TORONTO, May 02, 2024 (GLOBE NEWSWIRE) -- European Residential Real Estate Investment Trust ("ERES" or the "REIT") (TSX:ERE) announced today its results for the three months ended March 31, 2024. ERES's unaudited condensed consolidated interim financial statements and management's discussion and analysis ("MD&A") for the three months ended March 31, 2024 can be found at www.eresreit.com or under ERES's profile at SEDAR+ at www.sedarplus.ca. SIGNIFICANT EVENTS AND HIGHLIGHTS Operating Metrics Strong operating results continued into 2024, fuelled by strong rental growth. Same property portfolio Occupied Average Monthly Rents ("Occupied AMR") increased by 6.7%, from €1,001 as at March 31, 2023, to €1,068 as at March 31, 2024, demonstrating the REIT's continued achievement of rental growth in excess of its target range. Turnover was 3.1% for the three months ended March 31, 2024, with rental uplift on turnover of 15.6%, compared to rental uplift of 20.7% on turnover of 3.9% for the three months ended March 31, 2023. Occupancy for the residential properties remained strong at 98.5% as at March 31, 2024, compared to 98.7% as at March 31, 2023 and is at the high end of the REIT's target range. Occupancy for commercial properties increased to 100.0% as at March 31, 2024, from 99.5% as at March 31, 2023. Moreover, 36.8% of residential vacancies are due to suites held for potential sale relating to the REIT's ongoing capital recycling initiatives, and 19.8% of residential vacancies are attributable to suites undergoing renovation upon turnover. Net Operating Income ("NOI") increased by 7.1% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily driven by higher monthly rents on the same property portfolio, further supported by the REIT's extensive protection from inflation and strong cost control. Financial Performance Funds From Operations ("FFO") per Unit decreased by 2.5% to €0.039 for the three months ended March 31, 2024, compared to €0.040 for the three months ended March 31, 2023, primarily driven by increases in interest and other financing costs, partially offset by the positive impact of same property NOI growth. Adjusted Funds From Operations ("AFFO") per Unit decreased by 2.6% to €0.037 for the three months ended March 31, 2024, compared to €0.038 for the three months ended March 31, 2023, due to the same reasons mentioned above for FFO per Unit. Financial Position and Liquidity On March 27, 2024, the REIT renewed the mortgage financing on one of its commercial properties for a three-year period until March 27, 2027, with a total principal amount of €18.7 million and a fixed contractual interest rate of 4.70%. Overall, liquidity improved from prior year as a result of proceeds from suite dispositions being used to partially repay the Revolving Credit Facility. Debt coverage metrics are within covenant thresholds, with interest and debt service coverage ratios of 2.9x and 2.4x, respectively, and adjusted debt to gross book value ratio standing at 57.3%. The REIT's financial position is additionally supported by its well-staggered mortgage profile, with a weighted average term to maturity of 2.7 years and a weighted average effective interest rate of 2.22%. "Strong operational performance has steadily reinforced the ERES platform since inception and I'm pleased to be reporting another quarter of high occupancy and robust rent growth, in excess of our target range," commented Mark Kenney, Chief Executive Officer. "This has driven further expansion of our same property NOI margin, which grew by 200 basis points to 78.3% for the first quarter of 2024, as compared to the first three months of 2023. We're also excited to be accelerating our progress on individual suite sales, having completed the disposition of 24 residential units during Q1 for aggregate gross proceeds of €7.6 million. We'll continue to ramp up this initiative and explore additional opportunities to generate capital and sturdy our future financial position, in ongoing pursuit of value enhancement for Unitholders." "Our solid organic growth continues to mitigate the impact of the higher interest rates that we're absorbing, and our FFO per Unit of €0.039 was relatively flat versus the comparative period, notwithstanding our mortgage refinancing in the prior year," added Jenny Chou, Chief Financial Officer. "This past quarter, we refinanced one of our commercial mortgages with €18.7 million in principal outstanding, and at period end, we had only 7% of our mortgage debt maturing during the remainder of 2024. We'll continue to proactively and prudently manage our liquidity and leverage, and ensure our compliance with covenant restrictions going forward, as we've done to date." OPERATING RESULTS Rental Rates Total Property Portfolio Suite Count Occupied AMR/ABR1 Occupancy % As at March 31, 2024 2023 2024 2023 AMR 2024 2023       € € % Change     Residential Properties 6,862 6,900 1,068 1,002 6.6   98.5 98.7 Commercial Properties2     17.6 19.2 (8.3 ) 100.0 99.5 1 Average In-Place Base Rent ("ABR"). 