Hello, good afternoon, and welcome to Baltic Horizon Fund's quarterly webinar. It's quarter number three, and when I look back also on the whole year, at the past three quarters, we are already also in the middle of the fourth quarter. So, happy to give you the latest overview and as well answer any questions that you may have. So it's been continuously busy year for Baltic Horizon Fund.
Our team's main focus has gone into managing our liquidity, refinancing our various debt instruments, including the bonds, which happened in the second quarter, but also repaying back part of the bond as we have gone along as it is the most expensive financing instrument in our capital structure today. Overall, in addition to managing the properties and preparing for different tenant changes, we have continued to put a lot of emphasis on our quarterly reports to make sure that they are as precise and informative as possible. As well, focused on the ESG matters and achieving again a four-star rating with our GRESB report.
Whereas also performed activities with our partners to certify our properties, as it is part of the long-term goal of Baltic Horizon to have all of its properties certified. And in addition to office properties, we have now also certified our retail assets and are in the process to receive the final certifications for all of our properties. But it is true that one of the major events during this year has been refinancing of the bond back in May. It was quite a challenging process, and I've discussed this also in the previous webinars.
And we were also exiting at the beginning of the year two of our office properties, I would say at quite good prices. As I think the landscape, the investment landscape, in the Baltics has become more challenging in the second half of this year. That being said, let's look at our portfolio. There has been some slight changes in the portfolio, with some tenants not in the portfolio. As you remember, SEB was one of our largest tenants in Latvia, in Upmalas Biroji. We had already knowledge that they were moving out in August this year.
So, this has been the biggest change in the portfolio this year when it comes to the tenants. At the same time, we have been proactively working to find new tenants for the vacancies, and I will talk a little bit about that also a bit later. Our portfolio has decreased slightly. We have 12 assets currently in the portfolio, and quite a similar allocation to Latvia and Lithuania. Latvia being the largest allocation currently, and Estonia the smallest allocation. We have approximately half and half when it comes to office and retail as well in the portfolio today.
Now, going straight into the leasing activities, which has been one of our priorities, as it is extremely important in today's world to make sure that the properties get filled with new tenants, new concepts that do have also long-term potential. And this is interesting about real estate, is that nothing ever happens overnight. And for example, the ARKET lease agreement, which we negotiated beginning of last year and signed, I think it was September 2022, is now finally becoming a reality more than a year later. So some of these things do take time and... But finally, we are starting to see the openings.
When we have now this month ending, we will have also H&M Home opening in Postimaja, and ARKET then early December in Galerija. At the same time, we have continued to look for new tenants for our properties. We believe our properties are well located in the capital cities of the Baltic States, and they have, let's say, I would call some strategic locations in some ways. For example, Latvian State Police has discovered that our office building in Riga, Upmalas Biroji, on the left side of the riverbank is a good location for them to bring their different departments together.
After long negotiations, and also after strong support from the Latvian government, up to the president and prime minister, they have secured a budget for it, and also are investing into the premises to make them suitable for modern police building in today's world. So the lease agreement has been signed, and we do expect them to move in as soon as possible, but probably it will still take a few months time. So, probably end of first quarter, we will see Latvian State Police moving to Upmalas Biroji, and the occupancy of Upmalas Biroji increasing. Same goes for IKI Lietuva, who is replacing Maxima in Europa Shopping Center.
I think it was important for us to bring in a new tenant, a new brand, to refresh Europa. Maxima has been a long-term tenant of the property since 2005, when the property was opened. But we believe that IKI, with its new concept, is a better fit for the Europa going forward. As if you've been to Europa over this year, we've also signed up 13 new tenants in addition to the food hall. You know, including pilates, optical center, then Symmetry flagship store, and several others.
We believe that, you know, it takes a bit of time to find these tenants that fit the concept and are actually interesting to the people that visit the properties. What we also find, there's been a few questions that, you know, what are the average rents doing? And the answer to that is that average rents are doing very well for these new concepts to come in, because as well as their turnovers are immediately quite attractive.
