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Annual Report 2020
Hibernia REIT plc
W H O W E A R E
We are the largest Irish real estate investment trust (“REIT”),
owning a property portfolio worth €1.5bn all of which
is located in Dublin and mostly comprises city centre
offices. We are listed on Euronext Dublin and the London
Stock Exchange.
O U R P U R P O S E
Our purpose is to improve the built environment in Dublin,
primarily the stock of city centre offices, providing above
average long-term returns for our shareholders and bringing
benefits to all our stakeholders.
H O W W E D O I T
We use our knowledge and experience of the Dublin
property market, together with modest levels of leverage, to
upgrade buildings or deliver new ones at appropriate times
in the property cycle and to grow our income through active
asset management. We also recycle capital, selling assets
with limited future potential and reinvesting in property with
future (re)development opportunities. Our portfolio is mainly
a mix of redeveloped properties held for income and assets
held for future repositioning.
O U R C U L T U R E
• Transparent, honest and fair
• Hard-working and flexible
• Collaborative and inclusive
• Long-term perspective but pragmatic
O U R V A L U E S
• Openness
• Integrity
• Hunger
• Curiosity
• Passion
• Creativity
• Safety
• Sustainability
Read more at
www.hiberniareit.com
Contents
The year in summary
Our business at a glance
Chief Executive Officer’s review
Investment case
Impact of COVID-19
Strategic report
2
4
10 Chairman’s letter
12
14
15
16 Market review
20 Our stakeholders
22 Our business model
24 Our strategy
26 Strategy in action
36 Measuring our performance
38 Risk management
41 Going concern and viability statement
42 Principal risks and uncertainties
51
57
61
Business review
Financial review
Sustainability
Corporate governance
70 Chairman’s Corporate
Governance statement
72 What the Board did during the year
73 Board snapshot
Leadership
74
75 Board snapshot
76 Culture and people
The Board of Directors
78
80 The Senior Management Team
82 Board effectiveness
89 Nominations Committee report
92 Audit Committee report
98 Remuneration Committee report
117 Directors’ report
121 Directors’ responsibility statement
Independent auditor’s report
Financial statements
122
128 Consolidated income statement
129 Consolidated statement of
comprehensive income
130 Consolidated statement of
financial position
131 Consolidated statement of changes
in equity
132 Consolidated statement of cash flows
133 Notes to the consolidated
financial statements
177 Company statement of financial position
178 Company statement of changes in equity
179 Notes to the Company
financial statements
Supplementary information
(unaudited)
187 Five-year record
188 Alternative performance measures
189 EPRA performance measures
196 Other disclosures
198 Directors and other information
199 Glossary
01
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 T H E Y E A R I N S U M M A R Y
Financial highlights
Portfolio value
€1,465m
LFL growth +2.0% 2019: €1,395m
EPRA NAV per share
179.3c
+3.5% 2019: 173.3c
Net debt
€241m
+11.2% 2019: €217m
Loan to value (“LTV”)
16.5%
+0.9pp 2019: 15.6%
Cash and undrawn facilities net of
committed capital expenditure
€136m
-4.9% 2019: €143m
Total property return
5.9%
+1.5pp over benchmark
2019: 11.6%, +4.1pp
Net rental income
Profit after tax
€58.6m
+9.9% 2019: €53.3m
€61.0m
-50.6% 2019: €123.5m
EPRA EPS
5.5c
+39.9% 2019: 4.0c
Dividend per share (full year)
4.75c
+35.7% 2019: 3.5c
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 187 to
197 of this Annual Report.
02
Hibernia REIT plc Annual Report 2020 03
Operating highlights• Contracted rent up 14.1% to €65.7m at Mar-20 due to: –Seven new lettings on 93,000 sq. ft. adding €5.7m (on average 9% ahead of last net ERV) –Nine rent reviews completed on 99,000 sq. ft. adding €2.7m (on average 2% ahead of ERV at review)• 2 Cumberland development expanded 13% to 58,000 sq. ft. –Expected to complete in late 2020 –41% pre-let to 3M in April 2020 ahead of ERV• Longer term pipeline expanded and advanced –Office pipeline +5% to 566k sq. ft. after new planning grants at Harcourt Square and Clanwilliam Court –Mixed-use pipeline +5% to 154.3 acres • Net sales proceeds in FY19 of €60.3m reinvested: –€23.3m invested in nine acquisitions of property –€21.3m invested in capital expenditure on developments –€25.0m invested in share buyback programme• COVID-19 impact and response (see page 15): 89% of Q2 2020 commercial rent collected within seven days of due date, 94% within 60 daysStakeholders and responsibility• While s.172 of the UK Companies Act, referenced in the UK Corporate Governance Code 2018 (“UK Code”), does not apply directly to Hibernia see pages 86 and 87 for how we comply• Completed first formal stakeholder materiality assessment• Improved sustainability performance further – 13% LFL reduction in energy consumption and carbon emissions against prior year –Three star rating in 2019 GRESB submission (the Group’s second year of participation) and a score of 75%, up 17pp on prior year• 1SJRQ office development (completed in prior year) received LEED Platinum certification in the year• Helped organise and participated in third annual Dragons at the Docks event, which raised €349k for Dublin Simon and other local charities• Founder member of Irish Institutional Property, which helps promote engagement between institutional property owners in Ireland and their stakeholdersLeadership and governance• Appointment of Grainne Hollywood and Margaret Fleming as independent Non-Executive Directors (“NEDs”), taking total Board composition to 30% female and, for the non-executive Board, reducing average age to 65 years from 67 years and average tenure to 3.8 years from 4.3 years• Board succession remains a priority (see pages 89 to 91) • An external Board performance assessment was completed in May 2020 (see pages 82 and 83) • Promotion of Edwina Governey to Chief Investment Officer• Retirement of Mark Pollard as Director of Development from June 2020: Gerard Doherty promoted to the role• Appointment of Neil Menzies as full-time Sustainability Manager to lead our sustainability efforts• Second corporate governance roadshow (see page 85)Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 O U R B U S I N E S S A T A G L A N C E
A L L O F O U R
P O R T F O L I O I S
I N D U B L I N . . .
Our primary focus is on the Dublin city centre office
market but we also own multi-family residential
properties as we see similarly favourable dynamics
in the long-term in this market. Consistent with our
business model of asset management and asset
improvement (see pages 22 to 23 for further details),
our portfolio mainly comprises redeveloped
properties held for income and older assets
held for future repositioning. The majority of our
tenant base (by rent) comprises large companies
(especially in the TMT sector) or state entities.
Portfolio segments by value
€1,465m
Contracted rent by tenant
€65.7m
In-place office contracted rent
Contracted rent by tenant sector
by tenant business sector
€65.7m
04
Dublin office Traditional Core
Dublin office IFSC
Dublin office South Docks
Dublin CBD office development
Dublin residential
Industrial/land
30%
14%
38%
3%
11%
4%
HubSpot Ireland Limited
OPW
Twitter International Company
Zalando
Autodesk Ireland Operations
Informatica Ireland EMEA
Riot Games
Electricity Supply Board
Travelport Digital Limited
BNY Mellon Fund Services
Remaining tenants
TMT
Government/state entity
Banking and capital markets
Residential
Professional services
Other
Insurance and reinsurance
Serviced offices
16%
9%
8%
4%
4%
3%
3%
3%
3%
2%
45%
49%
16%
11%
9%
7%
5%
2%
1%
Hibernia REIT plc Annual Report 2020Strategic report K E Y S T A T I S T I C S
A T M A R - 2 0
Properties
36
In-place offices
1.1m sq. ft.
Offices including fully
developed pipeline
1.5m sq. ft.
In-place office vacancy
7%
Portfolio contracted annual rent
€65.7m
In-place office contracted annual rent
€57.7m
Average in-place office rent
€50psf
In-place office WAULT
6.4yrs
Rental uplift potential from
current investment portfolio
plus 2 Cumberland Place
€9.6m
05
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 O U R B U S I N E S S A T A G L A N C E C O N T I N U E D
. . . A N D O U R
P R O P E R T I E S A R E
W E L L - L O C A T E D ,
C L O S E T O P U B L I C
T R A N S P O R T L I N K S . . .
All of our office buildings, which comprise c. 85% of our
portfolio by value, are situated in the three main office
sub-markets in central Dublin: the Traditional Core, the
South Docks and the International Financial Services
Centre (“IFSC”). Most are in prominent positions and a
number are clustered together, improving the
effectiveness of our asset management for tenants or
offering the potential to do so in future. Many of the
properties held for repositioning also have the potential
for significantly increased building density on these
sites in the future.
We also have 11% of the portfolio in multi-family
residential assets, mostly in South Dublin and the
balance is in industrial/land assets with future change
of use potential.
Our properties
Key
1DC
2DC
15 One Earlsfort Terrace
Transport links
16 Hardwicke House
DART/railway lines
1
2
3
4
5
6
7
8
9
The Forum
17 Montague House
50 City Quay
18 Harcourt Square
1SJRQ
19 39-40 Harcourt
The Observatory
Street
1WML
2WML
South Dock House
20 35–37 Camden Street
21 Dublin Industrial
Estate
22 Newlands/Gateway
10 Central Quay
11
1 Cumberland Place
23 Malahide Road
Industrial Park
12 2 Cumberland Place
24 Cannon Place
13 Marine House
25 Dundrum View
LUAS lines
Residential
Office development
Completed office
developments
Office
Industrial
Windmill Quarter
Clanwilliam Quarter
14 Blocks 1, 2 & 5
Clanwilliam Court
06
26 Wyckham Point
Harcourt Quarter
K E Y C L U S T E R S
The Windmill Quarter
The Windmill Quarter comprises six
adjoining or adjacent buildings in Dublin’s
South Docks (there are two buildings on the
1WML site) with c. 400,000 sq. ft. of office
accommodation plus further ancillary space
and communal facilities. Four of the six
buildings have been delivered by us and the
Quarter is now valued at over €490m and
produces rent of €24m per annum. As well
as being our main regeneration scheme
for the past few years, the Quarter also
represents our first cluster of office buildings
and is managed as one estate.
Clanwilliam Court and Marine House
Blocks 1, 2, & 5 Clanwilliam Court and Marine
House are adjoining 1970s buildings fronting
onto the Grand Canal. Together they
comprise 134,000 sq. ft. of offices and
some ancillary space on a c. 1.2 acre
site. We have provisional planning for a
scheme of 190,000 sq. ft. and, with leases
expiring in 2020/21, optionality around
development timing.
Harcourt Square and
39/40 Harcourt Street
Currently the properties have 122,000 sq.
ft. of mostly 1970s office accommodation
on a site of 1.9 acres. There is potential to
deliver our third cluster on the site once the
existing leases expire at the end of 2022.
Planning has been received for c. 337,000
sq. ft. of office space.
Hibernia REIT plc Annual Report 2020Strategic report M3
M2
N3
M50
M4
N4
M1
23
21
24
Dublin City
Centre
N7
22
N81
25
26
N11
M50
IFSC
3
2
4 6
1
NORTH DOCKS
10
9
7
5
8
SOUTH DOCKS
11
12
C U R T L E ST O W N
TRADITIONAL CORE
W I C KL O W
M O U N T A IN S
N A T IO N AL
P A RK
14
13
G R EY S T O NE S
18
19
16
15
20
17
H O W TH
07
DundrumNewlands CrossDublin AirportGREYSTONESDundrumNewlands CrossDublin AirportWICKLOWMOUNTAINSNATIONALPARKCURTLESTOWNHOWTH M50M50M1M2N4N3N7N11M4M3N81Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020
O U R B U S I N E S S A T A G L A N C E C O N T I N U E D
. . . U N D E R P I N N E D
B Y F A V O U R A B L E
M A R K E T F U N D A M E N T A L S
I N T H E L O N G E R T E R M
While the outlook for the Dublin property market is
negative in the near term on account of the impact of the
COVID-19 pandemic, we remain positive on its longer term
prospects. Ireland has been successful in attracting foreign
direct investment to the country (and in particular to
Dublin) for many years and, as the only major EU member
where English is the primary language, we expect this to
continue. In addition, we believe the growing population
and trends towards greater urbanisation and a greater
proportion of white collar jobs will support demand for
offices and housing. Conversely, office and housing supply
is constrained: there is little available land in central Dublin,
a structural undersupply of housing, and limited availability
of development funding. While COVID-19 may accelerate
changes in working behaviour, we believe the city centre
office’s importance as a place for employees to work
together and exchange information and ideas will persist.
08
Hibernia REIT plc Annual Report 2020Strategic report F A V O U R A B L E L O N G - T E R M
D Y N A M I C S
The only major EU member where
English is the primary language
In addition the Irish legal system is
similar to the US/UK
Dublin dominates within Ireland
Greater Dublin is home to more than
40%
of Ireland’s 4.9m population and
generates more than half of its gross
value added (source: the CSO)
Favourable demographic trends
Greater Dublin population is expected
to grow by
>10%
by 2026 (source: the CSO)
Growing office-based employment
Pre COVID expectations were for
>5%
growth in office jobs by the mid-2020s
(source: Oxford Economics)
Supply constraints
Limited availability of land in
central Dublin and speculative
development funding scarce
Structural undersupply
in residential sector
09
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 C H A I R M A N ’ S L E T T E R
G O O D P R O G R E S S M A D E
A C R O S S T H E B U S I N E S S
Market conditions for most of our financial
year to 31 March 2020 were favourable
and I am pleased to report that results
were strong. EPRA earnings for the year
were €38.1m, an increase of 38.7% on last
year, reflecting our success in growing
rental income and the first full year of
operations without any costs associated
with the original external management
structure. The gross value of our investment
property portfolio at 31 March 2020 was
€1,465m (2019: €1,395m), net debt was
€241m (2019: €217m) and EPRA NAV per
share was 179.3 cent, an increase of 3.5%
in the year (+5.3% excluding the increase
in stamp duty from Oct-19). The Total
Property Return for our portfolio for the
12-month period was 5.9% while the MSCI
Ireland Property All Assets Index (excluding
Hibernia) returned 4.4%. Cash balances at
year end were €28.4m (2019: €22.4m) and
we are proposing a final dividend of 3.0
cent per share taking the full year dividend
to 4.75 cent, up 35.7% on prior year.
The COVID-19 pandemic has affected us
all in the first half of 2020 (calendar year).
The health and economic impacts have
been severe, particularly in the second
quarter of the year for Europe and the
US, and well covered by the media. Due in
part to the actions we have taken during
the last three years, selling some assets
and completing the majority of our active
development pipeline, we have gone into
this crisis period with low leverage, a strong
tenant base and little current development
exposure. To date the impact on our
business has not been significant although
we are keeping in close contact with our
tenants and providing assistance where
needed. While our sole active development
at 2 Cumberland Place was temporarily
delayed by the lockdown initiated by the
Irish Government we do not anticipate any
material negative impact, and we pre-let
over 40% of the building to 3M in April
2020, partly de-risking the project.
“Market conditions for
most of the financial
year were favourable
and we are proposing a
final dividend of
3.0 cent per share
taking our full year
dividend to 4.75 cent
per share, an increase
of 36% on the previous
financial year.”
10
Hibernia REIT plc Annual Report 2020Strategic report We recently undertook our second
corporate governance roadshow.
Along with my fellow Non-Executive
Director, Roisin Brennan, and our Company
Secretary, Sean O’Dwyer, I spoke to
some of our larger investors and I thank
them for their time and their feedback.
A more detailed report on the results
of roadshow can be found on page 85.
Employee engagement is also a high
priority for us: our small size and open
plan office layout ensure staff and Senior
Management interact continuously.
Some of my fellow Non-Executives sit on
certain Executive Committees and meet
staff regularly. As part of our compliance
with the 2018 Code Margaret Fleming has
agreed to take on the role of Designated
Non-Executive Director for Workforce
Engagement and will lead the Board’s
future interaction with staff. The results of
our annual Company team performance
survey were very positive and rank us
in the top decile of the survey universe
(1,500 companies).
The market outlook for our financial year
ended 31 March 2021 is challenging due to
the COVID-19 pandemic and the resulting
global slowdown in economic activity.
It is also uncertain how the behaviour of
people and companies may change as a
result of COVID-19. To date the impact on
the Group has been limited, we have low
levels of leverage, significant cash balances
and uncommitted credit facilities and
good assets. We believe that high-quality
city centre office accommodation will
remain in demand and that there may be
opportunities for us to add to our portfolio
over the coming months. The health and
welfare of our staff, tenants and suppliers
will remain our key priority and we will
continue investing for the long term.
Daniel Kitchen
Chairman
16 June 2020
The gradual reopening of the Irish
economy, announced in early May, is a
positive development. The full impact of the
COVID-19 pandemic on market rents and
property values is yet to be fully felt but we
are well positioned to withstand it. Most of
our staff have been working from home
since mid-March with minimal disruption
to operations and the Directors and I want
to thank them sincerely for their dedication
and commitment.
Our strategy remains unchanged: we
continue to focus on improving the
quality of Dublin’s built environment,
and in particular city centre offices, by
upgrading existing buildings and delivering
new buildings. We use modest levels of
borrowing and look to grow our income
through active asset management. Our aim
is to provide above average long-term
returns for our investors and deliver
benefits to all stakeholders.
During the year two new independent
Non-Executive Directors were appointed
to the Board as part of our ongoing
succession planning. In November 2019
we appointed Grainne Hollywood and
in January 2020 Margaret Fleming.
Grainne has extensive property
development experience and has taken
over as Chair of the Development Executive
Committee. Margaret’s experience is in the
area of property investment and she was
International Director – Capital Markets in
JLL until October 2019. We are delighted
that they have joined the Board: their
skills and knowledge will be beneficial and
will allow us to plan for the appointment
of further Non-Executive Directors as
existing Directors step down over the next
12-18 months. We completed our second
external evaluation of the Board and its
Committees this year. The findings were
that the Board and Committees are working
well with high standards of governance
(see pages 82 and 83 for more).
Our focus on sustainability continues
to increase and we have had extensive
discussions with stakeholders on a variety
of items, including sustainability, diversity
and the UK Code. We appointed a full-time
Sustainability Manager to help drive the
sustainability agenda within the Group.
The Board believes strongly in the positive
value that can be generated in the longer
term from good sustainability practices.
We have made good progress in complying
with the 2018 Code and are satisfied that
our governance standards remain at a
high standard.
H I G H L I G H T S O F
T H E Y E A R
Two new NEDs appointed bringing
female ratio to:
30%
+17pp on prior year
Total Accounting Return (“TAR”)
5.6%
-5.5pp on prior year
Total Property Return (“TPR”)
5.9%
+1.5pp over benchmark
EPRA cost ratio
26.8%
-12.5pp on prior year
11
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information C H I E F E X E C U T I V E O F F I C E R ’ S R E V I E W
S T R O N G P E R F O R M A N C E I N A Y E A R O F M O S T L Y
F A V O U R A B L E M A R K E T C O N D I T I O N S
and residential sectors accounting for 77%
of volumes. 2020 also started strongly with
€0.7bn traded in Q1 (source: Knight Frank)
but, unsurprisingly, the outlook for both the
investment and occupational markets has
weakened since mid-March.
Positive portfolio performance and
financial results, helped by developments
The Total Property Return of our portfolio
was 5.9%, outperforming our benchmark
(the MSCI Ireland Property All Assets
Index excluding Hibernia) which returned
4.4%, and our EPRA NAV per share grew
by 3.5% to 179.3 cent. This performance
came despite the impact of the 1.5pp
increase in stamp duty on commercial
property in October 2019, which C&W, our
Independent Valuer, estimates reduced the
value of our property portfolio by €22m
(1.5%) at 31 March 2020, a 3.2 cent (1.8%)
reduction in our EPRA NAV per share.
Even ignoring the impact of the stamp
duty increase, revaluation gains on our
portfolio were lower than in the prior year
given the larger amount of development
completions we had in the prior year and
the yield compression seen, particularly in
the residential sector, that year.
Growing rent roll and reduced costs
leading to significant increase in
distributable income
We had a busy year on the occupational
side with new leases and rent reviews
agreed adding €7.3m to our contracted
rent, net of expiries, breaks, surrenders and
adjustments. Acquisitions added a further
€0.8m of rent meaning contracted rent
grew by €8.1m (+14.1%) to €65.7m and our
reported net rental income for the year grew
€5.3m (+9.9%) to €58.6m. The WAULT of
our in-place office portfolio at 31 March
2020 was 6.4 years, with the WAULT of our
completed office developments of 9.1 years
being offset by the WAULT of 3.3 years on
our acquired office portfolio: approximately
40% of our acquired offices (by rent) are
development pipeline assets with a WAULT
of 2.0 years. At the same time, our cost
structure has reduced materially following
the expiry of the IMA in November 2018
and its replacement with a more standard
incentive scheme and as a result EPRA
earnings for the financial year grew €10.6m
(+38.7%) to €38.1m, with EPRA EPS growing
39.9% to 5.5 cent. Diluted IFRS EPS fell
49.8% to 8.8c due to lower revaluation gains
on the property portfolio compared with the
prior year. The Board has proposed a final
dividend of 3.0 cent per share, bringing the
dividend for the year to 4.75 cent, up 35.7%
on the prior year and representing a pay-out
ratio of 86% of EPRA EPS in line with the
requirements of the Irish REIT regime.
Our key priority in the present COVID-19
crisis remains the health and safety of
our staff, occupiers and suppliers and we
describe in detail below and elsewhere in
this document the actions we are taking
in this regard and the impact the crisis is
having on our business. With the first case of
COVID-19 reported in Ireland in late February
2020 and Ireland’s lockdown starting in
mid-March 2020, there was little impact on
our financial results for the year to 31 March
2020, which reflect the progress we
made with our strategic priorities and the
favourable market conditions that existed for
the majority of the financial year. Given this,
I have split my statement below into three
distinct parts: the year ended 31 March 2020,
our current position, and the outlook.
1) Year ended 31 March 2020
Favourable market conditions
With strong economic growth and foreign
direct investment in Ireland driving high
levels of occupier and investment demand
and with limited new supply, the central
Dublin Grade A office vacancy rate
continued to be low (5.9% at 31 March
2020), prime headline rents remained in
excess of €60psf and prime investment
yields also remained around 4.0% (source:
Knight Frank). 2019 saw 3.3m sq. ft.
of Dublin office take-up, the third highest
year on record, and, notwithstanding the
impact of COVID-19 towards the end of the
quarter, Q1 2020 saw a further 0.8m sq.
ft. taken up, the second highest Q1 figure
ever recorded (source: Knight Frank).
2019 also saw record investment volumes,
with €7.2bn of Irish property transacting
(including Green REIT plc) and the office
“Our key priority in
the present COVID-19
pandemic remains the
health and safety of
our staff, occupiers
and suppliers.”
12
Hibernia REIT plc Annual Report 2020Strategic report P E R F O R M A N C E
I N T H E Y E A R
Contracted rent
€65.7m
+14.1% on prior year
EPRA EPS
5.5c
+39.9% on prior year
Dividend per share
4.75c
+35.7% on prior year
LTV
16.5%
+0.9pp on prior year
Read more on page 57 to 60
De-risking current development and
progressing pipeline of future schemes
We obtained planning permission for an
extra floor at 2 Cumberland Place, our only
active development scheme, increasing
the new building’s lettable area by 13%
to 58,000 sq. ft.: by 31 March 2020 the
building’s frame was very substantially
complete, façade works were well advanced
and landlord fit-out work had commenced.
Practical completion will be later than our
previous expectation of Q3 2020 due to the
shutdown of all non-essential construction
sites from 28 March to 18 May 2020 but, at
present, we still expect it to occur in 2020.
Further progress occurred in April 2020
with the pre-leasing of 41% of the building to
3M, the science-based technology company.
We received provisional grants of planning
permission for our redevelopment schemes
at Harcourt Square and Clanwilliam Court,
increasing the overall space that the four
office schemes in our pipeline can deliver
by 5.2% to 566,000 sq. ft., and we grew
our mixed-use pipeline by 4.6% to 154.3
acres of land through acquisitions. In April
2020 we received a final grant of planning
for the revised 337,000 sq. ft. scheme at
Harcourt Square.
Effective capital management
The net sales proceeds of €60.3m
contracted to be received in the prior year
were successfully reinvested. €23.3m was
invested in nine acquisitions of property,
most of which provide potential synergies
with assets already in our portfolio. €21.3m
was capital expenditure on developments,
primarily 2 Cumberland Place, and €25.0m
was spent in acquiring 17.6m of our own
shares in an on-market share buyback
programme. We received final Court
approval in March 2020 for a capital
reorganisation to convert €50m of share
premium into distributable reserves in order
to increase our flexibility for future capital
management: this became effective in early
April 2020.
2) Current position
Market update
The emergence of COVID-19 has
created a lot of uncertainty in both the
occupational and investment markets.
However, as evidenced by our letting to
3M at 2 Cumberland Place, some leases
are progressing, and we understand
that c. 150,000 sq. ft. of office space has
been leased in Dublin since the COVID-19
restrictions commenced in mid-March.
Unsurprisingly, the picture for the rest
of 2020 appears less positive than was
expected at the start of the year and
our own tenant demand tracker (run in
conjunction with Cushman & Wakefield
(“C&W”)) saw a 20% fall in active demand
to 2.5m sq. ft. between the end of February
and end of April 2020. In the investment
market, some transactions, where terms
were already agreed (and due diligence
completed) prior to lockdown, have
proceeded to exchange of contracts and
completion, most notably Bishop’s Square,
D2 for a price of €180m, an implied yield
of approximately 4.0%, and we understand
another large city centre office transaction
is progressing through legal negotiations at
a similar yield.
Business update
Since mid-March all our head office
staff have been working remotely,
supported by our cloud-based IT systems.
Throughout the lockdown all our managed
buildings have remained accessible
by tenants as required. We have been
preparing our buildings for greater usage
as the lockdown eases and each building
has an individual plan for access control,
physical distancing measures, additional
cleaning and sanitising, and signage,
which we have been discussing with
tenants. Work at 2 Cumberland Place, our
only current development site, has now
restarted, with appropriate precautionary
measures, having been halted between
28 March and 18 May 2020. Mark Pollard,
our Director of Development, is retiring
at the end of June 2020 and will be
succeeded by Gerard Doherty, who joined
Hibernia in 2017 and has over 20 years of
development and construction experience.
Mark will continue to work with us on a
part-time basis.
Our tenants are important stakeholders
in the Group and we are working closely
with them. The majority of our rental
income comes from large companies in the
technology sector or government/state
entities. Where needed, we are assisting our
commercial tenants (c. 90% of our rent roll)
with their cashflow by allowing them to pay
rent on a monthly basis. In addition, where
our tenants are suffering particularly severe
impacts from the restrictions on movement,
we have allowed some deferral of rent.
Overall, the impact on our rent collection
statistics to date has been modest. 89% of
our commercial rent for the quarter ended
June 2020 was collected within seven
days of due date (2019: 93%), rising to
94% within 60 days (2019: over 99%): the
majority of the rent outstanding is due in
June or is deferred. On the residential side,
97% of rent due for the month of May 2020
has been collected at this point compared
with recent months at 99% or better.
Low leverage, significant headroom
Our balance sheet affords us significant
strategic flexibility: at 31 March 2020 we
had net debt of €241.4m and an LTV of
16.5%, making us amongst the lowest-
levered European REITs, and at that date
we could withstand a reduction in our
portfolio value of 65% or a reduction in
our underlying earnings of 76% before
breaching our key debt covenants.
Our weighted average debt maturity is
4.4 years and we have no debt repayable
until December 2023. We have €136m
of cash and undrawn facilities after
committed capital expenditure and our
debt is fully unsecured, giving us the
widest range of potential funding options
should opportunities arise requiring
additional funding.
3) Looking ahead
Market outlook negative in the near term;
we remain positive about the longer term
The full impact of the COVID-19 pandemic
on market rents and property values is
yet to be felt but we are well positioned
to withstand it thanks to our experienced
team, high-quality portfolio and robust
balance sheet. We believe the current
health crisis is underlining the importance
of city centre offices as places for
employees to work together and exchange
information and ideas. We remain confident
in the long-term prospects of the central
Dublin office market and the Dublin
residential market and will continue to
manage the business and our pipeline
of developments accordingly.
Kevin Nowlan
Chief Executive Officer
16 June 2020
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information Strategic report
I N V E S T M E N T C A S E
A C O M P E L L I N G I N V E S T M E N T C A S E
- W E L L P O S I T I O N E D F O R T H E F U T U R E
1 .
2 .
E X P E R I E N C E D
L O W L E V E R A G E
T E A M A N D
O P E R A T I O N A L
E X C E L L E N C E
A N D H I G H
Q U A L I T Y
T E N A N T B A S E
3 .
C L E A R
S T R A T E G Y
T O D R I V E
R E T U R N S
Read more on pages 78 to 81
Read more on pages 58 and 59
Read more on pages 24 and 25
4 .
5 .
6 .
D E V E L O P M E N T
S U S T A I N A B I L I T Y
F A V O U R A B L E
P I P E L I N E
A N I N T E G R A L
L O N G - T E R M
R I C H I N
P A R T O F T H E
O P P O R T U N I T Y
B U S I N E S S
D Y N A M I C S
I N D U B L I N
P R O P E R T Y
M A R K E T ,
I N C L U D I N G
B R E X I T
14
Read more on pags 54 and 55
Read more on pages 61 to 67
Read more on pages 16 to 19
Hibernia REIT plc Annual Report 2020 I M P A C T O F C O V I D - 1 9
While it is still too early to have visibility on the full impact of COVID-19 on Hibernia and the Irish property market, we have,
throughout this document, described how the Group is positioned and the actions we are taking to mitigate the risks arising from
the crisis. For ease of reference we summarise the points below.
Risk from COVID-19
Hibernia position / action
Health and safety
of staff, tenants,
suppliers and
the community
• Hibernia head office staff have been working from home throughout the crisis
• Dedicated manager selected to oversee Hibernia response to COVID-19
• Many tenant employees are also working from home although all our managed buildings have remained open
and accessible as needed by tenant employees
• We have prepared our buildings for increasing usage as the lockdown eases with individual building plans
covering access control, physical distancing measures, cleaning/sanitising and signage
• 2 Cumberland Place, our only development site, has now reopened, with appropriate precautionary measures,
having been closed between 28 March and 18 May 2020
• We are allowing healthcare staff to stay in the 12 un-rented units in Cannon Place on a temporary, pro bono
basis while they assist with the health crisis
• As part of our business continuity planning we had already ensured we were prepared for remote working:
our main IT systems are cloud based and many staff have portable work computers
• We are using software such as Microsoft Teams to communicate effectively within the Group (e.g. weekly
all-staff update call) and outside it
• 2 Cumberland Place, our only development site, has now reopened: completion is expected to be delayed
by c. three months to late 2020
• Having one of the lowest leverage levels in the European REIT sector (LTV at Mar-20: 16.5%) means Hibernia
can withstand a 65% decline in portfolio value without breaching debt covenants (at Mar-20)
• €136m of cash and undrawn facilities (net of committed capital expenditure) at Mar-20 to invest in
opportunities that arise
• Beyond our committed capital expenditure of €18m, primarily on 2 Cumberland Place, we have no current
development exposure
Remote working
and social distancing
measures may
disrupt business
operations
Investment market
activity and property
values may decline
Occupational market
activity and rental
values may decline
• As above, low leverage (LTV at Mar-20: 16.5%) means Hibernia can withstand a 76% decline in earnings before
interest and tax (58% decline in rental income) without breaching debt covenants (as at Mar-20)
• The WAULT on the Group’s in-place office portfolio is 6.4 years
• The Group has a diverse range of tenants, many of which are large multinational companies with strong
balance sheets
Debt funding may
become harder to
find/more expensive
• We have low leverage (LTV at Mar-20: 16.5%), weighted average debt maturity of 4.4 years and no debt
maturities before Dec-23
• We also have cash and undrawn facilities after committed capital expenditure and dividends of €136m and are
maintaining a minimum cash balance of €20m for liquidity purposes
• The Group’s fully unsecured debt structure gives us access to the widest possible range of funding alternatives
• Beyond our committed capital expenditure of €18m, primarily on 2 Cumberland Place, we have no current
development exposure
Tenants may not be
able to pay their rent
• The Group has a diverse range of tenants, many of which are large multinational companies (65% of our
contracted rent is from the Technology, Media and Telecommunications (“TMT”) sector and government/state
entities), and to date our rent collection statistics have remained strong
• The WAULT on the Group’s in-place office portfolio is 6.4 years
Dividends may need
to be cut
• We have proposed a final dividend for the financial year of 3.0 cent per share (taking the full year dividend to
4.75 cent or 86% of our EPRA EPS), subject to approval at the Annual General Meeting (“AGM”) and payable
at the end of July as normal
• We intend to continue to comply with the requirement in the REIT legislation to distribute at least 85% of our
rental profits annually via dividends
• The Group has a diverse range of tenants, many of which are large multinational companies, and to date our
rent collection statistics have remained strong
• The business is well capitalised, with low leverage and significant cash and undrawn facilities (see above)
15
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 Strategic report
M A R K E T R E V I E W
F A V O U R A B L E M A R K E T C O N D I T I O N S P R E
C O V I D - 1 9 : N E A R T E R M O U T L O O K N E G A T I V E
M A R K E T T R E N D S
Strong occupier and
investor demand in year to
March 2020
COVID-19 interruption
Housing shortage in Dublin
remains acute
Office occupiers are seeking
efficient space with strong
wellness and sustainability
credentials which helps
them recruit and retain the
best people
Some office occupiers are
seeking more flexible lease
terms (e.g. shorter term)
In the longer term, Dublin
office employment trends
and overall demographics
are likely to be favourable
16
H O W W E A R E R E S P O N D I N G
• We completed seven new lettings totalling 93,000 sq. ft.
adding a gross €5.7m to our contracted rent roll
• We are progressing with the office development at
2 Cumberland Place (58,000 sq. ft., now 41% pre-let)
which should complete by the end of 2020
• We undertook only modest investment activity, with
€23.3m spent on nine acquisitions
• We are providing support to our tenants, where needed
• We are continuing to lease available space, where
possible (e.g. 3M pre-lease)
• We are well positioned with low leverage (LTV: 16.5%)
and no debt maturities until Dec-23
• We are conserving cash while we see how the market is
impacted by COVID-19
• We have 11% of our portfolio in multi-family residential
blocks in Dublin
• We have 154.3 acres of land in Dublin with potential
for future mixed-use (predominantly residential)
development
• We seek to develop high quality space which meets the
latest wellness and sustainability standards: we expect
our 2 Cumberland Place development to be LEED
Platinum certified
• Where possible we form clusters of office buildings
(e.g. Windmill Quarter) to enable provision of additional
services (e.g. townhall, retail and fitness facilities)
• We have hired a full-time Sustainability Manager to drive
further improvements in ESG
• We are taking time to consider how the design of our
buildings can meet or exceed the needs of our tenants,
taking on board the learnings from COVID-19
• We will continue to show leadership in creating exciting
and innovative workplaces in Dublin
• We remain cautious about serviced offices providers
as tenants and our exposure remains low at <1% of
contracted rent
• In certain circumstances we are prepared to offer greater
lease flexibility for better terms:
– We signed a number of shorter leases (<10 years term
certain) at premium rents (in particular in 2WML)
– We provided one tenant in Observatory with 8,000
sq. ft. fully-fitted (“plug and play”) on a three year
contract, again at premium rents
• We have a pipeline of office developments which
can deliver up to 566,000 sq. ft. of Grade A office
accommodation in central Dublin
• We have 154.3 acres of land in Dublin with potential for
mixed-use (predominantly residential) development
Hibernia REIT plc Annual Report 2020 G E N E R A L E C O N O M Y
For most of the year to 31 March 2020
economic conditions were positive.
In 2019 global GDP growth was estimated
at 2.9% (source: the IMF) and while some
moderation in growth rates was generally
expected for the largest developed
economies (including China) in 2020,
consensus was that the outlook remained
benign. As recently as January 2020,
forecasts were for global GDP growth
of 3.3% in the year (source: the IMF).
However, the rapid emergence of the
COVID-19 pandemic and the extraordinary
precautionary measures governments
imposed in response are causing an
unprecedented fall in economic activity
and a global recession in 2020 now
seems inevitable. At the time of writing,
the IMF estimates global GDP will decline
3.0% in 2020, making it the first year of
contraction since 2009, when global GDP
fell 1.7% in the aftermath of the Global
Financial Crisis (source: the World Bank).
The main concern is that the current
restrictions in movement will cause lasting
economic damage despite the wide-
ranging economic stimuli introduced: in
the US, over 40m people have registered
for unemployment benefits in the eight
weeks to 18 May 2020, exceeding the
number of jobs created in the preceding
decade of expansion (source: US
Employment and Training Administration).
Ireland’s economic situation and outlook
reflect the global picture: having
experienced GDP growth of 5.5% in
2019 (helped by another strong year of
foreign investment in Ireland) growth
of 5.3% was expected in 2020 (source:
Goodbody), Irish GDP is now expected
to contract by 10.7% in 2020 before
returning to growth in 2021 (source:
Goodbody). Core domestic demand,
our preferred measure of Irish economic
activity, is expected to fall 11.7% in 2020
and then grow 6.7% in 2021 (source:
Goodbody). Irish unemployment has
risen significantly in a short space of
time: in Q4 2019 the unemployment rate
was 4.7%, near historic lows, but it is now
around 27% and is expected to recover
to approximately 10% by the end of 2021
(source: Goodbody).
Notwithstanding the external risks
currently faced, after a decade of fiscal
prudence the Irish economy is in a better
position to withstand a recession than it
was in the run-up to the Global Financial
Crisis. While government debt to gross
national income (“GNI”), a measure of
output that excludes the distorting effect
of some of the multinational sector, grew
from 28% in 2007 to approximately 98%
at the end of 2019, the current account
position was in significant surplus in
2019 versus the large deficit that existed
in 2007, the domestic banks’ capital
ratios and liquidity positions are much
improved, household debt to disposable
income fell from 200% in 2007 to 117%
in 2019 and house prices are much lower
relative to incomes (source: Goodbody).
The composition of the economy has also
shifted to one where the more resilient
and export-orientated multinational
sector makes up a greater share of output
and construction is a much smaller part
of the economy: the multinational sector
accounted for just over 40% of GDP in
2019 vs 20% in 2006 (source: Davy).
I R I S H P R O P E R T Y M A R K E T
O V E R V I E W
Just as the Irish economy is in a better
position to withstand a downturn than
it was in 2007, so the structural changes
that have occurred in the property sector
since 2007 leave it much better placed
to survive more challenging conditions.
From 2001 to 2008, 100% of investment
spend on Irish property was from
domestic investors (source: CBRE). At the
peak of the previous cycle in 2006, 36%
of investment spend was attributable to
developers, 26% to syndicates, 20% to
private investors and 10% to institutional
buyers, with the remainder attributable
to others including investment funds,
pension funds and occupiers (source:
CBRE). Much of this investment was debt-
funded, making it sensitive to fluctuations
in value. Since 2013, ownership has
shifted towards a more internationally
diverse investor base, many of which
are institutional investors seeking long
term income. Since 2013, €11.4bn has
been invested in Dublin offices, with
Irish investors accounting for 20% of
the spend, US 25%, Europe 19%, UK 15%,
REITs 12% and Asian/other 9% (source:
Knight Frank). Debt is generally a smaller
proportion of the funding mix for both
investment property and developments
than it was prior to the Global Financial
Crisis, and speculative development
funding has been limited, resulting
in more pre-leasing and overall new
building supply more in proportion with
occupier demand.
17
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 Strategic report
M A R K E T R E V I E W C O N T I N U E D
I R I S H P R O P E R T Y I N V E S T M E N T M A R K E T
In the 12 months to 31 March 2020 the
MSCI Ireland Property All Assets Index
(the “Index”) delivered a total return
of 4.4% excluding Hibernia (March
2019: 7.5%). This included the c. 1.4%
negative impact on values of commercial
property as a result of the stamp duty
increase introduced in October 2019.
Over the past year the industrial sector
has been the top performer in the Index
with a total return of 7.7% followed by the
office sector at 6.3% and ‘other’ – which
includes multi-family residential – at
4.2% (March 2019: 12.9%, 8.5% and 7.3%,
respectively). Prime office yields have
remained broadly constant over the past
two years and were at 4.0% as at 31 March
2020 (source: Knight Frank).
After record levels of investment of
€7.2bn achieved in 2019 (including
the Green REIT plc transaction), total
investment spend was €0.7bn in Q1
2020 (Q1 2019: €0.5bn) (source: CBRE).
The two key sectors that have dominated
investment volumes are residential and
offices which together accounted for
77% of volumes in 2019, up from 70%
Top 10 office investment transactions (12 months to March 2020)
Building
The Green REIT Portfolio
The Cedar Portfolio
5 Hanover Quay, D2
Nova Atria, Sandyford, D18
The Reflector, D2
The Treasury Building, D2
Citywest portfolio, D24
La Touche House, D1
Block 4&5 Harcourt Centre, D2
Elm Park, D4
Top 10 total
Source: Knight Frank.
Price
€1,500m
€530m
€197m
€165m
€155m
€116m
€105m
€84m
€54m
€53m
€2,959m
O F F I C E O C C U P A T I O N A L M A R K E T
in 2018 (source: Knight Frank). As a
result of the uncertainty (and in some
cases the practicalities of carrying
out property inspections) caused by
COVID-19, investment activity has slowed
significantly. Some transactions where
terms were already agreed (and due
diligence completed) prior to COVID-19
have proceeded to exchange of contracts,
most notably Bishop’s Square, D2, for
a price of €180m, an implied yield of
approximately 4.0%. However, given
current economic conditions the risk
is to the downside for property values
at present.
Buyer
Buyer nationality
Price
n/a
n/a
€1,233psf
€465psf
€1,260psf
€923psf
n/a
Henderson Park
Blackstone
Union Investment
Mapletree Investments
Deka
Google
Henley Bartra
€877psf
AXA IM Real Assets & BCP Capital
€942psf
€624psf
Arena Invest
Quadoro Doric
UK
US
Germany
Singapore
Germany
US
Ireland/UK
France/Ireland
Germany
Germany
Despite a lull in the middle of 2019, overall
occupier activity remained strong in the
Dublin office market with total take-up of
3.3m sq. ft. in the year making it the third
highest year on record (2018: 3.9m sq. ft.)
(source: Knight Frank). Large lettings
of 100,000 sq. ft. or greater were again
prevalent, accounting for 52% of overall
take-up in 2019 (2018: 37%), and the
average letting size in the year was 17,500
sq. ft., continuing the trend away from its
traditional level of around 10,000 sq. ft.
(source: Knight Frank). The strong
demand continued into 2020 with take-
up of 0.8m sq. ft. recorded in Q1 2020,
the second strongest opening quarter
on record (Q1 2019: 1.4m sq. ft.) (source:
Knight Frank). The city centre continued
to be the preferred location for office
occupiers, accounting for 68% of take-up
in 2019 (2018: 72%), though in Q1 2020
this reversed due to the 249,000 sq. ft.
letting to Mastercard in South County
Business Park in the South Suburbs
(source: Knight Frank).
In 2019 the Technology, Media and
Telecommunications (“TMT”) sector
continued to account for the majority of
space taken up at 55% (2018: 52%) and
18
IndustryBuilding
Area (sq. ft.)
Top 10 office lettings (12 months to March 2020)
Tenant
LinkedIn
TMT 2, 3 & 4 Wilton Park, D2
Mastercard
Financial
1 & 2 South County Business Park, D18
Amazon
Slack
Intercom
TMT Charlemont Square, D2
TMT Fitzwilliam 28, D2
TMT Cadenza, Earlsfort Terrace, D2
Paddy Power
Gambling Belfield Office Park, Clonskeagh, D14
Guidewire
TMT Stemple Exchange, D15
Google1
Elavon
Horizon
Top 10 total
TMT Block I Central Park, D18
TMT F1 Cherrywood Business Park, D18
Pharma 70 St. Stephen’s Green, D2
% of total
take-up
16%
9%
6%
5%
4%
3%
3%
3%
2%
2%
434k
249k
170k
135k
113k
90k
85k
75k
68k
62k
1,481k
54%
Google also leased c. 35k sq. ft. of space in other Dublin office buildings during the 12 months to Mar-20
1.
Source: Knight Frank.
it also dominated take-up in Q1 2020 at
91% (Q1 2019: 56%). Over the past decade
the TMT sector has accounted for 44% of
total Dublin office take-up. State bodies
accounted for 17% of take-up during 2019
(2018: 7%) while the co-working sector
accounted for 3% in 2019 (2018: 13%)
(source: Knight Frank). Overall, co-working
and serviced office providers occupy
approximately 4% of the city centre stock
(excl. period properties), up from 3% at
March 2019 (source: Knight Frank). This is
similar to other international cities such as
London, Paris and New York (Manhattan)
at 6%, 3% and 4%, respectively (source:
Knight Frank).
The vast majority of the lettings included
in the Q1 2020 statistics were signed
prior to the COVID-19 pandemic and the
disruption it has caused. Unsurprisingly,
despite there being more than 0.9m sq. ft.
Hibernia REIT plc Annual Report 2020 of space reserved at the end of Q1 2020
(source: CBRE), there is considerable
uncertainty around the demand outlook
for the rest of 2020. Our demand tracker,
run in conjunction with C&W, saw a 20%
fall in active demand between the end of
February and the end of April 2020 to a
figure of 2.5m sq. ft. (March 2019: 4.2m sq.
ft.) as businesses started to defer decisions.
The overall Dublin office vacancy rate (which
includes ‘shadow’ or ‘grey’ space) fell to 6.5%
at March 2020 from 7.0% at the end of Q4
2019 (March 2019: 5.4%) and the Grade A
vacancy rate in the city centre, where all of
Hibernia’s office portfolio is located, was
5.9% at March 2020, down from 6.4% the
previous quarter (March 2019: 4.5%) (source:
Knight Frank). These low rates of vacancy
will support the Dublin office market over
the coming quarters if transactional activity
declines as anticipated (source: CBRE)
but nonetheless vacancy rates are likely to
rise as un-let space is delivered. Prime city
centre rents remained stable in the €62.50-
€65.00psf range as at March 2020 (source:
JLL, Knight Frank, CBRE) and there has
been limited letting evidence seen since,
though the risks are to the downside in the
current economic environment.
R E S I D E N T I A L S E C T O R
Housing delivery continued to increase in
2019, with over 21,000 new homes delivered
nationally (up from 18,000 in 2018) and
33% of these completions were delivered
in the Dublin area (2018: 38%) (source: the
CSO). When combined with the commuter
counties around Dublin, the Greater
Dublin Area (“GDA”) accounted for 55% of
completions in 2019 (57% in 2018) (source:
the CSO). Growth in housing completions
was already slowing prior to the arrival of
COVID-19: 4,500 units were completed in
Q1 2020, a 6% increase in completions over
Q1 2019, the lowest year-on-year increase
since 2013 (source: Goodbody). March 2020
saw the sharpest fall in construction activity
since 2009 as the impact of the crisis began
to be felt and the overall completion figures
for 2020 are likely to be negatively affected,
given site closures and general business
interruption, with the Central Bank of Ireland
estimating a drop of 25% in supply this year.
Regardless of the impact of COVID-19, the
21,000 housing completions in 2019 was still
well below the natural demographic demand
for at least 35,000 units per annum.
The uncertainty caused by COVID-19 is
likely to make securing project-specific debt
funding for speculative office development
even more challenging than it has been
in recent years and as a result, as 2020
progresses, we may see some supply
being delayed or postponed: at present
construction has yet to commence for any of
the forecast supply 2023 in the table above.
O F F I C E D E V E L O P M E N T
P I P E L I N E
The table below sets out our expectation
for upcoming supply in Dublin’s city
centre and for the whole of Dublin by
calendar year. We currently expect 7.6m
sq. ft. of gross new space to be delivered
between 2020 and 2023 for the whole
of Dublin, of which 67% will be in the
city centre. 43% of office stock under
construction in Dublin (45% in the city
centre) has been let or reserved, meaning
there is 3.1m sq. ft. under construction but
not yet let (1.9m sq. ft. in the city centre)
(source: Knight Frank/Hibernia).
Year
2020f
2021f
2022f
2023f
Dublin city centre supply
All Dublin supply
1.2m sq. ft. (39% pre-let)
2.0m sq. ft. (34% pre-let)
1.8m sq. ft. (57% pre-let)
2.7m sq. ft. (62% pre-let)
0.8m sq. ft. (15% pre-let)
1.2m sq. ft. (18% pre-let)
1.3m sq. ft. (29% pre-let)
1.7m sq. ft. (21% pre-let)
Total 2020-23
5.1m sq. ft. (39% pre-let)
7.6m sq. ft. (39% pre-let)
Source: Knight Frank/Hibernia.
Despite the Ireland 2040 policy papers’
aspirations for compact urban growth there
continues to be a surge in housebuilding in
the commuter belt, up 36% in 2019, while
completions in Dublin grew by just 2%,
the lowest rate of growth in the country.
Although apartment completions did
grow rapidly in 2019 (up 60%), apartments
continue to represent the lowest
percentage of new housing delivery of any
EU member state: the 3,600 apartments
completed in 2019 represent just 17% of
total completions, relative to an EU average
of 59% (source: the CSO). In addition, due
to the undersupply of housing, particularly
within Dublin, and viability/affordability
issues, Goodbody estimates that 80%
of the apartments delivered are being
purchased by Private Rental Sector (“PRS”)
investors and the ongoing delivery of
apartments is likely to depend on continued
demand from PRS investors.
The outlook for the Irish housing market will
depend on how the current COVID-19 crisis
evolves and the impact on the economy.
Residential property prices increased by
1.1% nationally in the year to February 2020
(year to February 2019: 4.3%). In Dublin,
residential property prices decreased by
0.1% in the year to February 2020 (source:
the CSO). While transaction volumes in the
residential sector are likely to be muted
in the near term, institutional appetite for
multi-family product is expected to remain
strong as investors seek yield, with the
sector widely seen as more defensive than
some other property classes: the persistent
undersupply of housing in Ireland only
enhances these defensive characteristics
(source: CBRE).
19
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 Strategic report
O U R S T A K E H O L D E R S
We recognise the importance of
stakeholder engagement in achieving
our strategic priorities and ensuring the
long-term success of the Group.
What do they care about most?
• Fair pay
How we engage
• Open communication channels
• Good working environment
• Departmental meetings
• Clear communication
• Social network
• Regular townhalls
• Clear policies
• Opportunities for personal
• Formal review process
and community development
• Employee surveys
How do we respond?
• Performance is rewarded
• Director for Workforce
Engagement appointed
• New purpose-designed
workspace in 1WML
• Active Social Committee
E M P L O Y E E S
What do they care about most?
• Positive engagement
How do we respond?
• Liaison during development projects
• Provision of retail, social and
• Public realm improvements
other amenities
• Improvement of environment
• Community support
programmes
• Quality buildings
• Preservation of historical features
• Charity events
• Local social events
• Sponsoring apprenticeships
How we engage
• Community liaison
during developments
• Support local
community projects
• Charitable events
• Social events
C O M M U N I T I E S
Our purpose
Our purpose is to improve the built environment
in Dublin, primarily the stock of city centre offices,
providing above average long-term returns for
our shareholders and bringing benefits to all
our stakeholders.
Our approach
We define our strategic priorities, set our targets
and risk appetites and monitor our progress
and the likely outcomes. To do this stakeholder
engagement and management are key
ingredients for our continued success.
Read more on pages 22 and 23
Listening to our stakeholders
Understanding views, perspectives, concerns and
ideas from inside and outside the Group is vital to
ensure our operations meet the changing needs
of our stakeholders. Here we highlight how we
engage and respond. This year we completed our
first materiality survey to identify the issues of
most important key stakeholders
Read more on:
• Culture and people (pages 76 and 77)
• Investor relations (pages 84 to 86)
• Sustainability and first materiality
survey (pages 61 to 67)
• Section 172 statement (pages 86
and 87)
In all of this we recognise the need to act fairly
and maintain our reputation for high standards
of business conduct.
Read more on page 83
Our impact on the environment
and the community
Central to our property business is sustainability,
not only as this is increasingly a focus of
regulation around property development and
management, but also because our business
can make a positive impact on a sustainable
future and our stakeholders care about our
green credentials.
Read more in our Sustainability
Report 2020 which is available at
www.hiberniareit.com
20
Hibernia REIT plc Annual Report 2020 What do they care about most?
• Highest-quality, well-
designed space
• Flexible working environments
• Best-in-class service
• Flexible lease and
other arrangements
• Sustainability
How we engage
• Onsite Hibernia staff
• One-on-one meetings
• Engagement through
crisis management
• Social events
• Tenant surveys
How do we respond?
• Onsite building managers
• Targeted service improvements
• Clusters of enhanced services
• Sustainability initiatives
• COVID-19 support measures
T E N A N T S
V I S I O N
Investing for the
long-term to
improve Dublin
I N V E S T O R S
S U P P L I E R S
What do they care about most?
• Positive returns
• Regular dividends
• Clear communication
and disclosure
• Good governance practice
• Industry benchmarked
sustainability
How we engage
• One-on-one meetings and
site visits
• Roadshows and presentations
• Available for ad hoc
conversations outside of
closed periods
• Attendance at conferences
• Participation in industry
benchmarks such as GRESB
• High quality materials and
clear website
How do we respond?
• Investor relations
programme
• Clear disclosures
• Address concerns
and requests
• Aspire to best-in-class
business practices
• Online survey
What do they care about most?
• Prompt payment
How we engage
• Supplier Code of Conduct
• Fair terms
• Reliable workflow
• Reducing their
carbon footprint
• Technology enhancements for
paperless account
management
• One-on-one engagement
How do we respond?
• Prompt payment
• Fair tender process
• Emphasis on quality and
track record
21
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information O U R B U S I N E S S M O D E L
C R E A T I N G L O N G - T E R M
V A L U E
O U R I N P U T S
P E O P L E , R E L A T I O N S H I P S
A N D P U R P O S E
Experienced leadership with specialist investment,
asset management, development, sustainability and
finance teams and a deep knowledge of the Dublin
property market. We have a clear purpose and an open
and progressive culture.
Read more on pages 76 and 77
We seek to be at the forefront of understanding and
responding to changes in occupier needs and to
deliver world class workplaces. Our clustering strategy
enables us to provide better experiences and services
to our tenants and their staff. Unlike many property
companies in Ireland we manage most of our buildings
ourselves as we feel this is better for both tenant and
landlord. Our specialist Sustainability Manager ensures
we are assessing ways to reduce our environmental
impact and working with tenants to reduce theirs too.
Read more on changing occupier needs on page 16
Read more on our clustering strategy on page 6
We run with low leverage: our through-cycle target is
20-30% LTV.
Read more on page 58
I N N O V A T I O N S A N D
T E N A N T S E R V I C E
F I N A N C I A L
R E S O U R C E S
22
Hibernia REIT plc Annual Report 2020Strategic report We focus primarily on central Dublin offices and on Dublin multi-
family residential assets. Our approach is based on
active ownership of our properties through asset management
and/or redevelopment, assembling clusters of adjacent assets
where possible, and recycling capital into new opportunities
to generate above average long-term returns while using only
modest leverage.
H O W W E A D D
V A L U E
B U Y
Typically, we buy off-market
and we are experienced in
acquiring property through
secured loans.
A C T I V E
M A N A G E M E N T
We seek close relationships
with tenants and take a
cycle-based approach
to maturities.
C L U S T E R I N G
Where possible we form
clusters of buildings with
shared facilities to benefit
our tenants and their
employees.
A S S E T
I M P R O V E M E N T
We unlock value
through refurbishment,
redevelopment and
change of use, increasing
the rents tenants are
prepared to pay.
S E L L
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.
T H E V A L U E W E S H A R E
Investors
We aim to grow capital values and
income for our shareholders.
Tenants
Our well-located, attractive
buildings offer tenants excellent
spaces to work or live in.
Suppliers
We are responsible customers and
seek to pay suppliers promptly.
We encourage the highest ethical
standards in our supply chain and
support our suppliers through
training and information.
Communities
Investing in our buildings and
clusters improves the built
environment and benefits
local communities.
Employees
We give our employees the chance
to gain experience and develop.
Our review process gives concise
feedback and we run training
schemes for our employees.
23
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information O U R S T R A T E G Y
C L E A R S T R A T E G I C T H I N K I N G I S
K E Y T O O U R L O N G - T E R M S U C C E S S
Strategic priorities 2019-20
Strategic priorities 2020-21
Priority
Key targets
What we achieved
Priority
Key targets
Risks
1 Increase rental income
to drive dividends per
share and, where possible,
increase WAULTs
• Get office vacancy rate back
• Vacancy rate reduced from 12% to 7%
below 5%
• Agree outstanding and upcoming
rent reviews to capture reversion
• Contracted rent +14% to €65.7m (new leases added
€6.3m and nine completed rent reviews added €2.7m)
• WAULT reduced 15% to 6.4 years
• Net rental income +10% to €58.6m and dividend +36%
to 4.75c per share
• Continue construction of
• 2 Cumberland Place development expected to
2 Progress with our
committed development
scheme and prepare
pipeline of future projects,
especially where there
is potential for more
clusters similar to the
Windmill Quarter
2 Cumberland Place and aim to
complete as early as possible in
2020 calendar year
• Obtain planning permission
for redevelopment of
Clanwilliam Court
• Assess existing in-place portfolio
for future value-add opportunities
complete in late 2020 calendar year following COVID-
related delays and the addition of an extra floor to the
planned building (+13% additional lettable space). 41%
pre-let to 3M in Apr-20
• Provisional planning permission received for
redevelopment of Clanwilliam Court. Potential to add
significantly to existing areas across all three blocks
and create an office cluster (with Marine House)
• Planning permission granted for 337k sq. ft of offices
(343k incl. reception areas) at Harcourt Square in
Apr-20, an increase of 9% over previous planning
• Mixed use pipeline increased by 5% to 154 acres
through further acquisitions
• 77 SJRQ was disposed of in March 2019, generating
sales proceeds of €35.5m, received in April 2019
• €23.3m (incl. costs) was invested in nine acquisitions,
most of which were assets adjoining or adjacent to
existing Group properties
• €21.3m was invested in capital expenditure on our
development projects, primarily 2 Cumberland Place
• €25.0m used to buy back shares (see below)
• Net debt increased by 11% to €241m and LTV increased
from 15.6% to 16.5%
• €25m of property sales proceeds returned to
shareholders via an on-market share buyback
programme: in total 17.6m shares purchased and
cancelled during the year at an average price of €1.42
per share, well below the prevailing Net Asset Value
(“NAV”) per share
3 Recycle capital to
monetise gains and make
selective investments
• Continue to seek to dispose of
assets which do not meet our
expectations for forward returns
• Make acquisitions or investments
where we see opportunities to
enhance Group returns
4 Maintain an efficient
balance sheet
• Continue to progress towards
target range of 20-30% LTV
• Where net sales reduce leverage,
consider returning excess capital
to shareholders
5 Continue to improve
environmental efficiency
of the portfolio
• Reduce energy consumption
and green-house gas (”GHG”)
emissions per square metre on
LFL and absolute basis
• New office buildings delivered to
achieve at least LEED Gold
• LFL reductions in electricity and fuel consumption per
• Improving
square metre of 14% and 13% respectively
• Reduction in LFL GHG emissions intensity per square
metre across the office portfolio of 13% versus 2018
• 1SJRQ and 2WML office developments received LEED
Platinum and LEED Gold certifications, respectively
• 2 Cumberland Place on track for LEED Platinum
certification
5 Continue to improve
of the portfolio
environmental efficiency
environmental
efficiency should
enhance TAR,
relative TPR and
EPRA EPS in the
longer term
24
Impact on KPIs
• Increased rent
and WAULT may
increase Total
Accounting Return
(“TAR”), EPRA EPS
and relative Total
Property Return
(“TPR”)
1 Grow rental income and,
drive dividends per share
where possible, WAULTs to
• Let remaining space in 2
Cumberland Place
• Occupational
market weakness
• Get office vacancy rate to 5%
• Existing tenants leave or
or below
are unable to pay their rent
• Agree two outstanding rent
reviews and five rent reviews
upcoming during FY21
• Minimise impact from COVID-19
on rental income
• Development profits
enhance TAR and
relative TPR
• Receipt of planning
permission may do
likewise but to a
much lesser extent
2 Complete 2 Cumberland
development pipeline to
Place and work to optimise
maximise risk-adjusted
returns for shareholders
(e.g. optimising clusters,
progressing re-zonings)
• Deliver 2 Cumberland Place on
• COVID-19 disrupts
budget in late 2020
• Enhance and progress
completion of 2
Cumberland Place
pipeline schemes to improve
• Market decline reduces
potential returns
development surpluses
• Assess timing of upcoming
• Construction cost inflation
projects in light of
market conditions
• Assess existing in-place
portfolio for future value-
add opportunities
or (sub-)contractor failure
does likewise
• Adverse planning or
re-zoning decisions
• Disposals above
market value
enhance TAR and
relative TPR
• Investments should
enhance TAR and
relative TPR in the
longer term
3 Continue to recycle
investments to enhance
capital and make selective
Group returns
• Continue to seek to dispose of
• Market decline means
assets which do not meet our
inability to achieve book
expectations for forward returns
value on disposals
• Make acquisitions or investments
• No attractive acquisition or
where we see opportunities to
investment opportunities
enhance Group returns in the
medium term
• Returns expectations
wrong
• An efficient balance
sheet should
enhance TAR and
EPRA EPS
4 Maintain balance sheet
of investment opportunities
flexibility to take advantage
as they arise
• Maintain sufficient cash and
• Insufficient funding
undrawn facilities for any
investment opportunities
that arise
to take advantage of
investment opportunities
• Insufficient covenant
• Ensure level of indebtedness
headroom to take
does not bring the Group close
advantage of
to breaching any of the financial
investment opportunities
covenants in its debt facilities
• Reduce energy consumption and
• Failure to improve
GHG emissions per square metre
sustainability performance
on LFL and absolute basis
• Achieve LEED Platinum
certification at
2 Cumberland Place
• Revise Sustainability Strategy
could impact the Group’s
ability to attract tenants
and/or the value of the
Group’s properties in the
longer term
Hibernia REIT plc Annual Report 2020Strategic report We are in a strong position with a high-quality portfolio, low
leverage and little current development exposure. Given the
COVID-19 crisis our current risk appetite has reduced.
