Residential Disposition I is subject to compliance with the Dutch Competition Act and other closing conditions. ERES will receive an irrevocable standby letter of credit (the “Letter of Credit”) in the amount of €75 million in connection with the execution of the Disposition Agreement, which may be drawn on by ERES in certain circumstances, including upon a breach of the Disposition Agreement by the Purchaser. Notwithstanding the Letter of Credit, there can be no assurance that Residential Disposition I will close or that ERES will be able to draw upon the Letter of Credit.

Subject to the receipt of all regulatory approvals and satisfaction of closing conditions, Residential Disposition I and II are both anticipated to close by, or before, early Q1 2025. There can be no assurance that all requirements for closing will be obtained, satisfied or waived.

The use of proceeds described in this press release, including the amount and timing of the Special Distribution, the repayment of certain indebtedness, and the Distribution Reduction, assumes the completion of the Residential Dispositions on the timeframe disclosed herein. ERES will announce the timing and final amount of the Special Distribution and Distribution Reduction at a later date, in each case, subject to the discretion of the Board of Trustees.

Commercial Disposition

The Commercial Disposition, which closed this month, represents one of four office buildings comprising the German property. The sale price was paid in cash, with net proceeds redeployed in full to pay down the property’s mortgage principal outstanding.

Pro Forma

The following table sets out consolidated financial metrics of the REIT as of the date of the latest interim financial statements, and after adjusting for the estimated effect of the Transactions, the Commercial Disposition and the strategic dispositions previously announced in ERES’s press release dated July 15, 2024 (collectively, the “Dealings”):

Proposed Netherlands Tax Amendments and Impact on 2025 Current Income Tax Expense

The Dutch government has announced an intention to amend the earnings stripping rules, including amendments applicable to real estate entities, in a manner that would limit the ability of the REIT’s subsidiaries to deduct interest expense for income tax purposes. The amendments are expected to form part of the tax legislative proposals to be presented on Budget Day in the Netherlands, which is expected to be announced shortly, and are projected to become effective on January 1, 2025. There is no assurance that the announced amendments will be published as draft legislative proposals, nor that they will be enacted by the Dutch government or enter into force as per the timeline indicated. There is also no certainty around the definition and applicability of real estate entities which would be subject to the amendments or whether additional legislative amendments may be considered. As the potential amendments have yet to form part of an official legislative proposal and ultimately be enacted by the Dutch government, they are subject to change, and such change (and the impact of such change on the REIT) may be significant.

After adjusting for the estimated effect of the Dealings and assuming ongoing operations, the REIT’s forecasted current income tax expense for the year ending December 31, 2025 for the remaining portfolio is approximately €4 million (assuming the aforementioned amendments to Dutch tax law are not implemented) and would be approximately €6 million (assuming the aforementioned amendments to Dutch tax law are implemented as described above).

As previously disclosed, ERES will continue to explore all available opportunities to drive value, including the possibility for future strategic property sales, which would alter the estimated financial impact of the proposed tax amendments on the REIT’s residual portfolio.

“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,” commented Mark Kenney, Chief Executive Officer of ERES. “Moreover, our strategic dispositions this year are being executed at or above previously reported IFRS fair values.”

“Through the Transactions, we’re planning 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,” continued Mr. Kenney. “This will significantly mitigate the impact of higher interest rates on the revolving credit facility and on mortgages maturing in the near term, and ultimately improve ERES’s financial condition.”

“The Board looks forward to seeing the management team execute on these transformational dispositions,” added Gina Parvaneh Cody, Chair of the Board of Trustees of ERES. “We’re pleased with the progress that’s been made to date on ERES’s strategy, and the Board remains committed to exploring all potential future opportunities to maximize value for the REIT and its Unitholders.”

The description of the Disposition Agreement in this news release is a summary only and is qualified in its entirety by the terms of the Disposition Agreement. Pursuant to the Disposition Agreement, ERES has made certain representations and warranties to the Purchaser and has agreed to indemnify the Purchaser in certain circumstances. Further details regarding the terms of Residential Disposition I are set out in the Disposition Agreement, which will be filed by the REIT on SEDAR+ at www.sedarplus.ca. ERES encourages review of the full text of the Disposition Agreement.

ABOUT ERES
ERES is an unincorporated, open-ended real estate investment trust. ERES’s 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 June 30, 2024, ERES owned 157 multi-residential properties, comprised of approximately 6,750 residential suites and ancillary retail space located in the Netherlands, and owned one commercial property in Germany and one commercial property in Belgium. For more information about ERES, its business and its investment highlights, please visit our website at www.eresreit.com and our public disclosure which can be found under our profile on SEDAR+ at www.sedarplus.ca.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this press release constitute forward-looking information, future-oriented financial information, or financial outlooks (collectively, “forward-looking information”) within the meaning of applicable Canadian securities laws, which reflect ERES’s current expectations and projections about future results. Forward-looking information 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 information in this press release relates 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 information contained in this press release. Any number of factors could cause actual results to differ materially from this forward-looking information. Although ERES believes that the expectations reflected in forward-looking information are reasonable, it can give no assurances that the expectations of any forward-looking information will prove to be correct. Such forward-looking information is based on a number of assumptions that may prove to be incorrect, including regarding the expected completion and timing of the transactions, the satisfaction of closing conditions (including receipt of regulatory approvals) with respect to the transactions, the intended use of proceeds of the transactions, the amount and timing of the Special Distribution and Distribution Reduction, the impact of the transactions on ERES’s financial performance and metrics, the expected enactment of the proposed tax amendments, the timing and details of the potential legislation (including that amendments to the earnings stripping rules will include (i) the abolishment of the €1 million threshold applicable for real estate entities with property leased out to third parties, effective January 1, 2025, and (ii) the increase of the maximum interest expense deductibility to 25% of the taxpayer’s taxable EBITDA), the assessed impact to the REIT and the impact of higher interest rates and general economic conditions on ERES. Accordingly, readers should not place undue reliance on forward-looking information.

Forward looking information in this press release is subject to certain risks and uncertainties that could result in actual results differing materially from this forward-looking information, including with respect to the ability of the relevant parties to complete the transactions on the timing and terms described herein, the ability of closing conditions to the dispositions to be satisfied, governmental and regulatory requirements and actions by governmental authorities, including with respect to the proposed amendments to Dutch tax legislation, relationships with employees and tenants, diversion of management time on the transactions, and general market and economic conditions. Risks and uncertainties pertaining to ERES are more fully described in regulatory filings that can be obtained on SEDAR+ at www.sedarplus.ca.

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

The purpose of disclosing any future-oriented financial information or financial outlooks within the meaning of Canadian securities laws in this press release (including, without limitation, under the heading “Proposed Netherlands Tax Amendments and Impact on 2025 Current Income Tax Expense”) is to provide investors with more information concerning the expected financial impact on ERES of the transactions described in this press release and expected tax amendments. Readers are cautioned that such information may not be appropriate for other purposes.

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