Preliminary Results

PRELIMINARY RESULTS

For the financial year to 31 March 2017

23 May 2017

Hibernia REIT plc ("Hibernia", the "Company" or the "Group") today announces its preliminary results for the financial year to 31 March 2017. Highlights for the financial year:

Strong financial performance, driven by developments

· Portfolio value of €1,167m, up 9.9%[1] in the year (developments up 47.2%1) and 7.4%1 in H2

· 12-month total property return of 14.5% vs IPD Ireland Index of 11.2%

· EPRA NAV per share of 146.3 cent, up 11.9% in the year and 8.7% in H2

· Net rental income of €39.7m, up 56.3% excluding surrender premium in prior year (up 31.0% incl. this)

· Profit before tax of €119.0m (March 2016: €136.3m) including revaluation surplus

· EPRA earnings of €15.0m (March 2016: €5.1m, excluding surrender premium)

Development programme making excellent progress and enhanced by select acquisitions

· Three schemes completed, delivering 191,000 sq. ft. of Grade A space and profit on cost of 50%

· Three committed schemes at March 2017 (295,000 sq. ft. Grade A) completing over period to mid-2018

o Full ownership of 1WML acquired in December 2016 with purchase of Starwood's 50% interest

· Hanover Building added to committed schemes in May 2017: will deliver 71,000 sq. ft., of refurbished space (including 12,000 sq. ft. fitness facility) by end of 2018

· Near and longer term pipeline of five schemes totalling 660,000 sq. ft. of office space post completion

o Blocks 1, 2 & 5 Clanwilliam Court added to longer term pipeline following acquisition in July 2016

Income and WAULTs increased significantly through leasing activity, with more to come

· Contracted rent roll now €48.3m, up 24% on 31 March 2016[2]

· "In-place" office portfolio income duration and security increased

o WAULT to earlier of break / expiry now 6.7 years, up 56% on 31 March 2016

o 50% of rent now upward only or capped / collared at next rent review (March 2016: 36%)

· Increase in WAULTs driven by letting of completed developments which have avg. term to earlier of break / expiry of 10.7 years and avg. rents of €49psf

· Remaining "in-place"[3] CBD offices have avg. rents of €37psf, reversionary potential of 24% and an avg. period to earlier of rent review or expiry of 3.2 years

Asset management initiatives

· Building management department formed to take management of Group's multi-let buildings in-house and maximise service for tenants: as of April 2017 all multi-let offices were under direct management

· Flexible workspace arrangement formed with Iconic Offices in Block 1, Clanwilliam Court

Modest leverage: flexible, undrawn facilities for further investment

· Net debt at 31 March 2017 of €155.3m, LTV of 13.3% (March 2016: €52.9m, LTV 5.7%)

· Cash and undrawn facilities of €288.9m: €149.5m net of committed development spend and anticipated repayment of 1WML facility

Growing dividend as rental income increases 

· Final dividend of 1.45 cent per share, bringing total for year to 2.2 cent, up 46.7% (2016: 1.5 cent)

· Expect further growth as developments are leased and reversion captured via lease events / reviews

Kevin Nowlan, Chief Executive Officer of Hibernia, said:

"We are very pleased to report strong results, outperforming the Irish property index, driven particularly by development activity and asset management in the second half. Our leasing activity has led to a 24% increase in our contracted rent roll in the year and a 56% increase in the average unexpired term of our "in-place" office income. We are proposing to increase the dividend by 47% and with rising portfolio income, we expect dividends to become an increasingly important component of shareholder returns in the future.

"In addition we have made good progress in the year in de-risking the portfolio: we have acquired full control of 1WML, we have clarity on the date of the OPW's departure from Harcourt Square, the three developments we completed this year are fully let and pre-leasing is progressing well in our committed schemes.

"Looking ahead, we are positive about our prospects. Economic momentum remains strong in Ireland and we are seeing continued interest in Dublin from UK-based occupiers following the UK's decision to leave the EU: we expect that decisions on destination cities will start to be made in the second half of the year. We have a portfolio rich in opportunity, an exciting development pipeline and a strong balance sheet for further investment where we see opportunity."

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 87 738 6608, [email protected]

About Hibernia REIT plc Hibernia REIT plc is a Dublin-focused Irish Real Estate Investment Trust ("REIT"), listed on the Irish and London Stock Exchanges, which owns and develops Irish property. All of Hibernia's portfolio of properties is in Dublin and it specialises in city centre offices.

The results presentation will take place at 9.00am today: a conference call facility will be available to listen to the presentation live using the following details:

Ireland Toll: +353 (0)1 696 8154Ireland Toll-Free: 1800 936 842

Participant code: 71194587#

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. 

Chief Executive Officer's Statement

We are pleased to report another set of strong results, driven in particular by the performance of our developments in the second half of the year. The total property return of our portfolio in the year was 14.5%, outperforming the IPD Ireland Index which returned 11.2%, and delivering a 11.9% growth in EPRA NAV per share to 146.3 cent. Development programme making excellent progress and enhanced by acquisitions in the year We completed three schemes in the year, 1 Cumberland Place, One Dockland Central and SOBO Works, delivering 191,000 sq. ft. of refurbished Grade A office space, all of which is fully let, and an aggregate profit on cost of 50%. As at 31 March 2017, our three committed schemes, 1WML, 1SJRQ and Two Dockland Central were progressing well: with the acquisition of Starwood's 50% interest in 1WML in December 2016, these three schemes will now deliver 295,000 sq. ft. of Grade A office space over the period to mid-2018, of which 25% was pre-let as at 31 March 2017. In May 2017, the Board approved the refurbishment and extension of the Hanover Building, which will deliver a further 71,000 sq. ft. (including a 12,000 sq. ft. fitness facility) and which we expect to complete in late 2018. The acquisition of Blocks 1, 2 & 5 Clanwilliam Court added to our development pipeline, which now totals 5 schemes and 660,000 sq. ft. of office space post completion. Rent roll and income duration increased significantly through leasing activity Our priority is to increase portfolio income and extend lease terms and income security through the leasing of our developments and through rent reviews and lease renewals. Key lettings in the year included 35,000 sq. ft. in 1WML pre-let to Informatica at a rent of €2.1m per annum, 32,000 sq. ft. in Two Dockland Central pre-let to HubSpot at a rent of €1.8m per annum and a new lease agreed with the Office of Public Works ("OPW") for all 117,000 sq. ft. of Harcourt Square at an annual rent of €6.0m. In total, new lettings and rent reviews increased contracted rents by €10.4m (€9.3m net of lease expiries and including new acquisitions), bringing contracted rents as at 31 March 2017 to €48.3m, up 24% on 31 March 2016. The weighted average periods to break and lease expiry for the new leases agreed in the year were 10 and 17 years, respectively, and these increased the "in-place" office WAULT to the earlier of break or expiry to 6.7 years, up 56%. In addition, 50% of the "in-place" office rents of €38.0m are now upward only or capped / collared at the next rent review (2016: 36%), limiting the Group's near term rental exposure in the event of a downturn in the rental market. New asset management initiatives We established an internal building management department in July 2016 to take direct control of the management of our multi-let commercial properties in order to develop closer relationships with our tenants and to provide a better level of service for them. As at 30 April 2017, all thirteen multi-let office buildings (totalling 644,000 sq. ft.) had transferred to direct management and new multi-let buildings will be added as they are completed or acquired: the department is expected to be cost neutral for Hibernia now it is fully operational. In January 2017 we formed a five year flexible workspace arrangement with Iconic Offices ("Iconic"), a leading Dublin-based flexible workspace provider (and existing tenant of Hibernia), to establish a serviced office and co-working business in 21,000 sq. ft. of Block 1 Clanwilliam Court (see further details below). The arrangement gives Hibernia the opportunity to learn more about flexible workspace and serviced offices, which are increasingly significant elements of the office occupational market. In addition, it gives Hibernia contact with small, rapidly growing enterprises which may have larger space requirements in future. Modest leverage and available funding for further investment We are moving towards our through-cycle leverage target of 20-30% loan to value: in the financial year we invested €52.5m in development and refurbishment expenditure and €85.4m in acquisitions: as at 31 March 2017 net debt was €155.3m and our loan to value ratio was 13.3% (March 2016: 5.7%). We continue to have substantial available funding: cash and undrawn facilities as at 31 March 2017 were €288.9m, €149.5m net of committed development spend and expected repayment of the 1WML facility. Growing dividend as rental income increases EPRA earnings grew 192.5% to €15.0m in the year (excluding last year's one-off surrender premium) as a result of our letting activity. This has enabled the Board to propose a final dividend of 1.45 cent per share, bringing the dividend for the year to 2.2 cent, up 46.7% on prior year. We expect this to grow further as our developments are leased up and as we capture the reversionary potential within the "in-place" office portfolio.

