TORONTO, Nov. 12, 2019 (GLOBE NEWSWIRE) -- European Residential Real Estate Investment Trust (“ERES” or the “REIT”) (TSX-V: ERE.UN) announced today its results for the three and nine months ended September 30, 2019.
THIRD QUARTER 2019 HIGHLIGHTS
- On September 24, 2019, the REIT completed a public offering and closed on the issuance and sale of 40,185,000 REIT Units at C$4.15 per Unit for aggregate gross proceeds of C$166,767,750, including the exercise in full of an over-allotment option, through a syndicate of underwriters led by RBC Capital Markets and Scotiabank.
- Pursuant to the terms of a previously approved pipeline agreement between the REIT and Canadian Apartment Properties Real Estate Investment Trust (“CAPREIT”) (the “Pipeline Agreement”), during the nine months ended September 30, 2019, the REIT acquired from CAPREIT a total of 65 properties, representing an aggregate of 2,710 residential suites across the Netherlands, of which 18 properties comprised of 942 residential suites were acquired during the third quarter of 2019.
- The REIT additionally acquired a portfolio from an arm’s-length institutional vendor based in the Netherlands comprised of 16 properties, representing 315 residential suites across the Netherlands.
- As at September 30, 2019, the value of the REIT’s property portfolio increased to €1,152 million, consisting of €1,059 million of multi-residential properties located in the Netherlands and €93 million of commercial properties located in Germany and Belgium.
- NOI (as defined herein) increased by 79% for the nine months ended September 30, 2019 compared to the same period last year, primarily due to contribution from acquisitions during the period and six months of commercial NOI, 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 97.1% for residential properties and 99.8% for commercial properties as at September 30, 2019.
- Effective with the start of the third quarter of 2019, the REIT changed from making quarterly distributions to making monthly distributions of €0.00875 per REIT Unit and Class B LP Unit (as defined herein) (equivalent to €0.105 per REIT Unit and Class B LP Unit annualized).
“We have significantly expanded our residential portfolio this year, growing our residential asset base to 122 properties containing 5,116 suites with a total portfolio value of €1.15 billion at September 30, 2019,” commented Phillip Burns, Chief Executive Officer. “Looking ahead, we will continue to grow accretively and diversify our portfolio in the Netherlands while prudently evaluating other growth opportunities in the European residential market.”
ADDITION OF NEW RESIDENTIAL PROPERTIES TO ACCELERATE GROWTH
For the three months ended September 30, 2019, property revenues were €11.7 million, up from €5.3 million for the three months ended September 30, 2018. For the nine months ended September 30, 2019, property revenues were €25.7 million, up from €15.4 million for the nine months ended September 30, 2018. The increases are primarily due to acquisitions completed over the prior twelve months and an increase in average monthly rents (“AMR”) in the stabilized portfolio. Stabilized net average monthly rents for the multi-residential portfolio increased by 4.1% to €863 at September 30, 2019 from €829 at the same time last year.
Net Operating Income (“NOI”) was €8.9 million for the three months ended September 30, 2019, up from €4.0 million for the three months ended September 30, 2018. NOI was €19.6 million for the nine months ended September 30, 2019, up from €11.0 million in the nine months ended September 30, 2018. The increases were primarily driven by contribution from acquisitions as well as higher monthly rents on stabilized properties. NOI margin strengthened to 76.1% for the three months ended September 30, 2019 from 75.7% in the quarter ended September 30, 2018, and 76.4% for the nine months ended September 30, 2019 from 71.1% for the comparative period last year.
Funds from Operations (“FFO”) for the three and nine months ended September 30, 2019 were €5.4 million (€0.034 per Unit) and €12.7 million (€0.106 per Unit), respectively, compared to €2.9 million (€0.035 per Unit) and €7.4 million (€0.090 per Unit) in the prior year periods. Adjusted Funds from Operations (“AFFO”) for the three and nine months ended September 30, 2019 were €4.7 million (€0.029 per Unit) and €11.2 million (€0.093 per Unit), respectively, compared to €2.8 million (€0.035 per Unit) and €7.3 million (€0.090 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 prior twelve months. FFO and AFFO are calculated by excluding the effects of certain non-recurring items such as property management company net losses and interest on related party loans incurred in 2018, as well as general and administrative expenses related to structuring and certain current income tax expenses.
