We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| 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 : 0385B
Green REIT PLC
18 September 2018
PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2018
Development completions adding substantially to 11% profit growth;
EUR600m future development pipeline;
EPRA NAV per share 179 cent
Dublin, 18 September, 2018 - Green REIT plc, ("Green REIT" or the "Company"), the Irish property investment company, today announces its results for the year ended 30 June 2018.
Hot Features
Premium
30 June 30 June Change
2018 2017
Profit after Tax EUR144.2m EUR129.8m +11%
------------ ------------ ---------
EPRA Earnings EUR36.9m EUR33.0m +12%
------------ ------------ ---------
Portfolio Valuation EUR1,424.4m EUR1,381.4m +3%
------------ ------------ ---------
IFRS NAV per Share 180.3 cent 166.9 cent +8%
------------ ------------ ---------
178.9
EPRA NAV per Share cent 165.6 cent +8%
------------ ------------ ---------
IFRS NAV EUR1,251.6m EUR1,152.2m +9%
------------ ------------ ---------
Total Return 13.4% 12.7% +0.7 pps
------------ ------------ ---------
Property LTV 15.5% 20.2% -4.7 pps
------------ ------------ ---------
Basic EPS 20.8 cent 18.9 cent +10%
------------ ------------ ---------
EPRA EPS 5.3 cent 4.8 cent +11%
------------ ------------ ---------
Proposed Dividend per Share
(full year) 5.3 cent 5.0 cent +6%
------------ ------------ ---------
-- Profitable capital recycling from retail to logistics and offices
-- Development success a key driver to profit and income growth
-- Income security at an all-time high of 8.8 years
-- Positive outlook underpinned by EUR600 million future development pipeline and favourable economic growth trajectory
KEY FINANCIALS
-- Profit for the period up 11% to EUR144.2 million (2017: EUR129.8 million). 10% uplift in EPS to 20.8 cent (2017: 18.9 cent)
-- 12.4% increase in rental income to EUR67.9 million (2017: EUR60.4 million)
-- EPRA NAV per share up 8% to EUR1.79 per share, post payment of 2.6 cent per share interim dividend in March 2018 and an increase in stamp duty from 2% to 6% in October 2017 (8 cent NAV impact)
-- Total return 13.4% (2017: 12.7%) based on growth in EPRA NAV and dividends paid
-- Portfolio valued at EUR1,424 million (2017: EUR1,381 million)
-- Property revaluation surpluses of EUR109.2 million, 16% higher than the prior year
-- 12% growth in EPRA Earnings to EUR37 million and 11% increase in EPRA EPS to 5.3 cent per share
-- LTV remains low at 15.5%, with undrawn facilities at year end of EUR139 million providing further capital for deployment into development pipeline
-- Proposed full year dividend of 5.3 cent per share, a 6% increase over prior year, equating to 3% on June 2018 NAV. Guidance of a dividend of 4% per annum on NAV post current development programme remains
STRATEGIC & OPERATIONAL HIGHLIGHTS
PROFITABLE CAPITAL RECYCLING FROM RETAIL TO LOGISTICS AND OFFICES
- Sale of Westend Retail Park in June 2018 for EUR147.7 million, representing a 55% profit on cost
- Retail exposure reduced to less than 1% of total portfolio value - EUR260 million of disposals (75% of which was retail) since inception, at a 57% profit on cost
- Logistics approaching 8% of portfolio value post the current phase of development, with a target sectoral allocation in excess of 20% over the medium to longer term as Horizon Logistics Park is developed out
DEVELOPMENT SUCCESS A KEY DRIVER TO PROFIT AND INCOME GROWTH
- EUR10.4 million of new contracted annual rent added from developments in the year to 30 June 2018, with a further EUR1.7 million added post period end
- Current and completed development programme, generating 8.4% yield on cost, accounts for 28% of portfolio value, with 84% de-risked through lettings
- Completion of flagship One Molesworth Street, Dublin 2, adding EUR5.3 million to contracted annual rent and 6.1 cent/EUR42.3 million to NAV in FY18
- Completion and full letting of 5 Harcourt Road, Dublin 2, adding EUR3.1 million of contracted annual rent and 2.9 cent/EUR20.4 million to NAV in FY18
- Construction of Building I in Central Park well underway, totalling 9,000 square metre (97,000 square feet) of office space, with completion in Q1 2019
- Potential future development of 37,200 square metres (400,000 square feet) at Central Park, post Building I
- Completion of three further units at Horizon Logistics Park, including an 80,000 square foot unit for Kuehne + Nagel. Construction of two further speculative units to commence shortly, along with a large purpose built unit of 115,000 square feet for Bunzl (subject to planning)
- Further 28 acres of land acquired at Horizon Logistics Park, bringing total land holding to circa 300 acres, providing short, medium and longer term optionality
INCOME SECURITY AT ALL-TIME HIGH OF 8.8 YEARS
- WAULT of 8.8 years across the portfolio, a record high for the Company
- Contracted annual rent of EUR71.7 million at 30 June 2018, including EUR10.4 million in new rent from developments and EUR1.1 million from investment properties. Further increased to EUR74.3 million following additional letting activity since 30 June 2018
- Eight rent reviews settled, achieving an 11%/EUR1.2 million annual rental uplift to EUR12.5 million
- EUR1.1 million of new annual rent secured through new lettings on our investment properties
- Breaks not exercised by tenants with total annual rent of EUR5 million, with seven years of additional term certain at Central Park (EUR2.2 million annual rent) and nine years in George's Court (EUR2.3 million annual rent)
- Period end EPRA vacancy rate of 4.4% (30 June 2017: 1.5%), subsequently reduced to 2.8% through lettings secured since 30 June 2018
- 5% reversionary potential across the standing portfolio
Positive outlook underpinned by EUR600 million FUTURE development pipeline and FAVOURABLE economic growth trajectory
- Future development pipeline with an end value projection of EUR600 million, 43% greater than value of programme to date and with an estimated EUR37 million annual rent roll
- 7.2% expected yield on cost for future developments, highly accretive to shareholder value
- Demand for high quality office and logistics space remains robust, with four of the top 10 Dublin office occupiers having major additional requirements
- Irish economic growth set to continue, supporting real estate markets and underpinning our positive outlook
Gary Kennedy, Chairman of Green REIT plc, commented: "Our strategic focus continues to be on driving risk adjusted returns for shareholders. This has been another year of strong contributions from our development schemes both to NAV and to the income base which drives our dividends. We have further reweighted the portfolio towards our key sectors of offices and logistics, through effective capital recycling, and we look forward to creating additional value by capturing the development potential at Central Park and Horizon Logistics Park."
Pat Gunne, Chief Executive of Green Property REIT Ventures, added: "The past 12 months has been great for us on all fronts, particularly our development success across our major office projects and our profitable capital recycling programme from the retail sector into logistics, where we believe there are strong growth prospects. The Irish property market remains well supported by our growth economy, our expanding employment base, and a diverse international investor set which continues to find our market attractive, underpinning our positive outlook."
Contacts
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 7727 1000
Jonathan Neilan Giles Barrie
Patrick Berkery Claire Turvey
greenreit@fticonsulting.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
The year to 30 June 2018 was another year of strong growth and positive operational performance for the Company, with an increase in EPRA NAV per share of 8% and with EPRA Earnings up 12% on the prior year. Total return, as measured by growth in EPRA NAV and dividends paid to shareholders in the year, was a healthy 13.4% (2017: 12.7%).
Our strategy continues to be to deliver attractive risk adjusted returns to shareholders through active asset management and property development, with a disciplined level of gearing.
Strong momentum, income creation and returns from our development pipeline
Having completed our first two office developments in Dublin in the year to 30 June 2017, two further office developments were completed in the year to 30 June 2018, namely One Molesworth Street and 5 Harcourt Road, both in the core of Dublin city centre. Our strategy of developing the highest quality office buildings in the best locations in Dublin continues to attract the highest calibre occupiers. This is particularly evident at One Molesworth Street, our flagship office building, which exceeded our expectations from both a design and a financial perspective. The completion and letting of these schemes has made a significant contribution both to net asset value and to income, well ahead of our forecasts, while substantially de-risking our office development pipeline.
We look forward to the completion of Building I in Central Park in South Dublin in the first quarter of 2019, adding a further 9,000 square metres (97,000 square feet) to the business park and increasing it to 88,300 square metres (950,000 square feet) of lettable space, with a projected annual rent roll, including Building I, of EUR27.3 million. Subject to letting progress at Building I, we will assess further development of our landholding in Central Park, which is capable of accommodating an additional 37,200 square metres (400,000 square feet) of lettable office space, competing for high quality occupiers against the backdrop of a strong occupational market.
Elsewhere on the development front, we have seen a strengthening in momentum at Horizon Logistics Park, beside Dublin Airport, which we consider to be the best located logistics land in Dublin, with easy access to Dublin Airport, the M50 orbital motorway and Dublin Port. Having initially acquired three units with EUR0.9 million of annual rent and 112 acres of land in late 2013, we are now headed towards EUR6.3 million of annual rent from twelve units, and have a landholding of approximately 300 acres. We intend to continue our strategy of building a moderate level of speculative units at Horizon Logistics Park, while at the same time competing for larger and/or more specialised purpose built units, with a view to creating a logistics park of international scale and exceptionally high quality. We believe that we are well positioned at Horizon Logistics Park to take advantage of the strength of the real economy in Ireland, the increasing online retail penetration levels in Ireland and expansion opportunities that may arise from Brexit.
Sale of Westend Retail Park - rebalancing of portfolio, effective capital recycling
In June 2018 we completed the sale of Westend Retail Park in Blanchardstown, Dublin 15, for a cash consideration of EUR147.7 million, broadly in line with the EUR147.1 million valuation of the property at 31 December 2017. The annual contracted rent from the property was EUR8.5 million, representing 11% of the Company's then annual contracted rent and it represented 10% of the Company's total portfolio valuation based on the 31 December 2017 valuations.
The net proceeds from the sale were applied in reducing the Company's revolving credit facility, thereby providing access to debt capital for future development opportunities at Central Park and Horizon Logistics Park.
The disposal of Westend Retail Park, representing a 55% profit on cost, is in line with our stated strategy of recycling a portion of our capital to invest in higher return development projects in sectors where we see more attractive future growth opportunities, while maintaining a moderate gearing level. As a result of this strategic disposal, retail now comprises less than 1% of the overall portfolio value (30 June 2017: 10%).
Successful new lettings and active asset management underpin progressive dividend strategy
We continue to drive contracted rent, focusing on the quality and security of our income, with WAULT at a company high of 8.8 years at 30 June 2018, all of which is supportive of our progressive dividend strategy. Our guidance of a dividend of 4% per annum on net asset value post the completion and letting of our development programme remains unchanged.
The Board plans to declare a further dividend in respect of the year to 30 June 2018 of 2.7 cent per share, or EUR18.8 million, to be paid in October 2018. Added to the interim dividend of 2.6 cent per share paid in February 2018 this represents a total dividend for the year of 5.3 cent per share, or 100% of EPRA Earnings for the year to 30 June 2018.
Ireland - continued economic outperformance
All of the key indicators continue to follow a positive trajectory in Ireland, and the economy is growing at a pace that is well ahead of the Eurozone average.
The labour market continues to strengthen, with employment growth of 3.4% in the year to June 2018. The economy has generated 383,000 net new jobs over the past seven years, representing a 20% cumulative increase since the Q3 2011 low. The level of total employment reached a new record high of 2.3 million in Q2 2018, nearly 1% higher than the pre-crisis peak in Q4 2007. Employment growth continues to be driven by the broad services and construction sectors, which bodes well for the Company's office portfolio and future development schemes. The fact that Ireland is once again seeing net inward migration is also encouraging.
Core domestic demand growth is expected to be 4.8% in 2018, up from 2.6% in 2017, and is forecast to increase by 4% in 2019 and by 3.9% in 2020 (source: Goodbody), well ahead of forecast Eurozone averages, and with consumer spending and construction continuing to be the main drivers of economic growth in that period.
With CPI inflation at 0.7% for the year to August 2018, wage growth of 2.4% in the year to March 2018 and growth in retail sales volumes of 7% in the twelve months ended June 2018, the outlook for consumer spending looks positive, which we see as supportive for the logistics sector, one of the Company's strategic areas of focus.
FDI inflows remain strong, with FDI companies accounting for 10% of total employment in Ireland in 2017, attracted to Ireland by its EU market access, stable corporate tax environment, young and well-educated population and its attractiveness as a workplace for overseas talent.
Eurozone interest rates remain low and are expected to do so for some time, while the Irish government
10 year bond rate stood at 90 basis points at the end of August 2018, up on the 72 basis point level at 30 June 2017, but at levels which remain supportive of commercial property yields, given the significant yield gap which we monitor closely.
Financial results and position
Summary financial information
30 June 2018 30 June 2017 Change
Balance Sheet:
------------- ------------- ---------
Total Property Value EUR1,424.4m EUR1,381.4m +3.1%
------------- ------------- ---------
EPRA Net Assets EUR1,251.2m EUR1,149.9m +8.8%
------------- ------------- ---------
EPRA NAV per Share 178.9 cent 165.6 cent +8%
------------- ------------- ---------
Property LTV 15.5% 20.2% -4.7 pps
------------- ------------- ---------
Income Statement:
------------- ------------- ---------
Gross Rental Income (excluding
service charge income) EUR67.9.m EUR60.4m +12.4%
------------- ------------- ---------
Profit for the Period EUR144.2m EUR129.8m +11.1%
------------- ------------- ---------
EPRA Earnings EUR36.9m EUR33.0m +12%
------------- ------------- ---------
EPS - Basic 20.8 cent 18.9 cent +10.3%
------------- ------------- ---------
EPS - EPRA 5.3 cent 4.8 cent +10.9%
------------- ------------- ---------
Robust balance sheet
Our loan to value level of 15.5% at 30 June 2018 reflects the reduction in the balance on our revolving credit facility ('RCF') from the sale of Westend Retail and Office Park, which completed in June 2018. This provides us with EUR139 million of headroom on the RCF for investment in our developments in progress and for future development at Central Park and Horizon Logistics Park.
Since 30 June 2018 we have put in place a new RCF, with a maturity date of September 2022 and with an option to extend by a further year, at a reduced margin. This low cost and flexible financing will be used to fund our development costs in the offices and logistics sectors, our two key areas of focus.
Our intended gearing level at this point in the cycle continues to be 25%, post the completion and letting of our development assets, but as previously stated we remain opportunistic in our approach, which could lead to higher or lower gearing levels depending upon market conditions and investment opportunities.
Stamp Duty increase
In October 2017 the Irish Government increased the rate of stamp duty on commercial real estate transactions from 2% to 6% as part of its 2018 Budget, with immediate effect. This unexpected and significant tax increase caused a one-off reduction in the value of the Company's property portfolio and NAV of EUR55.5 million, or 8 cent per share. The higher rate of stamp duty does not appear to be impacting adversely on Irish real estate transaction volumes.
