European Residential Real Estate Investment Trust

Thank you for attending today's European Residential Real Estate Investment Trust first quarter 2022 conference call. My name is Nate and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would like to now pass the conference over to our host, Philip Burns with European Residential. Philip, please go ahead.

So please go ahead. Thank you.

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 Koh. After I provide an update on our operational progress during the quarter, Stephen will provide an overview of our financial results and position. During the first quarter of 2022, European residential REIT once again demonstrated our ability to pair strong organic growth with accretive acquisitions that has resulted in the REIT's continued outperformance on all its key operational and financial targets. At the forefront of this growth, on slide 4, you will see that our suite count has increased by 12% since the prior year period to 6,791 units, owned as at March 31st, 2022. Growth in market value of the portfolio is significantly higher, increasing by 33% to 1.96 billion euros since Q1 2021, which reflects the substantial fair value appreciation we have realized over the past year that is driven by steady and strong market and portfolio fundamentals the successful execution of our value enhancing capital expenditure program and our exceptional operating metrics, which we will highlight to you in the coming slides. Further, these numbers as of March 31st, 2022, exclude our latest acquisition of 110 suites in Rotterdam for a purchase price of 23 million, excluding costs and fees, which just closed yesterday, demonstrating the continuation of our external growth trajectory into the second quarter of 2022. Our strong operational and financial results are reflected in the 32% increase in our net asset value per unit compared to the prior year period, which stands at four euros and 31 cents as at the current period and compared to three euros and 27 cents as at March 31st, 2021. Our market capitalization as well as our public flow increased more modestly, both up by only 16% since the prior year period. We continue to see the persistent the persistent disconnect between eRES's underlying intrinsic value and its unit price, but at the same time, it continues to provide the opportunities for investors to secure the trifecta of growth, income, and value. Slide 5 contains an overview of business development during the first quarter of 2022, starting with the fair value of our investment portfolios, which increased significantly, as I just mentioned. 1.96 billion euros as at 31st of March 2022 of which 95% is comprised of our multi-residential properties with the remaining 100 million euros represented by commercial properties which we have located in Germany, Belgium and the Netherlands. The 6% increase in port values since year end 2021 includes our two multi-residential property acquisitions which closed during the quarter which were required for a combined purchase price of 62.4 million euros, excluding costs and fees, and represent an aggregate of 246 residential suites, details of which I will highlight shortly. This portfolio value increase does not yet include the REITs acquisition of a further 110 residential suites in Rotterdam that closed yesterday. Also during the quarter, the REIT's Board of Trustees approved another increase to its monthly distribution rate, up 9% to 1 euro cent per unit. That is equivalent to 12 euro cents per unit annualized, which was effective for the REIT's distribution with respect to March 2022. This demonstrates the REIT's strong financial management of its accretive returns, which enables the REIT to pass those returns onward to its unit holders. On the financing front, as at March 31st, 2022, The REIT had 133 million euros of immediately available liquidity through a combination of cash as well as capacity on its credit facility and pipeline or promissory note arrangements with CAPRI that translates into acquisition capacity of approximately 300 million euros, which will support the REIT's external growth ambitions in 2022. The REIT's accretive returns, which I just mentioned, are exhibited through the 17% increase in its FFO per unit to 4.2 euro cents as of March 31, 2022, as well as the 16% increase in its AFFO per unit to 3.7 euro cents as at the current period end, which Stephen will discuss later in detail. 16082389231. slide six contains a high level overview of some of the key characteristics of our latest acquisitions which close so far this year. The newly developed a general to property located in rice Vic and the rand standard region was acquired for purchase price of 19.5 million euros, excluding fees and costs. 