ERE.UN European Residetial Real Estate Investment Trust

European Residential Real Estate Investment Trust ("ERES" or the "REIT") (TSX: ERE.UN) announced today its results for the three months ended March 31, 2022.

ERES’s unaudited condensed consolidated interim financial statements and management's discussion and analysis ("MD&A") for the three months ended March 31, 2022 can be found at www.eresreit.com or under ERES's profile at www.sedar.com.

ONWARD AND UPWARD IN 2022

• Investment property portfolio value up by 6% since the prior year end
• Rental growth of 5.3% versus the prior year period, including 3.8% on stabilized assets
• Net operating income increase of 15% versus the prior year period, including 5% on stabilized contribution
• FFO and AFFO per Unit increased significantly, up by 17% and 16%, respectively, versus the prior year period
• Distribution increase of 9% commencing in March of 2022

SIGNIFICANT EVENTS AND HIGHLIGHTS

Business Update

• The REIT closed on two acquisitions in the Netherlands for a combined purchase price of €62.4 million (excluding transaction costs and fees), representing an aggregate 246 residential suites that increased its suite count by 4%.
• On February 17, 2022, the Board of Trustees approved an increase of 9% to the REIT's monthly distribution from its previous rate of €0.00917 per Unit (equivalent to €0.110 per Unit annualized) to €0.01 per Unit (equivalent to €0.120 per Unit annualized).

Outperforming Operating Metrics

• Excellent operating results continued into 2022, fuelled by accretive acquisitions since the prior year period, steadily strong rental growth and ongoing margin expansion. Stabilized portfolio Occupied Average Monthly Rent ("AMR") increased by 3.8%, from €901 as at March 31, 2021, to €935 as at March 31, 2022, demonstrating the REIT's unabated achievement of rental growth at the higher end of its target range, despite various developments in the regulatory regime.
• Turnover was 2.6% for the three months ended March 31, 2022, with rental uplift on turnover accelerating to 20.7%, which is significantly higher than rental uplift of only 13.3% on turnover of 3.8% in the prior year period.
• Occupancy for the residential properties increased to 98.6% as at March 31, 2022, compared to 98.3% as at March 31, 2021. Moreover, a significant proportion (82%) of residential vacancy in the current period is due to renovation, which should provide further rental uplifts once the suites are leased.
• Net Operating Income ("NOI") increased by 14.9% for the three months ended March 31, 2022, primarily driven by contribution from accretive acquisitions as well as the aforementioned higher monthly rents, that was further supported by lower property operating costs as a percentage of revenues. In aggregate, this drove the strong increase in NOI margin to 76.8% compared to 75.5% for the three months ended March 31, 2021.

Continued Fair Value Appreciation on Portfolio

• The fair value of the REIT's property portfolio increased by 6% to €1.96 billion as at March 31, 2022, consisting of €1.86 billion in multi-residential properties and €0.10 billion in commercial properties. The increase was comprised of €4.3 million in capital investment, €67.6 million in property acquisitions and a significant fair value gain of €32.0 million for the three months ended March 31, 2022. The quarterly gain in fair value was driven by steady and strong market and portfolio fundamentals, the successful execution of the REIT's value-adding capital expenditure program and its exceptional operating metrics, including continually increasing rental revenues, consistently high occupancy and strong cost control.

Accretive Financial Performance

• Funds From Operations ("FFO") per Unit increased significantly by 16.7% to €0.042 for the three months ended March 31, 2022, compared to €0.036 in the prior year period, positively driven by accretive acquisitions and increased stabilized NOI contribution.
• Adjusted Funds From Operations ("AFFO") per Unit similarly increased significantly by 15.6% to €0.037 for the three months ended March 31, 2022, compared to €0.032 in the three months ended March 31, 2021.
• The REIT's AFFO Payout Ratio was 76.4% for the three months ended March 31, 2022, down from 83.9% in the prior period and currently below its long-term target range, inclusive of regular increases to monthly distributions.

Strong Financial Position with Ample Liquidity

• Overall, 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 1.52%. The REIT has immediately available liquidity of €43.6 million as at March 31, 2022, and its total debt to gross book value is 47.7%.

