Dear partners, dear listeners, today we have gathered for a meeting for Baltic Horizon Annual General Meeting on this lovely first day of summer. We have several investors in attendance, as well as Baltic Horizon team in attendance. We have the chairman of the supervisory board, Antanas Anskaitis, me, the fund manager, Edvinas Karbauskas, the management board member, Gerda Bliuviene, and our team, Jana Karimova and Indrek Vilms. Let's begin the annual general meeting. We will have five items on our agenda today. Firstly, we will cover the audited annual report of Baltic Horizon for the financial year 2025. We will also overview the plans and the strategy for the remaining part of the year. We will have three voting items today. One is the election of the potential new supervisory board member, Priit Perens.
Remuneration of the newly elected board member, and then an extension of the mandates of all current supervisory board members. For this meeting, I will be the chairman of the meeting, while Jana Karimova will be the secretary of the meeting. I'm glad to announce that today we've reached a quorum. Over 50% of the investors of the fund is either attending live or has appointed a representative through power of attorney. We will have the voting power to reach decisions today. Let's start with 2025, and I give the word to Antanas Anskaitis, the chairman of the supervisory board.
Thank you very much. Good afternoon, everyone. To put 2025 into context, the figures have been published on the website. You have all had a possibility to study the report. 2025 was also a very eventful year for us. We joined the turnaround of Baltic Horizon Fund in full. We is a private investment company under a name Green Invest, which has invested into the fund first time in 2024, at the time when the fund was raising through private placement funds to support its liquidity needs. We invested then, and really soon we realized it's a much more complicated, much more demanding undertaking than just being a passive investor after that step.
I would like to share here with you, fellow unit holders, and also from now my chair as the Supervisory Board Chairman of the management company, where did we find the Fund at the beginning of 2025, and how did we proceed with the assessment of the situation and the steps we have taken, in particular during Q1 of this year in further strengthening of the capital of the Fund. We invested in the autumn of 2024 at the invitation of the management team back then, under the assumption that the Fund needs certain amount of capital to successfully bridge its interim need for cash and turn its fortunes around, meaning that the properties will acquire more tenants, and the money will be used to accommodate these incoming tenants with fitting out the premises, et cetera.
However, we realized that the money which was raised in the autumn of 2024 was absolutely insufficient for the fund to continue running solvently. It was mainly because the fund was over-indebted, had too much debt from basically before the COVID. That problem has dragged on the fund for the last five years. That volume of debt was impossible to service just to pay interest and repayment of the loan amortizations. Another problem has been that once you have loans which you cannot service or those loans are in breach of financing covenants, those loans could be called by the creditors, and once one of such loans is called, the other ones obtain the same right, also known as cross-default clause across different loan instruments, including the bonds which are held by the fund itself.
That in combination with continuously negative cash flow, so fund was always spending more money or collecting less money than it had to pay to service debt and to service properties. We realized that this fund is running out of money. If nothing is done in a year or so, the fund is running out of money, literally, and the creditors will obviously take their own rights according to their loan agreement. That was a scary reckoning, two figures which are shown here in the black, the consolidated debt service coverage ratio for the entire fund for 2024 was 0.78, which means that the fund was only collecting 78% of cash flow needed to service its debt. It was burning money at a very great velocity.
Another figure, 62% of loan-to-value, meaning the value of all loans compared to the valuation of the investment properties held by the fund, was also at the very steep level in combination with the property values, which were very difficult to achieve in any disposal attempts which were undertaken by the previous management. This was an obvious over-leveraged situation. Furthermore, the portfolio of properties this fund owns, they have been beaten by different factors over the last five years, so their performance has been deteriorating. Reletting has been taking place at lower rents than the expiring lease contracts required, fit-out contributions, and were in many instances very lengthy undertakings to fill the vacancies. Given that situation, management was trying to sell whatever is sellable, and those were difficult projects.