Positive outlook The Irish economy continues to perform well and vacancy rates in Dublin offices remain low. While there are new buildings under construction, the limited availability of speculative development funding means significant pre-lets are often a requirement before developments can proceed. We are seeing continued interest in Dublin from UK-based occupiers following the UK's decision to leave the EU, and we expect that decisions on destination cities will start to be made in the second half of the year.

We remain positive on our prospects: we have a portfolio rich in opportunity and let off low rents, an exciting development pipeline with substantial completions in the next 12 months, and a strong balance sheet for further investment where we see opportunity.

Kevin Nowlan, Chief Executive Officer

Market Review General economy Ireland's GDP growth in 2016 was 5.2% (source: CSO), which was ahead of expectations and the strongest growth in the Eurozone (source: European Commission). The Central Bank of Ireland ("CBI") is expecting GDP growth to remain strong in 2017 and 2018 at 3.5% and 3.2%, respectively. While the CBI's forecasts are more conservative than some commentators', they still compare favourably to GDP growth forecasts for the Euro area of 1.6% in 2017 and 2018 (source: the OECD). 

The unemployment rate in Ireland has continued to fall and reached 6.2% in April 2017 (April 2016: 8.4%). Dublin accounted for about one third of Irish job creation in 2016 and saw a year-on-year increase in the number of jobs of 3.2% (source: CSO), with office-based employment in Dublin growing 5.5% (source: Savills). With services, manufacturing and construction PMIs recovering following a softer period in the aftermath of the UK referendum in June 2016, the favourable labour market trends are expected to continue.

As the economy grows and tax revenues increase, so the fiscal position is improving: in 2017 the budget deficit is expected to reduce to 0.3% of GDP and the debt/GDP ratio is expected to fall to 72% (94% at start of 2016) (source: Davy). Political pressure for increased Government spending and/or tax cuts is growing so the deficit statistics may widen in coming years but accompanied by a likely stimulus to domestic demand.

As a relatively small and open economy, Ireland is highly dependent on international trade and foreign direct investment ("FDI"). Events that could negatively affect these, such as the UK's departure from the EU and possible US tax and trade policy changes, remain among the principal risks to the economy. To date however, no such impacts have been felt: 5,500 IDA sponsored jobs were created in Dublin & the Mid-East region in 2016 vs the five-year average of 4,800 (source: IDA) and the flow of FDI into Ireland has remained strong in early 2017. In addition, the UK's departure from the EU may create opportunities for Dublin even if the eventual impact for the wider Irish economy may be negative given strong trade links with the UK.

Irish property investment market As the Irish property market has moved out of its recovery phase returns have normalised: in the 12 months to 31 March 2017 the MSCI Ireland Property Index delivered a total return of 11.2% (vs 23.5% in 12 months to 31 March 2016), of which 6.2% derived from capital growth (March 2016: 17.7%) and 4.7% from income (March 2016: 5.0%). The industrial sector was the top performer over this period with a total return of 16.7%, followed by retail at 11.8% and offices at 10.8%. Despite the expected moderation of returns, in 2016 Ireland was the third highest performer in the MSCI Global Index, which delivered 7.4%. The majority of office capital growth (in the MSCI Ireland Index) has continued to come from ERV growth rather than yield compression. Views among the Dublin agents on the level of prime office yields vary but most are in a range of 4.25%-4.75%.

Investment spend in 2016 totalled €4.5bn with offices comprising 31% and retail 50%: these statistics are somewhat skewed by two particularly large shopping centre transactions in the year (source: CBRE). The last three years have seen exceptional investment volumes, averaging €4.2bn per annum as a result of deleveraging, but total volumes are expected to return to more "normal" levels of c.€2bn in 2017 (source: JLL): in Q1 2017 investment totalled €0.5bn (source: CBRE). Given the increasingly institutional nature of ownership of prime properties, and the reduction in investment volumes, Grade A offices are becoming harder to buy and accounted for a smaller share of the traded stock in 2016 (source: Savills). Consequently we may see more forward funding transactions as institutional investors seek to acquire prime office property in a market where development funding remains limited. 

The tax changes for property funds and S110 companies announced in late 2016 which do not apply to Irish REITs and were introduced at the start of 2017 have not had a discernible impact on our market (i.e. prime Dublin CBD offices) to date: the dominant buyer of this asset type for the past 18 months has been European pension funds who are generally exempt from the changes.

Office occupational market With office supply still limited and substantial tenant demand, market conditions in Dublin continue to favour landlords: long leases (15 years+) and limited tenant incentives remain prevalent, especially away from large pre-leasing deals. Dublin office take-up in 2016 was 2.6m sq. ft., substantially above the 10-year average of 2.0m sq. ft. (source: CBRE). In Q1 2017, a typically quiet quarter, 0.5m sq. ft. of lettings were agreed and 0.5m sq. ft. was listed as reserved, which bodes well for take-up in Q2 2017 (source: CBRE). We expect take-up in 2017 to be weighted towards the second half of the year as many of the larger requirements currently active are unlikely to translate into transactions until later in the year. Supporting this view, the volume of active demand for office accommodation at the end of Q1 2017 stood at more than 3.0m sq. ft. up from 2.8m sq. ft. at the end of Q4 2016 (source: CBRE). 

The overall Dublin vacancy rate was 7.0% at the end of Q1 2017 and the Grade A vacancy rate in Dublin 2/4 (where 65% of Hibernia's portfolio is located) was 3.1% (source: CBRE). These vacancy rates are marginally higher than at Q4 2016 as some new supply has started to complete and as offices vacated by some occupiers moving to new premises are coming back into vacant stock. Rents across the Dublin office market rose in the year with prime headline rents at the end of Q1 2017 of €62.50 per sq. ft., up from €57.50 per sq. ft. at the end of Q1 2016 (source: CBRE). Given the scarcity of speculative development funding, large single occupiers looking for pre-lets may be able to secure a discount on these terms where a letting enables a developer to unlock development funding.

Notwithstanding the increase in prime rents, the CBD (where all of Hibernia's office portfolio is located) remains the area of choice for occupiers, accounting for 77% of Dublin office take-up in 2016, slightly above the six-year average of 74% of take-up. In line with sectoral splits over the past three years, tenants in the technology, media and telecoms sector accounted for 25% of take-up in 2016, with professional services and financial services accounting for 15% and 14%, respectively (source: CBRE).

Office development pipeline 2016 marked the delivery of the first newly constructed office buildings in the Dublin market in over five years: in total, 1.1m sq. ft. of new office space was delivered, 94% of which is now let. We expect around 2.1m sq. ft. to be delivered in 2017 of which c. 50% is pre-let or reserved. Further ahead, we expect around 1.5m sq. ft. will be delivered in 2018, and 1.8m sq. ft. in both 2019 and 2020, with a total of 10.8m sq. ft. gross of new space delivered between 2015 and 2020. 10.8m sq. ft. of gross additions to the stock represents c.9.8m sq. ft. of net new space (as a result of demolition to facilitate new development) and would represent an increase in the total stock figure of c.24% vs an increase in stock of 98% from 1993 - 2002 and 51% in 2003 - 2011 (source: Goodbody). 

