Hibernia REIT Plc Annual Report 2017

FY2017 Annual Report · Hibernia REIT Plc

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Transforming
Dublin

Annual Report 2017

Hibernia REIT plc (“Hibernia”)
is a Dublin-focused Real Estate
Investment Trust (“REIT”), listed
on the Irish and London stock
exchanges, which owns and
develops Irish property. All of
Hibernia’s c.¤1.2bn portfolio
is in Dublin and it specialises
in city centre offices.

Strategic report
01–47
Highlights of the financial year

At a glance

Chairman’s statement

CEO’s statement

Market overview

Business model

Strategic priorities

Key performance indicators

Strategy in action

Portfolio review

– Acquisitions and disposals

– Portfolio overview

– Developments and refurbishments

– Asset management

Operational review

Risks and risk management

Principal risks and uncertainties

Sustainability

Governance
48–76
Chairman’s corporate
governance statement

Board of Directors

Directors’ report

Corporate governance report

– Audit Committee report

– Remuneration Committee report

– Nominations Committee report

Directors’ responsibility statement

Financial statements
77–136
Independent auditors’ report

Consolidated income statement

Consolidated statement of comprehensive
income

Consolidated statement of financial position 84

Consolidated statement of changes in equity 85

Consolidated statement of cashflows

Notes forming part of the Annual Report

Company statement of financial position

Company statement of changes in equity

Company statement of cashflows

124

125

126

Notes to the Company financial statements 127

Supplementary disclosures
137–145
Three-year record

EPRA Performance Measures

Other disclosures

Directors and other information

Glossary

Shareholders’ information

137

138

143

145

146

148

Central Quay, South Docks

Highlights of the financial year

Financial highlights
– Portfolio value of €1,167m, up 9.9% in the year (March 2016:

€928m) (developments up 47.2%1) and up 7.4%1 in H2

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

Return of 11.2%

– IFRS NAV per share of 147.9 cent, up 12.4% in the financial

year (March 2016: 131.6 cent); EPRA NAV per share of 146.3
cent, up 11.9% (March 2016: 130.8 cent) and up 8.7% in H2

– Net rental income of €39.7m, up 56.3% excl. surrender

premium in prior year (up 31.0% including this) (March 2016:
€30.3m or €25.4m excl. surrender premium)

– Profit before tax of €119.0m (March 2016: €136.3m)

including revaluation of investment properties

– EPRA earnings of €15.0m (March 2016: €5.1m, excl.

surrender premium)

– Net debt at 31 March 2017 of €155.3m, LTV of 13.3% (March

2016: €52.9m, LTV 5.7%)

– Cash and undrawn facilities of €288.9m: €149.5m net of

committed development spend and anticipated repayment
of 1WML facility

– Final dividend of 1.45 cent per share, bringing total for year

to 2.2 cent, up 46.7% (2016: 1.5 cent)

Operational highlights
Development programme making excellent progress
– Three schemes completed in the financial year, delivering
191,000 sq.ft. of Grade A space and profit on cost of 50%

– Three committed schemes at March 2017 (295,000 sq.ft.

Grade A) completing over period to mid-2018

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

– Near and longer term pipeline of five schemes totalling

660,000 sq.ft. of office space post completion

Income and WAULTs increased significantly through
leasing activity, with more to come
– Contracted rent roll now €48.3m, up 24% on 31 March 2016

when it was €39.0m

– “In-place” office portfolio income duration and

security increased

– WAULT to earlier of break/expiry now 6.7 years,

up 56% on 31 March 2016 (4.3yrs)

– 50% of rent now upward only or capped/collared

at next rent review (March 2016: 36%)

Asset management initiatives
– Building management department formed

– Flexible workspace arrangement formed with Iconic Offices

in Block 1, Clanwilliam Court

1. Net of capex and acquisitions costs.

EPRA NAV
(cent per share)

146.3

+12% in financial year

146.3

130.8

111.8

Net rental income
(excluding surrender premia)
(€'m )

39.7

+56% in financial year

39.7

25.4

14.0

EPRA earnings
(cent per share)

2.2

+47% in financial year

0.8

2.2

1.5

Dividend per share (“DPS”)
(cent per share)

2.2

+47% in financial year

0.8

2.2

1.5

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportAt a glance

We 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.

Number of properties

Number of commercial tenants

Portfolio by sector
(by value)

Office and development portfolio
(by net lettable area)

Industry split of in-place office
tenants (by contracted rent)

€1.2bn

1.7m sq ft1

€38.0m

Office IFSC 22%

In-place office portfolio 915k sq.ft.

TMT 32%

Office South Docks 15%

Committed developments (pre-let)

Government 27%

Office Traditional Core 38%

CBD Office Development 14%

Industrial 1%

Residential 10%

73k sq.ft.

Committed developments (to let)

280k sq.ft.

Near-term pipeline 50k sq.ft.2

Longer-term pipeline 336k sq.ft.3

Banking & Capital Markets 24%

Professional Services 11%

Insurance & Reinsurance 2%

Other 4%

1. Office areas only (i.e. excluding retail, basement space, gym, townhall, etc.).
2. Cumberland Place (Phase 2).
3.

Incl. incremental additional sq.ft. from Harcourt Square, Clanwilliam Court, Marine House, Earlsfort
Terrace and Gateway (c.115k sq.ft. of office). Note that there is also further development potential at
Gateway for c.130k sq.ft. of offices.

Read more about our portfolio on pages 22 to 30 >>

Hibernia REIT plc Annual Report 2017

Our portfolio

Our investment focus is on well-located
offices in central Dublin with the potential
for us to enhance value through repositioning
or asset management. We also have smaller
opportunistic investments in Dublin
residential and industrial property.

Read more about our properties on pages 22 to 30 >>

Key

Office properties
( four under development)

Residential properties

Industrial properties

Rail line and stations

LUAS line and stations

LUAS Cross City line
and proposed stations

No. of properties in pin

Hibernia REIT plc Annual Report 2017

Dublin BayRed CowInterchangeIFSCDublinCityCentreSouthDocksDublinAirportDundrumM50M50M50471211111GovernanceFinancial statementsStrategic reportStrategic report

Chairman’s statement

Our clear strategy and focus
on offices in Dublin’s city centre
is delivering excellent results:
net rental income grew 56%
to €39.7m and we achieved a
12-month total property return
of 14.5% vs IPD Ireland Index
return of 11.2%.

Our strategic focus on central Dublin
offices and on growing rental income
through developments and asset
management is delivering strong
financial results: in the year net rental
income grew 56% to €39.7m, excluding
a one-off surrender premium received in
2016. EPRA earnings increased 193% to
€15.0m on the same basis and EPRA
NAV per share rose 11.9% to 146.3 cent.

As the Dublin property market has
recovered and prices have continued
to rise we have shifted our attention
to investment within the portfolio and
our acquisition activity has reduced.
We invested €52.5m in our committed
development schemes in the year (2016:
€37.3m) and made two acquisitions
totalling €85.4m (2016: nine
acquisitions totalling €136.2m).
Both acquisitions enhanced our
office development programme.

Our developments are progressing well:
we completed three schemes in the year,
delivering 191,000 sq.ft. of new office
space and aggregate profits on cost of
50%, and as at 31 March 2017 we had
three committed development schemes

under way. With the acquisition of
Starwood’s 50% interest in 1WML in
December 2016, these three schemes will
now deliver 295,000 sq.ft. of Grade A
office space over the period to mid-2018,
of which 25% was pre-let as at 31 March
2017. Since financial year end, we have
approved the redevelopment of the
Hanover Building, which will deliver a
further 71,000 sq.ft. (including a 12,000
sq.ft. fitness facility) when it completes
in late 2018. Our development pipeline
totals five schemes with the potential to
deliver over 660,000 sq.ft. of office space
over the longer term.

our buildings. This broadens Hibernia’s
offering to tenants and will able us to
learn more about the flexible workspace
and serviced office market which is an
increasingly important element of the
occupational market.

In October 2016, shareholders approved an
amendment to the relative performance fee
calculation methodology: the purpose of
this is to ensure the relative performance
fee works as intended to align the interests
of shareholders and the Management Team
until the expiry of the current remuneration
structure in November 2018.

We have added two new business areas
to the Group in the year. In July 2016,
we established a building management
department: this was done to develop
closer relationships with our tenants
and to provide a better level of service to
them. Historically building management
in Ireland has tended to be outsourced
and this move brings us into line with
the majority of large UK and European
REITs. In January 2017, we formed a
five-year flexible workspace arrangement
with Iconic Offices to establish a serviced
office and co-working business in one of

As a result of the growth in earnings in
the year the Board has recommended an
increase in the final dividend of 81.3% to
1.45 cent per share, to be paid on 31 July
2017. This represents an increase in the
total dividend for the year of 46.7% to
2.2 cent per share. With a contracted
rent roll of €48.3m at 31 March 2017
(up 24% on the prior year), significantly
above our net rental income for the year,
and significant new office completions
and rental reversion to come in the next
few years, we expect to grow income and
dividends materially.

Hibernia REIT plc Annual Report 2017

Building management

Formation of building management department

As new multi-let developments are
completed (e.g. 1 Windmill Lane),
these will also come under the
management of the building
management department.

The formation of the building
management department and the
arrangement with Iconic Offices
to provide flexible workspace
within the portfolio, are examples
of the ways Hibernia is seeking
to improve its service offering
for tenants.

We announced the establishment
of an internal building management
department in July 2016. This
was done to take control of the
management of our multi-let
commercial properties and ensure
closer relationships with our tenants
and a better level of service for them.
In-house property management is
common amongst the major UK and
European REITs. The department is
expected to be broadly cost neutral
for Hibernia.

The building management team
now comprises eight staff and since
July 2016 has overseen the transfer
to in-house management of 13
of Hibernia’s multi-let buildings
totalling 644k sq.ft.: this represents
all of the current multi-let portfolio.

The successes this year are due to
the hard work and dedication of our
employees and I would like to thank
them for their commitment. Looking
forward, I believe we have the right
strategy to continue to prosper and
deliver superior shareholder returns.

Daniel Kitchen
Chairman
7 June 2017

Interior, 1DC, IFSC

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportCEO’s statement

We are pleased to report another
set of strong results, driven in
particular by the performance of
our developments in the second
half of the year, delivering 11.9%
growth for the year in EPRA NAV
per share to 146.3 cent.

Development programme making
excellent progress and enhanced
by acquisitions in the year
We completed three schemes in the year,
1 Cumberland Place, One Dockland
Central and SOBO Works, delivering
191,000 sq.ft. of refurbished Grade A
office space, all of which is fully let, and
an aggregate profit on cost of 50%. As
at 31 March 2017, our three committed
schemes, 1WML, 1SJRQ and Two
Dockland Central were progressing well:
with the acquisition of Starwood’s 50%
interest in 1WML in December 2016,
these three schemes will now deliver
295,000 sq.ft. of Grade A office space
over the period to mid-2018, of which
25% was pre-let as at 31 March 2017.
In May 2017, the Board approved the
refurbishment and extension of the
Hanover Building, which will deliver a
further 71,000 sq.ft. (including a 12,000
sq.ft. fitness facility) and which we expect
to complete in late 2018. The acquisition
of Blocks 1, 2 and 5 Clanwilliam Court
added to our development pipeline, which
now totals five schemes and 660,000 sq.ft.
of office space post completion.

Hibernia REIT plc Annual Report 2017

Rent roll and income duration
increased significantly through
leasing activity
Our priority is to increase portfolio income
and extend lease terms and income
security through the leasing of our
developments and through rent reviews
and lease renewals. Key lettings in the year
included 35,000 sq.ft. in 1WML pre-let to
Informatica at a rent of €2.1m per annum,
32,000 sq.ft. in Two Dockland Central
pre-let to HubSpot at a rent of €1.8m per
annum and a new lease agreed with the
Office of Public Works (“OPW”) for all
117,000 sq.ft. of Harcourt Square at an
annual rent of €6.0m. In total, new lettings
and rent reviews increased contracted rents
by €10.4m (€9.3m net of lease expiries and
including new acquisitions), bringing
contracted rents as at 31 March 2017 to
€48.3m, up 24% on 31 March 2016.

The weighted average periods to break
and lease expiry for the new leases
agreed in the year were 10 and 17 years,
respectively, and these increased the
“in-place” office WAULT to the earlier
of break or expiry to 6.7 years, up 56%.
In addition, 50% of the “in-place” office
rents of €38.0m are now upward only
or capped/collared at the next rent
review (2016: 36%), limiting the Group’s
near-term rental exposure in the event
of a downturn in the rental market.

New asset management initiatives
We established an internal building
management department in July 2016
to take direct control of the management
of our multi-let commercial properties
in order to develop closer relationships
with our tenants and to provide a better
level of service for them. As at 30 April
2017, all 13 multi-let office buildings
(totalling 644,000 sq.ft.) had transferred
to direct management and new multi-let
buildings will be added as they are
completed or acquired: the department
is expected to be cost neutral for
Hibernia now it is fully operational.

In January 2017 we formed a five-year
flexible workspace arrangement with
Iconic Offices (“Iconic”), a leading
Dublin-based flexible workspace provider
(and existing tenant of Hibernia), to
establish a serviced office and co-working
business in 21,000 sq.ft. of Block 1
Clanwilliam Court (see further details
opposite). The arrangement gives
Hibernia the opportunity to learn more
about flexible workspace and serviced
offices, which are increasingly significant
elements of the office occupational
market. In addition, it gives Hibernia
contact with small, rapidly growing
enterprises which may have larger
space requirements in future.

Modest leverage and available
funding for further investment
We are moving towards our through-
cycle leverage target of 20–30% loan
to value: in the financial year we
invested €52.5m in development and
refurbishment expenditure and €85.4m
in acquisitions: as at 31 March 2017 net
debt was €155.3m and our loan to value
ratio was 13.3% (March 2016: 5.7%). We
continue to have substantial available
funding: cash and undrawn facilities
as at 31 March 2017 were €288.9m,
€149.5m net of committed development
spend and expected repayment of the
1WML facility.

Growing dividend as rental
income increases
EPRA earnings grew 192.5% to €15.0m
in the year (excluding last year’s one-off
surrender premium) as a result of our
letting activity. This has enabled the
Board to propose a final dividend of 1.45
cent per share, bringing the dividend for
the year to 2.2 cent, up 46.7% on prior
year. We expect this to grow further as
our developments are leased up and as
we capture the reversionary potential
within the “in-place” office portfolio.

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

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

Kevin Nowlan
Chief Executive Officer
7 June 2017

Formation of
flexible workspace
arrangement with
Iconic Offices

The business opened its doors in
April 2017, and the space is already
75% occupied, significantly ahead
of budgeted performance.

This arrangement gives Hibernia
the opportunity to learn more about
flexible workspace and serviced
offices, which are increasingly
significant elements of the office
occupational market. In addition,
it gives Hibernia contact with small,
rapidly growing enterprises which
may have larger space requirements
in future.

In February 2017 we formed a five
year arrangement with Iconic Offices
(“Iconic”) to establish a serviced
office and co-working business in
21,000 sq.ft. of Block 1 Clanwilliam
Court. Iconic is a leading Dublin-
based flexible workspace provider
and was already a tenant of Hibernia
in SOBO Works.

Under the arrangement Hibernia
provides the property and Iconic is
managing the business operations,
with the rent generated being
shared. Hibernia funded 85% of the
fit-out costs (c.€1m) and receives
the majority of the rent from the
occupier (after amortisation of the
cost of fit-out) up to a level equating
to headline rent of c.€45 per sq.ft.
over the five-year period. Iconic
receives most of the rent above
this level.

Blocks 1, 2 and 5, Clanwilliam Court, D2

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportMarket overview

The economic fundamentals in
Ireland and in the Dublin property
market remain strong.

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

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

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

As a relatively small and open
economy, Ireland is highly dependent
on international trade and foreign direct
investment (“FDI”). Events that could
negatively affect these, such as the UK’s
expected departure from the EU and
possible US tax and trade policy changes,
remain among the principal risks to the

Hibernia REIT plc Annual Report 2017

economy. To date however, no such
impacts have been felt: 5,500 IDA
sponsored jobs were created in Dublin
& the Mid-East region in 2016 vs the
five-year average of 4,800 (source: IDA)
and the flow of FDI into Ireland has
remained strong to date in 2017. In
addition, the UK’s departure from the
EU may create opportunities for Dublin
even if the eventual impact for the wider
Irish economy may be negative given
strong trade links with the UK.

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

Investment spend in 2016 totalled
€4.5bn with offices comprising 31% and
retail 50%: these statistics are somewhat
skewed by two particularly large
shopping centre transactions in the year
(source: CBRE). The last three years have
seen exceptional investment volumes,
averaging €4.2bn per annum as a result
of deleveraging, but total volumes are
expected to return to more “normal”
levels of c.€2bn in 2017 (source: JLL):
in Q1 2017 investment totalled €0.5bn

(source: CBRE). Given the increasingly
institutional nature of ownership of
prime properties, and the reduction in
investment volumes, Grade A offices are
becoming harder to buy and accounted
for a smaller share of the traded stock
in 2016 (source: Savills). Consequently
we may see more forward funding
transactions as institutional investors
seek to acquire prime office property
in a market where development funding
remains limited.

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

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

The overall Dublin vacancy rate was
7.0% at the end of Q1 2017 and the
Grade A vacancy rate in Dublin 2/4
(where 65% of Hibernia’s portfolio
is located) was 3.1% (source: CBRE).
These vacancy rates are marginally
higher than at Q4 2016 as some new
supply has started to complete and
as offices vacated by some occupiers

One and Two Dockland Central, IFSC

moving to new premises are coming
back into vacant stock. Rents across
the Dublin office market rose in the year
with prime headline rents at the end of
Q1 2017 of €62.50 per sq.ft., up from
€57.50 per sq.ft. at the end of Q1 2016
(source: CBRE). Given the scarcity
of speculative development funding,
large single occupiers looking for
pre-lets may be able to secure a discount
on these terms where a letting enables a
developer to unlock development funding.

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

Office development pipeline
2016 marked the delivery of the first
newly constructed office buildings in
the Dublin market in over five years: in
total, 1.1m sq.ft. of new office space was
delivered, 94% of which is now let. We
expect around 2.1m sq.ft. to be delivered
in 2017 of which c.50% is pre-let or

reserved. Further ahead, we expect
around 1.5m sq.ft. will be delivered in
2018, and 1.8m sq.ft. in both 2019 and
2020, with a total of 10.8m sq.ft. gross
of new space delivered between 2015 and
2020. 10.8m sq.ft. of gross additions to
the stock represents c.9.8m sq.ft. of net
new space (as a result of demolition to
facilitate new development) and would
represent an increase in the total stock
figure of c.24% vs an increase in stock
of 98% from 1993–2002 and 51% in
2003–2011 (source: Goodbody).

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

Residential sector
The lack of available housing in Dublin
remains one of the biggest challenges
facing the Irish property industry in the
short to medium term. Data from the
2016 Census showed that the population
in Ireland grew by 3.8%, which was three
times faster than any other EU state in
the last five years. Dublin’s population
grew by 5.8% in the same period (74,000
people) (source: CBRE). The numbers in

rental accommodation rose by 4.7% over
the same period (source: CSO) and the
homeownership rate fell from 69.7%
to 67.6% and was even lower in urban
areas, at 59.2%. Regardless of whether
the Census or Department of Housing
statistics are used, completions and
commencements are falling well short
of the Government’s target to deliver
25,000 homes per annum in the period
to 2021 (Source: Rebuilding Ireland/
Government of Ireland) and the ESRI’s
projections that demand is likely to
increase at a steady rate before reaching
just over 30,000 units per annum by 2024.

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

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportBusiness model

Our approach

Our approach is based on highly active ownership
of our properties, whether through repositioning buildings
or asset management, to generate superior returns while
using only modest levels of leverage. We are disciplined
in our capital allocation: where assets no longer meet
our expected forward returns targets we look to sell
and recycle the proceeds into new investments.

Disciplined 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.

Asset
improvement
We unlock value
through refurbishment,
redevelopment and change
of use, increasing the rents
tenants are prepared to pay.

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.

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 investments.

Hibernia REIT plc Annual Report 2017

Our team

We are a team of 27 people (32 including the non-executive
Directors) of which 25 are employees. The team has grown
from 17 last year of which 13 were employees. This growth
comes mainly from the addition of a building management
department in this financial year. As an organisation with a
relatively low headcount we have a flat management structure
and we prioritise a culture of openness and co-operation
between individuals and teams. We encourage our staff to
develop broad skill sets and to be as flexible as possible.

Left to right:

Thomas
Edwards-Moss
Chief Financial
Officer

Frank O’Neill
Chief Operations
Officer

Kevin Nowlan
Chief Executive
Officer

Mark Pollard
Director of
Development

Richard Ball
Chief Investment
Officer

At the core of our culture are the following values:

Communication

Personal development

Performance

Remuneration

We encourage our people to
undertake training to develop
their skills and enhance their
career. We arrange for experts
to present to the team on a
regular basis.

Our people are aligned 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.

Weekly meetings are held
across and within departments
to ensure 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.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportStrategic priorities

Our strategic focus will help us to deliver long-term out
performance for shareholders across cycles. At this time
our overall priority is capitalising on the favourable market
conditions to deliver strong NAV and income growth.

STRATEGIC PRIORITY 2016–17

KEY INITIATIVES

PROGRESS 2016–17

KPI IMPACT

STRATEGIC PRIORITY 2017–18

KEY TARGETS 2017–18

RISKS

Deliver development
projects

See pages 26 to 28 >>

– Making progress with
the four committed
schemes, all of which
have completion dates
in the period to mid-2018

– Completion and letting
of 1 Cumberland Place

– Three other schemes
progressing well with
1WML now 29% pre-let
and 2DC 66% pre-let

– Development profits
enhance Net Asset
Value (“NAV”) and Total
Portfolio Return (“TPR”)

– Lettings/pre-lets increase

rent, WAULTS and
reduce voids/void risk

Deliver development

projects and prepare

pipeline of future projects

See pages 26 to 28 >>

– Complete 1WML and 2DC

– Market declines reduce development

– Progress 1SJRQ and Hanover Building

– Prepare other projects for

commencement (e.g. Cumberland

Phase 2, Gateway)

profit

– Construction cost inflation or contractor

failure does likewise

– Buildings delivered do not meet

tenant needs

Increase rental
income of portfolio

– Drive further increases
in rents through new
lettings and rent reviews

– Contracted rent
increased 24%
to €48.3m

– Lettings enhance NAV,
TPR, contracted rents
and WAULTs

Increase rental income

and duration

– Complete letting of 1WML and 2DC

– Occupational market weakness

– Let 1SJRQ and the Hanover Building

– Existing tenants leave/become insolvent

See pages 29 to 30 >>

– In-place office WAULT
break/expiry increased
56% to 6.7 years

See pages 29 to 30 >>

– Deliver rental uplifts through rent reviews

– Keep vacancy rates below 5%

Deploy further
capital into selective
acquisitions

– Make further selected
acquisitions where
we expect our returns
criteria to be met

See page 24 >>

– €85.4m deployed in two
acquisitions; Blocks 1, 2
and 5 Clanwilliam Court
and the 50% stake not
already owned in 1WML

– Acquisitions should

enhance NAV and TPR
in the longer term

Deploy capital into

selective acquisitions

or new developments

See page 24 >>

– No targets – depends on opportunities

– Capital deployed does not achieve

available

target returns

– Any acquisitions or new developments

must enhance Group returns

Recycle capital by
selling assets where
future returns are
not expected to
meet our targets and
reinvesting elsewhere

See page 24 >>

– Sale of assets where
future returns are not
expected to meet
our targets

– Sold most of the

remaining non-core
assets for €4.2m (gross)
generating total net
profits of €5m since
acquisition on sales
of €34.4m.

– Sales above book value
enhance NAV and TPR

Recycle capital to monetise

– Sale or swap of any assets where forward

– Unable to sell assets due to market

gains and enhance

future returns

See page 24 >>

returns are not expected to meet our

targets and possible redeployment as

discussed under priority 3 above

events

– Market declines mean cannot achieve

book value on disposals

Enhance balance
sheet efficiency

See page 32 >>

– Continue to utilise
debt facilities
where appropriate
opportunities arise

– Move LTV ratio towards
through-cycle target of
20–30%

– Deployed €85.4m in new
acquisitions and €52.5m
in capital expenditure

– LTV now 13.3% up from
5.7% at 31 March 2016.

– Efficient balance sheet
should enhance NAV
growth and Dividend
per Share (“DPS”)

5 Maintain an efficient

balance sheet

See page 32 >>

– Move towards 20–30% LTV target

– Disposals exceed deployment into new

– Reduce cost of debt where possible

opportunities reducing LTV

– Rates rise substantially increasing interest

costs on unhedged debt

– Debt covenants threatened by market

value declines

Deliver improvements in

environmental efficiency

of portfolio

– Reduce energy consumption and

– Failure to achieve reductions

greenhouse gas emissions per square

metre on “like for like” and absolute basis

– Could impact the Group’s ability to

attract tenants and/or the value of

– New office buildings delivered achieve

the Group’s property

See pages 42 to 47 >>

at least LEED Gold

Hibernia REIT plc Annual Report 2017

STRATEGIC PRIORITY 2016–17

KEY INITIATIVES

PROGRESS 2016–17

KPI IMPACT

STRATEGIC PRIORITY 2017–18

KEY TARGETS 2017–18

RISKS

Deliver development

projects

See pages 26 to 28 >>

the four committed

schemes, all of which

have completion dates

in the period to mid-2018

– Making progress with

– Completion and letting

– Development profits

of 1 Cumberland Place

– Three other schemes

progressing well with

1WML now 29% pre-let

and 2DC 66% pre-let

enhance Net Asset

Value (“NAV”) and Total

Portfolio Return (“TPR”)

– Lettings/pre-lets increase

rent, WAULTS and

reduce voids/void risk

Deliver development
projects and prepare
pipeline of future projects

See pages 26 to 28 >>

– Complete 1WML and 2DC

– Market declines reduce development

– Progress 1SJRQ and Hanover Building

– Prepare other projects for

commencement (e.g. Cumberland
Phase 2, Gateway)

profit

– Construction cost inflation or contractor

failure does likewise

– Buildings delivered do not meet

tenant needs

Increase rental

income of portfolio

– Drive further increases

– Contracted rent

in rents through new

lettings and rent reviews

increased 24%

to €48.3m

– Lettings enhance NAV,

TPR, contracted rents

and WAULTs

Increase rental income
and duration

– Complete letting of 1WML and 2DC

– Occupational market weakness

– Let 1SJRQ and the Hanover Building

– Existing tenants leave/become insolvent

See pages 29 to 30 >>

– In-place office WAULT

break/expiry increased

56% to 6.7 years

See pages 29 to 30 >>

– Deliver rental uplifts through rent reviews

– Keep vacancy rates below 5%

Deploy further

capital into selective

acquisitions

See page 24 >>

– Make further selected

– €85.4m deployed in two

– Acquisitions should

acquisitions where

we expect our returns

criteria to be met

acquisitions; Blocks 1, 2

and 5 Clanwilliam Court

and the 50% stake not

already owned in 1WML

enhance NAV and TPR

in the longer term

– Sale of assets where

– Sold most of the

– Sales above book value

enhance NAV and TPR

future returns are not

expected to meet

our targets

remaining non-core

assets for €4.2m (gross)

generating total net

profits of €5m since

acquisition on sales

of €34.4m.

Recycle capital by

selling assets where

future returns are

not expected to

meet our targets and

reinvesting elsewhere

See page 24 >>

Enhance balance

sheet efficiency

See page 32 >>

Deploy capital into
selective acquisitions
or new developments

See page 24 >>

– No targets – depends on opportunities

– Capital deployed does not achieve

available

target returns

– Any acquisitions or new developments

must enhance Group returns

Recycle capital to monetise
gains and enhance
future returns

– Sale or swap of any assets where forward
returns are not expected to meet our
targets and possible redeployment as
discussed under priority 3 above

– Unable to sell assets due to market

events

– Market declines mean cannot achieve

book value on disposals

See page 24 >>

– Continue to utilise

– Deployed €85.4m in new

– Efficient balance sheet

debt facilities

where appropriate

opportunities arise

– Move LTV ratio towards

through-cycle target of

20–30%

acquisitions and €52.5m

in capital expenditure

– LTV now 13.3% up from

5.7% at 31 March 2016.

should enhance NAV

growth and Dividend

per Share (“DPS”)

5 Maintain an efficient

balance sheet

See page 32 >>

– Move towards 20–30% LTV target

– Disposals exceed deployment into new

– Reduce cost of debt where possible

opportunities reducing LTV

– Rates rise substantially increasing interest

costs on unhedged debt

– Debt covenants threatened by market

value declines

Deliver improvements in
environmental efficiency
of portfolio

See pages 42 to 47 >>

– Reduce energy consumption and

– Failure to achieve reductions

greenhouse gas emissions per square
metre on “like for like” and absolute basis

– New office buildings delivered achieve

at least LEED Gold

– Could impact the Group’s ability to
attract tenants and/or the value of
the Group’s property

Read more about KPIs on page 14 >>

Read more about Risks on pages 34 to 41 >>

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportKey performance indicators

Our key performance indicators
(“KPIs”) are the main metrics we
use in running the business and
assessing its performance. These
KPIs are focused on returns to
shareholders and are the principal
drivers of remuneration under the
current arrangements which run
until November 2018 (see pages
66 to 70 for further details).

EPRA NAV
(cent per share)

Dividend per share (“DPS”)
(cent per share)

Total property return (“TPR”)
vs IPD (%)

150

120

+31%

130.8

146.3

111.8

2015

2016

2017

2.5

2.0

1.5

1.0

0.5

2.2

+175%

1.5

0.8

2015

2016

2017

14.5

11.2

2017
Hibernia

IPD
Ireland Index

Block 3, Wyckham Point, D16

Hibernia REIT plc Annual Report 2017

500

499.3

400

300

200

100

136.2

85.4

2015

2016

2017

Asset management

Portfolio value (€m)

1,167.4

927.6

1,500

1,200

900

600

300

641.3

2015

2016

2017

Operational metrics

In addition to our KPIs we use the following main operational metrics in managing the business.

Investment and development

Purchases (€m)

Disposals (€m)

24.5

5.0

3.5

2015

2016

2017

Capital expenditure
(“Capex”) (€m)

Committed capital
expenditure (€m)

52.5

37.3

12.2

150

120

125

104

2015

2016

2017

2015

2016

2017

In-place office
occupancy level

97%

(2016: 94%)

Passing rent roll

Contracted rent roll

€42.2m

(2016: €30.0m)

€48.3m

(2016: €39.0m)

In-place office rent roll
with cap and collar or
upwards only at next
rent review

In-place office portfolio
WAULT to break/expiry

Reversionary potential
in-place office portfolio
ERV uplift as %
contracted rent

50%

(2016: 36%)

6.7 years

(2016: 4.3 years)

18%

(2016: 26%)

Financial management

EPRA earnings
(cent per share)

Profit before tax
(€m)

2.2

1.5

2.5

2.0

1.5

1.0

0.5

0.8

150

120

136.3

119.0

92.9

2015

2016

2017

2015

2016

2017

Net debt (€m)

Loan to value (“LTV”) (%)

€155.3m

(2016: €52.9m)

13%

(2016: 6%)

Cash and undrawn facilities (€m)

€288.9m*

(2016: €368.8m)

* or €149.5m (2016: €264.8m) net of committed capital including

anticipated repayment of Windmill Lane facility.

Sustainability metrics are covered in the sustainability section on pages 42 to 47 of the Annual Report.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic report

Strategy in action

SOBO
District Dublin 2

Hibernia REIT plc Annual Report 2017

Hibernia owns five adjacent buildings in
Dublin’s South Docks, which will result
in c.400,000 sq.ft. of offices when fully
completed in late 2018. In total we expect
to invest €135m between the five buildings
and help regenerate the area: two of the
assets – 1WML and 1SJRQ – were acquired
as derelict sites and the buildings under
construction at present and are expected to
achieve a LEED Gold environmental rating or
better. The Hanover Building was acquired as
a completed asset and we are undertaking a full
refurbishment of the asset to bring it up to the
same standard as our adjoining assets. In a
market where most office buildings are less
than 100,000 sq.ft. in size, one of our focuses
has been on assembling clusters of adjoining
or nearby assets, enabling us to share facilities
(e.g. gyms, meeting areas, cafes) between them
and improve the experience for our tenants:
SOBO District is a prime example of this.

Mark Pollard
Director of Development

STRATEGIC PRIORITIES 1

Sobo District, South Docks

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic report
Strategy in action

Cumberland Place
Phase 1+2 Dublin 2

Hibernia REIT plc Annual Report 2017

Phase 1 of the redevelopment of Cumberland
Place successfully completed during the year,
delivering 122,000 sq.ft. of Grade A office
space, let to Twitter and Travelport on long
leases, and generating a profit on cost in
excess of 50%. The refurbished building has
achieved a LEED Platinum rating, the highest
available under the LEED environment
certification system, and is one of the first in
Dublin to achieve this rating. During the year
we received planning approval for Phase 2 of
the redevelopment: this comprises a new office
block of 50,000 sq.ft., which will integrate
with the existing reception area and will bring
Cumberland Place up to c.170,000 sq.ft. of
office accommodation. Commencement date
for Phase 2 is likely in 2018, subject to market
conditions and further de-risking of our
current committed schemes.

Kevin Nowlan
Chief Executive Officer

STRATEGIC PRIORITIES 1

2 Cumberland Place, D2

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic report
Strategy in action

Harcourt
Square Dublin 2

Hibernia REIT plc Annual Report 2017

This asset represents a significant future
redevelopment opportunity for Hibernia:
it comprises a 1.9 acre site a short distance
from St. Stephen’s Green in the centre of
Dublin and currently has 117,000 sq.ft. of
office accommodation in four blocks
constructed in the 1970s. During the year
Hibernia received planning permission for a
full redevelopment of the site, delivering up to
276,500 sq.ft. of Grade A office space. As with
the SOBO District, this fits with our focus on
assembling clusters of assets, enabling sharing
of facilities between buildings and a better
experience for tenants. In December 2016 we
agreed a new, non-renewable, six year lease
with the Office of Public Works (“OPW”) for
the entire building, commencing in January
2017, at an annual rent of €6.0m (€47psf),
plus a one-off rental arrears payment of
€0.5m. The building was let to the OPW and
occupied by An Garda Síochána (the police) at
a rent of €4.9m per annum on leases the last
of which expired in December 2016. The new
lease gives all parties certainty on the tenant’s
departure date, enables us to continue to work
up our plans for the site and secures enhanced
near term income for Hibernia.

