European Residential Real Estate Investment Trust (TSX:ERE.UN)
(“
ERES” or the “
REIT”) announced
today the following transactions (all amounts disclosed herein
exclude transaction costs and other customary adjustments):
- ERES Limited Partnership
(“ERES LP”) and certain other subsidiaries of ERES
have entered into an agreement (the “Disposition
Agreement”) with an entity owned by a consortium of
parties that includes TPG Angelo Gordon, Dream Unlimited
Corporation, Stadium Capital Partners, and several co-investment
partners (the “Purchaser”), to sell certain
entities owning 2,947 residential suites in the Netherlands for
proceeds, net of certain estimated adjustments, of approximately
€695 million (“Residential Disposition
I”).
- Certain other subsidiaries of ERES
have entered into a separate agreement to sell 232 residential
suites in the Netherlands for gross proceeds of approximately €44
million (“Residential Disposition II”, and
together with Residential Disposition I, the “Residential
Dispositions”).
- ERES’s German subsidiary has also
completed the disposition of one commercial building in Germany for
gross proceeds of approximately €9 million (the “Commercial
Disposition”).
Residential Dispositions
The aggregate price for the Residential
Dispositions, which represents a premium to previously reported
IFRS fair value, will be paid in cash, with proceeds to be used by
ERES and its subsidiaries in part to repay approximately €421
million in associated mortgage principal outstanding. The
associated mortgages currently have a weighted average term to
maturity of approximately 1.9 years, and a weighted average
effective interest rate of approximately 2.0%.
Remaining net proceeds from the Residential
Dispositions are intended to be used for: (i) the repayment of
amounts outstanding on the revolving credit facility; (ii) the
prepayment of certain mortgages maturing in the near term; and
(iii) the payment of a special cash distribution of an estimated
€0.75 per Unit and ERES LP’s exchangeable Class B LP Unit
(equivalent to an estimated C$1.13 based on the foreign exchange
rate of 1.51 on September 13, 2024) payable to holders of the
REIT’s Units and ERES LP’s Class B LP Units (collectively, the
“Unitholders”) of record at a date to be
determined (the “Special
Distribution”, and together with the Residential
Dispositions, the “Transactions”).
Following completion of the Residential
Dispositions, ERES will have sold approximately half of its
residential suites. Accordingly, following completion of the
Residential Dispositions, ERES intends to reduce its monthly rate
of distribution by approximately 50% (the “Distribution
Reduction”) to better align distributions with ERES’s
remaining portfolio.
Residential Disposition I is subject to
compliance with the Dutch Competition Act and other closing
conditions. ERES will receive an irrevocable standby letter of
credit (the “Letter of Credit”) in the amount of
€75 million in connection with the execution of the Disposition
Agreement, which may be drawn on by ERES in certain circumstances,
including upon a breach of the Disposition Agreement by the
Purchaser. Notwithstanding the Letter of Credit, there can be no
assurance that Residential Disposition I will close or that ERES
will be able to draw upon the Letter of Credit.
Subject to the receipt of all regulatory
approvals and satisfaction of closing conditions, Residential
Disposition I and II are both anticipated to close by, or before,
early Q1 2025. There can be no assurance that all requirements for
closing will be obtained, satisfied or waived.
The use of proceeds described in this press
release, including the amount and timing of the Special
Distribution, the repayment of certain indebtedness, and the
Distribution Reduction, assumes the completion of the Residential
Dispositions on the timeframe disclosed herein. ERES will announce
the timing and final amount of the Special Distribution and
Distribution Reduction at a later date, in each case, subject to
the discretion of the Board of Trustees.
Commercial Disposition
The Commercial Disposition, which closed this
month, represents one of four office buildings comprising the
German property. The sale price was paid in cash, with net proceeds
redeployed in full to pay down the property’s mortgage principal
outstanding.
