Hello, good afternoon, and welcome to Baltic Horizon Fund's webinar about first quarter results. Let's begin. We are living during interesting times, especially now when the COVID crisis is sort of fading away. We have the war, we have the refugees, and we have the supply chain shocks and energy prices going up, but with also the inflationary pressures being very high. Lots of variables, lots of elements that it's very difficult to predict where all of this will move. Just happy to give an overview of how Baltic Horizon is doing in this environment.
I'm gonna start out with the key notable events during this year for the fund. I think definitely we're very happy that we were able to open the first part of the concept upgrade of our Europa Shopping Center in Vilnius. Beginning of the year opened the food hall there on the ground floor with 10 outlets and 10 food small sort of offerings. It's been widely popular, and it continues to be a very busy lunch place in Vilnius today.
Very happy to see that the surrounding office building workers have slowly returned to the offices and seems to have their in the neighborhood, one of their most favored places for lunch. We're working now also on promoting the location for after hours, for dinner and for sort of after work drinks as well. I think there's still some potential there. This is a part of the reconstruction project we started last year. The second part is the on the other side of the concept change, where we are upgrading the look and feel of the center and having new escalators in place.
I think what we want to be here is ready for the next cycle and seeing the people come back to the offices, which if you know the area is a very densely built central business district of Vilnius where new skyscrapers have been built and are going to be built as well in the future. More customers coming. Anyway, talk about that a bit later as well. We are very happy to receive a notice from Standard & Poor's as well on our rating. They have reaffirmed our rating this year as well at the same level.
Regardless of the challenges that we've had with the lockdowns, we have maintained a good level of risk and return. Standard & Poor's have been rating us since 2018 when we launched the bond. We'll continue to monitor the fund's progress also in the future. Most recently, we have extended many of our bank loans and the beginning of this year was very important for us to prolong two of our largest loans for two of our largest properties, Galerija and Europa, also the ones that were influenced by the lockdowns.
We're really happy to have prolonged those loans for a period of two to three years and at quite similar conditions. Good to see that the banking market is healthy in the Baltics, and our cooperation with the banks is very very strong. This year and end of last year was the start of prolongation of our loans. It will continue in for the next 12 months as well. Very active period of renewing other loans is going to take place, and I will explain a bit more so later on.
Now, most recently we have invited investors to the Annual General Meeting, where a more thorough presentation will be made on last year's results and also this year's performance. We have also put on the agenda a buyback program, which is something that needs to be decided by the investors and further managed and coupled with the local financial supervisory authority. This is a program to put in place for three years. It's a tool that we want to have in the management toolbox, which we currently don't have. If you go look at today's market price of the fund, then I'll be very direct here.
It's not understandably low and considering that, you know, a year from now it was 10%, 15% higher and the fund was in a much worse situation with the lockdowns. As you know, the market is always right, but this is a program that we need in place also looking into the future. Continuing with the portfolio summary, there hasn't been much change. Our focus has been on our portfolio, on the assets that we have in the portfolio, mainly the retail properties to enhance them to bring them to the next cycle.
Our segment sort of allocation is still majority's offices around the 58% in terms of net rental income. Retail being the remaining part. I think in the future quarters, the retail percentage will probably be increasing because of the recovery of the NOI in two largest shopping centers what we expect. In terms of maintenance, there hasn't been either any changes. In that sense, the portfolio tenant structure remains solid. Going forward into the future, I think we are more inclined to increase our allocation to Estonia and to Lithuania and less so to Latvia. That means also new acquisitions.
Before the webinar we received quite a few questions, so I hopefully will answer those during the presentation. One of the questions was, you know, where, when and where do we estimate the recovery of our two largest assets being Europa and Galerija. Before that, just I think an interesting column to look at is direct property yield, which shows the NOI of the property in the first quarter compared to the acquisition value. I think overall our office buildings have been doing quite well, as well Domus PRO. The focus has been on recovering the NOI of Galerija and Europa.
In Europa, effectively the direct property yield should be higher. It was some one-off write-offs that were also recorded in the Q1. We do expect a continuous recovery of both of these centers going forward, also for the Postimaja complex. Now, I think the full recovery of both centers to the NOI levels that we had before COVID will still take some time, probably into 2023. I think overall, what we see and what I've also stated before is that our portfolios in full occupancy should deliver around EUR 22 million in NOI per year. Last year it was EUR 17 million.
