European Residential REIT Reports 2024 Annual Results

TORONTO, Feb. 12, 2025 (GLOBE NEWSWIRE) -- European Residential Real Estate Investment Trust ("ERES" or the "REIT") (TSX: ERE.UN) announced today its results for the year ended December 31, 2024.

ERES's audited consolidated annual financial statements and management's discussion and analysis ("MD&A") for the year ended December 31, 2024 can be found at www.eresreit.com or under ERES's profile at SEDAR+ at www.sedarplus.ca.

SIGNIFICANT EVENTS AND HIGHLIGHTS

Strategic Initiatives Update

• In December 2024, through a number of transactions, the REIT disposed of a total of 3,267 suites in the Netherlands for €768.3 million (excluding transaction costs and other adjustments).
• The REIT declared and paid a special cash distribution of €1.00 per Unit, totalling €234.4 million (including distributions on Class B LP Units), in December 2024, funded by proceeds from dispositions.
• On September 13, 2024, the REIT disposed of a commercial building being part of its German property for €8.6 million (excluding transaction costs and other adjustments).
• On July 15, 2024, the REIT disposed of 19 residential properties containing 464 suites in the Netherlands for €100.7 million (excluding transaction costs and other adjustments) and one office building being part of a residential property in the Netherlands for gross proceeds of €1.1 million.
• On June 18, 2024, the REIT disposed of one residential property containing 66 suites in the Netherlands for €14.2 million (excluding transaction costs and other adjustments).
• During the year ended December 31, 2024, the REIT disposed of 80 individual suites, which generated €22.8 million in gross proceeds.

• Strong operating results continued into 2024, fuelled by strong rental growth. Same property portfolio Occupied Average Monthly Rents ("Occupied AMR") increased by 6.8%, from €1,166 as at December 31, 2023, to €1,245 as at December 31, 2024, demonstrating the REIT's continued achievement of rental growth.
• Same property turnover was 12.4% for the year ended December 31, 2024, with rental uplift on turnover of 15.2%, compared to rental uplift of 21.5% on same property turnover of 17.4% in the prior year.
• Same property occupancy for the residential properties decreased to 94.9% as at December 31, 2024, compared to 99.2% as at December 31, 2023, primarily related to suites intentionally held vacant to maximize value. Same property occupancy for commercial properties decreased to 91.3% as at December 31, 2024, from 100.0% as at December 31, 2023, due to the expiration of one of the commercial leases.        
• Same property Net Operating Income ("NOI") increased by 3.1% for the year ended December 31, 2024 compared to the prior year, primarily driven by higher monthly rents on the same property portfolio and further supported by the REIT's extensive protection from inflation and strong cost control.

• Diluted Funds From Operations ("FFO") per Unit for the year ended December 31, 2024 decreased by 4.3%, compared to the prior year, primarily due to lower total portfolio NOI as a result of dispositions, partially offset by lower interest costs being incurred following repayment of debt using proceeds from dispositions.
• Diluted Adjusted Funds From Operations ("AFFO") per Unit for the year ended December 31, 2024 decreased by 7.3%, compared to the prior year, due to the same reasons mentioned above for the decrease in diluted FFO per Unit as well as an increase in actual non-discretionary capital investments.

• Liquidity improved significantly from the prior year end by €103.9 million as a result of proceeds from dispositions being partially used to repay the Revolving Credit Facility.
• During the year ended December 31, 2024, the REIT repaid €544.4 million of mortgages payable with a weighted average effective interest rate of 2.15%, including €476.9 million resulting from dispositions.
• On June 19, 2024, the REIT amended its Revolving Credit Facility to replace the Canadian Dollar Offered Rate with the Canadian Overnight Repo Rate Average as the benchmark interest rate for Canadian dollar borrowings, if any. The amendment also extended the maturity date of the Revolving Credit Facility from January 26, 2026 to June 14, 2027.
• On April 30, 2024, the REIT renewed the mortgage financing on one of its commercial properties for a one-year period ending March 31, 2025, with a total principal amount of €14.4 million and interest rate at three-month Euro Interbank Offered Rate plus a margin of 2.0%.
• On March 27, 2024, the REIT renewed the mortgage financing on one of its commercial properties for a three-year period ending March 27, 2027, with a total principal amount of €18.7 million and a fixed contractual interest rate of 4.70%.
• Debt coverage metrics are within covenant thresholds, with interest and debt service coverage ratios of 3.2x and 2.6x, respectively, and adjusted debt to gross book value ratio standing at 39.7%.
• As at December 31, 2024, the REIT's mortgage profile had a weighted average term to maturity of 2.5 years and a weighted average effective interest rate of 2.27%.

