Transforming
Dublin
Annual Report 2021
Our purpose is to create the best and
most efficient spaces for working or
living in Dublin, responsibly transforming
the fabric of the city and bringing
benefits to all stakeholders.
1SJRQ, South Docks
Who we are
We are the largest Irish real estate investment trust
(“REIT”), owning a property portfolio worth €1.4bn, all
of which is located in Dublin and which mostly comprises
city centre offices. We are listed on the Main Securities
Market of Euronext Dublin and the Main Market of the
London Stock Exchange.
How we do it
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 potential and reinvesting
in property with future redevelopment opportunities.
Our portfolio is mainly a mix of redeveloped properties
held for income and assets held for future repositioning.
Where possible, we seek to own clusters of office assets
to enhance the facilities and amenities we can provide
occupiers. We also have a strong focus on ESG excellence.
Read more on pages 20 to 21
Strategic report
2
The year in summary
4
Five reasons to invest
6
Letter from the Chair
8
Chief Executive Officer’s statement
10
Understanding our world
12
Why Dublin?
13
Market review
16
Our portfolio
20
Our business model
22
Strategy at a glance
26
Strategy in action
34
Engaging with our stakeholders
38
Measuring our performance
40
Our approach to risk
43
Going concern and viability statement
48
Principal risks and uncertainties
54
Business review
61
Financial review
64
COVID impacts and management
65
Sustainability
Corporate governance
72
Governance at a glance
74
Board of Directors
76
Senior Management Team
78
Introduction from the Chair
80
Culture and people
82
What we did during the year
84
Division of responsibilities
86
Stakeholder engagement
88
Composition, succession and evaluation
90
Nominations Committee report
92
Audit Committee report
96
Remuneration Committee report
127
Directors’ report
131
Directors’ responsibility statement
Financial statements
132
Independent auditor’s report
138
Consolidated income statement
139
Consolidated statement of
comprehensive income
140 Consolidated statement of financial position
141
Consolidated statement of cash flows
142
Consolidated statement of changes
in equity
143
Notes to the consolidated
financial statements
190
Company statement of financial position
191
Company statement of changes in equity
192
Notes to the Company financial statements
Supplementary information
(unaudited)
201
Five-year record
202 Alternative performance measures
203 EPRA performance measures
211
Other disclosures
213
Directors and other information
214
Glossary
C O N T E N T S
1
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Financial
highlights
Portfolio
value
€1,427m
LfL growth -4.4% 2020: €1,465m
EPRA Net Tangible Assets
(“NTA”) per share
172.7c
-3.7% 2020: 179.2c
Loan to value (“LTV”)
19.5%
+3.0pp 2020: 16.5%
Cash and undrawn facilities net
of committed capital expenditure
€110m
-19.1% 2020: €136m
Operating highlights
High rent collection rates driving further
increase in distributable income
−99% of rent for year ended Mar-21
(Mar-20: 99%) now received or on
agreed payment terms
−Annual contracted rent +2.2% since
Mar-20 to €67.1m
−Office WAULT of 5.8 years, -9.4%
since Mar-20
−EPRA EPS of 6.3c, +13.4% due to
increase in rental income
−Final DPS of 3.4c, bringing total for
financial year of 5.4c (Mar-20: 4.75c)
Disciplined capital allocation
−€16.8m in development expenditure,
mainly on two schemes to deliver
62,500 sq. ft. of Grade A office
space (38% pre-let): both expected
to complete by Jul-21, following delays
due to lockdowns (Mar-20: €21.3m)
−€11.1m invested in five bolt-on property
acquisitions (Mar-20: €23.3m)
−€25m share buyback programme
successfully executed; 23.1m shares
repurchased and cancelled, an avg.
price per share of €1.08 (Mar-20: 17.6m
shares repurchased for €25m, an avg.
price per share of €1.42)
Robust balance sheet and investment
capacity further enhanced post year end
by new US private placement
−Net debt of €278.8m, LTV of 19.5%
−€125m of 10- and 12-year unsecured US
private placement notes with an average
coupon of 1.9% to be issued in July-21
−Weighted average debt maturity at
Mar-21 of 3.4 years (Mar-20: 4.4 years), or
5.2 years pro-forma new debt issue
−Cash and undrawn facilities net of
committed expenditure of €110m,
or €235m proforma new USPP
Progress on clustering
−Full planning now in place for Clanwilliam
and Harcourt schemes, which can be
commenced in the next seven and
18 months, respectively, and can deliver
539,000 sq. ft. of clustered, Grade A
office space
−These schemes will take the proportion
of Hibernia’s office assets by value in
clusters from 39% to 65%
Modest decline in portfolio value,
primarily coming in the first quarter
−Portfolio value of €1,427.4m, down
4.4% on a like-for-like basis (“LfL”) in
the financial year and down 0.7% in H2
−Movement came primarily due to lower
net ERVs and higher yields assumed on
office assets
Responsibility and governance
Sustainability
−Sustainability Statement of Intent issued
in Apr-21 including our commitment to
become a net zero carbon business by
2030 and to align with the TCFD by 2022
(see more on pages 65 to 71 and 44 to 45)
−Real-time energy consumption monitoring
system installed and operating in our
managed in-place offices
−Received a four-star GRESB rating for
the first time 2020 and a B- score in our
inaugural CDP response
Governance
−2021 renewal of Remuneration Policy
−COVID-19 management (see page 64)
−Increased focus on stakeholder
engagement (see more on pages
34 to 37)
−Strategic priorities refocused to take
account of the impact of the pandemic
(see more on pages 22 to 23)
−ISO 14001 and ISO 45001 certification
completed
Supporting our employees while
working from home
Keeping our team happy, healthy and
focused has been a priority throughout
the year (see more on pages 80 to 81).
Read more on pages 61 to 63
2
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S T R A T E G I C R E P O R T
T H E Y E A R I N S U M M A R Y
Net rental income
€63.3m
+8.1% 2020: €58.6m
Loss after tax
€(25.2)m
-141.3% 2020: Profit of €61.0m
EPRA earnings per share
(“EPRA EPS”)
6.3c
+13.4% 2020: 5.5c
Dividend per share
(full year)
5.4c
+13.7% 2020: 4.75c
The Dockers pub, part of 1SJRQ, South Docks
3
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
1
Dublin tailwinds
from EU membership
and demographics
Dublin has been successful at attracting
foreign direct investment for many years
and we believe it is benefitting from now
being the only major capital city within the
EU where English is the primary language.
Unlike many developed countries, Ireland
has favourable demographics and Dublin is
experiencing significant population growth.
Expected population growth
in Dublin by 2031
+16%
(Source: National Planning Framework)
A compelling
investment case
We have low financial leverage and a clear
strategy to provide occupiers with the type
of office space they are increasingly seeking.
2
Experienced team
Our team knows the Dublin property
market intimately and has many years
of experience in all aspects of property
investment and development.
Years experience in the Dublin property
market in the Senior Management Team
>100 yrs
3
Low leverage
and high-quality
tenant base
We have a policy of maintaining a strong
balance sheet and our unsecured funding
structure gives us significant flexibility.
The quality of our tenant base can be seen
in our rent collection statistics during the
COVID-19 pandemic – over the 12 months
to March 2021, 99% of our commercial rent
and residential rent was collected or on
agreed payment terms.
LTV at 31 March 2021
19.5%
4
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
F I V E R E A S O N S T O I N V E S T
5
Clear strategy to lead
on workplace evolution
We are a responsible, forward-thinking business.
With our focus on clustering and ESG excellence
we are ensuring that we provide the type of
workspace occupiers are increasingly seeking.
Proportion of office portfolio
in clusters by 2026
65%
4
Strong income returns and
development pipeline rich
in opportunity
Our shares offer attractive income returns and
we have a significant pipeline of development
opportunities with the potential to deliver substantial
surpluses over the near to medium term.
Implied dividend yield of our shares
(at 6 June 2021)
4.4%
5
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Total Accounting Return (“TAR”)
(0.9)%
-6.5pp on prior year
Total Property Return (“TPR”)
(0.2)%
+1.3pp over benchmark
LTV
19.5%
+3pp on prior year
Our highlights
Daniel Kitchen
Chair
“As a property company, carrying out
our activities responsibly is integral
to our purpose.”
6
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
L E T T E R F R O M
T H E C H A I R
% female directors on the Board
33%
+3pp on prior year
Net zero carbon by
2030
Read more on pages 68 to 69
TCFD aligned by
2022
Read more on pages 44 to 45
Dear Shareholder,
Despite a challenging environment for all
of the financial year ended 31 March 2021,
we have made significant progress with
our strategic priorities and our business
performed well, delivering further growth
in distributable income, recording only
a modest decline in portfolio value and
outperforming the MSCI Ireland Property
All Assets Index by 1.3 percentage points.
Our rent collection was consistently strong
throughout the year. Most of our employees
have worked from home since March 2020
and continue to do so effectively. We have
not required or sought any government
support or suspended or reduced our
dividend payments during the pandemic.
We completed a €25m share buyback
programme in the financial year, which
has proved a highly accretive use of capital.
As a Board, we continually monitor our
strategy and engage with our stakeholders
to inform our decisions. One of our
challenges has been to make sure our
strategy continues to be aligned to our
purpose, in terms of both uncertainties
over the future of the office market post
COVID-19 and an increasing focus on ESG
matters by all stakeholders. To support
transparency, we have committed to
implement the ‘Task Force on Climate-
related Financial Disclosures’ (“TCFD”)
reporting recommendations by 2022.
In our view, the pandemic is accelerating
pre-existing changes in working patterns,
such as more remote working, a greater
focus on collaborative spaces in offices,
increased emphasis on employee wellness
and office buildings’ sustainability
credentials. This is something we had
already started to factor into our building
designs before the pandemic, as can be
seen in the Windmill Quarter, and we
remain positive about the long-term
prospects for well-configured, prime offices
in Dublin’s city centre. Our strategy
therefore continues to focus on responsibly
delivering Grade A space in clusters where
occupiers can benefit from shared services
and additional amenities.
To support our future development
projects, we have agreed an additional
€125m of 10- and 12-year unsecured US
private placement notes with average
coupons of 1.9% to be issued in late July
2021. This increases our weighted average
debt maturity on a pro-forma basis from
3.4 years at 31 March 2021 to 5.2 years.
As a property company, carrying out
our activities responsibly is integral to our
purpose. To reflect this, we took a closer
look at all aspects of our environmental,
social and governance (“ESG”) activities
this year. As a result, we produced a
Sustainability Statement of Intent to
set out our near- and long-term priorities
and ensure these are embedded into
our strategic priorities. In revising our
Remuneration Policy this year we also
ensured ESG is embedded into our
performance metrics. And as well as
expanding our ESG reporting to include
CDP, we have committed to a pathway
to net zero carbon by 2030.
While the world is hopefully on a path
towards recovery, the year ahead will
no doubt bring challenges, but we are
confident that our strong and talented
team, underpinned by our culture and
values, can continue to make good
progress with our strategic priorities.
We believe that we are well placed to
adapt to changing occupier requirements;
in particular as we have a strong balance
sheet and a development pipeline primed
to deliver high quality, ESG efficient offices
in clusters in Central Dublin.
Daniel Kitchen
Chair
14 June 2021
7
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Contracted rent
€67.1m
+2.2% on prior year
EPRA EPS
6.3c
+13.4% on prior year
Dividend per share
5.4c
+13.7% on prior year
Our performance
Kevin Nowlan
Chief Executive Officer
“While the near-term outlook is likely to
remain tied to progress on ‘unlocking’, we are
optimistic on our longer-term prospects.”
8
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
C H I E F
E X E C U T I V E
O F F I C E R ’ S
S T A T E M E N T
EPRA cost ratio (including vacancy costs)
25%
-1.8pp on prior year
Real-time energy monitoring now used in
100%
of our managed assets
At the onset of the pandemic, our key
priority was safeguarding our buildings for
our tenants, visitors and staff. Since then,
our attention has returned to the longer
term and ensuring our business is evolving
to meet changing occupier expectations.
Challenging market conditions
Property investment volumes and Dublin
office take-up in 2020 fell by 58% and
54%, respectively, versus 2019 due to the
impact of the pandemic, and the market
remained subdued in Q1 2021, with
COVID-19 restrictions in Ireland at their
highest level. As we have noted before,
the structural changes that have occurred
in the Irish property market since 2007
(greater institutional ownership, less debt)
have increased the market’s resilience to
external shocks and this, together with the
strong Dublin office market fundamentals
immediately prior to the pandemic and
support from governments and central
banks, has resulted in a relatively modest
negative impact on market pricing to
date despite the rise in vacancy rates.
Prime central Dublin office yields have
remained at around 4% since the start of
the pandemic and prime headline rents
stood at around €57.50psf at March 2021
versus €62.50psf a year earlier.
Resilient performance
Given market conditions, our leasing
activity in the financial year was limited
and contracted rent grew 2.2% to €67.1m,
primarily as a result of new lettings, rent
reviews and lease variations. Our rent
collection rates for the financial year have
averaged 99% and this, as well as leases
signed in previous years, good cost control
and the accretive €25m share buyback
executed in the year, resulted in a 13.4%
increase in EPRA EPS to 6.3 cent. We have
proposed a final dividend per share of
3.4 cent, taking the total in respect of the
financial year to 5.4 cent, an increase of
13.7%. The value of our property portfolio
declined 4.4% like-for-like, with the majority
of this occurring in the first quarter of the
financial year, shortly after the onset of the
pandemic, resulting in a net loss per share
of 3.7 cent for the year and a 3.7% decrease
in EPRA NTA per share to 172.7 cent.
Balance sheet strength
Our leverage remains amongst the lowest
in the European REIT universe, giving us
significant strategic flexibility. At 31 March
2021 the LTV ratio was 19.5% and we had
€110m of cash and undrawn facilities net of
commitments. Since then, we have agreed
to issue an additional €125m of 10- and
12-year US private placement notes with
an average coupon of 1.9%, increasing our
investment capacity, significantly extending
our average debt term and reducing our
average cost of debt. These new notes will
help fund the delivery of our office clusters
at Clanwilliam Court and Harcourt Square.
Responding to changing occupier
expectations by focusing on clusters
and ESG excellence
We believe office clusters and ESG
excellence will be key for us in providing
the type of flexible, efficient, amenity-rich
office space with strong wellness and
ESG credentials that occupiers are
increasingly seeking. This was our strategic
direction prior to the pandemic and we
had already completed our first cluster,
the Windmill Quarter, and recruited a
full-time Sustainability Manager to lead
our ESG programme. The pandemic is
accelerating many of these changes in
occupier requirements and consequently
we are concentrating on refining our
clustering strategy and accelerating our
ESG initiatives to deliver top-grade office
space suited to new, agile working and
wellness. We have now received full
planning approval for our new office
clusters at Clanwilliam Court and Harcourt
Square and we are working to further
enhance the active communal areas within
these schemes. Both developments can be
started over the next 18 months and, when
complete, will increase the proportion of
our office portfolio held in clusters to 65%.
We have also set new, long-term targets
in our recently published Sustainability
Statement of Intent and committed to
becoming a net zero carbon business
by 2030.
Portfolio rich in opportunity
As well as our developments at Clanwilliam
Court and Harcourt Square, which can be
started in the near term, our portfolio has
many other opportunities for enhancing
shareholder value. We invested €16.8m in
development expenditure in the financial
year, mostly on 2 Cumberland Place and
50 City Quay. These schemes, which will
deliver 62,500 sq. ft. of new office space,
62% of which is still available to let (ERV:
€2.2m), were scheduled to complete in
early 2021 but have been delayed by the
shutdown of development sites and are
now expected to complete in July 2021.
Longer term, we are assessing our
in-place office portfolio for improvement
opportunities and we own 155.2 acres of
land and industrial assets in Dublin with
potential for re-zoning in future for
mixed-use schemes.
Optimistic on longer-term outlook
With Ireland’s vaccination programme
gathering pace and a government roadmap
for the easing of lockdown restrictions,
optimism is growing and this is starting to
be seen in active demand for office space
and tenant enquiries. While the near-term
outlook is likely to remain tied to progress
on ‘unlocking’, we are optimistic on our
longer-term prospects. We have a clear
strategy to provide occupiers with the type
of office space they want, a portfolio rich in
opportunity, and the financial strength and
the team in place to deliver our plans.
Kevin Nowlan
Chief Executive Officer
14 June 2021
9
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
How office use is changing
More remote working
−Offices need to draw people in
Offices as a place for collaboration
−More breakout spaces
−Townhall or communal areas
Increased focus on employee wellness
−Building facilities
−Air and light quality
−Nearby amenities
Importance of ESG credentials
−Efficiency of operation and construction
Greater lease flexibility
−Shorter leases
−Furnished space (managed offices)
The future
of the office
Working habits and occupier expectations are changing.
This was happening before COVID-19 but the pandemic has
accelerated the pace of change. We believe the office will
still be crucial for employee collaboration, team culture and
creativity and we are positive about the long-term prospects
for flexible, efficient, prime offices in Dublin’s city centre.
How we are
responding
1
Bigger
and better
clustering
−Already part of our pre-pandemic
approach (see opposite) but we are
looking at ways to take the concept
further with future projects
−Greater service mindset and focus
on communal facilities/amenities
2
Greater emphasis
on ESG and
wellness
−New Sustainability Statement of
Intent recently published setting our
target of net zero carbon by 2030
−New buildings will push boundaries
on ESG efficiency
−Programme to improve operational
efficiency of existing buildings
3
Reiterating our
focus on prime
city centre
locations
−Our preference has always been to
own and/or develop the best office
buildings in central Dublin
−The pandemic has only reinforced
this view
Read more on pages 8 to 9
10
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
U N D E R S T A N D I N G O U R W O R L D
Windmill Quarter
−Completed in 2019
−Comprises 400,000 sq. ft. of office
space across six adjacent buildings
−Extensive facilities/amenities including
a gym, shops, coffee dock and a pub
−The centrepiece of it, the Townhall, gives
tenant staff a space to meet and work
informally, as well as hosting events
(both work and leisure)
Clanwilliam Quarter
and Harcourt Square
−Work due to start in early 2022
and 2023, respectively
−Expected to deliver c. 540,000 sq. ft.
of highly ESG efficient office space
across both schemes
−Designing both to take the clustering
concept to the next level, using the
lessons from the Windmill Quarter.
This will involve a bigger and more
flexible townhall area, better apps
for integrating with tenant staff,
and excellent facilities and amenities
One we've done
already…
The next generation
Proportion
of current office
portfolio in
clusters:
39%
Proportion of office
portfolio in clusters
once Clanwilliam and
Harcourt complete:
65%
Rear of 1SJRQ, South Docks
CGI of Harcourt Square, D2
11
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Why Dublin?
Dublin is a capital city and by far the largest
and wealthiest city in Ireland, being home
to more than 40% of the country’s
population of 5m people. Dublin has four
universities and several other higher
education institutions, and it has a young
(47% of the population are under 35 years
of age), highly skilled (48% have a third
level qualification) and growing workforce.
Dublin’s population grew by 13.5% between
2006 and 2016 (source: CSO).
This, together with Ireland’s language,
legal system, time-zone, tax advantages,
attractive living standards, and membership
of the European Union, has attracted
many international companies to Dublin.
Assisted by strong foreign direct investment,
Ireland has enjoyed the fastest rate of
economic growth in the EU for four of
the last five years and Dublin was ranked
as the 3rd best city in the world for FDI
by the Financial Times in 2019.
The presence of FDI companies in Dublin,
especially in the digital and pharma sectors,
has helped the economy withstand the
shock brought about by the COVID-19
pandemic. Dublin was the top performer
out of 30 major European cities in 2020
as its GDP declined by a modest 0.1%
compared to the European city average
of 6.7% (source: Oxford Economics).
Favourable
long-term dynamics
Dublin’s contribution to Irish GDP
(source: CSO)
>50%
Expected population growth
in Dublin by 2031 (source:
National Planning Framework)
+16%
Proportion of Dublin population with
third level qualification (source: CSO)
48%
Expected growth in office-based
employment by 2026, even in a
recessionary scenario (source:
Oxford Economics)
+5%
12
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
M A R K E T R E V I E W
General economy
Against the backdrop of the COVID-19
pandemic and a 3.4% decline in global
GDP in 2020 (source: the OECD), the Irish
economy has performed very strongly,
recording GDP growth of 3.3% in 2020,
the fastest in the developed world.
Much of this was due to the contribution
of the multinational-dominated sectors,
such as technology and pharmaceuticals.
Irish output, as measured by Gross Value
Added (“GVA”), in the foreign-owned
sector increased by 18% in 2020, while
other domestic industries declined
by 9.5% (source: Goodbody).
The Irish Government continues to offer
significant support to the labour market
through pandemic payments and wage
subsidy schemes: the standard measure
of monthly unemployment was 5.8% in
April 2021 (compared with 5.1% in
January 2020), while the COVID-19
adjusted measure of unemployment
was 22.4% if all claimants of the Pandemic
Unemployment Payment were classified
as unemployed (source: the CSO). Much
of this emergency support is going to
the hospitality and retail sectors, with
office-based employment less impacted,
particularly given the strong performance
of many multinationals in Ireland. The
labour market is expected to recover
gradually as restrictions ease, in-line with
the vaccine rollout in Ireland. Current
Government expectations are that all
adults in Ireland will be vaccinated by
late summer 2021 and the unemployment
rate (incl. PUP recipients) is projected to
average 16.3% in 2021, 8.2% in 2022 and
to reach 6.0% in 2024, a rate still above
the pre-pandemic level of 5.1% (source:
the DoF).
While global progress on vaccines and
the new EU-UK Trade and Cooperation
Agreement (“TCA”), which took effect
from 1 January 2021 and averted the threat
of a no-deal Brexit, have been positive
developments for the Irish economic
outlook, nonetheless risks remain over
the pace of recovery from the pandemic
and there is additional friction to trade
between Ireland and the UK as a result of
the TCA. International tax reforms could
negatively affect Ireland’s attractiveness
for foreign direct investment: while a lot
remains uncertain at present, changes
to the way multinationals are taxed have
been discussed for some time by the
OECD under the base erosion and profit
shifting (“BEPS 2.0”) process and the US
is also discussing corporate tax reform.
1SJRQ, South Docks: view of Dublin looking west from the balcony
Irish property market overview
As we have noted before, the structural
changes that have occurred in Ireland’s
property market since 2007, namely greater
levels of institutional ownership and less
debt, have given it greater resilience than
existed historically. Furthermore, the Dublin
office market entered the pandemic with
much healthier fundamentals than it had
prior to the Global Financial Crisis in 2008,
due in part to the limited speculative
development funding available this cycle.
While prime headline quoting rents in
March 2020 and March 2008 were both in
excess of €60psf, the Dublin office vacancy
rate in March 2020 was 6.5% versus 12.3%
in March 2008 and the unlet office space
under construction totalled 3.0m sq. ft.
(6.9% of existing stock) in March 2020
versus 4.6m sq. ft. (14.9% of existing stock)
in March 2008 (source: Knight Frank,
Property Market Analysis).
Irish property investment market
Total investment volumes in 2020 were
€3.0bn, down 58% on the record volumes
transacted in 2019 but broadly in line
with volumes in 2017 (€2.3bn) and 2018
(€3.6bn). The private rental sector (“PRS”)
and office sectors again dominated,
together accounting for 78% of volumes
(2019: 77%). Irish investors (excluding Irish
REITs) accounted for only 15% of investment
in 2020 (2019: 18%), indicative of the
continued interest from international
investors in Irish property despite significant
restrictions on mobility and travel (source:
Knight Frank). Investment volumes remained
resilient in Q1 2021 even though Ireland was
at the highest level of COVID-19 restrictions
throughout: investment spend amounted to
€1.3bn (Q1 2020: €0.7bn). The residential
and office sectors again dominated,
representing 60% and 31% of total Q1 2021
volumes, respectively. International capital
continues to seek opportunities to invest in
Irish property, with 55% of Q1 investment
acquired by overseas investors (Q1
2020: 87%) (source: Knight Frank).
13
Hibernia REIT plc Annual Report 2021
Strategic report
Governance
Additional information
Financial statements
www.hiberniareit.com
Top five office investment transactions (12 months to March 2021)
Building
Price
Capital value psf
Buyer
Buyer nationality
Project Tolka Portfolio, D2/4
€290m
€994
Blackstone
American
Bishop’s Square, D2
€183m
€1,003
GLL Real Estate Partners
German
28 Fitzwilliam, D2
€178m
€1,309
Amundi Real Estate
French
Baggot Plaza, D4
€141m
€1,090
Deka Immobilien
German
76 Sir John Rogerson’s Quay, D2
€95m
€1,026
AM Alpha
German
Top five total
€887m
Source: Knight Frank.
Top five PRS investment transactions (12 months to March 2021)
Building
Price
Price per unit
Buyer
Buyer nationality
Confidential portfolio, Dublin/Kildare
€450m
Confidential
Ardstone
Irish
Cheevers Court & Halliday House, Dun Laoghaire
€195m
€530k
SW3/DWS
German
The Prestige Portfolio, North Dublin
€145m
€457k
SW3/DWS
German
Off-market portfolio, North, South
& West Dublin suburbs
€140m
Confidential
GIC/Orange Capital Partners
Singaporean
Blackwood Square, Santry, Dublin 9
€124m
€416k
Quad Real Property Group/
Roundhill Capital
Canadian
Top five total
€1,054m
Source: Knight Frank.
Knight Frank reports that prime Dublin
office yields have tightened to 3.75% at
March 2021 (March 2020: 4%), given the
level of competitive demand in the market
for the best Dublin office assets, though
other agents remain at c.4%. CBRE states
that despite some uncertainty about the
future of the office, which is unlikely to
dissipate until such time as the majority
of office workers return to their buildings,
the office sector remains the preferred
sector for institutional investors in Europe
with most focussed on securing core and
core-plus opportunities. PRS investment
activity has continued to be robust.
In 2020, the sector comprised 38% of
overall investment (2019: 33%) and in the
first quarter of 2021, it comprised 60% of
investment (Q1 2020: 15%) (source: Knight
Frank). In its Spring 2021 yield matrix,
Cushman & Wakefield reports that PRS
yields for prime Dublin properties remain
stable within a range of 3.75-4.25%.
In the 12 months to 31 March 2021, the
MSCI Ireland Property All Assets Index
(the “Index”) delivered a total property
return of -1.5%, excluding Hibernia (March
2020: 4.4%). Over this period the industrial
sector has been the top performer in the
Index, with a total return of 11.0%, followed
by the ‘other’ sector (which includes
PRS) at 4.7% (March 2020: 7.7% and
4.2%, respectively). Offices delivered
a total return of 1.2% (March 2020: 6.3%).
Hibernia’s Total Property Return
over the same period was -0.2%,
outperforming the Index excluding
Hibernia by 1.3 percentage points.
Dublin office occupational market
Following a strong start to 2020, the onset
of the pandemic resulted in a significant
slowdown in letting activity. Total take-up
was 1.5m sq. ft., a decline of 54% on 2019,
with 0.8m sq. ft. of this coming in Q1 2020,
before the pandemic took hold (source:
Knight Frank). Unsurprisingly, demand was
driven by sectors which have continued to
generate economic and employment
growth: 64% of take-up was from the
multinational-dominated TMT sector
(2019: 55%). Only five letting transactions
for more than 50,000 sq. ft. occurred in
2020, compared with 12 transactions in
2019. The city centre continued to be
occupiers’ preferred location choice,
accounting for 51% of volumes in 2020
(2019: 68%) (source: Knight Frank), and
this figure was somewhat lower than usual
due to one particularly large letting in the
suburbs of 0.25m sq. ft. that completed in
Q1 2020. With the highest level of COVID-19
restrictions in place for the whole of Q1
2021, including the closure of construction
sites and a ban on property inspections,
the Dublin office market saw the lowest
quarterly take-up on record with <0.05m
sq. ft. transacted (Q1 2020: 0.8m sq. ft)
(source: Knight Frank).
Our active demand tracker, run in
conjunction with Cushman & Wakefield,
saw a c.30% fall in active demand to 2.3m
sq. ft. between February 2020 and
December 2020. The first signs of a
recovery are now beginning to emerge,
with 2.7m sq. ft. of active demand at the
end of March 2021, representing a 17%
increase on the position at the end of
December 2020. CBRE notes that
several requirements that had been
on hold have been reactivated and some
new requirements initiated. Although the
intensity of the requirements (i.e. how soon
the occupiers want the space) remains
relatively low, indicating occupier caution,
it is encouraging to note that CBRE is
reporting approximately 0.5m sq. ft.
of reserved office space at the end of
March 2021, which bodes well for leasing
activity as COVID-19 restrictions ease.
Recent figures from the CSO show that
in the final quarter of 2020, the technology
sector recorded an annual increase in
employment of 9%. Looking solely at
Dublin, the sector saw an annual increase
in employment of 4%, equating to 3,000
additional people employed. This trend is
being translated into active demand for
office space, with approximately 30% of
active demand at March 2021 coming from
the technology sector.
The overall Dublin office vacancy rate
(which includes “shadow” or “grey” space)
increased to 9.9% at 31 March 2021 from
6.5% at 31 March 2020. The Grade A
vacancy rate in the city centre, where
all of Hibernia’s office portfolio is located,
was 9.8%, up from 5.9% at 31 March 2020
(source: Knight Frank). Of the 3.4pp
increase in overall Dublin office vacancy
since 31 March 2020, 1.8pp related to 0.8m
14
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
M A R K E T R E V I E W C O N T I N U E D
Top 10 office lettings (12 months to March 2021)
Tenant
Industry
Building
Area (sq. ft.)
% of total take-up
Amazon
TMT
2 Burlington Plaza, D4
76k
10%
Microsoft
TMT
3 Dublin Landings, D1
44k
6%
HSE
State
1 Heuston South Quarter, D8
44k
6%
OPW
State
1GQ, George’s Quay, D2
42k
6%
Gilead
Pharma
North Dock 2, D1
31k
4%
Ryanair
Other
230/240 Airside Business Park, North Suburbs
30k
4%
3M
TMT
2 Cumberland Place, D2
24k
3%
OPW
State
Paramount Place, North Suburbs
24k
3%
Rabobank
Finance
76 Sir John Rogerson’s Quay, D2
24k
3%
Twilio
TMT
78 Sir John Rogerson’s Quay, D2
20k
3%
Top 10 total
359k
48%
Source: Knight Frank. Please note Hibernia classifies 3M as ‘healthcare’ or ‘other’ in its industry classification.
Office development pipeline
We currently expect 7.5m sq. ft. of gross
new space to be delivered between 2021
and 2024 for the whole of Dublin (none
completed thus far due to the recently
lifted lockdown), of which 83% will be
in the city centre. 45% of office stock
under construction in Dublin has been
let or reserved (46% in the city centre),
meaning there is 2.6m sq. ft. under
construction but not yet let (2.1m sq. ft.
in the city centre). Since we reported
in May 2020, the expected supply in
Dublin between 2020 and 2023 is down
7% to 7.1m sq. ft. and the expected supply
in the city centre over the same period is
down 2% to 5.6m sq. ft. (source: Knight
Frank/Hibernia).
Dublin city centre supply
Total
1.5m sq. ft.
(79% pre-let)
1.7m sq. ft.
(42% pre-let)
1.6m sq. ft.
(28% pre-let)
1.4m sq. ft.
(28% pre-let)
6.2m sq. ft.
(44% pre-let)
2021f
2022f
2023f
2024f
1.7m sq. ft.
(73% pre-let)
2.1m sq. ft.
(43% pre-let)
1.8m sq. ft.
(26% pre-let)
1.9m sq. ft.
(21% pre-let)
7.5m sq. ft.
(40% pre-let)
All Dublin supply
Source: Knight Frank/Hibernia.
* Note: There have been no development completions so far in 2021 due to the recently lifted lockdown.
Residential/PRS
There were 20,700 new home completions
in 2020, down 1.9% on 2019 (source: the
ESRI). This was a good outcome given
the various pandemic restrictions, but
nevertheless represented the first year-on-
year decline since 2012, putting Ireland
even further behind the estimated natural
demographic demand for at least 34,000
units per annum (source: the Central Bank
of Ireland). For 2021, the restrictions in
effect for the first four months of the
year, under which most construction work
was no longer deemed essential, are likely
to have had an adverse effect on overall
housing supply. The ESRI expects 15,000
units to be completed in 2021 and 16,000
in 2022. Dublin accounted for 29% of all
Irish delivery in 2020, slightly below the
sq. ft. from un-let new buildings completing
and 1.2pp related to 0.5m sq. ft. of grey
space coming back into the market as
tenants offered surplus space for sub-
leasing: the remaining 0.4pp came from
lease expiries. Knight Frank estimates that
approximately 0.25m sq. ft. of space could
potentially come to the grey space market
in the next six to nine months, driven by
space being made available by the banking
and public sectors. The main agents have
marked down their headline prime Dublin
office rent assumptions by 7-10% and are
also suggesting increased tenant incentives
in some cases. Knight Frank reports that
prime rents in Dublin currently stand at
€57.50psf (Mar-20: €62.50psf).
33% proportion recorded in 2019, and
when combined with the commuter
counties around Dublin, the Greater
Dublin Area (“GDA”) accounted for 50%
of Irish completions in 2020 (2019: 55%)
(source: the CSO). Within the GDA, houses
accounted for 69% of completions and
apartments for 31% in 2020, still far from
the aspirations of the Ireland 2040 plan
for compact urban growth. At 19% of total
completions, apartment building in Ireland
is running at the lowest level of any EU
member state, with the average being
59% (source: the European Commission).
Knight Frank estimates that there
continues to be €3bn of capital looking
to deploy into PRS in Ireland and this is
likely to keep prime yields in the sector
stable at 3.75-4.00%.
The latest data from the Residential
Tenancies Board for Q4 2020 show that
nationally rents grew by 2.7% year-on-year
and that the standardised average rent
stood at €1,256 per month. Rents grew
faster outside Dublin than within: Dublin
rents grew by 2.1% year-on-year while the
GDA excluding Dublin grew by 5.0% and
other regions outside the GDA grew by
3.4%. Apartment rents grew 2.0% in Dublin
and 2.7% outside Dublin.
15
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
All of our portfolio
is in Dublin
Our primary focus is on the Dublin city
centre office market but we also own
some multi-family residential properties.
Consistent with our business model of asset
management and asset improvement, 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 technology
sector or state entities).
Portfolio segment by value
€1,427.4m
Contracted rent by tenant
€67.1m
Contracted rent by tenant sector
€67.1m
Portfolio overview
Dublin office South Docks
39%
Dublin office Traditional Core
29%
Dublin office IFSC
12%
Dublin residential
12%
Dublin office development
4%
Industrial/land
4%
HubSpot Ireland
16%
Office of Public Works
9%
Twitter International Company
8%
Zalando Ireland
4%
Autodesk Ireland Operations
4%
Informatica Ireland EMEA
3%
Riot Games
3%
Travelport Digital
3%
Deloitte Ireland
2%
BNY Mellon Fund Services
2%
Remaining tenants
46%
Technology
43%
State entities
15%
Insurance and investment
management
10%
Other
10%
Residential assets
9%
Professional services
6%
Media
3%
Banking and capital markets
2%
Industrial assets
2%
The Windmill Quarter, South Docks
Read more on pages 20 to 21
for further details about our
business model
16
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
O U R P O R T F O L I O
Key portfolio statistics at Mar-21
In-place office
vacancy
7%
Including Clanwilliam Court
and Marine House vacancy
rate was 9%.
Average in-place
office ERV
€51psf
Average in-place
office rent
€51psf
Rental uplift potential including
committed developments
+€6.8m (+10%)
Properties
39
In-place offices
1.1m sq. ft.
Office WAULT
to break/expiry
5.8yrs
Offices including fully
developed pipeline
1.5m sq. ft.
17
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Why clusters?
Office clusters enable us to provide better facilities
and amenities to occupiers than they would be able
to get in a normal, multi-let office building. This is
in part because height restrictions in most parts of
Dublin mean it is unusual for single office buildings
to exceed 100,000-150,000 sq. ft. in size.
Existing cluster:
The Windmill Quarter
−c.400,000 sq. ft. of office space across six
adjacent buildings
−Completed in 2019 and fully let
−Mainly a mix of LEED Gold and Platinum buildings
−Currently assessing how to improve the offering
for tenants further
Future cluster:
The Clanwilliam Quarter
−Planning for c.200,000 sq. ft. of office and
ancillary space replacing Clanwilliam Court
and Marine House
−Aiming for LEED Platinum
−Can commence redevelopment in early 2022
Future cluster:
Harcourt Square
−Planning for c.340,000 sq. ft. of office space
replacing existing building
−Aiming for LEED Platinum
−Can commence redevelopment in early 2023
18
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
O U R P O R T F O L I O C O N T I N U E D
Dundrum
Newlands Cross
Dublin Airport
M50
M50
M1
M2
N4
N3
N7
N11
M4
M3
N81
Dundrum
Newlands Cross
Dublin Airport
M50
M50
M1
M2
N4
N3
N7
N11
M4
M3
N81
NORTH DOCKS
IFSC
TRADITIONAL CORE
9
13
17
15
20
16
10
1
26
25
21
22
Dublin City
Centre
24
2
19
18
14
4
6
11
5
7
8
SOUTH DOCKS
3
Transport links
DART/railway lines
LUAS lines
Residential
Office development
Completed office
developments
Office
Industrial
1
1DC
2
2DC
3
The Forum
4
50 City Quay
5
1SJRQ
6
The Observatory
7
1WML
8
2WML
9
South Dock House
10
Central Quay
11
1 Cumberland Place
12
2 Cumberland Place
13
Marine House
14
Blocks 1, 2 & 5
Clanwilliam Court
15
One Earlsfort Terrace
16
Hardwicke House
17
Montague House
18
Harcourt Square
19
39-40 Harcourt
Street
20 34–37 Camden Street
21
Dublin Industrial
Estate
22
Newlands/Gateway
23
Malahide Road
Industrial Park
24
Cannon Place
25
Dundrum View
26
Wyckham Point
Windmill Quarter
Clanwilliam Quarter
Harcourt Quarter
Our properties
12
23
19
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
How we create value
We apply our asset management, asset improvement and
investment expertise to our property portfolio in a responsible
manner to generate value for our stakeholders.
Our core activities
I M P A C T E D B Y
The markets
we operate in
Primarily the Dublin office and
residential property markets
Our assets and resources
Properties
Read more on pages 16 to 19
Financial resources
Read more on pages 61 to 62
People and relationships
Read more on pages 34 to 37
The views of our
stakeholders
Through effective engagement,
we ensure we understand views
of our stakeholders
Investment activity
We recycle capital, selling
assets with limited potential
and investing in future
redevelopment opportunities.
Clustering
Where possible we form
clusters of buildings with shared
facilities to benefit our tenants
and their employees.
Asset improvement
We unlock value through
refurbishment, redevelopment
and change of use at
appropriate times in the
property cycle, increasing the
rents tenants are prepared
to pay.
Active management
We seek close relationships
with tenants and take a
cycle-based approach
to maturities.
O U R P U R P O S E
Our purpose is to
create the best and
most efficient spaces
for working or living
in Dublin, responsibly
transforming the
fabric of the city
and bringing benefits
to all stakeholders.
O U R A C T I V I T I E S
A N D O B J E C T I V E S
20
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
O U R B U S I N E S S M O D E L
Driven by our five
strategic objectives
1
Maintain a
balanced
portfolio with
clusters of assets
2
Grow recurring
income over time
3
Operate and
develop our
buildings
responsibly
4
Maintain a strong,
flexible funding
structure
5
Attract, motivate,
develop and
retain a
talented team
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. Furthermore we
undertake community initiatives.
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.
T H E V A L U E W E S H A R E
21
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Our clear strategy
O U R S T R A T E G I C O B J E C T I V E S
1
Maintain a balanced portfolio
with clusters of assets
2
Grow recurring income over time
3
Operate and develop
our buildings responsibly
4
Maintain a strong,
flexible funding structure
5
Attract, motivate, develop
and retain a talented team
O U R P U R P O S E
We have a clear strategy for fulfilling
our purpose and creating value for
our stakeholders.
We focus on the central Dublin office
market and the Dublin residential
market, two of the deepest and most
liquid property markets in Ireland and
ones where we believe the long-term
dynamics are favourable.
We seek to acquire assets with future
redevelopment potential at relatively
low capital values and to improve and
expand these over time to deliver
best-in-class space for our customers.
Where possible we assemble clusters
of assets as this helps maximise the
benefits for our customers. We also
ensure the space we deliver has strong
ESG credentials. We are happy to sell
assets and recycle capital into new
opportunities where we think this will
improve future returns.
Our portfolio is a mix of stable,
income-producing properties, many
of which we have delivered ourselves,
and assets with future redevelopment
potential. This combination, together
with our policy of maintaining
low financial leverage, enables
us to manage the risk inherent
in development activity while
delivering attractive returns.
22
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S T R A T E G Y A T A G L A N C E
I M P A C T O N K P I S
− EPRA EPS
−TAR
−TPR
−TSR
− EPRA EPS
−TAR
−TPR
−TSR
−TAR
−TPR
−TSR
− EPRA EPS
−TAR
−TSR
−EPRA EPS
−TAR
−TPR
−TSR
K E Y T A R G E T S F O R 2 0 2 1 - 2 2
−Make acquisitions to enhance future
value of the portfolio
−Dispose of assets which do not
meet our risk-adjusted forward
returns expectations
−Complete our developments at
2 Cumberland Place and 50 City Quay
−De-risk future development pipeline
by securing pre-lets
−Enhance and progress possible
future development schemes
within the portfolio
−Reduce in-place office (excluding
Clanwilliam Court and Marine House)
vacancy rate from 7% at 31 March 2021
−Let remaining space in 2 Cumberland
Place and 50 City Quay
−Extend income through lease
renewals and regears
−Secure pre-lets for future
development schemes
−Publish pathway to achieve our
net zero carbon target by 2030
−Set internal carbon pricing model
−Achieve reductions in energy
intensity and greenhouse gas
(“GHG”) emissions per unit area
vs 2019 baseline
−Achieve LEED Platinum in
2 Cumberland Place
−Maintain sufficient financial capacity
for investment opportunities
(including developments)
−Maintain substantial headroom
against all financial covenants
−Explore ‘green’ funding opportunities
−Conduct next employee survey
−Hold team social events
including an away day
(health restrictions permitting)
−Continue to support employees
working from home
−Ensure greater inclusion of
ESG objectives/measures in
remuneration schemes
P R I N C I P A L R I S K S
For information on the principal
risks and uncertainties see pages
48 to 53.
1 2 3 4 5 6 7 8 9
1 2 3 4 5 6 7 8 9
1 2 3 4 5 6 7 8 9
1 2 3 4 5 6 7 8 9
1 2 3 4 5 6 7 8 9
23
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Progress against strategic
priorities for 2020-21
In last year’s Annual Report we set some specific targets for 2020-21 as detailed below.
Priority
Key targets
1
Grow rental income and, where possible,
WAULTs to drive dividends per share
• Let remaining space in 2 Cumberland Place
• Get office vacancy rate to 5% or below
• Agree two outstanding rent reviews and five rent
reviews upcoming during FY21
• Minimise impact from COVID-19 on rental income
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)
• Deliver 2 Cumberland Place on budget in late 2020
• Enhance and progress pipeline schemes to improve
potential returns
• Assess timing of upcoming projects in light of
market conditions
• Assess existing in-place portfolio for future value-
add opportunities
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
• Make acquisitions or investments where we see opportunities
to enhance Group returns in the medium term
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 environmental
efficiency of the portfolio
• Reduce energy consumption and GHG emissions per
square metre on like-for-like and absolute basis
• Achieve LEED Platinum certification at 2 Cumberland Place
• Revise Sustainability Strategy
24
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S T R A T E G Y A T A G L A N C E C O N T I N U E D
What we achieved
Impact on KPIs
• In-place office vacancy of 7% (9% including Clanwilliam
Court and Marine House)
• Contracted rental income +2% to €67.1m
• Net rental income +8% to €63.3m
• Three rent reviews and five lease variations agreed,
adding incremental rent of €0.7m
• Average rent collection rates running at 99% in FY21
• Increased rent and WAULT may increase Total Accounting Return
(“TAR”), EPRA EPS and relative Total Property Return (“TPR”)
• 2 Cumberland Place still on budget but completion delayed
by COVID-19 site lockdowns and now expected in Jul-21
• Final grant of planning obtained for 152,000 sq. ft.
redevelopment of Clanwilliam Court
• We continue to assess our upcoming schemes in the
current market
• We are assessing in-place portfolio for future opportunities
• Development profits enhance TAR and relative TPR
• Receipt of planning permission may do likewise but
to a much lesser extent
• €11.1m deployed in five acquisitions adjacent to existing
Hibernia assets
• €16.8m invested in development expenditure
• €25m share buyback programme executed: 23.1m shares
acquired and cancelled at an average price of €1.08
• Disposals above market value enhance TAR and relative TPR
• Investments should enhance TAR and relative TPR in the
longer term
• Buybacks at below NAV enhance TAR, TSR and EPRA EPS
• At Mar-21 cash and undrawn facilities were €110m net of
committed expenditure
• In May-21 the Group agreed to issue €125m of new 10- and
12-year USPP notes, adding financial capacity and extending
the average term
• The Group has significant headroom on all its financial
covenants (please see pages 61 to 62 for further details)
• An efficient balance sheet should enhance TAR and EPRA EPS
• Real-time energy monitoring system installed and operational
• Energy consumption and GHG emissions reductions of 23%
and 26% achieved on a like-for-like basis and 21% and 26%
on an absolute basis
• On track for LEED Platinum in 2 Cumberland Place
• New Sustainability Statement of Intent published, including
a commitment to become a net zero carbon business
by 2030
• Improving environmental efficiency should enhance TAR, relative
TPR and EPRA EPS in the longer term
25
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Managing with
COVID-19
We took immediate action at the start of the
pandemic to ensure the continued safety of
our tenants, suppliers and staff.
26
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S T R A T E G Y I N A C T I O N
“Engaging with our tenants has been
paramount in developing our response
to the pandemic. As the vaccine roll-out
progresses and Ireland emerges from
lockdown, Hibernia will continue to
tailor its offering to adhere to public
health advice and assist tenants to
meet their evolving needs.”
Dan Boyd Head of Occupier Services
Strategic
priority
1 2 3 4 5
The safety measures we introduced in
our managed buildings included access
control, physical distancing measures
and additional cleaning, sanitising
and signage. An individual plan was
developed for each building through
discussions with tenants.
Thanks to our cloud-based IT systems,
the transition to remote working has
been smooth for staff. Maintaining our
collaborative team culture and ensuring
staff welfare has been a key priority.
In a recent tenant survey
85%
of respondents said Hibernia’s
response to COVID-19
was very good
75%
of respondents expect
an increased focus
on wellness
Townhall at 1WML, South Docks
27
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Progressing with
our developments
Strategic
priority
1 2 3 4 5
It has been a mixed year for our
developments. The onset of the
pandemic and several national
lockdowns have materially delayed
our two active schemes, 2 Cumberland
Place and 50 City Quay. Both were due
to complete in 2020-21 but are now
expected to complete in July 2021.
Fortunately we are not expecting
material cost overruns.
We have made better progress with our
development pipeline, receiving a grant
of planning for the redevelopment of
Clanwilliam Court. This means we now
have full planning for all of our near term
office pipeline, which can deliver up to
539,000 sq. ft. of new office space, all
of which will be in clusters.
Committed developments
FY21
2 Cumberland Place, D2
58,000 sq. ft. of new Grade A offices
Expected completion: Q3 2021
– 41% pre-let following 3M leasing in Apr-20
(ahead of ERV)
– Total office space at Cumberland Place
post completion will be c. 190,000 sq. ft.
– Completion now expected in July-21 due
to COVID-19 restrictions
−Project remains on budget
50 City Quay, South Docks
4,500 sq. ft. of office space refurbished
to a high standard
Expected completion: Q3 2021
−Building faces the River Liffey
−Forms part of the Windmill Quarter and
tenants will have access to all the amenities
of the Quarter
−Completion now expected in July-21 due
to the COVID-19 restrictions
28
Hibernia REIT plc Annual Report 2021
S T R A T E G Y I N A C T I O N
Expected commencement: FY22
Expected commencement: Uncertain
Expected commencement: FY23
FY22
FY24
FY26
FY23
FY25
FY27
ONWARDS
Development pipeline
Harcourt Square, D2
337,000 sq. ft. of new Grade A offices
Completion: early 2026
−Planning granted for 337,000 sq. ft.
office development scheme (+9% on
previous planning)
−Site is a short walk from St. Stephen’s Green
in Dublin’s Traditional Core
−Existing lease expires in December 2022,
so project can commence thereafter
Clanwilliam Quarter, D2
> 200,000 sq. ft. of new Grade A offices
and retail/leisure use
Expected completion: early 2025
−Final planning received for Clanwilliam Court
and Marine House in the period
−> 200,000 sq. ft. office scheme including
11,000 sq. ft. retail/leisure
−Strategic location in Traditional Core but
near Grand Canal Dock
−Lease expiries during 2021 so project can
commence in early 2022
Newlands/industrial land
144 acres of land and industrial assets
Expected completion: Uncertain
−Strategic transport location
−Potential for future mixed-use
redevelopment subject to re-zoning
29
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Capital recycling
Given the pandemic restrictions, we sold no
assets in FY21. However, we deployed €53m
capital across a few bolt-on acquisitions,
development expenditure and a second
share buyback programme.
30
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S T R A T E G Y I N A C T I O N
“The €25m share buyback programme
executed in FY21 was highly accretive,
with 23.1m shares repurchased and
cancelled at an average price of €1.08
per share. The effects of the buyback
were primarily felt in the second half
of FY21.”
Thomas Edwards-Moss CFO
Strategic
priority
1 2 3 4 5
We invested €11m in five bolt-on
acquisitions of assets adjacent to or
near our existing assets. We spent
€17m, mainly in the development of
2 Cumberland Place and 50 City Quay,
and we deployed €25m in a share buyback
programme, completing the return to
shareholders of the proceeds from the sale
of 77 Sir John Rogerson’s Quay in 2019.
Development expenditure
€16.8m
Acquisition expenditure
€11.1m
Share buyback
€25.0m
1SJRQ, South Docks
31
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Setting long-term
sustainability targets
We recently published our Sustainability
Statement of Intent, which replaced
our existing Sustainability Strategy
and commits us to becoming a net
zero carbon business by 2030.
32
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S T R A T E G Y I N A C T I O N
“We are very pleased to have published
our Sustainability Statement of Intent,
which is the culmination of a lot of
reflection on the right targets for the
business. We are looking forward to
making progress on our journey to net
zero carbon.”
Neil Menzies Sustainability Manager
Strategic
priority
1 2 3 4 5
‘Transforming Dublin Responsibly’, our
Sustainability Statement of Intent, has
set long-term targets for the business and
simplified our objectives into three pillars:
−Become a net zero carbon and climate
resilient business by 2030
−Provide spaces that prioritise the
environment, health and wellbeing
−Create a long-term positive social
impact through our operations
Reduction in energy use intensity across
our managed portfolio, 2016 to 2020
51%
Net zero carbon by
2030
TCFD reporting by
2022
Rear of 1SJRQ, South Docks
33
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Communities
Employees
What do they
care about most?
−Fair pay
−Good working
environment
−Clear communication
−Health and wellbeing
−Opportunities for
personal and community
development
What do they care about most?
−Positive engagement
−Provision of retail, social and
other amenities
−Improvement of environment
−Community support programmes
How do we respond?
−Performance is rewarded
−COVID-19 support measures
−New, purpose-designed
workspace in 1WML
−Opportunities for development
and progression
−Active Social Committee
How do we respond?
−Liaison during development projects
−Public realm improvements
−Quality buildings
−Preservation of historical features
−Charity events
−Local social events
−Sponsoring apprenticeships
How we engage
−Open communication channels
−Non-Executive Director for
Workforce Engagement
−Departmental meetings
−Weekly townhalls
−Clear policies
−Formal review process
−Employee surveys
How we engage
−Community liaison
during developments
−Support local
community projects
−Charitable events
−Social events
Listening and responding
to our stakeholders
To ensure our long-term success
we must take account of what is
important to our key stakeholders.
Opposite are our main stakeholder groups
and a snapshot of their principal areas
of focus, how we engage and how we
respond. On the following pages we
illustrate some key activities in 2020-21
and we make our ‘s172 statement’ which
demonstrates how our stakeholders
influenced some key decisions taken
by the Board this year.
How we engage with our stakeholders
Central to our property business is
sustainability, not only as this is likely to be
increasingly regulated, but also because our
business can make a positive impact on a
sustainable future and our stakeholders
care about our environmental credentials.
We appointed a dedicated Sustainability
Manager in 2020 and we have started
reporting to CDP as well as to GRESB and
EPRA. We completed our first materiality
assessment in 2020. With our Sustainability
Statement of Intent (see pages 67 to 70)
we set out our short to longer-term
targets, including our pathway to net
zero carbon by 2030.
