22.01.2020

CLIENT BULLETIN 22 JANUARY 2020

Good news for unitholders of eQ Finnish Care Fund

The eQ Finnish Care Fund has grown significantly in the past few years, and we have built an outstanding real estate portfolio. Care and communal properties are still an extremely interesting investment target in Finland. Since many new subscriptions were made for the Fund last year and as we also sold 48 properties last spring, we have decided not to accept any new subscriptions for the eQ Finnish Care Fund during the subscription window in March 2020. The Fund Rules enable us to suspend subscriptions. However, income distributed from the Fund in March is used to subscribe for new fund units as usual.

With this measure, we hope to uphold the Fund’s investment exposure and secure return of the current unitholders. Our goal, as a long-term investor, is that the portfolio of our real estate funds is fully invested in high-quality properties, with 30–40% leverage. We closed the eQ Finnish Care Fund for subscriptions in spring 2017 also.
The investment activities of eQ Finnish Care Fund continue as planned, and this year the Fund will both acquire new properties and implement ongoing and new development and construction projects. As usual, the Fund will distribute a 6% income in April. For 2020, we expect a return of 6–9%* after full expenses. New fund subscriptions can be made again, in the ordinary manner, on 30 June 2020.

The temporary suspension of fund subscriptions has no effect on the redemption of fund units. Any unitholder wishing to redeem their fund units in eQ Finnish Care Fund can do so with the value on 30 June 2020, and any redemption order must be submitted by the end of March at the latest.

eQ Finnish Real Estate Fund is open as usual on 31 March 2020

eQ Finnish Real Estate Fund is open for subscriptions, as usual, on 31 March 2020 also. The market for commercial real estate in Finland is much larger than the care property market, and the Fund’s investment rate is at our targeted level.

Basic information about eQ Finnish Care and eQ Finnish Real Estate Funds:

eQ Finnish Care Fund has grown and become the most important fund in its sector in Finland and achieved a stable position in the marketplace. In the course of its operation, the Fund has provided investors a return of +9.0% p.a.*, after expenses. 2019 was also a successful year, and the Fund returned +9.1% after expenses. Capital in the Fund increased by more than 260 million euros in 2019, and real estate assets grew by over 200 million euros, despite a divestment of over 142 million euros in properties. At present, the Fund owns 161 modern properties in Finland. They have an occupancy rate of 99%, in other words they are fully rented out. The net operation income is 5.8% and the average maturity of rental agreements is 10 years. The tenants include some of the best public, private and third-sector operators in Finland. The Fund’s equity is 1,010 million euros, and it has 360 million euros in liabilities. The value of real estate assets is 1,237 million euros.

The real estate assets of eQ Finnish Real Estate Fund have increased to 1,087 million euros in five years. In the course of its operation, eQ Finnish Real Estate Fund has provided investors a return of +9.2% p.a., after expenses. 2019 was also a successful year, and the Fund returned +7.7%* after expenses. At present, the Fund owns 50 properties mostly in the Helsinki metropolitan area and Tampere. The occupancy rate of the properties is 95% so they are, in practice, fully rented out. The net rental income is 5.9% and the average maturity of rental agreements is five years. All of the Fund’s tenants are well-known operators in Finland. The Fund’s equity totals 712 million euros and its liabilities total 440 million euros. The Fund has an extremely good outlook for the near future, and we expect a return of 6–9% p.a.*, after expenses. We estimate that eQ Finnish Real Estate Fund will acquire 200 million euros’ worth of more properties over the next six months. The Fund has also launched two significant development projects, in Helsinki and Tampere.

eQ Asset Management’s real estate team employs 12 real estate investment professionals. The total size of the team is 18 professionals, including legal staff specializing in real estate and property administration employees.

We would be happy to provide further information.

* Expected return is eQ’s estimate and not a promise of future returns.

eQ Asset Management Ltd.

The main risk factors of the funds are related to property development, realization of investments and debt financing. The funds’ real estate investments of are concentrated in one sector (care or commercial real estate) and the development of this sector may affect the funds’ performance. In addition, the funds are exposed to risks in real estate development, such as renovation, planning and construction. Selling of investments, especially in a weak market situation, can lead to losses and delays and may delay payment of redemptions. The fund may need to suspend the fund's redemptions. The fund uses debt financing in its operations and pledges its assets as security for its debts. Debt contracts typically contain terms that protect the creditor and may limit the fund's investment activities and fund redemptions, especially in the event of a decline in the value of real estate. For more information on risks see the Fund Prospectus, available at www.eQ.fi