• Subsequent to the year ended December 31, 2024 and as at the date of this press release, the REIT has disposed of additional 279 suites in the Netherlands for €56.2 million (excluding transaction costs and other adjustments).
• On January 7, 2025, the Board of Trustees held a special meeting of Unitholders to amend the REIT's Declaration of Trust to provide the Board of Trustees with the authority (i) to sell all or substantially all of the assets of the REIT in one or more transactions at such times and on such terms and conditions as determined by the Board, (ii) to distribute the net proceeds of any such sales to Unitholders in the amounts and at the times determined by the Board, and (iii) to wind-up, liquidate, dissolve or take any such similar action to terminate the REIT on such terms and conditions determined by the Board, in each case without any requirement for further Unitholder approval (subject to applicable securities laws). The amendments were approved at the special meeting.
• The Board of Trustees has also approved a reduction in monthly distributions, from €0.01 per Unit to €0.005 per Unit, effective January 2025, implemented to better align distributions with the operations of the REIT's remaining portfolio.

"After paying down mortgage debt associated with our dispositions, we used part of the net proceeds to prepay certain additional mortgages maturing in the near-term,” added Jenny Chou, Chief Financial Officer. "In doing so, we headed into this year with approximately €34 million in mortgage principal maturing, which compares to €227 million that we originally had maturing in 2025, as of prior year end. In addition, we paid down all amounts outstanding on the REIT's Revolving Credit Facility, and, in aggregate, we significantly lowered our leverage with an adjusted debt to gross book value ratio of 39.7% as of current year end, down from 57.6% as of December 31, 2023. Operationally, on the same property portfolio, our occupied AMR grew by 6.8% and our NOI margin was solid at 76.6% for 2024, and we'll continue to focus on realizing these robust results for the remaining portfolio moving forward."

"We have been reiterating that our mission is the maximization of value for Unitholders, and we believe that this past year, we have evidenced our true commitment to that objective," said Gina Parvaneh Cody, Chair of the Board. "We were pleased to have commenced the new year with a special meeting of Unitholders, in which a resolution to amend the REIT's Declaration of Trust was passed. This provided the Board with maximum flexibility in assessing and executing on the most attractive opportunities available, so that we can continue to cover significant ground on the execution of our strategy in the year ahead. We are confident in the management team we have in place at ERES to do just that, in a responsible, disciplined and timely manner, and we are looking forward to seeing further generation of Unitholder returns in 2025."

OPERATING RESULTS

Rental Rates

Occupied AMR for the same property portfolio increased by 6.8% compared to €1,166 as at December 31, 2023, mainly driven by indexation, turnover and the conversion of regulated suites to liberalized suites. The REIT's achievement of strong growth in rental revenues demonstrates its ability to consistently operate in a complex and fluid regulatory regime. The Occupied ABR for the commercial properties for the same property portfolio decreased from €20.2 as at December 31, 2023 to €17.9 as at December 31, 2024, primarily due to a reduction in rent after lease renewal in one of the commercial properties.

Suite Turnovers

Total Portfolio Turnover

Same Property Turnover

Suite Renewals

Lease renewals generally occur on July 1 for residential suites. On July 1, 2024, the REIT renewed leases for 94% of its residential suites, to which the average rental increase due to indexation and household income adjustments was 5.5% (July 1, 2023 - renewal of 97% of its residential suites with 4.0% average rental increase).

There was one lease renewal in the REIT's commercial portfolio during the year ended December 31, 2024 (year ended December 31, 2023 - one lease renewal).

Total Portfolio Performance

The following table reconciles same property NOI and NOI from dispositions and assets held for sale to total NOI, for the three months and year ended December 31, 2024 and December 31, 2023.

Same Property Portfolio Performance¹