ERE.UN European Residetial Real Estate Investment Trust

European Residential Real Estate Investment Trust ("ERES" or the "REIT") (TSX: ERE.UN) announced today its results for the three and six months ended June 30, 2022.

ERES’s unaudited condensed consolidated interim financial statements and management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2022 can be found at www.eresreit.com or under ERES's profile at www.sedar.com.

FUNDAMENTALLY STRONGER IN 2022

• Increased suite count by 5% since the prior year end with acquisition of an aggregate 356 suites
• Rental growth of 4.7% versus the prior year period, including 4.2% on stabilized assets
• Net Operating Income increase of 16% versus the prior year period, including 5% on stabilized properties
• Significant increases in Funds From Operations and Adjusted Funds From Operations, each up by 15% on a per Unit basis versus the prior year period

SIGNIFICANT EVENTS AND HIGHLIGHTS

Business Update

• Since January 1, 2022, the REIT closed on three separate acquisitions consisting of a total of six additional multi-residential properties in the Netherlands for a combined purchase price of €85.4 million (excluding transaction costs and fees), representing an aggregate of 356 suites that increased its suite count by 5% since the prior year end.
• Mortgage financings were secured for the REIT's first quarter 2022 acquisition properties, combined with refinancing of certain existing properties, in the total principal amount of €118 million (excluding transaction costs and fees).
• On February 17, 2022, the Board of Trustees approved an increase of 9% to the REIT's monthly distribution from its previous rate of €0.00917 per Unit (equivalent to €0.110 per Unit annualized) to €0.01 per Unit (equivalent to €0.120 per Unit annualized).

Outperforming Operating Metrics

• Strong operating results continue throughout 2022, fuelled by accretive acquisitions since the prior periods, strong rental growth and ongoing margin expansion. Stabilized portfolio Occupied AMR increased by 4.2%, from €909 as at June 30, 2021, to €947 as at June 30, 2022, demonstrating the REIT's unabated achievement of rental growth in excess of its target range, despite various developments in the regulatory regime.
• Turnover was 5.1% for the six months ended June 30, 2022, with rental uplift on turnover accelerating to 21.6%, which is significantly higher than rental uplift of 15.1% on turnover of 7.4% in the comparable prior year period.
• Occupancy for the residential properties increased to 98.4% as at June 30, 2022, compared to 98.0% as at June 30, 2021. Moreover, a significant proportion (70%) of residential vacancy in the current period is due to renovation, which should provide for further rental uplifts once the suites are leased.
• Net Operating Income ("NOI") increased by 16.1% for the six months ended June 30, 2022, primarily driven by contribution from accretive acquisitions as well as the aforementioned higher monthly rents, that was further supported by lower property operating costs as a percentage of operating revenues. In aggregate, this drove the REIT's increase in NOI margin to 77.1% compared to 76.8% in the prior year period.

Accretive Financial Performance

• Funds From Operations ("FFO") per Unit increased significantly by 13.2% to €0.043 for the three months ended June 30, 2022, compared to €0.038 in the prior year period, and was up by an even greater 14.9% on a year to date basis, positively driven by accretive acquisitions and increased stabilized NOI contribution.
• Adjusted Funds From Operations ("AFFO") per Unit similarly increased significantly by 15.2% to €0.038 for the three months ended June 30, 2022, compared to €0.033 in the three months ended June 30, 2021, and was likewise up 15.4% on a year to date basis.
• Inclusive of regular increases to monthly distributions, the REIT's AFFO Payout Ratio was at the lowest end of its long-term target range at 80.0% for the three months ended June 30, 2022, down from 83.3% in the prior year period.

Strong Financial Position with Ample Liquidity

• Overall, liquidity and leverage remain strong, supported by the REIT's staggered mortgage profile with a four-year weighted average term to maturity and a weighted average effective interest rate of 1.77%. The REIT has immediately available liquidity of €33.9 million as at June 30, 2022, and its adjusted debt to gross book value is 48.8%.

