12th Nov 2015 07:00
INTERIM RESULTS
For the six month period to 30 September 2015
12 November 2015
Hibernia REIT plc ("Hibernia", the "Company" or the "Group") today announces its interim results for the six months to 30 September 2015. Highlights for the period:
Strong financial performance
· EPRA NAV per share of 122.1 cent up 9.2% since 31 March 2015
· EPRA profit of €10.1m (Sep 2014: €3.0m), helped by €4.9m of one-off gains
· Profit before tax of €73.7m (Sep 2014: €31.9m) including revaluation surplus and gains on disposals
· Interim dividend declared of 0.7 cent per share (Sep 2014: 0.3 cent per share)
Significant letting activity adding to contracted rent roll with more to come
· Major pre-let of c. 85,000 sq. ft. of Cumberland House to Twitter for annual rent of €4.6m (€50psf)
· Pre-let 27,500 sq. ft. currently under refurbishment in One Dockland Central, IFSC, to HubSpot for annual rent of €1.3m (€45psf)
· 213 units in Block 3, Wyckham Point fully let by period end adding net annual rent of c. €3.7m
· One further pre-let and one rent review securing €0.5m of additional rental income
· Contracted rent roll now €34.4m, up 52% on 31 March 2015[1]
· Income-producing "in-place"[2] CBD office portfolio has average rents of €32psf (vs ERV at 30 September of €40psf) and an average period to earlier of rent review or expiry of 2.2 years
Good progress made on development pipeline
· Block 3, Wyckham Point completed ahead of schedule delivering profit on cost of more than 30%
· Windmill Lane and 1-6 Sir John Rogerson's Quay on track for late 2017 and mid-2018 completions, respectively
· Refurbishment of Cumberland House commenced following Twitter pre-let
· Planning granted for Phase 1 of redevelopment of Harcourt Square and application made for Phase 2 (out of 2)
Select further investment activity
· Off-market acquisition of Dundrum View, an 80 unit apartment complex in Dundrum for c. €28m
· Two small acquisitions made totalling €3.1m, enhancing our positions on existing assets
· 50:50 JV (the "Windmill Lane Partnership") formed with an affiliate of Starwood Capital Group Global LP ("Starwood") on Windmill Lane development
Substantial financial capacity in place
· €115m of net cash at 30 September 2015 (31 March 2015: €139m)
· New five year €400m revolving credit facility entered, replacing existing €100m facility
Broadening universe of potential investors
· Inclusion in EPRA Index in September quarterly review[3]
· Internalisation of management team completed in early November following shareholder approval
· Kevin Nowlan and Tom Edwards-Moss have joined the Board of Directors
Kevin Nowlan, Chief Executive Officer of Hibernia, said:
"We are pleased with the performance for the first half of the year: we have made significant progress on our development portfolio and signed two major pre-lets. Hibernia's strategy and skillset - allowing us to access off-market deals, loan portfolio opportunities and to take on major development and refurbishment projects - is clearly delivering.
"The Dublin property market is well supported by the economic growth Ireland is enjoying and with new, flexible funding in place allowing us to act quickly as opportunities arise we are optimistic for the future."
Contacts:Hibernia REIT plc +353 1 536 9100Kevin Nowlan, Chief Executive OfficerTom Edwards-Moss, Chief Financial Officer
Murray ConsultantsDoug Keatinge: +353 86 037 4163, [email protected] Farrelly: +353 87738 6608, [email protected]
About Hibernia REIT plcHibernia REIT plc is an Irish Real Estate Investment Trust ("REIT") listed on the Irish and London Stock Exchanges. The principal activity of the Company is to acquire and hold investments in Irish property (primarily commercial property) with a view to maximising shareholder returns.
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.
Business Review
Acquisitions and disposals The acquisition of Dundrum View, an 80 unit apartment complex in Dundrum, South Dublin for c. €28m was announced and completed in June 2015. The Group also completed the acquisitions of 11 Lime Street and 35-37 Lower Camden Street for total consideration of €3.1m: both of these transactions were made to enhance the value of our existing portfolio. These transactions bring the total invested in acquisitions since the Company's IPO in December 2013 to €600m (€602m net of disposals and capex). Post 30 September, 39 Harcourt Street was acquired for €1.8m to improve our position for the future redevelopment of Harcourt Square.
During the period Starwood exercised their option to buy back into the Windmill Lane development as a 50:50 joint venture partner at purchase price plus an annual return of 7% (Hibernia acquired the site in 2014 from Starwood for €7.5m), leading to the formation of the Windmill Lane Partnership ("WLP"). The transaction, which is recognised in the accounts as at 30 September as a joint operation, resulted in a small increase to the Group's NAV as at 31 March 2015. All future income and expenditure will be shared equally between Hibernia and Starwood, with Hibernia acting as asset manager and development manager to WLP.
On 23 October 2015 the Group served notice to exercise a call option to acquire Hardwicke House and Montague House for €43m. This will result in the Group having direct ownership of both buildings: currently the Group's interest is held through secured loans. Both properties are recognised fully as investment properties in accordance with the Group's accounting policy.
Portfolio overview
As at 30 September 2015 the property portfolio consisted of 21 investment properties valued at €739m, which can be categorised as follows:
Value as at Sep 15 (all assets) | % of portfolio | % uplift since Mar 15excl. new acquisition (1) | % uplift since Mar 15incl. new acquisition (1) | % uplift since acquisition(all assets)incl. costs(1) | Equivalent Yield on value (%) | Passing rent (2)(€m) | |
1. Dublin CBD Offices | |||||||
Traditional Core | €179m | 24% | 8.2% | 8.0% | 17.9% | 5.1%(3) | €7.5m |
IFSC | €217m | 29% | 6.2% | 6.2% | 23.0% | 5.2% | €9.3m |
South Docks | €114m | 15% | 5.9% | 5.9% | 39.3% | 5.2% | €3.8m |
Total Dublin CBD Offices | €509m | 69% | 6.8% | 6.8% | 24.0% | 5.2%(3) | €20.7m |
2. Dublin CBD Office Development/Refurbishment | €109m | 15% | 26.2% | 26.2% | 43.0% | - | - |
3. Dublin Residential | €110m | 15% | 7.4% | 3.9% | 18.0% | 4.7% | €5.4m |
4. Industrial | €11m | 1% | 3.3% | 3.3% | 3.0% | 7.3% | €0.5m |
Total Investment Properties | €739m | 100% | 9.4% | 8.7% | 25.0% | 5.1%(3)(4) | €26.6m |
1. Includes capex in acquisition costs
2. Passing rent is pre full ownership of Hardwicke
3. Excludes Harcourt Square as this is valued by CBRE on a residual/ development appraisal basis
4. Excludes all Dublin CBD Office Development/Refurbishment
The "in-place" CBD office element of our portfolio had the following statistics at 30 September 2015:
· Average contracted rent €32psf (vs ERV of €40psf)
· Weighted average period to earlier of rent review or lease expiry: c. 2.2 years
· WAULT to earlier of expiry or break: 4.0 years
· WAULT to expiry: 6.6 years
· Occupancy level: 99%
Developments and refurbishments The Group has committed and near term development projects at five properties and a further two properties in the longer term development pipeline. Following a substantial pre-let to Twitter during the period (see further details below), work commenced on the refurbishment of Cumberland House, moving it from the development pipeline to committed and near term projects.
Completed projects
The fit-out of the 213 residential units in Block 3, Wyckham Point was completed in July 2015, well ahead of our original guidance that completion would occur by the end of 2015. The project was delivered within the budget of €25m, generating a profit on cost of greater than 30% and an unlevered IRR of greater than 25%. As at the end of September, all the units had been let, producing net annual rent of c.€3.7m, a yield on cost in excess of 6%.
Summary of committed & near term developments and refurbishments
Sector | NIA post completion (sq ft) | Full purchase cost | Est. capex | Est. total cost (incl. land) € psf | ERV(1) | Office ERV psf(1) | Expected PC Date | Comments | |
Refurbishment | |||||||||
Cumberland House | Office | 112k | €51m | €27m | €665psf | €6.4m | €50.00psf | Q4 2016 | • Refurbishment has commenced following the pre-let of 85,000 sq. ft. to Twitter • c.30k sq. ft. (top two floors) to let |
One Dockland Central | Office | 73.5k(5) | €47m(2) | €10m(3) | €740psf(2) | €3.5m(2) | €44.00psf(7) | Q1 2016 | • Contractors on site • Net lettable area to increase by c.2,200 sq. ft. to 73,500 sq. ft. • Terms agreed with HubSpot for a lease of c.27,500 sq. ft. at €45psf/€1.3m • Marketing remaining space |
Observatory Live/work SOBO Lofts | Office | 9.7k office 2k retail | €2m | €1.5m | €280psf | €0.4m | €32.50psf | Q1 2016 | • Contractors on site • Entire of office and retail pre-let at €0.4m p.a. • Offices let on stepped rent (€32psf rising to €36psf in yr 5) |
Development | |||||||||
Windmill Lane (50% interest) | Office | 60.5k office 3.3k retail 7.5 resi. Units | €4m | €26m | €425psf(4) | €2.8m(4) | €43.50psf | late 2017 | • Demolition completed and basement dug • Starwood 50:50 JV partner • Marketing campaign commenced at >€50psf |
1-6 SJRQ | Office | 119k office(6) 6.2k retail | €18m | €50m | €550psf | €5.7m | €47.50psf | mid 2018 | • Revised planning for a new and improved building has been conditionally approved • Demolition in progress |
375k office 11.5k retail 7.5 units | €122m | €114.5m | €18.8m | ||||||
1. Per CBRE valuation at 30 Sep 2015 2. For entire 3. €7.9m net of dilapidation charge received 4. Commercial only | 5. 55k sq. ft. of 73.5k sq. ft. being refurbished plus all common areas 6. 9k sq. ft. in basement 7. €45.00psf on refurbished space i.e. 56k sq. ft. and €41 on non-refurbished first floor of 16k sq. ft. | ||||||||
Summary of longer term development pipeline
Name | Sector | Current NIA (sq.ft.) | NIA post completion | Full purchase cost | Comments |
Gateway | Logistics | 178k on 14.1 acres | c.245k(1)sq.ft. | €10m | • Outline planning permission for new road configuration to be submitted shortly
|
Harcourt Square | Office | 117k on 1.9 acres | c.285k sq. ft. | €72m | • The 1.9 acre site lies within 700m of St. Stephen's Green • Phase 1 planning successful and final grant in early October 2015 • Phase 2 planning submitted early November 2015 |
Total | 295k on 16 acres | c.530k sq. ft. (1) | €82m | ||
1. Planned new offices of c.115k sq. ft. plus potential to add a further c.130k sq. ft of offices | |||||
Asset management report
The team has been highly active in the half with new leases and rent reviews agreed adding a total of €10.4m per annum to contracted rents and asset management initiatives under way at a number of buildings in the portfolio. Summary of letting activity:
· Office: three new leases signed and one rent review on c. 128,000sq.ft. generating €6.4m of incremental new annual rent.
· Residential: 310 units now let, generating €6.4m of annual rent (€5.4m net of costs) and includes the 80 Dundrum View apartments acquired in June 2015; Letting activity generated incremental new annual rent of €4.0m during the period.
· Industrial: restructuring of tenant leases at Gateway to maintain current passing rent and give landlord ability to gain vacant position upon 12 months' notice for any future redevelopment
Key highlights in the period include:
Cumberland House, Dublin 2 A pre-let to Twitter was signed in September, with the tenant agreeing to take c. 85,000 sq. ft. (out of c. 112,000 sq. ft.) on a 20 year lease with break in year 12. Twitter will pay initial rent of c. €4.6m per annum (€50psf) from expected lease commencement in H2 2016. Ahead of this, Hibernia has agreed to refurbish the entire building at a cost of up to €27m. Marketing of the remaining space is expected to begin in Q1 2016.
