TORONTO, May 11, 2020 (GLOBE NEWSWIRE) — European Residential Real Estate Investment Trust (“ERES” or the “REIT”) (TSX-V: ERE.UN) announced today its results for the three months ended March 31, 2020.
FIRST QUARTER 2020 HIGHLIGHTS
- NOI increased by 224% for the three months ended March 31, 2020 compared to the same period last year, primarily due to contribution from acquisitions during the period, higher monthly rents and reduced property operating costs driven by lower repairs and maintenance costs and lower property management fees on stabilized properties.
- NOI margin on the total portfolio was 76.0% compared to 73.5% for the same period last year, due to (i) higher monthly rents, (ii) lower R&M costs and (iii) reduced property management fees on stabilized properties.
- The REIT maintained a high, stable occupancy rate of 98.3% for residential properties and 100.0% for commercial properties as at March 31, 2020.
- As at March 31, 2020, the fair value of the REITâs property portfolio increased to â¬1.35 billion, consisting of â¬1.24 billion in multi-residential properties located in the Netherlands and â¬0.11 billion in commercial properties located in Germany, Belgium and the Netherlands, resulting in a fair value gain of â¬14.5 million for the period.
- During the three months ended March 31, 2020, the REIT declared three monthly distributions of â¬0.00875 per unit each (equivalent to â¬0.105 per unit annualized).
- On January 31, 2020, the REIT closed the sale of its commercial property located in Dusseldorf, Germany, to an arm’s length third party purchaser for total gross proceeds of â¬16.9 million, further streamlining the REIT’s strategic focus on the European multi-residential asset class.
In addition, for rental increases due to indexation beginning on July 1, 2020, the REIT served tenant notices to 5,352 suites, representing 95% of the residential portfolio, across which the weighted average rental increase due to indexation is 2.4%, based on the Dutch government’s allowed inflation of 2.6% for the 2020 regulated unit indexation framework.
“Despite the recent turbulence and uncertainty inflicted on the global economy by the rapidly evolving COVID-19 pandemic, ERES has remained steadfast and financially secure, enabling the REIT to safeguard effectively the well-being of its staff and tenants during these challenging times”, commented Phillip Burns, Chief Executive Officer. “In ERES’s first twelve months, we successfully have established an operating platform that already has proved its ability to withstand trying and unprecedented environments, and we have no doubt in our ability to continue adapting for as long as needed”.
EARNINGS STRENGTHEN IN UNCERTAIN TIMES
For the three months ended March 31, 2020, property revenues were â¬17.1 million, up from â¬5.4 million for the three months ended March 31, 2019. The increase is primarily due to acquisitions and an increase in average monthly rents (“AMR”) in the stabilized portfolio. Stabilized net AMR for the multi-residential portfolio increased by 4.0% to â¬874 per suite at March 31, 2020 from â¬840 per suite at the same time last year, driven by increased rents on annual indexation, turnover and conversion of regulated suites to liberalized suites.
Net Operating Income (“NOI”) was â¬13.0 million for the three months ended March 31, 2020, up from â¬4.0 million for the three months ended March 31, 2019. The increase is driven by contribution from acquisitions as well as higher monthly rents on stabilized properties, combined with reduced property operating costs from lower repairs and maintenance (“R&M”) costs, which includes the impact of a decline due to the COVID-19 pandemic with deferral of certain non-essential R&M, as well as lower property management fees on stabilized properties. NOI margin strengthened to 76.0% for the three months ended March 31, 2020 from 73.5% in the quarter ended March 31, 2019.
Funds from Operations (“FFO”) for the three months ended March 31, 2020 were â¬7.6 million (â¬0.033 per Unit), compared to â¬2.8 million (â¬0.034 per Unit) in the same prior period. Adjusted Funds from Operations (“AFFO”) for the three months ended March 31, 2020 were â¬6.8 million (â¬0.030 per Unit), compared to â¬2.5 million (â¬0.030 per Unit) in the same prior period. FFO and AFFO per Unit were impacted by higher current income tax and general and administrative expenses compared to the prior year period, offset by increased stabilized NOI and accretive acquisitions. FFO and AFFO are calculated in accordance with the recommendations of the Real Property Association of Canada (“REALpac”) as published in its white paper in February 2019 with the exception of certain adjustments which are: (i) interest on related party loans, (ii) general and administrative expenses related to structuring and (iii) acquisition research costs.
STRONG AND CONSERVATIVE FINANCIAL POSITION
ERES’s liquidity and leverage remained strong, supported by the REIT’s well-staggered mortgage profile with a 5-year weighted average term to maturity and a weighted average interest rate of 1.64%. The majority of the REIT’s mortgages are also non-amortizing, with no maturities occurring until 2022. The REIT had available liquidity of â¬87 million as at March 31, 2020, and its total debt to gross book value was 44.8%.