We appointed a Non-Executive Director for
Workforce Engagement in 2020 (more on
page 37). We also had an active investor
relations programme despite limitations
imposed by the pandemic. Engagement
with investors is explored in more detail
on pages 86 to 87, 2020-21 was also
an important year for engagement with
our tenants and suppliers, supporting their
businesses during difficult times. Some
of our efforts through the year in relation
to COVID-19 support are illustrated on
pages 64. Finally, although COVID-19 has
limited our opportunities for community
engagement, we continued to participate
where possible in charity events and in
our Sustainability Statement of Intent
we have focused on future improvements
in engaging with the communities where
our buildings are located.
34
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
E N G A G I N G W I T H O U R S T A K E H O L D E R S
Suppliers
Tenants
Vision
Investing for the
long term to
improve Dublin
Investors
What do they care about most?
−Highest-quality, well-designed space
−Flexible working environments
−Health and wellbeing
−Best-in-class service
−Amenities/facilities
−ESG credentials
What do they care about most?
−Prompt payment
−Fair terms
−Reliable workflow
−Reducing their carbon footprint
What do they care about most?
−Positive returns
−Regular dividends
−Clear communication and disclosure
−Good governance practice
−Industry benchmarked ESG
How do we respond?
−Onsite building managers
−Targeted service improvements
−Clusters of enhanced services
−ESG initiatives
−COVID-19 support measures
How do we respond?
−Prompt payment
−Fair tender process
−Emphasis on quality and track record
How do we respond?
−Investor relations programmes
−Clear disclosures
−Address concerns and requests
−Aspire to best-in-class business practices
−Online survey
How we engage
−Onsite Hibernia staff
−One-on-one meetings
−Engagement through crisis management
−Tenant surveys
−Social events
How we engage
−Supplier Code of Conduct
−Technology enhancements for paperless
account management
−One-on-one engagement
How we engage
−One-on-one meetings and site visits
−Roadshows and presentations
−Available for ad-hoc conversations
outside closed periods
−Attendance of conferences
−Participation in industry benchmarks
such as GRESB and CDP
−High-quality materials and clear website
35
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Materiality assessment
In early 2020 we carried out our first materiality assessment,
helping us identify and prioritise the ESG issues that matter most
to our stakeholders. We engaged with investors through virtual
meetings and roadshows, with tenants through conversations and
surveys and with staff through continuous discussions and surveys,
all complemented by research carried out by consultants on our
behalf. The process not only helped us understand what we need
to disclose in our Sustainability Reports, but also informed our
recently launched Sustainability Statement of Intent out to 2030
and Net Zero Carbon Pathway.
Material issues identified in 2020
The Board and our stakeholders
(Our ‘s172’ statement)
The Board of Directors confirms that during
the financial year ended 31 March 2021,
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:
A
The likely
consequences
of the decision
in the long term
Company purpose
Page 80
Our business model
Pages 20 to 21
Our strategy
Pages 22 to 23
Dividend policy
Page 63
B
The interests of
the Company’s
employees
Company purpose
Page 80
Our business model
Pages 20 to 21
Our strategy
Pages 22 to 23
C
The need to
foster the
Company’s
business
relationships
with suppliers,
customers
and others
Company purpose
Page 80
Our business model
Pages 20 to 21
Our strategy
Pages 22 to 23
D
The impact
of the
Company’s
operations
on the
community
and the
environment
Company purpose
Page 80
Our business model
Pages 20 to 21
E
The desirability
of the Company
maintaining
a reputation for
high standards
of business
conduct
Company purpose
Page 80
Our business model
Pages 20 to 21
Our strategy
Pages 22 to 23
F
The need to act
fairly between
members of the
Company
Our stakeholders
Pages 34 to 35
Investor relations
Pages 86 to 87
Read more on page 8 in our 2021
Sustainability Report
Hierarchy
• Climate change mitigation and resilience
• Energy efficiency
• Business conduct
• Waste management
• Tenant engagement
• Environmental compliance
• Health and safety
• Building obsolescence
• Air quality
• Smart buildings
• Governance
• Transparency
• Efficient use of raw materials
Priority 1 – Report
on in detail and
where possible
include measurable
KPI or goal and
include external
assurance
• Communities
• Supplier engagement
• Staff engagement
• Building design
• Sustainable transport
• Water management
• Employment and skills
• Human rights
• Public realm
• Diversity and inclusion
Priority 2 – Report
at least in narrative
and wherever
possible include
measurable KPI
36
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
E N G A G I N G W I T H
O U R S T A K E H O L D E R S C O N T I N U E D
Decisions in 2020-21
The principal activities of the Board can
be found on pages 82 to 83. All of these
decisions involve a range of inputs
from stakeholders.
A few examples of activities in 2020-21
that involved extensive stakeholder
engagement are:
Our Sustainability Statement of Intent,
published in 2021, involved using the
results of the materiality assessment as
well as other inputs from stakeholders
relating to climate change and resilience.
Pages 67 to 70, opposite and our 2021
Sustainability Report
The appointment in 2020 of a
Non-Executive Director for Workforce
Engagement and the commencement
of employee engagement.
See box on this page
Our COVID-19 response involved close
engagement with tenants, suppliers and
other stakeholders to ensure the health
and safety of our occupiers, employees,
suppliers and visitors.
Page 64
Our Remuneration Policy review,
undertaken in conjunction with PwC,
involved consultation with various
stakeholders and will culminate in
an advisory motion at the 2021 AGM.
Pages 113 to 126
Methods used by the Board to inform
their decisions include:
– Annual strategy reviews.
– Risk management procedures identify
the potential consequences of decisions.
Read more on pages 41 to 43
−The Board sets the Group’s purpose,
values and strategy and ensures it is
aligned with our culture.
Read more on page 80
– Direct engagement with employees,
investors and advisers.
– Informed on the material issues of other
stakeholders through its interactions
with the Senior Management Team
and external advisers.
– Specific training for Directors and
Senior Management.
How and when did your
role commence?
I was appointed to this role in
February 2020 in response to
changes in the UK Corporate
Governance Code. It aims to
strengthen the voice of employees
by establishing a method for
gathering the views of the workforce
so that both the employees’ and
employers’ voices are heard, and
their interests reflected in strategy.
How did you approach the role?
This is a new role in the world of
governance, and different companies
are feeling their way through what
works best for their size and structure.
My initial approach was to meet with
relevant managers and employees
and to review organisational charts,
employee surveys, results of strategy
meetings and so on.
Just as I was about to embark
on setting up group and individual
meetings over coffee, the pandemic
hit and working from home protocols
were introduced. In a way this led to
more intensive communication, and
I was able to observe as it occurred.
The All-Hands Meeting has changed
from happening a couple of times
a year in a Town Hall format to short,
weekly online sessions. It is very
popular and its role during lockdown
is particularly appreciated, as is the
work of the Social Committee.
I attended my first one of these
meetings in September 2020 where
I briefly explained my role, gave all
staff my contact details and made it
clear that anyone could contact me.
I’ve also had a series of small group
meetings and over time I hope to
meet everyone in this way.
What is your impression of workforce
communication with Hibernia?
Hibernia has a relatively small team,
with 35 employees. My impression
is of a strong culture of excellence.
Staff are proud of the Company
and the work they do within it.
The feedback received highlighted
great openness, trust and support.
Employees feel that the organisation
is very flat, that they always have both
formal and informal routes to express
ideas, concerns and challenges; in
short that there is always ‘someone
to go to’.
In feedback from cross-department
confidential working sessions and
attendance at some of the regular
All-Hands meetings, I found that
communication of the strategy,
including prioritisation and
implementation, is open and inclusive
of all staff with a high degree of detail
and transparency. There is a set of
‘Pillars’ setting out overarching
principles, detailed strategy and
implementation plans. Creation of
these pillars is a bottom-up/top-down
process in dedicated working groups
so that all staff feel ownership.
The team has really risen to
the challenge of the pandemic.
Working from home arrangements
are felt to be as good as possible,
with excellent support from the
Company both for those at home
and those on site in our buildings.
How have staff responded?
All employees have a good
understanding of my role and have
been very willing to participate and
contribute in the small group meetings.
No issues have been identified and
there has been no negative feedback
to date. All agree that the working
arrangements during the pandemic
are working as well as they can be;
it is harder for some people who have
young children to work at home, for
example. Building management staff
who work most closely with the
tenants report that tenants have been
very complimentary of our efforts,
something they are proud of.
What are your plans for 2021-22?
I want people to feel comfortable
about letting me know as and when
there are issues and this will be easier
when we can meet informally face to
face. COVID-19 has restricted my
ability to have informal face-to-face
meetings and building visits this year
so these are planned for 2021/22 when
restrictions are eased.
In addition to the informal measures,
I plan to hold two formal workforce
engagement meetings per annum.
Q
Q
Q
C A S E S T U D Y
Engaging with
the workforce
Margaret Fleming, Designated Non-
Executive Director for Workforce
Engagement, discusses her new role
which reports employee feedback to
the Board.
Q
Q
37
Hibernia REIT plc Annual Report 2021
Strategic report
Governance
Additional information
Financial statements
www.hiberniareit.com
Key performance indicators
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.
Total Accounting Return (“TAR”)
5.6%
(0.9%)
11.1%
2021
2020
2019
Reason
Measures the absolute growth
in the Group’s EPRA Net
Tangible Assets (“EPRA NTA”)
per share plus dividends per
share paid, expressed as a
percentage of the period’s
opening EPRA NTA per share.
Commentary
TAR was -0.9%. EPRA NTA
per share decreased due
to reductions in property
values partially offset by
an accretive share buyback.
In addition, dividends paid
increased as earnings grew.
Link to remuneration
A performance metric for:
−All annual bonuses
−Long Term Incentive
Plan (“LTIP”)
EPRA earnings per share (“EPRA EPS”)
5.5c
6.3c
4.0c
2021
2020
2019
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 loss.
Commentary
EPRA EPS grew 13.4% due
to an increase in net rental
income of +8.1%, mainly due
to leasing activity and
rent reviews.
Link to remuneration
A performance metric
for all annual bonuses.
Total Property Return (“TPR”) vs MSCI Ireland Index
1.3%
(1.5)%
1.5%
(0.2)%
5.9%
4.4%
4.1%
11.6%
7.5%
2021
2020
2019
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
(MSCI Ireland Property All
Assets Index) excluding
Hibernia properties.
Commentary
The Group generated a
TPR of -0.2% while the
benchmark (excl. Hibernia)
produced a TPR of -1.5%.
The relative outperformance
resulted primarily from the
positive contribution of our
residential assets.
Link to remuneration
A performance metric for:
−All annual bonuses
−LTIP
Total Shareholder Return (“TSR”)
(18.4)%
8.6%
(5.2)%
2021
2020
2019
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.
Commentary
TSR for the Group in the
year was 8.6% versus
the benchmark at 20.9%.
The Group’s share price
has recovered somewhat
from the significant impact
brought about by COVID-19
and other factors, but
continues to trade at
a discount to NAV.
Link to remuneration
A performance metric
for LTIP.
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 pages 202 to 203.
38
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
M E A S U R I N G O U R P E R F O R M A N C E
Operational metrics
In addition to our KPIs, the key operational metrics used in managing the business are:
Financial metrics
Capital allocation
2021
2020
Acquisitions
€11m
€23m
Disposals
€nil
€nil
Development capital expenditure
€17m
€21m
Committed capital expenditure
€3m
€18m
Capital returned via share buyback
€25m
€25m
Our portfolio
2021
2020
Portfolio value
€1,427m
€1,465m
Like-for-like (“LfL”) change in valuations
-4%
+2%
% of portfolio with
medium-term redevelopment potential
16%
18%
Read more on pages 54 to 58
Read more on pages 16 to 19
Asset management
2021
2020
In-place office vacancy
7%
7%
Contracted rent
€67m
€66m
In-place office WAULT to break/expiry
5.6yrs
6.4yrs
EPRA LFL rental growth
+7%
+4%
Premium to Estimated Rental Value
(“ERV”) achieved on lettings
+4%
+9%
Rent collected within 30 days
94%
90%
Rent review rental growth
+€0.6m
+€2.7m
Financial management
2021
2020
Net debt
€279m
€241m
LTV
19.5%
16.5%
Effective interest rate on debt
2.1%
2.1%
% of drawn debt interest rate fixed
or hedged
132%
76%
Cash and undrawn facilities – net
€110m
€136m
Weighted average maturity of debt
3.4 yrs
4.4 yrs
Read more on pages 59 to 60
Read more on pages 61 to 62
Non-financial metrics
Environment, social and governance (“ESG”)
2021
2020
Absolute GHG emissions (tCO2)
2,599
3,514
LFL GHG emissions (tCO2)
2,530
3,509
% of portfolio with minimum B1 rating
36%
36%
% of completed schemes with LEED Gold
100%
100%
Energy use intensity for managed assets
(kWh/m2/year)
120
153
Amount raised for charity partners via
Dragons at the Docks
€70k
€349k
Culture and people
2021
2020
Number of employees
35
36
% female employees
31%
31%
Training per employee (average hours)
18hrs
17hrs
Employee retention (turnover)
10%
14%
WFH equipment allowance per employee
€750
n/a
% staff who would recommend Hibernia
97%
n/a
Number of virtual social events
5
n/a
Read more in our 2021 Sustainability Report on pages 36 to 43
Read more in our 2021 Sustainability Report on page 42
Tenant engagement
Of respondents in the most recent tenant survey:
−95% rated the standard of building management as either
‘Very Good’ or ‘Good’
−100% rated the quality of financial information as either
‘Very Good’ or ‘Good’
−90% reported they would recommend Hibernia as a landlord
−100% rated Hibernia’s response to COVID-19 as ‘Very Good’
or ‘Good’
Read more on pages 34 to 35
What our tenants say:
“Hibernia REIT has been excellent at responding to the pandemic
and being proactive in all aspects of safety, especially in 1WML.
I look forward to returning and working more closely with all
other tenants.”
“Thank you to everyone at Hibernia REIT; I only wish we were
at the office for the full Hibernia experience, but I am very
impressed with the management and everyone I have worked
and communicated with throughout the year”.
39
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Agenda
What we did in 2020-21
Future focus 2021 onwards
COVID-19 risk
management
−Identify and monitor business risks, in particular business
continuity, cyber security and tenant credit status
−Manage our buildings as a safe environment for our tenants,
employees, contractors and visitors
−Support our employees working from home
Read more on pages 63 to 64
−Continue to focus on tenant credit
and cash flow
−Focus on health and wellbeing for
employees, occupiers and other
stakeholders
−Continue to monitor the risks inherent
in the ‘future of the office’ to ensure
our developments deliver
Read more on pages 10 to 12
Climate
change risks
−Published our Sustainability Statement of Intent (see pages 67 to 70)
−Established our pathway to Net Zero Carbon by 2030
−Ongoing monitoring and review of the efficiency/optimisation
and sustainable design of the development pipeline
−Risk management around climate change risks assessed during
TCFD review
−Developed our Sustainability Report to encompass more climate
change risks
Read more in our 2021 Sustainability Report available on
our website
−Net zero carbon goals
−Review and improve risk metrics, risks
assessment and reporting around
climate change
−Review key suppliers and long-term
contracts to identify vulnerability to
climate-related risks in the value chain
−TCFD reporting including implementing
risks management by 2022
−Continue to develop our sustainability
reporting with an improved risks focus
Future of our
business
−Monitored the risks attached to our strategy and portfolio in
a post-COVID market
−Considered our changing tenant needs
−Managed our developments and assessed future risks to
pipeline projects
−Focused on strategy particularly with respect to the potential
impacts and risks of a persistent discount to NAV
Read more on pages 8 to 9 and 10 to 11
−Continued focus on the strategic risks
posed by fluctuating market dynamics
post Brexit and other international
developments, e.g. tax reforms
−Broadening and adapting to changing
tenant needs
−Managing and anticipating changing
market trends
Market and
regulation
−The impact of the new Government on the property sector
and macro environment
−Monitored the trade negotiations between the EU and UK,
and other international developments
−Monitored compliance with regulatory bodies
−Ongoing compliance with regulatory
and legislative requirements
Ongoing risks
management
−ISO 14001 and 45001 completed in April 2021
−Annual review of risks, risk appetite and framework
completed in April 2021
−Regular reporting of limits, breaches or any
regulatory issues
−Updated the risk management framework
−Annual review of risk register, risk
appetite and framework
−Ongoing review of risk metrics,
appetites and tolerances
−Progress internal audit activities
and reviews
−Continuing focus on management
of cyber security risks
40
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
O U R A P P R O A C H T O R I S K
2020-21 in focus
This has been a challenging year, particularly
with respect to the management of the
COVID-19 pandemic. Measures we have taken
to deal with this can be found on page 64.
Managing the COVID-19 pandemic was
highlighted as a significant risk for 2020-21
potentially leading to failure to achieve
strategic goals and having a negative
impact on financial returns. In light of the
nature of this risk, a significant review was
completed across our risk management
framework. We have reviewed our risk
appetite, reassessed our risks and taken
steps to identify any new ones that may
have emerged, considered the strength
of our internal controls, performed scenario
and sensitivity analyses, and reviewed and
monitored our risks as frequently as we
considered necessary. In particular, certain
key risk indicators, such as tenant credit
ratings, have been introduced to monitor
additional risks to manage the business
through the crisis.
In addition to this focus, we recognise the
increasing demands of climate change and
the challenges and risks we face in the
future. The Board recognises the systemic
threat posed by climate change and the
need for urgent mitigating action. We have
commenced the implementation of the
recommendations of the Task Force on
Climate-related Financial Disclosures
(“TCFD”) with a view to fully aligning by
2022. As part of this process, we have
assessed our risk management around
climate change and will embed a greater
understanding of the risks that face the
Group and the potential for ‘stranded
assets’ if such risks are left unaddressed.
Managing our risks and opportunities
Our approach to risk management is
designed to encourage clear decision-making
as to which risks we take and how these
are managed, based on an understanding
of the potential strategic, commercial,
financial, compliance, legal and reputational
implications of these risks. The successful
delivery of the Group’s strategic objectives
depends on the effective identification,
understanding and mitigation of its principal
risks. The Group has established a risk
management framework and a system
of internal controls to support informed
decision making. Our risk management
framework provides structure to the risk
management process.
While the responsibility for risk
management lies with the Audit
Committee and ultimately the Board,
the day-to-day management of risk is
an integral part of the operation of the
business and the culture of the team.
We seek to foster a culture that is well
informed, curious, alert, responsive,
consistent and accountable so that
risk management becomes instinctive
and is embedded in our daily activities.
An executive Risk & Compliance
Committee was established early in 2020
in order to more effectively review, manage,
monitor and assess risks.
Risk management framework
The Group’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 monitoring plan
and risk tolerance limits. The Group has
devised an action plan to identify
and remediate any risk concerns
and/or breaches.
The risk management framework is
reviewed on an annual basis and more
frequently in the event of a significant
change of circumstances.
Effective day-to-day management of risk
is embedded in our operational processes
at all levels of the organisation. Risk is every
employee’s responsibility. The Board is
closely involved in the business, helping to
quickly identify new risks and weaknesses.
PwC has been retained as internal auditor
to provide an independent assessment
and assurance of internal controls and
risk management processes in place.
Measure, monitor
and control
Assess impact
Communicate
and engage
Set mitigants and
appetite
Identify
and analyse
Board
Audit Committee
Executive Committees
Operational management
Employees
Risk management system
41
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Our risk culture
We drive sustainable long-term value through best-in-class buildings
We maintain a sound risk culture throughout our business
Underpinned by our core values
Integrity and
openness
Our values
Safety
Passion and
creativity
Sustainability
Hunger and
curiosity
Risk culture
components
Governance
−Risk management
framework
−Risk appetite
−Supervision
−Independent controls
Accountability
−Clear ownership
−Established escalation
procedures
−Individual
accountability
Balance of risks
and returns
−Open
communication
−Measured risk taking
−Continual assessment
Encourage risk-
focused behaviour
−‘Tone from the top’
−Clear statement
of principles
−Communication
−Training
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. The full impact of the COVID-19
pandemic on demand for working office
space has yet to be seen. However, the
Group has focused its strategy to minimise
the risks associated with the office sector.
Our section on ‘the future of the office’
(see pages 10 to 11) explores our views on
how the market will develop. Our strategic
priorities are set out on pages 22 to 23.
The impact of, and measures taken to
mitigate the effects of, the COVID-19
crisis are explored in some detail on
pages 64. We are also monitoring
closely any changes to international tax
arrangements which could alter Ireland’s
attractiveness as a location for foreign
investment. Finally we have developed
a new Sustainability Statement of Intent
(see pages 67 to 70) which establishes
our approach to the risks of climate
change. We are aware of the importance
of climate-related risks to our business
and have commenced the implementation
of the recommendations of the Task Force
on Climate-related Financial Disclosures
(“TCFD”) (see pages 44 to 45).
Risk appetite
Risk appetite defines the amount and type of risk the Group is prepared to accept in
pursuit of its strategic priorities. 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.
An overview of the Group’s risk appetite is shown in the diagram below:
MODEST
RISK APPETITE
−Through-cycle leverage
target 20-30%
−Actual 19.5%
4% of the
portfolio value
in current
development
53% of the
property
portfolio in
this mid-range
(€20-100m)
−100% Dublin
property
−84% city centre
offices
−Vacancy rate 7%
−EPRA EPS 6.3c,+13.4%
−DPS 5.4c,+13.7%
Limited
development
exposure
Income-producing
assets
Mid-range
property
values
Dublin
property
focus
Moderate
leverage
Risk culture
principles
Integration into all
business decisions
Embedded into
daily operations
Individual
responsibility
Independent assurance
and oversight
42
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
O U R A P P R O A C H T O R I S K C O N T I N U E D
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 71 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 138 to 200 and in
note 2.e to the consolidated financial
statements. In addition, note 29 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 64 of this report. The Directors have
assessed the Group’s liquidity position 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 four-year period
to March 2025. This has been increased
from three years in order to ensure the
near-term development pipeline is included.
The Directors 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 48 to
53, are considered to be material in the
assessment of viability.
The Board also considers the longer-term
risks and opportunities of the Group; for
example the current office development
pipeline extends to 2026 and the portfolio
also has 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
four-year period.
Current position
The Group has a cash balance as at
31 March 2021 of €32m (March 2020: €28m),
is generating positive operating cash
flows and, as discussed in note 24 to the
consolidated financial statements, has in
place debt facilities with average maturity
of 3.4 years, no debt maturities until
December 2023, and an undrawn balance of
€93m at 31 March 2021 (March 2020: €133m).
In addition, the Group has agreed to issue
an additional €125m in fixed rate 10- and
12-year private placement notes in July
2021. These bring the Group’s average
maturity of debt at 31 March 2021 to 5.2
years on a pro-forma basis. The Group’s
capital commitments at 31 March 2021 were
€3m (March 2020: €18m). At 31 March 2021,
the Group’s low leverage (LTV 19.5%)
means it could withstand a 59% decline
in its portfolio value and a 77% decline
in earnings before interest and tax (60%
decline in rental income) without breaching
debt covenants at that date. The weighted
average unexpired lease term (“WAULT”)
is 5.8 years (March 2020: 6.4 years) for
the office portfolio. 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.
The Group has paid particular attention
to tenant credit risks and rent collection
metrics given the COVID-19 pandemic.
Due to the nature of rent collections, a
significant portion of revenue is collected
in advance of its due date which allows the
Group to respond early to potential issues.
99% of all rent due during the financial
year ended 31 March 2021 was collected
within 60 days of the due date. Information
on the Group’s financial assets and approach
to credit risk is contained in the consolidated
financial statements in Section IV: introduction,
note 20 and note 29.d.
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
four-year period of their assessment ending
31 March 2025.
Risk register
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.
A detailed risk identification and
assessment process is in place
which include the following steps:
1
Identify the risks
2
Determine each risk’s
magnitude of impact
3
Determine the likelihood
of the risk event occurring
4
Document the mitigants
in place for each risk
5
Produce the risk rating
The risk register is reviewed and reported
to the Board on an annual basis or more
often as necessary.
The Group’s principal and emerging risks,
those that could have a potentially
material impact on the sustainability of
the business model, are set out on pages
48 to 53 of this Report.
43
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
The Task Force on Climate-related Financial Disclosures
The TCFD has developed four recommendations on climate-related financial disclosures to be implemented. These are designed to
produce decision-useful, forward-looking information on financial impacts with a strong focus on risks and opportunities related to the
transition to a lower carbon economy. The core elements are outlined below:
Where we are
Where we are going
Governance
Describe the Board’s
oversight of climate-
related risks and
opportunities.
The Board is responsible for overseeing activities that relate to sustainability
and climate change, with the CEO and CFO retaining overall accountability
and oversight. The CEO chairs the Sustainability Committee and can provide
the Board with updates on our activities in this area.
Improved reporting and
training from Sustainability
Committee to Board.
Describe
management’s role
in assessing and
managing climate-
related risks and
opportunities.
−Risk & Compliance Committee, comprised of all members of the Senior
Management Team, is responsible for all risk oversight and management
including climate-related risks.
−Sustainability Committee reviews performance, in terms of climate related
activities, including progress against our Net Zero Carbon Pathway.
−Senior Management Team is provided with frequent updates by the
Sustainability Manager in relation to climate change risks and opportunities.
Integrate sustainability
commitments as part
of all Senior Management
department goals and
individual performance
objectives/remuneration KPIs.
Strategy
Describe the
climate-related risks
and opportunities
the organisation
has identified over
the short, medium,
and long term.
Short term: 1-3 years
−Increased legislation setting legal minimum energy requirements for new
commercial and non-commercial buildings.
−Increasing demand from occupiers to lease sustainable buildings.
−Investors are taking a greater interest in the performance of assets
and requesting benchmark participation.
−We have an opportunity to collaborate with our stakeholders to deliver
significant reductions in carbon emissions, ultimately de-risking our portfolio
to the impacts of climate change, providing cost savings for our occupiers
and greater returns for our investors.
Medium term: 3-10 years
−Demands around climate change management may give rise to higher
market demand for buildings with improved sustainability credentials
and greater energy efficiency.
−This may lead to stranded assets that are no longer fit for purpose from
an environmental efficiency perspective unless we respond to trends.
Long term: 10-30 years
−Speed of market transformation and technological progress may impact
on our ability to decarbonise our business.
−Greater demand for buildings that have been adapted to accommodate
the likely impact of climate change.
Model the financial impact
and payback of energy
efficiency measures.
Set a trajectory for energy
reductions for each asset.
Integrate our net zero
requirements at the design
stage for new developments.
Better understand the likely
cost of carbon offsetting.
Set up the frameworks
required to manage the
Carbon Reduction Fund.
.
Describe the
impact of climate-
related risks and
opportunities on
the organisation’s
businesses, strategy,
and financial planning.
Climate-related issues affect the way we develop new buildings, and how we
manage existing ones. Therefore, we take a proactive approach to managing
these issues. Our Sustainability Statement of Intent drives our corporate
approach, setting out how we manage these risks within our developments
and property management activities and the necessary performance
standards required to ensure that climate-related risks do not adversely
affect our work.
A strategic priority for 2021/22
is to progress the sustainability
agenda as set out in our
Sustainability Statement
of Intent and our Net Zero
Carbon Pathway.
Describe the resilience
of the organisation’s
strategy, taking into
consideration
different climate-
related scenarios,
including a 2°C or
lower scenario.
Our Sustainability Statement of Intent lays out a clear strategy for dealing with
both mitigation of climate change and adaptation to the effects of climate
change. We have modelled what our carbon emissions would be by 2030 if
we carried on with our current business model and set a Net Zero Carbon
pathway to 2030, aligned with climate science and a 1.5°C global warming
scenario, and an action plan to ensure that we reduce our carbon footprint
accordingly.
Our next step is to look
at various climate-related
scenarios and understand
the financial impact to the
business from the physical
and transitional risks and
opportunities.
44
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
O U R A P P R O A C H T O R I S K C O N T I N U E D
Where we are
Where we are going
Risk management
Describe how
processes for
identifying, assessing,
and managing
climate-related risks
are integrated into the
organisation’s overall
risk management
framework.
The Group’s risk management framework includes a periodic review of all
risks facing the business and a structured process to determine the impacts,
likelihood and risk ratings for all risks, including climate change risk. The risks
are collated by the Senior Management Team and finalised through the
Risk & Compliance Committee, including determination of the impacts,
likelihood and risk ratings for all risks as well as the mitigating measures
being implemented to reduce the level of risk to the business.
The Sustainability Committee has responsibility for agreeing management
strategies and specific projects and monitoring and measuring the impact
on the climate resilience of the business as a result of these actions.
Carry out reviews of key
suppliers and vulnerability
to climate-related risks in the
value chain. Test risks against
various climate scenarios.
Metrics and targets
Disclose the
metrics used by the
organisation to assess
climate-related risks
and opportunities
in line with its
strategy and risk
management process.
We provide to our stakeholders on our climate-related activities and performance
through the disclosure of certain relevant metrics for energy and resource
consumption and carbon emissions across our portfolio of assets. Metrics are
also in place for measuring our performance ratings in industry surveys.
These are presented in the performance tables on pages 38 to 42 of our 2021
Sustainability Report, covering the last two calendar years as well
as the delivery strategy section of our Net Zero Carbon Pathway.
Introduce internal price
on carbon and appropriate
associated metric to
measure impact of
Carbon Reduction Fund.
Disclose Scope 1,
Scope 2 and, if
appropriate, Scope 3
greenhouse gas
(GHG) emissions,
and the related risks.
Our performance tables on pages 38 to 42 detail our environmental data
performance. As part of this we publish carbon reporting across Scopes 1 and
2 and all relevant Scope 3 categories. Our emissions disclosures are aligned to
the EPRA Sustainability Best Practices Recommendations and independently
assured by our third-party consultants and their assurance statement can be
found on pages 44 to 46 of our 2021 Sustainability Report.
Disclose our climate-related
emissions publicly through
our 2021 CDP response and
share the output on our
Group website.
Describe the
targets used by
the organisation
to manage climate-
related risks and
opportunities
and performance
against targets.
In 2021, in recognition of the escalating concerns around climate change and
the need for the real estate industry to target meaningful carbon reduction,
we developed a Net Zero Carbon Pathway with the ambition of becoming
a net zero carbon business by 2030. The pathway includes the challenging
targets we have set ourselves.
Our disclosures in our 2022 Sustainability Report will detail our performance
against these targets and similar, to our existing metrics, these will be
third-party assured.
Fully integrate the Net
Zero Carbon Pathway
and share individual
asset benchmarking with
building management teams.
45
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Key statistics at March 2021
Vacancy rate
7%
LTV
19.5%
Earliest debt maturity
Dec-23
Available liquidity
€110m
(net of commitments
and reserved cash)
Commercial rent collected
within 7 days in FY21
88%
Weighted average
debt maturity
3.4 yrs
Contracted rent
€67.1m
Office WAULT
5.8 yrs
Risk heat map
1.
Failure to anticipate or react
to market trends resulting in
inappropriate business strategy
2.
Uncertain recovery from the
COVID-19 pandemic
3.
Ireland’s attractiveness is
negatively impacted
4.
Failure to respond appropriately
and sufficiently to climate
change risks
5.
Risk of tenant default
6.
Poor or mistimed execution
of development projects
7.
Failure to motivate and retain
team resulting in failure to execute
the Group’s business plan
8.
Disruption from external threat/
event, cyber attack or fraud
9.
Inappropriate capital structure/
lack of funds for investment
Low
Medium
High
Very high
Note: Risk rating as assessed after existing controls and mitigation
Risk severity
5
6
9
8
7
3
2
1
4
Impact
Likelihood
46
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
O U R A P P R O A C H T O R I S K C O N T I N U E D
Portfolio value would
have to fall by
59%
to breach bank covenants
EBIT would
have to fall by
77%
to breach bank
covenants
Principal risks overview
Risk
Description
What measures have we taken?
Strategic
−Failure to anticipate
or react to market
trends resulting in
an inappropriate
business strategy
−Experienced Senior Management Team
and Board
−Use of experts, regular tenant interaction
Read more on pages 74 to 77
Market
−Uncertain recovery from
the COVID-19 pandemic
−Ireland’s attractiveness is
negatively impacted
−Active monitoring of lead indicators.
Regular financial forecasting and
stress testing. Risk appetite limits
including leverage
Read more on pages 40 to 43
Climate
change
−Failure to respond
appropriately
and sufficiently
to climate change
−Sustainability Manager appointed
−Sustainability Committee oversight
−Reviewing approach to sustainability
Read more on pages 65 to 70
Finance
−Tenant default leading
to loss of income,
reduced cash flow
and poor returns
−Inappropriate capital
structure/lack of funds
for investment
−Credit risk management and
covenant monitoring
−Target LTV 20-30%, (actual at
Mar-21 19.5%)
−All debt unsecured with
staggered maturities
−Forward cash planning with full
Board oversight.
Read more on pages 61 to 62
Development
−Poor or mistimed
execution of
development projects
−Experienced development team, impacts
on and timing of pipeline projects
continually assessed
Read more on pages 57 to 58
Operational
risk
−Failure to motivate and
retain team resulting in
failure to execute the
Group’s business plan
−Disruption from external
threat/event, cyber-
attack, or fraud
−Employee remuneration strongly linked
to Group performance, active
engagement and succession planning
−Focus on business continuity and
crisis management
The principal risks and uncertainties facing the Group are set out on pages 48 to 53,
together with the potential impact and the mitigating actions and controls in place.
Key changes to principal risks in the year
Key risks added (excluding amalgamations):
−Uncertain recovery from the COVID-19 pandemic.
Key risks removed (excluding amalgamations):
−COVID-19 pandemic (we now see it as an operating risk in all aspects of our business
and therefore do not treat it as a separate risk).
−Weakening economy.
−Contractor or subcontractor default.
−Poor asset management.
Residual impacts increased:
−Ireland’s attractiveness is negatively impacted.
−Failure to motivate and retain team resulting in failure to execute the Group’s business plan.
Residual impacts reduced:
−None.
47
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Principal risks and uncertainties
Exposure
Strategic priorities
Risk impact
Risk trend
1. Failure to anticipate or react to market trends resulting in inappropriate business strategy
Failure to anticipate changing trends in occupier and investor
behaviour, resulting in an inappropriate business strategy and
below target returns.
In our view the pandemic has accelerated structural changes in
the workplace, with tenants increasingly looking for greater
flexibility, more collaborative space, better amenities, and
stronger wellness and ESG credentials.
1 2 3 4 5
2. Uncertain recovery from the COVID-19 pandemic
While the initial indicators are showing a rapid economic recovery
from the pandemic as the vaccine roll-out progresses, there is no
certainty this will continue, and new strains of the virus could
result in further disruption.
1 2 3 4 5
N
3. Ireland’s attractiveness is negatively impacted
Ireland’s economy is highly dependent on international trade
and foreign direct investment. Regulatory or tax changes, either
domestic or international (e.g. BEPS, US tax developments),
could result in Ireland becoming less attractive for investment
versus other jurisdictions. This in turn could reduce demand
for Dublin offices from occupiers and investors.
The pandemic will add a considerable strain on public sector
finances for many years to come and may impact domestic
politics and international regulation.
1 2 3 4 5
48
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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 principal risks and uncertainties facing
the Group, together with the potential impact on the business and the mitigating actions and
controls that are in place. In dealing with COVID-19 we have focused not just on the near-term
effects, but on the possible long-term impacts. The direct impact of COVID-19 on the Group’s
business has been relatively modest, the risks it currently presents primarily centre around how
quickly economic and property market activity can recover and whether it changes occupier and/
or investor behaviour to the detriment of the Group in the longer term. In 2019-20 we identified
COVID-19 as an emerging risk: we now see it as an operating risk in all aspects of our business
and consider its effects as part of the environment in which we operate.
Key controls and mitigants
Key activities in 2020-21
−Close monitoring of trends in the Dublin market and other
major international cities
−Conversations with tenants and stakeholders and annual
tenant survey
−Regular review of strategy and risks
−Board and Committee oversight of all significant investment
and divestment opportunities
Read more on pages 10 to 11 and 20 to 23
Regular dialogue with existing/potential tenants.
Tenant survey undertaken in late 2020 with positive feedback
received and no indication of a material reduction in the office
space requirements of our tenants.
Staff attended several CPD training seminars and conferences
to keep informed about trends in the global market.
A strategy review was completed by the Board in February 2021.
Our Remuneration Policy, reviewed this year, focuses on near-
and longer-term performance measures to align with strategy
and has an increased focus on ESG performance measures.
−Active monitoring of economic and market indicators, and
regular financial forecasting, stress testing and scenario planning
−Risk appetite limits are in place for key operating indicators
−The Group has a talented and experienced team with in-depth
knowledge of our market
−The Group has a low leverage (LTV of 19.5% at Mar-21) and long
office WAULT (5.8 years at Mar-21)
Read more on pages 10 to 15
We have been closely monitoring our markets and the pace
of economic recovery in Ireland and internationally.
Tenant credit risk assessment is a continuing focus: both before
and during the leasing relationship. The impacts of the macro-
economic conditions are a particular focus.
Relationships with professional advisers such as tax
& legal advisers, property professionals and sustainability
experts assist management to monitor market risk and
international developments.
−The Group regularly reviews and manages its risk profile
−The Group considers a variety of scenarios when considering
its strategic objectives, financial forecasting, and business plans
−Use of expert advisers
−The UK’s exit from the EU removes one of Ireland’s key
competitors as a destination for foreign direct investment
to take advantage of the EU Single Market
Read more on pages 22 to 23
The Group is a member of IIP (Irish Institutional Property) and
continues to engage with Government agencies and politicians,
to promote the development of a stable, competitive real estate
sector in Ireland.
The Group engages with Government departments and regulators
such as the Department of Finance and Revenue on matters that
directly impact the Group.
The Group engages expert tax and legal advisers to monitor the
impact of any changes to government policies, and international
changes or trends that may impact Ireland’s competitiveness, for
example international tax reform and US tax developments.
Risk trend
Unchanged
Increased
Decreased N New
Risk impact
High
Medium
Low
49
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Exposure
Strategic priorities
Risk impact
Risk trend
4. Failure to respond appropriately and sufficiently to climate change risks
The Group fails to appropriately and proactively respond
to climate change risks. This could result in a loss of value
to shareholders, as well as reputational damage and/or
regulatory issues.
The pandemic has increased the focus on ESG and wellness
in the office environment, thus increasing the risk of failure
to respond appropriately.
1 2 3 4 5
5. Risk of tenant default
Tenant default leading to loss of income, reduced cash flow and
poor returns.
The pandemic has highlighted the importance of a robust and
diverse tenant base and increased the risk of financial difficulties
for some tenants.
1 2 3 4 5
6. Poor or mistimed execution of development projects
Failure to manage the development pipeline to deliver
the profits anticipated through poor management and/or
misjudgement of the property market trends resulting in
poor returns and leasing performance.
Active developments have been delayed due to lockdowns
and the letting market has been less active. Future tenant
requirements may change as a result of the pandemic.
1 2 3 4 5
50
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Key controls and mitigants
Key activities in 2020-21
−Full-time Sustainability Manager
−Sustainability Committee monitors our ESG performance, risks,
and controls
−Use of external advisers where required
−Participation in industry benchmarks to monitor our ESG
performance and reporting status
Read more in our 2021 Sustainability Report and on pages 65 to 71
Release of Sustainability Statement of Intent. This includes
commitments to a net zero carbon strategy, implementation
of TCFD reporting, science-based targets, and several
other measures.
Implementation of ISO45001/14001 standards, EHS
management system.
We have reviewed our Remuneration Policy and have proposed
increasing the weighting towards ESG performance measures.
We have actively engaged with our main stakeholders, tenants
and investors, via meetings and a tenant survey to understand their
concerns and interests. We also carried out our annual staff survey.
−Risk indicators regarding sector, tenant and geographic
concentration form a key part in all leasing and
investment decisions
−A detailed assessment of the covenant strength of commercial
tenants is completed before agreeing leases and continues to
be assessed periodically
Read more on pages 16 to 19
The covenant strength of all major tenants has been assessed
at least once in the financial year. The covenant strength of all
prospective tenants was also assessed.
The Group has a strong tenant base: during FY21 rent collection
rates have remained at 99% despite the pandemic. Where tenants
have legitimately requested assistance, the Group has engaged in
agreeing appropriate payment plans.
−Regular review of the pipeline and schedule against portfolio
sectors, financing, risk appetites and market trends
−Rigorous monitoring of development expenditure against
approved budgets
−Reputable and experienced professionals and contractors are
appointed, with due diligence completed on main contractors
before signing and before each payment is made to a contractor
−Incorporation of sustainable elements in building design
−Marketing of properties starts well in advance of completion
date to de-risk the development portfolio
Read more on pages 57 to 58
2 Cumberland Place and 50 City Quay, our two active
developments, were due to complete in FY21 but have been
delayed by the construction lockdowns in Ireland and are now
expected to complete in early July 2021. We are not expecting
material cost overruns from the delays. Of the 62,500 sq. ft.
the two schemes will deliver, 38% was pre-let to 3M in early FY21
and we are currently engaging with potential tenants regarding
the remaining unlt space.
We have obtained full planning approval to commence the
development of the Clanwilliam cluster from early 2022 and the
Harcourt cluster from early 2023. Both schemes have low break-
even rents and much of our recent focus has been on optimising
the designs for ESG and collaborative work spaces. We retain
flexibility on when development commences.
Risk trend
Unchanged
Increased
Decreased
Risk impact
High
Medium
Low
51
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Exposure
Strategic priorities
Risk impact
Risk trend
7. Failure to motivate and retain team resulting in failure to execute the Group’s business plan
Loss of knowledge, experience and leadership could have
negative impacts on the Group’s ability to achieve its
strategic priorities.
People in Ireland have been working remotely for most of the
year due to the pandemic, which can cause difficulties with team
cohesion and motivation.
1 2 3 4 5
8. Disruption from external threat/event, cyber-attack, or fraud
Damage or losses due to fraud, error, cybercrime, or an external
event may result in significant disruption and damage to the
Group’s portfolio, reputation and/or operations.
The pandemic has resulted in the installation of new control
measures in our buildings. Working from home during the
pandemic has increased the risk of cyber-attacks and fraud.
1 2 3 4 5
9. Inappropriate capital structure/lack of funds for investment
Failure to meet target returns due to funding limitations
and inability to fund the development pipeline and/or invest
in accretive opportunities.
The pandemic has had a volatile impact on financial markets
which could negatively affect the availability of funds and
potential returns.
1 2 3 4 5
52
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Key controls and mitigants
Key activities in 2020-21
−Employee remuneration is strongly linked to Group and
individual performance and variable pay contains a significant
deferred element
−Periodic assessment of remuneration packages for all
staff is completed to ensure they remain competitive
−Employee performance and goal setting, with regular
performance reviews
−Succession planning at a Board level is led by the Nominations
Committee. Staff development is also supported to allow for
internal promotion
−Team events and opportunity for feedback through surveys
and team meetings
Read more on pages 96 to 126 and page 37
Along with regular video calls within departments, we have a
weekly All-Hands video call to keep our staff up to date with the
activities of all our departments. In addition, we have held several
virtual social events and training sessions.
Margaret Fleming, who was appointed to the role of Designated
Non-Executive Director for Workforce Engagement, has held several
working sessions with staff during the year (see page 37).
The annual staff survey was completed: recent surveys have
shown a high degree of employee satisfaction.
The Nominations Committee considered succession planning
as part of its remit.
−Business continuity and crisis management plans are reviewed
at least annually
−External IT consultants complete regular testing and review
of the Group’s systems
−IT and security updates are issued to all staff on a regular basis
−Effective internal controls and fraud prevention measures are in
place and reviewed regularly by staff and on a scheduled basis
by the Group’s internal auditor, PwC
−Insurance policies include cover for catastrophic events
Read more on pages 92 to 95
In accordance with public health guidance, our head office
staff have been working from home since mid-March 2020.
The transition to remote working has been smooth, assisted
by our cloud-based IT systems. Maintaining our collaborative
team culture and ensuring staff welfare have been a key priority.
At the start of the pandemic, we appointed one of our team
to oversee our COVID-19 response and we have developed an
individual plan for each building. This has been discussed with
tenants and covers access control, physical distancing measures,
additional cleaning, sanitising and signage.
The Group has continued to improve its IT security measures
during the financial year. A review of the Group’s information
security measures was completed in 2019 by PwC, and a cyber
security audit is planned for early in FY22.
−The Group has a target loan to value ratio of 20-30% through
the cycle, which is well below debt covenant limits, and the all
of interest rate exposure is fixed or hedged
−All debt is unsecured and has staggered maturities: weighted
average maturity at Mar-21 was 3.4 years
−Active monitoring and assessment of current and future
financial and cash flow requirements and availability of funding
is maintained.
−Board oversight
Read more on pages 61 to 63
In December 2020, the Group entered interest rate caps on €200m
of notional debt. These have a strike rate of 0.25% EURIBOR and
cover the five-year period to December 2025.
In May 2020, the Group agreed to issue €125m of new 10- and
12-year unsecured US private placement notes with average
coupon of 1.9%. The weighted average debt maturity at Mar-21 of
3.4 years, has increased to 5.2 years pro-forma the new debt issue.
At 31 March 2021 the Group had cash and undrawn facilities net
of commitments of €110m, rising on a proforma basis to €235m
including the new USPP notes.
Risk trend
Unchanged
Increased
Decreased
Risk impact
High
Medium
Low
53
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Business Review
Progress against strategic priorities for the financial year ended 31 March 2021
We have made good progress with the strategic priorities set out in the 2020 Annual Report, and we summarise this on pages 24 to 25.
As outlined in the CEO’s Statement much of our attention in the financial year has been on the longer term and ensuring our business
is evolving to meet changing occupier expectations: this is the basis for our strategic focus on office clusters and ESG excellence.
Disposals and acquisitions
We made no disposals (March 2020: none) and invested €11.1m in five acquisitions, all of which are adjacent to or within close proximity
of existing Hibernia assets and were “bolt-on” in nature (March 2020: €23.3m). In addition, on 31 March 2021 we transferred three assets
acquired as part of a loan portfolio in 2014 into investment property at a cost of €0.6m. We continue to review acquisition and disposal
opportunities though we will be disciplined in pursuing these, assessing them against investment in the material development opportunities
within our portfolio (see developments and refurbishments section below for more details).
Acquisition
Disposals
€11.1m
nil
(2020: €23.3m)
(2020: nil)
Portfolio overview
At 31 March 2021 the investment property portfolio consisted of 39 assets valued at €1,427.4m (March 2020: 36 assets valued at
€1,465.2m) which can be categorised as follows:
Value as at
March 2021
(all assets)
% of
portfolio
Equivalent
yield1
Passing
rent
Contracted
rent
ERV
1. Dublin CBD offices
Traditional Core
€415m
29%
5.0%2
€22.6m
€22.7m
€22.7m
IFSC
€178m
12%
4.8%
€8.3m
€8.3m
€10.9m
South Docks
€546m3
38%
4.4%
€26.9m
€27.2m
€27.8m
Total Dublin CBD offices
€1,139m3
80%
4.7%2
€57.9m
€58.2m
€61.4m
2. Dublin CBD office developments4
€62m
4%
–
–
€1.5m
€3.6m
3. Dublin residential5
€168m6
12%
3.8%7
€6.0m7
€6.0m7
€6.7m7
4. Industrial/other
€59m
4%
3.2%8
€1.5m
€1.5m
€2.2m
Total
€1,427m3,6
100%
4.5%2,7,8
€65.3m7
€67.1m7
€73.8m7
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 occupied by Hibernia in 1WML.
4. 2 Cumberland Place and 50 City Quay.
5. Includes 1WML residential element (Hanover Mills).
6. Valuation assuming 80% net-to-gross and purchaser costs as per C&W at Mar-21.
7. Residential income on net basis assuming Hibernia cost where asset is stabilized and 80% net-to-gross otherwise.
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.
In-place office portfolio area
1.1m sq. ft.
Total portfolio contracted rent
€67.1m
In-place office contracted rent
€58.2m
(€51psf)
54
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
B U S I N E S S R E V I E W
The key statistics of our office portfolio, which comprised 84% of our overall property portfolio by value at 31 March 2021 and 89%
by contracted rent (March 2020: 85% and 88%, respectively), are set out below. The WAULT to break/expiry of our completed office
developments (the majority of our office income) is 8.1 years. By comparison, our acquired office assets have a WAULT to break or expiry
of just under three years, with those assets in our development pipeline (Marine House, Clanwilliam Court and Harcourt Square) having
a WAULT of 1.3 years: this is to facilitate future redevelopment activity.
Contracted rent
ERV
WAULT
to review1
WAULT to
break/expiry
% of rent
upwards only
% of next
rent review
cap and collar
% of rent
MTM2 at next
lease event
1. Acquired in-place office portfolio
€26.9m (€48psf)
€26.6m (€47psf)
1.8yrs
2.8yrs
15%
–
85%
Development pipeline assets3
€9.7m (€42psf)
€9.7m (€42psf)
1.3yrs
1.3yrs
–
–
100%
Investment assets
€17.2m (€52psf)
€16.9m (€51psf)
2.1yrs
3.7yrs
23%
–
77%
2. Completed office
developments4
€31.3m (€54psf)
€31.1m (€54psf)
1.9yrs
8.1yrs
–
29%
71%
Whole in-place office portfolio
€58.2m (€51psf)
€57.7m (€51psf)
1.9yrs
5.6yrs
7%
15%
78%
3. Committed office-let7
€1.5m (€61psf)
€1.4m (€59psf)
5.0yrs
10.0yrs
0%
0%
100%
Total office portfolio
€59.7m (€51psf)
€59.2m (€51psf)
1.9yrs
5.8yrs
7%
15%
78%
4. Vacant in-place office
–
€3.7m5 (€47psf)
–
–
–
–
–
5. Committed office-unlet6
–
€2.2m (€55psf)
–
–
–
–
–
Whole in-place office portfolio
(after vacancy)
–
€65.0m (€51psf)
–
–
–
–
–
1. To earlier of review or expiry.
2. Mark-to-market.
3. Hibernia assumption that ERV of near-term development pipeline is equal to current contracted rent.
4. 1 Cumberland Place, SOBO Works, 1 and 2DC, 1WML, 2WML, 1SJRQ.
5. Includes parking and retail in office buildings.
6. 2 Cumberland Place and 50 City Quay.
7. In Apr-20 3M signed a pre-lease in 2 Cumberland Place.
Since 31 March 2020 Group contracted rent has increased by 2.2% to €67.1m, with the main drivers being the pre-let to 3M in
2 Cumberland Place and the five other new leases signed, which outweighed the loss of income from the expiry of some leases
in Marine House and Clanwilliam Court. Three rent reviews and five lease variations added a further €0.7m. The vacancy rate of the
in-place office portfolio, which was 7% by lettable area in March 2020, remained 7% at 31 March 2021, excluding Marine House and
Clanwilliam Court which we expect to redevelop in the near term: including these two assets it rose to 9%. For further details on the
vacant space and the increase in contracted rent, please refer to the asset management section on pages 59 to 60 and for further
details on our plans for Marine House and Clanwilliam Court please see the developments and refurbishments section on pages 57 to 58.
At 31 March 2021 our 10 largest tenants, all of which are large, multinational companies or state entities, accounted for 54% of our Group
contracted rent of €67.1m. By sector, technology and state entities accounted for 58% of contracted rent. As noted elsewhere in this
document, our rent collection statistics have remained strong throughout the pandemic.
Office WAULT
5.8 yrs
(Completed office
developments: 8.1yrs)
In-place office vacancy rate
7%
Contracted rent by sector/industry
€67.1m
Technology
43%
State entities
15%
Insurance and investment
management
10%
Other
10%
Residential assets
9%
Professional services
6%
Media
3%
Banking and capital
markets
2%
Industrial assets
2%
55
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Portfolio performance
In the financial year ended 31 March 2021 the portfolio value decreased €68m, or 4.4% on a like-for-like basis (i.e. excluding
acquisitions, disposals and capital expenditure). In the prior financial year, the portfolio value increased €23m, or 2.0% on
a like-for-like basis, with gains in the investment portfolio and our development assets reduced by the 1.5pp increase in the
rate of commercial stamp duty in Ireland in late 2019.
