Download = Best Long-Term Shareholder Value

 BEST PROPERTIES
BEST MARKET FUNDAMENTALS
+BEST MANAGEMENT
= Best Long-Term Shareholder Value
Irish Residential Properties REIT plc
Annual Report 2015
Irish Residential Properties REIT plc
Annual Report 2015
Profile
Irish Residential Properties REIT plc (“I-RES” or the “Company”) is
a growth-oriented Real Estate Investment Trust (“REIT”) that owns
2,064 apartments in Dublin, Ireland. As the largest non-governmental
residential landlord in Ireland, the Company is focused on acquiring,
holding and professionally managing interests in multi-unit residential
rental properties in Ireland and developing sites included in its property
portfolio. The Company’s shares are listed on the Irish Stock Exchange
(ISE: IRES). For more information, please visit the Company’s website
at www.iresreit.ie.
B
Irish Residential Properties REIT plc
Annual Report 2015
Contents
REVIEW
2
4
6
8
10
12
17
18
21
28
Financial and Operational Highlights
Best Properties
Best Market Fundamentals
Best Management
Chairman’s Statement
Chief Executive Officer’s Statement
IRES Fund Management, Investment
Manager Statement
Market Update
Portfolio Overview
Investment Policy and Strategy
GOVERNANCE
34
36
38
45
49
52
53
65
I-RES Board of Directors
CAPREIT and IRES Fund Management
Senior Management
Corporate Governance Statement
Report of the Audit Committee
Report of the Remuneration Committee
Report of the Nomination Committee
Report of the Directors
Statement of Directors’ Responsibility
FINANCIAL STATEMENTS
66 Independent Auditors’ Report to the members
of Irish Residential Properties REIT plc
72 Consolidated Statement of Financial Position
73 Consolidated Statement of Profit and Loss
and Other Comprehensive Income
74 Consolidated Statement of Changes in Equity
75 Consolidated Statement of Cash Flows
76 Notes to Financial Statements
96 Company Statement of Financial Position
97 Company Statement of Changes in Equity
98 Company Statement of Cash Flows
99 Notes to Company Financial Statements
105Glossary of Terms
IBC Forward-Looking Statements
Shareholder Information
Annual Report 2015
Irish Residential Properties REIT plc
1
Irish Residential Properties REIT plc
Annual Report 2015
Highlights
31 December 2015
31 December 2014
FINANCIAL
Revenue (€ millions)
Net Profit (€ millions)
Basic EPRA EPS (cents)
Basic NAV and EPRA NAV per share (cents)
Pro-forma NAV per share (cents)
Diluted EPRA NAV per share (cents)
Total return
Loan to Value
24.7
9.7 (1)
30.8
7.9 (1)
3.3
1.6 (1)
104.3
99.5
105.3
103.2
103.5
99.4
( 2)
15.3% 5.9%
8.6%
37.6%
OPERATIONAL
Gross Yield at Fair Value (3)
Net Rental Income Margin
Occupancy Rate
Average Monthly Rent (€)
6.2%6.0%
80.8%78.8% ( 1)
96.0%99.7%
1,372
1,250
(1) For the period 2 July 2013 to 31 December 2014.
(2) Total return is calculated assuming shares have been held since the initial offering and based on
a share price of €1.115 as at 8 February 2015 and including dividends declared to date.
(3) Adjusted for fair value of development land.
2
Irish Residential Properties REIT plc
Annual Report 2015
BEST PROPERTIES
BEST MARKET FUNDAMENTALS
+BEST MANAGEMENT
= Best Long-Term Shareholder Value
Accomplishments
to 31 December 2015
since 31 December 2015
> Successful equity issuance in March 2015,
raising net proceeds of approximately
€204 million used for acquisitions and to
partly repay the credit facility
> Arranged a new credit facility with
a reduced margin and five-year term
> Strategic acquisitions of 410 high-quality
apartments; €125.5 million invested in
Dublin during the year
> Dividends of €1.8 million paid in 2015 in
respect of the 2014 accounting period
> A further two properties (442 apartments
and eight apartments, respectively) were
acquired for €83 million and c. €2.3 million,
respectively (including VAT, but excluding
other transaction costs)
> Dividends declared of €13.1 million
(dividends per share of 3.15 cents) for
the 2015 fiscal year
> Announced first development for the construction of 68 apartments at Block B2B,
which is expected to have a gross yield
in the range of 8.5% to 9.0%
Annual Report 2015
Irish Residential Properties REIT plc
3
BEST
PROPERTIES
I-RES has built a welllocated, highest quality
and modern property
portfolio with a weighted
average age of only
7.9 years. By managing
properties close to one
another, I-RES is capturing
cost synergies that could
generate further benefits
for shareholders.
8
Finglas
Whitehall
9
13
Drimnagh
10
6
1
4
14
Inchicore
Donnybrook
Churchtown
5
Tallaght
3
15
Sandyford
16 2
7
11
12
Property Portfolio
Property
Location
Year Built
Date
Acquired
Number of
Suites Owned
83
1 Kings Court Smithfield, D7
2006 Luxury
10 Sep 2013 2 Grande Central
Sandyford, D18 2007 Luxury
10 Sep 2013 65
3 Priorsgate Tallaght, D24 2007 Luxury
10 Sep 2013 102
4 Camac Crescent Inchicore, D8 2008 Luxury
10 Sep 2013 90
5 The Laurels Tallaght, D24
2007 Mid-tier
27 Jun 2014 19
6 The Marker Docklands, D2 2012 Luxury
18 Jul 2014 84
7 Beacon South Quarter (1) Sandyford, D18 2007/2008 Luxury
7 Oct 2014 225
8 Charlestown Finglas, D11 235
9 Bakers Yard Portland Street North, D1
10 Lansdowne Gate 2007 Luxury
7 Oct 2014 2007/2008 Mid-tier
7 Oct 2014 85
Drimnagh, D12
2005 Luxury
7 Oct 2014 224
11 Rockbrook Grande Central Sandyford, D18
2007
Luxury
31 Mar 2015
81
12 Rockbrook South Central
Sandyford, D18
2007
Luxury
31 Mar 2015
189
13 Tyrone Court
Inchicore, D8
2014
Mid-tier
05 Jun 2015
92
14 Bessboro
Terenure, D6
2008
Mid-tier
11 Dec 2015
40
Total owned portfolio as at 31 December 2015
1,614
15 Tallaght Cross West Tallaght, D24
2008
Mid-tier
15 Jan 2016
16 Forum
Sandyford, D18
2007
Luxury
17 Feb 2016
8
Total owned portfolio as at date of this Report
2,064
(1) This includes eight additional apartments purchased on 6 November 2015
4
Building
Class
Irish Residential Properties REIT plc
Annual Report 2015
442
Beacon South Quarter
225 residential apartments
Sandyford, Dublin 18
The development was constructed in
2007/2008 and is a landmark mixed-use
development on 13 acres.
Annual Report 2015
Irish Residential Properties REIT plc
5
BEST
MARKET
FUNDAMENTALS
We continue to see strengthening fundamentals in the residential rental
business, as Ireland’s GNP is improving, unemployment is falling and
the overall population is growing. In addition, there is little new supply
of residential housing coming to the market and new housing starts are
expected to remain well under forecasted requirements.
Strong Real Estate Fundamentals
1
Significant supply and
demand imbalance
helps support the
rental market
2
Strengthening Irish
economy, with upward
pressure being
applied on employee
compensation
Strong Market Demand
The continued shortage of
housing supply in Dublin helps
support the rental market
3
Strong pipeline of
future acquisitions
available through
Ireland’s National
Asset Management
Agency (“NAMA”)
and private market
opportunities
4
Intensification
opportunity to add
approximately 600
to 650 apartments
with significant
infrastructure in place,
subject to planning
and any other
approvals
Growing Irish Population
Growing immigrant and young population
of renters (highest birth rate in Europe)
8.0%
3.5%
2.5%
5.7%
5.0%
2.0%
4.6%
4.0%
3.0%
2,891
8,000
Irish Residential Properties REIT plc
1.5%
3.3%
3.3%
1.0%
2.0%
0.5%
1.0%
0.0%
6
3.0%
6.9%
6.0%
HOUSING
REQUIRED 2015
Increasing apartment
rental sector caused
by various factors
such as the central
bank mortgage limits
and the growing Irish
population
Growing Irish Economy
Strong 2015 GNP growth and
a strong forecast for 2016
7.0%
HOUSING
COMPLETIONS
2015
5
0.0%
20122013201420152016F
Annual Report 2015
201120122013201420152016
Tallaght Cross West
442 residential apartments
Tallaght, Dublin 24
The development was constructed
in 2008 and consists of 507 residential
apartments, of which 442 are owned
by the Company.
Annual Report 2015
Irish Residential Properties REIT plc
7
BEST
MANAGEMENT
From left to right: Charles Coyle, Vice President, Acquisitions;
Daniel Mack, Associate; Darren O’Neill, Regional Accounting
Officer; Jodi Lieberman, Chief Human Resources Officer; Scott
Cryer, Chief Financial Officer; Corinne Pruzanski, General Counsel and Corporate Secretary; Thomas Schwartz, President and
Chief Executive Officer, CAPREIT; Mark Kenney, Chief Operating
Officer; and Roberto Israel, Chief Information Officer.
I-RES’ fully-integrated management platform, between the Dublin office
of IRES Fund Management Limited (“IRES Fund Management” or the
“Investment Manager”) and the CAPREIT Limited Partnership (“CAPREIT LP”)
head office resources, is driving solid increases in organic growth. Both
IRES Fund Management and CAPREIT LP are subsidiaries of Canadian
Apartment Properties Real Estate Investment Trust (“CAPREIT”).
Proven Investment Manager
1
3
2
4
Experienced investment manager
with a track record of growth and value
creation in the residential sector
CAPREIT is fully aligned with I-RES
shareholders, with an indirect 15.7%
beneficial ownership interest
Proven acquisition acumen in the
residential sector
Strong leadership team specialising
in residential real estate
5
Dedicated local team of 26 experienced staff in the Dublin office as of
31 December 2015, supported by
the CAPREIT LP platform
8
Irish Residential Properties REIT plc
Annual Report 2015
6
Benefits from CAPREIT LP’s
infrastructure and resources available
to I-RES, including management, due
diligence, finance, training, risk
management, marketing, legal and
information technology
7
On 1 November 2015, IRES Fund
Management became the alternative
investment fund manager for I-RES
The Marker
84 residential apartments
Grand Canal Dock, Dublin 2
Within walking distance of the Dublin Convention
Centre, the O2 Arena, Aviva Stadium, Croke Park
and Grafton Street, The Marker has access to the
DART at Barrow Street and the LUAS tram line in
the North Docklands.
Annual Report 2015
Irish Residential Properties REIT plc
9
Colm Ó Nualláin
Chairman
Chairman’s Statement
I am pleased to present the Group’s (1) results for the year ended 31December
2015, being the first full year of I-RES’ operations. >> In March 2015, the
Company raised gross proceeds of €215 million through the issuance of
215 million ordinary shares (the “Capital Raise”), which, together with the
€200 million raised in the initial offering in April 2014, brings the total gross
proceeds raised to €415 million.
During the year ended 31 December 2015, the Group
acquired a further 410 apartments for a total acquisition
cost of €125.5 million (including VAT and other transaction
costs), bringing its total number of apartments to 1,614 as
at 31 December 2015. I-RES continues to be the largest
non-governmental residential landlord in Ireland. As at
31 December 2015, the Group had invested approximately
€441 million (including VAT and other transaction costs)
across 13 locations in the Dublin area, funded through a
combination of equity and debt.
Financial Results
The Group has generated strong rental growth and
maintained a high level of occupancy across the portfolio
during the year, indicative of the strong market fundamentals
in the Irish residential rental sector. The portfolio Gross Yield
at fair value was 6.2% as at 31 December 2015, compared to
6.0% as at 31 December 2014, adjusted for the fair value of
development land.
Basic EPS and Basic EPRA EPS for the period were 8.4 cents
and 3.3 cents, respectively, for the year ended 31 December
2015.
Basic NAV and EPRA NAV was €435.0 million, with
Basic NAV and EPRA NAV per share of 104.3 cents as at
31 December 2015. Basic NAV and EPRA NAV per share
increased by 4.8% for the year ended 31 December 2015,
compared to 31 December 2014, driven by property valuation
increases and rental profit in the period, partially offset by
equity transaction costs.
Dividends
On 9 February 2016, the directors of the board (the “Directors”)
declared an interim dividend of €13.1 million (dividends per
share of 3.15 cents) for the 2015 accounting period, to be
paid on 21 March 2016 to shareholders on record on
19 February 2016.
(1) This report (“Report”) incorporates the financial information of the Company and its wholly-owned subsidiary, IRES Residential Properties Limited,
together referred to as the “Group,” for the period from 1 January 2015 to 31 December 2015.
10
Irish Residential Properties REIT plc
Annual Report 2015
Investment Manager
The Company’s board of directors (the “Board”) is very
satisfied with the significant contribution that the Investment
Manager and senior management (as well as the other staff)
of CAPREIT LP have made. As of 31 December 2015, there
were 26 staff located in Dublin providing dedicated and
experienced support to the I-RES portfolio.
On 28 October 2015, IRES Fund Management became
authorised by the Central Bank of Ireland as an alternative
investment fund manager under the European Union
(Alternative Investment Fund Managers) Regulations, 2013
(the “AIFM Regulations”). On 1 November 2015, IRES Fund
Management was appointed by the Company as its new
alternative investment fund manager in accordance with
the AIFM Regulations and replaced the existing alternative
investment fund manager.
On 17 February 2016, the Company acquired a further eight
apartments and 11 basement car parking spaces at the
Forum, located in Sandyford, Dublin 18, for a total purchase
price of c. €2.3 million (including VAT, but excluding other
transaction costs), funded by the Company’s cash on hand.
Effective 21 March 2016, I-RES will be added to the FTSE
EPRA/NAREIT Global Real Estate Index Series, EMEA region
(the “EPRA Index”).
Outlook
In summary, the Board is pleased with the Group’s performance. We believe the positive economic outlook for Ireland
and its property market will lead to increased demand in the
residential rental sector, which should result in continued
improvement in the performance of the Company over a
sustainable and long-term basis.
Events Subsequent to 31 December 2015
On 14 January 2016, the Company signed a new revolving
and accordion credit facility of up to €250 million, which can
be extended to €350 million subject to certain terms and
conditions (the “New Revolving Credit Facility”).
On 15 January 2016, the Company acquired a further
442 apartments, commercial space and associated
underground car parking for a total purchase price of
€83 million (including VAT, but excluding other transaction
costs), funded by the New Revolving Credit Facility.
Colm Ó Nualláin
Chairman
Annual Report 2015
Irish Residential Properties REIT plc
11
David Ehrlich
Chief Executive Officer
Chief Executive
Officer’s Statement
2015 was a busy and productive year for I-RES. In March 2015, the
Company raised gross proceeds of €215 million through the issuance
of 215 million ordinary shares, which, together with the €200 million
raised in the initial offering in April 2014, brought the total gross
proceeds raised to €415 million.
As the most active consolidator in the Irish residential
rental sector, I-RES completed the accretive acquisition of
410 apartments and 4,665 sq. m. (50,214 sq. ft.) of ancillary
commercial space during the year. This increased our
apartment count by 34% to 1,614 extremely high-quality,
well-located apartments in the Dublin area near important
transportation links and employment centres. Operationally,
we generated solid increases in our key operational
performance benchmarks, driven primarily by strong
organic growth resulting from high occupancies and solid
increases in monthly rents on renewals and turnovers. In
2015, approximately 25% renewed in each of quarter one and
quarter two and 15% and 10% were renewed in quarter three
and quarter four, respectively. Also, approximately 20% of the
apartments turned over in 2015.
On 14 January 2016, the Company signed a new revolving
and accordion credit facility of up to €250 million, which can
be extended to €350 million subject to certain terms and
12
Irish Residential Properties REIT plc
conditions. This new facility replaces the €60 million revolving
credit facility which was due to mature in August 2016. The
new facility has a reduced margin and a five-year term.
In addition, subsequent to the year ended 31 December 2015,
the Company acquired a further 442 apartments and 18,344
sq. m. (197,460 sq. ft.) of commercial space and associated
underground car parking at Tallaght Cross West, located in
Tallaght, Dublin 24, for a total purchase price of €83 million
(including VAT, but excluding other transaction costs). The
acquisition was mainly funded by our New Revolving Credit
Facility. On 17 February 2016, the Company acquired a further
eight apartments and 11 basement car parking spaces at the
Forum, located in Sandyford, Dublin 18, for a total purchase
price of c. €2.3 million (including VAT, but excluding other
transaction costs), funded by the Company’s cash on hand.
With this acquisition, our total portfolio consists of 2,064
apartments at a total investment of €529 million to date
(including VAT and other acquisition costs).
Annual Report 2015
Rockbrook Portfolio
270 residential apartments
Sandyford, Dublin 18
The development consists of 270 residential
apartments and mixed-use commercial space
of approximately 4,665 sq. m. (50,214 sq. ft.).
The portfolio also includes a development site
of approximately 1.13 hectares (2.8 acres) and
associated basement car parking.
Annual Report 2015
Irish Residential Properties REIT plc
13
Chief Executive Officer’s Statement (cont’d)
Financial Results
Balance Sheet of the Group:
Total Property Value (€ millions)
Basic and EPRA Net Asset Value (€ millions)
Basic and EPRA NAV per Share (cents)
Number of Apartments
Bank Indebtedness (€ millions)
Group Total Gearing
31 December 2015
472.2 435.0 104.3 1,614 41.5 8.6%
31 December 2014
323.6
200.9
99.5
1,204
125.0
37.6%
Income Statement of the Group:
Gross Rental Income (€ millions)
Net Rental Income (€ millions)
Profit (€ millions)
Basic EPS (cents)
Diluted EPS (cents)
Basic EPRA EPS (cents)
Year ended
31 December 2015
24.7 20.0 30.8 8.4 8.3 3.3 2 July 2013 to
31 December 2014
9.7
7.6
7.9
8.3
8.3
1.6
The property portfolio was valued at €472.2 million at
31 December 2015, with total net borrowings of €41.5 million,
compared to €323.6 million at the end of 2014, with total net
borrowings of €125.0 million. For the year ended 2015, there
was a significant 6.7% increase in value for the properties
held as at 31 December 2014. The Group’s loan to value ratio
was 8.6%.
Basic NAV and EPRA NAV were €435.0 million for the year,
with Basic NAV and EPRA NAV per share of 104.3 cents
in 2015, up 4.8% from 99.5 cents in 2014. The Company’s
Pro-forma NAV per share as at 31 December 2015 was
105.3 cents, adjusting for acquisition transaction costs.
Importantly, we have recovered all the costs incurred in
connection with our Capital Raise in 2015 and the costs
incurred with our acquisitions through appreciation in the
fair value of the portfolio. The main drivers of the valuation
movement in the year were primarily continued rental growth
14
Irish Residential Properties REIT plc
as a result of effective management, achieved together with
the continued increasing demand for high-quality rental
accommodation and slight yield compression.
Average monthly rent increased to €1,372 per apartment as
at 31 December 2015, up from €1,250 at 31 December 2014,
largely due to strong rental increases in monthly rental rates
on renewals and turnovers during the year. Occupancy levels
remained strong throughout the year, mirroring the strong
market fundamentals in the Irish residential rental sector. As at
31 December 2015, the property portfolio had an annualised
passing rent of €28.2 million, representing a Gross Yield at
cost of approximately 6.9% (excluding the estimated cost for
development land) and a net rental income (“NRI”) margin of
approximately 80.8%.
Basic EPS was 8.4 cents and EPRA Basic EPS was 3.3 cents
for the year ended 31 December 2015.
Annual Report 2015
‘‘
We believe we have one of the highest quality rental
property portfolios in any market, characterised by
quite new, well-maintained buildings, large, attractive
and modern apartments, and property management
programmes aimed at ensuring our residents’ needs
are met quickly and efficiently.”
DAVID EHRLICH, Chief Executive Officer
Dividends
Outlook
Under the Irish REIT regime, subject to having sufficient
distributable reserves, the Company is required to distribute
to shareholders at least 85% of the Property Income of its
Property Rental Business for each financial year. Accordingly,
in 2015, the Board paid dividends of approximately €1.8 million
for the 2014 accounting period.
Strong Market Fundamentals
Ireland’s GNP is improving, unemployment is falling and the
overall population is growing. As labour market conditions
continue to tighten, upward pressure is being applied on
employee compensation, which, together with a range
of tax cuts introduced in the most recent budget, should
boost disposable incomes. Ireland’s economy is expected
to continue to grow in 2016, with consumer demand, trade
and investment expected to increase going forward as
consumer confidence remains solid. In addition, there is little
new supply of residential housing coming to market, and new
housing starts are expected to remain well under forecasted
requirements over the next number of years. As a result, we
continue to see strengthening fundamentals in the residential
rental business.
On 9 February 2016, the Directors declared an interim
dividend of €13.1 million (dividends per share of 3.15 cents)
for the 2015 accounting period, to be paid on 21 March 2016
to shareholders on record on 19 February 2016.
Investment Manager
We are very satisfied with the significant contribution that the
Investment Manager and senior management (as well as the
other staff) of CAPREIT LP have made. As of 31 December
2015, there were 26 staff located in Dublin employed by IRES
Fund Management providing dedicated and experienced
support to the I-RES portfolio.
On 28 October 2015, IRES Fund Management became
authorised by the Central Bank of Ireland as an alternative
investment fund manager under the AIFM Regulations. On
1 November 2015, IRES Fund Management was appointed by
the Company as its new alternative investment fund manager
in accordance with the AIFM Regulations and replaced the
existing alternative investment fund manager.
Acquisition and Development Opportunities
We continue to evaluate a significant pipeline of future
acquisition opportunities available through NAMA as well as
off-market sources. As at 31 December 2015, the Company
has an acquisition (including development) capacity in excess
of €300 million based on a target gearing of 45%, of which
c. €90.3 million has been used subsequent to year end to
purchase a property and for other miscellaneous payments.
(Capacity as of the date of this Report is in excess of
€200 million based on a target gearing of 45%.) Using this
available financing under the New Revolving Credit Facility,
the Company will enhance returns to shareholders.
Annual Report 2015
Irish Residential Properties REIT plc
15
Chief Executive Officer’s Statement (cont’d)
The current planning guidelines and the high cost of new
construction will make it difficult for the severe shortage
of accommodation to be rectified, at least over the short
to medium term. The Company will benefit in two ways;
firstly, it helps it to continue to build on its strong operational
performance, and secondly, the Company has capacity at its
existing properties to build between approximately 600 to
650 apartments, subject to required planning and any other
necessary approvals. With respect to the Rockbrook Portfolio,
approximately 470 apartments can be built. The planning
process was postponed while we awaited the introduction
of the new building regulations. We believe the effect will be to
lower development costs. We are in the process of preparing
a planning application under the revised regulations.
We expect to begin development of the first phase of 68 units
at Block B2B, Beacon South Quarter, Sandyford, Dublin 18,
imminently and to have them available for rent in approximately
16 months. Based on management’s expectations of rents at
the time of letting and the fixed price cost of completion, the
apartments are expected to have a gross yield in the range
of 8.5% to 9%. We believe these sites can be developed and
leased on a highly accretive basis as infrastructure, particularly
multi-storey parking, has largely been completed and paid for
as part of the acquisition of those sites.
Industry-Leading Property Management
Our fully-integrated management platform, between
the Dublin office of IRES Fund Management and the
CAPREIT LP head office resources, both of which are subsidiaries of CAPREIT, is driving solid increases in organic
growth, and we are confident this progress will continue
as our property portfolio increases in size. We believe we
have one of the highest quality rental property portfolios
in any market, characterised by quite new, well-built, wellmaintained buildings, large, attractive and modern apartments,
and property management programmes aimed at ensuring
our residents’ needs are met quickly and efficiently. We
are confident that the quality of the portfolio and market
fundamentals will continue to drive strong occupancies and
increasing monthly rents over the long term. Finally, as we
further increase the size and scale of our property portfolio, we
will benefit from economies of scale and operating synergies,
enhancing our organic growth.
I wish to thank the Board of Directors for all of their hard
work this past year. We are excited about our future and look
forward to keeping you apprised of our progress.
David Ehrlich
Chief Executive Officer
16
Irish Residential Properties REIT plc
Annual Report 2015
Thomas Schwartz
Director of IRES Fund
Management
IRES Fund Management’s
Statement
We are pleased with our progress in growing I-RES’ portfolio and enhancing
its property operations. The strengthening fundamentals in the Irish multi-unit
residential rental market are compelling, and we believe there are significant
opportunities to further increase the size and scale of the Company’s property
portfolio and generate continued solid organic growth.
On 28 October 2015, IRES Fund Management became authorised by the Central Bank as an alternative investment fund
manager under the AIFM Regulations. On 1 November 2015,
IRES Fund Management was appointed by the Company as
its alternative investment fund manager in accordance with
the AIFM Regulations. IRES Fund Management is supported
by CAPREIT LP.
On completion of the I-RES initial offering, CAPREIT acquired an indirect beneficial interest in the Company. With
the completion of the Company’s Capital Raise on 26 March
2015, CAPREIT indirectly made a further investment, bringing
CAPREIT’s ownership interest at 31 December 2015 to 15.7%
(total invested €63.5 million). CAPREIT continues to be well
aligned with all I-RES shareholders. Our goal is to build I-RES
into the residential landlord of choice in Ireland through professional property management, a rigorous focus on property
maintenance, building and maintaining good relations with
residents and responding quickly and efficiently to their needs,
and attracting, retaining and training the best operating team
in Dublin. We are bringing a dedicated professionalism to the
Irish residential rental sector with proven property management programmes. I-RES has the benefit of CAPREIT LP’s
team of senior executives (including myself). CAPREIT LP’s
resources available to I-RES include management, due diligence, finance, training, risk management, marketing, legal,
information technology and other expertise provided by a significant number of specialists. In addition, I-RES benefits from
CAPREIT LP’s infrastructure, including an industry-leading IT
platform, and its practices that have been developed and successfully implemented in Canada over the past 18 years. As of
31 December 2015, we had 26 staff located in Dublin taking
advantage of CAPREIT LP’s systems and working seamlessly
with its resources in Toronto, including the number of senior
people who are also in Ireland on a regular basis.
We are confident that through our attention to detail, we can
continue to maintain high occupancy levels and achieve ongoing rental growth to generate strong cash flows over the
long term. We have proven we can source and complete
acquisitions, and we will continue to build on this success
going forward.
Thomas Schwartz
Director of IRES Fund Management
Annual Report 2015
Irish Residential Properties REIT plc
17
Market Update
The significant supply/demand imbalance previously noted by I-RES
continues to be a feature of the Irish residential property market. In Dublin,
where all of I-RES’ current portfolio is located, the situation is even more
acute, with only 2,891 residential completions recorded in 2015, which
compares to the ESRI’s estimate of new household formation in the city of
nearly 8,000 per annum.
Data from the Department of Environment, Community and
Local Government (“DoECLG”) shows that only 12,666 residential housing units were completed across Ireland in 2015.
While this is 15% above the outturn for 2014, this level of output is well below the Economic and Social Research Institute
(“ESRI”)’s estimate, using county-level analysis, of annual new
household formation (18,000).
Apart from new household formation, other drivers of demand
are supportive as noted below. Total employment in Ireland
has increased for 12 successive quarters (to the end of
Q3 2015), with the numbers at work having increased by
139,700 (+7.6%) from the Q3 2012 trough. The employment
components of all three Irish Purchasing Managers’ Indices
(“PMI”) – the Investec Services PMI, Investec Manufacturing
PMI, and Ulster Bank’s Construction PMI – suggest that this
momentum continued through Q4 2015 and into the new year.
The latest (January 2016) Monthly Unemployment release
from the Central Statistics Office (“CSO”) shows that the rate
of unemployment has fallen to a seven-year low of 8.6%.
18
Irish Residential Properties REIT plc
As labour market conditions continue to tighten, upward
pressure is being applied on employee compensation. CSO
data show that average weekly earnings rose 2.7% year-overyear in Q3 2015. Disposable incomes are also being boosted
by tax cuts. In October the government unveiled a range of tax
cuts in its budget, with reforms to the Universal Social Charge
and Income Tax alone set to cost €589 million in 2016. It is
estimated that, all else being equal, these measures will boost
disposable incomes by approximately 0.6%.
Given the supportive demand drivers and muted new build
activity, it is no surprise to see that Irish residential property
prices continue to increase. The latest Residential Property
Price Index (“RPPI”) release from the CSO reveals that national
prices rose at an annual pace of 6.6% in December 2015.
The RPPI also shows that the cumulative improvement in
national prices from the 2013 trough is 35.4%, although
it should be noted that prices are still 33.5% below the
September 2007 peak.
Annual Report 2015
Key Market
Indicators
+7.6 %
+11.1%
+2.7 %
Employment
growth
over the last
12 quarters
Average rent
increase in Dublin
year-over-year
Q3 2015
Increase in
average weekly
earnings
year-over-year
Q3 2015
With that being said, there has been a moderation in the annual
rate of inflation in the Irish housing market (as per the RPPI),
from a high of 16.8% in March 2015 to the current reading.
The subindices of the RPPI also show a somewhat more
pronounced softening in the annual rate of growth in Dublin
prices, from 25.1% in August 2014 to 2.6% in December 2015.
The introduction of new mortgage lending rules from the
Central Bank of Ireland (“CBI”), which took effect in February
2015, has been a key factor behind the moderation in price
inflation. The CBI introduced loan-to-value (80%, or 90%
in the case of most first-time buyers) and loan-to-income (3.5x)
ceilings which apply to the majority of Irish mortgage lending.
These rules have had a more significant impact in the Dublin
market, where prices are materially higher than in the rest
of the country (data on asking prices from the country’s
largest property website, Daft.ie, show that in Dublin these
stood at €306,613, versus €164,838 in the rest of the country,
in Q4 2015).
However, while tighter mortgage lending standards are impacting price inflation, particularly in Dublin, they are failing to
dampen demand for residential property, as evidenced by rising private rents. The Private Rent Index of the Consumer Price
Index (“CPI”) was +9.6% year-over-year in December 2015,
helping the cumulative increase in rents from the December
2010 trough to 37.1%. At 133.0 in December 2015, the CPI
Private Rent Index is at an all-time high. Regional data from
the Private Residential Tenancies Board (“PRTB”), a government agency tasked with ensuring the proper functioning of
the rental market, show that average rents for a two-bedroom
apartment in Dublin were +11.1% year-over-year in Q3 2015.
In a bid to cool the rate of increase in rents, the Minister for
the Environment, Alan Kelly, proposed the introduction of
hard rent controls linked to the CPI. This was met with opposition from a variety of sources, leading to the compromise
of the “rent certainty” measures unveiled in November 2015.
The most meaningful aspect of these measures is that they
will serve to limit the number of rent reviews to one every 24
months (most residential tenancies in Ireland were previously
reviewed annually).
Daft.ie data show that the national stock of units available to
rent has fallen to just 3,600 on 1 February 2016, the lowest in
the history of the series (which began in 2006).
CSO Planning Permissions data show that permission was
granted for only 785 apartments in 2014, the lowest annual
outturn in the history of the series (which dates back to 1975).
The latest data show that permission was granted for 1,331
apartments in the first nine months of 2015, but this is still
well below what might be considered a normal level of activity
(the average annual number of apartment permissions since
1975 is 7,721).
In summary, a combination of robust demand and supply
shortages suggests that the path of least resistance for both
prices and rents is to the upside, at least until meaningful new
supply begins to come onstream. As well, the CBI mortgage
rules should help to cause rental inflation continuing to outstrip price growth.
Annual Report 2015
Irish Residential Properties REIT plc
19
Lansdowne Gate
224 residential apartments
Drimnagh, Dublin 12
The development was constructed in 2005 and is
located adjacent to the LUAS light rail system, 5 km
from the city centre and within walking distance
of numerous large employers, as well as shopping
and leisure facilities.
20
Irish Residential Properties REIT plc
Annual Report 2015
Portfolio Overview
The following table provides an overview of the Group’s
property portfolio as at 31 December 2015.
