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European Residential REIT raises €116M in strategic capital

Market News, Real Estate
TSX:ERE.UN
15 July 2024 13:00 (EDT)
A modern apartment building in the Netherlands.

(Source: European Residential REIT)

European Residential REIT (TSX:ERE.UN) has sold 530 residential suites in the Netherlands across two deals worth a combined €114.9 million in gross proceeds.

Management will allocate proceeds from the sales – in addition to a €1.1 million disposition of an office building in the Netherlands – to pay down associated mortgage principal and outstanding revolving credit.

As of March 31, 2024, these mortgages have a weighted average term to maturity of 3.9 years and a weighted average interest rate of 3.2 per cent. 

Leadership insights

“We’ve been exploring various liquidity-generating opportunities in order to sturdy the REIT’s financial position and reduce its exposure to interest rate risk, and these three strategic dispositions accomplish just that,” Mark Kenney, European Residential REIT’s chief executive officer, said in a statement. “These transactions have freed up capital that we can reallocate into the repayment of our higher-interest credit facility debt, which will reduce our leverage, enhance our cash flows and strengthen our balance sheet.”

“Furthermore, we were able to complete these sales at prices at or above IFRS fair values, reinforcing the high quality of our property portfolio,” said Jenny Chou, the REIT’s chief financial officer. “We’ve also been surfacing capital through our suite-by-suite privatization program, as we’ve completed the sale of an additional 53 individual suites during the second quarter of 2024, which generated €14.2 million in incremental gross proceeds. We’re pleased to be executing on our commitment to maximize unitholder value through all possible means, and we remain focused on this mission going forward.”

What does an investment in European Residential REIT look like today?

European Residential REIT is managing its €1.67 billion primarily Netherlands-based portfolio with a focus on strong operating performance, which it has delivered on over the past five years through:

The company can draw on about €197 million in liquidity, and a conservative debt coverage ratio of 2.4, to enhance operational efficiencies and capitalize on undervalued opportunities as they present themselves.

The market has met the company’s track record for high quality results with a 40 per cent drop in share price since 2019, suggesting a mismatch between financial performance and investor sentiment that merits a closer look.

Continue your due diligence by reading the REIT’s latest investor presentation.

About European Residential REIT 

European Residential is a real estate investment trust (REIT) that owns and operates a portfolio of high-quality, multi-residential properties. As of March 31, 2024, the REIT owns 158 properties composed of approximately 6,900 residential suites and ancillary retail space in the Netherlands, in addition to commercial properties in Germany and Belgium. 

European Residential REIT (TSX:ERE.UN) is up by 9.39 per cent, trading at C$2.68 per share as of 11:20 am ET. The stock is marginally down year-over-year, but has given back about 40 per cent since 2019.

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The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.

(Top photo of European Residential REIT’s 222-apartment De Kameleon property in the Netherlands: European Residential REIT)


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