Frank O’Neill
Chief Operations Officer

STRATEGIC PRIORITIES 1

Harcourt Square, D2

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic report
Portfolio review

Increasing income
in our focused portfolio

Active development
schemes

2 Two Dockland Central
Completion late 2017

7 1 Windmill Lane
Completion mid 2017

5 1 Sir John Rogerson’s Quay
Completion mid 2018

8 The Hanover Building
Completion late 2018

1 One Dockland Central (1DC)

Guild Street, IFSC
Dublin 1

14 Marine House

Clanwilliam Place

Dublin 2

15 Blocks 1, 2 and 5
Clanwilliam Court
Clanwilliam Place

Dublin 2

16 1 Earlsfort Terrace
Dublin 2

17 Hardwicke House
Hatch Street

Dublin 2

18 Montague House
Adelaide Road

Dublin 2

19 Harcourt Square
Harcourt Street

Dublin 2

20 39 Harcourt Street
Dublin 2

21 35–37 Camden Street
Dublin 2

22 The Chancery Building

Chancery Lane

Dublin 8

23 Cannon Place
Herbert Road

Dublin 4

24 Dundrum View
Dundrum
Dublin 14

25 Block 3, Wyckham Point
Dundrum
Dublin 16

26 Gateway Site
Newlands Cross, Naas Road
Dublin 22

2 Two Dockland Central (2DC)

Guild Street, IFSC
Dublin 1

3 New Century House
Mayor Street, IFSC
Dublin 1

4 The Forum

Commons Street, IFSC

Dublin 1

5 1 Sir John Rogerson’s

Quay (1SJRQ)

Dublin 2

6 The Observatory Building

7–11 Sir John
Rogerson’s Quay

Dublin 2

7 1 Windmill Lane (1WML)

Windmill Lane
Dublin 2

8 The Hanover Building

Windmill Lane
Dublin 2

9 11a Lime Street

Dublin 2

10 8–12 Hanover Street East
Dublin 2

11 Central Quay

Sir John Rogerson’s

Quay Dublin 2

12 South Dock House
Hanover Quay

Dublin 2

13 1 Cumberland Place

Fenian Street

Dublin 2

Hibernia REIT plc Annual Report 2017

Dublin city centre

Key

Office properties

Active development schemes
Residential properties

Industrial properties
Rail line and stations

LUAS line and stations

LUAS Cross City line and proposed stations

Read more about our properties on page 24 to 30 >>

Hibernia REIT plc Annual Report 2017

River LiffeySouth DocksGrand CanalSt Stephen’sGreenIveaghGardensMerrionSquareM50AvivaStadiumTrinity CollegeSt Patrick’sCathedralChrist ChurchCathedralCity HallDublinCastleIFSCConnolly StationDublin Port2216171820211975349111282114156101323GovernanceFinancial statementsStrategic reportStrategic reportCity CentreDundrumRed Cow InterchangeM50M5026252423Portfolio review continued

Acquisitions and disposals
The Group made two acquisitions in
the year totalling €85.4m, both of which
have development angles:
– In July 2016 we acquired Blocks

ownership of four contiguous office
blocks in a prominent, city centre
location with potential for substantial
redevelopment in the longer term.

– In December 2016 we acquired

1, 2 and 5 Clanwilliam Court, Dublin
2, for €52.4m (including costs)
(€544 per sq.ft.). These 1970s office
buildings total 93,700 sq.ft. and have
220 underground car parking spaces.
The acquisition, together with Marine
House in March 2016, gave the Group

full control of the development at
1 Windmill Lane (“1WML”) by
purchasing Starwood’s 50% interest
for €28.3m (including costs) plus
€4.7m in debt through the assumption
of Starwood’s 50% share of the
Windmill debt facility.

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

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

VALUE AS
AT MARCH 17
(ALL ASSETS)

% OF
PORTFOLIO

% UPLIFT
SINCE MARCH 16
EXCL. NEW
ACQUISITIONS(1)

% UPLIFT
SINCE MARCH 16
INCL. NEW
ACQUISITIONS(1)

% UPLIFT SINCE
ACQUISITION(1)

EQUIVALENT
YIELD ON VALUE
(%)

PASSING
RENT
(€M)

1. Dublin CBD offices

Traditional Core

IFSC

South Docks

Total Dublin CBD offices

2. Dublin CBD office
Development(4)

3. Dublin residential

4. Industrial

€439m

€254m2

€177m3

€870m

€168m

€116m

€13m

38%

22%

15%

75%

14%

10%

Total investment properties

€1,167m

100%

6.9%

5.7%

3.1%

5.7%

45.8%

2.6%

6.1%

8.5%

6.8%

5.7%

3.1%

5.7%

47.2%

2.6%

6.1%

9.9%

29.6%

36.7%

31.7%

32.0%

86.7%

23.7%

26.0%

36.8%

5.3%5

€20.3m

5.1%

5.3%

€9.9m

€6.1m

5.3%(5)

€36.3m

–

4.6%

6.8%

–

€5.2m

€0.7m

5.2%(5)(6)

€42.2m

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

1.
2.
3. Excludes the value of space occupied by Hibernia in South Dock House.

Includes full value of the Hanover Building.

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

Dublin CBD Office Development.

5. Harcourt Square yield is the yield on existing building (91% of property value).
6. Excludes all CBD office developments but includes Hanover and 2DC in CBD

Dublin Offices.

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

CONTRACTED
RENT (€M/€PSF)

ERV

(€M/€PSF)

WAULT TO
REVIEW1
(YEARS)

WAULT TO
BREAK/EXPIRY
(YEARS)

% OF RENT
UPWARDS
ONLY2

% OF NEXT
RENT REVIEW
CAP & COLLAR

% OF RENT
MTM3 AT NEXT
LEASE EVENT

Acquired “in-place”
office portfolio

Completed office
developments4

Whole “in-place”
office portfolio

Pre-let committed schemes6

Whole office portfolio

€27.8m
(€37psf)

€10.2m
(€49psf)

€34.6m
(€47psf)

€10.4m
(€50psf)

€38.0m
(€40psf)

€45.0m
(€48psf)(5)

€4.1m
(€54psf)

€42.1m
(€41psf)

€4.1m
(€54psf)

€49.1m
(€48psf)

3.2

4.4

3.5

5.3

3.7

5.2

10.7

6.7

11.6

7.2

38%

28%

25%

62%

83%

22%

21%

17%

50%

92%

54%

1. To earlier of review or expiry.
2.
3. Mark-to-Market (“MTM”).

Including small amount (<1%) of CPI linked.

4. 1 Cumberland Place, SOBO, 1DC.
5. CBRE assume c.€18.2m Capex to achieve this ERV.
6. 2DC, 1WML.

Hibernia REIT plc Annual Report 2017

Portfolio key statistics

Number of properties

In-place office vacancy

Portfolio rent1
Passing:

Contracted:

Top 10 tenants of in-place
portfolio (by contracted rent)

€42.2m

€48.3m

€38.0m

In-place office rent and ERV1
Contracted:

ERV:

€40psf

€48psf2

In-place office WAULT1
To review/expiry:

3.5yrs

To break/expiry:

6.7yrs

1. Excluding arrangement with Iconic Offices in Block 1, Clanwilliam Court.
2. ERV as per CBRE @ Mar 17. Note: CBRE assume c.€18.2m Capex to achieve this ERV.

Office of Public Works 17%

Twitter International Company 13%

Bank of Ireland 8%

DEPFA Bank plc 6%

Travelport Digital 5%

Bank of New York Mellon 4%

ComReg 4%

Electricity Supply Board 4%

HubSpot 3%

Riot Games 3%

Other 33%

South Dock House, South Docks

Hibernia REIT plc Annual Report 2017

Strategic reportStrategic reportGovernanceFinancial statements

Portfolio review continued

Our priority is to increase portfolio
income and extend unexpired lease
terms and income security. We are
seeking to achieve this in two ways:
– Completion and letting of new office
developments: in the financial year
we completed three schemes, totalling
191,000 sq.ft. of office space, all of
which are fully occupied on leases
with average remaining terms of
20 years and first break options
at 10.7 years, adding €10.2m to
the “in-place” office portfolio and
significantly increasing the WAULTs
to break and expiry. The completion
and letting of our four committed
development schemes over the next 18
months (see further details opposite)
should further improve portfolio
income and unexpired lease terms.
– Rent reviews and lease renewals:

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

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

Developments and refurbishments
The Group completed three schemes
totalling 191,000 sq.ft. of refurbished
Grade A office space in the year. As at
31 March 2017 the Group had three
committed schemes under way, which
will deliver c.295,000 sq.ft. of new and
refurbished Grade A office space by
mid-2018, of which 25% was pre-let.
In May 2017, the Board approved the
redevelopment and extension of the
Hanover Building, which adds a further
71,000 sq.ft. (including a 12,000 sq.ft.

Hibernia REIT plc Annual Report 2017

fitness centre) to committed schemes
and is expected to complete by the end
of 2018 at an with estimated capital
expenditure of €22m. As a result,
the proportion of the office space in
the committed schemes that is now
pre-let is 21%.

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

Schemes completed
Three schemes completed in the year,
delivering 191,000 sq.ft. of Grade A
space, all of which are fully let:
– One Dockland Central (“1DC”):

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

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

– 1 Cumberland Place: completed in

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

Committed development schemes
At 31 March 2017, the Group had
committed schemes under way at three
properties which will deliver c.295,000
sq.ft. of new and refurbished Grade A
office space over the period to mid-2018.
25% of this office space was pre-let as at

31 March 2017. In May 2017, the Board
approved the redevelopment of the
Hanover Building, which adds a further
71,000 sq.ft. (including a 12,000 sq.ft.
fitness centre) to committed schemes:
– Two Dockland Central (“2DC”):

the refurbishment is on schedule to
complete in late 2017. All tenants
vacated following expiry of their leases
in March 2017 (with the exception of
BNY Mellon, who hold a long-term
lease and remain in occupation)
and the contractors are on site. The
building is now c.75 % let.
– 1 Windmill Lane (“1WML”):

completion is scheduled for July 2017,
ahead of the original completion
target of late 2017. So far 29% of
the building has been pre-let to
Informatica and discussions continue
with various potential tenants.

– 1 Sir John Rogerson’s Quay

(“1SJRQ”): construction work
continues and the scheme remains
on track to complete in mid-2018.
Preliminary discussions with potential
tenants have commenced.

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

At 31 March 2017 CBRE, the
independent valuer, had an average
estimated rental value for the unlet
office space (221,000 sq.ft.) in our
three committed schemes at that point
(1WML, 1SJRQ, 2DC) of €52.17psf
and were assuming an average yield
of 5.30% upon completion: based on
these assumptions they expect a further
c.€20m of development profit (excl.
finance costs) to be realised through
the completion and letting of the unlet
space in these schemes. A 25 basis point
movement in yields across the unlet
space would make c.€10m of difference
to the development profits, as would
a €2.50psf change in estimated
rental value.

Please see further details on the development schemes below:

1DC

SECTOR

Office

TOTAL NIA POST
COMPLETION (SQ.FT.)

FULL
PURCHASE
PRICE

CAPEX/EST.
CAPEX

EST. TOTAL COST
(INCL. LAND)

€PSF

ERV1

OFFICE

ERV PSF1

EXPECTED
PC DATE

74k2

€46m

€10m3

€736psf4

€4.0m

€50.40psf

SOBO Works

Office

11k

€2m

€1.3m

€275psf

€0.4m

€37.10psf

Office

122k5

€51m

€31m

€668psf6

€6.9m

€51.05psf7

207k

€99m

€42.3m8

€11.3m

73k9 office

€46m

€24m11

€11m10

€53m11

€765psf4

€4.1m

€52.10psf

Q3 2017

€557psf7

€7.3m12

€51.95psf7

mid 2017

Completed
May 16

Completed
Apr 16

Completed
Sept 2016

€21m

€22m13

€680psf7

€3.0m13

€47.40psf13

late 2018

€18m

€58m

€639psf7

€6.4m

€53.25psf

mid 2018

€109m

€144m(14)

€20.8m

1. Per CBRE valuation at 31 March 2017.
2. 58k sq.ft. refurbished out of total 74k sq.ft.
3. €7.9m net of dilapidation charge received.
4. Estimated total cost psf is net of dilapidation.
5. Excluding additional basement areas (7.5k sq.ft.) and potential new block (c.50k sq.ft.)

11. Hibernia est. all in cost of 1WML on 100% basis is €77m (i.e. €24m all-in land cost plus

€53m total Capex). Hibernia’s financial accounts show that the cost of acquiring 100% of
1WML was €36m which incl. the vendor’s 50% share of Capex spent to date of acquisition
of €13m. There was c.€28m of Capex remaining (based on estimated total Capex of €53m)
to be spent at date of acquisition. Therefore, the total cost of the project is €77m (€36m +
€28m + €13m = €77m).

12. Commercial (including reception/townhall) and residential.
13. CBRE valuation assumes Capex of €13.8m vs Company planned Capex of €22m.

CBRE office ERV of €47.40psf is based on €13.8m Capex.

14. €142.4m net of dilapidations charge received.

1 Cumberland
Place

Total
completed

2DC

1WML

Hanover
Building

1SJRQ

Total
committed

Office

122k office
7k retail
6k reception
14 resi. units

59k office
12k gym

115k office
5k retail
1k amenity

369k office
24k retail/gym
14 units
7k other

but including rentalised reception (2k sq.ft.).

6. No cost attributable to basement area.
7. Office demise only.
8. €40.2m net of dilapidation charge received.
9. 57k sq.ft. is committed refurbishment of entire 73k sq.ft.
10. €9.4m net of dilapidations charge received.

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

Near-term projects
– Cumberland Place: planning

permission has been received for a new
office block of 50,000 sq.ft. in front of

the existing block (“Cumberland
Phase 2”). Assuming market
conditions remain favourable and
provided we make sufficient progress
in de-risking 1WML and 1SJRQ, we
currently expect to commence work
on this project during 2018.

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

– Harcourt Square: planning permission
for Phase 2 was received in June 2016
giving full planning permission for a
development of up to 276,500 sq.ft. of
office and ancillary accommodation on
the 1.9-acre site. A new non-renewable
six-year lease was entered with the Office
of Public Works (“OPW”) in December
2016 giving all parties certainty over the
OPW’s departure date. We intend to
refine our plans for the development
between now and December 2022.
– Gateway Site: we continue to work
on plans for the 14-acre site’s future
redevelopment.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic report
Portfolio review continued

Please see further details on the development pipeline below:

SECTOR

CURRENT NIA
(SQ.FT.)

NIA POST
COMPLETION
(SQ.FT.)

FULL
PURCHASE
PRICE

COMMENTS

Near-term

2 Cumberland
Place
(front block)

Office

c.50k

€0m1

Full planning approval received from DCC

Likely to be 2018 commencement

Total near-term

c.50k

€0m

Longer-term

One Earlsfort
Terrace

Office

22k

>28k

€20m Planning permission is in place for two extra
floors which would add c.6k sq.ft. to the NIA

Harcourt
Square

Office

117k on
1.9 acres

Potential for redevelopment as part of the
wider Earlsfort Centre scheme

277k

€72m Potential development of 277k sq.ft. of office

space and ancillary space

Full planning approval received

New six-year lease granted to OPW until Dec 22

Blocks 1, 2 and
5 Clanwilliam
Court and
Marine House

Office

135k

c.190k

€80m Longer-term refurbishment/redevelopment

opportunity

Potential opportunity to add up to 40% to existing
NIA across all 4 blocks

Gateway Site

Logistics/
Office

14.1 acres2

c.115k
office3

€10m Strategic transport location

Full or partial redevelopment potential subject
to planning

Total
longer-term

274k

610k

€182m

1. €51m (including costs) paid for existing block which was refurbished and completed in September 2016. No land value attributed to new block at acquisition.
2. Currently 178k sq.ft. of industrial/logistics.
3. Planned new offices of c.115k sq.ft. plus potential to add a further c.130k sq.ft. of offices.

Hibernia REIT plc Annual Report 2017

Hardwicke House, D2

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

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

– Residential: letting activity and

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

As set out below, we are in discussions
with potential tenants in a number of
buildings where we have vacant space.

Key asset management highlights
See also “Developments and
Refurbishments” section on pages 26
to 28 for further details.

Building management
We established an internal building
management department in July 2016.
This was done to take direct control
of the management of our multi-let
commercial properties and develop
closer relationships with our tenants and
to provide a better level of service for
them: in-house property management
is common amongst the major UK and
European REITs. Now that it is fully
operational, the department is expected
to be cost neutral for Hibernia. As at
31 March 2017, eight office buildings
totalling 431,000 sq.ft. were under
direct management. The remaining five
buildings (213,000 sq.ft.) in the “in-
place” office portfolio moved to direct
management in April 2017. As new multi-
let office developments are completed
(e.g. 1WML, 2DC), these will also be
managed by the department.

Flexible workspace arrangement
In January 2017 we formed a five-year
flexible workspace arrangement with
Iconic Offices (“Iconic”) to establish a
serviced office and co-working business
in 21,000 sq.ft. of Block 1 Clanwilliam
Court (see further details below). Iconic is
a leading Dublin-based flexible workspace
provider and was already a tenant of
Hibernia in SOBO Works. Under the
agreement, Hibernia provides the
property and Iconic manages the business
operations, with the rent generated being
shared. Hibernia has funded the majority
of the fit-out costs (c.€1m) and receives
the majority of net rent from the occupier
(after amortisation of the cost of fit-out
over the five-year period) up to a level
equating to headline rent of c.€45 per
sq.ft. over the five-year period. Iconic
receives the majority of any net rent
above this level.

This arrangement gives Hibernia the
opportunity to learn more about flexible
workspace and serviced offices, which
are increasingly significant elements of
the office market. In addition, it gives
Hibernia contact with small, rapidly
growing enterprises which may have
larger space requirements in the future.
The arrangement commenced in April
2017: as at the end of April over 75% of
the workstations and over 50% of the
available co-working memberships
were contracted, significantly ahead of
budgeted performance.

1WML, South Docks
Having acquired full control of the
development scheme in December 2016,
in March 2017 we agreed a pre-let of the
top two floors, totalling 35,000 sq.ft.,
to Informatica on a 17-year lease with
six months rent-free. The initial rent is
€2.1m per annum, including proportional
contributions to the reception and town
hall areas. This pre-let represents c.29%
of the office space in the building, which
is due to complete in July 2017. We are
in discussions with a number of parties
regarding additional potential lettings.

Blocks 1, 2 and 5 Clanwilliam Court, D2
At acquisition in July 2016, the buildings,
which total 93,700 sq.ft. of office
accommodation and 220 car parking
spaces, were 76% let to a range of
occupiers, including the ESB, Bord Bia
(the Irish Food Board) and Hines Real
Estate Ireland, generating annual rent of
€2.9m per annum (an average of €34psf).
The flexible workspace arrangement with
Iconic (see further details above) formed
in January has taken virtually all the
remaining vacant space in the buildings:
occupancy is now c.98%.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportTwo Dockland Central, IFSC
All existing tenants vacated the building
by the end of March 2017 other than
BNY Mellon (which holds a long lease)
to enable the repositioning works
(similar to those done in Once Dockland
Central last year) to take place. As at
31 March 2017 we had pre-let 66% of
the 57,000 sq.ft. under refurbishment:
HubSpot, already an occupier of 27,500
sq.ft. in One Dockland Central, has
pre-let 32,000 sq.ft. (two floors) in Two
Dockland Central on 19 year leases. They
will pay initial rent of €1.8m (€52.50psf)
and will receive six months rent-free
from lease commencement (expected
mid-2017). ENI has pre-let 5,500 sq.ft.
on a 20-year lease with a four-month
rent-free at an initial rent of €55psf.

Other completed assets
The remaining completed properties in
the portfolio are close to full occupation.
The average period to rent review or lease
expiry for the “in-place” office portfolio
(not including recently completed
developments) is 3.2 years: the team is
assessing options to maximise returns
from the upcoming lease events and
continues to carefully monitor the
letting markets and work closely
with our tenants.

Portfolio review continued

Central Quay, South Docks
We are in discussions with potential
tenants regarding the ground floor (7,000
sq.ft.). Inspections are ongoing regarding
the vacant third floor (11,000 sq.ft.).

1 Cumberland Place, D2
The redevelopment works completed
in September 2016 and Twitter took
occupation of the c.96,000 sq.ft. it had
pre-let. The remaining 33,000 sq.ft.
was let to Travelport in September on
a lease which commenced in November
2016 with a five-month rent-free period.
The contracted rent of the building is
now c.€7m with weighted average
unexpired lease terms of c.11 years
to break and 21 years to expiry.

Harcourt Square, D2
In December 2016 we agreed a new,
non-renewable, six-year lease with the
Office of Public Works (“OPW”) for the
entire complex, commencing in January
2017, at an annual rent of €6.0m (€47psf),
plus a one-off rent arrears payment of
€0.5m. The building was let to the OPW
and occupied by An Garda Síochána
(the police) at a rent of €4.9m per annum
on leases the last of which expired in
December 2016. The agreement gives all
parties certainty on the tenant’s departure
date, allows Hibernia to plan for its
redevelopment and secures near-term
income for Hibernia.

One Dockland Central, IFSC
Of the 58,000 sq.ft. refurbished,
27,500 sq.ft. (two floors) was pre-let
to HubSpot in November 2015 on a
20-year lease at a rent of €1.3m per
annum (€45psf) with a six-month
rent-free period from commencement:
the lease commenced in February 2016.
In July 2016 the remaining two floors
were let to ComReg on a 20-year lease
at a rent of €1.6m per annum (€50psf)
with a four-month rent-free period. The
average weighted average unexpired
lease terms in the building are now 10
years to break and 17 years to expiry.

Hibernia REIT plc Annual Report 2017

The Observatory Building, South Docks

1SJRQ, South Docks (CGI)

Hibernia REIT plc Annual Report 2017

Strategic reportStrategic reportGovernanceFinancial statementsOperational review

Financial results and position

AS AT

IFRS NAV – cent per share

EPRA NAV – cent per share

Net debt

Group LTV

FINANCIAL YEAR ENDED

Profit before tax for the period

EPRA earnings

IFRS EPS

Diluted IFRS EPS

EPRA EPS

Proposed final DPS

FY DPS

* Excluding one-off €4.9m surrender premium received.

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

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

– 2.2 cent per share from EPRA
earnings for the financial year.
– Payment of the FY16 final dividend
and FY17 interim dividend, which
decreased NAV by 1.6 cent per share.

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

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

Hibernia REIT plc Annual Report 2017

31 MARCH 2017

31 MARCH 2016

MOVEMENT

147.9

146.3

€155.3m

13.3%

131.6

130.8

€52.9m

5.7%

+ 12.4%

+ 11.9%

+ 193.6%

+ 133.3%

31 MARCH 2017

31 MARCH 2016

MOVEMENT

€119.0m

€15.0m

17.4 cent

17.2 cent

2.2 cent

1.45 cent

2.2 cent

€136.3m

€5.1m*

20.2 cent

20.1 cent

1.5 cent

0.8 cent

1.5 cent

12.7%

192.5%

13.9%

14.4%

46.7%

81.3%

46.7%

premium) due to new lettings and
acquisitions made in the past two years.

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

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

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

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

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

Cash and undrawn facilities as at
31 March 2017 totalled €288.9m or
€149.5m net of committed capital
(including the Hanover Building) and
the intended repayment of the 1WML
Facility. Assuming repayment of the
1WML facility and the investment of
the remaining RCF funds in property,
the LTV, based on property values at

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

Hibernia’s Dividend Reinvestment Plan
(“DRIP”) remains in place, allowing
shareholders to instruct Capita, the
Company’s registrar, to reinvest dividend
payments by the purchase of shares in the
Company. The terms and conditions of
the DRIP and information on how to
apply are available on the Group’s website.

31 March 2017, would be c.28%. Our
through-cycle leverage target remains
20–30% LTV.

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

European Public Real
Estate Association (“EPRA”)
performance measures
The Group uses EPRA performance
measures which were developed to
improve transparency, comparability
and relevance of financial reporting
in real estate investment companies.
Accordingly, the table below summarises
the relevant measures at the financial
year end. The Group reports using IFRS
and these measures are extracted using
the Group’s financial information. Notes
on the preparation of each measure
are included in the “Supplementary
information” section at the back of
this Annual Report.

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

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

EPRA earnings

Adjusted EPRA earnings1

EPRA NAV

EPRA NNNAV

EPRA NIY

EPRA “topped-up” NIY

EPRA cost ratio including vacancy costs

EPRA cost ratio excluding vacancy costs

Costs adjusted for internalisation1

Adjusted EPRA cost ratio including vacancy costs

Adjusted EPRA cost ratio excluding vacancy costs

EPRA vacancy rate

31 MARCH 2017

31 MARCH 2016

– basic

– diluted

– basic

€’000

14,989

26,441

1,013,969

1,013,852

CENT PER
SHARE

2.2

3.9

146.3

4.4%

4.7%

56.0%

54.4%

23.7%

22.0%

2.7%

€’000

10,024

20,756

897,160

896,917

CENT PER
SHARE

1.5

3.1

130.8

3.8%

4.2%

49.4%

45.1%

24.5%

20.1%

4.8%

1. The costs relating to the internalisation are eliminated from this measure to provide indicative impacts on measures post November 2018.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportRisks and risk management

We believe appropriate and effective risk management
practices are essential to the achievement of our
strategic priorities and to delivering above average
returns for shareholders over the long term.

Our approach to risk management
Risk management is the ultimate responsibility of the Board, which uses the Group’s risk management framework to identify,
understand, mitigate and manage risks while recognising that such risks are inherent in running any business. The Group’s risk
management framework, which is maintained by the Management Team, is monitored by the Group’s Audit Committee. The
Audit Committee is responsible for overseeing the effectiveness of risk management and internal control systems on behalf of
the Board and also advises the Board on the principal risks facing the Group including those that would threaten its solvency
or liquidity. Additional oversight on risks relating to staff composition and incentivisation is provided by the Nomination and
Remuneration Committees.

Board

Overall responsibility for risk management
and internal controls.

Audit
Committee

Monitors the risk
management framework
and manages the risk
control function on
behalf of the Board.

Management Team
(Executive Directors, Senior Managers)

Provides input to Committees’ review processes.

Manages the Executive Committees.

Nominations/
Remuneration
Committees

Monitor risks relating
to incentivisation and
composition of staff.

Executive Committees

Prepare risk register and develop risk
management framework.

Review the operation of key controls.

Effective day-to-day management of risk is embedded in our operational processes at all levels of the organisation.

Some key points to note:
– The Board and senior management encourage a culture of openness and transparency throughout the organisation.
– The Group operates out of a single office in central Dublin and most of the assets in the portfolio are within walking distance.
– The Directors are closely involved in the business, helping to identify new risks or system weaknesses quickly.
– The Audit Committee has recently appointed PwC to act as internal auditors and undertake further testing of the risk

management framework and controls.

– The Management Team holds weekly Executive Committee meetings and bi-weekly departmental update meetings to discuss

progress in each area of the business.

The Group’s risk management framework involves designing, implementing, monitoring, reviewing and continually improving
risk management processes in the organisation. 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 which the business is measured against. This framework is reviewed
annually or more frequently if required. The most recent review was undertaken during the period from March to early May 2017.

Hibernia REIT plc Annual Report 2017

Risk assessment
This involves a four step process, led by the Risk & Compliance Officer (“RCO”), with other members of the Management Team
providing input.

Step 1: Identifying risks
The first step is to ensure that risks to the achievement of the Group’s strategic objectives are identified. The RCO is responsible
for promoting a timely and regular risk assessment process which involves reviewing the current risk register, considering new
risks and mitigants through meetings and discussions with the Management Team and other relevant parties.

Step 2: Determine the potential impact of the risk
The second step is to determine the impact the risk could have on the Group if it occurred, and what mitigants may exist (if any).

Step 3: Determine the likelihood of the risk occurring
A detailed review of each risk and the associated mitigants is undertaken by senior management annually or more frequently
if required. Several factors, including controls, industry benchmarks and precedents are discussed, considered and reviewed
before assigning an agreed rating for the likelihood of the risk occurring.

Step 4: Multiply the impact and likelihood ratings to produce the risk rating
The final step is to multiply “impact” by “likelihood” to produce the overall risk rating:

Impact x Likelihood = Overall Risk Rating

The likelihood of occurrence and level of impact must consider the controls the Group has in place to mitigate each risk. For
example, if the Group purchases buildings insurance (which protects against flood damage and income loss) for a property in
its portfolio, the impact of a flood should be decreased accordingly.

The Risk Ratings are then recorded and risks are classified using the following risk map.

The impact and potential likelihood of a risk are determined by the Management Team using their knowledge and experience. These
determinations are generally subjective given the uncertainty involved in assessing impact and likelihood.

If it is not possible to mitigate a risk to an acceptable level, then the Group will take steps to avoid incurring that risk. Risks that are
rated high are reviewed regularly so that additional mitigants can be considered.

Risk map

IMPACT

INSIGNIFICANT
1

MINOR
2

MODERATE
3

MAJOR
4

CATASTROPHIC
5

D
O
O
H
L
E
K
L

High

Unacceptable

Medium

High

T
S
O
M
L
A

N
A
T
R
E
C

Y
L
E
K
L

E
L
B
S
S
O
P

Y
L
E
K
L
N
U

E
R
A
R

Low

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic report
Principal risks and uncertainties

There are a number of potential risks and uncertainties
which could have a material impact on the Group’s
performance and could cause actual results to differ
materially from expected and historical results. A description
of these risks and the steps which the Group has taken
to manage these risks is set out below.

Risk trend

Impact trend

Increasing Unchanged Decreasing

High Medium Low

RISK

STRATEGIC RISKS

POTENTIAL
IMPACT

EXPOSURE

MITIGATION

POTENTIAL

IMPACT POST

MITIGATION

CHANGE

FROM

31 MARCH

2016

COMMENTS

Inappropriate business strategy

The Group’s strategy is not consistent with market
conditions affecting the ability of the Group to deliver
its strategic objectives.

MARKET RISKS

Weakening economy

The value of the investment portfolio may decline and rental
income may reduce as a consequence of a decline in levels
of economic activity in Dublin and/or Ireland.

As a relatively small and “open” economy Ireland depends
heavily on international trade and Foreign Direct Investment,
making it particularly sensitive to any deterioration in macro-
economic conditions elsewhere. Any reduction in trade with
the UK as a result of its expected departure from the EU
or a reduction of investment from the US as a result of the
new US presidential administration could impact Ireland’s
economy negatively.

Under-performance of
Dublin property market

Under-performance by the Dublin property market
compared to other Irish property sectors: to date all
the Group’s investments have been within Dublin.

DEVELOPMENT RISKS

Poor execution of
development projects

Development projects are not managed properly causing
possible delays, budget overruns and/or failure to achieve
expected rental levels, all resulting in reduced returns.

Continued on following page >>

Hibernia REIT plc Annual Report 2017

The Group carries out strategic reviews on an annual basis

looking to the next three years. Budgets are prepared and

reviewed by the Board each quarter looking at a three-year

period. The Group also assesses the sensitivity of its key

ratios to changes in the principal assumptions made and

in particular assesses headroom in negative scenarios for

viability purposes.

The Group pays close attention to economic and market lead

indicators and uses its contacts and advisers to ensure it has

the best possible understanding of likely economic changes.

The Group has set risk appetite limits, which are the level

of risk that the Board considers acceptable in achieving

the Group’s strategic objectives in the current economic

environment. The Group intends to maintain low leverage

levels throughout the cycle.

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.

As noted above, the Group also undertakes regular

budgeting and scenario planning exercises to ensure it

has sufficient headroom in negative economic scenarios.

The Group regularly reviews its strategy and asset allocation

to determine if it remains appropriate. Particular emphasis is

placed on monitoring its committed development projects

which will be completed by the end of 2018.

An experienced Director of Development joined in May

2016 to oversee all development projects. The Group has

a Development Committee which closely monitors Group

projects, the development supply pipeline in Dublin and

the rental market. The Group’s strategy in setting building

contracts is to fix pricing where feasible. This, coupled with

significant in-house experience in managing large scale

projects, reduces inherent construction risk.

While property price growth has moderated,

the Irish economy continues to grow strongly,

with GDP growth in 2017 and 2018 forecast at

3.5% and 3.2%, respectively.

Furthermore, tenant demand remains strong.

Against this backdrop, the Group is focusing

particularly on the delivery of its development

schemes.

The UK’s decision to leave the EU and the

result of the US presidential election have

raised external risks for the Irish economy,

but it continues to grow strongly and the

CSO recently raised GDP forecasts.

The Group has increased its WAULT

significantly (6.7 years up 56% over the

past financial year) and continues to work

to increase this further, thus reducing the

risk of materially increased vacancy rates

in market downturns.

The Dublin property market is currently

performing well, although there is some

evidence of a moderation of the rental

growth rate. Dublin remains a key contributor

to the Irish economy.

The Group completed three developments

totalling 191k sq.ft. in the financial year, all

of which are fully let. As at 31 March 2017 the

Group had three committed schemes totalling

295k sq.ft., all of which complete by mid-2018

and which were 25% pre-let. Since 31 March

2017, the Group has added the Hanover

Building to its committed developments: an

additional 71k sq.ft. of development exposure.

RISK

STRATEGIC RISKS

MARKET RISKS

Weakening economy

Inappropriate business strategy

The Group’s strategy is not consistent with market

conditions affecting the ability of the Group to deliver

its strategic objectives.

The value of the investment portfolio may decline and rental

income may reduce as a consequence of a decline in levels

of economic activity in Dublin and/or Ireland.

As a relatively small and “open” economy Ireland depends

heavily on international trade and Foreign Direct Investment,

making it particularly sensitive to any deterioration in macro-

economic conditions elsewhere. Any reduction in trade with

the UK as a result of its expected departure from the EU

or a reduction of investment from the US as a result of the

new US presidential administration could impact Ireland’s

economy negatively.

Under-performance of

Dublin property market

Under-performance by the Dublin property market

compared to other Irish property sectors: to date all

the Group’s investments have been within Dublin.

DEVELOPMENT RISKS

Poor execution of

development projects

Development projects are not managed properly causing

possible delays, budget overruns and/or failure to achieve

expected rental levels, all resulting in reduced returns.

POTENTIAL

IMPACT

EXPOSURE

MITIGATION

POTENTIAL
IMPACT POST
MITIGATION

CHANGE
FROM
31 MARCH
2016

COMMENTS

The Group carries out strategic reviews on an annual basis
looking to the next three years. Budgets are prepared and
reviewed by the Board each quarter looking at a three-year
period. The Group also assesses the sensitivity of its key
ratios to changes in the principal assumptions made and
in particular assesses headroom in negative scenarios for
viability purposes.