Commercial
Space
Average
# of Apts. Total #
Value as at Owned Monthly Rent
Property and Location
Year Built Date Acquired
Owned (1) of Apts.(1) (8) 31 Dec 2015 (1) (sq. m.)(1)
per Apt. (1)(2)(3)Occupancy (1)(2)
Kings Court, Smithfield
2006 10 Sep 2013
83 83 €
17.2m
566 €
1,288
98.8%
Grande Central, Sandyford (4)
2007 10 Sep 2013
65 195 €
19.3m
–
€
1,548
100.0%
Priorsgate, Tallaght
2007 10 Sep 2013
102 198 €
17.5m
2,538 €
1,045
98.0%
Camac Crescent, Inchicore
2008 10 Sep 2013
90 110 €
17.9m
–
€
1,221
98.9%
The Laurels, Tallaght
2007 27 Jun 2014
19 19 €
2.8m
190 €
1,103
94.7%
The Marker, Docklands
2012 18 Jul 2014
84 105 €
55.9m
1,218 €
2,328
96.4%
2007/2008
07 Oct 2014
225(5)
850 €
82.6m
2,395 €
1,479
93.3%
2007 07 Oct 2014
235 285 €
54.8m
–
€
1,165
94.5%
Bakers Yard, Portland Street North 2007/2008
07 Oct 2014
85 132 €
19.6m
792 €
1,283
98.8%
Lansdowne Gate, Drimnagh
2005 07 Oct 2014
224 280 €
60.3m
–
€
1,329
97.3%
Rockbrook Grande Central,
Sandyford (4)
2007 31 Mar 2015
81 195 €
26.1m
3,529 €
1,450
96.3%
Rockbrook South Central,
Sandyford
2007 31 Mar 2015
189 224 €
66.0m
1,136 €
1,454
95.8%
Tyrone Court, Inchicore
2014 05 Jun 2015
92 128 €
20.0m
–
€
1,297
92.4%
Bessboro, Terenure
2008 11 Dec 2015
40 40 €
12.2m
–
€
1,204
90.0%
€ 472.2m
12,364 €
1,372 96.0% (6)
83.0m (7) 18,344 €
1,006 (7)88.5% (7)
–
€
469 (7)37.5% (7)
30,708 €
1,290 (6)94.1% (6)
Beacon South Quarter,
Sandyford (5)
Charlestown, Finglas
Total owned portfolio as at 31 December 2015 1,614 Tallaght Cross West, Tallaght
2008 15 Jan 2016
442 507 €
Forum, Sandyford
2007 17 Feb 2016
8
127 €
Total properties owned as at the date of this Report
2,064 2.3m (7)
€ 557.5m
(6)
(1) As at 31 December 2015.
(2) Based on residential apartments.
(3) Average monthly rent (AMR) is defined as actual residential rents, net of vacancies, divided
by the total number of apartments owned in the property.
(4) Total number of owned apartments at Grande Central as of 31 December 2015 is 146.
(5) Includes eight additional apartments purchased on 6 November 2015.
(6) Weighted average, by number of apartments owned.
(7) For Tallaght Cross West and the Forum, the fair value is the purchase price including VAT but excluding
other transaction costs; the AMR and occupancy are as at the date of acquisition.
(8) Total number of apartments in the development.
Annual Report 2015
Irish Residential Properties REIT plc
21
Portfolio Overview (cont’d)
Kings Court
Grande Central
Priorsgate
83 residential apartments
Smithfield, Dublin 7
65 residential apartments
Sandyford, Dublin 18
102 residential apartments
Tallaght, Dublin 24
The Company acquired Kings Court, located in Smithfield, Dublin 7, in September
2013. The development was constructed
in 2006 and is a residential development
consisting of 83 residential apartments
dispersed over four blocks and 566 sq. m.
(6,093 sq. ft.) of commercial space, all of
which is owned by the Company. The entire
development is constructed over a common basement with 65 car park spaces.
The Company’s 83 residential apartments
consist of 25 one-bedroom, 54 two-bedroom and four three-bedroom residential
apartments.
The Company acquired Grande Central, located in Sandyford, Dublin 18, in September
2013. The development was constructed
in 2007 and is a residential development
located within the suburb of Sandyford,
Dublin 18, approximately 8 km south of
Dublin City Centre. The development is on a
0.5-hectare site and consists of a purposebuilt apartment block with 195 residential
apartments, of which 65 are owned by the
Company (which includes two additional
residential apartments that were acquired in
August and October 2014).
The Company acquired Priorsgate, located in
Tallaght, Dublin 24, in September 2013. The
development was constructed in 2007 and
is a residential development on a 2.6-acre
site located approximately 10 km southwest
of Dublin City Centre. The development consists of 198 residential apartments dispersed
over three blocks, of which 102 are owned by
the Company. The Company also owns eight
adjacent commercial units with a total of
2,538 sq. m. (27,316 sq. ft.) of space.
The purchase price was c. €12.5 million
(including VAT, but excluding other transaction costs), compared to a value of
c. €17.2 million as at 31 December 2015.
The annualised rent roll at 31 December
2015 for both residential and commercial
was c. €1.3 million, giving a gross yield of
about 7.7% (approximate gross yield of
10.6% based on the original purchase price
including VAT, but excluding other acquisition costs) and occupancy for residential
apartments was at approximately 98.8%.
22
Irish Residential Properties REIT plc
The entire development is constructed
over a common basement with a single car
park space per residential apartment. The
Company’s 65 residential apartments consist
of 10 one-bedroom, 34 two-bedroom and
21 three-bedroom residential apartments.
The purchase price was c. €11.4 million (including VAT, but excluding other
transaction costs), compared to a value of
c. €19.3 million as at 31 December 2015.
The annualised rent roll at 31 December
2015 was c. €1.2 million, giving a gross yield
of about 6.2% (approximate gross yield of
10.6% based on the original purchase price
including VAT, but excluding other acquisition costs) and occupancy was at approximately 100%.
Annual Report 2015
The entire development is constructed
over a common basement with a single
car park space per residential apartment.
Included with the property is an adjoining
detached building on a site of 0.18 hectare
(0.44 acre) known as Bruce House Site. The
Company’s 102 residential apartments,
which are dispersed over the three blocks,
consist of 49 one-bedroom, 47 two-bedroom, five three-bedroom and one fourbedroom residential apartments.
The purchase price was c. €9.0 million
(including VAT, but excluding other transaction costs), compared to a value of
c. €17.5 million at 31 December 2015. The
annualised rent roll at 31 December 2015
for both residential and commercial was
c. €1.4 million, giving a gross yield of about
8.2% (approximate gross yield of 16.0%
based on the original purchase price including VAT, but excluding other acquisition
costs) and occupancy for residential apartments was at approximately 98%.
Camac Crescent
The Laurels
The Marker Residences
90 residential apartments
Inchicore, Dublin 8
19 residential apartments
Tallaght, Dublin 24
84 residential apartments
Grand Canal Dock, Dublin 2
The Company acquired Camac Crescent,
located in Inchicore, Dublin 8, in September
2013. The development was constructed
in 2008 and is a residential development
on a 0.56-hectare site located in Inchicore,
Dublin 8, approximately 3 km west of Dublin
City Centre.
The Company acquired the Laurels, located
in Tallaght, Dublin 24, in June 2014. The
development was constructed in 2007 and
consists of 19 residential apartments, all of
which are owned by the Company.
The Company acquired the Marker
Residences, located in the Grand Canal
Dock area of Dublin 2, in July 2014.
The development was constructed in
2012 and consists of 105 luxury residential
apartments, of which 84 were acquired
by the Company, and approximately
1,218 sq. m. (13,111 sq. ft.) of commercial
space, all of which was acquired by the
Company. The Company’s 84 residential
apartments are all two-bedroom residential
apartments.
The development consists of 110 residential apartments dispersed over six blocks,
of which 90 are owned by the Company.
The entire development is constructed
over a common basement with a single car
park space per residential apartment. The
Company’s 90 residential apartments consist
of 21 one-bedroom, 49 two-bedroom and
20 three-bedroom residential apartments.
The purchase price was c. €9.9 million
(including VAT, but excluding other transaction costs), compared to a value of
c. €17.9 million as at 31 December 2015.
The annualised rent roll at 31 December
2015 was c. €1.3 million, giving a gross yield
of about 7.4% (approximate gross yield of
13.3% based on the original purchase price
including VAT, but excluding other acquisition costs) and occupancy was at approximately 98.9%.
The Company also owns 190 sq. m.
(2,045 sq. ft.) of commercial space in the
form of one large unit which could be split
into two units. The Laurels consists of four
one-bedroom, 13 two-bedroom and two
three-bedroom residential apartments.
The purchase price was c. €2.1 million
(including VAT, but excluding other transaction costs), compared to a value of
c. €2.8 million as at 31 December 2015. The
annualised rent roll at 31 December 2015
for both residential and commercial was
c. €0.3 million, giving a gross yield of about
9.0% (approximate gross yield of 11.8%
based on the original purchase price including VAT, but excluding other acquisition
costs) and occupancy for the residential
apartments was at approximately 94.7%.
Annual Report 2015
The purchase price was c. €50.1 million
(including VAT, but excluding other transaction costs), compared to a value of
c. €55.9 million at 31 December 2015.
The annualised rent roll at 31 December
2015 for both residential and commercial
was c. €2.7 million, giving a gross yield
of about 4.8% (approximate gross yield
of 5.4% based on the original purchase
price including VAT, but excluding other
acquisition costs) and occupancy for
the residential apartments was at
approximately 96.4%.
Irish Residential Properties REIT plc
23
Portfolio Overview (cont’d)
Beacon South Quarter
Charlestown
225 residential apartments
Sandyford, Dublin 18
235 residential apartments
Finglas, Dublin 11
The Company acquired Beacon South Quarter, located in Sandyford, Dublin 18, in October
2014. The development was constructed in 2007/2008 and is a landmark mixed-use
development on 13 acres. A number of major employers are located in the immediate
neighbourhood, including Vodafone, Merrill Lynch and Microsoft, and the development
is adjacent to the LUAS light rail line to the city centre.
The Company acquired Charlestown in
October 2014, a mixed-use development
set on 40 acres in Finglas, Dublin 11.
The development was constructed in 2007
and consists of 285 residential apartments,
of which 235 are owned by the Company.
The overall development comprises
facilities for tenants including a shopping
centre, a medical centre and a variety of
leisure and restaurant operators.
The Beacon South Quarter development includes many high-end occupiers, including
private medical care, leisure and a selection of food and lifestyle shops. The development
consists of 850 luxury residential apartments, of which 225 are owned by the Company.
The Company’s 225 residential apartments consist of 26 one-bedroom, 173 two-bedroom
and 26 three-bedroom residential apartments. The Company also owns approximately
2,395 sq. m. (25,777 sq. ft.) of ancillary commercial space within the development. In addition,
the Company owns three adjacent development sites and 6,847 sq. m. (73,701 sq. ft.) of
commercial space.
The Company initially acquired 217 apartments on 7 October 2014 for a purchase price
of c. €82.5 million (including VAT, but excluding other transaction costs) and on 6 November
2015, the Company acquired an additional eight apartments and eight car parking spaces
for a purchase price of €2.24 million (including VAT, but excluding other transaction costs).
At 31 December 2015, the property was valued at c. €82.6 million. The annualised rent roll at
that time for both residential and commercial was c. €4.8 million, giving a gross yield of about
5.8% (approximate gross yield of 5.7% based on the original purchase price including VAT,
but excluding other acquisition costs) and occupancy for the residential apartments was at
approximately 93.3%.
24
Irish Residential Properties REIT plc
Annual Report 2015
The property is located approximately
9.5 km from Dublin City Centre and 8 km
from Dublin airport and is adjacent to the
main M50 and M2 transportation corridors.
The Company’s 235 residential apartments
consist of 36 one-bedroom, 164 twobedroom and 35 three-bedroom residential
apartments.
The purchase price was c. €51.1 million
(including VAT, but excluding other
transaction costs), compared to a value of
c. €54.8 million as at 31 December 2015.
The annualised rent roll at 31 December
2015 was c. €3.3 million, giving a gross yield
of about 6.0% (approximate gross yield
of 6.4% based on the original purchase
price including VAT, but excluding other
acquisition costs) and occupancy was at
approximately 94.5%.
Bakers Yard
Lansdowne Gate
85 residential apartments
Portland Street North, Dublin 1
224 residential apartments
Drimnagh, Dublin 12
The Company acquired Bakers Yard in October 2014, an apartment development on
1.4 acres adjacent to Dublin City Centre in Dublin 1. The development was constructed
in 2007/2008 and is within walking distance of many large government and private sector
employers, as well as local and national public transport infrastructure. The development
consists of 132 residential apartments, of which 85 are owned by the Company.
The Company acquired Lansdowne Gate
in October 2014, a superior quality
development on 5.5 acres in Drimnagh,
Dublin 12. The development was
constructed in 2005 and is located adjacent
to the LUAS light rail system, 5 km from
the city centre and within walking distance
of numerous larger employers, as well as
shopping and leisure facilities.
The Company also owns approximately 792 sq. m. (8,525 sq. ft.) of ancillary commercial
space within the development. In addition, the Company owns an adjoining 0.45-acre site
with planning consent for a further 55 residential apartments and three ground-floor
commercial units. The Company’s 85 residential apartments consist of 13 one-bedroom,
60 two-bedroom and 12 three-bedroom residential apartments.
The purchase price was c. €17.3 million (including VAT, but excluding other transaction
costs), compared to a value of c. €19.6 million as at 31 December 2015. The annualised rent
roll at 31 December 2015 for both residential and commercial was c. €1.4 million, giving a
gross yield of about 7.2% (approximate gross yield of 8.1% based on the original purchase
price including VAT, but excluding other acquisition costs) and occupancy for the residential
apartments was at approximately 98.8%.
The development consists of 280 residential
apartments, of which 224 are owned by
the Company, set in 11 blocks over semibasement car parking, with the benefit
of a centralised district heating system,
landscaped gardens and a children’s
playground. The Company’s 224 residential
apartments consist of 23 one-bedroom,
146 two-bedroom and 55 three-bedroom
residential apartments.
The purchase price was c. €60.4 million
(including VAT, but excluding other transaction costs), compared to a value of
c. €60.3 million as at 31 December 2015.
The annualised rent roll at 31 December
2015 was c. €3.6 million, giving a gross
yield of about 5.9% (approximate gross yield
of 5.9% based on the original purchase
price including VAT, but excluding other
acquisition costs) and occupancy was at
approximately 97.3%.
Annual Report 2015
Irish Residential Properties REIT plc
25
Portfolio Overview (cont’d)
Rockbrook Grande Central
and Rockbrook South Central
(“Rockbrook Portfolio”)
Tyrone Court
Bessboro
92 residential apartments
Inchicore, Dublin 8
40 residential apartments
Terenure, Dublin 6
The Company acquired Tyrone Court,
located in Inchicore, Dublin 8, in June 2015.
The development was constructed in 2014
and consists of 128 apartments across four
residential apartment blocks, of which 92
are owned by the Company. The Company
also owns a three-storey detached crèche
building extending to approximately 310 sq.
m. (3,336 sq. ft.).
The Company acquired Bessboro, located
in Terenure, Dublin 6, in December 2015.
The development was constructed in 2008
and consists of 40 residential apartments,
all of which are owned by the Company. The
Company’s 40 residential apartments consist of six one-bedroom, 32 two-bedroom
and two three-bedroom apartments.
270 residential apartments
Sandyford, Dublin 18
The Company acquired the Rockbrook
Portfolio, located in Sandyford, Dublin 18,
in March 2015 via the acquisition of IRES
Residential Properties Limited. The development consists of 270 residential apartments,
and mixed-use commercial space of approximately 4,665 sq. m. (50,214 sq. ft.). The
portfolio also includes a development site of
approximately 1.13 hectares (2.8 acres) and
associated basement car parking.
The property is located close to the
Stillorgan LUAS light rail system stop, in
an area serviced by numerous bus routes.
Located nearby are the UPMC Beacon
Hospital and large employers such as
Microsoft, Vodafone, Volkswagen and
Bewleys. The Company’s 270 residential
apartments consist of 46 one-bedroom,
203 two-bedroom and 21 three-bedroom
residential apartments.
The Company’s 92 residential apartments
consist of four three-bedroom duplex units,
three three-bedroom, 62 two-bedroom
and 23 one-bedroom apartments. The
property is located in an established
residential area, close to Drimnagh Station,
which is a 15-minute commute to City
Centre. Located nearby are St. James’s
Hospital, Inchicore College, the Central
Criminal Court and Heuston Station, all of
which provide a strong employment centre
and tenant market.
The purchase price was c. €87.3 million
(including VAT, but excluding other transaction costs), compared to a value of
c. €92.1 million as at 31 December 2015.
The annualised rent roll at 31 December
2015 was c. €4.9 million, giving a gross yield
of about 5.3% (approximate gross yield of
5.6% based on the original purchase price
including VAT, but excluding other acquisition costs) and occupancy was at approximately 95.9%.
The purchase price was c. €19.5 million
(including VAT, but excluding other transaction costs), compared to a value of
c. €20.0 million as at 31 December 2015.
The annualised rent roll at 31 December
2015 was c. €1.4 million, giving a gross yield
of about 7.2% (approximate gross yield of
7.4% based on the original purchase price
including VAT, but excluding other acquisition costs) and occupancy was at approximately 92.4%.
26
Irish Residential Properties REIT plc
Annual Report 2015
Bessboro provides a strong suburban
location only 7 km from Dublin City Centre
and 4.6 km from the M50 motorway. The
location provides a range of amenities
including shops, schools, bars and
restaurants, all within walking distance of
Bessboro. The scheme is also in close proximity to Bushy Park, golf and rugby clubs.
The purchase price was c. €12.2 million
(including VAT, but excluding other transaction costs), compared to a value of
€12.2 million as at 31 December 2015. The
annualised rent roll at 31 December 2015
was c. €0.6 million, giving a gross yield of
about 4.7% (approximate gross yield of
4.7% based on the original purchase price
including VAT, but excluding other acquisition costs) and occupancy was at approximately 90%. The yield profile is anticipated
to improve as approximately 82% of the
existing leases, which are currently well
below market rents, will be renewed within
the next 12 months.
Tallaght Cross West
Forum
442 residential apartments
Tallaght, Dublin 24
8 residential apartments
Sandyford, Dublin 18
The Company acquired Tallaght Cross West, located in Tallaght, Dublin 24, in January 2016.
The development was constructed in 2008 and consists of 507 residential apartments, of
which 442 residential apartments are owned by the Company. The Company also owns
18,344 sq. m. (197,460 sq. ft.) of commercial space and associated underground car parking.
The Company acquired the Forum, located
in Sandyford, Dublin 18, in February 2016.
The development was constructed in 2007
and consists of 127 residential apartments,
of which eight residential apartments and
11 basement car parking spaces are owned
by the Company.
Tallaght Cross West has recently undergone significant capital expenditures to complete
the fit out of the apartments. The vendor commenced a residential leasing programme for all
442 units in September 2015 and 15% of the apartments remained unleased at closing on
15 January 2016. The Company’s 442 residential apartments consist of 161 one-bedroom,
237 two-bedroom and 44 three-bedroom residential apartments.
The purchase price was c. €83 million (including VAT, but excluding other transaction costs).
On closing, the 442 apartments had annualised passing residential rents of €5.3 million at
88% occupancy, generating a gross yield of 7.4% based on the original purchase price appointed to the apartments, including VAT, but excluding other transaction costs. The current
commercial annualised passing rent is c. €0.63 million at 10% occupancy. Based on current annualised passing residential rents on closing and lease up of the remaining 12% of
unleased apartments at market rents, it will generate a gross yield of 8.5%.
Annual Report 2015
The Forum is located on the LUAS tram
line and next to the Royal College of
Surgeons’ Sandyford facility. The development is also adjacent to the Company’s
Rockbrook and Beacon South Quarter
portfolios. The Company’s eight residential
apartments consist of one one-bedroom
and seven two-bedroom residential
apartments. The purchase price was
c. €2.3 million (including VAT, but excluding
other transaction costs).
Irish Residential Properties REIT plc
27
Investment Policy
and Strategy
Business Model
IRES Fund Management applies the following professional
business model to the growing I-RES property portfolio:
(i)
make strategic and accretive acquisitions to both
maintain the outstanding quality of the portfolio
and diversify and expand the size and scale of the
Company’s property portfolio.
(ii) apply proven property operating programmes to
increase cash flows.
(iii) reduce operating costs through efficient energy
management initiatives and sophisticated purchasing
programmes.
(iv) employ a “hands-on” approach to managing properties
to maximise occupancies and rents.
Investment Policy
The Company’s aim is to assemble a portfolio within its focus
activity of acquiring, holding and managing investments
primarily focused on apartment residential real estate located
on the island of Ireland and ancillary and/or strategically
located commercial property, for third-party rental, on the
island of Ireland principally within the greater Dublin area and
other major urban centres on the island of Ireland (the “Focus
Activity”). The vast majority of such properties acquired will
form the Company’s property investment portfolio for thirdparty rental. The Company may also acquire properties and
portfolios which include other assets, subject always to a
maximum limit of 20% of the overall gross value of property
assets, provided there is a disposal plan in place in connection
with such assets, which have been deemed non-strategic and
do not meet the Company’s investment objectives or which
could otherwise have an adverse effect on the Company’s
status as an Irish REIT.
28
Irish Residential Properties REIT plc
The Board intends to focus on creating both sustainable
income and strong capital returns.
The Company may also acquire indebtedness secured by
properties (including in respect of buy-to-let properties)
within its Focus Activity where it intends to gain title to and
control over the underlying property. There is no limit on
the proportion of the Company’s portfolio that consists of
indebtedness secured by properties.
The Board intends to focus on properties which require active
management and which are expected to benefit from the
expertise of its management team, which includes employees
of CAPREIT LP (the “Management Team”).
The Company will also have the ability to enter into a variety
of investment structures, including joint ventures, acquisitions
of controlling interests, acquisitions of minority interests or
other structures, including, but not limited to, for revenueproducing purposes in the ordinary course of business, within
the parameters stipulated in the Irish REIT regime. There is
no limit imposed on the proportion of the Company’s portfolio
that may be held through such structures.
Warehousing and Pipeline Arrangements
If the Company is unable to participate in sales processes for
property investments because it has insufficient funds and/
or debt financing available to it, including where its gearing
is at or close to the maximum permitted level under the Irish
REIT regime, the Company is permitted to acquire property
investments that meet the criteria specified in its Investment
Policy (including the acquisition of shares in property holding
companies) from time to time in accordance with the terms
of warehousing or pipeline arrangements entered into or to
be entered into by it with third parties, in each case, without
shareholder approval and for a price calculated on a basis that
has been approved in advance by the Directors of the Company.
Annual Report 2015
The Company will not invest more than 20% of its gross
assets, directly or indirectly, in a single underlying asset, or in
one or more collective investment undertakings, or be more
than 20% exposed to the creditworthiness or solvency of any
one counterparty.
Investment Criteria and Portfolio Characteristics
The Board intends that the portfolio of real estate assets
already acquired (and to be acquired) by the Company already
have (and will normally have) a majority of the following
characteristics:
(a) Apartment residential properties across the affordable,
mid-tier and luxury accommodation sectors and
ancillary and/or strategically located commercial
property located in the greater Dublin area and other
urban centres on the island of Ireland;
(b) Scope for short- and medium-term value enhancement
through active asset management;
(c) Opportunities to enhance the quality of the property;
(d) Opportunities to create tangible value by undertaking
initiatives to develop a sense of community among
tenants consistent with the Management Team’s
Canadian practices and expertise;
(e) Properties at Cap Rates that the Company believes
are attractive considering all factors, including growth
potential, location, building quality, market and economic conditions and other relevant considerations,
having regard to the Target Shareholder Return;
(f) Properties which can be acquired at close to (and
ideally below) replacement cost;
(g) Properties which have strong prospects of generating
income in the short to medium term in order to support
the Company’s dividend policy;
(h) Properties providing value enhancement opportunities
through intensification, redevelopment or project
completion, with such properties to be held for the
purposes of the Company’s Property Rental Business,
where the Investment Manager believes that this
can be effected on a basis that will add value to the
Company’s portfolio, subject always to the aggregate
costs to be incurred in respect of assets under
development at any time not exceeding 15% of the
Company’s most recently published net asset value;
and
(i)
Properties in markets where there is strong and/or
improving demand for apartment residential rental
accommodation and ancillary and/or strategically
located commercial property.
Investment Sourcing
Many members of the Management Team have track records
in acquiring multi-unit residential real estate investments
which they have demonstrated in Canada, where they have
grown CAPREIT’s property holdings from 2,900 residential
apartments located primarily in Ontario and Nova Scotia to
46,790 apartments and land lease sites from coast to coast
in Canada as at 31 December 2015. The Directors believe
that the Company has a proven acquisition strategy, owning
338 apartments at its initial offering in April 2014 and now
owning 2,064 apartments as at the date of this Report and is
well placed to secure and develop properties which meet its
investment criteria due to the Management Team’s acquisition
experience, established relationships and availability of equity
capital and debt financing. The Board is currently evaluating
a number of potential property investments in line with the
Investment Policy.
Banking Institutions/Receivers/Borrowers
The excessive use of gearing in the development of Irish
residential real estate, particularly in the middle part of the
last decade, and the subsequent severe re-pricing in values
has resulted in banking institutions that provided credit for
such developments having significant legacy exposure, both
directly and indirectly, to Irish residential real estate assets.
The Board believes that, based on the Central Bank of Ireland’s
quarterly resolution targets for mortgage arrears, the banks
operating in the Irish banking sector will have developed
various strategies, including divestment of properties with
respect to their legacy real estate exposures and apartment
residential real estate assets that have not been transferred
to NAMA.
The Board also believes that assets may become available
directly from Irish banks and from receivers appointed over the
assets, from borrowers who are selling under the guidance of
the banks or receivers and from private owners. In addition,
legislation was enacted in February 2013 providing for the
winding-up of Irish Bank Resolution Corporation Limited
(formerly Anglo Irish Bank). The Board believes that property
sales by any or all of these entities could result in opportunities
for the Company to acquire Irish apartment residential real
estate assets at attractive price levels.
Annual Report 2015
Irish Residential Properties REIT plc
29
Investment Policy and Strategy (cont’d)
National Asset Management Agency (“NAMA”)
NAMA was established in December 2009 as one of a number
of initiatives taken by Ireland to address the problems which
arose in Ireland’s banking sector as the result of excessive
property lending. Having initially acquired property and
construction loan assets from participating Irish financial
institutions over 2010 and 2011, since then NAMA’s focus
has been on managing its balance sheet down towards zero
as soon as it is commercially practicable.
NAMA’s primary commercial objective is to redeem all of
its senior debt before the end of 2018, while it also aims to
redeem its subordinated debt by 1 March 2020 and generate
a surplus by the time its work has been completed. In order
to meet its primary commercial objective, NAMA will manage
and invest in its asset base so as to maximise its incomeproducing potential and disposal value. In this regard, the
agency has also outlined plans for the delivery of Grade A
office accommodation in the Dublin Docklands Strategic
Development Zone (SDZ) and residential property in the
Greater Dublin Area.
The asset side of the core NAMA balance sheet peaked
at €30.7 billion in Q4 2011 and since then it has steadily
decreased to the latest (Q3 2015) level of €11.4 billion. Of
the €30.2 billion of senior debt originally issued in exchange
for NAMA’s initial loan assets, some €9.1 billion remained in
issue at the end of Q3 2015. NAMA aims to further reduce
this to c. €6.0 billion by the end of 2016, which implies that
further disposals are likely over the coming months. Indeed,
the agency says (see NAMA Annual Statement 2016) that it
will “act to sustain the positive momentum in the market by
ensuring that a pipeline of asset portfolios is available for sale
to international and domestic investors.”
The Company continues to expect NAMA’s orderly disposal of
certain of its real estate asset-backed loan portfolios to create
further liquidity within the Irish property investment market.
Purchasers of such portfolios may also seek to dispose of
some or all of the underlying real estate assets acquired.
Moreover, the Directors continue to believe that the disposal
of real estate assets held by debtors or NAMA and receivers
acting on behalf of debtors or NAMA will also be a source of
opportunities for the Company.
Private Equity Investors
A number of institutions, such as the commercial banks and
NAMA, have sold Irish real estate and asset-backed loan
30
Irish Residential Properties REIT plc
portfolios in recent years to international private equity firms
and to the Company. The Board believes that further Irish real
estate-related assets will be offered for sale over the coming
year, possibly including some supply arising from the recycling
of assets by private equity investors who purchased assets
earlier in the cycle. This will provide opportunities for the
Company to acquire assets that meet its investment criteria.
Gearing
The Company seeks to use gearing to enhance shareholder
returns over the long term. The level of gearing is monitored
carefully by the Board in light of the cost of borrowing and
the Company may seek to use hedging where considered
appropriate to mitigate interest rate risk.
The Board intends that gearing, represented by the Company’s
aggregate borrowings as a percentage of the market value of
the Company’s total assets, will not exceed the 50% maximum
permitted under the Irish REIT regime. The Board reviews
the Company’s gearing policy (including the level of gearing)
from time to time in light of then-current economic conditions,
relative costs of debt and equity capital, fair value of the
Company’s assets, growth and acquisition opportunities and
other factors the Board may deem appropriate, with the result
that the Company’s level of gearing may be lower than 50%.
Given the stability of the apartment residential sector, 45%
gearing is currently considered prudent by the Board.
Restrictions
Pursuant to the Irish REIT regime, the Company is required,
among other things, to conduct a Property Rental Business
consisting of at least three properties, with the market value
of any one property being no more than 40% of the total
market value of the properties in the Company’s Property
Rental Business. The Company has a three-year grace
period from the date of becoming an Irish REIT to comply
with these requirements. The Company complies with these
requirements as at the date of this Report as it already owns
apartment residential properties in 10 separate locations,
none of which currently accounts for more than 40% of the
aggregate market value of those existing properties.
Further, under the Irish REIT regime at least 75% of the
Company’s annual Aggregate Income must be derived from
its Property Rental Business and at least 75% of the market
value of its assets, including uninvested cash, must relate to
its Property Rental Business.
Annual Report 2015
Key Operational and Financial Performance Indicators
To assist investors in monitoring and evaluating the Group’s achievement of its objectives, the Group has defined
a number of key operating and performance indicators to measure the success of its operating and financial strategies:
KEY PERFORMANCE
INDICATORS
AS AT
31 DECEMBER 2015
Average Monthly
Rent Growth (1)
9.2%
Through active property management strategies, the lease
administration system and proactive capital investment
programmes, IRES Fund Management strives to increase rents
as market conditions will permit.
Occupancy
96.0%
Although occupancy was 99.7% at the beginning of the year,
IRES Fund Management managed occupancy to maximise the
revenues in 2015 while creating opportunities for market rental
increases in 2016, considering the new rent legislation allows
for rental increases every two years (instead of annually).
Net Rental Income
80.8%
By applying proven property operating programmes, IRES Fund
Management strives to achieve an annual net operating income
margin that is approximately 80% of operating revenues.
Gross Yield at Fair Value
6.2%
Through generating higher revenues compared to last year, and
maintaining high occupancies, IRES Fund Management has
increased the gross yield for the total portfolio.
EPRA EPS (cents)
3.3
Higher EPRA EPS compared to last reported period, 2 July 2013
to 31 December 2014 of 1.6 cents.
EPRA NAV per Share
€1.043
Focus on growing asset value and maximising shareholder
value through active and efficient asset and property
management.
Pro-forma NAV per Share
€1.053
Calculated as net asset value excluding one-off acquisition
transaction costs incurred in relation to all the property
purchases subsequent to 31 December 2014. The 3rd party
valuator adjusts for all transaction cost on acquisitions that
a purchaser will pay, notwithstanding that the intention of I-RES
is to hold it for the very long term.
(1) B
ased on properties held as at 31 December 2014. Average monthly rent is defined as actual residential rents, net of vacancies, divided by the total number of
apartments owned in the property.
Annual Report 2015
Irish Residential Properties REIT plc
31
Investment Policy and Strategy (cont’d)
Operational and Financial Results
The Group has generated strong rental growth and maintained
a high level of occupancy across the portfolio during the year,
indicative of the strong market fundamentals in the Irish
residential rental sector. Average monthly rent increased
to €1,372 per apartment as at 31 December 2015, up from
€1,250 at 31 December 2014, largely due to strong increases
in monthly rental rates on renewals and turnovers during the
year. Occupancy levels remained strong throughout the year,
mirroring the strong market fundamentals in the Irish residential
rental sector. The portfolio Gross Yield at fair value was 6.2% as
at 31 December 2015, compared to 6.0% as at 31 December
2014, adjusted for the fair value of development land, and a NRI
margin of approximately 80.8% for the year 2015.
Basic EPS and Basic EPRA EPS for the period were 8.4 cents
and 3.3 cents, respectively, for the year ended 31 December 2015.
Basic NAV and EPRA NAV was €435.0 million, with
Basic NAV and EPRA NAV per share of 104.3 cents as at
31 December 2015. Basic NAV and EPRA NAV per share
increased by 4.8% for the year ended 31 December 2015,
compared to 31 December 2014, driven by property valuation
increases and rental profit in the period, partially offset by
equity and acquisition transaction costs. Importantly, the
Company has recovered all the costs incurred in connection
with our Capital Raise in 2015 and the costs incurred with
our acquisitions through appreciation in the fair value of
the portfolio.
The property portfolio was valued at €472.2 million at
31 December 2015, with total net borrowings of €41.5 million.
The Group’s loan to value ratio was 8.6% as at 31 December 2015.
32
Irish Residential Properties REIT plc
Annual Report 2015
Governance
Annual Report 2015
Irish Residential Properties REIT plc
33
I-RES
Board of Directors
Colm Ó Nualláin
Declan Moylan
Aidan O’Hogan
Thomas Schwartz
Independent Non-Executive
Chairman
Independent Non-Executive
Deputy Chairman and Senior
Independent Director
Independent Non-Executive
Director
Non-Executive Director
(Nominee of IRES Fund
Management)
APPOINTED: 31 March 2014
APPOINTED: 31 March 2014
as Director
APPOINTED: 31 March 2014
as Director
APPOINTED: 5 March 2014
NATIONALITY: Irish
as Director
NATIONALITY: Irish
as Director
COMMITTEE MEMBERSHIP:
NATIONALITY: Irish
COMMITTEE MEMBERSHIP:
NATIONALITY: Canadian
Audit Committee:
COMMITTEE MEMBERSHIP:
COMMITTEE MEMBERSHIP:
Appointed 31 March 2014
Audit Committee:
Appointed 31 March 2014
Remuneration Committee:
Appointed 31 March 2014
Nomination Committee:
Appointed 31 March 2014
Audit Committee:
Appointed 31 March 2014
Remuneration Committee:
Appointed 31 March 2014
Nomination Committee:
Appointed 31 March 2014
Remuneration Committee:
Appointed 31 March 2014
Nomination Committee:
Appointed 31 March 2014
Colm Ó Nualláin recently retired
after more than 20 years as
Finance Director of Grafton
Group plc, a leading builders
merchant group quoted on the
London Stock Exchange.