"ERES has once again grown stronger during the second quarter of 2022, notwithstanding the challenging environment. We continue to out-perform on all of our key targets and are either surpassing our benchmarks or revising them upward", commented Phillip Burns, Chief Executive Officer. "These all-around operational results reinforce a track record that reflects the fundamental strength of ERES. Although the current environment requires us to exercise heightened scrutiny toward external growth and regulatory evolution, and continued vigilance around operational performance, our optimism toward ERES's future remains undiminished."

OPERATING METRICS CONTINUE TO STRENGTHEN

Rental Rates
Total Portfolio	Suite Count		Net AMR/ABR1			Occupied AMR/ABR			Occupancy %
As at June 30,	2022	2021	2022	2021	AMR	2022	2021	AMR	2022	2021
			€	€	% Change	€	€	% Change
Residential Properties	6,901	6,184	936	890	5.2	952	909	4.7	98.4	98.0
Commercial Properties2			17.8	17.8	—	18.0	17.8	1.1	99.0	100.0

1 Average In-Place Base Rent ("ABR").2 Represents 450,911 square feet of commercial gross leasable area.

Stabilized Portfolio	Suite Count1	Net AMR/ABR			Occupied AMR/ABR			Occupancy %
As at June 30,		2022	2021	AMR	2022	2021	AMR	2022	2021
		€	€	% Change	€	€	% Change
Residential Properties	6,183	931	890	4.6	947	909	4.2	98.4	98.0
Commercial Properties2		17.8	17.8	—	18.0	17.8	1.1	99.0	100.0

1 Represents all properties owned by the REIT continuously since June 30, 2021, and therefore excludes 17 residential properties (718 suites) acquired and 1 suite disposed in the subsequent period to date. 2 Represents 450,911 square feet of commercial gross leasable area.

Net and Occupied AMR for the total multi-residential portfolio increased by 5.2% and 4.7%, respectively, while Net and Occupied AMR for the stabilized portfolio increased by 4.6% and 4.2%, respectively, compared to the prior year period. The increases were driven by increased rents on annual indexation, turnover and conversion of regulated suites to liberalized suites. The REIT's achievement of growth in rental revenues in excess of its target range of 3% to 4% demonstrates its ability to consistently and profitably operate in a complex and fluid regulatory regime.

Suite Turnovers
For the Three Months Ended June 30,	2022			2021
	Change in Monthly Rent		Turnovers	Change in Monthly Rent		Turnovers
	€	%	%	€	%	%
Regulated suites turnover	13	1.8	0.2	6	1.0	0.4
Liberalized suites turnover	194	18.7	2.1	120	12.7	2.6
Regulated suites converted to liberalized suites	452	60.8	0.3	327	49.5	0.6
Weighted average turnovers	211	22.4	2.6	139	17.1	3.6

        

For the Six Months Ended June 30,	2022			2021
	Change in Monthly Rent		Turnovers	Change in Monthly Rent		Turnovers
	€	%	%	€	%	%
Regulated suites turnover	9	1.3	0.6	15	2.6	0.9
Liberalized suites turnover	193	18.3	3.9	113	12.1	5.4
Regulated suites converted to liberalized suites	408	55.3	0.7	282	42.0	1.0
Weighted average turnovers	202	21.6	5.1	125	15.1	7.4

For the three and six months ended June 30, 2022, turnover was 2.6% and 5.1%, respectively, with average rental uplift (including service charge income) of 22.4% and 21.6%, respectively. This compares exceptionally well to average rental uplift (including service charge income) of only 17.1% and 15.1% for the three and six months ended June 30, 2021, respectively, on turnover of 3.6% and 7.4%. Rental uplifts were significantly higher on conversions, at 60.8% and 55.3% for the current quarter and year to date, compared to 49.5% and 42.0% for the three and six months ended June 30, 2021, respectively.