One Dockland Central (formerly Commerzbank House), IFSC Vacant possession of four of the property's five floors (55,000 sq. ft. out of 71,600 sq. ft.) was secured in late 2014 following an early lease surrender. A full refurbishment of the vacant space and all common areas in the building is under way and on track for full completion in Q1 2016. Planning was granted for the elimination of a number of recessed balconies which has resulted in an increase in the building's net lettable area of c.2,200 sq. ft. As part of the refurbishment, the building has been renamed "One Dockland Central".
Two floors (27,500 sq. ft.) and 14 car parking spaces were pre-let to HubSpot in November 2015 on a 20 year lease with a break in 10.5 years: the tenant will pay rent of c.€1.3m per annum (€45psf) after receiving six months rent free from lease commencement (expected mid-December 2015). The marketing of the remaining space will be formally launched in November 2015 and is attracting interest from a number of potential tenants.Guild House, IFSC In July agreement was reached with FBD plc regarding the early surrender of their leasehold interest for a total payment to Hibernia of €8.8m, covering surrender premiums, rental top-ups and dilapidations. The property is fully occupied and the Group has now a direct landlord-tenant relationship with all nine previous sub-tenants of FBD. All of these leases, with the exception of Bank of New York Mellon who occupy the entire first floor, have lease expiration dates prior to the end of Q1 2017. The Group is considering its options and formulating a strategy for the maximisation of the value of this property, which adjoins One Dockland Central. The Observatory Building, South Docks A rent review effective from November 2014 in respect of c. 6,000 sq. ft. let to Morgan Stanley was agreed during the period. The rent achieved at review of c. €41psf represents an uplift of 40% over the passing rent. An upgrade of the entrance for the main office element of the property, which comprises c. 85,000 sq. ft., is under way and scheduled to complete in December 2015.
The "live/work" units at the rear of the property (which total c. 11,000 sq. ft.) are being converted to offices following a grant of planning permission and works are due to complete in Q1 2016. A pre-let of all the space (c. 9,700sq.ft. of office and c. 2,000sq.ft of retail) to a serviced office provider at an annual rent of €0.4m has been agreed and the units are being rebranded "SOBO Lofts". Chancery Building, Dublin 8 During the period Webzen, the tenant of two of the property's six floors (totalling c. 11,500 sq. ft.) has, as a consequence of a corporate restructuring, served notice of their intention to exercise a break option effective in March 2016. Webzen is currently paying rent of c. €0.3m per annum and a three month penalty will be due upon exercise of the break option. The Group has appointed agents and commenced marketing the space.
Block 3, Wyckham Point, Dundrum The phased fit-out works completed in July, well ahead of schedule. All 213 units were let by the end of September producing net annual rent of c. €3.7m, in line with expectations and a yield on cost of over 6%.
Dundrum View Dundrum View was acquired in June and consists of 80 residential units. Upon acquisition the Group appointed specialist letting and block managers. Since acquisition 43 of the leases have expired and have been re-let or renewed at an average rent uplift of 6%. A programme of improvement works is planned for the common areas.
Cannon Place All 16 units have been refurbished in the last six months at a cost of €0.4m and are now let. Gross rental income is c. €0.4m per annum, an increase of c.30% over the pre-refurbishment rents. Other completed assets The other completed properties in the portfolio are close to full occupation with the average period to rent review or lease expiry for the "in-place" office portfolio of 2.2 years: the team is assessing options to maximise returns from the up-coming lease events and continues to carefully monitor the letting markets.
Sale of non-core assets
The status of the disposal process of the remaining non-core assets as at 30 September 2015 was as follows:
Sold or contracted in period | Units | Carrying Value €'000 | Sales Price €'000 | Profit €'000 | |
Residential assets | 18 | 4,362 | 5,083 | 721 | |
Commercial assets | 1 | 310 | 300 | (10) | |
19 | 4,672 | 5,383 | 711 |
Sale agreed or committed at period end | Units | Carrying Value €'000 | Price Agreed €'000 | Expected Profit €'000 | |
Residential assets | 25 | 7,228 | 7,760 | 532 | |
25 | 7,228 | 7,760 | 532 |
Remainder of Non-Core Assets | Units | Carrying Value €'000 | |
Residential assets | 19 | 4,559 | |
Commercial assets | 2 | 2,040 | |
21 | 6,599 |
Since the period end three of the units which were sale agreed above have been contracted. In addition the sale of a further four units was agreed with an aggregate sales value of €0.8m.
Financial results and position
As at | 30 September 2015 | 31 March 2015 | Movement | ||
IFRS NAV - cent per share | 123.1 | 112.4 | + 9.5% | ||
EPRA NAV - cent per share | 122.1 | 111.8 | + 9.2% | ||
Net cash and cash equivalents | €114.8m | €139.0 m | - 17.5% | ||
Group LTV | n/a | n/a | |||
Six months ended | 30 September 2015 | 30 September 2014 | Movement | ||
Profit/(loss) for the period | €73.7 m | €31.9 m | + 130.8% | ||
Basic EPS | 11.0 cent | 8.3 cent | + 32.6% | ||
Diluted EPS | 10.9 cent | 8.3 cent | + 31.4% | ||
Interim dividend / DPS* | €4.8m / 0.7 cent | €2.0m /0.3 cent | + 133.3% | ||
*based on diluted number of shares post internalisation | |||||
The key drivers of the increase in EPRA NAV per share of 10.3 cent from 31 March 2015 were:
- 9.4 cent from the revaluation of the property portfolio, including 3.9 cent in relation to development properties
- 1.5 cent from EPRA earnings for the period
- Payment of the final dividend decreased NAV by 0.5 cent per share
- Other movements decreased NAV by 0.1 cent per share
EPRA profits for the period were €10.1m, up 227% over 30 September 2014. The key driver of the increase was the 196% increase in rental income excluding surrender premia due to further acquisitions made in the past 12 months, full periods of ownership for a number of assets and new lettings made (e.g. Block 3, Wyckham Point). In addition, property income in the period to 30 September 2015 was positively impacted by the surrender premium from FBD in relation to their lease in Guild House: this amounted to a one-off gain to property income of €4.9m.
Net profit for the period was €73.7m, an increase of 131% over the same period last year. In addition to the increase in property income, revaluation gains and losses to 30 September 2015 amounted to €63.6m, considerably higher than the prior period figure of €28.9m and assisted, in particular, by the valuation uplift in Cumberland House following the pre-let of the majority of the building to Twitter.
FinancingAs at 30 September 2015, the Group had cash of €115m and the €100m revolving credit facility with Bank of Ireland was undrawn. In November, the Group entered a new five year €400m revolving credit facility at a margin of 205bp with Bank of Ireland, Barclays and Ulster Bank, which replaced the existing revolving credit facility and will provide flexible funding for the development pipeline and future acquisitions. This would have resulted in an LTV of 31% if in place and fully drawn at the period end. Given the nature of our portfolio and the development exposure within it, we expect the through-cycle loan to value to be in the range of 20-30%.
Internalisation of management team
The Group completed the internalisation of its management team on 5 November 2015. This transaction was a related party transaction and was approved by shareholders at an Extraordinary General Meeting on 27 October 2015. The transaction was effected through the acquisition of the Investment Manager and its parent company, Nowlan Property Limited ("NPL"), on terms representing no anticipated material additional cost to the Group when compared to the estimated costs of retaining the external structure until the expiry of the initial term of the Investment Management Agreement in November 2018.
Initial consideration paid of €21.1m comprised €14.2m in respect of base management fees and €6.9m in respect of the net assets of the Investment Manager and NPL (which were principally the performance fee payable to the Investment Manager for the year to March 2015 and cash). The initial consideration was settled through the payment of €8.3m of cash and the issue of 10.9m of new ordinary shares. Following completion the Directors and senior management hold c. 2% of the issued share capital of the Company and the free float is c. 98%. The total number of issued shares is now 681,251,285.
Upon completion Kevin Nowlan (CEO) and Thomas Edwards-Moss (CFO) joined the Board of Directors, which continues to have a majority of independent non-executive directors and remains in compliance with the relevant requirements and procedures set out in the Irish, UK and AIC Corporate Governance Codes. Further information can be found in Note 23.4 of the Half Yearly Financial Report.
DividendThe Board has declared an interim dividend of 0.7 cent per share (2014: 0.3 cent) which will be paid in January 2016. All of this interim dividend will be a PID dividend. This represents 90% of the total dividends paid in relation to the financial year ended 31 March 2015 and over 85% of the recurring rental income received in the period. As the portfolio income stabilises, we intend that the interim dividend declared will usually be in the region of 30-50% of the regular dividends paid in respect of the prior financial year.
The Dividend Reinvestment Plan ("DRIP") which commenced with last year's final dividend remains in place: this allows shareholders to instruct Capita, the Company's registrar, to reinvest dividend payments by 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. Looking ahead
We expect the Irish economic backdrop and dynamics in Dublin occupational markets to remain favourable, and there to be further rental growth, particularly in the Dublin CBD office sector. In the investment market, we expect the volume of transactions in Dublin to remain at elevated levels in the near term and we are tracking a number of potential acquisitions, both large and small. These facts, together with the exciting opportunities we are exploiting within our existing portfolio, make us optimistic for the future.
Market update
General economy Ireland was the fastest growing euro area economy in 2014 and is expected to continue to be so for some time: the Department of Finance is forecasting GDP growth of 6.2% and 4.3% in 2015 & 2016, respectively, comparing favourably to the IMF's global growth forecasts of 3.1% and 3.6% in 2015 and 2016.
The Irish economy has entered a phase of broad based expansion: domestic demand is an increasing contributor, driven by a recovery in personal consumption, the largest component of domestic demand, which rose by 2.8% y-o-y. Investment (another component of domestic demand) remains strong despite construction output being at an all-time low as a percentage of GNP. Goodbody is forecasting investment, domestic demand and exports to be up 15.4%, 6.2% and 11.9%, respectively, in 2015.
The increase in personal consumption is being helped by earnings growth, tax cuts, low oil prices and growing employment. Unemployment is now below 10% vs a peak of over 15%. Employment growth is expanding across a greater number of sectors and full time rather than part time employment is leading the way: despite this capacity remains in the labour market at present.
Irish property investment market According to MSCI (formerly IPD), total property returns for Ireland for the year to Q3 2015 were 28.5%. The corresponding year to date figures for Q1 2015 and Q4 2014 were 36.3% and 40.1% respectively. After a period of exceptional growth the market is naturally moving into a more stabilised, albeit still high, growth phase.
Prime office yields are stabilising and are now at 4.65% vs 4.75% at the end of Q1 2015 (according to CBRE). While prime Dublin office capital values have increase c. 26% y-o-y, they remain over 30% below peak levels. Further capital growth is likely to be driven more by rental growth than additional yield compression.
Over €4.5bn of direct real estate and €20.8bn of real estate related loans traded in 2014. CBRE expect direct real estate transactions will total c. €3bn for 2015. €2.2bn of direct property transactions occurred in the first nine months of 2015 with €1.2bn of this invested in Dublin CBD offices. In Q4 2015, Project Jewel, which comprised debt secured on a number of retail assets including Dundrum Town Centre, was sold to a joint venture of UK REIT Hammerson and Allianz for €1.85bn. Office occupational marketThe Dublin office market remains characterised by strong demand for space and a shortage of Grade A stock in the CBD. More than 1.8m sq. ft. of lettings completed in the first nine months of 2015 (CBRE) and the total figure for 2015 is expected to be in line with the 2.4m sq. ft. achieved in 2014, well above the 20 year average of 1.7m sq. ft. As is usual in the Dublin market, the vast majority of deals (year to date) were for space less than 50,000 sq. ft. We remain optimistic that the strong take up levels achieved in 2014 and (to date in) 2015 will continue for the near term due to high active demand (c.2.7m sq. ft. according to CBRE and c.3.3m sq. ft. according to Savills).
As a result of strong take up and lack of new stock coming to the market, the Dublin overall vacancy rate fell below 10% of the first time in 15 years in Q3 2015. The CBD Grade A vacancy rate is currently 3.8% and is significantly lower in the core IFSC and Dublin 2/4 markets at 2.1% and 1.2%, respectively (CBRE).