Strategic priorities 2020-21
Priority
Key targets
Risks
1 Grow rental income and,
where possible, WAULTs to
drive dividends per share
• Let remaining space in 2
Cumberland Place
• Occupational
market weakness
• Get office vacancy rate to 5%
• Existing tenants leave or
or below
are unable to pay their rent
Strategic priorities 2019-20
Priority
Key targets
What we achieved
1 Increase rental income
to drive dividends per
share and, where possible,
increase WAULTs
• Get office vacancy rate back
• Vacancy rate reduced from 12% to 7%
below 5%
• Contracted rent +14% to €65.7m (new leases added
• Agree outstanding and upcoming
€6.3m and nine completed rent reviews added €2.7m)
rent reviews to capture reversion
• WAULT reduced 15% to 6.4 years
• Net rental income +10% to €58.6m and dividend +36%
to 4.75c per share
Impact on KPIs
• Increased rent
and WAULT may
increase Total
Accounting Return
(“TAR”), EPRA EPS
and relative Total
Property Return
(“TPR”)
• Agree two outstanding rent
reviews and five rent reviews
upcoming during FY21
• Minimise impact from COVID-19
on rental income
• Deliver 2 Cumberland Place on
budget in late 2020
• Enhance and progress
• COVID-19 disrupts
completion of 2
Cumberland Place
pipeline schemes to improve
potential returns
• Market decline reduces
development surpluses
• Assess timing of upcoming
projects in light of
market conditions
• Assess existing in-place
portfolio for future value-
add opportunities
• Construction cost inflation
or (sub-)contractor failure
does likewise
• Adverse planning or
re-zoning decisions
• Development profits
enhance TAR and
relative TPR
• Receipt of planning
permission may do
likewise but to a
much lesser extent
2 Complete 2 Cumberland
Place and work to optimise
development pipeline to
maximise risk-adjusted
returns for shareholders
(e.g. optimising clusters,
progressing re-zonings)
2 Progress with our
scheme and prepare
committed development
pipeline of future projects,
• Continue construction of
• 2 Cumberland Place development expected to
2 Cumberland Place and aim to
complete in late 2020 calendar year following COVID-
complete as early as possible in
related delays and the addition of an extra floor to the
2020 calendar year
planned building (+13% additional lettable space). 41%
especially where there
is potential for more
clusters similar to the
Windmill Quarter
• Obtain planning permission
for redevelopment of
Clanwilliam Court
• Assess existing in-place portfolio
for future value-add opportunities
pre-let to 3M in Apr-20
• Provisional planning permission received for
redevelopment of Clanwilliam Court. Potential to add
significantly to existing areas across all three blocks
and create an office cluster (with Marine House)
• Planning permission granted for 337k sq. ft of offices
(343k incl. reception areas) at Harcourt Square in
Apr-20, an increase of 9% over previous planning
• Mixed use pipeline increased by 5% to 154 acres
through further acquisitions
3 Recycle capital to
selective investments
monetise gains and make
• Continue to seek to dispose of
• 77 SJRQ was disposed of in March 2019, generating
assets which do not meet our
sales proceeds of €35.5m, received in April 2019
expectations for forward returns
• €23.3m (incl. costs) was invested in nine acquisitions,
• Make acquisitions or investments
most of which were assets adjoining or adjacent to
where we see opportunities to
existing Group properties
enhance Group returns
• €21.3m was invested in capital expenditure on our
development projects, primarily 2 Cumberland Place
• €25.0m used to buy back shares (see below)
4 Maintain an efficient
balance sheet
• Continue to progress towards
• Net debt increased by 11% to €241m and LTV increased
target range of 20-30% LTV
from 15.6% to 16.5%
• Where net sales reduce leverage,
• €25m of property sales proceeds returned to
consider returning excess capital
shareholders via an on-market share buyback
to shareholders
programme: in total 17.6m shares purchased and
cancelled during the year at an average price of €1.42
per share, well below the prevailing Net Asset Value
(“NAV”) per share
• Disposals above
market value
enhance TAR and
relative TPR
• Investments should
enhance TAR and
relative TPR in the
longer term
3 Continue to recycle
capital and make selective
investments to enhance
Group returns
• Continue to seek to dispose of
assets which do not meet our
expectations for forward returns
• Market decline means
inability to achieve book
value on disposals
• Make acquisitions or investments
where we see opportunities to
enhance Group returns in the
medium term
• No attractive acquisition or
investment opportunities
• Returns expectations
wrong
• An efficient balance
sheet should
enhance TAR and
EPRA EPS
4 Maintain balance sheet
flexibility to take advantage
of investment opportunities
as they arise
• Maintain sufficient cash and
undrawn facilities for any
investment opportunities
that arise
• Ensure level of indebtedness
does not bring the Group close
to breaching any of the financial
covenants in its debt facilities
5 Continue to improve
of the portfolio
environmental efficiency
• Reduce energy consumption
• LFL reductions in electricity and fuel consumption per
• Improving
and green-house gas (”GHG”)
emissions per square metre on
LFL and absolute basis
• New office buildings delivered to
achieve at least LEED Gold
square metre of 14% and 13% respectively
• Reduction in LFL GHG emissions intensity per square
metre across the office portfolio of 13% versus 2018
• 1SJRQ and 2WML office developments received LEED
Platinum and LEED Gold certifications, respectively
• 2 Cumberland Place on track for LEED Platinum
certification
environmental
efficiency should
enhance TAR,
relative TPR and
EPRA EPS in the
longer term
5 Continue to improve
environmental efficiency
of the portfolio
• Reduce energy consumption and
GHG emissions per square metre
on LFL and absolute basis
• Achieve LEED Platinum
certification at
2 Cumberland Place
• Revise Sustainability Strategy
• Insufficient funding
to take advantage of
investment opportunities
• Insufficient covenant
headroom to take
advantage of
investment opportunities
• Failure to improve
sustainability performance
could impact the Group’s
ability to attract tenants
and/or the value of the
Group’s properties in the
longer term
25
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information S T R A T E G Y I N A C T I O N
“Through a combination of leasing
activity and rent reviews, we have
achieved a double digit increase in rental
income. And with 2 Cumberland Place
expected to complete this year and 7%
vacancy in the office portfolio, there is
potential to increase rental income
further.”
Tom Edwards-Moss, CFO
Contracted rental income
+14.1% to
€65.7m
FY20 net rental income
+9.9% to
€58.6m
Letting activity reduced portfolio
vacancy from 12% to 7% and contracted
rent grew €8.1m in the year as a result of:
• New lettings, license agreements and
lease variations adding €6.3m
• Nine rent reviews concluded
adding €2.7m
• Acquisitions adding €0.8m
• Lease expiries, breaks, surrenders and
adjustments reducing contracted rent
by €1.7m
26
2019-20 strategic priority 1
Hibernia REIT plc Annual Report 2020Strategic report I N C R E A S I N G O U R
R E N T A L I N C O M E
27
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 P R O G R E S S W I T H
D E V E L O P M E N T S
2 C U M B E R L A N D P L A C E
S T R A T E G Y I N A C T I O N
28
Hibernia REIT plc Annual Report 2020Strategic report “During the financial year we managed to
obtain planning permission for an extra
floor, adding 7,000 sq. ft. to the scheme.
In spite of the site closure and associated
disruption caused by COVID-19, 2
Cumberland Place is on track to complete
by the end of 2020, bringing the total
office and ancillary space on the 1.6 acre
site to approximately 190,000 sq. ft.”
Ger Doherty,
Head of Development Management
Lettable area
+13% to
58,000 sq. ft.
Proportion of building pre-let
41%
COVID-19 notwithstanding, construction
work on 2 Cumberland Place is
advancing well. In April 2020 we agreed
to lease 24,000 sq. ft. to 3M, well ahead
of its expected completion in late 2020.
When fully let, the building is expected
to deliver contracted rent in excess of
€3m per annum.
2019-20 strategic priorities 1, 2, 3, 4, 5
29
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 P R O G R E S S W I T H
D E V E L O P M E N T S :
A D V A N C I N G T H E P I P E L I N E
S T R A T E G Y I N A C T I O N
30
Hibernia REIT plc Annual Report 2020Strategic report “We made good progress with our
pipeline in the year, receiving provisional
planning permission for Clanwilliam and
the revised Harcourt scheme. In April
2020 we received full planning permission
for Harcourt. We also increased the
mixed-use pipeline by 6.8 acres.”
Mark Pollard, Director of Development
Office development pipeline
+5% to
566,000 sq. ft.
Mixed-use pipeline
+5% to 154.3
acres
2019-20 strategic priority 2
31
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 Strategic report
S T R A T E G Y I N A C T I O N
R E C Y C L I N G C A P I T A L
32
Hibernia REIT plc Annual Report 2020Strategic report “While maintaining our disciplined
approach, we have successfully recycled
the net sales proceeds of €60.3m
generated in FY19 into accretive
opportunities.”
Kevin Nowlan, CEO
Development expenditure
€21.3m
Net acquisition expenditure
€23.3m
Share buyback
€25.0m
No sales were made in the financial
year but €35.5m of proceeds from the
sale of 77SJRQ were received. Net debt
grew €24m to €241m, equating to an
LTV of 16.5% (2019: 15.6%).
2019-20 strategic priorities 3, 4
33
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 S T R A T E G Y I N A C T I O N
“I am excited to have joined Hibernia. The
business has already made good strides in
improving its sustainability performance
but there is a lot more to come and I look
forward to helping deliver it.”
Neil Menzies,
Sustainability Manager
Reduction in energy consumption
across our managed portfolio on LFL
basis
13%
Reduction in GHG emissions across
our managed portfolio on
LFL basis
13%
In 2019 we made our second annual
submission to GRESB improving our
score by 17 percentage points to
75% and receiving a three star award
(ranking us in the third quintile of
companies assessed). We also recruited
Neil Menzies as full-time Sustainability
Manager: he joined in January 2020
and will help to further improve our
sustainability performance in future.
34
2019-20 strategic priority 5
Hibernia REIT plc Annual Report 2020Strategic report I M P R O V I N G O U R
S U S T A I N A B I L I T Y
P E R F O R M A N C E
35
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 Strategic report
M E A S U R I N G O U R P E R F O R M A N C E
M E A S U R I N G O U R
P E R F O R M A N C E
Our key performance indicators
(“KPIs”) are the main metrics we use
in running the business and assessing
its performance. They also help
determine variable remuneration.
T O T A L A C C O U N T I N G R E T U R N (“ T A R” )
E P R A E A R N I N G S P E R S H A R E ( “ E P R A E P S ” )
2020
2019
2018
Reason
Measures the absolute growth
in the Group’s EPRA NAV
per share plus dividends per
share paid, expressed as a
percentage of the period’s
opening EPRA NAV per share.
Link to remuneration
(see pages 106 and 107 for
further details)
A performance metric for:
• All annual bonuses
• Long Term Incentive Plan
(“LTIP”)
5.6%
11.1%
10.5%
2020
2019
2018
Commentary
TAR was 5.6% or 7.5%
excluding the increase in
stamp duty introduced in the
year. NAV per share increased
due to an uplift in property
values and an accretive share
buyback. In addition dividends
paid increased as rental
income grew.
Reason
A key measure of the Group’s
operating performance and
capacity to pay dividends:
it shows profit after tax per
share excluding revaluations
and any gains or losses on
disposals. Please see note 14 to
the Group financial statements
for a reconciliation of this
figure to IFRS profit.
Link to remuneration (see
pages 106 and 107 for further
details)
A performance metric for all
annual bonuses.
5.5c
4.0c
2.8c
Commentary
EPRA EPS grew 39.9% due
to increased rental income
(from leasing activity and rent
reviews) and a reduction in
operating expenses (primarily
due to the expiry of the IMA
in Nov-18 and its replacement
with a new, lower-cost
remuneration scheme).
T O T A L P R O P E R T Y R E T U R N (“ T P R” )
V S M S C I I R E L A N D I N D E X
T O T A L S H A R E H O L D E R R E T U R N (“ T S R” )
4.4%
1.5%
2020
2019
2018
7.5%
7.7%
4.1%
3.7%
5.9%
11.6%
11.4%
2020
2019
2018
Reason
Measures the total return
(i.e. capital and income return)
of the Group’s property
portfolio, as calculated by
MSCI, and compares it against
the TPR of the Irish property
market as calculated by MSCI
(the MSCI Ireland Quarterly
Property All Assets Index)
excluding Hibernia properties.
Commentary
The Group generated a TPR
of 5.9% while the benchmark
(excl. Hibernia) produced
a TPR of 4.4%. The relative
outperformance resulted
primarily from the progress
made with our 2 Cumberland
Place development and our
success in leasing 2WML in
the year.
Link to remuneration (see
pages 106 and 107 for further
details)
A performance metric for:
• All annual bonuses
• LTIP
36
Reason
TSR measures shareholder
value creation through
increase in share price and
dividends paid expressed
as a percentage of the
period’s opening share price.
It enables comparison to
peer companies.
The TSR of the Group is
benchmarked against the
FTSE/NAREIT Developed
Europe index constituents.
Link to remuneration (see
pages 106 and 107 for further
details)
A performance metric for LTIP.
-18.4%
-5.2%
18.1%
Commentary
TSR for the Group in the
year was -18.4% versus
the benchmark at -15.4%.
The Group’s share price
reduced significantly in the
year due to the impact of the
tax changes introduced in
October 2019, the result of the
General Election in early 2020
and the COVID-19 pandemic.
Hibernia REIT plc Annual Report 2020 Operational metrics
In addition to our KPIs, we use the following main operational metrics in managing the business:
Investment
Development
Acquisitions
Disposals
Disposals – premium to
book value
Net acquisition spend
See more on page 51
2020
€23m
2019
€40m
Capital expenditure
€nil
€(100)m
Profit on cost (completed in FY)
n/a
€23m
3%
€(60)m
Yield on cost (completed in FY)
Income already secured on
committed schemes
Committed capital expenditure
See more on page 54 and 55
2020
€21m
n/a
n/a
€1.5m
€18m
2019
€45m
>75%
9%
€nil
€35m
Asset management
Financial management
In-place office vacancy
Contracted rent
In-place office WAULT
to break/expiry
EPRA LFL rental growth
Premium to Estimated Rental
Value (“ERV”) (market lettings)
Rent collected within 30 days
2020
7%
€66m
6.4yrs
+4%
+9%
90%
2019
12%
Net debt
€58m
LTV
7.5yrs
+8%
+5%
97%
Effective interest rate on debt
% of drawn debt interest rate
fixed or hedged
Cash and undrawn facilities
Capital returned via
share buyback
2020
€241m
16.5%
2.1%
76%
€154m
2019
€217m
15.6%
2.1%
128%
€178m
€25m
€nil
See more on pages 55 and 56
See more on pages 57 to 60
Our portfolio
Portfolio value
LFL change in portfolio
valuations
LFL change in portfolio
valuations ex stamp duty
% of portfolio with medium-
term redevelopment potential
See more on pages 52 to 54
Culture and people
Number of employees
% female employees
Training per employee
(average hours)
Employee retention (turnover)
See more on pages 76 and 77
Environmental, Social and
Governance (“ESG”)
2020
2019
€1,465m
€1,395m
+2%
+4%
18%
+8%
+8%
19%
Absolute GHG emissions (tCO2)
LFL GHG emissions (tCO2)
% of office schemes completed
to date with LEED Gold
certification or better
Amount raised for
charity partners via DATD
See more on pages 61 to 67
2020
3,514
3,509
2019
4,045
4,045
100%
100%
€349k
€300k
Alternative performance measures
The Group uses a number of financial measures to describe
performance which are not defined under IFRS and are therefore
considered APMs. These are described on page 188.
2020
36
31%
17hrs
14%
2019
33
43%
20hrs
6%
37
Strategic report Governance Financial statements Additional informationHibernia REIT plc Annual Report 2020 R I S K M A N A G E M E N T
M A N A G I N G O U R
R I S K S A N D
O P P O R T U N I T I E S
Our risk management strategy is designed to align
the Group’s interests with those of shareholders, by
embedding the strategic priorities of the Group
within risk management.
2 0 1 9 - 2 0 H I G H L I G H T S
• Broadening the experience on the
Board by appointing two additional
independent Non-Executive Directors
• Focus on the future by hiring a full-
time Sustainability Manager
• Consideration of the risks caused by
the COVID-19 crisis and the mitigants
to this
• Detailed review of the principal risks
and uncertainties facing the Group
• General Data Protection Regulation
(“GDPR”) implementation
and compliance
• A standalone Sustainability
Report published along with the
Annual Report
• Improving the Group’s GRESB rating
• Completion of a cyber security audit
• New committees established for
Risk & Compliance, Sustainability,
Marketing, Health and Safety,
and Operations
2 0 2 0 - 2 1 F O C U S
• COVID-19: manage the business to
deal with the far-reaching impact of
the pandemic on the economy
• Climate change: the impact of on the
Group and its strategy
• Future proofing our portfolio with
technology and efficiencies
• Broadening the Group’s sustainability
reporting though its standalone report
• Monitoring and adapting to evolving
tenant needs
• Efficiency/optimisation and
sustainable design of the
development pipeline
• The impact of the new Government
on the property sector and
macro environment
• Monitoring the trade negotiations
between the EU and UK, and other
international developments
• Assessing the impact and ensuring
flexible mitigation procedures are
available to deal with exceptional
events such as the COVID-19 crisis
• ISO 14001 and 45001 accreditation
38
Risk profile
As a Group with the majority of its
assets in central Dublin offices, Hibernia
is especially sensitive to any factors
which impact demand for office space
in Dublin’s city centre. Any decline in
demand or material increase in supply
could negatively impact the value of the
Group’s portfolio, its rental income and
its ability to recycle capital or source new
capital. The Group has identified certain
principal risks and uncertainties that
could prevent the Group from achieving
its strategic priorities and has assessed
how these risks could best be mitigated
through a combination of internal
controls, risk management and the
purchase of insurance cover. These risks
are reviewed and updated on a regular
basis and were last formally assessed by
the Board in May 2020.
Risk appetite
Risk appetite defines the amount and
type of risk the Group is prepared to
accept in pursuit of its strategic priorities.
As part of the overall framework for risk
governance, it sets limits to risk taking.
Risk appetite is defined in qualitative
terms as well as quantitative terms,
through a series of high-level limits
and thresholds covering all areas of
activity. As part of the risk management
framework, risks are identified and the
Board then decides the appropriate
level of risk that should be taken and, if
necessary, risk mitigations that should
be put in place. The Audit Committee
supports the Board in identifying and
managing risk appetite. An overview of
the Group’s risk appetite is shown in the
diagram below.
M O D E R A T E
L E V E R A G E
• Through-cycle leverage
target 20-30%
• Actual 16.5%
L I M I T E D
D E V E L O P M E N T
E X P O S U R E
• Current developments
3% of the portfolio value
M O D E S T
R I S K
A P P E T I T E
I N C O M E
P R O D U C I N G
A S S E T S
• Vacancy rate 7%
• EPRA EPS 5.5 cent
• DPS 4.8 cent
• Interest cover 6.3x
M I D - R A N G E
P R O P E R T Y
V A L U E S
• 57% of the property portfolio
in this mid-range
(€20-100m)
D U B L I N
P R O P E R T Y
F O C U S
• 100% Dublin property
• 85% city centre offices
Hibernia REIT plc Annual Report 2020Strategic report R I S K C U L T U R E
P R I N C I P A L R I S K S O V E R V I E W
The Group’s risk appetite is the level
of risk the Group is prepared to take
to achieve its strategic priorities.
The risk culture of the Group reflects the
balance between:
• Risk management
• Risk taking and financial return
R I S K R E G I S T E R
The Group, through the Risk &
Compliance Officer, maintains a risk
register. The risk register details risks
across, inter alia, economic, political,
development, investment, asset
management, financial, sustainability,
operational, IT, governance, regulatory
and strategic areas of the business.
The risk identification and assessment
process involves four steps:
1. Identify the risks
2. Determine each risk’s magnitude
of impact
3. Determine the likelihood of the risk
event occurring
4. Produce the risk rating
In order for the Board to be properly
informed of the status of risks facing the
Group, management is required to report
regularly on risks assessed and progress
with respect to their areas. The risk
register is reviewed and reported to the
Board on an annual basis. The Group’s
principal risks, those that could have
a potentially material impact on the
sustainability of the business model, are
set out on pages 42 to 50 of this report.
N E W R I S K : C O V I D - 1 9
This is an extraordinary risk, meaning it is
one that arises from a new situation and
could significantly impact the Group’s
financial strength, performance or
reputation over future periods. This risk
has a high degree of uncertainty and is
therefore monitored closely and factored
into the Group’s viability assessment and
future strategic plans. In early 2020, a
coronavirus variant, COVID-19, emerged
as a rapidly spreading, life threatening
pandemic. The impacts of this on the
Group’s business are discussed further in
the Business Review on pages 51 to 60 of
this Annual Report. Our initial focus was
to ensure our staff, tenants and suppliers
are safe and that our assets are secured.
The potential impact on the Group
remains high, and the mitigations in place
are discussed on page 15.
Risk
Description
COVID-19 pandemic
Most areas of the Group’s
business could be impacted
leading to failure to achieve
strategic goals and a negative
impact on financial returns.
Strategic
Inappropriate business
strategy.
Climate change
Failure to respond
appropriately and sufficiently to
climate change.
Market
Weakening economy.
Development
Poor or mistimed execution of
development projects.
Regulatory, tax
and political
Changes to tax status or
environment.
What measures have we
taken?
The Group is maintaining low
leverage and has reduced
its risk appetite accordingly.
In addition safeguards for
tenants and staff have been
put in place.
Read more on page 15
Experienced Senior
Management Team and
Board. Use of experts, regular
tenant interaction.
Read more on pages 24
and 25
Experienced Sustainability
Manager appointed,.
Sustainability Committee
oversight. Reviewing approach
to sustainability.
Read more on pages 61
to 67
Active monitoring of lead
indicators. Regular financial
forecasting and stress
testing. Risk appetite limits
including leverage.
Read more on pages 16
to 19
Experienced development
team, impacts on and
timing of pipeline projects
continually assessed.
Read more on pages 54
and 55
Impact of economic downturn
and COVID-19 management
on taxation.
Operational risk
Disruption from external
threat.
Focus on business continuity
and crisis management.
K E Y C H A N G E S T O R I S K S I N T H E Y E A R
Key risks added (excluding amalgamations):
• COVID-19 pandemic
• Climate change risk: Failure to respond appropriately and sufficiently to
climate change
Key risks removed (excluding amalgamations):
• Development risk: Adverse outcome regarding re-zoning at Newlands
Residual impacts increased:
• Strategic risk: Inappropriate business strategy
• Market risk: Weakening economy
• Regulatory, tax and political risk: management of tax and changes to tax status
or environment
Residual impacts reduced:
• None
39
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information R I S K M A N A G E M E N T C O N T I N U E D
R I S K S T R A T E G Y A N D
R I S K M A N A G E M E N T
F R A M E W O R K
Risk strategy
The Group’s risk strategy is to ensure that the Group’s risk appetite
is clearly defined, and that it has put appropriate governance
processes and controls in place to protect its balance sheet
and deliver sustainable profitability. The Board has ultimate
responsibility for risk management, and this is implemented
through a risk management system which extends to all levels
of the Group. The Group’s employees are the foundation of the
system and a culture of openness and transparency is promoted,
encouraging all employees and Directors to identify, measure and
manage risk on an ongoing basis.
Risk management system
Identify and
analyse
Measure,
monitor and
control
Board
Audit
Committee
Executive Committees
Operational management
Employees
Assess
impact
Communicate
and engage
Set mitigants
and appetite
Risk management system
The Company’s risk management system
involves designing, implementing,
monitoring, reviewing and continually
improving risk management processes in
the organisation. The risk management
system’s inputs include all risks, processes
and controls applicable to the organisation.
Quantitative and qualitative analyses are
performed to identify and quantify the
most important risks. The system’s outputs
include a risk register, risk metrics, risk
monitoring plan and risk tolerance limits.
The Group’s risk management system
and any updates to it are communicated
to all relevant staff periodically and at
least annually.
Effective day-to-day management of risk
is embedded in our operational processes
at all levels of the organisation. Some key
points to note:
40
• The Company has documented
procedures for risk management
activities to include, inter alia, setting risk
appetites, risk tolerance, risk capacity,
stress testing, risk identification, risk
monitoring, escalation processes
and training
• The Board has delegated risk
management and operational
risk responsibility to the Risk &
Compliance Officer
• The Audit Committee and the Risk &
Compliance Committee have oversight
of the risk management system
• Risks are owned by the appropriate
designated person. The designated
person is responsible for measuring
and monitoring risk and implementing
controls to mitigate the effect of risks
• 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; the Investment and
Development Committees are chaired
by a Non-Executive Director, helping to
quickly identify new risks and weaknesses
• Senior Management is experienced, and
staff turnover remains low
• The Senior Management Team holds
weekly management meetings and
regular inter-departmental meetings
to review progress in each area of
the business
• PwC has been retained as internal
auditor to provide an independent
assessment of internal controls and
risk management processes
Hibernia REIT plc Annual Report 2020Strategic report risks and opportunities of the Group;
for example the office development
pipeline extends to 2026 with longer-
term mixed-use potential.
Financial projections for the current
financial year and the following three
years are updated and presented
to the Board on a quarterly basis.
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.
Current position
The Group is financed by a €320m
unsecured revolving credit facility
maturing in December 2023, and €75m
of unsecured US private placement
notes with an average maturity of all
facilities of 4.4 years. At 31 March 2020
the Group had net debt of €241m and
cash and undrawn facilities of €154m.
The Group’s WAULT at 31 March 2020
stands at 6.4 years for the whole office
portfolio with potential to grow rental
income through lettings, reversions and
the development pipeline over time.
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.
The resilience of the interest cover ratio,
LTV ratio and the minimum net worth
of the Group is stressed in this way over
the three-year period.
Due to the uncertainty surrounding the
impacts of COVID-19, the Group has
also been managing its cash position
closely, monitoring the potential issues
around rent collectability and trying
to ensure that all potential impacts are
identified, measured and managed.
As of the date of this report 9% of
the contracted rent roll is classified
as high risk and the Group is in close
communication with these tenants
in order to manage any potential
rent defaults.
Confirmation of viability
Having considered all the factors
outlined above, the Directors confirm
that they have a reasonable expectation
that the Group will be able to continue
in operation and meet its liabilities
as they fall due over the three-year
period of their assessment ending
31 March 2023.
COVID-19 pandemic
As discussed on page 39 the COVID-19
pandemic has emerged as a significant
risk, the full impact of which it is not yet
possible to quantify. In assessing both
going concern and viability, the Directors
have built their best estimation of the
potential impacts of this risk into their
models. Further information on the
Group’s response to the crisis and its
impact on the Group’s activities can be
found on page 15 and pages 42 and 43 of
this Annual Report.
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
2 to 67 of this Annual Report. This also
covers the financial position of the Group,
its liquidity position and debt 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 128 to
186 and in note 2.e to the consolidated
financial statements. In addition, note 30
to the consolidated financial statements
includes details on the Group’s financial
risk management and exposures.
Particular attention is drawn to the
discussion on the impacts of the COVID-19
pandemic on page 15 of this report.
The Directors have assessed the Group’s
liquidity position, including the potential
impacts of COVID-19, and have no reason
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 Board has assessed the viability of the
Group over a three-year period to March
2023. They are satisfied that a forward-
looking assessment of the Group for this
period is sufficient to enable a reasonable
statement of viability. This assessment
considers the Group’s current position
and the principal risks that it faces. All of
these principal risks, as outlined on pages
42 to 50, are considered to be material
in the assessment of viability. The most
significant of these is the emerging risk
of the COVID-19 pandemic and this has
been the subject of intensive viability
assessment by the Board over the last few
months and will continue to be so
for some time to come.
Given the cyclical nature of the Irish
property market, impacted by both
domestic and international factors, and the
weighted average maturity of the Group’s
debt at 31 March 2020 of over four years,
the Board believes a three-year forward-
looking period is appropriate to complete
financial projections and stress testing.
The Board also considers the longer-term
Commercial rent collected within 7 days
(June 2020 quarter)
89%
Contracted rent
€65.7m
% contracted rent considered ‘high risk’
9%
WAULT
6.4 years
Vacancy rate
7%
Earliest debt maturity
Dec-23
LTV
16.5%
Available liquidity
(net of commitments and reserved cash)
€136m
EBIT would have to fall by
76%
to breach bank covenants
Portfolio value would have to fall by
65%
to breach bank covenants
41
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S
The Board has carried out a thorough
assessment of the Group’s emerging and
principal risks, including those that could
threaten the Group’s business model,
future performance, solvency or liquidity.
It has assessed how these risks could best
be mitigated through a combination of
risk management, internal controls and
insurance cover. The mitigation measures
that are maintained in relation to these risks
are designed to provide a reasonable and
not absolute level of protection against
the impact of the events in question.
These risks and mitigants are reviewed and
updated on a regular basis and represent
the Board’s current assessment of risk.
The principal risks and uncertainties facing
the Group are set out on pages 42 to 51,
together with the potential impact and the
mitigating actions and controls in place.
Further detail on the Group’s approach
to risk management and mitigation is
on pages 38 to 41 of this Annual Report.
The impact of the COVID-19 pandemic has
increased risk ratings in a number of areas
as well as the overall level of risk the Group
is currently exposed to and the Board
continues to monitor the situation closely.
The COVID-19 pandemic and the Group’s
response are discussed in detail on page 15
of this Annual Report. The main changes to
our principal risks since 31 March 2019 are
on page 39.
Risk trend
Risk impact
Unchanged
High
Increased
Medium
Decreased
Low
Read more on our strategic priorities
on pages 24 and 25
Impact Probability Key controls and mitigants
Comments
Residual
risk impact
All head office staff have been
working effectively from home
using remote access infrastructure
and cloud-based systems that were
already in use by the Group.
Close oversight by Board and
Executive Committees of each area
of business and frequent stress tests
run as part of viability assessments.
Dedicated manager selected
to oversee our response to the
COVID-19 pandemic.
Increased tenant communication
and tenant financial health being
closely monitored to manage
potential issues proactively.
The Group policy is to have only
modest financial leverage.
IT and security updates are issued
to all staff on a regular basis.
Increased surveillance over IT and
cyber security procedures.
A detailed discussion of the impact
of the COVID-19 pandemic and the
Group’s response can be found
on page 15 of this Annual Report.
As mentioned, it has the potential to
negatively impact most areas of the
business and this is discussed under
the relevant principal risks below.
A high degree of uncertainty as to
the longer-term impacts still exists.
The Group has low leverage (16.5%
LTV at Mar-20), cash and undrawn
facilities after commitments of
€136m and no debt repayments due
until Dec-23, so it is well positioned
to cope with the adverse impact in
the near term and medium term.
The Group carefully assesses the
financial health of all prospective
commercial tenants ahead of
signing leases and continues to
monitor them once they become
tenants. In addition, the Group tries
to agree long leases and its office
portfolio (c. 90% of Group rental
income) has a WAULT of 6.4 years
at present.
The Board is monitoring the
evolving situation closely.
New risks
Exposure
COVID-19 pandemic
Most areas of the
Group’s business could
be impacted by the
pandemic leading to:
• Failure to achieve
strategic goals
• Negative impact on
business operations
from staff illness.
• Poor returns (capital
and income) and/
or losses
• Delay to development
projects resulting in
lower returns
• Increased cost of
financing/lower
availability of funding
• Increased risk of
cyber-attack
42
Hibernia REIT plc Annual Report 2020Strategic report
New risks
Exposure
Impact Probability Key controls and mitigants
Comments
Residual
risk impact
Climate change risk: Failure to respond appropriately and sufficiently to climate change
• Failure to achieve
strategic goals
• Assets become less
attractive to investors
and/or tenants without
significant expenditure
leading to a negative
impact on income and/
or capital returns
• Failure to meet
stakeholders’
expectations resulting
in reputational damage
Experienced Sustainability Manager
appointed who sits on all of the
Group’s Executive Committees.
The Sustainability Committee,
Senior Management and the Board
review environmental, social and
governance matters regularly.
The Group uses external experts
to advise on operational and
capital improvements to be
made to investment assets and
development assets.
The Group’s ESG performance
is benchmarked against industry
standards, including GRESB, giving
visibility of its relative performance
to the Group and its stakeholders.
The Sustainability section of the
Group’s website outlines the Group’s
targets, results and future plans
in ESG.
The Group is in the process of
reviewing its Sustainability Strategy
to seek improvements and a
materiality review has been carried
out to identify the issues material to
the business and our stakeholders.
Active daily monitoring of the
energy consumption of the Group’s
multi-tenanted buildings is due to
commence shortly.
In 2019 the Group received an
EPRA Gold Award for the quality
of its sustainability disclosures for
the second successive year and
has received three green stars
from GRESB with a score of 75%
(an improvement of 17 percentage
points on the prior year’s
submission). We are also intending
to participate in the CDP benchmark
in 2020.
Existing risks
Exposure
Impact Probability Key controls and mitigants
Comments
Strategic risk: Inappropriate business strategy
Residual
risk impact
• Failure to anticipate/
react to trends
e.g. changes in
office usage post
COVID-19, changing
occupier
requirements
more generally,
underperformance of
central Dublin offices
• Mistimed
investments or
disposals through
incorrect reading of
the property cycle
Experienced Senior Management
and Board with significant expertise
in property matters.
Board and Investment Committee
overview of investment/
divestment decisions.
Close monitoring of market and
economic lead indicators and use
of expert advisers.
Rigorous assessment of all
acquisition and disposal
opportunities and of projected
portfolio returns.
Regular tenant interaction at all
levels of the organisation.
Experienced market professionals
in both Board and Senior
Management closely monitor
strategy alongside market and
other trends.
Having building management in-
house and a full-time Sustainability
Manager increases the frequency
of interactions with tenants and
therefore gives some visibility
on their views and any changes
to these.
Compliance with sustainability and
environmental standards has been
an increasing focus for the Group
and its stakeholders.
The Group maintains low leverage
(LTV of 16.5% at Mar-20) to
enhance its strategic flexibility
and ability to move quickly on
strategic decisions.
43
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S C O N T I N U E D
Risk trend
Risk impact
Unchanged
High
Increased
Medium
Decreased
Low
Read more on our strategic priorities
on pages 24 and 25
Existing risks
Exposure
Impact Probability Key controls and mitigants
Comments
Market risk: Weakening economy
Residual
risk impact
Active monitoring of
economic lead indicators and
market developments.
Regular financial forecasting, stress
testing and scenario planning.
Risk appetite limits are in place for
key operating indicators.
Group policy is to use modest
leverage levels throughout the
property cycle.
• The COVID-19
pandemic is likely
to have a severe
negative impact on
the global economy
in 2020, despite
the interventions of
authorities around
the world
• Ireland’s economy is
a relatively small and
open economy and
is therefore sensitive
to deterioration in
macro-economic
conditions elsewhere
• A drop in economic
activity usually
leads to declining
property values and/
or rental income
The full market impact of the
COVID-19 pandemic is yet to be
realised. These conditions may have
an important bearing on the future
performance of the Irish economy
and, in turn, on the Group.
Grade A vacancy rates in city
centre Dublin offices at Mar-20
remain low at 5.9% and take-up in
Q1 2020 was strong at over 0.8m
sq. ft., though active demand fell by
20% between the end of February
and the end of April 2020. Whilst
early indications are present the
negative impact of COVID-19 on
the property market is yet to be
fully felt.
The Group targets long leases and
tenants with strong covenants,
helping to reduce vacancy risks in
a market downturn and provide
a level of protection in the short
term. The Group’s WAULT to the
earlier of break/expiry on its office
portfolio (c. 90% of rental income)
was 6.4 years at 31 March 2020.
Increased credit risk concerns
due to the likely market downturn
mean that the Group has placed
an increased focus on credit risk
management and collection of
rents and service charges, which
continue to hold up well (see page
59 for rent collection statistics).
44
Hibernia REIT plc Annual Report 2020Strategic report
Existing risks
Exposure
Impact Probability Key controls and mitigants
Comments
Market risk: Negative impacts from political actions/trends nationally and internationally
Residual
risk impact
Regular reviews by Senior
Management and discussion with
economic and tax experts.
Membership of Irish Institutional
Property which represents the
interests of institutional property
owners in Ireland.
There is significant uncertainty at
present about the ultimate impact
of the COVID-19 crisis on the Irish
economy and globally and similarly
there is uncertainty as to how
authorities in Ireland and globally will
respond to whatever position the
world finds itself in once the crisis
is over.
• Measures taken to
recoup emergency
government spending
once the COVID-19
crisis is over could
result in greater
taxation on Irish
companies including
the Group
• Similarly, the new Irish
Government, when
it is formed, could
take policy decisions
which adversely
affect the Group
• Though the UK’s exit
from the European
Union may be
beneficial for Dublin
in the longer term,
any disorderly end
to the transitional
arrangements in
place at present could
cause economic
damage to Ireland,
particularly in the
near term
• International
tax reform may
reduce Ireland’s
competitiveness as a
destination for foreign
direct investment
Investment risk: Inappropriate concentration on single assets, locations, tenants or tenant sectors
• Excessive exposure
leading to poor
performance and/or
reduced liquidity
Key risk indicators regarding
sector, tenant and geographic
concentration as well as rent
collection statistics are reported to
Senior Management regularly and
to the Board on a quarterly basis.
Assessment of the covenant
strength of commercial tenants
is performed ahead of signing
leases with them and periodically
once they become tenants and on
an ad-hoc basis where there are
specific concerns. At the moment,
given the economic uncertainty
an enhanced level of scrutiny is
being applied.
All the Group’s investments are
within Dublin and the majority are
in the office sector. The Group
focuses on multi-let buildings and
has assembled a balanced portfolio
comprising 36 properties with some
held for investment purposes and
some for their future (re)development
potential. At Mar-20 the largest single
asset represented 11% of the portfolio
by value (11% at Mar-19).
The Group’s ‘top 10’ tenants account
for 56% of the portfolio contracted
rent roll as at Mar-20 (61% at Mar-19).
See notes 4, 5 and 6 to the
consolidated financial statements
for more information on the
disaggregation of our income.
45
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S C O N T I N U E D
Risk trend
Risk impact
Unchanged
High
Increased
Medium
Decreased
Low
Read more on our strategic priorities
on pages 24 and 25
Existing risks
Exposure
Impact Probability Key controls and mitigants
Comments
Development risk: Poor or mistimed execution of development projects
Residual
risk impact
• Poor returns and/
or losses
• Development
projects not
managed properly
leading to delays and
cost overruns
• Inappropriate level
of development
as a percentage of
overall portfolio
• Failure to achieve
expected
rental levels
Experienced development team
with established relationships with
professional advisers.
Board and Development
Committee overview; new
members have increased
experience available to
the Committee.
Rigorous monitoring of
development expenditure against
approved budgets.
Sustainable building design a key
focus from early planning stage.
Marketing of properties starts well
in advance of completion date to
de-risk the development portfolio.
At Mar-20 the Group had one active
development scheme, 2 Cumberland
Place. Practical completion has been
delayed by the COVID-19 shutdown
but at present it is expected to
complete by the end of 2020 and is
41% pre-let which has reduced the
risk of this development.
Beyond this, the Group has no
active developments and can make
decisions about future development
commencements based on
prevailing market conditions.
Construction cost inflation had
been an increasing pressure
on profitability in the Group’s
development planned projects; with
no active contracts apart from 2
Cumberland Place, the Group is not
locked into overly expensive tenders
while the market value of property
and construction contract pricing
may be falling due to the impact of
COVID-19.
The Group’s pipeline of
developments is kept under review
to ensure that the plans are in line
with market trends. The Group
has adopted LEED certification
for its projects to provide an
objective measure of building
sustainability and targets Gold or
Platinum Awards.
46
Hibernia REIT plc Annual Report 2020Strategic report Existing risks
Exposure
Impact Probability Key controls and mitigants
Comments
Development risk: Contractor or sub-contractor default
Residual
risk impact
• Poor returns and/
or losses
• Higher costs due
to the loss of
fixed pricing
• Significant delays
in completing
development projects
Use of reputable and
larger contractors.
Use of expert advisers to assist in
management of contractors and
sub-contractors.
Due diligence is completed on
main contractors.
Close oversight by
experienced development
team, project managers and
Development Committee.
The Group uses expert advisers to
supplement its in-house expertise in
assessing and managing contractors.
The Group seeks to use contractors
with proven track records which also
helps to mitigate construction risks,
including the risk of failing to comply
with applicable building regulations.
Fixed price contracts are in place to
remove inflation risk.
2 Cumberland Place is the only site
currently under development and it is
already well advanced so the impact
of contractor default is anticipated
to be less than it has been in recent
years despite COVID-19.
Regulatory, tax and political risk: Management of tax and changes to tax status or environment
• Group’s REIT status
may be revoked if
it fails to satisfy all
the relevant tax and
legislative requirements
• Specific changes to
tax on Irish property
and REITs
• Changes to the
broader taxation
environment may
impact on the
Group’s operations
Effective monitoring of tax and
REIT requirements compliance is
completed by the Finance Team
and tax advisers and reviewed
quarterly by the Board and the
Audit Committee.
Management, the Board and
the Audit Committee spend
substantial time, and retain
external experts as necessary,
to ensure compliance with
current and possible future
tax requirements.
The Group proactively reviews any
tax changes specific to the Group and
to the broader environment and has
appointed expert advisers to review,
assist and advise. Where necessary
representations are made to
government and other state agencies
to highlight tax policies or changes
that could have a negative impact.
Compliance with the REIT regime is
monitored by the Board and there
have been no breaches to date.
See page 60 for details of the impacts
of tax changes introduced in the
Finance Act 2019.
Operations risk: Disruption from external threat
• An external event
causes significant
disruption and
damage to the
Group’s portfolio
and/or operations
Business continuity and crisis
management plans are reviewed
at least annually.
Business continuity plans are
reviewed periodically and at a
minimum on an annual basis.
Insurance policies include cover
for catastrophic events.
Security measures and
emergency plans are in place
for all our buildings.
The Group has invested in its IT
systems to ensure information is
stored securely and is fully cloud
based. Staff also have the ability to
work remotely, as they are doing at
present due to COVID-19.
See page 15 for the impact of
COVID-19.
47
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S C O N T I N U E D
Risk trend
Risk impact
Unchanged
High
Increased
Medium
Decreased
Low
Read more on our strategic priorities
on pages 24 and 25
Existing risks
Exposure
Impact Probability Key controls and mitigants
Comments
Residual
risk impact
Operations risk: Cyber-attack/threat
• Significant damage to
the Group’s business
• Reputational damage
External consultants complete
regular testing of IT security
and systems.
Regular back-up schedules are
in place for all Group information
and data.
Staff IT information security and
cyber security training plan is
in place.
IT and security updates are issued
to all staff on a regular basis.
Increased surveillance over IT and
cyber security procedures.
Cyber security continues to be
a focus as the incidence and
sophistication of cyber security
attacks increase. The Group has
continued to improve its IT security
measures during the financial
year 2020 by reviewing controls
and working closely with our
IT consultants.
The probability of cyber-attack
has increased in the last number of
months as staff are working remotely
as a result of the COVID-19 pandemic.
The Group has seen an increased
number of hacking attempts but
has managed these incidents
successfully, ensuring Group data was
not compromised.
A high-level review of selected
cyber security/information security
management, security operations,
security technology management
and IT continuity controls within the
Group and its IT service providers was
completed in April 2019. All internal
audit recommendations have since
been implemented.
48
Hibernia REIT plc Annual Report 2020Strategic report
Existing risks
Exposure
Impact Probability Key controls and mitigants
Comments
Operations risk: Loss or shortage of staff to execute our business plan or failure to motivate staff
Residual
risk impact
• Failure to achieve
strategic goals
• Replacement of
departing staff may
be challenging and/
or costly
Employee remuneration is strongly
linked to Group and individual
performance and variable pay
includes a deferred element.
Staff turnover remains low at
only 14% in the 2020 financial
year and vacancies have been
successfully filled.
Periodic assessment of
remuneration packages for all staff
is completed to ensure they are in
line with market.
Positive team spirit is fostered
through social and training events.
Personal development and
training requirements are
reviewed annually.
The Group has an annual appraisal
system for staff, with interim
reviews every six months. As well
as reviewing performance this
system also sets targets for personal
development. A confidential staff
survey is completed annually: recent
surveys have shown a high degree of
employee satisfaction.
The Group also hosts regular training
sessions to improve staff knowledge
in all areas of the business and
the industry.
During the COVID-19 pandemic, all
head office staff have been working
from home. Online video conferencing
is helping to maintain togetherness
during this difficult time: this includes
a weekly all-hands online meeting led
by the CEO.
Operations risk: Reputational damage
• Damage or losses
due to fraud, error or
cyber crime
• Inability to attract
and retain staff
resulting in
higher costs
• Regulatory sanctions
in the event of a non-
compliance issue
• Health and
safety risks
Effective internal controls and fraud
prevention measures in place.
The Group adheres to the highest
standards of corporate governance.
Board, Audit Committee
and internal audit scrutiny of
compliance, internal controls and
related matters.
The Group uses PwC to provide
internal audit services to give
additional assurances around
internal controls.
Building management is completed
in-house so the Group can manage
its multi-let properties to its own
rigorous standards and is not
dependent on third parties for this.
External consultants complete
regular testing of IT security
and systems.
Health and Safety Committee
meet quarterly to review all health
and safety issues. The Group uses
external advisers to complete
regular risk assessments for
the Group.
49
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
P R I N C I P A L R I S K S A N D U N C E R T A I N T I E S C O N T I N U E D
Risk trend
Risk impact
Unchanged
High
Increased
Medium
Decreased
Low
Read more on our strategic priorities
on pages 24 and 25
Existing risks
Exposure
Impact Probability Key controls and mitigants
Comments
Asset management risk: Poor asset management
Residual
risk impact
• Income not
maximised
through poor
asset management
• Failure to proactively
maintain assets
leading to
increased costs
• Loss of tenants due
to lack of satisfaction
with space
and service
All building and asset management
for multi-let office portfolio is in-
house to ensure regular interactions
with our tenants.
A regular survey of tenants is
undertaken to assess satisfaction/
areas for improvement.
Analysis of covenant strength of
prospective and existing tenants.
Focus on improving
sustainability credentials.
Finance risk: Inappropriate capital structure/lack of funds for investment
The Group’s policy is to maintain
modest leverage with a target LTV
ratio of 20-30% and the majority
of interest rate exposure fixed
or hedged.
Fully unsecured debt structure
maximises alternatives for the
Group if additional funding
is required.
Active monitoring and assessment
of current and future financial
and cash flow requirements and
availability of funding.
Board and Finance
Committee oversight.
• Failure to meet
target returns due to
funding limitations
• Incorrect balance
between excess or
lack of gearing
50
As well as daily interactions with
tenants by the Group’s building
managers and head of occupier
services, the Group carries
out regular tenant surveys to
assess satisfaction and areas
for improvement.
The Group has also, as a result of
the COVID-19 pandemic, introduced
a tenant credit risk rating system, in
order to monitor more closely those
at greatest risk of default (see page
15 for more details)
As outlined elsewhere, the Group is
increasingly focused on sustainability,
and has hired a dedicated
Sustainability Manager.
As the Group has €136m
uncommitted funding available at
Mar-20 (Mar-19: €143m) the impact
of liquidity tightening post COVID-19
is largely mitigated. The Group is
focused on ensuring available liquidity
remains strong, and so further returns
of capital to shareholders beyond
ordinary dividends are unlikely in the
near term.
At Mar-20 the Group had an LTV ratio
of 16.5% (Mar-19: 15.6%), one of the
lowest in the European REIT universe.
The weighted average maturity
of the Group’s debt is 4.4 years at
Mar-20 and the Group has no debt
repayments due until Dec-23.
No covenant breaches occurred in
the period.
Hibernia REIT plc Annual Report 2020Strategic report
B U S I N E S S R E V I E W
We remain alert for new
opportunities though we will
remain disciplined in pursuing
these, particularly given the
current market conditions.
O P E R A T I O N S
From mid-March to early June our head
office staff were working remotely,
supported by our cloud-based IT
systems, and most continue to work
remotely. Throughout the lockdown all
our managed buildings have remained
accessible by tenants as required. We
have been preparing our buildings for
greater usage as the lockdown eases and
each building has an individual plan,
which we have been discussing with
tenants, covering access control, physical
distancing measures, additional cleaning
and sanitising, and signage. Construction
has recommenced at 2 Cumberland
Place, our only current development site,
with appropriate precautionary
measures, having been shut between
28 March and 18 May 2020.
D I S P O S A L S A N D
A C Q U I S I T I O N S
It has been a less active year with no
disposals made (2019: €100.3m) and
only €23.3m invested in nine smaller
acquisitions (2019: €40.0m), many of
which are adjacent to existing Hibernia
assets and were ‘bolt-on’ in nature. We
continue to assess opportunities though
we will remain disciplined in pursuing
these, particularly given the current
economic conditions and outlook.
Acquisitions
Malahide Road Industrial Park, D17: the
property, which was acquired in July 2019
for €7.8m (including transaction costs),
comprises 66,000 sq. ft. of warehousing
and 17,000 sq. ft. of ancillary office
accommodation on a 3.8 acre site.
The property is occupied by Bunzl Irish
Merchants on a short-term lease and is
generating rent of €0.4m per annum. In the
longer term we believe it has potential for
mixed-use development (see further details
in the developments and refurbishments
section on page 54).
Dublin Industrial Estate, D11: some
additional industrial units were acquired
in the year for a total of €5.6m (including
transaction costs). In total these have
increased Hibernia’s holding in Dublin
Industrial Estate to 6.8 acres, with rent
of €0.8m per annum at 31 March 2020.
In the longer term we believe the property
we hold has potential for mixed-use
development (see further details in the
developments and refurbishments section
on page 54).
Other: during the period €9.9m was spent
on five small acquisitions, most of which
provide potential synergies with properties
already owned by Hibernia.
Acquisitions
€23.3m
(2019: €40.0m)
Disposals
nil
(2019: €100.3m)
51
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information B U S I N E S S R E V I E W C O N T I N U E D
In-place office portfolio area
1.1m sq. ft.
P O R T F O L I O O V E R V I E W
As at 31 March 2020 the property portfolio consisted of 36 investment properties valued at
€1,465.2m (March 2019: 32 investment properties valued at €1,395.4m), which can be
categorised as follows:
Total portfolio contracted rent
€65.7m
Dublin CBD offices
Traditional Core
In-place office contracted rent
IFSC
Value as at
March
2020*
(all assets)
€435m
€205m
€557m3
% of
portfolio
Equivalent
yield1
Passing
rent
Contracted
rent
ERV
30%
14%
38%
82%
3%
11%
4%
5.0%2
€23.4m
€23.4m €24.4m
4.7%
4.4%
€8.3m
€8.3m
€11.3m
€22.3m €26.0m
€27.7m
4.7%2
€54.0m
€57.7m €63.4m
–
–
–
€3.3m
4.0%7
2.8%8
€6.1m7
€6.1m7
€6.7m7
€1.6m
€1.9m
€1.9m
South Docks
Total Dublin CBD offices
€1,197m
Dublin CBD office
development4
Dublin residential5
Industrial/land
€48m
€159m6
€61m
Total
€1,465m
100%
4.5%2,7,8 €61.8m7
€65.7m7
€75.3m7
1. Yields on unsmoothed values and excluding the
adjustment for 1WML owner occupied space.
2. Harcourt Square, Clanwilliam Court and Marine House
yields are calculated as the passing rent over the total
value (after costs) which includes residual land value.
Excludes Iconic Offices in Clanwilliam Court.
3. Excludes the value of space now occupied by Hibernia
in 1WML.
4. 2 Cumberland Place.
5.
Includes 1WML residential element (Hanover Mills).
6. Net yield assuming 80% net-to-gross and purchaser
costs as per C&W at Mar-20.
7. Residential income on net basis assuming Hibernia cost.
8. Current rental value assumed as ERV as these assets
are valued using a combination of price per acre and on
an income basis.
Note: differences in summation of totals in above table are
due to rounding.
* Note: In the Mar-20 valuation C&W included a material
uncertainty clause, in line with RICS guidance. This is
intended to indicate that less certainty and a higher degree
of caution should be ascribed to the valuations than would
normally be the case due to the impact of COVID-19.
The key statistics for the office element of our portfolio, which comprised 85% by value
and 88% by contracted rent at 31 March 2020 (March 2019: 85% and 88%, respectively),
are set out below: contracted rent from developments we have completed comfortably
exceeds that from the offices we acquired with income.
Contracted
rent
ERV
WAULT
to
review1
WAULT
to break/
expiry
% of rent
upwards
only
Acquired in-place office
portfolio
€26.4m
(€47psf)
€27.1m
(€48psf)
Development pipeline
assets
€11.1m
(€42psf)
€11.1m
(€42psf)
2.2yrs
3.3yrs
16%
1.9yrs
2.0yrs
–
Investment assets
€15.3m
(€51psf)
€15.9m
(€53psf)
2.5yrs
4.3yrs
28%
% of next
rent
review
cap &
collar
% of rent
MTM2
at next
lease
event
–
–
–
84%
100%
72%
Completed office
developments3
€31.3m
(€54psf)
€31.7m
(€55psf)
Whole in-place office
portfolio
€57.7m
(€50psf)
€58.8m
(€51psf)
Vacant in-place office
Committed office
developments-unlet5
Whole in-place office
portfolio (after vacancy)
€4.6m4
(€49psf)
€3.3m6
(€57psf)
€66.7m
(€52psf)
–
–
–
2.9yrs
9.1yrs
–
29%
71%
2.6yrs
6.4yrs
8%
16%
77%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. To earlier of review or expiry.
2. Mark-to-market.
3.
4.
5. 2 Cumberland Place.
6.
1 Cumberland Place, SOBO Works, 1&2DC, 1WML, 2WML, 1SJRQ.
Includes approx. €150k of retail in office buildings.
In Apr-20 3M signed a pre-lease in 2 Cumberland Place, increasing contracted office rent to €59.2m.
€57.7m
(€50psf)
In-place office ERV
€58.8m
(€51psf)
In-place office WAULT
6.4yrs
(Completed office
developments: 9.1yrs)
In-place office vacancy rate
7%
C O N T R A C T E D R E N T
B Y S E C T O R / I N D U S T R Y
€65.7m
• TMT
• Government/state entity
• Banking and capital markets
• Residential
• Professional services
• Other
• Insurance and reinsurance
• Serviced offices
49%
16%
11%
9%
7%
5%
2%
1%
0
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
c
l
p
T
I
E
R
a
i
n
r
e
b
H
i
52
Strategic report
Since 31 March 2019 we have, consistent
with our strategic priority of increasing
rental income, added €8.1m to Group
contracted rent, principally through leasing
activity and the completion of outstanding
rent reviews. The in-place office portfolio
vacancy rate was 7% by lettable area
at 31 March 2020 (March 2019: 12%).
For further details on the vacant space and
the increase in contracted rent, please refer
to the asset management section on pages
55 and 56.
At 31 March 2020 our ‘top 10’ tenants,
most of which are large, multinational
companies or government/state entities,
accounted for 64% of our contracted office
rent of €57.7m and 56% of our contracted
portfolio rent of €65.7m. By sector, TMT
and government/state entities accounted
for 74% of contracted office rent and 65%
of contracted portfolio rent (please see
page 4). The composition of our tenant
base, in particular the amount of large,
well-capitalised technology companies and
government/state entities gives us some
comfort regarding its resilience and as
noted elsewhere in this document, to date
rent collection has remained strong.
P O R T F O L I O P E R F O R M A N C E
In the 12 months ended 31 March 2020 the
portfolio value increased €28.1m, or 2.0%
on a LFL basis (i.e. excluding acquisitions,
disposals and capital expenditure). The
1.5pp increase in stamp duty, which took
effect from October 2019, reduced the
portfolio value at 31 March 2020 by an
estimated €22m and without this the LFL
increase in portfolio value would have been
3.5%. In the 12 months ended 31 March 2019
the portfolio value increased by €99.0m,
or 7.9% on a LFL basis, helped by the
completion of two major development
projects and some yield compression in
the residential market.
Dublin CBD offices
Traditional core
IFSC
South Docks
Total Dublin CBD offices
Dublin CBD office development
Dublin residential
Industrial/land
Total
Value at
March 2019
(all assets)
€444m
€207m
€522m2
€1,173m
€16m
€153m
€53m
Capex
Acquisitions1
Revaluation
Stamp duty
impact
Value at March
2020*
(all assets)
LFL change
€2m
–
€8m
€10m
€14m
€1m
–
€2m
–
€7m
€9m
–
€1m
€13m
€23m
(€2m)
€1m
€27m
€26m
€19m
€5m
(€6m)
(€11m)
(€3m)
(€8m)
€435m
€205m
(€13m)
(€1m)
€557m3
€21m2,3
(€21m)
€1,197m3
€7m2,3
(€1m)
–
–
€48m
€159m
€61m
€18m
€5m
(€3m)
(2.6%)
(0.6%)
3.9%2,3
0.7%2,3
61.3%
3.2%
(4.9%)
€44m
(€22m)
€1,465m3
€28m2,3
2.0%2,3
€1,395m
€25m
Including acquisition costs.
1.
2. Excludes the value of space that was occupied by Hibernia in SDH.
3. Excludes the value of space occupied by Hibernia in 1WML.
* Note: In the Mar-20 valuation C&W included a material uncertainty clause, in line with RICS guidance. This is intended to indicate that less certainty and a higher degree of caution
should be ascribed to the valuations than would normally be the case due to the impact of COVID-19.
The key individual valuation movements in
the financial year (including the impact of
the increase in stamp duty) were:
office space increased from €55.19psf
to €57.08psf and the equivalent yield
compressed from 4.86% to 4.33%.
• 2 Cumberland Place, D2: €18.2m/61%
uplift as a result of a change from a
residual to an investment valuation
methodology as the development is
nearing practical completion and as
progress has been made on leasing (with
3M executing an agreement for lease
shortly after year end). The uplift was
also due to the addition of a sixth floor,
increasing the size of the development
by 7,000 sq. ft., growth in the headline
office market rent from €54.61psf to
€58.06psf and yield compression on
the office space from 4.75% to between
4.40% and 4.50%.
• 2WML, South Docks: €10.0m/16%
uplift driven by two new leases agreed
at rents well ahead of ERV resulting in
the property being fully let at year end.
The headline market rent across the
• Observatory, South Docks: €5.3m/6%
uplift driven by the new licence
agreement with N3 (8,000 sq. ft.) at a
rent ahead of ERV and settlement of a
rent review in line with ERV on 36,000
sq. ft. of space. In addition, a new lease
on the fifth floor (6,000 sq. ft.) was
agreed with an existing occupier at a
rent ahead of ERV. The headline market
rent across the office space increased
from €55.06psf to €56.07psf and the
equivalent yield compressed from 4.88%
to 4.73%.
• 1WML, South Docks: €4.4m/3% uplift
as a result of the headline market rent
on the office space increasing from
€56.13psf to €58.06psf. The equivalent
yield compressed during the period from
4.22% to 4.16%.
LFL increase in portfolio value
€28m
+2.0%
(2019: €99m, +7.9%)
LFL increase in portfolio value
(excl. stamp duty increase)
€40m
+3.5%
(2019: €99m, +7.9%)
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
B U S I N E S S R E V I E W C O N T I N U E D
• Blocks 1, 2 & 5 Clanwilliam Court,
D2: -€7.9m/-14% movement due to
a reduction in the value of current
contracted income as the unexpired term
decreases, higher capital expenditure
estimates for the development due
to cost inflation and a 2% reduction in
the assumed gross development value
(“GDV”). The impact of the increase
in stamp duty has a larger impact for
developments and this accounted for
27% of the decrease in value.
• Marine House, D2: -€5.4m/-18%
movement due to a reduction in the
value of current contracted income
as the unexpired term reduces,
higher capital expenditure estimates
for the development due to design
improvements and cost inflation, and a
3% reduction in GDV. The impact of the
increase in stamp duty is magnified in
developments and this accounted for 17%
of the decrease in value.
• Newlands, D22: -€2.8m/-8% movement
due to a reduction in the land value
per acre.
D E V E L O P M E N T S A N D
R E F U R B I S H M E N T S
Capital expenditure on developments in
the year amounted to €21.3m
(2019: €44.8m). No schemes were
completed and 2 Cumberland Place
remains under construction though
work on site was temporarily halted
between 28 March and 18 May 2020 due
to COVID-19 restrictions and as a result
expected completion has shifted to late
2020. The pipeline of future schemes was
advanced and expanded by new grants of
planning and acquisitions. Mark Pollard, our
Director of Development, is retiring at the
end of June 2020 and will be succeeded by
Gerard Doherty, who joined Hibernia in 2017
and has over 20 years of development and
construction experience. Mark will continue
to work with us on a part-time basis.
Committed development schemes
At 2 Cumberland Place, D2, construction
progressed well in the year and we
obtained planning permission for an extra
floor, adding 7,000 sq. ft. of office space
and taking the overall building to 58,000
sq. ft. of Grade A office accommodation.
At 31 March 2020 the frame was very
substantially complete, façade works
were well advanced and landlord fit-out
work had commenced. Due to the Irish
Government’s decision to suspend all non-
essential construction activity because of
COVID-19, work on site was temporarily
halted from 28 March until 18 May
2020. As a result practical completion
will be later than Q3 2020: our current
expectation, assuming work is able to
continue uninterrupted, is that practical
completion will occur in late 2020. In April
2020 we agreed to lease 24,000 sq. ft.
to 3M Digital Science Community Ltd, a
subsidiary of 3M Company, on a 10-year
lease on terms ahead of the September
2019 ERV. Please see further details on the
scheme below:
2 Cumberland Place, D2
Total committed
Total area post
completion
(sq. ft.)
58k office2
1k retail/café
58k office2
1k retail/café
Full purchase
price
Est. capex
Capex to
complete
Est. total cost
(incl. land)
ERV1
Office ERV1
Expected
practical
completion
(“PC”) date
€0m3
€35m
€16m4
€605psf5
€3.3m
€56.53psf
Q4 2020
€0m3
€35m
€16m4
€605psf5
€3.3m
€56.53psf
1. Per C&W valuation at Mar-20.
2. At Mar-20 none of the building was let. In Apr-20, 24,000 sq. ft. was pre-let to 3M on a 10-year lease, taking the office accommodation to 41% let.
3. The site forms part of Cumberland Place and at the time of acquisition of Cumberland House no value was ascribed to it.
4. Future capitalised interest cost until completion is estimated to be €0.2m.
5. Office demise only.
Development pipeline
The office pipeline has grown by 5%
(28,000 sq. ft.) since March 2019 due to
new grants of planning and now has the
potential to deliver up to 566,000 sq. ft.
of Grade A office space upon completion,
a net increase of 288,000 sq. ft. over the
areas in the existing buildings. The majority
of this will be in two clusters of office
buildings in Dublin’s traditional core (Dublin
2): Clanwilliam Court (incl. Marine House)
and Harcourt Square. In the year we
received a provisional grant of planning for
the 152,000 sq. ft. redevelopment scheme
at Clanwilliam Court, though this remains
subject to appeal. We also received a
provisional grant of planning to expand
our planned scheme at Harcourt Square by
28,000 sq. ft. to 337,000 sq. ft. (343,000
sq. ft. including reception areas), with
the final grant of planning received in
April 2020.