On April 24, 2020, the REIT received â¬63 million (excluding transaction costs) in principal from its mortgage financing secured during the period, which it used to (i) settle the remaining outstanding balance on the promissory note due to CAPREIT; and (ii) repay in full the outstanding draw on its Revolving Credit Facility. The â¬34 million remaining was maintained as cash on hand, to be used for general trust purposes and to reinforce the REIT’s strong liquidity position going forward, particularly in the context of the ongoing uncertainty related to the COVID-19 pandemic. As a result, the REIT made available â¬146 million of liquidity through a combination of â¬46 million in cash and â¬100 million in undrawn lines of credit. The REIT’s debt to gross book value also increased to 46.2%.
“ERES is robust in the strength of its financial profile, with its seasoned financial management team taking the necessary precautionary steps to not only protect, but improve its liquidity as it braces for further adverse impacts of the COVID-19 pandemic that may materialize going forward”, added Scott Cryer, Chief Financial Officer. “Combined with the support offered by our CAPREIT partnership, our cash flows will remain intact, and our financial risks minimized, as we continue to navigate this fluid situation”.
DISTRIBUTIONS
During the three months ended March 31, 2020, the REIT declared monthly distributions of â¬0.00875 per unit (equivalent to â¬0.105 per unit annualized). Such distributions are paid to unitholders of record on each record date, on or about the 15th day of the month following the record date.
The REIT intends to continue to make regular monthly distributions of â¬0.00875 per unit (equivalent to â¬0.105 per unit annualized), subject to the discretion of its Board of Trustees.
CONFERENCE CALL
A conference call hosted by Phillip Burns, Chief Executive Officer, and the ERES management team will be held Tuesday, May 12, 2020 at 9:00 am EST. The telephone numbers for the conference call are: Local/International: (416) 340-2216, North American Toll Free: (800) 377-0758.
A slide presentation to accompany managementâs comments during the conference call will be available an hour and a half prior to the conference call. To view the slides, access the ERES REIT website at www.eresreit.com, click on âInvestor Relationsâ, and follow the link at the top of the page. Please log on at least 15 minutes before the call commences.
The telephone numbers to listen to the call after it is completed (Instant Replay) are local/international (905) 694-9451 or North American toll free (800) 408-3053. The Passcode for the Instant Replay is 9844056#. The Instant Replay will be available until midnight, June 06, 2020. The call and accompanying slides will also be archived on the ERES REIT website at www.eresreit.com.
FINANCIAL AND OPERATING HIGHLIGHTS
Financial Highlights
| For the Three Months Ended March 31, |
2020 |
2019 |
|||||||
| Portfolio Performance | |||||||||
| Residential Properties | |||||||||
| Residential Occupancy 1 | 98.3 | % | 98.5 | % | |||||
| Residential Net AMR 1 | ⬠| 857 | ⬠| 840 | |||||
| Number of residential suites 1 | 5,632 | 2,091 | |||||||
| Commercial Properties | |||||||||
| Commercial Occupancy 1 | 100.0 | % | 99.0 | % | |||||
| Commercial Net ABR 1 | ⬠| 17.7 | ⬠| 16.6 | |||||
| GLA of commercial properties (sqf) 1 | 450,911 | 396,700 | |||||||
| Operating Revenues (000s) | ⬠| 17,060 | ⬠| 5,438 | |||||
| NOI (000s) | ⬠| 12,965 | ⬠| 3,999 | |||||
| NOI Margin | 76.0 | % | 73.5 | % | |||||
| Financial Performance | |||||||||
| FFO per Unit â Basic 2, 3 | ⬠| 0.033 | ⬠| 0.034 | |||||
| AFFO per Unit â Basic 2, 3 | ⬠| 0.030 | ⬠| 0.030 | |||||
| Liquidity and Leverage | |||||||||
| Total Debt to Gross Book Value 1, 4 | 44.8 | % | 44.0 | % | |||||
| Weighted Average Mortgage Effective Interest Rate 1, 5 | 1.64 | % | 1.98 | % | |||||
| Weighted Average Mortgage Term (years) 1 | 5.09 | 5.12 | |||||||
| Debt Service Coverage (times) 6 | 3.24 | 3.51 | |||||||
1 As at March 31.
2 These measures are not defined by International Financial Reporting Standards (“IFRS”), do not have standard meanings and may not be comparable with other industries or companies
3 Includes Class B LP Units.
4 Gross book value is defined as the gross book value of the REIT’s assets as per the REIT’s financial statements, determined on a fair value basis for investment properties.
