TORONTO, Aug. 09, 2021 (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, 2021.
SECOND QUARTER 2021 HIGHLIGHTS
- On June 30, 2021, the REIT closed on two acquisitions of multi-residential properties in the Netherlands for a combined purchase price of €47.0 million (excluding transaction costs and fees), representing an aggregate 137 residential units as well as ancillary commercial and parking space.
- The fair value of the REIT’s property portfolio increased to €1.56 billion as at June 30, 2021, consisting of €1.45 billion in multi-residential properties located in the Netherlands and €0.11 billion in commercial properties located in Germany, Belgium and the Netherlands, resulting in a gain of €30.9 million for the six months ended June 30, 2021.
- Strong operating results continued for the three and six months ended June 30, 2021, fueled by accretive acquisitions since the comparable prior year period and ongoing strong rental growth, with a 4.0% increase in stabilized Occupied Average Monthly Rent (“AMR”), from €876 as at June 30, 2020, to €911 as at June 30, 2021.
- Turnover was 7.4% for the six months ended June 30, 2021, with rental uplift on turnover of 15.1% for the period, compared to turnover of 7.5% and rental uplift on turnover of 9.6% in the prior year period.
- Occupancy for commercial properties remained stable at 100.0% as at June 30, 2021, while occupancy for the residential properties decreased to 98.0% as at June 30, 2021, compared to 98.8% as at June 30, 2020. However, 26% of residential vacancy is attributable to the REIT’s recently acquired newly built property, with a further 53% of residential vacancy in the current period due to renovation.
- NOI increased by 11% for the six months ended June 30, 2021, primarily driven by contribution from accretive acquisitions since the prior year period as well as the aforementioned higher monthly rents, supporting an increase in NOI margin to 76.8% compared to 76.1% for the six months ended June 30, 2020.
- 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.
- Liquidity and leverage remain strong, supported by the REIT’s staggered mortgage profile with a four-year weighted average term to maturity and a weighted average effective interest rate of 1.61%. The REIT has immediately available liquidity of €47 million as at June 30, 2021, and its total debt to gross book value is 47.9%.
- On March 10, 2021, the REIT extended its Pipeline Agreement with CAPREIT for an additional two-year period, ending on March 29, 2023, under the same terms and conditions, which makes available to the REIT a further €165 million to acquire properties.
- On February 23, 2021, the Board of Trustees approved an increase in the REIT’s monthly distribution from its previous rate of €0.00875 per Unit (equivalent to €0.105 per Unit annualized) to €0.00917 per Unit (equivalent to €0.110 per Unit annualized). Accordingly, during the six months ended June 30, 2021, the REIT declared monthly distributions of €0.00875 per Unit in respect of January and February, and €0.00917 per Unit thereafter.
“ERES has continued its strong operational performance for yet another quarter, consistently growing operations through careful execution of our strategic initiatives in an increasingly complex regulatory and economic environment,” commented Phillip Burns, Chief Executive Officer. “We are pleased to continue the expansion of our portfolio once again, starting with our latest two acquisitions of high-quality multi-residential properties in the Netherlands. We continue to see significant growth opportunities in the Dutch market, thereby fueling our external growth in the coming months and years.”
ANOTHER RESILIENT QUARTER OF STRONG OPERATIONS
For the three months ended June 30, 2021, property revenues were €18.7 million, up from €17.2 million for the three months ended June 30, 2020. For the six months ended June 30, 2021, property revenues were €37.6 million, up from €34.3 million for the six months ended June 30, 2020. The increases are primarily due to accretive acquisitions since the prior year period and an increase in AMR on the stabilized portfolio. Stabilized Occupied AMR for the multi-residential portfolio increased by 4.0% to €911 per suite at June 30, 2021, from €876 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 €14.7 million for the three months ended June 30, 2021, up from €13.1 million for the three months ended June 30, 2020. NOI was €28.9 million for the six months ended June 30, 2021, up from €26.1 million for the six months ended June 30, 2020. The increases in NOI were likewise driven by contribution from acquisitions since the prior year periods as well as higher monthly rents on stabilized properties. This was complemented by a decrease in property operating costs as a percentage of operating revenues, predominantly due to the recognition of a non-recurring rebate from the government for landlord levies. In aggregate, total portfolio NOI margin increased to 78.2% and 76.8% for the three and six months ended June 30, 2021, compared to 76.2% and 76.1% in the comparable prior year periods.
