TIDMYEW
RNS Number : 8657W
Yew Grove REIT PLC
24 April 2019
24 April 2019
Yew Grove REIT plc
("Yew Grove REIT" or the "Company")
Annual Report
And
Notice of AGM
Yew Grove REIT plc (LSE:YEW, Euronext:YEW), which owns a
diversified portfolio of Irish commercial property assets, is
pleased to announce that its Annual Report and Financial Statements
for the year ended 31 December 2018 and Notice of its 2019 Annual
General Meeting ("AGM") are today being posted to its
shareholders.
The AGM will be held at 12.00 p.m. on 24 May 2019 at the offices
of William Fry, 2 Grand Canal Square, Dublin 2, Ireland.
Yew Grove REIT's Annual Report and Financial Statements for the
year ended 31 December 2018 is available on the Company's website
at http://www.ygreit.com/investors. As this is the Company's first
Annual Report, the Board sets out below extracts (without material
adjustment) from the Annual Report and Financial Statements for the
year ended 31 December 2018*.
Enquiries:
Yew Grove REIT plc Tel: 353 (1) 480 3960
Jonathan Laredo, Chief Executive Officer
Michael Gibbons, Chief Investment Officer
Charles Peach, Chief Financial Officer
Investec Bank plc
NOMAD & Joint Broker: Tel: +44 (0) 20 7597
David Anderson, Darren Vickers 5970
ESM Advisor & Joint Broker: Tel: +353 (1) 421
Tommy Conway, Eoin Kennedy 0000
Goodbody Stockbrokers
Joint Broker: Tel +353 (1) 667 0400
David Kearney, Joe Gill
IFC Advisory Tel +44 203 934 6634
Financial PR
Tim Metcalfe, Graham Herring, Heather
Armstrong
* The Annual Report and Financial Statements for the year ended
31 December 2018 includes certain additional analysis and further
classifications of operating expenses and cash flow items to
augment the unaudited financial results released by the Company on
6 February 2019.
Notes to editors:
Yew Grove REIT is an Irish commercial real estate company
invested in a diversified portfolio of Irish commercial property,
with a particular focus on well-tenanted commercial real estate
assets comprising office and industrial assets let to Irish
government entities and other state bodies, IDA Ireland supported
and other FDI companies, and larger corporates.
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
For the financial period from 5 April 2018 (date of
incorporation) to 31 December 2018
Contents
1. Chairman's Statement
2. Chief Executive Officer's Statement
3. Strategic Priorities
4. Key Performance Indicators
5. Portfolio report
6. Market Report
7. Directors' Report
8. Directors' Responsibility Statement
9. Corporate Governance Statement
10. Principal Risks and Uncertainties
11. Audit Committee Report
12. Nominations Committee Report
13. Remuneration Committee Report
14. Valuation Committee Report
15. Independent Auditor's Report
16. Consolidated Statement of Financial Position
17. Consolidated Statement of Comprehensive Income
18. Consolidated Statement of Changes in Equity
19. Consolidated Statement of Cash Flow
20. Company Statement of Financial Position
21. Company Statement of Changes in Equity
22. Company Statement of Cash Flow
23. Notes to the Consolidated Financial Statements
24. Disclosures under AIFMD (unaudited)
25. Alternative performance measures
26. Glossary
Corporate Information
Chairman's Statement
I am delighted to introduce the Report and Consolidated
financial statements of Yew Grove REIT plc (the "Company") for the
financial period from 5 April 2018 (date of incorporation) to 31
December 2018 following the Company's successful initial public
offering and admission to trading on the Alternative Investment
Market of the London Stock Exchange and the Euronext Growth market
(while subsequently re-named Euronext Growth, at Admission it was
the Enterprise Securities Market.) of Euronext Dublin in June
2018.
Activity
2018 was a significant and busy year for the Company having
successfully launched its initial public offering and admission to
trading on both the Alternative Investment Market of the London
Stock Exchange and the Euronext Growth market of Euronext Dublin
with Admission on 8 June 2018. The Company was the only REIT to
successfully float on these exchanges in 2018. Having raised EUR75
million and acquired the shares of the Yew Tree Investment Fund,
the Company was left with investment capital of some EUR50 million.
Those funds, together with an additional EUR6.2 million drawn from
a revolving debt facility of EUR20 million from the Allied Irish
Bank plc, were invested in 5 new locations: namely the Gateway
buildings on East Wall Road just north of the Dublin Docks;
Blackwater House in Mallow, County Cork; and three buildings on the
IDA Ireland park outside of Letterkenny, County Donegal in the
north west of Ireland. Following the year end the Company purchased
an office on the Cork Airport Business Park and agreed to purchase
another on the IDA Ireland park outside Waterford in Ireland's
south east. These investments leave the Company almost fully
invested, with a strong tenancy mix and rent roll which will stand
the Company in good stead in future.
During 2018 the Company organised the integration of the Yew
Tree Investment Fund, with the transfer of the Yew Tree Investment
Fund's seed portfolio into the Company and progressed the
liquidation of the Yew Tree Investment Fund. In early November the
Company applied for and received Court approval for the capital
reduction of its share premium account, allowing for the
declaration and payment of the Company's maiden dividend early in
2019.
Board
During the period the Board devoted considerable time to the
Company's post flotation organisation and acquisitions and to the
strategic plans for the development of the business. Full details
of the Board's activities are set out in the Corporate Governance
Statement.
As required by the Corporate Governance Code the majority of the
Board are independent non-executive directors with a level of
relevant experience and diversity so the Board can oversee
executive management and provide an effective framework of
corporate controls. These include the Board Committees (whose roles
are described in more detail below) as well as the Company's
investment process. The Company has a clearly defined process under
which all material acquisitions and disposals of buildings as well
as material amendments to leases (as well as other core contracts)
come to the Board for discussion and approval if they have been
recommended by the investment committee of the Company.
The Board also oversees and is updated on the Company's
performance by regularly reviewing financial performance in
absolute terms and against budgets. It sets the overall strategic
direction of the business by conducting an annual Board review of
the market, the Company's place in that market and the proposed
focus for the year ahead.
I would like to thank each member of the Board for their
commitment during the period and I look forward to working with
them for the benefit of the Company in the following year.
Management and employees
On behalf of the Board, I would also like to thank the
management team and employees of the Company for their continued
hard work and energy over the past 7 months. We look forward to
their contributions in the years ahead. It has been a busy and
demanding year and as we look forward to further growth in 2019 and
beyond we believe that our success is driven by the dedication and
commitment of our team. Since Admission the Company has had an
Alternative Investment Fund Manager agreement in place with
Ballybunion Capital which remains in place.
Outlook
We are confident in the continued growth and success of our
business in 2019. The first mover advantage bestowed upon us by the
successful IPO gives us the opportunity to grow our business
through the strong pipeline of opportunity which has developed over
the past year. We remain committed to our strategy as outlined in
the admission document and believe that we are well positioned to
grow profitably.
On behalf of the Board, I would like to thank you, our
shareholders, for your continued support.
Barry O'Dowd
Chairman
23 April 2019
Chief Executive Officer's Statement
I am pleased to announce a strong set of inaugural results for
the Yew Grove Group of companies ("the Group) for the financial
period from 5 April 2018 (date of incorporation) to 31 December
2018.
The net proceeds from the IPO have been fully invested and
together with the two investments in Waterford and Cork (made after
the filing of the Company's Initial Financial Statements and
announcement of the results) mean that most of the current bank
facility is now drawn and invested. The properties that have been
acquired have enhanced the rent roll and tenancy mix of the overall
portfolio.
Results
Pre-tax profits for the period were EUR2.3 million including a
net valuation gain of over EUR1.6 million. The valuation gain was
partially driven by growth in value of the seed portfolio, but more
substantially by the increase in value of properties acquired since
the IPO in June 2018. The Company has tripled the size of its
property portfolio since IPO, and the valuation gain recorded for
the period represents a significant achievement given the market
assumption that Irish commercial property investments have an
associated cost (including stamp duty, legal, surveying and other
fees) of 8.46%.
As a result, European Public Real Estate ("EPRA") Net Asset
Value ("NAV") per share increased to 100.18c as at 31 December
2018, from 96.55c as at 30 June 2018. This means that the Company
has not only covered the acquisition costs of the new properties,
but also the costs of flotation. This is a noteworthy achievement
for a company in its first seven months of activity.
The agreement of a revolving credit facility with Allied Irish
Banks plc ("AIB") increased the Company's funds available for
investment and has allowed us to execute further attractive
investments.
The contracted rent roll as at 31 December 2018 was EUR6.3
million and following the purchase of the Cork and Waterford
buildings and the completion of the car park at our Athlone
facility the contracted rent roll will increase again, to EUR7.4
million. The Company has excellent opportunities to increase this
from the existing portfolio both through asset management as well
as generally increasing rental levels driven by a backdrop of
strong demand from tenants in our geographic target market.
Dividend
I am pleased that, as disclosed during the financial period, the
Board have agreed to pay an interim dividend in respect of the
period to 31 December 2018. The declared dividend was the Group's
net income, which rounds to 0.964 cents per share.
Again, as disclosed during 2018, the Company intends to pay
quarterly dividends in 2019 and announced the first of its
quarterly dividends at the end of March.
Review of activity
In the period from our April 2018 incorporation to period end,
we successfully completed a EUR75 million IPO in June 2018 and have
grown our portfolio to 14 properties. This includes 10 properties
from the seed portfolio acquired at IPO.
In July 2018, the Group acquired two office buildings (Buildings
One and Three Gateway, together the "Gateway buildings") on East
Wall Road, Dublin 3, just north of the Dublin docklands. The two
buildings were acquired for EUR31.0 million (including transaction
costs). In October, the Group acquired Blackwater House in Mallow
for EUR2.0 million (including transaction costs). In November 2018,
the Group agreed terms with IDA Ireland and a tenant of its Athlone
property to acquire land and begin construction of a car park
adjacent to that property. That work, which cost c EUR0.5 million,
was completed in February 2019. In December 2018, the Group
completed the acquisition of three buildings on an IDA park outside
Letterkenny in Donegal for an aggregate purchase price of EUR17.1
million (including transaction costs). The costs of these
acquisitions are detailed in note 13 to the accounts below.
In November 2018, the Company was granted permission by the
Courts to reduce its share premium account which was transferred to
distributable reserves and as a result when the Company's Initial
Financial Statements were filed with the CRO in February 2019, the
Board was able to announce the payment of an interim dividend for
2018.
Finally, in December 2018, the Company agreed a revolving credit
facility with AIB secured on some of its properties. The facility
has a three-year initial term and has an initial principal amount
of EUR19.95 million. At period end the Group had uncommitted
facilities of EUR13.7 million, the majority of which has since been
deployed.
Post balance sheet events
On 7 February 2019 the Company declared the payment of an
interim dividend in respect of the period ended 31 December 2018 of
EUR723,000 for 0.964 cents per ordinary share. This was paid to
shareholders on 26 February 2019.
On 8 February 2019 the Company exchanged contracts to purchase
Office Block A, located in the IDA Waterford Business and
Technology Park, Butlerstown, Waterford for EUR4 million plus
costs, representing a gross yield to fair value of 8.56% after
accounting for all purchase costs. The property, 36,845 sq. ft. of
open plan office space arranged over three storeys and is tenanted
by Tech Mahindra Business Services Ltd under a 20 years lease with
a break in five years, and SE2 Information Services Ireland Ltd
under a five years lease.
On 11 February 2019 the Company delivered a completed car park
in Athlone to its adjacent tenant under a co-terminus lease.
On 15 February the Company announced the inaugural grant of
options to executive management under the Long Term Incentive Plan
that had been established in June 2018 at Admission to the
Alternative Investment Market of the London Stock Exchange and the
Euronext Growth market of Euronext Dublin.
On 27 February 2019 the Company completed the purchase of Unit
2600, Cork Airport Business Park, Cork Airport for EUR7.5 million
plus costs, representing a gross yield at fair value of 7.85% after
accounting for purchase costs. The property, a two storey, 40,953
sq. ft office block which was refurbished in 2015 to a high
standard and includes a 163-space car park, is tenanted by
Clearstream Global Securities Services Ltd, a subsidiary of
Deutsche Borse AG, under a 25 year lease with final expiry in just
over five years' time.
On 29th March 2019 the Company declared the payment of an
interim dividend in respect of the first quarter of 2019 of
EUR825,000 for 1.10 cents per ordinary share. This is to be paid to
shareholders on 13 May 2019.
Property valuation
Lisney valued the Company's property portfolio at 31 December
2018, which included the initial valuation of all properties
acquired since the IPO. The portfolio was valued at EUR77.9 million
recognising a net valuation gain of EUR1.6 million.
As at 31 December 2018, the portfolio had a contracted rent roll
of EUR6.3 million representing a gross yield at fair value of 8.1%.
The expected gross reversionary yield on the portfolio is in excess
of 8.7%.
The portfolio has a weighted average unexpired lease term
("WAULT") of 4.9 years to break and 7.4 years to final maturity.
Given the current state of the market, i.e. that demand for
property in our geographic target market is driving rent levels up,
the Company is currently happy with a slightly shorter WAULT to
break/rent review where it can increase rental earnings more
quickly.
The post balance sheet transactions mentioned above increase
that contracted rent roll to EUR7.43 million representing a gross
yield at fair value of 8.13% with an expected gross reversionary
yield in excess of 8.7%.
Finance
Facility drawings at 31 December 2018 stood at EUR6.2 million
with further available facility of EUR13.7 million. Total debt to
equity gearing and LTV at 31 December 2018 were 8.25% and 7.96%
respectively. Details of the facility and the amount drawn can be
seen at note 18 to the accounts below. Following the 2019
acquisitions most of the balance of the facility has now been
drawn.
Irish Commercial Real Estate Market
The strength and depth of the Company's potential acquisition
pipeline is a reflection of the positive Irish commercial real
estate market, as well as the Company's first mover advantage as
the only publicly quoted vehicle focusing predominantly outside of
the Dublin Central Business District ("CBD"). The Irish economy has
performed strongly in recent years and this has been reflected by
the volume of property investment transactions. 2018 was one of the
strongest years on record with total transactions of EUR3.6
billion. More significantly for the Company, approximately 67% of
those transactions happened outside of the Dublin CBD (Source
Cushman and Wakefield ), i.e. within the Company's geographic
target market. The prognosis for the economy remains positive
despite underlying concerns relating to Brexit and other
macro-economic headwinds.
On current trends, demand for office space is increasingly being
driven by the requirement from multinationals for large footplate,
Grade A or modern space. In addition, the Irish Government has a
proactive policy focused on balanced regional development which is
encouraging the growth of regional FDI centres. With current rent
rates for prime space outside of the CBD at half of the CBD levels
or lower, multinationals and other tenants attracted by suitable
space are driving demand and falling vacancy rates. For the past 3
years take up has been stronger in Dublin's secondary and suburban
areas than in the CBD, and in 2018 vacancy rates in those locations
fell, whilst vacancy increased in the CBD (principally in older,
poorer quality buildings). Vacancy rates have fallen in Cork,
Limerick, Galway and the other key cities and towns in which large
corporate FDI companies are increasingly looking to site their
businesses. Rising rents have seen the beginnings of development
outside of the CBD, with over half a million square feet under
construction (Source Cushman and wakefield).
Transactions in industrial property are fewer as a severe
shortage of suitable properties makes secondary transactions
expensive and relatively infrequent. This market accounted for only
3% of all commercial real estate investment transactions in the
first 3 quarters of 2018 (Source Cushman and wakefield). However,
the demand for space is driving rents upwards and there are
increasing numbers of forward funded developments for tenants. The
Company expects to see that continue in 2019 and beyond.
These trends align with Yew Grove REIT's differentiated
strategy, targeting well-tenanted commercial real estate located
outside of the Dublin CBD and I and the Board look forward with a
high degree of optimism to our first full year of active
operations.
Strategic Priorities
Our business strategy is driven by our dividend strategy
The Company is committed to building a portfolio of commercial
buildings in Ireland, outside of Dublin's central business district
('CBD'). Target properties should be structurally sound, attractive
to tenants of good credit standing (government or large
corporations) and generate a rent roll and a reversionary rent
which will support a sustainable and growing dividend, paid
quarterly.
The execution of that strategy is driven by a number of
interlinked factors and objectives:
We will continue to manage our cost base carefully. The Company
is committed to paying shareholders 100% of property income by way
of a quarterly dividend. As our costs are principally fixed and not
linked to the size of our capital base we will reduce our cost to
revenue ratio as our capital base and portfolio grows, with the
consequent benefits for our dividend capacity.
We use our first mover advantage to buy well. Our chosen market
still offers the opportunity to invest in well tenanted buildings
at attractive investment yields and as the only public vehicle
focused on this opportunity, we continue to maximise our exposure
to the sector. Irish commercial real estate outside of the Dublin
CBD offers institutional quality buildings at net investment yields
in excess of 7%. Our target market is small by European standards
so it is not a core focus for European property firms. Most
institutional investors are interested only in the larger
transactions (typically above EUR20 million) which are few and far
between. The Company targets properties below this threshold which
are typically beyond the price range of most high net worth buyers.
Because many of the non-public funds and companies also targeting
these properties have found it difficult to raise capital over the
past 12-15 months Yew Grove has an opportunity to grow its
portfolio without a compression of net investment yields.
We manage the estate to optimise rent roll and WAULT. Many of
the properties in which we invest offer the opportunity to improve
the investment yield, either because rents are rising as demand for
modern buildings with institutional floor plates outstrips supply,
or because they have not been actively managed by the previous
owners, or a combination of both factors. Where buildings are
already fully let at rents which we consider to have little
opportunity for growth, we look to extend and maximise the lease
term. This fits with demand because, as there is a shortage of good
quality office and industrial buildings in our target market,
multinationals which are growing their activities locally are keen
to tie down quality space with longer leases.
In addition to growing our portfolio through investments in
existing buildings we are also focused on developing relationships
with key tenants that require more space on sites they have
occupied for some time. In certain circumstances we will consider
forward funded transactions to finance the development of new
industrial buildings or offices, provided the projected investment
by Yew Grove meets our required rate of return.
We also expect to rationalise the portfolio by selling down some
of the higher yielding, but smaller, buildings which are well
tenanted but are not institutional grade stock. The price for these
buildings suits the high net worth market and so should find
interest at or above the valuations at which we own them. Any
proceeds of sale will be reinvested.
As rental growth begins to slow and the market outside of the
Dublin CBD matures (supply and demand begin to balance) we will
seek to extend the WAULT on the portfolio. We expect therefore,
that our portfolio will over time coalesce into a coherent
collection of modern office and industrial buildings sited across
the country, with approximately 50% to 65% in the Dublin suburbs
and commuter belt and the balance spread between Cork, the Midlands
and the rest of the country.
Key Performance Indicators
The Company's results for the financial period 2018 are set out
in the Consolidated Statement of Comprehensive Income. The profit
for the financial period ended 31 December 2018 was EUR2.3 million,
including unrealised profits on investment properties of EUR1.6
million.
The Company's key performance indicators are chosen to be
specific to the Company's sector, to provide a measure of the
Company's performance and to show progression against the Company's
investment objectives.
KPI Relevance to Strategy
NAV per share The NAV reflects the Company's ability
to deploy its capital in a value enhancing
manner.
---------------------------------------------
EPRA NAV per share The EPRA NAV reflects the Company's ability
to deploy its capital in a value enhancing
manner that can be compared with its peers.
---------------------------------------------
Dividend per share The dividend reflects the Company's ability
to deliver a sustainable income stream
from its investment properties.
---------------------------------------------
Total shareholder return The total shareholder return demonstrates
the Company's ability to generate returns
for its shareholders
---------------------------------------------
Performance against KPIs
NAV per share Dividend per EPRA NAV per Total shareholder
share share* return (4)
Prior to Admission 100.0 0 100.0 100.0
-------------- ------------- ------------- ------------------
30 June 2018 96.5c 0 96.5c 101.0
-------------- ------------- ------------- ------------------
31 December
2018 100.2c 0 100.2c 100.0
===================== ============== ============= ============= ==================
Change from
prior to Admission +0.2c 0 +0.2c +0c
-------------- ------------- ------------- ------------------
Change from
30 June 2018 +3.7c 0 +3.7c -1c
-------------- ------------- ------------- ------------------
(*Alternative Performance Measures ("APMs"). The Company uses a
number of financial measures to describe its performance which are
not defined under International Financial Reporting Standards
("IFRS") and which are therefore considered APMs. In particular,
measures developed by the European Public Real Estate Association
("EPRA") are reported in line with other public real estate
companies. These are defined in more detail, and reconciled with
IFRS where applicable, in the Alternative Performance Measures
section.)
Operational Metrics
Additionally, the Company measures operational performance
metrics that allow the Company's property operations to be compared
with others in its sector or peer group.
The Company's investment objective, as laid out in the admission
document is to:
-- Provide shareholders with high, good quality income;
-- Pay a covered dividend and generate an attractive
risk-adjusted total return for shareholders;
-- Build a portfolio of Irish commercial office and industrial
property assets to support a 7c per share dividend while achieving
moderate capital growth; and
-- Ensure that the investment properties be tenanted principally
by Government and corporate tenants with favourable credit
profiles
The Company intends to pay its comprehensive income (excluding
fair value gains or losses on investment properties) to
shareholders by way of dividends. In order to pay dividends the
Company was required to reduce its share premium by transferring it
to distributable reserves. The Irish Courts approved this on 2
November 2018, and following filing financial statements with the
CRO in February 2019 the Company began to pay quarterly dividends
to shareholders. The interim dividend paid for the financial period
was 0.964c per share for a total of EUR723,000.
The primary operational metrics used by the Directors to measure
the Company's progress in achieving its investment objectives are
illustrated below:
The quality of the Company's income is measured with reference
to the creditworthiness of its tenants. Over the period from
Admission to 31 December 2018 the Company's contracted rent roll by
tenant type and ERV for vacancy has changed as shown below:
Government/quasi FDI Large Enterprise SME Vacancy
Government
Admission 34.0% 52.5% 1.0% 11.5% 1.0%
----------------- ------ ----------------- ------ --------
31 December
2018 37.5% 54.0% 0.4% 5.3% 2.8%
----------------- ------ ----------------- ------ --------
Period change 3.5% 1.5% -0.6% -6.2% 1.8%
----------------- ------ ----------------- ------ --------
Additionally, the tenor and trajectory of the Company's rental
income is measured;
WAULT to WAULT to Life to next Gross Gross reversionary
next break lease end rent reversion Yield yield(5)
date at fair
value*
Admission 5.2 years 10.4 years 3.2 years 10.0% 9%
------------- ------------ ----------------- --------- -------------------
31 December
2018 4.9 years 7.4 years 2.9 years 8.1% 8.6%
------------- ------------ ----------------- --------- -------------------
Period change -0.3 years -3.0 years -0.3 years -1.9% -0.4%
------------- ------------ ----------------- --------- -------------------
(*Alternative Performance Measures ("APMs"). The Company uses a
number of financial measures to describe its performance which are
not defined under International Financial Reporting Standards
("IFRS") and which are therefore considered APMs. In particular,
measures developed by the European Public Real Estate Association
("EPRA") are reported in line with other public real estate
companies. These are defined in more detail, and reconciled with
IFRS where applicable, in the Alternative Performance Measures
section)
Over the same period the Company has deployed the full proceeds
of its IPO and EUR6.2 million of its debt facility, increasing the
value of the Group's revenue generating assets from EUR25.9 million
to EUR77.9 million while increasing the Company's contracted rent
roll from EUR2.6 million at Admission to EUR6.3 million as at 31
December 2018. The Company measures contracted rent roll in order
to measure the progression of its primary source of income on a
monthly basis.
The Company has incurred EUR3.5 million of purchase costs
(including 6% stamp tax and legal/agency and due diligence costs)
on properties purchased since Admission. The fair value gain on the
Company's properties at 31 December 2018 offset the entirety of
these costs to show a net gain of EUR1.6 million and a gain of
EUR5.1 million from purchase price (excluding costs) being the
difference between the EUR25.9 million distributed in specie from
the Yew Tree Investment Fund, the subsequent property purchases of
EUR46.9 million and the period end valuation of EUR77.9
million.
In order to manage the Company's life and growth, the Directors
have set short and medium-term targets for the investment
objectives. These are a mix of organisational and property
management, investment and capital raising objectives:
2018 progress Impact
Short term objectives:
To have allocated the All of EUR75 million Company ahead of
capital raised at admission raised deployed capital allocation
within 12 months target
To establish and run Capital reduction, Company paid dividends
the Company's business subsidiary fund and property income
prudently and in compliance liquidation, REIT distributions in
with the REIT rules* rule compliance early 2019
Medium term objectives:
To raise leverage of RCF of EUR19.9 million Revenue increase,
no greater than 25% agreed, EUR6.2 million asset increase
on agreeable terms and drawn
deploy this in property
assets
To raise further equity Selection of suitable Timeline (excluding
capital and deploy further brokers and advisors market conditions)
equity capital in property achievable
assets
To increase amount, Rent reviews initiated Annual contracted
security and duration rent roll increase
of the Company's rental from 2019 from rent
income review of EUR0.04
million
To continue to minimise Staffing and systems Company operationally
the Company's cost base, established prudently ready to raise and
such that incremental deploy further capital
capital raises can enhance
the Company's dividends
(*As an Irish Real Estate Investment Trust ("REIT"), the Company
is subject to Part 25A of the Taxes Consolidation Act 1997 (as
inserted by section 41 of the Finance Act 2013).
Portfolio Report
Our Portfolio at a Glance;
Ø Contracted rent roll: EUR6.3 million.
Ø Portfolio Value: EUR77.9 million(1)
Ø Gross yield at fair value at year end valuation: 8.1%(2)
Ø Gross reversionary yield at year end valuation: 8.6%.
Ø Number of Properties: 14
Ø Income security with WAULT at 4.98 years to break and 7.4
years to expiry.
Ø Portfolio has increased in value from EUR25.9 million at
Admission to EUR77.9 million at 31 December 2018.
Ø 31 December 2018 valuation includes EUR72.8 million as
property purchase price, EUR5.1 million subsequent property
valuation gains.
Ø Contracted rent roll has increased from EUR2.6 million at
Admission to EUR6.3 million.
Ø Portfolio Location: 58% of income generated by properties
within the Dublin catchment area(3) .
Ø Portfolio Quality: 92% of annualised rental income secured by
Government & Foreign Direct Investment ("FDI") tenants.
Ø Income by Property Type: 76% of income generated from offices,
19% from industrial buildings and 5% from mixed use or retail
buildings.
Portfolio Schedule
Building Type Location Value(1) Current Gross Reversionary Gross WAULT to WAULT to Vacancy
(EUR'm) Rent (EUR'000) Yield Rent (EUR'000) Reversionary lease break lease end by ERV
at Yield years years
fair
value
1 One Gateway Office Dublin 18.0 1,101.2 6.1% 1,398.5 7.8% 3.5 5.0 5.3%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
North
2 Letterkenny Office West 16.0 1,436.7 9.0% 1,458.4 9.1% 9.3 9.3 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Three
3 Gateway Office Dublin 14.0 913.4 6.5% 1,070.6 7.6% 2.0 2.0 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Ashtown
4 Gate Office Dublin 9.4 766.7 8.2% 767.5 8.2% 3.0 7.1 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Airways Ind
5 Est. Industrial Dublin 4.5 300.0 6.6% 461.9 10.2% 6.8 11.8 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
6 IDA Athlone Industrial Midlands 3.9 386.7 10.0% 443.5 11.4% 4.7 15.7 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Blackwater
7 House Office Cork 2.3 229.0 10.1% 330.6 14.6% 1.6 5.5 28.9%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Bridge
8 Centre Retail Midlands 1.9 229.2 11.8% 177.6 9.2% 2.4 3.0 14.8%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Holly
9 Avenue Industrial Dublin 1.8 169.9 9.4% 169.9 9.4% 2.1 9.1 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Naas
Enterprise Dublin
10 Park Industrial catchment 1.7 170.0 9.9% 185.5 10.8% 4.1 4.1 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Mixed South
11 Listowel use West 1.6 275.9 16.9% 150.3 9.2% 4.2 10.7 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Mixed
12 Canal House use Midlands 1.0 106.5 10.8% 51.6 5.2% 8.0 8.0 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Heather
13 Road Industrial Dublin 1.0 92.5 9.7% 53.6 5.6% 10.6 10.6 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
Centre
14 Point Industrial Dublin 0.9 110.0 12.9% 51.0 6.0% 7.7 7.7 0.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
77.9 6,287.7 8.1% 6,770.5 8.6% 4.9 7.4 3.0%
------------ ----------- ---------- --------- ----------------- ------ ---------------- ------------- ------------------- ------------------- --------
1. Lisney 31 December 2018.
2. Estimated rent divided by current valuation of the
property.