Board composition and renewal
Thom Wernink completed his service as a non-executive director with effect from the conclusion of the Company's AGM on 1 December 2017. I would like to thank Thom for his contribution to the Company from its inception in mid-2013 and in particular during the busy time when the core portfolio was assembled. Rosheen McGuckian was co-opted to the Board for a three year term with effect from 1 January 2018 and will be put forward for election at the Company's next AGM in December 2018. This appointment followed a process assisted by an external search consultancy. Rosheen has also joined the Board's Audit Committee. Rosheen is an experienced board director and business leader who has successfully operated at a senior management level in Ireland and who will bring significant expertise to our Board. On behalf of the Board I would like to thank Rosheen for her positive contribution to date.
Investment Manager performance fee
The Board has approved the payment of a performance fee of EUR7.8 million to the Investment Manager for the year to 30 June 2018, in line with the provisions of the Investment Manager Agreement. The performance fee will be settled by the issuance of 5,114,736 new ordinary shares to the Investment Manager by the Company in quarter four of 2018. 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 in late September 2018 and will therefore not be entitled to dividends in respect of the year to 30 June 2018.
Outlook
Our focus remains on delivering attractive risk adjusted returns to shareholders, as highlighted by the total return to shareholders for the year to 30 June 2018 of 13.4%, achieved with moderate levels of both gearing and speculative property development.
As was also the case in the prior year, the completion and letting of development schemes were a key driver of the Company's strong performance for the year to 30 June 2018, and will contribute further in the years ahead at our substantial landholdings at Central Park and Horizon Logistics Park.
The Irish economy continues to grow in a sustained manner and FDI flows remain strong. This is underpinning a robust occupier market in our key sectors of offices and logistics, while the continuing low interest rate environment remains supportive of real estate values. Whilst Brexit may potentially be a headwind for the wider Irish economy, we continue to see it as an opportunity for our particular area of business, which is heavily weighted towards Dublin offices.
We continue to operate in a stable capital markets environment, where we see increased levels of core international capital bidding for prime Irish real estate and continue to carefully monitor the capital markets environment both in Ireland and abroad.
Sectorally, we continue to allocate more capital to logistics, at Horizon Logistics Park, and have substantially reduced the Company's exposure to retail to below 1% of value through the sale of Westend Retail Park.
We remain committed to our progressive dividend policy, underpinned by our high quality and well-located portfolio with secure income from leases to the highest calibre tenants. We remain confident in the Company's prospects as we look forward to the year ahead.
Gary Kennedy
Chairman
18 September 2018
Business Review
1. PORTFOLIO SUMMARY
-- Annual contracted rent of EUR71.7 million, net of the EUR8.5 million reduction in annual rent following the sale of Westend Retail Park (30 June 2017: EUR68.9 million)
-- 3 lettings/pre-lettings completed since year end further increased annual contracted rent to EUR74.3 million
-- 4.4% EPRA vacancy rate (30 June 2017: 1.5%), reduced to 2.8% through lettings secured since 30 June 2018
-- Record WAULT of 8.8 years across the portfolio
-- Dublin focus (95% by portfolio value), with our prime office building in Cork city our only non-Dublin location
-- Portfolio dominated by high grade office assets in Dublin's core CBD
-- Value by sector: 89% offices, 6% logistics, 4% mixed use and <1% retail
-- Portfolio is 5% reversionary at 30 June 2018
-- Diversified tenant base: 48% financial services, 20% TMT, 6% logistics, 6% retail trade and 5% each from government and professional services
-- Top 10 tenants account for 56% of contracted rent, with our largest tenant (AIB) accounting for 13% of the total
-- Yields:
On 30 June 2018 On 30 June 2017 Values
Values
Investment Initial
Yield(1) 4.9% 5.2%
--------------------------- ----------------------------------
Portfolio Initial
Yield(1) 4.6% 4.8%
--------------------------- ----------------------------------
(1) Calculated as contracted rent at 30 June 2017/18 over the June 2017/18 valuation plus notional purchaser's costs
2. PORTFOLIO VALUATION
-- Portfolio value EUR1.42 billion at 30 June 2018, an increase of 15.3% in the value of assets held throughout the year to that date, gross of capital expenditure
-- Revaluations of EUR109.2 million for the full year, comprising EUR61.4 million from developments and EUR47.8 million from investment properties
-- Revaluations are net of capital expenditure in the year of EUR75.5 million, of which EUR71.1 million was incurred on developments and EUR4.4 million on standing assets
-- Disposed of EUR158.1 million of non-core or lower growth assets during the year (Westend Retail Park and Arena Centre residential units)
-- Acquisitions during the year added EUR13.5 million to the 30 June 2018 valuations
-- 8.8% increase in value in the 6 months to 30 June 2018 for assets held throughout that period, gross of capital expenditure
-- Increase in commercial stamp duty rate from 2% to 6% in October 2017 impacted valuations by EUR55.5 million
An analysis of the movement in portfolio valuation in the year to 30 June 2018 is as follows:
Investment Develop-ments Total
Properties in Progress
and Lands
EURm EURm EURm
Portfolio Value at 30 June
2017 1,307.1 74.3 1,381.4
Acquisitions 13.5 - 13.5
Disposals (155.2) - (155.2)
Capital Expenditure 4.4 71.1 75.5
Reclassifications 191.8 (191.8) -
Property Value Uplifts 47.8 61.4 109.2
Portfolio Value at 30 June
2018 1,409.4 15.0 1,424.4
The main individual valuation movements in the year to 30 June 2018 were:
-- One Molesworth Street, Dublin 2: Gross increase in value by EUR59.3 million on 30 June 2017 value, or EUR42.3 million net of capital expenditure of EUR17.0 million in the period. Of the EUR42.3 million uplift, EUR36.7 million is development profit, while EUR5.6 million is the uplift since completion in Q4 2017. The uplift was due to the elimination of construction risk, along with long term lettings to Barclays Bank Ireland, Goshawk, TD Securities, The Ivy and Le Pain Quotidien, at rental levels ahead of valuer ERVs at 30 June 2017. The equivalent yield reduced from 5.25% in June 2017 to 4.20% at December 2017 and to 4.1% at June 2018, while the ERV for the building increased slightly from EUR5.3 million at December 2017 to EUR5.4 million at June 2018;
-- 5 Harcourt Road, Dublin 2: EUR33.3 million valuation increase gross of capital expenditure of EUR12.9 million in the period, or a EUR20.4 million uplift net of capital expenditure. The building was valued as a completed investment property for the first time at 30 June 2018, with the benefit of the letting of the entirety of the 50,280 square foot building, at 7% ahead of ERV, to WeWork, with a lease term of 20 years and with no tenant break options;
-- 2 Burlington Road, Dublin 4: EUR8.5 million valuation increase in the year, driven by the settlement of a rent review in the period which saw a 6% increase in rent, a minor element of yield compression from 4.4% in June 2017 to 4.2% at June 2018 and an increase in the ERV from EUR55 per square foot to EUR56 per square foot between December 2017 and June 2018;
-- Building H, Central Park, Dublin 18: EUR15.0 million valuation increase gross of capital expenditure of EUR1.2 million in the period, or EUR13.8 million net of capital expenditure. The uplift was driven by a contraction in equivalent yield from 5.3% to 4.8% in the year and the expiry of the rent free period granted to AIB, the tenant occupying the entire building of 158,244 square feet;
-- 32 Molesworth Street, Dublin 2: EUR6.1 million valuation increase, net of capital expenditure of EUR1 million, due primarily to a reduction in the equivalent yield from 4.6% to 4%, reflecting the movement in prime Dublin office yields in the period, and with a 5% increase in valuer ERV in the period; and
-- One Albert Quay, Cork: EUR5.7 million valuation increase in the year to June 2018 as a result of an increase in ERV by 10% to EUR5.1 million, with an increase in letting activity in the Cork market and a contraction in equivalent yield from 5.9% to 5.75%.
PORTFOLIO VALUATION ANALYSIS
Movement Movement Annual
June to December Movement
June 2017 December December 2017 to June 2018 to June
Valuation 2017 2017 Valuation June 2018 Valuation 2018
---------- -----------
EURMM EURMM EURMM
Offices
Dublin City Centre 618.2 10.1% 681.0 8.7% 740.1 19.7%
South Dublin - Central
Park 413.3 1.7% 420.3 5.2% 442.2 7.0%
Cork City - One Albert
Quay 71.1 2.8% 73.1 5.1% 76.8 8.0%
---------- ---------------- ----------- ---------------
Total Offices 1,102.6 6.5% 1,174.4 7.2% 1,259.1 14.2%
Mixed Use 59.8 -4.0% 57.4 0.8% 57.7 -3.3%
Logistics - Horizon
Logistics Park 55.1 6.5% 58.6 48.7% 87.2 58.3%
Retail - Dublin City
Centre 5.8 1.4% 5.9 0.5% 6.0 1.9%
Total - Assets Held
Throughout
the Period 1,223.3 6.0% 1,296.3 8.8% 1,410.0 15.3%
Disposals in the Period:
Arena Centre Residential
Units 9.1 - -
Westend Retail Park 149.0 147.1 -
Acquisitions in the
Period:
Additional Horizon Lands - 2.8 2.8
40% of 85-93 Mount Street,
Dublin
2 - - 11.6
Per Statement of Financial
Position 1,381.4 1,446.2 1,424.4
Note: the % movements above do not reflect capital expenditure incurred in the respective accounting periods. Capital expenditure in the period to 30 June 2018 is set out in the table on page 10.
3. NEW LETTINGS
In the year to 30 June 2018 the Company entered into new leases with total new contracted rent of EUR11.5 million per annum, EUR10.4 million of which came from the letting of development assets, across a total of 26,750 square metres (288,000 square feet) of lettable space.
Since financial year end, a further three lettings have been completed. The remaining office space at One Molesworth Street, comprising the balance of the third floor (7,800 square feet), was let to Banking Payments Federation Ireland; a re-letting of vacant space in George's Quay Plaza to Huawei was also completed, and a pre-letting, subject to planning permission being obtained, has been concluded with Bunzl at Horizon Logistics Park for a purpose built new unit of 10,700 square metres (115,000 square feet).
New Lettings Summary - Year to 30 June 2018
Property Lettable Rent Total Lease Lease Rent
Area Annual term break free
Rent year months
Developments Sq Ft psf EUR'000 Years
-------------------------------- --------- ------ --------
One Molesworth Street, Dublin
2:
Barclays Bank Ireland 37,251 EUR62.00 2,360 20 12 12
Goshawk Management 13,144 EUR65.00 870 20 13 9
TD Global Finance 10,559 EUR70.00 760 20 13 9
The Ivy Group 9,578 EUR57.90 550 20 - 12
Le Pain Quotidien 2,726 EUR88.00 240 20 15 12
---------
Total One Molesworth Street 73,258 EUR65.25 4,780
5 Harcourt Road, Dublin 2 -
WeWork 50,280 EUR60.00 3,060 20 - 18*
Horizon Logistics Park, Dublin
Airport:
Luxury goods retailer 47,750 EUR30.30 1,410 20 - -
Kuehne & Nagel 82,200 EUR9.80 810 15 10 3
Napier Couriers 34,209 EUR9.50 320 15 10 3
---------
Total Horizon Logistics Park 164,159 EUR15.75 2,540
Total - Developments 287,697 10,380
Investments Sq Ft psf EUR'000 Years
--------- ------
Central Park - Bank of America
Merrill Lynch 17,954 EUR25.50 490 10 6 3
George's Quay Plaza - Vistra 5,330 EUR55.00 310 15 7 3
30-31 Molesworth Street (3
lettings) 4,310 EUR32.50 140
Others 1,827 180
Total - Investments 29,421 1,120
Overall Total 317,118 11,500
-------------------------------- --------- ------ --------
* 18 months is the rent-free equivalent of a contribution by the Company to the tenant's fitout of the building
New lettings since 30 June 2018
Property Tenant Lettable Rent Total Lease Lease Rent
Area Annual term break free
Rent year months
Sq Ft EUR EUR'000 Years
psf
------------------ --------- -------- -------- ------ ------- --------
Horizon Logistics Bunzl Ireland
Park Ltd 115,000 EUR9.95 1,144 20 12 6
------------------ --------- -------- -------- ------ ------- --------
George's Court, Huawei Ireland
Dublin 2 Ltd 16,332 EUR54 922 15 10 4
------------------ --------- -------- -------- ------ ------- --------
One Molesworth Banking Payments
Street, Dublin Federation
2 Ireland 7,800 EUR65 520 25 - 12
------------------ --------- -------- -------- ------ ------- --------
Total 139,132 2,586
--------- -------- -------- ------ ------- --------
Details of the principal new lettings in the year to 30 June 2018 and to the date of this statement are as follows:
One Molesworth Street, Dublin 2: EUR5.3 million total contracted annual rent
-- Four new office lettings to Barclays, Goshawk Aviation, TD Securities and Banking Payments Federation Ireland brought the office space to full occupancy.
-- Following the lettings to The Ivy and to Le Pain Quotidien, totalling 1,140 square metres (12,304 square feet), one retail unit of 820 square metres (8,800 square feet) remains to be let.
-- We are proud to confirm that the building has been awarded LEED Platinum certification, the highest LEED sustainability rating level.
I. Barclays Bank Ireland - EUR2.4 million contracted annual rent
In August 2017 the Company signed an agreement with Barclays Bank Ireland plc ('Barclays') to lease 3,460 square metres (37,251 square feet) of lettable space at One Molesworth Street in Dublin 2.
The letting covers the first, second and half of the third floor of a total of five floors of office space. The lease duration is 20 years, with a tenant break option at the end of year 12. The annual rent payable by Barclays is EUR2.36 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 12 month rent free period from the outset of the lease in February 2018. The rent per square foot secured of EUR62 was 13% ahead of our then most recent rental estimate of EUR55 per square foot.
II. Goshawk Aviation - EUR0.87 million contracted annual rent
In October 2017 the Company agreed a 20 year lease, with a tenant break option at the end of year 13, with Goshawk Management (Ireland) Limited ('Goshawk') for 1,220 square metres (13,144 square feet) of lettable space, comprising the fourth floor. The annual rent payable by Goshawk is EUR0.87 million, which equates to EUR700 per square metre (EUR65 per square foot) per annum for office space and EUR4,000 per car space per annum, with the tenant entitled to a nine month rent free period from the outset of the lease in February 2018. The rent per square foot secured of EUR65 was 18.2% ahead of our then most recent rental estimate of EUR55 per square foot.
III. TD Securities - EUR0.76 million contracted annual rent
In March 2018 the Company signed an agreement with TD Global Finance Unlimited Company to lease 985 square metres (10,559 square feet) of lettable space. TD Global Finance Unlimited Company is an Irish subsidiary of The Toronto-Dominion Bank and a part of the TD Securities business. The letting comprises the fifth floor of the building on a 20 year lease and with a tenant break option at the end of year 13. The annual rent payable is EUR0.76 million, with the tenant entitled to a nine month rent free period from the outset of the lease in March 2018.
IV. The Ivy - EUR0.55 million contracted annual rent
The Company signed an agreement with The Ivy restaurant group, for its first restaurant outside the UK, in early 2017 which was subject to certain planning conditions being satisfied. These conditions were satisfied in late 2017 and the agreement became unconditional at that point. The restaurant is located in the ground and lower ground floors of the building, with frontage onto both Dawson Street and Molesworth Street, and comprises 890 square metres (9,578 square feet) of lettable space. The lease term is 20 years, with no breaks, at an annual contracted rent of EUR0.55 million and with 12 months' rent free granted to the tenant from February 2018. The Ivy commenced trading in late July 2018.
