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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 : 9618Q
Green REIT PLC
18 September 2017
GREEN REIT PLC
PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2017
10% NAV growth driven by development profits and increased underlying earnings
Dublin, 18 September, 2017 - Green REIT plc, ("Green REIT" or the "Company"), the Irish property investment company, today announces its results for the year ended 30 June 2017.
Hot Features
Premium
30 June 30 June Change
2017 2016
--------------------- ------------ ------------ -------
EPRA Earnings EUR33.0m EUR24.9m +33%
--------------------- ------------ ------------ -------
Profit after Tax EUR129.8m EUR145.5m -11%
--------------------- ------------ ------------ -------
Portfolio Valuation EUR1,381.4m EUR1,240.7m +11%
--------------------- ------------ ------------ -------
166.9 153.9
Basic NAV per Share cents cents +8%
--------------------- ------------ ------------ -------
165.6 151.8
EPRA NAV per Share cents cents +9%
--------------------- ------------ ------------ -------
NAV EUR1,152.2m EUR1,048.0m +10%
--------------------- ------------ ------------ -------
Total Return 12.9% 17.7% -27%
--------------------- ------------ ------------ -------
Property LTV 20.2% 20.6% -0.4%
--------------------- ------------ ------------ -------
EPRA EPS 4.8 cents 3.7 cents +31%
--------------------- ------------ ------------ -------
18.9 21.5
Basic EPS cents cents -12%
--------------------- ------------ ------------ -------
Proposed Dividend
per Share 5.0 cent 4.6 cent +9%
--------------------- ------------ ------------ -------
KEY FINANCIAL HIGHLIGHTS
-- 9% increase in EPRA NAV to EUR1.66 per share, underpinning a 12.9% total return in the period
-- 12% increase in contracted annual rent to EUR68.9 million, including EUR8 million per annum in new rent from developments and EUR2.4 million per annum from investment properties
-- Revaluation surpluses of EUR97 million, of which EUR47 million is from new developments
-- 33% growth in EPRA Earnings to EUR33 million and 31% increase in EPRA EPS to 4.8 cents per share
-- LTV remains low at 20.2%, with undrawn facilities at year end of EUR82 million providing further capital for deployment into development pipeline
-- Proposed full year dividend of 5 cents per share, a 9% increase over prior year, equating to 3% on June 2017 NAV
STRATEGIC & OPERATIONAL HIGHLIGHTS
-- Substantial value and income created through development completions, with expanded development programme and potential to deliver a further EUR11 million of annual rent
- Completion and full letting of office developments at 32 Molesworth Street and Building H in Central Park, adding EUR6.5 million to contracted annual rent and 6 cents/EUR41 million to EPRA NAV
- Commenced construction of Building I in Central Park, with completion in Q1 2019 of this 9,000 square metre (97,000 square feet) office building
- 164 acres of additional lands acquired at Horizon Logistics Park, with a further 30 acres contracted post year end, bringing total land holding to circa 300 acres, providing short, medium and longer term optionality
- Fourth new unit completed at Horizon Logistics Park, with 2 further pre-let units totalling 11,800 square metres (127,000 square feet) under construction and 2 further units to commence shortly
- Barclays Bank Ireland plc signed up at EUR62 per square foot at One Molesworth Street for over 50% of the office space, at an annual rent of EUR2.4 million
- EUR8.0 million of new contracted annual rent added from developments in the year to 30 June 2017, or EUR11.9 million including lettings completed since year end Potential future development of a minimum of 350,000 square feet at Central Park, post Building I
-- Successful asset management initiatives driving record WAULT
- EUR2.4 million of new annual rent secured through new lettings on our investment properties
- Lease renegotiations agreed on EUR4.4 million of annual contracted rent, principally with Bank of America Merrill Lynch in Central Park (EUR2.3 million) and the Irish Government at 76-78 Harcourt Street (EUR1.0 million)
- WAULT of 8 years across the portfolio, a record high for the Company - EPRA occupancy rate of 98.5% (30 June 2016: 98.3%)
- Dublin 2 and 4 offices 12% reversionary, with an average contracted rent per square foot of EUR43 versus EUR49 average ERV per square foot at 30 June 2017
Gary Kennedy, Chairman of Green REIT plc, commented: "This has been another year of strong results for the Company, with a significant contribution to both income and NAV from our development schemes. Our strategic focus continues to be on driving risk adjusted returns for shareholders, and we look forward to the further contributions to come from the completion and letting of our high quality buildings, against the backdrop of a robust office and logistics occupier market in Dublin."
Pat Gunne, Chief Executive of Green Property REIT Ventures, added: "The market backdrop in Ireland continues to provide us with opportunity, particularly around our development assets, which are achieving considerable letting success ahead of expectations. The strong levels of foreign investment into Ireland, demonstrated by the ongoing success of IDA Ireland in attracting international projects, is one of the key factors encouraging us to expand upon our existing development programme as we continue to successfully de-risk our current pipeline."
SContacts
Green Property REIT Ventures DAC (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 7650800 +44 (0) 20 7831 3113
Jonathan Neilan Giles Barrie
Patrick Berkery 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 Statements
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 revisions 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
It gives me pleasure to communicate another positive set of results for the Company for the year to 30 June 2017, a year of strong operational performance.
Development pipeline delivering ahead of plan
The year to 30 June 2017 saw the completion of our first two office developments in Dublin, both of which were fully let during the year and have made a significant contribution to both net asset value and to income, ahead of our forecasts. Since 30 June 2017 we have further de-risked our office development pipeline through the pre-letting to Barclays Bank Ireland plc of over half of the office space at One Molesworth Street, which is due for completion at the end of 2017.
Our strategy of developing the highest quality office buildings in the best locations in Dublin is paying off, and has led to the attraction of high calibre tenants. Our contracted rent and the security of our income are at Company highs, which supports our progressive dividend policy, with an increase in this year's proposed dividend by 9% over the prior year. Our guidance of a dividend of 4% on net asset value post the completion and letting of our development programme remains.
The substantial progress that we have made in de-risking our office development pipeline underpinned our decision to proceed with our next office development, Building I in Central Park, where construction commenced at the end of June. The building, comprising 9,000 square metres (97,000 square feet) of lettable space, is due for completion in the first quarter of 2019 and its construction highlights our confidence in the prospects for the Dublin office market.
We look forward to the completion of One Molesworth Street at the end of this year and 5 Harcourt Road in the first quarter of 2018, and to the contribution of both, in terms of net asset value and rental income.
The year to 30 June 2017 was also a busy and progressive year at Horizon Logistics Park. We completed an additional unit and leased it to DFS, we commenced construction of a new unit for Kuehne + Nagel and we acquired a further 164 acres of prime logistics development land in December 2016. Since year end we have commenced the construction of a further unit for a luxury goods retailer. We look forward to further developing this strategic land holding in what many consider to be the best located logistics land in Dublin, with easy access to Dublin Airport, the M50 orbital motorway and Dublin Port.
Strong recurring earnings and NAV growth
Through new lettings achieved on our completed development assets and across our investment properties, along with successful asset management initiatives, EPRA Earnings grew by 33% year-on-year to EUR33.0 million (2016: EUR24.9 million) or to 4.8 cents per share (2016: 3.7 cents per share). The positive contributions made by both EPRA Earnings and revaluation surpluses on our properties, particularly from our development schemes, has seen strong growth in EPRA NAV per share of 9.1% for the year to 165.6 cents, with a total return for the year of 12.9%.
Ireland - Positive macroeconomic backdrop continues
The Irish economy has continued to experience strong economic growth, with all of the key indicators trending positive. Employment growth for the year to March 2017 was 3.5%, with Dublin based office employment growing at 5.7%. The unemployment rate dropped to 6.3% in August 2017, from 8.3% in June 2016. This compares with a peak of 15.2% in early 2012. Investment and consumer spending are the main drivers of economic growth, with core investment growth of 13.6% and core domestic demand growth of 5.4% in 2016 (source: Goodbody).
On the FDI front the IDA results for the first half of 2017 announced that job approvals, their key metric, was up 22% versus the first half of 2016, with 93% of IDA clients ranking growth prospects for their Irish companies from Good to Excellent. FDI has played a key role in the recovery of the Irish economy and continues to do so.
The country's debt to GDP ratio continues to fall below the EU average, with only a minor government deficit expected for 2017. Eurozone interest rates remain low, and are expected to continue to remain low for some time, while the Irish government 10 year bond rate stood at 72 basis points at 30 June 2017, both of which continue to be supportive of commercial property yields.
Financial Results and Position
Summary Financial Information
30 June 30 June Change
2017 2016
------------------------ ------------ ------------ -------
Balance Sheet:
------------------------ ------------ ------------ -------
Total Property Value EUR1,381.4m EUR1,240.7m +11.3%
------------------------ ------------ ------------ -------
EPRA Net Assets EUR1,149.9m EUR1,048.0m +9.7%
------------------------ ------------ ------------ -------
EPRA NAV per Share 165.6 cents 151.8 cents +9.1%
------------------------ ------------ ------------ -------
Property LTV 20.2% 20.6% -0.4%
------------------------ ------------ ------------ -------
Income Statement:
------------------------ ------------ ------------ -------
Gross Rental Income
(excluding service
charge income and
joint venture income) EUR60.4m EUR56.4m +7.2%
------------------------ ------------ ------------ -------
Profit for the Period EUR129.8m EUR145.5m -10.8%
------------------------ ------------ ------------ -------
EPRA Earnings EUR33.0m EUR24.9m +32.5%
------------------------ ------------ ------------ -------
EPS - Basic 18.9 cents 21.5 cents -12.1%
------------------------ ------------ ------------ -------
EPS - EPRA 4.8 cents 3.7 cents +31.1%
------------------------ ------------ ------------ -------
Continued moderate gearing level
Our gearing level remained relatively unchanged year-on-year, at 20.2% (30 June 2016: 20.6%). During the year we agreed terms with Ulster Bank Ireland to join Barclays Bank Ireland as a revolving credit facility lender, increasing the total commitment under the facility from EUR150 million to EUR210 million, on the same terms. This additional commitment will fund further capital expenditure on our development projects.
Our intended gearing level continues to be 25%, post the completion and letting of our development assets, but as always we remain opportunistic in our outlook, which could lead to higher or lower gearing levels depending upon market conditions and opportunities.
Dividends
The Board expects to declare a dividend in respect of the year to 30 June 2017 of 5 cent per share, or a total dividend payout of EUR34.6 million, to be paid in the fourth quarter of 2017. This represents 100% of the EPRA Earnings for the year to 30 June 2017 plus a further EUR1.6 million from reserves, and is an increase of 10.4% on the prior year dividend.
The dividend expected to be declared is split as follows:
Cents
per
EURm Share
----------------------- ----- -------
Property Income
Distribution ('PID') 33.0 4.8
----------------------- ----- -------
Non-PID 1.6 0.2
----------------------- ----- -------
Total Dividend 34.6 5.0
----------------------- ----- -------
The Investment Manager
In May 2017 the Company confirmed that the Investment Manager Agreement in place with Green Property REIT Ventures since the launch of the Company in July 2013 will be renewed in July 2018, on the same terms, for a further three year renewal period. We welcome the certainty that this brings and the Board looks forward to continuing to work with the management team to add further value for shareholders through the completion of development properties, growing our income and dividends, and exploiting further opportunities that may arise in the coming years.
The Board has approved the payment of a Performance Fee of EUR5.7 million to the Investment Manager for the year to 30 June 2017, in line with the formula set out in the Investment Manager Agreement. The Performance Fee will be settled by the issuance of 4,007,197 new ordinary shares to the Investment Manager by the Company in quarter four of 2017. 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, ensuring an alignment of shareholders' interests. These new shares will be issued after the ex-dividend date and will therefore not be entitled to this year's dividend.
Outlook
We remain focused on delivering attractive risk adjusted returns to shareholders. The total return to shareholders for the year to 30 June 2017 of 12.9%, while maintaining moderate levels of gearing and speculative property development, highlights this focus. It also highlights both the quality of our portfolio and the experience of the management team.
Decisions made early in the Company's life are delivering ahead of plan, in particular the completion and letting of our development schemes, which were a key driver of the Company's strong performance for the year to 30 June 2017 and will contribute further in the years ahead. At the same time, we have further strengthened our income, growing our contracted rent significantly and enhancing the security of our income streams through a combination of long term new lettings and renegotiation of existing leases.
The value and income created through our development completions to date have encouraged us to proceed with the construction of the next building in Central Park, and to continue with our rolling programme of developing further logistics units at Horizon Logistics Park. All of this feeds through to our progressive dividend policy, another important aspect of shareholder returns.
The Board recognises that a continuation of the current favourable macroeconomic backdrop is an important dynamic in the context of delivering further on our objectives. While there continues to be uncertainty in many areas, the domestic Irish economy continues to grow in a sustained manner and FDI flows remain strong. This in turn is driving the occupier market, while the continuing low interest rate environment remains supportive of real estate values.
We remain confident in the Company's prospects as we look forward to the period ahead.
Gary Kennedy
Chairman
18 September 2017
Investment Manager's Review
Prime real estate with strong tenants on secure leases in a growth economy
Having commenced its first development scheme in April 2015, at what was an early point in the current cycle, the Company completed its first two Dublin office developments during the year to 30 June 2017. We were very happy to secure such high calibre tenants as Maples FS and Allied Irish Banks plc, at 32 Molesworth Street and Building H in Central Park respectively, the combined rent from which is EUR6.4 million per annum.
The Company's flagship office development at One Molesworth Street is due for completion towards the end of this year, with over half of the office space let since year end to Barclays Bank Ireland plc, at a strong rent of EUR670 per square metre (EUR62 per square foot) with 12 years to the first break option. The Company's other Dublin city centre office scheme at 5 Harcourt Road is progressing well and is due for completion in the first quarter of 2018, while construction of Building I in Central Park commenced in late June, with delivery of the building due in the first quarter of 2019. We remain confident that these buildings will deliver strong returns to shareholders when completed and with further high quality tenancies secured.
On the logistics front our organic growth strategy at Horizon Logistics Park is working well, as we combine pre-lettings with a measured level of speculative development on a rolling basis. On acquisition of the park in late 2013 the annual rental income was EUR0.9 million per annum. The units built and let since then and the units under construction will increase the annual rent to an estimated EUR4.5 million. Having exchanged contracts in September 2017 for the acquisition of a further circa 30 acres of land, the Company's total strategic land holding at Horizon is now approximately 300 acres. We look forward to developing these lands over the short, medium and longer term, against a backdrop of strong economic growth in Ireland and the potential benefit that may accrue to the logistics sector post Brexit.