3. Dublin Catchment Area defined as within a thirty minute
commute of the M50 motorway.
Investment Activity since Admission
The third quarter was dominated by the purchase and closing of
Gateway One and Three located on the East Wall Road adjacent to
Dublin docklands.
These buildings have 8,825 sq. m (95,000 sq. ft) of office space
and 71 car parking spaces and are tenanted by the ESB, Colt and
Whirlpool. This transaction was the Company's first acquisition
following Admission at a price of EUR29 million and EUR2 million of
transaction costs. The buildings have since been valued at EUR32
million for a gross yield at fair value of 6.3%.
The buildings were constructed in 2008 and offer high grade
office space in the North Dock area adjacent to East Point Business
Park. The area is expanding and improving in terms of profile and
rental levels.
The buildings are 97% let with one single fully fitted HQ suite
unlet. The unit is being marketed at a headline rent (headline rent
is the rent in a lease agreement not including incentives e.g.
rent-free periods) of EUR350 per sq. metre (EUR32.50 per sq. ft).
The recent letting of the nearby Beckett Building to Facebook and
rental growth at the adjacent East Point Business Park gives an
indication of the substantial reversionary potential of these
buildings, which together have a WAULT of 2.8 years to the next
tenant break option.
In the fourth quarter of 2018 the Company completed 2 further
acquisitions.
The Company's acquisition of Blackwater House in Mallow Business
Park, County Cork was completed in November 2018 for a price of
EUR1.85 million and transaction costs of EUR0.15 million. The
building was valued at 31(st) December 2018 at EUR2.3 million
giving a gross yield at fair value of 10.1%. The building, which
was included as part of the property pipeline in the Company's
Admission document, is a multi-tenanted office building with 29,462
sq. ft. of modern office space.
Blackwater House has a strong tenant mix with 85% of rental
income from Irish Water and the Health Service Executive (HSE). At
the time of acquisition, the building had 29.6% vacancy. The
management team is actively marketing the space both to existing
and new tenants and expects to let the vacant space at rents of
between EUR12 and EUR14 per square foot.
In December the Company acquired a three-office campus on the
IDA Technology & Business Park in Letterkenny, Donegal for
EUR16.0 million and transaction costs of EUR1.1 million. The
building was valued at period end at the purchase price of EUR16
million which is a 9% gross yield at fair value.
The three buildings are tenanted by Optum Operations (Ireland)
Ltd under a 10-year lease with 9.25 years of term remaining. The
leases are guaranteed by Optum's parent, the United Health Group,
the largest healthcare business globally and one of the US's
largest corporations by revenue. Following a major refurbishment in
2017 the buildings have 90,548 sq. ft. of net internal space
completed to Grade A specification. There are 688 surface car
parking spaces on the 2.18 ha (5.45 acre) site and sufficient zoned
land for expansion including a new building and additional car
parking.
Following Admission in 2018, the Company viewed 17 sites in the
Company's Geographic Target Market with a total value of EUR151
million. Of those, the Company acquired the 6 buildings on 3 sites
( 2 buildings at Gateway One and Three, East Wall Road, 1 at
Blackwater House, Mallow Business Park and 3 at IDA Technology
& Business Park, Letterkenny) detailed above at a cost of
EUR50.1 million in 2018, and 2 further buildings in Waterford and
Cork Airport with a cost of EUR11.3 million subsequently in
2019.
Portfolio Objectives & Policy
Yew Grove's investment strategy is to invest in a portfolio of
properties in its geographical target market let to and attractive
to FDI and Government tenants.
The strategy is supported by the following limitations;
(i) No single property exceeds 25% of the value of the total
assets of the company;
(ii) Income receivable from any one tenant (other than a State
Body) does not exceed 35% of the total rental income;
(iii) A minimum of 90% of the company's assets are invested in
the office and industrial properties.
(iv) No more than 20% of the total assets of the company are
invested in properties outside its geographic target market.
(v) The Company will not engage in speculative development. The
Company will consider funding development where the cost of
development and the lease on the completion of the development are
agreed and in place.
Portfolio Structure
The portfolio has 44,374 sq. m (477,644 sq. ft) of interior
building area. Offices represent 55% of the portfolio (260,469 sq.
ft), of which approx. 27% (127,932 sq. ft) is located within the
Dublin catchment area. Industrial buildings represent 41% of the
portfolio (197,037 sq. ft) of which approx. two thirds (116,443 sq.
ft) is in the Dublin catchment area. The balance of the industrial
buildings is located in the IDA Ireland Business and Technology
Park, Athlone.
Retail units represent 4% or 20,137 sq. ft of the Company's
floor area.
The vacancy rate of the portfolio by floor area stands at 2.5%
or 1,127 sq. m (12,132 sq. ft), and by ERV stands at 3.0%, the
majority being at Blackwater House.
Of the vacancy, 363 sq. m (3,909 sq. ft) is currently under
offer with agreed heads of terms at Blackwater House and the Bridge
Centre in Tullamore. The EPRA vacancy rate is 3.0% (the ERV of
vacant space divided by ERV of the Portfolio).
Reversionary and Rental Potential
One of the key challenges for the management team is to source a
pipeline of assets that not only meet the building and tenant
covenant criteria but is also situated in areas where the local
economy is driving a growth in rents. A consequence of the over
development of speculative property that led up to the Irish
economic crisis was that across the country many tenants were
subject to over-rented leases (i.e. leases where the existing rent
was higher than the prevailing rents for similar buildings in the
area). By and large this has been eliminated in most areas of the
country as the economy recovered, vacancy rates fell and rents
rose. Today, across most of our portfolio the market rent is higher
than that currently charged to our tenants. That growth in rents
continues and this reversionary potential will fuel the company's
rental income growth in the future.
The reduction in vacancy means that new lease terms being agreed
in the market are increasingly beneficial for landlords with less
tenant incentives and where rents are stabilising, longer lease
terms being achieved.
Similarly, rent-free periods are shorter and less frequent for
new tenants, allowing landlords to realise a higher net effective
rent on buildings.
The Company's portfolio has government bodies (such as Irish
Water, ESB and the OPW) accounting for 37% of the total rent roll,
while FDI and Corporates (such as KCI, Optum, GE) account for
54%.
Demand for office space is evident across the Company's
geographic target market as businesses expand and require more
space but the supply of new development remains scarce. As an
example, the Company's Blackwater House property was acquired with
29.6% vacancy in September 2018. Since then a further 10% has been
agreed to lease. It is anticipated that the remaining space will be
leased by the end of 2019. All new leases are expected to be at
levels at or above those underwritten at the time of
acquisition.
In the financial period, the company undertook a number of asset
management projects including the construction of a new 70 space
surface car park at the industrial unit located within the IDA
Technology & Business Park, Athlone with an agreement to lease
by KCI on a co-terminus lease to their current lease. Additionally,
a rent review of a suburban industrial unit at Holly Avenue in
Stillorgan, Co Dublin producing a rental uplift of 36% to EUR107.60
per sq. m (EUR10 per sq. ft) in February 2019.
Project Management for 2019
The portfolio has ongoing projects that will be completed within
the first six months of the year. The Company may from time to
time, undertake planning, intensification, unit consolidation, unit
division, modernisations and redevelopments in respect of
properties, where the management team believe it will enhance
future income generation and capital values.
The Company however does not acquire land for speculative
development of offices or industrial assets except where it forms
part of the demise of a property that otherwise satisfies the
Company's investment criteria.
Acquisitions & Disposals Policy
The Company's geographic target market is focused on a) Dublin
(other than the CBD area); b) the Dublin catchment area and c)
major regional cities and towns (especially those identified as
hubs for industrial development under Project Ireland 2040) and d)
IDA Ireland Business and Technology Parks.
Outside Dublin, the Company acquired properties within the major
regional cities and towns and IDA Business and Technology parks
nationally, ranging from Letterkenny, Donegal to the Cork and
Dublin suburban markets.
The management team seeks to develop and encourage close
relationships with the Company's tenants to understand their
business growth plans and where suitable to try to facilitate that
growth. Several tenants have already confirmed that they would like
to expand their current operations and may need additional space in
the medium term.
The Company's acquisition policy remains unchanged. The Company
is focused on buying industrial and office buildings, with a
targeted cost of between EUR5m and EUR15m. The Company expects to
generate a robust pipeline of assets in 2019 coming from a number
of different sources including loan workouts, private equity firms,
construction and development firms, asset sales, portfolio
reconfiguration, sale and leaseback and market consolidation.
In order to improve the weighting of capital values as well as
eliminating the retail exposure within the portfolio, the Company
will explore disposal of its smaller assets in 2019.
Top Five Portfolio Assets.
1. One & Three Gateway, East Wall Road, Dublin 3
Investment Non-CBD Dublin Tenant Gov/FDI/Corp
Region
Asset Building One & WAULT (expiry/break) 3.64/2.66
Three, Gateway
Type Office Acquisition Price EUR29.0m
Area 94,800 sq. ft Valuation* EUR32.0m
Gross yield at
Building Design Multi-tenanted fair value 6.3%
Gross reversionary
yield 7.7%
---------------------------------------------------------- -------------
* Lisney valuation as at 31(st) December 2018
2. IDA Letterkenny Office Park, Letterkenny, Co. Donegal
Investment Region Non-Core Regional Tenant FDI
Asset Optum 1, 2 WAULT (expiry/break) 9.3/9.3
& 3
Type Office Acquisition Price EUR16.0m
90,548 sq.
Area ft Valuation* EUR16.0m
Gross yield at
Building Design Single- tenanted fair value 9.0%
Gross reversionary
yield 9.1%
-------------------------------------------------------------- ---------
* Lisney valuation as at 31(st) December 2018
3. Ashtown Gate, Dublin
Investment Region Core Dublin Tenant Govt/FDI
Asset Ashtown Gate WAULT (expiry/break) 7.1/3.0
B & C
Type Office Acquisition Price EUR8.80m
Area 33,100 sq. ft Valuation* EUR9.36m
Gross yield at
Building Design Multi- tenanted fair value 8.2%
Gross reversionary
yield 8.2%
------------------------------------------------------------ ---------
* Lisney valuation as at 31(st) December 2018
4. 7 & 8 Airways Industrial Estate, Santry, Dublin 9
Investment Region Core Dublin Tenant FDI
Asset 7 & 8 Airways WAULT (expiry/break) 11.8/6.8
Ind. Est
Type Industrial Acquisition Price EUR3.8m
Area 88,000 sq. ft Valuation* EUR4.53m
Gross yield at
Building Design Single Tenant fair value 6.6%
Gross reversionary
yield 10.2%
---------------------------------------------------------- ---------
* Lisney valuation as at 31(st) December 2018
5. Block 2, IDA Ireland Business & Technology Park, Athlone, Co Westmeath
Investment Region Core Dublin Tenant FDI
Asset Block 2 IDA Tech WAULT (expiry/break) 15.7/4.7
& Bus Park.
Type Industrial Acquisition Price EUR3.615m
Area 46,900 sq. ft Valuation* EUR3.875m
Gross yield at
Building Design Single -tenanted fair value 10.0%
Gross reversionary
yield 11.4%
------------------------------------------------------------- ----------
* Lisney valuation as at 31(st) December 2018
Market Report
The Irish Commercial Real Estate Investment Market achieved a
record-breaking volume of EUR3.6bn of transactions in 2018 versus
EUR2.2bn in 2017. The Dublin CBD (including Docklands) accounted
for 33% of the 2018 volume and the Dublin suburbs accounted for an
additional 50% of the volume, with the regional markets accounting
for the 17% balance. This illustrates that 67% of the transactions
in the Irish investment market are within the company's geographic
target market. The volume of transactions is anticipated to be
maintained at around the EUR3bn level for 2019. (source TWM).
The Company's focus on its geographic target market allows it to
acquire institutional quality investment stock with high quality
tenant covenants at a premium to investment property located in the
CBD.
The yield differential between Dublin's CBD and the suburban or
regional markets depends on location and property specific issues,
but the yields for institutional quality office buildings outside
the CBD are now between 250 and 350 bps higher (and in some cases
even higher) than in the CBD. There has been relatively limited
yield compression in the regional markets despite the tightening
seen in central Dublin, largely because the regional markets have
not yet had sustained investment demand from institutional
investors. This began to change in 2018 and we expect this to
continue in future.
Investment Volume and Yield
Placing Ireland's prime rents in a European and UK context
(particularly cities competing for UK relocators) both Dublin
(particularly Dublin's suburbs) and the regional centres remain
competitive. While Dublin rents remained unchanged in Q3, the
average growth rate for office rents across Europe was 0.7%
according to Cushman & Wakefield's 'DNA of Real Estate Q3
2018'. The outlook across Europe for 2019 is for further rent
increases in core cities.
Market expectation is that the Dublin prime CBD office market
will continue to perform with yields stabilising between 4.0% and
4.5% for Grade A space. The CBD is benefiting from the 'Tech Mega
Lease' trend (Facebook, Amazon, Salesforce) as well as attracting
new first-time foreign investors in Irish commercial real
estate.
CBD rents have reached previous peaks at EUR65 per sq. ft. but
are expected to plateau at this level in the medium term. As CBD
rents are now matching the peak of the 2006/07 market and more
importantly expected to remain at this level (especially for grade
A, large floorplate buildings) for the medium term, the suburban
Dublin market is showing more value both for tenants and investors
as rental growth and yield compression have both significantly
lagged the CBD.
Outside Dublin, investment volume in regional markets was
EUR630m in 2018 with Cork, Limerick and Galway areas providing most
interest.
Cork prime city centre yields have reached 5.65% and are
expected to hit 5.50% in 2019. Likewise, in Galway and Limerick,
prime office yields stood at 6.00% and 6.50% respectively at the
end of the year, with further compression anticipated in 2019
(source Cushman & Wakefield). Transaction frequency for office
investment in these three regional centres has been increasing year
on year.
Suburban Dublin Office Take-Up and Rents
Like the investment market, occupier activity in the office
market is performing strongly, with 2019 set to be another record
year for leasing activity in the Dublin market.
Suburban rents have lagged the CBD with more modest growth
leaving rents from EUR20 to EUR32.5 per sq. ft depending on asset
quality and location, however the expectation is for continued
growth in 2019.
Occupiers including multi-national, large corporate and
government tenants are all increasing their requirements for space
in response to a positive local economic outlook. As a result, they
are increasingly looking outside the CBD for rental value and
availability in order to take up institutional space at rents up to
50% below the CBD.
Limited development and increasing demand are creating upward
pressure on rents. The forecast for Dublin suburban offices in 2019
is 8.4%, to EUR350 per sq. m (EUR32.50 per sq. ft) (source Cushman
& Wakefield)
The IDA policy of 'second siting' new and expanding FDI
investment showcases lower rents and more attractive labour markets
to FDI tenants in both suburban and regional market locations
versus the CBD. Some companies such as Google are increasingly
viewing the Dublin suburbs as sites for expansion, particularly the
southern suburbs such as Leopardstown, Cherrywood and Carrickmines.
This demand will drive new development here as rents achievable
make development viable as seen in Sandyford. Others
such as SAP, Metlife and Fidelity have divided their expanded
operations between Dublin and Galway.
A total of 3.72 million sq. ft was taken up in 2018 in Dublin.
Of this, 2.75 million sq. ft was in the CBD including the Facebook
Fibonacci letting of 870,000 sq. ft, and the balance of 976,555 sq.
ft in the Dublin suburbs. As occupiers are increasingly reviewing
the north, south and west Dublin suburbs for expansion,
availability in the suburbs has tightened by 11%, to 2.0 million
sq. ft. There is an additional 1.4 million sq. ft of office in
planning and under construction in the suburbs.
Prime headline rents in the southern suburbs were EUR30 per sq.
ft (EUR328.5 per sq. m) at the end of Q4 while rents in the
northern suburbs were at EUR19.50 per sq. ft (EUR210 per sq. m) and
in the western suburbs were at EUR17.50 per sq. ft (EUR188.30 per
sq. m).
Regional Office Markets
Regional office rents are recovering across the country and
continue to provide both FDI and Government tenants value for money
versus the Dublin CBD.
Performance in Cork, Limerick and Galway showed improvement
throughout 2018, with over-rental falling and upward pressure on
rents.
Tenant confidence is growing, but supply (especially for modern
offices) is limited in most locations. Cork, Galway and Limerick
continue to suffer from a shortage of large Grade A space which has
hampered tenant plans. These regional cities now have their lowest
vacancy levels for a decade. Cork has experienced the greatest
rental growth which has driven the initial new development. As
Dublin rents return to previous peaks, regional rents remain well
below their own previous peaks by 5.7%.
Regional Office Take up and Rents
Cork
Cork was the best performing of the three regional centres in
2018. Cork experienced a 2018 take up of 470,800 sq. ft versus a
prior norm of 360,000 sq. ft. per annum and several high-profile
technology firms are moving from the suburbs to the city centre as
new modern Grade A space is built there. The new Apple campus
inflated the 2018 take up and the normalised take up of 360,000 sq.
ft is expected in 2019.
The relative attractiveness of Cork in terms of cost of living
for experienced staff relative to Dublin is helping Cork to attract
increased FDI investment. A number of professional firms are
increasing their representation in the city as they find staff are
easier to recruit and costs are lower. Prime rents are expected to
exceed EUR30 psf for Grade A offices in the city, almost half that
of Dublin but still below the last peak of EUR35 psf.
Rents are expected to remain stable into 2019, with a slight
increase of 1.4% forecast for the coming year. Stronger rental
growth of 5.6% to EUR375 per sq. m (EUR34.80 per sq. ft) is
predicted for 2020. Suburban office rental levels in Mahon are
approximately EUR255 per sq. m (EUR23.70 per sq. ft), while other
suburban areas of Cork are at EUR185 per sq. m (EUR17.20 per sq.
ft) (source Cushman & Wakefield).
Cork is the most active of the three regional centres for office
development activity. Since 2016, 20,850 sq. m (224,450 sq. ft) has
been delivered in two large speculative office blocks. At the end
of 2018, approximately 21,800 sq. m (234,750 sq. ft) across three
schemes was under construction, all these developments are Grade A,
in the city centre commanding EUR30+ per sq. ft rents.
Limerick
Limerick recorded take up levels of 6,350 sq. m (68,150 sq. ft)
in 11 transactions in 2018. Rents in both Limerick city and suburbs
remain at EUR215 per sq. m (EUR20 per sq. ft) and are forecast to
stay close to this level for the next two years, with slight upward
pressure of 5% expected thereafter in 2021/22 to EUR225 per sq. m
(EUR20.90 per sq. ft).
However, new high specification Grade A developments are
expected to achieve up to EUR325 per sq. m (EUR30.20 per sq. ft).
Although viewed as mixed use developments and not market norm, they
do create a trend for the city's rental levels. New buildings in
suburban locations are achieving circa EUR265 per sq. m (EUR24.60
per sq. ft), with good quality suburban space being increasingly
sought near University of Limerick and Plassey Technology Park.
The volume of space under construction in Limerick is 17,750 sq.
m (191,000 sq. ft) across three schemes.
Galway
Galway had 22,200 sq. m (239,000 sq. ft) of available supply in
2018 which is a vacancy rate of 7.2% of mostly secondary stock.
Galway had few investment transactions with office rents in the
city steady at EUR296 per sq. m (EUR27.50 per sq. ft) and EUR194
per sq. m (EUR18 psf) in the suburbs. City centre demand and
limited supply suggests upward pressure over the next five years
with rents forecast to rise to EUR349 per sq. m (EUR32.40 sq. ft)
next year, and EUR365 per sq. m (EUR33.90 per sq. ft) in 2021. This
should push suburban rents in excess of EUR20 psf.
Industrial Market
The Company's exposure to industrial property by floor area is
currently 41% (16% by income), and the Company is focused on
increasing that exposure in anticipation of further growth in
2019.
The national industrial market has performed strongly in 2018
with suburban Dublin outperforming the regions. This is due to a
lack of available quality stock. Most agents are forecasting prime
rental growth over the next three years as occupier demand
increases and supply (particularly of speculative space in the
regional markets) slow to respond.
The Dublin industrial market had strong capital growth in 2018,
driven by demand for purpose-built units to match occupier demand,
in particular along arterial routes that capture the benefits of
the T50/ESB Metro Express deep fibre network. Pharmaceutical, data
centres, e-retailers, and logistics operators are responsible for
demand in the 'large box' segment of the market. This is primarily
focused in the M50 belt around Dublin, particularly the North and
South West. The market is seeing increased investor demand despite
industrial investment accounting for a minor portion of overall
investment in the Irish property market.
Yields have tightened over the past few years with strong
interest focusing on the logistics and data sector with prime
yields at 5.00% at year-end and expected for 2019.
Prime rents rose 12% to EUR95 per sq. m (EUR8.80 per sq. ft) in
2018. Several logistics deals happened for example at the Horizon
Logistics Park for EUR102 per sq. m (EUR9.50 per sq. ft). Forecasts
for 2019 see prime industrial rents rising to EUR108 per sq. m
(EUR10 per sq. ft) in 2019. Q4 take up alone was 1.1 million sq. ft
with high quality vacancy at 8.3% at year end with occupier
enquiries increasing quarter by quarter.
Regionally, and in tandem with Dublin, Cork yields moved tighter
by 1% to 6.5% by Q3 2018. Agent forecasts suggest prime yields in
Cork will remain stable in 2019. Limerick and Galway industrial
yields improved to 8.00% and are expected to stay at this level for
2019. (source Cushman & Wakefield)
Regionally the combination of low transaction activity, a slow
release of second-hand stock to the market, and few new completions
has resulted in availability and vacancy rates dropping.
Industrial rents in Cork were at EUR85 per sq. m (EUR8 per sq.
ft) in 2018, with new builds reaching EUR9.50 psf. Growing demand
and limited supply of new space are expected to increase rents in
the future.
In Galway, industrial rents were EUR75 per sq. m (EUR7 per sq.
ft) in 2018, with moderate upward pressure anticipated in 2019 as
rents rise to EUR80 per sq. m (EUR7.50 per sq. ft).
In Limerick, secondary industrial rents are at EUR58 per sq. m
(EUR5.50 per sq. ft) for 2018, whereas advanced manufacturing units
in the Shannon region for example, are achieving rents of EUR97 per
m (EUR9 per sq. ft).
Development activity has been very limited across all regional
industrial markets. In 2018 Cork saw the start of 5,550 sq. m
(60,000 sq. ft) of development in Blarney Business Park.
In Limerick, a 3,185 sq. m (34,300 sq. ft) unit was completed in
Shannon Industrial Estate in 2018. Further refurbishments and
development in this area are anticipated in the coming quarters in
line with the Shannon Redevelopment Programme.
In Galway work started at Mervue Business Park on a 1,150 sq. m
(12,450 sq. ft) unit to be let in 2019 and the IDA secured planning
permission in Parkmore for an advanced technology building of
office and light industrial/manufacturing space of 3,250 sq. m
(34,950 sq. ft).
Across regional markets the company sees current rental for
advanced, technology quality space suitable for FDIs at circa
EUR9.50 per sq. ft and investment yields for industrial investments
in the company's targeted market in a range of 6.5% to 8%.
FDI investment in the regional locations is expected to grow and
be the main driver of occupier demand. 2018 saw a 9% increase in
FDI employment to 230,000 jobs (10% of the economy total). There
has been a Brexit boost to FDI investment in 2018 and this is
expected to continue into 2019. In the absence of new development,
this demand will be the main driver of rental growth. Regional
yields are expected to improve as more investors look to these
markets.
Directors' Report
The Directors of Yew Grove REIT plc present their report and the
audited consolidated financial statements for the financial period
from 5 April 2018 (date of incorporation) to 31 December 2018.
Principal activities
The Company (Yew Grove REIT plc) was established in April 2018
and became an Irish real estate investment trust in May 2018. The
Company's main activities are the acquisition, management and
rental of commercial property in the Republic of Ireland. The
Company has a single class of shares that has been listed on the
Alternative Investment Market of the London Stock Exchange and the
Enterprise Securities Market of Euronext Dublin from admission on 8
June 2018. The Enterprise Securities Market has subsequently been
re-named the Euronext Growth market.
Results and activities for the Financial period
The Group's results for the financial period from 5 April 2018
(date of incorporation) to 31 December 2018 are set out in the
Consolidated Statement of Comprehensive Income. The profit for the
period was EUR2.3 million, including unrealised profits on
investment properties of EUR1.6 million. There is more detail
attached in the Consolidated Statement of Comprehensive Income.
The Chairman's statement, the CEO's statement, the Portfolio
Report and the Key Performance Indicators provide detail of the
performance and events that influenced the Group's performance in
this reporting period, the current standing, recent events and
future developments which form a part of this report of the
Directors.
Future developments
The Group reviews two year forward projections at its quarterly
board meetings and has conducted a strategy review, including
presentations from external market participants. Since the
financial period end date the Company acquired two further
buildings on IDA parks in Cork and Waterford, due diligence on both
of which had been initiated in the financial period. While these
additional purchases leave the Company with relatively little
capital available for further acquisitions the Company continues to
explore accretive opportunities that might merit the raising of
further capital. The Company will continue to manage its existing
portfolio in line with its investment strategy, reviewing each
asset to ensure its fit and economic benefit to the Company and
fulfilling a programme of works to ensure its properties each
remain at a standard that will satisfy tenants of good credit
quality and attract similar tenants to any vacancy.
The Company will also conduct a review of the performance, cost
and benefit of all its service providers, making changes where
these are merited and review the need and cost benefit of
additional staff to ensure the Company remains operationally
effective.
Events subsequent to the period end
On 7 February 2019 the Company declared the payment of an
interim dividend in respect of the period ended 31 December 2018 of
EUR723,000 for 0.964 cents per ordinary share. This was paid to
shareholders on 26 February 2019.
On 8 February 2019 the Company exchanged contracts to purchase
Office Block A, located in the IDA Waterford Business and
Technology Park, Butlerstown, Waterford for EUR4 million plus
costs, representing a gross yield to fair value of 8.56% after
accounting for all purchase costs. The property has 36,845 sq. ft.
of open plan office space arranged over three storeys and is
tenanted by Tech Mahindra Business Services Ltd under a 20 years
lease with a break in five years, and SE2 Information Services
Ireland Ltd under a five years lease.
On 11 February 2019 the Company delivered a completed car park
in Athlone to its adjacent tenant under a co-terminus lease.
On 15 February the Company announced the inaugural grant of
options to executive management under the Long Term Incentive Plan
that had been established in June 2018 at Admission to the
Alternative Investment Market of the London Stock Exchange and the
Euronext Growth market of Euronext Dublin.
On 27 February 2019 the Company completed the purchase of Unit
2600, Cork Airport Business Park, Cork Airport for EUR7.5 million
plus costs, representing a gross yield at fair value of 7.85% after
accounting for purchase costs. The property, a two storey, 40,953
sq. ft office block which was refurbished in 2015 to a high
standard and includes a 163-space car park, is tenanted by
Clearstream Global Securities Services Ltd, a subsidiary of
Deutsche Borse AG, under a 25 year lease with final expiry in just
over five years' time.
On 8 February 2019 the Company exchanged contracts to purchase
Office Block A, located in the IDA Waterford Business and
Technology Park, Butlerstown, Waterford for EUR4 million plus
costs, representing a gross yield to fair value of 8.56% after
accounting for all purchase costs. The property has 36,845 sq. ft.
of open plan office space arranged over three storeys and is
tenanted by Tech Mahindra Business Services Ltd under a 20 years
lease with a break in five years, and SE2 Information Services
Ireland Ltd under a five years lease.
