CONTINUING TO DELIVER. Annual Report 2017 GROWTH ECONOMY STRONG MARKET FUNDAMENTALS HIGH QUALITY ASSETS RISK REWARD FOCUS

Transcription

1 Annual Report CONTINUING TO DELIVER GROWTH ECONOMY STRONG MARKET FUNDAMENTALS HIGH QUALITY ASSETS RISK REWARD FOCUS

2 Having created a portfolio of high quality commercial property assets in Ireland, our experienced management team is focused on driving future growth and delivering risk adjusted shareholder returns. Who we are Green REIT plc is an Irish Real Estate Investment Trust ( REIT ) and is listed on the Irish and London Stock Exchanges. The Company was the first REIT established in Ireland following the introduction of REIT legislation by the Irish Government. What we do The Company is the largest listed Irish commercial property company by net assets and by market capitalisation, and owns a portfolio of commercial property assets located mainly in Dublin, most of which it acquired early in the Irish recovery cycle. How we do it Our strategy is simple: to grow the business in a sustainable way, delivering income and capital growth through active asset management and development within our portfolio of prime commercial real estate located in prime locations, mainly around Dublin.

3 Our Business at a Glance Portfolio overview 20 Properties Portfolio valuation 1.38bn Total asset value 235,000 sq m Total floor area 81% Offices 2.5m sq ft Initial Yield 1 Investment 5.2% 5.2% Portfolio 4.7% 4.8% Income overview Portfolio value by sector 10% Retail 5% Mixed use 4% Logistics On 30 June values On 30 June values On 30 June values On 30 June values 68.9m Total annual contracted rent 54% Of total contracted rent comes from our top 10 tenants 43% Financial services Occupancy rate by ERV 98.5% (30 June : 98.3%) Portfolio value breakdown Our portfolio is 5% reversionary at 30 June ( 68.9m annual contracted rent v. 72.5m annual ERV) Contracted rent breakdown by tenant business sectors 22% Technology media and Telecommunications ( TMT ) 15% Retail Dublin focus 95% Dublin, by value Prime focus 94% Prime, by value 20% Other 1 Calculated as contracted rent at 30 June /17 over the June /17 valuation plus notional purchaser s costs of 4.46%.

4 N O R T H D O C K S R I V E R L I F F E Y DUBLIN PORT TEMPLE BAR TRINITY COLLEGE S O U T H D O C K S G R A N D C A N A L D O C K DUBLIN CASTLE 13 9 RINGSEND ST PATRICK S CATHEDRAL MERRION SQUARE 8 ST STEPHEN S GREEN CENTRAL BUSINESS DISTRICT 12 IVEAGH GARDENS FITZWILLIAM SQUARE AVIVA STADIUM CENTRAL BUSINESS DISTRICT EXTENSION RANELAGH M1 Office Retail M3 HERBERT PARK N M2 M50 7 D U B L I N A IRPORT RDS POR TMA RNOC K H O WTH 2 2 Burlington Road, Dublin College Green, Dublin 2 M4 N4 3 Fitzwilliam Hall, Dublin College Green, Dublin 2 D U B L I N C I T Y C R E N T E R A T H MIN E S Mount Street Lower, Dublin Molesworth Street, Dublin 2 10 Central Park, Leopardstown, Dublin Westend Retail Park, Blanchardstown, Dublin Westend Commercial Village, Blanchardstown, Dublin 15 1 N7 6 N81 R O CKB R O O K D U NDRU M 10 M50 N Harcourt Road, Dublin Harcourt Street, Dublin 2 13 One Molesworth Street, Dublin 2 Mixed use 1 INM Building, Citywest Business Campus, Co. Dublin C ARRICKMINE S C U R TLEST O W N N11 14 George's Quay Plaza, Dublin 2 15 George's Quay House, Dublin 2 16 George's Court, Dublin 2 6 The Arena Centre, Tallaght, Dublin 24 Logistics WICKLOW M O U N T AINS N A TIONAL P ARK GREY S T ONE S 18 Westend Office Park, Blanchardstown, Dublin One Albert Quay, Cork 7 Horizon Logistics Park, Swords, Co. Dublin 20

5 Green REIT plc Annual Report and Accounts 01 In this Report Strategic Report 02 Financial Highlights 04 Strategic & Operational Highlights 06 Chairman s Report 10 Our Market Landscape 16 Our Strategy and Business Model 22 Risk Report 24 Principal Risks & Uncertainties 28 Investment Manager s Review 46 Portfolio Overview 51 Sustainability Review 62 The Management Team 06 Chairman s Report Gary Kennedy Chairman Green REIT plc Governance Section 64 Introduction to Corporate Governance 65 Corporate Governance Framework 66 Board of Directors 68 Corporate Governance Statement 72 Report of the Audit Committee 78 Report of the Nomination Committee 80 Report of the Remuneration Committee 81 Report of the Directors 86 Financial & Other Information Pat Gunne Chief Executive Green Property REIT Ventures Financial Information 87 Independent Auditors Report 94 Financial Statements 98 Notes to the Financial Statements 124 Company Financial Statements 127 Notes to the Company Financial Statements Supplementary Information 131 EPRA Performance Measures 137 AIFMD Disclosures 138 Three Year Review 140 Company Information 141 Note on Forward-looking Statements 142 Glossary of Terms 46 Portfolio Overview 28 Investment Manager s Review 51 Sustainability Review 66 Board of Directors

6 02 Strategic Report Financial Highlights Positive results and a year of strong operational performance. EPRA earnings per share 4.8c Dividend per share 5.0c +29.7% On last year 4.8c +8.7% On last year 4.6c 5.0c 3.7c 2.1c 1.6c 1.6c 0.9c Contracted annual rent 68.9m Profit after Tax 129.8m +12.4% On last year -10.8% On last year 55.7m 61.3m 68.9m 156.7m 145.5m 129.8m 29.4m 43.1m

7 Green REIT plc Annual Report and Accounts 03 Strategic Report Governance Section Financial Information Supplementary Information EPRA Earnings NAV increase 33.0m 10.0% +32.5% On last year 1,152.2m 1,048.0m EPRA NAV per share 1.66 Portfolio Valuation 1,381.4m +9.2% On last year +11.3% On last year ,240.7m 1,381.4m m m

8 04 Strategic Report Strategic & Operational Highlights Development Substantial value and income created through development completions, with expanded development programme and potential to deliver a further 11 million of annual rent. Completion and full letting of office developments at 32 Molesworth Street and Building H in Central Park, adding 6.5 million to contracted annual rent and 6 cent/ 41 million to EPRA NAV Commenced construction of Building I in Central Park, with completion in Q of this 9,000 square metre (97,000 square feet) office building 164 acres of additional lands acquired at Horizon Logistics Park, with a further 30 acres contracted post year end, bringing total land holding to circa 300 acres, providing short, medium and longer term optionality Third new unit completed at Horizon Logistics Park, with two further pre-let units totalling 11,800 square metres (127,000 square feet) under construction and two further units to commence shortly Barclays Bank Ireland plc signed up in August at 62 per square foot ( 670 per sq m) at One Molesworth Street for over 50% of the office space, at an annual rent of 2.4 million 8.0 million of new contracted annual rent added from developments in the year to 30 June, or 11.9 million including lettings completed since year end. Potential future development of a minimum of 32,500 square metre (350,000 square feet) at Central Park, post Building I One Molesworth Street construction progress August Horizon Logistics Park Building I construction progress August

9 Green REIT plc Annual Report and Accounts 05 Strategic Report Governance Section Financial Information Supplementary Information Asset Management Successful asset management initiatives driving record WAULT. 10.3m 2.3 million of new annual rent secured through new lettings on our investment properties Lease renegotiations agreed on 4.4 million of annual contracted rent, principally with Bank of America Merrill Lynch in Central Park ( 2.3 million) and the Irish Government at Harcourt Street ( 1.0 million) WAULT of 8 years across the portfolio at 30 June, a record high for the Company Occupancy rate by ERV of 98.5% (30 June : 98.3%) Dublin 2 and 4 offices 12% reversionary, with an average contracted rent per square foot of 43 ( 460 per sq m) versus 49 average ERV per square foot ( 530 per sq m) at 30 June Total new annual rent secured from new lettings and development completions 8 years A record high WAULT Homesense, Westend Retail Park Bank of America Merrill Lynch, Central Park

10 06 Strategic Report Chairman s Report This has been another year of strong results for the Company, with a significant contribution to both income and NAV from our development schemes. Our strategic focus continues to be on driving risk adjusted returns for shareholders. One Albert Quay, Cork

11 Green REIT plc Annual Report and Accounts 07 Strategic Report Governance Section Financial Information Supplementary Information Gary Kennedy Chairman It gives me pleasure to communicate another positive set of results for the Company for the year to 30 June, a year of strong operational performance. Development pipeline delivering ahead of plan The year to 30 June saw the completion of our first two office developments in Dublin, both of which were fully let during the year and have made a significant contribution to both net asset value ( NAV ) and to income, ahead of our forecasts. Since 30 June we have further de-risked our office development pipeline through the pre-letting to Barclays Bank Ireland plc of over half of the office space at One Molesworth Street, which is due for completion at the end of. Our strategy of developing the highest quality office buildings in the best locations in Dublin is paying off, and has led to the attraction of high calibre tenants. Our contracted rent and the security of our income are at Company highs, which supports our progressive dividend policy, with an increase in this year s dividend of 9% over the prior year. Our guidance of a dividend of 4% on NAV post the completion and letting of our development programme remains. The substantial progress that we have made in de-risking our office development pipeline underpinned our decision to proceed with our next office development, Building I in Central Park, where construction commenced at the end of June. The building, comprising 9,000 square metres (97,000 square feet) of lettable space, is due for completion in the Q and its construction highlights our confidence in the prospects for the Dublin office market. We look forward to the completion of One Molesworth Street at the end of this year and 5 Harcourt Road in Q1 2018, and to the contribution of both, in terms of NAV and rental income. The year to 30 June was also a busy and progressive year at Horizon Logistics Park. We completed an additional unit and leased it to DFS, we commenced construction of a new unit for Kuehne + Nagel and we acquired a further 164 acres of prime logistics development land in December. Since year end we have commenced the construction of a further unit for a luxury goods retailer. We look forward to further developing this strategic land holding in what many consider to be the best located logistics land in Dublin, with easy access to Dublin Airport, the M50 orbital motorway and Dublin Port. Strong recurring earnings and NAV growth Through new lettings achieved on our completed development assets and across our investment properties, along with successful asset management initiatives, EPRA Earnings grew by 33% year-on-year to 33.0 million (: 24.9 million) or to 4.8 cent per share (: 3.7 cent per share). The positive contributions made by both EPRA Earnings and revaluation surpluses on our properties, particularly from our development schemes, has seen strong growth in EPRA NAV per share of 9.1% for the year to cent, with a total return for the year of 12.9% (: 17.7%).

