Hibernia REIT plc. Preliminary results 2014

Transcription

1 Hibernia REIT plc Preliminary results 2014

2 2 Agenda Operating and financial highlights Market update Acquisitions Conclusion and outlook

3 3 OPERATING AND FINANCIAL HIGHLIGHTS Successful start to life as a REIT Key highlights from our first 140 days of operation: Management team built out Four new hires bringing permanent staff to 10 Three further hires in pipeline CFO appointment imminent Continued support from the wider WKN team of 30 people Finding attractive opportunities to spend our shareholders money in spite of competitive market Acquiring prime Dublin assets, mostly in CBD Reversionary potential and / or development angles Majority of transactions undertaken off-market Using loan acquisitions to gain access to property Exciting pipeline of deals still to come Well ahead of run rate to deploy IPO proceeds within 18 24months Over 162m spent on 5 acquisitions so far, with a further 63m in committed spending 60% IPO proceeds already spent or committed

4 4 OPERATING AND FINANCIAL HIGHLIGHTS Our strategy Proposed investment criteria Balanced portfolio of property types Principally institutional quality, well located, income producing commercial property Up to 30% of portfolio allocated to value-added properties e.g. requiring refurbishment or tenanting Full scale development not envisaged other than in special circumstances of limited risk and not above 15% of portfolio Primarily Dublin CBD and Greater Dublin area Target property types and locations Majority in Grade A or Grade B office buildings that can be acquired close to or below replacement cost Appropriate allocation to Retail assets with low tenant risk e.g. in Dublin s prime shopping districts that have historically performed well Industrial assets in prime locations close to good transport links and leased to strong tenant covenants Prime Dublin residential, infill residential schemes in close proximity to public transportation and within 6 miles of CBD Illustrative targeted portfolio breakdown Lot sizes typically 10m 50m Targeting Total Shareholder Return of 10-15% p.a. (pre-taxation) with a substantial income element when fully invested Ability to enter joint ventures Gearing not to exceed 50% of portfolio (Irish REIT limit) and not expected to exceed 40% of portfolio at time of borrowing Office Retail Industrial Residential

5 5 OPERATING AND FINANCIAL HIGHLIGHTS Summary of acquisitions to date Since commencing operations in January 2014, have deployed 162m, with a further 63m committed Acquisitions to date Name Location Date of acquisition Initial investment Type Gross initial yield Acquisition type Acquisition structure Wyckham Place Dundrum, Dublin Feb-14 67m Primarily Residential n/a Off-market Loan New Century House Mayor Street, Dublin 1 11-Mar-14 47m Office c.6% (1) Off-market Property Gateway Site Newlands Cross, Dublin Apr m Industrial c.5% On-market Property Montague House and Hardwicke House Hatch Street Upper and Adelaide Road, Dublin 2 16-May m Office c.8% Off-market Loan Chancery Building and Chancery Apartments Chancery Lane, Dublin 8 20-May-14 16m Office c.7% Off-market Loan Total Total including acquisition costs 158m 162m Notes (1) Once rent abatement period ends in October 2015

6 6 OPERATING AND FINANCIAL HIGHLIGHTS Financial highlights Financial highlights 31 March 2014 Gateway Site acquired [ ] Balance sheet 000 Notes Loans acquired from Ulster Bank (Wyckham assets) Loans 68,563 Principally Loans acquired cash from + cash Ulster equivalents Bank (Wyckham of [ ] assets) Current assets 303,337 Principally cash + cash equivalents of 291.7m Current liabilities (934) Principally accrued acquisition costs and other trade payables Net assets 370,966 EPRA NAV per share 96.4 cents Income statement 31 March 2014 Notes Net loss (846) Reflects operating expenses of 1.2m and modest interest income on cash deposits Basic and diluted loss per share (0.22) cents Financials reflect the fact most of the acquisitions did not close in the first 90 days of operations

7 7 Agenda Operating and financial highlights Market update Acquisitions Conclusion and outlook

