Expects to Acquire 2,091 Rental Residential
Suites in the Netherlands to
Accelerate Growth
TORONTO, March 26, 2019 /CNW/ - European Commercial
Real Estate Investment Trust ("ECREIT" or the "REIT") (TSX-V:
ERE.UN) announced today strong operating performance for the year
ended December 31, 2018.
2018 HIGHLIGHTS
- Portfolio growth and operating performance generate strong
results:
-
- Property revenues up 88% from 2017 to $12.2 million on acquisitions;
- Full-year contribution from portfolio and rental growth drive
strong increases in FFO and AFFO;
- Growth accretive as FFO and AFFO per Unit up 34% and 40%,
respectively, from 2017;
- $5.9 million fair value gain in
portfolio value; and
- Occupancy remains strong at 99.9% with 6.0 year weighted
average lease term.
- Maintaining strong financial position:
-
- Leverage remains conservative with total debt to gross book
value at 50.0%; and
- Low weighted average interest rate on property debt of 1.82%
with 5.6 years term to maturity.
- Unitholder cash distributions of $0.35 per Unit generated solid yield.
A TRANSFORMATIVE TRANSACTION EXPECTED TO CLOSE MARCH 29
- To indirectly acquire 41 multi-residential rental properties
well-located in growing Netherlands market;
- Purchase price of approximately $634
million funded by approximately $327
million by way of issuance of Class B limited partnership
units ("Class B LP Units") of ECRE Limited Partnership and
$307 million in assumed mortgages
based on a CAD/Euro exchange rate of 1.502;
- Upon completion, the value of the REIT's investment properties
to increase to approximately $820
million based on December 31,
2018 valuation;
- New focus on multi-residential sector with growth driven by
strong fundamentals;
- Partnering with Canadian Apartment Properties Real Estate
Investment Trust ("CAPREIT"), best-in-class property manager with
21-year track record of success;
- Pipeline agreement provides access to future acquisitions and
growth financing;
- Special distribution of $0.50 per
Unit to be distributed post-closing;
- Name change to European Residential REIT ("ERES REIT") to be
effective on closing.
"On closing of the acquisition of 2,091 rental suites, and our
new partnership with CAPREIT, we will have taken a significant and
transformative step in size, scale, and our ability to generate
long-term value for our Unitholders" commented Phillip Burns, Chief Executive Officer. "We will
have created Canada's first
Europe-focused multi-residential
REIT with properties well-positioned in growth markets possessing
strong fundamentals. With our new pipeline agreement with CAPREIT,
we also will have access to additional properties in the Netherlands for acquisition and will have
a strong institutional-quality partner with a majority 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."
PORTFOLIO CONTINUES TO PERFORM
WELL
For the year ended December 31, 2018, property revenues were
$12.2 million, up from $6.5 in 2017. The increase from the prior year is
due primarily to the full year's contribution from the Brussels and Landshut properties acquired in
2017.
Net Operating Income ("NOI") was $9.4
million for the year ended December
31, 2018, up from $4.7 million
in 2017 due primarily to portfolio growth over the prior twelve
months and strong operating performance.
Funds from Operations ("FFO") for the year ended December 31, 2018 were $6.6 million ($0.39
per Unit) compared to $3.0 million
($0.29 per Unit) in 2017. Adjusted
Funds from Operations ("AFFO") were $5.9
million ($0.35 per Unit) in
2018, up significantly from $2.6
million ($0.25 per Unit) in
2017. The increases were primarily due to the REIT's portfolio
growth over the prior twelve months and strong operating
performance.
The REIT reported net income of $8.2
million for the twelve months ended December 31, 2018 compared to a net loss of
$2.2 million in 2017. During 2018,
the REIT recognized a fair value gain on the value of its
commercial investment properties of $5.9 primarily due to the compression of
capitalization rates and increases in market rents in the
Brussels market.
STRONG AND CONSERVATIVE FINANCIAL POSITION
As at
December 31, 2018, ECREIT's leverage
(total debt to gross book value) stood at 50.0%, an improvement
from 53.6% as at December 31, 2017.
The weighted average all-in interest rate on total property debt
was 1.82% with a weighted average debt term to maturity of 5.6
years, which broadly matches ECREIT's weighted average lease term
of 6.0 years and further highlights the stability and
sustainability of the REIT's cash distributions.
"Our strong balance sheet and conservative financial position
reflect the growth of our property platform since inception. Going
forward, with the completion of the transaction approved by
Unitholders on March 21, 2019, our
assets will grow to approximately $820
million, a significant increase in size and scale for the
REIT," stated Ian Dyke, Chief
Financial Officer. "In addition, our new pipeline agreement with
CAPREIT provides access to up to $250
million in growth financing and a solid portfolio of
additional property acquisition opportunities in the Netherlands market. We look forward to
delivering further growth in the quarters ahead."