Total Portfolio Performance	Three Months Ended,								Six Months Ended
	June 30,								June 30,
			2022				2021				2022				2021
Operating Revenues (000s)		€	22,236			€	18,744			€	43,490			€	37,566
NOI (000s)		€	17,199			€	14,653			€	33,521			€	28,863
NOI Margin			77.3	%			78.2	%			77.1	%			76.8	%
Weighted Average Number of Suites			6,864				6,049				6,721				6,048

Operating revenues increased by 18.6% and 15.8% for the three and six months ended June 30, 2022, compared to the prior year periods, primarily due to accretive acquisitions and an increase in monthly rents on the stabilized portfolio, as described above.

NOI increased by 17.4% and 16.1% for the three and six months ended June 30, 2022, versus the same periods last year, likewise driven by contribution from acquisitions since the prior year periods, higher monthly rents on stabilized properties and strong cost control.

For the three months ended June 30, 2022, NOI margin decreased to 77.3% from 78.2% in the comparable prior year period, due to higher property operating costs as a percentage of operating revenues as a result of higher recoverable service charge expense. Excluding service charges, with the net amount of service charge income and expense during the period being nil, NOI margin on the total portfolio increased to 83.3% compared to 83.1% in the prior year period. For the six months ended June 30, 2022, the NOI margin on the total portfolio increased to 77.1% compared to 76.8% in the prior year to date (excluding service charges, 83.0% up from 82.1% in the prior year to date). The increases in NOI margin were due to higher monthly rents combined with a decrease in property operating costs as a percentage of operating revenues, driven by lower R&M as well as a reduction in landlord levy expense, due to utilization of a larger rebate from the government for landlord levies payable in the current year.

Stabilized Portfolio Performance	Three Months Ended,								Six Months Ended
	June 30,								June 30,
			2022				2021				2022				2021
Operating Revenues (000s)		€	19,716			€	18,744			€	39,261			€	37,566
NOI (000s)		€	15,223			€	14,653			€	30,187			€	28,863
NOI Margin			77.2	%			78.2	%			76.9	%			76.8	%
Stabilized Number of Suites1			6,046				6,046				6,046				6,046

1 Includes all properties owned by the REIT continuously since December 31, 2020, and therefore does not take into account the impact of acquisitions or dispositions completed during 2021 or 2022.

The increases in stabilized NOI contribution by 3.9% and 4.6% for the three and six months ended June 30, 2022, compared to the prior year periods, were primarily driven by higher operating revenues from increased monthly rents. Stabilized NOI margin decreased to 77.2% for the three months ended June 30, 2022, compared to 78.2% in the prior year period, primarily due to higher service charges. Excluding service charges, the quarterly NOI margin on the stabilized portfolio increased to 83.4% compared to 83.1% in the prior year period. For the six months ended June 30, 2022, NOI margin was 76.9% which is relatively stable compared to 76.8% for the same period last year. Excluding service charges, NOI margin for the current year to date was 82.9%, up from 82.1% in the prior year period, evidencing the REIT's consistent achievement of an improved NOI margin on a normalized basis. This again reflect the REIT's limited exposure to inflation, alongside strengthening rental revenues and an active program of lowering property operating costs as a percentage of rental revenues.

The REIT remains focused on continuing to further improve NOI and NOI margin in the long term through a combination of accretive and value-enhancing acquisitions, successful sales and marketing strategies to further improve revenues, and investment in capital programs to further reduce costs and enhance the quality and value of its portfolio. In addition, the REIT notes that its property operating costs are largely insulated from inflation, as 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. This further preserves the REIT's property operating costs and, combined with its strong growth in rental revenues, improves its normalized NOI margin.

