H
i
b
e
r
n
i
a
R
E
I
T
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8
Transforming
Dublin
Annual Report 2018
About us
Hibernia is a Dublin-
focused REIT, listed
on Euronext Dublin
and the London Stock
Exchange, which owns
and develops Irish
property. All of our
€1.3bn portfolio is in
Dublin and we specialise
in city centre offices.
We aim to use our knowledge and
experience of the Dublin property
market, together with modest
levels of leverage, to generate
above average long-term returns
for our shareholders.
We focus on improving buildings
at appropriate times in the
property cycle and growing
income: our portfolio is mainly
a mix of regenerated properties
and assets held for future
repositioning.
Clockwise from top left:
1SJRQ under construction
1WML
2WML (CGI)
2DC
Clanwilliam Court
1 Cumberland Place Phase II (CGI)
Hibernia’s Management Team at 1SJRQ
Hibernia REIT plc Annual Report 2018
Contents
Strategic report
IFC About us
02 Our business at a glance
03 Our portfolio
04 Why Dublin?
06 Chairman’s statement
08 CEO’s statement
12 Market review
14 Business model
16 Strategic priorities
18 Key performance indicators
19 Operational metrics
20 Strategy in action
24 Operational review
– Portfolio overview
24
– Acquisitions and disposals
26
– Developments and refurbishments
28
– Asset management
31
– Financial results and position
33
36 Risk management
40 Principal risks and uncertainties
48 Sustainability
Governance
68
Chairman’s corporate governance
statement
72 Board of Directors
74 Our Management Team
77 Corporate governance report
88 Audit Committee report
95 Remuneration Committee report
128 Nominations Committee report
130 Directors’ report
136 Directors’ responsibility statement
Financial statements
138 Independent auditors’ report
146 Consolidated income statement
147 Consolidated statement of
comprehensive income
148 Consolidated statement of financial
position
149 Consolidated statement of changes
in equity
150 Consolidated statement of cashflows
151 Notes to the financial statements
194 Company statement of financial
position
195 Company statement of changes
in equity
196 Company statement of cashflows
197 Notes to the Company financial
statements
Supplementary disclosures
(unaudited)
208 Four-year record
209 Alternative performance measures
211 EPRA performance measures
217 Other disclosures
219 Directors and other information
220 Glossary
Hibernia REIT plc Annual Report 2018
01
GovernanceFinancial statementsStrategic report Our business at a glance
Our investment focus is on office properties in central Dublin
with the potential for us to enhance value through repositioning
or asset management.
Portfolio
Segment by value
Office tenants by industry sector
CBD Office Traditional Core
TMT
CBD Office IFSC
CBD Office South Docks
CBD Office Development
Dublin Residential
Dublin Industrial
1%
11%
Professional Services
Government Agency
Banking & Capital Markets
Co-working
Other
Insurance & Reinsurance
2%
2%
4%
10%
33%
21%
Portfolio statistics
In-place offices (sq. ft.)
1.1m
Offices including fully
developed pipeline (sq. ft.)
1.5m
Properties
32
Commercial tenants
53
Average office rent (psf)
€43
€1.3bn
€49.6m
25%
21%
20%
8%
Financial position
Net assets
Net debt
Loan to value
42%
Reversionary potential
12.3%
EPRA vacancy rate
2.0%
Loan to value proforma
committed capex
(using GDV)
Cash and undrawn
facilities net of
committed capex
€1.1bn
€203m
15.5%
20.2%
€120m
Financial performance
Portfolio
value
Contracted rent
EPRA NAVPS
Net rental
income
Total property
return
EPRA EPS
DPS
€1.3bn
€56m
159.1c
€46m
11.6%
2.8c
3.0c
Alternative Performance Measures (“APMs”)
The Group uses a number of financial measures to describe its performance which are not defined under International
Financial Reporting Standards (“IFRS”) and which are therefore considered APMs. In particular, measures developed
by the European Public Real Estate Association (“EPRA”) are reported in line with other public real estate companies.
These are defined in more detail, and reconciled with IFRS where applicable, in the Supplementary Information
section on pages 211 to 216 of this Annual Report.
02
Hibernia REIT plc Annual Report 2018
Our portfolio
Read more about our
properties on pages
20 to 32 >>
M50
N7
Newlands
Cross
Dublin
City
Centre
Dundrum
Key
Office properties
Office developments
Residential properties
Industrial properties
Rail line and stations
LUAS line and stations
Hibernia REIT plc Annual Report 2018
03
GovernanceFinancial statementsStrategic report
Why Dublin?
Why is 90% of your portfolio
in central Dublin offices?
Our primary focus is the office
sector for a number of reasons: it
is a large, relatively liquid market
totalling over 40m sq. ft. in Dublin
(c. 25m sq. ft. in city centre) which
attracts international investors
and one where we expect secular
growth over the next decade.
Within the office sector we have
invested solely in central Dublin
offices (i.e. no suburban offices or
offices outside Dublin) as this is the
market where most tenants want to
be – leading to higher rents – and
also where the barriers to entry are
highest, on account of planning
restrictions and scarcity of sites.
We also have 12% of our portfolio
in opportunistic investments in the
residential and industrial sectors
in Dublin.
“We think that the
positives of Brexit for
Dublin are likely to
outweigh the negatives.”
Would you ever invest
outside Dublin?
It would be unwise to say ‘never’,
but for the reasons outlined above
we believe Dublin is likely to remain
the most attractive investment
market for us and it is also the one
where our local knowledge, built
up over many years, is a key
competitive advantage.
Is Brexit good or bad for Dublin?
At the moment none of us knows
exactly what any Brexit ‘deal’ will
look like, if indeed there is one, so
it’s a difficult question to answer!
While companies are often reticent
about giving reasons, we believe
that since the UK Referendum in
June 2016 Dublin has benefitted
from a number of companies
deciding to increase their
headcount here, primarily on
account of Brexit. Some of these
have been financial services
companies moving staff but we
think the larger source of demand
for office space has come from
the TMT sector directing their
expansion to Dublin (“latent
Brexit”). We think this trend will
continue and that the positives
Why is Dublin an attractive place
to invest?
Dublin is by far the largest and
wealthiest city in Ireland: Greater
Dublin currently represents c. 40%
of Ireland’s 4.8m population (source:
CSO) and nearly 50% of its GDP
(source: IMF). It has three
universities and four institutes of
technology producing a young and
highly-skilled workforce, which,
together with its language, legal
system, time-zone and tax
advantages, has attracted many
international companies, particularly
in the technology and financial
sectors. Greater Dublin is expected
to continue to grow rapidly, with the
population forecast to grow by over
25% in the next decade (source:
CSO), and office-based employment
forecast to grow by a similar
amount (source: Oxford Economics).
04
Hibernia REIT plc Annual Report 2018
of Brexit for Dublin are likely
to outweigh the negatives.
What is the outlook for
Dublin property?
Regardless of Brexit, the office
occupational market is in good
health. Take-up in the 2017 calendar
year set a new record of 3.6m sq. ft.
(source: CBRE) and active demand
continues to be strong. The supply
side remains controlled with 2.3m
sq. ft. expected to be delivered in
2018 (61% pre-let) and 1.7m sq. ft.
expected in 2019 (13% pre-let).
The investment market also remains
robust, with high levels of capital
looking to invest in long-let
buildings. The strength of the Irish
economy, a growing population and
robust investor and occupier
demand look set to continue to
support the Dublin property market.
Above and below:
South Dock House on Hanover Quay, above
showing the art installation Grand Canal
Square by Martha Schwartz
Hibernia REIT plc Annual Report 2018
05
GovernanceFinancial statementsStrategic report Chairman’s statement
“We have made good progress against
all our strategic priorities in the year.”
Net rental income
€45.7m +15%
EPRA EPS
2.8c +27%
The year to 31 March 2018 has been
another successful one for Hibernia
with good progress made against
all our strategic priorities. We
continued to grow our rental
income through the delivery of
development schemes and effective
asset management: net rental
income increased to €45.7m from
€39.7m in the previous year, an
increase of 15.1%. The value of our
property portfolio rose to €1.3bn by
year end and EPRA NAV per share
was 159.1 cent, an increase of 8.7%
despite the impact on our portfolio
value due to the increase in stamp
duty on commercial property from
2% to 6% (estimated at €54m or
7.7 cent per share).
Our primary focus in the year was
the delivery of our development
projects, namely the completion
of 1 Windmill Lane (“1WML”) and
Two Dockland Central (“2DC”), and
making significant progress on 1-6
Sir John Rogerson’s Quay (“1SJRQ”)
and 2 Windmill Lane (“2WML”),
which are due to complete by the
end of 2018. The delivery of 1SJRQ
and 2WML will complete our first
building cluster, the Windmill
06
Hibernia REIT plc Annual Report 2018
Quarter, which will total c. 400,000
sq. ft. of offices across five buildings
as well as smaller amounts of retail,
leisure and residential space. The
clustering of office buildings allows
us to provide affordable communal
areas and leisure facilities for our
tenants and is something we are
likely to replicate elsewhere in the
portfolio in future. Development
activity will remain a strategic
priority for us over the medium
term, with the development of
Phase II of Cumberland Place now
approved by the Board and due to
commence shortly and preparation
and planning continuing on our
longer-term pipeline of office
schemes, which will total 505,000
sq. ft. once complete. With the
acquisition of further land at
Gateway, our interest now
comprises 45.4 acres and we are
considering plans to enhance
value there.
Beyond our development
programme, and with property
prices in the Dublin market
continuing to rise, our focus has
shifted to ensuring portfolio returns
remain high through recycling our
capital out of assets with expected
forward returns below our targets
and into assets with opportunities
to drive value through asset
management or improvement. In
the year we sold three assets for a
total €35.8m and made acquisitions
totalling €39.1m.
The annual contracted rent of our
existing portfolio is now €56.0m
(March 17: €48.3m) and our WAULT
has increased to 7.3 years from 6.7
years. New lettings made in the year
added €5.7m to contracted rent
and had an average WAULT of 11.4
years. Rent reviews in the year
added €0.7m to contracted rent, an
average uplift of 138%. While the
overall monetary quantum of uplift
from rent reviews was modest, the
rents achieved were in line with
ERVs which bodes well for the
upcoming rent reviews: at present
there is c. €6m of reversionary
potential in our office portfolio and
most reversionary lease events
occur in the next two years. Given
the strong financial performance
the Board has recommended a final
dividend of 1.9 cent per share for a
total dividend of 3.0 cent for the
year, up 36.4% on last year. Subject
to approval at the 2018 AGM, the
final dividend will be payable on
3 August 2018.
The interim remuneration
arrangements approved as part of
the internalisation transaction in
October 2015 expire in November
2018 and details of the proposed
new Remuneration Policy (the
“Policy”) are set out in the
remuneration report in this Annual
Report and are also being circulated
with the AGM Notice. The new
Policy is intended to ensure the
retention of key management and
staff and to align their interests with
those of shareholders and other
stakeholders. The Remuneration
Committee has consulted Hibernia’s
largest shareholders and also
consulted proxy voting advisers
who have generally been supportive
of the new proposals. Some
changes have been implemented
following feedback and some areas
have been clarified. I hope that you
will be able to support the
Remuneration Committee’s
recommendations and vote in
favour of the new Remuneration
Policy at our AGM.
Finally, I want to thank all our staff
for their hard work and commitment
during the year. Our success would
not be possible without their
dedication and effort. I also want to
pay special thanks to Bill Nowlan
who retired as a Director following
our 2017 AGM. Bill was one of the
founders of Hibernia and played a
significant part in growing the
business in its early years.
Looking forward I am confident
that we can continue to deliver
on our strategic priorities and
enhance shareholder value,
particularly through income and
dividend growth. Hibernia has
an attractive development pipeline
and market conditions remain
favourable with strong demand for
high quality city centre office space.
Daniel Kitchen
Chairman
13 June 2018
Hibernia REIT plc Annual Report 2018
07
GovernanceFinancial statementsStrategic report CEO’s statement
“We are pleased to report excellent
results despite the increase in stamp
duty, with our developments and
residential assets being particularly
strong performers.”
EPRA NAVPS
159.1c +8.7%
Dividend per share
3.0c +36.4%
Total property return vs IPD
4.8%
Our portfolio delivered a total
property return (excluding
acquisition costs) of 11.6%,
outperforming our benchmark, the
IPD Ireland Index, which returned
6.8%. EPRA NAV per share grew by
8.7% to 159.1 cent and we are
proposing a 1.9 cent per share final
dividend taking our total for the
year to 3.0 cent, an increase of
36.4% over the prior year.
Growing Irish economy and
favourable market conditions
Ireland continues to have one of the
best performing economies in the
Euro area and unemployment has
fallen to near pre-crisis levels. This,
together with continuing FDI, is
resulting in strong occupier demand,
particularly from the TMT sector.
Dublin office take-up set a new
record in 2017 and remained above
trend in Q1 2018, taking the overall
vacancy rate to 6.2% by March 2018.
The Grade A vacancy rate in Dublin’s
city centre, where c. 90% of
Hibernia’s portfolio is located was
3.9% at the same date. While supply
of new offices has grown year-on-
year since 2015, it remains relatively
constrained and prime rents have
continued to increase. With strong
occupier demand, limited new
supply and growing rents it has been
unsurprising to see prime office
yields compress and the same
dynamics are in effect in the
residential market. The increase in
stamp duty on commercial property
in the year somewhat reduced the
valuation gains from the yield
compression and rental growth: on a
like-for-like basis our office portfolio
grew 4.3% in value (excl. current
developments) and our residential
portfolio (not subject to the stamp
duty increase) grew 13.4%.
Enhancing portfolio through
disciplined and profitable
recycling of capital
As guided, we made our first sales
of investment properties in the year
and reinvested the proceeds in new
assets which we believe will improve
the forward returns of the portfolio.
We sold three of our smaller assets in
the second half of the financial year
for €35.8m, an aggregate of 20.6%
ahead of their September 2017
valuations. In the case of the
08
Hibernia REIT plc Annual Report 2018
Chancery, D8, we had extended the
unexpired lease term from two years
at acquisition to eight years and
saw few further asset management
opportunities in the near and
medium term. In the case of the
two neighbouring assets in the
South Docks, Hanover Street East
and 11a Lime Street, these were
acquired with the objective of
building a consolidated land holding
to undertake a future redevelopment:
the sales price gave Hibernia the
majority of the upside it could
have expected from any such
redevelopment with no risk.
We made acquisitions totalling
€39.1m in the year. 77 Sir John
Rogerson’s Quay, in the improving
eastern end of the South Docks,
was acquired vacant and we agreed
a simultaneous long lease with
International Workplace Group plc
(“IWG”) generating an immediate
valuation uplift. We also acquired
31.3 acres of agricultural land adjacent
to our Gateway site, increasing our
holding to 45.4 acres in an area with
excellent transport links that we feel
has significant future potential.
Development programme
delivering and making progress
with pipeline of future schemes
We successfully completed our
committed schemes at 1WML and
2DC, delivering 197,000 sq. ft. of
Grade A office space and some
ancillary space and generating an
aggregate profit on cost in excess
of 65% at completion. At 31 March
2018 over 96% of this space was let,
with contracted rent of €11.5m. 1SJRQ
and 2WML, our two committed
developments at 31 March 2018,
will deliver 172,000 sq. ft. of prime
office space and remain on track for
completion in late 2018. They are
the final parts of the Windmill
Quarter, our first cluster of five
adjacent buildings in the South
Docks comprising c. 400,000 sq. ft.
of offices plus further retail (food
& beverage), leisure and residential
units centred around the communal
facilities we are putting into
Windmill Lane, most notably the
Townhall. In May 2018, the Board
approved the development of Phase
II of Cumberland Place, which will
deliver an additional 50,000 sq. ft.
of new Grade A office space and
which we expect to complete in the
first half of 2020.
Following the approval of
Cumberland Place Phase II, our
longer-term development pipeline
totals four schemes. The three
office schemes, two of which have
the scale to create similar clusters
of buildings with shared facilities
to the Windmill Quarter, are
expected to deliver 505,000 sq. ft.
of office space post completion
and we are working to optimise our
plans for them. At Gateway, our
interest has been enhanced by the
additional land we have acquired
and we are assessing our options
to enhance value.
Income and WAULT increasing
and driving growing dividend
Contracted rent grew by 15.9% to
€56.0m per annum and our office
WAULT to the earlier of break
or expiry grew 9.0% to 7.3 years.
The key driver of this has been
the lettings made at the two
developments which completed
in the year, 1WML and 2DC, which
added €5.7m of contracted rent
Hibernia REIT plc Annual Report 2018
09
GovernanceFinancial statementsStrategic report CEO’s statement continued
“We are positive on our prospects: we
have a talented team, a portfolio rich
in opportunity and flexible, low-cost
funding available to support our plans.”
with WAULT to break of 11.4 years.
In addition, we successfully concluded
four rent reviews, adding €0.7m to
contracted rent, an uplift of 138% on
existing rent and in line with ERVs.
EPRA earnings grew 29.4% to
€19.4m (2.8 cent per share) for the
financial year as a result of this
activity and the Board has proposed
a final dividend of 1.9 cent per share,
bringing the dividend for year to
3.0 cent, up 36.4% on prior year.
We see potential for further growth
as our committed and near term
developments, which are unlet at
present and have an ERV of €12.7m,
are leased up and as we capture the
€6.0m of reversionary potential in
our acquired ‘in-place’ office
portfolio, which has an average
period to earlier of review or
expiry of 2.6 years.
Moving towards target
leverage but still substantial
investment capacity
We continue to make progress
towards our through-cycle leverage
target range of 20-30% LTV: net debt
at 31 March 2018 was €202.7m, a loan
to value ratio of 15.5% (March 2017:
13.3%). The €47.4m increase in net
debt in the year was primarily due
to development expenditure, which
totalled €43.9m, and there remains
a further €77m of committed
development expenditure, most
of which will occur in the year to
March 2019. Net of this committed
development spend we have cash
and undrawn facilities of €120.3m
available. We are looking at options
to diversify our sources of debt
funding and extend average
maturity dates.
Outlook
The supply of new offices in Dublin
remains relatively constrained,
particularly in the city centre market
in which we specialise, and economic
momentum in Ireland continues to be
strong, as does demand from domestic
and international occupiers for
office space in Dublin. These same
dynamics are also in evidence in the
residential rental market. We are
positive on our prospects: we have
a talented team, a portfolio rich in
opportunity and flexible, low-cost
funding available to support our plans.
Kevin Nowlan
Chief Executive Officer
13 June 2018
10
Hibernia REIT plc Annual Report 2018
1WML, South Docks
Hibernia REIT plc Annual Report 2018
11
GovernanceFinancial statementsStrategic report Market review
Ireland again had one of the best performing economies
in the Euro area in 2017, with GDP growth for the year
forecast at 8.1%, as activity returned to pre-crisis levels
(source: CSO, Goodbody)
General economy
The Department of Finance (“DoF”)
recently upgraded its forecasts for
GDP growth in 2018 and 2019 to
5.6% and 4.0%, respectively
(previously 3.5% and 3.2%). Core
domestic demand is forecast to
grow by 2.8% in 2017 (source:
Goodbody) and is expected to
average 4.3% per annum for the
next two years, supporting further
GDP growth (source: Central Bank
of Ireland). The unemployment rate
fell to 5.9% in April 2018, the first
time in 10 years it has been below
6%, and the economy is nearing
practical full employment, which is
likely to create upward pressure on
wages in the near term (source:
Goodbody, CSO).
Notwithstanding current and capital
spending increases of 4% and 9%,
respectively, the Government
budget deficit reduced to 0.2% of
GDP in 2017 (2016: 0.7% deficit) as
tax revenues increased (source:
Goodbody). Ireland’s improving
fiscal health should help the
execution of the Government’s
National Development Plan, an
important programme of
investment in Ireland’s infrastructure
network for the long term.
The uncertainty around the terms
of the UK’s departure from the
EU and the impact of the recent
US tax reforms remain the key
external risks for the Irish economy.
To date there has been little
discernible negative impact from
either: an additional 4,700 IDA-
sponsored jobs were added in
Dublin in 2017 (3,300 in 2016) while
1,100 jobs were added in Q1 2018
(source: Davy, Goodbody).
Nonetheless, while the potential
upside for Dublin from Brexit has
been discussed previously, the
longer-term implications of it and
the US tax changes for Dublin
remain less clear.
MSCI Property Ireland Index
total return as at 31 March 2018
6.8%
(March 17: 11.2%)
Irish property investment market
In the 12 months to 31 March 2018
the MSCI Ireland Property Index
(the “Index”) delivered a total return
of 6.8% (March 2017: 11.2%). Over
97% of the Index by value comprises
commercial property, which was
negatively impacted by the trebling
of stamp duty on commercial
property transactions in Ireland
from 2% to 6% which came into
effect in October 2017. Excluding
the stamp duty change, the Index
would have delivered capital growth
of c. 6% in the year to March 2018
rather than 2.1% (March 2017: 6.2%).
The office sector delivered a total
return of 7.1% in the 12 months to
March 2018 and capital growth of
2.6%. This capital growth came from
ERV growth and yield compression
in broadly equal measure.
The immediate impact of the stamp
duty increase was a reduction in the
value of commercial property of
around 4%. However, it has been
difficult to determine any notable
impact on investment volumes:
although the €2.6bn of commercial
property transactions in Ireland in
2017 was lower than the €4.5bn of
transactions in 2016 this decrease
was expected as the market
continued to move out of its
deleveraging phase and Q4 2017
(i.e. after the change) saw 48% of all
the investment volumes in the year.
Q1 2018 volumes were relatively
strong at c. €0.9bn, helped by the
completion of three large
transactions of over €100m each
(source: CBRE).
Prime office yields compressed
from 4.65% to 4.00% in 2017 and
have remained stable in Q1 2018
(source: CBRE). Investor appetite
for prime assets remains strong
although the scarcity of product
has led some investors to shift to
the suburban market and forward-
funding transactions are becoming
more common (source: Knight
Frank). In addition, appetite for
alternative property classes
such as private rented sector
residential (“PRS”) and student
accommodation has grown,
with PRS witnessing net yield
compression from 4.80% to 4.25%
during the year to March 2018
(source: CBRE).
12
Hibernia REIT plc Annual Report 2018
Office occupational market
Take-up in the Dublin office market
in 2017 reached a record high of
3.6m sq. ft., well ahead of the five
and 10-year averages of 2.7m and
2.1m, respectively. Despite some
large suburban lettings, the city
centre accounted for 61% of take-
up. Q1 2018 saw a continuation of
this trend with take-up of 0.7m sq.
ft., up substantially on the same
period in 2017 (source: Knight
Frank). While the Dublin office
rental market is usually dominated
by relatively small leasing deals,
2017 witnessed larger than usual
lettings with 57% of take-up (by
area) comprising lettings of greater
than 50,000 sq. ft.. This trend has
also continued into 2018 with two
deals greater than 50,000 sq. ft. in
Q1 (source: Knight Frank).
TMT companies accounted for 51% of
take-up in 2017 in the Dublin office
market, followed by financial services
firms (20%) and state institutions
(10%) (source: Knight Frank). There
has also been significant activity in
the serviced office market in Dublin
in the past year, as international firms
such as WeWork and IWG have
begun to establish significant
presences: 3.2% of take-up in 2017
went to serviced office operators
(source: Knight Frank). While less
evident than the Brexit-related
moves (and potential moves) to
Dublin by UK-based financial and
professional services firms, we
believe it is investment decisions by
technology firms that are likely to
have the bigger impact on the Dublin
office market (“latent Brexit”): these
companies are highly reliant on
sourcing skilled labour, often from
overseas – something that Brexit and
the current US administration are
making less certain in those
countries. We believe this trend is
one of the drivers of the strong
take-up in Dublin over the past
18 months (source: CBRE).
Dublin office take-up in 2017
3.6m sq. ft.
(2016: 2.6m sq. ft.)
The overall Dublin office vacancy
rate fell to 6.2% in the quarter to
March 2018 and in the city centre
(where 88% of Hibernia’s portfolio is
located) the Grade A vacancy rate
is now 3.9% (source: Knight Frank).
While the new supply delivered in
Dublin has grown year on year since
2015, the strong tenant demand has
led to continued rental growth with
prime office rents increasing from
€62.50psf to €65.00psf in 2017 and
remaining at that level at the end of
Q1 2018.
Office development pipeline
Following the delivery of the first
new office developments in Dublin
in five years in 2016, 2017 saw growth
in supply with a total of 1.4m sq. ft.
delivered, over 90% of which has
now been let (source: Hibernia). 2.3m
sq. ft. is expected to be delivered in
Dublin in 2018, of which 1.4m sq. ft.
is already let, and 1.8m sq. ft. is
expected to be delivered in the CBD.
Between the start of 2018 and the
end of 2021 we expect that 7.4m sq.
ft. of space will be delivered in
Dublin, with 69% of this (5.1m sq. ft.)
in the CBD. At the end of Q1 2018,
4.4m sq. ft. of the aforementioned
7.4m sq. ft. was under construction.
The majority of the expected CBD
office delivery between the start of
2019 and 2021 will be in the IFSC and
North Docks areas as available sites
in the Traditional Core and South
Docks become increasingly scarce.
Finance for speculative development
is still limited, which is delaying
some supply.
Residential sector
Supply of new housing is still
below the Government’s target
of delivering 25,000 homes per
annum in the period to 2021 (source:
Rebuilding Ireland/Government of
Ireland) but completions grew to
19,271 units in 2017, up from 14,932
in 2016: in the Greater Dublin Area
completions were up 47% and
commencements were up 18% in
2017, to 8,576 and 1,738, respectively
(source: Department of Housing). In
an attempt to improve the viability
(and therefore delivery) of
apartments which accounted for
only 25% of the units delivered in
2017 (source: Department of
Housing), the Department of
Housing, Planning and Local
Government published updated
design standards for new
apartments in early 2018. A study
commissioned by the same
department indicated that these
measures reduced the build cost
of an apartment scheme by 15%.
Despite these measures, viability
remains challenging at affordable
rental levels.
A lack of available housing rental
stock remains, particularly in Dublin
where just 1,250 units of rental
stock were available as at April 2018,
a reduction of 11% year-on-year
(source: DAFT). Rents in Dublin are
up 12.4% in the 12 months to March
2018 and are now 30% above the
previous peak (source: DAFT).
On the sales side, house prices in
Dublin are up 13% in the 12 months
to February 2018, although they
remain 23% off their previous peak
(source: Residential Property Price
Index). House price growth of
c. 9% is forecast for 2018, given
the current market dynamics
(source: Goodbody).
Hibernia REIT plc Annual Report 2018
13
GovernanceFinancial statementsStrategic report Business model
We focus on the Dublin
office market. Our approach
is based on active ownership
of our properties, whether
through repositioning
buildings or asset
management, to generate
above average long-term
returns while only using
modest leverage.
We seek to form clusters of buildings
where possible: this enables us to provide
communal areas and shared facilities for
our tenants, enhancing the experience for
their employees. For further details please
see the case study on our first cluster,
the Windmill Quarter, on page 20.
We are disciplined in our capital allocation:
where assets no longer meet our forward
returns targets we look to sell and recycle
the proceeds into new investments.
How we create value
Buy
Typically, we buy
off-market and we
are experienced in
acquiring property
through secured
loans. We look for
well-located assets
with potential for
improvement or
with complex lease
situations to resolve.
Our inputs
People:
Experienced management with specialist
investment, asset and building management,
development and finance teams.
14
Hibernia REIT plc Annual Report 2018
Active management
We seek close relationships
with tenants and take a
cycle-based approach to
maturities.
€1.3bn
portfolio all in Dublin
Sell
Where assets no
longer meet our
expected forward
returns or we can
achieve future gains
today, we look to
sell and recycle the
proceeds into new
investments.
Clustering
Where possible we form
clusters of buildings with
shared facilities to benefit
our tenants and their
employees.
Asset improvement
We unlock value
through refurbishment,
redevelopment and
change of use, increasing
the rents tenants are
prepared to pay.
RECYCLE CAPITAL
Building management:
Unlike most property companies in Ireland,
we manage most of our buildings internally.
We do this because we believe it is essential
for giving the best experience and service
to our tenants.
Capital:
We run with low leverage, our through-cycle
target is 20-30% loan to value.
Hibernia REIT plc Annual Report 2018
15
GovernanceFinancial statementsStrategic report Strategic priorities
Currently our overall priority remains capitalising on
the favourable conditions in the occupational market
to deliver capital and income growth.
Strategic priority
2017–18
Key
initiatives
2017-18
progress
KPI impact and
operational metric
1 Deliver development
projects and prepare
pipeline of future
projects
See pages 28 to 30 >>
• Complete 1WML and 2DC
• Progress 1SJRQ and 2WML
(formerly the Hanover
Building)
• Prepare other projects
for commencement
(e.g. Cumberland Place
Phase II, Gateway)
• 1WML and 2DC completed
• 1SJRQ and 2WML both on
track for 2018 completion
• Cumberland Place Phase II
committed in May 2018
• The four schemes in the
pipeline are being optimised
2
Increase rental income
and duration
See pages 31 to 32 >>
• Complete letting of 1WML
• 1WML >96% let and 2DC
and 2DC
• Let 1SJRQ and 2WML
• Deliver rental uplifts
through rent reviews
• Keep vacancy rates
below 5%
fully let
• Contracted rent increased
•
16% to €56m
In-place office WAULT
break/expiry increased
9% to 7.3 years
• Vacancy rate at 31 March
2018 3%
• Development
profits enhance
EPRA NAVPS
and TPR
• Lettings/pre-lets
increase rent,
WAULTS and
reduce voids/
void risk
• Lettings enhance
EPRA NAVPS and
TPR, contracted
rents and WAULTs
3 Deploy capital into
selective acquisitions
or new developments
See pages 26 and
28 to 30 >>
4 Recycle capital to
monetise gains and
enhance future returns
See page 26 >>
5 Maintain an efficient
balance sheet
See pages 33 to 34 >>
• No targets – depends on
opportunities available
• Any acquisitions or new
developments must
enhance Group returns
• Sale of any assets where
forward returns are not
expected to meet our
targets and possible
redeployment as discussed
under priority 3 above
• Move towards 20-30%
LTV target
• Reduce cost of debt
where possible
6 Deliver improvements
in environmental
efficiency of portfolio
See pages 48 to 67 >>
• Reduce energy
consumption and
greenhouse gas
emissions per square
metre on ‘like for like’
and absolute basis
• New office buildings delivered
achieve at least LEED Gold
• €39m deployed in acquisitions
•
including costs: main
acquisitions were 77SJRQ and
Gateway Lands
Investments
should enhance
EPRA NAVPS and
TPR in longer term
• Sold three assets for €36m –
• Sales above book
21% ahead of Sept 17
book values
• Expect to sell Cannon Place
apartments
value enhance TPR
and EPRA NAVPS
• Net investment spend of
€47m: deployed €39m in
new acquisitions and €45m
in capital expenditure while
realising €36m through sales.
• LTV now 15.5% up from 13.3%
at 31 March 2017
• 1WML achieved LEED Gold
• Sustainability progress
discussed in more detail
in our sustainability report
on pages 48 to 67
• Efficient balance
sheet should
enhance EPRA
NAVPS growth
and DPS
• See sustainability
report on pages
48 to 67
16
Hibernia REIT plc Annual Report 2018
Strategic priority
2018–19
Key targets
2018-19
Risks
• Deliver 1SJRQ and 2WML completing the
• Market decline reduces
Windmill cluster
development profit
• Progress four pipeline projects and add to
• Construction cost inflation or
pipeline where possible
• Assess existing in-place portfolio for future
contractor failure does likewise
• Buildings delivered do not meet
value-add opportunities
tenant needs
1
Complete committed
near-term
developments and
prepare pipeline
of future projects.
Where possible use
development to form
clusters of buildings
with shared facilities
See pages 28 to 30 >>
2
Increase rental income
and duration
See pages 31 to 32 >>
• Let 1SJRQ and 2WML
• Deliver rental uplifts through rent reviews
• Occupational market weakness
• Existing tenants leave or
and lease renewals
• Keep vacancy rates below 5%
become insolvent
3 Make selective
investments
See page 26 >>
• Make acquisitions or investments where we
see opportunities to enhance Group returns
• No attractive opportunities
• Capital deployed does not achieve
target returns
4
Recycle capital to
monetise gains and
enhance future returns
See page 26 >>
• Sell assets which do not meet our
expectations for forward returns
• Market decline means cannot achieve
book value on disposals
• Forward returns on assets sold
materially exceed our expectations
5 Maintain an efficient
balance sheet and
seek to diversify
funding sources and
maturity dates
See pages 33 to 34 >>
6
Continue to improve
environmental
efficiency of the
portfolio
See pages 48 to 67 >>
• Continue to progress towards target
leverage level of 20-30%
• Look to diversify debt funding away from
purely bank debt and also seek to extend
debt maturity dates
• Disposals exceed deployment into
new opportunities reducing LTV
• Rates rise substantially increasing
interest costs on unhedged debt
• Unable to diversify debt
funding sources
• Reduce energy consumption and
greenhouse gas emissions per square metre
on ‘like for like’ and absolute basis
• New office buildings delivered achieve at
• Failure to achieve reductions
• Could impact the Group’s ability to
attract tenants and/or the value of
the Group’s property
least LEED Gold
Hibernia REIT plc Annual Report 2018
17
GovernanceFinancial statementsStrategic report Key performance indicators
Our key performance indicators (“KPIs”) are the
main metrics we use in running the business and
assessing its performance. They are focused on
returns to shareholders and are the principal
drivers of variable remuneration for the
Management Team.
See pages 95 to 127 for further details. >>
EPRA NAVPS
159.1c
Dividend per share
Total property return vs IPD
3.0c
4.8%
18
17
16
0
159.1
146.3
130.8
18
17
16
0
3.0
2.2
1.5
18
17
0
16 n/a
0
6.8
4.8
11.6
11.2
3.3
14.5
Rationale
EPRA NAVPS and dividend per
share (“DPS”) are measures of
the capital and income returns
generated by a company on
a per share basis. Total property
return (“TPR”) vs IPD measures
the performance of the Company’s
property portfolio against that
of the Irish property market.
EPRA NAVPS and TPR are
alternative performance measures
and are further explained and
reconciled to the appropriate IFRS
measures on the Supplementary
section on pages 211 to 216.
EPRA measures are benchmarks
established by the European real
estate industry and are an important
way for investors to measure real
estate company performance.
Link to remuneration
Under the terms of the Investment
Management Agreement which runs
until November 2018, remuneration
is calculated as follows:
Absolute performance
7.5% of any return between a 10%
and 15% annual NAV per share
growth rate (including dividends)
and 10% of any return above a 15%
annual NAV per share growth rate
(including dividends).
Relative performance
10% of any TPR outperformance
of IPD Ireland Index annually
(subject to high water marks). TPR
is calculated by MSCI, the producers
of the MSCI/Ireland index.
Future KPIs and remuneration
The existing remuneration structure
continues until November 2018.
The Remuneration Committee has
consulted key shareholders and
is proposing a new structure for
approval at this year’s AGM
(please see pages 95 to 127 for
further details).
Performance for the year
Hibernia performed strongly, having
a 12-month return of 11.6% versus
the index of 6.8%. IFRS NAV per
share and EPRA NAV per share are
both up 9% from 31 March 2017.
18
Hibernia REIT plc Annual Report 2018
Operational metrics
In addition to our KPIs we use the
following main operational metrics
in managing the business.
Investment & development
Purchases
Disposals
Capital expenditure
Committed capex
See more on pages 26 to 30. >>
Asset management
Portfolio value
In-place office occupancy
Passing rent
Contracted rent
Office rent w/cap and
collar or upwards only at
next review
In-place office WAULT to
break/expiry
Reversionary potential
See more on pages 31 to 32. >>
2018
€39m
€36m
€45m
€77m
2017
€85m
€4m
€53m
€95m
2018
2017
€1,309m €1,167m
97%
€42m
€48m
97%
€50m
€56m
36%
46%
7.3yrs
12%
6.7yrs
18%
Financial management
EPRA EPS
PBT
Net debt
LTV
Cash & undrawn facilities
See more on pages 33 to 35. >>
2018
2.8c
€107m
€203m
16%
€197m
2017
2.2c
€119m
€155m
13%
€289m
Sustainability
See more on pages 48 to 67. >>
Top to bottom:
1SJRQ (CGI)
1 Cumberland Place (reception)
Clanwilliam Court (interior)
Hibernia REIT plc Annual Report 2018
19
GovernanceFinancial statementsStrategic report Strategy in action: the Windmill Quarter
The Windmill Quarter comprises
five adjacent buildings in Dublin’s
South Docks which, when fully
complete in late 2018, will total
c. 400,000 sq. ft. of offices
together with retail and leisure
facilities and 14 residential units.
Given height restrictions in central Dublin,
few office buildings exceed 150,000 sq. ft.
and most are significantly smaller: this makes
providing the type of communal space and
facilities that employees expect today expensive
for occupiers who may only be taking one or
two floors in a building.
Our solution has been to assemble clusters
of adjoining buildings so that the cost of
communal areas, gyms and restaurants etc.
can be shared between buildings. The Windmill
Quarter will be our first completed cluster and
we expect to deliver similar clusters when we
redevelop Clanwilliam Court and Harcourt
Square in future.
d
Strategic priorities
1
2
3
5
6
Building status:
a 1WML (124,000 sq. ft. office):
• Ground up redevelopment,
completed August 2017
• Large 7,000 sq. ft. townhall and
reception area plus 8,000 sq. ft.
retail unit let to Spar and 14
residential units
• WiredScore Platinum certified
• Fully let to tenants including
Informatica, Core Media and
Pinsent Masons
b 2WML (60,000 sq. ft. office):
• Full refurbishment and extension
due to complete late 2018
• 12,000 sq. ft. gym included on
ground floor for use by the estate
• Now >96% let with annual rent
• Expected to achieve LEED
of €7.5m annum
Gold certification
• ERV: €3.4m per annum
• Expected yield on cost of 7.9%
• LEED Gold certified (see pages
• Profit on cost in excess of 80%
64 to 65 for more details)
and yield on cost of 9.6%
20
Hibernia REIT plc Annual Report 2018
Key statisticsBuildings• 5Acquired• 2014-2016 in 5 separate transactionsAcquisition cost• €116mRedevelopment capex• €134mEstimated rental value• €22.7m per annumExpected final completion date• late 2018Area at completion• c. 400k sq. ft. office• 7k sq. ft. town hall• 16k sq. ft. retail• 12k sq. ft. gym• 14 residential unitsTransport links• 5 minute walk to DART• 5 minute walk to LUAS b
a
e
c
c 1SJRQ (112,000 sq. ft. office):
• Ground up redevelopment, due
d Observatory (85,000 sq. ft. office):
• Acquired fully let, though heavily
to complete Q3 2018
• 8,000 sq. ft. of retail units
• Expect to achieve LEED
Gold certification
• ERV: €6.6m per annum
• Expected yield on cost of 8.7%
under-rented
• Tenants include Morgan Stanley,
Realex, QMP and Riot Games
• Current rent: €2.8m per annum,
with more to come through near
term rent reviews
e SOBO Works (11,000 sq. ft. office):
• Acquired vacant with Observatory
• €1.5m spent to convert live/work
units into 11,000 sq. ft. of office
and retail accommodation
• Fully let to Iconic Offices
• Current rent: €0.4m per annum
Hibernia REIT plc Annual Report 2018
21
GovernanceFinancial statementsStrategic report Strategy in action: Disposals and acquisitions
Ungeared IRR achieved through
investment in Chancery
>17%
The Chancery, Dublin 8
In December 2017 we agreed the sale of the Chancery
for €23.8m. The building was one of our early
acquisitions in 2014 and thanks to our leasing activity
and the market recovery the asset had performed well.
We elected to sell the asset as we felt the future returns
would likely be below our target returns, having
successfully completed most of the near term asset
management opportunities. In addition, while centrally
located, the building is not close to any of our other
assets and was one of the smaller assets in the
portfolio. The price achieved was ahead of the
September 2017 valuation and represented an
ungeared IRR of more than 17%.
Key statistics:
Capital value
Rent
WAULT
AT PURCHASE
AT SALE
€445psf
€645psf
€30psf
€32.6psf
2 years
8 years
Strategic priorities
4
22
Hibernia REIT plc Annual Report 2018
77 Sir John Rogerson’s Quay, South Docks
In February 2018, we acquired 77 SJRQ for a price of €30.7m.
The 34,400 sq. ft. building, which is located in the South Docks,
was being sold with vacant possession. Simultaneous with the
acquisition we agreed to let the entire building to International
Workplace Group plc (“IWG”), the flexible workspace provider,
on a 25 year lease. The simultaneous agreements enabled us to
recognise an immediate gain in the value of our investment and
the acquisition represented a rapid redeployment of the capital
received from the sale of the Chancery in December 2017.
Strategic priorities
2
3
5
Uplift in value since
acquisition
11%
Hibernia REIT plc Annual Report 2018
23
GovernanceFinancial statementsStrategic report Operational review
Portfolio overview
As at 31 March 2018 the property portfolio consisted of 32 investment properties valued at €1,309m4)
(March 2017: 28 investment properties valued at €1,167m4), which can be categorised as follows:
VALUE AS AT
MAR 18 (ALL
ASSETS)
% OF
PORTFOLIO
UPLIFT SINCE
MAR 17
EXCL. NEW
ACQUISITIONS1
UPLIFT SINCE
MAR 17
INCL. NEW
ACQUISITIONS1
EQUIVALENT
YIELD2
PASSING
RENT11
1. Dublin CBD offices
Traditional Core
IFSC
South Docks
Total Dublin CBD offices
€436m
€261m
€322m4
€1,019m
33%
20%
25%
78%
2. Dublin CBD Office Development5
€134m
10%
3. Dublin residential6
4. Industrial
€138m
€18m
11%
1%
3.7%
3.6%
5.3%3
€21.6m
(0.1%)
(0.1%)
5.1%
€12.2m
9.8%
4.3%
19.8%
13.4%
9.9%
4.5%
19.8%
13.3%
4.8%
€10.1m
5.1%3
€43.9m
–
–
4.2%7
€5.6m10
(3.7%)
(8.7%)
3.7%8
€0.7m
Total investment properties
€1,309m
100%
6.6%
6.6%
5.0%3, 7, 9
€50.2m10
Includes capex
1.
2. Yields on values excluding adjustments for rental incentives and excluding
the adjustment for South Dock House owner occupied space
Includes 2WML, 1SJRQ and Cumberland Place Phase II
Includes 1WML residential element (Hanover Mills)
3. Harcourt Square yield is based on the total value which includes residual land value
4. Excludes the value of space occupied by Hibernia in South Dock House
5.
6.
7. These are net yields assuming 80% net to gross. C&W has valued Wyckham
Point, Dundrum View, Cannon Place and Hanover Mills on a gross yield basis
excluding acquisition costs: gross initial yield is 4.9% and gross reversionary
yield is 5.2%
8. Current rental value assumed at ERV as this asset is now being valued on
a price per acre basis
9. Excludes all CBD office developments
10. Residential rent on a net basis
11. An Alternative Performance Measure (“APM”). The Group uses a number of
such financial measures to describe its performance which are not defined
under IFRS and which are therefore considered APMs. In particular, measures
defined by EPRA are an important way for investors to compare similar real
estate companies. For further information see Supplementary information
on pages 211 to 216 of this report
The office element of our portfolio, which comprises 88% by value and 89% of our contracted income had the
following statistics at 31 March 2018:
WAULT TO
REVIEW1
(YEARS)
WAULT TO
BREAK/EXPIRY
(YEARS)
% OF RENT
UPWARDS ONLY
% OF NEXT
RENT REVIEW
CAP & COLLAR
% OF RENT
MTM2 AT NEXT
LEASE EVENT
2.6
4.1
3.2
5.1
37%
10.4
–
7.3
22%
–
35%
14%
63%
65%
64%
Acquired ‘in-place’
office portfolio
Completed office
developments3
Whole office
portfolio
CONTRACTED
RENT
€29.1m
(€39psf)
€20.5m
(€51psf)
€49.6m
(€43psf)
ERV
€35.1m
(€48psf)
€20.6m
(€52psf)
€55.7m
(€49psf)
1. To earlier of review or expiry
2. Mark to Market (“MTM”)
3.
1 Cumberland Place, SOBO Works, 1DC, 2DC & 1WML
24
Hibernia REIT plc Annual Report 2018
Our focus on increasing portfolio
income and extending unexpired
lease terms continues. We are
achieving this through the
completion and letting of new office
developments and through rent
reviews and lease renewals in the
‘in-place’ portfolio. In the year we:
• Added €5.7m to office portfolio
income with average term certain
of 11.4 years through the letting
of the two developments that
completed in the year (see
Developments and refurbishments
on pages 28 to 30)
• Successfully agreed four rent
reviews, adding a further €0.7m
to contracted income, an uplift of
138% and in line with ERV. The
acquired ‘in-place’ office portfolio
has an average period to the
earlier of rent review or expiry of
2.6 years and reversionary
potential of 20.6% (at valuers’
ERVs) giving us further potential
to enhance portfolio income and
duration though rent reviews and
lease renewals
The ‘in-place’ office portfolio
vacancy rate was 3% at 31 March
2018 (31 March 2017: 3%). The
vacancy rate rose to 10% at
30 September 2017 mainly due to
the completion of 1WML, which was
only c. 50% let at that date, and has
since reduced as the remaining
space in the building has been let.
Top 10 tenants of in-place office
portfolio (by contracted rent)
Tenants of in-place office
portfolio (by industry sector)
3.6%
3.7%
12.1%
2.0%
2.0%
4.6%
3.8%
4.1%
4.3%
5.7%
8.3%
41.9%
€30.2m
€49.6m
10.2%
20.6%
5.7%
7.6%
20.6%
The Commissioners of Public Works
TMT
Twitter International Company
Government
Hubspot Ireland Limited
Banking & Capital Markets
Bank of Ireland
TMT Tenant
Professional Services
Co-working
Informatica Ireland EMEA
Insurance & Reinsurance
Depfa Bank plc
Other
Electricity Supply Board
Travelport Digital Limited
IWG
In-place office portfolio WAULT
In-place office vacancy
7.3 years
(2017: 6.7 years)
3%
(2017: 3%)
Hibernia REIT plc Annual Report 2018
25
GovernanceFinancial statementsStrategic report Operational review continued
Acquisitions and
disposals
Hibernia’s net acquisition spend in
the year was €3.3m including costs
(2017: €85.4m), comprising two
material acquisitions and the
disposal of three investment
properties as we started to recycle
capital into new opportunities as
previously guided.
Acquisitions
€39.1m
(2017: €85.4m)
Disposals
€35.8m
(2017: €3.5m)
Acquisitions
77 Sir John Rogerson’s Quay,
South Docks (“77SJRQ”)
The 34,000 sq. ft. office building was
bought in February 2018 for €30.7m.
The building was purchased with
vacant possession but we agreed
a simultaneous 25-year lease for
the entire building to International
Workplace Group plc (“IWG”)
creating an immediate valuation gain.
Gateway lands, D22
31.3 acres of land (zoned for
agriculture) adjacent to our
Gateway site was purchased
in H2 2017 for €6.2m. This
acquisition increased Hibernia’s
interest in the Newlands Cross area
to 45.4 acres and we believe it has
significant future potential.
Disposals
The Chancery, D8
The 35,000 sq. ft. office building
and four adjoining apartments were
sold in December 2017 for €23.8m,
equating to a net initial yield of
5.9% for the office accommodation.
The ungeared IRR for Hibernia since
acquisition in 2014 was over 17%.
Two small assets in the
South Docks
Hanover Street East, a 13,000 sq. ft.
office building, and 11a Lime Street,
a neighbouring house, were
sold in February 2018 for €12m,
significantly ahead of their
September 2017 valuations.
The assets had contracted income of
€0.2m per annum and were acquired
in 2015 for €4.8m with the objective
of building a consolidated land
holding to undertake a future
redevelopment. The sales price gave
Hibernia the majority of the upside it
could have expected from any such
redevelopment with no risk, and an
ungeared IRR of 40%.
26
Hibernia REIT plc Annual Report 2018
Montague House, Dublin 2
Hibernia REIT plc Annual Report 2018
27
GovernanceFinancial statementsStrategic report Operational review continued
Developments and
refurbishments
Schemes completed
We completed two schemes in
the year totalling 197,000 sq. ft.
of Grade A office space (see Asset
management section on pages 31 to
32 for further details of the lettings
at these schemes).
1 Windmill Lane (“1WML”),
South Docks
The development of 124,000 sq. ft.
of new office space, 7,000 sq. ft.
townhall and reception, 8,000 sq. ft.
of retail and 14 residential units, was
completed on time and on budget
in late August 2017, delivering a
profit on cost of over 80% (post
stamp duty and excluding finance
costs). The building is now over 96%
let and is yielding 9.6% on cost.
Two Dockland Central
(“2DC”), IFSC
The refurbishment of 57,000 sq. ft.
of office space (out of total building
of 73,000 sq. ft.) was completed
on schedule and within budget in
November 2017. It delivered a profit
on cost of over 35% (post stamp
duty change and excluding finance
costs) and is now fully let with
a yield on cost in excess of 7% (net
of dilapidations received).
