Annual Report and
Consolidated Financial
Statements 2019
Contents
Strategic Report
Chairman’s Statement
Chief Executive Officer’s Statement
Our Business Model and
Strategic Priorities
Key Performance Indicators
Financial Review
Portfolio Report
Engagement Report
Governance
Directors’ Report
Directors’ Responsibility Statement
Corporate Governance Statement
Principal Risks and Uncertainties
Audit Committee Report
Nomination Committee Report
Remuneration Committee Report
Valuation Committee Report
Financial Statements
Independent Auditor’s Report
Consolidated Statement of Financial
Position
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Changes in
Equity
Consolidated Statement of Cash Flow
Company Statement of Financial
Position
Company Statement of Changes in
Equity
Company Statement of Cash Flow
Notes to the Consolidated Financial
Statements
Disclosures under AIFMD (unaudited)
Glossary
Corporate Information
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Yew Grove reit plcreport and consolidated Financial statements 2019
strategic
report
1
Strategic reportgovernanceFinancial StatementS Chairman’s Statement
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Activity
2019 was another busy year for the Company. Having
invested all of the equity capital raised at the Company’s
initial public offering in 2018, Yew Grove invested the
proceeds of the debt facility raised from Allied Irish
Banks, p.l.c. (“AIB”) in the first half of the year in
Waterford and Cork Airport Business Park and in the
development of a car park in Athlone. In July we received
approval from our shareholders for a 100 million share
issuance programme. Just over 36.6 million shares have
been issued under the programme and the proceeds
invested in four buildings in Athlone and a portfolio
of six buildings in Millennium Park in Naas soon after
the year end.
The Company also began the process of selling the
smaller non-core properties acquired from the Yew Tree
Investment Fund on IPO. The first of those disposals
realised a gain on book value and it is hoped that the
remaining four properties will also sell well in the near
future. Once again we reached the year end with the
Company almost fully invested, the quality of tenant
improved and the rent roll increased by over 41% year
on year.
Our activity ref lects the Company’s continued
commitment to building a portfolio of institutionally
attractive commercial properties in Ireland, outside
of Dublin’s central business district (‘CBD’). The
addition of institutional quality buildings leased or
attractive to predominantly government or foreign
direct investment tenants is evidence of the Company’s
progress in generating a secure and growing rent roll,
with reversionary potential to support a sustainable and
growing dividend.
Not only did the Company expand its portfolio (almost
doubling in size if one includes the Millennium portfolio
on which we had exchanged contracts prior to year-end
and completed post year-end) but we began a number
of asset management projects which should bear fruit
in 2020.
As flagged last year the Company declared its inaugural
dividend in February 2019. A quarterly dividend was
instituted, the final quarter’s dividend being declared
in 2020. The first three quarters' dividends totalled
5.71 cents per share and despite the dilution of the final
quarter payment (because the 26.6 million shares issued
in December qualified for the dividend and increased our
shares in issue by over 31%) a dividend of 1.04 cents per
share was declared, giving 6.75 cents per share for the year.
One of our key strategic focuses for 2020 is enacting
our Environmental, Social and Governance (“ESG”)
policy and rolling out the strategy for achieving this
throughout the business. There is more on our plans in
our Engagement Report but I welcome this engagement
as one of the key issues of our time and look forward to
overseeing an active and productive year.
Board
During the year the Board devoted considerable time to
the Company’s post-flotation organisation, acquisitions
and to our strategic plans for the development of the
business. I would like to thank each member of the Board
for their commitment during the year and I look forward
to working with them for the benefit of the Company and
its shareholders. The Board are responsible for creating
and maintaining the Company’s strong culture and
collegiate values and ensuring these are understood
and shared by all employees and with all of our business
relationships.
Yew Grove reit plcreport and consolidated Financial statements 2019 Barry O’DOwD
Chair
3
“Once again we reached the
year end with the Company
almost fully invested, the
quality of tenant improved
and the rent roll increased
by over 41% year on year.”
Management and employees
On behalf of the Board, I would like to thank the
management team and employees of the Company for
their continued hard work and energy over the past year.
It has been a busy and demanding year and continues to
be as the Company grows in 2020. Our success will be
driven by the dedication and commitment of this team.
On behalf of the Board I would like to thank our
shareholders who have continued to support the growth
of our business.
Barry O’Dowd
Chair
23 April 2020
Strategic reportgovernanceFinancial StatementS Chief Executive Officer’s Statement
4
I am pleased to report the results for the Company
for the year ended 31 December 2019.
We finished a busy 2019 by exchanging on a portfolio of six office buildings in the
Millennium Park in Naas, Co. Kildare and following completion early this year are
again close to fully invested. This purchase has taken our property portfolio from
c.€116 million to c.€141 million in value with a rent roll of €10.6 million. The share
issue in December 2019 took our issued shares to over €110 million and, depending
on how the Covid-19 pandemic develops I am hopeful we will grow again in 2020.
Having instituted a quarterly dividend strategy in 2019 I look
forward to the regularity of that dividend becoming an important
constituent in the total equity return for shareholders.
Results
Pre-tax profits for the year were €5.06 million after
accounting for a gain on sale of a property of €0.12
million and a revaluation loss of €0.77 million. The
gains and losses are analysed further in the valuation
section below, however the existing portfolio grew
in value and the majority of the loss reflects the
€2.8 million acquisition costs on properties bought
during 2019. 98% of our European Public Real Estate
(“EPRA”) earnings of €5.7 million were distributed by
way of dividend.
As a result of the financial performance and the costs
of raising additional equity during the year, the EPRA
Net Asset Value (“NAV”) per share fell to 98.52 cents
at 31 December 2019 from 100.76 cents (excluding
declared but unpaid dividend) at 30 June 2019 and
100.18 cents at 31 December 2018. The Company’s
growth costs, including equity issuance costs of €1.0
million and the costs of buying new properties of
€2.8 million contributed to this NAV per share fall.
Underlying like for like property values increased by
5.3% over the period. I am confident that as our asset
management activities begin to bear fruit in 2020 and
beyond, we will see the value reflected in increased
rental income.
The Company was a prudent and active user of its
revolving finance facility with AIB during 2019. As
the portfolio grew in size we increased the facility,
enabling the Company to execute transactions as and
when appropriate.
The contracted rent roll at 31 December 2019 was
€8.9 million and following the completion of the
Millennium portfolio has increased to €10.6 million.
The gross yield at fair value (the return that the
Company earns from its contracted rent at current
valuation) was 7.7% at year end and following the
purchase of the Millennium portfolio will fall to
7.5% at Millennium Park’s June 2019 valuation.
The Millennium portfolio purchase improves the
Company’s reversionary rent roll which will underpin
future distributions to shareholders. The reversionary
rent roll (which is achieved through letting vacancy,
rent reviews and other events which allow for the
properties to be let at what our third party valuer
considers current market rent) was €10.1 million at
31 December 2019 and has increased to €12.8 million
following the Millennium acquisition. This represents
a gross reversionary yield of 8.7% at the year end and
9.1% following the Millennium portfolio acquisition.
Dividends
As set out in last year’s annual report the Company
instituted a quarterly dividend strategy in 2019.
The dividends for the first three quarters of the
year (including the special dividend paid in June to
Yew Grove reit plcreport and consolidated Financial statements 2019 JOnathan LareDO
Chief exeCutive OffiCer
5
distribute the income element of the Cork Airport
lease surrender premium) totalled 5.71 cents per share.
The dividend for the final quarter was announced in
February 2020 and brought the annual dividend per
share to 6.75 cents, fully covered by EPRA earnings.
Because the number of shares in issue increased from
85 million to 111.6 million in late December 2019, the
per share value of that final dividend was necessarily
diluted and would otherwise have exceeded 7 cents
per share. However, I am pleased that the Company
managed to meet expectations and paid a significant
dividend secured on good quality covenants even in
a year of rapid growth. The Company will continue
to reward shareholders by distributing as much of
a dividend as is sustainable and I look forward to
another good year in this regard.
Review of activity
In 2019 the Company bought six buildings, in
Waterford, Cork and Athlone, and sold one in Heather
Road in Dublin. Just before year end we exchanged
on a further six buildings on the Millennium Park in
Naas.
In February, the Company acquired a building on
the Cork Airport Business Park for €7.5 million
(plus costs). In May, the Company acquired an office
building on the Waterford IDA Park for €4 million
(plus costs). In June we negotiated a reverse premium
for the Cork property in return for allowing the
tenant, Clearstream, to break their lease and vacate
the building in July 2019.
Also in July, following the approval of a 100 million
share issuance programme at the Company’s EGM,
we issued 10 million shares under the programme
and together with debt from the AIB facility acquired
three buildings on the Athlone IDA Technology Park
for a combined price of €13 million plus costs.
In November the Company sold the first of the five
buildings we had targeted for sale. These buildings are
smaller, non-institutional properties some of which
have exposure to retail. The first sale (of the property
in Heather Road, Dublin) achieved a price of over 13%
above the June 2019 valuation.
In December following an issue of 26.6 million further
shares, the Company acquired the Teleflex office
building on the Athlone IDA Technology Park for €12
million plus costs and exchanged contracts for the
purchase of six office buildings on the Millennium
Park in Naas for a purchase price of €25.3 million.
The Millennium Park acquisition was completed in
February 2020. The various costs referred to above
are detailed in note 14 to the accounts.
At the year end the Company had an undrawn facility
with AIB of €8.3 million, allowing it some leeway to
continue to pursue and close transactions.
A major focus for the property market generally
and for the Company in particular was the growing
focus on sustainability, particularly through its
measurement by way of ESG criteria. As a small
company only recently floated on the public markets
Yew Grove is not yet able to join the Global Real
Estate Sustainability Benchmark and had not at
our last year end published a policy and strategy for
Strategic reportgovernanceFinancial StatementS Chief Executive Officer’s Statement (continued)
6
sustainability. That has been rectified with our policy,
strategy and initial targets all set out in the section
on engagement in this Annual Report. Moreover,
despite our size, we believe in engaging with local
communities and our suppliers to further that
strategy and our shared objectives and our activities
in that regard are also set out in that engagement
section. Finally, Yew Grove is an equal opportunity
employer and as we grow, we continue to invest in our
staff as well as our buildings and the communities in
which we operate.
Post balance sheet events
On 23 January 2020 the Company appointed Liberum
Capital Limited as joint corporate broker and
Nominated Adviser, Goodbody Stockbrokers UC was
appointed as Euronext Growth Adviser and continues
as joint corporate broker.
On 31 January 2020 the Company increased its facility
with AIB to €39 million by adding the buildings
acquired in the second half of 2019 to the security
package. Most of that increased facility was used to
complete the purchase of a portfolio of properties
at Millennium Park in Naas which completed on 6
February 2020. This acquisition of six buildings and
a greenfield site on the Millennium Park estate for
€25.3 million plus costs represented a yield of 5.8%
after costs. The portfolio’s six office properties have
140,000 sq. ft of lettable space and 773 car parking
spaces. Five of the buildings are fully tenanted and
one, a high quality HQ space, is vacant. The tenanted
buildings have a weighted average unexpired lease
term (“WAULT") to break of approximately 2.5 years
with a lease to final maturity of approximately 5
years. The Millennium portfolio is under rented and
together with vacant space will enable the Company
to achieve a reversion in excess of 9%.
On 13 February 2020 the Company announced its
interim dividend for Q4 2019. The dividend (1.04 cents
per share) brought the full 2019 dividend to 6.75 cents
per share.
On 3 March 2020 the Company further increased
its facility with AIB by €10.1 million, providing the
Company flexibility to acquire further properties.
“Lisney as the external
valuer valued the Company’s
property portfolio at
€115.79 million at
31 December 2019. ”
The Company is considering its funding options for
financing its pipeline of acquisition opportunities,
which could include using its existing share issuance
programme later this year, together with debt finance
where appropriate.
Property Valuation
Lisney as the external valuer valued the Company’s
property portfolio at €115.79 million at 31 December
2019. There are three key aspects to this valuation.
The like for like portfolio (in other words the
properties owned throughout the year) grew in value
by €4.1 million (+5.3%) after accounting for capital
expenditure; the properties acquired in 2019 fell
in value by €1.8 million (-4.8%) and the Company
incurred acquisition costs of €2.8 million.
The change from 6% to 7.5% in stamp duty on sales
of commercial property announced in the November
budget effectively reduced the valuations of all
properties by 1.65% and this explains much of the fall
in value of properties acquired in 2019. The balance
of that value fall is a temporary one. Having bought
a building on the Cork Airport Business Park in
February 2019, we agreed a lease surrender with the
tenant and received a premium for that surrender. The
year-end valuation of the now vacant property is some
€1.3 million below our purchase cost (and even after
accounting for €1 million surrender premium that
was received in lieu of dilapidations) which created a
fair value loss. We are actively marketing the building
and once re-let, the value of the building will rise
substantially.
Yew Grove reit plcreport and consolidated Financial statements 2019 A closer look at our like for like portfolio shows the
best performing parts of our portfolio were our
industrial buildings, which showed like for like growth
of over 15% for the year. The growth of our like for
like office portfolio was more muted at 4%, but some
of this can be explained by the difficulty in sourcing
sufficient ERV data in some of our regional locations
to demonstrate to valuers that they should rerate
valuations. As transactions occur we are confident
that they will feed through and we will see increases
but it does mean that the office portfolio is, in our
view, currently valued conservatively.
As at 31 December 2019, the portfolio had a contracted
rent roll of €8.9 million, representing a gross yield at
fair value of 7.7%. The rent roll at the reversionary
yield (assuming the vacancy in the portfolio has been
let and the balance of the portfolio is let at the valuer’s
estimated rental values) would be €10.1 million
representing a gross reversionary yield of 8.7%.
The portfolio has an unexpired lease term of 4.6
years to break and 8.1 years to final maturity. In our
target geographic market vacancy rates are falling
(and in many cases are at multi year lows). Moreover,
the vacancy rates on buildings of the sort we own
are lower than the average. In general, take up is
rising, and the net effect is that rent levels are rising.
This can be seen in Cork and Limerick and is, in our
view, beginning to happen in Galway, where new
construction has begun. The Company is therefore
happy with a shorter WAULT to break as it allows the
Company to capture reversion more quickly in this
cycle.
Finance
The AIB facility at 31 December 2019 stood at €29
million with €8.3 million undrawn. Total debt to
equity gearing and loan to value (“LTV”) at 31
December 2019 were 18.9% and 18.0% respectively,
having been 8.3% and 8.0% as at 31 December 2018.
Details of the drawings on the facility can be seen at
note 20 to the financial statements.
In January 2020 the facility was increased by €9.9
million before the acquisition of the Millennium
portfolio, the majority of the increased facility has
been drawn to complete the purchase. Following the
Millennium portfolio purchase the facility was further
increased by €10.1m.
7
Irish Commercial Real Estate Market
2019 was a record year for Irish commercial real
estate with total transactions of €7.2 billion reported
by CBRE. Part of the reason for this volume of
overall market activity was the increase in private
rented sector (“PRS”) activity, but notwithstanding
that, office transactions remained the largest sub
sector of the market. The Irish market is becoming
increasingly international with 2019 seeing a large
increase in Asian investors, principally Korean,
alongside European and US institutions. The
prevailing mood at the larger real estate advisory
firms is that the macroeconomic back drop for Irish
property remains good, with continuing low interest
rates driving demand for real estate as an asset class
and Ireland’s continued economic strength and the
relative cheapness of its property market versus those
in mainland Europe creating a positive sentiment
from institutional investors that outweighs short term
concerns. The Irish story, despite the relatively small
size of the market and the relatively small lot sizes
of individual transactions, has become increasingly
attractive as the resilience and performance of its
economy continues to impress. While the moves by
the Irish Government last year to introduce higher
stamp duty and amend some aspects of the tax
treatment of REITs are unwelcome, particularly in
the context of regional investment and development,
we are encouraged by continued strong levels of
investment activity.
From the Company’s perspective the most positive
changes in the landscape arose from two different
directions: in the office space growing demand from
occupiers meant vacancy rates, especially vacancy
rates in larger floorplate modern and Grade A offices,
fell to multi year lows. This is unsurprising given
that the economy is largely driven by foreign direct
investment (“FDI”) and increasingly that investment
results in business and jobs outside Dublin. This
demand has driven prime rental growth to the point at
which new development has begun in the three biggest
regional cities, Cork, Limerick and Galway. That shift
has not gone unnoticed in the investment market and
Strategic reportgovernanceFinancial StatementS Chief Executive Officer’s Statement (continued)
8
there has been increased interest in these markets
from the international institutional community. It
is only the beginnings of a shift in the market, but
it provides a welcome change in temperature. As
CBRE note the next stage of market development will
need to see the local infrastructure for employees
(apartments, better local transport links etc.) reflect
the growth of occupier demand and developer
supply. Outside of the regional cities new buildings
are still only possible on a forward funded basis, but
increasingly tenants require more space and more
modern space. We see this as a major opportunity for
the Company in the years ahead.
At the same time the maturation of the Dublin central
business district (“CBD”) market has led to a gradual
expansion of the CBD into Dublin 1, 3, 7 and 8 and
eastwards through Dublin 2 (“Core+”). The effect is
that whilst rents in the traditional Dublin CBD have
remained and are expected to remain relatively stable,
there has been a marked shift in rents in what were
traditionally seen as fringe or Core+ areas of the city.
This is partly driven by the larger tech tenants looking
for space in what have heretofore been fringe areas
(and in particular Dublin 8 has seen the benefits of
this growth), but also as the Government is priced
out of the city centre or needs to improve the quality
of its estate at prices it can meet, it too is looking
outside of its traditional locations. The demand led
shifts are driving a rapid rental growth in these areas
and that is also slowly spilling over into the suburbs.
The Company has c.42% of its portfolio in Core+ and
suburban locations and this should help to increase
ERVs in and provide a welcome tailwind to the value
of those properties.
The industrial market continues to reflect an
imbalanced supply and demand market for high
quality, larger buildings. Rents in the Dublin
catchment area are now above the level at which
speculative development is justified and increasingly
buildings are going up, not to fill a specific demand
but speculatively. The same thing has also happened
on a more limited scale in Cork and again the
buildings have been occupied almost at completion.
The demand has also fed through into older, larger
buildings that can be easily repurposed for modern
use with scope to rebuild at the end of their useful
lives. The investment market continues to be thin
as little trading activity is evidenced but because
Irish investment properties trade at a discount to
comparable mainland European properties they are
still popular with institutional investors.
ESG
In the Irish real estate market sustainability is the
watchword for 2020. ESG investing has caught
the imagination of the institutional investment
market and its application to the property world
is inescapable. The introduction in Europe of the
NZEB (Near Zero Energy Building) regulation in
November cemented the importance of the topic for
those businesses that had previously not considered
their carbon footprint to be of prime importance
in assessing environmental building quality. For
the Company the point is especially important.
Our tenant roster is fundamentally made up of
governmental bodies and large corporates, the very
tenants that are expected to comply with (and largely
want to live by) the newer, more environmentally
responsible standards. Our property portfolio is also,
because of the lack of development in the regions and
suburbs, comprised of older buildings which are not
as energy efficient or as environmentally friendly as is
now required for new buildings under law. To that end
we have instituted an ESG policy and strategy that
puts the improvement of our estate, the fair treatment
and development of our employees and suppliers and a
positive interaction with the communities in which we
invest, at the centre of our business. We are a small,
young company, but I expect this policy and strategy
to develop and grow with us over the next few years
and I look forward to reflecting on a positive change
over the next 12 months and beyond.
Outlook
The outlook for the world economy has been severely
impacted by the Covid-19 pandemic that spread to
Europe in February 2020. Government actions to
contain the spread of infection has meant much
commercial activity has halted, with large scale
societal quarantines across many of the world’s
developed countries. This has put huge pressure on
businesses, especially those most directly impacted
(for example: leisure, hospitality, travel, tourism and
non-food retail) and placed a premium on liquidity
and balance sheet strength with smaller and less
Yew Grove reit plcreport and consolidated Financial statements 2019 9
will affect our ability to capture that reversionary
value it is likely to affect the timing. For example,
with numbers of employees working from home,
the pressure to occupy new offices has lessened,
that together with the logistic slowdown caused by
professionals working remotely, and issues such as
council offices being shut making planning searches
more difficult, means vacancy periods are likely to be
longer than expected.
It is still too early to say what the longer term effects
of the pandemic will be, with commentators divided
on analysis and potential outturns. However, we
will focus on good stewardship in the short term
and provided the return to normality occurs we will
revert to our original business plan. It is important to
the Company and its shareholders that we grow our
equity base. We have strong operational leverage and
as we grow should generate higher returns for our
shareholders because our revenues rise faster than
costs. We will therefore remain ready to access the
capital markets once they reopen.
I would like to join the Board in thanking our
shareholders who have continued to support the
growth of our business.
Jonathan Laredo
Chief Executive Officer
23 April 2020
“On current trends,
“It is still too early to
say what the longer term
demand for office space
effects of the pandemic will
is increasingly being
be, with commentators
driven by the requirement
divided on analysis and
from multinationals for
potential outturns. ”
large footplate, Grade
A or modern space.”
well capitalized businesses suffering more quickly.
The capital markets reacted with large scale falls
in value across the world’s stock indices and the
various Government actions and public reactions hit
corporate revenues.
The effect on Yew Grove is that our access to the
equity markets is constrained by investors current
limited appetite for new risk and by a share price
that makes issuance unappealing at present. The
public equity markets are unlikely to reopen until
the second half of this year at the very earliest and
perhaps only next year. The Irish Commercial Real
Estate market has also effectively shut down for new
transactions as the difficulty of sourcing capital, the
practical difficulty of inspecting buildings and the
market uncertainty stopped investment. That is likely
to ease as the country begins to return to some level
of normality. Whilst the Irish economy has been and
will continue to be affected by the crisis it has some
structural advantages that will stand it in good stead
if this crisis does not become a long term economic
recession. The country is relatively lightly exposed to
the sectors most at risk and its economic drivers are
large, multi-national businesses, many of whom are in
sectors that are less affected by the business problems
associated with Covid-19.
Yew Grove is well positioned from a credit
perspective. We have a very high quality tenant base,
with exposure to SMEs and non-food retail being less
than 5% of our rent roll at the time of writing. The
portfolio also has significant reversionary potential.
However, while it is unlikely that the pandemic
Strategic reportgovernanceFinancial StatementS Our Business Model and Strategic Priorities
10
Our business model and strategy is simple and differentiated.
The Company is committed to building a portfolio of institutionally attractive
commercial properties in Ireland, outside of Dublin’s central business district (‘CBD’).
Target properties should be structurally sound, attractive to tenants of good credit
standing (government or large corporations) and generate a rent roll and have
reversionary potential to support a sustainable and growing dividend, paid quarterly.
The execution of that strategy is driven by a number
of interlinked factors and objectives:
We continue to manage our cost base carefully. The Company is committed to paying
shareholders the highest proportion of property income by way of a quarterly dividend as is
sensible given the demands of estate management and any capital expenditure necessary to
maintain or improve our buildings. As our costs are largely fixed and not linked to the size of
our capital base we will reduce our cost to revenue ratio as our capital base (and by implication
the portfolio) grows, the percentage of net income increases with the consequent benefit to our
dividend capacity.
We use our first mover advantage to buy well. Our chosen market still offers the opportunity
to invest in well tenanted buildings at attractive investment yields and as the only public vehicle
focused on this opportunity, we continue to attract vendors. Our target market is small by
European standards, so it is not a core focus for European property firms. Interest in the market
is growing from private funds and increasingly from smaller private equity firms but despite
increasing investor demand, the volume of sales has meant that we have not yet seen a material
compression in investment yields.
We manage the estate to retain and grow with our tenants as well as to optimise income
and lease term. Most of the properties we buy are tenanted by growing businesses that need
an active and engaged landlord. Most are also in areas where rents are rising because there is
insufficient local property to meet the demand of new and existing tenants. Our objective as a
landlord is to engage with tenants to encourage them to stay in the buildings wherever possible
and, where they are growing and are prepared to enter into lease terms and we have the capacity,
to expand our buildings or forward fund new buildings. We control strategic asset management
in house and that means that we target the early capture of reversionary income and whilst rents
are growing look for the optimum balance between income and lease term.
Yew Grove reit plcreport and consolidated Financial statements 2019 Ashtown Gate
Office, Dublin
11
We have begun to rationalise the portfolio by selling down some of the higher yielding,
but smaller, buildings which are well tenanted but not institutional grade stock. The price
for these buildings suits the high net worth market and so should find interest at or above the
valuations at which we own them. Any proceeds of these sales are expected to be reinvested.
As rental growth begins to slow and the market outside of the Dublin CBD matures
(supply and demand begin to balance) we will seek to extend the WAULT on the portfolio.
We expect therefore, that our portfolio will over time coalesce into a coherent collection of
modern office and industrial buildings sited across the country, with approximately 50% to
65% in the Dublin suburbs and commuter belt and the balance spread between the larger
regional cities, the Midlands and the rest of the country.
We recognise the value of not only addressing but also publicising and tracking how
we are improving, and will continue to improve the energy efficiency of our buildings,
interact better within the communities in which our buildings are sited, help to make
the work environment better for our tenants and treat our staff and suppliers fairly
and with respect. The quality of our estate is central to its future value and its attractiveness
to prospective tenants and as such we are committed to ensuring that as far as is possible
every building we own will have improved its environmental credentials over our period of
ownership. To that end we have, in this annual report, published our sustainability policy
together with details of the various strategies by which we intend to progress our overall
policy objectives. We are also rolling out a variety of measurements across our estate so
that by the end of 2020 we can demonstrate the change in energy and water consumption,
waste disposal, GHG emissions, use of renewable energy and other environmentally friendly
measures taken in our buildings.
Strategic reportgovernanceFinancial StatementS Key Performance Indicators
12
The Company’s results for the financial period 2019 are set out in the
Consolidated Statement of Comprehensive Income. The profit for
the financial year ended 31 December 2019 was €5.1 million, including
unrealised losses on investment properties of €0.8 million.
The Company’s key performance indicators are chosen to be specific to the
Company’s sector, to provide a measure of the Company’s performance and
to show progression against the Company’s investment objectives.
KPI
Relevance to Strategy
NAV per share
The NAV reflects the Company’s ability to deploy its capital in a value enhancing
manner.
EPRA NAV per share
The EPRA NAV reflects the Company’s ability to deploy its capital in a value
enhancing manner that can be compared with its peers.
Dividend per share
The dividend reflects the Company’s ability to deliver a sustainable income
stream from its investment properties.
Total shareholder
return
NAV total return1
The total shareholder return demonstrates the Company’s ability to generate
returns for its shareholders
The NAV total return demonstrates the Company’s ability to generate value
and dividend returns
Performance against KPIs
The Company is listed on the AIM market of the London Stock Exchange and the Euronext Growth market in
Dublin. The Company’s shares trade relatively infrequently on either of these exchanges and the majority of the
Company’s current shareholders have held their shares since purchase at Admission or further issuance in 2019. As
the Company’s shares often trade at different prices on each exchange, both have been shown below. Over the year
7% of the weighted average issued outstanding shares traded secondary, and the share price has moved significantly
on small volume. As an example, on Euronext Growth on 30 December 2019 the shares fell 2 cents on 4,678 (0.004%
of the outstanding) shares trading. The Company intends that liquidity in its shares should improve as further shares
are issued and the Company’s PR improves awareness of the Company’s business and track record, however, until
then as relatively small transactions influence the share price disproportionately, the Company also monitors the
NAV total return alongside the total shareholder return, as this is not influenced by share price movement. The NAV
total return is shown alongside the total shareholder return for each exchange.
Yew Grove reit plcreport and consolidated Financial statements 2019 31 December 2018
31 December 2019
Change from
31 December 2018
NAV per share
Dividend per
share
EPRA NAV per
share2
100.18c
98.52
-1.66c
0.96c
5.71c3
100.18c
98.52c
+4.75c
+5.74c3
-1.66c
13
Period total
shareholder
return
Euronext2
-2.0%
-1.3%
-0.3%3
Period total
shareholder
return LSE2
Period NAV total
return1
-4.7%
2.2%
3.2%3
4.8%
3.7%
4.74%3
As a young, dynamic company, the Company is keen to provide KPIs and detail that also explain the NAV total return
performance of the Company. The Company has grown significantly in 2019 both in terms of shares issued (+49%)
and size of property portfolio (+49%). Growth brings with it one-off costs for placement and legal fees on equity
issuance and the legal, tax and due diligence costs of buying property.
Costs of property purchase were 4.41% of capital in 2018 and 2.53% of capital in 2019, for a total of 6.94% since
Admission. Costs of share issuance were 2.93% in 2018 and 0.95% in 2019, for a total of 3.89% since Admission.
Combined, these have impacted the Company’s NAV since Admission by -10.83%. If these costs are stripped out
the NAV total return from Admission would increase from 3.70c to 11.67c, showing an annualised 9.29% return.
Operational Metrics
The Company uses operational performance metrics that allow the Company’s property operations to be compared
with others in its sector or peer group.
The Company’s investment objective, as laid out in the admission document is to:
• Provide shareholders with high, good quality income;
• Pay a covered dividend and generate an attractive risk-adjusted total return for shareholders;
• Build a portfolio of Irish commercial office and industrial property assets to support a high and sustainable share
dividend while achieving moderate capital growth; and
• Ensure that the investment properties be tenanted principally by Government and corporate tenants with
favourable credit profiles.
The Company intends to pay most of its comprehensive income (excluding fair value gains or losses on investment
properties) to shareholders by way of dividends. Following filing financial statements for the financial period from
April 2018 to December 2018 with the CRO in February 2019 the Company began to pay quarterly dividends to
shareholders. The interim dividends (for the first 3 quarters of 2019) for the financial period were 5.71c per share for
a total of €3.59 million and in February 2020 a fourth quarter 2019 dividend of 1.04c was declared, giving a dividend
per share for 2019 of 6.75c.
1 The NAV total return measures the return according to IFRS NAV and dividends paid. It is similar to Total shareholder return, except for its
use of IFRS NAV in place of share price.
2 Alternative Performance Measures (“APMs”). The Company uses a number of financial measures to describe its performance which are
not defined under International Financial Reporting Standards (“IFRS”) and which are therefore considered APMs. In particular, measures
developed by the European Public Real Estate Association (“EPRA”) are reported in line with other public real estate companies. These are
defined in more detail, and reconciled with IFRS where applicable, in the Alternative Performance Measures section.
3 Subsequent to year end a fourth quarter dividend was declared, bringing dividends for the year to 6.75 cents per share
Strategic reportgovernanceFinancial StatementS Key Performance Indicators (continued)
14
The primary operational metrics used by the Directors to measure the Company’s progress in achieving its investment
objectives are illustrated below.
The quality of the Company’s income is measured with reference to the creditworthiness of its tenants. Over the
period from 1 January 2019 to 31 December 2019 the Company’s contracted rent roll by tenant type is shown below,
alongside the percentage vacancy by ERV:
Admission
31 December 2018
31 December 2019
Change from Admission
Period change from 31 December 2018
Government/
quasi
Government
34.0%
37.5%
27.6%
-6.4%
-9.9%
% of contracted rent roll
FDI Large Enterprise
52.5%
54.0%
68.3%
15.8%
14.3%
1.0%
0.4%
0.3%
-0.7%
-0.1%
SME
11.5%
5.3%
3.8%
-7.7%
-1.5%
% of ERV
Vacancy
1.0%
2.8%
7.4%
6.4%
4.6%
Additionally, the tenor and trajectory of the Company’s rental income is measured;
Admission
31 December 2018
31 December 2019
Change from Admission
Change from 31 December 2018
WAULT to next
break
WAULT to lease
end
WAULT to next
rent reversion
date
Gross
Yield at fair
value4
Gross
reversionary
yield4
5.2 years
4.9 years
4.6 years
-0.6 years
-0.3 years
10.4 years
7.4 years
8.1 years
-2.3 years
+0.7 years
3.2 years
2.9 years
2.3 years
-0.9 years
-0.6 years
10.0%
8.1%
7.7%
-2.3%
-0.4%
9.0%
8.6%
8.7%
-0.3%
+0.1%
Over the same period the Company has deployed or committed the proceeds of its 2019 capital raises and €14.6
million of its debt facility, increasing the value of the Group’s revenue generating assets from €77.9 million to €115.8
million while increasing the Company’s contracted rent roll over the year from €6.3 million to €8.9 million as at 31
December 2019. The Company measures contracted rent roll in order to demonstrate the progression of its primary
source of income on a monthly basis.
The Company has incurred €2.8 million of purchase costs (including stamp tax and legal/agency and due diligence
costs) on properties purchased in the year as well as development costs of c. €0.8 million. The fair value gain on
the Company’s properties at 31 December 2019 did not fully offset the entirety of these costs, showing a net loss of
€0.8 million.
The Company expects to publish targets for improvements in energy efficiency, GHG emission, improvement in
recycling by the date of the interim Report in June 2020. For these to be meaningful the baseline measurements
need to be accurate and to that end the Company is ensuring there is measurement across all of the Company’s
buildings, but the Company is also engaged with the installation of intelligent measurement and analytical systems
which will track usage and system efficiency both at a landlord and tenant level to the benefit of both. At present the
Company is too small in capital terms to be considered for GRESB membership but provided the Company grows to
sufficient size it will target a private submission of data by the end of 2021 with a target of full membership by 2022.
4
Alternative Performance Measures (“APMs”). The Company uses a number of financial measures to describe its performance which are
not defined under International Financial Reporting Standards (“IFRS”) and which are therefore considered APMs. In particular, measures
developed by the European Public Real Estate Association (“EPRA”) are reported in line with other public real estate companies. These are
defined in more detail, and reconciled with IFRS where applicable, in the Alternative Performance Measures section.
