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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Green Reit Plc | LSE:GRN | London | Ordinary Share | IE00BBR67J55 | ORDS EUR0.10 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.84 | 1.902 | 1.916 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMGRN
RNS Number : 4944J
Green REIT PLC
12 September 2016
PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2016
ASSET MANAGEMENT FOCUS DELIVERS STRENGTHENED LONG TERM INCOME STREAM AND STRONG PERFORMANCE ACROSS ALL METRICS
NAV increase 16.5%; EPRA NAV per Share EUR1.52; Dividend up 188% to 4.6 cents per share
Dublin, 12 September, 2016 - Green REIT Plc, ("Green REIT" or the "Company"), the Irish property investment company, today announces its results for the year ended 30 June 2016.
The portfolio, which is dominated by high grade Dublin offices, is now valued at EUR1.24 billion, with the Company having recorded a strong performance across all key operational metrics during the period. The strategic focus will continue to be on driving risk adjusted returns for shareholders, through asset management, our development pipeline and increasing dividends, building on the total return of 17.7% delivered in the year to 30 June 2016.
Hot Features
Premium
30 June 30 June Change
2016 2015
------------------------------ ------------ ------------ -------
Net Rent EUR52.6m EUR37.8m +39%
------------------------------ ------------ ------------ -------
EPRA Earnings EUR24.8m EUR10.5m +137%
------------------------------ ------------ ------------ -------
Net Profit EUR145.5m EUR156.7m -7.2%
------------------------------ ------------ ------------ -------
Basic NAV Per Share 153.9 cents 134.8 cents +14.2%
------------------------------ ------------ ------------ -------
EPRA NAV per Share 151.8 cents 132.1 cents +14.9%
------------------------------ ------------ ------------ -------
NAV EUR1,048.0m EUR899.3m +16.5%
------------------------------ ------------ ------------ -------
Total Return 17.7% 24.4% -6.7%
------------------------------ ------------ ------------ -------
Total Gearing 19.2% 9.5% +9.7%
------------------------------ ------------ ------------ -------
Basic EPS 21.5 cents 23.5 cents -8.5%
------------------------------ ------------ ------------ -------
EPRA EPS (Diluted, on Rental
Profit only) 3.7 cents 1.6 cents +131%
------------------------------ ------------ ------------ -------
Proposed Dividend per Share 4.6 cent 1.6 cent +188%
------------------------------ ------------ ------------ -------
KEY FINANCIALS HIGHLIGHTS
-- 14.9% increase in EPRA NAV to EUR1.52 per share, underpinning a 17.7% total return in the period
-- Strong capital and income growth, with EPRA Earnings now contributing 17% of total profit
-- 10% increase in contracted annual rent to EUR61.3 million from 21 properties
-- EPRA EPS increase of 131% to 3.7 cents per share; Basic EPS of 21.5 cents per share
-- Strong EPRA Earnings of EUR24.8 million, up 137% on prior year; Net profit of EUR145.5 million for the year
-- Total gearing remains low at 19.2%, with cash and undrawn facilities at year end of EUR121.4 million providing further capital for growth and development
-- 188% increase in proposed dividend to 4.6 cents per share reflecting strong performance in the period
STRATEGIC & OPERATIONAL HIGHLIGHTS
-- Asset Management - delivering increased rental profit and more secure income over the longer term
- Lease renegotiations completed/agreed on EUR14 million, or 23% of total annual contracted rent, including leases with Vodafone Ireland and Pioneer Investments
- EUR9.5 million of new annual rent secured through new lettings, the largest of which is to Fidelity International in George's Quay
- 56% increase in total WAULT, from 5 years at 30 June 2015 to 7.8 years currently - Continued low EPRA vacancy of 2% at 30 June 2016 (30 June 2015: 2%)
-- Development - substantial value-adding potential from pipeline
- Solid progress at our four office sites, all on target for completion on schedule - Two industrial units completed on schedule and on budget at Horizon Logistics Park - Terms agreed for the single letting of 100% of 32 Molesworth Street on completion
- Good momentum at Horizon Logistics Park, with speculative development of an additional unit to commence in October 2016
- 6.1 acres at Central Park and over 100 acres at Horizon Logistics Park available for potential future development
-- Acquisitions and Disposals - supportive of investment strategy, strengthening the portfolio
- Acquisitions: Completed the acquisition of full control of Central Park in January 2016 and of One Albert Quay in Cork. Payments of EUR41 million made on One Albert Quay to 30 June 2016, with a further EUR10.4 million to be paid on or before March 2017
- Disposals: four properties from the 'Glas' collection sold in H2, at a combined sale price of EUR74.7 million, versus a combined purchase price of EUR42.6 million, generating a profit before disposal costs of EUR32.1 million, or 75.3 % on cost
-- Performance Fee of EUR13.9 million to be settled by issuing 9.5 million ordinary shares to the Investment Manager, in line with the total return threshold being exceeded in the year to 30 June 2016
PORTFOLIO OVERVIEW:
-- Portfolio now comprises 20 assets with a total floor area of 226,000 square metres (2.43 million square feet) (30 June 2015: 208,600 square metres (2.24 million square feet))
-- Significant Dublin focus (93% by portfolio value) and dominated by high grade Dublin office assets (73%)
-- Investment initial yield of 5.2%(1) on 30 June 2016 valuations (5.8%(1) at 30 June 2015 on 30 June 2015 valuations)
-- 98.3% EPRA occupancy rate (30 June 2015: 98.1%)
-- Value by sector: 78% offices, 15% retail, 2% industrial and 5% other
-- Yields:
On 30 June 2016 On 30 June 2015 Values
Values
-------------------- ---------------- -----------------------
Investment Initial
Yield(1) 5.2% 5.8%
-------------------- ---------------- -----------------------
Portfolio Initial
Yield(1) 4.7% 5.5%
-------------------- ---------------- -----------------------
(1) Calculated as contracted rent at 30 June 2015/16 over the June 2015/16 valuation plus notional purchaser's costs
-- Portfolio is 5% reversionary at 30 June 2016 (EUR61.3 million annual contracted rent versus EUR64.7 million annual ERV)
-- Diversified tenant base, with 41% of contracted rent from Financial Services, 23% from TMT and 18% from retail
-- Top 10 tenants account for 51% of contracted rent, with our largest tenant accounting for 12% of the total
Gary Kennedy, Chairman of Green REIT plc, commented: "The Board continues to focus on driving risk adjusted returns for shareholders through our clear and focused strategy. This has been another successful year for the Company, with dividend plans coming to fruition and our development projects on plan. We are confident in our business and our market and look forward to delivering shareholder returns in line with our target in the year ahead."
Pat Gunne, Chief Executive of Green Property REIT Ventures Limited, added: "Our strong results are a reflection of the continued growth in the Irish economy, and the prevailing low interest rate environment which is supportive of the commercial property industry both in Ireland and abroad. The 137% growth recorded in rental profits over the previous year allows us to achieve our dividend objectives ahead of schedule"
SContacts
Green Property REIT Ventures (Investment Manager to the Company)
Niall O'Buachalla, COO
+353 (0) 1 2418400
FTI Consulting (IR and PR to the Company)
Dublin London
+353 (0) 1 6633686 +44 (0) 20 7831 3113
Jonathan Neilan Giles Barrie
Melanie Farrell Claire Turvey
greenreit@fticonsulting.com
About Green REIT plc
Green REIT plc is an Irish Real Estate Investment Trust ("REIT") and is listed on the Irish and London Stock Exchanges. The Company was the first REIT established in Ireland following the introduction of REIT legislation by the Irish Government. The Company's stated strategy is to create a property portfolio consisting primarily of commercial property in Ireland to deliver income and capital growth through opportunistic investments, active property management and prudent use of debt finance. Please visit www.greenreitplc.com.
Note on forward-looking information
This Announcement contains forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements referred to in this paragraph speak only as at the date of this Announcement. The Company will not undertake any obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority.
Chairman's Report
DELIVERING ON OUR VISION
I am happy to communicate another strong set of results for the Company for the year to 30 June 2016.
During the year we further strengthened our portfolio through two strategic acquisitions, firstly the acquisition of full control of Central Park, increasing the Company's ownership from 50 to 100 per cent, and secondly the acquisition of One Albert Quay, Cork's flagship office building. We also disposed of four non-core properties in the period, acquired early in the recovery cycle, generating a profit on purchase price of 75 per cent.
The successful implementation of asset management initiatives during the year has strengthened our income, making it more secure and resulting in longer income streams for the Company. Our development pipeline will further enhance this income, with the Company completing two industrial units during the year and with the completion of two office buildings, at Central Park and 32 Molesworth Street, scheduled for December 2016. Construction of One Molesworth Street in Dublin's CBD is progressing well and on target, while construction of 4-5 Harcourt Road has recently commenced.
The total return delivered to shareholders in the year to 30 June 2016 was 17.7%. Our main focus now in the year ahead is on continuing to deliver risk adjusted shareholder returns through the completion and letting of our development projects and increasing dividends to shareholders, while at the same time monitoring acquisition opportunities that fit with our investment strategy.
Ireland - Positive Macroeconomic Indicators
The Irish economy continues to experience strong growth. Ireland was the fastest growing economy in the EU in 2014 and 2015, and growth is expected to continue through 2016 and 2017 at levels well above the EU average. While export growth was the main driver of recent economic growth, growth in the domestic economy is now a greater contributor. The country's unemployment rate of 8.3 per cent is now below the EU average, having peaked at 15.2 per cent in early 2012, while the country's debt to GDP ratio continues to fall and is now below the EU average, with a minor government deficit expected for 2016 and a small surplus forecast for 2017. Long term interest rates remain low, while the Irish government 10 year bond rate stood at 0.50% at 30 June 2016, both of which are supportive of commercial property yields.
Asset Management
The year to 30 June 2016 was a busy one on the asset management front. The highlights of the period were the renegotiation of existing leases with Vodafone Ireland, our largest tenant, and Pioneer Investments, our fourth largest tenant, which along with other asset management initiatives have increased our rent weighted average unexpired lease term ('WAULT') by 2.8 years from 5 years at 30 June 2015 to 7.8 years at 30 June 2016. We also entered into new leases with Fidelity International with a term certain of 12 years. Our contracted annual rent is now EUR61.3 million, an increase of 10% on the EUR55.7 million of contracted annual rent at 30 June 2015.
Development
One of the key tenets of our investment strategy is to create value for shareholders through a prudent level of property development. We acquired five properties with development potential at early points in the Dublin real estate development cycle, with a view to obtaining the necessary planning consents and delivering new buildings at the right time and into what is a constrained Dublin office market with low vacancy rates and manageable future supply.
Our development programme has ramped up substantially in the period since 1 July 2015. We have started on site at 32 Molesworth Street, One Molesworth Street and 4-5 Harcourt Road, all office developments in Dublin City Centre. We started on site at Block H in Central Park in April 2015 and completion is on target for December 2016. We also completed our first two industrial units at Horizon Logistics Park during the period. We look forward to completing and letting these high quality buildings and expect that they will be a significant driver of shareholder returns.
Disciplined Balance Sheet Management
Our intended total gearing level continues to be 25 per cent. Our total gearing level has increased from 9.5 per cent at 30 June 2015 to 19.2 per cent at 30 June 2016, due mainly to debt funding of the acquisition of full control of Central Park and payments made in respect of One Albert Quay in Cork, which were offset by debt reduction from the application of property sale proceeds. We have further capital to deploy to fund our development projects and the balance of the One Albert Quay payments, which are more than adequately covered between the Company's cash resources and our available debt facilities, while remaining within our intended gearing level.
Financial Results and Position
Summary Financial Information
Balance Sheet: 30 June 2016 30 June 2015 Change -------------------------------- ------------- ------------- ------- Total Property Value EUR1,241m EUR968m (i) +28.2% -------------------------------- ------------- ------------- ------- EPRA Net Assets EUR1,048m EUR899m +16.5% -------------------------------- ------------- ------------- ------- EPRA NAV Per Share 151.8 cents 132.1 cents +14.9% -------------------------------- ------------- ------------- ------- Total Gearing 19.2% 9.5% +9.7% -------------------------------- ------------- ------------- ------- Income Statement: -------------------------------- ------------- ------------- ------- Gross Rental Income (excluding service charge income and JV income) EUR56.4m EUR39.4m +43% -------------------------------- ------------- ------------- ------- Profit for the Period EUR145.5m EUR156.7m -7.2% -------------------------------- ------------- ------------- ------- EPRA Earnings EUR24.8m EUR10.5m +137% -------------------------------- ------------- ------------- ------- EPS - Basic 21.5 cents 23.5 cents -8.5% -------------------------------- ------------- ------------- ------- EPS - EPRA 3.7 cents 1.6 cents +131% -------------------------------- ------------- ------------- ------- (i) Includes the Company's 50% interest in Central Park property at 30 June 2015
Dividends
The Board expects to declare a dividend in respect of the year to 30 June 2016 of 4.6 cent per share, or a total dividend payout of EUR31.4 million, to be paid in the fourth quarter of 2016. This represents an increase in the annual dividend per share by 188 per cent on the dividend paid for the year to 30 June 2015, delivering on our promise to pay increasing dividends to shareholders.
The dividend expected to be declared is analysed as follows:
Cents
EURMM Per Share
------------------------------ ------ -----------
Property Income Distribution
('PID') 24.4 3.6
------------------------------ ------ -----------
Non PID 7.0 1.0
------------------------------ ------ -----------
Total Dividend 31.4 4.6
------------------------------ ------ -----------
Net Asset Value ('NAV')
The key drivers of the increase in the Company's NAV by EUR148.7 million, or by 16.5 per cent, between 1 July 2015 and 30 June 2016, were EPRA Earnings for the period of EUR24.8 million (30 June 2015: EUR10.5 million) and a positive movement in fair values (including JV property) by EUR120.7 million (30 June 2015: EUR146.2 million).
The Investment Manager
The Board continues to work well with the Investment Manager, Green Property REIT Ventures, led by Pat Gunne. The quality of the acquisitions, the asset management successes achieved and the substantial progress made with the Company's development projects in the period are testimony to the skills and experience of the management team.
The Board has approved the payment of a Performance Fee of EUR13.9 million (30 June 2015: EUR20.9 million) to the Investment Manager, in line both with the formula set out in the Investment Manager Agreement entered into in July 2013 and the total return threshold being exceeded in the year to 30 June 2016. The Performance Fee will be settled by the issuance of 9,482,718 new ordinary shares to the Investment Manager by the Company. These shares will be subject to the lock-in provisions set out in the Investment Manager Agreement, which prohibit the sale of these shares for up to up to 42 months from their issue date.
Outlook
Our clear strategic focus has continued to deliver strong shareholder returns in the year to 30 June 2016.
We have continued to grow the business through opportunistic and disciplined property acquisitions, which along with the disposals made in the period have strengthened the portfolio. Our income is stronger and our income streams are longer, as a result of active asset management. We look forward to the completion of our office and industrial developments and the contribution to shareholder returns from their anticipated value uplift and additional rental income. We remain conservatively leveraged with a strong balance sheet and well positioned to take advantage of opportunities that may arise.
The Board recognises that a continuation of the current favourable macroeconomic backdrop is an important dynamic in the context of delivering on our objectives, and that there are external factors which may impact on the Company's performance, such as economic and political uncertainty in Ireland and internationally.
We are vigilant in our risk management focus and continue to monitor the impact of the result of the UK's decision to leave the EU, both for opportunities for the Company and impacts on the wider Irish economy. We believe however that it is too early to tell what impact this may have on the Irish commercial real estate sector.
We remain confident in our business and our market and, having delivered above and beyond the targets set at IPO three years ago, we are confident that we have the right portfolio, business model, gearing profile, management expertise and financial capacity to continue to drive shareholder returns in the years ahead.
Gary Kennedy
Chairman
11 September 2016
Investment Manager's Review
Asset Management Successes, Capital Recycling and Good Progress with Developments
The year to 30 June 2016 was a very active one for us as the Company's Investment Manager. Implementation of asset management initiatives in the period has been very successful, enhancing the quality and security of our income. 60 per cent of the contracted income in the portfolio is on an upwards only review basis, with an overall weighted average unexpired lease term (WAULT) of 7.8 years at 30 June 2016, up by 56 per cent on 5 years at 30 June 2015. We also added EUR9.5 million of new contracted annual rent through new leases during the year, taking our total contracted annual rent to EUR61.3 million at 30 June 2016.
In addition, our estate is now 98% occupied, which highlights the security of income within the portfolio, and our active approach to managing any vacant space which becomes available. The quality of our assets is key to ensuring our void rates remain significantly below the wider market.
Our development projects are progressing in accordance with the plan we presented at the outset of our programme, and we are excited by the prospects that these buildings have for delivering strong returns to shareholders when completed and with tenancies secured. Our latest projections show a return on capital of 39% against the original underwrite target of 28%, so far exceeding our expectations, against a backdrop of very positive market conditions.
1. ACQUISITIONS, DISPOSALS & PORTFOLIO SUMMARY
Portfolio further strengthened through two value adding acquisitions and EUR75 million of disposals
Central Park - acquisition of full control
In January 2016 the Company acquired full control of Central Park, widely acknowledged as Dublin's best office park, increasing the Company's ownership from 50 per cent to 100 per cent. This acquisition added EUR8.9 million to annual contracted rent, with a property price of EUR155 million reflecting a capital value of EUR4,600 per square meter (EUR428 per square foot) of built space and an equivalent yield of 5.6%. The Company also now has full control of the circa 46,500 square meters (500,000 square feet) of planning consents for future expansion of the office park. The value of 50 per cent of Central Park at 30 June 2016 was EUR172.9 million, reflecting an 11.5 per cent uplift on cost.
One Albert Quay, Cork - acquisition completed
In February 2016 we completed the acquisition of One Albert Quay in Cork, a newly built office block of 15,300 square meters (164,334 square feet). Since February 2016 we have made payments to the vendor totalling EUR41 million, as occupational leases have become operative. The building is now 81% let by area, with in-place annual contracted rent on the building of EUR3.2 million, compared to a total ERV of EUR4.4 million at 30 June 2016. The building houses the global headquarters of Tyco, together with other high quality tenants including Arup Engineering, PwC, Malwarebytes, Ardmore Shipping, Investec and Starbucks. We expect the remaining vacant space to be let over the coming months and will then make further estimated payments of EUR10.4 million on or before March 2017. The estimated total property price of EUR51.4 million compares to a valuation of EUR63.8 million at 30 June 2016, reflecting a 24 per cent uplift.