Based on the current planning approvals
we have for Clanwilliam Court (incl.
Marine House) and Harcourt Square, the
valuations of these properties at 31 March
2020, which include the present value
of the income remaining on the leases,
equate to aggregate capital values of
€3191 per buildable foot and the estimated
capital expenditure required to deliver the
schemes is €550 per buildable foot, an all-
in cost of c. €870 per buildable foot2.
The quantity of land owned with potential
for mixed-use development schemes in
the longer term increased to 154.3 acres
(2019: 147.5 acres) with the acquisition of
an additional 6.8 acres of industrial sites in
Dublin Industrial Estate, D11, and Malahide
Road Industrial Park, D17. Re-zoning will be
necessary in all cases and consequently the
timing of any future developments remains
uncertain at present.
Yield on cost on schemes
completed in the year
n/a
(2019: 8.9%)
Office pipeline when completed
566,000
sq. ft.
(2019: 538,000 sq. ft.)
Mixed-used pipeline
154.3 acres
(2019: 147.5 acres)
54
1 Existing income within this figure represents €38 per buildable foot.
2 To calculate Net Development Value note that standard purchasers’ costs are 9.96%.
Hibernia REIT plc Annual Report 2020Strategic report Office
Marine House
Sector
Office
Current area
(sq. ft.)
Area post
completion
(sq. ft.)
Full purchase
price1
Comments
41k
49k
€30m
– Planning granted for 49k sq. ft. refurbishment/
Blocks 1, 2 & 5 Clanwilliam Court Office
93k
141k office
11k ancillary
€59m
Harcourt Square
Office
122k
337k office
€77m
extension
– Lower ground floor application may add
approx. 1.5k sq. ft.
– Flexibility to obtain vacant possession during
2020
– Redevelopment opportunity post 2021
– Potential to add significantly to existing NIA
across all three blocks and create an office
cluster similar to Windmill Quarter (with Marine
House)
– Provisional planning received for 152k sq. ft.
redevelopment – subject to appeal
– Leased to OPW until Dec-22
– Site offers potential to create cluster of office
buildings with shared facilities or a major HQ
– Planning granted for 337k sq. ft of offices
(343k including reception), +9% over previous
planning
One Earlsfort Terrace
Office
22k
28k
€20m
– Current planning permission for two extra
Total office & ancillary
Mixed-use
Newlands (Gateway)
278k
566k
€186m
– Total area post completion +5% since Mar-19
floors (6k sq. ft.), expiring Jul-21
– Potential for redevelopment as part of wider
Earlsfort Centre scheme
Logistics/
land
143.7 acres
n/a
€48m2
– Strategic transport location
– Potential for future mixed-use redevelopment
subject to re-zoning
Dublin Industrial Estate
Logistics
Malahide Road Industrial Park
Logistics
119k on
6.8 acres
66k warehouse
& 17k office on
3.8 acres
n/a
n/a
€11m
– Strategic transport location
– Potential for future mixed-use development
subject to re-zoning
€8m
– Potential for future mixed-use development
subject to re-zoning
Total mixed-use
154.3 acres
n/a
€67m
– Total land area +5% since Mar-19
1.
2.
Including transaction costs and capex spent to date.
Initial consideration.
A S S E T M A N A G E M E N T
Net capital expenditure on maintenance
items amounted to €0.8m in the financial
year or €0.4m net of a refund (2019:
€1.8m). Contracted rent increased by 14.1%
to €65.7m (March 2019: €57.6m) as a result
of:
• New lettings/licence agreements and
variations to existing leases adding
€6.3m;
• Rent reviews concluded adding €2.7m;
• Acquisitions adding €0.8m; and
• Lease expiries, breaks, surrenders and
adjustments reducing contracted rent
by €1.7m.
Some other key statistics at 31 March 2020:
Portfolio contracted rent roll
• The vacancy rate in the in-place office
portfolio was 7% based on lettable area
(March 2019: 12%), and this available
space has an ERV of €4.0m (March
2019: €8.0m);
• Average rent across the in-place
office portfolio was €50psf (March
2019: €47psf);
• Two office rent reviews were active over
30,000 sq. ft. of office space, with a
modest (<€1m) uplift in contracted rent
expected (March 2019: nine rent reviews
active over 86,000 sq. ft. with a €2.1m
uplift expected). Please see page 56; and
• Please see page 59 in the Financial
review for rent collection statistics.
€65.7m
(2019: €57.6m)
In-place office vacancy rate
7%
(2019: 12%)
55
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information B U S I N E S S R E V I E W C O N T I N U E D
• Hardwicke House & Montague House,
D2: six of the seven rent reviews
outstanding in the buildings at 31 March
2019 were settled in the financial year.
The reviews covered 58,000 sq. ft.
and resulted in an aggregate €1.6m
increase (+97%) in the passing rent to
€3.3m per annum. Two rent reviews over
30,000 sq. ft. are outstanding.
• The Observatory, South Docks: we
completed two lettings on 14,000 sq. ft.
and one rent review on 36,000 sq. ft.,
adding a net €1.6m to our contracted
rent. The weighted average term of the
new agreements was 4.6 years and the
term certain was 3.8 years.
• South Dock House, South Docks: all
9,500 sq. ft. of the property, part of
which was occupied by Guggenheim
and part of which served as the Hibernia
head office, was let to Irish Residential
Properties REIT plc on a lease with term
certain of 10 years, which commenced in
December 2019. The Hibernia head office
has moved to the ground floor suite
in 1WML.
• Flexible workspace arrangement: the
flexible workspace arrangement with
Iconic Offices in 21,000 sq. ft. of Block 1,
Clanwilliam Court performed well in the
year. 99% of workstations were occupied
at 31 March 2020 (c. 90% of revenue
from the arrangement) and 76% of the
available co-working memberships were
contracted at the same date. At 30 April
2020 96% of workstations were occupied
and 65% of the co-working memberships
were contracted.
Key in-place office properties with
vacancy at year end
As noted above, the in-place office
portfolio vacancy rate reduced from 12%
at 31 March 2019 to 7% at 31 March 2020
as a result of letting activity in the year.
The main office investment assets with
vacancy are:
• Central Quay, South Docks: 25,500 sq.
ft. of office accommodation is available
to lease.
• The Forum, IFSC: all 47,000 sq. ft.
of office accommodation and 50 car
parking spaces are available to lease.
• Other: 11,000 sq. ft. of available space.
S U S T A I N A B I L I TY
As set out in the Sustainability
Report we publish each June (see
www.hiberniareit.com/sustainability
for more details), we are making good
progress in improving our sustainability
performance. In the 12 months to
31 December 2019 we achieved reductions
of 13% for both LFL energy consumption
(gas and electricity) and greenhouse gas
emissions (Scope 1 and Scope 2 emissions)
from the areas under our control in our
offices. Since 2016, we have achieved a
reduction of over 25% in greenhouse gas
emissions intensity from landlord-obtained
utilities in our offices on a LFL basis and a
reduction of over 20% on an absolute basis.
In the financial year we received our second
successive EPRA Gold Award for the
quality of our sustainability performance
disclosures and we received three stars in
the GRESB 2019 Assessment, improving
our score by 17 percentage points over
prior year to 75%.
Reflecting the increasing importance of
sustainability and to ensure we continue to
improve in all aspects of our sustainability
performance we created a full-time
Sustainability Manager position and
recruited Neil Menzies to the role in January
2020. Some specific areas of focus for
us include:
• Improving the speed and scope of our
sustainability data collection to allow
us to drive further efficiencies in the
operation of our assets;
• Integrating climate change measures
by moving the portfolio towards net
zero carbon emissions and considering
science-based sustainability targets.
GRESB three stars with
75% score
(2019: GRESB three stars with 58% score)
Summary of letting activity in the
financial year
Offices:
• Five new lettings and one licence
agreement on 91,000 sq. ft., adding gross
rent of €5.7m per annum, or €4.3m per
annum net of expiries, breaks, surrenders
and adjustments on let or licensed space.
The weighted average periods to break
and expiry for the new agreements were
6.0 years and 11.9 years, respectively
• Nine rent reviews concluded over 99,000
sq. ft., adding a further €2.7m of rent
per annum: in aggregate the revised
rents were approximately 96% above the
previous contracted rents and 2% ahead
of the ERV at the date of review
Retail:
• One new letting of 2,000 sq. ft. at an
initial rent of €0.1m per annum
Residential:
• Letting activity and lease renewals
on our 331 residential units added
incremental net annual rent of €0.2m in
the financial year
• All let units are subject to the rental
cap regulations
Summary of letting activity since financial
year end
Offices:
• One pre-let on 24,000 sq. ft., generating
€1.5m per annum of new rent. The period
to expiry for the new lease is 10 years
Key asset management transactions by
property
• 2WML, South Docks: all 60,000 sq. ft.
of office accommodation in the building
was let to Udemy and Zalando in the
financial year, at rents well ahead of the
prevailing ERVs. The weighted average
term of the leases was 12.8 years and the
term certain was 6.1 years.
• 2 Cumberland Place, D2: the 58,000 sq.
ft. building remains under construction
(see further details on page 54).
In April 2020 we agreed to lease 24,000
sq. ft. to 3M Digital Science Community
Ltd, a subsidiary of 3M Company, on
a 10 year lease on terms ahead of the
September 2019 ERV.
• Cannon Place, D4: following the
completion of necessary remedial works
in the financial year the 16 units were
furnished and are now being re-let.
As at 31 March 2020 four units were let.
The remaining units are occupied on a
temporary, pro bono basis by healthcare
staff assisting with the COVID-19 crisis.
56
Hibernia REIT plc Annual Report 2020Strategic report F I N A N C I A L R E V I E W
As at
IFRS NAVPS
EPRA NAVPS1
Net debt1
Group LTV1
Financial period ended
Profit after tax
EPRA earnings1
Diluted IFRS EPS
EPRA EPS1
Proposed final DPS1
FY20 DPS1
31 March 2020 31 March 2019
Movement
179.8c
179.3c
174.7c
173.3c
€241.4m
€217.1m
+2.9%
+3.5%
+11.2%
16.5%
15.6%
+0.9pp
31 March 2020 31 March 2019
Movement
€61.0m
€38.1m
€123.5m
€27.5m
8.8c
5.5c
3.0c
4.75c
17.6c
4.0c
2.0c
3.5c
-50.6%
+38.7%
-49.8%
+39.9%
+50.0%
+35.7%
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 at the end of this report.
The key drivers of the 6.0 cent increase in EPRA NAV per share from 31 March 2019 were:
• 6.5 cent per share from the revaluation of the property portfolio, including 2.7 cent per share in relation to developments;
• 5.5 cent per share from EPRA earnings;
• Other items, primarily the share buyback, increased NAV by 1.0 cent per share;
• Payment of the FY19 final and FY20 interim dividends, which reduced NAV by 3.8 cent per share; and
• The 1.5pp increase in commercial stamp duty, which reduced portfolio value and NAV by 3.2 cent per share.
EPRA earnings were €38.1m, up 38.7% compared with the prior year as a result of:
• A €5.3m increase in net rental income (+9.9%) to €58.6m (2019: €53.3m), principally due to the commencement of the office lease in
1SRJQ in June 2019 and the successful completion of a number of new lettings and rent reviews. This increase came despite the sale
of two assets in the prior year and the cessation of the office lease in the Forum in March 2019; and
• A €5.9m reduction in operating expenses (-30.6%) to €13.4m (2019: €19.3m) mainly due to the expiry of the Investment Management
Agreement in November 2018 and its replacement with a new, lower-cost remuneration scheme.
Profit after tax was €61.0m, a reduction of 50.6% over last year, primarily because of higher revaluation gains in the prior year and due to
the stamp duty increase in October 2019 which reduced portfolio value by an estimated €22m in the year. The prior year saw the delivery
of our major development projects at 1SJRQ and 2WML and also saw significant yield compression within the residential sector.
EPRA EPS
5.5c
(2019: 4.0c)
FY20 DPS
4.75c
(2019: 3.5c)
57
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information F I N A N C I A L R E V I E W C O N T I N U E D
F U N D I N G P O S I T I O N
Group leverage target: our through-cycle target remains a loan to value ratio of 20-30%.
The Group’s debt funding is fully unsecured and comprises a revolving credit facility (“RCF”) and private placement notes. The weighted
average maturity of the Group’s debt at 31 March 2020 was 4.4 years (2019: 5.4 years) and no repayments are due before December
2023. Please see the table below for further details.
Instrument
Quantum
Maturity date
Interest cost
Revolving credit facility (five year)
€320m
December 2023
2.0% over EURIBOR on drawn funds
0.8% undrawn comm’t fee (fixed)
Private placement notes (seven year)
Private placement notes (ten year)
Total
€37.5m
€37.5m
€395m
January 2026
January 2029
n/a
2.36% coupon (fixed)
2.69% coupon (fixed)
n/a
Security
Unsecured
Unsecured
Unsecured
n/a
At 31 March 2020, net debt was €241.4m (2019: €217.1m), equating to an LTV of 16.5% (2019: 15.6%). The main capital expenditure items
increasing the net debt in the financial year were development expenditure of €21.3m, gross acquisition expenditure of €23.3m and the
share buyback of €25.0m (see further details on each of these on page 53, 54 and below in this Annual Report), which were partly offset
by the receipt of €35.2m from the sale of 77 SJRQ, which was agreed in the prior year. Cash and undrawn facilities at 31 March 2020
amounted to €154m or €136m, net of committed expenditure (2019: €178m and €143m, respectively). Assuming full investment of the
available facilities in property, the LTV, based on market values at 31 March 2020, would be c. 25%.
The Group has significant headroom on the financial covenants on its borrowings: the table below outlines the principal financial
covenants and the headroom above each as at 31 March 2020. Nonetheless, given the potential financial impact of COVID-19 on our
business and our markets, we are seeking to preserve capital wherever possible. We have also increased the minimum cash balance we
maintain at all times to €20m for liquidity reasons.
Key covenant
Calculation
Requirement At 31 March 2020
Headroom to covenant limit
Loan to value
Gross debt / (portfolio value + cash)
<50%
17.5%1
Portfolio value would have to fall 65% before breach
Interest cover ratio
Net worth
Underlying EBIT / total finance
costs
>1.5x
6.3x2
Underlying EBIT would have to fall 76% before breach
Net Asset Value
>€400m
€1,231m
Net Asset Value would have to fall 68% before breach
1. Please note, reported LTV is calculated as net debt / portfolio value, giving 16.5%.
2. Based on 12 month historic interest cover.
I N T E R E S T R A T E H E D G I N G
Group hedging policy: to ensure the majority of the interest rate risk on drawn debt balances is fixed or hedged.
At 31 March 2020 the Group had €75m of fixed coupon private placement notes and the interest rate risk on the RCF drawings of €187m
was mitigated by hedging instruments covering €125m of notional exposure as set out below. This means 67% of the interest rate risk on
the RCF drawings was hedged and 76% of the Group’s overall interest rate risk on its debt was fixed or hedged.
Instrument
Cap
Swaption
Notional
Strike rate
Exercise date
Effective date
Termination date
€125m
€125m
0.75%
0.75%
n/a
February 2019
December 2021
December 2021
December 2021
December 2023
C A P I T A L M A N A G E M E NT
In November 2019 we completed a €25m on-market share buyback programme, having repurchased and cancelled a total of 17.6m shares
at an average price of €1.42 per share, well below the prevailing EPRA NAV per share. The buyback programme was launched in April
2019 to return the majority of the proceeds of €35m from the sale of 77 SJRQ to shareholders.
In March 2020 we received final Court approval for a capital reorganisation to convert €50m of share premium into distributable reserves
in order to increase our flexibility for future capital management following approval from shareholders to do so at the AGM in July 2019.
As at 31 March 2020 our share premium account had a balance of €630.3m and we had distributable reserves of €35.5m. The capital
reorganisation was effective as of 9 April 2020. Given current economic conditions we have no plans to return further capital to
shareholders at present.
58
Hibernia REIT plc Annual Report 2020Strategic report R E N T C O L L E C T I O N
Our tenants are important stakeholders in our business and we have been working closely with them to offer support, where needed,
through the current COVID-19 crisis.
Commercial tenants
We are assisting our commercial tenants (c. 90% of our rent roll) with their cash flow by allowing them, where needed, to pay rent on a
monthly basis. In addition, where our tenants are suffering particularly severe negative impacts from the restrictions on movement, we
have allowed some deferral of rent. Overall, the impact on our rent collection statistics to date has been modest, as set out below:
Rent collected
Within seven days
Within 14 days
Within 30 days
Within 60 days
More than 60 days
Monthly rent
Deferred rent
Rent outstanding
Quarter ending June 20
Quarter ending March 20
Quarter ending June 19
89%
89%
90%
94%
95%
0.5%
3.5%
1%
93%
94%
98%
99.5%
100%
–
–
–
92%
97%
97%
99.5%
100%
–
–
–
Residential tenants
Where requested we are also assisting those residential tenants who are in difficulty. Again, the overall impact on our residential rent
collection statistics to date has been modest with 97% of the rent due for the month of May having been collected at this point, compared
to recent months which have tended to be 99% or better.
D I V I D E N D
Group dividend policy: to distribute 85-90% of rental profits via dividends each financial year, in compliance with the requirement of the
Irish REIT legislation to distribute at least 85%. The interim dividend in a financial year will usually be 30-50% of the total ordinary dividends
paid in respect of the prior financial year.
The Board has proposed a final dividend of 3.0 cent per share (2019: 2.0 cent), taking the total dividend for the financial year to 4.75
cent per share. This is a 35.7% increase on prior year (2019: 3.5 cent) and represents 86% of EPRA EPS for the financial year (2019: 89%).
Subject to approval at the Group’s AGM on 29 July 2020, the final dividend is expected to be paid on 31 July 2020 to shareholders on
the register at 3 July 2020. The final dividend will be a Property Income Distribution in respect of the Group’s property rental business, as
defined under the Irish REIT legislation.
Hibernia’s Dividend Reinvestment Plan (“DRiP”) is available to shareholders and allows them to instruct Link, the Group’s registrar, to
reinvest the cash dividends paid by Hibernia in the purchase of existing ordinary shares in the Company. The terms and conditions of the
DRiP and information on how to apply are available on the Group’s website.
Q/E June rent collected within 30 days
Q/E June rent collected within 60 days
90%
(2019: 97%)
94%
(2019: 99.5%)
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T A X C H A N G E S I N T R O D U C E D I N F I N A N C E A C T 2 0 1 9
In the 2020 Budget announced in early October 2019 and the subsequent Finance Act, which came into law in December 2019, the Irish
Government announced a number of changes to the taxation of Irish property which can be categorised into those that directly impact
the Group (either immediately or possibly at some point in future) and those that do not. We summarise these changes below and
estimate the impact for the Group where possible and/or appropriate.
Main tax changes directly impacting the Group
Overview
Type of change
Stamp duty increased from 6% to 7.5%
on all commercial property transactions
in Ireland
Market change
Effective from
Impact on Hibernia
9 October 2019
(unless a binding
contract was in place
before this date and
it completed by
31 December 2019)
• C&W, the Group’s Valuer, estimates that
without the increase in stamp duty, the
value of the Group’s portfolio at 31 March
2020 would have been 1.5% higher (€22m)
• This means the increase in stamp duty
resulted in a 1.8% (3.2c) reduction in the
Group’s NAV per share at 31 March 2020
Increase in the rate of dividend withholding
tax (“DWT”) from 20% to 25% for all
dividends paid by Irish companies
Where an entity ceases to be a REIT, there
will no longer be a deemed disposal and
reacquisition of the assets at market value
unless the REIT has been in existence for
15 years or more
85% of any proceeds a REIT generates from
the sale of a rental property which are not:
• Reinvested within a three-year window
(spanning one year before and two
years afterwards)
• Used to repay debt specifically used
to acquire, enhance or develop that
rental property
• Distributed to shareholders within two
years of sale (and thus subject to DWT)
will be taxed at 25% (an effective rate of
21.25% on the uninvested proceeds)
REITs are now subject to a ‘wholly and
exclusively’ test for expenses in arriving at
exempt income. Any amount of expenses
deemed not to be incurred ‘wholly and
exclusively’ for the purposes of the property
rental business of the REIT will be subject to
a 25% tax charge
Market change
1 January 2020
• The change affects shareholders directly
• The impact will vary depending on
the individual circumstances of each
shareholder and whether relief is available
under a tax treaty
REIT change
9 October 2019
• No immediate change for the Group
• If Hibernia ceased to be a REIT before
the expiry of the 15-year period (i.e.
before December 2028), this means the
original tax base cost of the assets would
apply to subsequent disposals, not the
market value at the date of cessation
• This could create latent tax for any bidder
and reduce the price it would be prepared
to pay to acquire the Group
REIT change
9 October 2019
• No immediate impact
• With low LTV and a pipeline of
potential future development projects
with significant capital expenditure
requirements, it is unlikely that Hibernia
will fail to reinvest any future sales
proceeds within the three-year window
in the near term or the medium term
REIT change
1 January 2020
• No immediate impact
• It is understood that this measure is
not intended to create a tax charge for
expenses incurred ‘wholly and exclusively’
for the residual business of the REIT
Tax changes not directly impacting the Group
Irish Real Estate Investment Funds (“IREFs”): anti-avoidance rules were introduced for IREFs. Broadly these seek to counteract
perceived aggressive tax planning by some IREFs by disincentivising the use of high levels of debt and excessive costs as a means of
reducing profits liable to IREF tax. While the changes do not directly impact the Group, with almost €17bn of property held within IREF
structures at the end of 2017 (source: Central Bank of Ireland) any changes which negatively impact IREFs may indirectly affect the wider
property market
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Schemes of arrangement: stamp duty on corporate acquisitions undertaken by a scheme of arrangement was increased to 1%
(previously 0%).
Hibernia REIT plc Annual Report 2020Strategic report S U S T A I N A B I L I T Y
S U S T A I N A B I L I T Y
A T H I B E R N I A
S U S T A I N A B I L I T Y
H I G H L I G H T S O F T H E Y E A R
Appointment of Neil Menzies as
Sustainability Manager
Carried out sustainability materiality
assessment and corporate governance
roadshow with investors
Alignment to the United Nations
Sustainable Development Goals
13%
reduction in absolute energy
consumption across total portfolio
13%
reduction in LFL Scope 1
and Scope 2 greenhouse gas
(“GHG”) emissions intensity across
our multi-let office portfolio
Measured impact of our Scope 3
GHG emissions for the first time
Zero waste sent to landfill
1SJRQ development received
LEED Platinum certification
€349,000
raised for Dublin Simon and
other charities through Dragons
at the Docks 2019
“The sustainability
priorities we had
previously identified
remain broadly relevant
and are now aligned
with the UN SDGs.”
I am pleased to present the sustainability
section of this year’s Annual Report.
Sustainability is an integral part of our
strategy and something we believe is
crucial to achieving our target of delivering
long-term value to our stakeholders.
Our ambition is to make Hibernia a
leader in sustainability in Ireland, both in
the property sector and more broadly,
and we set out how we plan to achieve
this, and our progress to date, in our
standalone Sustainability Report 2020
which is available on our website at
www.hiberniareit.com.
The COVID-19 outbreak is causing
considerable disruption to the way we work
and to the economy at large. Very few of
our stakeholders, from tenants through
to our local communities, will not have
been impacted by the pandemic and we
have been working hard to support them.
Our teams will continue to adapt and
support our stakeholders as the COVID-19
situation develops over the coming months.
Please refer to page 15 of this report for
a summary of the impacts and actions
to date.
Please do take the opportunity to read our
Sustainability Report 2020 and we will be
pleased to receive any feedback you have.
Kevin Nowlan
Chief Executive Officer
Greenhouse
gas emissions (“GHG”)
In 2019 we reduced our Scope 1 and 2 GHG
emissions 13% LFL. We have determined our
Scope 3 emissions for the first time in this Report
with the intention being to set a net zero carbon
pathway for the business.
Read more in our Sustainability Report 2020
on pages 5 and 21
CO2
Scope 3 GHG emissions
22,000
tCO2e
Carbon intensity reduction from 2016 through to 2019 (tCO2/m2/yr)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
)
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2
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2016
2017
2018
2019
For more information, read our
Sustainability Report 2020
Absolute
LfL
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Strategic report
S U S T A I N A B I L I T Y C O N T I N U E D
S U S T A I N A B I L I T Y A T H I B E R N I A
Our Sustainability Policy has been developed to
ensure that Hibernia operates in a responsible and
sustainable manner, having regard to its stakeholders
and the environment. The Policy’s principles were
reviewed in the light of our recent corporate
governance roadshow and the materiality assessment
carried out in early 2020, and have been aligned with
the UN SDGs.
Read our Sustainability
Policy at
www.hiberniareit.com
H O W W E D E F I N E S U S T A I N A B I L I T Y
O U R G O V E R N A N C E F R A M E W O R K
The policy consists of five key principles which are embodied in
our day-to-day business:
1 . R E S P O N S I B L E
A S S E T M A N A G E M E N T
2 . D E L I V E R I N G
S U S T A I N A B L E B U I L D I N G S
3 . P O S I T I V E L Y
I M P A C T C O M M U N I T I E S
4 . S U P P O R T I N G
O U R S U P P L I E R S
5 . D E V E L O P I N G
O U R E M P L O Y E E S
Board of Directors
Sustainability programme oversight
Sustainability Committee
Sustainability programme implementation
Chaired by CEO
Attended by heads of departments and others
For each of the principles, we have a series of targets. These form
our Sustainability Strategy.
Read more about our targets in our Sustainability Report
2020 on pages 20 to 33
H O W W E M A N A G E S U S T A I N A B I L I T Y
Thomas Edwards-Moss
CFO
Neil Menzies
Sustainability Manager
Hibernia’s Board has ultimate oversight
for all aspects of the business, including
sustainability. The Board reviews and
approves the Group’s Sustainability
Strategy, Sustainability Policy and other
policies, and receives updates from the
Sustainability Committee, which, along
with other Executive Committees, meets
at least once a quarter.
Day-to-day, Hibernia’s sustainability
programme is run by Neil Menzies, our
Sustainability Manager, with input and
support as required from the CFO and
other team members.
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We identify stakeholders on pages
20 and 21 and our corporate governance
roadshow is discussed on page 85.
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Sustainability Manager
Neil Menzies
Management of the programme
Internal engagement
Asset management
Development
Finance and IR
Governance and risk
Investment
Marketing
Operations
Events
External engagement
Charities
Communities
Consultants
Educational institutions
ESG ratings organisations
Industry organisations
Industry peers
Investors
Local authorities
Suppliers
Tenants
Strategic report
S U S T A I N A B I L I T Y , G O V E R N A N C E A N D S T R A T E G Y A T H I B E R N I A
O U R A L I G N M E N T W I T H
T H E U N S D G S R E F L E C T S
O U R C O M M I T M E N T T O
A S U S T A I N A B L E F U T U R E
T H E U N H A S E S T A B L I S H E D T H E U N S D G S
T H A T R E P R E S E N T T H E M O S T S I G N I F I C A N T
C H A L L E N G E S A N D K N O W L E D G E G A P S I N
T H E W O R L D T O D A Y
The UN SDGs are a set of 17 interconnected goals with 169
actionable targets designed to help our planet achieve an
environmentally and socially sustainable future. The goals
address the most pervasive global challenges, including
poverty, quality of education, and climate change. As a
property owner and developer, we are committed to doing our
part in addressing the applicable UN SDGs in the local context.
O U R S U S T A I N A B L E
D E V E L O P M E N T
G O A L S
H O W W E A P P L Y O U R
F I V E K E Y P R I N C I P L E S
T H E R E L E V A N T S D Gs
R E S P O N S I B L E A S S E T M A N A G E M E N T
We actively manage our buildings to minimise environmental
impact while maximising asset performance and efficiency
for our tenants and customers. Where possible, we adopt a
‘polluter pays’ approach: we have set specific targets in this area
to improve the performance of our buildings.
D E L I V E R I N G S U S T A I N A B L E B U I L D I N G S
We improve the local built environment by providing efficient
new space, through developments or refurbishments,
which offers lower running costs, fewer emissions and an
enhanced occupier experience. We have set specific targets
for new buildings, both in terms of certifications and more
general impacts.
P O S I T I V E L Y I M P A C T C O M M U N I T I E S
We support the communities in which we operate. We are
responsible neighbours and strive to develop and maintain
good relationships.
S U P P O R T I N G O U R S U P P L I E R S
We support our suppliers through the prompt payment of
invoices. In return, via our contractual relationship, we expect
suppliers to adhere to our Supplier Code of Conduct.
D E V E L O P I N G O U R E M P L O Y E E S
We have an inclusive and open working environment.
We encourage individuals and teams to realise their full
potential for personal and collective growth and to enable the
business to meet its strategic objectives.
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M A T E R I A L I T Y A S S E S S M E N T
To reassess the sustainability issues, risks and opportunities that are most important to Hibernia and our stakeholders, we completed
our first sustainability materiality assessment in 2020. Together with our other interactions with our stakeholders (see pages 20 and
21), this allows us to prepare the priorities for our strategy as identified below.
M A T E R I A L I T Y M A T R I X
The chosen topics can be seen in the materiality matrix below
and are integrated into the Sustainability Strategy through
alignment with the 5 key principles.
Business
conduct
Key
Environmental Social Governance
Energy
efficiency
G R A P H D E T A I L
Workplace
wellbeing
Waste
management
Tenant
engagement
Health
and safety
Environmental
compliance
P R I O R I T Y 1
Air
quality
Governance
Climate change mitigation and resilience
Building
obsolescence
Building
design
Smart
buildings
Transparency
Efficient
use of raw
materials
Sustainable
transport
Staff
engagement
Water
management
Employment
and skills
Human
rights
Communities
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Business
conduct
Energy
efficiency
Workplace
wellbeing
Waste
management
Tenant
engagement
Health
and safety
Environmental
compliance
Climate change mitigation and resilience
Building
obsolescence
P R I O R I T Y 1
Air
quality
Governance
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Building
design
Smart
buildings
Transparency
Efficient
use of raw
materials
Sustainable
transport
Staff
engagement
Water
management
Employment
and skills
Human
rights
Communities
P R I O R I T Y 2
Public
Realm
Supplier
engagement
Biodiversity
Diversity
and inclusion
P R I O R I T Y 3
Importance to stakeholders
P R I O R I T Y 2
Public
Realm
Supplier
engagement
Biodiversity
Diversity
and inclusion
P R I O R I T Y 3
Importance to stakeholders
Importance to stakeholders
Importance to stakeholders
The materiality matrix is broken into three
groups based on their level of priority:
Priority 1:
Report on in detail and where possible
include measurable KPI or goal and
include external assurance
Priority 2:
Report at least in narrative and wherever
possible include a measurable KPI
Priority 3:
Topic to be monitored and managed
internally but no reporting required
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Read more in our Sustainability Report 2020 on pages 10 and 11.
O U R P O L I C I E S
Hibernia has created a number of policy documents to ensure we act responsibly in everything that we do across all material
ESG issues identified by our stakeholders. These policy documents support our five key principles, laying out how we always manage
our Sustainability Strategy and implement our processes and procedures to improve our performance in an ethical and transparent
manner. We review and amend our policies as our sustainability risks and material issues change, and develop new policies to assist
our employees in meeting their own sustainability goals.
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Read more on pages 77 and 83.
Strategic report
Q & A W I T H O U R S U S T A I N A B I L I T Y
M A N A G E R , N E I L M E N Z I E S
How have you found your first six months
at Hibernia and what are you most
excited about?
I’ve really enjoyed my time so far and
the Company’s open and collaborative
culture. Hibernia has already achieved a
lot, but what I am really excited about is
the next stage. I will be helping to bring
the Sustainability Strategy to the next level
and setting new and ambitious targets,
informed by new real-time performance
data across our managed portfolio, whilst
engaging with colleagues, tenants and
suppliers to bring about meaningful
change. These goals, as well as driving
the climate change agenda to reduce the
carbon impact of our business, really excite
me. Hibernia is in a great position to be at
the forefront of change in Ireland and I look
forward to helping the Group achieve this.
What do you see as being the key
sustainability challenges?
As we emerge from the COVID-19
pandemic we need to develop a greater
understanding of the major risks for our
business, in particular climate change and
how it impacts our assets and the needs
and requirements of our key stakeholders,
our investors and tenants. Only then can
we develop efficient solutions to mitigate
these risks and future proof the business.
Achieving a meaningful reduction in
our overall environmental impact is also
dependent on the actions of our suppliers
and tenants so we need to work closely
with them in this, as well as other areas.
To what level is sustainability embraced
by Hibernia? Is there room for
improvement?
I am pleased to say that sustainability
is embraced across the organisation.
For example, we had a very good level
of engagement from our Non-Executive
Directors in the sustainability materiality
assessment undertaken to inform the latest
strategy and we held, via conference call,
another corporate governance roadshow
earlier this year. Similarly, our building
managers are enthusiastic about learning
to make the operation of our managed
buildings more efficient, driving down our
carbon impact as they do so. The next
“We consider climate
change to be one of the
principal risks to the
business.”
level will be to set a framework for how
we develop buildings more sustainably,
working collaboratively with tenants to
evolve our sustainability strategy and
engaging suppliers to bring about new
solutions and technologies that will support
our staff in our efforts.
What drives the emphasis on making
a difference in your communities?
We are developing buildings that provide
a unique user experience for our tenants
but we have to be mindful of the impact
that these buildings also have on the local
community, from the disturbance that is
caused during development right through
to the potential for positive interactions
and job creation once the building is open.
The Windmill Quarter is a great example,
where we have sponsored local sports
teams and youth group trips, upgraded
school facilities and made extensive
improvements to the public realm making it
a safer and more enjoyable environment in
which to live. We have brought local school
and university students into our 1WML
building to show them the finished product
and unique design features. One of the five
key principles of our Sustainability Policy is
to positively impact communities and we
must follow through on our commitment
and strengthen our community engagement
focus by getting all staff involved in the
process. I look forward to further developing
relationships with universities and outreach
groups to support local employment
initiatives for the property industry.
Why has Hibernia chosen to align with
the UN SDGs?
I have always been an advocate of the 17
UN SDGs and the role that business should
be playing in working towards their 169
targets. By carrying out a sustainability
materiality assessment and aligning our
Sustainability Strategy with the SDGs,
we are demonstrating our commitment
to local and global change for the better.
An added benefit is how well the SDGs
resonate with staff, which will further assist
with embedding sustainability within the
organisation. You can read more about
the SDGs and our alignment with them
on pages 12 and 13.
How is Hibernia addressing the issue
of climate change resilience?
We consider climate change to be one
of the principal risks to the business.
We must fully understand the impact that
we are having and the risk that climate
change poses to us. We have reported
our Scope 1 and 2 emissions for several
years now and this year we are also
disclosing our estimate of our indirect,
Scope 3, emissions. The next step will be
to assess pathways to net zero carbon for
the business over the next 20 to 30 years,
looking at how we remove, reduce and
offset our emissions. Alongside this, we will
assess the transition risks and physical risks
of climate change with a view to adopting
the TCFD recommendations.
And what about your own approach
to sustainability, outside of work?
I am passionate about living a sustainable
life and believe that we can all do our bit
to protect the environment and help to
shape better communities. I have been
keeping bees in my garden for three years
now and have planted flowers and trees
to attract not just the honey bees, but
lots of other insects and wildlife vital for
biodiversity. The honey that I harvest each
year is enjoyed by my family and friends.
I try to keep my travel-related emissions
to a minimum, so I drive a fully electric car
and take public transport to get to and
from work. Producing your own food is
also important and at home I grow my
own vegetables and have chickens, whilst
a number of years ago I was involved in
the development of a community-based
allotment project which now has over
300 plots. We can all do our part and
have fun doing so.
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O U R P R I O R I T I E S I N 2 0 2 0
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Real-time data system
In 2020 we will continue to roll out our
real-time energy and resource use data
monitoring system across all of our
managed assets to empower our building
managers to make more informed
decisions when optimising the building
management systems for our tenants.
We will allow tenants the option to have
their own energy data added to the
system and explore further options to
monitor plant and equipment and ambient
conditions of tenant spaces in real time
to further drive efficiencies.
CDP
We intend to report to CDP under the
climate change real estate questionnaire
for the first time in summer 2020.
This will prepare us for integrating the
TCFD recommendations into our Strategy
for 2021 and support our overall climate
change objectives.
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TCFD integration
We are aware of the importance of having
clarity on the climate-related risks to our
business and are considering implementing
the recommendations of the TCFD.
This will involve input from a number of
departments and will embed a greater
understanding of the risks that face the
company and the potential for ‘stranded
assets’ if such risks are left unaddressed.
Suppliers and tenants scope 3 GHG emissions
Suppliers and tenants contribute to the
majority of our Scope 3 GHG emissions.
In 2020 we will start to put together a
strategy for how we intend to work with
both sets of stakeholders, firstly to gain
the most accurate information on their
associated GHG emissions and, further to
this, to support them in how we can work
side by side to reduce such emissions.
This will create a win-win for both Hibernia
as well as our suppliers and tenants.
ESG due diligence in investment decisions
Science-based targets
When we acquire new assets, our
investment team will be required to delve
deeper into the sustainability risks and
opportunities associated with target
properties and sites. To assist them, we will
develop a sustainability investment brief
outlining the minimum and additional ESG
due diligence requirements that should
be completed for each acquisition before
Board approval is sought.
In line with our plans to develop a net zero
carbon pathway and to keep our GHG
emissions reduction strategy in check and
aligned with the latest findings of the IPCC,
we will consider science-based targets that
will clearly define our pathway to future
proof growth by specifying how quickly
and by how much we need to reduce
our GHG emissions.
Strategic report
Net zero carbon pathway
Tenant engagement
Development sustainability brief
In order to drive down our carbon
footprint and future proof our
assets given the certainty of climate
change and related increased costs
of construction and management of
buildings, we are assessing setting out
a pathway for the business over the
next 10, 20 and 30 years, looking at
how we remove, reduce and offset our
GHG emissions.
Our tenant engagement will be
bolstered by the introduction of our
new Sustainability Manager who will be
the face of our Sustainability Strategy,
meeting with tenants regularly, hosting
sustainability events at our Windmill
Quarter Townhall, sending out quarterly
communications and partnering with
tenants to help them meet their own
sustainability goals. We will use our
tenant survey to further inform the
decisions we make to improve the
sustainability of our buildings and
inform how we proceed with future
developments, particularly in regard
to post COVID-19 measures to protect
tenant health and safety at all times.
Clear sustainability strategies for each
new build and refurbishment will future
proof our assets. To achieve this, we
will create a sustainable development
brief that will be the basis of each
development’s journey to completion,
setting out our expectations of all
contractors working on the project
across all ESG material issues. Central to
this will be the carbon footprint of each
building and how we reduce the
embodied carbon associated with
the products and materials used to
construct the fabric of each building.
Community engagement
How we engage with our communities
requires a formal policy, which we intend
to implement in 2020, setting out how we
will forge long-lasting partnerships and
be good neighbours to those living in the
vicinity of our buildings. We will include
details of how employees can be a part
of the process and what we will commit
to supporting on an annual basis.
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C O R P O R A T E
G O V E R N A N C E
Hibernia REIT plc Annual Report 2020 C O R P O R A T E
G O V E R N A N C E
C O N T E N T S
70 Chairman’s Corporate
Governance Statement
72 What we did during the year
73 Board snapshot
Leadership
74
76 Culture and people
78 Board of Directors
80 The Senior Management Team
82 Board effectiveness
89 Nominations Committee Report
92 Audit Committee Report
98 Remuneration Committee Report
117 Directors’ Report
121 Directors’ Responsibility Statement
O U R C O M M I T M E N T
We are committed to
good governance and
transparency as a
key element of the
Group’s strategy.
We had calls with investors representing
32%
of our issued shares on our corporate
governance roadshow 2020
(March 2019: 46%)
Read more on page 85
Board succession was
a priority this year with
two
new Non-Executive Directors
appointed in the financial year
(March 2019: one)
Read more on pages 90 and 91
30%
female representation on our
Board following the appointment of
two female Non-Executive Directors
during the financial year
(March 2019: 13%)
69
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information C H A I R M A N ’ S C O R P O R A T E G O V E R N A N C E S T A T E M E N T
I N T R O D U C T I O N F R O M
T H E C H A I R M A N
Daniel Kitchen
Chairman
Dear fellow shareholder,
This year has been a busy one: while
occupational and investment markets
were favourable for most of the financial
year, we have had to contend with tax
changes announced in the October 2019
Budget (see page 60) and more recently
the COVID-19 pandemic. COVID-19 has
been particularly challenging for everyone,
and we discuss this in detail on page 15.
From a governance perspective, most of
our staff commenced working remotely
in mid-March 2020, and the challenge is
to keep that environment secure and the
Group functioning. All our meetings are
for the time being virtual, including our
Board meetings. Our information systems
were already cloud based and so the move
to remote working has been relatively
seamless. The impact on the business risks
and operational risks has been significant
and this is discussed in more detail in our
risk management report on pages 38 to 40
and in the principal risks section on pages
42 to 50.
On a more positive note, Hibernia
celebrated its sixth birthday as a public
company in December 2019. The Group
has matured; net rental income has grown
to €58.6m, an increase of 10% over 2019
as our completed developments are fully
let and have commenced generating rents.
Our focus now has shifted more to the
future and to medium-term and longer-
term projects in our pipeline.
We held a strategy session in December
2019 to reassess our goals and plans.
Most of our returns to date have been
generated through the completion of our
developments and we see our development
70
pipeline as significant in terms of
shareholder returns. Management of
development risk is therefore of foremost
importance. Climate change risk is also a
key focus. Future proofing our portfolio
means an increasing focus on its green
credentials – 2 Cumberland Place is our
first fully Nearly Zero Energy Building
(“NZEB”) compliant project. We continue
to be mindful of the importance of
good corporate governance and the
implementation of relevant provisions
of the UK Corporate Governance Code
2018 (“UK Code”) was a priority for this
financial year. (see pages 86 and 87 for
more) We comply with the UK Code and
the Irish Corporate Governance Annex
(“Irish Annex”) except for the provisions
on pensions alignment and post-
employment shareholdings which
are still to be implemented.
With regard to the requirements of
‘s172’, which are included in the UK Code
and with which the Company therefore
complies, the Directors continue to have
regard to the interests of the Group’s
employees and other stakeholders (see
‘Stakeholders’ section opposite).
Board activity and composition
The Board met eight times: six of these
were regular, scheduled meetings.
These meetings were 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.
Board succession is an important focus
for the Board as four members of the
current Board reach the nine-year limit on
H I G H L I G H T S I N
F I N A N C I A L Y E A R 2 0 2 0
• Board strategy day to plan
future direction
• New appointments and
succession planning
• 2018 UK Corporate Governance
Code implementation
• Capital management and
share buyback
• Corporate governance roadshow
• Established Risk & Compliance
Committee (Executive)
F O C U S F O R F I N A N C I A L
Y E A R 2 0 2 1
• Succession planning
and implementation
• Sustainability, alignment with
UN Sustainable Development Goals
and materiality
• Managing through the
COVID-19 pandemic
• Development pipeline
• Review of Remuneration Policy
• Consider suggested improvements
from Board evaluation review
Hibernia REIT plc Annual Report 2020Governance T H E I M P O R T A N C E O F
P U R P O S E , C U L T U R E
A N D V A L U E S
Our purpose
To improve the built environment in Dublin,
primarily the stock of city centre offices,
providing above average long-term returns
for our shareholders and bringing benefits
to all our stakeholders.
Our culture
• Transparent, honest and fair
• Hard-working and flexible
• Collaborative and inclusive
• Long-term perspective but pragmatic
Our values
• Openness
• Integrity
• Hunger
• Curiosity
• Passion
• Creativity
• Safety
• Sustainability
Read more on pages 76 and 77
100%
attendance for all Directors at scheduled
meetings in FY20
their tenures in 2022. We have appointed
Grainne Hollywood and Margaret Fleming
as independent Non-Executive Directors
during the year. Both bring strong Irish
property experience. Both have also
joined the Nominations Committee
and the Investment and Development
Committees (executive). We will continue
to seek diversity both in experience and
gender in future appointments.
Time commitments
The Board noted that some investors
had expressed concerns on possible
overboarding by certain members of the
Board. I have announced that I will step
down from the Chair of Workspace Group
in July 2020, reducing my Chair positions
to three including Hibernia. None of the
companies of which I am Chair operates
in heavily regulated businesses, such as
financial services or the pharmaceutical
industry, and only Applegreen has
geographically diverse operations. I am
able to manage my commitments to the
benefit of all of the companies. In addition
to completing all my normal duties with
the Group, I also undertook our second
corporate governance roadshow during
the period and oversaw the appointments
of Grainne Hollywood and Margaret
Fleming to the Board (see pages 90
and 91.
Stakeholder engagement
We believe that engaging with our
stakeholders helps us to understand
how we can create value in ways that are
meaningful to them. To do this the Group
considers not only its investors, but also
its tenants, employees, suppliers and the
communities it operates in when planning
its strategy and operating its business.
Stakeholder engagement is key to ensure
we are meeting their expectations as well
as acting responsibly.
We have worked with the Senior
Management Team to ensure a
continued focus on the engagement of
all our people, from Board to employees,
through our framework for understanding
the critical components of, and actions
needed to improve, team functioning and
performance. This is a process facilitated
externally and around which the whole
Group builds its goals, values and culture.
As detailed on page 76, we nominated
Margaret Fleming as our Designated
Non-Executive Director for Workforce
Engagement with a view to enhancing
Board and employee engagement
mechanisms and to strengthening the
employee voice in making decisions. This,
together with our other efforts to engage
with stakeholders, will continue
to enhance and inform our decisions.
Read more on stakeholder
engagement on pages 20 and 21
and on pages 86 and 87.
Board effectiveness
This year we undertook an external
Board performance review. The process,
recommendations and actions we plan to
take are summarised on pages 82 and 83.
I have evaluated the performance of
each Director and am satisfied that each
Director is committed to their role, provides
constructive challenge and devotes
sufficient time and energy to contribute
effectively to the performance of the
Board. The table on page 75 provides a
summary of competencies, important to
the long-term success of the Group, that
each Director seeking re-election at the
2020 AGM brings to the Board. Their full
biographies are set out on pages 78 and 79.
Board Committees
Our three Board Committees, Nominations,
Audit, and Remuneration, report on pages
89 to 116. In addition to their normal
activities, the Audit Committee focused
on sustainability, with the publication of
our first standalone Sustainability Report
in 2019 and the enhanced focus on climate
change risks. The Nominations Committee
has been busy ensuring Board succession.
The Remuneration Committee continues to
implement the 2018 Remuneration Policy;
the first LTIPs were awarded in July 2019
and the Committee will be commencing
its work towards the Remuneration Policy
review in 2021. Remuneration reporting
is also being continually enhanced; we
added our CEO pay ratio for the first
time this year, as with the expiry of the
IMA arrangements, FY20 was the first
year that the CEO was remunerated fully
under the Remuneration Policy and this is
now meaningful.
Conclusion
In 2020-21 we will continue to focus
on delivery of the Group’s strategy.
Specific tasks include ensuring smooth
Board succession, the planned 2021
review of the Remuneration Policy and
improvements in our focus on culture and
values. We also increasingly look at the
risks associated with climate change and,
in light of our pipeline of projects over
the next few years, on development risks
in particular.
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 Senior
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 strategic goals
and I am confident that we can continue
to deliver value for our shareholders.
Daniel Kitchen
Chairman
16 June 2020
71
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information W H A T W E D I D D U R I N G T H E Y E A R
W H A T T H E B O A R D D I D
I N T H E F I N A N C I A L Y E A R
E N D E D 3 1 M A R C H 2 0 2 0
In the 2020 financial year the Group
completed and fully let its first cluster,
the Windmill Quarter. The development
at 2 Cumberland Place has also almost
completed and is now 41% pre-let.
Our medium-term developments,
Clanwilliam Court and Harcourt Square,
have received grants of planning and we
will receive vacant possession in due course
to allow all the projects to commence.
The Marine House refurbishment, part of
the Clanwilliam Court cluster, can start from
as soon as late 2020.
Sustainability has been an important focus
in FY20. The cost of climate change is
not only in the potential physical risks to
Hibernia’s portfolio but also the possible
impact on returns to investors due to
building ‘obsolescence’. In planning our
developments and major refurbishments,
we aim to ensure that sustainability
remains a priority. 2 Cumberland Place is
our first NZEB development. A dedicated
Sustainability Manager has been appointed
and he joined us in January 2020.
In the year Hibernia made its second,
and first public, submission to GRESB, an
important European benchmark for the
real estate industry, and achieved three
stars. Hibernia’s membership enables
stakeholders to see how the Group
compares to other industry members, and
the progress that it has made towards
improving its sustainability credentials.
In FY21 Hibernia is focused on setting a
longer-term strategy and improving our
sustainability performance in all areas.
The Group continues to work on ensuring
Board succession and strength with the
appointment of Grainne Hollywood in
November 2019 and Margaret Fleming in
January 2020. Both have significant Irish
property expertise and add both extensive
property knowledge as well as diversity to
the Board.
“Investors increasingly
look for commitment
to greener business and
Hibernia is a leader in
the Dublin office market
with 2 Cumberland
Place to be one of the
first NZEB projects
to complete.”
72
K E Y A C T I V I T I E S O F T H E B O A R D D U R I N G 2 0 1 9 - 2 0
Board discussions have covered a wide range of topics with a significant amount of
time spent on the following strategic topics:
Business and strategy
Governance
• Overall strategy
• Consideration of new business structures
and investment/divestment opportunities
• Conflicts of interest and related
party transactions
• Updates from Committees
• Review and consideration of
development projects
• Annual performance evaluation of Board
and Committees
• Progress in leasing existing and upcoming
• Update policies and procedures
vacant space
• Profitability including KPIs and
operational metrics
• Recommended final and interim dividends
• Review of strategic objectives in 2018-19
and approval of objectives for FY20
• Tax changes in Budget 2020
• COVID-19 pandemic monitoring impact
and planning response
Stakeholder engagement
• AGM arrangements and consideration
of results of the AGM in particular
where there were material votes against
a resolution
• Review of investor feedback
• Results and corporate
governance roadshows
• Employee remuneration and management
• Appointment of Designated Non-
Executive Director for Workforce
Engagement director (Margaret Fleming)
Risk management and
internal controls
• Monitoring and update of risk register
• Establishment of risk appetites and
selection and monitoring of risk
appetite metrics
• Budget, viability, going concern and
stress tests
• Compliance and risk levels
• Levels of authority delegated
to management
• Compliance policy statement 2020
• Results of internal audit reporting
• Results of depositary audits due diligence
and onsite visit reports
• Managing the risks surrounding COVID-19
both from a business impact and
operational response
• Compliance with REIT legislation
pursuant to UK Corporate Governance
Code 2018 update
• Appointments of two new Non-
Executive Directors as recommended by
the Nominations Committee as well as
discussion around succession plan
• Review of Terms of Reference of
Board Committees
• Board delegations and
authorised signatories
• Review of Board time commitments
and attendance
• Appointment of Edwina Governey
as CIO
Corporate reporting and
performance monitoring
• Review and approval of external
reporting (including recommendations
from the Audit Committee); trading
announcements and updates,
Preliminary Results 2019, Annual Report
2019 and Auditor’s Report; Interim
Report 2019; Sustainability Report 2019
• External audit, planning and results
• Review and discussion of management
reports, KPIs and rolling forecasts
• Remuneration finalised and approved
• First grant of LTIP made
• Remuneration Policy, remuneration
awards and performance assessment for
Directors and Senior Management Team
• Approval of the issue of shares for the
final settlement of IMA performance-
related payments for the year ended
31 March 2019
Funding and balance
sheet management
• Liquidity status and
financing considerations
• Capital management including share
buyback, capital reorganisation
and gearing
• Compliance with debt covenants
Hibernia REIT plc Annual Report 2020Governance B O A R D S N A P S H O T
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 also 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.
Key experience
Average age
Non-Executive
65 years
(2019: 67 years)
Gender diversity
Gender (female)
Total Board
Average tenure
Total
3.9 years
(2019: 3.9 years)
30%
(2019: 13%)
Gender (female)
Non-Executives
Average tenure
Non-Executive
3.8 years
(2019: 4.3 years)
38%
(2019: 17%)
• Female
Finance
Public company
Property
Sustainability
Regulatory
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
73
•
•
•
•
•
Property investment,
development and management
Financial and corporate finance
Public company experience
Board skills and experience
Name
Daniel Kitchen
Colm Barrington
Roisin Brennan
Thomas Edwards-Moss
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Frank Kenny
Kevin Nowlan
Terence O’Rourke
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information L E A D E R S H I P
A W I D E R A N G E O F
B U S I N E S S E X P E R I E N C E
We aspire to the highest
standards of behaviour
based on honesty
and transparency in
everything we do
The role of the Board and its Committees
The Board is committed to developing
and maintaining a high standard of
corporate governance and complying
with all applicable regulations. The main
governance and regulatory requirements
are the Central Bank, the Listing Rules
of Euronext Dublin and the Financial
Conduct Authority, the UK Code, the
Irish Annex, the Transparency and Market
Abuse Regulations and AIFMD rules.
To this end, the Board has established
Audit, Remuneration and Nominations
Committees, as described below,
comprised entirely of independent Non-
Executive Directors. 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 Board meets regularly, with up to six
scheduled meetings per year and a number
of additional meetings depending on the
needs of the Company business.
See page 72 for key activities of the
Board in FY20
The Board is composed of highly
skilled individuals with a range of
professional skills, perspectives and
corporate experience.
See page 73 for a Board snapshot
See pages 78 and 79 for
Board members’ biographies
Board of Directors
The Board is collectively responsible for the long-term success of the Group.
The Board ensures that the Group’s policy, practices and behaviours throughout the business are aligned with the Group’s purpose, culture and values.
Our aim is to foster a culture that promotes fairness and where success reflects ability, potential, performance and teamwork.
The Board has reserved certain matters for its direct stewardship and decision making:
See Schedule of reserved matters at www.hiberniareit.com/about-us/corporate-governance
Biographies:
see pages 78 and 79
Board activities in 2019-20:
see page 72
Roles and responsibilities:
see pages 75
Delegation: Certain matters are delegated to its three principal Committees
Audit Committee
• Oversight of financial and other reporting,
including sustainability, ensuring integrity
• Oversight of external auditor and Valuers
• Risk management framework and oversight
•
Internal controls and oversight of the
internal auditor
Nominations Committee
• Review of recommendations on the size,
composition and structure of the Board
• Succession planning
• New appointments planning
Remuneration Committee
• Executive remuneration, policy and packages
• Oversight of Remuneration Policy and
remuneration for all staff
• Advised by PwC London
Report: see pages 92 to 95
Report: see pages 89 to 91
Report: see pages 98 to 116
The terms of reference for each Board Committee are available on the Group’s website at www.hiberniareit.com/about-us/corporate-governance
Senior Management Team
The Board delegates the execution of the Company’s strategy and the day-to-day management of the business to the Senior Management Team.
Our strategy: see pages 24 and 25
The Team: see pages 80 and 81
Investment, development, asset management, risk and compliance, operations, sustainability, health and safety, marketing, finance and investor relations.
74
Membership comprises Directors, Senior Management Team members and other staff as appropriate.
Executive Committees
These have oversight of key business activities and risks including:
Hibernia REIT plc Annual Report 2020Governance A formal schedule of matters reserved
to the Board is maintained and a copy is
available on our website:
See schedule of reserved matters
at www.hiberniareit.com/about-us/
corporate-governance
The Senior Management Team, with the
Executive Committees, 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 Senior Management Team
at a high level. The Board oversees the
performance of the Group’s activities and
reviews Group and Company performance
and management accounts on a quarterly
basis. Strategy is also reviewed periodically.
2018 UK Corporate Governance
Code implementation
The Group is compliant with most of the
required parts of the UK Code and has
discussed pensions alignment and post-
employment shareholding requirements
with investors and considered market
practice. It is our intention to implement
policies in respect of these two areas in
2020-21.
Read more on page 86 and 87
Board roles
Role
Chairman
CEO
CFO
Non-Executive Directors
Incumbent
Daniel Kitchen
Kevin Nowlan
Thomas Edwards-Moss
Independent Non-Executive
Directors:
Colm Barrington, Roisin Brennan,
Margaret Fleming, Stewart
Harrington, Grainne Hollywood,
Terence O’Rourke
Non-Executive Director:
Frank Kenny
Responsibilities:
– Leading the Board
– Constructive input to mission and strategy
– Board and CEO effectiveness and performance
– Setting the ‘tone from the top’ on purpose, values and culture
– Meeting with stakeholders and ensuring that their views are understood
and included
– Setting strategic direction
– Implementing agreed strategy
– Operational and financial performance
– Day-to-day management
– Oversight of culture and values
– Informing the Board
– Financial management and reporting
– Managing funding and balance sheet requirements
– Investor and other stakeholder relations
– Supporting the CEO in developing and implementing strategy
– Providing an external perspective and diverse knowledge
– Providing constructive challenge and support to decisions
– Monitoring the delivery of the strategy within the agreed risk framework
– Promoting high standards of corporate governance and integrity
Senior Independent Director
Colm Barrington
– Available for shareholders as an independent voice and approach
– Is an independent point of contact in whistleblowing process
– Carrying out the performance evaluation of the Chairman
– Providing a sounding board for the Chairman and serving as an
intermediary for the other Directors when necessary
Designated Non-Executive
Director for Workforce
Engagement
Company Secretary and
Risk & Compliance Officer
Margaret Fleming
– Enhancing Board and employee interactions
Sean O’Dwyer
– Providing advice and assistance to the Chairman and the Board on
corporate governance practice, risk management, compliance and
induction training and development
– Ensuring that all applicable regulations, filings and rules are identified and
complied with
– Ensuring timely provision of information for Board meetings
– Is supported by an independent Assistant Company Secretary in
company secretarial matters
The composition of the Board is reviewed regularly to ensure that the Board has an appropriate mix of expertise and experience.
The Articles of Association (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. In keeping with best corporate
governance practice, corporate policy is that all Directors seek re-election each year at the AGM. Any Director appointed to the Board by
the Directors is subject to re-election by the shareholders at the first AGM after his/her appointment.
Details of the remuneration of Directors are set out in the Report of the Remuneration Committee on pages 98 to 116.
75
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information C U L T U R E A N D P E O P L E
O U R P U R P O S E I S T O I M P R O V E T H E B U I L T E N V I R O N M E N T
I N D U B L I N , P R I M A R I L Y T H E S T O C K O F C I T Y C E N T R E
O F F I C E S , P R O V I D I N G A B O V E A V E R A G E L O N G - T E R M
R E T U R N S F O R O U R S H A R E H O L D E R S A N D B R I N G I N G
B E N E F I T S T O A L L O U R S T A K E H O L D E R S .
Our strength is our team
Together we define our culture as part
of our performance model. Hibernia has
only 36 employees, including Executive
Directors and Senior Management
Team members, so it is relatively easy
for everyone to meet and contribute.
However, to keep communication lines
O U R C U L T U R E I S :
Transparent, honest and fair
We aspire to be honest and direct;
team members have different
insights and opinions that can
improve future decisions.
We encourage a culture of open
communication and we work
together in an open plan office.
Hard-working and flexible
We support flexible
working arrangements.
We work with energy and
commitment and support and
empower our people to develop
their skills and experience.
Collaborative and inclusive
We all celebrate our successes.
We encourage teams to take
ownership of projects and support
each other.
Long-term perspective but
pragmatic
We drive sustainable long-term
value through best-in-class buildings.
We work with tenants and others to
find solutions.
open, the Company has designated
one of its Non-Executive Directors to
be in charge of workforce engagement.
An overview of this role is on the right,
but it is expected that this is flexible; it
will change as feedback is received and
requirements change.
A T T H E C O R E O F O U R
C U L T U R E A R E T H E
F O L L O W I N G V A L U E S :
Passion and creativity
We are passionate about improving
the built environment of Dublin and
doing so in creative ways.
Sustainability
We work to ensure the demands
of the present do not compromise
the future
Read more in our Sustainability Report at
www.hiberniareit.com/sustainability
Hunger and curiosity
We value hunger and curiosity to
succeed and explore; we encourage
our people to have fun while they
do this
Safety
We promote the highest standards
of health and safety
Read more on page 77
Integrity and openness
Our teams act with integrity
and honesty and strive to do
the right thing
Read more on page 83
Hibernia believes that the working
environment is one of the important
aspects of building the excellent teams
needed to support the strategy. The office
space is designed as open plan, so
everyday communication is encouraged;
informal engagement strengthens team
cohesiveness and performance. The Board
and Committees encourage participation
by all team members. Informal events and
feedback sessions foster good relationships
within the team.
76
E M P L O Y E E E N G A G E M E N T
W I T H T H E B O A R D
Margaret Fleming has been appointed
to the newly formed role of Designated
Non-Executive Director for Workforce
Engagement in February 2020. This
appointment is in response to changes
introduced in the UK Code. The Board
debated the best approach to these
changes and has decided this is the most
appropriate response for a company of
our size.
We have 36 employees operating in one
location and mostly out of one open plan
office. There is therefore a high level of
visibility of the Board to employees and
vice versa. There was already a significant
amount of engagement by the Board
with employees. Non-Executive Directors
are engaged in a number of Executive
Committees. Employees regularly attend
Board meetings to present and discuss
particular issues. The Board and the Senior
Management Team have more formal
meetings, through Board and Committee
meetings and regular strategy days.
This is a new role. We will review its
operation and revise responsibilities and
actions as they either arise or are agreed
between employees and Board in the
future. We want this engagement to be
flexible and responsive as we feel this is
the best way for it to be beneficial for all
concerned in future.
As an initial remit we have identified the
following actions to implement this role:
• Organise a ‘meet the Board event’
subject to COVD-19 restrictions
• Set up a confidential email address to
which employees can submit questions
or items for discussion at all staff events
• Attend townhall meetings to present
on Board activities and actions and
be available to meet with employees
as required
• Have input into and review the results of
the annual employee feedback survey
and other employee surveys
that are conducted
• Provide feedback to the Board on
employee issues and topics
Hibernia REIT plc Annual Report 2020Governance O U R P O L I C I E S I N F O C U S
Communication
Hibernia actively fosters a team
environment. Central to this
structure are the team’s culture
and values. Communication is
key to success, both in setting
the goals and in ensuring all
understand them and work
together towards them.