Yew Grove reit plcreport and consolidated Financial statements 2019 In order to manage the Company’s life and growth, the Directors have set short and medium-term targets for the
investment objectives. These are a mix of organisational and property management, investment and capital raising
objectives:
15
Prior year progress
Impact
2019 progress
Impact
Short term objectives:
To have allocated capital raised
within 12 months
All of €75 million
raised deployed
Company ahead of
capital allocation
target
All €36 million equity
capital raised in 2019
committed by year end
Increase in pipeline
as property sellers
acknowledge the
Company’s ability to raise
capital
To run the Company’s business
prudently and in compliance with
the REIT rules5
Capital reduction,
subsidiary fund
liquidation, REIT rule
compliance
Company paid
dividends and
property income
distributions for 2018
in early 2019
Quarterly dividends
declared and paid;
property reporting
system implemented
Company remains in
compliance with the
REIT rules, increased
distributions paid to
shareholders
Medium term objectives:
To raise leverage of no greater
than 25% on agreeable terms and
deploy this in property assets
Debt facility of €19.9
million agreed, €6.2
million drawn
Revenue increase,
asset increase
Debt facility increased
by €9.1 million, 72%
committed at year end
Revenue increase, asset
increase, greater diversity
To raise and deploy further
equity capital on property assets
Selection of suitable
brokers and advisors
Timeline (excluding
market conditions)
achievable
Additional broker
contracted, additional
€35 million equity
capital raised
Increased revenue and
shareholder base while
minimising cash drag
To increase amount, security and
duration of the Company’s rental
income
Rent reviews initiated
Annual contracted
rent roll increase from
rent review
Annual contracted rent
roll increase from 2018
from rent review of
€0.36 million
Increased revenue,
WAULT remains within a
half year from 2018
To continue to minimise the
Company’s cost base, such that
incremental capital raises can
enhance the Company’s dividends
Staffing and systems
established prudently
Company
operationally ready
to raise and deploy
further capital
Internalised finance
function, reduced
certain third-party
costs
NAV grew by 46%,
administrative costs were
+54% on 2018, reporting
period +43% longer than
2018
5
As an Irish Real Estate Investment Trust (“REIT”), the Company is subject to Part 25A of the Taxes Consolidation Act 1997 (as inserted by section 41 of the Finance
Act 2013).
Strategic reportgovernanceFinancial StatementS Financial Review
16
In the context of a rapidly growing company our results for the year were positive.
Our issued shares grew by 49%, debt facility by 46% and property portfolio by 49%.
Group net assets grew from €75.1 million to €109.9 million at year end, net rental
income grew from €2.6 million to €9.4 million and administrative costs remained
controlled at €3.0 million when compared with €1.8 million in 6.5 months of 2018.
Our total expense ratio (“TER”) fell from 4.3% in 2018 to 3.7% in the year.
Net Asset Value
The net assets of the Group increased by €34.8 million,
a rise of 46% over the year. The Company raised equity
capital of €35.8 million, and further debt capital of €9.1
million, which was deployed on a further €39.5 million of
property assets. Valuation falls on the Group’s portfolio
over the period were €0.8 million, while its accretive
strategy cost €2.8 million in property purchase costs
(including an increase in commercial property stamp
tax rates of 1.5% late in the period) and share issuance
costs of €1.0 million. The vast majority of the net rental
income was distributed to shareholders as property
income distributions.
“The net assets
of the Group increased
by €34.8 million,
a rise of 46%
over the year.”
NAV per share Progression
110
2.67
4.01
100.18
-6.29
-1.27
2.99
98.52
-3.76
90
31 Dec 2018
Net rental
income
Lease
surrender
income
Dividends
paid
Equity
issue
Property
acq/capex
costs
Property
valuation
change
31 Dec 2019
Annualised rent roll
10,000,000
Administrative costs incl financing
8,000,000
6,000,000
4,000,000
2,000,000
0
2,000,000
1,500,000
1,000,000
500,000
0
End Dec
2018
End Jun
2019
End Dec
2019
End Dec
2018
End Jun
2019
End Dec
2019
Yew Grove reit plcreport and consolidated Financial statements 2019 Annualised rent roll
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
Administrative costs incl financing
17
2,000,000
1,500,000
1,000,000
500,000
0
NAV per share Progression
110
2.67
4.01
100.18
-6.29
-1.27
2.99
98.52
-3.76
90
31 Dec 2018
Net rental
income
Lease
surrender
income
Dividends
paid
Equity
issue
Property
acq/capex
costs
Property
valuation
change
31 Dec 2019
End Dec
2018
End Jun
2019
End Dec
2019
End Dec
2018
End Jun
2019
End Dec
2019
Income statement
Net rental income for the year was €9.4 million, with the
contracted rent roll rising by €2.6 million. A comparison of
contracted rent roll for properties owned on 31 December
2018 with 31 December 2019 shows an increase of 41%,
while contracted rent roll on properties bought during
the period fell by €0.6 million, the majority of which was
due to the lease surrender on the Cork Airport Business
Park asset. As mentioned in the property review section,
there were lease events which increased the income
from some of the Company’s properties, and with our
reversionary portfolio we expect further increases over
the coming years.
Administrative expenses over the year were €3.0 million.
Excluding performance-based remuneration these were
€2.4 million, comparing favourably with €1.8 million for
the 6.5 months from Admission to 31 December 2018
while the Company’s shares in issue increased by 49%.
One additional hire was made in order to internalise
the Company’s finance function, which was previously
provided by an external administrator. The internalisation
was completed this year, and the Company will look at
internalising other roles over the coming year if they
offer control and cost benefits.
Dividends
Following last year’s capital reduction and the filing
of initial accounts in February, dividends for the year
were 6.75c per share, an increase of seven times on the
dividend declared for 2018 and fully covered by EPRA
earnings. The Company has had a quarterly dividend
schedule in place since March 2019 and continues to
target distributing its net rental income to shareholders
in this manner if prudent.
Strategic reportgovernanceFinancial StatementS Financial Review (continued)
18
Property value
140,000,000
120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0
End Dec
2018
End Jun
2019
End Dec
2019
Investment properties
The property portfolio value was €115.8 million as at 31
December 2019, up from €77.9 million a year previously.
Realised and unrealised losses on the property portfolio
were -€0.6 million for the year, reflecting the costs of
property purchases in an accretive period and the increase
in stamp tax of 1.5% towards the end of the year as well as
the gain on sale on one of our smaller properties. Capital
expenditure not recharged to tenants was €0.8 million.
As at 31 December 2019 the portfolio had 23 properties,
with an average value of €5.0 million. The smaller legacy
properties that were a part of the IPO seed portfolio
will be marketed over the coming year and the proceeds
may be redeployed in more institutional properties with
greater growth prospects.
Borrowings
Over the year the Company increased its revolving debt
facility with AIB from €20 million to €29.1 million in
July, and the drawn amount from €6.2 million to €20.8
million. As at 31 December 2019 the Company had
undrawn facilities of €8.3 million. The Loan to Value
ratio increased from 8% to 18% over the period and is
expected to rise again as pipeline assets are purchased.
The Company remained fully compliant with its facility
covenants throughout the year.
Share capital
The Company received agreement from its shareholders in
July for a one year, 100 million share issuance programme,
which was accessed twice in the following five months.
Initially €10 million was raised to purchase a portfolio of
properties on an IDA Ireland industrial estate in July, and
in December the Company raised a further €25.8 million
which was committed to the purchase of a portfolio of
office buildings within 2 weeks of receipt of funds. Shares
in issuance increased from 75.0 million to 111.6 million,
an increase of 49%.
“The property portfolio
value was €115.8 million
as at 31 December 2019,
up from €77.9 million
a year previously. ”
Yew Grove reit plcreport and consolidated Financial statements 2019 Portfolio Report
19
Year End 2019 Portfolio at a glance;
• Contracted rent roll: €8.9m
• Portfolio Value: €115.8m
• Gross yield at fair value: 7.7%. Gross
reversionary yield 8.7%.
• Number of buildings: 23*
• Income security with WAULT at 4.6 years to
break and 8.1 years to expiry.
• Contracted rental roll has increased from
€6.3m in 2018 to €8.9m in 2019: 41% increase.
• Portfolio Location: 42% of contracted rent
roll generated by buildings within the Dublin
catchment area.
• Portfolio Quality: 96% of contracted rent
roll secured by Government, FDI and Large
Enterprise tenants.
• Portfolio increase via acquisitions from
€77.9m to €115.8m at 31st Dec 2019: a 49%
increase.
• Sectoral Exposure: 67% contracted rent roll
generated from office, 26% from industrial
and 7% from mixed use and retail buildings
• Contracts exchanged on a further €25.3m of
property.
*
Letterkenny is treated as a single asset and tenant in the table below but has three leases over three co-located buildings.
Strategic reportgovernanceFinancial StatementS Portfolio Report (continued)
Contracted
rent roll
(€’000)
Gross Yield
at Fair Value
Reversionary
Rent Roll
(€’000)
Gross
Reversionary
Yield
WAULT to
lease break
(years)
WAULT to
lease end
(years)
Portfolio
vacancy
Building
Type
Location
One Gateway Office
Dublin
Value
(€’000)
19,000
Letterkenny
Office
North West
15,755
Three Gateway Office
Dublin
Teleflex
Office
Midlands
IDA Athlone
Block B
Industrial
Midlands
14,460
11,610
6,175
1,306
1,437
913
948
530
6.9%
9.1%
6.3%
8.2%
8.6%
1,491
1,458
1,188
851
530
7.8%
9.3%
8.2%
7.3%
8.6%
Unit 2600, Cork
Airport
Office
Cork
6,200
0
0.0%
633
10.2%
Office
Dublin
5,140
391
7.6%
Industrial
Midlands
5,050
483
9.6%
Office
Dublin
4,915
Office
South East
4,100
Industrial
Midlands
3,500
393
353
250
8.0%
8.6%
424
10.3%
7.1%
312
8.9%
Industrial
Midlands
3,150
280
8.9%
253
8.0%
1
2
3
4
5
6
7
8
9
10
11
12
Ashtown Gate
Block C
IDA Athlone
Unit B2
Ashtown Gate
Block B
IDA Waterford
Block A
IDA Athlone
Block A
IDA Athlone
Block C
13 Blackwater
House
Office
Cork
2,750
233
8.5%
313
11.4%
14 Airways Unit 7 Industrial
Dublin
15 Airways Unit 8 Industrial
Dublin
16
Bridge Centre
Retail
Midlands
17 Holly Avenue
Industrial
Dublin
18 Unit L2
Toughers
Industrial
Dublin
Catchment
2,470
2,740
1,840
1,835
1,815
19 Old Mill Lane Mixed Use
South West
1,500
20 Canal House
Mixed Use Midlands
21 Centre Point
Industrial
Dublin
930
855
160
150
229
170
170
302
107
110
6.5%
5.5%
12.5%
9.3%
9.4%
20.1%
11.5%
12.9%
Total
115,790
8,915
7.7%
10,092
401
483
380
7.8%
9.6%
7.7%
248
280
181
187
201
10.0%
10.2%
9.8%
10.2%
11.1%
176
11.7%
53
51
5.7%
6.0%
8.7%
2.0
8.3
2.0
8.8
3.2
0.0
4.2
3.7
3.0
4.2
1.2
4.8
1.4
5.5
6.1
1.4
1.1
3.1
6.9
7.0
6.7
4.6
4.2
8.3
2.0
11.7
13.2
0.0%
0.0%
0.0%
0.0%
0.0%
0.0
100.0%
5.9
0.0%
14.7
0.0%
9.5
0.0%
15.0
0.0%
11.1
0.0%
9.8
0.0%
4.5
29.7%
10.5
11.1
2.0
8.1
3.1
8.7
7.0
6.7
8.1
0.0%
0.0%
13.8%
0.0%
0.0%
0.0%
0.0%
0.0%
7.4%
1
Letterkenny
Tullamore
Athlone
5
1
1
Portlaoise
Waterford
1
1
Listowel
Cork
2
M3
M2
meath
Airways 7+8
M1
2
2
Ashtown B,C
2
M50
Gateway1,3
M4
Centrepoint
1
dublin
kildare
Naas
1
M50
1
Holly Avenue
N7
N81
N11
dublin
catchment
area
Sector mix by
contracted rent roll
Office
Industrial
Mixed use
Retail
67%
26%
5%
3%
Tenant mix by
contracted rent roll
FDI
SME
Government
Large Enterprise
68%
28%
4%
0.3%
Yew Grove reit plcreport and consolidated Financial statements 2019
21
1
Letterkenny
Tullamore
Athlone
5
1
1
Portlaoise
Waterford
1
1
Listowel
Cork
2
M3
M2
M1
meath
Ashtown B,C
2
Airways 7+8
M50
2
Gateway1,3
M4
Centrepoint
1
dublin
M50
2
1
N7
N81
Holly Avenue
kildare
Naas
1
N11
dublin
catchment
area
At year end, December 2019, the Company’s property
portfolio has 23 buildings spread throughout Ireland.
Independently valued by Lisney, the capital value of this
portfolio stands at €115.8m, reflecting a gross yield at
fair value of 7.7% and gross reversionary yield of 8.7%.
Company Portfolio Objectives
Yew Grove’s investment strategy is to pursue and invest
in a diversified portfolio of industrial and office property
assets in its target geographical area securing high quality
income from quality tenant covenants.
The investment objectives of quality income from quality
covenants are constrained by the following risk limits;
Sector mix by
contracted rent roll
Office
Industrial
Mixed use
Retail
67%
26%
5%
3%
Tenant mix by
contracted rent roll
FDI
Government
SME
Large Enterprise
68%
28%
4%
0.3%
1.
2.
3.
No single property shall exceed 25% capital value
of the total assets within the company;
Income receivable from one tenant group (except
Government) not exceeding 35% of the total rental
income;
At least 90% of the company’s assets will be
invested in the office and industrial sector. The
REIT does not invest in solely residential, retail,
or service sector buildings;
4. No more than 20% of the total assets of the
company may be invested in properties outside
its geographic target market;
5.
The company will not engage in speculative
development however will consider financing
construction against pre-lets and/or agreements
to lease to meet current tenants’ expansionary
plans;
Strategic reportgovernanceFinancial StatementS Portfolio Report (continued)
Block A, IDA Waterford Business and
Technology Park, Waterford
22
Investment Activity 2019
The company closed four acquisitions in 2019 and
exchanged conditional contracts on a fifth acquisition.
In February 2020 these conditions were satisfied and it
was completed as detailed in Note 30 to the financial
statements.
Unit 2600, Cork Airport Business Park, Cork
In Q1, the Company acquired its first Cork property, Unit
2600 in the Cork Airport Business Park. The Park sits
next to Cork Airport and is one of the prime sites in the
Cork suburbs for FDIs and business services companies
based in Cork. Built in 1999, the building has high grade
office space for FDI tenants.
The building has c. 40,827 sq. ft of open plan space
with 162 car parking spaces and was bought for €7.5
million which was a purchase yield to the Company of
7.85% after accounting for purchase costs. The tenant,
Clearstream Global Securities Service Ltd had five years
left to run on their lease. As part of its expansion plan,
the tenant negotiated a lease surrender in June, resulting
in a payment to the Company of €3m and the tenant
vacated the building in July. The Company has completed
a refurbishment on the building for a potential new
tenant and is currently discussing terms with a number
of interested parties.
In Q1, the company completed the acquisition of Block
A, IDA Waterford Business and Technology Park,
Butlerstown, Waterford for €4.0 million. The modern
office block has 36,845 sq. ft. of open plan space arranged
over three storeys and completed to a high standard.
The purchase yield to the Company was 8.56% after
accounting for purchase costs. The building is tenanted
by Tech Mahindra Business Services Ltd under a 20-year
lease with a break in 5 years and SE2 Information Services
Ireland Ltd under a five-year lease (with an exercised
option to extend by a further five years).
Three properties in the IDA Business and
Technology Park, Athlone
In July 2019, the company acquired a portfolio of three
high quality industrial buildings in the IDA Business and
Technology Park, Garrycastle, Athlone for a purchase
price of €13.0 million, which represents a purchase yield
to the company of 7.60% after accounting for purchase
costs. The portfolio should enjoy a potential reversionary
yield in excess of 8.0%.
Yew Grove reit plcreport and consolidated Financial statements 2019 Portfolio of six buildings at Millennium Park,
Naas
23
In late December 2019, the Company announced that it
had exchanged conditional contracts for the purchase of a
portfolio of six office buildings at Millennium Park, Naas,
County Kildare. The purchase price for the portfolio was
€25.3 million, which represents a purchase yield to the
company of 5.8% after accounting for purchase costs. The
conditions were satisfied and acquisition completed post
year end in February 2020. The portfolio is expected to
have near-term reversionary potential in excess of 9%.
The portfolio has 140,000 sq. ft. of modern offices over
six buildings, as well as 773 carparking spaces and a
six-acre greenfield site. Five of the office buildings are
tenanted by FDI and large Irish enterprises, with one of
the buildings being vacant. The combined leases have
a WAULT to break of c.2.5 years and to lease expiry of
c.5.0 years. The current annual rent roll for the portfolio
is approximately €1.6 million.
The portfolio is a part of the Millennium Park, Naas
development which is situated approximately 40 minutes’
drive from Dublin City Centre and Dublin Airport. It
is expected to benefit from a recent upgrade of the M7
motorway and significantly improved access from the
new M7 interchange at Millennium Park.
Once the Millennium Park acquisition has completed,
the Company’s portfolio will have 27 properties with a
proforma gross asset value of c. €141m and an annual
contracted rent roll of €10.6m.
The portfolio has 114,498 sq. ft. of modern high-tech space
in three buildings with associated carparking and is leased
to PPD Development Ireland Ltd, KCI Manufacturing
and Signature Ortho Europe Ltd. The combined leases
had a WAULT at time of purchase to break of 3.9 years
and to lease expiry of 12.5 years. The combined current
rent roll for the portfolio is €1.06 million.
The building occupied by KCI Manufacturing inter-
connects with the company’s existing Athlone property
and brings the total size of the Company’s property leased
to KCI to 101,230 sq. ft. The addition of the three new
buildings bring the Company’s total industrial footprint
in the park to c.161,370 sq. ft. with an aggregate rent roll
of c.€1.54 million.
A further property on the IDA Business and
Technology Park, Athlone
In December the Company completed the purchase of an
office building also situated within the IDA Business and
Technology Park, Garrycastle, Athlone. The purchase
price was €12.0 million, which represented a purchase
yield to the Company yield of 7.2% after purchase costs,
the lease has rent reviews linked to CPI.
The building, constructed in 2016, has 45,144 sq. ft. of
modern office space with a 245 space car park. It is leased
to Teleflex Medical Europe Ltd and has a WAULT to break
of 8.8 years and to lease expiry of 11 years. The current
rent roll for the building is €0.95 million per annum.
This acquisition brings the company’s total footprint in
this IDA Ireland park to c.206,500 sq. ft. in five buildings
with an aggregate annual rent roll of c.€2.49 million from
four highly rated FDI tenants.
Strategic reportgovernanceFinancial StatementS Portfolio Report (continued)
Regional commercial property rents are
still at the early stage
Provincial
Dublin Office
24
Portfolio Structure
The portfolio, which focuses on the industrial and office
sector, has a tenant base providing stable income from
higher yielding assets with strong tenant covenants.
The portfolio at 31 December 2019 has 707,100 sq. ft of
total space. The office sector represents 51.1% of the
portfolio floor space (361,491 sq. ft), of which approx.
35.4% (127,858 sq. ft) is within the Dublin catchment area.
The industrial sector represents 43.3% of the portfolio
floor space (306,429 sq. ft) of which approx. 47.3%
(145,060 sq. ft) is within the Dublin catchment area.
The balance (161,370 sq. ft) is within the IDA Business
& Technology Park, Athlone.
Mixed use (including retail space) represents 39,179 sq. ft
or 5.5% of the floor space and these units are in mixed-use
buildings where retail is ancillary to the anchor tenants
which are government agencies occupying office space
and also in the Tullamore Bridge Centre (anchored by
An Post). All of these buildings will be marketed for
sale during 2020.
Overall, the vacancy rate of the portfolio currently stands
at 7.1% or 50,118 sq. ft, the majority of which is at Unit
2600 at Cork Airport and Blackwater House.
Tenant Mix by Floor Area
FDI
Government
Vacant
SME
Large Enterprise
69%
17%
7%
6%
0.13%
Sector Mix by Floor Area
Office
Industrial
Mixed use
Retail
51%
43%
5%
1%
Reversionary and Rental Potential
A key activity for the management team is the capture of
potential reversionary rent and achieving rental growth
in the portfolio, which will increase the Company’s future
revenues.
In 2019, the Company completed three new leases/licence
and four rent reviews bringing an additional €376,000
to the annual rent roll. In addition, as tenants exercise
their lease/licence extension options or pass on lease
breaks, the WAULT of the portfolio has remained broadly
in line with the previous year.
The portfolio tenants are high quality and include
government bodies (such as Irish Water, ESB and the
Office of Public Works) accounting for 27.6% of the total
rent roll, while FDI and Corporates (such as KCI, Optum,
Teleflex) account for 68.34%.
The external valuer’s 31 December 2019 report shows
that approximately 70% of the core portfolio by building
has reversionary upside which could bring the yield on
the portfolio to 8.72%.
Asset management of the company’s portfolio is a key
driver to increasing rental income, WAULT, and ultimately
capital value of our properties. The highlights of 2019
include, the company achieving rental and licence
increases of 33.0% on a lease at Ashtown Gate, 36.0% on
a lease at Holly Avenue and 94.0% on a lease at Gateway
One.
In addition, the company forward funded the development
of a purpose-built surface carpark at an industrial unit
located within the IDA Technology & Business Park,
Athlone. This was leased to KCI Manufacturing in March
2019 at rent of €48,000 per annum for an additional 70
car parking spaces.
At the Gateway One property, a new lease to Mott
McDonald completed the full occupancy of the property
for the first time in 2019.
The portfolio has numerous ongoing projects that are to
be completed within the year. Where the management
team believe it will enhance future income generation
and capital values, the Company may from time to time,
140
x
e
d
n
I
t
n
e
R
t
e
k
r
a
M
0
12
%
d
l
e
i
y
t
n
e
l
a
v
i
u
q
E
Sep-05
Sep-19
Source: Goodbody, MSCI
Non-core offers attractive yeild spread 100-150bps
with similar income risk
Central Dublin
Rest of Dublin
Provincial
0
2008
Source: Goodbody, MSCI
2019
Yew Grove reit plcreport and consolidated Financial statements 2019
Regional commercial property rents are
still at the early stage
Provincial
Dublin Office
Sep-05
Sep-19
Source: Goodbody, MSCI
Non-core offers attractive yeild spread 100-150bps
with similar income risk
Central Dublin
Rest of Dublin
Provincial
140
x
e
d
n
I
t
n
e
R
t
e
k
r
a
M
0
12
i
l
%
d
e
y
t
n
e
a
v
u
q
E
l
i
Tenant Mix by Floor Area
FDI
Government
Vacant
SME
69%
17%
7%
6%
Large Enterprise
0.13%
Sector Mix by Floor Area
Office
Industrial
Mixed use
Retail
51%
43%
5%
1%
0
2008
Source: Goodbody, MSCI
2019
undertake planning, intensification, unit consolidation,
unit division, modernisations and redevelopments in
respect of properties.
A complete review of all assets in the portfolio by way
of a Building Investment Fund survey report began in
2019. The purpose is to ensure that existing sinking funds
for each of the buildings are appropriately funded given
the needs to replace and upgrade their mechanical and
engineering systems. The Company plans to further
develop this with a particular focus on enhancing the
environmental and sustainability aspects of each building
in line with the company’s ESG policy.
Acquisitions & Disposals Policy
25
The Company’s target geographic market is focused on
a) the Dublin catchment area b) major regional cities and
towns (especially those identified as hubs for industrial
development under Project Ireland 2040) and c) in IDA
Ireland Business and Technology Parks.
Outside Dublin, the Company has targeted and secured
assets within the major regional cities and towns. It has
specifically sought assets within IDA Ireland Business
and Technology Parks on a national level, ranging from
Letterkenny in the north to Waterford in the south.
These parks are occupied by government and IDA Ireland
backed tenants who are usually situated in a particular
park for geographically specific reasons (such as the
existence of an industrial supply chain in an industry
sector, the quality and specificity of graduates from the
local Institute of Technology or other educational and
research establishments or the clustering effect from a
number of companies in an industrial sector).
The investment focus of the management team is on
assets with strong, stable and growing income. To that
end, the Company looks for properties that are well
situated and tenants with strong credit profiles. Ideally
the buildings are in areas sought by similar tenants
and should therefore provide a strong reversionary
income as rents rise. Post-acquisition, the portfolio the
Company seeks to develop close relationships with its
tenants to facilitate better engagement with the tenants
to understand their requirements, meet their needs
and to improve visibility of potential opportunities but
also alleviate or avoid potential problems. As an active
landlord that is willing and able to facilitate a tenant’s
growth plans, the strategy has already borne fruit, and
several have already confirmed that they are planning
to expand their footprint within the Company’s existing
properties.
The Company’s acquisition policy for 2020 will continue
along the same path and focus on high quality buildings
with secure, strong and growing income.
In 2020, the target acquisition lot size for industrial
properties will be in a €5m and €15m range per property
and for offices will be in a €10m and €30m range per
property. The mixture of assets located within our target
market remains strong. The Company’s business model
and relationships afford it the opportunity to explore a
wider range of prospects and therefore diversification
Strategic reportgovernanceFinancial StatementS
Portfolio Report (continued)
26
within the portfolio. The Company expects to see a
robust pipeline of assets in 2020 coming from a number
of different sources, including Investment firms, private
equity firms and construction/development firms. The
pipeline of assets coming forward in 2020 comes from
asset and capital recycling, portfolio reconfiguration,
market consolidation and broader more transparent
pricing.
With the primary focus on strong but good quality
and growing income returns, the Company anticipates
generating capital growth as rents increase and through
active asset management.
Top Five Portfolio Assets
One Gateway, East Wall Road, Dublin 3
In order to maintain a higher quality and more balanced
weighting of capital values within the portfolio, the
management team intend to dispose of several of the
smaller mixed use and retail assets during 2020.
The first of these disposals was Heather Road for
€1.1m which represented a 15.1% annualised return to
the company since IPO. Three other assets have been
prepared for market, and one further asset is subject to
a lease negotiation in preparation for sale.
Investment Region
Asset
Sector
Area
Age of Building
Building Design
Tenant
WAULT (expiry/break)
Acquisition Price
Valuation
Gross yield at fair value
Gross Reversionary Yield
Non-CBD Dublin
One Gateway
Office
51,497 sq. ft GIA
12 years
Multi-tenanted
Govt/FDI/Corp
4.2/2.0
€16.31m
€19.00m
6.9%
7.8%
IDA Letterkenny Office Park, Letterkenny, Co. Donegal
Investment Region
Asset
Sector
Area
Age of Buildings
Building Design
Tenant
WAULT (expiry/break)
Acquisition Price
Valuation
Gross yield at fair value
Gross Reversionary Yield
North- West
Optum 1, 2 & 3
Office
90, 548 sq. ft GIA
13-21 years
Single- tenanted
FDI
8.3/8.3
€16.00m
€15.76m
9.1%
9.3%
Yew Grove reit plcreport and consolidated Financial statements 2019
Three Gateway, East Wall Road, Dublin 3
27
Investment Region
Asset
Sector
Area
Age of Building
Building Design
Tenant
WAULT (expiry/break)
Acquisition Price
Valuation
Gross yield at fair value
Gross Reversionary Yield
Non-CBD Dublin
Three Gateway
Office
43,212 sq. ft GIA
12 years
Single Tenant
Government
2.0/2.0
€12.69m
€14.46m
6.3%
8.2%
Teleflex, IDA Business & Technology Park, Athlone, Co. Westmeath
Investment Region
Asset
Sector
Area
Age of Building
Building Design
Tenant
WAULT (expiry/break)
Acquisition Price
Valuation
Gross yield at fair value
Gross Reversionary Yield
Midlands
Teleflex Building
Office
45,144 GIA sq. ft
4 years
Single Tenant
FDI
11.7/8.8
€12.00m
€11.61m
8.2%
7.3%
Block B, IDA Business & Technology Park, Athlone, Co. Westmeath
Investment Region
Asset
Sector
Area
Age of Building
Building Design
Tenant
WAULT (expiry/break)
Acquisition Price
Valuation
Gross yield at fair value
Gross Reversionary Yield
Midlands
Block B
Industrial
54,358sq. ft
11 years
Single tenant
FDI
13.2/3.2
€6.22m
€6.18m
8.6%
8.6%
Strategic reportgovernanceFinancial StatementS
Engagement Report
28
The Board is responsible for establishing the key principles and culture of the
Company, including in environmental, social and corporate governance. The
Company seeks to be clear and open in performance reporting for all stakeholders
and conduct its affairs responsibly and with suitable oversight. We are fortunate
to have built a strong team at the Company and our culture is key in ensuring that
team works well. We are guided by our shared objectives, values and understanding
of the Company and the Company’s stakeholders and environment.
Stakeholder Engagement
The Company has a number of stakeholder groups:
Employees
We value the contributions made by the Company’s
employee and non-executive teams. Since the Company’s
formation in 2018 we have striven for a strong and open
Company culture, with values that have been co-created
by our employees. We aim to have a positive, transparent
business environment consistent with our values, with
equal opportunities for all. All employees are invited
to the weekly Company business meeting and are free
to table points, question or propose agenda items and
participate as fully as they require. The Company has
a flat reporting structure, aided by its relatively small
size, so each employee reports, and has daily access, to
an executive board member.
“We seek to select, recruit,
develop and promote
the very best people in
a working environment
where all are treated with
dignity and respect.”
We seek to select, recruit, develop and promote the very best people in a working environment where all are treated
with dignity and respect. This is effected by:
1.
2.
Ensuring equal opportunities in the recruitment process
Setting fair and competitive salaries and benefits
3. Ensuring employee objectives and reviews reflect the Company’s objectives and culture
4. Having appropriate family and well-being policies
5. Being opposed to any form of discriminatory treatment
Yew Grove reit plcreport and consolidated Financial statements 2019 All employees and executive directors receive death
in service and long-term disability insurance, as
well as health insurance for them, their spouses and
dependents under the age of 18. The employee pension
benefits contributed by the Company are 15% for every
employee without exception. With the approval of the
Remuneration Committee each of the employees are
eligible to receive a bonus for outperformance against
specific and agreed measures. In 2020 the Company
intends to expand the membership of the Long Term
Incentive Plan to include certain employees in addition
to the executive directors to more closely align those
employees with Company performance.
The executive directors are responsible for overseeing
the training, development and career mentoring of the
employees that report to them. The Company’s open
and inclusive work culture allows employees to see the
benefits of their work to the Company and its wider
community. Employee development needs are met by a
mix of activities which include internally and externally
provided training, structured ‘on the job’ work experience
and through interaction with professional colleagues.
Over the year, staff completed an average of 15 hours
training each.
29
As a smaller company the Directors recognise the benefits
of diversity of skills, experience, background, gender
and other qualities in the Company’s employees. We are
committed to reflecting diversity in its broadest sense,
while ensuring that we maintain the necessary skills and
experience required to oversee the significant business
activities and related requirements of the Group. In
reviewing the Company’s employment requirements,
candidates are considered on merit against objective
criteria and with due regard for the benefits of diversity.
The Company has a Diversity Policy, the aim of which is
to ensure that the percentage of women employed by the
Company remains at or exceeds 30% and men employed
by the Company remains at or exceeds 30%. At the end
of the financial period of the Company’s employees 33%
were women, and of the officers (including independent
non-executive directors) 30% were women.
The health and well-being of our employees and stakeholders is critical to the business. Our commitment to providing
a safe and healthy working environment for our employees is achieved by:
1.
2.
3.
4.
5.
Adhering to the appropriate health and safety standards
Providing a working environment that as far as possible enables employees to work effectively and free from
unnecessary anxiety, stress and fear
Having private health benefits for all employees
Ensuring employees can report inappropriate behaviour or concerns through any of their manager, the senior
independent director or via the whistleblowing policy
Having appropriate family friendly policies
6. Having a modern slavery policy and a zero-tolerance approach to slavery, human trafficking, as well as
bribery and corruption.
Strategic reportgovernanceFinancial StatementS Engagement Report (continued)
EPRA enhanced measures for reporting table (social and governance)
Indicator
Gender
Diversity
(Male/Female
ratio)
Gender pay
(basic pay by
Male/Female
ratio)
All employees
31/12/2018
60%/40%
Executive Directors
100%/0%
Non executive Directors
75%/25%
All employees
71%/29%
Executive Directors
100%/0%
Non executive Directors
78%/22%
Training and development
(Average hours per employee)
12
Performance appraisals (% of workforce)
100%
New hires
Turnover
Injury rate (Injuries per work hour)
Lost day rate (Days per employee)
Absentee rate (Days per employee)
Fatalities
H&S Impact assessments
5
0
0
0
0
0
0
31/12/2019
66%/34%
100%/0%
75%/25%
73%/23%
100%/0%
78%/22%
15
100%
1
0
0
0
0
0
0
H&S incidents
No instances of non-compliance
No instances of non-compliance
Nomination and selection process for
selecting the highest governance body
http://www.ygreit.com/~/media/Files/Y/
Yew-Tree-Commercial/documents/20-
terms-of-reference-nominations-
committee-may-2018.pdf
http://www.ygreit.com/~/media/Files/Y/
Yew-Tree-Commercial/documents/20-
terms-of-reference-nominations-
committee-may-2018.pdf
Conflict of interest management
The Company has a conflict of interest
policy, the Conflicts log is reviewed by
the Audit Committee at each meeting, no
conflicts have been reported.
The Company has a conflict of interest
policy, the Conflicts log is reviewed by
the Audit Committee at each meeting, no
conflicts have been reported.
Yew Grove reit plcreport and consolidated Financial statements 2019 Shareholders
Tenants
31
The Directors welcome the opportunity to meet with the
Company’s shareholders both at the Company’s AGM,
EGM and at informal meetings. All directors attended
the 2019 AGM and EGM to meet with shareholders and
the Executive Directors conducted shareholder meetings
following release of the 2018 Annual report, the 2019
Interim report and before the Company’s capital raising
in July and December 2019. The Company hosted visits to
its offices and its properties for shareholders and intends
to continue doing so in 2020. At each quarterly Board
meeting (and at ad-hoc Board meetings if merited) the
Executive Directors brief the non-executive Directors
on current and potential shareholders’ views on the
Company’s performance, strategy and results. The
Company’s broker Goodbody Stockbrokers provides
written feedback from meetings that is shared directly
with the Board. Garry O’Dea as Senior Independent
Director remains a point of contact for shareholders who
wish to speak directly with the non-executive Directors.
Service Providers
The Company conducted a review of the performance,
cost and benefit of all its service providers, making
changes where these were merited and reviewing the
need and cost benefit of additional staff to ensure the
Company remains operationally effective. The Company
has internalised its finance function in 2019 and continues
to review other currently outsourced services that might
be better provided internally from 2020. As a lightly
staffed, responsible Company the Directors value the
past, present and future business relationships that allow
the Company’s strategy and business to be efficiently
executed. The Company has conducted property visits
with service providers to ensure they understand the
Company’s business better. A significant amount of
the Company’s employees’ time and effort is taken in
educating our business suppliers and stakeholders on the
Company’s objectives, plans and ethics in order that our
service providers understand their part in those goals.
The Company has a modern slavery policy and requires
behaviour from its service providers to be in keeping
with the Company’s Supplier Code of Conduct.
