Good afternoon, everyone, and welcome to the annual and special meeting of unit holders of European Residential Real Estate Investment Trust. My name is Dr. Gina Parvaneh Cody. I am the Chair of the Board of Trustees of ERES, and I will act as Chair of today's meeting.
Before I proceed, I would like to thank our unit holders who are able to join us virtually for today's meeting. Before we begin, please be aware that certain information to be presented or discussed today may be forward-looking. If you logged in to the webcast, I refer you to the cautionary note on the presentation slide. The cautionary note applies to our presentation and discussions this afternoon. For everyone else, I pause here while the note is read.
During today's meeting and in the management presentation that will follow, certain statements may contain forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to ERES's future outlook and anticipated events or results.
These statements are based on certain factors and assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. Management's estimates, beliefs, and assumptions are inherently subjective, 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 are based on assumptions and information that is currently available to management, including current market conditions and management's assessment of disposition and other opportunities that are or may become available to ERES, which are subject to change, management believes these statements have been prepared on a reasonable basis, reflecting ERES's best estimates and judgments.
However, there can be no assurance actual results, terms, or timing will be consistent with these forward-looking statements, and they may prove to be incorrect. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond ERES's control, that may cause ERES's or the industry's actual results, performance, achievements, prospects, and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements.
These risks and uncertainties are described in ERES's regulatory filings, including our Annual Information Form and Management's Discussion and Analysis, all of which can be obtained on SEDAR+ at www.sedarplus.ca. Subject to applicable law, ERES does not undertake any obligation to publicly update or revise any forward-looking information.
I will begin by introducing Mark Kenney, a member of the Board of Trustees and Chief Executive Officer, who will be speaking today. The format for today's meeting will be divided into two parts. First, I will deal with the formal aspects of the meeting, following which there will be a management presentation by Mark Kenney. At the end of that presentation, we will address questions from registered unit holders and duly appointed proxy holders.
Such questions may be submitted through the Message tab provided on the web portal. Though we may not have time to answer every question, we will do our best to provide a response to as many as possible during the meeting. In the unlikely event that we do not address your question during the meeting, ERES will communicate with you after the meeting if you have provided your contact information.
I will now begin with the formal part of the meeting. I now call the meeting to order. With the consent of the meeting, Ilse Lanser, ERES's secretary, will act as secretary of the meeting, and Wayne Yearwood of TSX Trust Company will act as a scrutineer for today's meeting. The secretary has advised me that we received the affidavit of mailing from TSX Trust Company confirming that the notice, calling the meeting, and related materials were provided to unit holders of record on the record date for the meeting.
With the consent of the meeting, I will dispense with the reading of the notice following the meeting. The secretary has advised me that the quorum is present for the meeting based on unit holders we know to be in attendance, including by proxy, and documented in the preliminary report of the scrutineer.
A final report will be prepared and filed as part of the record of the meeting. On this basis, I declare the meeting to be properly constituted for the transaction of business. On behalf of the board, I thank those unit holders who have joined us today. Voting results for resolutions to be voted on today will be formally announced by press release following the meeting.
For the purpose of today's meeting, voting on all matters will be conducted by a single electronic ballot. Registered unit holders and proxy holders of record can use the electronic ballot feature available on your screen. You are encouraged to complete your electronic ballot during the allotted time prior to the end of the formal portion of today's meeting.
If you voted in advance of the meeting and you do not wish to revoke your previously submitted proxy, then you do not need to vote during the meeting. If during the course of the meeting we encounter any technical difficulties with the webcams, please remain logged on, and we will resume as soon as practicable. Based on reporting by the scrutineer, the designated proxy holder for the meeting is holding proxies demonstrating voting sufficient for all motions to be carried.
Accordingly, we will try to move through the formal meeting items quickly. To make the best use of our time, we have designated unit holders that will move and second each of the meeting matters. The polls are now formally open for electronic voting. Voting will close once all resolutions have been formally dealt with.
Once voting closes, the scrutineer will tabulate the results of the vote for each matter. The first item of business is the presentation of the consolidated financial statement of ERES for the year ended 31 December 2023, and the related auditor's report. A copy of the financial statements was provided to those unit holders who requested them, and the financial statements are available electronically on ERES's website and SEDAR+.
