Hello, and very welcome to Eastnine's Q3 report. Today we'll go through our nine-month results as well. With me, I have Britt-Marie Nyman, and myself is Kęstutis Sasnauskas, CEO of Eastnine. Before I start, you are actually very welcome to post your questions. You'll find them just below our picture, where you can click and actually post your questions. There will also be possibility to ask questions live at the end of our presentation. With this, I will shoot off. If we look at Eastnine. Just a second. A little bit brief of the market where we are acting, actually. We are in the Baltics, even though we're listed in Stockholm. But we enjoy higher yields, as at...
In combination with relatively similar risk parameters as we see to the Nordic markets because most of our tenants are actually multinational strong tenants. The Baltic markets have been developing very rapidly during the whole period since independence. They are still growing multiple times faster than the Nordic peers. There is a natural convergence going on. We're actually in the market which has a very strong growth potential in the future. We also work very much with ESG, and we today can present top-of-the-class credentials in terms of both the property quality and the different evaluations or what I will go through it in a bit more detail later. We have a very prudent risk financial profile.
On that, I think let's go into economies. Well, as you can see on the graphs actually, the GDP drop during the pandemic was the smallest in our core market in Lithuania of all European countries, and actually even globally. We see also a decent recovery, which means also that the advancement is actually much higher. We also see higher inflation levels. This is caused by, of course, a very strong recovery in the market. Still the Baltic inflation is higher than the European levels. It doesn't affect European markets very much. I mean, Baltics are still very small economies in that context. We're enjoying constantly now falling yields.
Yields are still around 200-300 basis points above Nordic peers. We've seen gradual, basically yield compression and the strongest yield compression in our core market, Lithuania, which is in Vilnius primarily. Which is again our core market. Highlights during the nine months. We as a company continue growing. Our revenues are up 15%. Our profit from property management is somewhat slower, but this is a temporary effect, mainly driven by the bond issuance in July, which was not invested yet. As soon as it's invested, we will see a different picture again. We're also very happy to see that Melon is performing very well, and I will go into this a bit more.
We also received a five-star rating in GRESB. We achieved 92 points, which is among the highest in the industry. We also continued working very actively on improving our already excellent properties. S7 number one actually now received BREEAM Outstanding certification, which is absolutely highest in the industry. Net letting is negative. In Lithuania, we're coming from a very high level, so it's mainly caused by one bigger tenant moving out, which was planned, so it's nothing really dramatic. But we see that the rental levels are actually higher in the market than our averages. Then when we conclude new contracts, they are coming at a higher level. We see actually this as well as an improvement possibility in the future.
If we look at our property portfolio, again, not so much happened during the last quarter. We didn't do any acquisitions, but we today manage 130,000 sq m of prime offices, located in prime locations in Vilnius and in prime locations in Riga, with of course bigger share being in Vilnius. As you see on the tenant list, on the right-hand side, you see that it's dominated by strong Nordic names, which of course creates a different risk profile because all of these tenants and most of these tenants actually are producing for international markets, not only local markets. At the same time, we have a booming local market as well. We would enjoy to see more even of the local players as well.
Properties in Vilnius are concentrated in three clusters, number one, number two, and number three. All of them are quite significant right now. Number one is around 42,000 sq m of prime space. Number two is actually 42,000 sq m as well. Number three is a cluster where we're just accumulating more properties. It's 24,000 sq m today, but we'd also like to increase that location in the future as well. In Riga, our properties are situated along main road called Krišjāņa Valdemāra, where we started gathering our position. Today, we're still relatively small in Riga, but our position with the development potential, with the projects that we anticipate, will reach closer to 100,000 sq m in the near future.
We are very optimistic, actually, even about Riga as well. If we look on our holdings that are non-core today, Melon Fashion is the largest one. Melon Fashion has been performing extremely well. Sales are up 66%, despite the pandemic and despite quite a lot of turbulence in the markets in terms of logistics, in terms of production and so on. Online sales continue growing, and EBITDA is actually very, very strong as well. We are actually improving profitability, and growing very fast in this turbulent market. Of course, this opportunity and this growth opens up for a potential IPO, which could occur actually before summer 2022.
If we move further, our holding in East Capital Baltic Property Fund II, that fund is also performing very well. It has two logistics properties, which are probably the hottest in the industry today, one retail and one office. That fund is under divestment, and we expect proceeds to be received during next year, early next year. If we go into next slide, and our work in terms of ESG, we are actually aligned with the core UN sustainability goals, and four of them that we are working very, very actively in our markets. It's health and wellbeing, it's sustainable energy, it's cities and societies, and consumption and production. We also have green financing framework, which was rated by CICERO as dark green.
It's one of the very few companies in the industry that achieve that type of levels. Today we enjoy 26% of our loans already green. Most of our financing is still bank financing. Of course, green financing is something very new in our market. It's quite common here in the Nordics, but we are working very actively with our banks to turn this into more and more green financing as well. If you look on our properties, 88% of our floor space is environmentally certified. It's not only environmentally certified, it's also certified up in the highest levels or highest brackets of each of LEED or BREEAM. It's either BREEAM excellent or LEED Platinum. Now we have one property BREEAM outstanding as well.
