TORONTO, Feb. 25, 2020 (GLOBE NEWSWIRE) — European Residential Real Estate Investment Trust (“ERES” or the “REIT”) (TSX-V: ERE.UN) announced today its results for the year ended December 31, 2019. ERES was formed on March 29, 2019 following a takeover by European Commercial Real Estate Investment Trust (“ECREIT”), however for accounting purposes the acquisition has been designated as a reverse takeover by CAPREIT NL Holding B.V. (“Holding BV”, previously a subsidiary of CAPREIT), the deemed acquirer, and therefore the REIT is considered to be a continuation of Holding BV for financial reporting purposes and the comparative period presents Holding BV’s financial results.
- On March 29, 2019, ECREIT completed the acquisition from Canadian Apartment Properties Real Estate Investment Trust (“CAPREIT”) of 2,091 residential suites, creating Canada’s first European-focused multi-residential REIT with an initial portfolio value of â¬443 million.
- Effective March 29, 2019, the REIT entered into a new asset management agreement with CAPREIT, as well as property management agreements and a pipeline agreement pursuant to which during 2019 the REIT acquired from CAPREIT a total of 65 additional properties, representing an aggregate of 2,710 residential suites across the Netherlands.
- Also during 2019, the REIT acquired an additional 26 properties from third party vendors, comprising in total 831 residential suites and ancillary commercial space located in the Netherlands.
- By December 31, 2019, the value of the REITâs property portfolio increased to â¬1.3 billion, consisting of â¬1.2 billion in multi-residential properties located in the Netherlands and â¬0.1 billion in commercial properties in Germany, Belgium and the Netherlands.
- Successfully completed the REIT’s first public offering on September 24, 2019, and issued 40,185,000 trust units (“REIT Units”) at C$4.15 per REIT Unit for aggregate gross proceeds of C$166.7 million, including the exercise in full of an over-allotment option, through a syndicate of underwriters led by RBC Capital Markets and Scotiabank.
- Completed a second public offering on December 18, 2019, issuing a further 30,915,400 REIT Units at C$4.65 per REIT Unit for aggregate gross proceeds of C$143.8 million, including both an upsize and the exercise in full of an over-allotment option, through a syndicate of underwriters led by RBC Capital Markets.
- NOI increased by 214% and 114% for the three months and year ended December 31, 2019 compared to the same periods 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.
- High, stable occupancy rate of 97.2% for residential properties and 99.8% for commercial properties as at December 31, 2019.
- In connection with the creation of the REIT, on April 24, 2019 a special distribution of â¬0.33 (C$0.50) per REIT Unit was paid to REIT Unitholders (excluding CAPREIT) of record as at April 5, 2019, and on July 15, 2019, a quarterly distribution of â¬0.02625 per Unit (including both REIT Units and Class B LP Units as defined below, equivalent to â¬0.105 per Unit annualized) in respect of the second quarter of 2019 was paid to Unitholders of record as at June 28, 2019.
- Effective with the start of the third quarter, the REIT changed from paying quarterly distributions to paying monthly distributions of â¬0.00875 per Unit (equivalent to â¬0.105 per Unit annualized).
- As at December 31, 2019, CAPREIT owns 66% of the combined issued and outstanding Units of the REIT, decreased from its initial ownership of 83% on March 29, 2019 resulting from the reverse takeover.
- Achieved a ranking on the 2020 TSX Venture 50 as a top performer on the TSX Venture Exchange.
“2019 was ground breaking for ERES as we set out in pursuit of growing our high quality, multi-residential property portfolio and successfully more than tripled its value in the nine months since creation of the REIT”, commented Phillip Burns, Chief Executive Officer. “We look forward to continuing along this trajectory and driving value in the future for our unitholders”.
ACQUISITIONS OF NEW RESIDENTIAL PROPERTIES FUEL GROWTH
For the three months ended December 31, 2019, property revenues were â¬15.8 million, up from â¬5.4 million for the three months ended December 31, 2018. For the year ended December 31, 2019, property revenues were â¬41.5 million, up from â¬20.8 million for the year ended December 31, 2018. 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 3.3% to â¬868 per suite at December 31, 2019 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¬11.9 million for the three months ended December 31, 2019, up from â¬3.8 million for the three months ended December 31, 2018. NOI was â¬31.5 million for the year ended December 31, 2019, up from â¬14.7 million for the year ended December 31, 2018. The increases again were 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 costs and lower property management fees on stabilized properties. NOI margin strengthened to 75.3% for the three months ended December 31, 2019 from 70.8% in the quarter ended December 31, 2018, and 76.0% for the year ended December 31, 2019 from 71.0% for the comparative period last year.
Funds from Operations (“FFO”) for the three months and year ended December 31, 2019 were â¬6.5 million (â¬0.032 per Unit) and â¬19.2 million (â¬0.136 per Unit), respectively, compared to â¬2.2 million (â¬0.027 per Unit) and â¬9.6 million (â¬0.118 per Unit) in the prior year periods. Adjusted Funds from Operations (“AFFO”) for the three months and year ended December 31, 2019 were â¬5.6 million (â¬0.028 per Unit) and â¬16.9 million (â¬0.120 per Unit), respectively, compared to â¬2.2 million (â¬0.027 per Unit) and â¬9.6 million (â¬0.117 per Unit) in the same prior year periods. The increases were primarily due to higher rental revenue and stabilized NOI in 2019 as well as acquisitions completed over the period since inception of the REIT. 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) property management company net losses, (ii) interest on related party loans, (iii) general and administrative expenses related to structuring and (iv) certain current income tax expenses.