Finance for speculative development remains limited, which is resulting in the owners of key development sites in the CBD seeking large pre-lets before commencing development. Key pre-lets in 2016 included Grant Thornton (107,000 sq. ft.) and Amazon (170,000 sq. ft.), both achieving rents in excess of €50.00psf and term to break in excess of 12 years.

Residential sector The lack of available housing in Dublin remains one of the biggest challenges facing the Irish property industry in the short to medium term. Data from the 2016 Census showed that the population in Ireland grew by 3.8%, which was three times faster than any other EU state in the last five years. Dublin's population grew by 5.8% in the same period (74,000 people) (source: CBRE). The numbers in rental accommodation rose by 4.7% over the same period (source: CSO) and the homeownership rate fell from 69.7% to 67.6% and was even lower in urban areas, at 59.2%. Regardless of whether the Census or Department of Housing statistics are used, completions and commencements fall well short of the Government's target to deliver 25,000 homes per annum in the period to 2021 (Source: Rebuilding Ireland/Government of Ireland) and the ESRI's projections that demand is likely to increase at a steady rate before reaching just over 30,000 units per annum by 2024.

Despite the undersupply of stock, residential transaction and mortgage approval volumes showed strong growth early in the year (source: BPFI) resulting in house prices rising by 8.1% in Dublin in the year to February 2017 (source: CSO) and Davy are forecasting national house price inflation of 10% through 2017. There is continued upward pressure on rents and Dublin rents were up 13.9% in the 12 months to March 2017 (source: DAFT) although the ability to capture reversion on existing (let) residential stock is limited by the introduction of Rent Pressure Zones ("RPZs") (including Dublin) which limit rent increases to a maximum of 4% per annum for the next three years.

Business Review

Acquisitions and disposals The Group made two acquisitions in the year totalling €85.4m, both of which have development angles:

· In July 2016 we acquired Blocks 1, 2 & 5 Clanwilliam Court, Dublin 2, for €52.4m (incl. costs) (€544 per sq. ft.). These 1970s office buildings total 93,700 sq. ft. and have 220 underground car parking spaces. The acquisition, together with Marine House in March 2016, gave the Group ownership of four contiguous office blocks in a prominent, city centre location with potential for substantial redevelopment in the longer term

· In December 2016 we acquired full control of the development at 1 Windmill Lane ("1WML") by purchasing Starwood's 50% interest for €28.3m (incl. costs) plus €4.7m in debt through the assumption of Starwood's 50% share of the Windmill debt facility

The sale of non-core assets from the Dorville portfolio (acquired in 2014) was virtually completed in the year (only two assets remained to be sold at year end), with 13 assets disposed of, generating gross sales proceeds of €4.2m and a net profit of €0.1m after costs. Overall, the sale of the non-core assets has delivered a net profit of €5.0m on sales of €34.4m.

Portfolio overview

As at 31 March 2017 the property portfolio consisted of 28 investment properties valued at €1,167m, which can be categorised as follows:

1. Includes capex in acquisition costs

2. Includes full value of 2DC in IFSC (even though under refurbishment)

3. Excludes the value of space occupied by Hibernia in South Dock House. Includes full value of The Hanover Building

4. 1 Cumberland Place now in Traditional Core but value of site at the front is in Dublin CBD Office Development

5. Harcourt Square yield is the yield on existing building (91% of property value)

6. Excludes all CBD office developments but includes Hanover and 2DC in CBD Dublin Offices

The office element of our portfolio had the following statistics at 31 March 2017:

1. To earlier of review or expiry

2. Incl. small amount (

3. Mark to Market ("MTM")

4. 1 Cumberland Place, SOBO, 1DC

5. CBRE assume c.€18.2m CAPEX to achieve this ERV

6. 2DC, 1WML

Our priority is to increase portfolio income and extend unexpired lease terms and income security. We are seeking to achieve this in two ways:

· Completion and letting of new office developments: in the financial year we completed three schemes, totalling 191,000 sq. ft. of office space, all of which are fully occupied on leases with average remaining terms of 20 years and first break options at 10.7 years, adding €10.2m to the "in-place" office portfolio and significantly increasing the WAULTs to break and expiry.  The completion and letting of our four committed development schemes over the next 18 months (see further details below) should further improve portfolio income and unexpired lease terms

· Rent reviews & lease renewals: the remaining "in-place" portfolio (i.e. the acquired "in-place" office portfolio) has an average period to the earlier of rent review or expiry of 3.2 years and reversionary potential of 24% (at valuers' ERVs). As we progress through the rent reviews and lease renewals we expect to enhance portfolio income and duration further

The "in-place" office portfolio occupancy level at 31 March 2017 was 97% (31 March 2016: 94%). The increase in occupancy rate is largely attributable to small lettings in the Chancery Building and Hanover Street East as well Two Dockland Central (formerly Guild House) being moved to developments.

Developments and refurbishments

The Group completed three schemes totalling 191,000 sq. ft. of refurbished Grade A office space in the year. As at 31 March 2017 the Group had three committed schemes under way, which will deliver c.295,000 sq. ft. of new and refurbished Grade A office space by mid-2018, of which 25% was pre-let. In May 2017, the Board approved the redevelopment and extension of Hanover Building, which adds a further 71,000 sq. ft. (incl. 12,000 sq. ft. fitness centre) to committed schemes and is expected to complete by the end of 2018 at an estimated total cost of €22m. As a result, the proportion of committed schemes that is now pre-let is 21% of office space.

The Group's pipeline of potential future developments comprises five schemes (assuming Clanwilliam Court and Marine House are treated as one scheme) which, if undertaken, would deliver over 660,000 sq. ft. of high quality office space when completed.

Schemes completed Three schemes completed in the year, delivering 191,000 sq. ft. of Grade A space, all of which are fully let:

· One Dockland Central: the refurbishment was successfully completed in May 2016, delivering a profit on cost of 40%. Approximately half of the c. 58,000 sq. ft. refurbished was pre-let to HubSpot in November 2015 and the remaining space was let to ComReg in July 2016

· SOBO Works: converted to c. 10,000 sq. ft. of office accommodation and c. 2,000 sq. ft. of retail with the works completing in April 2016 and delivering a profit on cost in excess of 50%. All the space was pre-let to Iconic Offices, a flexible workspace provider, at a rent of €0.4m per annum

· 1 Cumberland Place: completed in September 2016, generating a profit on cost in excess of 50%. 96,000 sq. ft. was pre-let to Twitter, who took occupation at completion, and the remaining 33,000 sq. ft. was let to Travelport (MTT) in September 2016 on a lease which commenced in November 2016

Committed development schemes

At 31 March 2017, the Group had committed schemes under way at three properties which will deliver c. 295,000 sq. ft. of new and refurbished Grade A office space over the period to mid-2018. 25% of this office space was pre-let as at 31 March 2017. In May 2017, the Board approved the redevelopment of the Hanover Building, which adds a further 71,000 sq. ft. (including a 12,000 sq. ft. fitness centre) to committed schemes:

· Two Dockland Central: the refurbishment is on schedule to complete in late 2017. All tenants vacated following expiry of their leases in March 2017 (with the exception of BNY Mellon, who hold a long-term lease and remain in occupation) and the contractors are on site. The building is now c. 75 % let

· 1 Windmill Lane ("1WML"): completion is scheduled for July 2017, ahead of the original completion target of late 2017. So far 29% of the building has been pre-let to Informatica and discussions continue with various potential tenants

· 1 Sir John Rogerson's Quay ("1SJRQ"): construction work continues and the scheme remains on track to complete in mid-2018. Preliminary discussions with potential tenants have commenced

· Hanover Building: the office tenant (BNY Mellon) left the building at the end of March 2017 and the redevelopment and extension of the building is now approved and is expected to complete in late 2018

At 31 March 2017 CBRE, the independent valuer, had an average estimated rental value for the unlet office space (221,000 sq. ft.) in our three committed schemes at that point (1WML, 1SJRQ, Two Dockland Central) of €52.17psf and were assuming an average yield of 5.30% upon completion: based on these assumptions they expect a further c. €20m of development profit (ex. finance costs) to be realised through the completion and letting of the unlet space in these schemes. A 25 basis point movement in yields across the unlet space would make c. €10m of difference to the development profits, as would a €2.50psf change in estimated rental value.

