European Commercial REIT Delivers Continued Strong Growth in First Quarter 2018


TORONTO, May 24, 2018 (GLOBE NEWSWIRE) -- European Commercial Real Estate Investment Trust (“ECREIT” or the “REIT”) (TSX-V:ERE.UN) announced today strong growth for the three months ended March 31, 2018.

FIRST QUARTER 2018 HIGHLIGHTS

  • Portfolio growth and strong operating performance generate solid results:
    • Annual base rent up 2.3% from Q4 2017 from contractual rent indexation;
    • Occupancy remains strong at 99.9% with 6.8 year weighted average lease term;
    • Property revenues up 3.7% from Q4 2017 on rent increases and foreign exchange;
    • NOI increases 7.3% from Q4 2017 on higher revenues, strong operating performance;
    • FFO increases 6.8% from Q4 2017;  
    • AFFO increases 7.3% from Q4 2017;
    • AFFO per Unit and Class B LP Unit increases to $0.09 from $0.08 in Q4 2017.
  • Maintaining strong financial position:
    • Leverage remains conservative with debt to gross book value ratio improving to 52.7%;
    • Low weighted average interest rate of 1.82% with 6.4 years debt term to maturity;
  • FFO and AFFO exceeded published financial forecast;
  • Unitholder cash distributions of $0.35 per Unit annually continue to generate stable, recurring yield: 
    • Q1 2018 distribution of $0.0875 per Unit and Class B LP Unit paid April 16, 2018;
    • Q2 2018 distribution of $0.0875 per Unit and Class B LP Unit to be paid July 16, 2018.
  • Management and trustees remain fully aligned with 12.7% economic ownership of the REIT.

“The significant growth in our portfolio through 2017, combined with our strong operating performance, generated solid financial results in the first quarter of 2018,” commented Phillip Burns, Chief Executive Officer. “Looking ahead, we believe continued organic growth driven by rental uplifts and operational efficiency, as well as our robust pipeline of potential future accretive acquisition opportunities in our target European markets, will result in another very strong year for ECREIT. Our focus remains on enhancing Unitholder value over the long term.”

STRONG PORTFOLIO GROWTH IN 2017
During 2017, the REIT acquired a total of three high-quality office properties comprising six buildings in its key target markets, aggregating 398,447 square feet with a total fair market value of $137.5 million (€86.6 million). Occupancy remained strong at 99.9% as at March 31, 2018 with a long-dated 6.8 year weighed average lease term to maturity and a 2.3% increase in annual base rent due to contractual rent indexation during the period.

PLATFORM GROWTH GENERATES STRONG INCREASES IN FIRST QUARTER RESULTS   
For the three months ended March 31, 2018, ECREIT generated property revenues of $3.0 million compared to $2.9 million in the fourth quarter of 2017 and $206,000 in the first quarter of 2017. The increase is due to a full quarter’s contribution from the properties acquired in 2017 and a 2.3% increase in normalized annual base rent due to contractual indexation within certain tenant leases.  

Net Operating Income (“NOI”) was $2.4 million for the first quarter of 2018, up from $2.3 million in the fourth quarter of 2017 and $127,000 in the first quarter of 2017. The increase was due to a full quarter’s contribution from the 2017 property acquisitions and strong operating performance.

Funds from Operations (“FFO”) for the three months ended March 31, 2018 were $1.7 million compared to $1.6 million in the fourth quarter of 2017 and $21,000 in the first quarter of 2017. Adjusted Funds from Operations (“AFFO”) were $1.5 million in the first quarter of 2018 compared to $1.4 million for the fourth quarter of 2017 and $5,000 in the first quarter of 2017. The increases were primarily due to the higher NOI resulting from ECREIT’s portfolio growth. The REIT’s growth remained accretive in the first quarter of 2018 as FFO and AFFO rose to $0.10 per Unit and $0.09 per Unit, respectively, compared to $0.10 per Unit and $0.08 per Unit, respectively, in the fourth quarter of 2017.  

The REIT generated net income of $1.5 million in the first quarter of 2018. As at March 31, 2018 the fair value of investment properties was $137.5 million.

The REIT’s first quarter 2018 FFO and AFFO exceeded the forecast included in its final short form Prospectus dated July 18, 2017. More detail comparing actual results to the forecast can be found in the REIT’s Management’s Discussion and Analysis for the three months ended March 31, 2018.

STRONG AND CONSERVATIVE FINANCIAL POSITION
As at March 31, 2018, ECREIT’s leverage (debt to gross book value) stood at 52.7%, an improvement from 53.6% at December 31, 2017. The weighted average all-in interest rate on total property debt was 1.82% with a weighted average debt term to maturity of 6.4 years, which broadly matches ECREIT’s weighted average lease term, further highlighting the stability and sustainability of the REIT’s cash distributions. As at March 31, 2018, the REIT had cash of $10.3 million.