SUBSEQUENT EVENTS

On May 2, 2022, the REIT completed the acquisition of five multi-residential properties comprised of 110 suites located in Rotterdam, the Netherlands (the "GWD Rotterdam Portfolio"), for a purchase price of €23.0 million (excluding transaction costs and fees). The acquisition was initially funded via promissory note issued on April 27, 2022 to Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT"), the REIT's asset and property manager, in the principal amount of €25.7 million, carrying an interest rate of 1.50% per annum and a six-month term to maturity, to be replaced with long-term mortgage financing at a future date.

The GWD Rotterdam Portfolio is 100% owned and currently 100% occupied, and with 93% of its suites regulated, it provides significant potential for uplifts on conversion. Located in the Randstad region of the Netherlands, the GWD Rotterdam Portfolio is situated nearby a substantial portion of the REIT's existing portfolio, therefore enabling operational efficiency and synergy with the five buildings to be managed by the REIT's existing asset and property manager established in the Netherlands.

Further to the above, for rental increases due to indexation beginning on July 1, 2022, the REIT served tenant notices to 6,499 suites, representing 96% of the residential portfolio, across which the average rental increase due to indexation is 2.95%.

“During the first quarter of 2022, we once again have proven empirically our ability to pair strong organic growth with accretive acquisitive expansion, resulting in the REIT’s continued out-performance on all of its key operational and financial targets,” commented Phillip Burns, Chief Executive Officer. “The previously announced and now demonstrated acceleration of ERES’s over-achievement into the new year is on track to continue into the second quarter of 2022, with the successful completion of already another high-quality acquisition of 110 multi-residential suites in the Randstad region of the Netherlands."

OPERATING METRICS CONTINUE TO STRENGTHEN

Total Portfolio	Suite Count		Net AMR/ABR1			Occupied AMR/ABR			Occupancy %
As at March 31,	2022	2021	2022	2021	AMR	2022	2021	AMR	2022	2021
			€	€	% Change	€	€	% Change
Residential Properties	6,791	6,047	935	886	5.5	949	901	5.3	98.6	98.3
Commercial Properties2			17.8	17.8	—	18.0	17.8	1.1	99.0	100.0

1	Average In-Place Base Rent ("ABR")
2	Represents 450,911 square feet of commercial gross leasable area.

Stabilized Portfolio	Suite Count1	Net AMR/ABR			Occupied AMR/ABR			Occupancy %
As at March 31,		2022	2021	AMR	2022	2021	AMR	2022	2021
		€	€	% Change	€	€	% Change
Residential Properties	6,046	922	886	4.1	935	901	3.8	98.6	98.3
Commercial Properties2		17.8	17.8	—	18.0	17.8	1.1	99.0	100.0

1	Represents all properties owned by the REIT continuously since March 31, 2021, and therefore excludes 14 residential properties (745 suites) acquired and 1 suite disposed in the subsequent period to date.
2	Represents 450,911 square feet of commercial gross leasable area.

Net and Occupied AMR for the total multi-residential portfolio increased by 5.5% and 5.3%, respectively, while Net and Occupied AMR for the stabilized portfolio increased by 4.1% and 3.8%, respectively, compared to the prior year period. The increases were driven by increased rents on annual indexation, turnover and conversion of regulated suites to liberalized suites. The REIT's achievement of growth in rental revenues at the high end of its target range of 3% to 4% demonstrates its ability to consistently and profitably operate in a complex and fluid regulatory regime.

For the Three Months Ended March 31,	2022			2021
	Change in Monthly Rent		Turnovers	Change in Monthly Rent		Turnovers
	€	%	%	€	%	%
Regulated suites turnover	4	0.6	0.3	23	4.1	0.5
Liberalized suites turnover	193	18.4	1.9	107	11.6	2.8
Regulated suites converted to liberalized suites	397	55.1	0.3	230	33.4	0.5
Weighted average turnovers	194	20.7	2.6	111	13.3	3.8

For the three months ended March 31, 2022, turnover was 2.6%, with average rental uplift (including service charge income) of 20.7%. This compares exceptionally well to average rental uplift (including service charge income) of only 13.3% on turnover of 3.8% in the three months ended March 31, 2021. Rental uplifts were significantly higher on conversions, at 55.1% for the current quarter, compared to 33.4% for the three months ended March 31, 2021.