Please see further details on the development schemes below:

1. Per CBRE valuation at 31 Mar 2017

2. 58k sq. ft. refurbished out of total 74k sq. ft.

3. €7.9m net of dilapidation charge received

4. Est. total cost psf. is net of dilapidation

5. Excl. additional basement areas (7.5k sq. ft.) and potential new block (c.50k sq. ft.) but incl. rentalised reception (2k sq. ft.)

6. No cost attributable to basement area

7. Office demise only

8. €40.2m net of dilapidation charge received

9. 57k sq. ft. is committed refurbishment of entire 73k sq. ft.

10. €9.4m net of dilapidations charge received

11. Hibernia est. all in cost of 1WML on 100% basis is €77m (i.e. €24m all-in land cost plus €53m total capex). Hibernia's financial accounts show that the cost of acquiring 100% of 1WML was €36m which incl. the vendor's 50% share of capex spent to date of acquisition of €13m. There was c.€28m of capex remaining (based on est. total capex of €53m) to be spent at date of acquisition. Therefore, the total cost of the project is €77m (€36m + €28m + €13m = €77m)

12. Commercial (incl. reception/townhall) and residential

13. CBRE valuation assumes capex of €13.8m vs. Company planned capex of €22m. CBRE office ERV of €47.40psf is based on €13.8m capex

14. €142.4m net of dilapidations charge received

Development pipeline We have split our pipeline into near term projects and longer term projects and are working to prepare them for future development. Following the approval of Hanover Building as a committed scheme and the acquisition of Blocks 1, 2 & 5 Clanwilliam Court, there are now five future schemes in the pipeline (if combining Clanwilliam Court and Marine House) which, if undertaken, would deliver and estimated 660,000 sq. ft. of high quality office space when completed.

Near term projects

· Cumberland Place: Planning permission has been received for a new office block of 50,000 sq. ft. in front of the existing block ("Cumberland Phase 2"). Assuming market conditions remain favourable and provided we make sufficient progress in de-risking 1WML and 1SJRQ, we currently expect to commence work on this project during 2018

Longer term projects

· Blocks 1, 2 & 5 Clanwilliam Court: added to the longer-term pipeline following their acquisition in July 2016. All leases expire before the end of January 2022 and there is potential for repositioning via refurbishment and / or expansion or full redevelopment either with or without the adjoining Marine House, where all leases expire at a similar time

· Harcourt Square: planning permission for Phase 2 was received in June 2016 giving full planning permission for a development of up to 276,500 sq. ft. of office and ancillary accommodation on the 1.9-acre site. A new non-renewable six-year lease was entered with the Office of Public Works ("OPW") in December 2016 giving all parties certainty over the OPW's departure date. We intend to refine our plans for the development between now and December 2022

· Gateway: we continue to work on plans for the 14-acre site's future redevelopment

Please see further details on the development pipeline below:

1. €51m (incl. costs) paid for existing block which was refurbished and completed in September 2016. No land value attributed to new block at acquisition

2. Currently 178k sq. ft. of industrial/logistics

3. Planned new offices of c.115k sq. ft. plus potential to add a further c.130k sq. ft. of offices

Asset management

In the year to 31 March 2017 we added €10.4m to contracted rents through lettings and rent reviews, €9.3m net of lease expiries and surrenders, increasing the contracted rent roll by 24% to €48.3m.

Summary of letting activity in the period

· Offices: 10 new lettings of 302,000 sq. ft. and one rent review / lease extension, generating €10.4m of incremental new annual rent. The weighted average periods to break and lease expiry for the new leases were 10.7 years and 17 years, respectively

· Residential: Letting activity and lease renewals generated incremental gross annual rent of €93,000 in the period (new leases signed on 75 apartments and leases renewed on 180 apartments). 293 of the Company's 313 apartments are located in Dundrum and, in the period, average rents achieved by the Company for two - bed apartments in Dundrum were €1,703 per month vs average two - bed passing rents of €1,696 per month. The total net income from residential properties during the year was €5.2m representing a net to gross margin in excess of 80%

As set out below, we are in discussions with potential tenants in a number of buildings where we have vacant space. Key asset management highlightsSee also 'Developments and Refurbishments' section above for further details. Building management We established an internal building management department in July 2016. This was done to take direct control of the management of our multi-let commercial properties and develop closer relationships with our tenants and to provide a better level of service for them: in-house property management is common amongst the major UK and European REITs. Now that it is fully operational, the department is expected to be cost neutral for Hibernia. As at 31 March 2017, eight office buildings totalling 431,000 sq. ft. were under direct management. The remaining five buildings (213,000 sq. ft.) in the "in-place" office portfolio moved to direct management in April 2017. As new multi-let office developments are completed (e.g. 1WML, 2DC), these will also be managed by the department. Flexible workspace arrangement In January 2017 we formed a five-year flexible workspace arrangement with Iconic Offices ("Iconic") to establish a serviced office and co-working business in 21,000 sq. ft. of Block 1 Clanwilliam Court (see further details below). Iconic is a leading Dublin-based flexible workspace provider and was already a tenant of Hibernia in SOBO Works. Under the agreement Hibernia provides the property and Iconic manages the business operations, with the rent generated being shared. Hibernia has funded the majority of the fit-out costs (c. €1m) and receives the majority of net rent from the occupier (after amortisation of the cost of fit-out over the five-year period) up to a level equating to headline rent of c. €45 per sq. ft. over the five-year period. Iconic receives the majority of any net rent above this level. This arrangement gives Hibernia the opportunity to learn more about flexible workspace and serviced offices, which are increasingly significant elements of the office market. In addition, it gives Hibernia contact with small, rapidly growing enterprises which may have larger space requirements in future. The arrangement commenced in April 2017: as at the end of April over 75% of the workstations and over 50% of the available co-working memberships were contracted, significantly ahead of budgeted performance. 

