Challenging market conditions Property investment volumes and Dublin office take-up in 2020 fell by 58% and 54%, respectively, versus 2019 due to the impact of the pandemic, and the market remained subdued in Q1 2021, with COVID-19 restrictions in Ireland at their highest level. As we have noted before, the structural changes that have occurred in the Irish property market since 2007 (greater institutional ownership, less debt) have increased the market's resilience to external shocks and this, together with the strong Dublin office market fundamentals immediately prior to the pandemic and support from governments and central banks, has resulted in a relatively modest negative impact on market pricing to date despite the rise in vacancy rates. Prime central Dublin office yields have remained at around 4% since the start of the pandemic and prime headline rents stood at around EUR57.50psf at March 2021 versus EUR62.50 a year earlier.

Resilient performance Given market conditions, our leasing activity in the financial year was limited and contracted rent grew 2.2% to EUR67.1m, primarily as a result of new lettings, rent reviews and lease variations. Our rent collection rates for the financial year have averaged 99% and this, as well as leases signed in previous years, good cost control and the accretive EUR25m share buyback executed in the year, resulted in a 13.4% increase in EPRA EPS to 6.3 cent. We have proposed a final dividend per share of 3.4 cent, taking the total in respect of the financial year to 5.4 cent, an increase of 13.7%. The value of our property portfolio declined 4.4% like-for-like, with the majority of this occurring in the first quarter of the financial year, shortly after the onset of the pandemic, resulting in a net loss per share of 3.7 cent for the year and a 3.7% decrease in EPRA NTA per share to 172.7 cent.

Balance sheet strength Our leverage remains amongst the lowest in the European REIT universe, giving us significant strategic flexibility. At 31 March 2021 the LTV ratio was 19.5% and we had EUR110m of cash and undrawn facilities net of commitments. Since then, we have agreed to issue an additional EUR125m of 10- and 12-year US private placement notes with an average coupon of 1.9%, increasing our investment capacity, significantly extending our average debt term and reducing our average cost of debt. These new notes will help fund the delivery of our office clusters at Clanwilliam Court and Harcourt Square.

Responding to changing occupier expectations by focusing on clusters and ESG excellence We believe office clusters and ESG excellence will be key for us in providing the type of flexible, efficient, amenity-rich office space with strong wellness and ESG credentials that occupiers are increasingly seeking. This was our strategic direction prior to the pandemic and we had already completed our first cluster, the Windmill Quarter, and recruited a full-time Sustainability Manager to lead our ESG programme. The pandemic is accelerating many of these changes in occupier requirements and consequently we are concentrating on refining our clustering strategy and accelerating our ESG initiatives to deliver top-grade office space suited to new, agile working and wellness. We have now received full planning approval for our new office clusters at Clanwilliam Court and Harcourt Square and we are working to further enhance the active communal areas within these schemes. Both developments can be started over the next 18 months and, when complete, will increase the proportion of our office portfolio held in clusters to 65%. We have also set new, long-term targets in our recently published Sustainability Statement of Intent and committed to becoming a Net Zero Carbon business by 2030.

Portfolio rich in opportunity As well as our developments at Clanwilliam Court and Harcourt Square, which can be started in the near term, our portfolio has many other opportunities for enhancing shareholder value. We invested EUR16.8m in development expenditure in the financial year, mostly on 2 Cumberland Place and 50 City Quay. These schemes, which will deliver 62,500 sq. ft. of new office space, 62% of which is still available to let (ERV: EUR2.2m), were scheduled to complete in early 2021 but have been delayed by the shutdown of development sites and are now expected to complete in July 2021. Longer term, we are assessing our in-place office portfolio for improvement opportunities and we own 155.2 acres of land and industrial assets in Dublin with potential for rezoning in future for mixed-use schemes.

Optimistic on longer-term outlook With Ireland's vaccination programme gathering pace and a government roadmap for the easing of lockdown restrictions, optimism is growing and this is starting to be seen in active demand for office space and tenant enquiries. While the near-term outlook is likely to remain tied to progress on "unlocking", we are optimistic on our longer-term prospects. We have a clear strategy to provide occupiers with the type of office space they want, a portfolio rich in opportunity, and the financial strength and the team in place to deliver our plans.