Some of them materialized, they were becoming more and more desperate as it was becoming obvious the fund would run out of money. Before we entered into more close cooperation with the management, we first started looking around now that we have invested quite a significant amount of money, who are the other big investors who have been invested for a long period of time, and what do they think about this fund? What can we agree to do together as the capital providers for the fund in order to turn our fortunes around? We started approaching these different investors, we pretty much over the first calls realized there has not been a single leading investor who would have been a supporting investor, motivated and invested here consciously. That was a big reckoning where we found out basically we are alone.
Not to say that all of you who have invested into the fund are not there, but there has not been any other large investor who would have said, "Yes, we want to join the governing structure of the fund, the supervisory board, and we have an idea of how this should be handled so that the fortunes are turned around." That's when we realized that we have to get involved in much closer supervision of the management, and we appointed in 2025, we appointed a new composition of a supervisory board of the fund, which is a different body from the supervisory board of the management company, of which I am a chairman now. I'll say a few words about what was the role of this step on the next slide.
Basically, that was the year of reckoning when we as Green Invest, as the investor who started in 2024, we realized we have to take an active role because there is no other investor, and this management, without the support, any management without the support of investors cannot turn this fund around. It will be a very dire situation for everyone involved. The first step we've taken, we've appointed the supervisory board members in the fund. I was one of them. There were two other members, independent in the sense not owning any units, a professional chairman appointed by us, and it has been a very intensive period. Tarmo Karotam, as former manager, may witness that. We worked throughout the summer of 2025.
All in all, since May to October, beginning of November, when we, Green Invest, acquired the management company, there were at least seven formal supervisory board meetings taking place and basically focusing on the true crisis management. Going through the budgets together, cutting all non-essential costs, reviewing most complicated, most urgent burning property matters, reviewing CapEx. With the recognition that without new capital, this fund cannot continue, we also declared to the former owners of the management company that for us to lead a new recapitalization of this fund, we have to have control of the management in a sense that we would also own the management company. It has taken a few months to come to an agreement on the terms of this further commitment of ours.
By November last year, we acquired the management company and immediately proceeded with the steps of raising new capital which was implemented in Q1 of 2026. Coming up with the idea of how this new capital should be raised was not easy because we had to provide fair treatment to all existing unitholders without allowing external new capital to squeeze everybody out, or those who are not participating out. At the same time, it was obvious that if we are not investing into this new recapitalization, it will be very difficult for us to acquire trust of anybody else. We had to take part ourselves as the largest unitholder and now as the owners of the management company. Therefore, after many consultations with different advisors, lawyers, some of the other bigger unitholders, we offered something which is very similar to an instrument called rights offering.
All those who were the unitholders at the time of the raising, were offered a proportional share in the new capital if they wanted to. We have undertaken to take our part in it, which we did. We are glad to see that quite many other unitholders have taken part, including some of the bigger ones. That recapitalization, a necessary step for the company to complete its 2025 with auditors allowing this to be called a going concern, a company which is solvent and has a proven business plan to continue going forward. I wanted to give this overview before looking into figures because this year, 2025, was a year of many turnaround steps in hopefully stabilizing the capital structure of the fund. Gerda, if you could please take over and walk us through the figures.
Good afternoon. I would like to present the audited financial statements of 2025. Those were audited by our long-term partner, KPMG Estonia. I will start with the income statement. As you can see, total revenues for 2025 was around EUR 20 million. It was at the similar level as it was last year. It should be noted that in 2025, there was also Meraki, one of our assets, which was sold in the mid of March. It also includes two months of Meraki performance. Our property costs increased, slightly increased to EUR 8.1 million, and it also includes allowances for bad debts. As you can notice, the amount is significantly higher compared to the last year, where it was like EUR 540,000. It reflects, I would say, our stricter financial policy when we came to this management in relation to the change of the management board.
This is one of our clearest priority, I would say, to have more strict view on all of the items. Accordingly, our NOI was almost at the same level in EUR 11.7 million. Getting to overheads, those were slightly decreased due to two main reasons. One of them was lower management fee in relation to lower net asset value of the fund. Also you can notice that our administrative expenses were reduced. We're still doing that aggressively, I would say. We are removing all the costs we have in the fund and SPV level just to reduce anything what is really not necessary. EBITDA was EUR 9.7 million, slightly better result than it was last year. Back in November 2025, we have our independent property valuation performed by Newsec. The loss was a significant one. It was almost EUR 21 million.
