HALF YEARLY FINANCIAL REPORT

HALF YEARLY FINANCIAL REPORT

For the six month period to 30 September 2019

12 November 2019

Hibernia REIT plc ("Hibernia", the "Company" or the "Group") today announces interim results for the six months to 30 September 2019. Highlights for the period:

Steady portfolio performance

·; Portfolio value of €1,423.7m[1], up 0.6%[2] in the period (active developments up 4.5%2)

·; Six-month total property return[3] of 2.4% vs MSCI Ireland Property Index (excl. Hibernia) of 3.1%

·; EPRA NAV per share4 of 175.7 cent, up 1.4% in the period (March 2019: 173.3 cent)

Strong growth in distributable income from increasing rent roll and reduced costs

·; Annual contracted rent of €62.0m, up 7.6% since March 2019, mainly due to net new lettings and rent reviews

·; EPRA like-for-like net rental growth4 of 9.1% in the period

·; Net rental income of €28.6m, up 7.3% on the same period last year (September 2018: €26.6m)

·; Operating cost savings of €4.7m versus prior year period following expiry of IMA in November 2018

·; EPRA EPS4 of 2.8 cent, up 55.6% on the same period last year (September 2018: 1.8 cent)

·; Interim dividend declared of 1.75 cent per share, up 16.7% on prior year (2018: 1.5 cent)

Further rental growth potential in the near term

·; Unlet space with ERV of €7.8m (March 2019: €8.0m): office vacancy of 12% by area (March 2019: 12%)

·; 2 Cumberland Place development due to complete in Q3 2020 (ERV: €3.2m)

·; Reversionary potential of portfolio of €1.1m with avg. period to capture of 2.6 years for in-place CBD offices

Disciplined capital allocation continues

·; Net sales proceeds in FY19 of €60.3m are being reinvested or returned to shareholders

- €17.6m invested in five acquisitions, three of which were "bolt-on" in nature

- €9.3m invested in capital expenditure on developments in the period

- €25m share buyback launched in April 2019 and completed on 11 November 2019: 17.6m shares bought back and cancelled at an average price of 142.3 cent per share

Good progress with committed development and longer-term pipeline

·; 2 Cumberland Place expanded by 12% to 56,000 sq. ft. of new Grade A offices: Q3 2020 completion now expected

·; Longer-term pipeline being expanded and progressed and now comprises seven potential schemes

- Provisional planning granted for 152,000 sq. ft. redevelopment of Clanwilliam Court, subject to appeal

- Addition of Malahide Road: 3.8 acre industrial site with mixed-use potential in longer term

Robust balance sheet

·; Net debt4 at 30 September 2019 of €221.5m, LTV4 of 15.6% (March 2019: €217.1m, LTV4 15.6%)

- Weighted average debt maturity at September 2019 of 4.8 years (March 2019: 5.4 years)

·; Significant funding capacity: cash and undrawn facilities of €173.5m, €133.3m net of committed expenditure

Improving sustainability performance

·; Three star GRESB rating in 2019, with score +17pp on prior year

·; Full-time Sustainability Manager joining in January 2020

Tax changes announced in Budget 2020 and effective 9 October 2019 (post period end)

·; Increase in stamp duty on commercial property transactions from 6% to 7.5%: if effective as at 30 September 2019 it would have reduced portfolio value by an estimated €22m and EPRA NAV per share by an estimated 3.3 cent

·; For details on the other changes and their potential impact, please see the Financial Review section of this release

Kevin Nowlan, Chief Executive Officer of Hibernia, said:

"We have made good progress in the first half of the financial year, with net new lettings and rent reviews enabling us to increase our contracted rent roll by 8% to €62m, and EPRA earnings growing by 50% versus the same period last year. With €11m of potential incremental rent (per our independent valuer) to come from leasing the remaining available space in the existing portfolio and our 2 Cumberland Place development, there is a significant opportunity for us to grow our income further in the near term and this remains a high priority for us.

"We are also working hard to unlock the value within our development pipeline, with the key achievements in the period being the grant of planning to expand our 2 Cumberland Place scheme and the preliminary planning permission received for the redevelopment of Clanwilliam Court, which is subject to appeal. In addition, we have made a number of small bolt-on acquisitions, expanding and improving our pipeline.

"Whilst Ireland continues to have one of the fastest growing economies in the EU, business and consumer sentiment have softened in recent months, consistent with global trends. We have also seen some evidence of smaller occupiers deferring decisions on leasing space given the current geopolitical uncertainty. Nonetheless, overall tenant demand for offices and apartments in Dublin remains high and job creation from foreign direct investment is near record levels.

"It remains to be seen how the Irish property investment market reacts to the tax changes announced by the Government in the recent Budget. Our business has low leverage, a talented team and an exciting pipeline of potential development projects and we are well-positioned to take advantage of whatever opportunities arise."

Contacts:Hibernia REIT plc +353 1 536 9100Kevin Nowlan, Chief Executive OfficerTom Edwards-Moss, Chief Financial OfficerMurray Consultants Doug Keatinge: +353 86 037 4163, [email protected] Jill Farrelly: +353 87 738 6608, [email protected]

About Hibernia REIT plc Hibernia REIT plc is an Irish Real Estate Investment Trust ("REIT"), listed on Euronext Dublin and the London Stock Exchange. Hibernia owns and develops property and specialises in Dublin city centre offices.

The results presentation will take place at 8.30 a.m. today, 12 November 2019: a conference call facility will be available to listen to the presentation live using the following details:

Ireland dial-in: +353 (0)1 431 1252 UK dial-in: +44 (0)3 333 000 804 US dial-in: +1 (0)1 631 913 1422All other locations: +44 (0)3 333 000 804Access Code: 19145447#

DisclaimerThis announcement contains forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Group or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements speak only as at the date of this announcement. The Group will not undertake any obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority.

Market review

General economy

While Ireland's economy is expected to be one of the fastest growing in the euro area in 2019 and foreign direct investment ("FDI") remains strong, it is not immune from the global economic backdrop of slowing growth as concerns around trade and geopolitics persist: Goodbody now expects core domestic demand to grow 3.6% in 2019 and 3.2% in 2020, down from 4.5% and 3.7%, respectively, when we reported in May 2019.

Irish GDP growth is forecast at 4.0% in 2019 and 2.8% in 2020 versus 1.2% and 1.4% for the euro area, respectively (source: Goodbody), helped by continuing low levels of unemployment, which stood at 4.8% at October 2019 (source: the Central Statistics Office ("CSO")), consumer spending and growth in exports. FDI in Ireland continues to be strong: 8,175 IDA-sponsored jobs have been created in the first nine months of 2019, up 10% on the same period last year and, at the current run rate, 2019 looks set to be another record year for FDI job creation in Ireland (source: Goodbody, IDA). Employment in Dublin remains buoyant with the latest data from the CSO (Q2 2019) showing that there are 717,000 people employed, up from 695,000 a year earlier. The unemployment rate in Dublin at Q2 2019 was 4.4%, down from 5.3% a year earlier. Despite these strong fundamentals, recent economic data indicates activity is slowing and investment decisions are being delayed: Ireland's composite PMI (Purchasing Managers' Index) reading for October 2019 was 50.6, down from the 2018 average of 57.1 but still in expansionary territory (i.e. above 50) (source: Markit Economics / Bloomberg). Recent statistics released by the CSO also indicate a slowdown in core investment which, as Goodbody notes, is likely to stem mainly from the uncertainty around the UK's departure from the EU ("Brexit"): core investment grew by 1% year-on-year in Q2 2019 having been as high as 15% year-on-year in Q2 2018 (source: Goodbody). The recent rapid growth in the Irish economy and employment is eroding already limited spare capacity (source: CBI) and increasing the risks of wage inflation and a loss of competitiveness. Pay increases of 3.7% in 2019 and 4.1% in 2020 are expected versus overall inflation expectations of 0.8% and 1.1%, respectively (source: CBI). In the construction sector tender prices grew by 3.4% in the first half of 2019, largely as a result of rising labour and material costs (source: SCSI).

