1
Annual Report 2016
STRATEGIC REPORT H I B E R N I A R E I T P L C
A N N U A L R E P O R T 2 0 1 6
Governance
50
57
57
59
62
67
71
75
Directors’ report
Corporate governance report
Chairman’s corporate governance statement
Introduction
Audit Committee
Remuneration Committee
Nominations Committee
Directors’ responsibility statement
Contents
Strategic report
3
4
7
8
12
14
16
20
22
25
25
25
26
27
31
33
33
34
34
35
42
Our approach
Hibernia at a glance
Chairman’s statement
Our portfolio
Highlights for the financial year
Strategic priorities
Strategy in action: case studies
Chief Executive Officer’s statement
Market update
Business review
Acquisitions
Disposals
Portfolio overview
Developments and refurbishments
Asset management
Financial results and position
Financing and hedging
Internalisation of management team
Dividend
Sustainability
Risks and risk management
Financial statements
76
Independent auditors’ report to the members of
Hibernia REIT plc
Consolidated income statement
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
80
81
82
83
84
85
126
127
128
129 Notes to the company financial statements
137
145
146
148
Supplementary disclosures (unaudited)
Directors and other information
Glossary
Shareholders’ information
Daniel Kitchen
Chairman, Hibernia REIT plc, said:
Our clear strategy, and focus on offices in Dublin’s city centre, is
delivering excellent results: net property income grew 68% in the
year to €30.2m, profit before tax increased 47% to €136.3m and
EPRA NAV per share rose 17% to 130.8 cent.
Kevin Nowlan
CEO, Hibernia REIT plc, said:
We are delighted to report strong results: we have made good
progress in all aspects of our business in this, our second full
year since IPO. EPRA NAV per share grew 17% in the financial
year, with our portfolio of properties delivering an increase in
value of 19%.
Photograph of the
building works at
Cumberland House,
Dublin 2
STRATEGIC REPORT 2
Hibernia REIT plc (“Hibernia”)
is a Dublin-focused Real Estate
Investment Trust (“REIT”) which
owns and develops property.
Hibernia was established in late
2013 and now we have a portfolio
valued at €928m, all in Dublin, and
primarily in city centre offices.
Our strategy is to use our experience
and detailed knowledge of the Dublin
property market to create superior
shareholder returns through income
growth and through developing or
repositioning buildings at appropriate
times in the property cycle.
HIBERNIA REIT PLCANNUAL REPORT 2016 3
Our approach
Asset improvement
We unlock value through
refurbishment, redevelopment
and change of use, increasing the
rents tenants are prepared to pay.
Disciplined acquisitions
Capital recycling
Where assets no longer meet our
expected forward returns targets
or we can crystallise future
gains today we look to sell and
recycle the proceeds into new
acquisitions.
Where possible we buy off-
market (i.e. away from public
sales processes) and we are
experienced in buying property
through secured loans where,
since inception, we have often
seen greater value. We seek out
well-located buildings with
potential for improvement or
complex lease situations.
Active management
We seek to have close
relationships with tenants and
take a cycle-based approach to
lease maturities.
Financial management
We run with low leverage on a
through cycle basis and look for
flexible financing. We ensure
our interest rate exposure is
substantially hedged or fixed.
STRATEGIC REPORT 4
Hibernia at a glance
Key statistics at 31 March 2016
Total portfolio
Value:
€928m
Number of properties:
25
Number of tenants:
48
Contracted rent:
€39.0m
Passing rent:
€30.0m
Portfolio by sector
(by value)
Office and development portfolio
(by net lettable area)
Office traditional core
26%
In-place office portfolio
764k sq.ft.
Office South
Docks
19%
Total
€928m
CBD office
development /
refurb
17%
Total
1.5m sq.ft.
Longer term
development
pipeline
371k sq.ft.
Office IFSC
25%
Residential
12%
Industrial
1%
Committed
developments
340k sq.ft.
(Pre-let 105k sq.ft.)
HIBERNIA REIT PLCANNUAL REPORT 2016 5
Office portfolio
Value including
developments:
€802m
In-place office portfolio
– i.e. portfolio excluding assets under development or refurbishment – has the following characteristics:
Value at 31 March 2016:
€616m
Passing rent of
€24.1m; contracted
rent of €27.3m
Average rent of
€33psf
vs ERV of €44psf
Average 2.0 yrs to
earlier of rent review or
lease expiry
45% of leases with
break or expiry beyond
2019
Vacancy rate:
6%
Industry split of in-place tenants
Top 10 tenants of in-place portfolio
(by contracted rent)
Banking & capital markets
40%
Insurance &
reinsurance
5%
OPW
20%
BNY Mellon
11%
Total
€27.3m
TMT
10%
Total
€27.3m
Professional
services
12%
Government
20%
Other
13%
Remainder
29%
Capita
3%
Eversheds
2%
Deloitte
4%
Bank of Ireland
10%
DEPFA Bank
8%
HubSpot
5%
Riot Games
4%
AWAS
4%
STRATEGIC REPORT 7
Chairman’s statement
Our clear strategy, and focus on offices in
Dublin’s city centre, is delivering excellent
results: net property income grew 68%
in the year to €30.2m, profit before tax
increased 47% to €136.3m and EPRA NAV
per share rose 17% to 130.8 cent.
Given the strong growth in earnings the Board is recom-
mending an increase in the final dividend of 60% to 0.8 cent
per share, to be paid on 2 August 2016. This represents an
increase in the total dividend for the year of 88% to 1.5 cent
per share.
During the year we purchased nine properties, all of which
were consistent with our strategy of acquiring assets with
opportunities for rental growth through asset management
or building improvement: seven of the properties acquired
related to our portfolio of central Dublin offices.
We are making good progress with our development pro-
gramme: we completed one scheme in the year and two
shortly after year end, with all three projects delivering
profits on cost of more than 30%. The four active office de-
velopment schemes we have are all scheduled to complete
in the next 24 months and will deliver over 350,000 sq. ft.
of new office space at a time when we believe there will
be a significant shortage in available space. We have also
expanded our longer term pipeline of developments to six
projects with the potential to deliver over 600,000 sq. ft. of
office space, giving us plenty of future optionality.
In November 2015 we completed an important step in
the Company’s progress with the internalisation of the
management team through the acquisition of WK Nowlan
REIT Management Ltd, the Investment Manager, and its
parent company. Upon completion, Kevin Nowlan (CEO)
and Thomas Edwards-Moss (CFO) joined the Board, which
continues to have a majority of independent directors, as
recommended by the Corporate Governance Code.
All of the achievements we report this year are a reflection of
the hard work and dedication of our employees and I would
like to thank them for their expertise and commitment
which is growing our business. Looking ahead, I believe
we have the right strategy to continue to grow and deliver
superior shareholder returns.
Daniel Kitchen
Chairman
2 June 2016
STRATEGIC REPORT 8
Our portfolio
Dublin city centre
The Company’s investment
focus is on attractively-
located, institutional
quality, income-producing
commercial properties
primarily in the greater Dublin
area.
Key
Office properties
Rail line and station
Active development schemes
LUAS line and station
Residential properties
LUAS Cross City line and proposed station
Industrial properties
22141321151617192018756349111210821AvivaStadiumTrinity CollegeSt Patrick’sCathedralChrist ChurchCathedralCity HallDublinCastleIFSCConnolly StationDublin PortRiver LiffeyGrand CanalSt Stephen’sGreenIveaghGardensMerrionSquareM50HIBERNIA REIT PLCANNUAL REPORT 2016 9
22141321151617192018756349111210821AvivaStadiumTrinity CollegeSt Patrick’sCathedralChrist ChurchCathedralCity HallDublinCastleIFSCConnolly StationDublin PortRiver LiffeyGrand CanalSt Stephen’sGreenIveaghGardensMerrionSquareM50STRATEGIC REPORT 10
Our portfolio
Greater Dublin Area
Dun LaoghaireTallaghtSantryBlackrockRed CowInterchangeParkwestBusiness ParkPhoenix ParkCrumlin HeustonSouthQuarterRathminesIFSCCityCentreBallsbridgeDublin BayDonnybrookDundrumClontarfFairviewDrumcondraM50M50M50M50252423HIBERNIA REIT PLCANNUAL REPORT 2016 2.
Guild House
(2DC)
Guild Street, IFSC
Dublin 1
5.
1 Sir John
Rogerson’s
Quay (1 SJRQ)
Dublin 2
8.
The Hanover
Building
Windmill Lane
Dublin 2
11.
Central Quay
Sir John Rogerson’s
Quay Dublin 2
14.
Marine House
Clanwilliam Place
Dublin 2
17.
Montague House
Adelaide Road
Dublin 2
20.
35-37 Camden
Street
Dublin 2
23.
Dundrum View
Dundrum
Dublin 14
11
3.
New Century
House
Mayor Street, IFSC
Dublin 1
6.
The Observatory
Building
7-11 Sir John
Rogerson’s Quay
Dublin 2
9.
11 Lime Street
Dublin 2
12.
South Dock
House
Hanover Quay
Dublin 2
15.
1 Earlsfort
Terrace
Dublin 2
18.
Harcourt Square
Harcourt Street
Dublin 2
21.
The Chancery
Building
Chancery Lane
Dublin 8
24.
Block 3,
Wyckham Point
Dundrum
Dublin 16
1.
One Dockland
Central (1DC)
Guild Street, IFSC
Dublin 1
4.
The Forum
Commons Street,
IFSC
Dublin 1
7.
1 Windmill Lane
(1 WML)
Windmill Lane
Dublin 2
10.
8-12 Hanover
Street East
Dublin 2
13.
Cumberland
House
Dublin 2
16.
Hardwicke
House
Hatch Street
Dublin 2
19.
39 Harcourt
Street
Dublin 2
22.
Cannon Place
Sandymount
Dublin 4
25.
Gateway Site
Newlands Cross,
Naas Road
Dublin 22
Dun LaoghaireTallaghtSantryBlackrockRed CowInterchangeParkwestBusiness ParkPhoenix ParkCrumlin HeustonSouthQuarterRathminesIFSCCityCentreBallsbridgeDublin BayDonnybrookDundrumClontarfFairviewDrumcondraM50M50M50M50252423STRATEGIC REPORT 12
Highlights for the
financial year
Excellent financial
performance
Disciplined
investment activity
enhancing portfolio
Development
programme well-
timed and making
good progress
• EPRA NAV per share of 130.8 cent, up 17% since 31 March 2015
• EPRA profit of €10.0m (March 2015: €3.9m), helped by €4.9m surrender
premium (March 2015: €2.4m)
• Profit before tax up 47% to €136.3m (March 2015: €92.9m) including
revaluation surplus and gains on disposals of non-core assets
• Portfolio value of €927.7m (March 2015: €641.3m)
• Proposed final dividend of 0.8 cent per share bringing total for financial year
to 1.5 cent (2015: 0.8 cent)
• €179m invested in nine acquisitions: seven off-market and seven related to
central Dublin offices
• Office acquisitions all either with asset management opportunities (e.g.
Central Quay, Hardwicke & Montague) or future development potential (e.g.
Marine House, One Earlsfort Terrace)
• 50:50 joint arrangement formed with affiliate of Starwood Capital on
Windmill Lane development
• Block 3, Wyckham Point completed ahead of schedule delivering profit on
cost of more than 30%
• Refurbishments of One Dockland Central and SOBO Works completed
since financial year end, both delivering profits on cost in excess of 30% at
completion
• Currently four committed development schemes which are progressing well
and will deliver 354,000 sq. ft. of high quality office space in 2016, 2017 and
2018 (c. 27% pre-let)
• Longer term pipeline expanded to six schemes totalling 610,0001 sq. ft. of
office space post completion (Sept 2015: two schemes totalling 530,000 sq. ft.)
• Seeking vacant possession of Harcourt Square to commence redevelopment
Active year of
lettings adding
significantly to
contracted rent roll
with more to come
• Contracted rent roll now €39.0m, up 72% on 31 March 20152
• New lettings and rent reviews added €11.8m to contracted rent: includes
major pre-lets to Twitter and HubSpot totalling 129,000 sq. ft. (Twitter pre-
let extended by 16,500 sq. ft. for €0.7m extra rent)
• “In-place”3 Dublin Central Business District (“CBD”) office average rents of
€33psf (vs ERV at March 2016 of €44psf) and average period to earlier of rent
• Income producing “in-place” CBD office3 portfolio vacancy rate of 6% (Sept
review or expiry of 2 years
2015: 1%)
Substantial, flexible
funding in place
• Five year €400m revolving credit facility (“RCF”) agreed in November 2015,
• Three year €44.2m facility (Hibernia share: €22.1m) to fund Windmill Lane
replacing €100m RCF
development entered into
€139.0m)
development spend
• Net debt at 31 March 2016 of €52.9m, LTV of 5.7% (March 2015: net cash of
• Cash and undrawn facilities of €369m; €265m net of committed
Management
structure simplified
and team
strengthened
• Internalisation of management team completed in November 2015
• Appointment of Director of Development, Mark Pollard, who joined in May 2016
HIBERNIA REIT PLCANNUAL REPORT 2016 Excellent financial
performance
Disciplined
investment activity
enhancing portfolio
Development
programme well-
timed and making
good progress
• EPRA NAV per share of 130.8 cent, up 17% since 31 March 2015
• EPRA profit of €10.0m (March 2015: €3.9m), helped by €4.9m surrender
premium (March 2015: €2.4m)
• Profit before tax up 47% to €136.3m (March 2015: €92.9m) including
revaluation surplus and gains on disposals of non-core assets
• Portfolio value of €927.7m (March 2015: €641.3m)
• Proposed final dividend of 0.8 cent per share bringing total for financial year
to 1.5 cent (2015: 0.8 cent)
• €179m invested in nine acquisitions: seven off-market and seven related to
central Dublin offices
• Office acquisitions all either with asset management opportunities (e.g.
Central Quay, Hardwicke & Montague) or future development potential (e.g.
Marine House, One Earlsfort Terrace)
• 50:50 joint arrangement formed with affiliate of Starwood Capital on
Windmill Lane development
• Block 3, Wyckham Point completed ahead of schedule delivering profit on
cost of more than 30%
• Refurbishments of One Dockland Central and SOBO Works completed
since financial year end, both delivering profits on cost in excess of 30% at
• Currently four committed development schemes which are progressing well
and will deliver 354,000 sq. ft. of high quality office space in 2016, 2017 and
completion
2018 (c. 27% pre-let)
• Longer term pipeline expanded to six schemes totalling 610,0001 sq. ft. of
office space post completion (Sept 2015: two schemes totalling 530,000 sq. ft.)
• Seeking vacant possession of Harcourt Square to commence redevelopment
Active year of
lettings adding
significantly to
contracted rent roll
with more to come
Substantial, flexible
funding in place
Management
structure simplified
and team
strengthened
13
We are making good
progress with our
development programme:
we completed one scheme
in the year and two shortly
after year end, with all three
projects delivering profits on
cost of more than 30%.
Daniel Kitchen
Chairman
• Contracted rent roll now €39.0m, up 72% on 31 March 20152
• New lettings and rent reviews added €11.8m to contracted rent: includes
major pre-lets to Twitter and HubSpot totalling 129,000 sq. ft. (Twitter pre-
let extended by 16,500 sq. ft. for €0.7m extra rent)
• “In-place”3 Dublin Central Business District (“CBD”) office average rents of
€33psf (vs ERV at March 2016 of €44psf) and average period to earlier of rent
review or expiry of 2 years
• Income producing “in-place” CBD office3 portfolio vacancy rate of 6% (Sept
2015: 1%)
• Five year €400m revolving credit facility (“RCF”) agreed in November 2015,
replacing €100m RCF
• Three year €44.2m facility (Hibernia share: €22.1m) to fund Windmill Lane
development entered into
• Net debt at 31 March 2016 of €52.9m, LTV of 5.7% (March 2015: net cash of
€139.0m)
• Cash and undrawn facilities of €369m; €265m net of committed
development spend
• Internalisation of management team completed in November 2015
• Appointment of Director of Development, Mark Pollard, who joined in May 2016
1. Including new offices at Gateway of c. 115,000 sq.ft.
2. Includes pre-let refurbishments and net residential income.
3. Excludes refurbishment and development projects.
STRATEGIC REPORT 14
Strategic priorities
We have a clear
strategy and have a
number of strategic
priorities based on
this:
Progress 2015/16:
1
Delivery of
development
projects
2
3
4
5
Increase rental
income of portfolio
Deploy further
Recycle capital by
Enhance balance
capital into selective
selling assets where
sheet efficiency
acquisitions
• Contracted rent increased in the
financial year to €39.0m from
€22.7m at March 2015
• Passing rent increased in the
financial year to €30.0m from
€19.3m at March 2015
• We completed 213 residential
units at Block 3, Wyckham Point
in Dundrum in the financial year,
delivering a profit on cost of over
30%
• Shortly after financial year end
we completed the refurbishment
of One Dockland Central and
the conversion to offices of SOBO
Works, both delivering profits on
cost at completion in excess of 30%
• Invested €179m in 9 acquisitions
• No investment assets disposed
• Moved from net cash position of
in the financial year, primarily in
of in financial year although a
€139m at 31 March 2015 to net debt
Dublin city centre offices
50% interest in the Windmill
position of €53m at financial year
Lane site was sold to form a joint
end, equating to a loan to value
arrangement upon the exercise
ratio of 5.7%
forward returns
are not expected
to meet our targets
and reinvesting
elsewhere
of an option by an affiliate of
Starwood
• Sold the majority of the remaining
non-core assets acquired as part
of the Dorville loan portfolio
acquisition. In total 49 properties
sold in financial year, generating
proceeds of €16.7m and profits of
€2.1m
Priority 2016/17:
• Making progress with the four
committed schemes under way,
all of which have completion dates
over the next 24 months
• Drive further increases in rents
through new lettings and rent
reviews
• Further selective acquisitions
• Sale of assets where forward
• Continue to utilise our committed
where we expect our returns
returns not expected to meet our
debt facilities where investment
criteria to be met
targets
opportunities arise which meet our
criteria, moving our loan to value
ratio towards our through-cycle
target of 20-30%
HIBERNIA REIT PLCANNUAL REPORT 2016 15
We have a clear
strategy and have a
number of strategic
priorities based on
this:
Progress 2015/16:
1
Delivery of
development
projects
2
Increase rental
income of portfolio
• We completed 213 residential
• Contracted rent increased in the
units at Block 3, Wyckham Point
financial year to €39.0m from
in Dundrum in the financial year,
€22.7m at March 2015
delivering a profit on cost of over
• Passing rent increased in the
30%
financial year to €30.0m from
• Shortly after financial year end
€19.3m at March 2015
we completed the refurbishment
of One Dockland Central and
the conversion to offices of SOBO
Works, both delivering profits on
cost at completion in excess of 30%
3
4
Deploy further
capital into selective
acquisitions
• Invested €179m in 9 acquisitions
in the financial year, primarily in
Dublin city centre offices
Recycle capital by
selling assets where
forward returns
are not expected
to meet our targets
and reinvesting
elsewhere
• No investment assets disposed
of in financial year although a
50% interest in the Windmill
Lane site was sold to form a joint
arrangement upon the exercise
of an option by an affiliate of
Starwood
• Sold the majority of the remaining
non-core assets acquired as part
of the Dorville loan portfolio
acquisition. In total 49 properties
sold in financial year, generating
proceeds of €16.7m and profits of
€2.1m
Priority 2016/17:
• Making progress with the four
• Drive further increases in rents
committed schemes under way,
through new lettings and rent
all of which have completion dates
reviews
over the next 24 months
• Further selective acquisitions
where we expect our returns
criteria to be met
• Sale of assets where forward
returns not expected to meet our
targets
5
Enhance balance
sheet efficiency
• Moved from net cash position of
€139m at 31 March 2015 to net debt
position of €53m at financial year
end, equating to a loan to value
ratio of 5.7%
• Continue to utilise our committed
debt facilities where investment
opportunities arise which meet our
criteria, moving our loan to value
ratio towards our through-cycle
target of 20-30%
STRATEGIC REPORT 16
Strategy in action
Case studies
Photographs of
Block 3, Wyckham
Point
Block 3, Wyckham Point
D16
We acquired the asset in partially complete form in February
2014 as part of the Dorville loan portfolio purchase. We
completed the fit out of all 213 apartments in July 2015, well
ahead of schedule and within budget. All 213 units were let
by the end of September 2015, producing a net annual rent
of c. €3.7m (average 2 bed apartment rents of €1,700 per
month). The project delivered a profit on cost in excess of
30% and an unleveraged IRR in excess of 25%.
HIBERNIA REIT PLCANNUAL REPORT 2016
17
1 Sir John Rogerson’s Quay
D2 (“1 SJRQ”)
The 0.75 acre site, which forms part of Hibernia’s quadrant
of assets in the South Docks and overlooks the River Liffey,
was acquired in August 2014 for €17.8m with planning per-
mission for 102,000 sq. ft. of offices and 5,000 sq. ft. of retail.
Since acquisition, we have worked to improve the layout and
specification of the planned development and have received
planning approval for our revised scheme, which will total
110,000 sq. ft. of offices and 6,000 sq. ft. of retail space. The
site has now been cleared and construction has commenced.
We expect the development to be completed in mid-2018 at
a cost of €55m (excluding the purchase of the site).
CGIs of 1 SJRQ
STRATEGIC REPORT
18
Strategy in action
Case studies
(continued)
HIBERNIA REIT PLCANNUAL REPORT 2016 19
CGIs of 1 WML
Windmill Lane
D2 (“1 WML”)
The one acre site in the South Docks was acquired in June
2014 from an affiliate of Starwood Capital for €7.5m. The site
has planning permission for a 122,000 sq. ft. office develop-
ment, plus c. 6,000 sq. ft. of retail and 15 residential units.
Simultaneously we acquired the Hanover Building, an office
building which adjoins the site, and shortly afterwards
acquired the neighbouring Observatory office building and
the site at 1 Sir John Rogerson’s Quay (all from different
vendors), giving Hibernia a quadrant of adjoining assets
in the South Docks.
As part of the purchase, Starwood was granted an option
to buy back in as a joint arrangement partner on Windmill
Lane, which it exercised in 2015, leading to the formation of
the Windmill Lane Partnership, owned 50:50 by Hibernia
and Starwood and to which the Hibernia Group is acting
as asset manager and development manager. As the de-
sign process has evolved, Hibernia has been successful in
making a number of improvements to the specification
of the building which have allowed for a more efficient
design so that the building has the potential to be let on a
multi-occupancy per floor basis. The site has been cleared,
construction work is progressing well and the project is on
schedule for completion in late 2017 with capital expenditure
expected to be €52m (Hibernia’s share: €26m). Together
with the development of the neighbouring site at 1 Sir John
Rogerson’s Quay and improvement works in the Hanover and
Observatory buildings, we believe this project will deliver
a significant regeneration of the area.
STRATEGIC REPORT 20
Chief Executive Officer’s
statement
We are delighted to report strong
results: we have made good progress
in all aspects of our business in this, our
second full year since IPO. EPRA NAV
per share grew 17% in the financial
year, with our portfolio of properties
delivering an increase in value of 19%.
Disciplined acquisitions adding to portfolio and
development pipeline
We invested €179m (including costs) in the financial
year in nine acquisitions (seven excluding acquiring full
ownership of Hardwicke House and Montague House),
fully utilising the remaining cash raised in the second
equity issue in November 2014. Seven of these acquisitions
were related to our portfolio of central Dublin offices
and all were consistent with our strategy of acquiring
buildings with opportunities to exploit, whether through
redevelopment, active asset management or rental
reversion.
Development programme timed to take advantage
of cycle
We completed the fit out of Block 3, Wyckham Point ahead
of schedule, delivering a profit on cost of more than 30%
in the 18 months from its purchase to completion. Since
financial year end we have completed the refurbishment
of One Dockland Central (formerly Commerzbank House)
and the conversion of SOBO Works to office space, both of
which have delivered profits on cost upon completion in
excess of 30% in less than two years of ownership. We have
expanded our committed programme of central Dublin office
developments and refurbishments to four projects totalling
354,000 sq. ft. of office space, all of which are making good
progress towards their completion dates in 2016, 2017 and
2018.
We have also expanded our longer term development
pipeline to six projects and 610,000 sq. ft. of space with the
acquisitions of Marine House and One Earlsfort Terrace and
the addition of the Hanover Building and a possible new
block at the front of Cumberland House.
HIBERNIA REIT PLCANNUAL REPORT 2016 21
(€265m after committed development spend), almost all of
which is funded by a new €400m revolving credit facility
which was agreed in the financial year.
Positive outlook
The strength of the domestic economy together with low
vacancy rates and limited new supply in Dublin means
prospects for further rental growth are good in the absence
of macroeconomic shocks. We expect the volume of trans-
actions in Dublin’s investment market to remain above
long term averages in the near term. Our portfolio is rich in
opportunity and we have substantial undrawn facilities in
place to move quickly on further acquisition opportunities,
underpinning our confidence in the future.
Kevin Nowlan
Chief Executive Officer
2 June 2016
Leasing activity
New lettings and rent reviews added a total of €11.8m per an-
num to contracted rents. The largest lettings were the 101,500
sq. ft. pre-let in Cumberland House to Twitter (increased from
85,000 sq. ft. when originally agreed in September 2015) and
the 27,500 sq. ft. pre-let in One Dockland Central to HubSpot,
which together added a total €6.6m per annum to contracted
rents. In addition, the letting of the 213 apartments in Block
3, Wyckham Point upon their completion added €3.7m of
net rent. We agreed a lease surrender with Indeed Ireland
Operations Ltd at Central Quay for their 22,000 sq. ft. space for
a payment to the tenant of €0.3m and have let 11,000 sq. ft. of
this space to Daqri International Limited at a rent of €52.50
per sq. ft., significantly ahead of the average rent Indeed was
paying of €30 per sq. ft.. We expect to make further progress
with leasing in the coming months.
Experienced management team
In November 2015 we completed the internalisation of the
management team through the acquisition of WK Nowlan
REIT Management Ltd, the Investment Manager, and its
parent company and at financial year end the Company had
a team of 17. The internalisation was an important step in the
Company’s progress and secures our talented and experienced
team for the future. Upon completion Thomas Edwards-Moss
and I joined the Board of Directors.
In early May 2016 Mark Pollard joined the team as Director of
Development and will oversee the management and delivery
of our substantial pipeline of developments.
Flexible balance sheet with substantial capacity
With net debt of €52.9m and loan to value of 5.7% our leverage
is low and we have available undrawn debt capacity of €369m
STRATEGIC REPORT
22
Market update
General economy
Irish property investment market
Ireland recorded GDP growth of 7.8% in 2015, five times the
Euro area aggregate of 1.6% (source: Eurostat). Irish GDP
growth is expected to remain strong in 2016 and 2017, with
Goodbody forecasting 4.6% and 3.7%, respectively, and Davy
forecasting 6.0% and 4.0%, respectively. Irish “core” domestic
demand (which excludes aircraft leasing and R&D) provides
a good indicator of underlying economic activity and is
expected to grow by 5.0% in 2016 and 4.4% in 2017 following
a 4.3% increase in 2015 (source: Goodbody).
Unemployment continues to fall (down to 8.4% in April 2016
nationally) and was 7.8% in Dublin at December 2015 (source:
CSO). Increasing employment, coupled with tax reductions
announced in the most recent budget, lower oil prices and
the first period of sustained wage growth since the recession
began are having a positive impact on consumer spending,
which in 2015 experienced its best year of growth since 2007.
Growth in numbers in employment has been particularly
strong in Dublin, where the workforce increased 24,000
in 2015, bringing total employment in Dublin to 608,000
(Source: CSO).
Irish state finances are also improving; the debt to GDP
ratio fell to 94.4% at the end of 2015 and is expected to fall
to a mid-80% level by 2017 (source: Davy). With a new Irish
Government now formed, albeit a minority one, the biggest
near term risks facing the Irish economy are international
and include the UK referendum on its EU membership. The
UK accounts for 18% of Irish exports and 30% of imports
(source: Davy) so a vote to leave could impact the Irish
economy negatively. While a “Brexit” scenario could be
incrementally positive to the Dublin office sector in the near
term, the longer term implications are uncertain.
The MSCI Irish Property Index delivered a total return of
23.5% in the financial year to 31 March 2016. As expected,
returns moderated slightly compared to the financial year
to 31 December 2015, when a 25.0% return was delivered
making it the best performer in the MSCI Global Index,
which delivered 10.7% in 2015.
Prime Dublin office yields have remained stable at 4.65%
for three consecutive quarters according to CBRE, albeit a
handful of deals recorded closer to 4.5%. Capital values for
prime Dublin offices are up 24% year on year to over €1,200
per sq. ft., primarily driven by rental growth.
Investment volumes have reduced somewhat since the
mass deleveraging in 2014 and 2015, when €4.6bn and
€3.5bn of assets were traded (excluding debt) (source: CBRE).
Investment volumes in Q1 2016 were €735m (source: CBRE),
still considerably above long term run-rates, and we expect
a gradual reversion towards more normalised levels. As the
investment market matures, the investor profile is continu-
ing to evolve towards those with a lower risk appetite, with
71% of sales in 2015 vs 36% in 2013 to longer-term investors
(including REITs) (source: CBRE).
Office occupational market
The Dublin office market, particularly the prime office
sector in the city centre, continues to be characterised by
a shortage of available stock in the right locations to satisfy
high demand from tenants, both domestic and international.
Despite the lack of available stock, take-up in 2015 totalled
2.7m sq. ft., above the 20 year average of 1.8m sq. ft. per
annum (source: CBRE). 2016 has also started strongly, with
take-up in Q1 totalling 0.6m sq. ft., 37% higher than the
same period last financial year (source: CBRE). Occupation
has continued to be focused in central Dublin, with 69% of
take-up in the CBD in 2015 (source: CBRE).
HIBERNIA REIT PLCANNUAL REPORT 2016
23
As a result of strong tenant demand
and low vacancy rates, prime central
Dublin office rents at the end of Q1
2016 were €57.50 per sq. ft. up from
€47.50 per sq. ft. a year ago.
(source: CBRE)
pre-let is not in place) which has resulted in the owners of
key development sites in the CBD awaiting pre-lets before
commencing development.
Residential sector
The Dublin residential market continues to show strong
demand and insufficient supply. Housing completions in 2015
were 12,666 nationwide and just 2,900 in Dublin (source: Dept
of Environment) and despite an expected rise in delivery
levels in 2016 and 2017, the number of units are expected
to be well below the estimated c.30,000 units required per
annum nationwide (source: Goodbody).
The Central Bank measures introduced in February 2015 to
control mortgage ratios reduced the likelihood of another
credit-fuelled price boom and price growth in the financial
year to 31 March 2016 was a muted 3.9% in Dublin (source:
CSO). Despite this, the Central Bank’s quarterly survey of
housing market participants revealed an expectation of
price growth of 4% in Dublin in the 12 months to September
2016 (source: Goodbody). A side effect of the Central Bank
measures has been that potential purchasers have remained
in the rental market for longer, particularly in Dublin.
According to Daft.ie, the average rent in Dublin was up 8-9%
in the financial year to 31 March 2016 against a backdrop
of virtually zero inflation. The Dublin rental market does
not have the adequate infrastructure to house these people
appropriately and as a result, opportunities exist to deliver
stock that matches these demands.
The overall Dublin office vacancy rate is now 7.7% and 6.0%
in the CBD. However, there are marked differences by area
and quality of stock. In the IFSC, where 25% of Hibernia’s
portfolio is located, the Grade A vacancy rate is 2.4% while
in D2/D4, where 59% of Hibernia’s portfolio is located (in-
cluding three key committed developments sites) the Grade
A vacancy rate is 1.5% (source: CBRE).
As a result of strong tenant demand and low vacancy rates,
prime central Dublin office rents at the end of Q1 2016 were
€57.50 per sq. ft. up from €47.50 per sq. ft. a year ago (source:
CBRE). Most agents are expecting further rental growth in
2016.
While the TMT sector has undoubtedly played an important
part in Dublin’s economic recovery, tenant demand has come
from a wide range of sectors: TMT has accounted for 32% of
occupier take-up in the 5 years to December 2015 (source:
CBRE). Dublin continues to be an occupational market dom-
inated by lettings of less than 50,000 sq. ft.: 72% of take-up
in the past 5 years has been in this category (source: CBRE).
Almost two thirds of the lettings agreed in Q1 2016 were to
Irish companies (source: CBRE) highlighting the increasing
importance of domestic demand in the Irish economy and
the broadening of the economic recovery.
Office development pipeline
A handful of office refurbishment projects were delivered
in Dublin in late 2015. 2016 will see the first new build office
building delivered to the Dublin market in over 5 years. In
total, 1.3m sq. ft. of new stock is expected to be delivered in
2016, 46% of which is already pre-let and against a backdrop
of average 10 year take-up of 1.9 m sq. ft. and take-up of 2.4m
and 2.7m sq. ft. in 2014 and 2015, respectively (source: CBRE).