The EUR 5 million which was written off mostly because of the lockdowns and they used these rent reliefs and mainly in the two centers, as you know, they were closed almost half a year. We do aim and expect at least, you know, close to half of that being recovered this year. We have already also received some government support for the lockdown from Latvian government in the amount of EUR 300 ,000. That helps as well. We expect to then achieve the pre-COVID NOI for the portfolio probably next year. It's a recovery process. I think it has started very well. We are definitely in recovery mode.
We see that, in our footfalls, of the two largest centers and as well, the turnovers. Without, you know, the tourists, the footfall has been increasing still very strongly. When the tourists are coming back, that's definitely additional bonus for us. They are returning, and we see that around Postimaja definitely already. We see also, quite a lot of, tourists in Riga Old Town, in Galerija Centrs already. In Europa, tourists are less important for us because in Vilnius, Europa is in the center of business district where, you know, office workers and people that work there are key for us.
We do have high hopes definitely for the second half of this year in terms of recovery, people going back to the offices and living a more certain, in a lot more certain environment. More about our focus in on the assets that we have, that we own, and the redevelopment and development projects. Europa redevelopment is almost finished, and it includes as well the interior design, the new look and feel, cozy look and feel of the streets that goes through the center.
To have a new shop facades and as well new tiles, new escalators, new lifts, new visibility and definitely new corners, and areas for people to spend time on. Something called amphitheatre, which I think, when we open it, will be something very unique in Vilnius, you know, for people who visit to spend time on, to work, potentially to eat and to meet. That is finished. The next up is Galerija Centrs Food Hall. That is planned to be launched this summer and planned to be finished end of this year.
When it comes to the third project, retail project, which is the Postimaja and Coca-Cola Plaza redevelopment, we have also started there by expanding the cafeteria, Reval Café, and bring that more to the street level, have access from the street directly. Also for sort of steps, you know, for people to spend time in and have lunches and meetings. I think once opened in August, it will be a fantastic venue with glass facade and in the middle of the intersection there. In regards to the larger plan, the next up in Postimaja Coca-Cola Plaza complex is the ground floor of the cinema and opening the building up to the Rotermann Square.
We have prolonged the agreement with the cinema, the old agreement by another five years. There has been some changes in the ownership. The minority owner has now bought out the majority owners. Apollo Group is now our tenant, and we're happy to give them more efficient space by, you know, planning to take over the ground floor, where we can also execute our plans and the cinema operator can focus on the cinema floors. The whole reconstruction in the middle, there are plans to continue with that, but without anchor tenants, it is difficult.
We don't want to build this as a speculative project without anchor tenants in place at the beginning. COVID was prolonging the relationships with the anchor tenants, new anchor tenants, new brand names coming to the Baltics. After COVID slowed down, we had the war. And again, n ew retail tenants that wanted to enter the market were deciding to still hold. That's the time will come when more certainty will be in the markets.
I think international tenants, new international brands, they do see Baltics as a destination where they want to expand to because no one can really, despite the cost of living going up and energy crisis, they cannot just ignore also what has happened with the salaries of the average salaries of the Baltic inhabitants. That has come up doubled, you know, almost in 10 years and especially in the last three to five year period. City centers are coming back, and it will take a bit of time for them to recover fully. We're very optimistic today, seeing how things are happening in terms of their people visiting.
For Meraki, the first tower and the full underground parking for 1,000 places, close to 1,000 places is almost finished. We did have a small little hiccup there over the last month because of the construction company having issues with the employees because of the war. Those were resolved quite quickly. No impact on the cost just a bit on the time. We're planning now to open this property up for tenants within a month. New tenants moving in, especially to the ground floor. We have a clinic coming in and we are in active tendering for the anchor tenant. Several visits happening.
The Vilnius office market remains quite active and especially for the tenants that are already operating in the market. Quite high expectations on that. In regards to the second tower, we are currently not building the second tower, but have plans to build it in the coming periods, but that also depends on an anchor tenant being available. We will continue to search for tenants also for the second tower. Of course, it is now a big question mark how much the construction prices have increased. We may need to wait for some stabilization there.
Yeah, it's interesting to look at the construction sector now in the Baltics where many projects are being put on hold. The question is that at which point will the increase of construction prices stabilize. If, you know, construction companies will have less and less work and less demand for materials, that may actually, you know, stabilize the construction price or even start lowering it at some point. I think we need some resolve definitely for the supply chain and for the materials.
I know that construction companies are actively looking for solutions there because it seems that cooperation with Russia in many ways is terminated and the conflict there will probably continue for some time. New solutions need to be found. Yes, we do expect, you know, when the project is finished then to have a strongly yielding cash flow property. We're aiming, you know, 7%-8% yield depending on the construction price and the rental levels. It's definitely pushed also on the rental levels in the markets because less and less properties are being built and new properties are asking generally already 10%,15% more than they originally asked. Let's see.