5 Includes impact of deferred financing costs, fair value adjustment and interest rate swaps.
6 Based on trailing four quarters.
| For the Three Months Ended March 31, |
2020 |
2019 |
||||||
| Other Measures | ||||||||
| Weighted Average Number of Units – Basic 1 (000s) | 230,578 | 82,207 | ||||||
| Closing Price of REIT Units 2, 3 | ⬠| 2.39 | ⬠| 2.67 | ||||
| Closing Price of REIT Units (in C$) 2 | $ | 3.72 | $ | 4.00 | ||||
| Market Capitalization (millions) 1, 2, 3 | ⬠| 550 | ⬠| 263 | ||||
| Market Capitalization (millions in C$) 1, 2 | $ | 858 | $ | 394 | ||||
1 Includes Class B LP Units.
2 As at March 31.
3 Based on the foreign exchange rate of 1.5584 on March 31, 2020.
ERESâs unaudited consolidated financial statements and management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2020 can be found at www.eresreit.com or under ERES’s profile at www.sedar.com.
SUBSEQUENT UPDATE
For the subsequent period to May 11, 2020, residential occupancy has remained high and stable and the REIT’s rate of residential rent collection has been consistent with its historical average collection rate. The REIT received approximately 100% of residential rental revenue due for the month of April 2020, and its rate of rental collection for May 2020 to date likewise remains in line with its historical average rent collection rate, although this may not be indicative of the REIT’s rate of rent collection in the upcoming months given the ongoing uncertainty related to the COVID-19 pandemic, including uncertainty surrounding governmental measures taken to mitigate the economic impacts.
Commercial occupancy also holds strong at 100.0% as of May 11, 2020, while the REIT continues to work one-on-one with certain retail tenants affected by the COVID-19 pandemic to create individualized rent deferral programs, where needed. No additional retail tenants have contacted the REIT with respect to rent accommodation since the REIT’s last business update related to COVID-19 on May 1, 2020, and the REIT’s two office properties in Germany and Belgium continue to provide stable and consistent cash flows, with no indication that either will encounter financial difficulty in the foreseeable future.
The REIT will continue to work closely with all stakeholders during these unprecedented times. For more information on the REIT’s response to the COVID-19 pandemic and details on the steps taken within the organization to support tenants and staff, please refer to the Statement from the Office of the CEO dated May 6, 2020, “Navigating through COVID-19” on the REIT’s website.
About European Residential Real Estate Investment Trust
ERES is an unincorporated, open-ended real estate investment trust. ERES’s REIT Units are listed on the TSX Venture Exchange under the symbol ERE.UN. ERES is Canadaâs only European-focused multi-residential REIT, with a current initial focus on investing in high-quality multi-residential real estate properties in the Netherlands. ERES owns a portfolio of 131 multi-residential properties, comprised of 5,632 suites and ancillary retail space located in the Netherlands, and owns one office property in Germany and one office property in Belgium.
ERESâs registered and principal business office is located at 11 Church Street, Suite 401, Toronto, Ontario M5E 1W1.
For more information please visit our website at www.eresreit.com.
For further information:
| Phillip Burns | Scott Cryer |
| Chief Executive Officer | Chief Financial Officer |
| Email: p.burns@eresreit.com | Email: s.cryer@eresreit.com |
Category: Earnings
Certain statements contained in this press release constitute forward-looking statements within the meaning of applicable Canadian securities laws which reflect ERESâs current expectations and projections about future results. Forward-looking statements generally can be identified by the use of forward-looking terminology such as âoutlookâ, âobjectiveâ, âmayâ, âwillâ, âexpectâ, âintentâ, âestimateâ, âanticipateâ, âbelieveâ, âconsiderâ, âshouldâ, âplansâ, âpredictâ, âestimateâ, âforwardâ, âpotentialâ, âcouldâ, âlikelyâ, âapproximatelyâ, âscheduledâ, âforecastâ, âvariationâ or âcontinueâ, or similar expressions suggesting future outcomes or events. The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Any number of factors could cause actual results to differ materially from these forward-looking statements as well as future results. Although ERES believes that the expectations reflected in forward-looking statements are reasonable, it can give no assurances that the expectations of any forward-looking statements will prove to be correct. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect. Accordingly, readers should not place undue reliance on forward-looking statements.
Except as specifically required by applicable Canadian securities law, ERES does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. These forward-looking statements should not be relied upon as representing ERESâs views as of any date subsequent to the date of this press release.
ERES uses financial measures regarding itself, such as adjusted funds from operations, that do not have standardized meaning under IFRS and may not be comparable to similar measures presented by other entities (ânon-IFRS measuresâ). Further information relating to non-IFRS measures, is set out in ERESâs annual information form dated March 30, 2020 under the heading âNon-IFRS Measuresâ and in ERESâs MD&A under the heading âNon-IFRS Financial Measures.â
Neither TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange Inc.) accepts responsibility for the adequacy or accuracy of this release.