European Residential REIT Disposes of Approximately 3,200 Residential Units in Strategic Sale
September 2024 - European Residential REIT (ERES) has announced the sale of a substantial portion of its residential portfolio in the Netherlands, comprising approximately 3,200 units, as part of a strategic effort to optimize its financial standing amidst current market pressures. The transaction includes the sale of 2,947 dwellings to a consortium led by TPG-Angelo Gordon, Dream, and Stadium Capital, with an additional 232 units sold to a private family office.
The portfolio, referred to as the 'Glass' portfolio, is widely diversified, covering 60 cities across the Netherlands, including key urban centers such as Amsterdam, The Hague, Utrecht, and Rotterdam. About 60% of the portfolio consists of single-family homes, reflecting ERES’s significant presence in the Dutch residential market. This divestment follows ERES’s broader strategy to surface value for its unitholders and mitigate financial risks.
Mark Kenney, Chief Executive Officer of ERES, commented on the transaction:
“We are actively seeking additional ways in which we can surface value and alleviate current capital and financial market pressures, and the strategic sale of a large portion of our residential portfolio in the Netherlands achieves these objectives. Moreover, our strategic dispositions this year are being executed at or above previously reported IFRS fair values. Through the transactions, we plan to return a meaningful amount of capital to ERES’s unitholders, while using the remaining net proceeds to pay down debt, thus lowering ERES’s leverage. This will significantly mitigate the impact of higher interest rates on the revolving credit facility and on mortgages maturing in the near term, ultimately improving ERES’s financial condition.”
Laurens de Blij, Director Capital Markets at CBRE, added:
“These strategic dispositions enable ERES to maximize value for unitholders and to find large-scale liquidity to deploy in other ways. That such a landmark transaction can be executed above IFRS value underscores the high quality of the ERES portfolio and the underlying fundamentals of Dutch residential as an attractive asset class.”
ERES has enlisted CBRE as its financial and real estate advisor for both transactions, while legal advisors Loyens & Loeff and Van Doorne provided counsel on the 'Glass' portfolio and the additional transaction, respectively.
Strengthening ERES’s Financial Position
The proceeds from these strategic sales will be used to return capital to unitholders and reduce ERES’s debt load, with a specific focus on lowering its exposure to higher interest rates. This reduction in leverage will ease the pressure on the company’s revolving credit facility and maturing mortgages, providing greater financial stability in the face of tightening market conditions.
This divestment represents a significant move for ERES, aligning with its ongoing strategy to optimize its asset portfolio and improve financial health while ensuring it continues to deliver strong returns to its investors.
About ERES
European Residential REIT is an unincorporated, open-ended real estate investment trust listed on the Toronto Stock Exchange (TSX) under the symbol ERE.UN. It is Canada’s only REIT focused exclusively on European residential properties. As of March 31, 2024, ERES owned 158 residential properties in the Netherlands, amounting to approximately 6,900 residential units, along with ancillary retail spaces. Additionally, ERES holds one commercial property each in Germany and Belgium.
This landmark sale marks a pivotal moment for ERES as it adapts to the changing dynamics of the financial market, positioning itself to maintain strong growth and resilience in the European residential property sector.
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