Financial Performance
A reconciliation of net income (loss) to FFO is as follows:
	Three Months Ended								Six Months Ended
(€ Thousands, except per Unit amounts)	June 30,								June 30,
			2022				2021				2022				2021
Net income (loss) and comprehensive income (loss) for the period		€	126,935			€	27,991			€	95,206			€	(7,682	)
Adjustments:
Fair value adjustments of investment properties			9,790				(34,908	)			(22,249	)			(30,923	)
Fair value adjustments of Class B LP Units			(133,499	)			2,668				(67,710	)			39,896
Fair value adjustments of Unit Option liabilities			(2,258	)			(161	)			(1,167	)			(149	)
Interest expense on Class B LP Units			4,262				3,907				8,287				7,695
Deferred income taxes			(335	)			9,347				11,316				8,332
Foreign exchange loss1			5,003				935				6,700				1,417
Net movement in derivative financial instruments			(10,649	)			(1,117	)			(21,371	)			(1,610	)
Impairment of goodwill			10,541				—				10,541				—
Mortgage refinancing costs2			91				—				91				—
Acquisition research costs			—				—				11				—
Other prior period adjustments			—				34				—				34
FFO		€	9,881			€	8,696			€	19,655			€	17,010
FFO per Unit – basic3		€	0.043			€	0.038			€	0.085			€	0.074
FFO per Unit – diluted3		€	0.043			€	0.038			€	0.085			€	0.074
Total distributions declared		€	6,950			€	6,354			€	13,509			€	12,509
FFO payout ratio			70.3	%			73.1	%			68.7	%			73.5	%

1 Relates to foreign exchange movements recognized on remeasurement of Unit Option liabilities as well as on remeasurement of the REIT's US Dollar draw on the Revolving Credit Facility (defined herein) as part of effective hedge. 2 Relates to accelerated amortization of remaining deferred financing costs associated with the refinancing component of the REIT's mortgage which closed on June 14, 2022. 3 Includes Class B LP Units.

The table below illustrates a reconciliation of the REIT's FFO and AFFO:
	Three Months Ended								Six Months Ended,
(€ Thousands, except per Unit amounts)	June 30,								June 30,
			2022				2021				2022				2021
FFO		€	9,881			€	8,696			€	19,655			€	17,010
Adjustments:
Non-discretionary capital expenditure reserve1			(1,060	)			(973	)			(2,115	)			(1,859	)
Leasing cost reserve2			(129	)			(93	)			(259	)			(187	)
AFFO		€	8,692			€	7,630			€	17,281			€	14,964
AFFO per Unit – basic3		€	0.038			€	0.033			€	0.075			€	0.065
AFFO per Unit – diluted3		€	0.037			€	0.033			€	0.075			€	0.065
Total distributions declared		€	6,950			€	6,354			€	13,509			€	12,509
AFFO payout ratio			80.0	%			83.3	%			78.2	%			83.6	%

1 Non-discretionary capital expenditure reserve has been calculated based on the normalized annual 2022 forecast of €621 per weighted average number of residential suites during the period (2021 — annual 2021 forecast of €608 per weighted average number of residential suites). The adjustments are based on the normalized forecast amount as the REIT considers this to be more normalized on a long-term basis and therefore more relevant.2 Leasing cost reserve is based on annualized 10-year forecast of external leasing costs on the commercial properties.3 Includes Class B LP Units.

The increases in FFO and AFFO were driven by the positive impact of increased stabilized NOI and accretive acquisitions since the prior year periods.

FFO is a measure of operating performance based on the funds generated by the business before reinvestment or provision for other capital needs. AFFO is a supplemental measure which adjusts FFO for costs associated with capital expenditures, leasing costs, and tenant improvements. FFO and AFFO as presented are in accordance with the recommendations of the Real Property Association of Canada ("REALpac") as published in January 2022, with the exception of certain adjustments made to the REALpac defined FFO, which in the current period relate to (i) acquisition research costs, and (ii) mortgage refinancing costs. FFO and AFFO may not, however, be comparable to similar measures presented by other real estate investment trusts or companies in similar or different industries. Management considers FFO and AFFO to be important measures of the REIT’s operating performance. Please refer to "Basis of Presentation and Non-IFRS Measures" within this press release for further information.

