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.
Operating Metrics
- 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.
Financial Performance
- 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.
Financial Position and Liquidity
- 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%.
Significant Subsequent Events
- 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.
"We're very proud of what we were able to accomplish in 2024, with over €900 million in strategic dispositions that reduced our residential portfolio in the Netherlands from nearly 7,000 suites at the start of the year to approximately 3,000 as of December 31, 2024," commented Mark Kenney, Chief Executive Officer. "We were able to transact on these sales at pricing at or above previously reported fair values, generating significant capital that we used to strengthen our balance sheet and fund a special cash distribution to Unitholders of €1.00 per Unit. We're determined to do everything we can to see this sound execution of our strategy continue in the new year, as we seek to surface incremental value and maximize returns for our Unitholders in 2025."
"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
| Total Property Portfolio | Suite Count | Occupied AMR/ABR1 | Occupancy % | |||||
| As at December 31, | 2024 | 2023 | 2024 | 2023 | AMR | 2024 | 2023 | |
| € | € | % Change | ||||||
| Residential Properties | 3,009 | 6,886 | 1,222 | 1,063 | 15.0 | 94.6 | 98.5 | |
| Commercial Properties2 | 17.9 | 19.4 | (7.7 | ) | 91.3 | 100.0 | ||
| 1 | Average In-Place Base Rent ("ABR"). |
| 2 | Represents 392,904 square feet ("sq. ft.") of commercial gross leasable area ("GLA") as at December 31, 2024 (December 31, 2023 - 450,911 sq. ft.). |
| Same Property Portfolio | Suite Count1 | Occupied AMR/ABR | Occupancy % | ||||
| As at December 31, | 2024 | 2023 | AMR | 2024 | 2023 | ||
| € | € | % Change | |||||
| Residential Properties | 2,698 | 1,245 | 1,166 | 6.8 | 94.9 | 99.2 | |
| Commercial Properties2 | 17.9 | 20.2 | (11.4 | ) | 91.3 | 100.0 | |
| 1 | Same property suite count includes all suites owned by the REIT as at both December 31, 2024 and December 31, 2023, and excludes properties and suites disposed of or classified as assets held for sale as at December 31, 2024. |
| 2 | Includes 392,904 sq. ft. of same property commercial GLA, which excludes commercial GLA disposed of since December 31, 2023. |
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
| For the Three Months Ended December 31, | 2024 | 2023 | ||
| Change in Monthly Rent | Turnovers2 | Change in Monthly Rent | Turnovers2 | |
| % | % | % | % | |
| Regulated suites turnover1 | 4.9 | 0.8 | 11.9 | 0.3 |
| Liberalized suites turnover1 | 14.8 | 0.3 | 18.6 | 2.7 |
| Regulated suites converted to liberalized suites1 | 14.8 | 0.2 | 41.8 | 0.4 |
| Weighted average turnovers1 | 8.9 | 1.3 | 20.3 | 3.4 |
| Weighted average turnovers excluding service charge income | 9.6 | 1.3 | 19.2 | 3.4 |
| 1 | Represents the percentage increase in monthly rent inclusive of service charge income. |
| 2 | Percentage of suites turned over during the period based on the weighted average number of total residential suites held during the period. |
| For the Year Ended December 31, | 2024 | 2023 | ||
| Change in Monthly Rent | Turnovers2 | Change in Monthly Rent | Turnovers2 | |
| % | % | % | % | |
| Regulated suites turnover1 | 8.6 | 1.7 | 10.5 | 1.1 |
| Liberalized suites turnover1 | 13.1 | 4.6 | 17.7 | 11.0 |
| Regulated suites converted to liberalized suites1 | 29.3 | 1.4 | 51.8 | 1.6 |
| Weighted average turnovers1 | 14.9 | 7.7 | 20.4 | 13.8 |
| Weighted average turnovers excluding service charge income | 15.7 | 7.7 | 19.5 | 13.8 |
| 1 | Represents the percentage increase in monthly rent inclusive of service charge income. |
| 2 | Percentage of suites turned over during the year based on the weighted average number of total residential suites held during the year. |
Same Property Turnover
| For the Three Months Ended December 31, | 2024 | 2023 | ||
| Change in Monthly Rent | Turnovers2 | Change in Monthly Rent | Turnovers2 | |
| % | % | % | % | |
| Regulated suites turnover1 | 4.9 | 1.7 | 17.2 | 0.1 |