Pro Forma
The following table sets out consolidated
financial metrics of the REIT as of the date of the latest interim
financial statements, and after adjusting for the estimated effect
of the Transactions, the Commercial Disposition and the strategic
dispositions previously announced in ERES’s press release dated
July 15, 2024 (collectively, the “Dealings”):
|
June 30, 2024 |
June 30, 2024, adjusted for the estimated
effect of the Dealings |
Total residential suite count |
6,743 |
3,100 |
Total portfolio IFRS fair value |
€1.66 billion |
€0.83 billion |
Mortgage debt principal balance |
€0.88 billion |
€0.30 billion |
Mortgage debt weighted average effective interest rate |
2.2% |
2.3% |
Mortgage debt weighted average term to maturity |
2.5 years |
3.4 years |
Amounts outstanding on the revolving credit facility |
€0.08 billion |
Nil |
Ratio of adjusted debt to gross book value |
56% |
33-35% |
|
|
|
Proposed Netherlands Tax Amendments and Impact
on 2025 Current Income Tax Expense
The Dutch government has announced an intention
to amend the earnings stripping rules, including amendments
applicable to real estate entities, in a manner that would limit
the ability of the REIT’s subsidiaries to deduct interest expense
for income tax purposes. The amendments are expected to form part
of the tax legislative proposals to be presented on Budget Day in
the Netherlands, which is expected to be announced shortly, and are
projected to become effective on January 1, 2025. There is no
assurance that the announced amendments will be published as draft
legislative proposals, nor that they will be enacted by the Dutch
government or enter into force as per the timeline indicated. There
is also no certainty around the definition and applicability of
real estate entities which would be subject to the amendments or
whether additional legislative amendments may be considered. As the
potential amendments have yet to form part of an official
legislative proposal and ultimately be enacted by the Dutch
government, they are subject to change, and such change (and the
impact of such change on the REIT) may be significant.
After adjusting for the estimated effect of the
Dealings and assuming ongoing operations, the REIT’s forecasted
current income tax expense for the year ending December 31, 2025
for the remaining portfolio is approximately €4 million (assuming
the aforementioned amendments to Dutch tax law are not implemented)
and would be approximately €6 million (assuming the aforementioned
amendments to Dutch tax law are implemented as described
above).
As previously disclosed, ERES will continue to
explore all available opportunities to drive value, including the
possibility for future strategic property sales, which would alter
the estimated financial impact of the proposed tax amendments on
the REIT’s residual portfolio.
“We are actively seeking additional ways in
which we can surface value and alleviate current capital and
financial market pressures, and the strategic sale of a large
portion of our residential portfolio in the Netherlands achieves
these objectives,” commented Mark Kenney, Chief Executive Officer
of ERES. “Moreover, our strategic dispositions this year are being
executed at or above previously reported IFRS fair values.”
“Through the Transactions, we’re planning to
return a meaningful amount of capital to ERES’s Unitholders, while
using the remaining net proceeds to pay down debt thus lowering
ERES’s leverage,” continued Mr. Kenney. “This will significantly
mitigate the impact of higher interest rates on the revolving
credit facility and on mortgages maturing in the near term, and
ultimately improve ERES’s financial condition.”
“The Board looks forward to seeing the
management team execute on these transformational dispositions,”
added Gina Parvaneh Cody, Chair of the Board of Trustees of ERES.
“We’re pleased with the progress that’s been made to date on ERES’s
strategy, and the Board remains committed to exploring all
potential future opportunities to maximize value for the REIT and
its Unitholders.”
The description of the Disposition Agreement in
this news release is a summary only and is qualified in its
entirety by the terms of the Disposition Agreement. Pursuant to the
Disposition Agreement, ERES has made certain representations and
warranties to the Purchaser and has agreed to indemnify the
Purchaser in certain circumstances. Further details regarding the
terms of Residential Disposition I are set out in the Disposition
Agreement, which will be filed by the REIT on SEDAR+ at
www.sedarplus.ca. ERES encourages review of the full text of the
Disposition Agreement.