Net Asset Value
A reconciliation of Unitholders' equity to Net Asset Value ("NAV") is as follows:
(€ Thousands, except per Unit amounts)
As at	June 30, 2022				December 31, 2021
Unitholders' equity	€	533,084			€	441,765
Goodwill		—				(10,541	)
Class B LP Units		377,432				445,142
Unit-based compensation financial liabilities		1,081				2,016
Net deferred income tax liability1		96,100				84,784
Net derivative financial (asset) liability2		(15,335	)			286
NAV	€	992,362			€	963,452
NAV per Unit – diluted3	€	4.28			€	4.16
NAV per Unit – diluted (in C$)3,4	$	5.77			$	5.99

1 Represents deferred income tax liability of €98,425 net of deferred income tax asset of €2,325 (December 31, 2021 — deferred income tax liability of €87,435 net of deferred income tax asset of €2,651).2 Represents non-current and current derivative financial assets of €14,942 and €393, respectively (December 31, 2021 — non-current and current derivative financial liabilities of €722 and €494, respectively, net of non-current derivative financial assets of €930). 3 Includes Class B LP Units and the dilutive impact of unexercised Unit Options, calculated based on the treasury method. 4 Based on the foreign exchange rate of 1.3473 on June 30, 2022 (foreign exchange rate of 1.4391 on December 31, 2021).

NAV represents total Unitholders' equity per the REIT's consolidated statements of financial position, adjusted to exclude certain amounts in order to provide what management considers to be a key measure of the intrinsic value of the REIT on a going concern basis. Management believes that this measure reflects the residual value of the REIT to its Unitholders on a going concern basis and is therefore used by management on both an aggregate and per Unit basis to evaluate the net asset value attributable to Unitholders, and changes thereon based on the execution of the REIT's strategy. Please refer to the "Basis of Presentation and Non-IFRS Measures" section within this press release for further information.

Other Financial Highlights	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2022		2021			2022			2021
Weighted Average Number of Units – Basic1 (000s)	231,635		230,948			231,522			230,876
Closing Price of REIT Units2, 3					€	2.66		€	2.95
Closing Price of REIT Units (in C$)2					$	3.58		$	4.34
Market Capitalization (millions)1, 2, 3					€	616		€	682
Market Capitalization (millions in C$)1, 2					$	830		$	1,003

1 Includes Class B LP Units.2 As at June 30. 3 Based on the foreign exchange rate of 1.3473 on June 30, 2022 (foreign exchange rate of 1.4699 on June 30, 2021).

FINANCIAL POSITION REMAINS ROBUST AND CONSERVATIVE

As at	June 30, 2022				December 31, 2021
Ratio of Adjusted Debt to Gross Book Value1		48.8	%			46.8	%
Weighted Average Mortgage Effective Interest Rate		1.77	%			1.52	%
Weighted Average Mortgage Term (years)		3.94				3.93
Debt Service Coverage Ratio (times)1,2		3.4x				3.3x
Interest Coverage Ratio (times)1,2		4.2x				4.2x
Available Liquidity3	€	33,930			€	39,437

1 Please refer to the "Basis of Presentation and Non-IFRS Measures" section of this press release for further information. 2 For the rolling 12 months ended.3 Includes cash and cash equivalents of €15.6 million and unused credit facility capacity of €18.4 million as at June 30, 2022 (cash and cash equivalents of €10.3 million and unused credit facility capacity of €29.1 million as at December 31, 2021).

ERES's liquidity and leverage remain strong, supported by the REIT's staggered mortgage profile with a four-year weighted average term to maturity and a weighted average effective interest rate of 1.77%. The majority of the REIT's mortgages are non-amortizing, and mature between 2023 and 2028. The REIT has immediately available liquidity of €34 million as at June 30, 2022, and its adjusted debt to gross book value is 48.8%.