The Group pays close attention to economic and market lead
indicators and uses its contacts and advisers to ensure it has
the best possible understanding of likely economic changes.

The Group has set risk appetite limits, which are the level
of risk that the Board considers acceptable in achieving
the Group’s strategic objectives in the current economic
environment. The Group intends to maintain low leverage
levels throughout the cycle.

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.

As noted above, the Group also undertakes regular
budgeting and scenario planning exercises to ensure it
has sufficient headroom in negative economic scenarios.

The Group regularly reviews its strategy and asset allocation
to determine if it remains appropriate. Particular emphasis is
placed on monitoring its committed development projects
which will be completed by the end of 2018.

An experienced Director of Development joined in May
2016 to oversee all development projects. The Group has
a Development Committee which closely monitors Group
projects, the development supply pipeline in Dublin and
the rental market. The Group’s strategy in setting building
contracts is to fix pricing where feasible. This, coupled with
significant in-house experience in managing large scale
projects, reduces inherent construction risk.

While property price growth has moderated,
the Irish economy continues to grow strongly,
with GDP growth in 2017 and 2018 forecast at
3.5% and 3.2%, respectively.

Furthermore, tenant demand remains strong.
Against this backdrop, the Group is focusing
particularly on the delivery of its development
schemes.

The UK’s decision to leave the EU and the
result of the US presidential election have
raised external risks for the Irish economy,
but it continues to grow strongly and the
CSO recently raised GDP forecasts.

The Group has increased its WAULT
significantly (6.7 years up 56% over the
past financial year) and continues to work
to increase this further, thus reducing the
risk of materially increased vacancy rates
in market downturns.

The Dublin property market is currently
performing well, although there is some
evidence of a moderation of the rental
growth rate. Dublin remains a key contributor
to the Irish economy.

The Group completed three developments
totalling 191k sq.ft. in the financial year, all
of which are fully let. As at 31 March 2017 the
Group had three committed schemes totalling
295k sq.ft., all of which complete by mid-2018
and which were 25% pre-let. Since 31 March
2017, the Group has added the Hanover
Building to its committed developments: an
additional 71k sq.ft. of development exposure.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportPrincipal risks and uncertainties continued

Risk trend

Impact trend

Increasing Unchanged Decreasing

High Medium Low

RISK

INVESTMENT RISKS

POTENTIAL
IMPACT

EXPOSURE

MITIGATION

POTENTIAL

IMPACT POST

MITIGATION

CHANGE

FROM

31 MARCH

2016

COMMENTS

Poor investment of capital
or mis-timed sale of assets

Investment returns that are below the Group’s target
rate of return as a result of not reading/reacting to the
cycle correctly.

Inappropriate concentration
on single assets, locations,
tenants or tenant sectors

Excessive exposure leading to poor performance
or reduced liquidity.

ASSET MANAGEMENT RISKS

Poor asset management

Failure to maximise returns from investment portfolio as a
result of poor management of voids, breaks and renewals,
leading to possible loss of tenants and/or leases agreed at
lower than Estimated Rental Value (“ERV”). Poor building
management can impact tenant satisfaction and longevity
leading to loss of income. Failure to understand tenant
requirements also risks loss of income.

FINANCE RISKS

Inappropriate capital structure
for market conditions

Inappropriate capital structure may lead to the Group being
unable to meet goals through being too highly geared and
incurring high interest costs and risking covenant breaches
or being under geared and thus limiting returns.

Lack of available funds
for investment

Target returns impacted, new investment limited through
lack of available funds meaning the Group is unable to
exploit opportunities identified.

Continued on following page >>

Hibernia REIT plc Annual Report 2017

The Group has an experienced Investment Team which

assesses the various Dublin sub-markets at all times. The

Group also closely monitors current and anticipated future

economic conditions and reacts accordingly.

Prior to completing any acquisition extensive due diligence is

undertaken. Board approval is part of the investment decision

which provides another layer of scrutiny.

All the Group’s investments are within Dublin and the

majority are in the office sector: the Group maintains risk

exposure targets and limits regarding concentration risks

and assesses its portfolio regularly against these.

The Group has a dedicated and experienced Asset

Management Team which has been expanded in the period.

The Group has also formed a separate building management

subsidiary which, since April 2017, manages all the Group’s

multi-let buildings, giving the Group direct day-to-day

interaction with its tenants. This ensures the best service

to retain tenants and help maximise rental levels.

The Group has a target loan to value ratio of 20-30% through

the cycle and under the investment policy debt is limited to

a 40% LTV ratio at incurrence: these are well below covenant

limits. In addition, any new facilities entered into must be

approved by the Board.

Hedging instruments are used to limit the Group’s interest

rate exposure and the Group has a policy of hedging the

majority of its interest rate exposure on its long-term

drawn debt.

Active and regular monitoring of debt covenants is

undertaken as well as stress-testing to see what downside

scenarios the Group can withstand without breaching

debt covenants.

The Group actively manages its financial requirements and

continues to monitor availability to ensure it is well-placed

to take advantage of market investment opportunities as

they arise.

The Group actively reviews its portfolio of properties and

considers the disposal of those properties that may no longer

offer an adequate return. Any proceeds received can be used

to reduce debt or fund further acquisitions.

The Group now has a portfolio valued at

over c.€1.2bn and has slowed the rate of

acquisition: in the year ended 31 March 2017 it

acquired €85m of property in two acquisitions.

Looking ahead, the Group’s net investment

spend on further acquisitions is likely to be

relatively modest.

The Group has built a balanced

portfolio comprising 28 properties since

commencement of operations. As at 31 March

2017 the largest single asset represented 11%

of the portfolio by value (12% as at March

2016). The portfolio’s top 10 tenants account

for 67% of the contracted rent roll as at March

2017 (71% as at March 2016).

The Group has taken steps to deepen

relationships with tenants and increase

the level of service they receive by forming

a building company to manage multi-let

buildings. It is implementing plans to refurbish

and improve older stock on lease expirations

or breaks. Where possible, buildings are being

rebranded and improved to produce a high

standard common to all Hibernia buildings.

At 31 March 2017 the Group indebtedness

remained modest with a LTV ratio of 13%

(31 March 2016: 6%), with committed capital

expenditure in the next 15 months expected

to increase the LTV ratio to c.20%.

No covenant breaches have occurred in

the period.

At 31 March 2017 the Group had cash and

undrawn facilities totalling €289m, or €150m

net of committed capital expenditure and

the anticipated repayment of the Windmill

Lane facility (31 March 2016: €369 or

€265m). The Group continues to monitor

capital requirements to ensure that future

requirements are anticipated and met within

the limits of its leverage targets.

RISK

INVESTMENT RISKS

Poor investment of capital

or mis-timed sale of assets

Investment returns that are below the Group’s target

rate of return as a result of not reading/reacting to the

cycle correctly.

Inappropriate concentration

on single assets, locations,

tenants or tenant sectors

Excessive exposure leading to poor performance

or reduced liquidity.

ASSET MANAGEMENT RISKS

Poor asset management

Failure to maximise returns from investment portfolio as a

result of poor management of voids, breaks and renewals,

leading to possible loss of tenants and/or leases agreed at

lower than Estimated Rental Value (“ERV”). Poor building

management can impact tenant satisfaction and longevity

leading to loss of income. Failure to understand tenant

requirements also risks loss of income.

FINANCE RISKS

Inappropriate capital structure

for market conditions

Inappropriate capital structure may lead to the Group being

unable to meet goals through being too highly geared and

incurring high interest costs and risking covenant breaches

or being under geared and thus limiting returns.

Lack of available funds

for investment

Target returns impacted, new investment limited through

lack of available funds meaning the Group is unable to

exploit opportunities identified.

POTENTIAL

IMPACT

EXPOSURE

MITIGATION

POTENTIAL
IMPACT POST
MITIGATION

CHANGE
FROM
31 MARCH
2016

COMMENTS

The Group has an experienced Investment Team which
assesses the various Dublin sub-markets at all times. The
Group also closely monitors current and anticipated future
economic conditions and reacts accordingly.

Prior to completing any acquisition extensive due diligence is
undertaken. Board approval is part of the investment decision
which provides another layer of scrutiny.

All the Group’s investments are within Dublin and the
majority are in the office sector: the Group maintains risk
exposure targets and limits regarding concentration risks
and assesses its portfolio regularly against these.

The Group has a dedicated and experienced Asset
Management Team which has been expanded in the period.

The Group has also formed a separate building management
subsidiary which, since April 2017, manages all the Group’s
multi-let buildings, giving the Group direct day-to-day
interaction with its tenants. This ensures the best service
to retain tenants and help maximise rental levels.

The Group has a target loan to value ratio of 20-30% through
the cycle and under the investment policy debt is limited to
a 40% LTV ratio at incurrence: these are well below covenant
limits. In addition, any new facilities entered into must be
approved by the Board.

Hedging instruments are used to limit the Group’s interest
rate exposure and the Group has a policy of hedging the
majority of its interest rate exposure on its long-term
drawn debt.

Active and regular monitoring of debt covenants is
undertaken as well as stress-testing to see what downside
scenarios the Group can withstand without breaching
debt covenants.

The Group actively manages its financial requirements and
continues to monitor availability to ensure it is well-placed
to take advantage of market investment opportunities as
they arise.

The Group actively reviews its portfolio of properties and
considers the disposal of those properties that may no longer
offer an adequate return. Any proceeds received can be used
to reduce debt or fund further acquisitions.

The Group now has a portfolio valued at
over c.€1.2bn and has slowed the rate of
acquisition: in the year ended 31 March 2017 it
acquired €85m of property in two acquisitions.
Looking ahead, the Group’s net investment
spend on further acquisitions is likely to be
relatively modest.

The Group has built a balanced
portfolio comprising 28 properties since
commencement of operations. As at 31 March
2017 the largest single asset represented 11%
of the portfolio by value (12% as at March
2016). The portfolio’s top 10 tenants account
for 67% of the contracted rent roll as at March
2017 (71% as at March 2016).

The Group has taken steps to deepen
relationships with tenants and increase
the level of service they receive by forming
a building company to manage multi-let
buildings. It is implementing plans to refurbish
and improve older stock on lease expirations
or breaks. Where possible, buildings are being
rebranded and improved to produce a high
standard common to all Hibernia buildings.

At 31 March 2017 the Group indebtedness
remained modest with a LTV ratio of 13%
(31 March 2016: 6%), with committed capital
expenditure in the next 15 months expected
to increase the LTV ratio to c.20%.

No covenant breaches have occurred in
the period.

At 31 March 2017 the Group had cash and
undrawn facilities totalling €289m, or €150m
net of committed capital expenditure and
the anticipated repayment of the Windmill
Lane facility (31 March 2016: €369 or
€265m). The Group continues to monitor
capital requirements to ensure that future
requirements are anticipated and met within
the limits of its leverage targets.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic report
Principal risks and uncertainties continued

Risk trend

Impact trend

Increasing Unchanged Decreasing

High Medium Low

POTENTIAL
IMPACT

EXPOSURE

MITIGATION

POTENTIAL

IMPACT POST

MITIGATION

CHANGE

FROM

31 MARCH

2016

COMMENTS

Ability to achieve strategic goals impacted through loss
of expertise or key personnel or lack of motivation of staff.

Lower returns because of changes. For example, in 2016
the Government introduced rent controls for residential
tenancies which impacted the Group’s residential properties.
Failure to comply with any changes may also result in
reputational risk. The Finance Act 2017 changes did not
impact the Group directly but had the potential to impact
property values.

Achievement of strategic goals impacted through inability
to continue as a REIT and a greater tax burden.

Effective monitoring of REIT requirements compliance at

a senior level with review by Audit Committee.

Risks can include, but are not limited to, health and
safety incidents and/or loss of life or injury to employees,
contractors, members of the public or tenants. Reputational
damage through failure to prevent or manage effectively
incidents occurring.

The Group has a team of directly employed staff following

the internalisation of the Investment Manager in 2015 and

a remuneration system that is linked closely to individual

and Group performance. The Group has introduced a long-

term incentive plan (funded primarily through the existing

performance fee arrangements) as part of performance

remuneration in order to help better align employees’

interests with shareholders’ and encourage retention.

The Remuneration Committee is working on plans for

employee incentivisation post November 2018 when these

arrangements expire.

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.

The Group has formed a sustainability committee to manage

its environmental and social impact.

The Group has policies and procedures in place for health

and safety. The Group has regular risk assessments and

audits to proactively address the key health & safety areas,

including employee, contractors, tenant & public safety. The

Group ensures that all contractors engaged maintain the

highest standards of health and safety and have appropriate

and adequate insurance in place. All staff who visit work

sites and buildings have completed the “safe pass” course.

The Group takes all appropriate actions to ensure it is not

exposed to uninsured risks in respect of all normal insurable

risks in relation to health and safety.

The Group has implemented competitive

remuneration plans, clear employee objectives

and development plans, and regular employee

engagement to proactively identify and

address potential issues. The Nominations

and Remuneration Committees of the Board

regularly consider succession planning and

talent management, respectively.

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 is completed on a regular basis and

is the subject of review by our retained tax

advisers, KPMG.

The Group continues to maintain high

standards of health and safety.

Significant damage to Group’s business as a result of such
an event.

Within Dublin the Group monitors its geographic exposure,

and maintains a balance between various sub-markets.

The Group has business continuity plans in place, has

improved its IT security measures during the financial year,

and has insurance policies to cover catastrophic events.

We believe the risk of cyber attack has

increased for all businesses in the past

year although we have taken steps to

address this through improving our IT

security measures. The risk of other

external factors remains stable.

RISK

PEOPLE RISKS

Loss or shortage of key
staff or lack of motivation

REGULATORY & TAX RISKS

Regulatory, legislative,
tax, environmental or
planning changes

Failure to comply with
requirements of Irish
REIT Regime

Loss of life or injury to staff,
a contractor or member of the
public as a result of an accident
at one of the Group’s buildings

BUSINESS RISKS

An external event occurs (e.g.
natural disaster, war, terrorism,
civil unrest, cyber attack) which
significantly and negatively
affects the Group’s operations

Hibernia REIT plc Annual Report 2017

Ability to achieve strategic goals impacted through loss

of expertise or key personnel or lack of motivation of staff.

Lower returns because of changes. For example, in 2016

the Government introduced rent controls for residential

tenancies which impacted the Group’s residential properties.

Failure to comply with any changes may also result in

reputational risk. The Finance Act 2017 changes did not

impact the Group directly but had the potential to impact

property values.

Risks can include, but are not limited to, health and

safety incidents and/or loss of life or injury to employees,

contractors, members of the public or tenants. Reputational

damage through failure to prevent or manage effectively

incidents occurring.

RISK

PEOPLE RISKS

Loss or shortage of key

staff or lack of motivation

REGULATORY & TAX RISKS

Regulatory, legislative,

tax, environmental or

planning changes

Failure to comply with

requirements of Irish

REIT Regime

Loss of life or injury to staff,

a contractor or member of the

public as a result of an accident

at one of the Group’s buildings

BUSINESS RISKS

An external event occurs (e.g.

natural disaster, war, terrorism,

civil unrest, cyber attack) which

significantly and negatively

affects the Group’s operations

POTENTIAL

IMPACT

EXPOSURE

MITIGATION

POTENTIAL
IMPACT POST
MITIGATION

CHANGE
FROM
31 MARCH
2016

COMMENTS

The Group has a team of directly employed staff following
the internalisation of the Investment Manager in 2015 and
a remuneration system that is linked closely to individual
and Group performance. The Group has introduced a long-
term incentive plan (funded primarily through the existing
performance fee arrangements) as part of performance
remuneration in order to help better align employees’
interests with shareholders’ and encourage retention.
The Remuneration Committee is working on plans for
employee incentivisation post November 2018 when these
arrangements expire.

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.

The Group has formed a sustainability committee to manage
its environmental and social impact.

Achievement of strategic goals impacted through inability

to continue as a REIT and a greater tax burden.

Effective monitoring of REIT requirements compliance at
a senior level with review by Audit Committee.

The Group has policies and procedures in place for health
and safety. The Group has regular risk assessments and
audits to proactively address the key health & safety areas,
including employee, contractors, tenant & public safety. The
Group ensures that all contractors engaged maintain the
highest standards of health and safety and have appropriate
and adequate insurance in place. All staff who visit work
sites and buildings have completed the “safe pass” course.
The Group takes all appropriate actions to ensure it is not
exposed to uninsured risks in respect of all normal insurable
risks in relation to health and safety.

The Group has implemented competitive
remuneration plans, clear employee objectives
and development plans, and regular employee
engagement to proactively identify and
address potential issues. The Nominations
and Remuneration Committees of the Board
regularly consider succession planning and
talent management, respectively.

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 is completed on a regular basis and
is the subject of review by our retained tax
advisers, KPMG.

The Group continues to maintain high
standards of health and safety.

Significant damage to Group’s business as a result of such

an event.

Within Dublin the Group monitors its geographic exposure,
and maintains a balance between various sub-markets.

The Group has business continuity plans in place, has
improved its IT security measures during the financial year,
and has insurance policies to cover catastrophic events.

We believe the risk of cyber attack has
increased for all businesses in the past
year although we have taken steps to
address this through improving our IT
security measures. The risk of other
external factors remains stable.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic report
Sustainability

An integral part
of our strategy

We recognise the importance of
sustainability and social responsibility
in delivering long-term value for our
shareholders and have placed them
at the centre of our strategy and our
decision-making processes.

Introduction
Since inception in December 2013 we
have assembled a portfolio of Dublin
property worth c.€1.2bn and have made
the attainment of the highest levels of
environmental certification a key priority
in our development projects.

Last year we identified four sustainability
priorities for the business: responsible
asset management, delivering sustainable
buildings, positive community impact
and developing our employees. We
also commenced measurement and
reporting per the EPRA Best Practices
Recommendations on Sustainability,
achieving a bronze award.

This year we have:
1) Formalised our sustainability
management structure through
the formation of a Sustainability
Committee, comprising the CEO and
senior team members from across
the business units. The Committee
meets at least quarterly and leads
our engagement on sustainability
and social responsibility matters.

2) Developed the sustainability
priorities identified last year
into a formal policy document
and produced two associated
documents which cover the practical
implementation of the policies.
This work, led by the Sustainability
Committee with oversight from
the Board, had resulted in:

Hibernia REIT plc Annual Report 2017

– a Sustainability Policy, which
lays out the key principles by
which Hibernia operates;
– a Sustainability Strategy,

which sets specific near-term
and medium-term targets against
which Hibernia’s sustainability
progress will be measured; and

– a Supplier Code of Conduct,

which details the standards and
principles we expect our suppliers
to abide by.

3) Enhanced our reporting
per the EPRA Best Practices
Recommendations on Sustainability
to include like-for-like performance
comparisons. Our performance data
has been verified by Jones Lang
LaSalle Upstream Sustainability
Services (“JLL Upstream”) in line
with the AA1000 assurance standard.

4) Achieved LEED Platinum

environmental certification on
the redevelopment of 1 Cumberland
Place, Dublin 2. Cumberland Place
is one of the first office buildings in
Dublin to achieve a platinum rating,
the highest available under the LEED
environmental certification system.
Further details of the refurbishment
can be found in the “Strategy in action”
section of this report on pages 18 to 19.

The rest of this section summarises the
three sustainability documents (all
available in full on our website) and also
sets out our sustainability reporting for
this year.

Sustainability Policy
This has been developed from the
sustainability priorities set out last year
to ensure that Hibernia operates in a
responsible and sustainable manner.
It consists of five key principles which
we will ensure are applied through the
life cycle of our properties:
i) Responsible asset management
Actively managing our existing

buildings to reduce environmental
impact while maximising asset
performance and efficiency for
our tenants and customers and
where possible adopting a
“polluter pays” principle.

ii) Delivering sustainable buildings
Providing efficient new space through

developments or refurbishments
which offer lower running costs, lower
emissions and an enhanced occupier
experience while improving the local
built environment.

iii) Positive community impact
Supporting the communities in

which we operate, being responsible
neighbours and developing and
maintaining strong relationships.

iv) Suppliers
Supporting our suppliers through

the prompt payment of invoices whilst
ensuring our suppliers of goods and
services adhere to our Supplier Code
of Conduct at all times and integrating
these requirements into our various,
contractual relationships.
v) Developing our employees
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 objectives.

The Sustainability Policy has been
reviewed and approved by the Board
and will be subject to periodic review.
The latest version of the policy is
available on our website.

Delivering new buildings
Hibernia has adopted LEED certification for
its development projects. LEED is a green
building certification system developed by
the US 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 V4

LEED Certified
40–49

LEED Silver
50–59

LEED Gold
60–79

LEED Platinum
80–110

Montague House, D2

Hibernia REIT plc Annual Report 2017

Strategic reportStrategic reportGovernanceFinancial statementsSustainability continued

Sustainability Strategy (for the year ending March 2018)
This sets near term and medium term sustainability targets for Hibernia, categorised according to the key principles of the
Sustainability Policy. Our progress against these targets will be measured and reported annually and the strategy itself will be
subject to annual review and is available on our website. The current targets are:

i) Responsible asset

management

– Achieve a minimum 10% reduction in energy consumption across our multi-let investment portfolio
on a like-for-like basis by the year ending March 2022 when compared to our March 2017 baseline.

– Reduce greenhouse gas intensity based on carbon emissions per units of area by a minimum of 10%
on a like-for-like basis by the year ending March 2022 when compared to our March 2017 baseline.

ii) Delivering

sustainable
buildings

– Introduce an energy benchmarking system across the portfolio.

– Achieve a recycling rate of 50% or more at properties where we retain management responsibility.

– Set up Environmental Working Groups for each of our multi-tenanted properties over 25,000 sq.ft.

– Engage with our new and existing tenants within our multi-let buildings to encourage optimum

operation and efficiency of their demises.

– Undertake our first tenant satisfaction survey by March 2018.

– Monitor energy consumption in our headquarters in South Dock House with a view to setting effective

targets for 2018–2019.

– Achieve a LEED Gold rating or better on all new office developments over 40,000 sq.ft.

– Achieve a minimum B1 energy rating (and usually A3) for office developments/refurbishments and

minimum A2 energy rating for residential developments/refurbishments.

– Run a pilot study to incorporate “The WELL Building Standard” on one development project. The
WELL standard is a performance-based system for measuring, certifying, and monitoring features
of the built environment that impact human health and wellbeing, through air, water, nourishment,
light, fitness, comfort, and mind.

– Ensure that water optimisation systems are installed within our new development projects and as part

of our refurbishment projects where feasible.

– Provide shower and bike facilities over and above the requirements of the building regulations within

our office development and refurbishment projects.

– Divert 75% of non-hazardous waste generated at our development projects away from landfill.

– Where possible, integrate historic buildings into our new developments and have regard to the history

and character of the areas in which we undertake development projects.

– Where possible improve and/or enhance the public realm around development schemes we

are undertaking.

iii) Positive

community
impact,

iv) suppliers, and

v) developing

our employees

– Organise two work experience/educational/tours/ presentations/initiatives for local schools and

colleges during the year ending March 2018.

– Create and manage a significant charity event in our community for the benefit of our community.

– Keep our Supplier Code of Conduct updated.

– Undertake regular employee satisfaction and wellbeing reviews and implement revised policies and

procedures based on their results.

– Review our annual staff review process.

– Deliver at least six knowledge sharing meetings/presentations for our staff in the year ended March 2018.

– Survey and record the modes of transport our staff use to commute to and from work as part of our

carbon measurement system.

Supplier code of conduct
This details the standards and principles we expect our suppliers to abide by to ensure they are aligned with the principles
of Hibernia on sustainability and ethical issues. It is available on our website and will be reviewed periodically. It covers our
expectations on supplier behaviour in areas including:
– Governance;
– Environment;
– Health and safety;
– Employment and labour practices;
– Payment practices; and
– Community.

Hibernia REIT plc Annual Report 2017

Sustainability reporting
(January-December 2016)
Last year we initiated a first review of
our occupied (“in-place”) multi-tenanted
office buildings, which were assessed for
the metrics per the EPRA Best Practices
Recommendations on Sustainability
Reporting (September 2011) (the “EPRA
metrics”), and reported on these metrics.

This year we have reviewed all our
occupied multi-tenanted office buildings
and our multi-family residential
buildings. In total we have reported on
9 office buildings (2016: 8 buildings),
totalling c.45,000 square metres
(2016: c.39,000 square metres),
and 3 residential buildings (2016: not
measured) for the same EPRA metrics.

In addition, since we now have prior year
data for our multi-let office buildings,
we have been able to include like-for-like
(“LFL”) comparatives, as recommended
by EPRA.

The tables below set out the EPRA
metrics measured and prior year
comparatives. This data has been
verified by JLL Upstream, according
to the AA1000 assurance standard.

EPRA sustainability summary
Offices like-for-like

EPRA CODE

EPRA
CODE

PERFORMANCE
MEASURE

GRI G4
INDICATOR

Building

Total treated
floor area

Occupancy level

Energy

Elec-Abs

Fuels-Abs

Carbon

GHG-Dir-Abs

GHG-Indir-Abs

GHG-Int

Total direct greenhouse
gas (“GHG”) emissions
(Gas)
Total indirect greenhouse
gas (“GHG”) emissions
(Elec)
Greenhouse gas (“GHG”)
intensity from building
energy consumption

TOTAL
FOR LFL
BUILDINGS
2016

TOTAL
FOR LFL
BUILDINGS
2015

%
CHANGE

NO.
BUILDINGS
FOR LFL
UNDER
INDICATOR

UNIT

(m²)

31,687

99.5%

31,687

99.5%

6 of 6

G4-EN16

(T CO₂/ann)

1,572

1,638

CRE3

(kgCO₂/
m².ann)

(3)%

6 of 6

Total electricity
consumption

G4-EN3

(kWh/ann)

3,417,000

3,560,000

Total fuel consumption

G4-EN3

(kWh/ann) 4,059,000

4,043,000

Energy-Int

Building energy intensity

CRE1 (kWh/m².ann)

G4-EN15

(T CO₂/ann)

236

812

(2)%

240

809

Water

Waste

Cert

Water-Abs

Water-Int

Total water consumption

G4-EN8

(m³/ann)

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.

Note: This table provides the EPRA Sustainability summary on a like-for-like basis for the six offices assessed.

21,593

0.94

175

N/A

15,548

0.68

167

N/A

28%

4 of 6

6 of 6

Life-for-like analysis for the in-place office portfolio
Like-for-like analysis was undertaken for six office buildings except for water indices, for which only four were available as water
consumption is not metered at either the Hanover or Chancery Buildings. Due to refurbishment work, two of the buildings
assessed in 2015 are not included in the like-for-like analysis.

Consumption has reduced for energy (-2%) and carbon (-3%), whereas both water (+28%) and waste (+5%) increased.

Energy and carbon are derived from electricity and gas consumption, for which 100% complete monthly datasets were available.
The like-for-like reductions in energy and associated carbon of 2% and 3% respectively are in line with our targeted 10%
reductions by 2022 (as outlined in our Sustainability Strategy opposite).

The increase in water measurements for 2016 may arise as there was a significant element of estimation used (22 out of 72 data
points or c.30%) as metered data was unavailable. Water consumption was estimated by extrapolating consumption on a pro-rata
basis for absent datasets: for example, bill data for six months equating to 1,000m3 was determined to equate to an annual total
of 2,000m3. 100% of monthly data was available for waste measurement, but weight is estimated based on volumes (numbers of
bin lifts); however, the conversion utilised (68 kg/m3 density – see Section 4.1.4) is consistent between 2015 and 2016 enabling
like-for-like comparison. We are further investigating these numbers to ensure that measurement issues are addressed for future
reporting and consumption rates are brought into line where required.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportSustainability continued

EPRA sustainability summary
Offices

EPRA CODE

EPRA
CODE

PERFORMANCE MEASURE

Building

Total treated floor area

Occupancy level

Energy

Elec-Abs

Fuels-Abs

Energy-Int

Carbon

GHG-Dir-Abs

GHG-Indir-Abs

GHG-Int

GRI G4
INDICATOR

c.50k

UNIT

(m²)

TOTAL FOR
ASSESSED
BUILDINGS

44,968

95%

NO.
BUILDINGS
ASSESSED
UNDER
INDICATOR

PERCENTAGE
OF DATA
ESTIMATED

9 of 9

Total electricity consumption

G4-EN3

(kWh/ann)

4,951,000

Total fuel consumption

G4-EN3

(kWh/ann)

6,735,000

Building energy intensity

CRE1

(kWh/m².ann)

G4-EN15

(T CO₂/ann)

260

1,347

Total direct greenhouse gas
(“GHG”) emissions (Gas)
Total indirect greenhouse gas
(“GHG”) emissions (Elec)
Greenhouse gas (“GHG”)
intensity from building
energy consumption

G4-EN16

(T CO₂/ann)

2,277

CRE3

(kgCO₂/
m².ann)

9 of 9

Water

Waste

Cert

Water-Abs

Water-Int

Waste-Abs

Cert-Tot

Total water consumption

G4-EN8

(m³/ann)

36,836

Building water intensity

CRE2

(m³/m².ann)

Total weight of waste

G4-EN23

(Tonne/ann)

Type and number of
sustainability certified assets

CRE8

No.

1.05

255

N/A

6 of 9

8 of 9

9 of 9

37%

Absolute and intensity indices – offices
The table above outlines the 2016 absolute indicators for office buildings under the Group’s operational control for the full year,
i.e. excludes those purchased or under development or refurbishment during the year. For gas and electricity parameters, nine
buildings were measured, reducing to six for water as there was no metering in the Hanover Building, the Chancery Building or
Hanover St. East. Eight buildings are reported for waste as there is no waste monitoring to Hanover St. East.

Electricity consumption is for landlord areas only and excludes tenant areas; except for Montague House where no separate
sub-metering is currently provided. A complete dataset was obtained for all buildings covered.

Gas consumption was obtained for all buildings assessed with the exception of Hanover St. East, where six months of data was
utilised to estimate an annual total on a pro-rata basis. The estimated gas consumption of the overall total was therefore six out
of 108 data points or c.6%.

Water consumption has been determined based on estimates for 37% of monthly bills (31 of 84). Estimates are based on the
extrapolation of metered data to obtain annual totals. Metering responsibility for water transferred from Local (Dublin City
Council) to National (Irish Water) during 2016 which limited data availability within our reporting timeframe: it is anticipated
that this data will be more readily obtainable in future years.

Waste indices are based on a complete dataset of recorded disposal, however overall weights have been determined based on an
estimation of average density based on historic annual simultaneous volume and weight data for a particular office building.

Hibernia REIT plc Annual Report 2017

Residential

EPRA CODE

EPRA
CODE

PERFORMANCE MEASURE

Building

Total treated floor area

Occupancy level

Energy

Elec-Abs

Fuels-Abs

Energy-Int

Total electricity consumption

Total fuel consumption

Building energy intensity

Carbon

GHG-Dir-Abs

Total direct greenhouse gas (“GHG”) emissions (Gas)

GHG-Indir-Abs
GHG-Int

Total indirect greenhouse gas (“GHG”) emissions (Elec)
Greenhouse gas (“GHG”) intensity from building
energy consumption

Water

Waste

Cert

Water-Abs

Water-Int

Waste-Abs

Total water consumption

Building water intensity

Total weight of waste

GRI G4
INDICATOR

TOTAL FOR
ASSESSED
BUILDINGS

UNIT

No. Apt’s

297

N/A

G4-EN3

(kWh/ann)

305,570

(kWh/ann)

CRE1

(kWh/apt.ann)

G4-EN15

G4-EN16

CRE3

(T CO₂/ann)

(T CO₂/ann)
(kgCO₂/
m².ann)

G4-EN8

(m³/ann)

CRE2

(m³/apt.ann)

G4-EN23

(Tonne/ann)

N/A

1,029

N/A

141

473

N/A

161

N/A

Cert-Tot

Type and number of sustainability certified assets

CRE8

No.

Absolute and intensity indices – residential
The above table shows the EPRA parameters for the residential portfolio within operational control of the Group in 2016. As
no gas is consumed by landlord systems in these apartment blocks, this metric has been omitted, along with associated direct
greenhouse gas emissions. In addition, as no domestic properties are metered for water, this consumption has also been excluded.
Waste for the four Chancery apartments is not included here, as this is collected with the neighbouring office development.
Results for electricity and indirect greenhouse gas emissions are presented in consumption per apartment (kWh/ apt. and
kgCO2/apt.).

As no consumption was measured for residential properties in 2015, no like-for-like analysis was undertaken.

No assumptions or estimates were made within the collated data for electricity and waste – all were based from recorded
metering and monitoring respectively.

Verification of sustainability data
The data contained in this report, which is based on the calendar year January to December 2016, was verified by JLL Upstream
Sustainability Services. The report states that nothing came to their attention that would indicate that the specified energy,
waste, water and GHG emissions information is not fairly stated.

Hibernia REIT plc Annual Report 2017

GovernanceFinancial statementsStrategic reportStrategic reportChairman’s corporate governance statement

Our focus is to grow the Group in
a safe and measured way, ensuring
effective risk management remains a
priority, and continue to uphold high
standards of corporate governance.

Dear Shareholder,

Governance
I am pleased to confirm that Hibernia
REIT plc has, throughout the financial
year, complied with all relevant
provisions of the UK Corporate
Governance Code 2016 (“the Code”),
the Irish Corporate Governance Annex
(“the Annex”) and the Association of
Investment Companies Code of
Corporate Governance (“AIC Code”).

The Group has continued to follow the
strategic direction established in 2016,
focusing on the delivery of development
projects and increasing the rental
income of the portfolio while remaining
alert to acquisition opportunities that
arise. Following the internalisation of the
Management Team in late 2015, we have
concentrated in particular on ensuring
that our governance standards are
maintained and enhanced.

Post the internalisation of the investment
management function in 2015, Hibernia
REIT plc was approved as an internally
managed Alternative Investment fund
(“AIF”) of itself under the European Union
(Alternative Investment Fund Managers)
Regulations 2013 (as amended) (“the
AIFM Authorisation”) on 18 July 2016.
As a result of this, Hibernia REIT plc is
now subject to certain requirements under
the regulations such as a minimum capital
requirement and regular reporting to the
Central Bank of Ireland.

