i
i
H
b
e
r
n
a
r
e
i
T
p
l
c
Annual Report 2015
Annual Report 2015
a
n
n
u
a
l
r
e
p
o
r
T
2
0
1
5
Marine House
Clanwilliam Place
Dublin 2
Email:
info@hiberniareit.com
Cover image:
Dublin’s Samuel Beckett Bridge
by night
Annual Report 2015
97
Shareholders’ information
Hibernia REIT plc website:
http://www.hiberniareit.com
Investor contacts
Hibernia REIT plc
Marine House
Clanwilliam Place
Dublin 2
For investor queries please send an email to: info@hiberniareit.com
For media enquiries please send an email to: media@hiberniareit.com
Hardwicke House
Hatch Street
Dublin 2
This Annual Report 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 Company 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 Annual Report. The Company 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.
Annual Report 2015
1
Contents
Highlights
Chairman’s statement
Investment Manager’s report
Corporate governance report
Report of the directors
Directors’ responsibility statement
Independent auditor’s report to the members of Hibernia REIT plc
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes forming part of the annual report
Company statement of financial position
Company statement of changes in equity
Company statement of cash flows
Notes to the company financial statements
Supplementary disclosures (unaudited)
Directors and other information
Glossary
Shareholders’ information
Investor contacts
2
4
7
23
36
48
49
53
54
55
56
57
83
84
85
86
90
94
95
97
97
2
HIBERNIA REIT PLC
Highlights
HIGHLY ACTIVE
EXCELLENT
but disciplined period of
investment
• €445m invested and €43m
committed in Dublin property in the
period, in 14 transactions
• Since 31 March 2015 a further €3m
invested in two transactions
• Since IPO a total of €571m invested
and committed (€568m net of
disposals and capex) with 88%
of acquisitions1 completed off-
market and 39% being loan related
purchases1
financial performance
in year of portfolio assembly
• EPRA NAV per share 111.8 cent up
16.0% over the year and 6.8% over H2
• 19.5% uplift in value of investment
properties on purchase prices in
weighted average hold period of 7.5
months since completion
• EPRA profit of €3.9m (2014:
€-0.8m). EPRA EPS 0.8 cent (2014:
-0.2 cent)
• Including revaluation surplus and
gains on disposals PBT of €92.9m
(2014: €-0.8m)
• Final dividend proposed of 0.5 cent
per share bringing total for year to
0.8 cent per share
HIGH QUALITY
Dublin property portfolio with
rental reversion potential
• 75% CBD offices, 13% CBD office
development sites, 10% residential
and 2% logistics
• CBD office portfolio has average
rents of €34.5psf, well below current
prime rents of €47.52 psf and an
average period to rent review of 2.8
years3
• Portfolio EPRA Net Initial Yield
4.4%, 4.9% on topped up basis
1 By purchase price
2 Source: CBRE Market View Dublin Office Q1 2015
3 On contracted rents
Annual Report 2015
3
Danny Kitchen, Chairman,
Hibernia REIT plc said:
Kevin Nowlan, Chief Executive Officer,
WK Nowlan REIT Management Limited, said:
“Hibernia’s first full year has been highly active with €488m
invested and committed in 14 transactions. At year end the
Company’s portfolio comprised 18 Dublin properties and was
valued at €636m. The Investment Manager’s commitment
to uncovering opportunities away from public sales processes
and in the property loan market, where there has been less
competition, has been a significant contributor to the 19.5%
uplift in the value of the properties we have seen in an average
holding period since acquisition of 7.5 months.
“With Dublin at the centre of a broad-based recovery in
the Irish economy and property markets, and an exciting
portfolio of properties in place, the Board is confident that
the Company will deliver excellent returns.”
“I am pleased with our progress this year in building a
portfolio of Dublin property and excited by the opportunities
we have to deliver value from it through asset management,
rent reviews and development projects. The Company is
well funded to deliver its development pipeline and act
opportunistically as further acquisition opportunities arise.
“With a positive economic backdrop and favourable dynamics
in the Dublin property market, we look forward to the coming
year.”
DEVELOPMENT
programme progressing well
and longer term pipeline
supplemented
• Block 3, Wyckham Point ahead of
schedule and on budget: first units
finished and let in April 2015 and full
completion expected by September 2015
• Windmill Lane and Sir John
Rogerson’s Quay: targeting end of
2017 and mid 2018 completion,
respectively
• Cumberland House and Harcourt
Square added to pipeline in H2
STRONG
financial position
• €139m of cash at 31 March 2015 (of
the net €286m raised in November
2014) and €100m revolving credit
facility which is undrawn
• Additional incremental investment
capacity of c.€300m if leveraging
current equity base to 35% LTV4
• Dorville non-core: €18.0m of assets
held for disposal and €12.4m sold
(excluding acquisition costs). Balance
of assets expected to be sold by
December 2015
Guild House &
Commerzbank House
Guild Street, IFSC, Dublin 1
PROPOSED
internalisation of
Investment Manager
• All 16 team members of the Investment
Manager to transfer to Group
• No material additional cost to
shareholders: upfront consideration
of c.€16m is the present value of
management fee for remaining
3.5 year term of Investment
Management Agreement, less
costs that Group will assume, and
book value of the net assets of the
Investment Manager at 31 March
2015 (excluding performance fees
due)
• Kevin Nowlan and Tom Edwards-Moss
to join Board as executive directors
• Company will seek approval from
independent shareholders
4 Hibernia’s investment policy limits leverage to 40% LTV at time of incurrence. Under the Irish REIT Regime the Company is restricted to keep the LTV below 50%.
4
HIBERNIA REIT PLC
Chairman’s statement
Hibernia’s first full year has been a period of intense activity in a
recovering Irish property market: the Group invested €445m and
committed €43m across 14 transactions.
Since 31 March 2015, a further €3m has been invested and committed
in 2 transactions. This takes the total funds deployed since the Group’s
inception to €571m (€568m net of disposals and capex), creating
a portfolio of property, all of which is in Dublin, which was worth
€636m1 as at 31 March 2015.
Having invested the net proceeds of the IPO, in August 2014
the Company agreed a €100m three year revolving credit facility
with Bank of Ireland. This was followed by a second equity issue
which successfully completed in November 2014, raising net
proceeds of €286m. As at 31 March 2015, €147m of this had
been deployed and Hibernia REIT plc (“the Company”) had
net cash of €139m and undrawn credit facilities totalling €100m.
increase of 16.6% in IFRS NAV and 16.0% in EPRA NAV over
March 2014. This increase was principally due to an uplift in the
value of the Company’s property portfolio since acquisition of
19.5% excluding acquisition costs (15.6% including acquisition
costs). The weighted average hold period (by purchase price) of
the acquisitions the Company has made since completion to 31
March 2015 (for its investment properties) is 7.5 months.
The Board is pleased with the performance of the Company
to date and believes the portfolio that has been assembled will,
with active management, deliver long term sustainable value
for shareholders. The discipline the Investment Manager has
shown in a period of highly active investment markets has been
commendable, as has its commitment to uncovering opportunities
away from public sales processes and in the property loan market,
where there has been less competition.
As at 31 March 2015, the Group’s IFRS NAV was 112.4 cent
(estimated 111.6 cent after issue of performance shares) while
the EPRA NAV was 111.8 cent per share. This represented an
Corporate governance and proposed
internalisation
The Company is managed by WK Nowlan REIT Management
Limited (the “Investment Manager”) under the terms of a five
year Investment Management Agreement (the “IMA”) signed
in November 2013. At the IPO, the Board and the Investment
Manager expressed the intention that at the expiry of the five
year initial term of the IMA, subject to the EPRA NAV of the
Company being not less than €650m, the Company would seek
to internalise the management team of the Investment Manager
for nil consideration.
Financial results and position
31 March 2015
31 March 2014
Movement
IFRS NAV - cent per share
EPRA NAV - cent per share
Net cash and cash equivalents
Group LTV
Profit/(loss) for the period
Basic EPS
Diluted EPS
Final dividend / DPS
Full year dividend / DPS
1 Net of the value of the Windmill option of €5m
+ 16.6%
+ 16.0%
- 52.3%
112.4
111.8
€139m
0.0%
€92m
18.4 cent
18.3 cent
€3.4m / 0.5 cent
€5.4m / 0.8 cent
96.4
96.4
€292m
0.0%
(€1)m
-0.2 cent
-0.2 cent
n/a
n/a
Annual Report 2015
5
The Group has grown rapidly and the EPRA NAV at 31 March
2015 was €755m. After careful consideration, the Independent
Directors believe the time is now right for the Investment
Manager to be internalised and its 16 team members moved
into direct contracts with the Company.
The proposed transaction represents a related party transaction
under the Irish and UK Listing Rules: independent shareholders
will be given the opportunity to vote on the transaction, and in
advance of this, full details of the transaction and the rationale
for it will be sent to shareholders.
The Independent Directors believe the benefits will include:
• Securing the management team for the longer term
• Broadening the universe of potential investors in the
Company
• Simplifying the management structure and decision-
making processes
• Enhancing transparency and management accountability
• Eliminating any recruitment or retention challenges that
the Investment Manager may suffer as the end of the
initial term approaches
As announced on 8 May 2015, it is proposed that the
internalisation is done at no material additional cost to
shareholders by the Company acquiring the Investment Manager.
A sum of c. €16m will be paid to the Investment Manager,
50% in cash and 50% in Hibernia shares, subject to three year
clawback and earn-out provisions. This payment reflects the net
present value of the base fees due over the remaining term of the
IMA, less the net present value of the costs which the Company
will assume which under the IMA would have been borne by
the Investment Manager, and the book value of the net assets
of the Investment Manager at 31 March 2015 excluding any
performance fees due. In addition, potential deferred payments
may be due relating to “true-up” payments on the IM base fee
if the NAV increases, JV fees on Windmill Lane and Sir John
Rogerson’s Quay developments and the existing performance
fee arrangements.
Dividend
The Board has proposed a maiden final dividend, subject to
approval at the Company’s AGM, of 0.5 cent per share (€3.4m)
which will be paid in August 2015. Together with the interim
dividend of 0.3 cent, the total dividend for the year is 0.8
cent per share or €5.4m (2014: nil). The Board has decided to
introduce a Dividend Reinvestment Plan (“DRIP”) commencing
with the final dividend: this will allow 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 will
be communicated to shareholders along with the Annual Report.
Outlook
With Dublin at the centre of a broad-based recovery in the
Irish economy and foreign direct investment flows continuing,
the Board is confident that conditions in the Company’s core
markets will continue to strengthen in the coming year. The
high volume of transactions in the Irish property market is
anticipated to persist as the market normalises and the Board
expects continued success in deploying the Company’s capital
in building out its property portfolio. Additionally the Board is
confident that the proactive management of the Company’s
assets and the development of the sites it has acquired will
deliver excellent returns.
Daniel Kitchen
Chairman
29 May 2015
6
6
HIBERNIA REIT PLC
Hardwicke House
Hatch Street
Dublin 2
Investment Manager’s report
Annual Report 2015
7
WK Nowlan REIT Management Limited’s first full year of operation
has been highly active. We assessed a large number of investment
opportunities for the Company and brought the most attractive of these
into the Company’s ownership, where they matched the Company’s
investment policy and returns criteria. We completed 14 transactions for
the Company, investing €445m and committing a further €43m.
Since 31 March 2015, we have entered two further acquisitions
for the Company, investing an additional €3m, taking the total
funds invested and committed since IPO to €571m (€568m net
of disposals and capex).
have been loan related. Since IPO, 88% of our transactions
have been agreed privately (“off-market”) rather than through
competitive auction processes (“on-market”), as we believe this
generally improves certainty of execution and pricing.
Our expertise in the acquisition of debt has enabled the
Company to gain ownership of a number of properties through
the purchase of loans secured on those assets: there has generally
been less competition for loans than for direct property and a
broader loan market, thereby improving potential returns. Since
inception 39% of acquisitions (by purchase price) made by the
Company have been loan-related purchases and in the year 31%
The portfolio
Our investment activity has resulted in a property portfolio as
at 31 March 2015 of 18 investment properties valued at €636m
(€641m per IFRS consolidated statement of financial position
less the fair value of the Windmill site option, €5.1m), which
can be categorised as follows:
Portfolio overview
Market
Value at
31-Mar-15
€’m
% of
portfolio
value
%
% Uplift since Sep 2014
% Uplift since acquisition1
Yield on costs2
Excl. acq.
post Sep
2014
Including all
property
exclud.
acq. costs
with
acq. costs
Passing
rent
Contracted
rent
%
%
%
%
%
%
Dublin CBD office portfolio
476
74.8%
14.2%
11.1%
19.3%
16.3%
5.1%
5.4%
Dublin CBD Office development/
refurb.
Dublin residential
Dublin industrial logistics
84
67
10
13.1%
25.0%
7.4%
11.7%
8.3%
10.5%
12.4%
12.4%
36.5%
23.4%
-
-
-
-
1.6%
2.2%
2.2%
2.2%
0.0%
5.1%
5.1%
Total investment portfolio
636 100.0% 14.3% 10.5% 19.5% 15.6%
3.8%
4.1%
1 Includes capex spent to date in acquisition costs
2 Passing rent is pre full ownership of Hardwicke and Montague/ contracted rent is post full ownership
8
HIBERNIA REIT PLC
Investment Manager’s
report continued
The CBD office element of our portfolio had the following statistics
at 31 March 2015:
• Weighted average period to earlier of rent review or lease
expiry: c. 2.8 years
• WAULT to earlier of expiry or break: 3.9 years
• WAULT to expiry: 7.8 years
• Average contracted rent per square foot €34.5
• Weighted average capital cost per square foot at acquisition:
€570
• Occupancy level: 89%
Eight of the Company’s 18 investment property acquisitions since
formation have been facilitated through the purchase or advance
of loans secured on underlying property collateral. Significant
progress was made during the year to convey the underlying property
collateral into direct ownership and only two properties totalling
€26m in loans and representing c. 5% of the property portfolio cost
at 31 March 2015 remain to be conveyed. These are recognised as
investment properties.
Asset management
A key focus for the Investment Manager this year has been the
setting up of asset management systems which provide us and
Hibernia with effective and timely information on the portfolio and
its performance. The Asset Management team has worked hard
to quickly integrate all of the assets acquired onto these systems.
Key asset management highlights in the period include the following:
Commerzbank House, IFSC
As expected, we agreed with Commerz Management Services
Limited to an early surrender of its leasehold interests in the property,
comprising 55,500 sq. ft. out of a total of 71,000 sq. ft.. As part of
the settlement Hibernia received a payment of all of the rent and
irrecoverable outgoings to the break date, a one year rental penalty
of €2.4m, and a sum for dilapidations.
We are now in the process of refurbishing, modernising and
upgrading this property to bring it up to modern Grade A standard.
The upgrade elements include new lifts, improved sanitary facilities,
increased facilities for cycling (parking and showering) and a
complete overhaul of its reception and a leading design team has
been appointed.
Montague House
Adelaide Road, Dublin 2
Block 3, Wyckham Point
Dundrum, Dublin 16
Guild House and Commerzbank House
Guild Street, IFSC, Dublin 1
Annual Report 2015
9
Work is scheduled to commence on site in Q2 2015 and to be
completed in Q1 2016. The estimated capital expenditure will
be c. €10m (€7.9m net of the dilapidations payment received).
The available space is being actively marketed and a number
of parties have expressed interest.
Phase 1, consisting of 29 units, was handed over ahead of
schedule in mid-April 2015. Phase 2, consisting of 41 units
was completed, again ahead of schedule, in early May 2015
with the remaining phases on programme to be completed
on, or ahead of, schedule. The final phase is now expected to
complete in Q3 2015.
The Observatory Building, South Docks
The property comprises a total of 98,000 sq. ft. of which 11,000
sq. ft. is configured as “live/work” units. These units had been
vacant for a number of years and were in a dilapidated state
when the Company acquired the property in June 2014, and
we ascribed a value of €1.7m to them at purchase.
Having considered a number of asset management options for
these units we decided upon a change of use to office space to
maximise their value. A planning application for this change
was submitted in November 2014 and a positive grant of
permission with no onerous conditions was issued in March
2015. It is expected that a contractor will be selected shortly
and construction works will be completed by Q1 2016 at an
estimated cost of €1.5m.
We are in discussions with a tenant regarding the lease of the
whole of this space.
Block 3, Wyckham Point, Dundrum
This property comprises 213 residential units, the loan over which
was acquired by the Company in February 2014 as part of the
Dorville loan portfolio. On acquisition the units were incomplete:
the building structure was finished and weatherproofed but little
work had been done on the fit-out. JJ Rhatigan & Company was
appointed to complete the fit out of the property and a phased
(five phase) contract programme was agreed.
The marketing of the units commenced ahead of the completion
of Phase 1 and to date 35 units have been let (including 27
to a leading international corporate) and 43 have bookings
secured. To date, lettings with an aggregate annual rental value
of €1.6m have been secured of which €0.8m is in respect of
lettings which have commenced. On average the rental level
achieved are 9% in excess of the rental levels estimated in the
September 2014 valuation.
Other completed assets
As the other completed properties in the portfolio are close to full
occupation and the tenants’ next rent reviews are overwhelmingly
(by rental value) dated in future periods the level of leasing
and rent review activity has therefore been nil and minimal,
respectively. Our Asset Management team is, however, carefully
monitoring the letting markets and market rent review activity
with a view to ensuring that Hibernia maximises its rental income
in the event of vacancies arising in the portfolio and when rent
reviews dates are reached.
Additionally we are working closely with Hibernia’s tenants
to better understand their occupational requirements and
working pro-actively with them to establish if mutually beneficial
variations of their leasehold arrangements can be arrived at.
10
HIBERNIA REIT PLC
Investment Manager’s report
continued
Sale of Dorville non-core assets
Good progress has been made in the disposal of the Dorville non-core assets. The status as at 31 March 2015 was as set out below:
Sold or contracted at year end
Residential assets
Commercial assets
Development sites
Tax estimate
Sale agreed or committed at year end
Residential assets
Cost estimate
Remainder of Non-Core Assets
Residential assets
Commercial assets
1 Excludes stamp duty and other purchasing costs
Carrying
Value1
€’000
5,268
850
6,250
Sales
Price
€’000
5,564
1,212
9,415
12,368
16,191
Profit
€’000
296
362
3,165
(690)
3,133
Carrying
Value1
€’000
Price
Agreed
€’000
Expected
Profit
€’000
4,541
5,467
4,541
5,467
926
(315)
611
Carrying
Value1
€’000
Units
18
3
2
23
Units
19
19
Units
43
3
11,107
2,310
46 13,417
Since the period end three of the units which were sale agreed above have been contracted. In addition the sales of a further
ten units were agreed with an aggregate sales value of €3.0m (carrying value: €2.3m). We intend to complete the disposal of the
non-core assets by the end of 2015.
Annual Report 2015
11
Developments and refurbishments
The Company has committed and near term development and refurbishment projects at five properties and a further three
properties in the development pipeline.
Committed and near term projects
Net Internal
Area
(“NIA”) post
completion
(sq ft)
Full
purchase
cost
Est. total
cost €psf/
p.unit
Est. Capex
ERV(1)
Comments
Sector
Fit out or refurbishment
Block 3,
Wyckham
Point
Residential
213 units
€32m(2)
€25m(3)
€275k per 2
bed
€3.7m(4)
• On budget and ahead of schedule
• First completed units delivered
April 2015
• Project to finish in Q3 2015
• 35 units let to date and a further 43
bookings secured
Commerzbank
Office
71k(8)
€47m(5)
€10m(6)
€760psf(5)
€3.3m(5)
• Refurbishment scheduled to
House
complete by early 2016
• Active discussions ongoing with
potential tenants
Observatory
Office
9.5k office
€2m
€1.5m
€280psf
€0.4m
• Conversion from Live/Work units to
Live/Work
2k retail
Development
Windmill
Office
121k office
€8m
€52m
€425psf(7)
€5.1m(7)
Lane
7k retail
15 resi.
units
office accommodation
• Expected completion Q1 2016
• Near agreement to lease entire space
• Demolition commenced
• Construction scheduled to start
by Q3 2015
• Scheduled completion by end of
Q4 2017
• Increase in specification vs.
previous estimates
1-6 SJRQ
Office
102k office
€18m
€50m
€590psf(7)
€4.9m(7)
• Revised planning application to be
Total
5k retail
3 resi. units
304k
office
14k retail
231 units
submitted by end of May 2015
• Demolition commenced
• Expect to complete construction by
mid 2018
• Increase in building size and
specification vs. previous estimates
€107m
€138.5m
€17.4m
(1) Per CBRE valuation at 31 March 2015
(2) Includes VAT on acquisition
(3) €13.5m spent to 31 March 2015
(4) Net
(5) For entire
(6) €7.9m net of dilapidation charge received
(7) Commercial only
(8) 55k sq. ft. of 71k sq. ft. being refurbished plus all
common areas
12
HIBERNIA REIT PLC
Investment Manager’s report
continued
1-6 Sir John Rogerson’s Quay
Dublin 2
Development pipeline
Name
Sector
Cumberland House
Office
Current NIA
(sq. ft.)
112k on
1.6 acres
NIA post
completion
(sq. ft.)
Existing
planning for
250k sq. ft.
new build
office
Purchase
Price
€49.0m
Gateway
Logistics
178k on
14.1 acres
See right
€10.1m
Comments
• In active discussions with potential tenants
• Both refurbishment and redevelopment
options being assessed
• Expect to submit planning application for
interchange connection road to improve
access by Q3 2015
• Assessing site intensification/change of use
options
Harcourt Square
Office
Total
(1) Excludes Gateway
117k on
1.9 acres
407k on
17.6 acres
285k sq. ft.
€70.0m
• Phase 1 planning application submitted for
134k sq. ft. NIA of offices
• Discussions ongoing regarding near term
lease extension
535k sq. ft.(1)
€129.1m
Annual Report 2015
13
Financing
Having invested the proceeds of the Initial Public Offering
(IPO), in August 2014, the Investment Manager agreed the
terms of a €100m three year revolving credit facility secured
via a floating charge over the Company’s assets with Bank of
Ireland Corporate Banking. This was followed by a second equity
issue, in which all shareholders were given the opportunity to
participate, which completed in November 2014, raising net
proceeds of c.€286m.
As at 31 March 2015, the Company had cash of €139m and
the revolving credit facility was undrawn. Under its investment
policy, the Company can incur indebtedness up to a maximum
of 40% loan to value: currently therefore, the Company could
put in place up to a further c.€400m of new debt facilities and
preliminary discussions have been had with a number of lending
banks regarding additional debt facilities.
Team and proposed internalisation
The team increased in size in the year to 16 people (March 2014:
10) with the hiring of a Chief Financial Officer in June 2014 and
the expansion of the asset management, investment and finance
teams as the portfolio has grown. I am particularly pleased with
the culture of openness, teamwork and entrepreneurship that
we have developed in a short time.