The CBI identifies Brexit as the most material external risk to Irish growth alongside risks in relation to international trade, taxation and a slowdown in the global economy. Given the uncertainty around how Brexit will unfold, growth forecasts for the Irish economy are subject to a high margin of error with both large downside and upside risks. In light of this, the Irish Government has taken a cautious approach and based its recent Budget 2020 on the assumption of a "no-deal" Brexit, estimating that GDP would fall to 0.7%, investment would fall by 24% and unemployment would increase to 5.7%. (Goodbody, Department of Finance). As part of Budget 2020, the Irish Government announced that stamp duty on commercial property transactions would increase from 6.0% to 7.5%, which is estimated to have a one-off negative impact of around 1.5% on commercial property values as it will increase purchasers' costs by the same amount (see further details on the tax changes in the Financial Review section).

Irish property investment market

In the 12 months to 30 September 2019 the MSCI Ireland Property Index All Benchmark excluding Hibernia (the "Index") delivered a total return of 6.3% (September 2018: 6.9%). Over this period the industrial sector was the top performer with a total return of 10.0% followed by the office sector at 7.4% and "other" - which includes multi-family residential or private rental stock ("PRS") - at 3.8% (September 2018: 8.8%, 7.9% and 12.2%, respectively). Yields have remained broadly constant in the office sector since late 2017, with the agent consensus between 4.00% and 4.25%, while PRS yields are currently between 3.85% and 4.00% and are trending tighter (source: Cushman & Wakefield, CBRE).

Total investment spend in the first nine months of the year was €3.0bn and, with a number of transactions in the pipeline including the sale of Green REIT, the market is on track to exceed last year's record of €3.6bn by some margin (source: JLL). Dublin continues to be the principal location within Ireland for investment, accounting for 88% of volumes in the first nine months of the year, up from 84% in the same period last year (source: Knight Frank). Residential and office assets continue to dominate, accounting for 40% and 34%, of volumes respectively in the period (September 2018: 30% and 40%, respectively) (source: Knight Frank). These two sectors are expected to continue to represent the majority of investment volumes given demand for prime Dublin offices and residential assets, particularly from international investors (source: JLL). It is estimated that there was €3.0bn of demand for Dublin office investments and €4.0bn for residential investments as at 30 September 2019 (source: Knight Frank) though it remains to be seen whether this demand will be impacted by the recent tax changes announced as part of Budget 2020.

Top 10 office investment transactions (nine months to September 2019)

Source: Knight Frank

Office occupational market

With large occupiers continuing to be active, 2019 is on track to be another strong year in the office letting market following two consecutive years of record take-up: 2018 saw 3.9m sq. ft. of leasing transactions and 2017 had 3.6m sq. ft. of transactions. For the first nine months of 2019 take-up stood at 2.1m sq. ft., which compares to 2.2m sq. ft. at the same point last year (source: Knight Frank), and there are 1m-1.6m sq. ft. of letting deals in the pipeline (source: Knight Frank, CBRE) which, if all converted in Q4 2019, would bring the total lettings in 2019 above 3m sq. ft. for the third year in a row. However, we have seen some evidence of smaller occupiers deferring leasing decisions given the recent geopolitical uncertainty and the statistics reflect this: in the first nine months of 2019 take-up of space in the sub-20k sq. ft. market was 0.6m sq. ft. compared to the five-year average for first nine months of each year of 0.9m sq. ft. (source: Knight Frank). The city centre continues to account for the majority of take-up, representing 52% of lettings by area in the first nine months, down from 66% in the same period in 2018 (source: Knight Frank). Net take-up was 64% of the headline figure in the period (September 2018: 75%), suggesting underlying occupier growth remains robust (source: Knight Frank).

Top 10 Dublin office lettings (nine months to September 2019)

Source: Knight Frank

The technology, media and telecommunications ("TMT") sector remains the biggest source of demand, accounting for 44% of take-up in the first nine months of the year, up from 39% in the same period last year, followed by Irish state bodies at 24% (September 2018: 11%). Co-working and serviced office providers comprised 4% of take-up in the first nine months of 2019, down from 14% in the same period last year (source: Knight Frank). Overall, co-working and serviced office providers account for approximately 3.4% of the city centre stock (excl. period properties), up from 2.9% at March 2019 (source: Knight Frank). This compares to London at 6.0%, New York at 3.7% and Paris at 3.0% (source: Hibernia/Knight Frank). WeWork is by far the largest serviced office provider in Dublin at present with c. 500k sq. ft. of accommodation, more than twice that of its nearest competitor, which has 230k sq. ft. of accommodation.

The overall Dublin office vacancy rate at September 2019 was 6.8%, up from 5.4% at March 2019 (September 2018: 6.7%). The Grade A vacancy rate in the city centre where all of Hibernia's office portfolio is located was 6.0% at September 2019, up from 4.5% at March 2019 (September 2018: 5.3%) as a result of a large lease surrender and following some leased space coming back to the market for sub-lets (source: Knight Frank). Prime city centre rents are stable at above €60psf (source: JLL, Knight Frank, CBRE). Looking ahead, active demand remains strong at 4.1m sq. ft. at the end of September 2019, in line with March 2019 at 4.2m sq. ft. but down from 5.3m sq. ft. in September 2018 (source: Cushman & Wakefield).

Office development pipeline

The table below sets out our expectations for upcoming supply across Dublin's city centre and for the whole of Dublin by year. We expect a total of 8.4m sq. ft. of gross new space between 2019 and 2022, of which 62% will be in the CBD.

Source: Knight Frank/Hibernia

The pre- and mid-letting market continues to be active, with 38% of office stock under construction in Dublin (37% in the city centre) having been let or reserved as at November 2019 (source: Knight Frank/Hibernia).

Residential sector

Housing delivery is increasing, with 9,185 new homes delivered nationally in the first half of 2019 according to the CSO (versus 7,867 in H1 2018) and 33% of these delivered in the Dublin area (38% in H1 2018). When combined with the commuter counties around Dublin, the Greater Dublin Area ("GDA") accounted for 55% of completions in H1 2019 (56% in H1 2018). According to Goodbody's BER Housebuilding Tracker, housing completions grew strongly in Q3 2019 to 6,200 units, up 34% year-on-year. This would imply total completions to September 2019 of approximately 15,400 units and would be on track to modestly exceed Goodbody's forecast for the full year of 21,000 units but still well below the estimated annual requirement of approximately 35,000 - 40,000 units in order to meet demand (source: Goodbody). House price inflation has moderated somewhat, standing at 2% annually at August 2019 on a national basis and -0.3% annually in Dublin.