So, we are going through a transition phase still, not only us, but the market to sometimes as well replace older concepts with new concepts, that are attractive to people and actually can generate sales also in today's relatively challenging economic environment. There has been several smaller tenants as well in our other properties. So in that sense, the market remains quite active. And companies are still thinking long-term. And when you look at also Postimaja and the cinema building, then there are several discussions are ongoing there. And we at this point unfortunately can only remain general.
But just to put it in number terms, that across our portfolio today, active agreements that are being discussed across the retail properties are more than 4,000 sq m, and in the office segment, more than two and a half thousand sq m. And I think I can also state today that the majority of the office segment discussions are happening finally in our Meraki new office building in Vilnius. So there's quite a lot of activity there. The occupancy decreased in the third quarter. It was not expected, but already with the current signed lease agreements, you can add more than 4% to the occupancy as of today.
Then more specifically, yes, these numbers do show that some of our properties are the vacancy has increased in Europa. We do expect the occupancy to continue increasing over the coming quarters in Meraki as well, as I mentioned. And in Upmalas Biroji, with the new signed agreement with police in the first quarter, the occupancy of the property will be probably 2/3, or not probably, but will be. And we have engaged continuously with local brokers and local connections that we have to find more similar tenants, state-related tenants that work closely with police one way or the other, different departments to the property.
So, our vision of Upmalas is for the property to become a property where which would house a long-term municipal and governmental tenants in majority, but also other tenants that are currently already there and have been there since the beginning, 2008. Well, I know this property remains stable, then we've had some changes also in LNK, where one of the tenants decreased the space. In the next door of LNK, a brand new property Elemental was just finished and is almost fully let, as we hear. So, actions are going to find new anchor tenants for LNK Centre.
Galerija Centrs, it's been, or I would say, lowest as sort of the slowest recovery in our central located portfolio, mainly due to the recovering of tourism being slower than anticipated, and. But having two new anchors, the BURZMA Food Hall and ARKET, we believe and as well, H&M and Rimi prolongations, you know, we do have discussions and views on the new anchors coming in after those tenants are fully opened, especially ARKET.
When it comes to the Estonian portfolio, then that it has remained the most stable in Q3, and we do expect Lincona occupancy to increase due to the anchor tenants expanding in the next quarters. As well, we do expect the occupancy of Cinema and Postimaja to remain high over the next year as well. More specifically in numbers, so I think Galerija Centrs is showing recovery, and yes, the occupancy has been lower because of ARKET's works. Now, ARKET will be close to 1,000 sq m, and that will add to their occupancy and to the NOI. Also, the big recovery has been in Europa Shopping Center.
I think today I can say that the monthly net rental income is already above EUR 140,000, close to EUR 150,000. So making stronger recovery also for the coming quarters. Then, the rest of the properties have remained relatively stable, except for LNK and Upmalas, as mentioned earlier. But, in Upmalas, the new anchor tenant is already found, and in LNK, we expect to find a new tenant there also in the beginning of next year, latest.
Like to like, rental income has been close to 5%, and this is mainly to do with the recovery of the retail, retail segment rents, also the average rents being higher than the previous tenants had. In the first nine months, with it also the disposals staying taken into account, our NOI has been around EUR 11.7 million. We do expect the NOI for this year to be roughly EUR 13 million-EUR 13.5 million.
Then, when it comes to our valuations, and then, in the middle of the year, with the valuators, we had to accept a loss on our portfolio due to the change in the environment, mainly in the discount rates, the expectations of investors and the cost of financing being adjusted by the valuators. So, we have been operating then with a loss of around EUR 50 million as of this year. We have also seen an increase in our financial expenses. The financial expenses have increased mainly due to the bond that was outstanding in August.
