TORONTO, April 22, 2019 /CNW/ - European Residential Real
Estate Investment Trust (TSX-V:ERE.UN, "ERES") is pleased to
announce that ERES, pursuant to the terms of the previously
announced pipeline agreement dated March 29,
2019 between ERES and CAPREIT Limited Partnership (the
"Pipeline Agreement"), will acquire (the "Proposed
Acquisition") two portfolios of multi-residential properties in
the Netherlands (collectively, the
"Properties") from Canadian Apartment Properties Real Estate
Investment Trust and its subsidiaries ("CAPREIT"), which
include all of the remaining Netherlands properties that CAPREIT currently
owns. The first portfolio (the "Warehoused Portfolio") is
comprised of 26 properties, representing an aggregate of
1,257 residential suites and certain additional ancillary
commercial space and parking facilities, located in 24 cities and
towns across the Netherlands. The
properties included in the Warehoused Portfolio have an occupied
average monthly rent (excluding service charges) of €764 and an
occupancy rate of 97.3%. The second portfolio (the "Additional
Portfolio") is comprised of 21 properties, representing an
aggregate of 511 residential suites in six urban centres in
the Netherlands. The properties
included in the Additional Portfolio have an occupied average
monthly rent (excluding service charges) of €737 and an occupancy
rate of 97.1%. Subject to the approval of the TSX Venture Exchange
(the "TSX-V"), closing of the acquisition of the Warehoused
Portfolio is expected to occur by late May
2019 and closing of the acquisition of the Additional
Portfolio is expected to occur by late August 2019.
Pursuant to the Pipeline Agreement, which was approved by the
holders of ERES' trust units (the "Units") at a special
meeting held on March 21, 2019, ERES
(or an affiliate thereof) will acquire, directly or indirectly, the
Properties from CAPREIT. ERES' aggregate purchase price for the
Properties is based on the following: (i) for the Warehouse
Properties, the purchase price paid by CAPREIT for such
properties (less any third party indebtedness), due diligence
costs, financing fees, any capital expenditures incurred by
CAPREIT, any applicable acquisition related taxes and duties, and
all other third party acquisition costs reasonably incurred by
CAPREIT in respect of the acquisition (the
"Pipeline Acquisition Costs"); and (ii) for the
Additional Portfolio, the Pipeline Acquisition Costs plus an
underwriting fee of 1% of the purchase price of the Additional
Portfolio paid by CAPREIT plus applicable sales tax. Based on an
independent appraisal dated April 1,
2019, the market value of the Warehoused Portfolio and the
Additional Portfolio as at March 31,
2019 was approximately €236.8 million and €98.6
million, respectively.
Based on the Pipeline Agreement, the aggregate purchase price
for the Properties is approximately €333 million (C$499 million), subject to certain purchase price
adjustments (the "Acquisition Purchase Price"), which
reflects an approximately 3.8% forward capitalization rate.
The Acquisition Purchase Price is to be satisfied by a
combination of: (i) the assumption of approximately €97 million
(C$146 million) aggregate principal
amount of existing mortgage debt net of financing fees associated
with the Properties, bearing a weighted average 1.98% fixed
interest rate and a weighted average 6.8 year term to maturity; and
(ii) approximately €236 million (C$353
million) of equity consideration. Pursuant to the terms set
out in Pipeline Agreement, the equity consideration is to be funded
through either cash, the issuance of up to approximately 88 million
Units or class B limited partnership units (the "Class B LP
Units") of ERES Limited Partnership, a subsidiary of ERES, to
CAPREIT based on a price of C$4.00
per Unit or per Class B LP Unit (the "Unit Issuance"). A
portion of the Acquisition Purchase Price may be payable through
the assumption of up to approximately €62 million (C$93 million) of mortgage financing on the
Additional Portfolio (the "Mortgage Debt") and the drawing
down of up to approximately €20 million (C$30 million) on a credit facility anticipated to
be available to ERES (the "Credit Facility"). ERES expects
that both the Mortgage Debt and Credit Facility will be in place
prior to the closing of the Proposed Acquisition and, as such, the
number of Units or Class B LP Units potentially issuable pursuant
to the Unit Issuance may be reduced by up to approximately 31
million. While CAPREIT has currently elected to receive Units
or Class B LP Units, subject to TSXV approval, in satisfaction of
the full Acquisition Purchase Price, CAPREIT and ERES may agree
upon a cash payment or a combination of cash, Units and Class B LP
Units or such other consideration as ERES and CAPREIT may agree
upon. The Class B LP Units are convertible on a one-to-one basis
into Units.