In May 2018 the Board approved
the development of Phase II of
Cumberland Place, D2. This scheme,
which is expected to complete in
H1 2020, will deliver 50,000 sq. ft.
of new Grade A office space. The
building, will be in front of our
existing 1 Cumberland Place and
has the potential either to link into
the existing reception or to be
separately accessed, with additional
flexibility to interlink certain floors
to the existing building if required.
At 31 March 2018 Cushman &
Wakefield, the Group’s independent
valuer, had an average estimated
rental value for the unlet office
space (222,000 sq. ft.) in the
committed developments 1SJRQ,
2WML and Cumberland Place Phase
II of €54.94 per sq. ft. and was
assuming an average yield of 4.87%
upon completion: based on these
assumptions they expect a further
c. €19m of development profit
(excluding finance costs) to be
realised through the completion and
letting of these schemes. A 25-basis
point movement in yields across the
properties would make c. €12m of
difference to the development
profits, and a €2.50 per sq. ft.
change in estimated rental value
(“ERV”) would result in a c. €10m
difference. If current market
conditions prevail, we would expect
these yields to tighten once the
buildings are completed and let.
Profit on cost made on schemes
completed in the year
>65%
Committed development schemes
At 31 March 2018, we had two
committed schemes in progress
which will deliver c. 172,000 sq. ft.
of new and refurbished Grade A
office space by the end of 2018:
none of this is pre-let currently.
1 Sir John Rogerson’s Quay
(“1SJRQ”), South Docks
The 112,000 sq. ft. office building
is now largely enclosed and the
scheme remains on schedule for
completion in Q3 2018.
2 Windmill Lane (“2WML”,
formerly the Hanover Building),
South Docks
The office tenant (BNY Mellon) left
the building at the end of March 2017
and the retail tenant (Spar) left in
November 2017: the redevelopment
and extension of the building, which
will deliver 60,000 sq. ft. of office
space and a 12,000 sq. ft. gym, is
expected to complete in late 2018.
These two committed schemes
will complete the Windmill Quarter,
Hibernia’s first cluster of office
buildings, which will comprise
c. 400,000 sq. ft. of office space
upon completion. One of our
principal motivations in creating the
cluster was to be able to provide
some communal working and
leisure areas at affordable prices
for our tenants in multi-let buildings.
In the case of the Windmill Quarter,
this is centred around the Townhall
area in 1WML and we are also bringing
food & beverage units and a gym to
the cluster.
28
Hibernia REIT plc Annual Report 2018
Committed developments
TOTAL AREA
POST COMPLETION
(SQ. FT.)
FULL
PURCHASE
PRICE
SECTOR
EST. CAPEX
EST. TOTAL COST
(INCL. LAND)
ERV 1
OFFICE ERV
PSF 1
EXPECTED
PRACTICAL
COMPLETION
(“PC”) DATE
Schemes completed in 12 months to 31 March 18
1WML
Office
124k office
8k retail2
7k reception
14 resi. units
€25m3
€53m3
€554psf4
€7.6m5
€52.59psf4 • Completed
in August
2017
• Delivered
profit on
cost of
>80%6
• Now 96% let
2DC
Office
73k7 office
€46m
€11m8
€760psf9
€4.1m €52.37psf10 • Completed
in November
2017
• Delivered
profit on
cost >35%6
• Now fully let
Total
completed
Committed schemes
2WML
Office
1SJRQ
Office
197k office
8k retail2
7k reception
14 resi. units
60k office
12k gym
112k office
8k food &
beverage
€71m
€64m11
€11.7m
€21m
€22m
€678psf4
€3.4m
€53.00psf
Q4 2018
€18m
€58m
€639psf4
€6.6m
€56.19psf
Q3 2018
Cumberland
Place Phase II
Total
committed
Office
50k office
€0m
€27m
€540psf4
€2.7m
€54.48psf
H1 2020
222k office
20k retail/gym
€39m
€107m
€12.7m
1. Per C&W valuation at 31 March 2018
2.
3. Hibernia est. all-in cost of 1WML on 100% basis is €78m (i.e. €25m all-in land
Incl. 1k sq. ft. basement store
cost plus €53m total capex). In the prior year, Hibernia’s financial accounts
show that the cost of acquiring 100% of 1WML was €36m which incl. the
vendor’s 50% share of capex spent to date of acquisition of €13m. There was
c. €28m of capex remaining (based on est. total capex of €53m) to be spent
at date of acquisition. Therefore, the total cost of the project is €78m (€37m +
€28m + €13m = €78m)
4. Office demise only
5. Commercial (incl. reception/Townhall) and residential net
6. Assuming 6% stamp duty and no finance costs at Sep-17 values
7. 57k sq. ft. refurbished out of total 73k sq. ft.
8. €9.4m net of dilapidations received
9. Est. total cost psf is net of dilapidations
10. For entire 73k sq. ft.
11. €62.4m net of dilapidations received at 2DC
Development pipeline
Following the approval of
Cumberland Place Phase II as a
committed project, there are now
three office schemes in the future
pipeline (treating Clanwilliam Court
and Marine House as one project)
which, if undertaken, would deliver
an estimated 505,000 sq. ft. of high
quality office space upon completion.
Two of these future projects,
Clanwilliam Court/Marine House
and Harcourt Square, provide us
with opportunities to create clusters
of office buildings with shared
facilities similar to the Windmill
Quarter discussed above.
45.4 acres we now own at Gateway:
we think it is likely this would take
the form of a mixed-use scheme
and hence we have removed the
nominal 115,000 sq. ft. of offices
previously allocated to Gateway
from our pipeline.
In the longer term there is also
development potential for the
Hibernia REIT plc Annual Report 2018
29
GovernanceFinancial statementsStrategic report Operational review continued
Development pipeline
SECTOR
CURRENT AREA
(SQ. FT.)
AREA POST
COMPLETION
(SQ. FT.)
FULL
PURCHASE
PRICE
COMMENTS
Offices
Blocks 1, 2 & 5
Clanwilliam Court
and Marine
House
Office
139k
200k
€80m • Refurbishment/redevelopment opportunity
after 2020-21
• Potential to add significantly to existing NIA1
across all four blocks and create an office
cluster similar to Windmill Quarter
• Have applied for planning to refurbish Marine
House
Harcourt Square Office
117k on
1.9 acres
277k
€72m • Leased to OPW until December 2022
• Site offers potential to create cluster of office
buildings and shared facilities
• Planning in place for 277k sq. ft.
redevelopment
• Seeking revised planning for up to 322k sq. ft.
One Earlsfort
Terrace
Total offices
Mixed-use
Gateway &
Gateway Lands
Total
mixed-use
Office
22k
>28k
€20m • Current planning permission for two extra
floors
• Also potential for redevelopment as part of
the wider Earlsfort Centre scheme
278k
>505k
€172m
Mixed-use
45.4 acres2
Unclear
€17m • Strategic transport location
• Potential for future mixed-use development
• Have applied for planning for new access
road
45.4 acres2
Unclear
€17m
1. Net Internal Area (“NIA”).
2. Currently 178k sq. ft. of industrial/logistics on 14.1 acres and 31.3 acres of agricultural land.
30
Hibernia REIT plc Annual Report 2018
Asset management
In the year to 31 March 2018 we
added €8.9m to contracted rents
through lettings and €0.7m though
rent reviews, a total of €7.7m net
of lease expiries, surrenders, sales
and acquisitions increasing the
contracted rent roll by 15.9% to
€56.0m.
Summary of letting activity
Contracted rent roll
€56.0m +15.9%
(2017: 48.3m)
in the period
Offices
• 11 new lettings totalling 156,000
sq. ft. and generating €8.3m per
annum of incremental new rent.
The weighted average periods to
break and expiry for the new
leases were 11.4 years and 19.8
years, respectively
• Four rent reviews concluded over
25,000 sq. ft. adding a further
€0.7m of rent per annum: on
average these rent reviews
were 138% ahead of previous
contracted rents and in line
with ERVs
• At present, we have one rent
review under negotiation over
€0.3m of contracted income
At 31 March 2018 the vacancy rate
in the office portfolio was 3%
(March 2017: 3%).
Two Dockland Central, IFSC
Residential
• 293 of the Company’s 326
apartments are located in Dundrum
and, in the period, average rents
achieved in new lettings by the
Company for two bed apartments
in Dundrum were €1,799 per month
vs average two bed passing rents
of €1,758 per month
• Letting activity and lease renewals
at Dundrum generated
incremental gross annual rent of
€0.2m in the period (new leases
signed on 72 apartments
and leases renewed on 186
apartments). The total net income
from the Dundrum residential
properties during the year was
€5.1m representing a net to gross
margin in excess of 80%
• The 14 residential units at 1WML,
now known as Hanover Mills,
have been let to Corporate City
Apartments at a rent of €0.4m
per annum for a term of 5 years
Hibernia REIT plc Annual Report 2018
31
GovernanceFinancial statementsStrategic report 2DC, IFSC
The refurbishment works completed
in November 2017. As at 31 March
2018, the building was fully let to
HubSpot, BNY Mellon, ENI, Fountain
Healthcare and ALD Automotive
with a contracted rent of €4.0m per
annum and a weighted average
term certain of 9.1 years.
Flexible workspace arrangement
The flexible workspace arrangement
with Iconic Offices (“Iconic”) in
21,000 sq. ft. of Block 1 Clanwilliam
Court continues to operate well,
with 100% of the workstations
occupied and 92% of the available
co-working memberships rented as
at the end of March 2018.
Other completed assets
The remaining completed
properties in the portfolio are close
to full occupancy. The average
period to rent review or lease expiry
for the acquired “in-place” office
portfolio (not including recently
completed developments) is 2.6
years and the team is focused on
the upcoming lease events and is
working closely with our tenants.
Operational review continued
Reversionary potential of
acquired in-place office portfolio
€6.0m
(2017: €6.8m)
Clanwilliam Court, Block 2 and
Marine House, D2
In October 2017, the ESB leased the
ground floor of Block 2 and second
floor of Marine House (8,500 sq. ft.
in total) on leases which run until
2020/21 (i.e. these terminate
concurrently with other occupiers
in the buildings) at a total rent of
€0.4m per annum. In February
2018, 50 car parking spaces were let
to Park Rite on a two year term for
rent of €0.1m per annum.
The Forum, IFSC
Depfa Bank (“Depfa”), which
occupies all 47,000 sq. ft. of office
accommodation in the building and
50 car parking spaces, served notice
of its intention to exercise its options
to terminate its leasehold interests in
March 2019. Depfa pays rent of
€2.0m per annum (an average of
€40 per sq. ft. for the office space).
Hibernia is considering options for
the building, with the March 2018
ERV of the offices well in excess of
the passing rent.
Observatory, South Docks
We concluded rent reviews with
Core Media and Realex in the year,
adding €0.6m to our contracted
annual rent. In aggregate the rents
agreed were in line with ERV and
represented an uplift of 121%.
Key asset management highlights
See also Developments and
Refurbishments section above
for further details.
1WML, South Docks
The development completed in late
August 2017 and at 31 March 2018
the building was over 96% let, with
office tenants including Informatica,
Core Media and Pinsent Masons and
the retail unit let to Spar. The 14
residential units have been let to
Corporate City Apartments, a
residential letting provider, on a five
year lease. The contracted rent for
the property is €7.5m per annum
and the WAULT for the commercial
space is 11.6 years.
77SJRQ, South Docks
Having acquired the 34,000 sq. ft.
building in February 2018, the
planned improvement works
completed in late March for €0.3m
and the 25 year lease to IWG
commenced in early April 2018.
IWG is paying initial rent of €1.8m
per annum.
Cannon Place, D4
The tenants in the 16 units moved
out during the year to enable
remedial works to be carried out.
The programme completed in early
2018. The building remained vacant
at 31 March 2018: given its small
scale Hibernia is considering
disposing of the asset and recycling
its capital into other opportunities.
Central Quay, South Docks
A ground floor office suite of
c. 3,000 sq. ft. was let to Fragomen,
a firm of solicitors, in June 2017 on a
10-year lease. The remaining vacant
space on the ground floor (5,000
sq. ft.) and the third floor (12,000
sq. ft.) continues to be marketed.
32
Hibernia REIT plc Annual Report 2018
Financial results
and position
AS AT
IFRS NAV – cent per share
EPRA NAV – cent per share
Net debt1
Group LTV1
31 MARCH 2018
31 MARCH 2017
MOVEMENT
160.6
159.1
147.9
146.3
€202.7m
€155.3m
15.5%
13.3%
+8.6%
+8.7%
+30.5%
+16.5%
FINANCIAL PERIOD ENDED
31 MARCH 2018
31 MARCH 2017
MOVEMENT
Profit before tax for the period
EPRA earnings1
IFRS EPS
Diluted IFRS EPS
EPRA EPS1
Proposed final DPS1
FY DPS1
€107.1m
€19.4m
15.5 cent
15.4 cent
2.8 cent
1.9 cent
3.0 cent
€119.0m
€15.0m
17.4 cent
17.2 cent
2.2 cent
1.45 cent
2.2 cent
(10.0)%
+29.3%
(10.9)%
(10.5)%
+27.3%
+31.0%
+36.4%
1. An alternative performance measure (“APM”). The Group uses a number of such financial measures to describe its performance, which are not defined under IFRS
and which are therefore considered APMs. In particular, measures defined by EPRA are an important way for investors to compare similar real estate companies.
For further information see “Supplementary information” on pages 211 to 216 of this report.
The key drivers of EPRA NAV per
share, which increased 12.8 cent
from 31 March 2017 were:
• 19.3 cent per share from the
revaluation of the property
portfolio, including 8.1 cent per
share in relation to development
properties: the yield compression
seen in the market helped the
value of the Group’s more
prime office assets and its
residential assets
• 2.8 cent per share from EPRA
earnings in the period
• 0.9 cent per share from profits on
the sale of investment properties
• Payment of the FY17 final and
FY18 interim dividends, which
decreased NAV by 2.5 cent
per share
• The increase in stamp duty rate in
October 2017 reduced NAV by an
estimated 7.7 cent per share
acquisition spend in the year
was €3.3m and maintenance
expenditure was c. €3m.
EPRA earnings were €19.4m,
up 29.4% compared to the prior
financial year. The uplift was
principally due to increased rental
income as a result of new lettings
made at our developments in the
financial year and a full year of
income from lettings made in the
prior year. Administrative expenses
(excluding performance related
payments) were €13.5m (March
2017: €12.8m). Performance related
payments were €6.6m (March 2017:
€8.2m) with the majority relating to
relative performance fees earned
due to the Group’s outperformance
of the MSCI/IPD Ireland index over
the financial year.
Net debt increased by €47.4m to
€202.7m (LTV: 15.5%). Almost all of
the increase related to development
and refurbishment expenditure: net
EPRA EPS
2.8c +27.3%
(2017: 2.2c)
Profit before tax for the period
was €107.1m, a reduction of 10.0%
over the prior year, mainly due to
reduced revaluation gains in the
financial year as a result of the
increase in stamp duty on Irish
commercial property transactions
introduced in the 2018 Budget.
This change, which took effect
from 11 October 2017, increased the
stamp duty rate from 2% to 6%.
Cushman & Wakefield, the Group’s
independent valuers, calculated
that the reduction in the value of
the Group’s property portfolio
had the stamp duty change been
in place on 30 September 2017
would have been €53.7m. This
represents a 4.2% reduction in the
value of the Group’s portfolio as at
30 September and a 4.7% reduction
in the value of the Group’s office
portfolio, including developments.
Financing and hedging
As at 31 March 2018, the Group had
net debt of €202.7m, a loan to value
ratio (“LTV”) of 15.5%, up from net
Hibernia REIT plc Annual Report 2018
33
GovernanceFinancial statementsStrategic report
Operational review continued
debt of €155.3m (LTV of 13.3%) at
31 March 2017, primarily due to
development expenditure.
through-cycle leverage target
remains 20-30% LTV.
As intended, the Group repaid the
€44.2m non-recourse debt facility
for Windmill Lane (the “1WML
facility”) in February 2018 once
early repayment penalties expired.
The facility was €17.5m drawn at
the time of repayment and was
refinanced using the Group’s main
debt facility, a €400m revolving
credit facility (“RCF”) which
matures in November 2020. Since
shortly after acquiring full control of
1WML in December 2016 the Group
had used the RCF to fund capital
expenditure on the scheme due to
the comparatively high cost of the
1WML facility.
Cash and undrawn facilities as at
31 March 2018 totalled €197.3m or
€120.3m net of committed capital
expenditure. Assuming full
investment of the available RCF
funds in property, the LTV, based on
property values at 31 March 2018,
would be c. 27%. The Group’s
The Group has a policy of fixing or
hedging the interest rate risk on the
majority of its drawn debt. As at
31 March 2018 it had interest rate
caps and swaptions with 1% strike
rates in place covering the interest
rate risk on €244.7m of the RCF
drawings. Half of this covers the
period until November 2020 (when
the RCF expires) and half was put in
place during the year and covers
the period from November 2017 to
November 2021.
With a stable portfolio valued well
in excess of €1bn, the Group is
considering options to diversify
its sources of debt funding and
lengthen the average maturity of
its debt.
European Public Real Estate
Association (“EPRA”)
Performance Measures
The Group uses a number of
financial measures to describe its
performance which are not defined
under International Financial
Reporting Standards (“IFRS”) and
which are therefore considered
Alternative Performance Measures
(“APMs”). In particular, measures
defined by EPRA were developed
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. Further
detail on these measures are set
out in Supplementary information,
part III. European Public Real Estate
Association (“EPRA”) Performance
Measures, which starts on page 211
of this Annual Report. This includes
their calculation and reconciliation
to the consolidated financial
statements as prepared under
IFRS where applicable.
31 MARCH 2018
31 MARCH 2017
EPRA earnings
Adjusted EPRA earnings1
EPRA NAV
EPRA NNNAV
EPRA Like-for-like rental growth reporting
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
– basic
– diluted
– basic
€’000
19,403
19,403
32,189
1,112,075
1,111,730
€’000
14,989
14,989
26,441
1,013,969
1,013,852
CENT PER
SHARE
2.8
2.8
4.7
159.1
159.1
6.5%
3.8%
4.3%
47.8%
45.6%
21.8%
19.6%
2.0%
CENT PER
SHARE
2.2
2.2
3.9
146.3
146.3
4.0%
4.4%
4.7%
56.0%
54.4%
23.7%
22.0%
2.7%
1. The costs relating to the internalisation are eliminated from this measure to provide indicative impacts on measures post November 2018.
34
Hibernia REIT plc Annual Report 2018
Dividend
Following another substantial uplift
in EPRA earnings (distributable
income) in the year, the Board has
proposed a final dividend of 1.9 cent
per share (2017: 1.45 cent) which,
subject to approval at the Group’s
AGM on 31 July 2018, will be paid on
3 August 2018 to shareholders on
the register as at 6 July 2018. All of
this final dividend will be a Property
Income Distribution (“PID”) in
respect of the Group’s tax-exempt
property business.
The Group’s policy is to pay out
85-90% of distributable income in
dividends, with the interim dividend
in a year usually representing
30-50% of the total regular
dividends paid out in respect of the
prior financial year. Together with
the interim dividend paid of 1.1 cent
per share, the total dividend for the
year is 3.0 cent per share (2017: 2.2
cent) which represents 108% of the
year’s EPRA profits due to the
larger than expected uplift in NAV
and, as a result, performance fee.
Hibernia’s Dividend Reinvestment
Plan (“DRIP”) remains in place,
allowing shareholders to instruct
Link, 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.
The Observatory, South Docks
Hibernia REIT plc Annual Report 2018
35
GovernanceFinancial statementsStrategic report Risk management
The effective management of risk is essential for the
Group to achieve its strategic priorities and deliver long
term performance. The Board has overall responsibility for
risk management and this is implemented through a risk
management system which extends to all levels of the Group.
Our key focus areas in 2017-18
• Brexit and its potential impact on our strategy
• Implementation of internal audit function
• Implementation of new risk management software
• Cyber threats and other security risks
• Preparation for compliance with GDPR from May 2018
Our key focus areas in 2018-19
• Continue to monitor the potential impact of Brexit
• Analyse first internal audit reports and implement recommendations therein
• Continue to focus on cyber risk
• Compliance with GDPR post May 2018
Risk management system
The Board has put in place procedures designed to ensure that all applicable risks pertaining to the Group and
Company can be identified, monitored and managed at all times.
The Group’s risk management objectives are to:
• Ensure risk management is an integral part of business processes;
• Maintain an effective system of risk identification, analysis, evaluation and treatment within the Company;
• Avoid exposure to significant operational, reputational or financial losses;
• Contribute to the achievement of the Group’s strategic objectives; and
• Assess and challenge the benefits and costs of risk management processes and controls.
The Group’s risk system and any updates to it are communicated to staff as required.
36
Hibernia REIT plc Annual Report 2018
RISK MANAGEMENT SYSTEM RESPONSIBILITIES
Board
• Ensure effective risk management is in place across the Group
• Approve the risk appetite for the Group
• Review and assess the Group’s principal risks
Audit
committee
• Monitor and review the effectiveness of risk management
processes across the Group
• Monitor and review the Group’s management of risk
• Assess findings and recommendations of internal audit
and management in respect of risk
Risk and
compliance and
internal audit
• Lead the approach to risk management in the Group
• Implement risk management policy
• Present results of internal audit and other reviews to the Audit
Committee, identify deficiencies and recommend remedial
measures where necessary
• Identify and assess emerging risks
Management
committees
• Input into the Board process for setting risk appetites
• Implement strategy in line with the approved risk appetite
• Lead operational management approach to implementation
of risk management processes
• Identify and assess principal risks for the Board
e
c
n
a
i
l
p
m
o
c
d
n
a
n
o
i
t
a
t
n
e
m
e
l
p
m
I
g
n
i
t
r
o
p
e
r
d
n
a
g
n
i
r
o
t
i
n
o
M
Operational
management
• Create an environment of acceptance and support for risk
management by employees
• Implement and maintain the risk management process
• Produce the risk registers including identification of risks,
mitigations in place and actions required
Employees
• Active day to day consideration and management of risk
Hibernia REIT plc Annual Report 2018
37
GovernanceFinancial statementsStrategic report
Risk management continued
Internal audit: PwC was appointed
as the Group’s internal auditor
during the year. An internal audit
risk assessment and plan has been
agreed for the financial years
2018-2020. The first internal audit
commenced at the end of the
financial year. The plan proposes to
undertake a comprehensive review
of processes and controls in key risk
areas. Further detail is set out in the
Audit Committee Report on pages
88 to 94.
Risk appetite: Risk appetite is set
and reviewed by senior management
in consultation with the Board of
Directors. Conflicting interests, for
example, where a business decision
may exceed stated risk appetite
levels, is dealt with by the Board.
The Group’s risk appetite includes
the following factors:
• Moderate leverage: Leverage
should not exceed 40% of
portfolio value at incurrence
• Income producing assets:
The Group will meet its financing
commitments and the REIT
requirements in terms of dividend
payments to its shareholders
• Dublin concentration: The Dublin
property market is the deepest,
most liquid property market in
Ireland and is expected to
continue to perform well
• Irish property market focus:
The Management Team’s
expertise and value-adding
capabilities are most suited to
the Irish property market. This
focused strategy allows the
Group to limit its foreign currency
and geographical risks
• Limited development
expenditure: This ensures
that the Group has a constant
stream of income from developed
assets and also ensures the
Group limits its exposure to
higher risk development or
speculative projects
• Mid-range property values:
The Group primarily targets
commercial properties in the
€20m to €70m range. This
reduces the administration costs
associated with dealing with
multiple smaller value properties
and decreases the concentration
risk associated with large value
property assets, where exit
options are limited to a few
major purchasers
These parameters are reviewed
on a periodic basis by the Board.
Risk register: The Group’s risk
register details risks across, inter
alia, investment, operational, IT,
governance, regulatory and
strategic areas of the business.
The register was comprehensively
reviewed during the year with a new
risk added to reflect the expiry of
interim remuneration arrangements
in November 2018. A number of
risks were also removed. Risk
ratings reflecting the impact of the
increase in commercial stamp duty
and the increasing threat of cyber
security breaches were adjusted.
A register of errors and breaches
is maintained and no material
breaches were noted during
the period.
Other areas of focus during the
year included:
• Corporate crisis management
• Business continuity planning
• Preparation for GDPR compliance
• Cyber security
Risk management culture
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 Group
• The Group operates out of a
single, open-plan office in central
Dublin and most of its properties
are within walking distance
• The Directors are closely involved
in the business, helping to quickly
identify new risks and weaknesses
• The Management Team is
experienced and staff turnover
is low
• The Management Team holds
weekly management meetings
and regular inter-departmental
meetings to review progress in
each area of the business
• PwC acts as internal auditor to
provide an independent
assessment of controls and
risk management processes
38
Hibernia REIT plc Annual Report 2018
Going concern and viability statement
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 02 to 67 of this Annual
Report. This also covers the
financial position of the Group,
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
146 to 207 and in note 2.d. to the
consolidated financial statements.
In addition, note 29 to the Annual
Report includes details on the
Group’s financial risk management
and exposures. The Group has
assessed its liquidity position and
there are no reasons to expect
that the Group will not be able
to meet its liabilities as they fall
due for the foreseeable future.
Therefore, the Directors have
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.
The Directors’ assessment has
been made with reference to the
resilience of the Group, its strong
financial position, the Group’s
strategy and the Group’s principal
risks and risk appetite. The
Group’s strategic focus is
currently on its development
projects. As a result, these
projects are a particular focus
of the Group’s risk management.
The Board has concluded that a
three-year period for a viability
assessment remains appropriate.
This is the key period for
completion of the Group’s
committed development projects.
Assumptions have been built
into the business and financial
planning process which are based
on a conservative view of the
Group’s expected income and
investment profile over this
three-year period.
The financial planning process
considers the Group’s profitability,
capital values, gearing, cashflows
and other key operational and
financial metrics over the plan
period and the key vulnerabilities
inherent in the business. The
timing of the completion of
development projects, lease
commencement of new space,
expected lease renewals,
expected rental values and capital
values are the main elements
of planning reviewed at each
quarterly Board meeting.
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 40 to 47.
For the purposes of this viability
statement, the Directors have
considered the decline in
underlying operating profits
and asset values that would be
required before the Group would
breach its debt covenants or the
requirements of the Irish REIT
regime. Having reviewed the
results of this exercise, the
Directors consider that all of
these scenarios are extremely
unlikely to occur within the
three-year period 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.
Hibernia REIT plc Annual Report 2018
39
GovernanceFinancial statementsStrategic report Principal risks and uncertainties
A description of the Group’s principal risks and uncertainties
and the steps which the Group has taken to manage them is
set out below.
RISK
IMPACT
PROBABILITY
RESIDUAL
RISK
IMPACT
EXPOSURE
MITIGATION
COMMENTS
STRATEGIC RISKS
Strategic objective → 1 to 6
Inappropriate
business
strategy
MARKET RISKS
Strategic objective → 1 to 3
Weakening
economy
The Group’s strategy is not consistent
with market conditions affecting the
ability of the Group to deliver its
strategic objectives.
The Group carries out strategic reviews on an annual basis
The Irish economy continues to perform strongly
which cover the next three years. The Group pays close
with growing numbers in employment. GDP
attention to economic and market lead indicators and uses
growth in 2017 was 7.8% and for 2018 and 2019
its network of contacts and advisers to ensure it has the
it is forecast at 5.6% and 4% respectively.
best possible understanding of market conditions and likely
economic changes.
Tenant demand remains strong, particularly
from domestic and overseas companies with
Budgets are prepared and reviewed by the Board each quarter
existing bases in Dublin taking up further space
looking at a rolling three-year period. The Group also assesses
for expansion.
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 value of the investment portfolio
may decline and rental income may
reduce as a consequence of a drop
in levels of economic activity in Dublin
and/or Ireland.
As a relatively small and “open”
economy Ireland is particularly sensitive
to deterioration in macro-economic
conditions elsewhere.
The Group has set risk appetite limits for key operating
Uncertainty around the impact of the UK
indicators. The Group intends to maintain modest leverage
departure from the EU continues, and the
levels throughout the cycle.
impact of the recent US tax reforms remains
unclear. Vacancy rates in Dublin were low at 6%
The Group monitors economic lead indicators and market
at 31 March 2018 and take-up remains strong.
developments and undertakes regular financial forecasting
The Group continues to increase WAULTs
and scenario planning to help it to anticipate and react to
through lease renewals and letting of new
potential issues.
space completed, thereby reducing the risk
of rental income decreases and vacancy.
Under-performance
of Dublin property
market
Under-performance by the Dublin office
property market compared to other Irish
property sectors: to date all the Group’s
investments have been within Dublin.
The Group regularly reviews its strategy and asset allocation
There was record take-up in the Dublin office
to determine if it remains appropriate. Particular emphasis is
property market in 2017 and the trend has
placed on monitoring its committed development projects
continued in 2018, with a strong first quarter.
which will be completed by the end of 2018.
In addition, demand for office and residential
assets has led to yield compression in the
financial year ended 31 March 2018 despite the
increase in stamp duty on commercial property.
40
Hibernia REIT plc Annual Report 2018
RISK
IMPACT
PROBABILITY
EXPOSURE
MITIGATION
COMMENTS
RESIDUAL
RISK
IMPACT
Risk trend
Increasing Unchanged Decreasing
Impact trend
High Medium Low
STRATEGIC RISKS
Strategic objective → 1 to 6
Inappropriate
business
strategy
MARKET RISKS
Strategic objective → 1 to 3
Weakening
economy
The Group’s strategy is not consistent
with market conditions affecting the
ability of the Group to deliver its
strategic objectives.
The Group carries out strategic reviews on an annual basis
which cover the next three years. The Group pays close
attention to economic and market lead indicators and uses
its network of contacts and advisers to ensure it has the
best possible understanding of market conditions and likely
economic changes.
Budgets are prepared and reviewed by the Board each quarter
looking at a rolling 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 Irish economy continues to perform strongly
with growing numbers in employment. GDP
growth in 2017 was 7.8% and for 2018 and 2019
it is forecast at 5.6% and 4% respectively.
Tenant demand remains strong, particularly
from domestic and overseas companies with
existing bases in Dublin taking up further space
for expansion.
The value of the investment portfolio
may decline and rental income may
reduce as a consequence of a drop
in levels of economic activity in Dublin
and/or Ireland.
As a relatively small and “open”
economy Ireland is particularly sensitive
to deterioration in macro-economic
conditions elsewhere.
The Group has set risk appetite limits for key operating
indicators. The Group intends to maintain modest leverage
levels throughout the cycle.
The Group monitors economic lead indicators and market
developments and undertakes regular financial forecasting
and scenario planning to help it to anticipate and react to
potential issues.
Uncertainty around the impact of the UK
departure from the EU continues, and the
impact of the recent US tax reforms remains
unclear. Vacancy rates in Dublin were low at 6%
at 31 March 2018 and take-up remains strong.
The Group continues to increase WAULTs
through lease renewals and letting of new
space completed, thereby reducing the risk
of rental income decreases and vacancy.
Under-performance
of Dublin property
market
Under-performance by the Dublin office
property market compared to other Irish
property sectors: to date all the Group’s
investments have been within Dublin.
The Group regularly reviews its strategy and asset allocation
to determine if it remains appropriate. Particular emphasis is
placed on monitoring its committed development projects
which will be completed by the end of 2018.
There was record take-up in the Dublin office
property market in 2017 and the trend has
continued in 2018, with a strong first quarter.
In addition, demand for office and residential
assets has led to yield compression in the
financial year ended 31 March 2018 despite the
increase in stamp duty on commercial property.
Hibernia REIT plc Annual Report 2018
41
GovernanceFinancial statementsStrategic report
Principal risks and uncertainties continued
RISK
IMPACT
PROBABILITY
RESIDUAL
RISK
IMPACT
EXPOSURE
MITIGATION
COMMENTS
Development projects are not managed
properly causing possible delays, cost
overruns and/or failure to achieve
expected rental levels, all resulting in
reduced returns.
The Group has a Development Committee which closely
The Group completed two schemes in
monitors projects, the development supply pipeline in Dublin
the year, which are now over 96% let and
and the rental market. The Group’s strategy in setting
which completed on time and on budget.
building contracts is to fix pricing where feasible. This,
As at 31 March 2018 the Group had two
coupled with significant in-house experience in managing
committed schemes with a third added in
large-scale projects, reduces construction risk.
May 2018, totalling 222k sq. ft. Two of these
are on track to complete by late 2018. while
the third is targeted for H1 2020.
In the year the Group added to the development
team to ensure that it remains fully resourced for
the Group’s pipeline of development projects.
Investment returns that are below the
Group’s target rate of return as a result of
not reading/reacting to the cycle correctly.
The Group has an experienced Investment Team which
The Group has a portfolio valued at over €1.3bn:
is continually assessing the various Dublin sub-markets.
in the year ended 31 March 2018 it spent €39m
The Group closely monitors current and anticipated
principally in two acquisitions. It sold three
future economic conditions and reacts accordingly. Prior
properties for €36m. The Group expects further
to completing any acquisition extensive due diligence
recycling of capital in future years.
is undertaken. Board approval is part of the investment
decision which provides another layer of scrutiny.
Excessive exposure leading to poor
performance or reduced liquidity.
The Group maintains risk exposure targets and limits
All the Group’s investments are within Dublin
regarding concentration risks and assesses its portfolio
and the majority are in the office sector.
regularly against these.
The Group has built a balanced portfolio
comprising 32 properties. As at 31 March 2018
the largest single asset represented 11% of
the portfolio by value (11% as at March 2017).
The ‘in-place’ office portfolio’s top 10 tenants
account for 61% of the contracted rent roll as
at March 2018 (67% as at March 2017).
DEVELOPMENT RISKS
Strategic objective → 1 2
Poor execution
of development
projects
INVESTMENT RISKS
Strategic objective → 1 3 4
Poor investment
of capital or
mis-timed sale
of assets
Excessive
concentration on
single assets, locations,
tenants or tenant sectors
42
Hibernia REIT plc Annual Report 2018
RISK
IMPACT
PROBABILITY
EXPOSURE
MITIGATION
COMMENTS
RESIDUAL
RISK
IMPACT
DEVELOPMENT RISKS
Strategic objective → 1 2
Poor execution
of development
projects
INVESTMENT RISKS
Strategic objective → 1 3 4
Poor investment
of capital or
mis-timed sale
of assets
Excessive
concentration on
single assets, locations,
tenants or tenant sectors
Development projects are not managed
properly causing possible delays, cost
overruns and/or failure to achieve
expected rental levels, all resulting in
reduced returns.
The Group has a Development Committee which closely
monitors 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 construction risk.
The Group completed two schemes in
the year, which are now over 96% let and
which completed on time and on budget.
As at 31 March 2018 the Group had two
committed schemes with a third added in
May 2018, totalling 222k sq. ft. Two of these
are on track to complete by late 2018. while
the third is targeted for H1 2020.
In the year the Group added to the development
team to ensure that it remains fully resourced for
the Group’s pipeline of development projects.
Investment returns that are below the
Group’s target rate of return as a result of
not reading/reacting to the cycle correctly.
The Group has an experienced Investment Team which
is continually assessing the various Dublin sub-markets.
The Group 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.
The Group has a portfolio valued at over €1.3bn:
in the year ended 31 March 2018 it spent €39m
principally in two acquisitions. It sold three
properties for €36m. The Group expects further
recycling of capital in future years.
Excessive exposure leading to poor
performance or reduced liquidity.
The Group maintains risk exposure targets and limits
regarding concentration risks and assesses its portfolio
regularly against these.
All the Group’s investments are within Dublin
and the majority are in the office sector.
The Group has built a balanced portfolio
comprising 32 properties. As at 31 March 2018
the largest single asset represented 11% of
the portfolio by value (11% as at March 2017).
The ‘in-place’ office portfolio’s top 10 tenants
account for 61% of the contracted rent roll as
at March 2018 (67% as at March 2017).
Hibernia REIT plc Annual Report 2018
43
GovernanceFinancial statementsStrategic report Principal risks and uncertainties continued
RISK
IMPACT
PROBABILITY
RESIDUAL
RISK
IMPACT
EXPOSURE
MITIGATION
COMMENTS
ASSET MANAGEMENT RISKS
Strategic objective → 2 6
Poor asset management
FINANCE RISKS
Strategic objective → 1 3 5
Inappropriate capital
structure for market
conditions
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.
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.
The Group has dedicated and experienced Asset and
During the financial year, the Group has re-
Building Management teams which have been expanded
branded buildings, and increased tenant
in the financial year.
interactions including completion of a tenant
satisfaction survey. Action points arising from
The Finance team actively monitors tenants both in terms
this survey are being addressed. Most of the
of rent collection and also for changes in covenant strength.
Group’s multi-let buildings are under the direct
management of the Group. Older stock
The Group’s Building Management team manages most
continues to be refurbished and let at or above
of the Group’s multi-let office buildings, giving the Group direct
ERV. Sustainability goals have been set to
day-to-day interaction with its tenants. This ensures the best
improve environmental impact and work to
service to retain tenants and help maximise rental levels.
improve this is well under way.
The Group has a target loan to value ratio of 20-30%
At 31 March 2018 the Group indebtedness
through the cycle and under the investment policy is limited
remained modest with a LTV ratio of 16%
to a 40% LTV ratio at incurrence: these are well below the
(31 March 2017: 13%), with committed capital
debt covenant limits. In addition, any new facilities must be
expenditure in the next 24 months expected to
approved by the Board. Hedging instruments are used to
increase the LTV ratio to c. 20%. No covenant
limit the Group’s interest rate exposure on its long-term
breaches have occurred in the period.
drawn debt. Active and regular monitoring of debt covenants
is undertaken as well as stress-testing to see what downside
The Group is considering options to diversify its
scenarios the Group can withstand without breaching debt
sources of debt funding and extend maturity
covenants.
dates which stood at 2.6 years at 31 March 2018.
The Group actively manages its financial requirements and
At 31 March 2018 the Group had cash and
continues to monitor availability to ensure it is well-placed
undrawn facilities totalling €197m, or €120m net
to take advantage of market investment opportunities as
of committed capital expenditure (31 March 2017:
they arise.
€289 or €150m). The Windmill facility was repaid
in February 2018. The Group continues to monitor
The Group actively reviews its portfolio of properties and
capital requirements to ensure that future
considers the disposal of those properties that may no longer
requirements are anticipated and met within the
offer an adequate return. Any proceeds received can be used
limits of its leverage targets. During the year the
to reduce debt or fund further acquisitions.
Group sold three properties and acquired two,
spending €3m net.
PEOPLE RISKS
Strategic objective → 1 to 6
Loss or shortage of key
staff or lack of motivation
44
Hibernia REIT plc Annual Report 2018
Ability to achieve strategic goals
impacted through loss of expertise or key
personnel or lack of motivation of staff.
The expiry of the existing remuneration
structure in November 2018 and the
implementation of a new structure
is a particular area of risk this year.
The Group has a remuneration system that is linked closely
With the expiry of the current performance
to individual and Group performance. Remuneration includes
remuneration arrangements in November 2018,
a long-term incentive element to align employees’ interests
the Group has developed a new Remuneration
with shareholders’ and encourage retention. Engagement with
Policy for approval by shareholders at the AGM
staff at all levels, improvements in the office environment, and
in July 2018 and has consulted with its largest
an active social calendar encouraging staff to interact all help
shareholders on this.
to foster a positive team spirit and help to ensure that Hibernia
is a good place to work.
RISK
IMPACT
PROBABILITY
EXPOSURE
MITIGATION
COMMENTS
RESIDUAL
RISK
IMPACT
ASSET MANAGEMENT RISKS
Strategic objective → 2 6
Poor asset management
FINANCE RISKS
Strategic objective → 1 3 5
Inappropriate capital
structure for market
conditions
PEOPLE RISKS
Strategic objective → 1 to 6
Loss or shortage of key
staff or lack of motivation
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.
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.
The Group has dedicated and experienced Asset and
Building Management teams which have been expanded
in the financial year.
The Finance team actively monitors tenants both in terms
of rent collection and also for changes in covenant strength.
The Group’s Building Management team manages most
of the Group’s multi-let office 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.
During the financial year, the Group has re-
branded buildings, and increased tenant
interactions including completion of a tenant
satisfaction survey. Action points arising from
this survey are being addressed. Most of the
Group’s multi-let buildings are under the direct
management of the Group. Older stock
continues to be refurbished and let at or above
ERV. Sustainability goals have been set to
improve environmental impact and work to
improve this is well under way.
The Group has a target loan to value ratio of 20-30%
through the cycle and under the investment policy is limited
to a 40% LTV ratio at incurrence: these are well below the
debt covenant limits. In addition, any new facilities must be
approved by the Board. Hedging instruments are used to
limit the Group’s 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.
At 31 March 2018 the Group indebtedness
remained modest with a LTV ratio of 16%
(31 March 2017: 13%), with committed capital
expenditure in the next 24 months expected to
increase the LTV ratio to c. 20%. No covenant
breaches have occurred in the period.
The Group is considering options to diversify its
sources of debt funding and extend maturity
dates which stood at 2.6 years at 31 March 2018.
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.
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.
At 31 March 2018 the Group had cash and
undrawn facilities totalling €197m, or €120m net
of committed capital expenditure (31 March 2017:
€289 or €150m). The Windmill facility was repaid
in February 2018. The Group continues to monitor
capital requirements to ensure that future
requirements are anticipated and met within the
limits of its leverage targets. During the year the
Group sold three properties and acquired two,
spending €3m net.
Ability to achieve strategic goals
impacted through loss of expertise or key
personnel or lack of motivation of staff.
The expiry of the existing remuneration
structure in November 2018 and the
implementation of a new structure
is a particular area of risk this year.
The Group has a remuneration system that is linked closely
to individual and Group performance. Remuneration includes
a long-term incentive element to align employees’ interests
with shareholders’ and encourage retention. Engagement with
staff at all levels, improvements in the office environment, and
an active social calendar encouraging staff to interact all help
to foster a positive team spirit and help to ensure that Hibernia
is a good place to work.
With the expiry of the current performance
remuneration arrangements in November 2018,
the Group has developed a new Remuneration
Policy for approval by shareholders at the AGM
in July 2018 and has consulted with its largest
shareholders on this.
Hibernia REIT plc Annual Report 2018
45
GovernanceFinancial statementsStrategic report Principal risks and uncertainties continued
RISK
IMPACT
PROBABILITY
RESIDUAL
RISK
IMPACT
EXPOSURE
MITIGATION
COMMENTS
Tax and other regulatory changes can
impact returns. In 2017 the Government
increased stamp duty on commercial
property from 2% to 6% which impacted
directly on the value of the Group’s
investment properties. Failure to comply
with any legislative or regulatory changes
may also result in reputational risk.
Achievement of strategic goals impacted
through inability to continue as a REIT
and a greater tax burden.
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 effectively manage incidents
occurring.
The Management Team and the Board spend substantial
Risk remains unchanged and is managed
time, and retain external experts as necessary, to ensure
proactively. A major focus for 2018-19 is the
compliance with current and possible future regulatory
improvement of sustainability measures.
requirements.
A separate Sustainability Committee has been formed and
actively monitors progress in improving sustainability.
Effective monitoring of REIT requirements compliance
This is completed on a regular basis and
at a senior level with review by the Audit Committee.
is the subject of review by our retained tax
advisers, KPMG.
The Group has policies and procedures in place for health
The Group continues to maintain high standards
and safety. The Group has regular risk assessments and
of health and safety. A comprehensive health
audits to proactively address the key health & safety areas,
and safety strategy has been prepared with
including employee, contractors, tenant & public safety.
the assistance of an external consultant.
The Group works to ensure 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 to complete the ‘safe
pass’ course in advance. 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.
Significant damage to the Group’s
business as a result of such an event.
Within Dublin the Group monitors its geographic exposure,
The threat of cyber security attacks has become
and maintains a balance between various sub-markets.
more prevalent over the last few years.
The Group has developed business continuity plans, has
improved its IT security measures during the year and has
We continue to strengthen existing policies and
insurance in place to cover catastrophic events.
procedures and implement improvements to
minimise the threat of any such incidents. In
addition, business continuity management and
crisis management plans are reviewed regularly.
REGULATORY & TAX RISKS
Strategic objective → 5
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
Strategic objective → 1 to 6
An external event occurs
(e.g. natural disaster, war,
terrorism, civil unrest,
cyber-attack) which
significantly and negatively
affects the Group’s
operations
46
Hibernia REIT plc Annual Report 2018
RISK
IMPACT
PROBABILITY
EXPOSURE
MITIGATION
COMMENTS
RESIDUAL
RISK
IMPACT
REGULATORY & TAX RISKS
Strategic objective → 5
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
Strategic objective → 1 to 6
An external event occurs
(e.g. natural disaster, war,
terrorism, civil unrest,
cyber-attack) which
significantly and negatively
affects the Group’s
operations
Tax and other regulatory changes can
impact returns. In 2017 the Government
increased stamp duty on commercial
property from 2% to 6% which impacted
directly on the value of the Group’s
investment properties. Failure to comply
with any legislative or regulatory changes
may also result in reputational risk.
Achievement of strategic goals impacted
through inability to continue as a REIT
and a greater tax burden.
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 effectively manage incidents
occurring.
Significant damage to the Group’s
business as a result of such an event.
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.
Risk remains unchanged and is managed
proactively. A major focus for 2018-19 is the
improvement of sustainability measures.
A separate Sustainability Committee has been formed and
actively monitors progress in improving sustainability.
Effective monitoring of REIT requirements compliance
at a senior level with review by the Audit Committee.
This is completed on a regular basis and
is the subject of review by our retained tax
advisers, KPMG.
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 works to ensure 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 to complete the ‘safe
pass’ course in advance. 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 continues to maintain high standards
of health and safety. A comprehensive health
and safety strategy has been prepared with
the assistance of an external consultant.
Within Dublin the Group monitors its geographic exposure,
and maintains a balance between various sub-markets.
The Group has developed business continuity plans, has
improved its IT security measures during the year and has
insurance in place to cover catastrophic events.
The threat of cyber security attacks has become
more prevalent over the last few years.
We continue to strengthen existing policies and
procedures and implement improvements to
minimise the threat of any such incidents. In
addition, business continuity management and
crisis management plans are reviewed regularly.
Hibernia REIT plc Annual Report 2018
47
GovernanceFinancial statementsStrategic report
Sustainability
Our Sustainability
Strategy is designed
to provide goals which
will enhance long-term
value while minimising
our environmental
impact.
I am pleased to present the
sustainability section of this year’s
Annual Report. We have already
made significant progress against
the targets we have set, and we
are optimistic that we will continue
to enhance our sustainability
performance for the benefit of our
investors, stakeholders and tenants.
We confirm our commitment to:
delivering long term value to our
stakeholders by delivering
sustainable buildings; enhancing
local environments and communities
around our assets; and embedding
sustainable and socially responsible
practices across our business and
supply chain.
Kevin Nowlan
Chief Executive Officer
13 June 2018
Last year we launched our
Sustainability Strategy in conjunction
with our Sustainability Policy
and Supplier Code of Conduct.
Since then, we have formalised
our sustainability management
structure, enhanced our reporting
in line with EPRA Best Practice
Recommendations on Sustainability
Reporting and achieved LEED Gold
certification for 1WML (see our case
study on pages 64 and 65), which
includes the first LEED Gold certified
residential complex in Ireland. We
have also undertaken a tender
process for the suppliers of services
in our managed buildings with the
aim of enhancing the customer
experience for our tenants,
improving efficiency and embedding
best practice in our buildings.
48
Hibernia REIT plc Annual Report 2018
1WML Townhall, South Docks
Approved by the Board in May
2017, our Sustainability Policy and
Sustainability Strategy have been
developed to tie in with Hibernia’s
overall business strategy and to
influence the future direction of the
business. Hibernia’s sustainability
programme is managed by the
Sustainability Committee, overseen
by the Board and aligned with our
risk management processes.
Our Sustainability Strategy identifies five priority areas where we are seeking to make significant progress
across our business:
1
As a responsible asset
manager we seek to reduce
the environmental impact of
our assets, enhancing overall
performance and efficiencies.
3
By supporting local
initiatives around
our assets we aim to
positively impact
communities.
5
2
We aim to deliver
sustainable buildings
by designing them so that
they are efficient, meet the
needs of our tenants and
their employees, and
improve the built
environment of Dublin.
4
Our employees are at
the heart of the success
of our business.
Developing and
supporting our
employees remains one
of the most important
objectives of Hibernia.
We are aware of the
responsibility and
influence that we have
over our suppliers.
Having established
our Supplier Code of
Conduct last year, we
aim to continue to
support our suppliers
to adhere to
legislation and to
embed sustainable
practices within their
own businesses.
Ensuring that all the work we do at Hibernia follows our Sustainability Strategy will help us deliver sustainable, long
term value to our stakeholders against a set of strategic and ambitious targets.
Achieving this includes openly reporting on our financial, environmental, social and economic successes during the
year, as well as the challenges we have faced.
Hibernia REIT plc Annual Report 2018
49
GovernanceFinancial statementsStrategic report Sustainability continued
Responsible asset management
Met In progress Not met
CURRENT TARGETS
PROGRESS
FUTURE TARGETS
A 11% reduction has been
achieved to date (calculated
on a building intensity basis
in line with EPRA standards).