Value at
March 2020*
(all assets)
Capex
Acquisitions1
H1
revaluation
H2
revaluation
Value at
March 2021*
(all assets)
Like-for-like change
Traditional Core
€435m
€0.6m
–
(€21m)
€1m
€415m
(€20m)
(4.7%)
IFSC
€205m
–
–
(€14m)
(€13m)
€178m
(€27m)
(13.1%)
South Docks
€555m2
€2.2m
€6.9m
(€18m)
–
€546m2
(€17m)
(3.1%)
1. Total Dublin CBD offices
€1,194m2
€2.8m
€6.9m
(€53m)
(€12m)
€1,139m2
(€64m)
(5.4%)
2. Dublin CBD office
developments
€51m
€15.1m
–
(€3m)
(€1m)
€62m
(€4m)
(5.7%)
3. Dublin residential
€159m
€0.2m
€0.9m3
€4m
€3m
€168m
€7m
4.5%
4. Industrial/other
€61m
–
€3.9m3
(€5m)
(€1m)
€59m
(€5m)
(7.7%)
Total
€1,465m2
€18.1m
€11.7m
(€57m)
(€11m)
€1,427m2
(€66m)
(4.4%)
1. Including acquisition costs.
2. Excludes the value of space occupied by Hibernia in 1WML.
3. Includes the internal transfer of three non-core assets into investment property.
Note: At Mar-20, 50 City Quay was included in the South Docks segment. At Sep-20, this property was undergoing a substantial refurbishment
and so it was moved to Dublin CBD Office Developments.
*Note: In the Mar-20 valuation C&W included a material uncertainty clause for all assets valued, in line with RICS guidance. In the Sep-20 valuation
C&W removed the material uncertainty clause for assets within the “Dublin residential” group and in the Mar-21 valuation C&W removed the material
uncertainty clause for all assets within portfolio.
The valuation decrease in the portfolio during the financial year, which came mostly in the first quarter as the initial impact of the
pandemic was felt, was driven by the following:
−CBD offices: 5.4% reduction in value, largely due to a combination of yield expansion and lower net effective rents applied across the
office portfolio. While yields on our most prime offices and near-term developments (1SJRQ, Harcourt Square, Clanwilliam Court and
Marine House) remained unchanged, yields on other offices moved out between 5bps and 20bps. Headline office ERVs remained
largely unchanged, but an additional three months rent free (over an assumed 10-year term) was generally assumed, resulting in a
c. 3% reduction in net effective rents across the office portfolio. The value of our near-term developments (Harcourt Square, Clanwilliam
Court and Marine House) declined due to the quantum of rental income left to be paid under the current leases (prior to development)
reducing, but the residual site values remained broadly flat.
−CBD office development: 5.7% reduction in value due to the same valuation assumption changes applied to the CBD offices segment
noted above. In addition, the assumed period required to let the vacant space once these properties (2 Cumberland Place and 50 City
Quay) reach practical completion was increased.
−Residential: 4.5% increase in value, mainly due to yield compression driven by the weight of capital seeking investment opportunities
in Dublin PRS.
−Industrial/other: 7.7% reduction in value, primarily due to lower values per acre applied to our land at Newlands. While the industrial
portfolio has experienced some yield compression and ERV growth, the value increase has been offset by a reduction in the value
attributed to future development potential as a result of the uncertainty arising from the pandemic.
LfL decrease in portfolio value
€66m
down 4.4%
(2020: increase €28m, +2.0%)
56
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
B U S I N E S S R E V I E W C O N T I N U E D
Developments and refurbishments
Capital expenditure on developments in the financial year was €16.8m (2020: €21.3m) and mostly related to 2 Cumberland Place, our main
active development. In August 2020 work started at 50 City Quay, a small refurbishment project in the Windmill Quarter. Both schemes
have been delayed by the COVID-19 restrictions in Ireland and are expected to be completed in July 2021, delivering a total of 62,500 sq.
ft. of Grade A office space, 38% of which is pre-let. In the financial year we also received a final grant of planning for the redevelopment
of Clanwilliam Court. This means the three office schemes in our near-term development pipeline now have full planning permission to
deliver 539,000 sq. ft. of Grade A office space, and can be started in early 2022 (Marine House and Clanwilliam Court, most likely as one
project) and early 2023 (Harcourt Square).
Committed development schemes
Construction is nearing completion at 2 Cumberland Place and 50 City Quay, with delivery expected in July 2021. 24,000 sq. ft. of the
58,000 sq. ft. of offices in 2 Cumberland Place was pre-let to 3M Digital Science Community Ltd, a subsidiary of the 3M Company, in April
2020. In August 2020 work commenced on the refurbishment of 50 City Quay. The 4,500 sq. ft. office building is situated in the Windmill
Quarter, adjacent to 1SJRQ and faces the River Liffey. The completion of both schemes has been impacted by COVID-19 restrictions, most
notably the closure of construction sites in Ireland from early January until early May 2021 and both are now expected to complete in July
2021. Nonetheless, we are not expecting material cost overruns on either scheme.
Please see further details on the schemes below:
Total area post
completion
(sq. ft.)
Full
purchase
price
Est.
capex
Capex to
complete
Est.
total cost
(incl. land)
ERV1
Office
ERV1
Expected
practical
completion
(“PC”) date
2 Cumberland Place, D2
58k office2
1k retail/café
€0m3
€35m
€2m
€598psf4
€3.4m
€56.65psf
Jul-21
50 City Quay, D2
4.5k
€3m
€1m
€1m
€935psf
€0.3m
€55.00psf
Jul-21
Total committed
62.5k office2
1k retail/café
€3m3
€36m
€3m
€617psf
€3.7m
€56.53psf
1. Per C&W headline office ERV at Mar-21.
2. In Apr-20, 24,000 sq. ft. (41%) was pre-let to 3M on a 10-year lease
3. The site forms part of Cumberland Place and at the time of acquisition of Cumberland House no value was ascribed to it.
4. Office demise only.
Development pipeline
We received a final grant of planning from An Bord Pleanála, the planning appeals board, for the 152,000 sq. ft. redevelopment of
Clanwilliam Court after Dublin City Council’s initial planning approval was the subject of a third-party appeal. This means we have
planning permission now for the three office projects in our near-term development pipeline, Marine House, Clanwilliam Court and
Harcourt Square. Together these schemes can deliver 539,000 sq. ft. of Grade A office space in Dublin’s Traditional Core, a net increase
of nearly 283,000 sq. ft. and a 25% increase in the size of our current in-place office portfolio. We are also assessing the longer-term
redevelopment potential of certain other assets within the portfolio.
We can start the redevelopment of Marine House and Clanwilliam Court from early 2022, when the existing leases expire, and we can start
the redevelopment of Harcourt Square from early 2023. All three schemes should be profitable under most market conditions: based on
the planning approvals we have in place, the valuations of the three properties at 31 March 2021 (which include the present value of the
income remaining on the leases) equate to aggregate capital values of €3061 per buildable sq. ft. and the estimated capital expenditure
required to deliver the schemes is €555 per buildable sq. ft., an all-in cost of €861 per buildable sq. ft2.
We continue to hold 155.2 acres of land with potential for mixed-use development schemes in the longer term: re-zoning will be necessary
in all cases and consequently the timing of any future developments remains uncertain at present.
1. Existing income within this figure represents €22 per buildable square foot.
2. To calculate the net development value standard purchasers’ costs used are 9.96%.
57
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Office pipeline when completed
Mixed–use pipeline
Development expenditure in the year
539,000 sq. ft.
155.2 acres
€16.8m
(2020: 566,000 sq. ft.)
(2020: 154.3 acres)
(2020: €21.3m)
Office
Sector
Current area
(sq. ft.)
Area post
completion
(sq. ft.)
Full
purchase
price1
Comments
Marine House
Office
41k
50k
€30m
−Full planning for refurbishment and extension of Marine House
to provide 50k sq. ft. of office accommodation
−Leases expire during 2021
Clanwilliam
Court
Office
93k
141k office
11k ancillary
€59m
−Redevelopment opportunity post 2021
−Potential to create an office cluster similar to Windmill Quarter
(with Marine)
−Final planning grant received Aug-20
Harcourt Square
Office
122k
337k office
€77m
−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 incl. reception areas)
Total office and ancillary
256k
539k
€166m
Mixed-use
Sector
Current area
(sq. ft.)
Area post
completion
(sq. ft.)
Full
purchase
price1
Comments
Newlands
(Gateway)
Industrial/
other
143.7 acres
n/a
€48m2
−Strategic transport location
−Potential for future mixed-use redevelopment subject to re-zoning
Dublin Industrial
Estate
Industrial
128k on
7.7 acres
n/a
€12m
−Strategic transport location
−Potential for future mixed-use development subject to re-zoning
Malahide Road
Industrial Park
Industrial
66k warehouse
and 17k office
on 3.8 acres
n/a
€8m
−Potential for future mixed-use development subject to re-zoning
Total mixed-use
155.2 acres
n/a
€68m
1. Including transaction costs and capex spent to date.
2. Initial consideration.
58
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
B U S I N E S S R E V I E W C O N T I N U E D
Asset management
Net capital expenditure on maintenance items amounted to €0.7m in the financial period or €0.3m net of refunds (March 2020: €0.8m).
Portfolio contracted rent roll
In-place office vacancy rate
€67.1m
7%
(2020: €65.7m)
(2020: 7%)
Contracted rent increased by 2.2% to €67.1m (March 2020: €65.7m) as a result of:
−Six new lettings adding €2.6m, including a pre-let of €1.5m;
−Rent reviews concluded and lease variations adding €0.7m;
−Acquisitions adding €0.5m; and
−Lease expiries, breaks, surrenders and adjustments reducing contracted rent by €2.3m.
Some other key statistics at 31 March 2021:
−The vacancy rate of the in-place office portfolio was 7% based on lettable area (March 2020: 7%) and this available space had an ERV
of €3.1m, excluding retail and parking (March 2020: €4.0m). Including Marine House and Clanwilliam Court, where the leases are being
allowed to expire to enable redevelopment, the vacancy rate was 9%;
−Average rent across the in-place office portfolio was €51psf (March 2020: €50psf) and the ERV was also €51psf (March 2020: €51psf);
−Three office rent reviews were active over 60,000 sq. ft. of office space, with a modest (<€1m) uplift in contracted rent expected
(March 2020: two rent reviews active over 30,000 sq. ft. with a <€1m uplift expected);
−Please see page 63 for rent collection statistics, which remain strong.
Summary of letting activity in the period
Office:
−Five new offices leases agreed over 21,600 sq. ft., adding €1.1m per annum of gross new rent, and one pre-let on 24,000 sq. ft.,
adding a further €1.5m per annum. Net of expiries, breaks, surrenders and adjustments on let or licensed space, the total incremental
new rent was €0.4m per annum. The term certain of the five new leases is 4.1 years and the term certain of the pre-let is 10 years.
−Two rent reviews were concluded over 30,000 sq. ft., increasing contracted rent by €0.6m: in aggregate the revised rents were
approximately 60% ahead of the previous contracted rents and modestly ahead of the ERV at the date of review.
Industrial:
−One rent review concluded over 22,000 sq. ft. and three lease extensions signed over 217,000 sq. ft., increasing contracted rent by
€0.1m per annum.
Residential:
−A 3pp increase in the vacancy rate on our 334 residential units to 8% resulted in the contracted annual rent at 31 March 2021 reducing
by €0.1m compared with 31 March 2020; and
−All let units are subject to the rental cap regulations.
Key asset management transactions by property
−Central Quay, South Docks: In November 2020 we agreed to let 12,000 sq. ft. to Hines Real Estate Ireland Limited (“Hines”) on a long
lease on terms in line with the June 2020 ERV. Hines previously occupied 8,000 sq. ft. in Clanwilliam Court and its lease there was
terminated. The move resulted in a net increase in Hibernia’s contracted annual rent of €0.2m. In January 2021 we let a 3,000 sq. ft.
ground floor unit to Europ Assistance S.A. on a 10-year lease, adding €0.1m to contracted rent, in line with the September 2020 ERV.
Separately, Invesco has served notice to exercise a break option on its lease of 11,000 sq. ft. in the building with effect from November
2021: this will result in a 12-month rental penalty;
−2 Cumberland Place, Traditional Core: Construction of the 58,000 sq. ft. office building is approaching completion (see further details
on page 57). 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;
−Hardwicke House, Traditional Core: In December 2020, two rent reviews over 30,000 sq. ft. were concluded modestly ahead of ERV
at the date of review, adding €0.6m to contracted rent;
−Gateway, D22/24: In July 2020 we agreed lease extensions for two of the terminals to July 2021 and we have agreed a rent review on
another unit of the site, which is also let on short term rolling leases. In total these agreements have increased our contracted rent by
€0.2m per annum; and
−Marine House, Traditional Core: Most of the leases in the 41,000 sq. ft. office building expired in June 2020. We have taken the decision
to offer short term lease arrangements to align with the neighbouring blocks in Clanwilliam Court, where leases mostly expire in late
2021 or early 2022. At present Marine House is 53% occupied, generating rent of €0.8m per annum.
59
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Key in-place office properties with vacancy at period end
As noted above, the in-place office portfolio vacancy rate at 31 March 2020 was 7% and it remained at this level at 31 March 2021,
excluding Marine House and Clanwilliam Court, where the leases are being run down to facilitate redevelopment of the properties in the
near term. Including Marine House and Clanwilliam Court, the office vacancy rate at 31 March 2021 was 9%. The main office investment
assets with vacancy are:
−Central Quay, South Docks: 11,000 sq. ft. of office accommodation available to lease;
−The Forum, IFSC: all 47,000 sq. ft. of office accommodation and 50 car parking spaces are available to lease; and
−Other: 9,000 sq. ft. of available space.
Future rent reviews, break options and lease expiries
The table below summarises upcoming rent reviews and lease expiries by financial year, as well as setting out the ERVs for this space, at
31 March 2021. As noted in the footnote below, only a relatively small amount of income, €6.0m, is subject to break options over the next
five years.
Current income
ERV at 31 March 2021
FY
Expiries for
near term
development
All other
lease expiries
Rent
review
Expiries for
near term
development
All other
lease expiries
Rent
review
Mar-21
€0.1m
€0.1m
€2.9m
€0.1m
€0.1m
€3.2m
Mar-22
€3.6m
€0.7m
€11.6m
€3.6m
€0.7m
€11.9m
Mar-23
€6.0m
€0.7m
€8.8m
€6.0m
€0.5m
€8.2m
Mar-24
–
€3.3m
€4.8m
–
€3.3m
€4.7m
Mar-25
–
€2.9m
€11.4m
–
€2.9m
€11.2m
Total
€9.7m
€7.7m
€39.5m1
€9.7m
€7.4m
€39.3m1
Note: The table above shows upcoming rent reviews and expiries: break options amount to an additional €6.0m over the period to Mar-25 as follows:
€0.2m in FY22, €2.8m in FY23, €1.4m in FY24 and €1.5m in FY25
1. €9.0m of this income is capped and collared at next review and a further €4.0m is subject to upward only rent review provisions.
Sustainability/ESG
Improving our sustainability performance is a key strategic priority. In the four years to December 2020 (our sustainability data is measured
on a calendar year basis), we achieved a reduction of over 50% in greenhouse gas emissions intensity from landlord-obtained utilities in our
managed offices on a like-for-like basis and a reduction of over 55% on an absolute basis. Our performance in 2020 (a reduction of 26% in
greenhouse gas emissions intensity from landlord-obtained utilities in our managed offices on a like-for-like basis and on an absolute basis
when compared against 2019) was helped by the reduction in office usage due to the pandemic and also as a result of the real-time energy
monitoring system we have installed in our managed office buildings. We received our third successive EPRA Gold Award for the quality of
our sustainability performance disclosures in 2020, our first four star GRESB rating and a B minus rating in our response to the CDP Climate
Change questionnaire – a positive result for our first submission.
As mentioned in previous statements, a major area of focus for us in the financial year was assessing pathways towards net zero carbon
emissions and considering the disclosure recommendations of the TCFD. In April 2021 we published ‘Transforming Dublin Responsibly,
our Sustainability Statement of Intent. This replaced our existing Sustainability Strategy, setting long-term targets for the business, including
commitments to become a net zero carbon business by 2030 and to fully align our disclosures with the TCFD recommendations by 2022.
For further details please see pages 65 to 71 and our separate Sustainability Report which is published on our website, www.hiberniareit.com.
GRESB rating
CDP rating
Four stars
B-
(2020: three stars)
(2020: unrated)
60
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
B U S I N E S S R E V I E W C O N T I N U E D
Financial Review
As at
31 March 2021
31 March 2020
Movement
IFRS NAV per share (“IFRS NAVPS”)1
173.6c
179.8c
(3.4)%
EPRA NTA per share (“EPRA NTAPS”)1
172.7c
179.2c
(3.7)%
Net debt1
€278.8m
€241.4m
+15.5%
Group LTV1
19.5%
16.5%
+3.0pp
Financial year ended
31 March 2021
31 March 2020
Movement
(Loss)/profit after tax
€(25.2)m
€61.0m
(141.3)%
EPRA earnings1
€42.2m
€38.1m
+10.8%
Diluted IFRS EPS
(3.7)c
8.8c
(142.0)%
EPRA EPS1
6.3c
5.5c
+13.4%
Proposed final DPS1
3.4c
3.0c
+13.3%
FY21 DPS1
5.4c
4.75c
+13.7%
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’ on pages 201 to 212.
The key drivers of the 6.5 cent decrease in EPRA NTA per share since 31 March 2020, were:
−A 9.9 cent per share reduction due to revaluation losses on the property portfolio, including a 0.5 cent per share reduction from active
developments: 6.9 cent of these revaluation losses came in the first quarter;
−A 6.3 cent per share increase from EPRA earnings;
−Payment of the FY20 final dividend and FY21 interim dividend, which reduced NTA by 5.0 cent per share; and
−Other items, primarily the share buy-back, which increased NTA by 2.1 cent per share.
EPRA earnings were €42.2m, up 10.8% (or €4.1m) compared with the prior financial year due to:
−A full year of income from leases agreed in the prior year, which added €5.1m to earnings. These included leases within completed office
developments (e.g. 1SJRQ, 2WML) and leases in our office investment assets (e.g. South Dock House, Observatory);
−Activity in the current financial year, including rent reviews, new lettings, acquisitions and rent waived, which added €0.8m to earnings;
−Lease expiries and terminations, which reduced earnings by €1.2m; and
−A modest increase in costs (primarily a larger finance expense due to a larger drawn debt position) which reduced earnings by €0.6m.
The Group recorded an after-tax loss of €25.2m in the financial year, a reduction of 141.3% over the prior year profit after tax of €61.0m,
due to revaluation losses on the investment property portfolio of €67.6m (2020: revaluation gain of €22.9m).
EPRA EPS
FY21 DPS
6.3c
5.4c
(2020: 5.5c)
(2020: 4.75c)
Funding position
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 2021 was 3.4 years (March 2020: 4.4 years), with no debt due before December 2023.
In May 2021, the Group agreed to issue €125m of new private placement notes to five institutional investors, with closing occurring in late
July 2021. The new notes will help finance the Group’s development pipeline and provide long-term, low-cost funding. Pro-forma for the
new private placement notes the weighted average maturity of the Group’s debt at 31 March 2021 was 5.2 years. Please see the table
below for further details on the Group’s debt facilities.
61
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
F I N A N C I A L R E V I E W
Instruments
Quantum
Maturity
Interest cost
Security
Revolving credit facility (five year)
€320m
December 2023
2.0% over EURIBOR on drawn funds
0.8% undrawn commitment fee (fixed)
Unsecured
Private placement notes (seven year)
€37.5m
January 2026
2.36% coupon (fixed)
Unsecured
Private placement notes (ten year)
€37.5m
January 2029
2.69% coupon (fixed)
Unsecured
Total at 31 March 2021
€395m
3.4 years
Private placement notes (ten year) issuing Jul-21
€62.5m
July 2031
1.88% coupon (fixed)
Unsecured
Private placement notes (twelve year) issuing Jul-21
€62.5m
July 2033
1.92% coupon (fixed)
Unsecured
Total including July-21 issuance
€520m
5.2 years
At 31 March 2021, net debt was €278.8m (March 2020: €241.4m), equating to an LTV of 19.5% (March 2020: 16.5%). The main capital
expenditure items driving the increase in net debt in the financial year were development expenditure of €16.8m, acquisition expenditure
of €11.1m and the share buyback of €25m (please see further details below in capital management). Cash and undrawn facilities at
31 March 2021 amounted to €116m or €110m, net of committed expenditure (March 2020: €154m and €136m, respectively). Pro-forma
for the new private placement notes, cash and undrawn facilities at 31 March 2021 amounted to €241m or €235m, net of committed
expenditure. Assuming full investment of the available facilities in property, including the new private placement notes, the proforma LTV,
based on market values at 31 March 2021, would be c. 31%.
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 at 31 March 2021.
Key covenant
Calculation
Requirement
At 31 March-21
Headroom to covenant limit
Loan to value
Gross debt/(portfolio value + cash)
<50%
20.8%1
Portfolio value would have to fall 59% before breach
(March 2020: 65%)
Interest cover ratio
Underlying earnings before interest
and tax (“EBIT”)/total finance costs
>1.5x
6.4x2
Underlying EBIT would have to fall 77% before breach
(March 2020: 76%)
Net worth
Net Asset Value
>€400m
€1,149m
Net Asset Value would have to fall 65% before breach
(March 2020: 68%)
1. Reported LTV is calculated as net debt/portfolio value, giving a ratio of 19.5%.
2. Based on 12-month historic interest cover at 31 March 2021.
Interest rate hedging
Group hedging policy: to ensure the majority of the interest rate risk on drawn debt balances is fixed or hedged.
In December 2020, the Group entered interest rate caps on €200m of notional debt for a premium of €0.6m, taking advantage of the
low interest rate expectations at the time. These caps have a strike rate of 0.25% EURIBOR and cover the five-year period to December
2025. The Group’s existing interest rate hedging instruments on €125m of notional debt, which have a strike rate of 0.75% EURIBOR,
are expected to expire in December 2021. At 31 March 2021 the Group’s interest rate risk on its RCF drawings of €227m (2020: €187m)
were mitigated by these instruments, which cover €325m of notional exposure (2020: €125m) and the Group had €75m of fixed coupon
private placement notes (2020: €75m). This means 143% of the interest rate risk on the RCF drawings was hedged (2020: 67%) and
132% of the Group’s overall interest rate risk on its debt was fixed or hedged (2020: 76%). The “over-hedged” position at 31 March 2021
results in no additional financial risk to the Group. Please see the table below for further details on the Group’s hedging instruments at
31 March 2021.
Instrument
Notional
Strike rate
Exercise date
Effective date
Termination date
Cap
€125m
0.75%
n/a
February 2019
December 2021
Swaption
€125m
0.75%
December 2021
December 2021
December 2023
Cap
€200m
0.25%
n/a
December 2020
December 2025
Capital management
In August 2020, given the prevailing share price, we announced a €25m share buyback programme to complete the return to
shareholders of the proceeds of the sale of 77 Sir John Rogerson’s Quay, which were received in early 2019. The share buyback
programme completed on 16 November 2020, at which point 23.1m shares had been repurchased and cancelled at an average
purchase price per share of €1.08. The buyback programme was accretive to both EPRA NTAPS and EPRA EPS, with the effects
seen particularly in the second half of the financial year, when the majority of the shares were repurchased and cancelled. No shares
are being held in treasury.
62
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
F I N A N C I A L R E V I E W C O N T I N U E D
Rent collection
Our tenants are important stakeholders in our business, and we have been working closely with them to offer support, where needed,
in the current circumstances. This has included allowing some tenants to pay rent monthly in advance rather than quarterly in advance
on a temporary basis and, in a limited number of cases, rent deferrals or waivers. Our rent collection rates in the financial year ended
31 March 2021 averaged 99% across our commercial and residential properties.
Commercial tenants1
As shown in the table below, our commercial rent collection has remained strong since the start of the pandemic.
Commercial rent
Quarter ending
Jun-21
(Q1 FY22)
FY21
Rent received
Within seven days
88%
89%
Within 14 days
92%
91%
Within 30 days
94%
94%
Within 60 days
97%
98.5%
Rent received at 24 May 2021
97%
98.5%
Rent on payment plans
Monthly rent not yet due
2%
–
Rent deferred
–
0.5%
Rent on payment plans at 24 May 2021
2%
0.5%
Rent unpaid
Rent due
1%
0.5%
Rent waived
–
0.5%
Rent unpaid at 24 May 2021
1%
1%
Residential tenants2
At close of business on 24 May 2021, 98% of the rent due for the month of May had been received and the occupancy rate in our
residential units was 94%. At the same point in April, 98% of that month’s contracted rent had been received and the occupancy rate
was 93%. We have now received 99% of the April rent due. Across FY21 we have now received 99% of rent due and the occupancy
rate averaged 94%.
Q/E June rent collected within 30 days
Q/E June rent collected within 60 days
94%
97%
(2020: 90%)
(2020: 94%)
Dividend
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 3.4 cent per share (March 2020: 3.0 cent), taking the total dividend for the financial year to
5.4 cent per share. This is a 13.7% increase on prior year (March 2020: 4.75 cent) and represents 86% of EPRA EPS for the financial year
(March 2020: 86%). Subject to approval at the Group’s AGM on 27 July 2021, the final dividend is expected to be paid on 30 July 2021 to
shareholders on the register at 2 July 2021. 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.
1. 91% of Group contracted rent.
2. 9% of Group contracted rent.
63
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
C O V I D I M P A C T S A N D M A N A G E M E N T
Whilst the impact of COVID-19 on Hibernia and the Irish
property market is still ongoing, we have, throughout this
Annual Report, described how we have responded.
For ease of reference, we summarise the points below.
Consequences of COVID-19
Impact on Hibernia
Hibernia actions
Office occupational market
activity and rental values
have declined
Dublin office take-up in 2020 fell by 54% versus
2019 due to the impact of the pandemic
Grade A office vacancy rates increased to 9.8%,
up from 5.9% at March 2020
Headline prime CBD rents fell to €57.50 from
€62.50 in March 2020
We deferred the refurbishment of Marine House
and will now redevelop it as part of the wider
Clanwilliam Quarter, starting in early 2022
We offered tenants short term leases in Marine
House and Clanwilliam Court to coincide with
the planned redevelopment in early 2022
Investment market
activity and property
values have declined
Property investment volumes fell by 58% versus
2019 due to the impact of the pandemic
4.4% LFL reduction in Hibernia portfolio value,
primarily as a result of a decline in net ERVs
and some yield expansion in our office assets
By maintaining its modest leverage levels Hibernia
has not been materially impacted by office market
valuation declines
Non-essential construction
activity has been delayed
For c. six months of the financial year
construction activity on Hibernia’s active
development sites was prevented due to
Government restrictions meaning its two active
development projects did not reach practical
completion prior to the end of the financial year
Hibernia has not acquired any further development
sites and has deferred the commencement of the
development of Marine House to early 2022
We have sought confirmation from its main
contractors of their financial position, and timely
payments of sub contractors, prior to each invoice
payment in FY21
We are not expecting any material cost overruns
despite delays
Face-to-face consumer
businesses heavily impacted
Some tenants, especially those exposed to the
travel, hospitality and physical discretionary
retail sectors have sought rent assistance or
other support from us
Our tenant base is in the majority weighted
towards the technology and state entity sectors
whose operations have not been impacted
financially by COVID-19
We have engaged closely with those tenants
seeking financial assistance and have offered
rental deferrals or write-offs in selected instances
Pre-existing workspace
trends accelerated
Demand for more collaborative
workspaces with greater focus on
employee wellness has increased
Greater focus on ESG and sustainability
practices throughout the organisation
We are focusing on office clustering and ESG
excellence, both of which we believe will help us
in delivering the type of high quality, amenity-rich
office space tenants are increasingly seeking
Remote working and social
distancing measures may
disrupt business operations
The majority of Hibernia’s employees,
in line with Government health guidance,
have all worked from home for most of
the financial year
We invested in the appropriate remote working
software before the onset of COVID-19 and have
since provided an allowance to each staff member
to allow them to purchase any required equipment
We have sought to maintain our collaborative,
open working culture by holding weekly “all hands”
video calls along with hosting some successful
remote social events throughout the year
64
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
[[
Sustainability at Hibernia:
Highlights
Launched Transforming Dublin
Responsibly, our new Sustainability
Statement of Intent
Set a target of becoming a net zero
carbon business by 2030
Signed up to the Better
Building Partnership and the
World Green Building Council
net zero carbon commitments
€70,000 donated to local community
groups and charities through our
fundraising efforts
Instituted our artist in residence
programme, helping to keep culture
and collaboration flourishing in the
Windmill Quarter
A Lust For Life (young persons’ mental
health organisation) chosen as charity
partner for next two years
Neil Menzies
Sustainability Manager
Awards
Four green stars
with an overall score
of 80% (+5pp on
prior year)
Achieved a score
of positive B- in our
first CDP climate
change submission
EPRA sBPR – retained
Gold Award in 2020
for the third successive
year based on our
Sustainability Report
2 Cumberland Place
on track to be awarded
LEED Platinum
certification, soon
to be home to 3M
Further substantial reductions made
in Hibernia greenhouse gas (“GHG”)
emissions intensity 2020 (though
helped by low occupancy)
Sustainability at Hibernia
I am pleased to present the sustainability
section of this year’s Annual Report.
In 2021 we made the decision to simplify
our responsibility strategy and focus on
longer-term risks and opportunities.
We reduced our key principles from five
to three following detailed engagement
with our stakeholders over the past
18 months. Climate change is one of our
principal risks and we have set a target
of becoming a net zero carbon and
climate resilient business by 2030.
We have launched our ‘Net Zero Carbon
Pathway’ and agreed to adopt the
recommendations of the Task Force on
Climate-related Financial Disclosures
(“TCFD”) framework.
While, understandably, much of society’s
attention since early 2020 has been on
the COVID-19 pandemic, there has also
been increasing focus on issues of
sustainability and resilience. Hibernia’s
commitment to being a leader in ESG
matters in Ireland, both in the property
sector and more broadly, remains
unchanged. And the link between
financial performance and ESG initiatives
have never been clearer.
In this section we share our progress
over the last year and detail our new
responsibility strategy out to 2030,
including our commitment to becoming
a net zero carbon business.
As we look to the future, we are excited
about the challenge of meeting our
ambitious targets and continuing to improve
our ESG reporting and performance.
Please do take the opportunity to also read
our 2021 Sustainability Report, which you
can find on our website, www.hiberniareit.com,
and we will be pleased to receive any
feedback you have.
1. Scope 1 and Scope 2 GHG emissions only
e.g. landlord controlled areas.
2. Sustainability data shown on a calendar basis.
3. Reflects annual changes to the GHG
conversion factors.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
tCO2/m2 annum (t=tonnes)
2016
2017
2018
2019
2020
Absolute
65
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
www.hiberniareit.com
S U S T A I N A B I L I T Y
Our sustainability ambition
Our ambition is to be the most sustainable
property company in Ireland. It is
fundamental to the future value of our
business and to lessen our impact on
the environment and society that we act
now. We have an opportunity to make a
meaningful difference and we look forward
to working with our tenants, suppliers,
communities and sector peers to achieve
common goals and provide buildings that
are adaptable and resilient to climate change
and that promote the health and wellbeing
of the occupants and the surrounding areas.
We have set challenging targets which will
be independently assured, and we will draw
on innovation and partnerships to bring
about effective change.
The process not only helped us
understand what we need to disclose
in our Sustainability Reports, but
also informed our recently launched
Sustainability Statement of Intent out
to 2030 and our Net Zero Carbon Pathway.
Details of our 2020 materiality
assessment can be found on
www.hiberniareit.com/sustainability
How Hibernia manages sustainability
Hibernia’s Board has ultimate oversight
of all aspects of the business, including
sustainability and risk management.
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 per quarter.
Each business function head is required to
ensure that Hibernia’s sustainability agenda
is integrated into their area of work.
To oversee effective day-to-day
management, the Sustainability Manager
is responsible for overseeing delivery across
the business, with input and support as
required from the Chief Financial Officer
and other team members.
Assessing materiality
In early 2020 we carried out our first
materiality assessment, helping us identify
and prioritise the ESG issues that matter
most to our stakeholders. Identifying the
important issues involved, in part, speaking
to external stakeholders to capture their
views as to what is most important for the
Group from a sustainability perspective.
As the COVID-19 pandemic has progressed
we have added to our understanding by
engaging with investors through virtual
meetings and roadshows, with tenants
through conversations and surveys and
with staff through continuous discussions
and surveys, all complemented by research
carried out by consultants on our behalf.
“Economies, institutions and industry
are considering climate change risk
and solutions with greater urgency.”
Neil Menzies Sustainability Manager
Our delivery framework sets out the structure by which we aim to Transform Dublin
Responsibly. The framework ensures that we have the correct processes in place
across our business operations in order to meet the requirements of our strategy
and adhere to our policies.
Vision
To Transform Dublin Responsibly
Sustainability
governance
framework
Key targets
Sustainability Statement of Intent
• Become a net zero carbon and climate resilient business by 2030
• Provide spaces that prioritise the environment, health and wellbeing
• Create long-term positive social impact through our operations
Enablers
• Sustainability Policy
• Net Zero Carbon Pathway
• Sustainable Development Brief
• Supplier Code of Conduct
• Community Engagement Charter
• ISO 14001 Environmental
Management System
• ISO 45001 Occupational Health
and Safety Management System
• WELL Health Safety Rating
• LEED/WELL certification
Performance monitoring
and communications
Ongoing
• Sustainability performance dashboard
• Real-time monitoring system
• Occupier meetings
Fortnightly
• Building Managers meetings
on energy performance
Quarterly
• Sustainability Committee
• Executive Committees
• Energy performance reports
• Occupier sustainability newsletters
• Occupier sustainability working groups
Annual
• Sustainability Report
• Annual Report
• ISO audits
• ESG reporting
• Occupier surveys
• Employee surveys
66
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S T R A T E G I C R E P O R T
S U S T A I N A B I L I T Y C O N T I N U E D
The three key principles
UN SDGs
Objectives
Implementation
Become a net zero carbon
and climate-resilient
business by 2030
• By 2030, reduce our overall carbon
emissions by 30% and operational
carbon emissions by 40% against
a 2019 baseline.
• Set an internal carbon pricing
mechanism to drive behavioural
change and fund the energy efficiency
and on-site renewable improvements
to transition existing assets to net
zero carbon.
• Offset residual carbon emissions
from 2030 onwards once we
have implemented all other
feasible measures.
• Put climate change resilience at
the centre of our business strategy,
aligning with the recommendations
of the TCFD, and further incorporate
ESG targets into our remuneration.
• Publish Net Zero Carbon Pathway.
• Reduce embodied carbon of
new developments.
• Prioritise on-site solar photovoltaic panels.
• Formalise carbon reduction fund.
• Source electricity from grid on zero
carbon tariffs.
• Identify high-quality local offsetting
solutions for residual carbon.
• Full alignment with recommendations
of the TCFD by end 2022.
• Publish CDP climate change questionnaire
response annually.
• Incorporate ESG targets into our
remuneration schemes.
• Carry out whole-building carbon life-cycle
assessments for all new developments.
• Maintain a tenant energy-reduction
engagement plan.
Provide spaces that
prioritise the
environment, health
and wellbeing
• Prioritise health and wellbeing
considerations in all of our spaces.
• Promote initiatives that maintain an
exceptional standard of health and
safety with our employees, occupiers
and supply chain partners.
• Send zero waste to landfill and
achieve 70% recycling across all
of our managed assets by 2030.
• Ensure biodiversity net gain for
all major developments and
refurbishments by 2030.
• Obtain LEED and/or WELL certification
for all new developments.
• Develop only flexible, inclusive and
accessible spaces.
• Maintain ‘Step-Up’ and ‘Think Greener’
campaigns.
• Maintain a waste management tenant
engagement plan.
• Certify all managed buildings to ISO 14001
and ISO 45001.
• Ensure all stakeholders aware of safety
culture.
• Obtain ‘WELL Health-Safety Rating’ for
all managed spaces.
• Prioritise green spaces in all buildings.
• Maintain beehives on certain asset roof spaces.
• Undertake baseline biodiversity surveys for
new developments.
Create long-term positive
social impact through
our operations
• Better understand the social value
that our business brings to our local
communities by 2025 and then set
long-term targets to 2030.
• Partner with and support charity
organisations and groups dedicated
to issues that directly benefit our
local communities.
• Manage our employees in an inclusive
and fair manner that promotes
development, collaboration, creativity
and diversity.
• Carry out a social value assessment of all
new developments.
• By 2025 be able to set long-term social
value goals.
• Develop ‘Community Engagement Charter.’
• Measure employee satisfaction annually.
• Carry out annual staff surveys.
• Provide a positive working culture.
• Ensure our team is appropriately diverse.
Transforming
Dublin Responsibly
Our ambition is to be the most sustainable property company in Ireland and we
have committed to becoming a net zero carbon business by 2030. Although our
business is located in Dublin we are committed to creating a wider impact through
our sustainability ambitions and have chosen to align with the UN Sustainable
Development Goals (“UN SDGs”) most closely linked to our three key principles.
67
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
S U S T A I N A B I L I T Y C O N T I N U E D
Our roadmap
to net zero
Through our target
actions of reducing
the embodied carbon
in new developments,
reducing the energy
intensity of our
existing building stock
and increasing our
renewable energy
generation and
procurement,
we hope to reduce
our annual carbon
emissions to below
14,000 tonnes by 2030.
As we move beyond 2030, it will be
imperative that we continue to reduce
our carbon emissions and reduce our
reliance on carbon offsetting. As we
get closer to our target deadline, we
will revise our modelling and develop
a revised pathway that will allow us
to reach a point of zero carbon or be
carbon negative by the year 2050.
Baseline
emissions
Projected business-
as-usual emissions
2019
2030
21k
tonnes CO₂e
24.5k
tonnes C0₂e
www.hiberniareit.com
68
Hibernia REIT plc Annual Report 2021
S U S T A I N A B I L I T Y C O N T I N U E D
Our Net Zero Carbon Pathway is aligned to the Better Building
Partnership’s Net Zero Carbon Framework and The World Green
Building Council’s Net Zero Buildings Commitment. As part of
these commitments, we are required to report on our annual
progress and the steps we are taking along our pathway to achieve
our net zero carbon ambition. As we will have only published our
pathway in June 2021 we will provide a detailed review on our first
year of progress, including disclosures on the energy performance
of our portfolio, in our 2022 Sustainability Report.
Key
Embodied carbon
Developments, refurbishments
and fit-outs, and maintenance
Operational carbon
Occupier energy usage
Operational carbon
Landlord energy usage
Decarbonisation
actions
Projected residual emissions after
decarbonisation actions taken
Offset residual
emissions to net zero
2021-2030
2030
2030 onwards
14k
tonnes C0₂e
0
Net Zero
Reduced embodied carbon
of new developments
and refurbishments
Reduce energy intensity
of existing assets
Increase renewable energy
supply for all assets
Procure renewable energy
43%
reduction
69
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Why this is important to our
business model and strategy
The risks of climate change are increasingly
recognised. Both occupational and
investment markets are focusing more
on sustainability and, consequently,
commercial consequences for good or
poor performance in this area are to be
expected. Given the scale of the global
climate challenge, it is clear to Hibernia that
an especially ambitious approach is now
required. That is why we are committing
to achieving net zero carbon by 2030.
Where we stand right now
Over the past six years, Hibernia has shown
leadership in sustainability in the Irish
real estate sector, setting and achieving
ambitious targets to reduce its carbon
footprint and reduce the energy intensity
of its buildings. We have demonstrated
our ability to improve the performance
of existing assets and to develop leading-
edge sustainable buildings. During 2020,
we achieved further reductions during
periods of low occupancy due to COVID-19
restrictions and lockdowns. In addition,
further building optimisation measures
have been implemented across the
portfolio and the installation of real-time
energy sensors on all utility meters has
increased the visibility of our performance.
But we are not complacent. There is still
a long way to go to become a net zero
carbon business by 2030. Achieving on
our commitments will require partnership
working with all our stakeholders, from
designing net zero carbon buildings
with our architects and mechanical
and electrical consultants to operating
buildings in collaboration with tenants
who see the benefits of occupying smart,
energy-efficient buildings.
Description of approach
We developed our Net Zero Carbon
Pathway by involving all departments
of the business from day one. We also
consulted with our independent
sustainability consultants and assurance
providers to gain their feedback and
to model our existing baseline, 2030
‘business-as-usual’ footprint and 2030
net zero carbon footprint. This gave all
stakeholders a holistic view of the project.
Plan
Reduce operational carbon and energy
Operational carbon was over 66% of
our overall carbon footprint in 2020 and
provides the greatest opportunity to reduce
emissions across our portfolio. We will
carry out the following as part of the
process of lowering operational carbon:
−Optimise building performance through
data-driven technologies equipment.
−Transition away from fossil fuel towards
electric only heating, cooling and hot
water solutions.
−Increase on-site renewable generation
through solar PV installation.
−Procure only 100% renewable landlord
electricity and work with occupiers
to do same.
−Adopt a design performance approach
on all new buildings to close the
performance gap.
Reduce embodied carbon
Embodied carbon contributed 20%
of our overall carbon footprint in 2020
deserves a high degree of attention.
We will carry out the following as
part of the process of lowering
embodied carbon:
−Mandate whole life carbon
assessments for all major new
developments and fit-outs.
−Develop a ‘Sustainable Development
Brief’ incorporating minimum
requirements for contractors.
−Carry out research with stakeholders
in lower-carbon construction
materials and building methods.
−Incentivise the reduction in embodied
carbon through our internal carbon
pricing mechanism.
Offset residual carbon and set
an internal price on carbon
Where it is not possible to eliminate
carbon emissions, from 2030 we will
offset these residual emissions through
verifiable schemes.
Internal price on carbon
To help us achieve net zero, we have
established an internal price on carbon
using the expected price of carbon in
2030. The fund will provide seed funding
for energy improvements in existing
buildings, funded through a levy
on the embodied carbon of new
developments and refurbishments.
Net Zero Carbon pathway www./hiberniareit.com/sustainability
Becoming a net
zero carbon
Business by 2030
Tenant engagement to drive agenda
Recognising that more than two-thirds
of our operational emissions come from
tenant-controlled space, the scope of our
commitment includes space we do not
control. This is obviously challenging, but
it is also an opportunity to strengthen
our relationships with our tenants as we
collaborate on climate initiatives in the
years ahead. We already have sustainability
working groups in place in our managed
assets, platforms that facilitate discussion
on energy and carbon reduction, and we
will review our leases to ensure they are
kept up to date with the latest
developments in green leasing.
Challenges
Ultimately setting a net zero carbon
target requires a leap of faith as there
are a number of uncertainties:
−Much of the carbon emissions from our
assets come from the activities of our
tenants and from our development
activities, reducing our level of control.
−Some of the advances required to reach
net zero (e.g. grid decarbonisation, more
energy-efficient plant) may not be
available before 2030.
−Nobody knows exactly what carbon
pricing and offsetting costs will be
in 2030.
We will work with our stakeholders to
provide clarity around many of these
uncertainties and refine our model
accordingly, providing transparency
through our annual disclosures.
70
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S U S T A I N A B I L I T Y C O N T I N U E D
EPRA sustainability performance
Hibernia, as a member of the European
Public Real Estate Association (“EPRA”),
is committed to transparent reporting
on its non-financial data in line with the
EPRA Sustainability Best Practices
Recommendations Guidelines (“EPRA
sBPR”). Such non-financial data is
increasingly requested by investors and is
now a legal requirement under Regulation
(EU) 2019/2088, Sustainable Financial
Disclosures Regulations, under which
Hibernia falls as an Alternative Investment
Fund (“AIF”).
Full details on EPRA sBPR reporting,
including our assurance report, is in our
2021 Sustainability Report which is available
on www.hiberniareit.com/sustainability.
Sustainability performance metrics are
reported on a calendar year basis.
Although we have kept our buildings
open for tenants all during the pandemic,
occupancy numbers have been greatly
reduced. While we implemented various
building management energy-saving
initiatives, such as the roll-out of real-time
energy-monitoring sensors across utility
meters, and building management system
software upgrades and optimisation, it is
impossible to separate the effects of these
and COVID-19 lockdowns on energy
consumption and other metrics.
Some of the measures we have
undertaken to protect our tenants
also resulted in higher metrics, for
example air recirculation in all buildings
was turned off and fresh air only was
used for ventilation, resulting in higher
electricity and gas usage than would
have been expected at the low
occupancy levels.
Performance highlights
(on a like-for-like basis):
−Electricity consumption down by 28%
and other fuels consumption by 20%.
−26% decrease in Scope 1 and Scope 2
GHG emissions.
−57% reduction in water consumption
across the portfolio.
−76% decrease in waste generated.
Our detailed EPRA sustainability ESG
measures can be found in the tables
on pages 38 to 43 of the 2021
Sustainability Report.
JLL Upstream Sustainability Services
has assured this data in line with the
AA1000AS v3 standard. JLL’s assurance
statement can be found on pages 44 to
46 of the 2021 Sustainability Report.
Focus areas
for 2021
Net zero carbon – carry out audits of all
existing assets, agreeing capex plans to
reduce energy consumption and increase
on-site energy generation. Commence
whole life carbon assessments for latest
development projects, agree energy-use
intensity targets and maximise on-site
renewable generation.
Social impact – launch artist in residence
programme with stakeholders in the
Windmill Quarter and measure impact
of A Lust For Life partnership in
local communities.
TCFD – engage consultant to carry
out scenario analysis against potential
global warming scenarios.
Carbon Fund – formalise internal price of
carbon to be applied to the embodied
carbon of major new developments that
will seed fund energy reduction projects
in existing assets.
Remuneration – make ESG-linked
performance goals part of the
performance objectives of every
Hibernia employee.
Carbon offsetting – start offsetting annual
corporate carbon emissions through
verified local projects that offer
opportunities for employee participation.
Occupier engagement – continue to
issue sustainability newsletters and
host quarterly meetings. Organise
a breakfast forum on sustainability
for all occupiers once office-based
working fully resumes.
Employees – ensure a safe and positive
return to office working once COVID-19
restrictions allow.
The RIAM Baroque Orchestra rehearsing
in the Townhall at 1WML, South Docks
71
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
The importance of purpose,
culture and values
Our purpose
Our purpose is to create the best and
most efficient spaces for working and
living in Dublin, responsibly transforming
the fabric of the city 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 page 80
100%
attendance for all Directors
at six scheduled meetings in 2020-21
Corporate
governance
Good governance to us means achieving
our purpose while ensuring the best use
of resources and meeting the needs of
our stakeholders. Responsibility and
transparency are central to our strategy.
72
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
G O V E R N A N C E
1WML, South Docks
Corporate Governance at a glance –
Statement of compliance
The Board confirms that for the year ended 31 March 2021,
we have applied the principles of good governance set out
in the UK Corporate Governance Code 2018 (the “UK Code”)
and the specific provisions contained in the Irish Corporate
Governance Annex (“Irish Annex”) except for the provisions
on pensions alignment and post-employment shareholdings.
We have committed to pensions alignment by 2022 and
introduced post-employment shareholding requirements in
our 2021 Remuneration Policy renewal (see pages 113 to 126).
We set out below how we have structured our governance
section around these principles and have also referenced
where information is reported on elsewhere in the
Annual Report.
Pages
Board of Directors
74
Senior Management Team
76
Introduction from the Chairman
78
Culture and people
80
What we did during the year
82
Division of responsibilities
84
The role of the Board and its Committees
84
Board roles
85
Stakeholder engagement
86
Effective and efficient running of the Board
88
Listening and responding to our stakeholders
34 to 37
Composition, succession and evaluation
88
Board and Senior Management Team
74 to 77
Board evaluation
88
Nominations Committee report
90
Audit, risk and internal control
92
Independence and effectiveness of internal
and external audit
92
Audit Committee report
92
Risk control framework and principal risks
40 to 53
Remuneration
96 to 126
Remuneration Committee report
96 to 126
Remuneration at a glance
100 to 104
Additional context on remuneration
105 to 109
Annual report on remuneration
109 to 113
2021 Remuneration Policy review
113 to 126
73
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
The right skills
and experience to
deliver our strategy
Daniel Kitchen (69)
Independent Non-Executive Chair; Irish
Terence O’Rourke (66)
Independent Non-Executive Director; Irish
Grainne Hollywood (58)
Independent Non-Executive; Director; Irish
Colm Barrington (75)
Independent Non-Executive Director
and Senior Independent Director; Irish
Committee memberships: Remuneration and
Nominations Committees (Chair)
Appointed: 23 August 2013
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
Sirius Real Estate Limited.
Committee memberships: Audit (Chair),
Remuneration and Nominations Committees
Appointed: 23 August 2013
Skills and expertise: As 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
the ESB, Enterprise Ireland, the Irish Management
Institute and Kinsale Capital Management.
Non-Executive Director of The Irish Times Ltd
and Chair of their Audit Committee.
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, 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.
74
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
B O A R D O F
D I R E C T O R S
Kevin Nowlan (49)
Chief Executive Officer; Irish
Thomas Edwards-Moss (41)
Chief Financial Officer; British
Stewart Harrington (78)
Independent Non-Executive Director; Irish
Margaret Fleming (56)
Independent Non-Executive Director; Irish
Roisin Brennan (56)
Independent Non-Executive Director; Irish
Sean O’Dwyer (62)
Company Secretary; Irish
Committee memberships:
Executive Committees
Appointed: 5 November 2015
Skills and expertise: Kevin joined the Board
as Chief Executive Officer following the
Internalisation of the Investment Manager.
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: Chair of
ULI Ireland.
Committee memberships:
Executive Committees
Appointed: 5 November 2015
Skills and expertise: Tom joined the Board as
Chief Financial Officer following the Internalisation
of the Investment Manager. Prior to joining the
Group in 2014, 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.
Committee memberships: Audit,
Nominations, Remuneration, 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.
Committee memberships: Nominations
Committee, Investment and Development
Committees (Executive Committees)
Appointed: 20 January 2020
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.
Committee memberships: Audit, Nominations
and Remuneration Committees
Appointed: 16 January 2019
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: Non-Executive
Director of Ryanair Holdings plc, Musgrave Group
plc, Dell Bank International d.a.c. and Glanbia plc.
Committee memberships: Risk &
Compliance, Sustainability, Health & Safety
(Executive Committees)
Appointed: Sean joined the Group at inception
and was appointed Company Secretary in
February 2017.
Skills and experience: Sean 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. He is responsible for risk
management and compliance as well as company
secretarial duties.
Current external appointments: None.
75
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
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 financial statements on a quarterly basis.
Strategy is also reviewed periodically.
Gerard Doherty (47)
Director of Development
Appointed: Gerard joined Hibernia in June
2017 as Head of Project Management and
was promoted to Director of Development
in July 2020.
Responsibilities and experience: Ger is
responsible for all aspects of our development
and major refurbishment projects and was
responsible for the delivery of our award
winning Windmill Quarter. He has over 20 years’
experience in construction and real estate
development in both Ireland and the UK having
previously worked with Balfour Beatty and
John Paul Construction as well as in a variety
of Development and Asset Management roles.
He has extensive residential, office and planning
experience. Gerard is a graduate of the University
of Ulster and has post graduate diplomas in
both Management and Project Management.
He is also a Chartered Construction Manager.
We use our knowledge and
experience of the Dublin property
market to deliver our strategy.
76
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S E N I O R M A N A G E M E N T T E A M
Frank O’Neill (62)
Director of Operations
Sean O’Dwyer (62)
Company Secretary and
Risk & Compliance Officer
Edwina Governey (36)
Chief Investment Officer
Justin Dowling (44)
Director of Property
Kevin Nowlan (49)
Chief Executive Officer
Thomas Edwards-Moss (41)
Chief Financial Officer
Appointed: Frank is one of the founders of
Hibernia, joining in 2013 and was appointed
to his current role in January 2019.
Responsibilities and experience: 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. Before joining
the Company he worked in W K Nowlan &
Associates, a specialist property consultancy
practice, where he advised a wide range of
clients on property related matters and was
involved in the management of the practice.
Previously he was a director of Rohan Holdings,
a privately owned property company. He qualified
as both a Chartered Accountant and a Chartered
Surveyor and has a B Comm from University
College Dublin, an MSc in Spatial Planning from
Technical University Dublin and diplomas in
Property Investment, Property Tax and Property
and Facilities Management.
Appointed: Sean joined the Group at inception
and was appointed Company Secretary in
February 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.
Appointed: Edwina has been with the Group
since April 2014 and was appointed Chief
Investment Officer in August 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 has a Bachelors Degree in
Business and Legal Studies from University
College Dublin and a MSc in Real Estate
Economics & Finance from the London School
of Economics. She is a Member of the Society
of Chartered Surveyors in Ireland and the Royal
Institution of Chartered Surveyors.
Appointed: Director of Property in January 2019
having worked for the Group from inception.
Responsibilities and experience: Justin is
responsible for managing our standing portfolio.
He has over 20 years’ experience in the Irish
and UK property markets. Justin previously
held senior roles in Rohan Holdings and WK
Nowlan Property Limited. He has a BSc in
Estate Management from Oxford Brookes
University, a Diploma in Management from the
Irish Management Institute and is a member
of Society of Chartered Surveyors Ireland and
Royal Institution of Chartered Surveyors.
Appointed: Kevin is one of the founders of
Hibernia and has been CEO since 2013.
Responsibilities and experience: 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 has been
Chair of ULI Ireland since January 2021.