16082389231. and increases the ownership of that building to 83% with the REIT having previously purchased 120 suites as part of the panorama. Panorama transaction, which closed in Q4 of 2021. As of March 31, 2022, the Degenerale II asset is 100% occupied and 100% liberalized. The 51 property is a high-quality redevelopment comprised of 201 residential apartments that are 100% owned by the REIT and 100% occupied as of 31 March 2022. The 51 property, which was acquired for 42.9 million euros excluding costs and fees, is located 15 minutes by bicycle south of the city center of arnhem and enjoys excellent accessibility to highways public transportation and amenities the redeveloped building is highly sustainable and energy efficient with approximately 100 of the units liberalized last but not least is our very recent acquisition of gwd rotterdam portfolio that closed only yesterday in which we acquired 110 multi-residential suites across five properties for a purchase price of $23 million, excluding costs and fees. The portfolio is 100% owned and currently 97% occupied, and with 93% of the suites regulated, it provides significant potential for uplifts on conversion. On slide seven, you can see that our strong operating results accelerated into 2022, as we previously projected. Rental revenues again increased significantly compared to the prior year period. Total portfolio occupied average monthly rent increased by 5.3% in 949 euros as of March 31st, compared to 901 euros as of Q1 2021. On a stabilized basis, occupied AMR increased by 3.8% versus the prior period. These increases are attributable to the REITs trifold rent maximization strategy comprised of its value-adding capital expenditure program, including the conversion of regulated suites to liberalized, as well as increasing rents on indexation and turnover. Regarding the latter, for the three months ended March 31st, 2022, turnover was 2.6% with average rental uplift of 20.7%. This compares exceptionally well to average rental uplifts of only 13.3% on turnover of 3.8% in the prior year period. Rental uplifts were significantly higher on conversions at 55.1% for the current quarter compared to 33.4% for the three months ended March 31, 2021. As you can see, the REIT's achievement of its rental revenues was at the high end of its targeted range of 3 to 4%, demonstrating the ability of the REIT to consistently and profitably operate in a complex and fluid regulatory regime. Further to that, for the rental increases due to indexation beginning on July 1st, 2022, the REIT served notices to 6,499 suites representing 96% of the residential portfolio, across which the average rental increase due to indexation is 2.95%, which will further stimulate the REIT's organic rental growth in 2022. Moving to slide eight, Occupancy for our commercial properties remain strong at 99% as of March 31st, while occupancy for the residential portfolio increased to 98.6% as of Q1 2022, compared to 98.3% as at March 31st, 2021. Moreover, a significant portion of residential vacancy in the current period is due to renovation, with 80% of vacant suites offline for that reason, which should provide further rental uplifts once the suites are leased. For the three months ended March 31st, 2022, that operating income increased by a significant 15% to 16.3 million euros due to contribution from acquisitions, higher monthly rents, unstabilized property, and strong cost control. Total portfolio NLI margin increased to 76.8% for the first quarter of 2022, substantially from 75.5% in Q1 of 2021. which demonstrates the significant margin expansion that the REIT considers will be indicative of long-run performance, which Stephen will discuss in detail shortly. This is further supported by the fact that the REIT's property operating costs are largely insulated from inflation. Tenants are responsible for the majority of their own energy and other utility costs. The REIT has no employees and therefore no wage costs, and property management fees are a fixed percentage of operating revenues. Our overhead is also protected from inflation, with the largest contributor being asset management fees, which are based exclusively on historical cost with no allowance for inflation. Slide 9 serves as a reminder of the inherent and unique diversification within our high-quality portfolio. We maintain an approximately 60-40 split between liberalized and regulated units, providing balanced growth in rents on turnover and indexation, as well as the opportunity to liberalize more suites. In addition, you can see that over 40% of our current properties are located in the high-growth conurbation of the Randstad, with approximately one-quarter of the portfolio directly located in the cities of Amsterdam, Rotterdam, The Hague, and Utrecht. The rest of the portfolio is situated in smaller urban areas throughout the country. And further to all of this, approximately 35% of our portfolio is comprised of single-family homes, also known as Dutch row houses. a segment which represents an additional unique contributor to our portfolio mix. Finally, with approximately half of the current portfolio constructed since 1980, providing an average building age of under 40 years, we have lower ongoing repairs and maintenance costs, thus driving higher margins and asset values. With that, I will now turn the call over to Steven.