Total Portfolio Performance
For the Three Months Ended March 31,	2022			2021
Operating Revenues (000s)	€	21,254			€	18,822
NOI (000s)	€	16,322			€	14,210
NOI Margin	76.8		%	75.5			%
Weighted Average Number of Suites	6,577			6,047

Operating revenues increased by 12.9% for the three months ended March 31, 2022, compared to the prior year period, primarily due to accretive acquisitions and an increase in monthly rents on the stabilized portfolio, as described above.

NOI increased by 14.9% for the three months ended March 31, 2022, versus the same period last year, likewise driven by contribution from acquisitions since the prior year period, higher monthly rents on stabilized properties and strong cost control. This was complemented by a decrease in property operating costs as a percentage of operating revenues, predominantly due to lower repairs and maintenance ("R&M") costs as well as a reduction in landlord levy expense, as a result of the reduced landlord levy tax rate effective January 1, 2022 and utilization of a rebate from the government for landlord levies payable. In aggregate, total portfolio NOI margin increased substantially to 76.8% for the three months ended March 31, 2022, compared to 75.5% in the prior year period.

Excluding the impact of the landlord levy rebate, NOI margin on the total portfolio still increased to 76.3% for the three months ended March 31, 2022. However, given the REIT's intention to consistently purchase landlord levy rebates, along with the aforementioned reduction in the landlord levy tax rate as well as its potential abolishment, the REIT considers that its actual NOI margin for the three months ended March 31, 2022 will be indicative of long-run performance, with an expectation that it will achieve an annual NOI margin in the range of 76% to 79% of operating revenues. This is further reinforced by the REIT's limited exposure to inflationary pressures — tenants are responsible for the majority of their own energy and other utility costs, the REIT has no employees and therefore no wage costs, and property management fees are a fixed percentage of operating revenues. This preserves the REIT's property operating costs and, combined with its strong growth in rental revenues, improves its normalized NOI margin.

Stabilized Portfolio Performance
For the Three Months Ended March 31,	2022			2021
Operating Revenues (000s)	€	19,545			€	18,822
NOI (000s)	€	14,964			€	14,210
NOI Margin	76.6		%	75.5			%
Stabilized Number of Suites1	6,046			6,046

1	Includes all properties owned by the REIT continuously since December 31, 2020, and therefore does not take into account the impact of acquisitions or dispositions completed during 2021 or 2022.

The increase in stabilized NOI contribution by 5.3% for the three months ended March 31, 2022, compared to the prior year period, was primarily driven by higher operating revenues from increased monthly rents, as well as a reduction in operating expenses as a percentage of operating revenues, predominantly due to lower R&M as well as landlord levy expense, as a result of both the reduced landlord levy tax rate and utilization of the landlord levy rebate. Excluding the impact of the landlord levy rebate, NOI margin on the stabilized portfolio still increased to 76.0% for the three months ended March 31, 2022.

The REIT remains focused on continuing to further improve NOI and NOI margin in the long term through a combination of accretive and value-enhancing acquisitions, successful sales and marketing strategies to further improve revenues, and investment in capital programs to further reduce costs and enhance the quality and value of its portfolio. In addition, the REIT notes that its property operating costs are largely insulated from inflation, as tenants are responsible for the majority of their own energy and other utility costs, the REIT has no employees and therefore no wage costs, and property management fees are a fixed percentage of operating revenues. This further preserves the REIT's property operating costs and, combined with its strong growth in rental revenues, improves its normalized NOI margin.