Some of the work undertaken by the
Board during the financial year related
to implementing new requirements
under the Companies Act, 2014 around
compliance statements. The Directors
have, with the assistance of advisers and
the Management Team, identified the
Relevant Obligations that they consider
apply to the Company. The Directors
have also duly considered the resources
available to the Company and the
resources and expertise of the Depositary,
Registrar, Assistant Secretary, Tax
Advisers and Legal Advisers (the “Service
Providers”) who have been engaged to
support the Company and carry out
certain functions on its behalf.

We continued to monitor and assess the
Group structure post internalisation. As
part of continuing improvements in risk
management and internal control we
have decided to implement an internal
audit process. We have appointed PwC
to provide internal audit services to the
Group for the 2017–18 financial year.

Our role in strategy and risk
As in prior years, the Board and
Management Team continue to work
closely together and we held a strategy
session in April 2016 with a follow up
review in February 2017.

Risk management is an important
focus for our Board and is discussed
in some depth on pages 34 to 41
of the Annual Report in the “Risks and
risk management” section. We are

implementing a new risk management
system with an improved audit trail, and
focusing on linking risk measurement
and management to our strategic goals.

Stakeholder engagement
Engagement with all our stakeholders
is an important part of our role. We talk
about engagement with our shareholders
in “Communication with shareholders”
on pages 73 to 74 of this Annual Report.

The Board is conscious of the need for
the Company to engage and communicate
clearly with investors, and for its
shareholders to have the opportunity
to discuss performance and offer their
views on governance, strategy and
performance through active dialogue
with management. As a result, we held
a number of investor roadshows during
the financial year across Ireland, the UK,
continental Europe, Canada and North
America, attended various investor
conferences and held site visits for
investors to see our development
projects in progress and tour our
property portfolio.

We also engage actively with other providers
of capital such as our lending banks. We
monitor and manage covenant compliance
and encourage open communication with
our capital providers. In September 2016 we
arranged our annual property tour for our
main lending banks to see our major assets
and developments.

Hibernia REIT plc Annual Report 2017

In 2017–18 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 uphold high
standards of corporate governance.

Daniel Kitchen
Chairman
7 June 2017

We recognise the role and importance
of our employees’ contribution who
are also 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. The Executive Committee
structure aids this, with the inclusion
of non-executive and executive Directors
and employee representatives to ensure
open communication. Aside from formal
membership of the Committees, all
employees who have roles in each area
are invited to bi-weekly team 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 to foster the team
spirit that has driven the Group so
successfully in its first years of operation.

Board evaluation
This year saw the third round of Board
and Committee performance assessments.

In line with our stated policies, an
independent review of the Board’s
performance was carried out by the
Institute of Directors in Ireland and
is further discussed on page 59 of
this report.

The composition and performance of the
Committees were also reviewed during
the financial year. In general, there was
satisfaction with their composition and
performance. As already mentioned
the Audit Committee has decided to
outsource the provision of internal audit
services which will assist the Board in
maintaining effective oversight.

The Board
There were no changes to the
composition of the Board during the
financial year and I would like to thank
my fellow Directors for their ongoing
support and challenge.

In May 2017 it was announced that
William Nowlan wished to stand down
as a non-executive Director at the
forth-coming AGM. He will continue
to act as a consultant to the Group.

In February 2017 Sean O’Dwyer was
appointed as Company Secretary with
Chartered Corporate Services becoming
Assistant Secretary. This appointment will
help to maintain the good communication
between Board and management and
ensure the continuing provision of
appropriate information and advice
on corporate governance matters.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceBoard of Directors

Daniel Kitchen
Non-executive Chairman
(65)

Colm Barrington
Independent
Non-executive Director
and Senior Independent
Director (71)

Stewart Harrington
Independent
Non-executive Director
(74)

William Nowlan
Non-executive Director
(71)

Terence O’Rourke

Independent

Kevin Nowlan

Chief Executive Officer

Thomas Edwards-Moss

Chief Financial Officer

Sean O’Dwyer

Company Secretary

Non-executive Director

(46)

(37)

(58)

(62)

Appointment
23 August 2013

Appointment
13 August 2013

Appointment

23 August 2013

Appointment

5 November 2015

Appointment

5 November 2015

Appointment

10 February 2017

Nationality
Irish

Nationality

Irish

Nationality

Irish

Nationality

British

Nationality

Irish

Committee Membership
Nominations (Chair) and
Remuneration

Committee Membership
Audit, Nominations and
Remuneration (Chair)

Committee Membership
Audit, Nominations and
Remuneration

Committee Membership
None

Committee Membership

Audit (Chair), Nominations and

None

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 experience gained across
a variety of property, finance
and public company roles to his
chairmanship of the Board and
Nominations Committee.

Colm Barrington is currently
chief executive officer and a
Director of FLY Leasing Limited,
the NYSE-listed and Irish-based
aircraft leasing company and a
non-executive Director of IFG
Group plc and Finnair plc.
He is a former non-executive
Chairman of Aer Lingus Group
plc. Previously he was managing
Director of Babcock & Brown Ltd
in Ireland, President of GE Capital
Aviation Services Ltd, chief
operating officer of GPA Group
plc and chief executive of GPA’s
Capital Division. His 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 is currently
a non-executive Director of the
parent company of the BWG
Group, Stafford Holdings, Killeen
Properties and Activate Capital.
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 Argentum Property,
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.
He has extensive knowledge and
experience of the Irish property
market over many years in a
variety of roles.

William Nowlan is currently
Chairman of WK Nowlan Real
Estate Advisers which he founded
in 1996. Previously he was Head
of Property Investment at Irish
Life Assurance plc from 1985
to 1995 and 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 has more than 40 years’
experience investing in Irish
commercial property.

As previously announced, William Nowlan will not be standing for re-election. All of the other Directors will retire at the Annual General Meeting (AGM) and, being eligible, will offer
themselves up for re-election.

Hibernia REIT plc Annual Report 2017

Terence O’Rourke is currently

Kevin Nowlan joined the Board

Thomas Edwards-Moss joined

Sean O’Dwyer was appointed

Chairman of Enterprise Ireland

of Hibernia as Chief Executive

the Board of Hibernia as Chief

Company Secretary in February

and Kinsale Capital Management,

Officer in November 2015

Financial Officer in November

2017. He is also Risk and

a non-executive Director of the

following the internalisation of

2015, following the internalisation

Compliance Officer for the Group,

Irish Times and a council member

WK Nowlan REIT Management

of the Investment Manager. Prior

a role he performed for the

and non-executive Director of

Limited, the Investment Manager.

to this he held the same role in the

Investment Manager since 2013.

the Irish Management Institute.

Prior to this he held the same

Investment Manager since joining

Prior to this he was responsible

Previously, he was managing

position in the Investment

in June 2014. Previously he spent

for finance, risk and compliance

partner of KPMG Ireland from

Manager from its inception in

nine years at Credit Suisse in

at Bank of Ireland Asset

2006 to 2013, a board member

2013 and previously held senior

London as part of the UK &

Management (now SSgA Ireland)

of the Chartered Accountants

roles in NAMA and Treasury

Ireland Investment Banking team.

between 1987 and 2008. From

Regulatory Board, President

Holdings and was MD of WK

While there, he had a particular

2009 to 2013 he worked as a

of The Institute of Chartered

Nowlan Real Estate Advisers. He

focus on corporate finance in the

consultant with a number of

Accountants in Ireland and

is a Chartered Surveyor with more

property sector and he advised

financial services firms. He

Chairman of the Leinster Society

than 20 years’ experience in the

on the initial public offering of

qualified as a Chartered

of Chartered Accountants and

Irish property market, including

Hibernia. He is a graduate of

Accountant at EY in 1983.

a former member of the Global

commercial agency, property

Cambridge University and

Board, the EMA Board and the

management, investment,

qualified as a Chartered

Global Executive Team of KPMG

development and development

Accountant at PwC in 2005.

International. Terence O’Rourke’s

financing, commercial loan

professional accounting and

portfolio management and debt

management background and

restructuring. He has a BSc in

experience over many years in

Estate Management from the

advising clients across a range

University of Ulster, an MBA from

of sectors, contributes to the

Ulster Business School and a

balance of skills, experience

Diploma in Project Management

and knowledge of the Board.

from Trinity College, Dublin.

Daniel Kitchen

Colm Barrington

Non-executive Chairman

Independent

Stewart Harrington

Independent

William Nowlan

Non-executive Director

(65)

Non-executive Director

(71)

and Senior Independent

(74)

Director (71)

Terence O’Rourke
Independent
Non-executive Director
(62)

Kevin Nowlan
Chief Executive Officer
(46)

Thomas Edwards-Moss
Chief Financial Officer
(37)

Sean O’Dwyer
Company Secretary
(58)

Appointment

23 August 2013

Appointment

23 August 2013

Appointment

23 August 2013

Appointment

13 August 2013

Appointment
23 August 2013

Appointment
5 November 2015

Appointment
10 February 2017

Nationality

Irish

Nationality

Irish

Nationality

Irish

Nationality

Irish

Nationality
Irish

Nationality
British

Nationality
Irish

Committee Membership

Nominations (Chair) and

Remuneration

Committee Membership

Audit, Nominations and

Remuneration (Chair)

Committee Membership

Audit, Nominations and

Remuneration

Committee Membership

None

Daniel Kitchen is currently

Colm Barrington is currently

Stewart Harrington is currently

William Nowlan is currently

the non-executive Chairman

chief executive officer and a

a non-executive Director of the

Chairman of WK Nowlan Real

of Workspace Group plc, the

Director of FLY Leasing Limited,

parent company of the BWG

Estate Advisers which he founded

non-executive Chairman of

the NYSE-listed and Irish-based

Group, Stafford Holdings, Killeen

in 1996. Previously he was Head

Applegreen plc and a non-

executive Director of LXB

aircraft leasing company and a

Properties and Activate Capital.

of Property Investment at Irish

non-executive Director of IFG

Previously, he was a partner in

Life Assurance plc from 1985

Retail Properties plc, as well

Group plc and Finnair plc.

Jones Lang Wootton (now JLL),

to 1995 and a member of the

as the ISE-nominated Director

He is a former non-executive

a founding partner of Harrington

Committee of Management of

on the Irish Takeover Panel.

Chairman of Aer Lingus Group

Bannon Chartered Surveyors (now

IPUT (Irish Property Unit Trust,

Previously, he was finance

plc. Previously he was managing

BNP Paribas Real Estate Ireland)

one of the largest institutional

Director of Green Property plc

Director of Babcock & Brown Ltd

and managing Director of Dunloe

property investors in Ireland)

from 1994 to 2002, deputy chief

in Ireland, President of GE Capital

Ewart Ltd (formerly known as

from 1997 to 2007. He is a

executive of Heron International

Aviation Services Ltd, chief

Dunloe House Group plc). He was

member of the Irish Town

plc from 2003 to 2008 and the

operating officer of GPA Group

also previously a non-executive

Planning Institute, a fellow

Irish Government-appointed

plc and chief executive of GPA’s

Director of Argentum Property,

of the Royal Institute of Chartered

Chairman of Irish Nationwide

Capital Division. His senior

St. Vincent’s Healthcare Group,

Surveyors and a former Chairman

Building Society and a non-

executive and non-executive

CIE (Córas Iompair Éireann,

of both the Royal Institute of

executive Director of Kingspan

board roles add significant

Ireland’s national public transport

Chartered Surveyors Ireland

Group plc and Minerva plc. He

experience to the Board from

provider), ESB (the Electricity

and the Royal Institute of

brings the benefit of his expertise

outside the property sector

Supply Board, Ireland’s premier

Chartered Surveyors Europe.

and experience gained across

and within the context of a

electricity utility) and the National

He has more than 40 years’

a variety of property, finance

public company.

Development Finance Agency.

experience investing in Irish

and public company roles to his

chairmanship of the Board and

Nominations Committee.

He has extensive knowledge and

commercial property.

experience of the Irish property

market over many years in a

variety of roles.

Committee Membership
Audit (Chair), Nominations and
Remuneration

Terence O’Rourke is currently
Chairman of Enterprise Ireland
and Kinsale Capital Management,
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
2006 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 and
a former member of the Global
Board, the EMA Board and the
Global Executive Team of KPMG
International. 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.

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 in
London as part of the UK &
Ireland Investment Banking team.
While there, he had a particular
focus on corporate finance in the
property 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 PwC in 2005.

Sean O’Dwyer was appointed
Company Secretary in February
2017. He is also Risk and
Compliance Officer for the Group,
a role he performed for the
Investment Manager since 2013.
Prior to this he was responsible
for finance, risk and compliance
at Bank of Ireland Asset
Management (now SSgA Ireland)
between 1987 and 2008. From
2009 to 2013 he worked as a
consultant with a number of
financial services firms. He
qualified as a Chartered
Accountant at EY in 1983.

Kevin Nowlan 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 he 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 Real Estate Advisers. He
is a Chartered Surveyor with more
than 20 years’ experience in the
Irish property market, including
commercial agency, property
management, investment,
development and development
financing, commercial loan
portfolio management and debt
restructuring. 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.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceDirectors’ report

The Directors submit their report for
the financial year ended 31 March 2017.
The Strategic Report is incorporated into
the Directors’ Report by reference.

Directors’ responsibilities
These are set out in the Directors’
responsibility statement on pages 75
to 76 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 32 to 33.

The principal subsidiary and associate
undertakings are listed in note 33 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 consolidated income
statement on page 82. The profit for the
financial year ended 31 March 2017 was
€118.6m (March 2016: €136.8m),
including unrealised profits on investment
properties of €103.5m (31 March 2016:
€125.1m). The Company Statement of
Financial Position as at 31 March 2016
has been restated. As a result of the
restatement the previously reported
Company profit and net assets were
decreased by €0.2m. There was no
change in the Consolidated net assets or
Consolidated income statement. Please
see Note (b) of the Company financial
statements for more detail.

The Group has a number of key performance
indicators (“KPIs”) which it measures.
These are EPRA net asset value (“NAV”)
per share growth, dividend per share
(“DPS”) and total property return (“TPR”)
versus the IPD Ireland Index. The first two
of these KPIs measure growth in
shareholder value and return to
shareholders respectively. The third KPI
is a measure of the relative performance
of the Group’s property portfolio against

Hibernia REIT plc Annual Report 2017

the Irish property market. Other important
operational metrics for the Group are
measures relating to the management
of the portfolio, investment activity and
financial indebtedness. In addition, the
Group has commenced measurement of
sustainability parameters such as energy
and waste consumption using EPRA metrics.
Strategy and key performance measures
are reported on in the Strategic report on
pages 01 to 47 of this Annual Report.

Dividends
The Directors maintain a dividend which
has due regard for the Irish REIT regime
and for sustainable levels of dividend
payments. Under the Irish REIT regime,
subject to having sufficient distributable
reserves, the Company is required to
distribute to shareholders at least 85%
of the property income of its property
rental business for each accounting
period. Subject to the foregoing, the
Directors intend to re-invest proceeds
from disposals of assets in accordance
with the Group’s investment policy.
The Company seeks to pay dividends
biannually and has a general policy of
paying interim dividends equating to
30–50% of the total regular dividends
paid in respect of the prior year.

The Board has proposed a final dividend
of 1.45 cent per share (c.€10.1m)
(31 March 2016: 0.8 cent per share or
c.€5.5m) which will be paid, subject to
shareholder approval, on 31 July 2017.
Together with the interim dividend of
0.75 cent, the total dividend for the
financial year is 2.2 cent per share or
c.€15.2m (31 March 2016: 1.5 cent or
c.€10.3m) based on the number of shares
estimated to be in issue at that date.

Principal risks and uncertainties
The principal risks and uncertainties
are discussed in the “Risks and risk
management” section on pages 34 to 41
and form part of this report.

Directors’ compliance statement
The Directors have, with the assistance
of advisers and Hibernia employees,
identified the Relevant Obligations, as

required by the Companies Act 2014,
that they consider apply to the Company.
The Directors acknowledge they are
responsible for securing the Company’s
compliance with its Relevant Obligations
and confirm that they have:
– Drawn up a Compliance Policy

Statement setting out the Company’s
policies in respect of compliance with
its Relevant Obligations;
– Ensured that appropriate

arrangements and structures have
been put in place that are designed
to ensure material compliance with the
Company’s Relevant Obligations; and

– Conducted a review, during this

financial year, of the arrangements
and structures that were put in place
to secure material compliance with
the Company’s Relevant Obligations.

REIT status and taxation
Hibernia REIT plc has 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, corporation
tax is still payable in the normal way on
profits from any activities that are not part
of the Group’s qualifying rental business.

The Group must satisfy the conditions
summarised below for each accounting
period:
a) at least 75% of the Aggregate
Income of the Group must be
derived from carrying on a Property
Rental Business;

b) it should conduct a Property Rental
Business consisting of at least three
properties, the market value of no
one of which is more than 40% of the
total market value of the properties
in the Property Rental Business;

c) it should maintain a property

financing ratio being, broadly,
the ratio of Property Income plus
Financing Costs to Financing Costs,
of at least 1.25:1;

d) at least 75% of the market value
of the assets of the Group must
relate to assets of the Property
Rental Business;

e) the aggregate debt shall not exceed
an amount of 50% of the market
value of the assets of the Group; and

f) subject to having sufficient

distributable reserves, the Group
must distribute at least 85% of
its Property Income to its
shareholders by way of a Property
Income Distribution for each
accounting period.

In relation to properties under
development, where the development
costs exceed 30% of the market value
of the property at the commencement
of development, then the property must
not be disposed of within three years
of completion. If such a disposal takes
place then the Group would be liable to
tax on any profits realised on disposal.

The Directors confirm that the Group
complied with the REIT legislation for
the financial years ended 31 March 2017
and 2016, respectively.

Share capital
At 31 March 2017 the Company had
685,451,875 units of ordinary stock in
issue (31 March 2016: 681,251,285 units).

Approximately 7.6m shares will be
issued in relation to performance-related
payments for the financial year ended
31 March 2017 (31 March 2016: 4.5m).

Future developments
The Group continues to look for
opportunities to invest in its portfolio,
whether through further capital
expenditure or new acquisitions, 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 8 to 9 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 01 to 47 of this Annual Report.
This also covers the financial position
of the Company, its cashflows, 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 82 to 136 and in note 2. (d) to
these financial statements. In addition,
note 31 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 concluded 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 remains an
appropriate basis for the assessment
as this is the key period for completion
of the Group’s committed and longer-
term development projects pipeline.
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 analyses performed as part of the
Group’s budget forecasting and planning.
Scenarios are prepared and kept under
continuous review. Sensitivity analyses
are performed to test the potential impact
of some of the principal risks and
uncertainties affecting the Group’s
activities as described on pages 36 to 41.

For the purposes of this viability
statement, worst case budget projections
are used to conduct this assessment.
When considering stress scenarios, the
Directors have calculated the decline in
underlying operating profits and asset
values required before the Group breaks
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
considered 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 Directors of the Company are
as follows:
Daniel Kitchen (Chairman)
Colm Barrington (Senior Independent
Director)
Thomas Edwards-Moss (CFO)
Stewart Harrington
Kevin Nowlan (CEO)
William Nowlan
Terence O’Rourke

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. There were no changes
in Directors during the financial year.
Sean O’Dwyer was appointed as Company
Secretary on 10 February 2017, replacing
Castlewood Corporate Services Limited
who continue to provide support and act
as Assistant Secretary.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceDirectors’ report continued

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.

Details on Directors’ remuneration
are contained in the Remuneration
Committee Report on pages 66 to 70
of this Annual Report.

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.
All the current Directors, save William
Nowlan, will offer themselves for
re-election at the AGM. No re-
appointment 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 recommend a
Director for re-election if the individual
concerned is not considered effective
in carrying out their required duties.
Further discussion on the evaluation
process for Board, Committee and
Director performance is provided on
page 59 of the Annual Report.

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

Hibernia REIT plc Annual Report 2017

line with relevant legislation. Potential
insurance incidents are reported as
soon as possible to our insurance broker.
There have been no major incidents
at any of our properties in this or the
previous financial year. All our employees
receive health and safety training.
All must achieve relevant certification
before attending at construction sites.
We work closely with our partners
to ensure that customers, employees,
contractors and visitors are safe and
secure in all our sites. No reportable
incidents occurred during this or the
prior financial year.

who are seeking re-appointment at the
forthcoming AGM as they continue to be
effective and remain committed to their
role on the Board.

Directors’ interests in share
capital as at 31 March 2017
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 70. This is
further discussed in note 34 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.

Substantial shareholdings
As at 31 March 2017 the Company has
been notified of the following substantial
interests (3% or more of the issued share
capital) in the Company’s shares:

HOLDER

Invesco
Standard Life Investments
Oppenheimer Funds Inc.
Wellington Management Company LLP
TIAA-CREF Investment Management LLC
Morgan Stanley Investment Management Limited
FMR LLC
Blackrock Inc.

As at 7 June 2017 the Company has been
notified of the following changes:

HOLDER

Standard Life Investments
Invesco
TIAA-CREF Investment Management LLC

HOLDING
’000 SHARES

41,465
41,175
34,839
34,740
33,666
27,926
24,013
21,750

HOLDING
’000 SHARES

41,475
41,188
34,936

6.04
6.01
5.08
5.07
4.91
4.07
3.50
3.17

6.05
6.01
5.10

Corporate governance
The Group is committed to high
standards of corporate governance,
details of which are given in the Corporate
governance report on pages 56 to 74
which forms part of the Directors’ report.

Health, safety and security
The Group complies with all relevant
Health and Safety legislation and works
to industry best standards. Contractors
working on Group properties are fully
insured and all work is carried out in

Sustainability
The Group is committed to ensuring
ethical and sustainable practices for
the benefit of all our stakeholders.
More details on the Group’s policies
and progress can be found in our
Sustainability report on pages 42 to 47.

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 accounting records by

employing accounting personnel with
appropriate expertise and by providing
adequate resources to the finance
function. The accounting records of the
Group and Company are maintained
at the registered office located at South
Dock House, Hanover Quay, Dublin,
D02 XW94, Ireland.

Political contributions
The Group made no political
contributions during the financial year.

Financial risk management
The financial risk management
objectives and policies of the Group
and Company are set out in note 31 to
the consolidated financial statements.

Independent auditor
The auditor, Deloitte, Chartered
Accountants, continues in office in
accordance with section 383 (2) of
the Companies Act 2014. Under Irish
legislation, the Company’s external
auditor is automatically reappointed
each year at the AGM unless the meeting
determines otherwise or the auditor
expresses its unwillingness to continue
in office. However, 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 35 to the
consolidated financial statements.

Annual Report
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 61 to 65 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 advise the Board whether it believes
that the Annual Report, taken as a whole
is fair, balanced and understandable and
provides the information necessary
for shareholders to assess the Group’s
performance, business model and
strategy. In recommending the report
to the Board 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 judgements
and key estimates as presented in the
consolidated financial statements and
where appropriate discussed these items
with the external auditor.

General meetings
The third Annual General Meeting
(“AGM”) of the Company was held
on 26 July 2016. In addition, an
Extraordinary General Meeting was
held on 26 October 2016 to approve an
amendment to the relative performance
fee calculation methodology. Details of
the resolution are contained in a circular
issued and published on the Group’s
website on 4 October 2016. The fourth
AGM will be held on 25 July 2017. Notice
of the 2017 AGM, together with details
of special business to be considered at
the meeting, will be circulated to the
shareholders in June 2017.

Directors’ statement of relevant
audit information
Each of the Directors at the date
of approval of this Directors’ report
confirms that all relevant information
has been disclosed to the auditor. This
statement confirms that:
– so far as the Directors are aware,

there is no relevant audit information
of which the Group’s statutory auditor
is unaware; and

– each Director has taken all the steps
that ought to be taken as a Director
to make himself or herself aware of
any relevant audit information and
to establish that the statutory auditor
is aware of that information.

Kevin Nowlan
Chief Executive Officer
7 June 2017

Thomas Edwards-Moss
Chief Financial Officer
7 June 2017

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceCorporate governance report

Introduction
The Board of Directors of Hibernia REIT plc (“the Board”) is committed to developing and maintaining a high standard of corporate
governance and complying with all applicable regulations. The Company has been approved as an internally managed Alternative
Investment Fund (“AIF”) under the Alternative Investment Fund Management Directive (Directive 2011/61/EU) as amended
(“AIFMD”) and complies with the relevant requirements and procedures as set out by the Central Bank of Ireland in the AIF
Rulebook March 2017. The main governance requirements are the Listing Rules of the Irish and London Stock Exchanges, the Irish
Corporate Governance Annex to the UK Corporate Governance Code (“the Annex”), the UK Corporate Governance Code 2016 (“the
Code”) and the Association of Investment Companies’ Code of Corporate Governance (“AIC Code”). The Company has applied the
Code due to its 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 we implemented new requirements under the Companies Act, 2014 around compliance statements.
The Directors have, with the assistance of relevant advisers and Hibernia employees, identified the Relevant Obligations that
they consider apply to the Company. The Directors have also duly considered the resources available to the Company and
the resources and expertise of the Depositary, Registrar, Assistant Secretary, Tax Advisers and Legal Advisers (the “Service
Providers”) who have been engaged to support the Company and carry out certain functions on its behalf.

The Role of the Board and its Committees

Board

• Strategy and oversight
• Regulatory and Compliance
• Risk Management
• Corporate Governance and overall financial performance
• Culture, values and ethics

Audit Committee
• Oversight of financial and other reporting,

Remuneration Committee

• Executive remuneration, policy

ensuring integrity

and packages

• External audit and valuers oversight
• Risk management framework and oversight
• Internal control and the work of the internal

auditor

• Oversight of remuneration policy and issues

See pages 66 to 70 for more

Nominations Committee
• Review and recommendations on the size,
composition and structure of the Board

• Succession planning
• New appointments planning

See page 71 for more

See pages 61 to 65 for more

Risk & Compliance Officer/
Company Secretary

• Risk & Compliance
• Company secretarial

responsibilities

• Corporate governance

Internal Audit
External monitoring of

internal controls and

recommendations

CEO/CFO
• Development and implementation of strategy
• Financial planning, cash management,

operating and financial performance of
the Group

• Manage business performance
• Investor and other stakeholder relations
• Effective and motivated leadership

1 to 6

Investment

Development

Portfolio operations

• Consider and

• Propose development

recommend significant
investment transactions

3, 4

projects

• Budget, plan and
monitor ongoing
projects

1, 2, 6

• Manage the property
portfolio including:
• Lease negotiations
• Asset management
• Budget, plan and
monitor ongoing
projects

• Refurbishments

1, 2, 6

Link to strategic priority

Finance and
Investor Relations
• Financial performance

and reporting

• Cash management
• Balance sheet

management including
debt and other funding
arrangements

• Strategic and corporate

development

• Investor and other

stakeholder relations

4, 5

Sustainability
• Development and

implementation of the
Group’s sustainability
policy

• Consideration of

environmental, social
and energy issues

The Board is responsible for providing governance and stewardship to the Group and its business. This includes establishing
goals for management and monitoring the achievement of these goals.

Hibernia REIT plc Annual Report 2017

The Board oversees the performance of the Group’s activities. The Management Team has discretionary authority to enter into
transactions for and on behalf of the Group save for certain matters of sufficient materiality or risks which require the consent
of the Board. The Board challenges, supervises and instructs the Management Team at a high level. The Board reviews the Group
and Company’s performance and management accounts on a quarterly basis.

Board composition and roles

ROLE

INCUMBENT

FUNCTIONS

Chairman

Daniel Kitchen

Responsible for leading the Board, its effectiveness and governance and for monitoring
and measuring progress against strategy and the performance of the CEO.

Maintains a culture of openness and debate and sets the tone from the top in terms
of the values and objectives of the whole Group.

Makes sure that the Board is aware of and understands the views and objectives
of the major stakeholders of the Group and Company.

CEO

Kevin Nowlan

Responsible for developing the Group’s strategy and objectives, the implementation
of the same and running the Group’s day-to-day business.

Leads the executive team and maintains a close working relationship with the Chairman.

CFO

Thomas
Edwards-Moss

Responsible for the financial management and reporting of the Group, managing funding
requirements, investor and other stakeholder relations and corporate development.

Works closely with the CEO and other members of the Management Team.

Chair of Audit
Committee

Terence O’Rourke

Monitors the Group’s financial reporting process.

Monitors the effectiveness of the Group’s systems of internal control, internal audit
and risk management.

Monitors the statutory audit of the statutory financial statements.

Reviews and monitors the independence of the internal and statutory auditors.

Monitors the adequacy, effectiveness and security of the Group’s IT systems.

Independent
non-executive
Directors

Colm Barrington,
Stewart Harrington,
Terence O’Rourke

Bring independent and expert views to the Board’s deliberations and decision making.

Support and constructively challenge the executive Directors and monitor the delivery
of the agreed strategy within the risk framework developed by the Board.

Senior independent
Director

Colm Barrington

Provides a sounding board for the Chairman and serves as an intermediary for the
other Directors when necessary.

Facilitates shareholders if they have concerns which contact through the normal channels
of Chairman and the executive have 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.

To listen to the views of major shareholders in order to help develop a balanced
understanding of the issues and concerns of major shareholders.

Company Secretary

Sean O’Dwyer

Provides advice and assistance to the Board on corporate governance practice, risk
management, compliance and induction training and development.

Ensures that all applicable regulations and rules are identified and processes
implemented to ensure compliance.

Submits returns and other information.

Is supported by the Assistant Secretary in company secretarial matters.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceCorporate governance report continued

Board composition and roles continued
All Directors are expected to allocate sufficient time to the Group and Company to discharge their responsibilities effectively.
Directors are expected to attend all scheduled Board meetings as well as the Annual General Meeting (“AGM”).

All Directors are furnished with information necessary to assist them in the performance of their duties. The Board meets
at least four times each calendar year and, prior to such meetings taking place, an agenda and Board papers are circulated to
the Directors so that they are adequately prepared for the meetings. The Company Secretary is responsible for the procedural
aspects of the Board meetings. Directors are, where appropriate, entitled to have access to independent professional advice
at the expense of the Company. Standing items at Board meetings include management accounts for the period, risk reporting,
portfolio management, investment and progress on development projects as well as cash and liability management and other
operational reports.

Any Director appointed to the Board by the Directors will be subject to re-election by the shareholders at the first AGM after his/
her appointment. Furthermore, under the Articles, one-third of all Directors must retire by rotation each year and may seek
re-election. However, in keeping with best corporate governance practice, all Directors intend to seek re-election each year at
the AGM.

Details of the remuneration of Directors are set out in the Report of the Remuneration Committee on pages 66 to 70.

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.

Induction and development
New Directors receive a full and appropriate induction on joining the Board. This includes meetings with the other Board
members, Management Team and the Company’s advisers and visits to properties owned by the Group. This gives them the
opportunity to learn about the Group and Company and its processes and ethos. They also receive a comprehensive package
of information including:

Board

Papers and minutes of previous meetings, all documentation including reserved matters, policies and procedures.

Committees

Terms of reference, minutes and papers from prior meetings.

Risk

The Group’s risk framework, risk register and metrics, records of breaches and any other relevant documents.

Organisation

Organisational charts and latest Annual and Interim Reports, strategic priorities and latest KPIs.

Key policies

Key policies and procedures applicable within the organisation.

Governance

Copies of the relevant codes, compliance policy statement and other relevant documentation at the time
of appointment.

Legal/regulatory/
insurance

Full information of the Group’s regulatory and tax status. Details of Directors and Officers insurance and any other
relevant matters.

Hibernia REIT plc Annual Report 2017

Board actions during the year

Strategy

• Consideration and approval of strategy papers submitted by management

• Review and approval of sustainability strategy

AIFM application and implementation of regulatory process and reporting

Amendments to relative performance fee calculation and EGM on 26 October 2016

Supervision of regular activities including:

• Investment Committee terms of reference and acquisition activity (Blocks 1, 2 and 5 Clanwilliam Court and remaining 50% of the

Windmill Lane site)

• Development

• Operations activities

Risk and compliance, in particular:

• New Market Abuse Regulations (“MAR”)

• Directors’ compliance statement requirements

• Systems amendments including IT security

Board matters

• Succession planning

• Performance assessments

Remuneration policies

• Including approval of interim pay-related remuneration

Board and Committee performance
The UK Code requires that Board evaluations should be externally facilitated at least once every three years. A self-evaluation
is completed every year. This year the Board appointed the Institute of Directors in Ireland (“IoD”), who provided an external
facilitator, Mr George Bartlett. Mr Bartlett has no connection with the Group and the IoD does not provide any other services to
the Group. The external evaluation was an evaluation of the performance of the Board and its role in ensuring that the standard
of corporate governance is maintained at a high level. Each Director completed a questionnaire covering areas and questions
agreed between the Company Secretary and the facilitator.

The IoD collated the answers which were evaluated by the facilitator who then prepared a report for review and consideration by the
Board. The findings of the review were positive and confirmed that the Board was operating effectively and to a high standard. A
number of small points were identified and these are being implemented by the Chairman and the Company Secretary.

The annual self-evaluation of the Board Committees took place in the first quarter of 2017. Individual evaluation of Directors
aimed to show whether each Director continues to contribute effectively and to demonstrate commitment to the role (including
commitment of time for Board and Committee meetings and any other duties). The results of these evaluations were satisfactory.

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 Group and Company
in an advisory capacity. This number of Directors is considered by the Board to be sufficiently small to allow efficient management
of the Group 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 51.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceCorporate governance report continued

Directors’ attendance at Board and Committee meetings
Directors’ attendance at Board meetings

Daniel Kitchen

Colm Barrington

Thomas Edwards-Moss

Stewart Harrington

Kevin Nowlan

William Nowlan

Terence O’Rourke

FOR FINANCIAL YEAR ENDED 31 MARCH 2017

FOR FINANCIAL YEAR ENDED 31 MARCH 2016

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

Directors’ attendance at Board Committee meetings

FOR FINANCIAL YEAR ENDED 31 MARCH 2017

FOR FINANCIAL YEAR ENDED 31 MARCH 2016

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

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

All Directors save William Nowlan attended the 2016 AGM.

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 a Committee will depend on the purpose for which it is established and will take
into account the skills and experience required.

In May 2017 it was announced that William Nowlan wished to stand down as a non-executive Director at the forth-coming AGM.
He will continue to act as a consultant to the Group. The Nominations Committee is considering potential additions to the Board.

The Directors’ Responsibilities Statement is set out on pages 75 to 76.

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 Group’s website.

Hibernia REIT plc Annual Report 2017

Audit Committee report

Audit Committee year in focus:
– establishment of internal audit;
– assessment of compliance policy

and review of Directors’ compliance
statement; and

– reviewing procedures for the
management and security of
data and Information Technology

Terence O’Rourke
Chairman of the Audit Committee

Members of the Committee:
Colm Barrington and Stewart Harrington

All members have served since the establishment of the Company, three years and four months to 31 March 2017.

