European Residential REIT T.ERE.UN

TD

[retiredcf]

They have a $5.50 target. GLTA

European Residential REIT

(ERE.UN-V) C$4.25

Q4/20 First Look: Results in Line; 5% Distribution Increase Event

Q4/20 results. A conference call will be held at 9:00 a.m. ET today (1-800-898-3989; passcode: 8612870#).

Impact: NEUTRAL

FFO/unit (f.d.) of €0.035 was +10% versus Q4/19, and in line with our estimate (consensus: €0.04). AFFO/unit of €0.031 was also in line with our estimate.

Distribution Increase. The REIT announced a 4.8% increase in its annual distribution to €0.110, which was slightly ahead of our 3% forecast. The increase is effective March 2021.

Residential Operating Highlights

• Q4 Stabilized NOI was +5.3% y/y; 2020 +3.9% (only 35% of suites) on a 1.9% increase in revenues and a 7.3% decline in expenses. Stabilized residential net AMR was +4.7% y/y to €909, led by gains in the regions of Utrecht (+8.1%) and Limburg (+4.0%). All regions reported positive AMR growth. Occupancy was +110bps y/y to 98.8%, led by Utrecht at +240bps. Stabilized NOI margin was +250bps y/y to 75.3%. Total portfolio occupancy was +110bps y/y to 98.3%, while the NOI margin was +250bps y/y to 77.1%.

• Despite the pandemic, ERES continued to generate good growth on turnover. For 2020, ERES achieved 9.9% rent uplifts (2019: +7.4%), including 7.5% on liberalized suites (10.9% of suites), 2.9% on regulated suites (1.8% of suites), and 36.8% on suites converted into liberalized (1.4% of suites).

• Commercial Portfolio occupancy remained stable at 100%, while net ABR was +3.5% y/y to €17.60.

  Portfolio Update

• On October 1, acquired a five-property portfolio aggregating 113 suites and 98 parking stalls for €26.3mm (~€233,000/suite). The REIT also completed the acquisition of an 84 suite property on December 1 for €22.3mm (~€265,200/ suite) and the acquisition of a 98 suite property on December 29 for €12.3mm (~€125,000/suite).

• 2020 acquisitions totalled 415 suites for €80.9mm (~€195,000/suite) with €45.0mm of mortgages (WAIR: 0.97%; WADM: 4 years)

• 65 suites are under renovation representing 64% of residential vacancy.

  Balance Sheet/Other

• As at December 31, ERES had liquidity of €102mm (€11mm of cash; €91mm undrawn on credit lines), down from €120mm reported in Q3.

• Q4/20 leverage was 47.2%, +100bps q/q (WAIR: 1.61%; WADM: 4.4 years), owing to acquisition activity.
  
   Reported a Q4 €4.4mm IFRS fair value gain (2020: €46.0mm)