The proposed internalisation of the Investment Manager will
simplify the corporate structure and decision-making processes
and eliminate any recruitment or retention challenges the
Investment Manager may suffer as the initial five year term of
the Investment Management Agreement with the Company
approaches its end.
Windmill Lane
Dublin 2
Looking ahead
We expect the upward trend in office rents to continue, given the
low vacancy in the Dublin CBD office market, anticipated strong
occupational demand and little new supply of space expected
in the next 24 months. In the multi-family residential market in
Dublin we expect similar supply-demand dynamics to lead to
further rental increases. Turning to the investment market, we
are expecting the volume of transactions in Dublin in the next
12-18 months to remain above the long-term average as the
market normalises. We have identified and are tracking a number
of potential acquisition opportunities. With an experienced and
talented team, access to competitive debt terms, supportive
markets and a portfolio rich in opportunity we are confident
of generating attractive returns for shareholders.
Kevin Nowlan
Chief Executive Officer
WK Nowlan REIT Management Limited
29 May 2015
14
HIBERNIA REIT PLC
Investment Manager’s report
continued
Market update
General economy
The Irish economy was the fastest growing in the Euro area in
2014 and this trend is expected to be repeated in 2015 and 2016.
GDP growth of 4.8% was reported for 2014 and forecasts for
2015 and 2016 are in a similar range: Goodbody are forecasting
GDP growth of 4.3% and 4.0% in 2015 and 2016, respectively.
The Irish economic recovery came from a broader base in 2014;
investment grew by 11% (the strongest performance in a decade)
and domestic demand moved into growth. Projections for these
two measures are similarly strong for 2015 and 2016. Indeed,
Goodbody expects domestic demand to be the key driver of
growth going forward with increases of 4.3% and 5.1% now
anticipated for 2015 and 2016, respectively.
Employment figures have increased for nine consecutive quarters
with unemployment levels down from the peak of 15.1% in
January 2012 to the current 10% level. As a result of these
employment figures, coupled with expected pay rises (from
private firms) and lower energy prices, consumer sentiment
and the consumer’s contribution to the domestic economy is
expected to continue to grow. Consumer spending grew at an
annualised 2.1% in Q4 2014 after a muted period during the
two years to end Q3 2014. The latest KBC Ireland / ESRI
Consumer Sentiment Index rose in March 2015 to 97.8 up
from 96.1 in February. Consumer confidence is improving as
people are feeling more secure in their employment and thus
more confident about their personal finances.
As a result of the significant growth of the economy over the
last couple of years, Ireland’s debt sustainability has greatly
improved and this is currently being reflected in the pricing of
Irish government bonds, with the current 10 year bond yield at
c. 1.27% after reaching a record low of 0.65% in April 2015.
New debt levels are expected to fall below 90% of GDP by
the end of 2016 (Source: Goodbody). With the current weak
Euro, Ireland is set to benefit further from both a Foreign Direct
Investment and an export perspective, with 66% of Ireland’s
exports destined for non-Eurozone economies vs. 33% for
Germany (Source: IBEC).
Irish property investment market
According to MSCI (formerly IPD), total property returns for
Ireland in 2014 were 40.1% compared to a global total return
of 9.9%. Dublin topped the league tables with total returns of
44.7% in 2014. Since then, MSCI has reported a slowing of
growth across all sectors in Q1 2015 with the annual total return
to Q1 2015 at 36.3%. After a period of exceptional growth the
market is naturally moving into a more stabilised, albeit still
high, growth phase.
Prime office yields at the end of Q1 2015 are now at 4.75%
(according to CBRE), a further 25bps reduction since Q4 2014.
As with other European countries, prime office yields in Dublin
are higher than those in the USA and Asia and the spread
above 10 year government bond yields in the respective Asian
countries and US cities.
Investment volumes were exceptionally strong with over €4.5bn of
direct real estate and €20.8bn of real estate related loans traded
in 2014. This momentum continued into Q1 2015 with €1bn of
direct real estate traded in Q1 2015. Interestingly, the two largest
transactions of Q1 saw the arrival of new buyers to the market:
• Starwood Property Trust, a US REIT, acquiring Project
Molly (portfolio of Dublin offices) for €350m
• Union Investment (German Fund), acquiring 4&5 Grand
Canal Square for €233m
We are encouraged by the new wave of purchasers entering
the market resulting in an important broadening of sources of
capital. Purchasers in the past year have included US REITs, US
Private Equity Funds, European funds, Irish REITs and private
investors from both Ireland and abroad. Longer term investors
from other jurisdictions have appeared, joining the opportunistic
funds which have dominated the market since 2010.
We continue to see a healthy pipeline of quality stock and expect
this trend to continue for some time with CBRE forecasting
€4bn of direct property sales and €15bn of property related
loan sales in 2015.
Office occupational market
The office market in Dublin remains characterised by strong
demand for space (from all sectors) and a distinct lack of vacant
Grade A stock in the CBD.
Leasing volumes remain strong and vacancy rates continue to
move downwards: take up in 2014 was in excess of 2.2m sq. ft.
and there was a strong start to 2015 with 64 leasing transactions
signed in Q1 2015 – the highest number of individual leasing
deals to sign in a quarter in the last 7 years, bringing take-up
to over 400,000 sq. ft. in Q1 2015.
The overall vacancy rate in Dublin is now 11.3%; 9.1% in the
CBD and 1.8% in Grade A Dublin 2/4.
Annual Report 2015
15
New Century House
Mayor Street, IFSC
Dublin 1
As a result of these two factors, prime Dublin CBD office rents
continue to move upwards and are now c.€47.50psf with CBRE
expecting the €50psf barrier to be reached in the coming months
and expectations in the market that €55psf will be the prime
rent by the end of 2015 and €65psf by the end of 2017.
62% of the leasing volume in Q1 2015 was in the CBD and
there is a strong preference for city centre locations, although
some occupiers are looking at suburban options due to lack of
suitable available space in the CBD.
Residential
The residential market continues to perform very well.
Nationwide, residential property prices increased by 0.9% month
on month in March and climbed by 16.8% year on year. Dublin
residential property prices rose by 1.1% in March and were
22.8% higher year on year, with Dublin apartments increasing
by 29.8% year on year. With property prices still 39% below their
peak, an unemployment rate that is expected to drop below 10%
in the coming months, and limited new supply coming to the
market, the fundamentals of the residential market look strong.
Notable lettings in the last 12 months include the letting of No.
5 Grand Canal (127,600 sq. ft.) to Facebook at €45 per sq. ft.
and the entire 65 St. Stephen’s Green (61,500 sq. ft.) to Aercap
at €60psf. This building is due to complete in 2016 so perhaps
represents where the market is expected to be at that date.
According to the latest rental information from the Private
Residential Tenancies Board (“PRTB”) index (Q4 2014), Dublin
residential rents rose by 9.6% year on year, and Dublin apartment
rents rose by 10.9% year on year, outperforming Dublin housing
rents by 3.9%.
Supply shortages are expected to persist in the city centre
which should drive rents higher in the medium term. There
are concerns about competitiveness and ability to accommodate
expansion space in the short term which leads us onto the
important development pipeline.
Rental stock is at its lowest level since 2007 and Central Statistics
Office (“CSO”) data indicates that rents are now 7% below their
previous peak levels and, according to market commentators,
this will be surpassed by the end of 2015.
The introduction of the Central Bank of Ireland’s new mortgage
lending rules, which add new limits on consumer mortgage
lending, will shift pressure from the purchaser market to the
rental market, particularly in Dublin, and rental growth of 9%
and 8% over 2015 and 2016 is being forecasted by Goodbody.
On the supply side, according to Goodbody, 11,000 new units
were completed in 2014, this is an increase of 33% from the
prior year and the main driver of this increase was the increase
in housing commencements (4,708 to 7,717) confirming that
the residential construction market has restarted.
Office development pipeline
The development market for the Dublin CBD is starting to
respond to the well documented current shortage of supply and
there is now 1.3m sq. ft. under construction with most of this
stock to be delivered to the market by late 2016/2017. Of the
stock under construction approximately 27% has been pre-let.
Of the remaining 1.0m sq. ft., 0.4m sq. ft. is refurbished stock
and 0.6m sq. ft. relates to new builds which are being built on
a speculative basis. The Group’s Windmill Lane and 1 - 6 Sir
John Rogerson’s Quay developments represent over 0.2m sq.
ft. of the 0.6m sq. ft. of planned new build stock.
During the course of the last 12 months a number of new
schemes have received planning permissions and, using data
from CBRE combined with management expectations, if all
this stock was to be delivered it would create 2.7m sq. ft. of new
space: 0.6m sq. ft. of this is pre-let or owner occupied. Funding
is still an issue for a number of schemes with planning, as there is
only a limited number of financial institutions who are prepared
to provide debt funding to speculative development.
16
16
HIBERNIA REIT PLC
HIBERNIA REIT PLC
Title
Investment Manager’s report
continued
continued
Selected portfolio information
Top 10 tenants by contracted rent as
percentage of portfolio
Tenant analysis by sector
3.1% 2%
3%
4.5%
5.3%
9%
9.7%
24.1%
12.8%
9%
1%
6%
8%
16%
12.5%
24%
36%
30.9%
10.5%
33%
Office of Public Works
FBD Holdings plc.
Bank of Ireland
Bank of New York Mellon
DEPFA Bank plc.
Riot Games Limited
Deloitte & Touche1
Park Rite
Capita
Renaissance Services
of Europe Ltd.
1 Deloitte & Touche is a tenant of Hardwicke House, which
is an investment property of the Group. Deloitte & Touche
were in situ when the Group acquired its interest in the
building and all lease arrangements are at arm’s length.
Banking and Capital markets
Professional Services
Government
Insurance
Other
Retail
TMT
2.8% 2.2%
6%
12.8%
13.5%
19.2%
Banking and Capital Markets
Vacant
Government
Professional Services
Insurance & Reinsurance
TMT
Other
Retail
14.8%
22.2%
32.1%
Dublin 2
IFSC
South Docs
Other
0 - 1 years
2.8
1 - 2 years
5.8
2 - 3 years
1
3 - 4 years
7.6
4 + years
5.5
€m
3.1% 2%
3%
4.5%
5.3%
9%
9.7%
24.1%
12.8%
9%
1%
6%
8%
16%
36%
12.5%
24%
Office of Public Works
FBD Holdings plc.
Bank of Ireland
Bank of New York Mellon
DEPFA Bank plc.
Riot Games Limited
Deloitte & Touche1
Park Rite
Capita
Renaissance Services
of Europe Ltd.
Banking and Capital markets
Professional Services
Government
Insurance
Other
Retail
TMT
Annual Report 2015
Annual Report 2015
17
17
3. Portfolio by location
4. Portfolio by floor area by sector
14.8%
22.2%
32.1%
Dublin 2
IFSC
South Docs
Other
2.8% 2.2%
6%
30.9%
10.5%
33%
12.8%
13.5%
19.2%
Banking and Capital Markets
Vacant
Government
Professional Services
Insurance & Reinsurance
TMT
Other
Retail
5. Contracted rent by time to the earlier of the next review or
expiry date of the lease
0 - 1 years
2.8
1 - 2 years
5.8
2 - 3 years
1
3 - 4 years
7.6
4 + years
5.5
€m
Dublin’s Samuel Beckett Bridge
by night
18
18
HIBERNIA REIT PLC
HIBERNIA REIT PLC
1
Title
Sir John
Rogerson’s Quay
continued
1-6 Sir John
Rogerson’s Quay
Dublin 2
2 Windmill
Lane Site
Windmill Lane
Dublin 2
3
Cumberland
House
Cumberland House
Dublin 2
Parkwest
Business Park
4
Walkinstown
Cross
M50
Santry
Drumcondra
7
10
Fairview
Clontarf
5
6
1
2
Ballybough
IFSC
11
12
13
Heuston
South Quarter
City Centre
14
Crumlin
15
16
17
3
8
Rathmines
Ballsbridge
Elm Park
Donnybrook
9
Blackrock
Tallaght
4 Gateway Site
Newlands Cross,
Naas Road, Dublin 22
Dundrum
Dun Laoghaire
M50
Office development / refurbishment
Office
Residential
Industrial
5 New Century
House
Mayor Street
IFSC, Dublin 1
6
The Forum
Commons Street
IFSC, Dublin 1
7
Commerzbank
House, IFSC
Guild Street
IFSC, Dublin 1
Dublin Harbour
8
Cannon Place
Sandymount
Dublin 4
9
Block 3,
Wyckham Point
Dundrum
Dublin 16
10 Guild House
Guild Street
IFSC, Dublin 1
11 Observatory
Building
7-11 Sir John
Rogerson's Quay
Dublin 2
12 South Dock
House
Hanover Quay
Dublin 2
13 Hanover
Building
Windmill Lane
Dublin 2
14 Chancery
Building
Chancery Lane
Dublin 8
15 Harcourt
Square
Harcourt Street
Dublin 2
16 Montague
House
Adelaide Road
Dublin 2
17 Hardwicke
House
Hatch Street
Dublin 2
1
Sir John
Rogerson’s Quay
1-6 Sir John
Rogerson’s Quay
Dublin 2
2 Windmill
Lane Site
Windmill Lane
Dublin 2
3
Cumberland
House
Dublin 2
Cumberland House
M50
Santry
Drumcondra
7
10
Fairview
Clontarf
Ballsbridge
Elm Park
Donnybrook
9
5
6
1
2
15
16
Heuston
South Quarter
City Centre
Ballybough
IFSC
11
12
13
17
3
8
Rathmines
Parkwest
Business Park
4
Walkinstown
Cross
14
Crumlin
Tallaght
4 Gateway Site
Newlands Cross,
Naas Road, Dublin 22
Dundrum
M50
Annual Report 2015
Annual Report 2015
19
19
5 New Century
House
Mayor Street
IFSC, Dublin 1
6
7
8
9
The Forum
Commons Street
IFSC, Dublin 1
Commerzbank
House, IFSC
Guild Street
IFSC, Dublin 1
Dublin Harbour
Cannon Place
Sandymount
Dublin 4
Block 3,
Wyckham Point
Dundrum
Dublin 16
Blackrock
Dun Laoghaire
Office
Office development / refurbishment
Residential
Industrial
10 Guild House
Guild Street
IFSC, Dublin 1
11 Observatory
Building
7-11 Sir John
Rogerson's Quay
Dublin 2
12 South Dock
House
Hanover Quay
Dublin 2
13 Hanover
Building
Windmill Lane
Dublin 2
14 Chancery
Building
Chancery Lane
Dublin 8
15 Harcourt
Square
Harcourt Street
Dublin 2
16 Montague
House
Adelaide Road
Dublin 2
17 Hardwicke
House
Hatch Street
Dublin 2
20
20
HIBERNIA REIT PLC
HIBERNIA REIT PLC
Our acquisitions
Title
continued
New Century House,
IFSC, acquired for
€47m
Observatory Building,
Dublin 2, acquired for
€52m
Gateway logistics site,
Dublin 22, acquired for
€10m
DEC
13
JAN
14
FEB
14
MAR
14
APR
14
MAY
14
JUN
14
JUL
14
AUG
14
Windmill Lane site,
Dublin 2, acquired for
€7.5m
Hanover Building,
Dublin 2, acquired for
€20m
Hardwicke House
and Montague House,
Dublin 2, acquired for
€60m (of which €42m
deferred)
Chancery Building and
Apartments, Dublin 8,
acquired for €16m
Annual Report 2015
Annual Report 2015
21
21
Harcourt Square,
Dublin 2, acquired for
€70m
35-37 Lower Camden
Street, Dublin 2,
acquired for €1.6m
Cumberland House,
Dublin 2, acquired for
€49m
11 Lime Street,
Dublin 2, acquired for
€1.4m
SEP
14
OCT
14
NOV
14
DEC
14
JAN
14
FEB
15
MAR
15
APR
15
MAY
15
Guild House and
Commerzbank House,
IFSC, acquired for
€91m
1-6 Sir John Rogerson’s
Quay site, Dublin 2,
acquired for €18m
The Forum Building,
IFSC, acquired for
€38m
South Dock House
Dublin 2
22
22
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
Chancery Building
Chancery Lane
Dublin 8
Corporate governance report
Annual Report 2015
23
The year ended 31 March
2015 was the first full year of
operations for the Company
and also saw a second
equity offering.
The composition and performance of the Board and its
committees were reviewed during the year. In addition, we
performed an overview of the Company’s risk framework and
we keep the process in identifying and monitoring these risks
under constant and close review – the Investment Manager
reports on compliance and risks at every Board meeting.
The coming year will likely see our enterprise growing
significantly both in size and complexity. The proposed
internalisation of the Investment Manager will also have
a significant impact on governance practice within the
organisation. As a result, one of our key priorities for the
coming year is that we manage this change effectively and
ensure that we continue to keep pace with developments in
corporate governance.
Daniel Kitchen
Chairman
29 May 2015
Chairman’s corporate governance
statement
The year ended 31 March 2015 was the first full year of
operations for the Company and also saw a second equity
offering. The rapid growth of the portfolio and the wide
range of transaction methods the Group has used to acquire
properties (e.g. secured loan purchases) has required the Board
to be closely involved in monitoring and developing governance
procedures. We continue to comply with the Irish Corporate
Governance Annex to the UK Corporate Governance Code
(“Irish Code”), UK Corporate Governance Code 2012 (“UK
Code”) and the Association of Investment Companies Code
of Corporate Governance (“AIC Code”).
The Company has no executive structure and therefore relies
on the structures in place in the Investment Manager. We
believe good governance requires the Board to have a close
engagement with the Investment Manager and the business so
that we keep an in depth knowledge of the business and a clear
understanding of the challenges and risks that it faces.
We have only two committees, Audit and Nominations, as
with no executive Board there is no need for a remuneration
committee at present. This will be reviewed in light of the
proposed internalisation of the Investment Manager which
we announced on 8 May 2015, should it proceed. The Audit
Committee had a wide scope of work for the year, and is an
important factor in our being able to state our belief that
this Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable, and provides the information
necessary to assess the Group’s performance and prospects.
24
HIBERNIA REIT PLC
Corporate governance report
continued
Introduction
The Board of Directors of Hibernia REIT plc (“the Board”) is committed to developing and maintaining a high standard
of corporate governance. The Company has no executive employees as it is managed by the Investment Manager
under the terms of the Investment Management Agreement. The Company complies with the relevant requirements and
procedures as set out by the Central Bank of Ireland, the Irish Stock Exchange and the Financial Conduct Authority in
the UK, except as outlined below. The main governance requirements are listed in the Listing Rules of the Irish Stock
Exchange and the Financial Conduct Authority (“FCA”), the Irish Corporate Governance Annex to the UK Corporate
Governance Code (“Irish Code”), the UK Corporate Governance Code 2012 (“UK Code”) and the Association of
Investment Companies Code of Corporate Governance (“AIC Code”). To this end, the Board has established Audit and
Nominations Committees, as described below, comprised entirely of independent non-executive Directors.
The Board sets the remuneration of the non-executive directors. Further information on remuneration is set out in the Report
of the Directors on pages 36 to 47 of this report. If the proposed internalisation of the Investment Manager is approved
by the independent shareholders, the Board will also establish a Remuneration Committee comprised of independent non-
executive Directors.
The Board
Leadership and Strategy
Oversight, Control and Risk
Board
Board Level Committees
Audit
Committee
Nominations
Committee
Investment Manager Committees
Risk and
Compliance Officer
(reporting to the
Audit Committee)
Portfolio
Management
Committee
Management
Committee
Investment
Committee
The
Board
The
Chairman
Non-Executive
Directors
The Investment Manager
responsibility
control including
CEO
Overall
for the
Company
COO
Operational
property and
development
management
CIO
Investment
portfolio
strategic
management
liquidity and
CFO
Financial
management
including
capital
management
RCO
Risk
management
and regulatory
reporting and
compliance
Annual Report 2015
25
The Board
Leadership and Strategy
Oversight, Control and Risk
Board
Board Level Committees
Audit
Committee
Nominations
Committee
Investment Manager Committees
Risk and
Compliance Officer
(reporting to the
Audit Committee)
Portfolio
Management
Committee
Management
Committee
Investment
Committee
The
Board
The
Chairman
Non-Executive
Directors
The Investment Manager
CEO
Overall
responsibility
for the
Company
COO
Operational
control including
property and
development
management
CIO
Investment
portfolio
strategic
management
CFO
Financial
management
including
liquidity and
capital
management
RCO
Risk
management
and regulatory
reporting and
compliance
The role of the Board
The Board has reserved the following matters for its direct
stewardship and decision making:
• Strategy and Management oversight
• The Board composition, committees of the Board and
the Company Secretary
• Appointment and oversight of delegates
• Corporate structure and share capital
• Financial control
• Internal controls
• Remuneration of the Board
• Corporate governance
The Board is responsible for providing governance and
stewardship to the Company and its business. This includes
establishing goals for management and monitoring the
achievement of these goals. The Company has entered
into the REIT Investment Management Agreement with
the Investment Manager, whereby the Investment Manager
is required to produce an annual business execution plan
setting out the strategy for the provision of its services and
the management of the properties held or acquired by the
Company.
The Board oversees the performance of the Investment
Manager and the Company’s activities. The Investment
Manager has discretionary authority
into
transactions for and on behalf of the Company save for
certain matters which require the consent of the Board.
The Board is at all times free to offer ideas to the Investment
Manager relating to the structure of a transaction so as to
afford the Company the greatest value.
to enter
The Chairman is responsible for leadership of the Board
and ensuring its effectiveness in all aspects of its role.
All Directors are expected to allocate sufficient time to
the Company to discharge their responsibilities effectively.
Directors are expected to attend all scheduled Board
meetings as well as the Annual General Meeting (“AGM”).
All Directors are furnished with information necessary to
assist them in the performance of their duties. The Board
meets at least four times each calendar year and, prior to
such meetings taking place, an agenda and board papers
are circulated to the Directors so that they are adequately
prepared for the meetings. The Company Secretary
is responsible for the procedural aspects of the Board
meetings. Directors are, where appropriate, entitled to have
access to independent professional advice at the expense of
the Company.
26
HIBERNIA REIT PLC
Corporate governance report
continued
As at the date of this report, there are five Directors on
the Board, all of whom are non-executive. Daniel Kitchen
(the Chairman), Colm Barrington (the Senior Independent
Director), Stewart Harrington and Terence O’Rourke are each
considered independent for the purposes of legal requirements
and any applicable governance codes. William Nowlan is also
a member of the Board of the Investment Manager. This
number of directors is considered by the Board to be sufficiently
small to allow efficient management of the Company while
being large enough to ensure an appropriate mix of skills
and backgrounds. The Board has a strong focus on property
investment management to allow it access to a good knowledge
base. This is balanced with some diversity of background,
extensive experience of quoted companies and strong financial
skills. Further details of the background and qualifications of
the Board are given in the Directors’ biographical details report
on pages 42 to 43.