V. Le Pain Quotidien - EUR0.24 million contracted annual rent
In February 2018 the Company signed an agreement with Le Pain Quotidien to lease the 253 square metres (2,726 square feet) ground floor café unit adjacent to The Ivy on Molesworth Street. The annual rent is EUR240,000, with a rent free period of 12 months from February 2018. The lease term is 20 years, with a tenant break in year 15.
VI. Banking Payments Federation Ireland - EUR0.52 million contracted annual rent
In September 2018 the Company signed an agreement with Banking Payments Federation Ireland to lease the balance of the third floor, comprising 725 square metres (7,800 square feet), on a 25 year lease with no break options. The annual rent is EUR0.52 million, with a rent free period of 12 months from September 2018.
5 Harcourt Road, Dublin 2 - EUR3.1m contracted annual rent
In June 2018 the Company signed an agreement with a subsidiary of WeWork Companies Inc ("WeWork") to lease the entirety of 5 Harcourt Road, Dublin 2. WeWork is the world's largest provider of collaborative workspaces, and guarantees the lease obligations. This newly developed office building in Dublin city centre comprises 4,670 square metres (50,300 square feet) of lettable space over seven floors. WeWork signed a 20 year lease with no break options, at an annual rent of EUR3.1 million. The rent per square metre for the first five years is EUR645 (EUR60 per square foot), which increases to EUR700 per square metre (EUR65 per square foot) for years six to ten inclusive, after which the first rent review will take place. The rent commencement date is September 2018 and the Company is making a cash contribution equivalent to 18 months of rent free to the tenant towards their fitout costs.
Horizon Logistics Park, Dublin Airport
The year to 30 June 2018 was a busy and successful one at Horizon Logistics Park, where the total contracted annual rent roll has grown from EUR0.9 million at acquisition to EUR4.1 million at 30 June 2018.
During the year we completed the construction of a new purpose built 82,200 square foot unit for Kuehne + Nagel (EUR0.81 million annual rent) as well as two speculative units of 78,200 square feet in total, one of which we let in June 2018 (EUR0.32 million annual rent. Letting details are as follows:
-- Unit D2 - Kuehne+Nagel - EUR0.8 million contracted annual rent
In Q2 of 2018 we completed this purpose built unit of 7,640 square metres (82,200 square feet) for Kuehne + Nagel, the global transport and logistics company, under a pre-letting agreement entered into in the prior financial year. Kuehne + Nagel also has options for the construction of two additional units of 3,700 square metres (40,000 square feet) each. 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 at a point in the future, at which point we will refurbish and re-let the unit.
-- Unit D5 - Fastway Couriers - EUR0.3 million contracted annual rent
Napier Couriers Limited, which trades as Fastway Couriers, took a lease of this unit of 3,200 square metres (34,200 square feet) at a rent of EUR102.70 per square metre (EUR9.54 per square foot), or EUR320,000 per annum, with a lease term of 15 years and with a break option in year 10.
We also acquired an additional 30 acres of land, bringing the Company's total landholding at the park to approximately 300 acres.
We are nearing the completion of a purpose built unit for a luxury goods retailer, which will add EUR1.45 million to our contracted rent. Since 30 June 2018 we have signed an agreement with Bunzl Ireland Limited (part of the Bunzl plc group), subject to planning permission, to construct a unit of 10,700 square metres (115,000 square feet) for them, which when completed in late 2019 will add EUR1.14 million to the Company's annual rent. Also since year end, encouraged by the strength in occupier demand that we are seeing for high quality modern logistics units, we have commenced the construction of two further speculative units, totalling 5,400 square metres (58,000 square feet) of lettable space, due for completion in Q3 2019.
The pre-letting to Bunzl and the letting of the two additional speculative units under construction will increase the annual rent generated at Horizon Logistics Park to an estimated EUR6.3 million.
This letting momentum at Horizon Logistics Park reflects the confidence of these high calibre tenants in the park and its superior location, as well as the outlook for the logistics sector in Ireland. It also bodes well for our overall strategy of organically growing value and income at what will be Ireland's premier logistics park, through the supply of modern, high quality units.
We look forward to further developing this strategic land holding at what we consider to be the best located logistics land in Dublin, with easy access to Dublin Airport, the M50 orbital motorway and Dublin Port.
4. DEVELOPMENT PROJECTS
A 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 Completed to Complete
(sq ft) (sq ft) (EURm)
Completed in Prior Year 7.9
--------- ----------- --------- -------------
Completed in the Period
----------- --------- ----------- --------- -------------
One Molesworth Street,
D.2 Office 90,000 81,200 Q4 2017 8.9
----------- --------- ----------- --------- -------------
5 Harcourt Road, D.2 Office 50,280 50,280 Q2 2018 6.6
----------- --------- ----------- --------- -------------
Unit D2, Horizon Logistics
Park (Kuehne + Nagel) Logistics 82,200 82,200 Q2 2018 1.6
----------- --------- ----------- --------- -------------
Unit D4, Horizon Logistics
Park (Vacant) Logistics 44,000 - Q2 2018 2.2
----------- --------- ----------- --------- -------------
Unit D5, Horizon Logistics
Park (Fastway Couriers) Logistics 34,200 34,200 Q2 2018 1.4
----------- --------- ----------- --------- -------------
Total - Completed in the
Period 300,680 247,880 20.7
--------- ----------- --------- -------------
On Site
----------- --------- ----------- --------- -------------
Unit D3, Horizon Logistics
Park (luxury goods retailer) Logistics 47,000 47,000 Q3 2018 5.6
----------- --------- ----------- --------- -------------
Building I, Central Park Office 97,000 - Q1 2019 20.8
----------- --------- ----------- --------- -------------
Total - On Site at 30
June 2018 144,000 47,000 26.4
--------- ----------- --------- -------------
OVERALL TOTAL 444,680 294,880 55.0
--------- ----------- --------- -------------
5. ASSET MANAGEMENT
Rent reviews
During the year to 30 June 2018 we completed eight rent reviews, achieving an uplift of EUR11% or EUR1.2 million to annual rent. The new rents achieved overall were 1.3% ahead of ERV. Three of the reviews completed were at our George's Quay Estate, where we achieved an 11% uplift to EUR7.3 million per annum on 137,400 square feet of lettable space. On the other five reviews settled we achieved an uplift of 10% to EUR5.2 million per annum on 123,400 square feet of lettable space.
Lease breaks not exercised
In the year to 30 June 2018 tenant break options were not exercised on EUR5 million of the Company's annual contracted rent, adding to security of income by 11 years in the case of a block in Central Park and by 9 years at George's Court, and contributing to the Company's record high of 8.8 years total WAULT. We see this as an expression of confidence by our tenants in the quality and location of our buildings, and an endorsement of our maintenance capital expenditure programme at our Central Park and George's Quay estates, our two largest holdings by value.
6. ACQUISITIONS AND DISPOSALS
Acquisition - Additional Lands at Horizon Logistics Park, Dublin Airport - EUR2.8 million
In September 2017 the Company acquired a further 30 acres of land, approximately, near to its existing holding at Horizon Logistics Park at Dublin Airport, for a contract price of EUR2.8 million. The acquisition brought the Company's total land holding at Horizon Logistics Park to approximately 300 acres, of which an estimated 262 acres is capable of development.
Acquisition - Mount Street 40% minority interest - EUR10 million
In February 2018 the Company acquired the 40% interest in 85-93 Mount Street, Dubin 2, which was held by a third party, thereby giving the Company 100% ownership of the building. The price paid for the 40% interest was EUR10 million.
Disposal - Residential units at Arena Centre, Tallaght - EUR9.25 million
In October 2017 the Company disposed of its 63 apartments in the Arena Centre in Tallaght, retaining the balance of this mixed-use asset comprising retail units, a hotel, offices and apartments. The apartments were sold for EUR9.25 million, which was broadly in line with their then value. This price reflected a profit on original cost in late 2013 of 130%.
Disposal - Westend Retail Park - EUR147.7 million
In June 2018 the Company disposed of Westend Retail and Office Park in Blanchardstown, Dublin 15, for cash consideration of EUR147.7 million, which was broadly in line with the most recent valuation of the property of EUR147.1 million at 31 December 2017. The annual contracted rent from the property was EUR8.5 million. The disposal represented a 55% profit on cost and is in line with our stated strategy of recycling a portion of our capital to invest in higher return development projects in Horizon Logistics Park and Central Park, while maintaining balance sheet discipline.
7. FINANCIAL REVIEW
Four Year Summary
FY 2015 FY 2016 FY 2017 FY 2018
Total Return 24.4% 17.7% 12.7% 13.4%
---------- ------------ ------------ -----------
Total Profit EUR156.7m EUR145.5 EUR129.8m EUR144.2m
---------- ------------ ------------ -----------
Earnings per Share (cents)
- Basic 23.5 21.5 18.9 20.8
---------- ------------ ------------ -----------
EPRA Earnings EUR10.5m EUR24.9m EUR33.0m EUR36.9m
---------- ------------ ------------ -----------
EPRA Earnings per Share
(cents) 1.6 3.7 4.8 5.3
---------- ------------ ------------ -----------
IFRS NAV per Share (cents) 134.8 153.9 166.9 180.3
---------- ------------ ------------ -----------
EPRA NAV per Share (cents) 132.1 151.8 165.6 178.9
---------- ------------ ------------ -----------
Portfolio Value (note) EUR968.3m EUR1,240.7m EUR1,381.4m EUR1,424.4
---------- ------------ ------------ -----------
Property Loan to Value 9.9% 20.6% 20.2% 15.5%
---------- ------------ ------------ -----------
Note: includes the Company's 50% interest in Central Park for FY 2015.
11.1% growth in Total Profit
Total profit of EUR144.2 million for the year to 30 June 2018 was 11.1% ahead of total profit in the prior year, driven by an increase in EPRA Earnings (net rental profit) of 11.7% to EUR36.9 million (2017: EUR33.0 million) and an increase in net revaluation uplifts of 11% to EUR107.3 million (2017: EUR96.7 million).
On a per share basis the basic EPS for the year was 20.8 cent (2017: 18.9 cent), with EPRA EPS of 5.3 cent (2017: 4.8 cent).
A reconciliation of IFRS earnings and EPS to EPRA Earnings and EPRA EPS is as follows:
30 June 30 June 30 June 30 June
2018 2018 2017 2017
Cent per Cent per
EUR'000 Share EUR'000 Share
---------- --------- --------- ---------
Earnings per IFRS income
statement 144,234 20.8 129,775 18.9
---------- --------- --------- ---------
EPRA Adjustment - fair
value movements on properties
and financial instruments (107,333) (15.5) (96,738) (14.1)
---------- --------- --------- ---------
EPRA Earnings 36,901 5.3 33,037 4.8
---------- --------- --------- ---------
Looking at growth in underlying earnings, EPRA Earnings pre performance fee in the year to 30 June 2018 were EUR44.7 million, 15.4% ahead of the same number in the prior year of EUR38.7 million. This EUR6 million increase was driven by rental income growth of EUR7.4 million, which was offset by net cost increases of EUR1.4 million, EUR1.0 million of which relates to the increase in the Investment Manager base fee, which is calculated on NAV.
8.6% growth in NAV to EUR1.25 billion
The Company's IFRS NAV grew by 8.6% in the year, from EUR1,152.2 million to EUR1,251.6 million, or from 166.9 cent per share to 180.3 cent per share before dilution. EPRA NAV per share grew by 8% in the year from 165.6 cent to 178.9 cent.
The main drivers of the growth in IFRS NAV in the year to 30 June 2018 are analysed as follows:
EUR000
Net Assets at 30 June 2017 1,152,179
Investment Properties Revaluation 109,186
Swap Revaluations (1,853)
Net Rental Profit 36,901
Performance Fee Reserve 7,773
Dividends Paid (52,571)
Net Assets at 30 June 2018 1,251,615
-----------------------------------
Please see page 34 and the Supplementary Information on page 72 for further EPRA Performance Measures.
Total Return of 13.4% for the year
The total return to shareholders in the year to 30 June 2018, measured as the increase in EPRA NAV plus dividends paid in the period, was 13.4%, comprising 8.8% from EPRA NAV increase plus 4.6% from dividends paid.
Rental income
Rental income grew by 12.4% in the year to 30 June 2018, driven by new income from lettings secured on our development schemes completed in the prior and current years, which added EUR7.1 million, along with a contribution of EUR2.6 million from increased rents arising from rent review settlements. These increases were offset in part by a reduction of EUR2.0 million from property disposals in the current and prior years and a EUR1.2 million reduction in the current year due to vacancy at parts of the George's Quay Estate, part of which has been re-let since 30 June 2018.
Gross and net rental income is analysed as follows (excluding service charge income and expenditure):
2018 2017
EUR'000 EUR'000
Gross Rental Income 57,731 49,688
Spreading of Lease Incentives 10,175 10,732
--------
Gross rental and related
income 67,906 60,420
Property Operating Expenses (2,548) (2,421)
--------
Net rental income 65,358 57,999
--------
A summary of the main movements in rental income year-on-year is as follows:
EUR'000
Gross Rent - FY 2017 60,420
Developments Completed in FY 17
- new income 5,378
Developments Completed in FY 18
- new income 1,734
Sales in FY 2017 - income effect (1,288)
Sales in FY 2018 - income effect (726)
Acquisitions in FY 2018 - income
effect 482
Impact of vacancy at George's
Quay Estate (1,227)
Rent reviews settled - additional
income 2,639
Other 493
Gross Rent - FY 2018 67,906
Cost analysis:
-- Property outgoings: Property outgoings of EUR2.55 million were EUR0.13 million/5.3% higher than the prior year cost of EUR2.42 million, due mainly to (i) a higher level of agents' fees in connection with the settlement of rent reviews (ii) an increase in void costs as a result of certain parts of George's Quay Estate lying vacant during the year and (iii) write-offs of bad debts in respect of certain retail tenants at Westend Retail Park and Arena Centre. These cost increases were offset in part by a reduction in legal costs and in running cost of the Arena Centre apartments, which were sold in October 2017.
-- Administrative expenses: Administrative expenses decreased by EUR0.3 million or 13% to EUR2.1 million (2017: EUR2.4 million), due mainly to a reduction in depositary costs as a result of a fee renegotiation, and a reduction in legal fees due to a higher level of corporate level legal activity in the prior year.
-- Investment Manager fees: The base fee charged in the year was EUR11.8 million (2017: EUR10.8 million), with the increase in the fee reflecting the increased EPRA NAV of the Company on which the base fee is calculated, from EUR1,150 million to EUR1,251 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 EUR7.8 million (2017: EUR5.7 million) are set out in further detail in note 17 to the financial statements.