2 Represents 450,911 square feet of commercial gross leasable area. Same Property Portfolio Suite Count1 Occupied AMR/ABR Occupancy %   As at March 31,   2024 2023 AMR 2024 2023       € € % Change       Residential Properties 6,862 1,068 1,001 6.7   98.5 98.7   Commercial Properties2   17.6 19.2 (8.3 ) 100.0 99.5   1 Same property suite count only includes the suites owned by the REIT as at both March 31, 2024 and March 31, 2023, and therefore excludes thirty-eight suites disposed between the two dates. 2 Represents 450,911 square feet of commercial gross leasable area. Occupied AMR for the total portfolio increased by 6.6%, while Occupied AMR for the same property portfolio increased by 6.7%, compared to the prior year period. The increases were mainly driven by indexation, turnover and the conversion of regulated suites to liberalized suites. The REIT's achievement of growth in rental revenues significantly in excess of its target range of 3% to 5% demonstrates its ability to consistently operate in a complex and fluid regulatory regime. The Occupied ABR for the commercial properties for both the total and same property portfolio decreased from €19.2 as at March 31, 2023 to €17.6 as at March 31, 2024 due to a reduction in rent after lease renewal for one of the commercial properties. Suite Turnovers For the Three Months Ended March 31, 2024 2023   Change in Monthly Rent Turnovers2 Change in Monthly Rent Turnovers2   % % % % Regulated suites turnover1 10.7 0.4 4.5 0.3 Liberalized suites turnover1 14.1 2.4 16.7 3.1 Regulated suites converted to liberalized suites1 37.4 0.3 59.5 0.4 Weighted average turnovers1 15.6 3.1 20.7 3.9 Weighted average turnovers excluding service charge income 16.2 3.1 19.9 3.9 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 residential suites held during the period. Suite Renewals Lease renewals generally occur on July 1 for residential suites. Other than the household income adjustment, maximum rent indexation from July 1, 2023 to June 30, 2024 for all Regulated Units is set at the annual wage development figure of 3.1%. For the period from July 1, 2024 up to and including June 30, 2025, the indexation for all Regulated Units has been set at the annual wage development figure of 5.8% with a monthly rent of more than €300. Annual rental increases due to indexation for Liberalized Suites are also capped, as per the previously enacted Dutch government legislation, effective for an initial period of three years from May 1, 2021 up to and including April 30, 2024.The indexation for the period from January 1, 2024 to January 1, 2025 has been capped for Liberalized Suites to the annual inflation number ("CPI") + 1.0%, resulting in a maximum indexation of 5.5% based on CPI of 4.5%. Accordingly, for rental increases due to indexation beginning on July 1, 2024, the REIT served tenant notices to 6,572 suites, representing 96% of the residential portfolio, across which the average rental increase due to indexation and household income adjustments is 5.3%. In the prior year period, the REIT served tenant notices to 6,659 suites, representing 97% of the residential portfolio, across which the average rental increase due to indexation and household income adjustments was 4.0%. There was no lease renewal in the REIT's commercial portfolio during the three months ended March 31, 2024 and March 31, 2023. Total Portfolio Performance For the Three Months Ended March 31,   2024     2023   Operating Revenues (000s) € 24,439   €        23,380   NOI (000s) € 19,113   €         17,850   NOI Margin1   78.2 %   76.3 % Weighted Average Number of Suites   6,874     6,900   1 Excluding service charge income and expense, the total portfolio NOI margin for the three months ended March 31, 2024 was 83.5% (three months ended March 31, 2023 — 82.0%). Operating revenues increased by 4.5% for the three months ended March 31, 2024 compared to the prior year period, primarily due to increase in monthly rents on the same property portfolio, as described