Mr Ó Nualláin is a qualified
Chartered Accountant with
international experience and has
previously held senior financial
positions in a number of public
and semi-state companies.
34
Declan Moylan is a solicitor
admitted in Ireland, with over 40
years’ experience in business law
practice and in practice management. From 1999 until 2008, he
served as managing partner of
Mason Hayes & Curran, and
subsequently as chairman of
Mason Hayes & Curran from
2008 to 2013. Mr Moylan is currently of counsel to Mason Hayes
& Curran (which role expires on
31 March 2016). He is a member
of the Law Society of Ireland,
the Law Society of England and
Wales, the International Bar
Association and the Irish Centre
for European Law. Mr Moylan is a
director of several Irish registered
companies and is also an external
member of the audit committee of
the Office of Ireland’s Director of
Public Prosecutions. In November
2015, he was appointed by the
Minister for Arts, Culture and
Gaeltacht to the board of the Irish
Museum of Modern Art.
Irish Residential Properties REIT plc
Annual Report 2015
Aidan O’Hogan is a fellow of the
Society of Chartered Surveyors
Ireland and past president of
the Irish Association of Valuers
Institute. In 2009, Mr O’Hogan
retired as chairman of Savills
Ireland after 40 years as a real
estate professional. Mr O’Hogan
is currently chairman of Property
Industry Ireland. Mr O’Hogan
was previously managing director and chairman of Hamilton
Osborne King for almost 20
years. He is also a non-executive
director of Cairn Homes plc.
Small Transactions:
Appointed 22 July 2014
Thomas Schwartz, with over
35 years of real estate experience, is a director of IRES Fund
Management. Mr Schwartz
qualified as a Chartered
Accountant in 1975 and went on
to pursue a career in real estate
development. Mr Schwartz
founded Intraurban Projects to
specialise in the development of
new housing projects in mature
communities. Intraurban has
built and developed over 2,500
housing units serving all market
segments and, through York
Heritage Properties, has
participated in the development,
construction and management
of over 600,000 sq. ft. of
commercial space. In 1997,
Mr Schwartz founded CAPREIT
(TSX: CAR.UN), Canada’s first
apartment real estate investment
trust. Mr Schwartz is currently
President and Chief Executive
Officer of CAPREIT and has
supervised CAPREIT’s growth
from 2,900 residential apartments to 46,790, with an
estimated total asset value
of approximately C$7.1 billion
as at 31 December 2015.
Mr Schwartz is active in industry
and government affairs and
is currently on the Board of
Trustees of CAPREIT; the
board of Chartwell Retirement
Residences’ companies
(TSX: CSH.UN); and the Board
of Directors of the Mount
Sinai Hospital Foundation.
Mr Schwartz is also a member of
the Schulich School of Business
Advisory Council – Program in
Real Estate and Infrastructure.
David Ehrlich
Executive Director
APPOINTED: 13 January 2014
as Director
NATIONALITY: Canadian
COMMITTEE MEMBERSHIP:
Small Transactions:
Appointed 22 July 2014
David Ehrlich is Chief Executive
Officer of I-RES. Mr Ehrlich
graduated from Dalhousie Law
School in 1977 and has been
a member of the Nova Scotia
Barristers Society since 1979
(and a continuing member of the
Law Society of Upper Canada
since 1986). For over 10 years,
until 31 December 2013,
Mr Ehrlich was a senior partner
at Stikeman Elliott LLP, a leading
Canadian business law firm with
offices in the principal cities of
Canada as well as in New York,
London and Sydney. During his
years practising as a lawyer,
Mr Ehrlich acted for a number
of Canada’s leading real estate
investment trusts, investment
banks, life insurance companies,
banks, pension funds, developers, property owners, asset managers and governmental agencies. Since 1986, he has focused
his practice on the public real
estate markets and was involved
in creating the real estate investment trust industry in Canada
from its inception, including
the formation of CAPREIT.
Mr Ehrlich has been involved
in all significant aspects of
CAPREIT’s acquisition, financing
and capital market activities and
has worked closely with all of its
senior management. Mr Ehrlich
is also a Trustee of CAPREIT.
Annual Report 2015
Irish Residential Properties REIT plc
35
CAPREIT and
IRES Fund Management
Senior Management
Thomas Schwartz
Mark Kenney
Scott Cryer
Corinne Pruzanski
President and Chief Executive
Officer of CAPREIT
Chief Operating Officer
of CAPREIT
Chief Financial Officer
of CAPREIT
General Counsel and Corporate
Secretary of CAPREIT
See Board of Directors’ profiles
for further details.
With over 24 years of experience
in the multi-unit residential rental
property sector and as Chief
Operating Officer of CAPREIT,
Mark Kenney is actively involved
in creating and implementing
company policy, directing the
property management team,
overseeing marketing, procurement and energy initiatives,
and performing operational
due diligence on potential
acquisitions. Prior to joining
CAPREIT in 1998, Mr Kenney
held a senior position at Realstar
Management Partnership,
overseeing portfolios in Western
Canada and Northern Ontario,
as well as leadership roles at
Greenwin Property Management
and Tridel, where he managed
various property portfolios in the
Greater Toronto Area. Mr Kenney
is the vice-chairman of the
Federation of Rental-Housing
Providers of Ontario and was a
founding director of the Greater
Toronto Apartment Association
from 1998 to 2009. Mr Kenney
holds a bachelor of economics
degree from Carleton University.
Scott Cryer joined CAPREIT
in 2009 and is currently Chief
Financial Officer. Mr Cryer most
recently held the position of Vice
President, Financial Reporting.
Prior to joining CAPREIT,
Mr Cryer had an 11-year career
with increasing responsibility in
the Real Estate Assurance and
Advisory practice of Deloitte &
Touche LLP. Mr Cryer received
his Chartered Accountant
designation in 2000 and holds a
bachelor of economics degree
from the University of Western
Ontario.
Corinne Pruzanski joined
CAPREIT as General Counsel
and Corporate Secretary in 2011
with responsibility for all legal
and governance matters relating
to CAPREIT, including CAPREIT’s
acquisitions, dispositions, financing arrangements and compliance with laws. Ms Pruzanski is
also company secretary to IRES
Fund Management Limited.
Prior to joining CAPREIT,
Ms Pruzanski was a partner at
the law firm Stikeman Elliott LLP,
which she joined as an associate
in 2004 after working as a lawyer
in New York for seven years.
Ms Pruzanski was admitted to
the Bar in Ontario in 1996 and in
New York in 1997, and holds a
bachelor of law degree from the
University of British Columbia
and a bachelor of arts degree
from York University.
36
Irish Residential Properties REIT plc
Annual Report 2015
Roberto Israel
Charles Coyle
Jodi Lieberman
Chief Information Officer
of CAPREIT
Vice President,
Acquisitions
Chief Human Resources
Officer of CAPREIT
Roberto Israel joined CAPREIT
as Chief Information Officer in
2015 with more than 18 years
of experience in Information
Technology. Mr Israel was
formerly Managing Director at
PricewaterhouseCoopers LLP,
where he was the National
Forensic Technology Services
practice leader and also directed
PricewaterhouseCoopers’
technology real estate consulting practice. Prior to joining
PricewaterhouseCoopers, Mr
Israel held a variety of consulting, project management and
IT systems roles with several
leading companies including
Deloitte & Touche LLP, Canadian
Imperial Bank of Commerce,
Manulife Financial and IBM
Global Services. Mr Israel
holds a Masters of Business
Administration specialized in
Strategic Management and
Management Information
Systems from York University’s
Schulich School of Business,
and a Bachelor of Science
in Computer Science from
the University of Western
Ontario. He also holds a Project
Management Professional
(PMP) designation from the
Project Management Institute
and is certified in Information
Technology Infrastructure
Library (ITIL).
With over 18 years of property
investment and development
experience, Charles Coyle
was appointed by IRES Fund
Management as Vice President,
Acquisitions in December 2014.
Prior to his appointment, Mr
Coyle was employed in a senior
position with NAMA executing
asset management strategies
across significant residential and
commercial property portfolios.
During his last 12 months with
NAMA, Mr Coyle was the Senior
Property advisor with specific
responsibility for developing and
implementing strategy across
the NAMA residential portfolio.
Prior to that, Mr Coyle worked
with Goodbody Stockbrokers
sourcing, structuring, financing
and managing property transactions on behalf of private clients.
Over the past two decades,
Mr Coyle has been involved in
property transactions valued at
in excess of €2 billion. Following
the completion of an MA in property and law at City University,
London, Mr Coyle qualified as a
Chartered Surveyor in 2000 with
CB Richard Ellis and spent five
years working in their Central
London investment team.
Jodi Lieberman joined CAPREIT
in 2009 and has been instrumental in developing the Human
Resources function at the
company. Ms Lieberman has
over 17 years of professional HR
experience with large organizations such as Labatt Brewing
Company, TELUS Mobility and
Bentall Kennedy, and is responsible for leading the alignment
of CAPREIT’s human resources
strategy with its overall business strategy. Ms Lieberman
has contributed significantly to
the creation of a collaborative
HR team, capable of meeting
CAPREIT’s growing needs by
uniting training and development, recruitment and retention,
benefits and disability management, employee relations, office
services, and compensation
and payroll. As recognition for
Ms Lieberman’s and the team’s
accomplishments, CAPREIT has
been named one of Canada’s
50 Best Employers for 2014
and 2015 by Aon Hewitt.
Ms Lieberman has an Honours
BA in Sociology from York
University and has completed
her graduate Certificate in
Human Resources from
Seneca College.
Annual Report 2015
Irish Residential Properties REIT plc
37
Corporate Governance
Statement
Introduction
The Board is committed to developing and maintaining a high
standard of corporate governance. The Board considers that
the Company has complied with the relevant requirements and
procedures as set out by the Irish Corporate Governance Annex
to the UK Corporate Governance Code (“Irish Annex”) (to be
found at www.ise.ie/Products-Services/Sponsors-and-Advisors/
Irish-Corporate-Governance-Annex.pdf), UK Corporate
Governance Code 2014 (“UK Code”) (to be found at https://
www.frc.org.uk/Our-Work/Publications/Corporate-Governance/
UK-Corporate-Governance-Code-2014.pdf) and the Association
of Investment Companies Code of Corporate Governance (“AIC
Code”) (to be found at www.theaic.co.uk/sites/default/files/
uploads/files/AICCodeofCorporateGovernanceFeb15.pdf)
throughout the last financial year under review other than as set
out below on page 44.
This Report, including the Corporate Governance Statement, can
be accessed electronically on our website at www.iresreit.ie.
The Board is responsible for providing governance and
stewardship to the Company and its business. This includes
establishing goals for management and monitoring the
achievement of these goals. The Company appointed IRES
Fund Management as its alternative investment fund manager
as of 1 November 2015, pursuant to the terms of an investment
management agreement between the Company and IRES Fund
Management (as amended from time to time) (the “Investment
Management Agreement”), to provide the Company with
portfolio management, risk management and other services in
relation to assets or properties which may be acquired or held
or disposed of by the Company (“Investments”) and to act with
day-to-day authority, power and responsibility for the Investments.
Prior to 1 November 2015, the Company had appointed Gandon
Alternative Fund Management Limited (“GAFM”) as its alternative
investment fund manager pursuant to the terms of an AIFM
agreement between the Company and GAFM (as amended from
time to time).
The Board oversees the performance of the Investment Manager
and the Company’s activities. The Investment Manager has
discretionary authority to enter into transactions for and on
behalf of the Company, except for certain matters that require
the consent of the Board. Authority on certain matters is reserved
to the Board. Unless required to be performed by the Investment
Irish Residential Properties REIT plc
• any acquisition/disposal of a property investment or the
•
•
•
•
•
•
The Board of Directors
38
Manager as a matter of law or in order to respond to a bona fide
emergency, the Company’s prior written approval is required for
certain matters, including:
entry into any agreement to acquire/dispose of a property
investment;
any new financing or refinancing, including associated
hedging arrangements, entered into in respect of a property
investment;
any capital expenditure on a property investment in excess
of an approved budget;
any proposed lease event where the rent referable to the
relevant lease is greater than 7.5% of the aggregate rental
income of the Company;
any acquisition or the entry into any agreement to acquire
any property investment through a joint venture or coinvestment structure;
any disposal of any right, title or interest in any of the
Company’s properties at less than its acquisitions cost; and
in relation to the valuation of the Company’s properties, any
variation from the RICS Red Book.
The Board is at all times free to offer ideas to the Investment
Manager relating to the structure of a transaction so as to provide
the Company the greatest value.
In addition, the Board makes certain other key decisions, including:
• formulation and monitoring of Company strategy;
• the Company’s risk management and internal control
systems;
• dividend policy; and
• review of the performance and contractual arrangements
with the Investment Manager.
Directors are expected to participate in all scheduled Board
meetings as well as each annual general meeting. The Chairman
oversees the conduct of all Board meetings including ensuring
that all aspects of the Group’s activities receive appropriate
attention.
All Directors are furnished with the information necessary to
assist them in the performance of their duties. The Board meets at
least four (4) times each calendar year and, prior to such meetings
taking place, an agenda and board papers are circulated to the
Directors so that they are adequately prepared for the meetings.
Annual Report 2015
The Company Secretary is responsible for the procedural aspects
of the Board meetings. Directors have access to Elise Lenser, the
Company Secretary, and, where appropriate, are entitled to have
access to independent professional advice at the expense of
the Company.
if deemed necessary, ensures the most robust and objective
approach possible. The senior independent non-executive
director (the “Senior Independent Director”) also meets with
the non-executive Directors (other than the Chairman) to appraise
the Chairman’s performance.
As required by the UK Code, the Chairman has held meetings
during the year with the non-executive Directors without the
presence of the executive Directors. Any director appointed
to the Board by the Directors will be subject to election by the
shareholders of the Company at the first annual general meeting
after his or her appointment. Furthermore, under the Articles
of Association, all Directors must retire each year and may seek
re-election.
The Board completed the performance evaluation process in
March 2016. The various phases of the performance evaluation
are set out below:
Details of the remuneration of Directors are set out in the Directors’ remuneration report on page 50.
The Articles of Association of the Company provide that the
number of directors that may be appointed cannot be more than
nine (9) nor less than two (2) and that two Directors present at a
directors’ meeting shall be a quorum. The size and composition
of the Board is reviewed regularly to ensure that the Board has an
appropriate mix of expertise and experience.
On appointment, new directors are provided with induction
training. In addition, Directors are invited to tour part of the
Company’s property portfolio with the Chief Executive Officer
or a senior representative of IRES Fund Management in order
to familiarise themselves with the Company’s operations,
property management and a segment of the property portfolio.
This meeting also provides new directors with an opportunity to
ask any questions they may have on the nature and operations
of the business, and on the implementation of the Company’s
business strategy. The Board also arranges for presentations
from IRES Fund Management and the Company’s other advisors
on matters relevant to the Company’s business. The Nomination
Committee, on behalf of the Board, assesses the training needs
of the Directors on at least an annual basis.
The Board carries out an evaluation of its performance on
an annual basis. The evaluation reviews the balance of skills,
experience, independence and knowledge of the Board and
the effectiveness of the Board and its committees in their
workings. Directors are also evaluated individually to assess their
contribution and effectiveness. The evaluation is facilitated using
a self-evaluation questionnaire-based approach and a member
of the Nomination Committee reports to the Board on the results
of the evaluation at a board meeting. The Board considers that
the use of individual questionnaires and follow-up meetings,
• Evaluation questionnaires were provided to each of the
Directors to appraise the performance of the Board as a
whole, the committees of which they are a member, their
individual performance and the performance of each other
Director. The results of the performance evaluation process
were presented to the Board at a board meeting held on
11 March 2016;
• Declan Moylan, the Senior Independent Director, met with
the non-executive Directors (other than the Chairman) to
appraise the Chairman’s performance;
• Each of the Audit Committee, the Remuneration Committee
and the Nomination Committee reviewed their own
performance;
• At the board meeting on 11 March 2016 the Board
discussed its own performance, the performance of the
committees and the performance of individual Directors,
including the Chairman.
The Company does not require an external facilitator for the
performance evaluation process on the basis that the Company
is a smaller company for the purposes of the Irish Annex.
The Board has requested the Audit Committee to make an
assessment of the Group’s position and performance and
report back.
As at the date of this Report, there are five (5) Directors on the
Board. The Chief Executive Officer, David Ehrlich, is an Executive
Director. Colm Ó Nualláin, Aidan O’Hogan, Declan Moylan and
Thomas Schwartz are Non-Executive Directors. The biographies
of all the Directors appear in this Report on pages 34 to 35.
Colm Ó Nualláin (the Chairman), Declan Moylan (Deputy
Chairman and Senior Independent Director) and Aidan O’Hogan
are each considered independent for the purposes of the Listing
Rules. The Directors have determined that although Declan
Moylan was a partner in Mason Hayes & Curran and remains “of
counsel” to that firm, which has a material business relationship
with the Company, he may nonetheless be considered to be
independent as he has retired from the partnership of Mason
Annual Report 2015
Irish Residential Properties REIT plc
39
Corporate Governance Statement (cont’d)
Hayes & Curran and the Directors are satisfied that his prior
membership in the partnership of that firm and current role as
“of counsel” to that firm (which role expires on 31 March 2016)
and is an honorary role for which Declan Moylan receives only
an honorarium, but does not share in the profits of the firm, has
not and will not adversely affect the independence of his views
and his contribution as a Director. Declan Moylan is the Senior
Independent Director within the meaning of the Listing Rules.
Thomas Schwartz is not considered to be independent due to
his connection with CAPREIT, which is a significant shareholder
of both the Company and IRES Fund Management (the Investment Manager). Thomas Schwartz is a trustee of CAPREIT and
a trustee or director of each of CAPREIT’s subsidiaries, including
IRES Fund Management. He is also the chief executive officer
and president of CAPREIT and each of its Canadian subsidiaries.
Pursuant to the terms of the Investment Management Agreement,
IRES Fund Management is entitled to nominate and require the
Company to appoint one person as a non-executive director.
Thomas Schwartz is IRES Fund Management’s nominee.
The Board has a strong focus on property investment management to allow it access to a good knowledge base. As highlighted
in the biographies of the Directors on pages 34 to 35, each of
the Directors brings a different set of skills and experience to the
Board. The Directors’ diverse skill sets facilitate the consideration
of issues at meetings of the Board from a range of perspectives.
The division of responsibilities between the Chairman and the
Chief Executive Officer has been clearly established, set out in
writing and agreed to by the Board.
Given the growth of the Company, the Board, on the recommendation of the Nomination Committee, thought it advisable
to increase the size of the Board. Accordingly, the Board, on the
recommendation of the Nomination Committee, has appointed
Margaret Sweeney and Phillip Burns as independent nonexecutive directors effective 23 March 2016. Given that Ms
Sweeney and Mr Burns have had no involvement in the activities
of the Company in the period under review, the Board was of the
view that their appointments should only be effective after the
approval and issuance of this Report and the financial statements
included therein.
40
Irish Residential Properties REIT plc
Margaret Sweeney (Nationality: Irish)
Margaret Sweeney qualified as a Chartered
Accountant with KPMG in 1985 and worked
with the firm for 15 years. She has held a
number of senior positions including CEO
of Dublin Airport Authority plc and Postbank
Ireland Limited and has worked in Ireland and
overseas with international shareholders, business partners and
funders. She is currently a non-executive director on the board of
Dalata Hotel Group plc and a number of private companies. She
sits on the Council of the Institute of Chartered Accountants in
Ireland and the Governing Body of Dublin City University. She is a
Fellow of Chartered Accountants Ireland and holds the Diploma
in Company Direction from the Institute of Directors. Ms Sweeney
has been a non-executive director on a number of boards in
Ireland and internationally including Aer Rianta International plc,
Flughafen Dusseldorf GmbH, Birmingham International Airport,
Hamburg Airport, Shannon College of Hotel Management and
Teagasc (Irish Agriculture and Food Development Authority).
Ms Sweeney served as President of the Dublin Chamber of
Commerce from 2008 to 2009.
Phillip Burns (Nationality: American and British)
Phillip Burns is the Founder and a Principal of
Maple Knoll Capital and has been involved as
a principal or advisor in transactions with an
aggregate value of over €20.0 billion, with more
than 70% centred around real estate across
multiple geographies. Mr Burns has also been
involved with raising in excess of €11.0 billion of equity for principal
investment, including over €2.4 billion dedicated to real estate.
Previously, Mr Burns was CEO of Corestate Capital, an investment
manager focused on distressed real estate transactions in
Europe. Prior to this, he was a Managing Director at Terra Firma
Capital Partners, where he specialised in infrastructure, real
estate and credit. Mr Burns also worked for Goldman Sachs,
where he focused on mortgage finance, real estate and general
corporate finance, and was a corporate attorney at Skadden Arps.
Mr Burns holds a Bachelor of Science in Aerospace Engineering
from the University of Michigan and a Juris Doctor, summa cum
laude, from Syracuse University.
Annual Report 2015
Senior Independent Director
The Company has appointed Declan Moylan as the Senior
Independent Director and Deputy Chairman. The role of the
Senior Independent Director is mainly to:
• provide a sounding board for the Chairman and to serve as
Small Transactions Committee
Membership: David Ehrlich and Thomas Schwartz
The main roles of the Small Transactions Committee are to
consider, negotiate and complete the purchase of one-off
properties in residential developments in which the Company
currently owns apartments, up to a maximum value of €1 million.
an intermediary for the other Directors when necessary;
• respond to shareholders where contact through the normal
channels of the Chairman or the Investment Manager has
failed to resolve any concerns, or for which such contact
is inappropriate;
• hold a meeting with non-executive Directors at least
annually (and on such other occasions as are deemed
appropriate) to appraise the Chairman’s performance, taking
into account the view of the executive Directors (if any); and
• obtain updates from the Chief Executive Officer and the
Investment Manager on the views of major shareholders
in order to help develop a balanced understanding of the
issues and concerns of major shareholders.
Committees of the Board
As recommended by the UK Code, the Board has established
the following three (3) committees: the Audit Committee, the
Remuneration Committee and the Nomination Committee. The
Board has also established the Small Transactions Committee in
order to facilitate the consideration, negotiation and completion
of smaller transactions by the Company. The duties and
responsibilities of each of these committees are set out clearly
in written terms of reference, which have been approved by the
Board. Other committees have been and may be established from
time to time in accordance with the Company’s Memorandum
and Articles of Association, including the Small Transactions
Committee.
Internal Controls
The Board acknowledges that it is responsible for implementing
and monitoring the Group’s system of internal control and risk
management and assessing its effectiveness. Such a system is
designed to identify, manage and mitigate financial, operational
and compliance risks inherent to the Group and allow the Group
to meet its strategic objectives. The system is designed to
manage rather than eliminate the risk of failure to achieve these
objectives and can only provide reasonable, but not absolute,
assurance against material misstatement or loss.
During 2014, the Board delegated certain responsibilities
relating to internal controls, risk management and reporting
to the Audit Committee. Refer to pages 45 and 46 to see the
procedures established by the Audit Committee to discharge
the responsibilities delegated by the Board.
The Board relies on management of IRES Fund Management
and CAPREIT LP, as its service provider, to operate and manage
certain business activities of the Group utilising the system of
internal controls.
This system of internal controls includes:
• appropriately defined organizational structure and lines of
authority;
• policies and procedures surrounding corporate governance,
Audit Committee
Membership: Colm Ó Nualláin, Declan Moylan and
Aidan O’Hogan (Chair)
The main roles of the Audit Committee are set out in the Report
of the Audit Committee on pages 45 to 48.
•
•
Remuneration Committee
Membership: Colm Ó Nualláin, Declan Moylan (Chair) and
Aidan O’Hogan
The main roles of the Remuneration Committee are set out in
the Report of the Remuneration Committee on pages 49 to 51.
•
•
Nomination Committee
Membership: Colm Ó Nualláin (Chair), Declan Moylan and
Aidan O’Hogan
The main roles of the Nomination Committee are set out in the
Report of the Nomination Committee on page 52.
risk management, investment decisions, financial reporting,
financial risk management, information technology and
security, asset valuations and operations;
establishment and monitoring of budgets and business
plans, which includes consideration of key business risks;
system of manual and automated internal controls, both
preventative and detective in nature, around financial and
operational transactions, as well as information technology
systems and processes supporting these transactions;
monitoring and oversight controls surrounding financial
results and key performance/risk indicators; and
disclosure and communication controls surrounding
matters impacting key stakeholders.
Annual Report 2015
Irish Residential Properties REIT plc
41
Corporate Governance Statement (cont’d)
The Board has adopted a comprehensive signing authority
and delegation policy which sets out the respective authority
levels and responsibilities of employees of the Company, the
Investment Manager and CAPREIT LP, with respect to dayto-day transactions and more significant business initiatives.
An annual operating budget is reviewed and approved by the
Board and is monitored at least quarterly against actual financial
results. The annual report and financial statements are prepared
and reviewed by the Investment Manager with the support of
senior financial professionals at CAPREIT LP experienced in
International Financial Reporting Standards as endorsed by
the EU. Both the Investment Manager and CAPREIT LP have
implemented underlying manual and automated transactional
controls that support the amounts and disclosures in the financial
statements. In addition to this, the Audit Committee of the Board
reviews the semi-annual and annual reports and the financial
statements. The Board has appointed a third-party valuations
firm to provide valuations of the property-related assets of
the Group. The Investment Manager, with the support of
CAPREIT LP, reviews the assumptions and inputs used by the
third-party valuator, as well as the results provided. The Investment Manager has appointed a third-party risk management
firm to assist with the requirements of the Directive 2011/61/EU
of the European Parliament and of the Council on 8 June 2011
on Alternative Investment Fund Managers (“AIFMD”) in respect
of regulatory filings and also preparing reports surrounding
financial risk management and compliance with the Company’s
investment strategy, which are delivered to the Board. Additionally,
the Investment Manager also provides the Board with updates on
key performance indicators, such as occupancy, average monthly
rents, net operating income, capitalization rates, gearing, and
revenue collectability.
The internal audit function assesses the operating effectiveness
of the key internal controls, including those mentioned above. The
internal audit function reports the results of these assessments
to the Audit Committee of the Company.
Risk Management
The Board has overall responsibility for the Group’s risk
management function and considers risk management key
to ensuring the Group can meet its strategic and business
objectives. The Board, together with the Investment Manager,
undertakes the risk management on behalf of the Group. The
Investment Manager has put policies and procedures in place
which were designed to identify, measure, manage and monitor
appropriately all risks relevant to the investment strategy and to
which the Group is or may be exposed.
42
Irish Residential Properties REIT plc
The Investment Manager, with the support of CAPREIT LP, has
conducted a company-wide risk assessment based on meetings
with business process owners and management across the
Company, IRES Fund Management and CAPREIT LP. The
process resulted in identifying strategic, operational, financial,
and regulatory risks and the associated mitigating controls. An
assessment of the likelihood and impact of each of the risks was
carried out. The results of the overall process were captured in
a risk register and summary results were provided to the Board.
Key risks and mitigating controls are monitored by the Board
throughout the year.
To assist the Board of the Company in its assessment of the
risk management process, the Investment Manager’s Internal
Audit Function assessed and reviewed the results of the risk
assessment process above and reported on this review to the
Board of the Company.
Additionally, the Investment Manager has appointed a thirdparty risk management firm to assist with its regulatory filings
and also with preparing reports surrounding financial risk
management, including compliance with the investment
strategies of the Company. These reports are also delivered to
the Board. The Investment Manager also provides an update on
key performance indicators, such as occupancy, average monthly
rents, net operating income, capitalization rates, gearing and
revenue collectability. The Investment Manager also monitors
and reports to the Board on compliance with REIT legislation,
debt and other financial covenants.
The Board is satisfied that the risk management processes and
functions have the necessary authority, resources, expertise and
access to relevant information to fulfil its role and are operating
effectively as at the date of this Report. Further information on the
principal risks that were identified through the risk management
process are provided on pages 55 to 59.
Review of the effectiveness of the risk management and
internal control systems
Taking into account the information on principal risks and
uncertainties provided on pages 55 to 59, and the ongoing work
of the Audit Committee in monitoring the risk management and
internal control systems on behalf of the Board, the Board:
• is satisfied that it has carried out a robust assessment
Annual Report 2015
of the principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency or liquidity; and
Review of the Investment Manager
• has reviewed the effectiveness of the risk management
and internal control systems including all material financial,
operational and compliance controls (including those
relating to the financial reporting process) and no significant
failings or weaknesses were identified.
Internal Audit
The Board has reviewed the business model under which the
Group operates in the context of its activities and, in particular,
the external fund management model put in place to manage
the Group’s business operations. Having undertaken such a
review, and in light of the nature, scale and range of operations
of the Group, the Board does not intend to establish an internal
audit function and instead will rely on the Investment Manager’s
internal audit function with other monitoring procedures as
described above. The Investment Manager’s internal audit
function has adequate authority and access to the personnel,
processes and records of the Investment Manager, as well
as the Group, to perform its work. The Investment Manager’s
internal audit function is invited to present on its work related to
the internal controls of the Group to the Audit Committee of the
Board. As an internal audit function has not been established, the
Audit Committee will consider annually (in accordance with the
UK Code) whether there is a need for an internal audit function
and make a recommendation to the Board.
Model Code on Share Dealing
The Company must comply with the Model Code on Directors’
dealing in securities set out in the Listing Rules (“Model Code”),
which imposes restrictions on share dealings for the purposes of
preventing the abuse, or suspicion of abuse, of inside information
by Directors and other persons discharging managerial
responsibilities within the Company. The Board is responsible
for taking all proper and reasonable steps to ensure compliance
with the Model Code by the Directors and others to whom the
Model Code is applicable.
The Board has reviewed the performance of and contractual
arrangements with the Investment Manager and is satisfied
with the overall performance of the Investment Manager for FY
2015. For a detailed review of the key operational and financial
performance indicators, see page 31 in the “Key Operational and
Financial Performance Indicators” section.
The Investment Manager will continue in its performance of
its duties and, in the opinion of the Directors, the continuing
appointment of the Investment Manager on the terms of the
Investment Management Agreement is in the interests of the
shareholders as a whole. The Directors have formed this view
for the reasons set out in the section “Review of the Investment
Manager,” and based on the “Key Operational and Financial
Performance Indicators” section on page 31.
Communications with Shareholders
The Company recognises the importance of communications
with shareholders. Presentations are made to both existing
and prospective institutional shareholders, principally after the
release of the interim and annual results. Major acquisitions
are also announced to the market, and the Company’s website
(www.iresreit.ie) provides the full text of all press releases. The
website also contains annual and interim reports and incorporates audio and slide show investor presentations. The Board
is kept informed of the views of shareholders by the Chief
Executive Officer and the Investment Manager and receives
analysts’ reports on the Company. Furthermore, relevant
feedback from investor meetings is provided to the Board on a
regular basis. The Chairman and the other Directors also have the
opportunity to meet shareholders and analysts at the Company’s
annual general meeting.
Should shareholders wish to communicate directly with the
Board, they should contact David Ehrlich or Elise Lenser, contact
details for whom are provided in the “Shareholder Information”
section on the inside back cover of this Report.
The Company has in place a share dealing code that gives
guidance to the Directors, the Investment Manager, CAPREIT LP,
any persons discharging managerial responsibilities as defined
in regulation 12(8) of the Market Abuse Regulations and persons
identified by the Board to fulfil this role, along with anyone listed
on the Company’s insider list, on the pre-clearance notification
procedures to be followed when dealing in the shares of any class
of the Company or any other type of securities issued by or related
to the Company.
Annual Report 2015
Irish Residential Properties REIT plc
43
Corporate Governance Statement (cont’d)
Compliance with Relevant Codes
The Directors are committed to maintaining high standards of
corporate governance and this Corporate Governance Statement
describes how the Company has applied the UK Code, the Irish
Annex and the AIC Code in 2015. The Board considers that,
except where non-compliance is explained below, the Company
has complied with the provisions set out in the UK Code, the
Irish Annex and the AIC Code throughout the last financial year
under review.
(a)Board Recruitment
No external recruitment consultants were used in the recruitment of the Board, all members of which were appointed while
the Company was still a private limited company and prior
to the establishment of the Nomination Committee and the
listing of the Company. As discussed above, the Board, on the
recommendation of the Nomination Committee, has appointed
Margaret Sweeney and Phillip Burns as independent nonexecutive directors effective 23 March 2016, but without the
engagement of an external recruitment consultant, on the basis
that the Nomination Committee had access to a list of qualified
candidates and therefore an external recruitment consultant
would not add value in the circumstances.
