Hello, good afternoon. My name is Tarmo Karotam. Welcome to the Q4 Baltic Horizon. Let's start. I see quite a few people have joined over the past few days. We've received several questions, and I hope to answer those questions also during the presentation. If something I have missed then please don't hesitate to ask your question in the Q&A section. Let's start with the general overview. I would say that 2022 for us was a generally a still a good year considering the circumstances and tough environment that we have been operating in.
Several new events that were not forecasted to happen, happened and the funds, you know, having been partially from recovering from COVID restrictions, had to cope with other new challenges. I think overall, we achieved a good result. Definitely the key words for 2022 are, you know, increased energy costs for us, as well as uncertainty among some of our retail tenants. As well, listing in Stockholm that we had to restructure and of course refinancing of several of the fund loans. That has been the focus of the fund already for a couple of years.
Overall, if we start with the refinancing of the loans then, you know, the banking sector is working well, and we have, as a long-term client of several banks, been able to successfully extend many of our loans. If you ask me about conditions, then, the conditions are quite similar. What we have also done now over the past several months is to link to increase some of our loans. That's, you know. What we did see the change was that, amortization which we didn't have before. As you know, our capital structure, from previous periods, since 2018, was amortization-free.
That was the main goal of the fund to have net cash flow at the maximum levels. We introduced the bond for that purpose and lowered bank loans, LTVs, and were able to generate high cash flows and pay out a high dividend. We just calculated and well, since listing, we've paid out almost EUR 0.50 per unit in terms of cash return for the investors. If one joins the investment into the fund in 2016, over the years, also during the COVID years, we paid back almost 40% of the investment.
Times have changed and I think everybody knows that we have bonds maturing in spring this year. The management also for the past, I would say, year, has been working on the bonds, on refinancing the bonds. I will get into more details later on. Overall, I would say that the actions that have taken place within the fund and are taking place now also this year, especially before spring, are mainly focused on getting the new capital structure for the fund at least a three to five year period. One notable event just to mention here as well, we have a new board member at the management company of Northern Horizon Capital.
Our long-term employee, Edvinas Karbauskas. Edvinas' background is from Ernst & Young and also having been the fund controller of the fund. He knows all the numbers and details by heart. He is focusing also on financing projects, but also investment projects as we go along.
I note as well that Algis Vaicekaunas, previous board member, retired and but I think we will see him still around potentially in an advisory board of the fund for the coming period. Yes, we mentioned here the websites, which has been a part of a longer rebranding process to make communication more clear, to make our website more, more lean and clean, and to align also to the Northern Horizon's logo, to the different logos within the Northern Horizon group. As one may know, we have several other funds in the Nordics, healthcare funds. This has been a branding exercise that has taken place for some time now.
It is completed now and we live under the new signage. Let's get into more details. There's been quite a few specific questions about the properties, so I will try to answer them. I think one notable event at the end of last year, in the last days actually, was selling the parking house. It was. Well, it was a negotiation that took almost four to five months. We had several interested buyers, and we owned 50% of the parking house. If you haven't been there, then the parking house is behind the Europa Center.
It was built in 2004, and owned 50/50 by Europa Tower owner and their prime location property fund. When we acquired the shopping center back in 2015, we inherited 50% of the parking, so we were operating the parking together and had some space for our vehicles. But of course, the structure amortized and is getting older and older. We had some disagreements on how to renovate the house, the parking house, and what should be the future of the parking house.
When an offer came from the other party to sell 50% and we thought it was a good idea, we of course made sure that we have available parking spaces for our customers. Regardless that the change was now that from the first hour parking is payable because It previously used to be one of the few places in the city center of Vilnius where parking was still free. It is a promotion also for our tenants and that people if you really come and park there, then, you know, you're expected as well to shop and then you get the parking for free.
The conversion has been quite successful. We're also happy to deleverage, you know, with the sales proceeds. That has been also a main focus of the funds for the past six or nine months. A second transaction which we had prepared already end of last year was a sale of Domus PRO Vilnius. It's a neighborhood supermarket which we developed together with the local developer back in 2013, 2014, and 2015. There's been a few questions why Domus PRO and why not Europa Parking and why G4S, for example, in 2021.
Since already, you know, the COVID times, we have been internally discussing a lot, you know, the future of Baltic Horizon and where we want to be. Now we've actually started to execute some of these transactions. When we consider our disposals, we think about, you know, several things. One thing is of course, the tenant mix and the footfalls and attractiveness of certain property and location for the coming period. The second thing is as well, you know, the amount of investments that certain properties would need in the coming years, when certain lease agreements are coming to an end.