Funds from Operations (“FFO”) for the three and six months ended June 30, 2021 were €8.7 million (€0.038 per Unit) and €17.0 million (€0.074 per Unit), respectively, compared to €7.7 million (€0.033 per Unit) and €15.4 million (€0.067 per Unit) in the comparable prior year periods. Adjusted Funds from Operations (“AFFO”) for the three and six months ended June 30, 2021 were €7.6 million (€0.033 per Unit) and €15.0 million (€0.065 per Unit), respectively, compared to €6.9 million (€0.030 per Unit) and €13.7 million (€0.059 per Unit) in the same prior year periods. The increases in FFO and AFFO were driven by the positive impact of increased stabilized NOI and accretive acquisitions since the prior year period, in addition to the REIT’s partial recognition of a rebate from the government for landlord levies payable. 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) general and administrative expenses related to structuring and (ii) acquisition research costs.
STRONG AND CONSERVATIVE FINANCIAL POSITION
ERES’s liquidity and leverage remain strong, supported by the REIT’s staggered mortgage profile with a four-year weighted average term to maturity and a weighted average effective interest rate of 1.61%. The majority of the REIT’s mortgages are also non-amortizing, with no maturities occurring until December 2022. The REIT has immediately available liquidity of €47 million as at June 30, 2021, and its total debt to gross book value is 47.9%.
“Between our credit facility, the Pipeline Agreement with CAPREIT and our well-staggered mortgage maturity profile, ERES’s liquidity and financial condition continues to strengthen, reinforcing the foundation upon which ERES can execute on its growth-oriented objectives,” commented Stephen Co, Chief Financial Officer. “Accordingly, it remains one of ERES’s key competitive strengths that we will continue to prioritize and monitor amid all of our strategic endeavors going forward.”
SUBSEQUENT EVENTS
Subsequent to period end, the REIT extended the maturity of both its existing Revolving Credit Facility and Bridge Revolving Credit Facility, each originally maturing on July 8, 2021, for an additional period ending on September 10, 2021, under the same terms and conditions.
DISTRIBUTIONS
During the six months ended June 30, 2021, the REIT declared monthly distributions of €0.00875 per Unit (equivalent to €0.105 per Unit annualized) in respect of January and February, and €0.00917 per Unit (equivalent to €0.110 per Unit annualized) thereafter, following an increase in the REIT’s monthly distribution rate. 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, subject to the discretion of its Board of Trustees.
CONFERENCE CALL
A conference call hosted by Phillip Burns, Chief Executive Officer and Stephen Co, Chief Financial Officer, will be held on Tuesday, August 10, 2021 at 9:00 am EST. The telephone numbers for the conference call are: Local/International: (416) 406-0743, North American Toll Free: (800) 898-3989. The Passcode for the call is 6747224#.
