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 year ended December 31, 2023.

ERES’s audited consolidated annual financial statements and management's discussion and analysis ("MD&A") for the year ended December 31, 2023 can be found at www.eresreit.com or under ERES's profile at SEDAR+ at www.sedarplus.ca.   

SIGNIFICANT EVENTS AND HIGHLIGHTS

Business Update

• On January 24, 2023, the REIT amended and renewed its existing revolving credit facility, providing up to €125 million for a three-year period ending January 26, 2026, as well as an accordion feature to increase the limit a further €25 million upon satisfaction of conditions set out in the agreement and consent of applicable lenders.
• On March 31, 2023, pursuant to the departure of Phillip Burns, Mark Kenney assumed the role of Chief Executive Officer and trustee. Mr. Kenney is currently also the Chief Executive Officer and President of CAPREIT.
• On June 16, 2023, the REIT announced that it was working with CBRE, as financial and real estate advisor, to advise it in connection with a strategic review of ERES. On December 20, 2023, the REIT announced that the strategic review process has been concluded and the proposed transactions would not be proceeded with.
• On June 26, 2023, the REIT secured mortgage financing on its May 2, 2022 acquisition property, combined with refinancing of certain existing properties, in the total principal amount of €76.5 million (excluding financing costs and fees). The new mortgage financing matures on June 26, 2029, and carries a fixed contractual interest rate of 4.66%.

Operating Metrics

• Strong operating results continued into 2023, fuelled by strong rental growth. Same property portfolio Occupied Average Monthly Rents ("Occupied AMR") increased by 7.2%, from €992 as at December 31, 2022, to €1,063 as at December 31, 2023, demonstrating the REIT's continued achievement of rental growth in excess of its target range.
• Turnover was 13.8% for the year ended December 31, 2023, with rental uplift on turnover remaining strong at 20.4%, compared to rental uplift of 22.0% on turnover of 12.4% for the year ended December 31, 2022.
• Occupancy for the residential and commercial properties increased to 98.5% and 100.0%, respectively, as at December 31, 2023, compared to 98.4% and 99.5%, respectively as at December 31, 2022, and is at the high end of the REIT's target range. Moreover, 50.5% of residential vacancies are attributable to suites undergoing renovation upon turnover, and 27.7% of residential vacancies are due to suites held for potential sale relating to the REIT's ongoing capital recycling initiatives.
• Net Operating Income ("NOI") increased by 8.9% for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by higher monthly rents on the same property portfolio, further supported by the REIT's extensive protection from inflation and strong cost control.

Financial Performance

• Funds From Operations ("FFO") per Unit decreased by 4.7% to €0.161 for the year ended December 31, 2023, compared to €0.169 for the year ended December 31, 2022, primarily driven by increases in interest and other financing costs and current income tax expense, partially offset by the positive impact of increased same property NOI.
• Adjusted Funds From Operations ("AFFO") per Unit decreased by 2.7% to €0.146 for the year ended December 31, 2023, compared to €0.150 for the year ended December 31, 2022, due to the same reasons mentioned above for FFO per Unit.

Financial Position and Liquidity

• Overall, liquidity improved from prior year due to the amendment of the Revolving Credit Facility increasing the limit by €25.0 million, with immediately available liquidity of €28.9 million as at December 31, 2023, excluding the €25.0 million accordion feature on the Revolving Credit Facility, acquisition capacity on the Pipeline Agreement and alternative promissory note arrangements with CAPREIT.
• Debt coverage metrics are within covenant thresholds, with interest and debt service coverage ratios of 2.9x and 2.4x, respectively, and adjusted debt to gross book value ratio currently standing at 57.6%.
• The REIT's financial position is additionally supported by its well-staggered mortgage profile, with a weighted average term to maturity of 2.9 years and a weighted average effective interest rate of 2.07%.