Despite Ireland 2040's aspirations for compact, urban growth there has been a surge in housebuilding in the commuter belt (up 57% year-on-year) while completions in Dublin grew by just 9% year-on-year in Q3 2019 (source: Goodbody). One of the reasons for this is that the delivery of apartments in Dublin, particularly at affordable levels, remains challenging. Apartment delivery increased by 78% year-on-year in Q3 2019 to 1,100 units and 35% of all units completed in Dublin in H1 2019 were apartments, up from 23% in H1 2018 (source: CSO). However, as Goodbody notes, "given the costs of apartment delivery, viability appears only to be achieved in the higher-priced markets of Dublin, resulting in a sprawl of lower density housing outside the capital". Overall, there remains an excess of new homes at higher price ranges when compared to the number of people who can afford to buy them and, conversely, a deficit at more affordable prices (source: Goodbody). Notwithstanding these challenges, the fundamentals for housing remain strong with growing disposable incomes and net inward migration supportive of ongoing demand (source: Goodbody). Mortgage lending also continues to grow, and new lending is expected to increase 13% year-on-year in 2019. However, affordability issues remain to the fore due to the Central Bank's macroprudential rules which limit mortgages to 3.5x income.

Despite increases in supply and a moderation in growth in capital values, there remains a large amount of international and domestic institutional capital looking to invest in the residential sector, particularly in the private rented sector ("PRS"). CBRE's research earlier this year suggests that as much as €6.3bn is now targeting the sector in Ireland, up from €5.3bn a year earlier, and Knight Frank estimates that €4.0bn is targeting Dublin. While not impacted by the increase in stamp duty, unlike commercial property, it remains to be seen if this demand is impacted by the wider tax changes announced in Budget 2020.

Business review

Disposals and acquisitions

It has been a quieter period of investment activity for the Group with €17.6m invested in five smaller acquisitions,(€16.4m excluding transaction costs), many of which are adjacent to existing Hibernia assets and were "bolt-on" in nature, and no disposals made. Since period end, we have invested a further €1.4m in one acquisition (incl. transaction costs).

Disposals

·; None.

Acquisitions

·; Malahide Road Industrial Park, D17: the property, which was acquired in July 2019 for €7.8m, including transaction costs, comprises 66,000 sq. ft. of warehousing and 17,000 sq. ft. of ancillary office accommodation on a 3.8 acre site. The property is occupied by Bunzl Irish Merchants on a lease expiring in early 2020 and is generating rent of €0.4m per annum. In the longer term we believe it has potential for a mixed-use development (see further details in the developments and refurbishments section below).

·; Other: during the period €9.8m was spent on four small acquisitions, most of which provide potential synergies with properties already owned by Hibernia.

Acquisitions after period end

·; 136 A&B Slaney Close, D11: contracts have been exchanged to acquire two industrial units for €1.4m (incl. transaction costs). These units adjoin 129 Slaney Road, a property already owned by Hibernia. This acquisition increases Hibernia's total contiguous land holding in Dublin Industrial Estate from 3.8 acres to 4.5 acres. In the longer term we believe this land has potential for a mixed-use development (see further details in the developments and refurbishments section below).

Portfolio overview

As at 30 September 2019 the property portfolio consisted of 34 investment properties valued at €1,424m (March 2019: 32 investment properties valued at €1,395m), which can be categorised as follows: 

1. Yields on unsmoothed values and excluding the adjustment for South Dock House and 1WML owner-occupied space

2. Harcourt Square, Clanwilliam Court & Marine House yields are calculated as the passing rent over the total value (after costs) which includes residual land value. Excludes Iconic Offices in Clanwilliam Court

3. Excludes the value of space to be occupied by Hibernia in 1WML

4. HubSpot on rent free at Sep-19. Total rent €6.8m

5. 2 Cumberland Place

6. Includes 1WML residential element (Hanover Mills)

7. Net yields assuming 80% net-to-gross and purchaser costs as per C&W at September 2019

8. Current rental value assumed as ERV as these assets are valued on a price per acre basis except for Slaney Road which is valued on an income basis

9. Excludes. all CBD office developments

10. Residential rent on a net basis

11. Net ERV assuming 80% net to gross (as per valuer assumptions)

12. Note: differences in summation of totals is due to rounding

The key statistics for the office element of our portfolio, which comprised 83% by value and 88% by contracted rent at 30 September 2019 (March 2019: 85% and 88%, respectively), are set out below: contracted rent from completed developments now comfortably exceeds that from our acquired in-place offices.

1. To earlier of review or expiry

2. Mark-to-market

3. 1 Cumberland Place, SOBO Works, 1&2DC, 1WML, 2WML, 1SJRQ

4. 2 Cumberland Place

Increasing portfolio income and extending unexpired lease terms continue to be key priorities. Since 31 March 2019 we have added €4.4m to Group contracted rent through:

·; Four new leases/licence agreements and one variation to an existing lease adding €2.3m, with weighted average term certain for the new leases of c.5.3 years

·; Nine rent reviews concluded adding €2.7m

·; Two new acquisitions adding €0.5m to contracted rent

·; Lease expiries and breaks reducing contracted income by €1.1m

The in-place office portfolio vacancy rate was 12% by lettable area at 30 September 2019 (31 March 2019: 12%): for further details on the vacant space and the increase in contracted rent, please refer to the asset management section below. 

Portfolio performance

In the six months ended 30 September 2019 the portfolio value increased €9m or 0.6% on a like-for-like basis (i.e. excluding acquisitions, disposals and capital expenditure). Had the 1.5% increase in stamp duty on Irish commercial property transactions announced in the 2020 Budget on 8 October 2019 been effective from 30 September 2019, the Group's valuer estimates the negative impact on the portfolio value would have been €22m, meaning the portfolio value would have decreased €13m or -0.9% on a like-for like basis in the six month period (see further details in the Financial Review below). In the six months ended 31 September 2018 the portfolio value increased by €21.2m or 3.9% on a like-for-like basis.

1. Including acquisition costs

2. Excludes the value of space occupied by Hibernia in South Dock House but Sep-19 includes reclassification of 1SJRQ and 2WML as CBD offices from office development

3. During the period fit-out commenced on the space in 1WML of Hibernia's new head office from late 2019 and it is therefore recognised as owner occupied property in the financial statements. The space currently occupied by the Group in South Dock House has been leased to a tenant from Dec-19 (signed Sep-19). Upon Hibernia's head office relocating, this space (in SDH) will be transferred to investment property. These transfers are recognised at fair value on the date of transfer. For the purpose of the above table, the transfer is a deemed disposal and the subsequent transfer of SDH to investment property will be a deemed purchase for the year ending Mar-20. The "like-for-like" columns in the above table ignore the deemed disposal of the 1WML space since it was part of investment property at Mar-19.