Management aims to maintain an optimal degree of debt to gross book value of the REIT's assets depending on a number of factors at any given time. Capital adequacy is monitored against investment and debt restrictions contained in the REIT's fourth amended and restated declaration of trust dated April 28, 2020, and the amended and renewed credit agreement dated October 29, 2021, between the REIT and two Canadian chartered banks, providing access to up to €100.0 million (the "Revolving Credit Facility"). The REIT manages its overall liquidity risk by maintaining sufficient available credit facilities and available cash on hand to fund its ongoing operational and capital commitments and distributions to Unitholders, and to provide future growth in its business.

"Although there is turbulence characterizing the current macroeconomic and regulatory environment, ERES remains well-positioned to absorb the volatility", commented Stephen Co, Chief Financial Officer. "We have a staggered mortgage profile with a weighted average term to maturity of four years. Further to that, we have no mortgage financings coming due for the remainder of 2022, and less than 10% of our mortgage debt maturing in each of the following two years. Our adjusted debt to gross book value ratio also remains within our long-term target range of 45% to 50%, inclusive of our latest mortgage financings, evidencing our ability to weather the storm."

DISTRIBUTIONS

During the six months ended June 30, 2022, the REIT declared monthly distributions of €0.00917 per Unit (equivalent to €0.110 per Unit annualized) in respect of January and February, and €0.01 per Unit (equivalent to €0.120 per Unit annualized) thereafter, following an increase of 9% in the REIT's monthly distribution rate. Such distributions are paid to Unitholders of record on each record date, on or about the 15th day of the month following the record date. The REIT intends to continue to make regular monthly distributions, subject to the discretion of its Board of Trustees.

CONFERENCE CALL

A conference call hosted by Phillip Burns, Chief Executive Officer and Stephen Co, Chief Financial Officer, will be held on Thursday, August 4, 2022 at 9:00 am EST. The telephone numbers for the conference call are Canadian Toll Free: 1 (833) 950-0062 / International: +1 (929) 526-1599. The Passcode for the call is 100174.

A replay of the call will be available for 7 days after the call, until Thursday, August 11, 2022. The telephone numbers to access the replay are Canadian Toll Free: 1 (226) 828-7578 or International +44 (204) 525-0658. The Passcode for the replay is 771589.

The call will also be webcast live and accessible through the ERES website at www.eresreit.com — click on "Investor Info" and follow the link at the top of the page. The webcast will also be available by clicking on the link below:

https://events.q4inc.com/attendee/123857460 

A replay of the webcast will be available for 1 year after the webcast at the same link.

The slide presentation to accompany management's comments during the conference call will be available on the ERES website an hour and a half prior to the conference call.

About European Residential Real Estate Investment Trust

ERES is an unincorporated, open-ended real estate investment trust. ERES's REIT Units are listed on the TSX under the symbol ERE.UN. ERES is Canada’s only European-focused multi-residential REIT, with a current initial focus on investing in high-quality multi-residential real estate properties in the Netherlands. ERES owns a portfolio of 158 multi-residential properties, comprised of 6,901 suites and ancillary retail space located in the Netherlands, and owns one office property in Germany and one office property in Belgium.

ERES’s registered and principal business office is located at 11 Church Street, Suite 401, Toronto, Ontario M5E 1W1.

For more information please visit our website at www.eresreit.com. 

Basis of Presentation and Non-IFRS Measures

Unless otherwise stated, all amounts included in this press release are in thousands of Euros, the functional currency of the REIT. The REIT's unaudited condensed consolidated interim financial statements ("Interim Financial Statements") are prepared in accordance with International Financial Reporting Standards ("IFRS"). Financial information included within this press release does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the REIT's Interim Financial Statements and MD&A for the three and six months ended June 30, 2022, which is available on the REIT's website at www.eresreit.com and on SEDAR at www.sedar.com. 