"With growing demand for housing in the Netherlands continuing to outstrip the pace of new supply, we're experiencing increasingly tight rental market fundamentals which keep strengthening ERES's operational performance, as we saw again in 2023,” commented Mark Kenney, Chief Executive Officer. “Consistent with our track record to date, we're pleased to report that our occupancies remained as high as possible, while our same property NOI margin expanded to 78.6% for 2023. This year, we also proved our commitment to maximizing value for Unitholders in any way that we can, and we're confident that our current strategy achieves that objective. Looking ahead, we remain focused on optimizing our portfolio, enhancing our operational performance and fortifying our platform, and we're excited to continue making progress on each of these initiatives."

"We secured €76.5 million in mortgage financing during 2023, and the weighted average effective interest rate on our mortgage portfolio remains low at 2.1% today,” added Jenny Chou, Chief Financial Officer. “This reflects our conservative financing strategy as we fix 100% of our mortgage interest costs and stagger our renewals. As such, we're well positioned for next year with only 9% of our mortgage debt coming due in 2024. We'll continue to manage our debt and capital structure proactively and prudently going forward, and we have liquidity-generating programs in place to strengthen our balance sheet, reduce volatility and mitigate the impact of mortgages maturing in future years."

OPERATING RESULTS

Rental Rates

Total and Same Property Portfolio	Suite Count1		Occupied AMR/ABR2			Occupancy %
As at December 31,	2023	2022	2023	2022	AMR	2023	2022
			€	€	% Change
Residential Properties	6,886	6,900	1,063	992	7.2	98.5	98.4
Commercial Properties3			19.4	18.2	6.6	100.0	99.5

1	Same property suite count only includes the properties owned by the REIT as at both December 31, 2023 and December 31, 2022, and therefore does not take into account the impact of any property acquisitions completed between the two dates.
2	Average In-Place Base Rent ("ABR").
3	Represents 450,911 square feet of commercial gross leasable area.

Occupied AMR increased by 7.2% for both the total and same property multi-residential portfolios, compared to the prior year. The increase was mainly driven by indexation, turnover and the conversion of regulated suites to liberalized suites. The REIT's achievement of growth in rental revenues significantly in excess of its target range of 3% to 5% demonstrates its ability to consistently operate in a complex and fluid regulatory regime.

Suite Turnovers

For the Three Months Ended December 31,	2023		2022
	Change in Monthly Rent	Turnovers2	Change in Monthly Rent	Turnovers2
	%	%	%	%
Regulated suites turnover1	11.9	0.3	2.2	0.4
Liberalized suites turnover1	18.6	2.7	18.5	3.2
Regulated suites converted to liberalized suites1	41.8	0.4	82.2	0.4
Weighted average turnovers1	20.3	3.4	23.8	3.9
Weighted average turnovers excluding service charge income	19.2	3.4	23.1	3.9

1	Represents the percentage increase in monthly rent inclusive of service charge income.
2	Percentage of suites turned over during the period based on the weighted average number of residential suites held during the period.

For the Year Ended December 31,	2023		2022
	Change in Monthly Rent	Turnovers2	Change in Monthly Rent	Turnovers2
	%	%	%	%
Regulated suites turnover1	10.5	1.1	1.7	1.3
Liberalized suites turnover1	17.7	11.0	18.6	9.7
Regulated suites converted to liberalized suites1	51.8	1.6	65.0	1.4
Weighted average turnovers1	20.4	13.8	22.0	12.4
Weighted average turnovers excluding service charge income	19.5	13.8	21.4	12.4

1	Represents the percentage increase in monthly rent inclusive of service charge income.
2	Percentage of suites turned over during the period based on the weighted average number of residential suites held during the period.

