TORONTO, Feb. 23, 2021 (GLOBE NEWSWIRE) — European Residential Real Estate Investment Trust (“ERES” or the “REIT”) (TSX: ERE.UN) announced today its results for the year ended December 31, 2020.
2020 HIGHLIGHTS
- The REIT closed on four acquisitions of multi-residential properties in the Netherlands during the third and fourth quarters of 2020, for a combined purchase price of â¬80.9 million (excluding transaction costs and fees). Mortgage financing was secured for these acquisitions in aggregate, in the principal amount of â¬45.0 million, with an interest rate of 0.97% and bearing a four-year term to maturity.
- On July 7, 2020, the REIT graduated from the TSX Venture Exchange to the TSX, a significant milestone marking an increase in ERES’s trading liquidity and providing access to a wider and deeper investor base in Canada and beyond.
- The fair value of the REITâs property portfolio increased to â¬1.47 billion, consisting of â¬1.36 billion in multi-residential properties and â¬0.11 billion in commercial properties, resulting in a gain of â¬46.0 million for the year.
- Strong operating results for the year ended December 31, 2020 were fueled by accretive acquisitions since the prior year and strong rental growth, with a 3.7% increase in stabilized Occupied AMR.
- Occupancy for the residential properties increased to 98.3% for the total portfolio and remained stable and high at 100.0% for commercial properties as at December 31, 2020.
- The weighted average rental increase due to indexation effective July 1, 2020 was 2.4% across 5,280 suite renewals, reflecting the self-imposed cap implemented by the REIT in response to the COVID-19 pandemic and, importantly, risk of potential stresses that may have affected some of the REIT’s tenants.
- NOI increased by 69% for the year ended December 31, 2020 compared to last year, primarily due to contribution from acquisitions and the aforementioned higher monthly rents, with strong total portfolio NOI margin of 76.2%.
- 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 â¬102 million as at December 31, 2020, and its total debt to gross book value is 47.2%.
- During the year ended December 31, 2020, the REIT declared monthly distributions of â¬0.00875 per Unit (equivalent to â¬0.105 per Unit annualized).
- On January 31, 2020, the REIT closed on the sale of its commercial property located in Dusseldorf, Germany for total gross proceeds of â¬16.9 million, further streamlining the REIT’s strategic focus on the European multi-residential asset class.
DISTRIBUTION INCREASE
On February 23, 2021, the Board of Trustees approved an increase in the REIT’s monthly distribution to â¬0.00917 per Unit (equivalent to â¬0.110 per Unit annualized), effective for the REIT’s next monthly distribution in respect of March 2021, payable in April 2021.
“This year brought unforeseen challenges, and it is in this unprecedented environment that ERES was able to solidify and prove the robustness of the strategic vision that underpinned the creation of this new platform only last year,” commented Phillip Burns, Chief Executive Officer. “In this context, I am pleased with the strong operating results for the year ended December 31, 2020. Despite this backdrop of adversity, ERES continued to evolve and mature quickly, proficiently and beneficially. We look forward to continuing to fortify our success to date as we enter the next chapter of our growth in 2021, and then for years to come.”
RENTAL GROWTH TRANSCENDS PANDEMIC, DRIVING STRONG OPERATING RESULTS
For the three months ended December 31, 2020, property revenues were â¬18.0 million, up from â¬16.0 million for the three months ended December 31, 2019. For the year ended December 31, 2020, property revenues were â¬69.9 million, up from â¬41.7 million for the year ended December 31, 2019. The increases are primarily due to accretive acquisitions, improved occupancy and an increase in Net Average Monthly Rent (“AMR”) on the stabilized portfolio. Stabilized Net AMR for the multi-residential portfolio increased by 4.7% to â¬909 per suite at December 31, 2020 from â¬868 per suite at the same time last year, driven by increased rents on annual indexation, turnover and conversion of regulated suites to liberalized suites, as well as improved occupancy. Excluding the impact of reduced vacancy compared to the prior year, stabilized Occupied AMR increased to â¬920 at December 31, 2020 from â¬887 at December 31, 2019, representing overall rental growth of 3.7%.
Net Operating Income (“NOI”) was â¬13.9 million for the three months ended December 31, 2020, up from â¬11.9 million for the three months ended December 31, 2019. NOI was â¬53.3 million for the year ended December 31, 2020, up from â¬31.5 million for the year ended December 31, 2019. The increases were likewise driven by contribution from acquisitions as well as improved occupancy and higher monthly rents on stabilized properties, coupled with proportionally lower property operating costs. In aggregate, this drove an increase in NOI margin for the periods, to 77.1% for the three months ended December 31, 2020 compared to 74.6% in the quarter ended December 31, 2019, and to 76.2% for the year ended December 31, 2020 compared to 75.6% last year. On a stabilized basis, NOI increased by 5.3% and 3.9% for the three months and year ended December 31, 2020, to â¬4.3 million and â¬16.9 million, respectively. The increases are primarily attributable to higher operating revenues from increased AMR as described above, driving an increase in stabilized NOI margin to 75.3% and 75.0% for the three months and year ended December 31, 2020, respectively, compared to 72.8% and 74.3% in the same prior year periods.