It takes c. 2.5 years to deliver an office building so one
can forecast the supply pipeline to 2019 with reasonable
certainty: we expect 5.3m sq. ft. will be delivered between
now and the end of 2018 and that 8.3m sq. ft. will be de-
livered between now and the end of 2019. Availability of
development finance remains scarce (particularly if a
STRATEGIC REPORT
24
In March 2016 we acquired One
Earlsfort Terrace in Dublin 2, for €19.2m.
The 21,700 sq. ft. office building is let to
international law firm Eversheds.
Photograph of One
Earlsfort Terrace
HIBERNIA REIT PLCANNUAL REPORT 2016 25
Business review
Acquisitions
We purchased nine properties in the financial year for a
total investment of €179m (including acquisition costs).
In June 2015 we acquired Dundrum View, an 80 unit apart-
ment complex in Dundrum, South Dublin for €28.1m. The
property is situated close to Dundrum Town Centre, Ireland’s
leading shopping centre, and to our property at Block 3,
Wyckham Point and together the two properties give us
almost 300 residential units in the attractive Dundrum area.
In January 2016 we took direct ownership of Hardwicke
House and Montague House, D2, two fully occupied office
buildings totalling 88,500 sq. ft., for a net payment of €41.8m,
bringing the total consideration paid to €60m (€64m includ-
ing costs, or €725 per sq. ft.). Hibernia’s initial interest in
the buildings was via secured loans purchased in May 2014
for €18.2m with a put / call option arrangement allowing
Hibernia to acquire full ownership up to mid-2016.
In February 2016 we exchanged contracts to acquire Central
Quay, a 57,700 sq. ft. office building in the South Docks,
for €51.3m (€890 per sq. ft.). At the time of acquisition the
building, which was completed in 2007, was 88% let and
the net initial yield was 4.5%, with opportunities to move
this above 5.5% in the near term through letting the vacant
space and upcoming lease events. Since the acquisition we
have completed a lease surrender and signed a new lease
which will assist us in increasing the yield.
In March 2016 we exchanged contracts to acquire Marine
House, D2 for €26.5m (€640 per sq. ft.). The 41,000 sq. ft. office
building is fully occupied off low average rents of €23 per
sq. ft. and offers near term opportunities to enhance the
net initial yield of 4.3% through light refurbishment and
redevelopment potential in the longer term.
Also in March 2016 we acquired One Earlsfort Terrace, D2, for
€19.2m (€880 per sq. ft.). The 21,700 sq. ft. office building is let
to international law firm Eversheds. Concurrently we agreed
with the tenant that the rent will rise from €0.6m to €1.0m
per annum (€45psf) at the next rent review in September
2016, taking the running yield to 5.3%. In the longer term
there are opportunities to enhance the value of the building
through refurbishment, extension or redevelopment.
During the financial year we also completed the acquisitions
of three small buildings for a total consideration of €4.8m.
These assets, 11 Lime Street, 35-37 Lower Camden Street and
39 Harcourt Street, were acquired to enhance the value and
/ or optionality of the assets in our portfolio.
Disposals
Excluding the continued sell-off of the Dorville non-core
assets (see further details in the asset management section
below), the only disposal in the financial year was the sale
of a 50% interest in the Windmill Lane site for €4.9m. In
August 2015 Starwood exercised its option to buy back into
the Windmill Lane development as a 50:50 joint arrangement
partner at the price the asset was sold to Hibernia for (€7.5m)
and an annual return of 7%, plus costs incurred to date,
leading to the creation of the Windmill Lane Partnership
(“WLP”). The Hibernia Group is acting as asset manager
and development manager.
STRATEGIC REPORT 26
Business review
(continued)
Portfolio overview
At 31 March 2016 the property portfolio consisted of 25 investment properties valued at €928m, categorised as follows:
Value as at Mar 16 (all
assets)
% of portfolio
% uplift since
Mar 15 excl. new
acquisitions(1)
% uplift since
Mar 15 incl. new
acquisitions(1)
% uplift since
Equivalent yield
Passing rent
acquisition (all
on value (%)
(€m)
assets) incl. costs(1)
1. Dublin CBD offices
Traditional core
IFSC
South Docks
Total Dublin CBD offices
2. Dublin CBD office development/refurbishment
3. Dublin residential
4. Industrial
€238m
€237m
€173m(4)
€648m
€155m
€113m
€12m
25.7%
25.5%
18.6%
69.8%
16.7%
12.2%
1.3%
12.8%
12.9%
11.9%
12.6%
57.9%
9.2%
19.3%
9.2%
12.9%
8.3%
10.3%
57.9%
6.2%
19.3%
16.6%
29.7%
28.8%
24.4%
69.0%
20.4%
19.3%
5.2%(2)
€10.4m(5)
5.2%(2)
€24.1m(5)
5.2%
5.4%
–
4.6%
7.4%
€8.0m
€5.7m
–
€5.4m
€0.5m
Total investment properties
€928m
100.0%
19.0%
15.7%
29.5%
5.2%(2)(3)
€30.0m
1. Includes capex in acquisition costs and assumes 100% of South Dock House held for rent
2. Excludes Harcourt Square as this is valued by CBRE on a residual/ development appraisal basis
3. Excludes all Dublin CBD Office Development/Refurbishment
4. South Docks excludes the value of space occupied by Hibernia
5. Incl. c.€70k of residential in Chancery
The “in-place” CBD office element of our portfolio had
the following statistics at 31 March 2016:
• Average contracted rent: €33psf (vs ERV of €44psf)
• Weighted average period to earlier of rent review or lease
expiry: 2.0 years
• WAULT to earlier of expiry or break: 4.3 years
• WAULT to expiry: 7.3 years
• Occupancy level: 94%
• 45% of leases with break / expiry beyond 2019
The in-place office portfolio occupancy level decreased to
94% from 99% at 30 September 2015, principally due to the
acquisition of Central Quay and the asset management
initiatives ongoing there as well as vacancy in the Chancery
Building following a tenant exercising a break option (see
further details below).
Photograph of
1 WML and 1 SJRQ
marketing suite
in Observatory
Building
HIBERNIA REIT PLCANNUAL REPORT 2016
Value as at Mar 16 (all
% of portfolio
% uplift since
% uplift since
Mar 15 excl. new
Mar 15 incl. new
acquisitions(1)
acquisitions(1)
% uplift since
acquisition (all
assets) incl. costs(1)
Equivalent yield
on value (%)
Passing rent
(€m)
Portfolio overview
At 31 March 2016 the property portfolio consisted of 25 investment properties valued at €928m, categorised as follows:
1. Dublin CBD offices
Traditional core
IFSC
South Docks
Total Dublin CBD offices
3. Dublin residential
4. Industrial
2. Dublin CBD office development/refurbishment
assets)
€238m
€237m
€173m(4)
€648m
€155m
€113m
€12m
25.7%
25.5%
18.6%
69.8%
16.7%
12.2%
1.3%
12.8%
12.9%
11.9%
12.6%
57.9%
9.2%
19.3%
9.2%
12.9%
8.3%
10.3%
57.9%
6.2%
19.3%
1. Includes capex in acquisition costs and assumes 100% of South Dock House held for rent
2. Excludes Harcourt Square as this is valued by CBRE on a residual/ development appraisal basis
3. Excludes all Dublin CBD Office Development/Refurbishment
4. South Docks excludes the value of space occupied by Hibernia
5. Incl. c.€70k of residential in Chancery
Total investment properties
€928m
100.0%
19.0%
15.7%
29.5%
5.2%(2)(3)
€30.0m
27
Developments and refurbishments
With favourable conditions in the Dublin property market
and limited new supply expected in the near term, the Group
is active with a number of development and refurbishment
projects which it believes will deliver attractive returns to
shareholders.
At the financial year end the Group had projects under way
at five properties (the “committed schemes”) which will
deliver 340,000 sq. ft. of high quality new office space: two
of these schemes completed shortly after the financial year
end and one scheme, Guild House, was added bringing the
current committed schemes to 354,000 sq. ft..
The Group has added significantly to its longer term pipeline
of developments: this now totals six schemes (up from two
in September 2015), which, if undertaken would deliver an
estimated 610,000 sq. ft. of high quality office space when
fully completed.
€5.4m
Schemes completed
The fit-out of the 213 residential units in Block 3, Wyckham
Point was completed in late July 2015, well ahead of schedule.
The project was delivered within budget, generating a profit
on cost in excess of 30% and an IRR of over 25% at completion.
The units were fully let by the end of September 2015, and
currently produce a net rent of €3.7m per annum and a yield
on cost of over 6%.
The refurbishment of One Dockland Central was successfully
completed on budget in May 2016, delivering a profit on cost
of over 30%. 48% of the 57,500 sq. ft. being refurbished was
pre-let to HubSpot and we are in advanced discussions with
a tenant regarding the remaining vacant space.
SOBO Works (formerly known as the Observatory Live/Work
units) was converted to c. 9,500 sq. ft. of office accommoda-
tion and 1,500 sq. ft. of retail with the works completing in
April 2016. At completion the project had delivered a profit on
cost in excess of 50%. A pre-let of all the space to a serviced
office provider, Iconic Offices, was agreed in the financial
year at a rent of €0.4m per annum and the tenant is now
fitting out their demise.
16.6%
29.7%
28.8%
24.4%
69.0%
20.4%
19.3%
5.2%(2)
€10.4m(5)
5.2%
5.4%
€8.0m
€5.7m
5.2%(2)
€24.1m(5)
–
4.6%
7.4%
–
€0.5m
STRATEGIC REPORT
28
Business review
(continued)
Committed development and refurbishment schemes
Please see further details on the development schemes below:
Following the successful refurbishment of One Dockland
Central, a similar refurbishment of the adjoining Guild
House (which is to be renamed Two Dockland Central) is
now under way using the same contractors. Unlike One
Dockland Central, many of the tenants remain in occupation
in Guild House at present (all leases bar that of BNY Mellon
expire by March 2017), with works expected to be completed
towards the end of 2017.
Construction work at Windmill Lane (“1 WML”) is progress-
ing well and the structure is up to the second and third
storeys: the project remains on budget and on schedule for
completion in late 2017. The formal marketing campaign
for 1 WML and 1 Sir John Rogerson’s Quay (“1 SJRQ” and
formerly known as 1-6 Sir John Rogerson’s Quay) commenced
in April 2016.
Having completed site preparation, a contractor has been
selected for 1 SJRQ and construction works have commenced.
The estimated capital expenditure has increased to €55m
due to a higher specification building, increased council
levies and some cost inflation. We continue to expect the
project to complete in mid-2018.
Sector
NIA post completion
(sq ft)
Full purchase cost
land) € psf
Est. capex
Est. total cost (incl.
ERV(1)
Office ERV psf(1)
Expected PC date
Comments
Committed schemes
Cumberland House Office
127k(2)
€51m
€27m
€605psf
€7.2m
€51.40psf
Q4 2016
Guild House
(Two Dockland
Central)
Office
72k(4)
€46m
€12m
€790psf(5)
€3.9m
€50.50psf
Q3 2017
1 WML
(50% interest)
Office
61k office(6)
3k retail
7.5 resi. units
€4m
€26m
€420psf(8)
€3.0m(7)
€47.00psf
late 2017
• Structure up to second & third
1 SJRQ
Office
110k office
6.2k retail
€18m
€55m
€643psf(8)
€5.9m
€50.50psf
mid 2018
• Pre-let 101,500 sq. ft.(3) to Twitter
• In discussions with potential
tenants re remaining 33k sq. ft.
(top two floors)
• Refurbishment works on schedule
for full completion in Q4 2016
• Refurbishment works (to the same
standard as One Dockland Central)
expected to commence shortly
storeys and project remains
on budget & on schedule for
completion in late 2017
• Formal marketing campaign
commenced in April 2016
• Contractor selected and
construction works have
commenced
• Budget increased to €55m due to
higher spec building, increased
levies and some cost inflation
• Project on schedule for completion
mid-2018
€120m
€20m
Total
370k office(9)
9k retail
7.5 units
€119m
1 Per CBRE valuation at 31 March 2016
2. Excl. additional basement areas (8k sq. ft.) and potential new block (c.50k sq. ft.) but incl. new
reception (1k sq. ft.) additional ground floor (5k sq. ft.) and gains due to design efficiencies of existing
building (9k sq. ft.)
3. Including storage & ancillary areas
4. 56k sq. ft of 72k sq. ft. is committed refurbishment
5. Net of dilapidations
6. Incl. extensions to 4th & 5th floors (2.3k sq. ft.) for which planning was granted in May 2016
7. Commercial only
8. Office only
9. 354k sq. ft. when adjusted for the 56k sq. ft. that is committed refurbishment in Guild House (Two
Dockland Central)
HIBERNIA REIT PLCANNUAL REPORT 2016
29
Please see further details on the development schemes below:
Sector
NIA post completion
Full purchase cost
Est. capex
(sq ft)
Est. total cost (incl.
land) € psf
ERV(1)
Office ERV psf(1)
Expected PC date
Comments
Committed schemes
Guild House
(Two Dockland
Central)
Cumberland House Office
127k(2)
€51m
€27m
€605psf
€7.2m
€51.40psf
Q4 2016
Office
72k(4)
€46m
€12m
€790psf(5)
€3.9m
€50.50psf
Q3 2017
1 WML
(50% interest)
Office
61k office(6)
3k retail
7.5 resi. units
€4m
€26m
€420psf(8)
€3.0m(7)
€47.00psf
late 2017
1 SJRQ
Office
110k office
6.2k retail
€18m
€55m
€643psf(8)
€5.9m
€50.50psf
mid 2018
• Pre-let 101,500 sq. ft.(3) to Twitter
• In discussions with potential
tenants re remaining 33k sq. ft.
(top two floors)
• Refurbishment works on schedule
for full completion in Q4 2016
• Refurbishment works (to the same
standard as One Dockland Central)
expected to commence shortly
• Structure up to second & third
storeys and project remains
on budget & on schedule for
completion in late 2017
• Formal marketing campaign
commenced in April 2016
• Contractor selected and
construction works have
commenced
• Budget increased to €55m due to
higher spec building, increased
levies and some cost inflation
• Project on schedule for completion
mid-2018
Total
370k office(9)
€119m
€120m
€20m
9k retail
7.5 units
1 Per CBRE valuation at 31 March 2016
2. Excl. additional basement areas (8k sq. ft.) and potential new block (c.50k sq. ft.) but incl. new
reception (1k sq. ft.) additional ground floor (5k sq. ft.) and gains due to design efficiencies of existing
building (9k sq. ft.)
3. Including storage & ancillary areas
4. 56k sq. ft of 72k sq. ft. is committed refurbishment
5. Net of dilapidations
6. Incl. extensions to 4th & 5th floors (2.3k sq. ft.) for which planning was granted in May 2016
7. Commercial only
8. Office only
Dockland Central)
9. 354k sq. ft. when adjusted for the 56k sq. ft. that is committed refurbishment in Guild House (Two
Longer term development pipeline
Four new schemes have been added to the longer term
pipeline: two of the additions – Marine House and One
Earlsfort Terrace – are buildings acquired in the financial
year and two additions are from the existing portfolio. In the
Hanover Building, the main tenant (BNY Mellon) has served
notice to vacate in December 2016. We continue to assess our
options but expect that the space will be improved ahead of
re-letting. At Cumberland House, while our primary focus
is the successful completion of the existing refurbishment
programme, we are also assessing plans for a new office
block at the front of the site.
At Harcourt Square, where the four leases to the Office of
Public Works (“OPW”) have either expired or are due to expire
during 2016, we are seeking to gain vacant possession for
redevelopment. The OPW has applied to the Irish Circuit
Court seeking statutory extension of the leases, which we
will defend. We have planning permission for a first phase
development of 134,000 sq. ft. Net Internal Area (“NIA”) and
an application for a second phase development of 152,000
sq. ft. NIA has received preliminary approval from Dublin
City Council.
STRATEGIC REPORT
30
Business review
(continued)
Please see further details on the longer term development pipeline below:
Name
Sector
Current NIA
(sq. ft.)
NIA post completion
(sq. ft.)
Full purchase price
Comments
Cumberland House
(front block)
Office
0k
c.50k sq. ft.
€0m(3)
One Earlsfort
Terrace
Office
22k
>28k sq. ft.
€20m
Hanover Building Office
44k office 15k
retail(2)
c.73k sq. ft
€21m
• Potential for new block at front of
Cumberland House of up to c.50k
sq. ft. subject to planning
• Planning permission is in place for
two extra floors which would add
c.6k sq. ft. to the NIA
• Potential for redevelopment as
part of the wider Earlsfort Centre
scheme
• Potential to extend the current
building by adding c.13k sq. ft.
subject to planning
Harcourt Square
Office
117k on 1.9 acres
c.285k sq. ft.
€72m
• Potential development of over 285k
Marine House
Office
41k
c.60k sq. ft.
€27m
Gateway
Logistics / office
178k on 14.1 acres
c.115k(1) sq. ft.
€10m
Total
402k
c.611k sq. ft.
€150m
1. Planned new offices of c.115k sq. ft. plus potential to add a further c.130k sq. ft. of offices
2. 4k sq. ft. in basement
3. €49m excl. costs or €51m incl. costs paid for existing block which is being refurbished to create
135k sq. ft. i.e. €362psf. No land value attributed to new block at acquisition
sq. ft. of office space.
• Phase 1 planning granted with
Phase 2 under review by the
planning board
• Potential opportunity to develop
c.60k sq. ft. (+20k sq. ft.) NIA on the
site of Marine House
• Longer term redevelopment
opportunity as part of the wider
Clanwilliam Court complex
• Outline planning application for
new road configuration expected to
be submitted shortly
HIBERNIA REIT PLCANNUAL REPORT 2016 Photograph of
Central Quay
31
It has been a very active year
with new leases and rent
reviews agreed adding a
total of €11.8m per annum to
contracted rents and asset
management initiatives under
way at a number of buildings
in the portfolio.
Asset management
It has been a very active year with new leases and rent
reviews agreed adding a total of €11.8m per annum to con-
tracted rents and asset management initiatives under way
at a number of buildings in the portfolio.
estimated capital expenditure is €27m (€11m spent at 31
March 2016). We have commenced the marketing of the
remaining 33,000 sq. ft. of available space and are discussing
terms with a number of interested parties.
Summary of letting activity in the financial year
Central Quay, South Docks
• Offices: Six new leases signed on 157,000 sq. ft. and one
rent review together generating €7.8m of incremental
new annual rent. The weighted average periods to break
and lease expiry for the new leases were 11 years and 19
years, respectively
• Residential: 310 units now let generating €6.4m of annual
rent (€5.4m net of costs) and including the 80 Dundrum
View apartments acquired in June 2015: letting activity
generated incremental new net annual rent of €4.0m
during the financial year
• Industrial: restructuring of tenant leases at Gateway to
maintain current passing rent and give landlord ability
to gain vacant position upon 12 months’ notice for any
future redevelopment
Letting activity post financial year end
As set out below, we are in discussions with potential tenants
in a number of buildings where we have unlet space.
Key asset management highlights
See also developments and refurbishments section above
for further details.
Cumberland House, D2
In September 2015 we pre-let 85,000 sq. ft. to Twitter on a 20
year lease, with initial rent of c. €4.6m per annum (€50psf).
Subsequently the agreement for lease has been extended
to a further 16,500 sq. ft. generating additional net rental
income of €0.7m per annum: 14,000 sq. ft. of this is additional
space being created for Twitter and the remaining 2,500 sq.
ft. relates to design efficiencies in the existing building.
The total building area has increased from 112,000 sq. ft.
to 135,000 sq. ft. The expected lease commencement is late
2016 upon completion of the refurbishment works, for which
The 57,700 sq. ft. office building was acquired in February 2016
with some near term opportunities to drive rents through
asset management. In March 2016 we agreed a lease surren-
der with Indeed Ireland Operations Ltd, occupier of 22,000
sq. ft. across the first and third floors, for a payment to the
tenant of €0.3m. Indeed were paying a low average rent
of €30psf. Simultaneously with the surrender, we agreed
to lease the first floor (11,000 sq. ft.) to Daqri International
Limited for ten years, with a break after three years, from
April 2016 at a rent of €52.50psf. We are in discussions with
a number of potential occupiers regarding the remaining
18,500 sq. ft. of available space in the building.
The Chancery, D8
Webzen vacated all 11,500 sq. ft. previously occupied in March
2016 having exercised a break option. We are close to finalising
terms with a tenant for one of the two floors vacated. We are
also in the process of upgrading the common areas in the
building, at a cost expected to be less than €0.1m.
The Forum, IFSC
Terms have been agreed with Parkrite for a new 20 year lease
from 14 May 2013 for the multi storey car park. The initial
rent will be €0.5m with five yearly reviews. The lease is
expected to be completed in Q2 2016.
Guild House, IFSC
In July 2015 FBD plc surrendered their leasehold interest for
a total payment to Hibernia of €8.8m, covering surrender
premiums, rental top-ups and dilapidations. The building
was fully occupied and all nine of the former sub-tenants
of FBD, with the exception of Bank of New York Mellon who
occupy the entire first floor, have lease expiration dates prior
to the end of Q1 2017.
STRATEGIC REPORT
32
Business review
(continued)
We have informed all tenants of our decision to undertake a
full refurbishment of all common areas to the same standard
as that recently completed in One Dockland Central and
work is expected to commence shortly. We are in discussions
with the existing tenants regarding new leases beyond Q1
2017: we expect certain tenants will agree new leases and
remain in situ throughout the works. The building will be
renamed Two Dockland Central on completion.
One Dockland Central (formerly Commerzbank House),
IFSC
cussions with a potential occupier regarding the remaining
30,000 sq. ft. of available refurbished space.
Other completed assets
The other completed properties in the portfolio are close
to full occupation with an average period to rent review or
lease expiry for the “in-place” office portfolio of 2.0 years:
the team is assessing options to maximise returns from the
up-coming lease events and continues to carefully monitor
the letting markets.
Of the 57,600 sq. ft. refurbished, 27,500 sq. ft. (two floors) and
14 car parking spaces were pre-let to HubSpot in November
2015 on a 20 year lease at a rent of €1.3m per annum (€45psf)
after a six month rent free period from commencement: the
lease commenced in February 2016. We are in advanced dis-
Sale of non-core assets
Good progress has been made in disposing of the remaining
non-core assets acquired as part of the Dorville loan port-
folio, which is substantially complete. As at 31 March 2016
the position was as follows:
Sale of non-core assets
Sold or contracted in the financial year
Units
Residential assets
Commercial assets
Sale agreed at financial year end
Residential assets
Remainder of non-core assets
Residential assets
46
3
49
Units
1
Units
15
Carrying value
€’000
Sales price
€’000
12,168
13,134
Profit
€’000
966
2,410
3,580
1,170
14,578
16,714
2,136
Carrying value
€’000
Price agreed
€’000
Expected profit(1)
€’000
354
460
106
Carrying value
€’000
3,567
1. Figure excludes tax payable on net profits arising on disposal
Contracted in-place office portfolio rent by time to the
earlier of the next review or expiry date of the lease
Since the financial year end the sale which was agreed at
financial year end but uncompleted has closed with funds
received by Hibernia. In addition, the sale of a further seven
units have been agreed with an aggregate gross sales value
of €1.8m.
Time to open market review
0 - 1 years
1 - 2 years
2 - 3 years
3 - 4 years
4+ years
Total
€m
11.6
1.0
8.4
2.1
4.2
27.3
HIBERNIA REIT PLCANNUAL REPORT 2016 33
Financial results and position
IFRS NAV - cent per share
EPRA NAV - cent per share
Net debt / (cash)
Group LTV
Profit for the financial year
EPRA profits
Basic EPS
Diluted EPS
31 March 2016
31 March 2015
Movement
131.6
130.8
€52.9m
5.7%
€136.8m
€10.0m
20.2 cent
20.1 cent
112.4
111.8
€(139.0)m
n/a
+17%
+17%
n/a
n/a
€92.2m
+48%
€3.9m
+153%
18.4 cent
18.3 cent
+10%
+10%
Final dividend / DPS
€5.5m / 0.8 cent
€3.4m / 0.5 cent
Full year dividend /DPS*
€10.3m / 1.5 cent
€5.4m / 0.8 cent
* Based on estimated shares in issue at the dividend date
The key drivers of EPRA NAV per share, which increased
19.0 cent from 31 March 2015 were:
• 18.2 cent per share from the revaluation of the property
portfolio, including 8.2 cent per share in relation to de-
velopment properties
• 1.5 cent per share from EPRA earnings for the financial year
• Payment of dividends, which decreased NAV by 1.2 cent
per share
• Gains on sales of non-core assets, which increased NAV
by 0.5 cent per share
Net profit for the financial year was €136.8m, an increase
of 48% over the same period last financial year. In addition
to the increase in property income, revaluation gains and
losses to 31 March 2016 amounted to €125m, considerably
higher than the prior financial year figure of €80.8m (the
March 2015 figure was €90.9m including gain made on
recognition of Block 3, Wyckham Point as an investment
property) and assisted, in particular, by the valuation uplift
in Cumberland House following the pre-let of the majority
of the building to Twitter.
EPRA profits for the financial year were €10.0m, up 153%
since 31 March 2015. The key driver of the increase was the
85% increase in rental income, excluding surrender premia,
due to further acquisitions made in the past 12 months,
full periods of ownership for a number of assets and new
lettings made (e.g. Block 3, Wyckham Point). In addition,
property income was positively impacted by the surrender
premium from FBD in relation to their lease on Guild House:
this amounted to a one-off gain to property income of €4.9m
(31 March 2015: €2.4m from surrender premia).
Financing and hedging
At 31 March 2016 Group net debt was €52.9m, a loan to
value ratio (LTV) of 5.7%, having moved from a net cash
position of €139.0m at 31 March 2015 as capital expenditure
on acquisitions and developments significantly outweighed
inflows from the sale of non-core assets, Starwood affiliates’
buy-in to the Windmill Lane development and undistributed
rental income.
In November 2015 the Group entered a new five year €400m RCF
with Bank of Ireland, Barclays and Ulster Bank, replacing the
existing €100m facility and providing flexible funding for the
STRATEGIC REPORT
34
Business review
(continued)
development pipeline and future acquisitions. In December 2015
the Windmill Lane Partnership (“WLP”), the Group’s 50:50 joint
arrangement with Starwood entities, entered a non-recourse,
three year debt facility with Deutsche Bank of €46.7m (Hibernia
share: €23.4m) to fund the development of the Windmill Lane
site. At the request of WLP, this was subsequently reduced to
€44.2m (Hibernia share: €22.1m). If both facilities were fully
drawn at 31 March 2016 this would have resulted in a LTV of
32.5%. Given the nature of our portfolio and the development
exposure within it, we expect the through-cycle gearing to be
in the range of 20-30% LTV.
and remains in compliance with the relevant requirements
and procedures set out in the Irish, UK and AIC Corporate
Governance Codes. Further information can be found in
Note 5 to the financial statements.
Dividend
The Board has proposed a final dividend of 0.8 cent per share
(2015: 0.5 cent) which, subject to approval at the Company’s
AGM, will be paid in August 2016. All of this final dividend
will be a Property Income Distribution (“PID”) in respect
of the Group’s tax exempt property business.
The Group has a policy of fixing or hedging the interest
rate risk on the majority of its drawn debt. Consequently
it has entered into interest rate caps and swaptions with
1% strike rates (reference 3m Euribor) covering €100m of
the RCF. The interest rate exposure of the Windmill Lane
facility has been hedged using an interest rate cap with a
1% strike rate (reference 3m Euribor).
Together with the interim dividend of 0.7 cent, the total
dividend for the financial year will be 1.5 cent (2015: 0.8
cent). This represents over 87% of realised profits received
in the financial year. As the portfolio income stabilises, we
intend that the interim dividend declared will usually be
in the region of 30-50% of the total regular dividends paid
in respect of the prior financial year.
Internalisation of management team
The Group completed the internalisation of its management
team in November 2015, following approval by shareholders
in late October 2015. The transaction was effected through
the acquisition of WK Nowlan REIT Management Ltd (the
“Investment Manager”) and its parent company, Nowlan
Property Limited (“NPL”), on terms representing no antici-
pated material additional cost to the Group when compared
to the estimated costs of retaining the external structure
until the expiry of the initial term of the Investment
Management Agreement in November 2018. Under the terms
agreed, the transaction was structured to take effect from
1 April 2015.
Initial consideration paid of €21.1m comprised €14.2m in
respect of base management fees and €6.9m in respect of the
net assets of the Investment Manager and NPL (which were
principally the performance fee payable to the Investment
Manager for the financial year to March 2015 and cash). The
initial consideration was settled through the payment of
€8.3m of cash and the issue of 10.9m of new ordinary shares.
Following completion, the Directors and senior management
hold c. 2% of the issued share capital of the Company and
the free float is c. 98%.
Upon completion Kevin Nowlan (CEO) and Thomas Edwards-
Moss (CFO) joined the Board of Directors, which continues
to have a majority of independent non-executive directors
Hibernia introduced a Dividend Reinvestment Plan (“DRIP”)
last year: this allows shareholders to instruct Capita, the
Company’s registrar, to reinvest dividend payments by the
purchase of shares in the Company. The terms and con-
ditions of the DRIP and information on how to apply are
available on the Group’s website.
In November 2015 we
completed the internalisation
of the management team
[...] The internalisation was
an important step in the
Company’s progress and
secures our talented and
experienced team for the
future.
Kevin Nowlan
Chief Executive Officer
HIBERNIA REIT PLCANNUAL REPORT 2016
35
Sustainability
is an integral part of our strategy
Sustainability and social responsibility are key components in
our strategy to deliver superior long term value for shareholders.
We have identified four key sustainability priorities:
1
2
Responsible asset
management
Delivering
sustainable buildings
Active management of existing
buildings to reduce environmental
impact while maximising asset
performance and efficiency for
occupiers.
Providing efficient new space
through developments or
refurbishments which offer lower
running costs, lower emissions and
an enhanced occupier experience.
3
4
Positive community
impact
Developing our
employees
Supporting the communities in
which we operate, being responsible
neighbours and developing and
maintaining strong relationships.
Providing an inclusive, open
environment for our employees with
opportunities for individuals and
teams to realise their full potential
and enable the business to meet its
strategic targets.
STRATEGIC REPORT 36
Sustainability
(continued)
Management of the existing portfolio
This financial year we initiated a first review of our occupied
(“in-place”) buildings. All eight office buildings, which are
multi-tenanted and where the Group has control of the
utilities, were assessed for energy efficiency, water usage,
and greenhouse gas emission and waste production for
the period 1 April 2015 to 31 March 2016. As part of this,
measurement of the metrics recommended in the EPRA Best
Practices Recommendations on Sustainability Reporting
(September 2011) was undertaken.
The metrics assessed cover electrical and gas energy, water
and waste. A total of approximately 39,000 square meters
over the eight buildings was covered. These metrics will
continue to be measured as we undertake initiatives to
improve building efficiency in the future.
The key EPRA metrics for the eight buildings for the assessed
period were:
EPRA sustainability summary
EPRA code
EPRA code
Performance measure
Building
Total treated floor area
Occupancy level
GRI G4
indicator
Unit
(m²)
Total for assessed
buildings
39,260
95%
Energy
Elec-Abs
Total electricity consumption
G4-EN3
(kWh/ann)
4,475,000
Fuels-Abs
Total fuel consumption
G4-EN3
(kWh/ann)
5,753,000
Energy-Int
Building energy intensity
CRE1
(kWh/m².ann)
Carbon
GHG-Dir-Abs
Total direct greenhouse gas (GHG)
emissions (Gas)
G4-EN15
(T CO₂/ann)
261
1,151
GHG-Indir-Abs
Total indirect greenhouse gas (GHG)
emissions (Elec)
G4-EN16
(T CO₂/ann)
2,059
GHG-Int
Greenhouse gas (GHG) intensity
from building energy consumption
CRE3
(kgCO₂/m².ann)
82
Water
Water-Abs
Total water consumption
G4-EN8
(m³/ann)
16,751
Waste
Cert
Water-Int
Building water intensity
CRE2
(m³/ m².ann)
Waste-Abs
Total weight of waste
G4-EN23
(Tonne/ann)
Cert-Tot
Type and number of sustainability
certified assets
CRE8
No.
0.55
203
N/A
Note: Building Energy and Greenhouse Gas Intensity (CRE1 and CRE2) as reported are inclusive of total (i.e. Landlord plus Tenant) electrical energy
consumption for Montague House (solely), as its current metering arrangement records whole-building usage only. It is estimated that the inclusion
of tenant electricity consumption for this particular property amplifies expected energy and carbon intensity for the entire portfolio by the order of
5-10%. Sub-metering of electrical installations is being implemented at Montague House in order to enable future sustainability reporting to reflect solely
landlord energy consumption throughout the portfolio. As this is our first year of reporting, no “like for like” numbers are available.