On 29th March 2019 the Company declared the payment of an
interim dividend in respect of the first quarter of 2019 of
EUR825,000 for 1.10 cents per ordinary share. This is to be paid to
shareholders on 13 May 2019.
Dividends
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 accounting period. It is the Board's
intention to propose quarterly dividends from March 2019.
Subsequent to the financial period end the Board declared an
interim dividend of 0.964 cents per share, being EUR723,000 on 7
February 2019, which was paid on 26 February 2019 to all ordinary
shareholders on the share register at the close of business on 15
February 2019. This dividend was 91% a Property Income Distribution
("PID"), as defined in Irish REIT legislation. On 29th March 2019
the Company declared the payment of an interim dividend in respect
of the first quarter of 2019 of EUR825,000 for 1.10 cents per
ordinary share. This is to be paid to shareholders on 13 May
2019.
Share Capital
At 31 December 2018, the Company's total authorised and issued
share capital comprised 75,000,000 ordinary shares of EUR0.01 each
("Ordinary Shares") all of which were issued in the period and none
of which the Company held in treasury. The Company's entire
authorised share capital is EUR10,000,000 comprising 1,000,000,000
ordinary shares. All of these shares are of the same class and
carry equal voting rights and rank equally for dividends. The
Company has no securities in issue conferring special rights with
regard to control of the Company. Details of the share capital of
the Company are set out in Note 19 to the Consolidated financial
statements and are deemed to form part of this report. On 1
November 2018 the High Court of Ireland made an Order confirming
the Company's capital reduction resolution for the reduction of the
Company's Share Premium Account in the sum of EUR70,250,000 such
that the balance remaining credited to that account will be
EUR4,000,000 such that the reserve resulting from such cancellation
be treated as realised profits as defined by Section 117 of the
Companies Act 2014. The Order of Court and Minute on reduction of
share premium account was registered on the 2 November 2018.
The Company has only had a single class of shares since
incorporation on 5 April 2018. All of these shares are of the same
class and carry equal voting rights and rank equally for dividends.
The Company has no securities in issue conferring special rights
with regard to control of the Company.
Details of Directors' and Secretary's interests in share capital
at 31 December 2018:
Date Ordinary shares Interest in Ordinary Ordinary Issued
of owned options on shares shares Capital
appointment ordinary shares owned owned
as Director/ subject not subject
Secretary to to
performance performance
conditions conditions
On becoming At 31 On becoming At 31
a Director December a Director December
2018 2018
------------ ---------- ------------- ---------
Barry 4 June
O'Dowd 2018 0 25,000 0 0 0 25,000 0.03%
------------- ------------ ---------- --------- ------------- ------------ ------------ ---------
Eimear 4 June
Moloney 2018 0 25,000 0 0 0 25,000 0.03%
------------- ------------ ---------- --------- ------------- ------------ ------------ ---------
Garry 5 June
O'Dea 2018 0 25,000 0 0 0 25,000 0.03%
------------- ------------ ---------- --------- ------------- ------------ ------------ ---------
Brian 4 June
Owens 2018 0 25,000 0 0 0 25,000 0.03%
------------- ------------ ---------- --------- ------------- ------------ ------------ ---------
Jonathan 20 April
Laredo 2018 24,999,999* 2,529,596 0 0 0 2,529,596 3.37%
------------- ------------ ---------- --------- ------------- ------------ ------------ ---------
Charles 20 April
Peach 2018 0 251,440 0 0 0 251,440 0.34%
------------- ------------ ---------- --------- ------------- ------------ ------------ ---------
Michael 20 April
Gibbons 2018 0 2,052,544 0 0 0 2,052,544 2.74%
------------- ------------ ---------- --------- ------------- ------------ ------------ ---------
Sanne
Group
(Company 5 June
Secretary) 2018 0 0 0 0 0 0%
------------- ------------ ---------- --------- ------------- ------------ ------------ ---------
*On 20 April 2018 Jonathan Laredo was issued with 24,999,999
shares of EUR0.001 each. On the same day, the Company's shares of
EUR0.001 each were consolidated into shares of EUR0.10 each, and on
the 30 April 2018 each share was subdivided into 10 Ordinary Shares
of EUR0.01 each, such that Jonathan Laredo then held 2,500,000
ordinary shares in the Company. On 8(th) June 72,500,000 further
ordinary shares were issued on admission to trading, with these
shares being subscribed for at a price of EUR1.00 each. Jonathan
Laredo subscribed EUR1.00 (being the subscription price on 8 June
2018 and the same price that each other shareholder in the Company
subscribed for the shares) for each of the 2,500,000 shares he held
from prior to that date, such that the proceeds from subscription
were EUR75,000,000.
The Company's non-independent Directors (Jonathan Laredo,
Charles Peach and Michael Gibbons) own 4,833,580 shares between
them and have signed lock-in deeds that restrict the sale of the
shares shown above before 8 June 2020.
Substantial shareholdings
As at 31 December 2018 the Company has been informed of the
following substantial interests (being 3% or more of the issued
share capital) in the Company's shares.
Shares held % held
Royal London AM 12,200,000 16.3%
------------ -------
OVMK 7,500,000 10.0%
------------ -------
AIB 7,312,500 9.8%
------------ -------
Invesco 6,000,000 8.0%
------------ -------
Investec Wealth &
Investment 4,817,400 6.4%
------------ -------
Hof Hoorneman Bankiers 4,240,000 5.7%
------------ -------
Alpha 4 S.A. SICAV-SIF
Long Term Invest 3,000,000 4.0%
------------ -------
Schroders plc 2,925,000 3.9%
------------ -------
Jonathan Laredo 2,529,596 3.4%
------------ -------
Directors
The names of each person, who at any time during the financial
period from 5 April 2018 (date of incorporation) to 31 December
2018 was a Director and a short biographical note on each Director
appear in the Corporate Governance Statement.
All Directors have agreed letters of appointment with the
Company of three years in duration from the date of their
appointment. The terms and conditions of appointment of the
Non-Executive Directors are set out in their letters of
appointment, which are available for inspection at the Company's
registered office. In accordance with the Code, all Directors
submit to re-election at each AGM. For the purposes of the European
Communities (Takeover Bids (Directive 2004/25/EC)) Regulations
2006, details concerning the appointment and the re-election of
Directors and the amendment of the Company's Articles of
Association are set out in the Corporate Governance Statement.
Details of Directors' remuneration are disclosed in the
Remuneration Committee report.
Employees
The Company has grown to having 5 employees and 4 non executive
Directors at financial period end. As a smaller company the
Directors recognise the benefits of diversity of skills,
experience, background, gender and other qualities in the Company's
employees. We are committed to reflecting diversity in its broadest
sense, while ensuring that we maintain the necessary skills and
experience required to oversee the significant financial service
activities and related requirements of the Group. In reviewing the
Company's employment requirements, candidates are considered on
merit against objective criteria and with due regard for the
benefits of diversity. The Company has a Diversity Policy, the aim
of which is to ensure that the percentage of women or men employed
by the Company remains at or exceeds 30%. At the end of the
financial period of the Company's employees and officers (including
independent non executive directors) 33% were women, of the
employees 40% were women.
All employees receive death in service and long-term disability
insurance, as well as health insurance for them, their spouses and
dependents under the age of 18, similar to the executive directors.
The executive directors are responsible for the training and career
mentoring of their directly reporting employees.
Environment
Climate change has had a major impact on all business
operations. We are focused on corporate responsibility and we are
in the process of preparing a materiality assessment to gather
insight on the importance of specific environmental, social and
governance issues. This will allow us to set sustainability goals
and initiatives to create a positive impact on environment and
society. We are also developing our Building Improvement Programme
which will incorporate our long term environmental and
sustainability policy. The Company commissions environmental
reports on each of its acquisitions.
We are working with our partners, tenants and contractors to
help to protect and preserve the environment by operating
efficiently, minimizing waste and saving energy. Within our managed
properties we have introduced a Green Cleaning Policy focused on
recycling of waste and reducing energy by installing energy
efficient lights. The company is endeavouring to improve its
overall portfolio energy efficiency by working with its tenants to
improve individual property BER (Building Energy Report)
scores.
REIT status
The Company elected for REIT status in May 2018 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 the
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
May 2018 to 31 December 2018.
Principal Risks and Uncertainties
The Directors have carried out a robust assessment of the
principal risks facing the Company, including those that would
threaten its business strategy, performance, solvency or liquidity.
The principal risks and uncertainties are discussed in the
'Principal Risks and Uncertainties' section and form part of this
report.
Going Concern and the Viability Statement
In accordance with the relevant provisions of the UK Corporate
Governance Code and the Irish Corporate Governance Annex, the Board
has taken account of the principal risks and uncertainties, as set
out below, in considering the statement to be made regarding the
going concern basis of accounting and the Viability Statement.
These statements are as follows:
Going Concern
The Company has a geographically spread portfolio of commercial
properties with close to full occupancy (current levels of vacancy
total 2.8% by rent) across the portfolio and a low level of total
debt to equity gearing of 8.25% as at 31 December 2018. The Company
has good visibility of its future cash inflows from rental income
from its tenants, and of its cash outflows on expenses. Having
assessed the relevant business risks the Directors believe that the
Company is well placed to manage its business risks
successfully.
The Directors believe that the Company has adequate resources to
continue in operation for the foreseeable future and that it is
appropriate to continue to adopt the going concern basis in
preparing their Report and Consolidated financial statements.
Viability Statement
The period over which the Directors consider it relevant and
appropriate to report on the Company's viability is the two years
period to 31 December 2020. This period has been selected because
it is the period that is used and reviewed quarterly for the
Company's medium-term business plans. The assumptions behind these
forecast cash flows and covenant compliance forecasts were stressed
to review the strength of the Company in the light of the Company's
principal risks. The principal risks and uncertainties summarises
those matters that the Board believes might in the Board's view
inhibit the Company's ability to achieve its investment
objectives.
The Directors paid particular attention to the risk of a
deterioration in economic outlook and the potential impact of
Brexit, which would impact property fundamentals, including
occupier demand and profitability, which would have a negative
impact on valuations and rental income, and the impact that this
would have on financing covenants and compliance with the REIT
regime. The remaining principal risks, whilst potentially injurious
on the Company's business model, are unlikely to impact the
Company's viability over the two year period to 31 December
2020.
Having considered the forecast cash flows and covenant
compliance and the impact of the stressed risks, the Directors
confirm that they 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 ending 31 December 2020.
Corporate Governance
For the period from the date of Admission on 8 June 2018 to 31
December 2018, the Company's corporate governance practices were
governed by the relevant requirements and procedures as set out by
the Irish Corporate Governance Annex ("Irish Annex") and the UK
Corporate Governance Code ("UK Code"), (collectively known as the
"Codes") and its Articles of Association. The Board confirms that
the Company has complied with all provisions of the Codes during
the period from 8 June 2018 to 31 December 2018. Details of the
Company's compliance with the Codes are in the Corporate Governance
Report.
Directors' Compliance Statement
The Directors have, with the assistance of advisers, identified
the relevant obligations, as required by the Companies Act 2014,
that they consider apply to the Company. The Directors acknowledge
that they are responsible for securing the Company's compliance
with its relevant obligations and confirm that they have:
-- Drawn up a compliance policy statement setting out the
Company's policies in respect of compliance with its relevant
obligations;
-- Ensured that appropriate arrangements and structures have
been put in place that are designed to ensure
material compliance with the Company's relevant obligations;
and
-- Conducted a review, during the period from incorporation to
31 December 2018, of the arrangements and structures that were put
in place to secure material compliance with the Company's Relevant
Obligations.
Accounting records
The Directors are responsible for ensuring that adequate
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
resources to maintain adequate accounting records, including the
provision of services by the Administrator, Baker Tilly. The
accounting records of the Company are maintained at the
Administrator's registered office, 21-23 Holles Street, Dublin 2,
Ireland.
Principal Subsidiaries and Joint Ventures
Details of the Company's principal subsidiaries and joint
venture are set out in Note 1.11 to the financial statements.
Political donations
There were no political donations made by the Company.
Branches
The Company does not have any branches outside the Republic of
Ireland.
Audit Committee
The Directors have established an Audit Committee in compliance
with the Codes and section 167 and section 1551 of the Companies
Act 2014 to assist with certain responsibilities relating to
internal controls, risk management and reporting.
Independent auditor
The statutory auditor, Deloitte Ireland LLP, Chartered
Accountants ("Deloitte"), was appointed on the 9 April 2018 and
continues in office in accordance with section 383 (2) of the
Companies Act 2014 and have indicated their willingness to continue
in office. A resolution to re-appoint Deloitte will be proposed at
the first AGM of the Company.
Relevant audit information
The Directors believe that they have taken all steps necessary
to make themselves aware of any relevant audit information and have
established that the Company's statutory auditor is aware of that
information. Insofar as they are aware, there is no relevant audit
information of which the Company's statutory auditor is
unaware.
This Directors' statement was approved by the Board of Directors
on 23 April 2019 and is signed on their behalf by:
Jonathan Laredo Charles Peach
Chief Executive Officer Chief Financial Officer
Directors' Responsibility Statement
The Directors, whose names and details are listed in the
Corporate Governance Statement are responsible for preparing the
Report and Consolidated financial statements in accordance with
applicable laws and regulations.
Irish Company law requires the Directors to prepare financial
statements for each financial period. Under that law the Directors
have to prepare the Group and Company financial statements in
accordance with International Financial Reporting Standards as
adopted by the EU ("IFRSs").
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the assets, liabilities and financial position of the Group
and Company as at the financial period end date and of the profit
or loss of the Group for the financial period and otherwise comply
with the Companies Act 2014.
In preparing the Report and Consolidated financial statements,
the Directors are required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and accounting estimates that are reasonable and prudent;
-- State that Group and Company financial statements comply with
applicable International Financial Reporting Standards as adopted
by the European Union, subject to any material departures disclosed
and explained in the financial statements, and ensure the financial
statements contain the information required by the Companies Act
2014; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are also required by the Transparency Directive
(Directive 2004/109/EC) Regulations 2007, the Transparency Rules of
the Central Bank of Ireland, the Companies Act 2014, the AIM Rules
for Companies issued by the London Stock Exchange and the Euronext
Growth market Rules for Companies issued by Euronext Dublin
(formerly the Irish Stock Exchange), to prepare a Directors' report
and reports relating to Directors' remuneration and corporate
governance and the Directors are required to include a management
report containing, amongst other things, a fair review of the
development and performance of the Group's business and of its
position and a description of the principal risks and uncertainties
facing the Group.
The Directors are responsible for ensuring that the Group and
Company keeps or causes to be kept adequate accounting records
which:
-- Correctly explain and record the transactions of the Group and Company;
-- Enable at any time the assets, liabilities, financial
position and profit or loss of the Group and Company to be
determined with reasonable accuracy;
-- Enable them to ensure that the financial statements and
Directors' report comply with the Companies Act 2014; and
-- Enable the financial statements to be audited.
Directors are also responsible for safeguarding the assets of
the Group and the Company and for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The
Directors are responsible for the maintenance and integrity of
certain corporate and financial information included on the Group's
website (www.ygreit.com).
The Directors confirm that they have complied with the above
requirements in preparing the Report and Consolidated financial
statements.
Each of the Directors, whose names and functions are listed on
in the Corporate Governance Statement, confirms that, to the best
of each person's knowledge and belief:
-- The Report and Consolidated financial statements, prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position for
the Group and Company as at 31 December 2018 and of the result for
the financial period then ended for the Group and Company;
-- The Directors' Report includes a fair review of the
development and performance of the Group's business and the state
of affairs of the Group and Company at 31 December 2018, together
with a description of the principal risks and uncertainties facing
the Group; and
-- The Report and Consolidated financial statements, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the position and performance, strategy and business model of the Group and Company.
This responsibility statement was approved by the Board of
Directors on 23 April 2019 and is signed on their behalf by:
Jonathan Laredo Charles Peach
Chief Executive Officer Chief Financial Officer
Corporate Governance Statement
For the period from the date of Admission on 8 June 2018 to 31
December 2018, the Company's corporate governance practices were
governed by the relevant requirements and procedures as set out by
the Irish Corporate Governance Annex ("Irish Annex") and the UK
Corporate Governance Code ("UK Code"), (collectively known as the
"Codes") and its Articles of Association.
Statement of Compliance
The Board confirms that the Company has complied with all the
provisions of the Codes during the period from 8 June 2018 to 31
December 2018.
The Role of the Board of Directors
The role of the Board is to set the strategic objectives for the
Group, to monitor the achievement of these strategic objectives,
and to determine the nature and extent of the principal risks it is
prudent to take in achieving these strategic objectives. The Board
is also responsible for monitoring and reviewing the effectiveness
of the Group's risk management and internal control systems and
maintaining a high standard of corporate governance. The Board is
responsible for ensuring the accuracy of financial and business
information provided to shareholders and for ensuring that such
information, 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.
As at the date of this Report, there are seven (7) directors on
the Board, all of whom have been Directors from the date of
Admission. The Board does not have any planned changes to its
structure or size. While not required to by the UK Code as a
smaller company, the Company ensures that there is a majority of
independent non-executive directors (four) in accordance with the
UK Code. The number of non executive directors ensures that each
non-executive sits on two of the Board's Committees, all of which
have a majority (or only include) independent non-executive
directors. The Board has a majority of independent non-executive
directors and has sufficient members to provide relevant experience
in the areas of particular importance to the Company. These are,
property investment, capital markets, Irish foreign direct
investment, property development, financial management, property
management and asset management experience. The wide range of these
experiences has dictated the size of the Board. In reviewing the
Board composition and appointments, candidates are considered on
merit against objective criteria and with due regard for the
benefits of diversity. The Board has a Board Diversity Policy, the
aim of which is to ensure that the percentage of women on the Board
achieves or exceeds 30%. The percentage is currently 14%. Barry
O'Dowd (the Chairman), Eimear Moloney, Garry O'Dea and Brian Owens
are independent non-executive directors. The Chief Executive
Officer, Jonathan Laredo, the Chief Financial Officer, Charles
Peach and the Chief Investment Officer, Michael Gibbons are
executive directors.
The biographies of each of the Directors is set out below:
Barry O'Dowd (Chair, Independent Non-executive Director)
Mr O'Dowd was appointed as Chairman of the Company on 8 June
2018 and is also chairman of the Nomination Committee. Mr O'Dowd
was Senior Vice President of IDA Ireland until retiring from that
role in 2018. At IDA Ireland he was Global Head of two key
operating divisions, Emerging Business (2010 - 2018) and New forms
of Investment (2015-2018). From 2005 to 2009 he led the
Pharmaceutical & Biotechnology Department. Before joining IDA
Ireland he was Director of Strategy and Business Development at
Organon International between 2002 and 2005. Mr O'Dowd is a Member
of the Institute of Directors of Ireland, holds an MSc (Management)
from Trinity College, Dublin and is a qualified Barrister at Law
from University College Dublin & Kings Inns.
Eimear Moloney (Independent Non-executive Director)
Ms Moloney was appointed as a Director of the Company on 8 June
2018. She is chairman of the Remuneration Committee. Ms Moloney
was, until December 2017, a Senior Fund Manager at Zurich Life
Assurance Ireland plc where she had responsibility for equity and
regional asset allocation. She has also held responsibility for
sector and stock selection in a number of investment markets
including the United Kingdom, Ireland and the United States. She is
currently a non-executive director of Hostelworld Group plc, and a
member of the Institute of Directors in Ireland. She is a Chartered
Accountant and holds an MSc in Investments and Treasury from Dublin
City University.
Garry O'Dea (Senior Independent Non-executive Director)
Mr O'Dea was appointed as a Director of the Company and Senior
Independent Director on 8 June 2018. He is chairman of the Audit
Committee. Mr O'Dea is a former Finance Director of Irish
Continental Company plc ("ICG"), a position he held from 1988 until
his retirement in 2015. Prior to joining ICG, he worked in a number
of financial roles at CRH plc. Mr O'Dea is currently an independent
trustee of the RTE Superannuation Scheme. Mr O'Dea qualified as a
Chartered Accountant with KPMG and is also a member of the
Institute of Directors in Ireland.
Brian Owens (Independent Non-executive Director)
Mr Owens was appointed as a Director of the Company on 8 June
2018 and is chairman of the property Valuation Committee. Mr Owens
is CEO of Hardwicke Property Company, a position he has held since
2001, and was previously CFO of the same Company for 14 years. He
qualified as a Chartered Accountant with Deloitte and is a member
of both the Society of Chartered Surveyors and The Royal
Institution of Chartered Surveyors.
Jonathan Laredo (Chief Executive Officer)
Mr Laredo has over 29 years' experience in investment markets,
including running the European and Asian structured finance
business at JP Morgan, where amongst other business he was
responsible for Commercial Mortgage Backed Securities including
both securitised debt issuance and direct lending to real estate
based private equity. Mr Laredo was one of the founders and was the
CEO of Solent Capital Partners, a hedge fund founded in 2003. He
was one of the owners and a director of the Pepper Group, an
Australian based mortgage lender and servicer which built the
largest third-party servicing business in Ireland. He graduated
with a BA (Hons) in Philosophy from Sussex University. Mr Laredo
was a co-founder of the Yew Tree Investment Fund (which was
acquired by Yew Grove REIT plc at IPO) and a member of Parapet
Capital Advisors' management team during the time it acted as
investment adviser to the Yew Tree Investment Fund's Alternative
Investment Fund Manager. He was also responsible, along with the
other members of the Executive Management Team, for the
construction of the Seed Portfolio. He became a director of the
Company on incorporation on 5 April 2018 and was appointed to his
current role on 8 June 2018.
Charles Peach (Chief Financial Officer)
Mr Peach has over 24 years' experience in investment markets,
structuring and raising capital for companies and funds. He started
his career with Bear Stearns' FAST (Financial Analytics and
Structured Transactions) group for seven years, followed by five
years with Nomura's Exotic Credit Trading Group. At Nomura he
developed and ran managed vehicle issuance and risk management
programmes. As well as raising and structuring financing for funds
and corporate borrowers, he has advised pension schemes and banks
on their funding requirements and strategies. Mr Peach was a
co-founder of the Yew Tree Investment Fund and a member of Parapet
Capital Advisors' management team during the time it acted as
investment adviser to the Yew Tree Investment Fund's Alternative
Investment Fund Manager ("AIFM"). He was also responsible, along
with the other members of the Executive Management Team, for the
construction of the Seed Portfolio. He graduated with an MA (Hons)
in History of Art from the University of Aberdeen. He became a
director of the Company on 20 April 2018 and was appointed to his
current role on 8 June 2018.
Michael Gibbons (Chief Investment Officer)
Mr Gibbons has over 26 years' experience in investment markets
and has run high yield, distressed debt and special opportunities
businesses. He started his career in corporate finance at Bankers
Trust then spent seven years in Asia where he built Sumitomo
Finance's capital markets business spanning new issues to secondary
trading activity. He subsequently worked for Commerzbank, BNP
Paribas, Aladdin Capital Management LLP and distressed specialist
Guy Butler, moving back to Ireland in 2014. From 2008 to 2011 he
was a member of the international advisory board of Parker Green
International. He graduated with a BComm from University College
Dublin and a Diploma in Accounting from Queens University. Mr
Gibbons was a co-founder of the Yew Tree Investment Fund and a
member of Parapet Capital Advisors' management team during the time
it acted as investment adviser to the Fund Yew Tree Investment
Fund's Alternative Investment Fund Manager. He was also
responsible, along with the other members of the Executive
Management Team, for the construction of the Seed Portfolio. He
became a director of the Company on 20 April 2018 and was appointed
to his current role on 8 June 2018.
As required by the UK Code, specific areas of delegation are set
out in the terms of reference for each of the Audit Committee,
Nomination Committee, Remuneration Committee, and Valuation
Committee. The terms of reference of the Audit, Nomination,
Remuneration and Valuation Committees are available on the
Company's website at www.ygreit.com/investors/corporate-governance,
and reports of each of these Committees are set out below. The
Board reviews the Group's performance and management accounts on a
quarterly basis. The executive directors have discretionary
authority to enter into transactions for and on behalf of the
Company, except for certain matters that require the consent of the
Board. Unless required to be performed by the Company's AIFM as a
matter of law or in order to respond to a bona fide emergency, the
Board's prior approval is required by the executive directors for
certain reserved matters, which include but are not limited to:
1. any acquisition/disposal of a property investment or the
entry into any agreement to acquire /dispose of a property
investment in excess of EUR5 million;
2. any new financing or refinancing agreements or arrangements;
3. any capital expenditure or pre-funding agreements in excess of EUR5 million;
4. any proposed lease surrender where the rent referable to the
relevant lease is greater than 10% of the aggregate rental income
of the Company or 25% of the aggregate rental income of the lease's
property;
5. any proposed lease commitment where the area being leased exceeds 50,000 square feet;
6. any acquisition or the entry into any agreement to acquire
any property investment through a joint venture or co-investment
structure;
7. any hedging or use of derivatives;
8. the entry by the Company into any transactions for the
purchase of assets from, or provision of services of a material
nature by, any connected party.
Under the Company's corporate governance framework any matter
which requires the consent or approval of the Board of the Company
is considered at a Board meeting at which a quorum must be present
or by way of written resolution of the Board.
The Schedule of Matters Reserved for the Board was reviewed
prior to 31 December 2018 and will be reviewed annually and updated
as appropriate.
General meetings
The Company will hold an AGM in each year from 2019 year in
addition to any other meetings in that year. Not more than 15
months shall elapse between the date of one Annual General Meeting
and that of the next. The Company has not held an annual general
meeting ("AGM") in the 2018 calendar year and will hold its first
AGM on 24 May 2019. Notice of the 2019 AGM, together with details
of the resolutions to be considered at the meeting, will be
circulated to the shareholders in or around 25 April 2019.
The Directors are responsible for the convening of general
meetings. An annual general meeting and an extraordinary general
meeting calling for the passing of a special resolution shall be
called by at least twenty-one clear days' notice and all other
extraordinary general meetings shall be called by at least fourteen
clear days' notice (whether in electronic form or otherwise). No
business other than the appointment of a chairman shall be
transacted at any general meeting unless a quorum is present at the
time when the meeting proceeds to business. Three members present
in person or by proxy shall be a quorum.
The Company's AGM affords shareholders the opportunity to
question the Chairman and the Board. The chairperson of the Audit,
Nomination, Remuneration and Valuation Committees are also
available to answer questions at the AGM. The Chief Executive will
present at the AGM on the Company's business and its performance
during the prior year and answer questions from shareholders.
Voting rights
a. Votes of members: votes may be given either personally or by
proxy. Subject to any 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 shall have one vote,
so, however, that no individual shall have more than one vote, and
on a poll every member shall have one vote for every share carrying
voting rights of which he/she is the Holder. The Chairman shall be
entitled to a casting vote where there is an equality of votes.
b. Resolutions: resolutions are categorised as either ordinary
or special resolutions. The essential difference between an
ordinary resolution and a special resolution is that a simple
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 or implementing new pre-emption rights;
-- Market purchase of own shares and reissuing;
-- Altering the articles of association of the company;
.
Committees of the Board
The Board has delegated certain of its responsibilities to
Committees of the Board, namely the Audit Committee, Nomination
Committee, Remuneration Committee, and Valuation Committee. 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 and are available on the Company's website
www.ygreit.com. Each Committee has reported separately on its
activities. Membership and chairmanship of each committee is
reviewed by the Board at intervals of not more than three
years.
Audit Nomination Committee Remuneration Valuation
Committee Committee Committee
Garry O'Dea (Chair) Barry O'Dowd Eimear Moloney Brian Owens (Chair)
Eimear Moloney (Chair) (Chair) Barry O'Dowd
Brian Owens Eimear Moloney Garry O'Dea Jonathan Laredo
Jonathan Laredo
--------------------- --------------- --------------------
The Chairs of each of the Committees have reported separately on
their Committees' responsibilities and activities during the
reporting period.
Board Meetings
The Board met four (4) times as below in the period from 5 April
2018 to 31 December 2018 (the Board convened an additional six
times for a strategy meeting and to review matters reserved for the
Board) and will meet at least four (4) times each following
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. The Company Secretary is
responsible for the procedural aspects of the Board meetings.