Appointed: June 2014.
Responsibilities and experience: 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 June 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.
77
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Daniel Kitchen, Chair
Dear fellow shareholder,
Welcome to the governance section of this
year’s Annual Report. The purpose of this
section is to provide you with an overview
of the way in which the Board has operated
over the last year, and to confirm that we
aim to ensure that good governance is key
to all that we do.
Throughout the year we remained
largely compliant with the provisions of
the UK Code except for the provisions on
pensions alignment and post-employment
shareholdings. We also comply fully with
European Union Shareholder Rights
Directive II as implemented under Irish law
which became applicable during the year.
We had already voluntarily complied with
the ‘say on pay’ part so there are no major
changes to our remuneration reporting.
Our Remuneration Policy, updated this
year and to be put as an advisory motion
to the 2021 AGM, aims to bring us to full
compliance with the UK Code (see more
on pages 113 to 126).
This year we decided to rearrange the
lay-out of this section to try and make it
more logical and understandable and to
follow the requirements of the UK Code.
The table on page 73 can be used to
navigate quickly.
As a Board, we have faced challenges
in 2020-21, in particular the COVID-19
pandemic. It has become increasingly
important that we listen and respond to
the needs of all stakeholders. We detail
these on pages 34 to 37 and 86 to 87.
Our management of the pandemic is
outlined on page 64. An overview of the
principal actions and priorities of the Board
is on pages 82 to 83. The Board has been
particularly focused on risk management
during this period, due not only to the
impact of external pressures, but also to the
operational changes required to manage
the business in the current environment;
an overview of our risks management
and principal risks is on pages 40 to 53.
With the continued uncertainty due to
political and macro-economic factors, we
have focused on whether our strategy is
well positioned to maximise opportunity
and generate long-term value. The Board
held its annual strategy event during
February 2021. The strategy day is
structured to provide the Directors, and
the Non-Executive Directors in particular,
with an opportunity to focus on the
development of, and challenge to,
the Company’s corporate strategy. The
Executive Directors, Senior Management
Team and external invitees delivered a
number of presentations to attendees
providing in-depth analysis on Hibernia’s
strategic options and the external
environment. We reflected on whether
our business model remains valid, options
for the future to deliver optimal shareholder
value, whether our portfolio is appropriately
positioned and whether our risk profile is
appropriate. We consider the future of
the office on pages 10 to 11. We discuss
our medium and longer term plans for
development and major refurbishment on
pages 28 to 29 and 57 to 58. We set out
our strategic priorities and KPIs on pages
22 to 23 and 38 respectively. Last but not
least, we focused on sustainability and
produced our Sustainability Statement
of Intent (see more on pages 65 to 71 and
in our 2021 Sustainability Report which is
available on our website). As part of this,
we committed to a Net Zero Carbon
Pathway by 2030 (see pages 68 to 69).
To ensure executive alignment with
strategy, and in particular sustainability,
we have built greater emphasis on
sustainability targets into our proposed
revisions to the Remuneration Policy.
I encourage all shareholders to get involved
and let us know of any concerns and I look
forward to our 2021 AGM which is to be
held on 27 July 2021. I also welcome
questions and feedback via our website
www.hiberniareit.com or by email using
info@hiberniareit.com..
Finally, I thank again my colleagues on the
Board and all our employees for all their
commitment and support for our business.
Daniel Kitchen
14 June 2021
Introduction
from
the Chair
C O R P O R A T E
G O V E R N A N C E
78
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
As a real estate business, the Board
believes that sustainability is fundamental
to our strategy and to being the leading
real estate business in Dublin.
2020-21
Key governance activities
The Board’s key governance activities
during the year have included:
• There were nine Board meetings during
the year of which six were scheduled;
• Annual strategy review, challenging
whether in light of global events it
remains fit for purpose and appropriate
to generating value for our investors;
• Review of findings of external evaluation
of the Board, its Committees and
individual Directors (see page 88);
• Comprehensive review of our
executive remuneration framework and
Remuneration Policy (see pages 113 to 126);
• The 2020 Annual General Meeting (“AGM”);
• The 2021 Extraordinary General Meeting
(“EGM”) to approve the central securities
depository (“CSD”) migration following
Brexit; and
• The 2021 corporate governance roadshow.
Major Board decisions
The Board factored the needs and
concerns of our stakeholders into its
decisions in accordance with the UK
Code (see pages 36 to 37). The major
decisions taken by the Board and its
Committees during 2020-21 (see pages
82 to 83) included:
• Confirmation of the Board’s target to
become a Net Zero Carbon business by
2030 and approval of the Sustainability
Statement of Intent (see pages 65 to 70);
• Approval of the 2020-21 interim dividend
and proposed the final dividend;
• Approval of the share buyback (see
page 62);
• Update and review of risk framework,
appetites and risk register;
• Review and agreement of strategic
objectives 2020-21 and 2021-22;
• Ongoing business decisions such as
purchases, sales, development and
refurbishment projects;
• CSD migration;
• Updating of the Remuneration Policy;
and
• Approval of updated three year internal
audit plan.
Board snapshot
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.
Age
Board skills and experience
Gender diversity
Name
Finance
Public
company
Property
Sustainability
Regulatory
Daniel Kitchen
Colm Barrington
Roisin Brennan
Thomas Edwards-Moss
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Kevin Nowlan
Terence O’Rourke
Average age (Non-Executive):
65.4 years
(2020: 65 years)
Average tenure (total):
5.1 years
(2020: 3.9 years)
Average tenure (Non-Executive):
5.0 years
(2020: 3.8 years)
Total Board
Male
Female
Non-Executives
Male
Female
33%
(2020: 30%)
43%
(2020: 38%)
79
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Culture and people
Our purpose is to create the best and most efficient spaces for working and
living in Dublin, responsibly transforming the fabric of the city and bringing
benefits to all stakeholders. Our Sustainability Statement of Intent (pages 67
to 70) sets out our ambitions to ensure responsibility is in everything we do.
Our culture and values are reinforced by
the Board through its decisions, strategy
and conduct. We have described how
our Board factors stakeholders into its
decisions on pages 34 to 37 along with
our ‘s172’ statement. Culture is monitored
through the interaction of the Board, Senior
Management Team and employees. As a
small team of 35 employees it is relatively
easy for everyone to meet and contribute.
The Board also assesses cultural indicators
such as management’s attitude to risk,
behaviours and compliance with the
Group’s policies and procedures. This
is predominantly done through direct
engagement with management at
Board and Committee meetings.
Independent assurance is sought via the
outsourced internal audit function and
other advisers. The various Executive
Committees, some of which have Non-
Executive Director membership, facilitate
ensuring that policies and behaviours set
at Board level are effectively communicated
and implemented across the business.
Managing through COVID-19
Throughout the pandemic, employees have
mainly been working from home. To keep
communication open, we organised regular
all hands meetings and virtual social events.
There have been ongoing mental and
physical health sessions as well as more
fun events such as wine and beer tasting.
It is important to us to understand what
motivates our employees to perform their
best and to get feedback. To do this we
encourage employees to raise issues, we
use anonymous surveys, and Margaret
Fleming, our Designated Director for
Workforce Engagement, has established a
programme to encourage open feedback
to the Board (see page 37). We surveyed
employees’ attitudes and concerns to a
return to the office, what activities they
would find helpful, what social events
would be welcome and how a working
from home could be best supported.
We introduced a working from home
financial support and continue to look
at ways to make sure we maintain our
culture and team spirit no matter where
we are working.
Our culture is:
Transparent, honest
and fair
We aspire to be honest and fair;
team members have different
insights and opinions that can
improve future decisions.
We encourage a culture of open
communication and we normally
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.
At the core of our
culture are the
following values:
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 81
Integrity and openness
Our teams act with integrity and
honesty and always strive to do the
right thing.
Read more on page 81
80
Hibernia REIT plc Annual Report 2021
G O V E R N A N C E
www.hiberniareit.com
Our policies in focus
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 prior to appointment so any
potential conflicts can be addressed at
that time. All changes in such directorships
must also be notified to the Board and
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.
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.
Supplier Code of Conduct*
This outlines our expectations of supplier
ethics and behaviour. It was reviewed
during this financial year’
Read more in our 2021
Sustainability Report on page 35 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.
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. The Share Dealing
Code also applies to all employees.
Market Abuse Regulation 2016 (“MAR”)
The Company continues to maintain a
list of persons discharging managerial
responsibilities (“PDMRs”) and permanent
insiders and has complied with the MAR
requirements during the year.
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. 2021 will see the introduction
of a revised policy which will apply for
three years from 2021-22.
Read more on pages 113 to 126
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 2021 Sustainability Report
available at www.hiberniareit.com/
sustainability, page 42.
Employment and labour practices
All employees are made aware of the
Group’s policies through the Employee
Handbook, which was updated during
the year; they receive 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.
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.
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. Our Health
& Safety Policy was reviewed and
updated during the year. We report
EPRA metrics on page 42 of our
separate 2021 Sustainability Report
available at www.hiberniareit.com/
sustainability.
*
Policy available at www.hiberniareit.com/
about-us/policies
81
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Key activities of the
Board during 2020-21
Board discussions have covered a wide range of topics with a
significant amount of time spent on the following strategic topics:
Business
and strategy
−Overall strategy
−Consideration of new business
structures and investment/
divestment opportunities
−Review and consideration
of development projects
−Progress in leasing existing
and upcoming vacant space
−Profitability including KPIs
and operational metrics
−Recommended final and
interim dividends
−Review of strategic objectives
in 2020-21 and approval of
objectives for 2021-22
−Tax changes in Budget 2021
−COVID-19 pandemic monitoring
impact and planning response
−Appointment of Ger Doherty as
Director of Development
Link to strategic objectives
1 2 3 4 5
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
−Materiality review
−Employee remuneration
and management
−Appointment of Designated
Non-Executive Director for
Workforce Engagement
(Margaret Fleming)
−Strategic review
−COVID-19 management
Link to strategic objectives
1 2 3 4 5
Risk management
and internal
controls
−Monitoring and update of risk
register, risk appetites and risk
appetite metrics
−Budget, viability, going concern
and stress tests
−Levels of authority delegated
to management
−Compliance policy statement 2021
−Recommendations from Audit
Committee and reports of
internal audit
−Results of depositary audits and
due diligence reports
−Processes and documentation
for compliance with MAR
−Managing the risks surrounding
the COVID-19 pandemic both
from a business impact and
operational response
−Compliance with REIT legislation,
Central Bank and Stock Exchange
requirements
Link to strategic objectives
1 2 3 4 5
82
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
W H A T W E D I D D U R I N G T H E Y E A R
Governance
−Remuneration Policy updated,
remuneration awards and
performance assessment
for Directors and Senior
Management Team
−Board succession planning
−Conflicts of interest and related
party transactions
−Updates from Committees
−Implemented recommendations
of external performance evaluation
−Internal evaluation of Board
and Committees
−Review of terms of reference
of Board Committees
−Board delegations and
authorised signatories
−Review of Board time
commitments and attendance
Link to strategic objectives
1 2 3 4 5
Corporate reporting
and performance
monitoring
−Review and approval of
external reporting (including
recommendations from the
Audit Committee); trading
announcements and updates,
Preliminary Results 2020, Annual
Report 2020 and Auditor’s Report;
Interim Report 2020; Sustainability
Report 2020
−External audit, planning and results
−Review and discussion of
management reports, KPIs
and rolling forecasts
−Remuneration finalised
and approved
−Second grant of Long Term
Incentive Plan (“LTIP”) made
Link to strategic objectives
1 2 3 4 5
Funding and
balance sheet
management
−Liquidity status and financing
considerations
−Hedging arrangements
−Capital management including
share buyback, capital
reorganisation and gearing
−Compliance with debt covenants
−Private placement fixed rate
financing arrangements
Link to strategic objectives
1 2 3 4 5
What the Board did in the financial year ended 31 March 2021
Our core focus areas and key topics covered are outlined below. Throughout the
year, we met people both inside and outside of the Group. Through such interactions,
we have been able to identify and address the issues that matter to our stakeholders.
A key focus this year has been sustainability. We believe sustainability is not just
something extra we do but is central to all that we do. To that end, we developed our
Sustainability Statement of Intent and we are revising the sustainability targets within
our Remuneration Policy to ensure that all executives and employees are aligned in
our goal to Transform Dublin responsibly.
83
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
The main governance and regulatory requirements are the Central Bank requirements, the Listing Rules of Euronext Dublin and the
Financial Conduct Authority, the UK Code, the Irish Annex, the Transparency and Market Abuse Regulations and the Alternative
Investment Fund Management Directive (“AIFMD”) rules.
Certain matters are delegated to the three principal Board Committees:
Board of Directors
The Board is collectively responsible for the long-term success of the Group.
The Board ensures that the policies, practices and behaviours throughout the
business are aligned with the Group’s purpose, culture and values.
The Board aspires to the highest standards of behaviour based on honesty and transparency; our aim is to foster
a culture that promotes fairness and where success reflects ability, potential, performance and teamwork.
Executive Committees
Audit Committee
−Oversight of financial and other
reporting, including sustainability,
ensuring integrity of reporting processes
−Oversight of outsourced external
auditor and Valuer
−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
The Board has reserved certain matters for its direct stewardship and decision making.
A formal schedule of matters reserved to the Board is available on our website:
www.hiberniareit.com/about-us/corporate-governance
Our strategy: see pages 22 to 23
The Team: see pages 76 to 77
The terms of reference for each Board Committee are available on the Group’s website at
www.hiberniareit.com/about-us/corporate-governance
The Board delegates the execution of the Company’s strategy and the day-to-day
management of the business to the Senior Management Team.
The Executive Committees have oversight of key business activities and risks.
Membership comprises Directors, Senior Management Team members and other staff as appropriate.
Investment
Development
Asset
Management
Risk &
Compliance
Operations
Sustainability
Health
& Safety
Marketing
Finance &
Investor
Relations
The Board advocates maintaining the highest standards of corporate governance by complying with all applicable regulations and best
practice principles, and complying or explaining with provisions.
Biographies:
see pages 74 to 75
Board activities in 2020-21:
see pages 82 to 83
Roles and responsibilities:
see pages 84 to 85
Report: see pages 92 to 95
Report: see pages 90 to 91
Report: see pages 96 to 126
Senior Management Team
84
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
D I V I S I O N O F R E S P O N S I B I L I T I E S
The Board has regard for the interest of all stakeholders (see pages 86 to 87) and is responsible for ensuring high standards of
professional conduct. The division of responsibilities across Board members and the three principal Board Committees
is clearly defined. (See opposite).
The Group’s Board is comprised of seven independent Non-Executive Directors, including the Chairman, and two Executive Directors.
The Board is supported by the Company Secretary who is also the Group’s Risk & Compliance Officer. In keeping with best corporate
governance practice, corporate policy is that all Directors seek re-election each year at the AGM.
Non-Executive responsibilities
INED & Chair
Daniel Kitchen
−Leading the Board
−Constructive input to mission and strategy
−Board and CEO effectiveness and performance
−Setting the ‘tone from the top’ on purpose and values and promoting a culture of openness and debate
−Facilitating constructive Board relations
−Meeting with stakeholders and ensuring that their views are understood and included
−Ensuring the Board receives accurate, timely and clear information
Senior INED
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
INEDs
Roisin Brennan
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Terence O’Rourke
−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
−As Designated NED for Workforce Engagement, Margaret Fleming also has responsibility for enhancing
Board and employee interactions (see more on page 37)
Executive responsibilities
CEO
Kevin Nowlan
−Leading the Company’s business and day-to-day management
−Setting strategic direction
−Implementing agreed strategy
−Operational and financial performance
−Oversight of culture and values
−Informing the Board
CFO
Thomas Edwards-Moss
−Financial management and reporting
−Managing funding and balance sheet requirements
−Sustainability
−Investor and other stakeholder relations
−Supporting the CEO in developing and implementing strategy
Company Secretary
and Risk &
Compliance Officer
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
Board environment and access to appropriate information
The Chairman and Company Secretary ensure that the internal systems are in place so that 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 entitled to have access to independent professional advice at the expense of the Company where appropriate. The Group
also supports continuing professional education and individual training as appropriate for, or requested by, Directors.
Time commitments
The Board met nine times during the year: six of these were regular, scheduled meetings. There has been 100% attendance for all
Directors at scheduled meetings during the financial year. These meetings were also attended by relevant key management and
other employees and external invitees where appropriate.
The Board noted that some investors had expressed concerns on possible overboarding by certain members of the Board. The Chair
stood down from the role of Chair of WorkGroup plc in July 2020 and also left the Board of Applegreen plc in March 2021 following
its delisting which has reduced his overall time commitments. In the second half of 2021 Colm Barrington will step down from his role
as the CEO of a listed company following the acquisition of Fly Leasing Limited. This aside, the Board members have demonstrated
their commitment to their roles in Hibernia and are satisfied that all Non-Executives were readily available for meetings and were able
to devote sufficient time to properly deal with Group business. The Company Secretary also reported that there were no difficulties in
arranging Board meetings, even at relatively short notice.
Attendance: 100% for all Directors
at scheduled meetings
Nominations Committee:
see pages 90 to 91
Board effectiveness
see page 88
Board evaluation
see page 88
UK Code
see page 73
85
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
An overview of stakeholder engagement can be found
on pages 34 to 37 of the strategic report. In this section
we focus on our investors.
Investor relations
Non-deal roadshows 2020-21
As a result of the pandemic, all roadshows
in the financial year were held remotely.
These occurred after the FY20 and HY21
results and the CEO and/or CFO attended
all virtual meetings.
Corporate governance roadshow
A corporate governance roadshow was
held in March 2021. Approximately 20 of
the Company’s top institutional investors
representing holdings of c. 68% of the
issued share capital were contacted and
offered conference calls.
We received responses from thirteen
investors, five of whom requested a call.
The other eight respondents confirmed
they were happy with our governance
arrangements although one flagged
concerns over Colm Barrington having
two non-executive roles in addition to
his full time executive position with Fly
Leasing and said they would be reviewing
this again prior to our AGM. Daniel Kitchen,
Sean O’Dwyer and Roisin Brennan made
the calls to the five investors.
The agenda covered general corporate
governance matters including:
−Progress with Board succession and
specifically the intention to use a
recruitment firm to assist in the
appointment of a future Chair for
the Audit Committee;
−Progress on sustainability, including
plans for net zero carbon and TCFD
reporting; and
−The review of our Remuneration Policy
and the proposed updates regarding
pension alignment, post employment
shareholding requirements and the
inclusion of ESG metrics.
The investors were appreciative of
the opportunity to have this dialogue.
Feedback was positive in general.
The proposed updates to the Remuneration
Policy to bring it into full compliance with
the UK Code were welcomed, as was the
introduction of ESG metrics. They were
also complimentary about progress on
sustainability measures over the last
12 months. The impact of COVID-19 on
our business was discussed and how it
might affect office take up in the future.
Everyone accepted that it is still too early
to fully understand the implications. All
of the investors confirmed that the use of
ESG metrics in remuneration is positive but
flagged concerns over the detail and that
transparency will be important. Diversity
was also discussed and it was confirmed
that diversity must be considered as part of
the specific circumstances of each country
and industry sector.
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.
Key investor relations statistics for the financial year ended 31 March 2021
Shareholders by geography
661.7m
shares in issue
(2020: 684.7m)
Contact by investor origin
136 contacts
(2020: 182 contacts)
Investor contact by meeting method
136 contacts
(2020: 182 contacts)
2020
Ireland
Continental
Europe
UK
USA & Canada
Rest of World
21
%
11
27
20
40
2
20
%
11
29
29
29
2
2021
2020
Ireland
Continental
Europe
UK
USA & Canada
Rest of World
21
16
34
54
29
3
20
14
38
79
51
0
2021
2020
Meeting
Conference
Remote meeting
(call or video call)
Remote
conference
Tour/meeting
& tour
21
0
0
93
43
0
20
91
30
27
0
34
2021
86
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S T A K E H O L D E R E N G A G E M E N T
2020
2021
April
Equity sales call: Dublin x1
May
Virtual investor roadshow: Dublin, Edinburgh, London
Equity sales calls: Dublin x3
June
Virtual investor roadshow: Amsterdam, Boston, Dublin, Hamburg, London, Montreal,
New York
July
Virtual conferences QuotedData/Marten & Co
Annual General Meeting
November
Virtual investor roadshow: Amsterdam, Baltimore, Boston, Dublin, Edinburgh, London,
Montreal, Paris, Zurich
Equity sales calls: Dublin x3
Virtual conferences: Goodbody, EPRA
December
Virtual conference: HSBC
February
Extraordinary General Meeting
March
Corporate governance virtual roadshow: Edinburgh, London, New York, Paris
Virtual conferences: Goodbody, Bank of America
The 2020 AGM was held on 29 July 2020
both virtually and in The Townhall, 1WML,
Windmill Lane, Dublin D02 F206.
All Directors attended.
Votes in favour of the re-election of Directors > 99% other than for Daniel Kitchen
and Colm Barrington where votes in favour were 83% (see page 85 for discussion
on time commitments).
All other resolutions approved – six ordinary and five special with votes in favour > 90%;
other than authority to allot relevant securities at 87%.
An EGM was held on 10 February 2021 to
approve migration from the CREST trading
settlement platform in London to Euroclear
Bank in Belgium.
All Directors attended. The meeting was necessary as a result of Brexit, and a legal
formality to allow shares to continue to trade in London and Dublin. Voting was
conducted by poll and all motions were passed with 100% of the vote in favour.
The 2021 AGM is to be held on 27 July 2021
in The Townhall, 1WML, Windmill Lane,
Dublin D02 F206.
In light of ongoing COVID-19 restrictions the AGM will be held virtually and in person.
Some Directors may not attend in person but will do so remotely.
It is expected that we will have eight ordinary resolutions and five special resolutions
to be proposed to shareholders but this will be confirmed with the AGM notice.
Key investor relations activities in FY21
87
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Board effectiveness
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,
Chair and individual NEDs; and
−Other matters as identified annually.
This scope is reviewed annually to ensure
any particular objectives that may be
relevant are identified.
Board effectiveness review 2021
As part of our compliance with the Code,
Independent Audit Limited (“IAL”) carried
out an external evaluation of the effectiveness
of the Board and Committees and the Chair
in 2020 the details and findings of which
were set out in last year’s Annual Report.
IAL specialises in the provision of Board
evaluation services to a diverse range of
organisations across Europe. IAL had no
other connection with any of the Directors
or with the Group.
The Board met IAL in July 2020 to review
the findings of their reports and completed
an internal assessment of the report and its
findings. A detailed plan was put in place
for implementing the recommendations
over the course of 2020/2021. The following
key suggestions were considered and
implemented during the year:
−Internal CPD training and specific
training requirements for the Board
and its Committees.
−Continuing consideration of succession
planning and talent development at
Board and management level.
−Active engagement with employees by
the Designated Non-Executive Director
for Workforce Engagement (see more
on page 37.
−Formalised forward planning agenda
prepared.
−Informal and formal NED-only meetings
scheduled as part of the annual agenda.
In accordance with the Board performance
evaluation cycle all of the Directors
undertook an internal review of the
Board, with only the NEDs reviewing the
Committees of the Board. These reviews
took place towards the end of the financial
year. The internal reviews took the form
of online questionnaires. The responses
to the questionnaires indicated that there
was continued satisfaction amongst the
Directors as to the Boards effectiveness
and also to that of the Chair. There were
a couple of recommendations put forward
as suggestions to improve the Board
performance and these will be discussed
and actioned in the coming financial year.
Year 1
Internal review of Board and
Committees. The Chair also reviews
each Non-Executive Director.
Progress reviewed internally
and areas of focus identified.
Year 3
Independent, externally
facilitated review.
Board agrees action plan to
implement improvements.
Year 2
Internal review of Board and
Committees. The Chair also reviews
each Non-Executive Director.
Progress reviewed internally
and areas of focus identified.
The process is divided into four stages:
Stage 1:
Scope
Stage 2:
Design approach
and plan
Stage 3:
Complete process
and collect results
Stage 4:
Review and
agree action plan
Board composition and independence
As at 31 March 2021, the Board comprised
the Chair, two Executive Directors and six
Non-Executive Directors. The biographies
of all members of the Board outlining the
experience they bring to their roles are set
out on pages 74 and 75. The roles each of
the directors play on the Board are outlined
on page 85.
Other than the resignation of Frank Kenny
in July 2020 there were no changes to
Board membership during the financial
year. As a majority (four) of the Non-
Executive Directors are nearing the end
of their tenure, succession planning is
underway and will continue over the
next 12 to 18 months. Recruitment has
commenced for the role of Chair of the
Audit Committee (see pages 90 and 91).
88
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
C O M P O S I T I O N , S U C C E S S I O N A N D E V A L U A T I O N
Diversity and inclusion
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. Diversity and inclusion bring
new ideas and fresh perspectives which
fuel innovation and creativity. An inability to
attract and retain people with a wide range
of knowledge and experience could have
negative impacts on the Group’s ability to
achieve its strategic priorities.
We discussed our efforts and intentions
in progressing diversity on our corporate
governance roadshow. We have increased
our gender diversity on the Board from
0% in December 2018 to 33% now.
The Board’s diversity policy requires that,
where possible, each time a Director is
recruited at least one of the shortlist
candidates is female when recruiting.
We continue to seek out opportunities to
improve all kinds of diversity, however this
must be considered as part of the specific
circumstances of each country and industry
sector. Most importantly, we need to have
the right balance of skills and experience to
deliver constructive input and governance.
Gender diversity in the wider Group –
% female
36%
Employees
(2020: 31% Employees)
20%
Senior Management
(2020: 20% Senior Management)
Profile of the Non-Executive Directors
Non-Executive Directors
who are independent:
100%
Skills and experience
Name
Finance
Public
company
Property
Sustainability
Regulatory
Daniel Kitchen
Colm Barrington
Roisin Brennan
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Terence O’Rourke
Non-Executives
Male
Female
43%
(2020: 38%)
Length of tenure
1-3 years
7-8 years
3
4
Age profile
50-60 years
60-70 years
70-80 years
3
2
2
89
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Committee members
Members
Appointed
2020-21
Attendance
Daniel Kitchen
(Chair)
2013
3/3
Colm Barrington
2013
3/3
Roisin Brennan
2019
3/3
Margaret Fleming
2020
3/3
Stewart Harrington
2013
3/3
Grainne Hollywood
2019
3/3
Terence O'Rourke
2013
3/3
Meetings
There were three scheduled meetings, at
which all members were in attendance,
during the financial year.
Key considerations 2020-21
Board succession
Review of Committee membership
Diversity
Key considerations 2021-22
Recruitment and onboarding of future
Chair of the Audit Committee
Board succession planning
Review of Committee membership
Role of the Committee
Review the structure, size and composition
of the Board and its Committees
Review and oversight of the succession
planning of Directors and members of
the Senior Management Team
Consider time commitments of all Directors
and review potential additional appointments.
Lead any appointment process, and make
recommendations to the Board accordingly
Monitor and respond to developments in
corporate governance.
Daniel Kitchen, Chair
Dear fellow shareholder,
I am pleased to present the Nominations
Committee’s Report for the financial year
ended 31 March 2021.
As four of the independent Non-Executive
Directors will have served nine years by
the end of 2022, and may therefore no
longer be considered independent at
that point, succession planning was the
principal focus for 2020-21 and will
continue to be so for the coming year.
As reported in previous years, our
succession planning commenced in 2019
with the appointment of Rosin Brennan
and has continued with the more recent
appointments of Grainne Hollywood and
Margaret Fleming.
Transitional arrangements for the
Board were also addressed. At the
start of the financial year, the Board
was at its maximum membership of 10
but this has now reduced to 9 following
the retirement of Frank Kenny from the
Board in July 2020. I would like to take
this opportunity to express my gratitude
to Frank Kenny for his work with the
Group from its inception.
The number of Directors is likely to
continue to fluctuate over the coming
years as the original members retire
and are replaced by newer members.
The number of Directors on the Board
should be more stable by the start of 2023.
At Senior Management level, Gerard
Doherty replaced Mark Pollard as
Director of Development in June 2020
and again I would like to thank Mark
for his contribution to the Group during
his time with Hibernia. Gerard is an
experienced development professional
and has worked in the Group since 2016
and is looking forward to the challenge
of managing the development process
on our two large development projects
that are expected to commence in the
next 18 months.
On page 79 we provide a snapshot of the
Board. We overview our culture and major
policies on pages 80 to 81. On pages 88
to 89 we discuss Board effectiveness
and composition, as well as presenting
information around diversity and skills.
We present gender metrics across the
Group as part of our EPRA Sustainability
Reporting (see page 42 of our 2021
Sustainability Report).
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, and succession planning is one
of the responsibilities of this Committee.
The Committee may not be chaired
by the Chair when it is dealing with the
matter of succession to the position
as Chair of the Board. The Committee
had identified the need to transition the
Board membership and skill set, improve
its diversity and transition its age profile.
This process has already commenced with
the appointment of three female directors
to the Board since 2019 who have brought,
as well as gender diversity, significant plc
and Irish property market experience to
the Board. It is intended to continue this
process in the coming financial year.
As Directors retire and are replaced the
Committee has particular regard as to
the existing composition of the Board
in selecting suitable candidates.
In 2020-21, the recruitment process to
replace the Chair of the Audit Committee,
Terence O’Rourke, commenced. In line
with the Company’s search and recruitment
process for the appointment of Directors
to the Board, the Committee decided
that an external recruitment firm would
be appointed to oversee and guide
the recruitment process. The process
commenced with the Chair and Company
Secretary receiving virtual presentations
90
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
A full copy of the terms of reference,
which were updated during the year
for governance code updates, is
available on the Company’s website at:
www.hiberniareit.com/about-us/
corporate-governance
from three globally recognised executive
recruitment firms in February 2021.
Following due consideration of the
merits of each of the firms that presented,
the Committee agreed with the Chair’s
recommendation to formally appoint
Spencer Stuart to the engagement.
They are a global executive search
and leadership consulting firm with
their headquarters in the USA but with
offices locally in Dublin. Other than this
engagement, Spencer Stewart has no
connection with the Group or any Director.
Spencer Stuart have compiled a list of
suitable candidates and it is the intention
of the Committee that the Chair, Company
Secretary and two other INEDs will conduct
an initial round of interviews with a shortlist
of selected candidates. It is hoped to have
the prospective member of the Board
appointed and in place in time for the
commencement of the interim reporting
process for the financial year ending
31 March 2022, with the intention that
a managed transition period can take
place before they become chair of the
Audit Committee.
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.
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. As noted already
Gerard Doherty was appointed as Director
of Development to replace Mark Pollard
who retired during the year.
Time commitments
Time commitments are discussed on
page 85. As previously noted in last year’s
Annual Report, I formally stood down from
the role of Chairman of Workspace Group
plc in July 2020. In addition, following
Applegreen’s acquisition and delisting from
Euronext Dublin, which was first announced
in December 2020 and took legal effect in
March 2021, I have resigned as Chair. I am
continuing as Chair of Sirius Real Estate
Limited. These developments have reduced
my overall time commitments and ensure
that I continue to be available both for
regular and additional duties as required, in
my roles as Chair of the both the Board and
Nominations Committee. As in prior years
I led the Corporate Governance Roadshow
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 properly deal with Group business.
The Committee noted that attendance at
all meetings was 100%. The Company
Secretary also reported that there were
no difficulties in arranging Board meetings,
even at relatively short notice. A further
development towards the end of the
financial year was that the entity that
Colm Barrington is currently CEO of, Fly
Leasing, has agreed to be acquired and
will delist from the New York Stock
Exchange before the end of 2021.
Colm will therefore cease to be a CEO
of a public company. This should alleviate
the overboarding concerns raised by
some investors in recent years.
Re-election of the Directors
at the 2021 AGM
All proposed re-elections to the Board
have been considered by the Nominations
Committee, taking account of each
individual’s continued effectiveness and
commitment to the role. Following this
review, I can confirm that each of the
Non-Executive Directors is considered
effective in their roles and both independent
of the Senior Management Team and free
from any business or their relationship
which could materially interfere with their
exercising of independent judgement.
Committee effectiveness
Independent Audit Limited (“IAL”)
carried out an external evaluation of the
effectiveness of the Committee in 2020.
An internal evaluation of their report and
its findings was completed during the
year and a detailed plan was put in place
for implementing the recommendations.
These included reviewing Committee
attendance to ensure only relevant
people are present at meetings.
This year’s internal evaluation confirmed the
Committee’s overall satisfaction with how
it operated and highlighted the need for
a review of the Company’s induction process
for new Directors given the ongoing
succession that is going to continue to
take place over the next couple of years.
I am pleased to confirm that the Committee
continues to operate and function effectively.
In conclusion
I would like to take this opportunity to
thank my colleagues on the Committee
for their work during the year.
Daniel Kitchen
Chair
14 June 2021
91
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Committee members
Members
Appointed
2021
Attendance
Terence O’Rourke
Chair & INED
2013
4/4
Colm Barrington
Senior INED
2013
4/4
Roisin Brennan
INED
2019
4/4
Stewart Harrington
INED
2013
4/4
Key considerations
in 2020-21
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
Approval of internal audit three-year plan
Key considerations
in 2021-22
Sustainability, net zero carbon strategy and
Task Force on Climate-related Financial
Disclosures (“TCFD”)
Valuations and continuing impact of
COVID-19 on the market and Group
Valuer rotation
Development pipeline and associated risks
European Single Electronic Format
(“ESEF”) Regulation
Continuing internal audit programme
Terence O’Rourke, Chair
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 2021.
2021 was a challenging year for the
Group as we adapted to the COVID-19
pandemic. The sudden changes brought
about by the crisis are now part of our
everyday business life. For most of the
year, the majority of employees
continued to work remotely and our
meetings were held virtually. In all of our
work, we considered the impacts of the
pandemic, from risk management to
reporting. The Group continues to adhere
to all public health advice and looks
forward to returning to the office when
safe to do so.
In addition, both occupational and
investment markets are focusing more
on sustainability, and we expect there
will be commercial consequences for
good or poor performance in this
area in future. We discuss sustainability
further below.
Portfolio valuation
The Committee considers the
valuation of the Group’s properties to
be a significant area of judgement in
determining the accuracy of the financial
statements and therefore this is a major
focus of our work. We reviewed the
work of the Valuer, their effectiveness
and considered their independence.
As our current Valuer is approaching
the four-year anniversary of their
appointment, a tender process has
commenced with a view to appointing
a new valuer in time for the September
2021 valuations. I would like to thank
Cushman & Wakefield for their work
over the last four years.
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
Board intends to recommend the
reappointment of the auditor at the 2021
AGM, in accordance with Section 383
of the Companies Act 2014.
The external auditor is responsible for
the annual statutory audit and 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. All the work carried out
by the external auditor during the year
related to the audit of Group companies
or the review of interim reports.
Risk management and
internal controls
The Audit Committee is responsible for
overseeing the effectiveness of the Group’s
risk management and internal control
environment. The Committee monitors the
Group’s risk appetite, key risk metrics and
risk register on a regular basis. Breaches
in internal controls are documented and
reported to the Committee by the Risk &
Compliance Officer. We have focused in
particular on the impacts of the changes
in business practices which have resulted
from the COVID-19 pandemic as we believe
that the possibility of opportunistic
cyber-crime and fraud increases with more
remote working. This has been reflected in
our internal audit schedule and planning
and focus on cyber-security.
Two internal audits were completed in
the year by PwC. The areas covered were
tenant management and the valuation
process. PwC presented their findings
to the Committee, noting that they
identified good working practices
with only low-grade findings to report.
All recommendations and observations
are being implemented by management.
IMAGE TBC
92
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
A U D I T
C O M M I T T E E
R E P O R T
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
The Committee also reviewed the internal
audit plan until 2023 and instructed
PwC that a cyber-security internal audit
review should be conducted early in the
financial year 2021-22 given the current
environment. This is further to the
information technology security health
check which was conducted in 2019.
See pages 40 to 47 for further
information on risk management
Sustainability
We see climate change risk as of particular
importance in both our standing portfolio
and our development projects and monitor
these carefully. In addition to reporting to
industry standard benchmarks such as
GRESB, EPRA and CDP, we have issued our
Sustainability Statement of Intent in April
2021 which embeds sustainability targets
more firmly in our business and sets our
pathway to net zero carbon in 2030.
To support our management of this,
we are aligning our disclosures with the
recommendations of the TCFD which
will help ensure that we are working to
mitigate the risks of climate change.
See pages 65 to 71 and also in
our 2021 Sustainability Report for
further information on the Group’s
sustainability strategy
Committee performance
Following the external review of
the effectiveness of the Board and
Committees last year, we undertook
an internal evaluation this year.
See pages 88 and 89 for further details
Independent Audit Limited (“IAL”)
carried out an external evaluation of the
effectiveness of Audit Committee in 2020.
Reviews were carried out through the
completion of questionnaires, review of
Board and Committee papers and the
observation of a virtual Audit Committee
meeting. This external evaluation examined
both our own work and our interactions
with external assurance providers such as
the external auditor and Valuer. An internal
assessment of the report and its findings
was completed during the year and
a detailed plan was put in place for
implementing the recommendations.
These included reviewing Committee
attendance to ensure only relevant
people are present at meetings and
ensuring a review of the performance
of the outsourced internal audit partner
and external auditor is detailed in the
forward annual agenda. This year’s internal
evaluation confirmed the Committee’s
overall satisfaction with how it operated
and highlighted the need for some
additional discussion on internal controls,
the internal audit function and the controls
around related party transactions.
I am pleased to confirm that the Committee
continues to operate and function
effectively. There is confidence that there
is solid oversight of risk and finance, the
reporting environment is sound, meetings
are well chaired and that there is good
discussion and debate.
Significant items and key areas
of uncertainty – valuation of
investment property
When the Valuer assessed the Group’s
property portfolio as at 31 March 2020, it
did so on the basis of a material uncertainty
clause given the initial disruption caused
by the COVID-19 pandemic and the limited
market evidence available at that date.
While market conditions may move rapidly
in response to changes in the control or
future spread of COVID-19, the valuations
are no longer subject to a material
uncertainty clause. The Valuer has indicated
that property markets are mostly functioning
again, with transaction volumes and other
relevant evidence at levels where an
adequate quantum of market evidence
exists on which it could base its valuation
opinion as at 31 March 2021.
Approval of reports
As requested by the Board, the Committee
considered and recommended to the
Board, that in the Committee’s view, 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.
See page 131 for the Directors’
responsibility statement
The Annual Report and financial
statements were considered in draft
on 11 May 2021. The Preliminary
Results Statement, which included the
consolidated financial statements, was
approved by the Board on 25 May 2021.
The Annual Report was approved by the
Board on 14 June 2021 and signed on
its behalf by Kevin Nowlan and Thomas
Edwards-Moss on 14 June 2021.
Conclusion
I would like to thank my fellow Committee
members for their commitment and input
to the work of the Committee during this
financial year. I would also like to thank all
the employees in Hibernia for their hard
work and commitment to ensuring that
the 2021 Annual Report and market
announcements have been produced to
a high standard and in a timely fashion
despite difficult operating circumstances.
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.
Terence O’Rourke
14 June 2021
Audit and non-audit fees (Group)
Total fees in 2021 amounted to €181k
(2020: €185k). Other assurance services
include the review of the interim report.
2020
Audit fee
Audit of
subsidiaries
Other assurance
services
21
%
66
22
12
20
%
63
27
10
2021
93
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Representatives of the Group:
Third-party Attendees
Audit Committee
The Committee is comprised of independent Non-Executive Directors with sufficient
financial and real estate experience and competence to fulfil their role.
Who else attends 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:
External auditor
Deloitte Ireland LLP
To present and discuss its:
−plans and results in respect of the
annual audit, interim and limited
assurance reviews;
−analysis of the risks identified within
the Group; and
−recommendations for improvements
in systems and controls.
The Committee holds private meetings
with the external and internal auditors
and Valuer, without management present,
to allow frank and open discussion.
All Directors are invited to attend meetings
with the external auditor and Independent
Valuer to discuss property valuations and
financial results.
Other external experts may be called
upon by the Committee as required, such
as the Group’s corporate solicitors, A&L
Goodbody, or tax advisers, KPMG.
Independent Valuer
Cushman & Wakefield
To:
−discuss its work and its significant
assumptions in relation to the
investment property valuations; and
−its view of Management’s decisions in
relation to valuations and the
appropriateness of its assumptions.
Internal Auditor
PwC Dublin
To:
−report and discuss its findings
and recommendations; and
−discuss future internal audit plans.
CEO
CFO
Company Secretary and
Risk & Compliance Officer
CIO
Members of the
Finance Team
Terence O’Rourke
INED & Chair
Colm Barrington
Senior INED
Roisin Brennan
INED
Stewart Harrington
INED
See pages 74 to 75 for Committee
member biographies
94
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
www.hiberniareit.com
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
Key activities of Audit Committee during 2020-21
Reporting and external audit
External
announcements
−Preliminary results.
−Annual Report and financial statements including support for the assertions made
by the Directors in the Directors’ responsibility statement.
−Sustainability Report.
−Interim results.
−Regular and ad-hoc trading announcements and updates.
Valuation
−Appropriate basis for the valuations of properties.
−Valuer rotation and tender process.
−Removal of material uncertainty clause and impact of COVID-19.
External audit
−Appointment and performance of external auditor.
−Independence, qualifications, expertise and remuneration of external auditor.
−Review of the audit plan.
−Review of external auditors’ findings; no misstatements or control deficiencies were reported.
Internal audit and internal controls
Internal controls
−Review of, inter alia, control systems including matters reserved to the Board, risk management framework,
management reporting and forecasting, organisational structure and various policies.
−No material internal control weaknesses were identified.
Internal audit
−Approving the three-year rolling audit plan for 2020-23.
−Reviewing the findings of two internal audits, tenant management and valuation process. A satisfactory
rating was obtained for both.
Depository
−Review the results of the due diligence reports completed by the Depository (BNP Paribas); no issues identified.
Accounting policy
amendments
−Where applicable review management’s response to and plans to implement any material amendments to
IFRS during the period.
−Review accounting for material financial statement items as part of the review of the financial statements.
−All relevant requirements of the Transparency Regulations and the ESEF Regulation.
Risk management
Risk framework,
metrics and appetite
−Review of risk framework and register.
−Implementation plans for TCFD reporting (see pages 44 to 45).
−Covenant compliance.
Assessing material
and emerging risks
−Identification of emerging and principal risks at each reporting date.
−Assessment of the impact and likelihood of the risks.
−Reporting of emerging and principal risks (see pages 48 to 53).
Share buyback
−Overseeing the share buyback programme.
Other
−Dividend policy.
−Capital management.
−Going concern and viability statements (see page 43).
−Compliance with REIT legislation.
−Compliance statement (see page 128).
−Committees’ terms of reference.
−Evaluation and performance (see pages 88 and 89).
95
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Key considerations 2020-21
Set targets for the annual bonus plan for
2021 and the 2020 LTIP grant.
Reviewed workforce remuneration and
related policies and approved the outcome
of the 2020 annual bonus and considered
whether the formulaic outcomes aligned
with Company performance and culture.
Reviewed and approved the 2020
Directors’ Remuneration Report.
Reviewed the Remuneration Policy for
proposal at the 2021 AGM, the approach for
pension alignment and post-employment
shareholding requirements.
Ongoing engagement with major
shareholders as part of the corporate
governance roadshow, including engaging
with our major shareholders and investor
representative bodies on the 2021
Remuneration Policy proposals.
Key considerations 2021-22
Review the outcome of the 2021 annual
bonus and whether formulaic outcomes
aligned with Company performance
and culture.
Oversee the implementation of the 2021
Remuneration Policy, including pension
alignment and the introduction of the
post-employment shareholding requirement.
Review and approve the 2021 Directors’
Remuneration Report.
Consideration of the Group’s ESG strategy
and alignment of our ESG commitments
with the performance measures used in our
incentive plans.
Continue to set targets for the annual
bonus plan and the LTIP.
Continue to review wider workforce
remuneration outcomes and policies.
Continue to engage with the workforce
using the framework developed by the
Designated Non-Executive Director for
Workforce Engagement.
Continue to engage with major
shareholders, as necessary.
Continue to monitor developments in
corporate governance and market practice.
Colm Barrington, Chair of the Remuneration Committee
Dear fellow shareholder,
On behalf of the Hibernia’s Remuneration
Committee (the “Committee”), I am
pleased to introduce the Directors’
Remuneration Report for the financial
year ended 31 March 2021. Our current
Remuneration Policy (“Policy”) received
strong support at the 2018 AGM with
a vote of 94%. Over the past two years
we have received strong shareholder
support for our Annual Report on
Remuneration, evidenced most recently
by a 99% vote in favour at the 2020
AGM. We are putting forward a revised
Policy at the forthcoming AGM which is
set out on pages 113 to 126. In this letter,
I am setting out details regarding the
Policy review process.
The impact of COVID-19
We summarise the COVID-19 impacts
and management on page 64.
The Group has remained fully operational
throughout the pandemic and we are
gratified with how our staff have adjusted
to, and dealt with, the challenges posed.
Our rent collection statistics are discussed
on page 63 and have remained robust.
While we expect that letting and
investment volumes will remain subdued
until workers are able to return to their
offices in meaningful numbers, Hibernia
continues to be well-positioned with
a strong tenant base, an extensive
development pipeline, low financial
leverage and a talented team.
Performance during the year
Hibernia delivered a resilient performance in
the financial year despite the extraordinary
circumstances resulting from the pandemic.
While a net loss was recorded due to
a decline in portfolio value, high rent
collection rates helped growth in our
EPRA earnings and dividends. Our KPI
results (see page 38) were:
−The Total Property Return (“TPR”)
of our portfolio was -0.2%, which is
+1.3pp relative to the performance of
our benchmark (the MSCI Ireland All
Assets Index excluding Hibernia) which
returned -1.5%.
−EPRA NTA per share: 172.7 cent,
-3.7% on 2019-20.
−EPRA EPS: 6.3 cent, +13.4% on 2019-20.
−Total Accounting Return (“TAR”)
of -0.9%.
−Dividend of 5.4 cent, +13.7% on 2019-20
ESG performance was helped by low
occupancy throughout the pandemic,
although all our buildings remained open.
We achieved a 26% reduction in
greenhouse gas intensity for 2020
compared to 2019, received an EPRA Gold
award for our sustainability reporting, our
first four-star GRESB rating and a B minus
rating in our response to the CDP Climate
Change questionnaire. Our 2021
Sustainability Report (available on
our website) discusses our performance
and future plans in more detail.
96
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
The role of the Committee is set out
in detail in the Committee’s terms of
reference: www.hiberniareit.com/about-
us/corporate-governance
Our aim is to ensure that the remuneration framework
supports the delivery of our challenging long-term
strategy and rewards all our employees fairly for
exceptional performance.
Committee members
Appointed
Independent
Meetings
attended
Colm Barrington (Chair)
Feb-16
5 of 5
Roisin Brennan
Jan-19
5 of 5
Stewart Harrington
Feb-16
5 of 5
Daniel Kitchen
Feb-16
5 of 5
Terence O’Rourke
Feb-16
5 of 5
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?
Page
Annual statement
96
Remuneration at a glance
100
Remuneration at Hibernia
101
Summary of our current Policy and its implementation in 2021-22
102
Additional context on Executive Director remuneration
104
Fairness, diversity, inclusion and wider workforce considerations
107
Annual report on remuneration
109
Proposed 2021 Directors’ Remuneration Policy
113
Who advises the Committee?
During the year, the Committee received
advice from PwC LLP. PwC was appointed
in 2017 following a selection process. PwC’s
fees were €44k (2019-20: €37k), which
were charged based on a time taken basis.
PwC is a member of the Remuneration
Consultants Group, and as such operates
pursuant to a code of conduct that requires
remuneration advice to be given objectively
and independently. A separate team within
PwC also provides internal audit services to
the Group. There are no connections
between PwC and individual Directors.
The Committee is satisfied that the advice
provided by PwC is objective and
independent. The Company Secretary acts
as secretary to the Committee and attends
Committee meetings
Remuneration voting outcomes in 2020
For
99%
Against
1%
97
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Our approach to remuneration
in 2020-21
Hibernia’s philosophy is to pay for
performance. The Committee’s decisions
have been made taking into account the
Group’s financial performance in what
has been a difficult environment.
Base salary and fees
There were no salary increases awarded
to the Executive Directors, nor any
increases to fees for the Chairman
and Non-Executive Directors. This was
in line with the approach taken for the
wider workforce.
Annual bonus outcome for 2020-21
The bonus was based on EPRA EPS,
Relative TPR, TAR and a number of
strategic and operational measures.
The Committee felt that the performance
of the business over the year was strong,
with the Executive Directors exceeding the
target levels for all financial measures and
achieving a number of their strategic and
operational objectives. As a result, we
determined that the CEO and CFO had
both earned bonuses of 75% of maximum.
Details of the financial performance targets
are set out on page 100 and details of the
CEO and CFO’s strategic and operational
objectives are set out on pages 110 to 111.
When reviewing the formulaic outcome
against the targets, the Committee was
mindful of the need to consider a wide
range of factors in light of the pandemic
so that outcomes represented performance
and the wider stakeholder experience.
These factors included:
−Hibernia has continued to make good
progress with its strategy. The Group has
continued to invest in acquisitions and
between August and November 2020
the €25m share buyback programme
was executed. The Group also made
progress in relation to the development
of its long-term sustainability strategy
with the launch of Hibernia’s Sustainability
Statement of Intent in April 2021.
−The pandemic did have a negative
impact on the Company’s share price at
the time of the first lockdown in March
2020 and then as a result of subsequent
national lockdowns. Our share price has
since partly recovered, though remaining
below the per share valuation of our
properties net of debt.
−Hibernia has continued to pay interim
and final dividends.
−The Group has not received any
support from the Government and
has not made use of the Government’s
wage subsidy scheme.
−There were no redundancies within
the Group and there have been no
reductions in employee salaries.
All employees will receive a bonus
for the financial year 2020-21.
−Employee feedback has been positive
throughout the year.
Taking all of the above into account,
together with the leadership shown by
the Executive Directors, the Committee
concluded that the formulaic outcome is
justified and so no discretion has been
applied. For the Executive Directors,
one-third of the annual bonus will be
deferred into an award of shares to be
held for three years, with the balance
paid in cash.
Long-Term Incentive Plan (“LTIP”) vesting
As the first LTIP was granted in July 2019
there was no LTIP vesting.
Wider workforce considerations
Hibernia is committed to creating an
inclusive working environment and to
rewarding all our employees in a fair and
market competitive way. In this regard we
cascade our incentive structure throughout
the Group, with all employees being eligible
for an annual bonus.
The Committee is kept up to date on
remuneration policies and decisions
across the Group and is made aware
of all significant changes. Decisions on
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
disclosed our median employee to CEO
pay ratio for the second year and this is
set out on page 109
The Committee reviewed the alignment
of Executive Directors and the Senior
Management Team with the wider
workforce pension contributions and
determined that by the end of 2022,
the levels across the entire workforce will
be 10%. As part of this, wider workforce
pension levels will be increased from 7%
to 10% of base salaries.
Renewal of the Policy
Given the support for the current
Remuneration Policy, and with a business
model that remains broadly unchanged, we
are proposing a continuation of the current
framework, with some changes to ensure
that the Policy supports developments to
Hibernia’s strategy and aligns with the UK
2018 Corporate Governance Code (the “UK
Code”). The proposed changes are as follows:
1. From 2022 onwards, we propose that
awards under the LTIP will include a
performance measure relating to our
ESG commitments as articulated in our
Sustainability Statement of Intent. We will
consider all elements of our ESG strategy
to ensure that the measure is fit-for-
purpose and appropriately reflects our
longer-term sustainability ambitions.
2. We are introducing a post-employment
shareholding requirement that is in line
with the UK Code, i.e. for two years after
their departure, Executive Directors will
be required to hold all of the lower of
their shareholding requirement (which
is 350% of base salary) or their actual
shareholding. The requirement will apply
to shares vesting under all share plan
awards granted following approval of
the Remuneration Policy at the 2021
AGM. Shares purchased by Executive
Directors will not be included, nor will
beneficially owned shares held prior
to the date the policy is approved.
98
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
3. We are aligning Executive Director and
Senior Management pensions and wider
workforce pensions by the end of 2022
by increasing the wider workforce
pension level from 7% to 10% of base
salary and decreasing the pension
for Executive Directors and Senior
Management from 15% to 10% of salary.
This is in line with the guidance issued
by shareholder advisory bodies.
All employees will be able to make
additional voluntary contributions of up
to 5% of salary, which will be matched
by the Group.
4. We are introducing corporate failure
as an additional malus and claw back
trigger in the Group’s incentive plans.
This will ensure all our triggers are fully
aligned with corporate governance
best practice.
Our strategy and its link to the
proposed Remuneration Policy
A core remuneration principle for
Hibernia is that our incentive framework
must be directly linked to achievement
of the Group’s strategy and enhancing
shareholder value while being flexible
to take account of changing business
priorities. We know that the future value
of our business is linked to how we lessen
our impact on the environment and
increase our social contribution.