The Board sets the tone for
this process by ensuring that
everyone understands the
strategy, has an opportunity
to contribute and is supported
towards the goals by resource
allocation and by celebration
of successes.
Diversity and equal
opportunities
The Group is committed to
developing the skills and
diverse talents of its employees
and Board members and to
having a business and culture
in place which support this
objective. Equality and inclusion
are core values. The Group
has established and maintains
appropriate procedures
so that any employee who
feels that they are being
unfairly treated can have their
complaints investigated.
As part of our EPRA
sustainability measures, we
disclose gender diversity
information. Full details are
available in our Sustainability
Report 2020 available at
www.hiberniareit.com/
sustainability page 40.
Personal development
Staff are encouraged to
develop broad skill sets and
to be as flexible as possible by
facilitating training, mentoring
and cross-discipline knowledge
sessions. We arrange for
external experts to present to
the team on a regular basis.
Read more in our Sustainability
Performance
People are aligned with the
Group’s strategy through
objective setting and periodic
performance reviews.
Individual and Group KPIs are
linked to variable remuneration.
When there is a success such as
winning an award, everyone is
included in the celebrations.
Report 2020 pages 32 and 33
Read more on pages 111 to 113
Remuneration
Our Remuneration Policy is
designed to reward current
performance and promote
retention over the longer term.
The remuneration structure
cascades down from the Board;
the Remuneration Committee
is responsible for setting
the policy and managing
performance objectives.
Read more on page 112
Employment and
labour practices
All employees are made
aware of the Group’s policies
through the Employee
Handbook and regular bulletins
and also receive training
appropriate to their roles and
responsibilities. The Employee
Handbook also includes formal
grievance procedures should
normal communication lines
break down.
Health and safety
Our Health and Safety
Committee oversees health and
safety practices in the Group
and monitors employee and
contractor health and safety
as well as other aspects.
We report EPRA metrics In
our separate Sustainability
Report 2020 available at
www.hiberniareit.com/
sustainability on pages
34 to 41. The Health and
Safety Policy is available at
www.hiberniareit.com/about-
us/policies.
Whistleblowing and
grievance procedures
The Group has detailed
whistleblowing procedures
to facilitate a confidential
and accessible means for
employees to raise any
concerns in relation to how
we conduct our business
or interact with employees
or other stakeholders.
Any matters reported
under the Whistleblowing
Policy are investigated by
the Company Secretary
or Senior Independent
Director. During the year,
there were no whistleblowing
incidents reported.
The Whistleblowing
Policy is available to all
employees as part of the
Employee Handbook.
77
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information B O A R D O F D I R E C T O R S
B O A R D O F D I R E C T O R S
T H E R I G H T S K I L L S A N D E X P E R I E N C E
T O D E L I V E R O U R S T R A T E G Y
1
2
3
4
5
6
7
8
9
10
1. Terence O’Rourke (65)
2. Grainne Hollywood (57)
3. Stewart Harrington (77)
Independent Non-Executive Director; Irish
Independent Non-Executive Director; Irish
Independent Non-Executive Director; Irish
Committee memberships: Audit (Chair),
Remuneration and Nominations Committees
Appointed: 23 August 2013
Skills and expertise: As ex-Managing
Partner of KPMG Ireland from 2006 to
2013, former President of the Institute
of Chartered Accountants in Ireland
and a board member of the Chartered
accountants Regulatory Board, Terence
brings substantial management, regulatory,
risk and financial experience.
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 its Council.
Committee memberships: Nominations
Committee, Investment and Development
(Chair) Committees (Executive Committees)
Appointed: 5 November 2019
Skills and expertise: Grainne is a Chartered
Surveyor and is a specialist in property
construction and development matters.
She brings more than 35 years of property
experience and expertise to the Board
of Hibernia.
Current external appointments: Managing
Director of Property Solutions and
Resolutions Ltd.
Committee memberships: Audit,
Nominations, Remuneration Committees
Investment (Chair) and Development
Committees (Executive Committees)
Appointed: 23 August 2013
Skills and expertise: Stewart is a Chartered
Surveyor and has extensive knowledge and
experience of the Irish property market
gained over many years in a variety of
roles including as a partner in JLL and BNP
Paribas Real Estate Ireland and Managing
Director at Dunloe Ewart Limited.
Current external appointments: Non-
Executive Director of the parent company
of BWG Group, Stafford Holdings, Killeen
Properties and Activate Capital.
78
Hibernia REIT plc Annual Report 2020Governance 4. Kevin Nowlan (49)
5. Margaret Fleming (55)
6. Daniel Kitchen (68)
Chief Executive Officer; Irish
Independent Non-Executive Director; Irish
Independent Non-Executive Chairman; Irish
Committee memberships: All Executive
Committees
Appointed: 5 November 2015
Skills and expertise: Kevin joined the Board
as Chief Executive Officer following the
Internalisation of the Investment Manager,
where he held the same position from
its inception in 2013. He is a Chartered
Surveyor and has more than 20 years’
experience in the Irish property market,
including commercial agency, property
management, investment, development
and development financing, commercial
loan portfolio management and debt
restructuring. He is one of the founders
of Hibernia.
Current external appointments: None.
Committee memberships: Nominations
Committee Investment and Development
Committees (Executive Committees)
Committee memberships: Remuneration
Committee and Nominations (Chair)
Committees
Appointed: 20 January 2020
Appointed: 23 August 2013
Skills and expertise: Margaret is a
Chartered Surveyor with over 30 years’
experience in the Irish property market.
Until recently she was International Director,
Capital Markets at JLL Ireland.
Current external appointments: Non-
Executive Director of Activate Capital and
Trustee of the Iveagh Trust.
Skills and expertise: Danny brings the
benefit of his expertise and experience
gained across a variety of property,
finance and public company roles to
his chairmanship of the Board and the
Nominations Committee.
Current external appointments: Chairman
of Workspace Group plc (retiring in
summer 2020). Applegreen plc and Sirius
Real Estate Limited.
7. Frank Kenny (67)
8. Roisin Brennan (55)
9. Colm Barrington (74)
Non-Executive Director; Irish
Independent Non-Executive Director; Irish
Committee memberships: Development
Committee (Executive Committee)
Committee memberships: Audit,
Nominations and Remuneration Committees
Appointed: 8 November 2017
Appointed: 16 January 2019
Skills and expertise: Frank is a Chartered
Surveyor and has more than 35 years’
experience in the Irish and US property
markets; he is one of the founders
of Hibernia.
Skills and expertise: Roisin has extensive
experience in advising Irish public
companies and acting as a non-
executive director of listed, private and
State organisations.
Current external appointments: Founder
and Chief Executive Officer of Willett
Companies LLC, a property investment
company in the US,; Founder and Director
of Urbeo Residential Fund ICAV, an Irish
housing fund.
Current external appointments: Non-
Executive Director of Ryanair Holdings
plc, Musgrave Group plc and Dell Bank
International d.a.c.
Independent Non-Executive Director and
Senior Independent Director; Irish
Committee memberships: Audit,
Remuneration (Chair) and Nominations
Committees
Appointed: 23 August 2013
Skills and expertise: Colm’s senior
executive management experience and the
range of public company board roles held
by him add significant value to the Board
from outside the property sector.
Current external appointments: Chief
Executive Officer and Director of Fly
Leasing and a Non-Executive Director and
Vice Chairman of Finnair.
10. Thomas Edwards-Moss (40)
Chief Financial Officer; British
Committee memberships: All Executive
Committees
Appointed: 5 November 2015
Skills and expertise: Tom joined the Board
as Chief Financial Officer 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 where he focused on
corporate finance, latterly in the property
sector, and advised on the initial public
offering of the Company. He is a Chartered
Accountant and qualified at PwC.
Current external appointments: None.
The Directors’ responsibilities statement is set out on page 121.
79
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information T H E S E N I O R M A N A G E M E N T T E A M
T H E S E N I O R M A N A G E M E N T T E A M
1
2
3
5
6
W E U S E O U R K N O W L E D G E
A N D E X P E R I E N C E O F T H E
D U B L I N P R O P E R T Y M A R K E T
T O D E L I V E R O U R S T R A T E G Y .
“ Our people are key to our achievements.
Our remuneration scheme aims to attract
and retain talent and ensure alignment with
shareholders by focusing on long-term as
well as shorter-term goals.”
Our Senior Management Team
Standing, left to right:
Frank O’Neill
Director of Operations
Justin Dowling
Director of Property
Edwina Governey
Chief Investment Officer
Sean O’Dwyer
Company Secretary and
Risk & Compliance Officer
Seated, left to right:
Thomas Edwards-Moss
Chief Financial Officer
Kevin Nowlan
Chief Executive Officer
Mark Pollard
Director of Development
80
Hibernia REIT plc Annual Report 2020Governance 4
1
Frank O’Neill (61)
Director of Operations
Appointed: He is one of the founders of
Hibernia and moved to his current role in
January 2019.
Responsibilities and experience: In
addition to providing input on strategic
property matters and projects, Frank is
responsible for managing the Company’s
workspace and its HR and IT functions.
He has worked for more than 30 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 companies. Frank is a
Chartered Accountant and a Chartered
Surveyor and holds an MSc in Planning.
7
2
Justin Dowling (43)
Director of Property
Appointed: Appointed Director of Property
in January 2019 having been employed with
the Group from inception.
Responsibilities and experience: Justin
is responsible for managing our standing
portfolio. He has 20 years’ experience
in the Irish and UK property markets.
Justin previously held senior roles in Rohan
Holdings and WK Nowlan Property Limited.
He is a Chartered Surveyor.
3
Edwina Governey (35)
Chief Investment Officer
Appointed: Edwina has been with the
Group since 2014 in the investment team
and was appointed Chief Investment
Officer in May 2019.
Responsibilities and experience: Edwina
is responsible for the identification, analysis
and execution of investment opportunities,
portfolio analysis and reporting, and the
Group’s research function. Previously she
worked for Resolution Property and
Mountgrange Investment Managers in
London. She is a Chartered Surveyor.
4
Sean O’Dwyer (61)
Company Secretary and
Risk & Compliance Officer
Appointed: Sean joined the Group at
inception and was appointed Company
Secretary in 2017.
Responsibilities and experience: Sean
is responsible for risk management and
compliance as well as company secretarial
duties. He worked for over 20 years in Bank
of Ireland Asset Management where he had
responsibility for finance, compliance and
risk on a global basis. Between 2009 and
2013, he worked in a number of consulting
roles with a variety of financial services
firms. He has extensive experience of
governance, regulation and risk in Ireland
and overseas. He is a Chartered Accountant
and qualified with EY.
5
Thomas Edwards-Moss (40)
Chief Financial Officer
Appointed: 5 November 2015.
Skills and expertise: Tom joined the
Board of the Company as Chief Financial
Officer in November 2015, following the
Internalisation of the Investment Manager
where he held the same role since joining
in 2014. Prior to this, he spent nine years
at Credit Suisse in where he focused on
corporate finance, latterly in the property
sector, and advised on the initial public
offering of the Company. He is a Chartered
Accountant and qualified with PwC.
6
Kevin Nowlan (49)
Chief Executive Officer
Appointed: 5 November 2015.
Skills and expertise: Kevin joined the
Board of the Company as Chief Executive
Officer in November 2015 having had the
same role in the investment manager since
inception. He is a Chartered Surveyor and
has more than 20 years’ experience in the
Irish property market, including commercial
agency, property management, investment,
development and development financing,
commercial loan portfolio management and
debt restructuring. He is one of the founders
of Hibernia.
7
Mark Pollard (64)
Director of Development
Retired June 2020 but will continue in a
part-time role. Gerard Doherty, currently his
deputy, will succeed him.
Appointed: Mark joined the Group in 2016
as Director of Development.
Responsibilities and experience: Mark
is responsible for all aspects of our
development and major refurbishment
projects. He previously worked for the
National Asset Management Agency and
was responsible for managing a number
of key development assets in Dublin
and London. Before this he held senior
development roles at Treasury Holdings
and Asda Property Holdings. Mark is a
Chartered Surveyor.
81
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information B O A R D E F F E C T I V E N E S S
B O A R D C O M M I T T E E A N D D I R E C T O R S ' P E R F O R M A N C E E V A L U A T I O N C Y C L E
Y E A R 1
Y E A R 2
Y E A R 3
I N T E R N A L R E V I E W O F
B O A R D A N D
C O M M I T T E E S . C H A I R M A N
A L S O R E V I E W S E A C H
N O N - E X E C U T I V E
D I R E C T O R
I N T E R N A L R E V I E W O F
B O A R D A N D
C O M M I T T E E S . C H A I R M A N
A L S O R E V I E W S E A C H
N O N - E X E C U T I V E
D I R E C T O R
P R O G R E S S R E V I E W E D
I N T E R N A L L Y A N D A R E A S
O F F O C U S I D E N T I F I E D
P R O G R E S S R E V I E W E D
I N T E R N A L L Y A N D A R E A S
O F F O C U S I D E N T I F I E D
I N D E P E N D E N T ,
E X T E R N A L L Y
F A C I L I T A T E D R E V I E W
B O A R D A G R E E A C T I O N
P L A N T O I M P L E M E N T
I M P R O V E M E N T S
The process is divided into four stages:
STAGE 1
SCOPE
S TAG E 2
S TAG E 3
S TAG E 4
D E S I G N A P R O A C H
A N D P L A N
C O M P L E T E
P R O C E S S A N D
C O L L E C T R E S U L T S
R E V I E W A N D
A G R E E A C T I O N
P L A N
Board effectiveness review process
The Board performance evaluation cycle
is illustrated above. The scope of the
performance evaluation in general is
as follows:
• Role, culture and dynamics of the Board
• Board composition, structure
and processes
• Strategic focus and mission
• Effectiveness of Board, Committees,
Chairman and individual NEDs
Actions from the 2019 review
The following matters were addressed
arising out of the 2019 evaluation:
• The business continuity plan
was expanded to include crisis
management procedures
• A new Remuneration Policy was
prepared and submitted for shareholder
approval at the 2018 AGM. This has since
been implemented
• The Nominations Committee has
• Other matters as identified annually
been working on succession planning.
This scope is reviewed annually to ensure
any particular objectives that may be
relevant are identified. A range of methods
are used to collate results. The internal
reviews take the form of questionnaires
and interviews of both Directors and
Senior Management.
• The induction process has been reviewed
and updated
Board effectiveness review 2020
As part of our compliance with the Code
we asked Independent Audit Limited (IAL)
to carry out an external evaluation of the
effectiveness of the Board and Committees
and of the Chair. IAL is a consultancy
that specialises in the provision of Board
evaluation services to a diverse range of
organisations across Europe. IAL have no
other connection with the Group.
The evaluation consisted of a review
of a selection of board papers, the
completion of an online questionnaire
by the Board and Senior Management
team. The questionnaire was designed
by IAL based on an initial conversation
with the Company Secretary, it looked
at a variety of matters including board
dynamics and composition, strategic
oversight, risk management and internal
control, committee functioning, chairman
performance, focus of meetings and
priorities for change. IAL observed
meetings of the Board and Nominations,
Remuneration and Audit Committees.
Two reports were issued, one on the
effectiveness of the Board and Committees
and the other on the effectiveness of the
Chair. Overall, the conclusions of both
reports were positive showing that the
Board and its Committees have a number
of key strengths:
• Good leadership and functioning of the
board and committees
• Solid oversight of risk and finance
82
Hibernia REIT plc Annual Report 2020Governance • Good oversight and contribution to the
company’s strategy development
• Active review of business performance
• A strong chairman who has the
unanimous support of the Board
Whilst the outcome of the review indicated
that the Board and its members continue
to operate to a high standard, the
following were among the areas suggested
for improvement:
• Succession planning at Board and
management level
• How stakeholder views and engagement
are considered
• Development of a forward planning
annual agenda and clarifying meeting
follow up
• More frequent NED-only meetings, both
formal and informal
The Board has scheduled a meeting
with IAL to discuss the findings of the
reports and agree an action plan to
implement improvements.
Board environment and access
to appropriate information
All Directors are furnished with the
information necessary to assist them in the
performance of their duties. The Directors
utilise an electronic Board library system
which provides immediate, secure and
complete access to current and past
Board papers including information packs
for Board and Committee (including
Executive) meetings, minutes and other
relevant documents.
Directors are, where appropriate, entitled
to have access to independent professional
advice at the expense of the Company.
Hibernia supports continuing education,
external professional advice and individual
training as appropriate for or requested
by Directors.
Ethics
We set certain ethical standards for our
employees and suppliers.
The key policies which set out our
requirements include:
• Conflicts of interest
The Group has comprehensive conflict
of interest procedures, including a Gifts
and Inducements Policy, designed to
address not only any possible conflicts
within the Board, but also with all
employees. All Directors are required
to declare external directorships to the
Board and the Company Secretary
at the time of appointment so any
potential conflicts can be addressed
at that time. All changes in such
directorships must also be notified to
the Company Secretary and all potential
conflicts declared at Board meetings.
Directors must abstain from discussion
of or voting on items in which they may
have a conflict of interest. The Board
considers that these procedures are
working effectively.
• Supplier Code of Conduct*
This outlines our expectations of supplier
ethics and behaviour. It was reviewed
during this financial year.
of investors, tenants, employees and
others. This process is used for setting
strategic priorities around sustainability.
Our corporate governance roadshow (see
page 85) is used by the Board to identify
particular governance issues which are
important to our investors. Our investor
roadshows address existing and potential
investors and use their feedback to inform
our strategy.
Read more on stakeholder engagement
on pages 20 and 21; communication
with employees on pages 76 and 77
and communications with shareholders
on pages 84 to 86.
Read more in our Sustainability
Report (pages 30 and 31) at
www.hiberniareit.com/sustainability
• Modern slavery*
We have zero tolerance of violations of
anti-slavery and human trafficking laws.
The risk of slavery and human trafficking
in the recruitment and engagement
of our employees is negligible as our
investment property portfolio is located
entirely in Dublin and our employees are
all office-based professionals. All our
suppliers are required to comply with
our Supplier Code of Conduct which
includes a commitment to abide by
anti-slavery and human trafficking laws
and regulations.
• Bribery and Corruption Policy*
Bribery is not acceptable and is
not tolerated, whatever its form.
Staff are required to adhere to our
Gifts and Inducements Policy. The key
principle of this is that gifts, benefits or
inducements should neither be offered
nor accepted if they create, or appear to
create, an obligation that affects either
party’s impartiality or constitutes an
undue influence on a business decision.
Share Dealing Code
The Company has a Share Dealing Code
which imposes restrictions on share
dealings for the purpose of preventing
the abuse, or suspicion of abuse, of inside
information by Directors and other persons
discharging managerial responsibilities
within the Company. This code is available
at www.hiberniareit.com/about-us/
corporate-governance.
* Policy available at www.hiberniareit.com/about-us/
policies
Market Abuse Regulation 2016 (“MAR”)
The Company continues to maintain a
list of persons discharging managerial
responsibilities (“PDMRs”) and has
complied with the MAR requirements
during the year.
Stakeholder engagement
Stakeholder engagement is an important
part of our culture of communication.
we set out our engagement with our
stakeholders on pages 20 and 21.
During this year we carried out our first
materiality review. This took the form of a
survey which was addressed to selections
83
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information B O A R D E F F E C T I V E N E S S C O N T I N U E D
K E Y I N V E S T O R R E L A T I O N S S T A T I S T I C S F O R T H E F I N A N C I A L Y E A R
E N D E D 3 1 M A R C H 2 0 2 0
Shareholders by geography
684.7m
shares in issue
2019: 697.6m shares in issue
20 2 0
2 0 1 9
Investor contact by region
182
contacts
2019: 181 contacts
Investor contact by method
182
contacts
2019: 181 contacts
20 2 0
2 0 1 9
20 2 0
2 0 1 9
• US and Canada
•
•
•
•
UK
Continental Europe
Ireland
Rest of World
2020 2019
29%
29%
29%
11%
2%
42%
25%
23%
9%
1%
• US and Canada
•
•
•
UK
Continental Europe
Ireland
2020 2019
32
61
24
65
33
71
34
43
• Meeting
•
•
•
•
Conference
Tour
Meeting & tour
Telephone call
2020 2019
91
30
28
6
27
103
48
11
6
13
Key investor relations activities in FY20
April 2019
May 2019
June 2019
July 2019
September 2019
Conferences: Davy
(Dublin)
Investor roadshow:
Dublin, London,
Toronto, Montreal,
Boston, New York
Investor roadshow:
Amsterdam, Zurich,
Paris, Edinburgh,
London
Equity sales meetings:
Dublin x2
Conferences: EPRA
(London)
Equity sales meetings:
Dublin x1
84
Annual
General Meeting
Conferences: EPRA
(Madrid)
Hibernia REIT plc Annual Report 2020Governance
Executive Director shareholdings were
general issues for investors. Hibernia raised
the employer pension contribution rate
for employees to 7.0% during the year as a
step in the direction of pension alignment.
In future, all new members of the Senior
Management Team will receive the same
rate as employees. For existing members
of the Senior Management Team the 15%
rate will continue pending a review of
options for full alignment. Other issues
around remuneration that were raised
related to shareholdings, more disclosure,
especially the CEO pay ratio, and clawback
to cover material issues around reputational
damage. Investors were also pleased at
the progress in succession planning and
increase in diversity with the addition of
two more Non-Executive Directors. It was
also noted that it is good to see diversity
being promoted at Senior Management
level. Investors welcomed the Chairman’s
upcoming retirement from the Workspace
Group Board in July 2020, although some
still feel three Chair positions is too many.
Market announcements
The Group discloses information to the
market as required by the Central Bank of
Ireland, Euronext Dublin and the Financial
Conduct Authority. This information
includes results and trading updates,
changes in the Board, changes in major
shareholdings and any other information
assessed to be price sensitive. In addition,
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.
Non-deal roadshows FY20
The Group undertook extensive roadshows
following its FY19 and HY20 results – these
involved meetings in Ireland, the UK,
continental Europe and North America.
One of the CEO or CFO attended all
meetings and usually both. In addition, the
Group attended various conferences and
did ad-hoc meetings, calls and site visits.
Corporate governance roadshow
A corporate governance roadshow was
held in February 2020. The Company’s top
institutional investors representing holdings
of 1% or more (c. 30 investors) were
contacted and offered conference calls.
Nine investors (c. 32% of the shares in issue)
accepted the invitation. Five responded
that they had no issues and did not
need to talk. The rest did not respond.
Daniel Kitchen, Sean O’Dwyer
and Roisin Brennan made these calls.
The agenda covered general corporate
governance matters including:
• The progress with Board succession
and introduced the new Non-
Executive Directors
• Daniel Kitchen’s impending retirement
from Workspace Group
• The intention to replace the Investment
Policy with a business strategy and,
once approved by shareholders, seek
revocation of our AIFM authorisation
from the Central Bank of Ireland
• The intention to circulate a short survey
to get feedback on priorities
for sustainability measures
The investors were appreciative of
the opportunity to have this dialogue.
Feedback was positive in general on
progress with an increasing interest in the
Group’s sustainability policy and initiatives.
Investors are keen to see improvements in
sustainability management and reporting,
and while GRESB is the most suitable
benchmark for real estate, CDP (formerly
the Carbon Disclosure Project) reporting
is also desirable and the Group intends
to start reporting to the CDP this year.
The UK Code update requirements were
discussed and pension alignment and
October 2019
November 2019
December 2019
February 2020
Conferences: Berenberg
(London), Goodbody
(Amsterdam)
Investor roadshow: Dublin,
Toronto, New York, London,
Amsterdam, Zurich, Geneva,
Edinburgh
Conferences: Goodbody
(Boston), Goodbody (Dublin)
Equity sales meetings:
Dublin x1, London x1
Investor roadshow: London
Equity sales meetings:
Dublin x1
Corporate governance:
calls with shareholders
in Amsterdam, London,
Edinburgh, Paris and
New York
85
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information B O A R D E F F E C T I V E N E S S C O N T I N U E D
General meetings
The Company holds an Annual General
Meeting (“AGM”) each year in addition to
any other meetings in that year.
Not more than 15 months shall elapse
between the date of one AGM and that
of the next. The Directors are responsible
for the convening of general meetings.
Information is distributed to shareholders
at least 20 business days prior to such
meetings to ensure compliance with the
Articles and the UK Code.
Quorum
No business other than the appointment
of a Chairman shall be transacted at any
general meeting unless a quorum is present
at the time when the meeting proceeds to
business. Two members present in person
or by proxy shall be a quorum.
Voting rights
• 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.
• 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
• Approving a change of the
Company’s name
AGM details (2019 and 2020)
Overview
The 2019 AGM was held on 31 July 2019 in
The Townhall, 1WML, Windmill Lane, Dublin
D02 F206
The 2020 AGM is to be held on 29 July
2020 in The Townhall, 1WML, Windmill Lane,
Dublin D02 F206
All Directors attended
Votes in favour of the re-election of Directors
>96% other than for Daniel Kitchen where votes
in favour were 68% (see page 71 for discussion
on time commitments)
All other resolutions approved – six ordinary and
six special with votes in favour >90%; other than
authority to allot relevant securities at 81%
Some Directors may not attend in person but
will do so remotely.
Seven ordinary resolutions and five special
resolutions are being proposed to shareholders
It is expected that a physical meeting will go ahead. However, dial-in facilities will be in place.
S T A T E M E N T O F C O M P L I A N C E W I T H T H E U K C O D E
We comply with the UK Code and the Irish Corporate Governance Annex (“Irish Annex”) except for the provisions on pensions alignment
and post-employment shareholdings which are still to be implemented. We have discussed pensions alignment and post-employment
shareholding requirements with investors and are reviewing market practice. It is our intention to implement policies in respect of these two
areas in 2020/2021. In the meantime, we have raised the employer pension contribution rate for employees to 7.0% from 1 January 2019
as a step in the direction of pension alignment. In future, all new members of the Senior Management Team will receive the same rate as
employees. For existing members of the Senior Management Team the 15% rate will continue pending a review of options for full alignment.
Section 172 (“s172”) in this context refers to Section 172(1)(a) to (f) of the UK Companies Act 2006 with which, as an Irish company,
Hibernia is not obliged to comply. However, this has been enshrined into governance best practice as part of the 2018 update to the UK
Code and, as Hibernia complies with the UK Code, a ‘s172’ statement follows.
‘s172 statement’
The Board of Directors confirms that during the financial year ended 31 March 2020, it has acted to promote the long-term success of the
Company and the Group for the benefit of stakeholders, whilst having due regard to the following matters:
• The likely consequences of the decision in the long term
• The interests of the Company’s employees
• The need to foster the Company’s business relationships with suppliers, customers and others
• The impact of the Company’s operations on the community and the environment
• The desirability of the company maintaining a reputation for high standards of business conduct, and
86
• The need to act fairly between members of the Company
Hibernia REIT plc Annual Report 2020Governance S T A T E M E N T O N C O M P L I A N C E W I T H T H E U K C O D E
Disclosures relevant to these matters can be found as follows:
1 The long term
2 Employees
• Company purpose
• Our business model
• Our strategy
• Dividend policy
• Culture and people
• Our stakeholders
• Develop our employees
3 Business relationships
and suppliers
• Ethics
• Our stakeholders
• Support our suppliers
environment
4 Community and
5 Reputation
6 Investors
• Our stakeholders
• Positively impact communities
• Culture and people
• Ethics
• Support our suppliers
• Our stakeholders
• Investor relations
Inside front cover
pages 22 and 23
pages 24 and 25
page 59
pages 76 and 77
pages 20 and 21
Sustainability Report 2020
pages 32 and 33
pages 20 and 21
page 83
Sustainability Report 2020
pages 30 and 31
pages 20 and 21
Sustainability Report 2020
pages 28 and 29
pages 76 and 77
page 83
Sustainability Report 2020
pages 30 and 31
pages 20 to 21
pages 84 to 86
Stakeholder engagement
How we engage
On pages 20 to 21 we identify our principal stakeholders and set out what their concerns are, how we engage and how we respond.
Such engagement takes a number of forms but some examples of more formal methods are the corporate governance roadshow (see page
85), the materiality survey (see page 64) and engagement with our employees (see pages 76 and 77). Together with regular tenant surveys,
tenant and supplier meetings, community initiatives and other interactions these inform our decisions. Stakeholder engagement not only
allows us to understand the impact of our decisions on key stakeholders, but also ensures we are kept aware of any significant changes in
the market, including the identification of emerging trends and risks, which in turn can be factored into our strategy discussions.
In addition to the formal routes we also engage in more informal activities or in response to once off issues, for example charitable /
community activities (e.g. the annual Dragons at the Docks, Windmill Live events (see pages 28 and 29 of our Sustainability Report 2020
available at www.hiberniareit.com) and COVID-19 actions including letting medical staff stay in vacant properties on a pro-bono basis
and supporting local community endeavours. On page 16 we take some of the market trends we have identified through our various
engagements and show how we are responding.
How we responded in FY20
In response to items raised from our investors and others we increased our sustainability focus and took the following actions
amongst others:
• Appointed a dedicated Sustainability Manager
• Completed our first public submission to GRESB and committed to participate in the CDP benchmark in 2020
• Are considering a ‘net zero’ pathway and implement science based targets
• Will start to implement Scope 3 disclosures with suppliers
Read more in our Sustainability Report 2020 on www.hiberniareit.com
In 2020 we appointed Margaret Fleming to the newly formed role of Designated Non-Executive Director for Workforce Engagement (see
more on page 76).
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information B O A R D E F F E C T I V E N E S S C O N T I N U E D
Directors’ attendance at Board and Committee meetings
Directors’ attendance at Board meetings
Daniel Kitchen
Colm Barrington
Roisin Brennan
Thomas Edwards-Moss
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Frank Kenny
Kevin Nowlan
Terence O’Rourke
Directors’ attendance at Board Committee meetings
Audit Committee
Terence O’Rourke
Colm Barrington
Roisin Brennan
Stewart Harrington
Nominations Committee
Daniel Kitchen
Colm Barrington
Roisin Brennan
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Terence O’Rourke
Remuneration Committee
Colm Barrington
Daniel Kitchen
Roisin Brennan
Stewart Harrington
Terence O’Rourke
Financial year ended
31 March 2020
Financial year ended
31 March 2019
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
2
8
4
8
8
8
8
8
8
8
2
8
4
8
7
8
8
8
1
8
–
8
–
8
8
8
8
8
1
8
–
8
–
7
8
8
Financial year ended
31 March 2020
Financial year ended
31 March 2019
Number of
meetings held
while a Board
member
Number of
meetings
attended
while a Board
member
Number of
meetings held
while a Board
member
Number of
meetings
attended while
a Board
member
5
5
5
5
4
4
4
4
4
4
4
3
3
3
3
3
5
5
5
5
4
4
4
4
4
4
4
3
3
3
3
3
4
4
1
4
4
4
1
-
4
-
4
5
5
1
5
5
4
4
1
4
4
4
1
-
4
-
4
5
5
1
5
5
All Directors attended the 2019 AGM. All Directors attended all scheduled Board meetings.
On 5 November 2019 Ms Grainne Hollywood was appointed to the Board. On 20 January 2020 Ms Margaret Fleming was appointed to
the Board.
88
Hibernia REIT plc Annual Report 2020Governance N O M I N A T I O N S C O M M I T T E E R E P O R T
N O M I N A T I O N S
C O M M I T T E E R E P O R T
R O L E O F T H E C O M M I T T E E
• Reviews the structure, size and
composition of the Board and
its Committees
• Reviews and oversees the succession
planning of Directors and members of
the Executive Committee
• Leads any appointment process,
and makes recommendations to the
Board accordingly
• Monitors and responds to developments
in corporate governance
Our detailed duties are contained in the
terms of reference of the Committee which
were reviewed during the year and which
can be found on the Company’s website at:
www.hiberniareit.com/about-us/
corporate-governance
M E E T I N G S
There were four scheduled meetings at
which all members were in attendance
during the financial year.
See pages 90 and 91 for our detailed
activities in 2019-20; below are some of
highlights for this and key areas of focus
for 2020-21.
K E Y C O N S I D E R A T I O N S I N
2 0 1 9 - 2 0
• Board succession
• Succession: appointment of new
Non-Executive Directors
• Appointment of CIO
K E Y A R E A S O F F O C U S
I N 2 0 2 0 - 2 1
• Board succession
• Review of Committee membership
• Diversity
89
Daniel Kitchen
Chairman
Committee members
Members
Daniel Kitchen (Chairman)
Colm Barrington
Roisin Brennan
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Terence O’Rourke
Term served
Six years, four months
Six years, four months
One year, two months
Two months
Six years, four months
Five months
Six years, four months
Dear fellow shareholder,
I am pleased to present the report of the
Nominations Committee (the “Committee”)
for the financial year ended 31 March 2020.
As the majority of the independent Non-
Executive Directors will have served nine
years by the end of 2022, succession was
the principal focus for 2019-20 and will
continue to be so for the coming year.
The Committee identified and
recommended two female candidates for
appointment to the Board this year and,
after approval by the Central Bank, they
were appointed. Both have considerable
skills and experience in the Irish property
market. Ms Grainne Hollywood was
appointed in November 2019 and Ms
Margaret Fleming in January 2020
and both also joined the Nominations
Committee and the Group’s Investment
and Development Committees.
Transitional arrangements for the Board
were also addressed. The Board is
temporarily at its maximum membership
of 10. The number of Directors is likely to
fluctuate over the coming years as the
original members retire and are replaced
in their roles by newer members.
At Senior Management level Ms Edwina
Governey was confirmed as Chief
Investment Officer to replace Richard
Ball. Not only does Edwina have the
skills and knowledge for the role, but her
appointment increases gender diversity at
this level of the Group. She has been with
the Group since shortly after its inception.
Similarly, Gerard Doherty will replace
Mark Pollard as Director of Development
when he retires in June 2020. Gerard is
an experienced development professional
and has been with Hibernia since 2016.
The Committee also reviewed the Group’s
diversity and inclusion policy, and the
probity and fitness requirements of the
Central Bank.
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
N O M I N A T I O N S C O M M I T T E E R E P O R T C O N T I N U E D
Our search and recruitment process
Objective
External
search
consultancy
appointed
(where necessary)
Search
process led
by Nominations
Committee
The requirements
are defined:
what are the
upcoming gaps in
the composition,
experience
and skills?
Identify the
appropriate
consultancy
required to run a
recruitment process
where necessary.
Review the CVs
of proposed
candidates;
refine and revise
the criteria
as appropriate.
Selection
Interviews
Appointment
Induction
Selection based
on skills and
experience but with
due consideration
of other time
commitments,
potential conflicts
of interest and
Board diversity
and culture.
Appropriate
candidates are
approached
and interviewed
by designated
members of
the Committee
with appropriate
knowledge of the
skills and other
requirements of
the post.
The formal
appointment
process is
undergone, which
also involves prior
approval by the
Central Bank as
the Company
is regulated
under AIFMD.
A formal induction
process is in place.
Read more
below
M A R G A R E T F L E M I N G O N H E R B O A R D
I N D U C T I O N P R O G R A M M E
My induction began shortly after the
announcement of my appointment on
20 January 2020. It has been tailored
to my needs and adapted as I gave my
feedback and input.
I had met the Board prior to my
appointment, but once appointed, I
had more in-depth meetings with both
the Board and the Senior Management
Team. To prepare, I was provided with
a comprehensive bible of documents
including general information on
directors’ duties, governance and other
information essential for new directors.
In addition to the legal information, I
received comprehensive documentation
on the business including things such
as corporate strategy, the risk register,
the portfolio, corporate policies and
procedures and access to all Board and
Management Committee meeting minutes.
Everything on the meetings (agendas,
minutes and presentations) is kept in
an online library so that has been very
helpful in allowing me to get to know the
workings of the Group and having instant
access to reference material.
As I’m a member of the Investment and
Development Committees, this has also
been a good way to get a more in-depth
view of the portfolio, and to have the
opportunity to meet and interact with
many of the employees, thereby getting
differing perspectives on the business.
I have also been appointed to the new role
of Designated Non-Executive Director for
Workforce Engagement which is another
good opportunity to get to meet the
people and understand the culture.
As a property professional, I am familiar
with most of the Group’s portfolio and
plan on visiting the other buildings as soon
as practicable, particularly as I’d need to
be able to understand and constructively
challenge the investment and
development plans I would be seeing at
the meetings. I’d been around these sites
before to some extent, but armed with
Hibernia’s plans for the future it has been
interesting to see the transformations
planned. The Clanwilliam Court and
Harcourt Square developments are likely
to be the next big projects and a large part
of the potential future value of Hibernia
for investors, so I’ve focused on these
and talking to Mark Pollard, the Head of
Development and some of his team.
I’m looking forward to tracking these
projects closely and seeing the
development and investment strategies
in action.
I spent some time with Tom Edwards-
Moss, the Group CFO, to discuss the key
financial drivers and metrics the Group
uses to measure its performance.
I’ve also met the external advisers,
including the Valuer. All these meetings
help me to continue to expand my
knowledge of the Company and what risk
areas we should monitor more closely.
Induction
New Directors receive a full and
appropriate induction on joining the
Board. This includes a full information
pack, meeting the other Board members,
the Senior Management Team and the
Company’s advisers, visits to properties
owned by the Group and any other activity
as requested.
Succession planning and
Board composition
The focus for Board renewal is aligned to
Hibernia’s strategy and the needs of the
business. The Committee has due regard to
the composition of the Board in planning
succession. Succession planning is one
of the responsibilities of this Committee.
The Committee may not be chaired by
the Chairman when it is dealing with the
matter of succession to the Chairmanship
of the Company.
The Committee continues to work closely
on ensuring succession given that four of
the Non-Executive Directors have now
served more than six years. In addition,
lack of Board diversity was highlighted as
a concern in the 2018 evaluation and in
feedback from investors. The Committee
had also identified a need to strengthen
the Board’s skill set and transition its age
profile. The Committee identified and
recommended two female candidates for
appointment to the Board this year and,
90
Hibernia REIT plc Annual Report 2020Governance after a selection process and approval by
the Central Bank, both were appointed:
• Ms Grainne Hollywood in November 2019
• Ms Margaret Fleming in January 2020
to this Committee and to the Investment
and Development Committees (Executive).
Grainne has assumed the role of the Chair
of the Development Committee given her
experience in this area.
Both bring significant Irish property market
experience to the Board, including in
Grainne’s case, development experience
which will be important with the upcoming
pipeline of development projects.
In accordance with Group policy, they
both will offer themselves for re-election
at the 2020 AGM. Female membership
now stands at 30% of the Board.
The Committee also recommended that
both Grainne and Margaret be appointed
The Committee reviewed the independence
of the Non-Executive Directors; all except
Mr Frank Kenny are independent.
Frank Kenny was one of the founders of
Hibernia and one of the Vendors of the
Investment Manager and a consultant to
the Group until March 2019 and therefore
would not be considered as independent at
present. He has no other relationships with
the Company nor any conflicts of interest
at present.
P R O F I L E O F T H E N O N - E X E C U T I V E S
Gender (female)
Independence
30%
88%
• Female
Length of tenure
3
1
4
0-2 years
2-3 years
6-8 years
Age profile
3
3
2
50-60 years
60-70 years
70-80 years
• Independence
Average length of tenure
3.8 years
Senior Management Team
The Group has a relatively small Senior
Management Team and a flat structure
and therefore the focus is on developing
employees to become competent
across disciplines to provide personal
development and resource flexibility.
Ms Edwina Governey, interim CIO, was
confirmed as Chief Investment Officer in
May 2019. In addition, Mr Gerard Doherty
will succeed Mr. Mark Pollard, as Director of
Development, when he retires in June 2020.
Mark will continue to work for the Group on
a part-time basis.
A review of the Company’s resource
requirements and succession planning
is completed on an annual basis by the
Committee with management.
Time commitments
I address my personal time commitments
on page 71 in my introduction to the
governance section. I will step down
from the role of Chairman of WorkSpace
Group in July 2020 which will reduce my
overall time commitments. This aside, I
have demonstrated my availability and
commitment to my role in Hibernia in that I
have always been available both for regular
and additional duties as required, in my
roles as Chair of the both the Board and
the Nominations Committee, for example
I led the corporate governance roadshow
again this year. The Committee considered
the time commitment and attendance of
all the Non-Executive Directors at meetings
during the year and was satisfied that all
Non-Executives were readily available for
meetings and were able to devote sufficient
time to deal properly with Group business.
The Company Secretary also reported that
there were no difficulties in arranging Board
meetings, even at relatively short notice.
Committee effectiveness
This year an external evaluation was
undertaken and the conclusion was that
the Committee continues to perform
effectively. pages 82 to 83 for further detail.
Board transition continues to be the main
focus for the Committee and planning for
the orderly transition of the Non-Executive
Directors over the medium term is making
good progress with the appointment of
two independent Non-Executive Directors
during the year. This has led to a temporary
increase in the number of Directors on the
Board in the short to medium term to allow
for transition.
Daniel Kitchen
Chairman of the Nominations Committee
16 June 2020
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information A U D I T C O M M I T T E E R E P O R T
A U D I T C O M M I T T E E
R E P O R T
M E E T I N G S
There were five scheduled meetings at
which all members were in attendance
during the financial year. An overview of
the matters addressed at these meetings
can be found on page 94. Meetings are
also attended by Senior Management and
other personnel as invited. This enables the
Committee to acquire all the information
necessary to make its decisions.
C O V I D - 1 9
The COVID-19 pandemic has been an
important focus in finalising the FY20
financial and other reports and in managing
the Group’s risk appetite and internal
controls. There is a detailed discussion on
the impacts on page 15 of this report. For
this Committee, the focus has been on risks,
valuations and disclosures to ensure that all
impacts are properly reflected in the
Group’s announcements and that all risks
are proactively managed.
K E Y C O N S I D E R A T I O N S
I N 2 0 1 9 - 2 0
• Valuations
• Information security audit and health
check (internal audit results)
• Accounting for remuneration
• Risk management
• Sustainability
• COVID-19 risks and disclosures
K E Y A R E A S O F F O C U S
I N 2 0 2 0 - 2 1
• Increased monitoring of risks due to
the COVID-19 pandemic and focus on
covenant compliance
• Valuations in a volatile market
• Climate change impact and improved
reporting and monitoring
• ESMA – ESG compliance
• Valuer Rotation
• Continuing internal audit programme
Our detailed duties are contained in
the terms of reference of the Committee
which were reviewed during the year
and which can be found on the
Company’s website at:
www.hiberniareit.com/about-us/
corporate-governance
Terence O’Rourke
Chairman
Committee members
Members
Term served
Terence O’Rourke (Chairman)
Six years, four months
Colm Barrington
Roisin Brennan
Stewart Harrington
Six years, four months
One year, two months
Six years, four months
Dear fellow shareholder,
On behalf of the Audit Committee (the
“Committee”), I am pleased to present the
Committee’s report for the financial year
ended 31 March 2020.
continue in office. Therefore, the Board
intends to recommend the reappointment
of the auditor at the 2020 AGM in
accordance with Article 53 of the Articles
of Association of the Company.
The external auditor is responsible for
the annual statutory audit and also
provides certain other services which the
Committee believes it is best placed to
undertake due to its position as auditor.
In accordance with best practice, these
non-audit services must be approved in
advance by the Committee and they will
generally be limited to ‘other assurance’,
i.e. those relating to Group company
audits and assurance on interim results
and other similar matters.
The purpose of this report is to provide
insight into the workings of, and principal
matters considered by, this Committee
during this financial year to stakeholders.
It performs a key role in helping the Board
to fulfil its fiduciary responsibilities in
overseeing the Group’s financial position as
well as ensuring effective risk management
and internal controls are in place.
Reappointment of the external auditor
Deloitte Ireland LLP was appointed as the
first statutory auditor to the Company on
5 December 2013 and the audit partner
rotated in 2019. After due consideration of
the auditor’s qualification, expertise and
resources, effectiveness and independence,
the Committee has recommended to
the Board that the auditor should be
reappointed for the coming financial year.
The Committee will keep its 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
92
Hibernia REIT plc Annual Report 2020Governance Audit and non-audit fees (Group)
Audit fees
Audit of subsidiaries
Other assurance services1
2020
€’000
117
50
18
2019
€’000
113
46
26
1 Other assurance services include the review of the interim report, audit of Group subsidiary financial statements and
a review of the final IMA performance calculation in early 2019.
Risk management and internal controls
The Board has delegated responsibility for
overseeing the effectiveness of the Group’s
risk management and internal control
systems to the Committee. The Group’s risk
appetite and key risk metrics are reviewed
at every Board meeting. Control issues
and breaches identified are reported to
the Committee by Management, the Risk
& Compliance Officer, and internal and
external audit. The Committee ensures
that the impact of these and the measures
implemented to correct any internal
control weaknesses are properly identified
and addressed.
Committee members and other
Committee attendees
This Committee is comprised of
independent Non-Executive Directors
with sufficient financial experience and
real estate industry competence to fulfil its
role. It meets the specific requirement of
recent and relevant financial experience.
In order to ensure succession for the role of
Chair to the Committee, the Nominations
Committee is working on plans to ensure
that there will be an independent Non-
Executive Director with appropriate
experience in place in time to ensure
an orderly transition.
Further information on risks and risk
management can be found on pages
38 to 40 of this Annual Report.
Depositary
The Group had €28m (31 March
2019: €22m) 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 ongoing
reviews of processes and procedures the
depositary undertook two due diligence
reviews, including one onsite visit, during
the year. No material or significant issues
were identified and the depositary issued
satisfactory reports which were reviewed
and approved by the Committee.
Approval of reports
The Annual Report and financial statements
were considered in draft on 18 May 2020.
The Preliminary Results Statement,
which included the consolidated financial
statements, was approved by the Board
on 26 May 2020. The Annual Report
was approved by the Board on 15 June
2020 and signed on its behalf by Kevin
Nowlan and Thomas Edwards-Moss on
16 June 2020.
The Committee is empowered to undertake
investigations and to call on any persons
required to enable it to perform its
functions. We believe in open and frank
discussion and as part of our activities, we
regularly meet the Senior Management
Team and the internal and external auditors.
We also meet the Independent Valuer and
assess its work in valuing our investment
properties. The meetings with the External
and internal auditors and Valuer include
private meetings with the Committee to
allow frank and open discussion without
management present.
Other items addressed
As well as regular standing items such as
the compliance policy, REIT legislation
compliance and whistleblowing procedures,
there were a couple of new items this year.
This was the first full year for the new
Remuneration Policy and the first
Long-Term Incentive Plan (“LTIP”)
awards were made in July 2019.
Therefore accounting for these items
was a focus this year. Remuneration is
explored in more detail in the Remuneration
Committee’s report on pages 98 to 116 of
this Annual Report.
In 2019 we published our first standalone
Sustainability Report and the Committee
oversaw this process. This was subject
to AA1000 assurance by JLL Upstream
and so we reviewed these results and the
management report as well.
Another item on the Committee’s agenda
in the 2020 financial year was the share
buyback which completed in November
2019 and the capital reorganisation which
was approved by the Irish High Court in
March 2020 and became effective in
April 2020 (see page 58).
Committee performance
This year saw our second external
evaluation, examining both our own
work and our interactions with external
assurance providers such as the external
auditor and Valuer. I am pleased to confirm
that the Committee continues to
operate effectively.
I would like to thank my fellow Committee
members for their commitment and input
to the work of the Committee during the
financial year. I would also like to thank
all the employees in Hibernia for their
hard work and commitment to ensuring
that the 2020 Annual Report and market
announcements have been produced to
a high standard and in a timely fashion
despite difficult operating circumstances
in the latter part of the financial year and
since then.
The Committee will continue to focus on
external and internal audit planning, risk
management and internal controls. It will
also continue to monitor the impacts of
COVID-19 and the Group’s response to
the challenges it raises. The Group plans
some major developments over the coming
years and so our focus will also encompass
development risk in particular. We also
see climate change risk as of particular
importance in both our standing portfolio
and our development projects and will
monitor these carefully.
Terence O’Rourke
16 June 2020
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information A U D I T C O M M I T T E E R E P O R T C O N T I N U E D
What the Committee did in 2019-20
Reporting and external audit
Internal audit and internal controls
Risk management
Other
External announcements
The Committee reviewed the
preliminary results announcement
and Annual Report 2019; and the
interim results announcement to
30 September 2019. Both regular
and COVID-19 trading updates were
also reviewed. As part of this, the
Committee provided input for the
Board’s statement on page 121 that
the Annual Report and financial
statements are fair, balanced and
understandable. The Committee also
reviewed the Sustainability Report
and the assurance carried out by JLL
Upstream as part of that exercise.
The Committee also considered the
significant issues and key areas of
uncertainty: see table on page 95.
Valuation
The portfolio is independently
valued at each reporting date. The
Committee oversaw the Valuer’s
work and examined the results of
valuations critically, with a particular
focus on the material uncertainty
expressed in relation to the COVID-19
pandemic and its impact on the
market. It assessed the appropriate
basis for the inclusion of valuations
in the reports.
Audit
The Committee reviews the external
auditor’s work including, inter alia, its
audit plan, performance, qualifications,
expertise, independence
and remuneration. The Committee
also assessed whether the Directors’
representation to the auditor was
reasonable and accurate. It also
met with the external auditor
independently of Management.
Deloitte Ireland LLP is a tenant
of Hardwicke House and was in
situ when the Group acquired its
interest in the building and all lease
arrangements are at arm’s length.
The Committee concluded that the
independence and objectivity of
the external auditor have not been
compromised by this arrangement.
All of the work carried out by
the external auditor during the
year related to the audit of Group
companies or the review of
interim reports.
Internal controls
The Committee reviewed the Group’s
systems of internal controls and in
particular:
• Schedule of matters reserved to
the Board
• Risk management framework
including key controls and
principal risks and uncertainties
• Management reporting and
forecasting
• Organisational structure including
the workings of the Senior
Management Team
• Various policies including ethics-
related and whistleblowing
• Any other matters as required
Deloitte’s management letter from
the 2019 audit was also reviewed.
Internal reporting in the form of both
management accounts for the period
under review and a three-year rolling
forecast as well as scenario analysis
under various stress situations are
examined at each meeting.
Internal audit
The Committee set the internal
audit plan and met with the internal
auditor to discuss the results of
their work. During the year, internal
audits have been completed on
cyber security and building and
tenant management. The results
of completed internal audits were
satisfactory, with exceptions, and
all recommendations have been
implemented. Recommendations
arising from internal audit are
considered on an ongoing basis;
corrective measures, where
appropriate, are decided on and the
Committee monitors Management’s
implementation of these.
Accounting policy amendments
There were no amendments to IFRS
that have led to material changes
in accounting policies during this
year. The Committee reviewed the
amendments to IFRS, including the
introduction of IFRS 16, and was
satisfied that these are dealt with
properly in the accounting reports.
The updates required to policies to
account for the first grant of LTIPs
and the share buyback and capital
reduction were also considered. In
addition, the Committee decided to
present the Company only financial
statements using FRS 101. The
Committee is of the opinion that this
will simplify the disclosures presented
and will, in the Committee’s opinion,
increase the readability of the
Annual Report.
94
Risk framework, metrics and
risk appetite
The Group’s risk process is managed
in light of its concentration on one
market, Dublin, of which it has in-
depth knowledge and experience.
The Committee reviewed the
risk framework. The Committee
considered the impacts of COVID-19,
a new risk in 2020. Climate change
risk was also added in 2020, reflecting
an increased focus in this area. The
Committee sees that not only is
climate change a risk for the standing
portfolio, but also for the Group’s
developments, especially in ensuring
planning takes account of future
legislation. The Group uses a number
of key metrics to set its risk appetite
and manage the ongoing level of
risks. These include gearing, financial
cover, single asset or tenant sector
concentration, level of development
exposure, obsolescence and climate
risk. In addition, operational risks are
also monitored, inter alia, people,
business and legislative. For more
on risks see pages 38 to 40.
Assessing the emerging and
principal risks of the Group
The Committee reviews the Group’s
emerging and principal risks at each
external reporting date, to ensure
that the principal risks that may
threaten the delivery of the Group’s
strategy are properly identified. This
‘top-down’ examination of the risks
involves the assessment of the impact
and likelihood of the risks in order to
arrive at an estimation of the more
significant risks. Those identified are
examined in more detail on pages
42 to 50 of this report.
COVID-19
The impacts of the ongoing crisis are
as yet not fully visible. The Committee
has considered the following main
impacts:
• The impact on the financial
reporting including the material
uncertainty expressed by the Valuer
and the recoverability or otherwise
of trade receivables
• Impacts on risk management
including tenant credit risk
management and liquidity
• Potential impacts on the assessment
of going concern and viability
• Budget, forecasting and
stress testing
Dividend policy
Dividends are usually paid twice yearly.
At each date, the Committee reviewed
the proposed dividends, calculations of
distributable reserves with due regard
to capital maintenance in line with the
Companies Act 2014 and compliance
with REIT and other legislation, and
made recommendations to the
Board as to the suitability of the
dividends proposed.
Capital management
The Committee monitored the share
buyback and capital reduction, legally
approved in April 2020, which the
Company undertook especially in light
of Budget 2020 which introduced
amended tax treatments that could
potentially impact the Company’s
ability to return funds to shareholders
in the future. For further information
on the legislative changes that have
impacted the Group in this financial
year see page 60.
Going concern and viability
The Committee reviewed
management’s work on assessing the
potential risks to the business and the
appropriateness of the Company’s
choice of a three-year assessment
period. The Committee was satisfied
that management has conducted a
robust assessment and recommended
to the Board that it could approve and
make the going concern and viability
statement on page 41.
Other matters considered:
• Compliance with REIT legislation
• Changes to the REIT legislation
• Compliance policy statement
• Reviewing the Committee’s terms
of reference and performance
Hibernia REIT plc Annual Report 2020Governance Significant items and key areas of uncertainty
Valuation of investment property
The valuation of investment property is a significant item in view of the materiality of these amounts. The
Valuer has expressed a material uncertainty in relation to valuations at 31 March 2020 due to the potential
impacts of COVID-19 which are impossible to predict. The Committee met the Valuer to critically assess the
basis and inputs for the valuation of each property in order to advise the Board on the appropriateness of
the amounts provided in the financial statements.
Who else attends the Committee?
Apart from the members of the
Committee there are often other parties
in attendance at the request of the
Committee. The Committee invites
attendees where it feels that they will
provide information and discussion
which will aid their duties. Below are
some of the regular attendees:
E X T E R N A L A U D I T O R
D E L O I T T E I R E L A N D L L P
I N T E R N A L A U D I T O R
P w C D U B L I N
R E P R E S E N T A T I V E S
O F T H E G R O U P
Including:
the CEO, CFO, CIO, the
Finance Team and the
Company Secretary/Risk
& Compliance Officer
E X T E R N A L
V A L U E R
C U S H M A N &
W A K E F I E D
A U D I T
C O M M I T T E E
All members
To present:
• Its plans and
To:
• Report its
findings and
recommendations
• Plan its next reviews
results in respect
of the annual audit,
interim and limited
assurance reviews
• Its analysis of the risks
it identified within
the Group
• Its recommendations
for improvements in
systems and controls
To:
• Present the
financial statements
and investment
property valuations
• Discuss significant
judgements and key
areas of uncertainty
• Discuss risks and
risk management
• Discuss viability and
going concern
To:
• Discuss its work
and its significant
assumptions
in relation to
the investment
property valuations
• Its view of
Management’s
decisions in relation
to valuations and the
appropriateness of
its choices
95
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information Governance
R E M U N E R A T I O N
1 W M L ,
W I N D M I L L Q U A R T E R ,
S O U T H D O C K S
Read more on page 6
96
Hibernia REIT plc Annual Report 2020 C O N T E N T S
98 Remuneration Committee report
102 Remuneration Policy
104 Remuneration at a glance
108 Additional context on remuneration
O U R C O M M I T M E N T
Hibernia’s philosophy
is to pay for
performance
97
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information R E M U N E R A T I O N C O M M I T T E E R E P O R T
R E M U N E R A T I O N
C O M M I T T E E R E P O R T
Colm Barrington
Chairman of the
Remuneration Committee
Constitution of Committee
Colm Barrington (Chairman)
Roisin Brennan
Stewart Harrington
Daniel Kitchen
Terence O’Rourke
Appointed
Independent
Feb-16
Jan-19
Feb-16
Feb-16
Feb-16
Meetings
attended
3 of 3
3 of 3
3 of 3
3 of 3
3 of 3
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.
Where can you find the information?
Section
Annual statement
Introduction to remuneration
at Hibernia
Remuneration at a glance
Page
99
102
104
How did we implement the Policy in 2020?
How will we implement the Policy in 2021?
Additional context on Executive Director
remuneration
Fairness, diversity and wider workforce
considerations
What is our Policy?
106
Annual report on remuneration
Page
106
108
111
113
98
K E Y C O N S I D E R A T I O N S I N
2 0 1 9 - 2 0
• First full year of operation of the
Remuneration Policy (“Policy”) approved
by shareholders in 2018
• Approved the first grant under the Long-
Term Incentive Plan
• Set stretching targets for the annual
bonus plan for 2020 and the 2020
LTIP grant
• Oversaw preparation of the CEO pay
ratio for the first time
• Ongoing engagement with
shareholders as part of the corporate
governance roadshow
• Assessed performance for the 2020
annual bonus plan and considered
whether the formulaic outcomes aligned
with Company performance
• Reviewed wider workforce remuneration
outcomes and policies
K E Y A R E A S O F F O C U S I N
2 0 2 0 - 2 1
• Commence review of the Policy for
proposal at the 2021 AGM
• Approve policies for pension
alignment and post-employment
shareholding requirements
• Continue to set stretching targets for the
annual bonus plan and the LTIP
• Continue to review wider workforce
remuneration outcomes and policies
• Development of the remit and
supporting framework for Margaret
Fleming (Designated Non-Executive
Director for Workforce Engagement) to
engage with employees and stakeholders
on pay and benefits during the year
• Continue to monitor developments
in corporate governance and
market practice
The role of the Committee is set out
in detail in the Committee’s
terms of reference available at
www.hiberniareit.com/about-us/
corporate-governance
Hibernia REIT plc Annual Report 2020Governance “Our aim is to ensure
that the remuneration
framework supports
the delivery of a
challenging long-term
strategy and rewards
fairly for exceptional
performance.”
Colm Barrington
Chairman of the
Remuneration Committee
Dear fellow shareholder,
On behalf of the Remuneration Committee
(the “Committee”) I am pleased to
introduce the Directors’ Remuneration
Report for the financial year ended
31 March 2020.
This is the second year of reporting on the
current Policy and so the Committee will be
bringing a resolution to approve a renewal
of the Policy to the 2021 AGM.
Business performance
Like many other businesses, we have faced
some challenges as a result of COVID-19.
At all times, our priority has been the health
and safety of our staff, occupiers and
suppliers. We are fortunate that we have
been able to remain fully operational during
the pandemic and we are proud of how our
employees have adjusted.
The timing of Ireland’s lockdown, which
started in mid-March 2020, has meant
that COVID-19 has had little impact
on our financial results for the year to
31 March 2020. This is clearly reflected
through another year of solid progress
against our strategy which has translated
into the delivery of strong financial and
operational results.
• The Total Property Return of our portfolio
was 5.9%, outperforming our benchmark
(the MSCI Ireland All Assets Index
excluding Hibernia) which returned 4.4%
• Our EPRA NAV per share grew by 3.5%
to 179.3 cent despite the impact of the
increase to stamp duty on commercial
property in 2019
• EPRA EPS of 5.5 cent, up 39.9% on
last year
• Total Accounting Return of 5.6%
Ireland began the relaxation of its COVID-19
restrictions on 18 May 2020 and we believe
we are well-positioned to execute our
strategy over the long-term and critical to
this is the retention and motivation of our
experienced management team.
Key remuneration decisions
Hibernia’s philosophy is to pay for
performance, and this has remained at
the forefront of the Committee’s decisions
in relation to pay outcomes for the year
ended 31 March 2020. In the table below,
we have summarised key decisions during
the year and the Committee’s rationale.
Element of
remuneration
Annual bonus
for 2020
Committee decision
Committee rationale
To pay the bonus in the normal manner with no adjustment for
COVID-19. However, in October 2019 an increase to stamp duty
tax rates was announced and this resulted in a reduction to
EPRA NAV per share.
• The approach taken to adjust for the stamp duty changes is
fair and in the best interests of the Company as it allows for
like-for-like comparison and accurately reflects underlying
business and management performance.
After careful consideration, the Committee’s view is that the
impact of the stamp duty changes to the Total Accounting
Return (TAR) performance measure would not accurately
reflect underlying business or management performance.
The Committee has therefore, determined that an exercise of
discretion is appropriate so that all participants neither benefit
nor are penalised by changes in the tax regime. Further detail on
the Committee’s decision is set out on page 100 under “Impact
of stamp duty changes on remuneration.”
Kevin Nowlan and Thomas Edwards-Moss’ maximum annual
bonus opportunity for the financial year was 150% of salary and
the outcomes were both assessed as 120% of salary, i.e. 80% of
the maximum.
• The same bonus framework applies across the Group for
executives and employees.
• All employees will receive their 2020 bonuses.
• The Group was not materially financially impacted by
COVID-19 during the year ended 31 March 2020.
• No Government support has been sought by the Group.
• The Group’s balance sheet and finances are strong.
• The Group is proposing to pay an increased dividend for
the year.
Salary and fee
reviews for 2021
There will be no increases to salary / fees for the Board, including
the Executive Directors.
• This is in line with the approach taken for the wider workforce.
Annual bonus for
2021
The bonus opportunity, performance measures and weightings
will remain unchanged.
• The measures and weightings remain appropriate.
• The same bonus framework applies across the Group for
Targets will be set as normal once consensus forecasts are
available. The Committee is aware that targets will be set
against a backdrop of uncertainty and we will build in sufficient
flexibility to ensure bonus outcomes are fair to all stakeholders.
Full disclosure of targets for 2021 will be provided in next year’s
Remuneration Report.
executives and employees.
• The Committee is aware that the market outlook is uncertain
and the full impact of COVID-19 is yet to be felt across the
business. It is important to assess performance at year-end in
the context of the wider stakeholder experience during the
financial year.
99
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information R E M U N E R A T I O N C O M M I T T E E R E P O R T C O N T I N U E D
Element of
remuneration
LTIP grant in 2020
Committee decision
Committee rationale
The Committee has determined to:
• Make the grant on the normal timetable in July 2020.
• Retain the same performance measures.
• Targets for the relative measures (Total Property Return and
• The performance measures and weightings remain
appropriate.
• Targets for relative measures remain appropriate.