Consistent with the REIT's management framework, management uses certain financial measures to assess the REIT's financial performance, which are not in accordance with IFRS ("Non-IFRS Measures"). Since these Non-IFRS Measures are not recognized under IFRS, they may not be comparable to similar measures reported by other issuers. The REIT presents Non-IFRS Measures because management believes Non-IFRS Measures are relevant measures of the ability of the REIT to earn revenue, generate sustainable economic earnings, and to evaluate its performance and financial condition. The Non-IFRS Measures should not be construed as alternatives to the REIT's financial position, net income or cash flows from operating activities determined in accordance with IFRS as indicators of the REIT’s performance or the sustainability of distributions. For full definitions of these measures, please refer to "Non-IFRS Measures" in Section I and Section IV of the REIT's MD&A for the three and six months ended June 30, 2022.

Where not otherwise disclosed, reconciliations for certain Non-IFRS Measures included within this press release are provided below.

Adjusted Debt and Adjusted Debt Ratio

The REIT's Declaration of Trust requires compliance with certain financial covenants, including the Ratio of Adjusted Debt to Gross Book Value. Management uses Total Debt Adjusted for Declaration of Trust and the Ratio of Adjusted Debt to Gross Book Value as indicators in assessing if the debt level maintained is sufficient to provide adequate cash flows for distributions and for evaluating the need to raise funds for further expansion.

A reconciliation from total debt is as follows:

(€ Thousands)
As at	June 30, 2022				December 31, 2021
Mortgages payable1	€	881,043			€	814,422
Bank indebtedness		81,625				70,911
Promissory note		25,650				—
Total Debt	€	988,318			€	885,333
Fair value adjustment on mortgages payable		(1,412	)			(1,608	)
Total Debt Adjusted for Declaration of Trust	€	986,906			€	883,725
Ratio of Adjusted Debt to Gross Book Value2		48.8	%			46.8	%

1 Represents non-current and current mortgages payable of €818,849 and €62,194, respectively (December 31, 2021 — €762,318 and €52,104, respectively).2 Gross book value is defined by the REIT's Declaration of Trust as the gross book value of the REIT's assets as per the REIT's financial statements, determined on a fair value basis for investment properties.

Earnings Before Interest, Tax, Depreciation, Amortization and Fair Value

Earnings Before Interest, Tax, Depreciation, Amortization and Fair Value ("EBITDAFV") is calculated as prescribed in the REIT's Revolving Credit Facility for the purpose of determining the REIT's Debt Service Coverage Ratio and Interest Coverage Ratio, and is defined as net income (loss) attributable to Unitholders, reversing, where applicable, income taxes, interest expense, amortization expense, depreciation expense, impairment, adjustments to fair value and other adjustments as permitted in the REIT's Revolving Credit Facility. Management believes EBITDAFV is useful in assessing the REIT's ability to service its debt, finance capital expenditures and provide for distributions to its Unitholders.

A reconciliation of net income (loss) to EBITDA is as follows:

(€ Thousands)
For the Three Months Ended,	Q2 22			Q1 22			Q4 21			Q3 21			Q2 21			Q1 21			Q4 20			Q3 20
Net income (loss) and comprehensive income (loss)	€	126,935		€	(31,729)		€	45,204		€	58,616		€	27,991		€	(35,673	)	€	12,512		€	13,547
Adjustments:
Fair value adjustments of investment properties		9,790			(32,039	)		(86,748	)		(76,908	)		(34,908	)		3,985			(4,387	)		(21,498	)
Fair value adjustments of Class B LP Units		(133,499	)		65,789			22,352			2,868			2,668			37,228			(9,437	)		6,536
Fair value adjustments of Unit Option liabilities		(2,258	)		1,091			129			200			(161	)		12			(293	)		(2	)
Net movement in derivative financial instruments		(10,649	)		(10,722	)		(987	)		(1,264	)		(1,117	)		(493	)		1,656			(1,206	)
Impairment of goodwill		10,541			—			—			—			—			—			—			—
Foreign exchange loss (income)		5,003			1,697			285			1,541			935			482			(1,726	)		1,196
Interest expense on Class B LP Units		4,262			4,025			3,907			3,908			3,907			3,788			3,728			3,729
Interest on mortgages payable		3,186			3,046			2,899			2,830			2,810			2,785			2,708			2,699
Interest on bank indebtedness		167			150			143			203			110			95			132			100
Interest on promissory notes		256			50			15			—			—			—			—			—
Amortization		207			231			90			234			143			142			178			156
Income tax expense (recovery)		540			12,302			25,715			20,526			9,948			(447	)		6,502			5,677
EBITDAFV	€	14,481		€	13,891		€	13,004		€	12,754		€	12,326		€	11,904		€	11,573		€	10,934
Cash taxes		875			651			1,088			741			601			568			461			428
EBITDAFV after cash taxes	€	13,606		€	13,240		€	11,916		€	12,013		€	11,725		€	11,336		€	11,112		€	10,506
Principal repayments1	€	547		€	547		€	546		€	546		€	545		€	547		€	544		€	259