With, you know, putting these into numbers and, and looking into, you know, what, what we should dispose and where do we see potential and where do we don't see that much potential, in terms of, for example, rental growth, then, you know, those decisions have been made, you know, partly, because of, because of that. We are focused on making our portfolio more and more efficient and, you know, be, you know, believe it or not, we still believe in the city center. Regardless of COVID, which was of course, a big black swan, back in the day. What we see is that city centers continue to be very vibrant and just wait until the tourists are back.
In that sense, yeah, focusing, so focusing our, you know, investments more into city center areas. And that's why also we believe that the investments that we're making into, you know, some of our assets over the past years have been successful and will generate good results in the coming years. Maybe last comment here is that, you know, we held the property for close to nine years and developed it eventually bought it from the developer at an attractive price. And it was, it has been a good cash flow for the fund, allowing us to earn a double-digit return, doubling the money.
Yes, I think the key reason for selling this apart from, you know, preparing to refinance the bond was that, you know, these type of properties are amortizing and there are a lot of investments needed in these properties in the coming years. A few words about the tenant mix. Essentially the largest tenants haven't changed. There was also a question on how do I see the office market today, you know, are rental companies, are they increasing space becoming more efficient? I think my answer hasn't really changed. What I see is that, you know, companies are operating in their premises. Yes, home office is partially already, the new reality.
But there's a lot of planning of office space and for group works, for team-building exercises and so on. As I said also before, I don't think there's a major sort of push for a large, you know, expansions of certain tenants. I also don't see that there is a major push for large reductions of large tenants. Even though, you know, there has been some, also in our case, one example, the Ukrainian tax authority in our North Star during COVID times, reduced their space by thousands of square meters. We've, you know, installed a sort of small office hotel there and now it's fully let to smaller tenants.
I think, you know, it's still quite a normal scene what I see. I don't see major expansions, but also not too many major contractions as well. From this list, ACD, our tenant in Upmalas Biroji is actually the one who's actually expanding. That's the reason why, and expanding significantly. That's the reason why they have decided to move into a new development, the other side of the river, in Riga. By the end of the second half of this year, they could be moving out. But it's an attractive property, you know, very well, let's say the floors and the premises are in very, very good state.
We are already in negotiations with a couple of potential new tenants. We will meet one in Riga next Monday, to discuss, for that tenant for 2,000 square meters. We do see, you know, still, quite an active office market. The tenants are moving, expanding, some are reducing space, but, quite a normal market, yeah. More specifically about properties, one by one, a few comments. In Duetto there's been some reshuffling of tenants, some expanding, some retracting. So, but overall the properties remain fully let.
The small vacancy there is related to the kindergarten and a small cafeteria downstairs in Duetto I. Otherwise, a well-performing two office properties. In Europa Center, there's been also quite a few questions that the recovery of the NOI in Europa Center hasn't been as fast as expected, and it is true. We have, you know, put a lot of effort into rejuvenating Europa Center, not only, you know, how it looks, but also morally, to bring a different vibe. It used to be opened as a fashion center, but it's definitely not a fashion center anymore. It's a service center. To make that conversion has taken time. Plan is set and you have visited the property.
There's quite a few, you know, new tenants, the food hall they talked about this a lot and that's a big success. Also we have Ariala, which is now more of a gadget electronics shop. Modore & Amore which is a makeup store with a bar, very successful. Buran, the cafeterias. I would say that the strategy of Europa is definitely to bring more services and to bring more food and beverage and we are in negotiations with a base bar as well. There's quite a few, you know, new tenants that are coming. It just takes time to implement the agreements and bring them in.
If one asks, you know, why, you know, we don't have a nature, you know, new fashion anchor there, that's not our focus anymore. Yes, we want to, you know, have some fashion and some clothes environment for the customers. That's definitely more services, definitely more F&B. That's based on the questionnaires of which have been done, you know, for the for the surrounding offices. With the people in the surrounding offices. If you would, you know, look at our three top assets, you know, in our case, that was Postimaja in Tallinn, Galerija Centrs in Riga and Europa in Vilnius. They are just very centrally located, but they have quite a different catchment and audience.
In Europa definitely, the people working in the surroundings but also living, mainly working. Not so many tourists currently and historically, that may change in future, but it's not the most touristy location. Galerija Centrs, you know, main audience is the people living in the old town, working in the old town, government sector, students, but also definitely tourists. In Tallinn Postimaja catchment is people visiting the city center, working, living here, but as well tourists. It's slightly different what different customers of different centers are looking. There will be many things happening in Europa this year.