Financial Performance
A reconciliation of net income (loss) to FFO is as follows:
(€ Thousands, except per Unit amounts)
For the Three Months Ended March 31,	2022			2021
Net loss and comprehensive loss for the period	€	(31,729	)		€	(35,673	)
Adjustments:
Fair value adjustments of investment properties	(32,039		)	3,985
Fair value adjustments of Class B LP Units	65,789			37,228
Fair value adjustments of Unit Option liabilities	1,091			12
Interest expense on Class B LP Units	4,025			3,788
Deferred income taxes	11,651			(1,015			)
Foreign exchange loss1	1,697			482
Net movement in derivative financial instruments	(10,722		)	(493			)
Acquisition research costs	11			—
FFO	€	9,774			€	8,314
FFO per Unit – basic2	€	0.042			€	0.036
FFO per Unit – diluted2	€	0.042			€	0.036
Total distributions declared	€	6,559			€	6,155
FFO payout ratio	67.1		%	74.0			%

1	Relates to foreign exchange movements recognized on remeasurement of Unit Option liabilities as well as on remeasurement of the REIT's US Dollar draw on the Revolving Credit Facility (defined herein) as part of effective hedge.
2	Includes Class B LP Units.

 

The table below illustrates a reconciliation of the REIT's FFO and AFFO:
(€ Thousands, except per Unit amounts)
For the Three Months Ended March 31,	2021			2020
FFO	€	9,774			€	8,314
Adjustments:
Non-discretionary capital expenditure reserve1	(1,055		)	(886			)
Leasing cost reserve2	(130		)	(94			)
AFFO	€	8,589			€	7,334
AFFO per Unit – basic3	€	0.037			€	0.032
AFFO per Unit – diluted3	€	0.037			€	0.032
Total distributions declared	€	6,559			€	6,155
AFFO payout ratio	76.4		%	83.9			%

1	Non-discretionary capital expenditure reserve has been calculated based on the normalized annual 2022 forecast of €626 per weighted average number of residential suites during the period (2021 — annual 2021 budget of €586 per weighted average number of residential suites). The adjustments are based on the normalized forecast amount as the REIT considers this to be more normalized on a long-term basis and therefore more relevant (the prior year adjustments were based on the budget amount due to the REIT's deferral of certain non-discretionary capital expenditures for 2020 as a result of the COVID-19 pandemic).
2	Leasing cost reserve is based on annualized 10-year forecast of external leasing costs on the commercial properties.
3	Includes Class B LP Units.

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 is a measure of operating performance based on the funds generated by the business before reinvestment or provision for other capital needs. AFFO is a supplemental measure which adjusts FFO for costs associated with capital expenditures, leasing costs, and tenant improvements. FFO and AFFO as presented are in accordance with the recommendations of the Real Property Association of Canada ("REALpac") as published in January 2022, with the exception of certain adjustments made to the REALpac defined FFO, which relate to acquisition research costs. FFO and AFFO may not, however, be comparable to similar measures presented by other real estate investment trusts or companies in similar or different industries. Management considers FFO and AFFO to be important measures of the REIT’s operating performance. Please refer to "Basis of Presentation and Non-IFRS Measures" within this press release for further information.

Net Asset Value
A reconciliation of Unitholders' equity to Net Asset Value ("NAV") is as follows:
(€ Thousands, except per Unit amounts)
As at		March 31, 2022				December 31, 2021
Unitholders' equity	€	408,093			€	441,765
Goodwill	(10,541		)	(10,541			)
Class B LP Units	510,931			445,142
Unit-based compensation financial liabilities	3,245			2,016
Net deferred income tax liability1	96,435			84,784
Net derivative financial (asset) liability2	(8,434		)	286
NAV	€	999,729			€	963,452
NAV per Unit – diluted3	€	4.31			€	4.16
NAV per Unit – diluted (in C$)3,4	C$	5.99			C$	5.99

1	Represents deferred income tax liability of €98,484 net of deferred income tax asset of €2,049 (December 31, 2021 — deferred income tax liability of €87,435 net of deferred income tax asset of €2,651).
2	Represents derivative financial assets of €8,628 net of non-current and current derivative financial liabilities of €11 and €183, respectively (December 31, 2021 — non-current and current derivative financial liabilities of €722 and €494, respectively, net of derivative financial assets of €930).
3	Includes Class B LP Units and the dilutive impact of unexercised Unit Options, calculated based on the treasury method.
4	Based on the foreign exchange rate of 1.3900 on March 31, 2022 (foreign exchange rate of 1.4391 on December 31, 2021).