HIBERNIA REIT PLCANNUAL REPORT 2016 37
Delivering new buildings
A number of the assets we have acquired were
purchased as development or refurbishment
opportunities. Three of our largest active
development/refurbishment projects are shown
here.
Hibernia has adopted LEED certification for its projects. LEED is a green building certification
system developed by the U.S. Green Building Council (USGBC). Its aim is to be an objective measure
of building sustainability. It measures:
Water
efficiency
CO2 emissions
reduction
Improved
indoor
environmental
quality
Resource
stewardship
Improving
energy savings
Leadership in Energy and Environmental Design for core and shell buildings:
LEED CS Version 2009
LEED Certified
40-49
LEED Silver
50-59
LEED Gold
60-79
LEED Platinum
80-110
STRATEGIC REPORT 38
Sustainability
(continued)
High
performance
facade
Energy efficient
LED external
lighting
Case study
Cumberland House,
Dublin 2
In Ireland only one building has achieved LEED Platinum
rating to date and no office buildings. The refurbishment of
Cumberland House, a 1970’s office building, is currently on
target to achieve the LEED Platinum standard.
Cumberland House, near Trinity College and the National
Gallery, was purchased by Hibernia in March 2015. The entire
building is under refurbishment with 75% of the available
space prelet to Twitter.
The building’s refurbishment is expected to cost up to €27
million, with Twitter due to occupy the majority of the
space in late 2016.
Green roofs
Energy efficient
lift system
Energy efficient
LED lighting
throughout
Energy
efficient air
conditioning
Optimised
glazing
providing
natural daylight
Water efficient
appliances
Energy efficient
heat recovery
ventilation
system
Extensive
green
landscaping
and garden
spaces
HIBERNIA REIT PLCANNUAL REPORT 2016
39
Case study
1 Windmill Lane,
Dublin 2
This is a new development to a LEED Gold standard extend-
ing over six floors with a lettable area of approx. 122k sq ft of
Grade A office space. The building is part of our regeneration
of the Windmill Lane area of the South Docks.
Energy efficient
HVAC systems
Optimised
glazing
providing
natural daylight
Water efficient
appliances
Open
landscaped
areas and
courtyard
Green roof
Energy efficient
LED lighting
throughout
High
performance
facade
Sustainable
materials and
FSC wood
High ratio of
bicycle spaces
STRATEGIC REPORT 40
Sustainability
(continued)
Case study
1 Sir John Rogerson’s Quay,
Dublin 2
This project commenced in late 2015 and is a new develop-
ment to LEED Gold standard.
Optimised
glazing
providing
natural daylight
Energy efficient
LED lighting
throughout
Green roofs
and open
landscaped
areas
Green wall at
the entrance
Water efficient
appliances
High
performance
facade
Sustainable
materials and
FSC wood
High ratio of
bicycle spaces
HIBERNIA REIT PLCANNUAL REPORT 2016 41
from left to right:
Thomas Edwards-Moss,
Frank O’Neill, Kevin
Nowlan, Mark Pollard,
Richard Ball
Our team
With the internalisation of the Investment Manager
in November 2015, Hibernia became an employer.
We have a team of 17 people providing services
either as employees or contracted service
providers.
At the core of our culture are the following values:
Communication
Personal development
Weekly meetings are held across and within departments to
encourage regular and effective communication. The Board
and committees encourage participation by those directly
responsible for the topics being discussed. Informal team
events foster good relationships within the team.
We encourage our people to undertake training to develop
their skills and enhance their career and arrange for experts
to present to the team on a regular basis
Performance
Remuneration
Our people are encouraged to align with the Group’s strategy
through objective setting and periodic performance reviews.
We seek to remunerate in line with market salaries and
have bonus arrangements to incentivise achievement of
personal and Group objectives.
We support diversity in all areas.
STRATEGIC REPORT
42
Risks and risk management
We believe good risk management practices and
a strongly performing business go hand in hand
and that both are dependent on the right culture
of transparency, responsibility and accountability at
all levels within an organisation, which is what we
actively encourage in Hibernia.
Our approach to risk management
Risk management is the ultimate responsibility of the Board.
The Board has implemented a risk framework to manage risk
within the Group. This framework establishes and maintains
the appropriate systems and controls to manage risk within
the Group and ensure compliance with laws and regulations.
This framework is reviewed annually or more frequently if
required. The most recent review was undertaken as a result
of the restructuring of the Group through the internalisation
of the Investment Manager.
The risk management system is an integral part of the
internal control system within the Group.
HIBERNIA REIT PLCANNUAL REPORT 2016 43
Governance structure and risk management
Board
Committees: Audit –
Remuneration – Nomination
Direct management of risk
through Audit Committee and
full Board oversight
Operational management
Fortnightly meetings: Investment,
Development, Portfolio Operations, Finance and
Investor Relations
Periodic strategy and budget days
Monitoring of key risk indicators
Investment
returns
Debt covenant
compliance
Actuals v
budget
Lease
covenants
Market trends Risk tolerance
limits
Internal controls
Risk framework and
risk monitoring
including risk register
Policies and procedures
and formal approval
processes
Formal documentation
and Board approval for
investment and other
major decisions
Skilled and experienced
team
STRATEGIC REPORT 44
Risks and risk management
(continued)
Overall risk ratings are as follows:
Overall Risk Rating
Score
Unacceptable
High
Medium
Low
>15
9-15
4-9
<=4
The Group has controls and procedures to mitigate all risks
and strives in particular to reduce any risk which is rated as
“unacceptable”. In general, the Group will not proceed with a
course of action which would be likely to lead to such a risk.
The Group has identified its main risk appetites and risk
tolerance levels have been applied to these. A combined
risk register is maintained for the Group. This is reviewed
and reported on regularly. The Risk and Compliance Officer
reports directly to the Audit Committee/Board. The Directors
confirm that they have carried out a robust assessment of
these risks and set out below a description of the principal
risks together with the measures they have taken in order
to manage and mitigate these risks.
The Group’s risk management framework is continually
monitored by the Group’s Audit Committee, under delegation
from the Board. The Audit Committee is responsible for over-
seeing the effectiveness of this framework and of the internal
control environment of the Group. The Audit Committee
Report is set out on pages 62 to 66 of this Annual Report.
Internal controls are addressed in the Corporate Governance
Report on pages 72 to 73. Our risk management framework
involves designing, implementing, monitoring, reviewing
and continually improving risk management processes in
the organisation. Our inputs include all risks, processes and
controls applicable to the organisation. Quantitative and
qualitative analyses are performed to identify and quantify
the most important risks.
The system’s outputs include a risk register, risk monitoring
plan and risk metrics. The Group has devised an action plan
to identify and mitigate any risk concerns and/or breaches.
Identifying and monitoring principal risks
The Group has to take carefully considered and appropriate
risks in order to realise its strategic goals and risk appetites
are approved which are complementary and appropriate to
these goals. Principal risks are identified through a Group
wide assessment process. This assessment process consists
of the following steps:
• Identify the risk
• Determine the magnitude of impact. This assigns a rat-
ing from 1 (insignificant) to 5 (catastrophic) based on the
magnitude of possible financial loss
• Determine the likelihood of the risk occurring from 1
(rare) to 5 (almost certain)
• Multiply the impact and likelihood ratings to produce
the risk rating
HIBERNIA REIT PLCANNUAL REPORT 2016 45
Principal risks and uncertainties
There are a number of potential risks and uncertainties
which could have a material impact on the Group’s perfor-
mance and could cause actual results to differ materially
from expected and historical results. A description of these
risks and the steps which the Group has taken to manage
these risks is set out below.
Risk
Weakening economy
Potential impact
High
Strategic goal impact
Performance below target levels through lower capital or income returns or both.
Description of
exposure
Mitigation
Change from last
year
Comment
The value of the
investment portfolio
may decline and rental
income may reduce as a
consequence of lowered
levels of economic
activity in Dublin and/or
Ireland.
The Group has set risk appetite limits,
which are the level of risk that the Board
considers acceptable to accept in achieving
the Group’s strategic objectives in the
current economic environment. Close
monitoring of economic lead indicators
and access to market knowledge through
the Group’s contacts and advisers
help to ensure it has the best possible
knowledge of the current macro-economic
environment to allow it to anticipate and
react to potential issues.
Increased
The IMF has forecast that the Irish economy
is to continue its strong expansion, especially
relative to the Eurozone, for the next two years.
The Central Bank of Ireland’s view is similar
and it expects growth to be 5.1% this year and
4.2% next year. The Central Bank highlights
that risks to projections, related mainly to
external factors, are tilted to the downside.
Domestically, they note the continuing
relatively high levels of private sector
indebtedness but point out that the favourable
growth outlook offers some relief. Externally,
it noted that the risk of the UK leaving the
European Union could lead to weaker economic
and financial conditions in the broader
international economy. Adding to the specific
event risk of the UK “Brexit” referendum,
external risks in the global economy remain
elevated with fears over a hard landing for the
Chinese economy and uncertainty around the
path for US interest rate policy of particular
note.
Risk
Underperformance of Dublin property market
Potential impact
High
Strategic goal impact
Value of investment property may decrease thus reducing NAV. Potential impacts on rental income through lower rents or defaulting
tenants.
Description of
exposure
Mitigation
Change from last
year
Comment
Underperformance by
Dublin property market
compared to other
Irish property sectors:
to date all the Group’s
investments have been
within Dublin.
The Group regularly reviews its strategy
and asset allocation to determine if it
remains appropriate.
The Dublin property market is currently
performing well and Dublin remains a key
contributor to the Irish economy.
Stable
STRATEGIC REPORT
46
Risks and risk management
(continued)
Risk
Investment
Potential impact
High
Strategic goal impact
Inability to find new opportunities that meet the Group’s return targets, over concentration in one particular asset or location or failure to
correctly identify all risks of a purchase may result in poor investment returns below the Group’s targets.
Description of
exposure
Mitigation
Change from last
year
Comment
Competition may
reduce the access to
attractive investment
opportunities.
Market knowledge and contacts
improve the Group’s ability to uncover
opportunities and acquire investments.
Increased
Concentration of
investment in single
assets, tenants, locations
or sectors may increase
risk.
Overlooking or mis-
pricing risks at point of
investment.
Risk appetites are set and monitored for
concentration risk factors.
Stable
Stable
The Group has an experienced
management team which carries out
extensive due diligence ahead of purchase.
Board approval is part of the investment
decision which provides another layer of
scrutiny.
The rise in Dublin property prices has reduced
the pool of assets which meet our returns
criteria, although with our focus on value
add projects there remains a good level of
opportunity.
The Group has built a balanced portfolio since
commencement of operations. As at 31 March
2016 the largest single asset represented 11.7%
of the portfolio by value.
Due diligence involves a diverse range of
parties, internal and external, and helps to
mitigate risks around acquisitions.
Risk
Development
Potential impact
High
Strategic goal impact
Target returns impacted through lower than expected profits on developments.
Description of
exposure
Mitigation
Change from last
year
Comment
Inability to properly
manage developments.
Any refurbishment or
redevelopment project
may suffer delays, may
not be completed or may
fail to achieve expected
results. Budgets may
overrun.
Close monitoring of developments coupled
with significant in-house experience in
managing large scale projects reduces
these risks. The use of joint venture
arrangements also reduces overall
exposure.
Decreased
The Group has hired an experienced Director
of Development and our development projects
have progressed considerably in the last
twelve months. The Development Committee
monitors development progress and issues.
Issues are identified early and proactively
managed to ensure effective delivery of
projects. In addition, rents have risen in the
last twelve months which should enhance
returns on our developments.
HIBERNIA REIT PLCANNUAL REPORT 2016
47
Risk
Financing
Potential impact
Medium
Strategic goal impact
Inappropriate capital structure may lead to Group being unable to meet goals through covenant breaches or high interest costs impacting
returns.
Description of
exposure
Mitigation
Change from last
year
Comment
Leverage exposes the
Group to risks associated
with borrowing such as
covenant breaches.
New facilities are approved at Board level
and under the investment policy debt
is limited to a 40% loan to value ratio at
incurrence. Hedging instruments have
been used to cap the Group’s interest
rate exposure and the Group intends to
hedge the majority of its interest rate
exposure on its drawn debt. Active and
regular monitoring of covenant breaches
is undertaken. Levels of leverage are set
at Board level and monitored closely.
Alternative sources of financing are also
continually assessed.
Decreased
No breaches have occurred in the period. A
conservative approach to hedging of interest
costs on financing arrangements means that
the impact of borrowing on the overall return
on equity should be positive against a backdrop
of rising EURIBOR. The Group continues to be
vigilant in monitoring covenants and hedging
requirements.
Strategic goal impact
Targeted returns impacted, new investment limited through lack of available funds.
Description of
exposure
Mitigation
Change from last
year
Comment
No access to financing
limits potential for
further investment
growth or means the
Group misses out on
opportunities.
The Group actively manages its finance
requirements and continues to monitor
availability to ensure it is well placed to
take advantage of market investment
opportunities as they arise.
Decreased
The Group put in place a new €400m revolving
credit facility in 2015, replacing the previous
€100m revolving credit facility. €75m had
been drawn as of 31 March 2016 (31 March 2015:
€nil). Its Windmill Lane joint arrangement is
also funded from bank borrowings. The Group
continues to monitor capital requirements to
ensure that future requirements are anticipated
and met within the limits of its leverage targets.
Risk
People
Potential impact
Medium
Strategic goal impact
Strategic goals achievement impacted through loss of expertise or key personnel.
Description of
exposure
Mitigation
Change from last
year
Comment
The Group fails to
attract, motivate and
retain sufficient skilled
people to achieve targets.
Poor management of
people may impact on
performance.
The Group has a team of directly employed
staff through the internalisation of the
Investment Manager, with a remuneration
system that is linked closely to individual
and Group performance. The Group has
introduced a long-term incentive plan
(funded through the existing performance
fee arrangements) as part of performance
remuneration this year in order to help align
employees interest with shareholders and
encourage retention.
Decreased
With the completion of the internalisation of
the Investment Manager in November 2015
this risk has decreased due to the Group’s
enhanced ability to retain and attract staff.
A Remuneration Committee of the Board
has been established to proactively manage
remuneration measures.
STRATEGIC REPORT 48
Risks and risk management
(continued)
Risk
Regulatory
Potential impact
Low
Strategic goal impact
Achievement of strategic goals impacted through inability to continue as a REIT and a greater tax burden.
Description of
exposure
Mitigation
Change from last
year
Comment
Legislative and regulatory
requirements may not be
complied with resulting
in sanctions being
imposed.
The management team and the Board
spend substantial time, and retain
external experts as necessary, to ensure
compliance with current and possible
future regulatory requirements.
Effective monitoring of REIT requirements
compliance at a senior level.
The Group’s REIT status
may be revoked if it fails
to satisfy all the relevant
tax and legislative
requirements, which
would have adverse
consequences for its
investors.
Our strategy in managing this risk together
with a relatively unchanged regulatory
environment has meant the risk has remained
relatively stable over the last year.
This continues to be done on a regular basis
and is the subject of review by our retained tax
advisers, KPMG.
Stable
Stable
Photograph of
completion of
refurbishment works
at One Dockland
Central
HIBERNIA REIT PLCANNUAL REPORT 2016
50
Directors’ report
Board of Directors
Daniel Kitchen
Non-Executive Chairman
Appointed: 23 August, 2013
Nationality: Irish
Age: 64
Committee membership: Nominations (Chair) and Remuneration
Daniel Kitchen is currently the Non-Executive Chairman of Workspace Group plc, the Non-Executive
Chairman of Applegreen plc 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, Deputy Chief Executive of Heron International plc from 2003 to 2008
and the Irish Government-appointed Chairman of Irish Nationwide Building Society 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 chair-
manship of the Board and Nominations Committee.
Colm Barrington
Independent Non-Executive Director and Senior Independent Director
Appointed: 23 August, 2013
Nationality: Irish
Age: 70
Committee membership: Audit, Nominations and Remuneration (Chair)
Colm Barrington is currently Chief Executive Officer and a Director of Fly Leasing Ltd, the NYSE-listed
and Irish based aircraft leasing company. 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. He is a Non-Executive Director of IFG Group plc and is
a former Non-Executive Chairman of Aer Lingus Group plc. 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: 73
Committee membership: Audit, Nominations and Remuneration
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.
HIBERNIA REIT PLCANNUAL REPORT 2016 51
William Nowlan
Non-Executive Director
Appointed: 13 August, 2013
Nationality: Irish
Age: 70
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 Real Estate Advisers) 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.
Terence O’Rourke
Independent Non-Executive Director
Appointed: 23 August, 2013
Nationality: Irish
Age: 61
Committee membership: Audit (Chair), Nominations and Remuneration
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 EMEA 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.
GOVERNANCE 52
Directors’ report
(continued)
Kevin Nowlan
Chief Executive Officer
Appointed: 5 November, 2015
Nationality: Irish
Age: 45
Committee membership: None
Kevin Nowlan is a chartered surveyor with more than 20 years’ experience in the Irish property
market, including commercial agency, property management, investment, development and devel-
opment financing, commercial loan portfolio management and debt restructuring. Kevin joined the
Board of Hibernia as Chief Executive Officer in November 2015 following the internalisation of WK
Nowlan REIT Management Limited, the Investment Manager. Prior to this Kevin held the same
position in the Investment Manager from its inception in 2013 and previously held senior roles in
NAMA and Treasury Holdings and was MD of WK Nowlan Property (now WK Nowlan Real Estate
Advisers). He has a BSc in Estate Management from the University of Ulster, an MBA from Ulster
Business School and a Diploma in Project Management from Trinity College, Dublin.
Thomas Edwards-Moss
Chief Financial Officer
Appointed: 5 November, 2015
Nationality: British
Age: 36
Committee membership: None
Thomas Edwards-Moss joined the Board of Hibernia as Chief Financial Officer in November 2015, following
the internalisation of the Investment Manager. Prior to this he held the same role in the Investment
Manager since joining in June 2014. Previously he spent nine years at Credit Suisse, London as part of
the UK & Ireland Investment Banking team. While there, he had a particular focus on corporate finance
in the real estate sector and he advised on the initial public offering of Hibernia. He is a graduate of
Cambridge University and qualified as a chartered accountant at PricewaterhouseCoopers in 2005.
All 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 Services Limited (trading as Chartered Corporate
Services), was appointed on 15 November 2013.
HIBERNIA REIT PLCANNUAL REPORT 2016 53
The Directors submit their Annual Report for the financial year
ended 31 March 2016. The Strategic Report and all other sections
of the Annual Report, to which cross reference is made, are
incorporated into the Directors’ Report by reference.
Principal risks and uncertainties
The principal risks and uncertainties are discussed in the Risks
and risk management section on pages 42 to 48 and form part of this
report.
Directors' responsibilities
REIT status and taxation
These are set out in the Directors’ Responsibility Statement on page
75 of this report.
Principal activity and business review
The principal activity of the Group is property investment.
Further details on the Group’s development and performance for the
financial year under review are set out in the Financial results and
position on pages 33 to 34
The principal subsidiary and associate undertakings are listed in Note
31 to the consolidated financial statements and form part of this report.
Results for the financial year
Group results for the financial year are set out in the Group income
statement on page 80. The profit for the financial year ended 31 March
2016 was €136.8m (March 2015: €92.2m), including unrealised profits
on investment properties of €125.1m (31 March 2015: €80.8m).
The Group has a number of key performance indicators which it meas-
ures. The main indicators of performance used are EPRA Net Asset
Value per share (a measure of the growth in shareholder value) and
EPRA earnings (a measure of the underlying property rental income)
and profit before tax. Other important measures for the Group are
measures relating to the property portfolio and tenancy data such as
passing and contracted rents, weighted average life of leases and
occupancy levels. In addition, the Group has commenced measurement
of sustainability parameters such as energy and waste consumption
using EPRA measures. All of these measures are reported on in the
Strategic Report on pages 3 to 48 of this Annual Report.
The Board has proposed a final dividend of 0.8 cent per share (€5.5m)
(31 March 2015: 0.5 cent per share or €3.4m) which will be paid, subject
to shareholder approval, in August 2016. Together with the interim
dividend of 0.7 cent, the total dividend for the financial year is 1.5 cent
per share or c.€10.3m (31 March 2015: 0.8 cent or €5.4m) based on the
number of shares estimated to be in issue at that date.
Hibernia REIT plc elected for Real Estate Investment Trust (“REIT”)
status under section 705E Taxes Consolidation Act 1997. As a result,
the Group does not pay Irish corporation tax or capital gains tax on
the profits or gains from its qualifying rental business in Ireland
provided it meets certain conditions. With certain exceptions, cor-
poration tax is still payable in the normal way on profits from the
Group’s non-core business. The Group purchased two loan portfolios
in prior years 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 intend to hold in
its rental business, and which it has designated as “non-core” assets.
These non-core 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 close to completion with
only 16 assets unsold at financial year end. As they are not part of the
qualifying rental business, the Group may be liable to taxes on any
relevant profits arising from these assets.
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)
c)
d)
e)
f)
it should conduct a Property Rental Business consisting of 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;
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;
at least 75% of the market value of the assets of the Group must
relate to assets of the Property Rental Business;
the aggregate debt shall not exceed an amount of 50% of the market
value of the assets of the Group;
subject to having sufficient distributable reserves, the Group
must distribute at least 85% of its Property Income to its share-
holders by way of a Property Income Distribution for each account-
ing period.
GOVERNANCE 54
Directors’ report
(continued)
At 31 March 2016 the Group had invested all funds (31 March 2015:
€139m remained) from the Group’s secondary equity issue.
In relation to properties under development, where the development
costs exceed 30% of the market value of the property at the commence-
ment 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 the proceeds of any profit on disposal.
The Directors confirm that the Company complied with the REIT
legislation for the financial years ended 31 March 2016 and 2015.
So far as the Directors are aware the Company is not a close company
within the meaning of the Taxes Consolidation Act.
Share capital
At 31 March 2016 the Company had 681,251,285 units of ordinary stock
in issue (31 March 2015: 670,317,459 units).
As approved at an extraordinary general meeting of the Company on
27 October 2015, 10,933,826 units of ordinary stock were issued on 5
November 2015 in part payment of the cost of Internalisation. Approx-
imately €4.5m shares will be issued in relation to performance related
payments for the financial year ended 31 March 2016.
Further information on the Company’s share capital, including that
required by Regulation 21 of the European Communities (Takeover
Bids (Directive 2004/25/EC)) Regulations 2006 is contained in Note 22
to the Group financial statements.
Future developments
The Group continues to look for opportunities to increase the size of
its portfolio and to enhance its shareholders’ returns through leveraging
its capital base. The outlook for the property market is discussed in the
Strategic Report on pages 3 to 48 of this report. We are confident that the
Group is well-placed to deliver further progress in the coming financial
year and beyond.
Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position are set out
in the Strategic Report on pages 3 to 48 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 80 to 136 and in Note 2.(d) to these
financial statements. In addition, Note 29 to the Annual Report includes
details on the Group’s financial risk management and exposures. 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. Therefore the Directors have con-
cluded that the going concern assumption remains appropriate.
Viability statement
The Directors have assessed the prospects of the business and its ability
to meet its liabilities as they fall due over the medium term. They
have concluded that a three year period is an appropriate basis for the
assessment as this is the key period for completion of the Group’s
committed development projects.
Assumptions have been built into the planning process which are based
on a conservative view of the Group’s expected income and investment
profile over this three year horizon.
The Directors have based their assessment on the analysis performed as
part of the Group’s budget forecasting and planning. A number of scenarios
are prepared and kept under continuous review. Sensitivity analysis is
performed to test the potential impact of some of the principal risks and
uncertainties affecting the Group’s activities as described on pages 45
to 48.
For the purposes of this viability statement, worst case budget pro-
jections are used to conduct this assessment. When considering stress
scenarios, the Directors have calculated how significant a deterioration
in underlying operating profits and asset values is required before the
Group breaches its debt covenants or the requirements of the Irish
REIT regime. Having reviewed the results of this exercise, the Directors
consider that all of these scenarios are extremely unlikely to occur
within the three year horizon examined. The current €400m revolving
credit facility extends until November 2020.
Taking all these factors into account, the Directors have a reasonable
expectation that the Group will be able to continue in operation and
meet its liabilities as they fall due over the three year period of their
assessment.
Directors
The business of the Company is managed by the Directors, each of
whose business address is Hibernia REIT plc, South Dock House,
Hanover Quay, Dublin D02 XW94, 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, subject to appropriate
notification requirements.
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. In addition to their
general legal responsibilities, the Directors have responsibility for
the Company's strategy, performance, financial and risk control
and personnel.
HIBERNIA REIT PLCANNUAL REPORT 2016 55
Details on directors’ remuneration are contained in the Remuneration
Committee Report on pages 69 to 71 of this Annual Report.
who are seeking re-appointment at the forthcoming AGM as they
continue to be effective and remain committed to their role on
the Board.
In accordance with provision B.7.1 of the UK Corporate Governance
Code (“the Code”) and the Irish Corporate Governance Annex (the
“Annex”), the Directors individually retire at each AGM of the Company
and submit themselves for re-election if appropriate. No re-appoint-
ment is automatic and all Directors are subject to a full and rigorous
evaluation. One of the main purposes of this evaluation is to assess
each Director’s suitability for re-election. The Board will not recom-
mend a Director for re-election if the individual concerned is not
considered effective in carrying out their required duties.
In the financial year under review, each Director has been subject to
the evaluation process recommended by the Code. On this basis, the
Chairman and the Board are pleased to recommend those Directors
Substantial shareholdings
Directors’ interests in share capital as at 31 March 2016
The interests of the Directors and Company Secretary in the shares of
the Company are set out in the Report on the Directors’ Remuneration
on pages 69 to 71. This is further discussed in Note 32 to the Group
Financial Statements. The Directors and the Company Secretary have
no beneficial interests in any of the Group’s subsidiary or associated
undertakings.
As at 31 March 2016 the Company has been notified of the following substantial interests in the Company’s shares:
Holder
Soros Fund Management LLC
Wellington Management Company LLP
Oppenheimer Funds Inc.
Invesco
TIAA-CREF Investment Management LLC
Zurich Life Assurance plc
Morgan Stanley Investment Management Limited
As at 2 June 2016 the Company has been notified of the following changes:
Holder
Soros Fund Management LLC
Wellington Management Group LLP
Morgan Stanley Investment Management Limited
BlackRock, Inc.
Holding
'000 shares
46,902
39,941
34,839
34,352
33,370
20,951
20,688
%
6.88
5.86
5.11
5.04
4.89
3.07
3.04
Holding
'000 shares
%
38,477
32,183
27,926
21,026
5.64
4.72
4.10
3.09
GOVERNANCE
56
Directors’ report
(continued)
Corporate governance
Annual Report
The Group is committed to high standards of corporate governance,
details of which are given in the Corporate Governance Report on
pages 57 to 74 which forms part of the Directors’ Report.
Sustainability
The Group is committed to ensuring ethical and sustainable practices
for the benefit of all our stakeholders. More details on our policies and
progress can be found in our Sustainability Report on pages 35 to 41.
Accounting records
The Directors believe that they have complied with the provisions of
sections 281 to 286 of the Companies Act 2014 with regard to the
accounting records by employing accounting personnel with appro-
priate expertise and by providing adequate resources to the finance
function. The accounting records of the Company are maintained at
the registered office located at South Dock House, Hanover Quay,
Dublin, D02 XW94, Ireland.
Political contributions
The Board, having reviewed the Annual Report in its 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 62 to 66 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 under-
standable and provides the information necessary for shareholders 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 consolidated
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 judge-
ments and key estimates as presented in the consolidated financial
statements and where appropriate discussed these items with the
external auditor.
The Group made no political contributions during the financial year.
Annual General Meeting
Financial risk management
The financial risk management objectives and policies of the Company
are set out in Note 29 to the consolidated financial statements.
Independent auditor
The auditor, Deloitte, Chartered Accountants, continues in office in
accordance with section 383 of the Companies Act 2014. Under Irish
legislation, the Company’s external auditor is automatically reapp-
ointed each year at the AGM unless the meeting determines otherwise
or the auditor expresses its unwillingness to continue in office. How-
ever, a resolution confirming that they will be reappointed will be
included as ordinary business at the Annual General Meeting.
Events after the reporting date
These are described in Note 33 to the consolidated financial
statements.
The second Annual General Meeting of the Company was held on 30
July 2015. In addition, an Extraordinary General Meeting was held on
27 October 2015 to approve the internalisation of the Investment
Manager. The third Annual General Meeting will be held on 26 July
2016. Notice of the 2016 AGM, together with details of special business
to be considered at the meeting, will be circulated to the shareholders
in June 2016.
Mr Kevin Nowlan
Chief Executive Officer
2 June 2016
Mr Thomas Edwards-Moss
Chief Financial Officer
2 June 2016
HIBERNIA REIT PLCANNUAL REPORT 2016 Corporate governance report
57
Chairman’s corporate governance statement
Financial year to 31 March 2016
The financial year ended 31 March 2016 saw substantial change with
the internalisation of the Investment Manager. This was legally com-
pleted in November 2015 and in the planning and implementation
stages, we as a Board maintained a close overview of all strands of the
project. WK Nowlan REIT Management Limited (the Investment
Manager) remained approved as the alternative investment fund
manager (“AIFM”) under the European Union (Alternative Invest-
ment Fund Managers) Regulations 2013 (as amended) (“the AIFM
Authorisation”) at 31 March 2016. The Company has applied to the
Central Bank for approval as an Internally Managed Alternative
Investment Fund and awaits approval.
Throughout the financial year, the Company complied with all relevant
provisions of the UK Corporate Governance Code (“Irish Code), the UK
Corporate Governance Code 2014 (“UK Code”) and the Association of
Investment Companies Code of Corporate Governance (“AIC Code”).
During the financial year we reviewed our corporate governance
arrangements in light of the UK Code amendments.
Company restructuring
As a result of the Internalisation, the Company now has an executive
structure and we have transferred the procedures and policies that
were in place in the Investment Manager into the Company and put
them directly under our supervision. There is a clear division of respon-
sibility between the Board and executive management. Reflecting
this change we added a Remuneration Committee at Board committee
level and several executive committees as listed in this report. The
Remuneration Committee was constituted in February 2016 and reports
here for the first time. In addition to the Remuneration Committee, we
have Audit and Nominations Committees.
The Audit Committee continues to have a wide scope of work, and is
an important factor in our being able to state our belief that this Annual
Report and consolidated financial statements, taken as a whole, is
fair, balanced and understandable, and provides the information
necessary to assess the Group’s performance and prospects.
Our role in strategy and risk
We believe good governance requires the Board to have close engage-
ment with all aspects of governance and the business so that we have
an in depth knowledge of the business and a clear understanding of
the challenges and risks that it faces. As Chairman, it is my respon-
sibility to ensure we are effective in our roles and that we have focused
on strategic matters as well as the internal controls and risk manage-
ment. The Non-Executive Directors and Management Team held a
strategy day in April 2016. With all our cash raised by share issues
now invested and the new €400m revolving credit facility starting
to be drawn, it is particularly important that we continue to assess
and refine our strategy to ensure it delivers optimal returns for our
stakeholders.
Risk management is another important area of focus for our Board
and we have provided a separate section elaborating on our measures
to identify, manage and mitigate risks on pages 42 to 48 of this Annual
Report. In addition, we performed an overview of the Company’s risk
framework during the financial year and we keep the process of iden-
tifying and monitoring these risks under constant and close review
– the Risk and Compliance Officer reports on compliance and risks at
every Board meeting.
GOVERNANCE 58
Corporate governance report
(continued)
Stakeholder engagement
Board evaluation
I see engagement with all our stakeholders as an important part of
our role. We talk about engagement with our shareholders in
Communication with shareholders on pages 74 of this report. We also
engage actively with other providers of capital such as our bankers.
We signed a new revolving credit facility for €400m during the financial
year and also put in place financing for the Windmill Lane joint
arrangement. We actively manage covenant compliance and encourage
open communication with our capital providers.
The formation of the Windmill Lane joint arrangement has enabled
us to manage our development risk and funding requirements appro-
priately. We act as managers of the development through one of our
subsidiaries and this too has been actively managed by the Board in
developing controls and communication with our partner. Further
information on our joint arrangement is found in Note 18 of the Annual
Report.
We need to recognise the role and importance of our employees’ con-
tribution. They are also important stakeholders in our Group. It is
particularly important that non-executive and executive directors,
as well as other senior managers, continue to communicate effectively
and constructively. This was in place with the Investment Manager;
it continues in our new structure. The executive committee structure
aids this, with the inclusion of non-executive and executive directors
and employee representatives to ensure full communication. Aside
from formal membership of the committees, all employees that have
roles in each area are invited to the bi-weekly meetings and every two
months there is a meeting for all staff at which each department gives
an update on their area of responsibility. With these mechanisms we
hope to continue and grow the team spirit that has driven the Company
so successfully in its first years of operation.