Prime Dublin office rents are now at €52.50psf (up 17% since the beginning of 2015) and expected to rise to c.€55psf by year end. CBRE is forecasting that rents will reach €69psf by year end 2017 and then pull back to €61psf in 2018. The letting of the entire of 65 St. Stephen's Green (61,500 sq. ft.) to Aercap at €60psf remains the highest rent achieved to date in this cycle.
As the supply of new Grade A stock is some time off being delivered, occupiers are willing to pay for well-located refurbishments available within the next 12 months; The Group's letting of 85,000 sq.ft. at Cumberland House to Twitter at a rent of €50psf and the 27,000 sq.ft. let to HubSpot at One Dockland Central at €45psf were at levels similar to the rental levels being achieved at other CBD refurbishments. Office development pipeline No new office stock has been delivered to the Dublin office market since 2010. Hibernia has carried out extensive research on the potential development pipeline in the Dublin office market. Combining market intelligence with data from CBRE and Savills, management's expectation is that a maximum of c.5m sq. ft. of office space will be delivered in Dublin by the end of 2018. c.2.3m sq. ft. is currently under construction in Dublin with c. 1.4m sq. ft. of this already pre-let. Due to space being removed from the market in order to undertake refurbishments and developments, we expect the net new space added to be c.4m sq. ft. by the end of 2018.
There remain constraints to the delivery of new space: funding for speculative development continues to be difficult to obtain at reasonable rates and there are also concerns regarding the capacity of the construction sector. As a result many projects are being delayed beyond previously anticipated commencement dates. ResidentialAs with the Dublin office sector, the Irish housing market remains characterised by strong demand and extremely constrained supply. The Dublin sales market has moved into a more stabilised stage with the Residential Property Price Index for Dublin rising by a yearly rate of 6.5% to September 2015, a slower rate of y-o-y expansion than recorded in any of the past 24 months. However, in the Dublin rental market, price increases continued apace, with Dublin apartments recording an annual increase in rent of 9.4% to Q2 2015 according to the Private Residential Tenancy Board Ireland.
Principal Risks and Uncertainties
There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. A description of these risks and the steps which the Group has taken to manage these risks is set out below.
Risks | Description of exposure | Measures to manage risks | Movement in the period |
Macro-economic | A weakening of the economic recovery both in Ireland and / or globally could lead to a reduction in rental levels for commercial and residential properties in Dublin and negatively impact capital values. | The Group uses its access to market knowledge through its contacts and advisers to ensure that it has the best possible knowledge of the current macro-economic environment. The Group proactively manages its strategy and exposure using this knowledge and the combined expertise of its Board.
| STABLE: The Irish economy is growing strongly. However, risk of macro-economic shock remains and 2016 will see a general election in Ireland which may bring additional uncertainty to the economic environment. |
Dublin property market | Underperformance by Dublin property market compared to other Irish property sectors: all the Group's investments to date have been within Dublin.
| The Group reviews the execution of its strategy regularly. The Group intends to maintain relatively low levels of leverage across the property cycle and a stated policy that its loan to value ratio at incurrence will not exceed 40%.
| STABLE: To date the economic recovery in Ireland has been strongest in Dublin, where a significant proportion of the country's overall economic activity and wealth resides. The Group's €400m revolving credit facility is undrawn. |
Investment
| Competition may limit the ability of the management team to source investment opportunities that meet the Group's target returns. Poorly judged investment decisions (whether buying or selling) may impact on returns.
| The management team actively seeks out opportunities that may meet its return criteria using its extensive contacts in the Irish property market. The management team regularly assesses the property cycle through a range of lead indicators in making its investment proposals to the Board.
| STABLE: While competition for assets remains strong, the Group has successfully invested the majority of the funds raised through equity issuance in the last year. Capital values for Dublin property have risen, supported by increasing rental levels. |
Concentration of investment in single assets, tenants, locations or sectors may increase risk and reduce liquidity. | The management team reports regular risk metrics to the Board and monitors limits on sector and other relevant benchmarks.
| STABLE: The Group has built a balanced portfolio in the past months. As at 30 September 2015 the largest single asset represented 10% of the portfolio by value. | |
All the risks and liabilities at the point of entering transactions may not be identified leading to losses. | The Group uses appropriate experts where necessary and solicitors in order to manage this risk. | STABLE: The Group continues to look for investment opportunities. All investments made to date have been the subject of extensive due diligence. | |
Development | Lower than expected returns on the Group's development projects through factors including but not limited to: poor project management, cost and timing overruns, poor site choice, unattractive building design, bad reading of the property cycle. | Management has regular update meetings dedicated to development management and the Board monitors periodically. The Group has set a maximum exposure to active speculative development at 15% of reported net asset value. The Group intends to use joint arrangement structures and / or pre-leases where appropriate to mitigate and manage the Group's development risk.
| INCREASED:The Group has a number of development assets in its portfolio. Work has commenced on the Windmill Lane, now under a joint arrangement, and Sir John Rogerson's Quay sites. Work has also commenced on the refurbishment of Cumberland House (pre-let) and refurbishment work continues at One Dockland Central (formerly Commerzbank House). The fit-out of Block 3, Wyckham Point finished during the period. |
Asset Management | Poor management of the Group's assets and tenants may lead to a failure to maximise potential income returns from the portfolio. | A property industry portfolio management system (PMS) has been installed and populated which manages all the key aspects of the Group's assets and tenants' obligations. All receivables due under leases and licences are fully integrated from the PMS into the Group's financial and accounting systems. The PMS also facilitates the proactive management of all significant cyclical and ad-hoc leasehold events such as, inter alia, break notices, rent reviews and lease terminations. Regular building inspection and tenant meeting regimes have been established to ensure that the management team keeps fully abreast of the condition and management of the Group's assets and the occupational requirements of its tenants | STABLE: During the period the Group has made progress in managing and monitoring systems and developing risk metrics to montor the risks associated with its investment portfolio. Identifying risks and close management thereof is key to ensuring that this risk is reduced. |
Financial
| The Group can use leverage to increase available funds for investment and enhance returns for shareholders. This exposes the Group to debt covenant compliance risks in the event of interest rate rises or falls in property values.
| The Group has set a limit of incurring debt up to a maximum of 40% of total assets, well below the maximum permitted under Irish REIT legislation and its debt covenants. Compliance with covenants is actively monitored. In the event of significant debt drawings the Group intends to put in place interest rate hedging over a large proportion of such debt to limit its interest rate exposure. | INCREASE: The Group has put in place a new €400m revolving credit facility, replacing the previous €100m revolving credit facility. It is undrawn at the date of the report. The Group continues to monitor capital requirements to ensure that future requirements are anticipated and met within the limits of its leverage targets.
|
The Group's ability to execute its plans or hit its target returns may be hindered by being unable to get loan funding as required.
| Cash flows and future funding requirements are frequently assessed to ensure the Group has sufficient undrawn facilities in place to execute its plans. | STABLE: The Group's revolving credit facility remains undrawn. Debt funding terms and availability in Ireland have improved. | |
People | The Group fails to attract, motivate and retain sufficient skilled employees to maintain professional standards. | The Group has a team of directly employed staff through the internalisation of the Investment Manager, with a remuneration system that is linked closely to individual and Group performance. The Group is introducing a long-term incentive plan (funded through the existing performance fee arrangements) as part of performance remuneration this year in order to encourage retention of employees.
| DECREASED: With the completion of the internalisation of the Investment Manager in November 2015 this risk has decreased due to the Group's enhanced ability to retain and attract staff. |
Regulatory | Change in regulations including EU directives, tax, planning and environmental legislation could increase the Group's cost base. | The management team and the Board spends substantial time, and retains external experts as necessary, to ensure compliance with current and possible future regulatory requirements.
| STABLE: Our strategy in managing this risk together with a relatively unchanged regulatory environment has meant the risk has remained relatively stable over the last six months. |
Directors' Responsibilities Statement
Each of the Directors, whose names appear on page 47 of this report confirm to the best of their knowledge that the interim 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") and the interim management report[4] 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 2015 to 30 September 2015 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 2015 to 30 September 2015 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 2015
INDEPENDENT REVIEW REPORT TO HIBERNIA REIT PLC
We have been engaged by the Company to review the group condensed set of financial statements in the Interim Report for the six months ended 30 September 2015 which comprise the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Statement of Cash Flows, and related notes 1 to 24. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the group condensed set of financial statements.
This report is made solely to the Company, in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board, the Transparency (Directive 2004/109/EC) Regulations 2007 (as amended) and the Transparency Rules of the Central Bank of Ireland. 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 report, or for the conclusions we have formed.
Directors' Responsibilities
The Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 (as amended) and the Transparency Rules of the Central Bank of Ireland.
As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The group condensed set of financial statements included in this Half Yearly 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 group condensed set of financial statements in the Half Yearly Financial Report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in Ireland. 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 (UK and 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 group condensed set of financial statements in the Interim Report for the six months ended 30 September 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 (IAS 34 - Interim Financial Reporting) as adopted by the European Union, the Transparency (Directive 2004/109/ EC) Regulations 2007 (as amended) and the Transparency Rules of the Central Bank of Ireland.
