TORONTO, Nov. 04, 2020 (GLOBE NEWSWIRE) — European Residential Real Estate Investment Trust (“ERES” or the “REIT”) (TSX: ERE.UN) announced today its results for the three and nine months ended September 30, 2020.
THIRD QUARTER 2020 HIGHLIGHTS
- On July 7, 2020, the REIT graduated from the TSX Venture Exchange to the TSX, a milestone which will further increase ERES’s trading liquidity and open a wider and deeper investor base in Canada and beyond.
- On September 1, 2020, the REIT closed on its acquisition of a multi-residential property in the Netherlands comprised of 120 residential suites and 24 parking units for a purchase price of â¬20.1 million (excluding transaction costs).
- As at September 30, 2020, the fair value of the REITâs property portfolio increased to â¬1.4 billion, consisting of â¬1.29 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¬41.6 million for the 9-month period.
- Solid operating results for the three and nine months ended September 30, 2020 were fuelled by strong rental growth, driven by accretive acquisitions since the prior year periods and a 5.2% increase in Net Average Monthly Rent (“Net AMR”) on the stabilized portfolio.
- NOI increased by 101% for the nine months ended September 30, 2020 compared to the same period last year, primarily due to contribution from acquisitions and the aforementioned higher monthly rents, while NOI margin on the total portfolio remained strong at 75.9% compared to 76.3% in the prior period.
- The REIT maintained a high, stable occupancy rate of 98.4% for residential properties and 100.0% for commercial properties as at September 30, 2020.
- The weighted average rental increase due to indexation effective July 1, 2020, was 2.4% across 5,280 suite renewals, representing 94% of the residential portfolio.
- 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¬120 million as at September 30, 2020, and its total debt to gross book value was 46.2%.
- During the nine months ended September 30, 2020, the REIT declared monthly distributions of â¬0.00875 per Unit each (equivalent to â¬0.105 per Unit annualized).
“Despite the continuation of unprecedented and challenging circumstances, ERES is proud to report continued strong rental growth and property appreciation this quarter and year to date, reinforced by the robustness of our operating platform and the capability and adaptability of our team in Europe,” commented Phillip Burns, Chief Executive Officer. “In the context of the COVID-19 pandemic, we are pleased to be once again actively yet prudently pursuing our strategic growth initiatives in the defensive Dutch multi-residential market, and expect to continue along this course supported by an ongoing abundance of attractive opportunities in the near term.”
GROWING RENTAL INCOME FUELS ANOTHER QUARTER OF SOLID OPERATING RESULTS
For the three months ended September 30, 2020, property revenues were â¬17.6 million, up from â¬11.7 million for the three months ended September 30, 2019. For the nine months ended September 30, 2020, property revenues were â¬51.9 million, up from â¬25.7 million for the nine months ended September 30, 2019. The increases are primarily due to acquisitions completed during the periods and an increase in AMR and occupancy in the stabilized portfolio. Stabilized net average monthly rents for the multi-residential portfolio increased by 5.2% to â¬908 per suite at September 30, 2020 from â¬863 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¬13.3 million for the three months ended September 30, 2020, up from â¬8.9 million for the three months ended September 30, 2019. NOI was â¬39.4 million for the nine months ended September 30, 2020, up from â¬19.6 million for the nine months ended September 30, 2019. The increases were likewise driven by contribution from acquisitions as well as higher monthly rents and occupancy on stabilized properties. However, this was offset by higher property operating costs during the periods, predominantly due to higher repairs and maintenance as well as increased advertising costs associated with turnover and vacancy reduction. In aggregate, NOI margin remained strong at 75.6% for the three months ended September 30, 2020 compared to 76.1% in the quarter ended September 30, 2019, and 75.9% for the nine months ended September 30, 2020 compared to 76.3% for the comparative period last year.
Funds from Operations (“FFO”) for the three and nine months ended September 30, 2020 were â¬7.8 million (â¬0.034 per unit) and â¬23.1 million (â¬0.100 per unit), respectively, compared to â¬5.4 million (â¬0.034 per unit) and â¬12.7 million (â¬0.106 per unit) in the prior year periods. Adjusted Funds from Operations (“AFFO”) for the three and nine months ended September 30, 2020 were â¬6.9 million (â¬0.030 per unit) and â¬20.6 million (â¬0.089 per unit), respectively, compared to â¬4.7 million (â¬0.029 per unit) and â¬11.2 million (â¬0.093 per unit) in the same prior year periods. The increases in FFO and AFFO were driven by accretive acquisitions completed since the prior year period, 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, as well as lower return earned from above average cash maintained on hand this quarter and year to date, as a result of the REIT’s liquidity conservation amidst the uncertainty surrounding the COVID-19 pandemic. 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¬120 million as at September 30, 2020, and its total debt to gross book value was 46.2%.