Funds from Operations (“FFO”) for the three months and year ended December 31, 2020 were â¬8.1 million (â¬0.035 per Unit) and â¬31.2 million (â¬0.135 per Unit), respectively, compared to â¬6.5 million (â¬0.032 per Unit) and â¬19.2 million (â¬0.136 per Unit) in the prior year periods. Adjusted Funds from Operations (“AFFO”) for the three months and year ended December 31, 2020 were â¬7.3 million (â¬0.031 per Unit) and â¬27.8 million (â¬0.121 per Unit), respectively, compared to â¬5.6 million (â¬0.028 per Unit) and â¬16.9 million (â¬0.120 per Unit) in the same prior year periods. The increases in FFO and AFFO were driven by accretive acquisitions and increased stabilized NOI since the prior year, while FFO per Unit and AFFO per Unit were impacted by higher current income tax and general and administrative expenses, as well as lower return earned from above average cash maintained on hand this year as a result of the REIT’s liquidity conservation amid the uncertainty resulting from 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 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 â¬102 million as at December 31, 2020, and its total debt to gross book value is 47.2%.
“The REIT’s prioritization of cash conservation throughout the majority of the past year was both proactive and precautionary, and placed ERES in a position of strength with above average liquidity going into 2021. We expect to take advantage of our liquidity to pursue additional attractive opportunities in a continuously active Dutch multi-residential real estate market,” added Stephen Co, Chief Financial Officer. “This will provide the foundation upon which the REIT can further pursue its growth-oriented initiatives, as we look to move forward from the unprecedented uncertainty and volatility that characterized 2020.”
SUBSEQUENT EVENTS
On February 23, 2021, the Board of Trustees approved an increase in the REIT’s monthly distribution to â¬0.00917 per Unit (equivalent to â¬0.110 per Unit annualized), effective for the REIT’s next monthly distribution in respect of March 2021. Distributions will continue to be paid to Unitholders of record on each record date, on or about the 15th date of the month following the record date.
DISTRIBUTIONS
During the three months and year ended December 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 on Wednesday, February 24, 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 8612870#.
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 Relations”, 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 7342129#. The Instant Replay will be available until midnight, March 21, 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 | Year Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||
| Portfolio Performance | |||||||||||||
| Residential Properties | |||||||||||||
| Residential Occupancy 1 | 98.3 | % | 97.2 | % | |||||||||
| Residential Net AMR 1 | ⬠| 882 | ⬠| 844 | |||||||||
| Number of residential suites 1 | 6,047 | 5,632 | |||||||||||
| Commercial Properties | |||||||||||||
| Commercial Occupancy 1 | 100.0 | % | 99.8 | % | |||||||||
| Commercial Net ABR 1 | ⬠| 17.6 | ⬠| 17.0 | |||||||||
| GLA of commercial properties (sqf) 1 | 450,911 | 508,002 | |||||||||||
| Operating Revenues (000s) | ⬠| 18,017 | ⬠| 15,959 | ⬠| 69,880 | ⬠| 41,675 | |||||
| NOI (000s) | ⬠| 13,891 | ⬠| 11,899 | ⬠| 53,269 | ⬠| 31,519 | |||||
| NOI Margin | 77.1 | % | 74.6 | % | 76.2 | % | 75.6 | % | |||||
| Financial Performance | |||||||||||||
| FFO per Unit â Basic 2, 3 | ⬠| 0.035 | ⬠| 0.032 | ⬠| 0.135 | ⬠| 0.136 | |||||
| AFFO per Unit â Basic 2, 3 | ⬠| 0.031 | ⬠| 0.028 | ⬠| 0.121 | ⬠| 0.120 | |||||
| Liquidity and Leverage | |||||||||||||
| Total Debt to Gross Book Value 1, 4 | 47.2 | % | 45.9 | % | |||||||||
| Weighted Average Mortgage Effective Interest Rate 1, 5 | 1.61 | % | 1.64 | % | |||||||||
| Weighted Average Mortgage Term (years) 1 | 4.40 | 5.32 | |||||||||||
| Debt Service Coverage (times) 6 | 3.52 | 3.15 | |||||||||||
| Interest Coverage Ratio (times) 6 | 3.97 | 3.61 | |||||||||||
| 1 | As at December 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. |
| Three Months Ended | Year Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||
| Other Measures | |||||||||||||
| Weighted Average Number of Units – Basic 1 (000s) | 230,714 | 203,992 | 230,646 | 141,041 | |||||||||
| Closing Price of REIT Units 2, 3 | ⬠| 2.67 | ⬠| 3.19 | |||||||||
| Closing Price of REIT Units (in C$) 2 | $ | 4.17 | $ | 4.65 | |||||||||
| Market Capitalization (millions) 1, 2, 3 | ⬠| 617 | ⬠| 735 | |||||||||
| Market Capitalization (millions in C$) 1, 2 | $ | 962 | $ | 1,072 | |||||||||
| 1 | Includes Class B LP Units. |
| 2 | As at December 31. |
| 3 | Based on the foreign exchange rate of 1.5608 on December 31, 2020 (foreign exchange rate of 1.4583 on December 31, 2019). |
ERES’s unaudited consolidated financial statements and management’s discussion and analysis (“MD&A”) for the year ended December 31, 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 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 139 multi-residential properties, comprised of 6,047 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 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