European Residential Real Estate Investment Trust

Good morning, ladies and gentlemen, and welcome to the second quarter 2021 results conference call. I would now like to turn the meeting over to Mr. Philip Burns. Please go ahead, Mr. Burns.

Thank you, Operator, and good morning, everyone. Before we begin, let me remind everybody that during our conference call this morning, we may include forward-looking statements about our future financial and operating results. I direct your attention to slide two and our other regulatory filings. Joining me today is our CFO, Stephen Coe. After I provide an update on our operational progress during the quarter, Stephen will provide an overview of our financial results and position. We are very pleased to present to you today another quarter of strong operating performance, which we concluded with two acquisitions of multi-residential properties in the Netherlands that kick-started our 2021 external growth. In combination with our acquisitions completed during the third and fourth quarter of 2020, we have grown our residential suite count by 552 units across 10 properties, representing an increase of 10% compared to the second quarter of 2020. The fair value of our total investment property portfolio over the same time period increased by an even greater 15% to 1.562 billion euros at June 30th, 2021. magnifying the high quality of our properties, as well as the ongoing strong and favorable market dynamics in the Dutch residential sector. This resulted in a significant fair value gain of 34.9 million euros, which we recognized during the three months into June 20th. Our market capitalization and public flow also continue to trend upward, both increasing by 6% compared to the same period of last year. However, there continues to be a disconnect between the unit price and intrinsic value, despite the strong fundamentals in our portfolio. Slide 5 contains an overview of our business development during the second quarter of 2021, starting with the fair value of our investment properties increasing to just over $1.5 billion at June 30, as I just mentioned, which is comprised of $1.45 billion in the multi-residential properties and 0.11 billion euros in commercial properties located in Germany, Belgium, and the Netherlands. This also includes our two newest acquisitions of multi-residential properties in the Netherlands, which both closed on June 30th, 2021, comprising an aggregate 137 residential suites, as well as ancillary commercial and parking space, acquired for a combined purchase price of 47 million euros, excluding costs and fees. of financing activity. In terms of financing activity and liquidity, the acquisitions were funded using existing sources of liquidity via incremental drawdown of our credit facilities to be replaced with long-term mortgage financing that will be secured during the upcoming third quarter of 2021. With the remaining unused capacity in our credit facilities at June 30, combined with the cash on hand and the 165 million euros available to use via the pipeline agreement, E-RES still has over 200 million in immediately available liquidity. Our strong operating results this quarter translated through to our key metrics with FFO per unit and AFFO per unit of 0.038 euros and 0.033 euros respectively recognized for the quarter ended June 20th, 2021. Slide six contains a high-level overview of key characteristics of our latest two acquisitions, which closed at the end of the most recent quarter. The Villa property, located at Velperweg, east of the city center of Arnhem in the eastern region of the Netherlands, is comprised of 104 residential units, each with a corresponding parking space, as well as ancillary commercial space. The property was fully rented in 2019 and is 100% owned by E-Res. As of 30th of June, it was 99% occupied and 98% liberalized. Most of the units are leased in the mid-market sector, providing good potential for organic rental growth. In addition, almost all remaining regulated units are eligible for liberalization upon turnover, providing further potential for incremental uplifts of rent upon conversion. The D-Horizon property, located in the Oostenburg district of Amsterdam, is a newly built multi-residential property comprised of 33 residential units. The property is similarly 100% owned by eRES and 100% of the units are liberalized. As a new development, the property was entirely vacant upon acquisition and leasing initiatives are underway with good momentum. We expect to have the building fully leased by the end of October. Both properties are strategically well located near a significant portion of eRES' existing portfolio. allowing for operational efficiencies and synergies with the properties being managed by eRESM, our existing asset and property manager established in the Netherlands. Slide 7 provides some statistics on our current residential portfolio. Average occupied monthly rents were 865 euros as of June 30th, representing an increase of 4% versus Q2 2020. Residential occupancy It decreased to 98% at June 30th compared to 98.8 at June 30th, 2020. However, 26% of vacancy is attributable to our recently acquired newly built property that was entirely vacant upon acquisition. As mentioned earlier, we plan to have it fully leased by the end of October. The majority of the remaining residential vacancy in the current period is due to renovations. As of June 30, 2021, 67 residential units were under renovation, representing 53% of the total vacancy. Upon completion of this renovation, a significant portion of these suites will be converted from regulated to liberalized, demonstrating the execution of our value-add capital investment program. Turnover was 3.6% for the second quarter of 2021, compared to 3.4% in the prior year period. Rental uplift on that turnover continues to improve, however, at 16.9% compared to the 11.5% uplift achieved in the same period.