8 % YoY Index 8 MARKET UPDATE Irish economic backdrop supportive of continued recovery in property market Domestic demand to contribute to growth in % 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% f 2015f Domestic demand GDP Source: CSO, Goodbody PMIs are well into positive territory Employment growth has picked up strongly 2% 1% 0% -1% -2% -3% -4% Q Source: CSO Consumer confidence has risen since the end of the bailout Q Q Q Q Q Q Quarterly (LHS) Q Q Q Q Annual (RHS) Data released since IPO Q Q Q % 4% 2% 0% -2% -4% -6% -8% -10% Data released since IPO Data released since IPO 40 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar Jan 08 May 08 Sep 08 Jan 09 May 09 Sep 09 Jan 10 May 10 Sep 10 Jan 11 May 11 Sep 11 Jan 12 May 12 Sep 12 Jan 13 May 13 Sep 13 Jan 14 Source: Bloomberg, Markit Composite Manufacturing Services ource: Source: Factset

9 Capital value index Quarterly change Capital value index Quarterly change 9 MARKET UPDATE Commercial property market recovering strongly, particularly office sector Commercial property is continuing its recovery 1,600 1,400 1,200 1,000 Capital values are currently at c.1999 levels Data released since IPO Q Q Q Q Q Q Q Q Q Source: Jones Lang LaSalle Source: Jones Lang LaSalle Quarterly change in capital values by sector Quarterly change in rents by sector 7% 6% 5% 4% Data released since IPO 8% 6% 4% Data released since IPO 3% 2% 1% 2% 0% 0% -1% -2% -2% -4% -3% Q Q Q Q Q Q Q Q Q Retail Office Industrial -6% Q Q Q Q Q Q Q Q Q Retail Office Industrial Source: IPD Source: IPD

10 % YoY 10 MARKET UPDATE Dublin residential market also showing strong growth from depressed levels Residential prices now growing across the country Average residential property prices 20% 500,000 15% 450,000 10% 400,000 5% 350,000 0% 300,000-5% -10% 250,000-15% 200,000-20% 150,000-25% Data released since IPO 100,000 Data released since IPO -30% Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 50,000 Jan- 00 Jan- 01 Jan- 02 Jan- 03 Jan- 04 Jan- 05 Jan- 06 Jan- 07 Jan- 08 Jan- 09 Jan- 10 Jan- 11 Jan- 12 Jan- 13 Jan- 14 Dublin ex Dublin Dublin ex Dublin Source: CSO Source: ptsb/esri, CSO, Goodbody

11 Thousands (sq.ft.) 11 MARKET UPDATE Rental market: Dublin office dynamics Number of Grade A vacant buildings in Dublin IFSC, 2 and 4 Vacant space by geography and quality 14 IFSC 5,000 Grade A Dublin 2 Grade B 12 4 Dublin 4 4,000 Grade C , , ,999 10,000 - sq.ft. 19,999 sq.ft ,000-29,999 sq.ft. 2 30,000-39,999 sq.ft ,000-49,999 sq.ft. Only 2 buildings of >50,000 sq. ft. currently vacant, down from 5 at end of Q ,000-59,999 sq.ft. 60,000-69,999 sq.ft. 70,000-79,999 sq.ft. 80,000-89,999 sq.ft. 90,000-99,999 sq.ft. 100, , ,999 sq.ft.+ sq.ft 1,000 0 IFSC Dublin 2 Dublin 4 Rest of Dublin Dublin City Source: Jones Lang LaSalle Grade A & B vacancy rates have reduced since IPO, particularly in Dublin CBD Only c. 250,000 sq. ft. of prime city centre office space under construction and not expected to be delivered until Prime rents now headlining at 38 42psf CBRE forecasting prime rents at c. 60psf by 2020 (1) Source: Jones Lang LaSalle (1) CBRE Outlook 2014

12 Million sq.ft. Million sq.ft Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q MARKET UPDATE Rental market: Dublin office dynamics (cont d) Dublin office take-up expected to be c.2m sq.ft. in 2014 Dublin geographic take-up Forecast Take Up 20 Year Average 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 48% 44% 41% 34% 52% 56% 59% 66% Q City Centre Suburbs Source: Jones Lang LaSalle Source: Jones Lang LaSalle Vacancy reducing and no new supply Q Dublin take-up by sector Suburbs CBD 203,241 sq.ft. 393,839 sq.ft. Occupied Stock Vacant Stock Under Construction TMT Insurance and Pension Funds Other Transport and Storage Banking and Fin. Source: Jones Lang LaSalle Source: Jones Lang LaSalle