STRONG AND CONSERVATIVE FINANCIAL POSITION
As at September 30, 2019, ERES’ leverage (total debt to gross book value) stood at 47.0%, an improvement from 50.2% at September 30, 2018. The weighted average all-in interest rate on total property debt was 1.72%, with a weighted average debt term to maturity of 5.1 years.
“Our Pipeline Agreement with CAPREIT, combined with our strong financial position resulting from our recent equity offering, provides us with the resources and flexibility to act quickly and efficiently on further accretive acquisition opportunities going forward,“ added Scott Cryer, Chief Financial Officer.
SUBSEQUENT EVENTS
On October 23, 2019, the REIT obtained mortgage financing for its acquisition of the previously announced Eagle Properties for a principal amount of €98.5 million (excluding financing costs) for a seven-year term at a stated interest rate of 1.28% per annum, which the REIT used to repay the promissory note due to CAPREIT of €98.5 million (settled on October 31, 2019). No penalty was incurred for early repayment.
On October 31, 2019, the REIT closed on its acquisition of a portfolio from a third party comprised of 9 properties, representing an aggregate of 294 residential suites in five attractive locations across the Netherlands (the “Gazelle Properties”). The €67.3 million purchase price (excluding transaction costs) was financed by a new €39.5 million mortgage with a 7-year term to maturity and bearing a stated interest rate of 1.55%, combined with a draw of €26 million on the REIT’s revolving credit facility entered into on July 8, 2019 and the remaining balance in cash from the REIT’s September 2019 public offering. Pursuant to the REIT’s asset management agreement with CAPREIT, on closing of the acquisition the REIT incurred an acquisition fee of €597 (excluding sales tax) payable to CAPREIT.
DISTRIBUTIONS
At a Special Meeting of Unitholders held on March 21, 2019, Unitholders approved a Special Distribution of €0.33 (C$0.50) per REIT Unit to Unitholders 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 €0.02625 per REIT Unit and class B limited partnership units of ERES Limited Partnership, a wholly-owned subsidiary of the REIT (the “Class B LP Units”), being equivalent to €0.105 per REIT Unit and Class B LP Unit annualized. The distribution was paid on July 15, 2019 to holders of REIT Units and Class B LP Units 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 €0.00875 per REIT Unit and Class B LP Unit (equivalent to €0.105 per REIT Unit and Class B LP Unit annualized).
CONFERENCE CALL
A conference call hosted by Phillip Burns, Chief Executive Officer, and Scott Cryer, Chief Financial Officer, will be held Wednesday, November 13, 2019 at 10.00 am EST. The telephone numbers for the conference call are: Local/International: (416) 340-2216, North American Toll Free: (800) 273-9672.