We're working to recover the NOI and the new lease levels have been 20%-30% higher than we signed before. All the new leases that we've signed, the concepts are working. The customers are happy. I think that's very good feedback for us that we are on the right track. Domus PRO, as I mentioned, I think there's, you know, we're selling this property. There are several leases, large leases expiring there and some investment lease. We had an offer on the table. Actually, we had three offers on the table. It shows that, well, that the investment market is competitive even during these times.
North Star is doing well. Meraki we've finished the property and some tenants have moved in. Currently we have just recently signed another lease agreement with 20 clients. You can see now increased to close to 31%. We have several discussions ongoing as well with tenants. It's a matter of time when I think we will get that building filled out. Vainodes doing fine. You know, like this center is discussing with the tenants also how they view the future. There may be some changes in the floor areas. Currently these are only discussions, so we're waiting some feedback and ideas from the tenant side.
In Kai, everything is working well as well. It's quite interesting to see, you know, from our numbers, the recovery now compared to beginning of last year when we still had, you know, the restrictions and certain limitations that the footfalls and turnovers across the board in our in Tallinn assets has increased 30%-50%. I think the numbers, you know, they look astonishingly higher. Of course the base was also low. It definitely shows a strong recovery.
For example, if we look at the month of January for the sales and turnover, sales and footfalls, then you know, everybody was afraid of, you know, what's happening, what's gonna happen in January because it's the slowest month. New recovery is increasing and all the rest. It seems that it's very difficult to change people's habits and at least in our, in our retail assets, the turnovers are increasing, and so are the footfalls. What we heard also when discussing with kind of course our rating agency that this is quite similar to what is happening across Europe.
It seems that people are postponing their large ticket item purchases or investments such as apartments, maybe new cars, you know, boats and motorcycles, the like, but they are, you know, still indulging themselves into shopping and restaurants, small ticket items and areas, also traveling. That's quite interesting to see as well. Maybe last but not least, the corner has, we have one of the larger anchor tenants there expanding again, you know, some are retracting, some expanding to one floor now, and one additional floor in the coming few months. We have pretty big plans. Also showing increases in football and sales.
From these numbers, maybe just to mention one more time the retail assets recovery. It's in process, yes, it's been lower than what we hoped for and because of, you know, logic, because of the uncertainty last year. But I think the largest potential this year will be in Galerija Centrs, as we are on next Monday on the 27th, opening on the 4th floor, on 1,500 square meters, a new food hall. We have 600 people invited, including the mayor. I think with the branding of Burzma and the excitement that we have, you know, brought, I think it's gonna be successful. I do invite everybody to visit once it's open.
It has an outdoor terrace as well on the fourth floor overlooking the old town and lots of natural light. There was also a question about, you know, how do we make or how do we measure these investments, for example, you know, EUR 2 million investment into Galerija Centrs. For example, the IRR that we calculated from that investment, meaning that we make the investment and get a higher income. So it's around 12%. In Reval Cafes, you know, when we invested roughly EUR 200,000 to redo the 170 square meters of Reval Cafes premises, you know, completely, the rent that we're getting from that location is considerably better than it was before.
The IRR of that project, for example, is close to 20%. That's not even, you know, for example, in Galerija Centrs's case, we do hope that the footfall will increase and that will benefit also the other tenants. Also we have signed an international anchor, fashion anchor in this case of Galerija Centrs opening in the second half of this year. That should bring definitely more, so a lot of excitement. It's the first expansion of this brand into the Baltics. We definitely see for a recovery of the NOI in our retail assets. Yeah, it has just taken a bit more time than expected.
I think the numbers should speak for themselves. In regards to like-for-like, you know, increase in the NOI than the change in detail was around 23%. We did have recovery of the NOI already. This is last year. Now there was a question about, do we have or are we planning to index our rents? Yes, we have indexed our rents and we are, you know, planning to do so based on the contracts that we have. What these numbers don't show is that in January and February this year, we have indexed, you know, our rental agreements. Our rental agreements include different types of indexation clauses.
Some of them are capped, let's say, 3% or 5%, but some of them are uncapped. There is local inflation. There is European Union level EU CPI. What we are seeing is, and what we are estimating is for this year on average, By indexation, our rents should increase by roughly 8%. 8%-9%, so close to the EU CPI level. That is expected to be also visible in numbers now in probably also in the first part already, but most likely in the second quarter.
Going forward, you know, when we are t o note here, maybe, because of the, you know, vacancies that we had in those shopping centers, what was impacted the results last year was also the surcharges and especially energy costs that we were not able to charge the tenants. In that sense, when the vacancies are being filled with new tenants now, we also get the coverage of some of these utilities costs. That should have a positive, you know, double positive effect for the NOI. Few more words about the food hall in Galerija Centrs.