In April 2021 we launched our Sustainability
Statement of Intent. Our commitments can
be summarised across three pillars:
−become a net zero carbon and climate
resilient business by 2030;
−provide spaces that prioritise the
environment, health and wellbeing; and
−create a long-term positive social impact
through our operations.
We already consider ESG in calculating
the Executive Directors’ annual bonus,
with specific objectives relating to the
environmental efficiency of our portfolio,
initiatives relating to our employees,
tenants and suppliers and wider
social and community initiatives,
and stakeholder engagement.
We will continue to strengthen how
bonuses for all employees align with
our ESG ambitions.
A key focus is to align our ESG commitments
with the performance measures used in
the LTIP. As communicated to some of our
shareholders during our Policy engagement
exercise, we are committed to ensuring the
use of ESG measures in our future LTIP
awards is fully aligned to our ESG strategy
and we will provide specific details in the
2022 Directors’ Remuneration Report.
The introduction of an ESG performance
measure within the LTIP, along with the
use of the current performance measures
(relative total shareholder return, relative
total property return and total accounting
return), will focus management both on
financial performance and on operating
the business in an environmentally and
socially responsible way.
Engagement with shareholders
on our Remuneration Policy
In May 2021, we wrote to our major
shareholders representing c.60% of our
issued share capital, as well as Glass Lewis
and ISS, to inform them of the outcome
of the Policy review and understand their
views. We also discussed the Policy review
with some of our largest shareholders
during our corporate governance
roadshow in March 2021. The feedback
from shareholders has been positive
and as a result, no changes were made
to the original Policy proposals.
Implementation of the Remuneration
Policy for 2021-22
Base salary and fees
There will be no increases to salaries for
Executive Directors, nor will there be any
increase to fees for the Chairman and
Non-Executive Directors. This is in line with
the approach taken for the wider workforce.
We will continue to keep salaries and
Non-Executive Director fees under review.
Pension
Company contributions to Executive
Director pensions will reduce from 15% of
salary to 10% of salary by the end of 2022.
Annual bonus
The annual bonus opportunity for
Executive Directors will be 150% of
salary. The performance measures and
weightings will be unchanged. The strategic
and operational targets for 2021-22 will
have a greater focus on ESG matters,
taking into account the commitments
made in our Sustainability Statement
of Intent.
LTIP award
The Committee has determined to make
the grant on the normal timetable and
the performance measures remain
unchanged. From 2022, we will align
our ESG commitments with the
performance measures used in the LTIP.
Further information will be provided in
the 2022 Directors’ Remuneration Report.
In conclusion
The past year has been challenging.
Our Executive Directors, Senior Management
and colleagues have worked diligently to
ensure that the business remains strong and
that tenants and suppliers have remained
safe. The Committee will continue to ensure
that our remuneration arrangements support
the delivery of our strategy, reward
employees fairly for exceptional performance
and help the achievement of increased
shareholder value.
I am grateful for the time and input
shareholders have given in relation to the
Remuneration Policy review process. If you
would like to discuss any aspect of this
report, I would be happy to hear from you.
You can contact me through the Company
Secretary, Sean O’Dwyer.
Colm Barrington
Chair of the Remuneration Committee
14 June 2021
99
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Remuneration at a glance
Remuneration in the Group
Total spend on pay
€7.3m
CEO pay ratio to the
median employee
8:1
General increase for all
employees
0%
Eligible employees
receiving a bonus
100%
Total single figure remuneration for 2020-21
Director
Salary
€’000
Benefits
€’000
Pension
€’000
Bonus
paid in cash
€’000
Bonus
deferred
in shares
€’000
LTIPs
vested
€’000
Total
single figure
remuneration
€’000
CEO, Kevin Nowlan
450
33
68
336
168
–
1,055
CFO, Thomas Edwards-Moss
340
32
51
254
127
–
804
Annual bonus outcomes for 2020-21
For 2021, the CEO and the CFO both had a maximum bonus opportunity of 150% of salary. The overall outcome was 75% of
maximum for both the CEO and the CFO, respectively. Of this, 54% relates to the achievement of financial objectives and 21%
relates to the achievement of strategic and operational objectives. This gave rise to a bonus equal to 112% of salary for both the CEO
and the CFO. Financial targets for the bonus and actual performance is set out below. Details of strategic and operational objectives
are set out on pages 110 to 111.
Bonus measure
Weighting
Threshold
(20% payout)
Target
(50% payout)
Maximum
(100% payout)
Actual
Outcome %
maximum
CEO
€000
CFO
€000
Relative Total Property Return
(“TPR”)1
40%
Index
Index +1%
Index +2%
-0.2% vs
MSCI Ireland
annual return
of -1.5%
65%
€176
€133
Growth in EPRA Earnings per
share (“EPS”)
17.5%
5.6c
(2% growth)
5.9c
(7.1% growth)
6.2c
(12% growth)
6.16c
93%
€110
€83
Total Accounting Return per
share (“TAR”)
17.5%
156.50c
172.20c
184.05c
175.48c
64%
€76
€57
Strategic and operational
objectives
25%
See pages 110 to 111 for details of
objectives and outcomes
–
85% (CEO)
85% (CFO)
€142
€108
Total
€504
€381
LTIP award vesting for 2020-21
Not applicable as the first LTIP grants were awarded in July 2019.
LTIP award granted in July 2020
In July 2020, the second LTIP award was granted. Awards are subject to relative TSR, relative TPR and TAR per share (all equally
weighted). See page 103 for details of performance targets.
Director
Basis of award
Date of grant
Number of
shares granted
Face value
per share1
Total face
value of award
CEO, Kevin Nowlan
200% of salary
29 July 2020
807,899
€1.114
€900,000
CFO, Thomas Edwards-Moss
200% of salary
29 July 2020
610,412
€1.114
€680,000
1. This represents the share price on the day prior to grant date, i.e. 28 July 2020.
Shareholding of the Executive Directors
Director
Shareholding
requirement
Shares counting towards
shareholding
requirement1
Unvested shares subject to
performance conditions2
CEO, Kevin Nowlan
350%
1,982%
342%
CFO, Thomas-Edwards Moss
350%
183%
342%
1. Represents beneficially owned shares and annual bonus deferred share awards (of which 52% is deducted to cover statutory deductions).
2. Represents the 2019 and 2020 LTIP awards which are subject to ongoing performance conditions.
100
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Remuneration at Hibernia
Remuneration principles that we apply across Hibernia
Hibernia’s remuneration framework 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
Long-term
shareholder
alignment
Pay-for-performance
Market
competitiveness
Flexibility
Remuneration should
be simple and
transparent in terms
of design and
communication to
internal and external
shareholders
Remuneration
outcomes should
mirror the stakeholder
experience over the
long term
Remuneration
outcomes should be
clearly linked to the
delivery of superior
corporate results
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
Remuneration should
be able to support
potential changes in
business priorities
over time
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 selected support the business focus on income growth, asset improvement, portfolio management, delivery of
developments and capital discipline in a way that is aligned to the Group’s sustainability strategy. In addition, the combination of absolute and
relative measures focuses Executive Directors and the Senior Management Team on 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:
2021-22 strategic priorities
1
2
3
4
5
Maintain a balanced
portfolio with clusters of
assets
Grow recurring income over
time
Operate and develop our
buildings responsibly
Maintain a strong, flexible
funding structure
Attract, motivate, develop
and retain a talented team
Our KPIs
EPRA earnings per share
(“EPRA EPS”)
Total Accounting Return
(“TAR”)
Total Property Return
(“TPR”)
Total Shareholder Return
(“TSR”)
How our incentive plan performance measures link to our strategy
CHART TO
BE DONE
2020-21 Annual bonus
Measures
Link to strategy
Link to KPIs
EPRA EPS
1 2 3 4 5
TAR
1 2 3 4 5
Relative TPR
1 2 3 4 5
Strategic/
operational
1 2 3 4 5
2020-21 Long-term incentive plan
Measures
Link to strategy
Link to KPIs
TAR
1 2 3 4 5
Relative TPR
1 2 3 4 5
Relative TSR
1 2 3 4 5
Shareholding
guidelines
Alignment to shareholder interests
101
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Summary of our current Policy and its implementation in 2021-22
The Policy for Executive Directors supports Hibernia’s KPIs, which are set out on page 38. 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 proposed 2021 Policy aligns with the UK Code and, in particular, the
requirements under Provision 40 of the Code can be found on page 114. The table below summarises key aspects of the current Policy
and its implementation and sets out key changes between the current and proposed Policy. The current Policy itself is published on our
website at www.hiberniareit.com. The full details of the proposed 2021 Policy can be found on pages 113 to 126.
How is Executive Director pay structured?
The Company’s Policy aims to focus the workforce on the delivery of business priorities within a framework designed to promote the
long-term success of Hibernia and aligned with shareholders’ interests. The graphic below illustrates the balance of pay and time period
of each element of the Policy for Executive Directors. The tables below and on pages 103 to 104 set out key changes between the current
and proposed Policy.
Remuneration elements
Year 1
Year 2
Year 3
Year 4
Year 5
Base salary
Paid in the year
Pension and benefits
Paid in the year
Annual bonus
2/3rd in cash
1/3rd deferred in shares
LTIP
Three-year performance period
Two-year post-vesting holding period
Shareholding requirement
Share ownership to be built and maintained over five years
Key features of the
current Policy
Implementation for financial
year 2021-22
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.
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; and
• salaries paid in relevant comparator group.
Maximum salary levels are in line with companies
of a similar size to Hibernia and 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; or
• has a material increase in scope or responsibility.
There were no salary increases awarded to
the Executive Directors. This is in line with
the approach taken for the wider workforce.
Salaries for 2021-22 will be:
Kevin Nowlan (CEO): €450,000 p.a.
Thomas Edwards-Moss (CFO): €340,000 p.a.
Proposed changes from current Policy: No change.
Pension
Provides a basis for post-
retirement remuneration
in line with comparable
remuneration packages.
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.
Executive Directors and Senior Management
currently receive a 15% of salary pension
contribution. In line with the Policy proposed
for approval at this year’s AGM, pension
contributions will reduce to 10% by the end
of the calendar year 2022.
Proposed changes from current Policy: Changes are proposed to align with the UK Code requirement. For incumbent Executive
Directors, pensions will be 10% by the end of 2022 and this will be in line with the wider workforce level. Alignment will be achieved by
increasing the wider workforce level from 7% to 10% and decreasing the levels for incumbent Executive Directors and Senior
Management from 15% to 10%. Executive Directors and employees will also be able to make additional voluntary contributions which will
be matched by the Group up to a maximum of 5% of base salary.
102
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Key features of the
current Policy
Implementation for financial
year 2021-22
Benefits
Provides market competitive
benefits package.
Benefits may include car allowance, death in service
and long-term disability schemes, and other
benefits as needed to attract and retain Directors.
Each Executive Director receives car allowance,
death in service, long-term disability schemes,
and other benefits where necessary.
Proposed changes from current Policy: No change.
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.
Awards are granted annually with performance
measured over one financial year.
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.
The maximum bonus opportunity will remain
150% of salary for both Executive Directors.
Pay-out ranges are: 20% of maximum 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.
The performance conditions and their
weightings for the 2021-22 bonus are:
Condition
Weighting
Relative TPR1
40%
EPRA EPS
17.5%
TAR per share
17.5%
Strategic and operational objectives
25%
1. Compared to the MSCI Ireland Index.
Proposed changes from current Policy: Corporate failure is being added as a trigger for malus and clawback in the incentive plans.
LTIP
To incentivise the achievement
of long-term sustainable
shareholder return through
the delivery of key financial
performance indicators.
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.
The maximum LTIP opportunity will remain
200% of salary for both Executive Directors.
Pay-out ranges are: 20% vesting at threshold
to 100% at maximum level.
The performance conditions and their
weightings for the 2021 LTIP award are:
Condition
Weighting
Threshold
Maximum
Relative TPR1
33.3%
Equal to
Index
Index
1.5% p.a.
Relative TSR2
33.3%
Median
Upper
quartile
TAR per share3
33.3%
To be disclosed at grant
1. Compared to the MSCI Ireland Index.
2. Compared to constituents of the EPRA/NAREIT
Developed Europe Index.
3. TAR targets will be set once consensus forecasts
are available.
Proposed changes from current Policy: The performance measures have been updated to reflect that in the future performance
measures may be included relating to the Group’s ESG strategy and corporate failure has been included as a trigger for malus and
clawback in the incentive plans.
103
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Summary of our current Policy and its implementation in 2021-22 continued
Key features of the
current Policy
Implementation for financial
year 2021-22
Shareholding requirement
To ensure Executive Directors’
interests are aligned with
shareholders over the long term.
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.
The minimum shareholding requirement is
350% of salary for both Executive Directors.
A post-employment shareholding requirement
(“PESR”) will be introduced. The PESR will
apply for two years after the departure of
Executive Directors and they will be required
to hold all of the lower of their shareholding
requirement (which is 350% of base salary)
or their actual shareholding. The requirement
will apply to shares vesting under all share
plan awards granted following approval of
the Policy at the 2021 AGM. Shares purchased
by Executive Directors will not be included,
nor will beneficially owned shares held prior
to the date the Policy is approved.
Proposed changes from current Policy: Introduction of a PESR to align with the UK Code.
Non-Executive Directors’ fees
To attract and retain NEDs
of the highest calibre with
experience relevant to
the Group.
Non-Executive Directors are paid an annual fee and
additional fees for the chairing of Committees and
the role of Senior Independent Director (“SID”).
The Company retains the flexibility to pay fees for
the membership of Committees and for other
Board duties.
There were no increases awarded in relation
to the fees for the Chair and Non-Executive
Directors. Fees for 2021-22 will be as follows:
Chair: €150,000
NED base fee: €60,000
SID fee: €15,000
Committee Chair fee: €10,000 (excludes
Nominations Committee Chair)
Proposed changes from current Policy: Clarification that the Group retains the flexibility to pay fees for other Board duties.
Additional context on Executive Directors’ remuneration
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:
Top
quartile
Second
quartile
Third
quartile
Bottom
quartile
REIT Group
REIT Group
Irish Listed Group
Irish Listed Group
Hibernia’s base salary positioning
CEO, Kevin Nowlan
CFO, Thomas Edwards-Moss
Hibernia’s total remuneration positioning
104
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
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
The CFO’s remuneration is positioned significantly higher than the Irish comparators, but the Committee’s view is that the REIT
comparators should be the primary comparison group for this role.
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.
1. REIT group
2. Irish listed group
Assura
Cairn Homes
Big Yellow Group
Dalata Hotel Group
Capital & Counties Properties
First Derivatives
CLS Holdings
Glanbia
Empiric Student Property
Glenveagh Properties
Grainger
Greencoat Renewables
Great Portland Estates
Irish Continental Group
Harworth Group
Irish Residential Properties REIT
Helical REIT
Kenmare Resources
LondonMetric Property
Kerry Group
Picton Property Inc.
Kingspan Group
Safestore Holdings
Malin Corporation
Shaftesbury
Mincon Group
St Modwen Properties
Origin Enterprises
Workspace Group
Ryanair Holdings
Smurfit Kappa Group
Total Produce
Uniphar
Yew Grove REIT
105
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Summary of our current Policy and its implementation in 2021-22 continued
What is the 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 to
achieve this requirement. 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. The Executive
Directors are expected to retain all shares received through the vesting of any incentive schemes (after the settlement of any tax liability)
until the shareholding requirements are met.
Using the Company’s closing share price of €1.104 on 31 March 2021, compliance with these requirements as at 31 March 2021 is illustrated in
the graph below. The CEO has met his shareholding requirement and the CFO continues to build his shareholding towards the requirement.
0
500
1,000
1,500
2,000
2,500
350%
350%
2,324%
1,982%
183%
525%
Shareholding requirement
Shares counting towards shareholding requirement1
Unvested shares subject to performance conditions2
Kevin Nowlan
(CEO)
Thomas Edwards-Moss
(CFO)
1. Represents beneficially owned shares as well as annual bonus deferred share awards (of which 52% is deducted to cover statutory deductions).
2. Represents the 2019 and 2020 LTIP awards which are subject to ongoing performance.
Overall link to remuneration, equity and wealth of the Executive Directors
It is the Committee’s view that when considering the remuneration paid in the year under the single figure, it is important 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 which 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
2021 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
€’0001
Value of shares
at end of year
€’0002
Difference
€’000
CEO, Kevin Nowlan
1,055
7,902
7,902
8,392
8,724
332
CFO, Thomas Edwards-Moss
804
256
384
272
424
152
1. Based on a closing share price on 31 March 2020 of €1.062.
2. Based on a closing share price on 31 March 2021 of €1.104.
Other pay comparisons used by the Committee
Total Shareholder Return
The chart below shows the Company’s TSR since the Internalisation of the Investment Manager on 5 November 2015. The Committee
believes European industry benchmarks represent the most relevant benchmark for comparison.
05/11/2015
31/03/2016
30/09/2016
31/03/2017
31/03/2018
30/09/2018
30/09/2017
30/09/2019
31/03/2020
31/03/2019
30/09/2020
TSR rebased to 100 at 05/11/2015
Hibernia
FTSE EPRA/NAREIT Developed Europe
31/03/2021
0
20
40
60
80
100
120
140
160
106
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
CEO remuneration table
The table below indicates the total single figure remuneration for the CEO since 2016 together with the annual bonus payout and LTIP
vesting level as a percentage of the maximum opportunity.
CEO
2016
2017
2018
2019
2020
2021
CEO Single figure total remuneration (€’000)1
125
364
367
731
1,081
1,055
Annual bonus payout (% of maximum)2
–
–
–
28%
80%
75%
LTIP vesting (% of maximum)3
–
–
–
–
–
–
1. The 2016 figure is a part-year figure representing payments from the date of internalisation (5 November 2015) to 31 March 2016.
2. For the period up to 26 November 2018, the CEO, Kevin Nowlan, did not receive any variable remuneration as he was compensated under the
Internalisation agreement as he was one of the Vendors of the Investment Manager. For the period from 27 November 2018 to 31 March 2019
and thereafter, Kevin Nowlan participated in the annual bonus plan.
3. There has been no LTIP vesting yet as the first award under the LTIP was granted in 2019.
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 show year-on-year change. The two elements represent some of the most significant outgoings for the Company
during the financial year.
Staff costs (€m)
Dividends1 (€m)
0
1
2
3
4
5
6
7
8 +7.3% on 2019-20
0
5
10
15
20
25
30
35
40 +9.8% on 2019-20
5.3
6.8
7.3
2020
2019
2021
24.3
32.5
35.7
2020
2019
2021
1. 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, inclusion 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 Group with specific
regard for Directors and the Senior Management Team.
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, policies and incentives, which enables it to ensure
that the approach to Executive Director 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’s view is that the current process and the information that it receives 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); and
• Benefits.
107
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Summary of our current Policy and its implementation in 2021-22 continued
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 Team and Hibernia’s wider workforce.
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’s principles of remuneration. Further, in the Committee’s opinion the approach to Executive
Director remuneration aligns with the wider Group pay policy and there are no anomalies specific to the Executive Directors. The section
below, titled ‘Competitive pay and cascade of incentives’, provides a summary of the information reviewed by the Committee.
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
No. of employees
Remuneration element
Details
All employees
28
Base salary
Base salary is set with reference to the market and wider workforce considerations.
Where salary increases are awarded, all employees will typically receive the same
level of increase.
Benefits and pension
A range of benefits is provided to all our employees.
All employees have the opportunity to participate in a health insurance scheme
and are entitled to participate in the pension scheme.
A set out in the Chairman’s letter on page 99, as part of the Policy review process,
the Committee reviewed the alignment of Executive Director and wider workforce
pension contributions and determined that by the end of 2022, the levels across
the workforce will be 10%. This will be achieved by increasing wider workforce
level to 10% and decreasing the levels for incumbent Executive Directors to 10%.
Executive Directors and employees will also be able to make additional voluntary
contributions which will be matched by the Group up to a maximum of 5% of
base salary.
Annual bonus
All employees participate in the bonus plan.
Bonus opportunity varies from 60% of salary to 150% of salary across the Group.
Employees are set personal objectives and Group performance targets.
The balance between personal and Group performance targets is set depending
on the employee’s ability to influence outcomes.
Executive Directors and
Senior Management Team
7
LTIP
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 salary to 200% of salary across the Group.
Measures and targets are consistent for all participants.
Workforce engagement
Whilst not specifically consulted on Executive Director remuneration, there are a number of channels of communication available through
which employee views on pay may be gathered. In addition, details regarding our Group-wide pay principles and policies, including details
regarding the pay policy for Executive Directors (as set out in this report), are communicated to our employees.
Channels of communication with the workforce
Overview of pay and policy decisions
Regular team meetings and one-to-ones
Designated Non-Executive Director for
Workforce Engagement
The Committee is updated on employee
remuneration levels across the Group and
made aware of significant changes to
policies and other pay-related matters.
We have 33 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.
A Non-Executive Director (Margaret
Fleming) was appointed in 2020 to this
role to engage with employees and report
back to the Board (see page 37 for details
of her work during 2020-21).
108
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Margaret Fleming was appointed
to the role of Designated Non-Executive
Director for Workforce Engagement in
February 2020 in response to changes
introduced in the UK Code. Her role is
to engage with employees on a wide variety
of matters. Despite the pandemic, Margaret
implemented this role and she discusses the
progress achieved made on page 37 in our
stakeholder engagement section.
Diversity, inclusion 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 Best Practices
Recommendations, we publish gender
diversity and pay ratios in our Sustainability
Report which can be found on our website
at www.hiberniareit.com/sustainability.
Other culture, values and
working environment
We have an inclusive and open working
environment. Hibernia’s culture is based on
four core principles:
• Transparency, honesty and fairness;
• Hard-working and flexible;
• Collaborative and inclusive; and
• Taking a long-term perspective but
being pragmatic.
Hibernia’s culture is underpinned by the
following values: passion and creativity;
sustainability; hunger and curiosity;
safety; and integrity and openness.
Further information on our culture and
values is set out on page 80. There are
a number of policies which we have in
place to support our culture and values
and further information on these policies
is set out on page 81.
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 latest Supplier Code of Conduct,
revised in 2021 and which can be found on
our website, 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
34 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
Option
used
50th percentile
ratio (median)
31 March 2021
A
8:1
31 March 2020
A
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 2021.
• 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 2021, adjusted
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 2021 employee bonuses had not
been finalised and communicated at the
time of preparing this calculation.
• Benefits for employees 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 €132,310.
• 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 may vest in 2022
(subject to performance outcomes) and
therefore, the 2021 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 Executive Committee
compared to the CEO)is much more
stable over time.
Annual report on
remuneration for the financial
year ended 31 March 2021
The 2021 annual report on remuneration
contains details of how the Company’s Policy
for Directors was implemented during the
financial year ended 31 March 2021. As an
Irish-incorporated company, Hibernia is not
subject to the UK Directors’ Remuneration
Reporting Regulations though it is subject
to the European Union Shareholder Rights
Directive II as implemented under Irish
law. Following the implementation of the
Shareholder Rights Directive into Irish law
we reviewed our remuneration reporting
to ensure compliance. An advisory ordinary
resolution to approve this report and the
Annual Statement will be put to shareholders
at the AGM.
109
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Annual report on remuneration for the financial year ended 31 March 2021 continued
Single total figure of remuneration for Executive Directors (audited)
Director
Financial
year ended
31 March
Base
salary
€’000
Taxable
benefits
€’000
Pension
€’000
Annual
bonus
€’000
Other
€’000
Total
€’000
Total
fixed pay
%
Total
variable
pay
%
Kevin Nowlan, CEO
2021
450
33
68
504
–
1,055
52%
48%
2020
450
23
68
540
–
1,081
50%
50%
Thomas Edwards-Moss, CFO
2021
340
32
51
381
–
804
53%
47%
2020¹
337
34
51
408
–
830
51%
49%
1. The base salary for the CFO, Thomas Edwards-Moss, for 2020 was lower than his contracted salary due to unpaid leave during the year. On an
annualised basis it is €340,000.
Bonus outcomes for 2021 (audited)
For 2021, the CEO and the CFO both had a maximum bonus opportunity of 150% of salary. The overall outcome was 75% of maximum for
both the CEO and the CFO, respectively. Of this, 54% relates to the achievement of financial objectives and 21% relates to the achievement
of strategic and operational objectives. This gave rise to a bonus equal to 112% of salary for both the CEO and the CFO. One-third of the
Executive Directors’ bonus is deferred into shares for three years. The tables table on page 100 provides full information on the financial
performance conditions and targets, their level of satisfaction and the corresponding bonus earned.
The Executive Directors’ strategic and operational objectives reflect the priorities for the business during 2021. 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
Key achievements
Committee determination
Grow rental income and, where possible,
WAULTs to drive dividends per share.
Net rental income increased by 8% to €63.3m with dividends
increased by 13.7% to 5.4c. In-place office WAULT decreased
by 9% to 5.8 years.
Substantially met.
Complete 2 Cumberland Place and work to
optimise development pipeline to maximise
risk-adjusted returns for shareholders (e.g.
optimising clusters, progressing re-zonings).
The COVID-19 pandemic delayed completion of 2 Cumberland
Place. Full planning permissions in place for Clanwilliam and
Harcourt Square and will increase clustering to 65% of office assets.
The completion of 2
Cumberland Place was
progressed to the fullest
extent possible under
COVID-19 restrictions. Other
objectives were fully met.
Continue to recycle capital and make selective
investments to enhance Group returns.
Capital invested into bolt-on acquisitions (€11m) and
capital expenditure (€17m). Second, accretive €25m share
buyback completed.
Fully met.
No material breaches of corporate governance,
regulatory, tax and banking requirements.
Full compliance with all requirements and no material breaches.
Fully met.
Leadership and management.
The Senior Management Team has continued to perform
well during the year with good engagement from all members.
Ger Doherty appointed as Director of Development following
retirement of Mark Pollard. Our annual staff survey demonstrated
that staff morale is very good. Very positive staff feedback on
dealing with pandemic consequences. Other ESG objectives
(tenant survey, community/charity/employee and supplier
initiatives, stakeholder engagement).
Fully met.
Continue the development of Hibernia’s
sustainability strategy. Continue to improve
the environmental efficiency of the portfolio.
Public commitment to become a net zero carbon business by 2030
and align with TCFD recommendations by 2022. Sustainability
Statement of Intent issued in April 2021.
Real-time energy consumption monitoring system installed and
operating in our managed in-place offices and four-star GRESB
rating received. The pandemic reduced the opportunities
for social and charitable initiatives.
Good progress continues
to be made in these areas
and positive feedback was
received from shareholders.
110
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
CFO, Thomas Edwards-Moss
Objectives
Key achievements
Committee determination
Deliver best in class reporting in terms
of financial and sustainability reporting
to stakeholders.
EPRA Gold awards received for Financial and
Sustainability reporting.
Achieved four star GRESB rating for the first time and a B- rating
in our inaugural CDP submission.
Met, with further progress
expected.
Rigorous control of costs and proactive rent and
service charge collection.
Administrative expenses reduced by 1.4% over FY20. 99% of rent
due in FY21 either collected or on agreed payment terms and a
similar start to FY22.
Fully met.
Effective capital management through balance
sheet efficiency, capital availability and
maintaining diverse sources of funding.
Maintained strong balance sheet with LTV of 19.5% at March 2021.
In April 2021 agreed to issue €125m of new 10- and 12- year USPP
notes at below the existing cost of debt, further diversifying
sources of funding and increasing available capital.
Fully met.
Help reduce share price discount to NAV.
Investor targeting.
Some progress made in reducing discount to NAV in the
financial year. Executed accretive €25m share buyback
programme. Some progress made with converting key investor
targets to become shareholders.
Met, with further progress
expected.
No material breaches of corporate governance,
regulatory, tax and banking requirements.
Full compliance with all requirements and no material breaches.
Engaged with Department of Finance regarding the tax changes
made in Budget 2020.
Fully met.
Leadership and management of the
Finance Team.
The Finance Team has continued to develop and is working well
with other teams. There was no turnover in the Finance Team.
Positive feedback from our annual staff survey.
Good progress continues
to be made.
Continue the development of Hibernia’s
sustainability strategy. Continue to improve
the environmental efficiency of the portfolio.
Other ESG objectives (tenant survey,
community/charity/employee and supplier
initiatives, stakeholder engagement).
Sustainability Statement of Intent launched in April 2021.
Further reductions in energy consumption / GHG emissions
achieved in the financial year. Sustainability awards/ratings as
mentioned above.
Good progress continues to
be made in these areas and
positive feedback was
received from shareholders.
LTIP (audited)
No LTIP awards vested during the financial year. The following LTIP awards are outstanding:
Director
Basis of
award
Date of
grant
Number of
conditional shares
Face value
per share1
Face value
of LTIP
CEO, Kevin Nowlan
200% of salary
31 July 2019
585,176
€1.538
€900,000
200% of salary
29 July 2020
807,899
€1.114
€900,000
CFO, Thomas Edwards-Moss
200% of salary
31 July 2019
442,133
€1.538
€680,000
200% of salary
29 July 2020
610,412
€1.114
€680,000
1. This represents the share price on the day prior to grant date.
The performance conditions for the LTIP awards granted to the Executive Directors on 29 July 2020 are set out below. Performance will
be measured over a three-year period up from 1 April 2020 to 31 March 2023.
Performance measure
Weighting
(as % of maximum
opportunity)
Threshold vesting
(20%)1
Maximum vesting
(100%)1
Relative TSR
Assessment of TSR will be against companies in the EPRA/NAREIT2 Developed Europe Index
33.3%
Median
Upper quartile
Relative TPR
TPR will be compared to the MSCI Ireland Index excluding Hibernia
33.3%
Equal to index
Equal to index +
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%
151.0c
184.05c
1. Straight-line interpolation between threshold and maximum.
2. NAREIT: National Association of Real Estate Investment Trusts.
Deferred shares under the annual bonus plan (awards granted during the year subject to a three-year service condition) (audited)
Director
Relating to
financial year
Date of
grant
Number of
conditional
shares
Face value
per share1
Face value
of deferred
shares
CEO, Kevin Nowlan
2020
10 June 2020
169,492
€1.066
€180,678
CFO, Thomas Edwards-Moss
2020
10 June 2020
128,060
€1.066
€136,512
1. This represents the share price on the day prior to grant date, i.e. 9 June 2020.
111
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Annual report on remuneration for the financial year ended 31 March 2021 continued
Single figure remuneration table for Non-Executive Directors (audited)
The remuneration of Non-Executive Directors with comparative figures for the prior year is shown below. No payments other than fees
were made.
Director
Basis
Total fees 2021
€’000
Total fees 2020
€’000
Daniel Kitchen
Chair of the Board
150
150
Colm Barrington
Non-Executive Director, Senior Independent Director and Remuneration Committee Chair
85
85
Roisín Brennan
Non-Executive Director
60
60
Margaret Fleming
Non-Executive Director
60
12
Stewart Harrington
Non-Executive Director and Investment Committee Chair
70
70
Grainne Hollywood
Non-Executive Director and Development Committee Chair
70
28
Terence O’Rourke
Non-Executive Director and Audit Committee Chair
70
70
Frank Kenny1
Non-Executive Director
20
60
1. Frank Kenny retired from the Board on 29 July 2020.
Annual change in pay for Directors and employees
The table below sets out the annual change in Director’s remuneration from the previous year compared to the average annual change in
remuneration for all other employees. The notes beneath this table describe how we have calculated the year-on-year change.
Total
remuneration
2021
€’000
Total
remuneration
2020
€’000
Year on year
change (%)
Executive Directors
CEO, Kevin Nowlan
1,055
1,081
-2%
CFO, Thomas Edwards-Moss
804
830
-3%
Non-Executive Directors
Chair, Daniel Kitchen
150
150
–
Senior Independent Director, Colm Barrington
85
85
–
Roisin Brennan
60
60
–
Margaret Fleming1
60
12
+80%
Steward Harrington
70
70
–
Grainne Hollywood2
70
28
+53%
Frank Kenny3
20
60
-200%
Terence O’Rourke
70
70
–
Wider workforce
Employees4
192
183
+4.7%
TSR performance5
+8.6%
1. Margaret Fleming joined the Board on 20 January 2020.
2 Grainne Hollywood joined the Board on 5 November 2019.
3. Frank Kenny retired from the Board on 29 July 2020.
4. Based on average total remuneration for individuals employed by Hibernia REIT plc only. Estimated bonuses have been used for employees in 2021
based on the 2020 bonus as at the time of preparing this calculation, 2021 outcomes for employees below Executive Directors had not been finalised
and communicated.
5. TSR performance for the period 31 March 2020 to 31 March 2021.
112
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Statement of Directors’ shareholdings
Directors’ share interests are set out below:
Director
31 March 2021
beneficially
owned1
Total interests
subject to
performance
conditions2
Total interests
not subject to
performance
conditions3
% of share
capital
(2021)4
% of share
capital
(2020)
1 April 2020
beneficially
owned5
Kevin Nowlan (CEO)
7,902,227
668,676
177,332
1.32
1.20
7,902,227
Thomas Edwards-Moss (CFO)
383,599
505,222
180,367
0.16
0.09
255,933
Daniel Kitchen
100,371
n/a
n/a
0.02
0.01
100,371
Colm Barrington
1,100,000
n/a
n/a
0.17
0.16
1,100,000
Roisin Brennan
63,777
n/a
n/a
0.01
0.01
63,777
Margaret Fleming
80,000
n/a
n/a
0.01
–
–
Stewart Harrington
226,759
n/a
n/a
0.03
0.03
219,571
Grainne Hollywood
–
n/a
n/a
–
–
–
Frank Kenny6
8,029,773
n/a
n/a
1.21
1.17
8,029,773
Terence O’Rourke
165,886
n/a
n/a
0.03
0.02
160,628
Sean O’Dwyer (Company Secretary)
222,810
163,825
73,988
0.07
0.05
191,874
1. Beneficial interests include shares held directly or indirectly by connected persons at 31 March 2021 or at date of retirement, if earlier.
2. Include grants under the LTIP made in July 2019 and July 2020 in the form of conditional shares. 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 condition.
The interests included are deferred shares under the 2019 annual bonus, the 2020 annual bonus and the 2021 bonus.
4. Percentage 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 at 31 March 2021 or at date of retirement.
5. Or date of appointment if later.
6. Frank Kenny retired from the Board on 29 July 2020.
7. There are no share options held by Directors.
On 22 April 2021 45,414 shares were issued to Thomas Edwards-Moss pursuant to the settlement of performance related remuneration
in respect of the financial year ended 31 March 2019. Other than this there were no movements in Directors’ shareholdings between
31 March 2021 and the date of this report.
Additional disclosures
Payments to past Directors (audited)
None.
Payments for loss of office (audited)
None.
Statement of implementation of Policy for the year ended 31 March 2021
See pages 101 to 102
External appointments for Executive Directors
Kevin Nowlan is Chair of ULI Ireland.
Other than this, there are none.
Derogations and deviations from the Policy
None.
Statement of shareholder voting
2020 Annual Report on Remuneration
2018 Directors’ Remuneration Policy
Votes cast
(%)
Votes cast
(%)
For
464,560,923
99.05%
515,896,303
94.10%
Against
4,436,067
0.95%
32,356,441
5.90%
Withheld
–
–
4,100
–
Proposed 2021 Directors’ Remuneration Policy
Overview of the Policy
Under the Shareholders’ Rights Directive, which was transposed into Irish Law in March 2020, Hibernia is not obliged to submit its Policy
to shareholders for a non-binding advisory vote until the 2022 Annual General Meeting. However consistent with the Group’s commitment
to comply with corporate governance best practice and our existing three-year cycle, a new Policy will be brought to shareholders at the
2021 AGM. This section outlines the Directors’ Remuneration Policy which will be put to a non-binding advisory vote at the AGM to be
held on 27 July 2021 and will take effect from the date of the meeting.
The Policy has been reviewed by the Committee against the overarching remuneration principles of the Group (including Provision 40
of the UK Code) and has taken into account market best practice. The Committee has considered the views of a variety of stakeholders
including shareholders and external bodies and considered the pay and conditions of employees in developing the Policy.
The Committee has established the Policy on the remuneration of the Executive Directors and the Chair. The Board has established
the Policy on the remuneration of the other Non-Executive Directors; in order to mitigate against any conflicts of interests, no Director
is present when their own remuneration is discussed.
113
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Proposed 2021 Directors’ Remuneration Policy continued
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
Market
competitiveness
The remuneration
opportunity provided
should be fair and
competitive against
companies of a similar
size, scope and
complexity with a
strong emphasis on
variable elements
Flexibility
Remuneration should
be able to support
potential changes in
business priorities
over time
Provision 40 of the UK Code
The table below sets out how the proposed Policy addresses factors in Provision 40 of the UK Code, the objective of which is to ensure
the remuneration operated by the Group is aligned to all stakeholder interests including those of shareholders.
Factor
How our Remuneration Policy aligns
Clarity
Hibernia’s performance-related remuneration is based on supporting the implementation of the Group’s strategy measured
through KPIs which are used for the annual bonus and LTIP. This provides clarity to all stakeholders on the relationship between
the successful implementation of the Group’s strategy and the remuneration paid.
Simplicity
Hibernia operates a market standard approach to remuneration which is familiar to all stakeholders and aligned with best practice
in Ireland and the UK.
Risk
The Policy mitigates against the risk of target-based incentives by:
• Limiting the maximum value that can be earned;
• Deferring the value in shares for the long term which helps ensure that the performance earning the award was sustainable
and thereby discouraging short-term behaviours;
• Aligning any reward to the agreed strategy of the Group;
• Ensuring that the use of an LTIP supports a focus on the sustainability of the performance over the longer term;
• Reducing the awards or cancelling them if the behaviours giving rise to the awards are inappropriate; and
• Reducing the awards or cancelling them, if it appears that the criteria on which the award was based do not reflect the
underlying performance of the Group.
Predictability
Shareholders are given full information on the potential values which could be earned under the incentive plans prior to approval.
In addition, all the checks and balances set out above under ‘Risk’ were disclosed at the time of shareholder approval.
Proportionality
The Group’s incentive plans clearly reward the successful implementation of the strategy and, through deferral and measurement
of performance over a number of years, ensure that the Executive Directors and employees have a strong drive to ensure that the
performance is sustainable over the long term. Furthermore, the Committee has overriding discretion to depart from the formulaic
outcomes under the incentive plans if they do not reflect underlying business performance.
Alignment to culture
A key tenet of Hibernia’s culture is a focus on ensuring long-term sustainable performance. This is reflected directly in the type of
performance conditions used in Hibernia’s incentive plans which assess sustainable performance using a variety of non-financial
and financial measures and through the use of share-based remuneration.
The focus on share ownership and long-term sustainable performance is also a key part of the Group’s culture. In addition, the
measures used in the incentive plans support directly the implementation of the strategy.
Consideration of shareholder views
As set out on page 99, the Committee engaged with its major shareholders representing c.60% of its issued share capital and Glass Lewis
and ISS on the proposed changes to the Directors’ Remuneration Policy. The feedback from shareholders and Glass Lewis and ISS was
positive and they were supportive of the changes proposed and the supporting rationale and as a result, no changes were made to the
original Policy proposed.
In general, the Committee engages proactively with the Group’s major shareholders and is committed to maintaining an open dialogue.
The Committee reviews any feedback received from shareholders as a result of the AGM process and carefully considers voting outcomes
on remuneration-related resolutions. Committee members are available to answer questions at the AGM and throughout the rest of the
year. The Committee also takes into consideration the latest views of investor bodies and their representatives.
114
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Consideration of wider employee pay policies and employee views
The Committee is responsible for ensuring that the Group’s 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 Group 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, policies and incentives, which enables it to ensure
that the approach to Executive Director remuneration is consistent with that applied to the wider workforce and that it is designed to
support the desired culture and values of the Group. The key difference is that, overall, the remuneration framework for the Executive
Directors is more heavily weighted towards variable pay compared to other employees. Whilst not specifically consulted on Executive
Director remuneration, there are a number of channels of communication available to all our employees to gather their feedback as
outlined on page 108.
We have a section in this report about ‘Fairness, diversity, inclusion and wider workforce considerations’ (see pages 107 to 109).
This section sets out the steps we take to make sure that our pay and reward framework is transparent across the Group in a way that is
meaningful and useful. This section also includes more information on the cascade of remuneration, our wider workforce pay policies and
our CEO pay ratio disclosure.
Executive Directors’ Remuneration Policy table
Base salary
Element, purpose
and link to strategy
Provides the basis for the overall market remuneration package and takes into account the role
and skills of the individual.
Salaries are set at a level to ensure the recruitment and retention of high-calibre executives
to implement the Group’s strategy.
Operation
An Executive Director’s basic salary is set on appointment and reviewed annually or when there
is a change in position or responsibility. Changes will normally be effective from 1 April.
When determining an appropriate level of salary, the Committee considers:
• General salary rises to employees;
• Remuneration practices within the Group;
• Any change in scope, role and responsibilities;
• The general performance of the Group;
• The experience of the relevant Director;
• The economic environment; and
• When the Committee determines a benchmarking exercise is appropriate – salaries within the
ranges paid by the companies in the comparator groups used for remuneration benchmarking.
Individuals who are recruited or promoted to the Board may, on occasion, have their salaries set below
the targeted Policy level until they become established in their role. In such cases subsequent increases
in salary may be higher than the general rises for employees until the target positioning is achieved.
Maximum opportunity
Typically, the base salaries of Executive Directors in post at the start of the Policy period and who
remain in the same role throughout the Policy period will be increased by a similar percentage to the
average annual percentage increase in salaries of all other employees in the Group. The exceptions to
this rule may be where:
• An individual is below market level and a decision is taken to increase base pay to reflect proven
competence in role; or
• There is a material increase in scope or responsibility to the Executive Director’s role.
The Committee ensures that maximum salary levels are positioned in line with companies of a similar
size to Hibernia and validated against other companies in the industry, so that they are competitive
against the market.
The Committee intends to review the comparators periodically and may add or remove companies
from the group as it considers appropriate. Any changes to the comparator groups will be set out
in the section headed ‘Implementation of Policy’, in the following financial year.
Performance measures
n/a
Changes from the
previous Policy
None.
115
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Proposed 2021 Directors’ Remuneration Policy continued
Pension
Element, purpose
and link to strategy
To provide a basis for post-retirement remuneration in line with comparable remuneration packages.
Operation
The Group provides a pension contribution allowance in line with practice relative to its comparators to
enable the Group to recruit and retain Executive Directors with the experience and expertise to deliver
the Group’s strategy.
Maximum opportunity
The maximum contribution for current Executive Directors is 15% of salary, reducing to 10% of salary
by the end of 2022, which will be in line with the rate available to the wider workforce. New Executive
Directors will have a pension contribution in line with the wider workforce from the date of their
appointment. No element other than base salary is pensionable.
Performance measures
n/a
Changes from the
previous Policy
Change to the Policy to align with the UK Code requirement. For incumbent Executive Directors,
pensions will be aligned with the wider workforce level which is 10% by the end of 2022. This will be
achieved by increasing the wider workforce level to 10% and decreasing the levels for incumbent
Executive Directors/Senior Management to 10%. Executive Directors and employees will also be able to
make additional voluntary contributions which will be matched by the Group up to a maximum of 5% of
base salary.
Benefits
Element, purpose
and link to strategy
To provide a market competitive benefits package.
Operation
Benefits may include:
• Car allowance;
• Health insurance;
• Death in service and long-term disability schemes;
• Travel insurance; and
• Other benefits as provided from time to time, for example where a Director relocates.
The Committee recognises the need to maintain suitable flexibility in the benefits provided to ensure it
is able to support the objective of attracting and retaining personnel in order to deliver Group strategy.
Additional benefits may therefore be offered such as relocation allowances on recruitment.
Maximum opportunity
The maximum is the cost of providing the relevant benefits.
Performance measures
n/a
Changes from the
previous Policy
None.
116
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Annual bonus
Element, purpose
and link to strategy
To incentivise the achievement of annual performance targets that support the Group’s short-term
key performance indicators as well as providing long-term alignment with shareholders through the
operation of bonus deferral.
Operation
Annual bonus awards are decided annually, usually in June. The performance period is one financial year
with pay-out determined by the Committee following the year end, based on achievement against a
range of financial and non-financial performance targets including having regard to environmental,
health and safety issues.
Two-thirds of the bonus award will be paid out in cash with the further one-third deferred into shares
subject to a three-year vesting period. There are no further performance targets on the deferred amount.
Malus and clawback arrangements are in place as set out on page 124. These are compliant with the
Code and in line with corporate governance best practice.
Maximum opportunity
Maximum bonus opportunity is 150% of salary.
Threshold performance will result in a bonus equal to 20% of maximum.
On-target performance will result in a bonus equal to 50% of maximum.
Participants may be entitled to dividends or dividend equivalents on the deferred shares representing
the dividends paid during the deferral period.
Performance measures
Performance targets will be set by the Committee annually based on a range of financial and strategic
measures, including but not limited to:
• Relative Total Property Return;
• Total Accounting Return;
• EPRA earnings; and
• Strategic and Operational Objectives.
The specific measures, targets and weightings may vary from year to year in order to align with the
Group’s strategy. The measures will be dependent on the Group’s goals over the year under review
and directly link to the key measurable strategic milestones to incentivise Executive Directors to focus
on the execution of the strategy. The performance targets are calibrated each year to align with the
strategic plan. At least 50% of the awards will be linked to financial measures.
The actual performance targets set are not disclosed at the start of the financial year, as they are
considered to be commercially sensitive. These will be reported and disclosed retrospectively at the
end of the year in order for shareholders to assess the basis for any bonus outcomes.
Changes from the
previous Policy
Inclusion of corporate failure as a trigger for malus and clawback provisions.
117
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Proposed 2021 Directors’ Remuneration Policy continued
LTIP
Element, purpose
and link to strategy
To incentivise the achievement of long-term sustainable shareholder return through the delivery
of key financial performance indicators.
Operation
Under the LTIP, the Committee may award annual grants of performance share awards in the form
of conditional awards or nil cost options (LTIP awards) on an annual basis.
The performance period of LTIP awards is three years – awards will vest three years from the date
of grant subject to the achievement of the performance measures.
A two-year holding period will apply following the three-year vesting period for LTIP awards granted
to the Executive Directors.
Malus and clawback arrangements are in place as set out on page 124. These are compliant with the
UK Code and in line with corporate governance best practice.
Maximum opportunity
Maximum LTIP awards are 200% of base salary.
Threshold performance: 20% of maximum.
Vesting is dependent on service and performance measures.
Participants may be entitled to dividends or dividend equivalents representing the dividends paid
during the performance period on vested LTIP awards.
Performance measures
Performance targets will be set by the Committee annually based on a range of financial and strategic
measures, including but not limited to:
• Relative Total Property Return compared to the MSCI Ireland Index excluding the Hibernia;
• Relative Total Shareholder Return compared to constituents of the EPRA/NAREIT Developed
Europe Index;
• Total Accounting Return per share; and
• Measures relating to the Group’s long-term ESG strategy.
The Committee will review and set weightings and targets before each grant to ensure they remain
appropriate and align with the Group’s strategy. The performance targets are calibrated for each LTIP
award to align with the strategic plan.
The Committee may change the balance of the measures, or use different performance measures for
subsequent awards, as appropriate. No material change will be made to the type of performance
measures without prior shareholder consultation.
The Committee has the discretion to adjust targets or performance measures for any exceptional events
that may occur during the year.
Changes from the
previous Policy
No substantial changes. The performance measures have been updated to reflect that in the future
performance measures may be included relating to the Group’s sustainability strategy and corporate
failure has been included as a trigger for malus and clawback provisions.
Selection of performance measures and link to the Group’s strategy
The Committee carefully considers the performance measures for the annual bonus and the LTIP in the context of the long-term
strategy and selects financial and non-financial measures which support the Group’s focus on income growth, asset improvement,
portfolio management, delivery of developments and capital discipline in a way that is aligned to the Group’s ESG strategy. In addition,
the Committee seeks to combine the use of absolute and relative measures to focus Executive Directors and the Senior Management
Team on both outperformance of the strategic plan and industry benchmarks. Page 38 sets out the Group’s KPIs and how their
satisfaction is supported by the Group’s incentive framework.
118
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Operation of the incentive plans
The Committee will operate all incentive plans according to the rules of each respective plan and the discretions contained therein.
The discretions cover aspects such as the timing of grant and vesting of awards, determining the size of the award (subject to the
Policy limits), the treatment of leavers, retrospective adjustment of awards (e.g. for a rights issue, a corporate restructuring or for special
dividends) and, in exceptional circumstances, the discretion to adjust previously set targets for an incentive award if events happen which
cause the Committee to determine that it would be appropriate to do so. In exercising such discretions, the Committee will take into
account generally accepted market practice, best practice guidelines, the provisions of the Listing Rules and the Group’s approved Policy.
In exceptional circumstances the Committee retains the discretion to:
• Change the performance measures and targets and the weighting attached to the performance measures and targets part-way
through a performance year if there is a significant and material event which causes the Committee to believe the original measures,
weightings and targets are no longer appropriate; and
• Make downward or upward adjustments to the amount of bonus or LTIP earned resulting from the formulaic application of the
performance measures and targets, if the Committee believes that the bonus or LTIP outcomes are not a fair and accurate reflection
of business performance.
Cessation of employment and change of control provisions apply as set out on pages 121 to 123.
Remuneration scenarios
The charts below provide an indication of the potential remuneration for each element of remuneration for each of the two Executive
Directors under various scenarios. The elements of remuneration have been categorised into three components: fixed; annual bonus
(including deferred bonus); and LTIP.
€0
€500
€1000
€1500
€2000
€2500
€3000
Fixed*
Annual Bonus
LTIP
Equity growth on shares
*Fixed includes bases salary, pension and all benefits
CEO
CFO
€422,627
€2,800,411
€2,125,411
€1,472,911
€550,411
100%
38%
26%
20%
24%
32%
24%
38%
42%
32%
24%
100%
39%
26%
20%
23%
38%
32%
24%
38%
42%
32%
24%
€2,122,627
€1,612,627
€1,085,627
Maximum
(with equity growth at 50%)
Maximum
On-Target
Minimum
Maximum
(with equity growth at 50%)
Maximum
On-Target
Minimum
Notes
1. All numbers are in €’000.
2. 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 2021.
3. Benefits are as shown in the single figure remuneration table for the year to 31 March 2021 on page 100.
4. 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.
5. The maximum scenario includes 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. This is determined based on a 50% increase in the face value of the LTIP grant.
6. For incumbent Executive Directors, pensions will be aligned with the wider workforce level by the end of 2022. The value of pensions in the graph
reflects the pension contributions for the Executive Directors in the first year of the proposed Policy.
119
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Proposed 2021 Directors’ Remuneration Policy continued
Minimum shareholding requirements
Element, purpose
and link to strategy
In line with the Group’s remuneration principles, the minimum shareholding requirements aim to align
the interests of Executive Directors with those of shareholders over the long term.
Operation
The Committee has adopted formal shareholding requirements that will encourage the Executive
Directors to build up over a five-year period and then subsequently hold a shareholding equivalent
to a percentage of salary. This policy ensures that the interests of Executive Directors and those of
shareholders are closely aligned. The minimum shareholding requirement for Executive Directors is
350% of salary.
These requirements will continue to apply for two years post employment in the form of a post-
employment shareholding requirement (“PESR”). The PESR will apply to all share plan awards granted
following the approval of the 2021 Policy. Shares purchased by the Executive Director will not be
included, nor will beneficially owned shares prior to the implementation of this Policy. The enforcement
mechanism for the PESR will be facilitated via nominee accounts.
Maximum opportunity
n/a
Performance measures
n/a
Changes from the
previous Policy
A PESR will be introduced in line with the UK Code.
Recruitment policy
The Group’s principle is that the remuneration of any new recruit will be assessed in line with the same principles as for the current
Executive Directors. The Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a preferred
candidate with the appropriate calibre and experience needed for the role. In setting the remuneration for new recruits, the Committee
will have regard to guidelines and shareholder sentiment regarding one-off or enhanced short-term or long-term incentive payments as
well as giving consideration for the appropriateness of any award.
120
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
The Group’s detailed policy when setting remuneration for the appointment of new Directors is summarised below:
Recruitment policy
Salary, benefits and pension
These will be set in line with the policy for existing Executive Directors.
Annual bonus
The Executive Director will be eligible to participate in the annual bonus scheme as set out in the Policy
table. The maximum level of variable remuneration that may be offered is 150% of base salary consistent
with that of existing Executive Directors.
LTIP
The Executive Director will be eligible to participate in the LTIP as set out in the Remuneration Policy
table. The maximum level of variable remuneration that may be offered is 250% of base salary in
exceptional circumstances for the year of recruitment. The normal maximum award level is 200%
of salary.