Gearing and debt structure
A summary profile of the Company's debt at 30 June 2018 is as follows:
Balance Interest Annual Property
at 30.06.2018 Cost Interest LTV Maturity Years
EURm % per EURm %
annum
Central Park Facility 150.0 2.0% 3.0 33.9% Jun-21 3.0
Revolving Credit
Facility 70.9 1.7% 1.2 7.2% Dec-18 0.4
------
Total 220.9 1.9% 4.2 15.5% 2.2
----------------------- ---------- --------- ------
The Company's gearing level remains low, with property LTV of 15.5% at 30 June 2018, down from 20.2% at 30 June 2017. During the year to June 2018 we drew down EUR82 million on the revolving credit facility ('RCF') to fund our development schemes and acquisitions, and made repayments of EUR140 million, mainly from the sale of Westend Retail Park, ending the financial year with EUR71 million owing on the RCF. The flexibility and low borrowing cost afforded by the RCF make it an attractive form of financing for the Company.
New Revolving Credit Facility in place
Since 30 June 2018 we have put a new RCF in place with Barclays Bank Ireland and with Wells Fargo, with the following key terms:
-- Limit of EUR210 million, with optionality to increase to EUR290 million
-- Term of four years from September 2018 to September 2022, with the option to extend by a further year to September 2023
-- Margin of 1.7% per annum when LTV is less than 10%, and 1.8% per annum when LTV exceeds 10%
-- Commitment fee of 40% of applicable margin
-- Barclays and Wells Fargo to participate 50:50
The other facility that the Company has is with Bank of Ireland and is secured on the Central Park assets. The facility is fully drawn at EUR150 million and matures in June 2021, with extendibility to June 2023.
On the basis of the extended term of the new RCF, and incorporating the extension options in both facilities, the maturity profile of the Company's debt is as follows:
IF EXTENSIONS ARE
WITH NEW RCF EXERCISED
Facility Maturity Years Maturity Years
--------- ----- ----------- ------
Central Park Facility Jun-21 3.0 Jun-23 5.0
Revolving Credit Facility Sep-22 4.2 Sep-23 5.2
----- ------
3.4 5.1
----- ----------- ------
The Company has hedging 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 EUR0.4 million at 30 June 2018 (30 June 2017: EUR2.2 million).
Our Market
Economic Overview- Ireland continues to outperform
Ireland looks set to be one of the strongest performing economies in Europe again in 2018, with core domestic demand forecast to be 4.8%, up from 2.6% in 2017. This trend looks set to continue, with a 4% growth forecast for 2019 and 3.9% for 2020, driven predominantly by strong employment growth. The composite Markit PMI was 57.7 in May 2018, indicating strong momentum in the economy.
Strong growth in employment
In January 2018 the unemployment rate stood at 6.1% and as at August 2018 it was 5.6%. At the end of quarter two, the total number of people employed stood at 2.3 million, which is a rise of 3.4% year-on-year and equates to an additional 1,000 new jobs per week. At the end of Q2 2018, the construction sector was the fastest growing at +14% year-on-year, followed by accommodation and food services +11% year-on-year and administration and support services +10% year-on-year. Overall employment growth in the year to June 2018 was strong at 3.4%.
Total numbers employed as a result of FDI investment was 210,443 people as at the end 2017. The IDA, the government body charged with attracting FDI to Ireland, registered 19,851 new jobs created in 2017. As at end of H1 2018, they have recorded 139 distinct investments which are expected to create 11,300 positions. Not surprisingly, growth in FDI employment is centred in the cities, with 55% recorded in Dublin, 12% in Cork, 7% in Galway and 5% in the west of Ireland. In the period 2012-2017, it is estimated that over 40% of FDI employment was in the technology sector, followed by business services (16%), financial services (13%), pharmaceuticals (13%) and biotechnology (6%). Ireland has clearly been the beneficiary of strong economic growth in the US, with 72% of FDI employment coming from this region. It does however mean that we are susceptible to any slowing in US economic growth and further changes to tax policy that might be introduced.
Upward inflation pressure but strong consumer demand
Although it remains relatively low, inflation in Ireland is beginning to trend upwards. In the year to August 2018, headline CPI was +0.7%, with the main drivers being housing, water, electricity, gas & other fuels which were up +6.4%, alcohol and tobacco +2.9%, restaurants and hotels +2.1% and education +1.5% . The forecast is for house price inflation of +8.7% for 2018. As we move towards full employment, wage inflation is forecast to be 2.5% for 2018. While wage growth is a positive for consumer spending, it does raise some concern about ongoing competitiveness. Consumer spending continues to be strong, with retail sales growth of 5.5% in the year to July 2018 (by volume), and if car sales are excluded, growth was 2.9% in that period. Combined with strong employment growth, reducing unemployment and growth in real wages, the outlook for consumer spending remains positive.
The SCSI recently published construction cost inflation stats which show 4% cost increase in the half year to June 2018 and with a forecast for 7.4% cost inflation for the full year. This will bring construction prices back to the level they were at in the first half of 2006. Inflation in this sector is being driven by wage inflation, a skills shortage and cost increases in raw materials, particularly steel and timber. This sector now employs 137,700 workers, having dropped from 242,000 at its peak to 80,900 in 2009, and remains 43% below the last cycle peak.
Goods exports continue to perform strongly, up +9.5% year-on-year to H1 2018 to EUR69.2 billion while goods imported are up +2.0% year-on-year in the same period (nominal value). This has produced a trade surplus of EUR28 billion (+22.8% year-on-year) (nominal value), driven by strength particularly in the chemical sector.
Latest estimates as at April 2018 suggest that Ireland's total population has increased by 64,500 people to 4.9 million people, driven by an acceleration in the rate of immigration, from 84,600 (2017) to 90,300 (year-on-year to April 2018) and a fall in emigration from 64,800 (2017) to 56,300 (year-on-year to April 2018).
Improvement in Government finances
Irish Government debt to GDP is forecast to be 64% by the end of 2018. In addition, the cost of servicing government debt has fallen 25% since its peak in 2012 through the reduction in debt levels and refinancing of debt at lower cost. It is expected that Government revenues and expenditure will be balanced for 2018, with tax revenues 5.5% higher in the first seven months of the year than in 2017, providing further fiscal flexibility. The household savings rate remains high, at 9.8% of net disposable income at the end of Q1 2018, and household net worth is now 1% ahead of previous cycle peak at EUR727 billion.
The Central Statistics Office has produced an updated register of residential completions and for 2017 it recorded 14,446 completions, some way off the estimated 30,000 required per annum. The residential property price index recorded growth in prices of 12% in the year to June 2018.
Real estate investment market
Total investment spend in the first six months of 2018 was EUR1.9 billion which is three times the level for the same period in 2017, with an expectation of a total for 2018 of in excess of EUR3 billion (2017: EUR2.6 billion).
Demand for the traditional office, retail and logistics/industrial sectors remains strong, with alternative asset classes including the private rented residential sector also seeing strong demand. The buyer group continues to be predominantly international, with Irish investors accounting for 27% of acquisitions, German investors for 18%, South Korea for 15%, USA for 10%, UK for 2%, and with the remainder undisclosed.
By sector, offices remain the most popular sector, accounting for 46% of capital deployed in the first half of 2018, followed by residential at 25%, retail at 12%, mixed use at 14%, industrial at 1% and other at 2%.
The top ten investment transactions in the first half of 2018, representing 66% of total acquisitions, are as follows:
Property Sector Price Purchaser
Heuston South Quarter, Office EUR175m Korean Investor
Dublin 8
------------ ---------- -----------------------
Dublin Landings, Dublin Office EUR164m Triuva (German)
1
------------ ---------- -----------------------
Undisclosed Office EUR160m Undisclosed
------------ ---------- -----------------------
Chatham & King Street, Mixed use, EUR155m Hines (US)
Dublin 2 office and
retail
------------ ---------- -----------------------
Westend Retail Park, Dublin Retail EUR147.7m Deutsche Bank (German)
15
------------ ---------- -----------------------
The Beckett Building, Office EUR101m Kookman Bank (Korean
Dublin 3 )
------------ ---------- -----------------------
6 Hanover Quay, Dublin Residential EUR101m Carysfort Capital
2 (Irish)
------------ ---------- -----------------------
Fernbank, Dublin 14 Residential EUR100m Irish Life Investment
Managers
------------ ---------- -----------------------
Elysium, Cork City Residential EUR90m Kennedy Wilson (US)
------------ ---------- -----------------------
Undisclosed Residential EUR68.5m Undisclosed
------------ ---------- -----------------------
Prime Equivalent Yields - 65 bps reduction in Dublin prime office yields over the last year
Over the year to July 2018 the main movement in yields of note was the reduction from 4.65% to 4.00% for prime Dublin city centre offices. Over the last six months prime equivalent yields have remained stable, with the exception of multi-family residential, where the yield has dropped by 0.25%. As we look forward, yields are generally trending stable, with the exception of prime industrial and offices in Cork CBD, which is trending stronger. The movement in sectoral yields between July 2017 and July 2018 was as follows:
Sector July 2017 July 2018 Movement Currently
Trending
Prime Dublin City Centre
Offices 4.65% 4.00% -65 bps Stable
---------- ---------- --------- ----------
Prime Cork City Centre
Offices 6.25% 5.75% -50 bps Stronger
---------- ---------- --------- ----------
Prime Dublin Industrial 5.50% 5.50% - Stronger
---------- ---------- --------- ----------
Prime Retail Warehouse 5.00% 5.00% - Stable
---------- ---------- --------- ----------
Retail (Prime Dublin
High Street) 3.25% 3.15% -10 bps Stable
---------- ---------- --------- ----------
(Source: CBRE)
Property Returns - stabilising at 6.9%
The MSCI index recorded total returns for the year to June 2018 for Ireland of 6.9% across all property sectors (2017: 6.5%; 2016: 12.4%). Income is now a larger component of returns, accounting for 4.7% compared to capital growth at 2.1%. The logistics/industrial sector continues to outperform, with a total return of 8.1%, followed by offices at 7.4% and retail at 4.8% for the year to June 2018.
Occupier Markets
Dublin Offices - strong letting activity continues
Office leasing activity in Dublin remains very strong. The first half of 2018 saw 163,500 square metres (1.8 million square feet) of gross take-up. 2018 full year expectations are for in excess of 279,000 square metres (3 million square feet) , compared with 330,700 square metres (3.6 million square feet) of gross take-up in 2017. This level of take-up is well ahead of the long run annual average of 185,800 square metres (2 million square feet). There were 105 lettings in the first half of 2018, 77% of which were in the city centre and 19% in the south suburbs.
The top 10 letting deals in Dublin in the first half of 2018 is as follows:
Tenant Building Location Square Square % of
Metres Feet total
Bolands Quay, Barrow Dublin
Google Street 4 22,070 237,602 13.5%
----------------------------- ---------- -------- -------- -------
LinkedIn Dublin
Europe One Wilton, Wilton Terrace 2 14,195 152,794 8.7%
----------------------------- ---------- -------- -------- -------
3 Park Place, Hatch Dublin
IDA Street 2 10,757 115,794 6.6%
----------------------------- ---------- -------- -------- -------
Dublin
WeWork No.2 Dublin Landings 1 9,666 104,044 5.9%
----------------------------- ---------- -------- -------- -------
One Central Plaza, Dame Dublin
WeWork St 2 6,875 73,999 4.2%
----------------------------- ---------- -------- -------- -------
South
Google The Chase, Sandyford Dublin 4,805 51,721 2.9%
----------------------------- ---------- -------- -------- -------
Dublin
WeWork 5 Harcourt Road 2 4,580 49,305 2.8%
----------------------------- ---------- -------- -------- -------
South
Google Blackthorn House, Sandyford Dublin 4,488 48,308 2.7%
----------------------------- ---------- -------- -------- -------
Autodesk Dublin
Ltd 1 Windmill Lane 2 4,439 47,781 2.7%
----------------------------- ---------- -------- -------- -------
The Sharp Building, Dublin
Perrigo Hogan Place 2 4,157 44,746 2.5%
----------------------------- ---------- -------- -------- -------
Top 10 deals 86,034 926,094 52.6%
-------- -------- -------
Dublin City Centre - dominated by TMT
As can be seen from the top 10 lettings detailed above, the TMT sector continues to dominate take-up, accounting for 43% of leasing activity in the first half of 2018. This compares to 36.5% of total take-up in 2017.
Take-up by sector in Dublin for the first six months of 2018 was as follows:
Sector % of Gross
Take-up
TMT 43%
-----------
Business Services 23%
-----------
Public Sector 15%
-----------
Financial 10%
-----------
Manufacturing & Energy 5%
-----------
Professional 2%
-----------
Consumer Services
& Leisure 2%
-----------
Total 100%
-----------
South Dublin
Leasing activity in South Dublin was also strong in the first half of 2018, with 30,760 square metres (331,097 square feet) of lettings, accounting for 19% of total lettings in Dublin in the period. Take-up by sector for the first six months in South Dublin was as follows:
Sector % of Gross
Take-up
TMT 51%
-----------
Financial 18%
-----------
Business Services 12%
-----------
Public Sector 11%
-----------
Manufacturing & Energy 7%
-----------
Consumer Services
& Leisure 1%
-----------
Total 100%
-----------
Strong levels of demand across Dublin
Tenant demand across greater Dublin is currently running at record levels, with 360,000 square metres (3.9 million square feet) of existing requirements. This compares to 235,000 square metres (2.5 million square feet) of demand as at the end of 2017.
The greater Dublin office vacancy rate stood at 6.2% at the end of H1 2018, up slightly from 6.1% at the end of 2017. In the same period, the Dublin 2/4 vacancy rate was 5.5% and the grade A Dublin 2/4 vacancy rate was 2.7% (previously 5.7% and 3% respectively at the end of 2017). In South Dublin the overall vacancy rate was 8.3% at the end H1 2018, with the grade A vacancy rate at 6.8%. These rates are both up from 6% and 6.7% respectively at the end of 2017, due to vacancy coming through in some existing buildings in Cherrywood Business Park and in Sandyford.
Stable prime rents in Dublin city centre
Prime rents in the core of Dublin city centre have remained stable at EUR700 per square metre (EUR65 per square foot). Average grade A rents currently stand at EUR592to EUR619 per square metre (EUR55 to EUR57.50 per square foot). In South Dublin, prime rents currently stand at EUR307 per square metre (EUR28.50 per square foot).
There is currently 371,600 square metres (4 million square feet) by gross development area of office space under construction in Dublin city centre across 31 schemes, down from 406,200 square metres (4.4 million square feet) in February 2018. For the full year in 2018, 85,800 square metres (0.9 million square feet) is due for completion, and of this 76% has already been let.
In addition, there is currently 75,000 square metres (0.8 million square feet) under construction across seven projects in the suburbs, 34% of which has already been let.
Cork office market
The total take-up in the Cork office market was 7,690 square metres (82,441 square feet) for the first half of 2018. This would suggest an estimated annualised level of in the order of 15,000 square metres (161,500 square feet) for the full year, down from 19,000 square metres (205,000 square feet) in 2017. Demand remains good, limited only by a lack of supply of modern, grade A accommodation.
The current Cork vacancy rate is 10.2% (Feb 2018: 10.5%), or 11% in the city centre and 9.8% in the suburbs. The high vacancy rate in the city centre reflects a number of buildings that are older and requiring refurbishment.