The composition and performance of the Board and its committees
were reviewed during the financial year. In general, there was satis-
faction with the composition and performance of the Board. One minor
concern was that attendance in person could be difficult given the
large number of ad hoc meetings called at short notice. Many of these
were as a result of the Internalisation and a high level of acquisitions
as we rolled out our capital raised. The number of meetings is therefore
expected to reduce significantly as business settles into normal levels
of activity. Another point made was that we should keep the need for
an internal audit function under review. This need is reviewed regularly
and, at the moment, we are comfortable that there is appropriate oversight
for the nature and complexity of the business.
During the financial year the Company Secretary has provided strong
support in ensuring that we have all the information we need and in
advising us on governance matters.
In 2016/17 our challenge is to continue to grow the organisation in a
safe and measured way, ensuring that effective risk management
remains a priority and that we continue to keep pace with develop-
ments in corporate governance.
Daniel Kitchen
Chairman
2 June 2016
HIBERNIA REIT PLCANNUAL REPORT 2016 59
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 complies with the relevant requirements and procedures as set out by the Central Bank of Ireland and
the Irish and London Stock Exchanges. The main governance requirements are listed in the Listing Rules of the Irish and London
Stock Exchanges, the Irish Corporate Governance Annex to the UK Corporate Governance Code (“Irish Code”), the UK Corporate
Governance Code 2014 (“UK Code”) and the Association of Investment Companies Code of Corporate Governance (“AIC Code”).
The Company has applied the UK Corporate Governance Code due to the listing on the London Stock Exchange. To this end, the
Board has established Audit, Remuneration and Nominations Committees, as described below, comprised entirely of Independent
Non-Executive Directors.
During the financial year the Board reviewed changes in corporate governance recommendations arising from changes to the UK Code which
apply for the first time to this accounting period. The terms of reference of the Board committees were revised accordingly. The Company also
noted the commencement of the provisions of the Companies Act 2014 (“the Act”) during the financial year.
The role of the Board
The Board has reserved the following matters for its direct stewardship
and decision making:
• Strategy and oversight
• Board composition, committees of the Board and the company
secretary
• Appointment and oversight of delegates
• Corporate structure and share capital
• Risk management
• 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 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 ade-
quately prepared for the meetings. The Company Secretary is respon-
sible 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. Standing items include man-
agement accounts for the period, risk reporting, portfolio management
and development progress as well as cash management and other
operational reports.
The Board oversees the performance of the Group’s activities.
Management has discretionary authority to enter into transactions
for and on behalf of the Group save for certain matters which require
the consent of the Board. The Board is obliged to challenge, supervise
and instruct management at a high level. The Board reviews the Group
and Company's management accounts on a quarterly basis.
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 appoint-
ment. 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.
GOVERNANCE 60
Corporate governance report
(continued)
Details of the remuneration of Directors are set out in the Report of
the Remuneration Committee on pages 67 to 71.
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.
The Company has established a policy on induction procedures
for new directors. On appointment, new directors are provided with
induction training.
Board and Committee performance
An externally facilitated evaluation will be completed every three years.
A self-evaluation is completed every year. The annual self-evaluation
of the Board and Committees took place in the first quarter of 2016. 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 demon-
strate commitment to the role (including commitment of time for Board
and Committee meetings and any other duties).
Directors’ attendance at Board and Committee meetings
Directors’ attendance at Board meetings
The Board was satisfied with the performance, skills, and experience
of its members for the financial year under review. Due to Internalisation
and investment activity, there were yet again an unusually high number
of meetings and as a result some members had to attend ad hoc meetings
by telephone.
As at the date of this report, there are seven Directors on the Board,
five 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 also serves the Company in an advisory capacity. 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 50 to 52.
Name
Daniel Kitchen
Colm Barrington
Thomas Edwards-Moss
Stewart Harrington
Kevin Nowlan
William Nowlan
Terence O'Rourke
For financial year ended 31 March 2016:
For financial year ended 31 March 2015:
Number of meetings
held while a Board
member
Number of meetings
attended while a
Board member
Number of meetings
held while a Board
member
Number of meetings
attended while a Board
member
17
17
7
17
7
17
17
17
17
7
17
7
13
17
17
17
-
17
-
17
17
16
14
-
16
-
15
16
HIBERNIA REIT PLCANNUAL REPORT 2016
61
Directors’ attendance at Board Committee meetings
For financial year ended 31 March 2016:
For financial year ended 31 March 2015:
Number of meetings
held while a Board
member
Number of meetings
attended while a
Board member
Number of meetings
held while a Board
member
Number of meetings
attended while a
Board member
5
5
5
1
1
1
1
1
1
1
1
5
5
5
1
1
1
1
1
1
1
1
5
5
5
1
1
1
1
n/a
n/a
n/a
n/a
5
5
5
1
1
1
1
n/a
n/a
n/a
n/a
Committees of the Board
The Board has established three committees: the Audit Committee,
the Remuneration 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. These are available on the Company’s website http://www.
hiberniareit.com/about-us/corporate-governance.aspx.
Audit Committee
Colm Barrington
Terence O'Rourke
Stewart Harrington
Nominations Committee
Daniel Kitchen
Colm Barrington
Stewart Harrington
Terence O'Rourke
Remuneration Committee
Colm Barrington
Stewart Harrington
Daniel Kitchen
Terence O’Rourke
Where appropriate the Board also establishes Board Committees on
an ad hoc basis to deal with specific matters that arise throughout the
year. The membership of such committees will depend on the purpose
for which it is established and will take into account the skills and
experience required.
The Statement of Directors’ Responsibilities is set out on page 75.
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 inter-
mediary for the other Directors when necessary.
• facilitate shareholders if they have concerns which contact through
the normal channels of Chairman, Executive Management 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 any issues and concerns of major
shareholders.
GOVERNANCE
62
Corporate governance report
(continued)
H I B E R N I A R E I T P L C
A N N U A L R E P O R T 2 0 1 6
Audit Committee
Chairman of the Audit Committee:
Terence O’Rourke
Members of the Committee:
Colm Barrington, Stewart Harrington
Chairman’s report
Report of the Audit Committee
The Audit Committee is chaired by Terence O'Rourke, who is an inde-
pendent non-executive Director and is considered by the Board to have
sufficient financial experience and sufficient understanding of finan-
cial 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 Audit Committee is responsible for:
• monitoring the financial reporting process
• monitoring the effectiveness of internal control and risk manage-
ment systems
• monitoring the statutory audit of the annual and consolidated
financial statements and the work on the interim report
• review and monitor the independence of the statutory auditor, and
the provision of additional services by the auditor
The full Terms of Reference for the Audit Committee are published on the
Group’s website, http://www.hiberniareit.com/about-us/corporate-governance.
aspx.
Of particular note in this financial year was the Internalisation of the
Investment Manager and the resultant impact on processes and con-
trols. As the Audit Committee previously had oversight of the role of
the Investment Manager, this change had less impact than might
have been expected. The most important part of our work on this
transaction came from the due diligence and legal framework as well
as the accounting for the transaction. The Committee met five times
during the year.
We also carried out our second self-evaluation and this examined
both our own work and our interactions with external assurance such
as the external auditor 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 of public announcements
is sufficient and effective. There were no issues arising from
this evaluation.
During the year we bedded down the investment property portfolio,
working on enhancing controls and oversight. We worked with the
external auditor and valuers to ensure the proper recognition
of significant issues such as Internalisation and the fair value of
properties.
In the coming financial year the property portfolio is expected to
continue to grow as the Group leverages its equity, 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
2 June 2016
63
The Audit Committee meets regularly, 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
Deloitte
CBRE
Reason for attendance
The independent auditor attends to present its plans in respect of the annual audit and interim review, its
analysis of the risks it sees in the Group, the results of its audit and review(s), and its 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
Company
Representatives of the Company, 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 2015/16 were as follows:
Principal responsibilities
Key areas discussed in 2015/2016
Reporting and external audit
• Monitoring the integrity of the Group and
• Key documents of internalisation, interim and
Company financial statements and any other
formal announcement relating to the
Company’s financial performance, business
model and strategy; review significant
financial reporting issues and all other
material disclosure obligations.
• Policy on the supply of non-audit services by
the external auditor, taking into account any
relevant ethical guidance on the matter.
• Review and discussion of the external
auditor’s audit plan and ensuring that it is
consistent with the Group's overall risk
management system.
• Assessment of the external auditor’s
performance, qualifications, expertise,
resources, independence and their terms of
reference, 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.
• Review of all reports to recommend to the
Board that the annual report and financial
statements, taken as a whole, is fair balanced
and understandable and provides the
information necessary for shareholders to
assess the Company’s position and perfor-
mance, business model and strategy.
annual results reviewed.
• Interim review plan for September 2015 and the
audit plan for the financial year ending 31 March
2016 reviewed with external auditor, including the
engagement letters.
• Met the auditor both with and without the presence
of management. Considered audit scope, risks
assessment, results and recommendations.
Discussed materiality.
• Review of significant items of judgement and
recommendations to the Board in terms of
reporting for specific items; newly adopted
accounting policies reviewed.
• Review of Group forecasts and cash flow projections
particularly with regard to going concern and
viability assessments.
• Review of compliance with covenants and other
significant risk ratios.
• Reviewed the supply of non-audit services by the
auditor and engaged KPMG for tax services.
• Met with the valuers’. Discussed the valuation
approach, methods used, interaction with manage-
ment, availability of information and access to the
properties.
• Cash positions and depositary review.
GOVERNANCE 64
Corporate governance report
(continued)
Risk and internal control
Other
Principal responsibilities
Key areas discussed in 2015/2016
• Review of the adequacy and effectiveness of the
Group’s internal financial controls and internal
control and risk management systems in par-
ticular with regard to the changes arising from
Internalisation.
• Reviewed the risk management framework developed
by the Risk and Compliance Officer for the Group.
• This included an overview of the risk management
structure, the risk appetite, the impact of the main
risks and risk reporting.
• Assess the principal risks of the Group.
• Review of the risk register.
• Review the disclosures made on risk and inter-
nal control in the annual report.
• Procedures on the management and security
of information technology.
• Verification that procedures in place comply
with applicable legislation, the Listing Rules
and the Irish REIT Regime guidelines.
• The review of the operation of the Company's
procedures for the detection of fraud, bribery,
and compliance.
• Monitoring the necessity or otherwise of an internal
audit function on an ongoing basis.
• Discussed the need to carry out a risk assessment on
IT security. Agreed to complete risk assessment in
2016/17 together with actions to be implemented.
• Review of the Audit Committee’s effectiveness.
• Gap analysis of compliance with the Irish Corporate
Governance Annex to the UK Corporate Governance
Code (“Irish Code), UK Corporate Governance Code
2014 (“UK Code”) and the Association of Investment
Companies Code of Corporate Governance (“AIC Code”).
• Review the Committee’s terms of reference and
• Compliance overview of REIT related measures.
performance.
• Review of all correspondence with regulators.
• Self-evaluation completed.
The significant issues considered by the Audit Committee during the financial year ended 31 March 2016 and the action taken by the Committee
are set out opposite:
HIBERNIA REIT PLCANNUAL REPORT 2016 65
Significant issues considered
Action taken by Committee
Valuation of the investment
portfolio
The Group works to ensure all the information provided to the independent valuers, CBRE, is complete and
correct and that the results of their valuation judgements are in line with expectations based on whether
their assessment of the market and knowledge of the properties. It also reviews whether the valuation
methods, estimated rental value and market based yields and residual value method for development
properties, are relevant and appropriate to the individual property circumstances. The Audit Committee
challenges the assumptions made, considers the independence of the valuers and reviews the results of
these valuations. It 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.
Windmill Lane development
joint arrangement
Hibernia REIT entered into its first joint arrangement during the financial year. The Audit Committee
reviewed management’s treatment of the arrangement and its approach to recognising the assets and
liabilities and profits or losses of the arrangement.
Internalisation
Performance related
payments
Management prepared a detailed memorandum examining the accounting implications for the internal-
isation transaction which the Audit Committee has reviewed, challenged and agreed the accounting
treatment. This assessment detailed how the various payments under the share purchase agreement were
accounted for. The conclusions reached and the basis for these are outlined in Note 2.f to the financial
statements.
As part of the settlement of the business acquisition relating to the former Investment Manager, the
Company is obliged to make payments contingent on Group performance and in line with those that would
have been due under the performance fees calculation within the Investment Management Agreement.
The Audit Committee has reviewed these calculations and provisions relating to these amounts and con-
firmed Management’s estimates.
Recognition of payments
relating to lease surrenders
During the financial year, the Group received substantial amounts relating to lease breaks. The Audit
Committee reviewed Management’s recognition criteria and approach as set out in accounting memoranda
and concurred with their assessment.
Re-appointment of the external auditor
The Audit committee has recommended to the Board that the statutory
audit firm Deloitte, should be re-appointed for the coming financial
year. Under the Articles of the Company, the reappointment will be
tabled at the Annual General Meeting for shareholder approval. The
committee has reached this recommendation after due consideration
of the auditor’s qualification, expertise and resources, effectiveness
and independence.
In the course of arriving at this recommendation the Audit Committee
completed a detailed assessment of these factors including the key
points below:
• Confirmation with the auditor that there are no issues concerning
its status as a Statutory Auditor or the designation of the audit
engagement partner as a responsible individual.
• The independence and objectivity of the audit partner and senior
audit staff especially in its interaction with management.
• The quality of the audit partner and audit staff from a technical
accounting and auditing perspective, including their industry
knowledge and their specialist technical expertise.
• Whether issues were raised at the right time by the appropriate level
of audit staff with the appropriate Company staff and in particular
the level and quality of communication with the Audit Committee.
The outcome of this assessment confirmed that the auditor was per-
forming well, adding value to the control process, had a good relation-
ship with both Audit Committee and management and was sufficiently
independent and technically qualified to justify the recommendation
to re-appoint.
Deloitte were appointed as first statutory auditor to the Company in
2013. The Audit Committee will keep their tenure under review in
light of best practice and upcoming legislation.
In accordance with Section 383(2) of the Companies Act 2014 the auditor
has expressed its willingness to continue in office. Therefore, the
Board intends to recommend the reappointment of the auditor at the
2016 AGM in accordance with article 53 of the Articles of Association
of the Company.
GOVERNANCE Internal audit
The Audit Committee has reviewed the business model under which
the Company operates and decided, in light of the nature, scale, com-
plexity 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 Group’s internal monitoring
procedures, any internal audit functions in key service providers, on
reviews by the Depositary, and on external audit comment. 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 recommen-
dation to the Board.
Depositary
The Group had €23m (31 March 2015: €139m) in cash at the financial year
end. The depositary is responsible for monitoring the safe keeping of these
assets in accordance with the Group’s policy on cash management.
Approval of reports
The Annual Report and Financial Statements were considered in draft
on 17 May 2016. The Preliminary Statement, which included consoli-
dated financial statements, was approved by the Board on 23 May 2016.
The Annual report was approved by the Board on 2 June 2016.
66
Corporate governance report
(continued)
Non-audit work carried out by the external auditor during the
financial year ended 31 March 2016
The external auditor has carried out a significant amount of work
during the financial year ended 31 March 2016 which is non-audit in
nature.
Non audit services during the financial year arose in two main
areas:
Advice in connection with the acquisition of WK Nowlan REIT Management
Limited and Nowlan Property Limited: 46% (€83k) of non-audit fees related
to work by the external auditor. The Audit Committee consider that the
engagement of the external auditor on this project was both appropriate
and reasonable. The Committee is also of the opinion that the under-
taking of this assignment by the external auditors 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: 54% (€99k) of non-audit fees related to tax advice.
This advice was provided by Deloitte, albeit by partners and staff
unrelated to the audit engagement team. The Group used Deloitte 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 recommended that tax advice for regular tax issues
as well as future projects is sought from other providers. Accordingly,
the Group appointed KPMG as their retained tax advisers in March
2016.
The quantum of the non-audit fees is deemed non-substantial relative
to the overall size of Deloitte’s firm-wide fee income.
Deloitte is a tenant of Hardwicke House, which is an investment
property of the Group. Deloitte were in situ when the Group acquired
its interest in the building and all lease arrangements are at arm’s
length. Deloitte 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.
HIBERNIA REIT PLCANNUAL REPORT 2016 67
Remuneration Committee
Chairman of the Remuneration Committee:
Mr Colm Barrington
Members of the Committee:
Mr Daniel Kitchen, Mr Stewart Harrington,
Mr Terence O’Rourke
Constitution
The Remuneration Committee was established in February 2016 following
the internalisation of the Investment Manager. The Remuneration
Committee is responsible for ensuring that the Company’s overall
remuneration policy is consistent with the strategic objectives of the
Company and takes account of risk management implications. The
Remuneration Committee is responsible for oversight of remuneration
across the Company with specific regard for Directors and senior man-
agement. The terms of reference are compliant with the UK Corporate
Governance Code 2014 (the “UK Code”) and are available on the Company’s
website at http://www.hiberniareit.com/about-us/corporate-governance.aspx.
Chairman’s report
Dear Shareholder,
On behalf of my colleagues on the Remuneration Committee, I am pleased
to present the first Remuneration Committee Report of the Group for the
financial year ended 31 March 2016.
amendments to compensation packages until this is done. Part of this
incentive arrangement is a Long Term Incentive Plan or “LTIP”. This
plan aims to encourage staff retention and align their interests with
those of the Group through the payment of a percentage of performance
related rewards through shares in the Company.
Internalisation related payments are outside the remit of this committee.
These were determined before the Group or Company had employees or
a remuneration committee. The payments were agreed in the share
purchase agreement for the acquisition of the Investment Manager and
were approved by the shareholders of the Company at the Extraordinary
General Meeting of the Company held on 27 October 2015. We therefore
refer the reader to Note 5 to the financial statements which provides
further information on this.
The Remuneration Committee met for the first time in February 2016.
The first action of the Remuneration Committee was to implement a
remuneration policy. This is summarised below as part of this report.
Colm Barrington
On behalf of the Remuneration Committee
2 June 2016
The Company completed the acquisition of the Investment Manager
(the “Internalisation”) on 5 November 2015 and the transfer of the
employees at the end of December 2015. Kevin Nowlan and Thomas
Edwards-Moss were appointed as the first executive directors of the
Company on 5 November 2015. During the Internalisation process an
external benchmarking exercise was carried out on key management
personnel, including executive directors, and salaries set at or slightly
below market assessments. Mercer was engaged to carry out this
review.
Incentive arrangements are in a transitionary period, and were agreed
as part of the Internalisation process as submitted to shareholders
at our EGM on 27 October 2015. Until the end of the Investment
Management contract period in November 2018, variable incentive
payments for staff internalised will be principally funded out of the
performance fee that would have been due under this contract. At the
end of this period, a full revision of the remuneration policy will be
implemented. In the meantime, while there may be some review of
salaries related to market increases, there will be no substantial
GOVERNANCE 68
Corporate governance report
(continued)
Directors’ remuneration policy report
The following section sets out the Directors’ remuneration policy. This
policy is to be submitted as an advisory resolution to the AGM of the
Company to be held on 26 July 2016. The policy is reproduced here to
provide ease of reference for shareholders.
As an Irish company, Hibernia REIT plc is not subject to the UK
Directors’ Remuneration Reporting Regulations. However, in line
with best practice, the Group is committed to applying the require-
ments on a voluntary basis insofar as is practicable under Irish legis-
lation. As the Company cannot rely on UK statutory provisions, the
resolution submitted to the AGM is advisory in nature. The annual
remuneration report is also submitted to the AGM on a similar basis.
Remuneration policy
The main aim of the remuneration policy is to align the interests of the
Executive Directors and key management team members with the
strategy and aims of the Group. Pay is intended to be both competitive
and appropriate. The policy takes into account the regulatory environ-
ment, governance standards, the economic status and industry best
practice.
Remuneration principles
• Support the strategy
• Promote sound risk management
• Motivate and retain key individuals without paying more than is
required
• Align the interests of directors and shareholders in long term returns
and NAV creation
Remuneration elements
Base salary
• Provides the basis for the overall market remuneration package and
takes account of the role and skills of the individual
• It is determined by reference to market comparatives where available
and takes account of industry standards, size and complexity, and
the Company’s progress towards its objectives.
• There is no maximum amount but increases will normally be in
line with industry comparatives unless a change in scope of activity
or responsibility warrants a reconsideration of the amount
• It is not performance linked
Pension
• Provides a basis for post-retirement remuneration in line with com-
parable remuneration packages
• Scheme is a defined contribution one with an independent pension
provider and a 5% Company contribution must be matched by a 5%
personal contribution
• It is Company policy not to develop a defined benefits scheme
Benefits
• The purpose is to provide market typical benefits for an overall
effective remuneration package
• Executive Directors receive permanent health and life insurance
• Other benefits may be provided at the discretion of the remuneration
committee either as a once-off or on an on-going basis
• Executive Directors may also be eligible to join all-employee schemes
up to the relevant approved limits
Interim bonus plan
• As a result of Internalisation, the bonus plan will be funded princi-
pally by the performance fee arrangements per the Investment
Management Agreement until its expiry in November 2018: up to
15% of the performance fee due to the vendors of the Investment
Manager will be set aside to fund the bonus plan
• It is contingent on the continuing performance of service by the
individuals concerned
• It includes an LTIP arrangement, applicable only to non-vendor
service providers and employees which is being established
• It does not include directors and employees who were vendors of the
Investment Manager and who are compensated under the terms of
the share purchase agreement subject to clawback in the event of an
early departure as described in Note 5 to the financial statements.
Future bonus plan
Prior to the expiry of the interim arrangements under Internalisation,
the Remuneration Committee will develop a new bonus plan linked
to long term performance of employees including executive directors
as well as to that of the Group and undertake a consultation exercise
with key shareholders. All new employees will enter this plan and
existing employees, including executive directors, will transfer into
the new arrangement in November 2018. Prior to the finalisation of
this plan, separate arrangements will be made for new employees in
the interim. The details have not yet been developed but are under
consideration by the Committee and will be submitted in an advisory
capacity for approval at a future AGM.
Remuneration throughout the Group
The remuneration for all staff in the Group is based on the same prin-
ciples and arrangements as described above relating to executive
directors.
HIBERNIA REIT PLCANNUAL REPORT 2016 69
Non-Executive Director remuneration policy
Non-Executive Directors are paid fees at a level sufficient to attract
individuals of the calibre and qualifications required to manage the
business of the Group effectively. Fees should be appropriate to the
size and complexity of the organisation, the time commitment required
and the qualifications and experience of the individual appointed.
Annual report on remuneration for the financial year ended 31
March 2016
Directors’ remuneration
The Non-Executive Directors do not have service contracts but do
have letters of appointment which reflect their responsibilities and
commitments. Executive Directors have service contracts.
Fees for Non-Executive Directors are agreed by the Board following
recommendation from the remuneration committee. Fees for the
Chairman are determined by the committee. Only basic fees are paid,
no performance related element is considered appropriate. Reasonable
expenses will be reimbursed where appropriate. Training and induc-
tion are provided where relevant.
Succession planning
Succession planning is one of the responsibilities of this committee.
The Group has a flat structure as it is a small team and therefore the
focus is on personal development in order to encourage employees to
become competent across disciplines to provide some level of support
across functions. We have also recognised the contribution of more
experienced individuals who are nearing retirement and wish to work
on a more relaxed and flexible basis. These individuals provide exper-
tise and support that would otherwise be difficult and expensive to
source.
Non-Executive Directors’ remuneration
Name
Daniel Kitchen
Colm Barrington
Stewart Harrington
William Nowlan*
Terence O'Rourke
Totals
Non-Executive Directors’ remuneration
The Non-Executive Directors were appointed for an initial term of
three years. The Company may lawfully terminate a Non-Executive
Director's appointment with immediate effect in certain circumstanc-
es, including where a Non-Executive Director has breached the terms
of his letter of appointment and no compensation would be payable
to a Non-Executive Director in such event.
Annual Fee
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
€'000
100
50
50
50
50
300
100
50
50
50
50
300
100
50
50
-
50
250
*William Nowlan also earned €50,000 for advice given to the Company under a consulting contract. He was also a vendor of the Investment Manager and received payments
under the Share Purchase Agreement as disclosed in Note 5 to the financial statements.
GOVERNANCE
70
Corporate governance report
(continued)
Executive Directors’ remuneration
As discussed above, performance based payments to all employees,
including Executive Directors, are met out of arrangements under the
internalisation agreement. These are described as “Cash Bonus” and
“LTIP” in the table below. A description of the LTIP arrangements is
provided in a separate section below. There are no other performance
related payment arrangements during the period remaining under
the Investment Management Agreement.
Payments to Executive Directors in the period from the date of
appointment (5 November 2015) to 31 March 2016 are as follows:
Executive Directors’ remuneration (audited)
Kevin Nowlan
Thomas Edwards-Moss
Total
Salary
€'000
125
83
208
Benefits
Cash Bonus*
€'000
€'000
-
123
8
8
16
LTIP*
€'000
-
123
Pension
€'000
19
13
32
Total
€'000
152
350
502
123
123
* Mr Kevin Nowlan was one of the vendors of the Investment Manager and therefore receives no variable compensation as he is compensated under the Internalisation Share
Purchase Agreement as disclosed in Note 5 to the financial statements.
Both Mr Kevin Nowlan and Mr Thomas Edwards-Moss were appointed on 5 November 2015.
Conditions of employment
Executive Directors have service contracts with the Company which
can be terminated on six months notice by the individual. The
Committee may determine bonus entitlements that should apply, if
any, in the year of departure. The departure of Kevin Nowlan within
the interim bonus arrangement period may trigger clawback arrange-
ments under the criteria described in Note 5 to the consolidated
financial statements. Mr Thomas Edwards-Moss may be subject to
vesting conditions under the LTIP scheme.
If an Executive Director ceases to be employed by reason of ill health,
injury, redundancy, disability a change of control of the Group or by
virtue of any other reason at the Committee’s discretion, the extent
to which awards may vest or be clawed back may be adjusted by the
Committee.
Executive Directors’ contracts are available for shareholders to view
at the AGM.
Fixed remuneration arrangements
Executive Directors’ annual salary and other fixed remuneration arrangements
Kevin Nowlan
Thomas Edwards-Moss
Total
These conditions apply from 5 November 2015.
Salary
€'000
300
200
500
Benefits
Pension
€'000
€'000
19
17
36
45
30
75
Total
€'000
364
247
611
HIBERNIA REIT PLCANNUAL REPORT 2016
71
Performance related remuneration scheme (“PRR”)
All employees internalised in the financial year, including executive
directors, are entitled to participate in the performance related remu-
neration scheme, save Mr Kevin Nowlan and Mr Frank O’Neill who,
as a vendors of the Investment Manager, are compensated through
the internalisation arrangements as disclosed in Note 5 to the Financial
Statements.
An interim scheme applies in the period to the expiry of the Investment
Management Agreement. During this period there is a fixed PRR in
place, which is dependent on the level of performance of the Group.
This scheme is funded out of the performance fees and hence directly
linked to any performance fees earned. 50% of any amount payable
will be paid to employees in cash; the other 50% will be awarded in
shares, which will vest in three years from the start of the financial
year to which they relate.
In addition to the PRR which is dependent on the Group perform-
ance, a discretionary amount may be paid which is dependent on the
employee’s performance.
Nominations Committee
Chairman of the Nominations Committee:
Daniel Kitchen
Members of the Committee:
Colm Barrington, Stewart Harrington, Terence O’Rourke
Separate arrangements may be set up for any employees who join the
Group post Internalisation.
Report of the Nominations Committee
Interests of Directors and Secretary in share capital
31 March 2016
31 March 2015
Ordinary
shares
% of
Company
Ordinary
shares
% of
Company
Daniel Kitchen
100,883
0.01%
100,000
Colm Barrington
1,100,000
0.16% 1,100,000
Stewart Harrington 100,706
0.01%
100,000
William Nowlan
2,650,589
0.39%
600,000
Terence O'Rourke
151,059
0.02%
150,000
Kevin Nowlan*
4,249,237
0.62%
147,620
0.01%
0.16%
0.01%
0.09%
0.02%
0.02%
Thomas
Edwards-Moss*
Company Secretary,
Chartered
Corporate Services
95,921
0.01%
95,250
0.01%
-
-
-
-
* Kevin Nowlan and Thomas Edwards-Moss are executive directors and were appointed
on 5 November 2015. William Nowlan and Kevin Nowlan are related. 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 2016 and the date of
this report.
The Nominations Committee met once during the financial year ended
31 March 2016. 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.
The Nominations Committee is responsible for the appointments to
the Board and meets at least once in a financial year and as otherwise
directed. The Terms of Reference for the Nominations Committee,
which were updated in light of the revisions to the UK Code, are avail-
able on the Group’s website at http://www.hiberniareit.com/about-us/
corporate-governance.aspx, were confirmed in January 2016 as effective
and sufficient.
An evaluation of the Committee’s work was carried out in the first
quarter of 2016. Given that there have been no appointments made to
the Board during the period other than Mr Kevin Nowlan and Mr
Thomas Edwards-Moss as a result of the Internalisation of the
Investment Manager, the work of the Committee has been limited.
However, this self-assessment found that the Committee is satisfied
that there is the right mixture of skills involved on the Committee
that the processes in place to make new appointments are appropriate
and in line with best practice.
GOVERNANCE
72
Corporate governance report
(continued)
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 and complies
with the requirements of the UK Code and Companies Act 2014.
Diversity
The Group recognises the importance of diversity, not only in gender
but in background and experience. As a young company, the selection
process has focused on people with strong experience in relevant fields
that can provide the necessary support to ensure we grow confidently
and to help fill gaps in internal expertise.
We do not believe that selection on gender alone should be a basis; we
prioritise diversity of candidate qualification and experience and,
where possible, consider gender as a secondary basis. The organisation
will continue to build this into recruitment policies in the future. The
Nominations Committee keep this in mind in considering
appointments.
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.
Management structure
The management of the Group is structured over the following main areas:
Board of Directors
Investment
Committee
Objective: To consider all
investment decisions
Meets: fortnightly
Members:
• Kevin Nowlan (CEO)
• Tom Edwards-Moss (CFO)
• Richard Ball (CIO)
• Frank O’Neill (COO)
• William Nowlan
• Stewart Harrington
• Frank Kenny (Senior Adviser)
Development
Committee
Portfolio Operations
Committee
Finance and Investor
Relations
Objective: To monitor all
developments planned and in
progress
Meets: fortnightly
Members:
• Kevin Nowlan (CEO)
• Tom Edwards-Moss (CFO)
• Richard Ball (CIO)
• Frank O’Neill (COO)
• Frank Kenny (Senior Adviser)
Objective: To manage the assets in
the portfolio
Meets: fortnightly
Members:
• Kevin Nowlan (CEO)
• Richard Ball (CIO)
• Frank O’Neill (COO)
• William Nowlan
• Frank Kenny (Senior Adviser)
Objective: To monitor financial
management, capital use, debt
facilities and investor relations
Meets: fortnightly
Members:
• Kevin Nowlan (CEO)
• Tom Edwards-Moss (CFO)
• Richard Ball (CIO)
• Frank O’Neill (COO)
• William Nowlan
• Frank Kenny (Senior Adviser)
The senior management team on 31 March 2016 were:
Kevin Nowlan
Chief Executive Officer/
Executive Director
Richard Ball
Chief Investment Officer
Tom Edwards-Moss
Chief Financial Officer/ Executive Director
Frank Kenny
Senior Adviser
Sean O’Dwyer
Risk and Compliance Officer
Frank O’Neill
Chief Operations Officer
Group’s assets and to provide or procure the provision of various account-
ing, administrative, reporting, record keeping, regulatory and other
services to the Group. The management team 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 management team ensures that all Directors receive, in a timely
manner, all relevant management, regulatory and financial information.
Representatives of management, as well as the executive directors, are
invited to attend Board meetings where applicable, thus enabling the
Directors to probe further on matters of interest.
In addition to the above, Mr. Mark Pollard commenced on 5 May
2016 in the role of Director of Development.
Internal controls
The management team is responsible for the running of the Group’s
business under the supervision of the Board. Two members of the man-
agement team are also Executive Directors. The management team is
delegated to acquire properties on behalf of the Group, to manage the
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
HIBERNIA REIT PLCANNUAL REPORT 2016 73
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. The following are
the principles under which the internal control system operates:
• a defined schedule of matters reserved to the Board
• a detailed authorisation process
• risk metrics and risks reporting at each scheduled meeting
• formal documentation of all significant transactions
• business and financial planning to include cash flows and scenario
analysis covering a period of three financial years forward on a
rolling basis
Risk management
The Company considers risk management to be a very important
matter. The Board and the Audit Committee 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 management team and are kept under review by the
Audit Committee and the Board.