Along with JCD (the developer of the building) we are proud to report that One Albert Quay was awarded Commercial Project of the Year 2016 at the annual Irish Construction Awards, in recognition of its quality, environmental efficiency and technological advancement.
Disposals - 75% realised profit on cost
We outlined in February at our interim results our intention to raise EUR100 million from disposals. On 3 February 2016 we confirmed that we had appointed JLL to sell a portfolio of six of the Company's properties by private treaty on our behalf. In the period to 30 June 2016 four of these properties were sold, individually, for a combined value of EUR74.7 million. This compares to a combined cost of EUR42.6 million, reflecting a total profit on cost of EUR32.1 million or 75%. We are happy to have realised such a healthy profit from the completed sales, which we see as effective recycling of capital and a strengthening of our portfolio.
2. PORTFOLIO VALUATION
The valuation of the portfolio rose to EUR1.24 billion at 30 June 2016, which reflects a 13% increase on assets held throughout the period. Acquisitions in the period increased in value by EUR30 million between their acquisition dates and 30 June 2016, reflecting a combined 15% increase on property cost.
On a sectoral basis, the industrial assets saw a 44% increase in value, partly as a result of the completion of an industrial unit which had been under construction during the year and an increase in the value of the developable land. The city centre office portfolio saw a 13% increase in value, suburban offices saw a 14.5% increase and the retail assets held saw an 11% increase in value in the year.
In the period from June 2015 to June 2016 we saw the portfolio equivalent yield reduce by 50 basis points to 5%. This is partly as a result of extending the WAULT from 5 years to 7.8 years and also due to the various disposals and acquisitions in the period. The portfolio has gone from 72% prime to 93%.
Looking at the overall return from the portfolio, the movement in equivalent yield is contributing approximately 50% to returns with income and rental growth accounting for the remaining 50%. The rental growth component is pulled back somewhat by rent free periods given on new lettings and lease renegotiations, which will flow through in the coming months.
PORTFOLIO VALUATION ANALYSIS
Movement Movement Annual
June 15 Dec 2015 Movement
June 2015 to Dec December to June June 2016 to June
Valuation 15 2015 Valuation 2016 Valuation 2016
EURMM EURMM EURMM EURMM
Offices
Dublin City Centre 507.8 5.8% 537.0 6.9% 574.2 13.1%
Dublin Suburbs (including 50%
interest
in Central Park) 151.0 9.9% 165.9 4.2% 172.9 14.5%
----------- ---------------- ----------- ----------
Total Offices 658.8 6.7% 702.9 6.3% 747.1 13.4%
Mixed Use (Arena Centre, Dublin
24) 60.9 3.4% 63.0 -1.9% 61.8 1.4%
Industrial 26.2 10.8% 29.0 30.2% 37.8 44.3%
Retail 152.9 7.6% 164.4 2.9% 169.3 10.7%
Total - Assets Held Throughout the
Period 898.8 6.7% 959.3 5.9% 1,015.9 13.0%
----------- ---------------- ----------- ----------
Investment and Disposals in H2 FY
2016:
Assets Disposals - Glas Collection 69.5 7.7% 74.9 N/A
Sale of 40% of 85-93 Mount Street (11.5) N/A
Acquisitions (see note below) 236.6 N/A
Per Statement of Financial Position 968.3 1,034.2 1,241.0
----------- ---------------- -----------
Note - Acquisitions in the Period:
Movement
Property to June June 2016
Acquisitions in the period Price 2016 Valuation
EURM EURM
Other 50% of Central
Park 155.0 11.5% 172.9
One Albert Quay, Cork 51.3 24.2% 63.7
--------- --------- -----------
Total - Acquisitions
in the period 206.3 14.7% 236.6
--------- --------- -----------
3. ASSET MANAGEMENT
The year to 30 June 2016 was one of heightened activity on the asset management front and our busiest period to date. We continue to focus on growing our rental income and enhancing the security of that income through driving the portfolio WAULT higher.
Highlights in the period include the following:
Lease Re-gears
We completed or agreed lease renegotiations on EUR14 million, or 23 per cent of our current contracted annual rent, significantly increasing the WAULT on this income by 7.4 years. This includes our single largest tenant, Vodafone, and our fourth largest tenant, Pioneer Investment Management.
Summary details are as follows:
Tenant Building Contracted % of Term Increase Unexpired Unexpired
Rent (EURm Group Term (pre) Term (post)
p.a) Rent*
-------------- --------------- ------------ ------- -------------- ------------ -------------
Central
Vodafone Park (Block
Ireland E) 7.3 12% +8 years 2.8 years 10.8 years
-------------- --------------- ------------ ------- -------------- ------------ -------------
George's
Pioneer Quay, D.2
Investments (Block A) 3.4 6% +10 years 1.3 years 11.3 years
-------------- --------------- ------------ ------- -------------- ------------ -------------
Bank of Arena Centre,
Ireland D.24 1.4 2% +5 years 2.1 years 7 years
-------------- --------------- ------------ ------- -------------- ------------ -------------
The OPW 84-93 Mount
(Irish Street,
govt) D.2 1.7 3% +5 years 0.1 years 5.1 years
-------------- --------------- ------------ ------- -------------- ------------ -------------
* Total annual contracted rent at 30 June 2016
New Lettings
We secured new lettings with EUR9.5 million per annum of additional contracted rent over 25,111 square metres (270,300 square feet), which represents 15.5 per cent of the group's current contracted annual rent. The WAULT on these new leases is 10 years.
The largest of these is with Fidelity International at George's Quay. The Fidelity leases extend to 5,852 square metres (68,000 square feet) in total, which Fidelity will fully occupy by late 2016 when Twitter and Invesco vacate the space they currently occupy. The annual contracted rent from Fidelity is EUR3.7 million, on 25 year leases at a rent of EUR527 per square metre (EUR49 per square foot), with a break clause in the tenant's favour on the twelfth anniversary of the leases.
These new lettings were 8 per cent ahead of 30 June 2015 rental values (excluding short term lettings).
WAULT
-- In addition to the initiatives above, Allied Irish Banks did not exercise their lease break on 2 Burlington Road in the period, which added 10 years to the term certain of that EUR4.2 million of annual rent;
-- The combined effect on WAULT of the asset management initiatives completed in the period is to increase our overall WAULT by 56 per cent from 5 years at 30 June 2015 to 7.8 years at 30 June 2016;
-- As at 30 June 2015, 58 per cent of our contracted annual rent had a break option or lease expiry in the years 2016 to 2018. This has now been reduced to 17 per cent as at 30 June 2016;
-- 83 per cent of our contracted annual rent is now subject to a break or expiry beyond 2019, which has increased from 42 per cent at 30 June 2015;
Vacancy
As at 30 June 2016 there was 1.7 per cent vacancy across the portfolio by ERV (30 June 2015: 1.9%). Of the EUR1.2 million of annual ERV across our vacant space, EUR0.9 million of this is currently under offer and in legals.
4. DEVELOPMENT PROJECTS
We continue to report good progress with our development projects, with two industrial units at Horizon Logistics Park completed in the period and with completion on target at Block H Central Park and 32 Molesworth Street for December of this year. One Molesworth Street is also progressing well and we recently commenced the demolition and redevelopment of 4-5 Harcourt Road.
A brief summary of these schemes is as follows:
Property Use Lettable Start Date Estimated
Area (Sq Completion
Ft) Date
------------------------ ------------ ---------- ------------ ------------
Block H, Central Park Office 150,000 April 2015 December
2016
------------------------ ------------ ---------- ------------ ------------
32 Molesworth Street, Office 28,374 August 2015 December
D.2 2016
------------------------ ------------ ---------- ------------ ------------
One Molesworth Street, Office 90,000 November Q2 2017
D.2 2015
------------------------ ------------ ---------- ------------ ------------
4-5 Harcourt Road Office 48,243 September Early 2018
2016
------------------------ ------------ ---------- ------------ ------------
Horizon Logistics Park Industrial 44,000 August 2015 Completed
(units B1 & D1) May 2016
------------------------ ------------ ---------- ------------ ------------
Total 360,617
-------------------------------------- ---------- ------------ ------------
Development activity since 30 June 2016:
(i) 32 Molesworth Street, Dublin 2
Terms have been agreed and legal discussions are now underway with a potential occupier to take a lease on 32 Molesworth Street, which has a targeted completion date of December 2016. The proposed letting covers the entire building of 3,000 square meters (32,000 square feet) and the proposed annual rent compares favourably with the original underwrite assumptions. This letting is subject to leases being signed and completion of the building.
(ii) 4-5 Harcourt Road
We are now on site and have commenced demolition at 4-5 Harcourt Road in Dublin's CBD. The planning permission we secured represents an increase of close to 50% on the original floor area. In its place we will be developing a modern office building of 4,500 square meters (48,200 square feet), with completion due in early 2018.
(iii) Horizon Logistics Park, Dublin Airport:
Pre-letting to Kuehne+Nagel
An agreement to lease has been signed with Kuehne+Nagel Limited for a new unit of 7,400 square meters (80,000 square feet) which we will build for them, with Kuehne+Nagel having options on two additional units of 3,700 square meters (40,000 square feet) each. Kuehne+Nagel are an existing tenant in the logistics park and will be vacating their unit as part of this transaction. The construction of the new units is subject to planning consent and discussions are now underway with the planning authority with a view to submitting an application by the end of October.
Kuehne+Nagel's expansion plans show their confidence in Horizon Logistics Park as their preferred location to conduct this very substantial corporate expansion. It also confirms the opportunity around logistics in the Dublin market, in addition to the wider prospects for the Irish economy. This, combined with a sale and lease on the two units which we developed, bodes well for our expansion strategy at Horizon Logistics Park.
Letting of unit B1
Heads of terms have been agreed with a global logistics company for unit B1, which comprises 4,100 square meters (44,000 square feet). This unit was built speculatively and was completed in May 2016.
Commencement of construction of unit B2
Construction will commence shortly on this unit, which comprises 3,066 square meters (33,000 square feet) and will be built speculatively. Given the momentum generated by the sale of unit D1, the pre-letting to Kuehne+Nagel and that heads of terms have been agreed on unit B1, we feel that it is important to the success of the park to have new space available for prospective tenants, in a sector where there are strong levels of take-up and very limited supply of modern high bay warehousing.
5. FINANCIAL REVIEW
3 Year Summary
2016 2015 2014
----------------------------- ---------- ----------- ----------
NAV per Share (cents)
- Basic 153.9 134.8 109.1
----------------------------- ---------- ----------- ----------
NAV per Share (cents)
- EPRA 151.8 132.1 109.1
----------------------------- ---------- ----------- ----------
Earnings per Share (cents)
- Basic 21.5 23.5 12.4
----------------------------- ---------- ----------- ----------
EPRA Earnings per Share
(cents) 3.7 1.6 2.1
----------------------------- ---------- ----------- ----------
Total Gearing 19.2% 9.5% 9.2%
----------------------------- ---------- ----------- ----------
Property Loan to Value 20.6% 9.9% 18.6%
----------------------------- ---------- ----------- ----------
Interest Cover 9.5 times 19.6 times 7.4 times
----------------------------- ---------- ----------- ----------
Cash and undrawn facilities EUR121.4m EUR166.9m EUR369.7m
----------------------------- ---------- ----------- ----------
Weighted average interest
rate 1.9% 2.8% 3.2%
----------------------------- ---------- ----------- ----------
Weighted average debt 4 years 3.1 years 4 years
maturity
----------------------------- ---------- ----------- ----------
NAV Growth
NAV increased from EUR899.3 million at 30 June 2015 to EUR1,048.0 million, or from 134.8 cent per share to 153.9 cent per share (both basic), an increase in NAV per share of 14.2% year on year. The main drivers of the growth in basic NAV per share are analysed as follows, in cents per share:
NAV Analysis Year to 30.06.2016
----------------------
Cents per
EUR'000 Share
Net Assets at 30 June 2015 899,317 134.8
Investment Properties Revaluation 109,367 16.1
JV Property Revaluation 11,306 1.7
Net Rental Profit - Investment
Properties 21,635 3.2
Net Rental Profit - JV Property 2,740 0.4
Performance Fee Share Reserve 13,893 2.0
Dividends Paid (10,671) (1.6)
Shares Issued During the
Year - (2.7)
Others 454 0.1
Net Assets at 30 June 2016 1,048,041 153.9
---------- ----------
Please see Appendix 1 for further EPRA Performance Measures.
Gearing
As at 30 June 2016 our total gearing was 19.2% (30 June 2015: 9.5%), with total bank debt increasing from EUR95.7m at 30 June 2015 to EUR255.4 million at 30 June 2016. This level of gearing is within the range guided to our shareholders over the previous reporting periods.
The increase in total bank debt by EUR159.7 million in the year was as a result of the debt financing of the Company's acquisition of PIMCO's 50% interest in Central Park, payments made in acquiring One Albert Quay in Cork and debt funding of development costs. This was offset by debt reductions from the application of property sales proceeds against the Barclays revolving credit facility.
Debt Profile
The Company has two loan facilities in place, one with Bank of Ireland secured on the Central Park assets, and a revolving credit facility with Barclays Bank Ireland plc with floating security over the Company's other assets. During the year the Central Park facility was renegotiated with Bank of Ireland, the key changes being a reduction in the loan margin from 3% to 2% per annum, thereby saving the Company EUR1.5 million annually, and an extension of the maturity date from June 2018 to June 2021, with options to extend by two further years.
As a result of the renegotiation of the Central Park facility and a reduction in the 3 month Euribor rate, the Company's all-in annual debt cost has reduced from 2.8% at 30 June 2015 to 1.9% at 30 June 2016, with an increase in total debt maturity from 3 to 4 years.
Post 30 June 2016, additional hedging was put in place in the form of forward starting interest rate swaps covering the period from October 2018 to October 2022, at a blended fixed rate of 0.074% per annum on EUR200 million. These swaps give the Company certainty around its maximum interest cost on EUR200 million of its debt for the period October 2018 to October 2022, at what we believe is a very keen fixed rate.
A summary profile of the Company's debt at 30 June 2016 is as follows:
Gearing
Balance Interest Annual - Property Interest Maturity Maturity
at 30.06.2016 Cost Interest Only Cover Date - Years
--------------- --------- ---------- ------------ --------- --------- ---------
% per
EURMM annum EURMM % Times
Central Park
Facility 150.0 2.00% 3.0 43.4% 5.2 Jun-21 5.0
Barclays Facility 105.4 1.72% 1.8 11.8% 30.4 Dec-18 2.5
---------
Total 255.4 1.88% 4.8 20.6% 9.5 4.0
--------------- --------- ---------- ------------ --------- --------- ---------
Earnings per Share ('EPS')
EPRA EPS, which measures EPS on rental profit only, increased by 2.1 cents per share or by 131% from 1.6 cents to 3.7 cents. In the year to 30 June 2015 EPRA EPS accounted for 7 per cent of total EPS of 23.5 cents, while it accounted for 17 per cent of total EPS of 21.5 cents in the year to 30 June 2016.
This is a reflection firstly of our increased rental income in the current year, which is 43 per cent greater than in 2015, and secondly of the anticipated moderation in capital value growth as the Irish commercial real estate market moved from 'opportunistic' mode to a mode of more sustainable and moderate growth. This is illustrated by the total returns from Irish commercial real estate as measured by IPD/MSCI, which decreased from 25 per cent in calendar 2015 to 19.5 per cent in the year to 30 June 2016.
A reconciliation of total profit and EPS to EPRA Profit and EPRA EPS is as follows:
30 June 30 June 30 June 30 June
2016 2016 2015 2015
------------------------- ---------- ----------- ---------- -----------
Cents Cents
EUR'000 per Share EUR'000 per Share
------------------------- ---------- ----------- ---------- -----------
Profit for the Period 145,502 21.5 156,703 23.5
------------------------- ---------- ----------- ---------- -----------
EPRA Adjustment
- fair value movements (120,673) (17.8) (146,239) (21.9)
------------------------- ---------- ----------- ---------- -----------
EPRA Earnings 24,829 3.7 10,464 1.6
------------------------- ---------- ----------- ---------- -----------
Rental Income
Gross and net rental income is analysed as follows:
2016 2015
EUR'000 EUR'000
Gross Rental Income 66,821 45,864
Less: Service Charge Income (10,389) (6,432)
--------- --------
Gross Rent excl Service Charge
Income 56,432 39,432
Split as to:
Billed Rental Income 47,298 38,920
Spreading of lease incentives 6,241 512
Surrender Premia 2,893 0
--------- --------
56,432 39,432
Less: Property Outgoings (3,883) (1,613)
Net Rental Income 52,549 37,819
--------- --------
Gross rental income (excluding service charge income) of EUR56.4m in 2016 was 43% higher than 2015. It should be noted that the analysis above for 2016 includes rental income from Central Park from 8 January 2016 (the date the Company acquired full control) to 30 June 2016, whereas in 2015 there was no Central Park rental income included, as Central Park was separately accounted for on an equity basis during the period when the Company controlled only 50% of it.
An analysis of total gross rental income (excluding service charge income) with the Company's 50% share of the Central Park rent shown proportionately for the year to 30 June 2015 and for the period 1 July 2015 to 8 January 2016 is as follows:
2016 2015
EUR'000 EUR'000
100% Owned Properties 56,432 39,432
Central Park 50% (1/7/15 to
8/1/16) 4,418
Central Park 50% 7,733
Gross Rent incl Central Park 60,850 47,165
-------- --------
The main drivers of the increase in rental income year-on-year were as follows:
-- The acquisition of PIMCO's 50% interests in Central Park on 8 January 2016
-- The impact of the Sapphire Portfolio being owned throughout the year to 30 June 2016 but for only three quarters of the year to 30 June 2015 (George's Quay, George's Court and Westend Retail Park)
-- Surrender premia paid by departing tenants of EUR2.9 million
-- The impact of the spreading of lease incentives granted to tenants, which were EUR6.2 million in 2016 versus EUR0.5m in 2015. These arise mainly from the granting of new leases and the renegotiation of existing leases where rent free periods were granted. Under accounting rules we are required to smooth the effect of these incentives over the term certain of the leases.
-- There was a slight reduction in rents as a result of the redevelopment of One Molesworth Street and 4-5 Harcourt Road, totalling EUR1.1 million, as vacant possession of the buildings was required.