“We are pleased that our results in the quarter exceeded our forecast,” stated Ian Dyke, Chief Financial Officer. “Going forward, we aim to continue to exceed our forecast and remain confident we have the assets and team to continue meeting our ultimate objective of delivering stable and sustainable cash distributions and capital appreciation to our Unitholders.”

QUARTERLY DISTRIBUTION DECLARED
ECREIT’s Board of Trustees has announced today its regular quarterly cash distribution, in respect of the second quarter of 2018 of $0.0875 per Unit and Class B LP Unit, being equivalent to $0.35 per Unit annualized. The distribution will be payable to eligible, non-waiving holders of the Units and Class B LP Units (the “Unitholders”) of record on June 29, 2018, with payment on July 16, 2018. As previously disclosed, ECREIT‘s management and Board of Trustees have agreed to initially waive receipt of certain cash distributions subject to certain conditions.

Upon payment of ECREIT’s last distributions on April 16, 2018, 47,390 Units were issued pursuant to the REIT’s Distribution Reinvestment Plan (“DRIP”), of which 22% of such Units were issued to ECREIT insiders.

2017 Annual Unitholders’ Meeting
ECREIT will hold its Annual and Special Meeting of Unitholders on May 24, 2018 at 1:00 pm ET at the offices of Stikeman Elliott LLP, 199 Bay Street, Commerce Court West, 53rd Floor, Toronto, Ontario.

FINANCIAL AND OPERATING HIGHLIGHTS

Three Months Ended Mar. 31,
2018
  Dec. 31,
2017
  Sept. 31,
2017
  Jun. 30,
2017
  Mar. 31,
2017
 
Gross leasable area (m2) 37,015  37,015  37,015  21,315  5,261 
Occupancy 99.9%  99.9%  99.9%  99.8%  99.3% 
Weighted average lease term (yrs.) 6.8  7.0  7.2  7.4  5.7 
Portfolio fair market value (€M) 86.6  86.6  84.6  43.1  12.5 
Portfolio fair market value ($M) 137.5  130.4  124.7  63.8  17.7 
Debt to gross book value 52.7%  53.6%  53.4%  48.7%  53.5% 
Weighted average interest rate 1.82%  1.82%  1.82%  1.78%  1.55% 
Revenues ($,000) 2,981  2,874  2,515  856  206 
NOI ($,000) 2,442  2,275  1,625  634  127 
FFO ($,000) 1,713  1,603  998  360  21 
FFO per Unit$0.10 $0.10 $0.06 $0.04 $0.01 
AFFO ($,000) 1,496  1,394  860  313  5 
AFFO per Unit$0.09 $0.08 $0.05 $0.04 $0.00 
Total Units outstanding (000)1 16,731  16,694  16,670  8,892  2,7521 
  1. Reflects consolidation that took place as a result of ECREIT’s conversion into a real estate investment trust effective on May 3, 2017.

ECREIT’s Management Discussion and Analysis and Audited Financial Statements can be found at www.ecreit.com or www.sedar.com.  

About European Commercial Real Estate Investment Trust
ECREIT is an unincorporated, open-ended real estate investment trust focused on aggregating a bespoke portfolio of high-quality, non-prime core commercial real estate assets in key European markets with strong fundamentals.  ECREIT’s strategy is designed primarily to deliver long-term, secure income with additional potential for capital appreciation. ECREIT intends to grow by acquiring additional assets consistent with its strategy and which are expected to be accretive, on a per Unit basis, to its earnings. ECREIT’s Units are listed on the TSXV under the symbol ERE.UN. For more information please visit our web site at www.ecreit.com.

For more information please contact:     Phillip Burns
Chief Executive Officer
European Commercial Real Estate Investment Trust
Email: phillip.burns@ecreit.com
www.ecreit.com


The information in this news release includes certain information and statements about management's view of future events, expectations, plans and prospects that constitute forward looking statements. These statements are based upon assumptions that are subject to significant risks and uncertainties. Because of these risks and uncertainties and as a result of a variety of factors, the actual results, expectations, achievements or performance may differ materially from those anticipated and indicated by these forward-looking statements. Any number of factors could cause actual results to differ materially from these forward-looking statements as well as future results. Although ECREIT believes that the expectations reflected in forward looking statements are reasonable, it can give no assurances that the expectations of any forward-looking statements will prove to be correct. Except as required by law, ECREIT disclaims any intention and assumes no obligation to update or revise any forward-looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward-looking statements or otherwise.

ECREIT uses financial measures regarding itself, such as adjusted funds from operations, that do not have standardized meaning under the International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other entities (“non-IFRS measures”). Further information relating to non-IFRS measures, is set out in ECREIT’s final short form prospectus dated July 18, 2017 under the heading “Non-IFRS Measures” and “Non-IFRS Reconciliation”.

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