Robust office occupier market with manageable supply
Latest reports show that office take-up in Dublin remains robust, with gross take-up of 149,000 square metres (1.6 million square feet) in the first six months of the year, the strongest performance for nine years. Vacancy rates in Dublin continue to fall, standing at 6.5% for overall vacancy at June 2017 (8.3% in June 2016) and 7.4% for the South Suburbs (June 2016: 10.4%). We are seeing lettings concluding quickly and tenant incentives flat or reducing.
On the supply side 48% of the stock of space under construction in Dublin at the end of quarter 2 2017 was either pre-let or reserved. Given the robust levels of take-up and the visibility around new supply, we would continue to describe supply levels as manageable.
1. PORTFOLIO SUMMARY
-- Increase of 12.4% in annual contracted rent to EUR68.9 million at 30 June 2017
-- Lettings completed since year end increased annual contracted rent further to EUR72.8 million
-- Record WAULT of 8 years across the portfolio
-- Significant Dublin focus (95% by portfolio value) with our prime office building in Cork city now our only non-Dublin location
-- Dominated by high grade office assets (81%)
-- 98.5% EPRA occupancy rate (30 June 2016: 98.3%)
-- Value by sector: 81% offices, 10% retail, 5% mixed use and 4% logistics
-- Portfolio is 5% reversionary at 30 June 2017 with EUR68.9 million annual contracted rent versus EUR72.5 million annual ERV (both excluding developments in progress)
-- Diversified tenant base, with 43% of contracted rent from Financial Services, 22% from technology, media and telecommunications ("TMT") and 15% from retail
-- Top 10 tenants account for 54% of contracted rent, with our largest tenant (AIB) accounting for 13.5% of the total
-- Yields:
On 30 June 2017 On 30 June 2016
Values Values
-------------------- ---------------- ----------------
Investment Initial
Yield(1) 5.2% 5.2%
-------------------- ---------------- ----------------
Portfolio Initial
Yield(1) 4.8% 4.7%
-------------------- ---------------- ----------------
(1) Calculated as contracted rent at 30 June 2016/17 over the June 2016/17 valuation plus notional purchaser's costs
2. PORTFOLIO VALUATION
The valuation of the portfolio rose to EUR1.38 billion at 30 June 2017, which reflects a 12.6% increase in the value of assets held throughout the year to that date. Acquisitions during the year were limited to approximately 164 acres of additional adjoining land at Horizon Logistics Park, valued at EUR12.7 million at 30 June 2017, a marginal increase on its acquisition cost.
On a sectoral basis, the logistics assets saw a 35.4% increase in value, due to the completion and letting of Unit B2 (DFS), an increase in rental values and a reduction in yields for the income producing element. In addition, the construction of Unit D2 (pre-let to Kuehne + Nagel) has commenced. The city centre office portfolio saw a 9.9% increase in value; suburban offices saw an 18.8% increase due in the main to the completion of Building H in Central Park and the letting of the building to AIB. One Albert Quay in Cork saw an increase of 11.5%, with a 7.6% increase in the value of our retail holdings in the year.
In the period from June 2016 to June 2017 we saw the portfolio equivalent yield increase from 5% to 5.2%. This is predominantly due to recently completed developments at Horizon Logistics Park and Building H in Central Park, which are currently subject to rent free periods. The portfolio now has a WAULT of 8 years (7.8 years in June 2016) and has gone from 93% prime to 94%.
Looking at the overall return from standing investments in the portfolio, approximately 50% can be attributed to income growth and 50% to capital growth. If the recently completed developments are included, income growth accounts for approximately 40% and capital growth for 60%.
PORTFOLIO VALUATION ANALYSIS
Movement
Movement December Annual
June June December 2016 June Movement
2016 to December 2016 to June 2017 to June
Valuation 2016 Valuation 2017 Valuation 2017
----------- ------------- ----------- ---------- ----------- ----------
EURm EURm EURm
Offices
Dublin City Centre 562.3 3.7% 583.1 6.0% 618.2 9.9%
Dublin Suburbs 360.9 7.0% 386.1 11.1% 428.9 18.8%
Cork 63.8 3.0% 65.7 8.2% 71.1 11.5%
----------- ------------- ----------- ---------- ----------- ----------
Total Offices 987.0 4.9% 1,034.9 8.0% 1,118.2 13.3%
Mixed Use 68.3 1.0% 68.9 0.0% 68.9 1.0%
Logistics 31.3 11.7% 35.0 21.3% 42.4 35.4%
Retail 129.3 3.1% 133.2 4.4% 139.2 7.6%
Total - Assets Held Throughout
the Period 1,215.9 4.6% 1,272.0 7.6% 1,368.7 12.6%
----------- ------------- ----------- ---------- ----------- ----------
Disposal in the Period -
Parkway Retail Park 24.8 23.3 0.0
Acquisition in the Period
- Additional Horizon Lands 0.0 12.3 3.3% 12.7
Per Statement of Financial
Position 1,240.7 1,307.6 1,381.4
----------- ----------- -----------
3. NEW LETTINGS
In the year to 30 June 2017 the Company entered into new leases with total new contracted rent of EUR10.4 million per annum, EUR8.0 million of which came from the letting of development assets. Adding to that the EUR3.9 million of new annual rent secured from two pre-lettings completed since 30 June 2017, the total rent secured from new lettings since 1 July 2016 is EUR14.2 million, covering 44,000 square metres (474,000 square feet) of lettable space.
New Lettings Summary
Year to 30 June 2017
Property Tenant Area Rent Total Lease Lease Rent
(sq (EUR Annual term break free
ft) psf) Rent (years) year months
--------------- ------------- -------- --------- --------- --------- ------- --------
Building
H, Central
Park AIB 158,244 EUR27 EUR4.8m 20 12 12
--------------- ------------- -------- --------- --------- --------- ------- --------
32 Molesworth
Street, Maples
D.2 FS 32,300 EUR51.70 EUR1.7m 20 10 3
--------------- ------------- -------- --------- --------- --------- ------- --------
George's Innovative
Quay, D.2 Interfaces 8,400 EUR57.50 EUR0.5m 20 13 8
--------------- ------------- -------- --------- --------- --------- ------- --------
One Albert
Quay, Cork Various 33,400 EUR25 EUR0.9m 17 9 16
--------------- ------------- -------- --------- --------- --------- ------- --------
Horizon
Logistics
Park, Dublin
Airport DHL 44,400 EUR8.50 EUR0.4m 10 6 3
--------------- ------------- -------- --------- --------- --------- ------- --------
Horizon
Logistics
Park, Dublin
Airport DFS 33,300 EUR9.10 EUR0.3m 15 10 9 --------------- ------------- -------- --------- --------- --------- ------- -------- Horizon Logistics Park, Dublin Kuehne Airport + Nagel 80,000 EUR9.80 EUR0.8m 20 10 3 --------------- ------------- -------- --------- --------- --------- ------- -------- Others EUR0.9m ------------------------------ -------- --------- --------- --------- ------- -------- Total 390,044 EUR10.3m ------------------------------ -------- --------- --------- --------- ------- --------
Lettings completed since 30 June 2017
Property Tenant Area Rent Total Lease Lease Rent
(sq (EUR Annual term break free
ft) psf) Rent (years) year months
---------------- --------------- ------- --------- -------- --------- ------- --------
One Molesworth
Street, Barclays
D.2 Bank Ireland 37,000 EUR62 EUR2.4m 20 12 12
---------------- --------------- ------- --------- -------- --------- ------- --------
Horizon
Logistics Luxury
Park, Dublin goods
Airport retailer 47,000 EUR30.30 EUR1.5m 20 N/A 0
---------------- --------------- ------- --------- -------- --------- ------- --------
Total 84,000 EUR3.9m
--------------------------------- ------- --------- -------- --------- ------- --------
Details of the principal new lettings are as follows:
32 Molesworth Street, Dublin 2 - Maples FS - EUR1.7m contracted annual rent
32 Molesworth Street was the first office redevelopment completed by the Company, which was let in its entirety to Maples FS in December 2016. The lease extends to 3,000 square metres (32,300 square feet) in total, with an annual contracted rent of EUR1.7 million, on a 20 year lease at a blended rent of EUR557 per square metre (EUR51.70 per square foot), with a break clause in the tenant's favour on the 10th and 15(th) anniversaries of the lease.
The rent secured for best space in the building equates to approximately EUR56 per square foot. This letting was 14% ahead of our then most recent rental estimates.
Building H, Central Park, Dublin 18 - Allied Irish Banks - EUR4.8m contracted annual rent
In May 2017 the Company signed a lease with Allied Irish Banks plc ('AIB') for the entirety of its newly completed office building at Central Park in Dublin 18.
The letting comprises 14,701 square metres (158,244 square feet) of lettable space on a 20 year lease from May 2017, with a tenant break option at the end of year 12. The annual rent payable by AIB is EUR4.8 million, which equates to EUR291 per square metre (EUR27 per square foot). AIB is entitled to a 12 month rent free period under the terms of the agreement.
This letting, which is the Company's single biggest letting by annual rent and by lettable area, brought the total contracted rent in Central Park to EUR23.7 million per annum, with full occupancy throughout the 79,000 square metres (850,000 square feet) of lettable space in the office park. The annual rent secured of EUR4.8 million was 10.4% ahead of our then most recent rental estimate of EUR4.35 million, driven by a combination of the lettable area being greater by 770 square metres (8,244 square feet) and the rent per square foot being EUR2 or 8% ahead of expectations.
One Molesworth Street, Dublin 2 - Barclays Bank Ireland - EUR2.4m contracted annual rent
Subsequent to financial year end the Company signed an agreement with Barclays Bank Ireland plc ('Barclays') to lease 3,437 square metres (37,000 square feet) of lettable space at its flagship development at One Molesworth Street in Dublin 2.
The letting covers two and a half floors of a total of five floors of office space, with Barclays having an option up to practical completion over a further half a floor, which if taken up would bring the letting to approximately 4,200 square metres (45,000 square feet). The lease duration is 20 years, with a tenant break option at the end of year 12. The annual rent payable by Barclays is EUR2.4 million, which equates to EUR670 per square metre (EUR62 per square foot) per annum for office space and EUR4,000 per car space per annum, with the tenant entitled to a market level rent free period at the outset of the lease. The rent per square foot secured of EUR62 was 12.7% ahead of our then most recent rental estimate of EUR55 per square foot.
Following the letting to Barclays of 55% of the total office space, the remaining office space to be let comprises the balance of the third floor (subject to the Barclays option as set out above) and the fourth and fifth floors, totalling 2,900 square metres (31,000 square feet). The remainder of the building, including the 1,672 square metres (18,000 square feet) of retail space at ground and lower ground level, will be ready for fit out in Q4 2017.
Horizon Logistics Park, Dublin Airport
-- DHL - Unit B1 - lease signed with DHL Supply Chain (Ireland) Limited, part of the global logistics group DHL, for unit B1 in Horizon Logistics Park in October 2016. This newly built warehouse unit comprises 4,125 square metres (44,400 square feet) and was completed in May 2016. The annual rent agreed is EUR0.4 million, equating to EUR91.50 per square metre (EUR8.50 per square foot).
-- Kuehne + Nagel - Unit D2 - during the year we agreed a pre-letting for new space to be built at Horizon Logistics Park for Kuehne + Nagel, the global transport and logistics company, for a purpose built 7,400 square metres (80,000 square feet) unit at an annual rent of EUR0.8 million. Kuehne + Nagel also has options on two additional units of 3,700 square metres (40,000 square feet) each. The construction of the new unit commenced in May 2017 and is due for completion in quarter two of 2018. As part of this transaction, Kuehne + Nagel, which is an existing tenant in the logistics park, will vacate its current 4,200 square metre (45,000 square feet) unit, which we plan to refurbish and re-let.
-- DFS - Unit B2 - lease signed with DFS Trading Limited ('DFS'), the UK furniture retailer. The unit comprises 3,100 square metres (33,300 square feet) and was completed in April 2017. The annual rent payable by DFS is EUR0.3m, which equates to EUR98 per square metre (EUR9.10 per square foot), on a 15 year lease term and with a tenant break option at the end of year 10.
-- Luxury goods retailer - post year end an agreement for lease was signed on a specialised design and build project which will be a very prestigious addition to the park, and which illustrates our ability to secure major FDI projects in this sector of the market. See below for further information.
The total contracted annual rent roll in Horizon has grown from EUR0.9 million at the time of acquisition to EUR3.6 million, a fourfold expansion, and will increase to an estimated EUR4.5 million when two additional speculative units are complete and let, where construction is due to commence shortly.
This letting momentum at Horizon Logistics Park reflects the confidence of these high calibre tenants in the park, as well as the outlook for the logistics sector in Ireland, and bodes well for our overall strategy of organically growing value and income at the logistics park.
4. DEVELOPMENT PROJECTS
A brief summary of the Company's development schemes completed in the period and currently on site is as follows:
Property Use Lettable Lettings Delivery Capex
Area (sq Completed to Complete
ft) (EURm)
-------------------- ----------- ---------- ----------- --------- -------------
Completed in
the Period
-------------------- ----------- ---------- ----------- --------- -------------
32 Molesworth
Street, D.2 Office 32,300 32,300 Q4 2016 1.8
-------------------- ----------- ---------- ----------- --------- -------------
DFS, Horizon
Logistics Park Logistics 33,300 33,300 Q1 2017 0.5
-------------------- ----------- ---------- ----------- --------- -------------
Building H,
Central Park Office 158,244 158,244 Q2 2017 8.2
-------------------- ----------- ---------- ----------- --------- -------------
Total - Completed 223,844 223,844 10.5
--------------------------------- ---------- ----------- --------- -------------
On Site
-------------------- ----------- ---------- ----------- --------- -------------
One Molesworth
Street, D.2 Office 90,000 37,000 Q4 2017 20.3
-------------------- ----------- ---------- ----------- --------- -------------
5 Harcourt
Road Office 48,200 - Q1 2018 19.1
-------------------- ----------- ---------- ----------- --------- -------------
Kuehne + Nagel
unit, Horizon
Logistics Park Logistics 80,000 80,000 Q2 2018 8.5
-------------------- ----------- ---------- ----------- --------- -------------
Luxury goods
retailer unit,
Horizon Logistics
Park Logistics 47,000 47,000 Q3 2018 18.5
-------------------- ----------- ---------- ----------- --------- -------------
Building I,
Central Park Office 97,000 - Q1 2019 33.9
-------------------- ----------- ---------- ----------- --------- -------------
Total - On
Site 362,200 164,000 100.3 --------------------------------- ---------- ----------- --------- ------------- OVERALL TOTAL 586,044 387,844 110.8 --------------------------------- ---------- ----------- --------- -------------
Development activity since 30 June 2017:
(i) Building I in Central Park
In July 2017 the Company announced that it had commenced the construction of Building I in Central Park, Leopardstown, Dublin 18. This follows the completion and successful letting of the entirety of the adjacent Building H, to Allied Irish Banks plc in May 2017.