The Company’s interest in its tenants is indicated
in its investment policy and continued through the
ownership of each property. The Company’s property
management group’s aim is to be proactive, approachable
and responsible in their tenant interactions in order
that our properties support our tenants', and modern
workplace, requirements. All property purchases and
new leases require a detailed review of the tenant, the
tenant’s business and the relationship of these with the
company and the economic and social environment. The
Company’s property management group meet with the
tenants to understand their current and future use of the
properties, deal with issues and, where feasible, to try to
improve the quality of the property and its environment.
Communities
As a company we invest in property situated in
communities across Ireland, usually in areas where our
tenants are significant local employers. However, it is
important that we are not just the owners of the buildings
housing businesses that employ local people, but that we
do what we can to have a positive impact on those local
communities. That includes ensuring our buildings are
healthy places to work but also we aim to try to improve
the local communities in some way.
Our business strategy is predicated on benefitting from
Ireland’s attractiveness to foreign direct investment.
That investment is in large part driven by the quality of
the young, educated work forces that exist in the larger
towns and cities in regional Ireland. Whilst the cities
(Cork, Limerick and Galway) have thriving universities
which spawn research institutes and help to encourage
business investment, the towns rely on Institutes of
Technology which tailor many of their courses to educate
students in ways that make them more attractive to
and employable by those multinational investors. The
buildings we own outside of the larger cities are usually
situated on IDA Ireland parks set close to local institutes
of technology. One of our key community objectives for
2020 is to engage with at least two of those institutes to
see how better we can improve the local environment:
for example by sponsoring and facilitating research in
practical improvements to the environmental impacts
of both the parks in which the buildings are situated as
well as the buildings themselves.
Strategic reportgovernanceFinancial StatementS 32
Engagement Report (continued)
As part of a broader community outreach we also intend
to engage with at least one local charity in the regions
in a way which makes a material difference to that
charity. Given the relatively small size of our company
and workforce some of the involvement will necessarily
be small scale. However, the most effective engagement
which could make the most material impact is in the
creative use of our assets, such as development land or
vacant floor space.
Environment
Sustainable buildings
The Company’s portfolio of buildings were mostly
constructed when regulatory and social concerns
with environmental issues were less pronounced than
today. As a result whilst the buildings may have been
constructed soundly, the lighting, heating, insulation, air
conditioning, waste disposal and other systems integral
to its function will not be of a standard expected from
a new build, especially following the Near Zero Energy
Building regulations now in force for all new builds.
However, that does not mean that there is nothing we
can do. Our strategy is multi layered but in simple terms
it has three strands:
1. Throughout the life of the building and as leases,
building design and tenants allow we will replace existing
mechanical and engineering (M&E) systems with more
environmentally friendly improvements. For example
this means:
• replacing lights with LED lighting
• re-glazing and re-insulating (where possible)
• upgrading energy supply systems to switch as far as
is possible and desirable to renewable energy, using
technology such as heat pumps to reduce energy
wastage in air conditioning and heating systems
• introducing modern building management systems
either as upgrades to existing buildings or in a number
of cases to those buildings which have none.
The speed of development will vary across the estate
as some is single tenanted and control of a number of
the issues is vested with the tenant and some of the
estate is multi tenanted where we control the building
management but still need to work with our tenants.
2. Across our estate we have begun measuring all of the
energy and water consumption and will also measure
waste disposal and destination. The purpose is to allow
us to understand better the baseline usage and effect of
those buildings but also to target material improvements
in energy and water consumption, waste disposal and
greenhouse gas (GHG) emissions.
3. We have begun engaging tenants to understand their
objectives and concerns, and to let them know of our
plans. This is done through a tenant survey which has
been tested on one of our buildings and will be rolled out
across the entire estate and repeated annually. In order
to make the surveys meaningful we will, where possible
and where tenants are engaged, work with them to add
additional improvements to the buildings: for example
by adding more cycling facilities, improve the usage of
common space or land with bee friendly planting or
improving the common spaces within multi let offices
to improve the working environment for the workers
who use them.
We expect to publish ambitious targets for improvements
in energy efficiency, GHG emission and improvement in
recycling by the date of our Interim Report in June 2020.
But for those to be meaningful the baseline measurements
need to be accurate and to that end we are not only
ensuring there is measurement across all of our buildings,
but we are also engaged with the installation of intelligent
measurement and analytical systems which will track
usage and system efficiency both at a landlord and tenant
level to the benefit of both.
At present we are too small in capital terms to be
considered for GRESB membership but provided we grow
to sufficient size we will target a private submission of
data by the end of 2021 with a target of full membership
by 2022.
Yew Grove reit plcreport and consolidated Financial statements 2019 governance
33
Strategic reportgovernanceFinancial StatementS Directors’ Report
34
The Directors of Yew Grove REIT plc present their annual report
and the audited consolidated financial statements for the
financial year from 1 January 2019 to 31 December 2019.
Principal activities
Business review
The Company (Yew Grove REIT plc) was established in
April 2018 and became an Irish real estate investment
trust in May 2018. The Company’s main activities are
the acquisition, management and rental of commercial
property in the Republic of Ireland. The Company
has a single class of shares that has been listed on the
Alternative Investment Market of the London Stock
Exchange from Admission on 8 June 2018, and the
Enterprise Securities Market of Euronext Dublin from
Admission on 8 June 2018 until the Enterprise Securities
Market was renamed Euronext Growth, from which point
the shares were listed on Euronext Growth.
Results and activities for the Financial year
The Group’s results for the financial period from 1 January
2019 to 31 December 2019 are set out in the Consolidated
Statement of Comprehensive Income. Having invested all
of the equity capital raised at the Company’s initial public
offering in 2018, the Company invested the proceeds of
the debt facility raised in 2018 from Allied Irish Bank,
PLC (“AIB”) in the first half of the year on office and
industrial properties in Waterford, Cork Airport Business
Park and development of a car park in Athlone. In July the
Company sought and received approval from shareholders
to set up a €100 million equity issuance programme. Just
over €35.8 million of that has been drawn in the second
half of the year and invested in four buildings in Athlone,
with the remainder being committed to a portfolio of six
buildings at Millennium Park in Naas which completed
after year end. The Company also expanded its debt
facility by €9.1 million during the year and paid quarterly
dividends to shareholders. The profit for the year was
€5.1 million, including unrealised losses on investment
properties of €0.8 million. There is more detail attached
in the Consolidated Statement of Comprehensive Income.
The Chair’s statement, the CEO’s statement, the Financial
Review, the Portfolio Report and the Key Performance
Indicators provide detail of the business review, the
Group’s performance in this reporting period, and the
current standing, recent events and future developments
which form a part of this report of the Directors.
Principal Risks and Uncertainties
The Directors have carried out a robust assessment of
the principal risks facing the Company, including those
that would threaten its business strategy, performance,
solvency or liquidity. The principal risks and uncertainties
are discussed in the ‘Principal Risks and Uncertainties’
section and form part of this report.
Future developments
The Group reviews three-year forward projections at its
quarterly board meetings and conducts an annual strategy
review, including presentations from external market
participants. The Company maintains a seven-year
forward projection to ensure the impact of the Company’s
strategy and Directors’ decisions on implementing that
strategy can be seen in the longer term. The review of
these projections allows the Directors to see the expected
consequences (economic, operational, and relative
performance) of their decisions as well as reviewing
the Company’s past performance.
Since the financial year end date the Company has
increased its revolving debt finance facility by €20.0
million and completed the purchase of a portfolio of
office properties on the Millennium Business Park,
Naas for a price of €25.3 million. The company had
exchanged conditional contracts before the year end,
this conditionality was not resolved until February 2020.
A deposit had been paid which was refundable until
all conditions had been met. While these additional
purchases leave the Company with relatively little
capital available for further acquisitions the Company
continues to explore accretive opportunities that might
merit the raising of further capital. The Company will
Yew Grove reit plcreport and consolidated Financial statements 2019 35
continue to manage its existing portfolio in line with its
investment strategy, reviewing each asset to ensure its
fit and economic benefit to the Company and fulfilling
a programme of works to ensure its properties each
remain at a standard that will satisfy tenants of good
credit quality and attract similar tenants to any vacancy.
The Company has from Admission on 8 June 2018 been
listed on the AIM market of the London Stock Exchange
and the Euronext Growth market in Dublin. Under the
REIT rules the Company has until May 2021 to list its
shares on a recognised exchange in order to retain its
REIT status. The Board have reviewed the company’s
plans for doing so within the timeframe and continue
to monitor progress in this regard.
As a consequence of Brexit, it will no longer be possible
for Irish companies to have their shares settled on the
CREST system after March 2021. The Company’s shares
are currently settled on CREST, so will have to be moved
to a different, EU approved settlement system by March
2021. Following the completion of the Migration of
Participating Securities Act 2019 on 25 December 2019
the Company has the opportunity to migrate its shares
from the CREST system to Euroclear Bank in Belgium.
Events after the reporting period
The events subsequent to the reporting period are set
out in Note 30 to the consolidated financial statements.
Dividends
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. It is the Board’s intention to pay
quarterly dividends to shareholders. Over the period
the Company’s total interim dividends declared and
paid was €5,143,500 for 6.67 cents per ordinary share.
There were no final dividends proposed or paid. Over
the period the Board declared an interim dividend of
0.964 cents per share, being €723,000 on 7 February
2019, which was paid on 26 February 2019 to all ordinary
shareholders on the share register at the close of business
on 15 February 2019. This dividend was 91% a Property
Income Distribution (“PID”), as defined in Irish REIT
legislation. On 29th March 2019 the Company declared
the payment of an interim dividend in respect of the first
quarter of 2019 of €825,000 for 1.10 cents per ordinary
share. This was paid to shareholders on 13 May 2019.
On 26 June 2019 the Company declared the payment
of an interim dividend in respect of the second quarter
of 2019 of €1,027,500 for 1.37 cents per ordinary share,
and a special dividend of €1,395,000 for 1.86 cents per
ordinary share. These were paid to shareholders on 24
July 2019. On 26 September 2019 the Company declared
the payment of an interim dividend in respect of the third
quarter of 2019 of €1,173,000 for 1.38 cents per ordinary
share. This was paid to shareholders on 24 October 2019.
On February 13 2020 the Company declared the payment
of an interim dividend in respect of the fourth quarter
of 2019 of €1,160,350 for 1.04 cents per ordinary share.
This was paid to shareholders subsequent to the period
end on 19 March 2020.
Share Capital
At 1 January 2019, the Company’s total authorised and
issued share capital comprised 75,000,000 ordinary
shares of €0.01 each (“Ordinary Shares”) all of which
were issued prior and none of which the Company held
in treasury. In the year the Company issued an additional
10,000,000 Ordinary Shares at a price of €1.00 each,
and on 6 December the Company issued an additional
26,572,210 Ordinary Shares at a price of €0.97 each.
At 31 December 2019, the Company’s total authorised
and issued share capital comprised 111,572,210 ordinary
shares of €0.01 each (“Ordinary Shares”), none of which
the Company held in treasury. The Company’s entire
authorised share capital is €10,000,000 comprising
1,000,000,000 ordinary shares. All of these shares are
of the same class and carry equal voting rights and rank
equally for dividends. The Company has no securities in
issue conferring special rights with regard to control of
the Company. Details of the share capital of the Company
are set out in Note 21 to the Consolidated financial
statements and are deemed to form part of this report.
Strategic reportgovernanceFinancial StatementS Directors’ Report (continued)
36
Details of Directors’ and Secretary’s interests in share capital at 31 December 2019:
Date of
appointment
as Director/
Secretary
4 June 2018
4 June 2018
5 June 2018
4 June 2018
Number of Ordinary shares owned
At 1 January
2019
At 31 December
2019
25,000
25,000
25,000
25,000
50,309
70.773
75,773
70,773
Barry O’Dowd
Eimear Moloney
Garry O’Dea
Brian Owens
Jonathan Laredo
20 April 2018
2,529,596
2,575,369
Charles Peach
20 April 2018
251,440
277,213
Michael Gibbons
20 April 2018
2,052,544
2,052,544
Sanne Group
(Company Secretary)
5 June 2018
-
-
Ordinary shares
owned subject
to performance
conditions
Ordinary
shares owned
not subject to
performance
conditions
Percentage of
Issued Capital
at 31 December
2019
-
-
-
-
-
-
-
-
50,309
70.773
75,773
70,773
2,575,369
277,213
2,052,544
0.05%
0.06%
0.07%
0.06%
2.31%
0.25%
1.84%
-
0%
The Company’s non-independent Directors (Jonathan Laredo, Charles Peach and Michael Gibbons) own 4,905,153
shares between them and have signed lock-in deeds that restrict the sale of 4,833,580 of those shares before 8 June 2020.
Substantial shareholdings
As at 31 December 2019 the Company has been informed of the following substantial interests (being 3% or more of
the issued share capital) in the Company’s shares.
Royal London AM
Invesco
AIB
OVMK
Hof Hoorneman Bankiers
Investec Wealth & Investment
Alpha 4 S.A. SICAV-SIF Long Term Invest
Shares held
23,000,000
11,800,000
7,312,500
5,500,000
5,390,600
4,008,522
3,550,000
% held
20.6%
10.6%
6.6%
4.9%
4.8%
3.6%
3.2%
Yew Grove reit plcreport and consolidated Financial statements 2019 37
Directors
The names of each person who at any time during the year
from 1 January 2019 to 31 December 2019 was a Director
and a short biographical note on each Director appears
in the Corporate Governance Statement on page 44 and
45, and these notes are incorporated into this report by
cross reference.
All Directors have agreed letters of appointment with the
Company of three years in duration from the date of their
appointment. The terms and conditions of appointment
of the Non-Executive Directors are set out in their letters
of appointment, which are available for inspection at
the Company’s registered office. In accordance with the
Corporate Governance Code, all Directors submit to re-
election at each AGM. For the purposes of the European
Communities (Takeover Bids (Directive 2004/25/EC))
Regulations 2006, details concerning the appointment
and the re-election of Directors and the amendment of
the Company’s Articles of Association are set out in the
Corporate Governance Statement.
Details of Directors’ remuneration are disclosed in the
Remuneration Committee report.
Employees
The Company has grown to having 6 employees and 4
non-executive Directors at financial year end.
As a smaller company the Directors recognise the benefits
of diversity of skills, experience, background, gender
and other qualities in the Company’s employees. We are
committed to reflecting diversity in its broadest sense,
while ensuring that we maintain the necessary skills and
experience required to oversee the significant financial
service activities and related requirements of the Group.
In reviewing the Company’s employment requirements,
candidates are considered on merit against objective
criteria and with due regard for the benefits of diversity.
The Company has a Diversity Policy, the aim of which is
to ensure that the percentage of women or men employed
by the Company remains at or exceeds 30%. At the end
of the financial period of the Company’s employees and
officers (including independent non-executive directors)
30% were women, and 33% of the Company’s employees
were women.
All employees receive both death in service and long-
term disability insurance, as well as health insurance
for them, their spouses and dependents under the age
of 18, similar to the executive directors. The employee
pension benefits contributed by the Company are 15%
for each employee, including executive directors. The
Directors may, with the approval of the Remuneration
Committee, propose that employees receive a bonus for
outperformance. Employee membership of the Company’s
Long Term Incentive Plan will be expanded in 2020.
Shareholders
The Directors welcome the opportunity to meet with
the Company’s shareholders both at AGM, EGM and at
informal meetings. All directors attended the 2019 AGM
and EGM to meet with shareholders and the Executive
Directors conducted shareholder meetings following
release of the 2018 Annual report, the 2019 Interim
report and before the Company’s capital raising in July
and December 2019. At each quarterly Board meeting
(and at ad-hoc Board meetings if merited) the Executive
Directors brief the non-executive Directors on current
and potential shareholders’ views on the Company’s
performance, strategy and results. The Company’s broker
Goodbody Stockbrokers provided written feedback from
current and prospective shareholder meetings that is
shared directly with the Board. Garry O’Dea as Senior
Independent Director remains a point of contact for
shareholders who wish to speak directly with the non-
executive Directors.
Environmental
The Company expects to publish targets for improvements
in energy efficiency, GHG emission and improvement in
recycling by the date of the interim Report in June 2020.
For these to be meaningful the baseline measurements
need to be accurate and to that end the Company
is ensuring there is measurement across all of the
Company’s buildings, but the Company is also engaged
with the installation of intelligent measurement and
analytical systems which will track usage and system
efficiency both at a landlord and tenant level to the
benefit of both. At present the Company is too small in
capital terms to be considered for GRESB membership
but provided the Company grows to sufficient size it will
target a private submission of data by the end of 2021
with a target of full membership by 2022.
Strategic reportgovernanceFinancial StatementS Directors’ Report (continued)
38
REIT status
The Company elected for REIT status in May 2018 under
section 705 E of the Finance Act, 2013. As a result, the
Company does not pay Irish corporation tax on the profits
and gains from the qualifying rental business in Ireland
from that date, provided it meets the conditions.
As an Irish REIT, the Company is required to distribute
to its shareholders (by way of dividend), on or before the
filing date for its tax return for the accounting period
in question, at least 85% of the Property Income of the
Property Rental Business arising in each accounting
period (provided it has sufficient distributable reserves).
Failure to meet this requirement will result in an Irish
REIT incurring a tax charge calculated by reference to
the extent of the shortfall in the dividends paid. The
Company was in compliance with all the above REIT
requirements for financial year ended 31 December 2019.
The Company is required by the REIT rules to be listed
on the regulated market of a recognised exchange by
May 2021. It is not currently listed on a regulated market
of a recognised exchange but has plans to ensure this is
effected before May 2021.
Financial Risk Management
The financial risk management objectives and policies of
the Company are set out in Note 28 to the consolidated
financial statements.
Going Concern and the Viability Statement
In accordance with the relevant provisions of the UK
Corporate Governance Code and the Irish Corporate
Governance Annex, the Board has taken account of the
principal risks and uncertainties, as set out below, in
considering the statement to be made regarding the going
concern basis of accounting and the Viability Statement.
These statements are as follows:
Going Concern
The Company has a geographically spread portfolio
of commercial properties with close to full occupancy
(current levels of vacancy total 7.4% by the external
valuer’s estimated rental value) across the portfolio
and a low level of Loan to Value gearing of 18% as at 31
December 2019. The Company has good visibility of its
future cash inflows from rental income from its tenants,
and of its cash outflows on expenses. Having assessed
the relevant business risks the Directors believe that
the Company is well placed to manage its business risks
successfully.
The Directors believe that the Company has adequate
resources to continue in operation for the foreseeable
future and that it is appropriate to continue to adopt
the going concern basis in preparing their Report and
Consolidated financial statements.
Viability Statement
The period over which the Directors consider it relevant
and appropriate to report on the Company’s viability
is the three years period to 31 December 2022. This
period has been selected because it is the period that
is used and reviewed quarterly for the Company’s
medium-term business plans. The assumptions behind
these forecast cash flows and covenant compliance
forecasts were stressed to review the strength of the
Company in the light of the Company’s principal and
emerging risks. The key stresses assumed were falls
in the value of the Company’s property portfolio and
falls in the Company’s revenues. The principal risks and
uncertainties summarise those matters that the Board
believes might in the Board’s view inhibit the Company’s
ability to achieve its investment objectives.
The Directors paid particular attention to the risk of
a deterioration in economic outlook and the potential
impact of Brexit, which would impact property
fundamentals, including occupier demand and
profitability, which would have a negative impact on
valuations and rental income, and the impact that this
would have on financing covenants and compliance with
the REIT regime. The remaining principal risks, whilst
potentially injurious on the Company’s business model,
are unlikely to impact the Company’s viability over the
three-year period to 31 December 2022.
Having considered the forecast cash flows and covenant
compliance and the impact of the stressed risks, the
Directors confirm that they have a reasonable expectation
that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period
ending 31 December 2022.
Yew Grove reit plcreport and consolidated Financial statements 2019 Corporate Governance
Principal Subsidiaries and Joint Ventures
39
For the year from the 1 January 2019 to 31 December 2019,
the Company’s corporate governance practices were
governed by the relevant requirements and procedures as
set out by the Irish Corporate Governance Annex (“Irish
Annex”) and the 2018 UK Corporate Governance Code
(“UK Code”), (collectively known as the “Codes”) and
its Articles of Association. The Board confirms that the
Company has complied with all provisions of the Codes
during the period from 01 January 2019 to 31 December
2019, with the exception of harmonisation of employee
pension rates, which was effected during the year. Details
of the Company’s compliance with the Codes are in the
Corporate Governance Report.
Directors’ Compliance Statement
The Directors have, with the assistance of advisers,
identified the relevant obligations, as required by the
Companies Act 2014, that they consider apply to the
Company. The Directors acknowledge that 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
• Conducted a review, during the year from 1 January
2019 to 31 December 2019, of the arrangements and
structures that were put in place to secure material
compliance with the Company's relevant obligations.
Accounting records
The Directors are responsible for ensuring that adequate
accounting records, as outlined in sections 281 to 285
of the Companies Act 2014, are kept by the Company.
The Directors believe that they have complied with
this requirement by providing resources to maintain
adequate accounting records. The accounting records of
the Company are maintained at the Company’s office,
Pembroke House, 28-32 Pembroke Street, Dublin 2,
Ireland.
Details of the Company’s principal subsidiaries and joint
venture are set out in Note 16 to the financial statements.
Political donations
There were no political donations made by the Company.
Branches
The Company does not have any branches outside the
Republic of Ireland.
Audit Committee
The Directors have established an Audit Committee
in compliance with the Codes and section 167 and
section 1551 of the Companies Act 2014 to assist with
certain responsibilities relating to internal controls, risk
management and reporting.
Independent auditor
The statutory auditor, Deloitte Ireland LLP, Chartered
Accountants (“Deloitte”), was appointed on the 9 April
2018 and continues in office in accordance with section
383 (2) of the Companies Act 2014 and have indicated
their willingness to continue in office. A resolution to
re-appoint Deloitte was proposed and passed at the
first AGM of the Company in 2019. A resolution to re-
appoint Deloitte will be proposed at the 2020 AGM of
the Company.
Relevant audit information
The Directors believe that they have taken all steps
necessary to make themselves aware of any relevant audit
information and have established that the Company’s
statutory auditor is aware of that information. Insofar
as they are aware, there is no relevant audit information
of which the Company’s statutory auditor is unaware.
This Directors’ statement was approved by the Board of
Directors on 23 April 2020 and is signed on their behalf by:
Jonathan Laredo
Chief Executive Officer
Charles Peach
Chief Financial Officer
Strategic reportgovernanceFinancial StatementS Directors’ Responsibility Statement
40
The Directors, whose names and details are listed on page 44 and 45 are
responsible for preparing the Annual Report and Consolidated 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 have to prepare the Group and Company
financial statements in accordance with International
Financial Reporting Standards as adopted by the EU
(“IFRSs”).
Under company law, the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the assets, liabilities
and financial position of the Group and Company as at
the financial period end date and of the profit or loss of
the Group for the financial period and otherwise comply
with the Companies Act 2014.
In preparing the Annual Report and Group and Company
financial statements, the Directors are required to:
The Directors are also required by the Rules of the
Central Bank of Ireland, the Companies Act 2014, the
AIM Rules for Companies issued by the London Stock
Exchange and the Enterprise Securities Market Rules
for Companies issued by Euronext Dublin (formerly the
Irish Stock Exchange), to prepare a Directors’ report and
reports relating to Directors’ remuneration and corporate
governance and the Directors are required to include a
management report containing, amongst other things,
a fair review of the development and performance of the
Group’s business and of its position and a description of
the principal risks and uncertainties facing the Group.
The Directors are responsible for ensuring that the
Group and Company keeps or causes to be kept adequate
accounting records which:
• Correctly explain and record the transactions of the
• Select suitable accounting policies and then apply
Group and Company;
them consistently;
• Make judgements and accounting estimates that are
reasonable and prudent;
• State that Group and Company financial statements
comply with applicable International Financial
Reporting Standards as adopted by the European
Union, subject to any material departures disclosed and
explained in the financial statements, and ensure the
financial statements contain the information required
by the Companies Act 2014; and
• Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Company will continue in business.
• 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.
Yew Grove reit plcreport and consolidated Financial statements 2019 41
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.ygreit.com).
The Directors confirm that they have complied with the
above requirements in preparing the Annual Report and
Consolidated financial statements.
Each of the Directors, whose names and functions are
listed on page 44 and 45, confirms that, to the best of
each person's knowledge and belief that: The Annual
Report and Consolidated financial statements, taken
as a whole, are fair, balanced and understandable and
provides the information necessary for shareholders
to assess the position and performance, strategy and
business model of the Group and Company.
This responsibility statement was approved by the Board
of Directors on 23 April 2020 and is signed on their behalf
by:
Jonathan Laredo
Chief Executive Officer
Charles Peach
Chief Financial Officer
Strategic reportgovernanceFinancial StatementS 42
Yew Grove reit plcreport and consolidated Financial statements 2019 Corporate Governance Statement
For the period from 1 January 2019 to 31 December 2019, the Company’s corporate
governance practices were governed by its Articles of Association. The Board has
decided to apply by the relevant requirements and procedures as set out by the
Irish Corporate Governance Annex (“Irish Annex”) and the 2018 UK Corporate
Governance Code (“UK Code”), (collectively known as the “Codes”).
43
Statement of Compliance
The Board confirms that the Company has complied with
all the provisions of the Codes during the period from 01
January 2019 to 31 December 2019 with the exception of
harmonisation of all employee pension rates from 10%
to 15% of salary to match Directors’ pension rates, which
was effected during the year.
The Role of the Board of Directors
The role of the Board is to set the strategic objectives for
the Group, to monitor the achievement of these strategic
objectives, and to determine the nature and extent of the
principal risks it is prudent to take in achieving these
strategic objectives. The Board is also responsible for
monitoring and reviewing the effectiveness of the Group’s
risk management and internal control systems and
maintaining a high standard of corporate governance. The
Board is responsible for ensuring the accuracy of financial
and business information provided to shareholders and
for ensuring that such information, taken as a whole,
is fair, balanced and understandable and provides the
information necessary for shareholders to assess the
company’s position and performance, business model
and strategy.
The Directors’ promotion of the Company is made fairly
with regard to the Company’s positioning, employees,
environment, employees and business relationships.
The Directors have reviewed three-year projections of
the Company’s performance at their quarterly board
meetings and annual strategy meeting in order to see
the consequences of their decisions. The Company
runs corporate performance scenarios to seven years
in order to show a longer-term outlook. The Company has
relatively few employees and all employees report directly
to a Director. All employees participate in weekly calls
to discuss the Company’s business, position, structure
and operational effectiveness This close working
relationship between employees and the presence of
the three executive Directors on the Board allows the
Directors’ efforts to promote high standards of business
conduct to be clearly measured and effected, and provides
all employees with a direct channel to the Board. As the
Company has relatively few employees the Directors
ensure that the Company’s business relationships,
whether with service providers, tenants or others are
nurtured and all these understand the Company’s
business, objectives and their part in it.
As at the date of this Report, there are seven (7) Directors
on the Board, all of whom have been Directors from
the date of Admission. The Board does not have any
planned changes to its structure or size. While not
required to by the UK Code as a smaller company,
the Company ensures that at least half of the Board
(excluding the Chair) is made up of independent non-
executive directors (three) in accordance with the UK
Code. The number of non-executive directors ensures
that each non-executive sits on two or three of the Board’s
Committees, all of which have a majority of (or only
include) independent non-executive directors. The Board
has sufficient members to provide relevant experience
in the areas of particular importance to the Company.
These are property investment, capital markets, Irish
foreign direct investment, property development,
financial management, property management and
asset management experience. The wide range of
these experiences has dictated the size of the Board. In
reviewing the Board composition and appointments,
candidates are considered on merit against objective
criteria and with due regard for the benefits of diversity.
The Board has a Board Diversity Policy, the aim of which
is to ensure that the percentage of women on the Board
achieves or exceeds 30%. The percentage is currently
14%. Barry O’Dowd (the Chair), Eimear Moloney, Garry
O’Dea and Brian Owens are independent non-executive
directors. The Chief Executive Officer, Jonathan Laredo,
the Chief Financial Officer, Charles Peach and the Chief
Investment Officer, Michael Gibbons are executive
directors.
Strategic reportgovernanceFinancial StatementS Corporate Governance Statement (continued)
The biographies of each of the Directors is set out below:
44
Barry O’Dowd
(Chair, Independent
Non-executive Director)
Garry O’Dea
(Senior Independent
Non-executive Director)
Mr O’Dowd was appointed as Chair of the Company on 8
June 2018 and is also Chair of the Nomination Committee.
Mr O’Dowd was Senior Vice President of IDA Ireland until
retiring from that role in 2018. At IDA Ireland he was Global
Head of two key operating divisions, Emerging Business (2010 –
2018) and New forms of Investment (2015-2018). From 2005 to
2009 he led the Pharmaceutical & Biotechnology Department.
Before joining IDA Ireland he was Director of Strategy and
Business Development at Organon International between 2002
and 2005. Mr O’Dowd is a Member of the Institute of Directors
of Ireland, holds an MSc (Management) from Trinity College,
Dublin and is a qualified Barrister at Law from University
College Dublin & Kings Inns.
Mr O’Dea was appointed as a Director of the Company and
Senior Independent Director on 8 June 2018. He is Chair of the
Audit Committee. Mr O’Dea is a former Finance Director of Irish
Continental Group plc (“ICG”), a position he held from 1988
until his retirement in 2015. Prior to joining ICG, he worked in
a number of financial roles at CRH plc. Mr O’Dea is currently
an independent trustee of the RTE Superannuation Scheme.
Mr O’Dea qualified as a Chartered Accountant with KPMG
and is also a member of the Institute of Directors in Ireland.
Eimear Moloney
(Independent Non-executive
Director)
Brian Owens
(Independent Non-executive
Director)
Ms Moloney was appointed as a Director of the Company on 8
June 2018. She is Chair of the Remuneration Committee. Ms
Moloney was, until December 2017, a Senior Fund Manager at
Zurich Life Assurance Ireland plc where she had responsibility
for equity and regional asset allocation. She has also held
responsibility for sector and stock selection in a number of
investment markets including the United Kingdom, Ireland
and the United States. She is currently a non-executive director
of Hostelworld Group plc, and a member of the Institute of
Directors in Ireland. She is a Chartered Accountant and holds an
MSc in Investments and Treasury from Dublin City University.
Mr Owens was appointed as a Director of the Company on 8
June 2018 and is Chair of the property Valuation Committee.
Owens is a 30 year veteran of the Irish real estate industry prior
to which he worked with Deloitte. He is a partner in Beresford
Real Estate, an investment and advisory real estate firm having
recently stepped down as Chairman and Chief Executive of
Hardwicke Property Group, a position he held for the past 18
years. Mr. Owens is a Fellow of Chartered Accountants Ireland
as well as being a member of the Society of Chartered Surveyors
Ireland and the Royal Institution of Chartered Surveyors.
Yew Grove reit plcreport and consolidated Financial statements 2019 Jonathan Laredo
(Chief Executive Officer)
Charles Peach
(Chief Financial Officer)
45
Mr Laredo has over 30 years’ experience in investment markets,
including running the European and Asian structured finance
business at JP Morgan, where amongst other business he was
responsible for Commercial Mortgage Backed Securities
including both securitised debt issuance and direct lending
to real estate based private equity. Mr Laredo was one of the
founders and was the CEO of Solent Capital Partners, a hedge
fund founded in 2003. He was one of the owners and a director
of the Pepper Group, an Australian based mortgage lender and
servicer which built the largest third-party servicing business
in Ireland. He graduated with a BA (Hons) in Philosophy from
Sussex University. Mr Laredo was a co-founder of the Yew Tree
Investment Fund (which was acquired by Yew Grove REIT plc
at IPO) and a member of Parapet Capital Advisors’ management
team during the time it acted as investment adviser to the
Yew Tree Investment Fund’s Alternative Investment Fund
Manager. He was also responsible, along with the other members
of the Executive Management Team, for the construction of
the Seed Portfolio. He became a director of the Company on
incorporation on 5 April 2018 and was appointed to his current
role on 8 June 2018.
Mr Peach has over 25 years’ experience in investment markets,
structuring and raising capital for companies and funds. He
started his career with Bear Stearns’ FAST (Financial Analytics
and Structured Transactions) group for seven years, followed
by five years with Nomura’s Exotic Credit Trading Group. At
Nomura he developed and ran managed vehicle issuance and risk
management programmes. As well as raising and structuring
financing for funds and corporate borrowers, he has advised
pension schemes and banks on their funding requirements
and strategies. Mr Peach was a co-founder of the Yew Tree
Investment Fund and a member of Parapet Capital Advisors’
management team during the time it acted as investment adviser
to the Yew Tree Investment Fund’s Alternative Investment
Fund Manager (“AIFM”). He was also responsible, along with
the other members of the Executive Management Team, for the
construction of the Seed Portfolio. He graduated with an MA
(Hons) in History of Art from the University of Aberdeen. He
became a director of the Company on 20 April 2018 and was
appointed to his current role on 8 June 2018.
Michael Gibbons
(Chief Investment Officer)
Mr Gibbons has over 27 years’ experience in investment markets
and has run high yield, distressed debt and special opportunities
businesses. He started his career in corporate finance at Bankers
Trust International then spent seven years in Asia where he built
Sumitomo Finance’s capital markets business spanning new
issues to secondary trading activity. He subsequently worked for
Commerzbank, BNP Paribas, Aladdin Capital Management LLP
and distressed specialist Guy Butler, moving back to Ireland in
2014. From 2008 to 2011 he was a member of the international
advisory board of Parker Green International. He graduated
with a BComm from University College Dublin and a Diploma
in Accounting from Queens University. Mr Gibbons was a co-
founder of the Yew Tree Investment Fund and a member of
Parapet Capital Advisors’ management team during the time it
acted as investment adviser to the Fund Yew Tree Investment
Fund’s Alternative Investment Fund Manager. He was also
responsible, along with the other members of the Executive
Management Team, for the construction of the Seed Portfolio.
He became a director of the Company on 20 April 2018 and was
appointed to his current role on 8 June 2018.