Senior Independent Non-executive Director
The Company has appointed Colm Barrington as the Senior
Independent Director. The role of the Senior Independent
Director is mainly to:
• provide a sounding board for the Chairman and to serve as
an intermediary for the other Directors when necessary
• facilitate shareholders if they have concerns which contact
through the normal channels of Chairman, or Investment
Manager has failed to resolve or for which such contact is
inappropriate
• to discuss with non-executive Directors the Chairman’s
performance, taking into account the view of executive
directors (if any)
• to listen to the views of major shareholders in order to
help develop a balanced understanding of the issues and
concerns of major shareholders
Committees of the Board
The Board has established two committees: the Audit
Committee and the Nominations Committee. The duties and
responsibilities of each of these committees are set out clearly
in written terms of reference, which have been approved by
the Board.
Any Director appointed to the Board by the Directors will be
subject to re-election by the Shareholders at the first AGM
after his/her appointment. Furthermore, under the Articles,
one third of all Directors must retire by rotation each year and
may seek re-election. However, in keeping with best corporate
governance practice, all Directors intend to seek re-election
each year at the AGM.
The Board reviews the Company’s accounts, including all
expenses, on a quarterly basis, to ensure that the Company
expenditure is appropriate and in the best interest of the
Shareholders.
Details of the remuneration of Directors are set out in the
Directors’ Remuneration report on page 45.
The composition of the Board is reviewed regularly to ensure
that the Board has an appropriate mix of expertise and
experience. The Articles of the Company provide that the
number of Directors that may be appointed cannot be fewer
than two or greater than ten and that two Directors present at
a Directors’ meeting shall be a quorum.
On appointment, new directors are provided with induction
training.
Board and Committee performance
The first evaluation of the Board and Committees took place
in the first quarter of 2015. This evaluation reviewed the
balance of skills, experience, independence and knowledge of
the Board on the Company, its diversity, including gender, how
the Board works together as a unit, and other factors relevant
to its effectiveness. Individual evaluation of Directors aimed to
show whether each Director continues to contribute effectively
and to demonstrate commitment to the role (including
commitment of time for Board and Committee meetings and
any other duties).
The Board was satisfied with the performance and skills and
experience of its members for the period under review. As
the period was highly active, with 14 acquisition transactions
and a second equity issue, there were an unusually high
number of meetings and as a result some members had to
attend ad hoc meetings by telephone. It was noted that
while this was unavoidable given the circumstances, physical
attendance is preferable. One outcome of the review was an
acknowledgement of the relationship with the Investment
Manager and the good dialogue and support in considering
acquisition proposals in particular. The evaluation also raised
the topic of diversity, and it was emphasised that this should
stay on the agenda in future when considering the Board
composition.
Annual Report 2015
27
Audit Committee
Chairman of the Audit Committee:
Terence O’Rourke
Members of the Committee:
Colm Barrington, Stewart Harrington
Audit Committee Chairman’s report
Report of the Audit Committee
The Audit Committee is chaired by Terence O’Rourke, who
is an independent non-executive Director and is considered
by the Board to have sufficient financial experience
and sufficient understanding of financial reporting and
accounting principles. All members of the Audit Committee
are independent non-executive directors, appointed by
the Board for a period of up to three years. The Audit
Committee is constituted in compliance with the UK Code,
the AIC Code, the Irish Code and the Articles regarding
the composition of the Audit Committee. The Terms of
Reference for the Audit Committee are published on the
Group’s website.
This was the first full year of operations of the Group and
the Audit Committee met on four occasions during the
financial year to consider financial, governance and risk
matters. The year was a very busy one given the significant
work undertaken in acquiring properties and the launch and
successful completion of the second equity issue in November
2014. Significant property, legal and financial due diligence
was undertaken by our advisers as part of the capital raising
and our Depositary, Credit Suisse International, completed
their first Depositary review during the year. No significant
issues were identified as part of these workstreams.
We also carried out our first self-evaluation and this examined
both our own work and our interactions with external
assurance such as the external auditors and valuers. We are
satisfied that the Audit Committee has the right balance of
skills and resources, has been able to work effectively and has
received all the support and response it has required from
both management and the external providers. We are also
satisfied that the level of scrutiny on public announcements
is sufficient and effective. There were no issues arising from
this evaluation.
As the investment property portfolio was built out, so too
were the systems and procedures in place to manage this
as well as the reporting framework and risk management
activities. This process involved a significant amount of work
by the Committee in order to ensure the integrity of the
financial reporting and oversight of the auditors’ activities
and the risks inherent in a period of rapid growth. This
included meeting with the external auditors regularly as well
as the Group’s external valuers.
In the coming year the property portfolio is expected to
continue to grow and the Audit Committee will continue
its oversight of the audit engagement and the Group and
Company’s financial reporting and risk management
processes.
Terence O’Rourke
28
HIBERNIA REIT PLC
Corporate governance report
continued
The Audit Committee meets regularly during the year, in alignment with the financial reporting calendar. The Audit Committee
requests the attendance of various relevant parties as required. The parties met were as follows:
Invitee
Reason for attendance
Deloitte & Touche
CBRE
Representatives of the
Investment Manager
The independent auditors attend to present their plans in respect of the annual audit and interim
review, their analysis of the risks they see in the Group, the results of their audit and review(s), and
their recommendations for improvements in systems and controls
The Independent valuers meet the Audit Committee to discuss their work and the significant
assumptions in relation to the property valuations. From this the Audit Committee can make
recommendations to the Directors in relation to their assessment of property valuations
Representatives of the Investment Manager, such as the CFO, the COO and the Risk and
Compliance Officer (“RCO”) meet the Audit Committee in order to present the financial
statements, any significant judgements and areas of uncertainty, the risks and measures in place to
mitigate those risks, and any other matters as requested by the Audit Committee
Principal Responsibilities of the Audit Committee
The principal responsibilities of the Audit Committee and the key areas of discussion in 2014/15 were as follows:
Principal responsibilities
Reporting and
external audit
• The monitoring of the integrity of the
• Prospectus, Interim and Annual results
Key areas discussed in 2014/2015
Company’s financial statements and any
other formal announcement relating to
the Company’s financial performance,
business model and strategy and to review
significant financial reporting issues and all
other material disclosure obligations
• The development, implementation and
review of a policy on the supply of non-
audit services by the external auditor,
taking into account any relevant ethical
guidance on the matter
• The review and discussion of the external
auditor’s audit plan and ensuring that it is
consistent with the Company’s overall risk
management system
• The assessment of the external auditor’s
performance, qualifications, expertise,
resources, independence and their terms of
reference, the approval of their fees and the
review of external audit reports to ensure
that where deficiencies in internal controls
have been identified that appropriate and
prompt remedial action is taken by the
Investment Manager
reviewed
• Audit plan for year ending 31 March
2015 reviewed with external Auditors,
including the Engagement letter. Met
with the auditors both with and without
the presence of management. Considered
audit scope, risks assessment, results and
recommendations. The significant audit
risks identified by the auditor were the
valuation of investment properties, the
existence and entitlement to investment
properties, performance fees and the
recognition and measurement of loans
and receivables and other assets. Other
audit risks identified were the existence of
cash, revenue recognition, taxation, equity
transactions, compliance with regulatory
rules, disclosures and related party
transactions
• Review of significant items of judgement
and recommendations to the Board in
terms of reporting for specific items
• Review of the policy on the supply of
non-audit services by the external auditor,
particularly in light of the high level in
2015, in order to assess the independence
and objectivity of the external auditor
• Met with the valuers, both with and
without the presence of management.
Discussed the valuation approach, methods
used, interaction with management,
availability of information and access to
the properties
• Cash positions and depository review
Annual Report 2015
29
Principal responsibilities
Key areas discussed in 2014/2015
Risk and internal control
• Review of the adequacy and effectiveness
• Reviewed the Risk Management
of the Company’s internal financial
controls and internal control and risk
management systems in particular with
regard to the operation of the Investment
Manager
• Assess the principal risks of the Group
Framework developed by the Investment
Manager for the Group
• This included an overview of the risk
management structure, the risk appetite,
the impact of the main risks and risk
reporting
• Review the disclosures made on risk and
• Review of the risk register
internal control in the annual report
• Monitoring the necessity or otherwise of
an internal audit function on an ongoing
basis
Other
• Verification that procedures in place
• Review of the Audit Committee’s
comply with applicable legislation, the
Listing Rules and the Irish REIT Regime
guidelines
• The review of the operation of the
Investment Manager in relation to the
Company’s procedures for the detection
of fraud, bribery, and compliance
• Review the Committee’s terms of
reference and performance
effectiveness
• Gap analysis of compliance with the
Irish Corporate Governance Annex
to the UK Corporate Governance
Code (“Irish Code”), UK Corporate
Governance Code 2012 (“UK Code”)
and the Association of Investment
Companies Code of Corporate
Governance (“AIC Code”)
• Review of all correspondence with
regulators
The significant issues considered by the Audit Committee during year ended 31 March 2015 and the action taken by the
Committee are set out below:
Significant issues
considered
Valuation of the
Investment Portfolio
Recognition and
classification of
investment transactions
Action taken by Committee
The Investment Manager works to ensure that the information provided to the independent
valuers, CBRE, is correct and that the results of their valuation judgements are in line with
expectations based on their assessment of the market and knowledge of the properties.
The Audit Committee reviews the results of these valuations and considers whether any
amendments need to be made to the valuation amounts, e.g. in recognition of effects arising
from the accounting policy on the recognition of rental incentives.
The Group has acquired an interest in investment property assets both as direct asset
purchases and through the acquisition of loans which are secured over the target property.
Recognition of property assets collateralising acquired loans as investment properties
requires significant judgement by the Directors to determine if it is probable that the future
economic benefits that are associated with the underlying investment property will flow to
the Group. The Audit Committee reviewed management papers on key judgements as well
as the external auditor’s report in order to ensure that the treatment of the transactions is
appropriate.
30
HIBERNIA REIT PLC
Corporate governance report
continued
Performance fees
Impairment of other
non-current assets
held for sale
As detailed in Note 26.2 to the financial statements, the performance fee calculation involves
two parts. 50% is calculated by reference to the return to shareholders and is performed
by the IM, approved by the Board and involves a complex manual calculation. The other
50% is performed by a third party, IPD, there is therefore a risk that it will not be provided
in a timely fashion. For the year under review, the return to shareholders is the only part of
the calculation to give rise to an expense. It is considered a significant item, not insofar as it
requires judgement, but because it is payable to a related party and dependent on a complex
calculation. Having reviewed the process and calculation the Audit Committee was satisfied
that this was performed in a correct fashion.
Other non-current assets held for sale were acquired as a result of the work out of the
Dorville loan portfolio. They are measured at the lower of their carrying amount and
fair value less costs to sell. In order to measure these assets, the Directors are required to
exercise judgement in making estimations of the fair value less costs to sell. This involves
an assessment of the properties on an individual basis together with a review of the sales
agent’s estimation of achievable price to sell less expected costs to sell, including stamp duty
and other taxes. The Audit Committee recommended and the Board determined that no
impairment of these assets is required as they expect that these assets will be sold at least at
their carrying value.
Non-audit work carried out by the external
auditor during the year ended 31 March 2015
The external auditor has carried out a significant amount of
work during the year ended 31 March 2015 which is non-audit
in nature.
Non audit services during the year arose in two main areas:
Second equity raise: 67% (€225,894) of non-audit fees related to
work by the external auditor, mainly by the audit engagement
team, on the prospectus and the opinions thereon. The audit
committee consider that the engagement of the external
auditor as the reporting accountant for the issuance was both
appropriate and reasonable. The Committee is also of the
opinion that the undertaking of this assignment by the external
auditor is not inconsistent with its work as external auditor
and does not pose a threat to the auditor’s independence and
objectivity.
Tax advisory services: 29% (€97,121) of non-audit fees related to
tax advice. This advice was provided by Deloitte & Touche,
albeit by partners and staff unrelated to the audit engagement
team. This advice was sought in relation to the structuring
of a number of acquisitions which were complex in nature,
for example the Dorville loan acquisition and the Hardwicke
House and Montague House transaction. The Group used
Deloitte & Touche in these cases as their knowledge of the
Group’s structure and activities complemented and expedited
the advice they were being asked to give. While the Committee
is of the opinion that the undertaking of this work does not
compromise the independence or objectivity of the external
auditor, it has nonetheless recommended that tax advice for
future projects is sought from other providers where possible.
The Group already uses other consultants for various aspects
of tax advice, such as VAT, and will look at alternatives where
appropriate on new projects.
The quantum of the non-audit fees is deemed non-substantial
relative to the overall size of Deloitte & Touche’s firm-wide
fee income.
Deloitte & Touche is a tenant of Hardwicke House, which is
an investment property of the Group. Deloitte & Touche were
in situ when the Group acquired its interest in the building and
all lease arrangements are at arm’s length. Deloitte & Touche
occupies some space in this property and therefore pays rent
to the Group.
As a result of their consideration of the above facts, the Audit
Committee concluded that the independence and objectivity
of the external auditor has not been compromised.
Internal audit
The Audit Committee has reviewed the business model under
which the Company operates and in particular the external
management model which it has put in place to manage
its business operations. Having undertaken such a review,
and in light of the nature, scale, complexity and range of
operations of the Company, the Committee does not believe
that an internal audit function is required at present and
instead it will rely on its own and the Investment Manager’s
internal monitoring procedures, any internal audit functions
in key service providers, on reviews by the Depositary, and
on external audit reports. In addition the Audit Committee
noted that significant due diligence and verification work had
been completed as part of the recent equity capital raise and
this provided additional reassurance. As an internal audit
function has not been established, the Audit Committee will
consider annually (in accordance with the UK Code) whether
there is a need for an internal audit function and make a
recommendation to the Board.
Depository
The Group had €139m in cash at the year end. The depository
is responsible for monitoring the safe keeping of these assets in
accordance with the Group’s policy on cash management.
Approval of Reports
The Preliminary Statement and Annual Report were
considered in draft on 12 May 2015. The Preliminary
Statement, which included financial statements, was approved
by the Audit Committee on 12 May 2015 and recommended
to the Board for signing. The Annual Report was approved by
Board on 29 May 2015.
Nominations Committee
Membership:
Colm Barrington, Stewart Harrington,
Daniel Kitchen (Chair), Terence O’Rourke
Report of the Nominations Committee
The Nominations Committee met once during the year ended
31 March 2015. The Nominations Committee is chaired by
Daniel Kitchen, who is also the non-executive Chairman. All
members of the Nominations Committee are independent
non-executive directors, appointed by the Board for a
period of up to three years. The Nominations Committee is
constituted in compliance with the UK Code and Irish Stock
Exchange Annex, the AIC Code and the Articles regarding
the composition of the Nominations Committee.
Annual Report 2015
31
is responsible
The Nominations Committee
the
appointments to the Board and meets at least once a year
and as otherwise directed. The Terms of Reference for the
Nominations Committee, which are available on the Group’s
website, were confirmed at the meeting on 27 January 2015 as
effective and sufficient.
for
The Nominations Committee’s main areas of focus are the
following:
(a) to review the structure, size and composition of the Board
and the combination and balance of experience, core
competencies and other attributes which the Board should
possess in order to discharge its role and to propose changes
to the Board where appropriate;
(b) to assess the effectiveness of the Board and each of its
committees;
(c) to identify and nominate for the approval of the Board,
candidates to fill Board vacancies as and when they arise;
(d) to engage in succession planning for directors and other
senior executives, if any, of the Company taking into
account any skills set or expertise that the Board may
require;
(e) to review the leadership needs of the Company and stay
fully informed about strategic issues and commercial
changes affecting the Company; and
(f) to provide a report on its activity to be included in the
Company’s report and financial statements.
Before any appointment is made by the Board, the Nominations
Committee will evaluate the balance of skills, knowledge
and experience and diversity of the Board. The Board
actively considers diversity and believes this is an important
factor when considering appointments to the Board. In this
context, diversity in skills and background as well as gender is
important. This topic remains on the agenda for consideration
in future appointments.
An evaluation of the Committee’s work was carried out in the first
quarter of 2015. Given that there have been no appointments
made to the Board during the period, the work of the Committee
has been limited. However, this self-assessment found that the
Committee is satisfied that there are the right mixture of skills
involved on the Committee, that the Committee can work with
sufficient independence from the Investment Manager and that
the processes in place to make new appointments are appropriate
and in line with best practice. The Committee reviewed the time
and attention given by the Directors to their duties and were
satisfied that each Director has been adequately carrying out his
duties as a director of the Company.
The Nominations Committee may not be chaired by the
Chairman when it is dealing with the matter of succession to
the chairmanship of the Company.
32
HIBERNIA REIT PLC
Corporate governance report
continued
Internal controls
The Board acknowledges it is responsible for maintaining the
Group’s system of internal control and risk management in
order to safeguard the Group’s assets. Such a system is designed
to identify, manage and mitigate financial, operational and
compliance risks inherent to the Group. The system is designed
to manage rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable, but not
absolute, assurance against material misstatement or loss.
The Group’s internal control system is built on certain
fundamental principles, and is subject to review by the Board
and external auditors. Much of the activities of the Group are
carried out by the Investment Manager under the Investment
Management Agreement (IMA). The following are the
principles under which the internal control system operates:
• a defined schedule of matters reserved for the Board
• a detailed authorisation process
• formal documentation of all significant transactions
• business and financial planning to include cashflows and
scenario analysis covering a period of three years forward
on a rolling basis
• robust assessment of property investment decisions
• performance assessment versus budget on total and
individual project basis
• benchmarking of performance against external sources, i.e.
the Investment Property Databank (IPD)
The Policies and Procedures Manual has recently been revised
in line with developments in the business. This manual sets
out financial reporting and other procedures and policies of
the Group and addresses the respective authority levels and
responsibilities of the Group and the Investment Manager, the
authorisations required to effect those transactions, and the
necessary controls to ensure that only appropriately authorised
individuals in either the Investment Manager or the Group
can approve a transaction. In particular, the Policies and
Procedures Manual establishes the necessary controls and
authority levels of the Investment Manager to manage the
Group’s property portfolio. Other controls and authorities in
the Policies and Procedures Manual include those in relation
to the management of risk, property portfolio management,
property valuations, and the maintenance of registers and
other administrative matters.
Accountability and relationship with the
Investment Manager and the Depository
The Statement of Directors’ Responsibilities is set out on page 48.
The Board has contractually delegated to external third
parties, including the Investment Manager, and the Depository,
the management of the investment portfolio, the custodial
services (which include the safeguarding of the assets) and
the day to day accounting and administration. Each of these
contracts was entered into after full and proper consideration
by the Board of the quality and cost of the services provided,
including the control systems in operation in so far as they
relate to the affairs of the Group.
The Investment Manager is appointed on an exclusive basis
to acquire properties on behalf of the Group, to manage the
Group’s assets and properties on behalf of the Group and
to provide or procure the provision of various accounting,
administrative, reporting, record keeping, regulatory and
other services to the Group. The Investment Manager has
discretionary authority to enter into transactions for and on
behalf of the Group subject to certain reserved matters that
require the consent of the Board.
The Investment Manager ensures that all Directors receive,
in a timely manner, all relevant management, regulatory and
financial information. Representatives of the Investment
Manager attend each Board meeting enabling the Directors to
probe further on matters of interest.
Under the terms of the REIT Investment Management
Agreement, the Investment Manager provides a management
team. Within the Investment Manager, the senior management
team responsible for the provision of management services to
the Group are:
Kevin Nowlan
Richard Ball
Chief Executive Officer
Chief Investment Officer
Tom Edwards-Moss
Chief Financial Officer
Frank Kenny
Development Director
William Nowlan
Investment Director
Sean O’Dwyer
Frank O’Neill
Risk and Compliance Officer
Chief Operations Officer
Annual Report 2015
33
All of this team, with the exception of Sean O’Dwyer,
are Directors of the Investment Manager. The investment
management fee covers the services of this management team,
except for regulatory costs which are borne by the Company.
The Company is satisfied that the risk management function
has the necessary authority, resources, expertise and access to
relevant information to fulfil its role. Further information on
the principal risks is given on pages 37 to 40.
Details on the fee structure with the Investment Manager is
provided in Note 26 on page 81.
Risk management
The Company considers risk management to be a very
important matter. The Board and the Audit Committee,
together with the Investment Manager, deal with risk
management on behalf of the Company as part of the regular
monitoring of the business.
The Board has put in place procedures designed to ensure that
all applicable risks pertaining to the Company can be identified,
monitored and managed at all times. These procedures are
carried out as part of the duties of the Investment Manager
under the Investment Management Agreement and are kept
under review by the Audit Committee and the Board.
It is a requirement of the IMA that the Investment Manager
establish a permanent risk management function with the
following objectives:
Model Code on share dealing
The Company must comply with the Model Code which
imposes restrictions on share dealings for the purposes
of preventing the abuse, or suspicion of abuse, of inside
information by Directors and other persons discharging
managerial responsibilities within the Company. The Board is
responsible for taking all proper and reasonable steps to ensure
compliance with the Model Code by the Directors and others
to whom the Model Code is applicable.
The Company has in place a share dealing code which gives
guidance to the Directors, the Investment Manager, any
persons discharging managerial responsibilities as defined in
regulation 12(8) of the Market Abuse Regulations and persons
identified by the Board to fulfil this role, and anyone listed on
the Company’s Insider List on the pre-clearance notification
procedures to be followed when dealing in the shares of any
class of the Company or any other type of securities issued by
or related to the Company.
(a) Safeguard the assets of the Company and identify and
Communications with shareholders
The Board
shareholders on a regular basis.
intends to continue to communicate with
General Meetings
The Company holds a general meeting each year as its annual
general meeting in addition to any other meeting in that year.
Not more than 15 months shall elapse between the date of one
annual general meeting and that of the next. The Directors
are responsible for the convening of general meetings.
Information is distributed to shareholders at least 20 business
days prior to such meetings to ensure compliance with the
Articles and the UK Code.
Quorum
No business other than the appointment of a chairman shall
be transacted at any general meeting unless a quorum is
present at the time when the meeting proceeds to business.
Two members present in person or by proxy shall be a quorum.
manage liabilities;
(b) Maintain a risk register;
(c) Maintain the efficiency and effectiveness of the Company’s
operations;
(d) Ensure the reliability and completeness of all accounting,
financial and management information; and
(e) Ensure compliance with its internal policies and procedures
as well as all applicable laws and regulations.
The Investment Manager has appointed a Risk and
Compliance Officer (“RCO”) to undertake this function. The
RCO is responsible for monitoring and managing the key
risks of the Company and is independent from those persons
involved in the operations of the Company.
A Risk Register is maintained by the RCO in which risks are
identified, assessed and any gaps are considered for mitigation.
The Risk Register is updated and reviewed by the Board at
least annually or more frequently if specifically required. The
RCO reports quarterly to the Board on the adequacy and
effectiveness of the risk management process. This includes
the identification of deficiencies and the status of any remedial
action required. No specific matters have been escalated to the
Board as of this date.