above. NOI increased by 7.1% for the three months ended March 31, 2024, versus the same period last year, likewise driven by higher monthly rents on same property portfolio and reduction in property operating costs. For the three months ended March 31, 2024, the NOI margin on the total portfolio, including service charges, increased to 78.2% compared to 76.3% for the same period last year (excluding service charges, total portfolio NOI margin increased to 83.5% from 82.0% for the same period last year). Service charge expenses are fully recoverable from tenants via service charge income and therefore have a nil net impact on NOI. Same Property Portfolio Performance For the Three Months Ended March 31,   2024     2023   Operating Revenues (000s) €         24,422   € 23,258   NOI (000s) €         19,112   € 17,755   NOI Margin1   78.3 %   76.3 % Same Property Number of Suites   6,862     6,862   1 Excluding service charge income and expense, the same property portfolio NOI margin for the three months ended March 31, 2024 was 83.6% (three months ended March 31, 2023 — 82.0%). The increase in same property NOI by 7.6% for the three months ended March 31, 2024 compared to the same period last year, was primarily driven by higher operating revenues from increased monthly rents and decrease in same property property operating costs. Same Property NOI margin increased to 78.3% for the three months ended March 31, 2024, compared to 76.3% for the same period last year. Excluding service charges, same property NOI margin increased to 83.6% for the three months ended March 31, 2024, compared to 82.0% in the comparable prior year period. The REIT is focused on continuing to further improve NOI and NOI margin through a combination of rental growth and cost control, and investment in capital programs to enhance the quality and value of its portfolio. In addition, the REIT notes that its property operating costs are largely insulated from inflation, as tenants are responsible for all of their own energy and other utility costs, the REIT incurs no wage costs, and property management fees are a fixed percentage of operating revenues. This further preserves the REIT's property operating costs and, combined with its strong growth in rental revenues, improves its NOI margin. Financial Performance 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 and (ii) gain from Unit Options forfeited on senior management termination. 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 income (loss) and comprehensive income (loss) to FFO is as follows: (€ Thousands, except per Unit amounts)   For the Three Months Ended March 31,   2024     2023   Net income (loss) and comprehensive income (loss) for the period €         22,821   € (106,348)   Adjustments:     Net movement in fair value of investment properties   2,310     124,726   Net movement in fair value of Class B LP Units   (19,265 )   16,786   Fair value adjustments of Unit-based compensation liabilities   1,178     (141 ) Interest expense on Class B LP Units   4,261     4,261   Deferred income taxes   (670 )   (31,927 ) Foreign exchange loss (gain)1   214     (1,215 ) Net (gain) loss on derivative financial instruments   (638 )   3,028   Other activities and loss on transactions2   125     —   Tax on suite dispositions3   389     —   Gain from Unit Options forfeited on senior management termination4   (1,552 )   —   Senior management termination and retirement costs5   —     74   FFO €         9,173   € 9,244   FFO per Unit – diluted6 €         0.039   € 0.040         Total distributions declared €         7,012   € 6,974   FFO payout ratio   76.4 %   75.4 % 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 Represents loss on suite dispositions relating to transaction costs. 3 Included in current income tax expense in the consolidated interim statements of net income (loss) and comprehensive income (loss). 4 Represents Unit-based compensation financial liabilities written off during the three months ended March 31, 2024 due to 3,000,000 Unit Options forfeited as a result of senior management termination. 5 Relates to €59 of accelerated vesting of previously granted Unit Options and €15 in associated legal fees for the three months ended March 31, 2023. 6 Includes Class B LP Units and the dilutive impact of unexercised Unit Options and RURs.   The table below illustrates a reconciliation of the REIT's FFO and AFFO:       (€ Thousands, except per Unit amounts)   For the Three Months Ended March 31,   2024   2023¹ FFO €