Directors are expected to participate in all scheduled Board
meetings as well as the AGM. A schedule of Board meetings is
circulated to the Board before period end for the following year.
The Board and Committee papers are circulated sufficiently in
advance of each meeting to allow the Directors and Committee
members to properly prepare for the meetings. From time to time the
Board and Committees may be required to convene ad-hoc meetings but
appropriate notice is given and relevant papers are circulated in
advance. Standing items at quarterly Board meetings include
management accounts for the previous quarter, a review of budgeted
and actual performance, compliance reporting, portfolio and
pipeline reporting and other operational reports.
Attendance at Meetings, 8 June 2018 to 31 December 2018
The table below shows the number of meetings to which each
Director was invited, followed by the number of meetings attended
by the Director in the period:
Board Audit Nomination Remuneration Valuation
Meetings Committee Committee Committee Committee
Barry O'Dowd 4/4* 2/2* 2/2
---------- ----------- ----------- ------------- -----------
Eimear Moloney 4/4 4/4 1/1*
---------- ----------- ----------- ------------- -----------
Garry O'Dea 4/4 4/4* 1/1
---------- ----------- ----------- ------------- -----------
Brian Owens 4/4 4/3 2/2*
---------- ----------- ----------- ------------- -----------
Jonathan
Laredo 4/4 2/2 1/1() 2/2
---------- ----------- ----------- ------------- -----------
Charles
Peach 4/4 4/4()
---------- ----------- ----------- ------------- -----------
Michael
Gibbons 4/4 2/2()
---------- ----------- ----------- ------------- -----------
*Chair
() Invited, not a Committee member
All committee members were appointed to their respective
committees on 8 June 2018, except for the Valuation Committee,
which Jonathan Laredo became a member of on 2 August 2018 and the
Audit Committee which Eimear Moloney became a member of on 21
August 2018. Directors may request that any relevant concern they
have be considered and minuted at any Board or Committee meeting,
and minutes are circulated for review in advance of approval and
signing at the next meeting, or as appropriate.
Chair
The Chairman, Barry O'Dowd, is an independent non-executive
director. The Board believes that the Chairman meets all the
criteria in the Codes and is demonstrably independent in character
and judgement in his role. The Chairman's primary responsibility is
to lead the Board and to ensure it and its members are both
effective and provide good governance. The Chairman additionally is
responsible for monitoring and measuring performance against
strategy. The Chairman will meet shareholders from time to time and
intends to do so at the Company's AGM and as part of results
presentations, in order to understand their views. He also makes
himself aware of shareholder views through feedback and reporting
provided by the Company's brokers, Investec and Goodbody.
Before the beginning of each calendar year and following
consultation with the Company Secretary and other Directors, the
Chairman and the Chairs of the Board Committees set a schedule of
Board and Committee meetings, with key agenda items, for the
following year. The Chairman also leads the Company's strategy
session held in each calendar year, in conjunction with the Chief
Executive.
There have been no changes to the other significant commitments
of the Chairman since 8 June 2018, and the other non-executive
directors have informed the Board that there have been no
additional significant commitments undertaken by them since
admission which require notification to the Board. The Chairman
ensures all directors are furnished with the information necessary
to assist them in the performance of their duties.
The Senior Independent Director
The Senior independent director Garry O'Dea is an independent
non-executive director. His role includes acting as an advisor to
the Chair and as an intermediary for the Directors, providing an
alternate point of contact from the Chair and CEO for shareholders,
and discussing the Chair's performance with other Directors.
Board Strategy
The Board receives regular updates on the Company's achievements
in light of its strategy, as well as reviewing the Company's
performance against key metrics and investment objectives. The
Board held a dedicated strategy review meeting in October 2018,
attended by all Board members, at which the strategy was reviewed
for market validity, appropriateness and viability, following which
the strategic priorities for the Company were confirmed.
Information and Support
Directors have access to the Company Secretary and, where
appropriate, are entitled to have access to independent
professional advice at the expense of the Company. The Committees
of the Board are provided with sufficient resources to undertake
their duties. The Company provides appropriate Directors' and
Officers' insurance in respect of legal action against its
directors.
As required by the Codes, the Chairman has held meetings during
the financial period with the non-executive Directors without the
presence of the executive Directors.
Appointments to the Board
The Directors were all selected to bring in a range and depth of
knowledge, skills and business experience to the Company. All
serving members of the Board have been in place since Admission.
The Nomination Committee is responsible for leading the process for
Board appointments and is comprised of a majority of independent
non-executive directors. The criteria that it applies when
selecting potential candidates include experience and knowledge of
the Irish commercial real estate sector, strong financial skills,
general business experience, professional background and likely
availability, and a need for balance and diversity, including
gender, on the Board. At least half of the Board are independent
non-executive directors (excluding the Chairman). All non-executive
directors were appointed for a term of three years and, subject to
continued satisfactory performance, all directors will submitted
for re--election at the Company's AGM in 2019, in accordance with
the Company's Articles of Association and the provisions of the
Codes. Accordingly, all Directors will seek re-election at the
Company's forthcoming AGM on 24 May 2019.The terms and conditions
of appointment of all directors are set out in letters of
appointment which will be made available at each AGM.
Induction and Development of Directors
All new independent directors receive induction training on
joining the Board and are invited to visit part of the Company's
portfolio as soon as possible following their appointment to gain
first hand understanding of examples of the implementation of the
Company's strategy, property management, operations and tenant
relations. The independent directors also receive presentations
from the executive management and the Company's 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 Chairman also considers the training needs of directors, in
conjunction with individual directors, and has concluded that those
needs are adequately met.
Communications with Shareholders
The Board acknowledges the importance of and welcomes feedback
and all effective communications with shareholders. The Board is
responsible for ensuring that a satisfactory discourse with
shareholders takes place and that the Company maintains open,
two--way lines of communication with shareholders. It is important
to the Board that shareholders understand the Company's strategy
and objectives, which the Board works to ensure are clearly
explained and articulated.
The Company formally updates the market on its financial
performance with half year and full year results. Presentations are
made to both existing and prospective institutional shareholders,
principally after the release of the interim and annual results but
also as part of investor days organised by brokerage firms.
Major acquisitions are also announced to the market and the
Company's website (www.ygreit.com) provides the full text of all
stock exchange releases. The website also contains the first
interim report and will contain future interim reports and Reports
when they are published. The Chairman, in line with the Codes,
will, as required, ensure that the views, issues and concerns of
major shareholders are communicated to the Board so that
appropriate action can be taken if required. The Chairman and the
other directors also have the opportunity to meet shareholders and
analysts at the Company's AGM.
If shareholders would like to communicate directly with the
Board, they should contact Jonathan Laredo, contact details for
whom are available from the Company's website. The Senior
Independent non executive Director, Garry O'Dea, is also available
to shareholders who may have concerns which they would like to
bring to his particular attention.
Share Dealings
The Market Abuse Regulation (Regulation 596/2014 of the European
Parliament and the Council of the European Union) contains rules
requiring listed companies to have effective systems and controls
regarding persons discharging managerial responsibilities ("PDMRs")
securities dealing clearance. The Board has put in place securities
dealing rules which apply to the directors and relevant employees
of the Company and any of its affiliates (and certain persons
connected with such persons). The securities dealing rules set out
the pre--clearance approval procedures to be adhered to when
dealing in the shares of the Company and also set out periods in
which share dealings are prohibited.
Details of each director's interests in the Company's shares at
31 December 2018 are set out as below:
Number of shares Issued Capital
Barry O'Dowd 25,000 0.03%
Eimear Moloney 25,000 0.03%
Garry O'Dea 25,000 0.03%
Brian Owens 25,000 0.03%
Jonathan Laredo 2,529,596 3.37%
Charles Peach 251,440 0.34%
Michael Gibbons 2,052,544 2.74%
Independence
In accordance with the principles of the Codes, the Company
maintains a majority of independent non--executive directors on the
Board. The independence of each non-executive director is
considered each calendar year by the Board. The Board determines
whether each director is independent in character and judgement and
whether there are relationships or circumstances which are likely
to affect, or could appear to affect, the director's judgement. The
Board is satisfied that each of its designated independent
non--executive directors, namely Barry O'Dowd, Eimear Moloney,
Garry O'Dea and Brian Owens fulfil the independence requirements of
the Codes. The Board is also satisfied that the other directorships
held by its directors do not interfere with the discharge of their
duties to the Company.
The Company has and continues to maintain a robust
whistleblowing policy that allows Company staff or advisors to
raise concerns about possible improprieties in financial reporting
or any other activities of the Company.
Board Evaluation
The effectiveness and performance of the Board and its
directors, and of its Committees and their chairmen, will be
evaluated annually by the Board. Provision B.6.2 of the Codes
provides that the Company (also as a smaller Company for the
purposes of the Irish Annex) is not required to be externally
evaluated every three years, however the Company intends that an
independent review by an independent outside expert should be
conducted at least every three years.
The Board will formally conclude on a self-evaluation of its
performance in early 2019, on the performance of the Committees and
on the performance of the individual directors including the
Chairman. The senior independent non-executive director will meet
with the non-executive Directors (other than the Chairman) to
appraise the Chairman's performance, taking into consideration the
views of the executive directors.
Memorandum and Articles of Association
The Company's Memorandum and Articles of Association sets out
the objects and powers of the Company and are available at
http://www.ygreit.com/investors/company-documents/2018. 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 of and voting at general
meetings and the rules relating to the Directors, including their
appointment, retirement, re-election, duties and powers. The
Directors are responsible for the management of the business of the
Company and may exercise all the powers of the Company subject to
applicable legislation and regulation and the Company's Articles of
Association. The Company's Articles of Association may be amended
by a special resolution passed by the shareholders at an AGM or EGM
of the Company.
Purchase of own shares
The Company may purchase any of its own shares and any shares
the Company purchases may be cancelled or held by the Company as
treasury shares. The Company shall not make a purchase of shares in
the Company unless the purchase has first been authorised by a
special resolution of the Company. On 4(th) June 2018 the Company
made a special resolution to permit the Directors to make market
purchases not exceeding the lower of EUR75,000 nominal value and
10% of the aggregate nominal value of the issued share capital at 8
June 2018. There have been no purchases of own shares made by the
Company in the financial period and there were no shares owned in
treasury at the end of the financial period.
Accountability report
In accordance with the Codes, the Board aims to present a fair,
balanced and understandable assessment of the Company's position,
performance, business model and strategy specifically that they
consider that the Report and Consolidated financial statements, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position,
performance, business model and strategy. The Board's opinion as to
the validity of adopting the going concern basis of accounting in
preparing the annual financial statements is included in their
Directors' Report, as well as the basis by which the Company seeks
to generate or preserve value over the long term.
Risk Management and Internal Control
The Board has overall responsibility for the implementation and
success of the Company's system of internal control and risk
management. The Board has delegated responsibility for the
monitoring of the effectiveness of this system to the Audit
Committee. In accordance with the "Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting"
issued by the Financial Reporting Council in September 2014, the
Board confirms that there is an ongoing process for identifying,
measuring and managing the significant risks faced by the Company
in achieving its strategic objectives, that this process has been
in place from 6 June 2018 and up to the date of this report, and
that this process is regularly reviewed by the Board. The Board and
the Audit Committee have developed, documented and maintain a
robust risk identification, management and internal control
framework and periodically review and consider if the systems are
operating effectively. The Chairman of the Audit Committee reports
to the Board during the financial period on the Committee's
activities regarding risk management and internal control. The
Audit Committee reviewed the risk register and risk management
policy and recommended it for adoption by the Board. The Company's
risk management policy and risk register identify the principal
risks facing the Company and assess the controls in place to
mitigate those risks and the procedures in place to monitor them.
This process is designed to manage rather than eliminate the risk
of failure to achieve the Company's business objectives and can
only provide reasonable, but not absolute, assurance against
material loss or mis-statement. The principal risks facing the
Company and the means for their management and mitigants are
included in the Principal Risks and Uncertainties.
Code Compliance
The Directors are committed to maintaining high standards of
corporate governance and this Corporate Governance Statement
describes how the Company has complied with all provisions of the
Codes in the period from Admission on 8 June 2018 to 31 December
2018. The Board have reviewed the UK Corporate Governance Code 2018
and will adopt its principles.
AGM
The AGM of the Company will take place at 12p.m. on 24 May 2019
at the offices of William Fry, Grand Canal Square, Grand Canal
Dock, Dublin. The Report and Consolidated financial statements and
Notice of the AGM will be sent to shareholders at least 20 working
days prior to the date of the meeting. The Notice of the AGM sets
out the business of the meeting and an explanatory note on all
resolutions to be considered at the meeting. Separate resolutions
will be proposed on each substantive issue. All shareholders will
have the opportunity to attend and vote, in person or by proxy, at
the AGM. The Chairman, the Chair of each of the Committees and the
three Executive Directors will be available at the AGM to answer
shareholders' questions.
Results of resolutions proposed at the AGM will be published on
the Company's website www.ygreit.com following the AGM.
Barry O'Dowd Jonathan Laredo
Chairman Chief Executive Officer
Principal Risks and Uncertainties
The Company's Board has overall responsibility for the
establishment and oversight of the Company's risk management
framework to ensure that its strategy can be successfully
implemented. The Audit Committee is responsible for developing and
monitoring the Company's risk management policies, as set out in
the governance statement. Risk management policies are established
to identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls and to monitor risks and
adherence to limits. All of these policies are regularly reviewed
in order to reflect changes in the market conditions and the
Company's activities.
The Company's risk register, reviewed by the Audit Committee,
records key risks across the Company's current and future
investment, operations, IT, governance, economic and strategic
areas of activity. The register assesses the likelihood and impact
of risks as well as their direction in order to monitor progress in
managing and mitigating them. A register of errors and breaches is
also maintained and no material breaches were noted during the
financial period.
The Board
The Board has overall responsibility for maintaining and
monitoring the Group's systems for risk management and internal
control. The Board reviews and approves the risk appetite of the
Company.
The Audit Committee
The Board has charged the Audit Committee with reviewing the
adequacy and effectiveness of the Company's internal control
(including financial control) and risk management systems. The
Audit Committee assesses management's risk measurement and
control.
Executive Management
Executive management have day to day responsibility for ensuring
the Board's strategy with regards to risk management, measurement
and reporting is implemented. In addition, they identify and
provide assessment of current and future risks the Company may face
for the Board's review.
Internal Audit
The Audit Committee considers the nature, scale, complexity and
range of operations of the Company, including its external
administrator structure in relation to financial reporting. The
Company has appointed Baker Tilly ("BT" or "the Administrator ") to
act as an accounting service provider to the Company. There is a
comprehensive services agreement between the parties which sets out
the role of the Administrator in relation to financial reporting.
As part of the services agreement between the Company and the
Administrator, the Administrator is required to ensure that
appropriate internal controls suitable for the agreement are
maintained. BT is also required to ensure that reporting is
adequate, accurate and timely.
The Administrator is required to report compliance with its
internal control processes, disaster recovery processes, and
business continuity programme on a regular basis. The Administrator
and the management team are available to assist the Audit Committee
and the Board in discharging their responsibilities with regards to
assessing the effectiveness of the Company's risk management and
internal control systems. Based on the foregoing, and in particular
the size of the Company, the Committee has recommended to the Board
that it is not necessary to establish an internal audit function
within the Company. The Board concurs with the Audit Committee's
recommendation not to establish an internal audit function for the
Company. The Audit Committee will continue to review this position
annually and make appropriate recommendations to the Board.
The Company's assets are primarily office and industrial
commercial properties in the Republic of Ireland. The principal
risks it therefore faces are related to the Irish commercial
property market in general, the Company's operating environment and
individual properties and tenants. The Board has carried out a
robust assessment of the principal risks and sets out below the
principal risks and uncertainties that the Company is exposed to
and that may impact performance in the coming financial year. The
Company proactively identifies, assesses, monitors and manages
these risks. Some risks are not yet known and some that are not
currently deemed material may turn out to be material in the
future. The material risks and uncertainties identified, along with
their strategic impact on the business and mitigating factors, have
been outlined.
Identified Impact on the Company/Property Mitigating activities Momentum
Risk market
Key Macro
economic risks
------------------------------------------------------------------------------------------------
Brexit Weakening Irish The key risk areas Increasing
economy puts pressure by sector (agriculture,
on rents and tenants, food manufacture)
in the event of are avoided in the
a hard Brexit there REIT portfolio. Tenants
is the possibility are assessed on the
that the border volume of their sales
between the Republic to the UK or supplies
of Ireland and Northern from the UK at rental
Ireland became a or acquisition. Targeted
hard border properties are majority
tenanted by stronger
tenants.
------------------------------- ----------------------------- -----------
Weakening Weakening global The REIT assets are Decreasing
economy and/or national judged on the quality
economy puts pressure and local grounding
on rents and tenants. of tenants and prospective
Fall in availability tenants. Targeted
of debt financing. properties are majority
Fewer buyers for tenanted by stronger
the REIT's properties tenants with demand
and businesses not
just dependant on
the local economy.
------------------------------- ----------------------------- -----------
Weak Foreign Risk of falling The Company's acquisition Stable
Direct Investment demand from Foreign policy requires alternative
demand due Direct Investment use planning. The
to macro-economic tenants Company monitors and
factors aims to understand
Foreign Direct Investment
trends in advance.
------------------------------- ----------------------------- -----------
Interest rate Debt facility costs The Company will seek Stable
risk - rising based on Euribor to mitigate the impact
rates may increase with of interest rate rises
an adverse effect on any future debt
on dividend payments. facility. The Company's
finance manual includes
mitigating policies
for hedging interest
rate risk.
------------------------------- ----------------------------- -----------
Key Property
related risks
-----------------------------------------------------------------------------------------
Valuation Property assets The Company has a Decreasing
of Company outside the Dublin separate Valuation
Assets Central Business Committee to ensure
District may lack the most capable valuers
recent comparable are used. The Valuation
transactions or Committee can change
benchmarks for an the valuer and use
external valuer more than one valuer
to use in valuation. for the portfolio.
The property team
keep a record of comparables
from acquisition to
share with the valuer.
--------------------------- ------------------------------ -----------
Tenant payment Risk that the Company's Tenants' covenant Stable
behaviour current or future strength and prior
tenants fail to rental performance
make payments due is reviewed at purchase,
in a full or timely the property management
manner, which could group conduct regular
affect the Company's tenant meetings and
dividends. tenant financial reviews.
--------------------------- ------------------------------ -----------
Tightening Risk the Company The Company's owned Stable
of rental will not be able assets would reflect
yields to invest capital this tightening to
at its expected help achieve NAV price
rental yields targets. The Company
has a higher yielding
seed portfolio to
provide current income
in the absence of
suitable purchases.
--------------------------- ------------------------------ -----------
Refurbishment Failing contractors The Company does not Stable
- contractor may delay or increase expect to undertake
failure and the cost of refurbishment substantial refurbishment
cost and then only with
Board approval. The
Chief Investment Officer's
team would require
competing bids, pre-set
timelines and budgets
to identify failings
and replace contractors
earlier.
--------------------------- ------------------------------ -----------
Key Operational
Risks
-------------------------------------------------------------------------------------------
Inability Risk the Company The Company will have Stable
to raise further will not be able leverage below the
equity capital to fund unexpected REIT ceiling. The
major capital expenditure. Company will remain
Risk the Company in contact with leverage
will not be able providers to ensure
to achieve its IPO leverage is available
growth strategy at attractive levels.
The Investor relations
policy has a calendar
for capital raising
ensuring the Company
is regularly appraised
of Investor interest
and can target investors
well in advance of
the Company's immediate
needs.
---------------------------- ------------------------------ -------
Loss of key Risk of Executive The Company has Executive Stable
staff management resignation, management with significant
illness or death personal investment
in the Company with
lock-ups, and a specifically
judged remuneration
scheme and Long Term
Incentive Plan to
encourage retention.
Executive management
have non-compete clauses.
---------------------------- ------------------------------ -------
Regulatory, Risk of changing The Company has a Stable
legislative, operating environment strong Board with
tax, environmental hurting returns a mix of capital markets,
or planning and amending strategy property and audit
changes experience to better
be aware of and react
to these changes.
The Executive management
have experience of
managing through legislative
and tax changes and
relationships with
suitable professionals
for Company advice.
---------------------------- ------------------------------ -------
Audit Committee Report
Dear Shareholder,
On behalf of the Audit Committee, I am pleased to present the
Audit Committee's Inaugural Report for the period from the
Committee's establishment on 8 June 2018 to 31 December 2018.
The following pages provide insight into our work and activities
during the Committee's tenure as we discharge our responsibilities
in relation to the integrity of the Company's financial reporting,
the relationship with and independence of the external auditor and
the effectiveness of the Company's internal controls and risk
management system.
As part of our activities we met regularly with the Management
Team, the Administrator and the external auditors. During this
financial period the Company established and subsequently reviewed
its risk policies and procedures and published its first interim
financial statements.
While the Company is relatively newly established we have
reviewed the Committee's make-up and skills and our interactions
with external assurance such as the external auditor and
Administrator to date. We are satisfied that the Audit Committee
has the right balance of skills and resources, has been able to
work effectively and has received the support and response it has
required from both management and the external service providers.
We are also satisfied that the level of scrutiny of the Company's
public announcements is sufficient and effective. There were no
issues arising from this evaluation.
I will be available at the AGM to answer any questions on the
work of the Audit Committee.
____________
Garry O'Dea
23 April 2019
Audit Committee report (continued)
The Audit Committee is chaired by Garry O'Dea, who is the Senior
Independent Director and an independent Non-Executive Director. He
is considered by the Board to have recent and relevant financial
experience and the necessary understanding of financial reporting
and accounting principles. All the members of the Audit Committee
are independent Non-Executive Directors, appointed by the Board on
the recommendation of the Nomination Committee. They are appointed
for a period of up to three years, extendable by no more than two
additional three-year periods provided the member continues to meet
the criteria for membership. A quorum consists of two Independent
member Directors and all the members of the Committee are
considered to have recent significant and relevant financial
experience. The Committee brings experience in, among other areas,
commercial property, capital markets and financial accounting, all
of which are relevant to the sector the Company operates in. All
members are in their first term, which started at Admission, 8 June
2018.
The Audit Committee is constituted in compliance with the Codes,
section 167 of the Companies Act 2014, section 1551 of the
Companies (Statutory Audits) Act 2018 and the Company's Articles
regarding the composition of the Audit Committee. The current Terms
of Reference for the Audit Committee are published on the Company's
website.
The Audit Committee meets regularly, in alignment with the
financial reporting calendar. The Audit Committee was formed on 8
June 2018 and met 4 times in the period to 31 December 2018. The
Audit Committee requests the attendance of relevant other parties
as required. The parties met were as follows:
Deloitte Ireland LLP as External The independent external auditor
Auditor attended to present its audit
plans in respect of the annual
audit and interim review, its
analysis of the audit risks
it sees in the Group, the results
of an interim review, and its
recommendations for improvements
in systems and controls.
--------------------------------- --------------------------------------
Baker Tilly as Administrator The Administrator met the Committee
("BT") to discuss its work, its interaction
with the Company and any significant
assumptions or matters in relation
to the preparation of the Group's
accounts.
--------------------------------- --------------------------------------
Representatives of the Company Representatives of the Company,
principally the CFO, met the
Committee in order to present
the financial statements, to
discuss significant judgements
and areas of uncertainty, the
Group's risks and measures in
place to mitigate risks, and
any other matters as requested
by the Audit Committee.
The Company Secretary acts as secretary to the Committee.
Role of the Audit Committee
The roles and responsibilities of the Audit Committee are
summarised below. The full schedule of the roles and
responsibilities are contained in the Committee's terms of
reference, which are available from the Company's website
www.ygreit.com.
Financial reporting Monitoring the integrity of
Group financial statements and
any other formal announcements
relating to the Group's financial
performance, business model
and strategy.
Assessing whether the Report
and Consolidated financial statements
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.
Evaluating the Group's accounting
policies, any changes to them
and their appropriateness.
Reviewing and challenging judgements,
estimates and assumptions made
by the Group in its reports
or announcements.
----------------------------- ------------------------------------------
External Audit Overseeing the relationship
with the external auditor, including
selection, appointment, removal,
terms of engagement, approval
of remuneration, assessing independence
and objectivity, assessing effectiveness
of the audit process, and setting
policy on the use of non-audit
services.
Valuation Monitoring and reviewing the
property valuation process,
taking into account the actions
of the Valuations Committee.
Reviewing the valuation methodology
for non-property judgements.
----------------------------- ------------------------------------------
Internal Audit Reviewing the Group's requirement
for an internal audit function.
Assessing the need for additional
internal audit review and reporting.
----------------------------- ------------------------------------------
Risk Management and Internal Reviewing the principal risks
Controls facing the Group and recommending
to the Board the Group's risk
register and risk management
systems.
Reviewing the adequacy and effectiveness
of the Group's system of internal
financial controls and internal
controls including implementation,
relevance and any breaches of
controls.
Reviewing the Group's procedures
for detecting fraud, and the
systems and controls for the
prevention of bribery.
Performing an assessment of
the Group's compliance with
the Codes and other obligations.
----------------------------- ------------------------------------------
Committee Reviewing the Committee's Terms
of Reference, composition and
performance.
Monitoring compliance with legal,
listing, REIT rules and accounting
standards.
Reporting to the Board on fulfilment
of its responsibilities.
----------------------------- ------------------------------------------
Reporting
The Chairperson of the Audit Committee reports to the Board on
the activities of the Committee. The Audit Committee's activities
in the period from 8 June 2018 to 31 December 2018 are set out
under each of the relevant headings below:
Compliance with Code
The Codes require 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 Report and
Consolidated financial statements, 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
the 2018 Report and Consolidated financial statements met these
requirements.
The Committee considered and discussed with management the
established and documented process put in place by management for
the preparation of the 2018 Report and Consolidated financial
statements, and in particular the timetable, co-ordination and
review activities. The Committee also noted the formal audit plan
and process undertaken by Deloitte Ireland LLP. The Committee and
then the Board concluded that the Report and Consolidated financial
statements, taken as a whole, are fair, balanced and understandable
and that they provide the necessary information for shareholders to
assess the Company's position and performance, business model and
strategy.
Significant Issues
The Committee considered the Company and Group's proposed
accounting treatments for material and complex transactions and key
assumptions made in the preparation of the financial statements.
The Committee also reviewed the suitability of the Company and
Group's accounting policies, their adoption and their consistent
application across financial periods. The key judgements considered
by the Audit Committee during the financial period ended 31
December 2018 and the action taken by the Committee are set out
below:
Valuation of owned property
All of the properties owned by the Company were valued by Lisney
Limited (the "Valuer") as at 31 December 2018. The Valuation
Committee met with the Valuer, and reviewed its objectivity,
experience and cost competitiveness before engaging with it. The
Valuation Committee tested the Valuer's assumptions and valuations
and is satisfied that the valuations were conducted in accordance
with the Royal Institution of Chartered Surveyors Valuation
Standards. The valuation report prepared by the Valuer was also
provided to the external auditor. The Audit Committee reviewed the
valuations and their underlying comparable evidence and
assumptions. All properties are valued in accordance with their
current use, which is also the highest and best use except for
property under development. The Audit Committee paid specific
attention to the valuation of the car park under development at the
Company's property in Athlone, in particular the assumptions made
by the Valuer on timing of completion and investment return.
Treatment of subsidiary holdings
The Group owned, or following reorganisation of the management
companies expects to own, interests in three property management
companies and Yew Grove Investment Fund (in Member's Voluntary
Liquidation), a qualifying investor alternative investment fund
("QIAIF"). The Committee received a report addressed to the Group
from Holmes O'Malley Sexton (the solicitors acting on behalf of the
Group with respect to the management companies) describing the
ownership and influence the Group has or could have on each
management company. Additionally, the Committee discussed the
recognition and valuation of each of these with the Company, the
Administrator and the external auditor.
Treatment of share-based payments
Under the Company's Long-Term Incentive Plan ("LTIP") and Bonus
scheme the Company may be obliged to make payments or settle
options on the Company's shares contingent on individual and
Company performance. While the Company has not made any grants for
the reporting period, the Audit Committee reviewed the treatment of
the LTIP with the Company in the presence of the Administrator in
order that the Committee and the Remuneration Committee be aware of
the cost and recognition of awards made under these schemes in the
future.