1 For use in Debt Service Coverage Ratio calculation.

Debt Service Coverage Ratio

The Debt Service Coverage Ratio is defined as EBITDAFV less cash taxes, divided by the sum of interest expense (including on mortgages payable, bank indebtedness and promissory notes) and all regularly scheduled principal payments made with respect to indebtedness during the period (other than any balloon, bullet or similar principal payable at maturity or which repays such indebtedness in full). The Debt Service Coverage Ratio is calculated as prescribed in the REIT's Revolving Credit Facility, and is based on the trailing four quarters. Management believes the Debt Service Coverage Ratio is useful in determining the ability of the REIT to service the interest requirements of its outstanding debt.

(€ Thousands)
As at		June 30, 2022			December 31, 2021
EBITDAFV after cash taxes1	€	50,775		€	46,990
Debt service payments1,2	€	15,131		€	14,074
Debt Service Coverage Ratio (times)		3.4x			3.3x

1  For the trailing 12 months ended.2  Includes principal repayments as well as interest on mortgages payable, bank indebtedness and promissory notes, and excludes interest expense on Class B LP Units.

Interest Coverage Ratio

The Interest Coverage Ratio is defined as EBITDAFV divided by interest expense (including on mortgages payable, bank indebtedness and promissory notes). The Interest Coverage Ratio is calculated as prescribed in the REIT's Revolving Credit Facility, and is based on the trailing four quarters. Management believes the Interest Coverage Ratio is useful in determining the REIT's ability to service the interest requirements of its outstanding debt.

(€ Thousands)
As at		June 30, 2022			December 31, 2021
EBITDAFV1	€	54,130		€	49,988
Interest expense1,2	€	12,945		€	11,890
Interest Coverage Ratio (times)		4.2x			4.2x

1  For the trailing 12 months ended.2  Includes interest on mortgages payable, bank indebtedness and promissory notes, and excludes interest expense on Class B LP Units.

Forward-Looking Information

Certain statements contained in this press release constitute forward-looking statements within the meaning of applicable Canadian securities laws which reflect ERES’s current expectations and projections about future results. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intent”, “estimate”, “anticipate”, “believe”, “consider”, “should”, “plans”, “predict”, “estimate”, “forward”, “potential”, “could”, “likely”, “approximately”, “scheduled”, “forecast”, “variation” or “continue”, or similar expressions suggesting future outcomes or events. The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Any number of factors could cause actual results to differ materially from these forward-looking statements as well as future results. Although ERES 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. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect. Accordingly, readers should not place undue reliance on forward-looking statements.

Except as specifically required by applicable Canadian securities law, ERES does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. These forward-looking statements should not be relied upon as representing ERES’s views as of any date subsequent to the date of this press release.

For further information:

Phillip Burns	Stephen Co
Chief Executive Officer	Chief Financial Officer
Email: p.burns@eresreit.com	Email: s.co@eresreit.com

Category: Earnings