I can add maybe that it is still challenging to receive the prices which were quoted in our property valuations on the assets which we have for sale. Team is really working on that, but maybe Edvinas will comment more about that. Talking about financial side, our interest expenses makes a real pressure also on income statement and then cash flows as we have that bond we all knew about it, and it carries a really high margin, 8%+ Euribor. This is more than 10% of interest expenses. You know this is one of our clearest also priority to get rid of that as soon as we can.
Talking about some metrics, it is really glad that now we reached at the end of the year, this year which is above one, which means that the fund is starting to cover its debt obligations. We are committed to strengthen it further. As well, we can see that our debt to EBITDA ratio is still really high. It is 14 when I would say market practice, it should not be more than 8, 9. We are still getting there. Average cost of debt was slightly reduced due to changes in Euribor as well as the prepayment of the bond when we sold the Meraki. Getting to the financial standing balance sheet, our investment properties was EUR 209 million. It is a huge reduction due to two main reasons. It was the same valuation as well as the sale of Meraki.
As you can see on current asset sides, we have cash on account split into two categories because we see that this kind of split approach is a better way for investors to see the liquidity of the fund. Restricted cash means the cash which is on an SPV level in each of the companies. Only that company can use this money for its operating expenses, CapEx or debt services. Only EUR 1.4 million at year-end was the money the fund can use freely to pay bond interest, to pay expenses. Trade and other receivables was also significantly reduced due to the same two reasons. It was due to bad debt provisions, but also as well as we started to aggressively approach our tenants who were not paying. We started to monitor a lot our all of the debts.
Talking about the equity side, paid-in capital remained the same during the year as there was no capital strengthening, but it was a huge loss during the year mostly due to the valuation. We ended up with EUR 78 million on the equity side. Bank loans on the long-term side, you can see EUR 77 million, although we have more. There was additional EUR 20 million which are on the short-term side because some loans breach the covenants. We already covered during Q1, and we solved those issues, so it is already long-term loans, so it is above EUR 20 million. At the year-end, there was only two loans which were expiring. It was [Minordus] and LNK, but it was conditional loan prolongation because the creditor SEB asked for at least EUR 7.5 million of capital strengthening. When the capital was raised, we managed to prolong it in Q1.
Our ones as well was like short-term liability because as you know, our equity ratio due to property valuation loss was 36.1. It was a really huge breach. Due to the active management work, capital was raised, managed also to fix this covenant breach. Our total liabilities this year decreased mostly due to reasons that Meraki was sold. I'm aiming to total liability side, that Meraki was sold and all the sales proceeds was to use to cover our liabilities. We ended 2025 in the start of transition, and we enter 2026 with new priorities like reduce interest expenses, reduce administrative cost, and improve our performance of our assets. Some of the progress can already be seen in Q1 results, and then Edvinas will maybe explain more.
Thank you, Gerda. Thank you, Antanas. Indeed, 2025 was the legacy year where we still had the major burden of the bond. Hopefully, 2026 can become the year of turning point and we are already see some transformative actions and results. Firstly, at the beginning of the 2026 in Q1, we made a lot of adjustments to our property management teams, which actually helped us to improve the recoverability of cost from our tenants. Without major increases in the occupancy compared to the same period last year, we managed to achieve 4% higher service charge collection rate, which is already showing some operational efficiency as well as reduce our cost basis for the assets.
I'll talk about that a bit further. Basically, we managed to reduce the costs by a significant amount. I think we will see the full magnitude of the changes throughout the entire year of 2026. Still NOI remain roughly the same compared to the previous year. In the last year we still had Meraki asset. We are at a bit higher level even without one asset. As well as this is finally the first time in many quarters where the fund has reached profitability. Compared to, for example, previous years' Q1 where we had a loss, we've managed to turn the tide around and have a completely different outlook on the results.