13 millions 13 MARKET UPDATE Investment market: volumes of transactions picking up sharply 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 Ø 1,152m 1, Investment volume Loan sales Forecast 12 year average Source: Jones Lang LaSalle Note: Excludes IBRC loan sales of 9.3bn nominal value

14 14 MARKET UPDATE Investment market: volumes of transactions picking up sharply (cont d) 2014 Strong sales of direct property and loans Q (1) 934m of direct asset sales in Ireland 287m of loan sales Dublin made up 95% of total sales volume Hibernia transactions equated to c.10% of total sales volume in Q1 Q Special liquidators of IBRC confirmed completed sales processes of Project Stone and Project Sand Project Stone: 85% of 9.3bn nominally valued CRE loans originating through the Irish business of IBRC was sold to: Deutsche Bank Lone Star Carval Goldman Sachs Hibernia management believes that this transaction and others will lead to secondary sale + JV opportunities (1) Source: Jones Lang LaSalle

15 15 MARKET UPDATE Investment market: availability of assets Expectations for the total value of commercial property transactions in 2014 have increased significantly since IPO NAMA Current plan is to repay 7.5bn in bonds from In February 2014 Finance Minister Michael Noonan asked NAMA to weigh up the pros and cons of selling off its property more quickly During 2013 NAMA executed its first major Irish loan sale of 800m Banks IBRC: Unexpected decision by government in February 2014 to liquidate the bank. 90% of loans were sold rather than transferred to NAMA and this should result in faster disposal of underlying assets than previously estimated Ulster Bank: Disposal of 9bn in Irish investment and development loans kicked off in February with 850m sale process for portfolio of commercial loans Lloyds: Disposal programme continuing apace with 1.9bn (25% of total) Irish commercial loans sold in 2013 Permanent TSB: To sell commercial loan book of 2.1bn Domestic banks: continue to make selective loan sales Other Private equity funds, active over last 18 months in Ireland, have become increasingly active in other EU markets and some are exploring opportunities to exit Irish assets particularly where project management expertise is required JV opportunities NAMA has confirmed it will engage in JV opportunities with suitable partners, as have some PE funds, and these opportunities will most likely emerge where project management expertise is required JLL now forecasting direct property and commercial loan transactions totalling 5bn in 2014 (1) (1) Source: JLL Ireland Investment market report. April 2014

16 16 Agenda Operating and financial highlights Market update Acquisitions Conclusion and outlook

17 17 ACQUISITIONS Location of Hibernia acquisitions Office acquisitions all within CBD; ex-cbd acquisitions both with good transport links Central Dublin acquisitions N2/M2 Northwest Business Park M50 N3/M3 Blanchardstown Castleknock N4/M4 Palmerstown The Ward Dublin Airport Ballymun Drumcondra Phibsborough Dublin M1 Beaumont Clontarf Northern Cross Portmarnock Sutton North Bull Island Howth Kings Inns Fairview Park Croke Park Alexandra Basin River Liffey Clondalkin Kimmage N81 Ballsbridge N7/M7 Ballymount M50 Rathfarnham Dundrum Blackrock St. Stephens Green Tallaght N11 Glenageary M50 Herbert Park Source: Google Maps, Visit Dublin, Jones Lang LaSalle Note: Hibernia acquisitions shown in red

18 18 ACQUISITIONS Summary of Dorville portfolio loan acquisition Off market acquisition of 67m Dorville loan portfolio from Ulster Bank Gaining access to a portfolio of 16 assets, principally residential Recommending to Board to retain three core assets and undertake phased disposal of the other assets Summary Core assets Ascribed value Wyckham Point Residential 30m Cannon Place Residential 6m South Dock House Office 5m 41m Non core assets Ascribed value 8 residential assets 19m 2 office assets 2m 3 development assets 5m 26m