Achieve a further 10% reduction
by 2022 compared to March
2018 baseline on a like-for-
like basis for our offices
Target met: A 14% reduction
has been achieved over the
March 2017 baseline, for our
offices.
Achieve a further reduction
of 10% by 2022 compared
to March 2018 baseline
on a like-for-like basis for
our offices.
Hibernia will benchmark its
energy consumption on a
building by building basis
through reporting to GRESB
(Global ESG Benchmark for
Real Assets). Hibernia joined
GRESB in 2017.
We aim to submit to GRESB
in 2018 on a private basis
with full disclosure to GRESB
subscribers in 2019.
Energy monitoring is
underway at our
headquarters.
Own office energy targets to
be set in 2018-19.
A recycling rate of 40% has
been achieved. We have
changed supplier and are
working with building
managers and tenants to
improve this rate.
We have implemented these
three targets. The results of
our tenant surveys have led
to improvements within the
buildings where issues have
been raised.
Continue to progress towards
achieving a 50% target.
a. Continue to work with our
tenants to identify areas for
improvement and deal with
survey items identified
where appropriate.
b. Continue to set up
Environmental Working
Groups for all new multi-let
offices of over 25,000 sq. ft.
c. Repeat survey every year.
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
Introduce an energy benchmarking
system across the portfolio
Monitor energy consumption in our
headquarters in South Dock House
with a view to setting effective
targets for 2018–2019
Achieve a recycling rate of 50% or
more at properties where we retain
management responsibility
Tenant engagement:
a. Engage with our new and
existing tenants within our
multi-let buildings to encourage
optimum operation and
efficiency of their demises
b. Set up Environmental
Working Groups for each of
our multi-tenanted properties
over 25,000 sq. ft.
c. Undertake our first tenant
satisfaction survey by
March 2018
50
Hibernia REIT plc Annual Report 2018
1SJRQ under construction
Enhancing operational efficiency
of buildings
Taking the management of our
multi-let office buildings in-house
in 2016-17 has enabled us to assess
and improve the daily operation of
these buildings. Key actions we took
during the year included:
• Replacing existing lighting with
LED lights
• Improving operational alignment
of building facilities (e.g. lighting,
heating) within working hours
• Identifying areas where
inefficiencies occur (e.g. air
conditioning and heating systems
in conflict) and eliminating them
• Actively monitoring meters to
ensure any future issues are
identified and resolved promptly
These actions have contributed to
achieving an 11% like-for-like (“LfL”)
reduction in carbon emissions in
our office portfolio. Electricity
consumption was down 8% and LfL
gas consumption was down 11%,
meeting our targeted 10% LfL
Tenant survey
We ran our first tenant satisfaction
survey for all managed buildings in
2017. All respondents were satisfied
with the overall management of
their buildings and 75% indicated
that the standard of service had
improved since Hibernia took over
the building management.
The survey also focused on
identifying potential improvements.
Where appropriate, items identified
have been implemented, including
improved bicycle parking, on-site
maintenance days for bikes, new
shower facilities where they were
reduction target much earlier
than expected. We have also
engaged with our tenants to ensure
optimum operational efficiency
of their areas, and have switched
electricity suppliers so that 100%
of our electricity is now from
renewable sources.
We believe we can make further
improvements to the energy
efficiency of our buildings and
we are now targeting a further 10%
LfL reduction in carbon emissions
by March 2022 against our March
2018 baseline. One of the areas we
are examining at present is the
installation of photovoltaic (“PV”)
panels on the roofs of our buildings
to further enhance efficiency for
tenants. We intend to use 1WML as
a test case to assess whether this
technology could be extended more
widely across the portfolio.
26 survey responses received across nine properties
Quality of building management since taken in-house:
Improvement in
standard of service
Improvement in
communication
Improvement in
building reception
75%(5% disimproved, 20% same
50%(10% disimproved, 40% same
50%(50% same standard)
standard)
standard)
absent and improvements to
bathrooms and other tenant facilities.
The survey has been a starting point
for us to engage more with our
tenants on environmental issues
through the Environmental Working
Groups set up at our larger assets,
and for increased engagement at
our multi-let buildings to encourage
energy efficiency. We intend to run
the survey on an annual basis in
order to continue designing and
managing sustainable buildings.
Hibernia REIT plc Annual Report 2018
51
GovernanceFinancial statementsStrategic report Sustainability continued
Health and wellbeing
Hibernia REIT – Step-up trial campaign results
Decrease in use of lift
Hardwicke House
Montague House
35-40
People availed of our free
service on bike repair day
Health and wellbeing is an
increasingly important topic for
landlords and tenants alike. During
2017 we launched a trial of our
“Step-up” campaign, an awareness-
raising campaign intended to engage
tenants and visitors and encourage
healthy behaviour in the workplace
with four key focus areas:
• Encouraging people to take the
stairs over the lift
• Promoting cycling instead of
driving
• Increasing recycling rates in the
work place
• Being more health aware
To support the campaign, clear
branding was developed to draw
attention and engage employees.
Tenant feedback has been positive
across the three buildings where it
has been piloted and, where possible,
Hibernia will focus on implementing
tenant suggestions as the campaign
is broadened to more of our
buildings including Central Quay
and 1 Cumberland Place.
52
Hibernia REIT plc Annual Report 2018
Delivering sustainable buildings
Met In progress Not met
CURRENT TARGETS
PROGRESS
FUTURE TARGETS
Achieve a LEED Gold rating
or better on all new office
developments over 40,000 sq. ft.
1WML was completed last
year and achieved a LEED
Gold rating.
Continue to target LEED
Gold on all our new
office developments
over 40,000 sq. ft.
Achieve a minimum B1 energy
rating (and usually A3) for
office developments, a
minimum A3 energy rating
for residential developments
and seek to improve ratings
on refurbishment projects.
Incorporate the standards
into our buildings where
possible and practical.
Partially achieved: 1WML
development (BER B1),
2DC refurbishment (BER C2),
Hanover Mills residential
development (BER A3).
Pilot discussed with tenants
and decision made to
incorporate standards into
buildings rather than
incurring the cost of
certification.
Achieved.
Remain the same.
Achieved.
Remain the same.
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
Achieved a diversion from
landfill rate of over 90%
in the year.
Target is now set at over
90%.
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
Achieve a WiredScore Platinum
or Gold rating or all new office
developments
1WML has incorporated the
original grain store wall and
grind wheel. In 1SJRQ we
have retained the tramway
arch and incorporated the
Dockers pub into the design.
In the Windmill Quarter
considerable streetscaping
has taken place in co-
operation with Dublin City
Council.
Achieved Platinum at 1WML.
Continue to retain historic
features where feasible in
future projects.
Continue where possible
to improve the public realm
around development
schemes we undertake.
Re-affirm our commitment
to this standard.
Hibernia REIT plc Annual Report 2018
53
GovernanceFinancial statementsStrategic report Sustainability continued
Building certifications and energy ratings
We have delivered one new office
development at 1WML, totalling
124,000 sq. ft. of offices, plus smaller
areas designated for retail and
residential. The entire complex,
including the residential element of
the scheme, achieved LEED Gold
accreditation and is the first
residential development in Ireland to
achieve this certification. In addition,
we are on track to deliver two further
office developments in 2018, 1SJRQ
and 2WML, both of which we expect
to achieve LEED Gold certification
as well.
To ensure that we consistently
achieve improved levels of health
and wellbeing and deliver benefits to
our tenants beyond what is currently
delivered in our buildings, we
discussed running a pilot study of
the WELL Building Standard at one
of our assets. In response to tenant
feedback about the cost of
certification, we decided not to
progress with the pilot study. We are
now focusing on implementing the
actual requirements of the WELL
Building Standard where possible,
focusing on water quality, air quality
and natural indoor lighting. In
addition, all our new buildings have
bike and shower facilities which
exceed minimum standards to
encourage a healthy and active
lifestyle amongst our employees
and tenants.
We want all our new buildings to
have industry-leading connectivity
and as a result are working with
WiredScore to implement a variety of
recommendations and to achieve the
best levels of connectivity wherever
possible. 1WML achieved a Platinum
rating and we have targeted the
same rating for 2WML and 1SJRQ.
We are also considering obtaining
WiredScore accreditation for parts
of our existing office portfolio.
WiredScore
– Gold
WiredScore
– Platinum
LEED Gold
60-79
LEED Platinum
80-110
20 1 8
Water and waste management
In the year we diverted over 90% of
non-hazardous waste generated at
our development projects away from
landfill. This is well in excess of our
target of 75% and consequently we
have raised the target to a diversion
rate in excess of 90%. We are also
committed to investigating the
feasibility of water recycling and
re-use systems on all of our new
developments and refurbishments.
Finally, we strive to ensure our
buildings reflect and enhance the
locations they are in by integrating
historic buildings and features into
our portfolio where possible, and
by enhancing the public realm
around our assets. Please see further
details in the case study on pages
64 and 65.
54
Hibernia REIT plc Annual Report 2018
Creating positive community impact, supporting
our suppliers and developing our employees
Met In progress Not met
CURRENT TARGETS
PROGRESS
FUTURE TARGETS
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 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
We have contributed towards
facilities for local schools and
football teams.
During 2017 we organised the
first Dragons at the Docks
charity regatta along with
other property companies
raising over €270k in
donations which was given
to Dublin Simon Community
and other charities.
Our Code of Conduct has
been kept under review and
all new suppliers continue
to sign up to it.
We undertake an annual
employee survey. Suggestions
and recommendations (e.g.
improved social areas) are
implemented where possible.
Review our annual staff review
process
Staff review process has been
reviewed and updated.
Deliver at least six knowledge
sharing meetings/presentations
for our staff in the year ended
March 2018
Achieved.
Survey and record the modes of
transport our staff use to commute
to and from work as part of our
carbon measurement system
Survey completed.
Continue initiatives in
2018-19 to benefit the
local community. When
the Windmill Quarter
documentary is completed
organise free viewings
for schools.
Continue to organise these
events in future years.
Keep our Supplier Code
of conduct updated.
Continue with the same
target.
Continue to enhance our staff
review process in light of new
remuneration policies to be
implemented in 2018/19.
Continue to provide
information sharing sessions
and in particular focus on
NZEB buildings, WELL
Building Standard certification
and a recycling training
campaign.
Through cycle to work and
the provision of shower
facilities and secure bike
stores we continue to
encourage staff to reduce
our carbon footprint.
Hibernia REIT plc Annual Report 2018
55
GovernanceFinancial statementsStrategic report Sustainability continued
People and community
Hibernia was proud to be one of the
organisers of the inaugural Dragons
at the Docks charity regatta in
August 2017. The event brought
members from across the property
industry together to raise money for
Dublin Simon Community, a charity
supporting initiatives to help those
who are homeless in the areas of
Dublin, Kildare, Wicklow and Meath,
and a variety of other local charities
in the Grand Canal Dock area. The
event raised €220,000 for Dublin
Simon Community which helps
families escape homelessness in
Dublin. Additionally, €54,000 was
donated to several local charities,
including Liberty Saints Rugby
Football Club and Young Social
Innovators which were nominated
by Hibernia. Given its success, this
event will be an annual event, with
the next regatta taking place on
30 August 2018.
Our suppliers
The Supplier Code of Conduct was
launched in 2017, and covers key
economic, social and environmental
issues and risks that we believe are
of high importance to our business.
Since then, we are pleased with the
positive response we have had from
our suppliers and the commitment
they have made to maintaining it. It
is important to us that our suppliers
comply with and adhere to our
Supplier Code of Conduct and the
sustainability commitments we have
56
Hibernia REIT plc Annual Report 2018
made as a business, however we
also acknowledge our responsibility
to be a supportive and reliable
counterparty.
As we develop our business we
envisage our suppliers developing
their businesses too, through
support and leadership. During 2017
Hibernia undertook a tendering
process for all the key service
contracts within our buildings
including; energy, waste, mechanical
& electrical, security and cleaning.
The intention was to optimise the
service provided for tenants by
rationalising the list of suppliers
used in our buildings down to those
providing best in class service.
A large proportion of the new
supplier contracts commenced
in early 2018 and we are working
with our suppliers to enhance their
efficiency further.
EPRA tables and sustainability
summary
Introduction
We report on our energy, GHG
emissions, water and waste impacts
in accordance with the 3rd edition of
the EPRA Sustainability Best Practice
Recommendations (sBPR). Although
it is not mandatory to report on
social and governance impact
categories for 2018 we have included
these within our report for the
financial year ending March 2018.
Our reporting response has been
split into two sections:
1. Overarching recommendations
2. Sustainability performance
measures
1. Overarching recommendations
Organisational boundaries
We use the operational control
approach for our data boundary for
our office and residential assets.
Coverage
We report on all properties within
the organisational boundary defined
above, and for which we are
responsible for utilities consumption
(see Boundaries – reporting on
landlord and tenant consumption).
Data for our own office covers
the headquarters at South Dock
House only.
Estimation of landlord-obtained
utility consumption
All energy data is based on meter
readings and invoices where
applicable, therefore no
corresponding data is estimated. A
small proportion of water data from
2017 is estimated by extrapolating
consumption on a pro-rata basis for
absent and/or incomplete invoices.
In 2016 metering responsibility for
water consumption transferred from
Dublin City Council to Irish Water
which limited data availability within
the reporting timeframe. Full details
of estimations from 2016 are
available in our 2017 Annual Report.
Boundaries – reporting on landlord
and tenant consumption
The consumption reported includes
utilities (energy and water) that we
purchase as landlords. Tenant data
is therefore excluded with the
exception of Montague House (office
portfolio) which has no separate
metering. Waste data covers tenant
and landlord waste as we are
responsible for waste contracts.
Analysis – normalisation
Intensity indicators are calculated
using floor area (m2) for whole
buildings. We are aware of the
mismatch between nominator and
denominator, as our consumption
for electricity for some properties
relates to common areas only,
whereas at other properties data
covers the entire building as we
cannot separate tenant and landlord
consumption. For our own offices we
report intensity performance
measures using the floor area we
occupy within the building.
Analysis – segmental analysis (by
property type, geography)
Segmental analysis is reported in a
manner consistent with the reporting
to the Board of Directors of the
Company. Our office portfolio
includes Office IFSC, Office
South Docks, Office Traditional
Core and CBD Office Development
sub-portfolios, which together
account for approximately 88% of
our total portfolio by value. Our
residential portfolio accounts for
approximately 10% of our total
portfolio by value. We have not
included our industrial portfolio
as it is not considered material in
relation to our portfolio impacts.
Third party verification
JLL Upstream Sustainability Services
has verified this data in line with
AA1000 standard.
Disclosure on own offices
Our utilities consumption from our
own occupied offices is reported
separately to our portfolio. Please
see the table on page 61.
Narrative on performance
Between 2016 and 2017, we reduced
our electricity consumption across
our office portfolio by 8% on a
like-for-like basis and our fuels
consumption by 11% on a like-for-like
basis. The reductions can be
attributed to the rollout of energy
saving initiatives highlighted in the
‘Responsible asset management’
section of this report on page 50.
Absolute electricity and fuels
consumption in our office portfolio
increased as we added two new
buildings to our portfolio in 2017.
However, the new buildings are
energy efficient therefore the energy
intensity of our office portfolio has
reduced by 7%. In our residential
portfolio, building energy intensity
also reduced.
Despite the increase in the size of our
office portfolio, the absolute water
consumption reduced by 2% (and
by 33% on a like for like basis due to
over-estimated consumption data in
2016). We also diverted over 90% of
waste from landfill, 100% of office
assets are BER accredited and one
asset has achieved LEED platinum.
Location of EPRA sustainability
performance measures
EPRA sustainability performance
measures for our portfolio and own
offices can be found in the table
on pages 58 to 59 of this report.
Reporting period
We provide two years of performance
data covering the 2016 and 2017
calendar years for all performance
measures.
Materiality
We report on all environmental
performance measures that we are
responsible for across our portfolio
and include coverage on social and
governance measures.
Hibernia REIT plc Annual Report 2018
57
GovernanceFinancial statementsStrategic report
Sustainability continued
2. Sustainability Performance Measures
EPRA portfolio table
INDICATOR
EPRA CODE
UNIT OF MEASURE
2016
4,951,000
COVERAGE
(BUILDINGS)
COVERAGE
2017
(BUILDINGS)
CHANGE
2016
COVERAGE
(UNITS)
2017
COVERAGE
(UNITS)
CHANGE
9 of 9
5,466,000
10 of 10
10%
305,570
297 of 297
252,000
293 of 293
OFFICE PORTFOLIO
RESIDENTIAL PORTFOLIO
kWh
Total electricity consumption
Elec-Abs
% from renewable sources
not available
–
100%
–
–
not available
–
100%
–
6 of 6
3,567,000
6 of 6
-8%
299,738
293 of 293
252,000
293 of 293
9 of 9
7,586,000
11 of 11
13%
6 of 6
4,277,000
6 of 6
-11%
9 of 9
242
11 of 11
-7%
9 of 9
1,540
11 of 11
14%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
161
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
182
47%
0%
53%
9 of 9
2,236
10 of 11
-2%
138
297 of 297
103
293 of 293
-25%
9 of 9
70
11 of 11
-14%
473
297 of 297
679
293 of 293
44%
9 of 9
35,475
10 of 11
-2%
5 of 6
19,554
5 of 6
-33%
5 of 6
5 of 6
-32%
0.67
553
40%
10%
50%
not available
not available
not available
117%
n/a
n/a
n/a
0%
8 of 9
10 of 11
297 of 297
293 of 293
-18%
–
-16%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
13%
n/a
n/a
n/a
Like-for-like electricity consumption
Elec-LFL
Total energy consumption from fuel
Fuels-Abs
Like-for-like consumption from fuel
Fuels-LFL
kWh
kWh
kWh
Building energy intensity
Energy-Int
kWh/m3
Direct GHG emissions (total)
Scope 1
Indirect GHG emissions (total)
Scope 2
GHG-Dir-Abs
tCO2
GHG-Indir-Abs
tCO2 (location based)
Building GHG emissions intensity
GHG-Int
kgCO2/m2
Total water consumption
Water-Abs
Total m3
Like-for-like water consumption
Water-LFL
m3
Building water consumption intensity
Water-Int
Weight of waste by disposal route
(total)
Waste-Abs
(m3/m2)
tonnes
% recycled
% composted
% sent to incineration
3,858,890
6,735,000
4,826,000
260
1,347
2,277
81
36,836
29,118
0.99
255
not available
not available
not available
Weight of waste by disposal route
(Like-for-like)
Waste-LFL
tonnes
228
5 of 6
227
5 of 6
161
293 of 293
182
293 of 293
+12%
58
Hibernia REIT plc Annual Report 2018
2016
4,951,000
3,858,890
6,735,000
4,826,000
260
1,347
2,277
81
36,836
29,118
0.99
255
not available
not available
not available
INDICATOR
EPRA CODE
UNIT OF MEASURE
COVERAGE
(BUILDINGS)
2017
COVERAGE
(BUILDINGS)
CHANGE
2016
COVERAGE
(UNITS)
2017
COVERAGE
(UNITS)
CHANGE
OFFICE PORTFOLIO
RESIDENTIAL PORTFOLIO
% from renewable sources
not available
–
100%
–
–
not available
–
100%
–
9 of 9
5,466,000
10 of 10
10%
305,570
297 of 297
252,000
293 of 293
6 of 6
3,567,000
6 of 6
-8%
299,738
293 of 293
252,000
293 of 293
9 of 9
7,586,000
11 of 11
13%
6 of 6
4,277,000
6 of 6
-11%
9 of 9
242
11 of 11
-7%
9 of 9
1,540
11 of 11
14%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-18%
–
-16%
n/a
n/a
n/a
n/a
Building GHG emissions intensity
GHG-Int
kgCO2/m2
9 of 9
70
11 of 11
-14%
473
297 of 297
679
293 of 293
44%
GHG-Indir-Abs
tCO2 (location based)
9 of 9
2,236
10 of 11
-2%
138
297 of 297
103
293 of 293
-25%
Total electricity consumption
Elec-Abs
Like-for-like electricity consumption
Elec-LFL
Total energy consumption from fuel
Fuels-Abs
Like-for-like consumption from fuel
Fuels-LFL
kWh
kWh
kWh
kWh
Building energy intensity
Energy-Int
kWh/m3
Direct GHG emissions (total)
GHG-Dir-Abs
tCO2
Scope 1
Scope 2
Indirect GHG emissions (total)
Total water consumption
Water-Abs
Total m3
Like-for-like water consumption
Water-LFL
m3
9 of 9
35,475
10 of 11
-2%
5 of 6
19,554
5 of 6
-33%
Building water consumption intensity
Water-Int
Weight of waste by disposal route
(total)
Waste-Abs
(m3/m2)
tonnes
% recycled
% composted
% sent to incineration
5 of 6
8 of 9
0.67
553
40%
10%
50%
Weight of waste by disposal route
(Like-for-like)
Waste-LFL
tonnes
228
5 of 6
227
5 of 6
5 of 6
-32%
10 of 11
117%
n/a
n/a
n/a
0%
n/a
n/a
n/a
161
n/a
n/a
n/a
not available
not available
not available
297 of 297
n/a
n/a
n/a
293 of 293
n/a
n/a
n/a
182
47%
0%
53%
n/a
n/a
n/a
13%
n/a
n/a
n/a
161
293 of 293
182
293 of 293
+12%
Hibernia REIT plc Annual Report 2018
59
GovernanceFinancial statementsStrategic report Sustainability continued
Type and number of assets
certified
Cert-Tot
% of portfolio
certified OR
number of
certified assets
2017
TYPE OF
CERTIFICATION
100% (office portfolio)
BER
22% (office portfolio
by floor area)
LEED
Platinum
Data qualifying notes:
DH&C-Abs & DH&C-LfL: None of
our assets are supplied with District
Heating & Cooling so this
performance measure is not
applicable (n/a).
Fuels-Abs & Fuels-LfL: Fuels relates
to natural gas consumption only. The
proportion of fuels from renewable
sources is not reported as we have
no contracts in place to purchase
fuels from renewable sources. No
landlord metred fuels are consumed
across our residential portfolio so
this performance measures is not
applicable (n/a).
GHG-Dir-Abs: Scope 1 GHG
emissions for our residential
portfolio are not applicable as there
are no landlord obtained fuels.
Emissions from our office portfolio
are calculated using the applicable
emissions factors published the
Sustainable Energy Authority of
Ireland (“SEIA”).
GHG-Indir-Abs: Scope 2 emissions
are reported using emissions factors
published the Sustainable Energy
Authority of Ireland (“SEIA”).
Water-Abs, Water-LfL & Water-Int:
No landlord metred water is
consumed across our residential
portfolio so these performance
measures are not applicable (n/a).
Waste-LfL: We are not able to
report like-for-like waste disposal by
route as 2017 is the first year we
have reported this information
across our portfolio.
60
Hibernia REIT plc Annual Report 2018
EPRA own office table
INDICATOR
EPRA CODE
UNIT OF MEASURE
Total electricity consumption
Like-for-like electricity consumption
Total energy consumption from fuel
Like-for-like consumption from fuel
Elec-Abs
Elec-LFL
Fuels-Abs
Fuels-LFL
kWh
kWh
kWh
kWh
Building energy intensity
Energy-Int
kWh/m2
Direct GHG emissions (total) Scope 1
GHG-Dir-Abs
tCO2
Indirect GHG emissions (total) Scope 2
GHG-Indir-Abs
tCO2 (location based)
Building GHG emissions intensity
Total water consumption
Like-for-like water consumption
Building water consumption intensity
GHG-Int
Water-Abs
Water-LFL
Water-Int
tCO2/m2
m3
m3
m3/employee
Weight of waste by disposal route (total)
Waste-Abs
tonnes
Weight of waste by disposal route (Like-for-like)
Waste-LFL
% recycled
% sent to incineration
% other
tonnes
% recycled
% sent to incineration
% other
2017
137,000
140,000
74,000
141,000
254
15
56
71
230
207
0.28
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Data qualifying notes:
Elec-LfL, Fuels-LfL, Water-LfL:
We have not collected 2016
consumption data so these
performance measures are
not applicable (n/a).
DH&C-Abs & DH&C-LfL: Our
corporate offices are not supplied
with District Heating & Cooling so
these performance measure are not
applicable (n/a).
Fuels-Abs: Fuels relates to natural
gas consumption only. Consumption
in 2017 was reduced due to
corrections on billing from the
previous year. The proportion of
fuels from renewable sources is not
reported as we have no contracts
in place to purchase fuels from
renewable sources.
GHG-Dir-Abs & GHG-Indir-Abs:
Scope 1 and 2 emissions were
calculated using the applicable
national emissions factors published
by the Sustainable Energy Authority
of Ireland. Market based Scope 2
emissions data was not available at
the time of reporting.
Waste-Abs, Waste-LfL: As our
corporate offices are located on one
floor of a mixed-use building we do
not manage the waste contract and
are not able to provide data on our
waste consumption. Therefore these
performance measures are not
applicable (n/a).
Hibernia REIT plc Annual Report 2018
61
GovernanceFinancial statementsStrategic report
Sustainability continued
EPRA enhanced measures for reporting table (social and governance)
INDICATOR
Gender diversity
Gender pay
EPRA CODE
SCOPE
UNITS OF MEASURE
2016
2017
Diversity-Emp
Corporate operations
% of female employees
39% for general employees, 0% at
50% for general employees; 0% at
management level and above
management level and above
Diversity-Pay
Corporate operations
Training and development
Emp-Training
Performance appraisals
Emp-Dev
New hires
Turnover
Injury rate
Lost day rate
Absentee rate
Fatalities
H&S Impact Assessments
Number of incidents
Community Programmes
Board composition
Emp-Turnover
H&S-Emp
H&S-Asset
H&S-Comp
Comty-Eng
Corporate operations
Corporate operations
(excludes Non-Exec)
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Office portfolio
Residential portfolio
Office portfolio
Residential portfolio
Office portfolio
Residential portfolio
Gov-Board
Corporate operations
Process for nominating and selecting
the highest governance body
Gov-Select
Corporate operations
Conflicts of interest
Gov-CoI
Corporate operations
Involvement in another property
vehicle in Ireland
Data qualifying notes:
H&S-Emp absentee rate: The
absentee rate is not available as
we do not currently collect this
information in a single place.
H&S-Asset: Health and safety
impact assessments are not
regularly made by external
inspectors, generally these are
triggered on occurrence of a
reportable incident. Hibernia carries
out its own assessments and has
implemented a formal health and
safety policy.
62
Hibernia REIT plc Annual Report 2018
Ratio of basic pay in Euro (average
2. Management 0%
female versus average male)
3. Exec directors 0%
1. Executive staff 76%
1. Executive staff 92%
2. Management 0%
3. Exec directors 0%
4. Non-Exec directors 0%
4. Non-Exec directors 0%
Average hours per employee
% of total workforce
Injuries per hours works
lost days per hours works
Days per employee
Not available
Not available
Total number
No instances of non-compliance
No instances of non-compliance
No instances of non-compliance
No instances of non-compliance
89%
44%
6
8
0
0
0
0
0
100%
100%
Total number
Rate
Rate
Total number
Total number
% of assets
% of assets
members
Average tenure
topics
Description
Total number of Executive members 2
Total number of Independent
Total number with competencies
relating to environmental and social
0
Not available
Not available
5
2 years
11
94%
13
42%
3%
1
0
0
0
100%
100%
Not available
Not available
2
5
0
3 years
Terms of Reference governing the Nominations Committee for the Board of
Directors is available on our website: http://www.hiberniareit.com/about-us/
corporate-governance
Procedures for the avoidance of conflicts of interest are set out in the terms
of reference that set the duties and responsibilities for our Nominations
Committee and the Schedule of Reserved Matters for the Board. Both
are available on our website: http://www.hiberniareit.com/about-us/
corporate-governance
Training and development
Emp-Training
Performance appraisals
Emp-Dev
INDICATOR
Gender diversity
Gender pay
New hires
Turnover
Injury rate
Lost day rate
Absentee rate
Fatalities
H&S Impact Assessments
Number of incidents
Community Programmes
Board composition
Corporate operations
Corporate operations
(excludes Non-Exec)
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Corporate operations
Office portfolio
Residential portfolio
Office portfolio
Residential portfolio
Office portfolio
Residential portfolio
Emp-Turnover
H&S-Emp
H&S-Asset
H&S-Comp
Comty-Eng
Gov-Board
Corporate operations
EPRA CODE
SCOPE
UNITS OF MEASURE
2016
2017
Diversity-Emp
Corporate operations
% of female employees
Diversity-Pay
Corporate operations
Ratio of basic pay in Euro (average
female versus average male)
39% for general employees, 0% at
management level and above
50% for general employees; 0% at
management level and above
1. Executive staff 76%
2. Management 0%
3. Exec directors 0%
4. Non-Exec directors 0%
1. Executive staff 92%
2. Management 0%
3. Exec directors 0%
4. Non-Exec directors 0%
Average hours per employee
6
% of total workforce
Total number
Rate
Total number
Rate
Injuries per hours works
lost days per hours works
89%
8
44%
0
0
0
0
11
94%
13
42%
1
3%
0
0
Days per employee
Not available
Not available
Total number
% of assets
0
100%
100%
0
100%
100%
Total number
No instances of non-compliance
No instances of non-compliance
No instances of non-compliance
No instances of non-compliance
% of assets
Not available
Not available
Total number of Executive members 2
Total number of Independent
members
Average tenure
5
2 years
Total number with competencies
relating to environmental and social
topics
0
Not available
Not available
2
5
3 years
0
Process for nominating and selecting
the highest governance body
Conflicts of interest
Gov-Select
Corporate operations
Description
Gov-CoI
Corporate operations
Involvement in another property
vehicle in Ireland
Terms of Reference governing the Nominations Committee for the Board of
Directors is available on our website: http://www.hiberniareit.com/about-us/
corporate-governance
Procedures for the avoidance of conflicts of interest are set out in the terms
of reference that set the duties and responsibilities for our Nominations
Committee and the Schedule of Reserved Matters for the Board. Both
are available on our website: http://www.hiberniareit.com/about-us/
corporate-governance
Comty-Eng: This performance
measure is not available as we not
currently collect this information.
Hibernia REIT plc Annual Report 2018
63
GovernanceFinancial statementsStrategic report Sustainability continued
Windmill Quarter
case study
The Windmill
Quarter is an urban
regeneration
project in the SOBO
district of Dublin’s
South Docks which
is bringing new life
to the area whilst
preserving its
history with a mix
of office, retail,
residential and
leisure facilities.
The Quarter, when fully completed,
will comprise five buildings all
fully-owned by Hibernia, and
approximately 400,000 sq. ft. of
office accommodation. Three of
the buildings are complete and
close to full occupation (1WML, the
Observatory and SOBO Works)
with the remaining two buildings
(1SJRQ and 2WML) expected to be
completed by the end of 2018. The
Quarter has a long history both as
part of Dublin’s Docklands and later
as the site of the Windmill Lane
Recording Studios, where a number
of world-famous artists recorded
their albums.
64
64
Hibernia REIT plc Annual Report 2018
Hibernia REIT plc Annual Report 2018
The Windmill Quarter during construction showing the retention of the grain store,
the foundation of the original windmill, the tramyard gate and the Dockers pub
Hibernia is committed to delivering
sustainable buildings across our
entire portfolio. All three new
buildings (1WML, 1SJRQ, 2WML)
are expected to achieve WiredScore
Certified Platinum, with 1WML
achieving LEED Gold for the office
and residential elements in 2017,
and 1SJRQ and 2WML on track to
achieve LEED Gold. Key historic
buildings including the tram shed
façade, the Dockers pub and the
grain store have been retained
within the designs of 1SJRQ and
1WML. As well as the delivery of
the new buildings, we are taking
steps to improve environmental
efficiency in the Observatory and
SOBO Works.
We acknowledge that we need
to develop and maintain healthy
partnerships and relationships with
the external community and our
suppliers. We have therefore
collaborated with key stakeholders,
community groups and Dublin City
Council, whilst investing €2.5 million
into public realm enhancements
along Windmill Lane and Creighton
Street. These include installing new
granite footpaths and traffic
calming measures. Hibernia has
supported the refurbishment of
domestic science labs at a local
secondary school, and has also
sponsored sports facilities used by
local football teams. The hospitality
team at the Quarter, who are the
Strategic report
Strategic report
Governance
Governance
Financial statements
Financial statements
primary point of contact with
suppliers, have created a calendar
of events and activities to engage
and build relationships with both
our suppliers and occupiers.
Hibernia has also commissioned a
film to be made about the Quarter
that will be shown on site to
connect people with local history,
and to illustrate the importance
of the area to Dublin.
Construction of 1WML & 1SJRQ
showing retention of the
tramyard gate and the
Dockers pub
Hibernia REIT plc Annual Report 2018
Hibernia REIT plc Annual Report 2018
65
65
GovernanceFinancial statementsStrategic report Sustainability continued
Sustainability is an important focus for us – both
in developing new buildings and in upgrading our
standing portfolio.
over the last year will carry on into
the future as we continue to embed
sustainability throughout our business.
Future outlook and governance
As set out in this report, we have
made a good start on delivering
against the targets we set ourselves
last year in our Sustainability Strategy.
Where we have successfully met
our targets we have set new, more
ambitious targets reflecting
our commitment to embedding
sustainability throughout the whole
business. We expect to continue this
progress in future years.
As well as progressing towards our
sustainability targets, complying
with EPRA Best Practice
Recommendations on Sustainability
Reporting is an important focus for
us. This year we have started to
implement and measure the social
and governance indicators of
the sBPR whilst targeting full
implementation in the 2019
reporting cycle. We also expect
to make a first submission to
GRESB this year on a private basis,
with fully published data available
after the 2019 submission year.
Excellence in corporate governance
is a focus for our Group and an
overview of the structure can be
found in our Corporate Governance
Report on pages 77 to 79 of the
Annual Report. Our Sustainability
Committee is functioning effectively
and with no proposed changes to
the committee, we believe the
positive trends we have witnessed
66
Hibernia REIT plc Annual Report 2018
1WML Townhall interior showing
retention of original grain store
Hibernia REIT plc Annual Report 2018
67
GovernanceFinancial statementsStrategic report Chairman’s corporate governance statement
“Hibernia is performing well and our aim is to
ensure that the Group continues to do so and to
maintain the highest standards of governance. We
continue to work to ensure that risk management
and internal controls are further enhanced.”
Dear Shareholder
Governance
The Board of Hibernia remains
committed to ensuring that the
highest standards of corporate
governance prevail at all levels in
the Group.
On behalf of the Board, I am
pleased to confirm that Hibernia
has, throughout the financial year,
complied fully with all relevant
provisions of the UK Corporate
Governance Code 2016 (“the UK
Code”) and the Irish Corporate
Governance Annex (“the Irish
Annex”). We continue to keep
developments under review and
confirm that the Group intends to
remain fully compliant during the
financial year ended 31 March 2019.
Our corporate governance
framework underpins effective
decision-making and accountability,
and is the basis on which we
conduct our business and engage
with our tenants and stakeholders.
The Group has continued with the
strategic priorities established in
prior years, focusing on the delivery
of development projects and
increasing the rental income of the
portfolio while remaining alert to
any acquisition and disposal
opportunities that arise.
Board activity
The Board met eight times: four
of these were regular, scheduled
meetings which included a full
agenda addressing all areas of
the business. These meetings are
attended by the relevant key
management and other personnel
where appropriate, ensuring the
Board has a good interaction
with the Group’s staff and
appropriate experts.
I seek to ensure that we always have
the appropriate mixture of skills and
experience on the Board.
Bill Nowlan retired from the Board
on 25 July 2017 and I would like to
thank him for his considerable
contribution in the establishment
and success of the Group. He
continues in his role as a consultant
until November 2018, as agreed
during the Internalisation in 2015.
With his retirement, the
Nominations Committee sought
a suitable replacement.
Culture and values
We aspire to the highest standards
of behaviour based on honesty and
transparency in everything we do.
The Group has a single office
and an open workspace which
encourages communication and
interaction between all employees.
In addition, regular training sessions
and social events are organised
which are particularly important for
those members of building
management services who work
across our properties. Our executive
committee structure ensures a high
level of oversight over the Group’s
day to day activities. Each of our
executive committees meets
every six weeks on rotation or
more frequently if required. We
communicate our standards to those
who supply us with goods and
services in our Suppliers’ Code of
Conduct. This sets out the standards
we expect our suppliers to comply
with to ensure that they are
operating ethically and responsibly.
On 8 November 2017, Frank Kenny,
another of the founders of Hibernia,
a senior adviser to the Group and
one of the Vendors in the
Internalisation, was appointed to the
Board as a Non-Executive Director.
He has a wealth of experience in
property markets in Ireland and the
US and continues in his role as a
senior adviser.
Now that most of our multi-let
office buildings are managed by
our building management team,
we have taken steps to refresh
and align the branding within the
buildings and improve the level of
service for our tenants. One such
initiative this year has been the
introduction of our “Step-Up”
campaign, making sure staircases
are clearly identified within the
68
Hibernia REIT plc Annual Report 2018
buildings and encouraging tenants
and visitors to use them rather than
the lifts. (See our Sustainability
report on pages 48 to 67 for further
information.)
discussion of or voting on items
in which they may have a conflict
of interest. The Board considers
that these procedures are
working effectively.
“The addition of an internal
audit function has brought
a further layer of review.”
Bill Nowlan and Frank Kenny have set
up an investment fund concentrating
on the development of social and
affordable housing. While the Board
believes it is unlikely that the business
of this fund will overlap with that of
Conflict of interest procedures
We have comprehensive conflict
of interest procedures, including
a gifts and inducements policy,
designed to address not only
any possible conflicts within the
Board, but also of all employees.
This includes situations where
employees have personal direct
or indirect connections with parties
that may be involved in activities
with the Group that give rise to
financial rewards. The key principle
is that gifts, benefits or
inducements should neither be
offered nor received if they could
create or appear to create an
obligation, could affect either
party’s impartiality or could
constitute an undue influence on
a business decision.
All Directors are required to declare
external directorships to the Board
and the Risk and Compliance
Officer (“RCO”) at the time of
appointment so any potential
conflicts can be addressed at
that time. All changes in such
directorships must be notified to
the RCO and all potential conflicts
declared at Board meetings.
Directors must abstain from
Hibernia REIT plc Annual Report 2018
69
GovernanceFinancial statementsStrategic report Chairman’s corporate governance statement continued
EPRA NAVPS
159.1c
Dividend per share
Total property return vs IPD
3.0c
4.8%
18
17
16
0
159.1
146.3
130.8
18
17
16
0
3.0
2.2
1.5
18
17
0
16 n/a
0
6.8
4.8
11.6
11.2
3.3
14.5
Hibernia, it was agreed that both
parties will take steps to manage and
deal with any potential conflicts of
interest they may encounter in future.
Stakeholder engagement
The Group’s success depends on
its ability to engage and work
constructively with a range of
key stakeholders.
We talk about engagement with our
shareholders in ‘Communication
with shareholders’ on pages 84 to
87 of this Annual Report.
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
2017 we held our annual property
tour for our main lending banks to
view our key assets and developments.
We recognise the role and
importance of our employees’
contribution to the success of the
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 the rotating six-weekly meetings
and all papers and minutes of the
meetings are made available to
employees. Periodically there are
meetings 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 effectiveness
In 2017-18, the performance
evaluation of the Board, its
committees and individual Directors
was internally facilitated by me, the
Senior Independent Director and
the Company Secretary. I am
pleased to say that the results of
this exercise were positive. Actions
arising from last year’s externally
facilitated review were substantially
completed during this financial year.
More information on this process
can be found in the Corporate
Governance Report on page 83
of this Annual Report.
In 2018-19 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.
Board committees
Our Board committees have
continued to perform effectively.
With the expiry of the current
arrangements in November 2018,
we are conscious of the need
to ensure new remuneration
arrangements are put in place
and that they are sufficient,
without being excessive, to
incentivise performance and
retain and motivate key staff.
Consequently, a particular focus
of the Remuneration Committee
has been the proposed new
policy, which will be subject to
shareholders approval at the AGM.
The Audit Committee considered
and approved the appointment of
new valuers, Cushman & Wakefield,
and a three-year rolling internal
audit programme using PwC as the
provider of internal audit services.
70
Hibernia REIT plc Annual Report 2018
Conclusion
I would like to take this opportunity
to thank my colleagues on the
Board for their continued work
and dedication.
On behalf of the Board, I would
also like to extend my thanks to
the Management Team and staff,
without whose commitment and
hard work these results would not
be possible.
I believe the Group is well-placed
to make continued progress on our
goals and am confident that we
can continue to deliver value for
our shareholders.
Daniel Kitchen
Chairman
13 June 2018
I currently hold three non-executive
chairmanships (Hibernia REIT plc,
Workspace Group plc and
Applegreen plc), which represents
six mandates under ISS’s formula
and Colm Barrington is also
classified as holding six mandates
as he is an Executive Director of Fly
Leasing Limited, a Non-Executive
Director of Hibernia REIT plc, IFG
Group plc and Vice Chairman of
Finnair plc. Consequently, it is
possible that ISS may recommend
a vote against our re-election at
the AGM on 31 July 2018. The Board
has considered ISS’s definition of
overboarding and believe it is too
formulaic and do not accept that
either Colm or I are overboarded.
Our other commitments have been
fully disclosed and do not impact on
our availability to Hibernia. The time
commitment expected of us is fully
understood and reviewed as part of
the annual evaluation process. We
also remain in full compliance with
the UK Code requirements.
Director time commitments
Institutional Shareholder Services
Inc. (“ISS”), a proxy voting adviser,
issued revised United Kingdom
and Ireland Proxy Voting
Guidelines – Benchmark Policy
Recommendations in January 2018
which are effective for meetings on
or after 1 February 2018. These
guidelines serve as a tool to assist
institutional investors in meeting
their responsibilities with respect
to voting at meetings of listed
companies. One of their
recommendations deals with the
concept of overboarding, i.e. where
directors have excessive numbers of
board appointments. ISS may
recommend a vote against directors
who they believe hold an excessive
number of board roles at publicly-
listed companies. ISS use the
concept of mandates to define
overboarding with one Non-
Executive Directorship counting
as one mandate, a Non-Executive
Chairmanship counting as two
mandates and an Executive Director
role counting as three mandates.
Any person holding more than five
mandates is classified, by ISS, as
overboarded. Based on ISS’s
definition of overboarding, both
Colm Barrington and I are classified
as overboarded.
Hibernia REIT plc Annual Report 2018
71
GovernanceFinancial statementsStrategic report Board of Directors
Daniel Kitchen
Non-Executive Chairman
(66)
Colm Barrington
Non-Executive Director
and Senior Independent
Director (72)
Stewart Harrington
Non-Executive Director
(75)
Frank Kenny
Non-Executive Director
(65)
Terence O’Rourke
Kevin Nowlan
Non-Executive Director
Chief Executive Officer
Thomas Edwards-Moss
Chief Financial Officer
Sean O’Dwyer
Company Secretary
(63)
(47)
(38)
(59)
Independent
Yes
Appointment
23 August 2013
Nationality
Irish
Independent
Yes
Appointment
23 August 2013
Nationality
Irish
Independent
Yes
Appointment
23 August 2013
Nationality
Irish
Independent
No
Appointment
8 November 2017
Nationality
Irish
Committee Membership
Nominations (Chair) and
Remuneration
Committee Membership
Audit, Nominations and
Remuneration (Chair)
Current external appointments:
Chief Executive Officer and
Director of FLY Leasing, a
Non-Executive Director of IFG
Group plc and Non-Executive
Vice Chairman of Finnair plc.
Previous appointments: Colm
was Non-Executive Chairman of
Aer Lingus Group plc from 2008
to 2015 and Managing Director
of Babcock & Brown in Ireland
between 1994 and 2007. Prior
to 1994 he worked with GPA
Group plc and GE Capital
Aviation Services.
Skills and business experience:
Colm’s senior executive
management experience and the
range of public company
non-executive board roles held
by him add significant value to
the Board from outside the
property sector.
Current external appointments:
Chairman of Workspace Group
plc, Applegreen plc, a Non-
Executive Director of LXB Retail
Properties plc, Irish Takeover
Panel Limited and a member of
the Board of Governors of St
Patrick’s Hospital in Dublin.
Previous appointments: Danny
was Deputy Chief Executive at
Heron International plc between
2003 and 2008 and prior to that
was Finance Director at Green
Property from 1994 to 2002. He
was appointed by the Irish
Government as Non-Executive
Chairman of Irish Nationwide
Building Society between 2008
and 2011 and was a Non-
Executive Director of Kingspan
Group plc from 2009 to 2012.
Skills and business experience:
Danny brings a strong financial
background and expertise in the
property investment and
development sectors to his role
as chairman. His experience as
Chairman of other public
companies is also beneficial in
ensuring the Board operates in
an effective manner.
Committee Membership
Audit, Nominations and
Remuneration, Chair of
Investment and Development
Committees (executive
committees)
Committee Membership
Member of Development,
Investment and Asset
Management Committees
(executive committees)
Current external appointments:
Non-Executive Director of the
parent company of BWG Group,
Stafford Holdings, Killeen
Properties and Activate Capital.
Previous appointments: Stewart
was a partner in Jones Lang
Wootton (now JLL), 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 also served as a
Non-Executive Director of a
number of Irish semi-state bodies.
Skills and business experience:
Stewart has extensive knowledge
and experience of the Irish
property market gained over
many years in a number of
diverse roles. He provides
valuable advice and assistance
to executive management
through chairing the
Development and Investment
Committees.
Current external appointments:
Founder and Chief Executive
Officer of Willett Companies
LLC, of Rye, New York, a
property investment company
specialising in multi-tenanted
office and retail properties on
the East Coast of the United
States. Founder and Director of
Urbeo Residential Fund ICAV, an
Irish social and affordable
housing fund.
Previous appointments: Frank
was a Director of WK Nowlan
REIT Management Limited, the
former investment manager to
Hibernia REIT plc. He trained
as a chartered surveyor at
Lisney, Dublin.
Skills and business experience:
Frank has more than 35 years of
experience in the Irish and US
property markets in all aspects of
commercial and residential
property investment and
development for both private
investors and institutions. Frank’s
extensive property experience
assists management in investment
and development decisions.
All of the Directors will retire at the Annual General Meeting (“AGM”) and, being eligible, will offer themselves up for re-election.
72
Hibernia REIT plc Annual Report 2018
Independent
No
Independent
No
Independent
n/a
Appointment
5 November 2015
Appointment
5 November 2015
Appointment
10 February 2017
Nationality
Irish
Nationality
British
Nationality
Irish
Committee Membership
Committee Membership
Audit (Chair), Nominations and
All executive committees
Committee Membership
All executive committees
Committee Membership
None
Independent
Yes
Appointment
23 August 2013
Nationality
Irish
Remuneration
Current external appointments:
Skills and business experience:
Skills and business experience:
Skills and business experience:
Chairman of Enterprise Ireland
Kevin Nowlan joined the Board of
Thomas Edwards-Moss joined
Sean was appointed Company
and Kinsale Capital Management,
Hibernia as Chief Executive
Non-Executive Director of the Irish
Officer in November 2015
the Board of Hibernia as Chief
Financial Officer in November
Secretary in February 2017 and is
also the Risk and Compliance
Times. He is also Chairman of the
following the internalisation of
2015, following the internalisation
Officer for Hibernia, a role he
Irish Management Institute as well
WK Nowlan REIT Management
of the Investment Manager
as a member of their Council.
Limited, the Investment Manager,
where he held the same role
performed for the Investment
Manager from its inception in
where he held the same position
since joining in June 2014. Prior
2013. Prior to this, Sean was
from its inception in 2013.
to this, he spent nine years at
responsible for finance, risk and
Previously, Kevin held senior roles
Credit Suisse in London as part
compliance at Bank of Ireland
in NAMA and Treasury Holdings
of the UK & Ireland Investment
Asset Management (now SSgA
and was Managing Director of
Banking team. While there, he
Ireland) between 1987 and 2008.
WK Nowlan Real Estate Advisers.
focused on corporate finance in
From 2009 to 2013 he worked as
He is a Chartered Surveyor with
the property sector and advised
a consultant with a number of
more than 20 years’ experience
on the initial public offering of
financial services firms. He
Hibernia. He is a graduate of
Cambridge University and
qualified as a Chartered
Accountant at PwC.
qualified as a Chartered
Accountant at EY in 1983.
in the Irish property market,
including commercial agency,
property management,
investment, development
and development financing,
commercial loan portfolio
management and
debt restructuring.
Previous appointments: Terence
was Managing Partner of KPMG
Ireland from 2006 to 2013 and
a former member of the Global
Board, the EMA Board and the
Global Executive Team of KPMG
International, 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.
Skills and business experience:
Terence’s accounting and
management experience help
to ensure the Board has the
appropriate balance of skills,
experience and knowledge. His
accounting background ensures
he is an effective Chair of the
Audit Committee.
