Bolstered by the results of this
transformational transaction and backed by Canada's
pre-eminent multi-residential owner/manager, ERES will focus
on
the attractive European multi-residential
market
TORONTO, March 29, 2019 /CNW/ - European Residential Real
Estate Investment Trust (TSX-V:ERE.UN, "ERES")
and Canadian Apartment Properties Real Estate Investment Trust
(TSX:CAR.UN, "CAPREIT") are pleased to announce the closing
of the previously announced acquisition (the
"Transaction") by ERES from CAPREIT of a portfolio of
41 multi-residential properties (the "Properties") located
in the Netherlands, as more
particularly described in ERES' management information circular
dated February 22, 2019 (the
"Circular") and the supplement thereto dated March 11, 2019 (the "Supplement"). The
purchase price for the Properties of approximately $326.5 million was satisfied through the issuance
of 81,641,210 class B LP units of ERES Limited Partnership (the
"Class B LP Units"), a subsidiary of ERES, at a price of
$4.00 per Class B LP Unit, and is
subject to certain post-closing purchase price adjustments. The
Class B LP Units are convertible on a one-to-one basis into trust
units of ERES ("Units"). In connection with the Transaction,
ERES assumed CAPREIT's mortgages on the Properties in the amount of
approximately $307 million.
In light of the transformational nature of the Transaction,
effective today ERES has changed its name from European Commercial
Real Estate Investment Trust to European Residential Real Estate
Investment Trust, to reflect its new focus on investing in
high-quality multi-residential real estate properties in
Europe. The Units of ERES continue
to trade on the TSX Venture Exchange (the "TSX-V") under the
symbol "ERE.UN". A new website has been launched for ERES at
www.eresreit.com, which will provide updated information reflecting
the results of the Transaction.
In connection with the Transaction, as described in the
Circular, ERES' unitholders (other than CAPREIT) will receive a
one-time special distribution of $0.50 per unit (the "Special
Distribution"). The Special Distribution will be payable on
April 24, 2019 to unitholders of
record as at April 5, 2019. Such
unitholders will have until 4:00 p.m.
(EDT) on April 18, 2019 to
elect whether to receive the Special Distribution in cash, or units
based on a deemed issue price of $4.00 per unit. Election forms will be mailed to
unitholders on April 8, 2019. In the
event that no election is made by a qualified unitholder, then such
holder will automatically receive the Special Distribution in
cash.
Following the second quarter of 2019, or such other date as
may be determined by the ERES board of trustees, ERES intends to
change from making quarterly distributions to making monthly
distributions, subject to the discretion of the ERES board of
trustees. While the annual amount of the future distributions going
forward has yet to be determined, ERES expects to target an AFFO
payout ratio in the range of 80% to 90%. ERES Limited Partnership
will make corresponding cash distributions to holders of Class B LP
Units. It is expected that ERES unitholders will receive a
quarterly distribution in respect of the second quarter of 2019, at
the new distribution amount, after which they will receive monthly
cash distributions, with the first expected to be in respect of
July 2019 payable in August
2019. ERES expects the new distribution to be denominated in Euros,
and expects to provide investors with an ability to receive their
distributions directly in Euros.
The Transaction, which was overwhelmingly approved by
unitholders of ERES at a special meeting held on March 21, 2019, marks a dynamic transformation
for ERES, providing immediate scale and shifting its strategic
focus to European multi-residential assets, while benefitting from
CAPREIT's industry-leading management platform and a well-located,
high-quality portfolio of multi-residential assets across
the Netherlands. As a result of
the Transaction, ERES' assets have increased from approximately €97
million to approximately €540 million in value, consisting of 2,091
multi-residential suites in 41 properties and approximately 400,000
square feet of gross leasable office area in three commercial
properties. ERES' market capitalization has also increased
significantly, with the number of ERES units outstanding (including
Class B LP Units) increasing from approximately 17.0 million to
98.6 million. ERES' Debt to Gross Book Value is expected to be
approximately 46%, and the Net Asset Value per unit is expected to
be approximately €2.70 per unit (or approximately $4.07 per unit based on the current exchange
rate). Additionally, the Transaction provides ERES with a
well-capitalized, institutional-quality majority unitholder that
will support ERES' growth initiatives and its access to capital in
the future.
Transaction Highlights
- Attractive Asset Class with Strong Fundamentals:
European multi-residential assets continue to benefit from high
occupancy rates, increasing rents and strong cash flow growth.
Growth in rental rates and valuation metrics generally have
outpaced those of commercial assets in Europe, and there is currently an attractive
yield spread between European multi-residential capitalization
rates and debt financing rates. Additionally, the professional
management of the European multi-residential sector is early in its
maturation and provides opportunities for organic growth via asset
management initiatives.
- Significant Opportunity to Fuel Future Growth:
Significant external and organic growth opportunities are available
to be realized through further acquisitions and enhancement of
under-managed assets. ERES intends to pursue property acquisitions
directly and has entered into a pipeline agreement with CAPREIT to
ensure access to capital to take advantage of attractive, accretive
acquisition opportunities.
- Alignment of ERES' Interests with Majority Unitholder:
CAPREIT's approximately 83% economic ownership of ERES ensures that
its interests will be aligned with unitholders of ERES. CAPREIT is
committed to the success of ERES and intends to retain a
significant long-term ownership interest in ERES.
- Industry-Leading Platform: ERES will be managed by
CAPREIT pursuant to long-term asset and property management
agreements. CAPREIT has a 21-year proven record of growing cash
flows and enhancing value in multi-residential properties in
Canada and has an existing
property management platform in Europe. CAPREIT is Canada's largest multi-residential owner and
has a best-in-class management platform consisting of approximately
900 employees.