We repaid part of the bond, and also part of those financial expenses is the call premium that we paid also to the bond investors to pay down that first tranche. Overall, we have today a portfolio of roughly EUR 270 million with a Loan-to-Value ratio of 56%. So we have been very focused on making sure that that we also reduce our debts. As can be expected, our key priority is to focus on reducing the bond further, as EUR 12.5 million of the first tranche is still outstanding.
There are several actions being taken to make sure that we are able to reduce that tranche in full by early next year. Many actions are in motion, and we hope to announce as soon as possible the repayment of the remaining tranche of the bond. Let's focus then a bit more on the refinancing, as from our perspective, the two most important things is the occupancy, the rental income maximization, and then the cost of debt, and how can we get that down? Most of our bank loans do have hedges and caps.
So, the most, let's say, volatile today is our cost of debt for the bonds. And, when we have also several bank loans now maturing, beginning of next year, then, I think it's quite reasonable to assume that those discussions with the banks have been ongoing since already for some time. And, we are making good progress with them, and, we expect to reach an agreements with these partners in the next coming weeks. So it's not a lot of time for Christmas, and, definitely, I think those agreements shall be reached by the end of this year.
And same goes also for LNK loan, where we are in active discussions with the banks to prolong the loan and discussing what are the plans going forward. And we have engaged new leasing agents, and are very much on the ground actively showing the premises and discussing what else can we do to bring additional cash flow to LNK as a property. As it is currently one of the less occupied properties in our portfolio, albeit quite a small property still. Then cost of debt, yeah, that has increased to 5.1%. Yes, hedges have worked and have supported us in this way.
And with also the bonds now reduced, the cost of debt should stabilize and jump from the previous level, has been quite high. And when we are able to pay down the additional tranche, then we do expect the cost of debt to stabilize even further in the coming quarters. We have increased the weighted debt maturity and are in good process and progress to increase it even more in the coming months. We have also been able to reduce some of our debt through amortization and still keep the LTV at a relatively...
stable level, regardless of the devaluation of the portfolio, of what I talked a bit earlier about. So, when you look at 2023 and 2024, the loans outstanding, and to be refinanced, then, I think we're in good progress to prolong these loans, over the next coming weeks and months. Then before, maybe I go to the outlook and, and I will see if I can take, some of these, some of these questions. So the question is, about the additional lease agreements being signed, and, and currently, you know, the year-to-date occupancy of the portfolio, as mentioned, was or is already, more than 81%, so there is a recovery.
If those additional sq m now are signed with new tenants, then we do expect in the coming, let's say, one or two quarters, the occupancy of the portfolio to increase to at least 85%. So that is our goal, and of course we will move as quickly as possible. But what we're happy to see is that there is very active negotiations, and it's not that market is sleeping or not doing anything. So I think that's quite safe to say across the Baltic States.
Yes, things take more time, discussions are more lengthy, and more into detail, but I think we have finally reached a very good momentum, especially in our centrally located assets, especially in Europa. I would say over the past quarter or two, where majority of the also new retail leases have been signed, including IKI, but also have made good progress in Postimaja, the cinema building, and where, you know, I would say the majority of the focus will go and is going is on Galerija Centrs now. And we do have a vision, we do have a plan, we do have, I think, the strongest leasing partners in the market, when it comes to Galerija Centrs.
You know, if you know Riga City today, it will take a bit of time, but the Vaļņu Street is becoming a new pedestrian street, the high street in Riga Old Town, supported by the mayor. There are several committees formed for that, connecting also the main Rail Baltic station, which is currently being built at the end of that Vaļņu Street, next to the Old Town. So there's a lot of, let's say, positive long-term potential in this area, and the city government is very much also focused on reviving the Old Town of Riga, which was quite severely affected by the COVID lockdowns and has been recovering since.
But we do see what we can do. We in Galerija Centrs, also in the top floors, we have several, I think, ideas how to make that property a mixed-use property for the future. So there's a question also on the bonds. I think I answered that, so I can once again reaffirm that we have several activities in motion to make sure that we pay down the remaining EUR 12.5 million of the first tranche to our bondholders at our earliest possibility. We have aimed just to reach an LTV level of below 50%, but our valuations have been affected by the market changes and especially the discount rates.