• The Committee is mindful that the Company’s share price was
Total Shareholder Return) will remain the same.
impacted by COVID-19.
• Targets for TAR will be set once consensus forecasts are
available and will be communicated when the awards are
granted.
• Use the share price immediately prior to the date of grant to
• The Committee retains the discretion to adjust the vesting if
the formulaic outcomes do not reflect the Group, individual or
wider considerations including any potential “windfall” gains
arising out of the timing of the 2020 LTIP grant.
determine the number of shares awarded.
Impact of stamp duty changes on
remuneration and exercise of discretion
When assessing the annual bonus for 2020,
the Committee considered the increase in
stamp duty tax rates announced in October
2019. The increase resulted in a reduction to
EPRA NAV per share of 3.2 cent per share
(as at 31 March 2020). The impact of the
stamp duty tax rates on the Group’s EPRA
NAV has been independently calculated as
part of the Company’s normal reporting.
The effect of this reduction impairs
performance outcomes for growth in TAR
which is a performance measure operating
under both the annual bonus plan as well as
the LTIP. It is the Committee’s opinion that
no other performance measures used in the
annual bonus and LTIP, other than TAR, will
be materially impacted by the changes.
Changes to stamp duty rates were not
anticipated when the 2020 budget
was set and therefore, the 2020 bonus
performance targets and the 2019 LTIP
award do not factor in the impact of the
change. This was a principal consideration
for the Committee when considering
whether or not any adjustments should
be made.
After consideration and input from our
Remuneration Committee advisers, it is the
Committee’s view that the impact of the
stamp duty changes to TAR performance
as measured under the annual bonus
and LTIP would not accurately reflect
underlying business or management
performance. The Committee has therefore,
determined that an exercise of discretion
is appropriate so that participants neither
benefit nor are penalised by changes in
the tax regime. Under the adjustments,
the threshold to maximum growth ranges
remain unchanged. The Committee has
determined that adjustments would apply
to the 2020 annual bonus as well as the
LTIP award granted in July 2019.
Impact on the 2020 annual bonus (TAR
weighting is 17.5% of maximum
opportunity)
Under the annual bonus, the TAR outcome
has been increased by 3.2 cent. On the
basis the TAR target was set based on
a budget that did not incorporate the
impact of the stamp duty changes, the
Committee has determined that the most
appropriate course of action is to adjust
the TAR outcome for 2020 to reflect
the impact of this unbudgeted change.
The Committee believes this approach is
fair and in the best interests of the Group
as it allows for like-for-like comparison and
accurately reflects underlying business and
management performance.
The following table illustrates the approach with the impact on the bonus payments to both Executive Directors:
Impact of
stamp duty
Reported TAR
changes Adjusted TAR
Outcome (%
growth)
unadjusted
Outcome (%
growth)
adjusted
CEO bonus
unadjusted
9.75 cent
3.2 cent
12.95 cent
5.6%
7.5%
€516,000
CEO bonus
adjusted
(difference)
€540,000
(€24,000)
CFO bonus
unadjusted
€390,000
CFO bonus
adjusted
(difference)
€408,000
(€18,000)
Impact on the 2019 LTIP grant (TAR
weighting is 33.3% of maximum
opportunity)
For the 2019 LTIP which was granted in July
2019, the base level from which TAR growth
would be measured was 173.3 cent (being
the EPRA NAV for the financial year ended
31 March 2019). On the basis that the TAR
growth targets were based on a budget
and long-term business plan that did not
incorporate the impact of the stamp duty
changes, the Committee has determined
that the most appropriate course of action
is to adjust the base EPRA NAV (on which
TAR growth is calculated for the 2019
LTIP) to include the impact of the stamp
duty changes.
The Committee did consider adjusting
performance outcomes at the end of the
performance period for the LTIP, however,
the Committee felt that given that the
stamp duty changes occurred only a short
time after the commencement of the
performance period, that it was fair and in
the best interests of the Group to adjust
and re-state the base figure to allow for
like-for-like comparison at the end of the
performance period.
The following table sets out how the base figure for the 2019 LTIP grant has been adjusted:
Reported EPRA NAV (2019)
Impact of stamp duty
changes
Adjusted EPRA NAV
(2019 – restated)
Threshold TAR (% growth)
No change
Maximum TAR (% growth)
No change
173.3 cent per share
3.2 cent per share
170.1 cent per share
4%
10%
100
Hibernia REIT plc Annual Report 2020Governance Long-Term Incentive Plan vesting
There was no LTIP vesting as the first LTIP
was granted in July 2019.
Wider workforce considerations
Hibernia is committed to creating an
inclusive working environment and to
rewarding our employees throughout the
organisation in a fair manner. We have
worked hard to ensure that remuneration
for all our employees is market competitive
and we cascade our incentive structure
right through the Group. This year we
have continued to expand disclosures on
“fairness, diversity and wider workforce
considerations” and more information is
included on pay across the Group. In light
with our commitment to high standards of
corporate governance, we have voluntarily
disclosed our CEO pay ratio to the median
employee for the first time.
The Committee is kept up to date on
remuneration policies and decisions
across the Group and are made aware
of significant changes. Decisions around
salary increases and bonus outcomes
for Executive Directors and the Senior
Management Team are made only after
the Committee has reviewed the position
across the wider workforce.
We have also appointed Margaret Fleming
to engage with our employees and as
part of this process we will engage with
our employees on how remuneration is
structured and set.
Looking forward
Last year following the publication of
the 2018 Corporate Governance Code,
the Committee reviewed the extent to
which Hibernia’s remuneration framework
complied with the Code. We are satisfied
that the current Policy complies with many
of the Code’s requirements. We will shortly
commence reviewing the Policy ahead of
its renewal at our 2021 AGM in line with
the normal three-year cycle. As part of this
exercise, we will consider how we can fully
embed aspects of the Code around post-
cessation shareholding requirements and
pension alignment in the next Policy and,
where necessary, we will consult with our
major shareholders and Proxy Advisers.
In conclusion
As a Committee, we remain focused on
ensuring that Hibernia’s Remuneration
Policy is fit for purpose in the context of the
Group’s long-term strategy. We hope that
you will find this report clear, transparent
and informative and that you will be able
to support the advisory resolution to be
put to shareholders on this remuneration
report at the Company’s AGM on 29 July
2020. I would be happy to hear from you.
You can contact me through the Company
Secretary, Sean O’Dwyer.
On behalf of the Remuneration Committee
and the Board,
Colm Barrington
Chairman of the Remuneration Committee
16 June 2020
Voting outcomes in 2019
Remuneration Report
• For
• Against
94%
6%
Preparation of this report
As an Irish company Hibernia is
complying voluntarily with the UK
Directors’ Remuneration Reporting
regulations. In line with best practice
the Group is committed to applying the
requirements on a voluntary basis insofar
as practicable under Irish legislation.
As with previous years we are putting
our Annual Report on Remuneration to a
shareholder advisory vote.
Who advises the Committee?
During the year, the Committee received
advice on the implementation of the
Policy and preparation of the Directors’
Remuneration Report from PwC LLP.
PwC’s fees for this advice were €37k
(March 2019: €90k), which were charged
on a time/cost basis. PwC is a member
of the Remuneration Consultants
Group, and as such chooses to operate
pursuant to a code of conduct that
requires remuneration advice to be
given objectively and independently.
There are no connections between PwC
and individual Directors to be disclosed.
The Committee is satisfied that the
advice provided by PwC in relation to
remuneration matters is objective and
independent. The Company Secretary
acts as secretary to the Committee and
attends Committee meetings.
101
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
R E M U N E R A T I O N P O L I C Y
I N T R O D U C T I O N T O
R E M U N E R A T I O N
A T H I B E R N I A
Remuneration principles
Hibernia’s Policy aims to encourage, reward and retain the Executive Directors and other employees 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 shareholders
Long-term shareholder
alignment:
Remuneration outcomes
should mirror the
stakeholder experience
over the long term
Pay-for-performance:
Remuneration outcomes
should be clearly linked
to the delivery of
superior corporate results
Flexibility:
Remuneration should
be able to support
potential changes in
business priorities
over time
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
How do our incentive performance measures align to our strategy?
The Committee carefully considers the performance measures for the annual bonus and the LTIP in the context of the long-term
strategy and believes that the measures that were selected support the business focus on income growth, asset improvement, portfolio
management, delivery of developments and capital discipline. In addition, the combination of absolute and relative measures focuses
Executive Directors and the Senior Management Team on both outperformance of the strategic plan and industry benchmarks.
The following table sets out a number of the Group’s KPIs and how their satisfaction is supported by the Group’s incentive framework:
1
Increase rental income
to drive dividends per
share and, where possible,
increase WAULTs
2020 strategic priorities
2
3
4
5
Recycle capital to
monetise gains and make
selective investments
Maintain an efficient
balance sheet
Continue to improve
environmental efficiency
of the portfolio
Progress with our
committed development
scheme and prepare pipeline
of future projects, especially
where there is potential for
more clusters similar to the
Windmill Quarter
EPRA EPS
Total Accounting Return (“TAR”)
Total Property Return (“TPR”)
Total Shareholder Return (“TSR”)
Our key performance indicators
Measures
EPRA EPS
Relative TPR
Growth in TAR
Strategic/
operational
Annual bonus
Long-Term Incentive Plan
Link to strategy
Link to KPIs
Measures
Link to strategy
Link to KPIs
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
Relative TPR
Relative TSR
Growth in TAR
Shareholding
guidelines
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
Alignment to shareholder interests
102
Hibernia REIT plc Annual Report 2020Governance B U S I N E S S
H I G H L I G H T S
R E M U N E R A T I O N
I N T H E G R O U P
EPRA NAV per share
179.3c
+3.5%, 2019: 173.3c
EPRA EPS
5.5c
+39.9%, 2019: 4.0c
Total accounting return: (“TAR”)
5.6%
2019: 11.1%
Total property return: (“TPR”)
5.9%
2019: 11.6%
Total spend on pay
Wider workforce salary increase
€6.8m
0%
CEO pay ratio to the median employee
Eligible employees receiving a bonus
9:1
100%
E X E C U T I V E D I R E C T O R
R E M U N E R A T I O N
Total single figure CEO
€1.1m
Annual bonus achievement
CEO
120%of salary
Total single figure CFO
€0.8m
CFO
120%of salary
103
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
R E M U N E R A T I O N A T A G L A N C E
R E M U N E R A T I O N
A T A G L A N C E
R E M U N E R A T I O N I N R E S P E C T O F 2 0 2 0
Summary of Executive Directors’ remuneration for the year ended 31 March 2020
€1,250,000
€1,250,000
€1,081,340
€1,000,000
€1,000,000
€750,000
€500,000
€250,000
€0
€540,000
€830,414
€750,000
€500,000
€408,000
€250,000
€541,340
€422,414
€0
CEO, Kevin Nowlan
CFO, Thomas Edwards-Moss
Fixed
Variable
Fixed
Variable
Base Salary
Pension
Taxable Benefits
Bonus – paid in cash
Bonus – deferred in shares
Long term incentives vested
Total single figure remuneration
Notes
CEO, Kevin Nowlan
(€’000)
CFO, Thomas Edwards-Moss1
(€’000)
€450
€68
€23
€360
€180
–
€1,081
€337
€51
€34
€272
€136
–
€830
1. The CFO’s base salary reflects unpaid leave taken during the year. His annual bonus is based on his contracted salary.
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Hibernia REIT plc Annual Report 2020Governance Bonus outcomes for 2020 (audited)
For 2020, the CEO and the CFO both had a maximum bonus opportunity of 150% of salary. The overall outcome was 80% of
maximum for both Executive Directors. Of this, 57.5% relates to the achievement of financial objectives and 22.5% relates to the
achievement of strategic and operational objectives. This gave rise to a bonus equal to 120% of salary for both Executive Directors.
Annual bonus measure
Weighting Threshold
Target
Maximum
Actual
40% Equal to Index Index + 1%
Index + 2%
TPR of 5.87%
vs MSCI Ireland
annual return
of 4.43%
Outcome
(% of
maximum)
CEO
(€’000)2
CFO
(€’000)
72%
€194
€147
Relative Total Property
Return (TPR)
TPR is compared to
the MSCI/ SCSI Ireland
Quarterly Property Index
(excluding Hibernia)
Growth in EPRA Earnings
per share (EPS)
Growth in Total
Accounting Return per
share (TAR)1
Strategic and operational
objectives
Overall
Notes
17.5% 4.94 cents
(25%
growth)
5.20 cents
(31.5%
growth)
5.46 cents
(38.1%
growth)
5.51 cents
(39.9%
growth)
100%
€118
€89
17.5% 2.7%
6.0%
10.0%
7.5%
63%
€75
€56
25% See page 114 for details of the objectives and outcomes.
CEO: 90%
CFO: 90%
€153
€116
€540
120% of
salary
€408
120% of
salary
1. See pages 99 and 100 of the Chairman’s statement which sets out how the Committee exercised discretion to adjust formulaic outcomes in relation to the TAR performance
target as a result of the increase to stamp duty.
2. The financial year ended 31 March 2020 was the first year that the CEO, Kevin Nowlan, has received a full-year bonus under the Policy as the IMA expired on 26 November
2018. It is noted that in the previous financial year, the CEO participated in the Policy for part of the financial year only and his bonus outcome was pro-rated, accordingly.
To help with year-on-year comparison, this year we have provided 2019 single figure information for the CEO on both an actual and a pro-forma annualised basis.
LTIP award to be granted in July 2020
The maximum LTIP opportunity is 200% of salary for the CEO and the CFO. Set out below are the performance measures and
targets for the second grant which will be made in July 2020:
Performance measures
Relative TSR
Assessment of TSR will be against companies in the EPRA/NAREIT2 Developed Europe Index
Weighting
(as a % of
maximum
opportunity)
Threshold
vesting1
(20%)
Maximum
vesting
(100%)1
33.3%
Median Upper quartile
Relative TPR
TPR will be compared to the MSCI Ireland Quarterly Property All assets Index (“MSCI Ireland Index”)
excluding Hibernia
33.3% Equal to Index Equal to Index
plus 1.5% p.a.
TAR per share
Growth in TAR will be assessed against three-year targets based on a compound annual growth
rate
33.3%
To be disclosed at grant3
Notes
1. Straight-line interpolation between threshold and maximums
2. NAREIT: National Association of Real Estate Investment Trusts
3. The TAR targets will be set once consensus forecasts are available
2020 LTIP outcomes
Not applicable as the first LTIP grants were awarded in July 2019. See page 116 for details of LTIP awards which were granted to the
CEO and CFO in July 2019.
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information R E M U N E R A T I O N A T A G L A N C E C O N T I N U E D
What is our Policy? How did we implement it in 2020? How will we implement it in 2021?
The Policy for Executive Directors supports Hibernia’s KPIs, which are set out on page 36. The Policy and its use of performance
measures appropriately support shareholder value creation by delivering sustainable performance consistent with the strategic drivers
and appropriate risk management. A detailed review of how the Policy aligns with the UK Code and in particular, the requirements under
Provision 40 of the Code was undertaken in 2019 and can be found on page 98 of the 2019 Annual Report. The table below summarises
key aspects of the Policy and its implementation. The Policy itself is published on our website at www.hiberniareit.com.
Element
Year
Operation
Opportunity
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.
1 2 3 4 5
Salaries are set on appointment and reviewed annually. When determining
salary, the Committee considers:
• General employee salary rises
• Remuneration practices in the Group
• Scope, role and experience
• Performance of the Group and economic environment
• Salaries paid in relevant comparator group.
• Maximum salary levels in line with companies
Kevin Nowlan (CEO): €450,000 p.a.
No change.
of a similar size to Hibernia
Thomas Edwards-Moss (CFO): €340,000 p.a.
There were no salary increases awarded to
Implementation for financial year
Implementation for financial year
ended 31 March 2020
ending 31 March 2021
the Executive Directors. This is in line with the
approach taken for the wider workforce.
Pension
Provides a basis for post–retirement remuneration
in line with comparable remuneration packages.
1 2 3 4 5
Benefits
Provides a market competitive benefits package.
1 2 3 4 5
Directors may participate in a defined contribution scheme.
The maximum pension contribution allowance for
15% of base salary for Executive Directors.
No change.
The pension plan is an optional defined contribution scheme with an
independent pension provider and an employer contribution of between
7% and 15% for staff and Senior Management respectively.
Benefits may include car allowance, death in service and long-term disability
schemes, and other benefits as needed to attract and
retain Directors.
The maximum is the cost of providing the
Car allowance, death in service, long-term
No change.
relevant benefits.
disability schemes, and other benefits where
necessary.
• Validated against other companies in
the industry
• Average annual percentage increase in salaries
for Executive Directors will be in line with the
average for other employees in the Group
• Exceptions to this rule are:
– If an individual is below market level
– Material increase in scope or responsibility
existing Executive Directors is 15% of salary.
Annual bonus
To incentivise the achievement of annual
performance targets that support the Group’s
short-term key performance as well as providing
long-term alignment with shareholders through
the operation of bonus deferral in shares for
three years.
LTIP
To incentivise the achievement of long-term
sustainable shareholder return through the
delivery of key financial performance indicators.
1 2 3 4 5
Awards are granted annually with performance measured over one
financial year.
• Maximum: 150% of salary
Performance conditions and weightings:
No change to performance conditions and
• 20% of maximum is paid out for threshold
• 40% Relative TPR
weightings.
At least 50% of awards will be linked to financial measures. Specific
measures, targets and weightings may vary from year to year.
A third of any bonus earned is deferred into shares subject to a further
three-year vesting period.
Participants may be entitled to dividends or dividend equivalents during
the deferral period.
Malus and clawback arrangements apply.
Good/bad leaver provisions apply.
performance; 50% of maximum for on target
• 17.5% growth in EPRA EPS
performance; and 100% of maximum for
• 17.5% TAR per share
maximum performance
• 25% Strategic and operational objectives
• Actual performance targets are not disclosed
prospectively as they are considered to be
commercially sensitive
• Full disclosure will be published at the end of
the financial year
Executive Directors were awarded bonuses –
see page 105 for performance outcomes.
2020 was the first year that Kevin Nowlan
has received a full-year bonus under the
Remuneration Policy as the IMA expired on 26
November 2018.
1 2 3 4 5
The Committee may award annual grants of performance share awards
which vest three years from the date of grant subject to the achievement
of the performance measures.
A further two-year holding period applies to vested shares.
Participants may be entitled to dividends or dividend equivalents
representing the dividends paid during the performance period on vested
LTIP awards.
Malus and clawback arrangements apply.
Good/bad leaver provisions apply.
Shareholding requirement
To ensure Executive Directors’ interests are
aligned with shareholders over the long term.
1 2 3 4 5
Formal shareholding requirements which will encourage the Executive
Directors to build up shareholdings over a five-year period and then
subsequently hold a shareholding equivalent to a percentage of salary.
Non-Executive Directors’ fees
To attract and retain NEDs of the highest calibre
with experience relevant to the Company.
1 2 3 4 5
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.
• Maximum opportunity of 200% of base salary
Awards made in year (2019 LTIP):
No change to performance conditions and
for Executive Directors with 20% vesting at
• Kevin Nowlan (CEO): 585,176 LTIP conditional
weightings.
threshold to 100% at maximum level
shares at nil consideration
See page 105 for details of LTIP targets that will
• Performance conditions and weightings:
• Thomas Edwards-Moss (CFO): 442,133 LTIP
apply for the awards to be granted in July 2020.
– 33.3% Relative TPR compared to the MSCI
conditional shares at nil consideration
See page 116 for full details of the awards.
Ireland Index
– 33.3% Relative TSR compared to
constituents of the EPRA/NAREIT
Developed Europe Index
– 33.3% growth in TAR per share
The minimum shareholding requirement for
Current shareholdings of the Executive Directors
No change.
Executive Directors is 350% of salary.
are:
• CEO: 1,870% of salary
• CFO: 115% of salary
The level of fee increase for the Non-Executive
Non-Executive Director fees were as follows:
No change.
Directors and the Chairman will be set taking
• Chairman: €150,000
account of any change in responsibility and the
• NED Base fee: €60,000
general rise in salaries across employees.
• SID fee: €15,000
The Company will pay reasonable expenses
incurred by the Non-Executive Directors and
may settle any tax incurred in relation to these.
• Committee Chair fee: €10,000 (excludes
Nominations Committee Chair)
As set out above, this is consistent with the
approach taken for the wider workforce.
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Hibernia REIT plc Annual Report 2020Governance Element
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.
Year
Operation
1 2 3 4 5
salary, the Committee considers:
• General employee salary rises
• Remuneration practices in the Group
• Scope, role and experience
• Performance of the Group and economic environment
• Salaries paid in relevant comparator group.
Provides a basis for post–retirement remuneration
in line with comparable remuneration packages.
1 2 3 4 5
Directors may participate in a defined contribution scheme.
The pension plan is an optional defined contribution scheme with an
independent pension provider and an employer contribution of between
7% and 15% for staff and Senior Management respectively.
Pension
Benefits
Annual bonus
To incentivise the achievement of annual
performance targets that support the Group’s
short-term key performance as well as providing
long-term alignment with shareholders through
the operation of bonus deferral in shares for
three years.
LTIP
To incentivise the achievement of long-term
sustainable shareholder return through the
delivery of key financial performance indicators.
retain Directors.
1 2 3 4 5
financial year.
Awards are granted annually with performance measured over one
At least 50% of awards will be linked to financial measures. Specific
measures, targets and weightings may vary from year to year.
A third of any bonus earned is deferred into shares subject to a further
three-year vesting period.
Participants may be entitled to dividends or dividend equivalents during
the deferral period.
Malus and clawback arrangements apply.
Good/bad leaver provisions apply.
1 2 3 4 5
The Committee may award annual grants of performance share awards
which vest three years from the date of grant subject to the achievement
of the performance measures.
A further two-year holding period applies to vested shares.
Participants may be entitled to dividends or dividend equivalents
representing the dividends paid during the performance period on vested
LTIP awards.
Malus and clawback arrangements apply.
Good/bad leaver provisions apply.
Shareholding requirement
To ensure Executive Directors’ interests are
aligned with shareholders over the long term.
1 2 3 4 5
Formal shareholding requirements which will encourage the Executive
Directors to build up shareholdings over a five-year period and then
subsequently hold a shareholding equivalent to a percentage of salary.
Non-Executive Directors’ fees
To attract and retain NEDs of the highest calibre
with experience relevant to the Company.
1 2 3 4 5
Non-Executive Directors are paid an annual fee and additional fees
for chairmanship of committees and the role of Senior Independent
Director (“SID”).
of Committees.
The Company retains the flexibility to pay fees for the membership
Opportunity
Implementation for financial year
ended 31 March 2020
Implementation for financial year
ending 31 March 2021
Salaries are set on appointment and reviewed annually. When determining
• Maximum salary levels in line with companies
of a similar size to Hibernia
• Validated against other companies in
the industry
• Average annual percentage increase in salaries
for Executive Directors will be in line with the
average for other employees in the Group
• Exceptions to this rule are:
– If an individual is below market level
– Material increase in scope or responsibility
The maximum pension contribution allowance for
existing Executive Directors is 15% of salary.
Kevin Nowlan (CEO): €450,000 p.a.
Thomas Edwards-Moss (CFO): €340,000 p.a.
No change.
There were no salary increases awarded to
the Executive Directors. This is in line with the
approach taken for the wider workforce.
15% of base salary for Executive Directors.
No change.
Provides a market competitive benefits package.
schemes, and other benefits as needed to attract and
1 2 3 4 5
Benefits may include car allowance, death in service and long-term disability
The maximum is the cost of providing the
relevant benefits.
Car allowance, death in service, long-term
disability schemes, and other benefits where
necessary.
No change.
• Maximum: 150% of salary
• 20% of maximum is paid out for threshold
performance; 50% of maximum for on target
performance; and 100% of maximum for
maximum performance
• Actual performance targets are not disclosed
prospectively as they are considered to be
commercially sensitive
• Full disclosure will be published at the end of
the financial year
Performance conditions and weightings:
• 40% Relative TPR
• 17.5% growth in EPRA EPS
• 17.5% TAR per share
• 25% Strategic and operational objectives
Executive Directors were awarded bonuses –
see page 105 for performance outcomes.
2020 was the first year that Kevin Nowlan
has received a full-year bonus under the
Remuneration Policy as the IMA expired on 26
November 2018.
No change to performance conditions and
weightings.
• Maximum opportunity of 200% of base salary
for Executive Directors with 20% vesting at
threshold to 100% at maximum level
• Performance conditions and weightings:
Awards made in year (2019 LTIP):
• Kevin Nowlan (CEO): 585,176 LTIP conditional
shares at nil consideration
• Thomas Edwards-Moss (CFO): 442,133 LTIP
No change to performance conditions and
weightings.
See page 105 for details of LTIP targets that will
apply for the awards to be granted in July 2020.
– 33.3% Relative TPR compared to the MSCI
conditional shares at nil consideration
Ireland Index
– 33.3% Relative TSR compared to
constituents of the EPRA/NAREIT
Developed Europe Index
– 33.3% growth in TAR per share
The minimum shareholding requirement for
Executive Directors is 350% of salary.
See page 116 for full details of the awards.
Current shareholdings of the Executive Directors
are:
• CEO: 1,870% of salary
• CFO: 115% of salary
No change.
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 Director fees were as follows:
• Chairman: €150,000
• NED Base fee: €60,000
• SID fee: €15,000
• Committee Chair fee: €10,000 (excludes
Nominations Committee Chair)
No change.
As set out above, this is consistent with the
approach taken for the wider workforce.
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information A D D I T I O N A L C O N T E X T O N R E M U N E R A T I O N
A D D I T I O N A L C O N T E X T O N E X E C U T I V E D I R E C T O R R E M U N E R A T I O N
How do our remuneration levels compare to our peers?
The following chart shows the relative position of base salaries and target total remuneration for our Executive Directors compared to
our peers:
CEO, Kevin Nowlan
CFO, Thomas Edwards-Moss
Top
quartile
Second
quartile
Third
quartile
Bottom
quartile
REIT Group
Irish Listed Group
REIT Group
Irish Listed Group
Hibernia’s base salary positioning
Hibernia’s total remuneration positioning
External relativities
In line with the UK Code the Committee considered relevant external relativities when setting the remuneration levels within the
proposed Policy.
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.
See page 106 of the 2019 Annual Report for a list of companies in the comparator groups
Additional information on Hibernia’s remuneration positioning policy
The Committee’s determination of the appropriate policy position for remuneration is as follows:
• REIT comparators for both Executive Directors:
• Lower quartile fixed pay
• Upper quartile incentive opportunities
• Total target remuneration at around the median
• Irish comparators (Hibernia is median to upper quartile in terms of market capitalisation) for the CEO:
• Below median fixed pay
• Upper quartile incentive opportunities
• Total target remuneration at around the median to upper quartile
For the CFO the positioning is significantly higher against the Irish comparators. However, the Committee’s view is that the REIT
comparators are the primary group against which the Company should be compared for this role.
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Hibernia REIT plc Annual Report 2020Governance
What is our 2020 single figure compared to our current Policy?
When shareholders approved our Policy in 2018, we set out scenarios for the potential remuneration to be earned by our Executive
Directors under the Policy for various performance assumptions. We have set out the actual single figure of remuneration for the
Executive Directors for 2020 against these scenarios to demonstrate how the actual remuneration paid lines up with our Policy.
€3,000,000
€2,500,000
€2,000,000
€1,500,000
€1,000,000
€500,000
€0
Notes
€2,791,340
€2,116,340
€2,126,192
€1,418,840
€1,616,192
€541,340
€426,192
€1,081,340
€1,089,192
€830,414
Minimum
On-target
Maximum
Maximum
(with equity
growth at 50%)
Actual
2020
Minimum
On-target
Maximum
Maximum
(with equity
growth at 50%)
Actual
2020
CEO
CFO
Fixed*
Annual Bonus
LTIP
Equity growth on shares
*Fixed includes bases salary pensions and all benefits
The minimum scenario reflects fixed remuneration of salary, pension and benefits only as the other elements are linked to future performance. Base salary is current base salary
effective 1 April 2020.
Benefits are as shown in the single figure remuneration table for the year to 31 March 2020 on page 113. The CFO’s actual base salary in 2020 reflects unpaid leave taken during the year.
His bonus is based on his contracted salary.
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 maximum scenarios include an additional bar which shows the impact of 50% share price growth on the LTIP over the relevant performance period in line with the remuneration
reporting regulations.
What is our minimum shareholding requirement and has it been met?
The Company has a shareholding requirement for Executive Directors. 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.
Using the Company’s closing share price of €1.062 on 31 March 2020, compliance with these requirements as at 31 March 2020 was
as follows:
2,250
1,500
750
0
1870%
2008%
350%
350%
115%
262%
Kevin Nowlan
(CEO)
Thomas Edwards-Moss
(CFO)
Shareholding requirement
Shares counting towards shareholding requirement (i)
Unvested shares subject to performance conditions (ii)
Notes
(i) Represents beneficially owned shares as well as annual bonus deferred share awards (of which 52% is deducted to cover statutory deductions).
(ii) Represents the 2019 LTIP award which is subject to ongoing performance.
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Hibernia REIT plc Annual Report 2020 A D D I T I O N A L C O N T E X T O N R E M U N E R A T I O N C O N T I N U E D
Shares counting towards the achievement of the guideline include beneficially owned shares (including shares held by connected
persons) and the net of tax value of deferred shares which are subject to continued employment only.
Overall link to remuneration, equity and wealth of the Executive Directors
It is the Committee’s view that it is important when considering the remuneration paid in the year under the single figure to take a holistic
view of the Director’s total wealth linked to the performance of the Group. In the Committee’s opinion, the impact on the total wealth of
the Director is more important than the single figure in any one year; this approach encourages Directors to take a long-term view of the
sustainable performance of the Group; this is critical in a cyclical business. The ability for the Directors to gain and lose dependent on the
share price performance of the Group at a level which is material to their total remuneration is a key facet of the Group’s Policy.
The table sets out the number of shares beneficially owned by the Executive Directors at the beginning and end of the financial year,
and the impact on the value of these shares taking the opening and closing price for the year.
Director
CEO, Kevin Nowlan
CFO, Thomas Edwards-Moss
2020 Single
Figure (€’000)
Shares held at
the start of the
year (‘000)
Shares held at
the end of the
year (‘000)
Value of
shares at start
of year
(€’000)1
Value of
shares at end
of year
(€’000)2
1,081
830
6,907
147
7,902
256
9,228
196
8,392
272
Difference
(€’000)
(836)
76
1. Based on a closing share price on 31 March 2019 of €1.336
2. Based on a closing share price on 31 March 2020 of €1.062
Other pay comparisons used by the Committee
Total Shareholder Return
The chart below shows the Company’s TSR since Internalisation of the Management Team on 5 November 2015. 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
160
140
120
100
80
60
40
20
0
0 5/11/2 015
0 5/ 0 3/2 016
0 5/ 0 7/2 016
0 5/11/2 016
0 5/ 0 3/2 017
0 5/ 0 7/2 017
0 5/11/2 017
0 5/ 0 3/2 018
0 5/ 0 7/2 018
0 5/11/2 018
0 5/ 0 3/2 019
0 5/ 0 2/2 0 2 0
Hibernia
FTSE EPRA/NAREIT Developed Europe
110
Hibernia REIT plc Annual Report 2020Governance
Relative importance of spend on pay
The following graphs illustrate the relationship between total expenditure on remuneration and other disbursements from profit over the
past three years and shows year-on-year change. The two elements represent some of the most significant outgoings for the Company
during the financial year.
Staff costs1 (€m)
Dividends2 (€m)
+28% on FY19
+34% on FY19
7
6
5
4
3
2
1
0
6.8
5.3
4.4
€539,292
2018
2019
2020
35
30
25
20
15
10
5
0
32.5
24.3
20.9
€539,292
2018
2019
2020
1. Please note staff costs excludes the IMA costs which, until its expiry in November 2018, were significantly larger than the increase in staff costs since FY18.
2. Represents dividends in respect of the relevant financial year, i.e. the interim dividend paid during the year and the approved or proposed final dividend.
Fairness, diversity and wider workforce considerations
Overview of the Committee’s process
The Committee is responsible for ensuring that the Group overall Policy is consistent with the strategic objectives of the Group and takes
account of risk management implications. The Committee is responsible for oversight of remuneration across the Company with specific
regard for Directors and Senior Management.
Given the number of employees within the Group, the Committee has always taken a wider view on the matters that it reviews in relation
to workforce remuneration and historically has had oversight of wider workforce pay and policies and incentives, which enables it to
ensure that the approach to executive remuneration is consistent with that applied to the wider workforce.
The Committee currently receives an annual summary setting out the key details of remuneration changes for the wider workforce and
approves the details of changes for the Senior Management Team. The Committee has the authority to ask for additional information from
the Group in order to carry out its responsibilities.
The Committee reviewed the current process and the information that it receives and felt that, on the whole, it adequately enables the
Committee to fulfil its responsibility for the oversight and review of wider workforce pay, policies and incentives and ensure they are
designed to support the desired culture and values of the Group.
The Committee is aware of the following on workforce pay, policies and incentives.
• Salary and salary increases
• Annual bonus plan (bonus opportunities, performance conditions and target ranges, payment method, scope for discretion and malus
and clawback provisions)
• Pension levels
• Long-term incentive plans (total eligible population, performance conditions and target ranges, payment method, scope for
discretion, malus and clawback provisions, vesting and holding periods)
• Benefits
The Committee is aware that the level and type of remuneration offered will vary across employees depending on the employee’s level
of seniority and the nature of his or her role.
The Committee is not looking for a homogeneous approach to remuneration; however, when conducting its review, it pays particular
attention to: whether the element of remuneration is consistent with the Group remuneration philosophy; if there are differences, they are
objectively justifiable; and whether the approach seems fair and equitable in the context of Hibernia’s Senior Management and Hibernia’s
wider workforce.
Findings
The Committee reviewed the information that was provided by the Group and is satisfied that the approach to remuneration across
the Group is consistent with the Group principles of remuneration. Further, in the Committee’s opinion the approach to executive
remuneration aligns with the wider Group pay policy and there are no anomalies specific to the Executive Directors. The section
on page 112. ‘Competitive pay and cascade of incentives’, provides a summary of the information reviewed by the Committee.
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Competitive pay and cascade of incentives
The Company applies consistent principles when reviewing pay and incentives across the Group to ensure they are fair with respect to the
market at large, and internally in relation to gender balance and other relevant factors.
Level
CEO
CFO
Senior
Management Team
Employees #
Base pay
Benefits and pension
Annual bonus
LTIP
1
1
5
• Base salary is set with
• A range of benefits
reference to the market
and wider workforce
considerations
is provided to all our
employees
• All other employees
• All employees typically
receive the same
percentage salary
increase
have the opportunity
to participate in a
health insurance
scheme
• We believe that employees
should also share in the
success of the Group, and
therefore all employees
participate in the bonus plan
• Bonus opportunity varies from
• The LTIP is for senior
employees who have a
direct line of sight to the
delivery of the Group
long-term strategy
• Varies from 150% of
60% of salary to 150%
of salary across the Group
salary to 200% of salary
across the Group
• All employees are
• Employees are set
entitled to participate
in the pension scheme
with employer
contributions ranging
from 7.0% to 15%
performance targets that
encompass not only personal
objectives but also Group
performance targets
• The balance between personal
• Measures and targets
are consistent for all
participants
Other employees
29
and Group performance
targets is set depending on
the employee’s ability to
influence outcomes, but all
employees have an element
of Group performance
comprised within their targets
Percentage change in remuneration of CEO and employees
The table below shows how the percentage change in the CEO’s salary, benefits and bonus between 2019 and 2020 compares with the
percentage change in the average of each of those components of pay for employees of the Group as a whole. It should be noted that
2018-19 was a transitional year with partial implementation of the Policy and therefore a year-on-year comparison of the annual bonus
is not as meaningful. The notes beneath this table describe how we have calculated the year-on-year change in the annual bonus for
the CEO.
CEO
Wider employee population
Base salary
Taxable benefits
Annual bonus1
0%
0%
0%
0%
-3.0%
+6.0%
1. The financial year ended 31 March 2020 was the first year that the CEO, Kevin Nowlan, has received a full-year bonus under the Policy as the IMA expired on 26 November 2018.
It is noted that in the previous financial year, the CEO participated in the Policy for part of the financial year only and his bonus outcome (which was €190,711) was pro-rated,
accordingly. To help with meaningful year-on-year comparison, this year we have provided 2019 single figure information for the CEO on both an actual and a pro-forma annualised
basis. The difference of -3% is based on the 2019 annualised pro-forma bonus (€556,876) and the 2020 bonus (€540,000).
Workforce engagement
Whilst not specifically consulted on executive remuneration, there are a number of channels of communication available to all our
employees to gather their feedback.
C H A N N E L S O F C O M M U N I C A T I O N W I T H T H E W O R K F O R C E
Overview of pay and
policy decisions
The Committee is updated on employee
remuneration levels across the Group
and made aware of significant changes
to policies and other
pay-related matters.
Regular team meetings
and one-to-ones
We have 34 employees below the
Executive Directors and, as a result,
all our employees have the ability to
provide direct feedback to Senior
Management on business issues,
including but not limited to pay.
Nominated
Non-Executive Director
A Non-Executive Director
(Margaret Fleming) has been appointed
to engage with employees and report
back to the Board.
Diversity and equal opportunities
The Group is committed to developing the skills and diverse talents of its employees and Board members and has a business and culture
in place which support this objective. Our aim is to foster a culture that promotes fairness and where success is measured via ability,
potential, performance and working as part of a team. The Group’s policy is to employ the best candidates regardless of sex, race, ethnic
origin, nationality, socio-economic background, age, religion or philosophical belief, sexual orientation, marital status, pregnancy, maternity,
gender reassignment or disability. However, where possible, recruitment at all levels seeks to add diversity. Along with our commitment
to EPRA Sustainability Basic Principles, we publish gender diversity and pay ratios in our Sustainability Report which can be found on
our website at www.hiberniareit.com/sustainability.
112
Hibernia REIT plc Annual Report 2020Governance Fairness through our supply chain
Having established our Supplier Code of Conduct in 2017, we aim to continue to support our suppliers to adhere to legislation and
to embed sustainable practices within their own businesses. Our Supplier Code of Conduct, which can be found on our website at
www.hiberniareit.com/sustainability, sets out our expectations that our suppliers support fair pay and working time practices and
operate an ethical business policy.
Pay comparisons
As an Irish-incorporated company with no UK employees, Hibernia is not required to disclose details of its CEO pay ratio. However, the
Committee felt that it was appropriate to provide such disclosure based on its Irish employees given our commitment to high standards
of corporate governance. As Hibernia has 35 employees (excluding the CEO), the Committee has focused its disclosure on the CEO pay
ratio to the median employee. The ratio of the CEO’s total single figure of remuneration to the median employee’s full-time equivalent
total pay and benefits is detailed in the table below:
Financial year
31 March 2020
Option used
A
50th percentile ratio (median)
9:1
The Group chose to adopt the Option A methodology as it deemed it the most statistically robust.
To provide further context on the ratio, the following is noted:
• The calculations include all individuals who were employed by the Group on 31 March 2020.
• Salary and benefits data have been included on a full-time equivalent basis and no elements of pay have been omitted.
• Values for salary, pension contributions and the majority of benefits were determined with reference to the financial year to
31 March 2020, up-rated to reflect full year-equivalent total pay and benefits for employees joining during the financial year.
• Values for employee bonuses (excluding the CEO) reflect the prior year value, as at the time of preparing this calculation, 2020 bonus
outcomes for employees below Executive Directors had not been finalised and communicated. Benefits include health insurance,
pension, car allowances and life and disability insurance (data for the latter is based on the prior year value).
• The total pay and benefits figure for the median employee is €117,958.
• Our CEO’s remuneration package includes a higher proportion of performance-related pay than that of our wider workforce employees,
to reflect the nature of his role and the expectations of our shareholders. This introduces a higher degree of variability in his pay each
year, which will affect the ratio.
• The first LTIP award is due to vest in 2022 (subject to performance outcomes) and therefore, the 2020 ratio does not include a value
in respect of the LTIP. To the extent that LTIP awards vest, the value of these awards will be included from 2022 onwards. This will
introduce a further degree of variability to the ratio, because the LTIP is provided in shares, and therefore movements in the share price
over the three-year performance period will affect the vesting value of the LTIP and hence the resulting pay ratio.
• We recognise that the ratio is driven by the different remuneration structure of our CEO versus that of our wider workforce.
The Committee recognises that the ratio varies between businesses even those operating in the same sector as Hibernia. What is
important from our perspective is that this ratio is influenced only by the differences in remuneration structure and not by divergence
in fixed pay between the CEO and our wider workforce.
• The ratio between groups where the structure of remuneration is similar (e.g. for the Senior Management Team compared to the CEO)
is much more stable over time.
Annual report on remuneration for the financial year ended 31 March 2020
The 2020 annual report on remuneration contains details of how the Company’s Policy for Directors was implemented during the financial
year ended 31 March 2020. 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. An advisory ordinary resolution to approve this report and the Annual Statement will be put to shareholders at the AGM.
Single total figure of remuneration for Executive Directors (audited)
The financial year ended 31 March 2020 was the first year that the CEO, Kevin Nowlan, has received a full-year bonus under the Policy
as the IMA expired on 26 November 2018. It is noted that in the previous financial year, the CEO participated in the Policy for part of the
financial year only and his bonus outcome was pro-rated, accordingly. To help with meaningful year-on-year comparison, this year we
have provided 2019 single figure information for the CEO on both an actual and a pro-forma annualised basis (see the row titled
“2019 (annualised)” for the latter).
Financial
year ended
31 March
Base
salary
€’000
Taxable
benefits
€’000
Pension
€’000
CEO, Kevin Nowlan
2020
CFO, Thomas Edwards-Moss1
2019
(annualised)
2019 (actual)
2020
2019
450
450
450
3371
340
23
22
22
34
29
68
68
68
51
51
Annual
bonus
€’000
5401
557
191
408
408
Other
€’000
–
–
–
–
–
Total
fixed pay
€’000
Total
variable
pay
€’000
541
540
540
422
420
540
557
191
408
408
Total
€’000
1,081
1,097
731
830
828
1. The base salary for the CFO, Thomas Edwards-Moss, for 2020 is lower than his contracted salary due to unpaid leave during the year. On an annualised basis it is €340,000.
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Bonus outcomes for 2020 (audited)
For 2020, the Executive Directors had a maximum bonus opportunity of 150% of salary. The overall outcome was 80% of maximum for
both Executive Directors. Of this, 57.5% relates to the achievement of financial objectives and 22.5% relates to the achievement of strategic
and operational objectives. This gave rise to a bonus equal to 120% of salary for both Executive Directors.
The table on page 105 provides full information on the financial performance conditions and targets, their level of satisfaction and the
corresponding bonus earned. Page 100 of the Chairman’s statement sets out details on how the Committee exercised discretion in
relation to the TAR target to take into account changes to stamp duty tax.
The Executive Directors’ strategic and operational objectives reflect the priorities for the business during 2020. A summary of each of the
Executive Directors’ objectives, together with key achievements and the Committee’s determination, is shown in the table below.
CEO, Kevin Nowlan
Objectives
Increase rental income to drive
dividends per share and, where
possible, increase WAULTs.
Progress development of committed
projects and prepare pipeline of
future projects.
Key achievements
Committee determination
• Net rental income increased by 9.9% to €58.6m with dividends increased by 36% to
Substantially met
4.75c.
• In-place office WAULT decreased by 1.1yrs to 6.4yrs.
• Good progress on 2 Cumberland Place during the financial year – the COVID-19
Substantially met
pandemic has delayed completion post 31 March.
• New planning permissions on future developments have increased potential value.
Recycle capital to monetise gains
and make selective investments.
• Capital recycled into bolt on acquisitions (€23m) and capital expenditure (€21m).
• €25m share buyback completed.
• Full compliance with all requirements and no material breaches.
Fully met
Fully met
No material breaches of corporate
governance, regulatory, tax and
banking requirements.
Leadership and management of the
Senior Management Team.
Continue to improve the
environmental efficiency of the
portfolio.
Other ESG objectives (tenant survey,
community/charity/employee and
supplier initiatives, stakeholder
engagement).
CFO, Thomas Edwards-Moss
Objectives
Maintain an efficient balance sheet
with through-cycle target leverage
level of 20-30%. Return capital to
shareholders where appropriate.
• The Senior Management Team has continued to perform well during the year with
Fully met
good engagement from all members.
• Edwina Governey formally appointed to the Chief Investment Officer role during the
year.
• Very positive feedback from our annual staff survey demonstrated that staff morale is
very good and the overall culture of the organisation is strong.
• Further reductions achieved in energy consumption and greenhouse gas emissions.
• Second EPRA Gold Award achieved and GRESB 2019 Assessment improved by 17pp
to 75%.
• Full time Sustainability Manager appointed during the year.
• Tenant survey completed and feedback generally positive.
• Continuing involvement in community and charity initiatives.
Good progress continues
to be made and further
improvements are
expected.
Key achievements
Committee determination
• Leverage deliberately maintained below 20% level.
• €25m share buyback completed and approval received for transfer of €50m of share
Fully met
premium to distributable reserves.
Further improvement in quality of
financial and sustainability reporting
to stakeholders.
• EPRA Gold Awards received for Financial and Sustainability reporting.
• Shortlisted for Irish Published Accounts Award.
• First standalone Sustainability Report published.
Met with continuing
improvement expected.
No material breaches of corporate
governance, regulatory, tax and
banking requirements.
Leadership and management of the
Finance Team.
Continue to improve the
environmental efficiency of the
portfolio.
Other ESG objectives (tenant survey,
community/charity/employee and
supplier initiatives, stakeholder
engagement).
114
• Full compliance with all requirements and no material breaches.
• Engaged with Department of Finance around the tax changes made in Budget 2020.
Fully met
• The Finance Team has continued to develop and is working well with other teams in
Hibernia.
Good progress continues to
be made.
• There was no turnover in the finance team.
• Very positive feedback from our annual staff survey demonstrated that staff morale is
very good and the overall culture of the organisation is strong.
• 13% reductions achieved in energy consumption and greenhouse gas emissions.
• Second EPRA Gold Award achieved and GRESB 2019 Assessment improved by 17pp
to 75%.
• Full time Sustainability Manager appointed during the year.
• Tenant survey completed and feedback generally positive.
• Continuing involvement in community and charity initiatives.
Good progress continues
to be made and further
improvements are
expected.
Hibernia REIT plc Annual Report 2020Governance Single figure remuneration table for Non-Executive Directors (audited)
The remuneration of Non-Executive Directors showing the breakdown between components with comparative figures for the prior year
is shown below.
Daniel Kitchen
Colm Barrington
Roisín Brennan
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Terence O’Rourke
Frank Kenny
Fees
€’000
150
150
85
85
60
12
12
–
70
70
28
–
70
70
60
60
Other
€’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
€’000
150
150
85
85
60
12
12
–
70
70
28
–
70
70
60
60
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Statement of Directors’ shareholdings
Directors’ share interests are set out below:
Director
Kevin Nowlan (CEO)
Thomas Edwards-Moss (CFO)
Daniel Kitchen
Colm Barrington
Roisin Brennan
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Frank Kenny
Terence O’Rourke
Sean O’Dwyer (Company Secretary)
31 March 2020
beneficially
owned1
Total interests
subject to
performance
conditions2
Total interests
not subject to
performance
conditions3
7,902,227
280,884
104,207
255,933
100,371
1,100,000
63,777
–
219,571
8,029,773
160,628
191,874
212,223
172,368
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
68,817
77,871
% of share
capital
(2020)4
% of share
capital
(2019)
1 April
20195
1.20%
0.09%
0.01%
0.16%
0.01%
–
0.03%
1.17%
0.02%
0.05%
1.25%
6,907,472
0.04%
0.01%
0.16%
0.01%
146,673
100,371
1,100,000
63,777
–
–
0.01%
104,512
–
–
1.15%
6,799,936
0.02%
0.03%
157,523
121,982
1. Beneficial interests include shares held directly or indirectly by connected persons.
2. The first grant under the new Long Term Incentive Plan was made in July 2019. The maximum interests are shown net of tax.
3. Total interests not subject to performance conditions include deferred shares (shown net of tax), subject to continued employment conditions. The interests included are deferred
shares under the 2018 annual bonus, the 2019 annual bonus and the 2020 bonus.
4. % of share capital is calculated as beneficially owned shares plus total interests subject to performance and service conditions divided by the Company’s share capital.
5. Or date of appointment if later.
On 23 April 2020 47,251 shares were issued to Thomas Edwards-Moss pursuant to the settlement of performance-related remuneration in
respect of the financial year ended 31 March 2017. Other than this, there were no movements in Directors’ shareholdings between 31 March
2020 and the date of this report.
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A D D I T I O N A L C O N T E X T O N R E M U N E R A T I O N C O N T I N U E D
LTIP (audited)
No LTIP awards vested during the financial year.
In July 2019, the first LTIP award was granted. Details of the awards are set out in the table below:
Director
CEO, Kevin Nowlan
Basis of award
Date of grant
200% of salary
31 July 2019
CFO, Thomas Edwards-Moss
200% of salary
31 July 2019
Share awards
number
Face value
per share1
585,176
442,133
€1.538
€1.538
Face value
of LTIP
€900,000
€680,000
1. This represents the share price on the day prior to grant date, i.e. 30 July 2019.
The performance conditions for this LTIP grant are set out on page 107 and the performance targets were disclosed in fulll in the 2019
Annual Report on page 104.
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.
Director
Kevin Nowlan (CEO)
Thomas Edwards-Moss (CFO)
Date of contract
Notice period
27 November 2018
30 June 2019
6 months
6 months
Letters of appointment for Non-Executive Directors
The Non-Executive Directors do not have service contracts but do have letters of appointment which reflect their responsibilities
and commitments.
Non-Executive Director
Date of contract
Notice period
Daniel Kitchen
Colm Barrington
Roisin Brennan
Grainne Hollywood
Margaret Fleming
Stewart Harrington
Frank Kenny
Terence O’Rourke
August 2013
August 2013
January 2019
November 2019
January 2020
August 2013
November 2017
August 2013
1 month
1 month
1 month
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.
Additional disclosures
Payments to past Directors (audited)
Payments for loss of office (audited)
None.
None.
Statement of implementation of Policy for the year ended 31 March 2020
See pages 99 and 100.
See page 101.
None.
Shareholder voting
External appointments for Executive Directors
On behalf of the Committee and the Board,
Colm Barrington
16 June 2020
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Hibernia REIT plc Annual Report 2020Governance D I R E C T O R S ’ R E P O R T
The Directors submit their report for
the financial year ended 31 March 2020.
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 57 to
60 of the strategic report.
Directors’ responsibilities
These are set out in the Directors’
responsibility statement on page 121
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 review’ on pages 57 to 60.
The principal subsidiary and associate
undertakings are listed in note 36.a to the
consolidated financial statements and form
part of this report.
Results for the financial year
Group results for the financial year
are set out in the Group consolidated
income statement on page 128. The profit
after tax for the financial year ended
31 March 2020 was €61.0m (March
2019: €123.5m), including unrealised
gains on investment property of €22.9m
(31 March 2019: €95.5m). The key
performance indicators used in evaluating
the achievement of strategic objectives,
and as performance measurements for
remuneration, are as follows:
• Total Property Return (“TPR”): Measures
the relative performance of the
Company’s investment property portfolio
versus the MSCI Ireland Quarterly
Property All Assets Index (excluding
Hibernia). In the year, the TPR was 5.9%
versus 4.4% for the Index (2019: 11.6%
versus 7.5%).
• Total Accounting Return (“TAR”):
Measures the absolute growth in the
Group’s EPRA NAV per share plus any
ordinary dividends paid during the
period. In the year TAR was 5.6%
(2019: 11.1%).
• EPRA earnings per share (“EPRA EPS”):
Measures the profit after tax excluding
revaluations and gains and losses on
disposals and associated taxation (if
any). For property companies it is a key
measure of a company’s operational
performance and capacity to pay
dividends. EPRA EPS in the year was 5.5c
(2019: 4.0c).
• Total Shareholder Return (“TSR”):
Measures growth in share value over
a period assuming dividends are
reinvested in the purchase of shares.
Allows comparison to other companies
in the Group’s listed peer group. In the
year TSR was -18.4% (2019: -5.2%)
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 24 to 37 of this Annual Report.
COVID-19
The Directors draw attention to the impacts
of the COVID-19 pandemic, discussed in
detail on page 15 of this Annual Report.
In the year TAR was 5.6% (2019: 11.1%).
The Board has paid particular attention to
this issue, and continues to do so into the
2020-21 financial year. A key priority has
been the health and safety of our staff,
tenants and suppliers. With the first case
of COVID-19 reported in Ireland in late
February 2020 and Ireland’s lockdown
starting in mid-March 2020, there was
little or no impact on the financial results
for year to 31 March 2020. The Valuer
has expressed a material uncertainty in
relation to its property valuations as the
impact on the market can as yet not be
quantified. In light of this, the valuation
of the investment property portfolio
was a particular focus in preparing the
financial statements for this financial year.
The Group has significant headroom on the
financial covenants on its borrowings and
the liquidity position remains strong (see
page 41 for further information). All head
office staff were working remotely from
mid-March until early June. Most are still
working from home supported by cloud-
based technology so the management of
information security has also been a major
focus. The Board continues to manage the
situation closely.
Dividends
The Directors maintain a dividend which
adheres to 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
reinvest proceeds from disposals of assets
in accordance with the Group’s strategic
priorities or return funds to shareholders
(see ‘Share buyback programme’).
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 3.0 cent per share (c. €20.5m based on
the number of ordinary shares in issue as
at close of business on 15 June 2020 as
adjusted for expected share issues prior to
the payment date) (31 March 2019: 2.0 cent
per share or c. €14m) which will be paid,
subject to shareholder approval, by early
August 2020. Together with the interim
dividend of 1.75 cent per share, the total
dividend for the financial year is 4.75 cent
per share or c. €32.5m (31 March 2019:
3.5 cent or c. €24.3m).
Share buyback programme
On 1 April 2019 the Company announced
the sale of 77 Sir John Rogerson’s Quay
and its intention to return the net sales
proceeds from the sale (€35m) to
shareholders, commencing with an initial
share buyback of up to €25m. The share
buyback programme started on 2 April
2019, in accordance with the Company’s
general authority to repurchase ordinary
shares as approved by shareholders at
the Company’s AGM on 31 July 2018 and
confirmed at the 2019 AGM. The €25m
buyback programme completed on
11 November 2019, at which point 17.6m
shares had been repurchased and cancelled
at an average price of €1.42 per share.
All shares were cancelled immediately they
were repurchased and no shares were held
by the Company at any time during the
financial year.
Principal risks and uncertainties
The Directors confirm that they have
carried out a robust assessment of the
emerging and 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 ‘Principal
risks and uncertainties’ section on pages 42
to 50 and form part of this report.
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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
• 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 of the 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
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 2020 and
2019 respectively.
Budget announced in October 2019
In the 2020 Budget announced in October
2019, the Irish Government made a number
of changes to taxation. These included,
inter alia, an increase in stamp duty from
6% to 7.5% on commercial property
transactions, an increase in dividend
withholding tax from 20% to 25%, taxation
of 25% on 85% of any proceeds a REIT
generates from the sale of an asset of
its property rental business which are
not reinvested in the property rental
business within a three-year window and
changes to the tax base of the portfolio
when a company ceases to be a REIT.
More details can be found on page 60
of this Annual Report.
Share capital
At 31 March 2020 the Company had
684,656,740 units of ordinary stock in
issue (31 March 2019: 697,588,911).
4,640,868 ordinary shares with a nominal
value of €0.10 were issued during the
period in settlement of share-based
payments totalling €7.4m (note 10 to the
consolidated financial statements): 121,519
shares were issued on 4 April 2019 and
4,519,349 shares were issued on 24 July
2019 and the associated costs, which were
taken directly to equity, were €10k. 17.6m
shares were repurchased and cancelled
for aggregate consideration of €25.0m
and costs of €36k, which were taken
directly to equity, under the share buyback
programme that commenced on 1 April
2019 (average price €1.42).
e) The aggregate debt shall not exceed an
amount of 50% of the market value of
the assets of the Group
Approximately 1.5m shares will be issued in
relation to performance-related payments
as at 31 March 2020 (31 March 2019: 5.6m).
118
On 23 May 2019 the Company announced
its intention to undertake a share capital
reorganisation to convert part of its share
premium into distributable reserves.
A resolution was passed at the AGM on
31 July 2019 approving this reorganisation.
The reorganisation and conversion of €50m
of share premium into distributable reserves
was approved by the High Court in March
2020 and legally registered in April 2020.
Future developments
The outlook for the property market is
discussed in the strategic report on pages
16 to 19 of this Annual Report. Attention is
also drawn to the impact of COVID-19 on
page 15. We are confident that, despite
the difficulties of the current economic
environment, the Group is well placed to
deliver further progress in the coming years.
Going concern and viability statement
The financial statements have been
prepared on a going concern basis. Going
concern and viability are addressed on
page 41 of the risk report. The principal risks
of the Group are set out on pages 42 to 50.
For the purposes of this viability statement,
worst case budget projections are used
to conduct this assessment, including
potential impacts from the COVID-19
pandemic. 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.
The Company has in place a €320m
unsecured revolving credit facility and
€75m of unsecured US private placement
notes: overall the Group has an average
debt maturity of 4.4 years.
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)
Roisin Brennan
Thomas Edwards-Moss (Chief
Financial Officer)
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Frank Kenny
Kevin Nowlan (Chief Executive Officer)
Terence O’Rourke
Hibernia REIT plc Annual Report 2020Governance The business of the Company is managed
by the Directors, each of whose business
address is Hibernia REIT plc, 1WML,
Windmill Lane, Dublin D02 F206, Ireland.
Grainne Hollywood was appointed on
5 November 2019 and Margaret Fleming on
20 January 2020. Apart from these 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. 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 98 to 116 of this
Annual Report.
In accordance with Provision 18 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. No reappointment
is automatic and all Directors are subject
to a full and rigorous evaluation. 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 pages 82 to 83
of the Annual Report.
The Chairman and the Board are pleased
to recommend those Directors who are
seeking reappointment 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 2020
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 115. 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 2020, the Company has been notified of the following substantial interests (3% or more of the issued share capital) in the
Company’s shares:
Holder
Baillie Gifford & Co
TIAA-CREF Investment Management LLC
BlackRock Inc.
Kempen Capital Management N.V.
BNP Paribas Asset Management Holding SA
Standard Life Aberdeen plc
Sumitomo Mitsui Trust Holdings, Inc
LaSalle Investment Management Securities, LLC
FMR LLC
As at 15 June 2020 the Company has been notified of the following changes:
Holder
Baillie Gifford & Co
Kempen Capital Management N.V.
Timbercreek Asset Management Inc.
LaSalle Investment Management Securities, LLC
FMR LLC
Sumitomo Mitsui Trust Holdings, Inc
Holding
’000 shares
43,700
42,356
34,634
34,251
26,993
23,835
22,145
20,698
20,545
Holding
’000 shares
40,990
32,729
20,861
20,389
%
6.31
6.19
5.00
5.00
3.94
3.48
3.23
3.01
3.00
%
5.99
4.78
3.05
2.98
not stated
Below 3
19,485
2.85
119
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 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
• Each Director has taken all the steps that
ought to be taken as a Director to make
himself or herself aware of any relevant
audit information and to establish
that the statutory auditor is aware of
that information
The Directors’ Report was approved by the
Board of Directors on 15 June 2020 and
was signed on its behalf by:
Thomas Edwards-Moss
Kevin Nowlan
Chief Executive Chief Financial
Officer
16 June 2020
Officer
16 June 2020
D I R E C T O R S ’ R E P O R T C O N T I N U E D
Corporate governance
The Group is committed to high standards
of corporate governance, details of which
are given in the Corporate Governance
Report on pages 68 to 116 which forms part
of the Directors’ report.
Health, safety and security
The Group has a Health and Safety
Committee to monitor compliance with
all regulations. 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 the Group’s
insurance broker. There have been no
major incidents at any of the Group’s
properties in this or the previous financial
year. All employees receive health and
safety training. All must achieve relevant
certification before attending construction
sites. The Group works closely with
its partners to ensure that customers,
employees, contractors and visitors are
safe and secure in all the Group’s 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 its stakeholders. More details on the
Group’s policies and progress can be found
in the Sustainability Report for the year
ended 31 March 2020, which is published
separately and available on our website at
www.hiberniareit.com, and summarised in
this Annual Report on pages 61 to 67.
Accounting records
The Directors believe that they have
complied with the provisions of Sections
281 to 285 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 1WML, Windmill Lane,
Dublin D02 F206, 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 30 to the consolidated
financial statements.
120
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 it 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 understandable and gives
the reader all the information required to
understand the business model, strategy,
position 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 92 to 95 of this Annual Report.
A key responsibility of the Audit Committee
is to assist the Board in monitoring the
integrity of the financial statements and
to advise the Board whether it believes
that the Annual Report, taken as a whole,
is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the Group’s
performance, business model and strategy.
In recommending the report to the Board
for the current reporting period, the
Audit Committee reviewed the Annual
Report and considered whether the
consolidated financial statements were
consistent with the operating and financial
reviews elsewhere in the Annual Report.
The Audit Committee also considered the
treatment of items representing significant
judgements and key estimates as presented
in the consolidated financial statements
and, where appropriate, discussed these
items with the external auditor.
General meetings
The sixth Annual General Meeting (“AGM”)
of the Company was held on 31 July
2019. The seventh AGM will be held on
29 July 2020. Notice of the 2020 AGM,
together with details of the resolutions
to be considered at the meeting, will be
circulated to the shareholders in June 2020.
Hibernia REIT plc Annual Report 2020Governance
D I R E C T O R S ’ R E S P O N S I B I L I T Y S T A T E M E N T
The Directors, whose names and details are
listed on pages 78 and 79, 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
(“IFRS”) as adopted by the European Union
and have elected to prepare the parent
Company financial statements under FRS
101 ’Reduced Disclosure Framework’ as
issued by the Financial Reporting Council
(“FRS 101”).