The key individual valuation movements in the period were:

·; Observatory, South Docks: €4.2m/5% uplift driven by the new licence agreement with N3 at a rent ahead of the March 2019 estimated rental value ("ERV") and the settlement of an outstanding rent review in line with ERV

·; 2WML, South Docks: €3.6m/6% uplift as a result of leasing the 1st floor (13,000 sq. ft.) to Udemy significantly ahead of ERV. The headline market rent across the entire building increased from €55.19psf to €56.58psf and the equivalent yield compressed by 15bps from 4.85% to 4.65% on the let space

·; 1WML, South Docks: €2.4m/2% uplift as a result of the headline market rent on the office space increasing by €1psf to €57.06psf

·; Hardwicke & Montague House, D2: €1.8m/2% uplift as a result of the majority of the rent reviews being settled, all at or ahead of ERV, and the average headline market rent increasing marginally from €52.86psf to €53.86psf

·; The Forum, IFSC: -€1.9m/-4% movement as a result of higher expected capital expenditure on the property prior to leasing. The ERV and yield assumptions remain the same as March 2019

·; Marine House, D2: -€4.5m/-15% movement largely as a result of higher capital expenditure estimates for the development works as a result of design improvements, preparatory work for the Clanwilliam redevelopment and cost inflation, with no corresponding increase in value

Developments and refurbishments

No schemes were completed in the period and one scheme, 2 Cumberland Place, remained in progress. Capital expenditure on developments amounted to €9.3m (September 2018: €20.1m). The pipeline of future schemes was expanded with the acquisition of the property at Malahide Road and there was progress on planning at Clanwilliam Court.

Committed development schemes

At 2 Cumberland Place, D2, we have received planning permission for an extra floor, adding 6,500 sq. ft. of office space and a 2,000 sq. ft. terrace and taking the overall building to 56,000 sq. ft. of office accommodation. The construction work continues: the concrete cores are now in place and the steel frame is being erected. As a result of the additional floor, completion is now expected to occur in Q3 2020 (previously H1 2020) and capital expenditure is expected to be €35m (previously €30m).

Please see further details on the scheme below:

1. Per C&W valuation at 30 September 2019

2. Office demise only

At 30 September 2019 Cushman & Wakefield, the Group's independent valuer, had an average estimated rental value for the unlet office space (103,000 sq. ft.) in 2WML and 2 Cumberland Place of €56.57psf and was assuming an average yield of 4.80% upon completion: based on these assumptions C&W expects a further €12m of development profit (excluding finance costs) to be realised through the completion and letting of these schemes. A 25-basis point movement in yields across the properties would make c. €6m difference to the development profits, and a €2.50psf change in estimated rental value ("ERV") would result in a c. €5m difference. If current market conditions prevail, we would expect these yields to tighten once the buildings are completed and/or let.

Development pipeline The office pipeline remains broadly unchanged from March 2019, with the potential to deliver up to an estimated 538,000 sq. ft. of Grade A office space upon completion (a net increase over current areas of 260,000 sq. ft.), the majority of which would be in two clusters of office buildings at Clanwilliam Court/Marine House and Harcourt Square. We have received a provisional grant of planning for the 152,000 sq. ft. redevelopment scheme at Clanwilliam Court, though this is subject to appeal.

The quantity of land owned with potential for mixed-use development schemes in the long term increased to 151.3 acres (March 2019: 147.5 acres) with the acquisition of a 3.8 acre industrial site at Malahide Road. Re-zoning will be necessary in all cases and so the timing of any future developments is uncertain at present.

1. Including transaction costs and capex spent to date

2. Initial consideration

Asset management

Net capital expenditure on maintenance items amounted to €0.3m in the period (September 2018: €0.1m). Contracted rent increased by 8% to €62.0m (March 2019: €57.6m) as a result of:

·; New lettings/licence agreements and variations to existing leases adding €2.3m;

·; Rent reviews concluded adding €2.7m;

·; Acquisitions adding €0.5m; and

·; Lease expiries and surrenders reducing contracted rent by €1.1m

At 30 September 2019 one office rent review was active, with a modest ( and the vacancy rate in the office portfolio was 12%, based on lettable area (March 2019: 12%).

Summary of letting activity in the period

Offices:

·; Three new lettings on 31,000 sq. ft. and one license agreement, generating a total of €2.2m per annum of incremental new rent. The weighted average periods to break and expiry for the new leases were 5.1 years and 9.0 years, respectively

·; Nine rent reviews concluded over 99,000 sq. ft., adding a further €2.7m of rent per annum: in aggregate the revised rents were approximately 98% above the previous contracted rents and 2% ahead of the ERV at the time of review

Retail:

·; One new letting of 2,000 sq. ft. at an initial rent of €0.1m per annum

Residential:

·; 293 of the Group's 331 apartments are located in Dundrum and average rents achieved in new lettings in the period by the Group for two-bed apartments in Dundrum were €1,864 per month vs average two-bed passing rents of €1,854 per month

·; Letting activity and lease renewals at Dundrum generated incremental gross annual rent of

·; All let units are subject to the rental cap regulations

Key asset management highlights

1SJRQ, South Docks

The lease to HubSpot of all 112,000 sq. ft. of office accommodation at an annual rent of €6.8m commenced in June 2019. We have let the Dockers pub to L'Estrange Group on a long lease at an initial rent of €0.1m per annum for the 2,000 sq. ft. demise. We remain in discussions with food and beverage operators regarding the remaining 6,000 sq. ft. of retail space in the building. 

2WML, South Docks

We have let one floor (13,000 sq. ft.) to Udemy, an online learning platform, on a five year lease with three years term certain. The lease commenced in September 2019 and the initial rent payable is €0.8m per annum, materially ahead of the estimated rental value for the space at March 2019, in part due to the shorter term. Discussions continue with potential occupiers for the remaining 47,000 sq. ft. of available office accommodation.

50 City Quay, South Docks

We are working on plans for the refurbishment of the 4,500 sq. ft. office building which has a prominent river-fronting position next to 1SJRQ.

Cannon Place, D4

Following the completion of necessary remedial works the 16 units are being furnished for re-letting.

Central Quay, South Docks

Substantially all 27,500 sq. ft. of vacant space in the building is under offer from potential occupiers.

The Forum, IFSC

All 47,000 sq. ft. of office accommodation and 50 car parking spaces were vacated by the former tenant in March 2019 (which had been paying a rent of €2.0m per annum). We are continuing discussions with interested parties as we consider options for the building.

Hardwicke House & Montague House, D2

Six of the seven rent reviews outstanding in the buildings at 31 March 2019 have now been settled. The reviews covered 58,000 sq. ft. and resulted in an aggregate €1.6m increase (+97%) in the passing rent to €3.3m per annum. One rent review over 23,500 sq. ft. remains outstanding.

Marine House, D2

Two rent reviews over 4,300 sq. ft. of ground floor office space were settled, increasing the passing rent by €0.1m per annum.

The Observatory, South Docks

Riot Games exercised a break option on part of its demise and vacated 8,000 sq. ft. in July 2019 as expected. This space has been taken by N3, an international sales and marketing firm, on a three year, managed office contract which commenced in October 2019. Under the terms of the agreement N3 has taken the space fully-fitted ("plug and play") and Hibernia expects to generate net income after costs of €0.6m per annum. One rent review over 36,000 sq. ft. was concluded in the period resulting in a €1.0m (99%) uplift in the passing rent on the demise.

South Dock House, South Docks

We have agreed to let all 9,500 sq. ft. to an Irish plc on a long lease which is expected to commence in late 2019. Currently part of the property is occupied by Guggenheim and part is the Hibernia head office. We have commenced fit-out of the ground floor suite in 1WML and our head office will relocate there in late 2019.

