Hibernia REIT plc (“Hibernia” or “the Group”) today provides a trading update following the end of its financial year to 31 March 2020 and announces that it has pre-let 24,000 sq. ft. in its 2 Cumberland Place development to 3M Digital Science Community Ltd (“3M”), a subsidiary of 3M Company, the science-based technology company.
Kevin Nowlan, Hibernia’s Chief Executive Officer, said:
“Our priority is to ensure our staff, tenants and suppliers are safe in this challenging period. We will continue to work closely with our tenants and suppliers and to follow all instructions and guidance from the authorities.
“It is too early to have full visibility of the impact of COVID-19 but the Group is in a strong position with low leverage, substantial cash and undrawn facilities, and a diverse range of tenants, many of which are on long leases.
“While we expect activity in occupational markets to slow until the current crisis abates, some lease negotiations are continuing and we are delighted to have pre-let three floors in 2 Cumberland Place to 3M.”
All our head office staff are working from home, making use of our cloud-based systems to ensure business operations continue. Our managed buildings remain open and are fully accessible by tenant employees as required. Work on development sites in Ireland was suspended from 28 March 2020 in line with the Government’s decision to halt all non-essential construction activity and we have therefore secured 2 Cumberland Place until work on finishing the new 57,000 sq. ft. office building is allowed to recommence.
In the quarter to 31 March 2020 we secured three new office lettings on 56,000 sq. ft. (net), adding €3.3m (net) to our contracted rent and reducing the vacancy rate in the in-place office portfolio from 12% to 7%. The largest of these was the letting of the remaining 47,500 sq. ft. in 2WML to Zalando, the online fashion platform, which we announced to the market on 25 February 2020. All three lettings were ahead of September 2019 net estimated rental values (“ERVs”).
Since 31 March 2020 we have pre-let the fourth, fifth and sixth floors in 2 Cumberland Place, a total of 24,000 sq. ft., to3M. The lease term is 10 years, with an option to extend for a further five years at expiry. 3M will pay a net effective rent ahead of the September 2019 net ERV.
Following the leasing activity noted above the Group’s annual contracted rent exceeds €66m, with approximately 90% coming from office properties and the majority of the balance coming from our residential properties. 87% of the commercial rent was collected within seven days of our 1 April quarter day (Jan-20: 94%, Apr-19: 93%) and 93% of the residential rent for the month of April was collected at the same date (in-line with recent months).
The Group has a strong balance sheet with the key points of note being:
- Fully unsecured debt funding with no maturities until December 2023
- Cash of €21m and undrawn facilities of €133m at 31 March 2020
- Loan to value ratio (“LTV”) of 15.6% at 30 September 2019 versus LTV covenant of 50%: asset values would have to fall 66% before a covenant breach
- 12 month historic interest cover ratio (“ICR”) of 7.0x at 30 September 2019 versus ICR covenant of 1.5x: underlying earnings before interest and tax (“EBIT”) would have to fall 78% before a covenant breach
Corporate calendar & dividend
The Group’s preliminary results for the financial year ended 31 March 2020 are scheduled for release on 27 May 2020 and the Annual General Meeting is due to be held on 29 July 2020. Should either of these dates change for any reason we will update the market accordingly. Consistent with the RICS guidance concerning the current health crisis, the independent valuer is expected to include a material uncertainty statement in the property portfolio valuation contained in the preliminary results.
As usual, the Board will make a decision regarding recommending a final dividend payment immediately prior to publication of the preliminary results. We intend to continue to comply with all aspects of the Irish REIT regime, including the requirement to distribute 85% of rental profits each year by way of dividends.
About Hibernia REIT plc
Hibernia REIT plc is an Irish Real Estate Investment Trust (“REIT”), listed on Euronext Dublin and the London Stock Exchange. Hibernia owns and develops property and specialises in Dublin city centre offices.