There are two schemes currently under construction in Cork city centre, Block A Navigation Square and 85 South Mall, totalling 15,468 square metres (166,500 square feet), of which 75% is already pre-let to Clearstream at Navigation Square and to KPMG and Forcepoint at 85 South Mall.
Top Cork city centre rents are now EUR350 per square metre (EUR32.50 per square foot), up from EUR323 per square metre (EUR30 per square foot) in February 2018, while incentive packages range between 12-18 months. Prospects for further rental growth are strong, due to the limited availability of grade A accommodation and limited speculative development. It is expected that Block B Navigation Square will commence construction in September 2018 on a speculative basis. This will extend to 6,968 square metre (75,000 square feet) and the quoting rent is likely to be approximately EUR377 per square metre (EUR35 per square foot).
Logistics & Industrial sector
Take-up in the logistics/industrial sector reached 108,900 square metres (1.2 million square feet) in the first half of 2018, down 10% on the same period in 2017. Momentum is good, however, with a number of deals going through legal due diligence, so indications are that there will be a strong second half to 2018. In the first half of 2018 there were 98 transactions, 61% of which were lettings and the remainder were sales.
Demand is steady and predominantly coming from e-commerce (courier and parcel delivery services) and from the food sector. Latest research would suggest there is in the order of 64,000 square metres (689,000 square feet) of existing demand.
Prime rents in Dublin are stable at EUR102 per square metre (EUR9.50 per square foot), but forecast to rise to EUR110 per square metre (EUR10.20 per square foot) by the end of 2018.
There remains a limited number of developers who are building speculatively, so delivery of new build Grade A units continues to be restricted.
For the first half of 2018 investment in the logistics/industrial sector accounted for 1% of the total capital deployed, and prime Dublin yields are stable at 5.50%.
Sources:
1. CBRE research reports and department. 2. JLL research reports 3. Knight Frank research reports 4. Central Statistics Office website 5. IDA website 6. Investec research 7. Goodbody research 8. Davy research 9. Central Bank of Ireland
PORTFOLIO ANALYSIS
RENTAL INCOME
Passing Contracted ERV (1) Variance Vacant
Rent Rent EURm pa v Jun-18 ERV (1)
EURm pa EURm pa ERV EURm
pa
============== ============== ========= =========== ========= ========== =========
Dublin CBD
Office (2/4) 24.1 34.4 37.6 -9% 3.4
============== ============== ========= =========== ========= ========== =========
South Dublin 24.4 24.4 25.5 -4% -
============================= ========= =========== ========= ========== =========
Cork 3.8 4.1 5.1 -20% -
============================= ========= =========== ========= ========== =========
Office Total 52.3 62.9 68.2 -8% 3.4
============================== ========= =========== ========= ========== =========
Logistics 1.6 4.1 3.2 +28% -
============================== ========= =========== ========= ========== =========
Mixed Use 4.4 4.4 3.6 +22% 0.1
============================== ========= =========== ========= ========== =========
Retail 0.3 0.3 0.2 +35% -
============================== ========= =========== ========= ========== =========
Total (Let Properties
Only) 58.6 71.7 75.3(2) -5% 3.5
============================== ========= =========== ========= ========== =========
(1) Excludes ERV of development assets under construction at 30 June 2018
(2) Excludes vacant ERV of EUR3.5m. Total ERV EUR78.8m at 30 June 2018
LEASE LENGTHS & VACANCY
WAULT Vacancy Vacancy
(years) (1) (by floor (by ERV)
area) (2)
================= ============== ============= =========== ==========
Dublin CBD
Office (2/4) 9.8 8.2% 8.3%
================= ============== ============= =========== ==========
South Dublin 7.8 - -
================= ============== ============= =========== ==========
Cork 8.7 - -
================= ============== ============= =========== ==========
Office Total 9.0 3.5% 4.8%
================================= ============= =========== ==========
Logistics 6.9 - -
================= ============== ============= =========== ==========
Mixed Use 8.0 3.3% 2.7%
================================= ============= =========== ==========
Retail 11.6 - -
================= ============== ============= =========== ==========
Total Portfolio 8.8 2.9% 4.4%
================================= ============= =========== ==========
(1) Unexpired Term/ WAULT is the rent-weighted average remaining term on leases to lease expiry/ break date (whichever comes first). Excludes short term licences.
(2) Excludes ERV of development assets under construction at 30 June 2018
CONTRACTED RENTS VERSUS ESTIMATED MARKET RENTS (ERVs) (1)
Average Average Variance
Contracted ERV (v ERV)
Rent (EURpsf)
(EURpsf)
=============== =============== ============ ========== =========
Dublin CBD
Office (2/4) 48.70 53.10 -8%
=============== =============== ============ ========== =========
South Dublin 24.70 26.40 -6%
=============================== ============ ========== =========
Cork 23.70 28.50 -17%
=============================== ============ ========== =========
Office Total 34.20 37.30 -8%
================================ ============ ========== =========
Logistics 11.50 9.20 +25%
================================ ============ ========== =========
Mixed Use 14.60 11.30 +29%
================================ ============ ========== =========
Retail 59.60 44.70 +33%
================================ ============ ========== =========
Total (Let Properties Only) 28.50 30.00 -5%
================================ ============ ========== =========
(1) Let properties only. Excludes residential, hotel and car space rent (where applicable)
SECTORS BY VALUE
Net value at % of
30 June 2018 Group Total
EURm
================= ============== ============== =============
Dublin CBD
Office (2/4) 751.7 53%
================= ============== ============== =============
South Dublin 442.2 31%
================================ ============== =============
Cork 76.8 5%
================================ ============== =============
Office Total 1,270.7 89%
================================= ============== =============
Logistics 90.0 6%
================================= ============== =============
Mixed Use 57.8 4%
================================= ============== =============
Retail 5.9 <1%
================= ============== ============== =============
Total Portfolio 1,424.4 100%
================================= ============== =============
LOCATIONS BY VALUE
Net value at % of Group
30 June 2018 Total
EURm
================== ============== ===========
Dublin CBD (2/4) 757.6 53%
=================== ============== ===========
South Dublin 590.0 42%
=================== ============== ===========
Dublin Total 1,347.6 95%
=================== ============== ===========
Cork 76.8 5%
=================== ============== ===========
Total Portfolio 1,424.4 100%
=================== ============== ===========
CONTRACTED RENT BREAKDOWN BY TENANT BUSINESS SECTORS
Contracted % of
Rent Group Rent
EURm pa
============================= =========== ============
Finance/ Financial Services 34.6 48%
============================== =========== ==============
Technology, Media and
Telecommunications ("TMT") 14.5 20%
============================== =========== ==============
Retail Trade 4.0 6%
============================== =========== ==============
Public Administration
(Irish Government) 3.5 5%
============================== =========== ==============
Professional Services 3.0 5%
============================== =========== ==============
Logistics 4.1 6%
============================== =========== ==============
Other 8.0 11%
============================== =========== ==============
Total Portfolio 71.7 100%
============================== =========== ==============
TOP 10 OCCUPIERS BY CONTRACTED RENT
Tenant Business Contracted % of Unexpired
Sector Rent Group Rent Term
EURm pa (years)
(1)
============================= ======================= =========== ============ ==========
Allied Irish Bank Financial Services 9.3 12.9% 9.9
============================= ======================= =========== ============ ==========
Vodafone TMT 7.3 10.2% 8.3
============================= ======================= =========== ============ ==========
Fidelity International Financial Services 3.7 5.2% 9.6
============================= ======================= =========== ============ ==========
Amundi (Pioneer Investment) Financial Services 3.5 4.8% 8.8
============================= ======================= =========== ============ ==========
WeWork Other 3.1 4.3% 20
============================= ======================= =========== ============ ==========
Ulster Bank Financial Services 2.9 4.1% 8.1
============================= ======================= =========== ============ ==========
Bank of America Merrill
Lynch Financial Services 2.8 4.0% 5.7
============================= ======================= =========== ============ ==========
The Commissioners
of Public Works Ireland Public Administration 2.7 3.8% 4.8
============================= ======================= =========== ============ ==========
Northern Trust Financial Services 2.5 3.5% 8.3
============================= ======================= =========== ============ ==========
Barclays Financial Services 2.4 3.3% 11.6
============================= ======================= =========== ============ ==========
Top 10 Tenants 40.2 56.1% 9.4
====================================================== =========== ============ ==========
Remaining Tenants 31.5 43.9% 7.9
====================================================== =========== ============ ==========
Total Portfolio 71.7 100% 8.8
====================================================== =========== ============ ==========
(1) Unexpired Term/ WAULT is the rent-weighted average remaining term on leases to lease expiry/ break date (whichever comes first). Excludes short term licences
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"). Further analysis and calculations are set out in the Supplementary Information on page 72:
EPRA Performance Measure Unit Definition of Measure Jun-18 Jun-17
-------- -----------------------------------------------
Recurring earnings from core operational
EPRA Earnings EUR'000 activities 36,901 33,037
-------- ----------------------------------------------- ---------- ----------
EPRA Earnings per share EPRA earnings divided by the weighted average
('EPRA EPS') Cents basic number of shares 5.3 4.8
-------- ----------------------------------------------- ---------- ----------
EPRA earnings divided by the diluted weighted
Diluted EPRA EPS Cents average number of shares 5.3 4.8
-------- ----------------------------------------------- ---------- ----------
EPRA Net Asset Value ('EPRA Net assets adjusted to exclude the fair
NAV') EUR'000 value of financial instruments 1,251,226 1,149,937
-------- ----------------------------------------------- ---------- ----------
EPRA net assets divided by the number of
shares at the balance sheet date on a diluted
EPRA NAV per share Cents basis 178.9 165.6
-------- ----------------------------------------------- ---------- ----------
EPRA triple net assets EUR'000 EPRA net assets amended to include the 1,251,615 1,152,179
('EPRA NNNAV') fair value of financial instruments and
debt
-------- ----------------------------------------------- ---------- ----------
EPRA triple net assets divided by the number
of shares at the balance sheet date on
EPRA NNNAV per share Cents a diluted basis 178.9 165.9
-------- ----------------------------------------------- ---------- ----------
Administrative and operating costs, including
direct vacancy costs, divided by gross
EPRA cost ratio including rental income. Costs include Investment
vacancy costs % Manager base and performance fees. 35.7% 35.2%
-------- ----------------------------------------------- ---------- ----------
Administrative and operating costs, excluding
direct vacancy costs, divided by gross
EPRA cost ratio excluding rental income. Costs include Investment
vacancy costs % Manager base and performance fees. 34.9% 34.5%
-------- ----------------------------------------------- ---------- ----------
ERV of non-development vacant space as
a percentage of ERV of the whole portfolio
EPRA vacancy rate % of non-development space 4.4% 1.5%
-------- ----------------------------------------------- ---------- ----------
Annual passing rents at the balance sheet
date, less non-recoverable property operating
expenses, divided by the market value of
EPRA Net Initial Yield income producing property, increased by
(NIY) % estimated purchasers' costs. 3.8% 3.9%
-------- ----------------------------------------------- ---------- ----------
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.) 4.7% 5.0%
-------- ----------------------------------------------- ---------- ----------
Principal Risks
The Board takes the view that adequately identifying and managing the risks to achieving our strategic objectives is key to the successful delivery of shareholder returns. The Board has divided the principal risks into External Risks, over which we have no influence, and Internal Risks, which we can influence, which are set out below.
External Risks
Risks Potential Impact Mitigation Measures Direction of Risk
Cyclical Market Potential 95% concentration Stable - the
- the property adverse of our assets in rate of capital
market is impact on Dublin, and rental
cyclical property the capital city, growth for
and as such values and which experiences Dublin offices,
values and rental less where
market levels, volatility in a our portfolio
conditions can impacting downturn than is
be volatile. on shareholder regional concentrated,
returns. centres in has moderated
Ireland. Our only to more
non-Dublin stabilised
asset is in Cork, levels. Both
Ireland's second the occupier
city market and
by population the investment
size. market
for offices and
Our assets are logistics
predominantly in continue to
prime perform well,
locations, which underpinned by
are more a strong
resilient in underlying real
a downturn. economy
in Ireland. The
84% of our spread
portfolio by between Irish
value is Dublin property
offices, which yields and the
proved to be the risk free
most rate remain at
resilient asset historic
class in the last highs, which is
downturn. supportive
of property
Our retail assets values. We
now comprise less continue to
than monitor
1% of our movements
portfolio value, in interest
having reduced rates
our exposure to elsewhere,
this sector which could
through the have a bearing
sale of Westend on real estate
Retail Park in prices
June 2018. in Ireland.
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 2.8%
(September
2018), 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 8.8
years,
a record for the
Company.
The Investment
Manager is
experienced
in managing
property
portfolios
through
cycles.
---------------------------- ----------------------------- ---------------------------
Slowdown in Any slowdown or The Company's Stable -
Economic Growth reversal in the property Ireland's
- as a very current portfolio is economic
open economy, trajectory entirely recovery
the Irish of economic focused on city continues, with
economy recovery locations, all key
is highly could reduce the primarily macroeconomic
dependent demand for space Dublin, as the indicators
on the wider in our buildings large centres of positive,
European market and impact on population particularly
and indeed the rental are more employment
world economy. values and resilient growth and
property economically. FDI inflows.
values, while However there
increasing The Company continues to be
the level of targets well a heightened
tenant capitalised level of
default. tenants with geopolitical
strong covenants and economic
and maintains uncertainty,
a policy of in particular
keeping a large around Brexit,
and diversified which we
multi-sectoral continue to
tenant base to monitor.
avoid over
exposure to any
one tenant or
industry
sector.
The Investment
Manager's asset
management
team is highly
experienced.
---------------------------- ----------------------------- ---------------------------
Constrained Potential adverse The Board Increased -
supply in the impact on immigration monitors external while levels
residential and GDP growth risks closely of new
sector if the residential and their residential
shortage and rising potential impact completions
residential rental on achieving are increasing,
levels in Dublin the Company's they continue
are not adequately strategic to lag demand,
addressed by increased objectives. The while at
supply. Board also the same time
monitors the the rate
forecast levels of net inward
of FDI migration
is accelerating
and the
full extent of
Brexit
relocations and
Brexit-related
employment
growth has
yet to be seen,
both of
which will
further
strengthen
demand.
---------------------------- ----------------------------- ---------------------------
Speculative Potential adverse While a property Decreased -
Development impact on revenue, may not be let overall this
Risk - occupiers value and void when risk has
do not take costs and on achieving a development or reduced with
space in our target shareholder refurbishment the lettings
new returns on capital. commences, completed
developments. the marketing of within our
the building development
commences schemes during
well before the the year.
scheduled Also, take-up
completion in the
date. occupational
market remains
The Investment robust
Manager and the for Dublin
Board offices and
monitor market prime Dublin
conditions logistics,
frequently. where our
developments
Offices: in the are
year to 30 June concentrated.
2018,
and since that
date, we
mitigated this
risk through the
lettings of the
entire
of 5 Harcourt
Road and lettings
covering
all of the office
space at One
Molesworth
Street. This
leaves Building I
in Central
Park, which is
due for
completion in
Q1 2019, as the
only office
development
yet to be let.
