Trading Update

RNS Number : 0336M

Irish Residential Prop REIT PLC

06 May 2020

 

6 May 2020

Irish Residential Properties REIT plc

Trading Update

Irish Residential Properties REIT plc ("I ●RES" or the "Company") today issues an update on its key business operations and financial performance metrics, including the impact of Coronavirus ("Covid-19"), covering the period to 30 April 2020.

Our number one priority continues to be the health, safety and wellbeing of our staff, our residents and our business partners during this period. The social and economic consequences of the Covid-19 pandemic could result in changing business conditions as the situation evolves with impacts on the Company's business that we cannot foresee at this time. However, we are confident that the quality of the property portfolio, the strength of the balance sheet, the experience of the management team and the platform provided by IRES Fund Management Limited (the "Manager"), position the Company well to navigate this challenging future period.

We wish to thank all the employees at the Company and the Manager who continue to provide significant resident communications, support and service including the continued letting of homes, while complying with the social distancing and other necessary restrictions imposed by the Irish Government and the Health Service Executive. We would also like to acknowledge the residents in our apartments and houses who are working with us as we adapt our communications and services and focus on the health and safety of all our residents and the team who support them.

Key Highlights

· Trading throughout Q1 2020 was in line with our expectations. Net rental income margin remained strong at 80.7% for the first quarter in line with historic trends.

· Demand remains robust, with occupancy of 99% at 30 April 2020¹ compared to 98.3% at 31 December 2019.

· Residential rent collection rates were approximately 98% in April 2020, however there is no certainty in relation to the rate of rent collection in the upcoming months given the ongoing uncertainty related to the Covid-19 pandemic and Government measures .

· The Company took delivery of 55 units at Waterside and 18 units at Tallaght Cross West during Q1 2020, bringing the total units owned to 3,739.

· The Company is in a strong financial position, with a robust balance sheet and strong liquidity position.

· Dividend strategy continues, with a final dividend for the year ended 31 December 2019 of €16.2 million, paid on 23 March 2020.

Managing Performance through Covid-19

The first indications of Covid-19 in Ireland were seen at the end of February. The Company and Manager initiated the business continuity and crisis management plans in early March. We have in place 'working from home' for all staff other than frontline site staff. We enhanced cleaning and disinfecting at all properties as well as introducing an ongoing programme of communications with residents in relation to Covid-19.

In line with measures introduced by the Irish Government, we have implemented a temporary moratorium on rent increases to 27 June 2020 as well as on termination notices. We have put in place additional processes to communicate and work with our residents on an ongoing basis during this time including in relation to payment of monthly rents and have invited residents to discuss any issues they may have in meeting their monthly rent payments. We look to provide solutions on a case-by-case basis for those residents facing financial hardship due to Covid-19. We are also looking to ensure that residents experiencing financial challenges are aware of the various Government supports available to help them. At this time, we have limited our repairs and maintenance and capital expenditures on existing properties to essential works to allow us to maintain the safety of our residents. In addition, as part of the Company's social responsibility during this time of crisis, we have provided support to frontline medical workers and have continued our support to charitable organisations.

The Irish Government has introduced extensive restrictions on public movement and economic activity in order to mitigate the spread of Covid-19. The principal measures introduced were included in the Emergency Measures in the Public Interest (Covid-19) 2020 Act on 27 March 2020, which includes:

· a suspension on all notices of eviction and rent increases, in order to protect and support tenants for the duration of the Covid-19 crisis, initially for 3 months to 27 June 2020. Therefore, the current rent regulation which provides for rent increases of up to 4% per year in Rent Pressure Zones until 31 December 2021, does not apply during this period.

· a support package for businesses and workers affected by Covid-19, which includes a Pandemic Unemployment Payment of €350 per week for workers whose employers could not retain them due to the Covid-19 crisis and a Wage Subsidy Scheme, a subsidy of up to a maximum of €410 per week (provided an employee's net salary is now less than €960 per week) to help employers retain workers during a period of reduced trading, caused by Covid-19. The schemes are due to run for an initial period of 12 weeks from their introduction. These measures should provide some assistance to tenants during these challenging times to maintain their rental payments, even if they have experienced job disruption.

· the closure of all non-essential construction sites for an initial two-week period, which was subsequently extended to 18 May 2020. This resulted in construction activity at the Company's active development sites being temporarily suspended and therefore we expect delays to completion of these developments. We retain a flexible development pipeline and, where appropriate we will defer expenditure and decisions on future projects while retaining close contact with our development partners and the project teams on site. Developments impacted include:

o  Hansfield Wood (95 residential units, originally anticipated to be handed over in Q2 2020),

o  Merrion Road (69 residential units, originally anticipated to be handed over in Q2 2021), and

o  Bakers Yard (61 residential units, originally anticipated to be handed over in Q2 2021).

The Irish Government has recently announced a five-stage plan to reopen the country for public movement and business in a gradual way, commencing from 19 May 2020.

Resilient rental portfolio

I ● RES has a diversified, high-quality portfolio located close to transport hubs, schools and major employers. Key highlights include:

· Modern portfolio, with an average age of c.11 years.

· 3,739 apartments and houses, spread across 42 properties throughout Dublin and 1 property in Cork.