Building I will extend to approximately 9,000 square metres (97,000 square feet) of lettable space, together with 156 basement car parking spaces, and will be available in its entirety or on a floor-by-floor basis. Having already excavated the double level basement car park as part of the development of the adjacent Building H, Building I is scheduled for delivery in Q1 2019.
(ii) Unit D3 at Horizon Logistics Park
In August 2017 the Company signed an agreement for lease with a luxury goods retailer for a purpose built unit at Horizon Logistics Park, which is due for completion in the third quarter of 2018. This high specification unit will comprise 4,400 square metres (47,000 square feet) with a mix of office and logistics space, with an estimated rent of EUR1.5 million per annum, which will be a significant boost to the income at the logistics park. The lease to be entered into at completion of the unit will be a 20 year lease with no break options.
5. ACQUISITIONS AND DISPOSALS
Acquisition - Additional Lands at Horizon Logistics Park, Dublin Airport
In December 2016 the Company acquired approximately 164 acres of land adjacent to its existing holding at Horizon Logistics Park at Dublin Airport, for a contract price of EUR12.3 million. The acquisition brought the Company's total land holding at Horizon Logistics Park to approximately 264 acres. The transaction increases the Company's strategic land holding adjacent to Dublin Airport at a time when demand and rental values for well-located modern logistics units are increasing.
Since 30 June 2017 the Company has exchanged contracts to acquire a further circa 30 acres of lands adjacent to its holdings at Horizon Logistics Park, at a contract price of EUR2.8 million.
Disposal - Parkway Retail Park, Limerick
In March 2017 the Company disposed of Parkway Retail Park in Limerick. The contract price was EUR23.0 million, in line with the 31 December 2016 valuation. The contract price reflected a profit to the Company of 64% on the cost of the property, which was acquired in late 2013 for EUR14.0 million. This sale brought the proceeds from the Company's disposal programme to EUR97.7 million, broadly in line with target. The total profit realised from the sale of the five properties was EUR41.1 million, or 73% on purchase cost, an effective recycling of capital and strengthening of the Company's portfolio, which we now consider to be 94% prime.
6. FINANCIAL REVIEW
The year to 30 June 2017 saw strong growth in underlying earnings and a positive contribution to profits from revaluation surpluses, particularly on the Company's development properties. EPRA Earnings grew by 33.1% to EUR33.0 million for the year, while revaluation surpluses were EUR96.7 million, with a total profit of EUR129.8 million (2016: EUR145.5 million). On a per share basis the total EPS for the year was 18.9 cents (2016: 21.5 cents), with EPRA EPS of 4.8 cents (2016: 3.7 cents).
The Company's NAV grew by 9.9% in the year, from EUR1,048.0 million to EUR1,152.2 million, or from 153.9 cents per share to 166.9 cents per share before dilution. EPRA NAV per share grew by 9.1% in the year from 151.8 cents to 165.6 cents.
Four Year Summary
FY 2014 FY 2015 FY 2016 FY 2017
----------------------- ---------- ---------- ------------ ------------
NAV per Share (cents)
- Basic 109.1 134.8 153.9 166.9
----------------------- ---------- ---------- ------------ ------------
NAV per Share (cents)
- EPRA 109.1 132.1 151.8 165.6
----------------------- ---------- ---------- ------------ ------------
Earnings per Share
(cents) - Basic 12.4 23.5 21.5 18.9
----------------------- ---------- ---------- ------------ ------------
EPRA Earnings EUR7.2m EUR10.5m EUR24.9m EUR33.0m
----------------------- ---------- ---------- ------------ ------------
EPRA Earnings per
Share (cents) 2.1 1.6 3.7 4.8
----------------------- ---------- ---------- ------------ ------------
Total Return 14.4% 24.4% 17.7% 12.9%
----------------------- ---------- ---------- ------------ ------------
Portfolio Value
(note) EUR398.1m EUR968.3m EUR1,240.7m EUR1,381.4m
----------------------- ---------- ---------- ------------ ------------
Property Loan to
Value 18.6% 9.9% 20.6% 20.2%
----------------------- ---------- ---------- ------------ ------------
Interest Cover 7.4 times 19.6 9.5 times 10.5
times times
----------------------- ---------- ---------- ------------ ------------
Weighted average
interest rate 3.2% 2.8% 1.9% 1.8%
----------------------- ---------- ---------- ------------ ------------
Weighted average 4 years 3.1 years 4 years 2.8 years
debt maturity
----------------------- ---------- ---------- ------------ ------------
Note: includes the Company's 50% interest in Central Park for FY 2014 and FY 2015.
Earnings per Share ("EPS")
While total EPS for the year reduced by 12.1% from 21.5 cents to 18.9 cents, the EPRA EPS component, which measures EPS on rental profit only, increased by 1.1 cents per share or by 31.1% from 3.7 cents to 4.8 cents. In the year to 30 June 2016 EPRA EPS accounted for 17% of total EPS while it accounted for 25% of total EPS in the year to 30 June 2017. This rebalancing is as a result of the moderation in the rate of growth in property values in Ireland as the Irish commercial real estate market has stabilised. This is illustrated by the total returns from Irish commercial real estate as measured by IPD/MSCI, which decreased from 19.5% in calendar 2016 to 10.0% in the year to 30 June 2017.
A reconciliation of IFRS earnings and EPS to EPRA Earnings and EPRA EPS is as follows:
30 June 30 June 30 June 30 June
2017 2017 2016 2016
------------------------ --------- ----------- ---------- -----------
Cents Cents
EUR'000 per Share EUR'000 per Share
------------------------ --------- ----------- ---------- -----------
Earnings per IFRS
income statement 129,775 18.9 145,502 21.5
------------------------ --------- ----------- ---------- -----------
EPRA Adjustment -
fair value movements
on properties and
financial instruments (96,738) (14.1) (120,608) (17.8)
------------------------ --------- ----------- ---------- -----------
EPRA Earnings 33,037 4.8 24,894 3.7
------------------------ --------- ----------- ---------- -----------
NAV Growth
NAV increased from EUR1,048.0 million at 30 June 2016 to EUR1,152.2 million, an increase of 9.9% year-on-year, or from 153.9 cent per share to 166.9 cent per share (both basic). The main drivers of the growth in basic NAV per share are analysed as follows:
Year to 30 June
2017
-----------------------
Cents
per Share
EUR'000 (Basic)
Net Assets at 30 June
2016 1,048,041 151.8
Investment Properties
Revaluation 94,496 13.7
Swap Revaluations 2,242 0.3
EPRA Earnings 33,037 4.8
Performance Fee Reserve 5,682 0.8
Dividends Paid (31,319) (4.5)
-----------
Net Assets at 30 June
2017 1,152,179 166.9
------------------------- ---------- -----------
Please see Appendix 1 for further EPRA Performance Measures.
Rental Income
Gross and net rental income is analysed as follows (excluding service charge income and expenditure):
2017 2016
-------- --------
EUR'000 EUR'000
Gross Rental Income
(see note) 49,688 51,716
Spreading of Lease
Incentives 10,732 6,241
Surrender Premia - 2,893
-------- --------
Gross Rental and Related
Income 60,420 60,850
Property Operating
Expenses (2,421) (3,883)
-------- --------
Net Rental and Related
Income 57,999 56,967
-------- --------
Note: 2016 includes the Company's 50% share of Central Park rents from 1 July 2015 to 8 January 2016 (the date the Company acquired full control) of EUR4.4 million, to facilitate a like-for-like comparison
The main movements in rental income year-on-year were as follows:
EUR'000
Gross Rent - FY 2016 60,850
--------------------------- --------
Full year impact of 100%
of Central Park 4,418
One Albert Quay - full
year inclusion and new
rents 2,634
Completed Developments
- new income 1,472
Sales in FY 2016 - income
effect (4,101)
One-off surrender premia
in prior year (2,893)
Sales in FY 2017 - income
effect (1,110)
Other (850)
Gross Rent - FY 2017 60,420
--------------------------- --------
Property Outgoings
Property outgoings of EUR2.4 million were EUR1.9 million or 44% lower than the prior year cost of EUR4.3 million (including the Company's 50% share of Central Park costs for the period from 1 July 2015 to 8 January 2016 of EUR0.4 million), due in the main to a reduction of EUR0.8 million in the level of agents' fees expensed in the current year, which is explained firstly by the reduced level of lease events dealt with in the current year, where the year to 30 June 2016 was a very active year for lease renegotiations, and secondly by the Company's policy of amortising agents' fees on new lettings over the period to the earliest termination of each lease. We also saw a reduction in vacancy costs of EUR0.3 million on our retail assets due to new lettings and a reduction of EUR0.2 million in repair costs.
Administrative Expenses
Administrative expenses decreased by EUR0.3 million or 12% from EUR2.7 million in the year to 30 June 2016 to EUR2.4 million in the year to 30 June 2017. The prior year total included EUR0.9 million of one-off business combination costs relating to the acquisition of PIMCO's 50% interest in Central Park in January 2016. Stripping these out of the prior year costs, the like-for-like recurring costs in the prior year were EUR1.8 million, or EUR0.6 million lower than the current year total of EUR2.4 million. The increases year-on-year arose mainly on legal fees, internal audit fees, depositary fees and stock exchange fees.
For the year ahead we would expect total administrative costs to be in the order of EUR2.2 million.
Investment Manager Fees
The base fee charged in the year was EUR10.8 million (2016: EUR9.7 million), with the increase in the fee reflecting the increased EPRA NAV of the Company on which the base fee is calculated. In the year from 30 June 2016 to 30 June 2017 EPRA NAV increased from EUR1,048.0 million to EUR1,149.9 million. The base fee is calculated and paid calendar quarterly in cash on EPRA NAV at quarter end, on the basis of 1% per annum of EPRA NAV. The details of the performance fee provision for the year of EUR5.7 million (2016: EUR13.9 million) are set out in further detail in note 18 to the financial statements.
Gearing and Debt Profile
The Company's gearing level, as measured by property LTV, was relatively unchanged year-on-year, decreasing marginally from 20.6% to 20.2%. This level of gearing is within the range guided over the previous reporting periods, and is expected to increase towards 25% as the Company deploys further capital to complete its development schemes.
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 and Ulster Bank Ireland with floating security over the Company's other assets. Ulster Bank Ireland entered the revolving credit facility during the financial year, agreeing to lend EUR60 million alongside Barclays, thereby increasing the limit of the facility from EUR150 million to EUR210 million. Adding this to the Bank of Ireland facility on Central Park, which is fully drawn at EUR150 million, the Company's total debt commitments are EUR360 million.
The Company's all-in annual debt cost stood at 1.8% at 30 June 2017, with a weighted average debt maturity of 2.8 years.
A summary profile of the Company's debt at 30 June 2017 is as follows:
Balance Interest Annual Property Interest
at 30.06.2017 Cost Interest LTV Cover Maturity Years
--------------- --------- ---------- --------- --------- --------- ------
EURm % per EURm % Times
annum
Central Park
Facility 150.0 2.0% 3.0 36.3% 6.1 Jun-21 4.0
Revolving Credit
Facility 128.4 1.7% 2.1 13.3% 16.6 Dec-18 1.4
------
Total 278.4 1.8% 5.1 20.2% 10.5 2.8
------------------ --------------- --------- ---------- --------- --------- --------- ------
During the year 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, and were in a positive position for the Company of EUR2.24 million at 30 June 2017.
7. OUTLOOK & PRIORITIES FOR THE YEAR AHEAD
The market continues to absorb the implications of the UK's decision to exit the EU. Whilst acknowledging that it is potentially a headwind for the Irish economy, we have also been clear that we consider it an opportunity for our area of business, which is heavily weighted towards Dublin offices.
The Dublin office occupier markets remain healthy. The record take-up level in the second quarter of 2017 bodes well for those who have capital invested in the higher risk and reward area of office development in Dublin. Our recent successes at One Molesworth Street, with the signing of Barclay's Bank Ireland for over half of the office space, and securing AIB for the entirety of our newly completed building at Central Park, demonstrate that point clearly. At the same time, in Dublin the industry is developing speculative space equivalent to approximately 7% of our total market, well ahead of EU averages, so it is a time to remain disciplined in assessing risk around new speculative capital allocation decisions.
There are various perspectives on just how much Brexit has impacted on the latest take up figures, but the fact is that those international companies that are expanding in Ireland, be it from the financial services, professional services or TMT sectors, are using Ireland as a base for servicing their European business platforms. Accessing the EU through a proven English speaking and pro-business country such as Ireland must weigh heavily and favourably on those crucial investment decisions. While Ireland's 12.5% corporation tax rate is often cited as the predominant force in this context, it is one of a number of other factors, such as availability of workforce, and critically at this juncture, certainty of access to the EU market. Constraining factors include the inadequate provision of residential accommodation, which is a political priority, together with education facilities and infrastructure, both of which require investment and creative solutions.
On the capital markets front, the interest rate environment has remained relatively benign, with longer term interest rates best assessed off the 10 year Irish sovereign bond yield, remaining close to historic lows. Despite the tensions at geopolitical level around the globe, sustained low interest rates will likely offer continued support to real estate values, as a considerable gap remains between longer term interest rates and property yields, both in Dublin and across Europe. In fact, Ireland, and Dublin in particular, stands out as a market where yields for the best quality office assets may see further compression, which is in line with our views expressed in the Company's interim results in February of this year. Whilst we were very much out on a limb on that point at that time, there is now a growing consensus that yields will tighten as new investment stock comes to the market this coming autumn- winter season. As was our view in February 2017, bifurcation between prime and secondary assets continues to widen in terms of value and liquidity.
With tapering being increasingly debated at policy level for both the US Federal Reserve and the European Central Bank, the resulting rise in interest rates is likely at some point to reduce the flow of capital being allocated to real estate as an asset class. This would lead to a continuation of this theme of bifurcation, with the usual flight to quality real estate in times of capital retrenchment. How long this will take is uncertain, but it may become a bigger discussion point over the next 12 to 24 months.
Sectorally, at this point the decision to allocate more capital to logistics, at Horizon Logistics Park, and at the same time to reduce the Company's exposure to retail, looks very much to be the right decision. The Company continues to employ further capital into logistics development, and the increased land holding at Horizon provides the option to play out this very exciting opportunity in a sector which benefits from the expansion of internet shopping, and the potential opportunities from Brexit as border and trade issues get resolved.
As always, our focus is very much on delivering attractive risk adjusted returns for shareholders, with discipline in balance sheet management, both through the Company's capital structure and exposure to development, is of paramount importance in achieving this key objective.