| Liberalized suites turnover1 | 14.8 | 0.6 | 18.7 | 4.3 |
| Regulated suites converted to liberalized suites1 | 14.8 | 0.4 | 53.7 | 0.6 |
| Weighted average turnovers1 | 8.9 | 2.7 | 21.2 | 5.0 |
| Weighted average turnovers excluding service charge income | 9.6 | 2.7 | 19.9 | 5.0 |
| 1 | Represents the percentage increase in monthly rent inclusive of service charge income. |
| 2 | Percentage of suites turned over during the period based on the weighted average number of same property residential suites held during the period. |
| For the Year Ended December 31, | 2024 | 2023 | ||
| Change in Monthly Rent | Turnovers2 | Change in Monthly Rent | Turnovers2 | |
| % | % | % | % | |
| Regulated suites turnover1 | 8.7 | 3.2 | 13.0 | 0.7 |
| Liberalized suites turnover1 | 12.9 | 6.9 | 18.3 | 14.9 |
| Regulated suites converted to liberalized suites1 | 29.5 | 2.3 | 64.2 | 1.8 |
| Weighted average turnovers1 | 15.2 | 12.4 | 21.5 | 17.4 |
| Weighted average turnovers excluding service charge income | 16.9 | 12.4 | 20.1 | 17.4 |
| 1 | Represents the percentage increase in monthly rent inclusive of service charge income. |
| 2 | Percentage of suites turned over during the year based on the weighted average number of same property residential suites held during the year. |
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
| Three Months Ended, | Year Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Operating Revenues (000s) | € | 20,641 | € | 24,717 | € | 92,968 | € | 95,684 | ||||
| NOI (000s) | € | 16,020 | € | 19,505 | € | 72,867 | € | 75,131 | ||||
| NOI Margin1 | 77.6 | % | 78.9 | % | 78.4 | % | 78.5 | % | ||||
| Weighted Average Number of Suites | 5,681 | 6,894 | 6,426 | 6,898 | ||||||||
| 1 | Excluding service charge income and expense, the total portfolio NOI margin for the three months and year ended December 31, 2024 was 82.8% and 83.7%, respectively (three months and year ended December 31, 2023 - 84.2% and 83.8%, respectively). |
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.
| (€ Thousands) | Three Months Ended | Year Ended | ||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Same property NOI | € | 9,007 | € | 9,191 | € | 36,544 | € | 35,433 |
| NOI from dispositions and assets held for sale | 7,013 | 10,314 | 36,323 | 39,698 | ||||
| Total NOI | € | 16,020 | € | 19,505 | € | 72,867 | € | 75,131 |
Same Property Portfolio Performance1
| Three Months Ended, | Year Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Operating Revenues (000s) | € | 11,814 | € | 11,913 | € | 47,714 | € | 46,007 | ||||
| NOI (000s) | € | 9,007 | € | 9,191 | € | 36,544 | € | 35,433 | ||||
| NOI Margin2 | 76.2 | % | 77.2 | % | 76.6 | % | 77.0 | % | ||||
| 1 | Same property portfolio includes all properties and suites continuously owned by the REIT since December 31, 2022, and excludes properties, buildings and suites disposed of since December 31, 2022 and properties classified as assets held for sale as at December 31, 2024. For the years ended December 31, 2024 and December 31, 2023, same property portfolio includes 2,698 residential suites and 392,904 sq. ft. of commercial GLA. |
| 2 | Excluding service charge income and expense, the same property portfolio NOI margin for the three months and year ended December 31, 2024 was 83.9% and 84.6%, respectively (three months and year ended December 31, 2023 - 85.1% and 84.9%, respectively). |
For the three months ended December 31, 2024, the same property NOI decreased by 2.0% from the comparable prior year quarter and the NOI margin on the same property portfolio decreased to 76.2% from 77.2% for the comparable prior year quarter, mainly due to reduction in rent after lease renewal in one of the commercial properties and intentional vacancies to maximize value. However, the same property NOI increased by 3.1% for the year ended December 31, 2024, compared to the prior year, primarily driven by higher occupied AMR on the same property portfolio. The same property NOI margin slightly decreased to 76.6% for the year ended December 31, 2024, compared to 77.0% for the prior year, mainly due to increases in repairs and maintenance costs and insurance expense for the same property portfolio.