NAV represents total Unitholders' equity per the REIT's consolidated statements of financial position, adjusted to exclude certain amounts in order to provide what management considers to be a key measure of the intrinsic value of the REIT on a going concern basis. Management believes that this measure reflects the residual value of the REIT to its Unitholders on a going concern basis and is therefore used by management on both an aggregate and per Unit basis to evaluate the net asset value attributable to Unitholders, and changes thereon based on the execution of the REIT's strategy. Please refer to the "Basis of Presentation and Non-IFRS Measures" section within this press release for further information.

Other Financial Highlights
For the Three Months Ended March 31,		2022			2021
Weighted Average Number of Units – Basic1 (000s)		231,409			230,803
Closing Price of REIT Units2, 3	€	3.60		€	2.93
Closing Price of REIT Units (in C$)2	$	5.00		$	4.33
Market Capitalization (millions)1, 2, 3	€	833		€	677
Market Capitalization (millions in C$)1, 2	$	1,158		$	1,000

1	Includes Class B LP Units.
2	As at March 31.
3	Based on the foreign exchange rate of 1.3900 on March 31, 2022 (foreign exchange rate of 1.4759 on March 31, 2021).

FINANCIAL POSITION REMAINS ROBUST AND CONSERVATIVE

As at	March 31, 2022		December 31, 2021
Ratio of Adjusted Debt to Gross Book Value1	47.7	%	46.8	%
Weighted Average Mortgage Effective Interest Rate	1.52	%	1.52	%
Weighted Average Mortgage Term (years)	3.68		3.93
Debt Service Coverage Ratio (times)1,2	3.4x		3.3x
Interest Coverage Ratio (times)1,2	4.2x		4.2x
Available Liquidity3	€        43,559		€        39,437

1	Please refer to the "Basis of Presentation and Non-IFRS Measures" section of this press release for further information.
2	For the rolling 12 months ended.
3	Includes cash and cash equivalents of €22.6 million and unused credit facility capacity of €21.0 million as at March 31, 2022 (cash and cash equivalents of €10.3 million and unused credit facility capacity of €29.1 million as at December 31, 2021).

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 1.52%. The majority of the REIT's mortgages are non-amortizing, and mature between 2022 and 2027. The REIT has immediately available liquidity of €44 million as at March 31, 2022, and its total debt to gross book value is 47.7%.

Management aims to maintain an optimal degree of debt to GBV of the REIT's assets depending on a number of factors at any given time. Capital adequacy is monitored against investment and debt restrictions contained in the REIT's fourth amended and restated declaration of trust dated April 28, 2020, and the amended and renewed credit agreement dated October 29, 2021, between the REIT and two Canadian chartered banks, providing access to up to €100.0 million (the "Revolving Credit Facility"). The REIT manages its overall liquidity risk by maintaining sufficient available credit facilities and available cash on hand to fund its ongoing operational and capital commitments and distributions to Unitholders, and to provide future growth in its business.

"Over the past three years, ERES's ability to successfully and invariably execute on its strategic objectives has fundamentally relied on its robust yet flexible financial position, which itself constitutes a core pillar supporting the REIT’s track record for exceeding expectations,” commented Stephen Co, Chief Financial Officer. “We have both creatively and accretively financed acquisitions and operations, while simultaneously maintaining consistently conservative debt metrics. On top of that, we were able to pass the accomplishments of the REIT onward to its Unitholders by once again increasing its rate of distribution, up significantly by 9% in this past quarter and in turn, preserving ERES’s reputation for its comparatively high distribution yield.”

DISTRIBUTIONS

During the three months ended March 31, 2022, the REIT declared monthly distributions of €0.00917 per Unit (equivalent to €0.110 per Unit annualized) in respect of January and February, and €0.01 per Unit (equivalent to €0.120 per Unit annualized) thereafter, following an increase of 9% 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 CALL

A conference call hosted by Phillip Burns, Chief Executive Officer and Stephen Co, Chief Financial Officer, will be held on Tuesday, May 3, 2022 at 9:00 am EST. The telephone numbers for the conference call are Canadian Toll Free: 1 (833) 950-0062 / International: +1 (929) 526-1599. The Passcode for the call is 209395.