We did have an opening actually planned in the second quarter, but now it's, we are in time and we are doing it now in the end of February. The question was also that, you know, we are investing around EUR 1.5 million into the ground floor to make, you know, to bring in this new fashion anchor. How do we measure the profitability of such an investment? That is a bit more complex because, you know, there is these cases, as in retail, for the top anchor tenants, it is based on turnover rents.
It is based on what we, you know, what we know and what we see, how this brand is doing elsewhere, what sort of sales are they doing? Based on this, you know, sort of experience, we're forecasting our returns. Then again, like a food hall will be a destination point. Will be the new fashion anchor. And that is more difficult to measure and calculate what is the overall benefit then to the whole center and to the other tenants. We do believe there's definitely a positive benefit for that. That is more difficult to measure.
We're still absolutely confident that this will be a game changer, these changes for Galerija Centrs, in big old town. As well, mentioned a bit about Postimaja and Reval. Maybe additionally, I would mention that we have taken back the parking and also Basil premises on the ground floor. We were planning a new restaurant there. Parking is being operated by Parking So Smart, a new parking operator. That change has been made. In Postimaja, we have had some vacancy on second floor, but we're close to actually signing also a brand for that vacancy now very shortly. Currently, one can expect an increase in occupancy in Postimaja this quarter as well.
Overall, we managed to have higher rental income than in 2021, regardless that G4S was not in our portfolio in 2022 anymore. The remainder of the properties have performed well and really showed increase in rental income, especially the retail assets that have been recovering. As you can see, of course, the cost of rental activities has been much higher last year. That's mainly because of the increase in utilities and energy costs. We see some stabilization in energy costs. I think that's very good for the tenants and for the tenant confidence.
There was also note that we are aimed to fix our electricity cost in for our declining assets 50% level. That is expected to happen by mid this mid-year in 2023 at around EUR 100 so per megawatt-hour or so. I think most importantly, it is green energy that we are using. Solar panels and there's an option in Lithuania to choose that. Overall, we finished the year with EUR 4 million profit. Valuations here and sort of was expected, the valuators reviewed the discount rates and slightly moved discount rates upwards.
Not a lot, what does set this higher inflation and higher expectations of rental income in our properties. Quite a bit of recovery, value recovery also in our top retail assets. There was also a question on the administration administrative expenses. Last year we had quite a bit of, you know, administrative activity. Firstly, the rebranding of Baltic Horizon Fund. That increased slightly the marketing expenses and the budget that they normally have. But mostly, legal fees and as well, consultation fees that were around our Stockholm listings.
We have converted into a Stockholm, I think the Swedish entity and or the fund is listed as Swedish depository receipts in Stockholm. Quite a technical exercise, cooperation with Euroclear and Nasdaq Stockholm. That was the reason of higher expenses. Also, we have a new administrator therefore for the listing, the Nordic Issuing. Furthermore, of course, preparation for the refinancing of the bonds. Legal advice, also prospectus related to that, and so on. There were, let's say, quite a few specific costs that increased the administrative expenses.
The question was specifically as well, what are under other administrative expenses, which is roughly EUR 460,000 a year. So those are basically Nasdaq fees, listing fees, the Standard & Poor's fees for the rating. Mostly, mostly those type of fees. In regards to the balance sheet, I think year-on-year remained relatively unchanged. But yes, as I mentioned, we did refinancing as many of our loans and the majority of undercurrent liabilities, which are short-term financial obligations, a majority of that is the bond.
Then financing, a s I mentioned at the beginning, the fund, you know, since since the war started in Ukraine and all the aftermath and all the results of that war, has made us, you know, focus heavily on refinancing our loans and also pre-prepare for the bond financing. That preparation for such event takes a bit, quite a bit of time. Also, starting from last autumn, we could refinance the bond free of charge. Previously, we had to pay a fee of 1% if we wanted to do it earlier. Things like that to influence these decisions.
The environment for the bond refinancing is not favorable. That is the reason why, you know, we are aiming to decrease the bond as much as possible. You know, when in the previous periods and also during COVID time actually, the bonds worked very well for us because of bank loans were at a very low level. You know, some of the LTVs of the bank loans specifically were around 30%-35%. There was quite a bit of room for any covenant breaches. We did actually, you know, sail through that period quite smoothly because of the low level of bank loans.