Treatment of debt facility
The Company raised a debt finance facility during the reporting
period. The Committee reviewed the terms and use of the facility
and the costs of the facility in determining how these would be
treated and recognised in the Company and Group's accounts. The
Group paid particular attention to the valuation and treatment of
the liabilities the Company has incurred under the facility.
The External Auditors
The Audit Committee oversees the relationship with the External
Auditor.
Deloitte Ireland LLP was appointed as first statutory auditor to
the Company in 2018. The Audit Committee keeps the tenure of
Deloitte Ireland LLP under review in accordance with best practice,
recent applicable legislation and its terms of reference.
The Audit Committee has recommended to the Board that Deloitte
Ireland LLP should be re-appointed for the coming financial year.
As required under the Articles of the Company, the reappointment
will be tabled at the Annual General Meeting for consideration by
shareholders. In the course of arriving at this recommendation the
Audit Committee completed a detailed assessment of the external
auditor including the key points below:
-- Confirmation from the auditor that there are no issues
concerning its status as a statutory auditor or the designation of
the audit engagement partner as a responsible individual.
-- The independence and objectivity of the audit partner and
senior audit staff, particularly as regards to their interaction
with Company management.
-- The quality of the audit partner and audit staff from a
technical accounting and auditing perspective, including their
industry knowledge and their specialist technical expertise.
-- Whether issues were raised at the right time by the
appropriate level of audit staff with the appropriate Company staff
and in particular, the timeliness and quality of communication with
the Committee.
The outcome of this assessment confirmed that the auditor was
performing well, adding value to the control process, had a good
relationship with both Audit Committee, Administrator and Company
management and was sufficiently independent and technically
qualified to justify the Committee's recommendation to
re-appoint.
Services carried out by the external auditor during the
financial period
Services provided by Deloitte Ireland LLP to the Company and the
Company's subsidiaries for the financial period ending 31 December
2018 are:
Audit of Company accounts at 6 April
2018 EUR12,500
Financial Position and Prospects Procedures
review and reporting accountant at Admission EUR170,000
-----------
Review of interim accounts EUR12,500
-----------
Audit of Initial Financial Statements EUR12,500
-----------
Audit of the Company for the financial
period ended 31 December 2018 EUR30,000
-----------
Audit of the Group for the financial
period ended 31 December 2018 EUR10,000
-----------
Internal Audit
In accordance with the Codes, the Audit Committee has considered
the Company's scale, complexity and range of operations, including
the role of the Administrator in relation to financial reporting.
There is a comprehensive services agreement between the Company and
the Administrator, BT, which sets out the role of the Administrator
in relation to financial reporting.
As part of the services agreement, the Administrator is required
to report to the Company that it has appropriate internal controls
in place. BT is also required to ensure that reporting to the Audit
Committee and the Board is adequate, accurate, and timely.
The Administrator is required to report to the Company on
compliance with its internal control processes, disaster recover
processes and business continuity programme on a regular basis.
Based on the Committee's assessment of the foregoing controls
within the Administrator, and also the current size of the Company,
the Audit Committee has recommended to the Board that it does not
believe it is necessary to establish an internal audit function at
this time. The Board concurs with the Audit Committee's
recommendation not to establish an internal audit function for the
Company at this time. The Audit Committee will continue to review
this position annually and make appropriate recommendations to the
Board.
REIT status
As an Irish REIT, the Company is subject to Part 25A of the
Taxes Consolidation Act 1997 (as inserted by section 41 of the
Finance Act 2013). The Committee reviewed the Company's compliance
with these requirements at 30 October and 31 December 2018, based
on the Company's internal calculations. The Committee has confirmed
to the Board that the Company is in compliance with the REIT rules
at the date of this report. The Committee noted that in order to
maintain compliance the Company would need to be listed on the Main
market of the London or Euronext Dublin stock exchanges by May
2021.
Internal controls and Risk Management
The Board acknowledges that it is responsible for monitoring the
effectiveness of the Company's system of internal control
(including financial control) and risk management to safeguard the
Company's assets. The Company's internal control environment is
designed to identify, manage and mitigate financial, operational
and compliance risks inherent to the Company. The system is
designed to manage rather than eliminate the risk of failure to
achieve business objectives and can only provide reasonable, but
not absolute, assurance against material misstatement or loss.
The Company's internal control system is built on certain
fundamental principles and is subject to review by the Board. The
following are the principles under which the internal control
system operates:
-- A defined schedule of matters reserved to the Board
-- Documented, approved policies and procedures
-- A clear, effective authorisation process
-- Risk metrics and risk reporting at meetings
-- Approval and recording of all significant transactions
-- Maintenance of a breaches register with details of corrective actions
-- Business and financial planning (including two year forward
cashflows and viability modelling)
-- Formal multi step appraisal of property investment decisions
-- Performance assessment versus budget.
The Committee carried out an annual assessment of the Group's
risk management and internal control systems, using the Group's
risk management framework and risk register. The Committee
identified the Group's principal risks and reviewed the controls
and procedures in place to mitigate these risks. The Committee
reviewed each of the entries on the risk register to ascertain
whether they were relevant and complete, whether the risks
identified were expected to become more prevalent, what the
potential impact of the risks might be, mitigants to the risks that
had been or could be brought into action, and actions to be taken
by the Group. The Committee recommended the updated risk register
to the Board for adoption.
Whistleblowing
The Committee reviewed the adequacy and security of the Group's
arrangements for its employees and contractors to raise concerns in
confidence about possible wrongdoing in financial reporting or
other matters, and the subsequent proportional and independent
investigation of such matters. There were no items reported or
identified to the Audit Committee during the period ended 31
December 2018 which required investigation or follow up and the
Committee reported this to the Board.
Reporting
The Chairman of the Committee reports to the Board at each
meeting on the activities of the Committee and intends to attend
the Company's AGM to answer any questions on the Committee's
responsibilities and this report.
Approval of reports
The Report and Consolidated financial statements were considered
in draft on 9 April 2019. The Report and Consolidated financial
statements were approved by the Board on 23 April 2019.
Nomination Committee Report
I am pleased to present the first report of the Nomination
Committee from the Committee's establishment on 8 June 2018 to 31
December 2018, which provides a summary of the Nomination
Committee's role and responsibilities, and how the Committee
discharged these during 2018.
Role of the Nomination Committee
The duties, reporting responsibilities and authority on the
Nomination Committee is clearly set out in our written Terms and
Reference which are available on the Company's website
www.ygreit.com. These include, but are not limited to, the
following:
-- Regularly reviewing the structure, size and composition of
the Board and make recommendations to the Board with regard to any
changes;
-- Assessing the effectiveness and performance of the Board and
each of its committees including consideration of the balance of
skills, experience, independence and knowledge of the Company on
the Board, its diversity, including gender, how the board works
together as a unit, and other factors relevant to its
effectiveness;
-- Giving full consideration to succession planning for
Directors and other senior executives in the course of its work,
taking into account the challenges and opportunities facing the
Company, and the skills and expertise needed on the Board in the
future, in particular with respect to the chairman of the
Company;
-- Being responsible for identifying and nominating candidates
for approval by the Board to fill Board vacancies as and when they
arise;
-- Before any appointment is made by the Board, evaluating the
balance of skills, knowledge, experience, independence and
diversity on the Board, and, in the light of this evaluation
preparing a description of the role and capabilities required for a
particular appointment;
-- Reviewing annually the time required from non-executive
Directors and assessing whether the non-executive Directors are
spending sufficient time on fulfilling their duties.
Board Membership
The Board recognises and embraces the benefits of diversity
among its own members, including diversity of skills, experience,
background, gender and other qualities. We are committed to
reflecting diversity in its broadest sense, while ensuring that we
maintain the necessary skills and experience required to oversee
the significant financial service activities and related
requirements of the Group. In reviewing the Board composition and
appointments, candidates are considered on merit against objective
criteria and with due regard for the benefits of diversity. The
Board has a Board Diversity Policy, the aim of which is to ensure
that the percentage of women on the Board achieves at or exceeds
30%. The percentage is currently 14%. All Directors are subject to
re-election by shareholders at this year's Annual General Meeting
and will be subject to annual re-election thereafter. The Board's
composition will remain under continuous review.
Committee Membership
Under the Terms of Reference, the Nomination Committee must
comprise at least two Directors, of whom a majority shall be
independent non-executive Directors. Members are appointed to the
Committee by the Board for a period of up to three years which may
be extended for further periods of up to three years, provided the
relevant member still meets the criteria for membership of the
Committee.
The Committee is comprised of two non-executive Directors and
one executive Director:
Barry O'Dowd (Chairman)
Eimear Moloney (Non-executive Director)
Jonathan Laredo (CEO)
See the Corporate Governance Statement for their individual
biographies.
Other executives may be invited to attend when deemed
appropriate. The Company Secretary or his or her nominee shall act
as the secretary of the committee and will ensure that the
committee receives information and papers in a timely manner to
enable full and proper consideration to be given to issues.
Activities of the Nomination Committee
The Nomination Committee meets at least once in each calendar
year and otherwise as required. The Nomination Committee met on two
occasions during the period from 8 June 2018 to 31 December 2018.
The principal activities of the Nomination Committee throughout
this period are detailed below:
-- The Committee reviewed the Terms of Reference for the
Nomination Committee to ensure the contents remained relevant and
appropriate and best reflect the role and responsibilities of the
Committee.
-- The Committee reviewed the results of the annual performance
evaluation of the Board, its committees and individual Directors,
including a review of the time required from non-executive
Directors to fulfil their duties.
-- A review of the Corporate Governance Code that will apply from 1 January 2019.
-- In line with the UK Code, ensuring that all Directors,
subject to and seeking re-election, be put forward for
re-appointment at the Company's 2019 AGM.
-- The Committee appointed Jonathan Laredo to the Valuation
Committee with effect from 2 August 2018 and proposed to the Board
that Eimear Moloney be a member of the Audit Committee from 21
August 2018.
I will be available at the AGM to answer any questions that
shareholders may have on the work of the Committee.
On behalf of the Committee.
Barry O'Dowd
23 April 2019
Remuneration Committee Report
Dear Shareholder,
I am pleased to present the inaugural report of the Remuneration
Committee covering the remuneration policy and practice from the
Committee's establishment on 8 June 2018 to 31 December 2018 which
has been prepared by the Remuneration Committee and approved by the
Board.
The objective of the report is to provide shareholders with
information to enable them to understand the remuneration
structures and how they relate to the Group's financial
performance.
We have been mindful to ensure disclosures in relation to the
remuneration structures are in line with best practice and we
recognise the importance of having remuneration policies, practices
and reporting that reflect best corporate governance practices,
having regard to the Company's size and the markets on which its
shares are traded.
The Committee is dedicated to structuring a remuneration policy
for the business which promotes a continued alignment of
shareholders' and executives' interests. The significant
shareholdings of both the Chief Executive Officer and the Chief
Investment Officer also demonstrate their ongoing commitment to the
long-term success of the Company.
Membership and Responsibilities
The Remuneration Committee is chaired by Eimear Moloney and its
other member is Garry O'Dea, each of whom is considered by the
Board to be independent. The Remuneration Committee was set up at
the date of admission to trading in June 2018 and meets formally at
least once a year and otherwise as required.
Only members of the committee have the right to attend committee
meetings. However, other individuals such as officers and staff of
the Company and other directors and representatives from service
providers to the Company may be invited to attend all or part of
any meeting as and when appropriate and necessary.
The Company Secretary or his or her nominee shall act as the
secretary of the committee and will ensure that the committee
receives information and papers in a timely manner to enable full
and proper consideration to be given to issues.
The responsibilities of the Remuneration Committee are
summarised below and are set out in full in the Terms of Reference
for the Remuneration Committee which are available on the Company's
website www.ygreit.com. In the admission document published in
connection with the listing of the Company we set out the core
principles for our remuneration policy. The roles and
responsibilities include but are not limited to, the following:
-- within the terms of the agreed remuneration policy and in
consultation with the chairman and/or chief executive, as
appropriate, determine the total individual remuneration package of
the chairman, each executive director, company secretary and other
designated senior executives including bonuses, incentive payments,
share options or other share awards and pension benefits. No
director or manager shall be involved in any decisions as to their
own remuneration.
-- obtain reliable, up-to-date information about remuneration in
other companies. To help it fulfil its obligations the Committee
shall have full authority to appoint remuneration consultants and
to commission or purchase any reports, surveys or information which
it deems necessary, within any budgetary restraints imposed by the
board.
-- review the ongoing appropriateness and relevance of the
remuneration policy and the terms of reference and make
recommendations to the Board as regards changes or otherwise.
Key activities of the Remuneration Committee
There has been one Committee meeting during the period and the
key activities during the financial period were focused on:
-- Agreement of the Remuneration Committee's terms of
reference;
-- Formulation of the Company Remuneration Policy as fit for a
listed company;
-- Benchmarking base salary and total remuneration of executive
directors prior to listing;
-- Setting the policy for Chairman, and with the Board, the
policy for non-executive directors' fees;
-- Implementing the Company's new Long-Term Incentive Plan
("LTIP");
-- Drafting the Committee's first Report;
-- Started to consider the implications of the updated 2018 UK
Corporate Governance Code for the Company's remuneration practices
and reporting following the financial period.
Summary of current executive remuneration framework
The Group's policy on Executive Directors' remuneration is
designed to ensure that employment and remuneration conditions
reward, retain and motivate them to perform in the best interests
of shareholders. The Group aims to provide a remuneration package
for all employees that is market competitive and operates the same
reward and performance philosophy throughout the business.
The elements of the remuneration package which may apply to
Executive Directors are base salary, pension and benefits, annual
bonus and the long term incentive plan. The following paragraphs
summarise the framework which was applied at IPO and will apply
during 2019. The initial levels of salary, pension, and benefits
were agreed following the review of a recommendation for
remuneration prepared by Mercer Consulting Group ("Mercer"), acting
as independent remuneration consultants to the Company.
Executive remuneration framework
Base Salary: An appropriate level of fixed remuneration to
reflect the skills and experience of the individual. Salaries are
reviewed bi-annually by the committee taking into account all
relevant factors. Prior to admission Mercer were engaged by the
board to consider the appropriate level of both Executive and
Non-Executive remuneration by benchmarking the company against
other similar sized listed companies.
The salaries of each of the Executive Directors was set at
admission at EUR250,000 p.a. Each of the Executive Directors has
agreed to waive half of their annual salary until such time as the
share capital issued by the Company equals or exceeds EUR175
million.
Benefits: To provide a market competitive benefits package.
Benefits currently provide the Executives with critical illness and
death in service cover and reimbursement of the cost of a family
health insurance plan for spouse and children under 18 years
old.
Pension: Contribution to a company pension scheme at 15% of
salary. These pension contributions are in line with the
contribution level provided to the other members of the
workforce.
Bonus: To reward executives for the delivery of annually agreed
objectives and performance targets. The maximum bonus for a year
for each of the Executive Directors is 100% of salary. Targets are
set each year for the CFO and CIO by the CEO, and for the CEO by
the Chairman and each is assessed and approved by the
Committee.
In respect of 2018 no bonuses were payable to the Executive
Directors. While the board recognises the value generated by the
executive for the Company in successfully effecting the flotation
of Yew Grove REIT plc, in light of the limited resources and
profitability in this initial period it was considered prudent not
to pay a bonus.
For 2019, 70% of the bonus will be based on the achievement of
challenging actual dividend per share targets with the balance
being paid based on individually agreed non-financial objectives.
The non-financial objectives are set individually for each
executive director depending on their role and how they might
further influence the Company's objectives. The actual performance
targets set are not disclosed at the start of the
financial year, as they are considered to be commercially
sensitive. These will be reported and disclosed retrospectively at
the end of the year in order for shareholders to assess the basis
for any bonus outcomes.
LTIP: Prior to admission in June 2018 an LTIP was established.
Awards are designed to reward Executive Directors for the delivery
of long term performance and align their interests with those of
shareholders and other stakeholders. Under the LTIP scheme the
maximum annual award is 150% of salary. In addition, no more than
5% of the issued ordinary share capital of the Company may be
issued or reserved under the Scheme. The options are granted with a
fixed exercise price which is determined by the market value per
share of the Company at the grant date of the options. Options will
vest no earlier than the third anniversary of the award grant date.
The options expire seven years after the date of grant. The Group
has no legal or constructive obligation to repurchase or settle the
options in cash.
Malus will apply for the three year period from grant to vesting
with claw back applying for the two year period post vesting. Malus
and claw back provisions within the annual bonus scheme and LTIP
apply in the following circumstances:
-- Material restatement of the Company's audited financial statements;
-- Where an award that has been granted based on any materially
incorrect information relevant to the basis for setting the
performance conditions;
-- Material breach by the executive of this contract of
employment including, a material breach of a restrictive covenant
and/or confidentiality obligations of the Company; or
-- Serious business or reputational damage to the Company
arising from a criminal offence, serious misconduct or willful
misconduct by the individual executive.
There were no awards in 2018. The first awards under the LTIP
plan will be made during 2019. The Remuneration Committee has
determined that an exceptional award of 150% of base salary will be
made to each executive director as the Company builds out its
strategy and moves towards achieving its investment objectives.
Commencing in 2019, awards may be granted annually to executive
directors in the form of share options. These will vest at the end
of a three year period subject to:
1. the executive director's continued employment at the date of vesting;
2. satisfaction of the performance conditions.
The options are exercisable based on a series of performance
metrics agreed by the Remuneration Committee and approved by the
board. The vesting criteria for the 2019 LTIP Scheme awards are
split evenly across three metrics;
1. NAV growth but excluding dividends, 30% vests at >= 10%
growth, 60% at 15% growth and 100% at >= 20% growth.
2. Aggregate dividend payment per share over the final twelve
months of the performance period, 30% vests at EUR0.06 per share,
60% at EUR0.07 per share and 100% at EUR0.075 per share.
3. Annualised Total Shareholder Return (TSR), 30% vests
>=10%, 60% at >=12% and 100% at >=15%.
The Remuneration Committee may change the balance of the
measures, or use different measures for subsequent awards, as
appropriate. No material change will be made to the type of
performance conditions without prior shareholder consultation.
Non executive Directors fees:
The company provides a level of fees to support recruitment and
retention of Non-Executive Directors with the necessary experience
to advise and assist with establishing and monitoring the Company's
strategic objectives. The Board as a whole is responsible for
setting the remuneration of the Non-Executive Directors, other than
the Chairman whose remuneration is considered by the Remuneration
Committee and recommended to the Board. The Chairman is paid
additional fees above other Non-Executive Directors to reflect the
additional responsibilities and/or additional/unforeseen time
commitments. Non-Executive Directors do not participate in any of
the Company's incentive arrangements.
Outcomes for 2018 (to be read as part of the Consolidated
financial statements)
The following table summarises the remuneration received by the
Directors for the period from 8 June 2018 to 31 December 2018:
Salary Bonus Other Benefits Pension 2018 Total
/ Fees EUR'000 EUR'000 EUR'000 EUR'000
EUR'000
Executive Directors
--------- --------- --------------- --------- -----------
Jonathan Laredo 70 - 2 21 93
--------- --------- --------------- --------- -----------
Charles Peach 70 - 1 21 92
--------- --------- --------------- --------- -----------
Michael Gibbons 70 - 10 21 101
--------- --------- --------------- --------- -----------
Non-Executive
Directors
--------- --------- --------------- --------- -----------
Barry O'Dowd 44 - - - 44
--------- --------- --------------- --------- -----------
Garry O'Dea 28 - - - 28
--------- --------- --------------- --------- -----------
Eimear Moloney 28 - - - 28
--------- --------- --------------- --------- -----------
Brian Owens 28 - - - 28
--------- --------- --------------- --------- -----------
Total 338 - 13 63 414
--------- --------- --------------- --------- -----------
Service contracts/letters of appointment
The Remuneration Committee reviews the contractual terms for any
new Directors to ensure these reflect best market practice.
Executive Directors
All Executive Directors have service contracts with the Group
with a notice period of six months. The service contracts for all
three executive directors are dated 5 June 2018. The service
contracts allow for termination by way of payment for the entire
notice period or part thereof in lieu of notice. Standard 'cause'
provisions are included in the service agreement to allow the
Company to terminate without notice.
Non-Executive Directors
The Non-Executive Directors were appointed under letters of
appointment dated 4 June 2018. Each independent non-executive
director's term of office is for an initial period of 3 years
unless terminated earlier upon written notice or upon their
resignations.
The initial terms of the non-executive directors' positions are
subject to their election by the Company's shareholders at the AGM
scheduled for 24 May 2019 and to re-election at any subsequent AGM
at which the non-executive directors stand for re-election.
I am always happy to hear from the Company's shareholders and
you can contact me via the Company Secretary if you have any
questions on this report or more generally in relation to the
Company's remuneration.
I will be available at the AGM to answer any questions on the
work of the Committee.
On behalf of the Remuneration Committee
Eimear Moloney
23 April 2019
Valuation Committee Report
I am pleased to present the first report from the Valuation
Committee for the financial period ended 31 December 2018, which
provides a summary of the Committee's role and responsibilities and
how the Committee discharged these since its establishment on 8
August 2018.
Role of the Valuation Committee
The Valuation Committee plays an important role in providing the
Board with assurance that the valuation process in valuing the
Company's investment properties is robust, objective, independent
and in accordance with the RICS Valuation - Global Standards 2017,
incorporating the International Valuation Standards and RICS
Professional Standards (the "Red Book").
The duties, reporting responsibilities and authority of the
Valuation Committee is set out in the written terms of reference
which are available on the company's website www.ygreit.com and
include the following;
Valuation reporting
The Committee shall monitor the integrity of the valuation of
the property assets of the Company, reviewing and reporting to the
Board on significant valuation reporting issues and judgements
which they contain. The Committee shall also review and report to
the Board on summary valuation statements, valuation methodologies
used, and any valuation assumptions contained in valuation
documents.
In particular, the Committee shall review and challenge where
necessary;
i. the consistency of, and any changes to, valuation
methodologies both on a year on year basis and across the Company
and, if applicable, its subsidiaries to ensure the valuations are
in accordance with the Red Book;
ii. the methods used to account for significant or unusual
properties where different approaches are possible;
iii. whether the valuer has followed appropriate valuation
standards and made appropriate estimates and judgements;
iv. the clarity of disclosure in the valuer's reports and the
context in which statements are made; and the annual and
semi-annual valuations, and where the Committee is not satisfied
with any aspect of the valuations provided by the external valuer,
it shall report its views to the Board.
Narrative reporting
Where requested by the Board, the Committee should review the
content of the valuation reports and advise the Board on whether,
taken as a whole, they are fair, balanced and understandable and
provide a third party valuation for shareholders to assess the
value of the Company's properties.
External Valuation
The Committee shall consider and make recommendations to the
Board, in relation to the appointment, re-appointment and removal
of the Company's external valuer and oversee the relationship with
the external valuer including (but not limited to):
a. approval of their remuneration and that the level of fees is appropriate;
b. approval of their terms of engagement, including any
engagement letter issued at the start of each valuation;
c. assess annually their performance, independence and
objectivity and the effectiveness of the valuation process;
d. ensuring no conflict of interest impacts the independence of the external valuer;
e. assessing annually the qualifications, expertise and
resources of the valuer or valuers and the effectiveness of the
valuation process which shall include a report from the external
valuer on their own internal quality procedures;
f. meet the external valuer or valuers at least once a year,
without any member of the Company's management being present, to
discuss their remit and any issues arising from the valuation;
g. review and approve the annual valuation plan and ensure that
it is consistent with the scope of the valuation engagement;
h. review the findings of the valuation with the external valuer
or valuers, including but not be limited to, the following;
- a discussion of any major issues which arose during the valuation;
- any valuation judgements; and
- the effectiveness of the valuation process.
Reporting responsibilities
The Committee Chairman shall report formally to the Board on its
proceedings after each meeting on all matters within its duties and
responsibilities and shall also formally report on how it has
discharged its responsibilities. The Committee shall make whatever
recommendations to the Board it deems appropriate on any area
within its remit, where action or improvement is needed.
Membership
Membership of the Committee comprises Brian Owens (Chairman of
the Committee), Barry O'Dowd and Jonathan Laredo. The membership
fulfills the quorum of 3 members of which 2 are non-executive
directors of the Company.
Each member of the Committee has one vote with the Committee
Chairman having the casting vote. The Company Secretary also acts
as Secretary to the Committee.
Activities of the Valuation Committee
The Committee meets at least twice a year and has met twice in
the financial period.
To begin, the Committee selected a panel of external independent
third party valuation firms suitably qualified to value the Company
property assets. The Committee then chose one firm from the panel
and recommended its appointment to the Board, which recommendation
was endorsed. It was further agreed that this appointment be
rotated at intervals of not more than three years.
Accordingly, Lisney was appointed the Company's independent
external valuer for the first three year rotation period. The
Committee satisfied itself as to the qualification and resources
available to the valuer to conduct their valuations whilst ensuring
that there is no conflict of interest.
The Committee has met with the independent valuer to agree the
scope and terms of engagement. It has been agreed that in
conducting their valuations, the valuer will physically inspect all
properties and review the relevant legal title of the properties to
assist in determining their value. The Committee also met with the
valuer to review the valuation process, to discuss matters which
might be relevant to the valuation process, and to identify any
relevant material judgements.
The Committee also met with the valuer to discuss and consider
the interim and financial period end valuations before formally
adopting them and recommending their acceptance to the Board of
Directors. As part of this exercise the Committee worked closely
with the Audit Committee to ensure the valuations, and their
principal assumptions, are properly recorded in the financial
statements.
The Committee is satisfied that it was provided with adequate
management, legal, secretarial and other resources to effectively
carry out its duties in addition to having unrestricted access to
the Company's records and the valuer.
On behalf of the Valuation Committee
Brian Owens
23 April 2019
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF YEW GROVE REIT
PLC
Report on the audit of the financial statements
Opinion on the financial statements of Yew Grove REIT PLC (the
'company')
In our opinion the group and company financial statements:
-- give a true and fair view of the assets, liabilities and
financial position of the group and company as at 31 December 2018
and of the profit of the group for the financial period then ended;
and
-- have been properly prepared in accordance with the relevant
financial reporting framework and, in particular, with the
requirements of the Companies Act 2014.
The financial statements we have audited comprise:
The group financial statements:
-- the Consolidated Statement of Comprehensive Income;
-- the Consolidated Statement of Financial Position;
-- the Consolidated Statement of Changes in Equity;
-- the Consolidated Statement of Cash Flow; and
-- the related notes 1 to 28, including a summary of significant
accounting policies as set out in note 1.
The company financial statements:
-- the Company Statement of Financial Position;
-- the Company Statement of Changes in Equity;
-- the Company Statement of Cash Flow; and
-- the related notes 1 to 28, including a summary of significant
accounting policies as set out in note 1.
The relevant financial reporting framework that has been applied
in the preparation of the group financial statements is the
Companies Act 2014 and International Financial Reporting Standards
(IFRS) as adopted by the European Union ("the relevant financial
reporting framework").
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable
law. Our responsibilities under those standards are described below
in the "Auditor's responsibilities for the audit of the financial
statements" section of our report.
We are independent of the group and parent company in accordance
with the ethical requirements that are relevant to our audit of the
financial statements in Ireland, including the Ethical Standard
issued by the Irish Auditing and Accounting Supervisory Authority,
as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
---------------------------------------------------------------------------
Key audit matters The key audit matters that we identified in
the current year were:
* Valuation of investment property
* Completeness and accuracy of rental income
-------------------------------------------------------
Materiality The materiality that we used in the current
year was EUR0.75 million which was determined
on the basis of 1% of group net assets.
-------------------------------------------------------
Scoping We focused our audit scope, and the extent of
our testing, based on our assessment of the
risks of material misstatement and of the materiality
determined.
-------------------------------------------------------
Significant There is no significant changes to our approach
changes in our as this is the group's first year of audit.
approach
-------------------------------------------------------
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (Ireland) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in preparation of the financial statements is not appropriate;
or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group or parent company's ability to continue to
adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in
our audit of the financial statements of the current financial
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including
those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
Valuation of investment properties
Key audit matter Refer Note 1.5 - Significant accounting judgements,
description estimates and assumptions, Accounting Policy
- Fair value of investment property, and Note
13 - Investment properties.