Of course, our efforts are also demonstrated by external awards. We rank 92 points in GRESB 2021 survey, which makes us among top 20% globally, and very close to Nordic peers and Nordic industry leaders. We rank number three in terms of gender equality by AllBright, out of 55 companies in the green list of Stockholm Stock Exchange. That total list is around 200 companies overall. We rank 14.2 ESG score at Sustainalytics, and we received a U.S. Green Building Council award for our efforts in certifying and improving our properties on the LEED platform. On this, I will move over to Britt-Marie.
Thank you, Kęstutis. We continue with the financial overview and some financial highlights. The rental income in the earning capacity is EUR 22 million, and the net operating income is almost the same, EUR 20 million, since the surplus ratio in Eastnine is high, around 90%. The annual rent per square meter is EUR 180. In Sweden, this, the corresponding figure should be around EUR 600-EUR 800. That's good to know. The property value is more or less unchanged during the third quarter, EUR 416 million. The equity asset ratio is high, 55%, and the net LTV properties is low, 43%. The property yield in the earning capacity, excluding development properties, is 5%, and the occupancy rate decreased a little bit during the third quarter to 90%.
We continue with the income statement, and normally, Eastnine can see clear economies of scale effects when we add new properties. During the second quarter, we acquired two properties, which affects fully from the third quarter, but still, we can't see this economies of scale effect during the third quarter. The reason is the bond issue in July, and the money has not yet been invested, and that's why. The bond issue has also affected other financial income and expenses during the quarter. We had some positive, unrealized value changes in MFG as mentioned, and that was due to positive sales in MFG and also due to a strengthening of the ruble. We continue with the statement of financial position.
You can see that the portfolio of investment properties has increased during the year, and that's mainly due to acquisitions, but also due to some investments and some non-realized value changes during the year. The value of the long-term securities holding has increased, and that includes MFG and the fund. The cash has increased due to the bond issue. The equity increased due to the profit, and the interest-bearing liabilities increased due to the bond but also due to new bank loans, mostly related to acquisitions. We continue with the current earning capacity. As you know, the earning capacity is a theoretical assessment, and it's based on current agreements in the portfolio. It's not a prognosis.
We compare the end of September with the end of June, and the two major changes during this quarter was increased vacancies and the bond issue. The vacancies meaning that the vacancy value increases, and the bond issue meaning that the interest expenses increases during the quarter. Of course, these changes also affect the key figures such as ICR, average interest level, and so on. We continue with the debt maturity profile and the capital structure. We have, as you can see in the chart, up to the left, the maturity. We have no loans that mature in 2021 and 2022. The average capital tie-up period is 2.8 years.
If we look into the interest duration, around 40% of the interest-bearing liabilities has floating interest rate, and 25% each has fixed interest until 2023 and 2024. The average fixed interest period is 1.6 years. If we look into the chart down to the left, you can see that the equity asset ratio is on a high level but slowly decreasing, and the net LTV properties is on a low level and slowly increasing, and that's because Eastnine actually divesting non-core and non-leverage investments and instead investing in leveraged real estate. We continue with the share and the ownership. The share price has increased with 15% during the period, up to SEK 144 by the end of September. At the same time, the long-term net asset value increased with 7%, up to SEK 157. The share was trading with an 8% discount.
It has decreased during the year, and it has perhaps even decreased a little bit more today. I don't know right now. We can see that the liquidity has improved, that the number of shareholders have increased, and we can also see that. It's good to know that we pay dividend 4x a year, and the next dividend will be paid within a week or so. We have had some major changes in the shareholder list during October. Bonnier Fastigheter Invest has bought around 14% of the shares. East Capital and the Norwegian bank has divested their shares. Rytu Invest, previously reported by Peter Elam Håkansson, has transferred their shares to the original shareholders, and that's Peter Elam Håkansson and Kęstutis Sasnauskas and Karine Hirn. We have a reputable Board of Directors with Liselotte Hjorth as Chairwoman.
She is former Deputy CEO in SEB. Christian Hermelin is former CEO of Fabege. Ylva Sarby Westman is current Deputy CEO and CFO in Kungsleden. Peter Elam Håkansson is Founder and Chairman of East Capital. Peter Wågström is former CEO of NCC. Over to you, Kęstutis.
Why we believe that Eastnine is an exciting story? You can see actually on the profit from the property management per share, we continue growing it. In the last 12 months, we're still up compared to 2020. Dividend per share is growing, and as well we have a long-term equity per share, growing gradually. To summarize, we have a unique portfolio of top properties in the Baltic capitals today, which generate very strong cash flow. That cash flow is generated from the international, multinational, very much Nordic businesses, and that creates a very stable ground for the underlying businesses.
