European Residential REIT Announces First Quarter 2021

European Residential REIT Announces First Quarter 2021

News Highlights

TORONTO, May 04, 2021 (News) — European Residential Real Estate Investment Trust (“ERES” or the “REIT”) (TSX: ERE.UN) announced today its results for the three months ended March 31, 2021.

FIRST QUARTER 2021 HIGHLIGHTS

  • Strong operating results continued for the three months ended March 31, 2021, fueled by accretive acquisitions since the comparable prior year period and ongoing strong rental growth, with a 3.9% increase in both stabilized Net Average Monthly Rent (“AMR”) and stabilized Occupied AMR.
  • Turnover was 3.8% for the three months ended March 31, 2021, with rental uplift on turnover of 13.3% for the period, compared to turnover of 4.1% and rental uplift on turnover of 7.9% in the prior year period.
  • Occupancy for both the residential and commercial properties remained stable at 98.3% and 100.0%, respectively, as at March 31, 2021, with 78% of residential vacancy in the current period due to renovation.
  • NOI increased by 10% for the three months ended March 31, 2021 compared to the first quarter of 2020, primarily due to contribution from accretive acquisitions since the prior year period as well as the aforementioned higher monthly rents, supporting a stable NOI margin of 75.5%.
  • 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.
  • The fair value of the REIT’s property portfolio remained stable at €1.47 billion as at March 31, 2021, consisting of €1.36 billion in multi-residential properties and €0.11 billion in commercial properties.
  • 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 €101 million as at March 31, 2021, and its total debt to gross book value is 47.3%.
  • 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 three months ended March 31, 2021, the REIT declared monthly distributions of €0.00875 per Unit in respect of January and February, and €0.00917 per Unit in respect of March.

“In passing the two-year milestone since ERES’s inception, we reflect on what has proven to be an extremely atypical operating environment, characterized by extraordinary uncertainty and volatility, and these circumstances have provided the backdrop to more than half of our historical record thus far,” commented Phillip Burns, Chief Executive Officer. “In this context, we are very pleased with ERES’s strong and stable performance and the track record it has established to date, which highlights the core value inherent in our strategy. This first quarter of 2021 has been no exception to that trend, and while we will continue to strengthen operationally and grow internally, we continue to aim to grow externally through accretive acquisitions in the quarters to come.”

STEADFAST OPERATIONAL GROWTH, DESPITE CONTINUING ADVERSITYFor the three months ended March 31, 2021, property revenues were €18.8 million, up from €17.1 million for the three months ended March 31, 2020. The increase is primarily due to accretive acquisitions since the prior year period and an increase in AMR on the stabilized portfolio. Stabilized Net AMR for the multi-residential portfolio increased by 3.9% to €890 per suite at March 31, 2021, from €857 per suite at the same time last year, driven by increased rents on annual indexation, turnover and conversion of regulated suites to liberalized suites. Stabilized Occupied AMR also increased by 3.9% compared to the prior year period.

Net Operating Income (“NOI”) was €14.2 million for the three months ended March 31, 2021, up from €13.0 million for the three months ended March 31, 2020. The increase in NOI was likewise driven by contribution from acquisitions since the prior year period as well as higher monthly rents on stabilized properties. This was offset by higher property operating costs as a percentage of operating revenues, primarily due to higher R&M, including an increase in cleaning costs associated with the third wave of the COVID-19 pandemic, as well as certain one-time recoverable R&M expenses incurred in the REIT’s commercial portfolio. In aggregate, total portfolio NOI margin remained strong at 75.5% for the three months ended March 31, 2021, compared to 76.0% in the quarter ended March 31, 2020.

Funds from Operations (“FFO”) for the three months ended March 31, 2021 were €8.3 million (€0.036 per Unit), compared to €7.6 million (€0.033 per Unit) in the prior year period. Adjusted Funds from Operations (“AFFO”) for the three months ended March 31, 2021 were €7.3 million (€0.032 per Unit), compared to €6.8 million (€0.030 per Unit) in the same prior year period. The increases in FFO and AFFO were driven by the positive impact of increased stabilized NOI and accretive acquisitions since the prior year period. 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 POSITIONERES’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 €101 million as at March 31, 2021, and its total debt to gross book value is 47.3%.

“The extension of the Pipeline Agreement with CAPREIT during the first quarter of 2021 further expands ERES’s strong standalone liquidity position, providing a significant supplemental source of in-place capital to bolster acquisition capacity,” added Stephen Co, Chief Financial Officer. “This is symbolic of ERES’s intentions for 2021 and onward, while also representing CAPREIT’s support for ERES.”

DISTRIBUTIONSDuring the three months ended March 31, 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) in respect of March, 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 CALLA conference call hosted by Phillip Burns, Chief Executive Officer and Stephen Co, Chief Financial Officer, will be held on Wednesday, May 5, 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 5247379#.

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 3781063#. The Instant Replay will be available until midnight, May 30, 2021. The call and accompanying slides will also be archived on the ERES REIT website at www.eresreit.com.

FINANCIAL AND OPERATING HIGHLIGHTSFinancial Highlights

For the Three Months Ended March 31,2021 2020
Portfolio Performance  
Residential Properties  
Residential Occupancy 198.3% 98.3%
Residential Net AMR 1886  857 
Number of residential suites 16,047  5,632 
Commercial Properties  
Commercial Occupancy 1100.0% 100.0%
Commercial Net ABR 117.8  17.7 
GLA of commercial properties (sqf) 1450,911  450,911 
   
Operating Revenues (000s)18,822  17,060 
NOI (000s)14,210  12,965 
NOI Margin75.5% 76.0%
   
Financial Performance  
FFO per Unit – Basic 2, 30.036  0.033 
AFFO per Unit – Basic 2, 30.032  0.030 
Cash distributions per Unit 30.026  0.026 
FFO payout ratio 2, 374.0% 79.2%
AFFO payout ratio 2, 383.9% 88.9%
   
Liquidity and Leverage  
Total Debt to Gross Book Value 1, 447.3% 44.8%
Weighted Average Mortgage Effective Interest Rate 1, 51.61% 1.64%
Weighted Average Mortgage Term (years) 14.16  5.09 
Debt Service Coverage (times) 63.49  3.24 
Interest Coverage Ratio (times) 64.01  3.72 
Available Liquidity100,636  87,082 

1 As at March 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 companies3 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.

For the Three Months Ended March 31,2021 2020
Other Measures  
Weighted Average Number of Units – Basic 1 (000s)230,803  230,578 
Closing Price of REIT Units 2, 32.93  2.39 
Closing Price of REIT Units (in C$) 2$4.33  $3.72 
Market Capitalization (millions) 1, 2, 3677  550 
Market Capitalization (millions in C$) 1, 2$1,000  $858 

1 Includes Class B LP Units.2 As at March 31.3 Based on the foreign exchange rate of 1.4759 on March 31, 2021 (foreign exchange rate of 1.5584 on March 31, 2020).

ERES’s unaudited consolidated financial statements and management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2021 can be found at www.eresreit.com or under ERES’s profile at www.sedar.com.

About European Residential Real Estate Investment TrustERES 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:

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.”

 

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