Acquisition of 2,091 Rental Residential Suites
in the Netherlands to Accelerate
Growth
TORONTO, May 10, 2019 /CNW/ - European Residential
Real Estate Investment Trust ("ERES" or the "REIT") (TSX-V: ERE.UN)
announced today its results for the three months ended March 31, 2019. The REIT is the resulting issuer
following the reverse takeover involving European Commercial Real
Estate Investment Trust and a Dutch subsidiary of Canadian
Apartment Properties REIT ("CAPREIT"), creating Canada's first European-focused
multi-residential real estate investment trust. As a result, the
REIT's portfolio as at March 31, 2019
includes 41 residential rental properties totaling 2,091
residential suites in the
Netherlands and three commercial properties in Germany and Belgium. Results for the three months ended
March 31, 2019 include a full
quarter's contribution from the multi-residential portfolio and
three days from the commercial properties. All amounts, unless
otherwise noted, are in Euros (€). The consolidated interim
financial statements and corresponding management's discussion and
analysis ("MD&A") are presented in Euros (€), which is also the
REIT's functional currency. ERES intends to make Euro denominated
distributions with an option to elect the currency in which the
Euro-denominated distributions are paid based on an exchange rate
policy that is to be decided.
FIRST QUARTER 2019 HIGHLIGHTS
- On March 29, 2019, completed the
acquisition of 41 multi-residential properties totaling 2,091
residential suites, creating Canada's first European-focused
multi-residential REIT
- Acquisition increased value of property portfolio to €533
million, including €442 million of multi- residential properties
located in the Netherlands and €91
million of commercial properties located in Germany and Belgium
- New name, European Residential Real Estate Investment Trust,
reflects strategic focus on investing in high-quality
multi-residential real estate properties in Europe
- Entered into an asset and property management agreement with a
subsidiary of CAPREIT
- Declared a one-time special distribution of €0.33 (C$0.50), payable to REIT Unitholders of record
as at April 5, 2019, which was paid
on April 24, 2019
- NOI increased by 17.4% compared to last year primarily due to
higher monthly rents, three days of commercial NOI, and reduced
property operating costs driven by lower property management fees
and timing of expenses
- High, stable occupancy rate of 98.5% for residential properties
and 99.0% for commercial properties as at March 31, 2019
- Subsequent to quarter-end, entered into an agreement
(conditional on TSX Venture Exchange and Unitholder approval) to
acquire two additional portfolios of multi-residential properties
in the Netherlands comprising
1,768 suites across 47 properties for approximately €333
million
"With our entry into the European multi-residential sector and
our new partnership with CAPREIT, we have taken a significant and
transformative step in our ability to generate long-term value for
our Unitholders" commented Phillip
Burns, Chief Executive Officer of ERES. "The
multi-residential market is very strong and stable in our target
geographic markets, and we are confident that our operating
performance will increase as we leverage CAPREIT's proven asset and
property management platform. In addition, through our new pipeline
agreement with CAPREIT, we have access to additional funding for
acquisitions and a strong institutional-quality partner fully
aligned with all Unitholders through their substantial ownership
interest in the REIT. We are very excited about the significant
benefits this transaction brings to our Unitholders and look to
continue building value in the years ahead."
ADDITION OF NEW RESIDENTIAL PROPERTIES TO ACCELERATE
GROWTH
For the three months ended March 31, 2019, property revenues were
€5.4 million, up from €5.0 million in the first quarter of
2018. The increase is primarily due to an increase in occupancies
and average monthly rents. Occupancy for the multi-residential
portfolio was 98.5% at March 31,
2019, up from 98.4% at the same time last year. Occupancy
for the commercial portfolio at March 31,
2019 was 99.0%, consistent with the prior year. Net average
monthly rents ("AMR") for the multi-residential portfolio increased
by 6.1% to €840 at March 31, 2019
from €792 at the same time last year.
Net Operating Income ("NOI") was €4.0 million for the three
months ended March 31, 2019, up from
€3.4 million last year due primarily to the increase in revenues
and reduced operating expenses. NOI margin strengthened to 73.5%
for the three months ended March 31,
2019 from 68.4% last year.
Funds from Operations ("FFO") for the three months ended
March 31, 2019 were €2.8 million
(€0.034 per Unit) compared to €2.0 million (€0.025 per Unit) in the
prior year period. Adjusted Funds from Operations ("AFFO") were
€2.5 million (€0.030 per Unit), up from €2.0 million (€0.025 per
Unit) in the same prior year period. The increases were primarily
due to higher rental revenue in 2019 and lower general and
administrative expenses. 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.
STRONG AND CONSERVATIVE FINANCIAL POSITION
As at
March 31, 2019, ERES' leverage (total
debt to gross book value) stood at 44.0%, an improvement from 52.7%
at March 31, 2018. The weighted
average all-in interest rate on total property debt was 1.98%, with
a weighted average debt term to maturity of 5.1 years.
SUBSEQUENT EVENT
On April 22,
2019, the REIT announced an agreement with CAPREIT to
acquire two additional portfolios of multi-residential properties
located in the Netherlands
totaling 1,768 residential suites in 47 properties for total
acquisition costs of approximately €333 million, satisfied by a
combination of: (i) the assumption of approximately €97 million
aggregate principal amount of existing mortgage debt net of
financing fees bearing a weighted average fixed interest rate of
1.98% and a weighted average 6.8 year term to maturity; and (ii)
approximately €236 million of equity consideration. A portion of
the equity consideration may be payable through the replacement of
up to approximately €60 million of mortgage financing (the
"Mortgage Debt") and the drawing down of up to approximately €22
million on a credit facility (the "Credit Facility") anticipated to
be available to ERES. ERES expects that both the Mortgage Debt and
Credit Facility will be in place prior to the closing of the
proposed acquisition. The purchase of the two portfolios is
expected to close in late May 2019
and late August 2019.