34
HIBERNIA REIT PLC
Corporate governance report
continued
Voting Rights
(a) Votes of Members: Votes may be given either personally or
by proxy. Subject to any rights or restrictions for the time
being attached to any class or classes of shares, on a show
of hands every member present in person and every proxy
shall have one vote, so, however, that no individual shall
have more than one vote, and on a poll every Member
shall have one vote for every share carrying voting rights of
which he is the Holder. The Chairman shall be entitled to a
casting vote where there is an equality of votes.
(b) Resolutions: Resolutions are categorised as either ordinary
or special resolutions. The essential difference between an
ordinary resolution and a special resolution is that a bare
majority of more than 50% of the votes cast by members
voting on the relevant resolution is required for the passing
of an ordinary resolution, whereas a qualified majority of
more than 75% of the votes cast by members voting on
the relevant resolution is required in order to pass a special
resolution. Matters requiring a special resolution include
for example:
• altering the Objects of the Company;
• altering the Articles of Association of the Company; and
• approving a change of the Company’s name
Other
The Company discloses information to the market as required
by the Central Bank of Ireland, the Irish Stock Exchange and
Financial Conduct Authority including inter alia:
• periodic financial information such as annual and half
yearly results
• price-sensitive information, which might be a significant
change in the Company’s financial position or outlook,
unless a reason is present not to (e.g. prejudicing
commercial negotiations)
• information regarding major developments in the
Company’s activities
• information regarding dividend decisions
• any changes at board level must be announced immediately
once a decision has been made
• information in relation to any significant changes notified to
the company of shares held by a substantial shareholder
The Company will make an announcement if it has reason
to believe that a leak may have occurred about any on-going
negotiations of a price-sensitive nature. Any Board decisions
which might influence the share price must be announced
before the start of trading next day. Information relayed at a
shareholders’ meeting which could be price-sensitive must be
announced no later than the time the information is delivered
at the meeting.
In relation to any uncertainty regarding the communication of
a particular matter, advice will be sought from the Company’s
sponsors and/or legal adviser(s).
Annual Report 2015
35
Substantial shareholdings
As at 31 March 2015, the Company has been notified of the following substantial interests in the Company’s shares:
Holder
Soros Fund Management LLC
Mainstay Marketfield Fund
Putnam Investments LLC
TIAA-CREF Investment Management LLC
Invesco
Wellington Management Company LLP
Goodbody Stockbrokers
Zurich Life Assurance plc
Oppenheimer Funds, Inc.
Morgan Stanley Investment Management Limited
As at 28 May 2015 the Company has been notified of the following changes:
Holder
Putnam Investments LLC
Goodbody Stockbrokers
Oppenheimer Funds, Inc.
Holding
‘000 shares
52,181
46,356
38,434
36,302
33,087
27,439
24,181
22,605
21,166
20,229
Holding
‘000 shares
33,453
19,389
27,479
%
7.78
6.91
5.73
5.42
4.94
4.09
3.61
3.37
3.16
3.02
%
4.99
2.89
4.10
36
HIBERNIA REIT PLC
Report of the directors
The Directors submit their Annual Report for the year ended 31 March 2015. The Investment Manager’s Report and all
other sections of the Annual Report, to which cross reference is made, are incorporated into the Report of the Directors
by reference.
Directors’ responsibilities
These are set out in the Directors’ Statement of Responsibilities on page 48 of this Annual Report.
Principal activity and business review
The principal activity of the Group is property investment. The Group mainly consists of the Company, Hibernia REIT plc,
and its subsidiary, Hibernia REIT Finance Limited. Information regarding subsidiaries is set out in Note 25 to the consolidated
financial statements.
Overview of business activities in 2015
2015 was the first full year of operation for the Group and saw the build-up of a portfolio of investment property worth €641m
(€636m net of the Windmill option – see Note 13 to the financial statements) on 31 March 2015.
Overview of financial results and position
IFRS NAV - cent per share
EPRA NAV - cent per share
Net cash and cash equivalents
Group LTV
Profit /(loss) for the period
Basic EPS
Diluted EPS
Final dividend / DPS
Full year dividend / DPS
31 March
2015
31 March
2014
Movement
+ 16.6%
+ 16.0%
- 52.3%
112.4
111.8
€139m
0.0%
€92m
18.4 cent
18.3 cent
€3.4m / 0.5 cent
€5.4m / 0.8 cent
96.4
96.4
€292m
0.0%
(€1)m
-0.2 cent
-0.2 cent
n/a
n/a
A detailed review of the business and performance is
contained in the Investment Manager’s Report on pages 7
to 13. Financial results are also discussed in more detail on
pages 2 to 3.
As discussed in Note 17 to the financial statements, the
Company made a successful secondary equity offering during
the year which raised €286m in November 2014. In addition,
the Group raised debt finance in August 2014 of €100m which
was undrawn at year end (Note 19).
The profit for the period was €92m including unrealised gains
on investment properties (March 2014: Loss €0.8m). The
Board has proposed a maiden final dividend of 0.5 cent per
share (€3.4m) which will be paid in August 2015. Together
with the interim dividend of 0.3 cent, the total dividend for the
year is 0.8 cent per share or €5.4m (2014: nil).
REIT status and taxation
Hibernia REIT plc elected for Real Estate Investment Trust
(“REIT”) status under section 705 E of the Finance Act
2013. As a result, the Group does not pay Irish corporation
tax on the profits from qualifying rental business in Ireland
provided it meets certain conditions. With certain exceptions,
corporation tax is still payable in the normal way on profits
from the Group’s non-core business. The Group purchased
two loan portfolios during the year in order to acquire several
investment properties which were part of the collateral
securing these portfolios. These portfolios were also secured
on assets which the Group did not want for its rental business,
and which it designated as “non-core”. These assets have since
either been sold, and the proceeds applied against the loan
balances due, or have been acquired by the Group and are
classified as “non-current assets classified as held for sale”. The
disposal process of these assets is expected to be complete by
the end of 2015. As they are not part of the qualifying rental
business, the Group will be liable to taxes on any profits arising
from these assets including capital gains taxes on any profits
on disposal.
Annual Report 2015
37
The Group must satisfy the conditions summarised below for
each accounting period:
(a) at least 75% of the Aggregate Income of the Group must
be derived from carrying on a Property Rental Business;
(b) it should conduct a Property Rental Business consisting
of the generation of rental income from at least three
properties, the market value of no one of which is more
than 40% of the total market value of the properties in the
Property Rental Business;
(c) it should maintain a property financing ratio being, broadly,
the ratio of Property Income plus Financing Costs to
Financing Costs, of at least 1.25:1;
(d) at least 75% of the market value of the assets of the Group
must relate to assets of the Property Rental Business;
(e) the aggregate debt shall not exceed an amount of 50% of
In relation to properties under development, where the
development costs exceed 30% of the market value of
the property at the commencement of development, then
the property must not be disposed of within three years of
completion. If such a disposal takes place, then the Group
would be liable to tax on any profit on disposal.
The Directors confirm that the Company complied with the
REIT legislation for the year ended 31 March 2015.
Corporate governance
The Group is committed to high standards of corporate
governance, details of which are given in the Corporate
Governance Report on pages 22 to 35 which forms part of the
Report of the Directors.
the market value of the assets of the Group; and
Results and Dividend
(f) subject to having sufficient distributable reserves, the Group
must distribute at least 85% of its Property Income to its
shareholders by way of a Property Income Distribution
(“PID”) for each accounting period
At 31 March 2015 the Group had €139m of cash remaining to
be invested from the Group’s secondary equity issue, of which
€43m was committed. Profits arising from the investment of
these funds, other than in the property rental business, are
treated as property profits for two years from either the date
of issue of the shares or the date of disposal of the property.
Therefore income arising from these funds should qualify for
tax relief under the REIT provisions for a period of two years
from November 2014. The Group expects that the funds will
be invested in the next three to six months and therefore the
Group will comfortably comply with this condition.
The Group showed a profit of €92m for the year ended 31
March 2015 (Loss of €0.8m for the period to 31 March 2014).
The Group paid an interim dividend of €2.0m during the
year. The Directors propose a payment of €3.4m as a final
dividend for the year (31 March 2014: Nil).
Shares in issue
At 31 March 2015 the Company had 670,317,459 units of
ordinary stock in issue (31 March 2014: 385,000,000 units).
Principal risks and uncertainties
Under Irish company law, the Company is required to give
a description of the principal risks and uncertainties which
it faces.
The Board recognises there are certain risks in the structure,
operation and management of the Group and Company
and acts to mitigate these through their close and active
management. The Group and Company exposure to financial
risk is further described in Note 23 to the consolidated
financial statements. The Company’s procedures in respect
of the management of these risks are further explained in
the Corporate Governance Report on pages 22 to 35 of this
Annual Report.
Description of exposure
Measures to manage risks
Movement in the period
38
HIBERNIA REIT PLC
Report of the directors
continued
Principal Risks and Uncertainties
Risks
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
Dublin property
market
Under-performance by Dublin
property market compared to
other Irish property sectors: all
the Group’s investments to date
have been within Dublin
Investment
Competition may limit the
ability of the Investment
Manager to source investment
opportunities that meet the
Group’s target returns. Poorly
judged investment decisions
(whether buying or selling) may
impact on returns
▼ The rate of economic
recovery has increased in
pace and breadth during
the period. However, risk
of macro-economic shocks
remain and 2016 is likely
to see a general election in
Ireland which may bring
additional uncertainty to the
economic environment
◆ 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
◆ 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
The Group uses the services
of its Investment Manager and
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 pro-actively manages
its strategy and exposure using
this knowledge and the combined
expertise of its Board
The Group reviews the execution
of its strategy regularly and uses
the knowledge and research of the
Investment Manager to inform its
decisions. 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%
The Investment Manager actively
seeks out opportunities that may
meet its return criteria using its
extensive contacts in the Irish
property market. The ability of
the Group to gain ownership of
property assets through acquiring
secured loans has helped in
reducing competition. The
Investment Manager regularly
assesses the property cycle through
a range of lead indicators in
making its investment proposals to
the Board
Concentration of investment in
single assets, tenants, locations
or sectors may increase risk and
reduce liquidity
The Group and Investment
Manager regularly review the
portfolio to ensure it remains
balanced and take appropriate
action if not. The Group may use
partnerships to limit exposure to
especially large assets
◆ The Group has built a
balanced portfolio in the past
12 months. As at 31 March
2015 the largest single asset
represented 11% of the
portfolio by value
Annual Report 2015
39
Risks
Description of exposure
Measures to manage risks
Movement in the period
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
Asset
Management
Poor management of the
Group’s assets and tenants may
lead to a failure to maximise
potential income returns from
the portfolio
▲ The Group acquired a
number of development
sites in the year and has
commenced development
work at Windmill Lane
▲ During the period the
Group has acquired €641m
in value of investment
property thus increasing its
asset management risk
The Investment Manager has
staff dedicated to development
management and bi-weekly update
meetings. The Group has set a
maximum exposure to active
speculative development at 15%
of reported net asset value. Both
the Group and the Investment
Manager intend that joint venture
structures and / or pre-leases will
be used to mitigate and manage
the Group’s development risk
The Investment Manager has
put a number of protocols and
controls in place to ensure that
the management of the Group’s
assets and tenants is optimised.
A property industry portfolio
management system (PMS) has
been installed and populated
which manages in a structured way
all the key aspects of the Group’s
assets and tenant’s 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 Investment Manager keeps
fully abreast of the condition and
management of the Group’s assets
and the occupational requirements
of its tenants
40
HIBERNIA REIT PLC
Report of the directors
continued
Description of exposure
Measures to manage risks
Movement in the period
Risks
Financial
People
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
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
Cashflows and future funding
requirements are frequently
assessed to ensure the Group has
sufficient undrawn facilities in
place to execute its plans
The Group has no employees. It
is dependent on the Investment
Manager for its expertise
in property investment and
management. In particular,
the Group is dependent on
the ability of the Investment
Manager to procure and
retain to suitably skilled and
experienced staff to support the
Group’s activities
The Group manages the
performance of the Investment
Manager through the close
supervision of its activities and
uses a performance fee structure
payable in Hibernia shares
to incentivise the Investment
Manager and align its interests
with those of the Group
Regulatory
Change in regulations including
EU directives, tax, planning and
environmental legislation could
increase the Group’s cost base
The Investment Manager and the
Board spends substantial time,
and retains external experts as
necessary, to ensure compliance
with current and possible future
regulatory requirements
▲ The Group entered a three
year €100m revolving
credit facility with a floating
rate in August 2014. As at
31 March 2015 this was
undrawn
▼ The Group has a €100m
undrawn loan facility
as outlined above. With
the improving economic
situation in Ireland,
availability of debt funding
and terms has improved
▼ In the last 12 months the
Investment Manager has
successfully expanded its
team from 7 to 16, including
adding a CFO at the senior
level. Employee turnover
was zero during the year.
Plans to internalize the
Investment Manager
(discussed on pages 4 to 5 of
this report) will enhance the
Group’s ability to attract and
retain staff
◆ Our strategy in managing
this risk together with
a relatively unchanged
regulatory environment has
meant the risk has remained
relatively stable over the last
12 months
Annual Report 2015
41
Going concern
Directors
The Group’s business activities, together with the factors likely
to affect its future development, performance and position are
set out in the Investment Manager’s Report on pages 7 to 13 of
this Annual Report. This also covers the financial position of
the Company, its cash flows, liquidity position and borrowing
facilities. Further detail on the financial performance and
financial position of the Group and Company is provided in
the consolidated financial statements and Company financial
statements on pages 53 to 89. In addition, Note 23 to the
Annual Report includes details on the Group’s financial risk
management and exposures.
The Company has considerable financial resources in the form
of the remaining cash proceeds from its second capital raise
in November 2014 of €139m as well as an undrawn credit
facility of €100m (Note 19). Having therefore assessed the
relevant business risks, the Directors believe that the Company
is well placed to manage these risks successfully, and they have
a reasonable expectation that the Company, and the Group as
a whole, have adequate resources to continue in operational
existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing these
consolidated financial statements.
The business of the Company is managed by the Directors,
each of whose business address is Hibernia REIT plc, Marine
House, Clanwilliam Place, Dublin 2, Ireland.
Unless otherwise determined by the Company in a general
meeting, the number of Directors shall not be more than ten
nor less than two. A Director is not required to hold shares in
the Company. Two Directors present at a Directors’ meeting
shall be a quorum.
The Directors do not have service contracts but do have
letters of appointment which reflect their responsibilities
and commitments. Each Director has the same general legal
responsibilities to the Company as any other Director and
the Board as a whole is collectively responsible for the overall
success of the Company.
The Directors were appointed for an initial term of 3 years,
and their dates of appointment are set out below. The
Company may lawfully terminate a Director’s appointment
with immediate effect in certain circumstances, including
where a Director has breached the terms of his letter of
appointment and no compensation would be payable to
such Director in such an event. In addition to their general
legal responsibilities, the Directors have responsibility for the
Company’s strategy, performance, financial and risk control
and personnel.
42
HIBERNIA REIT PLC
Report of the directors
continued
Directors’ biographical details
Daniel Kitchen
Non-executive Chairman
Appointed: 23 August, 2013
Nationality: Irish
Age: 63
Committee membership: Nominations (Chair)
Daniel Kitchen is currently the non-executive Chairman of Workspace Group
plc, the non-executive Chairman of Applegreen and a non-executive director
of LXB Retail Properties plc, as well as the ISE-nominated director on the Irish
Takeover Panel. Previously, he was finance director of Green Property plc from
1994 to 2002, the Irish Government-appointed Chairman of Irish Nationwide
Building Society, deputy chief executive of Heron International plc from 2003 to
2008 and a non-executive director of Kingspan Group plc and Minerva plc. He
brings the benefit of his expertise and the experience gained across a variety of
property, finance and public company roles to his chairmanship of the Board and
Nominations Committee.
Colm Barrington
Independent Non-executive Director and Senior Independent Director
Appointed: 23 August, 2013
Nationality: Irish
Age: 69
Committee membership: Audit and Nominations
Colm Barrington is currently chief executive officer and a director of Fly Leasing
Ltd, the NYSE-listed and Irish based aircraft leasing company, non-executive
Chairman of Aer Lingus Group plc and a non-executive director of IFG Group
plc. Previously he was managing director of Babcock & Brown Ltd in Ireland,
President of GE Capital Aviation Services Ltd, chief operating officer of GPA
Group plc and chief executive of GPA’s Capital Division. Colm Barrington’s
senior executive and non-executive board roles add significant experience to
the Board from outside the property sector and within the context of a public
company.
Stewart Harrington
Independent Non-executive Director
Appointed: 23 August, 2013
Nationality: Irish
Age: 72
Committee membership: Audit and Nominations
Stewart Harrington is currently a director of Killeen Properties and a non-
executive director of the parent company of the BWG Group, Stafford Holdings
and Argentum Homes. He has extensive knowledge and experience of the
Irish property market over many years in a variety of roles. Previously, he was
a partner in Jones Lang Wootton (now JLL), a founding partner of Harrington
Bannon Chartered Surveyors (now BNP Paribas Real Estate Ireland), and
managing director of Dunloe Ewart Ltd (formerly known as Dunloe House
Group plc). He was also previously a non-executive director of St. Vincent’s
Healthcare Group, CIE (Córas Iompair Éireann, Ireland’s national public
transport provider), ESB (the Electricity Supply Board, Ireland’s premier
electricity utility) and the National Development Finance Agency.
Annual Report 2015
43
William Nowlan
Non-executive Director
Appointed: 13 August, 2013
Nationality: Irish
Age: 69
Committee membership: None
William Nowlan has more than 40 years’ experience investing in Irish
commercial property. Prior to forming WK Nowlan & Associates (now WK
Nowlan Property) in 1996, he was Head of Property Investment at Irish Life
Assurance plc from 1985 to 1995. He was a member of the Committee of
Management of IPUT (Irish Property Unit Trust, one of the largest institutional
property investors in Ireland) from 1997 to 2007. He is a member of the Irish
Town Planning Institute, a fellow of the Royal Institute of Chartered Surveyors
and a former Chairman of both the Royal Institute of Chartered Surveyors
Ireland and the Royal Institute of Chartered Surveyors Europe. He was also
a member of the RICS Governing council in London. He was the founding
Chairman of the Irish Property and Facilities Managers’ Association. He was
also Visiting Professor in the University of Ulster and lecturer in Town Planning
at University College, Dublin. He assembled and led the Irish REITs Forum, a
voluntary body of leading property industry practitioners and shareholders who
came together in January 2011, to promote the introduction of REITs to Ireland
that influenced the introduction of the Irish REIT legislation in early 2013. He
is also a director of WK Nowlan REIT Management Limited, the Investment
Manager to the Company.
Terence O’Rourke
Independent Non-executive Director
Appointed: 23 August, 2013
Nationality: Irish
Age: 60
Committee membership: Audit and Nominations
Terence O’Rourke is currently Chairman of Enterprise Ireland, a non-executive
director of The Irish Times and a council member and non-executive director
of the Irish Management Institute. Previously, he was managing partner
of KPMG Ireland from 2007 to 2013, a board member of the Chartered
Accountants Regulatory Board, President of The Institute of Chartered
Accountants in Ireland and Chairman of the Leinster Society of Chartered
Accountants. He was also a member of the Global Board, the EMA Board
and the Global Executive Team of KPMG International from 2007 to 2013.
Terence O’Rourke’s professional accounting and management background
and experience over many years in advising clients across a range of sectors,
contributes to the balance of skills, experience and knowledge of the Board.
All of the Directors will retire at the Annual General Meeting (AGM) and, being
eligible, will offer themselves up for election or re-election.
The Company Secretary, Castlewood Corporate Service Limited (trading as
Chartered Corporate Services), was appointed on 15 November 2013.
44
HIBERNIA REIT PLC
Report of the directors
continued
Directors’ attendance at Board and Committee meetings
Directors’ Attendance at Board Meetings
Name
Daniel Kitchen
Colm Barrington
Stewart Harrington
William Nowlan
Frank O’Neill
Terence O’Rourke
Year ended 31 March 2015
Period ended 31 March 2014
Number of meetings
held during the year
while a Board member
Number of meetings
attended during the
year while a Board
member
Number of meetings
held during the
period while a
Board member
Number of meetings
attended during the
period while a
Board member
17
17
17
17
-
17
16
14
16
15
-
16
14
14
14
15
2
14
13
7
14
12
2
11
Directors Attendance at Board Committee Meetings
Audit Committee
Colm Barrington
Terence O’Rourke
Stewart Harrington
Nominations Committee
Daniel Kitchen
Colm Barrington
Stewart Harrington
Terence O’Rourke
Year ended 31 March 2015
Period ended 31 March 2014
Number of meetings
held during the year
while a Board member
Number of meetings
attended during the
year while a Board
member
Number of meetings
held during the
period while a
Board member
Number of meetings
attended during the
period while a
Board member
5
5
5
1
1
1
1
5
5
5
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Annual Report 2015
45
Directors’ remuneration report
The Group has no executive directors or employees. There were no changes in remuneration during the year.
Remuneration policy
While the Group has no employees it is not intended to have a Remuneration Committee. The remuneration of the non-
executive directors is determined by the Board of Directors as a whole. The Chairman is not involved in determining his own
remuneration.
Levels of remuneration for non-executive directors should reflect the time commitment and responsibilities of the role. The fees
paid to non-executive directors are therefore set at a level which aims to attract individuals with the necessary experience and
ability to make a significant contribution to the Group and to compensate them appropriately for their role.
The Board will review its performance and the remuneration level of the Directors on an annual basis.
Remuneration report
Directors’ remuneration
Name
Daniel Kitchen
Colm Barrington
Stewart Harrington
William Nowlan
Terence O’Rourke
Totals
Annual Fee
€’000
Year to 31
March 2015
Period to 31
March 2014
€’000
€’000
100
50
50
0
50
250
100
50
50
0
50
250
58
29
29
0
29
145
William Nowlan does not receive remuneration for his role as a Director.
The Investment Manager performs most of the duties associated with key management activities and details on the remuneration
of the Investment Manager are disclosed in Note 26 to the consolidated financial statements. The Investment Manager
remuneration is set and reviewed by the Board.
Interests of Directors and Secretary in share capital
Daniel Kitchen
Colm Barrington
Stewart Harrington
William Nowlan
Terence O’Rourke
Company Secretary,
Chartered Corporate Services
31 March 2015
31 March 2014
Ordinary shares
% of Company Ordinary shares
% of Company
100,000
1,100,000
100,000
600,000
150,000
0.01%
0.16%
0.01%
0.09%
0.02%
100,000
800,000
100,000
500,000
100,000
0.03%
0.22%
0.03%
0.14%
0.03%
-
-
-
-
All of the Directors are non-executive directors.
The interests disclosed above include both direct and indirect interests in shares.
There have been no changes in the beneficial and non-beneficial shareholdings of the Directors between 31 March 2015 and
the date of this report.
46
HIBERNIA REIT PLC
Report of the directors
continued
The Investment Manager has also agreed to
lock-in
arrangements in respect of any Performance Fee Shares
that may be issued under the terms of the REIT Investment
Management Agreement. No such shares have been issued to
the Investment Manager as of the date of this report. Provision
of €5.8m has been made in respect of the shares to be issued
on foot of the agreement with the Investment Manager to
settle the performance fee for the year ended 31 March 2015
(31 March 2014: €nil).