Currently, yeah, we are focusing on getting the first tower filled in so that the G4S building that we sold the income can be replaced there in Meraki. As well, what we did with G4S building, we basically switched an old building, you know, to a new building with Meraki has BREEAM Excellent certification, as to note as well. Coming back to the numbers, and here you can see the development of the fund, and across also COVID years. We definitely see the recovery now in the second quarter especially.
First quarter was still relatively difficult for us, where we had to record many reliefs because the negotiations take time with tenants, reliefs for last year, end of last year. Our NAV today is around 1.1. I find it again very strange why the unit price is trading at 0.9 because of the recovery which is happening. When we were asked also one of the questions, when do we expect the NAV to return to the pre-COVID levels, which is around 1.3-1.35, then I would answer it in the same way that it depends highly on the recovery of Europa and Galerija Centrs.
As I noted, we expect, you know, half of the lost NOI to be recovered this year and the remainder next year. We do expect some improvement in the end of NAV this year and by next year we aim to achieve the pre-COVID NAV once again. A few more words about the profit and loss of the first quarter. It shows definitely already recovery. Without the G4S income, majority of the recovery came from Galerija Centrs, but also indexation of office building rents that happened and Europa's recovery will also continue to happen. Just to note that Europa some premises have been closed due to reconstruction, but the shopping center has been open throughout reconstruction.
When the reconstruction finishes in June, we have several tenants moving in. I can already say that there's definitely expectations that the vacancy levels will drop, and closer to 10%, during the summer. Overall, we managed through the first quarter and continue to foresee the recovery. No major changes here. We have valuations coming up now in June. It will start in June, and the valuations will be known by 15th of July when the June NAV is issued. Hopefully we see continuous recovery also in the valuations. Let's see how valuators look at the current environment. We don't see any major disruptions at this point.
We have continued to invest in the first quarter in Meraki, so majority of the cash has been invested there and also in Europa. Let's say after June, the major investments into internal projects will probably decrease and we will continue to focus on releasing the premises that are vacant in order to bring back the cash flows. Something to mention here as well that the trade receivables have slightly increased during the first quarter, but which are basically unpaid rent from tenants. It has also continued to show signs of improvement, and we're happy about that.
Going into the other side of things, and there were quite a few questions on that as well. Let me try to explain a bit how we see our loan portfolio and refinancing of our loan portfolio going forward. Almost 78% of our loans or let's say our debt is fixed. Either it's a direct confirmed coupon in bonds or hedged loans. This also fits into the strategy of the fund of having approximately 80% of the debt fixed at any given moment of time. EURIBOR is expected to increase, and currently is unknown, you know, how quickly and to what level EURIBOR will increase.
Probably it will increase first to positive side and then gradually closer to 1%, depends again on what's happening in the inflationary environment. I doubt that the EURIBOR will increase so aggressively like in the States, because inflation in the States has been very much due to direct support of the government to the people and to really increase their income and that has really pushed the spending up and the prices of services and especially services over there.
In Europe, the inflation is directly linked to the crisis that we have with Russia predominantly and let's say the energy prices and the prices of commodities going up. Let's see how quickly that can be resolved and what will be the end solution, but I'm sure ECB is looking at that very much. We will probably see some increase in EURIBOR already this year. The question is that will this affect and how, if at all, will it affect our loan portfolio and the cost of debt?
Then I can answer this today that our cost of debt has been slightly increasing during COVID times, and it was pre-COVID, it was 2.6%. Now it has increased to 2.8%. It will probably continue to increase a bit. I think the final answer can be given when we have refinanced all of our loans. I don't think the margins of the office portfolio loans, as you see, many of our office loans are going to be refinanced now in the next year or so. We don't expect any major margin increases there, and we would plan to have some sort of hedging even though it is slightly more expensive to hedge.
You know, there's various instruments for hedge, so there are caps and more reasonable options. We have to take those decisions when we actually prolong the loan, so it's difficult to say what the hedges are costing, you know, six months from now or 12 months from now. I think the margins will not increase in majority of our properties and when the question is then what do we do with the bond, since the debt capital markets are definitely not in the best state for bond issuers like us.
We're working on that right now to see, you know, what would be the coupon that we actually decide then for the next three-year period to refinance some of that bond with the bank loans and then see three years from now what is the capital market situation. This is definitely ongoing and I think there will be more news in that regard over the next quarter or so, because we are already working on it, on the bond now, despite that the term of the bond is in May 2023. We aim to find definitely all these solutions and then refinance also so our properties earlier than the terms are actually arriving.
