GROWTH AND OPPORTUNITY Irish Residential Properties REIT plc | Semi-Annual Report 30 June 2014
PROFILE Irish Residential Properties REIT plc (“I-RES”) is a growth-oriented real estate investment trust focused on building a portfolio of multi-unit residential real estate and strategically located commercial property located in major urban centres across Ireland for the purpose of generating rental income. Irish Residential Properties REIT plc | Semi-Annual Report 30 June 2014 OBJECTIVES • To provide stable, sustainable and growing cash • To capitalise on internal growth and accretive flows through investing primarily in multi-unit acquisition opportunities in the greater Dublin residential properties in Ireland; area and other major urban areas in Ireland; • To build a diversified property portfolio across the • To grow asset value and maximise shareholder affordable, mid-tier and luxury accommodation value through active and efficient asset and sectors; property management; and • To provide investors with long-term, stable and growing cash distributions.
FINANCIAL HIGHLIGHTS For the period 2 July 2013 to 30 June 2014 Number of Suites 357 Occupancy 99.4% Average Monthly Rent € 1,070 Operating Revenues (000s) € 3,499 Net Operating Income (“NOI”) (000s) € 2,625 NOI Margin 75.0% Cash and Cash Equivalents (000s) € 142,520 Closing Share Price € 1.01 Net Asset Value per Share € 0.982 Investment Property Value (000s) € 53,750 OPERATIONAL HIGHLIGHTS • Completed Initial Public Offering on 16 April 2014 • Entered into a two-year, €130 million credit facility on 15 August 2014, which will allow I-RES to grow • Acquired initial property portfolio on and achieve its investment goals 10 September 2013 • Selected as preferred bidder to acquire four • Established asset and property management properties in the greater Dublin area consisting agreement with CAPREIT , Canada’s leading multi- of 761 apartment suites with contracts to be unit residential rental REIT , on 11 April 2014 exchanged imminently • Set up Dublin, Ireland management office • Building strong and enduring relationships in September 2013 to strengthen our acquisition pipeline • Acquired The Marker Residences, a prestigious luxury property, on 18 July 2014
Our goal is for I-RES to become one of the leading consolidators “ of multi-unit residential rental properties in Ireland, capitalizing on the strong and improving fundamentals in the Irish apartment market. A Message from the Chairman On behalf of your Board of Directors, I am very pleased to present the first Irish Residential Properties REIT plc (“I-RES” or the “REIT”) report to shareholders for the period 2 July 2013 to 30 June 2014. It has been a very active and successful time since the REIT’s Initial Public Offering in April 2014 and we look for growth and progress to continue going forward. We are also pleased with the contribution of our designated investment advisor and prop- erty manager, a subsidiary of Canadian Apartment Properties Real Estate Investment Trust (“CAPREIT”). They have brought a wealth of professional property and asset man- agement experience to I-RES, already generating a significant improvement in our operating and financial results. We remain confident the continued application of their tested and proven programmes will result in solid growth and increased cash flows in the years ahead. From a governance perspective, as Chairman I believe the significant capital market, accounting, real estate and general business knowledge represented in the I-RES Board of Directors will help to guide management while ensuring the interests of I-RES’s share- holders remain paramount. It is a very strong and independent Board, and I look forward to working with them over the long term. Looking ahead, we believe I-RES presents a very compelling investment opportunity. Our goal is for I-RES to become one of the leading consolidators of multi-unit residential rental properties in Ireland, capitalising on the strong and improving fundamentals in the Irish apartment market. We are confident there is significant potential for I-RES to grow its property portfolio for the benefit of its shareholders. As the I-RES portfolio increases in size and scale, we are confident this external growth will be augmented by organic growth in cash flows through the implementation of our property manager’s proven property and asset management programmes. We look forward to keeping you apprised of our progress. Colm Ó Nualláin Chairman 2 Irish Residential Properties REIT plc Semi-Annual Report 30 June 2014
The Marker Residences, Docklands is a prestigious 84-suite luxury property well located in South Docklands and adjacent to Grand Canal Square, the iconic Bord Gais Energy Theatre, and numerous high-profile office developments. Residents have access to the exercise and spa facilities, including a gym and large exercise pool, of the adjacent award-winning five-star Marker Hotel. Camac Crescent, Inchicore is a modern 90-suite luxury property located in an established residential neighbourhood near Dublin City Centre, beside Europe’s largest inner-city pub- lic park and close to numerous amenities and major employers. Residents enjoy the property’s landscaped courtyard garden and its large dual-aspect open-concept suites with large balconies. 3 Irish Residential Properties REIT plc Semi-Annual Report 30 June 2014
Operating margins have also increased significantly, “ clearly showing the effectiveness of our property manager’s professional management programmes. A Message from the Chief Executive Officer Following the completion of I-RES’s initial public offering in April 2014, we have been very busy enhancing property operations and adding to our asset base. We are pleased with the REIT’s performance to date and look forward to further growth going forward. Our initial portfolio of four properties, consisting of 338 apart- South Docklands redevelopment continues. We also believe ment suites and related commercial units in the greater there is an opportunity for significant rental growth. Dublin area, was acquired in September 2013, when I-RES was a wholly owned subsidiary of Canadian Apartment We are particularly pleased to have been selected as pre- Properties Real Estate Investment Trust, a subsidiary of which ferred bidder, with contracts to be exchanged imminently to is our investment advisor and property manager. The initial acquire four properties in the greater Dublin area, consisting portfolio was appraised at the time of the initial public offering of 761 apartment suites and ancillary commercial space, in April for €46.5 million and was appraised as at 30 June 2014 for €211.3 million (excluding costs of acquisition). This out- for €51.5 million. standing portfolio was acquired through a process run by the National Asset Management Agency and the acquisition is At the time of the acquisition of the initial portfolio, occupancy anticipated to close in October 2014. We believe there are of the apartment suites was 93% with an average monthly significant opportunities to enhance net operating income rent of €900 per suite. As at 30 June 2014, portfolio apart- from these properties. ment occupancy was 99.4% and the average monthly rent was €1,070 per suite. Operating margins have also increased sig- Most significantly, the addition of this portfolio will bring our nificantly, clearly showing the effectiveness of our property total apartment units owned to 1,202, providing a real plat- manager’s professional management programmes. We look form for CAPREIT , our property manager, to leverage their for this to continue to be applied to our expanded portfolio proven professional management strategies and bring their going forward, to the great benefit of our shareholders. Canadian expertise to the Irish market. In June 2014, we acquired a small, fully leased property, There is no question that market competition in Ireland has consisting of 19 apartments and one commercial unit, for caused a compression in capitalisation rates for all invest- €2.1 million (excluding costs of acquisition) located in prox- ment property sectors from those that applied at the time of imity to an existing property and therefore requiring little our initial public offering. At the same time, rental increases additional management expense. have significantly outperformed our budgets from the time of acquisition of the initial portfolio. We anticipate rising levels In July 2014, we strengthened our portfolio by acquiring of property returns over the very near term as these rental The Marker Residences, a prestigious luxury property located increases take effect. Moreover, I-RES is looking at other in South Docklands adjacent to Grand Canal Square, for €50.1 opportunities, including buy-to-let portfolio acquisitions, which million (excluding costs of acquisition). This 84-suite luxury can be held for ultimate sale as the Irish banking sector and residential and ancillary commercial building, with access to economy continue to improve, which we anticipate will add the amenities of the adjoining Marker Hotel, will, we believe, to shareholder returns. be a prime asset for many years to come, particularly as the 4 Irish Residential Properties REIT plc Semi-Annual Report 30 June 2014
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