A replay of the call will be available for 7 days after the call, until Tuesday, May 10, 2022. The telephone numbers to access the replay are Canadian Toll Free: 1 (226) 828-7578 or International +44 (204) 525-0658. The Passcode for the replay is 048277.

The call will also be webcast live and accessible through the ERES website at www.eresreit.com — click on "Investor Info" and follow the link at the top of the page. The webcast will also be available by clicking on the link below:

https://events.q4inc.com/attendee/852348789

A replay of the webcast will be available for 1 year after the webcast at the same link.

The slide presentation to accompany management's comments during the conference call will be available on the ERES website an hour and a half prior to the conference call.

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 158 multi-residential properties, comprised of 6,901 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.

Basis of Presentation and Non-IFRS Measures

Unless otherwise stated, all amounts included in this press release are in thousands of Euros, the functional currency of the REIT. The REIT's unaudited condensed consolidated interim financial statements ("Interim Financial Statements") are prepared in accordance with International Financial Reporting Standards ("IFRS"). Financial information included within this press release does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the REIT's Interim Financial Statements and MD&A for the three months ended March 31, 2022, which is available on the REIT's website at www.eresreit.com and on SEDAR at www.sedar.com.

Consistent with the REIT's management framework, management uses certain financial measures to assess the REIT's financial performance, which are not in accordance with IFRS ("Non-IFRS Measures"). Since these Non-IFRS Measures are not recognized under IFRS, they may not be comparable to similar measures reported by other issuers. The REIT presents Non-IFRS Measures because management believes Non-IFRS Measures are relevant measures of the ability of the REIT to earn revenue, generate sustainable economic earnings, and to evaluate its performance and financial condition. The Non-IFRS Measures should not be construed as alternatives to net income or cash flows from operating activities determined in accordance with IFRS as indicators of the REIT’s performance or the sustainability of distributions. For full definitions of these measures, please refer to "Non-IFRS Measures" in Section I and Section IV of the REIT's MD&A for the three months ended March 31, 2022.

Where not otherwise disclosed, reconciliations for certain Non-IFRS Measures included within this press release are provided below.

Adjusted Debt and Adjusted Debt Ratio

The REIT's Declaration of Trust requires compliance with certain financial covenants, including the Ratio of Adjusted Debt to Gross Book Value. Management uses Total Debt Adjusted for Declaration of Trust and the Ratio of Adjusted Debt to Gross Book Value as indicators in assessing if the debt level maintained is sufficient to provide adequate cash flows for distributions and for evaluating the need to raise funds for further expansion.

A reconciliation from total debt is as follows:

(€ Thousands)
As at		March 31, 2022				December 31, 2021
Mortgages payable1	€	814,008			€	814,422
Bank indebtedness	78,994			70,911
Promissory notes	67,450			—
Total Debt	€	960,452			€	885,333
Fair value adjustment on mortgages payable	(1,510		)	(1,608			)
Total Debt Adjusted for Declaration of Trust	€	958,942			€	883,725
Ratio of Adjusted Debt to Gross Book Value2	47.7		%	46.8			%

1	Represents non-current and current mortgages payable of €761,902 and €52,106, respectively (December 31, 2021 — €762,318 and €52,104, respectively).
2	Gross Book Value ("GBV") is defined by the REIT's Declaration of Trust 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.

Earnings Before Interest, Tax, Depreciation, Amortization and Fair Value

Earnings Before Interest, Tax, Depreciation, Amortization and Fair Value ("EBITDAFV") is calculated as prescribed in the REIT's Revolving Credit Facility for the purpose of determining the REIT's Debt Service Coverage Ratio and Interest Coverage Ratio, and is defined as net income (loss) attributable to Unitholders, reversing, where applicable, income taxes, interest expense, amortization expense, depreciation expense, adjustments to fair value and other adjustments as permitted in the REIT's Revolving Credit Facility. Management believes EBITDAFV is useful in assessing the REIT's ability to service its debt, finance capital expenditures and provide for distributions to its Unitholders.