FINANCIAL PERFORMANCE
Funds from Operations and Adjusted Funds from Operations
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 certain capital expenditures, leasing costs and tenant improvements. FFO and AFFO as presented are in accordance with the most recent recommendations of the Real Property Association of Canada ("REALpac"), with the exception of certain adjustments made to the REALpac defined FFO, which relate to (i) senior management termination and retirement costs; (ii) gain from Unit Options forfeited on senior management termination; (iii) mortgage repayment costs; (iv) costs related to the concluded strategic review of the REIT; and (v) expired base shelf prospectus fees. 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.
A reconciliation of net loss and comprehensive loss to FFO is as follows:
| (€ Thousands, except per Unit amounts) | Three Months Ended | Year Ended | ||||||||||
| December 31, | December 31, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Net loss and comprehensive loss | € | (52,390 | ) | € | (35,917 | ) | € | (64,288 | ) | € | (114,229 | ) |
| Adjustments: | ||||||||||||
| Net movement in fair value of investment properties and assets held for sale | (13,873 | ) | 35,337 | (62,022 | ) | 230,229 | ||||||
| Net movement in fair value of Class B LP Units | (86,511 | ) | 8,218 | (31,042 | ) | (46,299 | ) | |||||
| Fair value adjustments of Unit-based compensation liabilities | 362 | (194 | ) | 1,517 | (1,311 | ) | ||||||
| Interest expense on Class B LP Units | 146,302 | 4,261 | 159,085 | 17,044 | ||||||||
| Deferred income tax expense (recovery) | 4,396 | (10,538 | ) | 15,268 | (59,679 | ) | ||||||
| Foreign exchange loss (gain)1 | - | 224 | 442 | (568 | ) | |||||||
| Net loss on derivative financial instruments | 3,088 | 6,304 | 7,128 | 9,244 | ||||||||
| Net transaction losses and other activities2 | 2,567 | 950 | 4,619 | 2,765 | ||||||||
| Tax related to dispositions3 | 3,124 | 234 | 4,521 | 314 | ||||||||
| Mortgage repayment costs4 | 1,344 | - | 2,512 | - | ||||||||
| Gain from Unit Options forfeited on senior management termination5 | - | - | (1,552 | ) | - | |||||||
| Senior management termination and retirement costs6 | - | - | - | 74 | ||||||||
| FFO | € | 8,409 | € | 8,879 | € | 36,188 | € | 37,584 | ||||
| FFO per Unit - diluted7 | € | 0.036 | € | 0.038 | € | 0.154 | € | 0.161 | ||||
| Total monthly distributions declared8 | € | 7,030 | € | 7,002 | € | 28,089 | € | 27,949 | ||||
| FFO payout ratio8 | 83.6 | % | 78.9 | % | 77.6 | % | 74.4 | % | ||||
| 1 | Relates to foreign exchange movements recognized on remeasurement of Unit-based compensation liabilities as well as on remeasurement of the REIT's US$ draw on the Revolving Credit Facility as part of effective hedging. |
| 2 | Represent transaction costs incurred on dispositions, gain on the assumption by the purchaser of liabilities related to assets held for sale, costs associated with the concluded strategic review of the REIT and expired base shelf prospectus fees. |
| 3 | Included in current income tax expense in the consolidated statements of net loss and comprehensive loss. |
| 4 | Relate to repayment penalties and write-off of deferred financing costs and fair value adjustment related to mortgages repaid. |
| 5 | Represents Unit-based compensation financial liabilities written off during the year ended December 31, 2024, due to Unit Options forfeited as a result of senior management termination. |
| 6 | Relate to €59 of accelerated vesting of previously granted Unit Options and €15 in associated legal fees for the year ended December 31, 2023. |
| 7 | Includes Class B LP Units and the dilutive impact of unexercised Unit Options and RURs. |
| 8 | Includes interest on Class B LP Units and excludes the special distribution declared and paid in December 2024. |
| The table below illustrates a reconciliation of the REIT's FFO and AFFO: | ||||||||||||
| Three Months Ended | Year Ended | |||||||||||
| (€ Thousands, except per Unit amounts) | December 31, | December 31, | ||||||||||
| 2024 | 2023¹ | 2024 | 2023¹ | |||||||||
| FFO | € | 8,409 | € | 8,879 | € | 36,188 | € | 37,584 | ||||
| Adjustments: | ||||||||||||
| Actual non-discretionary capital investments | (1,765 | ) | (763 | ) | (3,005 | ) | (2,149 | ) | ||||