Maximum variable
remuneration
The maximum level of variable remuneration which may be offered in the year of recruitment is 400% of
salary. The normal ongoing maximum is 350% of salary. This excludes in both cases the value of any buyouts.
Buy-outs or
replacement awards
The Committee’s policy is not to provide replacement awards as a matter of course. However, should
the Committee determine that the individual circumstances of recruitment justified the provision of
a replacement award, the value of any incentives that will be forfeited on cessation of an Executive
Directors’ previous employment will be calculated taking into account the following:
• The proportion of the performance period completed on the date of the director’s cessation
of employment;
• The performance conditions attached to the vesting of these incentives and the likelihood of them
being satisfied; and
• Any other terms and conditions having a material effect on their value (“lapsed value”).
The Committee may then grant a replacement award up to the equivalent value as the lapsed value
where possible under the Group’s incentives plans. Where the circumstances are such that this is not
possible a bespoke arrangement may be used including in accordance with LR 6.4.2 of the Listing Rules
of Euronext Dublin.
Relocation policies
In instances where the new Executive Director is required to relocate or spend significant time away
from his/her normal residence, the Group may provide one-off compensation to reflect the cost of
relocation for the Executive Director. The level of the relocation package will be assessed on a case by
case basis but will take into consideration any cost of living differences/housing allowance, disturbance
allowances and schooling.
Internal promotions
In the case of an internal appointment, any variable pay element awarded in respect of the prior role
would be allowed to pay out according to the terms on which it was originally granted. These would be
disclosed to shareholders in the Remuneration Report for the relevant financial year.
Changes from the
previous Policy
None
Legacy arrangements
The Committee reserves the right to honour any remuneration payments or awards, notwithstanding that they are not in line with the
Policy set out above where the terms of the payment or award were agreed before the Policy came into effect. Such payments or awards
will be set out in the ‘Annual report on remuneration’ for the relevant year.
Cessation of employment
When determining any loss of office payment for a departing Director, the Committee will always seek to minimise the cost to the Group
while complying with contractual terms and seeking to reflect the circumstances in place at the time. The Committee reserves the right
to make additional payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of
damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in connection with the
termination of an Executive Director’s office or employment.
121
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Proposed 2021 Directors’ Remuneration Policy continued
Treatment on cessation of employment
General
The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain
liquidated damages clauses. If a contract is to be terminated, the Committee will determine such mitigation
as it considers fair and reasonable in each case. There are no contractual arrangements that would guarantee
a pension with limited or no abatement on severance or early retirement. There is no agreement between
the Company and its Directors or employees, providing for compensation for loss of office or employment
that occurs because of a takeover bid. The Committee reserves the right to make additional payments
where such payments are made in good faith in discharge of an existing legal obligation (or by way of
damages for breach of such an obligation); or by way of settlement or compromise of any claim arising
regarding the termination of an Executive Director’s office or employment.
Salary, benefits and pension
These will be paid over the notice period. The Group has discretion to make a lump sum payment in lieu.
Annual bonus –
cash awards
Good leaver reason
Performance conditions will be measured at the bonus measurement date. Bonus will normally be
pro-rated for the period worked during the financial year.
Other reason
No bonus will be payable for year of cessation.
Discretion
The Remuneration Committee has the following elements of discretion:
• To determine that an Executive Director is a good leaver. It is the Committee’s intention to only use
this discretion in circumstances where there is an appropriate business case which will be explained
in full to shareholders.
• To determine whether to pro-rate the bonus for time. The Committee’s normal policy is that it will
pro-rate for time. It is the Committee’s intention to use discretion to not pro-rate in circumstances
where there is an appropriate business case which will be explained in full to shareholders.
Annual bonus –
deferred share awards
Good leaver reason
All subsisting deferred share awards will vest.
Other reason
Lapse of any unvested deferred share awards.
Discretion
The Committee has the following elements of discretion:
• To determine that an Executive Director is a good leaver. It is the Committee’s intention to only use
this discretion in circumstances where there is an appropriate business case which will be explained
in full to shareholders.
• To vest deferred shares at the end of the original deferral period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason resulting
in the cessation.
• To determine whether to pro-rate the maximum number of shares to the time from the date of grant
to the date of cessation. The Committee’s normal policy is that it will not pro-rate awards for time.
The Committee will determine whether or not to pro-rate based on the circumstances of the
Executive Director’s departure.
LTIP
Good leaver reason
Pro-rated for time and performance in respect of each subsisting LTIP award.
Other reason
Lapse of any unvested LTIP awards.
Discretion
The Committee has the following elements of discretion:
• To determine that an executive is a good leaver. It is the Committee’s intention to only use this
discretion in circumstances where there is an appropriate business case which will be explained in
full to shareholders.
• To measure performance over the original performance period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason resulting
in the cessation.
• To vest the LTIP award at the end of the original performance period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason resulting
in the cessation.
• To determine whether the holding period will apply including whether in full or in part.
• To determine whether to pro-rate the maximum number of shares to the time from the date of grant
to the date of cessation. The Committee’s normal policy is that it will pro-rate awards for time. It is the
Committee’s intention to use discretion to not pro-rate in circumstances where there is an appropriate
business case which will be explained in full to shareholders.
Changes from the
previous Policy
None.
122
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Definition of ‘good leaver’
A good leaver reason is defined as cessation in the following circumstances:
• Death;
• Ill-health;
• Injury or disability;
• Redundancy;
• Retirement (in agreement with the Group);
• Employing company ceasing to be a Group company;
• Transfer of employment to a company which is not a Group company; or
• Any reason, permitted by the Committee in its absolute discretion in any particular case except where termination is for dishonesty,
fraud, misconduct or other circumstances justifying summary dismissal.
Change of control
Treatment on change of control
Annual bonus –
cash awards
Pro-rated for time and performance to the date of the change of control.
The Committee has discretion regarding whether to pro-rate the bonus for time. The Committee’s
normal policy is that it will pro-rate the bonus for time. It is the Committee’s intention to use its
discretion to not pro-rate in circumstances only where there is an appropriate business case which
will be explained in full to shareholders.
Subsisting deferred share awards will vest on a change of control.
The Committee has discretion regarding whether to pro-rate the awards for time. The Committee’s
normal policy is that it will not pro-rate awards for time. The Committee will make this determination
depending on the circumstances of the change of control.
Annual bonus –
deferred share awards
Subsisting deferred share awards will vest on a change of control.
The Committee has discretion regarding whether to pro-rate the awards for time. The Committee’s
normal policy is that it will not pro-rate awards for time. The Committee will make this determination
depending on the circumstances of the change of control.
LTIP
The number of shares subject to subsisting LTIP awards will vest on a change of control, pro-rated to
time and performance.
The Committee has discretion regarding whether to pro-rate the LTIP awards for time. The Committee’s
normal policy is that it will pro-rate the LTIP awards for time. It is the Committee’s intention to use its
discretion to not pro-rate in circumstances only where there is an appropriate business case which will
be explained in full to shareholders.
Changes from the
previous Policy
None.
123
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Proposed 2021 Directors’ Remuneration Policy continued
Malus and clawback
Malus and clawback
Annual bonus –
cash awards
Malus will apply up to the date of bonus determination and clawback will apply for a period of two years
post bonus payment.
Annual bonus –
deferred share awards
Malus will apply during the share deferral period.
LTIP
Malus will apply during the vesting period and clawback will apply for a period of two years post vesting.
Changes from the
previous Policy
Inclusion of corporate failure as a trigger for malus and clawback provisions.
The circumstances in which malus and clawback could apply are as follows:
• Discovery of a material misstatement resulting in an adjustment in the audited financial statements of the Group or Company.
• The assessment that any performance condition or condition in respect of the annual bonus or LTIP award was based on error, or
inaccurate or misleading information.
• The discovery that any information used to determine the Group annual bonus or LTIP award was based on error, or inaccurate or
misleading information.
• Action or conduct of a participant which amounts to fraud or gross misconduct.
• Events or the behaviour of a participant have led to the censure of the Company by a regulatory authority or have had a significant
detrimental impact on the reputation of the Group or Company provided that the Board is satisfied that the relevant participant was
responsible for the censure or reputational damage and that the censure or reputational damage is attributable to the participant.
• Where, as a result of an appropriate review of accountability, the Remuneration Committee determines that the Executive Director
has caused wholly or in part a corporate failure of the Company.
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. Executive Director contracts are subject to rolling terms.
Director
Date of contract
Notice period
Kevin Nowlan (CEO)
27 November 2018
6 months
Thomas Edwards-Moss (CFO)
30 June 2019
6 months
In accordance with the requirements of the UK Code each of the Executive Directors submits themselves for re-election each year.
External appointments
Executive Directors are permitted to accept external, non-executive appointments with the prior approval of the Board where such
appointments are not considered to have an adverse impact on their role within the Group. Kevin Nowlan is currently Chair of ULI Ireland.
Thomas Edwards-Moss currently has no external appointments.
124
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Non-Executive Directors’ Policy table
Non-Executive Directors are paid fees at a level sufficient to attract individuals of the calibre and qualifications required to manage the
business of the Group effectively. Fees are set at levels appropriate to the size and complexity of the organisation, the time commitment
required, and the qualifications and experience of the individual appointed.
The Group’s policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy which applies to current
Non-Executive Directors, which is set out below.
Non-Executive Directors
Element, purpose
and link to strategy
Core element of remuneration, set at a level sufficient to attract and retain individuals with appropriate
knowledge and experience in organisations of broadly similar size and complexity.
Operation
The Board is responsible for setting the remuneration of the Non-Executive Directors. The Remuneration
Committee is responsible for setting the Chair’s fees.
Non-Executive Directors are paid an annual fee and additional fees for the chairing of Committees and
the role of Senior Independent Director (“SID”). The Company retains the flexibility to pay fees for the
membership of Committees or for other Board duties.
In exceptional circumstances, fees may also be paid for additional time spent on the Group’s business
outside of the normal duties. Fees are normally reviewed annually with any changes generally effective
from 1 April and are based on equivalent roles in the comparator group used to review salaries paid to
the Executive Directors.
Non-Executive Directors do not participate in any variable remuneration or receive any other benefits,
other than reasonable expenses incurred and being covered for disability benefits under the Group’s
insurance whilst travelling on Group business.
Maximum opportunity
The fees for Non-Executive Directors are broadly set at a competitive level against a comparator group
of companies of similar size and industry to Hibernia.
The Committee intends to review the list of companies each year and may add or remove companies
from the group as it considers appropriate. Any changes to the comparator groups will be disclosed in
the part of the report setting out the operation of the Policy for the future year.
In general, the level of fee increase for the Non-Executive Directors and the Chair will be set taking
account of any change in responsibility and the general rise in salaries across employees.
The Group will pay reasonable expenses incurred by the Non-Executive Directors and may settle any
tax incurred in relation to these.
Performance measures
n/a
Changes from the
previous Policy
Clarification that the Group retains the flexibility to pay fees for other Board duties.
125
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Proposed 2021 Directors’ Remuneration Policy continued
Terms of appointment
The Non-Executive Directors do not have service contracts but do have letters of appointment which reflect their responsibilities and
commitments see section below entitled ‘Letter of appointment for Non-Executive Directors’. Each Independent Non-Executive Director’s
term of office runs for one year.
Non-Executive Director
Date of contract
Notice period
Daniel Kitchen
August 2013
1 month
Colm Barrington
August 2013
1 month
Roisin Brennan
January 2019
1 month
Margaret Fleming
January 2020
1 month
Grainne Hollywood
November 2019
1 month
Stewart Harrington
August 2013
1 month
Terence O’Rourke
August 2013
1 month
In accordance with the requirements of the UK Code each of the Non-Executive Directors submits themselves for re-election each year.
On behalf of the Committee and the Board.
Colm Barrington
14 June 2021
126
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
The Directors submit their report for
the financial year ended 31 March 2021.
The strategic report, on pages 2 to 71
is incorporated into the Directors’ report
by reference. Financial highlights and
a discussion thereon can be found on
pages 61 to 63 of the strategic report.
Directors’ responsibilities
These are set out in the Directors’
responsibility statement on page 131
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 business review on pages 54 to
60.. The principal subsidiary and associate
undertakings are listed in note 33.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 138. The loss after tax
for the financial year ended 31 March 2021
was €25.2m (March 2020: profit of €61.0m),
including unrealised losses on investment
property of €67.6m (March 2020:
unrealised gains of €22.9m). 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 Group’s
investment property portfolio versus
the MSCI Ireland Quarterly Property
All Assets Index (excluding Hibernia).
In the year, the TPR was -0.2% versus
-1.5% for the Index (March 2020: +5.9%
versus +4.4%).
• Total Accounting Return (“TAR”):
Measures the absolute growth in
the Group’s EPRA NTA per share plus
any ordinary dividends paid during the
period. In the year TAR was -0.9% (March
2020, based on EPRA NAV: +5.6%).
• 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 6.3c (March 2020: 5.5c).
• 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 -8.6% (March 2020: -18.4%)
Other important operational metrics for
the Group are measures relating to the
management of the portfolio, investment
activity and financial indebtedness.
These are set out on page 39 of this
Annual Report.
In addition, the Group has issued a
Sustainability Statement of Intent in
April 2021 which establishes its medium-
and longer-term sustainability KPIs
including not only ESG measures, but
also committing to a pathway to Net
Zero Carbon by 2030 and TCFD
reporting by 2022.
COVID-19
In our Annual Report 2020 we reported
in detail on the measures we were taking
to mitigate the risks arising from the crisis.
The Board has continued to monitor the
impact on the business and the mitigating
actions and controls that are in place.
The Directors’ focus is not only on the
near-term but also on the longer-term
impacts of the COVID-19 crisis on our
strategy. The direct impact of COVID-19
on the Group’s business has been relatively
modest, the risk it currently presents
centres around how quickly economic
and property market activity can recover
and whether it changes occupier and/or
investor behaviour in the longer term.
The business has delivered a resilient
performance in the financial year despite
the pandemic. Rent collection has averaged
99%, distributable income grew 11% and
the decline in portfolio value has been
relatively modest.
Dividends
The Directors maintain a dividend which
adheres to the Irish REIT regime. 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.
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 3.4 cent per share (c. €23m based on
the number of ordinary shares in issue
as at close of business on 11 June 2021.
(March 2020: 3.0 cent per share or c. €21m)
which will be paid, subject to shareholder
approval, at the end of July 2021. Together
with the interim dividend of 2.0 cent per
share, the total dividend for the financial
year is 5.4 cent per share or c. €36m
(March 2020: 4.75 cent or c. €33m).
Share buyback programme
In August 2020, the Company commenced
a €25m share buyback programme
which completed in November 2020.
This €25m share buyback was accretive
to net asset value and earnings per share
and completed the return to shareholders
of the proceeds from the sale of 77
Sir John Rogerson’s Quay, which started
with the €25m share buyback programme
undertaken in the 2020 financial year.
In total, 23.1m shares were acquired and
immediately cancelled in this financial year
at an average price of €1.08 per share
(March 2020: 17.5m shares were acquired
and immediately cancelled at an average
price of €1.42 per share). No treasury shares
were held during the either this or the
prior financial year. For further details on
the movements of share capital during
the year see note 21 to the consolidated
financial statements.
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. In 2019-20 COVID-19
was identified as an emerging risk, it is
now an operating risk in all aspects of
our business. An uncertain recovery from
the COVID-19 pandemic is a new risk.
The principal risks and uncertainties
are discussed in the ‘Principal risks
and uncertainties’ section on pages
48 to 53 and form part of this report.
Funding
In addition to existing financing
arrangements, see note 24 to the
consolidated financial statements, an
additional €125m in 10 and 12 year senior
private placement will be issued on 23 July
2021. Pro-forma for this debt issuance, the
weighted average term of the Group’s debt
at 31 March 2021 would have been 5.2 years
up from 3.4 years excluding this issue.
Directors’
Report
127
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Directors’ compliance statement
The Directors have, with the assistance of
advisers and Hibernia employees, identified
the Relevant Obligations, as required by the
Companies Act 2014, that they consider
apply to the Company. The Directors
acknowledge they are responsible for
securing the Company’s compliance with
its Relevant Obligations and confirm that
they have:
• drawn up a compliance policy
statement setting out the Company’s
policies in respect of compliance with
its Relevant Obligations;
• ensured that appropriate arrangements
and structures have been put in place
that are designed to ensure material
compliance with the Company’s
Relevant Obligations; and
• conducted a review, during this
financial year, of the arrangements
and structures that were put in place
to secure material compliance with
the Company’s Relevant Obligations.
REIT status and taxation
Hibernia REIT plc has elected for
Real Estate Investment Trust (“REIT”)
status under Section 705E 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
e) The aggregate debt shall not exceed an
amount of 50% of the market value of
the assets of the Group
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 2021 and
2020 respectively.
Share capital and
distributable reserves
At 31 March 2021 the Company had
661,656,792 units of ordinary stock in
issue (31 March 2020: 684,656,740).
Shares issued during the period are as
follows: 0.1m ordinary shares with a nominal
value of €0.10 were issued on 23 April 2020
in settlement of share-based payments
relating to remuneration (see further
details below).
Shares cancelled during the period – share
buyback programme: This programme
completed on 16 November 2020 and
in total 23.1m shares were acquired and
cancelled at an average price of €1.08
per share.
On 9 April 2020 €50m in share premium
was converted to distributable reserves as
a result of a capital reorganisation which
commenced during the financial year
ended 31 March 2020.
Future developments
The outlook for the property market
is discussed in the strategic report on
pages 12 to 15 of this Annual Report.
How we see the future of the office
and our responses to that are set out
on pages 10 to 11. 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 43 of the risk report.
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.
At 31 March 2021, the Group had in place a
€320m unsecured revolving credit facility,
€75m of unsecured US private placement
notes and has agreed the issue of a further
€125m in US private placement notes in
July 2021: overall the Group has an average
debt maturity of 3.4 years at 31 March 2021.
This would have been 5.2 years including
the new issue.
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 four-year
period of their assessment.
Directors
The following were Directors of the
Company throughout the financial year
and were in office at 31 March 2021:
Daniel Kitchen (Chair)
Colm Barrington
(Senior Independent Director)
Roisin Brennan
Thomas Edwards-Moss
(Chief Financial Officer)
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Kevin Nowlan (Chief Executive Officer)
Terence O’Rourke
Frank Kenny resigned as a Director on
29 July 2020.
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.
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.
128
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
D I R E C T O R S ’ R E P O R T C O N T I N U E D
Details on Directors’ remuneration are
contained in the Remuneration Committee
report on pages 96 to 126 of this Annual
Report and is incorporated into this report
by this cross reference..
In accordance with Provision 18 of the UK
Code, 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 page 88.
The Chair 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.
Substantial shareholdings
As at 31 March 2021, the Company has been notified of the following substantial interests (3% or more of the issued share capital)
in the Company’s shares:
Holding
Holder
’000 shares
%
TIAA-CREF Investment Management LLC
46,036
6.96%
Hazelview Investments Inc. (formerly filed by Timbercreek Asset Management Inc.)
40,098
6.06%
BlackRock Inc
39,698
6.00%
Kempen Capital Management N.V.
25,406
3.84%
Standard Life Aberdeen plc
23,835
3.60%
Bank of Montreal
22,273
3.37%
BNP Asset Management Holding S.A.
19,953
3.00%
As at 11 June 2021 the Company has been notified of the following changes:
Holding
Holder
’000 shares
%
Universal-Investment-Gesellschaft mit beschränkter Haftung
20,443
3.09%
Directors’ interests in share capital
as at 31 March 2021
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 113.
The Directors and the Company
Secretary have no beneficial interests
in any of the Group’s subsidiary or
associated undertakings.
Corporate governance
The Group is committed to high standards
of corporate governance, details of which
are given in the Corporate Governance
Report on pages 72 to 126 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 staff 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, staff,
contractors and visitors are safe and
secure in all the Group’s sites. No reportable
incidents occurred during this or the prior
financial year.
129
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Sustainability
The Group is committed to ensuring ethical
and sustainable practices for the benefit
of all its stakeholders and issued a
Sustainability Statement of Intent in
April 2021 which sets out its targets for
the future. More details on the Group’s
policies and progress can be found in the
Sustainability Report for the year ended
31 March 2021, which is published
separately and available on our website
at www.hiberniareit.com, and is summarised
in this Annual Report on pages 65 to 71.
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 29.
Independent auditor
The auditor, Deloitte Ireland LLP, Chartered
Accountants, who was appointed as first
auditor to the Company in 2013, 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 34 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.
General meetings
The seventh Annual General Meeting
(“AGM”) of the Company was held on
29 July 2020. The eighth AGM will be held
on 27 July 2021. Notice of the 2021 AGM,
together with details of the resolutions
to be considered at the meeting, will be
circulated to the shareholders in June 2021.
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 14 June 2021 and was
signed on its behalf by:
Kevin Nowlan
Thomas Edwards-Moss
Chief Executive
Chief Financial
Officer
Officer
14 June 2021
14 June 2021
130
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
D I R E C T O R S ’ R E P O R T C O N T I N U E D
The Directors, whose names and details
are listed on pages 74 and 75, 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 Group for
the financial year and otherwise comply
with the Companies Act 2014.
In preparing the Annual Report, the
Directors are required to:
−select suitable accounting policies
and then apply them consistently;
−make judgements and accounting
estimates that are reasonable and prudent;
−state that 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; and
−prepare the financial statements on
a going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are also required by the
Transparency Directive (Directive 2004/109/
EC) Regulations 2007, the Central Bank
(Investment Market Conduct) Rules 2019 ,
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; and
−enable the financial statements to
be audited.
Directors are also responsible for
safeguarding the assets of the Group and
the Company and for taking reasonable
steps for the prevention and detection of
fraud and other irregularities. The Directors
are responsible for the maintenance and
integrity of certain corporate and financial
information included on the Group’s
website (www.hiberniareit.com).
The Directors confirm that they have
complied with the above requirements
in preparing the Annual Report.
Responsibility Statement as required
by the Transparency Directive and UK
Corporate Governance Code
Each of the Directors, whose names and
functions are listed on pages 74 and 75,
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 2021
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 2021, together with a
description of the principal risks and
uncertainties facing the Group; and
−the Annual Report and consolidated
financial statements, taken as a whole,
are fair, balanced and understandable
and 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 14 June 2021
and was signed on its behalf by:
Kevin Nowlan
Thomas Edwards-Moss
Chief Executive
Chief Financial
Officer
Officer
14 June 2021
14 June 2021
Directors’ responsibilities
statement
131
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
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 2021
and of the loss of the Group for the
financial year then ended; and
−have been properly prepared in
accordance with the relevant financial
reporting framework and, in particular,
with the requirements of the Companies
Act 2014 and, as regards the Group
financial statements, Article 4 of the
IAS Regulation.
The financial statements we have
audited comprise:
The Group financial statements:
−the Consolidated Income Statement;
−the Consolidated Statement
of Comprehensive Income;
−the Consolidated Statement
of Financial Position;
−the Consolidated Statement
of Cash Flow;
−the Consolidated Statement of Changes
in Equity; and
−the related notes 1 to 34, 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 Company Statement
of Changes in Equity; and
−the related notes a to u, including
a summary of significant accounting
policies as set out in the relevant 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
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 below in the “Auditor’s
responsibilities for the audit of the financial
statements” section of our report.
Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current and prior
year relates to the valuation of investment properties.
Materiality
We determined materiality for the Group to be €11.5m which is 1%
of Group net assets.
We determined materiality for the Company to be €10.7m which
is 1% of Company net assets.
Scoping
Our approach to the audit, in terms of scoping and areas
of focus, is consistent 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.
We focused the scope of our Group audit primarily on the audit
work in Hibernia REIT plc and other legal entities listed in note
33.a all of which were subject to individual statutory audit work.
The extent of our testing was based on our assessment of the
risks of material misstatement and of the materiality of the
Group’s operations in those entities.
Significant
changes in
our approach
Impact of COVID-19 on our audit approach
We have considered the impact of COVID-19 on the Group
and Company’s business as part of our audit risk assessment
and planning. This assessment resulted in additional focus on
the key judgements and estimates underpinning the valuation
of investment properties.
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.
132
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Conclusions relating to going concern
In auditing the financial statements, we
have concluded that the Directors’ use of
the going concern basis of accounting in
the preparation of the financial statements
is appropriate.
Our evaluation of the Directors’ assessment
of the Group and Company’s ability to
continue to adopt the going concern basis
of accounting included:
−evaluating the design and determining
the implementation of key controls over
the preparation of financial plans
and budgets;
−understanding the Group and Company’s
capital and liquidity forecasts including
under stressed scenarios;
−obtaining the updated financial plan
covering the four year period to
March 2025;
−assessing whether the level of forecasted
profits in the updated financial plan
were appropriate by challenging the
growth, profitability and economic
assumptions within;
−challenging and assessing the accuracy
of Management’s forecasting process by
reviewing previous forecasts and
comparing to actual results;
−challenging the key assumptions used
in the Directors’ assessment of the Group
and the Company’s ability to continue
as a going concern; and
−evaluating the adequacy of the relevant
disclosures made in the financial
statements.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or collectively,
may cast significant doubt on the Group
and Company’s ability to continue as a
going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.
In relation to the reporting on how the
Group has applied the UK Corporate
Governance Code and the Irish Corporate
Governance Annex, we have nothing
material to add or draw attention to in
relation to the Directors’ statement in
the financial statements about whether
the Directors considered it appropriate
to adopt the going concern basis
of accounting.
Our responsibilities and the responsibilities
of the Directors with respect to going
concern are described in the relevant
sections of this report.
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.
Valuation of investment properties
Key audit matter description
The valuation of the Group’s investment properties of €1,427m 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 2021.
Please refer to pages 92 and 93 (Audit Committee Report), pages 145 and 146 (notes 2.f and 2.g –
‘Significant judgements’ and ‘analysis of sources of estimation uncertainty’) and pages 163 to 169
(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 and 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 relevant controls the Group
has over the valuation of investment properties, including attendance at the year-end Investment
Committee meeting at which the valuations of the investment properties were 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.
133
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Valuation of investment properties continued
How the scope of our audit
responded to the key audit
matter continued
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 a sample of investment properties and to 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 to determine whether the valuation approach
for each investment property was in accordance with Royal Institution of Chartered Surveyors (“RICS”)
professional standards and suitable for use in determining the final value in the financial statements.
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, for a sample of investment properties, we set an
expected reasonable 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 and the Directors 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.
Key observations
We have no observations that impact on our audit in respect of the valuation of investment properties.
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.
134
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
Our application of materiality
We define materiality as the magnitude of
misstatement that makes it probable that
the economic decisions of a reasonably
knowledgeable person, relying on the
financial statements, would be changed
or influenced. We use materiality both in
planning the scope of our audit work and
in evaluating the results of our work.
We determined materiality for the Group
to be €11.5m which is 1% of Group net
assets and materiality for the Company
to be €10.7m which is 1% of 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 Group and 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.
We agreed with the Audit Committee
that we would report to them any audit
differences in excess of €0.57 million 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. We have considered the impact of
COVID-19 on the Group and Company’s
business as part of our audit risk assessment
and planning.
Based on that assessment, a full scope
audit was performed by the Group audit
team for all major subsidiaries of the Group
as listed in note 33.a all of which were
subject to individual statutory audit work.
The extent of our testing was based on
our assessment of the risks of material
misstatement and of the materiality of
the Group’s operations in those entities.
This gave coverage over substantially all
of the Group. In addition, our 2021 audit
was planned and executed having regard
to the fact there have been no significant
changes to the valuation methodology
or accounting standards relevant to
the Group.
Other information
The other information comprises the
information included in the Annual Report,
other than the financial statements and our
auditor’s report thereon. The Directors are
responsible for the other information
contained within the Annual Report.
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.
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.
Responsibilities of Directors
As explained more fully in the Directors’
Responsibility 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.
€0.57m
€1,149m
€11.5m
Group materiality
Group Net Assets
Audit Committee reporting threshold
Group Net Assets
Group materiality
Materiality
135
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
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), and
communicates with them all relationships
and other matters that may 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.
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
required by the Companies Act 2014
We report, in relation to information given
in the Corporate Governance Statement on
pages 78 to 131 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 subsections 2(c) of section
1373 of the 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
136
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
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
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.
Corporate Governance Statement
The Listing Rules and ISAs (Ireland) require
us to review the Directors’ statement in
relation to going concern, longer-term
viability and the part of the Corporate
Governance Statement relating to the
Group’s compliance with the provisions
of the UK Corporate Governance Code
and Irish Corporate Governance Annex
specified for our review.
Based on the work undertaken as part
of our audit, we have concluded that
each of the following elements of the
Corporate Governance Statement is
materially consistent with the financial
statements and our knowledge obtained
during the audit:
−the Directors’ statement with regards the
appropriateness of adopting the going
concern basis of accounting and any
material uncertainties identified set out
on page 128;
−the Directors’ explanation as to its
assessment of the Group’s prospects,
the period this assessment covers and
why the period is appropriate set out
on page 43;
−the Directors’ statement on fair, balanced
and understandable set out on page 131;
−the board’s confirmation on page 127 that
it has carried out a robust assessment
of the emerging and principal risks
and the disclosures in the annual report
that describe the principal risks and the
procedures in place to identify emerging
risks and an explanation of how they are
being managed or mitigated out on
pages 40 to 53;
−the section of the annual report that
describes the review of effectiveness
of risk management and internal control
systems set out on page 92 to 93; and
−the section describing the work of the
Audit Committee set out on pages 92
to 95.
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.
The Companies Act 2014 also requires
us to report to you if, in our opinion, the
Company has not provided the information
required by Section 1110N in relation to its
remuneration report. We have nothing to
report in this regard.
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 eight years, covering the
years ending 2014 to 2021.
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.
Use of our report
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.
Christian MacManus
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory
Audit Firm
Deloitte & Touche House, Earlsfort Terrace,
Dublin 2
14 June 2021
137
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Notes
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Revenue
5
72,712
67,930
Rental income
5
66,487
61,812
Property operating expenses
5
(3,181)
(3,227)
Net rental and related income
5
63,306
58,585
Operating expenses
Administration expenses
8
(13,062)
(13,246)
Expected credit losses on financial assets
(423)
(147)
Total operating expenses
(13,485)
(13,393)
Operating profit before gains and losses
49,821
45,192
Gains and (losses) on investment property
7
(67,581)
22,856
Other gains
81
10
Operating (loss)/profit
(17,679)
68,058
Finance income
1
3
Finance expense
11
(7,723)
(7,198)
(Loss)/profit before income tax
(25,401)
60,863
Income tax credit
12
188
180
(Loss)/profit for the financial year attributable to owners of the parent
(25,213)
61,043
EPRA earnings for the financial year
14
42,223
38,093
Earnings per share
Basic earnings per share (cent)
14
(3.7)
8.9
Diluted earnings per share (cent)
14
(3.7)
8.8
EPRA earnings per share (cent)
14
6.3
5.5
Diluted EPRA earnings per share (cent)
14
6.2
5.5
138
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
C O N S O L I D AT E D I N C O M E S TAT 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 1
Notes
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
(Loss)/profit for the financial year attributable to owners of the parent
(25,213)
61,043
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
(Loss)/gain on revaluation of land and buildings
17
(304)
1,658
Items that may be reclassified subsequently to profit or loss:
Net fair value gain on hedging instruments entered into for cash flow hedges
22.b
676
54
Total other comprehensive income
372
1,712
Total comprehensive income for the financial year attributable to owners of the parent
(24,841)
62,755
139
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
C O N S O L I DAT E D S TAT 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 1
Notes
31 March 2021
€’000
31 March 2020
€’000
Assets
Non-current assets
Investment property
16
1,427,413
1,465,183
Property, plant and equipment
17
7,858
8,631
Other assets
16
–
534
Other financial assets
19
972
34
Trade and other receivables
20
9,210
10,215
Total non-current assets
1,445,453
1,484,597
Current assets
Trade and other receivables
20
3,970
3,751
Cash and cash equivalents
18
31,634
28,454
Total current assets
35,604
32,205
Total assets
1,481,057
1,516,802
Equity and liabilities
Capital and reserves
Share capital
21
66,166
68,466
Share premium
21
580,444
630,276
Capital redemption reserve fund
21
4,070
1,757
Other reserves
22
6,638
5,379
Retained earnings
23
491,320
525,271
Total equity
1,148,638
1,231,149
Non-current liabilities
Financial liabilities
24
299,956
259,691
Deferred tax liabilities
25
206
395
Total non-current liabilities
300,162
260,086
Current liabilities
Financial liabilities
24
485
517
Trade and other payables
26
27,997
21,873
Contract liabilities
27
3,775
3,177
Total current liabilities
32,257
25,567
Total equity and liabilities
1,481,057
1,516,802
IFRS NAV per share (cent)
15
173.6
179.8
Diluted IFRS NAV per share (cent)
15
172.7
179.2
EPRA NTA per share (cent)
15
172.7
179.2
The consolidated financial statements on pages 138 to 189 were approved and authorised by the Board of Directors on 14 June 2021 and
were signed on its behalf by:
Kevin Nowlan
Chief Executive Officer
Thomas Edwards-Moss
Chief Financial Officer
140
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
C O N S O L I D AT E D S TAT 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 AT 3 1 M A R C H 2 0 2 1
Notes
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Cash flows from operating activities
Rent received
70,775
64,734
Other property income
7,160
6,560
Property expenses paid
(9,291)
(8,918)
Cash paid to and on behalf of employees
(6,554)
(6,024)
Other administrative expenses paid
(3,818)
(5,606)
Interest received
1
3
Other income
13
10
Income tax refund
–
81
Net cash from operating activities
58,286
50,840
Cash flows from investing activities
Purchase of investment property
28.a
(7,978)
(22,675)
Capital expenditure on investment property
28.b
(20,316)
(25,266)
Cash received from sale of investment property
136
34,503
Purchase of property, plant and equipment
(61)
(2,066)
Sale of property, plant and equipment
–
50
Net cash flow (used) by investing activities
(28,219)
(15,454)
Cash flows from financing activities
Dividends paid
(33,777)
(25,866)
Cash expended on share buyback
(25,035)
(25,036)
Borrowings drawn
24
42,100
57,945
Borrowings repaid
24
(2,500)
(29,968)
Finance expenses paid
(7,100)
(6,369)
Purchase of derivative hedges
(561)
–
Share issue costs
(14)
(10)
Net cash (outflow) from financing activities
(26,887)
(29,304)
Net increase in cash and cash equivalents
3,180
6,082
Cash and cash equivalents start of financial year
28,454
22,372
Increase in cash and cash equivalents
3,180
6,082
Cash and cash equivalents at end of financial year
31,634
28,454
The consolidated statement of cash flows, including the comparative information, has been presented here using the direct approach
under International Accounting Standard (“IAS”) 7 Statement of Cash Flows. In previous financial statements the indirect approach has
been presented. Further details on this change can be found in note 2.a.
141
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W 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 1
Share capital
€’000
Share premium
€’000
Capital
redemption
reserve fund
€’000
Property
revaluation
reserve
€’000
Cashflow
hedge reserve
€’000
Share-based
payment
reserve
€’000
Retained
earnings
€’000
Total
€’000
Balance at 1 April 2019
69,759
624,483
–
1,889
(288)
7,556
515,140
1,218,539
Profit for the financial year
–
–
–
–
–
–
61,043
61,043
Other comprehensive income
for the financial year
–
–
–
1,658
54
–
–
1,712
Balance before transactions
with shareholders
69,759
624,483
–
3,547
(234)
7,556
576,183
1,281,294
Issue of share capital
464
5,793
–
–
–
(6,257)
(10)
(10)
Own shares acquired and
cancelled in the financial year
(1,757)
–
1,757
–
–
–
(25,036)
(25,036)
Dividends paid
–
–
–
–
–
–
(25,866)
(25,866)
Share-based payments
–
–
–
–
–
767
–
767
Balance at 31 March 2020
68,466
630,276
1,757
3,547
(234)
2,066
525,271
1,231,149
(Loss) for the financial year
–
–
–
–
–
–
(25,213)
(25,213)
Other comprehensive income
for the financial year
–
–
–
(304)
676
–
–
372
Balance before transactions
with shareholders
68,466
630,276
1,757
3,243
442
2,066
500,058
1,206,308
Capital reorganisation
–
(50,000)
–
–
–
–
50,000
–
Issue of share capital
13
168
–
–
–
(181)
(14)
(14)
Own shares acquired and
cancelled in the financial year
(2,313)
2,313
–
–
–
(25,035)
(25,035)
Dividends paid
–
–
–
–
–
–
(33,777)
(33,777)
Share-based payments
–
–
–
–
–
1,068
88
1,156
Balance at 31 March 2021
66,166
580,444
4,070
3,243
442
2,953
491,320
1,148,638
142
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
C O N S O L I D AT E D S TAT 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 1
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.
1. General information
Hibernia REIT plc (the “Company”), registered number 531267, together with its subsidiaries and associated undertakings
(the “Group”), is engaged in property investment and development (primarily office) in the Dublin market with a view to
maximising its shareholders’ returns.
The Company is a public limited company and is incorporated and domiciled in Ireland. It is regulated by the Central Bank of 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 (the “Irish Official List”) and
the premium listing segment of the Official List of the UK Financial Conduct Authority (the “UK Official List” and, together with the Irish
Official List, the “Official Lists”) and are traded on the regulated markets for listed securities of Euronext Dublin and the London Stock
Exchange plc.
2. Basis of preparation
2.a Statement of compliance and basis of preparation
The consolidated financial statements of Hibernia REIT plc have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the EU and the Companies Act 2014. IFRS as adopted by the EU differ in certain respects from IFRS
as issued by the International Accounting Standards Board (“IASB”). The Group financial statements therefore comply with Article 4 of
the EU IASB 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 consolidated financial statements of the Group for the year ended 31 March 2020 (the “Annual Report 2020”) are available upon
request from the Company Secretary or from www.hiberniareit.com. The financial statements for the financial year ended 31 March 2020
have been filed in the Companies Registration Office.
The Group has decided to adopt the direct approach in preparing the consolidated statement of cash flows in these financial statements in
place of the indirect approach which has been used in prior financial periods. The consolidated cash flow statement in these consolidated
financial statements is therefore presented on this basis. The comparatives have also been presented in line with this approach. The Group
has chosen to make this accounting policy change in order to provide more relevant and reliable information for readers of the financial
statements. The main impact of this form of presentation is to present the Group’s operating cash flows in a clearer and more useful way,
with no need for reconciliation to arrive at the major operating cash flows, such as cash received from rental income. No other amendments
to presentation are included as this change does not impact net asset values, profitability or any other financial disclosures.
Apart from the change in presentation above, the Group has made no other amendments to its accounting policies nor has the Group
early adopted any forthcoming IASB standards (note 3). The adoptions of amendments and interpretations which became effective
during the financial year ended 31 March 2021 did not have any material effect on the financial statements.
These consolidated financial statements were approved for issue by the Board of Directors on 14 June 2021.
2.b Alternative performance measures (“APMs”)
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 Net Tangible Assets (“NTA”) are presented within the consolidated financial statements
and are fully reconciled to IFRS as these two measures are among the key performance indicators for the Group’s business.
2.c Functional and presentation currency
These consolidated financial statements are presented in euro, which is the Company’s functional currency and the Group’s
presentation currency.
143
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
2. Basis of preparation continued
2.d Basis of consolidation
The consolidated financial statements incorporate the 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 has power over the entity and the ability to use its power over the entity to
affect the returns. 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.
2.e Assessment of going concern
The consolidated financial statements have been prepared on a going concern basis.
The Board has assessed the viability of the Group over a four-year period to March 2025. 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 (see pages 48 to 53 for further detail). All of these risks are considered to be material in the
assessment of going concern and viability. The Group has acted to mitigate the impacts recognised, and this is also summarised on
page 47.
An analysis of revenue and a disaggregation of income is outlined in notes 4, 5 and 6. Due to the nature of rental collections, a significant
portion of revenue is collected in advance of its due date and 88% of commercial rent for the quarter ended 30 June 2021 had been
collected within seven days of the gale date rising to 97% within 60 days of the gale date. 98% of the residential rent due for the month
of May 2021 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 20 and note 29.d.
Detail on the financial performance and financial position of the Group is provided in the consolidated financial statements. In particular,
note 29 includes details on the Group’s financial risk management and exposures.
The Group has a cash balance as at 31 March 2021 of €32m (March 2020: €28m), is generating positive operating cash flows and, as
discussed in note 24, has in place debt facilities with average maturity of 3.4 years, no debt maturities until December 2023, and an
undrawn balance of €93m at 31 March 2021 (March 2020: €133m). In addition, the Group has agreed to issue an additional €125m in fixed
rate private placement notes in July 2021. These bring the Group’s average maturity of debt at 31 March 2021 to 5.2 years on a pro-forma
basis. The Group’s capital commitments at 31 March 2021 were €3m (March 2020: €18m). As at 31 March 2021, the Group’s low leverage
(LTV 19.5%) means it could withstand a 59% decline in its portfolio value and a 77% decline in earnings before interest and tax (60%
decline in rental income) without breaching debt covenants at that date. The weighted average unexpired lease term (“WAULT”) is
5.8 years (March 2020: 6.4 years) for the office portfolio. 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.
144
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
2. Basis of preparation continued
2.f Significant judgements
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:
Net asset value of the Group
The Company’s shares are trading at a significant discount to the net asset value per share reported in these consolidated financial
statements: at 31 March 2021, the closing share price was €1.104 and the discount to both the IFRS NAV per share and the EPRA NTA per
share was 36%. As at close of business on 11 June 2021, being the last day before the approval of the financial statements, the share price
was €1.252 and the discount to both was 28%. The Group’s main assets are its investment properties, which comprise 96% of total assets
or 124% of net asset value. These are independently valued at the financial year end and are measured at fair value in line with IFRS 13.
More information on the valuation of the Group’s investment properties can be found below and in note 16 to these consolidated financial
statements. The Group’s property, plant and equipment is mainly its head office in 1WML, which is also carried at fair value and independently
valued at 31 March 2021. The balance of assets are assessed for impairment under a simplified expected credit loss model. The Group
carries no intangible assets or goodwill. As outlined above, the Group has sufficient headroom above its debt covenants to ensure that its
financing remains in place. It is therefore the opinion of the Directors that no impairment on the net asset value of the Group is indicated,
despite the discount to NAV/NTA at which its shares currently trade.
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 2021 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 2019 (the “Red Book”). Valuations are compliant with the International Valuation Standards (“IVS”). 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. 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.
The Directors have reviewed the valuation process undertaken, changes in market conditions, 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 market uncertainty as a result of both the pandemic and Brexit, the Directors have also considered the extent to which this has
been impacting the property investment and occupational markets in relation to both liquidity and activity. When the Valuer assessed the
Group’s property portfolio as at 31 March 2020, it did so on the basis of a material uncertainty clause given the initial disruption caused by
the pandemic and the limited market evidence available at that date. While market conditions may move rapidly in response to changes
in the control or future spread of COVID-19, the valuations are no longer subject to a material uncertainty clause: the Valuer has indicated
that property markets are mostly functioning again, with transaction volumes and other relevant evidence at levels where an adequate
quantum of market evidence exists on which it could base its valuation opinion as at 31 March 2021. The Directors have concluded that
the valuation is suitable for inclusion in the Group’s consolidated financial statements at 31 March 2021.
145
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
2. Basis of preparation continued
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 as 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 the following:
−Harcourt Square, Marine House and Clanwilliam Court Blocks 1, 2 and 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 expire. Planning permission is in place for these developments.
These properties are valued on a combination of an investment basis until the end of the leases and on a residual basis thereafter.
−Newlands (including 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 redevelopment sites.
−A disused building which is valued on a residual basis but with regard to city centre land values per acre.
−2 Cumberland Place is close to practical completion and therefore the valuation methodology is on an investment basis, with
outstanding capital expenditure recognised within the valuation.
−50 City Quay refurbishment is close to practical completion and therefore the valuation methodology is on an investment basis,
with outstanding capital expenditure recognised within the valuation.
2.g Analysis of sources of estimation uncertainty
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 2021 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. In accordance with the
Group’s policy on revenue recognition from leases, the valuation provided by the Valuer 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 at 31 March 2021 was €8.7m (March 2020: €8.1m).
There were no other significant judgements or key estimates that might have a material impact on the consolidated financial statements
at 31 March 2021.
2.h Treatment of tax basis in relation to properties
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 (a) debt specifically used to acquire, enhance or develop the property
sold or (b) other debt in limited circumstances, 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. In addition, the Group has a very substantial development pipeline over the near and 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 financial statements relating to this.
146
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
2. Basis of preparation continued
2.h Treatment of tax basis in relation to properties continued
Recently completed commercial assets
Under the 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 31 March 2021 are:
2WML (completed early 2019) and 1SJRQ (also completed early 2019). In addition, 2 Cumberland Place and 50 City Quay are under
construction and are expected to complete in mid-2021. 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 financial statements
for this eventuality.
Recently completed residential assets
Hanover Mills (completed in early 2018): this property is held for long-term property rental and was developed on this basis. VAT was
payable on the construction costs which has been treated as irrecoverable and recognised as part of the capital costs of the project.
If the property was 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 costs on an apportioned basis according to the VAT life of the building. It is not
intended to sell this property within the five-year period and, in the opinion of the Directors, no amendment to the Valuer’s valuation
of this asset is deemed necessary.
3. Application of new and revised International Financial Reporting Standards (“IFRS”)
Changes in accounting standards
Amendments and interpretations which became effective during the financial year but had no material impact on the Group’s
financial statements
−Amendments to References to the Conceptual Framework in IFRS Standards;
−Amendment to IAS 1 and IAS 8 Definition of Material;
−Amendment to IFRS 3 Definition of a Business; and
−Amendments to IFRS 9, IAS 39 and IFRS 7 (September 2019) Interest Rate Benchmark Reform Phase 1.
Standards, amendments, and interpretations in issue but not yet effective nor adopted early
The Directors do not anticipate that these standards or amendments will have any material effect on the Group’s financial statements.
−Amendments to IAS 1 Classification of Liabilities as Current or Non-current;
−Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies;
−IFRS 10 and IAS 28 (amended) Sale or Contribution of Assets between an investor and its Associate or Joint Venture.
This is indefinitely deferred;
−Amendments to IFRS 3 Reference to the Conceptual Framework;
−Amendments to IAS 8 Definition of Accounting Estimates;
−Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform — Phase 2;
−Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction;
−Amendments to IFRS 16 (amended) Covid-19-Related Rent Concessions;
−Amendments to IAS 16 (amended) Property, Plant and Equipment: Proceeds before Intended Use;
−Amendments to IAS 37 Onerous contracts: the Costs of Fulfilling a Contract; and
−Annual Improvements to IFRS Standards 2018–2020 (May 2020).
147
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial 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.
4. Operating segments
4.a Basis for segmentation
The Group is organised into five business segments, against which the Group reports its segmental information. There were previously
six. The ’other’ category, which contained assets which were acquired as part of a portfolio purchase but were not intended for the
investment property portfolio, has been discontinued as the remaining assets, which were held at a fair value of €0.6m, have been
transferred into investment property (note 16). This segment is therefore no longer managed separately as there are no assets left in this
category nor are any planned for the future. The ‘industrial/land’ segment was renamed ‘industrial/other’ as there are some immaterial
assets included here that are investment property but do not readily fall into the other segment classifications.
These segments mainly represent the different investment property classes. The Group has divided its business in this manner as the
various 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 briefly describes each segment:
Reportable segment
Description
Office 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 generally remains in this category.
Office development assets
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 progress towards
the 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.
Residential assets
This segment contains the Group’s completed multi-tenanted residential assets.
Industrial/other assets
This segment contains industrial units, land and other minor assets, such as retail.
Central assets and costs
Central assets and costs include 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.
4.b Information about reportable segments
The Group’s key measure of underlying performance of a segment is total income after revaluation gains and losses, which comprises
revenue (rental and service charge income), 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 on pages 201 to 212)
measure the cash passing rent returns on market value of investment properties before and after an adjustment for the expiry of rent-free
periods or other lease incentives, respectively.
148
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
4. Operating segments continued
An overview of the reportable segments is set out below:
Group consolidated segment analysis
For the financial year ended 31 March 2021
Office
assets
€’000
Office
development
assets
€’000
Residential
assets
€’000
Industrial/
other assets
€’000
Central assets
and costs
€’000
Group
consolidated
position
€’000
Total revenue
63,323
–
7,164
2,225
–
72,712
Rental income
57,476
–
7,164
1,847
–
66,487
Property operating expenses
(1,698)
(3)
(1,363)
(117)
–
(3,181)
Net rental and related income
55,778
(3)
5,801
1,730
–
63,306
Operating expenses
Administration expenses
–
–
–
–
(12,552)
(12,552)
Expected credit losses on financial assets
(401)
–
–
(22)
–
(423)
Depreciation
–
–
–
–
(510)
(510)
Total operating expenses
(401)
–
–
(22)
(13,062)
(13,485)
Operating profit/(loss) before gains and losses
55,377
(3)
5,801
1,708
(13,062)
49,821
Gains and (losses) on investment property
(65,439)
(3,466)
7,132
(5,808)
–
(67,581)
Other gains
–
–
–
81
–
81
Operating profit/(loss)
(10,062)
(3,469)
12,933
(4,019)
(13,062)
(17,679)
Net finance expense
–
–
–
–
(7,722)
(7,722)
Profit/(loss) before income tax
(10,062)
(3,469)
12,933
(4,019)
(20,784)
(25,401)
Income tax
–
–
(41)
229
–
188
Profit/(loss) for the financial year attributable to
owners of the parent
(10,062)
(3,469)
12,892
(3,790)
(20,784)
(25,213)
Total segment assets
1,149,928
62,170
168,242
58,878
41,839
1,481,057
Investment property
1,138,819
62,006
167,710
58,878
–
1,427,413
149
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
4. Operating segments continued
For the financial year ended 31 March 2020
Office
assets
€’000
Office
development
assets
€’000
Residential
assets
€’000
Industrial/
other assets
€’000
Central assets
and costs
€’000
Group
consolidated
position
€’000
Total revenue
59,492
–
7,197
1,241
–
67,930
Rental income
53,374
–
7,197
1,241
–
61,812
Property operating expenses
(1,905)
(14)
(1,289)
(19)
–
(3,227)
Net rental and related income
51,469
(14)
5,908
1,222
–
58,585
Operating expenses
Administration expenses
–
–
–
–
(12,726)
(12,726)
Expected credit losses on financial assets
(147)
–
–
–
–
(147)
Depreciation
–
–
–
–
(520)
(520)
Total operating expenses
(147)
–
–
–
(13,246)
(13,393)
Operating profit/(loss) before gains and losses
51,322
(14)
5,908
1,222
(13,246)
45,192
Gains and (losses) on investment property
5,494
18,243
4,861
(5,742)
–
22,856
Other gains and (losses)
–
–
–
25
(15)
10
Operating profit/(loss)
56,816
18,229
10,769
(4,495)
(13,261)
68,058
Net finance expense
–
–
(7,195)
(7,195)
Profit/(loss) before income tax
56,816
18,229
10,769
(4,495)
(20,456)
60,863
Income tax
–
–
–
152
28
180
Profit for the financial year attributable to owners of the parent
56,816
18,229
10,769
(4,343)
(20,428)
61,043
Total segment assets
1,209,584
48,000
159,969
61,868
37,381
1,516,802
Investment property
1,196,925
47,999
159,459
60,800
–
1,465,183
4.c Geographic information
All of the Group’s assets, revenue, and costs are based in the Dublin area, mainly in central Dublin.
4.d Major customers
The Group closely monitors its tenants, and in particular its largest tenants, by contribution to its contracted rent roll. The top 10 tenants
are presented below based on contracted rents as at the financial year end. This is concentrated on office tenants as the next largest
segment, residential, consists mainly of private individuals and therefore contains no major concentration of credit risk.
The Group’s top 10 tenants are as follows, expressed as a percentage of Group contracted rent:
As at 31 March 2021
Tenant
Business sector
Contracted
rent1 (€’m)
%
HubSpot Ireland
Technology
10.5
15.4%
Office of Public Works
State entity
6.0
8.8%
Twitter International Company
Technology
5.1
7.5%
Zalando Ireland
Technology
2.9
4.2%
Autodesk Ireland Operations
Technology
2.8
4.1%
Informatica Ireland EMEA
Technology
2.1
3.1%
Riot Games
Technology
2.0
2.9%
Travelport Digital
Technology
1.8
2.6%
Deloitte Ireland
Professional services
1.7
2.5%
BNY Mellon Fund Services
Insurance and investment management
1.6
2.3%
Top 10 tenants
36.5
53.4%
Remaining tenants
31.8
46.6%
Whole portfolio
68.3
100.0%
1. Contracted rent includes residential rents on a gross basis.
150
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
4. Operating segments continued
As at 31 March 2020
Tenant
Business sector
Contracted rent
(€’m)
%
HubSpot Ireland
Technology
10.5
15.6%
Office of Public Works
State entity
6.0
8.9%
Twitter International Company
Technology
5.1
7.6%
Zalando Ireland
Technology
2.9
4.3%
Autodesk Ireland Operations
Technology
2.8
4.2%
Informatica Ireland EMEA
Technology
2.1
3.1%
Riot Games
Technology
2.0
3.0%
Electricity Supply Board
State entity
1.9
2.8%
Travelport Digital
Technology
1.8
2.7%
BNY Mellon Fund Services
Insurance and investment management
1.6
2.4%
Top 10 tenants
36.7
54.6%
Remaining tenants
30.4
45.4%
Whole portfolio
67.1
100.0%
5. Revenue and net rental and related income
Accounting policy
The Group recognises revenue from the following major sources:
−Rental income;
−Service charge income; and
−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 are 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.