12 08 Strategic Report Chairman s Report continued Ireland positive macroeconomic backdrop continues The Irish economy has continued to experience strong economic growth, with all of the key indicators trending positive. Employment growth for the year to March was 3.5%, with Dublin based office employment growing at 5.7%. The unemployment rate dropped to 6.1% in September, from 8.3% in June. This compares with a peak of 15.2% in early Investment and consumer spending are the main drivers of economic growth, with core investment growth of 13.6% and core domestic demand growth of 5.4% in (source: Goodbody). On the foreign direct investment ( FDI ) front the IDA Ireland results for the first half of announced that job approvals, their key metric, was up 22% versus the first half of, with 93% of IDA clients ranking growth prospects for their Irish companies from Good to Excellent. FDI has played a key role in the recovery of the Irish economy and continues to do so. The country s debt to GDP ratio continues to fall below the EU average, with only a minor government deficit expected for. Eurozone interest rates remain low, and are expected to continue to remain low for some time, while the Irish Government 10 year bond rate stood at 72 basis points at 30 June, both of which continue to be supportive of commercial property yields. Continued moderate gearing level Our gearing level remained relatively unchanged year-on-year, at 20.2% (30 June : 20.6%). During the year we agreed terms with Ulster Bank Ireland to join Barclays Bank Ireland as a revolving credit facility lender, increasing the total commitment under the facility from 150 million to 210 million, on the same terms. This additional commitment will fund further capital expenditure on our development projects. Our intended gearing level continues to be 25%, post the completion and letting of our development assets, but as always we remain opportunistic in our outlook, which could lead to higher or lower gearing levels depending upon market conditions and opportunities. Our contracted rent and the security of our income are at Company highs, which supports our progressive dividend policy, with an increase in this year s dividend of 10.4% over the prior year. Dividends On 19 September the Board declared a dividend in respect of the year to 30 June of 5 cent per share, or a total dividend payout of 34.6 million, which was paid on 20 October. This represents 100% of the EPRA Earnings for the year to 30 June plus a further 1.6 million from reserves, and is an increase of 10.4% on the prior year dividend. Property Income Distribution ( PID ) 33.0m 4.8 cent per share Non-PID 1.6m 0.2 cent per share Total dividend 34.6m 5.0 cent per share

13 Green REIT plc Annual Report and Accounts 09 Strategic Report Governance Section Financial Information Supplementary Information Financial Results and Position Summary Financial Information 30 June 30 June Change Balance Sheet: Total Property Value 1,381.4m 1,240.7m +11.3% EPRA Net Assets 1,149.9m 1,048.0m +9.7% EPRA NAV per Share cent cent +9.1% Property LTV 20.2% 20.6% 0.4% Income Statement: Gross Rental Income (excluding service charge income and joint venture income) 60.4m 56.4m +7.2% Profit for the Period 129.8m 145.5m 10.8% EPRA Earnings 33.0m 24.9m +32.5% EPS Basic 18.9 cent 21.5 cent 12.1% EPS EPRA 4.8 cent 3.7 cent +31.1% The Investment Manager In May the Company confirmed that the Investment Manager Agreement in place with Green Property REIT Ventures since the launch of the Company in July 2013 will be renewed in July 2018, on the same terms, for a further three year renewal period. We welcome the certainty that this brings and the Board looks forward to continuing to work with the management team to add further value for shareholders through the completion of development properties, growing our income and dividends, and exploiting further opportunities that may arise in the coming years. The Board approved the payment of a Performance Fee of 5.7 million to the Investment Manager for the year to 30 June, in line with the formula set out in the Investment Manager Agreement. This Performance Fee was settled by the issuance of 4,007,197 new ordinary shares to the Investment Manager by the Company on 2 October. These shares are subject to the lock-in provisions set out in the Investment Manager Agreement, which prohibit the sale of these shares for up to up to 42 months from their issue date, ensuring an alignment of shareholders interests. These new shares will be issued after the ex-dividend date and were therefore not entitled to this year s dividend. Outlook We remain focused on delivering attractive risk adjusted returns to shareholders. The total return to shareholders for the year to 30 June of 12.9%, while maintaining moderate levels of gearing and speculative property development, highlights this focus. It also highlights both the quality of our portfolio and the experience of the management team. Decisions made early in the Company s life are delivering ahead of plan, in particular the completion and letting of our development schemes, which were a key driver of the Company s strong performance for the year to 30 June and will contribute further in the years ahead. At the same time, we have further strengthened our income, growing our contracted rent significantly and enhancing the security of our income streams through a combination of long term new lettings and renegotiation of existing leases. The value and income created through our development completions to date have encouraged us to proceed with the construction of the next building in Central Park, and to continue with our rolling programme of developing further logistics units at Horizon Logistics Park. All of this feeds through to our progressive dividend policy, another important aspect of shareholder returns. The Board recognises that a continuation of the current favourable macroeconomic backdrop is an important dynamic in the context of delivering further on our objectives. While there continues to be uncertainty in many areas, the domestic Irish economy continues to grow in a sustained manner and FDI flows remain strong. This in turn is driving the occupier market, while the continuing low interest rate environment remains supportive of real estate values. We remain confident in the Company s prospects as we look forward to the period ahead. Gary Kennedy Chairman 24 October

14 10 Strategic Report Our Market Landscape The market backdrop in Ireland continues to provide us with opportunity, particularly around our development assets, which are achieving considerable letting success ahead of expectations. 149,000 sq m Record gross take-up in Dublin in H1 (1.6m sq ft) Positive macroeconomic backdrop supportive of commercial real estate 5 Harcourt Road (CGI)

15 Green REIT plc Annual Report and Accounts 11 Strategic Report Governance Section Financial Information Supplementary Information The strong levels of foreign investment into Ireland, demonstrated by the ongoing success of IDA Ireland in attracting international projects, is one of the key factors encouraging us to expand upon our existing development programme as we continue to successfully de-risk our current pipeline. Economic Overview The consensus forecast is that GDP growth will be 4.3% for the full year for and 3.1% for 2018, both well ahead of Eurozone averages. The composite Purchasing Managers Index ( PMI ) continues to show sustained growth, and for July was at The uninterrupted reduction in the unemployment rate continues, with the seasonally adjusted unemployment rate for August at 6.3%, down from 8.3% in June. These levels compare with a peak of 15.2% in February 2012, with the number of people employed now within 5% of the all-time peak. The forecast is that Ireland will reach full employment (circa 5% unemployment) by the end of Household debt was 214% of disposable income in Q and currently stands at 141%, with disposable income now ahead of the previous high in Q The savings rate has remained relatively constant and currently stands at 6.8%. Finally, Irish household net worth fell by 285 billion during the financial crisis, an estimated 221 billion of which has been recovered to date. While there are concerns that Brexit will impact negatively on domestic export businesses, to date this has not come through in the numbers. Nominal goods exported are up 7.3% year-on-year in H1, resulting in a trade surplus of 20.8 billion for the year, which is 19% higher than the previous year. The export component of the services PMI has been over 50 for eight successive readings, which is positive when the negative impact on exports from the recent weakening of Sterling versus Euro are considered. In fact, exports to the UK have grown by 14.1% year-on-year to June, much of which relates to the chemical sector. In IDA secured a total of 244 investments into Ireland, with total FDI related employment now at a record level of over 200,000 people, or 10% of the total workforce. IDA research shows that 48% of new jobs created are concentrated in Dublin, 14% in Cork and 10% in Galway. To the half year point in the IDA reported 114 new investments and job approvals, up 22% compared with H1. While there are many risks associated with Brexit, it does also offer opportunity for Ireland to benefit from further FDI investment and recent announcements of growth and relocations, particularly in the financial services sector, have been positive in that regard. Demand remains strong, with new entrants still emerging investors are mainly focused on core locations and Grade A quality buildings. Total tax receipts for Ireland for the six months to June are up 10% year-on-year, and the forecast is for a government deficit of 0.1% of GDP for and a small surplus in With the level of national debt remaining high, spending and tax policies are expected to remain relatively prudent in the coming years. In May of the Irish Government completed a successful initial public offering ( IPO ) of part of one of our pillar banks, Allied Irish Banks, and the National Asset Management Agency ( NAMA ) has reduced its balance sheet by 80% since its foundation and recently revised its lifetime profit guidance upwards to 3 billion. Inflation in Ireland remains muted, with headline Consumer Price Index ( CPI ) of 0% year-on-year to June. That said, we expect to see inflation emerging as a trend as we move closer to full employment. The total population of Ireland has increased by 12% in the last decade and currently stands at 4.7 million ( census), with 55% of the population under 40 years of age. The heightened level of uncertainty brought about by the new Administration in the US, particularly around potential corporate tax reform, and concerns about European politics appear to have abated for the time being. The biggest unknown and concern presently is Brexit and how it is likely to impact on the Irish economy. While the Dublin office market is likely to be a beneficiary of Brexit, the impact on the real economy, and particularly for the agricultural sector, is unlikely to be known for some time. Capital Markets The commercial investment market has been more subdued in H1, with total asset sales of 800 million, compared with 2.95 billion for the first half of and 4.5 billion for the full year to December. The anticipated pull back in volumes is as a result of bank de-leveraging winding down and the longer term view being taken by recent buyers, many of whom are institutional, with the resulting reduction in the level

16 12 Strategic Report Our Market Landscape continued of re-trading of assets. The 15 year average volume of sales in a six month period is 760 million, so we are now seeing a normalised market turnover emerging. As we look forward there is approximately billion of assets either on the market or coming to the market in the autumn period, so the likelihood is that total asset sales in calendar year will reach in the order of 2 billion. The private equity funds that were the early buyers of real estate in Ireland in this cycle continue to be active where loan books are trading. Overall, they are net sellers but in the main their portfolios have assets located throughout the country and often comprise small lot sizes. Demand remains strong, with new entrants still emerging. That said, investors are mainly focused on core locations and Grade A quality buildings, and there has been a dearth of this type of product on the market in the year to date. On the other hand we are seeing thin demand for secondary assets and secondary locations. Due to the shortage of prime stock and the desire of some funds to diversify, we are also seeing investors looking at alternatives including forward funding of speculative and pre-let office developments in Dublin, investing in the private rental residential sector and in build-to-rent student accommodation. The top 10 investment transactions in the first half of, which account for 47% of the total capital deployed, were as follows: Property Sector Price ( m) Purchaser City Quay, Dublin 2 Office (forward fund) 126 Irish Life Clayton Hotel Cardiff Lane, Dublin 2 Hotel 40 Dalata Park Portfolio, Dublin 18 Office 39 Syndicated Fund arranged by Cantor Fitzgerald Montrose, Dublin 4 Student Accommodation 38 Hines Aerodrome Business Park, Naas Industrial 28 Irish Life Parkway Retail Park, Limerick Retail 23 Oaktree Capital One Grand Parade, Dublin 6 Office 23 Quadoro Doric Real Estate Fumbally, Dublin 8 Office 22 M7 Real Estate South County Business Park Office 21 Private Irish Investor Ericsson Facility, Athlone Office 20 Finegrain Property TOTAL 380 In the six month period to June offices accounted for 38% of capital deployed, retail for 24%, mixed use for 12%, hotel for 8%, industrial for 8% and the remaining 10% is classed as other uses. In the same period 61% of assets were acquired by Irish buyers, with North America accounting for 9%, the UK for 6%, Germany for 3% and the remainder is of unknown origin. We have seen an increase in the number of Irish buyers, led predominantly by Irish institutions, albeit at reduced average lot sizes. While prime yields remain stable, all are generally trending stronger as can be seen in the table below. We have seen evidence of further yield compression in prime office yields in mainland Europe, for example Paris at 3.00%, Frankfurt at 3.50%, Madrid at 3.75% and Amsterdam at 4.00%. This compares with 4.65% for the Dublin office market, which is attractive when the supply/demand fundamentals and strong economic growth are considered. In addition, with long term bond yields at 0.72% (at 30 June ), there is a growing feeling that prime yields may in fact be keener than the quoted level, but to date a lack of transactional evidence has kept the headline numbers unchanged. 4.65% Prime Dublin office yield trending stronger