Key management personnel
The Company is managed by the non-executive directors who
have delegated investment management and administration
functions including accounting and risk management, to
the Investment Manager without abrogating their overall
responsibility. The Investment Manager’s remuneration is
detailed in Note 26 to the consolidated financial statements.
Directors’ conflict of interest
Section 194 of the 1963 Act requires each Director who is in
any way, either directly or indirectly, interested in a contract or
proposed contract with the Company to declare the nature of
his interest at a meeting of the Directors. The Company keeps
a record of all such declarations which may be inspected by
any Director, secretary, auditor or member of the Company at
the registered office of the Company.
The Chairman and each of Colm Barrington, Terence
O’Rourke and Stewart Harrington are independent of the
Investment Manager.
William Nowlan is a director of the Investment Manager and
a member of the Management Team and has provided an
undertaking to the Company that he will not: (i) be involved in
any capacity in the launch or operation of another REIT or
other property investment vehicle or fund involved in a similar
area of business as the Company, or in the launch or operation
of a REIT or other property investment vehicle or fund in
a different area of business, without approval of the Board
(such approval not to be unreasonably withheld), (ii) acquire
or act for another party to acquire a property investment
that is within the parameters of the investment policy of the
Company, to include all income producing property assets of
any value and non-income producing property assets with a
market value or purchase price of at least €10 million, other
than where the Company has had the opportunity to invest
in a particular property, and has declined to do so and has
consented to William Nowlan pursuing the opportunity or (iii)
advise any investor in competition with the Company for the
acquisition of an investment property. All possible or actual
conflicts of interest will be disclosed in writing by William
Nowlan to the Board. These provisions shall not apply to any
dealings or interest in property held as of the date of the REIT
Investment Management Agreement.
Subject to certain exceptions, the Articles generally prohibit
Directors from voting at Board meetings or meetings of
committees of the Board on any resolution concerning a
matter in which they have a direct or indirect interest which
is material or a duty which conflicts or may conflict with the
interests of the Company. Directors may not be counted in
the quorum in relation to resolutions on which they are not
entitled to vote. William Nowlan accordingly will not be
permitted to vote on any matter at Board level relating to
the Investment Manager. The Company has implemented
procedures to address any potential conflicts of interest which
may arise from time to time, for example conflicts that arise
by virtue of William Nowlan’s position as a Director of the
Company and of the Investment Manager.
The Directors also consider that the interests of the Company
and the Investment Manager are aligned via the incentivisation
Investment Management
structure within
Agreement.
the REIT
Annual Report 2015
47
The Directors consider that the fact that William Nowlan
and Kevin Nowlan are related does not give rise to a conflict
not addressed by any of the above procedures and provisions.
However, should any conflict emerge in relation to this or any
other matter, the Directors believe that sufficient provisions, in
the Articles and corporate governance procedures, exist in the
Company to address it. To the extent any matter arises that is
unforeseen at this point, additional procedures or provisions
that may be required shall be put in place.
Annual General Meeting
The 2nd Annual General Meeting of the Company will
be held on 30 July 2015. The 1st Annual General Meeting
of the Company was held on 22 July 2014. In addition an
Extraordinary General meeting was held on 3 November 2014
to approve the secondary equity issue via a Firm Placing and
Placing and Open Offer representing the issue of, in aggregate,
285,317,459 New Ordinary Shares and other related matters.
Political and charitable contributions
The Group made no political or charitable contributions
during the period.
Financial risk management
The financial risk management objectives and policies of the
Company are set out in Note 23 to the consolidated financial
statements.
Independent auditors
The auditors, Deloitte & Touche, have indicated their
willingness to continue in office and a resolution that they will
be reappointed will be included as ordinary business at the
Annual General Meeting.
Subsequent events
These are described in Note 28 to the consolidated financial
statements.
The Board, having reviewed the Annual Report in their
entirety, is satisfied it is fair, balanced and reasonable and gives
the reader all the information required to understand the
business model, strategy and performance of the Group. The
Board is assisted in this review by the work carried out by the
Audit Committee as set out in the Audit Committee Report
on pages 27 to 31 of this Annual Report. A key responsibility
of the Audit Committee is to assist the Board in monitoring
the integrity of the financial statements and to recommend
to the Board that it believes that the Annual Report taken as
a whole is fair, balanced and understandable and provides the
information necessary for stockholders to assess the Group’s
performance, business model and strategy. To achieve this for
the current reporting period, the Audit Committee reviewed
the Annual Report and considered whether the financial
statements were consistent with the operating and financial
reviews elsewhere in the Annual Report. The Audit Committee
also considered the treatment of items representing significant
judgements and key estimates as presented in the financial
statements and where appropriate discussed these items with
the external auditor.
Mr Daniel Kitchen
Chairman
29 May 2015
Mr Terence O’Rourke
Director
29 May 2015
48
HIBERNIA REIT PLC
Directors’ responsibility statement
The Directors, whose names and details are listed on pages
42 to 43, are responsible for preparing the Annual Report in
accordance with applicable laws and regulations.
a Report of the Directors and reports relating to Directors’
remuneration and corporate governance that comply with
that law and those Rules.
Company law requires the Directors to prepare financial
statements for each financial period. Under that law the
Directors are required to prepare the Group and Company
financial statements in accordance with International Financial
Reporting Standards as adopted by the EU (“IFRSs”) and in
accordance with the provisions of the Companies Acts, 1963
to 2013.
The Group and Company financial statements are required
by law and IFRSs to present fairly the financial position and
performance of the Group and Company: the Companies
Acts, 1963 to 2013 provide in relation to such financial
statements that references in the relevant part of that Act to
financial statements giving a true and fair view are references
to their achieving a fair presentation.
In preparing the Annual Report, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• comply with applicable International Financial Reporting
Standards as adopted by the European Union, subject to
any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company
and enable them to ensure that the financial statements
are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union and
comply with Irish statute comprising the Companies Acts,
1963 to 2013 and, as regards the Group financial statements,
Article 4 of the IAS Regulation, and the Listing Rules of
the Irish Stock Exchange. They are also responsible for
safeguarding the assets of the Company and the Group and
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
In accordance with the Transparency (Directive 2004/109/
EC) Regulations 2007 (“the Transparency Regulations”),
the Directors are required to include a management report
containing a fair review of the business and a description
of the principal risks and uncertainties facing the Group.
The Directors are also required by applicable law and the
Listing Rules issued by the Irish Stock Exchange to prepare
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the Republic of
Ireland governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
The Directors have contracted with the Investment Manager
in order to ensure that these requirements are met. The
accounting records of the Company are maintained at the
registered office located at Marine House, Clanwilliam
Place, Dublin 2. The Directors have delegated investment
management and administration functions, including risk
management, to the Investment Manager without abrogating
their overall responsibility. The Directors have in place
mechanisms for monitoring the exercise of such delegated
functions which are always subject to the supervision and
direction of the Board. These delegations of functions and the
appointment of regulated third party entities are detailed in
the Corporate Governance Report on pages 23 to 35. Each of
the Directors, whose names and functions are listed on pages
42 to 43, confirms that, to the best of each person’s knowledge
and belief:
• the financial statements, prepared in accordance with
IFRS as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position for the
Group as at 31 March 2015 and of the result for the year
then ended; and
• the Report of the Directors, the Chairman’s Statement
and the Investment Manager’s Report include a fair review
of the development and performance of the Group’s
business and the state of affairs of the Group at 31 March
2015, together with a description of the principal risks and
uncertainties facing the Group
• the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the performance, strategy and
business model of the Group
This responsibility statement was approved by the Board of
Directors on 29 May 2015 and is signed on their behalf by:
By order of the Board
Mr Daniel Kitchen
Chairman
29 May 2015
Mr Terence O’Rourke
Director
29 May 2015
Annual Report 2015
49
Independent auditor’s report
to the members of Hibernia REIT plc
Opinion on financial
statements of
Hibernia REIT plc
Going concern
In our opinion:
• the Group Financial Statements give a true and fair view in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted by the European Union, of the state of the
Group’s affairs as at 31 March 2015 and of its profit for the year then ended;
• the Company financial statements give a true and fair view in accordance with IFRSs, as
adopted by the European Union, as applied in accordance with the provisions of the Companies
Acts, 1963 to 2013 and of the state of the Company’s affairs as at 31 March 2015; and
• the financial statements have been prepared in accordance with the Companies Acts, 1963 to
2013 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation.
The financial statements comprise the Group Financial Statements: the Consolidated Statement
of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related
notes 1 to 28 and the Company Financial Statements: the Company Statement of Financial
Position, the Company Statement of Changes in Equity and the Company Statement of Cash
Flows, and the related notes (a) to (p). The financial reporting framework that has been applied
in their preparation is applicable law and IFRSs as adopted by the European Union, and, as
regards the Company financial statements, in accordance with the provisions of the Companies
Act 1963 to 2013.
As required by the Listing Rules we have reviewed the Directors’ Statement contained within the
Report of the Directors on page 41 that the Group is a going concern. We confirm that:
• we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate; and
• we have not identified material uncertainties related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern.
However, because not all future events or conditions can be predicted, this statement is not a
guarantee as to the Group’s ability to continue as a going concern.
Our assessment of
risks of material
misstatement
The assessed risks of material misstatement described below are those that had the greatest effect
on our audit strategy, the allocation of resources in the audit and directing the efforts of the
engagement team:
Risk of material misstatement
How the scope of our audit responded to the risk
Valuation of Investment
Properties
The appropriate valuation
of the Group’s investment
properties requires significant
judgement to be made by the
Directors with advice from the
external valuer and Investment
Manager.
Refer also to Note 13 of
the consolidated financial
statements.
• We considered the basis used by the Group for the valuation
of investment properties in light of the Group’s valuation
policy and the requirements of IFRS.
• We obtained an understanding of the controls at the
Investment Manager and at the Board over the valuation
process.
• We compared the valuation of each investment property held
to the valuation report prepared by the external valuer and
considered any adjustments made in light of the Group’s
accounting policies and the requirements of IFRS.
• We assessed the competence, independence and integrity of
the external valuer.
• We discussed with management and with the external valuer
the significant assumptions used in the valuation process,
including estimated rental value and market based yields, and
considered these assumptions in accordance with available
market data.
50
HIBERNIA REIT PLC
Independent auditor’s report
to the members of Hibernia REIT plc continued
Our assessment of
risks of material
misstatement
Risk of material misstatement
How the scope of our audit responded to the risk
• We reviewed supporting documentation in respect of investment
property transactions entered into during the year.
• We obtained independent audit evidence in respect to legal title
of investment properties held.
• We considered the recognition criteria applied by the Group for
investment properties in light of the Group’s accounting policies
and the requirements of IFRS. This includes consideration
of the judgements made by the Directors to determine if it
is probable that the future economic benefits associated with
investment properties will flow to the Group.
• We evaluated the period in which transactions around the year
end where recorded.
• We obtained an understanding of the controls at the Investment
Manager and the Board regarding the investment process.
• We have considered the inputs to the performance fee
calculation and where appropriate we have compared the
inputs to entity data or market data as appropriate.
• We have examined the calculation of the performance
fee to evaluate whether it is consistent with the investment
management agreement.
• We have examined the accounting treatment for performance
fees to consider that the accounting charge recorded has been
accounted for in accordance with the share based payments
requirements of IFRS 2.
Existence and Entitlement
to Investment Properties
The Group’s property
acquisitions may involve
complexity which requires
judgement to be applied
by the Board to determine
if the transactions meet
the recognition criteria for
investment properties in light of
the Group’s accounting policies
and the requirements of IFRS.
Refer also to Note 13 of
the consolidated financial
statements.
Performance Fees (Share
Based Payments)
The performance fee calculation
is complex in nature which
increases the risk of error. The
settlement of performance
fees due to the Investment
Manager is via shares in the
Company and therefore must
be recorded in accordance with
the requirements of share based
payments.
Refer also to Note 26 of
the consolidated financial
statements.
Our audit procedures relating to these matters were designed in the context of our audit of the
financial statements as a whole, and not to express an opinion on individual accounts or disclosures.
Our opinion on the financial statements is not modified with respect to any of the risks described
above, and we do not express an opinion on these individual matters.
Our application of
materiality
We define materiality as the magnitude of misstatement that makes it probable that the economic
decisions of a reasonably knowledgeable person, relying on the financial statements, would be
changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
We determined planning materiality for the Group to be €7,000,000 which is below 1% of the Net
Assets.
We agreed with the Audit Committee that we would report to the Committee any audit differences
in excess of €350,000, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that
we identified when assessing the overall presentation of the financial statements.
Annual Report 2015
51
An overview of the
scope of our audit
Our audit scope focused on the Company and its subsidiary, Hibernia REIT Finance Limited. The
subsidiary was subject to a full scope audit. We determined the materiality with reference to the size
of the subsidiary which was lower than Group Materiality.
Matters on which we
are required to report
by the Companies
Acts 1963 to 2013
• We have obtained all the information and explanations which we consider necessary for the
purposes of our audit;
• In our opinion proper books of account have been kept by the Company;
• The Company’s Statement of Financial Position is in agreement with the books of account;
• In our opinion the information given in the Report of the Directors is consistent with the financial
statements and the description in the Corporate Governance Report of the main features of
the internal control and risk management systems in relation to the process for preparing the
consolidated financial statements is consistent with the consolidated financial statements; and
• The net assets of the Company, as stated in the Company’s Statement of Financial Position are
more than half of the amount of its called up share capital and, in our opinion, on that basis there
did not exist at 31 March 2015 a financial situation which under Section 40 (1) of the Companies
(Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the
Company.
Matters on which we are required to report by exception
Directors’ remuneration
and transactions
Under the Listing Rules we are required to review the six specified elements of disclosures in the
report to shareholders by the Board of Directors’ remuneration. Under the Companies Acts, 1963
to 2013 we are required to report to you if, in our opinion the disclosures of Directors’ remuneration
and transactions specified by law are not made. We have nothing to report arising from our review
of these matters.
Corporate Governance
Statement
Under the Listing Rules of the Irish and London Stock Exchanges we are also required to review
the part of the Corporate Governance Statement relating to the Company’s compliance with
the nine provisions of the UK Corporate Governance Code and the two provisions of the Irish
Corporate Governance Annex specified for our review. We have nothing to report arising from our
review.
Our duty to read other
information in the Report
Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in
our opinion, information in the Annual Report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the
Group acquired in the course of performing our audit; or
• otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between
our knowledge acquired during the audit and the Directors’ statement that they consider the Annual
Report is fair, balanced and understandable and whether the Annual Report appropriately discloses
those matters that we communicated to the audit committee which we consider should have been
disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.
52
HIBERNIA REIT PLC
Independent auditor’s report
to the members of Hibernia REIT plc continued
Respective
responsibilities
of Directors
and auditor
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit
of the financial
statements
This report is made solely to the Group’s members, as a body, in accordance with section 193 of the
Companies Act 1990. Our audit work has been undertaken so that we might state to the Group’s
members those matters we are required to state to them in an auditor’s 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 and the Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group’s and the Company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the Directors; and the overall presentation of the financial statements. In
addition, we read all the financial and non-financial information in the Annual Report to identify
material inconsistencies with the audited financial statements and to identify any information
that is apparently materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Brian Jackson
For and on behalf of Deloitte & Touche
Chartered Accountants and Statutory Audit Firm
Dublin
Date: 29 May 2015
Consolidated statement of comprehensive income
For the year ended 31 March 2015
Annual Report 2015
53
Income
Revenue
Direct property costs
Total property income
Revaluation of investment properties
Other gains and losses
Total income after revaluation gains and losses
Expense
Investment Manager fee - base
Performance fee
Administration expenses
Total operating expenses
Operating profit/(loss)
Finance income
Finance expense
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income/(loss)
Basic earnings per share (cent)
Diluted earnings per share (cent)
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
Notes
€’000
€’000
6
13
7
26
26
8
9
9
10
12
12
18,769
(725)
18,044
80,809
7,691
106,544
(4,690)
(5,772)
(1,584)
(12,046)
94,498
399
(1,974)
92,923
(691)
92,232
-
158
(59)
99
-
-
99
(669)
-
(490)
(1,159)
(1,060)
214
-
(846)
-
(846)
-
92,232
(846)
18.4
18.3
(0.2)
(0.2)
The notes on pages 57 to 82 form an integral part of these consolidated financial statements. The consolidated financial
statements on pages 53 to 89 were approved and authorised for issue by the Board of Directors on 29 May 2015 and signed on
its behalf by:
Mr Daniel Kitchen
Chairman
Mr Terence O’Rourke
Director
54
HIBERNIA REIT PLC
Consolidated Statement of financial position
As at 31 March 2015
Assets
Non-current assets
Investment Property
Loans and receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Non-current assets classified as held for sale
Total current assets
Total assets
Equity and liabilities
Capital and reserves
Issued capital and share premium
Retained earnings
Other reserves
Total equity
Current liabilities
Trade and other payables
Payable due for investment property
Total current liabilities
Total equity and liabilities
IFRS NAV per share (cents)
Diluted IFRS NAV per share
EPRA NAV per share
31 March
2015
31 March
2014
Notes
€’000
€’000
13
14
15
16
17
18
20
21
22
22
22
641,296
152
641,448
9,046
139,048
148,094
-
68,563
68,563
11,647
291,690
303,337
18,499
166,593
-
303,337
808,041
371,900
657,987
89,375
5,772
753,134
12,210
42,697
54,907
371,812
(846)
-
370,966
934
-
934
808,041
371,900
112.4
111.6
111.8
96.4
96.4
96.4
The notes on pages 57 to 82 form an integral part of these consolidated financial statements. The consolidated financial
statements on pages 53 to 89 were approved and authorised for issue by the Board of Directors on 29 May 2015 and signed on
its behalf by:
Mr Daniel Kitchen
Chairman
Mr Terence O’Rourke
Director
Consolidated statement of changes in equity
For the year ended 31 March 2015
Annual Report 2015
55
Notes
Share
Capital
€’000
Share
Premium
€’000
Retained
earnings
€’000
Other
reserves
€’000
1 April 2014 to 31 March 2015
Balance at start of period
Total comprehensive income for the period
Profit for the period
Total other comprehensive income
Transactions with owners of the
Company, recognised directly in equity
Dividends
Issue of ordinary shares for cash
Share issue costs
Share based payments
11
17
17
18
38,500
333,312
(846)
-
-
38,500
-
28,532
-
-
-
-
333,312
-
271,052
(13,409)
-
92,232
-
91,386
(2,011)
-
-
-
Total
€’000
370,966
92,232
-
463,198
-
-
-
-
-
-
-
5,772
(2,011)
299,584
(13,409)
5,772
Balance at end of period
67,032
590,955
89,375
5,772
753,134
13 August 2013 to 31 March 2014
Share
Capital
€’000
Share
Premium
€’000
Retained
earnings
€’000
Other
reserves
€’000
Total comprehensive income for the period
Loss for the period
Total other comprehensive income
Transactions with owners of the
Company, recognised directly in equity
Issue of ordinary shares for cash
Share issue costs
-
-
-
-
-
-
38,500
-
346,500
(13,188)
(846)
-
(846)
-
-
Balance at end of period
38,500
333,312
(846)
-
-
-
-
-
-
The notes on pages 57 to 82 form an integral part of these consolidated financial statements.
Total
€’000
(846)
-
(846)
385,000
(13,188)
370,966
56
HIBERNIA REIT PLC
Consolidated statement of cash flows
For the year ended 31 March 2015
Cash flows from operating activities
Profit/(loss) for the period
Adjusted for:
Revaluation of investment properties
Other gains and losses
Share based payment
Rental income paid in advance
Interest (income)
Finance (income)/expense
Income tax expense
Operating cash flow before movements in working capital
(Increase) in trade and other receivables
Increase in trade and other payables
Net cash flow from operating activities
Cash flows from investing activities
Purchase of investment property
Development and Refurbishment Expenditure
Purchase of non-current assets classified as held for sale
Purchase of loans and receivables
Proceeds from loan repayments
Proceeds from the sale of non-current assets classified as held for sale
Finance income
Finance expense
Net cash flow absorbed by investing activities
Cash flow from financing activities
Dividends paid
Arrangement fee paid re bank facility
Proceeds from the issue of ordinary share capital
Share issue costs
Net cash inflow from financing activities
Net (decrease)/Increase in cash and cash equivalents
Cash and cash equivalents period start
(Decrease)/increase in cash and cash equivalents
Net cash and cash equivalents at period end
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
Notes
€’000
€’000
92,232
(846)
(80,809)
(7,691)
5,772
9
-
1,575
691
11,779
(1,061)
3,369
14,087
(445,236)
(12,173)
(541)
(39,300)
41,981
6,297
399
(1,820)
(450,393)
(2,011)
(500)
299,584
(13,409)
283,664
(152,642)
291,690
(152,642)
139,048
-
-
-
-
(158)
(214)
-
(1,218)
(600)
434
(1,384)
(11,010)
-
-
(67,905)
-
-
177
-
(78,738)
-
-
385,000
(13,188)
371,812
291,690
-
291,690
291,690
11
19
17
17
The notes on pages 57 to 82 form an integral part of these consolidated financial statements.
Notes forming part of the annual report
Annual Report 2015
57
1. General Information
The Company together with its subsidiaries, Hibernia
REIT Finance Limited, Hibernia REIT Holding
Company Limited, Lamourette Limited and Mayor
House Basement Management Limited (together 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 Marine House,
Clanwilliam Place, Dublin 2. 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. Application of new and revised
International Accounting Standards (IFRS)
There were a number of changes to IFRS which became
effective for the Group during the financial year but did
not result in material changes to the Group’s consolidated
financial statements.
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.
• IAS 1 Presentation of Financial Statements amendments
remove certain impediments to preparers in exercising
their judgement in presenting their financial reports
and is effective for annual periods beginning on or after
1 January 2016.
• IFRS 9 Financial Instruments is the IASB’s replacement
of IAS 39 Financial Instruments: Recognition and
Measurement. The Standard includes requirements
for recognition and measurement, impairment, de-
recognition and general hedge accounting. The version
of IFRS 9 issued in 2014 supersedes all previous versions
and is mandatorily effective for periods beginning on
or after 1 January 2018 with early adoption permitted
(subject to local endorsement requirements).
• 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.
• IFRS 11 Accounting for Acquisitions of Interests in Joint Operations
amends IFRS 11 to require an acquirer of an interest
in a joint operation in which the activity constitutes a
business (as defined in IFRS 3 Business Combinations) to
apply all the of the business combinations principles
of IFRS 3 except where they conflict with guidance in
IFRS 11 and disclose the information required by IFRS
3 and other IFRS for business combinations. This is
effective for accounting periods beginning on or after 1
January 2016.