ABOUT ERESERES is an
unincorporated, open-ended real estate investment trust. ERES’s
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, 2024, ERES owned 157
multi-residential properties, comprised of approximately 6,750
residential suites and ancillary retail space located in the
Netherlands, and owned one commercial property in Germany and one
commercial property in Belgium. For more information about ERES,
its business and its investment highlights, please visit our
website at www.eresreit.com and our public disclosure which can be
found under our profile on SEDAR+ at www.sedarplus.ca.
CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING INFORMATIONCertain statements contained in
this press release constitute forward-looking information,
future-oriented financial information, or financial outlooks
(collectively, “forward-looking information”) within the meaning of
applicable Canadian securities laws, which reflect ERES’s current
expectations and projections about future results. Forward-looking
information 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”, “forward”,
“potential”, “could”, “likely”, “approximately”, “scheduled”,
“forecast”, “variation” or “continue”, or similar expressions
suggesting future outcomes or events. The forward-looking
information in this press release relates 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 information contained in this press release.
Any number of factors could cause actual results to differ
materially from this forward-looking information. Although ERES
believes that the expectations reflected in forward-looking
information are reasonable, it can give no assurances that the
expectations of any forward-looking information will prove to be
correct. Such forward-looking information is based on a number of
assumptions that may prove to be incorrect, including regarding the
expected completion and timing of the transactions, the
satisfaction of closing conditions (including receipt of regulatory
approvals) with respect to the transactions, the intended use of
proceeds of the transactions, the amount and timing of the Special
Distribution and Distribution Reduction, the impact of the
transactions on ERES’s financial performance and metrics, the
expected enactment of the proposed tax amendments, the timing and
details of the potential legislation (including that amendments to
the earnings stripping rules will include (i) the abolishment of
the €1 million threshold applicable for real estate entities with
property leased out to third parties, effective January 1, 2025,
and (ii) the increase of the maximum interest expense deductibility
to 25% of the taxpayer’s taxable EBITDA), the assessed impact to
the REIT and the impact of higher interest rates and general
economic conditions on ERES. Accordingly, readers should not place
undue reliance on forward-looking information.
Forward looking information in this press
release is subject to certain risks and uncertainties that could
result in actual results differing materially from this
forward-looking information, including with respect to the ability
of the relevant parties to complete the transactions on the timing
and terms described herein, the ability of closing conditions to
the dispositions to be satisfied, governmental and regulatory
requirements and actions by governmental authorities, including
with respect to the proposed amendments to Dutch tax legislation,
relationships with employees and tenants, diversion of management
time on the transactions, and general market and economic
conditions. Risks and uncertainties pertaining to ERES are more
fully described in regulatory filings that can be obtained on
SEDAR+ at www.sedarplus.ca.
Except as specifically required by applicable
Canadian securities law, ERES does not undertake any obligation to
update or revise publicly any forward-looking information, whether
as a result of new information, future events or otherwise, after
the date on which the information is provided or to reflect the
occurrence of unanticipated events. This forward-looking
information should not be relied upon as representing ERES’s views
as of any date subsequent to the date of this press release.
The purpose of disclosing any future-oriented
financial information or financial outlooks within the meaning of
Canadian securities laws in this press release (including, without
limitation, under the heading “Proposed Netherlands Tax Amendments
and Impact on 2025 Current Income Tax Expense”) is to provide
investors with more information concerning the expected financial
impact on ERES of the transactions described in this press release
and expected tax amendments. Readers are cautioned that such
information may not be appropriate for other purposes.
For more information, please
contact:
ERESDr. Gina Parvaneh CodyChair of the Board of Trustees(437)
219-1765 |
|
ERESMr. Mark KenneyChief Executive Officer(416) 861-9404 |
|
ERESMs. Jenny ChouChief Financial Officer(416) 354-0188 |
|
|
|
|
|
European Residetial Real... (TSX:ERE.UN)
Gráfico Histórico do Ativo
De Set 2024 até Out 2024
European Residetial Real... (TSX:ERE.UN)
Gráfico Histórico do Ativo
De Out 2023 até Out 2024