Deloitte
Chartered Accountants and Statutory Audit Firm
Dublin
Date 11 November 2015
Group Condensed Consolidated Statement of Comprehensive Income
For the six month period 1 April 2015 to 30 September 2015Six months ended 30 September 2015 | Six months ended 30 September 2014 | ||||
Unaudited | Unaudited | ||||
Notes | €'000 | €'000 | |||
Income | |||||
Revenue | 6 | 18,405 | 5,758 | ||
Direct property costs | 7 | (968) | (137) | ||
Total property income | 17,437 | 5,621 | |||
Revaluation of investment properties | 11 | 63,618 | 18,810 | ||
Other gains and losses | 8 | 887 | 10,059 | ||
Total income after revaluation gains and losses | 81,942 | 34,490 | |||
Expense | |||||
Investment manager fee - base | 23 | (3,373) | (1,861) | ||
Performance fee | 23 | (1,500) | - | ||
Administration expenses | (2,233) | (717) | |||
Total operating expenses | (7,106) | (2,578) | |||
Operating profit | 74,836 | 31,912 | |||
Finance income | 9 | 112 | 238 | ||
Finance expense | 9 | (1,205) | (203) | ||
Profit before tax | 73,743 | 31,947 | |||
Income tax expense | - | - | |||
Profit for the period | 73,743 | 31,947 | |||
Other comprehensive income | - | - | |||
Total comprehensive income | 73,743 | 31,947 | |||
Basic earnings per share (cent) | 10 | 11.00 | 8.30 | ||
Diluted earnings per share (cent) | 10 | 10.91 | 8.30 | ||
Group Condensed Consolidated Statement of Financial Position
As at 30 September 201530 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
Notes | €'000 | €'000 | ||
Assets | ||||
Non-current assets | ||||
Investment Property | 11 | 739,147 | 641,296 | |
Loans and receivables | 152 | 152 | ||
Trade and other receivables | 13 | 2,196 | - | |
741,495 | 641,448 | |||
Current assets | ||||
Trade and other receivables | 13 | 12,735 | 9,046 | |
Cash and cash equivalents | 114,753 | 139,048 | ||
Non-current assets classified as held for sale | 14 | 13,827 | 18,499 | |
Total current assets | 141,315 | 166,593 | ||
Total assets | 882,810 | 808,041 | ||
Equity and liabilities | ||||
Capital and reserves | ||||
Issued capital and share premium | 15 | 657,987 | 657,987 | |
Retained earnings | 159,766 | 89,375 | ||
Other reserves | 16 | 7,272 | 5,772 | |
Total equity | 825,025 | 753,134 | ||
Current liabilities | ||||
Trade and other payables | 18 | 15,088 | 12,210 | |
Payable due for investment property | 19 | 42,697 | 42,697 | |
Total current liabilities | 57,785 | 54,907 | ||
Total equity and liabilities | 882,810 | 808,041 | ||
IFRS NAV per share (cents) | 20 | 123.1 | 112.4 | |
Diluted IFRS NAV per share (cents) | 20 | 122.0 | 111.6 | |
EPRA NAV per share (cents) | 20 | 122.1 | 111.8 |
Condensed consolidated Statement of Changes in Equity
For the period from 1 April 2014 to 30 September 2015Share Capital | Share Premium | Retained earnings | Other reserves | Total | |||||||
€'000 | €'000 | €'000 | €'000 | €'000 | |||||||
Balance at 1 April 2014 | 38,500 | 333,312 | (846) | - | 370,966 | ||||||
Total comprehensive income for the period ended 30 September 2014 | |||||||||||
Profit for the period | - | - | 31,947 | - | 31,947 | ||||||
Total other comprehensive income | - | - | - | - | - | ||||||
38,500 | 333,312 | 31,101 | - | 402,913 | |||||||
Transactions with owners of the Company, | |||||||||||
recognised directly in equity | |||||||||||
Issue of ordinary shares for cash | - | - | - | - | - | ||||||
Share issue costs | - | - | - | - | - | ||||||
Balance at 30 September 2014 | 38,500 | 333,312 | 31,101 | - | 402,913 | ||||||
Total comprehensive income for the period ended 31 March 2015 | |||||||||||
Profit for the period | - | - | 60,285 | - | 60,285 | ||||||
Total other comprehensive income | - | - | - | - | - | ||||||
38,500 | 333,312 | 91,386 | - | 463,198 | |||||||
Transactions with owners of the Company, | |||||||||||
recognised directly in equity | |||||||||||
Dividends | - | - | (2,011) | - | (2,011) | ||||||
Issue of ordinary shares for cash | 28,532 | 271,052 | - | - | 299,584 | ||||||
Share issue costs | - | (13,409) | - | - | (13,409) | ||||||
Share based payments | 16 | - | - | - | 5,772 | 5,772 | |||||
Balance at 31 March 2015 | 67,032 | 590,955 | 89,375 | 5,772 | 753,134 | ||||||
Total comprehensive income for the period ended 30 September 2015 | |||||||||||
Profit for the period | - | - | 73,743 | - | 73,743 | ||||||
Total other comprehensive income | - | - | - | - | - | ||||||
67,032 | 590,955 | 163,118 | 5,772 | 826,877 | |||||||
Transactions with owners of the Company, | |||||||||||
recognised directly in equity | |||||||||||
Dividends | - | - | (3,352) | - | (3,352) | ||||||
Issue of ordinary shares for cash | - | - | - | - | - | ||||||
Share issue costs | - | - | - | - | - | ||||||
Share issuance reserve | 16 | 1,500 | 1,500 | ||||||||
Balance at 30 September 2015 | 67,032 | 590,955 | 159,766 | 7,272 | 825,025 |
Group Condensed Consolidated Statement of Cash flows
For the six month period 1 April 2015 to 30 September 2015
Six months ended 30 September 2015 | Six months ended 30 September 2014 | ||||
Unaudited | Unaudited | ||||
Cash flows from operating activities | €'000 | €'000 | |||
Profit/(loss) for the period | 73,743 | 31,947 | |||
Adjusted for: | |||||
Revaluation of investment properties | (63,618) | (18,810) | |||
Other gains and losses | (887) | (10,059) | |||
Performance fee | 1,500 | 0 | |||
Rental income paid in advance/(accrued) | 645 | 144 | |||
Interest income accrued | - | (1,193) | |||
Finance (income)/expense | 1,093 | (35) | |||
12,476 | 1,994 | ||||
(Increase) in trade and other receivables | (3,483) | (1,990) | |||
Increase in trade and other payables | 5,352 | 4,069 | |||
Net cash flow from operating activities | 14,345 | 4,073 | |||
Cash flows from investing activities | |||||
Purchase of investment property[5] | (32,495) | (279,208) | |||
Development and Refurbishment Expenditure | (12,155) | - | |||
Purchase of loans and receivables | - | (39,300) | |||
Proceeds from loan repayments | 3,520 | 708 | |||
Proceeds from the sale of other assets held for sale | 6,850 | - | |||
Finance income | 112 | 298 | |||
Finance expense | (1,120) | (203) | |||
Net cash used in investing activities | (35,288) | (317,705) | |||
Cash flow from financing activities | |||||
Dividends paid | (3,352) | - | |||
Arrangement fee paid re bank facility | - | (500) | |||
Increase in loans and advances from banks | - | 25,000 | |||
Net cash (outflow)/inflow from financing activities | (3,352) | 24,500 | |||
Net (decrease)/Increase in cash and cash equivalents | (24,295) | (289,132) | |||
Cash and cash equivalents period start | 139,048 | 291,690 | |||
(Decrease)/increase in cash and cash equivalents | (24,295) | (289,132) | |||
Net cash and cash equivalents at period end | 114,753 | 2,558 | |||
Notes Forming Part of the Half Yearly Financial Report
1. General InformationThe Company together with its subsidiary and associated undertakings as detailed in Note 22 (the "Group"), is engaged in property investment (primarily commercial) in the Irish 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 Company was incorporated on 13 August 2013 and re‑registered as a public limited company on 8 November 2013. The registered number of the Company is 531267.
The Ordinary Shares of the Company are listed on the primary listing segment of the Official List of the Irish Stock Exchange (the ''Irish Official List'') and the premium listing segment of the Official List of the UK Listing Authority (the ''UK Official List'' and, together with the Irish Official List, the ''Official Lists'') and are traded on the regulated markets for listed securities of the Irish Stock Exchange and the London Stock Exchange plc (the ''London Stock Exchange'').
2. Basis of preparationa. Statement of compliance
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. This interim financial report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the EU.
The Group has not early adopted any forthcoming IASB standards. The half yearly financial statements are non-statutory financial statements for the purposes of the Companies Act 2014 and in compliance with Section 340(4) of that Act. The statutory accounts for the year ended 31 March 2015 were approved by the Board of Directors on 29 May 2015, contained an unqualified audit report and were filed with the Companies Registration Office on 7 July 2015.
b. Functional and presentation currency
These condensed consolidated financial statements are presented in Euro, which is the Group's functional currency and the Group's presentation currency.
c. Basis of accounting
The condensed consolidated financial statements have been prepared on a going concern basis, in accordance with IFRS and the IFRS Interpretations Committee (IFRIC) interpretations as adopted by the European Union and the Companies Act 2014. The Group financial statements therefore comply with Article 4 of the EU IAS Regulation.
The Group's performance is not subject to seasonal fluctuations.
The condensed consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of investment properties and financial instruments that are measured at fair value at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
d. Assessment of going concern
The half yearly financial report has been prepared on a going concern basis. The time period that the Directors have considered in evaluating the appropriateness of the going concern basis in preparing the half yearly financial report for the six months ended 30 September 2015 is a period of twelve months from the date of approval of this half yearly financial report.
In making this assessment, the Directors considered the Group's business, profitability projections, funding and capital plans under various scenarios. The Directors also considered the impact of external factors such as the outlook for the Irish economy and the Dublin property market.
The Group has a positive cash balance as at 30 September 2015 of €115m ( 31 March 2015: €139m), is generating positive cash flows and, as discussed in Note 17, has in place a revolving credit facility with an undrawn balance of €100m at 30 September 2015.
On the basis of the above, the Directors consider it is appropriate to prepare the half yearly financial statements on a going concern basis. There are no material uncertainties that the Group will not be able to meet its liabilities as they fall over the period of assessment.
e. Basis of consolidation
The financial statements incorporate the condensed consolidated financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is assessed based on the Company's:
- power over the investee
- exposure to variable return from its involvement with the investee; and
- ability to use its powers to affect returns.
When the Company has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.
The results of subsidiaries and joint ventures acquired or disposed of during the year are included from the effective date of acquisition or to the effective date of disposal. The accounting policies of all consolidated entities are consistent with the Group's accounting policies.
3. Accounting policiesThese condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Group's Annual Report in respect of the year ended 31 March 2015. The accounting policies and methods of computation employed in the preparation of the 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 2015, except as identified below.
a) Joint arrangements (new accounting policy)
A joint arrangement is an arrangement over which two or more parties have joint control. Joint control is established when no one entity has control of the arrangement on its own; all of the entities involved in the arrangement control it collectively. The Group enters into such arrangements to facilitate joint development of properties in its portfolio of investment properties. The arrangements are bound by contractual agreements and may be accounted for as either a joint venture or joint operation. These arrangements are reviewed at each accounting period to ensure that control continues to be joint and that, where entities are involved, reclassification into subsidiary or associate companies is not required.
A joint arrangement is classified as a joint venture when the Group has rights to the net assets of the arrangement rather than to the individual assets and liabilities, revenues and expenses. Otherwise the joint arrangement is classified as a joint operation. This classification is based upon an assessment of the structure and legal form of the arrangement.
The Group accounts for joint ventures using the equity method, the Groups share of the joint venture is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor's share of the investee's net assets. The Group's share of profit or loss includes its share of the investee's profit or loss and the Group's other comprehensive income includes its share of the investee's other comprehensive income.
Where the joint arrangement is recognised as a joint operation, the Group recognises its share of assets and liabilities held jointly as well as its share of revenues and expenses according to the IFRS applicable to the items being recognised.
4. Application of new and revised International Accounting Standards (IFRS)The Group has not adopted any new or amended accounting pronouncements which have impacted on the half yearly report.
5. Operating segmentsThe Group is organised into five business segments, against which the Group reports its segmental information, being Office Assets, Industrial Assets, Residential Assets, Development Assets and Other Assets (loans and other assets that do not fall into the preceding classifications). All of the Group's operations are in the Republic of Ireland. Operating segments are reported in a manner consistent with the reporting to the Board of Directors of the Company which is the chief operating decision maker of the Group.
Unallocated income and expenses are those that occur centrally, e.g. investment management fees and other administration expenses. Unallocated assets include cash and cash equivalents, tax refundable and administration expenses paid in advance. In addition, cash received in advance in relation to rental receipts on properties and rental income accrued have been allocated from receivables and cash and cash equivalents to the appropriate segment.
The Group's key measure of underlying performance of a segment is total income after revaluation gains and losses which comprises revenue (rental and interest 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, which measure the cash passing rent returns on market value of investment properties before and after an adjustment for the expiration of rent free period or other lease incentives respectively. All interest income relates to Other Assets whilst the revenue for all other segments represents rental income.