At Horizon
Logistics Park
our strategy
is to combine a
moderate level of
speculative
development with
pre-lettings of
new
units. Of the 2
units completed
during
the year to 30
June 2018, one
was let
and the other
remains to be
let.
---------------------------- ----------------------------- ---------------------------
Political/Geopolitical The UK referendum The Board Stable - it is
Risk - potential result to leave monitors external still too
adverse impact the EU may have risks closely early to tell
from 'Brexit' an adverse impact and their what the
and changes on the Irish economy potential impact impact of
to US tax policy. but potentially on achieving Brexit will
a favourable impact the Company's be and whether
on the Dublin office strategic it will
sector. Further objectives. To be a positive
US tax policy changes date there has or negative
could adversely been no notable one for Ireland
impact on FDI, adverse and for
and consequently impact from the Company.
on both the real Brexit on the
economy and commercial Irish economy; US - changes to
real estate in however, as we US tax
Ireland. approach March policy have not
2019 we adversely
are likely to impacted Irish
learn more. FDI and
look unlikely
to have
an impact in
the short
to medium term,
as evidenced
by the
continued
expansion
of the larger
tech companies
in Dublin.
---------------------------- ----------------------------- ---------------------------
Regulatory Risk Should the Investment The Board and the Stable.
- AIFMD - the Manager cease to Audit Committee
Investment Manager be authorised as regularly
is the authorised an AIFM then the discuss
AIFM of the Company would be regulatory
Company, under required to appoint aspects and
recently adopted a replacement AIFM receive
EU regulations. and may suffer reports from the
losses arising Investment
from the transition Manager in
from its current respect of AIFMD
Investment Manager compliance
to another. matters
concerning
both the Company
and the
Investment
Manager.
The Investment
Manager in turn
consults
with its legal
adviser and the
Company's
sponsor, Davy,
who attend
meetings with
the regulator on
behalf of the
Investment
Manager and the
Company
respectively.
The Company
obtains
independent legal
advice in
relation to AIFMD
matters in
order to keep
abreast of
developments
and to ensure
compliance by the
Company
with its
obligations under
AIFMD.
The Company has
appointed a
Depositary,
Northern Trust,
as required of it
under
AIFMD.
---------------------------- ----------------------------- ---------------------------
Cyber Attack A cyber-attack The Company Increased -
Risk could lead to potential engages external there has
data breaches or specialists been an
disruption to the to carry out increased
Company's systems, vulnerability and prevalence
website and operations, penetration in
and to reputational testing on its cyber-attacks
damage. website, globally
implementing in the past 12
any months.
recommendations
made.
Routine patch
upgrades are
carried out
on the Company's
systems to
safeguard
them from
attacks.
The Company's
systems were
upgraded during
2017 as part of
an office move,
and further
upgrades are in
the process of
being
implemented.
---------------------------- ----------------------------- ---------------------------
Internal Risks
Development Potential The Company only Decreased - the
Completion adverse employs blue Company
Risk - inadequate impact on chip contractors has completed 4
cost oversight shareholder with a strong office
and other returns as a and proven track buildings and
engineering/construction result record various
risks that of higher costs and with logistics units,
could delay and/or delays in requisite thereby
completion delivering new financial reducing the
and/or increase product into the strength. likelihood
costs. market. of this risk
The Company impacting
engages what it the business.
considers Building
to be the best I in Central
design team for Park is well
each project, progressed.
working closely
with them to
identify
any cost
overruns or
delays as early
as possible.
The Investment
Manager closely
monitors
each project and
works closely
with the
contractor,
attending on
site regularly.
The Investment
Manager's
development
team is highly
experienced in
developing
new buildings.
Development Potential reputational The Investment Decreased - this
- Health and risk, potential Manager ensures risk
Safety - with completion delay that all has decreased as
increased development and potential financial contractors the Company
activity there loss arising from engaged employ has since
is an increased a claim being made. high standards completed
risk of an of health and Building
accident which safety and carry H in Central
could result the appropriate Park, 32
in a significant levels of Molesworth
claim and reputational insurance to Street, One
damage. mitigate any Molesworth
issues Street and
which could 5 Harcourt Road,
arise. while
construction of
The Investment Building
Manager is an I in Central
experienced Park is well
developer with progressed.
formalised
health and
safety
procedures.
The primary
responsibility
for health
and safety
passes from the
Company to
the main
contractor, with
sub-contractors
engaged by the
contractor
having no
privity
with the
Company.
There is
adequate
insurance cover
in
place to deal
with any claims
which might
arise out of
claims being
made due to
incidents.
---------------------------- ---------------------------- ----------------------------
Green REIT plc
Consolidated statement of comprehensive income
Year Ended 30 June 2018 Year Ended 30 June 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 78,866 - 78,866 72,358 - 72,358
Rental income 3 67,906 - 67,906 60,420 - 60,420
Property Expenses 3 (2,548) - (2,548) (2,421) - (2,421)
Net rental and
related income 3 65,358 - 65,358 57,999 - 57,999
Net movement on
fair value of
investment
properties 4 - 109,186 109,186 - 94,496 94,496
Investment Manager
- base fee 17 (11,834) - (11,834) (10,805) - (10,805)
- performance fee 17 (7,773) - (7,773) (5,682) - (5,682)
Administrative
expenses (2,060) - (2,060) (2,370) - (2,370)
Operating profit 43,691 109,186 152,877 39,142 94,496 133,638
Finance
(expense)/income 5 (6,790) (1,853) (8,643) (6,105) 2,242 (3,863)
Profit on ordinary
activities before
taxation 36,901 107,333 144,234 33,037 96,738 129,775
Income tax 7 - - - - - -
Profit for the year
after taxation 36,901 107,333 144,234 33,037 96,738 129,775
Other comprehensive - - - - - -
income
____________ ____________ ____________ ____________ ____________ ____________
Total comprehensive
income for the
year attributable
to the
shareholders
of the Company 36,901 107,333 144,234 33,037 96,738 129,775
________ _________ _________ ________ _________ _________
Basic earnings per
share (cent) 13 20.8 18.9
Diluted earnings
per share (cent) 13 20.6 18.7
EPRA earnings per
share (cent) 13 5.3 4.8
_________ _________
The accompanying notes are an integral part of these financial statements.
Green REIT plc
Consolidated statement of financial position
as at 30 June
2018 2017
Assets Note EUR'000 EUR'000
Non-current assets
Investment properties 8 1,424,428 1,381,421
Financial Assets 9 389 2,242
Trade and other receivables 10 32,062 22,307
Total non-current assets 1,456,879 1,405,970
Current assets
Trade and other receivables 10 4,541 3,350
Cash and cash equivalents 48,470 48,797
Total current assets 53,011 52,147
Total assets 1,509,890 1,458,117
Equity
Share capital 11 69,435 69,035
Share premium 655,760 650,478
Performance fee share reserve 17 7,773 5,682
Retained earnings 518,647 426,984
Equity attributable to shareholders
of the Company 1,251,615 1,152,179
Liabilities
Current liabilities
Amounts due to investment manager
- base fee 3,115 2,875
Trade and other payables 15 24,745 19,184
Borrowings 16 70,534 -
Total current liabilities 98,394 22,059
Non-current liabilities
Borrowings 16 149,652 276,655
Other Payables 15 10,229 7,224
Total non-current liabilities 159,881 283,879
Total liabilities 258,275 305,938
Total equity and liabilities 1,509,890 1,458,117
Basic net asset value per share (cent) 14 180.3 166.9
Diluted net asset value per share
(cent) 14 178.9 165.9
EPRA net asset value per share (cent) 14 178.9 165.6
The accompanying notes are an integral part of these financial statements.
Green REIT plc
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 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
Total comprehensive income for the
year
Profit for the year to 30 June 2018 - - - 144,234 144,234
Transactions with owners, recognised
directly in equity
Investment Manager - performance fee
shares issued 400 5,282 (5,682) - -
Investment Manager - performance fee
share reserve - - 7,773 - 7,773
Dividends paid - - - (52,571) (52,571)
At 30 June 2018 69,435 655,760 7,773 518,647 1,251,615
The accompanying notes are an integral part of these financial statements.
Green REIT plc
Consolidated statement of cash flows
for the year ended 30 June
2018 2017
Note EUR'000 EUR'000
Cash flows from operating activities
Profit for the year 144,234 129,775
Adjustments for:
* Net movement on revaluation of investment
properties and financial assets 4 (109,186) (94,496)
* Net movement on revaluation of financial assets 5 1,853 (2,242)
* Finance expense 5 6,790 6,105
* Investment Manager - performance fee 18 7,773 5,682
* Increase in lease incentives 10 (8,510) (10,429)
42,954 34,395
Changes in:
* trade and other receivables 10 (2,436) (957)
* current liabilities and base fee due 15 5,779 (11,052)
* long term other payables 15 3,005 7,224
Cash generated from operating activities 49,302 29,610
Interest paid (5,869) (5,330)
Cash inflow from operating activities 43,433 24,280
Cash flows from investing activities
Acquisition of investment properties (13,467) (12,533)
Capital expenditure on properties (75,421) (53,892)
Proceeds from sale of investment
properties 8 155,161 22,696
Net cash generated from/(used in)
investing activities 66,273 (43,729)
Cash flows from financing activities
Dividends paid (52,571) (31,319)
Drawdowns under revolving credit
facility 82,138 43,028
Costs associated with revolving
credit facility - (300)
Repayments under revolving credit
facility (139,600) (20,002)
Net cash (outflow)/inflow from
financing activities (110,033) (8,593)
Net (decrease)/increase in cash
and cash equivalents (327) (28,042)
Cash and cash equivalents at beginning
of year 48,797 76,839
Cash and cash equivalents at end
of year 48,470 48,797
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 18 September 2018 and does not comprise statutory financial statements for the year ended 30 June 2018, within the meaning of the Companies Acts 2014. The financial information has been derived from the group financial statements for the year ended 30 June 2018. which will be finalised, reported on by the auditors, 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. The effective dates below refer to financial periods starting on or after these dates:
-- IAS 7 (amended) - Statement of Cash Flows (effective date 1 January 2017) -- IAS 12 (amended) - Income taxes (effective date 1 January 2017)
A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 30 June 2018, and consequently have not been applied in preparing these consolidated financial statements. The items that may have future relevance to the Group are as follows:
-- Amendments to IFRS 2, 'Share based payments', on clarifying how to account for certain types of share-based payment transactions (effective date 1 January 2018)
-- Amendment to IFRS 9, Financial instruments', on prepayment features with negative compensation (effective date 1 January 2019)
-- IFRS 15 - Revenue from contracts with customers (effective date 1 January 2018) -- Amendment to IFRS 15 - Revenue from contracts with customers (effective date 1 January 2018)
-- Amendments to IFRS 4 , 'Insurance contracts' regarding the implementation of IFRS 9, 'Financial instruments' (effective date 1 January 2018)
-- Amendments to IAS 40 , 'Investment property' relating to transfers of investment property (effective date 1 January 2018)
-- Amendments to IAS 28 (effective date 1 January 2019)*
-- Amendments to IAS 19 , 'Employee benefits' on plan amendment, curtailment or settlement' (effective date 1 January 2019)*
-- Annual Improvements to IFRSs 2014-2016 cycle (effective date 1 January 2018) -- Annual Improvements to IFRSs 2015-2017 cycle (effective date 1 January 2019)* -- IFRS 16 - Leases (effective 1 January 2019) -- IFRS 17, 'Insurance contracts' (effective date 1 January 2021)*
-- IFRIC 22 , 'Foreign currency transactions and advance consideration (effective date 1 January 2018)
-- IFRIC 23, 'Uncertainty over income tax treatments' (effective date 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 principal impact will be on the additional disclosures required by IFRS 16. As stated in the standard, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and accordingly the Group does not expect any material measurement change from the new standard. IAS 17 is the standard which applies to income recognition for the Group's leasing income, and not IFRS 15. We are satisfied that the recognition of our service charge income will be unchanged under IFRS 15. The other new standards are not expected to have a material impact on the Group.
The accounting policies set out below, as extracted from the 2017 Annual Report, have been applied to the consolidated financial statements in this preliminary announcement.
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 the going concern basis of accounting. Details of the new loan facility entered into since year end are including in Note 16.
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 for listed real estate companies. 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 in the consolidated statement of comprehensive income 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).
As 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 company and of all subsidiary undertakings made up to 30 June 2018. 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.
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 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 or close to 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 current estimated market values for the properties, being the 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, 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, assumptions to be made regarding the ability of existing tenants to meet their rental obligations over the entire life of their leases, 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 2018 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 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 17 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, Logistics Assets, Mixed Use Assets and Retail Assets. All of the Group's operations are in the Republic of Ireland. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, who has been identified as the Board of Directors of the Company.
Unallocated income and expenses are items incurred centrally which are neither directly attributable nor reasonably allocable to individual segments. Unallocated assets are cash and cash equivalents, and certain other assets.
The Group's key measures of 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:
Unallocated Group
Office Logistics Mixed Use Retail Expenses Consolidated
Assets Assets Assets Assets Total and Assets Position
2018 2018 2018 2018 2018 2018 2018
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Year ended 30 June 2018
Gross rental and related
income
(1) 62,532 2,054 5,316 8,964 78,866 - 78,866
Property outgoings (2) (9,748) (500) (1,197) (2,063) (13,508) - (13,508)
Net rental and related
income 52,784 1,554 4,119 6,901 65,358 - 65,358
Net movement on fair value
of
investment properties 108,410 6,192 (2,533) (2,883) 109,186 - 109,186
Investment Manager - base
fee (10,681) (646) (650) (1,034) (13,011) 1,177 (11,834)
Investment Manager -
performance
fee (7,349) (417) - (7) (7,773) - (7,773)
Administration expenses - - - - - (2,060) (2,060)
Segment profit before tax 143,164 6,683 936 2,977 153,760 (883) 152,877
Finance costs (4,646) - - - (4,646) (3,997) (8,643)
Profit before tax 138,518 6,683 936 2,977 149,114 (4,880) 144,234
As at 30 June 2018
Total segment assets (3) 1,333,340 91,734 61,237 11,407 1,497,718 12,172 1,509,890
Investment properties and
development
property 1,270,673 89,970 57,830 5,955 1,424,428 - 1,424,428
(1) Including service charge income
(2) Including service charge expenditure
(3) Total cash and cash equivalents and short term deposits at 30 June 2018 is EUR48.5 million (2017 EUR48.8 million) of which EUR11.1 million (2017: EUR10.2 million) is unallocated to operating segments.
