Quarterly report – Q4 2024

Baltic Sea Properties AS

Highlights

2024

Sustained growth and strategic execution

We are pleased to present our Q4 report, marking the completion of another year of strong financial performance, operational resilience, and execution according to our long-term growth strategy. Despite ongoing market uncertainties, we have maintained a solid financial position while staying committed to continue our strategy of growing a diversified portfolio of high-quality assets.

One of the year's key milestones was the completion of the first stage of Liepų Parkas, delivered on schedule to ESO (Ignitis) in January 2025. Meanwhile, we strengthened our capital position, maintained stable dividends, and received industry recognition for our performance.

Key metrics and highlights

• Completion of 1st stage of Liepų Parkas - The 4,340 m² office and warehouse development for ESO (Ignitis) was completed on time and on budget, with handover taking place in January 2025.
• Strong capital position - Successfully raised mNOK 98.4 through a direct placement and subsequent repair issue, reinforcing financial flexibility for future developments.
• Dividend distribution - Paid NOK 1.75 per share in dividends to shareholders, maintaining a stable and attractive return.
• Continued recognition - Awarded 1st place in the "Strongest Brand Baltics Developers - Logistics" category at the European Real Estate Brand Awards.
• Development pipeline expansion - We continue to work hard on building a strong development pipeline, including several exciting prospects within our new business and retail park, Liepų Parkas.
• Financial performance - Rental income, EBITDA, NAV, and LTV remain in line with expectations, reflecting continued financial resilience.
• Achieved BREEAM In-Use 'Excellent' certification for our two DPD terminals, reinforcing our commitment to sustainable building standards and energy-efficientoperations.

Quarterly report | Q4 2024

Liepų Parkas | Concept visualisations

Economic Growth and Market Shifts

Lithuania's economy in 2024 showed resilience, growing at 2.7%, primarily supported by stronger performance in manufacturing industry, wholesale and retail trade, and the ICT sectors. Positive contributions from construction enterprises also bolstered economic resilience. Inflation dropped below 1% primarily due to decreasing energy and food prices. Unemployment stabilized at 7% and started to decline faster in the last quarter of the year. This stability is attributed to a recovering labor market and sustained economic growth. Projections for 2025 suggest close to 3% GDP growth, driven by growth of industrial companies and domestic consumption.

The Investment Market

In the real estate sector, Lithuania accounted for approximately one-third of the total Baltic real estate investment market by the end of 2024. The total investment volume in Lithuania reached EUR 155 million, while the Baltic region as a whole saw approximately EUR 500 million in transactions, marking a 37% year-on-year decline. The retail segment was in the leading position, investments in the Baltic countries reached close to 240 mEUR or half of total investments during 2024, reflecting the same trend in Lithuania. Despite a less active fourth quarter, the market showed signs of recovery and higher activity in the beginning of 2025. Despite these challenges, investors have the opportunity to capitalize on upside potential in a difficult and less active market. By leveraging market data, they can position themselves to secure higher-than-average returns. The outlook for 2025 remains optimistic, with expectations of continued economic growth and a revitalized real estate market.

The Residential Market Development

The residential real estate market in Lithuania demonstrated recovery in 2024, fueled by stronger demand and lower interest rates. In Vilnius, secondary apartment transactions were only 3% lower than the previous year, while the primary market experienced an impressive 42% increase in activity. This growth was particularly evident in the third and fourth quarters, with transactions surging by 88%.

Pre-sales activity in the primary market was especially robust during the final months of the year, reflecting heightened market confidence. By the end of the year, total primary market sales in the city reached 3,400 units.

The European Central Bank's interest rate cuts played a critical role in reviving market activity by easing borrowing costs for potential buyers. This policy shift encouraged those who had previously been hesitant to commit to purchases, leading to a surge in transactions. Expectations of further rate cuts in the first half of 2025 are likely to sustain and even amplify this momentum,

positioning the residential market for continued growth in the coming year.

The Imbalance Between Office Supply and Demand Creates Market Tension

In the latter part of 2024, the office vacancy rate in Vilnius remained steady, staying close to the previous year's level. Class A office spaces saw an improvement, with fewer vacancies as demand for premium spaces grew. In contrast, vacancies in class B offices increased, surpassing 10% for the first time since mid-2022.

During the second half year, only one new speculative project was completed, adding a moderate amount of office space for the year. Looking ahead, a significant amount of new office space is expected next year, with most of it concentrated in the Central Business District, signaling a continuous developer interest in this prime location.

Office space take-up in the final quarter of 2024 was notably high, pushing the annual total well above the previous year's level. The strong demand was driven by an unexpected surge in pre- lease agreements and quick turnover of available spaces in the secondary market. However, the rate of office take-up relative to total supply has declined in recent years. This, combined with an expanding office market, suggests that supply may be outpacing demand, hinting at a potential slowdown ahead. In 2024, limited new supply provided landlords with a relatively stable environment. However, 2025 is expected to see the largest new supply growth in five years, intensifying competition for both owners of older buildings and developers of new projects. Slow growth in the startup segment workforce and a lack of foreign tenants have created challenges for all market players. The absorption of 2025's new supply is anticipated to extend into 2026, while projects not yet initiated are expected to face delays of at least two years.

The Logistics Market

The logistics and industrial real estate sector in Lithuania experienced a period of adjustment in 2024, marked by a temporary downturn in demand. The ongoing construction activity remained strong with over 300,000 sqm in development across all key regions last year. Despite short-term challenges, investment in mixed-use projects-combining office, retail, and industrial-warehouse spaces-continued, reflecting developer confidence in long-term market potential. A key trend throughout the year was the rising vacancy rate in older warehouse properties, driven by a growing preference for modern, efficient facilities. As businesses optimize operations, demand has gradually shifted toward newer developments. Looking ahead, a moderate recovery is expected in late 2024 or early 2025, supported by improving economic conditions and seasonal market dynamics. While near- term uncertainty remains, continued investment and strategic development indicate a positive long-term outlook for the sector.