With regard to Property Outgoings, which increased from EUR1.6 million to EUR3.9 million in the year to 30 June 2016 as per the analysis above, the main driver of the increase was agents and legal fees on new lettings and on lease renegotiations, which totalled EUR1.4 million, with vacant building costs of EUR0.8 million, repairs of EUR0.4 million, valuation fees of EUR0.4 million and other costs of EUR0.9 million.
For the year ahead we would expect agents and legal fees on our built space to be lower given the significant level of lease events dealt with this year, as with vacant building costs on the basis of completing the transactions which are currently in legals. As our development properties complete and are leased we can expect to incur additional agents and legal fees.
Administrative Expenses
Administrative expenses increased by EUR0.6 million from EUR2.1 million in the year to 30 June 2015 to EUR2.7 million in the year to 30 June 2016. The main cost items within this caption are directors' fees, audit fees, tax compliance and advice fees, corporate insurances, depositary and other regulatory costs.
Within the EUR2.7 million total cost for the year to 30 June 2016 are EUR0.9 million of one-off business combination costs relating to the stamp duty, legal and other costs incurred in the acquisition of PIMCO's 50% interest in Central Park in January 2016. These costs are required to be expensed in the period in which they are incurred under accounting rules. Stripping out these one-off costs the total administrative costs for the year were EUR1.8 million compared to EUR2.1 million in the year to 30 June 2015.
Investment Manager Fees
The base fee charged in the year was EUR9.7 million (2015: EUR8.1 million), with the increase in the fee reflecting the increased NAV of the Company on which the base fee is calculated. In the year from 30 June 2015 to 30 June 2016 NAV increased from EUR899.3 million to EUR1,048.0 million. The base fee is calculated and paid calendar quarterly in cash on the NAV at quarter end, on the basis of one per cent per annum of NAV. The details of the performance fee provision for the year of EUR13.9 million (2015: EUR21 million) are set out in further detail in note 19 of these results.
6. PRIORITIES FOR THE YEAR AHEAD
Our focus and priority for the year ahead is consistent with our previous messaging to shareholders which is all about maximising risk adjusted returns, and ensuring the portfolio is positioned to take advantage of the strong Irish economy and favourable real estate macro dynamics, particularly around falling interest rates and central bank policy.
Key for us is the completion and letting of our development projects in Dublin which will then allow us to reassess our risk positioning within the portfolio for the next phase, and at that juncture decide whether or not we pursue further development opportunities within the market. This decision will largely be dependent upon the supply and demand dynamics of the occupational market at that juncture, as well as the Irish economy and where it fits within the international GDP environment.
We are very happy with the quality of our real estate, and the security of income from our very strong tenant base, a result of our very successful active management campaign over the past 18 months in particular.
We are also pleased with the strong dividend proposed, and this will remain a key focus for us by continuing to drive strong rental profits through the portfolio.
The Irish economy is performing well on all key economic indicators, with growth well ahead of the EU average in the last three years, driven by both domestic demand and by FDI. The unemployment rate has almost halved since its peak and the Irish workforce is in excess of two million people for the first time since 2008.
The impact of the result of the UK referendum on EU membership ('Brexit') on the Irish economy and its consequences on Irish commercial real estate, whether positive or negative, is still unclear. This is likely to be the case in our view until Article 50 is triggered and negotiations take their course. There is speculation that Brexit could adversely impact on Irish economic growth, given for example the proportion of our exports directed at the UK. Brexit could however have a positive effect on Irish real estate, with potential relocations by UK tenants to Dublin and Ireland and increased FDI into Ireland rather than the UK. We continue to monitor the implications of Brexit closely for opportunities, and believe that our development pipeline and the quality of our existing properties puts us in a strong position to capitalise on opportunities that may arise.
Equally we will continue to monitor the taxation debate around Apple and other FDI clients operating in the Irish marketplace. We expect that Ireland will continue to compete successfully in the international arena for existing and future overseas corporates looking to use Ireland as their EU base for operations.
Demand in the occupational market has been resilient, with concerns about future Dublin office over-supply reducing, assuming no significant pull back in take up from FDI tenants in particular. This is an area that we devote a lot of time in understanding in order to ensure we can read the ever-changing dynamics of the occupational market. With regard to the investment market, we are seeing an increase in core capital flow to Ireland for prime assets, and with the continued decline in the risk free rate Irish commercial property yields still look attractive on a relative basis despite being close to previous cycle peaks.
We remain confident that our clear and focused strategy will continue to drive returns for our shareholders
Stephen Vernon Pat Gunne Executive Chairman Chief Executive Green Property REIT Ventures Limited Green Property REIT Ventures Limited
11 September 2016
Our Market
Economic Overview
Strong Economic Growth
The Irish economy continues to show strong and sustained growth, as it did in 2014 and 2015. The forecast is for 4.4% growth in 2016 and 3.1% in 2017, which means at this point, despite the uncertainty created by the "Brexit" referendum result in the UK, Ireland may well continue to out-perform relative to its European peers in the coming years. The composite PMI for August 2016 was 56.9, the strongest across developed economies surveyed.
Employment
The unemployment rate stood at 8.3% at the end of July, down from 8.6% in January 2016 or 9.5% at the end of July 2015. This compares to 4.9% in the US and the UK and 10.1% in the Euro area. The total number of people employed in Ireland is now above 2 million, compared to a high of 2.2 million in Q1 of 2008 and a low of 1.8 million in Q3 2012. There has been a shift from net emigration during the financial crisis to net immigration today. This is positive for the labour market as it should alleviate shortages in certain sectors and keep employment balanced, and thereby reduce the potential for wage inflation which has to date been muted, with average earnings up 1.1% in the year to Q1 2016, reflecting spare capacity in the labour market.
Foreign Direct Investment ('FDI')
In the period 2009 to 2014 Ireland was ranked 5(th) highest for FDI inflows in Europe and there is no doubt the level of investment in FDI in recent years has been vital to economic growth, employment levels, tax receipts and demand for office space. The level of FDI flows remains strong, with 2015 being a record year for FDI, and the Industrial Development Authority (IDA), which is charged with attracting and managing FDI in Ireland, sees a strong pipeline of further investment in the near term (they do not comment beyond the near term). Multinational enterprises today comprise over 10% of private sector employment in Ireland. So far in 2016 the IDA's job announcements have outpaced previous years. The leading FDI investments in 2016 were in the IT sector (Oracle, First Data, Facebook, Hubspot and Amazon) and the pharma and medical devices sector (Shire, Search Optics, OPKO, Eurofins and Lancaster).
Public finances continue to improve
Overall tax receipts were up 9.2% year on year for the first half of 2016. We have seen a continued approach by the Irish Government to be disciplined in spending, so while national budgets are now marginally expansionary, public finances continue to improve. In Q1 2016 there was a current account surplus of EUR9 billion. The government deficit at the end of 2015 was 1.5%, which is forecast to reduce to 0.3% by the end of 2016.
In addition, the national debt to GDP ratio for 2015 was 93.8% and has reduced further with debt reduction and with growth in GDP. Reduction in our national debt has had a positive impact on the rating of the country and our ability to borrow on the international markets. Bond yields continue to decline, with the 10 year rate currently standing at 0.5% at 30 June 2016.
Strong contribution from the domestic economy
With improving employment numbers and confidence re-emerging, domestic demand continues to improve, currently growing at 6% (quarter 1 2016). Consumer spending growth was 3.5% in 2015 and the forecast for 2016 is 3.7%. There is limited evidence of price inflation, which was +0.4% per annum as at June 2016.
The 2016 census in the Republic of Ireland confirmed that the population in Ireland grew by 3.7% in the period 2011 to 2016 and now stands at 4.67 million. Not surprisingly, the main increases have been in the main urban centres and counties adjacent to Dublin. The population of Dublin increased by 5.7% to 1.35 million and greater Dublin increased by 5.6% to 1.9 million in the five year period.
UK referendum result
The decision of voters in the UK to leave the European Union has created uncertainty across markets globally. It is too early to tell the extent of the impact of this decision in either the short or longer term, but it is clear that it will have an impact on the Irish economy.
On the positive side, there may be further FDI growth and relocation of business from the UK to Ireland, particularly because Ireland will be the only English speaking member of the EU post the UK's departure. This may result in job creation and increased demand for office and residential accommodation. In addition, there may be further demand from international capital for Irish real estate.
On the negative side, Ireland and the UK are strong trading partners and we are not likely to have clarity on trading arrangements between both countries for some time. At present 18% of our total exports are to the UK. The food, manufacturing, tourism and transport sectors are likely to be affected most, depending on trade arrangements agreed between the UK and the EU. A weak sterling will put pressure on the retail sector, particularly in towns close to the border with Northern Ireland, and more importantly as price takers Irish exporters price in sterling and therefore their profitability will be affected unless they can adjust profit margins to compensate for the currency effect.
Capital Markets
Over recent years bank de-leveraging has resulted in strong volumes of investment activity including asset sales of EUR4.6 billion in 2014 and EUR3.5 billion in 2015. As the banks and NAMA clear their inventory, volumes of loan books and asset sales from this source have declined. The first half of 2016 has seen a number of large property transactions (over EUR100 million) that have boosted transaction levels. Total spend in the period has reached EUR2.95 billion, which compares to EUR1.7 billion in the same period of 2015.
The top 10 deals in the first half of 2016 accounted for 63% of the total activity in the period and are summarised below:
Property Sector Price Purchaser
(in EURM)
-------------------------------- -------- ----------- --------------------
Blanchardstown Town Centre Retail 950 Blackstone Core
Fund
-------------------------------- -------- ----------- --------------------
One Spencer Dock Office 242 AGC Equity Partners
-------------------------------- -------- ----------- --------------------
Whitewater Shopping Centre Retail 180 DEKA
-------------------------------- -------- ----------- --------------------
The Oval, Ballsbridge Mixed 140 Patrizia
-------------------------------- -------- ----------- --------------------
Project Kells Mixed 93 Meyer Bergman/BCP
-------------------------------- -------- ----------- --------------------
LXV, St.Stephen's Green Office 85 CNP Assurance
-------------------------------- -------- ----------- --------------------
Central Quay, Dublin Office 51 Hibernia REIT
-------------------------------- -------- ----------- --------------------
Golden Island Shopping Centre, Retail 44 Credit Suisse
Athlone
-------------------------------- -------- ----------- --------------------
Royal Hibernian Way, Dawson Mixed 32 Friends First
St, Dublin
-------------------------------- -------- ----------- --------------------
8 Hanover Quay, Dublin Office 32 BNP Paribas
-------------------------------- -------- ----------- --------------------
Others 1,101
------------------------------------------ ----------- --------------------
TOTAL 2,950
------------------------------------------ ----------- --------------------
Due to two large shopping centre deals, the retail sector has dominated demand, accounting for 49% of transactions, followed by offices at 36%, mixed use at 9% and the remaining 6% divided split between residential, industrial, hotel and other. The USA continue to be the largest buyer group accounting for 34.3% of transactions, followed by domestic buyers (including Irish REITS) at 30%, European investors at 18.6%, UK buyers at 12.5%, and the remainder accounting for 4.6%. The profile of the buyer group has very much transitioned from private equity to long term core buyers, which is typical when the cycle moves from opportunistic to stable.
Property Returns
The MSCI index recorded total returns for H1 2016 for Ireland of 6.3% across all property sectors, which compares to 2.2% in the UK. On an annualised basis to June 2016 this reflects 19.5% compared to 25% in the calendar year 2015 and 40% in 2014. These moderating returns reflect where we are in the current cycle and demonstrate that we have now moved from an opportunistic phase (post the financial crisis) to a stabilised phase.
Over the longer term, average annual total returns per IPD/MSCI have been as follows:
3 year 5 year 10 year Dec 1994-June
2016
------- ------- -------- --------------
26.4% 16.8% 2.4% 11.3%
------- ------- -------- --------------
Of the total return in H1 2016, capital growth accounts for 3.9% and income return for 2.3%. By sector the top performer with total returns of 10.8% was industrial, followed by offices at 6.1% and retail at 6.2%. The MSCI all-property equivalent yield remains stable at 5.8% (it was also 5.8% at the end of 2015).
Over the last six months, prime yields have remained stable; prime offices remain at 4.50-4.65% (depending on property commentator), prime high street at 3.25% and prime retail warehousing at 5%. Prime industrial is currently 5.75%, and this is the only sector where property commentators are anticipating further yield compression.
Occupier Markets
Dublin Offices
Total take-up in H1 2016 in Greater Dublin reached 90,000 square meters (965,000 square feet). On an annualised basis this would equate to 177,000 square meters (1.9 million square feet) in gross terms. In the period 2006 to 2016 the overall annual take-up averaged 167,000 square meters (1.8 million square feet), so while current take-up levels are down on the same period in 2015 of 111,500 square meters (1.2 million square feet), they are still running ahead of the long-run average. In addition, we understand that there are a number of potential lettings in due diligence so the anticipation is for a strong second half of the year.
The city centre, as expected, accounted for the bulk of activity with 84% of the take-up in the period, with 58% of this in the Dublin 2/4 postcode. Outside the CBD, the south suburbs accounted for 69% of take-up.
Gross take-up by sector was as follows:
Dublin City Centre
Sector % of
Total
Take-Up
----------------------- ---------
TMT 33%
----------------------- ---------
Banking and Finance 16%
----------------------- ---------
Service Industries 16%
----------------------- ---------
Business Services 8%
----------------------- ---------
Education, Health and
Social 8%
----------------------- ---------
Manufacturing 6%
----------------------- ---------
Professional Services 4%
----------------------- ---------
Public Administration 4%
----------------------- ---------
Other 5%
----------------------- ---------
Total 100%
----------------------- ---------
Dublin South Suburbs
Sector % of
Total
Take-up
----------------------------- ---------
TMT 29%
----------------------------- ---------
Manufacturing Industrial
& Energy 26%
----------------------------- ---------
Business Services 18%
----------------------------- ---------
Financial Services 13%
----------------------------- ---------
Professional 8%
----------------------------- ---------
Consumer Services & Leisure 3%
----------------------------- ---------
Public Sector/Regulatory
Body 3%
----------------------------- ---------
Total 100%
----------------------------- ---------
There has been a steady decline in the greater Dublin vacancy rate which now stands at 8.3%, down from 8.7% in December 2015 and 9% at June 2015. The Dublin 2/4 vacancy rate currently stands at 6.1% (June 2015: 7.1%) and the grade A vacancy rate is 2.4% (June 2015: 1.8%). The vacancy rate in the south suburbs is at 10.4%, compared to 12% in Q2 2015. Grade A vacancy rates in the south suburbs are now being measured, and as at Q2 2015 they stand at 6.8%.
There is currently 409,000 square meters (4.4 million square feet) of office development under construction in the city centre in 30 schemes, of which 66% are speculative. Eleven of these developments are due to complete during the course of 2016, providing approximately 121,000 square meters (1.3 million square feet) of new build/refurbishment. In addition, 16,000 square meters (170,000 square feet) has already been completed to date in 2016. The majority of the remainder will complete between 2017 and 2018.
Looking beyond 2018, there are a number of sites with planning permission in place, particularly in the docklands area, which would suggest that further development could be mobilised should demand necessitate, however many developers appear to be either waiting for pre-lettings or to secure funding, which is delaying commencement. NAMA continues to hold a number of key sites in the docklands and it is not clear when these sites will be sold and subsequently built out by the purchasers.
There is still limited speculative development in the Dublin suburbs. As at June 2016 there is a total of 49,000 square meters (528,000 square feet) is under construction in the Dublin suburbs, in two projects, namely Microsoft's new headquarters which extends to 35,000 square meters (378,000 square feet) and which they are building for their own occupation, and our scheme at Central Park where we have 13,935 square meters (150,000 square feet) under construction. Recently completed schemes added 20,400 square meters (220,000 square feet) of new space.
Prime headline rents in Dublin city centre have grown 4.5% in the six months to June 2016 and currently stand at EUR618 per square meter (EUR57.50 per square foot) and in the south suburbs rents have remained stable at EUR296 per square meter (EUR27.50 per square foot). While leasing activity is down on the same period last year, tenant demand appears to remain robust and market commentators are still suggesting rents will get to EUR699 per square meter (EUR65 per square foot) by year end and to EUR726 per square meter (EUR67.50 per square foot) by the end of 2017.
Cork Office Market
The lack of new development continues to hamper take-up levels in Cork. In H1 2016, take up reached 6,100 square meters (65,650 square feet) (which if annualised would be 12,200 square meters (131,300 square feet)) compared to 22,100 square meters (237,800 square feet) in calendar year 2015. Tenant demand remains strong, albeit much of the FDI demand is for smaller suites. The issue facing the Cork market is a lack of modern space. While the office vacancy rate is 18.6%, much of the space is obsolete or requires a total refurbishment in order to let it. At present there is only one new building under construction, the Capital Cinema site which will provide approximately 1,860 square meters (20,000 square feet) of retail and 4,650 square meters (50,000 square feet) of offices. This is scheduled for completion in Q1 2017.
There are a number of sites for office development in the city centre and suburbs of Cork, however most developers are seeking pre-lettings in order to commence development and these are rare in the Cork market.
Rents for buildings in the city centre completed post 2000 are in the order of EUR215 per square meter (EUR20 per square foot). One Albert Quay, our only building in Cork, which is considered the best office building in the city by some margin, is now commanding rents of EUR296 per square meter (EUR27.50 per square foot) and the Capital Cinema scheme is likely to be marketed at a quoting rent of EUR323 per square meter (EUR30 per square foot).
Retail
Consumer confidence has continued to grow, reflected in Government tax receipts which were up 10.5% in the year to the end of 2015. The Central Stastistics Office in Ireland has confirmed that retail sales have seen 31 successive months of expansion, with retail sales up 8.1% in the year to May 2016. Car sales have been one of the strongest performers, up 24% year on year as at end June. When the motor trade is excluded, retail sales are up 6.5% in the same period. While retail sale volumes are now only 3.3% off peak levels, the value of retail sales is still 17.6% off peak, which would suggest the consumer is benefitting from some imported deflation and discounting.
In addition, tourism figures are positive, up 10.3% in the year to May 2016, with the North American market up 19.3%, the UK market up 9.3% and the European market up 9.2%. While these numbers look strong a weak Sterling is likely to impact on travellers from the UK and over the medium term there are concerns that BREXIT may have a negative impact on tourism.
