European Residential REIT Reports Second Quarter 2025 Results

TORONTO, Aug. 06, 2025 (GLOBE NEWSWIRE) — European Residential Real Estate Investment Trust (“ERES” or the “REIT”) (TSX: ERE.UN) announced today its results for the three and six months ended June 30, 2025.

ERES’s unaudited condensed consolidated interim financial statements and management’s discussion and analysis (“MD&A”) for the three and six months ended June 30, 2025 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

• During the six months ended June 30, 2025, through a number of transactions, the REIT disposed of ten residential properties in the Netherlands, which included the assets held for sale as at December 31, 2024, for total gross proceeds of €90.0 million.
• During the six months ended June 30, 2025, the REIT disposed of two individual residential suites in the Netherlands for gross proceeds of €0.9 million.
• In addition, the REIT has sold its Belgian commercial property on July 31, 2025, and also entered into agreements to sell its German commercial property and one of the residential properties in the Netherlands, which are expected to close in the third quarter of 2025, for approximately €52.8 million in aggregate gross proceeds.
• On April 2, 2025, the REIT announced that it has entered into an agreement to sell entities owning 1,446 residential suites in the Netherlands for gross proceeds, net of estimated adjustments, of approximately €337.3 million. Subject to the satisfaction of closing conditions, the announced disposition is expected to close on September 15, 2025. There can be no assurance that all requirements for closing will be obtained, satisfied or waived.
• Subject to the completion of certain pending dispositions in accordance with the terms and timing disclosed, the REIT has announced an intention to declare a special distribution to Unitholders of an estimated €0.90 per Unit, payable in cash in September 2025. The special distribution has not yet been declared and there can be no assurance as to the timing or quantum of such a distribution. The REIT also announced its intention to cease its regular monthly cash distributions. Subject to completion of the pending dispositions, the anticipated final regular monthly distribution is to be declared in August 2025, with payment in September 2025. Please refer to the REIT’s press releases dated April 2, 2025 and July 31, 2025 for more information.
• Furthermore, as previously announced, the REIT has launched a sale process for all or a portion of the balance of the REIT’s portfolio. There can be no assurance that this process will result in the successful completion of the sale of any portion of the remaining portfolio or that such sales will be completed at, or above, reported IFRS fair value. It is anticipated that the proceeds of any such sales will be distributed to Unitholders after deducting transaction expenses, taxes, wind-up costs and other costs and expenses (which could be significant).

Operating Metrics

• Same property portfolio Occupied Average Monthly Rents (“Occupied AMR”) increased by 6.8%, from €1,220 as at June 30, 2024 to €1,303 as at June 30, 2025, demonstrating the REIT’s continued achievement of rental growth.
• Same property turnover was 2.6% for the three months ended June 30, 2025, with rental uplift on turnover of 3.6%, compared to rental uplift of 9.1% on same property turnover of 3.9% for the same quarter last year. Same property turnover was 6.1% for the six months ended June 30, 2025, with rental uplift on turnover of 13.4%, compared to rental uplift of 9.5% on same property turnover of 8.3% for the same period last year.
• Same property occupancy for the residential properties decreased to 92.9% as at June 30, 2025, compared to 98.2% as at June 30, 2024, primarily related to suites intentionally held vacant to promote value maximization in the context of the REIT’s disposition strategy. Same property occupancy for commercial properties decreased to 89.1% as at June 30, 2025 from 91.3% as at June 30, 2024, due to a reduction in leased area after renewal of one of the commercial leases.        
• Same property Net Operating Income (“NOI”) margin decreased by 2.9% and 2.8%, respectively, for the three and six months ended June 30, 2025, compared to the same periods last year, primarily driven by decrease in revenue from investment properties due to suites intentionally held vacant to promote value maximization in the context of the REIT’s disposition strategy, along with higher R&M costs.

Financial Performance

• Diluted Funds From Operations (“FFO”) per Unit for the three and six months ended June 30, 2025 decreased by 48.7% and 51.3%, respectively, compared to the same periods last year, predominantly due to lower total portfolio NOI as a result of dispositions, partially offset by lower interest costs being incurred following repayment of debt with net disposition proceeds received.
• Diluted Adjusted Funds From Operations (“AFFO”) per Unit for the three and six months ended June 30, 2025 decreased by 48.6% and 50.0%, respectively, compared to the same periods last year, due to the same reasons mentioned above for diluted FFO per Unit and partially offset by decreases in actual non-discretionary capital investments.