A slide presentation to accompany Management’s 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 “Investor Info”, 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 6601418#. The Instant Replay will be available until midnight, September 4, 2021. 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, | |||||||||||
| 2021 |
2020 |
2021 |
2020 |
|||||||||
| Portfolio Performance | ||||||||||||
| Residential Properties | ||||||||||||
| Residential Occupancy 1 | 98.0 | % | 98.8 | % | ||||||||
| Residential Net AMR 1 | € | 890 | € | 865 | ||||||||
| Number of residential suites 1 | 6,184 | 5,632 | ||||||||||
| Commercial Properties | ||||||||||||
| Commercial Occupancy 1 | 100.0 | % | 100.0 | % | ||||||||
| Commercial Net ABR 1 | € | 17.8 | € | 17.6 | ||||||||
| GLA of commercial properties (sqf) 1 | 450,911 | 450,911 | ||||||||||
| Operating Revenues (000s) | € | 18,744 | € | 17,241 | € | 37,566 | € | 34,301 | ||||
| NOI (000s) | € | 14,653 | € | 13,144 | € | 28,863 | € | 26,109 | ||||
| NOI Margin | 78.2 | % | 76.2 | % | 76.8 | % | 76.1 | % | ||||
| Financial Performance | ||||||||||||
| FFO per Unit – Basic 2, 3 | € | 0.038 | € | 0.033 | € | 0.074 | € | 0.067 | ||||
| AFFO per Unit – Basic 2, 3 | € | 0.033 | € | 0.030 | € | 0.065 | € | 0.059 | ||||
| Distributions declared per Unit 3 | € | 0.028 | € | 0.026 | € | 0.054 | € | 0.053 | ||||
| FFO payout ratio 2, 3 | 73.1 | % | 78.6 | % | 73.5 | % | 78.9 | % | ||||
| AFFO payout ratio 2, 3 | 83.3 | % | 88.2 | % | 83.6 | % | 88.6 | % | ||||
| Liquidity and Leverage | ||||||||||||
| Total Debt to Gross Book Value 1, 4 | 47.9 | % | 46.0 | % | ||||||||
| Weighted Average Mortgage Effective Interest Rate 1, 5 | 1.61 | % | 1.65 | % | ||||||||
| Weighted Average Mortgage Term (years) 1 | 3.91 | 4.94 | ||||||||||
| Debt Service Coverage (times) 6 | 3.49 | 3.33 | ||||||||||
| Interest Coverage Ratio (times) 6 | 4.09 | 3.73 | ||||||||||
| Available Liquidity 1 | € | 47,314 | € | 141,198 | ||||||||
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, | |||||
| 2021 | 2020 | 2021 | 2020 | |||
| Other Measures | ||||||
| Weighted Average Number of Units – Basic 1 (000s) | 230,948 | 230,625 | 230,876 | 230,602 | ||
| Closing Price of REIT Units 2, 3 | € | 2.95 | € | 2.69 | ||
| Closing Price of REIT Units (in C$) 2 | $ | 4.34 | $ | 4.12 | ||
| Market Capitalization (millions) 1, 2, 3 | € | 682 | € | 621 | ||
| Market Capitalization (millions in C$) 1, 2 | $ | 1,003 | $ | 950 | ||
1 Includes Class B LP Units.
2 As at June 30.
3 Based on the foreign exchange rate of 1.4699 on June 30, 2021 (foreign exchange rate of 1.5305 on June 30, 2020).
ERES’s unaudited consolidated financial statements and management’s discussion and analysis (“MD&A”) for the three and six months ended June 30, 2021 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 Canada’s 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 141 multi-residential properties, comprised of 6,184 suites and ancillary retail space located in the Netherlands, and owns one office property in Germany and one office property in Belgium.
ERES’s 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 | Stephen Co |
| Chief Executive Officer | Chief Financial Officer |
| Email: p.burns@eresreit.com | Email: s.co@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 ERES’s current expectations and projections about future results. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intent”, “estimate”, “anticipate”, “believe”, “consider”, “should”, “plans”, “predict”, “estimate”, “forward”, “potential”, “could”, “likely”, “approximately”, “scheduled”, “forecast”, “variation” or “continue”, 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 ERES’s 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 (“non-IFRS measures”). Further information relating to non-IFRS measures, is set out in ERES’s annual information form dated March 30, 2021 under the heading “Non-IFRS Measures” and in ERES’s MD&A under the heading “Non-IFRS Financial Measures.”