17 Green REIT plc Annual Report and Accounts 13 Strategic Report Governance Section Financial Information Supplementary Information Prime Equivalent Yields (Dublin) Sector Yield Trending Retail (High Street) 3.25% Stronger Office 4.65% Stronger Retail Warehouse 5.00% Stable Industrial 5.50% Stable Student Accommodation 5.25% Stronger Multifamily 4.70% Stronger Source: CBRE Property Returns The MSCI index recorded total returns for H1 for Ireland of 5% across all property sectors (6.3% in H1 ). On an annualised basis to June this reflects 10.0% compared with 19.5% for the same period in. These moderating returns, while still healthy, illustrate that the market has stabilised and is at a mature phase in the cycle. This compares to the UK, where returns were 4.7% in the same period. Stripping out transactions and development in the period, the main driver of returns from standing investments is the income return and ERV growth. The top performing sector with a total return of 3% was industrial, followed by office and retail at 2%. The MSCI all-property equivalent yield (as at June ) has fallen from 5.8% when we last reported in February, to 5.6%. Occupier Markets Dublin Offices Tenant demand and the resulting leasing activity have been exceptional in the first six months of. Total take-up in H1 in Greater Dublin reached 150,000 square metres (1.6 million square feet) (H1 : 90,000 square metres (965,000 square feet)), of which 24% was in the suburbs. On an annualised basis this would equate to 300,000 square metres (3.2 million square feet) in gross terms. If this were to be achieved, it would surpass the total take-up for of 246,000 square metres (2.65 million square feet) and would be well ahead of the 10 year average of 186,000 square metres (2 million square feet) per annum. When the Dublin market is compared to the six main regional cities in the UK, from 2012 the total gross take-up in Dublin was 60% of the combined total gross take-up in those six regional cities. In H1, Dublin accounted for 74% of the combined take-up in those regional cities, which demonstrates the dynamic nature of the occupier market in Dublin. H1 large space occupiers have dominated take-up, with 48% of lettings being space over 4,700 square metres (50,000 square feet) and 24% being space between 1,900 and 4,700 square metres (20,000 and 50,000 square feet). The norm in the Dublin market would be in the order of 70% of take-up (by size) in a given period being space of less than 930 square metres (10,000 square feet), so the current strong take-up levels can be attributed to a number of large lettings. Gross take-up in H1, by sector, was as follows: Dublin City Centre Computer/High Tech 45% Public Sector/High Tech 25% Financial Services 11% Business Services 8% Consumer Services & Leisure 8% Professional 2% Manufacturing Industrial & Energy 1% Total 100% Dublin Suburbs Financial Services 33% Computers/Hi-Tech 26% Business Services 23% Manufacturing Industrial & Energy 8% Consumer Services & Leisure 6% Professional 4% Total 100% Of the total take-up in the suburbs, 45% in the first half of was in the south suburban market. This was particularly boosted by the 13,900 square metre (150,000 square feet) letting by the Company of Building H in Central Park to AIB in May. Looking towards the remainder of, with the volume of deals currently in legal due diligence and office agents reporting 250,000 square metres (2.7 million square feet) of current demand, this year looks set to be a record year for leasing activity. There is no doubt that Brexit is starting to have a positive impact on tenant demand for offices, and this is likely to increase over time as decisions are made by corporates around their post-brexit operating strategy. It has been reported that J.P. Morgan Cazenove has acquired a 12,100 square metre (130,000 square feet) building currently under construction in the South Docks of Dublin, and certain other recent lettings would appear to be facilitating Brexit relocations. In addition, there are a number of other occupiers, mostly in the financial

18 14 Strategic Report Our Market Landscape continued services sector, either looking to expand or new entrants currently carrying out due diligence on the Dublin market. It is still early days in the Brexit negotiations but we are now starting to see demand translating into actual lettings. The greater Dublin office vacancy rate continued to decline, and currently stands at 6.5%, down from 6.6% when we reported in February. In Dublin 2/4 (core city centre) the overall vacancy rate is 5%, and the Grade A vacancy rate is 2%. The vacancy rate in the south suburbs is 7.4% (Feb : 8.4%) and the Grade A vacancy rate is 5.5% (Feb : 5.9%). There is currently 441,800 square metres (4.76 million square feet) of gross office development under construction in Dublin city centre, over 34 schemes, of which 37% or 163,000 square metres (1.75 million square feet) is pre-let or in legals. Of this, 142,000 square metres (1.53 million square feet) is due for completion in and 62% of the completions have been pre-let or are in legals. The remainder is due for completion in 2018 and In addition, there is currently 33,700 square metres (363,000 square feet) under construction in four projects in the suburbs, of which 6,500 square metres (70,000 square feet) is due to be delivered in, with the remainder in 2018/19. Prime headline rents in Dublin city centre have remained static in the last six months and currently stand at per square metre ( per square foot), while rents in the south suburbs have also remained static at per square metre ( per square foot). Market commentators are suggesting modest single digit rental growth for. Cork Office Market The total take-up in the Cork office market reached 1,255 square metres (13,455 square feet) in Q1, down from 21,500 square metres (231,000 square feet) for calendar year. The lack of take-up continues to be due to the limited amount of Grade A buildings available. The current vacancy rate stands at 10% (end : 11.5%) and much of this is older, obsolete space with little Grade A space available to let. The Capitol Cinema site at Grand Parade is now complete and comprises a mixed retail and office scheme (50:50) with office rent of 323 per square metre ( 30 per square foot) being achieved. The building was recently sold to a German fund, Real IS, for approximately 46 million, reflecting a Net Initial Yield of 5.50%, which is a further endorsement for the prime Cork market. As there is such tight supply of Grade A buildings it is anticipated that the Cork market will see rents reaching 376 per square metre ( 35 per square foot) in the next 18 months. One Albert Quay, Cork There is a new scheme due to commence in the coming weeks on Albert Quay, not far from the Company s office building at One Albert Quay. The site extends to 2.25 acres and the intention is to build four buildings with a total area of 28,800 square metres (310,000 square feet). The first, known as Block A, will extend to 13,200 square metres (142,000 square feet) and is due to be completed by the end of In addition, there is a further 186,000 square metres (2 million square feet) in the Greater Cork area where a planning permission is granted, but where delivery is likely to be measured as developers will potentially require pre-lettings in order to obtain funding. Retail Retail sales data in Ireland is mixed and there is no doubt that the sector is generally under pressure, with competition coming from internet retailers due particularly to the weakening of Sterling versus the Euro. That said, most areas are recording moderate growth, assisted by the general improvement in the economy and employment growth. Data from the Central Bank of Ireland shows that e-commerce expenditure (in cash terms) was up 21.2% year-on-year in H1. The volume of retail sales was up by 4.1% in the year to June, and if motor sales are excluded this increases to 7.1%. The increase in the value of sales is more modest, showing an increase in the year of just 1.6%. The strongest performers are in the Household Equipment and the Books, Newspapers, Stationery and Other Goods categories, while the weakest performer is Motor & Fuel. The consumer sentiment index, while down on the high of January, is still ahead of the series average and a general commentary from retail agents is that footfall in major centres is up year-on-year.

19 Green REIT plc Annual Report and Accounts 15 Strategic Report Governance Section Financial Information Supplementary Information The MSCI index is showing that the ERV for Grafton Street, Dublin s main retail thoroughfare, is up 9% in the year to June and 5.5% overall for the sector. Prime rents on Grafton Street currently stand at 6,300 per square metre ( 585 per square foot), Dundrum Town Centre is at 4,500 per square metre ( 418 per square foot) and Blanchardstown Shopping Centre is at 3,000 per square metre ( 278 per square foot) (all in terms of Zone A). A lack of available premises to let is limiting expansion plans for many retailers. Recent openings include Homesense in Westend Retail Park, Dublin 15 and at Capitol Cinema in Cork, Urban Decay on Grafton Street, Lifestyle Sports and Smiggle in Blanchardstown Shopping Centre, and Sportsdirect has opened its first store on North Earl Street in Dublin city centre, with the expectation that it will open further stores. New retail development remains limited to extensions to existing centres, with no new commencements in the six months to June. Industrial and Logistics Sector Take-up to the half year point in reached 121,000 square metres (1.3 million square feet), which is consistent with take-up for the same period in. Supply of modern facilities continues to be constrained and is the main focus of demand. In the six month period to June there were 83 transactions (full year ; 183), of which 54% were lettings and 46% were sales of vacant units to owner occupiers. In the period 43% of lettings were of space between 1,900 and 4,700 square metres (20,000 and 50,000 square feet) and 28% were of space between 4,600 and 9,300 square metres (50,000 and 100,000 square feet). The remaining 11% was for space under 1,900 square metres (20,000 square feet) and there were no lettings over 9,300 square metres (100,000 square feet). Prime rental levels have continued to grow, with a further 6% rental growth so far in H1, following growth of 25% in, and with prime rents currently standing at per square metre ( 9.25 per square foot). Despite this, there remains limited speculative development. While Brexit negotiations are at an early stage, it is felt that it may result in increased demand within the industrial and logistics sector, due to likely changes to the UK s trading arrangements with the EU. Prime industrial/logistics yields remain stable at 5.50% and it accounted for 8% of the total investment spend in the first half of. Horizon Logistics Park Residential There has been an increase in the housing output, which was up 25% year-on-year for, with 14,932 units completed in the year. While completions are increasing, it is taking time to ratchet up and it is estimated that they represent roughly half of the current level of annual demand. As a result, there is a continued mismatch between demand and supply and it is likely to take some time before there is a balance. Consequently, house price inflation is evident, with a forecast of 7% growth for and 6% for Values today remain 25% off peak levels in Planning permissions granted in Q1 stood at 17,934 units, up 39% year-on-year, which is a positive sign that future completions are ticking up. The forecast is that there will be 16,000 completions in and 18,000 in In Q2 average rents nationally were 1,159 per month, which is up 11.8% year-on-year to June and is 56% above the trough of 742 per month in Q In Dublin, average monthly rents in Q2 were 1,707, which is 12.3% up year-on-year to June. Sources: 1 CBRE research reports 2 JLL research reports 3 Central Statistics Office website 4 IDA website 5 Investec research 6 Goodbody research 7 Davy research 8 Ulster Bank PMI 9 Daft.ie

20 16 Strategic Report Our Strategy and Business Model Our strategy is to grow the business in a sustainable way, delivering income and capital growth through active asset management and development of our commercial property portfolio, with prudent use of debt finance. One Molesworth Street (CGI)

21 Green REIT plc Annual Report and Accounts 17 Strategic Report Governance Section Financial Information Supplementary Information High Quality Assets The Company has a substantial portfolio of commercial property in Ireland, 94% of which is prime. Maximising the proportion of prime property within the Company s overall portfolio has been a goal of the Board since the Company s inception, which has been achieved to date through a combination of the following initiatives: The acquisition of prime commercial property, mainly through portfolio transactions, starting at an early point in the current cycle in late 2013 The selective acquisition of further prime property during 2015, being the other 50% of Central Park and One Albert Quay in Cork The disposal of close to 100 million of secondary assets between May and March The development of prime office and logistics real estate in the best locations in Dublin With regard to further acquisitions, these will be on a selective and opportunistic basis, as was the case with the acquisition of the additional lands at Horizon Logistics Park at Dublin Airport. We will continue to be disciplined in our approach to acquisitions. The Board believes that by maximising the proportion of prime property within the portfolio, its portfolio value will be optimised. In addition, the Board believes that the impact on the Company s portfolio of a downward cycle will be mitigated by the following portfolio characteristics: 95% Dublin focused: our portfolio is 95% by value in Dublin. 100% Properties which are in locations that are expected to benefit from ongoing FDI in Ireland: 100% of our portfolio by value is in Dublin and Cork. Warehousing and distribution facilities located in close proximity to airport and motorway infrastructure: our logistics units and approximately 300 acres of land are located adjacent to the runway of Dublin Airport, where there are proposals afoot to build a second runway, whi ch is in turn in close proximity to the M50 ring road, the M1 motorway to the north and the Dublin Port Tunnel. 94% Prime or good quality secondary assets and locations: we regard our portfolio at 30 June as being 94% prime. Retail assets in city centres and suburban areas: our retail assets are in Dublin city centre and a populous Dublin suburb (Blanchardstown). 8 years Properties which have strong and secure income streams from a mix of tenants with financial strength, in a mix of business sectors: in the year to 30 June we increased the WAULT of our income to 8 years.

22 18 Strategic Report Our Strategy and Business Model continued Secure Income The WAULT of the Company s income at 30 June was 8 years, an all-time high. In addition, the occupancy rate by ERV was 99%. These attractive metrics have been achieved through the execution of the following asset management initiatives by the Investment Manager: Renegotiation of leases Leasing of vacant space Completing and leasing development schemes Focusing on quality tenant covenants In addition, as a result of asset management successes to date, 42% of the Company s portfolio income had a WAULT of greater than 10 years at 30 June, with only 13% of our portfolio income with a lease event in the 3 years to 30 June Looking at the Company s 2 largest holdings, the WAULT at Central Park has been increased by 66% from 5 to 8.3 years since acquisition in March 2014, while that of our George s Quay Estate has been increased by 106% from 3.6 years to 7.4 years since acquisition in October These holdings accounted for 60% of the Company s portfolio value at 30 June. Attractive Risk Adjusted Returns The Board s focus continues to be on the delivery of risk adjusted returns to shareholders, by maintaining a prudent approach both to debt and to the level of property development as a proportion of the Company s NAV. The Company s property LTV at 30 June was 20.2%, while the proportion of the Company s NAV employed in property development at that date was 10%. The Company has provided attractive levels of total return each year since inception, with prudent debt and development levels. Total shareholder return for the year to 30 June was 12.9%, with 9.9% of this coming from NAV increase and 3% from the dividend paid in the year.