We look to the year ahead with confidence.
Stephen Vernon Pat Gunne Executive Chairman Chief Executive Green Property REIT Ventures DAC Green Property REIT Ventures DAC
18 September 2017
Our Market
Economic Overview
GDP growth in Ireland for the calendar year 2016 was 5.2%, and the first half of 2017 has seen a continuation of positive trends in the key macroeconomic indicators. The consensus forecast is that GDP growth will be 4.3% for the full year for 2017 and 3.1% for 2018, both well ahead of Eurozone averages. The composite PMI continues to show sustained growth, and for July was at 57.0.
The uninterrupted reduction in the unemployment rate continues, with the seasonally adjusted unemployment rate for August 2017 at 6.3%, down from 8.3% in June 2016. These levels compare with a peak of 15.2% in February 2012, with the number of people employed now within 5% of the all-time peak. The forecast is that Ireland will reach full employment (circa. 5% unemployment) by the end of 2018.
Household debt was 214% of disposable income in Q4 2009 and currently stands at 141%, with disposable income now ahead of the previous high in Q4 2008. The savings rate has remained relatively constant and currently stands at 6.8%. Finally, Irish household net worth fell by EUR285 billion during the financial crisis, an estimated EUR221 billion of which has been recovered to date.
While there are concerns that Brexit will impact negatively on domestic export businesses, to date this has not come through in the numbers. Nominal goods exported are up 7.3% year-on-year in H1 2017, resulting in a trade surplus of EUR20.8 billion for the year, which is 19% higher than the previous year. The export component of the services PMI has been over 50 for eight successive readings, which is positive when the negative impact on exports from the recent weakening of Sterling versus Euro are considered. In fact, exports to the UK have grown by 14.1% year-on-year to June 2017, much of which relates to the chemical sector.
In 2016 the IDA secured a total of 244 investments into Ireland, with total FDI-related employment now at a record level of over 200,000 people, or 10% of the total workforce. IDA research shows that 48% of new jobs created are concentrated in Dublin, 14% in Cork and 10% in Galway. To the half year point in 2017 the IDA reported 114 new investments and job approvals, up 22% compared with H1 2016. While there are many risks associated with Brexit, it does also offer opportunity for Ireland to benefit from further FDI investment and recent announcements of growth and relocations, particularly in the financial services sector, have been positive in that regard.
Total tax receipts for Ireland for the six months to June 2017 are up 10% year-on-year, and the forecast is for a government deficit of 0.1% of GDP for 2017 and a small surplus in 2018. With the level of national debt remaining high, spending and tax policies are expected to remain relatively prudent in the coming years. In May of 2017 the Irish Government completed a successful IPO of part of one of our pillar banks, Allied Irish Banks, and NAMA has reduced its balance sheet by 80% since its foundation and recently revised its lifetime profit guidance upwards to EUR3 billion.
Inflation in Ireland remains muted, with headline CPI of 0% year-on-year to June 2017. That said, we expect to see inflation emerging as a trend as we move closer to full employment.
The total population of Ireland has increased by 12% in the last decade and currently stands at 4.7 million (census 2016), with 55% of the population under 40 years of age.
The heightened level of uncertainty brought about by the new Administration in the US, particularly around potential corporate tax reform, and concerns about European politics, appear to have abated for the time being. The biggest unknown and concern presently is Brexit and how it is likely to impact on the Irish economy. While the Dublin office market is likely to be a beneficiary of Brexit, the impact on the real economy, and particularly for the agricultural sector, is unlikely to be known for some time.
Capital Markets
The commercial investment market has been more subdued in the first half of 2017, with total asset sales of EUR800 million, compared with EUR2.95 billion for the first half of 2016 and EUR4.5 billion for the full year to December 2016. The anticipated pull back in volumes is as a result of bank de-leveraging winding down and the longer term view being taken by recent buyers, many of whom are institutional, with the resulting reduction in the level of re-trading of assets. The 15-year average volume of sales in a six-month period is EUR760 million, so we are now seeing a normalised market turnover emerging. As we look forward there is approximately EUR1.3-1.5 billion of assets either on the market or coming to the market in the autumn period, so the likelihood is that total asset sales in the calendar year 2017 will reach in the order of EUR2 billion.
The private equity funds that were the early buyers of real estate in Ireland in this cycle, continue to be active where loan books are trading. Overall, they are net sellers but in the main their portfolios have assets located throughout the country and often comprise small lot sizes.
Demand remains strong, with new entrants still emerging. That said, investors are mainly focused on core locations and Grade A quality buildings, and there has been a dearth of this type of product on the market in the year to date. On the other hand we are seeing thin demand for secondary assets and secondary locations. Due to the shortage of prime stock and the desire of some funds to diversify, we are also seeing investors looking at alternatives including forward funding of speculative and pre-let office developments in Dublin, investing in the private rental residential sector and in build-to-rent student accommodation.
The top 10 investment transactions in the first half of 2017, which account for 47% of the total capital deployed, were as follows:
Property Sector Price Purchaser
(in
EURm)
----------------------- ----------------------- ------- ----------------------
13-18 City Quay, Office (forward 126 Irish Life
D2 fund)
----------------------- ----------------------- ------- ----------------------
Clayton Hotel Hotel 40 Dalata
Cardiff Lane ,
D2
----------------------- ----------------------- ------- ----------------------
Park Portfolio, Office 39 Syndicated
D18 Fund arranged
by Cantor Fitzgerald
----------------------- ----------------------- ------- ----------------------
Montrose, D4 Student Accommodation 38 Hines
----------------------- ----------------------- ------- ----------------------
Aerodrome Business Industrial 28 Irish Life
Park, Naas
----------------------- ----------------------- ------- ----------------------
Parkway Retail Retail 23 Oaktree Capital
Park, Limerick
----------------------- ----------------------- ------- ----------------------
One Grand Parade, Office 23 Quadoro Doric
D6 Real Estate
----------------------- ----------------------- ------- ----------------------
Fumbally, D8 Office 22 M7 Real Estate
----------------------- ----------------------- ------- ----------------------
South County Business Office 21 Private Irish
Park Investor
----------------------- ----------------------- ------- ----------------------
Ericsson Facility, Office 20 Finegrain Property
Athlone
----------------------- ----------------------- ------- ----------------------
TOTAL 380
------------------------------------------------ ------- ----------------------
In the six month period to June 2017 offices accounted for 38% of capital deployed, retail for 24%, mixed use for 12%, hotel for 8%, industrial for 8% and the remaining 10% is classed as other uses.
In the same period 61% of assets were acquired by Irish buyers, with North America accounting for 9%, UK for 6%, Germany for 3% and the remainder is of unknown origin. We have seen an increase in the number of Irish buyers, led predominantly by Irish institutions, albeit at reduced average lot sizes.
While prime yields remain stable, all are generally trending stronger as can be seen in the table below. We have seen evidence of further yield compression in prime office yields in mainland Europe, for example Paris at 3.00%, Frankfurt at 3.50%, Madrid at 3.75% and Amsterdam at 4.00%. This compares with 4.65% for the Dublin office market, which is attractive when the supply/demand fundamentals and strong economic growth are considered. In addition, with long term bond yields at 0.72% (at 30 June 2017), there is a growing feeling that prime yields may in fact be keener than the quoted level, but to date a lack of transactional evidence has kept the headline numbers unchanged.
Prime Equivalent Yields (Dublin):
Sector Yield Trending ---------------------- ------ --------- Retail (High Street) 3.25% Stronger ---------------------- ------ --------- Office 4.65% Stronger ---------------------- ------ --------- Retail Warehouse 5.00% Stable ---------------------- ------ --------- Industrial 5.50% Stable ---------------------- ------ --------- Student Accommodation 5.25% Stronger ---------------------- ------ --------- Multifamily 4.70% Stronger ---------------------- ------ ---------
Source: CBRE
Property Returns
The MSCI index recorded total returns for H1 2017 for Ireland of 5% across all property sectors (6.3% in H1 2016). On an annualised basis to June 2017 this reflects 10.0% compared with 19.5% for the same period in 2016. These moderating returns, while still healthy, illustrate that the market has stabilised and is at a mature phase in the cycle. This compares to the UK, where returns were 4.7% in the same period.
Stripping out transactions and development in the period, the main driver of returns from standing investments is the income return and ERV growth. The top performing sector with a total return of 3% was industrial, followed by office and retail at 2%. The MSCI all-property equivalent yield (as at June 2017) has fallen from 5.8% when we last reported in February 2017, to 5.6%.
Occupier Markets
Dublin Offices
Tenant demand and the resulting leasing activity has been exceptional in the first six months of 2017. Total take-up in H1 2017 in Greater Dublin reached 150,000 square metres (1.6 million square feet) (H1 2016: 90,000 square metres (965,000 square feet)), of which 24% was in the suburbs. On an annualised basis this would equate to 300,000 square metres (3.2 million square feet) in gross terms. If this were to be achieved, it would surpass the total take-up for 2016 of 246,000 square metres (2.65 million square feet) and would be well ahead of the 10 year average of 186,000 square metres (2 million square feet) per annum.
When the Dublin market is compared to the 6 main regional cities in the UK, from 2012-2016 the total gross take-up in Dublin was 60% of the combined total gross take-up in those six regional cities. In H1 2017, Dublin accounted for 74% of the combined take-up in those regional cities, which demonstrates the dynamic nature of the occupier market in Dublin.
In the first half of 2017 large space occupiers have dominated take-up, with 48% of lettings being space over 4,700 square metres (50,000 square feet) and 24% being space between 1,900 and 4,700 square metres (20,000 and 50,000 square feet). The norm in the Dublin market would be in the order of 70% of take-up (by size) in a given period being space of less than 930 square metres (10,000 square feet), so the current strong take-up levels can be attributed to a number of large lettings.
Gross take-up in H1 2017, by sector was as follows:
Dublin City Centre
Computer/High Tech 45% -------------------------- ----- Public Sector/Regulatory Body 25% -------------------------- ----- Financial Services 11% -------------------------- ----- Business Services 8% -------------------------- ----- Consumer Services & Leisure 8% -------------------------- ----- Professional 2% -------------------------- ----- Manufacturing Industrial & Energy 1% -------------------------- ----- Total 100% -------------------------- -----
Dublin Suburbs (all)
Financial Services 33% -------------------------- ----- Computers/Hi-Tech 26% -------------------------- ----- Business Services 23% -------------------------- ----- Manufacturing Industrial & Energy 8% -------------------------- ----- Consumer Services & Leisure 6% -------------------------- ----- Professional 4% -------------------------- ----- Total 100% -------------------------- -----
Of the total take-up in the suburbs, 45% in the first half of 2017 was in the south suburban market. This was particularly boosted by the 13,900 square metre (150,000 square feet) letting by the Company of Building H Central Park to AIB in May.
Looking towards the remainder of 2017, with the volume of deals currently in legal due diligence and office agents reporting 250,000 square metres (2.7 million square feet) of current demand, this year looks set to be a record year for leasing activity.
There is no doubt that Brexit is starting to have a positive impact on tenant demand for offices, and this is likely to increase over time as decisions are made by corporates around their post-Brexit operating strategy. It has been reported that JP Morgan has acquired a 12,100 square metre (130,000 square feet) building currently under construction in the South Docks of Dublin, and certain other recent lettings would appear to be facilitating Brexit relocations. In addition there are a number of other occupiers, mostly in the financial services sector, either looking to expand or new entrants currently carrying out due diligence on the Dublin market. It is still early days in the Brexit negotiations but we are now starting to see demand translating into actual lettings.
The greater Dublin office vacancy rate continued to decline, and currently stands at 6.5%, down from 6.6% when we reported in February 2017. In Dublin 2/4 (core city centre) the overall vacancy rate is 5%, and the Grade A vacancy rate is 2%. The vacancy rate in the south suburbs is 7.4% (Feb 2017: 8.4%) and the Grade A vacancy rate is 5.5% (Feb 2017: 5.9%).
There is currently 441,800 square metres (4.76 million square feet) of gross office development under construction in Dublin city centre, over 34 schemes, of which 37% or 163,000 square metres (1.75 million square feet) is pre-let or in legals. Of this, 142,000 square metres (1.53 million square feet) is due for completion in 2017 and 62% of the 2017 completions have been pre-let or are in legals. The remainder is due for completion in 2018 and 2019.
In addition, there is currently 33,700 square metres (363,000 square feet) under construction in four projects in the suburbs, of which 6,500 square metres (70,000 square feet) is due to be delivered in 2017, with the remainder in 2018/19.
Prime headline rents in Dublin city centre have remained static in the last 6 months and currently stand at EUR673 per square metre (EUR62.50 per square foot), while rents in the south suburbs have also remained static at EUR296 per square metre (EUR27.50 per square foot). Market commentators are suggesting modest single digit rental growth for 2017.
Cork Office Market
The total take-up in the Cork office market reached 1,255 square metres (13,455 square feet) in Q1 2017, down from 21,500 square metres (231,000 square feet) for calendar year 2016. The lack of take-up continues to be due to the limited amount of Grade A buildings available.
The current vacancy rate stands at 10% (end 2016: 11.5%) and much of this is older, obsolete space with little Grade A space available to let.
The Capitol Cinema site at Grand Parade is now complete and comprises a mixed retail and office scheme (50:50) with office rent of EUR323 per square metre (EUR30 per square foot) being achieved. The building was recently sold to a German fund, Real IS, for approximately EUR46 million, reflecting a net initial yield of 5.50%, which is a further endorsement for the prime Cork market. As there is such tight supply of Grade A buildings it is anticipated that the Cork market will see rents reaching EUR376 per square metre (EUR35 per square foot) in the next 18 months.
There is a new scheme due to commence in the coming weeks on Albert Quay, not far from the Company's office building at One Albert Quay. The site extends to 2.25 acres and the intention is to build four buildings with a total area of 28,800 square metres (310,000 square feet). The first, known as Block A will extend to 13,200 square metres (142,000 square feet) and is due to be completed by the end of 2018. In addition, there is a further 186,000 square metres (2 million square feet) in the Greater Cork area where a planning permission is granted, but where delivery is likely to be measured as developers will potentially require pre-lettings in order to obtain funding.
Retail
Retail sales data in Ireland is mixed and there is no doubt that the sector is generally under pressure, with competition coming from internet retailers due particularly to the weakening of Sterling versus the Euro. That said, most areas are recording moderate growth, assisted by the general improvement in the economy and employment growth. Data from the Central Bank of Ireland shows that e-commerce expenditure (in cash terms) was up 21.2% year-on-year in H1 2017.