You know, when we were restricted and our shopping center revenues, you know, I dropped, you know, tremendously. Even then we hardly broke any covenants. We were able to go through that period pretty successfully. Plus, of course, it allowed us to pay quite high dividends during the period. Now the times have changed, so we are moving back to bank financing. As I mentioned, we have increased some of our loans. Some of the loans are not yet withdrawn in, and they would be drawn in when the bond refinancing moment start, you know, arrives. Yet this is not attractive to have some financing to date for our fund.
We are looking how to reduce that. One step was selling Europa parking house and also. Before I go into the outlook, let me see if I have some questions. I think some of it I already answered, but let me, you know, just summarize that we are aiming to have a lower bond than EUR 50 million and considerably lower. For that, we are increasing some of our bank loans and have sold a couple of our assets. In regards to the expected rental income for this year, that we have now sold to Domus PRO and will rapidly recover that loss of income then, I believe so.
I think, We have several scenarios, but, we're targeting, you know, still higher levels than we had for last year. Of course, it depends on the environment and the, and it depends on how high and will Euribor become, and how long it will stay at the level where it will be. That is, that is quite difficult to estimate. Currently, there's various views on that.
Of course, if you would look on the next three year perspective, I think this year would be where we see the top level of Euribor and probably by the second half of this year, we will see more optimism, hopefully. That's what the markets are also expecting. I have a few more questions. There was a question that what if Euribor increases, you know, to extreme levels, let's say 5%, or let's say 3.5% a nd 4% or even 5%, then, as I mentioned, we have certain still for this year, quite a lot of fixed rate hedges and also caps.
That will help us a bit. What anybody can do in, like a commercial real estate segment today is in the trends and find efficiencies in the cost side as much as possible, and make sure that the occupancies are high, so that the costs are also covered. That's the name of the game of commercial real estate sector today. In regards to looking forward for the fund and after refinancing the bonds, will we what are we going to do? Are we going to expand further? Yes, we are currently focused on getting the new capital structure in place for the fund, and selling as we have sold a few assets.
We definitely want to focus, you know, on commercial real estate also in the future. As I mentioned, city centers, newer assets, and possibly as well, you know, a new capital raising by the end of this year, maybe early next year. Definitely we want to develop business further. We believe in the topic, capital cities, and we believe in the commercial sectors. Just one has to be quite smart about, you know, today, what properties, you know, will be more effective and efficient, and where do we see more rental growth, and so forth. That's currently what we're analyzing quite a bit.
In regards to the dividends, and why, of course your question there was also why haven't we done any buybacks? The truthful answer is that again, we're focusing on refinancing the bonds, and we see much more value in getting the more expensive bond to a lower amount than buying back our units currently in the market. Yes, they are extremely low, and I think, you know, we have demonstrated at least on a few occasions that we don't believe that our assets are valued at 50% of the NAV, which currently the stock market suggests, you know, with G4S, with parking, with Domus PRO.
I think we do have an attractive portfolio, you know, that even in today's market, you know, which is still quite uncertain, you know, we can get these close to the NAV level. Domus PRO, for example, we sold roughly 5% below the NAV, most recent valuation. With this, we do see potential, you know, and value in our portfolio. In that sense, yes, you know, we could buy back some units after the bond.
If really the unit price stays where it is, after we refinance the bonds, then I think it's quite a clear thing to do, quite reasonable. In regards to the dividends, same answer. You know, the focus is on deleveraging currently and getting the bond at a lower level. Then basically think about the dividend. The announcement and the discussion of the dividend will be early June. Hopefully, and I do say that that's definitely a goal for Baltic Horizon and myself to make sure that we are able to pay also something out of these periods. Let's see. There are some additional questions. I think the administrative expenses topic I covered.
Many of them I would consider still one-off expenses related to the listing and the prospectors and the rebranding. There's a question, specifically, are we looking to dispose more assets than? Yes. We have been on the market to sell some of our assets also previously and I think there will be. If there will be some news, of course, that will be shared through Nasdaq as it is supposed to be. Definitely we are looking to reshuffle some of our assets in our portfolio and investing some, decreasing some retail. It's almost pro and and then refinancing our bond and then growing the fund further.
One question specifically, you know, why the unit price is where it is today, then, I think, you know, some investors have said that it could be because of the bond refinancing topic, that how will that be solved? We're solving it now. I think after the bond is refinanced, it will be also a much clearer picture for the investors and, to see, you know, how the portfolio structure and the capital structure will look like, for the coming years. I think this concludes the presentation.
Thank you for attending. If there's any other questions you still have, please feel free to send an email. We'll try to answer them as we can. Once again, thank you very much.