Financial Position and Liquidity

• On June 23, 2025, the REIT amended its Revolving Credit Facility to reduce the availability from €125 million to €20 million to better align with the liquidity needs of the REIT and save on standby fees. As a result, liquidity decreased to €23.1 million, compared to €132.8 million as at prior year end.
• During the six months ended June 30, 2025, the REIT repaid €90.6 million of mortgages payable with a weighted average effective interest rate of 1.72%, including €63.6 million resulting from dispositions.
• Debt coverage metrics are within covenant thresholds, with interest and debt service coverage ratios of 3.5x and 2.9x, respectively, and adjusted debt to gross book value ratio standing at 35.8%.
• As at June 30, 2025, the REIT’s mortgage profile had a weighted average term to maturity of 2.4 years and a weighted average effective interest rate of 2.46%.

“Over the past few months, we’ve continued to make progress on our value-maximizing liquidation strategy,” commented Mark Kenney, Chief Executive Officer. “We kicked off this second quarter by announcing that we had entered an agreement to sell 1,446 residential suites in the Netherlands for aggregate proceeds, net of estimated adjustments, of approximately €337 million, and we’ve announced another €31 million in commercial dispositions. Subject to closing on the disclosed terms and timing, these transactions together are intended to fund a special distribution of an estimated €0.90 per Unit, payable in cash in September 2025, consistent with our stated commitment to surface the value of the platform and distribute the net proceeds to Unitholders. In line with that objective, we are continuing to work with our financial and real estate advisors on a sale process for the balance of the portfolio. The Board of Trustees and the management team remain united in our determination to execute on this strategic mission in the best financial interests of all Unitholders, and we will provide a further update on our progress as soon as practicable.”

“The REIT also announced that it has entered into an agreement to dispose of another 110-suite residential property in the Netherlands for approximately €22 million in gross proceeds, with closing expected by the end of the third quarter of 2025,” added Jenny Chou, Chief Financial Officer. “Following this, we will have a remaining portfolio of 1,036 high-quality residential suites in the Netherlands which are up for sale. Across this same property portfolio, rent growth remains robust, with Occupied AMR having increased by 6.8% to €1,303 at current period end. However, with elevated vacancies associated with our disposition strategy along with higher repairs and maintenance costs, our same property NOI margin was down to 73.6% for the three months ended June 30, 2025. That being said, our balance sheet continues to hold strong with an adjusted debt to gross book value ratio at 35.8% as of June 30, 2025. We also have only €7 million in mortgages maturing over the remainder of 2025, and no maturities in 2026. This provides us with the financial flexibility that we need to achieve our strategic objectives.”

OPERATING RESULTS

Rental Rates

Occupied AMR for the same property residential portfolio as at June 30, 2025 increased by 6.8%, compared to €1,220 as at June 30, 2024, mainly driven by indexation and turnover. The Occupied ABR for the same property commercial portfolio increased from €17.8 as at June 30, 2024 to €18.2 as at June 30, 2025, driven by indexation.

Suite Turnovers

Total Portfolio Turnover

Same Property Turnover

The percentage of suites turned over for the same property portfolio during the three and six months ended June 30, 2025 has decreased to 2.6% and 6.1%, respectively, compared to 3.9% and 8.3%, respectively for the comparable periods last year, primarily as a result of suites held vacant to to promote value maximization in the context of the REIT’s disposition strategy.

Suite Renewals

Lease renewals generally occur on July 1 for residential suites. For the rental increases due to indexation beginning July 1, 2025, the REIT served tenant notices to 85% of its residential suites, across which the average rental increase due to indexation and household income adjustments is 4.0%. 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 is 5.5%.

There was one lease renewal in the REIT’s commercial portfolio during the six months ended June 30, 2025 (six months ended June 30, 2024 – no lease renewal).

Total Portfolio Performance

Total portfolio operating revenues decreased by 51.4% and 51.5%, respectively, for the three and six months ended June 30, 2025, compared to the same periods last year. Total portfolio NOI decreased by 54.2% and 54.0%, respectively, from the same periods last year. The decreases in total portfolio operating revenues and NOI were primarily due to decrease in revenue from investment properties as a result of strategic dispositions of over 60% of the REIT’s residential portfolio since June 30, 2024 and loss in revenues due to disposition-related vacancies, partially offset by the increases in revenues from indexation and turnover.

For the three months ended June 30, 2025, the NOI margin on the total portfolio decreased to 74.4% from 79.1% for the comparable prior year quarter (excluding service charges, total portfolio NOI margin decreased to 82.7% from 84.3% for the comparable prior year quarter). For the six months ended June 30, 2025, the NOI margin on the total portfolio decreased to 74.6% from 78.6% for the prior year period (excluding service charges, total portfolio NOI margin decreased to 82.7% from 83.9% for the comparable prior year period). The decrease in the NOI margins was predominantly due to increases in R&M costs and realty taxes as a percentage of total operating revenues. Service charge expenses are fully recoverable from tenants via service charge income and therefore have a nil net impact on NOI.

