Hibernia records ‘modest’ decline in portfolio value

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Hibernia reit

HALF YEARLY FINANCIAL REPORT

For the six months ended 30 September 2020

17 November 2020

“Despite the challenging environment in the six months to September 2020 we have made significant progress with our strategic priorities and our business performed well, delivering further growth in distributable income and recording only a modest decline in portfolio value.

Hibernia REIT plc (“Hibernia”, the “Company” or the “Group”) today announces results for the six months ended 30 September 2020 (the “period”). Highlights include:

Rent collection rates reflecting strong tenant base

·     As at 16 November 2020, contracted rent received or on agreed payment terms was as follows:

–          Commercial[1]: 99% for Q/E Dec-20; 99% for Q/E Sep-20; 99% for Q/E Jun-20

–          Residential[2]: 98% for Nov-20; >99% for Oct-20; >99% for Sep-20 

·     60% of our contracted rent roll is from technology companies or state entities

Further growth in distributable income

·     Annual contracted rent of €66.5m at Sep-20, up 1% since Mar-20, and office WAULT of 6.2yrs, down 3%

–          One pre-let of 24,000 sq. ft. adding €1.5m, or €0.5m net of lease expiries and adjustments on let space

–          One rent review and two lease variations agreed, adding incremental rent of €0.2m

–          Since period end, one letting over 12,000 sq. ft. agreed, adding net rent of €0.2m

·     Diluted IFRS loss per share of 5.0 cent from negative revaluation movements in the period (Sep-19: profit of 3.7 cent)

·     EPRA EPS5 of 3.3 cent, up 17.6% on last year due to leases signed in prior periods (Sep-19: 2.8 cent)

·     Interim DPS of 2.0 cent declared, up 14.3% on prior year (Sep-19: 1.75 cent)

Modest decline in portfolio value, primarily coming in the first quarter of our financial year

·     Portfolio value of €1,420.9m, down 3.8%[3] in the period (Mar-20: €1,465.2m)

–          Valuation declined 3.2%3 in Q1 and 0.6%3 in Q2, primarily due to lower office net ERVs and higher office yields 

·     Six-month Total Property Return[4] of -1.7% vs MSCI Ireland Property All Assets Index (excl. Hibernia) of -1.6%

·     Per RICS guidance, C&W has included a material uncertainty statement in its September 2020 valuations of our commercial properties (residential properties not included)

·     EPRA NTA per share5 of 171.9 cent, down 4.1% in the period (Mar-20: 179.2 cent) 

Very robust balance sheet with no maturities until December 2023 giving substantial flexibility and investment capacity

·     Net debt of €265.3m, LTV5 of 18.7% (Mar-20: €241.4m, LTV 16.5%)

·     Weighted average debt maturity of 3.8 years (Mar-20: 4.4 years)

·     Cash and undrawn facilities of €130m, €103m net of committed expenditure (March 2020: €154m and €136m)

·     €25m share buyback programme launched in Aug-20

–          At end of Sep-20, 8.1m shares had been acquired for €9.0m, an average price per share of €1.11

–          Buyback programme completed on 16 Nov 2020: 23.1m shares repurchased at an average price per share of €1.08

Committed office developments near completion; major pipeline schemes ready to start in near term

·     Two office schemes on track to complete in early 2021, delivering 62,500 sq. ft. of Grade A office space (38% pre-let)

·     Major office developments fully planning approved and ready to start in next 12-26 months; all have low break-evens

–          Clanwilliam Court (final planning granted in the period) and Marine House can start in early 2022, delivering >200,000 sq. ft. of new, Grade A office space, our second cluster after the recently completed Windmill Quarter

–          Harcourt Square can start in early 2023, delivering 337,000 sq. ft. of new, Grade A space in another office cluster

Continuing focus on sustainability, one of our key strategic priorities

·     Real-time energy consumption monitoring system installed and operating in our managed in-place offices

·     Received third successive EPRA Gold Award for the quality of our ESG disclosures

·     Submissions made to GRESB and, for the first time, CDP: results are expected shortly

·     Considering the TCFD requirements and pathways for the Group to net zero carbon

Kevin Nowlan, Chief Executive Officer of Hibernia, said: 

“Despite the challenging environment in the six months to September 2020 we have made significant progress with our strategic priorities and our business performed well, delivering further growth in distributable income and recording only a modest decline in portfolio value.

“Our leverage is amongst the lowest in the pan-European REIT universe, and this balance sheet strength gives us substantial capacity and strategic flexibility for value-enhancing investment opportunities. We have completed the €25m share buyback programme launched in August 2020, which has proved a highly accretive use of capital.

“With the final grant of planning for our redevelopment of Clanwilliam Court, we now have planning permission for the three main office projects in our development pipeline, all of which have low break-even rents and all of which we can start in the next 12 – 26 months. These schemes will deliver 539,000 sq. ft. of Grade A offices in the traditional core of Dublin at relatively low capital costs per buildable square foot.

“Until there is a clear pathway for workers to return to their offices in meaningful numbers we expect Dublin office vacancy rates to continue to rise and rents to remain under pressure. In our view the pandemic is accelerating pre-existing changes in working patterns, such as more remote working, a greater focus on collaborative spaces in offices, increased emphasis on employee wellness and office buildings’ sustainability credentials. This is something we had been factoring into our building designs already, as can be seen in the Windmill Quarter. As the pandemic has continued we believe the importance of offices for employee collaboration, creativity and culture has become increasingly apparent and we remain positive about the long-term prospects for well-configured, prime offices in Dublin’s city centre.”