Board and Management Composition
Michael Stein (Chair),
Harold Burke and Gina Cody have been elected to ERES' board of
trustees, joining Ira Gluskin,
Jan Arie Breure and Phillip Burns. Another independent trustee, to
be selected by ERES' board of trustees, is expected to be appointed
in the coming months.
Phillip Burns will continue as
Chief Executive Officer of ERES and Scott Cryer has been appointed
ERES' new Chief Financial Officer and Corporate Secretary.
Biographies for Mr. Burns and Mr. Cryer are set out
below:
- Phillip Burns has, for 25
years, been involved as a principal or advisor in transactions with
an aggregate value of over €20.0 billion, with more than 70%
centered on real estate across multiple geographies. He has also
been involved with raising in excess of €11.0 billion of equity for
principal investment, including over €2.5 billion dedicated to real
estate. Mr. Burns holds a Bachelor of Science in Aerospace
Engineering from the University of
Michigan and a Juris Doctor, summa cum laude, from
Syracuse University.
- Scott Cryer joined
CAPREIT in September 2009 and is the
Chief Financial Officer. Mr. Cryer most recently held the position
of Vice President, Financial Reporting. Prior to joining CAPREIT,
Mr. Cryer had an eleven year career of increasing responsibility in
the Real Estate Assurance and Advisory practice of Deloitte &
Touche LLP. He received his Chartered Accountant designation in
2000 and holds a Bachelor of Economics degree from the University of Western Ontario.
ERES has granted 500,000 options to Mr. Burns in accordance with
the terms of his new employment arrangements with the asset manager
of ERES, which became effective on Closing. Each option is
exercisable at a price of $4.00 per
Unit in accordance with the terms of the unit option plan of
ERES.
Moving forward, the audit committee of ERES will be comprised of
Harold Burke, Gina Cody and Jan Arie
Breure.
CAPREIT's Ownership
As a result of the Transaction, CAPREIT beneficially owns,
controls or exercises direction over 81,641,210 Class B LP Units,
representing approximately 83% of the issued and outstanding Units,
on a fully diluted basis. Immediately before the completion of the
Transaction, CAPREIT did not own or control any securities of ERES.
Subject to the terms set out in the investor rights agreement dated
the date hereof between CAPREIT and ERES, CAPREIT may seek to sell
or otherwise dispose of some or all of ERES' securities (which
may include, but is not limited to, transferring some or all
of such securities to its affiliates) from time to time,
and/or may seek to acquire additional securities of ERES (which may
include rights or securities exercisable or convertible into
securities of ERES) from time to time, in each case, in open
market or private transactions, block sales or acquisitions or
otherwise.
This press release is issued pursuant to the early warning
requirements of National Instrument 62-103, which also requires a
report to be filed containing additional information with respect
to the foregoing matters (the "Early Warning Report"). A
copy of the Early Warning Report will appear under ERES' profile on
the SEDAR website at www.sedar.com.
About ERES
ERES is an unincorporated, open-ended real estate investment
trust. ERES' Units are listed on the TSX-V under the symbol ERE.UN.
ERES is Canada's first
European-focused multi-residential REIT, with a current
initial focus on investing in high-quality multi-residential real
estate properties in the
Netherlands. ERES owns a portfolio of 41 multi-residential
properties, comprised of 2,091 suites located in the Netherlands, and owns two office
properties in Germany and one
office property in Belgium.
ERES' 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.
About CAPREIT
As one of Canada's largest
residential landlords, CAPREIT is a growth-oriented investment
trust owning interests in 53,143 residential units, comprised of
45,446 residential suites and 45 manufactured home communities
comprising 7,697 land lease sites, located in and near major urban
centres across Canada and
the Netherlands. Since its Initial
Public Offering in May 1997, CAPREIT
has grown monthly cash distributions per unit by 93%.
CAPREIT's registered and principal business office is located at
11 Church Street, Suite 401, Toronto,
Ontario M5E 1W1.
For more information about CAPREIT, its business and its
investment highlights, please refer to our website at
www.caprent.com or www.capreit.net and our public disclosure, which
can be found under our profile at www.sedar.com.
Cautions Regarding Future Plans and Forward Looking
Information
Certain statements contained in this press release constitute
forward-looking statements within the meaning of applicable
Canadian securities laws which reflect ERES' 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", "intent", "estimate", "anticipate", "believe",
"consider", "should", "plans", "predict", "estimate", "potential",
"could", "likely", "approximately", "scheduled", "forecast",
"variation" or "continue", or similar expressions suggesting future
outcomes or events. The forward-looking statements made in this
press release relate 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
statements contained in this press release. Such forward-looking
statements are based on a number of assumptions that may prove to
be incorrect.
Except as specifically required by applicable Canadian
securities law, ERES 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 ERES' views as of any date
subsequent to the date of this press release. 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 such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements.
Investors are cautioned that, except as disclosed in the
Circular and the Supplement, any information released or received
with respect to the Transaction may not be accurate or complete and
should not be relied upon.
Neither the TSX-V nor its Regulation Services Provider (as that
term is defined in the policies of the TSX-V) have in no way passed
upon the merits of the Transaction and have neither approved nor
disapproved the contents of this news release. The issuance of any
Units in connection with the Special Distribution is subject to
prior TSX-V acceptance.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities of ERES.
SOURCE European Residential Real Estate Investment Trust