The Company’s risk management function has the following
objectives:
(a) Safeguard the assets of the Company and identify and manage
• robust assessment of property investment decisions
liabilities;
• performance assessment versus budget on total and individual
project basis
(b) Maintain a risk register;
(c) Maintain the efficiency and effectiveness of the Company's
• benchmarking of performance against external sources, i.e. the
Investment Property Databank (IPD)
Much of the Policies and Procedures Manual is carried across from
the Investment Manager but has been reviewed in light of the new
corporate structure. 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, the authorisations
required to effect those transactions, and the necessary controls to
ensure that only appropriately authorised individuals in the Group
can approve a transaction. In particular, the Policies and Procedures
Manual establishes the necessary controls and authority levels 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 valu-
ations, and the maintenance of registers and other administrative
matters.
The Group maintains a register of errors and breaches which is a
mechanism to detect and deal with failings or weaknesses which may
or may not be significant, but which could result in loss to the Group.
This register records incidents of error or potential error arising from
various sources such as attempted fraud, external service providers
and internal controls. During the financial year ended 31 March 2016
there were four such breaches recorded, none of which resulted from
a failure in internal controls or in material losses. Apart from this
procedure, revisions in internal controls resulted from ongoing work
at improving systems, for example in the preparation of financial
statements, revisions were made to checklists and approval processes
both in light of additional accounting policies and best practice.
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 Company 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.
Risk is managed through a Risk Framework which is prepared, mon-
itored and reported on by the RCO who reports to the Audit Committee
and to the Board at each quarterly Board meeting. The Risk framework
includes a risk matrix that measures risks against agreed limits. The
RCO is also responsible for the compilation of, maintenance and review
of the risk register. In this Risk Register 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.
The Company is satisfied that the risk management function has the
necessary authority, resources, expertise and access to relevant infor-
mation to fulfil its role. Further information on the principal risks are
given on pages 45 to 48.
GOVERNANCE 74
Corporate governance report
(continued)
Model Code on share dealing
Voting rights
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 management team, 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-clear-
ance 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.
Communications with shareholders
The Board intends to continue to communicate with shareholders on
a regular basis.
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.
(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 qual-
ified 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 the 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).
HIBERNIA REIT PLCANNUAL REPORT 2016 Directors’ responsibility statement
75
The Directors, whose names and details are listed on pages 50 to 52
are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable laws and regulations.
Irish Company law requires the Directors to prepare financial state-
ments 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 Act 2014.
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 Act 2014 provides 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. Under company law, the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the assets, liabilities and financial
position of the Company as at the financial year end date and of the
profit or loss of the Company for the financial year and otherwise
comply with the Companies Act 2014.
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;
• state that Group and Company financial statements 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 ensuring that the Group and Company
keeps or causes to be kept adequate accounting records which:
• correctly explain and record the transactions of the Group and
Company;
• enable at any time the assets, liabilities, financial position and profit
or loss of the Group and Company to be determined with reasonable
accuracy;
• enable them to ensure that the financial statements and Directors’
report comply with the Companies Act 2014;
• enable the financial statements to be audited; and
• prepare the financial statements in accordance with International
Financial Reporting Standards as adopted by the European Union
and, as regards the Group financial statements, Article 4 of the IAS
Regulation, and the Listing Rules of the Irish and London Stock
Exchanges.
Directors 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
also required to include a management report containing a fair review
of the business and a description of the principal risks and uncertain-
ties facing the Group. The Directors are also required by applicable law
and the Listing Rules issued by the Irish Stock Exchange to prepare
a Report of the Directors and reports relating to Directors’ remuneration
and corporate governance that comply with that law and those Rules.
The Directors confirm that they have complied with the above
requirements in preparing the Annual Report.
Each of the Directors, whose names and functions are listed on pages
50 to 52, confirms that, to the best of each person’s knowledge and
belief:
• the Annual report and 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 and
Company as at 31 March 2016 and of the result for the financial year
then ended; and
• the Report of the Directors includes a fair review of the development
and performance of the Group’s business and the state of affairs of
the Group and Company at 31 March 2016, together with a description
of the principal risks and uncertainties facing the Group; and
• the Annual Report and financial statements, 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 and Company.
This responsibility statement was approved by the Board of Directors
on 2 June 2016 and is signed on their behalf by:
Mr Kevin Nowlan
Chief Executive Officer
Mr Thomas Edwards-Moss
Chief Financial Officer
GOVERNANCE 76
Independent auditor’s report
to the members of Hibernia REIT plc
Opinion on financial
statements of Hibernia
REIT plc
In our opinion the financial statements:
• give a true and fair view of the assets, liabilities and financial position of the Group and the Company as
at 31 March 2016 and of the Group’s profit for the financial year then ended; and
• have been properly prepared in accordance with the relevant financial reporting framework and in par-
ticular, with the requirements of the Companies Act 2014 and, as regards the group financial statements,
Article 4 of the IAS Regulation.
The financial statements comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive
Income, the Consolidated and Company Statement of Financial Position, the Consolidated and Company Statement
of Changes in Equity, the Consolidated and Company Statement of Cash Flows and the related notes 1 to 33 and (a)
to (p). The financial reporting framework that has been applied in the preparation of the Group and parent Company
financial statements is Irish law and IFRSs as adopted by the European Union.
Going concern and the
Directors’ assessment
of the principal risks
that would threaten the
solvency or liquidity of
the group
As required by the Listing Rules we have reviewed the Directors’ statement contained within Note 2 to the financial
statements that the Group is a going concern.
We have nothing material to add or draw attention to in relation to:
• the Directors' confirmation on page 44 that they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business model, future performance, solvency or
liquidity;
Our assessment of
risks of material
misstatement
• the disclosures on pages 45 to 48 that describe those risks and explain how they are being managed or mitigated;
• the Directors’ statement in Note 2.(d) to the financial statements about whether they considered it appropriate
to adopt the going concern basis of accounting in preparing them and their identification of any material
uncertainties to the Group’s ability to continue to do so over a period of at least twelve months from the date of
approval of the financial statements; and
• the Directors' explanation on page 54 as to how they have assessed the prospects of the group, over what period
they have done so and why they consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the group will be able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
We agreed with the Directors’ adoption of the going concern basis of accounting and we did not identify any such
material uncertainties. 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.
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 Management.
Refer also to Note 17 of the consol-
idated financial statements.
• We obtained an understanding and assessed the design of the controls
the Board has implemented over the valuation process.
• 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 compared the valuation of each investment property held to the val-
uation report prepared by the external valuer and considered any adjust-
ments made in light of the Group’s accounting policies and the require-
ments 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.
HIBERNIA REIT PLCANNUAL REPORT 2016 77
Our assessment of
risks of material
misstatement
Risk of material misstatement
How the scope of our audit responded to the risk
Performance fees
(Share based payments)
The performance fee calculation is
complex in nature which increases
the risk of error. A portion of the
performance fees settlement is via
shares in the Company and there-
fore must be recorded in accord-
ance with the requirements of
share based payments.
• We obtained an understanding and assessed the design of the Group’s
controls over the calculation and approval of the performance fee.
• We considered the inputs to the performance fee calculation and where
appropriate we have compared the inputs to entity data or market data.
• We have examined the calculation of the performance fee to evaluate
whether it is consistent with the investment management agreement.
• We examined the accounting treatment for performance fees to consider
the accounting charge recorded has been accounted for in accordance
with the requirements of IFRS.
• We obtained an understanding of the transaction and the proposed
accounting treatment and evaluated whether the proposed treatment was
consistent with the Group’s accounting policies and the requirements of
IFRS.
• We obtained audit evidence in respect to the nature and substance of the
transaction by reviewing the transaction documentation including the
Share Purchase Agreement.
• We evaluated the disclosures of the transaction in the financial statements
for compliance with IFRS.
Refer also to Note 23 of the consol-
idated financial statements.
Acquisition of the investment
manager
During the financial year the
Group acquired its investment
manager in a transaction whose
consideration consisted of both
cash and shares of the Group and
included a payment in relation to
future services. The recognition of
this transaction required signifi-
cant judgement by the Directors.
The risk relates to the appropriate
accounting treatment and disclo-
sure of the consideration and the
future service value of the trans-
action within the financial
statements.
Refer also to Note 5 of the consoli-
dated financial statements.
The description of risks above should be read in conjunction with the significant issues considered by the Audit
Committee set out on page 65.
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.
FINANCIAL STATEMENTS 78
Independent auditor’s report
to the members of Hibernia REIT plc
(continued)
A N N U A L R E P O R T 2 0 1 6
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 €8,250,000 (2015: €7,000,000) which is below 1% of net
assets.
We agreed with the Audit Committee that we would report to the Committee any audit differences in excess
of €410,000 (2015: €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.
An overview of the scope
of our audit
Our audit scope focused on the Company and its subsidiaries listed in note 31 to the financial statements. The
subsidiaries were subject to a full scope audit. We determined the materiality with reference to the size of
the subsidiary which was lower than Group Materiality.
Opinion on other
matters prescribed by
the Companies Act
2014
Directors’ Report and Corporate Governance Statement
In our opinion the information given in the Directors’ Report is consistent with the financial statements and
based on the work undertaken in the course of the audit the description in the Corporate Governance Statement
of the main features of the internal control and risk management systems in relation to the financial reporting
process and the information required under Regulation 21(2)(c), (d), (f), (h) and (i) of the European Communities
(Takeover Bids (Directive 2004/25/EC)) Regulations 2006 (S.I. No. 255 of 2006) are consistent with the financial
statements and have been prepared in accordance with section 1373 Companies Act 2014. Based on our knowledge
and understanding of the company and its environment obtained in the course of the audit, we have not identified
any material misstatements in this information. In our opinion, the information required pursuant to section
1373(2)(a), (b), (e) and (f) Companies Act 2014 is contained in the Company’s Corporate Governance Statement.
Adequacy of explanations received and accounting records:
• We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
• In our opinion, the accounting records of the Company were sufficient to permit the financial statements to
be readily and properly audited.
• The parent Company Statement of Financial Position is in agreement with the accounting records.
Matters on which we are required to report by exception
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.
HIBERNIA REIT PLC 79
Directors’ remuneration
Under the Listing Rules of the Irish Stock Exchange we are required to review the six specified elements of
disclosures in the report to shareholders by the board on Directors’ remuneration. Under the Companies Act
2014 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
We reviewed the Corporate Governance report for compliance with the following provisions of Section C
“Accountability” of the UK Corporate Governance Code: C1.1; C.2.1 and C3.1 – C3.7. We have nothing to report
arising from our review of these matters.
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 and otherwise
comply with the Companies Act 2014. 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 Company’s members, as a body, in accordance with section 391 of the Companies
Act 2014. Our audit work has been undertaken so that we might state to the Company’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 Groups
and the parent 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 inconsist-
encies, we consider the implications for our report.
Brian Jackson
For and on behalf of Deloitte
Chartered Accountants and Statutory Audit Firm
Dublin
Date: 2 June 2016
FINANCIAL STATEMENTS 80
Consolidated income statement
For the financial year ended 31 March 2016
Revenue
Direct property costs
Net property income
Revaluation of investment properties
Other gains and (losses)
Total income after revaluation gains and losses
Expense
Investment manager fee - base
Performance related payments
Administration expenses
Total operating expenses
Operating profit
Finance income
Finance expense
Profit before tax
Income tax
Profit for the financial year
Earnings per share
Basic earnings per share (cent)
Diluted earnings per share (cent)
The notes on pages 85 to 125 form an integral part of these consolidated financial statements
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
Notes
€'000
€'000
7
32,786
18,769
(2,497)
(725)
30,289
18,044
17
8
5
9
12
12
13
15
15
125,056
80,809
(171)
7,691
155,174
106,544
-
(6,069)
(8,696)
(4,690)
(5,772)
(1,584)
(14,765)
(12,046)
140,409
94,498
153
399
(4,240)
(1,974)
136,322
92,923
475
(691)
136,797
92,232
20.2
20.1
18.4
18.3
HIBERNIA REIT PLCANNUAL REPORT 2016
Consolidated statement of comprehensive income
For the financial year ended 31 March 2016
81
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
Notes
€'000
€'000
Profit for the financial year
136,797
92,232
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Gain on revaluation of property
23
323
Items that may be reclassified subsequently to profit or loss
Net fair value (loss) on hedging instruments entered into for cash flow hedges
23
(112)
Total other comprehensive income
211
-
-
-
Total comprehensive income for the financial year attributable to owners of the Company
137,008
92,232
The notes on pages 85 to 125 form an integral part of these consolidated financial statements.
FINANCIAL STATEMENTS
82
Consolidated statement of financial position
As at 31 March 2016
Assets
Non-current assets
Property, plant and equipment
Investment Property
Other financial assets
Trade and other receivables
Total non-current assets
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
Other reserves
Retained earnings
Total equity
Non-current liabilities
Financial liabilities
Trade and other payables
Total non-current liabilities
Current liabilities
Trade and other payables
Payable due for investment property
Total current liabilities
Total equity and liabilities
IFRS NAV per share (cent)
Diluted IFRS NAV per share
EPRA NAV per share
31 March
2016
31 March
2015
Notes
€'000
€'000
16
17
19
20
20
21
22
23
24
25
26
2,946
-
927,656
641,296
365
11,666
152
-
942,633
641,448
18,880
23,187
42,067
3,921
45,988
9,046
139,048
148,094
18,499
166,593
988,621
808,041
672,398
657,987
6,136
218,040
896,574
5,772
89,375
753,134
72,724
-
72,724
-
-
-
26
19,323
-
19,323
12,210
42,697
54,907
988,621
808,041
27
27
27
131.6
130.7
130.8
112.4
111.6
111.8
The notes on pages 85 to 125 form an integral part of these consolidated financial statements. The consolidated financial statements on pages
80 to 125 were approved and authorised for issue by the Board of Directors on 2 June 2016 and signed on its behalf by:
Mr Kevin Nowlan
Chief Executive Officer
Mr Thomas Edwards-Moss
Chief Financial Officer
HIBERNIA REIT PLCANNUAL REPORT 2016
Consolidated statement of changes in equity
83
Balance at start of financial year
Profit for the financial year
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
Financial year ended 31 March 2016
Notes
Share capital
Share
premium
Retained
earnings
Other
reserves
Total
€'000
€'000
€'000
€'000
€'000
67,032
590,955
89,375
5,772
753,134
-
-
-
-
136,797
-
136,797
-
211
211
67,032
590,955
226,172
5,983
890,142
14
22
22
11
-
-
-
-
-
-
1,093
13,318
(8,121)
-
(11)
-
-
-
-
(8,121)
-
(11)
153
14,564
Balance at end of financial year
68,125
604,273
218,040
6,136
896,574
Financial year ended to 31 March 2015
Notes
Share capital
Share
premium
Retained
earnings
Other
reserves
Total
€'000
€'000
€'000
€'000
€'000
Balance at start of financial year
38,500
333,312
(846)
-
370,966
Total comprehensive income for the financial year
Profit for the financial year
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
-
-
-
-
92,232
-
38,500
333,312
91,386
14
22
22
-
-
(2,011)
28,532
271,052
-
-
(13,409)
-
-
-
-
-
-
-
-
-
-
92,232
-
463,198
(2,011)
299,584
(13,409)
5,772
5,772
Balance at end of financial year
67,032
590,955
89,375
5,772
753,134
The notes on pages 85 to 125 form an integral part of these consolidated financial statements.
FINANCIAL STATEMENTS
84
Consolidated statement of cash flows
For the financial year ended 31 March 2016
Cash flows from operating activities
Profit for the financial year
Adjusted non cash movements:
Revaluation of investment properties
Other gains and losses
Share based payments
Prepaid remuneration
Depreciation
Rental income (payable)/paid in advance
Finance (income)/expense
Income tax
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 fixed assets
Cash paid for investment property
Sale of investment property
Purchase of non-current assets classified as held for sale
Proceeds from the sale of non-current assets classified as held for sale
Net proceeds from loans
Business acquisition (Net of acquired cash)
Prepaid remuneration
Tax paid
Net finance income and expense
Net cash flow absorbed by investing activities
Cash flow from financing activities
Dividends paid
Borrowings drawn
Arrangement fee paid
Derivatives premium
Proceeds from the issue of ordinary share capital
Share issue costs
Net cash inflow from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents start of financial year
(Decrease) in cash and cash equivalents
Net cash and cash equivalents at end of financial year
The notes on pages 85 to 125 form an integral part of these consolidated financial statements.
Notes
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
136,797
92,232
(125,056)
(80,809)
(2,312)
5,925
4,191
65
(1,807)
4,087
(475)
21,415
(3,005)
8
(7,691)
5,772
-
-
9
1,575
691
11,779
(1,061)
3,369
18,418
14,087
(46)
-
(208,159)
(457,409)
4,951
-
12,226
3,476
237
(7,104)
(384)
(2,813)
-
(541)
6,297
2,681
-
-
-
(1,421)
(197,616)
(450,393)
(8,121)
75,529
(3,718)
(342)
(2,011)
-
(500)
-
-
(11)
299,584
(13,409)
63,337
283,664
(115,861)
(152,642)
139,048
291,690
(115,861)
(152,642)
23,187
139,048
16
28
28
5
14
25
25
22
22
HIBERNIA REIT PLCANNUAL REPORT 2016
Notes forming part of the Annual Report
85
1. General information
Hibernia REIT plc, the “Company”, together with its subsidiary and associated undertakings as detailed in Note 31 (the “Group”), is engaged
in property investment (primarily commercial) in the Irish (primarily Dublin) market with a view to maximising its shareholders’ returns.
The Company is a public limited company and is incorporated and domiciled in Ireland. The address of the Company’s registered office is South
Dock House, Hanover Quay, Dublin, D02 XW94, Ireland. The Company was incorporated on 13 August 2013 and registered as a public limited
company on 8 November 2013. The registered number of the Company is 531267.
The Ordinary Shares of the Company are listed on the primary listing segment of the Official List of the Irish Stock Exchange (the ‘‘Irish
Official List’’) and the premium listing segment of the Official List of the UK Listing Authority (the ‘‘UK Official List’’ and, together with the
Irish Official List, the ‘‘Official Lists’’) and are traded on the regulated markets for listed securities of the Irish Stock Exchange and the London
Stock Exchange plc (the ‘‘London Stock Exchange’’).
2. Basis of 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),
and the Companies Act 2014. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB.
The Group has not early adopted any forthcoming IASB standards. Note 3 sets out details of such upcoming standards.
b.
Functional and presentation currency
These consolidated financial statements are presented in Euro, which is the Company’s functional currency and the Group’s presentation
currency.
c.
Basis of 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 Act 2014. The Group financial statements therefore
comply with Article 4 of the EU IAS Regulation.
The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of investment properties,
owner occupied buildings and financial instruments that are measured at fair value at the end of each reporting period. Historical cost is
generally based on the fair value of the consideration given in exchange for goods and services.
d. Assessment of going concern
The consolidated financial statements have been prepared on a going concern basis. The Directors have performed an assessment of going
concern for a minimum period of 12 months from the date of this statement and are satisfied that the Group is appropriately capitalised. The
Group has a cash balance as at 31 March 2016 of €23m (31 March 2015: €139m), is generating positive operating cash flows and, as discussed in
Note 25, has in place a revolving credit facility with an undrawn balance of €325m at 31 March 2016 (31 March 2015: €100m). The Group has
assessed its liquidity position and there are no reasons to expect that the Group will not be able to meet its liabilities as they fall due for the
foreseeable future.
e. Basis of consolidation
The financial statements incorporate the consolidated financial statements of the Company and entities controlled by the Company (its
subsidiaries). Control is assessed based on the Company’s:
• power over the investee;
• exposure to variable return from its involvement with the investee; and
• ability to use its powers to affect returns.
When the Company has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the
voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.
FINANCIAL STATEMENTS
86
Notes forming part of the Annual Report
(continued)
2. Basis of preparation (continued)
The results of subsidiaries and joint arrangements acquired or disposed of during the financial year are included from the effective date
of acquisition or to the effective date of disposal. The accounting policies of all consolidated entities are consistent with the Group’s
accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are
eliminated in full on consolidation.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for under the acquisition method. The consideration transferred in a business
combination is measured at fair value. The assets and liabilities acquired in the business combination are recognised at their fair value with
the exception of deferred tax assets or liabilities related to employee benefit arrangements (measured according to IAS 12 and IAS 19) and assets
that are classified as held for sale (measured according to IFRS 5). Acquisition related costs are expensed as incurred.
Where the consideration transferred by the Group includes a contingent asset or liability, the contingent consideration is measured at its
acquisition date fair value and included as part of the consideration transferred in a business combination. The subsequent accounting for
changes in the measurement of these contingent assets or liabilities depends on the classification of the contingency. For example, contingent
fees recognised under acquired contracts would be measured as a change in the value of the trade receivable or payable and the movement
recognised in profit and loss.
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.
Joint arrangements
A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is established when no one entity has
control of the arrangement on its own; all of the entities involved in the arrangement control it collectively. The Group enters into such
arrangements to facilitate joint development of properties in its portfolio of investment properties. The arrangements are bound by contractual
agreements and may be accounted for as either a joint venture or joint operation. These arrangements are reviewed at each accounting period
to ensure that control continues to be joint and that, where entities are involved, reclassification into subsidiary or associate companies is not
required.
A joint arrangement is classified as a joint venture when the Group has rights to the net assets of the arrangement rather than to the individual
assets and liabilities, revenues and expenses. Otherwise the joint arrangement is classified as a joint operation. This classification is based
upon an assessment of the structure and legal form of the arrangement.
The Group accounts for joint ventures using the equity method, the Groups share of the joint venture is initially recognised at cost and adjusted
thereafter for the post-acquisition change in the investor's share of the investee's net assets. The Group’s share of profit or loss includes its share
of the investee's profit or loss and the Group’s other comprehensive income includes its share of the investee's other comprehensive income.
Where the joint arrangement is recognised as a joint operation, the Group recognises its share of assets and liabilities held jointly as well as
its share of revenues and expenses according to the IFRS applicable to the items being recognised.
f.
Significant judgements
The preparation of the financial statements may require Management to exercise judgement in applying the Group’s accounting policies. The
following are the significant judgements:
Classification of Starwood joint arrangement
Hibernia REIT plc has entered into a joint arrangement to develop the Windmill Lane site. The site is co-owned through its subsidiary, Hibernia
REIT Holding Company Limited, and the development is managed through a jointly owned development company, the Windmill Lane
Development Company Limited. The Directors have examined the overall arrangements and concluded that as the joint arrangement is not
structured through a separate legal vehicle and that the parties have rights to the specific assets and liabilities of the arrangement, it should
be accounted for as a joint operation. Accordingly, the Group has recognised its share of the assets, liabilities, income and expenditure.
HIBERNIA REIT PLCANNUAL REPORT 2016 87
2. Basis of preparation (continued)
Internalisation of the Investment Manager
On 5 November 2015, the Company completed the internalisation of the Investment Manager. The internalisation has occurred by the acquisition
of the entire issued share capital of the parent company of the Investment Manager, Nowlan Property Limited, and the Investment Manager
held otherwise than by the parent company. As part of the agreement, the Company assumed the expenses of the Investment Manager for
the period from 1 April 2015 to completion of the internalisation.
The main components of the transaction were:
A. A payment for the fair value of the net assets of the acquired companies, the “Acquirees”;
B. A payment calculated by reference to the base fee due under the Investment Management Agreement; and
C.
Payments in future periods which reference performance related fees, NAV increases and joint venture fees payable under the Investment
Management Agreement.
Part A has been determined to be a business combination and has been accounted for under the acquisition method.
88.75% of the payments under B and C above are conditional on the completion of service by vendors remaining part of the Management Team
of the Company until November 2018, with one third of payments vesting annually on the anniversary of the deal completion. The remaining
11.25% relates to payments to vendors that are not part of the Management Team.
The Directors have considered the accounting for these payments and determined that B and C substantially represent a transaction separate
to the acquisition of WK Nowlan REIT Management Limited and Nowlan Property Limited, together the “Acquirees”, as they remunerate
employees and contractors who were former owners for future services. This decision is based on the provisions included in the share purchase
agreement that require those owners subject to these conditions to continue to provide services to the Group until expiration of the agreement
in November 2018. Failure to comply with these provisions will result in clawback of the payments. This clawback is reduced by one third on
each anniversary of the agreement until November 2018.
The amount paid under part B which the Directors have identified as for future services, €13.4m, is therefore treated as a prepayment in the
financial statements and recognised over the period during which the services it is dependent on are provided. These services will be provided
from the completion date (5 November 2015) to November 2018. €1.8m has been recognised in the income statement for the financial year
ended 31 March 2016. The balance paid to vendors who are not obliged to provide services, €1.7m, was recognised immediately as an expense,
and is included in other gains and losses.
Payments made in subsequent periods under part C are recognised over the period that the Group receives the benefit of the services to which
they relate. Amounts not relating to services provided will be expensed as incurred.
As a material item, the accounting for this transaction constitutes a significant judgement by the Directors. Further details can be found in
Note 5 to these financial statements.
There were no other items of significant judgement that might have a material impact on the consolidated financial statements at 31 March 2016.
FINANCIAL STATEMENTS 88
Notes forming part of the Annual Report
(continued)
2. Basis of preparation (continued)
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.
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating
the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability if market participants would take
those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated financial statements is determined on such a basis, except for share based transactions that are within the
scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are
not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the
inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which
are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly or
indirectly
• Level 3 inputs are unobservable inputs for the asset or liability.
Valuation of investment properties
The Group’s investment properties are held at fair value and were revalued at 31 March 2016 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 valuations and the sensitivities is given in Note 17.
The Board conducts a detailed review of each property valuation to ensure that appropriate assumptions have been applied. Property valuations
are complex and involve data which is not publicly available and a degree of judgement. The valuation is based upon the key assumptions of
estimated rental values and market based yields. The approach to developments and refurbishments is on a residual basis and factors such as
the assumed timescale, the assumed future development cost and an appropriate finance and/or discount rate are used to determine the
property value together with market evidence and recent comparable properties where appropriate. In determining fair value, the valuers
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 cash flows from rental income both for the
current lease period and future estimated rental values. In accordance with the Group’s policy on lease incentives, the valuation provided by
CBRE is adjusted by the fair value of the rental income accruals ensuing from the recognition of these incentives. The total reduction in the
external valuers’ investment property valuation in respect of these adjustments was €2.6m (31 March 2015: €2.2m). No further adjustments
were required for the financial year ended 31 March 2016.
There were no other key estimates that might have a material impact on the consolidated financial statements at 31 March 2016.
HIBERNIA REIT PLCANNUAL REPORT 2016 89
3. Application of new and revised International Accounting Standards (IFRS)
Adoption of new standards
The following standards are effective for the first time in the current financial year, due to changes in the business structure, and have been
adopted:
• IFRS 11 Joint Arrangements
• IAS 16 Property, Plant and Equipment
• IAS 19 Employee Benefits (2011)
Prospective Accounting changes
The following standards and interpretations to existing standards have been published by the International Accounting Standards Board
(“IASB”) and, to the extent indicated, have been adopted by the European Union (“EU”) and will be mandatory for future accounting periods.
The Company has not early adopted these standards or interpretations.
• 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.
• IAS 7 Statement of Cash flows amendments to clarify disclosures and is effective for annual periods beginning on or after 1 January 2017.
(Subject to EUR endorsement)
• IFRS 9 Financial Instruments was issued in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS
9 includes a revised classification and measurement model, a forward looking ‘expected credit loss’ impairment methodology and modifies
the approach to hedge accounting. Unless early adopted, the standard is effective for accounting periods beginning 1 January 2018. (Subject
to EU endorsement)
• IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities, and IAS 28 Investment in Associates and Joint
Ventures are amended for accounting periods beginning on or after 1 January 2016 to clarify the treatment of the sale or contribution of
assets from an investor to its associate or joint venture. (EU endorsement currently halted)
• 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.
• IAS 12 Income taxes, amendments to deferred tax recognition. Effective for periods beginning on or after 1 January 2017. (Subject to EU
endorsement)
• 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. (Will not be EU endorsed)
• IFRS 15 Revenue from Contracts with Customers, provides a single, principles based five-step model to be applied to all contracts with
customers and is applicable to an annual reporting period beginning on or after 1 January 2018. (Subject to EU endorsement)
• 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.
• IFRS 16 Leases, sets out the principles for the recognition, measurement, presentation and disclosure of leases. It is effective for annual
periods commencing on or after 1 January 2019 and supersedes IAS 17 Leases and SIC 15: Operating leases - Incentives. (Subject to EU
endorsement)
• IAS 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.
• Investment entities: applying the consolidation 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: 2012-2015 cycle (effective for accounting periods beginning on or after 1 July 2016);
FINANCIAL STATEMENTS 90
Notes forming part of the Annual Report
(continued)
A N N U A L R E P O R T 2 0 1 6
3. Application of new and revised International Accounting Standards (IFRS) (continued)
IFRS 15 may have a future impact on revenue recognition and related. Under IFRS 15, an entity recognises revenue when (or as) a performance
obligation is satisfied. The Group’s main source of revenue is from the leasing of properties and revenue is recognised in accordance with IAS 17:
Leases and SIC 15: Operating Leases—Incentives. It is therefore expected that there will be no material impact from the adoption of IFRS 15.
IFRS 16: Leases will apply to the operating leases applicable to the Group’s Investment property but is not expected to materially change the
Group’s accounting in relation to these items.
The reminder of these amendments are not expected to have a material impact on the Group’s consolidated financial statements.
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 Income Statement when it meets the following criteria:
• It is probable that any future economic benefit associated with the item of revenue will flow to the Group; and
• The amount of revenue can be measured with reliability.
Rental Income
Rental income arises on properties which are included as investment properties in the Consolidated Statement of Financial Position and
which are leased out under operating leases. Rental income from operating leases is recognised in the Consolidated Income Statement on an
accrual 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 to.
Rental income also arises on 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 is 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 stage of completion of the relevant
service or transactions at the reporting date. These services generally relate to a 12 month period.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all of the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases. Rental income from operating leases is recognised on a straight-line basis over the
term of the lease. Therefore 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.
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.
HIBERNIA REIT PLC 91
4. Significant accounting policies (continued)
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 re-translated at the rates prevailing at that date. Non-monetary items
carried at fair value that are denominated in foreign currencies are re-translated 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.
d. Finance income and expense
Interest income and expense is recognised in the Consolidated Income Statement. Income for all interest-bearing financial instruments is
recognised 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. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of investment properties which take a considerable length
of time to get ready for rental to tenants, are added to the costs of those properties until such time as the properties are substantially ready for
use. All other borrowing costs are recognised in the profit and loss account as they occur.
f.
Employee benefits
Retirement benefit costs and termination benefits
Payments to the Group’s defined contribution retirement benefits plan are recognised as an expense when employees have rendered the service
which entitles them to the contribution. A liability for termination payments is recognised at the earlier of when the Group can no longer
withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.
Short term and long term employee benefits
A liability is recognised for benefits accruing to employees in respect of all elements of remuneration, annual leave, and sick leave in the period
the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid
for the related service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows
expected to be made for the Group in respect of services provided by the employees up to the reporting date.
g. 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 pre-tax 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.
h. Expenses
Expenses are recognised in the Consolidated Income Statement on an accrual basis.
FINANCIAL STATEMENTS 92
Notes forming part of the Annual Report
(continued)
4. Significant accounting policies (continued)
i.
Share-based payments
A share-based payment is a transaction in which the entity receives goods or services either as consideration for its equity instruments or by
incurring liabilities for amounts based on the price of the entity's shares or other equity instruments of the entity. Equity-settled share based
payments are measured at the fair value of the equity instruments on the grant date. Details regarding the determination of the fair value of
equity-settled share based transactions are set out in Note 11. The fair value determined at the grant date of the equity-settled share based
payment is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of equity instruments
which will vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of
equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee share benefits reserve.
Fair value movements between the grant and issue date are recognised at each accounting date.
Equity settled share based transactions with parties other than employees are measured at the fair value of the goods or services received,
except where that fair value cannot be measured reliably, in which case they are measured at the fair value of the equity instruments granted,
measured at the date the entity obtains the goods or the counterparty renders the service.
The fair value of the relevant services is recognised as an expense over the accounting period in which they are incurred.
j.
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.
k.
Joint arrangements
A joint arrangement is an arrangement over which two or more parties have joint control. Joint control is established when no one entity has
control of the arrangement on its own; all of the entities involved in the arrangement control it collectively. The Group enters into such
arrangements to facilitate joint development of properties in its portfolio of investment properties. The arrangements are bound by contractual
agreements and may be accounted for as either a joint venture or joint operation. These arrangements are reviewed at each accounting period
to ensure that control continues to be joint and that, where entities are involved, reclassification into subsidiary or associate companies is not
required.
A joint arrangement is classified as a joint venture when the Group has rights to the net assets of the arrangement rather than to the individual
assets and liabilities, revenues and expenses. Otherwise the joint arrangement is classified as a joint operation. This classification is based
upon an assessment of the structure and legal form of the arrangement.