| Leasing cost reserve2 | (128 | ) | (139 | ) | (510 | ) | (556 | ) | ||||
| AFFO | € | 6,516 | € | 7,977 | € | 32,673 | € | 34,879 | ||||
| AFFO per Unit - diluted3 | € | 0.028 | € | 0.034 | € | 0.139 | € | 0.150 | ||||
| Total monthly distributions declared4 | € | 7,030 | € | 7,002 | € | 28,089 | € | 27,949 | ||||
| AFFO payout ratio4 | 107.9 | % | 87.8 | % | 86.0 | % | 80.1 | % | ||||
| 1 | Certain 2023 comparative figures have been restated to conform with current period presentation. |
| 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 and the dilutive impact of unexercised Unit Options and RURs. |
| 4 | Include interest on Class B LP Units and exclude the special distribution declared and paid in December 2024. |
Diluted FFO per Unit for the three months and year ended December 31, 2024 decreased by 5.3% and 4.3%, respectively, compared to the prior year period, primarily due to lower total portfolio NOI as a result of dispositions, partially offset by lower interest costs being incurred following the repayment of debt with net disposition proceeds received. Diluted AFFO per Unit for the three months and year ended December 31, 2024 decreased by 17.6% and 7.3%, respectively, compared to the prior year period, due to the increase in actual non-discretionary capital investments as a result of seasonality and the same reasons for the decrease in diluted FFO per Unit.
Net Asset Value
Net Asset Value ("NAV") represents total Unitholders' equity per the REIT's consolidated balance sheets, adjusted to include or exclude certain amounts in order to provide what management considers to be a key measure of the residual value of the REIT to its Unitholders as at the reporting date. NAV 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. While NAV is calculated based on items included in the consolidated financial statements or supporting notes, NAV itself is not a standardized financial measure under IFRS and may not be comparable to similarly termed financial measures disclosed by other real estate investment trusts or companies in similar or different industries. Please refer to the "Basis of Presentation and Non-IFRS Measures" section within this press release for further information.
| A reconciliation of Unitholders' equity to NAV is as follows: | ||||||
| (€ Thousands, except per Unit amounts) | ||||||
| As at | December 31, 2024 | December 31, 2023 | ||||
| Unitholders' equity | € | 261,024 | € | 427,247 | ||
| Class B LP Units | 219,512 | 250,554 | ||||
| Unit-based compensation financial liabilities | 623 | 187 | ||||
| Net deferred income tax liability1 | 11,025 | 14,869 | ||||
| Net derivative financial asset2 | (5,925 | ) | (15,901 | ) | ||
| NAV | € | 486,259 | € | 676,956 | ||
| NAV per Unit - diluted3 | € | 2.07 | € | 2.90 | ||
| NAV per Unit - diluted (in C$)3,4 | C$ | 3.09 | C$ | 4.24 | ||
| 1 | Represents deferred income tax liabilities of €18,925 net of deferred income tax assets of €7,900 as at December 31, 2024 (December 31, 2023 - deferred income tax liabilities of €28,217 net of deferred income tax assets of €13,348). |
| 2 | Represents non-current and current derivative financial assets of €5,904 and €21, respectively, as at December 31, 2024 (December 31, 2023 - non-current derivative financial assets of €15,901). |
| 3 | Includes Class B LP Units and the dilutive impact of unexercised Unit Options and RURs. |
| 4 | Based on the foreign exchange rate of 1.4929 on December 31, 2024 (foreign exchange rate of 1.4626 on December 31, 2023). |
Other Financial Highlights
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2024 | 2023 | 2024 | 2023 | |
| Weighted Average Number of Units - Diluted (000s)1 | 234,616 | 233,348 | 234,260 | 232,867 |
| As at | December 31, 2024 | December 31, 2023 | ||
| Closing Price of REIT Units3, 4 | € | 2.55 | € | 1.76 |
| Closing Price of REIT Units (in C$)4 | C$ | 3.80 | C$ | 2.58 |
| Market Capitalization (millions)2, 3, 4 | € | 597 | € | 412 |
| Market Capitalization (millions in C$)2, 4 | C$ | 891 | C$ | 602 |
| 1 | Includes Class B LP Units and the dilutive impact of unexercised Unit Options and RURs. |
| 2 | Includes Class B LP Units. |
| 3 | Based on the foreign exchange rate of 1.4929 on December 31, 2024 (foreign exchange rate of 1.4626 on December 31, 2023). |