This year, we'll be heavily focusing on refinancing of the properties and on prolonging the debt maturity, which has currently decreased to 1.5 years. Going forward, about dividends. Again, every quarter for the past two years has been actually quite uncertain for us. You know, what are the lockdowns, what sort of reliefs we need to give, you know, what is the future? It definitely seems like that at least locally, any major lockdowns is not anymore a is something that any of the governments would consider. There could be some restrictions, there could be some, you know, masks that may come back or limitations of big events maybe.
I think at the moment, regardless of the war, we are feeling more certain than ever over the past two-year period about the future and the recovery. The tourism globally is also very much recovering in Europe. The flights are close to pre-COVID levels, being still. You know, they would be much higher if there would be no conflict in the east. The recovery of the tourists in the Baltics is also a bit slower because of that. You know, I don't want to talk about the war too much because really, nobody really knows how much or how long it will take and what would be the outcome.
It's definitely good to see the united front from the European side. If something notable may happen, as you know, Finland and Sweden are planning to join NATO. That's definitely a positive sign to the overall region. I think over long term, it will contribute to the success of the Baltic States as well, you know, making this area more solid, more in sync and definitely, I think, attractive for also tourists. Let's see how this pans out, but definitely long-term opportunities as well. Coming back to the dividends and how quickly that can recover to the pre-COVID levels.
Again, you know, I think quarter by quarter it will be recovering, if vacancies continue to decrease and we are making some CapEx as well. So that may influence a bit the fast recovery. Overall, I think, again, we have the plan to regain what was lost, 0.5 Of it, you know, by end of this year and the remainder by the end of next year.
It's what I see as well, you know, the cost of that probably is going up a bit for us, but I'm quite satisfied that we are able to index as well our rents and not by, you know, 15% or 20%, because of the caps usually in the lease agreements. Definitely more than in the previous years. This helps as well to counterbalance the added costs such as interest cost and some CapEx works.
Just to have a few general sort of comments on our retail portfolio and what trends do we see in the next three to five years, and what we really want to sort of harness also for our portfolio. First of all, food is the new fashion, that is clear. The people in the Baltics are definitely looking for good culinary experiences, and that it's not only the Baltic trend, but especially here right now, it sticks out. That's why our offering, we wanted to have a quality offering in Europa and not only visually and then really having good materials, good outlook. Sort of a couple of good visualizations, good sort of experience, but also good food and good offerings.
That's definitely a new trend that we need to continue with. As well, we're addressing that in Postimaja with a new Reval Café concept. Also probably new restaurants will be coming in the next 12 months in the cinema ground floor. Definitely focusing on that. MyFitness as a tenant in Pirita, which is actually expanding in Pirita right now, taking more space, rejuvenating their concept there, also in Postimaja. Definitely a tenant that we foresee in those properties in the coming years. They have recovered their visitors quite well and continue to do so.
Health and wellness, you know, it will be part of the offering in the shopping centers in the future. Also clinics, also health services. Regardless of the war, when and during the war, actually our footfalls increased quite rapidly. People are spending, you know, their savings. Yes, there is influence on the cost side, energy prices going up. It's a bit of a paradox that for some it's definitely, you know, impeding their propensity to spend. Then again, what we see from our numbers is that the retail spending is going up overall.
It could be as well because of the unequal distribution of wealth and incomes. That could be one reason, but also recovery probably of the tourists. That's also what we are expecting, you know, for our properties, the key performance indicators related to the tourists and citizens coming back to the city center. Then to finish up with some slides, this is now Europa's new food hall, called Dialogai, so dialogues, and we're marketing as well that quite heavily. Archie's Burger is one of the stars there. We have as well a wok place, a pizza place, sushi place. We have some Ukrainian food joint there and several others.
If you're visiting Vilnius, please do have lunch there. I think it's a good offering. Some visualizations also for our fourth floor, Galerija Centrs food hall concept. We have actually already signed up, if I recall, seven out of the 10 operators. I think it's an excellent venue also with the terrace that we can bring in there. It's old Sportland premises. Sportland we have moved to the third floor, so the fourth floor will be the destination for foodies. Excellent interior design, designers from Latvia here.
What we also aim is to, when the interior design project is finished, that we actually do what we sell to the tenants and to the customers and not cut corners because customers definitely don't appreciate if corners are cut. This is investment for a long-term period, definitely for another cycle, for another 10 years. It should be one of the focal points in Old Town of Riga in the future. We are as well negotiating with a couple of new anchors in Galerija Centrs for the ground floor. Again, new brands that have been now a bit hesitant because of the war, but the time will come when probably they will have to make the decisions.