Unit holders are not being asked to take any action regarding the financial statements, but if any unit holder has questions relating to the financial statements, they may be sent to ERES's investor relations team by email to ir@eresreit.com. We will now proceed with the election of trustees. The Management Information Circular sets out information for the six nominees for election to the board.
Since I am advised that no further nominations were received by ERES prior to the advance notice deadline in ERES's Fifth Amended and Restated Declaration of Trust, the following are the six trustee nominees: Harold Burke, myself, Gina Parvaneh Cody, Ira Gluskin, Mark Kenney, Gervais Levasseur, and Lisa Russell.
The Toronto Stock Exchange requires trustees to be voted on individually. Consistent with this requirement, unit holders have been provided with the opportunity to vote or withhold their vote for each nominee on an individual basis. I propose that we proceed with the motion to elect the nominees. May I have a motion for the election of trustees?
My name is Stephen Co. I am the Chief Financial Officer of CAPREIT and a beneficial unit holder and proxy holder. Chair, I move for the election of the six nominees as trustees.
My name is Jenny Chou. I am the Chief Financial Officer of ERES and a beneficial unit holder and proxy holder. Chair, I second the motion.
Thank you. We will now vote for the election of trustees. Any registered unit holder or duly appointed proxy holder who has not yet voted or who wishes to change their vote with respect to the election of trustees may do so now by clicking on the Vote Here button on the web portal and following the instructions.
We will now proceed with the reappointment of auditors for the ensuing year and the authorization of the board to fix their remuneration. The trustees, on the recommendation of the Audit Committee, propose that Ernst & Young LLP be reappointed as the auditors of ERES until the close of the next annual meeting or until a successor is appointed, and that the trustees be authorized to fix their remuneration. May I have a motion for such reappointment and authorization?
I so move.
I second the motion.
Thank you. We will now vote for the reappointment of the auditors and the authorization of the trustees to fix their remuneration. Any registered unit holder or duly appointed proxy holder who has not yet voted or who wishes to change their vote with respect to the reappointment of the auditor may do so now by clicking on the Vote Here button on the web portal and following the instructions.
The next item of business is to renew the Unit Option Plan and the RUR Plan in order to allow ERES to continue granting incentive securities under such plans until 10 June 2027. The management information circular sets forth the requirement of the TSX to renew the Unit Option Plan and the RUR Plan and the terms under which the renewal is proposed.
The full text of the resolution with respect to such renewal is set forth in Appendix A to the management information circular. The trustees propose that the Unit Option Plan and the RUR Plan be renewed in accordance with the resolution set forth in Appendix A to the management information circular. May I have a motion for such resolution?
I so move.
I second the motion.
Thank you. We will now vote on the renewal of the unit option plan and the RUR plan. Any registered unit holder or duly appointed proxy holder who has not yet voted or who wishes to change their vote with respect to the renewal of the unit option plan and RUR plan may do so now by clicking on the Vote Here button on the web portal and following the instructions.
Now that everyone has had the opportunity to vote, I now declare the polls closed. Based on the preliminary voting results received from the scrutineer, the voting results for each item of business show an abundance of favorability. Accordingly, each of the motions are carried.
Therefore, I declare Harold Burke, myself, Gina Cody, Ira Gluskin, Mark Kenney, Gervais Levasseur, and Lisa Russell, duly elected as trustees of ERES to hold office until the next annual meeting of unit holders or until successors are duly elected or appointed.
I declare that Ernst & Young LLP are reappointed as the auditor of ERES and that the trustees are authorized to fix their remuneration. I declare that the renewal of the unit option plan and RUR plan are approved. Thank you, everyone. We have now completed the formal part of the meeting. If there is no further business, I will ask for a motion to terminate the meeting.
I so move.
I second the motion.
Thank you. I declare the motion carried and the annual and special meeting of unit holders of ERES adjourned. On behalf of management and the board, I would like to thank you all for attending today. This concludes the formal part of the meeting. With that, I will now ask Mark to provide his remarks.
Thanks, Gina. Thanks, Ilse, and a warm welcome to everyone. Let's start off with our financial performance in 2023. Due to strong rent growth and high occupancies, operating revenues increased by 7.2% compared to 2022. On the cost side, our operating expenses decreased as a percentage of operating revenues, primarily due to the abolition of landlord levy tax, which became effective 1 January 2023.