Chairman’s report
During the financial year we continued to focus on ensuring the integrity of the financial reporting and internal controls. To
complete this work, we regularly met the Management Team and the external auditors. We also met the valuers and assessed their
work in valuing our properties. We considered the periodic rotation of our appointed valuers and will revisit this topic again in the
coming financial year. Specific items considered are outlined in our report.

In this financial year we decided that the Group has grown sufficiently in size to warrant the appointment of an internal auditor
to assess internal controls and, where appropriate, suggest improvements. We appointed PwC and the first internal audit will
take place later in 2017.

We also carried out our third 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 service providers. We are also satisfied that the level of scrutiny of the Group’s public announcements is sufficient and
effective. There were no issues arising from this evaluation.

Terence O’Rourke
7 June 2017

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Strategic reportFinancial statementsGovernanceCorporate governance report continued
Audit Committee report continued

Report of the Audit Committee
The Audit Committee is chaired by Terence O’Rourke, who is an independent non-executive Director and is considered by
the Board to have recent and relevant financial experience and sufficient understanding of financial reporting and accounting
principles. All members of the Audit Committee are independent non-executive Directors, appointed by the Board for a period
of up to three years, extendable by up to two additional three-year periods. The existing members will continue for a further
three-year term.

The Audit Committee is constituted in compliance with the UK Code, the AIC Code, the Irish Code and the Company’s 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 management systems;
– monitoring the statutory audit of the annual consolidated financial statements and the work on the Interim Report;
– reviewing and monitoring the independence of the statutory auditor, and the provision of additional services by the

auditor; and

– supervising the provision of internal audit services by PwC.

The current Terms of Reference for the Audit Committee are published on the Group’s website.

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

REASON FOR ATTENDANCE

Deloitte

CBRE

The independent auditor attended 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 met the Audit Committee to discuss their work and the significant assumptions in
relation to the property valuations. The Committee reviewed in particular the valuation of development assets,
assumptions on rental post development and variations on yields experienced in the market. These discussions
enabled the Audit Committee to review the valuations used in the financial statements and make recommendations
to the Directors in relation to their assessment of property valuations.

Representatives of
the Company

Representatives of the Group, including the CEO, the CFO, the COO and the Company Secretary/Risk and
Compliance Officer (“RCO”) met 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 risks, and any
other matters as requested by the Audit Committee. This gave the Audit Committee an opportunity for better
insight into the financial reporting and internal controls and helped it to make more informed decisions.

Hibernia REIT plc Annual Report 2017

Principal responsibilities of the Audit Committee
The principal responsibilities of the Audit Committee and the key areas of discussion in 2016–17 were as follows:

PRINCIPAL RESPONSIBILITIES OF THE COMMITTEE

KEY AREAS DISCUSSED AND REVIEWED IN 2016–2017

Reporting and
external audit

• Monitoring the integrity of the Group and

• Results, commentary and announcements.

Company financial statements and any other formal
announcements relating to the Group’s financial
performance, business model and strategy; reviewing
significant financial reporting issues and all other
material disclosure obligations.

• Key accounting judgements and disclosures.

• Discussions with IAASA on disclosures around

valuations and share-based payments.

• External audit planning and reporting.

• Reviewing and discussing the external auditor’s
audit plan and ensuring that it is consistent with
the Group’s overall risk management system.

• Assessing the external auditor’s performance,

qualifications, expertise, resources, independence
and their terms of reference, approving their fees and
reviewing the external audit reports to ensure that where
deficiencies in internal controls have been identified that
appropriate and prompt remedial action is taken.

• Monitoring the policy on the engagement of the
external auditor in providing non-audit services
in line with relevant guidance.

• Reviewing the content of the Annual Report and
financial statements to ensure it is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model and strategy.

• Reviewing the work of the independent valuers.

• Revision and amendment of accounting policies

as required.

• Considered audit scope, risks assessment, findings

and recommendations. Discussed materiality.
Met the auditor both with and without the presence
of management.

• Met valuers independently to discuss the valuation

process and risks.

• Going concern and viability assessments.

• Compliance with loan covenants and review

of significant risk metrics.

• Supply of non-audit services by the auditor which are

assessed as insignificant in nature.

• Valuation judgements, effectiveness and process.

• Liquidity reports and Depositary Board reports.

• Considered periodic the rotation of our appointed valuers

and agreed to revisit in the coming financial year.

Risk and internal
control

• Reviewing the adequacy and effectiveness of the
Group’s internal financial controls and internal
control and risk management systems.

• Monitoring the Group’s risk exposure and recommending

the risk appetite to the Board for approval.

• Risk register, including identification of principal

risks and movements in exposures.

• Established an internal audit function and appointed
PwC. The first internal audit will take place in the
second half of 2017.

• Assessing the principal risks of the Group.

• Review of all breaches in limits and internal controls

• Reviewing the disclosures made on risk and internal

control in the Annual Report.

• Reviewing procedures for the management and
security of data and information technology.

and responses required.

• IT security was reviewed and improvements

implemented together with the upgrade of the
IT security policy in November 2016.

Other

• Reviewing the procedures in place to comply with
applicable legislation, the Listing Rules and the
Irish REIT Regime guidelines.

• Reviewing the operation of the Group’s procedures
for the detection of fraud, bribery and compliance.

• Reviewing dividend policy and distributions planned

versus legislative requirements.

• Reviewing the Committee’s terms of reference

and performance.

• Review of the Audit Committee’s terms of reference

and effectiveness, including self-assessment.

• Review of JLL sustainability assurance report.

• Compliance statement: the Committee worked with
external service providers in order to ensure that all
appropriate relevant obligations were identified and
documented. Carried out an assessment of compliance
policy and a review of the controls and procedures that
were in place to ensure the relevant obligations were
complied with for the entire financial year.

• Review of all correspondence with regulators.

Hibernia REIT plc Annual Report 2017

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Audit Committee report continued

Principal responsibilities of the Audit Committee continued
The significant issues considered by the Audit Committee during the financial year ended 31 March 2017 and the action taken
by the Committee are set out below:

SIGNIFICANT ISSUES
CONSIDERED

ACTION TAKEN BY COMMITTEE

Valuation of the
Investment Portfolio

The Committee considers whether 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 the Committee’s
assessment of the market and knowledge of the properties. It also reviews 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. Of significance in this financial year were the basis for assessing
development properties and the decisions relating to the method applied to properties not valued on a current
use basis. Surplus lands at Harcourt Square were assessed using the residual method and this value was added
to the investment value of the existing blocks. The Hanover building was assessed using the residual method as
this is the highest and best use. In the case of Cannon Place the asset is valued on a break up/value per unit basis.

Performance-related
payments

As part of the cost of the internalisation of 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 confirmed
management’s calculations.

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. As required 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.

– Rotation of audit partner in due course.
– Whether issues were raised at the right time by the appropriate level of audit staff with the appropriate Group staff and in

particular the level and quality of communication with the Audit Committee.

Hibernia REIT plc Annual Report 2017

The outcome of this assessment confirmed that the auditor was performing well, adding value to the control process, had a good
relationship with both Audit Committee and management and was sufficiently independent and technically qualified to justify
the recommendation to re-appoint.

Deloitte was 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 recent 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 2017 AGM in accordance with article 53
of the Articles of Association of the Company.

Non-audit work carried out by the external auditor during the financial year ended 31 March 2017
The external auditor did not carry out a significant amount of work during the financial year ended 31 March 2017 which is
non-audit in nature. Fees not related to audit work or Interim Report review were €19,750 in the financial year.

KPMG was appointed as tax adviser in January 2016 which was a significant source of non-audit work completed by the auditor
in prior years.

External auditor independence
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.

Based on their consideration of the above facts, the Audit Committee concluded that the independence and objectivity of the
external auditor have not been compromised.

Internal audit
The Audit Committee has reviewed the business model under which the Group and Company operates and decided, in light
of the current nature, scale, complexity and range of operations of the Group, that an internal audit function would be an
appropriate addition to its own and the Group’s internal monitoring procedures. PwC has been appointed to provide internal
audit services with effect from April 2017.

Depositary
The Group had €18m (31 March 2016: €23m) 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. The depositary carried out its annual
audit in December 2016. No material issues were reported.

Approval of reports
The Annual Report and financial statements were considered in draft on 16 May 2017. The Preliminary Statement, which
included consolidated financial statements, was approved by the Board on 22 May 2017. The Annual Report was approved
by the Board on 7 June 2017.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceRemuneration Committee report

Remuneration year in focus:
– performance-related remuneration; and
– post November 2018 remuneration

structure planning.

Colm Barrington
Chairman of the Remuneration Committee

Members of the Committee:
Daniel Kitchen, Stewart Harrington and Terence O’Rourke

All members have served since the establishment of the Committee in February 2016, one year and two months to 31 March 2017.

Chairman’s report
On behalf of my colleagues on the Remuneration Committee, I am pleased to present the Remuneration Committee Report
of the Group for the financial year ended 31 March 2017.

The Remuneration Committee met four times during the financial year. The incentive arrangements that are in place until the
date that the Investment Management Agreement (“IMA”) would have expired were approved by shareholders at the EGM on
27 October 2015 to approve the internalisation. Until the end of the IMA in November 2018, variable incentive payments for
staff are principally funded out of any performance fees that would have been due under this contract. At our meeting in May
2017 we considered and approved the performance awards proposed for staff for the financial year ended 31 March 2017.

Another item considered during the financial year was the proposed amendments to the relative performance fee structure and,
consequently, amendments to the deferred consideration calculation under the provisions of the IMA. These amendments, which
clarified the calculation parameters, were considered by the Remuneration Committee and the Board ahead of publication of a
circular and were subsequently approved by shareholders at an Extraordinary General Meeting on 26 October 2016.

We approved the Performance-Related Remuneration Plan documentation at our meeting in November 2016. This is discussed
further in our report.

We continue to work on a remuneration policy for all staff which will commence post November 2018 and which we intend, in
due course, to discuss with key shareholders.

Colm Barrington
7 June 2017

Hibernia REIT plc Annual Report 2017

Directors’ remuneration policy report
The Remuneration Committee is responsible for ensuring that the Group’s overall remuneration policy takes risk management
into account and is consistent with the strategic objectives of the Group. The Remuneration Committee is responsible for
oversight of remuneration for the entire Group with specific regard to Directors and senior management. The terms of reference
are compliant with the UK Code and are available on the Group’s website.

The following section sets out the Directors’ Remuneration Policy. The Directors’ Report on Remuneration is to be submitted as
an advisory resolution to the AGM of the Company to be held on 25 July 2017.

As an Irish company, Hibernia is not subject to the UK Directors’ Remuneration Reporting Regulations. However, in line with
best practice, the Group is committed to applying the requirements on a voluntary basis insofar as is practicable under Irish
legislation. As the Company cannot rely on UK statutory provisions, the resolution submitted to the AGM is advisory in nature.

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. Remuneration is intended to be both competitive and appropriate. The policy considers
the regulatory environment, governance standards, the economic environment and industry best practice.

Remuneration principles
– Support the strategy.
– Promote sound risk management.
– Motivate and retain key individuals in a competitive manner.
– Align the interests of management and shareholders in the generation of long-term returns and value 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 Group’s progress towards its objectives.

– There is no maximum amount but reviews 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 comparable remuneration packages.
– It is an optional defined contribution scheme with an independent pension provider and a 5% Company contribution (for

most staff) matched by a 5% personal contribution.

– It is Group policy not to provide a defined benefit scheme.

Benefits
– The purpose is to provide market-typical benefits for an overall effective remuneration package.
– All staff are eligible to join the Group’s death in service and long-term disability schemes.
– Other benefits may be provided at the discretion of the Remuneration Committee either as a one-off or on an ongoing basis.
– Executive Directors may also be eligible to join all-employee schemes up to the relevant approved limits.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceCorporate governance report continued
Remuneration Committee report continued

Directors’ remuneration policy report continued
Interim Incentive plan
– Incentives related to IMA services are designed to be cost neutral to the Group, i.e. until the expiry date of the IMA this part
of incentive arrangements for non-Vendor staff is principally funded out of performance fee arrangements: up to 15% of any
performance fee due to the Vendors of the Investment Manager will be set aside to fund the incentive plan.
– Incentive arrangements relating to non-IMA-related services, e.g. building management, are separately funded.
– Arrangements include a long-term deferred element payable in Company shares (IMA-related services) or cash

(non-IMA services) and are contingent on the continuing performance of service for a further two years after the
award by the individuals concerned.

– The maximum incentive award payable to a senior executive is 1.5 times annual base salary.
– Up to 20% of any performance based remuneration award is dependent on individual performance as opposed to
Group-related performance metrics. Personal performance is measured against specific goals for a financial year
agreed annually with individuals and reviewed during the year.

– The incentive plan 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, and are subject to clawback in the event of an early
departure as described in note 5 to the consolidated financial statements.

Future incentive plan
Prior to the expiry of the interim arrangements, the Remuneration Committee will develop a new incentive plan linked to the
long-term performance of the Group and including an element of personal performance assessment of employees and executive
Directors and intends to 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 but analogous arrangements are applicable for employees providing non-IMA related services
with similar conditions.

Remuneration throughout the Group
The remuneration for all staff in the Group is based on the same principles and arrangements as described above.

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 are set at levels appropriate to the size and complexity of the organisation,
the time commitment required and the qualifications and experience of the individual appointed.

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. Training and induction are provided where relevant.

Hibernia REIT plc Annual Report 2017

Annual report on remuneration for the financial year ended 31 March 2017
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.

Non-executive Directors’ remuneration
The non-executive Directors were appointed for an initial term of three years in August 2013. In accordance with the
requirements of the UK Code each of the Directors submits themselves for re-election each year. The Company may lawfully
terminate a non-executive Director’s appointment with immediate effect in certain circumstances, including where a non-
executive Director has breached the terms of his or her letter of appointment and no compensation would be payable to
a non-executive Director in such event.

Daniel Kitchen

Colm Barrington

Stewart Harrington

William Nowlan*

Terence O’Rourke

Total

ANNUAL FEE
€’000

FINANCIAL YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL YEAR ENDED
31 MARCH 2016
€’000

100

300

100

300

100

300

* William Nowlan also earned €50,000 for advice given to the Group 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 34 to the financial statements.

Executive Directors’ remuneration
As discussed opposite, performance-related remuneration for all non-Vendor employees, including Thomas Edwards-Moss, are met
out of arrangements under the internalisation agreement. These are described as “Cash Bonus” and “LTIP” in the table below. Both
these are described further on page 70, under Performance-related remuneration scheme (“PRR”)*. There are no other performance-
related payment arrangements.

Payments to executive Directors in the financial year to 31 March 2017 are as follows:

EXECUTIVE DIRECTORS’ REMUNERATION (AUDITED)
31 MARCH 2017

SALARY
€’000

BENEFITS
€’000

CASH BONUS*
€’000

LTIP*
€’000

PENSION
€’000

Kevin Nowlan*

Thomas Edwards-Moss

Total

300

217

517

–

117

EXECUTIVE DIRECTORS’ REMUNERATION (AUDITED)
31 MARCH 2016

SALARY
€’000

BENEFITS
€’000

CASH BONUS*
€’000

Kevin Nowlan*

Thomas Edwards-Moss

Total

125

208

–

123

–

117

LTIP*
€’000

–

123

PENSION
€’000

TOTAL
€’000

364

500

864

TOTAL
€’000

152

350

502

* Mr Kevin Nowlan was one of the Vendors of the Investment Manager and therefore receives no variable compensation as he is compensated under the Share Purchase Agreement as

disclosed in note 34 to the financial statements.

Both Kevin Nowlan and Thomas Edwards-Moss were initially appointed to the Board on 5 November 2015.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceCorporate governance report continued
Remuneration Committee report continued

Annual report on remuneration for the financial year ended 31 March 2017 continued
Conditions of employment
Executive Directors have service contracts with the Company which can be terminated on six months’ notice by either party.
The Committee may determine incentive entitlements that should apply, if any, in the year of departure. The departure of Kevin
Nowlan may trigger clawback arrangements under the criteria established in the internalisation in 2015. Thomas Edwards-Moss
is subject to vesting conditions under the LTIP part of the PRR 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 varied by the Committee.

The executive Directors’ contracts are available for shareholders to view at the AGM.

Fixed remuneration arrangements from 1 April 2017

EXECUTIVE DIRECTORS’ ANNUAL SALARY AND
OTHER FIXED REMUNERATION ARRANGEMENTS

Kevin Nowlan

Thomas Edwards-Moss1

Total

SALARY
€’000

BENEFITS
€’000

PENSION
€’000

300

265

565

TOTAL
€’000

364

322

686

1. Following a third-party review of the appropriate remuneration package for Thomas Edwards-Moss, the Remuneration Committee approved an increase in his base annual salary from
€200,000 to €265,000 with effect from 1 January 2017. The cost of this increase for the period from 1 January 2017 to 30 November 2018 is borne by the Vendors of the Investment
Manager through deductions from performance and “top-up” arrangements.

Performance-related remuneration scheme (“PRR”)
All non-Vendor employees in place at the time of internalisation, including executive Directors, are entitled to participate in
the performance-related remuneration scheme. Kevin Nowlan and Frank O’Neill, as Vendors of the Investment Manager, are
compensated through the internalisation arrangements as disclosed in notes 5 and 34 to the consolidated financial statements.

An interim scheme applies in the period to the expiry of the Investment Management Agreement in November 2018. During
this period the PRR is dependent on the level of performance fees payable to the Vendors. The scheme is funded out of the
performance fees and hence directly linked to any performance fees earned. Subject to certain de minimis arrangements 50%
of any amount payable will be paid to employees in cash and the other 50% will be awarded in shares (LTIP), which will vest at
the end of three years from the start of the financial year to which they relate.

In addition to the PRR which is dependent on the Group performance, a discretionary amount may be paid of up to 20% which
is dependent on the employee’s performance.

Separate, but analogous, arrangements apply for any employees who join the Group post internalisation.

Interests of Directors and Secretary in share capital

Daniel Kitchen
Colm Barrington
Stewart Harrington
William Nowlan
Terence O’Rourke
Kevin Nowlan*
Thomas Edwards-Moss*
Sean O’Dwyer (Company Secretary)

31 MARCH 2017

31 MARCH 2016

ORDINARY
SHARES

%
OF COMPANY

ORDINARY
SHARES

%
OF COMPANY

100,371
1,100,000
101,167
3,438,200
152,482
5,824,458
96,824
101,191

0.01%
0.16%
0.01%
0.50%
0.02%
0.85%
0.01%
0.01%

100,371
1,100,000
100,706
2,650,589
151,059
4,249,237
95,921
100,706

0.01%
0.16%
0.01%
0.09%
0.02%
0.02%
0.01%
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.

On 1 June 2017 William Nowlan sold 600,000 shares leaving a balance of 2,838,200 shares held by him. There have been no other
changes in the beneficial and non-beneficial shareholdings of the Directors between 31 March 2017 and the date of this report.
70

Hibernia REIT plc Annual Report 2017

Nominations Committee report

Daniel Kitchen
Chairman of the Nominations Committee

Members of the Committee:
Colm Barrington, Stewart Harrington and Terence O’Rourke

All members have served since the establishment of the Company, three years and four months to 31 March 2017.

Report of the Nominations Committee
The Nominations Committee met once during the financial year ended 31 March 2017. The Nominations Committee is chaired
by Daniel Kitchen, who is also the non-executive Chairman of the Company. 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 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 are available on the Group’s website,
were reviewed in February 2017 and confirmed as effective and sufficient although it was agreed that there should be some
minor amendments.

An evaluation of the Committee’s work was carried out in the first quarter of 2017. Given that there have been no appointments
made to the Board during the period, the work of the Committee has been limited. However, this self-assessment found that
the Committee is satisfied that there 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. 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.

The Committee discussed the gender and age diversity within the Board. The Board believes diversity is important for ensuring
long-term success and to ensure different perspectives are considered by the Board. The long-term success of the Group requires
appointing the best people to the Board and all appointments to the Board will be made purely on merit with the objective of
maintaining the appropriate mix of skills and experience on the Board. The Committee does not believe it is currently necessary
to identify measurable objectives in relation to diversity.

Succession planning
Succession planning is one of the responsibilities of this Committee. The Group has a flat structure as it has a small team and
therefore the focus is on developing employees to become competent across disciplines to provide resource flexibility and
personal development. We also recognise the contribution of more experienced individuals who are closer to retirement and
wish to work on a more relaxed and flexible basis. These individuals provide expertise and support that would otherwise be
difficult to source.

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.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceCorporate governance report continued

Management structure
The Management Team comprises:
Kevin Nowlan
Richard Ball
Tom Edwards-Moss
Sean O’Dwyer
Frank O’Neill
Mark Pollard

Chief Executive Officer and executive Director
Chief Investment Officer
Chief Financial Officer and executive Director
Company Secretary and Risk & Compliance Officer
Chief Operations Officer
Director of Development

The Management Team is responsible for the running of the Group’s business under the supervision of the Board. Two members
of the Management Team are also executive Directors. The Management Team is delegated to acquire properties on behalf
of the Group, to manage the Group’s assets and to provide or procure the provision of various accounting, 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 are invited to attend Board meetings where applicable, thus enabling the Directors
to probe further on matters of interest.

Internal controls
The Board acknowledges that it is responsible for maintaining the Group’s system of internal control and risk management to
safeguard the Group’s assets. Such a system is designed to identify, manage and mitigate financial, operational and compliance
risks inherent to the Group. The system is designed to manage rather than eliminate the risk of failure to achieve business
objectives and can only provide reasonable, but not absolute, assurance against material misstatement or loss.

The Group’s internal control system is built on certain fundamental principles, and is subject to review by the Board. The following
are the principles under which the internal control system operates:
– a defined schedule of matters reserved to the Board;
– documented procedures and policies;
– a clear and detailed authorisation process;
– risk metrics and risks reporting at each scheduled meeting;
– formal documentation of all significant transactions;
– business and financial planning to include cashflows and viability modelling covering a period of three financial years forward

on a rolling basis;

– robust assessment of property investment decisions;
– performance assessment versus budget on total and individual project basis; and
– benchmarking of performance against external sources, i.e. the Investment Property Databank (“IPD”).

The Policies and Procedures 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 valuations and the maintenance of registers and other administrative matters.

Hibernia REIT plc Annual Report 2017

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 2017 there were three such breaches recorded, none of which resulted from a failure in internal controls
or any 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.

Risk management
Risks and risk management are dealt with in the risks and “Risk management” section on pages 34 to 41 of the Annual Report.
This section also covers the principal risks of the Group.

Code on share dealing
The Company has a Share Dealing 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 Code by the
Directors and others to whom the Code is applicable.

The Company’s Share Dealing Code gives guidance to the Directors, the Management Team, any persons discharging managerial
responsibilities as defined in Article 3.1 (25) of the Market Abuse Regulations and persons identified by the Board to fulfil this
role, and anyone listed on the Company’s Insider Lists on the pre-clearance notification procedures to be followed when dealing
in the shares of any class of the Company or any other type of securities issued by or related to the Company.

Market Abuse Regulations 2016 (“MAR”)
In July 2016, the separate existing Irish, UK and other EEA member state “market abuse” regimes were replaced with a single
new EU-wide market abuse regime based on a new central EU Regulation – known as “MAR”. The Company now has one
supervising regulator rather than two – the Central Bank of Ireland (the Competent Authority) – in relation to market abuse.
The Company identified and wrote to its persons exercising managerial responsibilities (“PDMRs”) explaining the legislative
changes and the new requirements.

Communications with shareholders
The Board communicates with shareholders on a regular basis.

Investor relations
During the year the executive Directors undertook several investor roadshows, covering Ireland, the UK, continental Europe
and North America and met many of the Group’s key shareholders as well as potential new investors. Furthermore, a number
of investor conferences were attended by members of the Management Team and ad-hoc calls and property visits were arranged.

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.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceCorporate governance report continued

Communications with shareholders continued
Voting rights
(a) Votes of members: votes may be given either personally or by proxy. Subject to any rights or restrictions for the time being

attached to any class or classes of shares, on a show of hands every member present in person and every proxy shall have
one vote, so, however, that no individual shall have more than one vote, and on a poll every member shall have one vote for
every share carrying voting rights of which he is the Holder. The Chairman shall be entitled to a casting vote where there is
an equality of votes.

(b) Resolutions: resolutions are categorised as either ordinary or special resolutions. The essential difference between an

ordinary resolution and a special resolution is that a simple majority of more than 50% of the votes cast by members voting
on the relevant resolution is required for the passing of an ordinary resolution, whereas a qualified majority of more than
75% of the votes cast by members voting on the relevant resolution is required in order to pass a special resolution. Matters
requiring a special resolution include for example:
– altering the objects of the Company;
– altering the Articles of Association of the Company; and
– approving a change of the Company’s name.

Other
The Group discloses information to the market as required by the Central Bank of Ireland, the Irish Stock Exchange and
Financial Conduct Authority including, inter alia:
– periodic financial information such as annual and half yearly results;
– any other information assessed to be price sensitive, which might be a significant change in the Group’s financial position

or outlook, unless a reason is present not to (e.g. prejudicing commercial negotiations);

– information regarding major developments in the Group’s activities;
– information regarding dividend decisions;
– any changes at board level must be announced immediately once a decision has been made; and
– information in relation to any notifications to the Company of the acquisition or disposal of major shareholdings.

The Company will make an announcement if it has reason to believe that a leak may have occurred about any matter 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
corporate brokers and/or legal adviser(s).

Hibernia REIT plc Annual Report 2017

Directors’ responsibility statement

The Directors, whose names and details are listed on pages 50 to 51 are responsible for preparing the Annual Report and Group
and Company financial statements in accordance with applicable laws and regulations.

Irish Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors
are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as
adopted by the EU (“IFRSs”) and have elected to prepare the Company financial statements in accordance with IFRSs and in
accordance with the provisions of the Companies Act 2014.

The Companies Act 2014 provides in relation to Group and Company 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 Group and 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 ensure the financial statements contain the information required by the Companies Act 2014; 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 also required by the Transparency Directive (Directive 2004/109/EC) Regulations 2007, the Transparency
Rules of the Central Bank of Ireland, and the Companies Act 2014 to prepare a Directors’ report and reports relating to Directors’
remuneration and corporate governance and the Directors are required to include a management report containing a fair review
of the business and a description of the principal risks and uncertainties facing the Group.

The Directors are 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 IFRSs 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 Group and the Company and for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The Directors confirm that they have complied with the above requirements in preparing the Annual Report.

Hibernia REIT plc Annual Report 2017

Strategic reportFinancial statementsGovernanceDirectors’ responsibility statement continued

Each of the Directors, whose names and functions are listed on pages 50 to 51, confirms that, to the best of each person’s
knowledge and belief:
– the Annual Report and consolidated financial statements, prepared in accordance with IFRSs 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 2017
and of the result for the financial year then ended for the Group and Company;

– 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 2017, together with a description of the principal risks and uncertainties
facing the Group; and

– the Annual Report and consolidated 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 7 June 2017 and is signed on their behalf by:

Kevin Nowlan
Chief Executive Officer

Thomas Edwards-Moss
Chief Financial Officer

Hibernia REIT plc Annual Report 2017

Independent auditors’ 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 state of the Group’s and of the Company’s

affairs as at 31 March 2017 and of the Group’s profit for the financial year then ended;

– the Group and Company financial statements have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

– the financial statements have been prepared in accordance with the requirements of the Companies Act

2014 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The financial statements that we have audited comprise:
– the consolidated income statement;
– the consolidated statement of comprehensive income;
– the consolidated and Company statement of financial position;
– the consolidated and Company cashflow statements;
– the consolidated and Company statements of changes in equity; and
– the related notes 1 to 35 and a to w.

The relevant financial reporting framework that has been applied in the preparation of the Group and Company financial
statements is Irish law and IFRSs as adopted by the European Union, and in the case of the Company financial statements IFRSs
as applied in accordance with the Companies Act 2014.

Summary of our audit approach

Key risks

Materiality

Significant changes
in our approach

The key risks that we identified in the current year were:
– Valuation of investment property; and
– Performance fees (Share based payments).

The materiality that we used in the current year was €8.25 million which was
determined on the basis of 0.8% of Group net assets.

There have been no significant changes in our approach from our prior year audit.

Going concern and the Directors’ assessment of the principal risks that would threaten the solvency
or liquidity of the Group

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.

As required by listing rules we have reviewed the Directors’ statement regarding the
appropriateness of the going concern basis of accounting contained within note 2. (d)
to the financial statements.

We have nothing material to add or draw attention to in relation to:
– the Directors’ confirmation on page 53 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;

– the disclosures on pages 34 to 41 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
the financial statements 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 Director’s explanation on page 53 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.

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsIndependent auditors’ report to the members of Hibernia REIT plc continued

Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy,
the allocation of resources in the audit and directing the efforts of the engagement team.

Valuation of investment properties

Risk description

The valuation of the Group’s investment properties requires significant judgement to
be made by the Directors taking into consideration advice from the external valuer and
Management. Any inaccurate inputs or calculations used in the estimation of fair value
could result in a material misstatement of the financial statements.

Please refer to page 64 (Audit Committee Report), page 88 (note 2 – Critical accounting
judgements and estimates), page 93 (Accounting policy – Valuation of investment
property), and pages 106 to 110 (note 19 – Investment properties).

How the scope of our audit
responded to the risk

We evaluated the design and implementation of the controls the Board has implemented
over the valuation of investment properties.

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 enquired with the external valuer to discuss and challenge 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.

We assessed the competence, independence and integrity of the external valuer.

We compared the value of each investment property held to the valuation report
prepared by the external valuer and considered any adjustments made in light of the
Group’s accounting policies and the requirements of IFRS.

We performed audit procedures to assess the accuracy and completeness of information
provided to the external valuers including agreement on a sample basis back to underlying
lease agreements.

In conjunction with our internal property specialists we met with management to
discuss properties under development. On a sample basis we assessed project costs,
progress of development and leasing status and considered the reasonableness of
forecast costs to completion included in the valuations as well as identified
contingencies, exposures and remaining risks.

Hibernia REIT plc Annual Report 2017

Performance fees (Share based payments)

Risk description

The performance fee calculation is complex in nature and with the shareholders
approved amendment to performance fee methodology during the financial year this
increases the risk of error. A portion of the performance fees settlement is through the
issue of shares in the Company and therefore must be recorded in accordance with the
requirements of share based payments.

Please refer to page 64 (Audit Committee Report) and page 92 (Accounting Policy –
Share based payments).

How the scope of our audit
responded to the risk

We evaluated the design and implementation of the controls the Board has implemented
over the calculation and approval of the performance fee.

We obtained the details of the performance fee calculation from the investment
management agreement and tested the calculation prepared by management to confirm
the basis of the calculation was consistent.

We considered the inputs to the performance fee calculation and where appropriate we
have compared the inputs to entity data or market data.

We assessed the accounting treatment for performance fees to consider the accounting
charge recorded has been accounted for in accordance with the requirements of IFRS.

The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee,
which is discussed on page 64.

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole,
and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified
with respect to any of the risks described above, and we do not express an opinion on these individual matters.

Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person 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.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group materiality

€8.25 million (2016: €8.25 million)

Basis for determining
Group materiality

Rationale for the
benchmark applied

Group materiality is set at 0.8% of the Group net assets.

We have determined that net assets is one of the principal benchmarks within
the Financial Statements relevant to members of the Company in assessing
financial performance.

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsIndependent auditors’ report to the members of Hibernia REIT plc continued

Net assets

€1,014m

Net assets

Group materiality

€8.25m

Audit Committee
reporting threshold

€0.41m

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of €0.41 million
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 Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls,
and assessing the risks of material misstatement at the Group level.

In establishing the overall approach to our Group audit, we assessed the risk of material misstatement, taking into account the
nature, likelihood and potential magnitude of any misstatement. Following this assessment, we applied professional judgement
to determine the extent of testing required over each balance in the financial statements.

Opinion on other matters prescribed by the Companies Act 2014
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 Company balance sheet is in agreement with the accounting records.

In our opinion the information given in the Directors’ Report is consistent with the Financial Statements.

In addition we report, in relation to information given in the Corporate Governance Report on pages 56 to 74, that:
– Based on knowledge and understanding of the Company and its environment obtained in the course of our audit, no material

misstatements in the information identified above have come to our attention;

– Based on the work undertaken in the course of our audit, in our opinion:

– The description of the main features of the internal control and risk management systems in relation to the process for
preparing the Group Financial Statements are consistent with the Financial Statements and have been prepared in
accordance with the Companies Act 2014; and

– The Corporate Governance Report contains the information required by the Companies Act 2014.

Hibernia REIT plc Annual Report 2017

Matters on which we are required to report by exception
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.

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.

Under the Listing Rules of the Irish Stock Exchange we are also required to review the part of the Corporate Governance Statement
relating to the Company’s compliance with the provisions of the UK Corporate Governance Code and the provisions of the Irish
Corporate Governance Annex specified for our review. We have nothing to report arising from our review of these matters.

Respective responsibilities of Directors and auditor
As detailed in the Statement of Directors’ Responsibilities, 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
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, as a result of fraud or error. This includes an assessment
of: whether the accounting policies are appropriate to the Groups and the Company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to
identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become
aware of any apparent material misstatements or inconsistencies with our Audit of the Financial Statements, we consider the
implications for our report.

Restriction on use
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 auditors’ 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.

Brian Jackson
For and on behalf of Deloitte
Chartered Accountants and Statutory Audit Firm
Dublin

7 June 2017

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statements
Consolidated income statement
For the financial year ended 31 March 2017

Total revenue

Rental income
Net property expenses

Net rental income
Revaluation of investment properties
Other gains and (losses)

Total income after revaluation gains and losses

Expenses
Performance-related payments
Administration expenses

Total operating expenses

Operating profit

Finance income
Finance expense

Profit before tax
Income tax

Profit for the financial year

Basic earnings per share (cent)

Diluted earnings per share (cent)

EPRA earnings per share (cent)

Diluted EPRA earnings per share (cent)

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

NOTES

46,372

42,519
(2,838)

39,681
103,525
2,476

145,682

32,786

32,786
(2,497)

30,289
125,056
(171)

155,174

(8,215)
(12,770)

(6,069)
(8,696)

(20,985)

(14,765)

124,697

140,409

10
(5,671)

119,036
(450)

118,586

17.4

17.2

2.2

153
(4,240)

136,322
475

136,797

20.2

20.1

1.5

The notes on pages 87 to 123 form an integral part of these consolidated financial statements.