Lease modifications, a change in the scope or consideration for the lease, result in the commencement of a new lease and rental
income is recognised including any changes to the lease terms, from the date of the modification over the remaining period of
the lease.
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 expenses’ 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
151
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
5. Revenue and net rental and related income continued
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.
Revenue can be analysed as follows:
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Gross rental income1
66,157
59,937
Rental incentives
330
1,875
Rental income
66,487
61,812
Revenue from contracts with customers2
6,225
6,118
Total revenue
72,712
67,930
1. Gross rental income includes €0.9m relating to variable rents (March 2020: €1.1m).
2. Revenue from contracts with customers is service charge income.
Net rental and related income
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Total revenue
72,712
67,930
Cost of goods and services1
(6,150)
(6,183)
Property expenses
(3,256)
(3,162)
Net rental and related income
63,306
58,585
1. Costs of goods and services are service charge expenses.
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 €0.9m (March 2020: €1.0m) relating to void costs on office properties, i.e. costs relating to
properties which were available to let but were not income-generating for at least part of the financial year.
Property operating expenses
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Service charge income
6,225
6,118
Service charge expenses
(6,150)
(6,183)
Property expenses
(3,256)
(3,162)
Property operating expenses
(3,181)
(3,227)
152
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
6. Disaggregation of revenue and rental income
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 generally negotiated on an annual basis. Other income is once-off in nature and is recognised in the one year or less duration.
Financial year ended 31 March 2021
Lease contracts:
One year or less
€’000
Between one and
five years
€’000
Greater than five years
€’000
Total
€’000
Office assets
12,211
19,342
32,227
63,780
Office development assets
–
–
–
–
Residential assets
6,854
310
–
7,164
Industrial/other assets
1,330
438
–
1,768
Total segmented revenue
20,395
20,090
32,227
72,712
Financial year ended 31 March 2020
Lease contracts:
One year or less
€’000
Between one and
five years
€’000
Greater than five years
€’000
Total
€’000
Office assets
8,379
23,205
27,747
59,331
Office development assets
–
–
–
–
Residential assets
6,769
428
–
7,197
Industrial/other assets
1,307
95
–
1,402
Total segmented revenue
16,455
23,728
27,747
67,930
153
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
6. Disaggregation of revenue and rental income continued
Gross rental income by tenant industry sector
During the financial year the tenant industry sectors were reviewed and amended to provide greater clarity. The comparative information
has also been updated.
Financial year ended
31 March 2021
Financial year ended
31 March 2020
€’000
%
€’000
%
Technology
28,588
43.1
25,185
40.9
State entities
9,797
14.8
10,263
16.6
Residential
7,164
10.8
7,197
11.6
Insurance and investment management
6,748
10.1
7,126
11.5
Professional services
4,473
6.7
3,761
6.1
Media
2,203
3.3
2,044
3.3
Industrial assets
1,680
2.5
1,623
2.6
Serviced offices
1,342
2.0
1,424
2.3
Aviation
1,189
1.8
1,189
1.9
Real estate
1,049
1.6
309
0.5
Banking and capital markets
829
1.2
440
0.7
Car parking
680
1.0
662
1.1
Retail
555
0.8
401
0.6
Other
190
0.3
188
0.3
Total
66,487
100.0
61,812
100
7. Gains and (losses) on investment property
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Gains and (losses) on investment property
(67,581)
22,856
There were no sales of investment property during this or the prior financial year.
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:
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Non-Executive Directors’ costs
612
561
Staff costs
7,325
6,829
Professional fees – property
688
1,100
Professional fees – corporate
2,073
1,967
Independent Valuer’s fees
346
285
Depository fees
283
315
Depreciation
510
520
Other administration expenses
1,225
1,669
Administration expenses
13,062
13,246
All fees paid to Non-Executive Directors are for services as Directors of the Company. Non-Executive Directors receive no other benefits.
Annualised Non-Executive Directors’ fees are €565k (March 2020: €625k). Directors’ remuneration is set out in the annual report on
remuneration on pages 109 to 113.
154
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
8. Administration expenses continued
‘Professional fees – property’ are those incurred in relation to legal and other expenses associated with acquisitions/disposals/lettings
which did not proceed, planning consulting in relation to future development projects and other similar expenses relating to property.
‘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.
Auditor’s remuneration (excluding VAT)
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Audit of the Group financial statements
120
117
Other assurance services1
61
68
Tax advisory services
–
–
Other non-audit services
–
–
Total
181
185
1. Other assurance services include the review of the Interim Report and audit of Group parent and subsidiary statutory financial statements.
9. Employment
The average monthly number of persons (including Executive Directors) directly employed during the financial year in the Group was 35
(March 2020: 36).
Total employees at financial year end:
Group
Financial year ended
31 March 2021
Number
Financial year ended
31 March 2020
Number
At financial year end:
Administration
26
27
Building management services
Head office staff
4
4
On-site staff
5
5
9
9
Total employees
35
36
No amount of staff costs was capitalised into investment properties.
The staff costs for the above employees were:
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Wages and salaries (including bonuses)
5,858
5,543
Social insurance costs
644
653
Employee share-based payment expense
1,455
1,252
Pension costs – defined contribution plan
343
376
Total
8,300
7,824
155
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
9. Employment continued
Staff costs are allocated to the following expense headings:
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Administration expenses
7,325
6,829
Net property expenses1
975
995
Total
8,300
7,824
1. Part of this is recovered directly from tenants via the service charge arrangements within Hibernia managed buildings.
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 payment 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 scheme
Financial year ended 31 March 2021
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
358
310
–
–
480
420
838
730
b. Long-term incentive
payments
621
411
–
–
879
715
1,500
1,126
c. Employee incentives –
previous arrangements
1,087
769
(568)
(391)
96
64
615
442
Total
2,066
1,490
(568)
(391)
1,455
1,199
2,953
2,298
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
23
17
–
–
335
293
358
310
b. Long-term
incentive payments
–
–
–
–
621
411
621
411
c. IMA performance-related
payments payable to Vendors
6,069
4,495
(6,107)
(4,519)
38
24
–
–
c. Employee incentives –
previous arrangements
1,464
1,087
(635)
(476)
258
158
1,087
769
Total
7,556
5,599
(6,742)
(4,995)
1,252
886
2,066
1,490
156
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
10. Share-based payments continued
Remuneration Policy
This policy was introduced in 2018 and was described in full in the 2018 Annual Report and is available on our website. The Remuneration
Policy has been reviewed in 2021 and is set out on pages 1113 to 126. It will put to shareholders at the 2021 AGM.
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 ESG 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.
10.a Annual bonus
Two thirds of any annual bonus award 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. 848k share awards were calculated as potentially due
in respect of the financial year ended at 31 March 2021, subject to approval by the Remuneration Committee (March 2020: 930k).
At 31 March 2021, 1,074k shares remained to be provided for in respect of the 2019, 2020 and 2021 financial years.
10.b Long-Term Incentive Plan (“LTIP”)
The LTIP commenced during the financial year ended 31 March 2020 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
Weighting
Reference
Performance
condition type
Service condition
SC
n/a
Relative Total Property Return
33%
TPR
Non–market
Total Accounting Return
33%
TAR
Non–market
Relative Total Shareholder Return
33%
TSR
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 relative TSR performance condition measures the Company’s TSR performance against the constituents
of the FTSE EPRA NAREIT Developed Europe index. 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
and the average growth rate of comparators. These inputs are calculated with reference to relevant historic 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 outcomes is
amended trough retained earnings.
157
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
10. Share-based payments continued
At 31 March 2021
Grant date
Share price
at grant date
Total awards made at
maximum vesting
’000 shares
Share equivalents
provided ’000 shares
Balance provided
€’000
LTIP dated 31 July 2019
31 July 2019
1.51
1,853
600
906
LTIP dated 31 July 2020
31 July 2020
1.13
2,438
526
594
Total LTIP awards as at financial year end
4,291
1,126
1,500
At 31 March 2020
Grant date
Share price at grant
date
Total awards made at
maximum vesting
’000 shares
Share equivalents
provided ’000 shares
Balance provided
€’000
LTIP dated 31 July 2019
31 July 2019
1.51
1,853
411
621
Total LTIP awards as at financial year end
1,853
411
621
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. 600k shares were provided for the TPR element as at 31 March
2021 (March 2020: 190k), 173k shares (March 2020: 130k) were provided against the TAR element based on the performance for the
period and 353k shares (March 2020: 92k) 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: LTIP awards dated:
29 July 2020
31 July 2019
Fair value per award (TSR tranche) (€ per share)
0.81
1.06
Inputs
Source
Risk free interest rate (%)
European Central Bank
(0.12)
(0.80)
Expected volatility Hibernia (%)
Datastream
27.7
17.1
Average comparator volatility (%)
Datastream
31.7
18.6
Average comparator correlation (%)
Datastream
40.5
20.8
Averaging factors
Datastream
Median 0.94
Hibernia 1.15
Median 1.01
Hibernia 1.16
10.c Employee incentives – previous arrangements
Investment Management Agreement (“IMA”) 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 all remaining balances have been settled since 31 March 2021.
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 was 31 March 2021. The remaining balances have been settled since 31 March 2021.
158
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
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.
Finance income is interest earned on the Group’s cash deposits.
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Interest on revolving credit facility
5,753
5,230
Interest on private placement notes
1,888
1,894
Other finance costs
334
215
Gross finance expense
7,975
7,339
Less: Capitalised interest at an average rate of 2.1% (March 2020: 2.1%)
(252)
(141)
Finance expense
7,723
7,198
Interest costs capitalised in the financial year were €0.3m (March 2020: €0.1m) in relation to the Group’s development and refurbishment
projects. The capitalisation rate used is the effective interest rate on the cost of borrowing applied to the portion of investment that is
financed from borrowings.
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 of the Taxes 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.
Reconciliation of the income tax expense for the financial year:
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
(Loss)/profit before tax
(25,401)
60,863
Tax (credit)/charge on (loss)/profit at standard rate of 12.5%
(3,175)
7,608
Non-taxable revaluation deficit/(surplus)
8,365
(2,931)
REIT tax-exempt profits
(5,534)
(4,737)
Other (including additional tax rate on residual income)
173
(402)
Over provision in respect of prior periods
(17)
282
Income tax (credit) for the financial year
(188)
(180)
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.
159
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
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.
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Interim dividend for the financial year ended 31 March 2021 of 2.0 cent per share (March 2020: 1.75 cent per share)
13,233
11,982
Proposed final dividend for the financial year ended 31 March 2021 of 3.4 cent per share1 (March 2020: 3.0 cent per share)
22,5021
20,544
Total
35,735
32,526
1. Based on shares in issue at close of business at 11 June 2021 of 661.8m.
The Board has proposed a final dividend of 3.4 cent per share (March 2020: 3.0 cent) which is subject to approval by shareholders
at the Annual General Meeting to be held on 27 July 2021 and has therefore not been included as a liability in these consolidated
financial statements. This dividend is expected to be paid on 30 July 2021 to shareholders on the register at 2 July 2021. All of this
proposed final dividend of 3.4 cent per share will be a Property Income Distribution in respect of the Group’s property rental business
(March 2020: 3.0 cent). The total dividend, interim paid and final proposed for the financial year ended 31 March 2021 is 5.4 cent per
share (March 2020: 4.75 cent per share) or €35.7m (March 2020: €32.5m).
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.
14. Earnings per share
There are no convertible instruments, options, or warrants on ordinary shares in issue as at 31 March 2021, other than those dealt with
under note 10 above, ‘Share-based payments’. The Company has established a reserve of €3.0m (March 2020: €2.1m) which is mainly
for the issue of ordinary shares relating to the payment of share-based payments. It is estimated that approximately 3.4m ordinary
shares (March 2020: 2.4m shares) will be issued in total, 2.3m of which are provided for at 31 March 2021 and a further 1.1m of which
will be recognised over the next three years. The dilutive effect of these shares is disclosed below.
The calculations are as follows:
Weighted average number of shares
Notes
Financial year ended
31 March 2021
’000
Financial year ended
31 March 2020
’000
Issued share capital at beginning of financial year
684,657
697,589
Shares purchased and cancelled during the financial year
(23,125)
(17,573)
Shares issued during the financial year
125
4,641
Shares in issue at financial year end
21
661,657
684,657
Weighted average number of shares
673,618
688,759
Number of shares to be issued under share-based schemes
3,372
2,375
Diluted number of shares
676,990
691,134
Notes
Financial year ended
31 March 2021
’000
Financial year ended
31 March 2020
’000
Number of shares due to issue under share-based schemes recognised at financial year end
10
2,298
1,490
Number of shares due to issue under share-based schemes not recognised at financial year end1
1,074
885
Number of shares to be issued under share-based schemes
3,372
2,375
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.
160
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
14. Earnings per share continued
Basic and diluted earnings per share (IFRS)
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
(Loss)/profit for the financial year attributable to the owners of the parent
(25,213)
61,043
’000
’000
Weighted average number of ordinary shares (basic)
673,618
688,759
Weighted average number of ordinary shares (diluted)1
673,618
691,134
Basic earnings per share (cent)
(3.7)
8.9
Diluted earnings per share (cent)
(3.7)
8.8
1. In a loss making scenario, potential shares are only dilutive if they increase the losses under IAS 33.
EPRA earnings
Notes
Financial year ended
31 March 2021
’000
Financial year ended
31 March 2020
’000
Group (loss)/profit for the financial year
(25,213)
61,043
Less:
ains and (losses) on investment property
16
67,581
(22,856)
Gainson other assets
(69)
–
Deferred tax in respect of EPRA adjustments
12
(188)
(152)
Changes in fair value of financial instruments and associated close-out costs
112
58
EPRA earnings
42,223
38,093
EPRA earnings per share and Diluted EPRA earnings per share1
’000
’000
Weighted average number of ordinary shares (basic)
673,618
688,759
Weighted average number of ordinary shares (diluted)
676,990
691,134
EPRA earnings per share (cent)
6.3
5.5
Diluted EPRA earnings per share (cent)
6.2
5.5
1. EPRA earnings and EPRA earnings per share are alternative performance measures and are calculated in accordance with the EPRA Best Practices
Recommendations Guidelines October 2019. EPRA earnings, earnings from operational activities, are presented as they are a key measure of the
Group’s underlying operating result 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.
161
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
15. IFRS NAV, EPRA NTA per share and Total Accounting Return (“TAR”)
The IFRS NAV is calculated as the value of the Group’s assets less the value of its liabilities based on IFRS measures and is equal to
total equity.
As at
31 March 2021
€’000
As at
31 March 2020
€’000
IFRS net assets at end of financial year
1,148,638
1,231,149
Ordinary shares in issue (‘000)
661,657
684,657
IFRS NAV per share (cent)
173.6
179.8
Notes
’000
’000
Ordinary shares in issue
661,657
684,657
Number of shares to be issued under share-based schemes
14
3,372
2,375
Diluted number of shares
665,029
687,032
Diluted IFRS NAV per share (cent)
172.7
179.2
EPRA NTA1
As at
31 March 2021
€’000
As at
31 March 2020
€’000
IFRS NAV
1,148,638
1,231,149
Include:
Revaluation of other non-current investments
–
–
Diluted NAV at fair value
1,148,638
1,231,149
Exclude:
Fair value of financial instruments
(442)
234
EPRA NTA
1,148,196
1,231,383
Diluted number of shares at financial year end
665,029
687,032
EPRA NTA per share at financial year end (cent)
172.7
179.2
1. EPRA Net Tangible Assets (“EPRA NTA”) (which is an APM) is calculated in accordance with EPRA Best Practices Recommendations Guidelines
October 2019. The underlying assumption behind the EPRA NTA calculation assumes entities buy and sell assets, thereby crystallising certain levels
of deferred tax liability.
Total Accounting Return (“TAR”)
Total Accounting Return, a key performance indicator and APM, is calculated as the increase in EPRA Net Tangible Assets (“NTA”) per
share for the period over the previous period-end EPRA NTA per share and adding back dividends per share paid during the period,
expressed as a percentage of opening EPRA NTA per share.
As at
31 March 2021
As at
31 March 20201
Opening EPRA NTA per share
179.2c
173.3c
Closing EPRA NTA per share
172.7c
179.3c
(Decrease)/Increase in EPRA NTA per share
(6.5)c
6.0c
Dividends per share paid in financial year
5.0c
3.8c
Total return
(1.5)c
9.8c
Total Accounting Return ("TAR")
(0.9)%
5.6%
1. The TAR calculation was based on EPRA NAV in the financial year ended 31 March 2020 under the EPRA 2016 guidelines.
2. TAR is an APM.
162
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
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.
163
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
16. Investment property continued
At 31 March 2021
Fair value category
Office assets
Level 3
€’000
Office development
assets
Level 3
€’000
Residential
assets
Level 3
€’000
Industrial/
other assets
Level 3
€’000
Total
Level 3
€’000
Carrying value at 1 April 2020
1,196,925
47,999
159,459
60,800
1,465,183
Additions:
Property purchases
6,900
–
366
3,833
11,099
Development and refurbishment expenditure
2,9331
14,973
203
–
18,109
Transferred between segments2
(2,500)
2,500
–
–
–
Transferred from other assets3
–
–
550
53
603
Revaluations included in income statement
(65,439)
(3,466)
7,132
(5,808)
(67,581)
Carrying value at 31 March 2021
1,138,819
62,006
167,710
58,8784
1,427,413
1. This includes capital expenditure on previously completed developments after their transfer to the office segment.
2. 50 City Quay is undergoing redevelopment and has been recognised as a development property from 30 September 2020.
3. Three assets remaining from a historical portfolio purchase have been recognised at fair value as investment property at 31 March 2021 (see note 4
in relation to the change in operating segments).
4. On 9 November 2018 the Group agreed to acquire 92.5 acres adjacent to its holdings in Newlands from the Irish Rugby Football Union (the “IRFU”)
for an 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 2020
Fair value category
Office assets
Level 3
€’000
Office development
assets
Level 3
€’000
Residential
assets
Level 3
€’000
Industrial/
other 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
8,741
–
694
13,385
22,8201
Development and refurbishment expenditure
9,0972
13,557
825
157
23,636
Revaluations included in income statement
5,494
18,243
4,861
(5,742)
22,856
Transferred from property, plant
and equipment3
6,210
–
–
–
6,210
Transferred to property, plant and equipment3
(5,757)
–
–
–
(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.
There were no transfers between fair value levels during the financial year. Approximately €0.3m of financing costs were capitalised at an
effective interest rate of 2.1% in relation to the Group’s developments and major refurbishments (March 2020: €0.1m). No other operating
expenses were capitalised during the financial year.
Valuations as at 31 March 2021
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.
164
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
16. Investment property continued
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.
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 2021, 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 methods
applied 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
Changes in the fair
value technique during
the financial year
Office assets
1,139
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 and 5 are valued on an investment
basis until the end of the current leases (which expire over the period 2021 to 2022)
and on a residual basis thereafter.
−The Forum is planned for refurbishment and the valuation methodology is on an
investment basis with outstanding capital expenditure recognised within the valuation.
−No change
in valuation
technique.
Office
development
assets
62
Residual method, i.e. Gross Development Value less Total Development Cost less Profit
equals Fair Value.
−Gross Development Value (“GDV”): the fair value of the completed proposed
development (arrived at by capitalising the market rent or estimated rental value
(“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 (“TDC”): 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 TDC (including the site
value). It also takes account of letting risk.
For developments close to completion the investment yield methodology with
outstanding capital expenditure recognised is usually applied.
−No change
in valuation
technique.
Residential assets
168
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.
−No change
in valuation
technique.
Industrial/
other assets
58
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.
−A disused building is valued on a residual basis with reference to city centre land values
per acre.
−No change
in valuation
technique.
165
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
16. Investment property continued
EPRA capital expenditure
Capital expenditure (“capex”) during the financial year is analysed below according to the EPRA Best Practices Recommendation
Guidelines. 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 or recently completed and related project costs capitalised,
including internal costs allocated.
3. ‘In-place’ 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; and
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 2021
Office assets
€’000
Office development
assets
€’000
Residential
assets
€’000
Industrial/
other assets
€’000
Total
€’000
Acquisitions
6,900
–
366
3,833
11,099
Development1
1,808
14,721
–
–
16,529
‘In-place’ investment properties
Incremental lettable space
–
–
–
–
–
No incremental lettable space²
98
–
203
–
301
Tenant incentives
–
–
–
–
–
Expenditure on properties due for
re-development/refurbishment
1,027
–
–
–
1,027
Other material non-allocated types
of expenditure
–
–
–
–
–
Capitalised interest3
9,833
–
14,721
252
569
–
3,833
–
28,956
252
Total capex
9,833
14,973
569
3,833
29,208
Conversion from accrual to cash basis
(1,844)
821
113
(4)
(914)
Total capex on cash basis
7,989
15,794
682
3,829
28,294
1. Capex relating to mainly development/refurbishment of 2 Cumberland Place and 50 City Quay.
2. Amounts are stated after taking account of dilapidation payments received from vacating tenants.
3. Financing expenses capitalised and expenditure on existing properties in relation to future planning for redevelopment.
166
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
16. Investment property continued
As at 31 March 2020
As at 31 March 2020
Office assets
€’000
Office development
assets
€’000
Residential
assets
€’000
Industrial/
other assets
€’000
Total
€’000
Acquisitions
8,741
–
694
13,385
22,8201
Development2
7,787
13,416
–
–
21,203
‘In-place’ investment properties
Incremental lettable space
–
–
–
–
–
No incremental lettable space
(446)3
–
825
–
379
Tenant incentives
–
–
–
–
–
Expenditure on properties due for
re-development/refurbishment
1,756
–
–
157
1,913
Other material non-allocated types
of expenditure
–
–
–
–
–
Capitalised interest4
17,838
–
13,416
141
1,519
–
13,542
–
46,315
141
Total capex
17,838
13,557
1,519
13,542
46,456
Conversion from accrual to cash basis
(173)
2,001
(220)
(123)
1,485
Total capex on cash basis
17,665
15,558
1,299
13,419
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. Capex relating to development or major refurbishment of 1SJRQ, 1&2WML, and 2 Cumberland Place.
3. Amounts are stated after taking account of dilapidation payments received from vacating tenants.
4. Financing expenses capitalised and expenditure on existing properties in relation to future planning for redevelopment.
Reconciliation of the Valuer’s valuation report amount to the carrying value of investment property in the consolidated statement
of financial position:
Notes
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Valuation per Valuer’s certificate
1,442,788
1,480,360
Owner-occupied
17
(6,647)
(7,089)
Income recognition adjustment¹
(8,728)
(8,088)
Investment property balance at end of financial year
1,427,413
1,465,183
1. Income recognition adjustment: this 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, 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.
167
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
16. Investment property continued
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 2021. 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 2021
Market value
€’000
Estimated rental value
Equivalent yield
Low
High
Low
High
Office
1,138,819
€25.00psf
€62.50psf
3.99%
7.17%
Office development
62,006
€40.00psf
€60.75psf
4.46%
5.60%
Residential1
167,710
€13,896pa
€31,200pa
3.55%
5.19%
Industrial/other
58,578
€5.25psf
€9.00psf
6.27%
8.38%
1. Average ERV based on a two-bedroom apartment. Residential yields are based on the contracted income after deducting operating expenses.
31 March 2020
Market value
€’000
Estimated rental value
Equivalent yield
Low
High
Low
High
Office
1,196,925
€25.00psf
€62.50psf
3.99%
6.65%
Office development
47,999
€30.00psf
€62.00psf
4.42%
4.42%
Residential1
159,459
€25,200pa
€32,400pa
3.70%
5.06%
Industrial/other
60,800
€5.00psf
€9.00psf
7.65%
7.94%
1. Average ERV based on a two-bedroom apartment. Residential yields are based on the contracted income after deducting 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 2021 and 31 March 2020.
168
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
16. Investment property continued
ERV and equivalent yields
31 March 2021
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
52.4
(52.4)
104.6
(104.6)
(72.8)
81.6
(138.1)
173.4
Office development
2.6
(2.6)
5.1
(5.1)
(3.6)
3.9
(6.7)
8.3
Residential
8.3
(8.3)
16.4
(16.4)
(10.6)
12.3
(19.8)
26.3
Industrial/other
0.6
(0.6)
1.4
(1.4)
(0.7)
0.7
(1.4)
1.5
Total
63.9
(63.9)
127.5
(127.5)
(87.7)
98.5
(166.0)
209.5
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
Sensitivities
Increase
€’m
Decrease
€’m
Increase
€’m
Decrease
€’m
Increase
€’m
Decrease
€’m
Increase
€’m
Decrease
€’m
Office
58.6
(58.6)
116.9
(116.9)
(83.4)
93.2
(158.3)
198.7
Office development
2.8
(2.8)
5.7
(5.7)
(3.8)
4.3
(7.3)
9.2
Residential
8.0
(8.0)
15.8
(15.8)
(9.9)
11.2
(18.6)
24.1
Industrial/other
0.3
(0.3)
0.6
(0.6)
(0.3)
0.3
(0.5)
0.6
Total
69.7
(69.7)
139.0
(139.0)
(97.4)
109.0
(184.7)
232.6
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 2021 (March 2020: €10m). Development construction costs are an unobservable input to residual appraisals which are used in
valuing those properties that are pipeline development assets.
169
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
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
retained earnings.
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
50 years
Fixtures and fittings/leasehold improvements
5 years
Office and computer equipment
3 years
As at 31 March 2021
Land and buildings
€’000
Office and computer
equipment
€’000
Leasehold
improvements and
fixtures and fittings
€’000
Total
€’000
Cost or valuation
At 1 April 2020
7,155
171
1,647
8,973
Additions
–
22
19
41
Revaluation recognised in other comprehensive income
(304)
–
–
(304)
At 31 March 2021
6,851
193
1,666
8,710
Depreciation
At 1 April 2020
(66)
(100)
(176)
(342)
Charge for the financial year
(138)
(39)
(333)
(510)
At 31 March 2021
(204)
(139)
(509)
(852)
Carrying amount at 31 March 2021
6,647
54
1,157
7,858
170
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
17. Property, plant and equipment continued
As at 31 March 2020
Land and buildings
€’000
Office and computer
equipment
€’000
Leasehold
improvements and
fixtures and fittings
€’000
Total
€’000
Cost or valuation
At 1 April 2019
5,942
207
596
6,745
Additions:
Purchases
366
71
1,649
2,086
Transferred from investment property1
5,757
–
–
5,757
Disposals:
Sales2
–
(107)
(598)
(705)
Transferred to investment property1
(6,568)
–
–
(6,568)
Revaluation recognised in other comprehensive income
1,658
–
–
1,658
At 31 March 2020
7,155
171
1,647
8,973
Depreciation
At 1 April 2019
(299)
(152)
(392)
(843)
Charge for the financial year
(125)
(35)
(360)
(520)
Disposals
–
87
576
663
Transferred to investment property1
358
–
–
358
At 31 March 2020
(66)
(100)
(176)
(342)
Carrying amount at 31 March 2020
7,089
71
1,471
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.
Land and buildings: The Group’s head office at 1WML was revalued by the Group’s Valuer in accordance with the valuation approach
described under note 16. It was measured at fair value at the financial year 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
31 March 2021
31 March 2020
ERV per sq. ft.
€51.0
€55.0
Equivalent yield
4.20%
4.25%
171
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Section IV – Financing including equity and working capital
This section 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. 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. 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.
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 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.
The Group’s financial assets comprise cash and cash equivalents at bank, trade and other receivables, and derivative instruments.
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.
The Group’s financial assets and liabilities and the methods used to calculate fair value are listed in note 29.b.
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 expected credit loss (“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 component 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 ECLs on all these assets without the need to identify significant
increases in credit risk (see note 20). 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 ECLs.
172
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
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 ECL of each age-band for the receivables has 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 fully impaired. When legal proceedings are instigated to recover the debt, the costs of these are charged to profit or loss.
18. Cash and cash equivalents
As at 31 March 2021
€’000
As at 31 March 2020
€’000
Cash and cash equivalents
31,634
28,454
Cash and cash equivalents includes cash at bank in current accounts and deposits held on call with banks. €8.4m is held in accounts for
service charges prepaid, sinking fund contributions and rent deposits from tenants. The management of cash and cash equivalents is
discussed in note 29. Please also refer to note 24.b on the net debt calculations. In addition, the Company holds funds in excess of its
regulatory minimum capital requirement at all times.
19. Other financial assets
Accounting policy
Derivatives: The Group utilises derivative financial instruments to hedge interest rate risks on its borrowings. Derivatives designated
as hedges against interest rate 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.
As at 31 March 2021
€’000
As at 31 March 2020
€’000
Opening balance
34
34
Purchases of financial derivatives
561
–
Amortised to profit and loss
(299)
–
Net fair value gain on hedging instruments entered into for cash flow hedges
676
–
Closing balance at financial year end
972
34
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 2021, as well as having €75m of fixed coupon private placement notes, it has
hedged the interest rate exposure on €325m of notional debt (March 2020: €125m) using a combination of caps and swaptions to limit
the EURIBOR element of interest payable to 0.75% on €125m of notional debt and 0.25% on €200m of notional debt. This means that at
31 March 2021 all of the Group’s drawn debt is either fixed or hedged (March 2020: 76%).
173
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
20. 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 and other
receivables which do contain a significant financing component are recognised at fair value at the recognition date and subsequently
measured at amortised cost using the effective interest rate method.
As at 31 March 2021
€’000
As at 31 March 2020
€’000
Non-current
Property income receivables
8,876
9,590
Recoverable capital expenditure
364
661
Expected credit loss allowance
(30)
(36)
Balance at end of financial year – non-current
9,210
10,215
Current
Property income receivables
3,447
1,955
Recoverable capital expenditure
369
460
Expected credit loss allowance
(489)
(61)
3,327
2,354
Receivable from investment property sales
–
136
Prepayments
484
985
Income tax refund due
–
2
VAT refundable
159
274
Balance at end of financial year – current
3,970
3,751
Balance at end of financial year – total
13,180
13,966
Of which are classified as financial assets
1,265
1,591
The non-current balance is mainly non-financial in nature; €0.4m (March 2020: €0.7m) 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 in the 2020 financial year in order to ensure proactive management of amounts due.
Tenants that are potentially at risk are discussed on a weekly basis. The Group has a diverse range of tenants, many of which are large
multinational companies, and our rent collection statistics 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 29.d). The ECL allowance is calculated according
to the provision matrix and totals €519k (March 2020: €97k). In addition, ECL of €nil (March 2020: €50k) were realised in the year.
21. 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.
174
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
21. Issued capital and share premium continued
At 31 March 2021
No. of
shares
in issue
’000
Share
capital
’000
Share
premium reserve
’000
Capital redemption
reserve
’000
Total
Company Capital
’000
Balance at beginning of financial year
684,657
68,466
630,276
1,757
700,499
Shares cancelled during financial year
(23,125)
(2,313)
–
2,313
–
Capital reorganisation (note 23)
–
–
(50,000)
–
(50,000)
Shares issued during the financial year
125
13
168
–
181
Balance at end of financial year
661,657
66,166
580,444
4,070
650,680
At 31 March 2020
No. of
shares
in issue
’000
Share
capital
’000
Share
premium reserve
’000
Capital redemption
reserve
’000
Total
Company Capital
’000
Balance at beginning of financial year
697,589
69,759
624,483
–
694,242
Shares cancelled during the financial year
(17,573)
(1,757)
–
1,757
–
Shares issued during the financial year
4,641
464
5,793
–
6,257
Balance at end of financial year
684,657
68,466
630,276
1,757
700,499
Shares issued during the financial year
0.1m ordinary shares with a nominal value of €0.10 were issued on 23 April 2020 in settlement of share-based payments relating to
remuneration (see further details below). 4.6m ordinary shares were issued in the financial year ended 31 March 2020 in settlement
of share-based payments totalling €6.2m.
Shares cancelled during the financial year – share buyback programme:
On 7 August 2020, the Company commenced a €25m share buyback programme which completed on 16 November 2020. This
€25m share buyback was accretive to net asset value per share and earnings per share and completed the return to shareholders
of the proceeds from the sale of 77 Sir John Rogerson’s Quay, which started with the €25m share buyback programme undertaken
in the 2020 financial year. In total, 23.1m shares were acquired and cancelled in this financial year at an average price of €1.08 per share.
In the financial year ended 31 March 2020, 17.5m shares were acquired and cancelled at an average price of €1.42 per share.
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 2021 were 2.3m shares and a
maximum of a further 1.1m potential shares remain to be accrued as at the financial year end. Amounts due at 31 March 2020 were 1.5m
shares and a further 0.9m potential shares remained to be accrued.
On 29 July 2020 conditional awards of the Company’s ordinary shares of €0.10 cent each (“LTIP Shares”) under the LTIP were granted to
Executive Directors and other key management personnel totalling 2.4m shares. These vest after three years subject to performance and
service conditions.
Share capital
Ordinary shares of €0.10 each:
Financial year ended
31 March 2021
’000 of shares
Financial year ended
31 March 2020
’000 of shares
Authorised
1,000,000
1,000,000
Allotted, called up and fully paid
661,657
684,657
In issue at end of financial year
661,657
684,657
There are no shares issued which are not fully paid.
175
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
22. Other reserves
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Property revaluation
3,243
3,547
Cash flow hedging
442
(234)
Share-based payment reserve
2,953
2,066
Balance at end of financial year
6,638
5,379
22.a Property revaluation reserve
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at beginning of financial year
3,547
1,889
(Decrease)/increase arising on revaluation of properties
(304)
1,658
Balance at end of financial year
3,243
3,547
The Group’s head office is carried at fair value and the remeasurement of this property is made through other comprehensive income
(note 17). If disposed of, the property revaluation reserve relating to the premises sold will be transferred directly to retained earnings.
22.b Cash flow hedging reserve
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.
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at beginning of financial year
(234)
(288)
Gain arising on fair value of hedging instruments entered into for cash flow hedges
676
54
Balance at end of financial year
442
(234)
22.c Share-based payment reserve
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at beginning of financial year
2,066
7,556
Performance-related payments provided
1,455
1,252
Settlement of performance-related payments
(568)
(6,742)
Balance at end of financial year
2,953
2,066
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.
176
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
23. Retained earnings, distributable reserves, and dividends on equity instruments
Retained earnings
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at beginning of financial year
525,271
515,140
(Loss)/profit for financial year
(25,213)
61,043
Share issuance costs
(14)
(10)
Capital reorganisation
50,000
–
Share buyback
(25,035)
(25,036)
Other
88
–
Dividends paid
(33,777)
(25,866)
Balance at end of financial year
491,320
525,271
The following table is included to show the amount of retained earnings available for distribution to the owners of the parent company at
the end of the financial year.
Distributable reserves – Company only
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Retained earnings at end of financial year (Company only)
409,724
444,029
Deduct: unrealised gains and losses1
(348,927)
(408,513)
Distributable reserves
60,797
35,516
1. Unrealised intercompany 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 2020, a final dividend of 3.0 cent per share (€20.5m) and in January 2021 an interim dividend of 2.0 cent per share (€13.2m)
were paid to the holders of fully paid ordinary shares. A final dividend for the financial year ended 31 March 2021 of 3.4 cent per share
(c. €22.5m) has been proposed (March 2020: 3.0 cent per share or €20.5m) (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.
The Directors confirm that the Company continues to comply with the dividend payment obligations contained within the Irish REIT legislation.
24. 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).
177
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
24. Financial liabilities continued
24.a Borrowings
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Non-current
Unsecured bank borrowings
225,317
185,109
Unsecured private placement notes
74,639
74,582
Total non-current borrowings
299,956
259,691
Current
Unsecured bank borrowings
132
159
Unsecured private placement notes
353
358
Total current borrowings
485
517
Total borrowings
300,441
260,208
The maturity of non-current borrowings is as follows:
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Less than one year
485
517
Between one and two years
–
–
Between two and five years
262,637
185,109
Over five years
37,319
74,582
Total
300,441
260,208
Movements in borrowings during the financial year:
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at beginning of financial year
260,208
231,555
Bank finance drawn
42,100
57,945
Bank finance repaid
(2,500)
(29,968)
Interest payable
633
676
Balance at end of financial year
300,441
260,208
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 an unsecured revolving credit facility (“RCF”) of €320m provided by Bank of Ireland, Wells Fargo, Barclays Bank Ireland
and Allied Irish Banks. This facility, which expires in December 2023, 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 €200m of its EURIBOR exposure is capped at 0.25%
and the balance at 0.75% as at the financial year end, in accordance with the Group’s hedging policy (note 29.d.ii).
The Group also has €75m of private placement notes with an average maturity of 6.3 years as at 31 March 2021 (March 2020: 7.3 years)
which are held by two institutional investors. Coupons of 2.525% are fixed so long as the Group’s credit rating remains investment grade.
An additional €125m in 10- and 12-year senior private placement will be issued on 23 July 2021 bringing the average maturity of fixed debt
to 9.3 years as at that date. These new notes will also be unsecured, with an average fixed coupon of 1.9%.
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. Approximately €252k of financing costs were capitalised at an effective interest rate of 2.1% in
relation to the Group’s developments and major refurbishments during the financial year (March 2020: €141k).
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).
178
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
24. Financial liabilities continued
24.b Net debt reconciliation and LTV
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.
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Cash and cash equivalents
31,634
28,454
Cash reserved1
(8,442)
(7,457)
Gross debt – fixed interest rates
(75,000)
(75,000)
Gross debt – variable interest rate
(226,990)
(187,390)
Net debt at financial year end
(278,798)
(241,393)
Investment property at financial year end
1,427,413
1,465,183
Loan to value ratio
19.5%
16.5%
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:
Assets
Liabilities
Total
Unreserved cash and
cash equivalents
€’000
Unsecured borrowings
€’000
Private placement
notes
€’000
€’000
As at 1 April 2019
17,322
(159,413)
(75,000)
(217,091)
Loan drawdowns
–
(57,945)
–
(57,945)
Loan repayments
–
29,968
–
29,968
Increase in cash and cash equivalents
6,082
–
–
6,082
(Increase) in cash reserved1
(2,407)
–
–
(2,407)
As at 31 March 2020
20,997
(187,390)
(75,000)
(241,393)
Loan drawdowns
–
(42,100)
–
(42,100)
Loan repayments
–
2,500
–
2,500
Increase in cash and cash equivalents
3,180
–
–
3,180
(Increase) in cash reserved1
(985)
–
–
(985)
As at 31 March 2021
23,192
(226,990)
(75,000)
(278,798)
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.
25. Deferred tax liabilities
Accounting policy
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.
The Group is not generally liable for direct 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 financial year that might be available to offset against these liabilities.
179
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
25. Deferred tax liabilities continued
As at
31 March 2021
€’000
As at
31 March 2020
€’000
The balance comprises temporary differences attributable to:
Unrealised gains on residual business
206
395
26. Trade and other payables
Accounting policy
Trade payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Current
Purchase of investment property
3,121
–
Investment property payable
1,830
4,037
Rent prepaid
12,850
8,631
Rent deposits and other amounts due to tenants
3,438
2,543
Sinking funds
2,091
1,975
Trade and other payables
4,464
4,470
PAYE/PRSI payable
203
217
Balance at end of financial year
27,997
21,873
Of which are classified as financial instruments
5,220
2,240
Cash is held against balances due for service charges prepaid and sinking fund contributions, €5.8m (March 2020: €3.7m), and rental
deposits from tenants, €2.7m (March 2020: €2.5m). 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.
27. 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
€’000
Contract liabilities at 1 April 2019
2,008
(Revenue)/expense recognised during the financial year
(133)
Amounts received from customers under contracts
6,661
Amounts paid to suppliers
(5,359)
Contract liabilities at 31 March 2020
3,177
(Revenue)/expense recognised during the financial year
(233)
Amounts received from customers under contracts
7,157
Amounts paid to suppliers
(6,326)
Contract liabilities at 31 March 2021
3,775
180
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
27. Contract liabilities continued
Service charge arrangements are typically managed over a calendar year. Tenants are issued budgets in advance of each year and
charged quarterly in advance with their lease rental payments. This performance obligation is met on an ongoing basis by the provision of
services under the agreements and the payment of suppliers, for the most part, on a monthly basis for which funds are in place quarterly
in advance from the occupiers. Any excess funds received are held in service charge accounts until they are used or refunded. At the end
of each year, service charge accounts are independently audited and any under or over expenditure for that year is refunded or charged
to the tenant. Service charge amounts typically cover operating expenses for the multi-let buildings.
28. Cash flow information
28.a Purchase of investment property
Notes
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Property purchases
16
11,099
22,820
Deposit paid on investment property
–
(145)
Purchase of investment property outstanding
(3,121)
–
Cash purchases of investment properties
7,978
22,675
28.b Cash expenditure on investment property
Notes
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Development and refurbishment expenditure
16
18,109
23,636
Decrease in investment property costs payable
2,207
1,630
Cash expenditure on investment property
20,316
25,266
29. Financial instruments and risk management
29.a Financial risk management objectives and policy
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 risks (including interest and price risk), liquidity risks and credit risks. 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.
29.b Financial assets and financial liabilities
The following table shows the Group’s financial assets and liabilities and the methods used to calculate fair value.
Asset/Liability
Carrying value
Level
Fair value calculation technique
Assumptions
Trade and
other receivables
Amortised cost
3
Discounted cash flow
Most trade receivables are very short-term, the majority less than
one month, and therefore face value approximated fair value on
a discounted basis.
Financial liabilities
Amortised cost
3
Discounted cash flow
The fair value of financial liabilities held at amortised cost has been
calculated by discounting the expected cash flows at prevailing
interest rates.
Derivative
financial instruments
Fair value
2
Calculated fair value price
The fair value of derivative financial instruments is calculated
using pricing based on observable inputs from financial markets.
Trade and
other payables
Amortised cost
3
Discounted cash flow
All trade and other payables that could be classified as financial
instruments are very short-term, the majority less than one month,
and therefore face value approximated fair value on a discounted basis.
Contract liabilities
Amortised cost
3
Discounted cash flow
All contract liabilities classified as financial instruments are very
short-term, the majority less than one month, and therefore face
value approximated fair value on a discounted basis.
181
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
29. Financial instruments and risk management continued
29.c Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which inputs to
the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are not based on
observable market data.
The following tables present the classification of financial assets and liabilities within the fair value hierarchy and the changes in fair values
measurements at Level 3 estimated for the purposes of making the above disclosure
As at 31 March 2021
Level
Total
€’000
Of which are
assessed as
financial
instruments
€’000
Measured at
fair value
€’000
Measured at
amortised cost
€’000
Total financial
instruments
€’000
Fair value
financial
instruments
€’000
Trade and other receivables
3
13,180
1,265
–
1,265
1,265
1,265
Derivatives at fair value
2
972
972
972
–
972
972
Borrowings
3
(300,441)
(300,441)
–
(300,441)
(300,441)
(310,341)
Trade and other payables
3
(27,997)
5,220
–
5,220
5,220
5,220
Contract liabilities
3
(3,775)
(3,775)
–
(3,775)
(3,775)
(3,775)
(318,061)
(296,759)
972
(297,731)
(296,759)
(306,659)
As at 31 March 2020
Level
Total
€’000
Of which are
assessed as
financial
instruments
€’000
Measured at fair
value
€’000
Measured at
amortised cost
€’000
Total financial
instruments
€’000
Fair value
financial
instruments
€’000
Trade and other receivables
3
13,966
1,591
–
1,591
1,591
1,591
Derivatives at fair value
2
34
34
34
–
34
34
Borrowings
3
(260,208)
(260,208)
–
(260,208)
(260,208)
(266,559)
Trade and other payables
3
(21,873)
(2,240)
–
(2,240)
(2,240)
(2,240)
Contract liabilities
3
(3,177)
(3,177)
–
(3,177)
(3,177)
(3,177)
(271,258)
(264,000)
34
(264,034)
(264,000)
(270,351)
182
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
29. Financial instruments and risk management continued
Movements of assets measured at fair value in Level 3
This reconciliation includes investment property 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.
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at beginning of financial year
1,465,183
1,395,418
Transfers out of level 3
–
–
Purchases, sales, issues and settlement
Purchases1
29,208
46,456
Transfer from other assets
603
–
Transfer to/from property, plant and equipment
–
453
Fair value movement
(67,581)
22,856
Balance at end of financial year
1,427,413
1,465,183
1. Includes development, refurbishment and remedial expenditure.
29.d Financial risk management
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance.
Risk
Exposure arising from
Measurement
Management
Market risk – interest rate risk
Long-term borrowings at
variable rates
Sensitivity analysis
Derivative products – cap/swaption arrangements
Credit risk
Cash and cash equivalents,
trade receivables, derivative
financial instruments
Ageing analysis, credit ratings
where applicable
Cash investment policy with minimum ratings
Diversification of deposits where merited
Liquidity risk
Borrowings and other liabilities
Cash flow forecasts are completed
as part of budgeting process
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:
i. Risk management framework
The Group’s Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Audit
Committee is responsible for developing and monitoring the Group’s risk management policies. Risk management policies are established
to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to
limits. All of these policies are regularly reviewed in order to reflect changes in the market conditions and the Group’s activities. The Audit
Committee is assisted in its work by internal audit, 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, and trade receivables. Financial liabilities comprise
short-term payables, private placement notes and bank borrowings. Therefore the primary market risk is interest rate risk.
Interest rate risk: The Group’s policy is to ensure the majority of the interest rate risk on its drawn debt is fixed or hedged. Only eligible
hedging instruments (external interest rate swaptions and caps) are used against eligible hedged items (interest rates payable on financial
liabilities that are reliably measurable). There is a formal designation and documentation in place for the hedging relationship and the risk
management objective and this is reviewed on an at least annual basis.
The Group has both fixed and variable rate borrowings. Variable rate borrowings consist of an unsecured revolving credit facility which
is referenced to EURIBOR and the Group has hedged against increases in EURIBOR by entering into interest rate caps and swaptions
to restrict EURIBOR on €200m of notional debt to 0.25% and on a further €125m of notional debt to 0.75%.
183
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
29. Financial instruments and risk management continued
The table below illustrates how the hedges in place impact profit or loss under scenarios of a 1% and 2% increase in EURIBOR assuming
the amount drawn under the RCF at the financial year end.
As at 31 March 2021
Principal
€’000
Impact on profit +1%
EURIBOR Increase
€’000
Impact on profit +2%
EURIBOR Increase
€’000
Amount drawn
(226,990)
(2,270)
(4,540)
Hedging (caps)
€200m cap expires December 2025: strike 0.25%
200,000
1,500
3,500
€125m cap expires December 2021: strike 0.75%¹
125,000
67
337
Impact on profit after hedging
(703)
(703)
1. Assumes the most favourable hedge is utilised first – so the balance is against the hedge expiring in December 2021.
As at 31 March 2020
Principal
€’000
Impact on profit +1%
EURIBOR Increase
€’000
Impact on profit +2%
EURIBOR Increase
€’000
Amount drawn
(187,390)
(1,874)
(3,748)
Hedging (caps)
€125m expires December 2021: strike 0.75%
125,000
313
1,563
Impact on profit after hedging
(1,561)
(2,185)
Exposure to interest rates is limited to the exposure of the Group’s interest expense from borrowings. Variable rate borrowings
were €227m (March 2020: €187m) and gross debt was €302m in total at the financial year end of which €75m was fixed rate private
placement notes (March 2020: €262m of which €75m was fixed). The Group’s drawings under its facilities were based on a EURIBOR
rate of 0% throughout the financial year.
iii. Credit risk
Credit risk is the risk of loss of principal or loss of a financial reward stemming from a counterparty’s failure to repay a loan or otherwise meet
a contractual obligation. Credit risk is therefore, for the Group and Company, the risk that the counterparties underlying its assets default.
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 20). Included in trade receivables is a net amount of €0.7m relating to expenditure on fit-outs
that is recoverable from tenants over the duration of the lease (March 2020: €1.0m). This amount is monitored closely in the current
economic environment due to its long-term nature. 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 20. ECL on financial and contract assets
recognised during the financial year were €423k (March 2020: €147k). 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, (57% of its
contracted rent is from the technology sector and state entities), and to date our rent collection statistics have remained strong (note 2.e).
184
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
29. Financial instruments and risk management continued
The maximum amount of credit exposure is therefore:
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Other financial assets
972
34
Trade and other receivables
13,180
13,966
Cash and cash equivalents
31,634
28,454
Balance at end of financial year
45,786
42,454
iv. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures that it has
sufficient available funds to meet obligations as they fall due. Net current assets, a measure of the Group’s ability to meet its current
liabilities, at the financial year end were:
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Net current assets at the financial year end
3,347
6,638
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.
In addition to a cash balance of €23m (excludes cash from sinking funds and tenant deposits) (March 2020: €21m), the Group had access
at 31 March 2021 to €93m (March 2020: €133m) in undrawn amounts under its revolving credit facility (note 24.a), which matures in
December 2023. In July 2021, the Group will receive an additional €125m from the issue of US private placement debt (note 34.3).
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 financial year.
At 31 March 2021
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
Non-derivatives
Borrowings
300,441
324,473
3,217
3,217
6,434
271,247
40,358
Trade payables
27,997
27,997
27,997
–
–
–
–
Contract liabilities
3,775
3,775
3,775
–
–
–
–
Total
332,213
356,245
34,989
3,217
6,434
271,247
40,358
At 31 March 2020
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
Non-derivatives
Borrowings
260,208
285,517
2,821
2,821
5,642
194,629
79,604
Trade payables
2,240
2,240
2,240
–
–
–
–
Contract liabilities
3,177
3,177
3,177
–
–
–
–
Total
265,625
290,934
8,238
2,821
5,642
194,629
79,604
185
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
29. Financial instruments and risk management continued
v. Capital management
The Group’s objectives when managing capital are to:
−safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for
other stakeholders; and
−maintain an optimal capital structure to minimise the cost of its capital.
In order to manage its capital, the Group may adjust the amount of dividends paid to shareholders (while ensuring it remains compliant
with the dividend distribution requirements of the Irish REIT regime), return capital to shareholders, issue new shares or sell assets to
reduce debt. On 7 August 2020, the Company commenced a €25m share buyback programme which completed on 16 November 2020
(note 21). The Group is also obliged to distribute at least 85% of its property rental income annually via dividends 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 2021 the total capital of the Group was €1,148m (March 2020: €1,231m).
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 Group’s investment property portfolio versus the Irish
property market, as calculated by MSCI.
−Total Accounting Return (“TAR”) %: Measures the absolute growth in the Group’s EPRA NTA per share plus any ordinary dividends 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) on a per share basis. 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 24.a). The loan to value ratio (“LTV”) is expressed as net
debt (note 24.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 24.b).
Key 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.
186
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
Section V – Other
This section contains notes that do not belong in any of the previous categories.
30. Operating lease receivables
Future aggregate minimum rentals receivable (to the next break date) under non-cancellable operating leases are:
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Operating lease receivables due in:
Less than one year
65,552
64,206
Between two and five years
169,348
178,678
Greater than five years
117,043
142,282
Total
351,943
385,166
The Group leases its investment properties under operating leases. The weighted average unexpired lease term based (“WAULT”) of the
office portfolio at 31 March 2021, based on the earlier of lease break or expiry date was 5.8 years (March 2020: 6.4 years).
These calculations are based on all leases in place at 31 March 2021, i.e. including leases that are in place but have not yet commenced.
31. Capital commitments
The Group has entered into a number of development contracts to develop buildings in its portfolio. The total capital expenditure
commitment in relation to these is approximately €3m (March 2020: €18m).
32. 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.
187
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
33. Related parties
33.a Subsidiaries
All transactions between the Company and its subsidiaries are eliminated on consolidation.