So, we haven't reached the 50% yet, but we definitely have a goal to reduce the bond and therefore also the loan-to-value. And we believe as well that when the occupancies of our portfolio continue to increase and more visibility is gonna be seen next year about the EURIBOR rate future, then we hope to also see some positive valuation gains in the coming periods. There is, I think, a good question of the retail sq m that are under negotiations today, additional tenants, and how the, how is the split between the three properties that we have, Europa, Galerija, and I guess, Postimaja as well?
What I can say is that it's, I think, it's quite well distributed between the three properties. So, maybe a slight edge as of, you know, the past couple of months has been for Europa, as the momentum there is the strongest with the new anchors coming in and with new small concepts coming into the property. There are also discussions in the cinema building for the ground floor, and some discussions also in Galerija, but probably most in Europa as of the past couple months.
Then the question is around, you know, exactly what are we doing, more specifically, what are we doing for paying down the second part of the first tranche, this EUR 12.5 million bond? So I... What I can say is that there are three things, well, what we are doing for that, and one is increasing occupancy in our portfolio in order to get better refinancings from the banks, and use resources from those transactions. And as well, we have been looking at some potential disposals, in case needed. And so it's probably could be a combination of both, going forward.
And, this is what I can disclose at this point. There is a question about NOI guidance for this year. And, as I mentioned, the first nine months, so we achieved EUR 11.7 million, which already excludes the past months of the disposed property NOIs. So, we hope to achieve at least EUR 13 million net operating income for this year. Depends on, you know, you know, what is the level of turnover rents, which are, in many cases, many cases, accrued and, and, put into the results in December. There is a question about our partners when it comes to leasing and when it comes to property management.
Then, and then there is also a question specifically on our Latvian properties and Galerija Centrs. So what I can say is that we work very closely with property management partners and also the project managers that are running the constructions reconstructions for us. And we do monitor the quality regularly, so and I think also the cooperation we evaluate on a regular basis. So what I can say here is that in case we think that we can work with a stronger partner, then we will make those changes quite swiftly and quite quickly.
So, what I can maybe, maybe reveal here is that, we, we do have, as of last, month, made a decision to strengthen our property management, partners in, in Latvia, in Riga. And, and we hope to... We're already engaged, in, in more active leasing activities with them and, and really, you know, really focused on, on getting our properties, filled up, in the coming quarters. So there is... A few questions, I think I already answered. There's, there's a question or there, there has been, let's say, some talks that what, what will Baltic Horizon do? And, and, how do we, you know, see ourselves, going into 2024?
And are we cooperating with potentially with some other real estate fund or real estate investors to make some very big changes into our structure? Then I can answer that everything related to that is stipulated in the fund rules, and it is eventually a decision of our investor base. But currently our work is going towards occupying, getting a higher occupancy in our properties, refinancing the bond, and refinancing debt. We're fully committed in that. We do see potential in that regardless of these temporary setbacks, let's say, some [audio distorted] which we do see are temporary. And...
But having said that, of course, we are thinking about all kinds of ideas with investors, you know, strengthening the fund's capital base or portfolio could also be a topic of discussion, major. But as I said, our primary focus is on our portfolio and making sure we extract this value from our portfolio to our investors in order to increase the cash flows, valuations, and eventually also the unit price on the stock exchange. So we have the question on how do we see the interest rates and going forward.
So I think the base case for us is that we don't see any changes in EURIBOR during 2024. And that's why we've committed to reduce the bond as soon as possible, because many of our other or most of our other bank loans are hedged and do have caps as far as into 2026. So what happens in 2025, it remains to be seen. So far, the inflation has shown signs of coming down, but as central banks in the past have always been slower to rather slower track than quicker track, then we don't expect any changes during the next year. So what happens here in 2025?
