TORONTO, Aug. 10, 2020 (GLOBE NEWSWIRE) — European Residential Real Estate Investment Trust (“ERES” or the “REIT”) (TSX: ERE.UN) announced today its results for the three and six months ended June 30, 2020.
SECOND QUARTER 2020 HIGHLIGHTS
- As at June 30, 2020, the fair value of the REITâs property portfolio increased to â¬1.36 billion, consisting of â¬1.25 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 gain of â¬25.4 million for the 6-month period.
- NOI increased by 144% for the six months ended June 30, 2020 compared to the same period last year, primarily due to contribution from acquisitions and higher monthly rents, while NOI margin on the total portfolio remained strong at 76.1% compared to 76.4% in the prior period.
- The REIT maintained a high, stable occupancy rate of 98.8% for residential properties and 100.0% for commercial properties as at June 30, 2020.
- 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 was 2.4%.
- The REIT continues to collect residential rental revenue at a rate consistent with its historical average, and its two office properties also provide stable and consistent cash flows, while the REIT works closely with certain retail tenants affected by the COVID-19 pandemic on individualized rent deferral programs.
- Liquidity and leverage remain 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 1.65%. The majority of the REIT’s mortgages are also non-amortizing, with no maturities occurring until December 2022. The REIT had immediately available liquidity of â¬141 million as at June 30, 2020, and its total debt to gross book value was 46.0%.
- During the six months ended June 30, 2020, the REIT declared monthly distributions of â¬0.00875 per unit each (equivalent to â¬0.105 per unit annualized).
“Against the backdrop of economic uncertainty currently defining the global operating environment, ERES’s priorities remain focused on the well-being of its staff and tenants first and foremost. With the gradual reopening of the Dutch economy, we continue to pursue prudently our strategic objectives to retain a strong liquidity position, and to remain cognizant of operating dynamics in the context of the COVID-19 pandemic,” commented Phillip Burns, Chief Executive Officer. “With the strong performance of the resilient multi-residential sector and the attractive opportunities it continues to provide, we are cautiously optimistic as the Dutch economy and others begin to reopen, and we will leverage our current scale in the market accordingly.”
STRONG OPERATING RESULTS PERSEVERE ANOTHER QUARTER
For the three months ended June 30, 2020, property revenues were â¬17.2 million, up from â¬8.6 million for the three months ended June 30, 2019. For the six months ended June 30, 2020, property revenues were â¬34.3 million, up from â¬14.0 million for the six months ended June 30, 2019. The increases are primarily due to acquisitions completed during the periods and an increase in average monthly rents (“AMR”) in the stabilized portfolio. Stabilized net average monthly rents for the multi-residential portfolio increased by 6.0% to â¬885 per suite at June 30, 2020 from â¬835 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¬13.1 million for the three months ended June 30, 2020, up from â¬6.7 million for the three months ended June 30, 2019. NOI was â¬26.1 million for the six months ended June 30, 2020, up from â¬10.7 million for the six months ended June 30, 2019. The increases were likewise driven by contribution from acquisitions as well as higher monthly rents on stabilized properties. However, this was offset by higher property operating costs during the periods, due to higher repairs and maintenance, increased advertising costs associated with turnover and vacancy reduction, as well as higher insurance and bad debt expense pertaining to the retail component of the REIT’s mixed-used property, due to the COVID-19 pandemic. As a result, NOI margin decreased to 76.2% for the three months ended June 30, 2020 from 78.3% in the quarter ended June 30, 2019, and to 76.1% for the six months ended June 30, 2020 from 76.4% for the comparative period last year.
Funds from Operations (“FFO”) for the three and six months ended June 30, 2020 were â¬7.7 million (â¬0.033 per unit) and â¬15.4 million (â¬0.067 per unit), respectively, compared to â¬4.5 million (â¬0.039 per unit) and â¬7.3 million (â¬0.073 per unit) in the prior year periods. Adjusted Funds from Operations (“AFFO”) for the three and six months ended June 30, 2020 were â¬6.9 million (â¬0.030 per unit) and â¬13.7 million (â¬0.059 per unit), respectively, compared to â¬4.0 million (â¬0.035 per unit) and â¬6.5 million (â¬0.066 per unit) in the same prior year periods. The increases in FFO and AFFO were driven by accretive acquisitions completed over the period since inception of the REIT, while FFO per unit and AFFO per unit were negatively impacted by higher current income tax and general and administrative expenses compared to the prior year periods. 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 remain 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 1.65%. The majority of the REIT’s mortgages are also non-amortizing, with no maturities occurring until December 2022. The REIT had immediately available liquidity of â¬141 million as at June 30, 2020, and its total debt to gross book value was 46.0%.