1WML, South Docks Having acquired full control of the development scheme in December 2016, in March 2017 we agreed a pre-let of the top two floors, totalling 35,000 sq. ft., to Informatica on a 17-year lease with six months rent free. The initial rent is €2.1m per annum, including proportional contributions to the reception and town hall areas. This pre-let represents c. 29% of the office space in the building, which is due to complete in July 2017. We are in discussions with a number of parties regarding additional potential lettings. Blocks 1, 2 & 5 Clanwilliam Court, D2 At acquisition in July 2016, the buildings, which total 93,700 sq. ft. of office accommodation and 220 car parking spaces, were 76% let to a range of occupiers, including the ESB, Bord Bia (the Irish Food Board) and Hines Real Estate Ireland, generating annual rent of €2.9m per annum (an average of €34psf). The flexible workspace arrangement with Iconic (see further details above) formed in January has taken virtually all the remaining vacant space in the buildings: occupancy is now c. 98%. Central Quay, South Docks We are in discussions with potential tenants regarding the ground floor (7,000 sq. ft.). Inspections are ongoing regarding the vacant third floor (11,000 sq. ft.). 1 Cumberland Place, D2 The redevelopment works completed in September 2016 and Twitter took occupation of the c. 96,000 sq. ft. it had pre-let. The remaining 33,000 sq. ft. were let to Travelport in September on a lease which commenced in November 2016 with a five-month rent free period. The contracted rent of the building is now c. €7m with weighted average unexpired lease terms of c. 11 years to break and 21 years to expiry. Harcourt Square, D2 In December 2016 we agreed a new, non-renewable, six-year lease with the Office of Public Works ("OPW") for the entire complex, commencing in January 2017, at an annual rent of €6.0m (€47psf), plus a one-off rent arrears payment of €0.5m. The building was let to the OPW and occupied by An Garda Síochána (the police) at a rent of €4.9m per annum on leases the last of which expired in December 2016. The agreement gives all parties certainty on the tenant's departure date, allows Hibernia to plan for its redevelopment and secures near term income for Hibernia. One Dockland Central, IFSC Of the 58,000 sq. ft. refurbished, 27,500 sq. ft. (two floors) was pre-let to HubSpot in November 2015 on a 20-year lease at a rent of €1.3m per annum (€45psf) with a six-month rent free period from commencement: the lease commenced in February 2016. In July 2016 the remaining two floors were let to ComReg on a 20-year lease at a rent of €1.6m per annum (€50psf) with a four-month rent free period. The average weighted average unexpired lease terms in the building are now 10 years to break and 17 years to expiry. Two Dockland Central, IFSC All existing tenants vacated the building by the end of March 2017 other than BNY Mellon (which holds a long lease) to enable the repositioning works (similar to those done in Once Dockland Central last year) to take place. As at 31 March 2017 we had pre-let 66% of the 57,000 sq. ft. under refurbishment: HubSpot, already an occupier of 27,500 sq. ft. in One Dockland Central, has pre-let 32,000 sq. ft. (two floors) in Two Dockland Central on 19 year leases. They will pay initial rent of €1.8m (€52.50psf) and will receive six months rent free from lease commencement (expected mid-2017). ENI has pre-let 5,500 sq. ft. on a 20-year lease with a four-month rent free at an initial rent of €55psf. Other completed assets The remaining completed properties in the portfolio are close to full occupation. The average period to rent review or lease expiry for the "in-place" office portfolio (not including recently completed developments) is 3.2 years: the team is assessing options to maximise returns from the upcoming lease events and continues to carefully monitor the letting markets and work closely with our tenants.

Financial results and position

* Excluding one-off €4.9m surrender premium received

The key drivers of EPRA NAV per share (equivalent to IFRS Diluted NAV per share), which increased 15.5 cent from 31 March 2016 were:

- 14.9 cent per share from the revaluation of the property portfolio, including 9.1 cent per share in relation to development properties

- 2.2 cent per share from EPRA earnings for the financial year

- Payment of the FY16 final dividend and FY17 interim dividend, which decreased NAV by 1.6 cent per share

Net debt increased by €102.4m to €155.3m (LTV: 13.3%). The major expenditure in the year was €85.4m on two acquisitions and €52.5m of capital expenditure on the Group's properties: almost all of this capital expenditure related to development or refurbishment work with c. €1m due to maintenance expenditure.

EPRA earnings for the financial year were €15.0m, up 192.5% compared to the financial year ended 31 March 2016, excluding the €4.9m one-off gain relating to the surrender premium received from FBD in the prior year. The key driver of the increase was the 52.5% uplift in rental income (excluding the surrender premium) due to new lettings and acquisitions made in the past two years. 

Administrative expenses (excluding performance related payments) were €12.8m (March 2016: €8.7m). The increase of €4.1m mainly relates to a €2.6m increase in amortisation of prepaid remuneration expense (in prior year amortisation only commenced mid-year with the completion of the internalisation) and a €0.8m increase in "Top-up" internalisation expenses due to the uplift in NAV over the year. Performance related payments were €8.2m (March 2016: €6.1m), comprising performance fees earned of €5.9m (31 March 2016: €6.1m) and a promote fee of €2.3m (31 March 2016: €nil) received from Starwood relating to the achievement of certain targets on the Windmill Lane development, which will be paid onto the vendors (net of costs and taxes) in shares under the terms of the internalisation.

Net profit for the year was €118.6m, a decrease of 13.3% over the same period last year (10.1% decrease excluding the surrender premium in the prior year) due to lower revaluation gains on investment properties as growth in capital values in the market have moderated.

Financing and hedging As at 31 March 2017, the Group's net debt was €155.3m, a loan to value ratio ("LTV") of 13.3%, having increased from a net debt position of €52.9m (LTV of 5.7%) at 31 March 2016 due to capital expenditure on developments and acquisitions.

The Group has two facilities in place, a €400m revolving credit facility ("RCF") which matures in November 2020, and a non-recourse, debt facility with Deutsche Bank for Windmill Lane (the "1WML Facility") of €44.2m which matures in June 2019.

Given the level of cash and undrawn facilities available and the high cost of the 1WML Facility relative to the RCF, we intend to use the RCF to fund the remaining expenditure on 1WML and to cancel the 1WML Facility in early 2018 when early repayment penalties expire. 

Cash and undrawn facilities as at 31 March 2017 totalled €288.9m or €149.5m net of committed capital (including Hanover Building) and the intended repayment of the 1WML Facility. Assuming repayment of the 1WML facility and the investment of the remaining RCF funds in property, the LTV, based on property values at 31 March 2017, would be c. 28%. Our through-cycle leverage target remains 20 - 30% LTV.

The Group has a policy of fixing or hedging the interest rate risk on the majority of its drawn debt. Currently it has interest rate caps and swaptions with 1% strike rates in place covering €100m of the RCF. The interest rate exposure of the Windmill Lane facility has been hedged using an interest rate cap with a 1% strike rate. 

Approval as Alternative Investment Fund Manager ("AIFM")

The Company received authorisation from the Central Bank of Ireland (the "Central Bank") as an internally managed Alternative Investment Fund ("AIF") in July 2016. Following the internalisation of WK Nowlan REIT Management Limited (the "Investment Manager") in November 2015, the Investment Manager remained authorised as the Alternative Investment Fund Manager ("AIFM") to Hibernia pending authorisation of Hibernia by the Central Bank as an internally managed AIF. Concurrent with the authorisation of Hibernia, and as requested by Hibernia, the Central Bank withdrew the authorisation of the Investment Manager.

Dividend Excluding unrealised gains, there has been a substantial uplift in earnings and the Board has proposed a final dividend of 1.45 cent per share (2016: 0.8 cent) which, subject to approval at the Company's AGM, will be paid on 31 July 2017 to shareholders on the register as at 7 July 2017. All of this final dividend will be a Property Income Distribution ("PID") in respect of the Group's tax exempt property business. 

Together with the interim dividend of 0.75 cent, the total dividend for the year will be 2.2 cent (2016: 1.5 cent). This represents 101% of realised profits received in the financial year. In future, dividends will likely account for 85-90% of distributable income. As previously stated, the Group's policy regarding interim dividends is that they will usually be 30-50% of the total regular dividends paid in respect of the prior financial year.

Hibernia' Dividend Reinvestment Plan ("DRIP") remains in place, allowing 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.

Selected portfolio information

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

2. "In-place" office contracted rent by business sector

Principal Risks and Uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance 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.

Strategic risks

Market risks

Development risks

Investment risks

Asset management risks

Finance risks

People risks

Regulatory & tax risk

 Business interruption

Consolidated Income Statement

 The notes on pages 30 to 76 form an integral part of these consolidated financial statements

Consolidated statement of comprehensive income

 The notes on pages 30 to 76 form an integral part of these consolidated financial statements.

Consolidated Statement of Financial Position

The notes on pages 30 to 76 form an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

The notes on pages 30 to 76 form an integral part of these consolidated financial statements.

Consolidated Statement of Cash Flows

The notes on pages 30 to 76 form an integral part of these consolidated financial statements.

Notes Forming Part of the Preliminary results

Hibernia REIT plc, the "Company", together with its subsidiaries and associated undertakings as detailed in Note 33 (the "Group"), is engaged in property investment and development (primarily office) in the Dublin market with a view to maximising its shareholders' returns.