Flexible workspace arrangement

The flexible workspace arrangement with Iconic Offices ("Iconic") in 21,000 sq. ft. of Block 1, Clanwilliam Court is performing well, with all workstations (c. 90% of revenue from the arrangement) occupied and 84% of the available co-working memberships contracted at 30 September 2019.

Other completed assets The remaining completed properties in the portfolio remain close to full occupancy.

SustainabilityAs set out in our Sustainability Report published in June 2019 (see www.hiberniareit.com/sustainability for more details), we are making good progress in improving our sustainability performance. Further evidence for this has come from the awards we have received in the six months to September 2019: as well as receiving an EPRA Gold award for the quality of our sustainability performance disclosures for a second successive year, we received three stars in the Global Real Estate Sustainability Benchmark ("GRESB") 2019 Assessment, improving our score by 17 percentage points over prior year. To ensure we continue to improve in all aspects of sustainability we have recruited a full-time Sustainability Manager who will join us in January 2020.

Financial review

1. An alternative performance measure ("APM"). The Group uses a number of such financial measures to describe its performance, which are not defined under IFRS and which are therefore considered APMs. In particular, measures defined by EPRA are an important way for investors to compare similar real estate companies. For further information see "supplementary information" at the end of this report.

The key drivers of EPRA NAV per share, which increased by 2.4 cent from 31 March 2019, were:

·; 0.9 cent per share from the revaluation of the property portfolio, including 0.1 cent per share in relation to development properties

·; 2.8 cent per share from EPRA earnings in the period

·; Other items, primarily the share buy-back, increased NAV by 0.7 cent

·; Payment of the FY19 final dividend, which reduced NAV by 2.0 cent per share

EPRA earnings were €19.3m, up 50.1% compared to the same period in the prior year as a result of:

·; A €2.0m increase in net rental income (+7.3%) to €28.6m (September 2018: €26.6m). This was principally due to the commencement of the office lease in 1SRJQ in June 2019 and the successful completion of a number of rent reviews and came in spite of the sales of New Century House and 77 Sir John Rogerson's Quay in the prior year and the cessation of the office lease in the Forum in March 2019

·; A €4.7m reduction in operating expenses (-44.9%) to €5.8m (September 2018: €10.4m): the reduction over the same period in prior year was mainly as a result to the expiry of the Investment Management Agreement in November 2018. The Group's new remuneration scheme commenced from the same date 

Profit before tax was €25.5m, a reduction of 60.1% over the same period last year, mainly because of higher revaluation gains in the financial period last year. The prior period saw significant yield compression within the residential sector and 1SJRQ benefitted from a change in valuation approach as it neared practical completion.

Funding position

Group leverage target: our through-cycle leverage target remains 20-30%.

The table below summarises our debt funding: the weighted average maturity of the Group's debt at 30 September 2019 was 4.8 years (March 2019: 5.4 years). We refinanced the Group's facilities in December 2018, moving to an unsecured structure, extending the weighted average maturity date and introducing non-bank funding for the first time in the form of private placement notes. The Group's overall interest costs under the new funding arrangements remained broadly unchanged due to a reduction in the undrawn commitment fee payable on the new revolving credit facility ("RCF").

As at 30 September 2019, net debt was €221.5m (March 2019: €217.1m), equating to a loan to value ratio ("LTV") of 15.6% (March 2019: 15.6%). The key capital items impacting net debt in the period were total capital expenditure of €10.7m, the share buyback of €19.0m and acquisition expenditure of €17.6m which were partially offset by the receipt of €35.3m from the sale of 77SJRQ, which was contracted to be sold in FY '19.

Cash and undrawn facilities as at 30 September 2019 totalled €173.5m or €133.3m net of committed expenditure (March 2018: €178m and €143m, respectively). Assuming full investment of the available facilities in property, the LTV, based on property values at 30 September 2019, would be c. 25%. 

Interest rate hedging

Group hedging policy: to ensure the majority of the interest rate risk on drawn debt balances is fixed or hedged.

As at 30 September 2019 the Group had €75m of fixed coupon private placement notes and the interest rate risk on the RCF drawings of €166.6m was mitigated by €225m of hedging instruments comprising:

While the Group was "over-hedged" on its interest rate exposure at 30 September 2019, this did not give rise to any additional financial risk to the Group and ceased on 11 November 2019 when the cap and swaption over €100m of notional debt expired. Had these instruments expired on 30 September 2019, 75% of the interest rate risk on the RCF drawings would have been hedged at that date and 83% of the Group's interest rate risk on its debt would have been fixed or hedged.

Dividend

Group dividend policy: to distribute 85-90% of recurring rental profits via dividends each financial year, with the interim dividend in a financial year usually representing 30-50% of the total ordinary dividends paid in respect of the prior financial year.

Consistent with its policy that the interim dividend will represent 30-50% of the total ordinary dividends paid in respect of the prior financial year, the Board has declared an interim dividend of 1.75 cent per share (2018: 1.5 cent), an uplift of 16.7%. This represents 63% of the EPRA earnings per share for the period and 50% of the ordinary dividends per share paid in respect of the financial year ended 31 March 2019.

The interim dividend will be paid on 23 January 2020 to shareholders on the register at 3 January 2020. All of the dividend will be a Property Income Distribution ("PID") in respect of the Group's property rental business as defined under the Irish REIT legislation.

Hibernia's Dividend Reinvestment Plan ("DRiP") is available to shareholders and allows them to instruct Link, the Group's registrar, to reinvest the dividends paid by Hibernia into the purchase of shares in the Company. The terms and conditions of the DRiP and information on how to apply are available on the Group's website.

Capital management

In April 2019 we announced the sale of 77SJRQ and our intention to return the net proceeds of €35m to shareholders to maintain the Group's progress towards the lower end of our stated 20-30% target, starting with an on-market share buyback programme of €25m which commenced the same month. As at 30 September 2019 13.3m shares had been repurchased and cancelled under this buyback programme for aggregate consideration of €19.0m (an average purchase price of €1.43 per share). The €25m buyback programme completed on 11 November 2019, at which point 17.6m shares had been repurchased and cancelled at an average price of €1.42 per share.

In our preliminary results in May 2019 we announced our intention to undertake a capital reorganisation to enhance our flexibility for future capital management through converting a substantial part of our share premium account, which had a balance of €624.5m at 31 March 2019, into distributable reserves. This was approved by shareholders at the Annual General Meeting in July 2019 and the final court hearing to approve the capital reorganisation has been deferred until January 2020 by which time there is expected to be greater clarity on the tax changes detailed below.

Tax changes announced in Budget in October 2019

In the 2020 Budget (and the subsequent Finance Bill) the Irish Government announced a number of changes to the taxation of Irish property which can be categorised into those that directly impact the Group (whether immediately or potentially at some point in future) and those that do not. We summarise these changes below and estimate the impact for the Group where possible and/or appropriate. At present the Finance Bill is still subject to review and possible amendment: the final Finance Act is expected to be signed in December 2019.

Main tax changes directly impacting the Group

Tax changes not directly impacting the Group

Irish Real Estate Investment Funds ("IREFs"): anti-avoidance rules have been introduced for IREFs. Broadly these seek to counteract perceived aggressive tax planning by some IREFs by disincentivising the use of high levels of debt and excessive costs as a means of reducing profits liable to IREF tax. While the changes do not directly impact the Group, with almost €17bn of property held within IREF structures at the end of 2017 (source: Central Bank of Ireland) any changes which negatively impact IREFs may indirectly affect the wider property market.