For the financial year ended 31 December 2018,
the investment properties of the group is EUR77.9
million.
The valuation of the group's investment properties
requires significant judgement to be made by
the Directors taking into consideration advice
from the external valuer and Management. Any
inaccurate inputs or calculations used in the
estimation of fair value could result in a material
misstatement of the financial statements.
-------------------------------------------------------
How the scope We evaluated the design and implementation of
of our audit the controls the Board has implemented over the
responded to valuation of investment properties.
the key audit
matter We considered the basis used by the group for
the valuation of investment properties in light
of the group's valuation policy and the requirements
of IFRS.
We enquired with the external valuer to discuss
and challenge the significant assumptions used
in the valuation process, including estimated
rental value and market based yields, and considered
these assumptions in accordance with available
market data.
We assessed the competence, independence and
integrity of the external valuer.
We compared the recorded value of each investment
property held to the valuation report prepared
by the external valuer and considered any adjustments
made in light of the Group's accounting policies
and the requirements of IFRS.
We performed audit procedures to assess the accuracy
and completeness of information provided to the
external valuers including agreements back to
underlying lease agreements.
-------------------------------------------------------
Key observations We have not identified any issues to bring to
the attention of the Audit Committee.
-------------------------------------------------------
Completeness and accuracy of rental income
Key audit matter Refer to Note 1.6 - Revenue recognition - Rental
description income.
Rental income is recognised over the term of
the lease. Lease incentives granted are recognised
as an integral part of the rental income over
the term of the lease.
Where a rent-free period is included as an incentive
in a lease the rental income foregone is allocated
evenly over the period from the first day of
the lease to the earliest termination date of
the lease.
During the period ended 31 December 2018, the
group has recognised net rental income of EUR2.8
million.
We focused on this area due to the significance
of the balances and
as the group has a manual process for the calculation
of rental income.
-------------------------------------------------------
How the scope We considered the group's accounting policy in
of our audit respect of revenue recognition and were satisfied
responded to that it is in accordance with applicable accounting
the key audit standards and that it has been consistently applied
matter throughout the year.
We obtained an understanding of the controls
in place over the accounting for rental income.
We recalculated our expectation of rental income
recognised in the group consolidated financial
statements based on the lease agreements taking
into consideration rent-free periods, if any.
We compared our expectation to what is included
in the financial statements and obtained explanations
for any differences above threshold.
We ensured that the group is entitled to the
rental income recognised in the group consolidated
financial statements.
-------------------------------------------------------
Key observations We have not identified any issues to bring to
the attention of the Audit Committee.
-------------------------------------------------------
Our audit procedures relating to these matters were designed in
the context of our audit of the financial statements as a whole,
and not to express an opinion on individual accounts or
disclosures. Our opinion on the financial statements is not
modified with respect to any of the risks described above, and we
do not express an opinion on these individual matters.
Our application of materiality
We define materiality as the magnitude of misstatement that
makes it probable that the economic decisions of a reasonably
knowledgeable person, relying on the financial statements, would be
changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our
work.
We determined materiality for the group to be EUR750,000 which
is approximately 1% of the group net assets. We have considered the
net assets to be the critical component for determining materiality
because it is one of the principal benchmarks within the Financial
Statements relevant to members of the Company in assessing
financial performance. We have considered quantitative and
qualitative factors such as understanding the company and its
environment, complexity of the company and the reliabity of control
environment.
We agreed with the Audit Committee that we would report to them
any audit differences in excess of EUR37,500, as well as
differences below that threshold which, in our view, warranted
reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group
level.
In establishing the overall approach to our group audit, we
assessed the risk of material misstatement, taking into account the
nature, likelihood and potential magnitude of any misstatement.
Following this assessment, we applied professional judgement to
determine the extent of testing required over each balance in the
financial statements.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the Annual
Report and Consolidated Financial Statements, other than the
financial statements and our auditor's report thereon. Our opinion
on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the Directors' Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view and otherwise comply with the Companies Act 2014, and
for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group and parent company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group and parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (Ireland) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs (Ireland), we
exercise professional judgment and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the group and parent company's internal
control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the group and
parent company's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to
draw attention in our auditor's report to the related disclosures
in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of the auditor's report. However,
future events or conditions may cause the entity (or where
relevant, the group) to cease to continue as a going concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the business activities within the group
to express an opinion on the (consolidated) financial statements.
The group auditor is responsible for the direction, supervision and
performance of the group audit. The group auditor remains solely
responsible for the audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that the auditor identifies during the
audit.
For listed entities and public interest entities, the auditor
also provides those charged with governance with a statement that
the auditor has complied with relevant ethical requirements
regarding independence, including the Ethical Standard for Auditors
(Ireland) 2016, and communicates with them all relationships and
other matters that may be reasonably be thought to bear on the
auditor's independence, and where applicable, related
safeguards.
Where the auditor is required to report on key audit matters,
from the matters communicated with those charged with governance,
the auditor determines those matters that were of most significance
in the audit of the financial statements of the current period and
are therefore the key audit matters. The auditor describes these
matters in the auditor's report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare
circumstances, the auditor determines that a matter should not be
communicated in the auditor's report because the adverse
consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
This report is made solely to the company's members, as a body,
in accordance with Section 391 of the Companies Act 2014. Our audit
work has been undertaken so that we might state to the company's
members those matters we are required to state to them in an
auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Report on other legal and regulatory requirements
Opinion on other matters prescribed by the Companies Act
2014
Based solely on the work undertaken in the course of the audit,
we report that:
-- 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 parent company
were sufficient to permit the financial statements to be readily
and properly audited.
-- The company balance sheet are in agreement with the accounting records.
-- In our opinion the information given in the directors' report
is consistent with the financial statements and the directors'
report has been prepared in accordance with the Companies Act
2014.
Corporate Governance Statement
We report, in relation to information given in the Corporate
Governance Statement that:
-- In our opinion, based on the work undertaken during the
course of the audit, the information given in the Corporate
Governance Statement pursuant to subsections 2(c) of section 1373
of the Companies Act 2014 is consistent with the company's
statutory financial statements in respect of the financial year
concerned and such information has been prepared in accordance with
the Companies Act 2014.
Based on our knowledge and understanding of the company and its
environment obtained in the course of the audit, we have not
identified any material misstatements in this information.
-- In our opinion, based on the work undertaken during the
course of the audit, the Corporate Governance Statement contains
the information required by Regulation 6(2) of the European Union
(Disclosure of Non-Financial and Diversity Information by certain
large undertakings and groups) Regulations 2017 (as amended);
and
-- In our opinion, based on the work undertaken during the
course of the audit, the information required pursuant to section
1373(2)(a),(b),(e) and (f) of the Companies Act 2014 is contained
in the Corporate Governance Statement.
Matters on which we are required to report by exception
Based on the knowledge and understanding of the group and the
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
directors' report.
We have nothing to report in respect of the provisions in the
Companies Act 2014 which require us to report to you if, in our
opinion, the disclosures of directors' remuneration and
transactions specified by law are not made.
Matthew Foley
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House, Earlsfort Terrace, Dublin 2
23 April 2019
Consolidated Statement of Financial Position
As at 31 December 2018
As at
31 December
2018
Notes EUR
Non-current assets
Investment properties 13 77,915,000
Interest in joint venture 14 3,473
--------------
77,918,473
Current assets
Trade and other receivables 16 565,100
Cash and cash equivalents 15 4,823,734
Total current assets 5,388,834
Total assets 83,307,307
Current liabilities
Trade and other payables 17 (2,333,729)
Non-current liabilities
Borrowings 18 (5,840,398)
--------------
Total liabilities (8,174,127)
--------------
Net assets 75,133,180
==============
Equity
Share capital 19 750,000
Share premium 20 4,000,000
Retained earnings 20 70,383,180
--------------
Total equity 75,133,180
==============
IFRS Net asset value per ordinary share (cents) 12 100.18
EPRA Net asset value per ordinary share (cents) 12 100.18
Diluted IFRS asset value per ordinary share 12 100.18
(cents)
The Consolidated financial statements were approved by the Board
of Directors on 23 April 2019 and were signed on its behalf by:
Charles Peach Jonathan Laredo
Chief Financial Officer Chief Executive Officer
23 April 2019
Consolidated Statement of Comprehensive Income
For the financial period from 5 April 2018 (date of
incorporation) to 31 December 2018
Period ended
31 December 2018
Notes EUR
Total Revenue
Revenue 2 2,764,695
Property expenses 3 (204,351)
--------------
Net Revenue 2,560,344
Fair value gains on investment properties 4 1,609,126
--------------
Total income after revaluation gains and
losses 4,169,470
Expenditure
AIFM fees 5 (70,378)
Goodwill 6 (180,011)
Finance costs 7 (15,412)
Administration expenses 8 (1,568,725)
--------------
Total expenditure (1,834,526)
Share of result from joint venture 14 3,473
Profit before taxation 2,338,417
Income tax 10 (4,538)
Profit for the financial period 20 2,333,879
--------------
Total comprehensive income for the financial
period attributable to the owners of the
Group 2,333,879
==============
Basic and diluted earnings per share (cent) 11 4.08
Consolidated Statement of Changes in Equity
For the financial period from 5 April 2018 (date of
incorporation) to 31 December 2018
Share capital
account Share premium Retained Total
Notes earnings equity
--------------------------
EUR EUR EUR EUR
-------------------------- ------------- ----------------- ---------------------- -------------- ------------
Total comprehensive
income
for the period: - - 2,333,879 2,333,879
Transactions with owners
recognised in equity:
Issue of ordinary share
capital 750,000 74,250,000 - 75,000,000
Transfer to retained
earnings 20 - (70,250,000) 70,250,000 -
Issue costs - - (2,200,699) (2,200,699)
----------------- ---------------------- -------------- ------------
As at 31 December 2018 750,000 4,000,000 70,383,180 75,133,180
================= ====================== ============== ============
Consolidated Statement of Cash Flow
Period ended
31 December
2018
Notes EUR
----------------------------------------------- ------ ---------------
Cash flows from operating activities
Profit before taxation 2,338,417
Adjustments for:
Fair value gains on investment properties 4 (1,609,126)
Share of profit in joint venture 14 (3,473)
Finance costs 7 15,412
Goodwill 6 180,011
Increase in trade and other receivables (147,502)
Decrease in trade and other payables 974,402
Corporation Tax paid (6,606)
---------------
Net cash inflow from operating activities 1,741,535
Cash flows from investing activities
Purchase of investment properties and
development expenses 13 (50,395,874)
---------------
Net cash outflow from investing activities (50,395,874)
Cash flows from financing activities
Proceeds from the issue of ordinary
share capital 19 75,000,000
Redemption of Class A shares in Yew
Tree Investment Fund(1) (23,064,484)
Issue costs (2,200,699)
Proceeds from loans and borrowings 18 6,199,540
Loan repayment (2) 23 (8,329,422)
Net cash acquired from subsidiary undertaking 23 5,873,138
---------------
Net cash inflow from financing activities 53,478,073
Net increase in cash and cash equivalents 15 4,823,734
---------------
Cash and cash equivalents at the end
of the period 15 4,823,734
===============
For the financial period from 5 April 2018 (date of
incorporation) to 31 December 2018
(1) On 8 June 2018 all of the Yew Tree Investment Fund (in
Members Voluntary Liquidation) Class A shares were redeemed.
(2) On 8 June 2018 the Company subscribed to 8,329,422 EUR1 B
ordinary shares for EUR8,329,422, the EUR8,329,422 proceeds were
used to fully repay the Yew Tree Investment Fund's (in Members
Voluntary Liquidation) outstanding loan subsequent to
acquisition.
Company Statement of Financial Position
As at 31 December 2018
As at
31 December 2018
EUR
Notes
Non-current assets
Investment properties 13 77,915,000
77,915,000
Current assets
Trade and other receivables 16 562,976
Cash and cash equivalents 15 4,364,045
-----------------
Total current assets 4,927,021
-----------------
Total assets 82,842,021
Current liabilities
Trade and other payables 17 (2,099,951)
Non-current liabilities
Borrowings 18 (5,840,398)
-----------------
Total liabilities (7,940,349)
Net assets 74,901,672
=================
Equity
Share capital 19 750,000
Share premium 20 4,000,000
Retained earnings 20 70,151,672
-----------------
Total equity 74,901,672
=================
The Company reported a profit of EUR2,102,371 for the financial
period from 5 April 2018 (date of incorporation) to 31 December
2018.
The Consolidated financial statements were approved by the Board
of Directors on 23 April 2019 and were signed on its behalf by:
Charles Peach Jonathan Laredo
Chief Financial Officer Chief Executive Officer
23 April 2019
Company Statement of Changes in Equity
For the financial period from 5 April 2018 (date of
incorporation) to 31 December 2018
Share capital
account Share premium Retained Total
Notes earnings equity
--------------------------
EUR EUR EUR EUR
-------------------------- ------------- ----------------- ---------------------- -------------- ------------
Total comprehensive
income
for the period: - - 2,102,371 2,102,371
Transactions with owners
recognised in equity:
Issue of ordinary share
capital 750,000 74,250,000 - 75,000,000
Transfer to retained
earnings 20 - (70,250,000) 70,250,000 -
Issue costs - - (2,200,699) (2,200,699)
----------------- ---------------------- -------------- ------------
As at 31 December 2018 750,000 4,000,000 70,151,672 74,901,672
================= ====================== ============== ============
Company Statement of Cash Flow
For the financial period from 5 April 2018 (date of incorporation)
to 31 December 2018
Period ended
31 December
2018
Notes EUR
--------------------------------------------------- ------ ---------------
Cash flows from operating activities
Profit before taxation 2,102,371
Adjustments for:
Fair value gains on investment properties 4 (1,609,126)
Finance costs 7 15,412
Increase in trade and other receivables (403,622)
Increase in trade and other payables 1,725,397
Net cash inflow from operating activities 1,830,432
Cash flows from investing activities
Purchase of investment properties and development
expenses 13 (50,395,874)
Purchase of shares in subsidiary(1) (26,069,354)
---------------
Net cash outflow from investing activities (76,465,228)
Cash flows from financing activities
Proceeds from the issue of ordinary share
capital 75,000,000
Issue costs(2) (2,200,699)
Proceeds from loans and borrowings 18 6,199,540
Net cash inflow from financing activities 78,998,841
Net increase in cash and cash equivalents 15 4,364,045
---------------
Cash and cash equivalents at the end of
the period 15 4,364,045
===============
(1) In relation to the purchase of shares in subsidiary, on 8
June 2018 all of the Yew Tree Investment Fund (in Members Voluntary
Liquidation) Class A shares were redeemed following the issue of
Class B shares.
(2) Issue costs represent the Company's contribution to costs of
issuing ordinary share capital for the financial period.
1. Accounting policies
1.1 General information
Yew Grove REIT plc (the "Company", registered number 623896),
together with entities controlled by the Company (its subsidiaries)
(together the "Group"), is engaged in investing in a diversified
portfolio of Irish commercial property with a view to maximising
its shareholder returns.
The Company is a public limited company, incorporated and
domiciled in Ireland. The registered address of the Company is 4th
Floor, 76 Lower Baggot Street, Dublin 2.
The ordinary shares of the Company were admitted to trading on
the Euronext Growth market (formerly the Enterprise Securities
Market) of Euronext Dublin and the Alternative Investment Market of
the London Stock Exchange on 8 June 2018.
1.2 Trading period
The Consolidated financial statements for the Group shown herein
are for the financial period from 5 April 2018 (date of
incorporation) to 31 December 2018.
The results are inclusive of the parent company (Yew Grove REIT
plc) and its subsidiary companies controlled by the Company as
disclosed in note 1.11 during the financial period from 5 April
2018 (date of incorporation) to 31 December 2018.
1.3 Going concern
The Group raised EUR75m, excluding issue costs, from an equity
placement on 8 June 2018 and deployed the majority of these funds
through: (i) subscription for the entire share capital of the Yew
Tree Investment Fund (in Members Voluntary Liquidation) on 8 June
2018 and (ii) direct purchase of Irish commercial property. The
Group's funds were employed to generate stable income streams from
majority tenanted Irish commercial properties (primarily office and
industrial property) that have the potential for income and capital
appreciation. As at 31 December 2018 the Group held EUR4.8m in cash
that had not been invested in or committed to acquire property.
Based on financial projections which extend beyond twelve months
from the date of the approval of this report, the Directors
consider that the Company and Group has adequate resources to
continue in operational existence for the foreseeable future. For
this reason, the Directors have concluded that they should prepare
the consolidated and company financial statements on a going
concern basis.
1.4 Basis of preparation
The Consolidated financial statements of the Group for the
financial period 5 April 2018 (date of incorporation) to 31
December 2018 have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), as adopted by the European
Union ("EU") and the Companies Act 2014.
The Consolidated financial statements have been prepared on the
historical cost basis, except for investment properties that are
measured at fair value.
The Consolidated financial statements are presented in Euro,
which is the Group's functional currency and the Group's
presentational currency.
Standards not affecting the reported results and financial
position
IASB and IFRIC have issued the following standards and
interpretations with an effective date after the date of these
Consolidated financial statements:
International Accounting Standards (IAS / IFRSs) Effective
date
IFRS 16 - Leases 1 January
2019
IFRS 17- Insurance Contracts 1 January
2021
IFRIC 23 - Uncertainty over Income Tax Treatments 1 January
2019
Amendments to IAS 28 - Long-term Interests in 1 January
Associates and Joint Ventures 2019
Annual Improvements to IFRS Standards 2015-2017 1 January
Cycle 2019
Amendments to IAS 19 - Plan Amendment, Curtailment 1 January
or Settlement 2019
Amendments to References to the Conceptual Framework 1 January
in IFRS Standards 2020
Amendments to IFRS 9 - Prepayment Features with 1 January
Negative Compensation 2019
Amendments to IFRS 3 - Definition of a business 1 January
2020
Amendments to IAS 1 and IAS 8 - Definition of 1 January
material 2020
Management are of the view that the initial adoption of any of
the above will not materially change financial performance or the
reported position of the Group.
1.5 Significant accounting judgements, estimates and
assumptions
The preparation of the Group's Consolidated financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets,
liabilities and the disclosure of contingent liabilities, at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of the assets or liabilities
affected in future periods.
In the process of applying the Company's and Group's accounting
policies, management has made the following judgements, which have
the most significant effect on the amounts recognised in the
Consolidated financial statements:
a) Significant judgements
The following are the significant judgements, apart from those
involving estimations (which are presented separately below), that
the directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the
Consolidated financial statements.
Operating lease contracts - the Group as lessor
The Group has acquired investment properties which are subject
to commercial property leases and licence with tenants. The Group
has determined, based on an evaluation of the terms and conditions
of the arrangements, particularly the duration of the lease terms
and minimum lease payments, that it retains all the significant
risks and rewards of ownership of these properties and so accounts
for these leases as operating leases.
Fair value
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
For financial reporting purposes, fair value measurements are
categorised into Level 1, 2 or 3 based on the degree to which
inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurements in its
entirety, which are described as follows:
i. Fair value hierarchy applied
a. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
b. Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
c. Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
ii. Property is treated as acquired or disposed of when the
significant risks and rewards of ownership have been assumed or
relinquished by the Group. This occurs when:
a. it is probable that the future economic benefits that are
associated with the property will flow to the Group;
b. there are no material conditions which could affect completion of the acquisition; and
c. the cost of the investment property can be measured reliably.
iii. Additions to property consist of construction,
re-development, refurbishment and other directly attributable costs
such as professional fees and expenses and capitalised interest
where applicable.
iv. Property is initially measured at cost including related
acquisition costs, and subsequently valued by the Group's Valuers
at its respective fair value at each reporting date (30 June and 31
December). The difference between the fair value of a property at
the reporting date and its carrying value prior to the external
valuation is recognised in the Consolidated Statement of
Comprehensive Income as a fair value gain or loss.
Control
The IFRS 10 control model focuses on whether the Group has power
over an investee, exposure or rights to variable returns from its
involvement with the investee, and ability to use its power to
affect those returns. In particular, IFRS 10 requires the Group to
consolidate investees that it controls on the basis of de facto
control. In accordance with IFRS 10, the Group's assessment of
control is performed on a continuous basis and the Group reassesses
whether it controls an investee if facts and circumstances indicate
that there are changes to one or more of the elements of the
control model.
a) Analysis of sources of estimation uncertainty
The key future assumptions, and other key sources of estimation
uncertainty for the reporting period that may have a significant
risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed
below.
Fair value of investment property
The market value of investment property ("property") would
normally be determined by a real estate valuation expert to be the
estimated amount for which a property should exchange on the date
of the valuation in an arm's length transaction. Properties are
valued on an individual basis.
The valuation of the Group's properties as at 31 December 2018
was completed by Lisney Limited ("Lisney") as external independent
Valuer. Lisney prepared the valuation on the basis of market value
in accordance with the Royal Institution of Chartered Surveyors
("RICS") Valuation - Global Standards (June 2017). Their valuation
was subsequently reviewed by the Valuation Committee.
The Group's investment properties will next be valued by the
Group's Valuers as at 30 June 2019. The valuers will continue to
use recognised valuation techniques and the principles of IFRS 13
for the valuation as at 30 June 2019 and 31 December 2019. Refer to
note 13 for further disclosure on the recognised valuation
techniques.
The Board's Valuation Committee conducts a detailed review of
each property valuation, the underlying valuation assumptions and
the valuation process used by the valuer to ensure that valuation
assumptions are valid and have been applied as set out below.
Property valuations are complex and involve data which is not
publicity available and a degree of judgement. Each valuation is
based upon key assumptions, particularly estimated rental values
and market-based yields. The valuation approach to on-going
developments and material refurbishments is on a residual basis and
factors such as the assumed timescale, the assumed future
development costs and an appropriate finance and/or discount rate
are used to determine the property value together with market
evidence and recent comparable properties where appropriate.
The Directors are satisfied that the valuations of the Group's
properties are appropriate for inclusion in the Consolidated
financial statements. The fair value of the Group's properties
accurately reflects the valuation provided by Lisney. The valuation
is based on the future cashflows from rental income both for the
current lease period and future estimated rental values, adjusted
for expected void periods and appropriate discount rates.
Calculation of loss allowance
When measuring expecting credit loss ("ECL") the Group uses
reasonable and supportable forward-looking information, which is
based on assumptions for the future movement of different economic
drivers and how these drivers will affect each other. Loss given
default is an estimate of the loss arising on default. It is based
on the difference between the contractual cash flows due and those
that the lender would expect to receive, taking into account cash
flows from collateral and integral credit enhancements.
Probability of default constitutes a key input in measuring ECL.
Probability of default is an estimate of the likelihood of default
over a given time horizon, the calculation of which includes
historical data, assumptions and expectations of future
conditions.
1.6 Revenue recognition
The Group's main source of revenue is the leasing and licensing
of properties. Lease and licence revenue is recognised over the
period of the lease or licence contracts. Rental income is
recognised as revenue at the time and amount governed by the lease
or licence in place with the customer.
The Group recognised revenue from the following major
activities:
-- Rental income from the Group's investment properties;
-- License income from licencing of the Group's car park spaces.
-- Service charge income from contributions received from
tenants relating to property expenses.
Revenue is measured based on the consideration to which the
Group's expects to be entitled in a contract with a customer and
excludes amounts collected on behalf of third parties.
Rental income
The Group receives rental income from tenants under leases
associated with the Group's properties. Rental income is recognised
over the term of the lease. Lease incentives granted are recognised
as an integral part of the rental income over the term of the
lease.
Where a rent-free period is included as an incentive in a lease
the rental income foregone is allocated evenly over the period from
the first day of the lease to the earliest termination date of the
lease. Where a lease incentive takes the form of an incentive
payment to a tenant the resultant cost is amortised evenly over the
remaining life of the lease to its earliest termination date. The
sum of unamortised incentives is included in trade and other
receivables and is released over the term of the relevant leases.
Lease adjustments such as rent reviews are included when the rent
review or adjustment has been completed and agreed with the
tenant.
License income
License income represents amounts under licences receivable from
tenants associated with the licensing of the Group's car park
spaces. License income is recognised over the term of the license.
License adjustments such as reviews or extensions are included when
the licence review, extension or adjustment has been completed and
agreed with the tenant.
Service charge income
Service charge income from tenants are recognised as revenue in
the period in which the related expenditure is incurred.
1.7 Direct lease costs
Direct lease costs incurred in the negotiation and arrangement
of new leases to tenants are initially capitalised and are then
recognised as an expense over the period from the date of the lease
to the earliest termination date of the lease.
There were no direct lease costs capitalised during the
financial period.
1.8 Finance income and finance costs
The Group's finance income and finance costs include interest
income, interest expense, commitment fees and related charges.
Interest income or expense is recognised using the effective
interest method. The effective interest rate is the rate that
exactly discounts estimated future cash receipts (including all
fees and costs paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the debt instrument, or,
where appropriate, a shorter period, to the net carrying amount on
initial recognition.
1.9 Taxation
Current tax
The Company elected for Real Estate Investment Trust ("REIT")
status on 21 May 2018 and following the acquisition of the entire
share capital of the Yew Tree Investment Fund (in Members Voluntary
Liquidation) gave notice to Revenue that it was the principal
company of a group REIT. An Irish REIT or group REIT will not pay
Irish corporation tax on profits and gains from its Property Rental
Business. Corporation tax will still apply in the normal way in
respect of its Residual Business which may include certain trading
activities incidental to letting, letting of administrative
property which is temporarily surplus to requirements, and certain
income such as dividends from other Irish REITs. Corporation tax
may also be payable in respect of profits arising in joint venture
or co-investment arrangements where no REIT election has been made
(or on the non-REIT proportion of the profits of joint ventures
where an Irish REIT election has been made) and also where a member
of a group or an interest in an investment vehicle (as opposed to
property involved in the Property Rental Business) is sold. Other
taxes such as VAT, stamp duty, local property tax and payroll taxes
will also still apply in the normal way.
1.10 Financial instruments
Financial assets and liabilities are recognised when a Group
entity becomes a party to the contractual provisions of the
instruments.
Financial assets and liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and liabilities (other
than financial assets or liabilities at fair value through profit
or loss) are added to or deducted from the fair value of the
financial assets or liabilities, as appropriate, on initial
recognition. Transaction costs attributable to the acquisition of
financial assets or liabilities at fair value through profit or
loss are recognised immediately in the Consolidated Statement of
Comprehensive Income.
i. Cash and cash equivalents
Cash and cash equivalents include cash balances and call
deposits with maturities of three months or less from the
acquisition date that are subject to an insignificant risk of
changes in their fair value and are used by the Group in the
management of its short-term commitments.
ii. Trade and other receivables and trade and other payables
Trade receivables include amounts due from tenants. Other
receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
Trade and other payables include amounts due to third party
suppliers and prepaid rent amounts received from tenants in
advance.
Trade and other receivables and trade and other payables are
initially measured at fair value and subsequently measured at
amortised cost using the effective interest rate method. The Group
applies the simplified approach to trade receivables for which
expected credit loss uses the lifetime expected credit allowance.
The Group has no material exposure to bad debts as the majority of
the Group's rental income is from State bodies or FDI entities as
they have good credit standing. The payment and credit performance
of these tenants is closely monitored; therefore, the expected
credit loss is not material and has not been presented. Where there
is evidence of credit loss appropriate allowances are recognised as
bad debts in the Statement of Comprehensive income.
iii. Loans and borrowings
Loans are initially recorded at fair value plus transaction
costs. They are subsequently accounted for at amortised cost.
1.11 Investment
Investments held as fixed assets are stated at fair value.
Income from other investments together with any related taxation is
recognised in the Consolidated Statement of Comprehensive Income in
the year in which it is receivable.
Basis for consolidation
The Consolidated financial statements include the financial
statements of the holding company (Yew Grove REIT plc) and all
subsidiary companies as at 31 December 2018. Control is achieved
when the Company has the power over the investee, exposure, or
rights, to variable returns from its involvement with the investee
and the ability to use its power over the investee to affect the
amount of the investor's returns. The results of subsidiaries
acquired or disposed of during the financial period are included in
the Consolidated Statement of Comprehensive Income from the
effective date of control or to the effective date of loss of
control as appropriate. All intragroup transactions, assets and
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation. Upon acquisition of a business, fair values are
attributed to the identifiable net assets acquired. The Group's
accounting policy in relation to goodwill is set out in note
1.18.