We're also leading in sustainability work in the Baltic region, where we, I told you about our credentials and what we have done, and we continue actually improving gradually already a very nice property portfolio. We have a nice growth journey ahead. As you know, we communicated that our investment plan is to reach EUR 700 million of property value by 2023. We also positioned to grow in this very exciting convergence story that is taking place in the Baltic region overall. Actually, we see Baltics as the new Nordics, and the journey has just begun. Now we will go into the question session. We have some questions that have been posted online, and
Perhaps we should start with some questions if we have some?
Yeah
would like to ask a question.
Thank you. Ladies and gentlemen, if you have any questions for our speakers, please press zero one on your telephone keypad. Thank you until we have our first question. Ladies and gentlemen, let me remind you, if you wish to ask a question by phone, please press zero one on your telephone keypad. There are no questions by phone at this time. Dear speakers, back to you.
Yeah, we continue with questions online. First question was, "Seems like in Q3, EUR 11 million valuation came from Melon Fashion upwards revaluation. Can you please elaborate on what assumptions, what is the plan for regarding disposal of Melon?"
We follow a cashflow model in our valuation, and that the key assumptions, actually, the positive drivers is actually, of course, the better performance of the company than expected in terms of profitability and EBITDA and growth, as well as the negative impacts have been in a higher WACC applied. I think all of these details are in the report under section of Melon Fashion Group.
In terms of our exit, of course, IPO would be a one way to exit for us partially or fully. As we wrote in the report, that opportunity might occur before summer 2022.
Yeah. We also received a question like this: "You placed EUR 45 million of corporate bond in the summer. What was the logic since no acquisitions happened since? What is your investment program this and next year?
Should I respond?
Yeah.
Yep. The logic was, of course, to finance an acquisition. Unfortunately, one acquisition that we thought was agreed and was very close to be done did not occur, for reasons not depending on us. Well, this sometimes happens, so it's a bit of a delay. We are still working on a number of acquisitions, and the idea is actually to actively continue growing. We believe that there will be more transactions being done in the near future. This is the situation as of today. Unfortunately, you know, we also are committed to make value-enhancing deals, so we not just buy anything, and the market is a little bit less liquid in Vilnius. It might take sometimes longer time.
Yeah. We've received a question: "In which properties are your biggest vacancies?" Perhaps I can answer that one.
Yeah.
It's in Riga, Alojas Biroji and Valdemara Centrs. Riga is a tougher market, but it's improving.
In Riga, we also just announced during the quarter that we leased out.
Yeah
... to a Norwegian IT company. That property will be filled. Valdemara Centrs will be filled, in-
Yeah. In the second quarter next year.
... in the second quarter next year. We're working continuously. We see actually much more life in both Riga market, but Vilnius market is actually extremely strong. In Lithuania, in Vilnius, we have a vacancy in 3Burės.
Yeah
right now.
Many
which is bigger. Vilnius market has been extremely strong with a net take-up during the nine months of around 100,000 sq m of office space. I mean, this is comparable to Stockholm figures actually. The market is really strong. The take-up is very strong. We see a very big trend of actually movement from lower quality to higher quality spaces. In that, we feel very confident that and actually we are in negotiations for those vacant spaces already very actively and very sort of some of them in the final stages.
Yeah. We can see a lot of international companies actually.
Yeah
entering into the Vilnius market right now.
Yeah. We still see a lot of inflow of those companies. I mean, only today, we could see in the news of another company, you know, entering and.
Asset management
asset management and then, you know, hiring 300 people and so on. There's a constant flow actually of people. Let's move.
The next question: "Can you shed some more light on the M&A potential? How many properties can you acquire per year roughly?
Oh, it's very difficult to say exactly how many in terms of. I mean, we have been the most M&A active company in the region over the last three years, standing for approximately 10%-15% of market share in acquisitions. This year probably slightly lower. With that planned deal that didn't happen, it would have been very close to those figures as well. I think in general, I mean, we are very active.
But, uh-
... in the market, and we are very active in the market right now. I said our ambition is to grow to EUR 700 million, and today we have EUR 400 million.
We can acquire for roughly EUR 100 million right now.
Yeah.
The next questions. Congratulations for a solid set of quarterly results. What are your expectations for occupancy rates for the fourth quarter and going into 2022?
For the fourth quarter, I think formal occupancy rate will probably not change very much.
No.
There will be lease outs that contract signed, but an actual move will take a bit longer time. We're not concerned about that. In general, we see still very, very strong market. Another important factor in Vilnius where it's our biggest market today is actually there's very few properties coming next year. Which makes if the take-up will be as strong as it is right now, we see that it will not be an issue at all.
Yeah. Next, what do you see as optimal LTV level long-term? At least midterm, I think it's better to answer midterm.
It's around 50%-55%, I would say. In the long run we even might go under 50%, since that could be good on the bond market. Right now between 50% and 55%.
Next question, what's your view on share repurchase versus cash dividends going forward?
It's more a question to the Board, I think. In general, I mean, we pay dividends and we have very ambitious plans for growth. I think there's nothing-
No
planned.
The focus is not on share repurchase.
Yeah
right now, at least. Okay. That was a lot of questions. Very good.
Yeah.
If there are no more questions, then we should perhaps say thank you.
Thank you very much.
Thank you for listening.
See you next quarter.