Transforming Dublin
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Transforming Dublin Annual Report 2021 Our purpose is to create the best and most efficient spaces for working or living in Dublin, responsibly transforming the fabric of the city and bringing benefits to all stakeholders. Who we are We are the largest Irish real estate investment trust (“REIT”), owning a property portfolio worth €1.4bn, all of which is located in Dublin and which mostly comprises city centre offices. We are listed on the Main Securities Market of Euronext Dublin and the Main Market of the London Stock Exchange. How we do it We use our knowledge and experience of the Dublin property market, together with modest levels of leverage, to upgrade buildings or deliver new ones at appropriate times in the property cycle and to grow our income through active asset management. We also recycle capital, selling assets with limited potential and reinvesting in property with future redevelopment opportunities. Our portfolio is mainly a mix of redeveloped properties held for income and assets held for future repositioning. Where possible, we seek to own clusters of office assets to enhance the facilities and amenities we can provide occupiers. We also have a strong focus on ESG excellence. Read more on pages 20 to 21 1SJRQ, South Docks CONTENTS report Strategic Strategic report Corporate governance Financial statements 2 The year in summary 72 Governance at a glance 132 Independent auditor’s report Governance 4 Five reasons to invest 74 Board of Directors 138 Consolidated income statement 6 Letter from the Chair 76 Senior Management Team 139 Consolidated statement of 8 Chief Executive Officer’s statement 78 Introduction from the Chair comprehensive income 10 Understanding our world 80 Culture and people 140 Consolidated statement of financial position Financial statements 12 Why Dublin? 82 What we did during the year 141 Consolidated statement of cash flows 13 Market review 84 Division of responsibilities 142 Consolidated statement of changes 16 Our portfolio 86 Stakeholder engagement in equity 20 Our business model 88 Composition, succession and evaluation 143 Notes to the consolidated 22 Strategy at a glance 90 Nominations Committee report financial statements 26 Strategy in action 92 Audit Committee report 190 Company statement of financial position 34 Engaging with our stakeholders 96 Remuneration Committee report 191 Company statement of changes in equity information Additional 38 Measuring our performance 127 Directors’ report 192 Notes to the Company financial statements 40 Our approach to risk 131 Directors’ responsibility statement Supplementary information 43 Going concern and viability statement (unaudited) 48 Principal risks and uncertainties 201 Five-year record 54 Business review 202 Alternative performance measures 61 Financial review 203 EPRA performance measures 64 COVID impacts and management 211 Other disclosures 65 Sustainability 213 Directors and other information 214 Glossary www.hiberniareit.com Hibernia REIT plc Annual Report 2021 1 STRATEGICTHE YEAR IN REPORT SUMMARY Financial Portfolio EPRA Net Tangible Assets highlights value (“NTA”) per share €1,427m 172.7c LfL growth -4.4% 2020: €1,465m -3.7% 2020: 179.2c Cash and undrawn facilities net Loan to value (“LTV”) of committed capital expenditure 19.5% €110m Read more on pages 61 to 63 +3.0pp 2020: 16.5% -19.1% 2020: €136m Operating highlights Responsibility and governance High rent collection rates driving further Disciplined capital allocation Sustainability increase in distributable income − €16.8m in development expenditure, − Sustainability Statement of Intent issued − 99% of rent for year ended Mar-21 mainly on two schemes to deliver in Apr-21 including our commitment to (Mar-20: 99%) now received or on 62,500 sq. ft. of Grade A office become a net zero carbon business by agreed payment terms space (38% pre-let): both expected 2030 and to align with the TCFD by 2022 − Annual contracted rent +2.2% since to complete by Jul-21, following delays (see more on pages 65 to 71 and 44 to 45) Mar-20 to €67.1m due to lockdowns (Mar-20: €21.3m) − Real-time energy consumption monitoring − Office WAULT of 5.8 years, -9.4% − €11.1m invested in five bolt-on property system installed and operating in our since Mar-20 acquisitions (Mar-20: €23.3m) managed in-place offices − EPRA EPS of 6.3c, +13.4% due to − €25m share buyback programme − Received a four-star GRESB rating for increase in rental income successfully executed; 23.1m shares the first time 2020 and a B- score in our − Final DPS of 3.4c, bringing total for repurchased and cancelled, an avg. inaugural CDP response financial year of 5.4c (Mar-20: 4.75c) price per share of €1.08 (Mar-20: 17.6m shares repurchased for €25m, an avg. price per share of €1.42) Robust balance sheet and investment Progress on clustering Governance capacity further