Interim Report and Financial Statement

8 August 2024

I-RES H1 2024 Results

Irish Residential Properties REIT plc

Underlying revenue growth of 2.1% and continued strong occupancy of 99.6%

Irish Residential Properties REIT plc (“I-RES” or the “Company”), the leading provider of residential rental accommodation in Ireland, today issues its results for the six-month period from 1 January 2024 to 30 June 2024.

Financial and Operational Highlights

• Like-for-like revenue growth of 2.1%, driven by both organic rental growth across the existing portfolio and enhanced ancillary revenue generation. Reported revenue for the period of €42.8 million, reducing versus prior year by 3.3% driven by the impact of asset disposals completed during the second half of 2023 which represented c. 5% of our portfolio.
• Continued strong occupancy of 99.6% at 30 June, reflecting the effectiveness of our leasing operations and the continued strong demand for our high-quality portfolio of modern properties.
• NRI margins broadly stable on a like for like basis, demonstrating the positive impact of moderating inflation levels in Ireland and continued rigorous cost control by management. NRI for the period of €32.7 million (30 June 2023: €34.3 million), with the reduction again driven by the impact of 2023 asset disposals.
• Financing costs reduced by 10.0% as disposal proceeds were deployed to reduce higher cost debt during 2023. The Company continues to have excellent visibility of future financing requirements, with 83% of our drawn debt fixed at a blended rate of 3.27%. Non-recurring costs of €1.5 million were recorded in the period associated with Shareholder Activism. A further €0.9 million was incurred in relation to the Strategic Review. 
• Adjusted EPRA Earnings of €14.2 million and resulting Adjusted EPRA EPS of 2.7c, down from 2.8c in H1 2023.
• Hugh Scott-Barrett appointed as Chair and lead of the Board’s Strategic Review in February 2024, having served as non-executive director since September 2022. Experienced real estate executive Eddie Byrne appointed as CEO in May 2024 with direct input into the Strategic Review since his appointment.
• Enhanced our vertically integrated digital platform “I-RES Living” through the launch of our new resident and corporate website. This launch is part of our wider operational and digital transformation strategy of enhancing our offering to customers and driving efficiencies in the business.  
• In line with Irish REIT legislation the Board intends to declare an interim dividend of 1.88 cents per share for H1 2024 representing 85% of our relevant distributable earnings in the period. Moving forward we intend to continue to pay, in line with REIT legislation of 85%, relevant earnings as a dividend to shareholders.  

Asset Portfolio Valuation and Balance Sheet Management

• As at 30 June 2024, I-RES’ portfolio had a total value of €1,243 million (31 December 2023: €1,274 million) with the change in the period driven by modest yield expansion, and partially offset by positive rental growth. The portfolio has an EPRA net initial yield of 5.1% representing a yield expansion of 0.2% since 31 December 2023 and resulting in an IFRS NAV per share of 126.4 cents (31 December 2023: 131.7 cents). This yield expansion resulted in a non-cash fair value revaluation adjustment of €32.5 million and a loss before tax for the period of €20.3 million. Net LTV was 45.4% at 30 June 2024, comfortably below our debt covenants and the limits set by the Irish REIT legislation.
• The Strategic Review has identified c. 315 units suitable for an asset recycling programme which is expected to generate proceeds of between €110 and €115 million (based on estimated current OMV[1]) over a 3 to 5 year period, with the proceeds to be deployed in line with our capital allocation policy. In the latter part of H1 2024, we completed 6 individual unit disposals, generating c. €2 million of net proceeds, with disposals completed at a significant premium to latest book values.

Strategic Review

• We have separately announced this morning the conclusion of our Strategic Review, which commenced in February 2024 and was led by Chair Hugh Scott-Barrett and a dedicated Board subcommittee including CEO Eddie Byrne and non-executive directors Denise Turner, Philip Burns, and Richard Nesbitt. The Review was supported by international financial and real estate advisors.
• The Board has unanimously concluded that, following rigorous market testing, a sale of the Company or its assets is unlikely to maximise shareholder value. No proposals were received to acquire the Company during the course of the Review.
• The Strategic Review has identified the following initiatives or actions which the Board believes will drive value maximisation for shareholders over the medium-term:
  • Executing a selective capital recycling programme which is accretive to value, including the disposal of c. 315 units which is expected to generate between €110 and €115 million of proceeds over a 3 to 5 year period (based on estimated current OMV). Disposals are expected to take place over a 3 to 5 year period as turnover of current tenancies is a prerequisite for the disposal of these units under Irish law. This represents c. 8% of the total portfolio and c. 23% of the Company’s market capitalisation[2].
  • Generation of supplementary revenue streams consistent with existing Irish regulations.
  • Optimising the Company’s cost structure to maximise Net Rental Income Margin and Adjusted EBITDA Margin to ensure the Company is best placed to leverage future growth opportunities.
  • Taking advantage of the significant growth and consolidation opportunities which exist in the Irish PRS market over the medium-term, and for which I-RES is uniquely positioned to capitalise on.
  • Continuing to work constructively with stakeholders, including government, to push for positive change in the Irish residential regulation system.
  • Continuing to advocate with the relevant Irish authorities for changes to the Irish REIT regime to better align with progressive REIT systems in other European jurisdictions.

• Exploring attractive opportunities to partner, inter alia, with Irish government bodies to deliver new supply to the affordable housing market including the Secure Tenancy Affordable Rental (“STAR”) scheme.

Commenting on the results, Eddie Byrne, Chief Executive Officer, said:

“I am pleased to report my first set of results as CEO of I-RES. It has been an active period for the Company with the delivery of another strong operational performance and the completion of our Strategic Review. I joined the Company at a very exciting time and it is clear that significant opportunities exist for I-RES in an exceptionally strong Irish PRS market.

While overall we believe the outlook is positive, the current Irish rental regulatory structure remains the single most inhibiting factor for our business. The 2% cap on rental increases has had a profound impact on the supply of new build-to-let properties in the market and is an impediment to critical international investment. We believe that a more progressive and evidence based regulatory framework that is fair and equitable to both the resident and the property owner, will attract institutional capital and help to alleviate the current supply shortage while also providing safe and secure tenancy for residents.

We are continuing to engage constructively with stakeholders to encourage reform of PRS regulation in Ireland, and welcome recent publications from the Departments of Housing and Finance and the Housing Commission, which all point towards a change of tone that the current regulatory structure requires significant reform. We are also engaging with Irish government bodies on initiatives such as the Secure Tenancy Affordable Rental programme to support the delivery of new supply to the affordable housing market.

Looking ahead, we will focus on implementing the operational initiatives identified by the Strategic Review which will help to optimise our portfolio, drive value maximisation for shareholders, and improve our financial performance over the medium-term.”

Financial Highlights