Suite Renewals

Lease renewals generally occur on July 1st for residential suites. Other than the household income adjustment, maximum rent indexation from July 1, 2023 to June 30, 2024 for all Regulated Units is set at the annual wage development figure of 3.1%. For the period from July 1, 2024 up to and including June 30, 2025, the indexation for all Regulated Units has been set at the annual wage development figure of 5.8% with a monthly rent of more than €300. Annual rental increases due to indexation for Liberalized Suites are also capped, as per the previously enacted Dutch government legislation, effective for an initial period of three years from May 1, 2021 up to and including April 30, 2024. The indexation for the period from January 1, 2023 to January 1, 2024 has been capped for Liberalized Suites to the annual wage development figure + 1.0%, resulting in a maximum indexation of 4.1% based on the annual wage development figure of 3.1%. For the period from January 1, 2024 to January 1, 2025, the rental cap limits indexation for Liberalized Suites to the annual inflation number ("CPI") + 1.0%, resulting in a maximum indexation of 5.5% based on CPI of 4.5%.

Accordingly, for rental increases due to indexation beginning on July 1, 2023, the REIT served tenant notices to 6,659 suites, representing 97% of the residential portfolio, across which the average rental increase due to indexation and household income adjustments is 4.0%. In the prior year, the REIT served tenant notices to 6,499 suites, representing 96% of the residential portfolio, across which the average rental increase due to indexation and household income adjustments was 3.0%.

There was one lease renewal in the REIT's commercial portfolio during the year ended December 31, 2023 (year ended December 31, 2022 — three lease renewals).

Total Portfolio Performance

	Three Months Ended,						Year Ended
	December 31,						December 31,
	2023			2022			2023			2022
Operating Revenues (000s)	€	24,717		€	22,932		€	95,684		€	89,252
NOI (000s)	€	19,505		€	17,546		€	75,131		€	68,980
NOI Margin1	78.9		%	76.5		%	78.5		%	77.3		%
Weighted Average Number of Suites	6,894			6,900			6,898			6,811

1	Excluding service charge income and expense, the total portfolio NOI margin for the three months and year ended December 31, 2023 was 84.2% and 83.8%, respectively (three months and year ended December 31, 2022 — 82.1% and 83.1%, respectively).

Operating revenues increased by 7.8% and 7.2% for the three months and year ended December 31, 2023, respectively, compared to the same periods last year, primarily due to increase in monthly rents on the same property portfolio.

NOI increased by 11.2% and 8.9% for the three months and year ended December 31, 2023, respectively, versus the same periods last year. Moreover, for the three months ended December 31, 2023, the NOI margin on the total portfolio increased to 78.9% from 76.5% for the comparable quarter (excluding service charges, total portfolio NOI margin increased to 84.2% from 82.1% for the comparable quarter). For the year ended December 31, 2023, the NOI margin on the total portfolio increased to 78.5% from 77.3% for the prior year (excluding service charges, total portfolio NOI margin increased to 83.8% from 83.1% for the prior year). The increases were primarily driven by higher operating revenues from increased total portfolio occupied AMR and substantial reduction in onsite costs, as a result of the abolishment of landlord levy tax. Service charge expenses are fully recoverable from tenants via service charge income and therefore have a nil net impact on NOI. The increase in the total portfolio NOI margin excluding service charges reflects the REIT's ability to successfully control costs as well as its limited exposure to inflationary pressures

Same Property Portfolio Performance

	Three Months Ended,						Year Ended
	December 31,						December 31,
	2023			2022			2023			2022
Operating Revenues (000s)	€	23,522		€	21,887		€	91,162		€	86,076
NOI (000s)	€	18,576		€	16,799		€	71,680		€	66,492
NOI Margin1	79.0		%	76.8		%	78.6		%	77.2		%
Same Property Number of Suites2	6,542			6,545			6,542			6,545

1	Excluding service charge income and expense, the same property portfolio NOI margin for the three months and year ended December 31, 2023 was 84.2% and 83.9%, respectively (three months and year ended December 31, 2022 — 82.4% and 83.1%, respectively).
2	The number of suites for same property NOI is based on the weighted average number of suites owned by the REIT during the current and comparative prior year periods, respectively, excluding property acquisitions or property dispositions completed during 2022 and 2023.