Mixed Unallocated Group
Office Logistics Use Retail 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 1,677 5,894 9,834 72,358 - 72,358
Property outgoings (2) (10,713) (547) (1,143) (1,956) (14,359) - (14,359)
Net rental and related income 44,240 1,130 4,751 7,878 57,999 - 57,999
Net movement on fair value of
investment properties 83,863 5,976 99 4,558 94,496 - 94,496
Investment Manager - base fee (9,787) (441) (719) (833) (11,780) 975 (10,805)
Investment Manager -
performance
fee (4,868) (338) (28) (448) (5,682) - (5,682)
Administration expenses - - - - - (2,370) (2,370)
Segment profit before tax 113,448 6,327 4,103 11,155 135,033 (1,395) 133,638
Finance costs (2,773) - - - (2,773) (1,090) (3,863)
Profit before tax 110,675 6,327 4,103 11,155 132,260 (2,485) 129,775
As at 30 June 2017
Total segment assets (3) 1,174,402 55,621 72,007 143,353 1,445,383 12,734 1,458,117
Investment properties and
development
property 1,118,230 55,065 68,930 139,196 1,381,421 - 1,381,421
(1) Including service charge income
(2) Including service charge expenditure
Total cash and cash equivalents and short term deposits at 30 June 2017 was EUR48.8 million (2016 EUR76.8 million) of which EUR10.2 million (2016: EUR55.6 million) was unallocated to operating segments.
3 Gross and net rental and related income 2018 2017
EUR'000 EUR'000
Gross rental and related income
Gross rental income 57,731 49,688
Spreading of tenant lease incentives/rent
free periods 10,175 10,732
Service charge income 10,960 11,938
Gross rental and related income 78,866 72,358
Service charge expenses (10,960) (11,938)
Property operating expenses (2,548) (2,421)
Net rental and related income 65,358 57,999
4 Net movement in fair value of investment 2018 2017
properties
EUR'000 EUR'000
Fair value gain on investment properties
(note 8) 109,186 94,496
Net movement on fair value 109,186 94,496
5 Finance (expense)/income 2018 2017
EUR'000 EUR'000
Loan interest (5,362) (4,732)
Commitment fees (356) (352)
Loan cost amortisation (1,068) (1,016)
Bank fees and other costs (4) (5)
(6,790) (6,105)
Fair value movement of interest
rate swaps (1,853) 2,242
Net finance expense (8,643) (3,863)
6 Profit for the period
The profit for the period has been arrived at after charging:
(i) External Auditor's remuneration 2018 2017
EUR'000 EUR'000
Audit fees
Parent and consolidated financial statements 130 130
Audit of subsidiary undertakings 25 25
Total audit fees 155 155
Review of interim report 40 40
Total audit and audit related assurance
services 195 195
As in the prior year the external auditor did not recharge
any out of pocket expenses.
No other fees were charge by the external
auditor.
2018 2017
Directors' remuneration EUR'000 EUR'000
Fees 266 270
Taxes 16 13
Expenses 32 53
314 336
7 Taxation
Tax recognised in statement of comprehensive 2018 2017
income
EUR'000 EUR'000
Current and deferred tax expense - -
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
2018 2018 2018 2017 2017 2017
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 1,307,096 74,325 1,381,421 1,170,162 70,550 1,240,712
Additions:
* Acquisitions including related costs 13,467 - 13,467 13,561 - 13,561
* Capital additions 4,378 71,137 75,515 7,468 47,880 55,348
Reclassification
to development (5,604) 5,604 - (19,818) 19,818 -
Reclassification
to investment 197,500 (197,500) - 109,240 (109,240) -
Disposals (155,161) - (155,161) (22,696) - (22,696)
Change in fair
value 47,772 61,414 109,186 49,179 45,317 94,496
Balance at 30
June 1,409,448 14,980 1,424,428 1,307,096 74,325 1,381,421
Acquisitions
Of the total acquisitions during the year, EUR2.8 million was paid for an additional 30 acres (approximately) of land near Horizon Logistics Park and EUR10.0 million was paid to acquire the 40% of 84-93 Mount Street, Dublin 2 which was owned by a third party. Acquisition related costs of EUR0.6m were incurred in respect of these purchases.
Included in capital additions is interest of EUR491,000 (2017: EUR419,000) capitalised in respect of assets under development. Interest was capitalised at the weighted average rate of general borrowings of 1.7% (2017 1.7%).
Disposal of Investment Properties
During the year the Group disposed of Westend Retail Park in Blanchardstown, Dublin 15 for its then fair value of EUR146.0 million. The Group also disposed of its 63 apartments at the Arena Centre in Tallaght at their then fair value of EUR9.2 million.
8 Investment properties
Reclassification of properties
During the year ended 30 June 2018 the Group reclassified certain lands in Horizon Logistics Park and certain lands at Central Park, Sandyford 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 six Development Properties to Investment Properties upon the completion of their development, namely One Molesworth Street, 5 Harcourt Road and four units at Horizon Logistics Park.
Fair Value of Properties
The fair value of the Group's investment property at 30 June 2018 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 47.0% of the investment property portfolio (by value), CBRE performed valuations on 47.8% of the portfolio and Savills performed valuations on the remaining 5.2%. 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 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 income approach / yield methodology 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 2018 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.
For the purposes of EPRA BPR disclosure, no reconciliation of the independent valuers' valuation report amounts to the carrying value of investment property in the Consolidated statement of financial position is required, as they are the same. In addition, the basis of the independent valuers' valuation fees is as follows:
- CBRE: 0.03% per annum of the value of the properties valued by them - JLL: 0.032% per annum of the value of the properties valued by them - Savills: EUR10,000 per annum (One Albert Quay only)
For further analysis on value by sector, rental income and ERV by sector and vacancy by sector please refer to Portfolio Analysis.
Asset class Input Range
Low Median High
------------------------------------------------------- ----------------------------- --------- ------- ----------
Office Assets - Dublin CBD (11 buildings) Annual rent per sq ft - EUR 22.13 49.58 63.89
-------------------------------------------------------
ERV per sq ft - EUR 23.17 53.35 59.53
Equivalent yield % 4.00% 4.66% 5.68%
Vacancy rate 0.00% 0.00% 17.72%
------------------------------------------------------------------------------------- --------- ------- ----------
Office Assets - Greater Dublin (6 buildings) Annual rent per sq ft - EUR 22.83 24.75 27.00
-------------------------------------------------------
ERV per sq ft - EUR 26.00 26.00 27.02
Equivalent yield % 4.80% 5.36% 5.52%
Vacancy rate 0.00% 0.00% 0.00%
------------------------------------------------------------------------------------- --------- ------- ----------
Office Asset - One Albert Quay, Cork City (1 building) Annual rent per sq ft - EUR 22.00 25.00 27.50
-------------------------------------------------------
ERV per sq ft - EUR 25.00 30.00 31.00
Equivalent yield % 5.75% 5.75% 5.75%
Vacancy rate 0.00% 0.00% 0.00%
------------------------------------------------------------------------------------- --------- ------- ----------
Retail Assets (3 buildings) Annual rent per sq ft - EUR 42.81 64.66 81.14
-------------------------------------------------------
ERV per sq ft - EUR 56.74 60.00 80.00
Equivalent yield % 4.00% 4.46% 4.46%
Vacancy rate 0.00% 0.00% 41.71%(2)
------------------------------------------------------------------------------------- --------- ------- ----------
Logistics Asset - Horizon Logistics Park (9 buildings) Annual rent per sq ft - EUR 7.81 8.55 9.82
-------------------------------------------------------
ERV per sq ft - EUR 8.50 9.00 9.75
Equivalent yield % 5.89% 5.89% 5.89%
Vacancy rate 0.00% 0.00% 0.00%
------------------------------------------------------------------------------------- --------- ------- ----------
Mixed Use Assets (2 buildings) Equivalent yield % 5.66% - 6.56%
-------------------------------------------------------
Vacancy rate 0.00% - 11.30%
------------------------------------------------------------------------------------- --------- ------- ----------
Development Assets - Office (1 building) Net initial yield % 6.00% - 6.00%
------------------------------------------------------- ----------------------------- --------- ------- ----------
Build costs psf EUR230 - EUR230
Rental value psf EUR28.00 - EUR28.00
------------------------------------------------------------------------------------- --------- ------- ----------
(1) Low range on rent in Dublin CBD relates to an older building that has had little capital investment in the last 15 years.
(2) The High vacancy rate within the range relates to a recently completed building with some space yet to let.
(3) ERV and Rent per square foot are calculated on a lease by lease basis as there is only one building in this category.
(4) Comprises Arena Centre in Tallaght, Dublin 24 and INM Building in Citywest, Dublin 24. Annual rent psf and ERV psf are not included as the units are not comparable.
(5) 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 and development properties, a 0.25% increase in equivalent yield would have the impact of a EUR75.1 million reduction in fair value whilst a 0.25% decrease in yield would result in a fair value increase of EUR79.5 million. On a similar basis, a 1.0% increase in the equivalent yield would have a EUR257.6 million reduction in fair value whilst a 1.0% decrease in yield would result in a fair value increase of EUR371.0 million. This is further analysed by property class, as follows:
Value +0.25% Value -0.25%
Property Class Equivalent Equivalent Yield
Yield
EUR'000 EUR'000
------------- -----------------
Office (68,684) 72,402
Retail (298) 346
Logistics (1,836) 2,042
Mixed Use (1,994) 2,193
------------- -----------------
Investment Properties (72,812) 76,983
Development Properties (2,330) 2,550
------------- -----------------
Total (75,142) 79,533
------------- -----------------
Value +1% Value -1%
Property Class Equivalent Equivalent Yield
Yield
EUR'000 EUR'000
----------- -----------------
Office (234,387) 338,302
Retail (1,039) 1,673
Logistics (6,590) 9,421
Mixed Use (7,244) 9,910
----------- -----------------
Investment Properties (249,260) 359,307
Development Properties (8,364) 11,648
----------- -----------------
Total (257,624) 370,955
----------- -----------------
9 Non-current financial asset
2018 2017
EUR'000 EUR'000
Total non-current financial assets 389 2,242
The non-current financial asset represents interest rate hedges entered into in respect of the Group's borrowings.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. This does not qualify for hedge accounting and changes in the fair value of the derivative instrument are recognised immediately in profit or loss and are included in finance costs.
10 Trade and other receivables
2018 2017
EUR'000 EUR'000
Current
Tenant lease incentives 225 769
Trade receivables 747 1,041
Other receivables 3,569 1,540
4,541 3,350
Non Current
Tenant lease incentives 30,011 20,957
Other receivables 2,051 1,350
32,062 22,307
_________ _________
Total trade and other receivables 36,603 25,657
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 which will be released over the term of the relevant leases to their earliest termination date.
The carrying value of all trade and other receivables approximates to their fair value.
Other receivables
Other receivables represent amounts due from property management companies for pre-funding of capital works.
11 Share capital
Authorised and issued share capital
2018 2017
Ordinary shares of EUR0.10 each Number Number
Authorised 1,000,000,000 1,000,000,000
Allotted, called up and fully paid
Issued for cash 666,969,696 666,969,696
Issued to settle 2015 Performance
Fee 13,895,291 13,895,291
Issued to settle 2016 Performance
Fee 9,482,718 9,482,718
Issued to settle 2017 Performance 4,007,197 -
Fee
In issue at 30 June 694,354,902 690,347,705
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 2 October 2017, the Company issued 4,007,197 shares 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 2017.
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 2018 the Property Income of the Property Rental Business of the Group is calculated as follows:
2018 2017
EUR'000 EUR'000
Profit for the period after taxation 144,234 129,775
Less net movement on fair value
of investment properties (109,186) (94,496)
Net movement on fair value of
financial assets 1,853 (2,242)
Property Income of the Property
Rental
Business 36,901 33,037
85% thereof (minimum dividend
payable) 31,366 28,081
On 20 October 2017 the Company paid a dividend of EUR34.6 million (5.0 cent per share) in respect of the year to 30 June 2017. On 26 March 2018 the Company paid a dividend of EUR18.1
million (2.6 cent per share) in respect of the six months to 31 December 2017. The Directors intend to declare a dividend of 2.7 cent per share in respect of the six months to 30 June 2018.
13 Earnings per share
Basic and diluted earnings per share
Profit attributable to ordinary shareholders
2018 2017
EUR'000 EUR'000
Profit for the period, attributable to
the owners of the company 144,234 129,775
EPRA adjustment
- deduction of fair value movement on
investment properties (109,186) (94,496)
- addition / (deduction) of fair value
movement on financial assets 1,853 (2,242)
___________ ___________
EPRA Earnings 36,901 33,037
Weighted average number of ordinary shares
2018 2017
Number Number
Effect of shares in issue on 1 July 690,347,705 680,864,987
Effect of performance fee shares issued 3,172,822 7,586,174
Weighted average number of ordinary shares
- basic 693,520,527 688,451,161
Performance fee shares payable - dilutive
effect 5,126,249 4,007,197
Weighted average number of ordinary shares
- diluted 698,646,776 692,458,358
Basic earnings per share (cent) 20.8 18.9
Diluted earnings per share (cent) 20.6 18.7
EPRA Earnings per share (cent) 5.3 4.8
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 that 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 2018 are calculated based on a share price of EUR1.52, which reflects the average share price calculation in the IMA.
14 Net asset value per share
2018 2017
Net assets as at 30 June ('000) EUR1,251,615 EUR1,152,179
EPRA Adjustment - Deduct fair value
of financial derivatives ('000) (EUR389) (EUR2,242)
___________ ___________
EPRA Net Assets as at 30 June ('000) EUR1,251,226 EUR1,149,937
Ordinary shares in issue at 30 June 694,354,902 690,347,705
Performance fee shares issuable 5,126,249 4,007,197
___________ ___________
Ordinary shares including Performance
Fee shares issuable 699,481,151 694,354,902
Basic NAV per share (cent) 180.3 166.9
Diluted NAV per share (cent) 178.9 165.9
EPRA NAV per Share (cent) 178.9 165.6
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 2018 represents the number of shares that are issuable.
15 Trade and other payables 2018 2017
EUR'000 EUR'000
Accrued expenditure 8,438 8,416
Deferred income and income received
in advance 8,224 6,095
Trade Creditors 1,006 993
Provision for Service Charge 1,188 127
VAT 461 633
Other creditors 5,428 2,920
______ ______
Total trade and other payables
- current 24,745 19,184
Long term other creditors 10,229 7,224
______ ______
34,974 26,408
The carrying value of all trade and other payables is approximate to their fair value.
16 Borrowings
30 June 30 June
2018 2017
EUR'000 EUR'000
Current
Revolving credit facility 70,534 -
Non-current
Bank of Ireland Central Park
facility 149,652 276,655
________ ________
Total borrowings 220,186 276,655
As at 30 June 2018 the Company had a revolving credit facility ('RCF') with EUR71 million drawn against a limit of EUR210 million, at an interest rate of Euribor plus 2.0%. There were a number of drawdowns during the year and excess proceeds from the sale of certain investment properties including Westend Retail Park 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 EUR0.5 million. The repayment date for this facility was December 2018, hence its inclusion in current liabilities at 30 June 2018. The facility was 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. Since year end a new RCF was put in place with the same security and with a repayment date of September 2022, with the benefit of an option to extend the repayment date to September 2023. The interest rate on the new RCF is Euribor plus 1.8%.
The Group has a second loan facility in place for EUR150 million with Bank of Ireland. The amount presented in the financial statements is net of unamortised initial arrangement fees and associated costs of EUR0.3 million. The facility has an interest rate of Euribor + 2.0% and the loan is repayable in June 2021, unless the extension option is exercised by the Company, in which case it will be repayable in June 2023. The loan is secured on the assets owned by the Group at Central Park, Dublin 18 along with the relevant rents from those properties.
17 Related parties
(a) Subsidiaries
The Company's subsidiaries are detailed in the annual report.