Hibernia REIT plc Annual Report 2017

Consolidated statement of comprehensive income
For the financial year ended 31 March 2017

Profit for the financial year

Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Gain on revaluation of property

Items that may be reclassified subsequently to profit or loss:
Net fair value loss on hedging instruments entered into for cashflow hedges

Total other comprehensive income

Total comprehensive income for the financial year attributable

to owners of the Company

The notes on pages 87 to 123 form an integral part of these consolidated financial statements.

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

NOTES

118,586

136,797

186

(105)

323

(112)

211

118,667

137,008

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsConsolidated statement of financial position
As at 31 March 2017

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

Total non-current liabilities

Current liabilities
Trade and other payables

Total current liabilities

Total equity and liabilities

IFRS NAV per share (cents)

EPRA NAV per share (cents)

Diluted IFRS NAV per share (cents)

NOTES

31 MARCH 2017
€’000

31 MARCH 2016
€’000

4,801
1,167,387
267
8,536

2,946
927,656
365
11,666

1,180,991

942,633

10,108
18,148

28,256
385

28,641

18,880
23,187

42,067
3,921

45,988

1,209,632

988,621

678,110
9,759
325,983

1,013,852

171,138

24,642

672,398
6,136
218,040

896,574

72,724

19,323

1,209,632

988,621

147.9

146.3

131.6

130.8

130.7

The notes on pages 87 to 123 form an integral part of these consolidated financial statements. The consolidated financial
statements on pages 87 to 123 were approved and authorised for issue by the Board of Directors on 7 June 2017 and signed on
its behalf by:

Kevin Nowlan
Chief Executive Officer

Thomas Edwards-Moss
Chief Financial Officer

Hibernia REIT plc Annual Report 2017

Consolidated statement of changes in equity

NOTES

SHARE
CAPITAL
€’000

SHARE
PREMIUM
€’000

RETAINED
EARNINGS
€’000

OTHER
RESERVES
€’000

TOTAL
€’000

FINANCIAL YEAR ENDED 31 MARCH 2017

68,125

604,273

218,040

6,136

896,574

–
–

118,586
–

–
81

118,586
81

68,125

604,273

336,626

6,217

1,015,241

Balance at start of financial year
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
Share issue costs
Share-based payments

Balance at end of financial year

68,545

609,565

325,983

–
–
420

–
–
5,292

(10,624)
(19)
–

–
–
3,542

9,759

(10,624)
(19)
9,254

1,013,852

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
Share issue costs
Share-based payments

NOTES

SHARE
CAPITAL
€’000

67,032
–
–

67,032

–
–
1,093

FINANCIAL YEAR ENDED 31 MARCH 2016

SHARE
PREMIUM
€’000

590,955
–
–

590,955

RETAINED
EARNINGS
€’000

89,375
136,797
–

226,172

OTHER
RESERVES
€’000

5,772
–
211

5,983

TOTAL
€’000

753,134
136,797
211

890,142

–
–
13,318

(8,121)
(11)
–

–
–
153

(8,121)
(11)
14,564

Balance at end of financial year

68,125

604,273

218,040

6,136

896,574

The notes on pages 87 to 123 form an integral part of these consolidated financial statements.

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsConsolidated statement of cashflows
For the financial year ended 31 March 2017

Cashflows from operating activities
Profit for the financial year
Adjusted non-cash movements:
Revaluation of investment properties
Other gains and losses
Share based payments
Deferred remuneration paid
Depreciation
Property income paid/(payable) in advance
Finance expense
Income tax charge/(credit)

Operating cashflow before movements in working capital
Decrease/(Increase) in trade and other receivables
(Decrease)/Increase in trade and other payables

Net cashflow from operating activities

Cashflows from investing activities
Purchase of fixed assets
Cash paid for/expended on investment property
Sale of investment property
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
Income tax paid
Finance income and expense

Net cashflow absorbed by investing activities

Cashflow from financing activities
Dividends paid
Borrowings drawn
Arrangement fee paid
Derivatives premium
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 87 to 123 form an integral part of these consolidated financial statements.

Hibernia REIT plc Annual Report 2017

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

NOTES

118,586

136,797

25c

(103,525)
380
8,874
4,444
207
5,118
5,661
450

40,195
2,106
(1,805)

40,496

(225)
(137,200)
–
9,534
–
–
–
(367)
(4,511)

(125,056)
(2,312)
5,925
4,191
65
(1,807)
4,087
(475)

21,415
(3,005)
8

18,418

(46)
(208,159)
4,951
12,226
3,476
237
(7,104)
(384)
(2,813)

(132,769)

(197,616)

(10,624)
97,877
–
–
(19)

87,234

(5,039)

23,187
(5,039)

18,148

(8,121)
75,529
(3,718)
(342)
(11)

63,337

(115,861)

139,048
(115,861)

23,187

Notes forming part of the Annual Report

1. General Information
Hibernia REIT plc, the “Company”, together with its subsidiaries and associated undertakings as detailed in note 33
(the “Group”), is engaged in property investment and development (primarily office) in the Dublin market with a view
to maximising its shareholders’ returns.

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

The ordinary shares of the Company are listed on the primary listing segment of the Official List of the Irish Stock Exchange (the
“Irish Official List”) and the premium listing segment of the Official List of the UK Listing Authority (the “UK Official List” and,
together with the Irish Official List, the “Official Lists”) and are traded on the regulated markets for listed securities of the Irish
Stock Exchange and the London Stock Exchange plc (the “London Stock Exchange”).

2. Basis of preparation
a. Statement of compliance and basis of preparation
The consolidated financial statements of Hibernia REIT plc have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as adopted by the EU and the Companies Act 2014. IFRS as adopted by the EU differ in certain
respects from IFRS as issued by the IASB. The Group financial statements therefore comply with Article 4 of the EU IAS
Regulation. The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation
of investment properties, owner occupied buildings and financial instruments that are measured at fair value at the end of
each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for goods
and services.

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

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

c. Basis of consolidation
The financial statements incorporate the consolidated financial statements of the Company and entities controlled by the
Company (its subsidiaries). The results of subsidiaries and joint arrangements acquired or disposed of during the financial year
are included from the effective date of acquisition or to the effective date of disposal. The accounting policies of all consolidated
entities are consistent with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and
cashflows relating to transactions between members of the Group are eliminated in full on consolidation.

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

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

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

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

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

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to
which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement
in its entirety, which are described as follows:
– Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at

the measurement date.

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

directly or indirectly.

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

Valuation basis of investment properties
All investment properties are valued in accordance with their current use, which is also the highest and best use, except for:
– Harcourt Square where, in accordance with IFRS 13:27, the valuation takes into account its potential as a refurbished and

extended asset which reflects the asset in its highest and best use. It is the Directors’ intention to pursue the redevelopment
of this property when the existing lease has expired.

– Hanover Building, which was occupied by BNY Mellon until 31 March 2017, has been valued on the basis of a refurbishment.
– Cannon Place apartment building which has been valued on a break up basis which is the highest and best us for this building.
– Block 3 Wyckham Point: this property is held for long-term property rental and was developed on this basis. The units
comprising this property were completed on a phased basis by the Group during 2015. VAT was payable both on the
acquisition and on the construction costs which were treated as irrecoverable and recognised as part of the capital costs
of the project. If this property is sold within five years of completion, i.e. before mid-2020, the Group would be obliged
to charge VAT on the sale but would be entitled to a recovery of the VAT incurred on the construction and acquisition costs
on an apportioned basis according to the VAT life of the building. As this property is not intended to be sold within the
five-year period, in the opinion of the Directors, no amendment to the valuer’s valuation of this asset was deemed necessary.

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

Hibernia REIT plc Annual Report 2017

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

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

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

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

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

3. Application of new and revised International Accounting Standards (“IFRS”)
Standards and amendments to standards that became applicable during the financial year

Standards
IFRS 14 Regulatory Deferral Accounts

Amendments to standards
Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)
Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)
Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)
Equity Method in Separate Financial Statements (Amendments to IAS 27)
Annual Improvements 2012–2014 Cycle
Disclosure Initiative (Amendments to IAS 1)
Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
Disclosure Initiative (Amendments to IAS 7)
Annual Improvements to IFRS Standards 2014–2016 Cycle – Amendments to IFRS 12

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

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

3. Application of new and revised International Accounting Standards (IFRS) continued
Prospective accounting changes
The following standards and interpretations to existing standards have been published by the International Accounting
Standards Board (“IASB”) and, to the extent indicated, have been adopted by the European Union (“EU”) and will be mandatory
for future accounting periods. The Company has not early adopted these standards or interpretations, none of which is expected
to have a material impact on the Group financial statements.
– IFRS 2 Share-based Payment amendments to clarify the standard in relation to the accounting for cash-settled share-based
payment transactions that include a performance condition, the classification of share-based payment transactions with net
settlement features, and the accounting for modifications of share-based payment transactions from cash-settled to equity-
settled. Is effective for annual periods beginning on or after 1 January 2018 (subject to EU endorsement).

– IAS 7 Statement of Cashflows amendments to clarify disclosures and is effective for annual periods beginning on or after

1 January 2017 (subject to EU endorsement).

– IFRS 9 Financial Instruments was issued in July 2014 and will replace IAS 39 Financial Instruments: Recognition and

Measurement. IFRS 9 includes a revised classification and measurement model, a forward looking “expected credit loss”
impairment methodology and modifies the approach to hedge accounting. Unless early adopted, the standard is effective
for accounting periods beginning 1 January 2018 (subject to EU endorsement).

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

– IAS 12 Income taxes, amendments to deferred tax recognition. Effective for periods beginning on or after 1 January 2017

(subject to EU endorsement).

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

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

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

– Annual Improvements to IFRS: 2012–2015 cycle (effective for accounting periods beginning on or after 1 July 2016).
– Annual Improvements to IFRS: 2014–2016 cycle (effective for accounting periods beginning on or after 1 January 2018 apart

from the amendment to IFRS 12 Disclosure of interests in other entities which is effective from 1 January 2017).

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

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

Hibernia REIT plc Annual Report 2017

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

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

4. Significant accounting policies
a. Revenue recognition
Revenue comprises rental income and surrender premia, service charge income and fees from other activities associated with
the Group’s property business.

Revenue is recognised in the Consolidated income statement when it meets the following criteria:
– it is probable that any future economic benefit associated with the item of revenue will flow to the Group; and
– the amount of revenue can be measured with reliability.

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

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

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

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

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

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

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

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

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

d. Administration expenses
Administration expenses are recognised when incurred in the Consolidated income statement.

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

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

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

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

g. Joint arrangements
A joint arrangement is an arrangement over which two or more parties have joint control. Joint control is established when no
one entity has control of the arrangement on its own; all the entities involved in the arrangement control it collectively. A joint
arrangement is classified as a joint venture when the Group has rights to the net assets of the arrangement rather than to the
individual assets and liabilities, revenues and expenses. Otherwise the joint arrangement is classified as a joint operation. This
classification is based upon an assessment of the structure and legal form of the arrangement.

Where the joint arrangement is recognised as a joint operation, the Group recognises its share of assets and liabilities held
jointly as well as its share of revenues and expenses according to IFRS applicable to the items being recognised.

Hibernia REIT plc Annual Report 2017

h. Investment properties
Investment properties are properties held to earn rental income and/or for capital appreciation (including property under
construction for such purposes). Properties are treated as acquired at the point at which the Group assumes the significant
risks and rewards of ownership. This occurs when:
(1) it is probable that the future economic benefits that are associated with the investment property will flow to the Group;
(2) there are no material conditions which could affect completion of the acquisition; and
(3) the cost of the investment property can be measured reliably.

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

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

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

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

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

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

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

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

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

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

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

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

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

The estimated useful lives for the main asset categories are:
Land and buildings
Fixtures and fittings/leasehold improvements
Office and computer equipment

50 years
5 years
3 years

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

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

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

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

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

Hibernia REIT plc Annual Report 2017

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

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

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

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

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

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

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

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

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

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

5. Remuneration to the Investment Manager continued
These arrangements fall into three categories:

a. Remuneration for future services
A payment of €14.2m, the “Initial Payment”, was made in November 2015. The fair value of this payment was €15.1m due to the
movement in the share price for the share-based portion.

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

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

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

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

Summary of performance-related payments

Performance fee
Windmill promote and development management fees

Total performance-related payments for the financial year
“Top-up” internalisation expenses (note 11)

Total

Of which are:
Payable to Vendors
Payable to employees

Total

Of which share-based (note 13)

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

5,907
2,308

8,215
1,101

9,316

8,430
886

9,316

8,873

6,069
–

6,069
311

6,380

5,470
910

6,380

5,925

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

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

Hibernia REIT plc Annual Report 2017

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

6. Operating segments
The Group is organised into six business segments, against which the Group reports its segmental information, being “Office
Assets”, “Office Development Assets”, “Residential Assets”, “Industrial Assets”, “Other Assets” (non-core assets) and “Central
Assets and Costs”. Segment analysis is based on the type of investment property with other assets containing non-core assets.
Central Assets and Costs includes the Group head office assets and expenses. All the Group’s operations are in Dublin in the
Republic of Ireland. Operating segments are reported in a manner consistent with the reporting to the Board of Directors of the
Company which is the chief operating decision maker of the Group. No segments are aggregated.

Central assets include cash and cash equivalents, tax refundable and administration expenses paid in advance. In addition, cash
received in advance in relation to rental receipts on properties and rental income accrued have been allocated from receivables
and cash and cash equivalents to the appropriate segment.

The Group’s key measure of underlying performance of a segment is total income after revaluation gains and losses which
comprises revenue (rental and service charge income and other gains and losses such as development management fees),
property outgoings, revaluation of investment properties and other gains and losses. Total income after revaluation gains and
losses includes rental income which is used as the basis to report key measures such as EPRA Net Initial Yield (“NIY”) and EPRA
“topped-up” NIY, which measure the cash passing rent returns on market value of investment properties before and after an
adjustment for the expiration of rent-free period or other lease incentives respectively.

Group consolidated segment analysis
For the financial year ended 31 March 2017

OFFICE
DEVELOPMENT
ASSETS
€’000

RESIDENTIAL
ASSETS
€’000

INDUSTRIAL
ASSETS
€’000

OTHER
ASSETS
€’000

CENTRAL
ASSETS
AND COSTS
€’000

GROUP
CONSOLIDATED
POSITION
€’000

Revenue

Rental income
Property outgoings

Total property income
Revaluation of investment properties
Other gains and losses

Total income

Performance-related payments
Depreciation
Administration expenses

Total operating expenses

Operating profit/(loss)
Net finance cost

Profit before tax
Income tax

Profit for the financial year

Total segment assets

Investment properties

OFFICE
ASSETS
€’000

36,403

35,490
(1,243)

34,247
37,925
–

72,172

–
–
–

–

72,172
(2,145)

70,027
–

70,027

2,930

33
(100)

(67)
61,941
2,805

64,679

(2,308)
–
–

(2,308)

62,371
(167)

62,204
(342)

61,862

6,434

6,434
(1,194)

5,240
2,902
–

8,142

–
–
–

–

8,142
–

8,142

879,532

168,215

117,332

869,748

168,042

116,429

562

562
(83)

479
757
–

1,236

–
–
–

–

1,236
–

1,236

13,168

–
(218)

(218)
–
43

(175)

–
–
–

–

–
–

–
–
(372)

(372)

(5,907)
(207)
(12,563)

46,372

42,519
(2,838)

39,681
103,525
2,476

145,682

(8,215)
(207)
(12,563)

(18,677)

(20,985)

(175)
–

(175)
(28)

(19,049)
(3,349)

(22,398)
(80)

124,697
(5,661)

119,036
(450)

(203)

(22,478)

118,586

790

30,595

1,209,632

–

1,167,387

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

OFFICE
DEVELOPMENT
ASSETS
€’000

RESIDENTIAL
ASSETS
€’000

INDUSTRIAL
ASSETS
€’000

OTHER
ASSETS
€’000

CENTRAL
ASSETS
AND COSTS
€’000

GROUP
CONSOLIDATED
POSITION
€’000

6. Operating segments continued
Group consolidated segment analysis
For the financial year ended 31 March 2016

Revenue

Rental income
Interest income

Revenue
Property outgoings

OFFICE
ASSETS
€’000

27,176

27,176
–

27,176
(716)

Total property income
Revaluation of investment properties
Other gains and losses

26,460
59,589
(260)

81
–

81
(666)

(585)
56,331
343

Total income

85,789

56,089

–
–
–

–

85,789
(1,152)

84,637
–

84,637

655,752

645,671

–
–
–

–

56,089
–

56,089
(38)

56,051

155,930

155,014

Performance-related payments
Depreciation
Administration expenses

Total operating expenses

Operating profit/(loss)
Net finance cost

Profit before tax
Income tax

Profit for the financial year

Total segment assets

Investment properties

7. Total revenue

Gross rental income
Rental incentives
Service charge income
Windmill promote fee
Surrender premia
Other income

Total revenue

4,835

4,835
–

4,835
(1,029)

3,806
7,168
–

10,974

–
–
–

–

10,974
–

10,974

115,180

114,571

524

524
–

524
(86)

438
1,968
–

170

170
–

–

–
–

170
–
2,136

–
–
(2,390)

32,786

32,786
–

32,786
(2,497)

30,289
125,056
(171)

2,406

2,306

(2,390)

155,174

–
–
–

–

2,406
–

2,406

–
–
–

–

(6,069)
(65)
(8,631)

(14,765)

2,306
–

(17,155)
(2,935)

2,306 (20,090)
–

513

140,409
(4,087)

136,322
475

2,819 (20,090)

136,797

12,400

10,565

38,794

988,621

12,400

–

927,656

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

41,215
1,304
1,048
2,511
–
294

46,372

26,520
1,366
–
–
4,900
–

32,786

Rental income arises from the Group’s investment properties.

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

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

Hibernia REIT plc Annual Report 2017

8. Rental income

Gross rental income
Rental incentives
Surrender premia

Rental income

9. Net property expenses

Service charge income
Service charge expense
Other property expenses

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

41,215
1,304
–

42,519

26,520
1,366
4,900

32,786

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

(1,048)
1,205
2,681

2,838

–
–
2,497

2,497

During the financial year, the Group established a building management department: previously this service was provided by
third party providers. Service charge income relates to contributions from tenants of managed buildings for the property
expenses of the occupied buildings. Service charge expense includes building management staff costs and all other costs of
managing the buildings. Building management fees are accounted for through the service charge income line along with the
amounts invoiced to tenants. Other property expenses consist mainly of residential property costs and vacancy and other costs
of commercial properties.

10. Other gains and losses

Gain on sale of investment property
Gains on sales of non-current assets classified as held for sale
Windmill promote fee
Other gains and losses

Other gains and losses

11. Administration expenses
Operating profit for the financial year has been stated after charging:

Non-executive Directors’ fees
Professional valuers’ fees
Prepaid remuneration expense
Pre-internalisation Investment Manager costs
Depository fees
Depreciation
“Top-up” internalisation expenses for financial year
Staff costs (note 12)
Other administration expenses

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

–
43
2,511
(78)

2,476

176
2,136
–
(2,483)

(171)

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

300
418
4,444
–
296
207
1,101
2,760
3,244

12,770

300
388
1,802
1,240
310
65
304
983
3,304

8,696

Hibernia REIT plc Annual Report 2017

Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

11. Administration expenses continued
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.
Further information on Directors emoluments can be found in the Directors’ remuneration report on pages 69 to 70 of the
Annual Report.

Prepaid remuneration expense relates to the recognition of payments to Vendors of the Investment Manager 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. “Top-up” internalisation expenses for the financial year are fees due to Vendors reflecting
management fees that would have been due under the IMA on increases in NAV since 31 March 2016.

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 0.019% 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 constitute a small amount of its total revenue.

Auditors’ remuneration (excluding VAT)

Audit of the Group and Parent Company financial statements
Audit of subsidiaries’ financial statements
Review of half year report
Other assurance services
Tax advisory services
Other non-audit services

Total

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

105
30
16
7
–
–

158

85
24
15
7
156
8

295

12. Employment
The average monthly number of persons (including executive Directors) directly employed during the financial year was 18
(31 March 2016 (from the date of internalisation): 11).

At financial year end:
Building management services
Head Office staff
On-site staff

Administration

Total employees

The staff costs for the above employees were:

Wage and salaries
Social insurance costs
Employee share-based payment expense (note 13)
Pension costs-defined contribution plan

Total

No amount of salaries and other benefits is capitalised into investment properties.

100

Hibernia REIT plc Annual Report 2017

FINANCIAL
YEAR ENDED
31 MARCH 2017
NUMBER

FINANCIAL
YEAR ENDED
31 MARCH 2016
NUMBER

4
3
7
16

–
–
–
13

€’000

2,974
251
443
195

3,863

1,215
122
455
101

1,893

Staff costs are allocated to the following expense headings:

Administration expenses
Net property expenses
Performance-related payments

Total

€’000

2,760
217
886

3,863

983
–
910

1,893

No amount of salaries and other benefits is capitalised into investment properties.

The increase in salaries reflects a full year charge in 2017: the internalisation took place in November 2015 and therefore the
Group had direct employees only from that date in the prior year.

13. Share-based payments
a. Performance-related payments
As part of the arrangements for the internalisation of the Investment Manager in 2015, it was agreed that any future
performance fees and other payments due under the terms of the Investment Management Agreement (“IMA”), would be made
in shares of the Company until the expiry of the agreement in November 2018. The calculation of these amounts is determined
using the EPRA Net Asset Value of the Group at the financial year end and the investment property returns as determined
by IPD and using calculation protocols as were set out in the Investment Management Agreement or as subsequently modified
by shareholder agreement at an Extraordinary General Meeting (“EGM”) on 26 October 2016.

These amounts are referenced to a share price of the average closing price of Hibernia shares on the Irish Stock Exchange for the
20 business days preceding the grant date in order to calculate the amount of shares that should be issued for any such award.

Once the NAV, including valuation of the investment properties, is determined, the amount of the award is fixed and the
Directors have determined that the grant date for the share-based payment is the date on which the calculation is fixed, i.e.
31 March each year. The Directors have calculated the amount of fees that are payable under this arrangement for the financial
year ended 31 March 2017 in preparing these consolidated financial statements and these are shown in the table below split
between performance-related payments, “top-up” internalisation expenses and employee share reserves. In addition, amounts
fell due in December 2016 in relation to the achievement of return targets on the unwinding of the Windmill Lane joint
arrangement which are also provided.

Shares issued relating to performance-related payments to Vendors who remain obliged to perform future services for the Group
are subject to lock-up provisions meaning they are restricted from being sold upon receipt, with one-third of the shares being
“unlocked” on each anniversary of issue date. All shares are beneficially owned by the recipients and all voting rights and rights
to dividends accrue to them. The Directors considered the likelihood of the clawback provision being triggered on these shares,
the difficulty in measuring this provision, and the likelihood that any discount to be applied would be material. They concluded
that it was inappropriate to modify the fair value of the shares issued to reflect these restrictions and the shares issued would be
valued without any discount to reflect these restrictions.

Hibernia REIT plc Annual Report 2017

101

Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

13. Share-based payments continued
b. Employee long-term incentive plan
Awards may be granted to employees of the Group under a remuneration plan which includes both cash elements and share-
based long-term incentive payments (the “Performance-Related Remuneration Scheme” or “PRR”). Until the expiry of the
performance-related payments referenced in part a. above in November 2018, the PRR will be funded principally by deductions
of up to 15% from any performance fees included in this payment. Shares awarded under the PRR, 50% of the total award or
up to 7.5% of the performance-related payments at a. above, are in the form of a contingent grant of Company shares which
will issue at the time of vesting, which occurs on the third anniversary of the start of the year to which they relate. The number
of shares is calculated based on the average closing price for the 20 business days preceding the end of the period to which the
award relates. These shares are recorded at fair value on the contingent grant date, i.e. the 31 March of the year to which they
are earned. The charge recognised in the consolidated income statement for the period ended 31 March 2017 is €0.4m (31 March
2016: €0.5m).

Shares are forfeited should the person leave the Group prior to the vesting date unless subject to “good leaver” provisions. Any
shares forfeited are transferable to the Vendors on the basis that these shares have been deducted from performance fees that
would otherwise have been due to the Vendors. Therefore, there is no impact on fair value measurement in respect of these shares.

Share-based payments made and provided during the financial year:

Financial year ended 31 March 2017
Shares issued during the period:
4,200,590 ordinary shares of €0.10 were issued during the period in settlement of performance-related fees due at 31 March
2016. The number of shares is determined by reference to the contract price. The fair value at the grant date was €5.5m. These
shares were issued on 16 August 2016 on which day the prior closing price was €1.36.

Settlement of performance fee due for 2016 financial year

* Contract price is average of 20 business days prior to grant date (under IMA).

CONTRACT
PRICE*
€’000 NO. OF SHARES

1.290
5,418

4,200,590

PRICE ON
ISSUE DATE

€’000

1.36
5,712

SUMMARY OF SHARE BASED PAYMENTS OUTSTANDING AS AT 31 MARCH 2017

SHARE
PRICE PER

CONTRACT1 GRANT DATE

SHARE
PRICE AT
GRANT
DATE

SHARE
PRICE AT
FINANCIAL
YEAR END

ESTIMATED
NO. OF
SHARES TO
BE ISSUED
’000

FAIR VALUE
AT
FINANCIAL
YEAR END
€’000

PAYMENT
€’000

1.290 31 March 2016
1.186 12 December 2016

456
2,308

1.302
1.201

1.245
1.245

350
1,946

436
2,423

1.237 31 March 2017

1,101

1.245

890

1,108

Balance of 2016 performance-related

payments – Employee portion

Windmill promote fee
“Top-up” internalisation expenses for

financial year

Performance-related payments provided

in period (note 13.a)

1.237 31 March 2017

Balance at end of financial year

5,464

9,329

1.245

4,417

5,500

7,603

9,467

1. The number of shares to be issued is calculated based on the average closing price for the 20 business days prior to the grant date.

102

Hibernia REIT plc Annual Report 2017

Financial year ended 31 March 2016
Shares issued during the period:
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 20 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

Total shares issued

CONTRACT

PRICE €’000 NO. OF SHARES

PRICE AT ISSUE
DATE €’000
(“FV”)

1.176
12,859

10,933,826

1.318
14,411

31 March 2016
Due under performance-related payments – Vendors
Due under performance-related payments – employees 31 March 2016

GRANT DATE

Balance at period end

PAYMENT

€’000

5,469
456

5,925

SHARE
PRICE AT
GRANT
DATE

SHARE
PRICE AT
FINANCIAL
YEAR END

1.302
1.302

ESTIMATED NO.
OF SHARES TO
BE ISSUED

’000

4,200
350

4,550

FAIR VALUE AT
FINANCIAL
YEAR END
€’000

5,469
456

5,925

SHARE-BASED PAYMENTS OUTSTANDING AS AT 31 MARCH 2016

14. Finance income and expense
The effective interest expense on borrowings arises as a result of the recognition of interest expense, commitment fees
and arrangement fees.

Interest income on cash and cash equivalents
Effective interest expense on borrowings
Finance expense on payable due for investment property

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

10
(5,671)
–

(5,661)

153
(2,822)
(1,418)

(4,087)

Interest costs capitalised in the financial year were €0.9m (31 March 2016: €0.1m) in relation to the Group’s development and
refurbishment projects. The capitalisation rate used is the effective interest rate on the cost of borrowing applied to the portion
of investment that is financed.

15. Income tax expense

Income tax on residual income
Tax on the disposal of non-core assets
Under/(Over) provision in respect of prior periods

Income tax expense/(credit) for financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

342
28
80

450

30
186
(691)

(475)

The net income tax charge on residual income in the financial year arises mainly from the receipt of promote and development
management fees on the Windmill Lane project. The tax credit during the prior financial year arose mainly in respect of over
provisions in prior periods.

Hibernia REIT plc Annual Report 2017

103

Strategic reportGovernanceFinancial statements
Notes forming part of the Annual Report continued

15. Income tax expense continued
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)
Under/(Over) provision in respect of prior periods

Income tax expense/(credit) for financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

119,036

136,322

14,880
(13,016)
(1,511)
17
80

450

17,040
(15,632)
(1,408)
216
(691)

(475)

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.

16. Dividends

Interim dividend for the financial year ended 31 March 2017 of 0.75 cent per share

(31 March 2016: 0.7 cent per share)

Proposed final dividend for the financial year ended 31 March 2017 of 1.45 cent per share

(31 March 2016: 0.8 cent per share)

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

5,141

4,769

10,050

5,486

The Board has proposed a final dividend of 1.45 cent per share (31 March 2016: 0.8 cent) 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 is expected to be paid to shareholders on 31 July 2017. All of this proposed final dividend of 1.45 cent
per share will be a Property Income Distribution (“PID”) in respect of the Group’s tax exempt property rental business (31 March
2016: 0.8 cent). The total dividend, interim paid and final proposed for the financial year ended 31 March 2017 is 2.2 cent per
share (31 March 2016: 1.5 cent per share) or €15.2m (31 March 2016: €10.3m).

104

Hibernia REIT plc Annual Report 2017

17. Earnings per share
There are no convertible instruments, options, or warrants on ordinary shares in issue as at the financial year ended 31 March
2017. However, the Company has established a reserve of €9.5m (31 March 2016: €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 (notes 5 and 13). It is estimated that approximately
7.6m ordinary shares (31 March 2016: 4.6m shares) will be issued and the details of these amounts are set out in note 13.
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 (note 13)

Diluted number of shares

BASIC AND DILUTED EARNINGS PER SHARE (IFRS)

Profit for the financial year attributable to the owners of the Company

Weighted average number of ordinary shares (basic)
Weighted average number of ordinary shares (diluted)
Basic earnings per share (cents)

Diluted earnings per share (cents)

EPRA EARNINGS PER SHARE AND DILUTED EPRA EARNINGS PER SHARE

Profit for the financial year attributable to the owners of the Company
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
Income tax on profit or loss on disposals
Fair value movement of derivatives
Acquisition costs on share deals

EPRA earnings

Weighted average number of ordinary shares (basic)
Weighted average number of ordinary shares (diluted)

EPRA earnings per share (cent)

Diluted EPRA earnings per share (cent)

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

681,251
4,201

685,452

683,351
7,603

670,317
10,934

681,251

675,784
4,550

690,954

680,334

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

118,586

136,797

€’000

683,351
690,954
17.4

17.2

675,784
680,334
20.2

20.1

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

118,586

136,797

(103,525)

(125,056)

–
(43)
(30)
1
–

(176)
(2,136)
(475)
17
1,053

14,989

10,024

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

683,351
690,954

675,784
680,334

2.2

1.5

Hibernia REIT plc Annual Report 2017

105

Strategic reportGovernanceFinancial statements
Notes forming part of the Annual Report continued

18. Property, plant and equipment
At 31 March 2017

Carrying value at start of financial year
Additions:
Transferred from investment property at fair value
Acquisitions
Depreciation
Revaluations included in other comprehensive income

Carrying value at end of financial year

LAND AND
BUILDINGS
€’000

2,703

1,651
–
(67)
186

4,473

OFFICE AND
COMPUTER
EQUIPMENT
€’000

LEASEHOLD
IMPROVEMENTS
AND FIXTURES
AND FITTINGS
€’000

–
51
(27)
–

211

–
174
(113)
–

272

TOTAL
€’000

2,946

1,651
225
(207)
186

4,801

The Group now occupies 54% (31 March 2016: 32%) of the office space in its South Dock House property. This property
was revalued as at 31 March 2017 and 31 March 2016 by the Group’s valuers and in accordance with the valuation approach
described under note 2(f).

At 31 March 2016

Carrying value at start of financial year
Additions:
Transferred from investment property at fair value
Acquired on acquisition of investment manager
Acquisitions
Depreciation
Revaluations included in other comprehensive income

Carrying value at end of financial year

19. Investment properties
At 31 March 2017

LAND AND
BUILDINGS
€’000

–

2,400
–
–
(20)
323

2,703

OFFICE AND
COMPUTER
EQUIPMENT
€’000

LEASEHOLD
IMPROVEMENTS
AND FIXTURES
AND FITTINGS
€’000

–

–
37
8
(13)
–

–

–
205
38
(32)
–

211

TOTAL
€’000

–

2,400
242
46
(65)
323

2,946

FAIR VALUE CATEGORY

Carrying value at start of financial year
Additions:
Property purchases
Development and refurbishment expenditure
Revaluations included in income statement
Disposals:
Transferred to property, plant and equipment

as owner occupied

Properties transferred between segments1

OFFICE ASSETS
LEVEL 3
€’000

OFFICE
DEVELOPMENT
ASSETS
LEVEL 3
€’000

RESIDENTIAL
ASSETS
LEVEL 3
€’000

INDUSTRIAL
ASSETS
LEVEL 3
€’000

TOTAL
LEVEL 3
€’000

647,042

155,016

113,200

12,398

927,656

52,369
7,413
37,925

32,981
44,754
61,941

28
299
2,902

(1,651)
126,650

–
(126,650)

–
–

–
13
757

–
–

85,378
52,479
103,525

(1,651)
–

Carrying value at end of financial year

869,748

168,042

116,429

13,168

1,167,387

1 Cumberland Place development which was completed in September 2016.

106

Hibernia REIT plc Annual Report 2017

At 31 March 2016

FAIR VALUE CATEGORY

as owner occupied

Property sale

OFFICE ASSETS
LEVEL 3
€’000

OFFICE
DEVELOPMENT
ASSETS
LEVEL 3
€’000

RESIDENTIAL
ASSETS
LEVEL 3
€’000

INDUSTRIAL
ASSETS
LEVEL 3
€’000

TOTAL
LEVEL 3
€’000

475,877

88,600

66,500

10,319

641,296

106,107
7,488
59,970

–
19,960
56,331

30,129
9,784
6,787

–
111
1,968

136,236
37,343
125,056

(2,400)
–

–
(9,875)

–
–

(2,400)
(9,875)

Carrying value at end of financial year

647,042

155,016

113,200

12,398

927,656

The valuations used to determine fair value for the investment properties in the consolidated financial statements are
determined by CBRE, the Group’s independent valuer, 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(f) of this report, 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 7. Valuations are completed on the Group’s investment property
on at least a half-yearly basis and, in accordance with the RICS Valuation – Professional Standards global January 2014
including the International Valuation Standards and the RICS Valuation – Professional Standards UK January 2014 (revised
April 2015) (“the Red Book”). This takes account of the properties’ highest and best use. Where the highest and best use is not
the current use, the valuation will account for the costs and likelihood of achieving this use in arriving at a valuation estimate for
that property. In the period to 31 March 2017, for most properties the highest and best use is the current use except as discussed
in note 2(f). In these instances the Group may need to achieve vacant possession before re-development or refurbishment may
take place and the valuation of the property takes account of any remaining occupancy period on existing leases. The table below
summaries the approach for each investment property segment and highlights properties where the approach has been varied.