Daniel Kitchen
Colm Barrington
Stewart Harrington
Frank Kenny
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
(66)
and Senior Independent
(75)
(65)
Terence O’Rourke
Non-Executive Director
(63)
Kevin Nowlan
Chief Executive Officer
(47)
Thomas Edwards-Moss
Chief Financial Officer
(38)
Sean O’Dwyer
Company Secretary
(59)
Independent
Yes
Appointment
23 August 2013
Nationality
Irish
Director (72)
Independent
Yes
Appointment
23 August 2013
Nationality
Irish
Independent
Yes
Appointment
23 August 2013
Nationality
Irish
Independent
No
Appointment
8 November 2017
Nationality
Irish
Independent
Yes
Appointment
23 August 2013
Nationality
Irish
Independent
No
Independent
No
Independent
n/a
Appointment
5 November 2015
Appointment
5 November 2015
Appointment
10 February 2017
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, Chair of
Committee Membership
Member of Development,
Investment and Asset
Committee Membership
Audit (Chair), Nominations and
Remuneration
Committee Membership
All executive committees
Committee Membership
All executive committees
Committee Membership
None
Investment and Development
Management Committees
Committees (executive
(executive committees)
committees)
Current external appointments:
Current external appointments:
Current external appointments:
Current external appointments:
Chairman of Workspace Group
Chief Executive Officer and
Non-Executive Director of the
Founder and Chief Executive
plc, Applegreen plc, a Non-
Director of FLY Leasing, a
parent company of BWG Group,
Officer of Willett Companies
Executive Director of LXB Retail
Non-Executive Director of IFG
Stafford Holdings, Killeen
LLC, of Rye, New York, a
Properties plc, Irish Takeover
Group plc and Non-Executive
Properties and Activate Capital.
property investment company
Panel Limited and a member of
Vice Chairman of Finnair plc.
the Board of Governors of St
Patrick’s Hospital in Dublin.
Previous appointments: Colm
was a partner in Jones Lang
was Non-Executive Chairman of
Wootton (now JLL), Harrington
Previous appointments: Stewart
Previous appointments: Danny
was Deputy Chief Executive at
Aer Lingus Group plc from 2008
Bannon Chartered Surveyors
to 2015 and Managing Director
(now BNP Paribas Real Estate
Heron International plc between
of Babcock & Brown in Ireland
Ireland) and Managing Director
2003 and 2008 and prior to that
between 1994 and 2007. Prior
of Dunloe Ewart Ltd (formerly
was Finance Director at Green
to 1994 he worked with GPA
known as Dunloe House Group
Property from 1994 to 2002. He
Group plc and GE Capital
was appointed by the Irish
Aviation Services.
plc). He also served as a
Non-Executive Director of a
specialising in multi-tenanted
office and retail properties on
the East Coast of the United
States. Founder and Director of
Urbeo Residential Fund ICAV, an
Irish social and affordable
housing fund.
Previous appointments: Frank
was a Director of WK Nowlan
REIT Management Limited, the
Government as Non-Executive
Chairman of Irish Nationwide
Building Society between 2008
and 2011 and was a Non-
Executive Director of Kingspan
Group plc from 2009 to 2012.
Skills and business experience:
Danny brings a strong financial
background and expertise in the
property investment and
development sectors to his role
as chairman. His experience as
Chairman of other public
companies is also beneficial in
ensuring the Board operates in
an effective manner.
number of Irish semi-state bodies.
former investment manager to
Skills and business experience:
Colm’s senior executive
Skills and business experience:
management experience and the
Stewart has extensive knowledge
range of public company
and experience of the Irish
non-executive board roles held
property market gained over
by him add significant value to
the Board from outside the
many years in a number of
diverse roles. He provides
Hibernia REIT plc. He trained
as a chartered surveyor at
Lisney, Dublin.
Skills and business experience:
Frank has more than 35 years of
experience in the Irish and US
property sector.
valuable advice and assistance
property markets in all aspects of
to executive management
through chairing the
commercial and residential
property investment and
Development and Investment
development for both private
Committees.
investors and institutions. Frank’s
extensive property experience
assists management in investment
and development decisions.
Skills and business experience:
Thomas Edwards-Moss joined
the Board of Hibernia as Chief
Financial Officer in November
2015, following the internalisation
of the Investment Manager
where he held the same role
since joining in June 2014. Prior
to this, he spent nine years at
Credit Suisse in London as part
of the UK & Ireland Investment
Banking team. While there, he
focused on corporate finance in
the property sector and advised
on the initial public offering of
Hibernia. He is a graduate of
Cambridge University and
qualified as a Chartered
Accountant at PwC.
Skills and business experience:
Sean was appointed Company
Secretary in February 2017 and is
also the Risk and Compliance
Officer for Hibernia, a role he
performed for the Investment
Manager from its inception in
2013. Prior to this, Sean 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.
Skills and business experience:
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,
where he held the same position
from its inception in 2013.
Previously, Kevin held senior roles
in NAMA and Treasury Holdings
and was Managing Director 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.
Current external appointments:
Chairman of Enterprise Ireland
and Kinsale Capital Management,
Non-Executive Director of the Irish
Times. He is also Chairman of the
Irish Management Institute as well
as a member of their Council.
Previous appointments: Terence
was Managing Partner of KPMG
Ireland from 2006 to 2013 and
a former member of the Global
Board, the EMA Board and the
Global Executive Team of KPMG
International, 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.
Skills and business experience:
Terence’s accounting and
management experience help
to ensure the Board has the
appropriate balance of skills,
experience and knowledge. His
accounting background ensures
he is an effective Chair of the
Audit Committee.
Hibernia REIT plc Annual Report 2018
73
GovernanceFinancial statementsStrategic report Our Management Team
We are a team of 32 people (37 including the Non-Executive
Directors). The team has grown from 27 last year (32 including
the Non-Executive Directors) of which 25 were employees.
This growth comes mainly from the
expansion of the building management
department, with five on-site staff
and a total of 11 employed in this
area. We have also added expertise
in development management
reflecting our focus on the delivery
of development projects.
As an organisation with a relatively
low head count 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. To this end we have
targeted in-house CPD sessions
and enable staff to widen their
skill sets.
Meet the team
Left to right:
Frank O’Neill
Chief Operations Officer
Thomas Edwards-Moss
Chief Financial Officer
Kevin Nowlan
Chief Executive Officer
Sean O’Dwyer
Company Secretary
Richard Ball
Chief Investment Officer
Mark Pollard
Director of Development
74
Hibernia REIT plc Annual Report 2018
At the core of our
culture are the
following values:
Communication
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.
Personal development
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.
Performance
Our people are aligned with
the Group’s strategy through
objective setting and periodic
performance reviews.
Remuneration
We seek to remunerate in line
with market salaries and have
bonus arrangements to incentivise
achievement of personal and
Group objectives.
Hibernia REIT plc Annual Report 2018
75
GovernanceFinancial statementsStrategic report Our Management Team continued
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 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.
Kevin Nowlan
Thomas Edwards-Moss
Sean O’Dwyer
Frank O’Neill
Chief Operations Officer
(59)
Mark Pollard
Director of Development
(62)
Richard Ball
Chief Investment Officer
(40)
See biographies on pages 72 to 73.
Skills and business experience:
Frank joined the Group from the
Investment Manager following the
internalisation in 2015. He has
worked for more than 20 years in
the Irish property market and has
considerable experience in
property transactions and advising
financial institutions in relation to
distressed borrowing. Previously,
he was a director at Rohan
Holdings, one of Ireland’s leading
private property investment and
development companies. He is a
Chartered Accountant and
Chartered Surveyor.
Skills and business experience:
Mark joined the Group in May
2016, from the National Asset
Management Agency (“NAMA”)
where he spent six years and
was responsible for managing a
number of key development
assets in Dublin and London.
Previously he held senior
development roles at Treasury
Holdings and Asda Property
Holdings. He qualified as a
Chartered Surveyor with Jones
Lang Wootton (now “JLL”)
in London.
Skills and business experience:
Richard joined the Group from
the Investment Manager
following the internalisation in
2015. Between 2007 and 2013 he
worked in senior positions within
Clancourt Group and Michael
McNamara & Company. Prior to
that, he worked for over three
years in corporate finance at
BDO, where he qualified as a
Chartered Accountant. He has a
Masters in Accounting from
University College Dublin and a
BSc from Trinity College Dublin.
76
Hibernia REIT plc Annual Report 2018
Corporate governance report
The role of the Board and its committees
The Board of Directors of Hibernia (“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 2018. The main governance
requirements are the Listing Rules of Euronext Dublin and the London Stock Exchange, the UK Code and the Irish
Annex. To this end, the Board has established Audit, Remuneration and Nominations Committees, as described
below, comprised entirely of independent Non-Executive Directors.
Governance structure
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
Nominations Committee
• Review and recommendations on the size,
composition and structure of the Board
• External audit and valuers oversight
• Risk management framework and oversight
• Internal control and the work of the internal
auditor
See pages 88 to 94 for more
• Oversight of remuneration policy and issues
• Advised by PwC London
• Succession planning
• New appointments planning
See pages 95 to 127 for more
See pages 128 to 129 for more
Risk & Compliance Officer/
Company Secretary
• Risk and compliance
• Company secretarial
responsibilities
• Corporate governance
Internal Audit
• External monitoring of
internal controls and
recommendations
• Outsourced to PwC
Ireland
CEO/CFO
• Development and implementation of strategy
• Effective and motivated leadership
• Manage business performance
• Financial planning, cash management,
operating and financial performance
of the Group
• Investor and other stakeholder relations
1
to
6
Executive Committees
Investment
Development
• Consider and
recommend
significant
investment
transactions
• Propose
development
projects
• Budget, plan and
monitor ongoing
projects
Asset
Management
• All items relating
to the management
of the property
portfolio
Building
Management
• Management of
multi-tenanted
properties
1
2
6
3
4
1
2
1
2
4
6
Strategic priorities (see pages 16 and 17)
1
2
3
4
5
6
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
stakeholders
relations
4
5
Sustainability
and Marketing
• Development and
implementation
of the Group’s
sustainability
policy
• Consideration of
environmental,
social and energy
issues
• Corporate
branding and
marketing issues
1
6
The Board is responsible for establishing goals for management and monitoring the achievement of these goals.
Hibernia REIT plc Annual Report 2018
77
GovernanceFinancial statementsStrategic report
Corporate governance report continued
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 risk 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
CEO
Kevin Nowlan
CFO
Thomas
Edwards-Moss
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
• Responsible for developing the Group’s strategy and objectives, the implementation
of the same and running the Group’s day-to-day business, ensuring effective internal
controls are in place
• Leads the executive team and maintains a close working relationship with the Chairman
• Responsible for the financial management and reporting of the Group, managing
funding requirements, investor and other stakeholder relations and corporate
development and ensuring effective internal controls are in place
• Works closely with the CEO and other members of the Management Team
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
Non-Executive
Director and
Senior Adviser
Chair of Audit
Committee
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 executives has failed to resolve or for which such
contact is inappropriate
• To discuss the Chairman’s performance with Non-Executive Directors, 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 shareholders
Frank Kenny
• Brings considerable property experience and participates in investment and
development decisions
Terence O’Rourke
• Monitors the Group’s financial reporting process
• Monitors the effectiveness of the Group’s systems of internal control, internal audit and
Chair of
Remuneration
Committee
Colm Barrington
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
• Determines the strategy and policy in relation to remuneration including the roles,
terms and conditions and specific total remuneration of the Chairman, the Non-
Executive and Executive Directors and the Management Team
• Determines and recommends the remuneration strategy of the Group to the Board
and the policy as it applies to all employees
• Specific fees payable to Non-Executive Directors are determined by the Board on the
recommendation of the Remuneration Committee
Chair of
Nominations
Committee
Company
Secretary
Daniel Kitchen
• Develops and maintains formal procedures for making recommendations on
appointments to the Board
• Succession planning for the Board
Sean O’Dwyer
• Provides advice and assistance to the Chairman and 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
• Ensures timely provision of information for Board meetings
• Submits returns and other information
•
Is supported by the Assistant Secretary in company secretarial matters
78
Hibernia REIT plc Annual Report 2018
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
Frank Kenny
All Directors attended all scheduled Board Meetings.
Directors’ attendance at Board Committee meetings
Audit Committee
Colm Barrington
Terence O’Rourke
Stewart Harrington
Nominations Committee
Daniel Kitchen
Colm Barrington
Stewart Harrington
Terence O’Rourke
Remuneration Committee
Colm Barrington
Stewart Harrington
Daniel Kitchen
Terence O’Rourke
FOR FINANCIAL YEAR ENDED
31 MARCH 2018
FOR FINANCIAL YEAR ENDED
31 MARCH 2017
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
8
8
8
8
8
4
8
2
8
7
8
8
8
3
7
1
10
10
10
10
10
10
10
–
10
9
10
10
10
10
8
–
FOR FINANCIAL YEAR ENDED
31 MARCH 2018
FOR FINANCIAL YEAR ENDED
31 MARCH 2017
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
4
4
4
1
1
1
1
3
3
3
3
4
4
4
1
1
1
1
3
2
3
3
4
4
4
1
1
1
1
4
4
4
4
3
4
4
1
1
1
1
3
4
4
4
All Directors attended the 2017 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.
William Nowlan stood down as a Non-Executive Director on 25 July 2017. He continues to act as a senior adviser
to the Group. On 8 November 2017 Mr Frank Kenny was appointed to the Board.
The Directors’ responsibilities statement is set out on pages 136 and 137.
Hibernia REIT plc Annual Report 2018
79
GovernanceFinancial statementsStrategic report What the Board did in financial year ended 31 March 2018
“2018 financial year saw the Group make good progress in its
strategic goals. The focus now is on continuing to progress the
Group’s developments and optimising the portfolio, replacing
lower performing assets with those with potential for greater
returns through future redevelopment or asset management.
The Board also focused on enhancing governance and controls,
with the commencement of internal audits and enhancement
of health and safety codes.”
Daniel Kitchen,
Chairman
Timeline of activity
Annual Report 2017 and Auditor’s Report considered
Performance fee and remuneration finalised and approved
Approval of refurbishment of Hanover Building, renamed
2WML
Sustainability policy, strategy and supplier code adopted
Board changes – William Nowlan retirement
Utilisation of the RCF to fund 1WML in place of DB facility
Approval of the issue of shares for the settlement of
deferred consideration for the year ended 31 March 2017
2WML (CGI)
A
Q1
M
J
J
Q2
A
S
77 Sir John Rogerson’s Quay
Considered appointment of new valuers in line with policy
on rotation
Trading update and AGM
Proposal to negotiate sale of Chancery Building and
apartments approved
Acquisition of 77 Sir John Rogerson’s Quay considered
and approved
Minor purchases adding to existing properties approved
Review of investor feedback following release of
annual results
80
Hibernia REIT plc Annual Report 2018
Matters addressed at each scheduled meeting:
• Review operational reports and
• Progress in leasing existing and
issues from all areas of the business
• Consideration of new business
structures and investment/
divestment opportunities
• Review and consideration of
capital expenditure proposals
upcoming vacant space
• Progress in rolling out own
management of properties and
Hibernia branding
• Profitability and other KPIs and
• Budget, viability and stress tests
• Compliance and risk levels
• Conflicts of interest and related-
party transactions
• Updates from committees
• Trading updates, announcements,
operational metrics
Annual and Interim Reports
• Liquidity status and financing
• Investor relations
issues
“A strong focus on sustainability was another key area of focus, in line with
investor expectations. We look forward to financial year 2019 and hope to
continue to make strides in the attainment of our strategic goals which are
set out on pages 16 and 17 of this report.”
Kevin Nowlan,
CEO
Appointment of Cushman and Wakefield as new valuers
Appointment of Frank Kenny to the Board
Consideration of other sales, including Hanover Street East/
Lime Street properties
Interim report as at 30 September 2017 approved
Assessment of impact of stamp duty increase considered
Appointment of PwC to advise on preparation of new
Remuneration Policy
Update on strategic priorities and targets for achievement
Appointment of PwC as internal auditors
Review of risk register/risk metrics
South Dock House
O
Q3
N
D
J
Q4
F
M
Review of compliance with UK Code and of Compliance
Policy Statement
Review of Terms of Reference of Board Committees
Approval of potential property disposal
Review of draft Remuneration Policy
Discussion around General Data Protection Regulation
(“GDPR”) readiness
Hanover Street East
Hibernia REIT plc Annual Report 2018
81
GovernanceFinancial statementsStrategic report Corporate governance report continued
Board effectiveness
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 95 to 127.
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.
Board strategy
Strategy is reviewed constantly by the Board by regular updates on progress to date, forecasts and stress testing
on forecasts, funding, capital expenditure and other topics relevant to the success of the Group’s strategy. At its
November meeting the Board specifically considered strategic priorities (see pages 16 and 17 of this Report) and
addressed possibilities for advancement of the Group’s targets in the coming year. The Management Team held
a strategy day in January 2018 to discuss implementation of the current strategy.
Induction and development
New Directors receive a full and appropriate induction on joining the Board. This includes meeting 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 culture. They also receive a
comprehensive package of information. Frank Kenny did not require the standard induction when he joined the
Board in November 2017 as he was a founding member of the Group and has been closely involved in the operations
of Hibernia since commencement. His knowledge of the Group and its workings was already extensive and he has
been a regular attendee at Board meetings. His induction was therefore limited to ensuring that he was up to date
on all aspects of procedures.
Information provided on induction:
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
Organisation
Key policies
Governance
The Group’s risk framework, risk register and metrics, records of breaches and any other relevant
documents.
Organisational charts and latest Annual and Interim Reports, strategic priorities and latest KPIs.
Key policies and procedures applicable within the organisation.
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.
Professional development, support and training for Directors
Board members regularly attend presentations and seminars on topics relevant to the property sector and their area
of professional expertise. These seminars are run by a variety of entities, including Euronext Dublin, professional
bodies and advisers. Additionally, when new regulatory or legal requirements are implemented, specific advice is
sought from the Company’s own advisers. If requested, individual training requests are also facilitated.
82
Hibernia REIT plc Annual Report 2018
Board evaluation 2017-18
In line with the UK Code recommendations that an external review be carried out every three years, the first external
review was conducted in March 2017. The overall outcome was satisfactory and concluded that the Board was
operating effectively in most areas. The areas requiring follow-up were:
• The business continuity plan was expanded to include crisis management procedures;
• Develop a new remuneration policy for implementation in November 2018 upon the expiry of the arrangements
dating from the internalisation transaction completed in November 2015;
• Succession planning process needs to be better documented;
• Review and update the induction process to include meetings with external advisers where not already done and
consider ongoing training;
• The Chairman should meet each Director individually at least annually; and
• The roles of the Chairman and CEO should be set out in writing.
These areas have been addressed by the Board. The new remuneration policy is substantially advanced and the
Board intends seeking shareholder approval at the next AGM.
For 2017-18 the Directors undertook a self-evaluation of the Board and the Committees. 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 to the Board’s effectiveness and also as to the Chairman’s effectiveness. No
follow-up action was identified from this self evaluation.
Board environment and access to appropriate information
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 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 with sufficient time allowed 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, operational reports covering asset
management, investment updates and progress on development projects as well as cash and liability management
and other activities.
The Board and its Committees have free access to management and staff, and may request whoever they like to
attend any part of the meetings. The culture of openness and transparency means that the Board remains well-
informed on all aspects of the business and issues arising. Visits to properties in the portfolio help keep the Board
informed on the progress of the Group’s activities.
Diversity
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 are examined in light of the current mix of skills and knowledge on the Board. As part
of our EPRA sustainability measures, we disclose gender diversity information. The Directors believe that when
making appointments to the Board it is important to ensure the proper mix of knowledge and experience. In that
context, priority will be given to making appointments that improve diversity.
Hibernia REIT plc Annual Report 2018
83
GovernanceFinancial statementsStrategic report Corporate governance report continued
Conflicts of interest
The Board is committed to ensuring that its business activities are carried out in an honest and professional manner.
It is the policy of the Group to avoid any conflict of interest, wherever possible, when performing its business
activities. From time to time, the Group may, however, have interests which conflict with shareholders’ interests.
The Group’s policy is to identify such instances and manage them accordingly.
The Board monitors any potential conflicts of interest that the Directors may have and reviews actions necessary
to address such conflicts.
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 are reviewed annually and approved by the Board. These are available on the Group’s
website. Each of these committees reports separately within this section of the Annual Report.
Other information
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.
Key investor relations
meetings in 2017-18
Conference: Davy
(Dublin)
Investor roadshow:
New York, Boston,
Montreal, Toronto,
Singapore, Hong
Kong, Beijing,
Tokyo
Conference:
Morgan Stanley
(London)
A
M
J
J
A
S
Investor roadshow:
Dublin, London,
Amsterdam, Paris,
Zurich
Equity sales
meetings (3)
Equity sales
meeting (1)
AGM
Conference: EPRA
(London)
Lenders’ tour
(Dublin)
Equity sales
meeting (1)
84
Hibernia REIT plc Annual Report 2018
Market Abuse Regulations 2016 (“MAR”)
The Company continues to maintain a list of persons exercising managerial responsibilities (“PDMRs”) and has
complied with the MAR requirements during the year.
Communications with shareholders
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. The Board therefore leads a comprehensive investor
relations programme. See further details below.
Investor relations programme
The investor relations programme aims to maintain a regular dialogue with shareholders, debt providers and
analysts. This year, members of the Management Team held meetings in Ireland, the UK and continental Europe as
well as North America, Asia and South Africa. The programme is executed through one-on-one and group meetings,
results presentations, investor and analyst events, industry conferences and property tours. Regular meetings with
shareholders and investors gives them the opportunity to become familiar with the Management Team, understand
the business model and strategy and give feedback on their concerns and questions on performance and other
issues. The Company uses this feedback to guide strategic decisions and to ensure that the Company is effectively
managed for the benefit of its shareholders. Meeting with analysts ensures that up to date and accurate information
is available to them to produce guidance for investors. Digital communications include live webcasts of results
presentations which are also available historically on our website together with digital copies of all reports.
While investor and analyst presentations and meetings are generally carried out by members of the Management
Team including the Executive Directors, the Board is updated regularly on these activities and receives feedback on
the discussions. The Chairman and Senior Independent Director are also available to meet investors independently
of the Executive Directors when required.
Conference:
Goodbody
(Amsterdam)
Investor meetings:
(Paris)
Conferences:
Goodbody (Dublin),
HSBC (Cape Town)
Conference: Davy
(Amsterdam)
O
N
D
J
F
M
Investor Roadshow:
Dublin, London,
New York, Brussels,
Amsterdam, Zurich
Conference:
Goodbody (Boston)
Equity sales
meetings (3)
Conference: ULI
(London)
Investor meetings
(London)
Investor meetings
(Amsterdam)
Hibernia REIT plc Annual Report 2018
85
GovernanceFinancial statementsStrategic report Corporate governance report continued
Shareholders by geography
at 31 March 2018 1
Investor contact by location
Investor contact by method
1%
10%
11%
2%
7%
28%
9%
44%
17%
19%
28%
19%
23%
25%
57%
Ireland
Ireland
Continental Europe
Continental Europe
UK
USA & Canada
Rest of World
UK
USA & Canada
Rest of World
1.
See significant shareholdings on page 133 for holdings 3% and over.
Meeting
Conference
Tour
Meeting & Tour
Call
General meetings
The Company holds an AGM each year in addition to any other meetings 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.
AGM DETAILS (2017 AND 2018)
OVERVIEW
The 2017 AGM was held on 25 July 2017 • All directors attended
• Votes in favour of the re-election of Directors > 90% other than for Colm
Barrington where votes in favour were 70%
• All resolutions approved – seven ordinary and five special
2018 AGM to be held on 31 July 2018
in 1WML, Dublin 2
• Full Director attendance expected
• New Remuneration Policy to be tabled for approval
• 10 ordinary resolutions and 5 special resolutions are being proposed to
shareholders
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.
86
Hibernia REIT plc Annual Report 2018
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/she 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;
• Pre-emption rights;
• Market purchase of own shares and reissuing;
• Altering the articles of association of the company; and
• Approving a change of the Company’s name.
Market announcements
The Group discloses information to the market as required by the Central Bank of Ireland, Euronext Dublin and the
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; 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 the 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 2018
87
GovernanceFinancial statementsStrategic report Audit Committee Chairman’s report
“This year saw the first rotation of the independent valuers
and the selection process and oversight of the transition was
an important item on our agenda for 2017-18.”
In addition, the required rotation of
the external audit partner will occur
after the financial year end reporting
is completed, and we have met with
his successor and will supervise the
changeover in the next financial year.
We also carried out our fourth
self-evaluation, examining 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
13 June 2018
Audit Committee year in focus:
• Rotation of valuers
• Finalisation of internal audit
plans for 2018-20
• External audit partner
rotation
• Consideration of financial
statements and key areas
of judgement
Chairman of the Audit
Committee:
Terence O’Rourke
Members of the Committee:
Colm Barrington and Stewart
Harrington
All members have served since
the establishment of the
Company, a period of four years
and four months to 31 March 2018.
Dear Shareholder
On behalf of the Audit Committee,
I am pleased to present the Audit
Committee’s Report for the financial
year ended 31 March 2018.
The following pages provide insight
into our work and activities during
the financial year as we discharge
our responsibilities in relation to the
integrity of financial reporting, the
relationship with and independence
of the external auditor, the
effectiveness of internal controls
and the risk management system
and, new this year, the role and
effectiveness of internal audit.
As part of our activities, we met
regularly with the Management Team
and the external auditors. We also
met the independent valuers and
assessed their work in valuing our
investment properties. During this
financial year the Company
undertook the first rotation of its
valuers and we oversaw the selection
and appointment of the new firm.
This was completed in September
2017 and the first full valuation
exercise was completed for the
interim reporting. Given the
changeover we focused on the
methods, assumptions and results
with particular care to ensure there
were no significant deviations as a
result of this change.
88
Hibernia REIT plc Annual Report 2018
Audit Committee report
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.
All members are in their second three-year term.
The Audit Committee is constituted in compliance with the UK Code, the Irish Annex and the Company’s Articles
regarding the composition of the Audit Committee.
The Audit Committee is responsible for:
• Monitoring the financial reporting process;
• Identifying and considering key areas of judgement in the financial statements;
• Monitoring the effectiveness of internal controls and risk management systems;
• Monitoring the statutory audit of the annual consolidated financial statements and the review 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 relevant parties as required. The parties met were as follows:
INVITEE
REASON FOR ATTENDANCE
Deloitte Ireland LLP 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.
Cushman &
Wakefield
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
bases of valuation (e.g. investment vs residual methodologies), estimated rental values and
variations on yields experienced in the market. Other areas of focus were on the treatment
of incentives, the recognition of lease commencement and similar issues around some more
tailored lease arrangements. 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 the property valuations.
Representatives
of the Company
Representatives of the Group, including the CEO, CFO, COO, CIO and the Company Secretary/
Risk and Compliance Officer (“RCO”) met the Audit Committee in order to present the
financial statements and investment property valuations, to discuss 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 2018
89
GovernanceFinancial statementsStrategic report Audit Committee report continued
Principal responsibilities of the Audit Committee
The principal responsibilities of the Audit Committee and the key areas of discussion in 2017–18 were as follows:
PRINCIPAL RESPONSIBILITIES OF THE COMMITTEE
KEY AREAS DISCUSSED AND REVIEWED IN 2017–18
• Results, commentary and announcements
• Key accounting judgements and disclosures.
• Discussions with IAASA on disclosures around
share-based payments and the grant date of
performance-related payments (see further
details later on in this section)
• External audit planning and reporting
• Rotation of external audit partner in 2018
• Revision and amendment of accounting
policies as required
• Considered audit scope, risks assessment,
findings and recommendations. Discussed
materiality. Met the external auditor both with
and without the presence of management
• CBRE was replaced by Cushman & Wakefield
in September 2017 after three years in the role
as part of a periodic rotation of key advisers.
This process was overseen by the Committee
• Met new 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
• ESMA guidance on Alternative Performance
Measures (“APMs”)
• Target areas identified and prioritised and
three-year plan prepared and reviewed by
Audit Committee
• First internal audit commenced in Q1 2018
focusing on budgeting and monitoring
processes and procedures in relation to
property development, property management
and general expenses including approvals
from the Management Team, Committees and
Board
Reporting and
external audit
• Monitoring the integrity of the Group and
Company financial statements and any other
formal announcements relating to the Group’s
financial performance, business model and
strategy and reviewing significant financial
reporting issues including material disclosure
obligations
• 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 guidelines
• 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
• Considering and approving the Group’s
viability and going concern statements
• Reviewing the work of the independent
valuers
Internal audit
• The scope of the internal audit plan and
resourcing requirements
• The independence, appropriateness and
effectiveness of internal audit
• Reviewing the recommendations and actions
taken by management to address matters
raised in internal audit review
90
Hibernia REIT plc Annual Report 2018
PRINCIPAL RESPONSIBILITIES OF THE COMMITTEE
KEY AREAS DISCUSSED AND REVIEWED IN 2017–18
Internal control
• Responsibility for reviewing the effectiveness
of the Group’s system of internal control on
behalf of the Board. This covers all material
controls including financial, operational and
compliance controls
• Reviewed the effectiveness of the Group’s
system of internal control, including risk
management
• Review of the 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
• Review of all breaches in limits and internal
controls and responses required. There were
four breaches during the year none which
resulted from a failure in internal controls or
resulted in any losses
• Revisions to internal controls through systems
procedures and checklists. Confirmed that
there were no significant failings or
weaknesses identified during the financial
year and up to the date of this Annual Report
• Monitoring data security actions and policies
Risk management • Reviewing the adequacy and effectiveness of
• Risk management is dealt with in the risks
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
• Assessing the principal risks of the Group
• Reviewing the disclosures made on risk in the
and ‘Risk management’ section on pages 36
to 47 of the Annual Report. This section also
covers the principal risks of the Group
• Monitoring of risk register, including
identification of principal risks and
movements in exposures
• Consideration of risk metrics and risk reporting
Other
Annual Report
• 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 arrangements for staff to raise
concerns about possible improprieties
• 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 2018
91
GovernanceFinancial statementsStrategic report Audit Committee report continued
The key issues considered by the Audit Committee during the financial year ended 31 March 2018 and the action
taken by the Committee are set out below:
SIGNIFICANT ISSUES
CONSIDERED
Valuation of
the Investment
property portfolio
Performance-
related payments
Grant date of
share-based
payments
ACTION TAKEN BY COMMITTEE
The Committee considered whether all the information provided to the independent valuers,
Cushman and Wakefield (“C&W”), was complete and correct and that the results of their
valuation judgements were in line with expectations based on the Committee’s assessment of the
market and knowledge of the properties. It also confirmed the valuation methods, estimated
rental value and market-based yields and residual value method for development properties,
were relevant and appropriate to the individual property circumstances. The Audit Committee
challenged the assumptions made, considered the independence of the valuers and reviewed the
results of these valuations. It considered whether any amendments needed 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 bases for assessing
all properties in view of the change in valuers to ensure no anomalies presented themselves.
All investment properties are valued in accordance with their current use, which is also the
highest and best use except for:
• Harcourt Square where the valuation takes into account its potential as a development asset
which reflects the asset in its highest and best use
• 1-6 Sir John Rogerson’s Quay, a development property which is nearing completion, has been
valued on an investment basis
• Gateway, currently partly rented on short-term leases, has been valued on a price per acre
basis as early stage plans are in place to redevelop this property in the future
As part of the cost of the internalisation of the former Investment Manager, the Group 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.
In 2016, and following correspondence on a few topics, IAASA informed the Company that they
would revert, after due consideration, as to their interpretation of the grant date for the share-
based payments under the Share Purchase Agreement (“SPA”) entered into as part of
internalisation. In December 2017 IAASA wrote that they had determined the grant date to be the
date of the SPA (November 2015) for all tranches of the performance fee to the expiry of
Investment Management Agreement (“IMA”) in November 2018 rather than 31 March each year.
Having reviewed the accounting treatment, the Committee determined that no amendment to
the accounting is required as the existing approach is consistent with IFRS 2 treatment of non
market-based performance conditions. At the grant date, Hibernia granted possible future share
awards to employees and service providers (Vendors) based on future performance conditions
which include both service and other non market-based performance conditions. At that date,
the Company had received no services, the service period is defined by the contract as the
financial year commencing each 1 April until the expiry of the agreement. As there had been no
services received, the Company did not therefore recognise any expense or increase in equity
until commencement of the service (IFRS2.15). Therefore, these share-based payments are
recognised over the service period, i.e. over the financial year to which they relate, and on the
same basis as previously recognised.
Rotation of valuers In accordance with the Company’s policy, the rotation of the independent valuers was completed
in September 2017. Cushman and Wakefield was appointed after a tendering process. The
Committee oversaw the changeover and has focused closely on valuations during its reviews.
92
Hibernia REIT plc Annual Report 2018
Re-appointment of the external auditor
The Audit Committee has recommended to the Board that the statutory audit firm, Deloitte Ireland LLP, 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 from 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 the audit partner
• 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
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. The audit partner, Mr Brian Jackson, will step away
from this appointment after the completion of this 2018 Annual Report as he has reached the maximum years of
service as audit partner for Hibernia before rotation is required. His replacement, Mr Christian MacManus, has met the
Audit Committee who consider him to have sufficient knowledge and experience to take on the assignment.
Deloitte Ireland LLP 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 2018 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 2018
All of the work carried out by the external auditor during the year related to the audit of Group companies or the
review of the Interim Report.
KPMG continues to act as tax adviser and provides taxation-related advice and support.
External auditor independence
Deloitte Ireland LLP is a tenant of Hardwicke House, which is an investment property of the Group. Deloitte Ireland
LLP were in situ when the Group acquired its interest in the building and all lease arrangements are at arm’s length.
Deloitte Ireland LLP 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.
Depositary
The Group had €23m (31 March 2017: €18m) 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. In addition
to on-going reviews of processes and procedures the depositary undertook onsite and due diligence reviews during
the year. No material or significant issues were identified and the depositary issued satisfactory reports.
Hibernia REIT plc Annual Report 2018
93
GovernanceFinancial statementsStrategic report Audit Committee report continued
Approval of reports
The Annual Report and financial statements were considered in draft on 16 May 2018. The Preliminary Statement,
which included consolidated financial statements, was approved by the Board on 23 May 2018. The Annual Report
was approved by the Board on 13 June 2018.
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 meetings;
• Formal documentation and approval of all significant transactions;
• Maintenance of a breaches register to record any failings and follow up corrective measures
• 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.
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 failure of internal controls. During the financial year ended 31 March 2018 there were four such breaches
recorded, none of which resulted from a failure in internal controls or resulted in any losses. The breaches were all
identified through secondary internal controls or internal reviews and corrective controls were amended as required
where appropriate.
Risk management
Risks and risk management are dealt with in the ‘Risks management’ section on pages 36 to 47 of the Annual Report.
This section also covers the principal risks of the Group.
Committee evaluation
A self-evaluation of the Committee’s work was carried out in early 2018. This evaluation found that the Committee
was operating effectively. There were no items identified for the Audit Committee to follow up.
94
Hibernia REIT plc Annual Report 2018
Remuneration Committee Chairman’s Statement
“This year has been one of significant activity for the
Committee as we have designed the first Remuneration Policy
to apply after our transition to an internally managed
company and which has been a ‘ground up’ exercise.”
that the Policy which is being
proposed will drive success over the
long-term. The Policy which we are
proposing will replace the interim
arrangements, implemented
following the internalisation of the
Investment Manager in 2015, which
expire on 26 November 2018.
When creating the Policy, the
Committee took into account the
extent to which the Group has
evolved and matured over the past
three years and the future long-term
strategy. The Committee felt that
fundamental changes were needed
to the structure of the Executive
Directors’ remuneration to support
the Company’s profile, long-term
business strategy and future
developmental aspirations. The
Committee has endeavoured to
construct a Policy that is fair,
competitive and focuses Executive
Remuneration Committee
year in focus:
• New Remuneration Policy
for approval at 2018 AGM
• Changes proposed to
Executive Directors’ base
salaries and Non-Executive
Director fee levels
• Performance-related
remuneration to drive
shareholder value
Chairman of the Remuneration
Committee:
Colm Barrington
Members of the Remuneration
Committee:
Daniel Kitchen, Stewart
Harrington and Terence
O’Rourke.
All members have served since
the establishment of the
Committee in February 2016,
a period of two years and two
months to 31 March 2018.
Dear Shareholder
On behalf of the Remuneration
Committee I am pleased to present
the Directors' Remuneration Report
for the financial year ended 31 March
2018. The Remuneration Committee
is responsible for ensuring that the
Group’s remuneration policy
supports the implementation of the
strategic objectives of the Group in a
way consistent with the Board’s
approved appetite for risk. The
Remuneration Committee is
responsible for oversight of
remuneration for the entire Group
with a specific focus on the Directors
and senior management. The
Committee’s terms of reference are
available on the Group’s website at
http://www.hiberniareit.com/
about-us/corporate-governance.
2018 Remuneration Policy review
and implementation
This year has been one of significant
activity for the Committee as we
have designed the first Remuneration
Policy (“Policy”) to apply after our
transition to an internally managed
company and which has been a
“ground up” exercise. During the
process of designing the Policy, we
consulted extensively with our major
shareholders and proxy advisers and
their views have helped shape the
Policy set out in this Report (see
page 122 for a summary of the
shareholder consultation
process). The Group’s
philosophy is to pay for
performance in a simple
and transparent way and
the Committee believe
Hibernia REIT plc Annual Report 2018
95
GovernanceFinancial statementsStrategic report Remuneration Committee Chairman’s Statement continued
Directors on executing the strategy to maximise long-term returns for shareholders. Further, the Committee was
conscious of ensuring that the new framework delivered the best return on investment for shareholders and
estimates that, under the new Policy, material cost savings will be delivered compared to the current remuneration
arrangements which include the deferred consideration payments approved as part of the internalisation process
(c.€7m per annum saving in the first full year of operation at target pay-outs).
The Committee is proposing to move to a framework that is aligned with Irish and UK corporate governance best
practice and which comprises fixed remuneration with separate incentives (i.e. an annual bonus plan and a long-term
incentive plan (“LTIP”)). Minimum shareholding guidelines will also apply which are equal to 350% of the Executive
Directors’ salary.
The design of the annual bonus, coupled with the new LTIP, seeks to achieve a remuneration framework that is in line
with the Group’s peers, which we consider as our competitors for talent. When considering the annual bonus and LTIP,
the Committee took into account a number of internal and external factors including: the Group’s growth and
development, remuneration levels within our peers and the Group’s underlying principle of paying fairly for performance.
The key features of the annual bonus and LTIP, are outlined in the table below. The full details of the proposed Policy
can be found on pages 110 to 121 and a summary is also included in the ‘At a glance’ section on pages 99 to 105.
INCENTIVE
QUANTUM
KEY FEATURES
Annual
Bonus
Up to 150% of salary
for the CEO and CFO
• Two-thirds paid in cash and the remaining third deferred into
shares for three years subject to continued employment
• Performance will be assessed over a financial year against the
following metrics for the first year of the annual bonus: Relative
Total Property Return (40%), Total Accounting Return (17.5%),
EPRA Earnings (17.5%) and individual-specific strategic/operational
measures (25%). Financial measures are calculated per share as
appropriate. The strategic and operational objectives will include
performance measures focused on environmental and sustainability
targets as well as objectives relevant to the individual
LTIP
Up to 200% of salary
for the CEO and CFO
• Awards of performance shares or nil-cost options
• The LTIP incorporates a two-year holding period after
a three-year performance period
• Performance will be assessed over three years against the
following metrics for the first grant to be made in the year
commencing 1 April 2019: Relative Total Property Return (33.3%),
Relative Total Shareholder Return (33.3%) and Total Accounting
Return (33.3%). Measures are calculated per share, as appropriate
Variable incentive arrangements under the new Policy will take effect on the expiry of the internalisation
arrangements in November 2018 and bonus outcomes under the new Policy will be pro-rated accordingly.
First grants under the LTIP will be made in the year commencing 1 April 2019. Full details on the implementation
of the Policy can be found on pages 103 to 105.
The Group is a small organisation in terms of the number of its employees and given its size, the Group’s
remuneration principles and the Policy are cascaded down the organisation. All our employees are eligible
to participate in the annual bonus and the LTIP is extended to members of the Management Team and others
on a discretionary basis.
96
Hibernia REIT plc Annual Report 2018
Shareholder engagement
The Committee consulted extensively with approximately 65% of our shareholder base (by holding) and the main
proxy advisers, (ISS and Glass Lewis) who represent the views of our shareholders, on the proposed Policy. Overall,
our shareholders indicated they were supportive of the proposed Policy with many commenting that they felt the
framework aligned strongly with shareholder interests. The key change shareholders suggested was around the
inclusion of environmental and sustainability targets within the strategic and operational element of the annual
bonus. The Committee has taken on-board this feedback and incorporated this into the 2019 annual bonus. The
Committee is very grateful for the feedback received and we would like to thank those who engaged with us.
Company performance highlights and impact on remuneration outcomes for 2017-18
This year has been another year of strong performance for the Group despite the increase to stamp duty on
Irish commercial property which had an adverse impact on our profit. Hibernia’s portfolio returns significantly
outperformed the Irish market delivering a total property return (excluding acquisition costs) of 11.6% compared
to the benchmark IPD Ireland Index which returned 6.8%. EPRA NAV per share grew by 8.7% to 159.1 cent and net
rental income grew by 15.1% to €45.7m. All of this has enabled the Company to increase its dividend by 36.4% this
year to 3.0 cent.
The strong financial performance has fed into performance-related remuneration for all our employees under the
internalisation arrangements. For the CFO, Thomas Edwards-Moss, the Committee determined that his outcome
under the Performance Related Remuneration (“PRR”) would be 108% of salary (72% of maximum of 150% of salary).
The Committee has set out on page 101 details of the CFO’s objectives for the year and how these have been
assessed. As the CEO, Kevin Nowlan, was one of the Vendors of the Investment Manager, he is compensated under
the Share Purchase Agreement (see note 34 of the consolidated financial statements for further information on
performance-related payments for this financial year).
Key remuneration decisions during 2017-18
Base salary levels
One of the key activities of the Committee was the consideration of the Executive Directors’ base salary levels.
The Committee undertook a detailed review taking into account the Executive Directors’ responsibilities, their
performance in the role, the evolution of the Company and internal and external relativities. The review found that
there is insufficient distance between the salary of the CEO, CFO and the next level of Management and that when
compared to roles at companies that are similar in size, scope and complexity, the current levels are well below
lower quartile.
As a result, the Committee proposed one-off salary increases to the CEO and CFO in line with the current Policy:
CEO – €450,000 from €300,000 and CFO – €340,000 from €265,000. It is the Committee’s view that the new
base salary levels fairly reflect the individuals’ responsibilities and the size, scope and complexity of the businesses
and external relativities. The increases are subject to approval at the 2018 AGM and, if approved, will be paid with
effect from 1 April 2018: a detailed explanation of the Committee’s rationale including the external positioning can
be found on pages 105 and 109. It should be noted that it is the Committee’s intention not to increase the salaries
of the Executive Directors over the Policy period other than potentially to reflect all employee or inflationary rises.
Hibernia REIT plc Annual Report 2018
97
GovernanceFinancial statementsStrategic report Remuneration Committee Chairman’s Statement continued
Non-Executive Director fee levels
The Board reviewed fees for the Non-Executive Directors and the Committee reviewed fees for the Chairman.
This was the first review since the Company’s IPO in 2013. The key findings of the review were that the current fee
levels were not commensurate with the level of responsibility and time commitment required and that the overall
fee structure was not aligned with the market and did not take into account additional time commitments and
responsibilities for the additional roles undertaken by the Non-Executive Directors; for example, chairing the
Audit Committee.
In order to ensure Non-Executive Director fees are competitive and fairly reflect the level of responsibility and time
commitment required, the following fees are proposed which would be paid with effect from 1 April 2018 but subject
to approval at the 2018 AGM:
• Chairman: €150,000 (€100,000 currently);
• NED Base fee: €60,000 (€50,000 currently);
• SID fee: €15,000 (none paid currently); and
• Committee Chair fee: €10,000 (none paid currently) (excludes Nominations Committee Chair).
At the 2018 AGM, ordinary resolutions on the Policy and Annual Report on Remuneration will be put to shareholders
on an advisory basis. This will be accompanied by resolutions seeking approval for the rules for the Annual Bonus
Deferred Share Plan and the LTIP. The Company is not incorporated in the UK and therefore is not required to
implement the UK Directors’ Disclosure Regulations; however the Board has voluntarily determined to follow the
Regulations within the constraints of Irish Law.
Once again, I would like to thank those shareholders who engaged with us this year. As always, we are keen to
engage with our shareholders and the Proxy Advisors and will continue to maintain an open and constructive
approach to dialogue. I hope that we can rely on your vote in support of our approach to remuneration and the
proposed Policy. If you would like to discuss any aspect of this report, I would be happy to hear from you. You can
contact me through the Company Secretary, Sean O’Dwyer.
On behalf of the Committee and the Board,
Colm Barrington
13 June 2018
98
Hibernia REIT plc Annual Report 2018
Remuneration Committee report
Remuneration at a glance
In this section, we summarise the principles which underpin our proposed Policy. We also highlight the remuneration
outcomes for the 2017-18 financial year and the key remuneration decisions. In addition, we have also set out a
summary of the Policy and how it will be implemented in the coming year. More detail can be found in the
Remuneration Policy Report on pages 110 to 122 and Annual Report on Remuneration on pages 122 to 127.
Remuneration principles
Hibernia’s Remuneration Policy aims to encourage, reward and retain the Executive Directors and ensure their
actions support the implementation of the Group’s strategy. The core principles which underpin remuneration across
the Group are:
• Simplicity and transparency: Remuneration should be simple and transparent in terms of design and
communication to internal and external stakeholders
• Long-term shareholder alignment: Remuneration outcomes should mirror the shareholder and wider stakeholder
experience over the long-term
• Pay-for-performance: Remuneration outcomes should be clearly linked to the delivery of superior
corporate results
• Market competitiveness: The remuneration opportunity provided should be fair and competitive against
companies of a similar size, scope and complexity with a strong emphasis on variable elements
• Flexibility: Remuneration should be able to support potential changes in business priorities over time
Link to strategy
The Committee carefully considered the performance measures for the annual bonus and the LTIP in the context
of the long-term strategy and believe that the final measures that were selected complement the business focus
on income growth, asset improvement, portfolio management, delivery of developments and recycling of capital
into new acquisitions. In addition, the combinations of absolute and relative measures focuses Executive Directors
on both outperformance of the internal plan as well as industry benchmarks. The following table sets out a number
of the Group’s KPIs and how their satisfaction is encouraged by the Group’s incentive framework:
Hibernia REIT plc Annual Report 2018
99
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
Our strategic priorities
Complete committed
near-term
developments and
prepare pipeline of
future projects
Increase rental
income and duration
Make selective
investments
Recycle capital to
monetise gains and
enhance future
returns
Maintain an efficient
balance sheet and
seek to diversify
funding sources and
maturity dates
Continue to improve
environmental
efficiency of the
portfolio
Our key performance indicators
EPRA Earnings
Total Accounting Return (TAR)
Total Property Return (TPR)
Total Shareholder Return (TSR)
Annual bonus
Long-Term Incentives
Measures
Link to strategy
Link to KPIs
Measures
Link to strategy
Link to KPIs
EPRA Earnings • Linked to shareholder value
Relative TPR • Measures how we are driving
• Key measure of organic growth
• Focus on sustainable investment
Relative TPR • Measures how we are driving
value in our portfolio
• Focus on maximising rental
income
• Focus on outperformance
Growth in TAR • Link to shareholder value
• Focus on sustainable investment
• Execution of our dividend
strategy
Strategic/
operational
• Focus on operational efficiencies
• Focus on specific internal
projects
value in our portfolio
• Focus on maximising
rental income
• Focus on outperformance
Relative TSR • Linked to shareholder value/
dividend strategy
• Focus on outperformance
Growth in TAR • Link to shareholder value
• Focus on sustainable investment
• Execution of our dividend
strategy
• Linked to shareholder value
Shareholding
guidelines
Single figure of remuneration for 2017-18
FINANCIAL
YEAR 31
MARCH
BASE
SALARY
€’000
TAXABLE
BENEFITS
€’000
ANNUAL
BONUS
€’000
DEFERRED
SHARES
€’000
PENSION
€’000
OTHER
€’000
TOTAL
€’000 (2018)
TOTAL
€’000 (2017)
Kevin Nowlan
(CEO)*
Thomas
Edwards-Moss
(CFO)
2018
300
22
–
–
45
2018
265
35
143
142
40
–
–
367
364
625
500
* 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 notes 11 and 34 to the financial statements.
Performance-related remuneration for 2017-18
Performance-related remuneration for all non-Vendor employees, including Thomas Edwards-Moss, is met out of
arrangements under the internalisation agreement. Kevin Nowlan was one of the Vendors of the Investment Manager
and therefore receives no variable compensation as he is compensated under the internalisation as disclosed in notes
11 and 34 to the consolidated financial statements. Further details on his compensation are set out on page 123.
100
Hibernia REIT plc Annual Report 2018
Awards under the PRR scheme for the financial year ended 31 March 2018 follow the achievement of financial
performance targets which lead to the payment of performance fees under the internalisation arrangements
(see KPIs on page 18). Personal performance was also measured against specific objectives for the financial year.