Group Consolidated Segment Analysis
For the period 1 April 2015 to 30 September 2015
Office Assets | Industrial Assets | Residential Assets | Office Development Assets | Other Assets | Unallocated | Group Consolidated Position | |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Rental income | 16,416 | 262 | 1,607 | 120 | - | - | 18,405 |
Interest income | - | - | - | - | - | - | - |
Revenue | 16,416 | 262 | 1,607 | 120 | - | - | 18,405 |
Property outgoings | (283) | (31) | (385) | (194) | - | (75) | (968) |
Total Property Income | 16,133 | 231 | 1,222 | (74) | - | (75) | 17,437 |
Revaluation of investment properties | 32,270 | 325 | 4,471 | 26,552 | - | - | 63,618 |
Other gains and losses | - | - | - | 176 | 711 | - | 887 |
Total Income | 48,403 | 556 | 5,693 | 26,654 | 711 | (75) | 81,942 |
Investment manager fee - base | - | - | - | - | - | (3,373) | (3,373) |
Performance fee | - | - | - | - | - | (1,500) | (1,500) |
Administration expenses | - | - | - | - | - | (2,233) | (2,233) |
Total operating expenses | - | - | - | - | - | (7,106) | (7,106) |
Operating profit/(loss) | 48,403 | 556 | 5,693 | 26,654 | 711 | (7,181) | 74,836 |
Net finance cost | (613) | - | - | - | - | (480) | (1,093) |
. | |||||||
Profit/(loss) before tax | 47,790 | 556 | 5,693 | 26,654 | 711 | (7,661) | 73,743 |
Total Segment Assets | 516,720 | 10,730 | 110,092 | 115,160 | 14,072 | 116,036 | 882,810 |
Investment Properties | 509,467 | 10,730 | 109,700 | 109,250 | - | - | 739,147 |
Group Consolidated Segment Analysis
For period 1 April 2014 to 30 September 2014
Office Assets | Industrial Assets | Residential Assets | Office Development Assets | Other Assets | Unallocated | Group Consolidated Position | ||
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | ||
Rental income | 4,213 | 216 | 91 | - | 45 | - | 4,565 | |
Interest income | - | - | - | - | 1,193 | - | 1,193 | |
Revenue | 4,213 | 216 | 91 | - | 1,238 | - | 5,758 | |
Property outgoings | - | - | - | - | - | (137) | (137) | |
Total Property Income | 4,213 | 216 | 91 | - | 1,238 | (137) | 5,621 | |
Revaluation of investment properties | 19,260 | (228) | (946) | 724 | - | - | 18,810 | |
Other gains and losses | - | - | 10,059 | - | - | - | 10,059 | |
Total Income | 23,473 | (12) | 9,204 | 724 | 1,238 | (137) | 34,490 | |
Investment manager fee - base | - | - | - | - | - | (1,861) | (1,861) | |
Performance fee | - | - | - | - | - | - | - | |
Administration expenses | - | - | - | - | - | (717) | (717) | |
Total operating expenses | - | - | - | - | - | (2,578) | (2,578) | |
Operating profit/(loss) | 23,473 | (12) | 9,204 | 724 | 1,238 | (2,715) | 31,912 | |
Net finance cost | - | - | - | - | - | 35 | 35 | |
. | ||||||||
Profit/(loss) before tax | 23,473 | (12) | 9,204 | 724 | 1,238 | (2,680) | 31,947 | |
Total Segment Assets | 355,480 | 10,120 | 46,350 | 26,700 | 68,450 | 5,643 | 512,743 | |
Investment Properties | 354,910 | 10,100 | 46,350 | 26,700 | - | - | 438,060 | |
6. Revenue
Group | ||||
Six months ended 30 September 2015 | Six months ended 30 September 2014 | |||
Unaudited | Unaudited | |||
€'000 | €'000 | |||
Rent receivable | 13,505 | 4,565 | ||
Surrender premia | 4,900 | - | ||
Gross rental and related income | 18,405 | 4,565 | ||
Interest Income from loans and receivables | - | 1,193 | ||
Revenue | 18,405 | 5,758 | ||
Rental income arises from the Group's investment properties. Rental income includes a €1.1m uplift in relation to the spreading of lease incentives (30 September 2014:€nil). Surrender premia relate to the surrender of the FBD lease in Guild House for a total payment of €8.8m. €4.9m is included in surrender premia as above. €2.3m related to top-up amounts for sub-leases and will be released to profit and loss over the term of the relevant sub-leases. The remaining €1.6m related to dilapidations payable on Guild House and is included as part of the development and refurbishment expenditure in Note 11.
7. Direct property costsDirect property costs arise from costs associated with the Group's investment properties such as residential costs and void costs on vacant properties and those under development. These expenses are analysed segmentally in Note 5.
8. Other gains and lossesGroup | ||||
Six months ended 30 September 2015 | Six months ended 30 September 2014 | |||
Unaudited | Unaudited | |||
€'000 | €'000 | |||
Gains on recognition of investment property | - | 10,059 | ||
Gain on asset sale | 176 | - | ||
Gains on sales of other non-core assets held for sale | 711 | - | ||
Other gains and losses | 887 | 10,059 | ||
9. Finance income and expense
Group | ||||
Six months ended 30 September 2015 | Six months ended 30 September 2014 | |||
Unaudited | Unaudited | |||
€'000 | €'000 | |||
Interest income on cash and cash equivalents | 112 | 238 | ||
Finance expense on borrowings | (592) | (203) | ||
Finance expense on payable due for investment property | (613) | - | ||
Net finance income/(expense) | (1,093) | 35 | ||
As disclosed in Note 19, the Group has recognised a payable due for investment property in relation to the Hardwicke House and Montague House acquisition. The Group has therefore accounted for the related finance charge using the effective interest method.
The effective interest expense on borrowings arises as a result of the recognition of interest expense, commitment fees and arrangement fee on the Group's undrawn revolving credit facility (Note 17).
10. Earnings per ShareGroup | ||||
Weighted average number of shares | 30 September 2015 | 30 September 2014 | ||
'000 | '000 | |||
Unaudited | Unaudited | |||
Shares in issue during the period | 670,317 | 385,000 | ||
Weighted average number of shares | 670,317 | 385,000 | ||
Estimated additional shares due for issue | 5,814 | - | ||
Diluted number of shares | 676,131 | 385,000 | ||
30 September 2015 | 30 September 2014 | |||
Basic and diluted earnings per share | Unaudited | Unaudited | ||
€'000 | €'000 | |||
Profit/(loss) for the period attributable to the owners of the Company | 73,743 | 31,947 | ||
'000 | '000 | |||
Weighted average number of ordinary shares (basic) | 670,317 | 385,000 | ||
Weighted average number of ordinary shares (diluted) | 676,131 | 385,000 | ||
Basic earnings per share (cents) | 11.00 | 8.30 | ||
Diluted earnings per share (cents) | 10.91 | 8.30 | ||
11. Investment Properties
Six months ended 30 September 2015 | |||||||
Office and Residential | Development | Industrial | Total | ||||
Level 3 | Level 3 | Level 3 | Level 3 | ||||
Group | Group | Group | Group | ||||
€'000 | €'000 | €'000 | €'000 | ||||
Carrying Value at start of period | 542,377 | 88,600 | 10,319 | 641,296 | |||
Additions: | |||||||
Property Purchases | 31,808 | - | - | 31,808 | |||
Development and Refurbishment Expenditure (Note 1) | 8,291 | 3,778 | 86 | 12,155 | |||
Revaluations included in income statement | 36,691 | 26,602 | 325 | 63,618 | |||
Disposals: | |||||||
Property sale (Note 2) | - | (9,730) | - | (9,730) | |||
Carrying Value at period end | 619,167 | 109,250 | 10,730 | 739,147 | |||
Year ended 31 March 2015 | |||||||
Office and Residential | Development | Industrial | Total | ||||
Level 3 | Level 3 | Level 3 | Level 3 | ||||
Group | Group | Group | Group | ||||
€'000 | €'000 | €'000 | €'000 | ||||
Carrying Value at start of period | - | - | - | - | |||
Additions: | |||||||
Property Purchases | 412,714 | 76,578 | 10,338 | 499,630 | |||
Investment properties recognised on de-recognition of loans | 48,684 | - | - | 48,684 | |||
Development and Refurbishment Expenditure | 11,678 | 510 | (15) | 12,173 | |||
Revaluations included in income statement | 69,301 | 11,512 | (4) | 80,809 | |||
Carrying Value at period end | 542,377 | 88,600 | 10,319 | 641,296 | |||
Note 1: The Group received €1.5m in relation to a dilapidation costs payment due to a tenant surrender of their lease on Guild House. This has been applied to the development and refurbishment costs on this property and therefore reduces the cost of this property.
Note 2: The vendor of the Windmill Lane site was granted an option when the Group purchased the site to buy into 50% of the future development project at the original purchase price plus 50% of any development costs spent to the date of purchase. This option has been exercised resulting in the disposal of 50% of the Group's stake in the Windmill Lane site.
The valuations used in order to determine fair value for the investment properties in the condensed consolidated financial statements are determined by CBRE, the Group's independent valuers, and are in accordance with the provisions of IFRS 13. CBRE has agreed to the use of their valuations for this purpose. Some of the inputs to the valuations are defined as "unobservable" by IFRS 13. Property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer. For these reasons, and consistent with EPRA's guidance, the Group has classified the valuations of its property portfolio as Level 3 as defined by IFRS 13. The methods that are applied for fair value measurements categorised within Level 3 of the fair value hierarchy is the yield methodology using market rental values capitalised with a market capitalisation rate or yield or other applicable valuation technique. A reduction of €1.2m (31 March 2015: €1.2m) has been made to the valuation of the Forum building to reflect the maximum value of a potential payment to the vendor in relation to the acquisition of the car park. In addition, a reduction of €1.4m (31 March 2015: €1.4m) has been recognised in the portfolio valuation as the effect of the recognition policy on rental incentives. There were no transfers between levels during the year. There was no capitalised interest included in investment properties during the year.
Information about fair value measurements using unobservable inputs (Level 3).
The valuation techniques used in determining the fair value for each of the categories of assets is market value as defined by VPS4 of the Red Book 2014, being the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion, and is in accordance with IFRS 13. Included in the inputs for the valuations above are future development costs where applicable. The tables below show a summary of the quantitative inputs for the fair value determination as at 30 September 2015 and 31 March 2015 and sensitivity information for each category.
Quantitative Information
The following information has been used in calculating the fair value of Investment Properties at 30 September 2015.
Fair value at 30 September 2015 | Inputs | Lowest in range | Highest in range | ||
€m | |||||
Office assets | 509,467 | Annual rent € per sq. ft. | € 15.87 | € 51.98 | |
ERV € per sq ft | € 28.00 | € 50.00 | |||
Equivalent Yield | 4.95% | 5.68% | |||
Industrial assets | 10,730 | Annual rent € per sq. ft. | € 4.23 | € 5.04 | |
ERV € per sq ft | € 2.75 | € 5.20 | |||
Equivalent Yield | 7.32% | 7.32% | |||
Residential assets | 109,700 | Equivalent Yield | 4.50% | 4.70% | |
Development assets | 109,250 | Equivalent Yield | 5.25% | 6.50% | |
Information on fair value inputs as at 31 March 2015
Fair value at 31 March 2015 | Inputs | Lowest in range | Highest in range | ||
€m | |||||
Office assets | 475 | Annual rent € per sq. ft. | € 14.45 | € 45.50 | |
ERV € per sq ft | € 22.50 | € 48.00 | |||
Equivalent Yield | 5.00% | 6.13% | |||
Industrial assets | 10 | Annual rent € per sq. ft. | € 4.22 | € 5.12 | |
ERV € per sq ft | € 2.75 | € 5.20 | |||
Equivalent Yield | 7.63% | 7.63% | |||
Residential assets | 67 | Equivalent Yield | 4.50% | 4.75% | |
Development assets | 89 | Equivalent Yield | 5.40% | 6.50% | |
Sensitivity Analysis
Estimated rental values and market observed yields are key inputs into the valuation models used. For example, completed properties are valued mainly using a term and reversion model, i.e. the present values of future cash flows from expected rental receipts are calculated. For the existing rental contract or "term" this is the expected rents from tenants over the period to the next lease break option or expiry. After this period, the "reversion", estimated rental values are used to calculate cash flows based on expectations from current market conditions. Thus a decrease in the estimated rental value will decrease the fair value. Similarly, an increase in the yield will decrease the fair value. There are interrelationships between these rates as they are determined by market rate conditions. Most of the Group's properties are valued on this or a basis using similar assumptions.
Across the entire portfolio of investment properties, a 1% increase in yield would have the impact of a €154m (31 March 2015: €139m) reduction in fair value whilst a 1% decrease in yield would result in a fair value increase of €234m (31 March 2015: €201m).
This is further analysed by property class, as follows:
30 September 2015 | |||
Property Class | Change in fair value +1% Yield | Change in fair value -1% Yield | |
€'000's | €'000's | ||
Office assets* | (96,225) | 143,331 | |
Development assets | (36,453) | 53,064 | |
Residential assets | (20,044) | 36,339 | |
Industrial assets | (1,145) | 1,692 | |
*Harcourt Square is an office investment with development potential and is subject to current planning permission. It is valued on this basis and included within office investments for sensitivity analysis in line with its current segmental position.