If we also consider the one-off costs which we had related to the capital raising, to the bond repayments, the fund would then be at around EUR 400,000 or EUR 500,000 of profit for Q1. We are definitely seeing a bit of positive trajectory, but still, it's just the first steps. As mentioned by Gerda, we are closely monitoring all bond and financial metrics. As you can see, the DSCR is slowly turning to 1.1 and we have the goal by the end of the year to reach 1.2, which is also mentioned in our bond rules. We are moving closer to that figure and having at least a bit of headroom to cover the debt.
In terms of our financial standing, as you all know, we've raised around EUR 12 million during the last capital raising, almost 50% of all pro rata units that could have been raised. We do consider this a good result and it gives us the capital to work with the assets as well as part of the capital immediately went to repayment of the bonds to, again, deleverage the fund. This was the key balance sheet change during the Q1 . In terms of investments, we made some small investments into the properties to enhance the properties and achieve leasing results. Generally, the NAV at the end of Q1 already reflects the full impact of the capital raising. As well as, I think it's important to note that we've made material steps towards reducing the stress on the bank loans.
As Gerda mentioned, many loans are now out of the breach and all of them are not in any covenant breaches. We managed to prolong them and now we only have Pirita as the only asset who has a loan expiring in the next 12 months. On the prospects of Pirita, I'll comment a bit later. Mostly, at least for now, the immediate crisis is managed and we can work towards our turnaround objectives. As the management of the fund, as well as with the support from the Supervisory Board, we managed to conclude that there are three turnaround objectives which we must achieve prior to anything.
First is we must ensure that the fund becomes profitable and cash flow positive again, even though we see that there is a net profitability for the Q1 , there are still CapEx works and that we need to deploy. We are still working heavily to have the actual cash flow being positive and to improve the results we've deployed fully new property management teams, which is now fully insourced. In the past, we used external partners to handle the property management services and as well as the leasing side, but now the entire team is hired into the fund and providing services just specifically to the fund exclusively. The motivational side is one directional towards the same common goal, which is one of the key attributes for us in the turnaround objectives.
Of course, as mentioned by Gerda and Antanas, we've have very stringent control on the overheads and any property expenses which is not essential for the services and even the essential services are being tendered quite actively. On the property side, we tendered majority of the services towards cheaper contracts. As I mentioned, the result will be seen later this year, as well as we've reduced the majority of overheads to have just the bare minimum of the cost that we need to run this fund. Hopefully in the future we can also find additional ways to remove it and reduce it.
As a result of this, we are hoping that all of these actions can also allow us to work with the banks, show a bit of more positive results and then hopefully remove and reduce the cost of borrowing as well. The second point on the turnaround is our properties have to become competitive again. There have been times in the past where we had prolonged vacancies. This is now fully being addressed by the deployed teams. Our general target, of course, is to have the net positive leasing. At the moment, we have around 85% occupancy. Definitely our aim through this year is to increase it, which then helps the cash flow. We are hoping that some of the rental conditions in the current contracts can be improved upon the prolongations of the lease agreements, which is another side that we are working close.
Generally, we together, the management board and together with the property teams, we underwent through full review of our all leasing contracts, all costs, and have done a concrete action plan, how we are going to decrease the costs and increase the leasing and rental agreements. Hopefully we can also achieve a bit of efficiency through CapEx for us, as also Antanas mentioned, the fund needed quite significant amount for CapEx works. We're trying to really focus on what's crucial at the moment and only deploy such CapEx works. Once we see that there is actual positive movement in the results, we can consider non-essential items as well. These first two points is mostly about engaging our teams and working a lot with the assets. We have the third objective, which is the sustainable capital structure.
This fund had the unsustainable capital structure for quite many years now, probably since COVID-19, and we are hoping to turn the tide. We reiterate and clearly state that our goal is to achieve below 50% of LTV and cover the debt, especially the bond as soon as possible. Hopefully in result, working more with the banks and achieving sustainable cost of debt, which at the moment, at least in my opinion, it's not sustainable and we must reduce it further. Hopefully we can achieve that. As our top priority, we've declared many times, but I'll reiterate that we have the goal of repaying back the entire bond as soon as possible, and we can do it realistically through disposals or further capital injections.