The increases in same property NOI by 10.6% and 7.8% for the three months and year ended December 31, 2023, respectively, compared to the same periods last year, were primarily driven by higher operating revenues from increased monthly rents and reduction in onsite costs, as a result of the abolishment of landlord levy tax. The increases in same property NOI margin including and excluding service charges for the three months and year ended December 31, 2023 are primarily driven by the same reasons for the increases in same property NOI mentioned above.

The REIT is focused on continuing to further improve NOI and NOI margin through a combination of rental growth and cost control, and investment in capital programs to 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 all of their own energy and other utility costs, the REIT incurs 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 NOI margin.

Financial Performance

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 certain 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 2023, with the exception of certain adjustments made to the REALpac defined FFO, which relate to (i) acquisition research costs, (ii) mortgage refinancing costs, (iii) senior management termination and retirement costs, (iv) costs related to the concluded strategic review of the REIT, and (v) expired base shelf prospectus fees. 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.

A reconciliation of net (loss) income and comprehensive (loss) income to FFO is as follows:

(€ Thousands, except per Unit amounts)	Three Months Ended						Year Ended
	December 31,						December 31,
	2023			2022			2023			2022
Net (loss) income and comprehensive (loss) income for the period	€	(35,917	)	€	(48,790	)	€	(114,229	)	€	116,416
Adjustments:
Net movement in fair value of investment properties	35,337			93,599			230,229			79,449
Net movement in fair value of Class B LP Units	8,218			(15,443		)	(46,299		)	(148,289		)
Fair value adjustments of Unit Option liabilities	(194		)	(1		)	(1,311		)	(1,850		)
Interest expense on Class B LP Units	4,261			4,261			17,044			16,809
Deferred income taxes	(10,538		)	(22,944		)	(59,679		)	(10,240		)
Foreign exchange loss (gain)1	224			1,148			(568		)	10,544
Net loss (gain) on derivative financial instruments	6,304			(2,496		)	9,244			(34,252		)
Other activities and loss on transactions2	950			—			2,765			—
Tax on suite dispositions3	234			—			314			—
Senior management termination and retirement costs4	—			—			74			—
Impairment of goodwill	—			—			—			10,541
Mortgage refinancing costs5	—			—			—			121
Acquisition research costs	—			—			—			11
FFO	€	8,879		€	9,334		€	37,584		€	39,260
FFO per Unit – diluted6	€	0.038		€	0.040		€	0.161		€	0.169
Total distributions declared	€	7,002		€	6,967		€	27,949		€	27,434
FFO payout ratio	78.9		%	74.6		%	74.4		%	69.9		%

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 as part of effective hedging.
2	Relate to costs associated with the concluded strategic review of the REIT, loss on suite dispositions, and expired base shelf prospectus fees.
3	Included in current income tax expense in the consolidated statements of net (loss) income and comprehensive (loss) income.
4	For the three months and year ended December 31, 2023, includes nil and €59, respectively, of accelerated vesting of previously granted Unit Options and nil and €15, respectively, in associated legal fees (three months and year ended December 31, 2022 — nil).
5	Relate to accelerated amortization of deferred financing costs for the year ended December 31, 2022 associated with the refinancing component of the REIT's mortgage, which closed on June 14, 2022.
6	Includes Class B LP Units and the dilutive impact of unexercised Unit Options, calculated based on the treasury method.

The table below illustrates a reconciliation of the REIT's FFO and AFFO:
	Three Months Ended						Year Ended
(€ Thousands, except per Unit amounts)	December 31,						December 31,
	2023			2022			2023			2022
FFO	€	8,879		€	9,334		€	37,584		€	39,260
Adjustments:
Non-discretionary capital expenditure reserve1	(769		)	(988		)	(3,073		)	(3,951		)
Leasing cost reserve2	(139		)	(129		)	(556		)	(518		)
AFFO	€	7,971		€	8,217		€	33,955		€	34,791
AFFO per Unit – diluted3	€	0.034		€	0.035		€	0.146		€	0.150
Total distributions declared	€	7,002		€	6,967		€	27,949		€	27,434
AFFO payout ratio	87.8		%	84.8		%	82.3		%	78.9		%

1	Non-discretionary capital expenditure reserve is determined based on management's best estimate of expected annual non-discretionary capital expenditure requirements per suite, divided by four for the quarter, and multiplied by the weighted average number of residential suites during the period. The estimated annual non-discretionary capital expenditure reserve per suite for 2023 and 2022 is €445 and €580, respectively. The estimated full year weighted average number of residential suites as at December 31, 2023 and December 31, 2022 is 6,898 and 6,811, respectively.
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 and the dilutive impact of unexercised Unit Options, calculated based on the treasury method.