31 March 2015 | |||
Property Class | Change in fair value +1% Yield | Change in fair value -1% Yield | |
€'000's | €'000's | ||
Office assets | (88,200) | 128,783 | |
Development assets | (36,290) | 52,820 | |
Residential assets | (13,660) | 18,400 | |
Industrial assets | (1,058) | 1,370 | |
12. Joint arrangements
The Group enters into joint arrangements in order to manage its development risk exposures. During the period, the Group entered into its first such arrangement as described below.
Windmill Lane Partnership
Nature of activity: Development of the Windmill Lane site
Principal place of business: South Dock House, Hannover Quay, Dublin D02 XW94
During the period Starwood Capital Group LP exercised their written call option to buy into the development of the Windmill Lane site as a 50:50 joint arrangement partner at purchase price, leading to the formation of the Windmill Lane Partnership ("WLP"). Development work has commenced and WK Nowlan REIT Management Limited is acting as asset manager and development manager to WLP.
The transaction, is recognised in the half yearly financial report as a joint operation and as such the Group recognises its share of assets and liabilities held jointly as well as its share of revenues and expenses according to the IFRS applicable to the items being recognised.
13. Trade and other receivables
Group | ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€'000 | €'000 | |||
Due in one year | ||||
Due from sale of other non-current assets held for sale | - | 1,467 | ||
Loan repayments from collateral sales | 93 | 3,613 | ||
Amounts due from joint arrangements partner | 5,910 | - | ||
Arrangement fee | 309 | 394 | ||
Property income receivables | 4,579 | 1,911 | ||
Prepayments | 1,198 | 266 | ||
VAT refundable | 646 | 1,395 | ||
Current trade and other receivables at end of period | 12,735 | 9,046 | ||
Due greater than one year and less than two | ||||
Property income receivables | 2,196 | - | ||
Total trade and other receivables at end of period | 14,931 | 9,046 | ||
There are no amounts past due. The Directors consider that the carrying value of trade and other receivables approximates to their fair value. The amount due from the joint arrangements partner relates to the sale of the 50% holding of the Windmill development site into a joint arrangement at original cost. Title does not pass until conveyancing is complete and therefore this amount is secured on the site. A further €4.4m (€2.4m net of a related creditor) is due from one counterparty in relation to a lease surrender. Apart from these, there is no concentration of credit risk with respect to trade receivables as most of the remaining balances relate to prepayments and refunds due on taxes.
14. Non-current assets classified as held for sale
Group | ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
'000 | '000 | |||
Balance at start of period | 18,499 | - | ||
Recognised during the period | - | 22,993 | ||
Acquisition costs | - | 541 | ||
Sold during the period | (4,672) | (5,035) | ||
Balance at end of period | 13,827 | 18,499 | ||
The Group purchased two portfolios of loans which included as collateral some assets the Group retained for its investment portfolio and other assets which the Group intends to dispose of as soon as possible. Those assets not intended for the investment portfolio and not disposed by February 2015 were legally acquired by the Company and recognised as non-current assets classified as held for sale in accordance with the Group's accounting policy. Plans for the disposal of these assets are well advanced. A sales agent has been appointed and a sales plan agreed. In order to ensure that the best prices are achieved, these assets are being released to the market in a phased basis. It is expected that disposal of these assets will be completed at the latest within 12 months from their acquisition by the Company.
Non-current assets classified held for sale are measured at the lower of carrying amount and fair value less costs to sell. The Directors have assessed the fair value of these assets by reviewing the sales prices achieved on similar assets and the expected sales price as determined by the selling agent in preparing their disposal plans. The majority of assets sold since acquisition have achieved at least their acquisition price on an individual basis and in total a profit of approximately €3.4m before tax and after costs has been achieved, €0.7m in the six month period to 30 September 2015. The Directors have therefore concluded that the fair value of these assets is at least their carrying value.
15. Issued capital and share premium30 September 2015 | 31 March 2015 | ||||||||||
Share Capital | Share Premium | Total | Share Capital | Share Premium | Total | ||||||
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | ||||||
At start of period | 67,032 | 590,955 | 657,987 | 38,500 | 333,312 | 371,812 | |||||
Shares issued during the period | - | - | - | 28,532 | 271,052 | 299,584 | |||||
Costs associated with the issue | - | - | - | - | (13,409) | (13,409) | |||||
At end of period | 67,032 | 590,955 | 657,987 | 67,032 | 590,955 | 657,987 | |||||
Authorised share capital | |||||||||||
No of shares '000 | No of shares '000 | ||||||||||
Authorised | 1,000,000 | 1,000,000 | |||||||||
Allotted, called up and fully paid | |||||||||||
Issued for cash | 670,317 | 670,317 | |||||||||
In issue at period end | 670,317 | 670,317 | |||||||||
Group | |||||
30 September 2015 | 31 March 2015 | ||||
Unaudited | Audited | ||||
€'000 | €'000 | ||||
Balance at start of period | 5,772 | - | |||
Provision for the period | 1,500 | 5,772 | |||
Balance at end of period | 7,272 | 5,772 | |||
Other reserves comprise amounts reserved for the issue of shares in respect of the performance fees due to the Investment Manager as at 30 September 2015 of €7.3m (31 March 2015: 5.8m). In order to estimate the level of performance fee that should be attributed to the period ended 30 September 2015, the Directors have considered the performance of the Group to date, their expectations of the real estate market for the second half of the financial year and the expected return within Hibernia REIT plc for the financial year 2016 in total and the amount of performance fee that might be due for the full year. The provision for this period has then been made by estimating the fair value of the amount attributable to the half year. Further details of this are set out in Note 23.2.
17. Loans and advances from banksOn 12 August 2014, the Company and its subsidiary, Hibernia REIT Finance Limited, signed a €100m three‑year floating rate revolving credit facility with Bank of Ireland. An arrangement fee of €500,000 was paid in relation to this facility and is accounted for as part of the effective interest on the loan. A commitment fee of 1% is payable on the undrawn balance.
First‑ranking security for the Revolving Credit Facility is given by way of floating charges granted by the Company and its subsidiary, Hibernia REIT Finance Limited, over all of the Group's assets and also by way of a fixed charge granted by the Company over the shares in each of its substantial subsidiaries as may from time to time exist.
There was no balance drawn on this facility at either 30 September 2015 or 31 March 2015. The Directors confirm that all covenants have been complied with and are kept under review.
18. Trade and Other Payables
Group | ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€'000 | €'000 | |||
Accrued investment property costs | - | 687 | ||
Fair value of written call option | - | 5,100 | ||
Rent deposits and early payments | 5,233 | 1,920 | ||
Investment management fee payable -base | 3,373 | 1,625 | ||
Trade and other payables | 5,757 | 2,153 | ||
PAYE/PRSI payable | 36 | 36 | ||
Tax payable | 689 | 689 | ||
Balance at end of period | 15,088 | 12,210 | ||
The written call option related to the Windmill joint arrangement and was exercised during the period leading to the set-up of a joint operation on the development of the site. Trade and other payables are interest free and have settlement dates within one year. The Directors consider that the carrying value of trade and other payables approximates to their fair value.
19. Payable due for investment propertiesGroup | ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€'000 | €'000 | |||
Payable due for investment property | 42,697 | 42,697 | ||
On 16 May 2014 the Group entered into an arrangement to acquire two Grade A office buildings, Hardwicke House and Montague House in Dublin's Central Business District in a partially deferred transaction for a total consideration of approximately €61.3m (including costs). This transaction was structured as a loan transaction with the Group paying an initial sum of €18.25m. Under the terms of a call option and put option agreement, the Group has the right to take ownership (or can be required to take ownership) of the buildings on payment of the agreed balance and the vendor has the right to sell the property to the Group after 1 January 2016 if the Group has not already acquired it. This option was exercised by the Group on 23 October 2015. The Group is most likely to complete the acquisition in December 2015 to comply with existing REIT rules. The finance charge relating to this payable is recognised for the period as a finance expense (Note 9).
20. IFRS and EPRA Net Asset Value per Share
Group
| ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€'000 | €'000 | |||
IFRS net assets at period end | 825,025 | 753,134 | ||
Ordinary shares in issue ('000) | 670,317 | 670,317 | ||
IFRS NAV per share (cents) | 123.1 | 112.4 | ||
'000 shares | '000 shares | |||
Ordinary shares in issue | 670,317 | 670,317 | ||
Estimated additional shares due for issue from performance reserve | 5,814 | 4,664 | ||
Diluted number of shares | 676,131 | 674,981 | ||
Diluted IFRS NAV per share (cents) | 122.0 | 111.6 | ||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€ '000 | € '000 | |||
IFRS net assets at period end | 825,025 | 753,134 | ||
Revaluation of other non-current assets held for sale | 734 | 1,445 | ||
EPRA NAV | 825,759 | 754,579 | ||
Diluted number of shares | 676,131 | 674,981 | ||
EPRA NAV per share (cents) | 122.1 | 111.8 | ||
The issue of the performance related shares for the year ended 31 March 2015 should have been completed in April 2015. However, due to the internalisation of the Investment Manager (Note 24.1) this was delayed until November 2015 when these shares were issued in settling the internalisation transaction.
21. Financial Instruments and risk managementThe Group has identified exposure to the following risks:
Market risk
Credit risk
Liquidity risk
The policies for managing each of these and the principal effects of these policies on the results for the period are summarised below:
a) Market risk
Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk reflects interest rate risk, currency risk and other price risks.
The Group's financial assets currently principally comprise short term bank deposits and trade receivables. The Group currently has no financial liabilities other than trade payables which do not give rise to any significant market risk.
Exposure to interest rates is limited to the exposure of its earnings from uninvested funds, €115m at the period end (31 March 2015: €139m). Interest rates are at historic lows and therefore the impact of a change in the rate of 10% during the period would be approximately €11,000 (31 March 2015: c. €40,000).
b) Credit risk
Credit risk is the risk of loss of principal or loss of a financial reward stemming from a counterparty's failure to repay a loan or otherwise meet a contractual obligation. Credit risk is therefore, for the Group, the risk that the counterparties underlying its' assets default.
The Group's main financial asset is cash and cash equivalents. Cash and cash equivalents are held with major Irish and European institutions. The Board has established a cash management policy for these funds which it monitors regularly. This policy includes ratings restrictions, BB or better, and related investment thresholds, €25-50m with individual institutions dependent on rating, to avoid concentration risks with any one counterparty. The Company has also engaged the services of a Depository to ensure the security of the cash assets.
Concentration of risk in receivables: At the period end, €5.9m was receivable from a joint arrangement partner in respect of the sale of a 50% interest in the Windmill site. All amounts due from this counterparty are secured on the site. Also included in trade receivables was an amount of €4.4m due in relation to a lease surrender, 50% of which is due in more than one year. €2m was held in trade payables as deferred income from the same source. The balance of trade and other receivables has no concentration of credit risk as it comprises mainly prepayments and tax refunds due.
The maximum amount of credit exposure is therefore:
Group
| ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€'000 | €'000 | |||
Trade and other receivables | 14,931 | 9,046 | ||
Cash and cash equivalents | 114,753 | 139,048 | ||
Balance at end of period | 129,684 | 148,094 | ||
c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group ensures that it has sufficient available funds to meet obligations as they fall due. The Investment manager is responsible for this activity and the Board monitors its performance.
Net current assets at the period end were:
Group
| ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€'000 | €'000 | |||
Net current assets at the period end | 83,530 | 111,686 | ||
The following tables show total liabilities due as compared with funds available. No account is taken of trade and other receivables due, rent income due under operating leases, or other cash in-flows. Only trade payables relating to cash expenditure are included, the balances relate either to non-cash items or deferred income.