STRONG AND CONSERVATIVE FINANCIAL POSITION
As at December 31, 2019, ERES’s leverage (total debt to gross book value) stood at 45.9%, an improvement from 46.5% at December 31, 2018. The weighted average all-in interest rate on total property debt was 1.64%, with a weighted average debt term to maturity of 5.3 years.
“Our robust financial position, strengthened during the year from our ability to obtain low interest rate debt financing along with the successful completion of our two recent equity offerings, has provided us with the financial footing needed to secure acquisitions at attractive yield spreads”, added Scott Cryer, Chief Financial Officer. “Our pipeline agreement with CAPREIT further contributes to the flexibility of our finances, enabling us to act quickly and efficiently on accretive opportunities, to date and in the future”.
On January 31, 2020, the REIT closed on its sale of its commercial property located in Dusseldorf, Germany, to an arm’s length third party purchaser. The sale price of the Dusseldorf property of â¬16.9 million was satisfied with cash from the purchaser, which the REIT used to settle the outstanding mortgage with a principal balance of â¬6.9 million, and in addition pay â¬0.3 million to unwind the associated interest rate swap, â¬0.9 million in capital gains tax and â¬0.2 million in other transaction costs. A disposition fee of â¬0.2 million (excluding VAT) was incurred on the sale and paid to Maple Knoll Capital Ltd., representing 1.0% of total gross proceeds, pursuant to the Maple Knoll Management Agreement. The REIT intends to use the net proceeds of the sale to reinvest in multi-residential assets.
At a Special Meeting of Unitholders held on March 21, 2019, Unitholders approved a Special Distribution of â¬0.33 (C$0.50) per REIT Unit to Unitholders (excluding CAPREIT) of record on April 5, 2019, which was paid on April 24, 2019. For the second quarter of 2019, the REIT declared a distribution of â¬0.02625 per REIT Unit and Class B Limited Partnership unit of ERES Limited Partnership, a wholly-owned subsidiary of the REIT (“Class B LP Unit”, and together with the REIT Units, the “Units”), being equivalent to â¬0.105 per Unit annualized. The distribution was paid on July 15, 2019 to Unitholders of record on June 28, 2019. Effective with the start of the third quarter of 2019, the REIT changed to paying monthly cash distributions to Unitholders of â¬0.00875 per Unit (equivalent to â¬0.105 per Unit annualized).
A conference call hosted by Phillip Burns, Chief Executive Officer, and Scott Cryer, Chief Financial Officer, will be held Wednesday, February 26, 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 2043785#. The Instant Replay will be available until midnight, March 28, 2020. The call and accompanying slides will also be archived on the ERES REIT website at www.eresreit.com.
FINANCIAL AND OPERATING HIGHLIGHTS
|Three Months Ended||Year Ended|
|December 31,||December 31,|
|2019 ¹||2018 ¹||2019 ¹||2018 ¹|
|Residential Occupancy 2||97.2||%||98.7||%|
|Residential Net AMR 2||â¬||844||â¬||840|
|Number of residential units 2||5,632||2,091|
|Commercial Occupancy 2||99.8||%||N/A|
|Commercial Net ABR 2||â¬||17.0||N/A|
|GLA of commercial properties (sqf) 2||508,002||N/A|
|Operating Revenues (000s)||â¬||15,809||â¬||5,350||â¬||41,481||â¬||20,770|
|FFO per Unit â Basic 3, 4||â¬||0.032||â¬||0.027||â¬||0.136||â¬||0.118|
|AFFO per Unit â Basic 3, 4||â¬||0.028||â¬||0.027||â¬||0.120||â¬||0.117|
|Liquidity and Leverage|
|Total Debt to Gross Book Value 2, 5||45.9||%||46.5||%|
|Weighted Average Mortgage Effective Interest Rate 2, 6||1.64||%||2.02||%|
|Weighted Average Mortgage Term (years) 2||5.32||5.31|
|Debt Service Coverage (times) 7||3.15||3.42|
1 Prepared as a continuation of Holding BV, which was not publicly traded prior to March 29, 2019.
2 As at December 31.
3 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
4 Includes Class B LP Units.
5 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.
6 Includes impact of deferred financing costs, fair value adjustment and interest rate swaps.
7 Based on trailing four quarters.
|Three Months Ended||Year Ended|
|December 31,||December 31,|
|Weighted Average Number of Units – Basic 1 (000s)||203,992||81,641||141,041||81,641|
|Closing Price of REIT Units 2, 3||â¬||3.19||N/A|
|Closing Price of REIT Units (in C$) 2||$||4.65||N/A|
|Market Capitalization (millions) 1, 2||â¬||735||N/A|
|Market Capitalization (millions in C$) 1, 2||$||1,072||N/A|
1 Includes Class B LP Units.
2 As at December 31.
3 Based on the foreign exchange rate of 1.4583 on December 31, 2019.
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: email@example.com||Email: firstname.lastname@example.org|
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 the International Financial Reporting Standards (âIFRSâ) 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 management information circular dated April 23, 2019 under the heading âNon-IFRS Measuresâ and in ERESâs management discussion and analysis 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.