The volume of retail sales was up by 4.1% in the year to June 2017, and if motor sales are excluded this increases to 7.1%. The increase in the value of sales is more modest, showing an increase in the year of just 1.6%. The strongest performers are in the Household Equipment and the Books, Newspapers, Stationery and Other Goods categories, while the weakest performer is Motor & Fuel. The consumer sentiment index, while down on the high of January 2016, is still ahead of the series average and a general commentary from retail agents is that footfall in major centres is up year-on-year.
The MSCI index is showing that the ERV for Grafton Street, Dublin's main retail thoroughfare, is up 9% in the year to June 2017 and 5.5% overall for the sector. Prime rents on Grafton Street currently stand at EUR6,300 per square metre (EUR585 per square foot), Dundrum Town Centre is at EUR4,500 per square metre (EUR418 per square foot) and Blanchardstown Shopping Centre is at EUR3,000 per square metre (EUR278 per square foot) (all in terms of Zone A/ITZA).
A lack of available premises to let is limiting expansion plans for many retailers. Recent openings include Homesense in Westend Retail Park, Dublin 15 and at Capitol Cinema in Cork, Urban Decay on Grafton Street, Lifestyle Sports and Smiggle in Blanchardstown Shopping Centre, and Sportsdirect has opened its first store on North Earl Street in Dublin city centre, with the expectation that it will open further stores.
New retail development remains limited to extensions to existing centres, with no new commencements in the six months to June 2017.
Industrial and Logistics Sector
Take-up to the half year point in 2017 reached 121,000 square metres (1.3 million square feet), which is consistent with take-up for the same period in 2016. Supply of modern facilities continues to be constrained and is the main focus of demand.
In the six month period to June 2017 there were 83 transactions (full year 2016; 183), of which 54% were lettings and 46% were sales of vacant units to owner occupiers. In the period 43% of lettings were of space between 1,900 and 4,700 square metres (20,000 to 50,000 square feet) and 28% were of space between 4,600 and 9,300 square metres (50,000 and 100,000 square feet). The remaining 11% was for space under 1,900 square metres (20,000 square feet) and there were no lettings over 9,300 square metres (100,000 square feet).
Prime rental levels have continued to grow, with a further 6% rental growth so far in H1 2017, following growth of 25% in 2016, and with prime rents currently standing at EUR99.50 per square metre (EUR9.25 per square foot). Despite this, there remains limited speculative development. While Brexit negotiations are at an early stage, it is felt that it may result in increased demand within the industrial and logistics sector, due to likely changes to the UK's trading arrangements with the EU.
Prime industrial/logistics yields remain stable at 5.50% and it accounted for 8% of the total investment spend in the first half of 2017.
Residential
There has been an increase in the housing output, which was up 25% year-on-year for 2016, with 14,932 units completed in the year. While completions are increasing, it is taking time to ratchet up and it is estimated that they represent roughly half of the current level of annual demand. As a result, there is a continued mismatch between demand and supply and it is likely to take some time before there is a balance. Consequently, house price inflation is evident, with a forecast of 7% growth for 2017 and 6% for 2018. Values today remain 25% off peak levels in 2007.
Planning permissions granted in Q1 2017 stood at 17,934 units, up 39% year-on-year, which is a positive sign that future completions are ticking up. The forecast is that there will be 16,000 completions in 2017 and 18,000 in 2018.
In Q2 2017 average rents nationally were EUR1,159 per month, which is up 11.8% year-on-year to June and is 56% above the trough of EUR742 per month in Q4 2011. In Dublin, average monthly rents in Q2 2017 were EUR1,707, which is 12.3% up year-on-year to June.
Sources:
1. CBRE research reports 2. JLL research reports 3. Central Statistics Office website 4. IDA website 5. Investec research 6. Goodbody research 7. Davy research 8. Ulster Bank PMI 9. Daft.ie
PORTFOLIO ANALYSIS
RENTAL INCOME
Passing Contracted ERV (1) Variance Vacant
Rent Rent EURm v Jun-17 ERV
EURm EURm pa ERV (1)
pa pa EURm
pa
============ ============ ======== =========== ======== ========== =======
Dublin
Office CBD (2/4) 19.5 25.6 28.9 -12% 1.0
============ ============ ======== =========== ======== ========== =======
Greater
Dublin 19.2 24.8 26.4 -6% -
========================= ======== =========== ======== ========== =======
Cork 1.5 4.1 4.6 -11% -
========================= ======== =========== ======== ========== =======
Office
Total 40.2 54.5 59.9 -9% -
========================== ======== =========== ======== ========== =======
Retail 7.1 7.7 6.5 +17% <0.1
========================== ======== =========== ======== ========== =======
Logistics 1.2 1.5 1.6 -7% -
========================== ======== =========== ======== ========== =======
Mixed Use 5.3 5.2 4.5 +16% <0.1
========================== ======== =========== ======== ========== =======
Total (Let Properties
Only) 53.8 68.9 72.5 -5% 1.1
========================== ======== =========== ======== ========== =======
(1) Excludes ERV of development assets under construction at 30 June 2017
LEASE LENGTHS & VACANCY
WAULT Vacancy Vacancy
(years) (by floor (by ERV)
(1) area) (2)
================= ============ ========= =========== ==========
Dublin
Office CBD (2/4) 8.0 3.1% 3.2%
================= ============ ========= =========== ==========
Greater 8.0 - -
Dublin
================= ============ ========= =========== ==========
Cork 9.7 - -
================= ============ ========= =========== ==========
Office Total 8.1 1.1% 1.6%
=============================== ========= =========== ==========
Retail 7.1 0.7% 0.9%
=============================== ========= =========== ==========
Logistics 4.5 - -
================= ============ ========= =========== ==========
Mixed Use 8.9 2.2% 1.8%
=============================== ========= =========== ==========
Total Portfolio 8.0 1.2% 1.5%
=============================== ========= =========== ==========
(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 and short term licences
(2) Excludes ERV of development assets under construction at 30 June 2017
CONTRACTED RENTS VERSUS ESTIMATED MARKET RENTS (ERVs) (1)
Average Average Variance
Contracted ERV (v ERV)
Rent (EURpsf)
(EURpsf)
============== ============ ============ ========== =========
Dublin
Office CBD (2/4) 43.00 49.00 -12%
============== ============ ============ ========== =========
Greater
Dublin 23.80 25.70 -8%
=========================== ============ ========== =========
Cork 23.70 26.20 -10%
=========================== ============ ========== =========
Office Total 30.50 33.90 -10%
============================ ============ ========== =========
Retail 31.5 26.90 +17%
============================ ============ ========== =========
Logistics 8.0 8.70 -8%
============================ ============ ========== =========
Mixed Use 14.70 11.40 +29%
============================ ============ ========== =========
Total (Let
Properties
Only) 27.00 28.50 -6%
============================ ============ ========== =========
(1) Let properties only. Excludes residential, hotel and car space rent (where applicable)
SECTORS BY VALUE (1)
Value % of
at 30 Group
June Total
2017
EURm
================= ============= ======== =======
Dublin
Office CBD (2/4) 618.2 45%
================= ============= ======== =======
Greater
Dublin 428.9 31%
=============================== ======== =======
Cork (100%) 71.1 5%
=============================== ======== =======
Office
Total 1,118.2 81%
================================ ======== =======
Retail 139.2 10%
================================ ======== =======
Logistics 55.1 4%
================================ ======== =======
Mixed Use 68.9 5% ================================ ======== ======= Total Portfolio 1,381.4 100% ================================ ======== =======
(1) Net of purchasers' costs of 4.46%
LOCATIONS BY VALUE (1)
Value % of
at 30 Group
June Total
2017
EURm
================= ======== =======
Dublin
CBD (2/4) 624.1 45%
================== ======== =======
Greater
Dublin 686.2 50%
================== ======== =======
Dublin
Total 1,310.3 95%
================== ======== =======
Cork (100%) 71.1 5%
================== ======== =======
Total Portfolio 1,381.4 100%
================== ======== =======
(1) Net of purchasers' costs of 4.46%
CONTRACTED RENT BREAKDOWN BY TENANT BUSINESS SECTORS
Contracted % of
Rent Group
EURm Rent
pa
========================= =========== =======
Finance/ Financial
Services 29.9 43%
========================== =========== =======
Technology, Media
and Telecommunications
("TMT") 15.2 22%
========================== =========== =======
Retail Trade 10.1 15%
========================== =========== =======
Public Administration
(Irish Government) 3.8 6%
========================== =========== =======
Professional Services 2.9 4%
========================== =========== =======
Logistics 1.5 2%
========================== =========== =======
Other 5.5 8%
========================== =========== =======
Total Portfolio 68.9 100%
========================== =========== =======
TOP 10 OCCUPIERS BY CONTRACTED RENT
Tenant Business Contracted % of Unexpired
Sector Rent Group Term
EURm pa Rent (years)
(1)
======================== ======================= =========== ======= ==========
Allied Irish Financial
Bank Services 9.3 13.5% 10.8
======================== ======================= =========== ======= ==========
Vodafone TMT 7.3 10.6% 9.3
======================== ======================= =========== ======= ==========
Financial
Fidelity International Services 3.7 5.4% 10.6
======================== ======================= =========== ======= ==========
Financial
Pioneer Investments Services 3.4 4.9% 9.8
======================== ======================= =========== ======= ==========
Financial
Ulster Bank Services 2.9 4.3% 3.4
======================== ======================= =========== ======= ==========
The Commissioners
of Public Works
Ireland Public Administration 2.7 3.9% 6.2
======================== ======================= =========== ======= ==========
Johnson Controls
(Tyco) TMT 2.1 3.0% 10.8
======================== ======================= =========== ======= ==========
Tullow Oil Other 2.0 2.9% 4.1
======================== ======================= =========== ======= ==========
Financial
Northern Trust Services 1.9 2.8% 1.2
======================== ======================= =========== ======= ==========
Bank of America Financial
ML Services 1.7 2.5% 6.7
======================== ======================= =========== ======= ==========
Top 10 Tenants 37.1 53.9% 8.4
================================================= =========== ======= ==========
Remaining Tenants 31.8 46.1% 7.4
================================================= =========== ======= ==========
Total Portfolio 68.9 100% 8.0
================================================= =========== ======= ==========
(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 and short term licences
APPIX 1 - EPRA PERFORMANCE MEASURES
Consistent with other public real estate companies we include recommended best practice performance measures as defined by the European Public Real Estate Association ("EPRA"):
Measure Unit Definition of Measure Jun-17 Jun-16
------------------------ -------- ------------------------------------ ---------- ----------
Recurring earnings from
EPRA Earnings EUR'000 core operational activities 33,037 24,894
EPRA earnings divided by
EPRA Earnings per the weighted average basic
Share ('EPRA EPS') Cents number of shares 4.8 3.7
EPRA earnings divided by
the diluted weighted average
Diluted EPRA EPS Cents number of shares 4.8 3.6
Administrative and operating
costs divided by gross rental
income. Costs include Investment
Manager base and performance
EPRA Cost Ratio % fees, with prior year restatement. 35.2% 50.2%
Net assets adjusted to exclude
EPRA Net Asset Value the fair value of financial
('EPRA NAV') EUR'000 instruments 1,149,936 1,048,023
EPRA net assets divided
by the number of shares
at the balance sheet date
EPRA NAV per share Cents on a diluted basis 165.6 151.8
EPRA net assets amended
to include the fair value
of financial instruments
EPRA triple net assets EUR'000 and debt 1,152,179 1,048,041
EPRA triple net assets divided
by the number of shares
EPRA triple net assets at the balance sheet date
per share Cents on a diluted basis 165.9 151.8
Annual passing rents at
the balance sheet date,
less non-recoverable property
operating expenses, divided
by the market value of income
producing property, increased
EPRA Net Initial Yield by estimated purchasers'
(NIY) % costs. 3.9% 3.5%
EPRA NIY adjusted for the
expiration of rent free
periods (or other unexpired
lease incentives such as
discounted rent periods
EPRA "topped-up" NIY % and step rents.) 5.0% 4.8%
ERV of non-development vacant
space as a percentage of
ERV of the whole portfolio
EPRA Vacancy Rate % of non-development space 1.5% 1.7%
------------------------ -------- ------------------------------------ ---------- ----------
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 High - potential 95% concentration of our assets Increased - the
Market - adverse impact in Dublin, the capital city, rate of capital
the property on property which experiences less volatility and rental growth
market is values and in a downturn than regional for Dublin offices,
cyclical rental levels, centres in Ireland. where our portfolio
and as such impacting on is concentrated,
values and shareholder Our assets are in prime and has moderated to
market conditions returns. good secondary locations, which more stabilised
can be volatile. are more resilient in a downturn. levels. Rent and
yields for retail
76% of our portfolio by value and industrial continue
is Dublin offices, which proved to improve for landlords,
to be the most resilient asset while the spread
class in the last downturn. between Irish property
yields and the risk
Our retail assets are in city free rate remain
centres and well-populated suburban at historic highs,
areas. which is supportive
of property yields.
Our logistics holding is located
in close proximity to airport
and motorway infrastructure.
Our vacancy rate across our
income producing properties
by ERV is low at 1.5%, thereby
reducing the leasing risk in
the event of a downturn.
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.
The WAULT of our income is now
8 years, a record for the Company.
The Investment Manager is experienced
in managing property portfolios
through cycles.
----------------------- --------------------- --------------------------------------- -----------------------------
Slowdown High - any The Company's property portfolio Stable - Ireland's
in Economic slowdown or is entirely focused on city economic recovery
Growth - reversal in locations, primarily Dublin, continues, with
as a very the current as the large centres of population all key macroeconomic
open economy, trajectory are more resilient economically, indicators positive.
the Irish of economic particularly for retail. However there continues
economy is recovery could to be a heightened
highly dependent reduce the The Company targets well capitalised level of geopolitical
on the wider demand for tenants with strong covenants and economic uncertainty
European space in our and maintains a policy of keeping while Brexit negotiations
market and buildings and a large and diversified multi-sectoral are at an early
indeed the impact on rental tenant base to avoid over exposure stage and with evolving
world economy. values and to any one tenant or industry policy under the
property values, sector. new Administration
while increasing in the US.
the level of The Investment Manager's asset
tenant default. management team is highly experienced.
----------------------- --------------------- --------------------------------------- -----------------------------
Speculative High - adverse We were early movers in the Decreased - overall
Development impact on revenue, development of new office space this risk has moderated
Risk - occupiers value and void in Dublin in order to benefit with the lettings
do not take costs and on from lower site and construction completed within
space in achieving target costs and to deliver completed our development
our new developments. shareholder properties early in the cycle schemes during the
returns on and at a time of strong occupier year. Also, take-up
capital. demand. in the occupational
market remains robust
While a property may not be for Dublin offices
let when a development or and prime Dublin
refurbishment industrial, where
commences, the marketing of our developments
the building commences well are concentrated.
before the scheduled completion
date.
