Value of Hibernia Reit’s properties falls 3.8% in six months

The final damage done to office values in Dublin by Covid-19 restrictions will depend on the length of the crisis, according to Hibernia Real Estate Investment Trust chief executive Kevin Nowlan.

He was speaking after Hibernia reported that the pandemic’s impact cut the value of its properties by 3.8 per cent to €1.421 billion in the six months to September 30th, the first half of its financial year.

Mr Nowlan predicted that the damage done by measures to constrain the pandemic to commercial property values in the capital would depend on how long the crisis lasted.

However, he said news that two potential vaccines could be available next year has prompted businesses to begin planning for a return to their offices.

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“They are starting to look forward towards a recovery,” said Mr Nowlan. He added that up to now, many commercial tenants simply did not know what to expect.

The company expects office rents to remain under pressure until there is a clear path for tenants to return to their workplaces.

Mr Nowlan believes Covid-19 will not ultimately result in widespread working from home in the long term, as Hibernia’s tenants have indicated that their organisations will continue to need offices to function.

“If you think about it in terms of overhead, your office is about 6 to 8 per cent, for tech companies it’s less because they pay their staff more.

“Why would you compromise the success of your organisation to save that amount of money?” he asked.

Hibernia, which develops and lets offices mainly in central Dublin, lost €32.4 million during its first half, against a profit of €25.5 million over the same period in 2019.

The property investor said its properties were worth a total of €1.421 billion at the end of September, 3.8 per cent less than six months earlier, when they were valued at €1.465 billion.

Hibernia blamed the fall partly on lower estimated rent values stemming from the Covid-19 crisis.

Values fell €42.7 million, or 3.2 per cent, in the three months ended June 30th, which coincided with the severe initial lockdown that the Government imposed in the spring.

The fall in the value of its properties was the main contributor to the company’s first half loss. Reits combine the increases and decreases in their rents and property values to calculate their profits and losses.

Hibernia’s annual contracted rent rose 1 per cent to €66.5 million, with its top 10 tenants accounting for €36.5 million of this.

Top payer: Hubspot

Software developer Hubspot, which leases One Sir John Rogerson's Quay on the southside of the River Liffey, pays €10.5 million a year, making it the company's biggest rent payer.

The Office of Public Works which leases a building on Harcourt Square, also on the capital's southside, is second, paying €6 million a year.

Social media company Twitter ranks third, paying €5.1 million for its office at Cumberland Place, also in the capital.

Hibernia’s net debt at the end of September was €265.3 million, against €241.4 million six months earlier.

The company intends paying shareholders an interim dividend of 2 cent a share, 14.3 per cent more than a year earlier.

Hibernia this week completed a €25 million share buyback programme announced in August, which returned proceeds from the sale of its property at 77 Sir John Rogerson’s Quay to shareholders.

Hibernia has planning permission for three office developments at Clanwilliam Place, Harcourt Square and Marine House, that will add 560,000sq ft in total to its properties. The company It will start work on these over the next 12 to 16 months.