“Our mortgage financing drawn during this most recent quarter evidences our continued ability to obtain low interest rate debt financing, and strengthened ERES’s liquidity position further as we increased our immediately available capital to â¬100.0 million in full capacity on our credit facilities,” added Scott Cryer, Chief Financial Officer. “Our pipeline agreement with CAPREIT further contributes to the flexibility of our finances, enabling future growth without compromising the security provided by our conservative financial position in these uncertain times.”
SUBSEQUENT EVENTS
On July 6, 2020, the REIT received final approval from the TSX to graduate from the TSX Venture Exchange and list its REIT units on the TSX. On July 7, 2020, its REIT units were listed and commenced trading on the TSX at the opening of markets, under the existing symbol “ERE.UN”, with its REIT units de-listed from the TSX Venture Exchange upon commencement of trading on the TSX.
On July 31, 2020, the REIT entered into an agreement to acquire a multi-residential property in the Netherlands, comprising 120 residential suites and 24 parking units, for a purchase price of â¬20.15 million (excluding transaction costs), with closing expected on or around September 1, 2020.
DISTRIBUTIONS
During the three and six months ended June 30, 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, August 11, 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 6325536#. The Instant Replay will be available until midnight, September 05, 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
| Three Months Ended | Six Months Ended | |||||||||||
| June 30, | June 30, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Portfolio Performance | ||||||||||||
| Residential Properties | ||||||||||||
| Residential Occupancy 1 | 98.8 | % | 97.6 | % | ||||||||
| Residential Net AMR 1 | ⬠| 865 | ⬠| 803 | ||||||||
| Number of residential suites 1 | 5,632 | 3,859 | ||||||||||
| Commercial Properties | ||||||||||||
| Commercial Occupancy 1 | 100.0 | % | 99.8 | % | ||||||||
| Commercial Net ABR 1 | ⬠| 17.6 | ⬠| 16.7 | ||||||||
| GLA of commercial properties (sqf) 1 | 450,911 | 400,309 | ||||||||||
| Operating Revenues (000s) | ⬠| 17,241 | ⬠| 8,567 | ⬠| 34,301 | ⬠| 14,005 | ||||
| NOI (000s) | ⬠| 13,144 | ⬠| 6,704 | ⬠| 26,109 | ⬠| 10,703 | ||||
| NOI Margin | 76.2 | % | 78.3 | % | 76.1 | % | 76.4 | % | ||||
| Financial Performance | ||||||||||||
| FFO per Unit â Basic 2, 3 | ⬠| 0.033 | ⬠| 0.039 | ⬠| 0.067 | ⬠| 0.073 | ||||
| AFFO per Unit â Basic 2, 3 | ⬠| 0.030 | ⬠| 0.035 | ⬠| 0.059 | ⬠| 0.066 | ||||
| Liquidity and Leverage | ||||||||||||
| Total Debt to Gross Book Value 1, 4 | 46.0 | % | 46.6 | % | ||||||||
| Weighted Average Mortgage Effective Interest Rate 1, 5 | 1.65 | % | 1.95 | % | ||||||||
| Weighted Average Mortgage Term (years) 1 | 4.94 | 5.13 | ||||||||||
| Debt Service Coverage (times) 6 | 3.33 | 3.36 | ||||||||||
| 1 | As at June 30. | |
| 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. |
| Three Months Ended | Six Months Ended | |||||||||
| June 30, | June 30, | |||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||
| Other Measures | ||||||||||
| Weighted Average Number of Units – Basic 1 (000s) | 230,625 | 115,844 | 230,602 | 99,025 | ||||||
| Closing Price of REIT Units 2, 3 | ⬠| 2.69 | ⬠| 2.92 | ||||||
| Closing Price of REIT Units (in C$) 2 | $ | 4.12 | $ | 4.35 | ||||||
| Market Capitalization (millions) 1, 2, 3 | ⬠| 621 | ⬠| 462 | ||||||
| Market Capitalization (millions in C$) 1, 2 | $ | 950 | $ | 688 | ||||||
| 1 | Includes Class B LP units. | |
| 2 | As at June 30. | |
| 3 | Based on the foreign exchange rate of 1.5305 on June 30, 2020 (foreign exchange rate of 1.4887 on June 30, 2019). |
ERESâs unaudited consolidated financial statements and management’s discussion and analysis (“MD&A”) for the three and six months ended June 30, 2020 can be found at www.eresreit.com or under ERES’s profile at www.sedar.com.
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 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