The Investment Manager and the
Board monitor market conditions
frequently.
In the year to 30 June 2017
we mitigated this risk through
the lettings of the entire of
32 Molesworth Street and Building
H in Central Park, and the letting
of 55% of the office space in
One Molesworth Street, all of
which were/are speculative development
schemes.
At Horizon Logistics Park our
strategy is to combine a moderate
level of speculative development
with pre-lettings of new units.
Both units currently under
construction
are pre-let to quality tenants.
----------------------- --------------------- --------------------------------------- -----------------------------
Political/Geopolitical High - the The Board monitors external Stable - this risk
Risk - potential UK referendum risks closely and their potential has stabilised somewhat
adverse impact result to leave impact on achieving strategic since 31 December
from 'Brexit', the EU is expected objectives. 2016.
evolving to have an UK. Although Article
US tax policy adverse impact 50 has been triggered
and general on the Irish since our interim
elections economy but results release
in larger potentially in February 2017,
EU states. a favourable it is still too
impact on the early to tell what
Dublin office the impact of Brexit
sector. US will be and whether
tax policy it will be a positive
changes could or negative one
adversely impact for Ireland and
on FDI, and for the Company.
consequently
on both the US - changes to
real economy US tax policy in
and commercial the short term which
real estate could adversely
in Ireland. impact Irish FDI
A destabilisation look unlikely to
arising from have an impact in
election results the short to medium
in Germany term.
and Italy in
2017-2018 could Europe - since our
have a similar interim results
adverse impact. release in February
2017 the general
election results
in the Netherlands
and France were
both in favour of
conservative parties.
----------------------- --------------------- --------------------------------------- -----------------------------
Regulatory Medium - should The Board and the Audit Committee Stable.
Risk - AIFMD the Investment regularly discuss regulatory
- the Investment Manager cease aspects and receive reports
Manager is to be authorised from the Investment Manager
the authorised as an AIFM in respect of AIFMD compliance
AIFM of the then the Company matters concerning both the
Company, would be required Company and the Investment Manager.
under recently to appoint The Investment Manager in turn
adopted EU a replacement consults with its legal adviser
regulations. AIFM and may and the Company's sponsor, Davy,
suffer losses who attend meetings with the
arising from regulator on behalf of the Investment
the transition Manager and the Company respectively.
from its current
Investment The Company obtains independent
Manager to legal advice in relation to
another. AIFMD matters in order to keep
abreast of developments and
to ensure compliance by the
Company with its obligations
under AIFMD.
The Company has appointed a
Depositary, Northern Trust,
as required of it under AIFMD.
----------------------- --------------------- --------------------------------------- -----------------------------
Interest Medium - an The Investment Manager is experienced Stable - although
Rate Risk increase in in monitoring the property market there has been an
- global interest rates through cycles. increase in US interest
interest could have rates, Eurozone
rates are an adverse Our assets are well located interest rates are
currently impact on the and focused on Dublin offices, expected to remain
at record Company's property with quality tenants and a focus low in the short
low levels values, as on security of rental income, to medium term.
but may increase the risk premium which should make them more
in the short applied to resilient in the event of yield
to medium property yields increases caused by increases
term. would increase. in interest rates.
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.
----------------------- --------------------- --------------------------------------- -----------------------------
Cyber Attack Medium - a The Company engages external Increased - there
Risk cyber-attack specialists to carry out vulnerability has been an increased
could lead and penetration testing on its prevalence in cyber-attacks
to potential website, implementing any globally in the
data breaches recommendations past 12 months.
or disruption made.
to the Company's
systems, website Routine patch upgrades are carried
and operations, out on the Company's systems
and to reputational to safeguard them from attacks.
damage.
The Company's systems were upgraded
during 2017 as part of an office
move.
----------------------- --------------------- --------------------------------------- -----------------------------
Internal Risks
Development Medium - potential The Company only employs blue Stable - the Company
Completion adverse impact chip contractors with a strong has completed its
Risk - inadequate on shareholder and proven track record and office and logistics
cost oversight returns as with requisite financial developments on time
and other a result of strength. and on budget, and
engineering/construction higher costs remains on course
risks that and/or delays The Company engages what it to do the same at
could delay in delivering considers to be the best design its developments
completion new product team for each project, working in progress. The
and/or increase into the market. closely with them to identify ongoing strikes by
costs. any cost overruns or delays crane workers in
as early as possible. Dublin may however
have an adverse impact
The Investment Manager closely if not resolved in
monitors each project and works the short term.
closely with the contractor,
attending on site regularly.
The Investment Manager's
development
team is highly experienced in
developing new buildings.
-------------------------- ---------------------- ---------------------------------- ------------------------------
Development Medium - reputational The Investment Manager ensures Decreased - this
- Health risk, potential that all contractors engaged risk has decreased
and Safety completion employ high standards of health since 31 December
- with increased delay and potential and safety and carry the 2016 as the Company
development financial loss appropriate has since completed
activity arising from levels of insurance to mitigate Building H in Central
there is a claim being any issues which could arise. Park and further
an increased made. progressed One Molesworth
risk of The Investment Manager is an Street and 5 Harcourt
an accident experienced developer with Road, while construction
which could formalised of Building I in
result in health and safety procedures. Central Park has
a significant since commenced.
claim and The primary responsibility for
reputational health and safety passes from
damage. the Company to the main
contractor,
with sub-contractors engaged
by the contractor having no
privity with the Company.
There is adequate insurance
cover in place to deal with
any claims which might arise
out of claims being made due
to incidents.
-------------------------- ---------------------- ---------------------------------- ------------------------------
Development Medium - delayed The Company only selects ò Decreased
- Main Contractor delivery of financially - as the general
or Subcontractor a development robust contractors to carry economy has improved
Failure or refurbishment out works. the risk of a sub-contractor
with resulting or main contractor
additional The principal contractor is failing is reducing.
costs, and responsible for monitoring the
potential failure viability of sub-contractors
to pass the appointed by them.
completed space
to a tenant The Company allows for timing
who has entered contingencies as well as possible
into a pre-letting cost contingencies at the project
agreement, planning phase.
thereby delaying
rental income
receipts.
-------------------------- ---------------------- ---------------------------------- ------------------------------
Green REIT plc
Unaudited consolidated statement of comprehensive income
Year Ended 30 June Year Ended 30 June 2016
2017
Notes Underlying Capital Total Underlying Capital Total
pre-tax and other pre-tax and other
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Gross rental and
related
income 3 72,358 - 72,358 66,821 - 66,821
Net rental and
related income 3 57,999 - 57,999 52,549 - 52,549
Net movement on
fair value
of investment
properties 4 - 94,496 94,496 - 109,367 109,367
Profit on
development
services - - - 519 - 519
Investment Manager
- base fee 18 (10,805) - (10,805) (9,669) - (9,669)
- performance fee 18 (5,682) - (5,682) (13,893) - (13,893)
Administrative
expenses (2,370) - (2,370) (2,708) - (2,708)
Operating profit 39,142 94,496 133,638 26,798 109,367 136,165
Finance
(expense)/income 5 (6,105) 2,242 (3,863) (4,644) - (4,644)
Share of joint
venture profit 9 - - - 2,740 11,306 14,046
Profit on ordinary
activities
before taxation 33,037 96,738 129,775 24,894 120,673 145,567
Income tax 7 - - - (65) - (65)
Profit for the year
after
taxation 33,037 96,738 129,775 24,829 120,673 145,502
Other comprehensive - - - - - -
income
____________ ____________ ____________ ____________ ____________ ____________
Total comprehensive
income
for the year
attributable
to the
shareholders of
the
Company 33,037 96,738 129,775 24,829 120,673 145,502
________ _________ _________ ________ _________ _________
Basic earnings per
share
(cents) 13 18.9 21.5
Diluted earnings
per share
(cents) 13 18.7 21.2
EPRA Earnings per
share
(cents) 13 4.8 3.7
_________ _________
The accompanying notes are an integral part of these financial statements.
Green REIT plc
Unaudited consolidated statement of financial position
as at 30 June
2017 2016
Assets Note EUR'000 EUR'000
Non-current assets
Investment properties 8 1,381,421 1,240,712
Financial Assets 2,242 -
Trade and other receivables 10 1,350 -
Total non-current assets 1,385,013 1,240,712
Current assets
Trade and other receivables 10 24,307 14,271
Cash and cash equivalents 48,797 76,839
Total current assets 73,104 91,110
Total assets 1,458,117 1,331,822
Equity
Share capital 11 69,035 68,087
Share premium 650,478 637,533
Performance fee share reserve 18 5,682 13,893
Retained earnings 426,984 328,528
Equity attributable to shareholders
of the Company 1,152,179 1,048,041
Liabilities
Current liabilities
Amounts due to investment
manager - base fee 2,875 2,613
Trade and other payables 15 19,184 28,220
Total current liabilities 22,059 30,833
Non-current liabilities
Borrowings 17 276,655 252,948
Other Payables 15 7,224 -
Total non-current liabilities 283,879 252,948
Total liabilities 305,938 283,781
Total equity and liabilities 1,458,117 1,331,822
Basic net asset value per
share (cents) 14 166.9 153.9
Diluted net asset value per share (cents) 14 165.9 151.8 EPRA net asset value per share (cents) 14 165.6 151.8
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 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
Total comprehensive income
for the year
Profit for the year to 30
June 2017 - - - 129,775 129,775
Transactions with owners,
recognised directly in equity
Investment Manager - performance
fee shares issued 948 12,945 (13,893) - -
Investment Manager - performance
fee share reserve - - 5,682 - 5,682
Dividends paid - - - (31,319) (31,319)
At 30 June 2017 69,035 650,478 5,682 426,984 1,152,179
The accompanying notes are an integral part of these financial statements.
Green REIT plc
Unaudited consolidated statement of cash flows
for the year ended 30 June
2017 2016
Note EUR'000 EUR'000
Cash flows from operating
activities
Profit for the year 129,775 145,502
Adjustments for:
* Net movement on revaluation of investment
Properties and financial
assets 4 (96,738) (109,367)
* Finance expense 5 6,105 4,644
* Profit from joint venture 9 - (14,046)
* Investment Manager - performance fee 18 5,682 13,893
* Increase in lease incentives 10 (10,429) (10,690)
34,395 29,936
Changes in:
* trade and other receivables 10 (957) 3,850
* current liabilities and base fee due 15 (11,052) 8,318
* long term other payables 15 7,224 -
Cash generated from operating
activities 29,610 42,104
Interest paid (5,330) (3,997)
Cash inflow from operating
activities 24,280 38,107
Cash flows from investing
activities
Acquisition of investment
properties (12,533) (43,384)
Acquisition of subsidiary,
net of cash acquired - (77,726)
Investment in joint venture 9 - (3,061)
Distribution from joint
venture 9 - 630
Capital expenditure (53,892) (22,638)
Proceeds from sale of investment
properties 8 22,696 73,583
Net cash used in investing
activities (43,729) (72,596)
Cash flows from financing
activities
Dividends paid (31,319) (10,671)
Costs associated with Bank
of Ireland refinancing - (665)
Drawdown of revolving credit
facility 43,028 116,203
Costs associated with Barclays (300) -
facility
Repayment of revolving
credit facility (20,002) (31,150)
Net cash (outflow)/inflow
from financing activities (8,593) 73,717
Net (decrease)/increase
in cash and cash equivalents (28,042) 39,228
Cash and cash equivalents
at beginning of year 76,839 37,611
Cash and cash equivalents
at end of year 48,797 76,839
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
Basis of preparation
The financial information in this announcement was approved by the Board of Directors on 17 September 2017 and does not comprise statutory financial statements for the year ended 30 June 2017, within the meaning of the Companies Acts 2014. The statutory financial statements for the year ended 30 June 2017 will be finalised based on the information presented in this preliminary announcement and will be published on the Group's website and filed with the Companies Registration Office in due course.
Statement of compliance
These consolidated financial statements have been prepared in accordance with 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 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 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)
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 30 June 2017, and have not been applied in preparing these consolidated financial statements. The items that may have relevance to the Group are as follows:
-- 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)* -- IAS 12 (amended) - Income taxes (effective date 1 January 2017)*
-- IFRS 2 (amended) - Classification and measurement of share-based payment transactions (effective 1 January 2018)*
-- IAS 40 (amended)- Investment Property (effective date 1 January 2018)* -- Annual Improvements to IFRSs 2014-2016 cycle (effective date 1 January 2018) -- IFRS 16 - Leases (13 January 2016) (effective 1 January 2019)
* Not EU endorsed at the time of approval of the financial statements
The Group is in the process of assessing the impact of the new standards and interpretations on its financial reporting and currently intends to apply the new requirements from their EU effective dates.
The accounting policies set out below, as extracted from the 2016 Annual Report, have been applied to the consolidated financial statements.
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 where 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 November 2016, 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. These exclusions from EPRA Earnings are included in the "Capital and other" column of the statement of comprehensive income. 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 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.
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 2017. The results of subsidiary undertakings acquired or disposed of in the year are included in the Group statement of comprehensive income 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.
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 for 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 the statement of comprehensive income 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 the statement of comprehensive income.
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 the statement of comprehensive income 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 the statement of comprehensive income.
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 rewards 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 for sale 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 the relevant borrowings. 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").
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 from a sale of 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.
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.
Direct lease costs
Direct lease costs incurred in the negotiation and arrangement of new leases to tenants are initially capitalised and are then recognised as an expense over the period from the date of the lease to the earliest termination date of the lease.
Finance income and finance costs
The Group's finance income and finance costs comprise interest income, interest expense, commitment fees 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.
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 its property rental business provided it meets certain conditions.
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 the statement of comprehensive income) 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.
The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through the statement of comprehensive income, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. At 30 June 2017 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 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 the statement of comprehensive income as they are incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in the statement of comprehensive income.
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are charged to the retained earnings 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 grant date is 1 July each year and on that date, 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 (see note 19 for further details).