FFO per Unit and AFFO per Unit for the three months and year ended December 31, 2023 decreased from the same periods last year primarily due to increases in interest and other financing costs and current income tax expense, partially offset by the positive impact of increased same property NOI.

Net Asset Value

Net Asset Value ("NAV") represents total Unitholders' equity per the REIT's consolidated balance sheets, 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 an ongoing basis. Management believes that this measure reflects the residual value of the REIT to its Unitholders on an ongoing 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. While NAV is calculated based on items included in the consolidated annual financial statements or supporting notes, NAV itself is not a standardized financial measure under IFRS and may not be comparable to similarly termed financial measures disclosed by other real estate investment trusts or companies in similar or different industries. Please refer to the "Basis of Presentation and Non-IFRS Measures" section within this press release for further information.

A reconciliation of Unitholders' equity to NAV is as follows:
(€ Thousands, except per Unit amounts)
As at	December 31, 2023			December 31, 2022
Unitholders' equity	€	427,247		€	550,147
Class B LP Units	250,554			296,853
Unit-based compensation financial liabilities	187			554
Net deferred income tax liability1	14,869			74,543
Net derivative financial asset2	(15,901		)	(22,931		)
NAV	€	676,956		€	899,166
NAV per Unit – diluted3	€	2.90		€	3.87
NAV per Unit – diluted (in C$)3,4	C$	4.24		C$	5.61

1	Represents deferred income tax liabilities of €28,217 net of deferred income tax assets of €13,348 as at December 31, 2023 (December 31, 2022 — deferred income tax liabilities of €77,474 net of deferred income tax assets of €2,931).
2	Represents non-current derivative financial assets of €15,901 as at December 31, 2023 (December 31, 2022 — non-current derivative financial assets of €23,771, net of current derivative financial liabilities of €840).
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 1.4626 on December 31, 2023 (foreign exchange rate of 1.4498 on December 31, 2022).

Other Financial Highlights

	Three Months Ended		Year Ended
	December 31,		December 31,
	2023	2022	2023	2022
Weighted Average Number of Units – Diluted (000s)1, 2	233,348	232,179	232,867	231,870

As at	December 31, 2023		December 31, 2022
Closing Price of REIT Units3	€	1.76	€	2.09
Closing Price of REIT Units (in C$)	C$	2.58	C$	3.03
Market Capitalization (millions)1, 3	€	412	€	486
Market Capitalization (millions in C$)1	C$	602	C$	704

1	Includes Class B LP Units.
2	Dilutive impact of unexercised Unit Options is calculated based on the treasury method.
3	Based on the foreign exchange rate of 1.4626 on December 31, 2023 (rate of 1.4498 on December 31, 2022).

FINANCIAL POSITION

As at	December 31, 2023			December 31, 2022
Ratio of Adjusted Debt to Gross Book Value1	57.6		%	51.0		%
Weighted Average Mortgage Effective Interest Rate4	2.07		%	1.77		%
Weighted Average Mortgage Term (years)	2.9			3.4
Debt Service Coverage Ratio (times)1,2	2.4		x	3.1		x
Interest Coverage Ratio (times)1,2	2.9		x	3.8		x
Available Liquidity (000s)3	€	28,893		€	21,386

1	Please refer to the "Basis of Presentation and Non-IFRS Measures" section of this press release for further information.
2	Based on trailing four quarters.
3	Includes cash and cash equivalents of €6.9 million and unused credit facility capacity of €22.0 million as at December 31, 2023 (cash and cash equivalents of €10.9 million and unused credit facility capacity of €10.5 million as at December 31, 2022).
4	Includes impact of deferred financing costs, fair value adjustment and interest rate swaps.