Schemes of arrangement: stamp duty on corporate acquisitions undertaken by a scheme of arrangement increased to 1% (previously 0%).

Selected portfolio information

1. Summary EPRA measures

2. Top 10 in-place office occupiers by contracted rent and % of contracted in-place office rent roll

3. In-place office contracted rent by tenant business sector

4. In-place office contracted rent and WAULT progression

1. Excl. arrangement with Iconic Offices at Block 1 Clanwilliam

2. To earlier of break or expiry

3. By net lettable office areas. Office area only (i.e. excl. retail, basement, gym, Townhall etc.)

PRINCIPAL RISKS AND UNCERTAINTIES

There are a number of risks and uncertainties which could have a significant impact on the Group's performance and could cause actual results to differ materially from expected results. The Directors consider that the principal risks and uncertainties to the Group, which are set out on pages 40 to 49 of the 2019 Annual Report, are substantially unchanged for the remaining six months of the financial year. These risks and uncertainties are summarised, together with a short update where relevant, below.

Market risks: under-performance of Dublin property market / weakening economy / adverse Brexit outcome

The Budget 2020 announced in early October 2019 introduced a number of changes to the taxation of Irish property including REITs (see Financial Review and/or see note 33 of the condensed consolidated financial statements for further details). These included an increase in the rate of stamp duty on Irish commercial property transactions from 6% to 7.5% which took effect from 9 October 2019 and is expected to have a one-off negative impact on the Group's portfolio value of approximately 1.6% or €22m. It remains to be seen if the taxation changes (some of which are still subject to possible amendment) will have an impact on the Irish property investment market. While Ireland's economy is expected to be one of the fastest growing in the euro area in 2019 and foreign direct investment ("FDI") remains strong, it is not immune from the global economic backdrop of slowing growth: Goodbody now expects core domestic demand to grow 3.6% in 2019 and 3.2% in 2020, down from 4.5% and 3.7%, respectively, when we reported in May 2019. Irish GDP growth is forecast at 4.0% in 2019 and 2.8% in 2020 (source: Goodbody). The Central Bank of Ireland ("CBI") identifies Brexit as the most material external risk to Irish growth alongside risks in relation to international trade, taxation and a slowdown in the global economy. WAULT stands at 6.9 years for the whole office portfolio, protecting against vacancy risks in a market downturn and we continue to focus on reducing vacancy and extending lease terms. 

Investment risks: mis-timed investment or sale / inappropriate concentration on assets, locations, tenants or tenant sectors

These risks are largely unchanged. The Group's portfolio was worth 1.4 billion at 30 September 2019 and comprised 34 properties, the largest being 11% of the portfolio by value (31 March 2019: 11%). The Group has invested €17.6m in a number of smaller acquisitions, mainly adjacent to existing Group assets, in the six months ending 30 September 2019. No disposals took place in the period. The office portfolio's top 10 tenants account for 65% of Group office portfolio contracted rent, the TMT sector accounts for 53% of contracted office rent and the single largest tenant is HubSpot, accounting for 19% of contracted office rent.

Development risks: poor or mistimed execution of development projects / contractor default / adverse outcome at Newlands

Construction cost inflation is still estimated to be mid to high single digit percent per annum and this is likely to impact the profitability of future developments. The Group uses fixed rate contracts to remove cost inflation risk during the construction phase. The Group has a highly experienced internal development team and partners with contractors with proven track records which also helps to mitigate construction risks, including the risks of breaching building standards. As at 30 September 2019 the Group had one committed scheme, totalling 56k sq. ft. of offices which is scheduled for completion in the second half of 2020 (calendar year). Other risks around contractor default and Newlands remain largely unchanged.

Asset management risks: poor asset management / failure to react to evolving tenant needs

The Group continues to work to implement improvements in asset and building management and this risk remains stable. Achieving high sustainability and environmental standards is a focus and we believe it is increasingly important in attracting tenants and investors. The Group has recruited a dedicated Sustainability Manager who will join in January 2020. The Group completed its second GRESB assessment during the period and has made significant progress in most areas, with a 17 percentage point increase in its performance, and was awarded three stars. Reacting to changing tenant requirements the Group signed two relatively small shorter leases in the period with terms of three and five years, respectively with appropriate rental premium to reflect the shorter term.

Finance risks: inappropriate capital structure or lack of available funding

The Group remains modestly geared: at 30 September 2019 the Group's loan to value ratio was 15.6% or 15.8% proforma the stamp duty increase in October 2019 (31 March 2019: 15.6%). Committed capital expenditure in the next 18 months is expected to increase the LTV ratio to c.18%. At 30 September 2019 the Group had cash and undrawn facilities totalling €174m, or €133m net of committed expenditure (31 March 2019: €178m or €143m, respectively), and on average 4.8 years until the maturity of its debt facilities. The Group continues to move towards the lower end of its 20-30% leverage target and its €25m share buyback completed on 11 November 2019.

People risks: Loss of key staff and / or motivation

Staff turnover was 8.8% in the first half of the financial year on total headcount of 34 and the senior team remained stable. The new Remuneration Policy has been fully implemented and the first LTIP awards were granted during the period. This risk is not expected to change materially for the remaining six months of the financial year.

Regulatory, tax and political risks: adverse changes or failure to comply with legislation including the REIT regime

It is possible that there is a general election in Ireland in the next six months, which may result in a change of government. As mentioned above, Budget 2020 increased the rate of stamp duty on Irish commercial property transactions from 6% to 7.5% which is expected to have a one-off negative impact on commercial property values with effect from early October 2019. There were a number of other changes made to the taxation of Irish property, including REITs and the impact of these on the property market is uncertain: please see Financial Review section and/or note 33 to the condensed consolidated financial statements for further information.

Business interruption risks: adverse external event

No significant incidents occurred during the period and these risks are not expected to materially change in the remaining six months of the financial year.

Directors' Responsibilities Statement

Each of the Directors, whose names appear on page 60 of this report, confirm to the best of their knowledge that the condensed consolidated financial statements in the Half Yearly Financial Report have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union ("EU"), give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the half year management report herein contains a fair review of the information required by Disclosure and Transparency Rules of the Central Bank of Ireland, namely:

·; Regulation 8(2) of the Transparency Directive (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the period from 1 April 2019 to 30 September 2019 and their impact on the half yearly financial report, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·; Regulation 8(3) of the Transparency Directive (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place during the period from 1 April 2019 to 30 September 2019 and that have materially affected the financial position or performance during the period.

Signed on behalf of the Board

Kevin Nowlan Thomas Edwards-Moss

Chief Executive Officer Chief Financial Officer

11 November 2019 

INDEPENDENT REVIEW REPORT TO HIBERNIA REIT PLC

We have been engaged by the Company to review the interim financial information included in the Half Yearly Financial Report for the six months ended 30 September 2019 which comprise the condensed consolidated statement of financial position as at 30 September 2019 and the related condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows, and the related notes 1 to 33 for the six-month period then ended ("interim financial information"). We have read the other information contained in the Half Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.