Under Irish 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:
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
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
• Enable the financial statements to
• Select suitable accounting policies and
be audited
Each of the Directors, whose names and
functions are listed on pages 78 and 79,
confirms that, to the best of each person’s
knowledge and belief:
• The Annual Report and consolidated
financial statements, prepared in
accordance with the relevant reporting
framework, give a true and fair view of
the assets, liabilities, financial position
for the Group and Company as at
31 March 2020 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 2020, together
with a description of the principal risks
and uncertainties facing the Group
• The Annual Report and consolidated
financial statements, taken as a whole,
are fair, balanced and understandable
and provide 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 15 June 2020
and was signed on its behalf by:
Thomas Edwards-Moss
Kevin Nowlan
Chief Executive Chief Financial
Officer
16 June 2020
Officer
16 June 2020
then apply them consistently
• Make judgements and accounting
estimates that are reasonable
and prudent
• State that the Group financial statements
comply with applicable IFRS as adopted
by the European Union and that the
Company financial statements comply
with ‘FRS 101', 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
• Prepare the financial statements on
a going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
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).
The Directors confirm that they have
complied with the above requirements
in preparing the Annual Report.
121
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I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E M E M B E R S O F H I B E R N I A R E I T P L C
Report on the audit of the financial statements
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 2020 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 frameworks 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 in the relevant notes.
The Company financial statements:
– the Company Statement of Financial Position;
– the Statement of Changes in Equity; and
– the related notes a to v, including a summary of significant accounting policies as set as referenced in the individual notes
The relevant financial reporting framework that has been applied in the preparation of the Group financial statements is the Companies
Act 2014 and International Financial Reporting Standards (“IFRS”) as adopted by the European Union (the “relevant financial
reporting framework”).
The relevant financial reporting framework that has been applied in the preparation of the Company financial statements is the
Companies Act 2014 and FRS 101 “Reduced Disclosure Framework” issued by the Financial Reporting Council (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 on page 126 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.
Summary of our audit approach
Key audit matters
Materiality
Scoping
The key audit matter that we identified in the current year relates to the valuation of
investment properties.
In the prior year we had identified the accuracy of the IMA performance-related payments
as a key audit matter; this is no longer a key audit matter following the expiry of the IMA
arrangements in November 2018.
We determined materiality for the Group and Company to be €12.1m which is 1% of Group and
Company net assets.
Our approach to the audit, in terms of scoping and areas of focus, was largely unchanged
when compared with the prior year. Within our assessment and identification of risks of
material misstatement we have considered the impact the Novel Coronavirus (“COVID-19”)
pandemic has had on the Group.
Significant changes in our approach
There were no significant changes in our approach which we feel require disclosure.
122
Hibernia REIT plc Annual Report 2020Financial statements
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 report, add or draw attention to:
– the Directors’ confirmation in the Annual Report on page 117 that they have carried out a robust assessment of the principal and
emerging risks facing the Group and the Company, including those that would threaten its business model, future performance,
solvency or liquidity;
– the disclosures on pages 38 to 50 to the Annual Report that describe those principal risks, procedures to identify emerging risks, and
an explanation of how they are being managed or mitigated;
– the Directors’ statements on pages 41 and 134 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 when
the financial statements are authorised for issue;
– whether the Directors’ statement relating to going concern required in accordance with Listing Rules 6.1.82(3) is materially inconsistent
with our knowledge obtained in the audit; or
– the Directors’ explanation on page 41 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 judgement, 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. In the prior year we had identified
the accuracy of IMA performance-related payments as a key audit matter; this is no longer considered a key audit matter following the
expiry of the IMA in November 2018.
Valuation of investment properties
Key audit matter description
The valuation of the Group’s investment properties of €1,465m (2019: €1,395m) requires
significant judgement and estimation to be made by the Directors, taking into consideration
advice from the Valuer and Management.
This was identified as a key audit matter given that the valuation of the investment property
portfolio is inherently subjective and complex due to, among other factors, the individual
nature of each property, its location, and the expected future rental streams for that particular
property. Input inaccuracies or inappropriate assumptions used in the valuation of the
investment properties (such as estimated rental values and market-based yields applied)
could result in a material misstatement of the financial statements.
In addition, the wider challenges currently facing the global economy as a result of the
COVID-19 pandemic, including the relative lack of comparable transactions, has further
contributed to the subjectivity of these valuations as at 31 March 2020.
Please refer to pages 94 and 95 (Audit Committee Report), pages 134 and 135 (notes 2.f and
2.g – ‘Significant judgements’ and ‘analysis of sources of estimation uncertainty’) and pages
152 to 157 (note 16 ‘Investment property’).
How the scope of our audit
responded to the key audit matter
Given the inherent subjectivity involved in the valuation of investment properties, the need for
deep market knowledge when determining the most appropriate assumptions and
techniques of the valuation methodology, we engaged our internal real estate specialists
(qualified chartered surveyors) to assist us in our audit of this account balance.
We evaluated the design and determined the implementation of the key relevant controls the
Group has over the valuation of investment properties including attendance at the year-end
Investment Committee at which the valuations of the investment properties are discussed
and challenged by the Directors.
We challenged the valuation basis used, including any changes during the year, by the Group
for the valuation of investment properties in light of the Group’s valuation policy and the
requirements of IFRS.
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E M E M B E R S O F H I B E R N I A R E I T P L C
C O N T I N U E D
We evaluated the competence, independence and integrity of the Valuer including reading
its terms of engagement with the Group to determine whether there were any matters that
might have affected its objectivity or that may have imposed scope limitations upon its work.
We also considered fee arrangements between the Valuer and the Group.
We met with the Valuer to discuss and challenge the significant assumptions used in the
valuation process, including estimated rental values and market-based yields, and considered
these assumptions in accordance with available market data.
We read the external valuation reports for the portfolio and confirmed that the valuation
approach for each was in accordance with RICS standards and suitable for use in determining
the final value for the purpose of the financial statements. The Valuer has reported on the
basis of a ‘material uncertainty’ as per VPS 3 and VPGA 10 of the RICS Red Book Global.
We discussed with and understood this valuation basis with the Valuer. Notwithstanding this
the Valuer has provided its opinion on the fair value of the portfolio at the valuation date.
We compared the recorded value of each investment property held to the valuation report
prepared by the Valuer and considered any adjustments made, including adjustments for
rental incentives and owner occupied properties, in light of the Group’s accounting policies
and the requirements of IFRS.
In conjunction with our internal real estate specialists, we set an expected range for yield
and capital value movements, determined by reference to published benchmarks, where
available, 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 where necessary, held further discussions
with the Valuer and management. We obtained property specific evidence, such as overall
quality and specification of the properties, latest leasing activity, location and desirability of
the asset as a whole, to support the explanations received.
We also discussed 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 assessed developer profit
assumptions, construction cost contingencies, exposures and remaining risks.
We performed audit procedures to assess the accuracy and completeness of information
provided to the Valuer including agreeing on a sample basis back to underlying
lease agreements.
Finally, 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 given the
increased uncertainty as a result of the COVID-19 pandemic and the sensitivity of their fair
value to changes in the underlying assumptions.
We have considered the adequacy of disclosures set out in note 2.f ‘Significant judgements’,
regarding the valuation of investment property. The Valuer has stated that it can place less
weight than usual on market evidence for comparison purposes, to inform opinions of fair
value due to the COVID-19 pandemic. The Valuer has reported at 31 March 2020 on the basis
of a material uncertainty. This basis is not intended by the Valuer to suggest that its valuations
cannot be relied on but to indicate that less certainty, and a higher degree of caution, should
be ascribed to the valuations than would normally be the case.
Based upon our procedures, we found that the assumptions used in the valuations of
investment properties at 31 March 2020 were consistent with our expectations and were
within a range we considered reasonable.
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.
124
Hibernia REIT plc Annual Report 2020Financial statements
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 and Company to be €12.1m which is 1% of Group and Company net assets. We have considered
net assets to be the critical component for determining materiality because it is a principal benchmark within the financial statements
relevant to the 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 misstatements, complexity of the Group and Company and the reliability
of the control environment.
Materiality
Group Net Assets
€1,231m
Materiality
Audit Committee reporting threshold
€0.605m
€12.1m
We agreed with the Audit Committee that we would report to them any audit differences in excess of €0.605m, 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 major subsidiaries of the Group; please see note 34.a for more information. This gives coverage over
substantially all of the Group.
Our 2020 audit was planned and executed having regard to the fact that the Group’s operations were largely unchanged in nature from
the previous year. There have been no significant changes to the valuation methodology and accounting standards relevant to the Group.
As part of our assessment and identification of risks of material misstatement of the financial statements we considered and understood
the impact that COVID-19 was having on 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
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 with respect 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 are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s
and the Company’s position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in
the audit; or
– 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
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E M E M B E R S O F H I B E R N I A R E I T P L C
C O N T I N U E D
– 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 6.1.85 and Listing Rule 6.1.86 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 judgement 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.
– 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.
For listed entities and public interest entities, the auditor also provides those charged with governance with a statement that the auditor
has complied with relevant ethical requirements regarding independence, including the Ethical Standard for Auditors (Ireland) 2016, and
communicates with them all relationships and other matters that may be reasonably be thought to bear on the auditor’s independence,
and where applicable, related safeguards.
Where the auditor is required to report on key audit matters, from the matters communicated with those charged with governance, the
auditor determines those matters that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. The auditor describes these matters in the auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, the auditor determines that a matter should not be communicated
in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
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.
126
Hibernia REIT plc Annual Report 2020Financial statements 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 70 to 121 that:
– in our opinion, based on the work undertaken during the course of the audit, the information given in the Corporate Governance
Statement pursuant to subsection 2(c) 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 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 Corporate Governance Statement contains the
information required by Regulation 6(2) of the European Union (Disclosure of Non-Financial and Diversity Information by certain large
undertakings and groups) Regulations 2017 (as amended); and
– 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 Euronext Dublin 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.
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. The period of total uninterrupted engagement including previous renewals and reappointments of the
firm is seven years, covering the years ending 2014 to 2020.
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.
Christian MacManus
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House, Earlsfort Terrace, Dublin 2
Date: 16 June 2020
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Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information C O N S O L I D A T E D I N C O M E S T A T E M E N T
F O R T H E F I N A N C I A L Y E A R E N D E D 3 1 M A R C H 2 0 2 0
Revenue
Rental income
Property operating expenses
Net rental and related income
Operating expenses
Administration expenses
IMA performance-related payments
Expected credit losses on financial assets
Total operating expenses
Operating profit before gains and losses
Gains and losses on investment property
Other gains
Operating profit
Finance income
Finance expense
Profit before income tax
Income tax credit/(expense)
Profit for the financial year attributable to owners of the parent
EPRA earnings 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 2020
€’000
Financial
year ended
31 March 2019
€’000
Notes
5
5
5
5
8
21
7
11
12
14
14
14
14
14
67,930
61,812
(3,227)
61,387
56,027
(2,718)
58,585
53,309
(13,246)
(13,890)
–
(147)
(5,401)
–
(13,393)
(19,291)
45,192
22,856
10
34,018
98,105
140
68,058
132,263
3
5
(7,198)
(8,226)
60,863
124,042
180
(583)
61,043
123,459
38,093
27,472
8.9
8.8
5.5
5.5
17.8
17.6
4.0
3.9
128
Hibernia REIT plc Annual Report 2020Financial statements
C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E
F O R T H E F I N A N C I A L Y E A R E N D E D 3 1 M A R C H 2 0 2 0
Profit for the financial year attributable to owners of the parent
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
Notes
61,043
123,459
Gain on revaluation of land and buildings
17
1,658
723
Items that may be reclassified subsequently to profit or loss:
Net fair value movement on hedging instruments entered into for cashflow hedges
23.b
Total other comprehensive income
Comprehensive income for the financial year attributable to owners of the Parent
54
1,712
41
764
62,755
124,223
129
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N
A S A T 3 1 M A R C H 2 0 2 0
Assets
Non-current assets
Investment property
Property, plant and equipment
Other assets
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
Share capital
Share premium
Capital redemption fund
Other reserves
Retained earnings
Total equity
Non-current liabilities
Financial liabilities
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Financial liabilities
Trade and other payables
Contract liabilities
Total current liabilities
Total equity and liabilities
IFRS NAV per share (cent)
Diluted IFRS NAV per share (cent)
EPRA NAV per share (cent)
Notes
31 March 2020
€’000
31 March 2019
€’000
16
17
18
20
21
21
19
18
22
22
22
23
24
25.a
26
25.a
27
28
15
15
15
1,465,183
1,395,418
8,631
534
34
10,215
5,902
–
194
7,928
1,484,597
1,409,442
3,751
28,454
32,205
–
40,164
22,372
62,536
534
32,205
63,070
1,516,802
1,472,512
68,466
69,759
630,276
624,483
1,757
5,379
–
9,157
525,271
515,140
1,231,149
1,218,539
259,691
231,048
395
547
260,086
231,595
517
21,873
3,177
507
19,863
2,008
25,567
22,378
1,516,802
1,472,512
179.8
179.2
179.3
174.7
173.2
173.3
The consolidated financial statements on pages 128 to 176 were approved and authorised for issue by the Board of Directors on
15 June 2020 and were signed on its behalf by:
Kevin Nowlan
Chief Executive Officer
16 June 2020
Thomas Edwards-Moss
Chief Financial Officer
16 June 2020
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Hibernia REIT plc Annual Report 2020Financial statements
C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y
F O R T H E F I N A N C I A L Y E A R E N D E D 3 1 M A R C H 2 0 2 0
Share
capital
€’000
Share
premium
€’000
Capital
redemption
fund
€’000
Property
revaluation
reserve
€’000
Cashflow
hedge
reserve
€’000
Share-based
payment
reserve
€’000
Retained
earnings
€’000
Total
€’000
Balance at 1 April 2018
69,235
617,461
Profit for the financial year
Other comprehensive income
for the financial year
Total comprehensive income
for financial year
–
–
–
–
69,235
617,461
Issue of share capital
524
7,022
Dividends paid in financial year
Share-based payments
–
–
–
–
Balance at 31 March 2019
69,759
624,483
Profit for the financial year
Other comprehensive income
for the financial year
Total comprehensive income
for the financial year
–
–
–
–
69,759
624,483
Issue of share capital
464
5,793
–
–
–
–
–
–
–
–
–
–
–
Own shares acquired and
cancelled in the financial year
Dividends paid in financial year
Share-based payments
(1,757)
–
–
–
–
–
1,757
–
–
1,166
–
723
(329)
8,783
415,414
1,111,730
–
41
–
–
123,459
123,459
–
764
1,889
(288)
8,783
538,873
1,235,953
–
–
1,889
–
–
–
(288)
–
1,658
54
(7,546)
(14)
(14)
–
(23,719)
(23,719)
6,319
–
6,319
7,556
515,140
1,218,539
–
–
61,043
61,043
–
1,712
3,547
(234)
7,556
576,183
1,281,294
–
–
–
–
–
–
–
–
(6,257)
(10)
(10)
–
–
767
(25,036)
(25,036)
(25,866)
(25,866)
–
767
Balance at 31 March 2020
68,466
630,276
1,757
3,547
(234)
2,066
525,271
1,231,149
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F O R T H E F I N A N C I A L Y E A R E N D E D 3 1 M A R C H 2 0 2 0
Cash flows from operating activities
Profit for the financial year attributable to owners of the parent
61,043
123,459
Notes
31 March 2020
€’000
31 March 2019
€’000
7
29.a
10.c
29.b
29.c
29.d
24
22
25.b
25.b
–
(2,578)
(13,932)
(77,278)
47,111
43,603
81
3
(485)
(670)
3,631
1,169
–
5
(339)
(961)
(447)
263
50,840
42,124
(47,941)
(86,847)
34,503
64,016
(2,016)
–
(52)
292
(6,369)
(9,546)
(21,823)
(32,137)
(25,866)
(25,036)
(23,719)
–
57,945
340,412
(29,968)
(326,372)
–
(10)
(443)
(14)
(22,935)
(10,136)
6,082
22,372
6,082
(149)
22,521
(149)
28,454
22,372
Adjusted for:
Gains on sale of investment property
Adjustments for non-cash movements
Operating cash flow before movements in working capital
Income tax refund received
Finance income
Cash-settled share-based payments
(Increase) in trade and other receivables
Increase/(decrease) in trade payables
Increase in contract liabilities
Net cash inflow from operating activities
Cash flows from investing activities
Cash expended on investment property
Cash received from sales of investment property
Cash expended on property, plant and equipment
Cash received in relation to other assets
Finance expenses paid
Net cash flow (absorbed) by investing activities
Cash flow from financing activities
Dividends paid
Cash expended on share buyback
Borrowings drawn
Borrowings repaid
Derivatives premium paid
Share issue costs
Net cash (outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents start of financial year
Increase/(decrease) in cash and cash equivalents
Net cash and cash equivalents at end of financial year
132
Hibernia REIT plc Annual Report 2020Financial statements
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
SECTION I – 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 property are described within the relevant note to the consolidated
financial statements. This section also includes a summary of the new European Union (“EU”) endorsed accounting standards,
amendments and interpretations that have not yet been adopted and their expected impact on the reported results of the Group.
The Group has applied IFRS 16 for the first time in these financial statements. There was no material impact on the financial results or
on the financial position as at 1 April 2019 as a result of adopting this standard.
General information
1.
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 1WML, Windmill Lane, Dublin D02 F206, 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”), 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”).
Basis of preparation
Statement of compliance and basis of preparation
2.
2.a
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 International Accounting Standards Board (“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 IASB standards (note 3).
These consolidated financial statements were approved for issue by the Board of Directors on 15 June 2020.
Alternative performance measures (“APMs”)
2.b
The Group uses alternative performance measures to present certain aspects of its performance. These are explained and, where
appropriate, reconciled to equivalent IFRS measures in the Supplementary Information section (unaudited) at the end of this document.
The main APMs used are those issued by the European Public Real Estate Association (“EPRA”) which is the representative body of the
listed European real estate industry. EPRA issues guidelines and benchmarks for reporting both financial and sustainability measures.
These are important in allowing investors to compare and measure the performance of real estate companies across Europe on a
consistent basis. EPRA earnings and EPRA NAV are presented within the consolidated financial statements and fully reconciled to
IFRS as these two measures are among the key performance indicators for the Group’s business.
Functional and presentation currency
2.c
These consolidated financial statements are presented in euro, which is the Company’s functional currency and the Group’s
presentation currency.
Basis of consolidation
2.d
The consolidated financial statements incorporate the consolidated financial statements of the Company and entities controlled by
the Company (its subsidiaries). The accounting policies of all consolidated entities are consistent with the Group’s accounting policies.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences
until the date on which control ceases. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. All intragroup assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
133
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 2.
2.e
The consolidated financial statements have been prepared on a going concern basis.
Basis of preparation continued
Assessment of going concern
The Board has assessed the viability of the Group over a three-year period to March 2023. It is satisfied that a forward-looking assessment
of the Group for this period is sufficient to enable a reasonable assessment of viability, and also in order to opine on the appropriateness
of the going concern basis of preparation of the financial statements. This assessment considers the Group’s current position and the
principal and emerging risks that it faces. All of these risks are considered to be material in the assessment of viability. The most significant
of these at the date of preparing these financial statements is the Novel Coronavirus (“COVID-19”) pandemic, the full impact of which it
is not yet possible to fully or accurately quantify, and this has been the subject of intensive assessment by the Board since 31 March 2020
and will continue to be so for some time to come. Factors specifically considered in light of the anticipated effects of this pandemic are:
– Health and safety of staff, tenants, suppliers and the community
– Remote working and social distancing measures may disrupt business operations
– Investment market activity and property values may decline
– Occupational market activity and rental values may decline
– Debt funding may become harder to find/more expensive
– Tenants may not be able to pay their rent
– Dividends may need to be cut
The Directors believe a three-year forward-looking period is appropriate for financial projections and stress testing to assess viability.
The Directors have also considered the longer-term risks and opportunities of the Group, for example the office development pipeline
extends to at least 2026 and the mixed-use pipeline further still. Financial projections for the current financial year and the following three
years are reviewed by the Directors on a quarterly basis. 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.
An analysis of revenue and a disaggregation of income is outlined in notes 5 and 6. Due to the nature of rental collections, a significant
portion of revenue is collected in advance of its due date and 89% of commercial rent for the quarter ending 30 June 2020 had been
collected within 7 days of the gale date rising to 94% within 60 days of the gale date. 97% of the residential rent due for the month of
May 2020 had been collected by the date of this Statement. Information on the Group’s financial assets and approach to credit risk is
contained in Section IV: introduction, note 21 and note 30.d.
Detail on the financial performance and financial position of the Group is provided in the consolidated financial statements. In particular,
note 30 includes details on the Group’s financial risk management and exposures.
The Group has a cash balance as at 31 March 2020 of €28m (March 2019: €22m), is generating positive operating cash flows and, as
discussed in note 25, has in place debt facilities with average maturity of 4.4 years, no debt maturities until December 2023 and an
undrawn balance of €132.6m at 31 March 2020 (March 2019: €160.6m). Its capital commitments as at 31 March 2020 were €18m (31 March
2019: €35m) and it is maintaining a minimum cash balance of €20m for liquidity purposes. As at 31 March 2020, low leverage (LTV 16.5%)
means Hibernia can withstand a 65% decline in its portfolio value and a 76% decline in earnings before interest and tax (58% decline in
rental income) without breaching debt covenants. 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.
Significant judgements
2.f
Not all of the Group’s accounting policies require the Directors to make difficult, subjective or complex judgements. Any judgements
made are continually evaluated and are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The following are the significant judgements used in preparing these consolidated
financial statements:
Valuation of investment property
The valuation of the Group’s property portfolio is a key element of the Group’s Net Asset Value as well as impacting variable executive
and employee remuneration. The Directors have appointed an Independent Valuer (Cushman & Wakefield, the “Valuer”) to perform
the valuations and report to them on its opinion as to the fair value of these properties. However, the nature of the valuation process is
inherently subjective and values are derived using comparable market transactions and the Valuer’s assessment of market sentiment.
This is therefore a significant judgement on this basis.
The Group’s investment properties are held at fair value and were valued at 31 March 2020 by the Valuer. Investment property is valued in
accordance with guidance in the appropriate sections of the Valuation Technical and Performance Standards (“VPS”) and the Valuation
Practice Guidance Applications (“VPGA”) contained within the Royal Institution of Chartered Surveyors (“RICS”) Valuation – Global
Standards November 2019 (the “Red Book Global”). Valuations are compliant with the International Valuation Standards. Fair value
under IFRS 13 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’. The Red Book confirms that the references in IFRS 13 to market participants and a sale make it
clear that for most practical purposes fair value is consistent with market value. Further information on the valuations and the sensitivities
is given in note 16.
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements Basis of preparation continued
Significant judgements continued
2.
2.f
The outbreak of COVID-19, declared by the World Health Organization a ‘global pandemic’ on 11 March 2020, has impacted financial
markets and the global economic environment. At the valuation date, the Valuer has stated that it can place less weight than usual
on market evidence for comparison purposes, to inform opinions of value. The current response to COVID-19 means that there is
an unprecedented set of circumstances on which to base a judgement. The Valuer has therefore reported on the basis of a material
uncertainty as per VPS 3 and VPGA 10 of the RICS Red Book Global. This is not intended by the Valuer to suggest that its valuations
cannot be relied on but to indicate that less certainty – and a higher degree of caution – should be ascribed to the valuations than would
normally be the case.
Property valuations are complex and involve data which is not publicly available, and a degree of judgement. The valuations are based
upon the key assumptions of estimated rental values and market-based yields. In light of the material valuation uncertainty because of
COVID-19, the Board has paid particular attention to the valuations and especially to properties within the portfolio where the impact may
be greatest.
The Directors have reviewed the valuation process undertaken, the meaning of the material uncertainty the Valuer has expressed, changes
in market conditions including COVID-19, recent transactions in the market, valuation movements on individual buildings and the Valuer’s
expectations in relation to future rental growth and yield movement. With the continued uncertainty in relation to the impact of COVID-19,
the Directors also considered the extent to which this was impacting the property investment and occupational market in relation to
both liquidity and activity. As a result of these reviews, the Directors concluded that the valuation was suitable for inclusion in the Group’s
consolidated financial statements.
Valuation basis of investment property
The valuation approach for each property, while generally similar, differs based on the physical and investment and/or development
attributes of the property. A judgement must be made to decide on the valuation premise appropriate for each asset is its ‘highest and
best use’. This judgement impacts on the valuation technique that is appropriate for the measurement, considering the availability of data
with which to develop inputs that represent the assumptions that market participants would use when pricing the property. All valuations
are at Level 3 in the fair value hierarchy.
‘Highest and best use’
All investment properties in the Group’s portfolio are valued in accordance with their current use, which is also the highest and best use
except for:
– Harcourt Square, Marine House and Clanwilliam Court Blocks 1, 2 & 5 where, in accordance with IFRS 13:27, the valuations take into
account the redevelopment potential upon expiry of the current leases which reflects the highest and best use. It is the Directors’
intention to pursue the redevelopment of these properties when the leases have expired. At 31 March 2020 preliminary planning was in
place for Harcourt Square and Clanwilliam Court and full planning was in place for Marine House. In April 2020 the Group received full
planning for Harcourt Square. These are valued on an investment basis until the end of the leases and on a residual basis thereafter
– Newlands (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 future and this approach reflects the highest and best use of this property
– Properties in Malahide Road Industrial Park and Dublin Industrial Estate which are currently partly rented on short-term leases, have
been valued on a basis that includes recognition of their potential as investment property development sites
– 2 Cumberland Place is now closer to practical completion and progress has been made in relation to pre-letting parts of the building.
Therefore, the valuation methodology has changed from a residual to an investment valuation with outstanding capital expenditure
recognised within the valuation
Analysis of sources of estimation uncertainty
2.g
Valuation of investment property
Although valuations are based on the Directors’ best knowledge of the amount, event or actions, actual results may differ from those
estimates. The Group’s investment properties are held at fair value and were valued at 31 March 2020 by the Valuer on the basis discussed
in 2.f above. Further information on the valuations and the sensitivities around the inputs used is given in note 16.
The Board conducts a detailed review of each property valuation to ensure that appropriate assumptions have been applied. The most
significant estimates affecting the valuation included yields and estimated rental values (“ERVs”). For development projects, other
assumptions including costs to completion and risk premium assumptions are also factored into the valuation. As discussed in 2.f,
the Valuer has expressed a material uncertainty due to the impacts of COVID-19. In accordance with the Group’s policy on revenue
recognition from leases, the valuation provided by C&W is adjusted only by the fair value of the income accruals ensuing from the
recognition of lease incentives and the deferral of lease costs. The total reduction in the Valuer’s investment property valuation in
respect of these adjustments was €8.1m (March 2019: €6.7m).
There were no other significant judgements or key estimates that might have a material impact on the consolidated financial statements
at 31 March 2020.
135
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information Basis of preparation continued
Treatment of tax basis in relation to properties
2.
2.h
Asset sales
Following changes to the Irish REIT legislation introduced in October 2019, if a REIT disposes of an asset of its property rental business
and does not (i) distribute the gross disposal proceeds to shareholders by way of dividend; (ii) reinvest them into other assets of its
property rental business (whether by acquisition or capital expenditure) within a three-year window (being one year before the sale and
two years after it); or (iii) use the disposal proceeds to repay debt specifically used to acquire, enhance or develop the property sold, then
the REIT will be liable to tax at a rate of 25% on 85% of the gross disposal proceeds, subject to having sufficient distributable reserves.
No sales of assets of the Group’s property rental business have happened since these rule changes took effect in October 2019 and none
is currently planned. In addition, the Group has a very substantial development pipeline over the medium term in which to reinvest any
sales proceeds. As a result the Group does not anticipate having to pay tax on uninvested sales proceeds for the foreseeable future and
no deferred tax has been provided in the Group’s accounts relating to this.
Recently completed development assets
Under Irish REIT legislation, assets where the cost of development exceeds 30% of the market value of the asset at the date of
commencement of development and which are sold within three years of practical completion of the development could be liable to tax
at a rate of 25% on the profits made from the sale. In the case of Hibernia, assets which meet these criteria at the financial year end are:
1WML (completed in mid-2017), 2WML (completed early 2019) and 1SJRQ (also completed early 2019). In addition, 2 Cumberland Place
is under construction and is expected to complete by the end of 2020. All these assets are held for long-term property rental and since
none of these assets is expected to be sold within three years of completion, no deferred tax has been provided in the Group’s accounts
for this eventuality.
Residential assets
Block 3 Wyckham Point (completed in phases during 2015) and Hanover Mills (completed in early 2018): 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, 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 each building. As neither property is expected to be sold within the five-year period in the opinion of the Directors, no amendment to
the Valuer’s valuation of either asset is deemed necessary.
3. Application of new and revised International Financial Reporting Standards
Changes in accounting standards
The following Standards and Interpretations are effective for the Group from 1 April 2019 but did not have a material impact on the results
or financial position of the Group:
IFRS 16 Leases is applicable for annual reporting periods beginning on or after 1 January 2019. IFRS 16 results in almost all leases being
recognised on the balance sheet of lessees as it removes the distinction between operating and finance leases for lessees. As the Group
is mainly a lessor, the introduction of IFRS 16 on 1 April 2019 had a minimal impact on the Group financial statements. As at the reporting
date the Group has no operating leases as a lessee, other than an intercompany lease in relation to the head office, which building is
owned by a subsidiary.
Amendments and interpretations which became effective during the year but had no material impact on the Group’s financial
statements
IFRIC 23 Uncertainty over Income tax treatments.
IFRS 9 Prepayment features with negative compensation.
IAS 19 Plan amendment containment or settlement.
IAS 28 Long-term interests in associates or joint ventures.
Annual improvements to IFRS standards 2015-2017 cycle.
Standards, amendments and interpretations in issue but not yet effective nor early adopted
The Directors do not anticipate that these standards or amendments will have any material effect on the Group’s financial statements:
IFRS 10 and IAS 28 (amended) Sale or contribution of assets between an investor and its associate or joint venture.
Amendments to References to the Conceptual Framework in IFRS Standards (amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8,
IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32).
Amendment to IFRS 3 Definition of a business .
Amendment to IAS 1 and IAS 8 Definition of material.
Amendments to IFRS 9 and IAS 39 Interest Rate Benchmark Reform.
IFRS 12 Disclosure of Interests in Other Entities clarifies the scope of the standard by specifying the disclosure requirements in the
standard that apply to an entity’s interests that are classified as held for sale, as held for distribution or as discontinued operations in
accordance with IFRS 5 non-current assets held for sale and discontinued operations.
IAS 28 Long-term Interests in associates and joint ventures clarifies that the election to measure at fair value through profit or loss an
investment in an associate or a joint venture that is held by an entity that is a venture capital organisation, or other qualifying entity,
is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition.
These amendments are not expected to have a significant impact on the Group.
136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements SECTION II – PERFORMANCE
This section includes notes relating to the performance of the Group for the year, including segmental reporting, earnings per share and
Net Asset Value per share as well as specific elements of the consolidated statement of income.
Operating segments
Basis for segmentation
4.
4.a
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/land assets
Other assets
Office assets comprise central Dublin completed office buildings, which are either generating rental income
or are available to let. Those assets which are multi-tenanted or multi-let are mainly managed by the Group.
Income comprises rental income and service charge income, including management fees, while expenses
comprise service charge expenses and other property expenses. Where only certain floors of a building are
undergoing refurbishment the asset remains in this category.
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”), Total Accounting Return (“TAR”) and
Total Portfolio Return (“TPR”). Once completed these assets are transferred to the office assets segment at
fair value.
This segment contains the Group’s completed multi-tenanted residential assets.
This segment contains industrial units and land which generated some rental income during the
financial year.
This segment contains other assets that are not part of the previous four strategic operating segments.
It originally represented the ‘non-core’ assets, i.e. those assets identified for resale from loan portfolio
purchases.
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 property is transferred to income-generating segments.
These transfers are made at fair value on an arm’s length basis using values determined by the Group’s Valuer.
Information about reportable segments
4.b
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), 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 APMs (detailed in the Supplementary Information section at the back of this
report) measure the cash passing rent returns on market value of investment properties before and after an adjustment for the expiry
of rent-free period or other lease incentives, respectively.
137
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 4.
4.b
An overview of the reportable segments is set out below:
Operating segments continued
Information about reportable segments continued
Group consolidated segment analysis
For the financial year ended 31 March 2020
Office
development
assets
€’000
Office assets
€’000
Residential
assets
€’000
Industrial/
land assets
€’000
Other assets
€’000
Central
assets and
costs
€’000
Group
consolidated
position
€’000
Total revenue
Rental income
Property operating expenses
Net rental and related income
Operating expenses:
Administration expenses
Expected credit losses on financial
assets
Depreciation
Total operating expenses
Operating profit before gains and
losses
Gains and (losses) on investment
property
Other gains and (losses)
Operating profit/(loss)
Finance expense
Profit/(loss) before income tax
59,492
53,374
(1,905)
51,469
–
(147)
–
(147)
–
–
(14)
(14)
–
–
–
–
7,197
7,197
(1,289)
5,908
–
–
–
–
1,241
1,241
(19)
1,222
–
–
–
–
51,322
(14)
5,908
1,222
5,494
18,243
4,861
(5,742)
–
–
–
–
56,816
(2,694)
54,122
18,229
10,769
(4,520)
–
–
(115)
18,229
10,769
(4,635)
Income tax
–
–
–
152
–
–
–
–
–
–
–
–
67,930
61,812
(3,227)
58,585
–
(12,726)
(12,726)
–
–
–
–
–
25
25
–
25
–
–
(520)
(147)
(520)
(13,246)
(13,393)
(13,246)
45,192
–
(15)
(13,261)
(4,386)
(17,647)
28
22,856
10
68,058
(7,195)
60,863
180
Profit for the financial year attributable
to owners of the Parent
Total segment assets
Investment property
54,122
18,229
10,769
1,209,584
48,000
159,969
(4,483)
61,334
1,196,925
47,999
159,459
60,800
25
534
–
(17,619)
61,043
37,381
1,516,802
–
1,465,183
For the financial year ended 31 March 2019
Office
development
assets
€’000
Office assets
€’000
Residential
assets
€’000
Industrial/
land assets
€’000
Other assets
€’000
Central assets
and costs
€’000
Group
consolidated
position
€’000
Total revenue
Rental income
Property operating expenses
Net rental and related income
Operating expenses:
Administration expenses
Depreciation
IMA performance-related payments
Total operating expenses
Operating profit before gains and
losses
Gains and (losses) on investment
property
Other gains
Operating profit/(loss)
Finance expense
Profit/(loss) before income tax
Income tax
Profit for the financial year attributable
to owners of the Parent
53,497
48,137
(1,373)
46,764
–
–
–
–
–
–
–
–
–
–
–
–
6,862
6,862
(1,314)
5,548
–
–
–
–
1,028
1,028
(31)
997
–
–
–
–
46,764
–
5,548
997
37,837
48,020
13,559
–
84,601
(2,861)
81,740
–
–
–
48,020
19,107
–
–
48,020
19,107
–
–
(1,311)
–
(314)
–
(314)
(547)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
61,387
56,027
(2,718)
53,309
(13,606)
(13,606)
(284)
(5,401)
(284)
(5,401)
(19,291)
(19,291)
(19,291)
34,018
–
140
(19,151)
(5,360)
98,105
140
132,263
(8,221)
(24,511)
124,042
(36)
(583)
81,740
48,020
19,107
(861)
–
(24,547)
123,459
Total segment assets
Investment property
1,224,888
1,173,140
16,199
16,199
153,606
53,144
153,079
53,000
534
–
24,141
1,472,512
–
1,395,418
138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements 4.
4.c
All of the Group’s assets, revenue, and costs are based in Ireland, mainly in central Dublin.
Operating segments continued
Geographic information
Major customers
4.d
The Group monitors its tenants, and in particular its ‘top 10’ tenants. This is presented below based on contracted rents as at the financial
year end. This is concentrated on office tenants as the next major segment, residential, consists mainly of small household tenants and
therefore contains no major concentration of credit risk.
The Group’s ‘top 10’ tenants are as follows, expressed as a percentage of contracted office rent:
As at 31 March 2020
Tenant
HubSpot Ireland Limited
OPW
Twitter International Company
Zalando
Autodesk Ireland Operations
Informatica Ireland EMEA
Riot Games
Electricity Supply Board
Travelport Digital Limited
BNY Mellon Fund Services
Top 10 tenants
Remaining tenants
Whole office portfolio
As at 31 March 2019
Tenant
HubSpot Ireland Limited
OPW
Twitter International Company
Autodesk Ireland Operations
Informatica Ireland EMEA
Electricity Supply Board
Travelport Digital Limited
BNY Mellon Fund Services
Commission for Communications Regulation
Core Media
Top 10 tenants
Remaining tenants
Whole office portfolio
Business sector
Contracted
rent (€’m)
TMT
10.5
Government/state entity
TMT
TMT
TMT
TMT
TMT
Government/state entity
TMT
Banking and capital markets
Business sector
TMT
Government/state entity
TMT
TMT
TMT
Government/state entity
TMT
Banking and capital markets
Government/state entity
TMT
6.0
5.1
2.9
2.8
2.1
2.0
1.9
1.8
1.6
36.7
21.0
57.7
Contracted
rent (€’m)
10.5
6.0
5.1
2.8
2.1
1.9
1.8
1.6
1.6
1.4
34.8
15.6
50.4
%
18.2%
10.4%
8.8%
5.0%
4.9%
3.7%
3.4%
3.3%
3.2%
2.8%
63.7%
36.3%
100.0%
%
20.9%
11.9%
10.1%
5.6%
4.2%
3.7%
3.6%
3.2%
3.2%
2.8%
69.2%
30.8%
100.0%
139
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
5.
Revenue and net rental and related income
Accounting policy
The Group recognises revenue from the following major sources:
– Rental income
– Service charge income
– Other ad-hoc income such as surrender premia and fees from other activities associated with the Group’s property business.
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and excludes
amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to
a customer.
Rental income
Rental income is the Group’s major source of income and arises from properties under operating leases. Rental income, including fixed
rental uplifts, is recognised in the consolidated income statement on a straight-line basis over the period of the lease until the next break
or expiry. 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. 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
The Group manages the majority of its multi-let buildings under service contracts. These contracts operate for rolling one-year periods
over which the Group provides communal services such as security, cleaning, waste and other occupation services to the tenants in its
buildings. The tenants pay a service charge, based on the area they occupy, which is collected in advance based on budgeted costs.
This income stream is recognised as revenue in accordance with the policy described under property-related income and expense
as below.
Other income
All other income is recognised in accordance with the following model:
1. Identify the contract with a customer
2. Identify all the individual performance obligations within the contract
3. Determine the transaction price
4. Allocate the price to the performance obligations
5. Recognise revenue as the performance obligations are fulfilled
Property-related income and expenses
Property-related income and expenses comprise service charge income (revenue from contracts with customers) and service charge
expenses (costs of goods and services) as well as other property expenses. The Group enters into property management arrangements
with tenants as part of its activities. These arrangements constitute a separate performance obligation to the obligations under
the rental leases. Buildings with multiple tenants share the costs of common areas and pooled services under these arrangements.
The Group manages these costs for tenants and earns a management fee for the provision of shared services on a cost-plus basis.
As a landlord, costs of vacant areas are absorbed by the Group and included in other property expenses.
The service charge income stream is accounted for as a single performance obligation which is satisfied over time because the tenant
simultaneously receives and consumes the benefits of the Group’s activities in providing services under the agreement. Service charge
income and expenditure is therefore recognised on an input basis. Tenants reimburse expenses in advance based on budgets with
over and under spends reconciled and settled annually. Service charge accounts are maintained for each managed building and the
application and management of funds are independently reviewed on the tenants’ behalf.
Property operating expenses comprise expenses relating to properties that are not recharged to tenants, i.e. void costs, residential
management costs and other related property expenses.
140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements 5.
Revenue can be analysed as follows:
Revenue and net rental and related income continued
Gross rental income1
Rental incentives
Rental income
Revenue from contracts with customers2
Total revenue
1. Gross rental income includes €1.1m relating to variable rents
2. Revenue from contracts with customers is service charge income
Net rental and related income
Total revenue
Cost of goods and services1
Property expenses
Net rental and related income
1. Costs of goods and services are service charge expenses
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
59,937
56,242
1,875
61,812
6,118
(215)
56,027
5,360
67,930
61,387
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
67,930
(6,183)
(3,162)
61,387
(5,482)
(2,596)
58,585
53,309
Further information on the sources and characteristics of revenue and rental income is provided in note 6.
Included in property expenses is an amount of €1.0m (March 2019: €0.5m) relating to void costs on office properties, i.e. costs relating to
properties which were available to let but were not income-generating for part of the financial year.
Property operating expenses
Service charge income
Service charge expenses
Property expenses
Property operating expenses
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
6,118
(6,183)
(3,162)
(3,227)
5,360
(5,482)
(2,596)
(2,718)
141
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information Disaggregation of revenue and rental income
6.
The Group’s business is the rental of its investment properties, the development of properties for its investment portfolio and the
provision of managed multi-let buildings to its tenants. The Group’s revenue consists of rental income, service charge income and other
ad-hoc receipts from its property business such as surrender premia. The majority of its contracts are longer-term, with some being 10
years or greater, excluding residential tenancy arrangements which are generally one year in duration. Service charge arrangements are
generally provided for under the lease contract but constitute a different performance obligation, the conditions attaching to which are
negotiated annually.
Note 4 ‘Operating segments’ discloses the analysis of revenue and income and expense in line with the Group’s business model, i.e.
by investment property category. In order to complete the disaggregation of revenue by categories that depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by economic factors, analyses of the revenue for the period by duration of
lease contracts (to next break date) and by tenant industry sector are provided below. Additional information on portfolio characteristics
that impact on income is set out in the business review.
Total revenue by duration of lease contract (based on next break date or expiry)
Service charge income is included within the one-year segment as these arrangements, while provided for under the lease contracts, are
negotiated on an annual basis. Other income is once-off in nature and is recognised in the one year or less segment, for example rental
income on other assets.
Financial year ended 31 March 2020
Lease contracts:
Office assets
Office development assets
Residential assets
Industrial/land assets
Total segmented revenue
Financial year ended 31 March 2019
Lease contracts:
Office assets
Office development assets
Residential assets
Industrial/land assets
Total segmented revenue
Rental income by tenant industry sector
Technology, media and telecommunications
Government/state entity
Residential
Banking and capital markets
Professional services
Insurance and reinsurance
Co-working
Logistics
Other
Rental income
142
One year or less
Assets sold
€’000
Current leases
€’000
Between one
and five years
€’000
Greater than
five years
€’000
Total
€’000
–
–
–
–
–
8,379
23,205
27,747
59,331
–
6,769
1,307
–
428
95
–
–
–
–
7,197
1,402
16,455
23,728
27,747
67,930
One year or less
Assets sold
€’000
Current leases
€’000
Between one
and five years
€’000
Greater than
five years
€’000
Total
€’000
2,926
10,360
16,710
23,501
53,497
–
–
–
–
6,473
–
–
389
698
–
–
330
–
6,862
1,028
2,926
16,833
17,797
23,831
61,387
31 March 2020
31 March 2019
€’000
27,114
10,241
7,197
6,338
4,802
1,816
1,424
1,412
1,468
%
43.9
16.6
11.6
10.3
7.8
2.9
2.3
2.3
2.3
€’000
19,977
10,362
6,862
8,501
5,276
1,246
2,230
1,028
545
61,812
100
56,027
%
35.7
18.5
12.2
15.2
9.4
2.2
4.0
1.8
1.0
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements 7.
Gains and losses on investment property
Revaluation of investment property
Gains on sale of investment property
Gains and losses on investment property
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
22,856
–
22,856
95,527
2,578
98,105
There were no sales of investment property in the financial year. Sales of two properties in the financial year ended 31 March 2019 realised
proceeds of €99m and a profit over book value of €2.6m after costs.
8.
Administration expenses
Accounting policy
Administration expenses are recognised on an accruals basis in the consolidated income statement.
Operating profit for the financial year has been stated after charging:
Non-Executive Directors’ fees
Staff costs
Professional fees: property-related
Professional fees: corporate
Valuer’s fees
Depository fees
Depreciation
Other administration expenses
‘Top-up’ internalisation expenses
Prepaid remuneration expense
Administration expenses
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
Notes
9
17
561
6,829
1,100
1,785
285
315
520
1,851
–
–
447
4,516
537
1,805
394
299
284
1,447
1,482
2,679
13,246
13,890
All fees paid to Non-Executive Directors are for services as Directors of the Company. Non-Executive Directors receive no other benefits.
In the prior financial year no benefits other than Directors’ fees were received, save for Frank Kenny who earned consultancy fees of
€140k (note 34.b). Annualised Non-Executive Directors’ fees increased from €495k at 31 March 2019 to €625k as at 31 March 2020 due
to Margaret Fleming and Grainne Hollywood joining the Board during the financial year.
‘Professional fees: property-related’ are those incurred in relation to legal and other expenses associated with due diligence on acquisitions
which did not proceed, planning consulting in relation to future development projects and other similar expenses relating to property
but not directly associated with properties in the Group’s portfolio. ‘Professional fees: corporate’ are various fees relating to legal, internal
audit, tax and other consulting services not relating directly to property.
Fees are paid to the Valuer in return for its services in providing independent valuations of the Group’s investment properties on an at
least twice-yearly basis. The fees are charged on a fixed rate per property valuation. In the prior financial year additional valuation work
was carried out for the calculation of the final IMA performance-related amounts and for the refinancing of the revolving credit facility.
Prepaid remuneration expense and ‘top-up’ internalisation expenses related to payments to the Vendors of the Investment Manager until
the expiry of the IMA on 26 November 2018. In place of the IMA, under which performance-related payments were also payable (and
totalled €5.4m in the prior year), a new incentive scheme was introduced: this is the primary reason for the increase in staff costs in the
year ended 31 March 2020 (see notes 9 and 10).
143
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information Administration expenses continued
8.
Auditor’s remuneration (excluding VAT)
Group
Audit of the Group financial statements
Other assurance services1
Tax advisory services
Other non-audit services
Total
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
117
68
–
–
185
113
72
–
–
185
1. Other assurance services include the review of the Interim Report and audit of Group subsidiary financial statements. In the financial year ended 31 March 2019 it also included a
review of the final IMA performance calculation in early 2019.
Employment
9.
The average monthly number of persons (including Executive Directors) directly employed during the financial year in the Group was 35
(March 2019: 33).
Total employees at financial year end:
Group
At financial year end:
Administration
Building management services:
Head office staff
On-site staff
Total employees
No amount of salaries and other benefits was capitalised into investment properties.
The staff costs for the above employees were:
Wages and salaries (including any cash bonuses)
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
IMA performance-related payments
Total
1. Most of the €995k is recovered directly from tenants via the service charge arrangements within Hibernia managed buildings.
144
Financial
year ended
31 March 2020
Number
Financial
year ended
31 March 2019
Number
27
4
5
9
36
23
6
5
11
34
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
5,543
653
1,252
376
7,824
4,953
430
587
310
6,280
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
6,829
995
–
4,516
954
810
7,824
6,280
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements
10.
Share-based payments
Accounting policy
The Group has a number of share-based payment 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. The equity-settled share-based awards granted under these arrangements are measured at the fair value of the award
at the date of grant. The cost of the award is charged to the consolidated income statement over the vesting period of the awards
based on the probable number of awards that will eventually vest, with a corresponding credit to shareholders’ equity.
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. When these shares vest they are assessed for
tax purposes at the current market share price and employee taxes are generally settled through payroll in cash. Employees therefore
receive the number of shares net of taxes at vesting date. Share-based payments that are cash-settled are remeasured 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.
Movements in share-based payments during the financial year by share-based payment scheme
Summary of share-based payments for financial year ended 31 March 2020
Balance outstanding at start
of financial year
Settled during
financial year
Provided during
financial year
Balance outstanding at
end of financial year
€’000
’000 shares
€’000
’000 shares
€’000
’000 shares
€’000
’000 Shares
a. Annual bonus
b. Long-term incentive
payments
c. IMA performance-
related payments
payable to Vendors
c. Employee incentives –
previous arrangements
Total
23
–
17
–
–
–
–
–
335
621
6,069
4,495
(6,107)
(4,519)
38
1,464
7,556
1,087
5,599
(635)
(6,742)
(476)
(4,995)
258
1,252
293
411
24
158
886
358
621
310
411
–
–
1,087
2,066
769
1,490
Summary of share-based payments for financial year ended 31 March 2019
Balance outstanding at start
of financial year
Settled during
financial year
Provided during
financial year
Balance outstanding at
end of financial year
€’000
‘000 shares
€’000
‘000 shares
€’000
‘000 shares
€’000
‘000 shares
–
–
–
–
23
17
23
17
7,332
5,079
(7,334)
(5,079)
6,071
4,495
6,069
4,495
1,451
8,783
1,104
6,183
(551)
(428)
(7,885)
(5,507)
564
6,658
411
4,923
1,464
7,556
1,087
5,599
a. Annual bonus
c. IMA performance-
related payments
payable to Vendors
c. Employee incentives –
previous arrangements1
Total
1. This line totals lines ‘b. IMA performance-related payments payable to employees’ and ’c. Employee long-term incentive plan – interim arrangements’ from note 11 to the
consolidated financial statements for the year ended 31 March 2019 as included in the Annual Report 2019.
2018 Remuneration Scheme
This scheme was introduced in 2018 and was described in full in the 2018 Annual Report and is available on our website.
Remuneration consists of the following:
1. Basic pay
2. Annual bonus
3. Long-Term Incentive Plan (“LTIP”)
The split between personal and Group performance targets is set depending on an employee’s ability to influence Group outcomes,
but all employees have an element of Group performance within their targets. We have also started to include sustainability criteria
within certain employees’ targets. All Group employees are eligible to participate in the annual bonus scheme while the LTIP applies to
Executive Directors and to members of the Senior Management Team other than in exceptional circumstances.
145
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 10.
10.a
Share-based payments continued
Annual bonus
Opening balance
Movements in amounts provided:
2019 awards
2020 awards provision
Net amount provided
Closing balance
Financial year ended
31 March 2020
Financial year ended
31 March 2019
€’000
‘000 shares
€’000
‘000 shares
23
89
246
335
358
17
60
233
293
310
–
23
–
23
23
–
17
–
17
17
Two-thirds of any annual bonus awarded is usually settled in cash and one-third in the grant of shares in the Company, subject to a three-
year service condition. The deferred shares awarded under the annual bonus are subject only to continued employment. The fair value
of the share award is therefore the number of shares granted at the closing share price on the date of grant. An allowance in relation to
expected departures is made and the amount amortised over the vesting period. 930k share awards were calculated as potentially
due in respect of the financial year ended at 31 March 2020, subject to approval by the Remuneration Committee (March 2019: 214k).
At 31 March 2020, 821k shares remained to be provided for in relation to 2019 and 2020 financial years.
Long-Term Incentive Plan
10.b
The LTIP commenced during the period with the first grant on 31 July 2019. This award consists of nil cost options which vest after three
years. Under the LTIP, recipients are granted a variable number of equity instruments depending on market and other conditions as
illustrated below:
LTIP conditions
Service condition
Relative Total Property Return
Total Accounting Return
Relative Total Shareholder Return
Weighting
Reference
Performance
condition type
33%
33%
33%
SC
TPR
TAR
TSR
n/a
Non–market
Non–market
Market
There is a two-year restricted holding period post vesting, but this is not subject to measurement as all conditions terminate on vesting.
The LTIP awards are measured as follows:
Non-market-based conditions: The fair value of the shares to be issued is determined using the grant date market price. The expected
number of shares is calculated based on the expectations of the number of shares which may vest at the vesting date and amortised
over the vesting period. At each accounting date, the calculation of the number of shares is revised according to current expectations
or performance. The number of shares is discounted using an estimate of the expected employee departure rate.
Market-based condition: The expected performance of Hibernia REIT plc shares over the vesting period is calculated using a Monte Carlo
simulation of 10,000 possible outcomes which are then averaged. Inputs are share price volatility for each company and the average
growth rate. These inputs are calculated with reference to relevant historical data and financial models. It should be recognised that the
assumption of an average growth rate is not a prediction of the actual level of returns that will be achieved. The volatility assumption in
the distribution gives a measure of the range of outcomes that may occur on either side of this average value. This is used to amortise
the fair value of an expected cost over the vesting period. The service condition is ignored for this calculation but applied in accruing the
amounts due. On vesting, any difference in amounts accrued versus actual is amended through reserves.
2019 LTIP
Number of awards granted : 1,853,381
Grant date: 31 July 2019
Grant date share price: €1.51
LTIP dated 31 July 2019
Total LTIP awards as at financial year end
146
Total awards
made at
maximum
vesting
‘000 shares
1,853
1,853
Provided at
31 March
2020
‘000 shares
Provided at 31
March 2020
€’000
411
411
621
621
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements Share-based payments continued
Long-Term Incentive Plan continued
10.
10.b
One-third of each award made is subject to a relative TSR measure against the constituents of the FTSE EPRA/NAREIT Developed
Europe Index. One-third each is made against TPR and TAR measures. 190k shares were provided for the TPR element as at
31 March 2020, 130k shares were provided against the TAR element based on the performance for the period and 92k shares were
provided against the TSR element based on the fair value calculated using a TSR pricing model as described above. Results and
inputs are summarised in the table below:
TSR valuation: 2019 LTIP
Fair value per award (TSR tranche) (€ per share)
Inputs
Risk free interest rate (%)
Expected volatility Hibernia (%)
Average comparator volatility (%)
Average comparator correlation (%)
Averaging factors
31 July 2019
LTIP
1.06
Source
European Central Bank
(0.80)
Datastream
Datastream
Datastream
Datastream
17.1
18.6
20.8
Median 1.01
Hibernia 1.16
Participants receive dividend equivalents so dividend yield is zero
Award certificate
10.c
Employee incentives – previous arrangements
Opening balance at start of financial year
Payment made during the financial year
Shares issued
Cash-settled share-based payments (taxes)
Cash-settled share-based payments
Total cash paid
Total payments in the financial year
Movements in amounts provided during the financial year
Share-based performance grants recognised2
Other amendments
Net amount provided during the financial year
Closing balance at end of financial year
Financial year ended
31 March 2020
Financial year ended
31 March 20191
€’000
‘000 shares
€’000
‘000 shares
1,464
1,087
1,451
1,104
(150)
(163)
(322)
(485)
(635)
288
(30)
258
1,087
(122)
(132)
(222)
–
(476)
204
(46)
158
769
(212)
(223)
(116)
(339)
(551)
583
(19)
564
(163)
(177)
(88)
–
(428)
432
(21)
411
1,464
1,087
1. Prior year information has been summarised to compare with the current financial year.
2. Relates to non-IMA performance-related payments which are recognised over the vesting period.
Investment Management Agreement performance-related payments to Vendors and staff
IMA performance-related payments refer to those payments that were made under the IMA for each financial year and settled mainly in
shares of the Company until the expiry of the agreement on 26 November 2018. These arrangements expired with the introduction of the
2018 Remuneration Scheme and no further awards will be due under this arrangement.
All amounts due to the Vendors have been settled during the period with the final issuance of 4.5m shares. There are 0.6m shares
outstanding to employees at 31 March 2020 under the IMA agreement for which the final vesting date is 31 March 2021. These shares are
forfeited by employees should they leave the Group prior to the vesting date unless subject to ‘good leaver’ provisions. However 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.
Employee incentives – interim arrangements
This covered employees who were providing services that were not part of the original IMA. This arrangement expired with the
introduction of the 2018 Remuneration Scheme and the final vesting date is 31 March 2021. A total of 0.2m shares are outstanding under
this arrangement and these are forfeited should the employee leave the Group prior to the vesting date unless subject to ‘good leaver’
provisions.
147
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
11.
Finance income and expense
Accounting policy
Finance expenses directly attributable to the construction 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 income statement 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.
The effective interest expense on borrowings arises as a result of the recognition of interest expense, commitment fees and
arrangement fees.
Interest on revolving credit facility
Interest on private placement notes
Early amortisation of arrangement fees on refinancing of revolving credit facility
Other finance costs
Gross finance expense
Less: Capitalised interest at an average rate of 2.10% (March 2019: 2.05%)
Finance expense
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
5,230
1,894
–
215
7,339
(141)
7,198
6,580
358
1,423
442
8,803
(577)
8,226
Interest costs capitalised in the financial year were €0.1m (March 2019: €0.6m) 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.
In December 2018 the Company refinanced the Group’s borrowings (note 25.a). As a result €1.4m relating to unamortised arrangement
fees on the previous facility was expensed in accordance with the relevant accounting policy.
12.
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.
Deferred tax: Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are only recognised where it is probable
that the amounts will be recoverable.
Tax changes announced in Finance Act 2019
In the 2020 Budget announced in early October 2019 and the subsequent Finance Act, which came into law in December 2019, a number
of changes to the taxation of Irish property were introduced, some of which may directly impact the Group. These included:
– Stamp duty increased from 6% to 7.5% on all commercial property transactions in Ireland;
– Increase in the rate of dividend withholding tax (“DWT”) from 20% to 25% for all dividends paid by Irish companies;
– Where an entity ceases to be a REIT, there will no longer be a deemed disposal and reacquisition of the assets at market value, unless
the REIT has been in existence for 15 years or more;
– 85% of any proceeds a REIT generates from the sale of a rental property which are not (i) reinvested within a three-year window
(spanning one year before and two years afterwards); (ii) used to pay debt specifically used to acquire, enhance or develop that rental
property; or (iii) distributed to shareholders within two years of sale (and thus subject to DWT) will be taxed at 25% (an effective rate
of 21.25% on the uninvested proceeds).
148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements Income tax expense continued
12.
The Group has no current intentions to cease to be a REIT or to sell any of its investment properties and as a result none of these changes
outlined above impacted on current or deferred taxation in the financial year ended 31 March 2020. The increase in stamp duty resulted in
a reduction in the valuation of the investment property of approximately €22m.
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 (including additional tax rate on residual income)
Over provision in respect of prior periods
Income tax (credit)/ expense for the financial year
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
60,863
124,042
7,608
(2,931)
(4,737)
(402)
282
(180)
15,506
(11,729)
(3,580)
381
5
583
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.
13.
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 2020 of 1.75 cent per share (March 2019: 1.5 cent per share)
Proposed final dividend for the financial year ended 31 March 2020 of 3.0 cent per share1 (March 2019: 2.0 cent per share)
Total
1. Based on shares in issue at close of business at 26 May 2020 of 684.8m.
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
11,982
20,543
32,525
10,465
13,884
24,349
The Board has proposed a final dividend of 3.0 cent per share (March 2019: 2.0 cent) which is subject to approval by shareholders at
the Annual General Meeting to be held on 29 July 2020 and has therefore not been included as a liability in these consolidated financial
statements. This dividend is expected to be paid by early August to shareholders on the register at 3 July 2020. All of this proposed final
dividend of 3.0 cent per share will be a Property Income Distribution in respect of the Group’s property rental business (March 2019: 2.0
cent). The total dividend, interim paid and final proposed for the financial year ended 31 March 2020 is 4.75 cent per share (March
2019: 3.5 cent per share) or €32.5m (March 2019: €24.3m).
Under the REIT regime, the Company is required to distribute a minimum of 85% of the Group’s property rental business profits annually
and the Group’s dividend policy is to pay out 85-90% of its property rental business profits annually. The Company has complied with this
requirement; the total dividends for the year ended March 2020 equate to 86% of EPRA EPS (March 2019: 89%).
Earnings per share
14.
There are no convertible instruments, options, or warrants on ordinary shares in issue as at 31 March 2020, other than those dealt with
under note 10 above, share-based payments. The Company has established a reserve of €2.1m (March 2019: €7.6m) which is mainly for
the issue of ordinary shares relating to the payment of share-based payments. It is estimated that approximately 2.4m ordinary shares
(March 2019: 6.0m shares) will be issued in total, 1.5m of which are provided for at 31 March 2020 and a further 0.9m which will be
recognised over the next three years. The dilutive effect of these shares is disclosed below.
149
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 14.
The calculations are as follows:
Earnings per share continued
Weighted average number of shares
Issued share capital at beginning of financial year
Shares acquired and cancelled during the period
Shares issued during the financial year
Shares in issue at financial year end
Weighted average number of shares
Number of shares to be issued under share-based schemes
Diluted number of shares
Number of shares due to issue under share-based schemes recognised at financial year end
Number of shares due under share-based schemes not recognised at financial year end1
Number of shares to be issued under share-based schemes
Financial
year ended
31 March 2020
’000
Financial
year ended
31 March 2019
’000
Notes
697,589
692,347
(17,573)
4,641
–
5,242
22
684,657
697,589
688,759
694,968
2,375
6,028
691,134
700,996
Notes
10
Financial
year ended
31 March 2020
’000
Financial
year ended
31 March 2019
’000
1,490
885
2,375
5,599
429
6,028
1.
Included here are all amounts from share-based payments described in note 10 which are either granted at the year end or shortly after and which have not been recognised at
year end but will be recognised over the next two to three years
Basic and diluted earnings per share (IFRS)
Profit for the financial year attributable to the owners of the Parent
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
Profit for the financial year attributable to owners of the Parent
Adjusted for:
Gains and losses on investment property
Profit or loss on disposals of other assets
Deferred tax in respect of EPRA adjustments
Changes in fair value of financial instruments and associated close-out costs
EPRA earnings
EPRA earnings per share1 and Diluted EPRA earnings per share
Weighted average number of ordinary shares (basic)
Weighted average number of ordinary shares (diluted)
EPRA earnings per share (cent)
Diluted EPRA earnings per share (cent)
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
61,043
123,459
‘000
‘000
688,759
694,968
691,134
700,996
8.9
8.8
17.8
17.6
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
Notes
61,043
123,459
16
26
(22,856)
(98,105)
–
(152)
58
(140)
547
1,711
38,093
27,472
‘000
‘000
688,759
694,968
14
691,134
700,996
5.5
5.5
4.0
3.9
1. EPRA Earnings per share is an alternative performance measure and is calculated in accordance with the EPRA Best Practices Recommendations Guidelines November 2016.
Further information is available in the Supplementary Information section at the end of this statement.
150
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements
IFRS NAV, EPRA NAV per share and Total Accounting Return
15.
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 EPRA Best Practices 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 movement of financial
instruments and deferred tax. It is calculated on a diluted basis.
Total Accounting Return (“TAR”), a key performance indicator and alternative performance measure, is calculated as the increase in EPRA
NAV per share over the previous financial year-end EPRA NAV per share and adding back dividends per share paid in the financial year,
expressed as a percentage.