19 19 ACQUISITIONS Wyckham Point Acquisition type Off-mkt Property Dev. opportunity On-mkt Loan Property type Office Grade A CBD Income producing Value-add space Retail Low tenant risk Prime Dublin Dundrum, Dublin 16 Acquired as part of 67m Ulster Bank loan portfolio Apportioned value of c. 30m Comprises: Wyckham Point 213 partially completed apartments Mix of one, two and three bed apartments Excellent amenities incl. 3 acre park with lake, gym, creche Prime south Dublin residential location Good transport links close to Dundrum Shopping Centre Industrial Prime location Residential Infill Good transport links Strong covenant Good transport links Wyckham Point planned timeline to complete Q Q Q Q Q Q Q Q Stage 1 - Pre Construction Stage 2 - Construction Stage 3 - Turn-key fit-out

20 20 ACQUISITIONS Cannon Place Acquisition type Off-mkt Property On-mkt Loan Dev. opportunity Property type Office Grade A CBD Income producing Value-add space Retail Low tenant risk Prime Dublin Herbert Road, Dublin 4 Acquired as part of 67m Ulster Bank loan portfolio Apportioned value of 6m Comprises 12 two and three-bed apartments in a 22 unit apartment block Well-located modern estate of three blocks of 22 apartments Walking distance from Sandymount and Ballsbridge villages Close to Lansdowne DART station and the Aviva Stadium Industrial Prime location Good transport links Strong covenant Residential Infill Good transport links

21 21 ACQUISITIONS South Dock House Acquisition type Off-mkt Property Property type Office Retail Dev. opportunity Grade A CBD Income producing Value-add space Low tenant risk Prime Dublin On-mkt Loan 1st Floor Offices, Hanover Quay, Dublin 2 Acquired as part of 67m Ulster Bank loan portfolio Apportioned value of c. 5m, equating to 530psf capital value Asset comprises One floor of 8,942 sq ft in three office suites with parking for 9 cars Let to 3 tenants (Open Hydro Ireland, Collins Stewart, Guggenheim Partners) Annual rent of 312k, average of 35psf WAULT of three years Industrial Prime location Residential Infill Good transport links Strong covenant Good transport links

22 22 ACQUISITIONS New Century House Acquisition type Off-mkt Property Property type Office Retail Dev. opportunity Grade A CBD Income producing Value-add space Low tenant risk Prime Dublin On-mkt Loan Mayor Street, IFSC Dublin 1 Acquisition price 47m: equating to 587psf capital value Asset comprises 80,000 sq ft offices over six storeys with parking for 87 cars Let to Bank of Ireland on FRI lease until 2024, with upward-only rent review in 2019 Annual headline rent 2.85m, or 32psf, with rental abatement until October 2015 Initial yield (post-abatement period): c.6% Significant refurbishment work is about to be implemented by the tenant Industrial Prime location Residential Infill Good transport links Strong covenant Good transport links

23 23 ACQUISITIONS Gateway Site Acquisition type Off-mkt Property Dev. opportunity On-mkt Loan Property type Office Grade A CBD Income producing Value-add space Retail Low tenant risk Prime Dublin Newlands Cross, Naas Road, Dublin 22 Acquisition price: 10.1m Comprises 14.1 acres (5.71 ha) with three large industrial/logistics facilities of 177,960 sq. ft. Buildings currently 46% occupied and producing an annual rental income of 517k or c. 5.5psf Initial yield c.5% Strategic location adjacent to intersection of Ireland s two busiest roads and Dublin s light rail system Significant redevelopment potential Industrial Prime location Good transport links Strong covenant Residential Infill Good transport links

24 24 ACQUISITIONS Montague House & Hardwicke House Acquisition type Off-mkt Property Property type Office Retail Dev. opportunity Grade A CBD Income producing Value-add space Low tenant risk Prime Dublin On-mkt Loan Hatch Street Upper & Adelaide Road, Dublin 2 Acquisition price: 60m, equating to 692psf capital value Acquisition from Hardwicke Group in partially deferred transaction structure Initial acquisition of 18.25m of loans (giving operational control) with NIY of 7.7% Right to take full ownership of the buildings any time up to mid-2016 for incremental 41.75m Assets comprise 88,483 sq ft of prime Grade A office space in two 5 storey buildings on contiguous back-to-back sites with 56 basement car parking spaces Both multi-let at avg rent of 30psf (Hardwicke 34psf, Montague 27psf) WAULT of 7 years 100% of rent to be reviewed during or prior to % with break clauses in 2016 Industrial Prime location Residential Infill Good transport links Strong covenant Good transport links

