Hibernia Reit has €260m capacity for further acquisitions

Hibernia Reit's chief executive Kevin Nowlan said on Tuesday the property investment company has about €260 million of headroom for further acquisition opportunities as it announced a 17 per cent increase in net asset values and an 88 per cent increase in its dividend to 1.5 cent.

The company said the first quarter of 2016, which marks the final three months of the company’s financial year, saw a significant increase in demand among Irish businesses for office space in Dublin in a market that had been driven in recent years by overseas companies investing in Ireland.

“While the market had been very much foreign direct investment driven, we’re now starting to see domestic demand increase,” Mr Nowlan said in a phone interview with The Irish Times. “It’s a good indication that the domestic economy is recovering.”

In the year to March 31st 2016, Hibernia Reit’s revenues rose by 75 per cent to €32.8 million, as pre-tax profits, including revaluation surplus and gains on disposals of non-core assets, advanced by 47 per cent to €136 million. Net asset values were up by 17 per cent for the year to 130.8 cent, while the value of the company’s portfolio - excluding new acquisitions - increased by 19 per cent to €928 million.

Hibernia Reit said it would pay a final dividend of 0.8 cent per share bringing the total for the year to 1.5 cent, up from 0.8 cent in 2015. Net debt stood at € 52.9 million as of March 31st, giving a loan to value of 5.7 per cent, while cash and undrawn facilities were € 369 million.

The company said the strength of the domestic economy together with low vacancy rates in Dublin gives it confidence, given a benign global economic backdrop, in the prospects for further rental growth.

Hibernia Reit said its portfolio is “rich in opportunity and we have substantial undrawn facilities to move quickly on further acquisition opportunities, underpinning our confidence for the future.”

Hibernia’s contracted rent roll is now € 39 million, up 72 per cent on the prior year,as new lettings and rent reviews added € 11.8 million to contracted rent, includes major pre-lets to Twitter and Hubspot totalling 129,000 sq. ft. Twitter is to increase the amount of space it takes at Cumberland House, up by 16.5k sq ft to 101.5k sq ft for for € 0.7 million extra rent.

The company sees upside to its income from exiting properties, according to Mr Nowlan, given that the average contracted rent across its portfolio is €33 per square foot compared to their estimated rental value of €44 per sq ft.

“We’ve had a very deliberate strategy to try and buy buildings that were significantly under-rented,” he said.

Development

During the year, Hibernia invested €179 million in nine acquisitions: seven off-market and seven related to central Dublin offices. The schemes are expected to deliver 354,000 sq. ft. of space over the next 24 months. About 27 per cent of this has been pre-let, Hibernia said. In the longer term, Hibernia has six schemes totalling 610,000 sq. ft. of office space post completion.

On the residential front, Hibernia said its apartment development at Wyckham Point was completed ahead of schedule, and is delivering profit on cost of more than 30 per cent.

Looking ahead, Mr Nowlan said the outlook was positive.

“The strength of the domestic economy together with low vacancy rates in Dublin gives us confidence, given a benign global economic backdrop, in the prospects for further rental growth. Our portfolio is rich in opportunity and we have substantial undrawn facilities to move quickly on further acquisition opportunities, underpinning our confidence for the future.”

In a note Davy Stockbrokers said the results show “ continued momentum across the group’s portfolio”.