IFRS net assets at end of financial year (€’000)
Ordinary shares in issue (‘000)
IFRS NAV per share (cent)
Ordinary shares in issue
Number of shares to be issued under share-based schemes (see note 14)
Diluted number of shares
Diluted IFRS NAV per share (cent)
IFRS net assets at end of financial year
Deferred tax
Net mark to market on financial assets
EPRA NAV
Diluted number of shares (‘000)
EPRA NAV per share (cent)
Total Accounting Return
Opening EPRA NAV per share
Closing EPRA NAV per share
Increase in EPRA NAV per share
Dividends per share paid in financial year
Total return
Total Accounting Return ("TAR")
As at
As at
31 March 2020
31 March 2019
1,231,149
684,657
1,218,539
697,589
179.8
174.7
’000
’000
684,657
697,589
2,375
6,028
687,032
703,617
179.2
173.2
€’000
€’000
1,231,149
1,218,539
395
234
547
288
1,231,778
1,219,374
687,032
703,617
179.3
173.3
As at
As at
31 March 2020
31 March 2019
173.3c
179.3c
6.0c
3.8c
9.8c
5.6%
159.1c
173.3c
14.2c
3.4c
17.6c
11.1%
151
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information SECTION III – 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.
16.
Investment property
Accounting policy
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 notes 2.f and 2.g.
The valuations of investment properties and investment properties under development are prepared in accordance with the
appropriate sections of the Professional Standards, the Valuation Technical and Performance Standards (“VPS”) and the Valuation
Applications (“VPGA”) contained within the RICS Valuation – Global Standards 2019 (“the Red Book”). It follows that the valuations
are compliant with the International Valuation Standards. 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 11.
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.
An investment property is derecognised on disposal, i.e. when the significant risks and rewards of ownership are transferred outside the
Group’s control, or when the investment property is permanently removed from use and no future economic benefits are anticipated
from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the consolidated income statement in the period in which the property
is derecognised.
152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements 16.
At 31 March 2020
Investment property continued
Fair value category
Office assets
Level 3
€’000
Office
development
assets
Level 3
€’000
Residential
assets
Level 3
€’000
Industrial/
land
assets
Level 3
€’000
Total
Level 3
€’000
Carrying value at 1 April 2019
1,173,140
16,199
153,079
53,000
1,395,418
Additions:
Property purchases
Development and refurbishment expenditure
Revaluations included in income statement
Transferred from property, plant and equipment3
Transferred to property, plant and equipment3
8,741
9,0972
5,494
6,210
(5,757)
–
13,557
18,243
–
–
694
825
4,861
–
–
13,385
157
(5,742)
–
–
22,8201
23,636
22,856
6,210
(5,757)
Carrying value at 31 March 2020
1,196,925
47,999
159,459
60,8004
1,465,183
1. A VAT refund of €0.5m was accounted for during the financial year arising as a result of the grant of VAT inclusive leases within a redeveloped property in 2DC, following its
refurbishment. Gross acquisitions in the financial year therefore €23.3m.
2. This includes capital expenditure on 1WML, SJRQ and 2WML after their transfer to the office segment.
3. The Group moved to a new head office in 1WML in late 2019. The space previously occupied by the Group in South Dock House has been leased to a tenant during the financial
year and was transferred to investment property at fair value on the date on which it changed in use.
4. On 9 November 2018 the Group agreed to acquire 92.5 acres adjacent to its holdings in Newlands Cross from the Irish Rugby Football Union (the “IRFU”) for initial consideration of
€27m. If re-zoning is achieved before November 2028 the IRFU will be due additional consideration equating to 44% of the value of Hibernia’s total land interests of 143.7 acres in
the Newlands site at re-zoning, less the initial consideration.
At 31 March 2019
Fair value category
Office assets
Level 3
€’000
Office
development
assets
Level 3
€’000
Residential
assets
Level 3
€’000
Industrial/land
assets
Level 3
€’000
Total
Level 3
€’000
Carrying value at 1 April 2018
1,017,937
134,500
138,480
17,800
1,308,717
Additions:
Property purchases
Development and refurbishment expenditure
Revaluations included in income statement
Disposals:
Sales2
Transferred between segments3
Carrying value at 31 March 2019
2,956
5,2441
35,259
–
41,500
48,020
(96,077)
207,821
–
(207,821)
980
60
13,559
–
–
36,094
40,030
417
(1,311)
47,221
95,527
–
–
(96,077)
–
1,173,140
16,199
153,079
53,0004
1,395,418
1. This includes capital expenditure on 1WML and 2DLC after their transfer to the office segment in the prior year.
2. New Century House and 77 Sir John Rogerson’s Quay were sold or contracted to be sold during the year, generating €2.6m in gains in excess of their carrying values.
3. 2WML (formerly the Hanover Building) and 1SJRQ were transferred from ‘Office development assets’ to ‘Office assets’ as they were completed before 31 March 2019.
4. On 9 November 2018 the Group agreed to acquire 92.5 acres adjacent to its holdings in Newlands Cross from the Irish Rugby Football Union (the “IRFU”) for initial consideration of
€27m. If re-zoning is achieved before November 2028 the IRFU will be due additional consideration equating to 44% of the value of Hibernia’s total land interests of 143.7 acres in
the Newlands site at re-zoning, less the initial consideration.
There were no transfers between fair value levels during the financial year. Approximately €0.1m of financing costs were capitalised at an
effective interest rate of 2.1% in relation to the Group’s developments and major refurbishments (March 2019: €0.6m). No other operating
expenses were capitalised during the financial year.
Valuations as at 31 March 2020
The valuations used to determine fair value for the investment properties in the consolidated financial statements are determined by
the Group’s Valuer and are in accordance with the provisions of IFRS 13. C&W has agreed to the use of its valuations for this purpose.
As discussed in notes 2.f and 2.g, property valuations are inherently subjective as they are made on the basis of assumptions made by the
Valuer and therefore are classified as Level 3. At the valuation date, the Valuer has reported on the basis of a material uncertainty as per
VPS 3 and VPGA 10 of the RICS Red Book Global. This is not intended by the Valuer to suggest that its valuations cannot be relied on but
to indicate that less certainty – and a higher degree of caution – should be ascribed to the valuations than would normally be the case.
Valuations are completed on the Group’s investment property portfolio on at least a half-yearly basis and, in accordance with the
appropriate sections of the Professional Standards, the Valuation Technical and Performance Standards (“VPS”) and the Valuation
Practice Applications (“VPGA”) contained within the RICS Valuation – Global Standards 2019 (“the Red Book”). It follows that the
valuations are compliant with the International Valuation Standards. Fair value under IFRS 13 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”. The Red Book
confirms that the references in IFRS 13 to market participants and a sale make it clear that for most practical purposes fair value is
consistent with market value.
153
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
Investment property continued
16.
Valuations as at 31 March 2020 continued
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 cash flows
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. Thus 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 complete, 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 the financial year ended 31 March 2020, 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 redevelopment 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 in this financial year.
Description of
investment property
asset class
Fair value of the
investment property
€’m
Narrative description
of the techniques used
Office assets
1,197
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 current lease (2022) and on a
residual basis thereafter.
– Marine House and Clanwilliam Court Blocks 1, 2
& 5 are valued on an investment basis until the end
of the current leases (which expire over the period
2020 to 2022) and on a residual basis thereafter.
Office
development assets
48
Residual method, i.e. GDV Value less Total
Development Cost less Profit equals Fair Value.
– GDV: the fair value of the completed proposed
development (arrived at by capitalising the market
rent or ERV with an appropriate yield, allowances for
purchasers’ costs, assumptions for voids and/or rent
free periods). The appropriate yield is based on the
Valuer’s opinion of the most likely tenant covenant
achievable for the property and the most likely
lease terms.
– Total Development Cost: this includes, but is not
limited to, construction costs, land acquisition
costs, professional fees, levies, marketing costs and
finance costs.
– Developer’s profit which is measured as a
percentage of the total development costs
(including the site value). It also takes account of
letting risk.
For developments close to completion the yield
methodology is usually applied.
Yield methodology using rental values capitalised
with a market capitalisation rate. Alternatively, the
comparable sales method of valuation is used to value
some residential assets.
Yield methodology using market rental values
capitalised with a market capitalisation rate.
The Newlands site, including the Gateway industrial
park, is valued as an early stage development site on
a price per acre basis. Properties in Dublin Industrial
Estate and Malahide Road Industrial Estate are valued
using market rental values capitalised with a market
capitalisation rate. The values are benchmarked to
capital values per sq. ft. to take account of their current
condition and development potential.
Residential assets
159
Industrial/
land assets
61
154
Changes in the fair value technique during
the financial year
– The calculation of the Gross
Development Value (“GDV”) for
office development assets (residual
appraisals and therefore also applies
to the pipeline assets listed opposite)
now values the net effective rent into
perpetuity, whilst the ‘froth income’
(difference between headline rent
and net effective rent) is valued for
the first five years of the lease (after
allowing for a void/rent free period)
to the assumed first rent review date.
Previously, the headline rent was
valued into perpetuity after deduction
of a void/rent free period.
– 2 Cumberland Place is now closer to
practical completion and significant
progress has been made on lettings,
with part of the building pre-let
shortly after the financial year end.
Therefore, the valuation methodology
has changed from a residual
valuation to an investment valuation.
Outstanding capital expenditure
has been deducted to arrive at the
final valuation.
No change in valuation technique.
No change in valuation technique.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements Investment property continued
16.
EPRA capital expenditure
Capital expenditure (“capex”) during the financial year is analysed below according to the EPRA Best Practices Recommendation
Guidelines. The tables below comply with the 2016 and 2019 recommendations. All amounts are from the IFRS financial statements
of the Group without adjustment and are reconciled below:
1. Acquisitions: amounts spent for the purchase of investment properties including purchase costs capitalised.
2. Development amounts spent on investment properties under construction and related project costs capitalised, including internal
costs allocated.
3.
Investment properties: amounts spent on the completed operational portfolio including:
a) Incremental lettable area: amounts spent to add additional lettable space to ‘in-place’ investment property;
b) No incremental lettable space: amounts spent to enhance the property without increasing lettable areas;
c) Tenant incentives: any amounts spent on the investment property as incentive for tenants.
4. Capitalised interest: capitalised finance costs which are added to the carrying value of investment properties.
The Group has no joint ventures; all of its properties are located in the Dublin area. Expenditure is therefore analysed into portfolio
property type only.
As at 31 March 2020
Acquisitions
Development2
‘In-place’ investment properties
Incremental lettable space
No incremental lettable space
Tenant incentives
Expenditure on properties due for redevelopment/refurbishment
Other material non-allocated types of expenditure
Capitalised interest4
Total capex
Conversion from accrual to cash basis
Total capex on cash basis
Office assets
€’000
8,741
7,787
–
(446)3
–
1,756
–
17,838
–
17,838
(173)
17,665
Office
development
assets
€’000
–
13,416
–
–
–
–
–
13,416
141
13,557
2,001
15,558
Residential
assets
€’000
694
–
–
825
–
–
–
1,519
–
1,519
(220)
1,299
Industrial/
land
assets
€’000
13,385
–
–
–
–
157
–
13,542
–
Total
€’000
22,8201
21,203
–
379
–
1,913
–
46,315
141
13,542
46,456
(123)
13,419
1,485
47,941
1. A VAT refund of €0.5m was accounted for during the financial year arising as a result of the grant of VAT inclusive leases within a redeveloped property in 2DC, following its
refurbishment. Gross acquisitions in the financial year were therefore €23.3m.
2. Capital expenditure relating to development or major refurbishment of 1SJRQ, 1&2WML and 2 Cumberland Place.
3. Dilapidation payments were received from vacating tenants and have been netted with capital expenditure.
4. Financing expenses capitalised.
155
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information Investment property continued
16.
EPRA capital expenditure continued
As at 31 March 2019
Acquisitions
Development1
‘In-place’ investment properties
Incremental lettable space
No incremental lettable space
Tenant incentives
Expenditure on properties due for re-development/refurbishment
Other material non-allocated types of expenditure
Capitalised interest3
Total capex
Conversion from accrual to cash basis
Total capex on cash basis
Office assets
€’000
Office
development
assets
€’000
2,956
3,094
–
41,496
–
(103)2
–
1,679
–
7,626
574
8,200
503
8,703
–
–
–
–
–
41,496
4
41,500
(1,220)
40,280
Residential
assets
€’000
Industrial/land
assets
€’000
Total
€’000
40,030
44,590
–
(43)
–
2,096
–
36,094
–
–
–
–
417
–
36,511
86,673
–
36,511
123
578
87,251
(404)
36,634
86,847
980
–
–
60
–
–
–
1,040
–
1,040
190
1,230
1. Capital expenditure relating to development or major refurbishment of 1SJRQ, 1&2WML and 2 Cumberland Place.
2. Dilapidation payments were received from vacating tenants and have been netted with capital expenditure.
3. Financing expenses capitalised.
Reconciliation of the Valuer’s valuation report amount to the carrying value of investment property in the consolidated statement of
financial position:
Valuation per Valuer’s certificate
Owner-occupied (note 17)
Income recognition adjustment1
Investment property balance at end of period
As at
31 March 2020
€’000
As at
31 March 2019
€’000
1,480,360
1,407,740
(7,089)
(8,088)
(5,643)
(6,679)
1,465,183
1,395,418
1.
Income recognition adjustment relates to the difference in valuation that arises as a result of property valuations using a cash flow based approach while income recognition for
accounting purposes spreads tenant incentives and lease related costs 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 VPS 4 of the
Red Book 2019, 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 and sensitivity data is provided on these.
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, are not generally directly observable and therefore classified as Level 3. Yields depend on the Valuer’s
assessment of market capitalisation rates and are therefore Level 3 inputs. The tables below summarise the key unobservable inputs used
in the valuation of the Group’s investment properties at 31 March 2020. 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 mainly 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 property
31 March 2020
Office
Office development
Residential1
Industrial/land
1,196,925
€25.00psf
€62.50psf
47,999
€30.00psf
€62.00psf
159,459
€25,200pa
€32,400pa
60,800
€5.00psf
€9.00psf
Low
3.99%
4.42%
3.70%
7.65%
High
6.65%
4.42%
5.06%
7.94%
Market value
€’000
Low
High
Estimated rental value
Equivalent yield
1. Average ERV based on a two-bedroom apartment. Residential yields are based on the contracted income after deducting operating expenses. The market standard deduction is
20% of gross rental income. Based on the Valuer’s estimation of market rent no deduction for operating expenses (as per 31 Mar 2019 below), the gross yields on the same assets as
noted at 31 Mar 2019 would be 5.28% (low) and 6.37% (high).
156
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements Investment property continued
16.
Key unobservable inputs used in the valuation of the Group’s investment property continued
31 March 2019
Office
Office development
Residential1
Industrial/land
1,173,140
€15.00psf
€60.00psf
16,199
€30.00psf
€57.50psf
153,079
€23,400pa
€31,800pa
53,000
€5.25psf
€9.25psf
Low
4.04%
4.75%
5.16%
8.02%
High
7.30%
4.75%
6.00%
8.02%
Market value
€’000
Low
High
Estimated rental value
Equivalent yield
1. Average ERV based on a two-bedroom apartment. Residential yields are gross yields based on the Valuer’s estimation of market rent no deduction for operating expenses.
Sensitivity data
The sensitivities below illustrate the impact of movements in key unobservable inputs on the fair value of investment properties. These are
ERV, equivalent yields and development construction costs (residual appraisals). 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. The tables illustrate the impacts from
a 5% or 10% ERV and a 25bp or 50bp shift in equivalent yield on the valuations as included in the consolidated financial statements at
31 March 2020 and 31 March 2019.
ERV and equivalent yields
31 March 2020
Impact on market value of
a 5% change in the
estimated rental value
Impact on market value of
a 10% change in the
estimated rental value
Impact on market value of
a 25bp change in the
equivalent yield
Impact on market value of
a 50bp change in the
equivalent yield
Increase
€‘m
Decrease
€’m
Increase
€‘m
Decrease
€’m
Increase
€‘m
Decrease
€’m
Increase
€‘m
Decrease
€’m
58.6
2.8
8.0
0.3
69.7
(58.6)
(2.8)
(8.0)
(0.3)
116.9
5.7
15.8
0.6
(116.9)
(5.7)
(15.8)
(0.6)
(83.4)
(3.8)
(9.9)
(0.3)
93.2
4.3
11.2
0.3
(158.3)
198.7
(7.3)
(18.6)
(0.5)
9.2
24.1
0.6
(69.7)
139.0
(139.0)
(97.4)
109.0
(184.7)
232.6
Impact on market value of
a 5% change in the
estimated rental value
Impact on market value of
a 10% change in the
estimated rental value
Impact on market value of
a 25bp change in the
equivalent yield
Impact on market value of
a 50bp change in the
equivalent yield
Increase
€‘m
Decrease
€’m
Increase
€‘m
Decrease
€’m
Increase
€‘m
Decrease
€’m
Increase
€‘m
Decrease
€’m
52.6
1.9
7.5
0.1
62.1
(53.7)
(2.0)
(7.5)
(0.1)
111.7
3.9
14.9
0.2
(111.7)
(3.9)
(14.9)
(0.2)
(72.8)
80.2
(143.3)
(2.1)
(8.2)
(0.1)
2.2
12.1
0.1
(4.0)
(17.6)
(0.3)
179.3
4.8
21.3
0.3
(63.3)
130.7
(130.7)
(83.2)
94.6
(165.2)
205.7
Sensitivities
Office
Office development
Residential
Industrial/land
Total
31 March 2019
Sensitivities
Office
Office development
Residential
Industrial/land
Total
Development construction costs
A 5% decrease or increase in construction costs would result in a decrease or increase in the total value of the portfolio of €10m as at
31 March 2020 (31 March 2019: €8m). Development construction costs are an unobservable input to residual appraisals which are used in
valuing those properties that are pipeline development assets.
157
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 17.
Property, plant and equipment
Accounting policy
Owned property which is occupied by the Group for its own purposes is derecognised 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. Similarly,
property which ceases to be occupied by the Group is derecognised as property, plant and equipment and recognised as investment
property at fair value on the date of change of use. Property used for administration purposes is stated in the consolidated statement
of financial position at its revalued amount. 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 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. On derecognition, the accumulated reserve for that property remains in reserves
until the asset is either sold or decommissioned, at which date the accumulated reserve relating to that asset is released directly to
revenue reserves.
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 cost 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 5 years
3 years
Office and computer equipment
50 years
As at 31 March 2020
Cost or valuation
At 1 April 2019
Additions:
Purchases
Transferred from investment property1
Disposals:
Sales2
Transferred to investment property1
Revaluation recognised in other comprehensive income
At 31 March 2020
Depreciation
At 1 April 2019
Charge for the financial year
Disposals
Transferred to investment property1
At 31 March 2020
Net book value at 31 March 2020
Office and
computer
equipment
€’000
Leasehold
improvements
and fixtures
and fittings
€’000
Land and
buildings
€’000
Total
€’000
5,942
207
596
6,745
366
5,757
–
(6,568)
1,658
7,155
(299)
(125)
–
358
(66)
7,089
71
–
1,649
–
(107)
(598)
–
–
171
(152)
(35)
87
–
(100)
71
–
–
1,647
(392)
(360)
576
–
(176)
1,471
2,086
5,757
(705)
(6,568)
1,658
8,973
(843)
(520)
663
358
(342)
8,631
1. The Group relocated its head office from South Dock House to 1WML during the financial year. South Dock House has now been leased to a tenant and so is recognised in
investment property. The space in 1WML now occupied by the Group has now been recognised in land and buildings as owner occupied property.
2. Disposals relate to furniture and fittings in South Dock House.
158
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements
17.
As at 31 March 2019
Property, plant and equipment continued
Cost or valuation
At 1 April 2018
Additions
Revaluation recognised in other comprehensive income
At 31 March 2019
Depreciation
At 1 April 2018
Charge for the financial year
At 31 March 2019
Net book value at 31 March 2019
Office and
computer
equipment
€’000
Leasehold
improvements
and fixtures
and fittings
€’000
Land and
buildings
€’000
Total
€’000
5,219
–
723
5,942
(190)
(109)
(299)
5,643
161
46
–
207
(104)
(48)
(152)
55
590
5,970
6
–
52
723
596
6,745
(265)
(127)
(392)
204
(559)
(284)
(843)
5,902
Land and buildings: The Group’s head office at 1WML was revalued at 31 March 2020, and the Group’s previous head office at South
Dock House was revalued at 31 March 2019, by the Group’s Valuer and in accordance with the valuation approach described under note
16. They were measured at fair value at the period end using a yield methodology using market rental values capitalised with a market
capitalisation rate. These fair value measurements use significant unobservable inputs. The inputs used are disclosed in the table below:
Valuation inputs
ERV per sq. ft.
Equivalent yield
18.
Other assets
31 March 2020
1WML
31 March 2019
South Dock
House
€55.0
4.25%
€57.5
5.0%
Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
These are property assets which were acquired as part of a loan portfolio purchased to acquire some of the Group’s investment
properties and are not suitable for retention as investment property. Previously they were recognised as non-current assets held for sale.
A profit of €5m has been realised on the disposal of these assets to date and the Directors have concluded that the fair value of the
remaining assets is at least their carrying value. The sale of the remaining assets has been delayed and the Directors have concluded
that it is more appropriate that they be recognised as non-current.
159
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information SECTION IV – 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.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability of another entity. The Group
has identified financial assets and liabilities in its financial position and the accounting policy for these is summarised in this note.
Financial instruments may be further analysed between current and non-current depending on whether these will fall due within
12 months after the balance sheet date or beyond.
Financial assets: This classification depends on the business model and the contractual terms of the cash flows. Financial assets that
are held to collect contractual cash flows where those cash flows represent solely payments of principal or interest are measured at
amortised cost. Financial assets measured at amortised cost are principally trade receivables. At initial recognition the Group measures
the financial assets at fair value plus (except for those at fair value through profit or loss) transaction costs.
On initial recognition the Group classifies its financial assets in the following measurement categories:
– Those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss)
– Those to be measured subsequently at amortised cost
The Group’s financial assets comprise trade and other receivables, loans receivable and derivative instruments. The Group derecognises
a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive
the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are
transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not
retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount of the asset and
the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative
gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. Relevant costs incurred with the
disposal of a financial asset are deducted in computing the gain or loss on disposal.
Financial liabilities: These are initially recognised at the fair value of the considerations received less directly attributable transaction
costs. Subsequent to initial recognition, financial liabilities are recognised at amortised cost. The difference between the recognition
value and the redemption value is recognised in the income statement over the contractual terms using the effective interest rate
method. This category includes trade and other payables and borrowings. Financial liabilities are derecognised in full when the Group
is discharged from its obligation, they expire, or they are replaced by a new liability with substantially modified terms.
The Group’s non-equity financing is all unsecured and comprises a revolving credit facility and private placement notes. The majority
of this debt is fixed rate or hedged through derivatives to protect against major rises in 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 or payments (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 financial asset or liability, or, where appropriate,
a shorter period, to the gross carrying amount of a financial asset or the amortised cost of a financial liability.
Impairment of financial assets: The Group recognises a loss allowance for expected credit losses on debt instruments, trade receivables
and other financial assets. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition
of the respective financial instrument. IFRS 9 allows entities to apply a ‘simplified approach’ for trade receivables, contract assets and
lease receivables. The simplified approach must be used for trade receivables with no significant financing approach and the Group
has chosen to apply this to all trade receivables as only some minor receivables have a financing component. The simplified approach
allows the recognition of lifetime ECL on all these assets without the need to identify significant increases in credit risk (see note
21). Lifetime ECL represents the ECL that will result from all possible default events over the expected life of a financial instrument.
The Group uses a provision matrix to calculate these ECL.
160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements In order to perform this assessment, the Group classifies its assessment into three stages:
– Step 1: Group trade receivables: The Group has chosen to use a tenant risk assessment which is based on the tenant’s industry, its
knowledge of its payment history and other factors as relevant to group financial assets into credit risk categories
– Steps 2 to 4: The Group uses the period since inception to gather loss data. As only minor losses have occurred, the Group has used
forward looking economic factors to determine appropriate loss rates to apply to each sub-group determined in step 1 as divided into
past due categories, thus creating a matrix for provision of ECL
– Stage 5: The ECL for each sub-group determined in step 1 is calculated by multiplying the loss rate calculated in steps 2 to 4 to the
balance of each age band for the receivables in each group. Once the ECL of each age band for the receivables have been calculated,
total ECL of the portfolio is provided
A financial asset is considered to be credit impaired where payments are past due and there is no engagement with the Group to make
arrangements to bring the payment schedule up to date. A financial asset is considered to be in default if the debtor has failed to pay all
rent and other charges due for a period of three months, has failed to agree payment terms for the clearance of the balance and there
are no legal grounds for suspended payment or the debtor has failed to engage or has moved out of the property and is considered a
high-risk debtor. Each circumstance is individual and Management may use discretion when deciding if such amounts are recoverable.
Rent continues to be recognised in rental income, with the appropriate ECL being recognised, until the financial asset is considered to
be in default. Once in default, these amounts are still due but not recognised in profit or loss. Amounts considered to be in default are
full impaired. When legal proceedings are instigated to recover the debt, the costs of these are charged to profit or loss.
19.
Cash and cash equivalents
Cash and cash equivalents
As at
31 March 2020
€’000
As at
31 March 2019
€’000
28,454
22,372
Cash and cash equivalents includes cash at bank in current accounts and deposits held on call with banks. The management of cash and
cash equivalents is discussed in note 30. Please also refer to note 25.b on the net debt calculations. In addition, the Company holds funds
in excess of its regulatory minimum capital requirement at all times. Given the impact of COVID-19, the Group has implemented a policy of
maintaining a minimum cash balance of €20m at all times.
20.
Other financial assets
Accounting policy
Derivatives: The Group utilises derivative financial instruments to hedge interest rate exposures on its borrowings.
Derivatives designated as hedges against interest risks are accounted for as cash flow hedges. Hedge relationships are documented
at inception. This documentation identifies the hedge, the item being hedged, the nature of the risks being hedged and how the
effectiveness is measured during its duration. Hedges are measured for effectiveness at each accounting date and the accounting
treatment of changes in fair value revised accordingly. The Group’s cash flow hedges are against variability in interest costs and the
effective portion is recognised in equity in the hedging reserve, with the ineffective portion being recognised in profit or loss within
finance expenses.
Derivatives at fair value
As at
31 March 2020
€’000
As at
31 March 2019
€’000
34
194
Cash flow hedges are the Group’s hedging instruments on its borrowings. The Group has a policy of having the majority of its interest
rate exposure on its debt hedged or fixed. As at 31 March 2020, as well as having €75m of fixed coupon private placement notes, it
has hedged the interest rate exposure on €125m of its revolving credit facility (March 2019: €225m) using a combination of caps and
swaptions to limit the EURIBOR element of interest payable to 0.75%. This means that at 31 March 2020 76% of the Group’s drawn debt
is either fixed or hedged (31 March 2019: 128%).
161
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 21.
Trade and other receivables
Accounting policy
Trade and other receivables are initially recognised when they are originated. Trade and other receivables that do not contain significant
financing components, which is assessed at initial recognition, are measured at the transaction price. Trade receivables that are held
within a business model where the objective is to hold the financial asset in order to collect cash flows and the contractual terms of the
financial asset give rise on specified dates to cash flows that are solely payments of principal and interest are recognised at fair value at
the recognition date and subsequently measured at amortised cost using the effective interest rate method.
For trade receivables which are financial assets the accounting policy is described under the introduction to Section IV above.
Non-current
Property income receivables
Recoverable capital expenditure
Expected credit loss allowance
Balance at end of period – non-current
Current
Property income receivables
Recoverable capital expenditure
Expected credit loss allowance
Receivable from investment property sales
Deposits paid on investment property
Prepayments
Income tax refund due
VAT refundable
Balance at end of period – current
Balance at end of period – total
Of which are classified as financial assets
As at
31 March 2020
€’000
As at
31 March 2019
€’000
9,590
661
(36)
10,215
1,955
460
(61)
2,354
136
–
985
2
274
3,751
13,966
1,591
7,163
765
–
7,928
4,105
314
–
4,419
34,639
145
548
54
359
40,164
48,092
37,630
The non-current balance is mainly non-financial in nature; €0.7m (March 2019: €0.8m) relates to amounts receivable from tenants in
relation to capital expenditure funded initially by the Group to be recovered over the relevant lease term, with the balance consisting of
deferred income and expenditure amounts relating to the lease incentives and deferred lease costs. These amounts, as they are receivable
over the term of the lease, have a financing element. The Group has chosen to apply the simplified ECL model to these. The Group
introduced an internal rating system for tenants during the COVID-19 pandemic in order to ensure proactive management of amounts
due. The Group has a diverse range of tenants, many of which are large multinational companies, and our rent collection statistics to date
have remained strong (note 2.e). The current balance of trade and other receivables has no concentration of credit risk as it comprises
mainly prepayments (note 30.d). The ECL allowance is calculated according to the provision matrix and totals €97k. In addition, ECL of
€50k were realised in the year.
162
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements
22.
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.
At 31 March 2020
Balance at beginning of period
Shares cancelled during the period (see below)
Shares issued during the period (see below)
No. of
shares
in issue
’000
697,589
(17,573)
4,641
Share
capital
€’000
69,759
(1,757)
464
Share
premium
€’000
624,483
–
5,793
Capital
redemption
fund
€’000
–
1,757
–
Total
Company
capital
€’000
694,242
–
6,257
Balance at end of period
684,657
68,466
630,276
1,757
700,499
At 31 March 2019
Balance at beginning of period
Shares issued during the period (see below)
No. of
shares
in issue
’000
692,347
5,242
Share
capital
€’000
69,235
524
Share
premium
€’000
617,461
7,022
Balance at end of period
697,589
69,759
624,483
Capital
redemption
fund
€’000
–
–
–
Total
Company
capital
€’000
686,696
7,546
694,242
Shares cancelled during the period – share buyback programme:
In April 2019 the Group announced an on-market share buyback programme to return up to €25m of the proceeds from the sale of 77
Sir John Rogerson’s Quay to shareholders. This commenced in April 2019 and completed in November 2019 with a total of 17.6m shares
repurchased and immediately cancelled for aggregate consideration of €25.0m (average price €1.42).
Shares issued during the period are as follows:
4.6m ordinary shares with a nominal value of €0.10 were issued during the period in settlement of share-based payments totalling €6.2m
(note 10): 0.1m shares were issued on 4 April 2019 and 4.5m shares were issued on 24 July 2019 and the associated costs were €10k.
Share-based payments:
The Group’s remuneration scheme includes awards which are made in shares or nil cost share options and which are payable to
employees only after fulfilling service and/or performance conditions. Amounts provided for at 31 March 2020 were 1.5m shares and a
further 0.9m shares remain to be accrued as at the period end. Amounts due at 31 March 2019 amounted to €7.6m or 5.6m shares and
0.4m shares remained to be provided. Full details on these arrangements are in note 10.
Share capital:
Ordinary shares of €0.10 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 2020
‘000 shares
Financial year
ended
31 March 2019
‘000 shares
1,000,000
1,000,000
684,657
684,657
697,589
697,589
Share premium:
On 23 May 2019 the Group announced its intention to undertake a share capital reorganisation to convert part of its share premium into
distributable reserves. A resolution was passed at the Group’s AGM on 31 July 2019 approving this reorganisation. The reorganisation
application proceeded in January 2020, and the conversion of €50m in share premium to revenue reserves was approved by the High
Court in March 2020 and took effect in April 2020.
163
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 23.
Other reserves
Property revaluation
Cash flow hedging
Share-based payment reserve
Balance at end of period
23.a
Property revaluation reserve
Balance at beginning of period
Increase arising on revaluation of properties
Balance at end of period
As at
31 March 2020
€’000
As at
31 March 2019
€’000
3,547
(234)
2,066
5,379
1,889
(288)
7,556
9,157
As at
31 March 2020
€’000
As at
31 March 2019
€’000
1,889
1,658
3,547
1,166
723
1,889
The Group’s head office is carried at fair value and the remeasurement of this property is made through other comprehensive income or
loss (note 17). If disposed of, the property revaluation reserve relating to the premises sold will be transferred directly to retained earnings.
The Group moved head office during the financial year and €2.5m of the balance on this reserve relates to unrealised gains on South
Dock House for the period during which it was the Group’s head office.
Cash flow hedging reserve
23.b
The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging
instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments
that are recognised and accumulated under the heading of cash flow hedging reserve 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 period are included in the following line items:
Balance at beginning of period
Net fair value movement on hedging instruments entered into for cashflow hedges
Balance at end of period
23.c
Share-based payment reserve
Balance at beginning of period
Performance-related payments provided
Settlement of performance-related payments
Balance at end of period
As at
31 March 2020
€’000
As at
31 March 2019
€’000
(288)
54
(234)
(329)
41
(288)
As at
31 March 2020
€’000
As at
31 March 2019
€’000
7,556
1,252
(6,742)
2,066
8,783
6,658
(7,885)
7,556
The share-based payment reserve comprises amounts reserved for the issue of shares in respect of variable remuneration. These are
discussed further in note 10.
24.
Retained earnings
Retained earnings, distributable reserves and dividends on equity instruments
Balance at beginning of financial year
Profit for the financial year
Share issuance costs
Share buy-back
Dividends paid
Balance at end of financial year
164
As at
31 March 2020
€’000
As at
31 March 2019
€’000
515,140
61,043
(10)
(25,036)
(25,866)
415,414
123,459
(14)
–
(23,719)
525,271
515,140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements 24.
Distributable reserves – Company only
Retained earnings, distributable reserves and dividends on equity instruments continued
Retained earnings at end of financial period (Company only)
Unrealised gains on investment property1
Distributable reserves
As at
31 March 2020
€’000
As at
31 March 2019
€’000
444,029
436,014
(408,513)
(388,791)
35,516
47,223
1. Unrealised inter-company profits arising on the transfer of investment properties to subsidiaries of the Company have been eliminated for the purpose of the above calculation
In August 2019 a dividend of 2.0 cent per share (€13.9m) and in January 2020 an interim dividend of 1.75 cent per share (€12.0m)
were paid to the holders of fully paid ordinary shares. A final dividend for the financial year of 3.0 cent per share (c. €20.5m) has been
proposed (31 March 2019: 2.0 cent per share or € 13.9m) (note 13).
On 9 April 2020 €50m in share premium was converted to distributable reserves on foot of a capital reorganisation which took place
during the financial year (note 22).
The Directors confirm that the Company continues to comply with the dividend payment obligations contained within the Irish
REIT legislation.
25.
Financial liabilities
Accounting policy
A financial instrument is classified as a financial liability where it contains an obligation to repay. These are accounted for at
amortised cost. Financial liabilities that are classified as amortised cost are initially measured at fair value minus any transaction costs.
Accounting at amortised cost means that any difference between the proceeds (net of transaction costs) and the redemption value
is recognised in profit or loss or capitalised into investment property over the period of the borrowings using the effective interest
method (see Section IV introduction).
25.a
Borrowings
Non-current
Unsecured bank borrowings
Unsecured private placement notes
Total non-current borrowings
Current
Unsecured bank borrowings
Unsecured private placement notes
Total current borrowings
Total borrowings
The maturity of non-current borrowings is as follows:
Less than one year
Between one and two years
Between two and five years
Over five years
Total
Movements in borrowings during the financial year:
Balance at beginning of financial year
Bank finance drawn
Bank finance repaid
Interest payable1
Balance at end of financial year
As at
31 March 2020
€’000
As at
31 March 2019
€’000
185,109
74,582
156,524
74,524
259,691
231,048
159
358
517
149
358
507
260,208
231,555
As at
31 March 2020
€’000
As at
31 March 2019
€’000
517
–
185,109
74,582
507
–
156,524
74,524
260,208
231,555
As at
31 March 2020
€’000
As at
31 March 2019
€’000
231,555
57,945
219,218
340,412
(29,968)
(326,372)
676
(1,703)
260,208
231,555
1. Balance in the prior year is negative due to the capitalisation of arrangement fees on the refinancing of the RCF and the issue of private placement notes.
165
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
Financial liabilities continued
Borrowings continued
25.
25.a
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 and has a through-cycle leverage target of 20-30% loan to value (“LTV”).
Under the Irish REIT rules the LTV ratio must remain under 50%. The Group has no finance leases as lessee.
In December 2018 the Group refinanced its €400m secured revolving credit facility (“RCF”), which was due to expire in November 2020,
with €395m of debt comprising:
– A €320m unsecured revolving credit facility expiring 19 December 2023
– €75m of unsecured US private placement notes, €37.5m dated 23 January 2026 and €37.5m 23 January 2029, with fixed rate coupons
of 2.36% and 2.69%, respectively
The unsecured RCF has a five-year term and is provided by Bank of Ireland, Wells Fargo, Barclays Bank Ireland and Allied Irish Banks.
This facility is denominated in euro and is subject to a margin of 2.0% over three-month EURIBOR. The Group has entered into derivative
instruments so that the majority (€125m) of its EURIBOR exposure is capped at 0.75% in accordance with the Group’s hedging policy
(note 30.d.ii)
The private placement notes have an average maturity of 7.3 years at 31 March 2020 (31 March 2019: 8.3 years) and were placed with
a single institutional investor. Coupons are fixed so long as the Group’s credit rating remains at investment grade.
Where debt is drawn to finance material refurbishments and developments that take a substantial period of time to take into use,
the interest cost of this debt is capitalised.
All costs related to financing arrangements are amortised using the effective interest rate. The Directors confirm that all covenants have
been complied with and are kept under review. There is significant headroom on the financial covenants (note 2.e).
Net debt reconciliation and LTV
25.b
Net debt and LTV are key metrics in the Group. Net debt is redemption value of borrowings as adjusted by cash available for use.
LTV is the ratio of net debt to investment property value at the measurement date.
Cash and cash equivalents
Cash reserved1
Gross debt – fixed interest rates
Gross debt – variable interest rate
Net debt at period end
Investment property at period end
Loan to value ratio
As at
31 March 2020
€’000
As at
31 March 2019
€’000
28,454
(7,457)
22,372
(5,050)
(75,000)
(75,000)
(187,390)
(159,413)
(241,393)
(217,091)
1,465,183
1,395,418
16.5%
15.6%
1. Cash is reduced by the amounts held in relation to rent deposits, sinking funds and similar arrangements as these balances are not viewed as available funds for the purposes of the
above calculation.
Reconciliation of opening to closing net debt:
Net debt at as at 1 April 2018
17,691
(220,373)
–
–
(202,682)
Assets
Liabilities
Cash and cash
equivalents
€’000
Secured
borrowings
€’000
Unsecured
borrowings
€’000
Private
placement
notes
€’000
Total
€’000
Cash inflow
Cash outflow
Movement in cash and cash equivalents
Movement in cash reserved1
Net debt as at 31 March 2019
Cash inflow
Cash outflow
Movement in cash and cash equivalents
Movement in cash reserved1
Net debt as at 31 March 2020
–
–
(149)
(220)
17,322
–
–
6,082
(2,407)
20,997
(31,000)
(234,413)
(75,000)
(340,413)
251,373
75,000
–
–
–
–
–
326,373
(149)
(220)
(159,413)
(75,000)
(217,091)
(57,945)
29,968
–
–
–
–
–
–
(57,945)
29,968
6,082
(2,407)
(187,390)
(75,000)
(241,393)
–
–
–
–
–
–
–
1. Cash is reduced by the amounts held in relation to rent deposits, sinking funds and similar arrangements as these balances are not viewed as available funds for the purposes of the
above calculation.
166
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements
Deferred tax liabilities
26.
The Group is not generally liable for corporate taxes as it has REIT status (see note 12). Where it is anticipated that certain assets may not
qualify as assets of the property rental business (defined in legislation) or where tax may be due on assets of the property rental business,
deferred tax liabilities may be recognised on unrealised gains recognised on these assets as future taxes may be payable on these gains.
There were no unrecognised deferred tax assets in the period that might be available to offset against these liabilities.
The balance comprises temporary differences attributable to:
Unrealised gains on residual business
27.
Trade and other payables
As at
31 March 2020
€’000
As at
31 March 2019
€’000
395
547
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
Trade and other payables
Payroll taxes payable
Balance at end of period
Of which classified as financial instruments
As at
31 March 2020
€’000
As at
31 March 2019
€’000
4,037
8,631
2,543
1,975
4,470
217
21,873
2,240
5,667
7,013
1,222
1,926
3,742
293
19,863
3,231
Cash is held against balances due for service charges prepaid and sinking fund contributions, €3.7m (March 2019: €3.9m), and rental
deposits from tenants, €2.5m (March 2019: €1.2m). Sinking funds are monies put aside from annual service charges collected from tenants
as contributions towards expenditure on larger maintenance items that occur at irregular intervals 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 trade and other payables approximates to their fair value.
28.
Contract liabilities
Accounting policy
Contract liabilities arise as a result of service charge contracts, the accounting for which is discussed in note 5.
Contract liabilities arise from service charge payables. Service charge arrangements form a single performance obligation under which
the Group purchases services for multi-let buildings and recharges them to tenants. The movements for the purchase of services and
income relating to these activities are presented below.
Contract liabilities at 1 April 2018
(Revenue)/expense recognised during the financial year
Amounts received from customers under contracts
Amounts paid to suppliers
Contract liabilities at 31 March 2019
(Revenue)/expense recognised during the financial year
Amounts received from customers under contracts
Amounts paid to suppliers
Contract liabilities at 31 March 2020
Contract
liabilities
€’000
1,745
243
6,311
(6,291)
2,008
(133)
6,661
(5,359)
3,177
167
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
29.
29.a
Cash flow information
Non-cash movements in operating profit
Revaluation of investment property
Share-based payments
Prepaid remuneration expense
Net impairment losses on financial and contract assets
Depreciation
Other gains
Net finance expense
Tax charge
Notes
31 March 2020
€’000
31 March 2019
€’000
16
10
17
(22,856)
(95,527)
1,252
–
147
520
(10)
7,195
(180)
6,658
2,679
–
284
(140)
8,221
547
Non-cash movements in operating profit
(13,932)
(77,278)
29.b
Cash expended on investment property
Investment property purchases
Development and refurbishment expenditure
Deposit paid on investment property
Decrease/(increase) in investment property costs payable
Cash expended on investment property
29.c
Cash received from sales of investment property
Property sales
Profit on sales
Decrease/(Increase) in receivable from investment property sales
Cash received from sales of investment property
29.d
Cash expended on property, plant and equipment
Additions to fixed assets
Disposal of fixed assets
Amounts due at financial year end
Cash expended on property, plant and equipment
Notes
31 March 2020
€’000
31 March 2019
€’000
16
16
21
22,820
23,636
(145)
1,630
40,030
47,221
145
(549)
47,941
86,847
Notes
31 March 2020
€’000
31 March 2019
€’000
16
7
21
Notes
17
–
–
34,503
34,503
96,077
2,578
(34,639)
64,016
31 March 2020
€’000
31 March 2019
€’000
2,086
(50)
(20)
2,016
52
–
–
52
Financial instruments and risk management
Financial risk management objectives and policy
30.
30.a
The Group takes calculated risks to realise its 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 & 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.
168
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements
30.
30.b
The following table shows the Group’s financial assets and liabilities and the methods used to calculate fair value:
Financial instruments and risk management continued
Financial assets and financial liabilities
Asset/Liability
Carrying value
Level
Fair value calculation technique Assumptions
Trade and
other receivables
Amortised cost
3
Discounted cash flow
Financial liabilities Amortised cost
3
Discounted cash flow
Derivative
financial instruments
Fair value
2
Calculated fair value price
Trade and
other payables
Amortised cost
3
Discounted cash flow
Contract liabilities Amortised cost
3
Discounted cash flow
Most trade receivables are very short-term, the
majority less than one month, and therefore
face value approximates fair value on a
discounted basis.
The fair value of financial liabilities held at
amortised cost have been calculated by
discounting the expected cash flows at
prevailing interest rates.
The fair value of derivative financial instruments
is calculated using pricing based on observable
inputs from financial markets.
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 approximates fair value on a
discounted basis.
All contract liabilities classified as financial
instruments are very short-term, the majority
less than one month, and therefore face value
approximates fair value on a discounted basis.
The carrying value of non-interest-bearing financial assets and financial liabilities approximates to their fair values, largely due to their
short-term maturities.
Fair value hierarchy
30.c
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:
As at 31 March 2020
Trade and other receivables
Derivatives at fair value
Borrowings
Trade and other payables
Contract liabilities
Of which are
assessed as
financial
instruments
€’000
1,591
34
Total
€’000
13,966
34
(260,208)
(260,208)
(21,873)
(3,177)
(2,240)
(3,177)
Measured at
fair value
€’000
Measured at
amortised
cost
€’000
Total financial
instruments
€’000
Fair value
financial
instruments
€’000
–
34
–
–
–
1,591
–
1,591
34
1,591
34
(260,208)
(260,208)
(266,559)
(2,240)
(3,177)
(2,240)
(3,177)
(2,240)
(3,177)
(271,258)
(264,000)
34
(264,034)
(264,000)
(270,351)
Level
3
2
3
3
3
169
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
30.
30.c
As at 31 March 2019
Financial instruments and risk management continued
Fair value hierarchy continued
Trade and other receivables
Derivatives at fair value
Borrowings
Trade and other payables
Contract liabilities
Of which are
assessed as
financial
instruments
€’000
37,630
194
Total
€’000
48,092
194
(231,555)
(231,555)
(19,863)
(2,008)
(3,231)
(2,008)
Level
3
2
3
3
3
Measured at
fair value
€’000
Measured at
amortised cost
€’000
Total financial
instruments
€’000
–
194
–
–
–
37,630
37,630
–
194
(231,555)
(231,555)
(231,555)
(3,231)
(2,008)
(3,231)
(2,008)
(3,231)
(2,008)
Fair value
financial
instruments
€’000
37,630
194
Movements of assets measured at fair value in Level 3
This reconciliation includes investment property, loans and other financial assets which are included in trade payables, trade receivables
and contract liabilities and measured at fair value. Measurement of these assets is described in note 16 (Investment property) and in the
table at the start of this note.
(205,140)
(198,970)
194
(199,164)
(198,970)
(198,970)
Balance at beginning of financial year
Transfers out of level 3
Purchases, sales, issues and settlement
Purchases1
Sales
Loan redemption
Transfer to/from property, plant and equipment
Fair value movement
Balance at end of financial year
1.
Includes development, refurbishment and remedial expenditure.
As at
31 March 2020
€’000
As at
31 March 2019
€’000
1,395,418
1,308,869
–
–
46,456
–
–
453
87,251
(96,077)
(152)
–
22,856
95,527
1,465,183
1,395,418
30.d
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance.
Financial risk management
Risk
Exposure arising from
Measurement
Management
Market risk – interest
rate risk
Long-term borrowings at
variable rates
Sensitivity analysis
Credit risk
Cash and cash equivalents,
trade receivables, derivative
financial instruments
Liquidity risk
Borrowings and other liabilities
Ageing analysis, credit ratings
where applicable
Cash flow forecasts are completed as
part of budgeting process
Derivative products – cap/
swaption arrangements
Cash investment policy with
minimum ratings Diversification of
deposits where merited
Availability of borrowing facilities
The policies for managing each of these and the principal effects of these policies on the results for the financial year are
summarised below:
Risk management framework
i.
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, conducted by PwC Ireland, which undertakes periodic reviews of different elements of
risk management controls and procedures.
ii.
Market risk
Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk
reflects interest rate risk, currency risk and other price risks. The Group has no financial assets or liabilities denominated in foreign
currencies. The Group’s financial assets mainly comprise cash and cash equivalents, trade receivables. Financial liabilities comprise short-
term payables, private placement notes and bank borrowings. Therefore the primary market risk is interest rate risk.
170
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements
Financial instruments and risk management continued
Financial risk management continued
Market risk continued
30.
30.d
ii.
The Group has both fixed and variable rate borrowings. Variable rate borrowings consist of an unsecured revolving credit facility and
the Group has partly hedged against increasing rates by entering into interest rate caps and swaptions to restrict EURIBOR costs to a
maximum of 0.75%.
The following therefore illustrates the potential impact on profit and loss for the financial year of a 1% or 2% increase in EURIBOR:
As at 31 March 2020
Amount drawn
Hedging (caps)
€125m expires December 2021: strike 0.75%
Impact on profit after hedging
As at 31 March 2019
Amount drawn
Hedging (caps)
€100m expires November 2019: strike 1.00%1
€125m expires December 2021: strike 0.75%
Impact on profit after hedging
Impact on
profit +1%
EURIBOR
Increase
€’000
Impact on
profit +2%
EURIBOR
Increase
€’000
(1,874)
(3,748)
313
(1,561)
1,563
(2,185)
Impact on
profit +1%
EURIBOR
Increase
€’000
Impact on
profit +2%
EURIBOR
Increase
€’000
(1,594)
(3,188)
–
313
(1,281)
344
1,563
(1,281)
€’000
(187,390)
125,000
€’000
(159,413)
34,413
125,000
1. This calculation uses the more advantageous hedge first and therefore shows the best-case scenario.
Exposure to interest rates is limited to the exposure of the Group’s earnings from borrowings. Variable rate borrowings were €187m
(March 2019: €159m) and gross debt was €262m in total at the financial year end of which €75m was fixed rate private placement
notes (March 2019: €234m of which €75m was fixed). The Group’s drawings under its facilities were based on a EURIBOR rate of 0%
throughout the financial year.
Credit risk
iii.
Credit risk is the risk of loss of principal or loss of a financial reward stemming from a counterparty’s failure to repay a loan or otherwise
meet a contractual obligation. Credit risk is therefore, for the Group and Company, the risk that the counterparties underlying its
assets default.
The Group has the following types of financial assets and cash that are subject to credit risk:
Cash and cash equivalents: These 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 Group has also engaged the services of a depository to ensure the security of the cash assets.
Trade and other receivables: Rents are generally received in advance from tenants and therefore there tends to be a low level of credit
risk associated with this asset class. As part of the Group’s response to the COVID-19 pandemic, a credit rating system was introduced for
tenants. This is used, together with an analysis of past loss patterns and future expectations of economic impacts, to create a matrix for
the calculation and provision of ECL (note 21). Included in non-current trade receivables is a net amount of €1.0m relating to expenditure
on fit-outs that is recoverable from tenants over the duration of the lease (31 March 2019: €0.7m). This amount is monitored closely in the
current economic environment due to its long-term nature. An amount of €0.1m was due in relation to the sale of an investment property
at 31 March 2020 (March 2019: €34.6m). Otherwise, the Group has small balances in trade receivables which are immaterial in the context
of credit risk.
Trade receivables are managed under a ‘held to collect’ business model as described in note 21, ECL on financial and contract assets
recognised during the financial year were €147k (31 March 2019: €nil). Details on the Group’s policy on providing ECL can be found in
the introduction to Section IV. The Group has a diverse range of tenants, many of which are large multinational companies (65% of its
contracted rent is from the TMT sector and Government/state entities), and to date our rent collection statistics have remained strong
(note 2.e).
171
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
30.
30.d
iii.
Financial instruments and risk management continued
Financial risk management continued
Credit risk
The maximum amount of credit exposure is therefore:
Other financial assets
Trade and other receivables
Cash and cash equivalents
Balance at end of financial year
As at
31 March 2020
€’000
As at
31 March 2019
€’000
34
13,966
28,454
42,454
194
37,630
22,372
60,196
Liquidity risk
iv.
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 financial year end
As at
31 March 2020
€’000
As at
31 March 2019
€’000
6,638
40,692
The nature of the Group’s activities means that the management of cash is particularly important and is managed over a four-year period.
The budget and forecasting process includes cash forecasting, capital and operational expenditure projections, cash inflows and dividend
payments on a quarterly basis over the four-year horizon. This allows the Group to monitor the adequacy of its financial arrangements.
The Group had access at 31 March 2020 to €133m (March 2019: €161m) in undrawn amounts under its revolving credit facility (note 25.a),
which matures in December 2023. As a precaution given the uncertainty caused by COVID-19, the Group has implemented a policy of
maintaining a minimum cash balance of €20m at all times for liquidity purposes.
Exposure to liquidity risk
Listed below are the contractual cash flows of the Group’s financial liabilities. This includes contractual maturity in relation to borrowings
which is also the earliest maturity of the facilities assuming that covenants are not breached. Covenants are reviewed quarterly and
scenario analyses performed as to the circumstances under which these covenants could be breached in order to monitor going concern
and viability (see also note 2.e). 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%
throughout the period.
Carrying
amount
€’000
Contractual
cash flows
€’000
6 months
or less
€’000
6-12
months
€’000
1-2
years
€’000
2-5
years
€’000
>5
years
€’000
260,208
285,517
2,240
3,177
2,240
3,177
265,625
290,934
2,821
2,240
3,177
8,238
2,821
5,642
194,629
79,604
–
–
–
–
–
–
–
–
2,821
5,642
194,629
79,604
Carrying
amount
€’000
Contractual
cash flows
€’000
6 months
or less
€’000
6-12
months
€’000
1-2
years
€’000
2-5
years
€’000
>5
years
€’000
234,413
265,390
3,231
2,008
3,231
2,008
239,652
270,629
2,541
3,231
2,008
7,780
2,541
5,082
173,765
81,461
–
–
–
–
–
–
–
–
2,541
5,082
173,765
81,461
At 31 March 2020
Non-derivatives
Borrowings
Trade payables
Contract liabilities
Total
At 31 March 2019
Non-derivatives
Borrowings
Trade payables
Contract liabilities
Total
172
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements 30.
30.d
v.
The Group’s objectives when managing capital are to:
Financial instruments and risk management continued
Financial risk management continued
Capital management
– Safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for
other stakeholders
– Maintain an optimal capital structure to minimise the cost of capital
In order to maintain or adjust capital, the Group may adjust the amount of dividends paid to shareholders (whilst ensuring it maintains
compliance with the dividend distribution requirements of the Irish REIT regime), return capital to shareholders, issue new shares or sell
assets to reduce debt. In November 2019, the Company completed a share buyback programme to return €25m, the majority of the net
sales proceeds (€35m) from the sale of an investment property, to shareholders (note 22). The Group is also obliged to distribute at least
85% of its property rental income annually under the REIT regime regulations.
Capital comprises share capital, retained earnings and other reserves as disclosed in the consolidated statement of changes in equity.
At 31 March 2020 the total capital of the Group was €1,231m (March 2019: €1,219m).
The key performance indicators used in evaluating the achievement of strategic objectives, and as performance measurements for
remuneration, are as follows:
– Total Property Return (“TPR”) %: Measures the relative performance of the Company’s investment property portfolio versus the Irish
property market, as calculated by the MSCI
– Total Accounting Return (“TAR”) %: Measures the absolute growth in the Group’s EPRA NAV per share plus any ordinary dividend paid
during the financial year
– EPRA earnings per share (cent): Measures the profit after tax excluding revaluations and gains and losses on disposals and associated
taxation (if any). For property companies it is a key measure of a company’s operational performance and capacity to pay dividends.
– Total Shareholder Return (“TSR”) %: Measures growth in share value over a period assuming dividends are reinvested in the purchase
of shares. Allows comparison of performance against other companies in the Group’s listed peer group
The Group seeks to leverage its equity capital in order to enhance returns (note 25.a). The LTV is expressed as net debt (note 25.b)
divided by total investment property value (as shown in the balance sheet). The Group’s policy is to maintain an LTV ratio of 20-30%
on a through-cycle basis and not to incur debt above an LTV ratio of 40% (see note 25.b)
Loan covenants
Under the terms of the major borrowing facilities, the Group is required to comply with the following key financial covenants:
– The LTV ratio must not exceed 50%
– Interest cover must be greater than 1.5 times on both a 12-month historical and forward basis
– The net worth (Net Asset Value) of the Group must exceed €400m at all times
The Group has complied with these key covenants throughout the reporting period.
Other
In addition, the LTV ratio must remain under 50% under the rules of the Irish REIT regime.
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 a minimum of 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.
173
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information SECTION V – OTHER
This section contains notes that do not belong in any of the previous categories.
31.
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
Total
As at
31 March 2020
€’000
As at
31 March 2019
€’000
64,206
55,395
178,678
162,407
142,282
195,291
385,166
413,093
The Group leases its investment properties under operating leases. The weighted average unexpired lease term (“WAULT”) at 31 March
2020, excluding residential properties and weighted on contracted rents, based on the earlier of lease break or expiry date was 6.4 years
(March 2019: 7.5 years).
These calculations are based on all leases in place at 31 March 2020, i.e. including leases that are in place but have not yet commenced.
Capital commitments
32.
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 €18m (March 2019: €35m).
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.
174
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements 34.
34.a
All transactions between the Company and its subsidiaries are eliminated on consolidation.
Related parties
Subsidiaries
The following are the major subsidiaries of the Group:
Name
Hibernia REIT
Holding Company
Limited
Hibernia REIT
Holdco One
Limited
Hibernia REIT
Holdco Two
Limited
Hibernia REIT
Holdco Three
Limited
Hibernia REIT
Holdco Four
Limited
Hibernia REIT
Building
Management
Services Limited
NL7
Limited Partnership
Registered address/
country of incorporation
1WML
Windmill Lane
Dublin D02 F206
Ireland
1WML
Windmill Lane
Dublin D02 F206
Ireland
1WML
Windmill Lane
Dublin D02 F206
Ireland
1WML
Windmill Lane
Dublin D02 F206
Ireland
1WML
Windmill Lane
Dublin D02 F206
Ireland
1WML
Windmill Lane
Dublin D02 F206
Ireland
1WML
Windmill Lane
Dublin D02 F206
Ireland
Shareholding/
number of
shares held
100%/1
100%/1
100%/1
100%/1
100%/1
100%/1
n/a
Hibernia REIT
Finance Limited
1WML
Windmill Lane
Dublin D02 F206 Ireland
100%/10
Directors
Company Secretary
Nature of business
Justin Dowling
Thomas Edwards-Moss
Kevin Nowlan
Frank O’Neill
Justin Dowling
Thomas Edwards-Moss
Kevin Nowlan
Frank O’Neill
Edwina Governey
Kevin Nowlan
Mark Pollard
Justin Dowling
Thomas Edwards-Moss
Frank O’Neill
Justin Dowling
Thomas Edwards-Moss
Frank O’Neill
Justin Dowling
Thomas Edwards-Moss
Kevin Nowlan
Frank O’Neill
Hibernia REIT
Holdco Two Limited
(General Partner)
Justin Dowling
Thomas Edwards-Moss
Kevin Nowlan
Frank O’Neill
Sean O’Dwyer
Holding property
interests
Sean O’Dwyer
Holding
property interests
Sean O’Dwyer
General partner
Sean O’Dwyer
Property
development
Sean O’Dwyer
Holding property
interests
Sean O’Dwyer
Property
management
Sean O’Dwyer
Holding property
interests
Sean O’Dwyer
Financing activities
WK Nowlan REIT
Management
Limited
1WML
Windmill Lane
Dublin D02 F206
Ireland
100%/300,000 Thomas Edwards-Moss
Sean O’Dwyer
Kevin Nowlan
Frank O’Neill
Investment
holding company
Other related party transactions
34.b
Both Kevin Nowlan and Frank O’Neill were shareholders in WK Nowlan Real Estate Advisors up until June 2019 when these shareholdings
were disposed of in full.
The rent review with WK Nowlan Real Estate Advisors, which was live during the financial year ended 31 March 2019, was settled during
this financial year. The Group earned rent of €115k (inclusive of backdated amounts) from WK Nowlan Real Estate Advisors in Marine
House during the financial year (March 2019: €115k). The Group was not owed any rent at financial year end (March 2019: €73k).
As his consultancy agreement with the Company had ceased prior to the commencement of this financial year, Frank Kenny
(Non- Executive Director) earned no consultancy fees (March 2019: €140k). No amounts were owed to him in respect of consultancy
fees at the financial year end (March 2019: €35k).
Amounts due in relation to the final tranche of the IMA performance-related payments which expired on 26 November 2018 were settled
by the issuance of shares in the financial year as follows: Kevin Nowlan: €2.3m, Frank Kenny: €1.5m, William Nowlan: €1.1m and Frank
O’Neill: €0.5m. (March 2019: Kevin Nowlan: €2.8m, Frank Kenny: €1.8m, William Nowlan: €1.4m and Frank O’Neill: €0.6m).
Thomas Edwards-Moss (CFO) rented an apartment from the Group at market rent and paid €14k in rent during the financial year
(March 2019: €12k).
Stewart Harrington (Non-Executive Director) rented an apartment from the Group for part of the financial year at market rent and paid
€9k in rent during the financial year (March 2019: €nil).
175
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information 34.
34.c
In addition to the Executive and Non-Executive Directors, the following are the key management personnel of the Group:
Related parties continued
Key management personnel
Justin Dowling
Edwina Governey
Sean O’Dwyer
Frank O’Neill
Mark Pollard
Director of Property
Chief Investment Officer
Company Secretary and Risk & Compliance Officer
Director of Operations
Director of Development
The remuneration of the key management personnel paid 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 2020
€’000
Financial year
ended
31 March 2019
€’000
3,385
3,035
262
–
367
226
–
353
4,014
3,614
The total fixed remuneration paid to the key management personnel in the financial year, all of whom are engaged in managing the Group
activities, was €4,013,896 of which €2,883,473 comprised fixed remuneration and €1,130,423 comprised variable remuneration (31 March
2019: €3,614,423 of which €2,820,157 comprised fixed remuneration and €794,266 comprised variable remuneration).
The remuneration of Executive Directors and key management is determined by the Remuneration Committee, having regard to the
performance of individuals and of the Group and market trends.
35.
1. The Directors have proposed a final dividend of 3.0 cent per share that is subject to approval at the AGM to be held on 29 July 2020.
Events after the reporting period
2. On 23 May 2019 the Group announced its intention to undertake a share capital reorganisation to convert part of its share premium into
distributable reserves. A resolution was passed at the Group’s AGM on 31 July 2019 approving this reorganisation. The reorganisation
and conversion of €50m of share premium into distributable reserves was approved by the Court in March 2020 and legally registered
in April 2020.
176
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDHibernia REIT plc Annual Report 2020Financial statements
C O M P A N Y S T A T E M E N T O F F I N A N C I A L P O S I T I O N
A S A T 3 1 M A R C H 2 0 2 0
Assets
Non-current assets
Investment properties
Property, plant and equipment
Investment in subsidiaries
Other assets
Loans to subsidiaries
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
Share capital
Share premium
Capital redemption fund
Other reserves
Retained earnings
Total equity
Non-current liabilities
Financial liabilities
Lease liability
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Financial liabilities
Lease liability
Trade and other payables
Contract liabilities
Total current liabilities
Total equity and liabilities
Notes
31 March 2020
€’000
31 March 2019
€’000
e
f
g
h
i
j
j
h
k
k
k
l
m
n
o
p
n
o
q
r
1,277,685
1,207,742
3,803
26,235
534
5,905
26,339
–
116,991
148,946
7,575
5,389
1,432,823
1,394,321
3,647
26,779
4,202
20,733
30,426
24,935
–
534
30,426
25,469
1,463,249
1,419,790
68,466
69,759
630,276
624,483
1,757
4,582
–
9,445
444,029
436,014
1,149,110
1,139,701
288,545
259,294
2,085
395
–
547
291,025
259,841
517
203
19,617
2,777
23,114
507
–
18,123
1,618
20,248
1,463,249
1,419,790
The Company’s profit after tax for the financial year ended 31 March 2020 determined in accordance with FRS 101 is €58.9m. The Company
has undergone a transition from reporting under International Financial Reporting Standards adopted by the European Union to FRS 101
Reduced Disclosure Framework, which is not considered to have had a material impact on the results presented in financial statements.