23 Green REIT plc Annual Report and Accounts 19 Strategic Report Governance Section Financial Information Supplementary Information Progressive Dividend Policy The Company s dividend policy is driven by the Irish REIT rules, whereby a minimum of 85% of the Property Income of the Company s Property Rental Business is required to be distributed each year, subject to having distributable reserves to do so. The Board considers the level of payout each year, bearing in mind the Company s future cash requirements. The Board is focused on the delivery of progressive dividends to shareholders, with a goal of paying out a dividend equating to a minimum of 4% of NAV post the completion and letting of our development schemes. On 19 September the Board declared a dividend for the year to 30 June of 5 cent per share, which equates to 3% of the NAV at that date. This represents a 9% increase in dividend over the prior year, and over the period since the Company s inception in mid-2013 the dividend per share has increased by 5.5 times. The Board maintains a strong focus on gross to net income ratios, and aims to drive gross rents through the re-letting of space that becomes vacant and through new lettings to quality tenants of the Company s development schemes. In the year to 30 June the Company entered into new leases with total new contracted rent of 10.3 million per annum, 8.0 million of which came from the letting of development schemes. The Company s total annual contracted rent increased by 12% to 68.9 million in the year to 30 June, and is expected to increase by a further 25% to 85.8 million post the completion and letting of current developments. With a focus on both driving rental income and controlling costs, the Board s objective is to continue to increase the Company s net rental income and to deliver progressive dividends to shareholders. Maintaining Optionality The Board remains opportunistic in its outlook. Through prudent balance sheet management, with a moderate level of debt, and by constantly reviewing capital allocation decisions, the Board s goal is to position the Company to take advantage of opportunities that may arise, using additional leverage to do so if necessary. Similarly, through disposals the Company s exposure to retail has reduced, while the acquisition of additional lands at Horizon Logistics Park provides relatively inexpensive optionality to increase our exposure to the logistics sector, which has significant potential in the context of a strongly performing Irish economy, the growth in online retail penetration in Ireland and potential opportunities that may arise from Brexit. In addition, the development lands at Central Park, acquired at an early point in the current cycle, offer further development optionality, against the backdrop of a robust office occupier market in Dublin, where there was record take-up in the first half of. This optionality is evident from the Board s decision in June to proceed with the construction of Building I, following the de-risking of Building H through the letting of the entirety of that newly developed office building to AIB.

24 20 Strategic Report Our Strategy and Business Model continued Looking forward, how we think about opportunity, risk and our positioning Short Term Opportunity Strong domestic economy Resilient occupier markets Positive yield gap of 450bps 1 Brexit Risk Uncertainty around US policy/fdi European political calender Close to rental peak as new supply emerges Positioning Green REIT 94% prime High quality portfolio WAULT now at 8 years Secure income 10% development 2 high risk reward Recycling capital where possible into higher return assets 1 Yield gap between investment equivalent yield and 10 year Irish bond yield at 12 September 2 Development and lands value at 30 June as a % of 30 June NAV

25 Green REIT plc Annual Report and Accounts 21 Strategic Report Governance Section Financial Information Supplementary Information Medium Term Long Term Improved visibility in Europe/US geopolitical outlook Positive yield gap, albeit likely reducing Brexit Logistics sector evolving around e-commerce Unlikely to have pervious levels of volatility due to less debt in the capital structure and more core international capital invested in Irish real estate Logistics secular trend continues Interest rate cycle in reverse Stock market/bond market correction Real estate capital allocations potentially in decline A significant decline in take-up from FDI would leave the market potentially over-supplied Too many uncertainties on the geopolitical and economic agenda to have any rigid views Maximising the Brexit opportunity Recycling capital Central Park development Exploiting opportunity around logistics sector with the continued development at Horizon Maintain discipline on balance sheet to exploit future opportunity Focus on income returns/dividend Take advantage of the cycle by looking to expand at times of misplaces or exaggerated lapses in general confidence Absolute focus on NAV per share and risk adjusted return Potential to revert to 30 40% LTV in the event of a more opportunistic market emerging Be ready and able to play the cycle

26 22 Strategic Report Risk Report The Board is responsible for ensuring that the Company has an effective system of internal controls and risk management in place to identify, measure, mitigate and monitor significant risks to the achievement of the Company s strategic objectives. This includes setting the Company s risk appetite. The Board has delegated the monitoring of the internal controls and risk management systems to the Audit Committee. The Company, on the Audit Committee s recommendation, engages Deloitte to assist it with the annual review of the Company s risk management framework and risk appetite statement, and in reviewing the Company s risk register on a semi-annual basis. The Board has carried out an assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. Those risks are described below, with a description of how they are being managed. The Board also carried out an annual review of the effectiveness of the Company s internal controls and risk management systems, including financial, operational and compliance controls. Risk Management The risk management framework adopted by the Board includes a risk appetite statement which sets out the type and level of risks that the Company is prepared to accept in achieving its strategic objectives. This risk appetite statement informs the risk management and internal controls systems maintained by the Company. The risk management framework, including the roles and responsibilities within the framework, is as follows: Risk Management Framework Board The Board has overall responsibility for maintaining the Company s systems of internal controls and risk management in order to safeguard the Company s assets. Audit Committee The Audit Committee has been delegated by the Board the responsibility for the ongoing oversight of the effectiveness of the Company s systems of internal control and risk management. External Audit First line of defence (Operational Level) Second line of defence (Risk Management) Third line of defence (Internal Audit) Risk owners are assigned with operational responsibility to identify, assess and manage risks This comprises the Company s Investment Manager Implement action plans as necessary to enhance controls to mitigate significant risks to the Company Reporting and managing incidents/breaches The second line is responsible for overseeing the execution of risk management process Provide independent review and challenge of the first line s management of risk Report to the Board and Audit Committee on risk Independent service providers are appointed to provide support to the second line Internal Audit provides independent and objective assurance on the effectiveness of the risk management framework and process

27 Green REIT plc Annual Report and Accounts 23 Strategic Report Governance Section Financial Information Supplementary Information The framework has been designed using the three lines of defence model. The first line comprises the staff of the Investment Manager, who have day-to-day responsibility for designing, implementing and maintaining effective internal controls within the Company. The second line comprises the oversight function provided by the compliance officer of the Investment Manager, while the third line comprises Deloitte in their role as the Company s internal auditor. Internal Audit As set out in the Report of the Audit Committee below on page 72, the Committee does not believe that it is necessary to establish an internal audit function, considering the nature, scale, complexity and range of operations of the Company. Instead, Deloitte are engaged to carry out internal audit reviews of certain key processes within the business, reporting their findings and recommending action plans to the Committee. Internal audit reviews of this nature will be carried out at least twice annually, in line with a rolling programme approved by the Committee. Internal audit reports are presented to the Committee by Deloitte, with the Committee in turn reporting the outcomes of internal audits to the Board. Going Concern and the Viability Statement In accordance with the relevant provisions of the Code, the Board has taken account of the principal risks and uncertainties, as set out below, in considering the statement to be made regarding the going concern basis of accounting and the Viability Statement. These statements are as follows: Going Concern The Company has a strong portfolio of mainly prime properties which are Dublin focused, with almost full occupancy across the portfolio and a low level of total gearing of 20.2%. The Company has good visibility of its future cash inflows from rental income from high quality tenants on long leases, and of its cash outflows. Having assessed the relevant business risks the Directors believe that the Company is well placed to manage its business risks successfully. Viability Statement The period over which the Directors consider it feasible and appropriate to report on the Company s viability is the three year period to 30 June This period has been selected because it is the period that is used for the Company s medium term business plans. The assumptions underpinning these forecast cash flows and covenant compliance forecasts were sensitised to assess the resilience of the Company to the potential impact of the Company s principal risks. The principal risks table which follows on pages 24 to 27 summarises those matters that could in the Board s view prevent the Company from delivering on its strategy. The Directors paid particular attention to the risk of a deterioration in economic outlook, which would impact property fundamentals, including investor and occupier demand, which would have a negative impact on valuations, and the impact that this would have on our banking covenants. This would also impact on our leasing programme for our development projects, in that it may take longer to lease them, potentially at lower rent levels than forecast, thereby delaying and reducing anticipated cash flows. The remaining principal risks, whilst having an impact on the Company s business model, are not considered by the Directors to have a reasonable likelihood of impacting the Company s viability over the three year period to 30 June Viability Statement Having considered the forecast cash flows and covenant compliance and the impact of the sensitivities assessed, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period ending 30 June The Directors believe that Green REIT plc has adequate resources to continue in operation for the foreseeable future and that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

28 24 Strategic Report Principal Risks and Uncertainties The Board takes the view that adequately identifying and managing the risks to achieving our strategic objectives is key to the successful delivery of shareholder returns. The Board has divided the principal risks into External Risks, over which we have no influence, and Internal Risks, which we can influence, which are set out below. External Risks Risks Potential Impact Mitigation Measures Direction of Risk Cyclical Market: the property market is cyclical and as such values and market conditions can be volatile. High potential adverse impact on property values and rental levels, impacting on shareholder returns. 95% concentration of our assets in Dublin, the capital city, which experiences less volatility in a downturn than regional centres in Ireland Our assets are in prime and good secondary locations, which are more resilient in a downturn 76% of our portfolio by value is Dublin offices, which proved to be the most resilient asset class in the last downturn Our retail assets are in city centres and well-populated suburban areas Our logistics holding is located in close proximity to airport and motorway infrastructure Our vacancy rate across our income producing properties by ERV is low at 1.5%, thereby reducing the leasing risk in the event of a downturn We continue to focus on capturing the longest lease terms possible from well capitalised and stable tenants so that the security of income and cash inflow is optimised The WAULT of our income is now 8 years, a record for the Company The Investment Manager is experienced in managing property portfolios through cycles The rate of capital and rental growth for Dublin offices, where our portfolio is concentrated, has moderated to more stabilised levels. Rent and yields for retail and industrial continue to improve for landlords, while the spread between Irish property yields and the risk free rate remain at historic highs, which is supportive of property yields. Slowdown in Economic Growth: as a very open economy, the Irish economy is highly dependent on the wider European market and indeed the world economy. High any slowdown or reversal in the current trajectory of economic recovery could reduce the demand for space in our buildings and impact on rental values and property values, while increasing the level of tenant default. The Company s property portfolio is entirely focused on city locations, primarily Dublin, as the large centres of population are more resilient economically, particularly for retail The Company targets well-capitalised tenants with strong covenants and maintains a policy of keeping a large and diversified multi-sectoral tenant base to avoid over-exposure to any one tenant or industry sector The Investment Manager s asset management team is highly experienced Ireland s economic recovery continues, with all key macroeconomic indicators positive. However there continues to be a heightened level of geopolitical and economic uncertainty while Brexit negotiations are at an early stage and with evolving policy under the new Administration in the US.

29 Green REIT plc Annual Report and Accounts 25 Strategic Report Governance Section Financial Information Supplementary Information Legend Stable Upward Downward External Risks Risks Potential Impact Mitigation Measures Direction of Risk Speculative Deveopment Risk: occupiers do not take space in our new developments. High adverse impact on revenue, value and void costs and on achieving target shareholder returns on capital. We were early movers in the development of new office space in Dublin in order to benefit from lower site and construction costs and to deliver completed properties early in the cycle and at a time of strong occupier demand While a property may not be let when a development or refurbishment commences, the marketing of the building commences well before the scheduled completion date The Investment Manager and the Board monitor market conditions frequently In the year to 30 June we mitigated this risk through the lettings of the entirety of 32 Molesworth Street and Building H in Central Park, and the letting of 55% of the office space in One Molesworth Street, all of which were/are speculative development schemes At Horizon Logistics Park our strategy is to combine a moderate level of speculative development with pre-lettings of new units. Both units currently under construction are pre-let to quality tenants Overall this risk has moderated with the lettings completed within our development schemes during the year. Also, take-up in the occupational market remains robust for Dublin offices and prime Dublin industrial, where our developments are concentrated. Political/Geopolitical Risk: potential adverse impact from Brexit, evolving US tax policy and general elections in larger EU states. High the UK referendum result to leave the EU is expected to have an adverse impact on the Irish economy but potentially a favourable impact on the Dublin office sector. US tax policy changes could adversely impact on FDI, and consequently on both the real economy and commercial real estate in Ireland. A destabilisation arising from election results in Germany and Italy in 18 could have a similar adverse impact. The Board monitors closely external risks and their potential impact on achieving strategic objectives This risk has stabilised somewhat since 31 December. UK although Article 50 has been triggered since our interim results release in February, it is still too early to tell what the impact of Brexit will be and whether it will be a positive or negative one for Ireland and for the Company. US changes to US tax policy in the short term which could adversely impact Irish FDI look unlikely to have an impact in the short to medium term. Europe since our interim results release in February the general election results in the Netherlands and France were both in favour of conservative parties.