2 Operating segments
The Group is organised into four business segments, against which the Group reports its segmental information, being Office Assets, Retail Assets, Logistics Assets and Mixed Use Assets. All of the Group's operations are in the Republic of Ireland. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, who has been identified as the Board of Directors of the Company. 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 for which it was held as a joint venture then eliminated to reconcile total numbers back to 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 in the table on the next page:
Mixed Unallocated Group
Office Retail Logistics Use Expenses Consolidated
Assets Assets Assets Assets Total and Assets Position
2017 2017 2017 2017 2017 2017 2017
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Year ended 30 June 2017
Gross rental and related
income (1) 54,953 9,834 1,677 5,894 72,358 - 72,358
Property outgoings (2) (10,713) (1,956) (547) (1,143) (14,359) - 14,359
Net rental and related
income 44,240 7,878 1,130 4,751 57,999 - 57,999
Net movement on fair
value of investment
properties 83,863 4,558 5,976 99 94,496 - 94,496
Investment Manager -
base fee (9,787) (833) (441) (719) (11,780) 975 (10,805)
Investment Manager -
performance fee (4,868) (448) (338) (28) (5,682) - (5,682)
Administration expenses - - - - - (2,370) (2,370)
Segment profit before
tax 113,448 11,155 6,327 4,103 135,033 (1,395) 133,638
Finance costs (2,773) - - - (2,773) (1,090) (3,863)
Profit before tax 110,675 11,155 6,327 4,103 132,260 (2,485) 129,775
As at 30 June 2017
Total segment assets
(3) 1,174,402 143,353 55,621 72,007 1,445,383 12,734 1,458,117
Investment properties
and development property 1,118,230 139,196 55,065 68,930 1,381,421 - 1,381,421
(1) Including service charge income
(2) Including service charge expenditure
(3) Total cash and cash equivalents and short term deposits at 30 June 2017 is EUR48.8 million (2016 EUR76.8 million) of which EUR10.2 million (2016: EUR55.6 million) is unallocated to operating segments.
Mixed Unallocated Group
Office Retail Logistics Use Joint Expenses Consolidated
Assets Assets Assets Assets 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 (1) 52,289 12,081 1,244 6,368 71,982 (5,161) - 66,821
Property
outgoings (2) (10,887) (2,711) (414) (1,368) (15,380) 1,108 - (14,272)
Net rental and
related
income 41,402 9,370 830 5,000 56,602 (4,053) - 52,549
Net movement on
fair
value of
investment
properties 94,673 15,357 7,675 2,968 120,673 (11,306) - 109,367
Profit on
Residual
Business - - - - - - 519 519
Investment
Manager -
base fee (7,535) (1,085) (240) (809) (9,669) - - (9,669)
Investment
Manager -
performance fee (10,748) (1,931) (876) (338) (13,893) - - (13,893)
Administration
expenses - - - - - - (2,708) (2,708)
Segment profit
before
tax 117,792 21,711 7,389 6,821 153,713 (15,359) (2,189) 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 114,085 21,711 8,265 7,159 150,006 - (4,439) 145,567
As at 30 June
2016
Total segment
assets
(3) 1,015,375 156,812 31,921 70,396 1,274,504 - 57,318 1,331,822
Investment
properties
and development
property 987,030 154,102 31,310 68,270 1,240,712 - - 1,240,712
(1) Including service charge income and expenditure
(2) For the purposes of our segmental reporting above the Central Park Joint Venture is included on a proportional consolidation basis for a period to 8 January 2016. The statutory reporting presents the Joint Venture using the equity method.
(3) Total cash and cash equivalents and short term deposits at 30 June 2017 is EUR48.8 million (2016 EUR76.8 million) of which EUR10.2 million (2016: EUR million) is unallocated to operating segments.
3 Gross and net rental and 2017 2016
related income
EUR'000 EUR'000
Gross rental and related
income
Gross rental income 49,688 47,298
Spreading of tenant lease
incentives/rent free periods 10,732 6,241
Surrender premia - 2,893
Service charge income 11,938 10,389
Gross rental and related
income 72,358 66,821
Service charge expenses (11,938) (10,389)
Property operating expenses (2,421) (3,883)
Net rental and related income 57,999 52,549
4 Net movement in fair value 2017 2016
of investment properties
EUR'000 EUR'000
Fair value gain on investment
properties (note 8) 94,496 98,601
Fair value gain on acquisition
of interest in The Central
Park Limited Partnership - 12,554
Fair value movement on property
option - (1,788)
Net movement on fair value 94,496 109,367
5 Finance (expense)/income 2017 2016
EUR'000 EUR'000
Loan interest (4,732) (3,152)
Loan cost amortisation (1,016) (872)
Commitment fees (352) (612)
Bank fees and other costs (5) (8)
(6,105) (4,644)
Fair value movement of interest 2,242 -
rate swaps
Net finance expense (3,863) (4,644)
6 Profit for the period
The profit for the period has been arrived at after charging:
(i) External Auditor's remuneration 2017 2016
EUR'000 EUR'000
Audit fees
Parent and consolidated financial
statements 130 140
Audit of subsidiary undertakings 25 25
Total audit fees 155 165
Review of interim report 40 40
Total audit and audit related
assurance services 195 205
As in the prior year the external auditor
did not recharge any out of pocket expenses.
Other fees charged by external
auditor
Tax compliance - 75
Tax advisory services - 120
Other - -
Total other fees - 195
(ii) Directors' remuneration EUR'000 EUR'000
Fees 270 270
Taxes 13 21
Expenses 53 24
336 315
7 Taxation
Tax recognised in statement 2017 2016
of comprehensive income
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.
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.
The Directors confirm that the Company has remained in compliance with the Irish REIT rules up to and including the date of this report.
8 Investment
properties
2017 2017 2017 2016 2016 2016
Investment Development Total Investment Development Total
Property Property Property Property
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At beginning
of year 1,170,162 70,550 1,240,712 787,571 29,755 817,326
Additions:
* Central Park Limited Partnership properties - - - 320,458 11,252 331,710
* Acquisitions 13,097 - 13,097 52,231 - 52,231
* Related acquisition costs 464 - 464 1,502 - 1,502
* Capital additions 7,468 47,880 55,348 4,809 17,829 22,638
Reclassification
to development (19,818) 19,818 - (500) 500 -
Reclassification
to Investment 109,240 (109,240) -
Disposals (22,696) - (22,696) (83,296) - (83,296)
Change in
fair value 49,179 45,317 94,496 87,387 11,214 98,601
Balance at
30 June 1,307,096 74,325 1,381,421 1,170,162 70,550 1,240,712
Acquisitions
The initial cost before acquisition expenses of the properties acquired in the year to 30 June 2017 was EUR13.1 million (2016: EUR372.7 million) on investment properties and nil (2016: EUR11.2 million) on development properties and the total costs of acquisition which comprised stamp duty payable at an average rate of 2%, legal services and other directly attributable costs arising from the transactions amounted to EUR0.5 million (2016: EUR1.5 million), resulting in total capitalised costs of EUR13.6 million (2016: EUR385.4 million) on acquisition.
Of the total acquisitions during the year EUR12.6 million was paid for the acquisition of the lands at Sillogue near Horizon Logistics Park and a further EUR0.5 million was paid as the final stage payment for the acquisition of One Albert Quay in Cork.
Included in capital additions is interest of EUR419,000 (2016: EUR145,000) capitalised in respect of assets under development.
Disposal of Investment Properties
During the year the Group disposed of Parkway Retail Park in Limerick at its then fair value of EUR22.7 million.
Reclassification of properties
During 2017 the Group reclassified certain lands in Horizon Logistics Park and 5 Harcourt Road from Investment Property to Development Property. This was done to reflect the planning permission that had been obtained for buildings on these sites and the Group's intention to develop them. During the year the Group also reclassified three Development Properties to Investment Properties upon the completion of their development.
Fair Value of Properties
The fair value of the Group's investment property at 30 June 2017 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 51.7% of the investment property portfolio (by value), while CBRE performed valuations on 43.2% 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 RICS 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 estimated 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.
There is a positive relationship between rental values and the property valuation, such that an increase in rental values will increase the valuation of a property and vice versa. However, the relationship between equivalent yields and the property valuation is inverse, therefore an increase in equivalent yield will reduce the valuation of a property and vice versa. There are interrelationships between these inputs as they are determined by market conditions and the valuation movement in any one period depends on the balance between them. If these inputs move in opposite directions (e.g. rental value increases and yields decrease) valuation movements can be amplified whereas if they move in the same direction, they may offset reducing the overall net valuation movement.
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.
At 30 June 2017 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.
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.
The Board of Directors determines the Group's valuation policies and procedures for property valuation. The Board decides which independent external valuer to appoint for the external valuations of the Group's properties. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
Quantitative information about fair value measurements using unobservable inputs (Level 3) at 30 June 2017, per property class are as follows:
Asset class Input 2017 Range 2016 Range
Low High Low High
Retail Assets Annual rent per sq ft 30.40* 81.14 15.32 81.14
ERV per sq ft 28.42 70.00 11.20 53.60
Equivalent yield % 4.01 6.46 4.16 6.88
Long term vacancy rate 0.00% 15.15% 0.00% 20.59%
Office Assets Annual rent per sq ft 11.77 50.76 10.62 49.65
ERV per sq ft 12.99 52.22 12.50 54.26
Equivalent yield % 4.42 7.46 4.48 7.76
Long term vacancy rate 0.00% 9.02% 0.00% 20.55%
Logistics Assets(i) Annual rent per sq ft 6.99 9.11 6.99 7.81
ERV per sq ft 8.50 9.00 7.48 7.48
Equivalent yield % 5.89 5.89 6.37 6.37
Long term vacancy rate 0.00% 0.00% 0.00% 0.00%
Mixed Use Assets (ii) Equivalent yield % 5.67 7.38 6.50 6.50
Long term vacancy rate 0.00% 7.30% 0.00% 0.00%
Development
Assets Net Initial yield % 5.00% 5.70% 5.20% 6.25%
Build cost per sq ft 77.67 308.00 132.94 198.58
Rental value per sq ft (iii) 9.75 65.00 28.00 52.45
* The increase in the low annual rent per square foot in retail is as a result of the sale of Parkway Retail Park in Limerick in March 2017.
(i) The range for the logistics assets is between the various units within Horizon Logistics Park.
(ii) Comprises Arena Centre in Tallaght, Dublin 24 and the INM Building in Citywest, Dublin 24.
(iii) Rental value on development assets is the external valuers' view of expected rental value that will be achieved upon completion of the development.
Sensitivity of measurement to variance of significant unobservable inputs
A decrease in the estimated rental value 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 0.25% increase in equivalent yield would have the impact of a EUR61.7 million reduction in fair value whilst a 0.25% decrease in yield would result in a fair value increase of EUR67.8 million. A 0.25% increase in the yield of development properties would have a EUR5.1 million reduction in fair value whilst a 0.25% decrease in yield would result in a fair value increase of EUR5.7 million. This is further analysed by property class, as follows:
2017
Value Value
+0.25% -0.25%
Equivalent Equivalent
Yield Yield
Property Class EUR'000 EUR'000
Office (51,399) 56,626
Retail (6,378) 7,089
Logistics (1,514) 1,634
Mixed Use (2,362) 2,495
________ ________
Investment Properties (61,653) 67,844
Development
Properties (5,130) 5,710
________ ________
Total Properties (66,783) 73,554
The comparative figure for the sensitivity of +/-1% on yields are included below.
2017 2016
Value Value Value Value
+1% -1% +1% -1%
Equivalent Equivalent Equivalent Equivalent
Yield Yield Yield Yield
Property Class EUR'000 EUR'000 EUR'000 EUR'000
Office (179,963) 268,732 (164,454) 237,600
Retail (22,207) 33,981 (25,511) 44,019
Logistics (5,347) 7,581 (2,450) 3,370
Mixed Use (8,445) 11,416 (680) 920
________ ________ ________ ________
Investment Properties (215,962) 321,710 (193,095) 285,909
Development
Properties (18,200) 26,920 (21,990) 31,822
________ ________ ________ ________
Total Properties (234,162) 348,630 (215,085) 317,731
9 Investment in joint venture
The Group, through its wholly owned subsidiary Green REIT (Central Park) DAC was until 8 January 2016 a 50% partner in the Central Park Limited Partnership, a joint arrangement formed on 28 March 2014 with LVS II CP Investor Limited. The Group classified this joint arrangement as a joint venture. On 8 January 2016 the Group purchased the remaining 50% of The Central Park Limited Partnership from PIMCO Property Fund II. From that date Central Park was accounted for as 100% owned by the Group and consolidated into the Group's results to 30 June 2016 and 30 June 2017.
The detailed breakdown of the Group's 50% share of the Central Park Limited Partnership joint venture profit for the period 1 July 2015 to 8 January 2016 is set out below.
(i) Summarised income statement
Period from 1 July
2015 to 8 January 2016
Capital 50%
Underlying and Central
pre-tax other Park Joint
Venture
EUR'000 EUR'000 EUR'000
Gross rental and related
income 5,080 - 5,080
_______ _______ _______
Net rental and related
income 4,053 - 4,053
Fair value movement
on investment properties - 11,344 11,344
Fair value movement
on derivatives - (38) (38)
_______ _______ _______
Operating profit 4,053 11,306 15,359
Finance expense (1,313) - (1,313)
_______ _______ _______
Profit on ordinary
activities before
tax 2,740 11,306 14,046
Income tax - - -
_______ _______ _______
Profit for the period
after tax 2,740 11,306 14,046
10 Trade and other receivables
2017 2016
EUR'000 EUR'000
Current
Tenant lease incentives 21,726 11,297
Trade receivables 1,041 530
Other receivables 1,540 2,444
24,307 14,271
Non Current
Other receivables 1,350 -
_________ _________
Total trade and other receivables 25,657 14,271
Tenant lease incentives
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. The balance included in trade and other receivables is the sum of these unamortised incentives and the balance will be released over the term of the relevant leases.
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.
11 Share capital
Authorised and issued share
capital
2017 2016
Ordinary shares of EUR0.10 Number Number
each
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 2015 Performance
Fee 13,895,291 13,895,291
Issued to settle 2016 Performance 9,482,718 -
Fee
In issue at 30 June 690,347,705 680,864,987
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 10 October 2016, the Company issued 9,482,718 shares at an issue price of EUR1.47 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 2016.
12 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 2017 the Property Income of the Property Rental Business of the Group is calculated as follows:
2017 2017 2016 2016
EUR'000 EUR'000 EUR'000 EUR'000
Profit for the period
after taxation 129,775 145,502
Less net movement on fair
value of investment properties
* Group 94,496 109,367
* Central Park joint venture - 11,306
(94,496) (120,673)
Less net movement on fair (2,242) -
value of financial assets
Less profit on residual
business - (519)
Add back tax on residual
business - 65
Property income of the
Property Rental
Business 33,037 24,375
85% thereof 28,081 20,719
On 7 November 2016 the Company paid a dividend of EUR31.3 million (4.6 cents per share) in respect of the year to 30 June 2016.
The Directors expect to declare and pay a dividend of 5.0 cents per share, or a total dividend of EUR34.6 million, in the fourth quarter of 2017.