“Liquidity remains a priority for ERES, given the heightened uncertainty which continues to characterize our economies today,” added Scott Cryer, Chief Financial Officer. “However, with ERES’s strong existing liquidity position, our pipeline agreement with CAPREIT and the enduring availability of favourable debt financing in the Netherlands, our ability and intention to capitalize on acquisition opportunities at attractive yield spreads remains intact.”
SUBSEQUENT EVENTS
On October 1, 2020, the REIT closed on its acquisition of a multi-residential portfolio of five properties located in the Netherlands, comprised of 113 residential suites and 98 parking units in aggregate. The purchase price of â¬26.25 million (excluding transaction costs and fees) was financed with cash on hand and a draw on the REIT’s Revolving Credit Facility, with ultimate funding to come from long-term mortgage financing.
DISTRIBUTIONS
During the three and nine months ended September 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 on Thursday, November 5, 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 4285178#. The Instant Replay will be available until midnight, November 30, 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 | Nine Months Ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Portfolio Performance | ||||||||||||
| Residential Properties | ||||||||||||
| Residential Occupancy 1 | 98.4 | % | 97.1 | % | ||||||||
| Residential Net AMR 1 | ⬠| 882 | ⬠| 828 | ||||||||
| Number of residential suites 1 | 5,752 | 5,116 | ||||||||||
| Commercial Properties | ||||||||||||
| Commercial Occupancy 1 | 100.0 | % | 99.8 | % | ||||||||
| Commercial Net ABR 1 | ⬠| 17.6 | ⬠| 16.8 | ||||||||
| GLA of commercial properties (sqf) 1 | 450,911 | 400,309 | ||||||||||
| Operating Revenues (000s) | ⬠| 17,562 | ⬠| 11,711 | ⬠| 51,863 | ⬠| 25,716 | ||||
| NOI (000s) | ⬠| 13,269 | ⬠| 8,917 | ⬠| 39,378 | ⬠| 19,620 | ||||
| NOI Margin | 75.6 | % | 76.1 | % | 75.9 | % | 76.3 | % | ||||
| Financial Performance | ||||||||||||
| FFO per Unit â Basic 2, 3 | ⬠| 0.034 | ⬠| 0.034 | ⬠| 0.100 | ⬠| 0.106 | ||||
| AFFO per Unit â Basic 2, 3 | ⬠| 0.030 | ⬠| 0.029 | ⬠| 0.089 | ⬠| 0.093 | ||||
| Liquidity and Leverage | ||||||||||||
| Total Debt to Gross Book Value 1, 4 | 46.2 | % | 47.0 | % | ||||||||
| Weighted Average Mortgage Effective Interest Rate 1, 5 | 1.65 | % | 1.72 | % | ||||||||
| Weighted Average Mortgage Term (years) 1 | 4.68 | 5.13 | ||||||||||
| Debt Service Coverage (times) 6 | 3.40 | 3.28 | ||||||||||
| Interest Coverage Ratio (times) 6 | 3.76 | 3.74 | ||||||||||
1 As at September 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 | Nine Months Ended | |||||||||
| September 30, | September 30, | |||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||
| Other Measures | ||||||||||
| Weighted Average Number of Units – Basic 1 (000s) | 230,666 | 160,997 | 230,623 | 120,250 | ||||||
| Closing Price of REIT Units 2, 3 | ⬠| 2.74 | ⬠| 3.23 | ||||||
| Closing Price of REIT Units (in C$) 2 | $ | 4.28 | $ | 4.67 | ||||||
| Market Capitalization (millions) 1, 2, 3 | ⬠| 632 | ⬠| 646 | ||||||
| Market Capitalization (millions in C$) 1, 2 | $ | 987 | $ | 932 | ||||||
1 Includes Class B LP units.
2 As at September 30.
3 Based on the foreign exchange rate of 1.5631 on September 30, 2020 (foreign exchange rate of 1.4438 on September 30, 2019).
ERESâs unaudited consolidated financial statements and management’s discussion and analysis (“MD&A”) for the three and nine months ended September 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 137 multi-residential properties, comprised of 5,865 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