(b)Board Diversity
Given the size of the Board and the development stage of the
Company, the Board does not consider it appropriate at this
time to set gender quotas for Board representation, but a female
director (Margaret Sweeney) has been appointed effective
23 March 2016, and the Board will continue to monitor developments in best practices. Before any appointment is made by
the Board, the Nomination Committee evaluates the balance
of skills, knowledge and experience and diversity of the Board.
The Board is committed to supporting diversity on the Board.
During the selection process for new non-executive directors,
the Nomination Committee ensures that diversity is considered
when developing a candidate pool. In considering diversity,
all potential considerations are taken into account, including
diversity of skills, background, experience and gender, in all
cases having regard to the Company’s current and future
plans and objectives. The Board will continue to monitor
whether it is taking diversity into account when appointing
new Board members, and the Board evaluation process
addresses diversity.
44
Irish Residential Properties REIT plc
(c)Management Engagement Committee
The Board fulfils the responsibilities typically undertaken by
a management engagement committee. On this basis, the
constitution of a separate management engagement committee
of the Board as proposed by the AIC Code has not been considered
necessary. These duties and responsibilities include the regular
review of the performance of, and contractual arrangements with,
the Investment Manager. Only the independent non-executive
directors are involved in undertaking this review.
(d)Internal Audit
The Board has reviewed the business model under which the
Group operates in the context of its activities and, in particular,
the external fund management model put in place to manage
the Group’s business operations. Having undertaken such a
review, and in light of the nature, scale and range of operations
of the Group, the Board does not intend to establish an internal
audit function and instead will rely on the Investment Manager’s
internal audit function, along with other monitoring procedures.
The Investment Manager’s internal audit function has adequate
authority and access to the personnel, processes and records
of the Investment Manager, as well as the Group, to perform its
work. The Investment Manager’s internal audit function is invited
to present on its work related to the internal controls of the Group
to the Audit Committee of the Board. As an internal audit function
has not been established, the Audit Committee will consider
annually (in accordance with the UK Code) whether there is a
need for an internal audit function, and make a recommendation
to the Board.
(e)Performance-Related Remuneration
The remuneration of the Directors under the long-term incentive
plan (“LTIP”) does not comply in full with Schedule A to the UK
Code. There is no minimum holding period for shares granted
under the LTIP and options vest over three years from the date of
grant on the basis of one third per completed year the recipient
of the option completes in respect of the relevant service which
has qualified him or her for the option grant. The terms of the LTIP
and options to be granted in connection with the initial offering
and the Capital Raise were disclosed in the relevant prospectus.
Annual Report 2015
Report of
the Audit Committee
Members: Colm Ó Nualláin, Declan Moylan and Aidan O’Hogan (Chair)
The Audit Committee is chaired by Aidan O’Hogan, who is also
an independent non-executive director. Colm Ó Nualláin is
considered by the Board to have recent and relevant financial
experience. All members of the Audit Committee are independent
non-executive directors, appointed by the Board for an initial
period of up to three (3) years. The Audit Committee is constituted in compliance with the UK Code, the AIC Code, the Irish
Annex and the Articles of Association regarding the composition
of the Audit Committee. The Chief Executive Officer also attends
the Audit Committee, as required.
The Audit Committee meets at least four (4) times per year and
as otherwise required.
The Audit Committee met ten (10) times during the period from
1 January 2015 to 31 December 2015, including five (5) times with
the external auditor.
The terms of reference established for the Audit Committee
were approved and adopted by the Board on 31 March 2014
(as amended on 2 April 2015 and 11 March 2016). Prior to the
adoption of the Audit Committee, the Board was responsible
for all matters delegated to the Audit Committee. The roles
and responsibilities delegated to the Audit Committee can be
accessed electronically at http://investorrelations.iresreit.ie/
corporate-governance.aspx.
The Audit Committee’s principal duties include:
i) to monitor and keep under review the scope and
effectiveness of the Group’s financial reporting and internal
control policies and procedures for the identification,
assessment and reporting of risks and shall ensure that
it receives regular reports on such matters from the
Company’s Investment Manager, internal auditor (if any) and
management;
ii) to monitor the integrity of the financial statements of the
Group, including its annual and half-yearly financial reports
and any other formal announcement relating to its financial
performance, reviewing and reporting to the Board on
summary financial statements, significant financial returns
to regulators and any financial information contained in
certain other documents, such as announcements of a
price sensitive nature;
iii) to keep under review the adequacy and effectiveness of
the Group’s internal financial controls and internal control
and risk management, whether these are carried out by an
internal audit function or by another service provider, such
as the Investment Manager;
iv) to oversee the relations with the external auditor and to
consider and make recommendations on the appointment,
reappointment and removal of the external auditor;
v) to ensure the independence and objectivity of the external
auditor annually;
vi) to ensure that the provision of non-audit services by the
external auditor does not impair the external auditor’s
independence or objectivity; and
vii)to review with the external auditor the findings of their work,
including any major issues that arose during the course of
the audit and have subsequently been resolved and those
issues that have been left unresolved.
The Audit Committee reviews its terms of reference on an annual
basis and, if necessary, proposes for formal board adoption,
amendments to the Audit Committee’s terms of reference. The
Audit Committee evaluates its own performance relative to its
terms of reference.
How the Audit Committee has Discharged
its Responsibilities in FY15
During FY15, the Audit Committee held ten (10) meetings. The
Audit Committee members’ attendance is set out on page 60. The
Audit Committee’s agenda is set based on the Group’s financial
calendar, which allows the Audit Committee to fulfil its role in an
efficient manner. In the year under review, the principal activities
of the Audit Committee were as follows:
• reviewed the appropriateness of Group accounting princi-
•
•
•
•
•
ples, practices and policies and monitored changes to and
compliance with accounting standards on an ongoing basis;
reviewed the Group’s interim report and this Report
including the financial statements contained therein
and considered the key areas of judgement before
recommending them to the Board for approval;
reviewed and approved the annual audit plan presented
by the external auditor and approved the audit fees;
reviewed and discussed the reports received from the
external auditor following the audit process;
reviewed and considered the Group’s key risks, internal
control policies and procedures and risk management
systems, with particular reference to the operations of the
Investment Manager;
reviewed the policy on the supply of non-audit services by
the external auditor, particularly in the context of the level of
non-audit fees in 2015 in order to assess the independence
and objectivity of the external auditor;
Annual Report 2015
Irish Residential Properties REIT plc
45
Report of the Audit Committee (cont’d)
• reviewed and considered the approach adopted by the
external valuer, including assumptions, procedures and
methodologies applied in valuing the Group’s property
portfolio;
• considered the necessity for an internal audit function on
an ongoing basis;
• reviewed the Investment Manager’s and the external
auditor’s fraud detection procedures; and
• reviewed the Company’s whistleblower policy and code
of ethics.
Financial Reporting and Significant
Financial Judgements
With respect to this Report and the financial statements included
therein, the Audit Committee assessed whether suitable
accounting policies had been adopted and whether management
had made appropriate judgements. The Audit Committee paid
particular attention to matters which it considered could have a
material impact on the Group’s results and those matters which
involve a higher level of complexity, judgement or estimation
by management. The most significant matters considered by
the Audit Committee in relation to this Report and the financial
statements contained therein for the year were as follows:
Investment Property Valuations
The Group had investment property with a fair value of
€472 million as at 31 December 2015, as set out in note 5 to the
Group financial statements. The Audit Committee considered the
investment property valuation process which had been carried
out by management in order to satisfy itself that the balances
were stated appropriately. These reviews involved understanding
management’s analytical procedures, management’s
discussions with the external valuer, and assessment of the
market inputs utilized on each property prior to recording the
valuations obtained. Following a review of the detailed valuation
analysis provided by management and detailed discussions
with management, the Audit Committee was satisfied that
the significant inputs used for valuation and valuation of the
investment properties were appropriate.
Transactions with CAPREIT
Due to the close nature of the relationship between CAPREIT
(or its affiliates) and I-RES, CAPREIT’s shareholding in I-RES at
31 December 2015, and the provision of investment management
services provided by IRES Fund Management, a subsidiary of
CAPREIT, to I-RES, the Audit Committee and the external auditor
46
Irish Residential Properties REIT plc
discussed the risk of undisclosed related party transactions
for the 2015 consolidated financial statements. The Audit
Committee discussed the level of fees incurred in respect of
management services received from CAPREIT and its affiliates
and discussed these with management. The Audit Committee
also considered the disclosures in the notes to the financial
statements.
Other Matters
Other matters considered by the Audit Committee included the
accounting treatment appropriate for the Group’s acquisition
of the Rockbrook Portfolio. The Audit Committee considered
management’s determination that the Rockbrook acquisition
should be treated as the acquisition of a property rather than the
acquisition of a business and confirmed the appropriateness of
this accounting treatment. The Audit Committee also considered
revenue recognition, compliance and regulatory obligations
and accounting disclosures including presentation of comparative figures.
Fair, Balanced and Understandable
The UK Code requires that the Board should present a fair,
balanced and understandable assessment of the Company’s
position and prospects, and specifically that they consider that
the annual report and financial statements included therein, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
At the request of the Board, the Committee considered whether
this Report and financial statements included therein met these
requirements.
The Audit Committee considered the process put in place by
management for the preparation of the annual report and financial
statements included therein and in particular the timetable,
coordination and review activities. The Audit Committee discussed these arrangements with management.
Arising from the Audit Committee’s work in this regard, the
Audit Committee and the Board concluded that this Report and
financial statements included therein, taken as a whole, is fair,
balanced and understandable and that it provides the necessary
information for shareholders to assess the Company’s position
and performance, business model and strategy.
Annual Report 2015
Risk Management and Internal Controls
The Board has delegated responsibility to the Audit Committee
to monitor the Group’s internal controls and risk management. In
order to discharge this responsibility for the period from 1 January
2015 to 31 December 2015, the Audit Committee:
i) conducted an annual review of the effectiveness of the
Group’s risk management and internal control systems and
reported to the Board on its findings;
ii) received presentations from the Investment Manager’s
internal audit function;
iii) reviewed the Group’s risk register semi-annually;
iv) reviewed quarterly reports from the Investment Manager
relating to monitoring of investment policy, strategy and
performance, compliance, risk management and liquidity
management;
v) received quarterly updates on any internal control
compliance issues or material legal matters;
vi) reviewed quarterly reports relating to the internal controls
of the Investment Manager and CAPREIT LP; and
vii)reviewed the Group’s signing authority and delegation policy.
In addition, the Board, as a whole, reviews quarterly reports from
the Investment Manager and operations updates relating to key
performance indicators.
The Chairman of the Audit Committee reports to the Board at
each meeting on the Audit Committee’s activities in regard to the
Group’s risk management and internal control systems.
External Audit
One of the key roles of the Audit Committee is to monitor the
performance, objectivity and independence of the external
auditor. Open, direct and honest communication between the
Audit Committee, the external auditor and the senior management
team is essential and it is our belief that effective oversight of the
activities undertaken by the external auditor assists in ensuring
both an effective audit and audit independence.
In November 2015, the Audit Committee met with the external
auditor to agree the FY15 audit plan. To ensure a quality audit,
the external auditor needs to be aware of the business risks;
therefore, the Audit Committee discussed and agreed upon
the key business, financial statements and audit risks, and the
materiality being used for the audit to ensure that the audit was
appropriately focused. In advance of the commencement of the
annual audit, the Audit Committee reviewed the external auditor’s
letter of engagement, together with a presentation from the
external auditor confirming its independence within the meaning
of the regulations and professional standards.
In February 2016, in advance of the finalisation of the Group’s
financial statements for the year ended 31 December 2015, the
Audit Committee received a report from the external auditor on its
key audit findings, including the key areas of risk and significant
judgements, and discussed the issues with them in order for the
Audit Committee to form a judgement on the financial statements.
In order to assist the Audit Committee in evaluating the external
audit process and to ensure continuous improvement, following
the completion of the audit, the Audit Committee members
discussed with the management team the effectiveness of the
external auditor and the external audit process generally.
At least annually, the Audit Committee meets with the external
auditor without the presence of management to discuss
any matters the external auditor may wish to raise. The Audit
Committee continues to be satisfied with the performance
of the external auditor who remains effective, objective and
independent. The Audit Committee has therefore recommended
to the Board that PricewaterhouseCoopers, the external
auditor, should continue in office as the Company’s auditor.
PricewaterhouseCoopers was initially first appointed in July 2013.
PricewaterhouseCoopers has expressed its willingness to
continue in office and is eligible for reappointment as the
Company’s auditor. It will continue in office in accordance with
Section 383 of the Companies Act, 2014 and is deemed to
be reappointed as the Company’s auditor in the absence of a
resolution for its removal. A resolution to authorise the Directors
to determine the auditor’s remuneration will be proposed at the
Company’s annual general meeting to be held on 16 May 2016.
Annual Report 2015
Irish Residential Properties REIT plc
47
Report of the Audit Committee (cont’d)
Non-Audit Services
Internal Audit
The Company has a policy on non-audit services. The level of
non-audit services provided is reviewed at least on an annual
basis and, in conjunction with the external auditor, the impact on
independence and objectivity is assessed.
The Audit Committee has considered the Group’s business
model and in particular the external management structure put
in place to manage operations. Having considered the scale,
complexity and range of operations of the Group, the Audit
Committee does not believe it is necessary to establish an
internal audit function.
The independence and objectivity of the auditor was addressed
by the Audit Committee in conjunction with the level of fees for
non-audit services in the reporting period. Following discussion
with the external auditor, the Audit Committee determined that
while the fees for non-audit services are higher than the audit
fees for the period to 31 December 2015, there are mitigating
factors which reduce the potential threat to independence and
objectivity. These factors include the following:
While the Audit Committee is not recommending the
establishment of an internal audit function at present, the
Audit Committee will review this position annually and make
appropriate recommendations to the Board.
• the quantum of the non-audit fees are deemed non-
•
•
•
•
substantial relative to the overall size of the external
auditor’s firm-wide fee income;
the non-audit services do not involve a significant amount
of judgement nor are they likely to have a material effect on
the Report and the financial statements included therein;
the professionals involved in the non-audit services were
different from those involved in the audit;
the Group is in its initial phase of operation and has
essentially been assembling its property portfolio; and
the non-audit services include work associated with
the Company’s Capital Raise and the Group’s property
acquisitions.
The Audit Committee concluded that the independence and
objectivity of the external auditor have not been compromised.
Details of the amounts paid to the external auditor during the
year for audit and non-audit services are set out in note 20 to the
Group financial statements.
48
Irish Residential Properties REIT plc
Annual Report 2015
Report of the
Remuneration Committee
Members: Colm Ó Nualláin, Declan Moylan (Chair) and Aidan O’Hogan
The Remuneration Committee is chaired by Declan Moylan, who
is also the Deputy Chairman and Senior Independent Director. All
members of the Remuneration Committee are independent nonexecutive directors, appointed by the Board for an initial period of
up to three (3) years. The Remuneration Committee is constituted
in compliance with the UK Code, the Irish Annex, the AIC Code
and the Articles of Association regarding the composition of the
Remuneration Committee. As highlighted in the biographies of
each member of the Remuneration Committee on page 34, each
of the members of the Remuneration Committee brings a different
set of skills and experience to the Remuneration Committee.
(f) to review the design of all share incentive plans for approval
by the Board and shareholders, and for any such plans, to
determine each year whether awards will be made and,
if so, the overall amounts of such awards, the individual
awards to eligible individuals as it so determines and the
performance targets to be used.
The Remuneration Committee meets at least once per year and
as otherwise directed.
Executive Compensation
The Company’s policy is to ensure that executive compensation
includes a mix of base salary and short-term and long-term
incentive awards. The mix of executive compensation should
be designed to reflect the relative impact of the executive’s
role on the Company’s performance and should consider how
the compensation mix aligns with long-term shareholder value
creation.
The Remuneration Committee met five (5) times during the
period from 1 January 2015 to 31 December 2015.
The terms of reference for the Remuneration Committee were
approved and adopted by the Board on 31 March 2014 and
amended on 26 May 2015. Prior to the establishment of the
Remuneration Committee, the Board was responsible for all
matters delegated to the Remuneration Committee. The roles
and responsibilities delegated to the Remuneration Committee
can be accessed electronically at http://investorrelations.iresreit.
ie/corporate-governance.aspx.
The Remuneration Committee’s principal duties include:
(a) to determine and agree to with the Board the framework
or broad policy for the remuneration of all executive
directors and the chairman, including pension rights and
any compensation payments, and to recommend and
monitor the level and structure of remuneration for senior
management;
(b)to take into account all factors which it deems necessary
in determining any such remuneration policy;
(c) to liaise with the Nomination Committee to ensure that the
remuneration of newly-appointed executives is within the
Company’s overall policy;
(d)to determine the policy for and scope of pension
arrangements, service agreements, termination payments
and compensation commitments for the executive
directors;
(e) to approve the design of, and determine targets for,
any performance-related pay schemes operated by the
Company, approving the total annual payments made under
such schemes and asking the Board, when appropriate,
to seek shareholder approval for any long-term incentive
arrangements; and
No Director shall be involved in any decisions in respect of his or
her own remuneration.
Statement on Remuneration Policy
In determining the target mix of compensation, the Remuneration
Committee considers market compensation data available for
comparator real estate investment trusts, which shall include
real estate investment trusts in jurisdictions inside and outside
of Ireland (including countries where executives are employed
and paid by the real estate investment trust), to ensure that the
compensation mix is competitive with comparator real estate
investment trusts and appropriate in light of the Company’s
business strategy.
Pursuant to an employment contract entered into as of 14 April
2014 between the Company and Mr Ehrlich (as amended from
time to time), Mr Ehrlich is entitled to an annual base salary
of C$500,000 and upon the recommendation of IRES Fund
Management and subject to the discretion of the Remuneration
Committee, a bonus of up to but not exceeding 100% of his base
salary. The bonus is subject to clawback where the amount of
bonus received was calculated based upon, or contingent on, the
achievement of certain financial results that were subsequently
the subject of or affected by a restatement of all or a portion of
the Company’s consolidated financial statements; and Mr Ehrlich
engaged in gross negligence, intentional misconduct or fraud
that caused or partially caused the need for the restatement,
as finally determined (beyond any right of appeal) by a court of
competent jurisdiction; and the bonus payment received would
have been lower had the financial results been properly reported.
Annual Report 2015
Irish Residential Properties REIT plc
49
Report of the Remuneration Committee (cont’d)
In addition, Mr Ehrlich is entitled to participate in the LTIP and
under his employment contract, he is entitled to be awarded
options over shares equivalent to 3% of the total number of
shares allotted in any capital raise by way of an allotment of
ordinary shares.
Non-Executive Director Fees
The remuneration of the non-executive directors shall be
determined by the Board as a whole. No director shall be involved
in any decisions in respect of his or her own remuneration.
Levels of remuneration for non-executive directors reflect the
time commitment and responsibilities of the role. The fees paid
to non-executive directors should therefore be set at a level
which aims to attract individuals with the necessary experience
and ability to make a significant contribution to the Company
and to compensate them appropriately for their role. The Board
will review its performance on an annual basis and will review
the remuneration level of the directors during the term of their
respective appointments.
Remuneration Policy of the Investment Manager
The Investment Manager has established a remuneration policy
which it applies in accordance with AIFMD and the guidelines
on sound remuneration policies under AIFMD as issued by the
European Securities and Markets Authority from time to time.
In the implementation of its remuneration policy, the Investment
Manager aims to ensure good corporate governance and promote
sound and effective risk management. It will not encourage any
risk taking which would be considered inconsistent with the risk
profile of the Group. The Investment Manager will ensure that
any decisions are consistent with the overall business strategy,
objectives, values and interests of the Group and will try to avoid
any conflicts of interest which may arise.
The Investment Manager ensures that the remuneration policy
is reviewed internally annually.
The total remuneration paid to the staff of the Investment Manager
in the period, all of whom are engaged in managing the Group
activities, was €685,000, of which €653,000 comprised fixed
remuneration and €32,000 comprised variable remuneration.
The number of staff employed as at 31 December 2015 was 26
(16 as at 31 December 2014).
50
Irish Residential Properties REIT plc
Directors’ Remuneration Report
The Company has one executive director. The only significant
decision made on remuneration during the period was the
annual bonus for the Chief Executive Officer and the grant of
options to the Chief Executive Officer and employees and senior
executives of CAPREIT and its affiliates under the Company’s
LTIP in connection with the Company’s secondary offering in
March 2015.
For further details on the LTIP, refer to note 10 of the Group
financial statements on page 85, which have been reviewed by
the external auditor.
Directors’ Remuneration
Fees
Annual Fee
Name
Period to
31 December
2014
Period to
31 December
2015
€’000
€’000 €’000
Colm Ó Nualláin
Declan Moylan
Aidan O’Hogan
100 50 50 75 38 38 100
50
50
Totals
200 151 200
(1) Neither David Ehrlich nor Thomas Schwartz received remuneration for
their role as a Director.
(2) David Ehrlich is the only permanent employee of I-RES, and his total
remuneration as the Chief Executive Officer for the period 1 January
2015 to 31 December 2015 was €753,000 (which included base salary
of €376,500 and bonus of €376,500), and for the period to 31 December
2014 was €642,000 (which included base salary of €244,000, bonus of
€245,000, and other of €153,000).
Outstanding Awards of Options
over Shares to Directors
Options over shares were awarded in April 2014 and in March
2015 in accordance with, and as governed by, the LTIP. The
options granted under the LTIP have a maximum life of seven
years less a day and vest over three years from the date of grant
on the basis of one third per completed year the recipient of the
option completes in respect of the relevant service which has
qualified him or her for an option grant.
The LTIP provides that any award to executive directors,
participants in the LTIP who report directly to the Chief Executive
Officer and such other participants as the Remuneration
Committee shall determine will include a provision for clawback
if the financial results of the Company for a relevant period have
been misstated to a material extent.
Annual Report 2015
Under the terms of his employment contract with the Company, David Ehrlich is entitled to be awarded options over shares equivalent to 3% of
the total number of shares allotted in any capital raise by way of allotment of ordinary shares. The exercise price for such options is the greater of
the issue price in the capital raise and the closing price of ordinary shares on the date of admission of such shares to listing.
The table below sets out the details of outstanding awards of options over shares held by Directors under the LTIP.
Fair
Options
Options
Options value at
No. of
No. of
Granted
Vested
Exercised
No. of
31-Dec-15
Latest
ExerciseOptionsOptions during during duringOptions
per Option VestingDate for
Director Grant Date
Price (€) 16-Apr-14 (1) 01-Jan-15 the Period the Period the Period 31-Dec-15
(cents)
Date(s)
Exercise
David Ehrlich 16-Apr-14
1.04 6,060,000 6,060,000 –
–
– 6,060,000 8.8 One third 15-Apr-21
in each
year from
16-Apr-2015
David Ehrlich 26-Mar-15
1.005 –
– 6,450,000 –
– 6,450,000 7.3 One third 25-Mar-22
in each
year from
26-Mar-2016
Thomas 16-Apr-14
1.04 2,020,000 2,020,000
–
–
– 2,020,000 8.8 One third 15-Apr-21
Schwartz
in each
year from
16-Apr-2015
Thomas 26-Mar-15
1.005 –
– 1,075,000 –
– 1,075,000 7.3 One third 25-Mar-22
Schwartz in each
year from
26-Mar-2016
(1) Options were first granted at I-RES’ initial offering on 16 April 2014.
The options granted to the non-executive director were granted in relation to his role with the Investment Manager and were considered by the
Board in the best interest of the Company and its business.
The Directors did not receive any additional remuneration for duties beyond those normally expected as part of each Director’s appointment.
Interests of Directors and Secretary in Share Capital
The Directors and the Secretary had no interests in the share capital at their date of appointment.
Outstanding
Outstanding
Ordinary Shares Ordinary Shares at
% of Company at
Option Awards at
Option Awards at
Name
as at 1 January 2015 31 December 2015 31 December 2015 1 January 2015 31 December 2015
Ordinary Shares as
at 21 March 2016
Colm Ó Nualláin
Declan Moylan
Aidan O’Hogan
Thomas Schwartz
David Ehrlich
Elise Lenser
200,000 –
–
1,000,000 500,000 –
333,333 –
90,000 1,000,000 500,000 –
0.08%
0.00%
0.02%
0.24%
0.12%
0.00%
–
–
–
2,020,000 6,060,000 –
–
–
–
3,095,000 12,510,000 250,000 333,333
–
90,000
1,000,000
500,000
–
Totals
1,700,000 1,923,333 0.46%
8,080,000 15,855,000 1,923,333
The interests disclosed above include both direct and indirect interests in shares.
Annual Report 2015
Irish Residential Properties REIT plc
51
Report
of the Nomination
Committee
Members: Colm Ó Nualláin (Chair), Declan Moylan and Aidan O’Hogan
The Nomination Committee is chaired by Colm Ó Nualláin, who
is also the independent non-executive Chairman. All members
of the Nomination Committee are independent non-executive
directors, appointed by the Board for an initial period of up to
three (3) years. The Nomination Committee is constituted in
compliance with the UK Code, the Irish Stock Exchange Annex,
the AIC Code and the Articles of Association regarding the
composition of the Nomination Committee.
The Nomination Committee meets at least once per year and
as otherwise required. The Nomination Committee met four
(4) times during the period from 1 January 2015 to 31 December 2015.
The Nomination Committee leads the process for considering
appointments to the Board. The Nomination Committee may not
be chaired by the Chairman when it is dealing with the matter
of succession to the chairmanship of the Company. The terms
of reference for the Nomination Committee were approved
and adopted by the Board on 31 March 2014. The roles and
responsibilities delegated to the Nomination Committee can
be accessed electronically at http://investorrelations.iresreit.ie/
corporate-governance.aspx.
Prior to the establishment of the Nomination Committee
the Board was responsible for all matters delegated to the
Nomination Committee. The Nomination Committee’s principal
duties include:
(a) to regularly review the structure, size and composition of
the Board and the Board committees, evaluate the balance
of skills, knowledge and experience on the Board and the
Board committees and make recommendations to the
Board with regard to any adjustments that are deemed
necessary;
(b)to be responsible for identifying and nominating for the
approval of the Board candidates to fill board vacancies as
and when they arise, ensuring that the procedures followed
are formal, rigorous and transparent; and
(c) to satisfy itself with regard to succession planning that
processes and plans are in place with regard to both Board
and senior appointments.
Before any appointment is made by the Board, the Nomination
Committee evaluates the balance of skills, knowledge and
experience and diversity of the Board. The Board is committed
to supporting diversity on the Board and a female director
52
Irish Residential Properties REIT plc
(Margaret Sweeney) has been appointed effective 23 March
2016. During the selection process for new non-executive
directors, the Nomination Committee ensures that diversity is
considered when developing a candidate pool. In considering
diversity, all potential considerations are taken into account,
including diversity of skills, background, experience as well as
gender, in all cases, having regard to the Company’s current and
future plans and objectives. The Board will continue to monitor
whether it is taking diversity into account when appointing new
Board members, and the Board evaluation process addresses
diversity. Given the size of the Board and the development stage
of the Company, the Board does not consider it appropriate at
this time to set gender quotas for Board representation, but will
monitor developments in best practices.
In its work in the area of Board renewal, the Nomination Committee
looks at a range of issues:
• skills, knowledge and expertise in areas relevant to the
operation of the Board;
• diversity; and
• the need for an appropriately sized Board.
Each non-executive director participates fully in Board discussions
and attends all possible Board and/or committee meetings in
order to do so; in addition, each non-executive director brings a
distinct range of abilities and experience that complements those
brought by the other non-executive directors. Non-executive
directors, including the chairman of the Board, are expected to
serve for a three-year term unless they are invited by the Board
and agree to serve for an additional period.
Given the growth of the Company, the Board, on the recommendation of the Nomination Committee, thought it advisable
to increase the size of the Board. Accordingly, the Board,
on the recommendation of the Nomination Committee, has
appointed Margaret Sweeney and Phillip Burns as independent
non-executive directors effective 23 March 2016 (refer to
page 40 for their biographies).
Following the evaluation conducted by the Board, it has been
confirmed that each director continues to be effective and to
demonstrate commitment to the role and should be put forward
for re-election, together with Margaret Sweeney and Phillip Burns
(who will be put forward for election since they were appointed
after the 2015 annual general meeting), at the Company’s annual
general meeting to be held on 16 May 2016.
Annual Report 2015
Report
of the Directors
The Directors of the Company present their report and the audited
financial statements for the financial period from 1 January 2015
to 31 December 2015.
Principal Activity and Business Review
The Company was incorporated in Ireland on 2 July 2013 as
Shoreglade Limited (formerly known as CAPREIT Ireland Limited,
Irish Residential Apartments REIT Limited and Irish Residential
Properties REIT Limited). On 16 April 2014, I-RES obtained
admission of its ordinary shares to the primary listing segment
of the Official List of the Irish Stock Exchange for trading on the
regulated market for listed securities of the Irish Stock Exchange.
Its registered office is Unit 4B Lazer Lane, Grand Canal Square,
Dublin 2, Ireland. Ordinary shares of I-RES are listed on the Irish
Stock Exchange under the symbol “IRES.” The Company owns
interests in multi-unit residential rental apartment properties
located in and near major urban centres in Dublin, Ireland. I-RES’
net assets and operating results are derived from real estate
located in Ireland, where it is also domiciled. The Company
purchased its first investment interests in investment properties
on 10 September 2013. Refer to note 4 of the Group financial
statements on page 81 (which lists all the investment property
acquisitions since 10 September 2013 that have contributed
to the operating results effective from the acquisition date of
those properties).
The Corporate Governance Statement on pages 38 to 44, the
Report of the Audit Committee on pages 45 to 48, the Report of
the Remuneration Committee on pages 49 to 51, the Report of
the Nomination Committee on page 52 and the Review on pages
2 to 32 are deemed to be included in this Report of the Directors
for the purposes of the Companies Act, 2014.
This Report and the documents referred to herein are deemed
to be the management report as required by the Transparency
(Directive 2004/109/EC) Regulations 2007 (the “Transparency
Regulations”).
Results for the Financial Period
Revenue for the financial period amounted to €24.72 million.
The profit for the year attributable to shareholders amounted
to €30.82 million. Earnings per share amounted to 8.4 cents.
REIT Status
The Company elected for REIT status on 31 March 2014 under
section 705 E of the Finance Act 2013. As a result, the Company
does not pay Irish corporation tax on the profits and gains from
qualifying rental business in Ireland from that date, provided it
meets the conditions.
As an Irish REIT, the Company is required 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 (provided it has sufficient distributable
reserves). Failure to meet this requirement will result in an Irish
REIT incurring a tax charge calculated by reference to the extent
of the shortfall in the dividends paid.
The Company is in compliance with all the above REIT
requirements for the period from 1 January 2015 to 31 December 2015.
Dividends
Under the Irish REIT regime, subject to having sufficient
distributable reserves, the Company will be required to distribute
to shareholders at least 85% of the Property Income of its Property
Rental Business for each accounting period. Accordingly, in 2015,
the Board paid dividends of approximately €1.8 million for the 2014
accounting period. On 9 February 2016, the Directors declared
an interim dividend of €13.1 million (dividends per share of
3.15 cents) for the 2015 accounting period, to be paid on 21 March
2016 to shareholders on record as of 19 February 2016.
Share Capital
The authorised share capital of the Company is 1,000,000,000
ordinary shares of €0.10 each, of which 417,000,000 shares
were in issue at 31 December 2015. All of these shares are
of the same class. They all carry equal voting rights and rank
equally for dividends. Other than dividends declared, no shares
in the Company were acquired or redeemed by the Company
during the financial period ended 31 December 2015, or made
subject to charge or lien. There are no securities holding special
rights with regard to control of the Company. Particulars of
the authorised and issued share capital of the Company as at
31 December 2015 are set out in note 11 of the Group financial
statements on page 86.
Annual Report 2015
Irish Residential Properties REIT plc
53
Report of the Directors (cont’d)
There are no restrictions on the transfer of shares in the Company
and no requirements to obtain approval of the Company, or of
other holders of securities in the Company, for a transfer of shares
in the Company, save that the Directors may decline to register
any transfer of a share:
• to or by a minor or a person with a mental disorder (as
defined by the Mental Health Act 2001);
• in certain circumstances where the Directors have given
notice to a shareholder under the Articles of Association
requiring such shareholder to notify the Company of his or
her interest in any shares in the Company and is in default
for a prescribed period in supplying such information to
the Company;
• if the transfer is in favour of any person, as determined by
the Directors, to whom a sale or transfer of shares, or whose
direct, indirect or beneficial ownership of shares, would or
might cause a specific regulatory burden to be imposed on
the Company, such as under the US Securities Exchange
Act of 1934;
• in certificated form where the following documents have not
been produced: the original share certificate and the usual
form of stock transfer duly executed by the holder of the
shares and stamped with the requisite stamp duty; and
• in uncertificated form only in such circumstances as may be
permitted or required by the CREST Regulations.
By Resolution 7 passed at the Company’s 2015 annual general
meeting, the Directors were granted authority to make market
purchases of the Company’s ordinary shares up to 10% of the
issued ordinary shares in the Company and to reissue those
shares. This authority is due to expire at the conclusion of the
2016 annual general meeting of the Company or 15 months
from the passing of the resolution, whichever occurs first. As at
21 March 2016, the Company held no shares in treasury. The
Directors are proposing resolutions on the same terms (except up
to 15% of the issued ordinary shares) at the 2016 annual general
meeting and will take advantage of the flexibility afforded by the
resolution, if passed, as they deem appropriate.