30 26 Strategic Report Principal Risks and Uncertainties continued External Risks Risks Potential Impact Mitigation Measures Direction of Risk Regulatory Risk AIFMD: the Investment Manager is the authorised AIFM of the Company, under recently adopted EU regulations. Medium should the Investment Manager cease to be authorised as an AIFM then the Company would be required to appoint a replacement AIFM and may suffer losses arising from the transition from its current Investment Manager to another. The Board and the Audit Committee regularly discuss regulatory aspects and receive reports from the Investment Manager in respect of AIFMD compliance matters concerning both the Company and the Investment Manager. The Investment Manager in turn consults with its legal adviser and the Company s sponsor, Davy, who attend meetings with the regulator on behalf of the Investment Manager and the Company respectively The Company obtains independent legal advice in relation to AIFMD matters in order to keep abreast of developments and to ensure compliance by the Company with its obligations under AIFMD The Company has appointed a Depositary, Northern Trust, as required of it under AIFMD Interest Rate Risk: global interest rates are currently at record low levels but may increase in the short to medium term. Medium an increase in interest rates could have an adverse impact on the Company s property values, as the risk premium applied to property yields would increase. The Investment Manager is experienced in monitoring the property market through cycles Our assets are well located and focused on Dublin offices, with quality tenants and a focus on security of rental income, which should make them more resilient in the event of yield increases caused by increases in interest rates In the event that some of our assets were to be sold, their quality, location and the quality of the tenant and income stream should make them desirable to purchasers Although there has been an increase in US interest rates, Eurozone interest rates are expected to remain low in the short to medium term Cyber-attack Risk Medium a cyberattack could lead to potential data breaches or disruption to the Company s systems, website and operations, and to reputational damage. The Company engages external specialists to carry out vulnerability and penetration testing on its website, implementing any recommendations made Routine patch upgrades are carried out on the Company s systems to safeguard them from attacks The Company s systems were upgraded during as part of an office move There has been an increased prevalence in cyber-attacks globally in the past 12 months. Internal Risks Development Completion Risk: inadequate cost oversight and other engineering/ construction risks that could delay completion and/or increase costs. Medium potential adverse impact on shareholder returns as a result of higher costs and/or delays in delivering new product into the market. The Company only employs blue chip contractors with a strong and proven track record and with requisite financial strength The Company engages what it considers to be the best design team for each project, working closely with them to identify any cost overruns or delays as early as possible The Investment Manager closely monitors each project and works closely with the contractor, attending on site regularly The Investment Manager s development team is highly experienced in developing new buildings The Company has completed its office and logistics developments on time and on budget, and remains on course to do the same at its developments in progress. The ongoing strikes by crane workers in Dublin may however have an adverse impact if not resolved in the short term.

31 Green REIT plc Annual Report and Accounts 27 Strategic Report Governance Section Financial Information Supplementary Information Legend Stable Upward Downward Internal Risks continued Risks Potential Impact Mitigation Measures Direction of Risk Development Health and Safety : with increased development activity there is an increased risk of an accident which could result in a significant claim and reputational damage. Medium reputational risk, potential completion delay and potential financial loss arising from a claim being made. The Investment Manager ensures that all contractors engaged employ high standards of health and safety and carry the appropriate levels of insurance to mitigate any issues which could arise The Investment Manager is an experienced developer with formalised health and safety procedures The primary responsibility for health and safety passes from the Company to the main contractor, with sub-contractors engaged by the contractor having no privity with the Company There is adequate insurance cover in place to deal with any claims which might arise out of claims being made due to incidents This risk has decreased since 31 December as the Company has since completed Building H in Central Park and further progressed One Molesworth Street and 5 Harcourt Road, while construction of Building I in Central Park has since commenced. Development Main Contractor or Subcontractor Failure: Medium delayed delivery of a development or refurbishment with resulting additional costs, and potential failure to pass the completed space to a tenant who has entered into a pre-letting agreement, thereby delaying rental income receipts. The Company only selects financially robust contractors to carry out works The principal contractor is responsible for monitoring the viability of sub-contractors appointed by them The Company allows for timing contingencies as well as possible cost contingencies at the project planning phase As the general economy has improved, the risk of a sub-contractor or main contractor failing is reducing.

32 28 Strategic Report Investment Manager s Review Prime real estate with strong tenants on secure leases in a growth economy. George s Quay Plaza

33 Green REIT plc Annual Report and Accounts 29 Strategic Report Governance Section Financial Information Supplementary Information Having commenced its first development scheme in April 2015, at what was an early point in the current cycle, the Company completed its first two Dublin office developments during the year to 30 June. We were very happy to secure such high calibre tenants as Maples FS and Allied Irish Banks plc, at 32 Molesworth Street and Building H in Central Park respectively, the combined rent from which is 6.4 million per annum. The Company s flagship office development at One Molesworth Street is due for completion towards the end of this year, with over half of the office space let since year end to Barclays Bank Ireland plc, at a strong rent of 670 per square metre ( 62 per square foot) with 12 years to the first break option. The Company s other Dublin city centre office scheme at 5 Harcourt Road is progressing well and is due for completion in Q1 2018, while construction of Building I in Central Park commenced in late June, with delivery of the building due Q We remain confident that these buildings will deliver strong returns to shareholders when completed and with further high quality tenancies secured. On the logistics front our organic growth strategy at Horizon Logistics Park is working well, as we combine pre-lettings with a measured level of speculative development on a rolling basis. On acquisition of the park in late 2013 the annual rental income was 0.9 million per annum. The units built and let since then and the units under construction will increase the annual rent to an estimated 4.5 million. Having exchanged contracts in September for the acquisition of a further circa 30 acres of land, the Company s total strategic land holding at Horizon is now approximately 300 acres. We look forward to developing these lands over the short, medium and longer term, against a backdrop of strong economic growth in Ireland and the potential benefit that may accrue to the logistics sector post Brexit. 20 Properties 235,000 sq m Total floor area (2.5m sq ft) 68.9m Contracted annual rent Robust Office Occupier Market with Manageable Supply Latest reports show that office take-up in Dublin remains robust, with gross take-up of 149,000 square metres (1.6 million square feet) in the first six months of the year, the strongest performance for nine years. Vacancy rates in Dublin continue to fall, standing at 6.5% for overall vacancy at June (8.3% in June ) and 7.4% for the south suburbs (June : 10.4%). We are seeing lettings concluding quickly and tenant incentives flat or reducing. On the supply side 48% of the stock of space under construction in Dublin at the end of Q2 was either pre-let or reserved. Given the robust levels of take-up and the visibility around new supply, we would continue to describe supply levels as manageable.

34 30 Strategic Report Investment Manager s Review continued 1. Portfolio Summary 2. Portfolio Valuation 3. New Lettings 4. Development Projects 5. Acquisitions & Disposals 6. Financial Review 7. Investor Relations 1. Portfolio Summary Net increase of 12.4% in annual contracted rent to 68.9 million at 30 June Lettings completed since year end increased annual contracted rent further to 72.8 million Record WAULT of 8 years across the portfolio Significant Dublin focus (95% by portfolio value) with our prime office building in Cork city now our only non-dublin location Dominated by high grade office assets (81%) 98.5% occupancy rate by ERV (30 June : 98.3%) Value by sector: 81% offices, 10% retail, 5% mixed use and 4% logistics Portfolio is 5% reversionary at 30 June with 68.9 million annual contracted rent versus 72.5 million annual ERV (both excluding developments in progress) Diversified tenant base, with 43% of contracted rent from financial services, 22% from technology, media and telecommunications ( TMT ) and 15% from retail Top 10 tenants account for 54% of contracted rent, with our largest tenant (AIB) accounting for 13.5% of the total Yields: On 30 June Values On 30 June Values Investment Initial Yield¹ 5.2% 5.2% Portfolio Initial Yield¹ 4.8% 4.7% 1 Calculated as contracted rent at 30 June /17 over the June /17 valuation plus notional purchaser s costs of 4.46%. 98.5% Occupancy rate by ERV (30 June : 98.3%) 8. Outlook & Priorities for the Year Ahead

35 Green REIT plc Annual Report and Accounts 31 Strategic Report Governance Section Financial Information Supplementary Information Portfolio Valuation The valuation of the portfolio rose to 1.38 billion at 30 June, which reflects a 12.6% increase in the value of assets held throughout the year to that date, gross of capital expenditure. For an analysis of the movement in property value as between acquisitions, disposals, capital expenditure and revaluations, please see the financial review section below. Acquisitions during the year were limited to approximately 164 acres of additional adjoining land at Horizon Logistics Park, valued at 12.7 million at 30 June, a marginal increase on its acquisition cost. On a sectoral basis, the logistics assets saw a 35.4% increase in value, due to the completion and letting of Unit B2 (DFS), an increase in rental values and a reduction in yields for the income producing element. In addition, the construction of Unit D2 (pre-let to Kuehne + Nagel) has commenced. The city centre office portfolio saw a 9.9% increase in value; suburban offices saw an 18.8% increase due in the main to the completion of Building H in Central Park and the letting of the building to AIB. One Albert Quay in Cork saw an increase of 11.5%, with a 7.6% increase in the value of our retail holdings in the year. In the period from June to June we saw the portfolio equivalent yield increase from 5.0% to 5.2%. This is predominantly due to recently completed developments at Horizon Logistics Park and Building H in Central Park, which are currently subject to rent free periods. The portfolio now has a WAULT of 8 years (7.8 years in June ) and has gone from 93% prime to 94%. Looking at the overall return from standing investments in the portfolio, approximately 50% can be attributed to income return and 50% to capital growth. If the recently completed developments are included, income return accounts for approximately 40% and capital growth for 60%. WAULT increased by 60% over the past 24 months to a new record high. Portfolio Valuation Analysis Offices June Valuation m Movement June to December December Valuation m Movement December to June June Valuation m Annual Movement to June Dublin City Centre % % % Dublin Suburbs % % % Cork % % % Total Offices % 1, % 1, % Mixed Use % % % Logistics % % % Retail % % % Total Assets Held Throughout the Period 1, % 1, % 1, % Disposal in the Period Parkway Retail Park Acquisition in the Period Additional Horizon Lands % 12.7 Per Statement of Financial Position 1, , ,381.4

36 32 Strategic Report Investment Manager s Review continued 3. New Lettings In the year to 30 June the Company entered into new leases with total new contracted rent of 10.3 million per annum, 8.0 million of which came from the letting of development assets. Adding to that the 3.9 million of new annual rent secured from two pre-lettings completed since 30 June, the total rent secured from new lettings since 1 July is 14.2 million, covering 44,000 square metres (474,000 square feet) of lettable space. 13% of our portfolio income with a lease event in the period to 30 June Details of the principal new lettings are as follows: New Lettings Summary Year to 30 June Total Annual Rent m Lease Term (Years) Area Rent Lease Rent Free Property Tenant (sq ft) ( psf) Break Year Months Building H, Central Park AIB 158, Molesworth Street, Dublin 2 Maples FS 32, George s Quay Plaza, Dublin 2 Innovative Interfaces 8, One Albert Quay, Cork Various 33, Horizon Logistics Park, Dublin Airport DHL 44, Horizon Logistics Park, Dublin Airport DFS 33, Horizon Logistics Park, Dublin Airport Kuehne + Nagel 80, Others 0.9 Total 390, Lettings Completed since 30 June Total Annual Rent m Lease Term (Years) Area Rent Lease Rent Free Property Tenant (sq ft) ( psf) Break Year Months One Molesworth Street, Dublin 2 Barclays Bank Ireland 37, Horizon Logistics Park, Dublin Airport Luxury goods retailer 47, N/A 0 Total 84, ,200 sq m Total area of new lettings (390,044 sq ft) 10.3m Total annual rent from new lettings secured in the year