The following table reconciles same property NOI and NOI from dispositions and assets held for sale to total NOI, for the three and six months ended June 30, 2025 and June 30, 2024.

Same Property Portfolio Performance¹

For the three and six months ended June 30, 2025, the same property NOI decreased by 7.6% and 6.1%, respectively, compared to the prior year periods. For the three months ended June 30, 2025, the NOI margin on the same property portfolio decreased to 73.6% from 76.5% for the comparable prior year quarter (excluding service charges, same property NOI margin decreased to 84.2% from 86.2% for the comparable prior year quarter). For the six months ended June 30, 2025, the NOI margin on the same property portfolio decreased to 73.9%, compared to 76.7% for the prior year period (excluding services charges, same property NOI margin decreased to 84.2% compared to 86.3% for the prior year period). The decreases in the same property NOI and NOI margins were primarily driven by decrease in revenue from investment properties due to suites intentionally held vacant to promote value maximization in the context of the REIT’s disposition strategy, along with an increase in R&M costs.

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 non-discretionary capital expenditures and leasing costs. 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) gain from Unit Options forfeited on senior management termination, (ii) mortgage repayment costs, (iii) amortization related to the accelerated vesting of RURs, and (iv) tax related to tax authority reassessments. 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) income and comprehensive (loss) income to FFO is as follows:

Diluted FFO per Unit for the three and six months ended June 30, 2025 decreased by €0.019 (48.7%) and €0.040 (51.3%), respectively, from the same periods last year, 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 and six months ended June 30, 2025 decreased by €0.018 (48.6%) and €0.037 (50.0%), respectively, from the same periods last year, due to the same reasons mentioned above for diluted FFO per Unit, partially offset by decreases in actual non-discretionary capital investments, mainly caused by the change in property management during the first quarter of 2025, which resulted in delays in capital investment projects, and the REIT’s dispositions.

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.

Other Financial Highlights

FINANCIAL POSITION AND LIQUIDITY

As at June 30, 2025, ERES’s available liquidity decreased to €23.1 million, compared to €132.8 million as at the prior year end, due to the amendment to the REIT’s Revolving Credit Facility agreement, which reduced the availability from €125.0 million to €20.0 million to better align with the liquidity needs of the REIT and save on standby fees. As at June 30, 2025, the REIT’s mortgage profile had a weighted average term to maturity of 2.4 years and fixed interest payment terms for substantially all of its mortgages at a weighted average effective interest rate of 2.46%. This is further reinforced by compliant debt coverage metrics, with debt and interest service coverage ratios of 2.9x and 3.5x, respectively, and adjusted debt to gross book value ratio well within its target range at 35.8%.

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 sixth amended and restated declaration of trust dated January 7, 2025 (the “Declaration of Trust”) and the amended and restated credit agreement dated June 23, 2025 between the REIT and one Canadian chartered bank, providing access to up to €20.0 million with an accordion feature to increase the limit a further €25.0 million upon satisfaction of conditions set out in the agreement (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 three and six months ended June 30, 2025, the REIT declared monthly distributions of €0.005 per Unit (being equivalent to €0.06 per Unit annualized), which were paid to Unitholders of record on each record date, on or about the 15th day of the month following the record date (three and six months ended June 30, 2024 — €0.010 per Unit (being equivalent to €0.12 per Unit annualized)). Subject to the completion of certain pending dispositions in accordance with the terms and timing disclosed, the REIT has announced an intention to declare a special distribution to Unitholders of an estimated €0.90 per Unit, payable in cash in September 2025. The REIT also announced its intention to cease its regular monthly cash distributions. Subject to completion of the pending dispositions, the anticipated final regular monthly distribution is to be declared in August 2025, with payment in September 2025.

The REIT had a Distribution Reinvestment Plan (“DRIP”), which allowed holders of REIT Units or Class B LP Units (“Eligible Unitholders”) to choose to have all or a portion of the REIT’s cash monthly distributions automatically reinvested in additional REIT Units. This DRIP was terminated on January 16, 2025 and as a result, the DRIP is not 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, August 7, 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 173557.

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 senior 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 June 30, 2025, ERES owned 2,592 residential suites, including 1,556 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 €709.8 million, including approximately €366.0 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 unaudited condensed consolidated interim financial statements and the notes thereto for the three and six months ended June 30, 2025, 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 unaudited condensed consolidated interim financial statements and MD&A for the three and six months ended June 30, 2025, 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 three and six months ended June 30, 2025.

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:

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:

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.

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.

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 Risks and Uncertainties in Section VI of 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.

Category: Earnings

Source: https://www.globenewswire.com/news-release/2025/08/06/3128771/0/en/European-Residential-REIT-Reports-Second-Quarter-2025-Results.html