54
Irish Residential Properties REIT plc
Lock-up Arrangements
Other than as disclosed below, the Company is not aware of any
arrangements between its shareholders which may result in
restrictions on the transfer of securities or voting rights. CAPREIT
LP has agreed to a lock-up arrangement pursuant to which,
subject to certain customary exceptions, none of the shares in
which CAPREIT LP held a beneficial interest on or before the initial
offering (including thereafter any shares derived therefrom, which
includes the shares subscribed for by CAPREIT LP pursuant to
the open offer in the Capital Raise) may be sold for two years
from initial admission on 16 April 2014, as long as the Investment
Management Agreement has not been terminated.
Powers of the Board
The Directors are responsible for the management of the business
of the Company and may exercise all the power of the Company
subject to the provisions of the Company’s Memorandum and
Articles of Association.
The Directors’ powers to allot, issue, repurchase and reissue
ordinary shares are dependent on the terms of the resolutions
from time to time in force so empowering the Directors.
Review of Activities and Events
since the Year End
The Chairman’s Statement on pages 10 to 11, the Chief
Executive Officer’s Statement on pages 12 to 16 and IRES Fund
Management’s Statement on page 17 contain a review of the
development and performance of the business during the year,
the state of affairs of the business at 31 December 2015, recent
events and likely future developments. The key performance
indicators used by the Board for monitoring the business are on
page 31. Information in respect of events since the year end as
required by the Companies Act, 2014 is included in these sections
and in note 21 of the Group financial statements on page 95.
Annual Report 2015
Principal Risks and Uncertainties
The Directors of the Company set out below the principal risks and uncertainties that the Group is exposed to and that may impact
performance in the coming financial year. The Group proactively monitors and manages these risks with the assistance of its Investment
Manager, as well as the combined expertise of the Board. The principal risks and uncertainties are summarised as follows:
RISKS
POTENTIAL EXPOSURE
MITIGATION MEASURES
General
Economic
Conditions
The Group’s investments are concentrated
in Ireland. Although there are clear signs
of a general economic recovery in Ireland,
this recovery is nascent and there can be no
assurance that current growth levels will be
sustained. Poor economic conditions could
impact the Company’s income and capital
performance.
The Company deployed the capital raised from
shareholders in an efficient manner.
In addition, the Company’s focus is on Dublin,
which has been more resilient economically than
other areas of Ireland in the past.
The Investment Manager monitors and reports
to the Board quarterly on investment performance
and economic factors that may affect such
performance. The Company also employs prudent
cash flow management and monitoring to ensure
that it can maintain attractive distributions to its
shareholders.
Availability
of Capital
The Company may not be able to source
debt financing at attractive rates, which could
impact the Company’s future growth through
acquisitions and development.
There is also a limited number of banks
providing financing against property in Ireland.
The Company may also not be able to raise
equity, which could also impact the Company’s
future growth through acquisitions and
development.
The Investment Manager has made a concerted
effort to develop relationships with lenders both in
Ireland and abroad. The quality of the Company’s
property portfolio and the conservative gearing
target of 45% on total assets are attractive credit
characteristics for potential lenders, which to date
have facilitated the raising of debt financing. The
Investment Manager also monitors the Company’s
compliance with existing debt covenants and
gearing ratios and reports to the Board quarterly
on these items.
The Company invests in properties that
generate a strong rate of return for its investors
and, in turn, increases the attractiveness of its
shares. As such, the Company believes it has
the ability to raise additional capital if required
and only after considering existing shareholders’
interests, as seen with the Capital Raise.
Investment
Strategy
The Group could significantly underperform
due to inappropriate or poor execution of the
Group’s investment strategy. This could impact
the valuation of the properties and a resultant
reduction in return to shareholders may occur.
The Investment Manager is made up of a wellregarded multi-disciplinary team of property
and finance professionals experienced in the
selection, financing and management of property
investments.
The Investment Manager and the Board carry
out a detailed evaluation of every investment
opportunity to determine its fit with the Group’s
stated investment policy and to ensure that it
Annual Report 2015
Irish Residential Properties REIT plc
55
Report of the Directors (cont’d)
RISKS
POTENTIAL EXPOSURE
Investment
Strategy (cont’d)
MITIGATION MEASURES
enhances the firm’s risk return goals as articulated
in the investment strategy.
The Investment Manager reports certain key
metrics on investment performance and risk,
as well as compliance with the Group’s stated
investment policy on a quarterly basis to the
Board.
Occupier
Demand
and Income
Sustainability
Occupancy levels are currently very strong;
however, there is a risk that due to a lack of
occupier demand resulting from possible
weakness in the macro economy or a significant
increase in housing completions, this could
fall, thereby impacting the Group’s income and
capital performance.
The Group’s strategy is to acquire prime and
good secondary residential property with a
Dublin focus, which is where all of the existing
apartments in its portfolio are located.
The Investment Manager monitors the Group’s
exposure to the letting market and deals with any
lease expiries well in advance of their expiry dates
to ensure that the income from the portfolio is
managed proactively to minimise any interruptions
and vacancies. The Investment Manager reports
to the Board quarterly on occupancy rates and
economic factors that may impact these.
Tenant Default
Tenant default may adversely impact the Group’s
income and the capital performance of the
portfolio. This may result in a reduction of rental
income.
Letting staff evaluate the creditworthiness of
prospective tenants within the means available
to them from a regulatory perspective.
The Investment Manager closely monitors
the rental payments of occupiers to identify any
weaknesses in their ability to meet their ongoing
obligations to the Group. In addition, no individual
tenant would have a material impact on the total
rental revenue. The Investment Manager reports
to the Board on revenue collections and key
economic factors that may impact these.
Investment
Manager’s
Performance
The Group is reliant on the Investment Manager
and CAPREIT LP for its property investment,
asset management and development expertise,
in particular, which drives the financial
performance of the Group.
The Group is reliant on the skills and the
ability of the Investment Manager and CAPREIT
LP to retain the management team and key staff.
It may be difficult to find replacements with the
same expertise, resulting in financial or business
reputation loss to the Group.
The Investment Manager is made up of a wellregarded multi-disciplinary team of property
and finance professionals experienced in the
selection, financing and management of property
investments.
The Board oversees the work of the Investment
Manager and there is a close working relationship
between the Board and the Investment Manager.
56
Irish Residential Properties REIT plc
Annual Report 2015
RISKS
POTENTIAL EXPOSURE
MITIGATION MEASURES
Investment
Manager’s
Performance
(cont’d)
The Investment Manager was authorised
as an alternative investment fund manager on
28 October 2015 by the Central Bank of Ireland
under recently adopted EU regulations. Should
the Investment Manager cease to be authorised
as an alternative investment fund manager, the
Company would then be required to appoint
a replacement alternative investment fund
manager and could suffer losses arising from
the transition from the Investment Manager to
another alternative investment fund manager.
Key management of the Investment Manager,
CAPREIT LP and its affiliates are financially
incentivised through the long-term incentive plan.
The board of the Investment Manager
oversees compliance with the AIFM Regulations
to ensure that the Investment Manager meets its
regulatory obligations at all times.
Interest Rate and
Credit Risk
The Company is exposed to risks associated
with movements in interest rates on its floating
rate bank debt and on the cash it holds.
The Company has entered into a revolving and
accordion credit facility of up to €250 million,
which can be extended to €350 million subject
to certain terms and conditions. This facility has
been secured from Barclays Bank Ireland plc and
Ulster Bank Ireland at a rate of EURIBOR +2% for
a five-year term commencing 14 January 2016.
With regard to floating rate bank debt which
the Company intends to raise, the Investment
Manager consults on a regular basis with the
external lenders with regard to interest rate
exposure and whether hedging should be put
in place, which would be approved by the Board.
The Company does not have a substantial
amount of cash on deposit.
Competition
The Group faces competition from other
property investors for suitable properties, which
could impact its ability to purchase suitable
properties for renting at satisfactory rates and to
successfully deploy the funds from future equity
offerings.
The Investment Manager has made a concerted
effort to develop relationships and contacts in
Ireland to seek out suitable properties for the
Group’s portfolio.
The Investment Manager has appointed the
appropriate management resource.
The Investment Manager monitors supply and
demand for rental apartments in operating areas
where the Group’s investment properties are
located.
The Group is well-capitalised and is also one
of Ireland’s largest residential real estate owners,
which gives it a competitive advantage.
Annual Report 2015
Irish Residential Properties REIT plc
57
Report of the Directors (cont’d)
RISKS
POTENTIAL EXPOSURE
MITIGATION MEASURES
Tax Risks –
Failure to Abide
by REIT Rules
The Group operates under the Irish REIT regime,
which, among other benefits, means that the
Group does not pay corporation tax or capital
gains tax on income from its Property Rental
Business as long as the Group is in compliance
with these rules. Failure to comply with the rules
may result in the Group losing its REIT status,
which could result in the Company having to pay
corporation tax and capital gains tax. This in turn
would result in a financial loss to the Group.
The Investment Manager monitors and tests
the Group’s compliance with the REIT rules and
regularly reviews and considers how the Group’s
planned operations will ensure compliance with
these rules, the results of which are reported to
the Board. The Investment Manager has received
independent legal advice in relation to the issues
it needs to monitor and manage and therefore,
is alert and vigilant in regard to these matters.
Additionally, the Board of the Company has also
obtained independent legal advice.
Regulatory Risk
The Company operates in a very challenging
and increasingly complex corporate governance
environment with significantly more compliance
rules and any failure to meet or to adhere to
these rules could result in a financial and
reputational loss to the Company. There is also a
possibility that the government authorities could
change the rental housing regime in a way that
is adverse to the Group.
The Board and the Investment Manager monitor
compliance by the Company with the regulations
so that, should any issues arise, the Company
is forewarned and can deal with any potential
disruption that might result.
The Investment Manager has engaged
experienced third-party advisors, who, along with
management of the Investment Manager, ensure
that compliance with the regulations are achieved
through detailed policies and procedures. The
Investment Manager reports to the Board on its
compliance with regulations quarterly.
The Company has also appointed experienced
third-party advisors.
The Company has also appointed a depositary,
BNP Paribas Securities Services. The depositary
has a number of roles relating to the oversight
of certain activities of the Company including,
but not limited to, overseeing the safekeeping
of the assets owned by the Company (including
cash), verification duties regarding the assets
of the Company and the depositing of cash not
yet invested by the Company. In addition, the
depositary also has custody duties in respect of any
assets acquired by the Company and monitoring
duties regarding the Company’s cash flows.
58
Irish Residential Properties REIT plc
Annual Report 2015
RISKS
Development
Risk
POTENTIAL EXPOSURE
MITIGATION MEASURES
Property development comes with planning
risk, construction risk, additional cost exposure
and overrun risk, engineering risk and the risk of
delayed delivery of a development with resulting
additional costs, and potential failure to pass the
completed space to tenants who have entered
into pre-letting agreements, thereby delaying
rental income receipts.
In sourcing/reviewing potential development
opportunities, the Investment Manager
undertakes detailed planning and cost review
and budgeting exercises around all capital
expenditures.
The Investment Manager uses competitive
tendering procedures to obtain fixed price
contracts negotiated with reputable and
experienced building contractors to minimise
delivery, quality and cost overrun risks.
Development projects undergo a detailed
investment analysis by the Investment Manager,
the results of which are presented to the Board
for review. The Board approves all development
opportunities prior to commencement, as well
as an annual capital expenditures budget for
upgrades to existing investment properties.
The Investment Manager will closely monitor
each project and will work closely with the
contractor.
The Company’s investment policy contains
restrictions on the amount of development
spend that can be incurred. The Investment
Manager reports quarterly on the amount of
actual development spend in relation to these
restrictions to the Board of the Company.
The principal contractor is responsible
for monitoring the viability of subcontractors
appointed by them. There is an increasing number
of contractors and subcontractors operating in the
Irish market, in the event that the need to replace
a subcontractor was to arise. The Company allows
for timing contingencies as well as possible cost
contingencies at the project planning phase.
Annual Report 2015
Irish Residential Properties REIT plc
59
Report of the Directors (cont’d)
Directors
The names of the Directors for the financial period ended
31 December 2015 and a short biographical note on each Director
appear on pages 34 to 35.
The Company has adopted a requirement in its Articles of
Association that all Directors will submit to re-election at each
annual general meeting. In accordance with paragraph B.7.1
of the UK Code, which applied to the Company for the financial
year ended 31 December 2015, and the Company’s Articles of
Association, each of Colm Ó Nualláin, Aidan O’Hogan, Declan
Moylan, David Ehrlich and Thomas Schwartz will retire and, being
eligible, will offer themselves for re-election at the 2016 annual
general meeting to be held on 16 May 2016. In addition, the Board,
on the recommendation of the Nomination Committee, has
appointed Margaret Sweeney and Phillip Burns as independent
non-executive directors effective 23 March 2016 and, being
eligible, they will offer themselves for election at the 2016 annual
general meeting to be held on 16 May 2016.
Other than Mr Ehrlich, the Directors do not have service contracts but do have letters of appointment which reflect their
responsibilities and commitments. Mr. Ehrlich’s service contract is
due to expire on 30 September 2016, or such earlier or later date as
set out upon the extension or termination of the service agreement.
Each Director has the same general legal responsibilities to the
Company as any other Director and the Board as a whole is
collectively responsible for the overall success of the Company.
The Directors were appointed for an initial term of three (3) years,
and their dates of appointment are set out on pages 34 to 35.
The Company may lawfully terminate a Director’s appointment
with immediate effect in certain circumstances, including where
a Director has breached the terms of his letter of appointment,
and no compensation would be payable to such Director in
such an event. In addition to their general legal responsibilities,
the Directors have responsibility for the Company’s strategy,
performance, financial and risk control and personnel.
Copies of the letters of appointment are available for inspection
by any person at the Company’s registered office during normal
business hours and at the Company’s annual general meeting for
15 minutes prior to the meeting and during the meeting.
There are no agreements between the Company and its
Directors or employees providing for compensation for loss of
office or employment, whether through resignation, purported
redundancy or otherwise, that occurs because of a bid for the
Company, except under the terms of the LTIP.
Meetings and Attendance
Directors’ attendance records at board and committee meetings from 1 January 2015 until 31 December 2015 (the end of the period)
are set out in the table below. For board and committee meetings, attendance is expressed as the number of meetings attended out
of the number that each Director was eligible to attend.
Board
Colm Ó Nualláin
Aidan O’Hogan
Declan Moylan
David Ehrlich
Thomas Schwartz
12 of 13
13 of 13
13 of 13
13 of 13
13 of 13
Audit
Committee
Remuneration
Committee 10 of 10
9 of 10
10 of 10
N/A
N/A
5 of 5
5 of 5
5 of 5
N/A
N/A
Details of the Directors’ and Secretary’s interests in the share
capital of the Company are set out in the Interests of Directors
and Secretary in share capital on page 51.
The Chairman does not have any other significant commitments.
Key Management Personnel
The Company is managed by the Chief Executive Officer of the
Company and through the external Investment Manager (and
prior to 1 November 2015 by GAFM) under the supervision of the
60
Irish Residential Properties REIT plc
Nomination Small Transactions
Committee
Committee
4 of 4
4 of 4
4 of 4
N/A
N/A
N/A
N/A
N/A
No meetings held
No meetings held
Board. The Company has engaged the services of the Investment
Manager (which is authorised as an alternative investment
fund manager by the Central Bank of Ireland under the AIFM
Regulations) to act as the Company’s alternative investment fund
manager under the AIFM Regulations and has delegated certain
portfolio, risk management and other functions to the Investment
Manager, pursuant to the Investment Management Agreement.
The Investment Manager also has access to the expertise and
resources provided by CAPREIT LP, pursuant to the services
agreement among the Company, CAPREIT LP and IRES Fund
Annual Report 2015
Management (as amended from time to time) (the “Services
Agreement”), which also covers property and asset management services.
Conflicts of Interest – Directors
Section 231 of the Companies Act, 2014 requires each Director
who is in any way, either directly or indirectly, interested in a
contract or proposed contract with the Company to declare the
nature of his interest at a meeting of the Directors. The Company
keeps a record of all such declarations, which may be inspected
by any Director, secretary, auditor or member of the Company at
the registered office of the Company.
Subject to certain exceptions, the Articles of Association generally
prohibit Directors from voting at Board meetings or meetings of
committees of the Board on any resolution concerning a matter
in which they have a direct or indirect interest which is material to,
or a duty which conflicts or may conflict with the interests of, the
Company. Directors may not be counted in the quorum in relation
to resolutions on which they are not entitled to vote.
Pursuant to the Investment Management Agreement, the
Investment Manager is entitled to nominate and require the
Company to appoint one person as a non-executive director.
Thomas Schwartz is a director of the Investment Manager and is
the Investment Manager’s nominee. Thomas Schwartz is also a
trustee of CAPREIT and a director or trustee of each of CAPREIT’s
subsidiaries. He is also the Chief Executive Officer and President
of CAPREIT and each of its Canadian subsidiaries. David Ehrlich is
a trustee of CAPREIT. CAPREIT is the parent company of CAPREIT
LP and the Investment Manager is wholly-owned and controlled
by CAPREIT LP. The Articles of Association prohibit Directors who
are officers of the Investment Manager or trustees of CAPREIT
or any CAPREIT affiliate from participating in deliberations of
the Board concerning the appointment or engagement by
the Company of IRES Fund Management or of any CAPREIT
affiliate. David Ehrlich and Thomas Schwartz accordingly will
not be permitted to vote on any matter at Board level relating to
CAPREIT, CAPREIT LP or IRES Fund Management.
Conflicts of Interest – Investment Management
Agreement and Services Agreement
Each of the Investment Management Agreement and the Services Agreement include non-compete provisions in favour of
the Company, subject to certain exceptions.
Corporate Governance
The Company has complied, from 1 January 2015 to 31 December
2015, with the provisions set out in the UK Code (issued in
September 2014) and in the Irish Annex (issued in 2010),
which applied to the Company for the financial period ended
31 December 2015, except as disclosed on page 44.
The Corporate Governance Statement on pages 38 to 44 sets
out the Company’s application of the principles and compliance
with the provisions of the UK Code and the Irish Annex and the
Company’s system of risk management and internal control.
Going Concern Statement
The Directors, after making enquiries, have a reasonable
expectation that the Company, and the Group as a whole, have
adequate resources to continue operating for at least 12 months.
For this reason, the going concern basis continues to be adopted
in preparing the financial statements included in this Report.
Assumptions are built for the income statement, balance sheet
and cash flow and these are rigorously tested by management
and the Directors. Sensitivity analysis has been applied to reflect
the potential impact of some of the principal strategic and commercial risks of the Company as described on pages 55 to 59.
After making enquiries and having considered the uncertainties
facing the Group and the options available to the Group, the
Directors have a reasonable expectation that the Group will
have sufficient funds available to it to meet other planned
expenditures when they fall due for the foreseeable future. Based
on the above, the Directors continue to adopt the going concern
basis for the preparation of the financial statements.
Viability Statement
The Directors have assessed the viability of the Group over a
three-year period to December 2018, taking account of the
Group’s current position and the potential impact of the principal
risks. Based on this assessment, the Directors have a reasonable
expectation that the company will be able to continue in operation
and meet its liabilities as they fall due over the period to December 2018.
In making this statement, the Directors have considered the
resilience of the Group, taking account of its current position,
the principal risks facing the business in severe but reasonable
Annual Report 2015
Irish Residential Properties REIT plc
61
Report of the Directors (cont’d)
scenarios, and the effectiveness of any mitigating actions. This
assessment has considered the potential impacts of these risks
on the business model, future performance, solvency and liquidity
over the period. Assumptions are built for the income statement,
balance sheet and cash flow included in the business model, and
a sensitivity analysis has been performed based on some of the
principal risks of the Group, as described on pages 55 to 59, to
reflect a comprehensive range of outcomes. These risks could
affect the level of revenues of the Group and the amount of capital
required to operate and grow the business.
The Directors concluded that three years was an appropriate
period for the assessment given that this is the key period of
focus within the Group’s strategic planning process, and it
reflects the development stage of the Company. The objectives
of the strategic planning process are to consider the key
strategic choices facing the Group and to build a consolidated
financial model with various scenarios, taking into account the
principal risks and uncertainties facing the Group.
Substantial Shareholdings
As at 31 December 2015, the Company has been notified of the
following substantial interests in the Company’s shares:
Holder 31 December 2015
Holdings
%
CAPREIT Limited Partnership
65,500,000 15.7
Franklin Templeton
Institutional, LLC
54,608,952 13.10
Setanta Asset
Management Limited
49,663,753 11.91
Irish Life Investment
Managers Limited
24,872,228 5.96
INVESCO Limited
17,392,844 4.17
Schroder plc (1)
25,230,000 6.05
APG Asset Management N.V.
15,000,000 3.60
GLG Partners LP
13,207,986 3.17
Alken Fund SICAV
12,889,378 3.09
Prudential Financial, Inc.
12,528,785 3.00
(1) Based on public filings, Schroder plc only has 16,830,000 voting
rights (4.036%).
As at 21 March 2016, the Company has been notified of the
following substantial interests in the Company’s shares:
21 March 2016
Holder Holdings
%
CAPREIT Limited Partnership 65,500,000 15.70
Franklin Templeton
Institutional, LLC 54,608,952 13.10
Setanta Asset
Management Limited 50,818,214 12.19
Irish Life Investment
Managers Limited 24,872,228 5.96
INVESCO Limited 17,392,844 4.17
Schroder plc 25,062,965
6.01
APG Asset Management N.V. 15,000,000 3.60
GLG Partners LP 13,207,986 3.17
Alken Fund SICAV 12,889,378 3.09
Prudential Financial, Inc.
12,528,785 3.00
(1)
(1) Based on public filings, Schroder plc only has 16,662,965 voting
rights (3.996%).
Subsidiaries and Joint Ventures
Details of the Company’s subsidiaries as at 31 December 2015,
which include IRES Residential Properties Limited, which was
acquired on 31 March 2015 in connection with the acquisition of
the Rockbrook Portfolio and holds the Rockbrook Portfolio, and
certain owner management companies in which the Company
holds a majority of the voting rights, are set out in note 16 of
the Group financial statements on pages 90 to 93. In addition,
on 15 January 2016, TC West Residential Owners Management
Company Limited and TC West Estate Management Company
Limited, the owner management companies for Tallaght
Cross West residential and commercial, respectively, became
subsidiaries of the Company. All of the Company’s subsidiaries
are incorporated in Ireland.
Financial Instruments
Financial instruments are set out in note 12 of the Group financial
statements on pages 87 to 89.
Financial Risk Management
The financial risks include market risk, liquidity risk, credit risk
and capital management risk. The financial risk management
objectives and policies of the Group are set out in note 12 of the
Group financial statements on pages 87 to 89.
62
Irish Residential Properties REIT plc
Annual Report 2015
Credit Facility Agreement
On 14 January 2016, the Company signed a new revolving and
accordion credit facility of up to €250 million, which can be
extended to €350 million subject to certain terms and conditions.
Details of the Company’s previous credit facility agreement, which
was entered into on 15 August 2014, are set out in note 9 of the
Group financial statements on page 84. The financial covenants
under the new credit facility agreement provide that for so long
as any amount is outstanding under the new credit agreement:
(i) adjusted EBITDA in respect of the relevant period being
tested expressed as a percentage of the interest payable at
that time (“Historical Interest Cover”) for the group (which
for the purposes of this section is defined as the Company
and its subsidiaries excluding any management companies),
must, at all times, be at least 200%;
(ii) adjusted EBITDA in respect of the relevant period being
tested expressed as a percentage of the projected interest
payable for such period (“Projected Interest Cover”) for the
group must, at all times, be at least 200%;
(iii)the aggregate amount of all obligations of members of the
group for or in respect of its total financial indebtedness
(“Total Debt”) (taking into account only indebtedness and
other obligations which are secured by security over the
Charged Assets (as defined in the facility agreement) must
not at any time be greater than 50% of the aggregate of
(i) the aggregate market value of all interests in real property
held by the Company and members of the group (unless any
such interest in a property ceases to be a Charged Asset)
(the “Properties”) and (ii) the value of all loans made by the
Company and/or IRES Residential Properties Limited to a
third party for the purpose of carrying out development work
in respect of a Property, both such values as determined
from the most recent financial statements once the value
of any work in progress on the Company’s consolidated
balance sheet funded by such loans has been deducted;
(iv)Total Debt (taking into account only indebtedness and
other obligations which are secured by security over those
Properties in respect of which rental income is being earned
by a member of the group) shall not at any time be greater
than 60% of the aggregate market value of all Properties in
respect of which rental income is being earned by a member
of the group in respect of the letting of completed buildings
to tenants;
(v) adjusted EBITDA in respect of the consolidated income of
the group derived from Charged Assets in respect of the
relevant period being tested expressed as a percentage
of the interest payable at that time (relating only to
indebtedness and other obligations which are secured by
security over the Charged Assets) is, at all times, at least
200%; and
(vi)adjusted EBITDA in respect of the projected consolidated
income of the group derived from Charged Assets in
respect of the relevant period being tested expressed as a
percentage of the projected interest payable for such period
(relating only to indebtedness and other obligations which
are secured by security over the Charged Assets) is, at all
times, at least 200%.
The Company will be deemed to be in default under the new credit
agreement if any one of a number of events occurs. Such events
of default include, but are not limited to, non-payment, breach of
financial covenants, cross default in respect of any other financial
indebtedness of the Company, insolvency, loss of REIT status
or the occurrence of any event or circumstance which, in the
opinion of the majority lenders, has or is reasonably likely to have
a material adverse effect on the Company. The occurrence of an
event of default will entitle the agent, if directed by the majority
lenders, to accelerate the facilities, cancel the commitments,
exercise the security or require that the facilities are immediately
repayable on demand.
Political Contributions
There were no political contributions which are required to be
disclosed under the Electoral Act, 1997.
Accounting Records
The Directors are responsible for ensuring accounting records,
as outlined in Sections 281 to 285 of the Companies Act, 2014,
are kept by the Company. The Directors believe that they have
complied with this requirement by providing adequate resources
to maintain accounting records through the delegation of these
functions to the Investment Manager, including by ensuring that it
has adequate numbers of appropriately trained and experienced
staff to perform such functions with an appropriate standard of
care. The accounting records of the Company are maintained at
its registered office located at Unit 4B Lazer Lane, Grand Canal
Square, Dublin 2.
Takeover Regulations
The Company has certain banking facilities which may require
repayment and cancellation of the commitments thereunder
in the event that a change of control occurs with respect to
the Company. In addition, the LTIP contains change of control
provisions which allow for the acceleration of the exercisability
of share options or awards in the event that a change of control
occurs with respect to the Company.
Annual Report 2015
Irish Residential Properties REIT plc
63
Report of the Directors (cont’d)
There are no other significant agreements to which the Company
is a party that take effect, alter or terminate upon a change of
control of the Company following a bid.
The information on Directors on pages 34 to 35 and the
disclosures on Directors’ Remuneration on page 50 of this
Report cover the information required for the purposes of
Regulation 21 of the European Communities (Takeover Bids
(Directive 2004/25/EC)) Regulations 2006.
Resolutions are categorised as either ordinary or special
resolutions. A bare majority of more than 50% of the votes cast
by members voting on the relevant resolution is required for the
passing of an ordinary resolution, whereas a qualified majority of
more than 75% of the votes cast by members voting on the relevant
resolution is required in order to pass a special resolution. Matters
requiring a special resolution include, for example: altering the
objects of the Company; altering the Articles of Association of
the Company; and approving a change of the Company’s name.
Auditor
Memorandum and Articles of Association
PricewaterhouseCoopers will continue in office in accordance
with the provisions of Section 383(2) of the Companies Act, 2014.
A resolution authorising the Directors to set their remuneration
will be proposed at the Company’s annual general meeting to be
held on 16 May 2016.
The Company’s Memorandum and Articles of Association set
out the objects and powers of the Company. The Articles of
Association detail the rights attaching to shares, the method by
which the Company’s shares can be purchased or re-issued,
the provisions which apply to the holding and voting at general
meetings and the rules relating to Directors, including their
appointment, retirement, re-election, duties and powers. The
Articles of Association may be amended by special resolution of
the shareholders, being a resolution proposed on not less than
21 days’ notice as a special resolution and passed by more than
75% majority of those voting on the resolution.
General Meetings
The Company holds a general meeting each year as its annual
general meeting in addition to any other meeting in that year.
Not more than 15 months shall elapse between the date of one
annual general meeting and that of the next. The Directors are
responsible for the convening of general meetings. Information
is distributed to shareholders at least 20 working days prior to the
annual general meeting.
No business other than the appointment of a chairman shall be
transacted at any general meeting unless a quorum of members
is present at the time when the meeting proceeds to business.
Except as provided in relation to an adjourned meeting, three
(3) persons entitled to vote upon the business to be transacted,
each being a member or proxy for a member or a duly authorised
representative of a corporate member, shall be a quorum.
Directors
21 March 2016
Colm Ó Nualláin
Chairman
Votes may be given either personally or by proxy or a duly
authorised representative of a corporate member. Subject to
rights or restrictions for the time being attached to any class or
classes of shares, on a show of hands, every member present
in person and every proxy or duly authorised representative of a
corporate body shall have one vote. No individual shall have more
than one vote, and on a poll, every member present in person or
by proxy or a duly authorised representative of a corporate body
shall have one vote for every share carrying voting rights of which
the individual is the holder.
64
Irish Residential Properties REIT plc
Annual Report 2015
David Ehrlich
Executive Director
Statement of Directors’
Responsibilities
The Directors are responsible for preparing the Report and the
financial statements in accordance with applicable laws and
regulations together with a description of the principal risks and
uncertainties that it faces.
Company law requires the Directors to prepare financial statements for each financial period. Under such law the Directors have
prepared the Company’s financial statements in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by
the European Union (“EU”) and in accordance with the provisions
of the Companies Act, 2014.
The financial statements are required by law and IFRS to present
a true and fair view of the financial position of the Company and
the Group and the performance of the Group.
In preparing the financial statements, the Directors are required to:
• select suitable accounting policies and apply them consistently;
• make judgements and estimates that are reasonable and
prudent;
• comply with IFRS as adopted by the European Union, subject
to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records which are (i) sufficient to correctly record and explain the
transactions of the Company and the Group, (ii) enable, at any
time, the assets and liabilities, financial position and profit or loss
of the Company to be determined with reasonable accuracy, and
(iii) ensuring that the financial statements are prepared in accordance with IFRS as adopted by the European Union and in accordance with the provisions of the Companies Act, 2014.
The Directors are also responsible for safeguarding the assets of
the Company and the Group and for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
In accordance with applicable law and the Listing Rules issued by
the Irish Stock Exchange, the Directors are also required to prepare
a Report of Directors and reports relating to Directors’ remuneration and corporate governance. The Directors are also required by
the Transparency (Directive 2004/109/EC) Regulations 2007 (the
“Transparency Regulations”) to include a management report
containing a fair review of the business and a description of the
principal risks and uncertainties facing the Group.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in Ireland governing the preparation and dissemination of the financial statements may differ from legislation
in other jurisdictions.
The Directors have contracted with the Investment Manager in
order to ensure that those requirements are met. The books and
accounting records of the Group and the Company are maintained
at its registered office located at Unit 4B Lazer Lane, Grand Canal
Square, Dublin 2. The Directors have delegated investment management and administration functions, including risk management,
to the Investment Manager without abrogating their overall responsibility. The Directors have in place mechanisms for monitoring the
exercise of such delegated functions, which are always subject to
the supervision and direction of the Board. These delegations of
functions and the appointment of regulated third-party entities are
set out in the Corporate Governance Statement on pages 38 to 44.
Each of the Directors, whose names and functions are listed on
pages 34 to 35, confirms that, to the best of each person’s knowledge and belief:
As required by the Transparency Regulations:
• the financial statements, prepared in accordance with IFRS
as adopted by the EU, give a true and fair view of the assets,
liabilities and financial position for the Group and the
Company as at 31 December 2015 and of the results of the
Group, taken as a whole, for the period 1 January 2015 to 31
December 2015;
• the Report of the Directors, the Chairman’s Statement, the
Chief Executive Officer’s Statement and the IRES Fund
Management, Investment Manager Statement include a fair
review of the development and performance of the Group’s
business and the position of the Group as at 31 December
2015, together with a description of the principal risks and
uncertainties that it faces; and
As required by the UK Corporate Governance Code:
• the Report and financial statements contained therein,
taken as a whole, are fair, balanced and understandable
and provides the information necessary for shareholders to
assess the Company’s position and performance, business
model and strategy.