13 Earnings per share
Basic and diluted earnings per share
Profit attributable to ordinary shareholders
2017 2016
EUR'000 EUR'000
Profit for the period, attributable
to the owners of the company 129,775 145,502
EPRA adjustment
- deduction of fair value movement
on investment properties (94,496) (120,673)
- deduction of fair value movement (2,242) -
on financial assets
___________ ___________
EPRA Earnings 33,037 24,829
Weighted average number of ordinary shares
2017 2016
Number Number
Shares in issue during the year
ended 30 June 2016 - 666,969,696
Effect of shares in issue on 680,864,987 -
1 July 2016
Effect of performance fee shares
issued 7,586,174 11,313,652
Weighted average number of ordinary
shares - basic 688,451,161 678,283,348
(restated*)
Performance fee shares payable
- dilutive effect 4,007,197 9,482,718
(restated*)
Weighted average number of ordinary
shares - diluted 692,458,358 687,766,066
Basic earnings per share (cents) 18.9 21.5
Diluted earnings per share (cents) 18.7 21.2*
EPRA Earnings per share (cents) 4.8 3.7
The weighted average number of ordinary shares (basic) in respect of each year reflects the inclusion of the performance fee shares in respect of the prior financial year, from the date of the respective final Board approval of the preliminary annual results, i.e. when all necessary conditions are satisfied. Typically the Company does not issue these shares until after the ex-dividend date, to ensure the performance fee shares are not entitled to a dividend in respect of the financial year in which they were earned.
The performance fee shares issuable at financial year end are included in full in the calculation of diluted earnings per share.
The performance fee shares payable in respect of the year to 30 June 2017 are calculated based on a share price of EUR1.418, which reflects the average share price calculation in the IMA.
* For 2016 the company has restated the comparative on the basis described above. Previously the performance fees were not included in full. The impact is a reduction in diluted earnings per share as originally reported of 0.2c from 21.4c to 21.2c for the year to 30 June 2016.
14 Net asset value per share
2017 2016
Net assets as at 30 June ('000) EUR1,152,179 EUR1,048,041
EPRA Adjustment - Deduct fair (EUR2,242) -
value of financial derivatives
('000)
___________ ___________
EPRA Net Assets as at 30 June
('000) EUR1,149,937 EUR1,048,041
Ordinary shares in issue at
30 June 690,347,705 680,864,987
Performance fee shares issuable 4,007,197 9,482,718
___________ ___________
Ordinary shares including Performance
Fee shares issuable 694,354,902 690,347,705
Basic NAV per share (cents) 166.9 153.9
Diluted NAV per share (cents) 165.9 151.8
EPRA NAV per Share (cents) 165.6 151.8
EPRA issued Best Practices Recommendations most recently in November 2016, which gives guidelines for performance measures.
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 is calculated on a fully diluted basis. The dilutive effect of the Investment Manager performance fee at 30 June 2017 represents the number of shares that are issuable.
15 Trade and other payables 2017 2016
EUR'000 EUR'000
Accrued expenditure 8,416 6,947
Deferred income and income
received in advance 6,095 6,369
Deferred Consideration - 10,350
Other creditors 4,673 4,554
______ ______
Total trade and other payables
- current 19,184 28,220
Long term other creditors 7,224 -
______ ______
26,408 28,220
In May 2015, the Group through its subsidiary Green REIT (ROI) DAC agreed to purchase One Albert Quay in Cork. The Deferred Consideration held on the balance sheet in June 2016 was paid in March 2017.
The carrying value of all trade and other payables is approximate to their fair value.
16 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 and cash and cash equivalents. The carrying amount of financial assets represents the maximum credit exposure.
Exposure to credit risk
Carrying amount 2017 2016
EUR'000 EUR'000
Trade and other receivables 3,931 2,974
Cash and cash equivalents 48,797 76,839
________ ________
52,728 79,813
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 2017 and no impairment allowance was considered necessary.
Cash and cash equivalents are held with Bank of Ireland (S&P rating of BBB).
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, capital commitments and dividends. All trade and other payables at 30 June 2017 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 or months years years
flows less
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 30 June 2017
Non derivatives
Borrowings 276,655 293,221 2,784 2,784 154,069 133,584
Accrued expenditure 8,416 8,416 8,416 - - -
Investment Manager
base fee 2,875 2,875 2,875 - - -
Other creditors 11,897 11,897 4,673 - 7,224 -
_____ ______ ______ ______ _____ _____
Total 299,843 316,409 18,748 2,784 161,293 133,584
_____ ______ ______ ______ _____ _____
1 2
6 - - -
Group Carrying Contractual 6 months 12 2 5
amount cash or months years years
flows less
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
Accruals 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
_____ ______ ______ ______ _____ _____
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 2017 the Group had a revolving credit facility ("RCF") with Barclays Bank Ireland plc and Ulster Bank Ireland DAC with a principal drawn balance of EUR128.4 million and an interest rate of Euribor + 2.0%, and a loan of EUR150.0 million due to Bank of Ireland that had an interest rate of Euribor + 2.0%. The Group's interest on the RCF was EUR1.7 million for the period and the Group's interest expense on the Bank of Ireland loan was EUR3.1 million for the period.
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 EUR278.4 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 the statement of comprehensive income.
During the year 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 2017, capital consisted 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.
17 Borrowings
30 June 30 June
2017 2016
EUR'000 EUR'000
Revolving credit facility 127,612 104,476
Bank of Ireland Central
Park facility 149,043 148,472
________ ________
Total borrowings 276,655 252,948
The Company has a revolving credit facility with Barclays Bank Ireland plc and Ulster Bank Ireland DAC with a limit of EUR210 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. The amount presented in the financial statements is net of unamortised initial arrangement fees and associated costs of EUR1.6 million. The facility is repayable in 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 and assumed full liability for the EUR150 million Bank of Ireland loan owed by the joint venture. The facility has an interest rate of Euribor + 2.0% and the loan is repayable in June 2021. The loan is secured on the assets owned by the Group at Central Park, Dublin 18 along with the relevant rents from those properties.
18 Related parties
(a) Subsidiaries
The Company's subsidiaries are detailed in note 19.
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 EUR871.3 million (2016: EUR808.6 million) in cash to fund their activities.
(b) Investment Manager - Green Property REIT Ventures DAC
Green Property REIT Ventures DAC is a related party by virtue of providing key management services to the reporting entity. These services are set out in the Investment Manager Agreement entered into on 12 July 2013.
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 advisers 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 Directors 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 initial term of the IMA was five years to 11 July 2018. The IMA further provides that in the absence of notice of termination of the IMA, which notice can be given by either party no less than 12 months before the expiry of the initial term, the IMA continues in force thereafter on the same terms for consecutive three year renewal periods. Once within a renewal period either party can give notice to terminate the IMA at the end of that renewal period, with not less than 12 months' notice.
In May 2017 both the Company and the Investment Manager confirmed to each other that they will not be serving notice of termination of the IMA. It will consequently continue in force on the same terms for a three year renewal period to 11 July 2021.
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 EPRA NAV for that quarter. The total base fee earned by the Investment Manager in the period amounted to EUR10.8 million (2016: EUR9.7 million).
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):
(i) 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
(ii) 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 2017 is EUR5.7 million (2016: EUR13.9 million). The fee will be settled by way of the issue of 4,007,197 ordinary shares to the Investment Manager based on the average share price of EUR1.418 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 23,378,009 ordinary shares in the Company. These shares were issued in full settlement of the performance fees for the years to 30 June 2015 and 2016.
(c) Directors and key management personnel
The key management personnel of the Company are the directors. During the year to 30 June 2017, the Company incurred directors' fees, including taxes and expenses of EUR0.3 million (2016: EUR0.3 million). There is no other director or key management compensation paid by the Company.
19 Group entities
The Company's principal subsidiaries as at 30 June 2017 are set out below. All of the Company's subsidiaries are resident in Ireland, with their registered addresses at 32 Molesworth Street, Dublin 2. All group entities trade and operate in Ireland only.
Group company Company's Nature Properties held
direct of business
holding
Green REIT (ROI) 100% Property INM Building
DAC Investment Albert Quay
Fitzwilliam Hall
1-2 College Green
4-5 College Green
76-78 Harcourt
Street
Green REIT (BR) 100% Property 2 Burlington
DAC Investment Road
Green REIT Mount 100% Property 84-93 Lower Mount
Street DAC Investment Street
Green REIT Horizon 100% Property Horizon Logistic
DAC Investment Park and Lands
Green REIT Arena 100% Property The Arena Centre
DAC Investment
Green REIT (Molesworth 100% Property 30-33 Molesworth
Street) DAC Investment Street
Green REIT (Central 100% Property 100% investment
Park) DAC Investment in structure
that holds commercial
properties at
Central Park,
Sandyford.
Green REIT (HR) 100% Property 5 Harcourt Road
DAC Investment
Green REIT (George's 100% Property Block A, E and
Quay and Court) Investment F George's Quay
DAC and George's
Court
Green REIT (Westend) 100% Property Westend Retail
DAC Investment Park, Office
Park and Commercial
Village
Green REIT (Dawson 100% Property 13-17 Dawson
St) DAC Investment Street
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.
20 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:
2017 2016
EUR'000 EUR'000
Not later than a year 60,390 59,249
Later than one year but not
more than five years 231,839 200,785
More than five years 237,558 221,698
529,787 481,732
21 Subsequent events
There were no events subsequent to the year-end that require adjustment to or disclosure in the financial statements.
22 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 EUR49.3 million.
23 Contingent liabilities
No contingent liabilities have been identified by the Group that should be disclosed in these financial statements.
Unaudited Supplementary Information
EPRA Performance Measures
Number of Shares Earnings per Share Net Asset Value
2017 2016 2017 2016
Number Number Number Number
For use in basic
measures 688,451,161 678,283,348 690,347,705 680,864,987
Performance shares
- dilutive effect 4,007,197 9,482,718 4,007,197 9,482,718
For use in diluted
measures 692,458,358 687,766,066 694,354,902 690,347,705
EPRA Earnings 2017 2016
EUR'000 EUR'000
Earnings per IFRS income statement 129,775 145,502
EPRA adjustments:
- deduction of fair value movement
on investment properties (94,496) (120,673)
- deduction of fair value movement (2,242) -
on interest rate swaps
- add tax on disposal - 65
___________ ___________
EPRA Earnings 33,037 24,894
EPRA Earnings per Share (cents) 4.8 3.7
Diluted EPRA Earnings per Share
(cents) 4.8 3.6
EPRA NAV
2017 2016
EUR'000 EUR'000
NAV per the financial statements
at 30 June 1,152,179 1,048,041
EPRA Adjustment - Deduct fair (2,242) -
value of financial instruments
___________ ___________
EPRA NAV at 30 June 1,149,937 1,048,041
EPRA NAV per share (cents) 165.6 151.8
EPRA Triple Net Asset Value (NNNAV)
2017 2016
EUR'000 EUR'000
EPRA NAV at 30 June 1,149,937 1,048,041
Fair value of financial derivatives 2,242 -
___________ ___________
EPRA NNNAV at 30 June 1,152,179 1,048,041
EPRA NNNAV per share (cents) 165.9 151.8
EPRA Net Initial Yield ("NIY")
2017 2016
EUR'000 EUR'000
Annual passing rent at balance
sheet date 53,817 45,900
Non-recoverable operating expenses (2,421) (4,247)
51,396 41,653
Market value of property (income
producing only) 1,264,286 1,142,412
Add: Puchasers' costs at 4.46% 56,387 50,952
Total Costs 1,320,673 1,193,364
EPRA NIY 3.9% 3.5%
EPRA 'topped-up' NIY
2017 2016
EUR'000 EUR'000
Annual contracted rent at balance
sheet date 68,900 61,300
Non-recoverable operating expenses (2,421) (4,247)
66,479 57,053
Market value of property (income
producing only) 1,264,286 1,142,412
Add: Purchasers' costs at 4.46% 56,387 50,952
Total Costs 1,320,673 1,193,364
EPRA 'topped-up' NIY 5.0% 4.8%
EPRA Cost Ratio
2017 2016
EUR'000 EUR'000
Administrative costs 2,370 2,708
Property operating costs 2,421 3,883
Share of joint venture costs - 364
Investment Manager base fee 10,805 9,669
Investment Manager performance
fee 5,682 13,893
Total Costs 21,278 30,517
Revenue - Group 60,420 56,432
Share of joint venture revenue - 4,418
60,420 60,850
EPRA Cost Ratio 35.2% 50.2%
EPRA Vacancy Rate
2017 2016
EUR'000 EUR'000
Estimated rental value of vacant
space 1,100 1,120
Estimated rental value of the
portfolio 72,500 65,727
EPRA Vacancy Rate 1.5% 1.7%
COMPANY INFORMATION
Directors Gary Kennedy (Chairman) (all non-executives) Pat Gunne
Jerome Kennedy
Gary McGann
Stephen Vernon (British)
Thom Wernink (Dutch)
Secretary Niall O'Buachalla Registered office 32 Molesworth Street
Dublin 2
Investment Manager Green Property REIT Ventures DAC
32 Molesworth Street
Dublin 2
Statutory Auditors PricewaterhouseCoopers
Chartered Accountants and Statutory Audit Firm
One Spencer Dock
North Wall Quay
Dublin 1
Solicitors Arthur Cox
Earlsfort Centre
Earlsfort Terrace
Dublin 2
Principal Bankers Bank of Ireland
39 St. Stephen's Green
Dublin 2
Barclays Bank Ireland plc
2 Park Place
Hatch Street Upper
Dublin 2
External Property Valuers CBRE
Connaught House
1 Burlington Road
Dublin 2
Jones Lang LaSalle Limited
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.
"AIFM"
an alternative investment fund manager within the meaning of AIFMD.
"AIFMD"
Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers.
"Basic NAV per share"
IFRS net assets divided by the number of shares in issue at the balance sheet date
"Brexit"
the referendum decision by the United Kingdom to leave the European Union.
"CBD"
Central Business District
"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.
"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
"EPRA"
European Public Real Estate Association.
"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)
"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.
"estimated rental value" ("ERV")
ERV is the open market rent that a property can be reasonably expected to attain given its characteristics, condition, location and local market conditions.
"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
"gross domestic product" ("GDP")
the market value of all officially recognised final goods and services produced within a country in a given period of time
"IMA"
the Investment Manager Agreement entered into by the Company and the Investment Manager (Green Property REIT Ventures DAC) 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
"Irish REIT Regime"
Part 25A of the Taxes Consolidation Act 1997 (as inserted by section 41 of the Finance Act 2013)
"loan to value" ("LTV")
calculated as the borrowings secured on an individual asset as a percentage of the market value of that asset.
"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.
"occupier market"
the office, industrial and retail market
"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, 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
"total return"
the movement in 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 net asset value at the beginning of the financial year.
"WAULT"
the weighted average period of unexpired lease term or if earlier period to the next lease break.
"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
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 SFEFEWFWSELU
(END) Dow Jones Newswires
September 18, 2017 02:00 ET (06:00 GMT)
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