Details of the financial and personal performance for the CFO, Thomas Edwards-Moss, are set out in the table below:
OBJECTIVES
ASSESSMENT
COMMITTEE DETERMINATION
Total Property Return: outperform
IPD Ireland Index
Hibernia TPR of 11.6% vs IPD annual
return of 6.8%
The objective was fully met
EPRA NAV per Share growth in
excess of 10% (including dividends
paid in the year and excluding new
shares issued)
EPRA NAV per Share increase of
11.3% (including dividends paid in the
year and excluding new shares
issued)
Ensure Hibernia has access to
competitive, low cost funding when
needed and investigate longer-term
funding options
Hibernia has €120m of available,
uncommitted debt funding in place
and longer-term funding options
have been investigated
The objective was fully met
The Committee felt that this
objective was substantially met
but that this is an area where
there is always an opportunity
for further improvement
No material breaches of corporate
governance, regulatory, tax and
banking requirements
Further improvement in quality of
financial reporting to stakeholders
Management of finance team
Full compliance with all requirements. The objective was fully met
Achieved Gold award from EPRA for
financial reporting and Silver award
for sustainability reporting.
Broadened sell-side analyst coverage
Recruited new accountant and
appointed a financial controller from
within team
The Committee felt that this
objective was substantially met but
that this is an area where there is
always an opportunity for further
improvement
The Committee felt that significant
steps had been taken this year but
there was room for further
improvement
Overall the Committee determined that the objectives has been satisfied at 72% giving rise to a bonus of 108% of
salary (maximum available 150%). Note that 50% will be paid in cash and the other 50% will be awarded in Shares
which will vest, net of tax, at the end of three years from the start of the financial year to which they relate.
Key remuneration decisions in 2017-18
Base salary increases for 2018-19
One of the key activities of the Committee was the consideration of the Executive Directors’ base salary levels. The
Committee undertook a detailed review taking into account their responsibilities, their performance in their role, the
evolution of the Group and internal and external relativities (see information on pages 105 to 109. The key findings
of the Committee’s review were that there is insufficient distance between the salary of the CEO, CFO and the next
level of Management and that when compared to roles at companies that are similar in size, scope and complexity,
the current levels are well below lower quartile. As a result, the Committee proposed one-off salary increases to the
CEO, Kevin Nowlan and the CFO, Thomas Edwards-Moss as follows:
• CEO, Kevin Nowlan: €450,000 from €300,000; and
• CFO, Thomas Edwards-Moss: €340,000 from €265,000.
Hibernia REIT plc Annual Report 2018
101
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
The rationale for these increases is set out below:
• The current positioning is a result of the Company’s historical focus on performance fee arrangements, whereby
elements of fixed remuneration were considered secondary to delivering out-performance under the Investment
Management Agreement. Whilst a salary increase was awarded to the CFO effective 1 January 2017 to start
aligning his levels with peers, the CEO’s salary has been in place since the IPO in December 2013.
• Remuneration opportunity should be fair and competitive and be aligned with levels amongst peers. In particular,
it is the Committee’s view that base salary levels should fairly reflect an individual’s responsibilities, the size of the
business and the complexity of the individual’s role.
• Since internalisation in 2015, the CEO and CFO have executed a challenging strategy through hard work,
dedication and knowledge of the market. Under their leadership, Hibernia has delivered solid results with the office
portfolio growing in size by 65% to more than a million square feet through acquisitions and development activity,
EPRA net asset value per share has increased by 42% to 159.1 cents (post stamp duty changes) and contracted
rent roll has grown 144% to €56m. The returns of Hibernia’s portfolio have also exceeded those of the wider Irish
property market as represented by the IPD Ireland Index.
• The proposed increases align their total remuneration better against companies that the Committee considers to
be key competitors for executive talent and positions the CEO and the CFO at the market median level in terms of
target total remuneration which is in line with our stated Policy to pay within market ranges (see information on
page 108). The overall package is also in line with our Policy to provide an appropriate balance between fixed and
variable performance-related components, with a significant element of long-term variable pay given the long
term nature of the business.
The increases are material but the Committee strongly believes that this is the right time in the Group’s development
to make such increases and ensure we have a stable team that continues to deliver against our KPIs for the benefit
of our shareholders. They are also in line with the wider objective of this review, to have a policy that is fair and
competitive against companies of a similar size and complexity. The Group is around the median by market
capitalisation against selected comparators (see page 106) and proposed target total remuneration levels have been
set broadly in line with this position.
The proposed salary levels are subject to approval at the 2018 AGM and, if approved, will be effective from 1 April
2018 (i.e. from the start of the financial year which is the usual date that salary increases take effect). It should noted
that it is the Committee’s intention not to increase the salaries of the Executive Directors over the Policy period other
than potentially to reflect all employee or inflationary rises.
Non-Executive fee levels
The Board reviewed fees for the Non-Executive Directors and the Committee reviewed fees for the Chairman. The
key findings of the review were that the current fee levels were not commensurate with the level of responsibility and
time commitment required by the Non-Executive Directors and the fee levels themselves were below or at the lower
quartile when compared to companies of similar size, scope and complexity. In addition, under the current structure
fees are not provided to Committee Chairs and the Senior Independent Director to take into account additional time
commitment and responsibilities.
In order to ensure Non-Executive Director fees reflect the increasing level of responsibility and time commitment as
the Group grows, the following levels are proposed and subject to approval at the AGM, will be effective from 1 April 2018:
• Chairman: €150,000 (€100,000 currently);
• NED Base fee: €60,000 (€50,000 currently);
• Senior Independent Director ("SID") fee: €15,000 (none paid currently); and
• Committee Chair fee: €10,000 (none paid currently) (excludes Nominations Committee Chair).
The Chairman’s proposed fee is positioned at the lower quartile of the market whilst the remainder of the proposed
fee levels are around or below market median levels (the same comparators as used for the Executive Directors see
page 106). It is envisioned that during the three-year Policy term there will be no further increases to fees other than
potentially to reflect all employee rises or inflation.
102
Hibernia REIT plc Annual Report 2018
Summary of the proposed Remuneration Policy and implementation for 2018-19
The Policy for Executive Directors supports Hibernia’s core KPIs, which are set out on page 18. The Policy and its use
of performance metrics appropriately support shareholder value creation by delivering sustainable performance
consistent with the strategic drivers and appropriate risk management. The table below summarises key aspects of
the Policy and sets out the Executive Directors’ proposed remuneration arrangements for 2018-19.
KEY ELEMENTS AND TIME PERIOD (YEAR)
+1
+2
+3
+4
+5
OVERVIEW OF REMUNERATION POLICY IMPLEMENTATION FOR 2018-19*
Base salary
Pension
Benefits
Annual bonus
• Cash
• Deferred share
award
LTIP
Kevin Nowlan (CEO): €450,000 p.a.
Thomas Edwards-Moss (CFO): €340,000 p.a.
Kevin Nowlan (CEO): 15% of base salary.
Thomas Edwards-Moss (CFO): 15% of base salary.
Kevin Nowlan (CEO) and Thomas Edwards-Moss (CFO): Car
allowance, death in service, long-term disability schemes,
travel insurance and other benefits where necessary.
Kevin Nowlan (CEO): Up to 150% of base salary.
Thomas Edwards-Moss (CFO): Up to 150% of base salary.
Subject to performance against a scorecard of financial and
strategic/operational targets comprising EPRA earnings per
share, relative total property return, total accounting return
per share and a scorecard of strategic operational objectives
(including sustainability and environmental targets and
objectives relevant to the individual).
One third of any award deferred into shares for a period of
three years with malus and clawback arrangements in place.
Further details on how the annual bonus will be implemented
are set out below under ‘Implementation of variable
remuneration arrangements’ on page 104.
Kevin Nowlan (CEO): Up to 200% of base salary.
Thomas Edwards-Moss (CFO): Up to 200% of base salary.
Performance will be assessed against relative total property
return, relative total shareholder return and total accounting
return per share.
Incorporates a two-year holding period post the three year
vesting period with malus and clawback arrangements
applicable.
Further details on how the LTIP will be implemented
are set out below under ‘Implementation of variable
remuneration arrangements’ on page 104.
*There will be no grant in 2018 and the first grants will be made in the year commencing 1 April 2019
Hibernia REIT plc Annual Report 2018
103
GovernanceFinancial statementsStrategic report
Remuneration Committee report continued
Minimum shareholding requirements for Executive Directors
Under the new Policy, minimum shareholding requirements have been introduced to encourage long-term share
ownership and enhance the alignment of the interests of Executive Directors with shareholders. The level of
shareholding reflects the total annual performance-related remuneration an Executive Director is eligible to receive
and is equal to 350% of salary. The Executive Directors have five years from the date of approval of the Policy to
achieve this guideline.
The following table sets out all subsisting interests in the equity of the Company held by the Executive Directors at
31 March 2018:
EXECUTIVE DIRECTOR
MINIMUM SHAREHOLDING
REQUIREMENT AS
A % OF SALARY
(UNDER NEW POLICY)
Kevin Nowlan
(CEO)
350%
BENEFICIALLY
OWNED1
5,002,918
Thomas
Edwards-Moss
(CFO)
350%
98,147
BASED ON SHAREHOLDINGS AS AT 31 MARCH 2018
TOTAL INTERESTS
SUBJECT TO
PERFORMANCE
CONDITIONS2
TOTAL INTERESTS
NOT SUBJECT TO
PERFORMANCE
CONDITIONS3
TOTAL
INTERESTS
HELD AT
31 MARCH 2018
SHAREHOLDING
MET
–
–
1,904,554
6,907,472
Yes
288,5332
386,680
No
1. Current beneficial shareholding.
2. Shares subject to the achievement of performance conditions, shown gross.
3. Shares subject to continued employment only. Shown Gross. Actual amounts may be received net of taxes at 52%.
Implementation of variable remuneration arrangements
It is anticipated that variable incentive arrangements under the new Policy will take effect on the expiry of the
internalisation arrangements in November 2018 and annual bonus outcomes under the new Policy will be pro-rated
for the 2018-19 financial year. The first grants under the LTIP will be made in the year commencing 1 April 2019.
Annual bonus
The maximum bonus opportunity under the proposed Policy will be 150% of salary for the CEO and the CFO.
The performance conditions and their weightings for the annual bonus are as follows:
PERFORMANCE MEASURES
Relative Total Property Return (TPR)
TPR will be compared to the SCSI/IPD Ireland
Quarterly Property Index (excluding Hibernia)
Growth in EPRA earnings per share
Growth in EPRA earnings will be assessed against
challenging targets that will be retrospectively
disclosed due to commercial sensitivity
Total Accounting Return per share (TAR)
Growth in TAR will be assessed against challenging
targets that will be retrospectively disclosed due to
commercial sensitivity
Strategic and operational objectives
The measures will comprise agreed strategic and
operational objectives relevant to the individual and
will include sustainability and environmental targets
WEIGHTING (AS A
% OF MAXIMUM
OPPORTUNITY)
DETAILS REGARDING TARGETS
40%
17.5%
17.5%
25%
PERFORMANCE
OUTCOME (% OF MAXIMUM)
Below threshold
Threshold
At target
Maximum
0%
20%
50%
100%
Between threshold &
target and target &
maximum
Straight-line
interpolation
Objectives will include: delivery of risk
management agenda, execution of strategy
for major developments, diversification/
optimisation of financing and environmental
and sustainability objectives
104
Hibernia REIT plc Annual Report 2018
The Committee believes that the TPR outperformance target, EPRA earnings per share target, TAR target and
details of the strategic and operational objectives for the coming year are commercially sensitive and these are not
disclosed. These will be reported and disclosed retrospectively next year in order for shareholders to assess the basis
for any bonus outcomes.
LTIP
The maximum LTIP opportunity under the proposed Policy will be 200% of salary for the CEO and the CFO. Set out
below are the performance measures and targets for the first grant to be made in the year commencing 1 April 2019.
If there is a material change to the economic environment or the business plans of the Group, the Committee will
consult with shareholders if there are any proposed amendments to the performance conditions and/or targets set
out below.
PERFORMANCE MEASURES
Relative Total Shareholder Return (TSR)
Assessment of TSR will be against companies in the EPRA/
NAREIT Developed Europe Index
Relative Total Property Return (TPR)
TPR will be compared to the SCSI/IPD Ireland Quarterly
Property Index (excluding Hibernia)
Total Accounting Return per share (TAR)
Growth in TAR will be assessed against 3-year targets
(Compound Annual Growth Rate “CAGR”)
* Straight-line interpolation between threshold and maximums.
WEIGHTING (AS A
% OF MAXIMUM
OPPORTUNITY)
THRESHOLD VESTING* (20%) MAXIMUM VESTING* (100%)
33.3%
Median
Upper quartile
33.3%
Equal to index
Equal to index plus
1.5% p.a.
33.3%
4% CAGR p.a.
10% CAGR p.a.
External relativities
Policy external positioning
In line with the UK FRC Code the Committee considered relevant external relativities when setting the remuneration
levels within the proposed Policy. The Committee looked at two comparator groups:
Comparator group 1: REIT comparators
This is the primary comparator group used which consists of those companies which the Committee believes are the
most relevant to the Group and where individuals are likely to be recruited from or lost to.
Comparator group 2: Irish comparators
The secondary comparator group recognises that the Group is listed in Ireland and therefore the domestic market
for executive talent is a relevant consideration when setting the Company’s remuneration levels.
Hibernia REIT plc Annual Report 2018
105
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
REIT COMPARATORS
IRISH COMPARATORS
COMPANY NAME
Intu Properties
Derwent London
Shaftesbury
Great Portland Estates
Workspace Group
Big Yellow Group
LondonMetric Property
Assura
Hansteen Holdings
Safestore Holdings
Empiric Student Property
Capital & Regional
Helical Reit
Mucklow (A & J) Group
Mckay Securities
COMPANY NAME
Smurfit Kappa Group
Kingspan Group
Glanbia
Aryzta
Cairn Homes
C&C Group
Irish Continental Group
Dalata Hotel Group
Origin Enterprises
First Derivatives
Glenveagh Properties
Total Produce
Irish Residential Properties REIT
Malin Corporation
Applegreen
Kenmare Resources
Hostelworld Group
Datalex
Mincon Group
REIT COMPARATORS
IRISH COMPARATORS
MARKET CAP
€M*
NET ASSET
VALUE €M*
2,010
1,246
559
940
2,386
1,006
610
1,013
Upper Quartile
Median
Lower Quartile
Hibernia
MARKET CAP
€M*
1,176
826
446
940
Upper Quartile
Median
Lower Quartile
Hibernia
* Market capitalisation is based on the average market capitalisation in 2017 downloaded from Thomson Reuters Datastream. NAV is the latest available NAV from Thomson
Reuters Datastream in January 2018.
106
Hibernia REIT plc Annual Report 2018
CEO REIT comparators
BASE SALARY
€000
TARGET
TOTAL CASH 1
€000
TARGET
TOTAL DIRECT
REMUNERATION 2
€000
TARGET TOTAL
REMUNERATION 3
€000
MARKET CAP. 4
€M
NET ASSET
VALUE 4
€M
1,122
860
665
855
2,097
1,341
1,100
1,395
2,255
1,439
1,199
1,463
2,010
1,246
559
940
2,386
1,006
610
1,014
BASE SALARY
€000
TARGET
TOTAL CASH 1
€000
TARGET
TOTAL DIRECT
REMUNERATION 2
€000
TARGET TOTAL
REMUNERATION 3
€M
MARKET CAP. 4
€M
1,004
776
578
855
1,850
1,144
867
1,395
1,907
1,206
851
1,463
1,176
826
446
940
Upper quartile
Median
Lower quartile
Hibernia (CEO)
612
528
480
450
CEO Irish comparators
Upper quartile
Median
Lower quartile
656
488
370
Hibernia (CEO)
450
CFO REIT comparators
BASE SALARY
€000
TARGET
TOTAL CASH 1
€000
Upper quartile
Median
Lower quartile
442
372
348
Hibernia (CFO)
340
CFO Irish comparators
731
617
561
646
BASE SALARY
€000
TARGET
TOTAL CASH 1
€000
TARGET
TOTAL DIRECT
REMUNERATION 2
€000
1,365
1,109
834
1,054
TARGET TOTAL
REMUNERATION 3
€000
MARKET CAP. 4
€M
NET ASSET
VALUE 4
€M
1,404
1,081
902
1,105
2,010
1,246
559
940
2,386
1,006
610
1,014
TARGET
TOTAL DIRECT
REMUNERATION 2
€000
TARGET TOTAL
REMUNERATION 3
€000
MARKET CAP 4
€M
Upper quartile
Median
Lower quartile
369
316
237
Hibernia (CFO)
340
563
491
354
646
941
747
523
1,054
991
794
553
1,105
1,176
826
446
940
1. Target total cash: Base salary plus target annual bonus (target annual bonus is valued at 60% of a company’s maximum bonus opportunity). Note, for benchmarking
purposes, Hibernia’s target annual bonus was also valued at 60% to ensure like-for-like comparison with the market remuneration data. However, under Hibernia’s
pay-out schedule for the annual bonus, target performance equals 50% of the maximum opportunity.
2. Target total direction remuneration: Target total cash plus expected value for LTIP (expected value for long-term incentives is based on a fair value of 60% of the
award’s face value).
3. Target total remuneration: Base salary, target bonus, expected value for long-term incentives plus employer pension contribution.
4. Market capitalisation is based on the average market capitalisation in 2017 downloaded from Thomson Reuters Datastream. NAV is the latest available NAV from
Thomson Reuters Datastream in January 2018.
Hibernia REIT plc Annual Report 2018
107
GovernanceFinancial statementsStrategic report
Remuneration Committee report continued
Policy position
The Committee’s determination of the appropriate Policy position for remuneration is as follows:
• REIT Comparators (Hibernia is broadly at just below the median in terms of market capitalisation and at median
for NAV) for both Executive Directors:
– Lower quartile fixed pay;
– Upper quartile incentive opportunities; and
– Total target remuneration at around the median.
• The Committee felt that this approach retained the current performance-based culture with market level of
rewards only being earned if performance was delivered with the opportunity to earn more than median for
exceptional performance.
• Irish Comparators (Hibernia is median to upper quartile in terms of market capitalisation) for the CEO:
– Below median fixed pay;
– Upper quartile incentive opportunities; and
– Total target remuneration at around the median to upper quartile.
• As above the Committee felt that this approach retained the current performance based culture with market level
of rewards only being earned if performance was delivered with the opportunity to earn more than median for
exceptional performance.
• In fact there is a reduction in the remuneration for the CEO under the proposed Policy. The remuneration
(including consideration paid in respect of performance fees under the Investment Management Agreement)
received by the CEO for 2017 was €3,526k. Under the proposed Remuneration Policy this is materially reduced
to c. €2,487k based on maximum pay-outs and c. €1,520k based on-target pay-out.
• For the CFO the positioning is significantly higher against the Irish Comparators. However, given the Committee’s
view that the REIT Comparators are the primary group against which the Company should be compared this was
the positioning which was given precedence. In addition, the Committee felt that the internal relativities between
the CEO and CFO were more appropriate with the levels the Committee set. Further, given the international nature
of finance skills and the small size of the Irish market for listed companies the Irish Comparators were felt to be
less relevant.
108
Hibernia REIT plc Annual Report 2018
Control group
The Committee looked at a further control group of internally managed REITs closest to the market capitalisation
of the Company. The Committee felt that the results supported the findings of the main external relativity’s exercise,
the results of which are set out above. The companies that were part of the control group are:
• LondonMetric
• Assura
• Hansteen
• NewRiver
• Safestore
• RDI
• Empiric Student Property
Upper quartile
Median
Lower quartile
Hibernia
CEO control group
Upper quartile
Median
Lower quartile
Hibernia
CFO control group
Upper quartile
Median
Lower quartile
Hibernia
MARKET CAP
(€M)
NET ASSET VALUE
(€M)
1,144
1,039
896
940
962
869
773
1,013
MARKET CAP
(€M)*
NET ASSET VALUE
(€M)*
BASE SALARY
(€000)
1,144
1,039
896
940
962
869
773
1,013
537
505
455
450
MARKET CAP
(€M)
NET ASSET VALUE
(€M)
BASE SALARY
(€000)
1,144
1,039
896
940
962
869
773
1,013
401
370
338
340
TARGET
TOTAL CASH
(€000)
TARGET TOTAL
DIRECT
REMUNERATION
(€000)
TARGET TOTAL
REMUNERATION
(€000)
948
890
850
855
2,082
1,452
1,246
1,395
2,166
1,511
1,320
1,463
TARGET
TOTAL CASH
(€000)
TARGET TOTAL
DIRECT
REMUNERATION
(€000)
TARGET TOTAL
REMUNERATION
(€000)
691
656
612
646
1,114
1,011
887
1,054
1,182
1,067
918
1,105
* Market capitalisation is based on the average market capitalisation in 2017 downloaded from Thomson Reuters Datastream. NAV is the latest available NAV from Thomson
Reuters Datastream in January 2018.
Hibernia REIT plc Annual Report 2018
109
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
Directors’ Remuneration Policy
The following section sets out the Directors’ Remuneration Policy, which is to be submitted as an advisory ordinary
resolution to the AGM of the Company to be held in July 2018 and will take effect following the AGM. The Committee
has established the Policy on the remuneration of the Executive Directors and the Chairman. The Board has
established the policy on the remuneration of the other Non-Executive Directors.
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 Group cannot rely on UK statutory provisions, the resolution submitted
to the AGM is advisory and non-binding in nature.
CHANGES FROM THE
PREVIOUS POLICY
None except that
operation of the Policy
regarding recruitment
and promotions has
been clarified.
ELEMENT, PURPOSE
AND LINK TO STRATEGY
Base salary
Provides the basis for
the overall market
remuneration package
and takes into account
the role and skills of
the individual.
Salaries are set at
a level to ensure
the recruitment
and retention of high
calibre executives to
implement the
Group’s strategy.
OPERATION AND PERFORMANCE MEASURES
MAXIMUM OPPORTUNITY
An Executive Director’s basic salary
is set on appointment and reviewed
annually or when there is a change in
position or responsibility. Changes will
normally be effective from 1 April.
When determining an appropriate level
of salary, the Committee considers:
• General salary rises to employees;
• Remuneration practices within
the group;
• Any change in scope, role and
responsibilities;
• The general performance of
the group;
• The experience of the relevant
director;
• The economic environment; and
• When the Committee determines
a benchmarking exercise is
appropriate – salaries within the
ranges paid by the companies in
the comparator groups used for
remuneration benchmarking.
Individuals who are recruited or
promoted to the Board may, on
occasion, have their salaries set below
the targeted policy level until they
become established in their role. In
such cases subsequent increases in
salary may be higher than the general
rises for employees until the target
positioning is achieved.
Typically, the base salaries of
Executive Directors in post at the
start of the policy period and who
remain in the same role throughout
the policy period will be increased by
a similar percentage to the average
annual percentage increase in salaries
of all other employees in the Group.
The exceptions to this rule may be
where:
• An individual is below market level
and a decision is taken to increase
base pay to reflect proven
competence in role; or
• There is a material increase in scope
or responsibility to the Executive
Director’s role.
The Committee ensures that maximum
salary levels are positioned in line with
companies of a similar size to Hibernia
and validated against other companies
in the industry, so that they are
competitive against the market (see
page 106 for current comparators).
The Committee intends to review the
comparators periodically and may add
or remove companies from the group
as it considers appropriate. Any
changes to the comparator groups will
be set out in the section headed
Implementation of Remuneration
Policy, in the following financial year.
110
Hibernia REIT plc Annual Report 2018
ELEMENT, PURPOSE
AND LINK TO STRATEGY
Pension
To provide a basis for
post – retirement
remuneration in line
with comparable
remuneration packages.
Benefits
To provide a market
competitive benefits
package.
OPERATION AND PERFORMANCE MEASURES
MAXIMUM OPPORTUNITY
CHANGES FROM THE
PREVIOUS POLICY
The maximum pension contribution
allowance for existing Executive
Directors is 15% of salary.
None.
The Group will set out in the
section headed Implementation
of Remuneration Policy, in the
following financial year the pension
contributions for that year for each
of the Executive Directors.
The maximum is the cost of providing
the relevant benefits.
None.
The Group provides a pension
contribution allowance in line with
practice relative to its comparators
to enable the Group to recruit and
retain Executive Directors with the
experience and expertise to deliver
the Group’s strategy.
The pension plan is an optional
defined contribution scheme with
an independent pension provider and
an employer contribution of between
5 – 15% for staff.
When recruiting or promoting new
Executive Directors the Committee
will aim at aligning the pension
contribution allowance to be provided
with the current level of Executive
Directors’ contribution. If the
circumstances require an alternative
approach to be used, this will be
fully explained in the Group’s
Annual Report.
Benefits may include:
• Car allowance;
• Death in service and long-term
disability schemes;
• Travel insurance; and
• Other benefits as provided from
time to time, for example where
a director relocates.
The Committee recognises the need
to maintain suitable flexibility in the
benefits provided to ensure it is able
to support the objective of attracting
and retaining personnel in order to
deliver Group strategy. Additional
benefits may therefore be offered
such as relocation allowances
on recruitment.
Hibernia REIT plc Annual Report 2018
111
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
ELEMENT, PURPOSE
AND LINK TO STRATEGY
Annual bonus
To incentivise the
achievement of annual
performance targets
that support the
Group’s short term key
performance indicators
as well as providing
long-term alignment
with shareholders
through the operation
of bonus deferral.
CHANGES FROM THE
PREVIOUS POLICY
The CFO currently
participates in the PRR
which will expire in
November 2018. Under
this arrangement, the
maximum opportunity
is 150% of salary with
50% of the award paid
in cash and remaining
50% awarded in shares
which vest three years
from the start of the
year of the award.
The CEO currently
receives no variable
remuneration on the
basis that he was one
of the vendors of WK
Nowlan REIT
Management Limited
and is compensated
under the Internalisation
Share Purchase
Agreement (note 34
to the consolidated
financial statements).
The annual bonus and
LTIP will replace these
previous arrangements
upon expiration.
OPERATION AND PERFORMANCE MEASURES
MAXIMUM OPPORTUNITY
Maximum: 150% of salary.
Threshold performance: 20%
of maximum.
On-target performance: 50%
of maximum.
Participants may be entitled to
dividends or dividend equivalents on
the deferred shares representing the
dividends paid during the deferral
period.
Annual bonus awards are granted
annually before agreeing the Annual
Report and Accounts, usually in June.
The performance period is one financial
year with pay-out determined by the
Committee following the year end,
based on achievement against
a range of financial and non-financial
targets including having regard to
environmental, health and safety issues.
Two thirds of the bonus award will be
paid out in cash with the further one
third deferred into shares subject to a
three year vesting period. There are no
further performance targets on the
deferred amount.
Malus and clawback arrangements are in
place. These are compliant with the FRC
UK Corporate Governance Code and in
line with best practice in this area.
Performance targets will be set by the
Committee annually based on a range
of financial and strategic measures,
including but not limited to:
• Relative Total Property Return;
• Growth in Total Accounting Return
(calculated per share); and
• Growth in EPRA earnings
(calculated per share).
The specific measures, targets and
weightings may vary from year to year
in order to align with the Group’s
strategy over each year. However, at
least 50% of the awards will be linked
to financial measures.
The measures will be dependent on
the Group’s goals over the year under
review and directly link to the key
measurable strategic milestones to
incentivise executives to focus on
the execution of the strategy. The
performance targets are calibrated
each year to align with the announced
strategic plan.
The actual performance targets set
are not disclosed at the start of the
financial year, as they are considered
to be commercially sensitive. These
will be reported and disclosed
retrospectively at the end of the year
in order for shareholders to assess the
basis for any bonus outcomes.
112
Hibernia REIT plc Annual Report 2018
CHANGES FROM THE
PREVIOUS POLICY
New remuneration
category for long-term
performance.
ELEMENT, PURPOSE
AND LINK TO STRATEGY
LTIP
To incentivise the
achievement of long
term sustainable
shareholder return
through the delivery
of key financial
performance indicators.
OPERATION AND PERFORMANCE MEASURES
MAXIMUM OPPORTUNITY
Maximum LTIP Awards are 200%
of base salary.
Threshold performance: 20% of
maximum.
Vesting is dependent on service and
performance measures.
Participants may be entitled to
dividends or dividend equivalents
representing the dividends paid during
the performance period on vested
LTIP Awards.
Under the Long-Term Incentive Plan,
the Committee may award annual
grants of performance share awards
in the form of conditional awards or
nil-cost options (LTIP awards) on an
annual basis.
LTIP awards will vest three years from
the date of grant subject to the
achievement of the performance
measures.
A two-year holding period will apply
following the three-year vesting period
for LTIP awards granted to the
Executive Directors.
Malus and clawback arrangements
are in place. These are compliant with
the FRC UK Corporate Governance
Code and in line with best practice
in this area.
The performance measures for LTIP
awards granted in the year
commencing 1 April 2019 will be
assessed against the following metrics:
• Relative Total Property Return
compared to the SCSI /IPD Ireland
Quarterly Property index excluding
the Group (33.3%);
• Relative Total Shareholder Return
compared to constituents of the
EPRA/NAREIT Developed Europe
Index (33.3%); and
• Growth in Total Accounting Return
per share (33.3%).
The Committee has the discretion to
adjust targets or performance
measures for any exceptional events
that may occur during the year.
The Committee will review and set
weightings and targets before each
grant to ensure they remain
appropriate. The Committee may
change the balance of the measures,
or use different measures for
subsequent awards, as appropriate.
No material change will be made to
the type of performance conditions
without prior shareholder consultation.
Hibernia REIT plc Annual Report 2018
113
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
ELEMENT, PURPOSE
AND LINK TO STRATEGY
Operation of
incentive plans
OPERATION AND PERFORMANCE MEASURES
MAXIMUM OPPORTUNITY
CHANGES FROM THE
PREVIOUS POLICY
The Committee will operate all
incentive plans according to the rules
of each respective plan and the
discretions contained therein. The
discretions cover aspects such as the
timing of grant and vesting of awards,
determining the size of the award
(subject to the policy limits), the
treatment of leavers, retrospective
adjustment of awards (e.g. for a rights
issue, a corporate restructuring or for
special dividends) and, in exceptional
circumstances, the discretion to adjust
previously set targets for an incentive
award if events happen which cause
the Committee to determine that it
would be appropriate to do so. In
exercising such discretions, the
Committee will take into account
generally accepted market practice,
best practice guidelines, the provisions
of the Listing Rules and the Company’s
approved Remuneration Policy.
In exceptional circumstances the
Committee retains the discretion to:
• Change the performance measures
and targets and the weighting
attached to the performance
measures and targets part-way
through a performance year if there
is a significant and material event
which causes the Committee to
believe the original measures,
weightings and targets are no
longer appropriate; and
• Make downward or upward
adjustments to the amount of
bonus or LTIP earned resulting from
the application of the performance
measures, if the Committee believe
that the bonus or LTIP outcomes
are not a fair and accurate
reflection of business performance.
Cessation of employment and change
of control provisions apply as set out
on pages 117 to 119.
114
Hibernia REIT plc Annual Report 2018
ELEMENT, PURPOSE
AND LINK TO STRATEGY
Minimum shareholding
requirements
To align the interests of
Executive Directors with
those of shareholders
over the long term.
OPERATION AND PERFORMANCE MEASURES
MAXIMUM OPPORTUNITY
CHANGES FROM THE
PREVIOUS POLICY
The minimum shareholding
requirement for Executive Directors
is 350% of salary.
Currently no
shareholding
requirements in place.
The Committee has adopted formal
shareholding requirements that will
encourage the Executive Directors to
build up over a five-year period and
then subsequently hold a shareholding
equivalent to a percentage of salary.
This policy ensures that the interests
of Executive Directors and those
of shareholders are closely aligned.
Legacy arrangements – performance-related remuneration scheme
Under the current Policy, variable incentive remuneration is primarily delivered through the performance-related
payments (see note 11 of the consolidated financial statements). These are 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 and are contingent on the continuing performance of service for a further two years after the award.
The maximum incentive award payable to a senior executive is 1.5 times annual base salary. Up to 40% 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.
These arrangements were introduced as an interim measure upon internalisation and come to an end on 26 November 2018.
Recruitment policy
The Group’s principle is that the remuneration of any new recruit will be assessed in line with the same principles as
for the current Executive Directors. The Committee is mindful that it wishes to avoid paying more than it considers
necessary to secure a preferred candidate with the appropriate calibre and experience needed for the role.
In setting the remuneration for new recruits, the Committee will have regard to guidelines and shareholder sentiment
regarding one-off or enhanced short-term or long-term incentive payments as well as giving consideration for the
appropriateness of any award.
Hibernia REIT plc Annual Report 2018
115
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
The Group’s detailed policy when setting remuneration for the appointment of new Directors is summarised below:
RECRUITMENT POLICY
Salary, benefits and pension
These will be set in line with the policy for existing Executive Directors.
Annual bonus
LTIP
The Executive Director will be eligible to participate in the Annual Bonus
Scheme as set out in the remuneration Policy table. The maximum level of
variable remuneration that may be offered is 150% of base salary consistent
with that of existing Executive Directors.
The Executive Director will be eligible to participate in the LTIP as set out in
the remuneration Policy table. The maximum level of variable remuneration
that may be offered is 250% of base salary in exceptional circumstances for
the year of recruitment. The normal maximum award level is 200% of salary.
Maximum variable remuneration
The maximum level of variable remuneration which may be offered in the
year of recruitment is 400% of salary. The normal ongoing maximum is
350% of salary.
Buy-outs or replacement awards
Relocation policies
Internal promotions
The Committee’s Policy is not to provide replacement awards as a matter
of course. However, should the Committee determine that the individual
circumstances of recruitment justified the provision of a replacement award,
the value of any incentives that will be forfeited on cessation of an Executive
Directors’ previous employment will be calculated taking into account the
following:
• the proportion of the performance period completed on the date of the
director’s cessation of employment;
• the performance conditions attached to the vesting of these incentives
and the likelihood of them being satisfied; and
• any other terms and conditions having a material effect on their value
(“lapsed value”).
The Committee may then grant a replacement award up to the equivalent
value as the lapsed value where possible under the Company’s incentives
plans. Where the circumstances are such that this is not possible a bespoke
arrangement may be used including in accordance with LR 6.4.2 of the
Listing Rules of Euronext Dublin.
In instances where the new Executive Director is required to relocate or
spend significant time away from his/her normal residence, the Company
may provide one-off compensation to reflect the cost of relocation for the
Executive Director. The level of the relocation package will be assessed on
a case by case basis but will take into consideration any cost of living
differences/housing allowance, disturbance allowances and schooling.
In the case of an internal appointment, any variable pay element awarded in
respect of the prior role would be allowed to pay out according to the terms
on which it was originally granted. These would be disclosed to shareholders
in the remuneration report for the relevant financial year.
The Group’s policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy
which applies to current Non-Executive Directors, which is set out on page 121.
116
Hibernia REIT plc Annual Report 2018
Cessation of employment
When determining any loss of office payment for a departing Director, the Committee will always seek to minimise
the cost to the Group while complying with contractual terms and seeking to reflect the circumstances in place at
the time. The Committee reserves the right to make additional payments where such payments are made in good
faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation); or by way
of settlement or compromise of any claim arising in connection with the termination of an Executive Director’s office
or employment.
TREATMENT ON CESSATION OF EMPLOYMENT
General
The Committee will honour Executive Directors’ contractual entitlements. Service contracts do
not contain liquidated damages clauses. If a contract is to be terminated, the Committee will
determine such mitigation as it considers fair and reasonable in each case. There are no
contractual arrangements that would guarantee a pension with limited or no abatement on
severance or early retirement. There is no agreement between the Company and its Directors
or employees, providing for compensation for loss of office or employment that occurs because
of a takeover bid. The Committee reserves the right to make additional payments where such
payments are made in good faith in discharge of an existing legal obligation (or by way of
damages for breach of such an obligation); or by way of settlement or compromise of any claim
arising regarding the termination of an Executive Director’s office or employment.
Salary, benefits
and pension
These will be paid over the notice period. The Company has discretion to make a lump sum
payment in lieu.
Annual bonus –
cash awards
Good leaver reason
Performance conditions will be measured at the bonus measurement date. Bonus will normally
be pro-rated for the period worked during the financial year.
Other reason
No bonus will be payable for year of cessation.
Discretion
The Remuneration Committee has the following elements of discretion:
• To determine that an Executive Director is a good leaver. It is the Committee’s intention to only
use this discretion in circumstances where there is an appropriate business case which will be
explained in full to shareholders; and
• To determine whether to pro-rate the bonus for time. The Committee’s normal policy is
that it will pro-rate for time. It is the Committee’s intention to use discretion to not pro-rate
in circumstances where there is an appropriate business case which will be explained in full
to shareholders.
Hibernia REIT plc Annual Report 2018
117
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
TREATMENT ON CESSATION OF EMPLOYMENT
Annual bonus –
deferred share
awards
Good leaver reason
All subsisting deferred share awards will vest.
Other reason
Lapse of any unvested deferred share awards.
Discretion
The Committee has the following elements of discretion:
• To determine that an Executive Director is a good leaver. It is the Committee’s intention to only
use this discretion in circumstances where there is an appropriate business case which will be
explained in full to shareholders;
• To vest deferred shares at the end of the original deferral period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason
resulting in the cessation; and
• To determine whether to pro-rate the maximum number of shares to the time from the date of
grant to the date of cessation. The Committee’s normal policy is that it will not pro-rate awards
for time. The Committee will determine whether or not to pro-rate based on the circumstances
of the Executive Director’s’ departure.
LTIP
Good leaver reason
Pro-rated for time and performance in respect of each subsisting LTIP award.
Other reason
Lapse of any unvested LTIP awards.
Discretion
The Committee has the following elements of discretion:
• To determine that an executive is a good leaver. It is the Committee’s intention to only use
this discretion in circumstances where there is an appropriate business case which will be
explained in full to shareholders;
• To determine to pay cash in lieu of shares;
• To measure performance over the original performance period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason
resulting in the cessation;
• To vest the LTIP award at the end of the original performance period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason
resulting in the cessation;
• To determine whether the holding period will apply including whether in full or in part; and
• To determine whether to pro-rate the maximum number of shares to the time from the date
of grant to the date of cessation. The Committee’s normal policy is that it will pro-rate awards
for time. It is the Committee’s intention to use discretion to not pro-rate in circumstances
where there is an appropriate business case which will be explained in full to shareholders.
Definition of ‘good leaver’
A good leaver reason is defined as cessation in the following circumstances:
• Death;
• Ill-health;
• Injury or disability;
• Redundancy;
• Retirement (in agreement with the Company);
• Employing company ceasing to be a group company;
118
Hibernia REIT plc Annual Report 2018
• Transfer of employment to a company which is not a group company; and
• Any reason, permitted by the Committee in its absolute discretion in any particular case except where termination
is for dishonesty, fraud, misconduct or other circumstances justifying summary dismissal.
Cessation of employment in circumstances other than those set out above is cessation for other reasons.
Change of control
TREATMENT ON CHANGE OF CONTROL
Annual bonus
– cash awards
Annual bonus
– deferred share
awards
Pro-rated for time and performance to the date of the change of control.
The Committee has discretion regarding whether to pro-rate the bonus for time. The
Committee’s normal policy is that it will pro-rate the bonus for time. It is the Committee’s
intention to use its discretion to not pro-rate in circumstances only where there is an
appropriate business case which will be explained in full to shareholders.
Subsisting deferred share awards will vest on a change of control.
The Committee has discretion regarding whether to pro-rate the awards for time. The
Committee’s normal policy is that it will not pro-rate awards for time. The Committee will
make this determination depending on the circumstances of the change of control.
LTIP
The number of shares subject to subsisting LTIP awards will vest on a change of control, pro-
rated to time and performance.
The Committee has discretion regarding whether to pro-rate the LTIP awards for time.
The Committee’s normal policy is that it will pro-rate the LTIP awards for time. It is the
Committee’s intention to use its discretion to not pro-rate in circumstances only where
there is an appropriate business case which will be explained in full to shareholders.
Malus and clawback
Annual bonus
– cash awards
Malus will apply up to the date of bonus determination and clawback will apply for a period of
two years post bonus payment.
Annual bonus
– deferred share
awards
LTIP
Malus will apply during the share deferral period.
Malus will apply during the vesting period and clawback will apply for a period of two years
post-vesting.
The circumstances in which malus and clawback could apply are as follows:
• Discovery of a material misstatement resulting in an adjustment in the audited accounts of the Group or Company;
• The assessment that any performance condition or condition in respect of the annual bonus or LTIP award was
based on error, or inaccurate or misleading information;
• The discovery that any information used to determine the Group annual bonus or LTIP award was based on error,
or inaccurate or misleading information;
• Action or conduct of a participant which amounts to fraud or gross misconduct; or
• Events or the behaviour of a participant have led to the censure of the Company by a regulatory authority or have
had a significant detrimental impact on the reputation of the Group or Company provided that the Board is
satisfied that the relevant participant was responsible for the censure or reputational damage and that the censure
or reputational damage is attributable to the participant.
Hibernia REIT plc Annual Report 2018
119
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
Remuneration scenario charts
The chart below seeks to demonstrate how pay varies with performance for the Executive Directors’ based on the
proposed Policy.
The minimum scenario reflects fixed remuneration of salary, pension and benefits only as the other elements are
linked to future performance. Base salary is that to be paid in the year to 31 March 2019. Benefits are as shown in the
single figure remuneration table for the year to 31 March 2018 on page 123. The on-target scenario reflects fixed
remuneration as above plus 50% of the maximum annual bonus opportunity and 60% vesting for the LTIP awards.
The maximum scenario reflects the fixed remuneration plus the maximum pay-out of all other incentive
arrangements.
The on-target and maximum scenarios include an additional bar which shows the impact of share price growth over
the relevant performance period to show how the package value is aligned to shareholders. We have used share
price growth of 5% per annum for on-target performance and 10% per annum for maximum performance.
€2,486,875
€2,114,500
€1,417,000
€1,519,850
€2,500,000
€2,000,000
€1,500,000
€1,000,000
€500,000
€539,500
€426,000
€1,879,350
€1,616,000
€1,089,000
€1,166,709
Fixed*
Annual bonus
LTIP
Equity growth on shares
* Fixed includes bases salary,
pensions and all benefits
€0
Minimum
On-target
On-target
(with equity
growth at 5%)
Maximum
Maximum
(with equity
growth at 10%)
Minimum
On-target
On-target
(with equity
growth at 5%)
Maximum
Maximum
(with equity
growth at 10%)
CEO
CFO
Service contracts for Executive Directors
When setting notice periods, the Committee has regard to market practice and corporate governance best practice.
The table below summarises the service contracts for Executive Directors. The Executive Directors’ contracts are
available for shareholders to view at the AGM. The maximum notice period will be 12 months.
DIRECTOR
Kevin Nowlan (CEO)
Thomas Edwards-Moss (CFO)
DATE OF CONTRACT NOTICE PERIOD
5 November 2015
n/a1
5 November 2015
6 months
1. Kevin Nowlan has a service agreement under arrangements which expire on 26 November 2018 and a new contract will be put in place.
The departure of Kevin Nowlan prior to November 2018 may trigger clawback arrangements under the criteria
established in the internalisation in 2015.
All directors are subject to annual re-election at the AGM in line with best practice.
External appointments
Executive Directors are permitted to accept external, non-executive appointments with the prior approval of the
Board where such appointments are not considered to have an adverse impact on their role within the Group. Both
Kevin Nowlan and Thomas Edwards-Moss currently do not have any external appointments.
Non-Executive Director remuneration policy and letters of appointment
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.
120
Hibernia REIT plc Annual Report 2018
The table below sets out our Non-Executive Directors' fees in greater detail.
ELEMENT, PURPOSE
AND LINK TO STRATEGY
OPERATION AND
PERFORMANCE MEASURES
MAXIMUM OPPORTUNITY
CHANGES FROM THE PREVIOUS POLICY
AND IMPLEMENTATION FOR 2018
Non-Executive Directors fees
Core element of
remuneration, set at a level
sufficient to attract and
retain individuals with
appropriate knowledge and
experience in organisations
of broadly similar size and
complexity.
Introduction of fees for
Chairmanship of Board
Committees and the role
of Senior Independent
Director.
Fees from 1 April 2018 are
as follows:
• Chairman: €150,000
(€100,000 currently);
• NED Base fee: €60,000
(€50,000 currently);
• SID fee: €15,000 (none
paid currently); and
• Committee Chair fee:
€10,000 (none paid
currently) (excludes
Nominations Committee
Chair).
The Board is responsible
for setting the remuneration
of the Non-Executive
Directors. The
Remuneration Committee
is responsible for setting
the Chairman’s fees.
The fees for Non-Executive
Directors are broadly set at
a competitive level against
a comparator group of
companies of similar size
and industry to Hibernia.
The Committee intends to
review the list of companies
each year and may add or
remove companies from the
group as it considers
appropriate. Any changes
to the comparator groups
will be disclosed in the part
of the report setting out the
operation of the policy for
the future year.
In general, the level of
fee increase for the Non-
Executive Directors and the
Chairman will be set taking
account of any change in
responsibility and the
general rise in salaries
across employees.
The Company will pay
reasonable expenses
incurred by the Non-
Executive Directors and
may settle any tax incurred
in relation to these.
Non-Executive Directors
are paid an annual fee
and additional fees for
chairmanship of
committees and the role
of Senior Independent
Director (“SID”). The
Company retains the
flexibility to pay fees
for the membership
of committees.
In exceptional
circumstances, fees may
also be paid for additional
time spent on the
Company’s business
outside of the normal
duties.
Fees are normally reviewed
annually with any changes
generally effective from
1 April and are based on
equivalent roles in the
comparator group used to
review salaries paid to the
Executive Directors.
Non-Executive Directors
do not participate in any
variable remuneration or
receive any other benefits,
other than being covered
for disability benefits under
the Company’s insurance
whilst travelling on
Company business.
Hibernia REIT plc Annual Report 2018
121
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
Letters of appointment
The Non-Executive Directors do not have service contracts but do have letters of appointment which reflect their
responsibilities and commitments.
NON-EXECUTIVE DIRECTOR
Daniel Kitchen
Colm Barrington
Frank Kenny
Stewart Harrington
Terence O’Rourke
DATE OF CONTRACT
NOTICE PERIOD
August 2013
August 2013
November 2017
August 2013
August 2013
1 month
1 month
1 month
1 month
1 month
In accordance with the requirements of the UK Code each of the Directors submits themselves for re-election
each year.
Remuneration throughout the Group
The remuneration for all staff in the Group is based on the same principles and arrangements as described above for
Executive Directors. The Group seeks to remunerate in line with market salaries and benefits. Bonus arrangements
are cascaded down the organisation to incentivise the achievement of Group and personal objectives. Participation
in the LTIP is extended to members of the Management Team and others on a discretionary basis. The Committee
believes the Group approach to cascading its variable incentive arrangements down the organisation is fair.
Consideration of shareholder views
The Committee develops and implements the Policy taking into account the views of principal shareholders. In
designing the new Policy, the Committee spent a significant period of time consulting with major shareholders to
ensure that views of shareholders on the proposed Policy were considered.
The Chair of the Committee consulted with the Company’s key shareholders, contacting the top 24 shareholders
who together represented c. 65% of the issued share capital as well as Proxy Advisors (Glass Lewis and ISS).
The Committee is grateful for shareholders’ comments and engagement during the consultation process. At the
end of the process the Committee was pleased that the majority of shareholders consulted expressed support for
the Policy.
The Committee will continue to maintain an open and constructive dialogue with its major shareholders and Proxy
Advisors and where appropriate, will always seek to consult.
Annual report on remuneration for the financial year ended 31 March 2018
The 2018 Annual report on remuneration contains details of how the Company’s Remuneration Policy for Directors
was implemented during the financial year ended 31 March 2018. 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 practicable under Irish legislation. An advisory ordinary
resolution to approve this report and the Annual Statement will be put to shareholders at the AGM.
122
Hibernia REIT plc Annual Report 2018
Executive Director Remuneration for the year ended 31 March 2018
Single figure remuneration table (audited)
The remuneration of Executive Directors showing the breakdown between components with comparative figures
for the prior year is shown below. Figures provided have been calculated in accordance with regulations.
Kevin Nowlan (CEO) 1
Thomas Edwards-Moss (CFO)
FINANCIAL
YEAR
ENDING
31 MARCH
2018
2017
2018
2017
BASE
SALARY
€’000
TAXABLE
BENEFITS 2
€’000
ANNUAL
BONUS
€’000
DEFERRED
SHARES 3
€’000
PENSION
€’000
OTHER
€’000
TOTAL
€’000
300
300
265
217
22
19
35
17
-
–
143
117
-
–
142
117
45
45
40
32
-
–
-
–
367
364
625
500
1. 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 (note 34 of the consolidated financial statements).
2. Taxable benefits comprise car and travel allowances,and professional subscriptions mainly.
3. Share price of €1.444 was used to value 2018 deferred shares.
As noted on page 100, performance-related remuneration for most non-Vendor employees, including Thomas
Edwards-Moss, is met out of arrangements under the internalisation agreement. 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. Further details on Kevin’s compensation under this Agreement are set
out in note 34 to the consolidated financial statements.
Awards under the PRR scheme for 2018 reflect the strong progress in respect of the key strategic objectives to
support the growth of the Company. For the CFO, Thomas Edwards-Moss, the Committee determined that his
objectives had been satisfied at 72% giving rise to a bonus of 108% of salary (maximum opportunity – 150% of
salary). Note that 50% will be paid in cash and the other 50% will be awarded in shares, which will vest, net of tax,
at the end of three years from the start of the financial year to which they relate.