Colm Ó Nualláin
Chairman
David Ehrlich
Executive Director
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
Annual Report 2015
Irish Residential Properties REIT plc
65
Independent Auditors’ Report to the
members of Irish Residential Properties REIT plc
for the year ended 31 December 2015
Report on the financial statements
Our opinion
In our opinion:
• Irish Residential Properties REIT plc’s Group financial
statements and Company financial statements (the
“financial statements”) give a true and fair view of the
Group’s and the Company’s assets, liabilities and financial
position as at 31 December 2015 and of the Group’s profit
and the Group’s and the Company’s cash flows for the year
then ended;
• the Group financial statements have been properly prepared
in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union;
• the Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union as applied in accordance with the
provisions of the Companies Act 2014; and
• the financial statements have been properly prepared in
accordance with the requirements of the Companies Act
2014 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
What we have audited
The financial statements, included within the Annual Report,
comprise:
• the Consolidated and Company Statements of Financial
Position as at 31 December 2015;
• the Consolidated Statement of Profit and Loss and Other
Comprehensive Income for the year then ended;
• the Consolidated and Company Statements of Cash Flows
for the year then ended;
• the Consolidated and Company Statements of Changes
in Equity for the year then ended; and
• the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented elsewhere in
the Annual Report, rather than in the notes to the financial statements. These are cross-referenced from the financial statements
and are identified as audited.
Our audit approach
Overview
Materiality
• Overall Group materiality: €4.5 million which represents 1%
of net assets.
• Specific Group materiality: €625,000 (5% of profit before tax
excluding movement in fair value of investment properties)
used for profit and loss items other than movement in fair
value of investment properties.
Audit scope
• We conducted audit work in one location, Dublin.
• The location and functions where we performed our audit
work accounted for 100% of revenues and 100% of profit
before tax.
Areas of focus
• Valuation of investment properties.
• Transactions with related parties.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing
the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective
judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering
future events that are inherently uncertain. As in all of our audits
we also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of bias
by the directors that represented a risk of material misstatement
due to fraud.
The risks of material misstatement that had the greatest effect
on our audit, including the allocation of our resources and effort,
are identified as “areas of focus” in the table below. We have also
set out how we tailored our audit to address these specific areas
in order to provide an opinion on the financial statements as a
whole. This is not a complete list of all risks identified by our audit.
The financial reporting framework that has been applied in the
preparation of the financial statements is Irish law and IFRSs as
adopted by the European Union and, as regards the Company
financial statements, as applied in accordance with the provisions
of the Companies Act 2014.
66
Irish Residential Properties REIT plc
Annual Report 2015
AREA OF FOCUS
Valuation of investment properties
We focused on this area because the valuation
of investment properties involves significant
judgement in the estimation of stabilised Net
Rental Income (“stabilised NRI”) and in the
selection of the appropriate capitalisation rate to
be applied to stabilised NRI for each multi-unit
residential property.
As set out in note 5 to the financial statements,
the capitalisation rate to be applied to stabilised
NRI for each multi-unit residential property
is dependent on the actual location, size and
quality of the property, taking into account any
available market data at the valuation date.
HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS
We obtained an understanding of the controls put in place by management
over the valuation process. We read and considered the valuation report
prepared by the external appraiser at 31 December 2015.
We performed testing on the underlying data provided to the external
appraiser on which NRI is based.
We discussed with management and the external appraiser the valuation
process, the significant assumptions used in estimating future rental
incomes and the key judgements used in the selection of the appropriate
capitalisation rates. We considered these assumptions and judgements
in the context of available market data.
We considered the competence, integrity and independence of the
external appraiser.
We also considered the year on year movements in capital values
(or movements from the acquisition date to the year end date where
properties were acquired during the year) by reference to relevant
published benchmarks.
We considered the disclosures made in the financial statements in relation
to the valuation of investment properties.
Transactions with related parties
As set out in note 16 to the financial statements,
a number of related party relationships exist
between the Group and CAPREIT and its
affiliates.
We focused on this area to address the risk
of non disclosure of relationships and of
transactions between the parties.
We read Board Minutes and Agreements with related parties.
We tested that amounts charged in the financial statements in respect of
fees from CAPREIT were calculated in accordance with the investment
management agreement.
We considered the disclosures included in the financial statements for
consistency with the agreements in place and transactions recorded during
the year.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the geographic
structure of the Group, the accounting processes and controls,
and the industry in which the Group operates.
The Group comprises a number of legal entities, all located in
the Republic of Ireland and all of the audit work was performed
in Ireland by the Group engagement team. In establishing the
overall approach to the audit, we determined the type of work
that needed to be performed on the individual financial statement
line items for the Group and the Company depending on risk
assessment and materiality.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement
line items and disclosures and in evaluating the effect of
misstatements, both individually and on the financial statements
as a whole.
Annual Report 2015
Irish Residential Properties REIT plc
67
Independent Auditors’ Report (cont’d)
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall Group materiality
€4.5 million (2014: €2.0 million).
How we determined it
1% of net assets.
Rationale for benchmark applied
We determined materiality using net assets for the following
reasons:
• As a property Group the primary ‘value’ of the entity is in
its net assets.
• Typically market investors will invest in a property entity
in expectation of net asset growth. Market commentators
will often quote a share price as a premium or discount to
net assets rather than as a multiple of earnings.
In addition, we set a specific materiality level of €625,000 for profit
and loss items other than the net movement in the fair value of
investment properties. This approximates 5% of profit before
tax excluding net movement in the fair value of investments. In
arriving at this judgement we had regard to the fact that a number
of key performance indicators of the Group are driven by income
statement items.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above €225,000
(2014: €100,000) as well as misstatements below that amount
that, in our view, warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the directors’
statement, set out on page 61, in relation to going concern. We
have nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we
have anything material to add or to draw attention to in relation
to the directors’ statement about whether they considered it
appropriate to adopt the going concern basis in preparing the
financial statements. We have nothing material to add or to draw
attention to.
As noted in the directors’ statement, the directors have concluded
that it is appropriate to adopt the going concern basis in preparing
the financial statements. The going concern basis presumes that
the Group and Company have adequate resources to remain in
operation, and that the directors intend them to do so, for at least
one year from the date the financial statements were signed. As
part of our audit we have concluded that the directors’ use of
the going concern basis is appropriate. However, because not all
future events or conditions can be predicted, these statements
are not a guarantee as to the Group’s and Company’s ability to
continue as a going concern.
Other required reporting
Consistency of other information
Companies Act 2014 opinion
In our opinion the information given in the Report of the Directors is consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
• information in the Annual Report is:
–
−
−
materially inconsistent with the information in the audited financial statements; or
apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Group and Company acquired in the course of performing our audit; or
otherwise misleading.
• the statement given by the directors on page 65, in accordance with provision C.1.1 of the UK
Corporate Governance Code (the “Code”), that they consider the Annual Report taken as a whole
to be fair, balanced and understandable and provides the information necessary for members to
assess the Group’s and Company’s position and performance, business model and strategy is
materially inconsistent with our knowledge of the Group and Company acquired in the course of
performing our audit.
68
Irish Residential Properties REIT plc
Annual Report 2015
We have no
exceptions to
report.
We have no
exceptions to
report.
ISAs (UK & Ireland) reporting (cont’d)
• the section of the Annual Report on pages 45 to 48, as required by provision C.3.8 of the
Code, describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We have no
exceptions to report.
The directors’ assessment of the prospects of the Group and of the principal risks that would
threaten the solvency or liquidity of the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw
attention to in relation to:
• the directors’ confirmation on pages 42 to 43 of the Annual Report, in accordance with provision
C.2.1 of the Code, that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency
or liquidity.
• the disclosures in the Annual Report that describe those risks and explain how they are being
managed or mitigated.
• the directors’ explanation on page 61 of the Annual Report, in accordance with provision C.2.2 of
the Code, as to how they have assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
We have nothing
material to add or to
draw attention to.
We have nothing
material to add or to
draw attention to.
We have nothing
material to add or to
draw attention to.
Under the Listing Rules we are required to review the directors’ statement that they have carried out
a robust assessment of the principal risks facing the Group and the directors’ statement in relation
to the longer-term viability of the Group. Our review was substantially less in scope than an audit
and only consisted of making inquiries and considering the directors’ process supporting their
statements; checking that the statements are in alignment with the relevant provisions of the Code;
and considering whether the statements are consistent with the knowledge acquired by us in the
course of performing our audit. We have nothing to report having performed our review.
Directors’ remuneration and transactions
Under the Companies Act 2014, we are required to report to you
if, in our opinion, the disclosure of directors’ remuneration and
transactions specified by sections 305 to 312 of that Act have
not been made, and under the Listing Rules of the Irish Stock
Exchange we are required to review the six specified elements
of disclosures in the report to shareholders by the Board on
directors’ remuneration. We have no exceptions to report arising
from these responsibilities.
Corporate governance statement
• In our opinion, based on the work undertaken in the course
of our audit of the financial statements:
− the description of the main features of the internal control
and risk management systems in relation to the financial
reporting process; and
− the information required by Section 1373(2)(d) of
the Companies Act 2014 included in the Corporate
Governance Statement is consistent with the financial
statements and has been prepared in accordance with
section 1373(2) of the Companies Act 2014.
Annual Report 2015
Irish Residential Properties REIT plc
69
Independent Auditors’ Report (cont’d)
• Based on our knowledge and understanding of the
Company and its environment obtained in the course of
our audit of the financial statements, we have not identified
material misstatements in the description of the main
features of the internal control and risk management
systems in relation to the financial reporting process and the
information required by section 1373(2)(d) of the Companies
Act 2014 included in the Corporate Governance Statement.
• In our opinion, based on the work undertaken during
the course of our audit of the financial statements, the
information required by section 1373(2)(a),(b),(e) and (f) is
contained in the Corporate Governance Statement.
• Under the Listing Rules of the Irish Stock Exchange we are
required to review the part of the Corporate Governance
Statement relating to the Company’s compliance with ten
provisions of the UK Corporate Governance Code and the
two provisions of the Irish Corporate Governance Annex
specified for our review. We have nothing to report having
performed our review.
Other matters on which we are required to report by the
Companies Act 2014
• We have obtained all the information and explanations
which we consider necessary for the purposes of our audit.
• In our opinion the accounting records of the Company were
sufficient to permit the Company financial statements to be
readily and properly audited.
• The Company Statement of Financial Position is in
agreement with the accounting records.
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 65, the directors are responsible for the
preparation of the financial statements and for being satisfied that
they give a true and fair view.
report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes
an assessment of:
• whether the accounting policies are appropriate to the
Group’s and the Company’s circumstances and have been
consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates
made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming our
own judgements, and evaluating the disclosures in the financial
statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide
a reasonable basis for us to draw conclusions. We obtain audit
evidence through testing the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications
for our report.
Our responsibility is to audit and express an opinion on the
financial statements in accordance with Irish law and ISAs (UK &
Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance with
section 391 of the Companies Act 2014 and for no other purpose.
We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this
70
Irish Residential Properties REIT plc
Paul Hennessy
for and on behalf of PricewaterhouseCoopers
Chartered Accountants and Statutory Audit Firm
Dublin
21 March 2016
Annual Report 2015
Financial
Statements
Annual Report 2015
Irish Residential Properties REIT plc
71
Consolidated Statement
of Financial Position
as at 31 December 2015
Note
2015
€’000
2014
€’000
5
6
472,230 322 323,580
618
472,552 324,198
6
9,494 3,563 2,004
6,146
Assets
Non-Current Assets
Investment properties Other non-current assets
Current Assets
Other current assets
Cash and cash equivalents
13,057 8,150
485,609 332,348
9
–
125,000
Current Liabilities
Current portion of bank indebtedness 9
Accounts payable and accrued liabilities
7
Security deposits
–
125,000
Total Assets
Liabilities
Non-Current Liabilities
Non-current portion of bank indebtedness Total Liabilities
41,529 –
6,960 4,911
2,100 1,519
50,589 6,430
50,589 131,430
Shareholders’ Equity
Share capital
Share premium
Other reserve
Retained earnings
11
11
41,700 20,200
354,978 172,374
1,553 574
36,789 7,770
Total Shareholders’ Equity
435,020 200,918
Total Shareholders’ Equity and Liabilities
485,609 332,348
The accompanying notes form an integral part of these financial statements.
Colm Ó Nualláin
David Ehrlich
Chairman
Executive Director
72
Irish Residential Properties REIT plc
Annual Report 2015
Consolidated Statement
of Profit and Loss and Other Comprehensive Income
for the year ended 31 December 2015
1 January 2015 to 31 December 2015
Note
€’000
2 July 2013
(date of
incorporation) to
31 December 2014
€’000
Operating Revenues
Revenue from investment properties
24,721 Operating Expenses
Property taxes
Property operating costs
(364)(199)
(4,389)(1,850)
Net Rental Income (“NRI”)
General and administrative expenses
Asset management fee
Share-based compensation expense
Net movement in fair value of investment properties
Depreciation of property, plant and equipment
Operating Profit
Financing costs on credit facility
Interest on intercompany loan
Investment income
Profit before Taxes
Current income tax expense
9,675
(4,753)(2,049)
19,968 7,626
10
5
(2,990)(2,218)
(1,938)(723)
(979)(574)
18,639 7,364
(13)(11)
9
8
32,687 11,464
(1,865)(1,147)
– (1,464)
–
23
13
30,822 –
8,876
(946)
Profit for the Period
30,822 7,930
Total Comprehensive Income
for the Period Attributable to Shareholders
30,822 7,930
Basic Earnings per Share (cents)
18
8.4 8.3
Diluted Earnings per Share (cents)
18
8.3 8.3
The accompanying notes form an integral part of these financial statements.
Name
David Ehrlich
Position
Executive Director
Annual Report 2015
Irish Residential Properties REIT plc
73
Consolidated Statement
of Changes in Equity
for the year ended 31 December 2015
Share
Capital
Share
Premium
Retained
Earnings
Other
Reserve
Total
Note
€’000
€’000
€’000
€’000
€’000
Shareholders’ Equity at 1 January 2015
Total comprehensive income for the period
Profit for the period
20,200 172,374 7,770 574 200,918
–
–
30,822 –
30,822
Total comprehensive income for the period
–
–
30,822 –
30,822
Transactions with owners, recognised directly in equity
Issue of ordinary shares for cash
Share issue costs
Long-term incentive plan
11
11
10
21,500 –
–
193,500 (10,896)
–
–
–
–
–
–
979 215,000
(10,896)
979
Transactions with owners, recognised directly in equity
21,500 182,604 –
979 205,083
Dividends of ordinary shares
Dividends paid
14
–
–(1,803)
–(1,803)
Dividends of ordinary shares
–
–
(1,803)
–
(1,803)
Shareholders’ Equity at 31 December 2015
41,700 354,978 36,789 1,553 435,020
Share
Capital
Share
Premium
Retained
Earnings
Other
Reserve
Total
Note
€’000
€’000
€’000
€’000
€’000
–
–
–
–
–
Shareholders’ Equity at 2 July 2013
Total comprehensive income for the period
Profit for the period
–
–
7,930 –
7,930
Total comprehensive income for the period
–
–
7,930 –
7,930
Transactions with owners, recognised directly in equity
Issue of ordinary shares for cash
Share issue costs
Capitalisation of bonus shares (1)
Long-term incentive plan
11
11
11
10
20,040 –
160 –
180,000 (7,626)
–
–
–
–
(160)
–
–
–
–
574 200,040
(7,626)
–
574
Transactions with owners, recognised directly in equity
20,200 172,374 (160)
574 192,988
Shareholders’ Equity at 31 December 2014
20,200 172,374 7,770 574 200,918
(1) €1.6 million of the retained earnings as at 30 June 2014 arose prior to the Company registering as an Irish REIT, with effect from 31 March 2014.
€160,000 was transferred to ordinary share capital, being the total par value of the bonus issue of 1,600,000 ordinary shares on 11 April 2014 (see note 10).
The €1.6 million has been designated as an undistributable reserve within the meaning of the Companies Act, 2014.
The accompanying notes form an integral part of these financial statements.
74
Irish Residential Properties REIT plc
Annual Report 2015
Consolidated Statement
of Cash Flows
for the year ended 31 December 2015
1 January 2015 to 31 December 2015
Note
€’000
2 July 2013
(date of
incorporation) to
31 December 2014
€’000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating Activities
Profit before taxes
Items related to operating activities not affecting cash:
Fair value adjustment – investment properties
Depreciation of property, plant and equipment
Amortisation of other financing costs Share-based compensation expense
Straight-line rent adjustment
9
10
(18,639)(7,364)
13 11
370 173
979 574
(196)(73)
Taxes paid
Profit items related to financing and investing activities Changes in operating assets and liabilities 15
15
13,349 2,197
–(946)
1,495 2,415
(4,860)4,426
Net Cash Generated from Operating Activities
30,822 8,876
9,984 8,092
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of investment properties Investment property enhancement expenditure
Purchase of property, plant and equipment
Direct leasing cost
Investment income
(125,480)(315,684)
(4,326)(459)
–
(58)
(9)–
–
23
Net Cash Used in Investing Activities
(129,815)(316,178)
8
8
9
9
8
15
14
–45,000
–(45,000)
(87)(744)
(83,471)125,000
(1,495)
(974)
–
(1,464)
204,104 192,414
(1,803)–
CASH FLOWS FROM FINANCING ACTIVITIES
Intercompany loan advanced
Intercompany loan repaid on maturity
Arrangement fee on credit facility
Bank indebtedness
Interest paid on bank indebtedness
Interest paid on intercompany loan
Net proceeds on issuance of shares
Dividends paid to shareholders
Net Cash Generated from Financing Activities
Changes in Cash and Cash Equivalents during the Period
Cash and Cash Equivalents, Beginning of the Period
(2,583)6,146
6,146 –
Cash and Cash Equivalents, End of the Period
The accompanying notes form an integral part of these financial statements.
Annual Report 2015
117,248 314,232
3,563 6,146
Irish Residential Properties REIT plc
75
Notes to Financial Statements
as at 31 December 2015
Note 1
General Information
Irish Residential Properties REIT plc (“I-RES” or the “Company”)
was incorporated in Ireland on 2 July 2013 as Shoreglade Limited
(formerly known as CAPREIT Ireland Limited, Irish Residential
Apartments REIT Limited and Irish Residential Properties REIT
Limited). On 16 April 2014, I-RES obtained admission of its ordinary shares to the primary listing segment of the Official List
of the Irish Stock Exchange for trading on the regulated market
for listed securities of the Irish Stock Exchange. Its registered office is Unit 4B Lazer Lane, Grand Canal Square, Dublin 2, Ireland.
Ordinary shares of I-RES are listed on the Irish Stock Exchange
under the symbol “IRES.”
I-RES was previously a wholly-owned subsidiary of CAPREIT
Limited Partnership (“CAPREIT LP”), prior to the Initial Offering
(as defined in note 11) on 16 April 2014. As a result of the Initial
Offering, CAPREIT LP’s interest in I-RES was diluted to 20.792%.
As of 26 March 2015, as a result of the Capital Raise (as defined in
note 10), CAPREIT LP’s interest in I-RES was diluted to 15.707%.
IRES Residential Properties Limited is a wholly-owned consolidated subsidiary of I-RES, acquired on 31 March 2015, and owns
directly the beneficial interest of its properties. I-RES and IRES
Residential Properties Limited together are referred to as “the
Group” in these consolidated financial statements. The Group
owns interests in multi-unit residential rental apartment properties located in and near major urban centres in Dublin, Ireland.
Specifically, IRES Residential Properties Limited owns an interest
in the “Rockbrook Portfolio,” which consists of 81 apartments
at Rockbrook Grande Central and 189 apartments at Rockbrook
South Central, mixed-use commercial space of approximately
4,665 sq. m., a development site of approximately 1.13 hectares
and associated basement car parking.
Note 2
Significant Accounting Policies
a) Basis of preparation
These consolidated financial statements of the Group have
been prepared in accordance with International Accounting
Standards (“IFRS”) as adopted by the European Union (“EU”),
IFRS Interpretations Committee (“IFRIC”) interpretations and
those parts of the Companies Act, 2014, applicable to companies
reporting under IFRS. The Company has availed of the exemption
to present an individual statement of profit and loss and other
comprehensive income provided in the Companies Act, 2014.
76
Irish Residential Properties REIT plc
The consolidated financial statements of the Group are prepared
on a going concern basis and under the historical cost convention,
as modified by the revaluation of investment properties at fair
value through profit or loss. The consolidated financial statements
of the Group have been presented in euros, which is the Group’s
functional currency.
The consolidated financial statements of the Group cover the
twelve-month period from 1 January 2015 to 31 December 2015.
The Group has not early adopted any forthcoming International
Accounting Standards Board (“IASB”) standards. Note 2(t) sets
out details of such upcoming standards.
Going concern
The Group meets its day-to-day working capital requirements
through its cash and deposit balances. The Group’s plans indicate that it should have adequate resources to continue operating
for the foreseeable future. Accordingly, the Directors consider it
appropriate that the Group adopts the going concern basis in the
preparation of the consolidated financial statements.
b) Basis of consolidation
These consolidated financial statements incorporate the financial statements of I-RES and its subsidiary, IRES Residential
Properties Limited. I-RES controls IRES Residential Properties
Limited by virtue of its 100% shareholding in that company. All intragroup assets and liabilities, equity, income, expenses and cash
flows relating to transactions between members of the Group are
eliminated in full on consolidation.
Subsidiaries
Subsidiaries are entities controlled by I-RES. I-RES controls an
entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect these
returns through its power over the entity. The financial information
of subsidiaries (except owner management companies) is
included in the consolidated financial statements from the date on
which control commences until the date on which control ceases.
I-RES does not consolidate owner management companies in
which it holds majority voting rights. For further details, please
refer to note 16.
c) Investment properties
The Group considers its income properties to be investment
properties under IAS 40, Investment Property (“IAS 40”), and
has chosen the fair value model to account for its investment
properties in the consolidated financial statements. Fair value
represents the amount at which the properties could be
Annual Report 2015
exchanged between a knowledgeable and willing buyer and a
knowledgeable and willing seller in an arm’s-length transaction
at the date of valuation.
Investment properties comprise investment interests held in
land and buildings (including integral equipment) held for the
purpose of producing rental income, capital appreciation or both,
but not for sale in the ordinary course of business. The Group’s
investment properties have been valued on a highest and bestuse basis, but do not include any portfolio premium that may be
associated with the economies of scale of owning a large portfolio
of properties.
All investment properties are initially recorded at cost, which
includes transaction and other acquisition costs, at their
respective acquisition dates and are subsequently stated at fair
value at each consolidated statement of financial position date,
with any gain or loss arising from a change in fair value recognised
within operating income in the consolidated statement of profit
and loss and other comprehensive income for the period. Gains
and losses incurred on the disposal of investment properties are
also recognised in the consolidated statement of profit and loss
and other comprehensive income.
The fair value of investment properties is determined by a qualified
external appraiser. Management undertakes a review of its
investment property valuations between external appraisal dates
to assess the continuing validity of the underlying assumptions,
such as cash flows and Capitalisation Rates. These assumptions
may be modified based on market information obtained from the
external appraiser. Where increases or decreases are warranted,
the carrying values of I-RES’ investment properties are adjusted.
See notes 3 and 5 for a detailed discussion of the significant
assumptions, estimates and valuation methods used.
d) Property asset acquisition
At the time of acquisition of a property or a portfolio of investment
properties, the Group evaluates whether the acquisition is a
business combination or asset acquisition. IFRS 3, Business
Combinations (“IFRS 3”), is applicable only if it is considered
that a business has been acquired. A business, under IFRS 3,
is defined as an integrated set of activities and assets conducted
and managed for the purpose of providing a return to investors,
or to lower costs or provide other economic benefits directly and
proportionately to investors.
When determining whether the acquisition of an investment
property or a portfolio of investment properties is a business
combination or an asset acquisition, the Group applies judgement
when determining whether an integrated set of activities is
acquired in addition to the property or portfolio of properties.
Activities can include whether employees were assumed in the
acquisition and whether an operating platform has been acquired.
When an acquisition does not represent a business as defined
under IFRS 3, the Group classifies these properties, or portfolio
of properties, as an asset acquisition. Identifiable assets acquired
and liabilities assumed in an asset acquisition are measured
initially at their fair values at the acquisition date. Acquisitionrelated transaction costs are capitalised to the property.
e) Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation, and mainly comprise of head office
fixtures and fittings and information technology hardware. These
items are depreciated on a straight-line basis over their estimated
useful lives ranging from three to five years.
f) Tenant inducements
Incentives such as cash, rent-free periods and move-in allowances
may be provided to lessees who enter into a lease. The incentives
are written off on a straight-line basis over the term of the lease
as a reduction of rental revenue.
g) Financial instruments
Financial assets and financial liabilities
Financial assets and financial liabilities are initially recognised
at fair value and are subsequently accounted for based on their
classification, as described below. Their classification depends
on the purpose for which the financial instruments were acquired
or issued, their characteristics and the Group’s designation of
such instruments.
Annual Report 2015
Irish Residential Properties REIT plc
77
Notes to Financial Statements (cont’d)
Classification of financial instruments
The following summarises the classification and measurement
the Group has elected to apply to each of its significant categories
of financial instruments:
Type
ClassificationMeasurement
Financial Assets
Cash and cash equivalents
Cash and
cash equivalents Amortised cost
Other receivables
Loans and
receivables
Amortised cost
Financial Liabilities Bank indebtedness
Other liabilities
Accounts payable
and accrued liabilities Other liabilities
Security deposits
Other liabilities
Amortised cost
Amortised cost
Amortised cost
h) Intercompany loan
An intercompany loan was recognised at amortised cost using
the effective interest rate method. Under the effective interest
rate method, any transaction fees, costs and discounts directly
related to the intercompany loan were recognised within interest
on intercompany loan in the consolidated statement of profit and
loss and other comprehensive income over the expected term of
the intercompany loan. The intercompany loan was repaid in full
on 16 April 2014.
i) Revenue recognition
The Group recognises rental revenue using the straight-line
method, whereby the total amount of rental revenue to be
received from all leases is accounted for on a straight-line basis
over the term of the related leases. The difference between the
rental revenue recognised and the amounts contractually due
under the lease agreements is accrued as rent receivable.
j) Interest on intercompany loan
This amount includes interest and other financing costs payable
on the intercompany loan, which is expensed at the stated
interest rate specified by the terms of the intercompany loan
agreement between I-RES and CAPREIT LP. The intercompany
loan agreement terminated when I-RES repaid the intercompany
loan in full on 16 April 2014.
k) Bank indebtedness, borrowing costs
and interest on credit facility
Bank indebtedness is recognised at amortised cost. Interest and
other financing costs includes interest on the credit facility, which
is expensed at the effective interest rate, and transaction costs
78
Irish Residential Properties REIT plc
incurred in connection with the revolving credit facilities, which
are capitalised and presented as other non-current assets and
amortised over the term of the facility to which they relate.
l) Operating segments
The Group operates and is managed as one business segment,
namely property investment, with all investment properties
located in Ireland. Operating segments are reported in a
manner consistent with the internal reporting provided to the
chief operating decision-maker, which has been identified as
I-RES’ Board.
m)Foreign currency transactions
Transactions in foreign currencies are translated into the Group’s
functional currency at exchange rates prevailing at the dates of
the transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are translated into the
functional currency at the exchange rate prevailing at that date.
n) Statement of cash flows
Cash and cash equivalents consist of cash on hand, balances
with banks and investments in money market instruments with
an original term to maturity of three months or less at acquisition.
Investing and financing activities that do not require the use of
cash or cash equivalents are excluded from the statement of
cash flows and are disclosed separately in the notes to financial
statements.
o) Income taxes
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 periods.
I-RES elected for REIT status on 31 March 2014. As a result, from
that date I-RES does not pay Irish corporation tax on the profits
and gains from its qualifying rental business in Ireland, provided
it meets certain conditions.
For the period from 2 July 2013 to 31 March 2014, I-RES is liable
for corporation tax on any profits and gains that would have arisen
prior to and upon election to REIT status.
Going forward, corporation tax is still payable in the normal
way in respect of income and gains from any residual business
(generally including any property trading business) not included
in the Property Rental Business. I-RES would also be liable to pay
other taxes such as VAT, stamp duty land tax, stamp duty, local
property tax and payroll taxes in the normal way.
Annual Report 2015
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.
p) Equity and share issue costs
The equity of I-RES consists of ordinary shares issued. Shares
issued are recorded at the date of issuance. Direct issue costs in
respect of the issue of shares are accounted for as a deduction
from equity. Direct issue costs include the costs of preparing the
prospectus, accounting, tax and legal expenses, underwriting
fees, and valuation fees in respect of the shares and other assets.
q) Net asset value (“NAV”)
The NAV is calculated as the value of the Group’s assets less the
value of its liabilities measured in accordance with IFRS as adopted
in the EU, and in particular will include the Group’s property assets
at their most recent independently assessed market values and
also the Group’s debt and hedging instruments at their most
recent independent valuations. EPRA NAV is calculated in
accordance with the European Public Real Estate Association
(“EPRA”) Best Practice Recommendations, September 2011 and
the additional guidance issued in December 2014.
r) Share-based payments
I-RES has determined that the options issued to senior executives
qualify as “equity-settled share-based payment transactions”
as per IFRS 2. In addition, any options issued to the directors
have also been based on “equity-settled share-based payment
transactions.” This implies the fair value of the options measured
on the grant date will be expensed over the vesting term with a
corresponding increase in equity. The fair value for all options
granted are measured using the Black-Scholes model.
s) IFRIC 21, Levies
This is an interpretation of IAS 37, Provisions, Contingent Liabilities
and Contingent Assets. IAS 37 sets out criteria for the recognition
of a liability, one of which is the requirement for the entity to have
a present obligation as a result of a past event (known as an
obligating event). The interpretation clarifies that the obligating
event that gives rise to a liability to pay a levy is the activity
described in the relevant legislation that triggers the payment of
the levy. This standard is applicable to annual reporting periods
beginning on or after January 1, 2014. The Group assessed the
standard and completed an analysis of the government levies that
the Group is subject to and determined IFRIC 21 does not impact
the Group on adoption in its current form.
t) Future accounting changes
The following new or amended standards and interpretations
have been issued by the IASB and are expected to apply to the
Group for future financial reporting. However, management does
not expect them to have a material impact.
IFRS 9, Financial Instruments (“IFRS 9”)
The complete version of IFRS 9 replaces most of the guidance
in IAS 39, Financial Instruments: Recognition and Measurement.
IFRS 9 retains but simplifies the mixed measurement model and
establishes three primary measurement categories for financial
assets: amortised cost, fair value through other comprehensive
income (“OCI”) and fair value through profit or loss. The basis
of classification depends on the entity’s business model and
the contractual cash flow characteristics of the financial asset.
Investments in equity instruments are required to be measured
at fair value through profit or loss with the irrevocable option at
inception to present changes in fair value in OCI. There is now a
new expected credit loss model that replaces the incurred loss
impairment model used in IAS 39 for financial liabilities.
For financial liabilities, there were no changes to classification
or measurement, except for the recognition of changes in credit
risk in OCI for liabilities designated at fair value through profit or
loss. IFRS 9 relaxes the requirements for hedge effectiveness by
replacing the bright line hedge effectiveness tests. It requires an
economic relationship between the hedged item and hedging
instrument and for the hedged ratio to be the same as the one
management actually uses for risk management purposes.
Contemporaneous documentation is still required but is different
to that currently prepared under IAS 39.
The effective date is 1 January 2018, and the EU has not yet
endorsed it.
Annual Improvements 2014
IFRS 5, Non-Current Assets Held for Sale and
Discontinued Operations
IFRS 7, Financial Instruments – Disclosures
IAS 19, Employee Benefits
IAS 34, Interim Financial Reporting
These amendments are effective 1 January 2016 and are EU
endorsed.
Annual Report 2015
Irish Residential Properties REIT plc
79
Notes to Financial Statements (cont’d)
IFRS 10 and IAS 28, Sale or Contribution of Assets
Between an Investor and its Associate or Joint Venture
The amendment clarifies an inconsistency between the two
standards, and establishes that a gain or loss on the sale or
contribution of assets between an investor and its associate or
joint venture is fully recognised when the transaction involves
a business, and a partial gain or loss is recognised when the
transaction involves assets that do not constitute a business. The
effective date is to be determined, and the EU has yet to endorse it.
IAS 27 and IFRS 1, Equity Method in
Separate Financial Statements
Amended to restore the option to apply the equity method when
accounting for investments in subsidiaries, joint ventures and
associates in an entity’s separate financial statements. This
amendment is effective 1 January 2016.
IAS 16 and IAS 38, Clarification of
Acceptable Methods of Depreciation and Amortisation
The amendment clarifies, in both standards, that the use of a
revenue-based depreciation and amortisation method is not
appropriate. This amendment is effective 1 January 2016 and is
EU endorsed.
IFRS 11, Accounting for Acquisitions of
Interests in Joint Operations
This amendment provides specific guidance for the acquisition of
an interest in a joint operation that is a business. This amendment
came into effect on 1 January 2016 and is EU endorsed.
IFRS 15, Revenue from Contracts with Customers
New standard on revenue recognition, superseding IAS
18, Revenue, IAS 11, Construction Contracts and related
interpretations. This standard is effective 1 January 2018.
IAS 27, Consolidated and Separate Financial Statements
This amendment restores the option to use the equity method
to account for investments in subsidiaries, joint ventures and
associates in an entity’s separate financial statements. The
amendment came into effect on 1 January 2016 and is EU
endorsed.
IAS 1, Presentation of Financial Statements
This amendment clarifies guidance on materiality and
aggregation, the presentation of subtotals, the structure of
financial statements and the disclosure of accounting policies.
This amendment came into effect for years beginning on or after
1 January 2016 and is EU endorsed.
IFRS 14, Regulatory Deferral Accounts
This standard permits first-time adopters to continue to
recognise amounts related to rate regulation in accordance
with their previous GAAP requirements when they adopt IFRS.