In summary, then, finishing what are the plans and what are the key sort of thoughts and actions. Is to finish Europa reconstruction and that should be finished within a month. Galerija Centrs food hall to start that. We have prepared for it already for six months and want to start executing now during the summer to have it ready by the end of the year. Working on the Postimaja food outlets, the cafeteria to start the reconstruction project there as well. Also focusing on, of course, on the ESG matters, upgrading building management systems to get more data. We already did have all of our office buildings certified.
Now we're looking into our retail objects and analyzing the data to improve our CO2 footprint, which we aim to decrease as well drastically over the next decade. As I mentioned as well previously, very heavy focus with our partners at CBRE, who are managing our portfolio on a daily basis to lease all of our vacancies in Galerija and Europa. There is definitely some progress already made, and you will see that in the Q2 report. Going forward, as well to finish the reconstructions and moving the new tenants, so it will take a bit of time.
What we are also doing is, like an example with G4S, we are recycling our portfolio, selling some of our older buildings, and replacing them with new ones that we feel are more sustainable and perform better in the competing environment in the future. We'll be focusing also on the new acquisitions. We do believe in new offices around and near the city centers in the clusters. We're definitely viewing logistics opportunities as well.
We've had several logistics properties under due diligence, but for reasons or maybe for technical reasons or the conditions, technical reasons for technical conditions, and also reasons of not believing in the future of that location. We have dropped those premises. I have to be careful with logistics, especially now when you have to analyze the tenants fully. You know, how much are they affected with the trade restrictions and restrictions coming from the east.
You also have to analyze very carefully that, you know, there was a property that we looked at, but we understood that people don't want to come to work there because it's not convenient and sort of unemployment is very low, so difficult for tenants to find sometimes employees. Of course, logistics is moving towards automation in the future, so we're definitely looking for brand-new premises in that segment. Yeah, so far the focus has been on upgrading our own portfolio assets and really making sure that the new attractiveness is there for the next decade. Last but not least, we have a new website coming.
I think it will look very cool, very much more friendly, you know, where investors can find information and want to promote ourselves as well through the communication channels across the Baltics to really reach investors and show them that we believe that our unit price is definitely undervalued today and should be at a much different level. It's almost that, you know, when you look at our portfolio that the unit price represents that our portfolio is 25% or 20% less than the valuations which I think are anyway also conservative. Yeah, that is the summary for this time. Let me see if there's any questions.
First question about the rental indexation, and how what is the possibility? Indexation in the rental contracts is quite different. Most of the rental agreements have caps, and usually it's around 5%. There are also some at 3%. I think the truth is probably there. When it comes to retail segment, then, in retail segment, I think we will see more potential in the turnover parts of the rental agreements going forward with the recovery. I think it's also unrealistic to expect, you know, 10, 15% indexation of the portfolio over the next 12 months.
I think definitely more than 1% that we usually have had over the past years. In regards to the Meraki loan refinancing, we have the Meraki loan or the bond, the term is in November this year. We have already started discussions with the banks. What we are offering to the banks is probably a fund guarantee. We're looking for the anchor tenant, and we do hope that we land an anchor tenant in the premises by the fall. To refinance with the bank will be quite easy.
In case of a more adverse scenario, we may want to prolong the term of the bond by one year. Currently, I think we're quite optimistic that we can refinance with banks over the next six months. The question is, when do we think that Meraki will be 90% let out? The answer to that, again, is you know, we are in negotiations or discussions with some of the potential anchor tenants. If we land an anchor tenant, it will be pretty much leased out fully. That's the goal.
We aim again to have a very high occupancy by fall this year, so we can refinance as well more successfully. The building is there. Visits are happening, the price that we're offering is around EUR 12.5 per square meter. Considering what's on the market, brand new buildings, we are definitely the cheapest. The ones that we are also competing with are having expectations of EUR 13, EUR 14 per square meter as starting rent. Okay, I don't see any more questions at the moment. I definitely recommend all investors to keep an eye on our NAV announcements, which are taking place on the fifteenth of every month.
I think that will start to show a continuous trend for recovery. Beginning of the year, we were averaging EUR 1.3, EUR 1.4 million of rental income per month. In April, we had EUR 1.5 million. Hopefully that trend will continue. Pre-COVID level of the NOI monthly was close to EUR 1.9 million. That is what we are aiming for. With the recovery of shopping centers and vacancies dropping and re-leasing vacant spaces, and we're leasing out Meraki, that should definitely help to our favor. Overall, the office segment remains stable for us.
Thank you for participating, and hope to be in touch soon.