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

The Ordinary Shares of the Company are listed on the primary listing segment of the Official List of 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'').

a. Statement of compliance and basis of preparation

These consolidated financial statements of Hibernia REIT plc are non-statutory consolidated financial statements. The Auditors have not completed their audit but the Directors expect that there will be no changes to the financial information between these non-statutory consolidated financial statements and the statutory financial statements that will be contained in the Annual Report. The Annual report of the Group will be issued at the end of June 2017. The consolidated financial statements of Hibernia REIT plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the Companies Act 2014. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB. The Group financial statements therefore comply with Article 4 of the EU IAS Regulation. The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of investment properties, owner occupied buildings 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.

The Group has not early adopted any forthcoming IASB standards. Note 3 sets out details of such upcoming standards.

b. Functional and presentation currency

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

c. Basis of consolidation

The financial statements incorporate the consolidated financial statements of the Company and entities controlled by the Company (its subsidiaries). The results of subsidiaries and joint arrangements acquired or disposed of during the financial 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. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Business combinations

Acquisitions of subsidiaries and businesses are accounted for under the acquisition method. The consideration transferred in a business combination is measured at fair value. Acquisition related costs are expensed as incurred. 

d. Assessment of going concern

The consolidated financial statements have been prepared on a going concern basis. The Directors have performed an assessment of going concern for a minimum period of 12 months from the date of this statement and are satisfied that the Group is appropriately capitalised. The Group has a cash balance as at 31 March 2017 of €18m (31 March 2016: €23m), is generating positive operating cash‑flows and, as discussed in Note 27 has in place debt facilities with an average period to maturity of 3.4 years and an undrawn balance of €289m at 31 March 2017 (31 March 2016: €325m). The Group has assessed its liquidity position and there are no reasons to expect that the Group will not be able to meet its liabilities as they fall due for the foreseeable future.

e. Significant judgements

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

Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share based transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the 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 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date

- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly or indirectly

- Level 3 inputs are unobservable inputs for the asset or liability.

Valuation basis of investment properties

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

- Harcourt Square where, in accordance with IFRS 13:27, the valuation takes into account its potential as a refurbished and extended asset which reflects the asset in its highest and best use. It is the Directors' intention to pursue the redevelopment of this property when the existing lease has expired.

- Hanover Building, which was occupied by BNY Mellon until 31/03/2017, has been valued on the basis of a refurbishment.

- Cannon Place apartment building which has been valued on a break up basis which is the highest and best use for this building.

- Block 3 Wyckham Point: This property is held for long-term property rental and was developed on this basis. The units comprising this property were completed on a phased basis by the Group during 2015. VAT was payable both on the acquisition and on the construction costs which were treated as irrecoverable and recognised as part of the capital costs of the project. If this property is sold within five years of completion, i.e. before mid-2020, the Group would be obliged to charge VAT on the sale but would be entitled to a recovery of the VAT incurred on the construction and acquisition costs on an apportioned basis according to the VAT life of the building. As this property is not intended to be sold within the five-year period, in the opinion of the Directors, no amendment to the valuer's valuation of this asset was deemed necessary.

Provisions for taxes

Where properties have been significantly developed or redeveloped by the Group, if the asset was to be sold within three years of completion, the Group would be liable to tax on any profits arising on the disposal under S.705G Taxes Consolidation Act 1997. No provision is currently being made for potential deferred tax on revaluations on these properties that have been significantly developed, since in the judgement of the Directors, these assets are held for longer term rental income and capital appreciation and therefore they will not be sold within the three-year period.

f. Key estimates

Valuation of investment properties 

The Group's investment properties are held at fair value and were valued at 31 March 2017 by the external valuer, CBRE Unlimited, a firm employing qualified valuers in accordance with the Royal Institution of Chartered Surveyors Valuation - Standards (January 2014 (revised April 2015) (the "Red Book"). Further information on the valuations and the sensitivities is given in Note 19. 

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

The Directors must be satisfied that the valuation of the Group's properties is appropriate for inclusion in the accounts. The fair value of the Group's properties is based on the valuation provided by CBRE. This valuation is based on future cashflows from rental income both for the current lease period and future estimated rental values.

In accordance with the Group's policy on lease incentives, the valuation provided by CBRE is adjusted by the fair value of the rental income accruals ensuing from the recognition of these incentives. The total reduction in the external valuer's investment property valuation in respect of these adjustments was €4.1m (31 March 2016: €2.6m).

There were no other significant judgements or key estimates that might have a material impact on the consolidated financial statements at 31 March 2017.

Standards and amendments to standards that became applicable during the financial year

Standards

IFRS 14 Regulatory Deferral Accounts 

Amendments to standards

Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)

Equity Method in Separate Financial Statements (Amendments to IAS 27)

Annual Improvements 2012-2014 Cycle

Disclosure Initiative (Amendments to IAS 1)

Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)

Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)

Disclosure Initiative (Amendments to IAS 7)

Annual Improvements to IFRS Standards 2014-2016 Cycle - Amendments to IFRS 12

There were no impacts on the financial statements from the adoption of these new accounting standards during the financial year.

Prospective Accounting changes

The following standards and interpretations to existing standards have been published by the International Accounting Standards Board ("IASB") and, to the extent indicated, have been adopted by the European Union ("EU") and will be mandatory for future accounting periods. The Company has not early adopted these standards or interpretations, none of which is expected to have a material impact on the Group financial statements.

• IFRS 2 Share-based Payment amendments to clarify the standard in relation to the accounting for cash-settled share-based payment transactions that include a performance condition, the classification of share-based payment transactions with net settlement features, and the accounting for modifications of share-based payment transactions from cash-settled to equity-settled. Is effective for annual periods beginning on or after 1 January 2018 (Subject to EU endorsement).

• IAS 7 Statement of Cashflows amendments to clarify disclosures and is effective for annual periods beginning on or after 1 January 2017. (Subject to EU endorsement)

• IFRS 9 Financial Instruments was issued in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes a revised classification and measurement model, a forward looking 'expected credit loss' impairment methodology and modifies the approach to hedge accounting. Unless early adopted, the standard is effective for accounting periods beginning 1 January 2018. (Subject to EU endorsement)

• IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities, and IAS 28 Investment in Associates and Joint Ventures are amended for accounting periods beginning on or after 1 January 2016 to clarify the treatment of the sale or contribution of assets from an investor to its associate or joint venture. (EU endorsement currently halted)

• IAS 12 Income taxes, amendments to deferred tax recognition. Effective for periods beginning on or after 1 January 2017. (Subject to EU endorsement).

• IFRS 15 Revenue from Contracts with Customers, provides a single, principles based five-step model to be applied to all contracts with customers and is applicable to an annual reporting period beginning on or after 1 January 2018. (Subject to EU endorsement)

• IFRS 16 Leases, sets out the principles for the recognition, measurement, presentation and disclosure of leases. It is effective for annual periods commencing on or after 1 January 2019 and supersedes IAS 17 Leases and SIC 15: Operating leases - Incentives. (Subject to EU endorsement)

• IAS 40 Investment property. Amends paragraph 57 to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management's intentions for the use of a property by itself does not constitute evidence of a change in use. The list of examples of evidence in paragraph 57(a) - (d) is now presented as a non-exhaustive list of examples instead of the previous exhaustive list. Is effective for annual periods beginning on or after 1 January 2018 (Subject to EU endorsement).

• Annual Improvements to IFRS: 2012-2015 cycle (effective for accounting periods beginning on or after 1 July 2016);

• Annual Improvements to IFRS: 2014-2016 cycle (effective for accounting periods beginning on or after 1 January 2018 apart from the amendment to IFRS 12 Disclosure of interests in other entities which is effective from 1 January 2017);

Impacts expected from relevant new or amended standards

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Measurement and Recognition and is effective for annual periods beginning on or after 1 January 2018. While minor amendments may arise due to changes in hedge accounting, implementation is not expected to have a material impact on the Group's financial statements.