Strategic reportgovernanceFinancial StatementS Corporate Governance Statement (continued)
46
As required by the UK Code, specific areas of delegation
are set out in the terms of reference for each of the Audit
Committee, Nomination Committee, Remuneration
Committee, and Valuation Committee. The terms of
reference of the Audit, Nomination, Remuneration and
Valuation Committees are available on the Company’s
website at w w w.ygreit.com/investors/corporate-
governance, and reports of each of these Committees are
set out below. The Board reviews the Group’s performance
and management accounts on a quarterly basis. The
executive directors have discretionary authority to enter
into transactions for and on behalf of the Company,
except for certain matters that require the consent of the
Board. Unless required to be performed by the Company’s
AIFM as a matter of law or in order to respond to a bona
fide emergency, the Board’s prior approval is required
by the executive directors for certain reserved matters,
which include but are not limited to:
1. any acquisition/disposal of a property investment or
the entry into any agreement to acquire /dispose of a
property investment in excess of €5 million;
2. any new financing or refinancing agreements or
arrangements;
3. any capital expenditure or pre-funding agreements in
excess of €5 million;
4. any proposed lease surrender where the rent referable
to the relevant lease is greater than 10% of the aggregate
rental income of the Company or 25% of the aggregate
rental income of the lease’s property;
5. any proposed lease commitment where the area being
leased exceeds 50,000 square feet;
6. any acquisition or the entry into any agreement to
acquire any property investment through a joint
venture or co-investment structure;
7. any hedging or use of derivatives;
8. the entry by the Company into any transactions for
the purchase of assets from, or provision of services
of a material nature by, any connected party.
Under the Company’s corporate governance framework
any matter which requires the consent or approval of the
Board of the Company is considered at a Board meeting
at which a quorum must be present or by way of written
resolution of the Board.
The Schedule of Matters Reserved for the Board was
reviewed prior to 31 December 2019 and will be reviewed
annually and updated as appropriate.
General meetings
The Company has and will hold an Annual General
Meeting (‘AGM’) in each year from 2019 in addition
to any other meetings in that year. Not more than 15
months shall elapse between the date of one AGM and
that of the next. The Company held an AGM on 24 May
2019. The Company will hold an AGM on 29 May 2020,
notice of which, together with details of the resolutions
to be considered at the meeting, will be circulated to
the shareholders.
The Directors are responsible for the convening of
general meetings. An annual general meeting and an
extraordinary general meeting calling for the passing of
a special resolution shall be called by at least twenty-one
clear days’ notice and all other extraordinary general
meetings shall be called by at least fourteen clear days’
notice (whether in electronic form or otherwise). No
business other than the appointment of a Chair shall
be transacted at any general meeting unless a quorum
is present at the time when the meeting proceeds to
business. Three members present in person or by proxy
shall be a quorum.
The Company’s AGM affords shareholders the opportunity
to question the Chair and the Board. The chairperson
of the Audit, Nomination, Remuneration and Valuation
Committees are also available to answer questions at
the AGM. The Chief Executive will present at the AGM
on the Company’s business and its performance during
the prior year and answer questions from shareholders.
Voting rights
a. Votes of members: votes may be given either personally
or by proxy. Subject to any rights or restrictions for the
time being attached to any class or classes of shares,
on a show of hands every member present in person
and every proxy shall have one vote, so, however, that
no individual shall have more than one vote, and on a
poll every member shall have one vote for every share
carrying voting rights of which he/she is the Holder. The
Chair shall be entitled to a casting vote where there is
an equality of votes.
Yew Grove reit plcreport and consolidated Financial statements 2019 The Chairs of each of the Committees have reported
separately on their Committees’ responsibilities and
activities during the reporting period.
47
Board Meetings
The Board met four (4) times as below in the period
from 1 January 2019 to 31 December 2019 (the Board
convened an additional strategy meeting and multiple
times throughout the year to review matters reserved
for the Board) and will meet at least four (4) times each
following calendar year and, prior to such meetings taking
place, an agenda and board papers are circulated to the
Directors so that they are adequately prepared for the
meetings. The Company Secretary is responsible for the
procedural aspects of the Board meetings.
Directors are expected to participate in all scheduled
Board meetings as well as the AGM. A schedule of Board
meetings is circulated to the Board before period end
for the following year. The Board and Committee papers
are circulated sufficiently in advance of each meeting
to allow the Directors and Committee members to
properly prepare for the meetings. From time to time
the Board and Committees may be required to convene
ad-hoc meetings but appropriate notice is given and
relevant papers are circulated in advance. Standing
items at quarterly Board meetings include management
accounts for the previous quarter, a review of budgeted
and actual performance, compliance reporting, portfolio
and pipeline reporting and other operational reports.
b. Resolutions: resolutions are categorised as either
ordinary or special resolutions. The essential difference
between an ordinary resolution and a special resolution is
that a simple majority of more than 50% of the votes cast
by members voting on the relevant resolution is required
for the passing of an ordinary resolution, whereas a
qualified majority of more than 75% of the votes cast by
members voting on the relevant resolution is required
in order to pass a special resolution. Matters requiring
a special resolution include for example:
• Altering the objects of the company;
• Altering or implementing new pre-emption rights;
• Market purchase of own shares and reissuing;
• Altering the articles of association of the company;
Committees of the Board
The Board has delegated certain of its responsibilities to
Committees of the Board, namely the Audit Committee,
Nomination Committee, Remuneration Committee, and
Valuation Committee. The duties and responsibilities of
each of these Committees are set out clearly in written
terms of reference which have been approved by the
Board and are available on the Company’s website www.
ygreit.com. Each Committee has reported separately
on its activities. Membership and Chairship of each
committee is reviewed by the Board at intervals of not
more than three years.
Audit
Committee
Garry O’Dea (Chair)
Eimear Moloney
Brian Owens
Nomination
Committee
Barry O’Dowd (Chair)
Eimear Moloney
Jonathan Laredo1
Remuneration
Committee
Eimear Moloney (Chair)
Garry O’Dea
Valuation
Committee
Brian Owens (Chair)
Barry O’Dowd
Jonathan Laredo1
1 Not an independent Director
Strategic reportgovernanceFinancial StatementS Corporate Governance Statement (continued)
48
Attendance at Meetings, 1 January 2019 to 31 December 2019
The table below shows the number of meetings to which each Director was invited, followed by the number of
meetings attended by the Director in the period:
Audit
Committee
Nomination
Committee
Remuneration
Committee
Valuation
Committee
Barry O’Dowd
Eimear Moloney
Garry O’Dea
Brian Owens
Jonathan Laredo
Charles Peach
Michael Gibbons
Quarterly
Board
Meetings
Ad Hoc
Board
Meetings
Board
Strategy
Meeting
4/4*
11/11*
1/1*
4/4
4/4
4/4
4/4
4/4
4/4
11/11
11/11
11/11
11/11
11/11
11/11
4/4
4/4*
4/4
4/4~
1/1
1/1
1/1
1/1
1/1
1/1
1/1*
1/1
2/2*
2/2
1/1
2/2~
6/6
6/6*
6/6
6/6~
*Chair
~Invited, not a Committee member
All committee members were appointed to their
respective committees on 8 June 2018, except for the
Valuation Committee, which Jonathan Laredo became
a member of on 2 August 2018 and the Audit Committee
which Eimear Moloney became a member of on 21 August
2018. Directors may request that any relevant concern
they have be considered and minuted at any Board or
Committee meeting, and minutes are circulated for
review in advance of approval and signing at the next
meeting, or as appropriate.
Chair
The Chair, Barry O’Dowd, is an independent non-
executive director. The Board believes that the Chair
meets all the criteria in the Codes and is demonstrably
independent in character and judgement in his role. The
Chair’s primary responsibility is to lead the Board and to
ensure it and its members are both effective and provide
good governance. The Chair additionally is responsible
for monitoring and measuring performance against
strategy. The Chair will meet shareholders from time to
time and intends to do so at the Company’s AGM and
as part of results presentations, in order to understand
their views. He also makes himself aware of shareholder
views through feedback and reporting provided by the
Company’s brokers.
Before the beginning of each calendar year and following
consultation with the Company Secretary and other
Directors, the Chair and the Chairs of the Board
Committees set a schedule of Board and Committee
meetings, with key agenda items, for the following year.
The Chair also leads the Company’s strategy session
held in each calendar year, in conjunction with the Chief
Executive.
There have been no changes to the other significant
commitments of the Chair since 1 January 2019, and
the other non-executive directors have informed the
Board that there have been no additional significant
commitments undertaken by them since admission which
require notification to the Board. The Chair ensures all
directors are furnished with the information necessary
to assist them in the performance of their duties.
The Senior Independent Director
The Senior independent director Garry O’Dea is an
independent non-executive director. His role includes
acting as an advisor to the Chair and as an intermediary
for the Directors, providing an alternate point of contact
from the Chair and CEO for shareholders, and discussing
the Chair’s performance with other Directors.
Yew Grove reit plcreport and consolidated Financial statements 2019 Board Strategy
The Board receives regular updates on the Company’s
achievements in light of its strategy, as well as reviewing
the Company’s performance against key metrics and
investment objectives. The Board held a dedicated
strategy review meeting in November 2019, attended by
all Board members, at which the strategy was reviewed for
market validity, appropriateness and viability, following
which the strategic priorities for the Company were
confirmed.
Information and Support
Directors have access to the Company Secretary
and, where appropriate, are entitled to have access to
independent professional advice at the expense of the
Company. The Committees of the Board are provided
with sufficient resources to undertake their duties. The
Company provides appropriate Directors’ and Officers’
insurance in respect of legal action against its directors.
As required by the Codes, the Chair has held meetings
during the financial period with the non-executive
Directors without the presence of the executive Directors.
Appointments to the Board
The Directors were all selected to bring in a range and
depth of knowledge, skills and business experience
to the Company. All serving members of the Board
have been in place since Admission. The Nomination
Committee is responsible for leading the process for
Board appointments and is comprised of a majority of
independent non-executive directors. The criteria that
it applies when selecting potential candidates include
experience and knowledge of the Irish commercial
real estate sector, strong financial skills, general
business experience, professional background and
likely availability, and a need for balance and diversity,
including gender, on the Board. At least half of the Board
are independent non-executive directors (excluding the
Chair). All non-executive directors were appointed for a
term of three years and, subject to continued satisfactory
performance, all directors will be submitted for reelection
at the Company’s AGM in 2020, in accordance with the
Company’s Articles of Association and the provisions of
the Codes. Accordingly, all Directors will seek re-election
at the Company’s forthcoming AGM on 29 May 2020.The
terms and conditions of appointment of all directors are
set out in letters of appointment which will be made
available at each AGM.
49
Induction and Development of Directors
All new independent directors receive induction training
on joining the Board and are invited to visit part of the
Company’s portfolio as soon as possible following their
appointment to gain first hand understanding of examples
of the implementation of the Company’s strategy,
property management, operations and tenant relations.
The independent directors also receive presentations
from the executive management and the Company’s
advisors on matters relevant to the Company’s business.
The Nomination Committee, on behalf of the Board,
assesses the training needs of the directors on at least
an annual basis.
The Chair also considers the training needs of directors,
in conjunction with individual directors, and has
concluded that those needs are adequately met.
Communications with Shareholders
The Board acknowledges the importance of and
welcomes feedback and all effective communications
with shareholders. The Board is responsible for ensuring
that a satisfactory discourse with shareholders takes place
and that the Company maintains open, twoway lines of
communication with shareholders. It is important to
the Board that shareholders understand the Company’s
strategy and objectives, which the Board works to ensure
are clearly explained and articulated.
The Company formally updated the market on its
financial performance with half year and full year results.
Presentations are made to both existing and prospective
institutional shareholders, principally after the release of
the interim and annual results but also as part of investor
days organised by brokerage firms.
Major acquisitions are also announced to the market
and the Company’s website (www.ygreit.com) provides
the full text of all stock exchange releases. The website
also contains all interim reports and Reports when they
are published. The Chair, in line with the Codes, will,
as required, ensure that the views, issues and concerns
of major shareholders are communicated to the Board
so that appropriate action can be taken if required. The
Strategic reportgovernanceFinancial StatementS Corporate Governance Statement (continued)
50
Chair and the other directors took the opportunity to
meet shareholders and analysts at the Company’s AGM
and EGM in 2019. No Board recommendation at the
AGM or EGM had 1% or more of votes cast against it. If
shareholders would like to communicate directly with
the Board, they should contact Jonathan Laredo, contact
details for whom are available from the Company’s
website. The Senior Independent non-executive Director,
Garry O’Dea, is also available to shareholders who may
have concerns which they would like to bring to his
particular attention.
Stakeholder engagement
The Board is responsible for promoting the success of
the Company while having regard to the consequences of
their and the Company’s actions on all its stakeholders,
both currently and in the future. All Directors are
conscientious about our responsibilities and duties to
our stakeholders under section 172 of the Companies
Act 2006. The Board and each Director is required to:
• Take a long-term view of their actions as Directors.
While the Directors review three-year projections at
quarterly board meetings, at the strategy meeting in
2019 this time horizon was extended, and multiple
scenarios and projections were illustrated to ensure
while the Company is still young a longer-term
strategic view is taken.
• Foster direct contact with all employees as each
employee reports to and is formally reviewed by a
Director. There has been no employee turnover in the
Company’s existence.
• Be aware of the number of out-sourced roles and
counterparties the Company requires to operate
effectively in its chosen manner. The Directors are
aware of the importance of these shareholders to the
Company, and the need to cultivate relationships with
them.
• Set and improve the Company’s sustainability policy
and take decisions with regard to the impact the
Company has on the environment and its community.
• Responsibly set and demonstrate the key principles and
culture of the Company. The Company has a number of
formal policies to ensure the members of the Company
are treated fairly and without discrimination.
Share Dealings
The Market Abuse Regulation (Regulation 596/2014 of the
European Parliament and the Council of the European
Union) contains rules requiring listed companies to
have effective systems and controls regarding persons
discharging managerial responsibilities (“PDMRs”)
securities dealing clearance. The Board has put in place
securities dealing rules which apply to the directors and
relevant employees of the Company and any of its affiliates
(and certain persons connected with such persons). The
securities dealing rules set out the preclearance approval
procedures to be adhered to when dealing in the shares
of the Company and also set out periods in which share
dealings are prohibited.
Details of each director’s interests in the Company’s
shares at 31 December 2019 are set out as below:
Number of
shares Issued Capital
50,309
70,773
75,773
70,773
2,575,369
277,213
2,052,544
0.05%
0.06%
0.07%
0.06%
2.31%
0.25%
1.84%
Barry O’Dowd
Eimear Moloney
Garry O’Dea
Brian Owens
Jonathan Laredo
Charles Peach
Michael Gibbons
Independence
In accordance with the principles of the Codes, the
Company maintains a majority of independent non
executive Directors on the Board. The independence of
each non-executive Director is considered each calendar
year by the Board. The Board determines whether each
Director is independent in character and judgement
and whether there are relationships or circumstances
which are likely to affect, or could appear to affect, the
Director’s judgement. The Board is satisfied that each
of its designated independent non executive Directors,
namely Barry O’Dowd, Eimear Moloney, Garry O’Dea
and Brian Owens fulfil the independence requirements
of the Codes. The Board is also satisfied that the other
Directorships held by its Directors do not interfere with
the discharge of their duties to the Company.
Yew Grove reit plcreport and consolidated Financial statements 2019 The Company has and continues to maintain a robust
whistleblowing policy that allows Company staff or
advisors to raise concerns about possible improprieties in
financial reporting or any other activities of the Company.
Board Evaluation
The effectiveness and performance of the Board and
its Directors, and of its Committees and their chairs, is
evaluated annually by the Board. Paragraph 21 of the 2018
UK Code provides that the Company (also as a smaller
Company for the purposes of the Irish Annex) is not
required to be externally evaluated every three years,
however the Company intends that an independent review
by an independent outside expert should be conducted
at least every three years.
The Board concluded a self-evaluation of its performance
in late 2019, on the performance of the Committees and
on the performance of the individual Directors including
the Chair. The effectiveness of the Board, the Board
committees and the individual Directors was reviewed
and evaluated. The senior independent non-executive
Director met with the non-executive Directors (other than
the Chair) to appraise the Chair’s performance, taking
into consideration the views of the executive Directors.
The Chair presented the results of the evaluation to the
Board and did not identify any specific development needs
for further action. The Nomination Committee separately
reviews the composition and diversity of the Board.
Memorandum and Articles of Association
The Company’s Memorandum and Articles of Association
sets out the objects and powers of the Company and are
available at http://www.ygreit.com/investors/company-
documents/2018. The Articles of Association detail the
rights attaching to shares, the method by which the
Company’s shares can be purchased or re-issued, the
provisions which apply to the holding of and voting at
general meetings and the rules relating to the Directors,
including their appointment, retirement, re-election,
duties and powers. The Directors are responsible for
the management of the business of the Company and
may exercise all the powers of the Company subject to
applicable legislation and regulation and the Company’s
Articles of Association. The Company’s Articles of
Association may be amended by a special resolution
passed by the shareholders at an AGM or EGM of the
Company.
Purchase of own shares
51
The Company may purchase any of its own shares and any
shares the Company purchases may be cancelled or held
by the Company as treasury shares. The Company shall
not make a purchase of shares in the Company unless the
purchase has first been authorised by a special resolution
of the Company. At the Annual General Meeting on 23
May 2019 the Company made a special resolution to
permit the Directors to make market purchases not
exceeding the lower of €75,000 nominal value and 10%
of the aggregate nominal value of the then issued share
capital. There have been no purchases of own shares made
by the Company in the financial period and there were
no shares owned in treasury at the end of the financial
period.
Accountability report
In accordance with the Codes, the Board aims to present
a fair, balanced and understandable assessment of the
Company’s position, performance, business model
and strategy. The Board specifically considers that
the Report and Consolidated financial statements, are
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position, performance, business model and
strategy. The Board’s opinion as to the validity of adopting
the going concern basis of accounting in preparing the
annual financial statements is included in their Directors’
Report, as well as the basis by which the Company seeks
to generate or preserve value over the long term.
Risk Management and Internal Control
The Boa rd has overa ll responsibilit y for t he
implementation and success of the Company’s system
of internal control and risk management. The Board
has delegated responsibility for the monitoring of the
effectiveness of this system to the Audit Committee. In
accordance with the “Guidance on Risk Management,
Internal Control and Related Financial and Business
Reporting” issued by the Financial Reporting Council
in September 2014, the Board confirms that there is an
ongoing process for identifying, measuring and managing
the significant risks and emerging risks faced by the
Company in achieving its strategic objectives, that this
process has been in place from 01 January 2019 and
up to the date of this report, and that this process is
regularly reviewed by the Board. The Board and the
Strategic reportgovernanceFinancial StatementS Corporate Governance Statement (continued)
52
AGM
The AGM of the Company will take place at 12 p.m. on
29 May 2020. The Report and Consolidated financial
statements and Notice of the AGM will be sent to
shareholders at least 20 working days prior to the date of
the meeting. The Notice of the AGM sets out the business
of the meeting and an explanatory note on all resolutions
to be considered at the meeting. Separate resolutions will
be proposed on each substantive issue. All shareholders
will have the opportunity to attend and vote, in person
or by proxy, at the AGM. The Chair, the Chair of each of
the Committees and the three Executive Directors will be
available at the AGM to answer shareholders’ questions.
Results of resolutions proposed at the AGM will be
published on the Company’s website www.ygreit.com
following the AGM.
Jonathan Laredo
Chief Executive Officer
Charles Peach
Chief Financial Officer
Audit Committee have developed, documented and
maintain a robust risk identification, management and
internal control framework and periodically review
and consider if the systems are operating effectively.
The Chair of the Audit Committee reports to the Board
during the financial period on the Committee’s activities
regarding risk management and internal control. The
Audit Committee reviewed the risk register and risk
management policy and recommended it for adoption
by the Board. The Company’s risk management policy
and risk register identify the principal risks and emerging
risks facing the Company and assess the controls in place
to mitigate those risks and the procedures in place to
monitor them. This process is designed to manage rather
than eliminate the risk of failure to achieve the Company’s
business objectives and can only provide reasonable,
but not absolute, assurance against material loss or
misstatement. The principal risks facing the Company
and the means for their management and mitigants are
included in the Principal Risks and Uncertainties.
Code Compliance
The Directors are committed to maintaining high
standards of corporate governance and this Corporate
Governance Statement describes how the Company
has complied with all provisions of the Codes in the
period from 01 January 2019 to 31 December 2019 with
the exception of harmonisation of employee pension
rates, which was effected during the year. The Board have
reviewed the UK Corporate Governance Code 2018 and
has adopted its principles.
Yew Grove reit plcreport and consolidated Financial statements 2019 53
Strategic reportgovernanceFinancial StatementS Principal Risks and Uncertainties
54
The Company’s Board has overall responsibility for the establishment and oversight
of the Company’s risk management framework to ensure that its strategy can be
successfully implemented. The Audit Committee is responsible for developing and
monitoring the Company’s risk management policies, as set out in the governance
statement. Risk management policies are established to identify and analyse the risks
and emerging risks faced by the Company, 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 Company’s activities.
The Company’s risk register, reviewed by the Audit
Committee, records key risks and emerging risks across
the Company’s current and future investment, operations,
IT, governance, economic and strategic areas of activity.
The register assesses the likelihood and impact of risks
as well as their direction in order to monitor progress in
managing and mitigating them. A register of errors and
breaches is also maintained and no material breaches
were noted during the financial period.
The Board
The Board has overall responsibility for maintaining and
monitoring the Group’s systems for risk management
and internal control. The Board reviews and approves
the risk appetite of the Company.
The Audit Committee
The Board has charged the Audit Committee with
reviewing the adequacy and effectiveness of the
Company’s internal control (including financial control)
and risk management systems. The Audit Committee
assesses management’s risk measurement and control.
Executive Management
Executive management have day to day responsibility
for ensuring the Board’s strategy with regards to
risk management, measurement and reporting is
implemented. In addition, they identify and provide
assessment of current and future risks the Company
may face for the Board’s review.
Internal Audit
The Audit Committee considers the nature, scale,
complexity and range of operations of the Company,
including its external administrator structure for the
first ten months of the period in relation to financial
reporting.
During the period the company internalised the finance
function that had previously been provided by the
Administrator. As part of this process, the required
internal controls and segregation of duties were put
in place. In order to reduce the risks surrounding the
transfer of the finance function to the internal finance
team the company ran parallel accounting records with
the Administrator for the months of August, September
and October 2019. Reviews were completed during this
period to ensure that the internal finance team have the
capabilities to maintain the accounting records of the
company, following which the Administrator resigned on
31 October 2019. The internal finance team have assumed
the Administrator’s role and now ensures that reporting
to the Audit Committee and the Board is adequate,
accurate, and timely.
The internal finance team maintains internal control
processes, disaster recover processes and a business
continuity programme which is reviewed on a regular
basis. Based on the Committee’s assessment of the
foregoing controls within the Company, combined with
the current size of the Company, the Audit Committee
has recommended to the Board that it does not believe
it is necessary to establish an internal audit function at
this time. The Board concurs with the Audit Committee’s
recommendation not to establish an internal audit
function for the Company at this time. The Audit
Committee will continue to review this position annually
and make appropriate recommendations to the Board.
Yew Grove reit plcreport and consolidated Financial statements 2019 The Company’s assets are primarily office and industrial commercial properties in the Republic of Ireland. The
principal risks it therefore faces are related to the Irish commercial property market in general, the Company’s
operating environment and individual properties and tenants. The Board has carried out a robust assessment of
the principal risks and sets out below the principal risks and uncertainties that the Company is exposed to and that
may impact performance in the coming financial year. These risks have been assessed in light of known information
about the Covid-19 pandemic at the date of this report. The Company proactively identifies, assesses, monitors and
manages these risks. Some risks are not yet known and some that are not currently deemed material may turn out
to be material in the future. The material risks and uncertainties identified, along with their strategic impact on the
business and mitigating factors, have been outlined.
55
Identified Risk
Impact on the Company/
Property market
Mitigating activities
Momentum
Key Macro economic risks
Weakening economy
Weakening global and/or
national economy puts pressure
on rents and tenants. Fall in
availability of debt financing.
Fewer buyers for the REIT’s
properties
Weak Foreign Direct
Investment demand due to
macro-economic factors
Risk of falling demand from
Foreign Direct Investment
tenants
Covid-19
Brexit
Risk that Covid-19 continues to
adversely affect the Company’s
economic environment
Weakening Irish economy puts
pressure on rents and tenants,
in the event of a hard Brexit
there is the possibility that the
border between the Republic of
Ireland and Northern Ireland
becomes a hard border
Increasing
Increasing
Increasing
Increasing
The REIT assets are judged on the
quality and local grounding of tenants
and prospective tenants. Targeted
properties are majority tenanted by
stronger tenants with demand and
businesses not just dependant on
the local economy. Tenant behaviour
following the economic downturn
after of 2007/8 is reviewed to indicate
correlation with macroeconomic
weakness
The Company’s acquisition policy
requires alternative use planning.
The Company monitors and aims to
understand Foreign Direct Investment
trends in advance.
The Company’s revenues are
predominantly stronger FDIs and
the Irish government. The Company
follows its tenant corporate strength
and payment behaviour closely. The
Company will continue to avoid retail
and weaker credit tenancies.
The key risk areas by sector
(agriculture, food manufacture) are
avoided in the REIT portfolio. Tenants
are assessed on the volume of their
sales to the UK or supplies from the
UK at rental or acquisition. Targeted
properties are majority tenanted by
stronger tenants.
Interest rate risk – rising
rates
Debt facility costs based on
Euribor may increase with
an adverse effect on dividend
payments.
The Company will seek to mitigate
the impact of interest rate rises on any
future debt facility. The Company’s
finance manual includes mitigating
policies for hedging interest rate risk.
Stable
Strategic reportgovernanceFinancial StatementS Principal Risks and Uncertainties (continued)
Identified Risk
Impact on the Company/
Property market
Mitigating activities
Momentum
56
Key Property related risks
Valuation of Company
Assets
Property assets outside the
Dublin Central Business
District may lack recent
comparable transactions or
benchmarks for an external
valuer to use in valuation.
Property concentration
Aggregation of property
location, tenant, building use
and tenant sectors may expose
the Company to increased risk
Stable
Stable
The Company has a separate Valuation
Committee to ensure the most capable
valuers are used. The Valuation
Committee can change the valuer
and use more than one valuer for the
portfolio. The property team keep a
record of comparables from acquisition
to share with the valuer.
The Company’s investment committee
reviews each asset individually and
against the aggregated portfolio on
purchase or later significant capital
expenditure. The Company seeks to
maintain a suitably diverse portfolio of
properties and tenants, paying regard to
the tenant’s credit quality. Significant
purchases, lease amendments or capital
expenditure are matters reserved for
the Board.
Tenant payment
behaviour
Risk that the Company’s
current or future tenants fail
to make payments due in a full
or timely manner, which could
affect the Company’s dividends.
Tenants’ covenant strength and prior
rental performance is reviewed at
purchase, the property management
group conduct regular tenant meetings
and tenant financial reviews.
Increasing
Tightening of rental
yields
Risk the Company will not
be able to invest capital at its
expected rental yields
Refurbishment –
contractor failure and
cost
Failing contractors may
delay or increase the cost of
refurbishment
Ineffective Asset
Management
Risk that the Company’s assets
become less attractive to
current and target tenants.
Stable
Stable
Stable
The Company’s owned assets would
reflect this tightening to help achieve
NAV price targets. The Company’s
current portfolio is reversionary, which
would be expected to support the
company’s rental income. The Company
seeks to raise capital against identified
assets to minimise the impact of lower
rental yields on new investments.
The Company does not expect to
undertake substantial refurbishment
and then only with Board approval.
The Chief Investment Officer’s team
would require competing bids, pre-set
timelines and budgets to identify
failings and replace contractors earlier.
The Property management group
establish early, on-going relationships
with tenants to understand their
accommodation needs. Each property
has an asset management plan to ensure
the tenant and Company work together
in this regard. Asset management is
reported weekly on all properties to the
Executive Directors
Yew Grove reit plcreport and consolidated Financial statements 2019 Impact on the Company/
Property market
Mitigating activities
Momentum
57
Identified Risk
Key Operational Risks
Inability to raise further
debt or equity capital
Risk the Company will not
be able to fund unexpected
major capital expenditure.
Risk the Company will
not be able to achieve its
growth strategy
Loss of key staff
Risk of Executive
management resignation,
illness or death
Regulatory, political,
legislative, tax,
environmental or planning
changes
Risk of changing operating
environment hurting
returns and amending
strategy
Stable
The Company has leverage below the REIT
ceiling. The Company has and will remain
in contact with leverage providers to ensure
leverage is available at attractive levels. The
Investor relations policy has a calendar for
capital raising ensuring the Company is
regularly appraised of Investor interest and
can target investors well in advance of the
Company’s immediate needs. The Company has
raised equity capital twice in 2019, increasing
the shares in issue by 49%, and debt capital
once, increasing debt facility by 46%
The Company has Executive management
with significant personal investment in the
Company with lock-ups expiring in June 2020,
and a specifically judged remuneration scheme
and Long Term Incentive Plan to encourage
retention. Executive management and other key
staff have non-compete clauses.
Stable
The Company has a strong Board with a
mix of capital markets, property and audit
experience to better be aware of and react to
these changes. The Executive management have
experience of managing through legislative
and tax changes and relationships with suitable
professionals for Company advice.
Increasing
Taxation planning
Environmental change
Corona virus spread
Business interruption
Emerging risk the
Company may attract a
tax charge if not listed on
a recognised exchange
within 3 years of IPO (May
2021)
The Company has established a plan to ensure it
is listed on a recognised exchange in advance of
the required date. Counterparties and advisers
have been selected, draft timings and actions
have been reviewed and agreed by the Board,
who are updated by executive management.
Stable
Emerging risk that the
Company’s assets and
operating or economic
model may be adversely
affected by climate change
The Company has established a Sustainability
Policy and Sustainability Committee to
ensure environmental risks are identified
and mitigated. The Company measures and
manages its properties’ environmental impact
directly.
Risk that Covid-19
adversely affects the
Company’s tenants,
employees and other
stakeholders
Risk one or more
environmental or other
disturbances adversely
affect the Company’s
physical operating
environment
The Company’s employees have been isolated
while social distancing is required and all have
the ability to work remotely. The Company’s
tenants are monitored weekly at the date of
this Report for the impact of the disease on
their work environment and businesses by the
property management group.
The Company has a robust business continuity
plan. The Company’s assets are geographically
dispersed and diversified by tenant, type and
use. All employees have the ability to work
remotely.
Stable
Increasing
Increasing
Strategic reportgovernanceFinancial StatementS Audit Committee Report
58
Dear Shareholder,
garry O’Dea
COmmittee Chairman
On behalf of the Audit Committee,
I am pleased to present the Audit
Committee’s Report for the period from
1 January 2019 to 31 December 2019.
appointed by the Board on the recommendation of the
Nomination Committee. They are appointed for a period
of up to three years, extendable by no more than two
additional three-year periods provided the member
continues to meet the criteria for membership. A quorum
consists of two Independent member Directors and all
the members of the Committee are considered to have
recent significant and relevant financial experience. The
Committee brings experience in, among other areas,
commercial property, capital markets and financial
accounting, all of which are relevant to the sector the
Company operates in. All members are in their first term,
which started at Admission, 8 June 2018.
The Audit Committee is constituted in compliance with
the Codes, section 167 of the Companies Act 2014 and
the Company’s Articles regarding the composition of the
Audit Committee. The current Terms of Reference for
the Audit Committee are published on the Company’s
website.
This report is intended to provide insight into our work
and activities during the Committee’s tenure as we
discharge our responsibilities in relation to the integrity
of the Company’s financial reporting, the relationship
with and independence of the external auditor and the
effectiveness of the Company’s internal controls and
risk management system.
As part of our activities we have met regularly with the
Management Team, Finance Team, the Administrator
whilst in role and the external auditors. During this
financial period the Company published its first Annual
report, mid-year interim financial statements and
internalised the Administrator’s role.
We are satisfied that the Audit Committee has the right
balance of skills and resources, has been able to work
effectively and has received the support and response it
has required from both management and the external
service providers. We are also satisfied that the level
of scrutiny of the Company’s public announcements
is sufficient and effective. There were no issues arising
from this evaluation.
The Audit Committee is chaired by Garry O’Dea, who
is the Senior Independent Director and an independent
Non-Executive Director. He is considered by the Board
to have recent and relevant financial experience and
the necessary understanding of financial reporting and
accounting principles. All the members of the Audit
Committee are independent Non-Executive Directors,
Yew Grove reit plcreport and consolidated Financial statements 2019 The Audit Committee meets regularly, in alignment with the financial reporting calendar. The Audit Committee
was formed on 8 June 2018 and met four times in the period from 1 January 2019 to 31 December 2019. The Audit
Committee requests the attendance of relevant other parties as required. The parties met were as follows:
59
Deloitte Ireland LLP
as External Auditor
Baker Tilly as
Administrator (“BT”)
Representatives of the Company
The independent external auditor attended to present its audit plans
in respect of the annual audit and interim review, its analysis of the
audit risks it sees in the Group, the results of an interim review, and its
recommendations for improvements in systems and controls.
BT held the position of Administrator until 31 October 2019, after
which date the role was internalised. The Administrator met the
Committee to discuss its work, its interaction with the Company and
any significant assumptions or matters in relation to the preparation of
the Group’s accounts.
Representatives of the Company, principally the CFO and Financial
Controller, met the Committee in order to present the financial
statements, to discuss significant judgements and areas of uncertainty,
the Group’s risks and measures in place to mitigate risks, and any other
matters as requested by the Audit Committee.
The Company Secretary acts as secretary to the Committee.
Role of the Audit Committee
The roles and responsibilities of the Audit Committee are summarised below. The full schedule of the roles and
responsibilities are contained in the Committee’s terms of reference, which are available from the Company’s
website www.ygreit.com.
Financial reporting
Monitoring the integrity of Group financial statements and any other formal
announcements relating to the Group’s financial performance, business model and
strategy.
Assessing whether the Report and Consolidated financial statements taken as
a whole are fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position and performance,
business model and strategy.
Evaluating the Group’s accounting policies, any changes to them and their
appropriateness.
Reviewing and challenging judgements, estimates and assumptions made by the
Group in its financial reports or announcements.
Strategic reportgovernanceFinancial StatementS Audit Committee Report (continued)
60
External Audit
Overseeing the relationship with the external auditor, including selection,
appointment, removal, terms of engagement, approval of remuneration, assessing
independence and objectivity, assessing effectiveness of the audit process, and
setting policy on the use of non-audit services.
Valuation
Monitoring and reviewing the property valuation process, taking into account the
actions of the Valuations Committee.
Reviewing the valuation methodology for non-property judgements.
Internal Audit
Reviewing the Group’s requirement for an internal audit function.
Assessing the need for additional internal audit review and reporting.
Risk Management and
Internal Controls
Reviewing the principal risks facing the Group and recommending to the Board the
Group’s risk register and risk management systems.
Reviewing the adequacy and effectiveness of the Group’s system of internal
financial controls and internal controls including implementation, relevance and
any breaches of controls.
Reviewing the Group’s procedures for detecting fraud, and the systems and
controls for the prevention of bribery.
Performing an assessment of the Group’s compliance with the Codes and other
obligations.
Committee
Reviewing the Committee’s Terms of Reference, composition and performance.