A slide presentation to accompany Management’s comments during the conference call will be available 30 minutes 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 7902859#. The Instant Replay will be available until midnight, December 14, 2019. 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, | |||||||||||||||||||||||||
| 2019(1) | 2018(1) | 2019(1) | 2018(1) | |||||||||||||||||||||||
| Portfolio Performance | ||||||||||||||||||||||||||
| Residential Properties | ||||||||||||||||||||||||||
| Residential Occupancy(2) | 97.1 | % | 97.9 | % | ||||||||||||||||||||||
| Residential Net AMR(2) | € | 828 | € | 829 | ||||||||||||||||||||||
| Number of residential units(2) | 5,116 | 2,091 | ||||||||||||||||||||||||
| Commercial Properties | ||||||||||||||||||||||||||
| Commercial Occupancy(2) | 99.8 | % | N/A | |||||||||||||||||||||||
| Commercial Net ABR(2) | € | 16.8 | N/A | |||||||||||||||||||||||
| GLA of commercial properties (sqf)(2) | 400,309 | N/A | ||||||||||||||||||||||||
| Operating Revenues (000s) | € | 11,715 | € | 5,262 | € | 25,672 | € | 15,420 | ||||||||||||||||||
| NOI (000s) | € | 8,917 | € | 3,982 | € | 19,620 | € | 10,958 | ||||||||||||||||||
| NOI Margin | 76.1 | % | 75.7 | % | 76.4 | % | 71.1 | % | ||||||||||||||||||
| Financial Performance | ||||||||||||||||||||||||||
| FFO per Unit – Basic(3)(4) | € | 0.034 | € | 0.035 | € | 0.106 | € | 0.090 | ||||||||||||||||||
| AFFO per Unit – Basic(3)(4) | € | 0.029 | € | 0.035 | € | 0.093 | € | 0.090 | ||||||||||||||||||
| Liquidity and Leverage | ||||||||||||||||||||||||||
| Total Debt to Gross Book Value(2)(5) | 47.0 | % | 50.2 | % | ||||||||||||||||||||||
| Weighted Average Mortgage Effective Interest Rate(2)(6) | 1.72 | % | 1.96 | % | ||||||||||||||||||||||
| Weighted Average Mortgage Term (years)(2) | 5.13 | 5.56 | ||||||||||||||||||||||||
| Debt Service Coverage (times)(7) | 3.28 | 3.42 | ||||||||||||||||||||||||
| (1) Prepared as a continuation of Holding BV, which was not publicly traded prior to March 29, 2019. | ||||||||||||||||||||||||||
| (2) As at September 30. | ||||||||||||||||||||||||||
| (3) These measures are not defined by 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 and interest rate swaps. | ||||||||||||||||||||||||||
| (7) Based on trailing four quarters. | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||
| Weighted Average Number of Units - Basic(1) (000s) | 160,997 | 81,641 | 120,250 | 81,641 | |||||||
| Closing Price of REIT Units(2) (3) | € | 3.23 | N/A | ||||||||
| Closing Price of REIT Units (in C$)(2) | $ | 4.67 | N/A | ||||||||
| Market Capitalization (millions)(2) | € | 646 | N/A | ||||||||
| Market Capitalization (millions in C$)(2) | $ | 932 | N/A | ||||||||
| (1) Includes Class B LP Units. | |||||||||||
| (2) As at September 30. | |||||||||||
| (3) Based on the foreign exchange rate of 1.4438 on September 30, 2019. | |||||||||||
ERES REIT’s Management Discussion and Analysis and Unaudited Financial Statements can be found at www.eresreit.com or www.sedar.com.
About European Residential Real Estate Investment Trust
ERES is an unincorporated, open-ended real estate investment trust. ERES is Canada's first European-focused multi-residential REIT, with a focus on investing in high-quality multi-residential real estate properties in Europe. ERES currently owns a portfolio of multi-residential properties located in the Netherlands, two office properties in Germany and one office property in Belgium. ERES’ Units are listed on the TSXV under the symbol ERE.UN. For more information please visit our web site at www.eresreit.com.
For more information please contact:
| Phillip Burns | Scott Cryer |
| Chief Executive Officer | Chief Financial Officer |
| Email: p.burns@eresreit.com | Email: s.cryer@eresreit.com |
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 REIT 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.
Completion of the proposed acquisitions is subject to a number of conditions, including but not limited to, acceptance by TSX Venture Exchange Inc. There can be no assurance that the proposed acquisitions will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in ERES’s management information circular dated April 23, 2019, any information released or received with respect to the proposed acquisitions may not be accurate or complete and should not be relied upon.
ERES uses financial measures regarding itself, such as adjusted funds from operations, that do not have standardized meaning under the International Financial Reporting Standards (“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 management information circular dated April 23, 2019 under the heading “Non-IFRS Measures” and in ERES’s MD&A under the heading “Non-IFRS Financial Measures.”
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.