With approval in hand from shareholders to divest assets and, if management chooses, wind up the operations of European Residential REIT (ERES), president/CEO Mark Kenney said Thursday the trust plans to continue divesting properties.

During ERES REIT's 2024 year-end financials call with analysts and investors, Kenney stopped short of formally committing to a wind-up of the Toronto-based trust, which now holds a much-reduced portfolio of 2,730 suites in the Netherlands. He did, however, once again state management is committed to surfacing maximum value for its shareholders.

ERES REIT's divestment strategy during 2024 resulted in the sales of 3,877 apartments for €916 million (C$1.36 billion) in a number of transactions. ERES' most recent divestments involve 279 apartments for €56.2 million (C$83.4 million) so far during 2025. 

“We were able to transact on these sales at pricing at or above previously reported fair values, generating significant capital that we used in part to strengthen our balance sheet,” Kenney said during the conference call.

ERES is Canada’s only European-focused multi-residential REIT. Toronto-headquartered Canadian Apartment Properties REIT owns about 65 per cent of ERES’ units and Kenney is the CEO of both trusts.

Proceeds from the divestments have been used mainly to reduce debt. There has been no indication from management of any plan to recycle proceeds from the sales into future property acquisitions.

“We repaid €544 million (C$807.22 million) in mortgage debt and we fully paid down the €103 million (C$152.82 million) we had outstanding on a revolving credit facility at the start of the year," Kenney said. "The result was a significant reduction in the REIT's ratio of adjusted debt-to-gross book value, from 57.6 per cent as of the previous year to 39.7 per cent as of December 31, 2024.”

Strong multi-residential transaction market

Last month on Jan. 7, ERES held a special meeting of unitholders, which Kenney said provided the board with “maximum flexibility in assessing and executing on the most attractive opportunities available, so that ERES can continue to make significant progress on the execution of its strategy in the year ahead.”

That included the option to sell all assets, distribute the proceeds and terminate the REIT without further need to consult shareholders, according to a release at the time. If that is the plan -- REIT management has neither confirmed nor denied it in public statements -- the timing seems to be good.

Kenney is confident in the multifamily transaction market in the Netherlands, which he said faces housing issues similar to Canada. Apartment property valuations are strong.

“The housing crisis and the need for housing remains extremely, extremely strong, which makes the market for privatization quite good,” Kenney said. “The Netherlands definitely remains a safe haven where people want to live.

"So with all of the geopolitical issues in Europe, the Netherlands has got its own influx of people and just not enough homes.”

The ERES portfolio is geographically diverse and should appeal to a variety of purchasers, according to Kenney. These include housing associations, family offices looking to privatize properties and funds raising capital to buy and privatize properties.

Increased market cap and liquidity

ERES had a market cap of €597 million (C$885.74 million) to end the year. That's up from €412 million (C$611.38 million) a year earlier, as the unit price rose to €2.55 (C$3.78) from €1.76 (C$2.61) over the course of 2024. 

The REIT had liquidity of €132.77 million (C$197.04 million), comprised of cash on hand and €125 million (C$185.52 million) in unused capacity on a revolving credit facility, as of Dec. 31. Liquidity was €28.89 million (C$42.88 million) to end 2023.

Operating revenues dropped by 2.8 per cent to €92.97 million (C$138 million) while net operating income (NOI) fell by three per cent to €72.87 million (C$108.16 million). ERES recorded a net loss of €64.29 million (C$95.46 million), down from €114.23 million (C$169.61 million) a year earlier.

Rents and occupancy

Average monthly rents on the same property portfolio rose by 6.8 per cent to €1,245 (C$1,849.02). There was a weighted average rent uplift of 14.9 per cent on suite turnover, which contributed to a same property NOI margin of 76.6 per cent.

Occupancy decreased to 94.6 per cent in 2024 from 98.5 per cent in 2023.

“This relates to our value maximization strategy and is mainly being driven by our disposition program,” Kenney explained. “To a lesser extent, we are also intentionally keeping certain suites temporarily vacant in order to optimize rent growth in balance with local market conditions.”

- With files from Don Wilcox