Monitoring compliance with legal, listing, REIT rules and accounting standards.
Reporting to the Board on fulfilment of its responsibilities.
Reporting
The Chairperson of the Audit Committee reports to the
Board on the activities of the Committee. The Audit
Committee’s activities in the period from 1 January
2019 to 31 December 2019 are set out under each of the
relevant headings below:
and understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
At the request of the Board, the Committee considered
whether the 2019 Annual Report and Consolidated
financial statements met these requirements.
Compliance with Code
The Codes require that the Board should present a
fair, balanced and understandable assessment of the
Company’s position and prospects and specifically that
they consider that the Annual Report and Consolidated
financial statements, taken as a whole, is fair, balanced
The Committee considered and discussed with
management the established and documented process put
in place by management for the preparation of the 2019
Annual Report and Consolidated financial statements,
and in particular the timetable, co-ordination and review
activities. The Committee also noted the formal audit
Yew Grove reit plcreport and consolidated Financial statements 2019 61
plan and process undertaken by Deloitte Ireland LLP. The
Committee and then the Board concluded that the Annual
Report and Consolidated financial statements, taken as
a whole, are fair, balanced and understandable and that
they provide the necessary information for shareholders
to assess the Company’s position and performance,
business model and strategy.
Significant Issues
The Committee considered the Company and Group’s
proposed accounting treatments for material and
complex transactions and key assumptions made in the
preparation of the financial statements. The Committee
also reviewed the suitability of the Company and Group’s
accounting policies, their adoption and their consistent
application across financial periods. The key judgements
considered by the Audit Committee during the financial
period ended 31 December 2019 and the action taken by
the Committee are set out below:
Valuation of owned property
All of the properties owned by the Company were
valued by Lisney Limited (the “Valuer”) as at 31
December 2019. The Valuation Committee met with
the Valuer, and reviewed its objectivity, experience
and cost competitiveness before engaging with it. The
Valuation Committee tested the Valuer’s assumptions
and valuations and is satisfied that the valuations were
conducted in accordance with the Royal Institution of
Chartered Surveyors Valuation Standards. The valuation
report prepared by the Valuer was also provided to the
external auditor. The Audit Committee reviewed the
valuations and their underlying comparable evidence
and assumptions. All properties are valued in accordance
with their current use, which is also the highest and best
use except for property under development. The Audit
Committee paid specific attention to the valuation of
properties purchased since the prior Annual report.
Treatment of share-based payments
Under the Company’s Long-Term Incentive Plan (“LTIP”)
and Bonus scheme the Company may be obliged to make
payments or settle options on the Company’s shares
contingent on individual and Company performance.
The Company made an initial grant under the LTIP
scheme in the reporting period and the Audit Committee
reviewed the calculation and treatment of the LTIP
accrual and accounting with the Company in order that
the Committee and the Remuneration Committee be
aware of the cost and recognition of awards made under
this scheme in the reporting period and the future.
Treatment of revenue
The Company received payments from current
leases, lease surrenders, service charge payments
and property sales during the reporting period. The
Committee reviewed the source and nature of these in
determining how these would be treated and recognised
in the Company and Group’s accounts. The Group paid
particular attention to treatment of lease surrender
premium payments received on the Company’s property
at Cork Airport Business Park.
Treatment of debt facility
The Company increased its debt finance facility during
the reporting period. The Committee reviewed the terms
and use of the facility and the costs of the facility in
determining how these would be treated and recognised
in the Company and Group’s accounts. The Committee
paid particular attention to the valuation and treatment
of the liabilities the Company has incurred under the
facility as well as advice on the pricing and the valuation
of the facility.
The External Auditors
The Audit Committee oversees the relationship with
the External Auditor.
Deloitte Ireland LLP was appointed as first statutory
auditor to the Company in 2018. The Audit Committee
keeps the tenure of Deloitte Ireland LLP under review
in accordance with best practice, recent applicable
legislation and its terms of reference.
The Audit Committee has recommended to the Board
that Deloitte Ireland LLP should be re-appointed
for the coming financial year. As required under the
Articles of the Company, the reappointment will be
tabled at the Annual General Meeting for consideration
by shareholders. In the course of arriving at this
recommendation the Audit Committee completed a
detailed assessment of the external auditor including
the key points below:
Strategic reportgovernanceFinancial StatementS Audit Committee Report (continued)
62
• Confirmation from the auditor that there are no
issues concerning its status as a statutory auditor or
the designation of the audit engagement partner as a
responsible individual.
• The independence and objectivity of the audit partner
and senior audit staff, particularly as regards to their
interaction with Company management.
• The quality of the audit partner and audit staff from
a technical accounting and auditing perspective,
including their industry knowledge and their specialist
technical expertise.
• Whether issues were raised at the right time by the
appropriate level of audit staff with the appropriate
Company staff and in particular, the timeliness and
quality of communication with the Committee.
The outcome of this assessment confirmed that the
auditor was performing well, the results of their audit
added value to the control process, had a good relationship
with both Audit Committee, Administrator, Finance
team and Company management and was sufficiently
independent and technically qualified to justify the
Committee’s recommendation to re-appoint.
Services carried out by the external auditor
during the financial period
Services provided by Deloitte Ireland LLP to the Company
and the Company’s subsidiaries for the financial period
ending 31 December 2019 are:
Review of interim accounts
Audit of the Group for the financial
period ended 31 December 2019
€20,000
€55,000
Internal Audit
In accordance with the Codes, the Audit Committee has
considered the Company’s scale, complexity and range
of operations, including the role of the Administrator
in relation to financial reporting. For the period to
31 October 2019 there was a comprehensive services
agreement between the Company and the Administrator,
Baker Tilly (“BT”), which set out the role of the
Administrator in relation to financial reporting.
As part of this services agreement, the Administrator was
required to report to the Company that it had appropriate
internal controls in place. BT was also required to ensure
that reporting to the Audit Committee and the Board
was adequate, accurate, and timely.
The Administrator was required to report to the Company
on compliance with its internal control processes,
disaster recovery processes and business continuity
programme on a regular basis until the pre-agreed end
of their contract on 31 October 2019, after which the
function was internalised. They will hold the records
from their cessation date in accordance with the statute
of limitations.
During the period the company internalised the finance
function that had previously been provided by the
Administrator. As part of this process, the required
internal controls and segregation of duties were put
in place. In order to reduce the risks surrounding the
transfer of the finance function to the internal finance
team the company ran parallel accounting records for the
months of August, September and October 2019. Reviews
were completed during this period to ensure that the
internal finance team have the capabilities to maintain the
accounting records of the company, following which the
Administrator resigned on 31 October 2019. The internal
finance team have assumed the Administrator’s role and
now ensures that reporting to the Audit Committee and
the Board is adequate, accurate, and timely.
The internal finance team maintains internal control
processes, disaster recover processes and a business
continuity programme which is reviewed on a regular
basis. Based on the Committee’s assessment of the
foregoing controls within the Company, combined with
the current size of the Company, the Audit Committee
has recommended to the Board that it does not believe
it is necessary to establish an internal audit function at
this time. The Board concurs with the Audit Committee’s
recommendation not to establish an internal audit
function for the Company at this time. The Audit
Committee will continue to review this position annually
and make appropriate recommendations to the Board.
Yew Grove reit plcreport and consolidated Financial statements 2019 63
The Committee carried out an annual assessment of the
Group’s risk management and internal control systems,
using the Group’s risk management framework and risk
register. The Committee identified the Group’s principal
risks and reviewed the controls and procedures in place to
mitigate these risks. The Committee reviewed each of the
entries on the risk register to ascertain whether they were
relevant and complete, whether the risks identified were
expected to become more prevalent, what the potential
impact of the risks might be, mitigants to the risks that
had been or could be brought into action, and actions to
be taken by the Group. The Committee recommended
the updated risk register to the Board for adoption.
Reporting
The Chair of the Committee reports to the Board at each
meeting on the activities of the Committee and intends
to attend the Company’s AGM to answer any questions
on the Committee’s responsibilities and this report.
Approval of reports
The Annual Report and Consolidated financial statements
were considered in draft on 23 April 2020. The Annual
Report and Consolidated financial statements were
approved by the Board on 23 April 2020.
I will be available at the AGM to answer any questions
on the work of the Audit Committee.
Garry O’Dea
23 April 2020
REIT status
As an Irish REIT, the Company is subject to Part 25A of
the Taxes Consolidation Act 1997 (as inserted by section
41 of the Finance Act 2013). The Committee reviewed the
Company’s compliance with these requirements at 30
August and 31 December 2019, based on the Company’s
internal calculations. The Committee has confirmed to
the Board that the Company is in compliance with the
REIT rules at the date of this report. The Committee
noted that in order to maintain compliance the
Company would need to be listed on the Main market
of a recognised stock exchange by May 2021. The Board
received a presentation from the CFO during the year
on the Company’s plan and timings for listing on a
recognised stock exchange before May 2021.
Internal controls and Risk Management
The Board acknowledges that it is responsible for
monitoring the effectiveness of the Company’s system
of internal control (including financial control) and risk
management to safeguard the Company’s assets. The
Company’s internal control environment is designed to
identify, manage and mitigate financial, operational and
compliance risks inherent to the Company. The system
is designed to manage rather than eliminate the risk
of failure to achieve business objectives and can only
provide reasonable, but not absolute, assurance against
material misstatement or loss.
The Company’s internal control system is built on certain
fundamental principles and is subject to review by the
Board. The following are the principles under which the
internal control system operates:
• A defined schedule of matters reserved to the Board
• Documented, approved policies and procedures
• A clear, effective authorisation process
• Risk metrics and risk reporting at meetings
• Approval and recording of all significant transactions
• Maintenance of a breaches register with details of
corrective actions
• Business and financial planning (including three-year
forward cashflows and viability modelling)
• Formal multi step appraisal of property investment
decisions
• Performance assessment versus budget.
Strategic reportgovernanceFinancial StatementS
Nomination Committee Report
Barry O’DOwD
COmmittee Chairman
64
I am pleased to present the second annual
report of the Nomination Committee
for the year ended 31 December 2019,
which provides a summary of the
Nomination Committee’s role and
responsibilities, and how the Committee
discharged these during the year.
• Before any appointment is made by the Board,
evaluating the balance of skills, knowledge, experience,
independence and diversity on the Board, and, in
the light of this evaluation preparing a description
of the role and capabilities required for a particular
appointment;
• Reviewing annually the time required from non-
executive Directors and assessing whether the non-
executive Directors are spending sufficient time on
fulfilling their duties.
The Committee ensures that when reviewing the
Company’s officer and employee requirements, candidates
are considered on merit against objective criteria and with
due regard for the benefits of diversity. The Company
has a Diversity Policy, the aim of which is to ensure that
the percentage of women and the percentage of men
employed by the Company remains at or exceeds 30%.
Role of the Nomination Committee
The duties, reporting responsibilities and authority of
the Nomination Committee are clearly set out in the
Committee’s Terms of Reference which are available on
the Company’s website www.ygreit.com. These include,
but are not limited to, the following:
• Regularly reviewing the structure, size and composition
of the Board and make recommendations to the Board
with regard to any changes;
• Assessing the effectiveness and performance of
the Board and each of its committees including
consideration of the balance of skills, experience,
independence and knowledge of the Company on the
Board, its diversity, including gender, how the Board
works together as a unit, and other factors relevant
to its effectiveness;
• Giving full consideration to succession planning for
Directors and other senior executives in the course
of its work, taking into account the challenges and
opportunities facing the Company, and the skills
and expertise needed on the Board in the future, in
particular with respect to the Chair of the Company;
• Being responsible for identifying and nominating
candidates for approval by the Board to fill Board
vacancies as and when they arise;
Yew Grove reit plcreport and consolidated Financial statements 2019 Membership
Under the Committee’s Terms of Reference, the
Nomination Committee must have at least two Directors,
of whom the majority shall be independent non-executive
Directors. Members are appointed to the Committee by
the Board for a period of up to three years which may
be extended for further periods of up to three years,
provided the relevant member still meets the criteria
for membership of the committee.
• The Committee reviewed the results of the annual
performance evaluation of the Board, its Committees
and individual Directors, including a review of the
time required from non-executive Directors to fulfil
their duties; and
• Recommending to the Board that in line with the
2018 Code, that all Directors, subject to and seeking
re-election, be put forward for re-appointment at the
Company’s 2020 AGM.
The Committee has two independent non-executive
Directors and one executive Director:
I will be available at the AGM to answer any questions
that shareholders may have on the work of the Committee.
65
Barry O’Dowd
23 April 2020
• Barry O’Dowd (Chair)
• Eimear Moloney (Non-executive Director)
• Jonathan Laredo (Chief Executive Officer)
Other executives may be invited to attend when deemed
appropriate. The Company Secretary or his or her
nominee shall act as the secretary of the Committee
and will ensure that the Committee receives information
and papers in a timely manner to enable full and proper
consideration to be given to issues.
Other executives may be invited to attend when deemed
appropriate. The Company Secretary or his or her
nominee shall act as the secretary of the Committee
and will ensure that the Committee receives information
and papers in a timely manner to enable full and proper
consideration to be given to issues.
Activities of the Nomination Committee
The Nomination Committee meets at least once a year
and otherwise as required. The Nomination Committee
met once during 2019. The principal activities of the
Nomination Committee in the year are detailed below:
• The Committee reviewed the Terms of Reference for
the Nomination Committee to ensure the contents
remained relevant and appropriate and best reflect the
role and responsibilities of the Committee.
Strategic reportgovernanceFinancial StatementS Remuneration Committee Report
66
eimear mOLOney
COmmittee Chairman
Dear Shareholder,
I am pleased to present the Company’s
Remuneration Committee report covering
the remuneration policy and practice for
the year ended 31 December 2019 which
has been prepared by the Remuneration
Committee and approved by the Board.
The objective of the report is to provide shareholders
with information to enable them to understand the
remuneration structures and how they relate to the
Group’s financial performance.
We have been mindful to ensure that disclosures in
relation to the remuneration structures are in line with
best practice and we recognise the importance of having
remuneration policies, practices and reporting that reflect
best corporate governance practices, having regard to
the Company’s size and the markets on which its shares
are traded.
The Committee is dedicated to str ucturing a
remuneration policy for the business which promotes
a continued alignment of shareholders’ and executives’
interests. The significant shareholdings of both the Chief
Executive Officer and the Chief Investment Officer also
demonstrate their ongoing commitment to the long-term
success of the Company.
Membership and Responsibilities
The Remuneration Committee is formed by the Chair
of the Remuneration Committee, Eimear Moloney and
Garry O’Dea, each of whom is considered by the Board
to be independent. The Remuneration Committee meets
formally at least once a year and otherwise as required.
Only members of the committee have the right to attend
committee meetings. However, other individuals such as
officers and staff of the Company and other Directors and
representatives from service providers to the Company
may be invited to attend all or part of any meeting as
and when appropriate and necessary.
The Company Secretary or his or her nominee shall act
as the secretary of the committee and will ensure that
the committee receives information and papers in a
timely manner to enable full and proper consideration
to be given to issues.
The responsibilities of the Remuneration Committee are
summarised below and are set out in full in the Terms of
Reference for the Remuneration Committee which are
available on the Company’s website www.ygreit.com. In
the Admission document published in connection with
the listing of the Company we set out the core principles
for our remuneration policy. The roles and responsibilities
include but are not limited to, the following:
• within the terms of the agreed remuneration policy and
in consultation with the Chair and/or Chief Executive
Officer, as appropriate, determine the total individual
remuneration package of the Chair, each executive
Director, Company Secretary and other designated
senior executives including bonuses, incentive
payments, share options or other share awards and
pension benefits. No Director or manager shall be
involved in any decisions as to their own remuneration.
• obtain reliable, up-to-date information about
remuneration in other companies. To help it fulfil its
obligations the Committee shall have full authority to
appoint remuneration consultants and to commission
or purchase any reports, surveys or information which
it deems necessary, within any budgetary restraints
imposed by the Board.
Yew Grove reit plcreport and consolidated Financial statements 2019 67
• review the ongoing appropriateness and relevance of
the remuneration policy and the terms of reference
and make recommendations to the Board as regards
changes or otherwise.
Key activities of the Remuneration
Committee
There have been two Committee meetings during the
period and the key activities during the financial period
were focused on:
• Finalising the 2018 Remuneration Report;
• Agreeing the final outturn of the 2018 annual bonus
scheme for the Executive Directors;
• Agreeing the approach to the award of the initial
grant under the Company’s Long Term Incentive Plan
(“LTIP”) in 2019 including the quantum, metrics,
targets and award participants;
• Agreeing the structure of the 2019 annual bonus
scheme for the Executive Directors, including bonus
opportunity, metrics and specific targets to be
employed;
• Reviewing the remuneration packages for the
Executives and the terms of remuneration for the
non-Executive Directors;
• Considering the implication for our remuneration
reporting and practices of the updated 2018 UK
Corporate Governance Code.
Subsequent to the financial year end, the Remuneration
Committee met to review salaries for 2020, the final
outcome of the 2019 annual bonus scheme and the
structure and targets of the annual bonus scheme and
LTIP for 2020.
Summary of current executive
remuneration framework
The Company’s policy on Executive Directors’
remuneration is designed to ensure that employment
and remuneration conditions reward, retain and motivate
them to perform in the best interests of shareholders. The
Company aims to provide a remuneration package for all
employees that is market competitive and operates the
same reward and performance philosophy throughout
the business.
The elements of the remuneration package which may
apply to Executive Directors are base salary, pension
and benefits, annual bonus and the long term incentive
plan. The table below summarises the framework which
was applied during 2019. The initial levels of salary,
pension, and benefits were agreed following a review
by Mercer Consulting Group (“Mercer”). Mercer has no
other connection with the Company or the individual
Directors.
Executive remuneration framework
Base Salary: An appropriate level of fixed remuneration to
reflect the skills and experience of the individual. Salaries
are reviewed bi-annually by the Committee taking into
account all relevant factors. Prior to Admission Mercer
were engaged by the Board to consider the appropriate
level of both Executive and Non-executive remuneration
by benchmarking the Company against other similar
sized listed companies.
The salaries of each of the Executive Directors was set
at admission at €250,000 p.a. Each of the Executive
Directors has agreed to waive half of their annual salary
until such time as the share capital issued by the Company
equals or exceeds €175 million.
Benefits: To provide a market competitive benefits
package. Benefits currently provide the Executives
with critical illness and death in service cover and
the reimbursement of the cost of a family health plan
insurance for spouse and children under 18 years old.
Pension: Contribution to a Company pension scheme
at 15% of salary. These pension contributions are in line
with the contribution level provided to the other members
of the workforce.
Bonus: To reward executives for the delivery of annually
agreed objectives and performance targets. The maximum
bonus for each of the Executive Directors is 100% of
salary. Targets are set each year for the CFO and CIO
by the CEO, and for the CEO by the Chair and each is
assessed and approved by the Committee.
• In respect of 2019 70% of the bonuses were based on the
achievement of challenging dividend per share targets
and the balance was based on individual performance
against objectives set for the executives by the CEO
and with objectives for the CEO being set by the Board
Strategic reportgovernanceFinancial StatementS Remuneration Committee Report (continued)
68
• LTIP: As reported in last year’s annual report in March
2019 awards of 150% of salary were made to each of
the executives. The awards are designed to reward
Executive Directors for the delivery of long-term
performance and align their interests with those of
shareholders and other stakeholders. The options
were granted with a fixed exercise price of 1 cent (the
nominal share price at the time the LTIP award was
made). The options will vest no earlier than the third
anniversary of the award grant date provided the
director continues to be employed at the date of vesting
and subject to the satisfaction of the performance
conditions. The options expire seven years after the
date of grant. The Company has no legal or constructive
obligation to repurchase or settle the options in cash.
Malus will apply for the three-year period from grant to
vesting with claw back applying for the two-year period
post vesting. Malus and claw back provisions within the
annual bonus scheme and LTIP apply in the following
circumstances:
• Material restatement of the Group’s audited financial
statements;
• Where an award that has been granted based on any
materially incorrect information relevant to the basis
for setting the performance conditions;
• Material breach by the executive of this contract of
employment including, a material breach of a restrictive
covenant and/or confidentiality obligations of the
Company; or
• Serious business or reputational damage to the
Company arising from a criminal offence, serious
misconduct or wilful misconduct by the individual
executive.
The options are exercisable based on a series of
performance metrics agreed by the Remuneration
Committee and approved by the Board. The vesting
criteria for the 2019 LTIP Scheme awards are split evenly
across three metrics;
1. NAV growth but excluding dividends, 30% vests at ≥
10% growth, 60% at 15% growth and 100% at ≥ 20%
growth.
2. Aggregate dividend payment per share over the final
twelve months of the performance period, 30% vests
at €0.06 per share, 60% at €0.07 per share and 100%
at €0.075 per share.
3. Annualised Total Shareholder Return (TSR), 30% vests
≥10%, 60% at ≥12% and 100% at ≥15%.
The Remuneration Committee may change the balance
of the measures, or use different measures for subsequent
awards, as appropriate. No material change will be made
to the type of performance conditions without prior
shareholder consultation.
Non-Executive Directors fees:
The Company provides a level of fees to support
recruitment and retention of Non-Executive Directors
with the necessary experience to advise and assist with
establishing and monitoring the Company’s strategic
objectives. The Board as a whole is responsible for
setting the remuneration of the Non-Executive
Directors, other than the Chair whose remuneration
is considered by the Remuneration Committee and
recommended to the Board. The Chair is paid additional
fees above other Non-Executive Directors to reflect
the additional responsibilities and/or additional/
unforeseen time commitments. Non- Executive Directors
do not participate in any of the Company’s incentive
arrangements.
Outcomes for 2019 (to be read as part of
the consolidated financial statements)
As described earlier in this Annual Report, 2019 was a year
of significant activity for Yew Grove REIT. In addition to
a number of significant acquisitions the Company also
concluded two successful share placings. In light of the
Group’s performance over the financial year, there were
payments to Executive Directors and senior management
under the annual bonus scheme set up at the start of
2019. The requirement for a threshold level of Dividend
Per Share (DPS) to be met before any bonuses were paid
was met, with this threshold set at the start of the year.
Yew Grove reit plcreport and consolidated Financial statements 2019 The following table summarises the remuneration received by the Directors for the 2019 financial period, it should be
noted the bonus amounts were accrued for in 2019 for 2019 performance but paid subsequent to the year end in 2020:
69
Non-executive Directors:
Barry O’Dowd
Garry O’Dea
Eimear Moloney
Brian Owens
Executive Directors:
Jonathan Laredo
Charles Peach
Michael Gibbons
Salary / Fees
Bonus Other Benefits
Pension
2019 Total
€’000
€’000
€’000
€’000
€’000
2018 Total
€’000
80
50
50
50
125
125
125
-
-
-
-
205
205
205
-
-
-
-
4.3
3.5
17.1
-
-
-
-
37.5
37.5
37.5
80
50
50
50
371.8
371.0
384.6
44
28
28
28
93
92
101
How we will apply the policy in 2020
Following the year end the Remuneration Committee
met and reviewed the Executive Directors salaries and
determined that no increase was warranted.
The financial underpin in the annual bonus scheme has
been amended so that payment of any bonus in future
years will require a Remuneration Committee assessment
of overall corporate performance during the year. This
replaces the inflexible provision in the current scheme for
2019 which triggered a bonus payment once a threshold
level of dividend per share (“DPS”) was achieved. In
making this change, the committee believes it can better
align directors’ incentive with shareholder returns
and good corporate governance . When considering
whether a minimum level of performance has been
achieved to justify the payment of the bonus in 2020,
the Remuneration Committee will review factors such
as underlying financial performance (including DPS),
performance against other KPIs and progress against
the achievement of strategic goals. In addition, the
Remuneration Committee will reserve the right to adjust
the provisional bonus outturn if it is not deemed to be
a fair and accurate reflection of business performance.
The maximum annual bonus opportunity for the
Executive Directors will remain at 100% of basic salary.
The bonus will be divided into two assessments, 30%
based in a series of individual objectives set for each of
the Executives and 70% based on the performance of
the Group subject to the achievement of challenging
performance targets in the following areas :
(a) 40% payable based upon the dividend paid out of
income profits
(b) 40% payable based on the NAV performance over
the year, and
(c) 20% based on the level of Total Expense Ratio (“TER”)
improvement through the year.
The Committee intends to make awards under the LTIP
during 2020. At the time of writing, the Committee is
continuing to review the appropriate metrics and targets
in line with Yew Grove REIT’s strategic development and
plans for growth for the coming years, and to help ensure
that the continued commitment and contributions of the
management team are appropriately rewarded. Major
shareholders will be consulted in the event that the
Committee makes material changes to the performance
conditions used for awards made in 2020. The specific
Strategic reportgovernanceFinancial StatementS
Remuneration Committee Report (continued)
70
performance targets which are chosen will be disclosed in
the required regulatory announcement when the grants
are made later this year, and full details will also be
included in next year’s Annual Report on Remuneration.
I am always happy to hear from the Company’s
shareholders and you can contact me via the Company
Secretary if you have any questions on this report or more
generally in relation to the Company’s remuneration.
Service contracts/letters of appointment
The Remuneration Committee reviews the contractual
terms for any new Directors to ensure these reflect best
market practice.
I hope that you find the information in this report helpful
and informative and I look forward to your continued
support at the AGM where I will be available to answer
any questions on the work of the Committee.
On behalf of the Remuneration Committee
Eimear Moloney
23 April 2020
Executive Directors
All Executive Directors have service contracts with the
Company with a notice period of six months. The service
contracts for all three executive Directors are dated 5
June 2018. The service contracts allow for termination
by way of payment for the entire notice period or part
thereof in lieu of notice. Standard ‘cause’ provisions are
included in the service agreement to allow the Company
to terminate without notice or the obligation to make
payment in lieu of notice.
Non-Executive Directors
The Non-executive Directors were appointed under letters
of appointment dated 4 June 2018. Each independent
Non-executive Director’s term of office is for an initial
period of 3 years unless terminated earlier upon written
notice or upon their resignations,
The initial terms of the Non-executive Directors’
positions are subject to their election by the Company’s
shareholders at the AGM scheduled for 29 May 2020 and
to re-election at any subsequent AGM at which the Non-
executive Directors stand for re-election.
Yew Grove reit plcreport and consolidated Financial statements 2019 Valuation Committee Report
Brian Owens
COmmittee Chairman
71
I am pleased to present the Valuation
Committee’s report for the financial
year ending 31 December 2019,
which summarises the Committee’s
role and responsibilities and how
the Committee discharged these
during the year under review.
Role of the Valuation Committee
The Valuation Committee plays an important role in
providing the Board with assurance that the valuation
process of valuing the Company’s investment properties
by the independent valuer, Lisney (the “Valuer”), is
objective, transparent and consistent in approach and
methodology in accordance with the Red Book code.
The duties, reporting responsibilities and authority of the
Valuation Committee are set out in the written terms of
reference which are available on the Company’s website
www.ygreit.com and include the following;
Valuation reporting
The Committee shall monitor the integrity of the
valuation of the property assets of the Company,
reviewing and reporting to the Board on significant
valuation reporting issues and judgements which they
contain. The Committee shall also review and report to
the Board on summary valuation statements, valuation
methodologies used, and any valuation assumptions
contained in valuation documents.
In particular, the Committee shall review and challenge
where necessary;
1. the consistency of, and any changes to, valuation
methodologies both on a year on year basis and across
the Company and, if applicable, its subsidiaries to
ensure the valuations are in accordance with the RICS
Valuation – Global Standards 2017, incorporating
the International Valuation Standards and RICS
Professional Standards (the “Red Book”);
2. the methods used to account for significant or unusual
properties where different approaches are possible;
3. whether the Valuer has followed appropriate valuation
standards and made appropriate estimates and
judgements;
4. the clarity of disclosure in the Valuer’s reports and the
context in which statements are made in the annual and
semi-annual valuations, and where the Committee is
not satisfied with any aspect of the valuations provided
by the external Valuer, it shall report its views to the
Board.
Narrative reporting
Where requested by the Board, the Committee should
review the content of the valuation reports and advise the
Board on whether, taken as a whole, it is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the value of the Company’s
properties.
External Valuation
The Committee shall consider and make recommendations
to the Board, in relation to the appointment, re-
appointment and removal of the Company’s external
Valuer and oversee the relationship with the external
Valuer including (but not limited to):
(a) approval of their remuneration and that the level of
fees is appropriate.
(b) approval of their terms of engagement, including
any engagement letter issued at the start of each
valuation.
Strategic reportgovernanceFinancial StatementS Remuneration Committee Report (continued)
72
(c) assess annually their performance, independence
and objectivity and the effectiveness of the valuation
process.
(d) ensuring no conf lict of interest impacts the
independence of the external Valuer
(e) assessing annually the qualifications, expertise and
resources of the Valuer or Valuers and the effectiveness
of the valuation process which shall include a report
from the external Valuer on their own internal quality
procedures;
(f) meet the external Valuer or Valuers at least once a year,
without any member of the Company’s management
being present, to discuss their remit and any issues
arising from the valuation;
(g) review and approve the annual valuation plan and
ensure that it is consistent with the scope of the
valuation engagement;
(h) review the findings of the valuation with the external
Valuer or Valuers, including but not be limited to,
the following;
• a discussion of any major issues which arose during
the valuation;
• any valuation judgements; and
• the effectiveness of the valuation process.
Reporting responsibilities
The Committee Chair shall report formally to the
Board on its proceedings after each meeting on all
matters within its duties and responsibilities, and
shall also formally report on how it has discharged its
responsibilities. The Committee shall make whatever
recommendations to the Board it deems appropriate on
any area within its remit, where action or improvement
is needed.
Membership of the Valuation Committee
Membership of the Committee is Brian Owens (Chair of
the Committee), Barry O’Dowd and Jonathan Laredo.
The membership fulfills the quorum of 3 members of
whom 2 are non-executive directors of the Company.
Each member of the Committee has one vote with the
Committee Chair having the casting vote.
The Company Secretary Sanne are appointed Secretary
to the Committee.
Activities of the Valuation Committee
The Committee meet at least twice a year, in the year
under review the Committee has met 6 times.
The beginning of the year began with a review, approval
and recommendation of the independent valuations
for inclusion in the financial statements as at 31
December 2018 which we reported on in our first report.
Midway through the year the Committee procured the
independent valuation of our portfolio of assets for
inclusion in the interim financial statements made up
to 30 June 2019. In doing so, the Committee ensured
there was a consistency of approach and methodology
whilst ensuring the properties were valued in accordance
with the Red Book (RICS Valuation – Global Standards
(June 2017)).
The non-executive members of the Committee met with
the Valuer, Lisney on two occasions during the year in
discharge of their duties. Additionally, the Committee
worked closely with the Audit Committee to ensure the
valuations, and their principal assumptions, are properly
recorded in the financial statements.
Yew Grove reit plcreport and consolidated Financial statements 2019 73
The Committee is satisfied that it was provided with
adequate management, legal, secretarial and other
resources to effectively carry out its duties in addition
to having unrestricted access to the Company’s records
and to the Valuer.
Year End Valuation as at 31 December 2019
Prior to the independent Valuer engaging in the formal
year end valuation process, the Committee reviewed and
approved the terms of their engagement to do so. During
the valuation process the non-executive members of the
Committee met with Lisney to ensure the terms of their
engagement were adhered to, that the basis of valuation
adopted was consistent with previous reporting periods
and that Lisney had received all necessary information
and support to conduct their valuation exercise.
• the Committee did not adjust the valuations or
observable inputs used by Lisney in their Valuation
Report
• the Valuation Report is judged to be fair and prepared
on the basis of Market Value in accordance with the
RICS Valuation – Global Standards (June 2017).
Accordingly, the Committee recommended approval of
the Valuation Report to both the Audit Committee and
the Board for inclusion in the financial statements for the
financial year ended 31 December 2019. I will be available
at the AGM to answer any questions that shareholders
may have on the work of the Committee.
On behalf of the Valuation Committee
Once the year end Valuation Report had been received,
the Committee met to consider it and the valuation
process. The Committee is satisfied
Brian Owens
23 April 2020
• the Committee has adhered to its terms of reference
throughout the year;
• the continued appointment of Lisney as independent
valuer is adequately provided for in their engagement
letter to ensure the integrity of the valuation process.
• both management and the Valuer cooperated in
all aspects of resourcing and provision of required
information to ensure a transparent and objective
valuation process.
• the methodology of individual property valuations
was consistent from one reporting period to the next,
and adequate consideration was given to matters of
judgement where it arose.
• the Committee reviewed the parameters used by Lisney
for their valuation, including their inputs for discount
rates, ERVs, void periods and lease terms.
Strategic reportgovernanceFinancial StatementS yew grOve reit plC
repOrt and COnsOlidated finanCial statements 2018
74
“Target properties should be
structurally sound, attractive
to tenants of good credit
standing and generate a rent
roll and have reversionary
potential to support a
sustainable and growing
dividend, paid quarterly.”
Yew Grove reit plcreport and consolidated Financial statements 2019 Strategic report
governance
Financial StatementS
financial
statements
75
Independent Auditor’s Report
to the Members of Yew Grove Reit Plc
76
Report on the audit of the financial statements
Opinion on the financial statements of Yew Grove 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 December
2019 and of the profit of the Group for the financial period 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.
The financial statements we have audited comprise:
The Group financial statements:
• the Consolidated Statement of Comprehensive Income;
• the Consolidated Statement of Financial Position;
• the Consolidated Statement of Changes in Equity;
• the Consolidated Statement of Cash Flow; and
• the related notes 1 to 31, including a summary of significant accounting policies as set out in note 1.
The Company financial statements:
• the Company Statement of Financial Position;
• the Company Statement of Changes in Equity;
• the Company Statement of Cash Flow; and
• the related notes 1 to 31, including a summary of significant accounting policies as set out in note 1.
The relevant financial reporting framework that has been applied in the preparation of the Group and Company
financial statements is the Companies Act 2014 and International Financial Reporting Standards (IFRS) as adopted
by the European Union (“the relevant financial reporting framework”).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and
applicable law. Our responsibilities under those standards are described below in the “Auditor’s responsibilities for
the audit of the financial statements” section of our report.
We are independent of the Group and Company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in Ireland, including the Ethical Standard issued by the Irish Auditing and
Accounting Supervisory Authority, as applied to listed 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.
Yew Grove reit plcreport and consolidated Financial statements 2019 77
Summary of our audit approach
Key audit matters
Materiality
Scoping
Significant changes in our
approach
The key audit matters that we identified in the current year were:
• Valuation of investment properties; and
• Completeness and accuracy of rental income
The Group and Company materiality that we used in the current year
was €1,100,000 which was determined on the basis of 1% of Group and
Company net assets.