25 25 ACQUISITIONS Chancery Building & Chancery Apartments Acquisition type Off-mkt Property Property type Office Retail Dev. opportunity Grade A CBD Income producing Value-add space Low tenant risk Prime Dublin On-mkt Loan Chancery Lane, Dublin 8 Acquisition price: 16m Acquiring loans from Bank of Ireland, giving full ownership of assets Assets comprise a) office building with 33,799 sq. ft. space over 6 stories with 19 parking spaces Allocated price of 15m for the offices equates to cap. val. of 445psf Fully let with WAULT of 9 years and 2 years to break Average passing rent of 30psf Net initial yield 6.8% b) four 2 bed apartments in same building with separate entrance Fully let on 1 year contracts Allocated price of 1m for the apartments equates to a net initial yield 6.1% c) a small 0.05 acre site with planning consent for a c. 13,900 sq. ft. NIA office building or a 45 suite student accommodation building Industrial Prime location Residential Infill Good transport links Strong covenant Good transport links

26 26 Agenda Operating and financial highlights Market update Acquisitions Conclusion and outlook

27 27 CONCLUSION AND OUTLOOK Conclusion and outlook Successful start to life as a publicly traded REIT Management team strengthened Over 225m of funds spent or committed in first 140 days of operation (60% of net capital raised) Well ahead of run-rate to deploy funds within months stated Competition remains strong, particularly for office buildings but team is finding exciting opportunities Significant increase in off-market situations Continuing opportunities in loan to own transactions Remain confident of finding attractive deals in all property types and of spending shareholders money wisely

28 28 Agenda Appendix

29 29 APPENDIX Strong board with mix of property and plc experience Hibernia REIT plc Danny Kitchen Independent Non-Executive Chairman Stewart Harrington Independent Non-Executive Director Terence O Rourke Non-Executive Director Colm Barrington Independent Non-Executive Director Bill Nowlan Non-Executive Director Governance Non-Executive Chairman of Workspace Group plc and Non-Executive Director of LXB Retail Properties plc Previously Finance Director of Green Property plc Non-Executive Director of BWG Group and Stafford Holdings Previously a Partner Jones Lang Wootton (now Jones Lang LaSalle) Founding Partner of Harrington Bannon Chartered Surveyors Non-Executive Director of The Irish Times and Board Member of the Chartered Accountants Regulatory Board Previously Managing Partner KPMG Ireland Non-Executive Chairman of Aer Lingus plc and CEO and Director of Fly Leasing Ltd Previously Head of Property Investment of Irish Life from 1985 to 1995, the largest property fund manager in Ireland. Established WK Nowlan in 1995, one of the largest property asset managers in Ireland WK Nowlan REIT Management Breadth of skill set and experience encompassing institutional property management and development in prime and value add space, with strong relationships with key decision makers in banking and property Kevin Nowlan Chief Executive Officer Bill Nowlan Investment Director Frank Kenny Portfolio Management Director Frank O Neill Chief Operations Officer Management >20 years of experience in the Irish property market Previous positions include Senior Portfolio Manager at NAMA, Portfolio Manager at Treasury Holdings and Assistant Manager at Anglo-Irish Bank plc >40 years of experience advising on investment in Irish commercial property Previously Head of Property Investment of Irish Life from 1985 to 1995, the largest property fund manager in Ireland. Established WK Nowlan in 1995, one of the largest property asset managers in Ireland >35 years of experience in the Irish and US property markets Founder and CEO of Willett Companies LLC, boutique investment company which managed, developed and/or owned 2 million sq ft of real estate >20 years of experience in the Irish property market Previously, manager of WK Nowlan Property Management Division, covering Irish and UK properties WK Nowlan Property Support WK Nowlan is a property asset management company staffed by 33 professional staff with capacity to execute multiple transactions simultaneously The team has a broad mix of skills covering all the key professional aspects of property management and development: surveyors and valuers, architects, engineers, portfolio managers and financial analysts Capacity to execute multiple transactions simultaneously Ability to manage complex commercial and residential projects