Kevin Nowlan, Chief Executive Officer

Market review General economy

Against the backdrop of the COVID-19 pandemic and a 3.4% decline in global GDP in 2020 (source: the OECD), the Irish economy has performed very strongly, recording GDP growth of 3.3% in 2020, the fastest in the developed world. Much of this was due to the contribution of the multinational-dominated sectors, such as technology and pharmaceuticals. Irish output, as measured by Gross Value Added ("GVA"), in the foreign-owned sector increased by 18% in 2020, while other domestic industries declined by 9.5% (source: Goodbody).

The Irish Government continues to offer significant support to the labour market through pandemic payments and wage subsidy schemes: the standard measure of monthly unemployment was 5.8% in April 2021 (compared with 5.1% in January 2020), while the COVID-19 adjusted measure of unemployment was 22.4% if all claimants of the Pandemic Unemployment Payment ("PUP") were classified as unemployed (source: the CSO). Much of this emergency support is going to the hospitality and retail sectors, with office-based employment less impacted, particularly given the strong performance of many multinationals in Ireland. The labour market is expected to recover gradually as restrictions ease, in-line with the vaccine rollout in Ireland. Current Government expectations are that all adults in Ireland will be vaccinated by late summer 2021 and the unemployment rate (incl. PUP recipients) is projected to average 16.3% in 2021, 8.2% in 2022 and to reach 6.0% in 2024, a rate still above the pre-pandemic level of 5.1% (source: the DoF).

While global progress on vaccines and the new EU-UK Trade and Cooperation Agreement ("TCA"), which came into force on 1 January 2021 and averted the threat of a no-deal Brexit, have been positive developments for the Irish economic outlook, nonetheless risks remain over the pace of recovery from the pandemic and there is additional friction to trade between Ireland and the UK as a result of the TCA. International tax reforms could negatively affect Ireland's attractiveness for foreign direct investment: while a lot remains uncertain at present, changes to the way multinationals are taxed have been discussed for some time by the OECD under the base erosion and profit shifting ("BEPS 2.0") process and the US is also discussing corporate tax reform. Irish property market overview

As we have noted before, the structural changes that have occurred in Ireland's property market since 2007, namely greater levels of institutional ownership and less debt, have given it greater resilience than existed historically. Furthermore, the Dublin office market entered the pandemic with much healthier fundamentals than it had prior to the Global Financial Crisis in 2008, due in part to the limited speculative development funding available this cycle. While prime headline quoting rents in March 2020 and March 2008 were both in excess of EUR60psf, the Dublin office vacancy rate in March 2020 was 6.5% versus 12.3% in March 2008 and the unlet office space under construction totalled 3.0m sq. ft. (6.9% of existing stock) in March 2020 versus 4.6m sq. ft. (14.9% of existing stock) in March 2008 (source: Knight Frank, Property Market Analysis). Irish property investment market

Total investment volumes in 2020 were EUR3.0bn, down 58% on the record volumes transacted in 2019 but broadly in line with volumes in 2017 (EUR2.3bn) and 2018 (EUR3.6bn). The PRS and office sectors again dominated, together accounting for 78% of volumes (2019: 77%). Irish investors (excluding Irish REITs) accounted for only 15% of investment in 2020 (2019: 18%), indicative of the continued interest from international investors in Irish property despite significant restrictions on mobility and travel (source: Knight Frank). Investment volumes remained resilient in Q1 2021 even though Ireland was at the highest level of COVID-19 restrictions throughout: investment spend amounted to EUR1.3bn (Q1 2020: EUR0.7bn). The residential and office sectors again dominated, representing 60% and 31% of total Q1 2021 volumes, respectively. International capital continues to seek opportunities to invest in Irish property, with 55% of Q1 investment acquired by overseas investors (Q1 2020: 87%) (source: Knight Frank). Top five office investment transactions (12 months to March 2021) 


Building                        Price Capital value Buyer                    Buyer nationality 
Project Tolka Portfolio, D2/4   EUR290m EUR994          Blackstone               American 
Bishop's Square, D2             EUR183m EUR1,003        GLL Real Estate Partners German 
28 Fitzwilliam, D2              EUR178m EUR1,309        Amundi Real Estate       French 
Baggot Plaza, D4                EUR141m EUR1,090        Deka Immobilien          German 
76 Sir John Rogerson's Quay, D2 EUR95m  EUR1,026        AM Alpha                 German 
Top five total                  EUR887m

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May 26, 2021 02:03 ET (06:03 GMT)