We focused our audit scope, and the extent of our testing, based on our
assessment of the risks of material misstatement and of the materiality
determined.
There is no significant changes to our approach, this is the Group’s and
the Company’s second year of audit.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which ISAs
(Ireland) require us to report to you whether we have anything material to report, add or draw attention to:
• the disclosures in the annual report set out on pages 54-57 that describe the principal risks and explain how they
are being managed or mitigated;
• the directors’ confirmation set out on page 34 in the annual report that they have carried out a robust assessment
of the principal risks facing the Group and the Company, including those that would threaten its business model,
future performance, solvency or liquidity;
• the directors’ statement set out on page 38 in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting in preparing the financial statements and the directors’
identification of any material uncertainties to the Group’s and the Company’s ability to continue to do so over a
period of at least twelve months from the date of approval of the financial statements;
• the directors’ explanation set out on page 38 in the annual report as to how they have assessed the prospects of the
Group and the Company, over what period they have done so and why they consider that period to be appropriate,
and their statement as to whether they have a reasonable expectation that the Group and the Company will be
able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications or assumptions.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current financial period 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.
Strategic reportgovernanceFinancial StatementS Independent Auditor’s Report
To The Members Of Yew Grove Reit Plc (continued)
78
Valuation of investment properties
Key audit matter description
The valuation of the Group’s investment properties requires significant
judgement to be made by the directors taking into consideration advice
from the external valuer and management. Any inaccurate inputs or
calculations used in the estimation of fair value could result in a material
misstatement of the financial statements.
How the scope of our audit
responded to the key audit
matter
For the financial year ended 31 December 2019, the investment properties
of the Group is €115.8 million.
Refer to page 96 (Note 1.5 – Significant accounting judgements, estimates
and assumptions), page 97 (Accounting Policy – Fair value of investment
property), and page 112 (Note 14 - Investment properties).
We evaluated the design and determined the implementation of the
controls the Board has implemented over the valuation of investment
properties.
We considered the basis used by the Group for the valuation of investment
properties in light of the Group’s valuation policy and the requirements of
IFRS.
We enquired with the external valuer that was engaged by the Group, to
discuss and challenge the significant assumptions used in the valuation
process, including estimated rental value and market based yields. We
reviewed the assumptions and sources of information used in the valuation
as detailed in the Valuation Report prepared by the external valuer.
We assessed the competence, capabilities and objectivity of the external
valuer, obtained an understanding of the work of the external valuer
and evaluated the appropriateness of the external valuer’s work as audit
evidence for the relevant assertion. We compared the recorded value
of each investment property held to the Valuation Report prepared by
the external valuer in light of the Group’s accounting policies and the
requirements of IFRS.
We performed audit procedures to assess the accuracy and completeness
of information provided to the external valuer including reviewing and
agreeing the lease terms to the underlying lease agreements.
We reviewed the financial statement note disclosures and ensured that the
IFRS requirements on the valuation of investment properties have been
adequately included in the financial statements.
Yew Grove reit plcreport and consolidated Financial statements 2019 Completeness and accuracy of rental income
Key audit matter description
Rental income is recognised over the term of the lease. Lease incentives
granted are recognised as an integral part of the rental income over the
term of the lease.
79
During the period ended 31 December 2019, the Group has recognised net
rental income of €9.9 million.
We focused on this area due to the significance of the balances and as rental
income is the Group’s primary source of revenue.
How the scope of our audit
responded to the key audit
matter
Refer to page 98 (Note 1.6 – Revenue recognition – Rental income).
We considered the Group’s accounting policy in respect of revenue
recognition and were satisfied that it is in accordance with applicable
accounting standards and that it has been consistently applied throughout
the year.
We evaluated the design and determined the implementation of the
controls in place over the accounting for rental income.
We developed our independent expectation of rental income recognised in
the Group consolidated financial statements based on the lease agreements
taking into consideration rent-free periods, if any. We compared our
expectation to what is included in the financial statements and obtained
explanations for any differences.
We ensured that the Group is entitled to the rental income recognised in
the Group consolidated financial statements by reviewing and agreeing the
lease terms to the underlying lease agreements.
We reviewed the financial statement note disclosures and ensured that
the IFRS requirements on revenue have been adequately included in the
financial statements.
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.
Strategic reportgovernanceFinancial StatementS Independent Auditor’s Report
To The Members Of Yew Grove Reit Plc (continued)
80
Our application of materiality
We def ine mater ia lit y as the
m a g n it ude of m i s s t ate me nt
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.
Net assets
Materiality
Audit Committee
reporting threshold
€110
€1.1
€0.055
We determined materiality for the Group and Company to be €1,100,000 which is approximately 1% of the Group
and Company net assets. We have considered net assets to be the critical component for determining materiality
because it is one of the principal benchmarks within the Financial Statements relevant to members of the Group in
assessing financial performance. We have considered quantitative and qualitative factors such as understanding the
Company and its environment, complexity of the Company and the reliability of control environment.
We agreed with the Audit Committee that we would report to them any audit differences in excess of €55,000, 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.
In establishing the overall approach to our Group audit, we assessed the risk of material misstatement, taking into
account the nature, likelihood and potential magnitude of any misstatement. Following this assessment, we applied
professional judgement to determine the extent of testing required over each balance in the financial statements.
Other information
The directors are responsible for the other information. The other information comprises the information included
in the Annual Report and Consolidated Financial Statements, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Yew Grove reit plcreport and consolidated Financial statements 2019 In this context, we also have nothing to report in regard to our responsibility to specifically address the following
items in the other information and to report as uncorrected material misstatements of the other information where
we conclude that those items meet the following conditions:
81
• Fair, balanced and understandable – the statement given by the directors that they consider the annual report and
financial statements taken as a whole is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group’s and the Company’s performance, business model and strategy, is materially
inconsistent with our knowledge obtained in the audit; or
• Audit committee reporting – the section describing the work of the audit committee does not appropriately address
matters communicated by us to the audit committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code and the Irish Corporate Governance Annex
– the parts of the directors’ statement relating to the Company’s compliance with the UK Corporate Governance
Code and the Irish Corporate Governance Annex do not properly disclose a departure from a relevant provision
of the UK Corporate Governance Code or the Irish Corporate Governance Annex.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view and otherwise comply with the
Companies Act 2014, and for such internal control as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group and Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group and Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs (Ireland), we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group and Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
Strategic reportgovernanceFinancial StatementS Independent Auditor’s Report
To The Members Of Yew Grove Reit Plc (continued)
82
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group and Company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may
cause the entity (or where relevant, the Group) to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,
and whether the financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within
the Group to express an opinion on the (consolidated) financial statements. The Group auditor is responsible for
the direction, supervision and performance of the Group audit. The Group auditor remains solely responsible for
the audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that the
auditor identifies during the audit.
For listed entities and public interest entities, the auditor also provides those charged with governance with a
statement that the auditor has complied with relevant ethical requirements regarding independence, including
the Ethical Standard for Auditors (Ireland) 2016, and communicates with them all relationships and other matters
that may be reasonably be thought to bear on the auditor’s independence, and where applicable, related safeguards.
Where the auditor is required to report on key audit matters, from the matters communicated with those charged
with governance, the auditor determines those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. The auditor describes these matters in the
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, the auditor determines that a matter should not be communicated in the auditor’s report because
the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
This report is made solely to the Company’s members, as a body, in accordance with Section 391 of the Companies
Act 2014. Our audit work has been undertaken so that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
Yew Grove reit plcreport and consolidated Financial statements 2019 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:
83
• We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
• In our opinion the accounting records of the Company were sufficient to permit the financial statements to be
readily and properly audited.
• The Company Statement of Financial Position is in agreement with the accounting records.
• In our opinion the information given in the directors’ report is consistent with the financial statements and the
directors’ report has been prepared in accordance with the Companies Act 2014.
Corporate Governance Statement
We report, in relation to information given in the Corporate Governance Statement on pages 43 to 52 that:
• In our opinion, based on the work undertaken during the course of the audit, the information given in the Corporate
Governance Statement pursuant to subsection 2(c) of section 1373 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 its environment obtained in the course of the
audit, we have not identified any material misstatements in this information.
• In our opinion, based on the work undertaken during the course of the audit, the Corporate Governance Statement
contains the information required by Regulation 6(2) of the European Union (Disclosure of Non-Financial and
Diversity Information by certain large undertakings and Groups) Regulations 2017 (as amended); and
• In our opinion, based on the work undertaken during the course of the audit, the information required pursuant to
section 1373(2)(a),(b),(e) and (f) of the Companies Act 2014 is contained in the Corporate Governance Statement.
Matters on which we are required to report by exception
Based on the knowledge and understanding of the Group and the Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the directors’ report.
We have nothing to report in respect of the provisions in the Companies Act 2014 which require us to report to
you if, in our opinion, the disclosures of directors’ remuneration and transactions specified by law are not made.
Matthew Foley
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House, Earlsfort Terrace, Dublin 2
23 April 2020
Strategic reportgovernanceFinancial StatementS
Consolidated Statement of Financial Position
As at 31 December 2019
84
Notes
2019
€
2018
€
Non-current assets
Investment properties
Computer equipment
Interest in joint venture
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity
IFRS Net asset value per ordinary share (cents)
EPRA Net asset value per ordinary share (cents)
Diluted IFRS asset value per ordinary share (cents)
14
15
16
17
18
19
20
21
22
22
22
13
13
13
115,790,000
4,717
3,473
115,798,190
3,527,754
14,577,461
18,105,215
133,903,405
77,915,000
-
3,473
77,918,473
565,100
4,823,734
5,388,834
83,307,307
(3,577,657)
(2,333,729)
(20,403,207)
(23,980,864)
109,922,541
(5,840,398)
(8,174,127)
75,133,180
1,115,722
39,409,322
125,222
69,272,275
109,922,541
98.52
98.52
98.41
750,000
4,000,000
-
70,383,180
75,133,180
100.18
100.18
100.18
The Consolidated financial statements were approved by the Board of Directors on 23 April 2020 and were signed
on its behalf by:
Charles Peach
Chief Financial Officer
Jonathan Laredo
Chief Executive Officer
23 April 2020
Yew Grove reit plcreport and consolidated Financial statements 2019
Consolidated Statement of Comprehensive Income
For the financial year ended 31 December 2019
Year ended
31 December
2019
€
5 April 2018 to
31 December
2018
€
Notes
85
Total Rental and Related Income
Rental income
Property expenses
Net Rental and related income
Fair value (loss)/gains on investment properties
Realised gain on disposal of Investment properties
Total income after revaluation gains and losses
Expenditure
AIFM fees
Goodwill
Finance costs
Administration expenses
Total expenditure
Share of result from joint venture
Profit before taxation
Income tax
Profit for the financial period
Total comprehensive income for the financial period
attributable to the owners of the Group
Basic earnings per share (cent)
Diluted earnings per share (cent)
3
4
5
5
6
7
8
9
16
11
22
12
12
9,946,724
(527,948)
9,418,776
(768,283)
123,174
8,773,667
2,764,695
(204,351)
2,560,344
1,609,126
-
4,169,470
(95,833)
-
(669,384)
(2,949,241)
(3,714,458)
(70,378)
(180,011)
(15,412)
(1,568,725)
(1,834,526)
-
3,473
5,059,209
-
2,338,417
(4,538)
5,059,209
2,333,879
5,059,209
6.24
6.23
2,333,879
4.08
4.08
Strategic reportgovernanceFinancial StatementS Consolidated Statement of Changes in Equity
For the financial year ended to 31 December 2019
86
Share capital
account
€
Share premium
€
Retained
earnings
€
Notes
Other Reserves
€
Total equity
€
As at 1 January 2019
Total comprehensive income
Ordinary share capital issued
Share issue costs
Share based payments expense
Equity Dividends paid
As at 31 December 2019
750,000
-
365,722
-
-
-
1,115,722
4,000,000
-
35,409,322
-
-
-
39,409,322
70,383,180
5,059,209
-
(1,026,614)
-
(5,143,500)
69,272,275
-
-
-
-
125,222
-
75,133,180
5,059,209
35,775,044
(1,026,614)
125,222
(5,143,500)
125,222 109,922,541
21
22
25
23
Yew Grove reit plcreport and consolidated Financial statements 2019 Consolidated Statement of Changes in Equity
For the financial period from 5 April 2018 (date of incorporation) to 31 December 2018
Share capital
account
€
Share premium
€
Retained
earnings
€
Notes
Other Reserves
€
Total equity
€
87
Total comprehensive income
for the period:
Transactions with owners
recognised in equity:
Issue of ordinary share capital
Transfer to retained earnings
Issue costs
As at 31 December 2018
21
22
22
-
-
2,333,879
750,000
74,250,000
-
- (70,250,000) 70,250,000
(2,200,699)
-
-
70,383,180
4,000,000
750,000
-
-
-
-
-
2,333,879
75,000,000
-
(2,200,699)
75,133,180
Strategic reportgovernanceFinancial StatementS Consolidated Statement of Cash Flow
For the financial year ended 31 December 2019
88
Notes
Year ended
31 December 2019
5 April 2018 to
31 December 2018
Cash flows from operating activities
Profit before taxation
Adjustments for:
Depreciation
Fair value losses/(gains) on investment properties
Gain on disposal of investment property
Share of profit in joint venture
Finance costs
Goodwill
Increase in trade and other receivables
Decrease in trade and other payables
Equity share based payments
Corporation Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of investment properties and development
expenses
Development
Proceeds on disposal of investment property
Purchase of computer equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from the issue of ordinary share capital
Redemption of Class A shares in Yew Tree Investment
Fund(1)
Issue costs(3)
Proceeds from loans and borrowings
Loan repayment(2)
Equity dividends paid
Net cash acquired from subsidiary undertaking
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at the end of the period
5,059,209
2,338,417
857
1,552,378
(123,174)
-
669,384
-
(2,962,651)
1,069,371
125,222
-
5,390,596
-
(1,609,126)
-
(3,473)
15,412
180,011
(147,502)
974,402
-
(6,606)
1,741,535
(39,546,096)
(831,283)
1,073,174
(5,575)
(39,309,780)
(50,395,874)
-
-
-
(50,395,874)
5
5
16
8
7
25
14
14
14
15
21/22
35,775,044
75,000,000
-
(1,026,614)
14,591,200
(523,219)
(5,143,500)
-
43,672,911
9,753,727
4,823,734
14,577,461
(23,064,484)
(2,200,699)
6,199,540
(8,329,422)
5,873,138
53,478,073
4,823,734
-
4,823,734
22
20
20
23
18
(1) On 8 June 2018 all of the Yew Tree Investment Fund (in Members Voluntary Liquidation) Class A shares were redeemed.
(2) On 8 June 2018 the Company subscribed to 8,329,422 €1 B ordinary shares for €8,329,422, the €8,329,422 proceeds were used to fully
repay the Yew Tree Investment Fund’s (in Members Voluntary Liquidation) outstanding loan subsequent to acquisition. The current year
balance relates to repayment of company borrowings.
(3) Issue costs represent the Company’s contribution to costs of issuing ordinary share capital for the financial period.
Yew Grove reit plcreport and consolidated Financial statements 2019 Company Statement of Financial Position
As at 31 December 2019
Notes
2019
€
2018
€
89
Non-current assets
Investment properties
Computer equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Borrowings
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity
IFRS Net asset value per ordinary share (cents)
EPRA Net asset value per ordinary share (cents)
Diluted IFRS asset value per ordinary share (cents)
14
15
17
18
19
20
21
22
22
22
115,790,000
4,717
115,794,717
3,232,119
14,086,632
17,318,751
133,113,468
77,915,000
-
77,915,000
562,976
4,364,045
4,927,021
82,842021
(3,044,870)
(2,099,951)
(20,403,207)
(23,448,077)
109,665,391
(5,840,398)
(7,940,349)
74,901,672
1,115,722
39,409,322
125,222
69,015,125
109,665,391
98.29
98.29
98.18
750,000
4,000,000
-
70,151,672
74,901,672
100.18
100.18
100.18
The Company reported a profit of €5,033,567 (2018: €2,102,371) for the year ended 31 December 2019.
The financial statements were approved by the Board of Directors on 23 April 2020 and were signed on its behalf by:
Charles Peach
Chief Financial Officer
Jonathan Laredo
Chief Executive Officer
23 April 2020
Strategic reportgovernanceFinancial StatementS
Company Statement of Changes in Equity
For the financial period to 31 December 2019
90
Share capital
account
€
Share premium
€
Retained
earnings
€
Notes
Other reserves
€
Total equity
€
As at 1 January 2019
Total comprehensive income
Ordinary share capital issued
Share issue costs
Share based payments expense
Equity Dividends paid
As at 31 December 2019
750,000
-
365,722
-
-
-
1,115,722
4,000,000
-
35,409,322
-
-
-
39,409,322
70,151,672
5,033,567
-
(1,026,614)
-
(5,143,500)
69,015,125
-
-
-
-
125,222
-
74,901,672
5,033,567
35,775,044
(1,026,614)
125,222
(5,143,500)
125,222 109,665,391
22
22
25
23
Yew Grove reit plcreport and consolidated Financial statements 2019 Company Statement of Changes in Equity
For the financial period from 5 April 2018 (date of incorporation) to 31 December 2018
Share capital
account
€
Share premium
€
Retained
earnings
€
Notes
Other reserves
€
Total equity
€
91
Total comprehensive income
for the period:
Transactions with owners
recognised in equity:
Issue of ordinary share capital
Transfer to retained earnings
Issue costs
As at 31 December 2018
21
22
22
-
-
2,102,371
750,000
74,250,000
-
- (70,250,000) 70,250,000
(2,200,699)
-
-
70,151,672
4,000,000
750,000
-
-
-
-
-
2,102,371
75,000,000
-
(2,200,699)
74,901,672
Strategic reportgovernanceFinancial StatementS Company Statement of Cash Flow
For the year ended 31 December 2019
92
Cash flows from operating activities
Profit before taxation
Adjustments for:
Depreciation
Fair value losses/(gains) on investment properties
Gain on disposal of investment property
Finance costs
Increase in trade and other receivables
Increase in trade and other payables
Equity share based payments
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of investment properties and development
expenses
Purchase of shares in subsidiary(1)
Development
Proceeds on disposal of investment property
Purchase of computer equipment
Distribution from Yew Tree Fund
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from the issue of ordinary share capital
Issue costs(2)
Proceeds from loans and borrowings
Loan repayment
Equity dividends
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at the end of the period
Year ended
31 December 2019
€
5 April 2018 to
31 December 2018
€
Notes
5,033,567
2,102,371
857
1,552,378
(123,174)
669,384
(2,703,643)
770,365
125,222
5,324,956
(1,609,126)
-
15,412
(403,622)
1,725,397
-
1,830,432
(39,546,096)
-
(831,283)
1,073,174
(5,575)
34,500
(39,275,280)
(50,395,874)
(26,069,354)
-
-
-
-
(76,465,228)
35,775,044
(1,026,614)
14,591,200
(523,219)
(5,143,500)
43,672,911
9,722,587
4,364,045
14,086,632
75,000,000
(2,200,699)
6,199,540
-
-
78,998,841
4,364,045
-
4,364,045
5
5
8
25
14
14
14
15
26
22
22
20
20
23
18
(1) In relation to the purchase of shares in subsidiary, on 8 June 2018 all of the Yew Tree Investment Fund (in Members Voluntary Liquidation)
Class A shares were redeemed following the issue of Class B shares.
(2) Issue costs represent the Company’s contribution to costs of issuing ordinary share capital for the financial period.
Yew Grove reit plcreport and consolidated Financial statements 2019 93
Notes to the Consolidated Financial Statements
1. Accounting policies
1.1 General information
Yew Grove REIT plc (the “Company”, registered number 623896), together with entities controlled by the Company
(its subsidiaries) (together the “Group”), is engaged in investing in a diversified portfolio of Irish commercial property
with a view to maximising its shareholder returns.
The Company is a public limited company, incorporated and domiciled in Ireland. The registered address of the
Company is 4th Floor, 76 Lower Baggot Street, Dublin 2.
The ordinary shares of the Company are listed on the Euronext Growth market (formerly the Enterprise Securities
Market) of Euronext Dublin and the Alternative Investment Market of the London Stock Exchange.
1.2 Trading period
The Consolidated financial statements for the Group shown herein are for the financial year ended 31 December
2019 with comparatives from 5 April 2018 (date of incorporation) to 31 December 2018.
The results are inclusive of the parent company (Yew Grove REIT plc) and its subsidiary companies controlled by
the Company.
1.3 Going concern
Based on financial projections which extend beyond twelve months from the date of the approval of these financial
statements, the Directors consider that the Company and Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, the Directors have concluded that they should prepare the
consolidated and company financial statements on a going concern basis.
1.4 Basis of preparation
The statements of the Group and Company for the financial year ended 31 December 2019 have been prepared in
accordance with International Financial Reporting Standards (“IFRS”), as adopted by the European Union (“EU”)
and the Companies Act 2014.
The financial statements of the Group and Company have been prepared on the historical cost basis, except for
investment properties that are measured at fair value.
The financial statements of the Group and Company are presented in Euro, which is the functional currency.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
1. Accounting policies (continued)
94
Standards not affecting the reported results and financial position
IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of
these Consolidated financial statements:
Amendments to References to the Conceptual Framework in IFRS Standards
IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
Amendments to IFRS 3 – Definition of a business
Amendments to IAS 1 and IAS 8 – Definition of material
IFRS 17 Insurance contracts
1 January 2020
1 January 2020
1 January 2020
1 January 2020
1 January 2021
Management are of the view that the initial adoption of any of the above will not materially change the financial
performance or the reported position of the Group or Company.
New standards effective for the current accounting period do not have a material impact on the consolidated financial
statements of the Group and Company. These are discussed in further detail below.
Standards implemented for the first time on preparation of these financial statements
IFRS 16 Leases
In the current year, the Group and Company adopted IFRS 16 Leases for the first time. The date of initial application
of IFRS 16 for the Group and Company was 1 January 2019. It introduces significant changes to lessee accounting by
removing the distinction between operating and finance leases and requires the recognition of a right-of-use asset
and a lease liability at commencement of all leases, except for short-term leases and leases of low value assets. In
contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The Group
and Company is not party as a lessee to material property and equipment leases. The Group and Company does act
as a lessor. Details of the Group’s and Company’s accounting policies under IFRS 16 are set out below.
Lease contracts - the Group and Company as lessor
The Group has acquired investment properties which are subject to commercial property leases with tenants. The
Group has determined, based on an evaluation of the terms and conditions of these lease arrangements, particularly
the duration of the lease terms and minimum lease payments, that it retains substantially all of the risks and rewards
incidental to ownership of these leased properties. Income from these leases is recognised on a straight line basis,
recognition is from the date on which the company becomes a contractual party to the lease. A Lease is derecognised
at the termination of the lease or when the company is no longer a contractual party to the lease.
Lease contracts - the Group as lessee
The Group assesses whether a contract is a lease or contains a lease at inception of the lease contract. The Group
recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it
is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low
value assets (less than €5,000 per annum). For these short-term leases, the Group recognises the lease payments
as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability of leases other than short term leases is initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted by the rate implicit in the lease. If this rate cannot be readily
determined, the Group uses its incremental borrowing rate.
Yew Grove reit plcreport and consolidated Financial statements 2019 1. Accounting policies (continued)
Lease payments included in the measurement of the lease liability comprise:
95
• fixed lease payments (including in substance fixed payments), less any lease incentives;
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date;
• the amount expected to be payable by the lessee under residual value guarantees;
• the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate
the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position. The lease
liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group
remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case
the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using
the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which
case a revised discount rate is used).
• a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the
lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
The Group did not make any such adjustments during the year presented.
Right-of-use assets are amortised over the shorter period of lease term or useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to
exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
The depreciation starts at the commencement date of the lease. The Group does not have any leases that include
purchase options or transfer ownership of the underlying asset.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as peppercorn ground
leases), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense
is presented within Expenses in the consolidated statement of comprehensive income. As a practical expedient, IFRS
16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease
components as a single arrangement. The Group has not used this practical expedient.
Approach to transition
The Group has applied IFRS 16 using the modified retrospective approach, without restatement of the comparative
information.
Financial impact
The application of IFRS 16 to leases previously classified as operating leases under IAS 17 did not result in any changes
for the recognition of right-of-use assets and lease liabilities. Leases are expensed to the Statement of Comprehensive
Income on a straight-line basis.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
1. Accounting policies (continued)
96
1.5 Significant accounting judgements, estimates and assumptions
The preparation of the Group’s Consolidated financial statements requires management to make judgements, estimates
and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and the disclosure of
contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to the carrying amount of the assets or liabilities affected in
future periods.
In the process of applying the Company’s and Group’s accounting policies, management has made the following
judgements, which have the most significant effect on the amounts recognised in the Consolidated financial statements:
(a) Significant judgements
The following are the significant judgements, apart from those involving estimations (which are presented separately
below), that the directors have made in the process of applying the Group’s accounting policies and that have the
most significant effect on the amounts recognised in the Consolidated financial statements.
Operating lease contracts - the Group as lessor
The Group has acquired investment properties which are subject to commercial property leases and licence with
tenants. The Group has determined, based on an evaluation of the terms and conditions of the arrangements,
particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and
rewards of ownership of these properties and so accounts for these leases as operating leases.
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
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
measurements in its entirety, which are described as follows:
(i)
(ii)
Fair value hierarchy applied
(a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
(b)
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
(c)
Property is treated as acquired or disposed of when the significant risks and rewards of ownership have
been assumed or relinquished by the Group. This occurs when:
(a)
it is probable that the future economic benefits that are associated with the property will flow to the
Group;
there are no material conditions which could affect completion of the acquisition; and
the cost of the investment property can be measured reliably.
(b)
(c)
(iii)
Additions to property consist of construction, re-development, refurbishment and other directly attributable
costs such as professional fees and expenses and capitalised interest where applicable.
Yew Grove reit plcreport and consolidated Financial statements 2019
1. Accounting policies (continued)
(iv)
Property is initially measured at cost including related acquisition costs, and subsequently valued by the
Group’s Valuers at its respective fair value at each reporting date (30 June and 31 December). The difference
between the fair value of a property at the reporting date and its carrying value prior to the external valuation
is recognised in the Consolidated Statement of Comprehensive Income as a fair value gain or loss.
97
(v)
Share based payment fair value at grant date is estimated using a Monte Carlo simulation pricing model, taking
into account the terms and conditions upon which the options are granted.
Control
The IFRS 10 control model focuses on whether the Group has power over an investee, exposure or rights to variable
returns from its involvement with the investee, and ability to use its power to affect those returns. In particular, IFRS
10 requires the Group to consolidate investees that it controls on the basis of de facto control. In accordance with
IFRS 10, the Group’s assessment of control is performed on a continuous basis and the Group reassesses whether
it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of
the control model.
(b) Analysis of sources of estimation uncertainty
The key future assumptions, and other key sources of estimation uncertainty for the reporting period that may have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Fair value of investment property
The market value of investment property (“property”) would normally be determined by a real estate valuation
expert to be the estimated amount for which a property should exchange on the date of the valuation in an arm’s
length transaction. Properties are valued on an individual basis.
The valuation of the Group’s properties as at 31 December 2019 was completed by Lisney Limited (”Lisney”) as
external independent Valuer. Lisney prepared the valuation on the basis of market value in accordance with the
Royal Institution of Chartered Surveyors (“RICS”) Valuation – Global Standards (June 2017). Their valuation was
subsequently reviewed by the Valuation Committee.
The Group’s investment properties will next be valued by the Group’s Valuers as at 30 June 2020. The valuers will
continue to use recognised valuation techniques and the principles of IFRS 13 for the valuation as at 30 June 2020
and 31 December 2020. Refer to note 14 for further disclosure on the recognised valuation techniques.
The Board’s Valuation Committee conducts a detailed review of each property valuation, the underlying valuation
assumptions and the valuation process used by the valuer to ensure that valuation assumptions are valid and have
been applied as set out below. Property valuations are complex and involve data which is not publicity available
and a degree of judgement. Each valuation is based upon key assumptions, particularly estimated rental values and
market-based yields. The valuation approach to on-going developments and material refurbishments is on a residual
basis and factors such as the assumed timescale, the assumed future development costs and an appropriate finance
and/or discount rate are used to determine the property value together with market evidence and recent comparable
properties where appropriate.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
1. Accounting policies (continued)
98
The Directors are satisfied that the valuations of the Group’s properties are appropriate for inclusion in the Consolidated
and Company financial statements. The fair value of the Group’s and Company’s properties accurately reflects
the valuation provided by Lisney and no changes to Lisney’s valuation was made by the valuation committee. The
valuation is based on the future cashflows from rental income both for the current lease period and future estimated
rental values, adjusted for expected void periods and appropriate discount rates.
Calculation of loss allowance
When measuring expecting credit loss (“ECL”) the Group uses reasonable and supportable forward-looking
information, which is based on assumptions for the future movement of different economic drivers and how these
drivers will affect each other. Loss given default is an estimate of the loss arising on default. It is based on the
difference between the contractual cash flows due and those that the lender would expect to receive, taking into
account cash flows from collateral and integral credit enhancements.
Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the likelihood
of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations
of future conditions.
1.6 Rental and related income
The Group’s main source of revenue is the leasing and licensing of properties. Lease and licence revenue is recognised
over the period of the lease or licence contracts. Rental income is recognised as revenue at the time and amount
governed by the lease or licence in place with the customer.
The Group recognised revenue from the following major activities:
• Operating lease income from the Group’s investment properties;
• License income from licencing of the Group’s car park spaces;
• Service charge income from contributions received from tenants relating to property expenses.
Revenue is measured based on the consideration to which the Group’s expects to be entitled in a contract with a
customer and excludes amounts collected on behalf of third parties.
Rental income
The Group receives rental income from tenants under leases associated with the Group’s properties. Rental income
is recognised on a straight line basis over the term of the lease.
Where a rent-free period is included as an incentive in a lease the rental income foregone is allocated evenly over
the period from the first day of the lease to the earlier of termination date of the lease or first break option of the
lease. Where a lease incentive takes the form of an incentive payment to a tenant the resultant cost is amortised
evenly over the remaining life of the lease to its earliest termination date. The sum of unamortised incentives is
included in trade and other receivables and is released over the term of the relevant leases. Lease adjustments such
as rent reviews are included when the rent review or adjustment has been completed and agreed with the tenant.
Yew Grove reit plcreport and consolidated Financial statements 2019 1. Accounting policies (Continued)
License income
99
License income represents amounts under licences receivable from tenants associated with the licensing of the
Group’s car park spaces. License income is recognised over the term of the license. License adjustments such as
reviews or extensions are included when the licence review, extension or adjustment has been completed and agreed
with the tenant.
Service charge income
Service charge income from tenants are recognised as revenue in the period in which the related expenditure is
incurred.
Surrender Premium
Where the Group receives a surrender premium from a tenant for the early termination of a lease, the proceeds,
net of any then agreed costs associated with dilapidation and legal costs relating to that lease, is recognised in the
accounting period in which the surrender took place.
1.7 Direct lease costs
Direct lease costs incurred in the negotiation and arrangement of new leases to tenants are initially capitalised and are
then recognised as an expense over the period from the date of the lease to the earliest termination date of the lease.
There were no direct lease costs capitalised during the financial year.
1.8 Finance income and finance costs
The Group’s finance income and finance costs include interest income, interest expense, commitment fees and
related charges. Interest income or expense is recognised using the effective interest method. The effective interest
rate is the rate that exactly discounts estimated future cash receipts (including all fees and costs paid or received
that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on
initial recognition.
1.9 Taxation
Current tax
The Company elected for Real Estate Investment Trust (“REIT”) status and on 21 May 2018 gave notice to Revenue
that it was the principal company of a group REIT following the acquisition of the entire share capital of the Yew Tree
Investment Fund (in Members Voluntary Liquidation). An Irish REIT or group REIT will not pay Irish corporation tax
on profits and gains from its Property Rental Business. Corporation tax will still apply in the normal way in respect
of its Residual Business which may include certain trading activities incidental to letting, letting of administrative
property which is temporarily surplus to requirements, and certain income such as dividends from other Irish REITs.
Corporation tax may also be payable in respect of profits arising in joint venture or co-investment arrangements
where no REIT election has been made (or on the non-REIT proportion of the profits of joint ventures where an
Irish REIT election has been made) and also where a member of a group or an interest in an investment vehicle (as
opposed to property involved in the Property Rental Business) is sold. Other taxes such as VAT, stamp duty, local
property tax and payroll taxes will also still apply in the normal way.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
1. Accounting policies (Continued)
100
1.10 Financial instruments
Financial assets and liabilities are recognised when a Group entity becomes a party to the contractual provisions
of the instruments.
Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to
the acquisition or issue of financial assets and liabilities (other than financial assets or liabilities at fair value through
profit or loss) are added to or deducted from the fair value of the financial assets or liabilities, as appropriate, on initial
recognition. Transaction costs attributable to the acquisition of financial assets or liabilities at fair value through
profit or loss are recognised immediately in the Consolidated Statement of Comprehensive Income.
(i) Cash and cash equivalents
Cash and cash equivalents include cash balances and call deposits with maturities of three months or less from the
acquisition date that are subject to an insignificant risk of changes in their fair value and are used by the Group and
Company in the management of its short-term commitments.
(ii) Trade and other receivables and trade and other payables
Trade receivables include amounts due from tenants. Other receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. Trade and other payables include amounts due
to third party suppliers and prepaid rent amounts received from tenants in advance.
Trade and other receivables and trade and other payables are initially measured at fair value and subsequently
measured at amortised cost using the effective interest rate method. The Group applies the simplified approach
to trade receivables for which expected credit loss uses the lifetime expected credit allowance. The Group has no
material exposure to bad debts as the majority of the Group’s rental income is from State bodies or FDI entities as
they have good credit standing. The payment and credit performance of these tenants is closely monitored therefore,
the expected credit loss is not material and has not been presented. Where there is evidence of credit loss appropriate
allowances are recognised as bad debts in the Statement of Comprehensive income.
(iii) Loans and borrowings
Loans are initially recorded at fair value plus transaction costs. They are subsequently accounted for at amortised cost.
1.11 Investment
Investments held as fixed assets are stated at fair value. Income from other investments together with any related
taxation is recognised in the Consolidated Statement of Comprehensive Income in the year in which it is receivable.
Basis for consolidation
The Consolidated financial statements include the financial statements of the holding company (Yew Grove REIT
plc) and all subsidiary companies as at 31 December 2019. Control is achieved when the Company has the power
over the investee, exposure, or rights, to variable returns from its involvement with the investee and the ability to
use its power over the investee to affect the amount of the investor’s returns. The results of subsidiaries acquired or
disposed of during the financial period are included in the Consolidated Statement of Comprehensive Income from
the effective date of control or to the effective date of loss of control as appropriate. All intragroup transactions,
assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group
are eliminated in full on consolidation. Upon acquisition of a business, fair values are attributed to the identifiable
net assets acquired. The Group’s accounting policy in relation to goodwill is set out in note 1.20.