30 30 APPENDIX Overview of the Irish REIT regime Summary of Irish REIT regime Summary of Irish REIT regime Established Introduced by Finance Act 2013 Legal form Irish incorporated PLC company with an allotted share capital of not less than 38,092 Shareholder requirements No closely held company; 10% threshold for corporate shareholders Listing requirements Listed on the main market of a stock exchange in an EU Member State Business restrictions >75% of aggregate income derived from property rental business >75% of portfolio market value must relate to property rental business Within 3 years of commencement, the REIT must hold at least 3 separate assets, none of which having a market value >40% of total portfolio Irish and non-irish assets Leverage restrictions Profit financing ratio of at least 1.25 : 1 Authorised sectors: commercial properties, industrial properties, residential properties Profit financing ratio = property income plus property finance costs divided by property finance costs Tax Tax exemption for certain income from property rental business, 12.5% for non property rental income Tax exemption for capital gains, 33.0% for non property rental assets Dividend withholding tax of 20.0% Distribution requirements Property income: 85% Irish stamp duty of 1.0% apply to the purchase of shares in a REIT Capital gains: no distribution obligation Source: European Public Real Estate Association

31 31 MARKET UPDATE Investment market: recent transactions in Dublin 75 St Stephen s Green Transaction Close Q Sector Quality Price Purchaser Office Grade A 75 million Lonestar Initial Yield Off market deal info not available Capital Value psf 695 Years to Expiry Lease Rent psf Off market deal info not available Maples & Calder, Hedgeserve, Cantor & EMPGI Unknown Riverside II Transaction Close Q Sector Office Quality Grade A Price 50 million Purchaser IPUT Initial Yield 6.12% Capital Value psf 685 Years to Expiry 7 years to break option on both leases Lease Rent psf 42 Bank of NY Mellon & Beauchamps Solicitors I Adelaide Road Transaction Close Q Sector Office Quality Grade B Price 33.7 million Purchaser Irish Life Initial Yield 6.75% Capital Value psf 555 Years to Expiry 11 years Lease AIB Rent psf One Grand Canal Square Transaction Close Q Sector Quality Price Purchaser Office Grade A 93 million IPUT Initial Yield 5.86% Capital Value psf 770 Years to Expiry Lease Rent psf HSBC and Accenture account for 90% of income and both have break options in (8.5 years) Multi-Let to HSBC, Warner Chilcott & Accenture. Small element of Retail at Ground Floor. Office: Retail: 60-80

32 32 MARKET UPDATE Investment market: recent transactions in Dublin (cont d) Hume House, Ballsbridge Transaction Close Q Sector Quality Price Purchaser Office Initial Yield 5.9% Capital Value psf 364 Years to Expiry Lease 2 nd Generation Analysed at 30 million Blackstone AIB (10 years), BOI (4 years) AIB and BOI Rent psf Block 1 & 2, Grand Mill Quay Transaction Close Q Sector Office Quality Grade A Price 65 million Purchaser Google Initial Yield n/a - bought by occupier Capital Value psf 674 Years to Expiry n/a Lease n/a Rent psf n/a Block B, Riverside IV Transaction Close Q Sector Quality Price Purchaser Office Grade A Analysed at 32.3 million Blackstone Initial Yield 4.30% Capital Value psf 550 Years to Expiry Lease Rent % vacant at date of sale AWAS Aviation Acquisitions & Indeed Ireland Operations Bloodstone Building Transaction Close Q Sector Quality Price Purchaser Initial Yield Office Grade A Capital Value psf 450 Years to Expiry Lease Analysed at 37.7 million Blackstone 1.5% (due to vacancy) 79% vacant at time of sale Seb Life Assurance, LogMeIn, Wonga (new tenant) Rent