A reconciliation of net income (loss) to EBITDA is as follows:

(€ Thousands)
For the Three Months Ended,		Q1 22				Q4 21				Q3 21				Q2 21				Q1 21				Q4 20				Q3 20				Q2 20
Net loss and comprehensive loss for the period	€	(31,729)			€	45,204			€	58,616			€	27,991			€	(35,673)			€	12,512			€	13,547			€	(35,857)
Adjustments:
Fair value adjustments of investment properties	(32,039		)	(86,748			)	(76,908			)	(34,908			)	3,985				(4,387			)	(21,498			)	(5,592			)
Fair value adjustments of Class B LP Units	65,789			22,352				2,868				2,668				37,228				(9,437			)	6,536				43,303
Fair value adjustments of Unit Option liabilities	1,091			129				200				(161			)	12				(293			)	(2			)	342
Net movement in derivative financial instruments	(10,722		)	(987			)	(1,264			)	(1,117			)	(493			)	1,656				(1,206			)	(1,466			)
Foreign exchange loss	1,697			285				1,541				935				482				(1,726			)	1,196				1,531
Interest expense on Class B LP Units	4,025			3,907				3,908				3,907				3,788				3,728				3,729				3,728
Interest on mortgages payable	3,046			2,899				2,830				2,810				2,785				2,708				2,699				2,611
Interest on bank indebtedness	150			143				203				110				95				132				100				97
Interest on promissory notes	50			15				—				—				—				—				—				3
Amortization	231			90				234				143				142				178				156				66
Income tax expense (recovery)	12,302			25,715				20,526				9,948				(447			)	6,502				5,677				1,896
EBITDAFV	€	13,891			€	13,004			€	12,754			€	12,326			€	11,904			€	11,573			€	10,934			€	10,662
Cash taxes	651			1,088				741				601				568				461				428				266
EBITDAFV after cash taxes	€	13,240			€	11,916			€	12,013			€	11,725			€	11,336			€	11,112			€	10,506			€	10,396
Principal repayments1	€	547			€	546			€	546			€	545			€	547			€	544			€	259			€	259

1	For use in Debt Service Coverage Ratio and Interest Coverage Ratio calculations.

Debt Service Coverage Ratio

The Debt Service Coverage Ratio is defined as EBITDAFV less cash taxes, divided by the sum of interest expense (including on mortgages payable, bank indebtedness and promissory notes) and all regularly scheduled principal payments made with respect to indebtedness during the period (other than any balloon, bullet or similar principal payable at maturity or which repays such indebtedness in full). The Debt Service Coverage Ratio is calculated as prescribed in the REIT's Revolving Credit Facility, and is based on the trailing four quarters. Management believes the Debt Service Coverage Ratio is useful in determining the ability of the REIT to service the interest requirements of its outstanding debt.

(€ Thousands)
As at	March 31, 2022			December 31, 2021
EBITDAFV after cash taxes1	€	48,894		€	46,990
Debt service payments1,2	€	14,440		€	14,074
Debt Service Coverage Ratio (times)	3.4x			3.3x

1	For the trailing 12 months ended.
2	Includes principal repayments as well as interest on mortgages payable, bank indebtedness and promissory notes, and excludes interest expense on Class B LP Units.

Interest Coverage Ratio

The Interest Coverage Ratio is defined as EBITDAFV divided by interest expense (including on mortgages payable, bank indebtedness and promissory notes). The Interest Coverage Ratio is calculated as prescribed in the REIT's Revolving Credit Facility, and is based on the trailing four quarters. Management believes the Interest Coverage Ratio is useful in determining the REIT's ability to service the interest requirements of its outstanding debt.

(€ Thousands)
As at	March 31, 2022			December 31, 2021
EBITDAFV1	€	51,975		€	49,988
Interest expense1,2	€	12,256		€	11,890
Interest Coverage Ratio (times)	4.2x			4.2x

1	For the trailing 12 months ended.
2	Includes interest on mortgages payable, bank indebtedness and promissory notes, and excludes interest expense on Class B LP Units.

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’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.

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