Details of the of the Committee’s assessment of Thomas Edwards-Moss’ performance-related remuneration are
set out on page 101 in the ‘At a glance’ section.
Payments to past Directors or for loss of office
Mr William Nowlan resigned from the Board on 25 July 2017. During the year he was paid €16k in fees for his role
as a Non-Executive Director, €84k in consulting fees and €1.4m in performance related payments as a Vendor.
Other than this, there were no payments to past Directors and there were no payments for loss of office.
Hibernia REIT plc Annual Report 2018
123
GovernanceFinancial statementsStrategic report Remuneration Committee report continued
Non-Executive Directors remuneration
Single figure remuneration table (audited)
The remuneration of Non-Executive Directors showing the breakdown between components with comparative
figures for the prior year is shown below. Figures provided have been calculated in accordance with regulations.
Daniel Kitchen
Colm Barrington
Terence O’Rourke
Frank Kenny
Stewart Harrington
William Nowlan
FEES
€’000
100
100
50
50
50
50
20
–
50
50
16
50
OTHER
€’000
–
–
–
–
–
–
–
–
–
–
–
–
TOTAL
€’000
100
100
50
50
50
50
20
–
50
50
16
50
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Statement on implementation of the Policy for the year ending 31 March 2019
Pages 103 to 105 within the ‘At a glance’ section set out in detail how the Policy will be implemented for the year
ending 31 March 2019.
124
Hibernia REIT plc Annual Report 2018
Statement of Directors’ shareholdings
Directors' share interests are set out below. From 1 April 2018 onwards, minimum shareholding requirements have
been introduced and the requirement equal 350% of salary. The Executive Directors have five years from the date
of the Policy to achieve this guideline.
INTERESTS HELD
31 MARCH 2018
BENEFICIALLY
OWNED1
TOTAL
INTERESTS
SUBJECT TO
PERFORMANCE
CONDITIONS2
TOTAL
INTERESTS NOT
SUBJECT TO
PERFORMANCE
CONDITIONS3
DIRECTOR
Kevin Nowlan (CEO) 4
5,002,918
n/a
1,904,554
Thomas Edwards-Moss
(CFO)
98,147
n/a
288,533
Daniel Kitchen
Colm Barrington
Frank Kenny
Terence O'Rourke
Stewart Harrington
William Nowlan 4
100,371
1,100,000
5,530,234
154,566
102,550
4,131,056
Sean O’Dwyer (Company
Secretary)
102,574
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1,269,702
n/a
n/a
952,277
121,127
SHAREHOLDING
REQUIREMENT
MET
% OF SHARE
CAPITAL
(2018)
% OF SHARE
CAPITAL
(2017)
1 APRIL 20175
Y
N
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0.99%
0.85%
5,824,458
0.05%
0.01%
96,824
0.01%
0.16%
0.97%
0.02%
0.01%
0.73%
0.01%
100,371
0.16%
1,100,000
0.81%
5,530,234
0.02%
0.01%
152,482
101,167
0.50%
3,438,200
0.03%
0.01%
101,191
On 9 April 2018 45,773 shares were issued to Thomas Edwards-Moss pursuant to the settlement of performance
related remuneration in respect of the financial year ended 31 March 2016. Other than this, there were no
movements in Directors’ shareholdings between 31 March 2018 and the date of this report.
1. Beneficial interests include shares held directly or indirectly by connected persons.
2. There are currently no unvested LTIP shares subject to performance conditions. The first grant under the new Long Term Incentive Plan will be made in the financial
year starting 1 April 2019.
3. Total interests not subject to performance conditions include deferred shares granted under the interim incentive scheme, subject to continued employment
conditions, and shares due to vendors under internalisation.
4. William Nowlan and Kevin Nowlan are related.
5. Or date of appointment if later.
Performance graph
The chart below shows the Company’s Total Shareholder Return (TSR) since internalisation of the management team
on 5 November 2015. During this period Hibernia has experienced significant growth and outperformed European
industry benchmarks. The Committee believes European industry benchmarks represent the most relevant
benchmark for comparison.
5
1
0
2
/
1
1
/
5
0
t
a
0
0
1
o
t
d
e
s
a
b
e
r
R
S
T
125
120
115
110
105
100
95
90
85
80
Hibernia
EPRA/NAREIT
Developed Europe
5
1
0
2
/
1
1
/
5
0
6
1
0
2
/
2
0
/
5
0
6
1
0
2
/
5
0
/
5
0
6
1
0
2
/
8
0
/
5
0
6
1
0
2
/
1
1
/
5
0
7
1
0
2
/
2
0
/
5
0
7
1
0
2
/
5
0
/
5
0
7
1
0
2
/
8
0
/
5
0
7
1
0
2
/
1
1
/
5
0
8
1
0
2
/
2
0
/
5
0
Hibernia REIT plc Annual Report 2018
125
GovernanceFinancial statementsStrategic report
Remuneration Committee report continued
CEO remuneration and percentage change in the CEO’s remuneration
The table below details the total remuneration of Kevin Nowlan for the period from the Company’s internalisation
to 31 March 2018. The percentage change in remuneration is equivalent to +0.82%. Kevin Nowlan was one of the
Vendors of the Investment Manager and therefore, receives no variable remuneration as he is compensated under
the Share Purchase Agreement. The table below excludes Kevin’s compensation under the Share Purchase Agreement
as this is not remuneration but details can be found in note 11 to the consolidated financial statements.
Kevin Nowlan (CEO)
FINANCIAL
YEAR ENDED
31 MARCH
BASE SALARY
€’000
TAXABLE
BENEFITS
€’000
PENSION
€’000
OTHER
€’000
2018
2017
300
300
22
19
45
45
–
–
TOTAL
€’000
367
364
Relative importance on spend on pay
The table below sets out the overall spend on pay for all employees compared with the returns distributed to
shareholders.
SIGNIFICANT DISTRIBUTIONS
Staff costs for all non-vendor employees (€’m)1
Distributions to shareholders (€’m)
2018
2017 % CHANGE
4m
21m
3m
15m
+24%
+36%
1. €1m in staff costs is excluded from this as it is recovered through service charge arrangements on Hibernia managed buildings.
Considerations by the Committee of matters relating to Directors’ remuneration for 2018
The Committee complies with the UK Corporate Governance Code. The Committee makes recommendations to the
Board, within agreed terms of reference, on remuneration for the Executive Directors and Chair of the Board and has
oversight of remuneration arrangements for senior management. The Committee’s full terms of reference are
available on the Company’s website at www.hiberniareit.com.
Remuneration Committee members
COMMITTEE MEMBERS
Colm Barrington (Chair)
Daniel Kitchen
Terence O’Rourke
Stewart Harrington
NUMBER OF
SCHEDULED
MEETINGS HELD
DURING THE YEAR
NUMBER OF
MEETINGS
ATTENDED
INDEPENDENT
Yes
Yes
Yes
Yes
3
3
3
3
3
3
3
2
The matters covered by the Committee over the course of the meetings were as follows: consideration of the 2017
bonus outcomes, consideration of the 2018 performance fee arrangements, approving the 2017 Directors’
Remuneration Report, review of the Committee’s terms of reference, review of the selection process for independent
advisers to the Committee and review of market remuneration/fee data for Executive Directors and Non-Executive
Directors. In addition, a large portion of the Committee’s time was spent in relation to the new Remuneration Policy
and engagement with shareholders and Proxy Advisors.
126
Hibernia REIT plc Annual Report 2018
None of the Committee members has any personal financial interest (other than as shareholders) in the decisions
made by the Committee, conflicts of interest arising from cross-directorships or day-to-day involvement in running
the business.
Advisers to the committee
PwC are independent advisers to the Committee. The advisers were selected through a competitive tender overseen
by the Chairman of the Committee in December 2017. PwC is a member of the Remuneration Consultants Group
and, as such, voluntarily operates under the code of conduct in relation to executive remuneration consulting in the
UK. On this basis, the Committee is satisfied that the advice received is objective and independent.
PwC also provided the Company with outsourced internal audit service during the financial year. The Committee
reviewed the nature of the services provided and was satisfied that no conflict of interest exists or existed in the
provision of these services. The total fees paid to PwC in respect of services to the Committee during the year were
€42,550.
Shareholder voting
The table below shows the results of the latest shareholder votes on the Directors’ remuneration report.
Remuneration Report (2017)
On behalf of the Committee and the Board,
Colm Barrington
13 June 2018
VOTES FOR
%
VOTES
AGAINST
396.7m
87%
60.0m
%
13%
Hibernia REIT plc Annual Report 2018
127
GovernanceFinancial statementsStrategic report Nominations Committee report
“2017-18 saw the first change in the Board
since the foundation of the Company.”
Report of the Nominations
Committee
The Nominations Committee met
once during the financial year ended
31 March 2018. The Nominations
Committee is chaired by Daniel
Kitchen, who is also the 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, the Irish Annex, 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
required. The Terms of Reference for
the Nominations Committee, which is
available on the Group’s website, was
updated in 2017 and reviewed in 2018
with no amendments.
Composition of the Board
Mr William Nowlan indicated his
desire to retire as a Director during
the financial year and did not put
himself forward for re-election at the
2017 AGM. He will continue to
provide consulting services until
November 2018 in line with the
agreements made during the
Internalisation.
The Committee continued to
discharge its responsibility for
ensuring that the balance of skills,
knowledge and experience on both
the Board and its Committees
remains appropriate, such that they
can carry out their roles effectively.
The Committee considered the
effect of the departure of Mr William
Nowlan from the Board and decided
it was necessary to replace him and
to appoint someone with a similar
level of knowledge and experience in
the property business.
Chairman of the Nominations
Committee
Daniel Kitchen
Members of the Committee:
Colm Barrington, Stewart
Harrington and Terence
O’Rourke
All members have served since
the establishment of the
Company, a period of four
years and four months to
31 March 2018.
128
Hibernia REIT plc Annual Report 2018
After due consideration, the Committee decided to appoint Mr Frank Kenny to the Board: he brings to the role
more than 35 years of experience in the Irish and US property markets in all aspects of commercial and residential
property investment and development for both private investors and institutions. Apart from his knowledge of the
property market in general, Mr Kenny was one of the founding members of the Company and has an intimate
knowledge of its business, management and employees. In his role as Senior Adviser he has attended meetings
of the Board and has also attended Executive Committee meetings. After being approved to the position by the
Central Bank of Ireland, Mr Frank Kenny was appointed on 8 November 2017 and will offer himself for re-election
at the 2018 AGM.
The Committee did not use an external consultant or advertising when appointing Mr Kenny to the Board as he was
well-known to the Directors and his property knowledge and expertise were the attributes that had been identified
by the Directors as being required for this appointment.
Committee evaluation
In 2017, the evaluation found that the Committee was operating effectively and the following items were identified
for the Nominations Committee in 2017 for follow up:
• Better documenting of succession planning process;
• Additional board training is recommended and the induction process should include meetings with external
advisers where not already done; and
• The roles of the Chairman and CEO should be set out in writing.
These items were completed during the year. A self-evaluation of the Committee’s work was also carried out in the
2018. This assessment found that the members of the Committee are satisfied that the Committee is functioning well,
that it has the right mixture of skills and that the processes in place to make new appointments are appropriate and
in line with best practice. The Committee reviewed the time and attention given by the Directors to their duties and
was 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. There were no issues arising from
this review.
The Board has discussed the gender and age diversity within the Board and 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
continue to 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 necessary to identify measurable objectives in relation to
diversity. However, priority will be given to making appointments that improve diversity.
Succession planning
Succession planning is one of the responsibilities of this Committee. The Group has a relatively small management
team and a flat structure and therefore the focus is on developing employees to become competent across
disciplines so as to provide personal development and resource flexibility. The Committee also recognises the
contribution of more experienced individuals who are closer to retirement and wish to work on a more 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 2018
129
GovernanceFinancial statementsStrategic report Directors’ report
The Directors submit their report for the financial year ended 31 March 2018. The Strategic Report, on pages
2 to 67 is incorporated into the Directors’ Report by reference.
Financial highlights and a discussion thereon can be found on pages 33 to 35 of the strategic report.
Directors’ responsibilities
These are set out in the Directors’ responsibility statement on pages 136 to 137 of this report.
Principal activity and business review
The principal activity of the Group is property investment. Further details on the Group’s development and
performance for the financial year under review are set out in the ‘Financial results and position’ on pages
33 to 35.
The principal subsidiary and associate undertakings are listed in note t to the Company 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 146. The profit
for the financial year ended 31 March 2018 was €107.1m (March 2017: €118.6m), including unrealised profits on
investment properties of €81.4m (31 March 2017: €103.5m).
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 absolute returns. The third KPI is a measure of the relative
performance of the Group’s property portfolio against 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 in the
Strategic report on pages 16 to 17 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 strategic priorities. 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 1.9 cent per share (c.€13.3m) (31 March 2017: 1.45 cent per share or
c.€10.1m) which will be paid, subject to shareholder approval, on 3 August 2018. Together with the interim
dividend of 1.1 cent, the total dividend for the financial year is 3.0 cent per share or c.€ 20.9m (31 March 2017: 2.2
cent or c.€15.2m) based on the number of shares estimated to be in issue at that date.
Principal risks and uncertainties
The Directors confirm 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 principal
risks and uncertainties are discussed in the ‘Risks management’ section on pages 40 to 47 and form part of
this report.
130
Hibernia REIT plc Annual Report 2018
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
2018 and 2017, respectively.
Share capital
At 31 March 2018 the Company had 692,347,106 units of ordinary stock in issue (31 March 2017: 685,451,875 units).
On 9 April 2018 162,996 shares were issued pursuant to the settlement of performance-related remuneration
awards for the year ended 31 March 2016 thereby increasing total issued shares to 692,510,102.
Approximately 6.6m shares will be issued in relation to performance-related payments for the financial year
ended 31 March 2018 (31 March 2017: 7.6m).
Hibernia REIT plc Annual Report 2018
131
GovernanceFinancial statementsStrategic report Directors’ report continued
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 2 to 67 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 and viability statement
The financial statements have been prepared on a going concern basis. Going concern and viability are
addressed on page 39 of the Risk report. The principal risks of the Group are set out on pages 40 to 47.
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 these scenarios are considered extremely
unlikely to occur within the three-year horizon examined. The current €400m revolving credit facility extends
until November 2020, and the Directors fully expect to be able to refinance this.
As a result of these assessments, the Directors expect 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
Frank Kenny
Kevin Nowlan (CEO)
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. William Nowlan retired on 25 July 2017 and Frank
Kenny was appointed on 8 November 2017. Apart from this there were no changes to the Board or Company
Secretary during the financial year.
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
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 95 to 127
of this Annual Report.
132
Hibernia REIT plc Annual Report 2018
In accordance with provision B.7.1 of the UK Code and the Irish Annex, the Directors individually retire at each
AGM of the Company and submit themselves for re-election if appropriate. All the current Directors 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 83 of the Annual Report.
In the financial year under review, each Director has been subject to the evaluation process recommended by the
UK Code. On this basis, the Chairman and the Board are pleased to recommend those Directors 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 2018
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 page 125. 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 2018 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 Ltd
Standard Life Aberdeen plc
TIAA-CREF Investment Management LLC
Oppenheimer Funds Inc.
Blackrock Inc.
BNP Paribas Asset Management France SAS
FMR LLC
Wellington Management Group LLP
The Capital Group Companies, Inc
As at 12 June 2018 the Company has been notified of the following changes:
HOLDER
Invesco Ltd
BNP Paribas Asset Management Holding SA
Bailie Gifford & Co
FMR LLC
HOLDING
‘000 SHARES
41,543
36,521
34,936
34,839
34,634
27,744
27,732
27,584
21,443
HOLDING
‘000 SHARES
34,625
34,947
20,892
26,727
%
6.00
5.27
5.04
5.03
5.00
4.01
4.00
3.98
3.10
%
4.99
5.05
3.02
3.86
Corporate governance
The Group is committed to high standards of corporate governance, details of which are given in the Corporate
governance report on pages 77 to 87 which forms part of the Directors’ report.
Hibernia REIT plc Annual Report 2018
133
GovernanceFinancial statementsStrategic report Directors’ report continued
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 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 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.
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 48 to 67.
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 29 to the
consolidated financial statements and note q of the Company financial statements.
Independent auditor
The auditor, Deloitte Ireland LLP, 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 88 to 94 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.
134
Hibernia REIT plc Annual Report 2018
General meetings
The fourth Annual General Meeting (“AGM”) of the Company was held on 25 July 2017. The fifth AGM will be held
on 31 July 2018. Notice of the 2018 AGM, together with details of the resolutions to be considered at the meeting,
will be circulated to the shareholders in June 2018.
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 aware of any relevant
audit information and to establish that the statutory auditor is aware of that information.
Kevin Nowlan
Chief Executive Officer
13 June 2018
Thomas Edwards-Moss
Chief Financial Officer
13 June 2018
Hibernia REIT plc Annual Report 2018
135
GovernanceFinancial statementsStrategic report
Directors’ responsibility statement
The Directors, whose names and details are listed on pages 72 to 73 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 Article 4 of IAS Regulations.
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, the Companies Act 2014, and the Listing Rules issued
by Euronext Dublin (formerly the Irish Stock Exchange), 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, amongst other things, a fair review of the development and performance of the Group’s
business and of its position 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; and
• Enable the financial statements to be audited.
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 are responsible
for the maintenance and integrity of certain corporate and financial information included on the Group’s website
(www.hiberniareit.com).
136
Hibernia REIT plc Annual Report 2018
The Directors confirm that they have complied with the above requirements in preparing the Annual Report.
Each of the Directors, whose names and functions are listed on pages 72 to 73, 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 2018 and of the result for the financial year then ended for the Group and Company;
• The Directors’ Report 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 2018, 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, are fair, balanced and understandable
and provides the information necessary for shareholders to assess the position and performance, strategy and
business model of the Group and Company.
This responsibility statement was approved by the Board of Directors on 13 June 2018 and is signed on their
behalf by:
Kevin Nowlan
Chief Executive Officer
Thomas Edwards-Moss
Chief Financial Officer
Hibernia REIT plc Annual Report 2018
137
GovernanceFinancial statementsStrategic report
Independent auditors’ report to the members of Hibernia REIT plc
Opinion on the financial statements of Hibernia REIT plc (the ‘Company’)
In our opinion the Group and Company financial statements:
• Give a true and fair view of the assets, liabilities and financial position of the Group and Company as at
31 March 2018 and of the profit of the Group for the financial year then ended; and
• Have been properly prepared in accordance with the relevant financial reporting framework and, in particular,
with the requirements of the Companies Act 2014 and as regards the Group financial statements, Article 4 of
the IAS Regulation.
The financial statements we have audited comprise:
The Group financial statements:
• The Consolidated income statement;
• The Consolidated statement of comprehensive income;
• The Consolidated statement of financial position;
• The Consolidated statement of changes in equity;
• The Consolidated statement of cash flows; and
• The related notes 1 to 35, including a summary of significant accounting policies as set out therein.
The Company financial statements:
• The Statement of financial position;
• The Statement of changes in equity;
• The Statement of cash flows; and
• The related notes a to x, including a summary of significant accounting policies as set out therein.
The relevant financial reporting framework that has been applied in their preparation is the Companies Act 2014
and International Financial Reporting Standards (IFRS) as adopted by the European Union (“the relevant financial
reporting framework”).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and
applicable law. Our responsibilities under those standards are described below in the “Auditor's responsibilities
for the audit of the financial statements” section of our report.
We are independent of the Group and Company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in Ireland, including the Ethical Standard issued by the Irish Auditing and
Accounting Supervisory Authority (IAASA), as applied to public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
138
Hibernia REIT plc Annual Report 2018
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Valuation of investment properties; and
• Performance-related payments.
Materiality
We determined materiality for the Group to be €10.75 m which is 1% of Group
net assets.
Significant changes
There were no significant changes in our approach which we feel require disclosure
in our approach
to the members.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which ISAs
(Ireland) require us to report to you whether we have anything material to add or draw attention to:
• The disclosures on pages 40 to 47 to the annual report that describe the principle risks and explain how they
are being managed or mitigated;
• The directors’ confirmation in the annual report on page 130 that they have carried out a robust assessment
of the principal risks facing the Group and the Company, including those that would threaten its business
model, future performance, solvency or liquidity;
• The directors’ statement on page 152 in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting in preparing the financial statements and the
directors’ identification of any material uncertainties to the Group’s and the Company’s ability to continue to
do so over a period of at least twelve months from the date of approval of the financial statements;
• Whether the directors’ statement relating to going concern required under the Listing Rules in accordance
with Listing Rule 6.8.3(3) is materially inconsistent with our knowledge obtained in the audit; or
• The director's explanation on page 39 in the annual report as to how they have assessed the prospects of
the Group and the Company, 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 and the
Company 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current financial year and include the most significant assessed risks
of material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of investment properties
Key audit matter description The valuation of the Group’s investment properties of €1,309m (2017: €1,167m)
requires significant judgement and estimation to be made by the Directors taking
into consideration advice from the external valuer and management. Any input
inaccuracies or inappropriate assumptions used in these judgements (such as in
respect of estimated rental value and market based yields applied) could result
in a material misstatement of the financial statements.
Please refer to page 92 (Audit Committee Report), page 152 (Note 2 – Significant
judgements and analysis of sources of estimation uncertainty and page 171 (Note
17 – Investment properties).
Hibernia REIT plc Annual Report 2018
139
GovernanceFinancial statementsStrategic report Independent auditors’ report to the members of Hibernia REIT plc continued
Valuation of investment properties
How the scope of our audit
responded to the key
audit matter
We evaluated the design and determined the implementation of the key controls
the Company has implemented over the valuation of investment properties.
We challenged 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 evaluated the competence, independence and integrity of the external valuer
including reading their terms of engagement with the Group to determine
whether there were any matters that might have affected their objectivity or that
may have imposed scope limitations upon their work. We also considered fee
arrangements between the external valuer and the Group.
We met 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 compared the recorded 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 set an expected range for yield and capital value movements, determined
by reference to published benchmarks and our experience and knowledge of the
market. Where assumptions were outside the expected range or otherwise
appeared unusual, and/or valuations showed unexpected movements, we
undertook further investigation and when necessary, held further discussions with
the external valuer and obtained evidence to support explanations received.
We performed audit procedures to assess the accuracy and completeness of
information provided to the external valuer including agreeing 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. We considered the
reasonableness of forecast costs to complete included in the valuations as well
as identified contingencies, exposures and remaining risks.
We evaluated the disclosures made in the financial statements. In particular,
we challenged management to ensure the disclosures were sufficiently clear
in highlighting the significant estimates that exist in respect of valuation of
investment properties and the sensitivity of their fair value to changes in the
underlying assumptions.
We have no observations that impact on our audit in respect of the amounts
and disclosures related to the valuation of investment properties.
Key observations
140
Hibernia REIT plc Annual Report 2018
Performance-related payments
Key audit matter description The calculation of performance-related payments of €8.3m (2017: €9.3m)
as disclosed on page 163 (Note 11a Performance related payments) is manual,
the basis of the calculation is complex in nature and the recipients of payments
are related parties of the Group. These factors increases the risk of error.
A portion of the performance-related payments is settled 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 92 (Audit Committee Report) and page 162 (Note 11a
Performance related payments).
How the scope of our audit
responded to the key
audit matter
We evaluated the design and determined implementation of the key controls the
Company has implemented over the calculation and approval of the performance-
related payments.
We obtained the details of the performance-related payment calculation as
detailed in the investment management agreement and tested that the calculation
prepared by management was consistent with this agreement.
We considered the inputs to the performance-related payments calculation and
where appropriate we have compared the inputs to entity or market data to
evaluate the accuracy of the inputs.
We assessed the accounting treatment of the performance-related payments
and considered that the accounting charge recorded has been accounted for
in accordance with the requirements of IFRS.
We have no observations that impact on our audit in respect of the amounts
and disclosures related to the performance-related payments.
Key observations
Our audit procedures relating to these matters were designed in the context of our audit of the financial
statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the
financial statements is not modified with respect to any of the risks described above, and we do not express an
opinion on these individual matters.
Our application of materiality
We define materiality as the magnitude of misstatement that makes it probable that the economic decisions of
a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. We use
materiality both in planning the scope of our audit work and in evaluating the results of our work.
We determined materiality for the Group to be €10.75m which is 1% of 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. We have considered quantitative and qualitative factors such as
understanding the entity and its environment, history of mistatements, complexity of the company and the
reliability of the control environment.
Hibernia REIT plc Annual Report 2018
141
GovernanceFinancial statementsStrategic report Independent auditors’ report to the members of Hibernia REIT plc continued
Net assets
Group materiality
Net assets
€1,112m
Group materiality
€10.75m
Audit Committee
reporting threshold
€0.54m
We agreed with the Audit Committee that we would report to them any audit differences in excess of €0.54m,
as well as differences below that threshold which, 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
We determined the scope of our Group audit 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. Based on that
assessment, a full scope audit was performed by the Group audit team for all subsidiaries of the Group. This gives
coverage over substantially all of the Group.
Our 2018 audit was planned and executed having regard to the fact that the Group’s operations were largely
unchanged in nature from the previous year. Additionally, there have been no significant changes to the valuation
methodology and accounting standards relevant to the Group. In light of this, our approach to the audit in terms
of scoping and areas of focus was largely unchanged.
Other information
The directors are responsible for the other information. The other information comprises the information included
in the Annual Financial Report other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following
items in the other information and to report as uncorrected material misstatements of the other information
where we conclude that those items meet the following conditions:
• Fair, balanced and understandable – the statement given by the directors that they consider the annual report
and financial statements taken as a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s and the Company’s performance, business model and
strategy, is materially inconsistent with our knowledge obtained in the audit; or
142
Hibernia REIT plc Annual Report 2018
• Audit Committee reporting – the section describing the work of the audit committee does not appropriately
address matters communicated by us to the Audit Committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code and the Irish Corporate
Governance Annex – the parts of the directors’ statement required under the Listing Rules relating to the
Company’s compliance with the UK Corporate Governance Code and the Irish Corporate Governance Annex
containing provisions specified for review by the auditor in accordance with Listing Rule 6.8.3(7) and Listing
Rule 6.8.3(9) do not properly disclose a departure from a relevant provision of the UK Corporate Governance
Code or the Irish Corporate Governance Annex.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view and otherwise
comply with the Companies Act 2014, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the directors are responsible for assessing the Group and Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group and Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs (Ireland), we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group and Company’s internal control
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group and Company’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of the auditor’s report. However, future events or
conditions may cause the entity (or where relevant, the Group) to cease to continue as a going concern
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation
Hibernia REIT plc Annual Report 2018
143
GovernanceFinancial statementsStrategic report Independent auditors’ report to the members of Hibernia REIT plc continued
• Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within
the Group to express an opinion on the (consolidated) financial statements. The Group auditor is responsible
for the direction, supervision and performance of the Group audit. The Group auditor remains solely
responsible for the audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that the
auditor identifies during the audit.
This report is made solely to the Company’s members, as a body, in accordance with Section 391 of the
Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Report on other legal and regulatory requirements
Opinion on other matters prescribed by the Companies Act 2014
Based solely on the work undertaken in the course of the audit, we report that:
• 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 Statement of Financial Position is in agreement with the accounting records
• In our opinion the information given in the directors’ report is consistent with the financial statements and
the directors’ report has been prepared in accordance with the Companies Act 2014
Corporate Governance Statement
We report, in relation to information given in the Corporate Governance Statement on pages 77 to 87 that, in our
opinion the information given in the Corporate Governance Statement pursuant to subsections 2(c) and (d) of
section 1373 Companies Act 2014 is consistent with the company’s statutory financial statements in respect of
the financial year concerned and such information has been prepared in accordance with section 1373 of the
Companies Act 2014.
Based on our knowledge and understanding of the company and its environment obtained in the course of the
audit, we have not identified any material misstatements in this information.
In our opinion, based on the work undertaken during the course of the audit, the information required pursuant to
section 1373(2)(a),(b),(e) and (f) of the Companies Act 2014 is contained in the Corporate Governance Statement.
Matters on which we are required to report by exception
Based on the knowledge and understanding of the Group and the Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the directors' report.
We have nothing to report in respect of the provisions in the Companies Act 2014 which require us to report to
you if, in our opinion, the disclosures of directors’ remuneration and transactions specified by law are not made.
The Listing Rules of the Irish Stock Exchange require us to review six specified elements of disclosures in the
report to shareholders by the Board of Directors’ remuneration committee. We have nothing to report in
this regard.
144
Hibernia REIT plc Annual Report 2018
Other matters which we are required to address
Following the recommendation of the Audit Committee we were appointed on 5 December 2013 to audit the
financial statements for the financial year ended 31 March 2014 and subsequent financial periods. The period of
total uninterrupted engagement including previous renewals and reappointments of the firm is 5 years, covering
the years ending 2014 to 2018.
The non-audit services prohibited by IAASA’s Ethical Standard were not provided and we remained independent
of the company in conducting the audit.
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide
in accordance with ISA (Ireland) 260.
Brian Jackson
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte House, Earlsfort Terrace, Dublin 2
13 June 2018
Notes: An audit does not provide assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular on whether any
changes may have occurred to the financial statements since first published. These matters are the responsibility of the directors but no control procedures can provide
absolute assurance in this area.
Legislation in Ireland governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.
Hibernia REIT plc Annual Report 2018
145
GovernanceFinancial statementsStrategic report Consolidated income statement
For the financial year ended 31 March 2018
Total revenue
Income
Rental income
Property expenses
Net rental income
Gains and losses on investment properties
Other gains and (losses)
Total income after revaluation gains and losses
Expense
Performance-related payments
Administration expenses
Total operating expenses
Operating profit
Finance income
Finance expense
Profit before tax
Income tax
Profit for the financial year
Earnings per share
Basic earnings per share (cent)
Diluted earnings per share (cent)
EPRA earnings per share (cent)
Diluted EPRA earnings per share (cent)
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTES
5
6
7
8
11
9
12
12
13
15
15
15
15
54,168
46,372
49,075
(3,352)
45,723
87,802
(41)
133,484
42,519
(2,838)
39,681
103,525
2,476
145,682
(6,599)
(13,517)
(8,215)
(12,770)
(20,116)
(20,985)
113,368
124,697
7
(6,243)
107,132
(31)
107,101
10
(5,671)
119,036
(450)
118,586
15.5
15.4
2.8
2.8
17.4
17.2
2.2
2.2
The notes on pages 151 to 193 form an integral part of these consolidated financial statements.
146
Hibernia REIT plc Annual Report 2018
Consolidated statement of comprehensive income
For the financial year ended 31 March 2018
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 land and buildings
Items that may be reclassified subsequently to profit or loss:
Net fair value loss on hedging instruments entered into for cash flow hedges
Total other comprehensive income
Total comprehensive income for the financial year attributable
to owners of the Company
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTES
107,101
118,586
18
24b
657
(112)
545
186
(105)
81
107,646
118,667
The notes on pages 151 to 193 form an integral part of these consolidated financial statements.
Hibernia REIT plc Annual Report 2018
147
GovernanceFinancial statementsStrategic report
Consolidated statement of financial position
As at 31 March 2018
Assets
Non-current assets
Investment properties
Property, plant and equipment
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)
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTES
17
18
21
22
22
20
19
23
24
25
26
27
16
16
16
1,308,717
5,411
240
7,787
1,167,387
4,801
267
8,536
1,322,155
1,180,991
7,239
22,521
29,760
534
30,294
10,108
18,148
28,256
385
28,641
1,352,449
1,209,632
686,696
9,620
415,414
678,110
9,759
325,983
1,111,730
1,013,852
219,218
219,218
21,501
21,501
171,138
171,138
24,642
24,642
1,352,449
1,209,632
160.6
159.1
159.1
147.9
146.3
146.3
The notes on pages 151 to 193 form an integral part of these consolidated financial statements. The consolidated
financial statements on pages 146 to 193 were approved and authorised for issue by the Board of Directors on
13 June 2018 and signed on its behalf by:
Kevin Nowlan
Chief Executive Officer
Thomas Edwards-Moss
Chief Financial Officer
148
Hibernia REIT plc Annual Report 2018
Consolidated statement of changes in equity
For the financial year ended 31 March 2018
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
Issue of Ordinary Shares in settlement
of share-based payments
Share issue costs
Share-based payments expense
FINANCIAL YEAR ENDED 31 MARCH 2018
SHARE
CAPITAL
€’000
SHARE
PREMIUM
€’000
RETAINED
EARNINGS
€’000
OTHER
RESERVES
€’000
TOTAL
€’000
NOTES
68,545 609,565 325,983
9,759 1,013,852
–
–
–
–
107,101
–
–
545
107,101
545
68,545 609,565 433,084
10,304 1,121,498
14
23
23
11
–
–
(17,656)
–
(17,656)
690
–
–
7,896
–
–
–
(14)
–
(8,586)
–
7,902
–
(14)
7,902
Balance at end of financial year
69,235
617,461
415,414
9,620 1,111,730
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
Issue of Ordinary Shares in settlement
of share-based payments
Share issue costs
Share-based payments expense
FINANCIAL YEAR ENDED 31 MARCH 2017
SHARE
CAPITAL
€’000
SHARE
PREMIUM
€’000
RETAINED
EARNINGS
€’000
OTHER
RESERVES
€’000
TOTAL
€’000
NOTES
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
–
–
(10,624)
–
(10,624)
23
420
–
–
5,292
–
–
–
(19)
–
(5,712)
–
9,254
–
(19)
9,254
Balance at end of financial year
68,545 609,565
325,983
9,759 1,013,852
The notes on pages 151 to 193 form an integral part of these consolidated financial statements.
Hibernia REIT plc Annual Report 2018
149
GovernanceFinancial statementsStrategic report
Consolidated statement of cashflows
For the financial year ended 31 March 2018
Cash flows from operating activities
Profit for the financial year
Gain on sales of investment properties
Other gains and losses
Adjusted for non-cash movements:
Operating cash flow before movements in working capital
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cashflow from operating activities
Cash flows from investing activities
Cash expended on investment property
Cash received from sales of investment properties
Purchase of fixed assets
Cash received in relation to other non-current assets held for sale
Income tax (paid)
Finance income
Finance expense
Net cashflow absorbed by investing activities
Cashflow from financing activities
Dividends paid
Borrowings drawn
Borrowings repaid
Derivatives premium paid
Share issue costs
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents start of financial period
Increase/ (decrease) in cash and cash equivalents
Net cash and cash equivalents at end of financial period
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTES
7
28
28
7
18
25
26
26
107,101
(6,425)
–
(62,479)
38,197
(989)
1,829
118,586
–
380
(83,889)
35,077
7,224
(1,805)
39,037
40,496
(93,787)
35,815
(238)
–
(4)
7
(5,378)
(137,200)
–
(225)
9,534
(367)
10
(4,521)
(63,585)
(132,769)
(17,656)
86,454
(39,674)
(189)
(14)
28,921
4,373
18,148
4,373
22,521
(10,624)
97,877
–
–
(19)
87,234
(5,039)
23,187
(5,039)
18,148
The notes on pages 151 to 193 form an integral part of these consolidated financial statements.
150
Hibernia REIT plc Annual Report 2018
Notes to the financial statements
For the year ended 31 March 2018
Section 1 – General
This section contains the significant accounting policies and other information that apply to the Group’s
financial statements as a whole. Those policies applying to individual areas such as investment properties
are described within the relevant note to the consolidated financial statements. This section also includes
a summary of the new European Union endorsed accounting standards, amendments and interpretations
that have not yet been adopted and their expected impact on the reported results of the Group.
1. General Information
Hibernia REIT plc, the “Company”, registered number 531267, together with its subsidiaries and associated
undertakings (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 Euronext
Dublin (formerly 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 Euronext Dublin 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 derivative
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 IFRS 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.
Hibernia REIT plc Annual Report 2018
151
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
2. Basis of preparation continued
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 signing of this
statement and are satisfied that the Group is appropriately capitalised. The Group has a cash balance as at
31 March 2018 of €23m (31 March 2017: €18m), is generating positive operating cashflows and, as discussed in
note 26, has in place a debt facility with a period to maturity of 2.6 years and an undrawn balance of €179m at
31 March 2018 (31 March 2017: €289m). The Group has assessed its liquidity position and there are no reasons to
expect that the Group will not be able to meet its liabilities as they fall due for the foreseeable future.
e. Significant judgements
The preparation of the financial statements may require management to exercise judgement in applying the
Group’s accounting policies. The following are the significant judgements and key estimates used in preparing
these financial statements:
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or liability, the Group takes
into account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated financial statements is determined on such a basis, except for share-based
transactions that are within the scope of IFRS 2 (see note 11 for more details), 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
redevelopment 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
• 1-6 Sir John Rogerson’s Quay, a development property which is nearing completion, has been valued on an
investment basis, using market rental values capitalised with a market capitalisation rate, from which remaining
capital expenditure has been deducted
• Gateway, which is currently partly rented on short-term leases, has been valued on a price per acre basis as
early stage plans are in place to redevelop this property in the future and this approach reflects the highest
and best use of this property
152
Hibernia REIT plc Annual Report 2018
Block 3 Wyckham Point and Hanover Mills: Both properties are held for long-term property rental and were
developed on this basis. VAT was payable on the acquisition (in the case of Block 3 Wyckham Point only) and on
the construction costs for both schemes which has been treated as irrecoverable and recognised as part of the
capital costs of both projects. If either property is sold within five years of completion (i.e. before mid-2020 in the
case of Block 3 Wyckham Point), 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 neither property is intended to be sold within the five-year period, in the opinion
of the Directors, no amendment to the Valuer’s valuation of either asset was deemed necessary.
Share-based payments
The Group has a number of share-based payment arrangements in place. The determination of the grant date in
particular can be complex in nature and requires significant judgement in the interpretation and application of
IFRS 2 to these arrangements. The determination of grant date for the performance-related payments element of
share-based payments (note 11) was given particular attention by the Audit Committee. Although the grant date
of the payments at note 11a and 11b (those arising from internalisation) has been amended from 31 March each
financial year to the date of original agreement of the conditions of the payment, the Directors have determined
that there is no impact on the accounting for this payment as it is dependent on future performance conditions
which include both service and other non-market performance conditions and can only therefore be measured
during the period in which it is earned, i.e. during each financial year. This is considered a significant judgement
due to the quantum of performance-related payments shown in note 11 each year. The calculation of the absolute
element of the performance fee requires some judgement around adjustments to EPRA NAV and while not
material in nature, due to the related party nature of the performance-related payments, these are reviewed by
the Audit Committee.
f. Analysis of sources of estimation uncertainty
Valuation of investment properties
The Group’s investment properties are held at fair value and were valued at 31 March 2018 by the external valuer,
Cushman and Wakefield (“C&W”), a firm employing qualified valuers in accordance with the appropriate sections
of the Professional Standards (“PS”), the Valuation Technical and Performance Standards (“VPS”) and the
Valuation Applications (“VPGA”) contained within the RICS Valuation – Global Standards 2017 (“the Red Book”).
It follows that the valuations are compliant with the International Valuation Standards (“IVS”). Further information
on the valuations and the sensitivities is given in note 17. The Group’s investment properties at 31 March 2017 were
valued by CBRE Unlimited, the Group’s previous valuers. C&W was appointed by Hibernia in September 2017
following a tender process after a rotation of the Group’s valuers was considered and approved by the
Audit Committee.
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 material 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 are satisfied that the valuation of the Group’s properties is appropriate for inclusion in the financial
statements. The fair value of the Group’s properties is based on the valuation provided by C&W. This valuation
is based on future cashflows from rental income both for the current lease period and future estimated rental values.
Hibernia REIT plc Annual Report 2018
153
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
2. Basis of preparation continued
In accordance with the Group’s policy on lease incentives, the valuation provided by C&W 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 €6.8m (31 March 2017:
€4.1m).
There were no other significant judgements or key estimates that might have a material impact on the
consolidated financial statements at 31 March 2018.
3. Application of new and revised International Financial Reporting Standards (“IFRS”)
Impacts expected from relevant new or amended standards
The following standards and amendments will be relevant to the Group but were not effective at the financial
year end 31 March 2018 and have not been applied in preparing these consolidated financial statements. The
Group’s current view of the impact of these accounting changes is outlined below:
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.
The Group’s financial instruments consist of its borrowings and a small number of hedging instruments and loans.
There are also some minor amounts in trade receivables and payables which will also be classified as financial
instruments. These are analysed further in note 29. We have carried out an assessment of the impacts and
implemented these changes from 1 April 2018. While there are some minor amendments to the treatment of
financial instruments due to the implementation of IFRS 9, there is no material impact and retained earnings are
not expected to be materially impacted based on unaudited calculations.
IFRS 15 Revenue from Contracts with Customers is effective 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 IAS 17. IFRS 15 will
apply to service charge income, performance fees and miscellaneous minor contracts. This is effective for the
financial year commencing 1 April 2018 and therefore implementation has commenced. The impact of this
standard on the recognition of revenue is minor. The service charge income stream is accounted for as a single
performance obligation satisfied over time by measuring its progress towards complete satisfaction of that
performance obligation. Management fees relating to the provision of services to tenants are recognised as these
services are provided. This is in line with the prior recognition approach.
IFRS 16 Leases is applicable for annual periods beginning on or after 1 January 2019.
This standard will apply to the operating leases applicable to the Group’s Investment properties 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 Group has some immaterial lease arrangements for
minor office assets and recognising these in accordance with IFRS 16 will have no material impact on its
financial statements.
154
Hibernia REIT plc Annual Report 2018
Section 2 – Performance
This section includes notes relating to the performance of the Group for the year, including segmental
reporting, earnings per share and net assets per share as well as specific elements of the consolidated
statement of income.
4. Operating segments
a. Basis for segmentation
The Group is organised into six business segments, against which the Group reports its segmental information.
These segments mainly represent the different investment property classes. The Group has divided its business in this
manner as the various asset segments differ in their character and returns profiles depending on market conditions
and reflect the strategic objectives that the Group has targeted. The following table describes each segment:
REPORTABLE SEGMENT
DESCRIPTION
Office Assets
Office Development Assets
Residential Assets
Industrial Assets
Other Assets
Office assets comprise central Dublin completed office buildings, all of which are
generating rental income. Those assets which are multi-tenanted or multi-let are
mainly managed by the Group. Income is therefore rental income and service
charge income, including management fees, while expenses are service charge
expenses and other property expenses. Where only certain floors of a building are
under-going refurbishment the asset usually remains in this category, as was the
case in Two Dockland Central.
Office development assets are not currently revenue generating and are the
properties that the Group has currently under development in line with its strategic
objectives. Development profits, recognised in line with completion of the projects,
enhance Net Asset Value (“NAV”) and Total Portfolio Return (“TPR”). Once
completed these assets are transferred to the appropriate segment at fair value.
This segment contains the Group’s income generating multi-tenanted
residential assets.
This segment contains industrial units with adjacent agricultural land which
generates some rental income.
This segment contains other assets not part of the previous four strategic
segments. It originally represented the “non-core” assets, i.e. those assets
identified for resale from loan portfolio purchases. Currently this segment contains
assets held for sale.
Central Assets and Costs
Central Assets and Costs includes the Group head office assets and expenses.
The Board reviews the internal management reports, including budgets, at least quarterly at its scheduled
meetings. There is some interaction between reportable segments, for example completed development
properties transferred to income-generating segments, for example 1WML, in this financial year. These transfers
are made at fair value on an arm’s length basis using values determined by the Group’s independent Valuers.
b. Information about reportable segments
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. These 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.
Hibernia REIT plc Annual Report 2018
155
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
4. Operating segments continued
An overview of the reportable segments is set out below:
Group consolidated segment analysis
For the financial year ended 31 March 2018
Total income
74,227
38,405
21,999
(1,046)
(60)
OFFICE
DEVELOPMENT
ASSETS
€’000
RESIDENTIAL
ASSETS
€’000
INDUSTRIAL
ASSETS
€’000
OTHER
ASSETS
€’000
CENTRAL
ASSETS
AND COSTS
€’000
GROUP
CONSOLIDATED
POSITION
€’000
–
–
–
–
6,475
6,475
(1,257)
5,218
665
665
(16)
649
34,311
–
38,405
–
16,781
–
(1,695)
–
–
–
(60)
(60)
–
–
–
–
–
–
–
(41)
(41)
(6,599)
(13,232)
(285)
54,168
49,075
(3,352)
45,723
87,802
(41)
133,484
(6,599)
(13,232)
(285)
(20,116)
(20,116)
–
–
–
–
–
–
–
–
(1,046)
–
–
(1,046)
–
(60)
–
(103)
(20,157)
7
(3,302)
(163)
–
(23,452)
(31)
113,368
7
(6,243)
107,132
(31)
–
–
–
–
38,405
–
–
38,405
–
–
–
–
–
21,999
–
–
21,999
–
OFFICE
ASSETS
€’000
47,028
41,935
(2,019)
39,916
–
–
–
–
74,227
–
(2,838)
71,389
–
71,389
38,405
21,999
(1,046)
(163)
(23,483)
107,101
1,034,046
134,500
139,025
17,800
686
26,392
1,352,449
1,017,937
134,500
138,480
17,800
–
–
1,308,717
Total revenue
Rental income
Property expenses
Net rental income
Gains and losses on investment
properties
Other gains and (losses)
Performance-related payments
Administration expenses
Depreciation
Total operating expenses
Operating profit/(loss)
Finance income
Finance expense
Profit before tax
Income tax
Profit for the financial year
Total segment assets
Investment properties
156
Hibernia REIT plc Annual Report 2018
Group consolidated segment analysis
For the financial year ended 31 March 2017
Total revenue
Rental income
Property expenses
Net rental income
Revaluation of investment properties
Other gains and losses
Total Income
Performance-related payments
Administration expenses
Depreciation
Total operating expenses
Operating profit/(loss)
Finance income
Finance expense
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
879,532
OFFICE
DEVELOPMENT
ASSETS
€’000
RESIDENTIAL
ASSETS
€’000
INDUSTRIAL
ASSETS
€’000
OTHER
ASSETS
€’000
CENTRAL
ASSETS
AND COSTS
€’000
GROUP
CONSOLIDATED
POSITION
€’000
2,930
33
(100)
(67)
61,941
2,805
64,679
(2,308)
–
–
(2,308)
62,371
–
(167)
62,204
(342)
61,862
168,215
6,434
6,434
(1,194)
5,240
2,902
–
8,142
–
–
–
–
8,142
–
–
8,142
–
8,142
117,332
116,429
562
562
(83)
479
757
–
1,236
–
–
–
–
1,236
–
–
1,236
–
1,236
13,168
13,168
43
–
(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)
10
(3,359)
(22,398)
(80)
124,697
10
(5,671)
119,036
(450)
(203)
(22,478)
118,586
790
30,595
1,209,632
–
–
1,167,387
869,748
168,042
c. Geographic information
All of the Group’s assets, revenue, and costs are based in Ireland, mainly in central Dublin.
d. Major customers
Included in gross rental income are rents of €11.1m (31 March 2017: € 11.7m) which arose from the Group’s two
largest tenants, both of which contributed more than 10% of the rental income. No other single tenant contributed
more than 10% of the Group’s revenue in 2018 or 2017.
Hibernia REIT plc Annual Report 2018
157
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
5. Total revenue
Accounting policy
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, including fixed rental uplifts, arises on the Group’s investment properties and is recognised in the
consolidated income statement on a straight-line basis over the term of the lease. 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 therefore recognised on the same straight-line basis over the lease term. Contingent rents, being
lease payments that are not fixed at the inception of a lease, such as turnover rents, are recorded as income in
the period in which they are earned.
Service charge income and other sums receivable from tenants are recognised as revenue in the period in which
the related expenditure is recognised.
Gross rental income
Rental incentives
Rental income
Service charge income
Windmill promote fee
Other income
Total revenue
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
46,306
2,769
49,075
5,019
–
74
54,168
41,215
1,304
42,519
1,048
2,511
294
46,372
6. Net property expenses
Accounting policy
Net property expenses comprise service charges and other costs directly recoverable from tenants and non-
recoverable costs directly attributable to investment properties. 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, vacancy costs and other costs of commercial
properties.
Service charge income
Service charge expense
Other property expenses
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
(5,019)
5,224
3,147
3,352
(1,048)
1,205
2,681
2,838
Included in other property expenses is an amount of €1.2m (31 March 2017: €0.9m) relating to void costs, i.e.
costs relating to assets which were not income-generating during the financial year.
158
Hibernia REIT plc Annual Report 2018
7. Gains and losses on investment properties
Revaluation of investment properties
Gain on sale of investment properties
Sale price of investment properties
Carrying value at sales date
8. Other gains and losses
Gains on sales of non-current assets classified as held for sale
Windmill promote fee
Other (losses)
Other (losses)/gains
NOTE
17
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
81,377
6,425
87,802
103,525
–
103,525
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
35,815
(29,390)
6,425
–
–
–
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
–
–
(41)
(41)
43
2,511
(78)
2,476
9. Administration expenses
Accounting policy
Administration expenses are recognised when incurred in the consolidated income statement.