Together, this drove the 8.9% increase in our NOI, and our margin expanded to 78.5% for the year ended December 31, 2023, up by 120 basis points versus the previous year. Solid organic growth positively contributed to FFO. However, this was offset by higher interest costs and current income tax. As a result, our diluted AFFO per unit decreased by 4.7%, and our diluted AFFO per unit was down by 2.6%.
We maintained our annual rate of distribution steady in 2023 at EUR 0.12 per unit, and our AFFO payout ratio was 80.1% for the year. Strong performance continued into Q1 of 2024. Our residential suites were 98.5% occupied as of 31 March 2024, largely consistent with prior periods. Furthermore, I will note that the majority of our vacancy at any given time relates to suites, which we've intentionally kept offline, whether enhanced value through renovation or potentially sell as part of our optimization strategy.
For our most recent quarter, our occupied average monthly rent grew by 6.7% versus the same property portfolio on 31 March 2023. This is above our target range of 3% to 5%, reflecting the tight rental conditions, which continue to characterize the Dutch housing market, alongside our ability to effectively maneuver within its complex and ever-changing regulatory framework.
Strong rent growth and lower property operating costs together drove meaningful margin expansion. Our same property NOI margin was up by 200 basis points, while our total portfolio margin increased by 190 basis points. This growth continues to mitigate the impact of higher interest rates that we're absorbing, and our diluted FFO per unit was EUR 0.039 for three months ended 31 March 2024, which compares to EUR 0.04 in the prior year period, representing a slight decrease of 2.5%.
Finally, our AFFO payout ratio was 80.8% during the Q1 of 2024, remaining within our long-term target range. I will also briefly provide an overview of our financial position as we continue to proactively and prudently manage our liquidity and leverage. Our adjusted debt-to-market value ratio was 58% as of 31 March 2024, which is consistent with the previous quarter.
In addition to our current debt service and interest coverage ratios of 2.4x and 2.9x , respectively, we remain in compliance with our covenant restrictions. On our mortgage portfolio, we fixed nearly all of our interest costs, and we've staggered our renewals in order to mitigate interest expense volatility risk.
As a result, the portfolio continues to carry a below-market weighted average interest rate of 2.2% as of 31 March 2024. Looking ahead, we remain focused on carefully and optimally managing our platform, financial structure, and liquidity in order to enhance cash flows, maintain balance sheet flexibility, and minimize the impact of upcoming mortgage maturities. Further to our debt strategy, I want to take a minute to highlight all of the ways which we're currently enhancing returns for our unit holders.
This includes our tried and tested rent growth strategy, which is comprised of uplifts on turnover, indexation, and the conversion of regulated suites to liberalized. This is further augmented by the opportunity we have had to execute on suite-by-suite privatization, and we're evaluating the net present value of reletting individual units versus selling the units to end users.
We're just getting started with this strategic initiative, and we're excited to ramp up our efforts on this front in order to generate incremental capital, primarily to pay down our credit facility debt and strengthen our future financial position.
Beyond this, we're also continuing to explore additional opportunities to optimize our business with a view to ensuring we're ultimately maximizing value for our unit holders. That brings me to our investment highlights. The end of our most recent quarter marked the five-year anniversary of ERES.
We're proud of the progress we've made to date, and we'd like to thank all stakeholders for their long-standing support. Looking ahead, we'll continue to execute on our strategic and financial operational objectives as we reaffirm our active commitment to driving incremental value for our unit holders through all means possible. With that, I'd like to thank you for your time this afternoon, and we would now be pleased to take any questions you may have.
We'll now move to the question-and-answer session of the meeting. If you have not yet submitted a question but wish to do so, please do so now by submitting your question through the Message tab provided on the web portal.
As a reminder, only registered unit holders or duly appointed proxy holders in attendance at the meeting will be able to ask questions at this time. There are no comments or questions to be addressed. I will now turn the meeting back to Mr. Kenney.
Thank you, everyone, for attending the meeting and voting online. We look forward to welcoming you again at next year's annual meeting. Thank you again, and goodbye.