With the remaining part, I think there are concrete steps that we can take to reduce it as soon as possible. Of course, once we've done all the work of the bond, improved the assets, we can then hopefully restore the top-tier lenders' willingness to finance the long-term debt and reduce further our cost of debt. Our plans for 2026 generally reflects the key goals. There is very concrete decision that we have made inside the management company that unfortunately we cannot continue or restart the distributions to investors until we reach the turnaround objectives as well as we will not be taking any decisions on further capital injections until we have solved the turnaround objectives.
I think at the moment we are going through this transition phase looking at the realistic situation of the fund where we can get it within the next 12 months. Once we've dealt with the fundamental immediate objectives of leasing the properties and working with the assets, then we can look at the strategic options of the fund, what can be done with the assets, and what we can achieve. What's the best outcome to return the funds to the investors, whether it's to after stabilizing the portfolio, return to distributions or are there any further sales that we should do and kind of return the funds to the investors through the disposals of the assets. In terms of the plans, we've generally working tremendously on the leasing side. Leasing, leasing is the current phrase we have in the fund.
Throughout the past quarter and the beginning of this quarter, we've worked a lot on our Latvian assets where we signed a new anchor lease with Abrands Cash and Carry. We needed this new tenant because our previous tenant, Sky Baltija in Hippokrata Asset, which was previously Sky Asset, went bankrupt. They declared bankruptcy in March, and we immediately found a new anchor tenant who can occupy the building and still provide the positive cash flow for it. As well as we've been, in the past several months, working closely with LVM, one of our largest tenants and the one who fully occupies pretty much this building to find a long-term solution. I think we found one. We signed an agreement with them, and they will hopefully be staying in the building until 2034. We're still working out the structure and how to best support them as a tenant.
We've managed to reach an agreement on the formal side of things and hopefully we have them for the long term. As well as we've been working on many different partnerships and one example I want to point out is Civinity, where we signed a lease agreement with them as well as a partnership agreement, which both helped us to lease the properties, as well as achieve good partnership results through our property management side and the cost side on the assets. We are aiming to do more of these partnerships in the future, hopefully resulting in further leasing activities. The last item from the leasing side is we managed to sign the prolongation with MyFitness and an expansion. They will be expanding in Postimaja in 2027, it's another way to secure tenants for the foreseeable future.
These activities truly, in a sense, help us to stabilize the fund, as they are prolonging the weighted average lease term of the fund, which now has gone from three years, roughly at the start of 2025, to four years at the beginning of 2026, and now hopefully even to a higher number of having a stable cash flow and less risk of these tenant changes and them moving away from the assets, which was the case throughout the past five years. I think there have been many cases in Lincona or in Upmalas where a large tenant left the building, creating immediate pressure for the assets. We are getting a lot of new leases, which is in a modern sense and size at 500 sq m to 1,000 sq m. We have more diversification, hopefully higher WALT. As the other objective, we had the costs.
Our goal for this year is to have the run rate of overheads at around EUR 100,000 per quarter, which is without the management fee. This is a significant reduction from the previous overheads which we had in the past, again, reducing the stress on the fund and on the profitability. We are finishing with the onboarding of the property operators, and this task is now mostly finished. As I mentioned, we will still be undergoing some partner changes in the assets. Hopefully, during this year, we can have the full base, where we have the full property management competence in-house and then the partners that fit us right and can help us achieve the goals which we outlined. Of course, it's not 2026 if we're not using AI, so we're deploying a lot of AI in our daily work.
We are looking to how to enhance our property performance by also deploying some AI tools and especially in sales. We use a lot of them. Hopefully this can result in an improvement on the sales side as well. The last one on the item list, we have the disposal targets. We've been vocal about the need to dispose at least one or two additional assets. We are going through with the plan and at the moment, the three key assets that we are considering for sale is Pirita, Hippokrates Center, which is ex-Sky, and North Star. In all three cases, we have suitable buyers at the moment and already engaged discussions. Probably throughout the next couple of quarters, we will see if the negotiation materializes.