| 4 | The December 31, 2024 closing price of REIT Units and market capitalization did not reflect the €1.00 per Unit special distribution paid on the same date with the ex-distribution date of January 2, 2025. |
FINANCIAL POSITION
| As at | December 31, 2024 | December 31, 2023 | ||||
| Ratio of Adjusted Debt to Gross Book Value1 | 39.7 | % | 57.6 | % | ||
| Weighted Average Mortgage Effective Interest Rate4 | 2.27 | % | 2.07 | % | ||
| Weighted Average Mortgage Term (years) | 2.5 | 2.9 | ||||
| Debt Service Coverage Ratio (times)1,2 | 2.6 | x | 2.4 | x | ||
| Interest Coverage Ratio (times)1,2 | 3.2 | x | 2.9 | x | ||
| Available Liquidity (000s)3 | € | 132,770 | € | 28,893 | ||
| 1 | Please refer to the "Basis of Presentation and Non-IFRS Measures" section of this press release for further information. |
| 2 | Based on trailing four quarters. |
| 3 | Includes cash and cash equivalents of €7.8 million and unused credit facility capacity of €125.0 million as at December 31, 2024 (cash and cash equivalents of €6.9 million and unused credit facility capacity of €22.0 million as at December 31, 2023). |
| 4 | Includes impact of deferred financing costs, fair value adjustment and interest rate swaps. |
For the year ended December 31, 2024, ERES's liquidity substantially improved by €103.9 million, as compared to the prior year end, as a result of the Revolving Credit Facility balance paid down in entirety using disposition proceeds. The REIT's immediately available liquidity of €132.8 million as at December 31, 2024 excludes the €25.0 million accordion feature on the Revolving Credit Facility, acquisition capacity on the Pipeline Agreement and alternative promissory note arrangements with CAPREIT. As at December 31, 2024, the REIT's mortgage profile had a weighted average term to maturity of 2.5 years and fixed interest payment terms for substantially all of its mortgages at a low weighted average effective interest rate of 2.27%. This is further reinforced by compliant debt coverage metrics, with debt and interest service coverage ratios of 2.6x and 3.2x, respectively, and adjusted debt to gross book value ratio well within its target range at 39.7%.
Management aims to maintain an optimal degree of debt to gross book value 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 most recently amended and restated declaration of trust (the "Declaration of Trust") and the amended and renewed credit agreement dated June 19, 2024 between the REIT and three Canadian chartered banks, providing access to up to €125.0 million with an accordion feature to increase the limit a further €25.0 million upon satisfaction of conditions set out in the agreement and the consent of applicable lenders (the "Revolving Credit Facility").
The REIT manages its overall liquidity risk by maintaining sufficient available credit facility and available cash on hand to fund its ongoing operational and capital commitments and distributions to Unitholders.
DISTRIBUTIONS
During the year ended December 31, 2024, the REIT declared monthly distributions of €0.01 per Unit (being equivalent to €0.12 per Unit annualized). 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.
On December 16, 2024, the REIT declared a special cash distribution of €1.00 per Unit, which was subject to the TSX's "due bill" trading procedures, meaning that the special distribution was payable to Unitholders of the REIT on the payment date of December 31, 2024. The special distribution did not qualify for the REIT's Distribution Reinvestment Plan (the "DRIP"). Effective January 2025, the REIT reduced its monthly distribution by 50% to €0.005 per Unit to better align distributions with the operations of the REIT's remaining portfolio.
The REIT has announced that the DRIP has been terminated effective January 16, 2025. As a result, the DRIP will not be available for the REIT's monthly distributions paid on and after January 16, 2025.
CONFERENCE CALL
A conference call hosted by Mark Kenney, Chief Executive Officer and Jenny Chou, Chief Financial Officer, will be held on Thursday, February 13, 2025 at 9:00 am EST. The telephone numbers for the conference call are: Canadian Toll Free: +1 (833) 950-0062 / International Toll: +1 (929) 526-1599. The conference call access code is 278125.