• IFRS 14 Regulatory Deferral Accounts, applies to an entity’s
first annual IFRS financial statements for a period
beginning on or after 1 January 2016, permits an entity
which is a first-time adopter of International Financial
Reporting Standards to continue to account, with
some limited changes, for ‘regulatory deferral account
balances’ in accordance with its previous GAAP, both
on initial adoption of IFRS and in subsequent financial
statements.
• 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.
• IAS 16 Property, Plant and Equipment and IAS 38 Intangible
Assets, which are effective for accounting periods
beginning on or after 1 January 2016, clarify acceptable
methods of depreciation and amortisation.
• IAS 16 Property, Plant and Equipment and IAS 41 Agriculture
are amended for accounting periods starting on or after
1 January 2016 to include and define “bearer plants”
within property, plant and equipment.
• IAS 19 Employee Benefits, which is effective for accounting
periods beginning on or after 1 July 2014, deals with
employee contributions to defined benefit plans.
• IAS 27 Separate Financial Statements is amended to permit
investments in subsidiaries, joint ventures and associates
to be optionally accounted for using the equity method
in separate financial statements for accounting periods
beginning on or after 1 January 2016.
58
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
2. Application of new and revised
International Accounting Standards (IFRS)
continued
• Investment
the
consolidation
entities: applying
exception
(amendments to IFRS 10 and 12 and IAS 28)
addresses issues in applying the consolidation exception
for investment entities and is effective for period
commencing on or after 1 January 2016.
• Annual Improvements to IFRS: 2012-2014 cycle
(effective for accounting periods beginning on or
after 1 July 2016); Annual Improvements to IFRS:
2011-13 cycle and Annual Improvements to IFRS:
2010-12 cycle (effective for annual periods beginning
on or after 1 July 2014). The IASB has adopted the
Annual Improvements process to deal efficiently with a
collection of narrow scope amendments to IFRSs even
though the amendments are unrelated.
IFRS 15 may have a future impact on revenue
recognition and related disclosures although it is not
practicable to give a reasonable estimate of the effect of
implementation of this standard, if any, until a detailed
review has been completed. The Company has not yet
fully determined the impact of these amendments on its
future financial reporting but does not expect them to
have a material impact.
3. Basis of preparation
a. Statement of compliance
The consolidated 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.
The Company has not early adopted any forthcoming
IASB standards. Note 2 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 accounting
The 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 Acts, 1963 to 2013. 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 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.
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
the
transaction between market participants at
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 IFRS 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
d. Assessment of going concern
The financial statements have been prepared on a
going concern basis. The Directors have performed an
assessment of going concern and are satisfied that the
Group is appropriately capitalised. The Group has a
positive cash balance as at 31 March 2015 of €139m (31
March 2014: €292m), is generating positive cashflows
and, as discussed in Note 19, has in place a revolving
credit facility with an undrawn balance of €100m at
31 March 2015 (31 March 2014: €0m). 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.
Annual Report 2015
59
Assets”). The Dorville Core Assets were recognised as
investment properties during the year in accordance with
the Group’s accounting policy on investment properties.
Additionally, the Dorville loan portfolio was secured
against 13 other asset groups, namely over 70 apartments,
3 houses, 12 commercial units and 26.5 acres of land,
primarily in Dublin. These 13 asset groups are referred to
as the Dorville Non-Core Assets. The Group determined
that the Dorville Non-Core Assets are not suitable for
the Group’s portfolio of investment properties. Some of
these assets have been disposed of during the year and the
balance have been legally transferred to the Company in
order to complete the disposal of these assets. The disposal
process is expected to be completed by December 2015.
Further details are presented in Note 16.
two of
title of
During the year, the Directors judged that the acquisition
of the three Dorville Core Assets was virtually certain
and as a result these assets were recognised as investment
properties. The
these properties
subsequently was legally transferred to the Group during
the year to 31 March 2015. The third property, Cannon
Place Apartments, is expected to transfer shortly. These
properties fulfil the criteria for recognition as investment
properties under the Group’s accounting policy on
investment properties (Note 4.i) below. The Directors
considered that the recognition of these properties
presented the most relevant and useful information for
users of the financial information that was presented both
in the prospectus relating to the secondary equity issue
and the interim financial reporting as at 30 September
2014. It ensured that users of this financial information
could properly assess the portfolio structure and potential.
As a result, the acquisitions of the Dorville Core Assets
were recognised as investment properties during the
period, although the legal process has still to complete for
the Cannon apartments.
There were no other items of significant judgement that
might have a material impact on the financial statements
at 31 March 2015.
g. Key estimates
The preparation of financial information requires the use
of certain critical accounting estimates. Although these
estimates are based on the Board’s best knowledge of the
amount, event or actions, actual results ultimately may
differ from those estimates. The following are the key
estimates which were made in respect of this financial
information:
e. Basis of consolidation
The financial statements incorporate the consolidated
financial statements of the Company and its subsidiaries,
Hibernia REIT Finance Limited, Hibernia REIT
Holding Company Limited, Lamourette Limited and
Mayor House Basement Management Limited. The
Company controls its subsidiaries by virtue of its 100%
shareholding in those companies. The Company and its
subsidiary Hibernia REIT Finance Limited, make up
the majority of the Group assets and liabilities and each
of their financial statements are made up to 31 March
each year.
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.
f. Significant judgements
The preparation of financial information requires the
Group to exercise judgement in applying the Group’s
accounting policies. The following are the significant
judgements:
Recognition and classification of investment
transactions
The Group has acquired an interest in investment
property assets both as direct asset purchases and through
the acquisition of loans which are secured over the target
property. In some cases the Group may acquire portfolios
of loans where it does not intend to ultimately directly
acquire all the underlying property assets.
Investment properties are treated as acquired when
the Group assumes the significant risks and rewards of
ownership. In order to make this judgement, the Board
reviews each deal individually.
Recognition of property assets collateralising acquired
loans as investment properties requires significant
judgement by the Directors to determine if it is
probable that the future economic benefits that are
associated with the underlying investment property
will flow to the Group.
Dorville Loan Portfolio
The Dorville Loan Portfolio was a loan portfolio, with
a par value (at the time of acquisition) of €151.3m,
which was acquired by the Group in March 2014 for
€67m (€68.4m including costs). The Board completed
an extensive exercise in reviewing the collateral attached
to this portfolio, consisting of 16 asset groups, in May
2014 and as a result determined that it would seek the
direct ownership of three of the property assets, namely
Block 3, Wyckham Point, the Dorville Cannon Place
Apartments and South Dock House (the “Dorville Core
60
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
3. Basis of preparation continued
Valuation of investment properties
The Group’s investment properties are held at fair value
and were revalued at 31 March 2015 by the external
valuer, CBRE Limited, a firm employing qualified valuers
in accordance with the Royal Institution of Chartered
Surveyors Valuation — Standards (January 2014) (the
“Red Book”). Further information on the valuation is
given in Note 13.
The Board and Investment Manager conduct 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
publically available and a degree of judgement. The
valuation is based upon the key assumptions of estimated
rental values and market based yields. With regard to
redevelopments and refurbishment, the development
considered achievable, assumed timescale, the assumed
future development cost and an appropriate finance
and/or discount rate are also used to determine the
property value together with market evidence and recent
comparable properties where appropriate. In determining
fair value the valuers make reference 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 valuations
were also amended to reflect the impact of a potential cost
in respect of the car park in the Forum Building, IFSC.
The total reduction in the external valuers’ investment
property valuation in respect of these adjustments was
€2.2m. No further adjustments were required for the year
ended 31 March 2015.
Impairment of non-current assets classified as
held for sale
Non-current assets classified as held for sale are measured
at the lower of their acquisition cost (or previous carrying
amount) and fair value less costs to sell. In order to
measure these assets, the Directors are required to make
estimations of the fair value less costs to sell. In estimating
these fair values, the Directors assessed the properties
on an individual basis together and reviewed the sales
agent’s estimation of achievable price to sell less expected
costs to sell including stamp duty and other taxes. The
Directors have determined as a result that no impairment
of these assets is required as they expect that the assets
will be realised for at least their carrying value. These fair
values are sensitive to market movements in residential
property prices. The Directors have estimated that the
current fair value gain is approximately €1.5m. Therefore
a movement of 8% downwards in residential property
values would not result in the need for an impairment in
the carrying value of these assets.
There were no other key estimates that might have a
material impact on the financial statements at 31 March
2015.
4. Significant accounting policies
a. Revenue recognition
Revenue consists of rental income on the Group’s
investment properties and interest income on loans and
receivables.
Revenue is recognised in the Consolidated Statement
of Comprehensive Income 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
leases. Rental
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
from operating
leases is recognised in the Consolidated Statement of
Comprehensive Income on an accruals basis as revenue
on a straight line basis over the lease term. Rent received
in advance is deferred in the Consolidated Statement of
Financial Position and recognised in the period to which
it relates.
income
income also arises on
Rental
the Group’s non-
current assets classified as held for sale. This income
is an immaterial and decreasing amount as the Group
continues its programme of selling these assets in the
short term and is therefore seeking vacant possession
where possible. This income is included in the “Other”
segment for reporting purposes.
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 and other sums receivable from tenants
are recognised on an accrual basis by reference to the
Annual Report 2015
61
d. Finance income and expense
Interest income and expense is recognised in the
Consolidated Statement of Comprehensive Income
for all interest bearing financial instruments 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.
e. Provisions
A provision is recognised if, as a result of a past event,
the Group has a present obligation (legal or constructive)
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting
the expected future cash flows (in most cases, the risk
free rate) at a pretax rate that reflects the current market
assessments of the time value of money and the risks
specific to the liability. The unwinding of the discount
is recognised as a finance cost. When some or all of
the economic benefits required to settle a provision are
expected to be recovered from a third party, a receivable
is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of the
receivable can be measured reliably.
f. Expenses
Expenses are recognised in the Consolidated Statement
of Comprehensive Income on an accruals basis.
g. Share based payments
The Group operates an Investment Management
Agreement with the Investment Manager under which
the Group receives management services which in part
are compensated on a performance fee basis. Any such
performance fee is paid in shares in the Company.
The performance fee is calculated in accordance with the
provisions of the Investment Management Agreement
and the number of shares that this represents is determined
by the average closing price in the 20 days prior to
the issue of the invoice for this fee by the Investment
Manager. The shares are issued as soon as is practicable
after this invoice date. These shares are issued directly
to the Investment Manager at the issue date and there is
therefore no further fair value measurement required in
accounting for these after issue. The Investment Manager
has agreed that these shares will be “locked in” for up to
three years after their issuance under the terms of the
Investment Management Agreement.
The Group recognises its best estimate of its obligation
in relation to the issue of shares on foot of the agreement
with the Investment Manager to settle the performance
fee in other reserves during the period.
stage of completion of the relevant service or transactions
at the reporting date. These services generally relate to a
12 month period.
Lease incentives
When the Group provides incentives to its tenants the
incentives are recognised over the lease term on a straight
line basis. These incentives can be a rent free period at
the commencement of the lease, a reduced rent for a
period, an assumption of lessee costs or other incentives
negotiated. All such incentives are recognised as an
integral part of the net consideration agreed for the use
of the leased asset, irrespective of the incentive’s nature or
form. 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.
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.
Interest Income
Interest income arising on the loans held in the Group’s
investment portfolio is included in Revenue on the basis
that it relates to the Group’s property business. This
interest income arises from the effective interest rate
applicable to loans and receivables and is calculated by
calculating the amortised cost of the loans and advances
and of allocating the interest income, interest expense
and fees paid and received over the relevant period.
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. Foreign currencies transactions and balances
Transactions in currencies other than Euro are recognised
at the rates of exchange prevailing on the dates of the
transactions. At the end of each period, monetary amounts
denominated in foreign currencies are retranslated at the
rates prevailing at that date. Non monetary items carried
at fair value that are denominated in foreign currencies
are retranslated at the rates prevailing when the fair
value was determined. Non monetary items carried at
historical cost are reported using the exchange rate at the
date of the transaction.
Exchange differences on monetary items are recognised
in profit or loss in the period in which they arise.
62
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
4. Significant accounting policies continued
The fair value of the relevant services are recognised
as an expense over the accounting period in which they
are incurred.
h. 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). 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.
Current tax
Current tax is the expected tax payable on the taxable income
or loss for the period, using tax rates enacted or substantially
enacted at the reporting date, and any adjustment in taxes
payable in respect of the previous periods.
Deferred tax
Deferred tax is recognised in respect of temporary
differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is measured at
the tax rates that are expected to be applied to temporary
differences when they reverse using tax rates enacted or
substantially enacted at the reporting date.
for capital appreciation
i. Investment properties
Investment properties are properties held to earn rental
(including
income and/or
property under construction
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:
for
(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
initial
transaction costs. Subsequent
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 Statement of Comprehensive Income in
the period in which they arise.
to
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
investment
level 3. The valuation of
properties is further discussed above under Note 3.
The valuations of investment properties and investment
properties under development are prepared, as
recommended by the Society of Chartered Surveyors,
in accordance with the RICS-Valuation-Professional
Standards (January 2014) (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
Statement of Comprehensive Income. Interest and
other outgoings, less any income, on properties under
development are capitalised. Interest capitalised
is
calculated on development outgoings using the weighted
average cost of general Group borrowings. Fair value
for investment properties under development is based
on the Group’s external professional valuers’ assessment
of future value, with an appropriate adjustment for the
costs of completion and remaining risk, based on market
conditions at the reporting date.
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 “dilapidation”, 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
Annual Report 2015
63
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included
in the Consolidated Statement of Comprehensive Income
in the period in which the property is de-recognised.
‘available for sale’ (AFS) financial assets and ‘loans and
receivables’. Financial assets ‘at fair value through profit
or loss’ has two subcategories which are determined at
initial recognition:
j. Non-current assets classified as held for sale
Non-current assets are classified as held for sale if their
carrying amount will be recovered principally through
a sale transaction rather than through continuing use
as an investment property. Non-current assets 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 asset will flow to the Group;
2. There are no material conditions which could affect
completion of the acquisition; and
3. The cost of the asset can be measured reliably
Assets fall into this category only when the sale is highly
probable and the asset is available for immediate sale in
its present condition. The Group must be committed
to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the
date of classification. Non-current assets classified as held
for sale are measured at the lower of their acquisition cost
and fair value less costs to sell.
k. 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 Statement of Comprehensive Income.
(1) Designated. This includes any financial asset to be
measured at fair value with fair value changes in profit
or loss.
(2) Held for trading. The second category includes
financial assets that are held for trading.
Purchases and sales of financial assets in a regular
way, i.e. within timeframes established by regulation or
convention in the marketplace, are recognised and de-
recognised on a trade date basis.
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 are non
derivative financial assets with fixed or determinable
payments that are not quoted in an active market.
Loans are recorded at fair value plus transaction costs
when acquired. They are subsequently accounted for at
amortised cost using the effective interest method.
Impairment allowances for loans and receivables are
created if there is objective evidence that it will not be
possible for the entire amount which is due under the
original contractual arrangements to be recovered.
Allowances for loans and receivables are calculated where
there is objective evidence with regard to loan defaults,
the structure and quality of the loan portfolio as well
as macroeconomic parameters, on an individual basis.
Losses expected as a result of future events, no matter
how likely, are not recognised.
Where the Group enters into a written option, i.e.
an option that is written into a contract with no net
settlement (i.e. it will be settled with a non-financial asset,
an investment property) the relevant investment property
will be included at its full fair value while the fair value of
the written option is classified as a payable.
Individual loans: The allowance is calculated as the
difference between the carrying value of the asset and the
present value of the expected future cash flows using the
original effective interest rate. The increase in the present
value of an adjusted receivable which occurs over time is
shown as interest income.
Financial assets
Financial assets are generally classified into the following
specified categories: financial assets ‘at fair value through
profit or loss (FVTPL)’, ‘held to maturity investments’,
In assessing the need for impairment on loans and
receivables, the Group takes into account the expected
cash flows from the realisation of collateral.
64
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
4. Significant accounting policies continued
De-recognition: When the cash flows from a loan are
considered to have expired, or where no further cash
flows are expected to be received on the loan in the case
where the underlying property asset has been recognised
as an investment property or non-current assets classified
as held for sale, the original asset is de-recognised and
a new asset is recognised, initially measured at fair
value. Any difference between the carrying value of the
original asset and the fair value of the new asset on initial
recognition is recognised within other gains and losses in
the Consolidated Statement of Comprehensive Income.
l. Trade and other receivables
Trade and other receivables are initially measured at
fair value and subsequently measured at amortised
cost. Where there is objective evidence of loss,
appropriate allowances for any irrecoverable amounts
are recognised in the Consolidated Statement of
Comprehensive Income.
m. 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.
n. 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 share premium account, as a
deduction from equity, net of any related tax deduction.
Direct issue costs include:
• Costs of preparing the prospectus
• Accounting, tax and legal expenses
• Underwriting fees
• Valuation fees in respect of the shares and of other
assets
Costs that relate to the listing itself (e.g. stock exchange
registration costs) are not directly attributable to the share
issue and are expensed.
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 financial instruments and
deferred tax and related goodwill.
5. Operating segments
its
The Group is organised into five business segments,
against which
segmental
the Group reports
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 periods or other
lease incentives respectively. All interest income relates to
Other Assets whilst the revenue for all other segments
represents rental income.
o. Trade and other payables
Trade and other payables are initially measured at fair
value, subsequently measured at amortised cost.
No segment information is presented for the prior period
as the Group’s investment properties were all acquired
since 31 March 2014.
p. 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
Group consolidated segment analysis
For the year 1 April 2014 to 31 March 2015
Annual Report 2015
65
Office
Assets
€’000
15,997
-
15,997
(253)
15,744
66,750
-
82,494
Industrial
Assets
Residential
Assets
Office
Development
Assets
€’000
€’000
€’000
440
-
440
(140)
300
196
-
196
(104)
92
-
-
-
(116)
(116)
Other
Assets
€’000
479
1,657
2,136
(74)
2,062
Group
Consolidated
Position
Unallocated
€’000
€’000
-
-
-
(38)
(38)
17,112
1,657
18,769
(725)
18,044
(4)
-
296
2,551
10,059
12,702
11,512
(5,100)
6,296
-
2,732
4,794
-
-
(38)
80,809
7,691
106,544
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,690)
(5,772)
(1,584)
(12,046)
(4,690)
(5,772)
(1,584)
(12,046)
Rental income
Interest income
Revenue
Property outgoings
Total Property Income
Revaluation of investment
properties
Other gains and losses
Total Income
Investment Manager
fee - base
Performance fee
Administration expenses
Total operating expenses
Operating profit/(loss)
Net finance cost
82,494
-
296
-
12,702
-
6,296
-
4,794
-
(12,084)
(1,575)
94,498
(1,575)
Profit/(loss) before tax
82,494
296
12,702
6,296
4,794
(13,659)
92,923
Total Segment Assets
475,877
10,319
66,500
88,600
18,651
148,094
808,041
Investment Properties
475,877
10,319
66,500
88,600
-
-
641,296
6. Revenue
Rent receivable
Surrender premium
Gross rental and related income
Interest income from loans and receivables
Revenue
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
14,712
2,400
17,112
1,657
-
-
-
158
18,769
158
Rental income arises from the Group’s investment properties. Interest income arises from the recognition of the effective interest
rate on the loans and receivables in accordance with the accounting policy described in Note 4(d). Rental income includes €1.4m
in relation to the spreading of lease incentives (31 March 2014:€nil).
66
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
7. Other gains and losses
Gains on recognition of investment property
Fair value of written call option
Gains on sales of non-current assets classified as held for sale
Other gains and losses
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
10,059
(5,100)
2,732
7,691
-
-
-
-
The gains on recognition of investment property arise from the difference between initial recognition at cost of the loans relating
to the Dorville Core Assets and the fair value at the date of subsequent recognition of the underlying investment properties.
8. Operating profit for the year
Operating profit for the year has been stated after charging/(crediting):
Non-executive directors’ fees
Professional valuers’ fees
Depository fees
Registrar fees
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
250
218
218
28
145
-
69
4
All fees paid to non-executive directors are for services as directors.
Professional valuers’ fees are paid to CBRE Dublin in return for their services in providing independent valuations of the Group’s
properties on an at least twice yearly basis. In 2014 CBRE also provided valuation services in relation to the secondary equity
issue. CBRE Ireland, a private unlimited company, is part of a worldwide group with total revenues for 2014 of approximately
$9 billion of which valuation and appraisal services constitute approximately 5%.
There were no employees during the year.
Auditor’s remuneration
Fees paid to the external auditor
Audit of financial statements
Other assurance services
Tax advisory services
Other non-audit services
Total
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
85
17
97
226
30
-
30
220
425
280
The other non-audit fees were charged in relation to the Company’s share offering, €225,894 to 31 March 2015 (31 March 2014:
€220,000, relating to the Initial Public Offering).
9. Finance income and expense
Interest income on cash and cash equivalents
Effective interest expense on borrowings
Finance expense on payable due for investment property
Net finance income/(expense)
Annual Report 2015
67
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
399
(897)
(1,077)
(1,575)
214
-
-
214
As disclosed in Note 21 below, 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 19).
10. Income tax expense
Income tax on non-core property income
Tax on the disposal of non-core assets
Income tax expense for year
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
(5)
(686)
(691)
-
-
-
The tax expense during the year arose in respect of income and gains from the Group’s residual business.
Reconciliation of income tax expense for the year
Profit/(loss) before tax
Tax charge on profit at standard rate of 12.5%
Non-taxable revaluation surplus
REIT tax-exempt rental profit
Other (Additional tax rate on Non-Core)
Income tax expense for year
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
92,923
(846)
11,615
(10,721)
(547)
344
691
-
-
-
-
-
Hibernia REIT plc has elected for Real Estate Investment Trust (“REIT”) status under section 705 E of the Finance Act 2013.
As a result, the Group does not pay Irish corporation tax on the profits and gains from its qualifying rental business in Ireland
provided it meets certain conditions. With certain exceptions, corporation tax is still payable in the normal way in respect of
income and gains from a group’s Residual Business that is, its non-property rental business.
The Directors confirm that the Group has remained in compliance with the Irish REIT rules and regulations up to and including
the date of this report.
68
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
11. Dividends
Interim dividend for the year ended 31 March 2015 of 0.3 cent per share
Proposed final dividend for the year ended 31 March 2015 of 0.5 cent per share
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
2,011
3,375
-
-
The Board has proposed a final dividend of 0.5 cent per share which is subject to approval by shareholders at the Annual
General Meeting and has therefore not been included as a liability in these consolidated financial statements. The proposed
dividend is payable to all shareholders on the Register of Members on 26 June 2015 and therefore will include the performance
fee shares which are to be issued. Of this proposed final dividend, 0.45 cent per share will be a PID in respect of the Group’s tax
exempt property rental business. The total dividends, interim paid and proposed for the year ended 31 March 2015 are 0.8 cent
per share or €5,386,007 (31 March 2014: €nil).
The payment of this dividend will not have any tax consequences for the Group. The Board has decided to introduce a Dividend
Reinvestment Plan (“DRIP”) commencing with the final dividend: this will allow shareholders to instruct Capita, the Company’s
registrar, to reinvest dividend payments by the purchase of shares in the Company. Details will be provided to shareholders along
with this Annual Report.