The method that is applied for fair value measurements categorised within Level 3 of the fair value hierarchy is the yield
methodology using market rental values capitalised with a market capitalisation rate or yield or other applicable valuation
technique. Using this approach for the Group’s investment properties, values of investment properties are arrived at by
discounting forecasted net cashflows at market derived capitalisation rates. This approach includes future estimated costs
associated with refurbishment or development, together with the impact of rental incentives allowed to tenants. Therefore, for
example, development properties are assessed using a residual method in which the completed development property is valued
using income and yield assumptions and deductions are made for the estimated costs to completion, including finance costs and
developers’ profit, to arrive at the current valuation estimate. In effect this values the development as a proportion of the
completed property.

Hibernia REIT plc Annual Report 2017

107

Strategic reportGovernanceFinancial statements
Notes forming part of the Annual Report continued

19. Investment properties continued
The following table illustrates the methods applied to each segment:

DESCRIPTION OF
INVESTMENT
PROPERTY ASSET
CLASS

FAIR VALUE OF
THE INVESTMENT
PROPERTY €’M AT
THE FINANCIAL
YEAR END

Office assets

870

Office
development
assets

168

Residential
assets

116

Industrial
assets

NARRATIVE DESCRIPTION OF
THE TECHNIQUES USED

WHETHER OR NOT THERE WAS A CHANGE IN THE
TECHNIQUE DURING THE FINANCIAL YEAR

Yield methodology using market rental values
capitalised with a market capitalisation rate.

Surplus lands at Harcourt Square were
assessed using the residual method (see
below method) and the present value of this
was added to the investment value of the
existing blocks.

Residual method i.e. “Gross Development
Value” less “Total Development Cost” less
“Profit” equals “Fair Value”:
– Gross Development Value (“GDV”):

the fair value of the completed proposed
development (arrived at by capitalising
the ERV with an appropriate yield).
– Total Development Cost (“TDC”):

these include, but are not limited to,
construction costs, land acquisition costs,
professional fees, levies, marketing costs
and finance costs.

– Profit or “Profit on Cost”: this is measured
as a percentage of the total development
costs (including the site value).

For developments close to completion the
yield methodology is applied.

Yield methodology using market rental values
capitalised with a market capitalisation rate.
In the case of Cannon Place, where the
highest and best use is different from the
current use, the asset is now valued on an
individual apartment basis which is the
highest and best use for this building.

Yield methodology using market rental values
capitalised with a market capitalisation rate.

No change in valuation technique.
1 Cumberland Place, which was an office
development asset at the previous financial
year end is now part of this segment and
valued on this basis as the development is
completed. Harcourt Square was valued on
a residual basis at 31 March 2016.

No change in valuation technique. The office
element at 1 Windmill Lane, which is nearing
completion has been valued using yield
methodology using market rental values
capitalised with a market capitalisation rate,
from which remaining capital expenditure
has been deducted.

No change in valuation technique apart from
Canon Place which was previously valued
under yield methodology.

No change in valuation technique.

In valuing the Group’s investment properties, the Directors have applied a reduction of €4.1m (31 March 2016: €2.6m) to the
Valuers’ valuations to factor in the impact of the accounting policy on the recognition of rental incentives allowed to tenants.
This deduction is a measure of the impact on the property valuation of the difference between cash and accounting approaches
to the recognition of rental income.

108

Hibernia REIT plc Annual Report 2017

There were no transfers between fair value levels during the period. Approximately €0.9m of financing costs were capitalised
in relation to the Group’s developments and refurbishments (31 March 2016: €0.1m).

Reconciliation of the independent valuer’s valuation report amount to the carrying value of investment property in the
Consolidated statement of financial position:

Valuation per Valuer’s certificate

50% Windmill joint arrangement
Owner occupied (note 18)
Rental incentives adjustment1

Investment property balance at financial year end

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

1,175,926

953,830

–
(4,473)
(4,066)

(20,875)
(2,703)
(2,596)

1,167,387

927,656

1. Rental incentives adjustment: this relates to the difference in valuation that arises as a result of property valuations using a cashflow based approach while incentives given to tenants under

lease arrangements are recognised as an integral part of the net consideration agreed for the use of the leased asset and the aggregate cost of such incentives is recognised as a reduction of
rental income on a straight-line basis over the lease term.

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. These development costs are generally determined by tender at the outset
of the project and are neither unobservable nor subject to material change.

As outlined above, the main inputs in using a market based capitalisation approach are the ERV and equivalent yields. ERVs,
apart from in multi-family residential properties as discussed below, are not generally directly observable and therefore
classified as Level 3. Yields depend on the valuers assessment of market capitalisation rates and are therefore Level 3 inputs.

The table below summarises the key unobservable inputs used in the valuation of the Group’s investment properties at 31 March
2017. There are interrelationships between these inputs as they are both determined by market conditions and the valuation
result in any one period depends on the balance between them. The Group’s residential properties are multi-family units and
therefore ERVs are based on current market rents observed for units rented within the property. ERV is included in the below
table for completeness.

Key unobservable inputs used in the valuation of the Group’s investment properties
31 March 2017

Office
Office development
Residential*
Industrial

* Average ERV based on a two bedroom apartment.

ESTIMATED RENTAL
VALUE € PER SQ.FT.

EQUIVALENT YIELD %

MARKET VALUE
€’000

LOW

HIGH

LOW

HIGH

869,748
168,042
116,429
13,168

€55.00psf
€26.00psf
€50.00psf
€55.00psf
€19,800pa €22,800pa
€5.75psf

€2.26psf

4.89%
4.90%
4.60%
6.50%

6.57%
5.60%
4.60%
6.50%

Hibernia REIT plc Annual Report 2017

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Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

19. Investment Properties continued
31 March 2016

Office
Office development
Residential*
Industrial

* Average ERV based on a two bedroom apartment.

ESTIMATED RENTAL
VALUE € PER SQ.FT.

EQUIVALENT YIELD %

MARKET VALUE
€’000

LOW

HIGH

647,042
155,016
113,200
12,398

€23.55psf
€47.00psf
€18,000pa
€3.75psf

€55.00psf
€55.00psf
€26,400pa
€5.75psf

LOW

4.87%
5.25%
4.40%
7.36%

HIGH

6.24%
5.50%
4.60%
7.36%

The sensitivities below illustrate the impact of movements in key unobservable inputs on the fair value of investment properties.
To calculate these impacts only the movement in one unobservable input is changed as if there is no impact on the other. In
reality there may be some impact on yields from an ERV shift and vice versa. However, this gives an assessment of the maximum
impact of shifts in each variable. If rents in the market are assumed to move 5% from those estimated at 31 March 2017, the
Group’s investment property portfolio would increase or decrease in value approximately €57m (31 March 2016: €51m). A 25bp
increase in equivalent yields would decrease the value of the portfolio by €62m (31 March 2016: €54m) and a 25bp decrease
results in an increase in value of €68m (31 March 2016: €60m).

31 March 2017

SENSITIVITIES

Office
Office development
Residential
Industrial

Total

31 March 2016

SENSITIVITIES

Office
Office development
Residential
Industrial

Total

IMPACT ON MARKET VALUE
OF A 5% CHANGE IN THE
ESTIMATED RENTAL VALUE

IMPACT ON MARKET VALUE
OF A 25BP CHANGE IN THE
EQUIVALENT YIELD

INCREASE €’M

DECREASE €’M

INCREASE €’M

DECREASE €’M

39.5
12.0
4.9
0.5

56.9

(39.4)
(12.0)
(4.9)
(0.5)

(56.8)

(44.2)
(11.3)
(5.7)
(0.4)

(61.6)

48.6
12.5
6.3
0.4

67.8

IMPACT ON MARKET VALUE
OF A 5% CHANGE IN THE
ESTIMATED RENTAL VALUE

IMPACT ON MARKET VALUE
OF A 25BP CHANGE IN THE
EQUIVALENT YIELD

INCREASE €’M

DECREASE €’M

INCREASE €’M

DECREASE €’M

29.7
14.2
6.6
0.5

51.0

(29.5)
(14.2)
(6.6)
(0.5)

(50.8)

(34.9)
(12.9)
(5.9)
(0.4)

(54.1)

38.4
14.2
6.6
0.4

59.6

20. Joint arrangement
As part of the purchase of 100% ownership of the Windmill Lane property, the Group acquired 100% of the Windmill Lane
Development Company Limited by the acquisition of the 50% interest held by its partner, Starwood Capital Group LP, at the fair
value of the net assets in December 2016. As a result, the Group had no joint arrangements in place at 31 March 2017.

110

Hibernia REIT plc Annual Report 2017

At 31 March 2016 the following joint arrangement was in place:

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

Windmill Lane
Development
Company Limited

REGISTERED ADDRESS/
COUNTRY OF
INCORPORATION

GROUP RELATIONSHIP

DIRECTORS

COMPANY SECRETARY

NATURE OF BUSINESS

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

Castlewood
Corporate Services
Limited

Property
development

21. Other financial assets

Derivatives at fair value
Loans carried at amortised cost

Balance at end of financial year – current

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

115
152

267

213
152

365

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 (31 March 2016: €100m) 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 Lane debt facility. Further details on the
Group’s accounting policy on derivatives can be found in note 4(j) and on its borrowings in note 27. 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 €44m based on a schedule of estimated drawings.

22. Trade and other receivables

Non-current
Prepaid remuneration1
Property income receivables
Other 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 remuneration1
Receivable from loan redemptions
Property income receivables
Prepayments
Tenant fit-out
Corporation tax refund due
VAT refundable

Balance at end of financial year – current

Balance at end of financial year – total

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

2,679
4,066
1,791

8,536

–
–
4,444
137
4,538
789
–
128
72

10,108

18,644

7,124
4,542
–

11,666

326
5,955
4,444
137
2,807
1,253
2,861
427
670

18,880

30,546

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 balance of trade and other receivables has no concentration of credit risk as it comprises mainly prepayments (note 31).

Hibernia REIT plc Annual Report 2017

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23. Non-current assets classified as held for sale

Balance at beginning of financial year
Recognised during the year
Acquisition costs
Sold during the year

Balance at end of financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

3,921
–
–
(3,536)

385

18,499
–
–
(14,578)

3,921

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 (since being acquired in 2014)
have achieved at least their acquisition price on an individual basis and in total a profit of approximately €5.0m (31 March 2016:
€4.8m) 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.

24. Issued capital and share premium

Balance at beginning of financial year
Shares issued during the financial

year (note 1)

31 MARCH 2017

SHARE
CAPITAL
€’000

SHARE
PREMIUM
€’000

31 MARCH 2016

SHARE
CAPITAL
€’000

SHARE
PREMIUM
€’000

TOTAL
€’000

68,125

604,273

672,398

67,032

590,955

657,987

420

5,292

5,712

1,093

13,318

14,411

Balance at end of financial year

68,545

609,565

678,110

68,125

604,273

672,398

Note 1: Shares issued during the financial year as follows:

Share price
Settlement of performance fee due for 2016 financial year

31 MARCH 2017

AT 31 MARCH
2016

€’000 NO. OF SHARES

1.302
5,469

4,200,590

PRICE ON
ISSUE DATE
€’000

1.360
5,712

4,200,590 ordinary shares with a nominal value of €0.10 were issued during the period in settlement of performance-related
fees at a fair value of €1.302 on 31 March 2016, the grant date, giving a total recorded of €5.5m in settlement of fees due.

All of these shares were issued on 16 August 2016 and the associated costs were €19k.

Share price

Business acquisition
Settlement of performance fee due for 2015 financial year
Prepaid remuneration

Total shares issued (10 November 2015)

112

Hibernia REIT plc Annual Report 2017

31 MARCH 2016

CONTRACT
PRICE

€ NO. OF SHARES

1.17605

1,174,625
4,580,443
7,103,659

998,788
3,894,769
6,040,269

PRICE ON ISSUE
DATE
€

1.31800

1,316,402
5,133,305
7,961,075

12,858,727

10,933,826

14,410,782

All of these shares were issued on 10 November 2015 and the associated costs were €11k.

Share capital

Authorised

Allotted, called up and fully paid

In issue at end of financial year

31 MARCH 2017
NO. OF SHARES
’000

31 MARCH 2016
NO. OF SHARES
’000

1,000,000

685,452

681,251

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 and other share-based payments due at 31 March 2017 amounted
to €9.5m at the financial year end (31 March 2016: €5.9m) and are all payable in shares (note 5). A further 7.6m shares are
expected to be issued in relation to these payments.

25. Other reserves

Property revaluation
Cashflow hedging
Share-based payment reserve

Balance at end of financial year

a. Properties revaluation reserve

Balance at beginning of financial year
Increase arising on revaluation of owner-occupied properties

Balance at end of financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

509
(217)
9,467

9,759

323
(112)
5,925

6,136

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

323
186

509

–
323

323

54% (31 March 2016: 32%) of the Group’s property, South Dock House, has been derecognised as an investment property
and recognised as owner occupied property. Subsequent remeasurement to fair value of this property 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.

b. Cashflow hedging reserve

Balance at beginning of financial year
(Loss) arising on fair value of hedging instruments entered into for cashflow hedges

Balance at end of financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

(112)
(105)

(217)

–
(112)

(112)

The cashflow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value
of hedging instruments entered into for cashflow 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 cashflow 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.

Hibernia REIT plc Annual Report 2017

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25. Other reserves continued
b. Cashflow hedging reserve continued
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 expense

c. Share-based payment reserve

Balance at beginning of financial year
Performance-related payments in financial year
Settlement of performance-related payments
Fair value adjustment

Balance at end of financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

5,925
8,874
(5,469)
137

9,467

5,772
5,869
(5,772)
56

5,925

Other reserves comprise represented amounts reserved for the issue of shares in respect of performance-related and other
payments. These are discussed further in note 13.

26. 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

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

218,040
118,586
(19)
(10,624)

89,375
136,797
(11)
(8,121)

325,983

218,040

In August 2016, a dividend of 0.8 cent per share (total dividend €5.5m) was paid to the holders of fully paid ordinary shares.

In January 2017 a dividend of 0.75 cent per share (total dividend €5.1m) was paid to the holders of fully paid ordinary shares.

The Directors propose a final dividend of 1.45 cent per share to be paid to shareholders on 31 July 2017. 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 final dividend to be paid is €10.1m.

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 pages 52 to 53.

114

Hibernia REIT plc Annual Report 2017

27. Financial liabilities

Balance at beginning of financial year
Bank finance drawn during the financial year
Arrangement fees and other costs
Interest payable

Balance at end of financial year

The maturity of non-current borrowings is as follows:
Less than one year
Between two and five years
Over five years

Total

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

72,724
97,877
–
537

171,138

192
170,946
–

171,138

–
75,529
(3,718)
913

72,724

(119)
72,843
–

72,724

The Group has a €400m revolving credit facility (“RCF”) with Bank of Ireland, Barclays Bank plc and Ulster Bank Limited which
has a five-year term to November 2020. The RCF is secured against a corporate debenture. Where debt is drawn to finance the
Group’s developments, the interest cost of this debt is capitalised.

The Group also has a facility of €44.2m to fund the development works at 1 Windmill Lane. The Group’s exposure to this facility
was 50% until the acquisition of 100% of the joint operation in December 2016. As part of the purchase consideration of the
Starwood portion of the Windmill joint operation, the Group assumed €4.7m of the drawn facility and now has full exposure to
the €44.2m facility. The Group intends to repay this facility in early 2018 and also intends to use the RCF to finance the
remaining development expenditure at 1 Windmill Lane.

Where applicable, financing costs relating to these facilities 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 six months or less interest rate changes and contractual
re-pricing rates. In addition, the Group has entered into derivative instruments so that the majority of its EURIBOR exposure
is capped at 1% in accordance with the Group’s hedging policy (note 31).

28. Trade and other payables

Current
Investment property costs payable
Rent prepaid
Rent deposits and other amounts due to tenants
Deferred revenue
Trade and other payables
PAYE/PRSI payable
Tax payable

Balance at end of financial year – current

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

10,083
8,589
2,269
1,067
2,496
138
–

9,130
3,573
1,978
–
4,323
103
216

24,642

19,323

Trade and other payables are interest free and have settlement dates within one year. The Directors consider that the carrying
value of the of trade and other payables approximates to their fair value.

Hibernia REIT plc Annual Report 2017

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29. IFRS and EPRA NAV per share

IFRS net assets at end of financial year
Ordinary shares in issue
IFRS NAV per share (cents)

Ordinary shares in issue
Estimated additional shares for performance related payments

Diluted number of shares

Diluted IFRS NAV per share (cents)

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

Diluted number of shares

EPRA NAV per share (cents)

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

1,013,852
685,452
147.9

685,452
7,603

693,055

896,574
681,251
131.6

681,251
4,550

685,801

146.3

130.7

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

1,013,852
117
–

1,013,969

693,055

896,574
129
457

897,160

685,801

146.3

130.8

The Company has established a reserve of €9.5m (31 March 2016: €5.9m) against the issue of 7.6m ordinary shares relating to
shares due to issue for payments due to the Vendors of the Investment Manager and employees as detailed in note 13.

30. Cashflow statement
Purchase of investment property

Property purchases
Development and refurbishment expenditure (note 2)
Change in prepayment for investment property
Payable for investment property
Change in accrued investment property costs

Cash paid for investment property

NOTE

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

85,378
52,479
296
–
(953)

136,236
37,343
326
42,697
(8,443)

137,200

208,159

31. Financial Instruments and risk management
a. Financial risk management objectives and policy
The Group takes calculated risks 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 Chief Financial Officer, 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
some of the financial risks associated with the underlying business activities of the Group.

116

Hibernia REIT plc Annual Report 2017

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

FAIR VALUE CALCULATION
TECHNIQUE

ASSUMPTIONS

Cash and cash
equivalents

Amortised cost

1 Cash value

Loan and receivables

Amortised cost

3 Assessed in relation to

collateral value

The fair value of cash and cash equivalents
held at amortised cost have been calculated
by discounting the expected cashflows at
prevailing interest rates.

Valuation of collateral is subjective based
on agents guide sales prices and market
observation of similar property sales
were available.

Amortised cost

2 Cash settlement value Most of these are receivables in relation to

Trade and other
receivables

prepayments and they are expected to be
recoverable in the short term. No discounting
is therefore applied.

2 Discounted cashflow The fair value of financial liabilities held
at amortised cost have been calculated by
discounting the expected cashflows at
prevailing interest rates.

Financial liabilities

Amortised cost

Derivative financial
instruments

Fair value

2 Calculated fair value

price

The fair value of derivative financial
instruments is calculated using pricing based
on observable inputs from financial markets.

Trade and other
payables

Amortised cost

2 Cash settlement value We have assessed these items and have
determined that they are either deferred
income or accruals or are creditors that 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 plc Annual Report 2017

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31. Financial Instruments and risk management continued
c. Fair value hierarchy 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.

Trade and other receivables
Loans
Derivatives at fair value
Cash and cash equivalents
Financial liabilities
Trade and other payables

FAIR VALUE
HIERARCHY

LOANS AND
RECEIVABLES
€’000

AT FAIR VALUE
€’000

AT AMORTISED
COST
€’000

AS AT 31 MARCH 2017

2
3
2
1
2
2

18,644
152
–
18,148
–
–

36,944

–
–
115
–
–
–

115

–
–
–
–
(171,138)
(24,642)

CARRYING
VALUE
€’000

18,644
152
115
18,148
(171,138)
(24,642)

FAIR VALUE
€’000

18,644
152
115
18,148
(171,138)
(24,642)

(195,780)

(158,721)

FAIR VALUE
HIERARCHY

LOANS AND
RECEIVABLES
€’000

AT FAIR VALUE
€’000

AT AMORTISED
COST
€’000

CARRYING
VALUE
€’000

FAIR VALUE
€’000

AS AT 31 MARCH 2016

2
3
2
1
2
2

30,546
152
–
23,187
–
–

53,885

–
–
213
–
–
–

213

–
–
–
–
(72,724)
(19,323)

30,546
152
213
23,187
(72,724)
(19,323)

(92,047)

(37,949)

Movements of Level 3 fair values
This reconciliation includes investment property which is described further in note 19 to these consolidated financial statements.

Balance at beginning of financial year
Transfers out of Level 31
Purchases, sales, issues and settlement
Purchases2
Sales
Written call option3
Fair value movement

Balance at end of financial year

1. Owner occupied property.
2.
3. Starwood option to acquire its 50% interest in the Windmill Lane development was exercised in 2016.

Includes development and refurbishment expenditure.

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

927,808
(1,651)

137,857
–
–
103,525

631,248
(2,400)

173,579
(9,875)
5,100
130,156

1,167,539

927,808

118

Hibernia REIT plc Annual Report 2017

d. Risk management
The Group has identified exposure to the following risks:
Market risk
Credit risk
Liquidity risk

The policies for managing each of these and the principal effects of these policies on the results for the financial year are
summarised below:

i. Market risk
Market risk is the risk that the fair value or cashflows 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 partly
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 this or the previous financial year-end. Borrowings were €173.4m
(31 March 2016: €75.6m). 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 €1.7m (31 March 2016: €0.8m).

ii. 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
Depository to ensure the security of the cash assets.

Concentration of risk in receivables: €2.2m is due from a previous tenant in relation to scheduled lease break payments, none of
which is past due. Other than this there are no concentrations of credit risk (31 March 2016: approximately €2.9m was 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

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

267
18,644
18,148

37,059

365
30,546
23,187

54,098

Hibernia REIT plc Annual Report 2017

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Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

31. Financial Instruments and risk management continued
d. Risk management continued
iii. 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 period end

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

3,999

26,665

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.

Trade and other payables
Financial liabilities

Total liabilities due

Funds available:
Cash and cash equivalents
Revolving credit facility undrawn

Total funds available

Net funds available

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

24,642
171,138

195,780

18,148
241,000

259,148

63,368

19,323
72,724

92,047

23,187
325,000

348,187

256,140

Listed below are the contractual maturities of the Group’s financial liabilities. Only trade and other payables relating to cash
expenditure are included, the balances relate either to non-cash items or deferred income. These include interest margins
payable and contracted repayments. EURIBOR is assumed at 0%.

At 31 March 2017

Non-derivatives
Borrowings
Trade and other payables
Payable for investment property

Total

At 31 March 2016

Non-derivatives
Borrowings
Trade and other payables
Payable for investment property

Total

120

Hibernia REIT plc Annual Report 2017

CARRYING
AMOUNT

CONTRACTUAL
CASHFLOWS

6 MONTHS
OR LESS

6–12 MONTHS

1–2 YEARS

2–5 YEARS

171,138
2,634
10,083

183,267
2,634
10,083

183,855

195,984

1,630
2,634
10,083

14,347

2,345
–
–

2,345

18,119
–
–

18,119

161,173
–
–

161,173

CARRYING
AMOUNT

CONTRACTUAL
CASHFLOWS

6 MONTHS
OR LESS

6–12 MONTHS

1–2 YEARS

2–5 YEARS

76,155
4,642
9,130

89,927

82,619
4,642
9,130

96,391

626
4,426
9,130

14,182

782
216
–

998

1,563
–
–

1,563

79,648
–
–

79,648

e. Capital management
The Group manages capital in order to ensure its continuance as a going concern.

The Group has a stated policy of not incurring debt above 40% of the market value of its property assets. Under the Irish REIT
rules the ratio must remain under 50%.

Capital comprises share capital, reserves and retained earnings as disclosed in the Consolidated and Company Statement
of changes in equity. At 31 March 2017 the total capital of the Company was €1,014m (31 March 2016: €897m).

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.

As the Company is authorised under the Alternative Investment Fund regulations it is required to maintain 25% of its annual fixed
overheads as capital. This is managed through the Company’s risk management process. The limit was monitored throughout the
financial year and no breaches occurred.

32. 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

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

45,773
137,766
162,841

30,592
82,245
80,808

346,380

193,645

The Group leases its investment properties under operating leases. The weighted average unexpired lease term (“WAULT”) at
31 March 2017, excluding residential properties and weighted on contracted rents, based on the earlier of lease break or expiry
date 6.7 years (31 March 2016: 5.6 years).

These calculations are based on all leases entered into at 31 March 2017, i.e. including pre-lets. The sizeable increase in
receivables is mainly the result of new leases contracted in Cumberland Place and One Dockland Central, increases due to
Harcourt Square lease renegotiations along with the addition of the Clanwilliam Court purchases.

Hibernia REIT plc Annual Report 2017

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Strategic reportGovernanceFinancial statementsNotes forming part of the Annual Report continued

33. Investment in subsidiary undertakings
The Company has the following interests in ordinary shares in the following material subsidiary undertakings at 31 March 2017.
These subsidiaries are fully owned and consolidated within the Group.

NAME

Hibernia REIT
Finance Limited

Hibernia REIT Holding
Company Limited

Hibernia REIT
Building Management
Services Limited

WK Nowlan REIT
Management Limited

Nowlan Property
Limited

Windmill Lane
Development Company
Limited

REGISTERED
ADDRESS/COUNTRY
OF INCORPORATION

SHAREHOLDING/
NUMBER OF
SHARES HELD

DIRECTORS

COMPANY SECRETARY

NATURE OF BUSINESS

South Dock
House, Hanover
Quay, Dublin D02
XW94, Ireland

100%/10 Richard Ball, Thomas

Sean O’Dwyer

Edwards-Moss,
Kevin Nowlan, Frank
O’Neill

Financing
activities

100%/1 Richard Ball, Kevin

Nowlan, Frank
O’Neill

Castlewood
Corporate Services
Limited

Holding property
interests

100%/1 Richard Ball, Kevin

Nowlan, Frank
O’Neill

Castlewood
Corporate Services
Limited

Property
management

100%/300,000 Richard Ball, Thomas

Edwards-Moss,
Kevin Nowlan, Frank
O’Neill

Castlewood
Corporate Services
Limited

Investment
holding company

100%/100 Kevin Nowlan,

William Nowlan,
Frank O’Neill

Castlewood
Corporate Services
Limited

Holding company

100%/100 Richard Ball, Kevin
Nowlan

Castlewood
Corporate Services
Limited

Development and
management of
real estate

On 12 December 2016, the Group acquired a 50% interest in Windmill Lane Development Company Limited through its
subsidiary, Hibernia REIT Holding Company Limited. This brought its total holding to 100%. This company manages the
Windmill Lane development and was acquired in conjunction with of the acquisition of the 100% interest in this property.
50% of the fair value of the net assets of €100 were acquired for €50. The Group also established a subsidiary during the
financial year, Hibernia REIT Building Management Services Limited, to carry out property management services.

The Group has other subsidiary companies which are generally property management companies and are not considered material.

The Group has no interests in unconsolidated subsidiaries.

34. Related parties
a. Subsidiaries
All transactions between the Company and its subsidiaries are eliminated on consolidation.

b. Other related party transactions
WK Nowlan Property Limited, now trading as WK Nowlan Real Estate Advisors, has one Director (William Nowlan) in common
with the Company. During the financial year WK Nowlan Real Estate Advisors was engaged on an arm’s length basis to carry out
project management, agency and due diligence services across the Group’s property portfolios. The fees earned by WK Nowlan
Real Estate Advisors for these services were benchmarked on normal commercial terms and totalled €0.8m for the financial year
to 31 March 2017 (31 March 2016: €1.3m). An amount of €30k was owed to WK Nowlan Real Estate Advisors at the financial
year end (31 March 2016: €100k).

122

Hibernia REIT plc Annual Report 2017

In March 2016, the Group acquired Marine House and as a result became the landlord of WK Nowlan Real Estate Advisors who,
in 2013, had agreed lease terms with the previous owner on normal commercial terms. The Group received rent of €140k from
WK Nowlan Real Estate Advisors during the financial year (31 March 2016: €6k). No amounts were owed to the Group from WK
Nowlan Real Estate Advisors at the financial year end.

William Nowlan is Chairman of WK Nowlan Real Estate Advisors. William Nowlan is a shareholder in WK Nowlan Real Estate
Advisors along with Kevin Nowlan and Frank O’Neill. 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 2017 (31 March 2016: €50k). William Nowlan also
receives a fee of €50k per annum in relation to his role as a non-executive Director. An amount of €12.5k was owed to him at
the financial year end as well as the performance related payments below.

As part of the performance-related payments for the financial year (note 5) the following payments are due:

Kevin Nowlan: €3.2m, Frank Kenny: €2.1m, William Nowlan: €1.6m and Frank O’Neill: €0.6m. (31 March 2016: Kevin Nowlan:
€2.0m, William Nowlan: €1.0m, Frank Kenny: €1.4m and Frank O’Neill: €0.4m).

As part of his consultancy agreement with the Company, Frank Kenny is entitled to €200k in fees for the financial year ended
31 March 2017 (31 March 2016: €200k). These were paid in full during the financial year.

Thomas Edwards-Moss rents an apartment from the Group at market rent and paid €17k in rent during the financial year
(31 March 2016: €17k).

For further information on Directors’ emoluments please refer to the Directors Remuneration Report on pages 66 to 70 of this
Annual Report.

c. Key management personnel
In addition to the executive and non-executive Directors, the following are the key management personnel of the Group:
Richard Ball
Sean O’Dwyer
Frank O’Neill
Mark Pollard

Chief Investment Officer
Company Secretary and Risk & Compliance Officer
Chief Operations Officer
Director of Development

The remuneration of the Directors and the key management personnel during the financial year was as follows:

Short-term benefits
Post-employment benefits
Other long-term benefits
Share-based payments

Total for the financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 20161
€’000

2,121
163
–
263

1,171
63
–
254

2,547

1,488

The remuneration of Directors and key management is determined by the Remuneration Committee having regard to the
performance of individuals and market trends.

35. Events after the reporting period
The Directors have proposed a final dividend of 1.45 cent per share or €10.1m that is subject to approval at the AGM to be held
on 25 July 2017. Other than this, there were no significant events after the reporting date.

Hibernia REIT plc Annual Report 2017

123

Strategic reportGovernanceFinancial statements

Company statement of financial position
As at 31 March 2017

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

Total non-current liabilities

Current liabilities
Trade and other payables

Total current liabilities

Total equity and liabilities

NOTES

31 MARCH 2017
€’000

31 MARCH 2016
AS RESTATED
€’000

4,795
1,057,427
26,235
47,067
98
8,247

1,143,869

9,434
17,881

27,315
385

27,700

2,946
906,781
26,225
15,298
203
11,662

963,115

17,754
21,183

38,937
3,921

42,858

1,171,569

1,005,973

678,110
9,759
279,528

967,397

184,102

20,070

672,398
6,136
211,653

890,187

98,574

17,212

1,171,569

1,005,973

The notes on pages 127 to 136 form an integral part of these Company financial statements. The Company financial statements on
pages 127 to 136 were approved and authorised for issue by the Board of Directors on 7 June 2017 and signed on its behalf by:

Kevin Nowlan
Chief Executive Officer

Thomas Edwards-Moss
Chief Financial Officer

124

Hibernia REIT plc Annual Report 2017

Company statement of changes in equity
For the financial year ended 31 March 2017

Balance as previously stated at 31 March 2016
Effect of restatement
Balance at beginning of financial year as restated
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
Share issue costs
Share-based payments

SHARE
CAPITAL
€’000

68,125
–
68,125

–
–

FINANCIAL YEAR ENDED 31 MARCH 2017

SHARE
PREMIUM
€’000

604,273
–
604,273

RETAINED
EARNINGS
€’000

211,857
(204)
211,653

OTHER
RESERVES
€’000

6,136
–
6,136

TOTAL
€’000

890,391
(204)
890,187

–
–

78,518
–

–
81

78,518
81

68,125

604,273

290,171

6,217

968,786

–
–
420

–
–
5,292

(10,624)
(19)
–

–
–
3,542

9,759

(10,624)
(19)
9,254

967,397

Balance at end of financial year

68,545

609,565

279,528

Balance at beginning of financial year
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
Share issue costs
Share-based payments

FINANCIAL YEAR ENDED 31 MARCH 2016 (AS RESTATED)

SHARE
CAPITAL
€’000

SHARE
PREMIUM
€’000

RETAINED
EARNINGS
€’000

OTHER
RESERVES
€’000

TOTAL
€’000

67,032

590,955

89,249

5,772

753,008

–
–

130,536
–

–
211

130,536
211

67,032

590,955

219,785

5,983

883,755

–
–
1,093

–
–
13,318

(8,121)
(11)
–

–
–
153

(8,121)
(11)
14,564

Balance at end of financial year

68,125

604,273

211,653

6,136

890,187

The notes on pages 127 to 136 form an integral part of these Company financial statements.

Hibernia REIT plc Annual Report 2017

125

Strategic reportGovernanceFinancial statementsCompany statement of cashflows
For the financial year ended 31 March 2017

Cashflows from operating activities
Profit for the financial year
Adjusted non-cash movements:
Revaluation of investment properties
Other gains and losses
Share-based payments
Deferred remuneration paid
Depreciation
Property income paid/(payable) in advance
Finance expense
Income tax charged/(credited)

Operating cashflow before movements in working capital
Decrease/(Increase) in trade and other receivables
(Decrease)/Increase in trade and other payables

Net cashflow from operating activities

Cashflows from investing activities
Purchase of fixed assets
Cash paid for investment property
Proceeds from the sale of non-current assets classified as held for sale
(Increase) in loans to subsidiaries
Business acquisition (net of acquired cash)
Prepaid remuneration
Income tax paid
Finance expense

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
AS RESTATED
€’000

NOTES

78,518

130,536

(63,153)
25
8,874
4,444
206
4,949
6,238
466

40,567
2,124
(242)

42,449

(218)
(91,902)
9,534
(31,769)
(10)
–
(388)
(4,710)

(118,948)
(2,530)
5,925
4,191
65
(1,807)
3,149
(514)

20,067
(2,149)
(6,724)

11,194

(46)
(188,406)
12,226
(11,314)
(24,094)
(7,104)
(349)
(2,261)

Net cashflow absorbed by investing activities

(119,463)

(221,348)

Cashflow from financing activities
Dividends paid
Dividends received
Bank borrowings and notes issued
Arrangement fee paid re bank facilities
Derivatives premium
Share issue costs

Net cash inflow from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at start of financial year
(Decrease)/increase in cash and cash equivalents

Net cash and cash equivalents at end of financial year

The notes on pages 127 to 136 form an integral part of these Company financial statements.