This standard came into effect on 1 January 2016 and is not yet
endorsed by the EU.
IFRS 16, Leases
This standard specifies how an IFRS reporter will recognise,
measure, present and disclose leases. The standard provides a
single lessee accounting model, requiring lessees to recognise
assets and liabilities for all leases unless the lease term is
12 months or less or the underlying asset has a low value. This
standard is effective 1 January 2019.
IAS 7, Statement of Cash Flows
This amendment clarifies that entities shall provide disclosures
that enable users of financial statements to evaluate changes
in liabilities arising from financing activities. This amendment is
effective 1 January 2017.
IAS 8, Accounting Policies, Changes in Accounting Estimates
and Errors
This amendment clarifies the distinction between a change in
accounting policy and a change in accounting estimate.
I-RES is currently assessing the impact of the above standards
and amendments but does not expect to be significantly affected
on adoption in its current form.
Note 3
Critical Accounting Estimates,
Assumptions and Judgements
The preparation of the financial statements in accordance with
IFRS requires the use of estimates, assumptions and judgements
that in some cases relate to matters that are inherently uncertain,
and which affect the amounts reported in the financial statements
and accompanying notes. Areas of such estimation include, but
are not limited to, valuation of investment properties. Changes
to estimates and assumptions may affect the reported amounts
of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates under
different assumptions and conditions.
The valuation estimate of investment properties is deemed to be
more significant. See note 5 for a detailed discussion of valuation
methods and the significant assumptions and estimates used.
80
Irish Residential Properties REIT plc
Annual Report 2015
Note 4
Recent Investment Property Acquisitions
The Group has completed the following investment property acquisitions since 1 January 2015, which have contributed to the operating
results effective from the acquisition date:
For the period 1 January 2015 to 31 December 2015
Total
Acquisition Interest Term to
Apartment Count
Region
Costs Funding
Rate Maturity
€’000€’000
(Years)
31 March 2015
5 June 2015
6 November 2015
11 December 2015
270 92 8
40 Dublin, Ireland
Dublin, Ireland
Dublin, Ireland
Dublin, Ireland
90,603 19,968 2,283 12,626 410 125,480 –(1)–(1)– (1)
–(2)–(2)– (2)
(3)
(3)
–(3)–
–
(2)
(2)
(2)
– –
–
– (1) The acquisition was funded from equity proceeds raised on 26 March 2015.
The acquisition of IRES Residential Properties Limited, which owns the Rockbrook Portfolio, is considered an asset acquisition. Upon acquisition, I-RES
undertook the day-to-day property management services of IRES Residential Properties Limited. In addition, no processes or existing employees of IRES
Residential Properties Limited were acquired as part of the transaction. The purchase price is based on the value of the investment property acquired.
(2) The acquisition was funded from I-RES’ Credit Facility (as defined in note 9).
(3) The acquisition was funded from the Group’s cash reserves.
For the period 2 July 2013 to 31 December 2014
Total
Acquisition Interest Term to
Apartment Count
Region
Costs Funding
Rate Maturity
€’000€’000
(Years)
10 September 2013
27 June 2014
18 July 2014
7 October 2014 (3)
338 19 84 763 Dublin, Ireland
Dublin, Ireland
Dublin, Ireland
Dublin, Ireland
44,173 2,172 51,945 217,394 – (1)– (1)
– (1)
(2)
(2)
– – – (2)
(2)
– (2)–(2)–
– (4)– (4)– (4)
1,204 315,684 –
(1) The acquisition was funded from an intercompany loan payable to CAPREIT LP at a stated interest rate of 5.3% per annum.
The loan was repayable on demand, but in any event, no later than 29 August 2014, with interest on such amount at the stated interest rate.
The loan was repaid on 16 April 2014.
(2) The acquisition was funded from equity proceeds raised on 16 April 2014.
(3) Included are two residential apartments purchased in August and October 2014 relating to the initial portfolio aggregating to €424,000, which
was funded from cash on hand.
(4) The 761 residential apartment acquisition was funded from the proceeds of the Initial Offering (as defined in note 11) and from
the Credit Facility (as defined in note 9).
Annual Report 2015
Irish Residential Properties REIT plc
81
Notes to Financial Statements (cont’d)
Note 5
Investment Properties
Valuation basis
Investment properties are carried at fair value, which is the amount
at which the individual properties could be sold in an orderly
transaction between market participants, considering the highest
and best use of the asset, with any gain or loss arising from a
change in fair value recognised in the consolidated statement of
profit and loss and other comprehensive income for the period.
The fair values of all of the Group’s investment properties are
determined by a qualified external appraiser. The qualified external
appraiser holds a recognised relevant professional qualification
and has recent experience in the location and category of the
respective property. Valuations are prepared on a bi-annual basis
at the interim reporting date and the annual reporting date.
For investment property, the income approach / yield methodology
involves applying market-derived Capitalisation Rates to current
and market-derived future income streams. These Capitalisation
Rates and future income streams are derived from comparable
property 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.
Information about fair value measurements
using unobservable inputs (Level 3)
The Group tests the reasonableness of all significant unobservable
inputs, Capitalisation Rates and stabilised net rental income
(“Stabilised NRI”) used in the valuation, and reviews the results
with the external appraiser for all independent valuations. The
Stabilised NRI represents property revenue less property operating
expenses, adjusted for market-based assumptions such as longterm vacancy rates, management fees, repairs and maintenance.
At 31 December 2015, the Group considers that all of its
investment properties fall within Level 3 fair value as defined by
IFRS 13. As 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 a number of unobservable inputs
including technical reports, legal data, build costs, rental analysis,
professional opinion on profile, lot size, layout and presentation
of accommodation. In addition, the valuers also utilise proprietary
databases maintained in respect of similar properties to the
assets being valued.
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Irish Residential Properties REIT plc
Sensitivity analysis
Estimated Stabilised NRI and market-observed Capitalisation
Rates are key inputs into the valuation model used. For example,
completed properties are valued mainly using a term and reversion
model: i.e., the present values of future cash flows from expected
rental receipts are calculated. For the existing rental contract or
“term” this is the expected net rents from tenants over the period
to the next lease break option or expiry. After this period, the
“reversion,” estimated Stabilised NRI is used to calculate cash
flows based on expectations from current market conditions.
Thus a decrease in the estimated Stabilised NRI will decrease
the fair value, and an increase in the estimated Stabilised NRI will
increase the fair value.
The Capitalisation Rates magnify the effect of a change in
Stabilised NRI, with lower Capitalisation Rates resulting in a
greater effect on the fair value of investment properties than
higher Capitalisation Rates.
Across the entire portfolio of investment properties, a 1% increase
in the Equivalent Capitalisation Rate would have an impact of an
€81.8 million reduction in fair value while a 1% decrease in the
Equivalent Capitalisation Rate would result in a fair value increase
of €126.5 million.
The direct operating expenses recognised in the consolidated
statement of profit and loss and other comprehensive income for
the Group is €4.8 million for the year ended 31 December 2015,
arising from investment property that generated rental income
during the period. The direct operating expenses are comprised
of the following significant categories: property taxes, utilities,
repairs and maintenance, wages, insurance, service charges and
property management fees.
The direct operating expenses recognised in the consolidated
statement of profit and loss and other comprehensive income for
the Group is €nil for the year ended 31 December 2015, arising
from investment property that did not generate rental income
during the period. There were no investment properties for the
reporting period that did not generate rental income.
An investment property is comprised of various components,
including undeveloped land and vacant units for residential and
commercial; no direct operating costs were specifically allocated
to these components noted above.
Annual Report 2015
Quantitative information
A summary of the Equivalent Capitalisation Rates and ranges along with the fair value of the total portfolio of the Group as at
31 December 2015 is presented below:
As at 31 December 2015
Weighted
Type of Interest
Fair Value
WA NRI(1) Rate Type (3)
Max.
Min.Average
€’000
€’000
%
%
%
Investment properties Development land (2)
456,180 16,050 Total investment properties
472,230 2,315 Equivalent Capitalisation Rate
7.14
3.52
5.02
(1) Weighted average (“WA”) net rental income (“NRI”).
(2) Development land is fair-valued based on the value of the undeveloped site per acre.
(3) The Equivalent Capitalisation Rate disclosed above is based on the Stabilised NRI divided by the fair value of the investment property.
As at 31 December 2014
Weighted
Type of Interest
Fair Value
WA NRI(1) Rate Type (3)
Max.
Min.Average
€’000
€’000
%
%
%
Investment properties Development land (2)
Total investment properties
316,580 7,000
2,361 Equivalent Capitalisation Rate
6.95
4.56
5.22
323,580
(1) Weighted average (“WA”) net rental income (“NRI”).
(2) Development land is fair-valued based on the value of the undeveloped site per acre.
(3) The Equivalent Capitalisation Rate disclosed above is based on the Stabilised NRI divided by the fair value of the investment property.
The following table summarises the changes in the investment properties portfolio during the periods:
Reconciliation of carrying amounts of investment properties
For the Period
1 January 2015 to
31 December 2015
2 July 2013 (date
of incorporation) to
31 December 2014
€’000
€’000
Balance at the beginning of the period
Additions:
Acquisitions
Property capital investments
Capitalised leasing costs (1)
Direct leasing costs
Unrealised fair value movements
323,580 125,480 4,326 196 9
18,639 –
315,684
459
73
–
7,364
Balance at the end of the period
472,230 323,580
(1) Comprised of straight-line rent.
All the lease terms are one year or less.
The carrying value for the Group of €472.2 million for the investment properties at 31 December 2015 (and €323.6 million at
31 December 2014) was based on an external valuation carried out as at that date. The valuations were prepared in accordance with
the RICS Valuation – Professional Standards, January 2014 (Red Book).
Annual Report 2015
Irish Residential Properties REIT plc
83
Notes to Financial Statements (cont’d)
Note 6
Note 8
Other Assets
Intercompany Loan
As at 31 December
2015 2014
€’000
€’000
Other Non-Current Assets
Property, plant and equipment (1): At cost
Accumulated amortisation 58 (24)
58
(11)
34 288 47
571
322 618
Other Current Assets
Prepaid expenses
Other receivables
Deposits (3)
303 1,089 8,102 288
654
1,062
Total 9,494 2,004
Net property, plant and equipment
Deferred loan costs, net (2)
Total (1) Consists of head office fixtures and fittings and information technology
hardware.
(2) Includes deferred loan costs related to the Credit Facility (as defined in
note 9), net of accumulated amortisation of €543,000 as at 31 December
2015 and €173,000 as at 31 December 2014.
(3) Consists of €7.4 million paid as a deposit on an acquisition that closed
subsequent to the 2015 year end.
Note 7
Accounts Payable and Accrued Liabilities
As at 31 December
2015 2014
€’000
€’000
Accounts Payable and Accrued Liabilities
Rent deposits and early payments
1,010 Trade creditors
414 Accruals
5,254 Value-added tax 282 787
32
3,750
342
Total 6,960 4,911
On 16 April 2014, I-RES repaid an intercompany loan payable to
CAPREIT LP, a related party, aggregating to €45.0 million with
a stated interest rate of 5.3% per annum. The intercompany
loan was repayable on demand, but in any event, no later than
29 August 2014, with interest on such amount at the stated
interest rate.
Note 9
Credit Facility
I-RES entered into a facility agreement on 15 August 2014 (as
amended on 16 February 2015) with Barclays Bank Ireland
PLC and TD Bank, which provides for a credit facility of up to
€130.0 million, comprising a revolving facility of €60.0 million and a
bridge facility of €70.0 million (the “Credit Facility”). The revolving
facility has a two-year term from the date of the agreement, and
the bridge facility of €70.0 million was repayable at the earlier of:
(i) an issue of shares by I-RES; and (ii) the termination date of
the bridge facility, which was 15 May 2015. The Credit Facility is
subject to compliance with various provisions of the facility
agreement (including certain financial covenants and commitments and limitations on indebtedness). The interest on the
Credit Facility is at an annual rate of 2.5%, plus the one-month
or three-month EURIBOR rate (at the option of I-RES). The debt
is secured over the properties of I-RES and there was a onetime arrangement fee of €740,000 relating to the Credit Facility.
Pursuant to the terms of the Credit Facility, on 27 March 2015
I-RES repaid the entire €70.0 million of borrowings under the
bridge facility out of the net proceeds from the completion of the
I-RES Capital Raise (as defined in note 10) on 26 March 2015
and partly repaid the borrowings under the €60 million revolving
facility. The €60 million revolving facility will remain available for
borrowing to the extent that any amounts are undrawn or repaid
under the facility agreement, which has a termination date of
15 August 2016.
Refer to note 21, Subsequent Events, for details of a new facility
agreement signed since 31 December 2015.
84
Irish Residential Properties REIT plc
Annual Report 2015
Note 10
Share-based Compensation
Options are issuable pursuant to I-RES’ share-based
compensation plan, namely, the long-term incentive plan (“LTIP”).
Options were granted on 26 March 2015 and 16 April 2014 by
I-RES to certain trustees and employees of Canadian Apartment
Properties Real Estate Investment Trust (“CAPREIT”) and its
affiliates and to David Ehrlich, CEO of I-RES. The LTIP will have
a maximum life of seven years less a day and will vest over three
years from the date of grant. The LTIP limit cannot exceed 10% of
I-RES’ issued ordinary share capital (adjusted for share issuance
and cancellation) during the 10-year period prior to that date. As
at 31 December 2015, the maximum number of additional options
issuable under the LTIP is 14,885,070.
The fair value of options has been determined as at the grant
date using the Black-Scholes model. The assumptions utilised to
arrive at the estimated fair value for the outstanding grants at the
respective periods are shown at right.
The expected volatility is based on historic market volatility
over the past five years and four years for the options issued on
26 March 2015 and 16 April 2014, respectively. The risk-free rate
is based on Irish government bonds with a term consistent with
the assumed option life.
LTIP
For the period 1 January 2015
to 31 December 2015
Number of Units
Share options outstanding
as at 1 January 2015
Issued, cancelled or granted during the period:
Issued or granted
Exercised or settled Cancelled (1)
Share options outstanding and exercisable in accordance with the LTIP
as at 31 December 2015
17,080,000
11,900,000
–
(2,165,070)
26,814,930
(1) Cancelled the unvested shares resulting from the departure of certain
CAPREIT employees in 2015.
LTIP
Issuance Date
26 March
2015
Number of shares
Share price on date of grant (€)
Award grant price (€)
Risk free rate (%)
Distribution yield (%)
Expected years
Volatility (%)
Award option value (€)
16 April
2014
11,900,000 17,080,000
1.005 1.040
1.005 1.040
0.4 1.2
5.0 5.0
7.0 7.0
20.2 20.3
0.07 0.08
The total number of LTIP shares outstanding and exercisable
as at 31 December 2015 was 26,814,930 (31 December 2014 –
17,080,000).
Annual Report 2015
Irish Residential Properties REIT plc
85
Notes to Financial Statements (cont’d)
Note 11
Shareholders’ Equity
On 13 March 2014, I-RES had an authorised share capital of
€100.0 million divided into 1,000,000,000 ordinary shares of €0.10
each. On 20 March 2014, I-RES was converted to a public limited
company.
On 11 April 2014, prior to the Initial Offering (as defined below),
I-RES issued 1,600,000 ordinary shares to CAPREIT LP by way of
a capitalised issue.
On 16 April 2014, I-RES raised gross proceeds of €200.0 million
through the issuance of an aggregate of 200,000,000 ordinary
shares at an issue price of €1.00 per share, nominal value of €0.10
per share (the “Initial Offering”). CAPREIT LP’s initial investment
in I-RES’ share capital (prior to the dilution of its beneficial interest)
was €40,000 at a par value of €0.10 per share, resulting in 400,000
ordinary shares.
On 26 March 2015, I-RES raised gross proceeds of €215.0 million
through the issuance of an aggregate of 215,000,000 new ordinary
shares at an issue price of €1.00 per share, nominal value of
€0.10 per share (the “Capital Raise”).
The funds raised from all the ordinary shares issued during the
period were used for the purchase of investment properties and
to pay down the Credit Facility.
All equity shares outstanding are fully paid and are voting shares.
Equity shares represent a shareholder’s proportionate undivided
beneficial interest in I-RES. No equity share has any preference
or priority over another. No shareholder has or is deemed to have
any right of ownership in any of the assets of I-RES. Each share
confers the right to cast one vote at any meeting of shareholders
and to participate pro rata in any distributions by I-RES and, in the
event of termination of I-RES, in the net assets of I-RES remaining
after satisfaction of all liabilities. Shares will be issued in registered
form and are transferable.
The number of issued and outstanding ordinary shares is as follows:
For the Period
1 January 2015 to
31 December 2015
2 July 2013 to
31 December 2014
Ordinary shares outstanding, beginning of period
CAPREIT LP’s initial ownership
Shares issued to CAPREIT LP prior to Initial Offering
New units issued
202,000,000 –
–
215,000,000 –
400,000
1,600,000
200,000,000
Ordinary shares outstanding, end of period
417,000,000 202,000,000
The shares issued to CAPREIT LP prior to the Initial Offering were issued at par.
a) New shares issued on Capital Raise
Shares Issued
Number
Price
per Share
Gross Transaction
Proceeds Costs
Net
Proceeds
€€’000€’000€’000
26 March 2015
215,000,000 1.00
215,000 10,896 204,104
Total 215,000,000 215,000 10,896 204,104
Gross Transaction
Proceeds Costs
Net
Proceeds
b) New shares issued on Initial Offering
Shares Issued
Number
Price
per Share
€€’000€’000€’000
16 April 2014
200,000,000 1.00
200,000 7,626 192,374
Total 200,000,000 200,000 7,626 192,374
86
Irish Residential Properties REIT plc
Annual Report 2015
Note 12
Financial Instruments, Investment Properties and Risk Management
a) Fair value of financial instruments and investment properties
The Group classifies and discloses the fair value for each class of financial instrument based on the fair value hierarchy in accordance
with IFRS 13. The fair value hierarchy distinguishes between market value data obtained from independent sources and the Group’s
own assumptions about market value. The hierarchy levels are defined below:
Level 1 – Inputs based on quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs based on factors other than quoted prices included in Level 1 and may include quoted prices for similar assets and
liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest
rates and yield curves that are observable at commonly quoted intervals; and
Level 3 – Inputs which are unobservable for the asset or liability, and are typically based on the Group’s own assumptions, as there is
little, if any, related market activity.
The Group’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgement, and
considers factors specific to the asset or liability.
The following table presents the Group’s estimates of the fair value on a recurring basis based on information available as at
31 December 2015, aggregated by the level in the fair value hierarchy within which those measurements fall. These estimates are not
necessarily indicative of the amounts the Group could ultimately realise.
Level 1
Quoted prices in active
markets for identical assets
and liabilities
Recurring Measurements – Assets
Investment properties
Level 2
Level 3
Significant
other observable
inputs
€’000
Significant
unobservable
inputs
€’000
– Total
€’000
–
€’000
472,230 (1)
472,230
(1) Fair values for investment properties are calculated using the income approach / yield methodology method, which results in these measurements being
classified as Level 3 in the fair value hierarchy. See note 5 for detailed information on the valuation methodologies and fair value reconciliation.
b) Risk management
The main risks arising from the Group’s financial instruments are
market risk, interest rate risk, liquidity and credit risks. The Group’s
approach to managing these risks is summarised as follows:
Market risk
Market risk is the risk that the fair value or cash flows of a financial
instrument will fluctuate due to changes in market prices. Market
risk reflects interest rate risk, currency risk and other price risks.
The Group’s financial assets currently comprise short-term bank
deposits and trade receivables.
The short-term bank deposits are used to invest cash while
awaiting suitable investment properties for investment. These
are denominated in euros. Therefore, exposure to market risk
in relation to these is limited to interest rate risk. The Group’s
exposure to interest rates as at 31 December 2015 is limited to
€3.6 million of earnings from uninvested funds.
Interest rate risk
As at 31 December 2015, I-RES’ Credit Facility was drawn for
€41.5 million. Interest on this Credit Facility was paid at a rate of
2.5% per annum plus the one-month or three-month EURIBOR
rate (at the option of I-RES). For the year ended 31 December
2015, a 100 basis point change in interest rates would have the
following effect:
EURIBOR rate debt (1) EURIBOR rate debt Change in
interest rates
Basis Points
Increase (decrease)
in net income 2015
€’000
+100
–100
(415)
415
(1) Based on the fixed margin of 2.5% plus the one-month EURIBOR rate as
at 4 January 2016 of –0.210%
Annual Report 2015
Irish Residential Properties REIT plc
87
Notes to Financial Statements (cont’d)
Liquidity risk
Liquidity risk is the risk that the Group may encounter difficulties in accessing capital markets and refinancing its financial obligations
as they come due.
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation. The Group monitors the level of expected cash inflows on trade and other receivables, together with expected
cash outflows on trade and other payables and capital commitments.
As at 31 December 2015
6 months
or less
€’000
6 to 12
months €’000
1 to 2
years
€’000
2 to 5
years
€’000
More than
5 years
€’000
Bank indebtedness
Bank indebtedness interest (1)
Other liabilities
Security deposits
–
41,529 481 122 6,960 –
2,100 –
–
–
–
–
–
–
–
–
–
–
–
9,541 –
–
–
41,651 (1) Based on current in-place interest rate for the remaining term to maturity.
The carrying value of bank indebtedness and trade and other payables (other liabilities) is approximate to their fair value.
Credit risk
Credit risk is the risk that: (i) counterparties to contractual financial
obligations will default; or (ii) the possibility that the Group’s
tenants may experience financial difficulty and be unable to meet
their rental obligations.
The Group monitors its risk exposure regarding obligations with
counterparties through the regular assessment of counterparties’
credit positions and will not be exposed to the creditworthiness
or solvency of any one counterparty.
The Group mitigates the risk of credit loss with respect to tenants
by evaluating the creditworthiness of new tenants, obtaining
security deposits wherever permitted by legislation, and
geographically diversifying its portfolio.
The Group monitors its collection experience on a monthly basis
and ensures that a stringent policy is adopted to provide for all
past due amounts. All residential accounts receivable balances
exceeding 30 days are written off to bad debt expense and
recognised in the consolidated statement of profit and loss and
other comprehensive income. Subsequent recoveries of amounts
previously written off are credited in the consolidated statement
of profit and loss and other comprehensive income.
Cash and cash equivalents are held with major Irish and European
institutions. The Board has established a cash management
88
Irish Residential Properties REIT plc
policy for these funds, which it monitors regularly. This policy has
investment thresholds, with a maximum limit of 20% of the overall
gross assets, with individual institutions to avoid concentration of
risk with any one counterparty. The Group has also engaged the
services of a depository to ensure the security of the cash assets.
Capital management
The Group’s objectives when managing capital are to safeguard
its ability to continue as a going concern, in order to provide
returns for shareholders and benefits for other stakeholders,
and to maintain an optimal capital structure to reduce the cost
of capital.
In order to maintain or adjust the capital structure, I-RES may
issue new shares or consider the sale of assets to reduce debt.
I-RES, through the Irish REIT regime, is restricted in its use of
capital to making investments in real property in Ireland. I-RES
intends to make distributions if results of operations and cash
flows permit in the future.
The Board’s policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. At 31 December 2015,
capital consists of equity and debt, with the loan to value of 8.6%.
I-RES seeks to use gearing to enhance shareholder returns over
the long term. The level of gearing is monitored carefully by the
Board in light of the cost of borrowing and I-RES may seek to use
hedging where considered appropriate to mitigate interest rate
risk. Given the stability of the multi-unit residential sector, 45%
gearing is currently considered prudent by the Board.
Annual Report 2015
The Board monitors the return on capital as well as the level of
dividends paid to ordinary shareholders. Subject to distributable
reserves, it is the policy of I-RES to distribute at least 85% of
the Property Income of its Property Rental Business for each
accounting period.
Note 13
Taxation
I-RES was incorporated on 2 July 2013 and was liable for corporate
taxes up to 31 March 2014, following which it elected for REIT
status. I-RES paid corporate taxes of €946,000 relating to the
period from 2 July 2013 to 31 December 2014.
I-RES elected for REIT status on 31 March 2014. As a result, from
this date the Group is exempt from paying Irish corporation tax
on the profits and gains from qualifying rental business in Ireland
provided it meets certain conditions.
Instead, dividends paid 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 any residual
business (generally including any property trading business) not
included in the Property Rental Business. I-RES is also liable to
pay other taxes such as VAT, stamp duty, land tax, local property
tax and payroll taxes in the normal way.
Note 14
Dividends
Under the Irish REIT regime, subject to having sufficient
distributable reserves, I-RES is required to distribute to shareholders at least 85% of the Property Income of its Property Rental
Business for each accounting period, provided it has sufficient
distributable reserves. The Directors paid a maiden dividend of
€969,600 (0.48 cents per share) in the form of an interim dividend
on 31 March 2015 to shareholders on record as at 20 February
2015, and paid a second interim dividend of €833,609 (0.20 cents
per share) on 4 September 2015 to shareholders on record as
at 21 August 2015, relating to the I-RES accounting period from
31 March 2014 to 31 December 2014. See note 21 for dividends
declared after 31 December 2015.
2015 €’000
Profit for the period Less: net movement in fair value
of investment properties
Add back: share-based
compensation expense
Property income of the
Property Rental Business
Dividend payout ratio
Dividends payable 2014
€’000
30,822 6,330
(18,639)
(5,101)
979 574
13,162 1,803
99.80%100%
13,136 1,803
Within the Irish REIT regime, for corporation tax purposes the
Property Rental Business is treated as a separate business from
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
reserve, 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 would 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. Any normal dividend
paid from the residual business by the Irish REIT is referred to as
a non-property income distribution dividend.
The Directors confirm that the Group has remained in compliance
with the Irish REIT regime up to and including the date of this
Report.
Annual Report 2015
Irish Residential Properties REIT plc
89
Notes to Financial Statements (cont’d)
Note 15
Issuance of shares
Breakdown of operating income items related to
financing and investing activities
For the Period
Supplemental Cash Flow Information
For the Period
1 January 2015 to
2 July 2013 (date
31 December 2015
of incorporation) to
31 December 2014
€’000€’000
Financing costs
on credit facility (1) 1,495 974
Interest on intercompany loan
–1,464
Investment income received
–
(23)
1,495 2,415
(1) For the Period
1 January 2015 to
2 July 2013 (date
31 December 2015
of incorporation) to
31 December 2014
€’000€’000
Financing costs
on credit facility as per
the consolidated statement
of profit and loss and other
comprehensive income
Less: amortisation
of arrangement fee
1,865 1,147
(370)
(173)
1,495 974
Changes in operating assets and liabilities
For the Period
1 January 2015 to
2 July 2013 (date
31 December 2015
of incorporation) to
31 December 2014
€’000€’000
Prepaid expenses
Other receivables
Deposits and other assets
Accounts payable
and other liabilities
Security deposits
Changes in operating
assets and liabilities
90
(15)
(435)
(7,040)
(288)
(654)
(1,062)
2,049 581 4,911
1,519
(4,860)
4,426
Irish Residential Properties REIT plc
1 January 2015 to
1 December 2015
1 April 2014 to
31 December 2014
€’000€’000
Issuance of shares
Issuance costs
215,000 (10,896)
200,040
(7,626)
Net proceeds
204,104 192,414
Note 16
Related Party Transactions
CAPREIT LP has an indirect 15.7% beneficial interest in I-RES
and has determined that it has significant influence over I-RES.
The beneficial interest is held through a qualifying investor
alternative investment fund, Irish Residential Properties Fund,
CAPREIT LP’s wholly-owned subsidiary. In addition, effective
11 April 2014, CAPREIT LP’s wholly-owned subsidiary, IRES Fund
Management Limited (“IRES Fund Management”), entered into
an agreement to perform certain property and asset management
services for the Group. As per the agreement, I-RES pays 3.0% per
annum of its gross rental income as property management fees
and 0.5% per annum of its net asset value as asset management
fees net of fixed fees paid to the third-party regulated fund
manager for I-RES. IRES Fund Management has a lease for
office space with I-RES. The rental income for the office space
for the year ended 31 December 2015 was €37,000 (€12,000 as
at 31 December 2014). The lease expires on 1 March 2020. Minimum annual rental payments from IRES Fund Management for
the next three years are as follows:
Minimum annual rent
payments from IRES
Fund Management Annual Report 2015
2016 €’000
2017
€’000
52
52
2018
€’000
52
On 28 October 2015, IRES Fund Management became
authorised by the Central Bank as an alternative investment fund
manager under the European Union (Alternative Investment
Fund Managers) Regulations, 2013 (the “AIFM Regulations”).
On 1 November 2015, IRES Fund Management was appointed
by the Company as its alternative investment fund manager in
accordance with the AIFM Regulations and replaced the thirdparty regulated fund manager. On this date, the investment
management agreement between IRES Fund Management
and I-RES (“Investment Management Agreement”) came
into effect, pursuant to which I-RES pays 3.0% per annum of
its gross rental income as property management fees and
0.5% per annum of its net asset value as asset management
fees to IRES Fund Management. The Investment Management
Agreement governs the provision of portfolio management, risk
management and other related services to the Company by the
Investment Manager. It has an initial term of five years, unless
it is duly terminated pursuant to a provision of the Investment
Management Agreement, and thereafter shall continue in force
for consecutive five-year periods.
In addition, Mr Ehrlich will be entitled to participate in the LTIP
and, under his employment contract, he is entitled to be granted
options in respect of 3% of the number of shares issued by the
Company pursuant to an equity offering. On 26 March 2015, Mr
Ehrlich and Mr Schwartz were granted a further 6,450,000 and
1,075,000 options, respectively, pursuant to I-RES’ Capital Raise.
On 16 April 2014, Mr Ehrlich and Mr Schwartz were granted
6,060,000 and 2,020,000 options, respectively, pursuant to I-RES’
Initial Offering.
For the year ended 31 December 2015, I-RES incurred
€1.9 million in asset management fees. In addition, €0.9 million
in property management fees were incurred and recorded
under operating expenses. For the period from 2 July 2013 to
31 December 2014, €0.7 million in asset management fees and
€0.3 million in property management fees were recorded.
Total expenses, which is comprised of remuneration of the
Directors, is €200,000 for the year ended 31 December 2015,
and €151,000 for the period from 2 July 2013 to December 2014,
excluding expenses related to David Ehrlich, CEO and Director.
The Directors were appointed to I-RES on 31 March 2014. No
loans or quasi-loans were made to the Directors in either period.
The amount payable to CAPREIT LP (including I-RES Fund
Management), totalling €3.5 million as at 31 December 2015
(€1.7 million as at 31 December 2014), related to asset
management fees, property management fees, payroll-related
costs and other miscellaneous expenses incurred by CAPREIT
LP on behalf of the Group. All charges from CAPREIT LP are at
an arm’s length basis.
Owner management companies not consolidated
As a result of the acquisition by the Group of apartments in certain
multi-unit residential properties, the Group holds voting rights in
the relevant owner management companies associated with
those developments. Where the Group holds the majority of those
voting rights, this entitles it, inter alia, to control the composition
of such owner management companies’ boards of directors.
However, as each of those owner management companies is
incorporated as a company limited by guarantee to not having
share capital solely for the purpose of owning the common
areas in those multi-unit developments, they are not intended to
trade for gain. For these reasons, I-RES does not consider these
owner management companies to be material for consolidation,
either individually or collectively. I-RES has considered the latest
available financial statements of these owner management
companies in making this assessment.
David Ehrlich is the CEO and a Director of I-RES’ Board. He is
also a trustee of CAPREIT. Thomas Schwartz is a Director (nonexecutive) of I-RES’ Board. He is also a trustee of CAPREIT and a
trustee or director of each of CAPREIT’s subsidiaries, including
IRES Fund Management. He is also the President and CEO of
CAPREIT and each of its Canadian subsidiaries. Certain trustees
and employees of CAPREIT and its affiliates were granted options
of I-RES in the Initial Offering and the Capital Raise.
The only executive member of the Board is David Ehrlich, CEO,
who was appointed as the CEO of I-RES on 16 April 2014;
all other members are non-executive directors. Mr Ehrlich’s
total remuneration for the period from 1 January 2015 to
31 December 2015 was €753,000 (C$1million). Mr Ehrlich’s
total remuneration for the period from 2 July 2013 to 31 December 2014 was €642,000 (C$931,000), of which C$233,000 was
paid for professional services provided to I-RES in connection
with the Initial Offering prior to his appointment as CEO, and such
costs have been included in the issuance costs.