As well as we know, we have declared in the past that we're not selling the assets below the book value. All three suitors for all three of these assets are in the range of current book values. As discussed and said by Gerda, there is definitely a bit of pressure and difficulties to actually achieve the sales at the current book values. I think through constructive talks and creative solutions with the potential partners, we can achieve the book price for these particular assets. Of course, the main objective of selling these assets is to repay back the bond. Whatever free cash we will have from the disposals, we will use to further decrease the bond. I think this is a more appropriate way to reduce the bond rather than trying to get additional capital from the investors and doing dilutions.
This is mostly our goals for 2026. We will definitely be communicating more about them in the future as we see the actual results of our actions. Now I want to focus more on the voting items of this general meeting. The first one being the proposal of the new Supervisory Board Member, Priit Perens, who has an extensive experience in the banking industry. He was the CEO of Swedbank Estonia and worked in the group executive management team. We are proposing Priit as a new Supervisory Board Member from June 1st. With this, we are trying to strengthen the Estonian presence inside the fund and having an experienced professional as Mr. Priit can deliver additional value to the shareholders and to the entire management team through his support and his consultations on the management and best practices for the governance of the fund.
I want to announce that as of today, Ms. Milda Dargužaitė, who was the previous supervisory board member, has resigned from her position. With Priit, we would again have three supervisory board members of the fund. At the moment, we have the chairman, Andrius Smaliukas, and Professor Per V. Jenster. Today, we are hoping to achieve three resolutions in line with the mentioned information. First is to elect Mr. Priit Perens to the supervisory board for two years from today, June 1st 2026. Approve remuneration of EUR 11,000 per year for the new supervisory board member, Mr. Priit, which is in line with the current remuneration of the current supervisory board members. The third item is to extend the mandates of all current supervisory board members until June 1st, 2028.
Aligning all of the mandates to the same term and having now clear Supervisory Board in place. We are now beginning the voting. We have received some powers of attorney prior to the meeting. As I mentioned, we have the quorum today, so we can pass decisions. In the meantime, while we're voting, we can proceed with the Q&A section. We have not received any questions to this Annual General Meeting beforehand. Let's look if we have received any questions during the webinar. It seems not. If anyone has any questions, I encourage to raise them, and hopefully we can answer.
Yeah, I have a question. About those bonds outstanding, do their terms include any limitations to pay back that principal, or are you flexible anytime you have the liquidity of that program?
Yes. I don't know if the webinar attendees can hear the sound because we're in a quite sizable room, so I'll repeat the question. Basically, the question is about the bond limitations. Are there any limitations that would prevent us from repaying the bonds? Maybe, Gerda, you can answer.
The only bond limitation is that the minimum amount we can repay is starting from EUR 3 million. This is the minimum amount.
If I may add, another small limitation is that every repayment costs a repayment fees. There is a little penalty which the bondholders will charge, and that penalty is diminishing as the time goes. The later the repayment takes place, the smaller that early repayment fee.
As mentioned, if we have free cash, then definitely it will be used. If we reach this EUR 3 million threshold of free cash, which we have, then we will immediately repay the bonds. Please ask further questions. You've been very cheerful before the meeting.
Yes. Sure. Maybe we can do like a type of official meeting, then we can have some discussion. Yeah, what was my interest that, yes, it was like three properties, on things or you have to open a discussion. What do you believe? Can the deal see already Q2 or move to maybe Q3 this year?
Forward.
Forward.
Forward.
I mean, it's been it since X Sky center, et cetera. Because it's a big challenge is that your expectation on the pricing, and definitely I would like to get a very good pricing. Is it a very big difference, what is your expectations and what are the buyers expecting?