Group
| ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€'000 | €'000 | |||
Liabilities due in less than one year: | ||||
Trade and other payables | 9,855 | 5,190 | ||
Payable for investment property | 42,697 | 42,697 | ||
Total liabilities due in less than one year | 52,552 | 47,887 | ||
Group
| ||||
30 September 2015 | 31 March 2015 | |||
Unaudited | Audited | |||
€'000 | €'000 | |||
Funds available: | ||||
Cash and cash equivalents | 114,753 | 139,048 | ||
Revolving credit facility undrawn | 100,000 | 100,000 | ||
Total funds available - less than one year | 214,753 | 239,048 | ||
Net funds available | 162,201 | 191,161 | ||
All financial liabilities for the Group fall due within one year.
d) Capital management
The Group manages capital in order to ensure its continuance as a going concern.
As the Group grows it is planned to finance up to 40% of the market value of the Group's assets out of borrowings in order to enhance the return on equity for its shareholders. This percentage may increase to 50% under the REIT regime and so the Group may modify this leverage from time to time taking into account current prevailing economic and market conditions. Any alteration in this leverage ratio would be an amendment to the investment policy and therefore require a shareholder vote. This leverage ratio will be monitored in the regular financial reporting and prior to entering into any borrowing arrangements in order to ensure this policy is maintained.
Capital comprises share capital, reserves and retained earnings as disclosed in the Condensed consolidated statement of changes in equity. At 30 September 2015 the capital of the Company was €825m (31 March 2015: €753m).
There are no external capital requirements on the Group.
Under the Irish REIT regime, the Group must distribute at least 85% of its property income by way of a Property Income Distribution ("PID"). Therefore, capital available for business growth will not be augmented by dividend policy. To grow the business, the Group must therefore consider the need to seek further capital in the market given both the inability to grow reserves and the restriction on its borrowings as a source of increasing its portfolio size as discussed above
The Company's share capital is publicly traded on the London and Irish stock exchanges. In order to ensure the proper management of the share register, the Group employs the services of a share registrar, Capita Registrars (Ireland) Limited t/a Capita Asset Services.
e) Fair values of financial assets and financial liabilities
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.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are not based on observable market data
The following table shows the Group's financial assets and liabilities and the methods used to calculate fair value.
Asset/ Liability | Carrying value | Level | Method | Assumptions |
Loan and receivables | Amortised cost | 3 | Assessed in relation to collateral value | Valuation of collateral is subjective based on agents guide sales prices and market observation of similar property sales were available. Most of the loans have now been realised with only €0.15m remaining to be recovered (31 March 2015: €0.15m) |
Trade and other receivables | Amortised cost | 2 | Cash value | Most of these are receivables in relation to amounts due from surrender agreements, the sale of properties and prepayments and therefore there is no objective information of any loss and they are expected to be fully recoverable in the short term. No discounting is therefore applied |
Trade and other payables | Amortised cost | 2 | Cash value | These are mainly accruals and deferred income and in the case of accruals will settle in the short term based on their cash value and therefore no discounting is applied. Deferred income, with the exception of €5m (31 March 2015: €2m), has already been received in cash. |
The carrying value of non-interest bearing financial assets and financial liabilities and cash and cash equivalents approximates their fair values, largely due to their short-term maturities.
At 30 September 2015 the Group's liability, payable due for investment property is held at fair value based on the net present value discounted at a market interest rate. Other than this, the Group had no financial assets or liabilities held at fair value. At 31 March 2015 the Group's liability, payable due for investment property was held at fair value based on the net present value discounted at a market interest rate. In addition, the written call option on the Windmill Lane site was held at fair value. The following tables present the classification of financial assets and liabilities within the fair value hierarchy and the changes in fair values measurements at Level 3 estimated for the purposes of making the above disclosure.
30 September 2015 | 31 March 2015 | |||||||||||
Carrying value Unaudited Group | Level 1 Group | Level 2 Group | Level 3 Group | Carrying value Audited Group | Level 1 Group | Level 2 Group | Level 3 Group | |||||
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |||||
Financial assets | ||||||||||||
Loans and receivables | 152 | - | - | 152 | 152 | - | - | 152 | ||||
Trade and other receivables | 14,931 | - | 14,931 | - | 9,046 | - | 9,046 | - | ||||
Cash and Cash equivalents | 114,753 | 114,753 | - | - | 139,048 | 139,048 | - | - | ||||
129,836 | 114,753 | 14,931 | 152 | 148,246 | 139,048 | 9,046 | 152 | |||||
Financial liabilities | ||||||||||||
Trade and other payables | 15,088 | - | 15,088 | - | 12,210 | - | 7,110 | 5,100 | ||||
Payable due for investment property | 42,697 | - | 42,697 | - | 42,697 | - | 42,697 | - | ||||
57,785 | - | 57,785 | - | 54,907 | - | 49,807 | 5,100 |
Fair value movements at level 3 | ||||
30 September 2015 Group | 31 March 2015 Group | |||
€'000 | €'000 | |||
Unaudited | Audited | |||
Balance at start of period | 636,348 | 68,563 | ||
Transfers into level 3 | - | - | ||
Transfers out of level 3 | - | (22,993) | ||
Purchases, sales, issues and settlement | ||||
Purchases | 43,963 | 550,603 | ||
Sales | (9,730) | - | ||
Option exercise | 5,100 | - | ||
Repayments | - | (47,092) | ||
Fair value recognition | 63,618 | 85,768 | ||
Amortisation | - | 1,499 | ||
Balance at end of period | 739,299 | 636,348 | ||
22. Investment in subsidiary and associate undertakings
The Company has the following interests in ordinary shares in the following subsidiary undertakings at 30 September 2015. These subsidiaries, except for Windmill Lane Development Company Limited are fully owned and consolidated within the Group. Windmill Lane Development Company, established on 20 August 2015, will be 50% owned by the Group once the legal documents are completed. This company is the development management company in the Windmill Lane joint arrangement.
Name | Registered address/ Country of Incorporation | Shareholding/ Number of shares held | Directors | Company Secretary | Nature of business |
Hibernia REIT Finance Limited | South Dock House, Hanover Quay, Dublin D02 XW94, Ireland | 100%/ 10
| Daniel Kitchen, Colm Barrington, Stewart Harrington, Terence O'Rourke, William Nowlan | Castlewood Corporate Services Limited | Financing activities |
Hibernia REIT Holding Company Limited | South Dock House, Hanover Quay, Dublin D02 XW94, Ireland | 100%/ 10
| Richard Ball, Kevin Nowlan, Frank O'Neill | Castlewood Corporate Services Limited | Holding property interests |
Mayor House Basement Management Limited | South Dock House, Hanover Quay, Dublin D02 XW94, Ireland | 100%/2
| Richard Ball, Kevin Nowlan, Frank O'Neill | Castlewood Corporate Services Limited | Property management |
Dockland Central Limited (previously Lamourette Limited)
| South Dock House, Hanover Quay, Dublin D02 XW94, Ireland | 100%/2
| Richard Ball, Kevin Nowlan, Frank O'Neill | Castlewood Corporate Services Limited | Property management |
Windmill Lane Development Company Limited* | South Dock House, Hanover Quay, Dublin D02 XW94, Ireland | 100% (held through Hibernia REIT Holding Company Limited)/1 | Richard Ball, Kevin Nowlan | Castlewood Corporate Services Limited | Property development |
*The Windmill Lane Development Company is the development management company for the Windmill Lane Partnership. This company will be jointly owned when the legal documents are complete.
The Group has no interests in unconsolidated subsidiaries.
23. Related Parties23.1 SubsidiariesAll transactions between the Company and its subsidiaries are eliminated on consolidation.
23.2 Investment ManagerAs at 30 September 2015, the Group, pursuant to the Investment Management Agreement entered into on 27 November 2013, was managed by WK Nowlan REIT Management Limited ("The Investment Manager") which was wholly owned and controlled by Nowlan Property Limited and Mr. Frank Kenny. William Nowlan was the investment director of the Investment Manager. Frank J. Kenny was the development director of the Investment Manager. Both the Investment Manager and Nowlan Property Limited are considered to be related parties of the Company. The following were the key management of the Investment Manager:
Kevin Nowlan Chief Executive Officer
Richard Ball Chief Investment Officer
Tom Edwards-Moss Chief Financial Officer
William Nowlan Investment Director
Frank Kenny Development Director
Sean O' Dwyer Risk and Compliance Officer
Frank O'Neill Chief Operations Officer
As at 30 September 2015, all of this team, with the exception of Sean O' Dwyer, were Directors of the Investment Manager. The investment management fee covers the services of this management team, save regulatory costs which are borne by the Company.
At 30 September 2015, the Directors of the Investment Manager held an aggregate of 2,086,836 shares in the Company, of which 600,000 are held by William Nowlan and 148,058 are held by Kevin Nowlan.
(31 March: 2015:2,059,854).
The Investment Management Agreement governs the provision of investment management and related services to the Company by the Investment Manager. It has an initial term of five years and will automatically continue for three consecutive year periods, unless terminated by the Company or the Investment Manager.
Investment Manager's fees
Base Fee
The base fee for each quarter is payable quarterly in arrears and is calculated by reference to the following table. The fee is based on the EPRA Net Asset Value (NAV) and is the sum of the following amounts:
EPRA NAV:
EPRA NAV | EPRA NAV | Base Fee | |
From | To | % | |
€'000,000 | €'000,000 | ||
0 | 0.250 | ||
>450 | 0.200 | ||
>600 | 0.150 | ||
Uninvested net proceeds | 0.125 |
The total base fee earned by the Investment Manager in the period amounted to €3.4m (30 September 2015: €1.9m) (excluding VAT). The Company did not pay the Investment Manager during the period in relation to the base fee and at the period end the Company owed the Investment Manager €3.4m (31 March 2015:€1.6m).
Performance fee
A performance fee may also paid to the Investment Manager subject to the Group achieving certain returns criteria. The Performance Fee is calculated annually on a per Ordinary Share basis as to 50% by reference to the return to shareholders (via the calculation of REIT IMA Shareholder Return) and as to 50% by reference to outperformance of the Reference Index the "SCSI/IPD Ireland Quarterly Property Index-All Property Quarterly Index" (via the calculation of the Relative Performance Fee). The Half Year Financial Statements include a performance fee provision of €1.5m being the Directors' best estimate of that portion of the performance fee which should be accrued as at 30 September 2015 (30 September 2014:€nil). The actual performance fee due for the year to 31 March 2016 will be determined in accordance with the provisions of the Investment Management Agreement, on the basis of the year end EPRA NAV. Performance fees due on 31 March 2015 were €5.8m. A reserve has been created for these amounts (Note 16).
The dilutive effect of the Investment Manager performance fee at 30 September 2015 has been included in the number of ordinary shares in issue (diluted). It is based on the number of shares that would be issuable had the performance fee for the year ended 31 March 2015 been settled in line with the terms of the Investment Management Agreement. For the portion provided in relation to the half year to 30 September 2015 the dilutive effect is calculated by reference to the NAV on 30 September 2015, based on the average share price for 20 days before that date.
23.3 Key management personnel
As at 30 September 2015, the non-executive directors were the only key management personnel of the Group. The management functions were delegated to the Investment Manager under the Investment Management Agreement. Details on the investment management fees which compensate the Investment Manager for these functions are disclosed above.
23.4 Internalisation of the Investment Manager
As described in Note 24.1, on 5 November 2015, the Company completed the internalisation of the Investment Manager. Under the Irish and UK Listing Rules, the internalisation transaction is classified as a related party transaction (a ''Related Party Transaction'') by virtue of (i) the relationship between the Company and the Investment Manager; (ii) the relationship between the Company, the Investment Manager and William Nowlan (a Director of the Company, a director of the Investment Manager and the holder of 25 per cent. of the issued share capital of Nowlan Property Limited); and (iii) the fact that William Nowlan, Kevin Nowlan, Frank O'Neill and Frank Kenny may, for the purposes of this particular transaction, be regarded as being persons exercising significant influence over the Company by virtue of such persons constituting the majority of the directors of the Investment Manager, and each of William Nowlan, Kevin Nowlan, Frank O'Neill and Frank Kenny also being vendors in respect of the transaction. Consequently, the transaction required the approval of the Shareholders at an Extraordinary General Meeting, which was held on 27 October 2015. In addition to Shareholder approval, the transaction was also conditional upon, amongst other things, the conditions to completion set out in the Share Purchase Agreement having been satisfied (or, if capable of being waived, waived by the Company) and the relevant regulatory approvals from the Central Bank of Ireland having been obtained.