Details of the subsidiaries acquired during the financial period
are as follows;
Name of subsidiary Registered Address/Country Nature of the Investment Votes controlled
of Incorporation business by the Company
Yew Tree Investment
Fund (in Member
Voluntary
Liquidation)
(Consolidated
up to the
date of loss Ashley house, Qualifying Investor
of control Morehampton Road, Alternative 100% Class
- 27 July Donnybrook, Dublin Investment Fund. B ordinary
2018) 4, Ireland Property investment shares 100%
---------------------------- ---------------------- --------------- -----------------
Gateway Estate 2(nd) Floor, River Company Limited 0% Membership 99% of voting
Management House, East Wall by Guarantee. rights
Company Limited Road, Dublin 3, Management of
by Guarantee Ireland common areas
(Consolidated
Subsidiary
at the financial
reporting
date)
---------------------------- ---------------------- --------------- -----------------
Yew Tree Investment Fund plc (in Members Voluntary
Liquidation)
The Consolidated financial statements include the results of Yew
Tree Investment Fund (in Members Voluntary Liquidation) from the
date of acquisition of 8 June 2018 to the date of loss of control
27 July 2019 following the appointment of a liquidator.
At the Statement of Financial Position date, the liquidation of
Yew Tree Investment Fund (in Members Voluntary Liquidation) had yet
to be fully completed.
1.12 Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The cost of the acquisition is
measured at the aggregate of the fair values, at the date of
exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of
the acquire. Acquisition-related costs are recognised in the
Consolidated Statement of Comprehensive Income as incurred.
1.13 Investments in Joint Ventures
A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets
of the joint arrangement. Joint control is the contractually agreed
sharing of control of an arrangement, which exits only when
decisions about the relevant activities require unanimous consent
of the parties sharing control.
The results and assets and liabilities of joint ventures are
incorporated in these Consolidated financial statements using the
equity method of accounting, except when the investment is
classified as held for sale, in which case it is accounted for in
accordance with IFRS 5.
An investment in a joint venture is accounted for using the
equity method from the date on which the investee becomes a joint
venture.
1.14 Foreign currency
Monetary assets and liabilities denominated in foreign
currencies are translated at the rates of exchange ruling at the
Statement of Financial Position date. Non-monetary items that are
measured in terms of historical cost in a foreign currency are
translated at the rates of exchange ruling at the date of the
transaction. Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange rate at the
date when the fair value was determined. The resulting exchange
differences are dealt with in the Consolidated Statement of
Comprehensive Income.
1.15 Borrowing cost
Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset (a qualifying
asset is one that necessarily takes a substantial period of time to
get ready for its intended use or sale) are included in the cost of
the asset. All other borrowing costs are recognised in the
Consolidated Statement of Comprehensive Income in the period in
which they are incurred.
1.16 Pension
Annual contributions payable to the Group's pension scheme are
charged to the Consolidated Statement of Comprehensive Income in
the period to which they relate.
1.17 Share issue cost
Costs directly attributable to issuing new shares are deducted
from retained earnings net of any related tax deduction. All other
costs are recognised in the Consolidated Statement of Comprehensive
Income in the period in which they are incurred.
1.18 Goodwill
Goodwill arising on the acquisition of a subsidiary is
recognised as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of the sum of
the consideration transferred and the fair value of the acquirer's
previously-held equity interest (if any) in the entity over the net
fair value of the identifiable net assets recognised.
Goodwill is not amortised but is reviewed for impairment at
least annually. Any impairment loss is recognised immediately in
the Consolidated Statement of Comprehensive Income and is not
subsequently reversed. Any gain on a bargain purchase is recognised
in the statement of comprehensive income immediately.
1.19 Segmental information
The directors have considered the requirements of IFRS 8
'Operating Segments'. The Group's investments are commercial
properties in the Republic of Ireland. The financial information on
a property by property basis is provided to senior management of
the Group, who collectively comprise the chief operating decision
makers.
Properties are not aggregated by type or location for reporting
purposes, the properties are managed and reported on for the Group
to the Board of Directors collectively as a single portfolio.
Collectively the properties have similar characteristics and
therefore, the Directors are of the opinion that the Group is
currently engaged in a single segment business, being investment in
commercial property in the Republic of Ireland.
Revenue as stated in the Consolidated Statement of Comprehensive
Income relates to rental income from its investment in commercial
properties held by the Group, license income from the licensing of
the Group's car park spaces and service charges received by its
subsidiary management companies. The profit or loss and total
assets and liabilities of the Group are from its single segment
business.
Major Customers
Included in gross rental income are rents of EUR1.3m which arise
from the Group's three largest tenants, each of which contributed
more than 10% of the Group's revenue. No other single tenant
contributed more than 10% of the Group's revenue in 2018.
1.20 Impairment of financial assets
The Group applies a three-stage expected credit loss model
("ECL") in relation to the impairment of its financial assets
carried at amortised cost except for trade receivables for which
the simplified approach is applied in accordance with IFRS 9. The
ECL is used to account for expected credit losses and changes in
those ECL at each reporting date to reflect changes in credit risk
since initial recognition of the financial assets.
The expected credit loss is charged against the respective
financial asset and recognised in the Consolidated Statement of
Comprehensive income.
The three stages that determine the amount of impairment to be
recognised as expected credit losses at each reporting date are as
follows:
i. Stage 1: Credit risk has not increased significantly since
initial recognition - recognised 12 months ECL;
ii. Stage 2: Credit risk has increased significantly since
initial recognition - recognise lifetime ECL;
iii. Stage 3: Financial asset is credit impaired - recognise lifetime ECL.
The 12 months ECL is calculated by multiplying the probability
of a default occurring in the next 12 months by the total
(lifetime) ECLs that would result from that default. Lifetime
expected credit losses are the present value of expected credit
losses that arise if a borrower defaults on its obligation at any
point throughout the terms of the financial asset.
Definition of default
The Group considers the following as constituting events of
default for internal credit risk management purposes as experience
indicates that financial assets that meet the following criteria
are generally not recoverable:
i. When there is a breach of financial covenants by the debtor; and
ii. Information developed internally or obtained from external
sources indicates that the debtor is unlikely to pay its creditors,
including the Group, in full (without taking into account any
collateral held by the Group).
Write off
The Group writes off a financial asset when there is information
indicating that the debtor is in severe financial difficulty and
there is no realistic prospect of recovery.
2. Revenue
Period ended
31 December 2018
EUR
------------------------ ------------------
Gross rental income 2,556,944
License income 56,789
Service charge income 150,962
------------------------ ------------------
Net rental income 2,764,695
------------------------ ------------------
Gross rental income represents amounts receivable from tenants
under leases associated with the Group's property business. License
income represents amounts under licences receivable from tenants
associated with the licensing of the Group's car park spaces.
Service charge income relates to contributions from tenants of the
Group's buildings for property expenses of the occupied buildings.
Service charge income receivable from tenants is recognised as
revenue in the period in which the related expenditure is
recognised.
3. Property expenses
Period ended
31 December 2018
EUR
------------------------- ------------------
Service charge expenses 157,581
Direct property costs 32,100
Car park costs 14,670
------------------------- ------------------
Total 204,351
------------------------- ------------------
Property expenses include service charges and other costs
directly recoverable from tenants, and non-recoverable costs
directly attributable to the Group's properties. Service charge
expenses typically include security, insurance, maintenance and
other costs of managing the buildings due from and recharged to
tenants.
4. Fair value gains on investment properties
Period ended
31 December 2018
EUR
------------------------------------------- ------------------
Fair value gains on investment properties 1,609,126
------------------------------------------- ------------------
Total 1,609,126
------------------------------------------- ------------------
5. AIFM Fees
Period ended
31 December
2018
EUR
----------- -------------
AIFM Fees 70,378
----------- -------------
Total 70,378
----------- -------------
The Company is required, as a REIT, to have an alternative
investment fund manager ("AIFM"). The Company has agreed with
Ballybunion Capital, an AIFM authorised by the Central Bank of
Ireland, for it to act as the external AIFM of the Group, subject
to overall supervision of the AIFM by the Board. The fees above are
fees paid to the AIFM in accordance with the service level
agreement between the AIFM and the Company.
6. Goodwill
Period ended
31 December 2018
EUR
----------------------- -----------------
Impairment of goodwill 238,750
Negative goodwill (58,739)
----------------------- -----------------
Total 180,011
----------------------- -----------------
As referred to in note 23, goodwill arose on the acquisition of
100% of the class B ordinary share capital of Yew Tree Investment
Fund (in Members Voluntary Liquidation). The fair value of
unamortised loan facility costs with a book value of EUR238,750
included in trade receivables was estimated to have a recoverable
amount of EURnil at the acquisition date. This gave rise to
goodwill of EUR238,750 at the date of acquisition. The goodwill was
subsequently reviewed for impairment and an impairment charge was
taken to the Statement of Comprehensive Income.
The recoverable amount of the trade receivable and prepayments
was determined based on a level 3 fair value hierarchy. The fair
value was determined based on company only information available at
the date of acquisition.
Goodwill also arose on the acquisition of Gateway Estate
Management Company Limited by Guarantee (refer to note 23) as the
company was acquired on 2 July 2018 for nil consideration following
the acquisition of One and Three Gateway, East Wall Road, Dublin 3.
As nil consideration was paid this resulted in negative goodwill of
EUR58,739 at the date of acquisition. In line with the Groups
accounting policy, negative goodwill of EUR58,739 was taken
directly to the Statement of Comprehensive Income during the
period.
None of the goodwill is expected to be deductible for income tax
purposes.
The carrying value of the Goodwill at the Statement of Financial
Position date was nil.
7. Finance costs
Period ended
31 December
2018
EUR
------------------------------------------ ---------------
Effective interest expense on borrowings 15,412
------------------------------------------ ---------------
Total 15,412
------------------------------------------ ---------------
The effective interest expense on borrowings arises as a result
of the recognition of interest expense, commitment fees and
arrangement fees.
8. Administration expenses
Profit before tax for the financial period has been stated after
charging:
Period ended
31 December 2018
EUR
------------------------------ ------------------
Capital reduction costs 108,667
Staff costs 529,900
Listing expenses 160,329
Property valuation fees 53,639
Property management fees 60,936
Legal and consultancy fees 87,637
Independent accountant fees 73,888
Audit fees 65,000
Liquidation costs 119,589
Other costs 309,140
------------------------------- ------------------
Total 1,568,725
------------------------------- ------------------
Staff costs represents total remuneration and other benefits
paid to all employees and officers for the financial period.
Further information on Directors' remuneration can be found in note
22 to the Consolidated financial statements.
Capital reduction costs relate to the Company's application to
the Court to reduce the amount standing to the credit of the
Company's share premium account by the sum of EUR70,250,000. The
Company's application to the Court was approved on 1 November 2018.
Refer to note 20 for further details
Auditor's remuneration
Period ended
31 December
2018
EUR
------------------------------------------- -------------
Company
Audit of entity financial statements 42,500
Other assurance services 195,000
Tax advisory services -
Other non-audit services -
------------------------------------------- -------------
Company total 237,500
------------------------------------------- -------------
Group
Audit of the Group financial statements 10,000
Other assurance services -
Tax advisory services -
Other non-audit services -
------------------------------------------- -------------
Group total 10,000
------------------------------------------- -------------
Other assurance services include fees paid in respect to the
role of reporting accountant at Admission to trading on AIM and the
Euronext Growth market, review of the Interim Report, and Report on
the Initial Financial Statements.
9. Employment
The Company had no employees prior to Admission (8 June 2018).
The average monthly number of employees (including Directors)
directly employed during the period from incorporation to period
end (5 April 2018 to 31 December 2018) in the Group was 7.
Total employees and officers at financial period end:
31 December
2018
Number
------------------------------ ------------------------------
At financial period end:
Executive Directors 3
Office staff 2
Non-Executive Directors 4
------------------------------ ------------------------------
Total employees and officers 9
------------------------------ ------------------------------
The staff costs for the above employees and officers were:
Period ended
31 December
2018
EUR
---------------------------------------------------------- ---------------
Wages and salaries 421,158
Social insurance cost 23,031
Other benefits - Health insurance 14,445
Pension costs - defined contribution plan 71,266
---------------------------------------------------------- ---------------
Total - all charged to income statement; nil capitalised 529,900
---------------------------------------------------------- ---------------
Staff costs are allocated to administration expenses during the
financial period.
10. Income tax
Current tax: current tax is the expected tax payable or
receivable on the taxable income or loss for the period, using tax
rates enacted at the reporting date, and any adjustment to tax
payable in respect of previous years. Yew Grove REIT plc has
elected for Real Estate Investment Trust ("REIT") status under
section 705E Tax Consolidation Act 1997. As a result, the Group
does not pay Irish corporation tax on the profits and gains from
its qualifying rental business in Ireland provided it meets certain
conditions. With certain exceptions, corporation tax is still
payable in the normal way in respect of income and gains from a
Group's Residual Business, that is its non-property rental
business.
Period ended
31 December
2018
EUR
--------------------------------------------- ---------------
Income tax on residual income -
Current period charge 4,538
--------------------------------------------- ---------------
Income tax expense for the financial period 4,538
--------------------------------------------- ---------------
Reconciliation of the income tax expense for the financial
period
Period ended
31 December
2018
EUR
------------------------------------------------- -------------
Profit before tax 2,338,417
Tax charge on profit at standard rate of 12.5% 292,302
Non-taxable revaluation surplus (201,140)
REIT tax-exempt profits (91,162)
Other (charge on subsidiary undertakings) 4,538
------------------------------------------------- -------------
Income tax expense for the financial period 4,538
------------------------------------------------- -------------
The directors confirm that in their opinion having conducted due
enquiries the Group and the Company have remained in full
compliance with the Irish REIT rules and regulations up to and
including the date of the approval of this report.
11. Earnings per share
WEIGHTED AVERAGE NUMBER OF SHARES Period ended
31 December
2018
EUR
------------------------------------------- ---------------
Shares issued during the financial period 75,000,000
------------------------------------------- ---------------
Share in issue at financial period end 75,000,000
------------------------------------------- ---------------
Weighted average number of shares 57,231,482
------------------------------------------- ---------------
Diluted number of shares 57,231,482
------------------------------------------- ---------------
Period ended
31 December
BASIC AND DILUTED EARNINGS PER SHARE 2018
EUR
------------------------------------------------------- ---------------
Profit for the financial period attributable to the
owners of the Group 2,333,879
------------------------------------------------------- ---------------
EUR
------------------------------------------------------- ---------------
Weighted average number of ordinary shares (basic) 57,231,482
Weighted average number of ordinary shares (diluted) 57,231,482
Basic earnings per share (cent) 4.08
------------------------------------------------------- ---------------
Diluted earnings per share (cent) 4.08
------------------------------------------------------- ---------------
Adjusted earnings per share
The adjusted basic and diluted earnings per ordinary share of
3.11 cents per share is based on the profit for the financial
period of EUR2,333,879 and on 75,000,000 ordinary shares, being the
number of shares in issue since admission and at the period
end.
12. IFRS and EPRA NAV per share
The IFRS NAV is calculated as the value of the Group's assets
less the value of its liabilities based on IFRS measures. EPRA NAV
is calculated with accordance with the European Real Estate
Association ("EPRA") Best Practice Recommendations: November
2016.
EPRA net asset value ("EPRA NAV") is defined as the IFRS assets
including properties and other investment interests at fair value
and to exclude certain items not expected to crystallise in a
long-term investment property business.
Period ended
31 December
2018
EUR
-------------------------------------------- ---------------
IFRS net assets at end of financial period 75,133,180
Ordinary shares in issue 75,000,000
-------------------------------------------- ---------------
IFRS NAV per share (cent) 100.18
-------------------------------------------- ---------------
Ordinary shares in issue 75,000,000
-------------------------------------------- ---------------
Diluted number of shares 75,000,000
-------------------------------------------- ---------------
Diluted IFRS NAV per share (cent) 100.18
-------------------------------------------- ---------------
Period ended
31 December
2018
EUR
-------------------------------------------- ---------------
IFRS net assets at end of financial period 75,133,180
Net market to market on financial assets -
-------------------------------------------- ---------------
EPRA NAV 75,133,180
-------------------------------------------- ---------------
EPRA NAV per share (cent) 100.18
-------------------------------------------- ---------------
13. Investment properties
a) Group and Company
As at
31 December 2018
EUR
--------------------------------------------- -------------------
Acquired by distribution in specie 25,910,000
Property purchases 50,147,611
Development expenditure 248,263
Fair value gain on investment properties 1,609,126
---------------------------------------------- ------------------
Closing fair value 77,915,000
---------------------------------------------- ------------------
During the financial period the Company acquired 100% of the B
ordinary shares in the Yew Tree Investment Fund (in Members
Voluntary Liquidation). By this acquisition the Company secured 10
properties with a fair value as at 30 June 2018 of EUR25,910,000.
The Company has since received all the properties and the majority
of the cash from the Yew Tree Investment Fund (in Members Voluntary
Liquidation) through distribution in specie following the Members
Voluntary Liquidation of the Fund.
The Group also acquired the One and Three Gateway, East Wall
Road, Dublin 3 buildings during the financial period for
EUR31,001,082 (vendor price of EUR29,000,000 and transaction costs
of EUR2,001,082), Blackwater House, Mallow Business Park, Mallow,
Co. Cork building for EUR2,010,008 (vendor price of EUR1,850,000
and transaction costs of EUR160,008) and Buildings 1, 2 and 3,
Letterkenny Business Park, Co. Donegal for EUR17,136,521(vendor
price of EUR16,000,000 and transaction costs of EUR1,136,521).
A valuation is conducted on the Group's owned properties on 30
June and 31 December each year based upon the key assumptions of
estimated rental values and market-based yields. In determining
fair value, the valuers refer to market evidence and recent
transaction prices for similar properties.
The Directors are satisfied that the valuation of the Group's
properties is appropriate for inclusion in the accounts. The fair
value of the Group's properties owned at 31 December 2018 is based
on the valuation provided by the external independent Valuers,
Lisney. This valuation is prepared on the basis of market value in
accordance with the Royal Institution of Chartered Surveyors
Valuation - Global Standards (June 2017) and the principles of IFRS
13. This valuation has not been adjusted by the directors in making
their determination of the fair value of investment properties at
31 December 2018.
Fair value
The valuation technique used in determining the fair value of
the property assets is market value as defined by the Royal
Institution of Chartered Surveyors Valuation, being the estimated
amount for which an asset or liability should exchange on the
valuation date between a willing buyer and a willing seller in an
arm's length transaction after proper marketing wherein the parties
had acted knowledgeably, prudently and without compulsion. This is
in accordance with IFRS 13.
The main inputs for property valuation using a market-based
capitalisation approach are the ERV ("Estimated Rental Value") and
equivalent yield. ERV is a valuer's opinion as to the open market
rental value of a property on a valuation date which could
reasonably be expected to be the achievable rent for a new letting
of that property on the valuation date. ERVs are not generally
directly observable and therefore classified as Level 3 inputs.
Equivalent yields depend on the valuer's assessment of market
capitalisation rates and are therefore Level 3 inputs. There were
no transfers between fair value levels during the financial
period.
Details of the Group's investment properties and information
about the fair value hierarchy using unobservable inputs (level 3)
at the end of the reporting period are as follows:
Range
Asset Class Market value Input Low Median High
------------- ----------------- -------- --------- ---------
Commercial Property
Assets EUR77.9m ERV per sq ft EUR4.00 EUR11.98 EUR33.33
------------- ----------------- -------- --------- ---------
Equivalent yield
% 6.44% 8.23% 10.23%
------------- ----------------- -------- --------- ---------
Sensitivity of measurement to variance of significant
unobservable inputs
A decrease in the ERV will decrease the fair value. An increase
in equivalent yield will decrease the fair value. There are
interrelationships between these rates as they are partially
determined by market rate conditions.
The table below shows the sensitivity of the Group's properties
to changes in equivalent yield and ERV, which have been identified
as key sensitivities by the directors. A change in long term
vacancy rate was not considered significant and was not therefore
tested, as the Group's long-term vacancy rates are low and lease
contracts are long in duration.
Across the entire portfolio of investment properties, a 0.25%
increase in equivalent yield would have the impact of a EUR3.00m
reduction in fair value whilst a 0.25% decrease in yield would
result in a fair value increase of EUR3.19m, and a 5% increase in
ERV would have the impact of a EUR3.28m increase in fair value
whilst a 5% decrease in ERV would result in a fair value decrease
of EUR3.29m.
Market Value Value Value Value -0.25%
Value +5% -5% +0.25% Equivalent
in ERV in Equivalent Yield
ERV Yield
EUR EUR EUR EUR
Commercial property
assets EUR77.9m 3.28m (3.29m) (3.00m) 3.19m
Total 3.28m (3.29m) (3.00m) 3.19m
---------------------- --------- -------- -------- ------------ -------------
14. Interest in joint venture
Details of the Group's only joint venture at the end of the
reporting period was as follows:
Name of joint Country of Nature of Investment Votes controlled Carrying
venture Incorporation the business by the amount
Company 31 December
2018
Friends First
House, Cherrywood Private
Science & Limited
Technology Company.
Ashtown Management Park, Loughlinstown, Management Ashtown Management
Company Limited Co. Dublin, of common Company Limited
(Joint venture) ireland areas (Joint venture) 50% EUR3,473
----------------------- --------------- -------------------- ----------------- -------------
This joint venture is accounted for using the equity method in
these Consolidated financial statements as set out in the Group's
accounting policies in note 1.
The Group acquired its interest in the joint venture when it
acquired the entire class B ordinary share capital of the Yew Tree
Investment Fund (in Members Voluntary Liquidation) on 8 June 2018.
The share of profits attributable to the Group from 8 June 2018 to
31 December 2018 are as follows;
Period ended
31 December 2018
EUR
------------------------------------------------ -------------------
Distribution in specie on 8 June 2018 nil
Share of joint venture profits for the period 3,473
------------------------------------------------- ------------------
Period ended 31 December 2018 3,473
------------------------------------------------- ------------------
Summarised financial information in respect to the results of
the joint venture for the financial period 8 June 2018 to 31
December 2018 is set out below:
Period ended
31 December 2018
EUR
--------------------------------------------- -------------------
Revenue 178,198
Profit post tax from continuing operations 6,946
Profit for the period 6,946
---------------------------------------------- ------------------
Total comprehensive income 6,946
---------------------------------------------- ------------------
14. Interest in joint venture (continued)
The balance sheet of the Company's interest in a joint venture
as at 31 December 2018 is as follows:
As at
31 December 2018
EUR
--------------------------------------------- -------------------
Cash and cash equivalents 122,349
Trade and other payables (115,403)
---------------------------------------------- ------------------
As at 31 December 2018 6,946
---------------------------------------------- ------------------
15. Cash and cash equivalents
a) Group
As at
31 December
2018
EUR
--------------------------- -------------
Cash and cash equivalents 4,823,734
--------------------------- -------------
b) Company
As at
31 December
2018
EUR
--------------------------- -------------
Cash and cash equivalents 4,364,045
--------------------------- -------------
The management of cash and cash equivalents is discussed in
detail in note 25.
16. Trade and other receivables
a) Group As at
31 December
2018
EUR
------------------------------------- -------------
Trade receivables and prepayments 201,214
Taxation debtors - VAT recoverable 160,081
Other receivables 203,805
------------------------------------- -------------
Total 565,100
------------------------------------- -------------
Trade receivables include amounts due from tenants for rental
and service charges. The balance of trade and other receivables has
no concentration of credit risk as it covers mainly prepayments.
The directors therefore consider the carrying value of trade and
other receivables approximates to their fair value.
a) Company As at 31
31 December
2018
EUR
------------------------------------- -------------
Trade receivables and prepayments 199,090
Taxation debtors - VAT recoverable 160,081
Other receivables 203,805
------------------------------------- -------------
Total 562,976
------------------------------------- -------------
Trade receivables include amounts due from tenants. Other
receivables are inclusive of EUR159,354 due from the liquidator of
Yew Tree Investment Fund (in Members Voluntary Liquidation).
On 27 July 2018, the Yew Tree Investment Fund was placed into
Members' Voluntary Liquidation ("MVL") with the expectation that
the Fund's properties and cash be distributed in specie to the
Company as the 100% owner of the B ordinary shares. In the
financial period to 31 December 2018 EUR31,234,552 (EUR25,910,000
in investment properties and EUR5,324,552 in cash) of the Fund's
assets were distributed in specie to the Company. The directors
expect to receive a distribution of the remaining assets of the
Fund in 2019.
Other than the amounts due from the liquidator of Yew Tree
Investment Fund (in Members Voluntary Liquidation) the balance of
trade and other receivables has no concentration of credit risk as
it covers mainly prepayments and amounts due from tenants. The
directors therefore consider the carrying value of trade and other
receivables approximates to their fair value.
17. Trade and other payables
a) Group As at
31 December
2018
EUR
--------------------------------- -------------
Trade payables and accruals 2,302,163
Taxation creditors - PAYE/PRSI 19,729
Borrowings 11,837
--------------------------------- -------------
Total 2,333,729
--------------------------------- -------------
Trade payables includes amounts due to third party suppliers and
prepaid rent amounts received from tenants in advance. Accrued
expenses include operational expenses incurred but not yet invoiced
to the Group as at 31 December 2018. Trade and other payables are
interest free and have settlement dates within one year. The
Directors consider that the carrying value of the trade and other
payables approximates to their fair value.
b) Company As at
31 December
2018
EUR
--------------------------------- -------------
Trade payables and accruals 2,068,385
Taxation creditors - PAYE/PRSI 19,729
Borrowings 11,837
--------------------------------- -------------
Total 2,099,951
--------------------------------- -------------
Trade payables includes amounts due to third party suppliers and
prepaid rent amounts received from tenants in advance. Accrued
expenses include operational expenses incurred but not yet invoiced
to the Company as at 31 December 2018. Trade and other payables are
interest free and have settlement dates within one year. The
Directors consider that the carrying value of the trade and other
payables approximates to their fair value.
18. Borrowings
The Group has a revolving credit facility with Allied Irish Bank
plc ("AIB"), secured by fixed and floating charges over certain
property assets. The facility is EUR19,954,000 and can be repaid
and re-drawn without penalty throughout its 3 years expected life.
The facility was partially drawn once, the amount of drawing
remained the same to period end. This facility was measured
initially at fair value, after transaction costs, and carried at
amortised cost, with all attributable costs charged to Consolidated
Statement of Comprehensive Income over the life of the
facility.
a) Group and Company
Reconciliation of borrowings Period ended
is shown below 31 December 2018
EUR
---------------------------------- ------------------
Bank finance drawn during the
financial period 6,199,540
Less: Borrowing costs (362,717)
Plus: effective interest rate 15,412
---------------------------------- ------------------
Balance at end of the financial
period 5,852,235
Maturity of borrowings is as
follows
Less than one year 11,837
Between two and five years 5,840,398
---------------------------------- ------------------
Total
5,852,235
Undrawn at end of the financial
period 13,754,460
---------------------------------- ------------------
The loan facility was drawn down in December 2018 and there were
no loan repayments during the period to 31 December 2018. No
interest was paid during the financial period.
The Company stated in its Admission document its intention to
target borrowings, following full investment of the net proceeds
raised at Admission, of 25% loan-to-value ("LTV"). LTV is the ratio
of drawn debt to the value of property investments, which at 31
December 2018 was 7.96%. Under the Irish REIT rules the REIT's
borrowings must not exceed 50% of the value of its assets.
Where debt is drawn to finance material refurbishments and
developments on qualifying assets, the borrowing cost associated
with this debt is capitalised. No amounts were capitalised during
the financial period for this purpose. All costs related to finance
arrangements are amortised using the effective interest rate.
All borrowings are denominated in Euro. All borrowings are
subject to six months or less interest rate changes and contractual
re-pricing rates.