Operating profit for the financial year has been stated after charging:
Non-executive Directors’ fees
Professional Valuers’ fees
Prepaid remuneration expense
Depository fees
Depreciation
‘Top-up’ internalisation expenses for financial year
Staff costs
Other administration expenses
Total administration expenses
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTE
286
281
4,444
278
285
1,743
3,405
2,795
13,517
300
418
4,444
296
207
1,101
2,760
3,244
12,770
18
11
10
All fees paid to Non-Executive Directors are for services as Directors to the Company. Non-Executive Directors
receive no other benefits other than Frank Kenny who also received €181k in consulting fees during the year and
1.3m shares or €1.8m as a Vendor (note 34). Further information on Directors emoluments can be found in the
Directors’ remuneration report on pages 122 to 127 of the Annual Report.
Hibernia REIT plc Annual Report 2018
159
GovernanceFinancial statementsStrategic report
Notes to the financial statements continued
For the year ended 31 March 2018
9. Administration expenses continued
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 the service. These payments were made in November 2015 as part of the internalisation of the
Investment Manager and were made subject to clawback arrangements for those Vendors who remain tied to the
Group by employment or service contracts. These clawback arrangements over one-third of this payment are
removed on each anniversary of the acquisition date until November 2018. €2.7m (31 March 2017: €7.1m) is
included in trade and other receivables as prepaid remuneration (note 22).
‘Top-up’ internalisation expenses relate to additional management fees that would have been due under the IMA
due to increases in NAV in the period since internalisation. These are payable in shares of the Company (note 11).
Professional valuers’ fees are paid to Sherry FitzGerald (Commercial) Limited, trading as Cushman & Wakefield
(formerly DTZ Sherry FitzGerald) (“C&W”), in return for their services in providing independent valuations of the
Group’s investment properties on an at least twice-yearly basis. Professional valuers’ fees are charged on a fixed
rate per property valuation. The fees for the period from September 2017 to 31 March 2018 were agreed in
September 2017 through a letter of engagement. The fees payable to C&W are less than 5% of their fee income
for the financial year 31 December 2016.
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
71
–
–
–
71
36
28
16
–
–
80
151
70
–
–
–
70
35
30
23
–
–
88
158
Auditors’ remuneration (excluding VAT)
Company
Audit of entity financial statements
Other assurance services
Tax advisory services
Other non-audit services
Company total
Group
Audit of the Group financial statements
Audit of subsidiaries financial statements
Other assurance services1
Tax advisory services
Other non-audit services
Group total
Total
1. Other assurance services include the review of the Interim Report.
160
Hibernia REIT plc Annual Report 2018
10. Employment
The average monthly number of persons (including executive Directors) directly employed during the financial
year in the Group was 28 (31 March 2017: 18). The single largest area of growth since last year was building
management services, as the number of buildings under Hibernia’s direct management increased.
Total employees at financial year end:
Group
At financial year end:
Building management services
Head office staff
On-site staff
Administration
Total employees
Company
At financial year end:
Administration
FINANCIAL
YEAR ENDED
31 MARCH 2018
NUMBER
FINANCIAL
YEAR ENDED
31 MARCH 2017
NUMBER
6
5
11
21
32
4
3
7
16
23
FINANCIAL
YEAR ENDED
31 MARCH 2018
NUMBER
FINANCIAL
YEAR ENDED
31 MARCH 2017
NUMBER
21
16
No amount of salaries and other benefits is capitalised into investment properties. Staff costs are allocated to the
following expense headings:
Group
The staff costs for the above employees were:
Wage and salaries
Social insurance costs
Employee share-based payment expense
Pension costs – defined contribution plan
Total
Staff costs are allocated to the following expense headings:
Administration expenses
Net property expenses1
Performance-related payments
Total
1. Most of the €848k is recovered directly from tenants via the service charge arrangements within Hibernia managed buildings.
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
4,023
415
570
235
5,243
2,974
251
443
195
3,863
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
3,405
848
990
5,243
2,760
217
886
3,863
Hibernia REIT plc Annual Report 2018
161
GovernanceFinancial statementsStrategic report
Notes to the financial statements continued
For the year ended 31 March 2018
10. Employment continued
Company
The staff costs for the above employees were:
Wage and salaries
Social insurance costs
Employee share-based payment expense
Pension costs – defined contribution plan
Total
Staff costs are allocated to the following expense headings:
Administration expenses
Performance-related payments
Total
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
3,261
350
570
214
4,395
2,785
231
443
187
3,646
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
3,405
990
4,395
2,760
886
3,646
11. Share-based payments
Accounting policy
The Group has a number of share-based arrangements in place. These share-based payments are transactions in
which the Group receives services in exchange for its equity instruments or by incurring liabilities for cash
amounts based on the price of the Group’s shares. Share-based payments settled in the Group’s shares are
measured at the grant date except where they are subject to non-market performance conditions which include a
service condition in which case they are measured over the relevant service period.
Share-based payments that are granted to employees at the end of each financial year, and that have a vesting
period subject to service conditions, are recognised at fair value at the grant date and amortised through the
consolidated income statement over the vesting period. Share-based payments that are cash-settled are re-
measured at fair value at each accounting date. 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 share-based payment reserve.
The following share-based payment arrangements were in place during the financial year.
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 calculated as under the IMA for each financial year and settled mainly in shares of the Company
until the expiry of the agreement in November 2018. It was agreed that up to 15% of any performance fees would
be set aside for the payment of cash bonuses and deferred share-based payments (see part b below) to
employees. This was agreed within the Share Purchase Agreement (“SPA”) which was signed on 23 September
2015 and approved by shareholders at an EGM on 27 October 2015. As all parties had a shared understanding of
the terms and conditions of the arrangement and approval was obtained on 27 October 2015, the grant date is
determined to be this date for payments made under this arrangement (see Audit Committee report on pages 88
to 94 for further information).
162
Hibernia REIT plc Annual Report 2018
At the grant date, the Company has granted possible future share awards based on future performance
conditions which include both service and other non-market performance conditions. The service period is
defined in the contract as each financial year until the expiry of the agreement on 26 November 2018. Expenses
are therefore recognised over each financial year as services are provided.
Performance-related payments comprise absolute and relative performance fees as described under the IMA as
well as ‘top-up’ internalisation expenses that relate to management fees that would have been due under the IMA
as a result of increases in NAV in the period since internalisation.
At the start of each financial year, as part of the budgeting process, the Board estimates the level of
performance-related fees that are expected to be earned over the period. The number of shares expected to
issue in payment of these fees is estimated by reference to the share price at each accounting date. At the year
end, the calculation of the monetary value of the performance-related payments is determined using the EPRA
Net Asset Value of the Group at the financial year end and the Total Property Return as determined by IPD and
using calculation protocols as were set out in the Investment Management Agreement and as subsequently
modified by shareholder agreement at an Extraordinary General Meeting (“EGM”) on 26 October 2016. The
number of shares which will be issued to satisfy these payments is determined using the average closing price of
Hibernia shares on Euronext Dublin for the 20 business days preceding the date of the financial year end.
The Directors have calculated the amount of fees that are payable under this arrangement for the financial year
ended 31 March 2018 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-based
payment reserves (see also part b). In addition, amounts fell due in December 2016 in relation to the achievement
of return targets on the termination of the Windmill Lane joint arrangement and these were provided in the
financial year ended 31 March 2017.
Summary of performance-related payments
Performance-related payments
Windmill promote and development management fees
Total performance-related payments for the financial year
‘Top-up’ internalisation expenses (note 9)
Total
Of which are:
Payable to Vendors (share-based, see 11.a below)
Payable to employees (approximately 50% share-based – see part b below)
Total
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
6,599
–
6,599
1,743
8,342
7,352
990
8,342
5,907
2,308
8,215
1,101
9,316
8,430
886
9,316
Shares issued relating to performance-related payments to Vendors 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 the issue date. All shares are beneficially owned by the recipients and all voting rights and rights
to dividends accrue to them.
Hibernia REIT plc Annual Report 2018
163
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
11. Share-based payments continued
Share-based performance-related payments during the financial year
€0.5m of the above total performance payment of €8.3m will be paid in cash bonuses to staff, the balance of
€7.8m will be payable in shares.
a. Performance-related
payments
b. Employee long-term
incentive plan – IMA
portion
c. Employee long-term
incentive plan – interim
arrangements
SUMMARY OF SHARE-BASED PAYMENTS OUTSTANDING AS AT 31 MARCH 2018
PAYMENT PROVIDED AT
START OF FINANCIAL YEAR
PAID DURING
FINANCIAL YEAR
PROVIDED DURING
FINANCIAL YEAR1
BALANCE OUTSTANDING AT
END OF FINANCIAL YEAR
€’000 ‘000 SHARES
€’000 ‘000 SHARES
€’000 ‘000 SHARES
€’000 ‘000 SHARES
8,586
6,895
(8,586)
(6,895)
7,332
5,079
7,332
5,079
881
708
–
–
–
–
–
–
492
336
1,373
1,044
78
60
78
60
Balance at period end
9,467
7,603
(8,586)
(6,895)
7,902
5,475
8,783
6,183
1. The 20-day average share price prior to the financial year end was 1.448.
a. Performance-related
payments
b. Employee long-term
incentive plan – IMA
portion
c. Employee long-term
incentive plan – interim
arrangements
SUMMARY OF SHARE-BASED PAYMENTS OUTSTANDING AS AT 31 MARCH 2017
PAYMENT PROVIDED AT
START OF FINANCIAL YEAR
PAID DURING
FINANCIAL YEAR
PROVIDED DURING
FINANCIAL YEAR1
BALANCE OUTSTANDING AT
END OF FINANCIAL YEAR
€’000 ‘000 SHARES
€’000 ‘000 SHARES
€’000 ‘000 SHARES
€’000 ‘000 SHARES
5,469
4,200
(5,469)
(4,200)
8,586
6,895
8,586
6,895
456
350
–
–
–
–
–
–
425
358
881
708
–
–
–
–
Balance at period end
5,925
4,550
(5,469)
(4,200)
9,011
7,253
9,467
7,603
1. The 20-day average share price prior to the financial year end was 1.237.
FINANCIAL YEAR ENDED
31 MARCH 2018
FINANCIAL YEAR ENDED
31 MARCH 2017
GRANT DATE: 27 OCTOBER 2015
MEASUREMENT DATE: 31 MARCH 2018
SHARE PRICE
€‘000
Opening balance at start of financial year
Payment made during the financial year
Amounts provided during the financial year
Less: payable to employees (b)
Share-based payment due to vendors
1.245
Closing balance at end of financial year
1.444
8,586
(8,586)
8,322
(990)
7,332
7,332
NUMBER OF
SHARES
‘000
6,895
(6,895)
5,079
5,079
NUMBER OF
SHARES
‘000
4,200
(4,200)
6,895
6,895
€‘000
5,469
(5,469)
9,472
(886)
8,586
8,586
164
Hibernia REIT plc Annual Report 2018
The settlement of performance-related fees for the financial year ended 31 March 2017 was made on 3 July 2017
resulting in the listing of 6,895,231 new Ordinary Shares when the prior days closing price of the Company’s
shares was €1.375.
b. Employee long-term incentive plan – IMA portion
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 these performance-related
payments. Shares awarded under the PRR, approximately 50% of the total award or up to 7.5% of the performance
fee element of the performance-related payments at a. above, are in the form of a contingent award 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. These shares are a part of the payments outlined at part a. above and the grant and measurement dates
are determined on the same basis. 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 measurement 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 2018 is €0.5m (31 March 2017: €0.4m). When these
shares vest they are assessed for tax purposes at the current market share price. Employee taxes are recognised
through payroll.
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 from any possible departures relating to these shares.
GRANT DATE: 27 OCTOBER 2015
MEASUREMENT DATE: 31 MARCH 2018
Opening balance at start of financial year
Amounts provided during the year1
Of which is payable in cash
Share-based element this year
SHARE PRICE
1.245
Closing balance at end of financial year
1.444
FINANCIAL YEAR ENDED
31 MARCH 2018
FINANCIAL YEAR ENDED
31 MARCH 2017
NUMBER OF
SHARES
‘000
708
336
1,044
€‘000
881
990
(498)
492
1,373
NUMBER OF
SHARES
‘000
350
358
708
€‘000
456
870
(445)
425
881
1. These amounts are paid out of the deductions from performance-related payments in a. above. Share-based payments awards amount to approximately 50% of the
total, the balance being paid in cash.
Hibernia REIT plc Annual Report 2018
165
GovernanceFinancial statementsStrategic report
Notes to the financial statements continued
For the year ended 31 March 2018
11. Share-based payments continued
c. Employee long-term incentive plan – interim arrangements
Employees who fall outside of the arrangements at b. above, i.e. those who provide services that were not part
of the IMA arrangements, e.g. new staff including building management and development staff, are also paid
bonuses on a similar basis to those paid to the employees qualifying at b. above. Until the expiry of the IMA and
the introduction of the new remuneration arrangements as described in the Remuneration Committee report on
pages 95 to 127 of the Annual Report, these arrangements are approved by the Board each year. Shares granted
to these employees are determined to have a grant date of the date of approval by the Board of these awards.
These shares vest two years after the end of the financial year to which they relate. Employees who leave before
the vesting date will lose entitlement to these shares. These amounts are amortised over the vesting period by
reference to the fair value of the shares granted and after appropriate consideration of the potential impact of
employee departures. Due to the low level of turnover in the Group to date, the fact that the relevant employees
have mainly joined within the last year, and the likely immaterial amounts involved, the Directors have made no
amendment to the amount provided for expected forfeiture of shares due to departures. When these shares vest
they are assessed for tax purposes at the current market share price.
GRANT DATE: 24 MAY 2017
SHARE PRICE
€‘000
NUMBER OF
SHARES
‘000
NUMBER OF
SHARES
‘000
€‘000
Opening balance at start of financial year
Payment made during the financial year
Amounts provided during the financial year
–
Closing balance at end of financial year
1.444
–
–
78
78
–
–
60
60
–
–
–
–
–
–
–
FINANCIAL YEAR ENDED
31 MARCH 2018
FINANCIAL YEAR ENDED
31 MARCH 2017
Total shares awarded at the grant date 24 May 2017 were 0.1m. These vest on 31 March 2019.
A further 0.4m shares are expected to be granted and, if granted, will vest on 31 March 2020.
12. Finance income and expense
Accounting policy
Finance expenses directly attributable to the construction or production of investment properties which take a
considerable length of time to prepare 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.
166
Hibernia REIT plc Annual Report 2018
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
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
7
(6,243)
(6,236)
10
(5,671)
(5,661)
Interest costs capitalised in the financial year were €2.0m (31 March 2017: €0.9m) 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 from borrowings.
13. Income tax expense
Accounting policy
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except insofar as it
applies to business combinations or to items recognised in other comprehensive income.
Current tax: current tax is the expected tax payable or receivable on the taxable income or loss for the year,
using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years. 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.
Income tax on residual income
Tax on the disposal of non-core assets
Under provision in respect of prior periods
Income tax expense for the financial year
Reconciliation of the income tax expense for the financial year
Profit before tax
Tax charge on profit at standard rate of 12.5%
Non-taxable revaluation surplus
REIT tax-exempt profits
Other (additional tax rate on residual income)
Under provision in respect of prior periods
Income tax expense for the financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
21
–
10
31
342
28
80
450
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
107,132
13,392
(10,172)
(3,220)
21
10
31
119,036
14,880
(13,016)
(1,511)
17
80
450
The Directors confirm that the Group has remained in full compliance with the Irish REIT rules and regulations up
to and including the date of this report.
Hibernia REIT plc Annual Report 2018
167
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
14. Dividends
Accounting policy
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 at the AGM.
Interim dividend for the financial year ended 31 March 2018 of 1.1 cent per share
(31 March 2017: 0.75 cent per share)
Proposed final dividend for the financial year ended 31 March 2018 of 1.9 cent per share1
(31 March 2017: 1.45 cent per share)
1. An estimated 697.6m shares are entitled to the proposed final dividend.
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
7,616
5,141
13,254
10,040
The Board has proposed a final dividend of 1.9 cent per share (31 March 2017: 1.45 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 3 August 2018.
All of this proposed final dividend of 1.9 cent per share will be a Property Income Distribution (“PID”) in respect
of the Group’s tax-exempt property rental business (31 March 2017: 1.45 cent). The total dividend, interim paid and
final proposed for the financial year ended 31 March 2018 is 3.0 cent per share (31 March 2017: 2.2 cent per share)
or €20.9m (31 March 2017: €15.2m).
Under the REIT regime, the Company is required to distribute a minimum of 85% of the Group’s property rental
business income. The actual amounts are compared to the property rental income:
Profit for the period
Less gains and losses on investment properties
Add back other losses
Property income of the Property Rental Business
85% thereof
Total dividends
% of property income to be distributed
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
107,101
(87,802)
41
19,340
16,439
20,870
108%
118,586
(103,525)
35
15,096
12,832
15,181
101%
15. Earnings per share
There are no convertible instruments, options, or warrants on Ordinary Shares in issue as at the financial year
ended 31 March 2018. However, the Company has established a reserve of €8.8m (31 March 2017: €9.5m) which
is mainly for the issue of Ordinary Shares relating to the payment of performance-related amounts due under the
performance-related payment element of the Share Purchase Agreement relating to the internalisation of the
Investment Manager (note 11). It is estimated that approximately 6.6m Ordinary Shares (31 March 2017: 7.6m
shares) will be issued in total, 6.2m of which are provided for at 31 March 2018 and a further 0.4m which will be
recognised over the next two years. Details on share-based payments are set out in note 11. The dilutive effect of
these shares is disclosed below.
168
Hibernia REIT plc Annual Report 2018
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 at financial year end
FINANCIAL
YEAR ENDED
31 MARCH 2018
‘000
FINANCIAL
YEAR ENDED
31 MARCH 2018
‘000
685,452
6,895
681,251
4,201
692,347
685,452
Weighted average number of shares
Estimated additional shares due for issue for long-term incentive plan/performance fee
688,900
6,599
683,351
7,603
Diluted number of shares
695,499
690,954
The estimated additional shares are calculated as follows:
Share-based payments due at financial year end (note 11)
Non-IMA share-based payment awards granted post year end
Number of shares to be issued
BASIC AND DILUTED EARNINGS PER SHARE (IFRS)
FINANCIAL
YEAR ENDED
31 MARCH 2018
‘000
FINANCIAL
YEAR ENDED
31 MARCH 2017
‘000
6,183
416
6,599
7,603
–
7,603
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
Profit/(loss) for the financial year attributable to the owners of the Company
107,101
118,586
Weighted average number of ordinary shares (basic)
Weighted average number of ordinary shares (diluted)
Basic earnings per share (cent)
Diluted earnings per share (cent)
EPRA EARNINGS PER SHARE AND DILUTED EPRA EARNINGS PER SHARE1
Profit for the financial year attributable to the owners of the Company
Exclude:
Gains and losses on investment properties
Profit or (loss) on disposals of non-core assets
Income tax on profit or loss on disposals
Fair value of derivatives
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)
‘000
‘000
688,900
695,499
15.5
683,351
690,954
17.4
15.4
17.2
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
107,101
118,586
(87,802)
–
–
104
(103,525)
(43)
(30)
1
19,403
14,989
‘000
‘000
688,900
695,499
2.8
683,351
690,954
2.2
2.8
2.2
1. EPRA Earnings per share are an alternative performance measure and are calculated in accordance with the EPRA Best Practice Recommendations Guidelines
November 2016. Further information is available in the Supplementary information section on pages 211 to 216 of this report.
Hibernia REIT plc Annual Report 2018
169
GovernanceFinancial statementsStrategic report
Notes to the financial statements continued
For the year ended 31 March 2018
16. IFRS and EPRA NAV per share
Accounting policy
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: November 2016.
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.
IFRS net assets at end of financial year
Ordinary Shares in issue
IFRS NAV per share (cent)
Ordinary Shares in issue
Estimated additional shares due for issue for long-term incentive plan/performance fee
Diluted number of shares
Diluted IFRS NAV per share (cent)
IFRS net assets at end of financial year
Net mark to market on financial assets
EPRA NAV
EPRA NAV per share (cent)
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
1,111,730
692,347
160.6
692,347
6,599
698,946
1,013,852
685,452
147.9
685,452
7,603
693,055
159.1
146.3
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
1,111,730
345
1,013,852
117
1,112,075
1,013,969
159.1
146.3
The Company has established a reserve of €8.8m (31 March 2016: €9.5m) against the issue of 6.2m Ordinary
Shares relating to shares due to issue for payments due to the Vendors of the Investment Manager and
employees as detailed in note 11.
170
Hibernia REIT plc Annual Report 2018
Section 3 – Tangible assets
This section contains information on the Group’s investment properties and other tangible assets. All
investment properties are fully owned by the Group. The Group’s investment properties are carried at
fair value and its other tangible assets at depreciated cost except for land and buildings which are
adjusted to fair value.
17. 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 2e and 2f.
The valuations of investment properties and investment properties under development are prepared in
accordance with the appropriate sections of the Professional Standards (“PS”), the Valuation Technical and
Performance Standards (“VPS”) and the Valuation Applications (“VPGA”) contained within the RICS Valuation –
Global Standards 2017 (“the Red Book”). It follows that the valuations are compliant with the International
Valuation Standards (“IVS”). 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 12.
In accordance with the Group’s policy on revenue recognition (note 5), the value of accrued income in relation to
the recognition of lease incentives under operating leases over the term of the lease is adjusted 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.
Hibernia REIT plc Annual Report 2018
171
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
17. Investment properties continued
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.
At 31 March 2018
FAIR VALUE CATEGORY
Carrying value at 31 March 2017
Additions:
Property purchases
Development and refurbishment expenditure
Revaluations included in income statement
Disposals:
Sales1
Transferred between segments2
OFFICE
ASSETS
LEVEL 3
GROUP
€’000
OFFICE
DEVELOPMENT
ASSETS
LEVEL 3
GROUP
€’000
RESIDENTIAL
ASSETS
LEVEL 3
GROUP
€’000
INDUSTRIAL
ASSETS
LEVEL 3
GROUP
€’000
TOTAL
LEVEL 3
GROUP
€’000
869,748
168,042
116,429
13,168
1,167,387
32,075
12,250
29,875
–
36,953
38,405
923
815
14,792
6,160
167
(1,695)
39,158
50,185
81,377
(26,990)
100,979
–
(108,900)
(2,400)
7,921
–
–
(29,390)
–
Carrying value at 31 March 2018
1,017,937
134,500
138,480
17,800
1,308,717
1. The Chancery Building, Hanover Street East and 11 Lime Street were sold during the year, generating €6.4m in gains in excess of their carrying values.
2. 2WML (formerly the Hanover Building) was transferred from ‘Office Assets’ to ‘Office Development Assets’ as re-development commenced in the period. 1WML and
Hanover Mills Apartments were completed during the period and moved from ‘Office Development Assets’ to ‘Office Assets’ and ‘Residential Assets’, respectively.
At 31 March 2017
FAIR VALUE CATEGORY
Carrying Value at 31 March 2016
Additions:
Property Purchases
Development and Refurbishment Expenditure
Revaluations included in income statement
Disposals:
Transferred to property, plant and equipment
as owner occupied
Transferred between segments1
OFFICE
ASSETS
LEVEL 3
GROUP
€’000
OFFICE
DEVELOPMENT
ASSETS
LEVEL 3
GROUP
€’000
RESIDENTIAL
ASSETS
LEVEL 3
GROUP
€’000
INDUSTRIAL
ASSETS
LEVEL 3
GROUP
€’000
TOTAL
LEVEL 3
GROUP
€’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 31 March 2017
869,748
168,042
116,429
13,168
1,167,387
1.
1 Cumberland Place development which was completed in September 2016.
172
Hibernia REIT plc Annual Report 2018
The valuations used to determine fair value for the investment properties in the consolidated financial statements
are determined by C&W, the Group’s independent Valuer, and are in accordance with the provisions of IFRS 13.
C&W 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) to the consolidated financial statements, 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 appropriate sections of the Professional Standards (“PS”), the
Valuation Technical and Performance Standards (“VPS”) and the Valuation Applications (“VPGA”) contained
within the RICS Valuation – Global Standards 2017 (“the Red Book”). It follows that the valuations are compliant
with the International Valuation Standards (“IVS”). 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 2018, 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
summarises 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.
In valuing the Group’s investment properties, the Directors have applied a reduction of €6.8m (31 March 2017:
€4.1m) 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.
There were no transfers between fair value levels during the period. Approximately €2.0m of financing costs
were capitalised in relation to the Group’s developments and refurbishments (31 March 2017: €0.9m). No other
operating expenses were capitalised during the financial year.
Hibernia REIT plc Annual Report 2018
173
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
17. 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
1,018
135
Office
development
assets
NARRATIVE DESCRIPTION OF
THE TECHNIQUES USED
CHANGES IN THE FAIR VALUE TECHNIQUE DURING
THE FINANCIAL YEAR
Yield methodology using market
rental values capitalised with a
market capitalisation rate.
Exceptions to this:
Harcourt Square is valued on an
investment basis until the end of the
lease and on a residual basis
thereafter at 31 March 2018. The
present value of the residual land
value was added to the investment
value of the existing income.
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”):
this includes, but are not limited
to, construction costs, land
acquisition costs, professional
fees, levies, marketing costs and
finance costs.
No change in valuation technique.
However: At 31 March 2017, 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.
The whole property is now valued on a
residual basis when the lease expires.
No change in valuation technique.
However: the following properties changed
the method applied during the period:
• The office element at 1SJRQ, which is
nearing completion, has been valued on
an investment basis using market rental
values capitalised with a market
capitalisation rate, from which remaining
capital expenditure has been deducted.
• 1WML was completed during the year
and transferred to the office segment.
Hanover Mills apartments, part of the
1WML development, were moved to the
residential segment on completion.
• Profit or ‘Profit on Cost’: this is
• 2WML (formerly the Hanover Building),
measured as a percentage of the
total development costs (including
the site value).
where a redevelopment has commenced,
was transferred into this segment and is
valued on a residual basis.
Residential
assets
138
For developments close to
completion the yield methodology
is applied.
Yield methodology using market
rental values capitalised with a
market capitalisation rate.
No change in valuation technique apart
from Cannon Place which was previously
valued on a break-up basis and is now
valued on an investment basis reflecting the
highest and best use.
174
Hibernia REIT plc Annual Report 2018
DESCRIPTION OF
INVESTMENT
PROPERTY ASSET
CLASS
FAIR VALUE OF
THE INVESTMENT
PROPERTY €’M AT
THE FINANCIAL
YEAR END
Industrial
assets
18
NARRATIVE DESCRIPTION OF
THE TECHNIQUES USED
CHANGES IN THE FAIR VALUE TECHNIQUE DURING
THE FINANCIAL YEAR
Yield methodology using market
rental values capitalised with a
market capitalisation rate.
The technique has changed in relation
to the Gateway complex, the Group’s only
industrial property. This is now valued on
a price per acre basis. Early stage plans are
in place to redevelop in the future and this
approach currently reflects the highest and
best use of this property.
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 Valuers’ certificate
Owner occupied (note 18)
Rental incentives adjustment1
Investment property balance at financial year end
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
1,320,581
(5,029)
(6,835)
1,175,926
(4,473)
(4,066)
1,308,717
1,167,387
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 2017, 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
therefore observable and not 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.
Hibernia REIT plc Annual Report 2018
175
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
17. Investment properties continued
The table below summarises the key unobservable inputs used in the valuation of the Group’s investment
properties at 31 March 2018. 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 2018
Office
Office development
Residential1
Industrial
1. Average ERV based on a two-bedroom apartment.
31 March 2017
Office
Office development
Residential1
Industrial
1. Average ERV based on a two-bedroom apartment.
MARKET
VALUE
€‘000
ESTIMATED RENTAL
VALUE € PER SQ. FT.
EQUIVALENT YIELD %
LOW
HIGH
LOW
HIGH
€60.00 psf
1,017,937
€20.00 psf
€58.00 psf
134,500 €30.00 psf
138,480 €19,800 pa € 31,800 pa
€5.5 psf
€5.5 psf
17,800
4.56%
4.75%
5.20%
7.45%
7.17%
5.25%
6.43%
7.45%
MARKET
VALUE
€‘000
869,748
168,042
116,429
13,168
ESTIMATED RENTAL
VALUE € PER SQ. FT.
EQUIVALENT YIELD %
LOW
HIGH
LOW
HIGH
€55.00 psf
€26.00 psf
€50.00 psf
€55.00 psf
€19,800 pa € 22,800 pa
€5.75 psf
€2.26 psf
4.89%
4.90%
4.60%
6.50%
6.57%
5.60%
4.60%
6.50%
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 2018, the Group’s investment property portfolio would
increase or decrease in value approximately €60m (31 March 2017: €57m). A 25bp increase in equivalent yields
would decrease the value of the portfolio by €69m (31 March 2017: €62m) and a 25bp decrease results in an
increase in value of €78m (31 March 2017: €68m).
31 March 2018
SENSITIVITIES
Office
Office development
Residential
Industrial
Total
176
Hibernia REIT plc Annual Report 2018
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
42.2
10.0
7.0
0.5
59.7
(42.2)
(10.0)
(6.9)
(0.6)
(59.7)
(52.5)
(10.4)
(5.7)
(0.4)
(69.0)
59.6
11.7
6.3
0.4
78.0
31 March 2017
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
18. Property, plant and equipment
Accounting policy
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 materially from those that
would be determined using fair values at the end of each accounting period.
Any revaluation increase from this property is recognised in other comprehensive income and accumulated in
equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in
profit or loss, in which case the increase is credited to the profit or loss to the extent of the decrease previously
expensed. A decrease in the carrying amount of this property arising on revaluation is recognised in profit or loss
to the extent that it exceeds the balance, if any, held in the property’s revaluation reserve relating to a previous
revaluation of that asset.
Depreciation on revalued property is recognised in profit or loss. On the subsequent sale or retirement of a
revalued property, the attributable revaluation reserve is transferred directly to retained earnings.
Fixtures and fittings are stated at costs less accumulated depreciation and impairment losses.
Depreciation is recognised to write off the cost or value of assets less their residual value over their useful lives.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
The estimated useful lives for the main asset categories are:
• Land and buildings
• Fixtures and fittings/leasehold improvements
• Office and computer equipment
50 years
5 years
3 years
Hibernia REIT plc Annual Report 2018
177
GovernanceFinancial statementsStrategic report
Notes to the financial statements continued
For the year ended 31 March 2018
18. Property, plant and equipment continued
At 31 March 2018
Cost or valuation
At 1 April 2017
Additions
Revaluation recognised in other comprehensive income
At 31 March 2018
Depreciation
At 1 April 2017
Charge for the year
At 31 March 2018
Net book value at 31 March 2018
LAND AND
BUILDINGS
€’000
OFFICE AND
COMPUTER
EQUIPMENT
€’000
LEASEHOLD
IMPROVEMENTS
AND FIXTURES
AND FITTINGS
€’000
4,562
–
657
5,219
(89)
(101)
(190)
5,029
96
65
–
161
(40)
(64)
(104)
57
417
173
–
590
(145)
(120)
(265)
325
TOTAL
€’000
5,075
238
657
5,970
(274)
(285)
(559)
5,411
Land and buildings: 54% of the Group's investment property South Dock House is used as the Group's
headquarters. This was revalued at 31 March 2018 and 31 March 2017 by the Group’s independent Valuers and in
accordance with the valuation approach described under note 17. It is measured at fair value at the financial year
end using a yield methodology using market rental values capitalised with a market capitalisation rate. This fair
value measurement uses the following significant unobservable inputs:
VALUATION INPUTS
ERV per sq. ft.
Equivalent yield
At 31 March 2017
Cost or valuation
At 1 April 2016
Additions
Revaluation recognised in other comprehensive income
At 31 March 2017
Depreciation
At 1 April 2016
Charge for the year
At 31 March 2017
Net book value at 31 March 2017
31 MARCH 2018
31 MARCH 2017
€52.50
5.0%
€52.50
5.4%
LAND AND
BUILDINGS
€’000
OFFICE AND
COMPUTER
EQUIPMENT
€’000
LEASEHOLD
IMPROVEMENTS
AND FIXTURES
AND FITTINGS
€’000
2,725
1,651
186
4,562
(22)
(67)
(89)
4,473
45
51
–
96
(13)
(27)
(40)
56
243
174
–
417
(32)
(113)
(145)
272
TOTAL
€’000
3,013
1,876
186
5,075
(67)
(207)
(274)
4,801
178
Hibernia REIT plc Annual Report 2018
19. Non-current assets classified as held for sale
Balance at start of financial year
Recognised during the year
Sold during the year
Balance at end of financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
385
149
–
534
3,921
–
(3,536)
385
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 2017: €5.0m) 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.
The balance carried forward from 2017 contains two assets which remain from assets deemed not to be part of
the Group’s core property rental business. There have been unforeseen delays in the sales of these assets but the
Directors expect that the assets will be sold in the near future and they are therefore retained as held for sale.
Hibernia REIT plc Annual Report 2018
179
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
Section 4 – Financing including equity and working capital
This part focuses on the financing of the Group’s activities, including the equity capital, bank borrowings
and working capital. It also covers financial risk management.
All of the Group’s non-equity financing is currently via a revolving credit facility which is secured on the
Group’s investment properties. The majority of this debt has been hedged through derivatives to protect
against rising interest rates.
Effective interest method: the Group uses the effective interest method of calculating the amortised cost
of a debt instrument and of allocating interest income and expense 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.
20. Cash and cash equivalents
Accounting policy
Cash and cash equivalents includes cash at banks in current accounts, deposits held on 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.
Cash and cash equivalents
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
22,521
18,148
The management of cash and cash equivalents is discussed in detail in note 29. Please also refer to note 26 on the
net debt calculations. In addition, the Company holds funds in excess of its minimum capital requirement at
all times.
21. Other financial assets
Accounting policy
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.
180
Hibernia REIT plc Annual Report 2018
Derivatives at fair value
Loans carried at amortised cost
Balance at end of financial year end – current
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
88
152
240
115
152
267
Derivatives at fair value are the Group’s hedging instruments on its borrowings. The Group has hedged up to
€244m of its revolving credit facility (31 March 2017: €100m) using a combination of caps and swaptions to limit
the EURIBOR interest rate element of interest payable to 1%.
22. Trade and other receivables
Accounting policy
Trade receivables 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.
Non-current
Prepaid remuneration1
Property income receivables
Other receivables
Balance at end of financial year – non-current
Current
Prepaid remuneration1
Receivable from loan redemptions
Property income receivables
Prepayments
Recoverable capital expenditure
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 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
–
5,681
2,106
7,787
2,679
–
2,885
1,077
416
102
80
7,239
2,679
4,066
1,791
8,536
4,444
137
4,538
789
–
128
72
10,108
15,026
18,644
1. This consists of the balance of the payment to service providers relating to the internalisation transaction.
There are no amounts past due. The non-current balance is mainly non-financial in nature; €0.5m (31 March 2017:
€0.7m) relates to amounts receivable from a tenant with the balance consisting of deferred income and
expenditure amounts relating to the lease incentives and deferred lease costs. The balance of trade and other
receivables has no concentration of credit risk as it comprises mainly prepayments (note 29). The Directors
therefore consider that the carrying value of trade and other receivables approximates to their fair value.
Hibernia REIT plc Annual Report 2018
181
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
23. Issued capital and share premium
Accounting policy
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.
FINANCIAL YEAR ENDED
31 MARCH 2018
FINANCIAL YEAR ENDED
31 MARCH 2017
NO. OF
SHARES IN
ISSUE
‘000
SHARE
CAPITAL
€’000
SHARE
PREMIUM
€’000
TOTAL
€’000
NO. OF
SHARES IN
ISSUE
‘000
SHARE
CAPITAL
€’000
SHARE
PREMIUM
€’000
TOTAL
€’000
Balance at beginning of financial year 685,452
Shares issued during the financial
year (see below)
6,895
68,545 609,565 678,110
681,252
68,125 604,273 672,398
690
7,896
8,586
4,200
420
5,292
5,712
Balance at end of financial year
692,347
69,235
617,461 686,696 685,452
68,545 609,565
678,110
Shares issued during the financial year as follows:
6,895,231 Ordinary Shares with a nominal value of €0.10 were issued during the period in settlement of
performance-related fees giving a total recorded of €8.6m in settlement of fees due. All of these shares were
issued on 3 July 2017 and the associated costs were €14k.
Share capital
Ordinary Shares of 10 cents each:
Authorised
Allotted, called up and fully paid
In issue at end of financial year
There are no shares issued which are not fully paid.
FINANCIAL
YEAR ENDED
31 MARCH 2018
NO. OF SHARES
FINANCIAL
YEAR ENDED
31 MARCH 2017
NO. OF SHARES
1,000,000
692,347
1,000,000
685,452
692,347
685,452
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 2018 amounted to €8.8m at the financial year end (31 March 2017: €9.5m) and are all
payable in shares (note 11). A further 6.2m shares are expected to be issued in relation to these payments.
24. Other reserves
Property revaluation
Cash flow hedging
Other reserves
Balance at end of financial year
182
Hibernia REIT plc Annual Report 2018
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
1,166
(329)
8,783
9,620
509
(217)
9,467
9,759
a. Properties revaluation reserve
Balance at beginning of financial year
Increase arising on revaluation of properties
Balance at end of financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
509
657
1,166
323
186
509
The Group’s headquarters are carried at fair value and the remeasurement of this property is made through other
comprehensive income or loss (note 18). On disposal, that portion of the properties revaluation reserve relating to
the premises sold will be transferred directly to retained earnings.
b. Cashflow hedging reserve
Balance at beginning of financial year
Released to profit and loss
(Loss) arising on fair value of hedging instruments entered into for cash flow hedges
Balance at end of financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
(217)
58
(170)
(329)
(112)
–
(105)
(217)
The cashflow hedging 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 is reclassified to profit or loss when the hedged transaction affects the profit or loss
consistent with the Group’s accounting policy.
No income tax arises on this item.
Cumulative gains or losses arising on changes in fair value of hedging instruments that have been tested as
ineffective and reclassified from equity into profit or loss during the financial year are included in the following
line items:
Finance expense
c. Share-based payment reserve
Balance at beginning of financial year
Performance-related payments provided
Settlement of 2017 performance fees
Balance at end of financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
104
1
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
9,467
7,902
(8,586)
8,783
5,925
9,011
(5,469)
9,467
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 11.
Hibernia REIT plc Annual Report 2018
183
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
25. 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 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
325,983
107,101
(14)
(17,656)
218,040
118,586
(19)
(10,624)
415,414
325,983
In August 2017, a dividend of 1.45 cent per share (total dividend €10m) was paid to the holders of fully paid
Ordinary Shares.
In January 2018 a dividend of 1.1 cent per share (total dividend €7.6m) was paid to the holders of fully paid
Ordinary Shares. The Directors propose a final dividend of 1.9 cent per share to be paid to shareholders on
3 August 2018. 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 €13.3m (note 14).
The Directors confirm that the Company continues to comply with the dividend payment conditions contained
in the Irish REIT legislation as described in the Director’s report on pages 130 to 135.
26. Financial liabilities
Accounting policy
The Group has a general borrowing facility secured by a floating charge over its assets. 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 (see note 12).
Balance at beginning of financial year
Bank finance drawn during the financial year
Bank finance repaid during the financial year
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
Total
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
171,138
86,454
(39,674)
1,300
219,218
72,724
97,877
–
537
171,138
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
809
218,409
219,218
192
170,946
171,138
The Group seeks to leverage its equity capital to achieve higher returns within agreed limits. 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 loan-to-value (“LTV”) ratio must remain under 50%.
184
Hibernia REIT plc Annual Report 2018
The Group has a €400m revolving credit facility (“RCF”) with Bank of Ireland, Barclays Bank plc and NatWest
which has a five-year term to November 2020. The RCF is secured against a floating charge over the Group’s
assets. Where debt is drawn to finance material refurbishments and developments, the interest cost of this debt
is capitalised.
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 29).
Net debt and LTV
Financial liabilities
Add: arrangement fees
Deduct: accrued interest payable
Cash and cash equivalents
Amounts held for sinking funds and other deposits received
Net debt at period end
Investment property at period end
Loan to value ratio
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
219,218
1,963
(808)
(22,521)
4,830
171,138
3,718
(1,450)
(18,148)
–
202,682
155,258
1,308,717
15.5%
1,167,387
13.3%
Cash is reduced by the amounts collected from tenants for deposits, sinking funds and similar arrangements
as this expenditure is viewed as paid for the purposes of the above calculation.
27. Trade and other payables
Accounting policy
Trade payables are initially measured at fair value and subsequently measured at amortised cost using the
effective interest rate method.
Current
Investment property payable
Rent prepaid
Rent deposits and other amounts due to tenants
Sinking funds
Deferred revenue
Trade and other payables
PAYE/PRSI payable
Balance at end of financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
5,118
7,313
1,569
2,053
241
5,044
163
21,501
10,083
8,589
2,269
–
1,067
2,496
138
24,642
Cash is held against balances due for service charges prepaid and sinking fund contributions, €3.6m (31 March
2017: €1.0m), and rental deposits from tenants, €1.2m (31 March 2017: €1.2m). Sinking funds are monies put aside
out of annual service charges collected from tenants as contributions towards expenditure on larger maintenance
items that occur at irregular intervals, such as replacement of boilers, in buildings managed by Hibernia. 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 2018
185
GovernanceFinancial statementsStrategic report
Notes to the financial statements continued
For the year ended 31 March 2018
28. Cashflow statement
Non-cash movements in operating profit
Revaluation of investment properties
Share-based payments
Deferred remuneration paid
Depreciation
Net finance expense
Income tax
Non-cash movements in operating profit
Cash expended on investment property
Property purchases
Development and refurbishment expenditure
Financing arrangement fee write-off
Decrease/(increase) in investment property costs payable
Cash expended on investment property
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTE
17
11
9
18
12
13
(81,377)
7,902
4,444
285
6,236
31
(103,525)
8,874
4,444
207
5,661
450
(62,479)
(83,889)
NOTE
17
17
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
39,158
50,185
(522)
4,966
85,378
52,479
296
(953)
93,787
137,200
29. 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.
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
Loan and
receivables
Amortised cost
3 Assessed in relation to
collateral value
Valuation of collateral is subjective
based on agents guide sales prices and
market observation of similar property
sales were available.
Trade and other
receivables
Amortised cost
Financial liabilities Amortised cost
2 Discounted cash flow Only a small element of trade and
receivables are financial in nature
2 Discounted cash flow The fair value of financial liabilities held
at amortised cost have been calculated
by discounting the expected cashflows
at prevailing interest rates.
186
Hibernia REIT plc Annual Report 2018
ASSET/LIABILITY
CARRYING VALUE
LEVEL
FAIR VALUE CALCULATION
TECHNIQUE
ASSUMPTIONS
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 Discounted cash flow All trade and other payables that could
be classified as financial instruments
are very short-term, the majority less
than one month, and therefore face
value approximated fair value on a
discounted basis.
The carrying value of non-interest-bearing financial assets and financial liabilities 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
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
Financial liabilities
Trade and other payables
LEVEL
TOTAL
€’000
OF WHICH ARE
ASSESSED AS
FINANCIAL
INSTRUMENTS
€’000
MEASURED AT
FAIR VALUE
€’000
MEASURED AT
AMORTISED
COST
€’000
TOTAL
FINANCIAL
INSTRUMENTS
€’000
FAIR VALUE
FINANCIAL
INSTRUMENTS
€’000
AS AT 31 MARCH 2018
2
3
2
2
2
15,026
152
88
(219,218)
(21,501)
2,092
152
88
(219,218)
(3,114)
(225,453)
(220,000)
522
–
88
–
–
610
1,570
152
–
(219,218)
(3,114)
2,092
152
88
(219,218)
(3,114)
2,092
152
88
(219,218)
(3,114)
(220,610)
(220,000)
(220,000)
Hibernia REIT plc Annual Report 2018
187
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
29. Financial instruments and risk management continued
AS AT 31 MARCH 2017
OF WHICH ARE
ASSESSED AS
FINANCIAL
INSTRUMENTS
€’000
MEASURED AT
FAIR VALUE
€’000
MEASURED AT
AMORTISED
COST
€’000
TOTAL
€’000
FAIR VALUE
€’000
Trade and other receivables
Loans
Derivatives at fair value
Financial liabilities
Trade and other payables
LEVEL
2
3
2
2
2
TOTAL
€’000
18,644
152
115
(171,138)
(24,642)
4,581
152
115
(171,138)
(5,267)
(176,869)
(171,557)
754
–
115
–
–
869
3,827
152
–
(171,138)
(5,267)
4,581
152
115
(171,138)
(5,267)
4,581
152
115
(171,138)
(5,267)
(172,426)
(171,557)
(171,557)
A small amount of trade receivables relating to the recovery of fit-out costs are carried at fair value as they relate
to tenant receivables that are receivable in future years.
Movements of Level 3 fair values
This reconciliation includes investment property which is described further in note 17 to these consolidated
financial statements.
Balance at beginning of financial year
Transfers out of level 3
Purchases, sales, issues and settlement
Purchases1
Sales
Fair value movement
Balance at end of financial year
1.
Includes development and refurbishment expenditure.
d. Financial risk management
The Group has identified exposure to the following risks:
• Market risk
• Credit risk
• Liquidity risk
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
1,167,539
–
927,808
(1,651)
89,343
(29,390)
81,377
137,857
–
103,525
1,308,869
1,167,539
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. Risk management framework
The Group’s Board has overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Audit Committee is responsible for developing and monitoring the Group’s risk management
policies. Risk management policies are established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls and to monitor risks and adherence to limits. All of these policies are regularly
reviewed in order to reflect changes in the market conditions and the Group’s activities. The Audit Committee is
assisted in its work by internal audit which undertakes periodic reviews of different elements of risk management
controls and procedures.
188
Hibernia REIT plc Annual Report 2018
ii. 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 mainly comprise trade
receivables which are classified as financial assets. Financial liabilities comprise short-term payables and bank
borrowings. All of these items are denominated in Euro. 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 and swaptions to restrict EURIBOR interest costs to
a maximum of 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 €220.4m (31 March 2017: €173.4m). While interest rates remain at historic lows, the hedging strategy means
there will not be an impact on earnings if EURIBOR rate increases over 1%. The Group’s drawings under its
facilities were based on a EURIBOR rate of 0% throughout the year and therefore the impact of a rise in EURIBOR
to 1% for a full year would be approximately €2.2m (31 March 2017: €1.7m).
iii. 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.
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, maximum balances of €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.
Trade and other receivables: rents are generally received a quarter in advance from tenants, except for the
residential segment which is approximately 13% of rental income and therefore there tends to be a low level
of credit risk associated with this asset class. There are no concentrations of credit risk at the financial year
end (31 March 2017: approximately €2.2m was due from a previous tenant in relation to scheduled lease break
payments). The balance of trade and other receivables has no concentration of credit risk as it comprises
mainly prepayments.
The Group has small balances in financial assets which are immaterial in the context of credit risk.
The maximum amount of credit exposure is therefore:
Financial assets
Trade and other receivables
Cash and cash equivalents
Balance at end of period
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
240
2,092
22,521
267
4,581
18,148
24,853
22,996
Hibernia REIT plc Annual Report 2018
189
GovernanceFinancial statementsStrategic report Notes to the financial statements continued
For the year ended 31 March 2018
29. Financial instruments and risk management continued
iv. 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, a measure of the Group’s ability to meet its current liabilities, at the financial year end were:
Net current assets at the period end
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
8,793
3,999
The nature of the Group’s activities means that the management of cash is particularly important and is managed
over a three-year period. The budget and forecasting process includes cash forecasting, capital and operational
expenditure projections, cash in-flows and dividend payments on a quarterly basis over the three-year horizon.
This allows the Group to monitor the adequacy of its financial arrangements. At 31 March 2018 €179m (31 March
2017: €241m) remains undrawn on the Group’s revolving credit facility.
Exposure to liquidity risk
Listed below are the contractual maturities of the Group’s financial liabilities. Only trade and other payables
relating to cash expenditure are included, the balance relates either to non-cash items or deferred income. These
include interest margins payable and contracted repayments. EURIBOR is assumed at 0%.
AT 31 MARCH 2018
Non-derivatives
Borrowings
Trade payables
Total
AT 31 MARCH 2017
Non-derivatives
Borrowings
Trade payables
Total
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
6 MONTHS
OR LESS
6-12 MONTHS
1-2 YEARS
2-5 YEARS
219,218
3,114
251,399
3,114
19,355
3,114
222,332
254,513
22,469
2,259
–
2,259
4,518
–
4,518
225,267
–
225,267
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
6 MONTHS
OR LESS
6-12 MONTHS
1-2 YEARS
2-5 YEARS
–
171,138
5,267
–
183,267
5,267
176,405
188,534
–
1,630
5,267
6,897
–
2,345
–
2,345
–
18,119
–
18,119
–
161,173
–
161,173
e. Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain the future development of the business. The key performance indicators used in evaluating the
achievement of strategic objectives are return on capital (growth in EPRA NAV) and dividends to ordinary
shareholders (dividend per share) as well as the total return of the Group’s property portfolio versus IPD Ireland.
Capital comprises share capital, reserves and retained earnings as disclosed in the Consolidated and Company
Statement of changes in equity. At 31 March 2018 the total capital of the Group was €1,112m (31 March 2017: €1,014m).