SUBSEQUENT EVENT
On December
11, 2018, the REIT announced that it had entered into an
agreement to acquire, indirectly, from CAPREIT a portfolio of
multi-residential properties located in the Netherlands (the "Acquisition
Properties"), comprising 2,091 suites in 41 properties for an
aggregate purchase price of approximately $634 million subject to certain purchase price
adjustments (the "Transaction"). The Transaction will be
funded by a combination of:
a)
|
The assumption of
approximately $307 million aggregate principal amount of existing
mortgage debt relating to the Acquisition Properties and all other
liabilities associated with the entities (including subsidiaries)
that hold the Acquisition Properties; and
|
b)
|
Approximately $327
million, by the issuance of 81,641,210 Class B LP Units to CAPREIT
at a deemed issue price of $4.00 per Class B LP Unit.
|
The value at which the REIT is acquiring the Acquisition
Properties is based on a December
2019 independent appraisal value of €421,830,000 and a
CAD/Euro exchange rate of 1.502.
Unitholders approved the Transaction on March 21, 2019. In connection with the
closing of the Transaction (the "Closing"), which is expected to
occur on or about March 29, 2019,
Unitholders will receive a one-time special distribution of
$0.50 per Unit, funded by a cash
payment of approximately $8.5 million
from CAPREIT to the REIT (the "Special Distribution"). The record
date for the determining the Unitholders that will be eligible to
receive the Special Distribution is expected to be shortly after
Closing. As well, CAPREIT will act as the external asset and
property manager for the REIT and certain of its subsidiaries other
than in connection with the REIT's existing commercial properties
in Dusseldorf, Landshut and
Brussels, for which Maple Knoll
Capital Ltd. will remain the asset manager. Further details
can be found in the management information circular issued by the
REIT dated February 22, 2019, as
supplemented on March 11, 2019 (the
"Circular") on www.sedar.com.
FINANCIAL AND OPERATING HIGHLIGHTS
|
Three Months
Ended
|
Year
Ended
|
|
Dec. 31,
2018
|
Dec. 31,
2017
|
Dec. 31,
2018
|
Dec. 31,
2017
|
Gross leasable area
(m2)
|
37,015
|
37,015
|
37,015
|
37,015
|
Occupancy
|
99.9%
|
99.9%
|
99.9%
|
99.9%
|
Wtd. average lease
term (yrs)
|
6.0
|
7.0
|
6.0
|
7.0
|
Portfolio fair market
value (€M)
|
90.6
|
86.6
|
90.6
|
86.6
|
Portfolio fair market
value ($M)
|
141.4
|
130.4
|
141.4
|
130.4
|
Debt to fair market
value
|
54.3%
|
58.2%
|
54.3%
|
58.2%
|
Debt to gross book
value
|
50.0%
|
53.6%
|
50.0%
|
53.6%
|
Weighted average
interest rate
|
1.82%
|
1.82%
|
1.82%
|
1.82%
|
Revenues
($,000)
|
2,988
|
2,874
|
12,160
|
6,451
|
NOI
($,000)
|
2,316
|
2,275
|
9,431
|
4,660
|
Net income (loss)
($,000)
|
(864)
|
4,724
|
8,232
|
(2,168)
|
FFO
($,000)
|
1,475
|
1,603
|
6,629
|
2,981
|
FFO per
Unit
|
$0.09
|
$0.10
|
$0.39
|
$0.29
|
AFFO
($,000)
|
1,380
|
1,394
|
5,886
|
2,571
|
AFFO per
Unit
|
$0.08
|
$0.08
|
$0.35
|
$0.25
|
Wtd. Avg. Units
outstanding (000)
|
16,902
|
16,691
|
16,844
|
10,322
|
ECREIT's Annual Management Discussion and Analysis and Audited
Financial Statements can be found at www.ecreit.com or
www.sedar.com.
About European Commercial Real Estate Investment
Trust
ECREIT is an unincorporated, open-ended real estate
investment trust focused on aggregating a bespoke portfolio of
high-quality, non-prime commercial real estate assets in key
European markets with strong fundamentals. ECREIT's units are
listed on the TSX Venture Exchange (the "TSX-V") under the symbol
ERE.UN. For more information, please visit our website at
www.ECREIT.com.
Upon Closing, the REIT will change its name to European
Residential Real Estate Investment Trust. It will be Canada's first European-focused
multi-residential REIT, with an initial primary focus on investing
in high-quality multi-family real estate properties in the Netherlands.
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", "intent", "estimate", "anticipate", "believe",
"consider", "should", "plans", "predict", "estimate", "potential",
"could", "likely", "approximately", "scheduled", "forecast",
"variation" or "continue", or similar expressions suggesting future
outcomes or events. The forward-looking statements made in this
press release relate only to events or information as of the date
on which the statements are made in this press release. Actual
results and developments are likely to differ, and may differ
materially, from those expressed or implied by the forward-looking
statements contained in this press release. Such forward-looking
statements are based on a number of assumptions that may prove to
be incorrect.
Except as specifically required by applicable Canadian
securities law, 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.
There can be no assurance that forward-looking statements will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on
forward-looking statements.
The REIT 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 the
Circular under the heading "Non-IFRS Measures" and "Non-IFRS
Reconciliation".
Completion of the Transaction is subject to a number of
conditions. There can be no assurance that the Transaction will be
completed as proposed or at all.
Investors are cautioned that, except as disclosed in the
Circular, any information released or received with respect to the
Transaction may not be accurate or complete and should not be
relied upon.
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 Commercial Real Estate Investment Trust
(ECREIT)