The following are the major subsidiaries of the Group:
Name
Registered address/
Country of incorporation
Shareholding/
Number of shares held
Directors
Company Secretary
Nature of business
Hibernia REIT
Holding Company
Limited
1WML
Windmill Lane
Dublin D02 F206
Ireland
100%/1
Justin Dowling
Thomas Edwards-Moss
Kevin Nowlan
Frank O’Neill
Sean O’Dwyer
Holding property
interests
Hibernia REIT
Holdco One
Limited
1WML
Windmill Lane
Dublin D02 F206
Ireland
100%/1
Justin Dowling
Thomas Edwards-Moss
Kevin Nowlan
Frank O’Neill
Sean O’Dwyer
Holding property
interests
Hibernia REIT
Holdco Two
Limited
1WML
Windmill Lane
Dublin D02 F206
Ireland
100%/1
Edwina Governey
Kevin Nowlan
Mark Pollard
Sean O’Dwyer
General partner
Hibernia REIT
Holdco Three Limited
1WML
Windmill Lane
Dublin D02 F206
Ireland
100%/1
Justin Dowling
Thomas Edwards-Moss
Frank O’Neill
Sean O’Dwyer
Property
development
Hibernia REIT
Holdco Four
Limited
1WML
Windmill Lane
Dublin D02 F206
Ireland
100%/1
Justin Dowling
Thomas Edwards-Moss
Frank O’Neill
Sean O’Dwyer
Holding property
interests
Hibernia REIT
Building
Management
Services Limited
1WML
Windmill Lane
Dublin D02 F206
Ireland
100%/1
Justin Dowling
Thomas Edwards-Moss
Kevin Nowlan
Frank O’Neill
Sean O’Dwyer
Property
development
WK Nowlan REIT
Management
Limited
1WML
Windmill Lane
Dublin D02 F206
Ireland
100%/300,000
Thomas Edwards-Moss
Kevin Nowlan
Frank O’Neill
Sean O’Dwyer
Investment
holding company
33.b Other related party transactions
Thomas Edwards-Moss (CFO) rented an apartment from the Group at market rent and paid €33k in rent during the financial year
(March 2020: €14k).
Stewart Harrington (Non-Executive Director) rented an apartment from the Group for part of the financial year at market rent and paid
€17k in rent during the financial year (March 2020: €9k).
188
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
C O N T I N U E D
33. Related parties continued
33.c Key management personnel
In addition to the Executive and Non-Executive Directors, the following are the key management personnel of the Group:
Justin Dowling
Director of Property
Edwina Governey
Chief Investment Officer
Sean O’Dwyer
Company Secretary and Risk & Compliance Officer
Frank O’Neill
Director of Operations
Gerard Doherty
Director of Development
The remuneration of the above key management personnel and Executive Directors paid during the financial year was as follows:
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Short-term benefits
3,751
3,385
Post-employment benefits
288
262
Other long-term benefits
–
–
Share-based payments
222
367
Total for the financial year
4,261
4,014
The total fixed remuneration paid to the key management personnel in the financial year, all of whom are engaged in managing the
Group’s activities, was €4,261,292 of which €3,017,153 comprised fixed remuneration and €1,244,139 comprised variable remuneration
(31 March 2020: €4,013,896 of which €2,883,473 comprised fixed remuneration and €1,130,243 comprised variable remuneration).
The remuneration of Executive Directors and key management is determined by the Remuneration Committee, having regard to the
performance of individuals, of the Group and market trends.
34. Events after the financial year end
1. On 22 April 2021, 154,349 ordinary shares were issued pursuant to the settlement of performance-related remuneration awards for the
year ended 31 March 2019. Following the transaction, the issued share capital of the Company is 661,811,141 ordinary shares of €0.10 each.
2. The Directors have proposed a final dividend of 3.4 cent per share that is subject to approval at the AGM to be held on 27 July 2021.
3. On 20 May 2021, the Group announced the issue of €125m senior unsecured fixed rate notes which will be funded on 23 July 2021 in
two series as follows:
−€62.5m 1.88% due July 2031
−€62.5m 1.92% due July 2033
Pro-forma for this debt issuance, the weighted average term of the Group’s debt at 31 March 2021 would have been 5.2 years, up from
3.4 years excluding the issue.
189
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Notes
31 March 2021
€’000
31 March 2020
€’000
Assets
Non-current assets
Investment property
e
1,247,910
1,277,685
Property, plant and equipment
f
3,231
3,803
Investment in subsidiaries
g
26,235
26,235
Other assets
–
534
Loans to subsidiaries
i
–
116,991
Trade and other receivables
h
7,192
7,575
Total non-current assets
1,284,568
1,432,823
Current assets
Trade and other receivables
h
3,638
3,647
Loans to subsidiaries
i
109,359
–
Cash and cash equivalents
29,103
26,779
Total current assets
142,100
30,426
Total assets
1,426,668
1,463,249
Equity and liabilities
Capital and reserves
Share capital
j
66,166
68,466
Share premium
j
580,444
630,276
Capital redemption reserve fund
j
4,070
1,757
Other reserves
k
5,469
4,582
Retained earnings
l
409,724
444,029
Total equity
1,065,873
1,149,110
Non-current liabilities
Financial liabilities
m
299,956
288,545
Lease liability
n
1,874
2,085
Deferred tax liabilities
o
206
395
Total non-current liabilities
302,036
291,025
Current liabilities
Financial liabilities
m
29,945
517
Lease liability
n
211
203
Trade and other payables
p
25,426
19,617
Contract liabilities
q
3,177
2,777
Total current liabilities
58,759
23,114
Total equity and liabilities
1,426,668
1,463,249
The Company’s loss after tax for the financial year ended 31 March 2021 determined in accordance with FRS 101 is €25.6m (31 March 2020:
Profit of €58.9m).
The Company’s financial statements on pages 190 to 200 were approved and authorised for issue by the Board of Directors on
14 June 2021 and were signed on its behalf by:
Kevin Nowlan
Thomas Edwards-Moss
Chief Executive Officer
Chief Financial Officer
14 June 2021
14 June 2021
190
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
C O M PA N Y S TAT 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 AT 3 1 M A R C H 2 0 2 1
Share capital
€’000
Share premium
€’000
Capital
redemption
reserve fund
€’000
Property
revaluation
reserve
€’000
Share-based
payment
reserve
€’000
Retained
earnings
€’000
Total
€’000
Balance at 1 April 2019
69,759
624,483
–
1,889
7,556
436,014
1,139,701
Profit for the financial year
–
–
–
–
–
58,927
58,927
Other
comprehensive income for the financial year
–
–
–
627
–
–
627
Balance before transactions
with shareholders
69,759
624,483
–
2,516
7,556
494,941
1,199,255
Issue of share capital
464
5,793
–
–
(6,257)
(10)
(10)
Own shares acquired and cancelled in the
financial year
(1,757)
–
1,757
–
–
(25,036)
(25,036)
Dividends paid
–
–
–
–
–
(25,866)
(25,866)
Share-based payments
–
–
–
–
767
–
767
Balance at 31 March 2020
68,466
630,276
1,757
2,516
2,066
444,029
1,149,110
Profit for the financial year
–
–
–
–
–
(25,561)
(25,561)
Balance before transactions
with shareholders
68,466
630,276
1,757
2,516
2,066
418,468
1,123,549
Capital reorganisation
–
(50,000)
–
–
–
50,000
–
Issue of share capital
13
168
–
–
(181)
(14)
(14)
Own shares acquired and cancelled in the
financial year
(2,313)
2,313
–
–
(25,035)
(25,035)
Dividends paid
–
–
–
–
–
(33,777)
(33,777)
Share-based payments
–
–
–
–
1,068
82
1,150
Balance at 31 March 2021
66,166
580,444
4,070
2,516
2,953
409,724
1,065,873
191
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
C O M PA N Y S TAT 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 1
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 and applies FRS 101 ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council (“FRS 101”).
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, on pages 138
to 189 prepared in accordance with IFRS and the Companies Act 2014,
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.
Indicator of impairment
The Company’s shares are trading at a significant discount to the net asset value per share reported in the consolidated and Company
statement of financial posiiton at 31 March 2021 the closing share price discount to both the IFRS NAV per share and the EPRA NTA per
share was 36%. As at close of business on 11 June 2021, being the last day before the signing of these financial statements, the share price
discount to both was 28%. The Company’s main assets are its investment properties, which comprise 87% of total assets or 117% of net
asset value. For further discussion on this and information on going concern refer to note 2.e and 2.f 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 and key
assumptions in terms of unobservable inputs.
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.
192
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O M PA N Y F I N A N C I A L S TAT 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 1
c) Auditor’s remuneration
For information on the Auditor’s remuneration refer to note 8 of the consolidated financial statements.
d) Employment
Number of employees
Financial year ended
31 March 2021
Number
Financial year ended
31 March 2020
Number
Total employees at financial year end
26
27
Average employees
26
24
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 2021
€’000
Financial year ended
31 March 2020
€’000
Wages and salaries
5,085
4,796
Social insurance costs
546
544
Employee share-based payment expense
1,386
1,149
Pension costs – defined contribution plan
308
340
Total
7,325
6,829
e) Investment property
At 31 March 2021
Fair value category
Office assets
Level 3
€’000
Office development
assets
Level 3
€’000
Residential
assets
Level 3
€’000
Industrial/
other
assets
Level 3
€’000
Total
Level 3
€’000
Carrying value at start of financial year
1,041,008
47,999
151,360
37,318
1,277,685
Additions:
Property purchases
6,900
–
366
3,833
11,099
Development and refurbishment expenditure1
2,933
14,973
203
–
18,109
Transferred between segments2
(2,500)
2,500
–
–
–
Transferred from other assets3
–
–
550
53
603
Revaluations included in income statement
(60,070)
(3,466)
7,331
(3,381)
(59,586)
Carrying value at end of financial year
988,271
62,006
159,810
37,823
1,247,910
1. This includes capital expenditure on previously completed developments after their transfer to the office segment.
2. 50 City Quay is undergoing redevelopment and has been recognised as a development property from 30 September 2020.
3. Three assets remaining from an historic portfolio purchase have been recognised at fair value as investment property at 31 March 2021.
Key unobservable inputs used in the valuation of the Company’s investment property at 31 March 2021
Market value
€'000
Estimated rental value
Equivalent yield
Low
High
Low
High
Office
988,271
€25.00psf
€62.50psf
3.99%
7.17%
Office development
62,006
€40.00psf
€60.75psf
4.46%
5.60%
Residential1
159,810
€13,896pa
€31,200pa
3.55%
4.12%
Industrial/other
37,823
€5.25psf
€9.00psf
6.27%
8.38%
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.
193
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
e) Investment property continued
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
46.9
(46.9)
93.7
(93.7)
(64.2)
72.0
(121.9)
152.8
Office development
2.6
(2.6)
5.1
(5.1)
(3.6)
3.9
(6.7)
8.3
Residential
7.9
(7.9)
15.7
(15.7)
(10.1)
11.8
(19.0)
25.3
Industrial/other
0.6
(0.6)
1.4
(1.4)
(0.7)
0.7
(1.4)
1.5
Total
58.0
(58.0)
115.9
(115.9)
(78.6)
88.4
(149.0)
187.9
Each 5% movement in construction costs would impact the investment property valuations by €10m at 31 March 2021.
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.
At 31 March 2021
Right-of-use asset
€’000
Office and computer
equipment
€’000
Leasehold
improvements and
fixtures and fittings
€’000
Total
€’000
Cost or valuation
At 1 April 2020
2,403
152
1,647
4,202
Additions
–
21
19
40
At 31 March 2021
2,403
173
1,666
4,242
Depreciation
At 1 April 2020
(140)
(79)
(180)
(399)
Charge for the period
(240)
(39)
(333)
(612)
At 31 March 2021
(380)
(118)
(513)
(1,011)
Carryng amount at 31 March 2021
2,023
55
1,153
3,231
For further information on the Company’s property, plant and equipment refer to note 17 of the consolidated financial statements.
194
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O M PA N Y F I N A N C I A L S TAT 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 1
C O N T I N U E D
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.
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at end of financial year
26,235
26,235
The major subsidiaries of the Company are disclosed in note 33.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.
No impairments were recognised during the financial year (March 2020: €0.1m). The Group has no interests in unconsolidated subsidiaries.
h) Trade and other receivables
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Non-current
Property income receivables
6,858
6,950
Recoverable capital expenditure
364
661
Expected credit loss allowance
(30)
(36)
Balance at end of financial year – non-current
7,192
7,575
Current
Property income receivables
3,133
1,998
Recoverable capital expenditure
369
460
Expected credit loss allowance
(489)
(61)
3,013
2,397
Prepayments
487
964
Income tax refund due
–
2
VAT refundable
138
284
Balance at end of financial year– current
3,638
3,647
Balance at end of financial year – total
10,830
11,222
Of which are classified as financial assets
1,241
1,405
For information on trade receivables refer to note 20 of the consolidated financial statements.
195
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
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.
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 – recognise interest (if any) on a net basis
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.
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Balance at beginning of financial year
116,991
148,946
Loan advances
937
4,233
Loan repayments
(217)
(36,188)
Allowance for ECL
(8,352)
–
Interest income at effective interest rate
–
–
Balance at end of financial year
109,359
116,991
The maturity of intercompany loans are as follows:
Less than one year
109,359
116,991
Management has assessed the loans for recovery at 31 March 2021 and determined that, except as discussed under ECL below, there
has been no significant increase in credit risk since initial recognition, all loans to subsidiaries remain at stage 1 and they expect to recover
the balances outstanding in full. The majority of this balance, €108.4m, relates to two subsidiaries that hold three of the Group’s investment
properties. These funds have been provided from the Group’s borrowings and cash reserves, as loans repayable on demand, to finance
the assets held. There is no interest payable and they are held at amortised cost. While the contractual terms of these loans are repayable
on demand, the properties held in these subsidiaries are held for long term income and capital returns for the Group. The ‘recovery
strategy’ for these loans is to arrange for the sale of these properties and subsequent repayment of the loan.
ECL: In relation to one of the loans, €29.4m, the investment property that it has funded has been valued at €21.1m as at 31 March 2021.
If repayment of the loan was demanded at this date, the full amount would not therefore be recovered. While this property is part of the
longer term development pipeline of the Group and is not expected to be sold in the next few years nor to realise a loss on the eventual
sale, the Directors have made an expected credit loss allowance of €8.4m. This represents the amount which might remain unrecovered
after selling the underlying asset if the subsidiary defaults on the loan.
j) Issued share capital and share premium
For information on issued share capital refer to note 21 of the consolidated financial statements.
196
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O M PA N Y F I N A N C I A L S TAT 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 1
C O N T I N U E D
k) Other reserves
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Property revaluation
2,516
2,516
Share-based payment reserve
2,953
2,066
Balance at end of period
5,469
4,582
The property revaluation reserve represents revaluation gains on South Dock House during the time it was recognised as owner
occupied property.
For further information on the share-based payment reserve refer to note 22.c of the consolidated financial statements.
l) Retained earnings, distributable reserves and dividends on equity instruments
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at beginning of financial year
444,029
436,014
(Loss)/Profit for financial year
(25,561)
58,927
Share issuance costs
(14)
(10)
Capital rerganisation
50,000
–
Share buy-back
(25,035)
(25,036)
Other
82
–
Dividends paid
(33,777)
(25,866)
Balance at end of financial year
409,724
444,029
For further information on retained earnings and distributable reserves please refer to note 23 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.
m) Financial liabilities
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Non-current
Debenture issued to subsidiary
–
28,854
Unsecured bank borrowings
225,317
185,109
Unsecured private placement notes
74,639
74,582
Total non-current borrowings
299,956
288,545
Current
Debenture issued to subsidiary
29,460
–
Unsecured bank borrowings
132
159
Unsecured private placement notes
353
358
Total current borrowings
29,945
517
Total borrowings
329,901
289,062
197
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
m) Financial liabilities continued
The maturity of non-current borrowings is as follows:
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Less than one year
29,945
517
Between one and two years
–
28,854
Between two and five years
262,637
185,109
Over five years
37,319
74,582
Total
329,901
289,062
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Balance at beginning of financial year
289,062
259,801
Bank finance drawn
42,100
57,945
Bank finance repaid
(2,500)
(29,968)
Interest payable
1,239
1,284
Balance at end of financial year
329,901
289,062
For further information on financial liabilities please refer to note 24 of the consolidated financial statements.
n) Lease liability
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Amount due in
Less than one year
211
203
Between two and five years
939
901
Ove five years
935
1,184
Total lease liability
2,085
2,288
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Amounts recognised in the income statement
Depreciation expense on right-of-use asset
240
140
Interest on lease liability
97
60
337
200
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Analysis of movement in lease liability
Opening balance
2,288
–
Additions
–
2,403
Lease payments
(300)
(175)
Interest expense
97
60
Total lease liability
2,085
2,288
o) Deferred taxation
For further information on financial liabilities refer to note 25 of the consolidated financial statements.
198
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
N O T E S T O T H E C O M PA N Y F I N A N C I A L S TAT 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 1
C O N T I N U E D
p) Trade and other payables
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Current
Purchase of investment property
3,121
–
Investment property payable
1,741
4,037
Rent prepaid
11,153
7,105
Rent deposits and other amounts due to tenants
3,020
2,185
Sinking funds
1,919
1,858
Trade and other payables
4,286
4,231
PAYE/PRSI payable
186
201
Balance at end of financial year
25,426
19,617
Of which are classified as financial instruments
7,284
2,209
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 26 of the consolidated financial statements.
q) Contract liabilities
Contract liabilities
€’000
Contract liabilities at 1 April 2019
1,618
Amounts received from customers under contracts
(4,045)
Amounts paid to suppliers
5,204
Contract liabilities at 31 March 2020
2,777
Amounts received from customers under contracts
(3,862)
Amounts paid to suppliers
4,262
Contract liabilities at 31 March 2021
3,177
For further information on contract liabilities refer to note 27 of the consolidated financial statements.
199
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
r) Operating lease receivables
Future aggregate minimum rentals receivable (to the next break date) under non-cancellable operating leases are:
As at
31 March 2021
€’000
As at
31 March 2020
€’000
Operating lease receivables due in:
Less than one year
58,004
56,676
Between two and five years
140,586
149,528
Greater than five years
109,904
109,904
Total
308,494
316,108
s) Capital commitments
Please refer to note 31 of the consolidated financial statements.
t) Related parties
i. Subsidiaries
Please refer to note 33.a of the consolidated financial statements.
ii. Other transactions
Transactions with related parties are the same as those disclosed in note 33 of the consolidated financial statements.
iii. Income statement of the Parent Company
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 loss after tax for the financial year ended 31 March 2021 determined in accordance with
FRS 101 is €25.6m (31 March 2020: Profit of €58.9m.)
u) Events after the reporting date
For information on events after the reporting date refer to note 34 of the consolidated financial statements.
N O T E S T O T H E C O M PA N Y F I N A N C I A L S TAT 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 1
C O N T I N U E D
200
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
i. Five-year record
Based on the Group’s consolidated financial statements for the financial years ended 31 March:
Consolidated statement of financial position
2021
€’m
2020
€’m
2019
€’m
2018
€’m
2017
€’m
Investment property
1,427
1,465
1,395
1,309
1,167
Other assets
54
52
77
44
43
Financial liabilities
(300)
(260)
(231)
(219)
(171)
Other liabilities
(32)
(26)
(23)
(22)
(25)
Net assets
1,149
1,231
1,218
1,112
1,014
Financed by:
Share capital
650
700
694
687
678
Reserves
499
531
524
425
336
Total equity
1,149
1,231
1,218
1,112
1,014
IFRS NAV per share (cent)
173.6
179.8
174.7
160.6
147.9
EPRA NTA per share (cent)1
172.7
179.2
173.3
159.1
146.3
Consolidated income statement
2021
€’m
2020
€’m
2019
€’m
2018
€’m
2017
€’m
Net rental income
63
59
53
46
40
Gains and (losses) on investment property
(67)
23
98
88
104
Other gains and losses
–
–
–
–
2
Total operating expenses
(13)
(14)
(19)
(21)
(21)
Operating profit/(loss)
(17)
68
132
113
125
Net finance expense
(8)
(7)
(8)
(6)
(6)
Profit/(loss) for the financial year
(25)
61
124
107
119
Basic earnings per share (cent)
(3.7)
8.9
17.8
15.5
17.3
Diluted earnings per share (cent)
(3.7)
8.8
17.6
15.4
17.2
EPRA earnings per share (cent)
6.3
5.5
4.0
2.8
2.2
Diluted EPRA earnings per share (cent)
6.2
5.5
3.9
2.8
2.2
Dividend per share (cent)
5.4
4.8
3.5
3.0
2.2
1. For 2019 and prior years EPRA NAV is presented, under the 2016 EPRA BPR. EPRA updated these in October 2019 and we present EPRA NTA from
then onwards (see iii.f EPPRA NAV measures for more information). There is no material change between EPRA NAV and EPRA NTA for Hibernia.
ii. Alternative performance measures
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 Guidelines 2019
(“BPR”). These measures are defined by EPRA in order to encourage comparability with the real estate sector in Europe (see Section iii).
The table on pages 202 to 203 lists the APMs used in this report together with information on their calculation and relevance.
S U P P L E M E N TA R Y I N F O R M AT I O N ( U N A U D I T E D )
201
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
ii. Alternative performance measures continued
APM
Reconciled to IFRS measure:
Reference
Definition
Contracted rent roll
n/a
n/a
Contracted rent under the lease agreements, excluding all incentives or rent
abatements, for the portfolio as at the reporting date.
EPRA cost ratios
IFRS operating expenses
iii.c
Calculated using all administrative and operating expenses under IFRS, net
of service fees. It is presented including and excluding direct vacancy costs.
EPRA earnings
IFRS (loss)/profit for the
financial year attributable
to owners of the parent
iii.a
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 per share
(“EPRA EPS”)
IFRS earnings per share
Note 14
iii.a
EPRA earnings on a per share basis.
EPRA like-for-like rental
growth reporting
n/a
iii.b
Like-for-like rental growth compares the growth of the net rental income of
the portfolio that has been consistently in operation, and not under
development, during the two full preceding periods that are described.
EPRA Net Reinstatement
Value (“NRV”)
Total assets less total
liabilities as calculated
under IFRS (IFRS NAV)
iii.f
This assumes that entities never sell assets and aims to represent the value
required to rebuild the entity.
EPRA Net Reinstatement
Value (“NRV”) per share
Total assets less total
liabilities as calculated
under IFRS (IFRS NAV)
iii.f
EPRA NRV calculated on a diluted basis.
EPRA Net Tangible Assets
(“NTA”)
Total assets less total
liabilities as calculated
under IFRS (IFRS NAV)
iii.f
Assumes that entities buy and sell assets, thereby crystallising certain levels
of unavoidable deferred tax.
EPRA Net Tangible Assets
(“NTA”) per share
Total assets less total
liabilities as calculated
under IFRS (IFRS NAV)
iii.f
EPRA NTA calculated on a diluted basis.
EPRA Net Disposal Value
(“NDV”)
Total assets less total
liabilities as calculated
under IFRS (IFRS NAV)
iii.f
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 Net Disposal Value
(“NDV”) per share
Total assets less total
liabilities as calculated
under IFRS (IFRS NAV)
iii.f
EPRA NDV calculated on a diluted basis.
EPRA Net Initial Yield
(“EPRA NIY”)
n/a
iii.e
Inherent yield of the completed portfolio using passing rent at the
reporting date.
EPRA ‘topped-up’ Net Initial
Yield (“EPRA ‘topped-up’
NIY”)
n/a
iii.e
Inherent yield of the completed portfolio using contracted rent at the
reporting date.
EPRA vacancy rate
n/a
iii.d
ERV of the vacant space over the total ERV of the completed portfolio.
IFRS net asset value
(“IFRS NAV”)
Total assets less total
liabilities as calculated
under IFRS (equivalent to
total equity per the
consolidated statement of
financial position)
Note 15
Loan to value (“LTV”)
n/a
Note 24.b
Net debt as a proportion of the value of investment properties.
Final and interim dividend
per share
Dividend per share
Note 13
Number of cent to be distributed to shareholders in dividends.
Net debt
Financial liabilities
Note 24.b
Financial liabilities net of cash balances (as reduced by the amounts
collected from tenants for deposits, sinking funds and similar) available.
Passing rent
n/a
n/a
Annualised gross property rent receivable on a cash basis as at the
reporting date.
Property-related capital
expenditure
Amounts expended on
investment property, i.e.
property purchases and
development and
refurbishment expenditure
Note 16
Property-related capital expenditure analysed so as to illustrate the element
of such expenditure that is ‘maintenance’ rather than investment.
202
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S U P P L E M E N TA R Y I N F O R M AT I O N ( U N A U D I T E D )
C O N T I N U E D
APM
Reconciled to IFRS measure:
Reference
Definition
Reversionary potential
n/a
iii.g.iii
Potential rent uplift available from leases with break dates, expiring or review
events in future periods.
Total Accounting Return
Indirectly through EPRA
NTA per share (Calculated
through EPRA NAV per
share in financial year
ended 31 March 2020)
Note 15
Measures the absolute growth in the Group’s EPRA NTA per share plus any
ordinary dividends paid in the accounting period.
Total Property Return
n/a
n/a
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 All Assets Index.
iii. European Public Real Estate Association (“EPRA”) Performance Measures
EPRA performance measures presented here are calculated according to the EPRA Best Practice Recommendation Guidelines (“BPR”).
EPRA performance measures are used in order to enhance transparency and comparability with other public real estate companies in
Europe. EPRA earnings and EPRA NTA 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
Unit
Financial year ended
31 March 2021
Financial year ended
31 March 2020
EPRA earnings
€’000
42,223
38,093
EPRA EPS
cent
6.3
5.5
Diluted EPRA EPS
cent
6.2
5.5
LfL rental growth
%
6.7%
3.9%
EPRA cost ratio – including direct vacancy costs
%
25.0%
26.8%
EPRA cost ratio – excluding direct vacancy costs
%
23.5%
25.2%
EPRA performance measure
Unit
As at 31 March 2021
As at 31 March 2020
EPRA Net Initial Yield (“NIY”)
%
4.4%
4.1%
EPRA “topped-up” NIY
%
4.4%
4.4%
EPRA Net Reinstatement Value (“EPRA NRV”)
cent
192.7
199.5
EPRA Net Tangible Assets (“EPRA NTA”)
cent
172.7
179.2
EPRA Net Disposal Value (“EPRA NDV”)
cent
171.2
178.3
EPRA vacancy rate
%
8.5%
6.9%
Adjusted EPRA vacancy rate
%
7.3%
6.9%
203
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
ii. Alternative performance measures continued
iii. European Public Real Estate Association (“EPRA”) Performance Measures continued
iii.a EPRA earnings
EPRA earnings, earnings from operational activities, are presented as they are a key measure of the Group’s underlying operating result
and an indication of the extent to which current and proposed 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
Notes
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
(Loss)/profit for the financial year attributable to owners of the parent
(25,213)
61,043
Adjusted for:
(Gains) and losses on investment property
16
67,581
(22,856)
(Gains) on other assets
(69)
–
Deferred tax in respect of EPRA adjustments
(188)
(152)
Changes in fair value of financial instruments and associated close-out costs
112
58
EPRA earnings
42,223
38,093
EPRA earnings per share and diluted EPRA earnings per share
’000
’000
Weighted average number of ordinary shares (basic)
14
673,618
688,759
Weighted average number of ordinary shares (diluted)
14
676,990
691,134
EPRA earnings per share (cent)
6.3
5.5
Diluted EPRA earnings per share (cent)
6.2
5.5
iii.b EPRA like-for-like (“LfL”) rental growth
Lf net rental growth compares the growth of the net rental income of the portfolio that has been consistently in operation by the Group,
and not under development, during the two full preceding periods that are described. Information on the growth in rental income, other
than from acquisitions and disposals, allows stakeholders to arrive at an estimate of organic growth. This can be used to measure whether
the reversions feed through as anticipated, and whether the vacancy rates are changing. This 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 2021
Whole portfolio
Like-for-like portfolio
Value –
all assets
Net rental
income
Value
LfL assets
Net rental
income
LfL assets
current year
Net rental
income
LfL assets prior
year
Growth in net rental income
Segment
€’m
€’m
€’m
€’m
€’m
€’m
%
Office assets
1,138.8
55.8
1,125.4
55.3
51.4
3.9
7.5
Residential assets
167.7
5.8
166.8
5.8
5.9
(0.1)
(1.1)
Industrial/other assets
58.9
1.7
16.3
1.3
1.1
0.2
11.8
Total ‘in-place’ portfolio
1,365.4
63.3
1,308.5
62.4
58.4
4.0
6.7
Development assets
62.0
–
Assets sold
–
–
Total portfolio
1,427.4
63.3
Buildings excluded from LfL as at 31 March 2021
Developments in progress/sites: 2 Cumberland Place, 50 City Quay, Newlands.
Properties acquired: 2021: Docklands office asset, units in Dublin Industrial Estate; 2020: Docklands office asset, units in Dublin Industrial Estate, Industrial
unit Malahide Road.
204
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S U P P L E M E N TA R Y I N F O R M AT I O N ( U N A U D I T E D )
C O N T I N U E D
iii. European Public Real Estate Association (“EPRA”) Performance Measures continued
iii.b EPRA like-for-like (“LfL”) rental growth continued
Financial year ended 31 March 2020
Whole portfolio
Like-for-like portfolio
Value
- all assets
Net rental
income
Value
LfL assets
Net rental
income
LfL assets
current year
Net rental
income
LfL assets prior
year
Growth in net rental income
Segment
€’m
€’m
€’m
€’m
€’m
€’m
%
Office assets
1,196.9
51.5
963.2
45.7
44.1
1.6
3.7
Residential assets
159.5
5.9
147.7
5.9
5.6
0.3
6.0
Industrial/other assets
60.8
1.2
13.0
0.7
0.7
0.0
(0.9)
Total ‘in-place’ portfolio
1,417.2
58.6
1,123.9
52.3
50.4
1.9
3.9
Development assets
48.0
–
Assets sold
–
–
Total portfolio
1,465.2
58.6
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
iii.c EPRA cost ratios
A key measure to enable meaningful measurement and comparison of the changes in a company’s operating costs.
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Total operating expenses under IFRS
13,485
13,393
Property expenses1
3,174
3,051
Net service charge costs/fees
(75)
65
EPRA costs including direct vacancy costs
16,584
16,509
Direct vacancy costs
(984)
(964)
EPRA costs excluding direct vacancy costs
15,600
15,545
Gross rental income1
66,405
61,701
EPRA cost ratio including direct vacancy costs
25.0%
26.8%
EPRA cost ratio excluding direct vacancy costs
23.5%
25.2%
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 prior financial year. Property expenses are reduced by costs which are
reimbursed through rental receipts.
iii.d EPRA vacancy rate
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 of the completed portfolio.
EPRA vacancy rate: Calculated as recommended excluding current developments/refurbishments projects underway: 2 Cumberland
Place and 50 City Quay.
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Annualised ERV vacant units1
6,143
5,208
Annualised ERV completed portfolio
72,348
75,173
EPRA vacancy rate
8.5%
6.9%
1. The ERV from vacant units includes the vacant units within the Group’s residential assets at the financial year end.
205
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
iii. European Public Real Estate Association (“EPRA”) Performance Measures continued
iii.d EPRA vacancy rate continued
Adjusted EPRA vacancy rate: Calculated as above but excluding the Clanwilliam Court properties (Clanwilliam Blocks 1,2 and 5 and
Marine House) which are scheduled to move to the development portfolio segment within the next twelve months and therefore will
be unavailable to rent when the current leases expire:
Financial year ended
31 March 2021
€’000
Financial year ended
31 March 2020
€’000
Annualised ERV vacant units
4,895
5,208
Annualised ERV completed portfolio
67,311
75,173
EPRA vacancy rate
7.3%
6.9%
iii.e EPRA Net Initial Yield (“EPRA NIY”) and EPRA ‘topped-up’ Net Initial Yield
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: this measures the yield based on rents adjusted
for the expiration of lease incentives, i.e. on a contracted rent basis.
At 31 March 2021
Office
€’m
Residential
€’m
Industrial/other
€’m
Total
€’m
Development
€’m
Total
€’m
Investment property at fair value
1,139
168
58
1,365
62
1,427
Less: Development/refurbishment
–
–
(30)1
(30)
(62)
(92)
Completed property portfolio
1,139
168
28
1,335
–
1,335
Allowance for purchasers’ costs2
113
7
3
123
Gross up of completed property portfolio (A)
1,252
175
31
1,458
Annualised cash passing rental income3
58
7
2
67
Property outgoings
(1)
(1)
(1)
(3)
Annualised net rents (B)
57
6
1
64
Expiry of lease incentives and fixed uplifts4
–
–
–
–
‘Topped-up’ annualised net rent (C)
57
6
1
64
EPRA NIY (B/A)
4.5%
3.3%
4.6%
4.4%
EPRA ‘Topped-up’ NIY (C/A)
4.5%
3.3%
4.6%
4.4%
1. Lands at Newlands are excluded as held for future development and were undeveloped at 31 March 2021.
2. Purchasers’ costs are 9.96% for commercial property and 4.46% for residential.
3. Cash passing rent includes residential rents gross as property outgoings are included separately.
4. Expiry of lease incentives and fixed uplifts are mainly within one year.
206
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S U P P L E M E N TA R Y I N F O R M AT I O N ( U N A U D I T E D )
C O N T I N U E D
iii. European Public Real Estate Association (“EPRA”) Performance Measures continued
iii.e EPRA Net Initial Yield (“EPRA NIY”) and EPRA ‘topped-up’ Net Initial Yield continued
At 31 March 2020
Office
€’m
Residential
€’m
Industrial/other
€’m
Total
€’m
Development
€’m
Total
€’m
Investment property at fair value
1,197
159
61
1,417
48
1,465
Less: Development/refurbishment
–
–
(338)1
(33)
(48)
(81)
Completed property portfolio
1,197
159
28
1,384
–
1,384
Allowance for purchasers’ costs2
119
7
3
129
Gross up of completed property portfolio (A)
1,316
166
31
1,513
Annualised cash passing rental income3
55
7
2
64
Property outgoings
(1)
(1)
–
(2)
Annualised net rents (B)
54
6
2
62
Expiry of lease incentives and fixed uplifts4
4
–
–
4
‘Topped-up’ annualised net rent (C)
58
6
2
66
EPRA NIY (B/A)
4.2%
3.7%
5.2%
4.1%
EPRA ‘Topped-up’ NIY (C/A)
4.4%
3.7%
6.1%
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% 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 office arrangement
in Clanwilliam.
4. Expiry of lease incentives and fixed uplifts are mainly within one year.
iii.f EPRA NAV measures
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 three measures in the 2019 Guidelines as below.
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.
Financial year ended 31 March 2021
EPRA NRV
EPRA NTA1
EPRA NDV2,5
€'000
€'000
€'000
IFRS NAV
1,148,638
1,148,638
1,148,638
Include:
Revaluation of other non-current investments
–
–
–
Diluted NAV at fair value3
1,148,638
1,148,638
1,148,638
Exclude:
Deferred tax in relation to unrealised gains on investment property
206
–
–
Fair value of financial instruments
(442)
(442)
–
Include:
Fair value of fixed interest rate debt
–
–
(9,900)
Real estate transfer tax4
132,997
–
–
NAV performance measure
1,281,399
1,148,196
1,138,738
Diluted number of shares at financial year end
665,029
665,029
665,029
NAV per share at financial year end (cent)
192.7
172.7
171.2
Footnotes: see below 2020 table on page 208.
207
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
iii. European Public Real Estate Association (“EPRA”) Performance Measures continued
iii.f EPRA NAV measures continued
Financial year ended 31 March 2020
EPRA NRV
EPRA NTA1
EPRA NDV2,5
€'000
€'000
€'000
IFRS NAV
1,231,149
1,231,149
1,231,149
Include:
Revaluation of other non-current investments
–
–
–
Diluted NAV at fair value3
1,231,149
1,231,149
1,231,149
Exclude:
Deferred tax in relation to unrealised gains on investment property
395
–
–
Fair value of financial instruments
234
234
–
Include:
Fair value of fixed interest rate debt
–
–
(6,380)
Real estate transfer tax4
138,545
–
–
NAV performance measure
1,370,323
1,231,383
1,224,769
Diluted number of shares at financial year end
687,032
687,032
687,032
NAV per share at financial year end (cent)
199.5
179.2
178.3
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 the
disposal proceeds to repay (a) debt specifically used to acquire, enhance or develop the property sold or (b) other debt in limited circumstances,
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 the financial year end 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.
iii.g Portfolio information
Portfolio information can be generally found in the strategic report on pages 54 to 60. Below is further information based on the
guidelines issued by EPRA.
i. Additional analysis of rental income
All rents are denominated in Euro.
Financial year ended
31 March 2021
€’m
Financial year ended
31 March 2020
€’m
Properties owned throughout last two last years
66.0
54.8
Acquisitions
0.5
0.8
Disposals
–
–
Developed/refurbished property1
–
6.2
Gross rental income
66.5
61.8
Less: property operating expenses
(3.2)
(3.2)
Net rental income
63.3
58.6
1. 2020: 1SJRQ and 2WML
208
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S U P P L E M E N TA R Y I N F O R M AT I O N ( U N A U D I T E D )
C O N T I N U E D
iii. European Public Real Estate Association (“EPRA”) Performance Measures continued
iii.g Portfolio information
ii. Portfolio statistics – valuation
Financial year ended 31 March 2021
Market value
€’m
Valuation movement
€’m
EPRA NIY
%
EPRA ‘topped-up’ NIY
%
Reversionary yield
%
Office
1,138
(65)
4.5
4.5
4.8
Development
62
(4)
n/a
n/a
n/a
Residential
168
7
3.3
3.3
4.2
Industrial/other
59
(6)
4.61
4.6
6.61
Total
1,427
(68)
4.4
4.4
4.7
1. These yields exclude the value of the lands at Newlands in accordance with EPRA guidance.
Financial year ended 31 March 2020
Market value
€’m
Valuation movement
€’m
EPRA NIY
%
EPRA ‘topped-up’ NIY
%
Reversionary yield
%
Office
1,197
5
4.2
4.4
4.8
Development
48
18
n/a
n/a
n/a
Residential
159
5
3.7
3.7
4.5
Industrial/other
61
(6)
5.21
6.11
5.51
Total
1,465
22
4.1
4.4
4.7
1. These yields exclude the value of the lands at Newlands in accordance with EPRA guidance.
iii. Reversionary potential
The following data is calculated for the ‘in-place’ office and industrial portfolio (exclusive of the Iconic office 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. Passing 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 2021
Rent subject to rent reviews
Financial year ended 31 March
2022
€’m
2023
€’m
2024-25
€’m
>2025
€’m
Total
€’m
Passing rent
12.7
8.1
15.5
2.6
38.8
Uplift to ERV1
0.7
(0.3)
(0.2)
0.1
0.3
Total
13.4
7.8
15.3
2.7
39.1
% increase/(decrease) possible
5%
(4)%
(1)%
6%
1%
From vacant space
4.4
–
–
–
4.4
Total
17.8
7.8
15.3
2.7
43.5
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.
209
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
iii. European Public Real Estate Association (“EPRA”) Performance Measures continued
Rent subject to break or expiry
Financial year ended 31 March
2022
€’m
2023
€’m
2024-25
€’m
>2025
€’m
Total
€’m
Passing rent
5.3
9.0
5.9
0.1
20.4
Uplift to ERV
(0.1)
(0.7)
(0.2)
0.1
(0.9)
Total
5.2
8.3
5.8
0.2
19.5
% increase/(decrease) possible
(2)%
(8)%
(3)%
44%
(5)%
Total reversion from review and break/expiry
(excluding vacancy)
Total passing rent
18.0
17.1
21.4
2.7
59.2
Total uplift to ERV
0.6
(1.0)
(0.3)
0.2
(0.6)
% increase/(decrease) possible
3%
(6)%
(2)%
8%
(1)%
% increase possible including vacancy
6%
As at 31 March 2020
Rent subject to rent reviews
Financial year ended 31 March
2022
€’m
2023
€’m
2024-25
€’m
>2025
€’m
Total
€’m
Passing rent
5.3
9.8
11.0
8.7
34.8
Uplift to ERV1
1.1
0.5
–
–
1.6
Total
6.4
10.3
11.0
8.7
36.4
% increase/(decrease) possible
21%
5%
–
1%
5%
From vacant space
4.7
–
–
–
4.7
Total
11.1
10.3
11.0
8.7
41.1
Rent subject to break or expiry
Financial year ended 31 March
2022
€’m
2023
€’m
2024-25
€’m
>2025
€’m
Total
€’m
Passing rent
3.6
2.6
12.1
2.7
21.0
Uplift to ERV
(0.2)
–
(0.6)
(0.1)
(0.9)
Total
3.4
2.6
11.5
2.6
20.1
% increase/(decrease) possible
(4)%
(2)%
(5)%
(1)%
(4)%
Total reversion from review and break/expiry
(excluding vacancy)
Total passing rent
8.9
12.4
23.2
11.3
55.8
Total uplift to ERV
1.0
0.5
(0.6)
–
0.9
% increase/(decrease) possible
11%
4%
(3)%
–
1%
% increase possible including vacancy
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.
Property-related capital expenditure (“capex”)
Capital expenditure on the investment portfolio is analysed according to EPRA recommendations to allow an understanding of the
investment in the portfolio during the period. (See note 16 to the consolidated financial statements: ‘EPRA capital expenditure’
on pages 166 to 167).
210
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S U P P L E M E N TA R Y I N F O R M AT I O N ( U N A U D I T E D )
C O N T I N U E D
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 losses disclosed
under IFRS there is a total of €75.7m (31 March 2020: €25.6m) in unrealised losses and €8.1m (31 March 2019: €48.5m) 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 14
identified staff (March 2020: 15), who have a material impact on the risk profile of the Company, is set out within Note 34.c of the
consolidated Financial Statements.
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.
Reporting requirement
Policies and standards
that govern our approach1
Read more here
Page
Business model
Our business model
Our clear strategy
20 and 21
22 and 23
Key performance indicators
relevant to our business
Key performance indicators
Operational metrics
38
39
Environmental matters
Sustainability Statement of Intent2
Sustainability
2021 Sustainability Report2
65 to 71
Social and employee matters
Diversity policy
Anti-bullying and harassment policy1
Disability policy1
Equal opportunities policy1
Health and safety policy1
Corporate governance report
81
Human rights
Supplier Code of Conduct2
Data protection policy2
Modern slavery statement
Supplier Code of Conduct2
2021 Sustainability Report2
Bribery and corruption
Anti-bribery policy1
Whistle-blowing policy1
Money laundering policy1
Gifts and inducement policy1
Diversity
Diversity policy
Corporate governance report
81 and 89
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 Statement of Intent and our 2021
Sustainability Report.
211
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Occupiers representing over 0.5% of contracted rent at 31 March 2021
Tenant
€’m
%
HubSpot Ireland Limited
10.5
15.4%
The Commissioners of Public Works
6.0
8.8%
Twitter International Company
5.1
7.5%
Zalando Ireland Limited
2.9
4.2%
Autodesk Ireland Operations Limited
2.8
4.1%
Informatica Ireland EMEA
2.1
3.1%
Riot Games Limited
2.0
2.9%
Travelport Digital Limited
1.8
2.6%
Deloitte Ireland LLP
1.7
2.5%
BNY Mellon Fund Services (Ireland) DAC
1.6
2.3%
The Commission for Communications Regulation
1.6
2.3%
Electricity Supply Board
1.6
2.3%
3M Digital Science Community Limited
1.5
2.2%
Capita Life and pensions Services (Ireland) Limited
1.5
2.1%
Core
1.4
2.1%
DAE (Ireland) Limited
1.2
1.7%
O.D.S Company (Eversheds Sutherland)
1.0
1.5%
Pay & Shop Ltd t/a Global Payments
0.9
1.3%
J.M.C. Van Trans Limited
0.9
1.3%
Udemy Ireland Limited
0.8
1.2%
An Bord Bia
0.8
1.1%
Renaissance Svcs of Europe Ltd.
0.8
1.1%
Quinn McDonnell Pattison Limited
0.7
1.0%
Park Rite Limited
0.7
1.0%
Seven Seas Business Ventures LLC t/a N3
0.7
1.0%
Bearingpoint Ireland Limited
0.7
1.0%
Irish Residential Properties REIT plc
0.6
0.9%
Hines Real Estate Ireland Limited
0.6
0.9%
Invesco Investment Management Limited
0.6
0.8%
Pinsent Masons Services Ireland Limited
0.6
0.8%
Weston Office Solutions Limited
0.5
0.7%
Essentra Packaging Ireland Limited
0.4
0.6%
City Break Apartments Limited
0.4
0.6%
Morgan Stanley Fund Services (Ireland) Limited
0.4
0.6%
Prudential Int. Services Ltd,
0.4
0.6%
Crowe Horwath Bastow Vharleton Cons. Ltd.
0.4
0.6%
ENI Insurance DAC
0.3
0.5%
212
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
S U P P L E M E N TA R Y I N F O R M AT I O N ( U N A U D I T E D )
C O N T I N U E D
Directors
Daniel Kitchen (Chairman)
Colm Barrington (Senior Independent Director)
Roisin Brennan
Thomas Edwards-Moss (CFO)
Margaret Fleming
Stewart Harrington
Grainne Hollywood
Frank Kenny (resigned 29 July 2020)
Kevin Nowlan (CEO)
Terence O’Rourke
Company Secretary
Sean O’Dwyer
Assistant Secretary
Blackglen Corporate Governance Solutions Limited
t/a Corporate Governance Solutions
169 Bracken Hill
Sandyford
Dublin D18 R22W
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
Ireland
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
Dublin D04 YW83
Ireland
Credit Suisse International
One Cabot Square
London E14 40J
United Kingdom
213
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
D I R E C T O R S A N D O T H E R I N F O R M AT I O N
AGM is Annual General Meeting.
Alternative Investment Fund Managers
Directive (“AIFMD”) is a European Union
(EU) regulation that applies to Alternative
Investment Funds (“AIF”).
APM is an alternative performance measure.
BEPS is base erosion and profit shifting.
It refers to corporate tax planning strategies
used by multinationals to shift profits from
higher tax jurisdictions to low
tax jurisdictions.
Brexit is the UK exit from the EU.
C&W or Cushman & Wakefield or the Valuer
is 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.
CDP is a not-for-profit organisation
that runs the global disclosure system
for investors, companies, cities,
states and regions to manage their
environmental impacts.
Central securities depository (“CSD”) is
an entity which provides a central point for
depositing financial instruments
(“securities”), for example bonds
and shares.
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.
CSO is the Central Statistics Office.
DAC is a Designated Activity Company and
is a private company limited by shares with
the capacity, including the power, to do
only those acts or things set out in its
constitution (memorandum of association).
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 cost is 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.
DoF is the Department of Finance.
DPS is dividend per share.
EBIT is earnings before interest and tax.
Environmental, Social and Governance
(“ESG”) or sustainability. Investors are
increasingly applying these non-financial
factors as part of their analysis process to
identify material risks and growth
opportunities.
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 Best Practices Recommendations
Guidelines (“EPRA BPR”) and EPRA
Sustainability Best Practices
Recommendations Guidelines (“EPRA
sBPR”) are guidelines produced by EPRA
to make financial statements and
disclosures of public real estate entities
more comparable across Europe.
EPRA cost ratio (excluding direct vacancy
costs) is the same as below except it
excludes direct vacancy costs.
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 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 NAV per share is the EPRA NAV
divided by the diluted number of shares at
the period end. This measure has now been
superseded by EPRA NRV, NTA and NDV.
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.
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 Net Tangible Assets (“NTA”)
assumes that entities buy and sell assets,
thereby crystallising certain levels of
unavoidable deferred tax.
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.
ESMA is the European Securities and
Markets Authority
ESRI is the Economic and Social
Research Institute.
EU is the European Union.
214
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
G L O S S A R Y
EU-UK Trade and Cooperation Agreement
(“TCA”), which provisionally applied on
1 January 2021 and came into force on
1 May 2021, set out preferential treatment
between the EU and UK on trade and other
matters post-Brexit.
Expected lifetime credit loss (“ECL”) are
the expected credit losses that result from
all possible default events over the
expected life of the financial instrument.
Financial Reporting Standards 101 (“FRS
101”) is a standard issued by the Financial
Reporting Council and allows the use of
IFRS recognition, measurement and
disclosure methods, makes the amendments
necessary to comply with the Companies
Act 2014 and allows some exemptions from
IFRS disclosures.
Fair value movement is the accounting
adjustment to change the book value of
the asset or liability to its market value.
Gale date is the date on which rent is due.
GDA is the Greater Dublin Area.
GDV is gross development value.
Greenhouse gases (GHG”) emissions
are the most significant contributor to
climate change. Measurement of these
allows Hibernia to measure the success or
otherwise of measures taken in managing
its emissions
GRESB is a sustainability benchmark
for property assets.
Grey or shadow space is surplus
space offered by tenants for letting
by sub-tenants.
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.
Gross Value Added (“GVA”) is
conceptually the same as Gross Domestic
Product (GDP). The difference between the
two concepts is that GDP is measured after
including product taxes (e.g. excise duties,
non-deductible VAT, etc.) and deducting
product subsidies while GVA is measured
prior to adding product taxes but includes
product subsidies (source: CSO).
Hibernia is Hibernia REIT plc, the
Company or the Group.
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.
Investment Management Agreement
(“IMA”) governed the internalisation of the
Investment Manager and arrangements
under this ceased in November 2018.
Investment Manager, WK Nowllan Property
Management Limited, managed ibernia
before the management function was
internalised in December 2015.
The Irish Corporate Governance
Annex(the ‘Irish Annex’) is addressed to
companies with a primary equity listing on
Euronext Dublin and includes the provisions
of the UK Code as well as additional
recommendations on governance in
Euronext Dublin’s listing rules.
Key performance indicators (“KPIs”)
are the main metrics used in running the
business and assessing its performance.
They also help determine variable
remuneration.
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.
Like-for-like (“LfL”) is used when
comparing the portfolio year on
year, using assets in place for the
full comparison period, i.e. ignoring
purchases and sales during the period.
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 Regulation (“MAR”)
consists of the EU Market Abuse Regulation
and the Market Abuse Directive as
transcribed into Irish Law by way of the
European Union (Market Abuse)
Regulations 2016. These can be accessed at
https://www.centralbank.ie/regulation/
securities-markets/market-abuse/Pages/
default.aspx.
MSCI Ireland 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.
NAVPS is the NAV in cent per share.
Net development value (“NDV”) 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 purchaser’s costs) a property
will produce based on the timing of the
income received. As is normal practice,
the equivalent yields (as determined by
the external 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.
NTAPS is the NTA in cent per share.
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.
OECD is the Organisation for Economic
Co-operation and Development.
Over rented is used to describe when the
contracted rent is higher than the ERV.
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.
PC is practical completion.
215
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
Strategic report
Governance
Additional information
Financial statements
Post-employment shareholding
requirement (“PESR”) requires executive
directors to hold shares in the company for
a period after they cease t be employed.
PP are private placement notes, effectively
private loan notes.
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.
Property-related capital expenditure
(“capex”) refers to amounts expended on
investment property for development or
refurbishment or as maintenance capex.
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. A revision of the Policy
will be tabled at the 2021 AGM, (the “2021
Remuneration Policy”).
Reversion is the rent uplift where the ERV
is higher than the contracted rent.
Royal Institution of Chartered Surveyors
(“RICS”) Professional Standards, RICS
Valuation Technical and Performance
Standards and the RICS Valuation Practice
Guidance Applications are applications
contained within the RICS Valuation –
Global Standards 2019 (the “Red Book”)
issued by the Royal Institution of Chartered
Surveyors which provide the standards for
preparing valuations on property.
RTB is the Residential Tenancies Board.
Shadow space is surplus space offered
by tenants for letting by sub-tenants.
Sq. ft. is square feet.
TCFD is the Task Force on Climate-related
Financial Disclosures created by the
Financial Stability Board which has
produced recommendations to improve
and increase reporting of climate-related
financial information.
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 MSCI Ireland Property
All Assets Index.
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 are the
Transparency (Directive 2004/109/EC)
Regulations 2007, as amended and
establish minimum requirements in relation
to the disclosure of periodic and ongoing
information by issuers and on the
disclosure of major shareholdings and
voting rights. These can be accessed at
https://www.centralbank.ie/regulation/
industry-market-sectors/securities-
markets/transparency-regulation.
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.
UN Sustainable Development Goals (“UN
SDGs”) are 17 goals with 169 targets that all
UN Member States have agreed to work
towards achieving by the year 2030.
UK Corporate Governance Code 2018 (the
“UK Code”) is published by the Financial
Reporting Council in the UK and contains
recommendation on governance standards
to be followed by organisations. Irish listed
companies are also subject to this on a
comply or explain basis under the Euronext
Dublin listing rules.
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 and Wakefield. Previously the
Group has used CBRE.
WAULT is weighted average unexpired
lease term and is variously calculated to
break, expiry or next review date.
216
Hibernia REIT plc Annual Report 2021
www.hiberniareit.com
G L O S S A R Y C O N T I N U E D
Here are some of us (including a Lockdown baby-in-progress) in our home offices
during the third Irish COVID-19 Lockdown.
H I B E R N I A D U R I N G D U B L I N ’ S T H I R D L O C K D O W N
Consultancy, design and production
www.luminous.co.uk
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
Hibernia’s Head Office, 1WML, South Docks