The Group accounts for joint ventures using the equity method, the Groups share of the joint venture is initially recognised at cost and adjusted
thereafter for the post-acquisition change in the investor's share of the investee's net assets. The Group’s share of profit or loss includes its
share of the investee's profit or loss and the Group’s other comprehensive income includes its share of the investee's other comprehensive
income.
Where the joint arrangement is recognised as a joint operation, the Group recognises its share of assets and liabilities held jointly as well as
its share of revenues and expenses according to IFRS applicable to the items being recognised.
HIBERNIA REIT PLCANNUAL REPORT 2016 93
4. Significant accounting policies (continued)
l.
Investment properties
Investment properties are properties held to earn rental income and/or for capital appreciation (including property under construction for
such purposes). Properties are treated as acquired at the point at which the Group assumes the significant risks and rewards of ownership.
This occurs when:
(1)
(2)
(3)
It is probable that the future economic benefits that are associated with the investment property will flow to the Group;
There are no material conditions which could affect completion of the acquisition; and
The cost of the investment property can be measured reliably
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties
are measured at fair value. Gains and losses arising from changes in the fair value of investment properties are included in the Consolidated
Income Statement in the period in which they arise.
Investment properties and properties under development are professionally valued on a twice yearly basis or as required by qualified external
valuers using inputs that are observable either directly or indirectly for the asset in addition to unobservable inputs and are therefore classified
at level 3. The valuation of investment properties is further discussed above under Note 2.(g).
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 (the 'Red Book') January 2014.
When the Group begins to redevelop an existing investment property, or property acquired as an investment property, for future use as an
investment property, the property remains an investment property and is accounted for as such. Expenditure on investment properties is
capitalised only when it increases the future economic benefits associated with the property. All other expenditure is charged to the Consolidated
Income Statement. Interest and other outgoings, less any income, on properties under development are capitalised. Borrowing costs, that is
interest and other costs incurred in connection with borrowing funds, are recognised as part of the costs of an investment property where
directly attributable to the purchase or construction of that property. Interest capitalised is calculated on development outgoings using the
cost of funds specifically borrowed for a particular development or 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 derecognition of the property (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.
FINANCIAL STATEMENTS 94
Notes forming part of the Annual Report
(continued)
4. Significant accounting policies (continued)
m. Property, plant and equipment
Owned property which is occupied by the Group for its own purposes is de-recognised as investment property at the date occupation commenced
and at the fair value at that date. Property used for administration purposes is stated in the Consolidated Statement of Financial Position at
its revalued amount, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated
impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ from materially from
those that would be determined using fair values at the end of each accounting period.
Any revaluation increase from this property is recognised in other comprehensive income and accumulated in equity, except to the extent
that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to the
profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount of this property arising on revaluation is
recognised in profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous
revaluation of that asset.
Depreciation on revalued property is recognised in profit or loss. On the subsequent sale or retirement of a revalued property, the
attributable revaluation reserve is transferred directly to retained earnings.
Fixtures and fittings are stated at costs less accumulated depreciation and impairment losses.
Depreciation is recognised so as to write off the cost or value of assets less their residual value over their useful lives. The estimated useful
lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate
accounted for on a prospective basis.
The estimated useful lives for the main asset categories are:
Land and buildings
Fixtures and fittings/ Leasehold improvements
Office and computer equipment
50 years
5 years
3 years
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. Where there is no reasonable
expectation that ownership will be retained at the end of the lease term, then they are depreciated over the shorter of the lease term or their
useful life.
An item of property, plant or equipment is de-recognised upon disposal or when no future economic benefits are expected to arise from the
use of the asset. Any gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in profit or loss.
n. 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:
• It is probable that the future economic benefits that are associated with the asset will flow to the Group;
• There are no material conditions which could affect completion of the acquisition; and
• 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 classifi-
cation. Non-current assets classified as held for sale are measured at the lower of their acquisition cost and fair value less costs to sell.
HIBERNIA REIT PLCANNUAL REPORT 2016 95
4. Significant accounting policies (continued)
o.
Financial instruments
Financial assets and liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instruments.
Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue
of financial assets and liabilities (other than financial assets or liabilities at fair value through profit or loss) are added to or deducted from the
fair value of the financial assets or liabilities, as appropriate, on initial recognition. Transaction costs attributable to the acquisition of financial
assets or liabilities at fair value through profit or loss are recognised immediately in the Consolidated Income Statement.
The fair value of a financial instrument 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 in the principal, or in its absence, the most advantageous market to which the Group
has access at that date. Quoted prices are used where possible. If these cannot be observed, then valuation techniques which maximise the
use of relevant observable inputs are used. The valuation techniques used incorporate the factors that market participants would take into
account in pricing a transaction; for example, recent market evidence from similar instruments, pricing models, discounted cash flow analysis
or other commonly used valuation techniques.
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.
Financial assets and liabilities
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss (FVTPL)’, ‘held-to-ma-
turity investments’, ‘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:
• Designated. This includes any financial asset to be measured at fair value with fair value changes in profit or loss.
• 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.
Individual loans: Impairment 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.
In assessing the need for impairment on loans and receivables, the Group takes into account the expected cash flows from the realisation
of collateral.
FINANCIAL STATEMENTS 96
Notes forming part of the Annual Report
(continued)
4. Significant accounting policies (continued)
Derecognition: 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 Income Statement.
p. Derivatives
The Group utilises derivative financial instruments to hedge interest rate exposures. Derivatives designated as hedges against interest risks
are accounted for as cash flow hedges. Hedge relationships are documented at inception. This documentation identifies the hedge, the item
being hedged, the nature of the risks being hedged and how the effectiveness is measured during its duration. Hedges are measured for
effectiveness at each accounting date and the accounting treatment of changes in fair value revised accordingly.
The Group’s cash flow hedges are against variability in interest costs and the effective portion is recognised in equity in the hedging reserve,
with the ineffective portion being recognised in profit or loss within finance costs. The time value of option contracts at recognition is recorded
as a financial asset and amortised to profit or loss over the period hedged.
q. Financial liabilities
The Group has borrowing facilities in place both as general facilities and secured on specific projects. These borrowings are measured initially
at fair value, after taking into account transaction costs, and carried at amortised cost, with all attributable costs either charged to profit or
loss or capitalised into investment property costs as appropriate. All costs are based on the effective interest rate method.
r.
Trade receivables and payables
Trade receivables and payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest
rate method. Where there is objective evidence of loss, appropriate allowances for any irrecoverable amounts are recognised in the Consolidated
Income Statement.
s. 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.
t.
Equity and share issue costs
The equity of the Company consists of ordinary shares issued. Shares issued are recorded at the date of issuance. The par value of the issued
shares is recorded in the share capital account. The excess of proceeds received over the par value is recorded in the share premium account.
Direct issue costs in respect of the issue of shares are accounted for in the retained earnings reserve, net of any related tax deduction. 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.
u. Dividends
Interim dividends are recognised as a liability of the Company when the Board of Directors resolves to pay the dividend and the shareholders
have been notified in accordance with the Company’s Articles of Association. Final dividends of the Company are recognised as a liability
when they have been approved by the Company’s shareholders.
v. Net Asset Value (NAV)
The IFRS NAV is calculated as the value of the Group’s assets less the value of its liabilities based on IFRS measures. EPRA NAV is calculated
in accordance with the European Public Real Estate Association (EPRA) Best Practice Recommendations: December 2014.
The EPRA Net Asset Value per share includes investment property, other non-current asset investments and trading properties at fair value.
For this purpose, non-current assets classified as held for sale are included at fair value. It excludes the fair value of movement financial
instruments and deferred tax and related good will.
HIBERNIA REIT PLCANNUAL REPORT 2016 97
5.
Internalisation of the Investment Manager
Acquisition of the Investment Manager, WK Nowlan REIT management Limited (the “Internalisation”)
On 27 October 2015 at an Extraordinary General Meeting of the Company, the shareholders approved the acquisition of the Investment Manager,
WK Nowlan REIT Management Limited. On 5 November 2015 the Company completed this acquisition by acquiring the entire share capital
(100% of voting equity) of WK Nowlan REIT Management Limited and its parent, Nowlan Property Limited (together “the Acquirees”). This
transaction was carried out in order to internalise the investment management function. Under the terms agreed and as per the share purchase
agreement, the transaction was structured to take effect from 1 April 2015 and consequently no base fees were payable under the Investment
Management Agreement from that date and the Company assumed the expense of the Investment Manager from 1 April 2015. The income
statement has been presented on this basis.
Total payments in cash and shares made relating to the Internalisation totalled €21.1m (fair value €22.6m). The composition of these amounts
is explained below.
This transaction is also discussed under Note 2.(f) Significant judgements.
The Internalisation was completed in three separate parts: Amounts paid to related parties are included in Note 32.
a. Business acquisition
On 5 November 2015 the Company acquired 100% of the share capital of the Acquirees as described in Note 2.(f). The purpose of this business
combination was to internalize the investment management of the Group. €0.1m profit has been consolidated in relation to these entities
since acquisition.
The following table shows the NAV and fair value of the Acquirees at the date of acquisition.
Nowlan Property Limited
NAV
WK Nowlan REIT Management
Assets
Property, plant and equipment
Cash and cash equivalents
Trade receivables
- due from Hibernia REIT plc Group companies
- other
Total assets
Liabilities
Trade and other payables
Net assets
*Fair value basis for the acquisition
Book value
€'000
Fair value*
€'000
478
478
242
933
7,079
22
242
933
7,079
22
8,754
8.754
(1,824)
(1,824)
6,930
6,930
Total consideration paid for the assets of the Acquirees was €6.9m which is equivalent to the fair value of the net assets acquired and no
goodwill was recognised as part of the business combination.
FINANCIAL STATEMENTS
98
Notes forming part of the Annual Report
(continued)
5.
Internalisation of the Investment Manager (continued)
Calculation of fair value
Asset / Liability
Carrying value
Assumptions
Property, plant and equipment
Depreciated cost
Trade and other receivables / Trade and other
payables
Amortised cost
The Directors considered that the fair value of the property,
plant and equipment at the acquisition date was the net book
value.
The carrying value of trade and other receivables and trade
and other payables is considered a reasonable approximation
of fair value due to their short term nature.
Cash and cash equivalents
Amortised cost
Carrying value is fair value as all balances are on demand.
b. Remuneration for future services
The second part of the Internalisation transaction was the payment of €14.2m, the “Initial payment”, 50% by way of ordinary shares and 50%
by way of cash. The fair value of this payment was €15.1m due to the movement in the share price that is disclosed in Note 11. The cash impact
was €7.1m with the balance paid by the issue of 6m shares.
This payment was made subject to clawback arrangements for those vendors who remain tied to the Company by employment or service
contracts. These payments vest by one third on each anniversary of the acquisition date until November 2018. €13.4m was recognised as
prepaid remuneration of which €1.8m was recognised in the Consolidated Income Statement in the financial year ended 31 March 2016 and
€11.6m is included in trade receivables (Note 20). The balance of the payment, €1.7m was recognised in expenses in the financial year ended
31 March 2016.
c.
Future performance payments
The third element of consideration for Internalisation was the payment of performance fees due under the original Investment Management
Agreement and other top-up amounts, by an equivalent payment annually to the vendors of the Investment Manager, contingent for the
majority of vendors on the fulfilment of service obligations.
The performance fee due for 2016 is €6.1m. Under arrangements made at the time of the internalisation, 85% of this is due to the vendors,
representing €5.1m (the remainder being used to incentivise non vendor staff). Together with top up payments due of €0.3m the total due to
vendors is €5.4m.
The payments at b and c above, while remuneration in nature due to the existence of clawback and vesting conditions, are not under
the discretion of the Remuneration Committee but were determined in the share purchase agreement for the acquisition of the Invest-
ment Manager and were approved by the shareholders of the Company at the Extraordinary General Meeting of the Company held on
27 October 2015.
HIBERNIA REIT PLCANNUAL REPORT 2016 99
6. Operating segments
The Group is organised into six business segments, against which the Group reports its segmental information, being “Office assets”, “Industrial
assets”, “Residential assets”, “Office Development assets”, “Other assets” (non-core assets) and “Central assets and costs”. The segment “Central
assets and costs” has been added for the financial year ended 31 March 2016 to reflect the new operating structure post internalisation of the
Investment Manager and includes the previously unallocated assets and items of income and expenditure as well as the operating segment
which was previously external in the Investment Manager. 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.
Central assets include cash and cash equivalents, tax refundable and administration expenses paid in advance. In addition, cash received in
advance in relation to rental receipts on properties and rental income accrued have been allocated from receivables and cash and cash equiv-
alents 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 the market value of investment properties before and after an adjustment
for the expiration of rent free period or other lease incentives respectively.
Group consolidated segment analysis
For the financial year ended 31 March 2016
Rental income
Interest income
Revenue
Property outgoings
Total property income
Office
assets
€'000
27,176
-
27,176
(716)
26,460
Industrial
assets
Residential
assets
Office
Development
assets
€'000
€'000
€'000
524
-
524
(86)
438
4,835
-
4,835
(1,029)
3,806
81
-
81
(666)
(585)
Other
assets
€'000
170
-
170
-
170
Central
assets and
costs
Group
consolidated
position
€'000
€'000
-
-
-
-
-
32,786
-
32,786
(2,497)
30,289
Revaluation of investment properties
59,589
1,968
7,168
56,331
-
-
125,056
Other gains and losses
Total income
(260)
-
-
343
85,789
2,406
10,974
56,089
2,136
2,306
(2,390)
(2,390)
(171)
155,174
Investment manager fee - base
Performance related payments
Administration expenses
Total operating expenses
Operating profit/(loss)
Net finance cost
Profit before tax
Income tax
-
-
-
-
85,789
-
85,789
-
-
-
-
-
2,406
-
2,406
-
-
-
-
-
-
-
-
-
-
-
-
(6,069)
(8,696)
-
(6,069)
(8,696)
-
(14,765)
(14,765)
10,974
56,089
2,306
(17,155)
140,409
-
10,974
-
-
56,089
(38)
-
2,306
513
(4,087)
(4,087)
(21,242)
136,322
-
475
Profit for the financial year
85,789
2,406
10,974
56,051
2,819
(21,242)
136,797
Total segment assets
655,752
12,400
115,180
155,930
10,565
38,794
988,621
Investment properties
645,671
12,400
114,571
155,014
-
-
927,656
FINANCIAL STATEMENTS
100
Notes forming part of the Annual Report
(continued)
6. Operating segments (continued)
Group consolidated segment analysis
For the financial year ended 31 March 2015
Rental income
Interest income
Revenue
Property outgoings
Total property income
Office
assets
€'000
15,997
-
15,997
(253)
15,744
Industrial
assets
Residential
assets
Office
Development
assets
Other assets
€'000
€'000
€'000
440
-
440
(140)
300
196
-
196
(104)
92
-
-
-
(116)
(116)
Central
assets and
costs
Group
consolidated
position
€'000
€'000
-
-
-
(38)
(38)
-
-
17,112
1,657
18,769
(725)
18,044
80,809
7,691
(38)
106,544
(4,690)
(5,772)
(1,584)
(4,690)
(5,772)
(1,584)
(12,046)
(12,046)
€'000
479
1,657
2,136
(74)
2,062
-
2,732
4,794
-
-
-
-
Revaluation of investment properties
66,750
(4)
2,551
11,512
Other gains and losses
Total income
-
82,494
-
296
10,059
12,702
(5,100)
6,296
Investment manager fee - base
-
-
-
-
-
-
-
-
-
-
-
-
Performance fee
Administration expenses
Total operating expenses
Operating profit/(loss)
Net finance cost
Profit before tax
Income tax expense
Profit for the financial year
-
-
-
82,494
-
82,494
-
296
12,702
6,296
4,794
(12,084)
-
-
-
296
-
12,702
6,296
-
-
-
4,794
-
(1,575)
(13,659)
(691)
94,498
(1,575)
92,923
(691)
82,494
296
12,702
6,296
4,794
(14,350)
92,232
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
HIBERNIA REIT PLCANNUAL REPORT 2016
7. Revenue
Rental income
Surrender premia
Gross rental and related income
Interest income from loans and receivables
Revenue
101
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
27,886
4,900
32,786
-
14,712
2,400
17,112
1,657
32,786
18,769
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 €1.3m in relation to the spreading
of lease incentives (31 March 2015: €1.4m).
Surrender premia relate to the surrender of a lease in Guild House for a total payment of €8.8m. €4.9m is included in surrender premia as
above. €2.3m related to top-up amounts for sub-leases and is included in deferred income. It will be released to profit or loss over the term of
the relevant sub-leases, all of which terminate by the end of March 2017. €0.7m has been recognised in the financial year ended 31 March 2016.
The remaining €1.6m related to dilapidations payable on Guild House and is included as part of the development and refurbishment expenditure
in Note 17.
8. Other gains and losses
Gains on recognition of investment property
Gain on sale of investment property
Fair value movement of written call option
Gains on sales of non-current assets classified as held for sale
Other gains and losses
Other gains and losses
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
-
176
-
2,136
(2,483)
10,059
-
(5,100)
2,732
-
(171)
7,691
Other gains and losses includes a €2.4m charge relating to the Internalisation of the Investment Manager comprising approximately €1.7m
relating to payments to vendors relating to the base management fee buyout which were not restricted as discussed in Note 5 and amounts
relating to the recognition of the difference between the fair value of assets acquired and the fair value of shares issued.
FINANCIAL STATEMENTS 102
Notes forming part of the Annual Report
(continued)
9. Administration expenses
Operating profit for the financial year has been stated after charging / (crediting):
Non-Executive Directors' fees
Professional valuers' fees
Prepaid remuneration expense
Depositary fees
Registrar fees
Pre-Internalisation Investment Manager costs
Depreciation
“Top-up ” Internalisation expenses for financial year
Other administration expenses (including staff costs) (Note 10)
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
300
388
1,802
310
40
1,240
65
304
4,247
250
218
-
218
28
-
-
-
870
Total
8,696
1,584
All fees paid to Non-Executive Directors are for services as directors. Non-Executive Directors receive no other benefits other than William
Nowlan who also receives €50,000 per annum in consulting fees under terms agreed as part of the Internalisation. He did not receive a Director’s
fee in the previous financial year. Further information on Directors’ Emoluments can be found in the Directors’ Remuneration report on pages
67 to 71 of the Annual Report.
Prepaid remuneration recognised re-Internalisation relates to the recognition of payments to vendors that are contingent on the continued provision
of services to the Group over the period during which the Group benefits from those services and is further discussed in Note 5.
Pre-internalisation Investment Manager Costs: Any costs incurred by the Investment Manager in respect of the period from 1 April 2015 to the
date of Completion (being costs of the nature to be assumed by the Company post completion) were recognised by the Company on completion
as agreed as part of the transaction.
Professional valuers’ fees are paid to CBRE Ireland in return for their services in providing independent valuations of the Group’s properties
on an at least twice yearly basis. Professional valuers’ fees are charged at 0.02% of the portfolio value for each of the interim and final year end
valuations. This is agreed in advance on each valuation exercise through a letter of engagement. CBRE Ireland, a private unlimited company,
is part of a worldwide group where fee revenues from valuation and appraisal services as reported in May 2016 constitute approximately 6%
of total revenue.
Auditor’s remuneration (excluding VAT)
Audit of the Group financial statements
Review of half year report
Other assurance services
Tax advisory services
Other non-audit services
Total
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
85
15
7
167
8
282
85
15
2
97
226
425
HIBERNIA REIT PLCANNUAL REPORT 2016 103
10. Employment
The average monthly number of persons (including Executive Directors) directly employed during the financial year since the Internalisation
of the Investment Manager was 11.
Administration – at the financial year end
The staff costs for the above employees were:
Wages and salaries
Social insurance costs
Employee share based payment expense (Note 11)
Pension costs – defined contribution plan
Total
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
Number
Number
13
-
€'000
1,215
122
455
101
1,893
€'000
-
-
-
-
-
No amount of salaries and other benefits is capitalised into investment properties.
11. Share based payments
a. The Internalisation of the Investment Manager
Under the terms of the Internalisation of the Investment Manager share purchase agreement, a part of the payment was made in shares of
the Company. The issue price of €1.17605 per share was determined by reference to the average share price for twenty days prior to 1 April 2015.
10.9m shares were issued on 10 November 2015 when the price was €1.318. The fair value of these shares is set out below.
Shares issued in the transactions comprising “Internalisation” of the Investment Manager
Contracted
price €
Number of
shares
Price at issue
date € (FV)
Difference
1.17605
1.31800
Total shares issued
12,858,727
10,933,826
14,410,782
1,552,055
Further details on these shares are disclosed in Notes 5 and 22.
b. Employee long term incentive plan
Awards will be granted to non-vendor individuals who became employees of the Group through the Internalisation under a bonus plan which
includes both cash elements and elements of long term incentive payments, which are share based (the “Performance Related Remuneration
Scheme” or “PRR”). Until the expiry of the Performance Fee arrangements in November 2018, the PRR will be funded entirely by deductions
of up to 15% from any Performance Fees payable to the vendors. Any shares awarded under the PRR will be held in trust until the third anni-
versary of the start of the year to which they relate. The number of shares is calculated at market value on the date of allocation and the fair
value of the award is equal to the share price on the allocation date. The charge recognised in the consolidated income statement for the
financial year ended 31 March 2016 is €0.5m. There was no charge in the prior financial year.
Shares are forfeited should the person leave the Group prior to the vesting date subject to “good leaver” provisions. Any shares forfeited are
transferable to the vendors.
FINANCIAL STATEMENTS
104
Notes forming part of the Annual Report
(continued)
12. Finance income and expense
The effective interest expense on borrowings arises as a result of the recognition of interest expense, commitment fees, arrangement fees and
the amortisation of the time value of hedging costs on the Group’s revolving credit facility and on the debt facility relating to the Windmill
Lane joint operation (Note 18).
Interest income on cash and cash equivalents
Effective interest expense on borrowings
Finance expense on payable due for investment property
Finance income and expense
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
153
(2,822)
(1,418)
€'000
399
(897)
(1,077)
(4,087)
(1,575)
Interest costs capitalised in the financial year were €0.1m (31 March 2015: €nil) in relation to the Windmill Lane joint operation. The
capitalisation rate used is the effective interest rate on the cost of borrowing applied to the portion of investment that is financed.
13. Income tax expense
Income tax on residual income
Tax on the disposal of non-core assets
Over provision in respect of prior periods
Income tax credit / (expense) for financial year
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
(30)
(186)
691
475
(5)
(686)
-
(691)
The net income tax credit in the financial year arises from an over provision in respect of prior financial years. The tax expense during the
prior financial year arose in respect of income and gains from the Group’s residual business, the sale of non-core assets.
Reconciliation of income tax expense for the financial 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 the financial year
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
136,322
92,923
17,040
(15,632)
(1,408)
(475)
11,615
(10,721)
(547)
344
(475)
691
Hibernia REIT plc has elected for Real Estate Investment Trust (“REIT”) status under section 705E Tax Consolidation Act 1997. 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.
HIBERNIA REIT PLCANNUAL REPORT 2016
14. Dividends
Interim dividend for the financial year ended 31 March 2016 of 0.7 cent per share
(31 March 2015:0.3 cent per share)
Proposed final dividend for the financial year ended 31 March 2016 of 0. 8 cent per share
(31 March 2015:0.5 cent per share)
105
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
4,769
2,011
5,486
3,352
The Board has proposed a final dividend of 0.8 cent (31 March 2015: 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. This dividend will be paid on 2
August 2016 to shareholders on the share register as at 8 July 2016. All of this proposed final dividend of 0.8 cent per share will be a PID in
respect of the Group’s tax exempt property rental business (31 March 2015: 0.45 cent). The total dividends, interim paid and proposed for the
financial year ended 31 March 2016 are 1.5 cent per share (31 March 2015: 0.8 cent per share) or €10.3m (31 March 2015: €5.4m).
15. 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 financial year ended 31 March 2016. However, the Company has established a reserve of €5.9m against the issue of ordinary shares relating
to the payment of performance related amounts due under the performance related payment element of the Share Purchase Agreement relating
to the Internalisation of the Investment Manager (Note 5). It is estimated that approximately 4.6m ordinary shares (31 March 2015: 4.5m shares)
will be issued calculated on an issue price of €1.2899. The dilutive effect of these shares is disclosed below.
The calculations are as follows:
Weighted average number of shares
Issued share capital at beginning of financial year
Shares issued during the financial year
Shares in issue at end of financial year
Weighted average number of shares
Estimated additional shares due for issue for long term incentive plan/ performance fee
Diluted number of shares
Basic and diluted earnings per share
31 March
2016
'000
670,317
10,934
31 March
2015
'000
385,000
285,317
681,251
670,317
675,784
500,690
4,550
4,664
680,334
505,354
31 March
2016
€'000
31 March
2015
€'000
Profit/(loss) for the financial year attributable to the owners of the Company
136,797
92,232
Weighted average number of ordinary shares (basic)
Weighted average number of ordinary shares (diluted)
Basic earnings per share (cent)
Diluted earnings per share (cent)
'000
675,784
680,334
'000
500,690
505,354
20.2
18.4
20.1
18.3
FINANCIAL STATEMENTS 106
Notes forming part of the Annual Report
(continued)
16. Property, plant and equipment
Carrying value at start of financial year
Additions:
Transferred from investment property at fair value 1
Acquired on acquisition of investment manager
Acquisitions
Depreciation
Revaluations included in other comprehensive income
Carrying value at end of financial year
Office and
computer
equipment
Leasehold
improvements
and fixtures
and fittings
Land and
buildings
€'000
€'000
€'000
-
-
-
Total
€'000
-
2,400
242
46
(65)
323
2,400
-
-
(20)
323
2,703
-
37
8
(13)
-
32
-
205
38
(32)
-
211
2,946
1: On 17 July 2015 the Group commenced occupation of part of the South Dock House property. The fair value of this is recognised in property, plant and equipment from this date.
Revaluations of this property are now recognised in other comprehensive income in accordance with the Group’s accounting policy on property, plant and equipment (Note 4.m).
17.
Investment properties
Fair value category
Office and
residential
Level 3
€'000
Development
Industrial
Level 3
€'000
Level 3
€'000
Total
Level 3
€'000
Carrying value at start of financial year
542,377
88,600
10,319
641,296
Additions:
Property purchases
Development and refurbishment expenditure1
Revaluations included in income statement
Disposals:
136,236
17,272
66,757
-
19,960
56,331
-
136,236
111
1,968
37,343
125,056
Transferred to property, plant and equipment as owner-occupied
Property sale2
Carrying value at end of financial year
(2,400)
-
-
(9,875)
-
-
(2,400)
(9,875)
760,242
155,016
12,398
927,656
1: The Group received €1.6m in relation to a dilapidation costs payment due to a tenant surrender of their lease on Guild House. This has been applied to the development and
refurbishment costs on this property and therefore reduces the cost of this property.
2: The vendor of the Windmill Lane site was granted an option when the Group purchased the site to buy into 50% of the future development project at the original purchase price
plus 50% of any development costs spent to the date of purchase. This option has been exercised resulting in the disposal of 50% of the Group’s stake in the Windmill Lane site and
the formation of a joint arrangement.
HIBERNIA REIT PLCANNUAL REPORT 2016 107
17.
Investment properties (continued)
Fair value category
Carrying value at start of financial year
Additions:
Property purchases
Investment properties recognised on de-recognition of loans1
Development and refurbishment expenditure2
Revaluations included in income statement
31 March 2015
Office and
residential
Level 3
€'000
-
Development
Industrial
Level 3
€'000
-
Level 3
€'000
-
Total
Level 3
€'000
-
412,714
76,578
10,338
499,630
48,684
11,678
69,301
-
510
11,512
-
(15)
(4)
48,684
12,173
80,809
Carrying value at end of financial year
542,377
88,600
10,319
641,296
1: During the financial 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(l).
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 One Dockland Central (Previously Commerzbank House).
The valuations used in order to determine fair value for the investment properties in the consolidated financial statements are determined
by CBRE, the Group’s independent valuers, and are in accordance with the provisions of IFRS 13. CBRE has agreed to the use of their valuations
for this purpose. Some of the inputs to the valuations are defined as “unobservable” by IFRS 13. As discussed in Note 2. (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 methods that are applied
for fair value measurements categorised within Level 3 of the fair value hierarchy is the yield methodology using market rental values capi-
talised with a market capitalisation rate or yield or other applicable valuation technique. In addition, a reduction of €2.6m (31 March 2015:
€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 financial year. Approximately €0.1m interest was capitalised in relation to the Windmill joint operation (31 March 2015: €nil).
Reconciliation of the independent valuers’ valuation report amount to the carrying value of investment property in the consolidated statement
of financial position:
Valuation per Valuers’ certificate
50% Windmill joint arrangement
Owner occupied (South Dock House at 30%)
Adjustment for Forum carpark
Income smoothing adjustment
Investment property balance at financial year end
31 March
2016
31 March
2015
€'000
€'000
953,830
643,460
(20,875)
(2,703)
-
(2,596)
-
-
(1,200)
(964)
927,656
641,296
FINANCIAL STATEMENTS
108
Notes forming part of the Annual Report
(continued)
17.
Investment properties (continued)
Information about fair value measurements using unobservable inputs (Level 3).
The valuation techniques used in determining the fair value for each of the categories of assets is market value as defined by VPS4 of the Red
Book 2014, being the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a
willing seller in an arm’s length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without
compulsion, and is in accordance with IFRS 13. Included in the inputs for the valuations above are future development costs where applicable.
The tables below show a summary of the quantitative inputs for the fair value determination as at 31 March 2016 and 31 March 2015 and
sensitivity information for each category.
Quantitative Information
The following information has been used in calculating the fair value of investment properties at 31 March 2016 and 31 March 2015.
Information on fair value inputs
Fair value at 31 March 2016
Office assets
Industrial assets
Residential assets
Development assets
Fair value at 31 March 2015
Office assets
Industrial assets
Residential assets
Development assets
Inputs
Lowest in
range
Highest in
range
€m
646 Annual rent € per sq. ft.
ERV € per sq ft
Equivalent Yield
12 Annual rent € per sq. ft.
ERV € per sq ft
Equivalent Yield
€ 16.00
€ 23.55
4.87%
€ 5.04
€ 3.75
7.36%
€ 76.81
€ 52.00
6.20%
€ 5.04
€ 5.75
7.36%
115 Equivalent Yield
4.40%
4.60%
155 Equivalent Yield
5.25%
5.50%
Inputs
Lowest in
range
Highest in
range
€m
475 Annual rent € per sq. ft.
ERV € per sq ft
Equivalent Yield
10 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%
67 Equivalent Yield
4.50%
4.75%
89 Equivalent Yield
5.40%
6.50%
HIBERNIA REIT PLCANNUAL REPORT 2016
109
17.
Investment properties (continued)
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 €183m (31 March 2015: €139m) reduction in
fair value whilst a 1% decrease in yield would result in a fair value increase of €272m (31 March 2015: €201m).
This is further analysed by property class, as follows:
Property class
Office assets
Development assets
Residential assets
Industrial assets
Total
Property class
Office assets
Development assets
Residential assets
Industrial assets
Total
31 March 2016
Change in fair
value +1%
Yield
Change in fair
value -1%
Yield
€’000
€’000
(121,700)
179,392
(39,693)
(20,350)
(1,349)
57,661
32,919
1,750
(183,092)
271,722
31 March 2015
Change in fair
value +1%
Yield
Change in fair
value -1%
Yield
€’000
€’000
(88,200)
(36,290)
(13,660)
(1,058)
128,783
52,820
18,400
1,370
(139,208)
201,373
FINANCIAL STATEMENTS 110
Notes forming part of the Annual Report
(continued)
18. Joint arrangement
The Group enters into joint arrangements in order to manage its development risk exposures. During the financial year, the Group entered
into its first joint operation as described below.
Windmill Lane Partnership
Nature of activity: Development of the Windmill Lane site
Principal place of business: South Dock House, Hanover Quay, Dublin D02 XW94
Name
Registered address/
Country of Incorporation
Group relationship
Directors
Windmill Lane
Development
Company Limited
South Dock House,
Hanover Quay, Dublin D02
XW94, Ireland
50% held through
Hibernia REIT Holding
Company Limited
Richard Ball,
Kevin Nowlan,
Sarah Broughton,
Thomas Tolley
Company
Secretary
Castlewood
Corporate
Services Limited
Nature of
business
Property
development
During the financial year affiliates of Starwood Capital Group LP exercised their written call option to buy back into the development of the
Windmill Lane site as a 50:50 joint arrangement partner at purchase price, leading to the formation of the Windmill Lane Partnership (“WLP”).
Development work has commenced and WK Nowlan REIT Management Limited is acting as asset manager and development manager to
WLP, and it is planned that Hibernia REIT plc will take over this role.
The transaction, is recognised in the consolidated financial statements as a joint operation and as such the Group recognises its share of assets
and liabilities held jointly as well as its share of revenues and expenses according to the IFRS applicable to the items being recognised. The
Group is entitled to a proportionate share of the rental income received and bears a proportionate share of the joint operations costs.