Let's see or, you know, what the market thinks, but hopefully there will be some relief in EURIBOR, but that will be so very gradual. It depends how the economies will be affected in the first half of next year. I think that will be the basis for the central banks to make decisions whether another crisis or another geopolitical conflict will generate some abrupt and abnormal market forces, you know, that will all be part of the picture. But I think what we've seen so far is inflation is coming down. It's quite sticky, but it is coming down. But we got some inflation in next year. There's a question also on the generated net cash flow for the third quarter.
Just a few words on that, the [audio distortion] of the rest of the CapEx was updated during the year. We have generated reserves for that, you know, to make sure that the new tenants in our properties can start working. Of course, many of our tenants are making... New tenants are making home investments, such as IKI, such as the Peace, such as many others. But also from the landlord's side, we need to put down reserves for some CapEx investments, this quarter and also in the next quarters.
When it comes to the cost of financing, I think very high in the third quarter, that is also partly to do with the premium, core premium that paid to the bondholders in order to call back the first tranche of EUR 7.5 million. So, in the coming quarters, the cost of debt should continue to stabilize when we reduce the bond further. That's a good question. Which of the investment properties are not available for sale, if any? How are the disposals handled? I think I can answer it quite straightforwardly. When the price is very attractive, then we can consider any offer.
But of course, we do have our strategic portfolio, we do have our strategic assets, and we do need to think, you know, how our strategy has been evolving and will be evolving also in the future. But I think to this question, I can be very, very extreme, general, and very straightforward answer. Disposal processes are handled internally by the disposal investment management team. So I think that's quite regular task for the fund management company. A few more questions. There's a question on the year-end valuations, and I think that's a difficult one to answer because the valuators have already changed some assumptions in the valuations in the mid-year.
But it now really depends on whether there are transactions going to happen in the market, and whether there are other forces affecting the valuation inputs. So we, you know, we are ourselves doing with what we can with our properties and increasing the occupancy, signing leases. So it's difficult to say, but well, I think personally, I would expect some stability in the year and, but there could be as well, some properties seeing some write-downs. But I think, hopefully also some properties will regain a bit of value, you know, from new leases. So hopefully by year-end, the valuations will remain stable.
But yes, I think overall you could say that there's quite a bit of pressure on valuations over the next, I would say, six to 12 months still going forward. Regarding, depending on, you know, what will happen in the macroeconomic environment and also overall in the market. There's a question on energy prices being hedged, and... So in that sense, we've had quite extensive discussions about that, and we've signed some fixed agreements, though not for a long period of time.
So, we've tried to find some stability for our tenants, and we hope that any kind of very large volatility in the coming, let's say, six to 12 months, we have hedged to a reasonable extent. But we also haven't, you know, gone into hedging everything fully at a very high cost, so or very high price level. So, but it is true that tenants do expect stability and also in their budgetary planning. We have signed several green energy lease contracts over the past three quarters, so that I can say as well, but I think that's as far as hedging energy prices goes for us.
So let me and I just finalize here. There's been quite a few questions, so hopefully I answered all of them also during the presentation. But what, you know, what is our team focusing on? Once again, priorities is to reduce the bonds, find ways how to do it, and continue executing the solutions. And in that sense, giving you a bit of a timeline, we do expect the redemptions of another tranches of this outstanding bond in latest by early next year. There are several things in process for that to happen. And of course, one of them is refinancing the expiring bank loans that we have for our properties.
Some of our properties have shown increase in the NOI, so that should facilitate the refinancing the properties with cheaper debt financing. As well, we have made new agreements with our property management partners which we have worked with as well. We have expanded our cooperation with Newsec and Colliers specifically. And as occupancy is key and to increase occupancy is absolutely imperative for us in the coming not only quarters but coming years. And then hopefully with more stable environment we are able to reduce the leverage below 50% and obtain a strong platform for future dividends and future growth.