The retail real estate sector continues to improve. Prime retail is performing strongest, hampered only by limited vacancy on the prime high streets and shopping centres. There are some retailers looking to expand in multiple locations, typically in the café/restaurant and value sectors, but with limited demand from fashion occupiers. In addition, there is reasonable tenant demand for retail parks, albeit by a small pool of tenants. Rental growth is becoming more evident and not just for prime Dublin retail. Partly as a result of rents coming off such a low base and partly due to limited vacancy, the agents are reporting rental growth of 10-15% in provincial locations, depending on the location.
Some of the notable announcements in the period include John Lewis opening their first store in Ireland, taking space in the Arnotts department store on Henry street, and IKEA are rolling out a new click and collect concept with a 1,400 square meter (15,000 square feet) unit in Carrickmines Retail Park.
Development in the retail sector is limited. The only new scheme currently under construction is the western end expansion of Liffey Valley shopping centre in the western suburbs of Dublin, which is nearing completion. Lettings have been agreed there with Penneys, Cosmo, TGI Friday and Prezzo.
Industrial
Take-up in H1 2016 was 1.29 million square feet, down 35% on levels achieved in the same period of 2015. Demand remains at similar levels and property agents are suggesting there is currently in the order of 121,000 square meters (1.3 million square feet) of live demand. However, a shortage of supply of modern premises is restricting options and many occupiers are having to choose the design and built route in order to satisfy the requirements.
As was anticipated, rental growth has now emerged in this sector. In the six months to June, prime industrial rents rose by 12.9% and currently stand at EUR85 per square meter (EUR7.90 per square foot). By year-end the forecasts are for rents to increase to EUR94 per square meter (EUR8.70 per square foot) which could mean rental growth for the calendar year of up to 24.3%.
At present we are the only developer building speculatively in the market, having just completed 4,100 square meters (44,000 square feet) at Horizon Logistics Park. With rents now starting to rise and the shortage of modern space clearly evident, it is likely that others will follow over the latter have of 2016 and into 2017.
The data centre market continues to see ongoing activity. Microsoft has obtained planning permission to develop four new data centres in Dublin and planning has also been granted for a new data centre in Cork.
Finally, while investment into the industrial sector is popular, particularly with Irish pension funds, the availability of product to buy is limited. In H1 2016, only 1% of transactions were accounted for by industrial property.
References
- CBRE Research Reports& Research department - JLL Research Reports & Research department - Savills Research department - SCSI/MSCI Ireland Quarterly Property Index - Investec Irish Economy research reports 2016 - Goodbody Irish Economy research reports 2016 - Davy Irish Economy research reports 2016 - Focus Economics - IDA Ireland - Central Statistics Office of Ireland
PORTFOLIO OVERVIEW
1. LOCATION
As at 30 June 2016, 93% of the portfolio is located in Dublin city centre and greater Dublin, with the remaining 7% located in Cork (One Albert Quay, 5%) and Limerick (Parkway Retail Park, 2%). This is in line with the Company's investment strategy to build a portfolio which would be predominantly Dublin and selectively Cork, Limerick and Galway.
LOCATIONS BY VALUE (1)
Net Value % of Group
EURm Total
================= ========== ===========
Dublin 2/4 567.6 46%
================== ========== ===========
Greater Dublin 584.6 47%
================== ========== ===========
Dublin Total 1,152.2 93%
================== ========== ===========
Cork (100%) 63.8 5%
================== ========== ===========
Limerick 24.7 2%
================== ========== ===========
Total Portfolio 1,240.7 100%
================== ========== ===========
(1) Net of costs. Valuation as at 30 June 2016. Includes 100% of One Albert Quay, Cork
2. SECTOR SPLIT
The portfolio is split 78% offices, 15% retail, 2% industrial and 5% other (including residential and a hotel) by value. This is broadly in line with our original investment strategy of building a portfolio comprising predominantly offices (60%-70%), up to 25% retail and up to 15% industrial. Being ahead of the suggested office weighting is intentional, in that we believed that Dublin offices would perform best as a sector, which is proving to be the case. With regard to the weighting of industrial property, we have now completed two new units at Horizon Logistics Park, where the land is zoned for logistics warehousing and has capacity for up to 93,000 square meters (1 million square feet) of future development. We will soon be commencing the construction of another unit of 33,000 square feet and have agreed terms with Kuehne & Nagel to build them a new 7,400 square meter (80,000 square feet) unit with options to build two further units of 3,700 square meters (40,000 square feet) each. The allocation to industrial is therefore likely to increase as we build out the park.
SECTORS BY VALUE (1)
Net Value % of Group
EURm Total
================= ================ ========== ===========
Dublin CBD
Office (2/4) 562.3 45%
================= ================ ========== ===========
Greater Dublin 348.6 28%
================================== ========== ===========
Cork (100%) 63.8 5%
================================== ========== ===========
Office Total 974.7 78%
=================================== ========== ===========
Retail 181.5 15%
=================================== ========== ===========
Industrial 23.6 2%
=================================== ========== ===========
Other 60.9 5%
=================================== ========== ===========
Total Portfolio 1,240.7 100%
=================================== ========== ===========
(1) Net of costs. Valuation as at 30 June 2016. Includes Green REIT's 60% in Mount Street property and 100% of One Albert Quay (Cork) (contracted to purchase)
3. RENT & ERV
The portfolio was 5% reversionary at 30 June 2015, with annual portfolio contracted rent of EUR61.3 million compared to an annual ERV of EUR64.6 million. Total annual passing rent of EUR45.9 million at 30 June 2016 will step up to EUR61.3 million on the expiry of rent free periods granted on new and renegotiated leases and other abatements granted to tenants.
RENTAL INCOME (1)
Passing Contracted ERV (2) Variance Vacant
Rent Rent EURm v ERV ERV
EURm EURm pa pa EURm
pa pa
============== ================ ======== =========== ======== ========= =======
Dublin CBD
Office (2/4) 16.3 24.4 27.7 -12% <0.1
============== ================ ======== =========== ======== ========= =======
Greater Dublin 16.8 20.8 22.3 -7% -
=============================== ======== =========== ======== ========= =======
Cork 0.0 3.2 3.5 -8% -
=============================== ======== =========== ======== ========= =======
Office Total 33.1 48.4 53.5 -10% -
================================ ======== =========== ======== ========= =======
Retail 10.5 10.7 8.8 +23% 0.8
================================ ======== =========== ======== ========= =======
Industrial
(3) 1.3 1.3 1.3 -2% 0.3
================================ ======== =========== ======== ========= =======
Other 1.0 0.9 1.1 -18% -
================================ ======== =========== ======== ========= =======
Total (Let Properties
Only) 45.9 61.3 64.7 -5% 1.2
================================ ======== =========== ======== ========= =======
(1) Includes Green REIT's 60% in Mount Street property and One Albert Quay (Cork) acquired portion only
(2) Excludes ERV of development assets which are 1 & 32 Molesworth Street, Harcourt Road and Block H Central Park
(3) Unit B1 (new build) completed but vacant. ERV reflected in the above
On a sectoral basis, within the retail portfolio there remains an amount of over renting (23% at 30 June 2016 versus 28% at 30 June 2015), as this sector has only started to turn the corner and rental growth is yet to emerge. The contracted rent from the retail element is EUR10.7 million per annum (average EUR23.29 per sq. ft.) compared to an ERV of EUR8.8 million per annum (average EUR19 per sq. ft.). Helpfully the WAULT on our retail income is 8 years.
On the office side the Dublin CBD portfolio currently has a contracted rent of EUR24.3 million per annum (average EUR42.27 per sq. ft.) compared to an ERV of EUR27.6 million (average EUR48.21 per sq. ft.), and there is also further reversionary potential from the Greater Dublin office and Cork (One Albert Quay) elements of the portfolio.
CONTRACTED RENTS VERSUS ESTIMATED MARKET RENTS (ERVs) (1)
Average Average Variance
Contracted ERV (v ERV)
Rent EURpsf
EURpsf
============== ================ ============ ======== =========
Dublin CBD
Office (2/4) 42.27 48.21 -12%
============== ================ ============ ======== =========
Greater Dublin 21.69 23.68 -8%
=============================== ============ ======== =========
Cork 23.35 25.19 -7%
=============================== ============ ======== =========
Office Total 29.36 32.78 -10%
================================ ============ ======== =========
Retail 23.29 18.97 +23%
================================ ============ ======== =========
Industrial 7.12 7.29 -2%
================================ ============ ======== =========
Total (Let Properties Only) 26.27 27.78 -5%
================================ ============ ======== =========
(1) Let properties only. Excludes car space rent (where applicable)
TOP 10 OCCUPIERS BY CONTRACTED RENT (1)
The table below shows that our top 10 tenants account for 48% of the annual contracted rent. The top ten tenants include Vodafone, Allied Irish Banks, Fidelity International and Pioneer Investments.
Tenant Business Contracted % of Unexpired
Sector Rent Group Term
EURm pa Rent (years) (3)
========================== ======================= =========== ======= =============
Vodafone Ireland TMT 7.3 12% 10.3
========================== ======================= =========== ======= =============
Allied Irish Bank Banking 4.5 7% 10.7
========================== ======================= =========== ======= =============
Fidelity International
(2) Financial Services 3.7 6% 11.4
========================== ======================= =========== ======= =============
Pioneer Investments Financial Services 3.4 6% 10.7
========================== ======================= =========== ======= =============
Ulster Bank Banking 2.8 5% 4.2
========================== ======================= =========== ======= =============
The Commissioners
of Public Works Ireland
(OPW) Public Administration 2.7 4% 4.2
========================== ======================= =========== ======= =============
Northern Trust Financial Services 1.9 3% 2.2
========================== ======================= =========== ======= =============
Bank of America Merrill
Lynch Financial Services 1.7 3% 1.7
========================== ======================= =========== ======= =============
Tyco TMT 1.7 3% 11.6
========================== ======================= =========== ======= =============
GAM Financial Services 1.4 2% 5.9
========================== ======================= =========== ======= =============
Top 10 Tenants 31.1 51% 8.3
=================================================== =========== ======= =============
Remaining tenants 30.2 49 7.3
%
================================================== =========== ======= =============
Total Portfolio 61.3 100% 7.8
=================================================== =========== ======= =============
(1) Includes Green REIT's 60% in Mount Street property and One Albert Quay (Cork) acquired portion only
(2) Includes Fidelity second lease contracted at EUR2.3m pa commencing in November 2016
(3) Unexpired Term/ WAULT is the rent-weighted average remaining term on leases to lease expiry/ break date (whichever comes first). Excludes residential component in Arena Centre
4. TENANT BUSINESS SECTORS
The portfolio has a diversified income base with a high quality tenant mix. As at 30(th) June 2016, 98% (measured by ERV) of the portfolio was occupied, with the banking/financial services sector where the largest concentration is, accounting for 41% of our annual contracted rent.
CONTRACTED RENT BREAKDOWN BY TENANT BUSINESS SECTORS (1)
Contracted % of
Rent Group Rent
EURm pa
========================= =========== ============
Banking/ Financial
Services 25.0 41%
========================== =========== ============
Professional Services 1.7 3%
========================== =========== ============
Technology, Media
and Telecommunications
('TMT') 14.0 23%
========================== =========== ============
Retail Trade 11.3 18%
========================== =========== ============
Public Administration
(Irish Government) 3.8 6%
========================== =========== ============
Other 5.5 9%
========================== =========== ============
Total Portfolio 61.3 100%
========================== =========== ============
(1) Includes Green REIT's 60% in Mount Street property and One Albert Quay (Cork) acquired portion only
5. WAULT & VACANCY
The weighted average unexpired lease term (WAULT) from the portfolio is 7.8 years, up 56% from 5 years at 30 June 2015. This increase in WAULT was brought about by the renegotiation of some of our key leases (e.g. Vodafone and Pioneer Investments) and the granting of new leases to the likes of Fidelity International in George's Quay.
LEASE LENGTHS & VACANCY
WAULT Vacancy Vacancy
(years) (1) (by floor (by ERV)
area)
================= ================ ============= =========== ==========
Office Dublin CBD 7.8 - <1%
(2/4)
================= ================ ============= =========== ==========
Greater Dublin 7.5 - -
================= ================ ============= =========== ==========
Cork 10.8 - -
================= ================ ============= =========== ==========
Office Total 7.9 - -
================= ================ ============= =========== ==========
Retail 8.0 2% 1%
=================================== ============= =========== ==========
Industrial 5.0 2% <1%
=================================== ============= =========== ==========
Other 5.6 - -
================= ================ ============= =========== ==========
Total Portfolio 7.8 4% 2%
=================================== ============= =========== ==========
(1) Unexpired Term/ WAULT is the rent-weighted average remaining term on leases to lease expiry/ break date (whichever comes first). Excludes residential component in Arena Centre
APPIX 1 - EPRA PERFORMANCE MEASURES
Measure Definition of Measure Jun-16 Jun-15
--------------------------------------- -------- ------------------------------------------ ---------- --------
Recurring earnings from core operational
EPRA earnings EUR'000 activities 24,894 10,464
EPRA earnings divided by the weighted
EPRA earnings per share Cents average basic number of shares 3.7 1.6
EPRA earnings divided by the diluted
Diluted EPRA earnings per share Cents weighted average number of shares 3.7 1.6
Administrative and operating costs
EPRA Cost Ratio % divided by gross rental income 11.2% 8.6%
Net assets adjusted to exclude the
EPRA Net Asset Value EUR'000 fair value of financial instruments 1,048,023 899,261
EPRA net assets divided by the number
of shares at the balance sheet date
EPRA Net Asset Value per share Cents on a diluted basis 151.8 132.1
EPRA Triple Net Asset Value EUR'000 EPRA net assets amended to include 1,048,041 899,317
the fair value of financial instruments
and debt
EPRA triple net assets divided by
the number of shares at the balance
EPRA Triple Net Asset Value per share Cents sheet date on a diluted basis 151.8 132.1
Annual passing rents at the balance
sheet date, less non-recoverable
property operating expenses, divided
by the market value of the property,
increased by (estimated) purchasers'
EPRA Net Initial Yield (NIY) % costs. 3.2% 5.0%
EPRA NIY adjusted for the expiration
of rent free periods (or other unexpired
lease incentives such as dicounted
EPRA Topped-up NIY % rent periods and step rents.) 4.4% 5.3%
ERV of non-development vacant space
as a percentage of ERV of the whole
EPRA Vacancy Rate % portfolio of non-development space 2% 2%
--------------------------------------- -------- ------------------------------------------ ---------- --------
APPIX 2 - ASSET MANAGEMENT INITIATIVES - 1 JULY 2015 TO 30 JUNE 2016 (1)
Property Tenant Term Area Contracted Contracted Jun '15 Jun '15 Variance
Certain (Sq. Rent EURm Rent (2) ERV ERV (2)
(years) Ft.) pa EUR psf EURm pa EUR psf
5
====================== ============== =========== ========= =========== =========== ========= ========== =========
LEASE RE-GEARS:
====================================== =========== ========= =========== =========== ========= ========== =========
Central Park
(100%) Vodafone +10 263,000 7.3 24.75 7.5 25.00 -1%
================= =================== =========== ========= =========== =========== ========= ========== =========
George's Quay Pioneer +10 62,782 3.4 50.77 3.2 47.50 +7%
================= =================== =========== ========= =========== =========== ========= ========== =========
Mount Street OPW +5 49,353 1.7 35.32 2.3 44.87 -21%
================= =================== =========== ========= =========== =========== ========= ========== =========
Arena Centre Bank of Ireland +7 (3) 63,586 1.4 20.34 0.9 12.00 +70%
================= =================== =========== ========= =========== =========== ========= ========== =========
College Green Starbucks +10 2,280 0.2 -- 0.1 -- +69%
================= =================== =========== ========= =========== =========== ========= ========== =========
Total (Re-gears) +7.4 441,001 14.0 29.29 14.0 28.67 -
====================================== =========== ========= =========== =========== ========= ========== =========
NEW LETTINGS/ RENEWALS:
====================================== =========== ========= =========== =========== ========= ========== =========
7 tenants to
include Tyco,
Arup, PWC and
One Albert Quay others +11 133,295 3.2 23.35 3.2 23.35 --
(average)
=================== =========== ========= =========== =========== ========= ========== =========
George's Quay Fidelity (4) +12 71,592 3.7 49.00 3.3 43.53 +12%
================= =================== =========== ========= =========== =========== ========= ========== =========
George's Quay RBC Dexia +10 16,651 0.9 49.88 0.8 46.73 +6%
================= =================== =========== ========= =========== =========== ========= ========== =========
George's Quay Informatica +1.5 9,510 0.5 47.50 0.5 46.00 +3%
================= =================== =========== ========= =========== =========== ========= ========== =========
Various Leases 10 leases +5.3 37,296 0.8 21.80 0.9 24.14 -9%
(average)
=================== =========== ========= =========== =========== ========= ========== =========
Various Licences 16 licences Short Term 1,982 0.4 -- <0.1 -- +830%
================= =================== =========== ========= =========== =========== ========= ========== =========
Total (New lettings/ renewals) +10 (6) 270,326 9.5 32.48 (6) 8.8 31.10 (6) +8%
====================================== =========== ========= =========== =========== ========= ========== =========
BREAK OPTIONS NOT EXERCISED:
====================================== =========== ========= =========== =========== ========= ========== =========
Allied Irish
2 Burlington Bank
Road (EBS Limited) +10 85,266 4.2 -- -- -- --
================= =================== =========== ========= =========== =========== ========= ========== =========
Various 9 tenants +3.2 88,042 1.4 -- -- -- --
================= =================== =========== ========= =========== =========== ========= ========== =========
Total (Break option not exercised) +8.3 173,308 5.6 -- -- -- --
====================================== =========== ========= =========== =========== ========= ========== =========
(1) Completed lettings but excludes deals in legals and deals completed for assets sold in the period. Residential element of Arena Centre excluded
(2) Car spaces excluded on rent psf calculations
(3) Bank of Ireland re-gear include term extension for five years with two year's rent equivalent break penalty on next break
(4) Fidelity second lease contracted with commencement date in November 2016
(5) Unexpired Term/ WAULT is the rent-weighted average remaining term on leases to lease expiry/ break date (whichever comes first). Excludes residential component in Arena Centre
(6) Calculations excludes licences
Principal Risks
The Board takes the view that adequately identifying and managing the risks to achieving our strategic objectives is key to the successful delivery of shareholder returns. The Board has divided the principal risks into External Risks, over which we have no influence, and Internal Risks, which we can influence, which are set out below.