· Focused on the mid-tier affordable market, which tends to be more resilient in times of economic downturn.

· Diversified tenant base, with no significant large scale letting to any one tenant.

· Majority of the portfolio (over 60%) is two-bedroom apartments, which tend to be more defensive in a downturn.

Robust and flexible balance sheet

I ● RES has a strong balance sheet with significant liquidity in place to manage through this period of uncertainty. In addition to the ongoing stable cash flow from its operating business, the Company has available cash and undrawn committed facilities to cover costs and capital commitments over the medium term.

· The Company's revolving credit facility was refinanced during 2019, increasing the committed facility to €600 million (with an uncommitted accordion facility of €50 million), lowering the interest fixed margin to 1.75% and extending the maturity to 2024, with the option to extend further to 2026 (subject to certain conditions).

· The Group ² completed a private placement of notes of c.€200 million equivalent in March 2020, with a weighted average interest rate of 1.92% inclusive of swap costs. The notes have a weighted average maturity of 9.7 years, laddered over seven, ten and twelve-year maturities, with the first repayment due in 2027.

· Currently, the Company has €9.5 million of cash and €210 million of committed undrawn debt under its revolving credit facility.

· The Group's loan to value ratio was 40.8% as at 31 December 2019, below the 50% maximum allowed under the Irish REIT rules and the financial covenants under the Group's debt facilities. The Company also maintains significant headroom on its interest coverage ratio.

Social Responsibility

The Company is conscious of the immense pressures facing the medical frontline staff at this time and has provided practical assistance where possible. The Company has several properties located close to hospitals which we have made available to frontline workers in the health service for the period of the crisis.

This includes recently completed apartments at the Tallaght Cross West development (adjacent to Tallaght Hospital in Dublin), the Waterside development in Malahide (close proximity to a number of hospitals in North Dublin) and apartments at the Elmpark development (adjacent to St Vincent's Hospital in Dublin). In addition, we are making available to frontline workers, during the period of the crisis, car parking spaces in properties in close proximity to a number of Dublin hospitals, including Tallaght Cross West (Tallaght Hospital), Rockbrook, Sandyford (Beacon Hospital) and the Marker (River Liffey Covid-19 testing centre)

Margaret Sweeney, Chief Executive Officer, commented:

"Despite the ongoing challenging and unprecedented times, I believe that our high quality, diverse portfolio of assets, robust financial position and highly experienced property management team will ensure that our business emerges from the Covid-19 crisis in as strong a condition as possible.

I would especially like to convey the gratitude of myself and the Board to the employees of the Manager. They have been working tirelessly through this challenging time in continuing to manage the portfolio and offer an exceptional service to our residents who have been living and working under significant restrictions over the last seven weeks as the country deals with the Covid-19 pandemic. As of 30 April 2020, I ● RES   has received approximately 98% of residential rental revenue due for the month of April. However, this may not be indicative of the rate of rent collection in the upcoming months given the ongoing uncertainty related to the Covid-19 pandemic, including uncertainty surrounding governmental measures taken to mitigate the economic impacts. As a result of proactive measures taken by the Company in recent years and our continued belief in the underlying strength of the Irish residential market, we believe we are well positioned and remain confident in the long-term outlook for the business.

Our utmost priority remains the health and wellbeing of our employees, in the Company and the Manager, residents and wider stakeholders. We fully support the various Irish Government guidelines that have been introduced to date and the Company will look to play its part in tackling and overcoming the various economic and societal challenges presented by the Covid-19 pandemic.

The Company will continue to monitor events as they evolve and further announcements will be made as and when appropriate."

Notes:

¹ This number excludes the units which have been made available to health service staff for the period of the Covid-19 crisis.

² Comprising the Company and IRES Residential Properties Limited.

For further information please contact:

For Investor Relations:

Irish Residential Properties REIT plc

Margaret Sweeney, Chief Executive Officer

+ 353 (0) 1 557 0974 or + 353 (0) 87 609 8032

[e-mail]

For Media Requests:

Q4PR

Gerry O'Sullivan

+ 353 87 2597644

About Irish Residential Properties REIT plc

Irish Residential Properties REIT plc, is a leading Irish Real Estate Investment Trust ("REIT") listed on Euronext Dublin. The Company is the first REIT established in Ireland primarily focused on residential rental accommodations. The Company will continue to acquire, hold, manage and develop investments primarily focused on residential rental accommodations in Ireland.  The Company currently owns 3,739 residential units with an additional 164 units due for delivery between now and the end of 2021 under pre-purchase contracts. The Company has planning approval to develop an additional 627 residential units on its existing sites. Further information in respect of the Company can be obtained from the Company's website at www.iresreit.ie .

Note on forward-looking information

This note applies if and to the extent that there are forward-looking statements in this Announcement.

This Announcement may contain forward-looking statements, which are subject to risks and uncertainties because they relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements referred to in this paragraph speak only as at the date of this Announcement. Except as required by law or by any appropriate regulatory authority, the Company will not undertake any obligation to release publicly any revision or updates to these forward-looking statements to reflect future events, circumstances, unanticipated events, new information or otherwise including in respect of the Covid-19 pandemic, the uncertainty of its duration and impact, and any government regulations or legislation related to it.

 

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