Let me help here answering this question because it's part of the information which maybe is confidential and should not be communicated to the market for its firm binding. This fund, like any seller in a situation like this, is on a very delicate negotiation power or lack of it. It is obvious that everybody would like to come and buy a good asset for a very distressed price. The duty of this management towards all of the unit holders is not to allow such distressed sales to take place for as long as better options are available. Therefore, the communication this management were giving to the market to any potential buyers is, first of all, that there are three properties identified for sale for different reasons why these three are selected.
Mostly because this management, and we believe that they are liquid, they are smaller in size, they should attract certain smaller type of investors who are still out there on the market. A, B, they are in a decent commercial shape, so they should be okay to finance with bank loans and, therefore, make some sort of buyer interested. I think we can answer today in terms of future guidance, that it is not likely that any of those disposals would close in Q2 because Q2 is essentially this month.
[audio distortion]Yeah.
We have also communicated on this meeting that we give it Q3 to see how much of disposals can take place, and if that is sufficient for the management to believe that we are on the right track to repay the bonds or not to face the bond breaches before the year end of 2026. We are not bringing up for the consideration of the management and supervisory board, and ultimately the unit holders, a question of new equity raising, new capital raising. That would be an obvious way to solve this over-indebtedness problem. Q3 will be very important in terms of how the disposals of these three or few of those three properties are progressing. That's the calendar which is in every one of these conversations which the management is having with prospective buyers.
Once there are binding agreements, those will be communicated to the market, to the stock exchange. Until then, we can say today there are no commitments regarding any of the three sales, so.
Are you satisfied? We're still recording, aren't we?
We're still recording, yes. There are online question about the share of units published somewhere to the majority, like the majority of unit holders, are they reported somewhere? We have the report on the unit holders in our quarterly and annual report. There is a section at the back of the financial report where one can see the investors. Unfortunately, in the current setup, Nasdaq does not allow us to see the full unit holders, as some of the unit holders use nominees like banks to hold their accounts, and then we can only see the banks. We are disclosing as much information as we can. Any other questions? While we're waiting for the voting results. Yes.
This is interesting, you mentioning here property management as an in-house role. How is it managed today if it's your objective to become managing in-house the property? I was assuming this is part of the operating procedure.
It is done already.
It is done already.
Yes. Initially, we deployed and hired the full property management teams in-house. As you may know, for the fund of such size, there are definitely some transition period which is needed, hiring the right personnel and deploying them. We've now in Q2 are mostly them. There's one of two positions that still are up for debate, but basically the entire fund and all assets are now managed by internal partners.
Does it mean staff recruitment or still outsourcing?
Could you clarify the question?
You said hiring. Hiring means you are going to recruit people versus outsourcing.
Yes
Right.
The people are fully in-housed and recruited to work in-house. There are some people that are working within the fund limits and the restrictions that we have under fund rules that are working inside the SPVs and subsidiaries of the fund. There are some other people who are exclusively working with the assets and providing services on a contractor basis.
Right.
They are 100% dedicated just to these assets, in all 11 assets that we have.
In three countries.
Yes. It's different teams for different assets, not just one. Every single asset has an individual property management team. The bigger assets have typically the team of four or five people and the smaller, for example, in case of Hippokrates, there's just one person who is providing the property management and the leasing service. We, of course, have outsourced facility management and another
It's more cost-effective to do it that way?
Yes, definitely. I would say that first of all, we get the full dedication, second of all, it's cost effective because we can avoid brokerage fees, we can avoid some additional service fees, and you have a full dedicated person, where you have typically the salary but some, of course, motivational scheme as well.
Do you have also, like a long term, should I say, available right now, assuming that everything goes very smoothly, very well, and potentially maybe 2027, 2028, are you planning to start acquiring some new properties or what's the long term goals?
Let me help here because let me be very honest here. There are different ways in which this fund could continue living a successful life, but we have to get there to have that platform which will allow for a choice. For now, this fund, we can fantasize about growing certain type of ownership of certain type of assets if the competence of the team, let's say, is all about, just to give an example, these city center properties like Postimaja and such assets in Riga and Vilnius or something else. For now, this is a luxury conversation which we cannot honestly have. There are certain ideas what this fund could be, but first of all, it has to stop burning cash and address the over-leverage. Once we are there, then we can have trust together that this works, that this has some sort of future.