External Risks
Risks Potential Impact Mitigation Measures Direction of
Risk
-------------------------- ------------------------- ---------------------------------- ---------------------------
Cyclical Market Potential adverse ü 93% concentration of our ñ Both rents
- the property impact on property assets in Dublin, and yields for
market is cyclical values and rental the capital city, which Dublin offices
and as such levels, impacting experiences less volatility are relatively
values and market shareholder returns. in a downturn than regional stable, having
conditions can centres in Ireland improved rapidly
be volatile. ü Our assets are in prime in landlords'
and good secondary favour since
locations, which are more 2013 as economic
resilient in a downturn recovery took
ü 73% of our portfolio by hold. Rent and
value is Dublin yields for retail
offices, which proved to be the and industrial
most resilient continue to improve
asset class in the last downturn for landlords,
ü Our retail assets are in while the spread
city centres and between Irish
well-populated suburban areas property yields
ü Our warehousing and and the risk
distribution facilities free rate are
are located in close proximity to at historical
airport and highs, which
motorway infrastructure is supportive
ü Our vacancy rate by ERV is of property yields.
low at 2%, thereby
reducing the leasing risk in the
event of a downturn
ü We continue to focus on
capturing the longest
lease terms possible from well
capitalised and
stable tenants so that the
security of income
and cash inflow is optimised
ü The WAULT of our income is
7.8 years
ü The Investment Manager is
experienced in
managing property portfolios
through cycles
-------------------------- ------------------------- ---------------------------------- ---------------------------
Slowdown in Any slowdown or ü The Company's acquisition ò Ireland's
economic growth reversal in current strategy focused economic recovery
- as a very trajectory of economic on city locations, primarily is now firmly
open economy, recovery could Dublin, as the large established,
the Irish economy reduce the demand centres of population are more although there
is highly dependent for space in our resilient economically, are increased
on the wider buildings and impact particularly for retail concerns surrounding
European market on rental values ü The Company also targets global economic
and indeed the and property values, well capitalised growth prospects,
world economy. while increasing tenants with strong covenants and which have been
the level of tenant maintains a heightened by
default. policy of keeping a large and the result of
diversified multi the UK referendum
sectoral customer base to avoid on EU membership.
the Company being
over exposed to any one tenant or
industry sector
ü The Investment Manager's
asset management
team is highly experienced
-------------------------- ------------------------- ---------------------------------- ---------------------------
Speculative Adverse impact ü We are early movers in the ñ As the
Development on revenue, cashflow, development Company has now
Risk - occupiers value and void of new space in Dublin in order commenced 5 developments,
don't take space costs. to benefit from one of which
in our new developments. lower construction costs and to has completed,
deliver completed the risk level
properties when the demand for here has increased.
space outstrips Letting terms
supply and rental values remain have been agreed
strong for one of the
ü While a property may not buildings under
be let when a development,
development or refurbishment and take-up in
commences, the marketing the occupational
of the building commences well market remains
before the scheduled robust.
completion date. We could choose
to start the
letting process earlier if deemed
to mitigate
risk further
ü The Investment Manager and
the Board monitor
changing market conditions
carefully
-------------------------- ------------------------- ---------------------------------- ---------------------------
Political Risk The UK referendum The Board of the REIT is ñ This risk
- potential result in June monitoring this closely. has increased
adverse impact 2016 to leave the It is too early to tell what the since our interim
from 'Brexit' EU could have an impact will be results now that
adverse impact and whether it will be a positive the result of
on the Irish economy. or negative the referendum
We currently export one for Ireland and for the is known.
a high proportion Company.
of our manufactured
goods and our services
to the UK. Given
the potential barriers
that could arise
if Britain becomes
a non-EU territory,
the impact on the
Irish economy could
be significant,
thereby adversely
impacting the real
economy and the
prospects for our
tenants with a
reliance on exports
to the UK.
-------------------------- ------------------------- ---------------------------------- ---------------------------
Regulatory Risk Should the Investment ü The Board and the Audit ñ The regulatory
- AIFMD - The Manager cease to Committee regularly framework is
Investment Manager be authorised as discuss regulatory aspects and continually evolving.
is the authorised an AIFM then the receive reports
AIFM of the Company would be from the Investment Manager in
Company, under required to appoint respect of AIFMD
recently adopted a replacement AIFM compliance matters concerning
EU regulations. and may suffer both the Company
losses arising and the Investment Manager. The
from the transition Investment Manager
from its current in turn consults with its legal
Investment Manager adviser and the
to another. Company's sponsor, Davy, who
attend meetings with
the regulator on behalf of the
Investment Manager
and the Company respectively
ü The Company obtains
independent legal advice
in relation to AIFMD matters in
order to keep
abreast of developments and to
ensure compliance
by the Company with its
obligations under AIFMD
ü The Company has appointed
a Depositary,
Northern Trust, as required of it
under AIFMD
-------------------------- ------------------------- ---------------------------------- ---------------------------
Interest Rate An increase in ü The Investment Manager is ñ With US
Risk - global interest rates experienced in interest rates
interest rates could have an adverse monitoring the property market expected to rise
are currently impact on the Company's through cycles in the short
at record low property values, ü Our assets are well term, this risk
levels but may as the risk premium located and focused has marginally
increase in applied to property on Dublin offices, with quality increased, but
the short to yields would increase. tenants and with Euro and UK rates
medium term. a focus on security of rental are expected
income, which should to stay lower
make them more resilient in the for longer.
event of yield
increases caused by increases in
interest rates
ü In the event that some of
our assets were
to be sold, their quality,
location and the quality
of the tenant and income stream
should make them
desirable to purchasers
-------------------------- ------------------------- ---------------------------------- ---------------------------
Internal Risks
Development Potential adverse ü The Company only employs blue chip ñ The Company
Completion impact on shareholder contractors is on site at
Risk - engineering, returns as a result with a strong and proven track record and 4 locations and
construction of higher costs with therefore the
and other risks and/or delays in requisite financial strength risk level here
that could delivering new ü The Company engages what it has increased.
delay completion product into a considers to
and/or increase supply constrained be the best design team for each project,
costs. market. working
closely with them to identify any cost
overruns
or delays as early as possible
ü The Investment Manager closely
monitors
each project and works closely with the
contractor,
attending on site regularly
ü The Investment Manager's
development team
is highly experienced in developing new
buildings
----------------------- ----------------------- ------------------------------------------ ------------------------
Development Reputational risk, ü The Investment Manager ensures ñ This risk
- Health and potential completion that all has increased
Safety - with delay and potential contractors engaged employ high standards as the Company
increased development financial loss of health has now embarked
activity there arising from a and safety and carry the appropriate on a development
is an increased claim being made. levels of program which
risk of an insurance to mitigate any issues which involves a significant
accident which could arise. amount of construction
could result ü The Investment Manager is an activity.
in the death experienced
or injury. developer with formalised health and
safety procedures.
ü The primary responsibility for
health and
safety passes from the Company to the
main contractor,
with sub-contractors engaged by the
contractor
having no privity with the Company.
ü There is adequate insurance cover
in place
to deal with any claims which might arise
out
of claims being made due to incidents.
----------------------- ----------------------- ------------------------------------------ ------------------------
Development Delayed delivery ü The Company only selects ò As the
- Main Contractor of a development financially robust general economy
or Subcontractor or refurbishment contractors to carry out works has improved
failure with resulting ü The principal contractor is the risk of a
additional costs, responsible sub-contractor
and potential failure for monitoring the viability of or main contractor
to pass the completed sub-contractors failing is reducing.
space to a tenant appointed by them
who has entered ü The Company allows for timing
into a pre-letting contingencies
agreement, thereby as well as possible cost contingencies at
delaying rental the
income receipts. project planning phase
----------------------- ----------------------- ------------------------------------------ ------------------------
Financial Statements
Green REIT plc
Unaudited consolidated statement of comprehensive income
Year Ended 30 June 2016 Year Ended 30 June 2015
Notes Underlying Capital Total Underlying Capital Total
pre-tax and other pre-tax and other
EUR'000 EUR'000
(1) EUR'000 EUR'000 (1) EUR'000 EUR'000
Gross rental and related income 3 66,821 - 66,821 45,864 - 45,864
Net rental and related income 3 52,549 - 52,549 37,819 - 37,819
Net movement on fair value of
investment
properties 4 - 109,367 109,367 - 113,803 113,803
Profit on development services 519 - 519
Investment Manager
- base fee 19 (9,669) - (9,669) (8,104) - (8,104)
- performance fee 19 (13,893) - (13,893) (20,982) - (20,982)
Administrative expenses (2,708) - (2,708) (2,137) - (2,137)
Operating profit 26,798 109,367 136,165 6,596 113,803 120,399
Finance income 5 - - - 95 - 95
Finance expense 5 (4,644) - (4,644) (1,245) - (1,245)
Share of joint venture profit 9 2,740 11,306 14,046 5,018 32,436 37,454
Profit on ordinary activities before
taxation 24,894 120,673 145,567 10,464 146,239 156,703
Income tax 7 (65) - (65) - - -
Profit for the year after taxation 24,829 120,673 145,502 10,464 146,239 156,703
Other comprehensive income - - - - - -
____________ ____________ ____________ ____________ ____________ ____________
Total comprehensive income for the
year attributable to the
shareholders
of the Company 24,829 120,673 145,502 10,464 146,239 156,703
________ _________ _________ ________ _________ _________
Basic earnings per share (cents) 14 21.5 23.5
Diluted earnings per share (cents) 21.4 23.4
________ _________ _________ ________ _________ _________
The accompanying notes are an integral part of these financial statements.
(1) As outlined in note 1.
Green REIT plc
Unaudited consolidated statement of financial position
as at 30 June
2016 2015
Assets Note EUR'000 EUR'000
Non-current assets
Investment properties 8 1,240,712 817,326
Investment in joint venture 9 - 77,874
Total non-current assets 1,240,712 895,200
Current assets
Trade and other receivables 11 14,271 2,631
Cash and cash equivalents 76,839 37,611
Total current assets 91,110 40,242
Total assets 1,331,822 935,442
Equity
Share capital 12 68,087 66,697
Share premium 12 637,533 617,941
Performance fee share reserve 12 13,893 20,982
Retained earnings 328,528 193,697
Equity attributable to shareholders
of the Company 1,048,041 899,317
Liabilities
Current liabilities
Amounts due to investment manager
- base fee 2,613 2,248
Trade and other payables 16 28,220 14,454
Total current liabilities 30,833 16,702
Non-current liabilities
Borrowings 18 252,948 19,423
Total non-current liabilities 252,948 19,423
Total liabilities 283,781 36,125
Total equity and liabilities 1,331,822 935,442
Net asset value per share (cents) 15 153.9 134.8
Diluted and EPRA net asset value
per share (cents) 15 151.8 132.1
The accompanying notes are an integral part of these financial statements.
Green REIT plc
Unaudited consolidated statement of changes in equity
Performance
Share Share fee share Retained
capital premium reserve earnings Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 30 June 2014 66,697 617,941 - 43,129 727,767
Total comprehensive income for the
year
Profit for the year to 30 June 2015 - - - 156,703 156,703
Transactions with owners, recognised
directly in equity
Investment Manager - performance fee
share reserve - - 20,982 - 20,982
Dividends paid - - - (6,135) (6,135)
At 30 June 2015 66,697 617,941 20,982 193,697 899,317
Total comprehensive income for the
year
Profit for the year to 30 June 2016 - - - 145,502 145,502
Transactions with owners, recognised
directly in equity
Investment Manager - performance fee
shares issued 1,390 19,592 (20,982) - -
Investment Manager - performance fee
share reserve - - 13,893 - 13,893
Dividends paid - - - (10,671) (10,671)
At 30 June 2016 68,087 637,533 13,893 328,528 1,048,041
The accompanying notes are an integral part of these financial statements.
Green REIT plc
Consolidated statement of cash flows
for the year ended 30 June 2016 and the year ended 30 June 2015
2016 2015
Note EUR'000 EUR'000
Cash flows from operating activities
Profit for the year 145,502 156,703
Adjustments for:
* Net movement on revaluation of investment
properties 8 (109,367) (113,803)
* Finance income 5 - (95)
* Finance expense 5 4,644 1,245
* Profit from joint venture 9 (14,046) (37,454)
* Investment Manager - performance fee 19 13,893 20,982
40,626 27,578
Changes in:
* trade and other receivables 11 (6,840) (711)
* current liabilities and base fee due 16 8,318 2,258
Cash generated from operating activities 42,104 29,125
Interest received 5 - 95
Interest paid (3,997) (1,032)
Cash inflow from operating activities 38,107 28,188
Cash flows from investing activities
Acquisition of investment properties (43,384) (372,639)
Acquisition of subsidiary, net
of cash acquired 10 (77,726) -
Distribution from joint venture 9 (3,061) 1,464
Investment in joint venture 9 630 -
Withdrawals from money market funds - 351,649
Capital expenditure (22,638) (2,182)
Proceeds from sale of investment
properties 8 73,583 -
Net cash used in investing activities (72,596) (21,708)
Cash flows from financing activities
Dividends paid (10,671) (6,135)
Drawdown of overdraft facility - 18,010
Repayment of overdraft facility - (18,010)
Costs associated with Bank of Ireland (665) -
refinancing
Drawdown of revolving credit facility 116,203 20,746
Costs associated with Barclays
facility - (1,536)
Repayment of revolving credit facility (31,150) -
Net cash inflows from financing
activities 73,717 13,075
Net increase in cash and cash equivalents 39,228 19,555
Cash and cash equivalents at beginning
of year 37,611 18,056
Cash and cash equivalents at 30
June 2016 76,839 37,611
The accompanying notes are an integral part of these financial statements.
Green REIT plc
Notes
Notes to the Financial Statements
1 Basis of preparation and significant accounting policies
Statement of compliance
Basis of preparation and significant accounting policies
The financial information in this announcement was approved by the Board of Directors on 11 September 2016 and does not comprise statutory financial statements for the year ended 30 June 2016, within the meaning of the Companies Acts 2014. The statutory financial statements for the year to 30 June 2016 will be finalised based on the financial information presented in this preliminary announcement and will be delivered to the Companies Registration Office in due course.
Statement of compliance
These unaudited consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (EU IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), and the Companies Act 2014.
The following new standards and amendments were adopted by the Group for the first time in the current financial reporting period with no significant impact on the Group's result for the period or financial position:.
-- Annual Improvements to IFRSs 2010-2012 cycle (effective date 1 February 2015)
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 30 June 2016, and have not been applied in preparing these consolidated financial statements. The items that may have relevance to the Group are as follows:
-- Annual Improvements to IFRSs 2012-2015 cycle (effective date 1 January 2016) * -- IAS 1 (amended) - Presentation of financial statements (effective date 1 January 2016)* -- IAS 27 (amended) - Separate financial statements (effective date 1 January 2016)* -- IFRS 10 (amended) - Consolidated financial statements (effective date 1 January 2016)* -- IFRS 11 (amended) - Joint arrangements (effective date 1 January 2016)* -- IFRS 15 - Revenue from contracts with customers (effective date 1 January 2018)* -- IFRS 9 - Financial Instruments (effective date 1 January 2018)* -- IAS 7 (amended) - Statement of Cash Flows (effective date 1 January 2017)*
-- IFRS 2 (amended) - Classification and measurement of share-based payment transactions (effective 1 January 2018)*
-- IFRS 16 - Leases (13 January 2016) (effective 1 January 2019)*
* Not EU endorsed at the time of approval of these financial statements
The Group is in the process of assessing the impact of the new standards and interpretation on its financial reporting and currently intends to apply the new requirements once they are endorsed by the EU.
The accounting policies set out below have been applied to the consolidated and Company financial statements.
Green REIT plc
Notes (continued)
1 Basis of preparation and significant accounting policies (continued)
Going concern
The Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is appropriate to prepare the consolidated financial statements on a going concern basis.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for investment properties, short term investments and derivatives, which are measured at fair value.
Functional and presentation currency
The financial information is presented in Euro, which is the Company's functional currency. All financial information presented in Euro has been rounded to the nearest thousand except when otherwise indicated.
Underlying pre-tax earnings
The European Public Real Estate Association (EPRA) has issued Best Practices Recommendations, the latest update of which was issued in December 2014, which give guidelines for performance measures. EPRA Earnings is the profit after tax excluding investment and development property revaluations and gains or losses on disposals, changes in the fair value of financial instruments and associated close-out costs and their related taxation. EPRA Earnings will also include earnings from non-property operating activity should a real estate company be involved in such an activity. Underlying earnings consists of the EPRA Earnings measure.
Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period or in the period of revision and future periods if the revision affects both current and future periods.
Information about critical judgements in applying accounting policies that have the most significant effect on amounts recognised in the consolidated financial statements is included in the accounting policies and the notes to the financial statements.
The key accounting judgement and estimate in these financial statements is the valuation of the property portfolio. This is discussed in further detail under the accounting policy for property valuation and in note 8.
Green REIT plc
Notes (continued)
1 Basis of preparation and significant accounting policies (continued)
Measurement of fair values
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.
A number of the Group's accounting policies and disclosures require the measurement of fair values. When measuring the fair value of an asset or liability the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
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).
If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
Basis of consolidation
The Group's financial statements consolidate the financial statements of the Parent and of all subsidiary undertakings together with the Group's share of the results and net assets and joint ventures made up to 30 June 2016. The results of subsidiary undertakings acquired or disposed of in the year are included in the Group income statement from the date of acquisition or up to the date of disposal.
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.
Green REIT plc
Notes (continued)
1 Basis of preparation and significant accounting policies (continued)
Subsidiaries
Subsidiaries are entities controlled by the Group (control exists when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity). The financial statements of the subsidiaries are
included in the consolidated financial statements from the date that control commences until the date that control ceases.
Joint Arrangements
Under IFRS 11, Joint Arrangements, the Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group's rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Group considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. When the Group has rights to the assets and obligations to the liabilities, relating to an arrangement, it accounts for each of its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation. When the Group has rights only to the net assets of an arrangement, it accounts for its interest using the equity method. Investments in joint ventures are accounted for using the equity method and are recognised initially at cost. The cost of such investments includes transaction costs.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Business Combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Green REIT plc
Notes (continued)
1 Basis of preparation and significant accounting policies (continued)
Investment properties
Investment property is property held either to earn rental income, or for capital appreciation (including future re-development) or for both, but not for sale in the ordinary course of business. The Group does not have any properties held for resale or trading purposes.