37 Green REIT plc Annual Report and Accounts 33 Strategic Report Governance Section Financial Information Supplementary Information New lettings continued 32 Molesworth Street Building H, Central Park, Dublin 18 Allied Irish Banks 4.8m contracted annual rent In May the Company signed a lease with Allied Irish Banks plc ( AIB ) for the entirety of its newly completed office building at Central Park in Dublin 18. The letting comprises 14,701 square metres (158,244 square feet) of lettable space on a 20 year lease from May, with a tenant break option at the end of year 12. The annual rent payable by AIB is 4.8 million, which equates to 291 per square metre ( 27 per square foot). AIB is entitled to a 12 month rent free period under the terms of the agreement. This letting, which is the Company s single biggest letting by annual rent and by lettable area, brought the total contracted rent in Central Park to 23.7 million per annum, with full occupancy throughout the 79,000 square metres (850,000 square feet) of lettable space in the office park. The annual rent secured of 4.8 million was 10.4% ahead of our then most recent rental estimate of 4.35 million, driven by a combination of the lettable area being greater by 770 square metres (8,244 square feet) and the rent per square metre being 22 ( 2 per square foot), or 8%, ahead of expectations. 32 Molesworth Street, Dublin 2 Maples FS 1.7m contracted annual rent 32 Molesworth Street was the first office redevelopment completed by the Company, which was let in its entirety to Maples FS in December. The lease extends to 3,000 square metres (32,300 square feet) in total, with an annual contracted rent of 1.7 million, on a 20 year lease at a blended rent of per square metre ( per square foot), with a break clause in the tenant s favour on the 10th and 15th anniversaries of the lease. Construction progress August The rent secured for best space in the building equates to approximately 56 per square foot. This letting was 14% ahead of our then most recent rental estimates. Building H, Central Park One Molesworth Street, Dublin 2 Barclays Bank Ireland 2.4m contracted annual rent Subsequent to the financial year end the Company signed an agreement with the Barclays Bank Ireland plc ( Barclays ) to lease 3,437 square metres (37,000 square feet) of lettable space at its flagship development at One Molesworth Street in Dublin 2.

38 34 Strategic Report Investment Manager s Review continued 3. New lettings continued The letting covers two and a half floors of a total of five floors of office space, with Barclays having an option up to practical completion over a further half floor, which if taken up would bring the letting to approximately 4,200 square metres (45,000 square feet). The lease duration is 20 years, with a tenant break option at the end of year 12. The annual rent payable by Barclays is 2.4 million, which equates to 670 per square metre ( 62 per square foot) per annum for office space and 4,000 per car space per annum, with the tenant entitled to a market level rent free period at the outset of the lease. The rent per square metre secured of 670 ( 62 per square foot) was 12.7% ahead of our then most recent rental estimate of 592 per sq m ( 55 per square foot). Following the letting to Barclays of 55% of the total office space, the remaining office space to be let comprises the balance of the third floor (subject to the Barclays option as set out above) and the fourth and fifth floors, totalling 2,900 square metres (31,000 square feet). The remainder of the building, including the 1,672 square metres (18,000 square feet) of retail space at ground and lower ground level, will be ready for fit-out in Q4. Horizon Logistics Park, Dublin Airport DFS Unit B2, Horizon Logistics Park DHL Unit B1 lease signed with DHL Supply Chain (Ireland) Limited, part of the global logistics group DHL, for unit B1 in Horizon Logistics Park in October. This newly built warehouse unit comprises 4,125 square metres (44,400 square feet) and was completed in May. The annual rent agreed is 0.4 million, equating to per square metre ( 8.50 per square foot). Construction progress at Horizon Logistics Park August Kuehne + Nagel Unit D2 during the year we agreed a pre-letting for new space to be built at Horizon Logistics Park for Kuehne + Nagel, the global transport and logistics company, for a purpose built 7,400 square metres (80,000 square feet) unit at an annual rent of 0.8 million. Kuehne + Nagel also has options on two additional units of 3,700 square metres (40,000 square feet) each. The construction of the new unit commenced in May and is due for completion in Q As part of this transaction, Kuehne + Nagel, which is an existing tenant in the logistics park, will vacate its current 4,200 square metre (45,000 square feet) unit, which we plan to refurbish and re-let. DFS Unit B2 lease signed with DFS Trading Limited ( DFS ), the UK furniture retailer. The unit comprises 3,100 square metres (33,300 square feet) and was completed in April. The annual rent payable by DFS is 0.3 million, which equates to 98 per square metre ( 9.10 per square foot), on a 15 year lease term and with a tenant break option at the end of year 10. Luxury goods retailer post year end an agreement for lease was signed on a specialised design and build project which will be a very prestigious addition to the park, and which illustrates our ability to secure major FDI projects in this sector of the market. See below for further information. The total contracted annual rent roll in Horizon has grown from 0.9 million at the time of acquisition to 3.6 million, a fourfold expansion, and will increase to an estimated 4.5 million when two additional speculative units are complete and let, the construction of which commenced in early October. This letting momentum at Horizon Logistics Park reflects the confidence of these high calibre tenants in the park, as well as the outlook for the logistics sector in Ireland, and bodes well for our overall strategy of organically growing value and income at the logistics park.

39 Green REIT plc Annual Report and Accounts 35 Strategic Report Governance Section Financial Information Supplementary Information Development Projects A brief summary of the Company s development schemes completed in the period and currently on site is as follows (all 100% owned): Property Use Lettable Area (sq ft) Lettings Completed % let Delivery (calendar year) Capex to Date ( m) Capex to Complete ( m) Completed in the Period 32 Molesworth Street, Dublin 2 Office 32,300 32, % Q DFS, Horizon Logistics Park, Dublin Airport Logistics 33,300 33, % Q Building H, Central Park, Dublin 18 Office 158, , % Q Total Completed 223, , % On Site One Molesworth Street, Dublin 2 Office 90,000 37,000 41% Q Harcourt Road, Dublin 2 Office 48,200 Q Kuehne + Nagel unit, Horizon Logistics Park, Dublin Airport Logistics 80,000 80, % Q Luxury goods retailer unit, Horizon Logistics Park, Dublin Airport Logistics 47,800 47, % Q Building I, Central Park, Dublin 18 Office 97,000 Q Total On Site 363, ,800 45% OVERALL TOTAL 586, ,644 66% Building I Central Park (CGI) Development Activity since 30 June Building I in Central Park In July the Company announced that it had commenced the construction of Building I in Central Park, Leopardstown, Dublin 18. This follows the completion and successful letting of the entirety of the adjacent Building H, to Allied Irish Banks plc in May. Building I will extend to approximately 9,000 square metres (97,000 square feet) of lettable space, together with 156 basement car parking spaces, and will be available in its entirety or on a floor-by-floor basis. Having already excavated the double level basement car park as part of the development of the adjacent Building H, Building I is scheduled for delivery in Q Unit D3 at Horizon Logistics Park In August the Company signed an agreement for lease with a luxury goods retailer for a purpose built unit at Horizon Logistics Park, which is due for completion in Q This high specification unit will comprise 4,400 square metres (47,000 square feet) with a mix of office and logistics space, with an estimated rent of 1.5 million per annum, which will be a significant boost to the income at the logistics park. The lease to be entered into at completion of the unit will be a 20 year lease with no break options.

40 36 Strategic Report Investment Manager s Review continued Development Programme Summary Sub total Office Area 55% Let (offices) One 5 Molesworth Harcourt Street Road Dublin 2 Dublin 2 Office Logistics Complete & Let 6 Under construction Building I Central Park Dublin 2 Under construction Unit D2 Horizon Logistics Park Conditional letting Unit D3 Horizon Logistics Park Conditional letting Units D4&5 Horizon Logistics Park Under construction Building H Central Park 32 Molesworth Street Unit B1 Horizon Unit B2 Horizon Existing NIA (sq m) 6,949 3,939 77% office 23% retail 3, ,115 New GIA (sq m) 26,144 11,148 5,981 9,015 7,432 4,436 6,959 25,941 Lettable Area (sq m net ratio) 21,716 83% 8,219 74% 4,482 75% 9, % 7, % 4, % 6, % 24,918 Cost Site Cost 43m 1,994 psm 5 24m 2,920 psm 5 16m 3,570 psm 5 3.3m 366 psm 5 0.5m 73 psm 5 0.3m 67 psm 5 0.5m 76 psm 5 9m All in Build Cost 2 97m 4,457 psm 5 38m 4,623 psm 5 25m 5,564 psm 5 34m 3,755 psm m 1,393 psm m 4,170 psm 5 9.6m 1,385 psm 5 63m Rent Rent Estimate m 5.1m 667 psm 5 2.5m 538 psm 5 2.9m 296 psm m 105 psm m 328 psm 5 0.7m 102 psm 5 7.2m Void Months 12 Months 12 Months 18 Months 3 Months 12 Months Income Producing 2018/ / Return Net Development 199m 104.5m 47m 47m 12.8m 22m 11.2m 120.3m Value (NDV) 4 9,169 psm 5 12,714 psm 5 10,580 psm 5 5,236 psm 5 1,722 psm 5 4,959 psm 5 1,609 psm 5 Yield on Cost 7.5% 8.2% 6.0% 7.9% 7.2% 7.7% 7.0% 10% Yield on Value 5.0% 4.5% 4.75% 5.5% 5.75% 6.25% 5.75% Value v. Cost 42% +69% +16% +27% +17% +17% +10% +69% 1 Financial appraisals subject to change 2 Estimated build cost plus development levies and fees. Excludes financing and tenant incentives 3 Estimated rent on completion 4 Net present value to allow for void on NDV and notional purchaser s costs of 4.46% 5 On lettable area 6 NDV adjusted to include outstanding construction costs to complete (if any) for completed projects

41 Green REIT plc Annual Report and Accounts 37 Strategic Report Governance Section Financial Information Supplementary Information Acquisitions & Disposals Acquisition Additional Lands at Horizon Logistics Park, Dublin Airport In December the Company acquired approximately 164 acres of land adjacent to its existing holding at Horizon Logistics Park at Dublin Airport, for a contract price of 12.3 million. The acquisition brought the Company s total land holding at Horizon Logistics Park to approximately 264 acres. The transaction increases the Company s strategic land holding adjacent to Dublin Airport at a time when demand and rental values for well-located modern logistics units are increasing. Since 30 June the Company has exchanged contracts to acquire a further circa 30 acres of lands adjacent to its holdings at Horizon Logistics Park, at a contract price of 2.8 million. Disposal Parkway Retail Park, Limerick In March the Company disposed of Parkway Retail Park in Limerick. The contract price was 23.0 million, in line with the 31 December valuation. The contract price reflected a profit to the Company of 64% on the cost of the property, which was acquired in late 2013 for 14.0 million. This sale brought the proceeds from the Company s disposal programme to 97.7 million, broadly in line with target. The total profit realised from the sale of the five properties was 41.1 million, or 73% on purchase cost, an effective recycling of capital and strengthening of the Company s portfolio, which we now consider to be 94% prime. 6. Financial Review The year to 30 June saw strong growth in underlying earnings and a positive contribution to profits from revaluation surpluses, particularly on the Company s development properties. EPRA Earnings grew by 33.1% to 33.0 million for the year, while revaluation surpluses were 96.7 million, with a total profit of million (: million). On a per share basis the total EPS for the year was 18.9 cent (: 21.5 cent), with EPRA EPS of 4.8 cent (: 3.7 cent). The Company s NAV grew by 9.9% in the year, from 1,048.0 million to 1,152.2 million, or from cent per share to cent per share before dilution. EPRA NAV per share grew by 9.1% in the year from cent to cent. In the year to 30 June the Company entered into new leases with total new contracted rent of 10.3 million per annum, 8.0 million of which came from the letting of development assets. Horizon Logistics Park Dubber lands Horizon Logistics Park Dublin Airport M50 Motorway