12. Earnings per Share
There are no convertible instruments, options, warrants or ordinary shares that are issued upon the satisfaction of specified
conditions as at the year ended 31 March 2015. However, the Company has established a reserve of €5.8m against the issue
of ordinary shares relating to the payment of the performance fee due under the Investment Management Agreement. It is
estimated that approximately 4.7m ordinary shares will be issued calculated on an issue price of €1.2375. The dilutive effect of
these shares is disclosed below. There were no dilutive effects on earnings per share as at 31 March 2014.
The calculations are as follows:
Weighted average number of shares
Issued share capital at beginning of period
Shares issued during the period
Shares in issue at end of period
Weighted average number of shares
Estimated additional shares due for issue from performance reserve
Diluted number of shares
31 March
2015
31 March
2014
‘000
‘000
385,000
285,317
-
385,000
670,317
385,000
500,690
4,664
383,559
-
505,354
383,559
12. Earnings per Share continued
Basic and diluted earnings per share
Annual Report 2015
69
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
Profit/(loss) for the period attributable to the owners of the Company
92,232
(846)
Weighted average number of ordinary shares (basic)
Weighted average number of ordinary shares (diluted)
Basic earnings per share (cents)
Diluted earnings per share (cents)
‘000
500,690
505,354
‘000
383,559
383,559
18.4
18.3
(0.2)
(0.2)
The estimated additional shares that are to be issued pursuant to performance fee arrangements are not included in the basic
share calculation due to the way in which the performance fee is earned which is outlined in Note 26.2. The price applied in
calculating these shares is €1.2375 per share.
For the period 13 August 2013 to 31 March 2014 the calculation of earnings per share is based on the period from commencement
to trade, 11 December 2013, to 31 March 2014 rather than the period from incorporation, 13 August 2013, to 31 March 2014
as the Directors believe that this calculation provides a more informative disclosure to the shareholders because:
• The date of commencement to trade is the same as the listing date, and
• The majority of shares were issued at this date
13. Investment Properties
31 March 2015
Office and
Residential
Level 3
€’000
Development
Industrial
Level 3
€’000
Level 3
€’000
Total
Level 3
€’000
Carrying Value at 1 April 2014
-
-
-
-
Additions:
Property Purchases
Investment properties recognised on de-recognition of loans (Note 1)
Development and Refurbishment Expenditure (Note 2)
Revaluations included in income statement
412,714
48,684
11,678
69,301
76,578
-
510
11,512
10,338
-
(15)
(4)
499,630
48,684
12,173
80,809
Carrying Value at 31 March 2015
542,377
88,600
10,319
641,296
No disclosures are made in relation to the period ended 31 March 2014 as all investment property acquisitions were made during
the year ended 31 March 2015.
Note 1: During the year, certain loans which were acquired by the Group were recognised as investment properties and accounted
for in accordance with the accounting policies set out in Note 4(i).
Note 2: The €11.7m of development and refurbishment expenditure on office and residential includes €13.5m in relation to the
expenditure on Wyckham Point and a dilapidation receipt for Commerzbank House as discussed below.
70
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
13. Investment Properties continued
On 28 August 2014, the Group announced that it had signed a development contract with JJ Rhatigan & Company for the fit-
out and completion of the Group’s 213 partially completed apartments in Wyckham Point, Dundrum. The total cost to complete
the apartments is expected to be up to €25m (including VAT). Approximately €13.5m in costs in relation to this development
have been incurred to date. This project will be completed on a phased basis with the first units finished and let to tenants in
April 2015.
The Group received €2.1m in relation to a dilapidation costs payment relating to Commerzbank’s break of their lease on
Commerzbank House. This has been applied to the development and refurbishment costs on this property and therefore reduces
the cost of this property.
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. This option has been accounted for as written call option and, as there is no
net settlement, the fair value liability of €5.1m is shown separately from the investment property value in the financial statements
as a trade and other payable. In analysing the results of the portfolio, the Group nets the value of this option with the fair value
of the investment properties, resulting in a total value of investment property for portfolio performance purposes of €636m.
The valuations used in order to determine fair value for the investment properties in the 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. As discussed
in Note 3 (g) above, 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 method that is 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 has been made to the valuation of the Forum building to reflect the
maximum value of a potential payment in relation to the acquisition of the car park. In addition, a reduction of €1m has been
recognised in the 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 technique 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 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 31 March 2015. There is no
equivalent disclosure for the period ended 31 March 2014 as the Group had no Investment Properties as at that date.
Annual Report 2015
71
13. Investment Properties continued
Information on fair value inputs as at 31 March 2015
Office assets
Industrial assets
Residential assets
Development assets
Fair value at
31 March
2015
Inputs
Lowest in range Highest in range
€m
475
10
67
89
Annual rent € per sq. ft.
ERV € per sq ft
Equivalent Yield
Annual rent € per sq. ft.
ERV € per sq ft
Equivalent Yield
€14.45
€22.50
5.00%
€4.22
€2.75
7.63%
€45.50
€48.00
6.13%
€5.12
€5.20
7.63%
Equivalent Yield
4.50%
4.75%
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 €139m reduction in fair
value whilst a 1% decrease in yield would result in a fair value increase of €201m.
This is further analysed by property class, as follows:
Property Class
Office assets
Development assets
Residential assets
Industrial assets
Total
31 March 2015
Change in fair
value +1%
Yield
Change in
fair value -1%
Yield
€’000’s
€’000’s
(88,200)
(36,290)
(13,660)
(1,058)
128,783
52,820
18,400
1,370
(139,208)
201,373
72
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
14. Loans and receivables
Balance at beginning of period
Purchases and loan advances
Loans recognised as investment properties
Loans recognised as non-current assets classified as held for sale
Loan repayments
Interest income at effective interest rate
Balance at end of period
31 March
2015
31 March
2014
€’000
€’000
68,563
-
38,800
(38,625)
(22,993)
(47,250)
1,657
68,405
-
-
-
158
152
68,563
The opening loans and receivables balance consists of the loans which were part of the Dorville loan portfolio acquired in
March 2014, which were secured on the Dorville Core and Non-Core Assets as discussed in Note 3(f). The Dorville Core assets
are recognised as investment properties and the legal acquisition of 213 partially completed apartments at Wyckham Point,
Dundrum and offices at South Dock House, Grand Canal Dock, Dublin has also completed. The Dorville Non-Core assets have
now either been disposed of, and the proceeds applied to the loan balances, or acquired by the Company as non-current assets
classified as held for sale (Note 16).
Loan purchases and advances for the year consist of a loan issued to the owners of Cumberland House as well as part of a
portfolio acquired from Ulster Bank, the BH portfolio. The Group acquired Cumberland House in February 2015, at which
time the loan principle was repaid through the acquisition of the property. The BH portfolio was purchased for a total cost of
€2.5m of which €1.7m related to loans secured over four apartments in the Cannon Place apartment block acquired as part
of the Dorville acquisition. These four apartments are recognised as investment properties in line with the Group’s policy on
investment property recognition.
The balance of loans and receivables at the year-end consists of one loan on which the Group hold a property as collateral.
15. Trade and other receivables
Deposit paid on investment property
Due from sale of non-current assets classified as held for sale
Receivable from loan redemptions
Amounts receivable from related parties
Arrangement fee
Property income receivables
Prepayments
VAT refundable
31 March
2015
31 March
2014
€’000
€’000
-
1,467
3,613
-
394
1,911
266
1,395
11,010
-
-
366
-
-
110
161
Balance at end of period
9,046
11,647
There are no amounts past due. The Directors consider that the carrying value of trade and other receivables approximates to
their fair value. The amounts receivable from loan redemptions and the sale of other non-current assets classified as held for sale
relate to monies due from the sale of a number of collateral properties. Apart from this amount, there is no concentration of
credit risk with respect to trade receivables as most of these relate to prepayments and refunds due on taxes.
16. Non-current assets classified as held for sale
Balance at start of period
Recognised during the period
Acquisition costs
Sold during the period
Balance at end of period
Annual Report 2015
73
31 March
2015
€’000
-
22,993
541
(5,035)
18,499
31 March
2014
€’000
-
-
-
-
-
The Group has purchased two portfolios of loans (see Note 14) 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 of by February 2015 have been legally acquired by the Company and recognised as
non-current assets classified as held for sale in accordance with the Group’s accounting policy (Note 4.j). 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 over the period to 31 December 2015. It is expected
that disposal of these assets will be completed at the latest within 12 months from their acquisition by the Company. These assets
do not form part of the REIT property rental business.
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. Assets sold to date have achieved at least their
acquisition price on an individual basis and in total a profit of approximately €2.7m before tax and after costs has been achieved.
The Directors have therefore concluded that the fair value of these assets is at least their carrying value.
17. Issued capital and share premium
At start of period
Shares issued during the period
Costs associated with the issue
At end of period
Authorised share capital
Authorised
Allotted, called up and fully paid
Issued for cash
In issue at period end
31 March 2015
31 March 2014
Share Capital
Share Premium
Total
Share Capital
Share Premium
Total
€’000
38,500
28,532
-
€’000
333,312
271,052
(13,409)
€’000
371,812
299,584
(13,409)
€’000
-
38,500
-
€’000
-
346,500
(13,188)
€’000
-
385,000
(13,188)
67,032
590,955
657,987
38,500
333,312
371,812
No of shares
‘000
1,000,000
670,317
670,317
No of shares
‘000
1,000,000
385,000
385,000
On 7 October 2014 the Company announced its intention to undertake a Firm Placing and a Placing and Open Offer (the “Capital
Raise”) to raise gross proceeds of approximately €299.6m through the issue of 285,317,459 New Ordinary Shares at a price of 105
euro cent (or €1.05) per New Ordinary Share (the “Issue Price”). 71,428,571 New Ordinary Shares were issued through the Firm
Placing at the Issue Price and 213,888,888 New Ordinary Shares were issued through the Placing and Open Offer at the Issue Price
to raise gross proceeds of approximately €299.6m. These shares were admitted to trading on 4 November 2014.
74
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
18. Share based payments
Other reserves
31 March
2015
31 March
2014
€’000
€’000
5,772
-
Other reserves comprise amounts reserved for the issue of shares in respect of the performance fees due to the Investment
Manager for the year ended 31 March 2015 (31 March 2014: €nil). Further details of this are set out in Note 26.2.
19. Loans and advances from banks
On 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 subsidiaries as may from time to time exist.
There was no balance drawn on this facility at 31 March 2015. The Directors confirm that all covenants have been complied
with and are kept under review.
20. Trade and Other Payables
Accrued investment property costs
Loan acquisition costs
Fair value of written call option
Rent deposits and early payments
Investment management fee payable -base
Trade and other payables
PAYE/PRSI payable
Tax payable
31 March
2015
31 March
2014
€’000
€’000
687
-
5,100
1,920
1,625
2,153
36
689
-
500
-
-
-
398
36
-
Balance at end of period
12,210
934
The fair value of the written call option relates to an option that was granted to the vendor of the Windmill Lane site to buy into
50% of the development project at the original purchase price. 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.
21. Payable due for investment properties
Payable due for investment property
Annual Report 2015
75
31 March
2015
31 March
2014
€’000
€’000
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 a 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. The Company is most likely to complete the acquisition by 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).
22. IFRS and EPRA Net Asset Value per Share
IFRS net assets at period end
Ordinary shares in issue
IFRS NAV per share (cents)
Ordinary shares in issue
Estimated additional shares due for issue from performance reserve
Diluted number of shares
Diluted IFRS NAV per share (cents)
31 March
2015
31 March
2014
€’000
€’000
753,134
370,966
670,317
385,000
112.4
96.4
670,317
4,664
674,981
385,000
-
385,000
111.6
96.4
The Company has established a reserve of €5.8m against the issue of ordinary shares relating to the payment of the performance
fee due under the Investment Management Agreement. It is estimated that approximately 4.7m ordinary shares will be issued in
relation to this fee. The IFRS NAV is therefore presented on a diluted basis including these shares.
EPRA NAV
IFRS net assets at period end
Revaluation of non-current assets classified as held for sale
EPRA NAV
EPRA NAV per share (cents)
31 March
2015
31 March
2014
€ ‘000
€ ‘000
753,134
1,445
754,579
370,966
-
370,966
111.8
96.4
76
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
23. Financial Instruments and risk management
The 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, with the exception of a written call option on the Windmill
lane site, give rise to any significant market risk. The written call option is measured at fair value which is approximately 50% of
the gain on the Windmill Lane site held as investment property.
The short term bank deposits are used to invest cash while awaiting suitable investment properties for investment. These are
denominated in euro. Therefore exposure to market risk in relation to these is limited to interest rate risk. Exposure to interest
rates is limited to the exposure of its earnings from uninvested funds, €139m at the period end (31 March 2014: €291m). Interest
rates are at historic lows and therefore the impact of a change in the rate by 10% during the period would be approximately
€40,000 (31 March 2014: c. €22,000).
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 and Company, the risk that the counterparties
underlying its assets default.
The Group’s main financial asset is cash and cash equivalents. Loans receivables which totalled €69m on 31 March 2014 have
either been repaid through the sale of collateral properties and the receipt of income from these properties or by the direct
acquisition of the properties by the Group.
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: Approximately €5.1m of the balance of trade and other receivables relates to funds due
from the sale of properties. These amounts are therefore secured on the properties as title will not be released until the funds
have been received on completion. 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:
Trade and other receivables
Cash and cash equivalents
Balance at end of period
31 March
2015
31 March
2014
€’000
€’000
9,046
139,048
11,647
291,690
148,094
303,337
Annual Report 2015
77
23. Financial Instruments and risk management continued
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:
Net current assets at the period end
31 March
2015
31 March
2014
€’000
€’000
111,686
302,403
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.
Liabilities due in less than one year:
Trade and other payables
Payable for investment property
Total liabilities due in less than one year
Funds available:
Cash and cash equivalents
Revolving credit facility undrawn
Total funds available - less than one year
Net funds available
31 March
2015
31 March
2014
€’000
€’000
5,190
42,697
934
-
47,887
934
139,048
100,000
291,690
-
239,048
291,690
191,161
290,756
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 Consolidated and Company statement of
changes in equity. At 31 March 2015 the capital of the Company was €753m (31 March 2014: €371m).
There are no external capital requirements on the Group.
78
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
23. Financial Instruments and risk management continued
d. Capital management continued
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. During the year ended
31 March 2015, the Group launched a secondary equity issue as discussed in Note 17.
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
Trade
and other
receivables
Amortised cost
Trade and
other payables
Amortised cost
2
2
Cash value
Cash value
Valuation of collateral is subjective based
on agents’ guide sales prices and market
observation of similar property sales where
available
Most of these are receivables in relation
to the sale of properties, prepayments or
income tax refunds 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
These are all accruals and will settle in the
short term based on their cash value and
therefore no discounting is applied
The Directors have determined that the carrying value of loans and receivables approximates their fair value, based on their
assessment of the value of the underlying collateral. 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 31 March 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. In addition, the written call option on the Windmill Lane site is held at fair value. Other than
this, the Group had no financial assets or liabilities held at fair value. As at 31 March 2014, the Group had no financial assets or
liabilities which were carried at fair value.
Annual Report 2015
79
23. Financial Instruments and risk management continued
e. Fair values of financial assets and financial liabilities continued
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.
31 March
2015
Carrying
value
€’000
152
9,046
Level 1
€’000
Level 2
€’000
Level 3
€’000
31 March
2014
Carrying
value
€’000
Level 1
€’000
Level 2
€’000
Level 3
€’000
-
-
-
152
68,563
9,046
-
11,647
-
-
-
68,563
11,647
-
139,048
148,246
139,048
139,048
-
9,046
-
152
291,690
371,900
291,690
291,690
-
11,647
-
68,563
12,210
42,697
54,907
-
-
-
7,110
5,100
42,697
49,807
-
5,100
934
-
934
-
-
-
934
-
934
-
-
-
Financial assets
Loans and receivables
Trade and other
receivables
Cash and Cash
equivalents
Financial liabilities
Trade and other payables
Payable due for
investment property
Fair value movements at level 3
Balance at start of period
Transfers into level 3
Transfers out of level 3
Purchases, sales, issues and settlement
Purchases
Sales
Repayments
Fair value recognition
Amortisation
31 March
2015
31 March
2014
€’000
€’000
68,563
-
(22,993)
550,603
-
(47,250)
85,768
1,657
-
-
-
68,405
-
-
-
158
Balance at end of period
636,348
68,563
The Directors review and approve the valuations as part of their review of the financial statements. The Group’s policy is to
recognise transfers into and out of the fair value hierarchy levels as of the date of the event or change in circumstance that
caused the transfer.
80
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
24. Operating leases receivables
Future aggregate minimum rentals receivable (to the next break date) under non-cancellable operating leases are:
Operating lease receivables due in:
Less than one year
Between two and five years
Greater than five years
31 March
2015
31 March
2014
€’000
€’000
20,457
41,469
24,412
86,338
-
-
-
-
The Group leases its investment properties under operating leases. The weighted average unexpired lease term (WAULT) at
31 March 2015 based on lease expiry date was 7.8 years or 3.9 years based on the next tenant break option date (31 March
2014: n/a).
25. Investment in subsidiary undertakings
The Company has the following interests in ordinary shares in the following subsidiary undertakings at 31 March 2015. These
subsidiaries are fully owned and consolidated within the Group.
Name
Registered
address/
Country of
Incorporation
Shareholding/
Number of
shares held
Directors
Hibernia REIT
Finance Limited
Marine House,
Clanwilliam Place,
Dublin 2/ Ireland
100%/ 10
Hibernia REIT
Holding Company
Limited
Marine House,
Clanwilliam Place,
Dublin 2/ Ireland
100%/ 10
Mayor House
Basement
Management
Limited
Lamourette
Limited
Marine House,
Clanwilliam Place,
Dublin 2/ Ireland
100%/2
Marine House,
Clanwilliam Place,
Dublin 2/ Ireland
100%/2
The Group has no interests in unconsolidated subsidiaries.
Daniel Kitchen,
Colm Barrington,
Stewart Harrington,
Terence O’Rourke,
William Nowlan
Richard Ball,
Kevin Nowlan,
Frank O’Neill
Richard Ball,
Kevin Nowlan,
Frank O’Neill
Richard Ball,
Kevin Nowlan,
Frank O’Neill
Company
Secretary
Nature of
business
Castlewood
Corporate
Services Limited
Financing
activities
Castlewood
Corporate
Services Limited
Castlewood
Corporate
Services Limited
Castlewood
Corporate
Services Limited
Holding property
interests
Property
management
Property
management
Annual Report 2015
81
26. Related Parties
26.1 Subsidiaries
All transactions between the Company and its subsidiaries are eliminated on consolidation.
26.2 Investment Manager
The Group, pursuant to the Investment Management Agreement entered into on 27 November 2013, is managed by WK
Nowlan REIT Management Limited (“The Investment Manager”). WK Nowlan REIT Management Limited is wholly
owned and controlled by Nowlan Property Limited and Mr. Frank Kenny. William Nowlan is the investment director of the
Investment Manager. Frank Kenny is 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 are the key management
of the Investment Manager:
Kevin Nowlan
Richard Ball
Chief Executive Officer
Chief Investment Officer
Tom Edwards-Moss
Chief Financial Officer
William Nowlan
Investment Director
Frank Kenny
Sean O’ Dwyer
Frank O’Neill
Development Director
Risk and Compliance Officer
Chief Operations Officer
All of this team, with the exception of Sean O’ Dwyer, are 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 31 March 2015, the Directors of the Investment Manager held an aggregate of 2,059,894 shares in the Company, of which
600,000 are held by William Nowlan and 147,620 are held by Kevin Nowlan.
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
From
€’000,000
0
>450
>600
Uninvested net proceeds
EPRA NAV
Quarterly Base Fee
To
€’000,000
<=450
<=600
%
0.250
0.200
0.150
0.125
The total base fee earned by the Investment Manager in the period amounted to €4.7m (excluding VAT). The Company paid
the Investment Manager €2.7m during the period in relation to the base fee and at the period end the Company owed the
Investment Manager €1.6m with the remaining €0.4m being prepaid as at 31 March 2014.
The Investment Manager incurred “out of pocket” expenses during the year to the amount of €159k (excluding VAT). These
costs were refunded by the Company in accordance with the Investment Management Agreement.
82
HIBERNIA REIT PLC
Notes forming part of the annual report
continued
26. Related Parties continued
26.2 Investment Manager continued
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). Performance fees due at 31 March 2015 were €5.8m. A reserve has been created for this amount (Note 18). Shares based
on the average closing price for the 20 days prior to the issuing of the performance fee invoice by the Investment Manager will
be issued after the year end when the fees are agreed.
26.3 Key management personnel
The non-executive directors are the only key management personnel of the Group. The management functions are 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.
26.4 Other related party transactions
WK Nowlan Property Limited is an 80% owned subsidiary of Nowlan Property Limited and was engaged on an arm’s length
basis to carry out receivership and project management services in relation to the loan and property portfolios. A significant
amount of this work relates to the resolution of the collateral properties that made up the Dorville portfolio of loans. The fees
paid for these services were benchmarked on normal commercial terms. These fees totalled €0.7m to 31 March 2015 (31 March
2014: €nil). No balances were owed to WK Nowlan Property Limited at the period end. William Nowlan is Chairman of
Nowlan Property Limited and Frank O’Neill is a non-executive director.
There were no further related party transactions for the period.
27. Profit or loss of the parent company
The parent company of the Group is Hibernia REIT plc. In accordance with Section 148(8) of the Companies Act, 1963 and
Section 7(1A) of the Companies (Amendment) Act, 1986, the Parent Company is availing of the exemption of presenting its
individual income statement to the Annual General Meeting and from filing it with the Registrar of Companies. The Parent
Company’s profit after tax for the year ended 31 March 2015 determined in accordance with IFRS is €92.2m (31 March 2014:
€0.8m (Loss)).
28. Subsequent Events
1. On 30 April 2015 the Company acquired 35 – 37 Lower Camden St for a price of €1.6m (€1.7m including costs).
2. On 7 May 2015 the Company announced the acquisition of 11 Lime Street for €1.4m.
3. On 8 May 2015, the Company announced its intention to seek approval from its shareholders for the internalisation of the
investment Manager. Further information on this proposal is given in the Chairman’s Statement on pages 4 to 5 of this Annual
Report.