Investment property is initially measured at cost including related acquisition costs and subsequently valued by professional external valuers at their respective fair values at each reporting date. The difference between the fair value of an investment property at the reporting date and its carrying value prior to the external valuation is recognised in profit or loss as a fair value gain or loss.
Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
Properties leased out to tenants under operating leases are included in investment property in the statement of financial position.
Investment properties are treated as acquired at the point where the Group assumes the significant risks and returns of ownership which normally occurs when the conveyancing contract has been performed by both buyer and seller and the contract has been deemed to have become unconditional and completed. Investment properties are deemed to have been sold when the buyer has assumed the risks and rewards of ownership and the contract has been completed.
Additions to investment properties consist of construction and other directly attributable costs such as professional fees and expenses and in the case of investment properties under development capitalised interest where applicable. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs. Where the Group begins to redevelop an existing investment property the property continues to be held as an investment property.
Properties that are currently being developed or that are to be developed in the near future are held as development properties. These properties are initially valued at cost. Any direct expenditure on development properties is capitalised and the properties are then valued by external valuers at their respective fair value at each reporting date.
The cost of properties in the course of development includes attributable interest and other associated outgoings. Interest is calculated on the development expenditure by reference to specific borrowings, where relevant, and otherwise on the average rate applicable to short-term loans. Interest is only capitalised where development activity is taking place. A property ceases to be treated as a development property on practical completion.
External, independent valuers, having appropriate recognised and relevant professional qualifications and recent experience in the location and category of property being valued, value the Group's property portfolio at each reporting date, in accordance with the Royal Institution of Chartered Surveyors Valuation Standards (RICS).
Green REIT plc
Notes (continued)
1 Basis of preparation and significant accounting policies (continued)
Investment property (continued)
Critical accounting judgements and key estimations of inherent uncertainty in investment property valuations
The fair values derived are based on anticipated market values for the properties, being the estimated amount that would be received to sell the assets in an orderly transaction between market participants.
The valuation of the Group's investment property portfolio is inherently subjective as it requires among other factors, assumptions to be made regarding the ability of existing tenants to meet their rental obligations over the entire life of their leases, the estimation of the expected rental income in to the future, an assessment of a property's ability to remain as an attractive technical configuration to existing and prospective tenants in a changing market and a judgement to be reached on the attractiveness of a building, its location and the surrounding environment. While these and other similar matters are market standard considerations in determining the fair value of a property in accordance with the RICS methodology they are all subjective assessments of future outturns and macro-economic factors which are outside of the Group's control or influence and therefore may prove to be inaccurate long term forecasts.
As a result of all of these factors the ultimate valuation the Group places on its investment properties is subject to some uncertainty which may not turn out to be accurate, particularly in times of macro-economic volatility.
The RICS property valuation methodology is considered by the Board to be the valuation technique most suited to the measurement of the fair value of property investments. It is also the primary measurement of fair value that all major and reputable property market participants use when valuing a property investment.
Rental income
Rental income from investment property is recognised on an accruals basis as revenue on a straight-line basis over the term of the lease. The Group considers this is the most representative systematic time pattern in which the benefits of ownership of the assets will accrue to the business. Lease incentives granted are recognised as an integral part of the total rental income, 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 date of the lease to the earliest termination date 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.
Contingent rents, such as turnover rents, and indexation adjustments are recorded as income in the periods in which they are earned. Rental concessions are recorded as adjustments to income in the rental periods to which the concession relates.
A rent adjustment or review due under a lease which has not yet been settled at the reporting date is included in the results based upon a reasonable estimate of the amount the review will be settled at and then adjusted to actual outcome when the outstanding review is finally established.
Green REIT plc
Notes (continued)
1 Basis of preparation and significant accounting policies (continued)
Rental Income (continued)
Where the Group receives a surrender premium from a tenant for the early termination of a lease, the profit net of any direct costs associated with dilapidation and legal costs relating to that lease, is reflected in the accounting period in which the surrender took place.
Details on all rental incentives are provided to the external valuers for their consideration during their review of the investment property valuation at each reporting date.
Service charge income is recognised in the period in which it is earned.
Finance income and finance costs
The Group's finance income and finance costs comprise interest income, interest expense and related charges. Interest income or expense is recognised using the effective interest method.
Tax
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse using tax rates enacted or substantively enacted at the reporting date.
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other financial assets (including assets designated as at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Green REIT plc
Notes (continued)
1 Basis of preparation and significant accounting policies (continued)
Financial instruments (continued)
Non-derivative financial assets (continued)
The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. At 30 June 2016 the Group had the following non-derivative financial assets, which are classified as loans and receivables:
Cash and cash equivalents
Cash and cash equivalents comprise 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 in the management of its short-term commitments.
Trade and other receivables
Trade and other receivables are initially recognised at fair value, which is usually the original invoiced amount and subsequently carried at amortised cost using the effective interest method less provision made for impairment, if applicable.
The fair values of trade and other receivables are estimated at the present value of future cash flows, discounted at the market rate of interest at the measurement date. Short-term receivables with no stated interest rate are measured at the original invoice amount if the effect of discounting is immaterial. Fair value is determined at initial recognition and, where appropriate for disclosure purposes.
Non-derivative financial liabilities
All financial liabilities are recognised initially on the trade or origination date, which is the date that the Group becomes a party to the contractual provisions of the instrument and are measured initially at fair value less initial direct costs and subsequently measured at amortised cost.
Fair value is calculated, for period end disclosure purposes, based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the measurement date.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Derivative financial instruments
Derivatives are recognised initially at fair value; any directly attributable transaction costs are recognised in profit or loss as they are incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss.
Green REIT plc
Notes (continued)
1 Basis of preparation and significant accounting policies (continued)
Financial instruments (continued)
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are charged to the profit and loss account reserve.
Share based payments - performance fee
The performance fee arrangement between the Company and the Investment Manager is accounted for as an equity settled share based payment arrangement. The Company estimates the grant date fair value of each equity instrument and the number of equity instruments for which the service and non-market performance conditions are expected to be satisfied, resulting in the initial estimate of the total share based payment cost which is expensed over the vesting period.
Subsequent to 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 is revised during the vesting period, that is, the period from 1 July to 30 June. Ultimately, the share based payment cost is based on the fair value of the number of equity instruments issued upon satisfaction of these conditions.
2 Operating segments
The Group is organised into four business segments, against which the Group reports its segmental information, being Retail Assets, Office Assets, Industrial Assets and Other Assets (properties that do not fall into the preceding classifications). 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. For the period from 1 July 2015 to 8 January 2016, the date of acquisition, Central Park is presented on a proportional consolidation basis, with the period it was held as a joint venture then eliminated to reconcile total numbers back the statement of comprehensive income.
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 underlying performance of a segment are net rental income and the movement in fair value of properties, as these measures illustrate and emphasise 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.
Information related to each reportable segment is set out below:
Green REIT plc
Notes (continued)
2 Operating segments (continued)
Unallocated Group
Office Retail Industrial Other Joint Expenses Consolidated
Assets
Assets Assets Assets (i) Total Venture** and Assets Position
2016 2016 2016 2016 2016 2016 2016 2016
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Year ended 30
June 2016
Gross rental
and related
income 54,792 14,145 1,244 1,801 71,982 (5,161) - 66,821
Property
outgoings (11,403) (3,155) (414) (408) (15,380) 1,108 - (14,272)
Net rental and
related income 43,389 10,990 830 1,393 56,602 (4,053) - 52,549
Net movement on
fair value of
investment
properties 95,534 15,476 7,675 1,988 120,673 (11,306) - 109,367
Profit on
Residual
Business - - - - - - 519 519
Investment
Manager - base
fee (7,783) (1,615) (240) (238) (9,876) - 207 (9,669)
Investment
Manager -
performance
fee - - - - - - (13,893) (13,893)
Administration
expenses - - - - - - (2,708) (2,708)
Segment profit
before tax 131,140 24,851 8,265 3,143 167,399 (15,359) (15,875) 136,165
Finance costs (3,707) - - - (3,707) 1,313 (2,250) (4,644)
Share of profit
in joint
venture - - - - - 14,046 - 14,046
Profit before
tax 127,433 24,851 8,265 3,143 163,692 - (18,125) 145,567
As at 30 June
2016
Total segment
assets* 1,030,418 201,312 21,921 20,853 1,274,504 - 57,318 1,331,822
Investment
properties and
development
property 1,014,599 170,751 17,060 38,302 1,240,712 - - 1,240,712
(i) Includes hotel and car park assets
*Total cash and cash equivalents and short term deposits at 30 June 2016 is EUR76.8 million (2015 EUR37.6 million) of which EUR55.6 million (2015: EUR28.2 million) is unallocated to operating segments.
** Reconciliation of the Group's segmental reporting analysis to the consolidated financial statements. For the purposes of our segmental reporting the Central Park Joint Venture is included on a proportional consolidation basis for the period to 8 January 2016. The statutory reporting presents the Joint Venture using the equity method
Green REIT plc
Notes (continued)
2 Operating segments (continued)
Unallocated Group
Office Retail Industrial Other Joint Expenses Consolidated
Assets
Assets Assets Assets (i) Total Venture** and Assets Position
2015 2015 2015 2015 2015 2015 2015 2015
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Period ended 30
June 2015
Gross rental and
related income 40,889 11,258 1,160 1,733 55,040 (9,176) - 45,864
Property
outgoings (7,043) (1,893) (366) (314) (9,616) 1,571 - (8,045)
Net rental and
related income 33,846 9,365 794 1,419 45,424 (7,605) - 37,819
Net movement on
fair value of
investment
properties 102,869 40,219 246 2,905 146,239 (32,436) - 113,803
Investment
Manager - base
fee (4,813) (1,896) (198) (210) (7,117) - (987) (8,104)
Investment
Manager -
performance
fee (2,831) (2,025) (16) (128) (5,000) - (15,982) (20,982)
Administration
expenses - - - - - - (2,137) (2,137)
Segment profit
before tax 129,071 45,663 826 3,986 179,546 (40,041) (19,106) 120,399
Finance income - - - - - - 95 95
Finance costs (2,587) - - - (2,587) 2,587 (1,245) (1,245)
Share of profit
in Joint
Venture - - - - - 37,454 - 37,454
Profit before tax 126,484 45,663 826 3,986 176,959 - (20,256) 156,703 As at 30 June 2015 Total segment assets* 746,657 187,243 10,696 39,070 983,666 (76,423) 28,199 935,442 Investment properties and development property 735,507 183,870 10,460 38,469 968,306 (150,980) - 817,326 (i) Includes hotel and car park assets
*Total cash and cash equivalents and short term deposits at 30 June 2016 is EUR76.8 million (2015 EUR37.6 million) of which EUR55.6 million (2015: EUR28.2 million) is unallocated to operating segments.
** Reconciliation of the Group's segmental reporting analysis to the consolidated financial statements. For the purposes of our segmental reporting the Central Park Joint Venture is included on a proportional consolidation basis. The statutory reporting presents the Joint Venture using the equity method
Green REIT plc
Notes (continued)
3 Gross and net rental and related income 2016 2015
EUR'000 EUR'000
Gross rental and related income
Gross rental income 47,298 38,920
Spreading of tenant lease incentives/rent
free periods 6,241 512
Surrender Premia 2,893 -
Service charge income 10,389 6,432
Gross rental and related income 66,821 45,864
Service charge expenses (10,389) (6,432)
Property operating expenses (3,883) (1,613)
Net rental and related income 52,549 37,819
4 Net movement on fair value of investment 2016 2015
properties
EUR'000 EUR'000
Fair value gain on investment properties
(note 8) 98,601 119,000
Fair value gain on acquisition of 12,554 -
interest in The Central Park Limited
Partnership (note 10)
Fair value movement on property option
(note 16) (1,788) (5,197)
Net movement on fair value of investment
properties 109,367 113,803
5 Net finance expense 2016 2015
EUR'000 EUR'000
Finance income
Interest income on short term deposits - 95
_________ _________
Finance costs
Loan interest (4,024) (501)
Commitment fee (612) (582)
Bank fees and other costs (8) (9)
Overdraft arrangement fee - (153)
Finance costs (4,644) (1,245)
_________ _________
Net finance expense (4,644) (1,150)
Green REIT plc
Notes (continued)
6 Profit for the period
The profit for the period has been arrived at after charging:
(i) Auditor's remuneration 2016 2015
EUR'000 EUR'000
Audit fees
Parent and consolidated financial
statements 140 105
Audit of subsidiary undertakings 25 25
Total audit fees 165 130
Audit related assurance services 40 40
Total audit and audit related assurance
services 205 170
The auditor recharged EURNil in out
of pocket expenses
(2015: Nil)
Other fees
Tax compliance 75 22
Tax advisory services 120 145
Other - 70
Total other fees 195 237
(ii) Directors' remuneration EUR'000 EUR'000
Fees 270 270
Taxes 10 10
Expenses 17 3
297 283
Green REIT plc
Notes (continued)
7 Taxation
Tax recognised in profit or loss 2016 2015
EUR'000 EUR'000
Current and deferred tax expense 65 -
Green REIT plc elected for group REIT status with effect from July 2013. As a result, the Group does not pay Irish corporation tax on the profits and gains from qualifying rental business in Ireland provided it meets certain conditions.
Instead, distributions to shareholders in respect of the property rental business are treated for Irish tax purposes as income in the hands of shareholders. Corporation tax is still payable in the normal way in respect of income and gains from a Group's residual business (generally including any property trading business) not included in the property rental business. The Group is also liable to pay other taxes such as VAT, stamp duty land tax, stamp duty, local property tax and payroll taxes in the normal way.
Within the Irish REIT regime, for corporation tax purposes the property rental business is treated as a separate business to the residual business. A loss incurred by the property rental business cannot be set off against profits of the residual business.
An Irish REIT is required, subject to having sufficient distributable reserves, 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. Failure to meet this requirement will result in a tax charge calculated by reference to the extent of the shortfall in the dividend paid. A dividend paid by an Irish REIT from its property rental business is referred to as a property income distribution or PID. Any normal dividend paid from the residual business by the Irish REIT is referred to as a Non-PID dividend.
In 2016 the Group earned a profit of EUR0.52 million from its residual business, resulting in a tax charge of EUR65,000 for the financial year.
The Directors confirm that the Company has remained in compliance with the Irish REIT rules and regulations up to and including the date of this report.
Green REIT plc
Notes (continued)
8 Investment properties
2016 2016 2016 2015 2015
Investment Development Total Investment Development
Property Property Property Property Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At beginning of
year 787,571 29,755 817,326 286,005 - 286,005
Additions
* Central Park Limited Partnership Properties 320,458 11,252 331,710 - - -
* Contract price other 52,231 - 52,231 377,719 23,000 400,719
* Related acquisition costs 1,502 - 1,502 8,204 1,216 9,420
* Capital additions 4,809 17,829 22,638 1,764 418 2,182
Reclassification (500) 500 - (4,700) 4,700 -
Disposals (83,296) - (83,296) - - -
Change in fair
value 87,387 11,214 98,601 118,579 421 119,000
Balance at 30 June 1,170,162 70,550 1,240,712 787,571 29,755 817,326
Acquisitions
The initial cost before acquisition expenses of the properties acquired in the year to 30 June 2016 was EUR372.7 million (2015: EUR377.7 million) on investment properties and EUR11.2 million (2015: EUR23.0 million) on development properties and the total costs of acquisition which comprised of stamp duty payable at an average rate of 2%, legal services and other directly attributable costs arising from the transactions amounted to EUR1.5 million (2015: EUR9.4 million), resulting in total capitalised costs of EUR385.4 million (2015: EUR410.1 million) on acquisition.
Of the total acquisitions during the year EUR331.7 million was acquired through the acquisition of the Central Park Limited Partnership which is detailed more fully in note 10 Business Combinations.
The Group agreed to acquire Albert Quay in Cork in May 2015 subject to practical completion of the building, which was achieved in February 2016. The agreement allowed for stage payments as tenants occupied the buildings. As at 30 June 2016 EUR41.1 million had been paid with a further EUR10.35 million in payments expected to be paid post year end.
Included in capital additions is interest of EUR145,000 (2015: EURnil) capitalised in respect of assets under development.
Green REIT plc
Notes (continued)
8 Investment properties (continued)
Disposal of Investment Properties
The Group disposed of four investment properties during Q2 2016 at their then fair value of EUR72.5 million.
In February 2016, the group disposed of its 40% interest in the Mount Street Investment pursuant to the terms of the related option agreement. The carrying value of the group's 40% interest in the property at that date was EUR10.7 million. See note 16 for further detail.
During 2016, the Group reclassified a small parcel of land in Horizon Business Park from Investment Property to Development Property. This was done to reflect the planning permission that had been obtained for a building on the site and the Group's intention to develop the property.
Fair Value of Properties
The fair value of the Group's investment property at 30 June 2016 has been arrived at on the basis of valuations carried out at that date by external valuers appointed by the Group, namely CBRE Ireland (CBRE), Savills Ireland (Savills) and Jones Lang LaSalle Ireland (JLL).
JLL performed valuations on 50.5% of the investment property portfolio (by value), while CBRE performed valuations on 44.4% of the portfolio and Savills performed valuations on the remaining 5.1%. The fees earned by JLL, CBRE and Savills from the Group are less than 5% of their total Irish revenues.
The information provided to the valuers, and the assumptions and valuation methodologies and models used by the valuers, are reviewed by senior members of the Investment Manager. The valuers meet with the external auditors and also present the results of their valuation at 31 December and 30 June directly to the Audit Committee.
The valuations performed by CBRE, Savills and JLL, which conform to the Valuation Standards of the Royal Institution of Chartered Surveyors and with IVA 1 of the International Valuations Standards, were arrived at by reference to market evidence of transaction prices for similar properties.
For investment property, the income approach/yield methodology involves applying market-derived capitalisation yields to current and market-derived future income streams, with appropriate adjustments for income voids arising from vacancies or rent-free periods. These capitalisation yields and future income streams are derived from comparable property and leasing transactions and are considered to be the key inputs in the valuation. Other factors that are taken into account include the tenure of the property, tenancy details, planning, building and environmental factors that might affect the property.
In the case of investment property under development, the approach applied is the "residual method" of valuation, which is the investment method as described above with a deduction for the costs necessary to complete the development together with an allowance for the remaining risk.