23.5 Other related party transactions
WK Nowlan Property Limited was an 80% owned subsidiary of Nowlan Property Limited until 5 August 2015 when it was transferred at its net asset value to a company owned and controlled by the Shareholders of Nowlan Property Limited. During the period it was engaged on an arm's length basis to carry out asset management and project management services in relation to other non-current assets held for sale and investment properties. The fees paid for these services were benchmarked on normal commercial terms. These fees totaled €0.6m to 30 September 2015 (30 September 2014: €0.3m). A balance of €0.1m was due to WK Nowlan Property Limited at the period end (31 March 2014: €nil). William Nowlan is Chairman of WK Nowlan Property Limited and Frank O'Neill is a non-executive director; both are shareholders in WK Nowlan Property Limited along with Kevin Nowlan.
The Group acquired Dundrum View, an apartment block in Dundrum, Dublin 14 at a contracted price of €28.05m during the period. Frank Kenny held a 1.9% holding in this asset while other family members held a further 1.1%.
There were no further related party transactions for the period.
24. Subsequent Events24.1 Internalisation of the Investment ManagerOn 8 May 2015, the Group announced the proposed internalisation of the investment manager. The internalisation occurred by the acquisition of the entire issued share capital of the parent company of the investment manager, Nowlan Property Limited, together with the acquisition of the 25% of the shares in the investment manager held otherwise than by the parent company. The effective date for the acquisition is 1 April 2015. The internalisation of the investment manager was approved by an Extraordinary General Meeting of the Company on 27 October 2015, and completed on 5 November 2015. 10.9m shares in the Company were issued on 10 November 2015 in part payment for this transaction.
On acquisition, the Group recognised goodwill of €14.2m being the difference between the consideration paid for the Investment Manager and the value of the tangible net assets and liabilities. The difference is due to the valuation of the Investment Management Agreement.
As a result of the internalisation, the following directors of the Investment Manager became Directors of the Company on 5 November 2015.
Mr. Kevin Nowlan Chief Executive Officer
Mr. Thomas Edwards-Moss Chief Financial Officer
The effect of the internalisation on the group consolidated financial statement as at 30 September 2015 is illustrated in the table below. Further information on the transaction, including details on the consideration payable, can be obtained from the Shareholder Circular published on the Group's website on 23 September 2015.
30 September 2015 - Impact of the internalisation of the Investment Manager | |||||
Pre internalisation | Post internalisation | Impact | |||
€'000 | €'000 | ||||
Unaudited | Unaudited | ||||
Investment Property | 739,147 | 736,771 | |||
Tangible fixed assets | - | 2,618 | |||
Goodwill | - | 14,207 | |||
Cash | 114,753 | 107,887 | |||
Other assets | 28,911 | 28,997 | |||
Total Assets | 882,810 | 890,480 | 0.9% | ||
Liabilities* | (57,785) | (56,236) | |||
Net asset Value | 825,025 | 834,244 | 1.1% | ||
Shareholders' funds | |||||
Issued capital and share premium | 657,987 | 670,846 | |||
Retained earnings | 159,766 | 161,899 | |||
Other reserves | 7,272 | 1,500 | |||
825,025 | 834,244 | ||||
'000 shares | '000 shares | ||||
Ordinary shares in issue | 670,317 | 670,317 | |||
Shares issued during internalisation | - | 10,934 | |||
Ordinary shares in issue post internalisation | 670,317 | 681,251 | |||
Estimated additional shares due for issue from performance reserve | 5,814 | 1,150 | |||
Diluted number of shares | 676,131 | 682,401 | |||
IFRS NAV per share (cents) | 123.1 | 122.5 | -0.5% | ||
Diluted IFRS NAV per share (cents) | 122.0 | 122.3 | 0.2% | ||
EPRA NAV per share (cents) | 122.1 | 122.4 | 0.2% | ||
An interim dividend of of 0.7 cent per share (2014: 0.3 cent) was declared on 11 November 2015. All of the dividend is a PIB dividend.
24.3 Hardwicke and Montague HouseOn 23 October 2015 the Group served notice to exercise a call option to acquire Hardwicke House and Montague House. This will result in the legal completion of this purchase. Both properties have been recognised fully as investment properties in accordance with the Groups accounting policy on investment properties.
24.4 Purchase of 39 Harcourt StreetOn 6 October the Group exchanged contracts to purchase 39 Harcourt Street at a purchase cost of €1.8m.
24.5 Bank facilityOn 11 November 2015, the Company entered into an €400m revolving credit facility at a margin of 205bp which replaces the Company's €100m revolving credit facility which was in place at the period end.
Directors and Other Information
Directors Daniel Kitchen (Chairman)
Colm Barrington (Senior Independent Director)
Stewart Harrington
William Nowlan
Terence O'Rourke
Kevin Nowlan (Chief Executive Officer - appointed 5 November 2015)
Thomas Edwards-Moss (Chief Financial Officer-appointed 5 November 2015)
Secretary Castlewood Corporate Services Limited
(Trading as Chartered Corporate Services)
Taney Hall
Eglinton Terrace
Dundrum
Dublin 14
Ireland
Registered Office South Dock House
Hannover Quay
Dublin D02 X
Ireland
Company Number 531267
Independent Auditor Deloitte
Chartered Accountants and Statutory Audit Firm
Hardwicke House
Hatch Street
Dublin 2
Investment Manager WK Nowlan REIT Management Limited
South Dock House
Hannover Quay
Dublin D02 XW94
Ireland
Independent Valuer CBRE Dublin
3rd Floor, Connaught House
1 Burlington RoadDublin 4
Ireland
Principal Bankers Bank of Ireland
50-55 Baggot Street Lower
Dublin 2
Ireland
Depository BNP Paribas Securities Services (formerly Credit Suisse International, Dublin Branch)
Trinity Point 10-11
Leinster Street South
Dublin 2
Ireland
Registrar Capita Registrars (Ireland) Limited t/a Capita Asset Services
2 Grand Canal Square
Dublin 2
Ireland
Principal Legal Advisers A&L Goodbody
25/28 North Wall Quay
IFSC
Dublin 1
Ireland
Corporate Brokers Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
Dublin 4
Ireland
Credit Suisse International
One Cabot Square
London E14 40J
United Kingdom
Glossary
AIF is an Alternative Investment fund
AIFM is an Alternative Investment Fund Manager
Cash passing rent is the gross property rent receivable on a cash basis as at the reporting date. It includes sundry items such as car parks rent and estimates of rents in respect of unsettled rent reviews.
Contracted rent is the annualised rent adjusted for the inclusion of rent that is subject to a rental incentive such as a rent free or reduced rent period.
Developer's profit is the profit on cost estimated by valuers which is typically a percentage of developer's costs, usually 20%.
Development construction cost is the total costs of construction to completion, excluding site and financing costs. Finance costs are assumed at a notional 6% per annum by the valuers.
EPRA is the European Public Real Estate Association, which is the industry body for European REITs
EPRA cost ratio (including direct vacancy costs) is the ratio of net overheads and operating expenses against gross rental income. Net overheads and operating expenses relate to all administrative and operating expenses net of any service fees, recharges or other income which is specifically intended to cover overhead and property expenses.
EPRA cost ratio (excluding direct vacancy costs) is the same as above except it excludes direct vacancy costs.
EPRA earnings are the profit after tax excluding revaluations and gains and losses on disposals and associated taxation (if any).
EPRA NAV per share is the EPRA NAV divided by the diluted number of shares at the period end.
EPRA net assets (EPRA NAV) are defined as the IFRS assets excluding the mark to market on effective cash flow hedges and related debt instruments and deferred taxation on revaluations. EPRA NAV therefore equals IFRS NAV in this instance.
EPRA Net Initial Yield (NIY) is the cash passing rent generated by the investment portfolio, less estimated recurring irrecoverable property costs expressed as a percentage of the portfolio valuation as adjusted. The portfolio valuation is adjusted by the exclusion of development and residential properties and the addition of purchaser's costs where applicable.
EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of debt and derivatives and to include deferred taxation on revaluations.
EPRA Topped-up Net Initial Yield is calculated as the EPRA NIY but adjusting the cash passing rent for contractually agreed uplifts, where these are not in lieu of rental growth.
EPRA vacancy rate is the Estimated Rental Value (ERV) of vacant space divided by the ERV of the whole portfolio, excluding developments and residential property. This is the inverse of the occupancy rate.
EPS or Earnings per share is the profit after taxation divided by the weighted average number of shares in issue during the period
Equivalent yield is the weighted average of the initial yield and reversionary yield and represents the return that a property will produce based on the occupancy data of the tenant leases.
Estimated Rental Value (ERV) or market rental value is the external valuers' opinion as to what the open market rental value of the property is on the valuation date, and which could reasonably be expected to be the rent obtainable on a new letting on that property on the valuation date.
Fair value movement is the accounting adjustment to change the book value of the asset or liability to its market value.
Gross rental income is the accounting based rental income under IFRS. When the Group provides incentives to its tenants the incentives are recognised over the lease term on a straight line basis in accordance with IFRS. Gross rental income is therefore the cash passing rent as adjusted for the spreading of these incentives.
IPO is the Initial public offering, i.e. the first equity raising of the Company.
IPD is the Investment Property Databank Limited which is part of the MSCI Group and produces as independent benchmark of property returns and which provides the Group with the performance information required in calculating the performance based management fee.
Like for like rental income growth is the growth in net rental income on properties owned through the current and previous periods under review. This growth rate includes revenue recognition and lease accounting adjustments but excludes properties held for development in either period or properties with guaranteed rental reviews. The Group does not present this statistic in this period as this is the first period in which the Group has held investment properties.
Net development value is the external valuers view on the end value of a development property when the building is fully completed and let.
Net equivalent yield is the weighted average income return (after allowing for notional purchaser's costs) a property will produce base on the timing of the income received. As is normal practice, the equivalent yields (as determined by the external valuers) assumes rent is received annually in arrears.
Net reversionary yield is the expected yield after the rent reverts to the ERV.
Occupancy rate is the estimated rental value of let units as a percentage of the total estimated rental value of the portfolio, excluding development properties.
Over rented is used to describe when the contracted rent is higher than the ERV.
Property Income Distributions (PIDs) are dividends distributed by a REIT that are subject to taxation in the hands of the shareholders. Normal withholding tax still applies in most cases.
REIT is a Real Estate Investment Trust as set out under section 705 E of the Finance Act 2013.
Reversion is the rent uplift where the ERV is higher than the contracted rent.
Tenant or lease incentives are incentives offered to occupiers on entering into a new lease and may include a rent free or reduced rent period, or a cash contribution to fit-out. Under accounting rules the value of these incentives is amortised through the rental income on a straight line basis over the term of the lease or the period to the next break point.
Total shareholder return is the growth in share value over a period assuming dividends are reinvested to purchase additional units of stock.
Under rented is the term used to describe where contracted rents are lower than ERV. This implies a positive reversion after expiry of the current lease contract terms.
VPS4 is the RICS Red Book Valuation Standard VPS4.
Shareholders' Information
Hibernia REIT plc website: www.hiberniareit.com Investor Contacts
South Dock House | Hanover Quay | Dublin D02 XW94 | Ireland
T +353 (0)1 536 9100 | F +353 (0)1 536 9101
For investor queries please email [email protected]
For media enquiries: [email protected]
[1] Includes pre-let refurbishments, residential income net
[2] Excludes refurbishment and development projects
[3] FTSE EPRA/NAREIT Global Real Estate Index Series
[4] Comprising the Business Review and Principal Risks and Uncertainties
[5] Cash purchases include c. €687,000 payable from 31 March 2015
Related Shares:
HBRN.L