Again, quite honestly, if it doesn't, this fund should liquidate in a gradual fashion if the market conditions are such that the assets could be sold at meaningful prices. That's what it should do if it cannot stop burning cash. We came to this recognition. What we cannot afford to do is just to go and sell for to the first buyer for whatever they pay today, because it's not the quality of the assets and not the quality of the market conditions now we are facing. We would all be left with nothing if it's just to go and do a spring sale, so to say.
Absolutely. I think-
Why do you say we are all left with nothing?
It might.
Yes.
It might. It's all of us around the table with the same care and the same hope that this will work out.
You come across very inspirational.
Inspirational is not enough. Delivering is what really does.
You also have positive outlook, not all negative.
Yeah, I absolutely agree with Antanas. We have to be brutally honest with each other, with investors, with partners, and then once we've underwent the full transition, then we can set a clear strategy for the future. At the moment, I do believe it's too early.
I have a question. How about some CapEx or fit- out needs for the next, let's say, 12 months? Any major needs there, or you said you have cut back the non-essential things? How's that going?
Most of the CapEx that we have budgeted at the moment is going towards the improvement of the assets related to tenant activity. Signing of the leases, prolongations of the leases, and majority of the cost is attributed there. Once we have done and have stabilized the situation, then we can consider more long-term asset enhancement activities.
It is still 15% of the space in the portfolio which the fund owns today, which has no tenants. Most of that space to get a tenant in will require some expenditures on behalf of the landlord, meaning the fund. Negative outflows to get that space filled, they are there. They will be there. In terms of the budgets which are prepared for the properties and the liquidity which the fund currently has, it seems the fund would pay for such expenditures over the period of next 12 months, to answer your question. CapEx can be funded. The real challenge is that the cash flow of this operation cannot continue repaying the bonds and other excess debt. That can be only achieved through property disposals, having repaid the bank, whatever is left would be used for further down payment of the bonds.
15% vacancy is not good, but the events will become, if you have 5.6% to service the loans [audio distortion] .
It's the problem of averages that one who is dead and one who has a fever on average is 36.6. The problem for the averages is that some properties have too much vacancy to be operationally, especially when you're going to shopping centers. A shopping center needs certain-
Yeah
-minimum level of activity so that it is on the right positive track in terms of customer experience, in terms of cash flow, in terms of properties in fraction . It's not that dramatic if you have one unit in an office building vacant. The other office tenants are not so much affected by it. Of course, keeping vacancy costs money just to keep the vacancy. Real estate taxes, security, cleaning of the territory. There is a cost of it .
We have now the results of the voting for the three agenda items, think we can announce it and continue the discussion in an informal setting. As mentioned, we have reached the quorum today as more than 50% of the whole fund investors, unitholders have registered for this meeting through attendance or powers of attorney. First agenda item was the election of Mr. Priit Perens as the new Member of the Supervisory Board of the fund. In favor of Mr. Priit, 123,882,973 units have voted, which is roughly 99% of the whole attendance of today's meeting. The decision is passed. Against voted 909 units. The decision is passed and Mr. Priit Perens will become Supervisory Board Member of the fund effective as of today.
On the second agenda item, we have the decision to pay remuneration of EUR 11,000 for Mr. Priit. Again, the decision is in favor. In favor, 123,808,473 units have voted in favor, 909 units have voted against. We had 74,500 units being neutral. The decision is passed and Mr. Priit Perens will receive an annual remuneration of EUR 11,000 for his tenure as the Supervisory Board Member. The last item is the decision to extend the mandates of all three supervisory board members of the fund until 2028 June. 123,878,382 units have voted in favor. The decision is again passed and 5,500 units were neutral. All three decisions are passed. The mandates are extended for two years.
Mr. Priit Perens is elected, and with this, the voting is fully done and legally binding. For those who are in attendance through webinar and the line, I want to thank you. There are no further questions in the webinar. Thank you. It was lovely to have you and see you next time. Bye.