Green REIT plc
Notes (continued)
8 Investment properties (continued)
At 30 June 2016, the Group considers that all of its investment properties fall within Level 3 fair value as defined by IFRS 13 and believe that the income approach / yield methodology using market rental values capitalised with a market capitalisation rate or yield used by the valuers is the best method to determine the fair value of the investment properties. As further outlined in IFRS 13, a Level 3 fair value recognises that not all of the inputs and considerations made in determining the fair value of property investments can be derived from publicly available data, as the valuation methodology in respect of a property has also to rely on other factors including technical engineering reports, legal data and analysis, and proprietary data bases maintained by the valuers in respect of similar properties to the assets being valued.
The Group external valuation experts have noted that "following the EU referendum held on 23 June 2016 concerning the UK's membership of the EU, a decision was taken to exit. We are now in a period of uncertainty in relation to many factors that impact the property investment and letting markets. Since the Referendum date it has not been possible to gauge the effect of this decision by reference to transactions in the market place. The probability of our opinion of value exactly coinciding with the price achieved, were there to be a sale, has reduced".
Valuations are performed on a bi-annual basis at each reporting date, being 30 June and 31 December each year.
In consideration of the fair value of investment properties, the current use of the properties is their highest and best use.
Green REIT plc
Notes (continued)
8 Investment properties (continued)
Quantitative information about fair value measurements using unobservable inputs (level 3) at 30 June 2016, per property class are as follows:
Asset class Input 2016 Range 2015 Range
Low High Low High
Retail Assets Annual rent per sq ft 15.32 81.14 15.12 81.14
ERV per sq ft 11.20 53.60 9.53 48.13
Equivalent yield % 4.16 6.88 4.26 6.76
Long term vacancy rate 0.00% 20.59% 0.00% 16.27%
Office Assets (i) Annual rent per sq ft 10.62 49.65 11.24 48.93
ERV per sq ft 12.50 54.26 12.00 50.04
Equivalent yield % 4.48 7.76 4.98 7.93
Long term vacancy rate 0.00% 20.55% 0.00% 12.13%
Industrial Assets(ii) Annual rent per sq ft 6.99 7.81 6.99 7.77
ERV per sq ft 7.48 7.48 6.50 6.50
Equivalent yield % 6.37 6.37 6.66 6.66
Long term vacancy rate 0.00% 0.00% 0.00% 0.00%
Other Assets (iii) Equivalent yield % 6.50 6.50 6.94 6.94
Long term vacancy rate 0.00% 0.00% 0.00% 0.00%
Development
Assets Net Initial yield % 5.20% 6.25% 5.20% 5.25%
Build per sq ft 132.94 198.58 160.00 220.00
Rental value per sq ft (iv) 28.00 52.45 50.00 55.00
(i) Includes the Central Park office portfolio.
(ii) There is only one asset in this asset class and therefore there is no range information provided on ERV, equivalent yield or vacancy rate.
(iii) Includes hotel and car park assets.
(iv) Rental value on development assets is the expected rental value that will be achieved upon completion of the development.
Green REIT plc
Notes (continued)
8 Investment properties (continued)
Sensitivity of measurement to variance of significant unobservable inputs
A decrease in the estimated annual rent will decrease the fair value. Similarly, 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.
Across the entire portfolio of investment properties, a 1% increase in equivalent yield would have the impact of a EUR193.1 million reduction in fair value whilst a 1% decrease in yield would result in a fair value increase of EUR285.9 million. This is further analysed by property class, as follows:
2016 2015
Value +1% Value -1% Value +1% Value
-1%
Equivalent Equivalent Equivalent Equivalent
Yield Yield Yield Yield
Property Class EUR'000 EUR'000 EUR'000 EUR'000
Office (i) (164,454) 237,600 (116,884) 172,187
Retail (25,511) 44,019 (26,452) 37,814
Industrial (2,450) 3,370 (1,451) 1,990
Other (680) 920 (2,786) 3,736
________ ________ ________ _______
Investment Properties (193,095) 285,909 (147,573) 215,727
Development Properties (21,990) 31,822 (11,010) 16,407
________ ________ ________ _______
Total Properties (215,085) 317,731 (158,583) 232,134
Green REIT plc
Notes (continued)
9 Investment in joint venture
2016 2015
EUR'000 EUR'000
At the beginning of the period 77,874 41,884
Investments made 3,061 2,344
Distributions received (630) (3,808)
Share of profit 14,046 37,454
Disposal of joint venture (94,351) -
_______ _______
Total investment - 77,874
The Group, through its wholly owned subsidiary Green REIT (Central Park) Limited was a 50% partner in the Central Park Limited Partnership, a joint arrangement formed on 28 March 2014 with LVS II CP Investor Ltd.
On the 8 January 2016, the Group purchased the remaining 50% of Central Park from LVS II CP Investor Ltd the details of which are outlined in note 10 to these financial statements.
During the period, the Group provided EUR3.1 million (2015: EUR2.3 million) further funding to the Partnership and received a distribution of EUR0.6 million (2015: EUR3.8 million).
(i) Summarised income statement
Period from 1 July 2015 to 8 January
2016
50% 100%
Underlying Capital Central Central
pre-tax and Park Joint Park Joint
other Venture Venture
EUR'000 EUR'000 EUR'000 EUR'000
Gross rental income 3,632 - 3,632 7,264
Spreading of tenant incentives/
rent free periods 632 - 632 1,264
Service charge income 816 - 816 1,632
_______ _______ _______ ______
Gross rental and related
income 5,080 - 5,080 10,160
_______ _______ _______ ______
Net rental and related income 4,053 - 4,053 8,106
Fair value movement on investment
properties - 11,344 11,344 22,688
Fair value movement on derivatives - (38) (38) (76)
_______ _______ _______ _______
Operating profit 4,053 11,306 15,359 30,718
Finance expense (1,313) - (1,313) (2,626)
_______ _______ _______ _______
Profit on ordinary activities
before tax 2,740 11,306 14,046 28,092
Income tax - - - -
_______ _______ _______ _______
Profit for the period after
tax 2,740 11,306 14,046 28,092
Green REIT plc
Notes (continued)
9 Investment in joint venture
(continued)
Financial year ended 30 June 2015
50% 100%
Underlying Capital Central Central
pre-tax and Park Joint Park Joint
other Venture Venture
EUR'000 EUR'000 EUR'000 EUR'000
Gross rental income 7,364 - 7,364 14,728
Spreading of tenant incentives/rent
free periods 369 - 369 738
Service charge income 1,443 - 1,443 2,886
_______ _______ _______ _______
Gross rental and related income 9,176 - 9,176 18,352
_______ _______ _______ _______
Net rental and related income 7,605 - 7,605 15,210
Fair value movement on investment
properties - 32,555 32,555 65,110
Fair value movement on derivatives - (119) (119) (238)
_______ _______ _______ _______
Operating profit 7,605 32,436 40,041 80,082
Finance expense (2,587) - (2,587) (5,174)
_______ _______ _______ _______
Profit on ordinary activities
before tax 5,018 32,436 37,454 74,908
Income tax - - - -
_______ _______ _______ _______
Profit for the period after
tax 5,018 32,436 37,454 74,908
Green REIT plc
Notes (continued)
10 Business combinations
On 8 January 2016, the Group through its subsidiary Green REIT (Central Park) Ltd completed the purchase of the remaining 50% of the Central Park Limited Partnership, the joint venture it held with LVS II CP Investor Ltd and the remaining 50% of Central Park GP Co Ltd (the General Partner of the Central Park Limited Partnership).
The total cash consideration for acquiring the remaining 50% of the joint venture was EUR81.8 million. A gain of EUR12.6 million has been included in the net movement on fair value of investment properties in the income statement (note 4), principally representing the fair value uplift in the Central Park investment properties from the contract valuation reference date of 30 June 2015 to the date of acquisition.
EUR'000 EUR'000
Consideration transferred
Cash consideration 81,797
Fair value of previously held interest 94,351
176,148
Assets acquired and liabilities assumed
Investment property 331,710
Trade and other receivables 4,800
Cash and cash equivalents 4,421
Trade and other payables (3,353)
Borrowings (148,876)
Total net assets acquired 188,702
Fair value gain on acquisition 12,554
Cost of EUR0.9 million in respect of stamp duty and legal fees were incurred on the acquisition and have been included in administrative expenses.
For the period from 8 January 2016 to 30 June 2016, the Central Park Limited Partnership contributed revenue of EUR9.6 million and profit, including investment property fair value gains of EUR10.4 million to the Group's results. If the acquisition had occurred on 1 July 2015, management estimates that the consolidated revenue would have been EUR77.0 million and the consolidated profit for the year, including investment property fair value gains, would have been EUR159.5 million.
Green REIT plc
Notes (continued)
11 Trade and other receivables
2016 2015
EUR'000 EUR'000
Current
Tenant lease incentives 11,297 607
Trade receivables 530 562
Other receivables 2,444 1,462
Total trade and other receivables 14,271 2,631
The Group's exposure to credit and market risks, and related impairment losses are disclosed in Note 17. The carrying value of all trade and other receivables approximates to their fair value.
12 Share capital and share premium
Authorised and issued share capital
2016 2015
Ordinary shares of EUR0.10 each Number Number
Authorised 1,000,000,000 1,000,000,000
Allotted, called up and fully paid
Issued for cash 666,969,696 666,969,696
Issued to settle Performance Fee 13,895,291 -
In issue at 30 June 680,864,987 666,969,696
The Company has one class of shares referred to as Ordinary shares. All shares rank equally. The holders of Ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.
On 28 September 2015, the Company issued 13,895,291 shares at an issue price of EUR1.51 to the Investment Manager. These shares were issued to meet the Company's obligation with respect to the performance fee, earned in the year ended 30 June 2015.
Green REIT plc
Notes (continued)
13 Dividends
In accordance with the Irish REIT regime, the Group is required, subject to having sufficient distributable reserves, to distribute to its shareholders (by way of dividend), at least 85% of the Property Income of the Property Rental Business arising in each accounting period.
For the year ended 30 June 2016 the Property Income of the Property Rental Business of the Group is calculated as follows:
2016 2016 2015 2015
EUR'000 EUR'000 EUR'000 EUR'000
Profit for the period after taxation 145,502 156,703
Less net movement on fair value
of investment properties
* Group 109,367 113,803
* Central Park joint venture 11,306 (120,673) 32,555 (146,358)
Add back group share of fair value
loss on
derivative held in Central Park
joint venture - 119
Less profit on residual business (519) -
Add back tax on residual business 65 -
Property income of the Property
Rental
Business 24,375 10,464
85% thereof 20,719 8,894
The directors expect to declare and pay a total dividend of 4.6 cents per share, or a total dividend of EUR31.4 million in the fourth quarter of 2016.
On the 23 October 2015 the Company paid a dividend of EUR10.7 million (1.6 cent per share) in respect of the year to 30 June 2015.
Green REIT plc
Notes (continued)
14 Earnings per share
Basic and diluted earnings per share
Profit attributable to ordinary shareholders
2016 2015
EUR'000 EUR'000
Profit for the period, attributable to
the owners of the company 145,502 156,703
EPRA adjustment - deduction in fair value
movement of
investment properties (120,673) (146,358)
EPRA adjustment - add back group share
of fair value loss on
derivative held in Central Park joint
venture - 119
___________ ___________
EPRA Earnings for year 24,829 10,464
Weighted average number of ordinary shares
2016 2015
Number Number
Shares in issue during the year ended
30 June 2015 - 666,969,696
Effect of shares in issue on 1 July 2015 666,969,696 -
Effect of shares issued on 28 September 10,507,124 -
2015
Weighted average number of ordinary shares
- basic 677,476,820 666,969,696
Performance fee shares payable 31 December
- dilutive effect 1,979,455 1,655,629
Performance fee shares payable 30 June - -
- dilutive effect
Weighted average number of ordinary shares
- diluted 679,456,275 668,625,325
Basic earnings per share (cents) 21.5 23.5
Diluted earnings per share (cents) 21.4 23.4
EPRA earnings per share (cents) 3.7 1.6
The performance fee shares payable in respect of the year to 30 June 2016 are calculated based on a share price EUR1.465 which reflects the average share price calculation in the IMA. For the purposes of the diluted earnings calculation in 2016 EUR5.8 million of the performance fee shares are deemed as issued on the 31 December 2015 (in line with interim accounts accruals) (2015: EUR5.0 million) and therefore is included in weighted average shares calculation for half the year. The remaining performance fee shares are deemed as issued as at the year end.
Green REIT plc
Notes (continued)
15 Net asset value per share
2016 2015
Net assets as at 30 June ('000) EUR1,048,041 EUR899,317
EPRA Adjustment - Remove Group share
of derivative held as part of Central
Park joint venture ('000) - (EUR56)
___________ ___________
EPRA Net Assets as at 30 June ('000) EUR1,048,041 EUR899,261
Ordinary shares in issue at 30 June 680,864,987 666,969,696
Performance fee shares issuable 9,482,718 13,895,291
___________ ___________
Ordinary shares including Performance
Fee shares issuable 690,347,705 680,864,987
Basic NAV per share (cents) 153.9 134.8
Diluted NAV per share (cents) 151.8 132.1
EPRA NAV per share (cents) 151.8 132.1
The European Public Real Estate Association (EPRA) issued Best Practices Recommendations most recently in August 2011 and additional guidance in December 2014, which gives guidelines for performance measures.
The EPRA NAV per share excludes the net mark to market adjustment to the value of financial instruments which are used for hedging purposes and where the Company has the intention of keeping the hedge position until the end of the contractual duration and this EPRA NAV per share is calculated on a fully diluted basis. The dilutive effect of the Investment Manager performance fee at 30 June 2016 represents the number of shares that are issuable.
Green REIT plc
Notes (continued)
16 Trade and other payables 2016 2015
EUR'000 EUR'000
Accrued expenditure 6,947 2,876
Deferred income and income received
in advance 6,369 3,191
Option liability - 7,890
Deferred consideration 10,350 -
Other creditors 4,554 497
______ ______
Total trade and other payables 28,220 14,454
In May 2015, the Group through its subsidiary Green REIT (ROI) Ltd agreed to purchase Albert Quay in Cork. The Deferred Consideration represents the estimated final liability in relation to the purchase of Albert Quay which is expected to be payable no later than March 2017.
In connection with the purchase of the Mount Street Investment Property, the group granted the original vendor an option to acquire a 40% interest in the property. On 8 February 2016, the vendor exercised this option at an exercise price of EUR1 million cash consideration. The fair value of the option liability at the date of exercise was a liability of EUR9.7 million (note 4).
The carrying value of all other trade and other payables is approximate to their fair value.
Green REIT plc
Notes (continued)
17 Financial instruments - risk management and fair value
Financial risk management
Overview
The Group has exposure to the following risks arising from financial instruments: * credit risk * liquidity risk * market risk This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital. Risk management framework The Company's Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Group's 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. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group Audit Committee keeps under review the adequacy and effectiveness of the Group's internal financial controls and the internal control and risk management systems.
Fair value
No differences arose between the determined fair values of the financial assets and liabilities of the Group and their carrying amounts.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's trade and other receivables, cash and cash equivalents and short-term investments. The carrying amount of financial assets represents the maximum credit exposure.
Green REIT plc
Notes (continued)
17 Financial instruments - risk management and fair value (continued)
Credit risk (continued)
Exposure to credit risk
Carrying amount 2016 2015
EUR'000 EUR'000
Trade and other receivables 2,974 2,631
Cash and cash equivalents 76,839 37,611
________ ________
79,813 40,242
Trade and other receivables
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group is not exposed to any concentration of revenue with any one customer.
In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, industry, aging profile, maturity and existence of previous financial difficulties.
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.
All receivables were deemed current at 30 June 2016 and no impairment allowance was considered necessary.
Cash and cash equivalents are held with Bank of Ireland.
Green REIT plc
Notes (continued)
17 Financial instruments - risk management and fair value (continued)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. 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. All trade and other payables at 30 June 2016 are considered current with the expected cash outflow equivalent to their carrying value.
Detailed below are the contractual maturities of the Group's financial liabilities:
6 - 1 - 2 -
Group Carrying Contractual 6 months 12 2 5
amount cash flows or less months years years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 30 June 2016
Non derivatives
Borrowings 252,948 271,940 2,554 2,554 5,108 261,724
Accrued expenditure 6,947 6,947 6,947 - - -
Deferred Consideration 10,350 10,350 - 10,350 - -
Investment manager
base fee 2,613 2,613 2,613 - - -
Other Creditors 4,554 4,554 4,554 - - -
_____ ______ ______ ______ _____ _____
Total 277,412 296,404 16,668 12,904 5,108 261,724
_____ ______ ______ ______ _____ _____
6 - 1 - 2 -
Group Carrying Contractual 6 months 12 2 5
amount cash flows or less months years years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 30 June 2015
Non derivatives
Borrowings 19,423 22,271 218 218 436 21,399
Accruals 2,822 2,822 2,822 - - -
Service charge payables 234 234 234 - - -
Investment manager
base fee 2,248 2,248 2,248 - - -
_____ ______ ______ ______ _____ _____
Total 24,727 27,575 5,522 218 436 21,399
_____ ______ ______ ______ _____ _____
Green REIT plc
Notes (continued)
17 Financial instruments - risk management and fair value (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Interest Rate Risk
At 30 June 2016 the Group had a revolving credit facility ("RCF") with Barclays bank that had a principal drawn balance of EUR105.4 million and an overall interest rate of Euribor + 2.0%, and a loan of EUR150.0 million with Bank of Ireland that had an interest rate of Euribor + 2.0%. The Group's interest on the RCF was EUR1.3 million on an Effective Interest Rate basis for the period and the Group's share of the interest expense on the Bank of Ireland loan was EUR1.3 million for the period held as a joint venture and EUR2.1 million for the period when the loan was held solely by the Group.
An increase or decrease in the interest rate by 10 basis points will result in an increase/decrease of interest payable of EUR0.3 million on debt of EUR255 million, on an annualised basis.
The Group is also exposed to interest rate risk on its cash and cash equivalents. These balances attract low interest rates and therefore a relative increase or decrease in their interest rates would not have a material effect on profit or loss.
Post 30 June 2016, additional hedging was put in place in the form of forward starting interest rate swaps covering the period from October 2018 to October 2022, at a blended fixed rate of 0.074% per annum on a notional amount of EUR200 million.
Currency risk
The Group is not exposed to currency risk. The Company operates only in the Republic of Ireland.
Capital management
The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. At 30 June 2016, capital consists entirely of equity. The Board monitors the return on capital as well as the level of dividends to ordinary shareholders. Subject to distributable reserves, it is the policy of the Company to distribute at least 85% of the Property Income of its Property Rental business for each accounting period.