Yew Grove reit plcreport and consolidated Financial statements 2019 1. Accounting policies (Continued)
There were no subsidiaries acquired in the current year. Details of the subsidiaries acquired during the prior financial
period are outlined below and in Note26.
101
Yew Tree Investment Fund plc (in Members Voluntary Liquidation)
The Consolidated financial statements for the period ended 31 December 2018 include the results of Yew Tree
Investment Fund (in Members Voluntary Liquidation) from the date of acquisition of 8 June 2018 to the date of loss
of control on 27 July 2018 following the appointment of a liquidator. At the Statement of Financial Position date,
the liquidation of Yew Tree Investment Fund (in Members Voluntary Liquidation) had yet to be fully completed.
1.12 Property, Plant and Equipment
Office and computer equipment 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:
Office and computer equipment 3 years
1.13 Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of the acquisition
is measured at the aggregate of the fair values, at the date of acquisition, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of the acquire. Acquisition-related
costs are recognised in the Consolidated Statement of Comprehensive Income as incurred.
1.14 Interest in Joint Ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement,
which exits only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of joint ventures are incorporated in these Consolidated financial statements
using the equity method of accounting, except when the investment is classified as held for sale, in which case it is
accounted for in accordance with IFRS 5.
An investment in a joint venture is accounted for using the equity method from the date on which the investee
becomes a joint venture.
1.15 Foreign currency
Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at
the Statement of Financial Position date. Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated at the rates of exchange ruling at the date of the transaction. Non-monetary items
that are measured at fair value in a foreign currency are translated using the exchange rate at the date when the
fair value was determined. The resulting exchange differences are dealt with in the Consolidated and Company
Statement of Comprehensive Income.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
1. Accounting policies (Continued)
102
1.16 Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (a qualifying
asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale) are included
in the cost of the asset. All other borrowing costs are recognised in the Consolidated Statement of Comprehensive
Income in the period in which they are incurred.
1.17 Pension
Annual contributions payable to the Group’s pension scheme are charged to the Company Statement of Comprehensive
Income in the period to which they relate.
1.18 Share Based Payments
The long term incentive plan arrangement (“LTIP”) between the Company and its Executive Management is accounted
for as an equity settled share based payment arrangement. The initial and only outstanding grants under this plan
were made on 15 February 2019. On that date the Company estimated the fair value of each granted instrument and
the number of equity instruments for which service, market and non-market performance conditions are expected
to be satisfied. This initial estimate of the total share-based payment cost is expensed over the vesting period.
Subsequent to this initial recognition and measurement, the estimate of the number of equity instruments for which
the service and non-market performance conditions are expected to be satisfied will be revised during the vesting
period, (the period from 15 February 2019 to 15 February 2022). Ultimately, the share-based payment cost is based
on the fair value of the number of equity instruments to be issued on satisfaction of these conditions (see note 25
for further details).
1.19 Share issue cost
Costs directly attributable to issuing new shares are deducted from retained earnings net of any related tax deduction.
All other costs are recognised in the Company Statement of Comprehensive Income in the period in which they
are incurred.
1.20 Goodwill
Goodwill arising on the acquisition of a subsidiary is recognised as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred and the fair value
of the acquirer’s previously-held equity interest (if any) in the entity over the net fair value of the identifiable net
assets recognised.
Goodwill is not amortised but is reviewed for impairment at least annually. Any impairment loss is recognised
immediately in the Consolidated Statement of Comprehensive Income and is not subsequently reversed. Any gain
on a bargain purchase is recognised in the statement of comprehensive income immediately.
1.21 Impairment of financial assets
The Group applies a three-stage expected credit loss model (“ECL”) in relation to the impairment of its financial
assets carried at amortised cost except for trade receivables for which the simplified approach is applied in accordance
with IFRS 9. The ECL is used to account for expected credit losses and changes in those ECL at each reporting date
to reflect changes in credit risk since initial recognition of the financial assets.
The expected credit loss is charged against the respective financial asset and recognised in the Consolidated
Statement of Comprehensive income.
Yew Grove reit plcreport and consolidated Financial statements 2019 1. Accounting policies (Continued)
The three stages that determine the amount of impairment to be recognised as expected credit losses at each
reporting date are as follows:
103
Stage 1: Credit risk has not increased significantly since initial recognition – recognised 12 months ECL;
(i)
(ii) Stage 2: Credit risk has increased significantly since initial recognition – recognise lifetime ECL;
(iii) Stage 3: Financial asset is credit impaired – recognise lifetime ECL.
The 12 months ECL is calculated by multiplying the probability of a default occurring in the next 12 months by the
total (lifetime) ECLs that would result from that default. Lifetime expected credit losses are the present value of
expected credit losses that arise if a borrower defaults on its obligation at any point throughout the terms of the
financial asset.
1.21 Impairment of financial assets (Continued)
Definition of default
The Group considers the following as constituting events of default for internal credit risk management purposes
as experience indicates that financial assets that meet the following criteria are generally not recoverable:
(i) When there is a breach of financial covenants by the debtor; and
(ii)
Information developed internally or obtained from external sources indicates that the debtor is unlikely to
pay its creditors, including the Group, in full (without taking into account any collateral held by the Group).
Write off
The Group writes off a financial asset when there is information indicating that the debtor is in severe financial
difficulty and there is no realistic prospect of recovery.
2. Operating Segments
The Group is organised into two business segments, against which the Group reports its segmental information.
These are Office Assets (including retail and mixed use buildings) and Industrial Assets. All of the Group’s operations
are in the Republic of Ireland. Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision maker, who has been identified as the Board of Directors of the Company.
Unallocated income and expenses are items incurred centrally which are neither directly attributable nor reasonably
allocable to individual segments. Unallocated assets are cash and cash equivalents, and certain other assets.
The Group’s key measures of performance of a segment are net rental income and the movement in fair value of
properties, as these measures illustrate and emphasize that segment’s contribution to the reported profits of the
Group and the input of that segment to earnings per share. By focusing on these prime performance measures,
other key statistical data such as capital expenditure and once off exceptional items are separately highlighted for
analysis and attention.
Revenue as stated in the Consolidated Statement of Comprehensive Income relates to rental income from its
investment in commercial properties held by the Group, license income from the licensing of the Group’s car park
spaces and service charges received by its subsidiary management companies.
The reporting segments are new in the current financial year, the change is a result of the size of the portfolio
increasing and identification by management of the differing returns between the two identified segments.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
2. Operating Segments (continued)
104
Major Customers
Included in gross rental income are rents of €4.6m (2018: €1.3m) which arise from the Group’s three largest tenants,
each of which contributed more than 10% of the Group’s revenue. No other single tenant contributed more than 10%
of the Group’s revenue in 2019 and 2018.
Year ended 31 December 2019
Rental income and related income
Property outgoings
Net rental income
Net movement on fair value of
investment properties
Gain on Sale of investment property
Net fair value movement
Office Assets
2019
€
Industrial Assets
2019
€
Total 2019
€
8,382,108
(500,365)
7,881,743
1,564,616
(27,583)
1,537,032
9,946,724
(527,948)
9,418,776
(1,063,004)
-
(1,063,004)
294,721
123,179
417,900
(768,283)
123,179
(645,104)
Unallocated
expenses and
assets
2019
€
-
-
-
-
-
-
Group Total
2019
€
9,946,724
(527,948)
9,418,776
(768,283)
123,179
(645,104)
Operating expenses
-
-
-
(3,714,458)
(3,714,458)
Profit before tax
6,818,739
1,954,932
8,773,672
(3,714,458)
5,059,214
As at 31 December 2019
Investment properties
Year ended 31 December 2018
Rental income and related income
Property outgoings
Net rental income
Net movement on fair value of
investment properties
8,200,000
27,590,000
115,790,000
-
115,790,000
Office Assets
2018
€
Industrial Assets
2018
€
Total 2018
€
2,328,381
(179,829)
2,148,552
436,314
(24,522)
411,792
2,764,695
(204,351)
2,560,344
617,389
991,737
1,609,126
Unallocated
expenses and
assets
2018
€
-
-
-
-
Group Total
2018
€
2,764,695
(204,351)
2,560,344
1,609,126
Operating expenses
-
-
-
(1,831,053)
(1,831,053)
Profit before tax
2,765,941
1,403,529
4,169,470
(1,831,053)
2,338,417
As at 31 December 2018
Investment properties
64,185,000
13,730,000
77,915,000
-
77,915,000
Yew Grove reit plcreport and consolidated Financial statements 2019 3. Rental and related income
Gross rental income
License income
Service charge income
Lease surrender premium
Net rental income
105
31 December 2019
€
7,337,846
243,015
365,863
2,000,000
9,946,724
5 April 2018 to
31 December 2018
€
2,556,944
56,789
150,962
-
2,764,695
Gross rental income represents amounts receivable from tenants under leases associated with the Group’s property
business. License income represents amounts under licences receivable from tenants associated with the licensing
of the Group’s car park spaces. Service charge income relates to contributions from tenants of the Group’s buildings
for property expenses of the occupied buildings. Service charge income receivable from tenants is recognised in the
period in which the related expenditure is recognised.
During the period the company agreed terms on the surrender of a lease at its property Office Block, Unit 2600, in
Cork Airport Business Park. The lease surrender took effect on 30 June 2019. Of the €3 million surrender premium
agreed, €2 million was for lease surrender recognised as part of revenue and €1 million for dilapidations recognised
as part of the fair value gains. The total expenditure on dilapidations to 31 December 2019 was €215,905 leaving a
gain of €784,095 on dilapidations which is recognised as part of the fair value gains (Note 5).
4. Property expenses
Service charge expenses
Direct property costs
Car park costs
Total
31 December 2019
€
329,552
172,396
26,000
527,948
5 April 2018 to
31 December 2018
€
157,581
32,100
14,670
204,351
Property expenses include service charges and other costs directly recoverable from tenants, and non-recoverable
costs directly attributable to the Group’s properties. Service charge expenses typically include security, insurance,
maintenance and other costs of managing the buildings due from and recharged to tenants.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
5. Fair value (Loss) /Gain on investment properties
106
Fair value (losses)/gains on investment properties(1)
Realised gain on disposal of investment property
Total
31 December 2019
€
(768,283)
123,174
(645,109)
5 April 2018 to
31 December 2018
€
1,609,126
-
1,609,126
(1) The Fair value (losses)/gains on investment properties includes a gain on lease surrender premium of €784,095.
A valuation of the Group’s properties as at 31 December 2019 was completed by Lisney Limited (“Lisney”) as
external independent valuer Lisney prepared the valuation on the basis of market value in accordance with the
Royal Institution of Chartered Surveyors (“RICS”) Valuation – Global Standards (June 2017). Their valuation was
subsequently reviewed by the Valuation Committee.
During the year the company agreed terms on the surrender of a lease at its property Office Block, Unit 2600, in
Cork Airport Business Park.
6. AIFM Fees
AIFM Fees
Total
31 December 2019
€
95,833
95,833
5 April 2018 to
31 December 2018
€
70,378
70,378
The Company is required, as a REIT, to have an alternative investment fund manager (“AIFM”). The Company has
agreed with Ballybunion Capital, an AIFM authorised by the Central Bank of Ireland, for it to act as the external
AIFM of the Group, subject to overall supervision of the AIFM by the Board. The fees above are fees paid to the
AIFM in accordance with the service level agreement between the AIFM and the Company.
Yew Grove reit plcreport and consolidated Financial statements 2019 7. Goodwill
Impairment of goodwill
Negative goodwill
Total
31 December 2019
€
-
-
-
5 April 2018 to
31 December 2018
€
238,750
(58,739)
180,011
107
As referred to in note 26, in the prior period goodwill arose on the acquisition of 100% of the class B ordinary share
capital of Yew Tree Investment Fund (in Members Voluntary Liquidation). The fair value of unamortised loan
facility costs with a book value of €238,750 included in trade receivables was estimated to have a recoverable amount
of €nil at the acquisition date. This gave rise to goodwill of €238,750 at the date of acquisition. The goodwill was
subsequently reviewed for impairment and an impairment charge was taken to the Statement of Comprehensive
Income in the prior period.
Goodwill also arose in the prior period on the acquisition of Gateway Estate Management Company Limited by
Guarantee (refer to note 26) as the company was acquired on 2 July 2018 for nil consideration following the acquisition
of One and Three Gateway, East Wall Road, Dublin 3. As nil consideration was paid this resulted in negative goodwill
of €58,739 at the date of acquisition. In line with the Group’s accounting policy, negative goodwill of €58,739 was
taken directly to the Statement of Comprehensive Income during the prior period.
The carrying value of the Goodwill at the Statement of Financial Position date was nil.
8. Finance costs
Effective interest expense on borrowings
Total
31 December 2019
€
669,384
669,384
5 April 2018 to
31 December 2018
€
15,412
15,412
The effective interest expense on borrowings arises as a result of the recognition of interest expense, commitment
fees and arrangement fees using the effective interest rate method.
Strategic reportgovernanceFinancial StatementS
Notes to the Consolidated Financial Statements (continued)
9. Administration expenses
108
Profit before tax for the financial period has been stated after charging:
Capital reduction costs
Staff costs (Note 10)
Independent Non-executive Directors (Note 25)
Listing expenses
Property valuation fees
Property management fees
Legal and consultancy fees
Independent accountant fees
Audit and interim review fees
Depository fees
Liquidation costs
Other costs
Total
31 December 2019
€
-
1,581,426
230,000
18,859
69,000
88,842
195,746
57,912
75,000
57,601
-
574,855
2,949,241
5 April 2018 to
31 December 2018
€
108,667
400,731
129,169
160,329
53,639
60,936
87,637
73,888
65,000
-
119,589
309,140
1,568,725
Staff costs represents total remuneration and other benefits paid to all employees and officers for the financial period.
Further information on Directors’ remuneration can be found in note 25 to the Consolidated financial statements.
Capital reduction costs relate to the Company’s application to the Court to reduce the amount standing to the credit
of the Company’s share premium account by the sum of €70,250,000 in the prior year. The Company’s application
to the Court was approved on 1 November 2018. Refer to note 21 for further details.
Liquidation costs relate to the Yew Tree Fund see Note 26 for further details.
Auditor’s remuneration
Company
Audit of entity financial statements
Other assurance services
Tax advisory services
Other non-audit services
Company total
Group
Audit of the Group financial statements
Other assurance services
Tax advisory services
Other non-audit services
Group total
31 December 2019
€
5 April 2018 to
31 December 2018
€
45,000
20,000
-
-
65,000
10,000
-
-
-
10,000
42,500
195,000
-
-
237,500
10,000
-
-
-
10,000
Yew Grove reit plcreport and consolidated Financial statements 2019 9. Administration expenses (continued)
Other assurance services in 2018 include fees paid in respect to the role of reporting accountant at Admission to
trading on AIM and the Euronext Growth market, review of the Interim Report, and Report on the Initial Financial
Statements. In 2019 the other assurance services was the review of the Interim Report.
109
10. Employment
The average monthly number of employees (including Directors and excluding Non-Executive Directors) directly
employed during the year to 31 December 2019 in the Group and Company was 6. The Company had no employees
prior to Admission (8 June 2018) and six as at 31 December 2019.
Total employees and officers at financial period end:
At financial period end:
Executive Directors
Office staff
Non-Executive Directors (Note 25)
Total employees and officers
The staff costs for the above employees were:
Wages and salaries
Bonus accrual
Social insurance cost
Share based payments and other benefits (Note 25)
Pension costs – defined contribution plan
Other benefits – Health insurance
Total staff costs
Independent Non-executive Directors (Note 25)
2019
Number
2018
Number
3
3
4
10
3
2
4
9
31 December 2019
€
577,901
633,429
62,991
133,321
163,445
10,339
1,581,426
230,000
5 April 2018 to
31 December 2018
€
421,158
-
23,031
-
71,266
14,445
529,900
129,169
Staff costs are allocated to administration expenses during the financial period.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
11. Income tax
110
Current tax: current tax is the expected tax payable or receivable on the taxable income or loss for the period, using
tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Yew Grove
REIT plc has elected for Real Estate Investment Trust (“REIT”) status under section 705E Tax Consolidation Act
1997. As a result, the Group does not pay Irish corporation tax on the profits and gains from its qualifying rental
business in Ireland provided it meets certain conditions. With certain exceptions, corporation tax is still payable in the
normal way in respect of income and gains from a Group’s Residual Business, that is its non-property rental business.
Income tax on residual income
Current period charge
Income tax expense for the financial period
Reconciliation of the income tax expense for the financial period
Profit before tax
Tax charge on profit at standard rate of 12.5%
Non-taxable revaluation surplus
REIT tax-exempt profits
Other (charge on subsidiary undertakings)
Income tax expense for the financial period
31 December 2019
€
-
-
-
5 April 2018 to
31 December 2018
€
-
4,538
4,538
31 December 2019
€
5,059,209
632,401
-
(632,401)
-
-
5 April 2018 to
31 December 2018
€
2,338,417
292,302
(201,140)
(91,162)
4,538
4,538
The directors confirm that in their opinion having conducted due enquiries the Group and the Company have
remained in full compliance with the Irish REIT rules and regulations up to and including the date of the approval
of this report.
Yew Grove reit plcreport and consolidated Financial statements 2019 12. Earnings per share and EPRA Earnings per share
Weighted average number of shares
111
Issued share capital at beginning of the financial period
Shares issued during the financial period
Share in issue at financial period end
Weighted average number of shares
Share based payments payable – dilutive effect
Diluted number of shares
Basic and diluted earnings per share
Profit for the financial period attributable to the owners of the Group
Weighted average number of ordinary shares (basic)
Weighted average number of ordinary shares (diluted)
Basic earnings per share (cent)
Diluted earnings per share (cent)
Earnings per share
31 December 2019
€
75,000,000
36,772,210
111,772,210
81,095,292
125,222
81,220,514
5 April 2018 to
31 December 2018
€
-
75,000,000
75,000,000
57,231,482
-
57,231,482
31 December 2019
€
5,059,209
5 April 2018 to
31 December 2018
€
2,333,879
€
81,095,292
81,220,514
6.24
6.23
€
57,231,482
57,231,482
4.08
4.08
The adjusted basic and diluted earnings per ordinary share of 6.24 and 6.23 cents per share (2018: 4.08) is based on the
profit for the financial period of €5,059,209 and on 81,095,292 ordinary shares (2018: €2,333,879 and on 75,000,000
ordinary shares) being the weighted average number of shares in issue for the year.
EPRA Earnings per share
Profit for the financial period
Adjusted for:
Change in the fair value of investment property
(Gain)/loss on disposal of investment property
Total EPRA earnings
EPRA EPS (Basic)
EPRA EPS (Diluted)
31 December 2019
€
5,059,209
5 April 2018 to
31 December 2018
€
2,333,879
768,283
(123,174)
5,704,318
7.03
7.02
(1,609,126)
-
724,753
1.26
1.26
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
13. IFRS and EPRA NAV per share
112
The IFRS NAV is calculated as the value of the Group’s assets less the value of its liabilities based on IFRS measures.
EPRA NAV is calculated with accordance with the European Real Estate Association (“EPRA”) Best Practice
Recommendations: November 2016.
EPRA net asset value (“EPRA NAV”) is defined as the IFRS assets including properties and other investment interests
at fair value and to exclude certain items not expected to crystallise in a long-term investment property business.
IFRS net assets at end of financial period
Ordinary shares in issue
IFRS NAV per share (cent)
Ordinary shares in issue
Diluted number of shares
Diluted IFRS NAV per share (cent)
IFRS net assets at end of financial period
Net market to market on financial assets
EPRA NAV
EPRA NAV per share (cent)
14. Investment properties
(a) Group and Company
Opening balance
Acquired by distribution in specie
Property purchases
Disposal of property
Development expenditure
Lease surrender dilapidations premium
Fair value (loss)/gain on investment properties
Closing fair value
31 December 2019
€
109,922,541
111,772,210
98.52
111,772,210
111,697,432
98.41
31 December 2019
€
109,922,541
-
109,922,541
98.52
5 April 2018 to
31 December 2018
€
75,133,180
75,000,000
100.18
75,000,000
75,000,000
100.18
5 April 2018 to
31 December 2018
€
75,133,180
-
75,133,180
100.18
31 December 2019
€
77,915,000
-
39,546,096
(950,000)
831,282
(784,095)
(768,283)
115,790,000
5 April 2018 to
31 December 2018
€
-
25,910,000
50,147,611
-
248,263
-
1,609,126
77,915,000
Yew Grove reit plcreport and consolidated Financial statements 2019 14. Investment properties (continued)
During the prior financial period the Company acquired 100% of the B ordinary shares in the Yew Tree Investment
Fund (in Members Voluntary Liquidation). By this acquisition the Company secured 10 properties with a fair value
as at 30 June 2018 of €25,910,000. The Company has since received all the properties and the majority of the cash
from the Yew Tree Investment Fund (in Members Voluntary Liquidation) through distribution in specie following
the Members Voluntary Liquidation of the Fund. In 2018 the Company purchased a total of six buildings comprising
two portfolios and one other building for €50,147,611 including costs.
113
In 2019 the Group acquired Office Block A, located in the IDA Waterford Business and Technology Park, Butlerstown,
Waterford for €4,307,733 (vendor price of €4,000,000 and transaction costs of €307,733) and Office Block, Unit
2600, located in the Cork Airport Business Park, Cork for €8,005,107 (vendor price of €7,500,000 and transaction
costs of €505,107). A portfolio of three industrial buildings at the IDA Business and Technology Park, Garrycastle,
Athlone was acquired for €13,959,612 (vendor price of €13,000,000 and transaction costs of €959,612) and an Office
building at the IDA Ireland Business and Technology Park, Garrycastle, Athlone for €13,044,609 (vendor price of
€12,000,000 and transaction costs of €1,044,609)
The Group disposed of an industrial property, at Heather Road, Sandyford, for €1.1 million, the carrying value of the
building was €950,000, a net gain of €123,174 after disposal costs and derecognition of the carrying value.
During the period the Group also completed the development of a car park on the IDA Athlone Business and Technology
Park, Athlone, Westmeath and purchased additional car parking spaces at One Gateway, Dublin 3 for €229,035
(vendor price of €192,000 and transaction costs of €37,000) the building and other spaces were acquired in 2018.
A valuation is conducted on the Group’s owned properties on 30 June and 31 December each year based upon the
key assumptions of estimated rental values and market-based yields. In determining fair value, the valuers refer to
market evidence and recent transaction prices for similar properties.
The Directors are satisfied that the valuation of the Group’s properties is appropriate for inclusion in the accounts.
The fair value of the Group’s properties owned at 31 December 2019 is based on the valuation provided by the external
independent Valuers, Lisney. This valuation is prepared on the basis of market value in accordance with the Royal
Institution of Chartered Surveyors Valuation – Global Standards (June 2017) and the principles of IFRS 13.
Fair value
The valuation technique used in determining the fair value of the property assets is market value as defined by
the Royal Institution of Chartered Surveyors Valuation, 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. This is in
accordance with IFRS 13.
The main inputs for property valuation using a market-based capitalisation approach are the ERV (“Estimated
Rental Value”) and equivalent yield. ERV is a valuer’s opinion as to the open market rental value of a property on
a valuation date which could reasonably be expected to be the achievable rent for a new letting of that property on
the valuation date. ERVs are not generally directly observable and therefore classified as Level 3 inputs. Equivalent
yields depend on the valuer’s assessment of market capitalisation rates and are therefore Level 3 inputs. There were
no transfers between fair value levels in 2019 and 2018.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
14. Investment properties (continued)
114
Details of the Group’s investment properties and information about the fair value hierarchy using unobservable
inputs (level 3) at 31 December 2019:
Asset Class
Commercial Property Assets
Market value
€115.8m
Input
ERV per sq. ft
Equivalent yield %
Low
€4.00
6.49%
Range
Median
€12.00
7.77%
at 31 December 2018:
Asset Class
Commercial Property Assets
Market value
€77.9m
Input
ERV per sq. ft
Equivalent yield %
Low
€4.00
6.44%
Median
€11.98
8.23%
High
€33.34
10.09%
Range
High
€33.33
10.23%
Sensitivity of measurement to variance of significant unobservable inputs
A decrease in the ERV will decrease the fair value. An increase in equivalent yield will decrease the fair value. There
are interrelationships between these rates as they are partially determined by market rate conditions.
The table below shows the sensitivity of the Group’s properties to changes in equivalent yield and ERV, which have
been identified as key sensitivities by the directors. A change in long term vacancy rate was not considered significant
and was not therefore tested, as the Group’s long-term vacancy rates are low and lease contracts are long in duration.
Across the entire portfolio of investment properties, a 0.25% increase in equivalent yield would have the impact of
a €4.0m (2018: €3.0m) reduction in fair value whilst a 0.25% decrease in yield would result in a fair value increase
of €4.2m (2018: €3.19m), and a 5% increase in ERV would have the impact of a €5.0m (2018: €3.28m) increase in fair
value whilst a 5% decrease in ERV would result in a fair value decrease of €5.1m (2018: €3.29m).
At 31 December 2019
Commercial property assets
Total
at 31 December 2018
Commercial property assets
Total
Market
Value
€115.8m
Market
Value
€77.9m
Value
+5% in ERV
€
Value
-5%
in
ERV
€
Value
+0.25%
Equivalent Yield
€
Value
-0.25% Equivalent
Yield
€
5.0m
5.0m
(5.1m)
(5.1m)
(4.0m)
(4.0m)
4.2m
4.2m
Value
+5% in ERV
€
Value
-5%
in
ERV
€
Value
+0.25%
Equivalent Yield
€
Value
-0.25% Equivalent
Yield
€
3.28m
3.28m
(3.29m)
(3.29m)
(3.0m)
(3.0m)
3.19m
3.19m
Yew Grove reit plcreport and consolidated Financial statements 2019 15. Computer equipment
(a) Group and Company
Costs
At 1 January 2019
Additions
At 31 December 2019
Accumulated Depreciation
At 1 January 2019
Charge for the year
At 31 December 2019
Net Book Value 31 December 2019
Net Book Value 31 December 2018
115
Computer
Equipment
€
-
5,575
5,575
-
(857)
(857)
4,717
-
Total
€
-
5,575
5,575
-
(857)
(857)
4,717
-
16. Interest in joint venture (Group)
Details of the Group’s only joint venture at the end of the reporting period was as follows:
Name of joint
venture
Ashtown
Management
Company
Limited
(Joint
venture)
Country of
Incorporation
Friends
First House,
Cherrywood
Science &
Technology
Park,
Loughlinstown,
Co. Dublin,
Ireland
Nature of the
business
Private Limited
Company.
Management of
common areas
Investment
Ashtown
Management
Company
Limited
(Joint
venture)
Votes controlled by
the Company
50%
Carrying amount 31
December 2019
€3,473
This joint venture is accounted for using the equity method in these Consolidated financial statements as set out in
the Group’s accounting policies in note 1.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
16. Interest in joint venture (Group) (continued)
116
The Group acquired its interest in the joint venture in the prior when it acquired the entire class B ordinary share
capital of the Yew Tree Investment Fund (in Members Voluntary Liquidation) on 8 June 2018. The share of profits
attributable to the Group for the year ended 31 December 2019 and the period from 8 June 2018 to 31 December
2018 are as follows;
Distribution in specie on 8 June 2018
Share of joint venture profits for the period
Period ended 31 December 2019
31 December 2019
€
-
-
-
31 December 2018
€
-
3,473
3,473
The joint venture broke-even for the year ended 2019 (2018: €6,946). Summarised financial information in respect
to the results of the joint venture to 31 December 2019 is as follows:
Revenue
Profit post tax from continuing operations
Profit for the period
Total comprehensive income
31 December 2019
€
306,908
5 April 2018 to
31 December 2018
€
178,198
-
-
-
6,946
6,946
6,946
The balance sheet value of the Company’s interest in a joint venture as at 31 December 2019 is as follows:
Cash and cash equivalents
Trade and other payables
As at 31 December 2019
31 December 2019
€
61,126
(54,180)
6,946
31 December 2018
€
122,349
(115,403)
6,946
Yew Grove reit plcreport and consolidated Financial statements 2019 17. Trade and other receivables
(a) Group
Trade receivables and prepayments
Taxation debtors – VAT recoverable
Deposit paid
Other receivables
Total
117
31 December 2019
€
634,879
231,311
2,530,000
131,564
3,527,754
31 December 2018
€
201,214
160,081
-
203,805
565,100
Trade receivables include amounts due from tenants for rental and service charges. The balance of trade and other
receivables has no concentration of credit risk as it covers mainly prepayments. The directors therefore consider
the carrying value of trade and other receivables approximates to their fair value.
A deposit of €2,530,000 was paid following an exchange of contracts to purchase a portfolio of six office buildings
at Millennium Park, Naas, County Kildare on 19 December 2019 (Note 30).
(b) Company
Trade receivables and prepayments
Taxation debtors – VAT recoverable
Deposit paid
Other receivables
Total
31 December 2019
€
214,390
231,311
2,530,000
256,418
3,232,119
31 December 2018
€
199,090
160,081
-
203,805
562,976
Trade receivables include amounts due from tenants. Other receivables are inclusive of €124,854 (2018: €159,354)
due from the liquidator of the Yew Tree Investment Fund (in Members Voluntary Liquidation).
On 27 July 2018, the Yew Tree Investment Fund was placed into Members’ Voluntary Liquidation (“MVL”) with the
expectation that the Fund’s properties and cash be distributed in specie to the Company as the 100% owner of the
B ordinary shares. In the financial period to 31 December 2018 €31,234,552 (€25,910,000 in investment properties
and €5,324,552 in cash) of the Fund’s assets were distributed in specie to the Company. There was distribution of
€34,500 made in 2019. The directors expect to receive a distribution of the remaining assets of the Fund in 2020.
Other than the amounts due from the liquidator of Yew Tree Investment Fund (in Members Voluntary Liquidation)
the balance of trade and other receivables has no concentration of credit risk as it covers mainly prepayments
and amounts due from tenants. The directors therefore consider the carrying value of trade and other receivables
approximates to their fair value.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
18. Cash and cash equivalents
118
(a) Group
Cash and cash equivalents
(b) Company
Cash and cash equivalents
31 December 2019
€
14,577,461
31 December 2018
€
4,823,734
31 December 2019
€
14,086,632
31 December 2018
€
4,364,045
As part of the company’s facility agreement rent paid in advance on the facilities secured is collected into a rent
account controlled by the bank. The amount of this cash as at 31 December 2019 was €778,352. Rent in excess of
accrued facility interest is released at the end of each quarter to an account controlled by the Group.
The management of cash and cash equivalents is discussed in detail in note 28.
19. Trade and other payables
(a) Group
Trade payables and accruals
Taxation creditors – PAYE/PRSI
Borrowings
Other payables
Total
19. Trade and other payables (Continued)
31 December 2019
€
3,061,571
22,698
16,053
477,336
3,577,657
31 December 2018
€
2,302,163
19,729
11,837
-
2,333,729
Trade payables include amounts due to third party suppliers and prepaid rent amounts received from tenants in
advance. Accrued expenses include operational expenses incurred but not yet invoiced to the Group as at 31 December
2019. 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.
Yew Grove reit plcreport and consolidated Financial statements 2019 19. Trade and other payables (continued)
(b) Company
Trade payables and accruals
Taxation creditors – PAYE/PRSI
Borrowings
Other payables
Total
119
31 December 2019
€
2,528,783
22,698
16,053
477,336
3,044,870
31 December 2018
€
2,068,385
19,729
11,837
-
2,099,951
Trade payables includes amounts due to third party suppliers and prepaid rent amounts received from tenants
in advance. Accrued expenses include operational expenses incurred but not yet invoiced to the Company as at 31
December 2019. 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.
20. Borrowings
The Company has a revolving credit facility with Allied Irish Bank plc (“AIB”), secured by fixed and floating charges
over certain property assets, the existing facility of €19,954,000 (December 2018) was extended with a second
tranche in July 2019, increasing available funds by €9,120,000, for a total facility of €29,074,000. The facility can
be repaid and re-drawn without penalty throughout its 3 years expected life. This facility was measured initially at
fair value, after transaction costs, and carried at amortised cost, with all attributable costs charged to Consolidated
Statement of Comprehensive Income over the life of the facility.
(a) Group and Company
Balance at the beginning of the financial period
Bank finance drawn during the financial period
Interest during the financial period
Borrowing costs
Effective interest expense
Balance at end of the financial period
Maturity of borrowings is as follows
Less than one year
Between two and five years
Total
31 December 2019
€
5,852,235
14,591,200
(523,219)
(185,976)
685,020
20,419,260
5 April 2018 to
31 December 2018
€
-
6,199,540
-
(362,717)
15,412
5,852,235
16,053
20,403,207
20,419,260
11,837
5,840,398
5,852,235
Undrawn at end of the financial period
8,283,260
13,754,460
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
20. Borrowings (continued)
120
The first loan facility was drawn down in December 2018 and there were no loan repayments during the period to
31 December 2018. The second facility was arranged and partial drawn in July 2019. The facility was partially repaid
later in the year. The total interest paid was €523,219. As at 31 December 2019 €8,283,260 (2018: €13,754,460) available
within the facility, €20,790,740 (2018: €6,199,540) was drawn.
The Company stated in its Admission document its intention to target borrowings, following full investment of
the net proceeds raised at Admission, of 25% loan-to-value (“LTV”). LTV is the ratio of drawn debt to the value of
property investments, which at 31 December 2019 was 17.96% (2018: 7.96%). Under the Irish REIT rules the REIT’s
borrowings must not exceed 50% of the value of its assets.
Where debt is drawn to finance material refurbishments and developments on qualifying assets, the borrowing cost
associated with this debt is capitalised. No amounts were capitalised during the financial period for this purpose.
All costs related to finance arrangements are amortised using the effective interest rate.
All borrowings are denominated in Euro. All borrowings are subject to six months or less interest rate changes
and contractual re-pricing rates. Post year end the company extended its facility please refer to note 30 for details
21. Share Capital
Shares in issue
Issue for cash 2018
Issue for cash 2019
In issue 31 December 2019
31 December 2019
31 December 2018
111,572,210
75,000,000
€
750,000
365,722
1,115,722
€
750,000
-
750,000
The Group has a single class of ordinary shares of one cent each. 75 million authorised and issued shares were
outstanding on 31 December 2018, following the additional issue of 36.5 million shares in the period there were 111.6
million authorised and issued shares at 31 December 2019. All issued shares are fully paid.