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. A replay of the webcast will be available for one 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 portfolio of high-quality, multi-residential real estate properties in the Netherlands. As at December 31, 2024, ERES owned 3,009 residential suites, including 311 suites classified as assets held for sale, and ancillary retail space located in the Netherlands, and owned one commercial property in Germany and one commercial property in Belgium, with a total fair value of approximately €838.7 million, including approximately €64.7 million of assets held for sale.
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 audited consolidated annual financial statements and the notes thereto for the year ended December 31, 2024, 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 audited consolidated annual financial statements and MD&A for the year ended December 31, 2024, which are available on the REIT's website at www.eresreit.com and on SEDAR+ at www.sedarplus.ca.
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 the REIT's financial position, 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 year ended December 31, 2024.
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 Adjusted Total Debt as defined by 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.
A reconciliation from total debt is as follows:
| (€ Thousands) | ||||||
| As at | December 31, 2024 | December 31, 2023 | ||||
| Mortgages payable1 | € | 344,181 | € | 889,749 | ||
| Revolving Credit Facility2 | (290 | ) | 102,741 | |||
| Total Debt | € | 343,891 | € | 992,490 | ||
| Fair value adjustment on mortgages payable | (92 | ) | (816 | ) | ||
| Adjusted Total Debt as Defined by Declaration of Trust | € | 343,799 | € | 991,674 | ||
| Gross Book Value3 | € | 865,374 | € | 1,722,684 | ||
| Ratio of Adjusted Debt to Gross Book Value | 39.7 | % | 57.6 | % | ||
| 1 | Represents non-current and current mortgages payable of €310,682 and €33,499, respectively, as at December 31, 2024 (December 31, 2023 - €809,215 and €80,534, respectively). |
| 2 | Negative balance as at December 31, 2024 represents unamortized deferred loan costs. |
| 3 | Gross Book Value 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 and assets held for sale. |
Adjusted Earnings Before Interest, Tax, Depreciation, Amortization and Fair Value
Adjusted 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, depreciation expense, amortization expense, impairment, adjustments to fair value, transaction gain (loss), costs associated with repayment of mortgages and other adjustments as permitted in the REIT's Revolving Credit Facility. Management believes Adjusted 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 (loss) income and comprehensive (loss) income to Adjusted EBITDAFV is as follows:
| (€ Thousands) | ||||||||||||||||||||||||
| For the Three Months Ended | Q4 24 | Q3 24 | Q2 24 | Q1 24 | Q4 23 | Q3 23 | Q2 23 | Q1 23 | ||||||||||||||||
| Net (loss) income and comprehensive (loss) income | € | (52,390 | ) | € | (52,126 | ) | € | 17,407 | € | 22,821 | € | (35,917 | ) | € | 24,784 | € | 3,252 | € | (106,348 | ) | ||||
| Adjustments: | ||||||||||||||||||||||||
| Net movement in fair value of investment properties and assets held for sale | (13,873 | ) | (39,352 | ) | (11,107 | ) | 2,310 | 35,337 | 24,768 | 45,398 | 124,726 | |||||||||||||
| Net movement in fair value of Class B LP Units | (86,511 | ) | 80,240 | (5,506 | ) | (19,265 | ) | 8,218 | (39,339 | ) | (31,964 | ) | 16,786 | |||||||||||
| Fair value adjustments of Unit-based compensation liabilities | 362 | 203 | (226 | ) | 1,178 | (194 | ) | (463 | ) | (513 | ) | (141 | ) | |||||||||||
| Net loss (gain) on derivative financial instruments | 3,088 | 4,480 | 198 | (638 | ) | 6,304 | 640 | (728 | ) | 3,028 | ||||||||||||||
| Foreign exchange loss (gain) | - | - | 228 | 214 | 224 | 213 | 210 | (1,215 | ) | |||||||||||||||
| Interest expense on Class B LP Units | 146,302 | 4,261 | 4,261 | 4,261 | 4,261 | 4,261 | 4,261 | 4,261 | ||||||||||||||||
| Interest on mortgages payable | 3,301 | 4,373 | 4,832 | 4,558 | 4,608 | 4,607 | 3,843 | 3,777 | ||||||||||||||||
| Interest on Revolving Credit Facility | 528 | 734 | 1,210 | 1,335 | 1,422 | 1,336 | 1,237 | 797 | ||||||||||||||||
| Interest on promissory notes | - | - | - | - | - | - | 70 | 234 | ||||||||||||||||
| Amortization | 621 | 176 | 138 | 144 | 246 | 150 | 202 | 173 | ||||||||||||||||