19. Other financial assets
Derivatives at fair value
Loans carried at amortised cost
Loans to other entities
Balance at end of financial year - current
31 March
2016
31 March
2015
€'000
€'000
213
152
-
365
-
152
-
152
Derivatives at fair value are the Group’s hedging instruments on its borrowings. The Group has hedged up to €100m of its revolving credit
facility by a combination of caps and swaptions to limit the EURIBOR interest rate element of interest payable to 1%. A similar arrangement
is in place on the Windmill debt facility. Further details on the Group’s accounting policy on derivatives can be found in Note 4. (p) and on its
borrowings in Note 25. The derivatives covering the revolving credit facility have a nominal value of 100m in total. The Windmill Lane cap
has a maximum nominal value of €45m based on a schedule of estimated drawings or €6m at 31 March 2016.
Loans and receivables at the financial year end consists of one loan on which the Group holds a property as collateral. The Directors consider that
no impairment charge is necessary.
HIBERNIA REIT PLCANNUAL REPORT 2016
20. Trade and other receivables
Non-current
Prepaid remuneration1
Property income receivables
Balance at end of financial year – non current
Current
Investment property prepaid
Due from sale of non-current assets classified as held for sale
Prepaid remuneration 1
Receivable from loan redemptions
Property income receivables
Prepayments
Tenant fit-out
Income tax refund due
VAT refundable
Balance at end of financial year – current
111
31 March
2016
31 March
2015
€'000
€'000
7,124
4,542
11,666
326
5,955
4,444
137
2,807
1,253
2,861
427
670
18,880
-
-
-
-
1,467
-
3,613
1,911
660
-
-
1,395
9,046
Balance at end of financial year – total
30,546
9,046
1: This consists of the balance of the payment to service providers relating to the Internalisation transaction (Note 5)
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 the sale of other non-current assets held for sale relate to monies due from the sale of a number of non-core
properties acquired as part of the Dorville loan portfolio. In addition, approximately €2.9m is due from tenants for fit-out works and €4.4m
which is included in property income receivables and receivable over two years relating to agreed payments under a lease surrender. The
balance of trade and other receivables has no concentration of credit risk as it comprises mainly prepayments and tax refunds due.
21. Non-current assets classified as held for sale
Balance at beginning of financial year
Recognised during the financial year
Acquisition costs
Sold during the financial year
Balance at end of financial year
31 March
2016
31 March
2015
€'000
€'000
18,499
-
-
(14,578)
-
22,993
541
(5,035)
3,921
18,499
Non-current assets classified as 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 €2.1m (31 March 2015: €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.
FINANCIAL STATEMENTS 112
Notes forming part of the Annual Report
(continued)
22. Issued capital and share premium
Balance at beginning of
financial year
Shares issued during
the financial year
Share capital
31 March 2016
Share
premium
Total
Share capital
31 March 2015
Share
premium
Total
€'000
€'000
€'000
€'000
€'000
€'000
67,032
590,955
657,987
38,500
333,312
371,812
1,093
13,318
14,411
28,532
271,052
299,584
Costs associated with the issue
-
-
-
-
(13,409)
(13,409)
Balance at end of financial year
68,125
604,273
672,398
67,032
590,955
657,987
Shares issued during the financial year as follows:
Business acquisition
Settlement of performance fee due for 2015 financial year
Prepaid remuneration
Contract price
€
1.17605
No of shares
Price on issue
date €
1.31800
1,174,625
998,788
1,316,402
4,580,443
3,894,769
5,133,305
7,103,659
6,040,269
7,961,075
Total shares issued (10 November 2015)
12,858,727 10,933,826
14,410,782
All of these shares were issued on 10 November 2015 and the associated costs were €11,000. Further details on the issue of these shares can be
found in Note 5.
Authorised share capital
Authorised
Allotted, called up and fully paid
In issue at financial year end
2016
2015
No of shares
'000
No of shares
'000
1,000,000
1,000,000
681,251
670,317
681,251
670,317
All of these shares are of the same class and carry equal voting rights and rank equally for dividends. The company has no securities in issue
conferring special rights with regard to the control of the company.
Under the terms of the agreement under which the Group internalised the Investment Manager, the vendors are entitled to certain deferred
contingent payments which are, for the most part, equivalent to the performance fees which would have been due under the Investment
Management Agreement. These amounted to €5.9m at the financial year end (31 March 2015: €5.8m) and are all payable in shares (Note 23).
A further 4.6m shares are expected to be issued in relation to these payments.
HIBERNIA REIT PLCANNUAL REPORT 2016
23. Other reserves (net of income tax)
Property revaluation
Cash flow hedging
Other reserves
Balance at end of financial year
a. Properties revaluation reserve
Balance at beginning of financial year
Increase arising on revaluation of properties
Balance at end of financial year
113
31 March
2016
31 March
2015
€'000
€'000
323
(112)
5,925
-
-
5,772
6,136
5,772
31 March
2016
31 March
2015
€'000
€'000
-
323
323
-
-
-
In July 2015 the Group moved its headquarters to a section of South Dock House. At that date the Group de-recognised this portion (33%) of the
asset as an investment property and recognised it in owner occupied property at fair value. Subsequent remeasurement to fair value is made
through other comprehensive income or loss. On disposal, that portion of the properties revaluation reserve relating to the premises sold is
transferred directly to retained earnings. No income tax arises on this item.
b. Cash flow hedging reserve
Balance at beginning of financial year
(Loss) arising on fair value of hedging instruments entered into for cash flow hedges
Balance at end of financial year
31 March
2016
31 March
2015
€'000
€'000
-
(112)
(112)
-
-
-
The cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instru-
ments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are
recognised and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the hedged
transaction affects the profit or loss consistent with the Group’s accounting policy. No income tax arises on this item.
Cumulative gains or losses arising on changes in fair value of hedging instruments that have been tested as ineffective and reclassified from
equity into profit or loss during the financial year are included in the following line items:
Finance loss
Financial
year ended
31 March
2016
Financial year
ended 31
March
2015
€'000
€'000
17
-
FINANCIAL STATEMENTS 114
Notes forming part of the Annual Report
(continued)
23. Other reserves (net of income tax) (continued)
c. Other reserves
Balance at beginning of financial year
Performance related payments provided
Settlement of prior year performance related payment
Balance at end of financial year
31 March
2016
31 March
2015
€'000
€'000
5,772
5,925
(5,772)
-
5,772
-
5,925
5,772
Other reserves comprise represented amounts reserved for the issue of shares in respect of performance related payments. These are discussed
further in Note 5.
During Internalisation of the Investment Manager, it was agreed that 3,894,659 shares would be issued at a price of €1.17605 or €4.6m. A transfer
of €537,000 was made to provide for performance payments to non-vendor staff and a further €654,349 was provided against taxes that would
have been payable in the Investment Manager prior to the dividend being paid to its shareholder. For further information on the internalisation
transaction see Note 5.
24. Retained earnings and dividends on equity instruments
Balance at beginning of financial year
Profit for the financial year
Share issuance costs
Dividends paid
Balance at end of financial year
31 March
2016
31 March
2015
€'000
€'000
89,375
136,797
(11)
(8,121)
(846)
92,232
-
(2,011)
218,040
89,375
In August 2015, a dividend of 0.5 cent per share (total dividend €3.4m) was paid to the holders of fully paid ordinary shares.
In January 2016 a dividend of 0.7 cent per share (total dividend €4.8m) was paid to the holders of fully paid ordinary shares.
The Directors propose a final dividend of 0.8 cent per share to be paid to shareholders in August 2016. This dividend is subject to approval by
shareholders at the Annual General Meeting and has not been included as a liability in these consolidated financial statements. The total
estimated dividend to be paid is €5.5m.
The Directors confirm that the Company complies with the dividend payment conditions contained in the Irish REIT legislation as described
in the Director’s Report on page 53 to 54.
HIBERNIA REIT PLCANNUAL REPORT 2016 25. Financial liabilities
Balance at beginning of financial year
Bank finance drawn during the financial year
Arrangement fees and other costs
Amortised interest
Balance at end of financial year
The maturity of borrowings is as follows:
Less than 1 year
Between 2 and 5 years
Over 5 years
Total
115
31 March
2016
31 March
2015
€'000
€'000
-
75,529
(3,718)
913
72,724
(119)
72,843
-
72,724
-
-
-
-
-
-
-
-
-
In November 2015, the Group entered into a new €400m revolving credit facility (“RCF”) with Bank of Ireland, Barclays Bank Ireland PLC and
Ulster Bank Ireland Limited, secured against a corporate level debenture. The new RCF, which has a five year term, replaces the existing €100m
facility which was due to mature in August 2017.
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. The amount presented in the financial statements is net of initial arrangement fees and associated
costs.
In December 2015 the Group entered into a €46.7m non-recourse debt facility with Deutsche Bank AG, London Branch secured on the Windmill
Lane joint operation. The facility has a three year term, with an option to extend for a further year, and will be used to fund the development
works at 1 Windmill Lane. In early 2016, at the request of the joint operation partners, the facility was downsized to €44.2m. The Group’s
exposure to this facility is 50%.
€4.2m was paid in arrangement fees and related costs for these two facilities during the financial year ended 31 March 2016. Interest and fees
relating to the Windmill facility are capitalised into development costs. All costs related to financing arrangements are amortised into the
effective interest rate.
The Directors confirm that all covenants have been complied with and are kept under review.
All borrowings are denominated in Euro. All borrowings are subject to 6 months or less interest rate changes and contractual re-pricing rates.
In addition, the Group has entered into derivative instruments so that EURIBOR exposure is capped at 1% in accordance with the Group’s
hedging policy (Note 19).
FINANCIAL STATEMENTS
116
Notes forming part of the Annual Report
(continued)
26. Trade and other payables
Current
Accrued investment property costs
Fair value of derivatives
Rent deposits and early payments
Investment management fee payable -base
Trade and other payables
PAYE/PRSI payable
Tax payable
31 March
2016
31 March
2015
€'000
€'000
9,130
-
5,551
-
4,323
103
216
687
5,100
1,920
1,625
2,153
36
689
Balance at end of financial year – current
19,323
12,210
Trade and other payables are interest free and have settlement dates within one year. Derivatives have been restated at fair value. The Directors
consider that the carrying value of the remainder of trade and other payables approximates to their fair value.
27. IFRS and EPRA Net Asset Value per share
IFRS net assets at end of financial year
Ordinary shares in issue
IFRS NAV per share (cent)
Ordinary shares in issue
Estimated additional shares for performance related payments
Diluted number of shares
Diluted IFRS NAV per share (cent)
IFRS net assets at end of financial year
Net mark to market on financial assets
Revaluation of non-current assets classified as held for sale
EPRA NAV
EPRA NAV per share (cent)
31 March
2016
31 March
2015
€'000
€'000
896,574
753,134
681,251
670,317
131.6
112.4
681,251
670,317
4,550
4,664
685,801
674,981
130.7
111.6
31 March
2016
31 March
2015
€'000
€'000
896,574
753,134
129
457
-
1,445
897,160
754,579
130.8
111.8
The Company has established a reserve of €5.9m (31 March 2015: €5.8m) against the issue of 4.6m ordinary shares relating to shares due to issue for
payments due to the vendors of the Investment Manager and employees as detailed in Note 5. The issue price will be 1.2899, calculated on the average
closing price for twenty days prior to 31 March 2016. The closing price on 31 March 2016 was 1.302.
HIBERNIA REIT PLCANNUAL REPORT 2016
28. Cash flow statement
Purchase of investment property
Property Purchases
Development and Refurbishment Expenditure
Change in deposits paid for investment property
Change in prepayment for investment property
Payable for investment property
Change in accrued investment property costs
Cash paid for investment property
Business acquisition
Cash paid in Internalisation transaction
Of which is prepaid remuneration
Cash paid for business acquisition
Cash received in transaction
Net cash movement in business acquisition
117
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
Note
€'000
€'000
17
17
20
20
26
136,236
499,630
37,343
-
326
42,697
(8,443)
12,173
(11,010)
-
(42,697)
(687)
208,159
457,409
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
(8,278)
7,104
(1,174)
1,411
237
-
-
-
-
-
Internalisation was paid for in a combination of shares and cash as discussed in Note 5.
29. Financial instruments and risk management
a. Financial risk management objectives and policy
The Group has to take calculated risks in order to realise strategic goals and this exposes the Group to a variety of financial risks. These include,
but are not limited to, market risk (including interest and price risk), liquidity risks and credit risk. These financial risks are managed in an overall
risk framework by the Board, in particular by the CFO, and monitored and reported on by the Risk and Compliance Officer. The Group monitors
market conditions with a view to minimising the volatility of the funding costs of the Group. The Group uses derivative financial instruments
such as interest rate caps and swaptions to manage the financial risks associated with the underlying business activities of the Group.
FINANCIAL STATEMENTS
118
Notes forming part of the Annual Report
(continued)
29. Financial instruments and risk management (continued)
b. Financial assets and financial liabilities
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
Cash and cash
equivalents
Amortised cost
1
Cash value
The fair value of cash and cash equivalents held at
amortised cost have been calculated by discounting the
expected cash flows at prevailing interest rates.
Loan and receivables
Amortised cost
3
Assessed in
relation to
collateral value
Valuation of collateral is subjective based on agents
guide sales prices and market observation of similar
property sales were available
Trade and other
receivables
Amortised cost
2
Cash value
Financial liabilities
Amortised cost
2
Discounted cash
flow
Derivative financial
instruments
Trade and other
payables
Fair value
2
Calculated price
Amortised cost
2
Cash value
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 recoverable in the short
term. No discounting is therefore applied
The fair value of financial liabilities held at amortised
cost have been calculated by discounting the expected
cash flows at prevailing interest rates.
The fair value of derivative financial instruments is
calculated using pricing based on observable inputs from
financial markets
These are all accruals and will settle in the short term
based on their cash value and therefore no discounting is
applied
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.
c.
Fair value hierarchy
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
HIBERNIA REIT PLCANNUAL REPORT 2016 119
29. Financial instruments and risk management (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.
Level
2016
Loans and
receivables
At fair value
At amortised
cost
Carrying
value
Fair value
2
3
2
1
2
2
Level
2
3
2
3
2
2
Trade and other receivables
Loans
Derivatives at fair value
Cash and cash equivalents
Financial liabilities
Trade and other payables
Trade and other receivables
Loans
Cash and cash equivalents
Derivative financial instruments
Financial liabilities
Trade and other payables
Movements of level 3 fair values
Balance at beginning of financial year
Transfers into level 3
Transfers out of level 3
Purchases, sales, issues and settlement
Purchases
Sales
Written call option1
Repayments
Fair value movement
Amortisation
Balance at end of financial year
€'000
€'000
€'000
€'000
€'000
30,546
152
-
23,187
-
-
-
-
213
-
-
-
53,885
213
-
-
-
-
(72,724)
(19,323)
(92,047)
30,546
30,546
152
213
23,187
(72,724)
(19,323)
(37,949)
152
213
23,187
(72,724)
(19,323)
(37,949)
At fair value
At amortised
cost
Carrying
value
Fair value
€'000
€'000
2015
Loans and
receivables
€'000
9,046
152
139,048
-
-
-
-
-
-
-
(5,100)
-
-
-
-
-
-
-
-
-
(49,807)
(49,807)
148,246
(5,100)
€'000
9,046
152
€'000
9,046
152
139,048
139,048
-
(5,100)
-
(49,807)
93,339
-
(5,100)
-
(49,807)
93,339
31 March
2016
31 March
2015
€'000
€'000
631,248
68,563
-
-
(2,400)
(22,993)
173,579
550,603
(9,875)
5,100
-
130,156
-
-
(5,100)
(47,250)
85,768
1,657
927,808
631,248
1: Included in this balance is the written call option in 2015 related to the joint operation partner’s option to purchase 50% of the Windmill Lane site at cost
This reconciliation includes investment property which is described further in Note 17 to these consolidated financial statements.
FINANCIAL STATEMENTS
120
Notes forming part of the Annual Report
(continued)
29. Financial instruments and risk management (continued)
d. Risk management
The Group has identified exposure to the following risks:
(a) Market risk
(b) Credit risk
(c)
Liquidity risk
The policies for managing each of these and the principal effects of these policies on the results for the financial year 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 has no financial assets or liabilities denominated in foreign currencies.
The Group’s financial assets currently principally comprise mainly short term bank deposits and trade receivables. Financial liabilities comprise
short term payables and bank borrowings. Therefore the primary market risk is interest rate risk. Bank borrowing interest rates are based on
short term variable interest rates and the Group has hedged against increasing rates by entering into interest rate caps to restrict EURIBOR
interest costs to 1%.
Exposure to interest rates is limited to the exposure of its earnings from uninvested funds and borrowings. There were no uninvested funds
from the Company’s capital raises at the financial year-end (31 March 2015: €139m). Borrowings were €75.6m (31 March 2015: €nil). While
interest rates remain at historic lows, the hedging strategy means there is minimal impact on earnings of EURIBOR rate increases over 1%.
The Group’s drawings under its facilities were based on a EURIBOR rate of 0% and therefore the impact of a rise in EURIBOR to 1% for a full
year would be approximately €0.8m (31 March 2015: The impact of a 10% rate change with no hedging was estimated to be c. €40,000).
(b) Credit risk
Credit risk is the risk of loss of principal or loss of a financial reward stemming from a counterparty’s failure to repay a loan or otherwise meet
a contractual obligation. Credit risk is therefore, for the Group and Company, the risk that the counterparties underlying its assets default.
The Group’s main financial asset is cash and cash equivalents. Cash and cash equivalents are held with major Irish and European institutions.
The Board has established a cash management policy for these funds which it monitors regularly. This policy includes ratings restrictions,
BB or better, and related investment thresholds, €25-50m with individual institutions dependent on rating, to avoid concentration risks with
any one counterparty. The Company has also engaged the services of a Depositary to ensure the security of the cash assets.
Concentration of risk in receivables: Approximately €6.0m (31 March 2015: €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. In addition, approximately €2.9m is due from tenants for fit-out works and €4.4m for surrender premia. 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:
Financial assets
Trade and other receivables
Cash and cash equivalents
Balance at end of financial year
31 March
2016
31 March
2015
€'000
€'000
365
30,546
23,187
152
9,046
139,048
54,098
148,246
HIBERNIA REIT PLCANNUAL REPORT 2016 121
29. 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.
Net current assets at the financial year end were:
Net current assets at the financial year end
31 March
2016
31 March
2015
€'000
€'000
26,665
111,686
The following tables show total liabilities due as compared with funds available. No account is taken of trade and other receivables due, rent
income due under operating leases, or other cash in-flows. Only trade payables relating to cash expenditure are included, the balances relate
either to non-cash items or deferred income.
Trade and other payables
Financial liabilities
Payable for investment property
Total liabilities due
Funds available:
Cash and cash equivalents
Revolving credit facility undrawn
Total funds available
Net funds available
31 March
2016
€'000
19,323
72,724
31 March
2015
€'000
5,190
-
-
42,697
92,047
47,887
23,187
325,000
139,048
100,000
348,187
239,048
256,140
191,161
FINANCIAL STATEMENTS 122
Notes forming part of the Annual Report
(continued)
29. Financial instruments and risk management (continued)
Listed below are the contractual maturities of the Group’s financial liabilities:
Group
At 31 March 2016
Carrying
amount
€’000
Contractual
cash flows
€’000
6 months
or less
€’000
6-12
months
€’000
1-2
years
€’000
2-5
years
€’000
76,155
82,619
4,642
9,130
4,642
9,130
626
4,426
9,130
89,927
96,391
14,182
782
216
-
998
1,563
79,648
-
-
-
-
1,563
79,648
Group
At 31 March 2015
Carrying
amount
€’000
Contractual
cash flows
€’000
6 months
or less
€’000
-
-
4,503
43,384
47,887
4,503
43,384
47,887
-
3,814
687
4,501
6-12
months
€’000
-
689
42,697
43,386
1-2
years
€’000
2-5
years
€’000
-
-
-
-
-
-
-
-
Non derivatives
Borrowings
Trade payables
Payable for investment property
Total
Non derivatives
Borrowings
Trade payables
Payable for investment property
Total
e. 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 2016 the capital of the Company was €897m (31 March 2015: €753m).
There are no external capital requirements on the Group currently. However, as the Company is now self-managed it is applying for authori-
sation under the Alternative Investment Fund regulations. Once this approval is in place, it will be required to maintain 25% of its fixed
overheads as capital.
Under the Irish REIT regime, the Group must distribute at least 85% of its property income by way of a Property Income Distribution (“PID”).
Therefore, capital available for business growth will not be augmented by dividend policy. To grow the business, the Group must therefore
consider the need to seek further capital in the market given both the inability to grow reserves and the restriction on its borrowings as a
source of increasing its portfolio size as discussed above.
The Company’s share capital is publicly traded on the London and Irish Stock Exchanges. In order to ensure the proper management of the
share register, the Group employs the services of a share registrar, Capita Registrars (Ireland) Limited t/a Capita Asset Services.
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.
HIBERNIA REIT PLCANNUAL REPORT 2016 123
30. 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
2016
31 March
2015
€'000
€'000
30,592
82,245
80,808
20,457
41,469
24,412
193,645
86,338
The Group leases its investment properties under operating leases. The weighted average unexpired lease term (‘WAULT’) at 31 March 2016,
excluding residential properties and weighted on contracted rents, based on lease expiry date was 9.3 years or 5.6 years based on the next
tenant break option date (31 March 2015: 7.8 years and 3.9 years).
These calculations are based on all leases entered into at 31 March 2016, i.e. including pre-lets.
31. Investment in subsidiary undertakings
The Company has the following interests in ordinary shares in the following subsidiary undertakings at 31 March 2016. These subsidiaries
are fully owned and consolidated within the Group.
Registered address /
Country of
incorporation
Shareholding /
Number of
shares held
Directors
Name
Dockland Central
Limited (previously
Lamourette Limited)
Hibernia REIT
Finance Limited
Hibernia REIT
Holding Company
Limited
Mayor House
Basement
Management Limited
WK Nowlan REIT
Management Limited
South Dock House,
Hanover Quay, Dublin
D02 XW94, Ireland
South Dock House,
Hanover Quay, Dublin
D02 XW94, Ireland
South Dock House,
Hanover Quay, Dublin
D02 XW94, Ireland
South Dock House,
Hanover Quay, Dublin
D02 XW94, Ireland
South Dock House,
Hanover Quay, Dublin
D02 XW94, Ireland
100%/2
100%/10
100%/1
100%/2
100%/300,000
Nowlan Property
Limited
Wyckham Point
(Block 3) Owners’
Management
Company Limited by
Guarantee
South Dock House,
Hanover Quay, Dublin
D02 XW94, Ireland
South Dock House,
Hanover Quay, Dublin
D02 XW94, Ireland
100%/100
N/A
The Group has no interests in unconsolidated subsidiaries.
Company
Secretary
Castlewood
Corporate Services
Limited
Castlewood
Corporate Services
Limited
Castlewood
Corporate Services
Limited
Castlewood
Corporate Services
Limited
Castlewood
Corporate Services
Limited
Nature of business
Property management
Financing activities
Holding property
interests
Property management
Development and
management of real
estate
Castlewood
Corporate Services
Limited
Castlewood
Corporate Services
Limited
Holding company
Property management
Richard Ball,
Kevin Nowlan,
Frank O'Neill
Richard Ball,
Kevin Nowlan,
Frank O'Neill,
Thomas Edwards-Moss
Richard Ball,
Kevin Nowlan,
Frank O'Neill
Richard Ball,
Kevin Nowlan,
Frank O'Neill
Frank Kenny,
Frank O’Neill,
Kevin Nowlan,
William Nowlan,
Kevin Murphy,
Richard Ball,
Thomas Edwards-Moss
Kevin Nowlan,
William Nowlan,
Frank O’Neill
Richard Ball,
Kevin Nowlan,
Thomas Edwards-Moss,
Frank O’Neill
FINANCIAL STATEMENTS 124
Notes forming part of the Annual Report
(continued)
32. Related parties
a. Subsidiaries
All transactions between the Company and its subsidiaries are eliminated on consolidation.
b.
Internalisation of the Investment Manager
The Group completed the Internalisation of its management team on 5 November 2015. Under the Irish and UK Listing Rules, the transaction was
classified as a related party transaction (a ''Related Party Transaction'') by virtue of (i) the relationship between the Company and the Investment
Manager; (ii) the relationship between the Company, the Investment Manager and William Nowlan (a Director of the Company, a director of the
Investment Manager and the holder of 25 per cent. of the issued share capital of Nowlan Property Limited); and (iii) the fact that William Nowlan,
Kevin Nowlan, Frank O'Neill and Frank Kenny may, for the purposes of this particular transaction, be regarded as being persons exercising
significant influence over the Company by virtue of such persons constituting the majority of the directors of the Investment Manager, and each
of William Nowlan, Kevin Nowlan, Frank O'Neill and Frank Kenny also being vendors in respect of the transaction. Consequently, the transaction
required the approval of the Shareholders at an Extraordinary General Meeting, which was held on 27 October 2015. In addition to Shareholder
approval, the transaction was also conditional upon, amongst other things, the conditions to completion set out in the Share Purchase Agreement
having been satisfied (or, if capable of being waived, waived by the Company) and the relevant regulatory approvals from the Central Bank of
Ireland having been obtained.
Amounts paid and payable to related parties under this transaction were (at fair value and including shares and cash):
NAV purchase of the Acquirees: Kevin Nowlan €2.9m, William Nowlan €1.4m, Frank Kenny €1.9m, Frank O’Neill €0.6m.
Prepaid remuneration: Kevin Nowlan €5.6m, William Nowlan €2.8m, Frank Kenny € 3.8m, Frank O’Neill €1.1m.
Performance related payments and top-ups due for 2016: Kevin Nowlan €2.0m, William Nowlan €1.0m, Frank Kenny €1.4m, Frank O’Neill €0.4m.
Further details on this transaction may be found in Note 5 of these financial statements.
c. Other related party transactions
WK Nowlan Property Limited was an 80% owned subsidiary of Nowlan Property Limited until 5 August 2015 when it was transferred at its
net asset value to a company owned and controlled by the Shareholders of Nowlan Property Limited. During the financial year WK Nowlan
Property Limited was engaged on an arm’s length basis to carry out receivership, project management, agency and due diligence services
across the Group’s loan and property portfolios. The fees earned by WK Nowlan Property Limited for these services were benchmarked on
normal commercial terms and totalled €1.3m for the financial year to 31 March 2016 (31 March 2015: €0.7m). In addition, costs totalling €0.1m
were also recharged to the Group by WK Nowlan Property Limited during the financial year (and included in this figure is €23k of costs relating
to services provided by Kirsty Foynes, the wife of Kevin Nowlan. These services related to the preparation for sale, by the Receiver, of apartments
held in the non-core Dorville portfolio). An amount of €0.1m was owed to WK Nowlan Property Limited at the financial year end.
In March 2016 the Group acquired Marine House and as a result became the landlord of WK Nowlan Property Limited who, in 2013, had agreed
lease terms with the previous owner on normal commercial terms. The Group received rent of €6k from WK Nowlan Property Limited during
the financial year. The Group also recharged to WK Nowlan Property Limited €5k of miscellaneous costs during the financial year to 31 March
2016. No amounts were owed to the Group from WK Nowlan Property Limited at the financial year end.
William Nowlan is Chairman of WK Nowlan Property Limited. William Nowlan and Frank O’Neill are both shareholders in WK Nowlan
Property Limited along with Kevin Nowlan. As part of his consultancy agreement with the Company, William Nowlan is entitled to €50k in
consulting fees for the financial year ended 31 March 2016. William Nowlan also receives a fee of €50k per annum in relation to his role as a
non-executive director.
As part of his consultancy agreement with the company, Frank Kenny is entitled to €200k in fees for the financial year ended 31 March 2016.
€66k was paid to Frank Kenny during the year with the remainder outstanding at the financial year end. The Group acquired Dundrum View,
an apartment block in Dundrum, Dublin 14 at a contracted price of €28.05m during the financial year. Frank Kenny held a 1.9% holding in
this asset while other family members held a further 1.1%.
Thomas Edwards-Moss rents an apartment from the Group at market rent and paid €17k in rent during the financial year. For further
information on Directors’ emoluments please refer to the Directors’ Remuneration Report on pages 67 to 71 of this Annual Report.
HIBERNIA REIT PLCANNUAL REPORT 2016 125
32. Related parties (continued)
d. Key management personnel
In addition to the Executive and Non-Executive Directors, the following are the key management personnel of the Group:
Richard Ball
Mark Pollard
Sean O’Dwyer
Frank O’Neill
Chief Investment Officer
Director of Development
Risk and Compliance Officer
Chief Operations Officer
The remuneration of the Non-Executive Directors during the financial year was as follows:
Short term benefits
Post-employment benefits
Other long-term benefits
Share-based payments
Termination payments
Total for the financial year
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
300
250
-
-
-
-
-
-
-
-
300
250
The remuneration of the Executive Directors and the key management personnel during the financial year from the date of the Internalisation
of the Investment Manager was as follows:
Short term benefits
Post-employment benefits
Other long-term benefits
Share-based payments
Termination payments
Total for the financial year
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
871
63
-
254
-
1,188
-
-
-
-
-
-
The remuneration of Directors and key management is determined by the remuneration committee having regard to the performance of
individuals and market trends.
33. Events after the reporting period
The Directors have proposed a final dividend of 0.8 cent per share or €5.5m that is subject to approval at the AGM to be held on 26 July 2016.
Other than this, there were no significant events after the reporting date.
FINANCIAL STATEMENTS
126
Company statement of financial position
As at 31 March 2016
Assets
Non-current assets
Property, plant and equipment
Investment property
Investment in subsidiaries
Loans to subsidiaries
Other financial assets
Trade and other receivables
Total non-current assets
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
Other reserves
Retained earnings
Total equity
Non-current liabilities
Financial liabilities
Trade and other payables
Total non-current liabilities
Current liabilities
Financial liabilities
Trade and other payables
Payable due for investment property
Total current liabilities
Total equity and liabilities
31 March
2016
31 March
2015
Notes
€'000
€'000
c
d
e
f
g
h
h
i
j
k
l
m
n
m
n
2,946
-
906,781
641,296
6,930
15,298
203
11,662
-
3,984
-
-
943,820
645,280
17,754
21,183
38,937
3,921
42,858
5,428
138,652
144,080
18,499
162,579
986,678
807,859
672,398
657,987
6,136
211,857
890,391
5,772
89,249
753,008
72,145
5,772
77,917
-
18,370
-
18,370
-
-
-
-
12,154
42,697
54,851
986,678
807,859
The notes on pages 129 to 136 form an integral part of these Company financial statements. The company financial statements on pages 126
to 136 were approved and authorised for issue by the Board of Directors on 2 June 2016 and signed on its behalf by:
Mr Kevin Nowlan
Chief Executive Officer
Mr Thomas Edwards-Moss
Chief Financial Officer
HIBERNIA REIT PLCANNUAL REPORT 2016
Company statement of changes in equity
For the financial year ended 31 March 2016
127
Financial year ended 31 March 2016
Share capital
Share
premium
Retained
earnings
Other
reserves
Total
€'000
€'000
€'000
€'000
€'000
Balance at beginning of financial year
67,032
590,955
89,249
5,772
753,008
Total comprehensive income for the financial year
Profit for the financial year
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
-
-
-
-
130,740
-
130,740
-
211
5,983
211
883,959
67,032
590,955
219,989
-
-
-
-
-
-
1,093
13,318
(8,121)
-
(11)
-
-
-
-
(8,121)
-
(11)
153
14,564
Balance at end of financial year
68,125
604,273
211,857
6,136
890,391
Financial year ended to 31 March 2015
Share capital
Share
premium
Retained
earnings
Other
reserves
Total
€'000
€'000
€'000
€'000
€'000
Balance at beginning of financial year
38,500
333,312
(962)
Total comprehensive income for the financial year
Profit for the financial year
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
-
-
-
-
92,222
-
38,500
333,312
91,260
-
28,532
-
-
-
(2,011)
271,052
(13,409)
-
-
-
-
-
-
-
-
-
-
-
5,772
370,850
92,222
-
463,072
(2,011)
299,584
(13,409)
5,772
Balance at end of financial year
67,032
590,955
89,249
5,772
753,008
The notes on pages 129 to 136 form an integral part of these Company financial statements.