IFRS 15 Revenue from Contracts with Customers is valid for periods starting on or after 1 January 2018 and specifies how and when an entity recognises revenue from a contract with a customer. This will be effective for the financial year ended 31 March 2019. The Group has reviewed its revenue streams to consider the impact of IFRS 15 on the financial statements. Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied. The Group's main source of revenue is from the leasing of properties and revenue is recognised in accordance with IAS 17: Leases and SIC 15: Operating Leases-Incentives. Rental and other income is recognised over the period of the contract in accordance with the principles in IFRS 17. IFRS 15 will apply to service charge income, performance fees and miscellaneous minor contracts but it is expected that there will be no material impact from the adoption of this standard.

IFRS 16 Leases is applicable for annual periods beginning on or after 1 January 2019 will apply to the operating leases applicable to the Group's Investment property but is not expected to materially change the Group's accounting in relation to these items as lessor accounting arrangements remain largely unchanged from IAS 17.

The remainder of these amendments are not expected to have a material impact on the Group's consolidated financial statements.

a) Revenue recognition

Revenue comprises rental income and surrender premia, service charge income and fees from other activities associated with the Group's property business.

Revenue is recognised in the Consolidated Income Statement when it meets the following criteria:

- It is probable that any future economic benefit associated with the item of revenue will flow to the Group; and

- The amount of revenue can be measured with reliability.

Rental Income

Rental income arises on properties which are included as investment properties in the Consolidated Statement of Financial Position and which are leased out under operating leases or similar arrangements. Rental income is recognised in the Consolidated Income Statement on an accrual basis as revenue on a straight-line basis over the agreement term. Rent received in advance is deferred in the Consolidated Statement of Financial Position and recognised in the period to which it relates to. All incentives given to tenants under lease arrangements are recognised as an integral part of the net consideration agreed for the use of the leased asset and the aggregate cost of such incentives is recognised as a reduction of rental income on a straight-line basis over the lease term. The lease term is either the period to the expiry date of the lease or to the next break point, i.e. where there is a legal right for the tenant to break the lease. The value of the resulting accrual is included within the respective property value in the Consolidated Statement of Financial Position.

Surrender payments for early lease terminations are reflected, net of any costs such as dilapidation or legal costs relating to the lease, in the accounting period in which the surrender took place.

Where adjustments to rent or a review under a lease are unsettled at the reporting date, these are included in income based on a reasonable estimate of the expected settlement amount and then adjusted to the actual amount when settlement is reached. Surrender payments for early lease terminations are reflected, net of any costs such as dilapidation or legal costs relating to the lease, in the accounting period in which the surrender took place.

Service Charges

Service charges and other sums receivable from tenants are recognised on an accrual basis by reference to the stage of completion of the relevant service or transactions at the reporting date. These services generally relate to a 12‑month period.

Leases

The Directors have considered the potential transfer of risks and rewards of ownership in accordance with IAS 17 Leases for all the Group's rental agreements and judged these arrangements all to be operating leases. 

Details on all aspects of rental payments and concessions under leases are provided to the external valuers at each reporting date for their consideration in assessing the fair value of the properties concerned.

b) Direct property costs

Direct costs comprise service charges and other costs directly recoverable from tenants and non-recoverable costs directly attributable to investment properties and other revenue streams.

c) Finance income and expense

Finance expenses directly attributable to the construction or production of investment properties which take a considerable length of time to get ready for rental to tenants, are added to the costs of those properties until such time as the properties are substantially ready for use. All other finance expenses and income are recognised in the profit and loss account as they occur using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability (or group of financial assets or financial liabilities) and of allocating the interest income, interest expense and fees paid and received over the relevant period.

d) Administration Expenses

Administration expenses are recognised when incurred in the Consolidated Income Statement.

e) Share based payments

A share-based payment is a transaction in which the entity receives goods or services either as consideration for its equity instruments or by incurring liabilities for amounts based on the price of the entity's shares or other equity instruments of the entity. Equity-settled share based payments are measured at the fair value of the equity instruments on the grant date. Details regarding the determination of the fair value of equity-settled share based transactions are set out in Note 13. The fair value determined at the grant date of the equity-settled share based payment is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of equity instruments which will vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee share benefits reserve. Share based payments for which the shares have not been issued are remeasured to fair value at each accounting date.

Equity settled share based transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be measured reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

The fair value of the relevant services is recognised as an expense over the accounting period in which they are incurred. 

f) Taxation

Hibernia REIT plc elected for Real Estate Investment Trust (REIT) status on 11 December 2013. As a result, the Company will not pay Irish corporation tax on the profits and gains from qualifying rental business in Ireland provided it meets certain conditions. Corporation tax is still payable as normal in respect of income and gains from the Group's residual business (generally any non-investment property rental business including building management services). The Group is also liable to pay other taxes such as VAT, capital gains tax, relevant contracts tax, local property tax, property rates, payroll taxes and foreign taxes as normal.

g) Joint arrangements

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 the entities involved in the arrangement control it collectively. 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.

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 IFRS applicable to the items being recognised.

h) Investment properties

Investment properties are properties held to earn rental income and/or for capital appreciation (including property under construction for such purposes). Properties are treated as acquired at the point at which the Group assumes the significant risks and rewards of ownership. This occurs when:

(1) It is probable that the future economic benefits that are associated with the investment property will flow to the Group;

(2) There are no material conditions which could affect completion of the acquisition; and

(3) The cost of the investment property can be measured reliably.

Investment properties are measured initially at cost, including transaction costs. After initial recognition, investment properties are measured at fair value. Gains and losses arising from changes in the fair value of investment properties are included in the Consolidated Income Statement in the period in which they arise.

Investment properties and properties under development are professionally valued on a twice-yearly basis or as required by qualified external valuers using inputs that are observable either directly or indirectly for the asset in addition to unobservable inputs and are therefore classified at level 3. The valuation of investment properties is further discussed above under Note 2.(f).

The valuations of investment properties and investment properties under development are prepared in accordance with the RICS Valuation - Professional Standards global January 2014 including the International Valuation Standards and the RICS Valuation - Professional Standards UK January 2014 (revised April 2015) ("the Red Book").

When the Group begins to redevelop an existing investment property, or property acquired as an investment property, for future use as an investment property the property remains an investment property and is accounted for as such. Expenditure on investment properties is capitalised only when it increases the future economic benefits associated with the property. All other expenditure is charged to the Consolidated Income Statement. Interest and other outgoings, less any income, on properties under development are capitalised. Borrowing costs, that is interest and other costs incurred in connection with borrowing funds, are recognised as part of the costs of an investment property where directly attributable to the purchase or construction of that property. Borrowing costs are capitalised in accordance with the policy described in Note 4.d.

In accordance with the Group's policy on revenue recognition (Note 4.a), the value of accruals in relation to the recognition of lease incentives under operating leases over the term of the lease is included in the fair value assessment of the investment property to which the accrual relates.

Where amounts are received from departing tenants in respect of "dilapidations", i.e. compensation for works that the tenant was expected to carry out at the termination of a lease but the tenant, in agreement with the Group, pays a compensatory sum in lieu of carrying out this work, the Group applies these amounts to the cost of the property. The value of the work to be done is therefore reflected in the fair value assessment of the property when it is assessed at the end of the period.

An investment property is de‑recognised on disposal, i.e. when the significant risks and rewards are transferred outside the Group's control, or when the investment property is permanently removed from use and no future economic benefits are anticipated from the disposal. Any gain or loss arising on de‑recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Consolidated Income Statement in the period in which the property is de‑recognised.

i) Property, plant and equipment

Owned property which is occupied by the Group for its own purposes is de-recognised as investment property at the date occupation commenced and recognised as owner occupied property within property, plant and equipment at its fair value at that date. Property used for administration purposes is stated in the Consolidated Statement of Financial Position at its revalued amount, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ from materially from those that would be determined using fair values at the end of each accounting period.