This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE 2410") issued by the International Auditing and Assurance Standards Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this review report, or for the conclusions we have formed.

DIRECTORS' RESPONSIBILITIES

The Half Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Yearly Financial Report which includes the interim financial information, in accordance with the International Accounting Standard 34, ''Interim Financial Reporting,'' as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007,and the Transparency Rules of the Central Bank of Ireland.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The interim financial information included in this Half Year Financial Report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

OUR RESPONSIBILITY

Our responsibility is to express to the Company a conclusion on the interim financial information in the Half-Yearly Financial Report based on our review.

SCOPE OF REVIEW

We conducted our review in accordance with ISRE 2410. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information in the Half Yearly Financial Report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with the International Accounting Standard 34, ''Interim Financial Reporting,'' as adopted by the European Union and the Transparency (Directive 2004/109/EC) Regulations 2007, and the Transparency Rules of the Central Bank of Ireland.

Christian MacManus

For and on behalf of Deloitte Ireland LLP

Chartered Accountants and Statutory Audit Firm

Deloitte & Touche House, Earlsfort Terrace, Dublin 2

Date: 11 November 2019

Condensed consolidated income statement

For the six months ended 30 September 2019

Condensed consolidated statement of comprehensive income

For the six months ended 30 September 2019

Condensed consolidated statement of financial position

As at 30 September 2019

Condensed consolidated statement of changes in equity

For the six months ended 30 September 2019 (unaudited)

Condensed consolidated statement of cash flows

For the six months ended 30 September 2019

Notes to the condensed consolidated financial statements

The accounting conventions and accounting policies employed in the preparation of these condensed consolidated financial statements are consistent with those employed in the preparation of the most recent annual consolidated financial statements in respect of the year ended 31 March 2019 as described in the Annual Report and referenced in this document as appropriate except as noted below.

The Group adopted IFRS 16 for the first time in these condensed consolidated financial statements. There was no material impact on these interim results or on the financial position as at 1 April 2019. These condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should therefore be read in conjunction with the Group's Annual Report in respect of the year ended 31 March 2019.

Hibernia REIT plc, the "Company", registered number 531267, together with its subsidiaries and associated undertakings (the "Group"), is engaged in property investment and development (primarily office) in the Dublin market with a view to maximising its shareholders' returns.

The Company is a public limited company and is incorporated and domiciled in Ireland. The address of the Company's registered office is South Dock House, Hanover Quay, Dublin, D02 XW94, Ireland.

The Ordinary Shares of the Company are listed on the primary listing segment of the Official List of Euronext Dublin and the premium listing segment of the Official List of the UK Listing Authority and are traded on the regulated markets for listed securities of Euronext Dublin and the London Stock Exchange plc.

a. Statement of compliance and basis of preparation

The annual financial statements of Hibernia REIT plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, which comprise standards and interpretations approved by the International Accounting Standards Board (IASB). IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB. These condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the EU.

The interim figures for the six months ended 30 September 2019 are unaudited but have been reviewed by the independent auditor, Deloitte Ireland LLP , whose report is set out on page 18 of this report. The summary financial statements for the year ended 31 March 2019 that are presented in the condensed consolidated financial statements represent an abbreviated version of the full financial statements for that year on which the independent auditor, Deloitte Ireland LLP , issued an unqualified audit report and are not annexed to these financial statements. The half yearly financial statements herein are non-statutory financial statements for the purposes of the Companies Act 2014.

The Group has not early adopted any forthcoming IASB standards (Note 3).

The consolidated financial statements of the Group for the year ended 31 March 2019 ("the Annual Report 2019") are available upon request from the Company Secretary or from www.hiberniareit.com. The financial statements for the financial year ended 31 March 2019 have been filed in the Companies Registration Office.

These condensed consolidated financial statements were approved for issue by the Board of Directors on 11 November 2019.

b. Alternative performance measures

The Group uses alternative performance measures to present certain aspects of its performance. These are explained and, where appropriate, reconciled to equivalent IFRS measures in the Supplementary Information section at the back of these condensed consolidated financial statements. The main alternative performance measures used are those issued by the European Public Real Estate Association ("EPRA") which is the representative body of the listed European real estate industry. EPRA issues guidelines and benchmarks for reporting both financial and sustainability measures. These are important in allowing investors to compare and measure the performance of real estate companies across Europe on a consistent basis. EPRA earnings and EPRA NAV are presented within the condensed consolidated financial statements and fully reconciled to IFRS as these two measures are among the key performance indicators for the Group's business.

c. Functional and presentation currency

These condensed consolidated financial statements are presented in euro, which is the Company's functional currency and the Group's presentation currency.

d. Basis of consolidation

The condensed consolidated financial statements incorporate the condensed consolidated financial statements of the Company and entities controlled by the Company (its subsidiaries). The accounting policies of all consolidated entities are consistent with the Group's accounting policies. All intragroup assets and liabilities, equity, income, expenses and cashflows relating to transactions between members of the Group are eliminated in full on consolidation.

e. Assessment of going concern

The condensed consolidated financial statements have been prepared on a going concern basis. The Directors have performed an assessment of going concern for a minimum period of 12 months from the date of signing of these condensed consolidated financial statements and are satisfied that the Group is appropriately capitalised. The Group has a cash balance as at 30 September 2019 of €25.3m (31 March 2019: €22m), is generating positive operating cashflows and, as discussed in note 24.a, has in place debt facilities with average maturity of 4.8 years and an undrawn balance of €153m at 30 September 2019 (31 March 2019: €161m). The Group has assessed its liquidity position and there are no reasons to expect that the Group will not be able to meet its liabilities as they fall due for the foreseeable future.

f. Significant judgements 

The preparation of the condensed consolidated financial statements may require management to exercise judgement in applying the Group's accounting policies. The following are the significant judgements and key estimates used in preparing these condensed consolidated financial statements:

Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In calculating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. In valuing an investment property, the Group must judge the property's highest and best use, which may not necessarily be the current use. For example, it may be decided that older properties, nearing the end of their current lease arrangements, may be better used by either significant refurbishment or demolition and rebuilding. The valuation techniques applied to the properties depend on their use, and results may vary significantly, therefore the Group's judgement as to the appropriate valuation basis for these properties is considered by the Directors to be significant in preparing financial statements. Fair value for measurement and/or disclosure purposes in these condensed consolidated financial statements is determined on such a basis, except for share-based transactions that are within the scope of IFRS 2 (see note 10 for more details), leasing transactions that are within the scope of IFRS 16, and measurements that have some similarities to fair value but are not fair value such as value in use in IAS 36.

Valuation basis of investment property (note 15)

All investment properties are valued in accordance with their current use, which is also the highest and best use except for:

·; Harcourt Square, Marine House and Clanwilliam Court Blocks 1, 2 and 5 where, in accordance with IFRS 13:27, the valuations take into account the redevelopment potential upon expiry of the current leases which reflects the highest and best use. It is the Directors' intention to pursue the redevelopment of these properties when the existing leases have expired. These are valued on an investment basis until the end of the leases and on a residual basis thereafter.

·; Gateway, which is currently partly rented on short-term leases, has been valued on a price per acre basis as early stage plans are in place to redevelop this property in future and this approach reflects the highest and best use of this property.

·; Malahide Road Industrial Park, which is currently partly rented on short-term leases, has been valued on a basis that includes recognition of its potential as a development site.