"This transaction further highlights the benefit of ERES'
strategic relationship with CAPREIT," commented Phillip Burns, CEO. "As a result, ERES'
asset base is expected to grow to over €900 million, while
maintaining its Debt to Gross Book Value within its target range,
at approximately 48%. Going forward, ERES intends to continue
to leverage CAPREIT's proven industry-leading platform to acquire
and manage additional attractive European multi-residential
portfolio acquisitions."
Pursuant to subsection 5.14 of TSX-V Policy 5.3 –
Acquisitions and Dispositions of Non-Cash Assets, because
the number of Units or Class B LP Units that may potentially be
issued to CAPREIT, a Non-Arm's Length Parties (as such term is
defined in the TSXV Corporate Finance Manual), as payment of the
Acquisition Purchase Price for the Proposed Acquisition, may exceed
10% of the number of outstanding Units and Class B LP Units of ERES
on a non-diluted basis, ERES will seek disinterested Unitholder
approval for the Unit Issuance at a duly called annual and special
meeting of Unitholders to be held on May 23,
2019. A management information circular describing, among
other things, details of the Properties and the Unit Issuance (the
"Circular") will be prepared and mailed to Unitholders as
soon as possible. If ERES were to satisfy the full Acquisition
Purchase Price by way of the Unit Issuance, CAPREIT may own up to
an aggregate of approximately 170 million Units and Class B LP
Units, representing up to approximately 90% of the total issued and
outstanding Units and Class B LP Units.
About ERES
ERES is an unincorporated, open-ended real estate investment
trust. ERES' Units are listed on the TSX-V 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 41 multi-residential
properties, comprised of 2,091 suites located in the Netherlands, and owns two office
properties in Germany and one
office property in Belgium.
ERES' 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.
About CAPREIT
As one of Canada's largest
residential landlords, CAPREIT is a growth-oriented investment
trust owning interests in 53,334 residential units, comprised of
45,637 residential suites and 45 manufactured home communities
comprising 7,697 land lease sites, located in and near major urban
centres across Canada and
the Netherlands. Since its Initial
Public Offering in May 1997, CAPREIT
has grown monthly cash distributions per unit by 93%.
CAPREIT's registered and principal business office is located at
11 Church Street, Suite 401, Toronto,
Ontario M5E 1W1.
For more information about CAPREIT, its business and its
investment highlights, please refer to our website at
www.caprent.com or www.capreit.net and our public disclosure, which
can be found under our profile at www.sedar.com.
Cautions Regarding Future Plans and Forward Looking
Information
Certain statements contained in this press release constitute
forward-looking statements within the meaning of applicable
Canadian securities laws which reflect ERES' 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.
Such forward-looking statements are based on a number of
assumptions that may prove to be incorrect.
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' views as of any date
subsequent to the date of this press release. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements.
Completion of the Proposed Acquisition 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
Acquisition will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the
Circular, any information released or received with respect to the
Proposed Acquisition or the Unit Issuance may not be accurate or
complete and should not be relied upon.
Neither the TSX-V nor its Regulation Services Provider (as that
term is defined in the policies of the TSX-V) have in no way passed
upon the merits of the Transaction and have neither approved nor
disapproved the contents of this news release.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities of ERES.
SOURCE European Residential Real Estate Investment Trust