42 38 Strategic Report Investment Manager s Review continued 30 June 30 June +/ v. 30 June EPRA Earnings 24.9m 33.0m +33% 3.7 cent per share 4.8 cent per share +31% Revaluation uplifts 120.7m 96.7m -20% 17.8 cent per share 14.1 cent per share Total profit 145.5m 129.8m -11% 21.5 cent per share (basic) 18.9 cent per share (basic) Net asset value 1,048m 1,152m +10% Four Year Summary FY 2014 FY 2015 FY FY NAV per Share (cent) Basic NAV per Share (cent) EPRA Earnings per Share (cent) Basic EPRA Earnings 7.2m 10.5m 24.8m 33.0m EPRA Earnings per Share (cent) Total Return 14.4% 24.4% 17.7% 12.9% Portfolio Value (note) 402.9m 968.3m 1,240.7m 1,381.4m Property Loan to Value 18.6% 9.9% 20.6% 20.2% Interest Cover 7.4 times 19.6 times 9.5 times 10.5 times Weighted Average Interest Rate 3.2% 2.8% 1.9% 1.8% Weighted Average Debt Maturity 4 years 3.1 years 4 years 2.8 years Note: includes the Company s 50% interest in Central Park for FY 2014 and FY 2015

43 Green REIT plc Annual Report and Accounts 39 Strategic Report Governance Section Financial Information Supplementary Information Earnings per Share ( EPS ) While total EPS for the year reduced by 12.1% from 21.5 cent to 18.9 cent, the EPRA EPS component, which measures EPS on rental profit only, increased by 1.1 cent per share or by 31.1% from 3.7 cent to 4.8 cent. In the year to 30 June EPRA EPS accounted for 17% of total EPS while it accounted for 25% of total EPS in the year to 30 June. This rebalancing is as a result of the moderation in the rate of growth in commercial real estate values in Ireland as the market has stabilised, which explains the reduced level of revaluation surpluses and total profit compared the prior year. This is illustrated by the total returns from Irish commercial real estate as measured by IPD/ MSCI, which decreased from 19.5% in calendar year to 10.0% in the year to 30 June. A reconciliation of IFRS earnings and EPS to EPRA Earnings and EPRA EPS is as follows: 30 June 30 June Cent per Share 30 June 30 June Cent per Share Earnings per IFRS Income Statement 129, , EPRA Adjustment fair value movements on properties (94,496) (13.6) (120,673) (17.5) EPRA Adjustment fair value movements on financial instruments (2,242) (0.3) EPRA Adjustment tax on disposal 65 Dilutive Effect of Shares Issued (0.2) (0.3) EPRA Earnings 33, , NAV Growth NAV increased from 1,048.0 million at 30 June to 1,152.2 million, an increase of 9.9% year-on-year, or from cent per share to cent per share (both basic). The main drivers of the growth in basic NAV per share are analysed as follows: EPRA Nav Analysis cent per share Investment Properties Development Properties 6.5 9% EPRA NAV per share at 30 June Property Value Uplifts Net Rental Profit Dividends Paid EPRA NAV per share at 30 June

44 40 Strategic Report Investment Manager s Review continued The following tables provide a reconciliation of the increase in NAV in the year to 30 June to the movement in the value of the Company s property portfolio value: Year to 30 June m Net Assets at 30 June 1,048 Dilutive Effect of Performance Fee Shares Issuable Investment Properties Revaluation 94.5 Swap Revaluations 2.2 EPRA Earnings 33.0 Performance Fee Reserve 5.7 Dividends Paid (31.3) Net Assets at 30 June 1,152.2 Movement In Portfolio Value FY m Value at 30 June 1,240.7 Acquisition 13.5 Disposals (22.7) Capital Expenditure 55.4 Property Value Uplifts: Investment Properties 49.2 Development Properties 45.3 Total Property Value Uplifts 94.5 Portfolio Value at 30 June 1,381.4 Rental Income Gross and net rental income is analysed as follows (excluding service charge income and expenditure): Gross Rental Income (see note) 49,688 51,716 Spreading of Lease Incentives 10,732 6,241 Surrender Premia 2,893 Gross Rental and Related Income 60,420 60,850 Property Operating Expenses (2,421) (3,883) Net Rental and Related Income 57,999 56,967 Note: includes the Company s 50% share of Central Park rents from 1 July 2015 to 8 January (the date the Company acquired full control) of 4.4 million, to facilitate a like-for-like comparison The main movements in rental income year-on-year were as follows: Gross Rent FY 60,850 Full year impact of 100% of Central Park 4,418 One Albert Quay full year inclusion and new rents 2,634 Completed Developments new income 1,472 Sales in FY income effect (4,101) One off surrender premia in prior year (2,893) Sales in FY income effect (1,110) Other (850) Gross Rent FY 60,420

45 Green REIT plc Annual Report and Accounts 41 Strategic Report Governance Section Financial Information Supplementary Information Property Outgoings Property outgoings of 2.4 million were 1.9 million or 44% lower than the prior year cost of 4.3 million (including the Company s 50% share of Central Park costs for the period from 1 July 2015 to 8 January of 0.4 million), due in the main to a reduction of 0.8 million in the level of agents fees expensed in the current year, which is explained firstly by the reduced level of lease events dealt with in the current year, where the year to 30 June was a very active year for lease renegotiations, and secondly by the impact in the current year of the Company s policy of amortising agents and legal fees on new lettings over the period to the earliest termination of each lease, in what was a busy year for new lettings. We also saw a reduction in vacancy costs of 0.3 million on our retail assets due to new lettings and a reduction of 0.2 million in repair costs. 4.3m H2 2.6m H1 1.7m FY Performance 13.9m 59% 44% 2.4m H2 1.6m Base 9.7m 41% H1 0.8m FY Administrative Expenses Administrative expenses decreased by 0.3 million or 12% from 2.7 million in the year to 30 June to 2.4 million in the year to 30 June. The prior year total included 0.9 million of one-off business combination costs relating to the acquisition of PIMCO s 50% interest in Central Park in January. Stripping these out of the prior year costs, the like-forlike recurring costs in the prior year were 1.8 million, or 0.6 million lower than the current year total of 2.4 million. The increases year-on-year arose mainly on legal fees, internal audit fees, depositary fees and stock exchange fees. 2.7m H2 1.1m H1 1.6m 11% Performance 13.9m 59% Base 9.7m 41% 2.4m H2 1.2m H1 1.2m For the year ahead we would expect total administrative costs to be in the order of 2.2 million. FY FY Investment Manager Fees The base fee charged in the year was 10.8 million (: 9.7 million), with the increase in the fee reflecting the increased EPRA NAV of the Company on which the base fee is calculated. In the year from 30 June to 30 June EPRA NAV increased from 1,048.0 million to 1,149.9 million. The base fee is calculated and paid calendar quarterly in cash on EPRA NAV at quarter end, on the basis of 1% per annum of EPRA NAV. The details of the Performance Fee provision for the year of 5.7 million (: 13.9 million) are set out in further detail in Note 18 to the financial statements. 23.6m Performance 13.9m 59% Base 9.7m 41% 30% 16.5m Performance 5.7m 34% Base 10.8m 66% FY FY

46 42 Strategic Report Investment Manager s Review continued Gearing and Debt Profile The Company s gearing level, as measured by property LTV, was relatively unchanged year-on-year, decreasing marginally from 20.6% to 20.2%. This level of gearing is within the range guided over the previous reporting periods, and is expected to increase towards 25% as the Company deploys further capital to complete its development schemes. Debt Levels in Line with Targets 399m 1 255m 279m 278m 25.4% 18.6% 20.6% 21.3% 20.2% 94m 96m 105m 75m 10.7% 9.9% 10.1% Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Post Development Total Debt Property LTV % 30 June Post Development 1 Assumes all assets held to post development The Company has two loan facilities in place, one with Bank of Ireland secured on the Central Park assets, and a revolving credit facility with Barclays Bank Ireland and Ulster Bank Ireland with floating security over the Company s other assets. Ulster Bank Ireland entered the revolving credit facility during the financial year, agreeing to lend 60 million alongside Barclays, thereby increasing the limit of the facility from 150 million to 210 million. Adding this to the Bank of Ireland facility on Central Park, which is fully drawn at 150 million, the Company s total debt commitments are 360 million. The Company s all-in annual debt cost stood at 1.8% at 30 June, with a weighted average debt maturity of 2.8 years. 1.8% Total annual interest cost 20.2% LTV at 30 June

47 Green REIT plc Annual Report and Accounts 43 Strategic Report Governance Section Financial Information Supplementary Information A summary profile of the Company s debt at 30 June is as follows: Balance at 30 June m Interest Cost % per annum Annual Interest m Property LTV % Interest Cover Times Maturity Years Central Park Facility % % 6.1 Jun Revolving Credit Facility % % 16.6 Dec Total % % During the year hedging was put in place in the form of forward-starting interest rate swaps covering the period from October 2018 to October 2022, at a blended fixed rate of 0.074% per annum on 200 million. These swaps give the Company certainty around its maximum interest cost on 200 million of its debt for the period October 2018 to October 2022, and were in a positive position for the Company of 2.24 million at 30 June. European Public Real Estate Association ( EPRA ) Performance Measures and Disclosures Consistent with other public real estate companies we include recommended best practice performance measures as defined by the EPRA. These performance measures were developed to improve transparency, comparability and relevance of financial reporting in real estate investment companies. The Company reports using IFRS and these EPRA measures are extracted from its financial information. The table below summarises the relevant measures at the financial year end, with prior year comparatives. Notes on the definition and basis of preparation of each measure below are included in Section 4, Supplementary Information, of this Annual Report. EPRA Performance Measure Unit June June EPRA Earnings 33,037 24,894 EPRA Earnings per Share ( EPRA EPS ) Cent Diluted EPRA EPS Cent EPRA net asset value ( EPRA NAV ) 1,149,937 1,048,023 EPRA NAV per Share Cent EPRA Triple Net Assets ( EPRA NNNAV ) 1,152,179 1,048,041 EPRA NNNAV per Share Cent EPRA Cost Ratio Including Vacancy Costs % 35.2% 50.2% EPRA Cost Ratio Excluding Vacancy Costs % 34.5% 48.9% EPRA Vacancy Rate % 1.5% 1.7% EPRA Net Initial Yield ( NIY ) % 3.9% 3.5% EPRA Topped-up NIY % 5.0% 4.8% EPRA also issues guidelines on best practice for investment property reporting in annual reports of listed property companies. These disclosures are incorporated into this Annual Report in various locations, namely the notes to the financial statements (Note 8, Investment properties), the Portfolio Overview section, the Development Projects section at 4 above and at Section 4, Supplementary Information.

48 44 Strategic Report Investment Manager s Review continued 7. Investor Relations We recognise the importance of communication with shareholders. Our investor relations programme is designed to ensure that we communicate regularly with the Company s major shareholders and with potential investors. We also seek to maintain a dialogue with analysts and the sales teams within our broker firms and other brokers. Communication is carried out through various means, including one-to-one meetings and calls, roadshow meetings following results and attending investor conferences and site tours to show investors our properties. The senior management team of the Investment Manager represents the Company in meetings with investors and analysts, and the main geographies covered are the UK, the US, Europe and Ireland. During the year to 30 June there were 190 meetings (: 228 meetings) with existing and potential shareholders, broken down geographically and by meeting type as follows: The Company s Annual General Meeting ( AGM ) also provides an opportunity for shareholders to meet with and to put questions to the Chairman, the Directors, the Committee Chairmen and representatives of the Investment Manager. We also communicate with shareholders through our semi-annual and annual results and announcements of our larger transactions, be they acquisitions, developments or leasing related transactions. All of these documents and all of the Company s announcements can be found on the Company s website at 8. Outlook & Priorities for the Year Ahead The market continues to absorb the implications of the UK s decision to exit the EU. Whilst acknowledging that it is potentially a headwind for the Irish economy, we have also been clear that we consider it an opportunity for our area of business, which is heavily weighted towards Dublin offices. The Dublin office occupier markets remain healthy. The record take-up level Q1 bodes well for those who have capital invested in the higher risk and reward area of office development in Dublin. Our recent successes at One Molesworth Street, with the signing of Barclays Bank Ireland for over half of the office space, and securing AIB for the entirety of our newly completed building at Central Park, demonstrate that point clearly. At the same time, in Dublin the industry is developing speculative space equivalent to approximately 7% of our total market, well ahead of EU averages, so it is a time to remain disciplined in assessing risk around new speculative capital allocation decisions. There are various perspectives on just how much Brexit has impacted on the latest take up figures, but the fact is that those international companies that are expanding in Ireland, be it from the financial services, professional services or TMT sectors, are using Ireland as a base for servicing their European business platforms. Accessing the EU through a proven English speaking and pro-business country such as Ireland must weigh heavily and favourably on those crucial investment decisions. While Ireland s 12.5% corporation tax rate is often cited as the predominant force in this context, it is one of a number of other factors, such as availability of workforce and, 190 investor meetings in the year to 30 June Investor Meetings Held by Investors' Location 5 Ireland 54 US 5 Rest Of World 63 UK 63 Europe Investor Meetings Held by Type of Contact to-1 Meeting 14 Group Meeting 9 Conference Call 5 Site Tour