Its profit after tax for the financial year ended 31 March 2019 was determined in accordance with IFRS and was €115.0m.
The Company’s financial statements on pages 177 to 186 were approved and authorised for issue by the Board of Directors on
15 June 2020 and were signed on its behalf by:
Kevin Nowlan
Chief Executive Officer
16 June 2020
Thomas Edwards-Moss
Chief Financial Officer
16 June 2020
177
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
C O M P A N Y S T A T E M E N T O F C H A N G E S I N E Q U I T Y
F O R T H E F I N A N C I A L Y E A R E N D E D 3 1 M A R C H 2 0 2 0
Share
capital
€’000
Share
premium
€’000
Capital
redemption
fund
€’000
Property
revaluation
reserve
€’000
Cashflow
hedge
reserve
€’000
Share-based
payment
reserve
€’000
Retained
earnings
€’000
Total
€’000
1,166
–
(231)
–
723
231
8,783
344,758
1,041,172
–
–
114,989
114,989
–
954
–
–
–
–
–
–
–
–
–
–
–
–
8,783
459,747
1,157,115
(7,546)
(14)
(14)
–
(23,719)
(23,719)
6,319
–
6,319
7,556
436,014
1,139,701
–
–
58,927
58,927
–
627
7,556
494,941
1,199,255
(6,257)
(10)
(10)
–
–
767
(25,036)
(25,036)
(25,866)
(25,866)
–
767
2,066
444,029
1,149,110
Balance at 1 April 2018
69,235
617,461
Profit for the financial year
Other comprehensive income
for the period
Total comprehensive income
for the period
–
–
–
–
69,235
617,461
Issue of share capital
524
7,022
Dividends paid
Share-based payments
–
–
–
–
Balance at 31 March 2019
69,759
624,483
Profit for the financial year
Other comprehensive income
for the financial year
Total comprehensive income
for the financial year
–
–
–
–
69,759
624,483
Issue of share capital
464
5,793
–
–
–
–
–
–
–
–
–
–
–
Own shares acquired and
cancelled in the financial year
Dividends paid
Share-based payments
(1,757)
–
–
–
–
–
1,757
–
–
1,889
–
–
1,889
–
627
2,516
–
–
–
–
Balance at 31 March 2020
68,466
630,276
1,757
2,516
178
Hibernia REIT plc Annual Report 2020Financial statements N O T E S T O T H E C O M P A N Y F I N A N C I A L S T A T E M E N T S
F O R T H E F I N A N C I A L Y E A R E N D E D 3 1 M A R C H 2 0 2 0
a) General information
Hibernia REIT plc, the “Company”, registered number 531267 is a public limited company and is incorporated and domiciled in Ireland.
The address of the Company’s registered office is 1WML, Windmill Lane, Dublin, D02 F206, Ireland. Refer to note 1 of the consolidated
financial statements.
b) Basis of preparation
These financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework.
The Company meets the definition of a qualifying entity under FRS 100 Application of Financial Reporting Requirements issued by the
Financial Reporting Council. The Company has undergone a transition from reporting under International Financial Reporting Standards
adopted by the European Union (“IFRS”) to FRS 101 ’Reduced Disclosure Framework as issued by the Financial Reporting Council
(“FRS 101”). The transition from IFRS to FRS 101 is not considered to have had a material impact on the results presented in the financial
statements. The reason for the transition is to simplify the disclosures given in the Company financial statements with the consolidated
financial statements of the Group providing more detailed disclosure.
The Company financial statements were prepared on a going concern basis under the historical cost convention, except for the
revaluation of investment properties that are measured at fair value at the end of each reporting period, and the relevant financial
reporting framework that has been applied is the Companies Act 2014 and FRS 101.
The financial statements of the Company are consolidated in the Hibernia REIT plc consolidated Group financial statements, prepared
in accordance with IFRS and the Companies Act 2014, which are available to the public (see pages 128 to 176 of the Annual Report).
FRS 101 Disclosure Exemptions
in preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International
Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes amendments where necessary in order to comply
with the Companies Act 2014 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken:
• The requirements of IAS 1 Presentation of Financial Statements:
– to provide a statement of cash flows for the period
– to provide a statement of compliance with IFRS
– to disclose information on the management of capital
– to disclose comparative period reconciliations for tangible fixed assets
• The requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to disclose new
IFRS that have been issued but are not yet effective
• The requirements in IAS 24 Related Party Disclosures:
– to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which
is a party to the transaction is wholly owned by such a member
– to disclose key management personnel compensation
As the consolidated financial statements of the Company and its subsidiaries include the equivalent disclosures, the Company has also
availed of the following disclosure exemptions under FRS 101:
• IFRS 2 Share-Based Payment in respect of Group-settled share-based payments
• Paragraphs 91 to 99 of IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial instrument Disclosures
Going concern
These financial statements have been prepared on a going concern basis. The Board has assessed the viability of the Company as part of
its overall assessment of the Group. For further information on going concern refer to note 2.e of the consolidated financial statements.
Significant judgements
The significant judgements made in the preparation of these financial statements are the same as those for the Group and are detailed
in note 2.f of the consolidated financial statements. These are judgements around the valuation basis of investment property, key
assumptions in terms of unobservable inputs and the impact that the COVID-19 pandemic has had thereon.
Analysis of sources of estimation uncertainty
The sources of estimation uncertainty are the same as those for the Group which are detailed in note 2.g of the consolidated
financial statements.
179
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c)
Operating profit is stated after charging:
Operating profit
Non-Executive Directors’ fees
Staff costs
Professional fees: property-related
Professional fees: corporate
Valuer’s fees
Depository fees
Depreciation
Other administration expenses
Top-up internalisation expenses
Prepaid remuneration expense
Administration expenses
Auditor’s remuneration
Company
Audit of the Company financial statements
Other assurance services1
Tax advisory services
Other non-audit services
Total
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
561
6,829
1,055
1,762
285
315
599
1,799
–
–
447
4,516
537
1,758
394
299
281
1,411
1,482
2,679
13,205
13,804
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
75
18
–
–
93
72
26
–
–
98
1. Other assurance services are for the review of the Interim Report. In the financial year ended 31 March 2019 it included a review of the final IMA performance calculation in early
2019 in addition to the review of the Interim Report
d)
Employment
Number of employees
Total employees at financial year end
Average employees
Financial
year ended
31 March 2020
Number
Financial
year ended
31 March 2019
Number
27
24
23
22
No amount of salaries and other benefits were capitalised into investment properties. The staff costs for the above employees were:
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
4,796
4,097
544
1,149
340
360
587
282
6,829
5,326
Wages and salaries
Social insurance costs
Employee share-based payment expense
Pension costs – defined contribution plan
Total
All staff costs are allocated to administration expenses.
180
Hibernia REIT plc Annual Report 2020Financial statements e)
Investment property
31 March 2020
Fair value category
Carrying value at 1 April 2019
Property purchases
Development and refurbishment expenditure
Revaluations included in income statement
Transferred from owner occupied property
Office assets
Level 3
€’000
Office
development
assets
Level 3
€’000
Residential
assets
Level 3
€’000
Industrial/
landassets
Level 3
€’000
Total
Level 3
€’000
1,018,600
16,199
145,280
27,663
1,207,742
8,741
6,2672
1,190
6,2103
–
13,557
18,243
–
694
825
4,561
–
13,385
157
(3,887)
–
22,8201
20,806
20,107
6,210
Carrying value at 31 March 2020
1,041,008
47,999
151,360
37,318
1,277,685
1. A VAT refund of €0.5m was received for prior years relating to the grant of VAT inclusive leases in 2DC, following its refurbishment. Gross acquisition spend was therefore €23.3m.
2. This includes capital expenditure on SJRQ and 2WML after their transfer to the office segment in the prior year.
3. The Group moved to a new head office in 1WML, which is held by a subsidiary company, in late 2019. The space previously occupied by the Group in South Dock House has been
leased to a tenant from December 2019 and was transferred to investment property at fair value on the date on which it changed in use.
Key unobservable inputs used in the valuation of the Company’s investment property at 31 March 2020
Office
Office development
Residential1
Industrial/land
Estimated rental value
Equivalent yield
Market value
€’000
Low
High
1,041,008
€25.00 psf
€62.5 psf
47,999
€30.00 psf
€62.00 psf
151,360
€25,200 pa
€32,400 pa
37,318
€5.00 psf
€9.00 psf
Low
3.99%
4.42%
3.70%
7.65%
High
6.65%
4.42%
4.07%
7.94%
1. Average ERV based on a two-bedroom apartment. Residential yields are based on the contracted income after deducting operating expenses. The market standard deduction is
20% of gross rental income. Based on the Valuer’s estimation of market rent no deduction for operating expenses (as per 31 Mar 2019 below), the gross yields on the same assets as
noted at 31 Mar 2019 would be 5.28% (low) and 6.37% (high).
Sensitivity data
Impact on market value
of a 5% change in the
estimated rental value
Impact on market value
of a 10% change in the
estimated rental value
Impact on market value
of a 25bp change in the
equivalent yield
Impact on market value
of a 50bp change in the
equivalent yield
Sensitivities
Increase €‘m Decrease €’m Increase €‘m Decrease €’m Increase €‘m Decrease €’m Increase €‘m Decrease €’m
Office
Office development
Residential
Industrial/land
Total
52.2
2.8
7.6
0.3
62.9
(52.2)
(2.8)
(7.6)
(0.3)
104.1
(104.1)
5.7
15.1
0.6
(5.7)
(15.1)
(0.6)
(73.1)
(3.8)
(9.4)
(0.3)
81.6
4.3
10.7
0.3
(138.8)
(7.3)
(17.7)
(0.5)
173.9
9.2
23.0
0.6
(62.9)
125.5
(125.5)
(86.6)
96.9
(164.3)
206.7
Each 5% movement in construction costs would impact the investment property valuations by €10m at 31 March 2020.
For further information on the Company’s investment property refer to note 16 of the consolidated financial statements.
f)
Property, plant and equipment
Accounting policy
The Group’s accounting policy for property, plant and equipment is set out in note 17 to the consolidated financial statements.
In addition, the Company has recognised one right of use asset, the lease between itself and a subsidiary company in relation to the
Group’s head office in 1WML.
A right-of-use asset and lease creditor may be recognised at the commencement date for contracts containing a lease. The lease
creditor is initially measured at the present value of the future minimum lease payments, discounted using the interest rate implicit in
the lease, in this case the valuers yield of the office space occupied. After initial recognition, the lease creditor is measured at amortised
cost using the effective interest method. The right-of-use asset is depreciated over the lease term and is tested periodically for
impairment if an impairment indicator is considered to exist.
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f)
Property, plant and equipment continued
At 31 March 2020
Cost or valuation
At 1 April 2019
Additions1
Disposals1
Transferred to investment property1
Revaluation recognised in other comprehensive income
At 31 March 2020
Depreciation
At 1 April 2019
Charge for the financial year
Disposals
Transferred to investment property1
At 31 March 2020
Net book value at 31 March 2020
Land and
buildings
€’000
Right-of-use
asset
€’000
Office and
computer
equipment
€’000
Leasehold
improvements
and fixtures
and fittings
€’000
5,940
–
–
(6,567)
627
–
(297)
(61)
–
358
–
–
–
2,403
–
–
–
2,403
–
(140)
–
–
(140)
2,263
188
71
(107)
–
–
152
(133)
(33)
87
–
(79)
73
598
1,647
(598)
–
–
1,647
(391)
(365)
576
–
(180)
1,467
Total
€’000
6,726
4,121
(705)
(6,567)
627
4,202
(821)
(599)
663
358
(399)
3,803
1. The Group moved to a new head office in 1WML, which is held by a subsidiary company, in late 2019. The space previously occupied by the Group in South Dock House has been
leased to a tenant from December 2019 and was transferred to investment property at fair value on the date on which it changed in use.
For further information on the Company’s property, plant and equipment refer to note 17 of the consolidated financial statements.
g)
Investment in subsidiaries
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.
Investments in subsidiaries are held at cost. The Company assesses investments for impairment whenever events or changes in
circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists, the
Company makes an estimate of its recoverable amount. When the carrying amount of an investment exceeds its recoverable amount,
the investment is considered impaired and is written down to its recoverable amount. In the opinion of the Directors the shares in
subsidiaries are worth at least the amounts at which they are stated in the balance sheet.
Balance at end of financial year
As at
As at
31 March 2020
€’000
31 March 2019
€’000
26,235
26,339
The major subsidiaries of the Company are disclosed in note 34.a of the consolidated financial statements. The Group has other subsidiary
companies which are generally property management companies and are not considered material in the Group’s operations. During the
financial year an investment of €0.1m was impaired. The Group has no interests in unconsolidated subsidiaries.
h)
For information on other assets and non-current assets held for sale refer to note 18 of the consolidated financial statements
Other assets
i)
Loans to subsidiaries
Accounting policy
Classification and measurement
Loans to subsidiaries are financial assets that are managed under a ‘held to collect’ business model. The cash collected represents
‘solely principal and interest’ (the “SPPI test”) where applicable. Loans to subsidiaries are recognised initially at fair value plus any
directly attributable transaction costs.
182
Hibernia REIT plc Annual Report 2020Financial statements
i)
Loans to subsidiaries continued
Subsequent to initial recognition loans to subsidiaries are measured at amortised cost using the effective interest method, less any
impairment losses. As these are repayable on demand the loan amount approximates to fair value at recognition. Loans to subsidiaries
are assessed under a three-stage model:
– Stage 1: Credit risk has not increased significantly since initial recognition – recognise 12 months expected lifetime credit loss (“ECL”),
and recognise interest (if any) on a gross basis
– Stage 2: Credit risk has increased significantly since initial recognition – recognise lifetime ECL, and recognise interest (if any) on a
gross basis
– Stage 3: Financial asset is credit impaired and lifetime ECL recognised
Once it is determined which stage a loan to a subsidiary is at, the ECL is calculated and applied where relevant. Loans to subsidiaries
are usually repayable on demand and are without a significant financing component. Therefore expected credit losses are based on
the assumption that the repayment of the loan is demanded at the reporting date or earliest possible call date where another date has
been agreed. If the recovery strategies indicate that the Company would fully recover the balance outstanding on the loans, the ECL is
limited to the effect of discounting, at the loans’ effective discount rate, the amount due over the period to collection.
Balance at beginning of financial year
Loan advances
Loan repayments1
Balance at end of financial year
The maturity of intercompany loans are as follows:
Less than one year
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
148,946
4,233
(36,188)
116,991
113,139
36,629
(822)
148,946
116,991
148,946
1. 77 SJRQ was held in a subsidiary company, Hibernia REIT Holdco One Ltd, and disposed of in the prior year.
The majority of the above balance, €116m, is due from the following entities, Hibernia REIT Holding Company Limited (1 Windmill Lane
office building and Hanover Mills residential units) and NL7 Limited Partnership (Newlands development project). 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 they are
held at amortised cost. Management assessed the loans for recovery and determined that there has been no significant increase in credit
risk since initial recognition, all loan to subsidiaries remain at stage 1 and they expect to recover the balances outstanding in full and that
therefore no impairment loss needs to be recognised.
j)
Trade and other receivables
Non-current
Property income receivables
Recoverable capital expenditure
Expected credit loss allowance
Balance at end of period – non-current
Current
Property income receivables
Recoverable capital expenditure
Expected credit loss allowance
Deposits paid on investment property
Prepayments
Income tax refund due
VAT refundable
Balance at end of period – current
Balance at end of period – total
Of which are classified as financial assets
As at
As at
31 March 2020
€’000
31 March 2019
€’000
6,950
661
(36)
4,624
765
–
7,575
5,389
1,998
460
(61)
2,397
–
964
2
284
3,647
11,222
1,405
2,746
333
–
3,079
145
518
42
418
4,202
9,591
1,987
The Directors consider that the carrying value of trade and other receivables approximates to their fair value.
For information on trade receivables refer to note 21 of the consolidated financial statements.
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N O T E S T O T H E C O M P A N Y F I N A N C I A L S T A T E M E N T S C O N T I N U E D
k)
For information on issued share capital refer to note 22 of the consolidated financial statements.
Issued share capital and share premium
l)
Other reserves
Property revaluation
Share-based payment reserve
Balance at end of financial year
i.
Property revaluation reserve
Balance at beginning of financial year
Increase arising on revaluation of properties
Balance at end of financial year
As at
31 March 2020
€’000
As at
31 March 2019
€’000
2,516
2,066
4,582
1,889
7,556
9,445
As at
31 March 2020
€’000
As at
31 March 2019
€’000
1,889
627
2,516
1,166
723
1,889
ii.
For further information on the share-based payment reserve refer to note 10 of the consolidated financial statements.
Share-based payment reserve
m)
Retained earnings, distributable reserves and dividends on equity instruments
Balance at beginning of financial year
Profit for the financial year
Share issuance costs
Share buyback
Dividends paid
Balance at end of financial year
As at
31 March 2020
€’000
As at
31 March 2019
€’000
436,014
344,758
58,927
114,989
(10)
(25,036)
(25,866)
(14)
–
(23,719)
444,029
436,014
For further information on retained earnings and distributable reserves please refer to note 24 of the consolidated financial statements.
For information on the dividends paid and proposed during the financial year please refer to note 13 of the consolidated
financial statements.
n)
Financial liabilities
Non-current
Unsecured bank borrowings
Debenture issued to subsidiary
Unsecured private placement notes
Total non-current borrowings
Current
Unsecured bank borrowings
Unsecured private placement notes
Total current borrowings
Total borrowings
The maturity of non-current borrowings is as follows:
Less than one year
Between one and two years
Between two and five years
Over five years
Total
184
As at
31 March 2020
€’000
As at
31 March 2019
€’000
185,109
28,854
74,582
156,524
28,246
74,524
288,545
259,294
159
358
517
149
358
507
289,062
259,801
As at
31 March 2020
€’000
As at
31 March 2019
€’000
517
28,854
185,109
74,582
507
–
184,770
74,524
289,062
259,801
Hibernia REIT plc Annual Report 2020Financial statements
n)
Financial liabilities continued
Movements in borrowings during the financial year:
Balance at beginning of financial year
Bank finance drawn
Bank finance repaid
Interest payable
Balance at end of financial year
For further information on financial liabilities refer to note 25 of the consolidated financial statements.
o)
Lease liability
Accounting policy
Please refer to note f above.
Amounts due in:
Less than one year
Between two and five years
Over five years
Total lease liability
As at
31 March 2020
€’000
As at
31 March 2019
€’000
259,801
57,945
(29,968)
1,284
246,859
340,412
(326,372)
(1,098)
289,062
259,801
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
203
901
1,184
2,288
–
–
–
–
During the financial year, the Company entered into a rental agreement on market terms with Hibernia REIT Holding Company Limited,
a wholly owned subsidiary, to rent space in 1WML. This space is the Group’s head office. For further information see note f above.
Amounts recognised in the income statement:
Depreciation expense on right-of-use asset
Interest on lease liability
Amounts recognised in the statement of cash flows:
Total cash outflow for leases during the period
Analysis of movement in lease liability:
At 1 April 2019
Additions
Lease payments
Interest expense
Total lease liability
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
140
60
200
–
–
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
175
175
–
–
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
–
2,403
(175)
60
2,288
–
–
–
–
–
185
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
N O T E S T O T H E C O M P A N Y F I N A N C I A L S T A T E M E N T S C O N T I N U E D
p)
For further information on financial liabilities refer to note 26 of the consolidated financial statements.
Deferred taxation
q)
Trade and other payables
Current
Investment property payable
Rent prepaid
Rent deposits and other amounts due to tenants
Sinking funds
Trade and other payables
Payroll tax payable
Balance at end of period
Of which classified as financial instruments
As at
31 March 2020
€’000
As at
31 March 2019
€’000
4,037
7,105
2,185
1,858
4,231
201
19,617
2,209
5,500
6,188
883
1,862
3,430
260
18,123
3,195
Sinking funds are monies put aside from annual service charges collected from tenants as contributions towards expenditure on larger
maintenance items that occur at irregular intervals in buildings managed by Hibernia.
For further information on trade and other payables refer to note 27 of the consolidated financial statements.
r)
Contract liabilities
Contract liabilities at 1 April 2018
Amounts received from customers under contracts
Amounts paid to suppliers
Contract liabilities at 31 March 2019
Amounts received from customers under contracts
Amounts paid to suppliers
Contract liabilities at 31 March 2020
Contract
liabilities
€’000
1,420
5,006
(4,808)
1,618
(4,045)
5,204
2,777
For further information on trade and other payables refer to note 28 of the consolidated financial statements.
s)
Future aggregate minimum rentals receivable (to the next break date) under non-cancellable operating leases are:
Operating lease receivables
Operating lease receivables due in:
Less than one year
Between two and five years
Greater than five years
Total
t)
Please refer to note 32 of the consolidated financial statements.
Capital commitments
u)
i.
Please refer to note 34.a of the consolidated financial statements.
Related parties
Subsidiaries
As at 31 March
2020
€’000
As at 31 March
2019
€’000
56,676
149,528
109,904
47,856
134,007
148,689
316,108
330,552
ii.
Transactions with related parties are the same as those disclosed in note 34 of the consolidated financial statements.
Other transactions
Income statement of the Parent Company
iii.
The Parent Company of the Group is Hibernia REIT plc (the “Company”). In accordance with Section 304 (2) of the Companies Act, 2014,
the 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 Company’s profit after tax for the financial year ended 31 March 2020 determined in accordance
with FRS 101 is €58.9m. The Company has undergone a transition from reporting under International Financial Reporting Standards
adopted by the European Union to FRS 101 Reduced Disclosure Framework, which is not considered to have had a material impact on the
results presented in financial statements. Its profit after tax for the financial year ended 31 March 2019 was determined in accordance with
IFRS and was €115.0m
v)
For information on events after the reporting date refer to note 35 of the consolidated financial statements.
Events after the reporting date
186
Hibernia REIT plc Annual Report 2020Financial statements
S U P P L E M E N T A R Y I N F O R M A T I O N ( U N - A U D I T E D )
i.
Based on the Group’s consolidated financial statements for the year ended 31 March:
Five-year record
Consolidated statement of financial position
Investment property
Other assets
Financial liabilities
Other liabilities
Net assets
Financed by:
Share capital
Reserves
Total equity
IFRS NAV per share (cent)
EPRA NAV per share (cent)
Consolidated income statement
Net rental income
Gains and losses on investment property
Other gains and losses
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)
2020
€’m
1,465
52
(260)
(26)
1,231
700
531
1,231
179.8
179.3
2020
€’m
59
23
–
(14)
68
(7)
61
8.9
8.8
5.5
5.5
4.8
2019
€’m
1,395
77
(231)
(23)
1,218
694
524
1,218
174.7
173.3
2019
€’m
53
98
–
(19)
132
(8)
124
17.8
17.6
4.0
3.9
3.5
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
187
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information S U P P L E M E N T A R Y I N F O R M A T I O N ( U N A U D I T E D ) C O N T I N U E D
Alternative performance measures
ii.
The Group has applied the European Securities and Markets Authority (“ESMA”) ‘Guidelines on Alternative Performance Measures’ in
this document. An alternative performance measure (“APM”) is a measure of financial or future performance, position or cash flows
of the Group which is not a measure defined by International Financial Reporting Standards (“IFRS”). The main APMs presented are
European Public Real Estate Association (“EPRA”) Performance Measures as set out in EPRA’s Best Practices Recommendations (“BPR”).
These measures are defined by EPRA in order to encourage comparability with the real estate sector in Europe (see Section iii).
The following are the APMs used in this report together with information on their calculation and relevance:
APM
Contracted rent roll
Reconciled to
IFRS measure:
n/a
Reference
n/a
EPRA cost ratios
EPRA earnings
IFRS operating
expenses
IFRS profit
after tax
iii.c
iii.a
EPRA earnings per
share (“EPRA EPS”)
EPRA like-for-
like (“LFL”) rental
growth reporting
EPRA NAV
IFRS earnings
per share
n/a
Note 14
iii.a
iii.b
IFRS NAV
Note 15
iii.f
EPRA NAV per share
EPRA NNNAV
EPRA NNNAV
per share
EPRA Net
Reinstatement Value
(“NRV”)
EPRA Net
Reinstatement Value
(“NRV”) per share
EPRA Net Tangible
Assets (“NTA”)
EPRA Net Tangible
Assets (“NTA”)
per share
EPRA Net Disposal
Value (“NDV”)
EPRA Net Disposal
Value (“NDV”) per share
EPRA Net Initial Yield
(“EPRA NIY”)
EPRA ‘topped-up’ Net
Initial Yield (“EPRA
‘topped-up’ NIY”)
EPRA vacancy rate
Loan to value (“LTV”)
Final and interim
dividend per share
Net debt
Passing rent
IFRS NAV
per share
IFRS NAV via
EPRA NAV
IFRS NAV
per share via
EPRA NAV
IFRS NAV
Note 15
iii.f
iii.f
iii.f
iii.f
IFRS NAV
IFRS NAV
IFRS NAV via
EPRA NAV
IFRS NAV via
EPRA NAV
n/a
n/a
iii.f
iii.f
iii.f
iii.f
iii.e
iii.e
n/a
n/a
Dividend
per share
Financial
liabilities
n/a
iii.d
Note 25.b
Note 13
Note 25.b
n/a
Note 16
iii.g.iii
Note 15
n/a
Property-related
capital expenditure
Reversionary potential n/a
Total Accounting
Return (“TAR”)
188
Total Property Return
(“TPR”)
Indirectly through
EPRA NAV
per share
n/a
Definition
Contracted rent under the lease agreements, and excluding all incentives or rent
abatements, for the portfolio as at the reporting date.
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 of the
Group, 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.
EPRA earnings on a per share basis.
LFL 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 calculated on a diluted basis taking into account the impact of any
options, convertibles, etc. that are ‘dilutive’.
Reports EPRA NAV including fair value adjustments for any material balance
sheet items which are not included in EPRA NAV at fair value.
Reports EPRA NAV including fair value adjustments for any material balance
sheet items which are not included in EPRA NAV at fair value and calculated on
a dilutive basis.
This assumes that entities never sell assets and aims to represent the value
required to rebuild the entity.
Assumes that entities buy and sell assets, thereby crystallising certain levels of
unavoidable deferred tax.
EPRA NTA calculated on a diluted basis.
Represents the shareholders’ value under a disposal scenario, where deferred
tax, financial instruments and certain other adjustments are calculated to the full
extent of their liability, net of any resulting tax.
EPRA NDV calculated on a diluted basis.
Inherent yield of the completed portfolio using passing rent at the
reporting date.
Inherent yield of the completed portfolio using contracted rent at the
reporting date.
ERV of the vacant space over the total ERV of the completed portfolio.
Net debt as a proportion of the value of investment properties.
Number of cent 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.
Annualised gross property rent receivable on a cash basis as at the
reporting date.
Property-related capital expenditure analysed so as to illustrate the element of
such expenditure that is ‘maintenance’ rather than investment.
Potential rent uplift available from leases with break dates, expiring or review
events in future periods.
Measures the absolute growth in the Group’s EPRA NAV per share plus any
ordinary dividends paid in the accounting period.
TPR is the return for the period of the property portfolio (capital and income) as
calculated by MSCI, the producers of the MSCI Ireland Property Index.
IFRS NAV
iii.f
EPRA NRV calculated on a diluted basis taking into account the impact of any
options, convertibles, etc. that are ‘dilutive’.
Hibernia REIT plc Annual Report 2020Financial statements European Public Real Estate Association (“EPRA”) Performance Measures
iii.
EPRA performance measures presented here are calculated according to the EPRA Best Practices Recommendations November 2016,
although some measures from the October 2019 updated BPR (valid for the financial year ended 31 March 2021 onwards) are also
presented. EPRA performance measures are used in order to enhance transparency and comparability with other public real estate
companies in Europe.
EPRA earnings and EPRA NAV measures are also included within the financial statements, in which they are audited, as they are
important key performance indicators for variable remuneration. All measures are presented on a consolidated basis only and, where
relevant, are reconciled to IFRS figures as presented in the consolidated financial statements.
EPRA performance measure
EPRA earnings
EPRA EPS
Diluted EPRA EPS
EPRA cost ratio – including direct vacancy costs
EPRA cost ratio – excluding direct vacancy costs
EPRA performance measure
EPRA Net Initial Yield (“NIY”)
EPRA ‘topped-up NIY
EPRA Net Asset Value (“EPRA NAV”)
EPRA NAV per share
EPRA triple net assets (“EPRA NNNAV”)
EPRA NNNAV per share
LFL rental growth
EPRA vacancy rate
Financial
year ended
31 March 2020
Financial
year ended
31 March 2019
38,093
27,472
5.5
5.5
26.8%
25.2%
4.0
3.9
39.3%
38.3%
Unit
€’000
cent
cent
%
%
As at
31 March 2020
As at
31 March 2019
Unit
%
%
€’000
cent
4.1%
4.4%
3.6%
4.1%
1,231,778
1,219,374
179.3
173.3
€’000
1,224,798
1,218,539
cent
%
%
178.3
3.9%
6.9%
173.2
7.6%
10.7%
EPRA earnings
iii.a
EPRA earnings, earnings from operational activities, are presented as they are a key measure of the Group’s underlying operating results
and an indication of the extent to which current dividend payments are supported by earnings. Unrealised changes in valuation, gains
or losses on disposals of properties and certain other items are excluded as they are not considered to be part of the core activity of an
investment property company.
EPRA earnings
Profit for the financial year attributable to owners of the parent
Adjusted for:
Gains and losses on investment property
Profit or loss on disposals of other assets
Deferred tax in respect of EPRA adjustments
Changes in fair value of financial instruments and associated close-out costs
EPRA earnings
EPRA earnings per share and diluted EPRA earnings per share
Weighted average number of ordinary shares (basic)
Weighted average number of ordinary shares (diluted) (note 14)
EPRA earnings per share (cent)
Diluted EPRA earnings per share (cent)
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
Notes
61,043
123,459
16
26
(22,856)
(98,105)
–
(152)
58
(140)
547
1,711
38,093
27,472
‘000
‘000
688,759
694,968
691,134
700,996
5.5
5.5
4.0
3.9
189
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
S U P P L E M E N T A R Y I N F O R M A T I O N ( U N A U D I T E D ) C O N T I N U E D
European Public Real Estate Association (“EPRA”) Performance Measures continued
EPRA LFL rental growth
iii.
iii.b
LFL 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 net 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 is presented on a segmented basis by portfolio
type. All properties are in Dublin therefore a geographic spread is not included.
Financial year ended 31 March 2020
Whole portfolio
Value – all
assets
€’m
Net rental
income
€’m
Value LFL
assets
€’m
Net rental
income LFL
assets current
year
€’m
LFL portfolio
Net rental
income LFL
assets prior
year
€’m
963.2
147.7
13.0
1,123.9
45.7
5.9
0.7
52.3
44.1
5.6
0.7
50.4
1,196.9
159.5
60.8
1,417.2
48.0
–
51.5
5.9
1.2
58.6
–
–
1,465.2
58.6
Growth in net LFL rental income
€’m
1.6
0.3
0.0
2.0
%
3.7
6.0
(0.9)
3.9
Buildings excluded from LFL as at 31 March 2020
Developments/refurbishments concluded in prior year: 1SJRQ, 2WML, Cannon Place (residential).
Developments in progress/sites: 2 Cumberland Place, Newlands.
Properties acquired: 2020: Docklands office asset, all units in Dublin Road Industrial Estate, Industrial unit Malahide Road; 2019: 50 City Quay, 129 Slaney Road Industrial Park,
Clanwilliam Apartments.
Properties sold: 2020: None; 2019: New Century House, 77 Sir John Rogerson’s Quay .
Financial year ended 31 March 2019
Whole portfolio
Value – all
assets
€’m
Net rental
income
€’m
Value LFL
assets
€’m
Net rental
income LFL
assets current
year
€’m
LFL portfolio
Net rental
income LFL
assets prior
year
€’m
725.8
134.1
12.8
872.7
35.3
5.2
0.7
41.2
32.5
5.1
0.7
38.3
1,173.1
153.1
53.0
1,379.2
16.2
–
1,395.4
43.9
5.5
1.0
50.4
–
2.9
53.3
Growth in net LFL rental income
€’m
2.8
0.1
0.0
2.9
%
8.5
2.1
5.8
7.6
Segment
Office assets
Residential assets
Industrial/land assets
Total ‘in-place’ portfolio
Development assets
Assets sold
Total portfolio
Segment
Office assets
Residential assets
Industrial/land assets
Total ‘in-place’ portfolio
Development assets
Assets sold
Total portfolio
Buildings excluded from LFL as at 31 March 2019
Developments/refurbishments concluded: 1WML, 1SJRQ, 2WML, Two Dockland Central, Hanover Mills (residential), Cannon Place (residential).
Developments in progress/sites: 2 Cumberland Place, Newlands.
Properties acquired: 50 City Quay, 129 Slaney Road Industrial Park, Clanwilliam Apartments; 2018: 77 Sir John Rogerson’s Quay acquired in year end March 2018).
Properties sold: 2019: New Century House, 77 SJRQ; 2018: The Chancery, Hanover Street East and Lime Street.
190
Hibernia REIT plc Annual Report 2020Financial statements iii.
iii.c
A key measure to enable meaningful measurement and comparison of the changes in a company’s operating costs.
European Public Real Estate Association (“EPRA”) Performance Measures continued
EPRA cost ratios
Total operating expenses under IFRS
Property expenses1
Net service charge costs/fees
EPRA costs including direct vacancy costs
Direct vacancy costs
EPRA costs excluding direct vacancy costs
Gross rental income1
EPRA cost ratio including direct vacancy costs
EPRA cost ratio excluding direct vacancy costs
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
13,393
3,051
65
19,291
2,596
122
16,509
22,009
(964)
15,545
61,701
26.8%
25.2%
(545)
21,464
56,027
39.3%
38.3%
1. Adjusted for costs recovered through rents and, under IFRS, accounted for on a gross basis.
The Group has not capitalised any overheads in the current or the prior financial year. Property expenses are reduced by the costs which
are reimbursed through rental receipts.
EPRA vacancy rate
iii.d
This provides comparable and consistent vacancy data for investors based on the Valuer’s assessment of gross ERV. The EPRA vacancy
rate measures the ERV of vacant space expressed as a percentage of the total ERV.
Annualised ERV vacant units1
Annualised ERV completed portfolio
EPRA vacancy rate
Financial
year ended
31 March 2020
€’000
Financial
year ended
31 March 2019
€’000
5,208
75,173
6.9%
7,265
67,760
10.7%
1. The ERV from vacant units includes the vacant units within the Group’s residential assets at the financial year end.
EPRA Net Initial Yield (“EPRA NIY”) and EPRA ‘topped-up’ Net Initial Yield
iii.e
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. EPRA ‘topped-up’ NIY measures the yield based
on rents adjusted for the expiration of lease incentives, i.e. on a contracted rent basis.
At 31 March 2020
Investment property at fair value
Less: Development/refurbishment
Completed property portfolio
Allowance for purchasers’ costs2
Gross up completed property portfolio (A)
Annualised cash passing rental income3
Property outgoings
Annualised net rents (B)
Expiry of lease incentives and fixed uplifts4
‘Topped-up’ annualised net rent (C)
EPRA NIY (B/A)
EPRA ‘topped-up’ NIY (C/A)
Total
€’m
1,465
(81)
1,384
Office
€’m
Residential
€’m
Industrial/
land
€’m
Total
€’m
Development
€’m
48
(48)
–
1,197
–
1,197
119
1,316
55
(1)
54
4
58
4.2%
4.4%
159
–
159
7
166
7
(1)
6
–
6
3.7%
3.7%
61
(33)1
28
3
31
2
–
2
–
2
5.2%
6.1%
1,417
(33)
1,384
129
1,513
64
(2)
62
4
66
4.1%
4.4%
1. Lands at Newlands are excluded as held for future development and were undeveloped at 31 March 2020.
2. Purchasers’ costs are 9.96% (up from 8.46% from October 2019) for commercial property and 4.46% for residential.
3. Cash passing rent includes residential rents gross as property outgoings are included separately and rents from the Iconic arrangement in Clanwilliam.
4. Expiry of lease incentives and fixed uplifts are mainly within one year.
191
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
S U P P L E M E N T A R Y I N F O R M A T I O N ( U N A U D I T E D ) C O N T I N U E D
iii.
iii.e
European Public Real Estate Association (“EPRA”) Performance Measures continued
EPRA Net Initial Yield (“EPRA NIY”) and EPRA ‘topped-up’ Net Initial Yield continued
At 31 March 2019
Investment property at fair value
Less: Development/refurbishment
Completed property portfolio
Allowance for purchasers’ costs2
Gross up completed property portfolio (A)
Annualised cash passing rental income3
Property outgoings
Annualised net rents (B)
Expiry of lease incentives and fixed uplifts4
‘Topped-up’ annualised net rent (C)
EPRA NIY (B/A)
EPRA ‘Topped-up’ NIY (C/A)
Development
€’m
16
(16)
–
Total
€’m
1,395
(52)
1,343
Office
€’m
Residential
€’m
1,173
–
1,173
100
1,273
47
(1)
46
7
53
3.6%
4.1%
153
–
153
7
160
7
(1)
6
–
6
3.7%
3.7%
Industrial/
land
€’m
53
(36)1
17
1
18
1
–
1
–
1
5.8%
6.5%
Total
€’m
1,379
(36)
1,343
108
1,451
55
(2)
53
7
60
3.6%
4.1%
1. Lands at Newlands are excluded as held for future development and were undeveloped at 31 March 2019.
2. Purchasers’ costs are 8.46% for commercial property and 4.46% for residential.
3. Cash passing rent includes residential rents gross as property outgoings are included separately and rents from the Iconic arrangement in Clanwilliam.
4. Expiry of lease incentives and fixed uplifts are mainly within one year.
EPRA NAV measures
iii.f
Net Asset Value (“NAV”) is a key performance measure for real estate companies. EPRA has introduced a number of measures to
enhance investors’ understanding. EPRA has defined two measures in the 2016 Guidelines as below.
EPRA NAV and EPRA NNNAV: The objective of EPRA NAV 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 reports represent the
shareholders’ value under a disposal scenario, where deferred tax, financial instruments and certain other adjustments are calculated to
the full extent of their liability, net of any resulting tax.
IFRS NAV
Deferred tax
Fair value of financial instruments
EPRA NAV
Deferred tax
Fair value of financial instruments
EPRA NNNAV
Diluted ordinary shares issued (note 15)
Financial year ended
31 March 2020
Financial year ended
31 March 2019
€‘000 Cent per share
€‘000 Cent per share
1,231,149
395
234
1,218,539
547
288
1,231,778
179.3
1,219,374
173.3
(395)
(6,585)
1,224,798
687,032
(547)
(288)
178.3
1,218,539
173.2
703,617
Calculation of EPRA NRV, EPRA NTA and EPRA NDV (new measures introduced in EPRA BPR October 2019)
These measures replace EPRA NAV and EPRA NNNAV for future financial years.
EPRA Net Reinstatement Value (“NRV”) highlights the value of net assets on a long-term basis. This assumes that entities never sell assets
and aims to represent the value required to rebuild the entity.
EPRA Net Tangible Assets (“NTA”) assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA Net Disposal Value (“NDV”) represents the shareholders’ value under a disposal scenario, where deferred tax, financial instruments
and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax.
192
Hibernia REIT plc Annual Report 2020Financial statements
iii.
iii.f
Calculation of EPRA NRV, EPRA NTA and EPRA NDV (new measures introduced in EPRA BPR October 2019)
European Public Real Estate Association (“EPRA”) Performance Measures continued
EPRA NAV measures continued
IFRS NAV
Include:
Revaluation of other non-current investments
Diluted NAV at fair value3
Exclude:
Deferred tax in relation to unrealised gains on investment property
Fair value of financial instruments
Include:
Fair value of fixed interest rate debt
Real estate transfer tax4
NAV performance measure
Diluted number of shares at financial year end
NAV per share at financial year end (cent per share)
Financial year ended 31 March 2020
EPRA NRV
€’000
EPRA NTA1
€’000
EPRA NDV2,5
€’000
1,231,149
1,231,149
1,231,149
–
–
–
1,231,149
1,231,149
1,231,149
395
234
–
138,545
–
234
–
–
–
–
(6,380)
–
1,370,323
1,231,383
1,224,769
687,032
687,032
687,032
199.5c
179.2c
178.3c
1. Following changes to the Irish REIT legislation introduced in October 2019, if a REIT disposes of an asset of its property rental business and does not (i) distribute the gross disposal
proceeds to shareholders by way of dividend; (ii) reinvest them into other assets of its property rental business (whether by acquisition or capital expenditure) within a three-year
window (being one year before the sale and two years after it); or (iii) use them to repay debt specifically used to acquire, enhance or develop the property sold, then the REIT will
be liable to tax at a rate of 25% on 85% of the gross disposal proceeds, subject to having sufficient distributable reserves. For the purposes of EPRA NTA we have assumed any
such sales proceeds are reinvested within the required three-year window.
2. Deferred tax is assumed as per the IFRS balance sheet. To the extent that an orderly sale of the Group’s assets was undertaken over a period of several years, during which time
(i) the Group remained a REIT; (ii) no new assets were acquired or sales proceeds reinvested; (iii) any developments completed were held for three years from completion; and
(iv) those assets sold were sold at 31 March 2019 valuations, the sales proceeds would need to be distributed to shareholders by way of dividend within the required timeframe or
else a tax liability amounting to up to 25% of distributable reserves plus current unrealised revaluation gains could arise for the Group.
3. The Group uses the fair value option under IAS 40 and has no hybrid instruments or tenant leases held as finance leases.
4. The Group has no goodwill or intangibles. This is the purchasers’ costs amount as provided in the valuation certificate. Purchasers’ costs consist of items such as stamp duty on
legal transfer and other purchase fees that may be incurred, and which are deducted from the gross value in arriving at the fair value of investment and owner occupied property
for IFRS purposes. Purchasers’ costs are in general estimated at 9.96% (up from 8.46% from October 2019) for commercial and 4.46% for residential.
5. Following changes to the Irish REIT legislation introduced in October 2019, if the Group ceases to be a REIT, as defined under Irish legislation, within 15 years of it originally
becoming a REIT then a potential tax liability could arise for the Group.
IFRS NAV
Include:
Revaluation of other non-current investments
Diluted NAV at fair value1
Exclude:
Deferred tax in relation to unrealised gains on investment property
Fair value of financial instruments
Include:
Fair value of fixed interest rate debt
Real estate transfer tax2
NAV performance measure
Diluted number of shares at financial year end
NAV per share at financial year end (cent per share)
Financial year ended 31 March 2019
EPRA NRV
€’000
EPRA NTA
€’000
EPRA NDV
€’000
1,218,539
1,218,539
1,218,539
–
–
–
1,218,539
1,218,539
1,218,539
547
288
–
112,972
–
288
–
–
–
–
–
–
1,332,346
1,218,827
1,218,539
703,617
703,617
703,617
189.4c
173.2c
173.2c
1. The Group uses the fair value option under IAS 40 and has no hybrid instruments or tenant leases held as finance leases.
2. The Group has no goodwill or intangibles. This is the purchasers’ costs amount as provided in the valuation certificate. Purchasers’ costs consist of items such as stamp duty on
legal transfer and other purchase fees that may be incurred, and which are deducted from the gross value in arriving at the fair value of investment property and owner occupied
property for IFRS purposes. Purchasers’ costs are in general estimated at 8.46% for commercial property and 4.46% for residential.
193
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information S U P P L E M E N T A R Y I N F O R M A T I O N ( U N A U D I T E D ) C O N T I N U E D
European Public Real Estate Association (“EPRA”) Performance Measures continued
Portfolio information
iii.
iii.g
Portfolio information can be generally found in the business review section of this Annual Report. Below is further information based on
the guidelines issued by EPRA.
i.
All amounts are denominated in euro.
Additional analysis of rental income
Properties owned throughout last two years
Acquisitions
Disposals
Developed/refurbished property1
Gross rental income
Less: property operating expenses
Net rental income
1. 2020: 1SJRQ and 2WML; 2019: 1WML, Hanover Mills, Two Dockland Central and Cannon Place apartments.
ii.
Portfolio statistics – valuation
Financial
year ended
31 March 2020
€’m
Financial
year ended
31 March 2019
€’m
54.8
0.8
–
6.2
61.8
(3.2)
58.6
43.4
0.3
3.0
9.3
56.0
(2.7)
53.3
Office
Development
Residential
Industrial/land
Total
Financial year ended 31 March 2020
Market value
€’m
Valuation
movement
€’m
EPRA NIY
%
EPRA
‘topped-up’
NIY
%
Reversionary
yield
%
1,197
48
159
61
1,465
6
18
5
(6)
23
4.2
n/a
3.7
5.21
4.1
4.4
n/a
3.7
6.11
4.4
4.8
n/a
4.5
5.51
4.7
1. These yields exclude the value of the lands at Newlands in accordance with EPRA guidance.
Office
Development
Residential
Industrial/land
Total
Financial year ended 31 March 2019
Market value
€’m
Valuation
movement
€’m
EPRA NIY
%
EPRA
‘topped-up’
NIY
%
Reversionary
yield
%
1,173
16
153
53
1,395
35
48
13
(1)
95
3.6
n/a
3.7
5.81
3.6
4.1
n/a
3.7
6.51
4.1
4.8
n/a
4.3
6.51
4.7
1. These yields exclude the value of the lands at Newlands in accordance with EPRA guidance.
194
Hibernia REIT plc Annual Report 2020Financial statements European Public Real Estate Association (“EPRA”) Performance Measures continued
Portfolio information continued
Reversionary potential
iii.
iii.g
iii.
The following data is calculated for the ‘in-place’ office and industrial portfolio (inclusive of the Iconic arrangement) and based on the
earliest of review, break or expiry dates. Residential data is excluded as reversion to ERV is limited to 4% in rent-controlled areas where
all the residential assets are based, and all leases roll on average annually. Contracted rent is used to avoid overstating uplifts to ERV as
fixed uplifts are generally in the first year of lease and are accounted for on a smoothed period over the lease term in the financial data.
Further details on portfolio rent statistics can be found in the business review.
As at 31 March 2020
Rent subject to rent reviews
Financial year ended 31 March
Contracted rent
Uplift to ERV1
Total
% increase/(decrease) possible
From vacant space
Total
Rent subject to break or expiry
Financial year ended 31 March
Contracted rent
Uplift to ERV
Total
% increase/(decrease) possible
Total reversion from review and break/expiry (excluding vacancy)
Total contracted rent
Total uplift to ERV
% increase/(decrease) possible
% increase possible including vacancy
2021
€’m
5.3
1.1
6.4
21%
4.7
11.1
2021
€’m
3.8
(0.3)
3.5
(9)%
9.1
0.8
9%
2023-24
€’m
>2024
€’m
2022
€’m
9.8
0.5
10.3
11.0
0.1
11.1
5%
1%
–
10.3
–
11.1
12.2
(0.1)
12.1
–
–
12.1
2022
€’m
2023-24
€’m
>2024
€’m
3.5
(0.1)
3.4
(1)%
13.3
0.4
4%
12.1
(0.6)
11.5
(5)%
23.1
(0.5)
(2)%
2.7
(0.1)
2.6
(1)%
14.9
–
–
Total
€’m
38.3
1.6
39.9
4%
4.7
44.6
Total
€’m
22.1
(1.1)
21.0
(5)%
60.4
0.7
1%
9%
1. ERV uplift includes all ‘in-place’ office and industrial potential uplifts and excludes the Group’s residential units. The Group may develop some of these properties in the longer term
and therefore these reversions may not be obtained.
195
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information S U P P L E M E N T A R Y I N F O R M A T I O N ( U N A U D I T E D ) C O N T I N U E D
iii.
iii.g
European Public Real Estate Association (“EPRA”) Performance Measures continued
Portfolio information continued
As at 31 March 2019
Rent subject to rent reviews
Financial year ended 31 March
Contracted rent
Uplift to ERV1
Total
% increase/(decrease) possible
From vacant space
Total
Rent subject to break or expiry
Financial year ended 31 March
Contracted rent
Uplift to ERV1
Total
% increase/(decrease) possible
Total reversion from review and break/expiry (excluding vacancy)
Total contracted rent
Total uplift to ERV
% increase/(decrease) possible
% increase possible including vacancy
2020
€’m
3.9
3.1
7.0
80%
7.4
14.4
2020
€’m
1.9
0.7
2.6
37%
5.8
3.8
53%
2021
€’m
1.6
–
1.6
0%
–
1.6
2021
€’m
2.7
–
2.7
–
4.3
–
–
2022-24
€’m
19.9
(0.1)
19.8
(1)%
–
19.8
>2024
€’m
8.9
0.2
9.1
2%
–
9.1
2022-24
€’m
>2024
€’m
13.6
(0.3)
13.3
(2)%
33.5
(0.4)
(1)%
–
–
–
–
8.9
0.2
2%
Total
€’m
34.3
3.2
37.5
9%
7.4
44.9
Total
€’m
18.2
0.4
18.6
2%
52.5
3.6
7%
21%
1. ERV uplift includes all ‘in-place’ office and industrial potential uplifts and excludes the Group’s residential units. The Group may develop some of these properties in the longer term
and therefore these reversions may not be obtained.
Property related capital expenditure (“capex”)
Capital expenditure on the investment portfolio analysed to allow an understanding of the investment in the portfolio during the period.
Analysis of capex is in note 16 to the consolidated financial statements.
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 no gains arising on the sale of investment properties (31 March 2019: €2.6m). Included within the unrealised gains disclosed
under IFRS there is a total of €25.6m (31 March 2019: €8.1m) in unrealised losses and €48.5m (31 March 2019: €103.6m) in unrealised gains.
Remuneration disclosures
The Directors and certain members of the senior management team are considered to be the Company’s key management personnel.
The total remuneration for the financial year, both fixed and variable in nature, paid to the key management personnel, which numbers
fifteen identified staff (March 2019: thirteen), who have a material impact on the risk profile of the Company, is set out within Note 34.c
of the consolidated Financial Statements.
196
Hibernia REIT plc Annual Report 2020Financial statements
IV.
Other disclosures continued
Non-financial information statement
We are not obliged to comply with the non-financial reporting requirements contained in the European Union (Disclosure
of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 (the “2017 Regulations”).
However, the table below, and the information it refers to, is intended to help readers of the Group’s Annual Report find key
non-financial information relevant to the Group.
Policies and standards
that govern our approach1
Reporting requirement
Business model
Key performance indicators
relevant to our business
Environmental matters
Sustainability Policy2
Social and employee matters
Human rights
Bribery and corruption
Diversity policy
Anti-bullying and harassment policy1
Disability policy1
Equal opportunities policy1
Health and safety policy1
Supplier Code of Conduct2
Data protection policy2
Modern slavery statement
Anti-bribery policy1
Whistle-blowing policy1
Money laundering policy1
Gifts and inducement policy1
Read more here
Our business model
Key performance indicators
Operational metrics
Sustainability
Sustainability Report 20202
Page
22 and 23
36
37
61 to 67
Corporate governance report
77
Supplier Code of Conduct2
Sustainability Report 20202
Diversity
Diversity policy
Corporate governance report
77
1. Certain Group policies and guidelines are not published externally.
2. Further information is available on our website, including our Supplier Code of Conduct, our Sustainability Policy and our Sustainability Report 2020.
Occupiers representing over 0.5% of contracted rent at 31 March 2020
Tenant
Hubspot Ireland Limited
The Commissioners of Public Works
Twitter International Company
Zalando Ireland Limited
Autodesk Ireland Operations Limited
Informatica Ireland EMEA
Riot Games Limited
Electricity Supply Board
Travelport Digital Limited
BNY Mellon Fund Services (Ireland) DAC
The Commission for Communications Regulation
Capita Life & Pension Services Irl Ltd.
Core Media
AWAS Aviation Acquisitions Limited
O.D.S Company (Eversheds Sutherland)
Deloitte Ireland LLP
Pay & Shop Ltd T/a Global Payments
Udemy Ireland Limited
An Bord Bia
€’m
10.5
6.0
5.1
2.9
2.8
2.1
2.0
1.9
1.8
1.6
1.6
1.5
1.4
1.2
1.0
1.0
0.9
0.8
0.8
%
Tenant
16.0%
Renaissance Svcs of Europe Ltd.
9.1%
7.7%
4.4%
4.3%
3.2%
3.0%
2.9%
2.8%
2.4%
2.4%
2.2%
2.2%
1.8%
1.6%
1.6%
1.4%
1.3%
1.2%
JMC Van Trans Ltd
Quinn McDonnell Pattison Limited
Park Rite
Bearingpoint Ireland Limited
Seven Seas Business Ventures LLC t/a N3
Irish Residential Properties REIT plc
Invesco Global Asset Management Limited
Pinsent Masons Services Ireland Ltd
Essentra Packaging Ireland Limited
Weston Office Solutions Limited
City Break Apartments Limited
Morgan Stanley Fund Services (Ire.) Ltd.
Hines Real Estate Ireland Limited
Prudential Int. Services Ltd,
Crowe Horwath Bastow Charleton Cons. Ltd.
Bunzl Ireland Limited
ENI Insurance DAC
Ellucian Ireland Limited
€’m
0.8
0.7
0.7
0.7
0.7
0.6
0.6
0.6
0.6
0.5
0.5
0.4
0.4
0.4
0.4
0.4
0.4
0.3
0.3
%
1.2%
1.1%
1.0%
1.0%
1.0%
1.0%
1.0%
0.9%
0.8%
0.8%
0.7%
0.7%
0.6%
0.6%
0.6%
0.6%
0.6%
0.5%
0.5%
197
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information
D I R E C T O R S A N D O T H E R I N F O R M A T I O N
DIRECTORS AND OTHER INFORMATION
Directors
Daniel Kitchen (Chairman)
Colm Barrington (Senior Independent Director)
Roisin Brennan
Thomas Edwards-Moss (CFO)
Margaret Fleming (appointed 20 January 2020)
Stewart Harrington
Grainne Hollywood (appointed 5 November 2019)
Frank Kenny
Kevin Nowlan (CEO)
Terence O’Rourke
Company Secretary
Sean O’Dwyer
Assistant Secretary
Sanne Corporate Administration Services Ireland
Limited t/a Sanne
4th Floor
76 Lower Baggot Street
Dublin D02 EK81
Ireland
Registered office
1WML
Windmill Lane
Dublin D02 F206
Ireland
Company number
531267
Independent auditor
Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House
29 Earlsfort Terrace
Dublin D02 AY28
Tax adviser
KPMG
1 Stokes Place
St. Stephen’s Green
Dublin D02 DE03
Ireland
Independent Valuer
Cushman & Wakefield
164 Shelbourne Road
Ballsbridge
Dublin D04 HH60
Ireland
Principal banker
Bank of Ireland
2 Burlington Plaza
Burlington Road
Dublin D04 X738
Ireland
Depositary
BNP Paribas Securities Services, Dublin Branch
Trinity Point
10-11 Leinster Street South
Dublin D02 EF85
Ireland
Registrar
Link Registrars Limited t/a Link Asset Services
2 Grand Canal Square
Dublin D02 A342
Ireland
Principal legal adviser
A&L Goodbody
25/28 North Wall Quay
IFSC
Dublin D01 H104
Ireland
Corporate brokers
Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
D04 YW83
Ireland
Credit Suisse International
One Cabot Square
London E14 40J
United Kingdom
198
Hibernia REIT plc Annual Report 2020Additional Information G L O S S A R Y
Glossary
AGM is Annual General Meeting.
AIF is an Alternative Investment Fund.
EPRA cost ratio (excluding direct vacancy
costs) is the same as above except it
excludes direct vacancy costs.
AIFM is an Alternative Investment
Fund Manager.
APM is an Alternative Performance
Measure.
Brexit is the UK exit from the EU.
C&W or Cushman and Wakefield or
the Valuer are the Group’s external
Independent Valuer.
Cash passing rent is the gross property
rent receivable on a cash basis as at the
reporting date. It includes sundry items
such as car parks rent and estimates of
rents in respect of unsettled rent reviews.
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% and 25%.
Development construction costs are the
total costs of construction to completion,
excluding site and financing costs.
Finance costs are usually assumed at a
notional 7% per annum by the Valuer.
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.
EBIT is earnings before interest and tax.
EPRA is the European Public Real Estate
Association, which is the industry body
for European property companies.
It produces guidelines for a number of
standardised performance measures (e.g.
EPRA earnings).
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 earnings is the profit after tax
excluding revaluations and gains and
losses on disposals and associated taxation
(if any).
EPRA EPS is EPRA earnings on a per share
basis (diluted) .
EPRA NAV per share 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 Net Reinstatement Value (“NRV”)
is NAV calculated on a basis that assumes
entities never sell assets and aims to
represent the value required to rebuild
the entity.
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.
ERV or estimated rental value is the
Valuer’s opinion as to what the open
market rental value of the property is
on the valuation date, and which could
reasonably be expected to be the rent
obtainable on a new letting on that
property on the valuation date.
Fair value movement is the accounting
adjustment to change the book value of
the asset or liability to its market value.
Gale day is the date on which rent is due.
GDV is gross development value.
GRESB is a sustainability benchmark for
property 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.
IFRS are International Financial
Reporting Standards.
‘In-place’ portfolio is the portfolio of
completed properties, i.e. excluding active
development and refurbishment projects
and land.
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.
IPD is Investment Property Databank
Limited which is part of the MSCI Group
and produces an independent benchmark
of property returns (IPD Ireland Index)
and which provides the Group with
the performance information required
in calculating the performance-based
management fee.
Lease incentive is any consideration or
expense, borne by the Group, in order to
secure a lease.
LEED (“Leadership in Energy and
Environmental Design”) is a Green Building
Certification System developed by the US
Green Building Council. Its aim is to be an
objective measure of building sustainability.
199
Hibernia REIT plc Annual Report 2020Strategic report Governance Financial statements Additional information Like-for-like (“LFL”) rental income growth
is the growth in net rental income on
properties owned through the current and
previous periods under review. This growth
rate includes revenue recognition and
lease accounting adjustments but excludes
properties held for development in either
financial year or properties with guaranteed
rental reviews.
Loan to value (“LTV”) is the ratio of
the Group’s net debt to the value of its
investment properties.
Long-term incentive plan (“LTIP”)
aims to encourage Senior Management
retention and align their interests with
those of the Group through the payment
of rewards based on the Group’s long-
term performance through shares in the
Company that vest after a future period
of service.
Market Abuse Regulations are issued
by the Central Bank of Ireland and can
be accessed at www.centralbank.ie/
regulation/securities-markets/market-
abuse/Pages/default.aspx.
MSCI/SCSI Ireland Quarterly Property All
Assets Index (“MSCI Ireland Index”) is the
index produced by MSCI which measures
the return of the property market in Ireland
for all asset classes and which is calculated
by MSCI both including and excluding
Hibernia assets and is used to calculate our
KPI ‘Total Property Return’ or TPR.
NAV is the net asset value
NAVPS is the NAV in cent per share.
Net development value is the external
Valuer’s view on the end value of a
development property when the building is
fully completed and let.
Net equivalent yield is the weighted
average income return (after allowing for
notional purchasers’ costs) a property
will produce based on the timing of the
income received. As is normal practice,
the equivalent yield (as determined by the
external Valuer) assumes rent is received
annually in arrears.
Net lettable or net internal area (“NIA”) is
the usable area within a building measured
to the internal face of the perimeter walls at
each floor level.
Net reversionary yield is the expected
yield after the rent reverts to the ERV.
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.
200
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.
Total Shareholder Return (“TSR”) is
the growth in share value over a period
assuming dividends are reinvested to
purchase additional units of stock.
Transparency regulations enhance
the information made available about
issuers whose securities are admitted
to trading on a regulated market and
further information is available on
www.centralbank.ie/regulation/securities-
markets/transparency/Pages/default.aspx.
Under rented is the term used to describe
where contracted rents are lower than ERV.
This implies a positive reversion after expiry
of the current lease contract terms. .
USPP is US private placement notes.
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 & Wakefield. Previously the
Group used CBRE.
WAULT is weighted average unexpired
lease term and is variously calculated to
break, expiry or next review date.
PC is practical completion.
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 rental sector which refers
to residential properties held for rent.
Psf is per square foot.
RCF is revolving credit facility.
REIT is a Real Estate Investment Trust.
Irish REITs follow Section 705E of the Taxes
Consolidation Act, 1997.
Remuneration Policy is the remuneration
policy approved by shareholders at the
2018 AGM and which took effect from
27 November 2018.
Reversion is the rent uplift where the ERV
is higher than the contracted rent.
Royal Institute of Chartered Surveyors
(“RICS”) Professional Standards, RICS
Global Valuation Practice Statements
and the RICS Global Valuation Practice
Guidance are applications contained
within the RICS Valuation – Global
Standards 2019 (the “Red Book”) issued by
the Royal Institute of Chartered Surveyors
provide the standards for preparing
valuations on property.
Sq. ft. is square feet.
Tenant or lease incentives are incentives
offered to occupiers on entering into a
new lease and may include a rent free or
reduced rent period, or a cash contribution
to fit-out. Under accounting rules, the value
of these incentives is amortised through
the rental income on a straight-line basis
over the term of the lease or the period to
the next break point.
Term certain is the lease period to the next
break or expiry.
TMT sector is the technology, media and
telecommunications sector.
Total Accounting Return (“TAR”)
measures the absolute growth in the
Group’s EPRA NAV per share plus any
ordinary dividends paid.
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 IPD Ireland Index.
GLOSSARY CONTINUEDHibernia REIT plc Annual Report 2020Additional Information H I B E R N I A
D U R I N G
L O C K D O W N
Here are some members of the
Hibernia team pictured in their home
offices during the COVID-19 lockdown.
Consultancy, design and production
www.luminous.co.uk
Design and production
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Hibernia REIT plc
1WML
Windmill Lane
Dublin D02 F206
Ireland
T: 353 1 536 9100
www.hiberniareit.com
For investor queries:
info@hiberniareit.com
For media enquiries:
media@hiberniareit.com