Company statement of financial position
As at 31 March 2015
Annual Report 2015
83
Assets
Non-current assets
Investment Property
Loans to subsidiary
Current assets
Trade and other receivables
Cash and cash equivalents
Non-current assets classified as held for sale
Total current assets
Total assets
Equity and liabilities
Capital and reserves
Issued capital and share premium
Retained earnings
Other reserves
Total equity
Current liabilities
Trade and other payables
Payable due for investment property
Total current liabilities
Total equity and liabilities
31 March
2015
31 March
2014
Notes
€’000
€’000
c
d
e
f
g
h
i
j
641,296
3,984
645,280
5,428
138,652
144,080
18,499
162,579
-
68,416
68,416
11,647
291,679
303,326
-
303,326
807,859
371,742
657,987
89,249
5,772
371,812
(962)
-
753,008
370,850
12,154
42,697
54,851
892
-
892
807,859
371,742
The notes on pages 86 to 89 form an integral part of these Company financial statements. The Company financial statements
on pages 83 to 89 were approved and authorised for issue by the Board of Directors on 29 May 2015 and signed on its behalf
by:
Mr Daniel Kitchen
Chairman
29 May 2015
Mr Terence O’Rourke
Director
29 May 2015
84
HIBERNIA REIT PLC
Company statement of changes in equity
For the year ended 31 March 2015
Balance at start of period
Total comprehensive income
for the period
Profit for the period
Total other comprehensive income
Transactions with owners of the
Company, recognised directly in equity
Dividends
Issue of ordinary shares for cash
Share issue costs
Share based payments
h
1 April 2014 to 31 March 2015
Notes
Share Capital
Share Premium
€’000
€’000
Retained
earnings
€’000
Other reserves
€’000
Total
€’000
38,500
333,312
(962)
-
370,850
-
-
38,500
-
28,532
-
-
-
-
333,312
-
271,052
(13,409)
-
92,222
-
91,260
(2,011)
-
-
-
-
-
-
92,222
-
463,072
-
-
-
5,772
(2,011)
299,584
(13,409)
5,772
Balance at end of period
67,032
590,955
89,249
5,772
753,008
13 August 2013 to 31 March 2014
Share Capital
Share Premium Retained earnings
Other reserves
€’000
€’000
€’000
€’000
Total comprehensive income
for the period
Loss for the period
Total other comprehensive income
Transactions with owners of the
Company, recognised directly in equity
Issue of ordinary shares for cash
Share issue costs
-
-
-
-
-
-
38,500
-
346,500
(13,188)
(962)
-
(962)
-
-
Balance at end of period
38,500
333,312
(962)
The notes on pages 86 to 89 form an integral part of these Company financial statements.
-
-
-
-
-
-
Total
€’000
(962)
-
(962)
385,000
(13,188)
370,850
Company statement of cash flows
For the year ended 31 March 2015
Cash flows from operating activities
Profit/(loss) for the period
Adjusted for:
Revaluation of investment properties
Other gains and losses
Share based payment
Rental income paid in advance/(accrued)
Finance (income)/expense
Income tax expense
(Increase) in trade and other receivables
Increase in trade and other payables
Net cash flow from operating activities
Cash flows from investing activities
Purchase of investment property
Development and Refurbishment Expenditure
Purchase of non-current assets classified as held for sale
Sale of non-current assets classified as held for sale
Decrease/(Increase) in inter-company loans
Finance income
Finance expense
Net cash used in investing activities
Cash flow from financing activities
Dividends paid
Arrangement fee paid re bank facility
Proceeds from the issue of ordinary share capital
Share issue costs
Net cash inflow from financing activities
Net (decrease)/Increase in cash and cash equivalents
Cash and cash equivalents period start
(Decrease)/increase in cash and cash equivalents
Net cash and cash equivalents at period end
The notes on pages 86 to 89 form an integral part of these Company financial statements.
Annual Report 2015
85
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
92,222
(962)
(80,809)
(7,691)
5,772
9
1,575
691
11,769
(1,056)
3,355
14,068
(483,861)
(12,173)
(23,534)
6,297
63,933
399
(1,820)
(450,759)
(2,011)
(500)
299,584
(13,409)
283,664
(153,027)
291,679
(153,027)
138,652
-
-
-
-
(214)
-
(1,176)
(600)
392
(1,384)
(11,010)
-
-
-
(67,916)
-
177
(78,749)
-
-
385,000
(13,188)
371,812
291,679
-
291,679
291,679
86
HIBERNIA REIT PLC
Notes to the company financial statements
a. Accounting policies and critical accounting estimates and judgements
The Company’s financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) and IFRS Interpretations Committee (IFRIC) interpretations as adopted by the European Union (EU) and with those
parts of the Companies Acts, 1963 to 2013 applicable to companies reporting under IFRS. The financial statements reflect the
financial position of the Company only and do not consolidate the results of any subsidiaries. The financial statements have
been prepared under the historical cost convention, as modified to include the fair valuation of certain financial instruments
and land and buildings. The significant accounting policies of the parent company are the same as those of the Group which
are set out in Note 4 to the consolidated financial statements on pages 62 to 64 of the Group’s Annual Report. The Company’s
investments in its subsidiaries are stated at cost less any impairment. The preparation of financial statements in conformity
with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these
estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from
those estimates. A description of the key estimates and significant judgements is set out in Note 3.(f) and 3.(g) to the consolidated
financial statements on pages 59 to 60 of the Group’s Annual Report.
Impairment review of shares in Group undertakings
The Company reviews its shares in Group undertakings for impairment at each reporting date. Impairment testing involves the
comparison of the carrying value of the investment with its recoverable amount. The recoverable amount is the higher of the
investment’s fair value or its value in use. Value in use is the present value of expected future cash flows from the investment. 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. Impairment testing inherently involves a number of judgemental areas: the preparation
of cash flow forecasts for periods that are beyond the normal requirements of management reporting; the assessment of the
discount rate appropriate to the business; estimation of the fair value of the investment; and the valuation of the separable assets
comprising the overall investment in the Group undertaking. The use of reasonably possible alternative assumptions would not
materially impact the carrying value of the Company’s shares in Group undertakings. See note k for further information.
b. Auditors’ remuneration
Fees paid to the external auditor
Audit of financial statements
Other assurance services
Tax advisory services
Other non-audit services
Total
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€’000
€’000
85
17
97
226
30
-
30
220
425
280
The other non-audit fees were charged in relation to the Company’s share offering, €225,894 to 31 March 2015 (31 March 2014:
€220,000 relating to the Initial Public Offering).
c. Investment properties
For further information on investment properties refer to Note 13 of the consolidated financial statements.
d. Loans to subsidiary
Balance at start of period
Loan advances
Loan repayments
Interest income at effective interest rate
Balance at end of period
Annual Report 2015
87
31 March
2015
31 March
2014
€’000
€’000
68,416
93,107
(161,711)
4,172
-
68,258
-
158
3,984
68,416
This represents funding supplied to the Company’s subsidiary, Hibernia REIT Finance Limited, for the purchase of loans and
loan portfolios over collateral properties. The majority of these properties are destined for the investment property portfolio of
the Company. These loans are all at current market rates.
e. Trade and other receivables
Deposit paid on investment property
Due from sale of non-current assets classified as held for sale
Amounts receivable from related parties
Property income receivables
Prepayments
Arrangement fee
VAT refundable
Balance at end of period
31 March
2015
31 March
2014
€’000
€’000
-
1,467
-
1,911
261
394
1,395
11,010
-
366
-
110
-
161
5,428
11,647
There are no amounts past due. The Directors consider that the carrying value of trade and receivables approximates to their
fair value. The amounts receivable from the sale of non-current assets classified as held for sale relate to monies due from
the sale of a number of properties which were originally held as collateral for loans due in a subsidiary company. Apart from
this amount, there is no concentration of credit risk with respect to trade receivables as the balance relates mainly to either
prepayments or refunds due on taxes.
f. Non-current assets classified as held for sale
For further information on non-current assets classified as held for sale refer to Note 16 of the consolidated financial statements.
g. Issued share capital and share premium
For further information on issued share capital refer to Note 17 of the consolidated financial statements
h. Other reserves
For further information on share based payments refer to Note 18 of the consolidated financial statements.
88
HIBERNIA REIT PLC
Notes to the company financial statements
continwd
i. Trade and other payables
Accrued investment property costs
Loan acquisition costs
Fair value of written call option
Rent deposits and early payments
Investment management fee payable -base
Trade and other payables
PAYE/PRSI
Capital gains tax payable
31 March
2015
31 March
2014
€’000
€’000
687
-
5,100
1,920
1,625
2,097
36
689
-
500
-
-
-
356
36
-
Balance at end of period
12,154
892
For further information on trade and other payables refer to Note 20 of the consolidated financial statements.
j. Payable due for investment property
For further information refer to Note 21 of the consolidated financial statements
k. Financial instruments and risk management
The Company has identified exposure to the following risks:
Market risk
Credit Risk
Liquidity risk
The substantial majority of these risks for the Group are held by the Company and managed at the Group level. Therefore the
policies for managing each of these and the principal effects of these policies on the results for the period are summarised in
Note 23 of the Annual Report.
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 Company only for the purposes of making the disclosures in Note 23 of
the Annual Report. Assets held at level 3 include investment properties in addition to the loans and receivables and written call
option (trade and other payables) included in the below table of financial assets and liabilities.
Financial assets
Loans to subsidiary
Trade and other receivables
Cash and Cash equivalents
Financial liabilities
Trade and other payables
Payable due for investment
property
31 March
2015
Carrying
value
Level 1
€’000
€’000
31 March
2014
Carrying
value
Level 1
€’000
€’000
Level 2
€’000
Level 3
€’000
Level 2
€’000
Level 3
€’000
-
3,984
-
5,428
138,652
138,652
148,064 138,652
-
5,428
-
5,428
3,984
-
-
-
68,416
-
11,647
291,679
291,679
3,984 371,742 291,679
-
11,647
-
11,647
68,416
-
-
68,416
12,154
42,697
54,851
-
-
-
7,054
5,100
42,697
49,751
-
5,100
892
-
892
-
-
-
892
-
892
-
-
-
k. Financial instruments and risk management continued
Fair value movements at level 3
Balance at start of period
Transfers into level 3
Transfers out of level 3
Purchases, sales, issues and settlement
Purchases
Sales
Repayments
Fair value recognition
Amortisation
Annual Report 2015
89
31 March
2015
31 March
2014
€’000
€’000
68,416
-
(22,993)
643,710
-
(138,719)
85,768
3,998
-
-
-
68,416
-
-
-
-
Balance at end of period
640,180
68,416
The Company has, in addition to the short term bank deposits and trade payables and receivables, loans to subsidiary financial
assets, the risks of which correspond to the risks of the loans and receivables discussed for the Group risks as these loans were
made to facilitate the purchase of the loans and receivables portfolio for the Group.
l. Dividends
For information on the dividends refer to Note 11 of the consolidated financial statements
m. Investment in subsidiary undertakings
For information on the Company’s holdings in subsidiaries refer to Note 25 of the consolidated financial statements.
n. Related parties
For information on related parties refer to Note 26 of the consolidated financial statements.
o. Profit or loss of the parent company.
The parent company of the Group is Hibernia REIT plc. In accordance with Section 148(8) of the Companies Act, 1963 and
Section 7(1A) of the Companies (Amendment) Act, 1986, the parent company is availing of the exemption of presenting its
individual income statement to the Annual General Meeting and from filing it with the Registrar of Companies. The parent
company’s profit after tax for the year ended 31 March 2015 determined in accordance with IFRS is €92.2million (31 March
2014: €0.9m (Loss)).
p. Subsequent events
For information on subsequent events refer to Note 28 of the consolidated financial statements.
90
HIBERNIA REIT PLC
Supplementary disclosures (unaudited)
European Real Estate Association (EPRA) Performance Measures
EPRA performance measures are calculated according to the EPRA Best Practices Recommendations December 2014. EPRA
performance measures are used in order to enhance transparency and comparability with other public real estate investment
companies in Europe. EPRA has consulted with investors and preparers of information in order to compile its recommendations.
Using these measures ensures that the Group’s investors can compare the Group’s performance on a like for like basis with other
similar companies.
EPRA measures are discussed in the Investment Manager’s Report on pages 7 to 13. Further detail on these measures is set out
below, including their calculation and reconciliation to the financial statements where applicable.
Table 1: Summary of EPRA performance measures
Year ended
31 March 2015
Period ended
31 March 2014
€ ‘000
cent per share
€ ‘000
cent per share
EPRA Earnings
EPRA NAV
EPRA NNNAV
EPRA NIY
EPRA “topped-up” NIY
EPRA vacancy rate
- basic
- diluted
3,961
3,961
754,579
754,218
(i)
(ii)
(ii)
(iii)
(iii)
(iv)
(846)
(846)
370,966
370,966
0.8
0.8
111.8
111.7
4.4%
4.9%
3.0%
(0.2)
(0.2)
96.4
96.4
n/a
n/a
n/a
Calculation and explanation of EPRA performance measures
(i) EPRA Earnings
EPRA earnings are presented as they are important for investors who want to assess the extent to which dividends are supported
by recurring income. They indicate the extent to which current dividend payments are supported by earnings.
IFRS Profit/(loss) for the period after taxation
Exclude:
Changes in fair value of investment properties
Fair value of written call option
Loan income from asset disposals (net)1
Profit and loss on disposals of non-core assets
Tax in respect of EPRA adjustments
EPRA earnings
Weighted average number of shares
Basic
Potential shares to be issued re performance fees
Diluted number of shares
EPRA Earnings per share - (cents)
Diluted EPRA earnings per share (cents)
31 March
2015
31 March
2014
€ ‘000
€ ‘000
92,232
(846)
(90,868)
5,100
(454)
(2,732)
683
3,961
-
-
-
-
-
(846)
500,690
383,559
4,664
505,354
-
383,559
0.8
0.8
(0.2)
(0.2)
1 Loan income from asset disposals comprises profit on the sale of collateral assets which is recognised under IFRS as part of the effective interest rate on loans. However, since
it arises from asset disposals it is deducted from EPRA income in the above calculation.
Annual Report 2015
91
(ii) EPRA NAV and EPRA NNNAV
The objective of these measures is to highlight the fair value of net assets on an on-going, long-term basis. Therefore assets which
are not expected to crystallize in normal circumstances are excluded while trading properties are adjusted to their fair value. The
Group presents its investment properties in its financial statements at fair value as allowed under IAS 40 and has no items not
expected to crystallise in a long term investment property business model. EPRA NAV as calculated includes an adjustment for
the revaluation of other non-current assets held for sale. Under the provisions of IFRS 5 these are held at the lower of cost or
net realisable value. In order to make this adjustment the Directors have estimated the fair value based on expected sales value
derived from sale of similar properties in the recent past and agents guide prices. As these assets are subject to tax, a deferred
tax adjustment is also made. There are no adjustments for fair value required to EPRA NAV in order to reach EPRA NNNAV.
NAV per the Financial statements
Revaluation of other non-current assets held for sale
EPRA NAV
Deferred tax on the revaluation of other non-current
assets held for sale
EPRA NNNAV
Ordinary shares in issue
Estimated additional shares due for issue
from performance reserve
Ordinary shares in issue including
performance shares to be issued -”diluted”
31 March 2015
31 March 2014
€ ‘000
cent per share
€ ‘000
cent per share
753,134
1,445
754,579
(361)
754,218
670,317
4,664
674,981
111.8
111.7
370,966
-
370,966
-
370,966
385,000
-
385,000
96.4
96.4
92
HIBERNIA REIT PLC
Supplementary disclosures (unaudited)
continued
(iii) EPRA Net Initial Yield (EPRA NIY) and EPRA “topped-up” Net Initial Yield (EPRA “topped-up” NIY)
EPRA NIY: This measures the inherent yield of the portfolio according to set guidelines to allow investors to compare real
estate investment companies across Europe on a consistent basis, using current cash passing rent. The EPRA “topped-up” NIY
measures yield based on rents adjusted for the expiration of lease incentives, i.e. on a contracted rent free period.
Investment property at fair value
Developments / Refurbishments1:
Completed property portfolio
Allowance for purchasers’ costs (per CBRE valuation report)
Gross up completed property portfolio
Annualised cash passing rental income
Property outgoings
Annualised net rents
Expiration of lease incentives and fixed uplifts
“Topped-up” annualised net rent
EPRA NIY
EPRA “topped-Up” NIY
1 Commerzbank House is included at 77% of floor space representing area being refurbished
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€ ‘000
€ ‘000
641,296
(195,078)
446,218
19,052
465,270
20,524
(167)
20,357
2,214
22,571
4.4%
4.9%
-
-
-
-
-
-
-
-
-
0.0%
0.0%
(iv) EPRA vacancy rate
This provides comparable and consistent vacancy data for investors based on the independent valuers’ assessment of ERV.
Annualised ERV vacant units
Annualised ERV completed portfolio1
EPRA vacancy rate
1 The part of Commerzbank House undergoing refurbishment is not treated as a vacant nor completed property
1 April 2014
to 31 March
2015
13 August 2013
to 31 March
2014
€ ‘000
€ ‘000
756
25,326
-
-
3.0%
n/a
Annual Report 2015
93
Other disclosures
1. Disclosures required under the Alternative Investment Fund Managers Directive (“AIFMD”)
for Annual Reports of Alternative Investment Funds (“AIF”s)
a. Material changes and periodic risk management disclosures
All disclosure requirements to be made to investors prior to their investing in the Company are made on the Company’s
website, www.hiberniareit.com. The Company published a prospectus for the second equity offering in October 2014,
which details all the information required. There have been no material changes to this information other than has been
disclosed in the Annual Report on pages 4 to 5.
b. Financial information disclosures
There were no realised gains or losses on investments during the period as no investment properties were sold. Included
within the unrealised gains disclosed under IFRS there is a total of €0.7m in unrealised losses.
c. Remuneration disclosures
The Investment Manager, WK Nowlan REIT Management Limited, has adopted a Remuneration Policy with the objective
of aligning the interests of employees of WKNRM with the creation of long term value for the shareholders of WKNRM
and Hibernia REIT plc. The remuneration paid takes account of the remuneration paid in similar organisations, the
regulatory and governance framework and the current economic climate. The key elements comprising remuneration are
base salary, pension contribution and annual bonus to a maximum of 100% of annual salary. Where the annual bonus
exceeds certain monetary amounts there is a requirement that a portion of the total bonus be invested in shares of Hibernia
REIT plc. Performance related remuneration takes account of individual performance and the financial performance of
the Investment Manager and Hibernia REIT plc
The total remuneration paid to the staff of the Investment Manager in the period, all of whom are engaged in managing
the Group activities, was €2,206,416 of which €1,404,250 comprised fixed remuneration and €802,165 comprised variable
remuneration. The number of staff employed during the period was 17.
2. Occupiers representing over 0.5% of rent
Tenant Occupiers Representing over 0.5% of total contracted rent
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
Office of Public Works
FBD Holdings Plc.
Bank of Ireland
Bank of New York
DEPFA Bank PLC
Riot Games Limited
Deloitte & Touche1
Park Rite
Capita
Renaissance Services of Europe Ltd.
JMC Van Trans Ltd
Realex
Morgan Stanley
Bearingpoint Ireland Limited
Gala networks Europe Limited
Quinn McDonnell Pattison Limited
Wella (U.K.) Limited
Prudential Int. Services Ltd,
Triode Newhill Hanover St. Ltd. T/A Eurospar
Guggenheim Partners Europe Ltd
Open Hydro Group
€’m
5.5
2.9
2.8
2.2
2.0
1.2
1.0
0.7
0.7
0.4
0.4
0.4
0.2
0.3
0.3
0.3
0.2
0.2
0.2
0.1
0.1
%
24.0
12.7
12.5
9.7
9.0
5.3
4.5
3.2
3.1
2.0
1.9
1.8
0.8
1.3
1.3
1.2
1.0
0.9
0.7
0.6
0.6
1 Deloitte & Touche is a tenant of Hardwicke House, which is an investment property of the Group. Deloitte & Touche were in situ when the Group acquired its
interest in the building and all lease arrangements are at arm’s length.
94
HIBERNIA REIT PLC
Directors and other information
Depository
Registrar
Principal Legal
Advisers
Corporate
Brokers
Credit Suisse International,
Dublin Branch
Kilmore House
Park Lane
Spencer Dock
Dublin 1
Ireland
Capita Registrars (Ireland)
Limited t/a Capita Asset Services
2 Grand Canal Square
Dublin 2
Ireland
A&L Goodbody
25/28 North Wall Quay
IFSC
Dublin 1
Ireland
Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
Dublin 4
Ireland
Credit Suisse Securities
(Europe) Limited
One Cabot Square
London E14 4QJ
United Kingdom
Directors
Secretary
Registered Office
Daniel Kitchen (Chairman)
Colm Barrington (Senior
Independent Director)
Stewart Harrington
William Nowlan
Terence O’Rourke
Castlewood Corporate
Services Limited
(Trading as Chartered
Corporate Services)
Taney Hall
Eglinton Terrace
Dundrum
Dublin 14
Ireland
Marine House
Clanwilliam Place
Dublin 2
Ireland
Company Number
531267
Independent
Auditor
Deloitte & Touche
Chartered Accountants and
Statutory Audit Firm
Hardwicke House
Hatch Street
Dublin 2
Ireland
Investment Manager WK Nowlan REIT Management
Limited
Marine House
Clanwilliam Place
Dublin 2
Ireland
Independent Valuer CBRE Dublin
Principal Bankers
3rd Floor, Connaught House
1 Burlington Road
Dublin 4
Ireland
Bank of Ireland
50-55 Baggot Street Lower
Dublin 2
Ireland
Glossary
Annual Report 2015
95
AIF is an Alternative Investment Fund.
AIFM is an Alternative Investment Fund Manager.
EPRA NNNAV is the EPRA NAV adjusted to reflect the fair
value of debt and derivatives and to include deferred taxation
on revaluations.
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.
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.
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.
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.
Developer’s profit is the profit on cost estimated by valuers
which is typically a percentage of developer’s costs, usually
20%.
EPS or Earnings per share is the profit after taxation divided
by the weighted average number of shares in issue during the
period.
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.
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.
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).
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.
EPRA NAV per share is the EPRA NAV divided by the
diluted number of shares at the period end.
IPO is the Initial Public Offering, i.e. the first equity raising
of the Company.
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 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.
IPD is the Investment Property Databank Limited which
is part of the MSCI Group and produces an independent
benchmark of property returns and which provides the Group
with the performance information required in calculating the
performance based management fee.
Net development value is the external valuers’ view on the
end value of a development property when the building is fully
completed and let.
96
HIBERNIA REIT PLC
Glossary
continued
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 yield (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.
NIA is the Net Internal Area.
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.
Cover image:
Dublin’s Samuel Beckett Bridge
by night
Annual Report 2015
97
Shareholders’ information
Hibernia REIT plc website:
http://www.hiberniareit.com
Investor contacts
Hibernia REIT plc
Marine House
Clanwilliam Place
Dublin 2
For investor queries please send an email to: info@hiberniareit.com
For media enquiries please send an email to: media@hiberniareit.com
Hardwicke House
Hatch Street
Dublin 2
This Annual Report 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 Company 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 Annual Report. The Company 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.
i
i
H
b
e
r
n
a
r
e
i
T
p
l
c
Annual Report 2015
Annual Report 2015
a
n
n
u
a
l
r
e
p
o
r
T
2
0
1
5
Marine House
Clanwilliam Place
Dublin 2
Email:
info@hiberniareit.com