The table below shows the proforma statement of financial
position after the acquisition of the two portfolios as indicated
above.
|
ERES
|
ERES Including
proposed
|
Balance
Sheet
|
March 31,
2019
|
acquisitions
|
Investment
Properties
|
533,220
|
866,716
|
Goodwill
|
11,126
|
11,126
|
Derivative Financial
Instrument
|
440
|
440
|
Other
Assets
|
29,818
|
29,818
|
Total
Assets
|
574,604
|
908,100
|
|
|
-
|
Mortgages(1)
|
252,687
|
410,187
|
Credit
Facility(2)
|
-
|
22,200
|
Class B LP
Units
|
217,681
|
371,477
|
Other
Liabilities
|
38,513
|
38,513
|
Total
Liabilities
|
508,881
|
842,377
|
Unitholder's
Equity
|
65,723
|
65,723
|
Total Liabilities
and Unitholders' Equity
|
574,604
|
908,100
|
|
|
(1)
|
Includes mortgage
assumption of €97.5 million and expected mortgage financing of
€60.0 million.
|
(2)
|
Assumes a €22.2
million draw on a credit facility anticipated to be available to
ERES prior to closing of the proposed acquisition.
|
SPECIAL DISTRIBUTION
At a Special Meeting of Unitholders held on March 21, 2019, Unitholders approved a Special
Distribution of €0.33 (C$0.50) per
Unit to Unitholders of record on April 5,
2019, which was paid on April 24,
2019.
FINANCIAL AND OPERATING HIGHLIGHTS
For the Three
Months Ended March 31,
|
|
2019
(6)
|
|
2018
(6)
|
|
|
|
|
|
Portfolio
Performance
|
|
|
|
|
Residential
Properties
|
|
|
|
|
Residential
Occupancy(1)
|
|
98.5%
|
|
98.4%
|
Residential Net
AMR(1)
|
|
€
|
840
|
|
792
|
Number of residential
units
|
|
2,091
|
|
2,091
|
Commercial
Properties
|
|
|
|
|
Commercial
Occupancy(1)
|
|
99.0%
|
|
N/A
|
Commercial Net
ABR(1)
|
|
€
|
16.6
|
|
N/A
|
GLA of commercial
properties (sqf)
|
|
396,700
|
|
N/A
|
|
|
|
|
|
Operating Revenues
(000s)
|
|
€
|
5,438
|
|
€
|
4,977
|
NOI (000s)
|
|
€
|
3,999
|
|
€
|
3,406
|
NOI Margin
|
|
73.5%
|
|
68.4%
|
|
|
|
|
|
Financial
Performance
|
|
|
|
|
FFO per Unit –
Basic(3)
|
|
€
|
0.034
|
|
€
|
0.025
|
AFFO per Unit –
Basic(3)
|
|
€
|
0.030
|
|
€
|
0.025
|
|
|
|
|
|
Liquidity and
Leverage
|
|
|
|
|
Total Debt to Gross
Book Value(1)
|
|
44.0%
|
|
52.7%
|
Weighted Average
Mortgage Effective Interest Rate(1)(4)
|
|
1.98%
|
|
2.02%
|
Weighted Average
Mortgage Term (years)(1)
|
|
5.12
|
|
6.10
|
Debt Service Coverage
(times)(5)
|
|
3.51
|
|
2.96
|
|
|
|
|
|
(1)
|
As at March
31.
|
(2)
|
Gross book value is
defined as the gross book value of ERES's assets as per ERES's
financial statements, determined on a fair value basis for
investment properties.
|
(3)
|
These measures are
not defined by IFRS, do not have standard meanings and may not be
comparable with other industries or companies (see Section I -
Non-IFRS Financial Measures). For a reconciliation to IFRS, see
Section IV - Non-IFRS Financial Measures.
|
(4)
|
Includes impact of
deferred financing costs and interest rate swaps.
|
(5)
|
Based on trailing
four quarters.
|
(6)
|
The MD&A is
prepared as a continuation of Holding BV, which was not publicly
traded prior to March 29, 2019.
|
Other
|
|
|
|
|
2019
|
|
|
2018
|
Weighted Average
Number of Units - Basic (000s)
|
|
82,207
|
|
|
81,641
|
Closing Price of REIT
Units(1)(2)
|
€
|
2.67
|
|
|
N/A
|
Closing Price of REIT
Units (in C$)(1)(2)(3)
|
$
|
4.00
|
|
|
N/A
|
Market Capitalization
(millions)(1)
|
€
|
263
|
|
|
N/A
|
Market Capitalization
(millions in C$)(1)(2)
|
$
|
394
|
|
|
N/A
|
|
|
(1)
|
As at March
31.
|
(2)
|
Based on the foreign
exchange rate of 1.5002 on March 31, 2019.
|
(3)
|
Adjusted closing
price of REIT Units for special distribution (as defined herein) of
C$0.50.
|
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.
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.
SOURCE European Residential Real Estate Investment Trust