For the year ended December 31, 2023, ERES's liquidity improved, as compared to the prior year, primarily driven by the amended revolving credit facility agreement, which increased the limit by €25.0 million, with immediately available liquidity of €28.9 million as at December 31, 2023, excluding the €25.0 million accordion feature on the Revolving Credit Facility, acquisition capacity on the Pipeline Agreement and alternative promissory note arrangements with CAPREIT. The REIT's financial position is additionally strengthened by its well-staggered mortgage profile, with a weighted average term to maturity of 2.9 years and fixed interest payment terms for 100% of its mortgages at a low weighted average effective interest rate of 2.07%. This is further reinforced by compliant debt coverage metrics, with interest and debt service coverage ratios of 2.9x and 2.4x, respectively, and adjusted debt to gross book value ratio within its target range at 57.6%.

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 (the "Declaration of Trust") and the amended and renewed credit agreement dated January 24, 2023, between the REIT and three Canadian chartered banks, providing access to up to €125.0 million with an accordion feature to increase the limit a further €25.0 million upon satisfaction of conditions set out in the agreement and the consent of applicable lenders (the "Revolving Credit Facility").

The REIT manages its overall liquidity risk by maintaining sufficient available credit facility and available cash on hand to fund its ongoing operational and capital commitments and distributions to Unitholders, and to provide for future growth in its business.

DISTRIBUTIONS

During the year ended December 31, 2023, the REIT declared monthly distributions of €0.01 per Unit (being equivalent to €0.12 per Unit annualized). 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 Mark Kenney, Chief Executive Officer and Jenny Chou, Chief Financial Officer, will be held on Thursday, February 22, 2024 at 9:00 am EST. The telephone numbers for the conference call are: Canadian Toll Free: +1 (833) 950-0062 / International Toll: +1 (929) 526-1599. The conference call access code is 380011.

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. A replay of the webcast will be available for one 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 portfolio of high-quality, multi-residential real estate properties in the Netherlands. As at December 31, 2023, ERES owned 158 multi-residential properties, comprised of approximately 6,900 residential suites and ancillary retail space located in the Netherlands, and owned one commercial property in Germany and one commercial 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 audited consolidated annual financial statements and the notes thereto for the year ended December 31, 2023, 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 audited consolidated annual financial statements and MD&A for the year ended December 31, 2023, which are available on the REIT's website at www.eresreit.com and on SEDAR+ at www.sedarplus.ca.

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 year ended December 31, 2023.

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 and Revolving Credit Facility 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.

A reconciliation from total debt is as follows:

(€ Thousands)
As at	December 31, 2023			December 31, 2022
Mortgages payable1	€	889,749		€	875,615
Credit facility2	102,741			89,259
Promissory note	—			25,650
Total Debt	€	992,490		€	990,524
Fair value adjustment on mortgages payable	(816		)	(1,215		)
Total Debt Adjusted for Declaration of Trust	€	991,674		€	989,309
Ratio of Adjusted Debt to Gross Book Value3	57.6		%	51.0		%

1	Represents non-current and current mortgages payable of €809,215 and €80,534, respectively, as at December 31, 2023 (December 31, 2022 — €813,733 and €61,882, respectively).
2	Comparative figure was restated to conform with current year presentation.
3	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) and comprehensive income (loss) to EBITDAFV is as follows:

(€ Thousands)
For the Three Months Ended,	Q4 23			Q3 23			Q2 23			Q1 23			Q4 22			Q3 22			Q2 22			Q1 22
Net (loss) income and comprehensive (loss) income	€	(35,917	)	€	24,784		€	3,252		€	(106,348	)	€	(48,790	)	€	70,000		€	126,935		€	(31,729	)
Adjustments:
Net movement in fair value of investment properties	35,337			24,768			45,398			124,726			93,599			8,099			9,790			(32,039		)
Net movement in fair value of Class B LP Units	8,218			(39,339		)	(31,964		)	16,786			(15,443		)	(65,136		)	(133,499		)	65,789
Fair value adjustments of Unit Option liabilities	(194		)	(463		)	(513		)	(141		)	(1		)	(682		)	(2,258		)	1,091
Net loss (gain) on derivative financial instruments	6,304			640			(728		)	3,028			(2,496		)	(10,385		)	(10,649		)	(10,722		)
Foreign exchange loss (gain)	224			213			210			(1,215		)	1,148			2,696			5,003			1,697
Interest expense on Class B LP Units	4,261			4,261			4,261			4,261			4,261			4,261			4,262			4,025
Interest on mortgages payable	4,608			4,607			3,843			3,777			3,832			3,862			3,186			3,046
Interest on credit facility	1,422			1,336			1,237			797			576			262			167			150
Interest on promissory notes	—			—			70			234			197			97			256			50
Amortization	246			150			202			173			130			149			207			231
Loss on suite dispositions	58			19			—			—			—			—			—			—
Impairment of goodwill	—			—			—			—			—			—			10,541			—
Income tax (recovery) expense	(8,143		)	(5,081		)	(9,647		)	(30,718		)	(21,926		)	2,371			540			12,302
EBITDAFV	€	16,424		€	15,895		€	15,621		€	15,360		€	15,087		€	15,594		€	14,481		€	13,891
Cash taxes	2,395			1,251			1,235			1,209			1,018			983			875			651
Tax on suite dispositions	(234		)	(80		)	—			—			—			—			—			—
EBITDAFV less cash taxes	€	14,263		€	14,724		€	14,386		€	14,151		€	14,069		€	14,611		€	13,606		€	13,240
Principal repayments1	€	550		€	550		€	549		€	549		€	548		€	548		€	547		€	547

1	For use in the 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, credit facility 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 principal and interest requirements of its outstanding debt.

(€ Thousands)
As at	December 31, 2023			December 31, 2022
EBITDAFV less cash taxes1	€	57,524		€	55,526
Debt service payments1,2	€	24,129		€	17,871
Debt Service Coverage Ratio (times)	2.4		x	3.1		x

1	For the trailing 12 months ended.
2	Include principal repayments as well as interest on mortgages payable, credit facility and promissory notes, and exclude 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, credit facility 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	December 31, 2023			December 31, 2022
EBITDAFV1	€	63,300		€	59,053
Interest expense1,2	€	21,931		€	15,681
Interest Coverage Ratio (times)	2.9		x	3.8		x

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

Forward-Looking Disclaimer

Certain statements contained in this press release constitute forward-looking statements within the meaning of applicable Canadian securities laws which reflect the REIT’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”, “intend”, “estimate”, “anticipate”, “believe”, “consider”, “should”, "plan", “predict”, “forward”, “potential”, “could”, "would", "should", "might", “likely”, “approximately”, “scheduled”, “forecast”, “variation”, "project", "budget" or “continue”, or similar expressions suggesting future outcomes or events. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. Although the forward-looking statements contained in this press release are based on assumptions and information that are available to management as of the date on which the statements are made in this press release, including current market conditions and management's assessment of acquisition, disposition and other opportunities that are or may become available to the REIT, which are subject to change, management believes these statements have been prepared on a reasonable basis, reflecting the REIT's best estimates and judgement. However, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in this press release. Accordingly, readers should not place undue reliance on forward-looking statements. For a detailed discussion of risks and uncertainties affecting the REIT, refer to the Risks and Uncertainties section in the MD&A contained in the REIT's 2023 Annual Report.

Except as specifically required by applicable Canadian securities law, the REIT 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 the REIT’s views as of any date subsequent to the date of this press release.

For further information:

Mark Kenney	Jenny Chou
Chief Executive Officer	Chief Financial Officer
Email: m.kenney@capreit.net	Email: j.chou@capreit.net

Category: Earnings