FINANCIAL STATEMENTS
128
Company statement of cash flows
For the financial year ended 31 March 2016
Cash flows from operating activities
Profit for the financial year
Adjusted non cash movements:
Revaluation of investment properties
Other gains and losses
Performance related payments
Prepaid remuneration
Rental income (payable)/paid in advance
Depreciation
Finance (income)/expense
Income tax
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 fixed assets
Cash paid for investment property
Sale of investment property
Purchase of non-current assets classified as held for sale
Proceeds from the sale of non-current assets classified as held for sale
(Increase)/decrease in loans to subsidiaries
Business acquisition
Prepaid remuneration
Income tax paid
Finance income and expense
Net cash flow absorbed by investing activities
Cash flow from financing activities
Dividends paid
Borrowings drawn
Arrangement fee paid re bank facility
Derivatives premium
Proceeds from the issue of ordinary share capital
Share issue costs
Net cash inflow from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
(Decrease) in cash and cash equivalents
Net cash and cash equivalents at end of financial year
The notes on pages 129 to 136 form an integral part of these Company financial statements.
Notes
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
130,740
92,222
(118,948)
(80,809)
o
o
(2,530)
5,925
4,191
(1,807)
65
2,945
(514)
20,067
(2,149)
206
(7,691)
5,772
-
9
-
1,575
691
11,769
(1,056)
3,355
18,124
14,068
(46)
-
(203,158)
(496,034)
14,752
-
-
(23,534)
12,226
(11,314)
(1,174)
(7,104)
(349)
(2,261)
6,297
63,933
-
-
-
(1,421)
(198,428)
(450,759)
(8,121)
75,000
(3,718)
(315)
(2,011)
-
(500)
-
-
(11)
299,584
(13,409)
62,835
283,664
(117,469)
(153,027)
138,652
291,679
(117,469)
(153,027)
21,183
138,652
HIBERNIA REIT PLCANNUAL REPORT 2016
Notes to the company financial statements
129
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) as adopted
by the European Union (EU) and with those parts of the Company’s Act 2014 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 investment properties, 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 90 to 96 of the Group’s Annual Report.
The Company’s investments in its subsidiaries that are not classified as held for sale are stated at cost less any impairment. If the investment
is classified as held for sale, the Company accounts for it at the lower of its carrying value and fair value less estimated costs to sell.
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 financial
year. 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 2 (f) to the consolidated financial
statements on page 86 to 87 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 years 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.
b. Operating profit
Operating profit for the financial year is stated after charging:
Non-Executive Directors' fees
Professional valuers' fees
Prepaid remuneration expense
Depositary fees
Registrar fees
Pre-internalisation Investment Manager Costs
Depreciation
“Top-up ”internalisation expenses for financial year
Other administration expenses
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
300
388
1,802
310
40
1,240
65
304
3,954
250
218
-
218
28
-
-
-
846
8,403
1,560
FINANCIAL STATEMENTS 130
Notes to the company financial statements
(continued)
b. Operating profit (continued)
Auditors’ remuneration
For further information on Auditors‘ remuneration, please refer to Note 9 of the consolidated financial statements.
Employment
For further information on employment, please refer to Note 10 of the consolidated financial statements.
c. Property, plant and equipment
For further information on property, plant and equipment please refer to Note 16 of the consolidated financial statements.
d.
Investment properties
Office and
residential
Level 3
Group
€'000
Development
Industrial
Total
Level 3
Group
€'000
Level 3
Group
€'000
Level 3
Group
€'000
Carrying value at start of financial year
542,377
88,600
10,319
641,296
Additions:
Property purchases
Development and refurbishment expenditure1
Revaluations included in income statement
Disposals:
136,236
17,272
66,757
-
19,960
45,374
-
136,236
111
1,968
37,343
114,099
Transferred to property, plant and equipment as owner occupied
Property sale
Carrying value at end of financial year
(2,400)
-
-
(19,793)
-
-
(2,400)
(19,793)
760,242
134,141
12,398
906,781
1 The Group received €1.5m in relation to a dilapidation costs payment due to a tenant surrender of their lease on Guild House. This has been applied to the development and
refurbishment costs on this property and therefore reduces the cost of this property.
Office and
residential
Level 3
€'000
31 March 2015
Development
Industrial
Total
Level 3
€'000
Level 3
€'000
-
-
-
Level 3
€'000
-
Carrying value at start of financial year
Additions:
Property purchases
Investment properties recognised on de-recognition of loans
Development and refurbishment expenditure
Revaluations included in income statement
Carrying value at end of financial year
412,714
76,578
10,338
499,630
48,684
11,678
69,301
542,377
-
510
11,512
88,600
-
(15)
(4)
48,684
12,173
80,809
10,319
641,296
Note 17 to the Group Financial Statements contains further information in relation to the Company’s investment property. All Group investment
properties are held directly by the Company save the Windmill Lane development property which is held in a joint operation through the
Company’ s subsidiary, Hibernia REIT Holding Company Limited.
HIBERNIA REIT PLCANNUAL REPORT 2016 131
e.
Investment in subsidiary
For further information on the subsidiary acquired during the financial year, please refer to Note 5 of the consolidated financial statements.
f.
Loans to subsidiary
Balance at beginning of financial year
Loan advances
Loan repayments
Interest income at effective interest rate
Balance at end of financial year
31 March
2016
31 March
2015
€'000
€'000
3,984
17,172
(6,982)
1,124
68,416
93,107
(161,711)
4,172
15,298
3,984
The majority of the above balance, €15.3m is due from Hibernia REIT Holding Company Limited in relation to short term funding supplied
for the Windmill Lane development project. These loans are all at book value which the Directors consider approximates fair value due to
their short term nature.
g. Other financial assets
Derivatives at fair value
31 March
2016
31 March
2015
€'000
€'000
203
-
Other financial assets consist of the fair value of the Company’s hedging instruments. Note 19 of the Group financial statements contains
further information on these instruments.
h. Trade and other receivables
Non-current
Prepaid remuneration
Deferred income
Balance at end of financial year – non current
Current
Due from sale of non-current assets classified as held for sale
Prepaid remuneration
Arrangement fee
Property income receivables
Due from tenants re fitouts
Prepayments
Income tax refund due
VAT refundable
Balance at end of financial year – current
31 March
2016
31 March
2015
€'000
€'000
7,123
4,539
11,662
5,955
4,444
-
2,806
2,861
779
349
560
17,754
-
-
-
1,467
-
-
1,911
-
655
-
1,395
5,428
Balance at end financial year – total
29,416
5,428
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 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 contracted at the financial year end. 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.
FINANCIAL STATEMENTS 132
Notes to the company financial statements
(continued)
i. Non-current assets classified as held for sale
For further information on non-current assets classified as held for sale refer to Note 21 of the consolidated financial statements.
j.
Issued share capital and share premium
For information on issued share capital refer to Note 22 of the consolidated financial statements
k. Other reserves
For further information on other reserves refer to Note 23 of the consolidated financial statements.
l.
Retained earnings
Balance at beginning of financial year
Profit for the financial year
Share issuance costs
Dividends paid
Balance at end of financial year
For further information on retained earnings refer to Note 24 of the consolidated financial statements.
m. Financial liabilities
Balance at beginning of financial year
Bank finance drawn during the financial year
Arrangement fees and other costs
Amortised interest
Balance at end of financial year
The maturity of non-current borrowings is as follows:
Less than one year
Between 2 and 5 years
Over 5 years
Total
For further information on financial liabilities refer to Note 25 of the consolidated financial statements.
31 March
2016
31 March
2015
€'000
€'000
89,249
130,740
(11)
(8,121)
(962)
92,222
-
(2,011)
211,857
89,249
31 March
2016
31 March
2015
€'000
€'000
-
75,000
(3,718)
863
72,145
(169)
72,314
-
72,145
-
-
-
-
-
-
-
-
-
HIBERNIA REIT PLCANNUAL REPORT 2016
n. Trade and other payables
Non-current
Payable to subsidiary
Balance at end of financial year – non current
Current
Accrued investment property costs
Fair value of derivatives
Rent deposits and early payments
Investment management fee payable -base
Trade and other payables
PAYE/PRSI payable
Tax payable
Balance at end of year - current
Balance at end financial year - total
For further information on trade and other payables refer to Note 26 of the consolidated financial statements.
o. Cash flow statement
Purchase of investment property
Property purchases
Development and refurbishment expenditure
Change in deposits paid for investment property
Payable for investment property
Change in accrued investment property costs
Cash paid for investment property
Business acquisition
Cash paid in internalisation transaction
Of which is prepaid remuneration
Cash paid for business acquisition
133
31 March
2016
€'000
31 March
2015
€'000
5,772
5,772
8,621
-
5,551
-
3,930
92
176
-
-
687
5,100
1,920
1,625
2,097
36
689
18,370
12,154
24,142
12,154
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
136,236
32,159
-
42,697
(7,934)
538,255
12,173
(11,010)
(42,697)
(687)
203,158
496,034
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€'000
€'000
(8,278)
7,104
(1,174)
-
-
-
Internalisation was paid for in a combination of shares and cash as discussed in Note 5 to the consolidated financial statements.
FINANCIAL STATEMENTS 134
Notes to the company financial statements
(continued)
p. 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 financial year are summarised in Note 29 of the Annual
Report. The following tables measure the risks discussed on a Company only basis for the purpose of these discussions.
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 29 of the Annual Report. Assets
held at level 3 include investment properties in addition to the loans and receivables.
Trade and other receivables
Loans
Derivatives at fair value
Cash and cash equivalents
Financial liabilities
Trade and other payables
Trade and other receivables
Loans
Cash and cash equivalents
Derivative financial instruments
Financial liabilities
Trade and other payables
2016
Loans and
receivables
Level
At fair value
At amortised
cost
Carrying
value
€'000
€'000
€'000
€'000
2
3
2
1
2
2
29,416
15,298
-
-
-
203
21,183
-
-
65,897
2015
-
-
-
203
-
-
-
-
(72,145)
(18,370)
(90,515)
29,416
15,298
203
21,183
(72,145)
(18,370)
(24,415)
Level
Loans and
receivables
At fair value
At amortised
cost
Carrying
value
€’000
5,428
3,984
138,652
-
-
-
2
3
2
3
2
2
€’000
€’000
-
-
-
(5,100)
-
-
-
-
-
-
-
(49,751)
(49,751)
€’000
5,428
3,984
138,652
138,652
(5,100)
(5,100)
-
(49,751)
93,213
-
(49,751)
93,213
148,064
(5,100)
Fair value
€'000
29,416
15,298
203
21,183
(72,145)
(18,370)
(24,415)
Fair value
€’000
5,428
3,984
HIBERNIA REIT PLCANNUAL REPORT 2016
p. Financial instruments and risk management (continued)
Fair value movements at level 3
Balance at beginning of financial year
Transfers into level 3
Transfers out of level 3
Purchases, sales, issues and settlement
Purchases
Sales
Written call option
Advances
Repayments
Fair value movement
Amortisation
Balance at end of financial year
135
31 March
2016
€'000
31 March
2015
€'000
635,080
68,416
-
-
(2,400)
(22,993)
168,395
(19,459)
5,100
17,172
(6,982)
124,048
1,124
643,710
-
(5,100)
-
(138,719)
85,768
3,998
922,078
635,080
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 investment property portfolio discussed for the Group.
Maximum credit risk exposure
Financial assets
Trade and other receivables
Cash and cash equivalents
Balance at end of financial year
Liquidity risk
Net current assets at the financial year-end
Trade and other payables
Financial liabilities
Payable for investment property
Total liabilities due
Funds available:
Cash and cash equivalents
Revolving credit facility undrawn
Total funds available
Net funds available
31 March
2016
€'000
203
29,416
21,183
31 March
2015
€'000
-
5,428
138,652
50,802
144,080
31 March
2016
€'000
31 March
2015
€'000
24,488
107,728
31 March
2016
€'000
24,142
72,145
31 March
2015
€'000
54,851
-
-
42,697
96,287
97,548
21,183
325,000
138,652
100,000
346,183
238,652
249,896
141,104
FINANCIAL STATEMENTS 136
Notes to the company financial statements
(continued)
p. Financial instruments and risk management (continued)
Listed below are the contractual maturities of the Company’s financial liabilities
At 31 March 2016
Non derivatives
Borrowings
Trade payables
Payable for investment property
Total
At 31 March 2015
Non derivatives
Borrowings
Trade payables
Payable for investment property
Total
q. Dividends
Carrying
amount
€’000
Contractual
cash flows
€’000
6 months
or less
€’000
6-12
months
€’000
1-2
years
€’000
2-5
years
€’000
75,576
82,021
4,198
8,621
4,198
8,621
576
4,022
8,621
88,395
94,840
13,219
782
176
-
958
1,563
79,100
-
-
-
-
1,563
79,100
-
-
2,878
43,384
46,262
2,878
43,384
46,262
-
2,189
687
2,876
-
689
42,697
43,386
-
-
-
-
-
-
-
-
For information on the dividends refer to Note 14 of the consolidated financial statements
r.
Investment in subsidiary undertakings
For information on the Company’s holdings in subsidiaries refer to Note 31 of the consolidated financial statements.
s. Related parties
Transaction with related parties are substantially the same as those disclosed in Note 32 of the consolidated financial statements. The only
amount not relating to the Company is an amount of €0.2m of the fees earned by WK Nowlan Property Limited which was earned from the
Company’s subsidiary, Hibernia REIT Finance Limited.
t.
Income statement of the parent company
The parent company of the Group is Hibernia REIT plc. In accordance with Section 304 (2) of the Companies Act, 2014, 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 financial year ended 31 March 2016 determined in accordance with IFRS is €130.7m
(31 March 2015: €92.2m).
u. Events after the reporting date
For information on events after the reporting date refer to Note 33 of the Consolidated Financial Statements.
HIBERNIA REIT PLCANNUAL REPORT 2016 Supplementary disclosures (unaudited)
137
European Public 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 Strategic Report on pages 3 to 48. 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
Financial year ended
31 March 2016
Financial year ended
31 March 2015
€ '000
cent per share
€ '000
cent per share
EPRA Earnings
EPRA NAV
EPRA NNNAV
EPRA NIY
EPRA "topped-up" NIY
EPRA vacancy rate
EPRA cost ratio including vacancy costs
EPRA cost ratio excluding vacancy costs
- basic
- diluted
10,024
10,024
1.5
1.5
3,961
3,961
897,160
896,917
130.8
130.8
754,579
754,218
3.8%
4.2%
4.8%
49.4%
45.1%
0.8
0.8
111.8
111.7
4.4%
4.9%
3.0%
74.6%
73.7%
FINANCIAL STATEMENTS
138
Supplementary disclosures (unaudited)
(continued)
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 for the financial year after taxation
Exclude:
Changes in fair value of investment properties
Profits or losses on the disposal of investment properties, development properties held for investment and
other interests
Profit or loss on disposals of non-core assets
Loan income from asset disposals (net)
Income tax on profit or loss on disposals
Fair value of derivatives
Impact of internalisation
Weighted average number of shares
Basic
Potential shares to be issued re contingent payments
Diluted number of shares
EPRA Earnings per share (cent)
Diluted EPRA Earnings per share (cent)
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€ '000
€ '000
136,797
92,232
(125,056)
(90,868)
(176)
-
(2,136)
-
(475)
17
1,053
(2,732)
(454)
683
5,100
-
10,024
3,961
675,784
500,690
4,550
4,664
680,334
505,354
1.5
1.5
0.8
0.8
Impact of Internalisation: Internalisation was accomplished through the acquisition of the Investment Manager. This acquisition is discussed
in detail in Note 5 to the Consolidated Financial Statements. For the purposes of EPRA Earnings, costs relating to this acquisition are
deducted.
HIBERNIA REIT PLCANNUAL REPORT 2016
139
In order to show the impact of items relating to the original external management structure and the subsequent Internalisation which will, to
a large extent, cease to be a cost after November 2018, EPRA Earnings are shown below amended for these Internalisation related items:
EPRA Earnings as calculated above
Amounts charged re internalisation
Prepaid remuneration amortised
Performance related charges
Financial year
ended 31
March 2016
Financial year
ended 31
March 2015
10,024
3,961
2,557
1,802
6,069
-
-
5,772
Underlying earnings excluding effects of management charges
20,452
9,733
Weighted average number of shares
Adjusted earnings per share (cent)
(ii) EPRA NAV and EPRA NNNAV
NAV per the financial statements
Revaluation of other non-current assets held for sale
Fair value of financial instruments
EPRA NAV
Deferred tax on the revaluation of other non-current assets held for sale
Fair value of financial instruments
EPRA NNNAV
675,784
500,690
3.0
1.9
Financial year ended
31 March 2016
Financial year ended
31 March 2015
€ '000
cent per share
€ '000
cent per share
896,574
457
129
753,134
1,445
-
897,160
130.8
754,579
111.8
(114)
(129)
(361)
-
896,917
130.8
754,218
111.7
Ordinary shares in issue
Estimated additional shares due for issue from performance reserve
Ordinary shares in issue including performance shares
to be issued – "diluted"
681,251
4,550
685,802
670,317
4,664
674,981
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 crystallise 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 profits on these assets may be subject to tax, a deferred tax adjustment is made. The fair value of derivative instruments is
excluded from NAV on the basis that these are hedging instruments and intended to be held to maturity.
FINANCIAL STATEMENTS
140
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 year. The EPRA vacancy rate measures the value of vacant space
expressed as a percentage of the total ERV.
As at 31 March 2016
Office
Residential
Industrial
Total
Development
€'000
€'000
€'000
€'000
€’000
Total
€’000
Investment property at fair value
645,671
114,571
12,400
772,642
155,014
927,656
Less: Development/refurbishment1
(31,840)
-
-
(31,840)
(155,014)
(186,854)
Completed property portfolio
Allowance for purchasers costs
613,831
114,571
12,400
740,802
-
740,802
27,377
5,110
553
33,040
Gross up completed property portfolio
641,208
119,681
12,953
773,842
Annualised cash passing rental income2
Property outgoings
24,078
(645)
6,430
(1,226)
524
(97)
31,032
(1,968)
Annualised net rents
23,433
5,204
427
29,064
Expiration of lease incentives and fixed uplifts
3,225
-
-
3,225
"Topped-up" annualised net rent
26,658
5,204
427
32,289
EPRA NIY
EPRA "topped-up" NIY
3.7%
4.2%
4.3%
4.3%
3.3%
3.3%
3.8%
4.2%
1 Once Dockland Central is included at 41% of floor space representing area being refurbished (31 March 2015: 77%)
2 Cash passing rent includes residential rents gross as property outgoings are included in the line below. Contracted rents are for in place only and therefore pre-lets or leases that
commenced post financial year end are not included.
HIBERNIA REIT PLCANNUAL REPORT 2016
141
As at 31 March 2015
Investment property at fair value
475,877
66,500
10,319
552,696
88,600
641,296
Office
Residential
Industrial
Total
Development
€'000
€'000
€'000
€'000
€’000
Total
€’000
Less: Development/refurbishment1
(39,978)
(66,500)
-
(106,478)
(88,600)
(195,078)
Completed property portfolio
Allowance for purchasers costs
435,899
18,592
Gross up completed property portfolio
454,491
Annualised cash passing rental income
Property outgoings
Annualised net rents
20,000
(46)
19,954
Expiration of lease incentives and fixed uplifts
2,214
"Topped-up" annualised net rent
EPRA NIY
EPRA "topped-up" NIY
(iv) EPRA costs
22,168
4.4%
4.9%
-
-
-
-
-
-
-
-
10,319
446,218
-
446,218
460
19,052
10,779
465,270
524
(121)
20,524
(167)
403
20,357
-
2,214
403
22,571
n/a
n/a
3.7%
3.7%
4.4%
4.9%
EPRA costs are calculated below. A table excluding internalisation related costs is also provided. However, some increase in remuneration costs
to provide for variable remuneration for employees is anticipated post expiration of the current arrangements and therefore the amended costs
ratios are only provided to show indicative impacts on ratios post November 2018.
Total operating expenses under IFRS
Direct property costs
Costs recognised re internalisation
EPRA costs including vacancy costs
Direct vacancy costs
EPRA costs excluding vacancy costs
Gross rental income
EPRA cost ratio including vacancy costs
EPRA cost ratio excluding vacancy costs
Financial
year ended
31 March
2016
€ '000
14,765
2,497
(1,053)
Financial
year ended
31 March
2015
€ '000
12,046
725
-
16,209
12,771
1,429
167
14,780
12,604
32,786
17,112
49.4%
45.1%
74.6%
73.7%
FINANCIAL STATEMENTS
142
Supplementary disclosures (unaudited)
(continued)
Costs adjusted for internalisation
EPRA costs including vacancy costs
Prepaid remuneration amortised
Performance related charges
Adjusted costs (excluding internalisation effects)
Direct vacancy costs
Adjusted costs excluding direct vacancy costs
Gross rental income
Adjusted cost ratio
Adjusted cost ratio excluding vacancy costs
(v) EPRA vacancy rate
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€ '000
€ '000
16,209
12,771
(1,802)
(6,069)
-
-
8,338
12,771
1,429
167
6,909
12,604
32,786
17,112
25.4%
21.1%
74.6%
73.7%
This provides comparable and consistent vacancy data for investors based on the independent valuers’ assessment of ERV. The EPRA vacancy
rate measures the value of vacant space expressed as a percentage of the total ERV.
Annualised ERV vacant units1
Annualised ERV completed portfolio
EPRA vacancy rate
1The part of One Dockland Central undergoing refurbishment is excluded from vacant and from completed
Financial
year ended
31 March
2016
Financial
year ended
31 March
2015
€ '000
€ '000
2,092
43,815
751
25,326
4.8%
3.0%
HIBERNIA REIT PLCANNUAL REPORT 2016
143
(vi) Analysis of lease expiration profile
(a) Rent subject to lease break or expiry - passing rent at 31 March 2016
For period 31 March
2017
2018
2019-2021
Office
Residential
Industrial
Total
Percentage of passing rent
Potential uplift at current ERV
(b) Rent subject to open market review - passing rent at 31 March 2016
For period 31 March
Office
Residential
Industrial
Percentage of contracted rent
Potential uplift at current ERV
(vii) Like for like analysis
€'m
8.3
6.4
-
€'m
0.4
-
0.1
14.7
0.5
€'m
6.3
-
0.4
6.7
47.4%
1.0
1.6%
0.0
21.7%
1.3
2017
€'m
9.6
6.4
-
2018
2019-2021
€'m
1.8
-
0.4
€'m
12.7
-
0.1
16.0
2.2
12.8
51.6%
1.3
7.1%
0.3
41.2%
3.5
All properties have been purchased during the two year period ended 31 March 2016 therefore like for like reporting is not relevant for this
period.
Other disclosures
Disclosures required under the Alternative Investment Fund Managers Directive (“AIFMD”) for Annual Reports of Alternative
Investment Funds (“AIF”s)
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.
Financial information disclosures
€0.2m has been included in other gains and losses (31 March 2015: €nil) relating to the sale of investment properties. Included within the
unrealised gains disclosed under IFRS there is a total of €2.2m in unrealised losses.
Remuneration disclosures
Hibernia REIT plc has adopted a remuneration policy with the objective of aligning the interests of employees of the Group with the creation of
long term value for the shareholders of 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. Further details on the remuneration policy are in the Remuneration
Report on pages 67 to 71 of the Annual Report. Performance related remuneration takes account of individual performance and the financial
performance of Hibernia REIT plc.
FINANCIAL STATEMENTS 144
Supplementary disclosures (unaudited)
(continued)
Hibernia REIT plc assumed the remuneration expenses for all staff of the Investment Manager as part of the agreement on internalisation.
The total remuneration paid to these staff in the financial year, all of whom are engaged in managing the Group activities, was €2,574,847 of
which €1,670,048 comprised fixed remuneration and €904,799 comprised variable remuneration. The average number of staff employed during
the financial year was 13.
Occupiers representing over 0.5% of rent
Tenant name
Office of Public Works
Twitter
BNY Mellon
Bank of Ireland
DEPFA Bank plc
HubSpot Ireland Limited
Riot Games Limited
AWAS
Deloitte 1
Capita Life & Pension Services Ireland Limited
O.D.S. Company
Daqri International Limited
Invesco Global Asset Management Limited
JMC Van Trans Limited
Park Rite
Renaissance Services of Europe Limited
Pay & Shop Ltd T/a Realex Payments
Merrion Capital Holdings Limited
Iconic Offices
Crowe Horwath Bastow Charleton Cons. Limited
Axa Global Distributors (Ireland) Limited
Bearingpoint Ireland Limited
Quinn McDonnell Pattison Limited
ENI Insurance Limited
Morgan Stanley Fund Services (Ireland) Limited
Wella (UK) Limited
Prudential Int. Services Limited
Ellucian Ireland Limited
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
€'m
5.5
5.3
3.0
2.8
2.0
1.3
1.2
1.2
1.0
0.7
0.6
0.6
0.6
0.5
0.5
0.4
0.4
0.4
0.4
0.4
0.3
0.3
0.3
0.3
0.3
0.2
0.2
0.2
%
13.7
13.3
7.5
7.1
5.1
3.2
3.0
3.0
2.6
1.7
1.6
1.5
1.5
1.3
1.3
1.1
1.0
1.0
1.0
1.0
0.8
0.7
0.7
0.7
0.7
0.6
0.5
0.5
1 Deloitte is a tenant of Hardwicke House, which is an investment property of the Group. Deloitte were in situ when the Group acquired its interest in the building and all lease
arrangements are at arm’s length.
HIBERNIA REIT PLCANNUAL REPORT 2016 Directors and other information
145
Depositary
Registrar
Principal legal advisers
Corporate brokers
BNP Paribas Securities Services
(formerly Credit Suisse International,
Dublin Branch)
Trinity Point 10-11
Leinster Street South
Dublin 2
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 International
One Cabot Square
London E14 40J
United Kingdom
Directors
Secretary
Daniel Kitchen (Chairman)
Colm Barrington
(Senior Independent Director)
Thomas Edwards-Moss
(CFO: Appointed 5
November 2015)
Stewart Harrington
Kevin Nowlan (CEO:
Appointed 5 November 2015)
William Nowlan
Terence O'Rourke
Castlewood Corporate Services Limited
(Trading as Chartered Corporate
Services)
Taney Hall
Eglinton Terrace
Dundrum
Dublin 14
Ireland
Registered office
South Dock House
Hanover Quay
Dublin 2
Ireland
Company number
531267
Independent auditor
Tax advisers
Independent valuer
Principal bankers
Deloitte
Chartered Accountants and Statutory
Audit Firm
Hardwicke House
Hatch Street
Dublin 2
Ireland
KPMG
1 Stokes Place
St. Stephen’s Green
Dublin 2
Ireland
CBRE Dublin
3rd Floor, Connaught House
1 Burlington Road
Dublin 4
Ireland
Bank of Ireland
50-55 Baggot Street Lower
Dublin 2
Ireland
146
Glossary
AIF is an Alternative Investment Fund
AIFM is an Alternative Investment Fund Manager
Cash passing rent is the gross property rent receivable on a cash basis
as at the reporting date. It includes sundry items such as car parks
rent and estimates of rents in respect of unsettled rent reviews.
Contracted rent is the annualised rent adjusted for the inclusion of
rent that is subject to a rental incentive such as a rent free or reduced
rent year.
Developer’s profit is the profit on cost estimated by valuers which is
typically a percentage of developer’s costs, usually 20%.
Development construction cost is the total costs of construction to
completion, excluding site and financing costs. Finance costs are
assumed at a notional 6% per annum by the valuers.
DRIP or dividend reinvestment plan is a plan offered by the Group
that allows investors to reinvest their cash dividends by purchasing
additional shares on the dividend payment date.
EPRA is the European Public Real Estate Association, which is the
industry body for European REITs
EPRA cost ratio (including direct vacancy costs) is the ratio of net
overheads and operating expenses against gross rental income. Net
overheads and operating expenses relate to all administrative and
operating expenses net of any service fees, recharges or other income
which is specifically intended to cover overhead and property
expenses.
EPRA cost ratio (excluding direct vacancy costs) is the same as above
except it excludes direct vacancy costs.
EPRA Earnings are the profit after tax excluding revaluations and
gains and losses on disposals and associated taxation (if any).
EPRA NAV per share is the EPRA NAV divided by the diluted number
of shares at the financial year end.
EPRA net assets (EPRA NAV) are defined as the IFRS assets excluding
the mark to market on effective cash flow hedges and related debt
instruments and deferred taxation on revaluations. EPRA NAV there-
fore equals IFRS NAV in this instance.
EPRA Net Initial Yield (NIY) is the cash passing rent generated by
the investment portfolio, less estimated recurring irrecoverable prop-
erty costs expressed as a percentage of the portfolio valuation as
adjusted. The portfolio valuation is adjusted by the exclusion of devel-
opment and residential properties and the addition of
EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of debt
and derivatives and to include deferred taxation on revaluations.
EPRA Topped-up Net Initial Yield is calculated as the EPRA NIY but
adjusting the cash passing rent for contractually agreed uplifts, where
these are not in lieu of rental growth.
EPRA vacancy rate is the Estimated Rental Value (ERV) of vacant space
divided by the ERV of the whole portfolio, excluding developments and
residential property. This is the inverse of the occupancy rate.
EPS or Earnings per share is the profit after taxation divided by the
weighted average number of shares in issue during the financial year
Equivalent yield is the weighted average of the initial yield and rever-
sionary yield and represents the return that a property will produce
based on the occupancy data of the tenant leases.
Estimated Rental Value (ERV) or market rental value is the external
valuers’ opinion as to what the open market rental value of the property
is on the valuation date, and which could reasonably be expected to
be the rent obtainable on a new letting on that property on the valu-
ation date.
Fair value movement is the accounting adjustment to change the
book value of the asset or liability to its market value.
FRI Lease Full Repairing and Insuring lease
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.
In place portfolio is the portfolio of completed properties, i.e. excluding
development and refurbishment projects.
Internalisation refers to the acquisition of the Investment Manager
and the ultimate elimination of reliance on the external investment
management function through bringing these activities inside the
Group.
IPO is the Initial Public Offering, i.e. the first equity raising of the
Company.
IPD is the Investment Property Databank Limited which is part of the
MSCI Group and produces as independent benchmark of property returns
and which provides the Group with the performance information
required in calculating the performance based management fee.
Lease incentive is any consideration or expense, borne by the Group,
in order to secure a lease.
LEED (Leadership in energy and environmental design) is a Green
Building Certification System developed by the U.S. Green Building
Council (USGBC). Its aim is to be an objective measure of building
sustainability.
Like for like rental income growth is the growth in net rental income
on properties owned through the current and previous periods under
review. This growth rate includes revenue recognition and lease
accounting adjustments but excludes properties held for development
in either financial year or properties with guaranteed rental reviews.
The Group does not present this statistic in this financial year as the
last financial year was the first in which the Group held investment
properties and therefore it does not have two full years of history to
which to base this
LTIP or Long Term Incentive Plan aims to encourage staff retention
and align their interests with those of the Group through the payment
of a percentage of performance related rewards through shares in the
Company that vest after a future period of service.
HIBERNIA REIT PLCANNUAL REPORT 2016 147
Total shareholder return is the growth in share value over a period
assuming dividends are reinvested to purchase additional units of stock.
Transparency Regulations enhance the information made available
about issuers whose securities are admitted to trading on a regulated
market and further information is available on https://www.centralbank.
ie/regulation/securities-markets/transparency/Pages/default.aspx.
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.
WAULT is weighted average unexpired lease term and is variously
calculated to break, expiry or next review date
Market Abuse Regulations are issued by the Central Bank of Ireland
and can be accessed on https://www.centralbank.ie/regulation/securi-
ties-markets/market-abuse/Pages/default.aspx.
Model Code is a universal code of conduct, with comprehensive guide-
lines and best practices which span the whole of Fixed Income,
Currency and Commodity markets and can be accessed on https://
acifma.com/model-code.
Net development value is the external valuers view on the end value
of a development property when the building is fully completed
and let.
Net equivalent yield is the weighted average income return (after
allowing for notional purchaser’s costs) a property will produce base
on the timing of the income received. As is normal practice, the equiv-
alent yields (as determined by the external valuers) assumes rent is
received annually in arrears.
Net reversionary yield is the expected yield after the rent reverts to
the ERV.
Net lettable or Net Internal Area (NIA) the usable area within a
building measured to the internal face of the perimeter walls at each
floor level
Occupancy rate is the estimated rental value of let units as a percentage
of the total estimated rental value of the portfolio, excluding devel-
opment 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 705E
of the Taxes Consolidation Act 1997.
Reversion is the rent uplift where the ERV is higher than the
contracted rent.
RICS Valuation – Professional Standards (the 'Red Book') 2014 issued
by the Royal Institute of Chartered Surveyors provides standards for
preparing valuations on property.
sq ft square feet
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.
TMT sector is the technology, media and telecommunications sector.
148
Shareholders’ information
Hibernia REIT plc website:
http://www.hiberniareit.com
Investor contacts
Hibernia REIT plc
South Dock House
Hanover Quay
Dublin D02 XW94
Phone: 00 353 (0) 1 536 9100
For investor queries please send an email to info@hiberniareit.com
For media enquiries: media@hiberniareit.com
HIBERNIA REIT PLCANNUAL REPORT 2016 South Dock House
Hanover Quay
Dublin D02 XW94
info@hiberniareit.com
www.hiberniareit.com