| Transaction losses | 2,567 | 1,547 | 380 | 125 | 58 | 19 | - | - | ||||||||||||||||
| Costs associated with repayment of mortgages | 1,306 | 1,206 | - | - | - | - | - | - | ||||||||||||||||
| Income tax expense (recovery) | 8,796 | 10,481 | 5,253 | 1,308 | (8,143 | ) | (5,081 | ) | (9,647 | ) | (30,718 | ) | ||||||||||||
| Adjusted EBITDAFV | € | 14,097 | € | 16,223 | € | 17,068 | € | 18,351 | € | 16,424 | € | 15,895 | € | 15,621 | € | 15,360 | ||||||||
| Cash taxes | (4,400 | ) | (1,756 | ) | (2,436 | ) | (1,978 | ) | (2,395 | ) | (1,251 | ) | (1,235 | ) | (1,209 | ) | ||||||||
| Tax related to dispositions | 3,124 | 277 | 731 | 389 | 234 | 80 | - | - | ||||||||||||||||
| Adjusted EBITDAFV less cash taxes | € | 12,821 | € | 14,744 | € | 15,363 | € | 16,762 | € | 14,263 | € | 14,724 | € | 14,386 | € | 14,151 | ||||||||
| Principal amortization repayments1 | € | 444 | € | 444 | € | 444 | € | 444 | € | 550 | € | 550 | € | 549 | € | 549 | ||||||||
| 1 | For use in the Debt Service Coverage Ratio calculation. |
Debt Service Coverage Ratio
The Debt Service Coverage Ratio is defined as Adjusted EBITDAFV less cash taxes, divided by the sum of interest expense (including on mortgages payable, Revolving Credit Facility and promissory notes) and all regularly scheduled principal amortization repayments 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 principal and interest requirements of its outstanding debt.
| (€ Thousands) | |||||
| As at | December 31, 2024 | December 31, 2023 | |||
| Adjusted EBITDAFV less cash taxes1 | € | 59,690 | € | 57,524 | |
| Debt service payments1,2 | € | 22,647 | € | 24,129 | |
| Debt Service Coverage Ratio (times) | 2.6x | 2.4x | |||
| 1 | For the trailing 12 months ended. |
| 2 | Include principal amortization repayments as well as interest on mortgages payable, Revolving Credit Facility and promissory notes, and exclude interest expense on Class B LP Units. |
Interest Coverage Ratio
The Interest Coverage Ratio is defined as Adjusted EBITDAFV divided by interest expense (including on mortgages payable, Revolving Credit Facility 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 | December 31, 2024 | December 31, 2023 | ||
| Adjusted EBITDAFV1 | € | 65,739 | € | 63,300 |
| Interest expense1,2 | € | 20,871 | € | 21,931 |
| Interest Coverage Ratio (times) | 3.2x | 2.9x | ||
| 1 | For the trailing 12 months ended. |
| 2 | Includes interest on mortgages payable, Revolving Credit Facility and promissory notes, and excludes interest expense on Class B LP Units. |
FORWARD-LOOKING DISCLAIMER
Certain statements contained in this press release constitute forward-looking statements within the meaning of applicable Canadian securities laws which reflect the REIT'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", "intend", "estimate", "anticipate", "believe", "consider", "should", "plan", "predict", "forward", "potential", "could", "would", "should", "might", "likely", "approximately", "scheduled", "forecast", "variation", "project", "budget" or "continue", or similar expressions suggesting future outcomes or events. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. Although the forward-looking statements contained in this press release are based on assumptions and information that are available to management as of the date on which the statements are made in this press release, including current market conditions and management's assessment of disposition and other opportunities that are or may become available to the REIT, which are subject to change, management believes these statements have been prepared on a reasonable basis, reflecting the REIT's best estimates and judgement. However, 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 this press release. Accordingly, readers should not place undue reliance on forward-looking statements. For a detailed discussion of risks and uncertainties affecting the REIT, refer to the Risks and Uncertainties section in the MD&A contained in the REIT's 2024 Annual Report.
Except as specifically required by applicable Canadian securities law, the REIT 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 the REIT's views as of any date subsequent to the date of this press release.
For further information:
| Mark Kenney | Jenny Chou |
| Chief Executive Officer | Chief Financial Officer |
| Email: m.kenney@capreit.net | Email: j.chou@capreit.net |
Category: Earnings