enhanced post year end − Full planning now in place for Clanwilliam − 2021 renewal of Remuneration Policy by new US private placement and Harcourt schemes, which can be − COVID-19 management (see page 64) − Net debt of €278.8m, LTV of 19.5% commenced in the next seven and − Increased focus on stakeholder − €125m of 10- and 12-year unsecured US 18 months, respectively, and can deliver engagement (see more on pages private placement notes with an average 539,000 sq. ft. of clustered, Grade A 34 to 37) coupon of 1.9% to be issued in July-21 office space − Strategic priorities refocused to take − Weighted average debt maturity at − These schemes will take the proportion account of the impact of the pandemic Mar-21 of 3.4 years (Mar-20: 4.4 years), or of Hibernia’s office assets by value in (see more on pages 22 to 23) 5.2 years pro-forma new debt issue clusters from 39% to 65% − ISO 14001 and ISO 45001 certification − Cash and undrawn facilities net of completed committed expenditure of €110m, or €235m proforma new USPP Modest decline in portfolio value, Supporting our employees while primarily coming in the first quarter working from home − Portfolio value of €1,427.4m, down Keeping our team happy, healthy and 4.4% on a like-for-like basis (“LfL”) in focused has been a priority throughout the financial year and down 0.7% in H2 the year (see more on pages 80 to 81). − Movement came primarily due to lower net ERVs and higher yields assumed on office assets 2 Hibernia REIT plc Annual Report 2021 www.hiberniareit.com Strategic report Strategic Governance Net rental income Loss after tax €63.3m €(25.2)m Financial statements +8.1% 2020: €58.6m -141.3% 2020: Profit of €61.0m EPRA earnings per share Dividend per share (“EPRA EPS”) (full year) information Additional 6.3c 5.4c +13.4% 2020: 5.5c +13.7% 2020: 4.75c The Dockers pub, part of 1SJRQ, South Docks www.hiberniareit.com Hibernia REIT plc Annual Report 2021 3 FIVE REASONS TO INVEST A compelling investment case We have low financial leverage and a clear strategy to provide occupiers with the type of office space they are increasingly seeking. Dublin tailwinds Experienced team Low leverage from EU membership and high-quality and demographics tenant base Dublin1 has been successful at attracting Our2 team knows the Dublin property We3 have a policy of maintaining a strong foreign direct investment for many years market intimately and has many years balance sheet and our unsecured funding and we believe it is benefitting from now of experience in all aspects of property structure gives us significant flexibility. being the only major capital city within the investment and development. The quality of our tenant base can be seen EU where English is the primary language. in our rent collection statistics during the Unlike many developed countries, Ireland COVID-19 pandemic – over the 12 months has favourable demographics and Dublin is to March 2021, 99% of our commercial rent experiencing significant population growth. and residential rent was collected or on agreed payment terms. Expected population growth Years experience in the Dublin property LTV at 31 March 2021 in Dublin by 2031 market in the Senior Management Team +16% >100 yrs 19.5% (Source: National Planning Framework) 4 Hibernia REIT plc Annual Report 2021 www.hiberniareit.com Strategic report Strategic Governance Financial statements Additional information Additional Strong income returns and Clear strategy to lead development pipeline rich on workplace evolution in opportunity Our4 shares offer attractive income returns and We5 are a responsible, forward-thinking business. we have a significant pipeline of development With our focus on clustering and ESG excellence opportunities with the potential to deliver substantial we are ensuring that we provide the type of surpluses over the near to medium term. workspace occupiers are increasingly seeking. Implied dividend yield of our shares Proportion of office portfolio (at 6 June 2021) in clusters by 2026 4.4% 65% www.hiberniareit.com Hibernia REIT plc Annual Report 2021 5 LETTER FROM THE CHAIR Daniel Kitchen Chair “ As a property company, carrying out our activities responsibly is integral to our purpose.” Our highlights Total Accounting Return (“TAR”) Total Property Return (“TPR”) LTV (0.9)% (0.2)% 19.5% -6.5pp on prior year +1.3pp over benchmark +3pp on prior year 6 Hibernia REIT plc Annual Report 2021 www.hiberniareit.com Strategic report Strategic Dear Shareholder, To support our future development Governance Despite a challenging environment for all projects, we have agreed an additional of the financial year ended 31 March 2021, €125m of 10- and 12-year unsecured US we have made significant progress with private placement notes with average our strategic priorities and our business coupons of 1.9% to be issued in late July Financial statements performed well, delivering further growth 2021.