Annual Report 2015
Irish Residential Properties REIT plc
91
Notes to Financial Statements (cont’d)
Details of the owner management companies in which the Group had an interest during the year ended 31 December 2015, along
with the relevant service fees paid by I-RES to them, are as follows:
Development
Owner Management Entity
Registered Official Address
Managed
Percentage
of Voting
Rights Held
% of total
Service Fees
Incurred in
the Period
€’000
Payable
by I-RES
€’000
Majority voting rights held
Priorsgate Estate Management Company Limited
Unit 4B Lazer Lane,
Grand Canal Square, Dublin 2 Priorsgate
52.40
141.52 11.79
GC Square (Residential) Management Company Limited
Unit 4B Lazer Lane, Grand Canal Square, Dublin 2
Marker
Residences
80.00
196.72 –
Lansdowne Valley Management Limited
Unit 4B Lazer Lane,
Grand Canal Square, Dublin 2
Lansdowne
78.60
439.60 –
Charlestown Apartments Management Company Limited
Unit 4B Lazer Lane,
Grand Canal Square, Dublin 2
Charlestown
82.46
410.01 34.17
Bakers Yard Management Company Limited
Ulysses House,
Foley Street, Dublin 1
Bakers Yard
66.19
124.89 10.41
Rockbrook Grande Central Management Company Limited
Unit 4B Lazer Lane,
Grand Canal Square, Dublin 2
Grande Central
76.92
290.64 –
Rockbrook South Central Management Company Limited
Unit 4B Lazer Lane,
Grand Canal Square, Dublin 2
South Central
83.84
328.52 –
Rockbrook Estate
Management Company Limited
Unit 4B Lazer Lane, Grand Canal Square, Dublin 2
Rockbrook
Commercial
64.29 (1)
45.00 –
Other
BSQ Management Company Limited
5th Floor, St. Stephen’s
Beacon South
Green House, Earlsfort
Quarter
Terrace, St. Stephen’s Green,
Dublin 2
11.28
516.59 37.93
GC Square Management Company Limited
39 Lower Leeson Street,
Dublin 2
1.51 –
Marker
Commercial
48.00 (1)
(1) Includes voting rights controlled directly and indirectly.
All of these owner management companies are incorporated
in Ireland and are property management companies. As noted
above, as at 31 December 2015, €94,300 is payable by the
Group to the owner management companies. No amounts were
owing between the Group and any of the owner management
companies at 31 December 2014.
Pursuant to a management agreement between IRES Fund
Management and GC Square (Residential) Management
Company Limited, commencing 11 March 2015, IRES Fund
Management became the managing agent for the Marker
92
Irish Residential Properties REIT plc
Residences. For the year ended 31 December 2015, I-RES has
incurred management agent expense for the Marker Residences
in the amount of €19,000.
Pursuant to a management agreement between IRES Fund
Management and GC Square Management Company Limited,
commencing 11 August 2015, IRES Fund Management became
the managing agent for the Marker Commercial. For the year
ended 31 December 2015, I-RES has incurred management agent
expense for the Marker Commercial in the amount of €1,200.
Annual Report 2015
Pipeline agreement
CAPREIT LP entered into an agreement (the “Pipeline
Agreement”) dated 21 November 2014 (as amended on
9 February 2015 with effect from 21 November 2014) with I-RES to
make available up to €150.0 million for a period of up to one year to
acquire properties in Ireland, and to subsequently permit I-RES to
acquire such properties from CAPREIT LP, subject, among other
things, to shareholder approval once I-RES has sourced additional
funding to do so. CAPREIT LP’s obligation to make available up
to €150.0 million terminates on the earlier of: (i) the completion
of a Capital Raise by I-RES, and (ii) one year from the date of
the Pipeline Agreement (or such later date as may be agreed in
writing by the parties).
The Pipeline Agreement was amended on 9 February 2015,
with effect from 21 November 2014, to remove the proposed
2.5-year extension to be made to the investment management
agreement between I-RES and IRES Fund Management, and
related services agreement among I-RES, CAPREIT LP and IRES
Fund Management, and to include an underwriting fee of 1% of
the purchase price of each property investment acquired under
the Pipeline Agreement as part of the purchase price payable
by I-RES to CAPREIT LP for each such property investment.
The Pipeline Agreement was approved by shareholders on
25 March 2015.
The €150.0 million facility commitment provided by CAPREIT LP
to I-RES under the Pipeline Agreement terminated on 26 March
2015 on completion of I-RES’ Capital Raise.
Note 17
Contingencies
The Group is not aware of any contingent liabilities that should
be disclosed in these financial statements.
Note 18
Earnings per Share
Earnings per share amounts are calculated by dividing profit for
the reporting period attributable to ordinary shareholders of I-RES
by the weighted average number of ordinary shares outstanding
during the reporting period.
For the Period
1 January 2015
to 31 December 2015
Profit attributable
to shareholders
of I-RES (€’000)
30,822 Basic weighted average
number of shares
367,520,548 Diluted weighted average
number of shares (1) 370,548,189 2 July 2013 (date
of incorporation) to
31 December 2014
7,930
95,510,684
95,590,610
Basic Earnings
per share (cents)
8.4 8.3
Diluted Earnings
per share (cents)
8.3 8.3
(1) Diluted weighted average number of shares includes the additional
shares resulting from dilution of the long-term incentive plan options as
of the reporting period date.
EPRA issued Best Practices Recommendations most recently in
August 2011 and additional guidance in December 2014, which
gives guidelines for performance matters.
Annual Report 2015
Irish Residential Properties REIT plc
93
Notes to Financial Statements (cont’d)
EPRA Earnings represents the earnings from the core operational
activities (recurring items for I-RES). It is intended to provide
an indicator of the underlying performance of the property
portfolio and therefore excludes all components not relevant
to the underlying and recurring performance of the portfolio,
including any revaluation results and results from the sale of
properties. EPRA Earnings per Share amounts are calculated
by dividing EPRA Earnings for the reporting period attributable
to shareholders of I-RES by the weighted average number of
ordinary shares outstanding during the reporting period.
For the Period
1 January 2015 to
31 December 2015
Earnings per IFRS
income statement (€’000)
2 July 2013 (date
of incorporation) to
31 December 2014
30,822 7,930
Adjustments to calculate
EPRA Earnings, exclude:
Changes in fair
value on investment
properties (€’000)
Tax on profits or losses
on disposals (€’000)
(18,639)
(7,364)
–
946
1,512
EPRA issued Best Practices Recommendations most recently in
August 2011 and additional guidance in December 2014, which
gives guidelines for performance matters.
EPRA NAV measures the fair value of net assets on an ongoing,
long-term basis in accordance with guidelines issued by EPRA.
EPRA NAV excludes the net marked-to-market to the value of
financial instruments used for hedging purposes and where a
company has the intention to keep the hedge position until the
end of the contractual duration, and deferred tax in respect of
any difference between the fair value and the book value of the
investment properties.
367,520,548 95,510,684
95,590,610
2014
Basic NAV
104.3 99.5
104.3 99.5
Diluted NAV
EPRA Basic Earnings
per share (cents)
3.3 1.6
EPRA Diluted Earnings
per share (cents)
3.3 1.6
Irish Residential Properties REIT plc
2015 Net assets (€’000)
435,020 200,918
EPRA net assets (€’000)435,020 200,918
Number of shares outstanding
417,000,000 202,000,000
Diluted number
of shares outstanding
420,396,755 202,169,109
Net Asset Value per share (cents)
EPRA Net Asset Value per share (cents)
Diluted weighted average
number of shares
370,548,189 94
Net Asset Value per Share
As at 31 December
EPRA Earnings (€’000)12,183 Basic weighted average
number of shares
Note 19
Net Asset Value per share (cents)
EPRA Net Asset Value per share (cents)
Annual Report 2015
103.5 99.4
103.5 99.4
Note 20
Directors’ Remuneration, Employee Costs
and Auditor Remuneration
Note 21
For the Period
On 14 January 2016, the Company signed a new revolving and
accordion credit facility for up to €250 million, which can be extended to €350 million subject to certain terms and conditions
(the “New Revolving Credit Facility”).
1 January 2015 to
31 December 2015
€’000
Subsequent Events
2 July 2013 to
31 December 2014
€’000
Directors’ remuneration
Short-term employee benefits (1) 953 793
Post-employment benefits
––
Other long-term benefits (2) 47 34
Share-based payments
527 270
Termination benefits
–
–
Total (3)
1,527 1,097
(1) Included in this amount are Directors’ fees, the CEO’s salary and
amounts paid to David Ehrlich prior to his appointment as CEO, for
professional services provided to I-RES in connection with the Initial
Offering. Such costs have been included in the issuance costs.
(2) Included in this amount is pay-related social insurance paid for the
Directors and Canadian pension plan, employment insurance, medical
benefits, and employer health taxes paid for the CEO.
(3) None of these costs have been capitalised except as noted above in note 1.
For the Period
1 January 2015 to
31 December 2015
€’000
Employment costs (1)
Salaries and bonus
Social insurance costs
Pension costs
Share-based payments
Termination benefits
Other (2)
Total (3)
2 July 2013 to
31 December 2014
€’000
753 489
25 18
––
424203
––
–
153
1,202 On 15 January 2016, the Company acquired 442 apartments,
18,344 sq. m. (197,460 sq. ft.) of commercial space and associated underground car parking at Tallaght Cross West located in
Tallaght, Dublin 24 for a total purchase price of €83 million (including VAT but excluding other transaction costs) funded mainly by
the New Revolving Credit Facility.
On 9 February 2016, the Directors declared an interim dividend
of €13.1 million for the 2015 accounting period, to be paid on
21 March 2016 to shareholders on record as of 19 February 2016
(3.15 cents per share).
Note 22
Approval of Consolidated Financial Statements
These audited Financial Statements were approved by the Board
on 21 March 2016.
863
(1) David Ehrlich is the only permanent employee of I-RES.
(2) Paid to David Ehrlich prior to his appointment as CEO, for professional
services provided to I-RES in connection with the Initial Offering. Such
costs have been included in the issuance costs.
(3) None of these costs have been capitalised except as noted above in note 2.
For the Period
1 January 2015 to
31 December 2015
€’000
2 July 2013 to
31 December 2014
€’000
Auditor remuneration
(including expenses)
Audit of the group accounts
Other assurance services
Tax advisory services
Other non-audit services (1)
104 19 388 304 80
49
421
243
Total 815 793
(1) Included in other non-audit services are services provided in relation to
the share issuance at the Initial Offering. This amount has been charged
to the share premium account as part of the cost of share issuances.
Annual Report 2015
Irish Residential Properties REIT plc
95
Company Statement
of Financial Position
as at 31 December 2015
Note
2015
€’000
2014
€’000
(iii)
(v)
380,050 873 322 323,580
–
618
381,245 324,198
(iv)
(v)
91,368 9,352 2,136 102,856 8,150
484,101 332,348
–
–
125,000
125,000
41,529 6,525 1,749 –
4,911
1,519
Assets
Non-Current Assets
Investment properties Investment in subsidiary
Other non-current assets
Current Assets
Loan advances to the subsidiary
Other current assets
Cash and cash equivalents
Total Assets
–
2,004
6,146
Liabilities
Non-Current Liabilities
Non-current portion of bank indebtedness Current Liabilities
Current portion of bank indebtedness (viii)
Accounts payable and accrued liabilities
(vi)
Security deposits
49,803 6,430
49,803 131,430
(x)
(x)
41,700 354,978 1,553 36,067 20,200
172,374
574
7,770
Total Shareholders’ Equity
434,298 200,918
Total Shareholders’ Equity and Liabilities
484,101 332,348
Total Liabilities
Shareholders’ Equity
Share capital
Share premium
Other reserve
Retained earnings
The accompanying notes form an integral part of these financial statements.
Colm Ó Nualláin
David Ehrlich
Chairman
Executive Director
96
Irish Residential Properties REIT plc
Annual Report 2015
Company Statement
of Changes in Equity
for the year ended 31 December 2015
Note
Share
Share Retained
Other
Capital Premium Earnings Reserve
€’000
€’000
€’000
€’000
Shareholders’ Equity at 1 January 2015
Total comprehensive income for the period
Profit for the period
20,200 172,374 7,770 574 200,918
–
–
30,100 –
30,100
Total comprehensive income for the period
–
–
30,100 –
30,100
Total
€’000
Transactions with owners,
recognised directly in equity
Issue of ordinary shares for cash
Share issue costs
Long-term incentive plan
(ix)
(ix)
(viii)
21,500 –
–
193,500 (10,896)
–
–
–
–
–
–
979 215,000
(10,896)
979
Transactions with owners,
recognised directly in equity
21,500 182,604 –
979 205,083
Dividends of ordinary shares
Dividends paid
(vii)
–
–
(1,803)
–
(1,803)
Dividends of ordinary shares
–
–
(1,803)
–
(1,803)
Shareholders’ Equity at 31 December 2015
41,700 354,978 36,067 Note
1,553 434,298
Share
Share Retained
Other
Capital Premium Earnings Reserve
€’000
€’000
€’000
€’000
Total
€’000
Shareholders’ Equity at 2 July 2013
Total comprehensive income for the period
Profit for the period
–
–
7,930 –
7,930
Total comprehensive income for the period
–
–
7,930 –
7,930
(ix)
(ix)
(ix)
(viii)
20,040 –
160 –
180,000 (7,626)
–
–
–
–
(160)
–
–
–
–
574 200,040
(7,626)
–
574
Transactions with owners,
recognised directly in equity
20,200 172,374 (160)
574 192,988
Shareholders’ Equity at 31 December 2014
20,200 172,374 7,770 574 200,918
Transactions with owners,
recognised directly in equity
Issue of ordinary shares for cash
Share issue costs
Capitalisation of bonus shares (1)
Long-term incentive plan
–
–
–
–
–
(1) €1.6 million of the retained earnings as at 30 June 2014 arose prior to the Company registering as an Irish REIT, with effect from 31 March 2014.
€160,000 was transferred to ordinary share capital, being the total par value of the bonus issue of 1,600,000 ordinary shares on 11 April 2014 (see note 11).
The €1.6 million has been designated as an undistributable reserve within the meaning of the Companies Act, 2014.
The accompanying notes form an integral part of these financial statements.
Annual Report 2015
Irish Residential Properties REIT plc
97
Company Statement
of Cash Flows
for the year ended 31 December 2015
1 January 2015 to 31 December 2015
Note
€’000
2 July 2013
(date of
incorporation) to
31 December 2014
€’000
CASH FLOWS FROM OPERATING ACTIVITIES:
Operating Activities
Profit before taxes
Items related to operating activities not affecting cash:
Fair value adjustment – investment properties
Depreciation of property, plant and equipment
Amortisation of other financing costs Share-based compensation expense
Straight-line rent adjustment
Taxes paid
Operating income items related to financing
and investing activities Changes in operating assets and liabilities 30,100 8,876
(17,514)
13 370 979 (114)
(7,364)
11
173
574
(73)
13,834 –
2,197
(946)
(xiv)
(xiv)
Net Cash Generated from Operating Activities
(1,837) 2,415
(5,504)4,426
6,493 8,092
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of investment properties Investment in subsidiary Investment property enhancement expenditure
Purchase of property, plant and equipment
Investment income
(34,877)
(315,684)
(873)
–
(3,965)
(459)
–(58)
–23
Net Cash Used in Investing Activities
(39,715)
(316,178)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest income from subsidiary
Loan advances to subsidiary
Repayment of loan advances from subsidiary
Interest receivable from subsidiary
Intercompany loan advanced
Intercompany loan repaid on maturity
Arrangement fee on credit facility
Bank indebtedness
Interest paid on bank indebtedness
Interest paid on intercompany loan
Net proceeds on issuance of shares
Dividends paid to shareholders
(xiv)
Net Cash Generated from Financing Activities
Changes in Cash and Cash Equivalents during the Period
Cash and Cash Equivalents, Beginning of the Period
Cash and Cash Equivalents, End of the Period
The accompanying notes form an integral part of these financial statements.
98
Irish Residential Properties REIT plc
Annual Report 2015
3,332
–
(89,730)
–
1,694
–
(3,332)
–
–45,000
–
(45,000)
(87)
(744)
(83,471)
125,000
(1,495)
(974)
–
(1,464)
204,104 192,414
(1,803)–
29,212 314,232
(4,010)
6,146
6,146 –
2,136 6,146
Notes to Company
Financial Statements
as at 31 December 2015
Note (i)
Note (ii)
Significant Accounting Policies
Critical Accounting Estimates,
Assumptions and Judgements
These Company financial statements have been prepared in
accordance with IFRS as adopted by the EU, IFRIC interpretations
and those parts of the Irish Companies Act, 2014, applicable to
companies reporting under IFRS. The Company has availed of
the exemption to present an individual statement of profit and
loss and other comprehensive income provided in the Companies
Act, 2014.
For further information on critical accounting estimates,
assumptions and judgements, refer to note 3 of the consolidated
financial statements.
Note (iii)
Investment Properties
The financial statements of the Company are prepared on a
going concern basis and under the historical cost convention, as
modified by the revaluation of investment properties at fair value
through profit or loss. The financial statements of the Company
have been presented in euros, which is the Company’s functional
currency.
For further information on investment properties, refer to note 5
of the consolidated financial statements.
For the Company, a 1% increase in the Equivalent Capitalisation
Rate would have an impact of a €64.7 million reduction in fair value
whilst a 1% decrease in the Equivalent Capitalisation Rate would
result in a fair value increase of €99.1 million.
The significant accounting policies of the Company are the
same as those of the Group, which are set out in note 2 of the
consolidated financial statements.
A summary of the Equivalent Capitalisation Rates and ranges
along with the fair value of the total portfolio of the Company as
at 31 December 2015 and 2014 is presented below:
As at 31 December 2015
Weighted
Type of Interest
Fair Value
WA NRI(1) Rate Type (3)
Max.
Min.Average
€’000
€’000
%
%
%
Investment properties Development land (2)
373,700 6,350 2,320 Total fair value
380,050 Equivalent Capitalisation Rate
7.14
3.52
5.04
(1) Weighted average (“WA”) net rental income (“NRI”).
(2) Development land is fair valued based on the value of the undeveloped site per acre.
(3) The Equivalent Capitalisation Rate disclosed above is based on the Stabilised NRI divided by the fair value of the investment property.
As at 31 December 2014
Weighted
Type of Interest
Fair Value
WA NRI(1) Rate Type (3)
Max.
Min.Average
€’000
€’000
%
%
%
Investment properties Development land (2)
Total fair value
316,580 7,000
323,580
2,361 Equivalent Capitalisation Rate
6.95
4.56
5.22
(1) Weighted average (“WA”) net rental income (“NRI”).
(2) Development land is fair valued based on the value of the undeveloped site per acre.
(3) The Equivalent Capitalisation Rate disclosed above is based on the Stabilised NRI divided by the fair value of the investment property.
Annual Report 2015
Irish Residential Properties REIT plc
99
Notes to Company Financial Statements (cont’d)
The following table summarises the changes in the investment
properties portfolio during the periods:
Note (v)
For the Period
1 January 2015
2 July 2013 (date
to 31 December 2015
of incorporation) to
31 December 2014
€’000€’000
As at 31 December
Balance at the beginning
of the period
323,580 –
Additions:
Acquisitions
34,877 315,684
Property capital investments 3,965 459
Capitalised leasing costs (1)
114 73
Unrealised fair value
gain adjustments 17,514 7,364
Other Assets
2015 €’000
2014
€’000
Other Non-Current Assets
Property, plant and equipment (1):
At cost
Accumulated amortisation 58 58
(24)(11)
34 47
288 571
Net property, plant and equipment
Deferred loan costs, net (2)
Total 322 618
Other Current Assets
Prepaid expenses
Other receivables
Deposits (3)
282 288
968 654
8,102 1,062
(1) Comprised of straight-line rent.
Total 9,352 2,004
The carrying value for the Company of €380.1 million for the
investment properties at 31 December 2015 (€323.6 million at
31 December 2014) was based on an external valuation carried
out as at that date. The valuations were prepared in accordance
with the RICS Valuation – Professional Standards, January 2014
(Red Book).
(1) Consists of head office fixtures and fittings and information technology
hardware.
(2) Includes deferred loan costs related to the Credit Facility (as defined
in note 9 of the consolidated financial statements for the Group), net of
accumulated amortisation of €543,000 as at 31 December 2015 and
€173,000 as at 31 December 2014.
(3) Includes €7.4 million paid as a deposit on an acquisition that closed
subsequent to the 2015 year end.
Note (iv)
Note (vi)
Balance at the
end of the period
380,050 323,580
Loan Advances to the Subsidiary
Accounts Payable and Accrued Liabilities
2015 €’000
Balance at the beginning of the period
2014
€’000
–
–
3,332 –
Interest receivable
Receivable for the acquisition,
net of repayments
88,036 –
Balance at the end of the period
91,368 –
During 2015, the Company acquired the entire issued share
capital of IRES Residential Properties Limited and provided the
finance to IRES Residential Properties Limited to repay the loan
on the Rockbrook Portfolio to CAPREIT LP. The total amount in
aggregate receivable from its subsidiary amounted to €91 million
as at 31 December 2015, net of repayments. This receivable is
interest bearing and repayable on demand. As this receivable
is repayable on demand, its carrying value is considered to be
materially in line with its fair value.
100 Irish Residential Properties REIT plc
As at 31 December
2015 €’000
2014
€’000
Accounts Payable and Accrued Liabilities
Rent deposits and early payments
831 Trade creditors
331 Accruals
5,084 Value added tax 279 787
32
3,750
342
Total 4,911
Annual Report 2015
6,525 Note (vii)
Note (x)
For further information on the intercompany loan, refer to note 8
of the consolidated financial statements.
For further information on shareholders’ equity, refer to note 11
of the consolidated financial statements.
Note (viii)
Note (xi)
Intercompany Loan
Shareholders’ Equity
Credit Facility
Financial Instruments, Investment Properties
and Risk Management
For further information on the Credit Facility, refer to note 9 of the
consolidated financial statements.
Note (ix)
Share-based Compensation
For further information on share-based compensation, refer to
note 10 of the consolidated financial statements.
Level 1
Quoted prices in active
markets for identical assets
and liabilities
Recurring Measurements – Assets
Investment properties
a) Fair value of financial instruments
and investment properties
For further information on the fair value of financial instruments
and investment properties, refer to note 12 (a) of the consolidated
financial statements.
The following table presents the Company’s estimates of the fair
value on a recurring basis based on information available as at
31 December 2015, and aggregated by the level in the fair value
hierarchy within which those measurements fall. These estimates
are not necessarily indicative of the amounts the Company could
ultimately realise.
Level 2
€’000
Level 3
Significant
other observable
inputs
Significant
unobservable
inputs
€’000
– Total
€’000
€’000
– 380,050 (1) 380,050
(1) Fair values for investment properties are calculated using the income approach / yield methodology method, which results in these measurements being
classified as Level 3 in the fair value hierarchy. See note 5 of the consolidated financial statements for detailed information on the valuation methodologies
and fair value reconciliation.
b) Risk management
For further information on risk management, refer to note 12 (b) of the consolidated financial statements.
The Company’s exposure to interest rates as at 31 December 2015 is limited to €2.1 million of earnings from uninvested funds.
As at 31 December 2015
6 months
or less
€’000
6 to 12
months €’000
1 to 2
years
€’000
2 to 5
years
€’000
More than
5 years
€’000
Bank indebtedness
Bank indebtedness interest (1)
Other liabilities
Security deposits
–
481 6,525 1,749 41,529 122 –
–
–
–
–
–
–
–
–
–
–
–
–
–
8,755 41,651 –
–
–
(1) Based on current in-place interest rate for the remaining term to maturity.
Annual Report 2015
Irish Residential Properties REIT plc 101
Notes to Company Financial Statements (cont’d)
Note (xii)
Changes in operating assets and liabilities
For further information on taxation, refer to note 13 of the
consolidated financial statements.
For the Period
Taxation
Note (xiii)
Dividends
For further information on dividends, refer to note 14 of the
consolidated financial statements.
Note (xiv)
Supplemental Cash Flow Information
1 January 2015 to
31 December 2015
€’000
2 July 2013 (date
of incorporation) to
31 December 2014
€’000
Financing costs
on credit facility (1)
Interest from loan advance
to subsidiary
Interest on intercompany loan
Investment income received
1,495 974
(3,332) –
–
–
1,464
(23)
(1,837) 2,415
(1) For the Period
1 January 2015 to
2 July 2013 (date
31 December 2015
of incorporation) to
31 December 2014
€’000€’000
Financing costs
on credit facility as per
the consolidated statement
of profit and loss and other
comprehensive income
Less: amortisation
of arrangement fee
1,864 1,147
(370)
(173)
1,495 974
102 Irish Residential Properties REIT plc
2 July 2013 (date
of incorporation) to
31 December 2014
€’000
5
(314)
(7,040)
(288)
(654)
(1,062)
Prepaid expenses
Other receivables
Deposits and other assets
Accounts payable and
other liabilities
Corporate taxes payable
Security deposits
Changes in operating
assets and liabilities
1,615 4,911
––
230 1,519
(5,504)
4,426
1 January 2015 to
31 December 2015 €’000
1 April 2014 to
31 December 2014
€’000
Issuance of shares
Issuance costs
215,000 (10,896)
200,040
(7,626)
Net proceeds
204,104 192,414
Issuance of shares
Breakdown of operating income items related to financing
and investing activities
For the Period
1 January 2015
to 31 December 2015
€’000
For the Period
Note (xv)
Statement of Profit and Loss and
Other Comprehensive Income
The Company has availed of the exemption to present an
individual statement of profit and loss and other comprehensive
income provided in the Companies Act, 2014. The Company’s
profit for the year ended 31 December 2015 is €30.1 million (for
the period ended 31 December 2014 – €7.9 million).
Annual Report 2015
Note (xvi)
Note (xviii)
The Company during 2015 financed the purchase of the
Rockbrook Portfolio on behalf of its subsidiary, IRES Residential
Properties Limited. The total amount in aggregate receivable
from its subsidiary amounted to €91 million as at 31 December
2015, net of repayments. This receivable is interest bearing and
repayable on demand.
For further information on earnings per share, refer to note 18
of the consolidated financial statements.
Related Party Transactions
Earnings per Share
For the Period
1 January 2015 to
31 December 2015
Contingencies
Profit attributable to
shareholders
of I-RES (€’000) 30,100 Basic weighted average
number of shares
367,520,548 Diluted weighted average
number of shares
370,548,189 The Company is not aware of any contingent liabilities that should
be disclosed in these financial statements.
Basic Earnings
per share (cents)
For further information on related party transactions, refer to
note 16 of the consolidated financial statements.
Note (xvii)
2 July 2013 (date
of incorporation) to
31 December 2014
7,930
95,510,684
95,590,610
8.2 8.3
Diluted Earnings
per share (cents)8.1 8.3
For further information on EPRA Earnings per share, refer to
note 18 of the consolidated financial statements.
For the Period
1 January 2015 to
31 December 2015
Earnings per IFRS
income statement (€’000)
Adjustments to calculate
EPRA Earnings, exclude:
Changes in fair value
on investment
properties (€’000)
Tax on profits or losses
on disposals (€’000)
EPRA Earnings (€’000)
30,100 2 July 2013 (date
of incorporation) to
31 December 2014
7,930
(17,514)
(7,364)
–
946
12,586 1,512
Basic weighted average
number of shares
367,520,548 Diluted weighted average
number of shares
370,548,189 95,510,684
95,590,610
EPRA Basic Earnings
per share (cents)
3.4 1.6
EPRA Diluted Earnings
per share (cents)
3.4 1.6
Annual Report 2015
Irish Residential Properties REIT plc 103
Notes to Financial Statements (cont’d)
Note (xix)
Note (xx)
Net Asset Value per Share
Directors’ Remuneration, Employee Costs
and Auditor Remuneration
For further information on net asset value per share, refer to
note 19 of the consolidated financial statements.
As at 31 December 2015
2014
Net assets (€’000)
435,020 200,918
EPRA net assets (€’000)
435,020 200,918
Number of shares outstanding
Diluted number
of shares outstanding
417,000,000 202,000,000
420,396,755 202,169,109
Basic NAV
Net Asset Value per share (cents)
EPRA Net Asset Value per share (cents)
104.3 104.3 99.5
99.5
Diluted NAV
Net Asset Value per share (cents)
EPRA Net Asset Value per share (cents)
103.5 103.5 99.4
99.4
104 Irish Residential Properties REIT plc
For further information on directors’ remuneration, employee
costs and auditor remuneration, refer to note 20 of the
consolidated financial statements.
Note (xxi)
Subsequent Events
For further information on subsequent events, refer to note 21 of
the consolidated financial statements.
Annual Report 2015
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.
“Basic Net Asset Value” or “Basic NAV”
Calculated as the value of the Company’s
assets less the value of its liabilities measured in accordance with IFRS.
“Aggregate Income”
As defined in section 705A of the Taxes
Consolidation Act, 1997.
“Capitalisation Rates”
The rate of returns on a property investment based on current and marketderived future revenue streams that such
property investment will generate.
“Average Monthly Rent (AMR)”
Actual residential rents, net of vacancies,
divided by the total number of apartments owned in the property.
“Basic Earnings per share (Basic EPS)”
Calculated by dividing the profit for the
reporting period attributable to ordinary
shareholders of the Company in accordance with IFRS by the weighted average
number of ordinary shares outstanding
during the reporting period.
“Basic EPRA EPS”
Calculated by dividing EPRA Earnings
for the reporting period attributable to
shareholders of the Company by the
weighted average number of ordinary
shares outstanding during the reporting
period. EPRA Earnings represents the
earnings from the core operational activities (recurring items for the Company). It
is intended to provide an indicator of the
underlying performance of the property
portfolio and therefore excludes all components not relevant to the underlying
and recurring performance of the portfolio, including any revaluation results and
results from the sale of properties.
“Cap Rate”
The rate of return on a property investment based on the expected income that
such property investment will generate.
“Companies Act, 2014”
The Irish Companies Act, 2014
“Diluted Earnings per share
(Diluted EPS)”
Calculated by dividing profit for the
reporting period attributable to shareholders by the diluted weighted average
number of ordinary shares outstanding
during the reporting period.
“Diluted EPRA NAV per share”
Calculated by dividing EPRA NAV by
the diluted weighted average number of
ordinary shares outstanding during the
reporting period.
“Diluted weighted average
number of shares”
Includes the additional shares
resulting from dilution of the long-term
incentive plan options as of the
reporting period date.
“EPRA”
The European Public Real Estate
Association.
Annual Report 2015
“EPRA NAV”
Measures the fair value of net assets
on an ongoing, long-term basis in
accordance with guidelines issued by
EPRA. The EPRA NAV excludes the net
marked-to-market to the value of financial
instruments used for hedging purposes
and where a company has the intention
to keep the hedge position until the end
of the contractual duration, and deferred
tax in respect of any difference between
the fair value and the book value of the
investment properties.
“Equivalent Capitalisation Rate”
The Equivalent Capitalisation Rate is calculated as the Stabilised NRI divided by
the fair value of the investment property.
“Group Total Gearing”
Calculated by dividing bank indebtedness by total assets.
“Gross Yield”
Calculated as the annualised residential
and commercial rents passing as at
the stated date, divided by the aggregate
purchase price of the total portfolio (including VAT but excluding other acquisition costs) as at the date of acquisition, or
divided by the fair market value as at the
reporting date.
“Pro-forma NAV per share”
Calculated as NAV excluding one-off
acquisition expenses incurred in relation
to all property purchases subsequent to
31 December 2014. The pro-forma NAV
per share has been calculated based on
the number of ordinary shares outstanding as at 31 December 2015.
Irish Residential Properties REIT plc 105
Glossary of Terms (cont’d)
“Property Income”
As defined in section 705A of the Taxes
Consolidation Act, 1997. It means 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: (a) reduced by
the Property Net Gains of the company
or group, as the case may be, where
Property Net Gains arise, or (b) increased
by the Property Net Losses of the company or group, as the case may be, where
Property Net Losses arise.
“Property Net Gains”
As defined in section 705A of the Taxes
Consolidation Act, 1997.
“Property Rental Business”
As defined in section 705A of the Taxes
Consolidation Act, 1997.
“Property Net Losses”
As defined in section 705A of the Taxes
Consolidation Act, 1997.
“Sq. ft.”
Square feet
“Property Profits”
As defined in section 705A of the Taxes
Consolidation Act, 1997.
106 Irish Residential Properties REIT plc
Annual Report 2015
“Sq. m.”
Square metres
“Stabilised NRI”
Measured as property revenue less
property operating expenses adjusted for
market-based assumptions such as longterm vacancy rates, management fees,
repairs and maintenance.
Forward-Looking Statements
This Report may contain 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 I-RES 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 Report. I-RES does 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.
Shareholder Information
Head Office
Unit 4B Lazer Lane,
Grand Canal Square,
Dublin 2, Ireland
Tel:
+353 (0)1 518 0300
Investor Information
Analysts, shareholders and others
seeking financial data should visit
I-RES’ website at www.iresreit.ie
or contact:
website: www.iresreit.ie
David Ehrlich
Chief Executive Officer
Tel: +1 416 861-2467
Fax: +1 416 861-9209
E-mail: [email protected]
Officers
David Ehrlich
Chief Executive Officer
Colm Ó Nualláin
Chairman
Corporate Secretary
Elise Lenser
Tel: +1 416 861-9404
Fax: +1 416 861-9209
E-mail: [email protected]
Registrar and Transfer Agent
Computershare Investor Services
(Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18, Ireland
Tel:
+353 (0)1 447 5566
Auditor
PricewaterhouseCoopers
One Spencer Dock
North Wall Quay
Dublin 1, Ireland
Legal Counsel
Mason Hayes & Curran
South Bank House
Barrow Street
Dublin 4, Ireland
Stock Exchange Listing
Shares of I-RES are listed on the
Irish Stock Exchange under the
trading symbol “IRES.”
Irish Residential Properties REIT plc
Unit 4B Lazer Lane
Grand Canal Square
Dublin 2, Ireland
www.iresreit.ie