19. Share Capital
Period ended
31 December
2018
Number of shares EUR
------------------------------------- ---------------- ------------
Issued and fully paid *
Issued during the financial period 75,000,000 750,000
------------------------------------- ---------------- ------------
Closing total issued ordinary Shares 75,000,000 750,000
------------------------------------- ---------------- ------------
The Group has authorised and issued share capital of 75m
Ordinary Shares.
* share capital as at 31 December 2018 was fully paid. There is
one class of ordinary shares of one cent each.
On 7 June 2018, the day before Admission, the Company had
2,500,000 shares in issue, all of which had been issued to Jonathan
Laredo. On 8 June 2018 an additional 72,500,000 shares were issued
at a price of EUR1.00 each, of which 29,596 were issued to Jonathan
Laredo. On 8 June 2018 Jonathan Laredo subscribed EUR1.00 for each
of the 2,500,000 shares he already held, and an additional
EUR29,596 for the shares issued to him on that date, such that all
the Company's shares were subscribed for at a price of EUR1.00 and
the proceeds of share issuance were EUR75,000,000.
20. Reserves
a) Group
Share Premium Retained
EUR Earnings
EUR
---------------------------------- -------------- --------------
Shares issued in the period 74,250,000 -
Issue costs - (2,200,699)
Transfer to retained earnings (70,250,000) 70,250,000
Profit for the financial period - 2,333,879
---------------------------------- -------------- --------------
As at 31 December 2018 4,000,000 70,383,180
---------------------------------- -------------- --------------
b) Company
Retained
Share Premium Earnings
EUR EUR
---------------------------------- ---------------- -------------
Shares issued in the period 74,250,000 -
Issue costs - (2,200,699)
Transfer to retained earnings (70,250,000) 70,250,000
Profit for the financial period - 2,102,371
---------------------------------- ---------------- -------------
As at 31 December 2018 4,000,000 70,151,672
---------------------------------- ---------------- -------------
The equity of the Company consists of Ordinary Shares issued.
The par value of the share is recorded in the share capital
account. The excess of proceeds received over the par value is
recorded in the share premium account. Direct issue costs in
respect of the issue of shares are accounted for in the retained
earnings reserve, net of any related tax deduction.
On 1 November 2018 the High Court of Ireland made an Order
confirming the Company's capital reduction resolution for the
reduction of the Company's Share Premium Account in the sum of
EUR70,250,000 such that the balance remaining credited to that
account will be EUR4,000,000 such that the reserve resulting from
such cancellation be treated as realised profits as defined by
Section 117 of the Companies Act 2014. The Order of Court and
Minute on reduction of share premium account was registered on the
2 November 2018.
21. Related party transactions and fees paid to directors
The Directors are considered to be related parties.
On Admission to the AIM and the Euronext Growth market the
Executive Directors subscribed for shares in the Company at the
issued price. They subscribed their post-tax proceeds from
redemption of shares in the Yew Tree Investment Fund (in Members
Voluntary Liquidation) and their shares of all incentive fees due
from Parapet Capital Advisors' role as Investment Adviser to the
AIFM of the Yew Tree Investment Fund (in Members Voluntary
Liquidation). Concurrently the Non-executive Directors subscribed
for shares in the Company at the issued price.
The interest of the Directors in the share capital of the Group
as at 31 December 2018 is as follows:
Director No. of Ordinary Shares % of issued share
capital
Michael Gibbons 2,052,544 2.74%
----------------------- ------------------
Charles Peach 251,440 0.34%
----------------------- ------------------
Jonathan Laredo 2.529,596 3.37%
----------------------- ------------------
Barry O'Dowd 25,000 0.03%
----------------------- ------------------
Garry O'Dea 25,000 0.03%
----------------------- ------------------
Eimear Moloney 25,000 0.03%
----------------------- ------------------
Brian Owens 25,000 0.03%
----------------------- ------------------
The Directors of the Group received remuneration, fees and other
benefits from the Group for their services. Total amounts for the
financial period were EUR414,807. No remuneration, fees or other
benefits were paid to the Directors by any subsidiary or joint
venture.
Full disclosure of the Directors' remuneration can be seen under
the Remuneration Committee report and in note 22.
All transactions between the Company and its subsidiaries are
eliminated on consolidation.
Key management personnel
The remuneration of the key management personnel during the
financial period is disclosed in note 22 below.
22. Directors' remuneration
Period ended
31 December 2018
EUR
----------------------------------------------------- -----------------
Remuneration - Executive Directors 210,426
Other benefits - Health insurance 12,086
Pension contributions - defined contribution
plan (3 Directors) 63,126
Remuneration - Independent Non-executive Directors 129,169
----------------------------------------------------- -----------------
Total 414,807
The remuneration of Directors and key management is determined
by the Remuneration Committee to reflect the performance of
individuals and market trends. Other benefits paid to the three
Executive Directors during the period includes health insurance.
Defined contribution pension payments represent contributions on
behalf of the three Executive Directors. All fees paid to
Non-Executive Directors are for services as Directors to the Group,
they receive no other benefits. There were no payments of
compensation made to Directors for termination or loss of
office.
The Company established a Long Term Investment Plan (LTIP) on
Admission. The plan did not make any awards in the financial period
and had no awards outstanding at 31 December 2018.
23. Acquisition of subsidiaries
Yew Tree Investment Fund plc (in Member's Voluntary
Liquidation)
On 8 June 2018 the Company acquired 100% of the class B ordinary
share capital of the Yew Tree Investment Fund (in Members Voluntary
Liquidation) for cash consideration of EUR23,064,484. The AIFM of
the Yew Tree Investment Fund (in Members Voluntary Liquidation) had
previously been advised by the Executive Directors, and details of
the Fund and its assets were included in the Company's Admission
document. Goodwill arising on the acquisition of the Yew Tree
Investment Fund (in Members Voluntary Liquidation) has been
capitalised and assessed for impairment at the period end date.
Analysis of acquisition of the Yew Tree Investment Fund (In
Member's Voluntary Liquidation)
Upon acquisition of a subsidiary, fair values are attributed to
the identifiable net assets acquired. The amounts recognised in
respect of the identifiable assets acquired and liabilities assumed
are set out in the table below.
Book value Fair value
at the date at the date
Net assets at the date of of Fair value of
acquisition acquisition adjustment acquisition
EUR EUR EUR
Investment properties 25,910,000 - 25,910,000
Trade receivables and
prepayments 513,727 (238,750) 274,977
Cash and cash equivalents 5,781,977 - 5,781,977
------------ ----------- -------------
32,205,704 (238,750) 31,966,954
Trade payables and accruals (811,798) - (811,798)
Loan (8,329,422) - (8,329,422)
------------ ----------- -------------
23,064,484 (238,750) 22,825,734
Share of net asset acquired
(100%) 22,825,734
Cash consideration 23,064,484
-------------
Goodwill arising on acquisition 238,750
On 8 June 2018 the Company subscribed for 23,064,484 of the EUR1
B ordinary share capital in Yew Tree Investment Fund (in Members
Voluntary Liquidation) for EUR23,064,484 as consideration for the
Fund's net assets.
The fair value of unamortised loan facility costs with a book
value of EUR238,750 included trade receivables was estimated to
have a fair value of EURnil at the acquisition date.
No deferred tax arose from this acquisition.
On 27 July 2018, the Yew Tree Investment Fund was placed into
Members Voluntary Liquidation. From which date the Yew Tree
Investment Fund is no longer consolidated in the Group's financial
statements.
Subsequent to the appointment of the liquidator on 27 July 2018
and prior to 31 December 2018, Yew Tree Investment Fund's
properties of EUR25.9m and cash of EUR5.3m had been distributed in
specie to Yew Grove REIT plc as the 100% owner of the B ordinary
shares. A further distribution is expected to be made on
finalisation of the liquidation in 2019.
At the Statement of Financial Position date the Yew Tree
Investment Fund (in Members Voluntary Liquidation) was still under
the Member's Voluntary Liquidation process.
Gateway Estate Management Company Limited by Guarantee
On 2 July the Group acquired 99% of the voting rights of Gateway
Estate Management Company Limited by Guarantee for nil
consideration following the acquisition of One and Three Gateway,
East Wall Road, Dublin 3. Negative goodwill arising on the
acquisition of Gateway Estate Management Company Limited by
Guarantee has been taken directly to the Statement of Comprehensive
Income during the period. The investment in Gateway Estate
Management Company Limited by Guarantee has been included in the
Group's balance sheet at its fair value.
Analysis of acquisition of Gateway Estate Management Company
Limited by Guarantee
Upon acquisition of a subsidiary, fair values are attributed to
the identifiable net assets acquired. The amounts recognised in
respect of the identifiable assets acquired and liabilities assumed
are set out in the table below.
Book value Fair value
at the date at the date
Net assets at the date of acquisition of acquisition of acquisition
EUR EUR
Trade receivables and prepayments 142,621 142,621
Cash and cash equivalents 91,161 91,161
---------------- ----------------
233,782 233,782
Trade payables and accruals (175,043) (175,043)
---------------- ----------------
58,739 58,739
Share of net asset acquired (100%) 58,739
Consideration -
----------------
Negative goodwill arising on acquisition (58,739)
Negative goodwill arising on the acquisition of Gateway Estate
Management Company Limited by Guarantee has been taken directly to
the Statement of Comprehensive Income during the period.
24. Operating lease receivables
Future aggregate minimum rental receivables (to the next break
date) under non-cancellable operating leases and licences are:
Period ended
31 December
2018
EUR
------------------------------------------------- ---------------
Operating lease and licence receivables due in:
Less than one year 6,283,984
Between two and five years 16,679,791
Greater that five years 7,918,572
------------------------------------------------- ---------------
Total 30,882,347
------------------------------------------------- ---------------
The Group has both operating leases and operating licences. The
operating licences are predominantly for car parking spaces and are
less than one year in duration.
The Group leases its investment properties under operating
leases. The weighted average unexpired lease term of these leases
("WAULT") at 31 December 2018 is 7.4 years.
These calculations are based on all lease and licences
outstanding at 31 December 2018.
25. Financial instruments - risk management and fair value
Financial assets and financial liabilities
The following table shows the Group's financial assets and
liabilities and the methods used to calculate fair value.
ASSET/ CARRYING CARRYING LEVEL VALUATION TECHNIQUE
LIABILITY VALUE VALUE
--------------------- ------------ ----------- -------- ----------------------------------
All trade and other receivables
that could be classified
as financial instruments
are short-term, the majority
being less than three months
in duration, and therefore
face value approximates fair
value on an amortised costs
Trade and Amortised basis using the effective
other receivables cost 360,568 3 interest rate method.
--------------------- ------------ ----------- -------- ----------------------------------
The carrying amount of loans
and borrowings held at amortised
cost have been calculated
by discounting the expected
Loans and Amortised cashflows at prevailing interest
borrowings cost 5,840,398 3 rates.
--------------------- ------------ ----------- -------- ----------------------------------
All trade and other payables
that could be classified
as financial instruments
are short-term, the majority
being less than one months
in duration, and therefore
face value approximates fair
value on an amortised costs
Trade and Amortised basis using the effective
other payables cost 1,930,902 3 interest rate method.
-------------------- ------------- ----------- -------- ----------------------------------
The Group's Board has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The Audit Committee is responsible for developing and
monitoring the Group's risk management policies. Risk management
policies are established to identify and analyse the risks faced by
the Group, to set appropriate risk limits and controls and to
monitor risks and adherence to limits. All of these policies are
regularly reviewed in order to reflect changes in the market
conditions and the Group's activities.
The main risks arising from the Group's financial instruments
are market risk, credit risk and liquidity risk. The policies for
managing each of these and the principal effects of these policies
on the results for the financial period are summarised below:
i. Market risk
Market risk is the risk that the fair value or cashflows 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 mainly comprise of
investment properties, and trade and other receivables and cash
which are classified as financial assets. The Group has no
financial assets or liabilities denominated in foreign currencies.
Financial liabilities comprise short-term payables and bank
borrowings. All of these items are denominated in Euro. The Group's
primary market risk for financial instruments is interest rate
risk.
a) Interest rate risk
Bank borrowing interest rates are based on short-term variable
interest rates which the Group has chosen not to hedge. Exposure to
interest rates is limited to the exposure of its earnings from
uninvested funds and borrowings. The Group has a revolving credit
facility with AIB of EUR19.9m, of which EUR13.7m was undrawn as at
31 December 2018. Interest due on the drawn amount of the facility
will vary with changes in the underlying interest rate which may
result in an increase in financing costs. The Group's drawings
under its bank facility float on the higher of 3 months Euribor or
0% at drawing and quarterly reset dates and therefore the impact of
a rise in 3 months Euribor to 1% for a full year on drawings as at
31 December 2018 would be approximately EUR0.06m, and if the
facility were fully drawn would be EUR0.2m.
The Group is also exposed to interest rate risk on its cash and
cash equivalents. There were EUR4.36m uninvested Group funds held
within Bank of Ireland and Societe Generale accounts at 31 December
2018. These balances attract low interest rates and therefore a
relative increase or decrease in their interest rates would not
have a material effect on the Consolidated Statement of
Comprehensive Income.
b) Currency risk
The Company has a sterling bank account with Societe Generale.
As at 31 December 2018 the amount outstanding was GBP18,168. This
amount is judged sufficient to settle all expected sterling
payments due to service providers for 2019. As such, the Company
had minimal foreign exchange exposure.
ii. Liquidity risk
Liquidity risk is the risk the Group may encounter difficulties
in meeting the obligations associated with its financial
liabilities settled by cash or other financial assets. 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.
Detailed below are the contractual maturities of the Group's
financial liabilities;
Carrying 6 months 6 to 1 to 2 to More Total
Value or less 12 months 2 years 5 years than contractual
5 years amount
------------------ ----------- ----------- ----------- --------- ---------- --------- -------------
Borrowings 5,840,398 159,101 159,100 319,703 6,508,152 - 7,146,056
Trade and
other payables 1,930,902 1,930,902 - - - - 1,930,902
------------------ ----------- ----------- ----------- --------- ---------- --------- -------------
Total carrying
amount 7,771,300 2,090,003 159,100 319,703 6,508,152 - 9,076,958
------------------ ----------- ----------- ----------- --------- ---------- --------- -------------
iii. Credit risk
Cash and cash equivalents: cash and cash equivalents are held
with major Irish and European banking institutions. These banking
institutions and their short term ratings are listed below (ratings
for each are from Standard and Poors/Moody's/Fitch):
Societe Generale S.A. has short term unsecured debt ratings of
A-1/P-1/F1
Allied Irish Bank plc has short term unsecured debt ratings of
A-2/P-2/F3
The Governor and Company of the Bank of Ireland has short term
ratings of A-2/P-1/F2
Trade and other receivables: rents and licences are generally
received monthly in advance or quarterly in advance from tenants.
There are no significant concentrations of credit risk at the
financial period end. The balance of trade and other receivables
has no concentration of credit risk as it comprises mainly
prepayments.
The Group's exposure to credit risk is influenced mainly by the
individual characteristics of its customers. Trade and other
receivables relate mainly to the Group's property tenants. The
day-to-day management of the Group's customers is managed by
appointed property agents under the oversight of the Group's
internal property management group.
Refer to accounting policy 1.20 for details of the Group's
policy in relation to ECL.
The Group applies the simplified approach to trade receivables
for which expected credit losses uses the lifetime expected credit
allowance. The Group has no exposure to bad debts as the majority
of the Group's rental income is from State bodies or FDI entities
as they have good credit standing. The payment and credit
performance of these tenants is closely monitored; therefore, the
expected credit loss is not material and has not been
presented.
There was no credit loss in the period as a result of the
Directors' assessment.
Detailed below are the carrying amount of the Group's financial
assets as the maximum amount of exposure to credit risk;
As at
31 December
2018
EUR
----------------------------- -------------
Trade and other receivables 565,100
Cash and cash equivalents 4,823,734
----------------------------- -------------
Balance at end of period 5,388,834
----------------------------- -------------
Capital management
The Group's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
the future development of the business. The key performance
indicators used in evaluating the achievement of strategic
objectives are return on capital, growth in NAV and dividends to
ordinary shareholders (dividend per share) as well as the total
return of the Group's property portfolio.
Capital consists of share capital, reserves and retained
earnings. At 31 December 2018 the equity of the Group was
EUR75.13m.
The Group seeks to leverage capital in order to enhance returns.
Refer to note 18 for more details.
The Group's share capital is publicly traded on the Euronext
Growth market of Euronext Dublin and the Alternative Investment
Market of the London Stock Exchange.
26. Contingent Liabilities
The Group has not identified any contingent liabilities which
are required to be disclosed in the Consolidated financial
statements.
27. Events after the reporting period
On 7 February 2019 the Company declared the payment of an
interim dividend in respect of the period ended 31 December 2018 of
EUR723,000 for 0.964 cents per ordinary share. This was paid to
shareholders on 26 February 2019.
On 8 February 2019 the Company exchanged contracts to purchase
Office Block A, located in the IDA Waterford Business and
Technology Park, Butlerstown, Waterford for EUR4 million plus
costs, representing a gross yield to fair value of 8.56% after
accounting for all purchase costs. The property,845 sq. ft. of open
plan office space arranged over three storeys and is tenanted by
Tech Mahindra Business Services Ltd under a 20 years lease with a
break in five years, and SE2 Information Services Ireland Ltd under
a five years lease.
On 11 February 2019 the Company delivered a completed car park
in Athlone to its adjacent tenant under a co-terminus lease.
On 15 February the Company announced the inaugural grant of
options to executive management under the Long Term Incentive Plan
that had been established in June 2018 at Admission to the
Alternative Investment Market of the London Stock Exchange and the
Euronext Growth market of Euronext Dublin.
On 27 February 2019 the Company completed the purchase of Unit
2600, Cork Airport Business Park, Cork Airport for EUR7.5 million
plus costs, representing a gross yield at fair value of 7.85% after
accounting for purchase costs. The property, a two storey, 40,953
sq. ft office block which was refurbished in 2015 to a high
standard and includes a 163-space car park, is tenanted by
Clearstream Global Securities Services Ltd, a subsidiary of
Deutsche Borse AG, under a 25 year lease with final expiry in just
over five years' time.
On 29th March 2019 the Company declared the payment of an
interim dividend in respect of the first quarter of 2019 of
EUR825,000 for 1.10 cents per ordinary share. This is to be paid to
shareholders on 13 May 2019.
28. Capital commitments
At the Statement of Financial Position, the Group has entered
contracts for future capital expenditure of amounting to EUR236,671
in respect of the development of a car park at one of its
investment properties. The capital commitments were fully satisfied
on delivery of the car park post year end.
There are no other capital commitments at the Statement of
Financial Position date.
Disclosures under AIFMD (unaudited)
Disclosure required under the Alternative Investment Fund
Managers Directive ("AIFMD") for Reports of alternative investment
funds ("AIFs") (unaudited)
Financial information disclosures
The Company did not realise any gains or losses on sale of any
of its investment properties in the financial period from 5 April
2018 (date of incorporation) to 31 December 2018. Within the total
unrealised gains for the same period of EUR1.6 million disclosed
under IFRSs, there is a total of EUR1.2 million in unrealised
losses and EUR2.8 million in unrealised gains.
Material changes and periodic risk management disclosures
All disclosure requirements to be made to investors prior to
investing in the Company are set out on the Company's website,
www.ygreit.com.
Remuneration disclosures
The information provided below relates to Ballybunion Capital
Limited, the alternative investment fund manager ("AIFM"), and not
to Yew Grove REIT plc. The disclosure is required under AIFMD for
reports of alternative investment funds ("AIFs").
The AIFM operates under the terms of its remuneration policy
which has been developed with due regard to all relevant
legislation and regulatory guidance. This remuneration policy is
designed to:
-- Promote sound and effective risk management
-- Not encourage risk taking that is inconsistent with the risk
profile, rules or investment policies of the REIT and
-- Prevent conflicts of interest.
The AIFM charges a fixed annual fee of EUR120,000 for its
services to the REIT. There is no variable element to this fee.
Total remuneration paid by the AIFM to its staff for the year ended
30 June 2018 (most recent audited figures) was EUR697,000 which
related to an average staff number of 9 during that period. All
AIFM staff receive only contracted fixed remuneration where the
payment and benefits thereof are not subject to the performance of
the REIT. The average number of AIFM staff engaged in providing
part-time services to the REIT during the reporting period was
5.
Alternative performance measures
The Group has applied the European Securities and Markets
Authority (ESMA) 'Guidelines on Alternative Performance Measures'
in this Report and Consolidated financial statements. An
alternative performance measure ("APM") is a measure of financial
or future performance, position or cashflows of the Group which is
not a measure defined by International Financial Reporting
Standards ("IFRS").
The following are the APMs used in this report together with
information on their calculation and relevance.
APM IFRS measure Description
for reconciliation
Contracted rent n/a Annualised cash rental income
roll (including car park licence income)
being received as at the stated
date
-------------------- --------------------------------------
EPRA NAV IFRS NAV (note The objective of the EPRA NAV
12) measure is to illustrate the
fair value of net assets on an
ongoing, long-term basis. Assets
and liabilities that are not
expected to crystallise in normal
circumstances (e.g. the fair
value of financial derivatives,
deferred taxes on property valuation
surpluses) are excluded
-------------------- --------------------------------------
EPRA NAV per IFRS NAV per EPRA NAV calculated on a diluted
share share (note 12) basis taking into account the
impact of any options, convertibles,
etc. that are dilutive.
-------------------- --------------------------------------
EPRA Net Initial n/a Inherent yield of the portfolio
Yield ("EPRA using cash passing rent at the
NIY") reporting date.
-------------------- --------------------------------------
Loan to Value n/a Outstanding drawings under loan
facilities as a percentage of
the fair value of the investment
properties
-------------------- --------------------------------------
Total Shareholder n/a A measurement of the growth in
Return share value for shareholders
(assuming gross
dividends are reinvested and
share appreciation) over a defined
period.
-------------------- --------------------------------------
GLOSSARY
CBD: The central business district of a city.
Contracted rent roll: The annualised cash rental income
(including car park licence income) being received as at the stated
date.
Dublin Catchment Area: The geographic area within an
approximately thirty-minute commute of the M50 motorway.
EPRA: The European Public Real Estate Association.
EPRA EPS: is 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 measures the level of income
arising from operational activities. It is intended to provide an
indicator of the underlying income generated from leasing and
management of the property portfolio and so excludes components not
relevant to the underlying net income performance of the portfolio
such as unrealised changes in valuation and any gains or losses on
disposals of properties.
EPRA NAV: A measures of the fair value of net assets on an
ongoing, long-term basis in accordance with guidelines issued by
the EPRA while taking into account the dilutive effects of any
outstanding options, convertibles, or other financial instruments.
The EPRA NAV excludes the net mark-to market value of financial
instruments used for hedging purposes 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.
ERV/Estimated Rental Value: A valuer's opinion as to the open
market rental value of a property on a valuation date which could
reasonably be expected to be the achievable rent for a new letting
of that property on the valuation date. Colloquially referred to as
market rent.
Gross reversionary yield: The reversionary rent roll of a
property or group of properties as a percentage of their fair
value.
Gross yield at fair value: A calculation of the current expected
cash rental return, being the contracted rent roll divided by the
fair value of the investment property or properties.
Loan to Value/LTV: The LTV is calculated by dividing the amount
of drawn loans by the fair value of the Company's investment
properties.
Net Initial Yield ("NIY"): Annualised rental income based on the
cash rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market value of the
property, increased with (estimated) purchasers' costs.
Net valuation gain: The fair value gain over the period (from
the shorter of the time to the last valuation or purchase).
Purchases made since the last valuation are initially measured at
cost including transaction costs.
Next rent reversion date: The earliest following date at which
the Company could be expected to choose to re-let a property at the
property's ERV or conduct a market level rent review.
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 Losses: As defined in section 705A of the Taxes
Consolidation Act, 1997. It means in relation to a company or
group, the amount by which the sum of the losses recognised in
arriving at the aggregate profits of the company or group, as the
case may be, being losses which arise on the revaluation or
disposal of investment property or other non-current assets which
are assets of the property rental business, exceeds the sum of the
gains so recognised, being gains which arise on such revaluation or
disposal.
Property Net Gains: As defined in section 705A of the Taxes
Consolidation Act, 1997. It means the amount by which the sum of
the gains recognised in arriving at the aggregate profits of the
company or group, as the case may be, being gains which arise on
the revaluation or disposal of investment property or other
non-current assets which are assets of the property rental
business, exceeds the sum of the losses so recognised, being losses
which arise on such revaluation or disposal.
Property Profits: As defined in section 705A of the Taxes
Consolidation Act, 1997. It means, in relation to a company or
group, means an amount which is the lesser of (a) the amount which
would be the aggregate profits of the company or group, as the case
may be, if the residual business, if any, of the company or group,
as the case may be, were disregarded, and (b) the aggregate profits
of that company or group, as the case may be.
Property Rental Business: As defined in section 705A of the
Taxes Consolidation Act, 1997. A business which is carried on by a
REIT or a group REIT, as the case may be, for the sole purpose of
generating rental income in the State or outside the State, and,
for the purpose of this definition, such businesses of a group are
to be treated as a single business.
QIAIF: A Qualifying Investor Alternative Investment Fund.
Rent review: A clause often included in property leases that
provides for a periodic adjustment of the rent of a property to the
market level of rent.
Reversion: A term used to describe the difference in rent from
that which is currently due on outstanding leases and the ERV.
Under-rented properties have contracted rents lower than ERV,
over-rented properties have contracted rents higher than ERV.
Reversionary rent roll: The annualised cash rental income
(including car park licence income) that would be received if the
property or properties were leased at ERV.
Seed portfolio: The portfolio of investment properties owned by
the Yew Tree Investment Fund (in Members Voluntary Liquidation)
when it was purchased on 8 June 2018.
SME: As defined by Enterprise Ireland, an enterprise that has
between 50 employees and 249 employees and has either an annual
turnover not exceeding EUR50m or an annual balance sheet total not
exceeding EUR43m.
State Body: a body established by legislation in the Republic of
Ireland which is either entirely or majority owned by the Irish
Government.
Total debt to equity gearing: The ratio of drawn debt to NAV of
the Company.
Total shareholder return: The growth in share value over a
period assuming all dividends are reinvested in shares of the
Company when paid.
Vacancy: Lettable space owned by the Company which is not let or
licenced to a tenant.
Corporate Information
Directors Barry O'Dowd (Chair, Independent Non-executive
Director)
Eimear Moloney (Independent Non-executive
Director)
Garry O'Dea (Senior Independent Non-executive
Director)
Brian Owens (Independent Non-executive
Director)
Jonathan Laredo (Chief Executive Officer)
Charles Peach (Chief Financial Officer)
Michael Gibbons (Chief Investment Officer)
Registered office 4th Floor
76 Lower Baggot Street
Dublin 2, Ireland
Company Secretary Sanne Corporate Administration Services
Ireland Limited
4th Floor
76 Lower Baggot Street
Dublin 2, Ireland
AIFM Ballybunion Capital Limited
Ashley House
Morehampton Road
Dublin 4, Ireland
ESM Adviser and Investec Bank plc (Irish Branch)
Broker The Harcourt Building
Harcourt Street
Dublin 2, Ireland
Nominated Adviser Investec Bank plc
30 Gresham Street
London EC2V 7QP
Joint Broker Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
Dublin 4, Ireland
Legal adviser Dickson Minto W.S.
to the Company Broadgate Tower
as to English 20 Primrose Street
law London EC2A 2EW
Legal Adviser William Fry
to the Company Grand Canal Square
as to Irish law Grand Canal Dock
Dublin 2, Ireland
Registrar Link Asset Services
Link Registrars Limited
2 Grand Canal Square
Dublin 2, Ireland
Depositary and Société Générale S.A.,
Custodian Dublin Branch
3rd Floor, IFSC House
IFSC
Dublin 1, Ireland
Valuer Lisney Limited
St. Stephen's Green House
Dublin 2, Ireland
Administrator Baker Tilly
Joyce House
22/23 Holles Street
Dublin 2, Ireland
Auditor Deloitte Ireland LLP
Chartered Accountants and Statutory Audit
Firm
Deloitte & Touche House
29 Earlsfort Terrace
Dublin 2, Ireland
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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