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 EUR860.9 million (2017: EUR871.3 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 the IMA was renewed on the same terms for a three year renewal period to 11 July 2021, in accordance with the renewal provisions therein.
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 EUR11.8 million (2017: EUR10.8 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 2018 is EUR7.8 million (2017: EUR5.7 million). The fee will be settled by way of the issue of 5,126,249 ordinary shares to the Investment Manager based on the average share price of EUR1.52 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.
At 30 June 2018 Green Property REIT Ventures held 27,385,206 ordinary shares in the Company. These shares were issued in full settlement of the performance fees for the years to 30 June 2015, 2016 and 2017.
(c) Directors and key management personnel
The key management personnel of the Company are the directors. During the year to 30 June 2018, the Company incurred directors' fees, including taxes and expenses of EUR0.3 million (2017: EUR0.3 million). There is no other director or key management compensation paid by the Company.
18 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:
2018 2017
EUR'000 EUR'000
Not later than a year 65,591 60,390
Later than one year but not more than
five years 245,622 231,839
More than five years 250,684 237,558
________ ________
561,897 529,787
19 Subsequent events
Other than the new revolving credit facility set out in Note 16, there were no events subsequent to the year-end that require adjustment to or disclosure in the financial statements.
20 Capital commitments
The Group has entered into a number of development contracts to develop buildings at various locations. The total capital commitment, for contracts entered into at the 30 June 2018, over the next 12-24 months is EUR34.5 million.
21 Contingent liabilities
No contingent liabilities have been identified by the Group that should be disclosed in these financial statements.
Supplementary Information
1. EPRA Performance Measures
i. EPRA Earnings Jun-18 Jun-17
EUR'000 EUR'000
--------------------------------------------------- ---------- ----------
Earnings per IFRS statement of comprehensive
income: 144,234 129,775
Adjustments to calculate EPRA Earnings:
Changes in fair value of investment properties (109,186) (94,496)
Change in fair value of financial instruments 1,853 (2,242)
EPRA Earnings 36,901 33,037
---------- ----------
EPS - Number of Shares: '000 '000
--------------------------------------------------- ---------- ----------
Shares in issue at opening 690,348 680,865
Effect of shares issued during the period 3,173 7,586
---------- ----------
Weighted average basic number of shares 693,521 688,451
Dilutive effect of shares issuable at
30 June 5,115 4,007
---------- ----------
Diluted number of shares 698,635 692,458
---------- ----------
EPRA Earnings per share (cent) 5.3 4.8
Diluted EPRA Earnings per share (cent) 5.3 4.8
ii. EPRA NAV and EPRA NNNAV Jun-18 Jun-17
EUR000 EUR000
--------------------------------------------------- ---------- ----------
NAV per the financial statements 1,251,615 1,152,179
Fair Value of Financial Instruments (389) (2,242)
EPRA NAV 1,251,226 1,149,937
---------- ----------
Fair Value of Financial Instruments 389 2,242
EPRA NNNAV 1,251,615 1,152,179
---------- ----------
NAV - Number of Shares: '000 '000
---------- ----------
Shares in Issue at Balance Sheet Date 694,355 690,348
Dilutive effect of shares issuable at
30 June 5,115 4,007
Diluted number of shares 699,470 694,355
---------- ----------
EPRA NAV per share (cent) 178.9 165.6
EPRA NNNAV per share (cent) 178.9 165.9
iii. EPRA Cost Ratios Jun-18 Jun-17
EUR000 EUR000
--------------------------------------------------- ---------- ----------
Total operating expenses per IFRS (excl.
direct property costs) 21,667 18,857
Direct property costs 2,548 2,421
---------- ----------
EPRA costs including vacancy costs 24,216 21,278
Direct vacancy costs (488) (433)
---------- ----------
EPRA costs excluding vacancy costs 23,728 20,845
Gross Rental Income per IFRS 67,906 60,420
EPRA cost ratio including vacancy costs 35.7% 35.2%
EPRA cost ratio excluding vacancy costs 34.9% 34.5%
iv. EPRA vacancy rate Jun-18 Jun-17
EUR000 EUR000
--------------------------------------------------- ---------- ----------
Annualised ERV of vacant space (income
producing only) 3,500 1,100
Annualised ERV of portfolio (income producing
only) 78,800 72,500
EPRA vacancy rate 4.4% 1.5%
iv. EPRA Net Initial Yield ('EPRA NIY')
and EPRA 'topped-up' NIY
At 30 June 2018 Office Logistics Mixed Retail Total
Use
EUR000 EUR000 EUR000 EUR000 EUR000
------------------------------------------------ ---------- ---------- ------------- ------------- ----------
Investment property at fair value 1,270,673 89,970 57,830 5,955 1,424,428
Less: Development and Land (27,435) (34,279) - - (61,714)
---------- ---------- ------------- ------------- ----------
Completed property portfolio 1,243,238 55,691 57,830 5,955 1,362,714
Purchasers' Costs at 8.46% 105,178 4,711 4,892 504 115,286
Gross up completed property portfolio
valuation 1,348,416 60,402 62,722 6,459 1,478,000
---------- ---------- ------------- ------------- ----------
Annualised cash passing rental income 52,300 1,600 4,400 300 58,600
Property outgoings (1,378) (60) (195) (31) (1,664)
---------- ---------- ------------- ------------- ----------
Annual net passing rent 50,922 1,540 4,205 269 56,936
Annual cash rent on expiry of lease incentives 10,600 2,500 - 10 13,110
---------- ---------- ------------- ------------- ----------
Topped-up annual net passing rent 61,522 4,040 4,205 279 70,046
---------- ---------- ------------- ------------- ----------
EPRA NIY 3.8% 2.5% 6.7% 4.2% 3.9%
EPRA 'topped-up' NIY 4.6% 6.7% 6.7% 4.3% 4.7%
iv. EPRA Net Initial Yield ('EPRA NIY')
and EPRA 'topped-up' NIY (continued)
At 30 June 2017 Office Logistics Mixed Retail Total
Use
EUR000 EUR000 EUR000 EUR000 EUR000
------------------------------------------------ ---------- ---------- ------------- ------------- ----------
Investment property at fair value 1,118,230 55,065 68,930 139,196 1,381,421
Less: Development and Land (87,060) (30,075) - - (117,135)
---------- ---------- ------------- ------------- ----------
Completed property portfolio 1,031,170 24,990 68,930 139,196 1,264,286
Purchasers' Costs at 4.46% 45,990 1,115 3,074 6,208 56,387
Gross up completed property portfolio
valuation 1,077,160 26,105 72,004 145,404 1,320,673
---------- ---------- ------------- ------------- ----------
Annualised cash passing rental income 40,220 1,238 5,286 7,073 53,817
Property outgoings (1,740) (46) (308) (327) (2,421)
---------- ---------- ------------- ------------- ----------
Annual net passing rent 38,480 1,192 4,978 6,746 51,396
Annual cash rent on expiry of lease incentives 14,266 303 (78) 578 15,069
---------- ---------- ------------- ------------- ----------
Topped-up annual net passing rent 52,746 1,495 4,900 7,324 66,465
---------- ---------- ------------- ------------- ----------
EPRA NIY 3.6% 4.6% 6.9% 4.6% 3.9%
EPRA 'topped-up' NIY 4.9% 5.7% 6.8% 5.0% 5.0%
PORTFOLIO INFORMATION
Rent subject to lease break or expiry
- passing rent at 30 June 2018
For the year to 30 June 2019 2020 2021-2023
EUR'M EUR'M EUR'M
------------------------------------------ ------- ------- ----------
Office 1.0 0.7 9.2
Logistics 0.4 0.0 0.5
Mixed Use 0.0 0.1 2.0
Retail 0.0 0.0 0.0
------- ------- ----------
Total 1.4 0.8 11.7
Percentage of passing rent 2.4% 1.3% 20.1%
Potential uplift at current ERV 0.0 0.4 1.2
------- ------- ----------
Rent subject to review - passing rent
at 30 June 2018
For the year to 30 June 2019 2020 2021-2023
EUR'M EUR'M EUR'M
------------------------------------------ ------- ------- ----------
Office 0.6 3.5 42.3
Logistics 0.0 0.0 0.9
Mixed Use 0.4 0.5 1.5
Retail 0.0 0.0 0.3
------- ------- ----------
Total 1.0 4.0 45.0
Percentage of passing rent at 30 June
2017 1.7% 6.8% 76.8%
Potential uplift at current ERV 0.4 0.6 3.1
------- ------- ----------
Rent subject to lease break or expiry
- passing rent at 30 June 2017
For the year to 30 June 2018 2019 2020-2022
EUR'M EUR'M EUR'M
------------------------------------------ ------- ------- ----------
Office 2.9 4.2 6.7
Logistics 0.3 0.4 0.0
Mixed Use 0.5 0.0 0.1
Retail 0.0 0.2 1.9
------- ------- ----------
Total 3.7 4.8 8.7
Percentage of passing rent 6.8% 8.9% 16.1%
Potential uplift at current ERV 0.5 0.7 1.1
------- ------- ----------
Rent subject to review - passing rent
at 30 June 2017
For the year to 30 June 2018 2019 2020-2022
EUR'M EUR'M EUR'M
------------------------------------------ ------- ------- ----------
Office 5.4 0.7 18.8
Logistics 0.5 0.0 0.4
Mixed Use 3.5 0.4 1.0
Retail 1.1 0.1 5.4
------- ------- ----------
Total 10.5 1.2 25.6
Percentage of passing rent at 30 June
2017 19.4% 2.4% 47.5%
Potential uplift at current ERV 1.8 0.8 2.1
------- ------- ----------
Property related capital expenditure 2018 2017
EUR000 EUR000
Acquisitions 13,467 13,561
Development (ground-up/green field/brown
field) 70,646 47,461
Like-for-like portfolio 4,378 7,468
Capitalised Interest 491 419
Total capital expenditure 88,982 68,909
------- -------
2. Other Performance Measures
Gearing/Property LTV
As at 30-Jun-18 30-Jun-17
EURm EURm
Total Debt 220.9 278.4
Property Portfolio Value 1,424.4 1,381.4
Gearing/Property LTV 15.5% 20.2%
The use of debt to increase the potential returns to shareholders
is common in real estate companies. The disclosure of the gearing
level assists an assessment by shareholders of the financial position
of the company, in that it shows the extent to which debt is being
used to enhance returns. It also assists shareholders in an assessment
of the headroom that exists between the company's total property
value and its borrowings, in the event that there was to be a
reduction in the level of property values.
Interest Cover
As at 30-Jun-18 30-Jun-17
EURm EURm
Total Debt 220.9 278.4
Total Interest Rate 1.9% 1.8%
Annual Interest Cost 4.2 5.1
Annual passing rent 58.6 53.8
Interest cover - times 14.0 10.5
This metric illustrates the company's ability to cover the interest
cost on its borrowings from its cash rents, showing the headroom
between the two. It is related to the gearing level, in that if
for example the company increases its level of borrowings to enhance
returns to shareholders, the corollary is that its interest cost
will increase in that scenario, the impact of which on its ability
to cover that increased cost from rents can be measured by the
interest cover ratio. Similarly, with stable borrowings but with
an increase in interest rates a shareholder can assess the impact
on the company's ability to service its debt in that scenario
from its interest cover ratio, comparing it to prior periods.
Total Return
Year ended 30-Jun-18 30-Jun-17
EURm EURm
EPRA net asset value at balance sheet date 1,251.2 1,149.9
Add: Dividends paid in the period 52.6 31.3
-------------- -------------
Adjusted net asset value 1,303.8 1,181.3
EPRA net asset value at previous balance sheet
date 1,149.9 1,048.0
Increase in adjusted net asset value 153.9 133.2
-------------- -------------
Total Return for the year 13.4% 12.7%
Total return measures the performance of the company in a given
period in terms of both balance sheet growth and the income distributed
to shareholders by way of dividend, which are the two key components
of shareholder return from REITs. It is also the metric driving
the calculation of performance fees payable to the Investment
Manager (if applicable).
Investment Initial Yield and Portfolio
Initial Yield
As at 30-Jun-18 30-Jun-17
EURm EURm EURm EURm
Excl Inc Excl Inc
Purchasers Purchasers Purchasers Purchasers
Costs Costs Costs Costs
Purchaser's Costs 8.46% 4.46%
Investment
property
value 1,362.7 1,478.0 1,264.3 1,320.7
Developments and
land
value 61.7 66.9 117.1 122.4
------------- ------------- ------------- -------------
Property portfolio
value 1,424.4 1,544.9 1,381.4 1,443.0
Contracted annual
rent 71.7 68.9
Investment Initial
Yield 4.9% 5.2%
Portfolio Initial
Yield 4.6% 4.8%
Investment Initial Yield - this metric allows shareholders
to assess the return on the company's portfolio of income
producing assets from its contracted rents, being its stabilised
rents once any temporary tenant incentives have expired. The
measure, which is common in our industry, can be compared
to that of other real estate companies for benchmarking purposes,
and can be compared to yields on market transactions, allowing
shareholders to make their own assessment as to the potential
for an increase or decrease in values, if they view the company's
yield to be above or below the yields being achieved on comparable
transactions.
Portfolio Initial Yield - as per Investment Initial Yield
above, this is in common use in our industry, but in terms
of gauging the return on the entire portfolio (including development
and land assets) rather than from income producing properties
only.
COMPANY INFORMATION
Directors Gary Kennedy (Chairman) (all non-executives) Pat Gunne
Jerome Kennedy
Gary McGann
Stephen Vernon (British)
Thom Wernink (Dutch - retired 1 December 2017)
Rosheen McGuckian (appointed 1 January 2018)
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 BPR"
EPRA's Best Practices Recommendations (BPR) for financial reporting by listed property companies
"EPRA NAV per Share"
EPRA net assets divided by the number of shares at the balance sheet date on a diluted basis (see page 34 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
"interest cover"
the ratio of the company's total annual passing rent, or cash rent, at a point in time, to its total annualised loan interest cost based on loans outstanding at that date
"investment income yield"
the current annualised rent produced by investment properties, net of costs, expressed as a percentage of capital value, after allowing for notional purchaser's costs
"investment initial yield"
annual contracted rental income expressed as a percentage of the valuation of income producing properties at a specified date plus applicable notional purchasers' costs of acquisition
"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.
"occupancy"
the extent to which a property or portfolio of properties is occupied by a tenant by way of a lease or license, measured by ERV
"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
"portfolio initial yield"
annual contracted rental income expressed as a percentage of the valuation of the overall property portfolio at a specified date plus applicable notional purchasers' costs of acquisition
"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.
"Property LTV"
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 Company's property portfolio (also referred to as Gearing)
"reversionary"
the gap by which the passing rent of a property or portfolio is below that of its ERV.
"sq ft"
square feet
"TMT"
Technology, media and telecommunications
"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.
"vacancy"
the extent to which a property or portfolio of properties is not occupied by a tenant by way of a lease or license, measured by ERV
"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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR LLFITARIDLIT
(END) Dow Jones Newswires
September 18, 2018 02:00 ET (06:00 GMT)
1 Year Green Reit Chart |
1 Month Green Reit Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