On 7 June 2018, the day before Admission, the Company had 2,500,000 shares in issue, all of which had been issued
to Jonathan Laredo. On 8 June 2018 an additional 72,500,000 shares were issued at a price of €1.00 each, of which
29,596 were issued to Jonathan Laredo. On 8 June 2018 Jonathan Laredo subscribed €1.00 for each of the 2,500,000
shares he already held, and an additional €29,596 for the shares issued to him on that date, such that all the Company’s
shares were subscribed for at a price of €1.00 and the proceeds of share issuance were €75,000,000.
Yew Grove reit plcreport and consolidated Financial statements 2019 21. Share Capital (continued)
On 13 June 2019 the Company announced details of an issuance program of up to 100 million new shares in a number
of tranches through a 12-month Share Issuance Programme. This issuance program was approved at an EGM of the
Company on 11 July 2019. A Launch Announcement of 11 July 2019 included details of an initial placing, the result
of which was subscription for 10.0 million shares at a price of €1.00 per share, raising gross proceeds of €10 million
for the Company.
121
On 22 November 2019 the company announced a further Placing which was conducted by way of a bookbuild. The
result of this placing was subscription for 26.6 million shares on 4 December 2019 at a price of €0.97 per share, raising
gross proceeds of approximately €25.8 million for the Company.
The Company had 63,427,790 unissued shares remaining under its share issuance program at 31 December 2019. All
authorised shares are issues at year end.
The Company’s entire authorised share capital is €10,000,000 comprising 1,000,000,000 ordinary shares.
22. Reserves
(a) Group
At 1 January 2019
Shares issued in the period
Issue costs
Share based payment (Note 25)
Profit for the financial period
Dividend paid (Note 23)
As at 31 December 2019
Shares issued in the period
Issue costs
Transfer to retained earnings
Profit for the financial period
As at 31 December 2018
Share premium
€
4,000,000
35,409,322
-
-
-
-
39,409,322
Share premium
€
74,250,000
-
(70,250,000)
-
4,000,000
Retained
earnings
€
70,383,180
-
(1,026,614)
-
5,059,209
(5,143,500)
69,272,275
Retained
earnings
€
-
(2,200,699)
70,250,000
2,333,879
70,383,180
Share based
payments
€
-
-
-
125,222
-
-
125,222
Share based
payments
€
-
-
-
-
-
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
22. Reserves (continued)
122
(b) Company
At 1 January 2019
Shares issued in the period
Issue costs
Share based payments (Note 25)
Profit for the financial period
Dividend paid (Note 23)
As at 31 December 2019
Shares issued in the period
Issue costs
Transfer to retained earnings
Profit for the financial period
As at 31 December 2018
Share premium
€
4,000,000
35,409,322
-
-
-
-
39,409,322
Share premium
€
74,250,000
-
(70,250,000)
-
4,000,000
Retained
earnings
€
70,151,672
-
(1,026,614)
-
5,033,567
(5,143,500)
69,015,125
Retained
earnings
€
-
(2,200,699)
70,250,000
2,102,371
70,151,672
Share based
payments
€
-
-
-
125,222
-
-
125,222
Share based
payments
€
-
-
-
-
-
The equity of the Company consists of Ordinary Shares issued. The par value of each share 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.
On 1 November 2018 the High Court of Ireland made an Order confirming the Company’s capital reduction resolution
for the reduction of the Company’s Share Premium Account in the sum of €70,250,000 such that the balance
remaining credited to that account will be €4,000,000 such that the reserve resulting from such cancellation be
treated as realised profits as defined by Section 117 of the Companies Act 2014. The Order of Court and Minute on
reduction of share premium account was registered with the Companies Registration Office on the 2 November 2018.
Yew Grove reit plcreport and consolidated Financial statements 2019 23. Distributions made and declared
Cash dividends to the equity holders of the Company:
123
Dividends on ordinary shares declared and paid
Final dividend for 2018: 0.96 cent per share
Interim dividend for Q1 2019: 1.10 cent per share
Interim dividend for Q2 2019: 1.37 cent per share
Special dividend* Q2 2019: 1.86 cent per share
Interim dividend for Q3 2019: 1.38 cent per share
Total
Declared dividend on ordinary shares
Proposed Interim dividend for Q4 2019: 1.04 cent per share
31 December 2019
€
5 April 2018 to
31 December 2018
€
723,000
825,000
1,027,500
1,395,000
1,173,000
5,143,500
1,160,350
-
-
-
-
-
-
-
* The declared Q2 interim dividend on ordinary shares was declared on 26 June 2019 and paid to equity holders on 24 July 2019. This dividend
was inclusive of a special dividend of 1.86 cent per share following the receipt of a lease surrender during the period.
The Dividend for the year resulted in a full year dividend amount of 6.75 cent per share (7.08 cent per share undiluted)
Proposed dividend had not been accounted for as a liability at year end. The board approved the dividend on 13
February 2020 and it was paid on 19 March 2020.
24. Related party transactions
The Directors are considered to be related parties.
On Admission to the AIM and the Euronext Growth market the Executive Directors subscribed for shares in the
Company at the issued price. They subscribed their post-tax proceeds from redemption of shares in the Yew Tree
Investment Fund (in Members Voluntary Liquidation) and their shares of all incentive fees due from Parapet
Capital Advisors’ role as Investment Adviser to the AIFM of the Yew Tree Investment Fund (in Members Voluntary
Liquidation). Concurrently the Non-executive Directors subscribed for shares in the Company at the issued price.
The Directors made further subscriptions for shares at the issued price in the July and December share placings. The
interest of the Directors in the share capital of the Group as at 31 December 2019 is as follows in 2019:
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
24. Related party transactions (continued)
124
Director
Michael Gibbons
Charles Peach
Jonathan Laredo
Barry O’Dowd
Garry O’Dea
Eimear Moloney
Brian Owens
No. of Ordinary Shares
2,052,544
277,213
2,575,369
50,309
75,773
70,773
70,773
% of issued share capital
1.84%
0.25%
2.31%
0.05%
0.07%
0.06%
0.06%
The Directors of the Group received remuneration, fees and other benefits from the Group for their services. Total
amounts for the financial period were €1,358,154. No remuneration, fees or other benefits were paid to the Directors
by any subsidiary or joint venture.
All transactions between the Company and its subsidiaries are eliminated on consolidation.
Key management personnel
The remuneration of the key management personnel during the financial period is disclosed in note 25 below.
Subsidiaries, Associates and joint ventures
All transactions between the Company and its subsidiaries are eliminated on consolidation.
The following lists the subsidiaries of the Group:
Name of subsidiary
Gateway Estate
Management
Company Limited by
Guarantee
Mallow Business
Park Management
Company Limited by
Guarantee
Registered Address/Country
of Incorporation
2nd Floor, River
House, East Wall
Road, Dublin 3,
Ireland
Mallow Business
Park, Gooldhill,
Mallow, Co. Cork
Nature of the business
Management of
common areas
Management of
common areas
Membership
2/3
Votes controlled by the
Company
99% of voting rights
1/2
50% of voting rights
The following lists the joint ventures of the Group:
Name of joint venture
Ashtown Management
Company Limited by
Guarantee
Registered Address/Country of
Incorporation
Friends First House,
Cherrywood,
Loughlinstown, Co.
Dublin, Ireland
Nature of the business
Management of common
areas
Votes controlled by the
Company
50%
The joint venture had a break even result for the period to 31 December 2019.
Other related parties
No other related party transactions have been identified.
Yew Grove reit plcreport and consolidated Financial statements 2019 25. Directors’ remuneration
Remuneration – Independent Non-executive Directors
Remuneration – Executive Directors
Total Directors and Non-executive Directors remuneration
Bonus accrual
Pension defined contribution plan – Executive Directors
Other benefits Health insurance – Executive Directors
Total
125
31 December 2019
€
230,000
375,012
605,012
615,000
113,242
24,900
1,358,154
5 April 2018 to
31 December 2018
€
129,169
210,426
339,595
-
63,126
12,086
414,807
The remuneration of Directors and key management is determined by the Remuneration Committee to reflect the
performance of individuals and market trends. Other benefits paid to the three Executive Directors during the period
includes health insurance, death in service and illness combined insurance. Defined contribution pension payments
represent contributions on behalf of the three Executive Directors. All fees paid to Non-Executive Directors are for
services as Directors to the Group, they receive no other benefits. There were no payments of compensation made
to Directors for termination or loss of office.
Share based payments
In February 2019, the Remuneration Committee granted 1,125,000 share options to senior executives under the
Long-Term Incentive Plan (“LTIP”). The exercise price of the options of €0.01 is equal to the nominal price of the
shares on the date of grant. The options vest (30% if at lowest hurdle, 100% if at or above highest hurdle) if the
Company’s Net Asset Value (“NAV”) growth is 10% - 20%, Dividend per Share is €0.06 - €0.075 per share and Total
Shareholder Return (“TSR”) is 10% - 15%.
Vesting is three years from the date of grant and requires the senior executive to still be employed by the Company on
such date. If the lower hurdles are not met, the options lapse. The vested options must be exercised within 2 years
of vesting. The fair value at grant date is estimated using a Monte Carlo simulation pricing model, taking into
account the terms and conditions upon which the options were granted. There is no cash settlement of the options.
The fair value of options granted during the period to 31 December 2019 was estimated on the date of grant using
the following assumptions:
• Dividend yield (%) 6.14
• Expected volatility (%) 17.94
• Risk-free interest rate (%) 1
• Vesting period of share options (years) 2.87
• Grant date share price (€) 0.98
While the TSR linked option values calculated are based on market based assumptions, the NAV and dividend per
share linked options, being non-market based, required management assumptions as to the probability of their
respective hurdles being achieved.
For the year ended 31 December 2019, the Group has recognised €125,222 of share-based payment expense in the
Consolidated Statement of Comprehensive Income.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
26. Acquisition of subsidiaries
126
Yew Tree Investment Fund plc (in Member’s Voluntary Liquidation)
On 8 June 2018 the Company acquired 100% of the class B ordinary share capital of the Yew Tree Investment Fund
(in Members Voluntary Liquidation) for cash consideration of €23,064,484. The AIFM of the Yew Tree Investment
Fund (in Members Voluntary Liquidation) had previously been advised by the Executive Directors, and details of the
Fund and its assets were included in the Company’s Admission document. Goodwill arising on the acquisition of the
Yew Tree Investment Fund (in Members Voluntary Liquidation) was been capitalised and assessed for impairment
at the prior period end date.
Analysis of acquisition of the Yew Tree Investment Fund (In Member’s Voluntary Liquidation)
Upon acquisition of a subsidiary, fair values are attributed to the identifiable net assets acquired. The amounts
recognised in respect of the identifiable assets acquired and liabilities assumed in the prior period are set out in
the table below.
Net assets at the date of acquisition
Investment properties
Trade receivables and prepayments
Cash and cash equivalents
Trade payables and accruals
Loan
Share of net asset acquired (100%)
Cash consideration
Goodwill arising on acquisition
Book value at the date
of acquisition
€
25,910,000
513,727
5,781,977
32,205,704
(811,798)
(8,329,422)
23,064,484
Fair value adjustment
€
-
(238,750)
-
(238,750)
-
-
(238,750)
Fair value at the date
of acquisition
€
25,910,000
274,977
5,781,977
31,966,954
(811,798)
(8,329,422)
22,825,734
22,825,734
23,064,484
238,750
On 8 June 2018 the Company subscribed for 23,064,484 of the €1 B ordinary share capital in Yew Tree Investment
Fund (in Members Voluntary Liquidation) for €23,064,484 as consideration for the Fund’s net assets.
The fair value of unamortised loan facility costs with a book value of €238,750 included trade receivables was estimated
to have a fair value of €nil at the acquisition date.
No deferred tax arose from this acquisition.
On 27 July 2018, the Yew Tree Investment Fund was placed into Members Voluntary Liquidation, from which date
the Yew Tree Investment Fund is no longer consolidated in the Group’s financial statements.
Subsequent to the appointment of the liquidator on 27 July 2018 and prior to 31 December 2018, Yew Tree Investment
Fund’s properties of €25.9m and cash of €5.3m had been distributed in specie to Yew Grove REIT plc as the 100%
owner of the B ordinary shares. A distribution of €34,500 was made during the year. A further distribution is expected
to be made on finalisation of the liquidation in 2020.
At the Statement of Financial Position date the Yew Tree Investment Fund (in Members Voluntary Liquidation) was
still under the Member’s Voluntary Liquidation process.
Yew Grove reit plcreport and consolidated Financial statements 2019 26. Acquisition of subsidiaries (continued)
Gateway Estate Management Company Limited by Guarantee
127
On 2 July 2018 the Group acquired 99% of the voting rights of Gateway Estate Management Company Limited by
Guarantee for nil consideration following the acquisition of One and Three Gateway, East Wall Road, Dublin 3.
Negative goodwill arising on the acquisition of Gateway Estate Management Company Limited by Guarantee has
been taken directly to the Statement of Comprehensive Income during the period. The investment in Gateway
Estate Management Company Limited by Guarantee has been included in the Group’s balance sheet at its fair value.
Analysis of acquisition of Gateway Estate Management Company Limited by Guarantee
Upon acquisition of a subsidiary, fair values are attributed to the identifiable net assets acquired. The amounts
recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below.
Net assets at the date of acquisition
Trade receivables and prepayments
Cash and cash equivalents
Trade payables and accruals
Share of net asset acquired (100%)
Consideration
Negative goodwill arising on acquisition
Book value at the date
of acquisition
€
142,621
91,161
233,782
(175,043)
58,739
Fair value at the date
of acquisition
€
142,621
91,161
233,782
(175,043)
58,739
58,739
-
(58,739)
Negative goodwill arising on the acquisition of Gateway Estate Management Company Limited by Guarantee has
been taken directly to the Statement of Comprehensive Income during the prior period.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
27. Operating lease receivables
128
Future aggregate minimum rental receivables (to the next break date) under non-cancellable operating leases and
licences are:
Operating lease rentals and licence income receivables due in:
Less than one year
Between two and five years
Greater that five years
Total
31 December 2019
€
5 April 2018 to
31 December 2018
€
8,778,209
20,983,091
9,943,038
39,704,338
6,283,984
16,679,791
7,918,572
30,882,347
The Group has both operating leases and operating licences. The operating licences are predominantly for car parking
spaces and are less than one year in duration.
The Group leases its investment properties under operating leases. The weighted average unexpired lease term of
these leases (“WAULT”) at 31 December 2019 is 7.85 years to expiry (2018: 7.4 years).
These calculations are based on all lease and licences outstanding at 31 December 2019.
The Company shares weekly reports which includes details of the next lease events for all its leases . Following
distribution of this report the company holds a weekly meeting at which each property, and the strategy for impending
or future lease amendments is discussed. The principal strategies for managing risk of its leases are: monitoring the
creditworthiness and business models of existing tenants and their guarantors, arranging new leases with existing
or new tenants, effecting rent reviews and lease amendments with existing tenants.
Yew Grove reit plcreport and consolidated Financial statements 2019 28. Financial instruments – risk management and fair value
Financial assets and financial liabilities
129
The following table shows the Group’s financial assets and liabilities and the methods used to calculate fair value.
Asset/ liability
Trade
and other
receivables
Carrying value
Amortised
cost
Carrying value
960,819
Level
3
Loans and
borrowings
Amortised
cost
20,419,260
3
Trade
and other
payables
Amortised
cost
3,061,571
3
Valuation technique
All trade and other receivables that could be
classified as financial instruments are short-term,
the majority being less than three months in
duration, and therefore face value approximates
fair value on an amortised costs basis using the
effective interest rate method.
The carrying amount of loans and borrowings
held at amortised cost have been calculated by
discounting the expected cashflows at prevailing
interest rates.
All trade and other payables that could be classified
as financial instruments are short-term, the
majority being less than one month in duration,
and therefore face value approximates fair value on
an amortised cost basis using the effective interest
rate method.
The 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 main risks arising from the Group’s financial instruments are market risk, credit risk and liquidity risk. The
policies for managing each of these and the principal effects of these policies on the results for the financial period
are summarised below:
(i) Market risk
Market risk is the risk that the fair value or cashflows of a financial instrument will fluctuate due to changes in market
prices. Market risk reflects interest rate risk, currency risk and other price risks. The Group’s financial assets mainly
comprise of investment properties, and trade and other receivables and cash which are classified as financial assets.
The Group has no financial assets or liabilities denominated in foreign currencies. Financial liabilities comprise
short-term payables and bank borrowings. All of these items are denominated in Euro. The Group’s primary market
risk for financial instruments is interest rate risk.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
28. Financial instruments – risk management and fair value (continued)
130
(a) Interest rate risk
Bank borrowing interest rates are based on short-term variable interest rates which the Group has chosen not to
hedge. Exposure to interest rates is limited to the exposure of its earnings from uninvested funds and borrowings.
The Group has a revolving credit facility with AIB of €29.1m (2018: €19.9m), of which €8.3m was undrawn as at 31
December 2019 (2018: €13.7) Interest due on the drawn amount of the facility will vary with changes in the underlying
interest rate which may result in an increase in financing costs. The Group’s drawings under its bank facility float at
a margin over the higher of 3 months Euribor or 0% at drawing and quarterly reset dates and therefore the impact of
a rise in 3 months Euribor to 1% for a full year on drawings as at 31 December 2019 would be approximately €0.21m
(2018:€0.06m), and if the facility were fully drawn would be €0.30m (2018: €0.20m).
The Group is also exposed to interest rate risk on its cash and cash equivalents. There were €14.38m uninvested
Group funds held within Bank of Ireland, Allied Irish Bank and Societe Generale accounts at 31 December 2019 (2018:
€4.36). These balances attract low interest rates and therefore a relative increase or decrease in their interest rates
would not have a material effect on the Consolidated Statement of Comprehensive Income.
(b) Currency risk
The Company has a sterling bank account with Societe Generale. As at 31 December 2018 the amount outstanding
was £6,202 (2018:£18,168). This amount is judged sufficient to settle expected sterling payments due to service
providers. As such, the Company had minimal foreign exchange exposure.
(ii) Liquidity risk
Liquidity risk is the risk the Group may encounter difficulties in meeting the obligations associated with its financial
liabilities settled by cash or other financial assets. The Group’s approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group monitors
the level of expected cash inflows on trade and other receivables, together with expected cash outflows on trade and
other payables and capital commitments.
Detailed below are the contractual maturities of the Group’s financial liabilities;
2019:
Borrowings
Trade and other payables
Total carrying amount
6 months
Carrying
or less
Value
20,419,260
297,440
3,561,604 3,344,401
23,980,864 3,641,841
6 to 12
months
297,440
201,150
498,590
2018:
Borrowings
Trade and other payables
Total carrying amount
Carrying
6 months
Value
or less
5,840,398
159,101
1,930,902 1,930,902
7,771,300 2,090,003
6 to 12
months
159,1
-
159,100
1 to 2
years
2 to 5
years
594,879 20,419,260
-
594,879 20,419,260
-
1 to 2
years
2 to 5
years
319,703 6,508,152
-
319,703 6,508,152
-
More than
5 years
Total
contractual
amount
- 21,609,018
- 3,545,551
- 25,154,569
More than
5 years
Total
contractual
amount
- 7,146,056
- 1,930,902
- 9,076,958
Yew Grove reit plcreport and consolidated Financial statements 2019 28. Financial instruments – risk management and fair value (continued)
(iii) Credit risk
131
Cash and cash equivalents: cash and cash equivalents are held with major Irish and European banking institutions.
These banking institutions and their short term ratings are listed below (ratings for each are from Standard and
Poors/Moody’s/Fitch):
• Societe Generale S.A. has short term unsecured debt ratings of A-1/P-1/F1
• Allied Irish Bank plc has short term unsecured debt ratings of A-2/P-2/F3
• The Governor and Company of the Bank of Ireland has short term ratings of A-2/P-1/F2
Trade and other receivables: rents and licences are generally received monthly in advance or quarterly in advance
from tenants. The balance of trade and other receivables has no concentration of credit risk as it comprises mainly
prepayments.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of its customers. Trade and
other receivables relate mainly to the Group’s property tenants. The day-to-day management of the Group’s customers
is managed by appointed property agents under the oversight of the Group’s internal property management group.
The Group applies the simplified approach to trade receivables for which expected credit losses uses the lifetime
expected credit allowance. The Group has no exposure to bad debts as the majority of the Group’s rental income is
from State bodies or FDI entities as they have good credit standing. The payment and credit performance of these
tenants is closely monitored; therefore, the expected credit loss is not material and has not been presented.
There was no credit loss in the year as a result of the Directors’ assessment.
Detailed below are the carrying amount of the Group’s financial assets as the maximum amount of exposure to
credit risk;
Trade and other receivables
Cash and cash equivalents
Balance at end of period
Capital management
31 December 2019
€
3,477,065
14,577,461
18,054,526
5 April 2018 to
31 December 2018
€
565,100
4,823,734
5,388,834
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain the future development of the business. The key performance indicators used in evaluating the
achievement of strategic objectives are return on capital, growth in NAV and dividends to ordinary shareholders
(dividend per share) as well as the total return of the Group’s property portfolio.
Capital consists of share capital, reserves and retained earnings. At 31 December 2019 the equity of the Group was
€109.92m (2018: €75.13m).
The Group seeks to leverage capital in order to enhance returns. Refer to note 20 for more details.
The Group’s share capital is publicly traded on the Euronext Growth market of Euronext Dublin and the Alternative
Investment Market of the London Stock Exchange.
Strategic reportgovernanceFinancial StatementS Notes to the Consolidated Financial Statements (continued)
29. Contingent Liabilities
132
The Group has not identified any contingent liabilities which are required to be disclosed in the Consolidated
financial statements.
30. Events after the reporting period
On 23 January 2020 the Company appointed Liberum Capital Limited as joint corporate broker and Nominated Adviser.
Goodbody Stockbrokers UC continues as joint corporate broker and has been appointed as Euronext Growth Adviser.
On 31 January 2020 the Company agreed a €9.9 million increase to its three year floating rate loan facility with
Allied Irish Banks, p.l.c. (“AIB”) bringing the total Facility to €39.0 million. The Facility is in place until December
2021, secured on certain of Yew Grove’s properties, and interest is charged on a margin over three month Euribor.
On 06 February 2020 the Company completed the acquisition of a portfolio of six office buildings at Millennium Park,
Naas, County Kildare (the “Portfolio”). The purchase price for the Portfolio is €25.3 million which represents a net
initial yield of 5.8 per cent. after accounting for purchase costs. The Portfolio has reversionary potential expected
to yield in excess of 9 per cent. The Portfolio has 141,000 sq. ft. of modern offices over six buildings, as well as 773
carparking spaces and a six-acre greenfield site. Five of the office buildings are tenanted by foreign direct investment
(“FDI”) and large Irish enterprises, with one of the buildings being vacant. The combined leases have a weighted
average unexpired lease term (WAULT) to break of approximately 2.5 years and to lease expiry of approximately 5
years. The current annual rent roll for the Portfolio is approximately €1.6 million.
On 13 February 2020 the Company declared the payment of an interim dividend for the fourth quarter in respect
of the period ended 31 December 2019 of €1,160,350 for 1.04 cents per ordinary share. This was paid to shareholders
on 19 March 2020.
On 3 March 2020 the Company agreed a €10.1 million increase to its three year floating rate loan facility with Allied
Irish Banks, p.l.c. (“AIB”) bringing the total Facility to €49.1 million. The Facility is in place until December 2021,
secured on certain of Yew Grove’s properties, and interest is charged on a margin over three month Euribor.
The long-term impact of Covid-19 is unclear at the date of this report and may have a significant impact on economic
forecasts for Irish and Global economic performance over the remainder of 2020 and beyond. Due to the uncertainty
of the effect of the Covid-19 pandemic its financial impact on the Company cannot be accurately estimated. The
Company will continue to work increasingly closely with tenants and occupiers to monitor the development of
the pandemic and assess how the Company will respond to the changing economic environment. The directors
believe that the Company has a strong balance sheet, no near term debt maturities and sufficient headroom on its
debt facility, and that the Company’s well tenanted portfolio is defensive and resilient, even in comparison to other
property sectors.
Yew Grove reit plcreport and consolidated Financial statements 2019 31. Capital commitments
133
At the Statement of Financial Position, the Group has entered contracts for future capital expenditure of amounting to
€268,163. There is a commitment of €120,000 for works at Ashtown Gate for improvements to the estate, the amount
is half the full capital expenditure required as this relates to the joint venture, the full amount is recoverable from
tenants under the lease agreements over the next three years. Works at Letterkenny have also been committed to with
an expected cost of €48,163. It is also expected that a car park is built at the Waterford property with an estimated
cost of €100,000, this commitment was taken on as part of the purchase of the property in 2019 and was due to be
completed by December 2019, an extension was requested in respect of the development of the car park to 2020.
There are no other capital commitments at the Statement of Financial Position date.
Strategic reportgovernanceFinancial StatementS Disclosures under AIFMD (unaudited)
Disclosure required under the Alternative Investment Fund Managers Directive
(“AIFMD”) for Reports of alternative investment funds (“AIFs”) (unaudited)
134
Financial information disclosures
The Company realised a gain of €0.1 million on sale of one of its investment properties in the financial period from
1 January 2019 to 31 December 2019. Within the total unrealised losses for the same period of €0.8 million disclosed
under IFRSs, there is a total of €5.2 million in unrealised losses and €4.4 million in unrealised gains.
Material changes and periodic risk management disclosures
All disclosure requirements to be made to investors prior to investing in the Company are set out on the Company’s
website, www.ygreit.com.
Remuneration disclosures
The information provided below relates to Ballybunion Capital Limited, the alternative investment fund manager
(“AIFM”), and not to Yew Grove REIT plc. The disclosure is required under AIFMD for reports of alternative
investment funds (“AIFs”).
The AIFM operates under the terms of its remuneration policy which has been developed with due regard to all
relevant legislation and regulatory guidance. This remuneration policy is designed to:
• Promote sound and effective risk management
• Not encourage risk taking that is inconsistent with the risk profile, rules or investment policies of the REIT and
• Prevent conflicts of interest.
The AIFM charged a fixed annual fee of €95,883 for its services to the REIT for 2019. There is no variable element
to this fee. Total remuneration paid by the AIFM to its staff for the year ended 30 June 2019 (most recent audited
figures) was €751,109 which related to an average staff number of 9 during that period. All AIFM staff receive only
contracted fixed remuneration where the payment and benefits thereof are not subject to the performance of the
REIT. The average number of AIFM staff engaged in providing part-time services to the REIT during the reporting
period was 5.
Yew Grove reit plcreport and consolidated Financial statements 2019 Alternative performance measures
The Group has applied the European Securities and Markets Authority (ESMA) ‘Guidelines on Alternative Performance
Measures’ in this Annual Report and Consolidated financial statements. An alternative performance measure (“APM”)
is a measure of financial or future performance, position or cashflows of the Group which is not a measure defined
by International Financial Reporting Standards (“IFRS”).
135
The following are the APMs used in this report together with information on their calculation and relevance.
IFRS measure for
reconciliation
NA
Note
APM
Contracted rent
roll
EPRA Earnings
per share
EPRA NAV
IFRS NAV
Note 13
EPRA NAV per
share
IFRS NAV per
share
Note 13
EPRA Net
Initial Yield
(“EPRA NIY”)
NA
Loan to Value
NA
Total Debt to
Equity Gearing
Total
Shareholder
Return
NA
NA
Description
Annualised cash rental income (net of car park
licence income) being received as at the stated date
Earnings from core operational activities. A key
measure of a company’s underlying operating
results from its property rental business and an
indication of the extent to which current dividend
payments are supported by earnings
The objective of the EPRA NAV measure is to
illustrate the fair value of net assets on an ongoing,
long-term basis. Assets and liabilities that are not
expected to crystallise in normal circumstances
(e.g. the fair value of financial derivatives, deferred
taxes on property valuation surpluses) are
excluded
EPRA NAV calculated on a diluted basis taking into
account the impact of any options, convertibles,
etc. that are dilutive.
Inherent yield of the portfolio using cash passing
rent at the reporting date.
Outstanding drawings under loan facilities as
a percentage of the fair value of the investment
properties
Outstanding drawings under loan facilities as
a percentage of the IFRS nett asset value of the
Group
A measurement of the growth in share value for
shareholders (assuming gross dividends are
reinvested and share appreciation) over a defined
period.
Strategic reportgovernanceFinancial StatementS Glossary
136
CBD: The central business district of a city.
Contracted rent roll: The annualised cash rental income
(including car park licence income) being received as at
the stated date.
ERV/Estimated Rental Value: A valuer’s opinion as to
the open market rental value of a property on a valuation
date which could reasonably be expected to be the
achievable rent for a new letting of that property on the
valuation date. Colloquially referred to as market rent.
Debt to Equity gearing: The ratio calculated by dividing
the amount of drawn loans by the Net Asset Value of
the Group.
Foreign Direct Investment companies (“FDI”):
Overseas companies that have established operations
in Ireland, often with the assistance of IDA Ireland.
Dublin Catchment Area: The geographic area within
an approximately thirty-minute commute of the M50
motorway.
Gross reversionary yield: The reversionary rent roll
of a property or group of properties as a percentage of
their fair value.
EPRA: The European Public Real Estate Association.
EPRA EPS: is calculated by dividing EPRA Earnings
for the reporting period attributable to shareholders
of the Company by the weighted average number of
ordinary shares outstanding during the reporting period.
EPRA Earnings measures the level of income arising
from operational activities. It is intended to provide
an indicator of the underlying income generated from
leasing and management of the property portfolio and so
excludes components not relevant to the underlying net
income performance of the portfolio such as unrealised
changes in valuation and any gains or losses on disposals
of properties.
EPRA NAV: A measures of the fair value of net assets on
an ongoing, long-term basis in accordance with guidelines
issued by the EPRA while taking into account the dilutive
effects of any outstanding options, convertibles, or
other financial instruments. The EPRA NAV excludes
the net mark-to market value of financial instruments
used for hedging purposes where a company has the
intention to keep the hedge position until the end of the
contractual duration, and deferred tax in respect of any
difference between the fair value and the book value of
the investment properties.
Gross yield at fair value: A calculation of the current
expected cash rental return, being the contracted rent
roll divided by the fair value of the investment property
or properties.
Loan to Value/LTV: The LTV is calculated by dividing
the amount of drawn loans by the fair value of the
Company’s investment properties.
Net Initial Yield (“NIY”): Annualised rental income
based on the cash rents passing at the balance sheet
date, less non-recoverable property operating expenses,
divided by the market value of the property, increased
with (estimated) purchasers’ costs.
Net valuation gain: The fair value gain over the period
(from the shorter of the time to the last valuation or
purchase). Purchases made since the last valuation are
initially recognised at price including transaction costs.
Next rent reversion date: The earliest following date
at which the Company could be expected to choose to
re-let a property at the property’s ERV.
Yew Grove reit plcreport and consolidated Financial statements 2019 Property income: As defined in section 705A of the
Taxes Consolidation Act, 1997. It means, in relation to a
company or group, the Property Profits of the company
or group, as the case may be, calculated using accounting
principles, as: (a) reduced by the Property Net Gains of
the company or group, as the case may be, where Property
Net Gains arise, or (b) increased by the Property Net
Losses of the company or group, as the case may be,
where Property Net Losses arise.
Property Net Losses: As defined in section 705A of the
Taxes Consolidation Act, 1997.
Property Net Gains: As defined in section 705A of the
Taxes Consolidation Act, 1997.
Property Profits: As defined in section 705A of the
Taxes Consolidation Act, 1997.
Property Rental Business: As defined in section 705A
of the Taxes Consolidation Act, 1997.
QIAIF: A Qualifying Investor Alternative Investment
Fund.
Rent review: A clause often included in property leases
that provides for a periodic adjustment of the rent of a
property to the market level of rent.
Reversion: A term used to describe the difference in rent
from that which is currently due on outstanding leases
and the ERV. Under-rented properties have contracted
rents lower than ERV, over-rented properties have
contracted rents higher than ERV.
Reversionary rent roll: The annualised cash rental
income (net of car park licence income) that would be
received if the property or properties were leased at ERV.
137
Seed portfolio: The portfolio of investment properties
owned by the Yew Tree Investment Fund (in Members
Voluntary Liquidation) when it was purchased on 8 June
2018.
SME: As defined by Enterprise Ireland, an enterprise
that has between 50 employees and 249 employees and
has either an annual turnover not exceeding €50m or an
annual balance sheet total not exceeding €43m.
State Body: a body established by legislation in the
Republic of Ireland which is either entirely or majority
owned by the Irish Government
Total debt to equity gearing: The ratio of drawn debt
to NAV of the Company.
Total expense ratio (“TER”): The ratio of the Company’s
annualised expenses, excluding transaction costs,
financing costs and capital expenses and a percentage
of the average net assets during that period.
Total shareholder return: The growth in share value
over a period assuming all dividends are reinvested in
shares of the Company when paid.
Vacancy: lettable space owned by the Company which
is not let or licenced to a tenant.
WAULT: Weighted average unexpired lease term
Strategic reportgovernanceFinancial StatementS Corporate Information
138
Directors
Barry O’Dowd (Chair, Independent Non-executive Director)
Eimear Moloney (Independent Non-executive Director)
Garry O’Dea (Independent Non-executive Director)
Brian Owens (Independent Non-executive Director)
Jonathan Laredo (Chief Executive Officer)
Charles Peach (Chief Financial Officer)
Michael Gibbons (Chief Investment Officer)
Registered office
4th Floor
76 Lower Baggot Street
Dublin 2, Ireland
Company Secretary
Sanne Corporate Administration Services Ireland Limited
4th Floor
76 Lower Baggot Street
Dublin 2, Ireland
AIFM
Ballybunion Capital Limited
Euronext Growth Adviser and
Joint Broker
Nominated Adviser and Joint
Broker
Ashley House
Morehampton Road
Dublin 4, Ireland
Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
Dublin 4, Ireland
Liberum Capital Limited
Ropemaker Place,
25 Ropemaker Street,
London EC2Y 9LY
Yew Grove reit plcreport and consolidated Financial statements 2019 139
Legal Adviser to the
Company as to Irish law
Registrar
William Fry
Grand Canal Square
Grand Canal Dock
Dublin 2, Ireland
Link Asset Services
Link Registrars Limited
2 Grand Canal Square
Dublin 2, Ireland
Depositary and Custodian
Société Générale S.A., Dublin Branch
Valuer
Auditor
3rd Floor, IFSC House
IFSC
Dublin 1, Ireland
Lisney Limited
St. Stephen’s Green House
Dublin 2, Ireland
Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House
29 Earlsfort Terrace
Dublin 2, Ireland
Strategic reportgovernanceFinancial StatementS 140
Yew Grove reit plcreport and consolidated Financial statements 2019