Any revaluation increase from this property is recognised in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to the profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount of this property arising on revaluation is recognised in profit or loss to the extent that it exceeds the balance, if any, held in the property's revaluation reserve relating to a previous revaluation of that asset.

Depreciation on revalued property is recognised in profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation reserve is transferred directly to retained earnings.

Fixtures and fittings are stated at costs less accumulated depreciation and impairment losses.

Depreciation is recognised to write off the cost or value of assets less their residual value over their useful lives. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

The estimated useful lives for the main asset categories are:

Land and buildings 50 years

Fixtures and fittings/ Leasehold improvements 5 years

Office and computer equipment 3 years

j) Financial instruments

Financial assets and liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instruments.

Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities (other than financial assets or liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or liabilities, as appropriate, on initial recognition. Transaction costs attributable to the acquisition of financial assets or liabilities at fair value through profit or loss are recognised immediately in the Consolidated Income Statement.

Financial assets and liabilities

Effective interest method: The Group uses the effective interest method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Loans and receivables: Loans and receivables (including loans to subsidiaries) are non‑derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans are initially recorded at fair value plus transaction costs. They are subsequently accounted for at amortised cost using the effective interest method.

Derivatives: The Group utilises derivative financial instruments to hedge interest rate exposures. Derivatives designated as hedges against interest risks are accounted for as cash flow hedges. Hedge relationships are documented at inception. This documentation identifies the hedge, the item being hedged, the nature of the risks being hedged and how the effectiveness is measured during its duration. Hedges are measured for effectiveness at each accounting date and the accounting treatment of changes in fair value revised accordingly. The Group's cashflow hedges are against variability in interest costs and the effective portion is recognised in equity in the hedging reserve, with the ineffective portion being recognised in profit or loss within finance costs.

Financial liabilities: The Group has borrowing facilities in place both as general facilities and secured on specific projects. The Company has short term loan and debenture transactions with subsidiaries. These are measured initially at fair value, after considering transaction costs, and carried at amortised cost, with all attributable costs either charged to profit or loss or capitalised into investment property costs as appropriate. All costs are based on the effective interest rate method.

k) Trade receivables and payables

Trade receivables and payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method. Where there is objective evidence of loss, appropriate allowances for any irrecoverable amounts are recognised in the Consolidated Income Statement.

l) Cash and cash equivalents

Cash and cash equivalents includes cash at banks in current accounts, deposits held at call with banks and other highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

m) Equity and share issue costs

The equity of the Company consists of ordinary shares issued. Shares issued are recorded at the date of issuance. The par value of the issued shares is recorded in the share capital account. The excess of proceeds received over the par value is recorded in the share premium account. Direct issue costs in respect of the issue of shares are accounted for in the retained earnings reserve, net of any related tax deduction.

n) Dividends

Interim dividends are recognised as a liability of the Company when the Board of Directors resolves to pay the dividend and the shareholders have been notified in accordance with the Company's Articles of Association. Final dividends of the Company are recognised as a liability when they have been approved by the Company's shareholders.

o) Net Asset Value (NAV)

The IFRS NAV is calculated as the value of the Group's assets less the value of its liabilities based on IFRS measures. EPRA NAV is calculated in accordance with the European Public Real Estate Association (EPRA) Best Practice Recommendations: December 2014.

The EPRA Net Asset Value per share includes investment property, other non-current asset investments and trading properties at fair value. For this purpose, non-current assets classified as held for sale are included at fair value. It excludes the fair value of movement financial instruments and deferred tax and related goodwill.

On 27 October 2015 at an Extraordinary General Meeting of the Company, the shareholders approved the acquisition of the Investment Manager, WK Nowlan REIT Management Limited. On 5 November 2015, the Company completed this acquisition by acquiring the entire share capital (100% of voting equity) of WK Nowlan REIT Management Limited and its parent, Nowlan Property Limited (together "the Acquirees") from the companies' shareholders (the "Vendors"). This transaction was carried out to internalise the investment management function.

As part of the arrangements in this transaction, amounts were paid or agreed to be paid for future services. These arrangements continue until November 2018, the date on which the Investment Management Agreement ("IMA") was due to expire.

These arrangements fall into three categories: 

A. Remuneration for future services

A payment of €14.2m, the "Initial Payment", was made in November 2015. The fair value of this payment was €15.1m due to the movement in the share price for the share based portion.

This payment was made subject to clawback arrangements for those Vendors who remain tied to the Company by employment or service contracts. The clawback arrangements over one third of this payment is removed on each anniversary of the acquisition date until November 2018. €4.4m was recognised as "Prepaid remuneration expenses" (Note 11) in the Consolidated Income Statement in the financial year ended 31 March 2017 (31 March 2016: €1.8m) and €7.1m (31 March 2016: €11.6m) is included in trade and other receivables as prepaid remuneration (Note 22).

B. Performance related payments

Performance related payments comprise absolute and relative performance fees as described under the IMA. During the year, the shareholders agreed to correct the method of calculation for the relative fee. These amounts are paid annually to the Vendors of the Investment Manager, contingent for the majority of Vendors on the fulfilment of service obligations.

The performance fee due for 2017 is €5.9m (31 March 2016: €6.1m). Under arrangements made at the time of the internalisation, 85% of this is due to the Vendors, representing €5.0m (31 March 2016: €5.1m) (the remainder being used to incentivise non-Vendor staff). In addition, an amount of €2.3m (31 March 2016: €nil), relating to a promote fee and development management fee, due to the Vendors arising out of payments made by Starwood on the termination of the Windmill joint arrangement is included bringing the total due to Vendors in relation to performance related payments for the period to €7.3m (31 March 2016: €6.1m). Including the amounts reserved for non-vendor staff, performance related payments total €8.2m.

C. "Top-up" internalisation expenses for financial year

"Top-up" internalisation expenses for financial year are €1.1m (31 March 2016: €0.3m) and relate to management fees that would have been due under the IMA due to increases in NAV in the period since internalisation. These payments are included in administration expenses for the period (Note 11).

Summary of performance related payments

The total due to Vendors for the financial year is therefore €8.4m (31 March 2016: €5.5m), all of which is payable in shares of the Company (Note 13). The balance is reserved for employee incentives.

The payments above, while remuneration in nature due to the existence of clawback, vesting or service conditions, are not under the discretion of the Remuneration Committee but were determined in the share purchase agreement for the acquisition of the Investment Manager and approved by the shareholders of the Company at the Extraordinary General Meeting of the Company held on 27 October 2015.

All amounts of fees payable in shares are further analysed in Note 13 to the consolidated financial statements and are recorded at fair value as at the financial year end.

The Group is organised into six business segments, against which the Group reports its segmental information, being "Office Assets", "Office Development Assets", "Residential Assets", "Industrial Assets", "Other Assets" (non-core assets) and "Central Assets and Costs". Segment analysis is based on the type of investment property with other assets containing non-core assets. Central Assets and Costs includes the Group head office assets and expenses. All the Group's operations are in Dublin 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. No segments are aggregated.

Central 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 service charge income, and other gains and losses such as development management fees), 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.

Group Consolidated Segment Analysis

For the financial year ended 31 March 2017

Group Consolidated Segment Analysis 

For the financial year ended 31 March 2016

Rental income arises from the Group's investment properties.

The Windmill promote fee relates to fees received from Starwood, earned through the achievement of certain performance targets, when the Company purchased Starwood's interest in the joint arrangement. These are payable, net of taxes and other costs due, in shares to the Vendors (Notes 5 and 13) and are included in performance related payments in the Consolidated Income Statement. Other income consists of development management fees, some of which are also payable (net of taxes) to the Vendors.

Subsequent to the surrender of the head lease in Two Dockland Central, €1.2m has been recognised in rental income in the financial year ended 31 March 2017 relating to top up payments for sub-leases (31 March 2016: €0.7m).