(10,624)
355
84,000
–
–
(19)

73,712

(3,302)

21,183
(3,302)

17,881

(8,121)
–
104,850
(3,718)
(315)
(11)

92,685

(117,469)

138,652
(117,469)

21,183

126

Hibernia REIT plc Annual Report 2017

Notes to the Company financial statements

a. Accounting policies and critical accounting estimates and judgements
The Company’s financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as applied in accordance with the provisions of the Companies Act 2014. 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 91 to 95 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 Notes 2(e) and 2(f) to the consolidated financial statements on pages 88 to 89 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 cashflows 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 cashflow 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. Restatement of prior year
In November 2015, the Company entered into a debenture with a nominal value of €29.9m with its subsidiary, WK Nowlan REIT
Management Limited. This debenture is redeemable in 2021 and was issued as consideration in the transfer of the business of
WK Nowlan REIT Management Limited to the Company. This debenture was omitted in error from the Company statement of
financial position which was included in the 2016 Annual Report. In line with accounting policy 4. (j), the debenture is accounted
for at fair value at recognition and subsequently carried at amortised cost. Thus, the profits of the Company are decreased by the
effective interest rate on the debenture for the financial year ended 31 March 2016 of €204k. The comparatives for the Company
statement of financial position in this Annual Report have been retrospectively restated to show the impact of this debenture on
the Company statement of financial position. This debenture is eliminated from the Group accounts on consolidation.

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Strategic reportGovernanceFinancial statementsNotes to the Company financial statements continued

b. Restatement of prior year (continued)
Impact on financial statements for the year ended 31 March 2016

Balance sheet as at 31 March 2016
Non-current assets
Investment in subsidiaries

Capital
Retained earnings

Non-current liabilities
Financial liabilities
Trade and other payables

Current liabilities
Trade and other payables

PREVIOUSLY
REPORTED
STATEMENT OF
FINANCIAL
POSITION AT
31 MARCH 2016
€’000

ISSUANCE OF
DEBENTURE AT
FV
€’000

IMPAIRMENT
ASSESSMENT OF
INVESTMENT IN
SUBSIDIARY
€’000

EFFECTIVE
INTEREST RATE
CHARGED FOR
PERIOD
€’000

RESTATED
BALANCE
STATEMENT OF
FINANCIAL
POSITION AT
31 MARCH 2016
€’000

6,930

19,2952

(211,857)

(72,145)
(5,772)

(26,225)1
5,772

(18,370)

1,158

–

26,225

2043

(211,653)

(204)3

–

(98,574)
–

(17,212)

1. The debenture will mature at €29.9m in November 2021. The fair value of the debenture at the date of issue was €26.2m.
2. The excess of the fair value of the debenture issued over the fair value of the assets and liabilities acquired by the Company was €19.3m and is recorded as an investment in a subsidiary.
3. This is the effective interest rate for the period.

c. Operating profit
Operating profit for the financial year is stated after charging:

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

300
418
4,444
–
296
206
1,101
2,760
2,948

12,473

300
388
1,802
1,240
310
65
304
1,438
2,556

8,403

Auditors’ remuneration
For further information on Auditor’s remuneration, please refer to note 11 of the consolidated financial statements.

128

Hibernia REIT plc Annual Report 2017

FINANCIAL
YEAR ENDED
31 MARCH 2017
NUMBER

FINANCIAL
YEAR ENDED
31 MARCH 2016
NUMBER

€’000

2,785
231
443
187

3,646

€’000

2,760
886

3,646

€’000

1,259
78
455
101

1,893

€’000

983
910

1,893

TOTAL
€’000

2,946

1,651
218
(206)
186

4,795

d. Employment

Administration

The staff costs for the above employees were:

Wage and salaries
Social insurance costs
Employee share-based payment expense (Group note 13)
Pension costs-defined contribution plan

Total

Staff costs are allocated to the following expense headings:

Administration expenses
Performance-related payments

Total

For further information on employment, please refer to note 12 of the consolidated financial statements.

e. Property, plant and equipment
At 31 March 2017

Carrying value at start of financial year
Additions:
Transferred from investment property at fair value
Acquisitions
Depreciation
Revaluations included in other comprehensive income

Carrying value at end of financial year

LAND AND
BUILDINGS
€’000

2,703

1,651
–
(67)
186

4,473

OFFICE AND
COMPUTER
EQUIPMENT
€’000

LEASEHOLD
IMPROVEMENTS
AND FIXTURES
AND FITTINGS
€’000

–
45
(26)
–

211

–
173
(112)
–

271

The Group now occupies 54% (31 March 2016: 32%) of the office space in its South Dock House property. This property was
revalued as at 31 March 2017 and 31 March 2016 by the Group’s valuers in accordance with the valuation approach described
under note 2. (f).

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129

Strategic reportGovernanceFinancial statementsNotes to the Company financial statements continued

e. Property, plant and equipment (continued)
At 31 March 2016

Carrying value at end of financial year

f. Investment properties

LAND AND
BUILDINGS
€’000

–

2,400
–

(20)
323

2,703

OFFICE AND
COMPUTER
EQUIPMENT
€’000

LEASEHOLD
IMPROVEMENTS
AND FIXTURES
AND FITTINGS
€’000

–

–
37
8
(13)
–

–

–
205
38
(32)
–

211

TOTAL
€’000

–

2,400
242
46
(65)
323

2,946

FAIR VALUE CATEGORY

as owner occupied

Properties transferred between segments1

31 MARCH 2017

OFFICE ASSETS
LEVEL 3
€’000

OFFICE
DEVELOPMENT
ASSETS
LEVEL 3
€’000

RESIDENTIAL
ASSETS
LEVEL 3
€’000

INDUSTRIAL
ASSETS
LEVEL 3
€’000

TOTAL
LEVEL 3
€’000

647,042

134,141

113,200

12,398

906,781

52,369
7,413
37,925

(9)
29,031
21,569

28
299
2,902

–
13
757

52,388
36,756
63,153

(1,651)
126,650

–
(126,650)

–
–

(1,651)
–

Carrying value at end of financial year

869,748

58,082

116,429

13,168

1,057,427

1. Cumberland Place development which was completed in September 2016.

FAIR VALUE CATEGORY

Carrying value at 31 March 2015
Additions:
Property purchases
Development and refurbishment expenditure
Revaluations included in income statement
Disposals:
Property sale
Transferred to property, plant and equipment

as owner occupied

31 MARCH 2016

OFFICE ASSETS
LEVEL 3
€’000

OFFICE
DEVELOPMENT
ASSETS
LEVEL 3
€’000

RESIDENTIAL
ASSETS
LEVEL 3
€’000

INDUSTRIAL
ASSETS
LEVEL 3
€’000

TOTAL
LEVEL 3
€’000

475,877

88,600

66,500

10,319

641,296

106,107
7,488
59,970

–
19,960
45,374

30,129
9,784
6,787

–

(19,793 )

(2,400)

–

–
111
1,968

–

136,236
37,343
114,099

(19,793)

(2,400)

Carrying value at 31 March 2016

647,042

134,141

113,200

12,398

906,781

Note 19 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 except for the Windmill Lane development property which is
held through the Company’s subsidiary, Hibernia REIT Holding Company Limited.

130

Hibernia REIT plc Annual Report 2017

g. Investment in subsidiaries

Balance at financial year end

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
AS RESTATED
€’000

26,235

26,225

The Company set up Hibernia REIT Building Management Services Limited during the financial year to carry on its building
management activities.

h. Loans to subsidiaries

Balance at beginning of financial year
Loan advances
Loan repayments
Interest income at effective interest rate

Balance at end of financial year

The maturity of intercompany loans are as follows:
Less than one year
Between two and five years
Over five years

Total

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

15,298
32,901
(1,132)
–

47,067

47,067
–
–

47,067

3,984
17,172
(6,982)
1,124

15,298

15,298
–
–

15,298

The majority of the above balance, €46m is due from Hibernia REIT Holding Company Limited in relation to the purchase of
and short-term funding supplied to the Windmill Lane development project. It is expected that now the project is 100% owned
by the Group, funding may be supplied directly from the Group financing arrangements in the short term. These loans are
therefore all recorded at book value which the Directors consider approximates fair value due to their short-term nature.

i. Other financial assets

Derivatives at fair value

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

203

Other financial assets consist of the fair value of the Company’s hedging instruments. Note 31 of the Group financial statements
contains further information on these instruments.

Hibernia REIT plc Annual Report 2017

131

Strategic reportGovernanceFinancial statementsNotes to the Company financial statements continued

j. Trade and other receivables

Non-current
Prepaid remuneration
Property income receivables
Other receivables and prepayments

Balance at end of financial year – non-current

Current
Due from sale of non-current assets classified as held for sale
Prepaid remuneration
Property income receivables
Prepayments
Tenant fit-out
Income tax refund due
VAT refundable

Balance at end of financial year – current

Balance at end of financial year – total

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

2,679
4,067
1,501

8,247

–
4,444
4,319
576
–
95
–

9,434

17,681

7,123
4,539
–

11,662

5,955
4,444
2,806
779
2,861
349
560

17,754

29,416

There are no amounts past due. The Directors consider that the carrying value of trade and other receivables approximates to
their fair value.

k. Non-current assets classified as held for sale
For further information on non-current assets classified as held for sale refer to note 23 of the Consolidated financial statements.

l. Issued share capital and share premium
For information on issued share capital refer to note 24 of the consolidated financial statements

m. Other reserves
For further information on other reserves refer to note 25 of the consolidated financial statements.

n. Retained earnings

Balance at beginning of financial year
Profit for the financial year
Share issuance costs
Dividends paid

Balance at end of financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
AS RESTATED
AS RESTATED
€’000

211,653
78,518
(19)
(10,624)

279,528

89,249
130,536
(11)
(8,121)

211,653

For further information on retained earnings refer to note 26 of the consolidated financial statements.

132

Hibernia REIT plc Annual Report 2017

o. Financial liabilities

Balance at beginning of financial year
Debenture issued
Bank finance drawn during the financial year
Arrangement fees and other costs
Interest payable

Balance at end of financial year

The maturity of non-current borrowings is as follows:
Less than one year
Between two and five years
Over five years

Total

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
AS RESTATED
€’000

98,574
–
84,000
–
1,528

184,102

429
156,639
27,034

184,102

–
26,225
75,000
(3,718)
1,067

98,574

137
72,212
26,225

98,574

For further information on financial liabilities refer to note 27 of the consolidated financial statements.

p. Trade and other payables

Current
Investment property costs payable
Rent prepaid
Rent deposits and other amounts due to tenants
Deferred revenue
Trade and other payables
PAYE/PRSI payable
Tax payable

Balance at end of financial year – current

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
AS RESTATED
€’000

5,863
8,589
2,269
975
2,211
125
38

20,070

8,621
3,573
1,978
–
2,772
92
176

17,212

For further information on trade and other payables refer to note 28 of the consolidated financial statements.

q. Cashflow statement
Purchase of investment property

Property purchases
Development and refurbishment expenditure
Payable for investment property
Change in accrued investment property costs

Cash paid for investment property
Cash received from sale of investment property

Net cash paid for investment property

NOTE

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

52,388
36,756
–
2,758

91,902
–

91,902

136,236
32,159
42,697
(7,934)

203,158
(14,752)

188,406

Hibernia REIT plc Annual Report 2017

133

Strategic reportGovernanceFinancial statementsNotes to the Company financial statements continued

r. 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 31 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 31 of the
Annual Report. Assets held at Level 3 include investment properties in addition to the loans and receivables.

FAIR VALUE
HIERARCHY

LOANS AND
RECEIVABLES
€’000

AT FAIR VALUE
€’000

AT AMORTISED
COST
€’000

AS AT 31 MARCH 2017

2
3
2
1
2
2

17,681
47,067
–
17,881
–
–

82,629

–
–
98
–
–
–

–
–
–
–
(184,102)
(20,070)

FAIR VALUE
HIERARCHY

LOANS AND
RECEIVABLES
€’000

AT FAIR VALUE
€’000

AT AMORTISED
COST
€’000

AS AT 31 MARCH 2016 AS RESTATED

2
3
2
1
2
2

29,416
15,298
–
21,183
–
–

65,897

–
–
203
–
–
–

203

–
–
–
–
(98,574)
(17,212)

CARRYING
VALUE
€’000

17,681
47,067
98
17,881
(184,102)
(20,070)

FAIR VALUE
€’000

17,681
47,067
98
17,881
(184,102)
(20,070)

CARRYING
VALUE
€’000

29,416
15,298
203
21,183
(98,574)
(17,212)

FAIR VALUE
€’000

29,416
15,298
203
21,183
(98,574)
(17,212)

(204,172)

(121,445)

(115,786)

(49,686)

Trade and other receivables
Loans
Derivatives at fair value
Cash and cash equivalents
Financial liabilities
Trade and other payables

134

Hibernia REIT plc Annual Report 2017

Fair value movements at Level 3

Balance at beginning of financial year
Transfers out of Level 31
Purchases, sales, issues and settlement
Purchases2
Sales
Written call option3
Advances
Repayments
Fair value movement
Interest income at effective interest rate

Balance at end of financial year

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
AS RESTATED
€’000

922,079
(1,651)

645,280
(2,400)

89,144
–
–
32,901
(1,132)
63,154
–

168,479
(19,793)
5,100
17,172
(6,982)
114,099
1,124

1,104,495

922,079

1. Owner occupied property.
2.
3. Starwood option to acquire its 50% interest in the Windmill Lane development was exercised in 2016.

Includes development and refurbishment expenditure.

Credit risk
The Company has, in addition to the short-term bank deposits and trade payables and receivables, loans to subsidiaries, the
risks of which correspond to the risks of the investment property portfolio discussed for the Group.

Financial assets
Trade and other receivables
Cash and cash equivalents

Balance at end of financial year

Net current assets at financial year

Trade and other payables
Financial liabilities

Total liabilities due

Funds available:
Cash and cash equivalents
Revolving credit facility undrawn

Total funds available

Net funds available

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

98
17,680
17,881

203
29,416
21,183

35,659

50,802

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
AS RESTATED
€’000

7,630

256,646

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
AS RESTATED
€’000

20,070
184,102

204,172

17,212
98,574

115,786

17,881
241,000

21,183
325,000

258,881

346,183

54,709

230,397

Hibernia REIT plc Annual Report 2017

135

Strategic reportGovernanceFinancial statementsNotes to the Company financial statements continued

r. Financial instruments and risk management continued
Listed below are the contractual maturities of the Group’s financial liabilities. These include interest margins payable and
contracted repayments. EURIBOR is assumed at 0%.

At 31 March 2017

Non-derivatives
Financial liabilities
Trade and other payables

Total

At 31 March 2016 as restated

Non-derivatives
Financial liabilities
Trade and other payables

Total

CARRYING
AMOUNT

CONTRACTUAL
CASHFLOWS

6 MONTHS OR
LESS

6–12 MONTHS

1–2 YEARS

2–5 YEARS

184,102
8,144

197,542
8,144

192,246

205,686

1,630
8,144

9,774

1,630
–

1,630

3,260
–

3,260

191,023
–

191,023

CARRYING
AMOUNT

CONTRACTUAL
CASHFLOWS

6 MONTHS OR
LESS

6–12 MONTHS

1–2 YEARS

2–5 YEARS

98,574
11,661

82,021
11,661

110,235

93,682

576
11,485

12,061

782
176

958

1,563
–

1,563

79,100
–

79,100

s. Dividends
For information on the dividends refer to note 16 of the consolidated financial statements

t. Investment in subsidiary undertakings
For information on the Company’s holdings in subsidiaries refer to note 33 of the consolidated financial statements.

u. Related parties
i. Subsidiaries
The Company has loans to subsidiaries of €47.1m as follows comprising:
WK Nowlan REIT Management Limited
Hibernia REIT Holding Company Limited
Hibernia REIT Finance Limited
Hibernia REIT Building Management Services Limited

€0.4m (see debenture below)
€46.3m (Windmill Lane development project)
€0.3m
€0.1m

In addition, the Company has issued a debenture of €29.9m with a carrying value of €27.0m to its subsidiary WK Nowlan REIT
Management Limited.

ii. Other transactions
Transaction with related parties are the same as those disclosed in note 34 of the consolidated financial statements.

iii. Key management personnel
For information on key management personnel refer to note 34c of the consolidated financial statements.

v. 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 2017
determined in accordance with IFRS is €78.5m (31 March 2016: €130.5m).

w. Events after the reporting date
For information on events after the reporting date refer to note 35 of the consolidated financial statements.

136

Hibernia REIT plc Annual Report 2017

Supplementary disclosures (unaudited)
Three-year record

Based on the Group’s consolidated financial statements for the three years ended 31 March
Consolidated statement of financial position

Investment property
Other assets
Financial liabilities
Other liabilities

Net assets

Financed by:
Share capital
Reserves

Total equity

IFRS NAV per share (cents)

EPRA NAV per share (cents)

Consolidated income statement

Net rental income
Revaluation of investment properties
Other income/(expense)
Total operating expenses

Operating profit
Net finance expense

Profit for the financial year

Basic earnings per share (cent)

Diluted earnings per share (cent)

EPRA earnings per share (cent)

Diluted EPRA earnings per share (cent)

Dividend per share (cent)

2017
€’M

1,167
43
(171)
(25)

1,014

678
336

1,014

147.9

146.3

2017
€’M

40
104
2
(21)

125
(6)

119

17.3

17.2

2.2

2016
€’M

928
61
(73)
(19)

897

673
224

897

131.6

130.8

2016
€’M

30
125
–
(15)

140
(4)

136

20.2

20.1

1.5

2015
€’M

641
167
–
(55)

753

658
95

753

112.4

111.8

2015
€’M

18
81
8
(12)

95
(2)

18.4

18.3

0.8

Hibernia REIT plc Annual Report 2017

137

Strategic reportGovernanceFinancial statementsSupplementary disclosures (unaudited) continued
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 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 similar companies.

EPRA measures are discussed in the strategic report on pages 1 to 47. Further detail on these measures are set out below,
including their calculation and reconciliation to the financial statements where applicable.

Table 1: Summary of EPRA performance measures

EPRA Earnings

– basic
– diluted

Adjusted EPRA earnings1 – basic
EPRA NAV
EPRA NNNAV

EPRA NIY
EPRA “topped-up” NIY
EPRA cost ratio including vacancy costs
EPRA cost ratio excluding vacancy costs

Costs adjusted for internalisation1
Adjusted EPRA cost ratio including vacancy costs
Adjusted EPRA cost ratio excluding vacancy costs

EPRA vacancy rate

31 MARCH 2017

31 MARCH 2016

NOTE

€’000

CENT PER
SHARE

14,989
14,989
26,441
1,013,969
1,013,852

(i)
(i)
(i)
(ii)
(ii)

(iii)
(iii)
(iv)
(iv)

(iv)
(iv)

(v)

2.2
2.2
3.9
146.3
146.3

4.4%
4.7%
56.0%
54.4%

23.7%
22.0%

2.7%

€’000

10,024
10,024
20,756
897,160
896,917

CENT PER
SHARE

1.5
1.5
3.1
130.8
130.8

3.8%
4.2%
49.4%
45.1%

45.1%
24.5%
20.1%

4.8%

1. The costs relating to the internalisation are eliminated from this measure to provide indicative impacts on measures post November 2018.

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.

IFRS profit/(loss) 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
Income tax on profit or loss on disposals
Fair value of derivatives
Acquisition costs on share deals (internalisation)1

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)

1. These are costs associated with the acquisition of the Investment Manager in the internalisation transaction.

138

Hibernia REIT plc Annual Report 2017

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

118,586

136,797

(103,525)

(125,056)

–
(43)
(30)
1
–

(176)
(2,136)
(475)
17
1,053

14,989

10,024

683,351
7,603

675,784
4,550

690,954

680,334

2.2
2.2

1.5
1.5

Impact of internalisation: 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 adjusted to remove internalisation-related costs:

EPRA earnings as calculated above
Amounts charged for internalisation
Prepaid remuneration amortised
Performance-related payments1
“Top-up” internalisation expenses

Underlying earnings excluding effects of internalisation

Weighted average number of shares

Adjusted basic EPRA earnings per share (cent)

1. Excludes the net Starwood promote fee of €2.3m which was received as income.

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

14,989
–
4,444
5,907
1,101

26,441

10,024
2,557
1,802
6,069
304

20,756

683,351

675,784

3.9

3.1

ii. EPRA NAV and EPRA NNNAV
The objective of these measures is to highlight the fair value of net assets on an ongoing, 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 movement of derivative instruments is excluded from EPRA NAV on the basis
that these are hedging instruments and intended to be held to maturity.

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

FINANCIAL YEAR ENDED
31 MARCH 2017

FINANCIAL YEAR ENDED
31 MARCH 2016

€’000

1,013,852
–
117

1,013,969

–
(117)

CENT PER
SHARE

€’000

896,574
457
129

CENT PER
SHARE

146.3

897,160

130.8

(114)
(129)

1,013,852

146.3

896,917

130.8

Ordinary shares in issue
Estimated additional shares due for issue from performance reserve

Ordinary shares in issue including performance shares to be

issued – “diluted”

685,452
7,603

693,055

681,251
4,550

685,802

Hibernia REIT plc Annual Report 2017

139

Strategic reportGovernanceFinancial statements
Supplementary disclosures (unaudited) continued
European Public Real Estate Association (“EPRA”) Performance Measures continued

Calculation and explanation of EPRA performance measures 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 basis. The EPRA vacancy rate
measures the value of vacant space expressed as a percentage of the total ERV.

As at 31 March 2017

Investment property at fair value
Less: development/refurbishment1

Completed property portfolio
Allowance for purchasers’ costs

Gross up completed
property portfolio

Annualised cash passing rental income1
Property outgoings

Annualised net rents

Expiration of lease incentives and

fixed uplifts

“Topped-up” annualised net rent

EPRA NIY
EPRA topped-up NIY

OFFICE
€’000

RESIDENTIAL
€’000

INDUSTRIAL
€’000

TOTAL
€’000

OFFICE
DEVELOPMENT

869,748
(94,350)

775,398
34,583

116,429
–

116,429
5,193

13,168
–

13,168
587

999,345
(94,350)

168,042
(168,042)

904,995
40,363

TOTAL

1,167,387
(262,392)

904,995

809,981

121,622

13,755

945,358

35,972
(614)

35,358

2,860

38,218

4.4%
4.7%

6,428
(1,216)

5,212

–

5,212

4.3%
4.3%

674
–

674

705

4.9%
5.1%

43,074
(1,830)

41,244

2,891

44,135

4.4%
4.7%

1. Two Dockland Central and the Hanover Building were in the office segment at the financial year but were under refurbishment at that date. Accordingly, these buildings are excluded from

the above analysis along with any residual income in cash passing rent at 31 March 2017.

As at 31 March 2016

Investment property at fair value
Less: development/refurbishment1

Completed property portfolio
Allowance for purchasers’ costs

Gross up completed
property portfolio

Annualised cash passing rental income
Property outgoings

Annualised net rents

Expiration of lease incentives and

fixed uplifts

“Topped-up” annualised net rent

EPRA NIY
EPRA topped-up NIY

OFFICE
€’000

RESIDENTIAL
€’000

INDUSTRIAL
€’000

645,671
(31,840)

613,831
27,377

114,571
–

114,571
5,110

12,400
–

12,400
553

TOTAL
€’000

772,642
(31,840)

740,802
33,040

DEVELOPMENT

TOTAL

155,014
(155,014)

927,656
(186,854)

740,802

641,208

119,681

12,953

773,842

24,078
(645)

23,433

3,225

26,658

3.7%
4.2%

6,430
(1,226)

5,204

–

5,204

4.3%
4.3%

524
(97)

427

–

427

3.3%
3.3%

31,032
(1,968)

29,064

3,225

32,289

3.8%
4.2%

1. One Dockland Central is included at 41% of floor space representing area being refurbished (31 March 2015: 77%).

140

Hibernia REIT plc Annual Report 2017

iv. EPRA costs
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 after the 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 referring to internalisation

EPRA costs including vacancy costs
Direct vacancy costs

EPRA costs excluding vacancy costs

Gross rental income1

EPRA cost ratio including vacancy costs
EPRA cost ratio excluding vacancy costs

Costs adjusted for internalisation
EPRA costs including vacancy costs
Prepaid remuneration amortised
“Top-up” internalisation expenses for financial year
Performance-related payments

Costs excluding internalisation effects

Direct vacancy costs

Costs excluding direct vacancy costs

Gross rental income1

EPRA cost ratio including vacancy costs
EPRA cost ratio excluding vacancy costs

1. Excludes the net Starwood promote fee of €2.3m which was received as income.

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

20,985
2,838
–

23,823
(695)

23,128

42,519

56.0%
54.4%

14,765
2,497
(1,053)

16,209
(1,429)

14,780

32,786

49.4%
45.1%

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

23,823
(4,444)
(1,101)
(8,215)

10,063

(695)

9,368

42,519

23.7%
22.0%

16,209
(1,802)
(304)
(6,069)

8,034

(1,429)

6,605

32,786

24.5%
20.1%

v. EPRA vacancy rate
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 units
Annualised ERV completed portfolio1

EPRA vacancy rate

FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000

FINANCIAL
YEAR ENDED
31 MARCH 2016
€’000

1,468
54,535

2.7%

2,092
43,815

4.8%

1. Two Dockland Central and Hanover Building are excluded from vacant and completed space as under refurbishment (31 March 2016: The part of One Dockland Central undergoing

refurbishment is excluded from vacant and from completed).

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Strategic reportGovernanceFinancial statements
Supplementary disclosures (unaudited) continued
European Public Real Estate Association (“EPRA”) Performance Measures continued

Calculation and explanation of EPRA performance measures continued
vi. Portfolio information
Rent subject to lease break or expiry – passing rent at 31 March 2017
For period 31 March

Office
Residential
Industrial

Total

Percentage of passing rent
Potential uplift at current ERV

Rent subject to review – passing rent at 31 March 2017
For period 31 March

Office
Residential
Industrial

2018
€’M

0.8
6.4
–

7.2

16.7%
0.4

2018
€’M

2.6
6.4
–

9.0

2019
€’M

3.1
–
0.5

3.6

8.4%
0.5

2020–2022
€’M

7.2
–
0.2

7.4

17.2%
2.6

2019
€’M

8.4
–
0.4

8.8

2020–2022
€’M

19.2
–
0.1

19.3

Percentage of passing rent
Potential uplift at current ERV

20.9%
0.3

20.5%
3.2

44.8%
3.2

In addition to up lifts due to the expiry of incentives and similar arrangements of €2.9m in 2018 there was €2.1m in pre-lets on
developments at 31 March 2017.

Rent subject to lease break or expiry – passing rent at 31 March 2016
For period 31 March

Office
Residential
Industrial

Total

Percentage of passing rent
Potential uplift at current ERV

Rent subject to review – passing rent at 31 March 2016
For period 31 March

Office
Residential
Industrial

Percentage of contracted rent
Potential uplift at current ERV

142

Hibernia REIT plc Annual Report 2017

2017
€’M

8.3
6.4
–

14.7

47.4%
1.0

2017
€’M

9.6
6.4
–

16.0

51.6%
1.3

2018
€’M

0.4
–
0.1

0.5

1.6%
0.0

2019–2021
€’M

6.3
–
0.4

6.7

21.7%
1.3

2018
€’M

2019–2021
€’M

1.8
–
0.4

2.2

7.1%
0.3

12.7
–
0.1

12.8

41.2%
3.5

Supplementary disclosures (unaudited) continued
Other disclosures

Disclosures required under the Alternative Investment Fund Managers Directive (“AIFMD”) for Annual Reports
of Alternative Investment Funds (“AIF”)
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
There were no gains and losses arising on the sale of investment properties (31 March 2016: €0.2m). Included within the
unrealised gains disclosed under IFRS there is a total of €1.1m (31 March 2016: €2.2m) in unrealised losses and €104.6m
(31 March 2016: €127.3m) in unrealised gains.

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 66 to 70 of the Annual Report.
Performance-related remuneration takes account of individual performance and the financial performance of Hibernia REIT plc.

The total remuneration paid to staff in the financial year, all of whom are engaged in managing the Group activities, was
€3,863,125 of which €2,981,483 comprised fixed remuneration and €881,642 comprised variable remuneration (31 March 2016:
€2,574,847 of which €1,670,048 comprised fixed remuneration and €904,799 comprised variable remuneration).
The average number of identified staff during the financial year was 23 (31 March 2016: 13).

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Strategic reportGovernanceFinancial statementsSupplementary disclosures (unaudited) continued
Other disclosures continued

Occupiers representing over 0.5% of contracted rent at 31 March 2017

TENANT

Office of Public Works
Twitter International Company
HubSpot Ireland Limited
The Governor & Co. of the Bank of Ireland
Informatica
Depfa Bank plc
Travelport Digital Limited
BNY Mellon Fund Services (Ireland) Limited
The Commission for Communications Regulations
Electricity Supply Board
Riot Games Limited
AWAS Aviation Acquisitions Limited
O.D.S Company
Deloitte1
Pay & Shop Ltd T/a Realex Payments
BCWM
An Bord Bia
JMC Van Trans Limited
Capita
Invesco Global Asset Management Limited
Daqri International Limited
Park Rite
Renaissance Services of Europe Limited
Weston Office Solutions Limited
Hines Real Estate Ireland Limited
ENI Insurance Limited
Bearingpoint Ireland Limited
Quinn McDonnell Pattison Limited
Morgan Stanley Fund Services (Irl.) Limited
Altify Ireland Limited
Guggenheim Partners Europe Limited
Wella (U.K.) Limited

€’M

PERCENTAGE

6.6
5.1
3.0
2.8
2.1
2.0
1.8
1.6
1.6
1.5
1.2
1.2
1.0
1.0
0.9
0.8
0.7
0.7
0.7
0.6
0.6
0.6
0.4
0.4
0.4
0.3
0.3
0.3
0.3
0.3
0.2
0.2

13.3%
10.3%
6.2%
5.8%
4.2%
4.2%
3.7%
3.3%
3.3%
3.0%
2.5%
2.4%
2.1%
2.1%
1.9%
1.6%
1.4%
1.4%
1.4%
1.2%
1.2%
1.1%
0.9%
0.8%
0.8%
0.6%
0.6%
0.6%
0.5%
0.5%
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.

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Hibernia REIT plc Annual Report 2017

Depository

Registrar

Principal Legal
Adviser

Corporate Brokers

BNP Paribas Securities Services
(Dublin Branch)
Trinity Point
10-11 Leinster Street South
Dublin D02 EF85
Ireland

Capita Registrars (Ireland) Limited
t/a Capita Asset Services
2 Grand Canal Square
Dublin D02 A342
Ireland

A&L Goodbody
25/28 North Wall Quay
IFSC
Dublin D01 H104
Ireland

Goodbody Stockbrokers
2 Ballsbridge Park
Ballsbridge
Dublin D04 YW83
Ireland

Credit Suisse International
One Cabot Square
London E14 40J
United Kingdom

Directors and other information

Directors

Secretary

Assistant Secretary

Daniel Kitchen (Chairman)
Colm Barrington (Senior
Independent Director)
Thomas Edwards-Moss (CFO)
Stewart Harrington
Kevin Nowlan (CEO)
William Nowlan
Terence O’Rourke

Sean O’Dwyer
(Appointed 10 February 2017)

Castlewood Corporate Services
Limited t/a Chartered Corporate
Services
4th Floor
76 Lower Baggot Street
Dublin D02 EK81
Ireland

Registered Office

South Dock House
Hanover Quay
Dublin D02 XW94
Ireland

Company Number

531267

Independent Auditor Deloitte

Chartered Accountants and
Statutory Audit Firm
Hardwicke House
Hatch Street
Dublin D02 ND96
Ireland

KPMG
1 Stokes Place
St. Stephen’s Green
Dublin D02 DE03
Ireland

CBRE Dublin
3rd Floor, Connaught House
1 Burlington Road
Dublin D04 C5Y6
Ireland

Bank of Ireland
50-55 Baggot Street Lower
Dublin D02 Y754
Ireland

Tax Adviser

Independent Valuer

Principal Banker

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Strategic reportGovernanceFinancial statements

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 period or reduced rent in a 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 IFRSs
assets excluding the mark to market on effective cashflow
hedges and related debt instruments and deferred taxation
on revaluations.

EPRA Net Initial Yield (“EPRA NIY”) is the cash passing
rent generated by the investment portfolio at the balance sheet
date, less estimated recurring irrecoverable property costs,
expressed as a percentage of the portfolio valuation as adjusted.
The portfolio valuation is adjusted by the exclusion of
development properties and those under refurbishment.

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 reversionary yield and represents the return that
a property will produce based on the occupancy data of the
tenant leases.

Estimated Rental Value (“ERV”) or market rental value
is the external valuers’ opinion as to what the open market
rental value of the property is on the valuation date, and
which could reasonably be expected to be the rent obtainable
on a new letting on that property on the valuation date.

Fair value movement is the accounting adjustment to
change the book value of the asset or liability to its market value.

FRI Lease is a 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 Group.

IPD is the Investment Property Databank Limited which
is part of the MSCI Group and produces an independent
benchmark of property returns (“IPD Ireland Index”)
and which provides the Group with the performance
information required in calculating the performance
based management fee.

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Hibernia REIT plc Annual Report 2017

IPD Index is the SCSI/Investment Property Databank
Limited Ireland Quarterly Property Index – All Property
(the “IPD Ireland Index”).

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 US 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 on 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.

Market Abuse Regulations are issued by the Central Bank
of Ireland and can be accessed at https://www.centralbank.ie/
regulation/securities-markets/market-abuse/Pages/default.aspx.

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 based on the timing of the income received. As is
normal practice, the equivalent yields (as determined by the
external valuers) assume 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 development properties.

Over rented is used to describe where 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”) January 2014 issued by the Royal Institute of
Chartered Surveyors provides standards for preparing
valuations on property.

Sq.ft. is 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.

Total Portfolio Return (“TPR”) is the annual return of
the property portfolio (capital and income) as calculated by
MSCI, the producers of the IPD Ireland Index.

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.

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147

Strategic reportGovernanceFinancial statementsShareholders’ information

Hibernia REIT plc website
www.hiberniareit.com

Investor contacts
Hibernia REIT plc
South Dock House
Hanover Quay
Dublin D02 XW94
Ireland

T: +353 1 536 9100

For investor queries: info@hiberniareit.com
For media enquiries: media@hiberniareit.com

148

Hibernia REIT plc Annual Report 2017

Hibernia REIT plc
South Dock House
Hanover Quay
Dublin D02 XW94
Ireland

T: +353 1 536 9100
www.hiberniareit.com

For investor queries: info@hiberniareit.com
For media enquiries: media@hiberniareit.com

Townhall space at 1WML under construction,
South Docks