The Group seeks to leverage capital in order to enhance returns. See note 26 for more details.
The Company’s share capital is publicly traded on Euronext Dublin and the London Stock Exchange.
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.
190
Hibernia REIT plc Annual Report 2018
Section 5 – Other
This section contains notes that do not belong in any of the previous categories.
30. Operating leases receivables
Future aggregate minimum rentals receivable (to the next break date) under non-cancellable operating
leases are:
Operating lease receivables due in:
Less than one year
Between two and five years
Greater than five years
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
54,680
166,096
150,565
45,773
137,766
162,841
371,341
346,380
The Group leases its investment properties under operating leases. The weighted average unexpired lease term
(“WAULT”) at 31 March 2018, excluding residential properties and weighted on contracted rents, based on the
earlier of lease break or expiry date 7.3 years (31 March 2017: 6.7 years).
These calculations are based on all leases entered into at 31 March 2018, i.e. including pre-lets.
31. Investment in subsidiary undertakings
Accounting policy
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.
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. 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.
There were no business combinations during the period. In the prior financial year, the Company acquired a 50%
holding in Windmill Lane Development Company Limited, thereby acquiring 100% of the share capital and the full
ownership of 1WML and Hanover Mills apartments.
32. Capital commitments
The Group has entered into a number of development contracts to develop buildings in its portfolio. The total
capital expenditure commitment in relation to these over the next one to two years is approximately €77m
(31 March 2017: €95m).
Hibernia REIT plc Annual Report 2018
191
GovernanceFinancial statementsStrategic report
Notes to the financial statements continued
For the year ended 31 March 2018
33. Contingent liabilities
Accounting policy
Contingent liabilities are possible obligations depending on whether some uncertain future event occurs, or
present obligations where payment is not probable or the amount cannot be measured reliably. Contingent
liabilities are not recognised but are disclosed unless the possibility of an outflow of economic resources
is remote.
The Group has not identified any contingent liabilities which are required to be disclosed in the financial statements.
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, had one director (William
Nowlan) in common with the Company during part of the financial year. 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 €0.2m for the financial year to
31 March 2017 (31 March 2017: €0.8m). No amounts were due to WK Nowlan Real Estate Advisors at the financial
year end (31 March 2017: €30k).
The Group received rent of €140k (gross) from WK Nowlan Real Estate Advisors during the financial year
(31 March 2017: €140k) for the space it leases in Marine House which Hibernia acquired after the lease had
been entered into. 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 received to €84k in consulting fees for the financial year ended 31 March 2018
(31 March 2017: €50k). William Nowlan also received a fee of €16k during the financial year in relation to his role
as a non-executive Director. An amount of €25k 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 11) the following payments are due:
Kevin Nowlan: €2.8m, Frank Kenny: €1.8m, William Nowlan: €1.4m and Frank O’Neill: €0.6m.
(31 March 2017: Kevin Nowlan: €3.2m, Frank Kenny: €2.1m, William Nowlan: €1.6m and Frank O’Neill: €0.6m).
As part of his consultancy agreement with the Company, Frank Kenny earned €181k in fees for the financial year
ended 31 March 2018 (31 March 2017: €200k). He also received a fee of €20k during the financial year in relation
to his role as Non-Executive Director. These were paid in full during the financial year.
Thomas Edwards-Moss rents an apartment from the Group at market rent and paid €14k in rent during the
financial year (31 March 2017: €17k).
For further information on Directors’ emoluments please refer to the Directors’ Remuneration report on pages 95
to 127 of this Annual Report.
192
Hibernia REIT plc Annual Report 2018
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 above 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 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
2,381
200
–
379
2,960
2,121
163
–
263
2,547
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 1.9 cent per share, or €13.3m, that is subject to approval at the
AGM to be held on 31 July 2018. Other than this, there were no significant events after the reporting date.
Hibernia REIT plc Annual Report 2018
193
GovernanceFinancial statementsStrategic report
Company statement of financial position
As at 31 March 2018
Assets
Non-current assets
Investment properties
Property, plant and equipment
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
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTES
d
e
f
g
h
i
i
j
k
l
m
n
o
1,128,292
5,409
26,235
113,139
2
5,631
1,057,427
4,795
26,235
47,067
98
8,247
1,278,708
1,143,869
5,977
21,795
27,772
534
9,434
17,881
27,315
385
28,306
27,700
1,307,014
1,171,569
686,696
9,718
344,758
1,041,172
246,859
246,859
18,983
18,983
678,110
9,759
279,528
967,397
184,102
184,102
20,070
20,070
1,307,014
1,171,569
The Parent Company’s profit after tax for the financial year ended 31 March 2018 determined in accordance with
IFRS is €82.9m (31 March 2017: €78.5m).
The notes on pages 197 to 207 form an integral part of these Company financial statements. The Company
financial statements on pages 194 to 207 were approved and authorised for issue by the Board of Directors on
13 June 2018 and signed on its behalf by:
Kevin Nowlan
Chief Executive Officer
Thomas Edwards-Moss
Chief Financial Officer
194
Hibernia REIT plc Annual Report 2018
Company statement of changes in equity
For the financial year ended 31 March 2018
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
Issue of Ordinary Shares in settlement of
share-based payments
Share issue costs
Share-based payments
NOTES
SHARE CAPITAL
€’000
FINANCIAL YEAR ENDED 31 MARCH 2018
SHARE
PREMIUM
€’000
RETAINED
EARNINGS
€’000
OTHER
RESERVES
€’000
TOTAL
€’000
68,545
609,565
279,528
9,759
967,397
–
–
–
–
82,900
–
–
643
82,900
643
68,545
609,565
362,428
10,402
1,050,940
–
690
–
–
–
(17,656)
–
(17,656)
7,896
–
–
–
(14)
–
(8,586)
–
7,902
–
(14)
7,902
Balance at end of financial year
69,235
617,461
344,758
9,718
1,041,172
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
Issue of Ordinary Shares in settlement of
share-based payments
Share issue costs
Share-based payments
FINANCIAL YEAR ENDED 31 MARCH 2017
NOTES
SHARE
CAPITAL
€’000
SHARE
PREMIUM
€’000
RETAINED
EARNINGS
€’000
OTHER
RESERVES
€’000
TOTAL
€’000
68,125
604,273
211,653
6,136
890,187
–
–
–
–
78,518
–
–
81
78,518
81
68,125
604,273
290,171
6,217
968,786
–
420
–
–
(10,624)
–
(10,624)
5,292
–
–
(19)
–
(5,712)
–
9,254
–
(19)
9,254
Balance at end of financial year
68,545
609,565
279,528
9,759
967,397
The notes on pages 197 to 207 form an integral part of these Company financial statements.
Hibernia REIT plc Annual Report 2018
195
GovernanceFinancial statementsStrategic report
Company statement of cashflows
For the financial year ended 31 March 2018
Cash flows from operating activities
Profit for the financial year
Gains on sale of investment properties
Adjusted for non-cash movements:
Operating cash flow before movements in working capital
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash flow from operating activities
Cash flows from investing activities
Cash expended on investment properties
Cash received from sales of investment properties
Cash received in relation to other non-current assets held for sale
(Increase) in loans to subsidiaries
Business acquisition
Purchase of fixed assets
Income tax received/(paid)
Finance income
Finance expense
Net cash flow absorbed by investing activities
Cash flow from financing activities
Dividends paid
Dividends received
Borrowings drawn
Borrowings repaid
Share issue costs
Net cash inflow from financing activities
Net Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of financial period
Increase/(decrease) in cash and cash equivalents
Net cash and cash equivalents at end of financial period
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTES
p
p
n
n
82,900
(6,425)
(39,691)
36,784
1,485
527
38,796
(43,206)
35,815
–
(66,072)
–
(226)
(42)
7
(5,470)
78,518
–
(42,900)
35,618
7,073
(242)
42,449
(91,902)
–
9,534
(31,769)
(10)
(218)
(388)
10
(4,720)
(79,194)
(119,463)
(17,656)
610
83,500
(22,128)
(14)
44,312
3,914
17,881
3,914
21,795
(10,624)
355
84,000
–
(19)
73,712
(3,302)
21,183
(3,302)
17,881
The notes on pages 197 to 207 form an integral part of these Company financial statements.
196
Hibernia REIT plc Annual Report 2018
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 the notes to the consolidated financial statements on pages 151 to 193 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 152 to 154 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. Operating profit
Operating profit for the financial year is stated after charging:
Non-executive Directors’ fees
Professional valuers’ fees
Prepaid remuneration expense
Depository fees
Depreciation (see note e)
‘Top-up’ internalisation expenses for financial year
Staff costs
Other administration expenses
Total administration expenses
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
286
281
4,444
278
269
1,743
3,405
2,567
13,273
300
418
4,444
296
206
1,101
2,760
2,948
12,473
For further information on expenses please refer to note 9 of the consolidated financial statements.
Hibernia REIT plc Annual Report 2018
197
GovernanceFinancial statementsStrategic report Notes to the Company financial statements continued
b. Operating profit continued
Auditor's remuneration
For further information on Auditor’s remuneration, please refer to note 9 of the consolidated financial statements.
c. Employment
For further information on employment, please refer to note 10 of the consolidated financial statements.
d. Investment properties
31 March 2018
FAIR VALUE CATEGORY
Carrying Value at 31 March 2017
Additions:
Property purchases
Development and refurbishment Expenditure
Revaluations included in income statement
Disposals:
Sales
Transferred between segments1
OFFICE
ASSETS
LEVEL 3
GROUP
€’000
OFFICE
DEVELOPMENT
ASSETS
LEVEL 3
GROUP
€’000
RESIDENTIAL
ASSETS
LEVEL 3
GROUP
€’000
INDUSTRIAL
ASSETS
LEVEL 3
GROUP
€’000
TOTAL
LEVEL 3
GROUP
€’000
869,748
58,082
116,429
13,168
1,057,427
1,377
9,997
24,321
(26,990)
(32,170)
–
22,174
22,074
–
32,170
923
815
13,942
(2,400)
–
6,160
167
(1,695)
8,460
33,153
58,642
–
–
(29,390)
–
Carrying Value at 31 March 2018
846,283
134,500
129,709
17,800
1,128,292
1. 2WML was moved from ‘Office Assets’ to ‘Office Development Assets’ as re development commenced in the period.
31 March 2017
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
134,141
113,200
12,398
906,781
52,369
7,413
37,925
(9)
29,031
21,569
28
299
2,902
(1,651)
126,650
–
(126,650)
–
–
–
13
757
–
–
52,388
36,756
63,153
(1,651)
–
Carrying value at end of financial year
869,748
58,082
116,429
13,168
1,057,427
1.
1 Cumberland Place development which was completed in September 2016.
Note 17 to the Group consolidated financial statements contains further information in relation to the Company’s
investment properties. All Group investment properties are held directly by the Company except for the
1 Windmill Lane, Hanover Mills and 77 Sir John Rogerson’s Quay properties which are held through wholly owned
subsidiaries of the Company. The tables below provide information on inputs and sensitivities for the calculations
of fair value for the properties held by the Company.
198
Hibernia REIT plc Annual Report 2018
31 March 2018
Office
Office development
Residential1
Industrial
1. Average ERV based on a two-bedroom apartment
31 March 2017
Office
Office development
Residential1
Industrial
1. Average ERV based on a two-bedroom apartment.
31 March 2018
SENSITIVITIES
Office
Office development
Residential
Industrial
Total
31 March 2017
SENSITIVITIES
Office
Office development
Residential
Industrial
Total
ESTIMATED RENTAL VALUE
€ PER SQ. FT.
EQUIVALENT YIELD %
MARKET VALUE
€‘000
LOW
HIGH
LOW
HIGH
€60.00 psf
846,283
€35.00 psf
€58.00 psf
134,500 €30.00 psf
129,709 €19,800 pa €31,800 pa
€5.50 psf
€5.50 psf
17,800
4.61%
4.75%
5.20%
7.45%
7.17%
5.25%
6.43%
7.45%
ESTIMATED RENTAL VALUE
€ PER SQ. FT.
EQUIVALENT YIELD %
MARKET VALUE
€‘000
LOW
HIGH
LOW
HIGH
869,748
58,082
116,429
13,168
€55.00 psf
€26.00 psf
€50.00 psf
€55.00 psf
€19,800 pa €22,800 pa
€5.75 psf
€2.26 psf
4.89%
4.90%
4.60%
6.50%
6.57%
5.60%
4.60%
6.50%
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
35.5
10.0
6.6
0.5
52.6
(35.5)
(10.0)
(6.5)
(0.6)
(52.6)
(43.2)
(10.0)
(5.4)
(0.4)
(59.0)
48.3
11.7
5.9
0.4
66.3
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
Hibernia REIT plc Annual Report 2018
199
GovernanceFinancial statementsStrategic report
Notes to the Company financial statements continued
e. Property, plant and equipment
At 31 March 2018
Cost or valuation
At 1 April 2017
Additions
Revaluation recognised in other comprehensive income
At 31 March 2018
Depreciation
At 1 April 2017
Charge for the year
At 31 March 2018
Net book value at 31 March 2018
LAND AND
BUILDING1
€’000
OFFICE AND
COMPUTER
EQUIPMENT
€’000
LEASEHOLD
IMPROVEMENTS
AND FIXTURES
AND FITTINGS
€’000
4,560
–
657
5,217
(87)
(101)
(188)
5,029
90
54
–
144
(40)
(48)
(88)
56
416
172
–
588
(144)
(120)
(264)
324
TOTAL
€’000
5,066
226
657
5,949
(271)
(269)
(540)
5,409
1. The Group occupies 54% (31 March 2017: 54%) of the office space in its South Dock House property. This property was revalued as at 31 March 2018 and 31 March 2017
by the Group’s Valuers in accordance with the valuation approach described under note 2. (f). of the consolidated financial statements
At 31 March 2017
Cost or valuation
At 1 April 2016
Additions
Revaluation recognised in other comprehensive income
At 31 March 2017
Depreciation
At 1 April 2016
Charge for the year
At 31 March 2017
Net book value at 31 March 2017
LAND AND
BUILDINGS1
€’000
OFFICE AND
COMPUTER
EQUIPMENT
€’000
LEASEHOLD
IMPROVEMENTS
AND FIXTURES
AND FITTINGS
€’000
2,723
1,651
186
4,560
(20)
(67)
(87)
4,473
45
45
–
90
(13)
(27)
(40)
50
243
173
–
416
(31)
(113)
(144)
272
TOTAL
€’000
3,011
1,869
186
5,066
(64)
(207)
(271)
4,795
1. The Group occupies 54% (31 March 2017: 54%) of the office space in its South Dock House property. This property was revalued as at 31 March 2018 and 31 March 2017
by the Group’s Valuers in accordance with the valuation approach described under note 2. (f). of the consolidated financial statements.
f. Investment in subsidiaries
Balance at end of financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
26,235
26,235
For further information on the Company’s subsidiaries refer to note 31 of the consolidated financial statements
and note t below.
200
Hibernia REIT plc Annual Report 2018
g. 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
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
47,067
66,474
(402)
–
113,139
15,298
32,901
(1,132)
–
47,067
113,139
47,067
The majority of the above balance, €112m, is due from two subsidiaries, Hibernia REIT Holding Company Limited
(1 Windmill Lane office building and Hanover Mills residential apartments) and Hibernia REIT Hold Co One Limited
(77 Sir John Rogerson’s Quay). These funds have been provided from the Group’s borrowings, as loans repayable
on demand, to finance the assets held. There is no interest payable and their carrying amount is the amount lent
due to their short-term nature.
h. Other financial assets
Derivatives at fair value
i. Trade and other receivables
Non-current
Prepaid remuneration
Property income receivables
Other receivables
Balance at end of financial year – non-current
Current
Prepaid remuneration
Property income receivables
Prepayments
Recoverable capital expenditure
Income tax refund due
VAT refundable
Balance at end of financial year – current
Balance at end of financial year – total
€’000
€’000
2
98
FINANCIAL
YEAR ENDED
31 MARCH
2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH
2017
€’000
–
4,231
1,400
5,631
2,679
2,042
606
416
88
146
5,977
11,608
2,679
4,067
1,501
8,247
4,444
4,319
576
–
95
–
9,434
17,681
There are no amounts past due. The Directors consider that the carrying value of trade and other receivables
approximates to their fair value.
Hibernia REIT plc Annual Report 2018
201
GovernanceFinancial statementsStrategic report
Notes to the Company financial statements continued
j. Non-current assets classified as held for sale
For further information on non-current assets classified as held for sale refer to note 19 of the consolidated
financial statements.
k. Issued share capital and share premium
For information on issued share capital refer to note 23 of the consolidated financial statements
l. Other reserves
Property revaluation
Cash flow hedging
Other reserves
Balance at end of financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
1,166
(231)
8,783
9,718
509
(217)
9,467
9,759
i. Property revaluation reserve
For further information on the property revaluation reserve refer to note 24a of the consolidated financial statements.
ii. Cashflow hedging reserve
Balance at beginning of financial year
Released to profit and loss
(Loss) arising on fair value of hedging instruments entered into for cash flow hedges
Balance at end of financial year
Finance expense
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
(217)
54
(68)
(231)
(112)
–
(105)
(217)
31 MARCH 2018
€’000
31 MARCH 2017
€’000
82
1
iii. Share-based payment reserve
For further information on the share-based payment reserve refer to note 24c of the consolidated financial statements.
m. Retained earnings
Balance at beginning of financial year
Profit for the financial year
Share issuance costs
Dividends paid
Balance at end of financial year
202
Hibernia REIT plc Annual Report 2018
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
279,528
82,900
(14)
(17,656)
211,653
78,518
(19)
(10,624)
344,758
279,528
For further information on retained earnings and dividends refer to note 25 of the consolidated financial statements.
n. Financial liabilities
Balance at beginning of financial year
Bank finance drawn during the financial year
Bank finance repaid during the financial year
Interest payable
Balance at end of financial year
The maturity of non-current borrowings is as follows:
Bank finance
Debenture issued to subsidiary
Balance at end of financial year
Less than one year
Between two and five years
Total
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
184,102
83,500
(22,128)
1,385
246,859
98,574
84,000
–
1,528
184,102
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
219,218
27,641
246,859
809
246,050
246,859
157,068
27,034
184,102
429
183,673
184,102
For further information on financial liabilities refer to note 26 of the consolidated financial statements.
o. Trade and other payables
Current
Investment properties payable
Rent prepaid
Rent deposits and other amounts due to tenants
Sinking funds
Deferred revenue
Trade and other payables
PAYE/PRSI payable
Tax payable
Balance at end of financial year
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
4,269
7,047
1,568
2,037
241
3,677
144
–
5,863
8,589
2,269
–
975
2,211
125
38
18,983
20,070
For further information on trade and other payables refer to note 27 of the consolidated financial statements.
Hibernia REIT plc Annual Report 2018
203
GovernanceFinancial statementsStrategic report
Notes to the Company financial statements continued
p. Cashflow statement
Non-cash movements
Revaluation of investment properties
Other gains and losses
Share-based payments (see Group note 28)
Deferred remuneration
Depreciation
Net finance expense
Income tax
Non-cash movements in operating profit
Cash expended on investment properties
Property purchases
Development and refurbishment expenditure
Decrease in Investment property costs payable
Cash expended on investment properties
q. Financial instruments and risk management
The Company has identified exposure to the following risks:
• Market risk
• Credit risk
• Liquidity risk
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
NOTE
d
b
e
(58,642)
–
7,902
4,444
269
6,325
11
(63,153)
25
8,874
4,444
206
6,238
466
(39,691)
(42,900)
NOTE
d
d
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
8,460
33,153
1,593
43,206
52,388
36,756
2,758
91,902
The substantial majority of these risks for the Group are held by the Company and managed at the Group level.
Therefore, the policies for managing each of these and the principal effects of these policies on the results for the
financial year are summarised in note 29 of the Annual Report. The following tables measure the risks discussed
on a Company only basis for the purpose of these discussions.
In addition to the assets and liabilities of the Group, the company has loans to subsidiaries that are repayable on
demand. These loans are therefore carried at their amortised costs which approximates their fair value. These loans
are made by the parent company in order to fund the purchase of and capital expenditure on investment properties
which are secured to the parent. The fair value of the collateral properties is €180.4m (31 March 2017: €110.0m).
The following tables present the classification of financial assets and liabilities within the fair value hierarchy and
the changes in fair values measurements at Level 3 estimated for the Company only for the purposes of making
the disclosures in note 29 of the Annual Report. Assets held at Level 3 include investment properties in addition
to the loans and receivables.
204
Hibernia REIT plc Annual Report 2018
Trade and other receivables
Loans
Derivatives at fair value
Financial liabilities
Trade and other payables
Trade and other receivables
Loans
Derivatives at fair value
Financial liabilities
Trade and other payables
Balance at beginning of financial year
Transfers out of level 3
Purchases, sales, issues and settlement
Purchases
Sales
Advances
Repayments
Fair value movement
Balance at end of financial year
Financial assets
Trade and other receivables
Cash and cash equivalents
Balance at end of period
Net current assets at the period end
AS AT 31 MARCH 2018
OF WHICH ARE
ASSESSED
AS FINANCIAL
INSTRUMENTS
€’000
MEASURED AT
FAIR VALUE
€’000
MEASURED AT
AMORTISED
COST
€’000
LEVEL
TOTAL
€’000
CARRYING
VALUE
€’000
FAIR VALUE
€’000
2
3
2
2
2
11,607
113,139
2
(246,859)
(18,983)
2,191
113,139
2
(246,859)
(3,251)
523
–
2
–
–
1,668
113,139
–
(246,859)
(3,251)
2,191
113,139
2
(246,859)
(3,251)
2,191
113,139
2
(246,859)
(3,251)
(141,094)
(134,778)
525
(135,303)
(134,778)
(134,778)
AS AT 31 MARCH 2017
OF WHICH ARE
ASSESSED AS
FINANCIAL
INSTRUMENTS
€’000
MEASURED AT
FAIR VALUE
€’000
MEASURED AT
AMORTISED
COST
€’000
4,196
47,067
98
(184,102)
(2,196)
754
–
98
–
–
16,927
47,067
–
(184,102)
(2,196)
LEVEL
2
3
2
2
2
TOTAL
€’000
17,681
47,067
98
(184,102)
(20,070)
CARRYING
VALUE
€’000
17,681
47,067
98
(184,102)
(2,196)
FAIR VALUE
€’000
17,681
47,067
98
(184,102)
(2,196)
(139,326)
(134,937)
852
(122,304)
(121,452)
(121,452)
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
1,104,495
–
922,079
(1,651)
41,613
(29,390)
66,473
(402)
58,642
89,144
–
32,901
(1,132)
63,154
1,241,431
1,104,495
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
2
2,191
21,795
23,988
98
4,196
17,881
22,175
FINANCIAL
YEAR ENDED
31 MARCH 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
8,789
7,245
Hibernia REIT plc Annual Report 2018
205
GovernanceFinancial statementsStrategic report
Notes to the Company financial statements continued
r. Operating lease 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 2018
€’000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€’000
46,977
130,494
84,383
41,550
120,714
134,541
261,854
296,805
s. Dividends
For information on the dividends paid and proposed during the financial year please refer to note 14 of the
consolidated financial statements
t. Investment in subsidiary undertakings
The Company has the following interests in Ordinary Shares in the following material subsidiary undertakings
at 31 March 2018. These subsidiaries are fully owned and consolidated within the Group.
NAME
Hibernia REIT
Finance Limited
Hibernia REIT
Holding Company
Limited
Hibernia REIT
Hold Co One
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
South Dock
House, Hanover
Quay, Dublin
D02 XW94, Ireland
South Dock
House, Hanover
Quay, Dublin
D02 XW94, Ireland
South Dock
House, Hanover
Quay, Dublin
D02 XW94, Ireland
South Dock
House, Hanover
Quay, Dublin
D02 XW94, Ireland
South Dock
House, Hanover
Quay, Dublin
D02 XW94, Ireland
South Dock
House, Hanover
Quay, Dublin
D02 XW94, Ireland
100%/10 Richard Ball, Thomas
Sean O’Dwyer
Edwards-Moss,
Kevin Nowlan,
Frank O’Neill
100%/1 Richard Ball,
Kevin Nowlan,
Frank O’Neill
100%/1 Richard Ball,
Kevin Nowlan,
Frank O’Neill
100%/1 Richard Ball,
Kevin Nowlan,
Frank O’Neill
100%/300,000 Richard Ball, Thomas
Edwards-Moss,
Kevin Nowlan,
Frank O’Neill
100%/100 Kevin Nowlan,
William Nowlan,
Frank O’Neill
100%/100 Richard Ball,
Kevin Nowlan
Sanne Corporate
Administration
Services Ireland
Limited
Sanne Corporate
Administration
Services Ireland
Limited
Sanne Corporate
Administration
Services Ireland
Limited
Sanne Corporate
Administration
Services Ireland
Limited
Sanne Corporate
Administration
Services Ireland
Limited
Sanne Corporate
Administration
Services Ireland
Limited
Financing
activities
Holding property
interests
Holding property
interests
Property
management
Investment
holding company
Holding
company
Development
and management
of real estate
206
Hibernia REIT plc Annual Report 2018
The Group has other subsidiary companies which are generally property management companies and are not
considered material in the Group’s operations.
The Group has no interests in unconsolidated subsidiaries.
u. Capital commitments
The Company has entered into a number of development contracts to develop buildings in its portfolio. The total
capital expenditure commitment in relation to these over the next one to two years is approximately €74m
(31 March 2017: €76m).
v. Related parties
i. Subsidiaries
Please refer to note t.
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.
w. 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 2018 determined in accordance with IFRS is €82.9m (31 March 2017: €78.5m).
x. Events after the reporting date
For information on events after the reporting date refer to note 35 of the consolidated financial statements.
Hibernia REIT plc Annual Report 2018
207
GovernanceFinancial statementsStrategic report Supplementary information (unaudited)
I. Four-year record
Based on the Group’s consolidated financial statements for the four years ended 31 March
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Investment properties
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
Gains and losses on investment properties
Other income
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)
2018
€’M
1,309
44
(219)
(22)
1,112
687
425
1,112
160.6
159.1
2018
€’M
46
88
–
(21)
113
(6)
107
15.5
15.4
2.8
2.8
3.0
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
2.2
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
1.5
1.5
2015
€’M
641
167
–
(55)
753
658
95
753
112.4
111.8
2015
€’M
18
86
3
(12)
95
(2)
93
18.4
18.3
0.8
0.8
0.8
208
Hibernia REIT plc Annual Report 2018
Supplementary information (unaudited) continued
II. Alternative performance measures
The Group has applied the European Securities and Markets Authority (ESMA) ‘Guidelines on Alternative
Performance Measures’ in this annual report. An alternative performance measure (“APM”) is a measure of
financial or future performance, position or cashflows of the Group which is not a measure defined by
International Financial Reporting Standards (“IFRS”).
The following are the APMs used in this report together with information on their calculation and relevance.
APM
RECONCILED TO IFRS MEASURE:
REFERENCE
DEFINITION
Contracted rent roll
n/a
n/a
EPRA cost ratio
IFRS operating expenses III.e
EPRA earnings and
adjusted earnings
IFRS Profit after tax
III.a
Annualised rent of the portfolio adjusted for
the inclusion of rent that is subject to a
rental incentive such as a rent-free period or
reduced rental year.
Calculated using all administrative and
operating expenses under IFRS net of
service fees. It is calculated including and
excluding vacancy costs.
As EPRA Earnings is used to measure the
operational performance, it excludes all
components not relevant to the underlying
net income performance of the portfolio,
such as the change in value of the
underlying investments and any gains or
losses from the sales of investment
properties.
IFRS earnings per share Note 15
Earnings on a per share basis
EPRA Earnings per share
(“EPRA EPS”)
EPRA like-for-like rental
growth reporting
n/a
III.a
III.a
EPRA NAV
IFRS NAV
Note 16
III.b
Like-for-like rental growth compares the
growth of the net rental income of the
portfolio that has been consistently in
operation, and not under development,
during the two full preceding periods that
are described.
The objective of the EPRA NAV measure is
to highlight the fair value of net assets on an
ongoing, long-term basis. Assets and
liabilities that are not expected to crystallise
in normal circumstances such as the fair
value of financial derivatives and deferred
taxes on property valuation surpluses are
therefore excluded.
EPRA NAV per share
IFRS NAV per share
Note 16
III.c
EPRA NAV calculated on a diluted basis
taking into account the impact of any
options, convertibles, etc. that are ‘dilutive’.
EPRA NNNAV
IFRS NAV via EPRA NAV III.c
Reports EPRA NAV including fair value
adjustments for any material balance sheet
items which are not included in EPRA NAV
at fair value.
EPRA Net Initial Yield
(“EPRA NIY”)
n/a
III.d
Inherent yield of the portfolio using cash
passing rent at the reporting date.
Hibernia REIT plc Annual Report 2018
209
GovernanceFinancial statementsStrategic report Supplementary information (unaudited) continued
II. Alternative performance measures
APM
RECONCILED TO IFRS MEASURE:
REFERENCE
DEFINITION
EPRA topped-up Net Initial
Yield (“EPRA topped-up NIY”)
EPRA vacancy rate
n/a
n/a
III.d
III.f
Inherent yield of the portfolio using
contracted rent the reporting date.
In order to encourage the provision of
comparable and consistent disclosure of
vacancy measures, EPRA has identified a single
vacancy measure that can be clearly defined,
Loan to value (“LTV”)
n/a
Note 26 Net debt as a percentage of
Final and interim dividend
per share
Dividend per share
Note 14
Net debt
Financial liabilities
Note 26
Passing rent
Total property return
n/a
n/a
n/a
n/a
investment properties
Number of cent per share to be distributed
to shareholders in dividends.
Financial liabilities net of cash balances (as
reduced by the amounts collected from
tenants for deposits, sinking funds and
similar) available expressed as a percentage
of the value of investment properties.
Annualised gross property rent receivable on
a cash basis as at the reporting date.
Total property return is the return for the
period of the property portfolio (capital and
income) as calculated by MSCI, the
producers of the MSCI/IPD Ireland Index.
210
Hibernia REIT plc Annual Report 2018
Supplementary information (unaudited) continued
III. European Public Real Estate Association (“EPRA”) Performance Measures
EPRA performance measures are calculated according to the EPRA Best Practices Recommendations November
2016. 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.
Further detail on these measures are set out below, including their calculation and reconciliation to the financial
statements where applicable.
EPRA Earnings
Adjusted earnings1
EPRA NAV
EPRA NNNAV
– basic
– diluted
– basic
EPRA Like-for-like rental growth reporting
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
FINANCIAL YEAR ENDED
31 MARCH 2018
FINANCIAL YEAR ENDED
31 MARCH 2017
€‘000
19,403
19,403
32,189
1,112,075
1,111,730
€‘000
14,989
14,989
26,441
1,013,969
1,013,852
CENT PER
SHARE
2.8
2.8
4.7
159.1
159.1
6.5%
3.8%
4.3%
47.8%
45.6%
21.8%
19.6%
2.0%
CENT PER
SHARE
2.2
2.2
3.9
146.3
146.3
4.0%
4.4%
4.7%
56.0%
54.4%
23.7%
22.0%
2.7%
1. The costs relating to internalisation are eliminated from this measure to provide indicative impacts on measures post November 2018.
a. 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 for the financial year after taxation
Exclude:
Changes in fair value of investment properties
Profits on disposals of investment properties
Other profits or losses on assets disposals net of tax
Fair value of derivatives
Weighted average number of shares
Basic
Potential shares to be issued
Diluted number of shares
EPRA Earnings per share – (cent)
Diluted EPRA earnings per share (cent)
FINANCIAL
YEAR ENDED
31 MARCH 2018
€‘000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€‘000
107,101
118,586
(81,377)
(6,425)
–
104
19,403
(103,525)
–
(73)
1
14,989
688,900
6,599
683,351
7,603
695,499
690,954
2.8
2.8
2.2
2.2
Hibernia REIT plc Annual Report 2018
211
GovernanceFinancial statementsStrategic report
Supplementary information (unaudited) continued
III. European Public Real Estate Association (“EPRA”) Performance Measures
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 an expense to the Group after
November 2018, EPRA earnings are shown below adjusted to remove internalisation-related costs. While the
adjusted earnings number does not factor in the cost of any replacement incentive scheme, this is likely to be a
significantly lower cost.
EPRA earnings as calculated above
Prepaid remuneration amortised
Performance-related payments
‘Top-up’ internalisation expenses
Underlying earnings excluding effects of management charges
Weighted average number of shares
Adjusted earnings per share – (cent)
FINANCIAL
YEAR ENDED
31 MARCH 2018
€‘000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€‘000
19,403
4,444
6,599
1,743
32,189
14,989
4,444
5,907
1,101
26,441
688,900
683,351
4.7
3.9
b. EPRA like-for-like rental growth reporting
Like-for-like net rental growth compares the growth of the net rental income of the portfolio that has been
consistently in operation, and not under development, during the two full preceding periods that are described.
Information on the growth in rental income other than from acquisitions and disposals, allows stakeholders to
arrive at an estimate of organic growth. This can be used to measure whether the reversions feed through as
anticipated, and whether the vacancy rates are changing. This measure excludes rental income on disposals and
acquisitions and properties under development or refurbishment during the period. All rental income is from
properties based in Dublin, Ireland and the greater Dublin area.
Office assets
Residential assets
Industrial assets1
Total
1. A new lease on vacant space commenced during the period.
FINANCIAL
YEAR ENDED
31 MARCH 2018
FINANCIAL
YEAR ENDED
31 MARCH 2017
7.1%
3.3%
18.4%
6.5%
3.9%
–
7.2%
4.0%
212
Hibernia REIT plc Annual Report 2018
c. 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. The fair value of derivative instruments is excluded from EPRA NAV on the basis that
these are hedging instruments and intended to be held to maturity. EPRA NNNAV is the EPRA NAV adjusted to
reflect the fair value of debt and derivatives and to include deferred taxation on revaluations (if any).
IFRS NAV
Fair value of financial instruments
EPRA NAV
Fair value of financial instruments
EPRA NNNAV
Ordinary Shares in issue
Estimated additional shares due for issue from
performance reserve
Ordinary Shares in issue including shares to be
issued – ‘diluted’
FINANCIAL YEAR ENDED
31 MARCH 2018
FINANCIAL YEAR ENDED
31 MARCH 2017
€‘000
1,111,730
345
1,112,075
(345)
1,111,730
692,347
6,599
698,946
CENT PER
SHARE
€‘000
1,013,852
117
CENT PER
SHARE
159.1
1,013,969
146.3
(117)
159.1
1,013,852
146.3
685,452
7,603
693,055
d. 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 expiry 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.
Hibernia REIT plc Annual Report 2018
213
GovernanceFinancial statementsStrategic report
Supplementary information (unaudited) continued
III. European Public Real Estate Association (“EPRA”) Performance Measures
At 31 March 2018
OFFICE
€’000
RESIDENTIAL
€’000
INDUSTRIAL
€’000
TOTAL
€’000
DEVELOPMENT
€’000
€’000
Investment properties at fair value
Less: Development/refurbishment
1,017,937
–
138,480
–
17,800
(5,000)
1,174,217
(5,000)
134,500
(134,500)
1,308,717
(139,500)
Completed property portfolio
1,017,937
138,480
12,800
1,169,217
1,169,217
Allowance for purchasers’ costs1
86,117
6,176
1,083
93,376
Gross up completed
property portfolio
Annualised cash passing
rental income2
Property outgoings
Annualised net rents
Expiration of lease incentives
and fixed uplifts
‘Topped-up’ annualised net rent
EPRA NIY
EPRA “Topped-up” NIY
1,104,054
144,656
13,883
1,262,593
43,836
(1,662)
42,174
5,798
47,972
3.8%
4.3%
6,816
(1,229)
5,587
47
5,634
3.9%
3.9%
695
–
695
10
705
5.0%
5.1%
51,347
(2,891)
48,456
5,855
54,311
3.8%
4.3%
1. Purchasers costs increased from 4.46% to 8.46% on commercial properties only after an increase in stamp duty in October 2017.
2. Cash passing rent includes residential rents gross as property outgoings are included in the line below.
At 31 March 2017
OFFICE
€’000
RESIDENTIAL
€’000
INDUSTRIAL
€’000
TOTAL
€’000
DEVELOPMENT
€’000
Investment properties at fair value
Less: Development/refurbishment1
Completed property portfolio
Allowance for purchaser’s costs
869,748
(94,350)
775,398
34,583
116,429
–
116,429
5,193
13,168
–
13,168
587
999,345
(94,350)
904,995
40,363
168,042
(168,042)
€’000
1,167,387
(262,392)
904,995
Gross up completed
property portfolio
Annualised cash passing
rental income2
Property outgoings
Annualised net rents
Expiration of lease incentives
and fixed uplifts
‘Topped-up’ annualised net rent
EPRA NIY
EPRA ‘Topped-up’ NIY
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
31
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 2WML were in the office segment at the financial year end 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.
2. Cash passing rent includes residential rents gross as property outgoings are included in the line below.
214
Hibernia REIT plc Annual Report 2018
e. 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 expiry
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
Property expenses
Net service charge costs/fees
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
1. Excludes the net Starwood promote fee of €2.3m which was received as income.
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 2018
€‘000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€‘000
20,116
3,147
205
23,468
(1,073)
22,395
49,075
47.8%
45.6%
20,985
2,681
157
23,823
(695)
23,128
42,519
56.0%
54.4%
FINANCIAL
YEAR ENDED
31 MARCH 2018
€‘000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€‘000
23,468
(4,444)
(1,743)
(6,599)
10,682
(1,073)
9,609
49,075
21.8%
19.6%
23,823
(4,444)
(1,101)
(8,215)
10,063
(695)
9,368
42,519
23.7%
22.0%
f. 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 ERV of vacant space expressed as a percentage of the
total ERV.
Annualised ERV vacant units
Annualised ERV completed portfolio
EPRA vacancy rate
FINANCIAL
YEAR ENDED
31 MARCH 2018
€‘000
FINANCIAL
YEAR ENDED
31 MARCH 2017
€‘000
1,283
65,571
2.0%
1,468
54,535
2.7%
Hibernia REIT plc Annual Report 2018
215
GovernanceFinancial statementsStrategic report
Supplementary information (unaudited) continued
III. European Public Real Estate Association (“EPRA”) Performance Measures
g. Portfolio information
Analysis of lease expiration profile
Rent subject to lease break or expiry – passing rent at 31 March 2018
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 2018
For period 31 March
Office
Residential
Industrial
Total
Percentage of passing rent
Potential uplift at current ERV
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
Total
2019
€’M
3.1
6.8
0.5
10.4
20.2%
0.2
2019
€’M
9.2
6.8
0.5
16.5
30.7%
3.5
2018
€’M
0.8
6.4
–
7.2
16.7%
0.4
2018
€’M
2.6
6.4
–
9.0
2020
€’M
2021-2023
€’M
2.2
–
0.2
2.4
4.7%
1.6
18.0
–
–
18.0
35.0%
3.6
2020
€’M
2021-2023
€’M
2.9
–
0.2
3.1
5.9%
1.9
2019
€’M
3.1
–
0.5
3.6
8.4%
0.5
31.7
–
–
31.7
63.4%
0.8
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 uplifts due to the expiry of incentives and similar arrangements, there was €2.9m in leases due to
commence 31 March 2018 (31 March 2017: €2.1m).
216
Hibernia REIT plc Annual Report 2018
Supplementary information (unaudited) continued
IV. 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 €6.4m gains arising on the sale of investment properties (31 March 2017: €nil). Included within the
unrealised gains disclosed under IFRS there is a total of €15.3m (31 March 2017: €1.1m) in unrealised losses and
€96.7m (31 March 2017: €104.6m) 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
95 to 127 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 (via cash and deferred shares and inclusive of amounts
recouped via service charges from tenants), all of whom are engaged in managing the Group activities, was
€5,243,190 of which €3,794,219 comprised fixed remuneration and €1,448,971 comprised variable remuneration
(31 March 2017: €3,863,125 of which €2,981,483 comprised fixed remuneration and €881,642 comprised variable
remuneration). The average number of identified staff during the financial year was 28 (31 March 2017: 23).
Hibernia REIT plc Annual Report 2018
217
GovernanceFinancial statementsStrategic report Supplementary information (unaudited) continued
Other disclosures
Occupiers representing over 0.5% of contracted rent at 31 March 2018
TENANT
The Commissioners of Public Works (OPW)
Twitter International Company
Hubspot Ireland Limited
The Governor & Co. of the Bank of Ireland
TMT Tenant
Informatica Ireland EMEA
Depfa Bank plc
Electricity Supply Board
Travelport Digital Limited
Wyvern Business Centre Limited (IWG plc)
BNY Mellon Fund Services (Ireland) Ltd
COMREG
Mediavest Limited (Core Media)
Riot Games Limited
AWAS Aviation Acquisitions Limited
O.D.S Company (Eversheds Sutherland)
Deloitte Ireland LLP
Pay & Shop Ltd (t/a Realex Payments)
An Bord Bia
Capita Life & Pension Services Irl Ltd.
Park Rite
Invesco Global Asset Management Limited
Daqri International Limited
Pinsent Masons Services Ireland Ltd
Weston Office Solutions Limited (t/a Iconic Offices)
Renaissance Services of Europe Ltd.
Hines Real Estate Ireland Limited
Crowe Horwath Bastow Charleton Cons. Ltd.
ENI Insurance DAC
Bearingpoint Ireland Limited
Quinn McDonnell Pattison Limited
Morgan Stanley Fund Services (Irl.) Ltd.
Altify Ireland Limited
BCWM plc
€’M
6.0
5.1
3.8
2.8
2.8
2.1
2.0
1.9
1.8
1.8
1.6
1.6
1.6
1.2
1.2
1.0
1.0
0.9
0.7
0.7
0.6
0.6
0.6
0.6
0.4
0.4
0.4
0.4
0.3
0.3
0.3
0.3
0.3
0.3
%
10.6%
8.9%
6.6%
5.0%
5.0%
3.7%
3.6%
3.3%
3.2%
3.2%
2.8%
2.8%
2.8%
2.1%
2.1%
1.8%
1.8%
1.6%
1.3%
1.2%
1.0%
1.0%
1.0%
1.0%
0.8%
0.8%
0.7%
0.7%
0.6%
0.5%
0.5%
0.5%
0.5%
0.5%
218
Hibernia REIT plc Annual Report 2018
Directors and Other Information
Directors
Principal Banker
Depositary
Daniel Kitchen (Chairman)
Colm Barrington (Senior
Independent Director)
Thomas Edwards-Moss (CFO)
Stewart Harrington
Frank Kenny (appointed
8 November 2017)
Kevin Nowlan (CEO)
William Nowlan (resigned
25 July 2017)
Terence O’Rourke
Company Secretary Sean O’Dwyer
Registrar
Assistant Secretary
Sanne Corporate
Administration Services Ireland
Limited t/a Sanne
4th Floor
76 Lower Baggot Street
Dublin D02 EK81
Ireland
Registered Office
South Dock House
Hanover Quay
Dublin D02 XW94
Ireland
Company Number
531267
Principal Legal
Adviser
Corporate Brokers
Independent Auditor
Tax Adviser
Independent Valuer
Deloitte Ireland LLP
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
Cushman and Wakefield
164 Shelbourne Road
Ballsbridge
Dublin 4
Ireland
Bank of Ireland
50-55 Baggot Street Lower
Dublin D02 Y754
Ireland
BNP Paribas Securities
Services, Dublin Branch
Trinity Point 10-11
Leinster Street South
Dublin D02 EF85
Ireland
Link Registrars Limited t/a
Link 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
Ballsbridge Park
Ballsbridge
D04 YW83
Ireland
Credit Suisse International
One Cabot Square
London E14 40J
United Kingdom
Hibernia REIT plc Annual Report 2018
219
GovernanceFinancial statementsStrategic report
Glossary
AIF is an Alternative Investment Fund.
AIFM is an Alternative Investment Fund Manager.
Brexit is the UK exit from the EU.
Cash passing rent is the gross property rent receivable
on a cash basis as at the reporting date.
CBD is Central Business District.
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 year.
Developer’s profit is the profit on cost estimated by
valuers which is typically a percentage of developer’s
costs, usually between 10% to 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.
DoF is the Department of Finance.
DPS is dividend per share.
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. It
produces guidelines for number of standardised
performance measures (e.g. EPRA earnings,
EPRA NAV).
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 or EPRA NAVPS is the EPRA
NAV divided by the diluted number of shares at the
period end.
EPRA net asset value (“EPRA NAV”) is defined as the
IFRS assets excluding the mark to market on effective
cash flow hedges and related debt instruments and
deferred taxation on revaluations.
EPRA Net Initial Yield (“NIY”) is the 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 passing rent for
contractually agreed uplifts, where these are not
in lieu of rental growth.
EPRA vacancy rate is the Estimated Rental Value
(“ERV”) of vacant space divided by the ERV of the
whole portfolio, excluding developments and
residential property. This is the inverse of the
occupancy rate.
EPS or earnings per share is the profit after taxation
divided by the weighted average number of shares in
issue during the period.
Equivalent yield is the weighted average of the initial
yield and reversionary yield and represents the return
that a property will produce based on the occupancy
data of the tenant leases.
Estimated Rental Value (“ERV”) or market rental
value is the external valuers’ opinion as to what the
open market rental value of the property is on the
valuation date, and which could reasonably be
expected to be the rent obtainable on a new letting
on that property on the valuation date.
220
Hibernia REIT plc Annual Report 2018
Fair value movement is the accounting adjustment
to change the book value of the asset or liability to
its market value.
FRI Lease Full Repairing and Insuring Lease.
GRESB is the Global ESG Benchmark for Real Assets.
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 passing rent as
adjusted for the spreading of these incentives.
Hibernia is Hibernia REIT plc, the Group or the Company.
'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.
Like-for-like rental income growth (“LFL”) is the
growth in net rental income on properties owned
through the current and previous periods under review.
This growth rate includes revenue recognition and lease
accounting adjustments but excludes properties held
for development in either financial year or properties
with guaranteed rental reviews. The Group does not
present this statistic in this financial year as the last
financial year was the first in which the Group held
investment properties and therefore it does not have
two full years of history to which to base this.
Market Abuse Regulations are issued by the Central
Bank of Ireland and can be accessed on https://www.
centralbank.ie/regulation/industry-market-sectors/
securities-markets/market-abuse-regulation
Long-Term Incentive Plan (“LTIP”) 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.
NAVPS is the net asset value in cent per share.
IPO is the Initial public offering, i.e. the first equity
raising of the Company.
Net development value is the external valuers’ view on
the end value of a development property when the
building is fully completed and let.
IPD is the Investment Property Databank Limited which
is part of the MSCI Group and produces as independent
benchmark of property returns (IPD Ireland Index)
and which provides the Group with the performance
information required in calculating the performance fee.
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) assumes
rent is received annually in arrears.
IRR is internal rate of return.
MSCI/IPD Index is the MSCI/SCSI/Investment Property
Databank Limited Ireland Quarterly Property Index –
All Property (the ‘‘MSCI/IPD Index’’).
Lease incentive is any consideration or expense, borne
by the Group, in order to secure a lease.
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.
LEED (“Leadership in Energy and Environmental
Design”) is a Green Building Certification System
developed by the U.S. Green Building Council (USGBC).
Its aim is to be an objective measure of building
sustainability.
Occupancy rate is the estimated rental value of let
units as a percentage of the total estimated rental value
of the portfolio, excluding development properties.
Over rented is used to describe when the contracted
rent is higher than the ERV.
Hibernia REIT plc Annual Report 2018
221
GovernanceFinancial statementsStrategic report Glossary continued
Passing rent is the annualised 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.
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.
PRS is the private rented sector.
TMT sector is the technology, media and
telecommunications sector.
Total Property Return (“TPR”) is the return for the
period of the property portfolio (capital and income)
as calculated by MSCI, the producers of the MSCI/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.
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.
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/industry-market-sectors/securities-markets/
transparency-regulation
Royal Institute of Chartered Surveyors (“RICS”)
Professional Standards, RICS Global Valuation
Practice Statements and the RICS Global Valuation
Practice Guidance – Applications contained within
the RICS Valuation – Global Standards 2017 (the
“Red Book”) issued by the Royal Institute of Chartered
Surveyors provide the standards for preparing
valuations on property.
Sq. ft. square feet.
Tenant or lease incentives are incentives offered
to occupiers on entering into a new lease and may
include a rent free or reduced rent period, or a cash
contribution to fit-out. Under accounting rules, the
value of these incentives is amortised through the
rental income on a straight-line basis over the term
of the lease or the period to the next break point.
Term certain is the lease period to the next break
or expiry.
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.
Ungeared IRR is the internal rate of return excluding
gearing.
Valuer is the independent valuer appointed by the
Group to value the Group’s investment properties at
the date of the consolidated financial statements.
From September 2017 the Group has used Cushman
and Wakefield. Previously the Group used CBRE.
WAULT is weighted average unexpired lease term and is
variously calculated to break, expiry or next review date.
222
Hibernia REIT plc Annual Report 2018
Notes
Hibernia REIT plc Annual Report 2018
223
GovernanceFinancial statementsStrategic report Notes
224
Hibernia REIT plc Annual Report 2018
H
i
b
e
r
n
i
a
R
E
I
T
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8
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