Block 3 Wyckham Point and Hanover Mills: both properties are held for long-term property rental purposes and were developed on this basis. VAT was payable on the acquisition (in the case of Block 3 Wyckham Point only) and on the construction costs for both schemes which has been treated as irrecoverable and recognised as part of the capital costs of both projects. If either property is sold within five years of completion, the Group would be obliged to charge VAT on the sale but would be entitled to a recovery of the VAT incurred on the construction and acquisition costs on an apportioned basis according to the VAT life of the building. As neither property is intended to be sold within the five-year period, in the opinion of the Directors, no amendment to the valuer's valuation of either asset was deemed necessary.

g. Analysis of sources of estimation uncertainty

Valuation of investment property

The Group's investment properties are held at fair value and were valued at 30 September 2019 by the external valuer, Cushman and Wakefield ("C&W"), a firm employing qualified valuers in accordance with the appropriate sections of the Professional Standards ("PS"), the Valuation Technical and Performance Standards ("VPS") and the Valuation Applications ("VPGA") contained within the RICS Valuation - Global Standards 2017 ("the Red Book"). It follows that the valuations are compliant with the International Valuation Standards ("IVS"). Further information on the valuations and the sensitivities is given in note 15.

The Board conducts a detailed review of each property valuation to ensure that appropriate assumptions have been applied. Property valuations are complex and involve data which is not publicly available and a degree of judgement. The valuation is based upon the key assumptions of estimated rental values and market-based yields. The approach to developments and material refurbishments is on a residual basis and factors, such as the assumed timescale, the assumed future development cost and an appropriate finance and/or discount rate are used to determine the property value together with market evidence and recent comparable properties where appropriate. In determining fair value, the valuers refer to market evidence and recent transaction prices for similar properties.

The Directors are satisfied that the valuation of the Group's investment property is appropriate for inclusion in the condensed consolidated financial statements. The fair value of these properties is based on the valuation provided by C&W. This valuation is based on future cashflows from rental income both for the current lease period and future estimated rental values.

In accordance with the Group's policy on income recognition from leases, the valuation provided by C&W is adjusted by the fair value of the income accruals ensuing from the recognition of lease incentives and the deferral of lease costs. The total reduction in the external valuer's investment property valuation in respect of these adjustments was €7.3m (31 March 2019: €6.7m).

There were no other significant judgements or key estimates that might have a material impact on the condensed consolidated financial statements at 30 September 2019.

Changes in accounting standards

The following standards, amendments and interpretations endorsed by the EU were effective for the first time for the Group's current accounting period and had no material impact on the financial statements.

IFRS 16 Leases 

Effective for accounting periods starting on or after 1 January 2019. The main impact of this standard, which replaces IAS 17 and SIC-15, is the removal of the distinction between operating and financial leases for lessees. This will result in almost all leases being recognised on the balance sheet for lessees. As the Group does not hold any material operating leases as lessee, the impact of the standard is not material in the Group's financial statements. This standard has also no material impact on the Group's accounting for rental and related income as lessor.

Amendments and interpretations which became effective during the period but had no material impact on the Group's financial statements

IFRIC 23 Uncertainty over tax treatments

IFRS 9 Prepayment features with negative compensation

IAS 19 Plan amendment containment or settlement

IAS 28 Long term interests in associates or joint ventures

Annual improvements to IFRS standards 2015-2017 cycle

Standards, amendments, and interpretations in issue but not yet effective nor early adopted 

The Directors do not anticipate that these standards or amendments will have any material effect on the Group's financial statements.

IFRS 17 Insurance contracts

IFRS 10 and IAS 28 (amended) Sale or contribution of assets between an investor and its associate or joint venture

Amendments to References to the Conceptual Framework in IFRS Standards (amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32)

Amendment to IFRS 3 Definition of a business

Amendment to IAS 1 and IAS 8 Definition of material

This section includes notes relating to the performance of the Group for the period, including segmental reporting, earnings per share and net assets per share as well as specific elements of the condensed consolidated statement of income.

a. Basis for segmentation

The Group is organised into six business segments, against which the Group reports its segmental information. These segments mainly represent the different investment property classes. The Group has divided its business in this manner as the various asset segments differ in their character and returns profiles depending on market conditions and reflect the strategic objectives that the Group has targeted. The following table describes each segment:

The Board reviews the internal management reports, including budgets, at least quarterly at its scheduled meetings. There is some interaction between reportable segments. For example, completed development property is transferred to income-generating segments. These transfers are made at fair value on an arm's length basis using values determined by the Group's independent valuer.

b. Information about reportable segments

The Group's key measure of underlying performance of a segment is total income after revaluation gains and losses, which comprises revenue (rental and service charge income), property outgoings, revaluation of investment properties and other gains and losses.

Total income after revaluation gains and losses includes rental income which is used as the basis to report key measures such as EPRA Net Initial Yield ("NIY") and EPRA "topped-up" NIY. These alternative performance measures ("APMs") (detailed in the supplementary section on pages 53 to 59) measure the cash passing rent returns on market value of investment properties before and after an adjustment for the expiry of a rent-free period or other lease incentives, respectively.

An overview of the reportable segments is set out below:

Group consolidated segment analysis

For the six months ended 30 September 2019 unaudited

For the six months ended 30 September 2018 unaudited

For the financial year ended 31 March 2019 audited

c. Geographic information

All of the Group's assets, revenue and costs are based in the Greater Dublin Area, mainly in central Dublin.

d. Major customers

The Group uses information on its top 10 tenants to monitor its major customers. This is presented below based on contracted rents (including variable rents based on profit sharing arrangements) as at the period end. This is concentrated on office tenants as the next major segment, residential, consists mainly of small private tenants and therefore contains no major concentration of credit risk.

The Group's top 10 tenants as at 30 September 2019 are as follows, expressed as a percentage of contracted office rent:

As at 30 September 2019

As at 30 September 2018

1. Excludes 1SJRQ lease agreed in November 2018

As at 31 March 2019

Accounting policy

See note 5 of the Annual Report 2019.

Revenue can be analysed as follows:

1. Revenue from contracts with customers is service charge income

Net rental and related income

1. Costs of goods and services are service charge expenses.

Further information on the sources and characteristics of revenue and rental income is provided in note 6.

Included in other property expenses is an amount of €0.4m (Sep 2018: €0.5m) relating to void costs on office properties, i.e. costs relating to office properties which were available to let but were not income-generating during the financial period.

Property operating expenses

The Group's business is the rental of its investment properties, the development of properties for its investment portfolio and the provision of managed multi-let buildings to its tenants. The Group's revenue consists of rental income, service charge income and other ad hoc receipts from its property business such as surrender premiums. The majority of its contracts are longer term, with some being 10 years or more, excluding residential tenancy arrangements which are generally one year in duration. Service charge arrangements are generally provided for under the lease contract but constitute a different performance obligation, the conditions attaching to which are negotiated annually.

Note 4: Operating segments discloses the analysis of revenue and income and expense in line with the Group's business model, i.e. by investment property category. In order to complete the disaggregation of revenue by categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors, analyses of the revenue for the period by duration of lease contracts (to next break date) and by tenant industry sector are provided below. Additional information on portfolio characteristics that impact on income is set out in the half year business review.