Hibernia Reit shares surge as it signals generous payouts

Real estate investment trust Hibernia Reit’s shares surged on Tuesday after the company signalled that it planned more generous dividends and reported growth in the value of its properties.

Hibernia, which buys, develops and lets offices and apartments in Dublin, said that the value of its properties climbed 9.9 per cent to €1.167 billion in its 2017 financial year, which ended on March 31st.

The trust’s shares were up 2.58 per cent at €1.311 by lunchtime on Tuesday and closed 1.7 per cent higher at €1.30.

Hibernia intends to pay shareholders a final dividend of 1.45 cent a share, bringing its total payout for the year to 2.2 cent a share, 46.7 per cent more than the 1.5 cent that they received in 2016.

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Chief executive Kevin Nowlan indicated that Hibernia was planning more generous payouts to investors as earnings from its properties grew. "We expect dividends to become an increasingly important component of shareholder returns in the future," he said.

Speaking after the results’ publication, he explained that rent income could reach €64 million a year from €39.7 million at the end of March, as it completes and lets offices on which it is currently working. On top of that, it has scope to add a further €7-€8 million from existing properties that he said were under-rented.

“All of that will go to our bottom line,” he said.

Mr Nowlan pointed out that the dividend declared on Tuesday represented a yield of 1.7 per cent on the previous day’s closing price. “Next year it will be closer to 3 per cent and the following year hopefully we will move up closer to 4 per cent,” he added.

Hibernia is hoping to benefit as financial services and other businesses opt to move operations from the UK to European Union jurisdictions as the impact of Brexit becomes evident.

Mr Nowlan noted that companies are scouting for suitable properties in Dublin and other European cities. He predicted that some would move to the Republic’s capital and probably announce plans in the second half of the year.

The trust has about 300 apartments and is interested in expanding its residential operations, but Mr Nowlan believes that current building guidelines make it impossible for developers to earn a profit.

“The Government needs to review those guidelines, we need something less onerous and more cost effective,” he said.

Undrawn loans

Hibernia’s net debt was €155.3 million at the end of March, 13 per cent of the total value of its assets. Its cash and undrawn loans came to €289 million on March 31st.

Excluding €90 million that it intends spending on developing further properties and repaying a loan tied to its One Windmill Lane project, this left the company with €149.5 million, which Mr Nowlan indicated could be used to buy further properties, given the right opportunities.

Windmill Lane is one of three developments on which it is working. Hibernia bought its partner Starwood Capital Group’s 50 per cent share in the project in December for €27.5 million.

As part of the deal, it inherited Starwood's share of a €44.5 million loan for the development from Deutsche Bank. The company plans to repay this debt. Windmill Lane will hold 122,000sq ft (11,334sq m) of offices, along with shops and apartments.

By the end of March, Hibernia had committed to three projects, including Windmill Lane, that would add 295,000sq ft (27,4000sq m) of offices to its existing properties.

Its short- and longer-term pipeline now comes to five schemes with a total of 600,000sq ft (61,300sq m). Its longer-term commitments include Clanwilliam Court in Dublin 2, which it bought last July.

Hibernia Reit’s net asset value per share grew 11.9 per cent to 146.3 cent in its last financial year. Rental income increased 56.3 per cent to €39.7 million while it earned profits before tax of €119 million, which included a surplus for the revaluation of its properties. In a statement, Mr Nowlan said that it was positive about its prospects.