Green REIT plc
Notes (continued)
18 Borrowings
30 June 30 June
2016 2015
EUR'000 EUR'000
Revolving credit facility 104,476 19,423
Bank of Ireland Central Park 148,472 -
facility
________ ________
Total Borrowings 252,948 19,423
During the previous year the Company entered into a revolving credit facility with Barclays for an initial commitment of EUR150 million at an interest rate of Euribor + 2.0%. There were a number of drawdowns during the year and excess proceeds from the sale of certain investment properties were used to partially pay down the loan prior to the year end. The amount presented in the financial statements is net of initial arrangement fees and associated costs of EUR1.6 million. The facility is repayable by December 2018 and is secured by way of a floating charge over the assets of the Company and its subsidiaries, excluding those assets secured to Bank of Ireland under the Central Park financing.
On 8 January 2016, the Group through its subsidiary Green REIT Central Park took full control of the Central Park Limited Partnership (See Note 10) and assumed full liability for the EUR150.0 million Bank of Ireland loan that had been used by the joint venture as part of the initial acquisition of the property in 2014. On acquisition, the facility had an interest rate of Euribor + 3.0%. The terms of the facility were renegotiated in May 2016 and the margin of interest was reduced to Euribor + 2.0% with the term being elongated from June 2018 to June 2021. The loan is secured on the assets owned by the Group at Central Park, Sandyford, Co. Dublin along with the relevant rents from those properties.
19 Related parties
(a) Subsidiaries
The Company's subsidiaries are detailed in Note 20.
The Company transacts with its 100% owned and controlled subsidiaries and has provided them with the necessary funding to facilitate the acquisition of the assets that now form part of the Group's overall assets.
The Company has provided its subsidiaries with EUR808.6 million (2015: EUR704.0 million) in cash to fund their activities.
(b) Investment Manager - Green Property REIT Ventures Limited
The Company, pursuant to the Investment Manager Agreement entered into on 12 July 2013, is managed by Green Property REIT Ventures Limited. Through the Investment Manager, the Company will have access to the asset management operation of Green Property Management Limited.
Green REIT plc
Notes (continued)
19 Related parties (continued)
(b) Investment Manager - Green Property REIT Ventures Limited (continued)
Investment Manager role and responsibilities
The Investment Manager identifies possible property acquisitions for, and opportunities with a view to investment by, the Company by reference to the Company's investment policy and strategy and will be entitled to consult with professional advisors to assist it.
The Investment Manager has discretionary authority to enter into transactions for and on behalf of the Company subject to certain reserved matters which require the consent of the board of directors of the Company. Such reserved matters include the acquisition or disposal of property investment where the aggregate acquisition cost/gross proceeds in respect of such property investment is/are in excess of EUR30 million (in the case of income producing property) or EUR15 million (in the case of property not producing income at the time of acquisition) and entry into leases where the rent referable to the relevant lease is greater than 7.5% of the aggregate rental income of the Company.
The Board has specified certain reserved matters which require the consent of the Board of the Company and should be approved at a board meeting attended by an appropriate number of directors, a majority of whom must be independent of the Investment Manager.
The Investment Manager Agreement has an initial term of five years and thereafter shall continue for consecutive three year periods, unless terminated by either party.
Base fee
The base fee is paid to the Investment Manager in cash quarterly in arrears. The base fee in respect of each quarter is calculated by reference to 1% per annum of the EPRA NAV for that quarter.
The total base fee earned by the Investment Manager in the period amounted to EUR9.7 million (2015: EUR8.1 million) (excluding VAT). The Company paid Green Property REIT Ventures EUR9.4 million (2015: EUR7.7 million) during the period and owed Green Property REIT Ventures EUR2.6 million (2015: EUR2.3 million) in respect to the base fee.
Performance fee
The performance fee is designed to incentivise and reward the Investment Manager for generating returns to shareholders.
The return to shareholders in an annual accounting period is the increase in the EPRA NAV plus the total dividends that are declared in the accounting period (adjusted to exclude the effects of any issuance of ordinary shares during that accounting period) ("Shareholder Return"). The performance fee is calculated annually based on 20% of the lesser of out-performance above two key hurdles, as follows (both hurdles have to be achieved for the performance fee to become payable):
(a) the excess of Shareholder Return over a 10% annual return hurdle. The annual return hurdle resets annually to 10% of the sum of the previous Accounting Period's closing EPRA NAV; and
Green REIT plc
Notes (continued)
19 Related parties (continued)
(b) Investment Manager - Green Property REIT Ventures Limited (continued)
(b) the excess of the year-end EPRA NAV (which is adjusted to include total dividends declared in the Accounting Period and adjusted to exclude the effects of any issuance of Ordinary Shares during that Accounting Period) over the relevant high watermark.
The relevant high watermark in each Accounting Period is the closing EPRA NAV (adjusted for total dividends declared during that Accounting Period and adjusted to exclude the effects of any issuance of Ordinary Shares during that Accounting Period) achieved in the most recent Accounting Period in which a performance fee was payable or, if greater, the gross proceeds of the Initial Issue plus further cash and non-cash issues of Ordinary Shares (excluding any issues of performance fee shares but including the capital raise), as at the end of the Accounting Period in respect of which the performance fee is calculated.
The performance fee is calculated annually based on the number of Ordinary Shares in issue at the year-end (but excluding, for that Accounting Period only, any Ordinary Shares issued during that Accounting Period).
The performance fee is accounted for as a share based payment arrangement, as described in the accounting policies. It is accounted for as a charge against income but as it is settled in shares will have no impact on the net assets of the Group.
The performance fee payable to the Investment Manager for the year ended 30 June 2016 is EUR13.9 million (2015: EUR20.9 million). The fee will be settled by way of an issue of 9,482,718 number of Ordinary Shares to the Investment Manager based on the average share price of EUR1.465 for the 20 business days following the end of the accounting period.
The Ordinary Shares issued pursuant to performance fee arrangement are subject to a lock up period as follows:
(a) One third shall be subject to a lockup period of 18 months from date of issue
(b) One third shall be subject to a lock up period of 30 months from date of issue, and
(c) One third shall be subject to a lock up period of 42 months from date of issue.
The provisions permitting releases from the lock up arrangements will be suspended if EPRA NAV falls below the gross proceeds on the issue of ordinary shares, of EUR710 million.
Green Property REIT Ventures holds 13,895,291 Ordinary shares in the Company. These shares were issued on the 28 September 2015 in full settlement of the performance fee for the year to 30 June 2015.
Green REIT plc
Notes (continued)
19 Related parties (continued)
(c) Green Property Holdings Limited
Green Property Holdings Limited ("GP Holdings") is a related party by virtue of it being a shareholder in Green REIT plc. At 30 June 2016, GP Holdings Ltd held 10,000,000 Ordinary shares of the Company. GP Holdings also shares common directors with Green REIT Plc.
(d) Green Property Management Ltd (Subsidiary of GP Holdings Ltd)
Green Property Management Ltd ("GPM") is a related party by virtue of common directors with Green REIT plc. GPM operates central payroll services for the Irish directors of Green REIT plc. During the period to 30 June 2016, GPM processed Directors fees of EUR0.3 million on behalf of the Company. GPM did not charge any fees or apply any commission for this service.
(e) Directors and key management personnel
During the year to 30 June 2016, the Company incurred directors' fees, including taxes and expenses of EUR0.3 million (2015: EUR0.3 million). There is no other director or key management compensation paid by the Company.
Green REIT plc
Notes (continued)
20 Group entities
The Company's principal subsidiaries as at 30 June 2016 are set out below. All of the Company's subsidiaries are resident in Ireland, with their registered address at Styne House, Upper Hatch Street Dublin 2. All group entities trade and operate in Ireland only.
Group company Company's Nature of Properties held
direct holding business
Green REIT (ROI) Ltd 100% Property INM Building
Investment Albert Quay
Fitzwilliam Hall
Parkway Retail Park
1-2 College Green
4-5 College Green
76-78 Harcourt Street
Green REIT (BR) Ltd 100% Property 2 Burlington Road
Investment
Green REIT Mount Street 100% Property 84-93 Lower Mount
Ltd Investment Street
Green REIT Horizon 100% Property Horizon Logistic
Ltd Investment Park and Lands
Green REIT Arena Ltd 100% Property The Arena Centre
Investment
Green REIT (Molesworth 100% Property 30-33 Molesworth
Street) Ltd Investment Street
Green REIT (Central 100% Property 100% investment in
Park) Ltd Investment structure that holds
commercial properties
at Central Park,
Sandyford.
Green REIT (HR) Ltd 100% Property 4-5 Harcourt Road
Investment
Green REIT (George's 100% Property Block A, E and F
Quay and Court) Ltd Investment George's Quay and
George's Court
Green REIT (Westend) 100% Property Westend Retail Park,
Ltd Investment Office Park and Commercial
Village
Green REIT (Dawson 100% Property 13-17 Dawson Street
St) Ltd
In addition, some of the Group companies acquired service charge management companies or interests in service charge entities when they acquired the properties they now hold. These interests are not considered material to the Group's operations.
The Company has guaranteed the liabilities of its subsidiary undertakings for the purpose of Section 357 of the Companies Act 2014, and as a result such subsidiaries have been exempted from the filing provisions of Sections 347 and 348 of the Companies Act 2014.
Green REIT plc
Notes (continued)
21 Operating lease arrangements
The Group earns rental income by leasing its investment properties to tenants under non-cancellable operating leases. At the reporting date, the Group had contracted with tenants to receive the following future minimum lease payments:
2016 2015
EUR'000 EUR'000
Not later than a year 59,249 50,712
Later than one year but not more than
five years 200,785 121,755
More than five years 221,698 111,427
481,732 283,894
22 Subsequent events
There were no events subsequent to the year-end that require adjustment to or disclosure in the financial statements.
23 Capital commitments
The Group has entered into a number of development contracts to develop buildings at various locations. The total capital commitment over the next 12-24 months with respect to these developments is expected to be in the order of EUR99 million.
24 Contingent liabilities
The Group is not aware of any contingent liabilities that should be disclosed in these financial statements.
Green REIT plc
Notes (continued)
25 EPRA Performance Measures
Number of Shares Earnings per share Net asset value
2016 2015 2016 2015
Number Number Number Number
For use in basic measures 677,476,820 666,969,696 680,864,987 666,969,696
Performance shares -
dilutive effect 1,979,455 1,655,629 9,482,718 13,895,291
For use in diluted measures 679,456,275 668,625,325 690,347,702 680,864,987
2016 2015
EUR'000 EUR'000
Profit for the period, attributable to
the owners of the company 145,502 156,703
EPRA adjustment - deduction in fair value
movement of
investment properties (120,673) (146,358)
EPRA adjustment - add back group share
of fair value loss on
derivative held in Central Park joint
venture - 119
___________ ___________
EPRA Earnings for year 24,829 10,464
Basic earnings per share (cents) 21.5 23.5
Diluted earnings per share (cents) 21.4 23.4
EPRA earnings per share (cents) 3.7 1.6
2016 2015
Net assets as at 30 June ('000) EUR1,048,041 EUR899,317
EPRA Adjustment - Remove Group share
of derivative held as part of Central
Park joint venture ('000) - (EUR56)
___________ ___________
EPRA Net Assets as at 30 June ('000) EUR1,048,041 EUR899,261
Basic NAV per share (cents) 153.9 134.8
Diluted NAV per share (cents) 151.8 132.1
EPRA NAV per share (cents) 151.8 132.1
Green REIT plc
Notes (continued)
25 EPRA Performance Measures (continued)
Cost Ratios
2016 2015
EUR'000s EUR'000s
Administrative costs 2,708 2,137
Property Operating costs 3,883 1,613
Share of Joint Venture costs 211 315
Total Costs 6,802 4,065
Revenue - Group 56,432 39,432
Share of Joint Venture revenue 4,418 7,733
60,850 47,165
Cost Ratio 11.2% 8.6%
Gearing and interest cover
Facility Balance Interest Annual Security Gearing Passing Interest
at 30 June Cost Interest Value - Property Rent Cover
Only
EUR000 % EUR000 EUR000 % EUR000 Times
Bank of Ireland 150,000 2.00% 3,000 345,740 43.4% 15,500 5.2
Barclays 105,400 1.72% 1,813 895,252 11.8% 30,400 16.8
Total 255,400 1.88% 4,813 1,240,992 20.6% 45,900 9.5
Total Return
EUR000
Net Assets at 30 June
2016 1,048,041
Add: Dividends Paid in
October 2015 10,672
Adjusted Net Assets 1,058,713
Net Assets at 30 June
2015 899,317
Increase in Adjusted Net
Assets 159,396
Total Return 17.7%
COMPANY INFORMATION
Directors Gary Kennedy (Chairman) (all non executives) Pat Gunne
Jerome Kennedy
Gary McGann
Stephen Vernon (British)
Thom Wernink (Dutch)
Secretary Mark Munro Registered office Styne House
Hatch Street Upper
Dublin 2
Investment Manager Green Property REIT Ventures Ltd.,
Styne House
Hatch Street Upper
Dublin 2
Auditors KPMG
Chartered Accountants
1 Stokes Place
St. Stephen's Green
Dublin 2
Solicitors Arthur Cox
Earlsfort Centre
Earlsfort Terrace
Dublin 2
Principal Bankers Bank of Ireland
39 St. Stephen's Green
Dublin 2
Valuers CBRE
Connaught House
1 Burlington Road
Dublin 2
Jones Lang LaSalle Ltd.,
Styne House
Hatch Street Upper
Dublin 2
Savills
11 South Mall
Cork
GLOSSARY OF TERMS
The following explanations are not intended as technical definitions, but rather are intended to assist the reader in understanding terms used in this report.
"AIFMD"
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers.
"AIFM"
an alternative investment fund manager within the meaning of AIFMD.
"Average Passing Rent"
passing rent divided by occupied net internal area
"Basic NAV per Share"
IFRS net assets divided by the number of shares in issue at the balance sheet date
"CBD"
Central Business District
"economic cycle"
the upward and downward movements of levels of gross domestic product and refers to the period of expansions and contractions in the level of economic activities around a long-term trend
"equivalent yield"
The internal rate of return from an investment property reflecting reversions to current market rent and such items as voids and non-recoverable expenditure but ignoring future changes in capital value.
"EPRA"
European Public Real Estate Association.
"Earnings per share (EPS)"
Profit after taxation attributable to owners of the Parent divided by the weighted average number of ordinary shares in issue during the period.
"EPRA NAV per Share"
EPRA net assets divided by the number of shares at the balance sheet date on a diluted basis (see Appendix 1 for further details)
"ERV"
Estimated rental value (ERV) is the open market rent that a property can be reasonably expected to attain given its characteristics, condition, location and local market conditions.
"FRI Lease"
Full Repair and Insurance Lease
"GDP" or "Gross Domestic Product"
the market value of all officially recognised final goods and services produced within a country in a given period of time
"gearing"
calculated as the borrowings secured on an individual asset as a percentage of the market value of that asset, or the aggregate borrowings of a company as a percentage of the market value of the total assets of the company (also referred to as loan to value or LTV ratio). In an investment strategy context, gearing refers to the use of various financial instruments or borrowed capital to increase the potential return of an investment
"GNP" or "Gross National Profit"
is the sum of GDP and Net Factor Income from the rest of the world
"good quality secondary assets"
a real estate asset that would be considered secondary to a prime asset due to, amongst other things, its location or quality of construction. An example of a good quality secondary real estate asset would be a retail unit close to but not location on a high street
"IMA"
the Investment Manager Agreement entered into by the Company and the Investment Manager (Green Property REIT Ventures Limited) on 12 July 2013
"industrial and logistics"
an industrial type real estate asset which may, for example, be used for manufacturing and distribution operations
"investment income yield"
The current annualised rent produced by investment properties, net of costs, expressed as a percentage of capital value, after allowing for notional purchaser's costs
"investment running yield"
The annualised contracted rent produced by investment properties expressed as a percentage of capital value, after allowing for notional purchaser's costs
"Irish REIT Regime"
Part 25A Taxes Consolidation Act 1997 (as inserted by section 41 of the Finance Act 2013)
"JV"
Joint venture arrangement
"LTV"
Loan to Value, calculated as the borrowings secured on an individual asset as a percentage of the market value of that asset.
"m2"
square meters
"mixed use"
a building or complex of buildings that blends a combination of residential, commercial, cultural, institutional, or industrial uses, where those functions are physically and functionally integrated
"multifamily"
a classification of housing where multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex
"Net Asset Value" or "NAV"
The measure shown in a company's balance sheet of all assets less all liabilities, and is equal to the equity attributable to shareholders in any company or group.
The net asset value of the Company will be measured consistently with IFRS as adopted in the EU, and in particular will include the Company's property assets at their most recent independently assessed market values and also the Company's debt and hedging instruments at their most recent independent valuations.
"Net Internal Area"
the usable area within a building measured to the internal face of the perimeter walls at each floor level
"occupier market"
the office, industrial and retail market
"Over-rented"
Space where the passing rent is above the ERV
"passing rent"
the annualised cash rental income being received as at a certain date, excluding the net effects of straight-lining for lease incentives;
"prime assets"
a highly regarded real estate asset due to, amongst other things, its location or quality of construction. An example of prime real estate asset would be a modern office building in the central business district of a major city
"Property Income"
in relation to a company or group, means the Property Profits of the company or group, as the case may be, calculated using accounting principles, as reduced by revaluation surpluses on the Company's assets or increased by the revaluation deficits on the Company's assets.
"Property Income Distribution" or "PID"
a dividend paid by a REIT or the principal company of a Group REIT, as the case may be, from its Property Income;
"reversionary"
the gap by which the passing rent of a property or portfolio is below that of its ERV.
"sq ft"
square feet
"sq m"
square metres
"Total Return"
the movement in EPRA net asset value between the beginning and the end of each financial year plus the dividend paid during the year, expressed as a percentage of the EPRA net asset value at the beginning of the financial year.
"yield"
A measure of return on an asset calculated as the income arising on an asset expressed as a percentage of the total cost of the asset, including costs
"WAULT"
the weighted average period of unexpired lease term or if earlier period to the next lease break.
Forward Looking Statements
This preliminary announcement may contain certain forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements referred to in this paragraph speak only as at the date of this announcement. The Company will not undertake any obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise except as required by law or by any appropriate regulatory authority.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR AKDDNDBKBQCD
(END) Dow Jones Newswires
September 12, 2016 02:01 ET (06:01 GMT)
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