49 Green REIT plc Annual Report and Accounts 45 Strategic Report Governance Section Financial Information Supplementary Information critically at this juncture, certainty of access to the EU market. Constraining factors include the inadequate provision of residential accommodation, which is a political priority, together with education facilities and infrastructure, both of which require investment and creative solutions. On the capital markets front, the interest rate environment has remained relatively benign, with longer term interest rates best assessed off the 10 year Irish sovereign bond yield, remaining close to historic lows. Despite the tensions at geopolitical level around the globe, sustained low interest rates will likely offer continued support to real estate values, as a considerable gap remains between longer term interest rates and property yields, both in Dublin and across Europe. In fact, Ireland, and Dublin in particular, stands out as a market where yields for the best quality office assets may see further compression, which is in line with our views expressed in the Company s interim results in February of this year. Whilst we were very much out on a limb on that point at that time, there is now a growing consensus that yields will tighten as new investment stock comes to the market this coming autumn winter season. As was our view in February, bifurcation between prime and secondary assets continues to widen in terms of value and liquidity. The impact on Irish commercial real estate pricing and demand, as a result of the decision by the Irish Government in its 10 October budget to increase stamp duty from 2% to 6%, will be seen in the coming months, and will be reflected in the next periodic valuation of the Company s property portfolio at 31 December. As always, our focus is very much on delivering attractive risk adjusted returns for shareholders, with discipline in balance sheet management, both through the Company s capital structure and exposure to development, being of paramount importance in achieving this key objective. We look to the year ahead with confidence. Stephen Vernon Executive Chairman Green Property REIT Ventures DAC 24 October Pat Gunne Chief Executive Green Property REIT Ventures DAC 24 October With tapering being increasingly debated at policy level for both the US Federal Reserve and the European Central Bank, the resulting rise in interest rates is likely at some point to reduce the flow of capital being allocated to real estate as an asset class. This would lead to a continuation of this theme of bifurcation, with the usual flight to quality real estate in times of capital retrenchment. How long this will take is uncertain, but it may become a bigger discussion point over the next 12 to 24 months. Sectorally, at this point the decision to allocate more capital to logistics, at Horizon Logistics Park, and at the same time to reduce the Company s exposure to retail, looks very much to be the right decision. The Company continues to employ further capital into logistics development, and the increased land holding at Horizon Logistics Park provides the option to play out this very exciting opportunity in a sector which benefits from the expansion of internet shopping, and the potential opportunities from Brexit as border and trade issues are resolved.

50 46 Strategic Report Portfolio Overview 1. Location 2. Sector Split Our portfolio has a diversified income base with a high quality tenant mix and strong Dublin focus. 3. Rent & ERV 4. Top 10 Occupiers 5. Tenant Business Sectors 6. WAULT & Vacancy Central Park Estate 7. Major Properties Owned

51 Green REIT plc Annual Report and Accounts 47 Strategic Report Governance Section Financial Information Supplementary Information Location Locations by Value 1 Value at 30 June m % of Group Total Dublin CBD (2/4) % Greater Dublin % Dublin Total 1, % Cork % Total Portfolio 1, % Value by Geography 5% Cork 95% Dublin Dublin CBD (2/4) Dublin Other 2. Sector Split Sectors by Value 1 Value by Sector Value at 30 June m % of Group Total Office Dublin CBD (2/4) % Greater Dublin % Cork % Office Total 1, % Retail % Logistics % Mixed Use % Total Portfolio 1, % 5% Mixed Use 4% Logistics 10% Retail 81% Offices 1 Net of purchasers costs of 4.46% Dublin CBD (2/4) 76% offices in Dublin Dublin Other Cork 5%

52 48 Strategic Report Portfolio Overview continued Sectors by Lettable Area Floor Area (sq m) 000 Floor Area (sq ft) 000 Office Dublin CBD (2/4) % % of Total Greater Dublin % Cork % Office Total 156 1,679 67% Retail % Logistics % Mixed Use % Total 235 2, % Completed properties only, at 30 June 3. Rent & ERV Rental Income Passing Rent m pa Contracted Rent m pa ERV 1 m pa Variance v. June ERV Vacant ERV 1 m pa Office Dublin CBD (2/4) % 1.0 Greater Dublin % Cork % Office Total % Retail % <0.1 Logistics % Mixed Use % <0.1 Total (Let Properties Only) % 1.1 Contracted Rents v. Estimated Market Rents (ERVs) 2 Average Contracted Rent Average ERV psm psf psm psf Variance (v. ERV) Office Dublin CBD (2/4) % Greater Dublin % Cork % Office Total % Retail % Logistics % Mixed Use % Total (Let Properties Only) % 1 Excludes ERV of development assets under construction at 30 June 2 Let properties only. Excludes residential, hotel and car space rent (where applicable)

53 Green REIT plc Annual Report and Accounts 49 Strategic Report Governance Section Financial Information Supplementary Information Top 10 Occupiers by Contracted Rent Tenant Business Sector Contracted Rent m pa % of Group Rent Unexpired Term (years) 1 Allied Irish Banks Financial Services % 10.8 Vodafone TMT % 9.3 Fidelity International Financial Services % 10.6 Amundi Pioneer (formerly Pioneer Investments) Financial Services % 9.8 Ulster Bank Financial Services % 3.4 The Commissioners of Public Works Ireland Public Administration % 6.2 Johnson Controls (Tyco) TMT % 10.8 Tullow Oil Other % 4.1 Northern Trust Financial Services % 1.2 Bank of America Merrill Lynch Financial Services % 6.7 Top 10 Tenants % 8.4 Remaining Tenants % 7.4 Total Portfolio % Unexpired Term/WAULT is the rent-weighted average remaining term on leases to lease expiry/break date (whichever comes first). Excludes residential component in Arena Centre and short term licences 54% of total contracted rent comes from our top 10 tenants

54 50 Strategic Report 5. Tenant Business Sectors Contracted Rent Breakdown by Tenant Business Sectors Contracted Rent m pa % of Group Rent Finance/Financial Services % TMT % Retail Trade % Public Administration (Irish Government) 3.8 6% Professional Services 2.9 4% Logistics 1.5 2% Other 5.5 8% Total Portfolio % 6. WAULT & Vacancy Lease Lengths & Vacancy WAULT (years) 1 Vacancy (By floor area) Vacancy (By ERV) 2 Office Dublin CBD (2/4) % 3.2% Greater Dublin 8.0 Cork 9.7 Office Total % 1.6% Retail % 0.9% Logistics 4.5 Mixed Use % 1.8% Total Portfolio % 1.5% 1 Unexpired Term/WAULT is the rent-weighted average remaining term on leases to lease expiry/break date (whichever comes first). Excludes residential component in Arena Centre and short term licences 2 Excludes ERV of development assets under construction at 30 June 7. Major Properties Owned % Ownership Title Location Lettable Area (sq m) Lettable Area (sq ft) Type Vacancy by ERV () Year of Acquisition/ Construction Central Park 100% Freehold Dublin 18 79, ,000 Office Acquired in 2014, additional building completed in George s Quay 100% Freehold/ Dublin 2 32, ,000 Office 866 Acquired in 2014 Long leashold Westend Shopping Park 100% Freehold Dublin 15 28, ,000 Retail 67% 63 Acquired in 2014 Office 33% 2 Burlington Road 100% Freehold Dublin 4 7,900 85,000 Office Acquired in 2013 One Albert Quay 100% Freehold Cork 15, ,000 Office Completed in 2015

55 Green REIT plc Annual Report and Accounts 51 Strategic Report Governance Section Sustainability Review Financial Information Supplementary Information Sustainability is a strategic priority for Green REIT. 100% Achievement in all short term targets to date 31% Sustainability Summary We recognise the important role that the built environment has in creating a sustainable future and, in, started to implement a five-year sustainability strategy which aligns to our business. The strategy focuses on five key areas of priority and includes comprehensive and measurable short term (one year), medium term (two to three years) and long term (five years plus) targets. To implement this strategy, we are focused on enhancing the sustainability performance of our multi-let properties and over the medium term we hope to engage with single-let occupiers to widen the reach of our strategy. Achievement in medium term targets

56 52 Strategic Report Sustainability Review continued LiveWorkGrow Fitness week at Central Park LiveWorkGrow event at Central Park Looking to the remainder of, and beyond to 2018, our focus will be to act upon key opportunities identified through our recent Global Real Estate Sustainability Benchmark (GRESB) submission, and to position the company against the EPRA Sustainability Best Practices Recommendations, whilst keeping on track with the five year strategy. Our Progress Short Term Targets () Medium Term Targets ( 18) Long Term Targets ( ) 0% 31% 100% Management and Risks and Opportunities, where we outperformed our peer group. We will now work to interrogate our GRESB results and incorporate these into our strategy for the year ahead. Progress Against our 5 key Objectives 1. To ensure compliance with all applicable statutory requirements relevant to our business activity and to look for opportunities to go beyond. We have undertaken a review of all current and emerging legislation to future-proof against any changes in government policy. The resulting briefing document undergoes regular review to ensure our objectives reflect and incorporate all legal requirements. Following our GRESB dry run in, the summer of saw our first full submission to GRESB, benchmarking our performance against a peer group of real estate investors. Identified opportunities for improvement will form the basis of our sustainability goals for the remainder of calendar year and throughout We are pleased to report that we have made significant progress on our five year sustainability strategy. We have achieved 100% of all short term targets to date, and have made good progress on medium term targets, having already achieved more than 30% of targets stretching to Targeted sustainability initiatives and proactive asset management have enabled progress across each of our five key strategy objectives. GRESB Results In, we completed our first formal submission to GRESB, providing a benchmark of how we perform alongside our industry peers. We received positive feedback from the survey, achieving Green Talker status a significant result for our first year of submission. Our positive score was largely a result of our strong sustainability position in the categories of We are focused on enhancing the sustainability performance of our multi-let properties and over the medium term we hope to engage with single-let occupiers to widen the reach of our strategy.

57 Green REIT plc Annual Report and Accounts 53 Strategic Report Governance Section Financial Information Supplementary Information We have launched a new Sustainability Communications Strategy, ensuring that our most senior decision makers and stakeholders are engaged and informed of our sustainability commitments and performance. This not only increases accountability across our operations, but further facilitates continuous improvement through positioning our people as agents of positive change. 2. To ensure responsible design and delivery of new and refurbished buildings. Our philosophy is to ensure that all new office buildings and major refurbishment projects across our portfolio are completed to the highest sustainability standards, using quality materials and innovative technologies that both improve resource efficiency and minimise waste. We aim to create positive working environments, which maximise natural light and indoor air quality, through best-practice design and construction processes. To this end, it is our policy that all new office buildings across our portfolio are completed to, at a minimum, LEED BD+C: Core & Shell Gold standard. We have successfully completed two LEED Gold-certified office schemes, with all those under construction on target to achieve a minimum of LEED Gold upon completion. Projects completed to date have incorporated features such as energy-efficient LED lighting, water-efficient sanitary ware, utilities metering, low-emitting materials and finishes, and have been constructed in accordance with LEED requirements such as pollution management, waste management, and best practice commissioning processes. We have defined guidelines for the refurbishment of our existing building stock, which comprises a mix of buildings including Georgian, 1980s and 1990s offices. These guidelines incorporate best practice standards for sustainable buildings. Refurbishment projects completed to date have been limited to minor works; however, at the point of a major refurbishment these guidelines will be fully adhered to. We are developing an innovative Smart Metering Strategy, which will be initially rolled out at our Central Park and George s Quay assets. We have completed an energy performance review of all assets across the portfolio, identifying those low-performing assets with a Building Energy Rating ( BER ) of D1 or below, in order to inform an action plan for improvement. Thus, over a 12 month period, we have seen 21 low-performing assets improve to a B3 BER or higher, and 31 assets improve to within C1-C3 BER. Over the next 12 months we will continue in our efforts to improve the remaining low-performing assets where possible. BER Rating Original Revised Movement A A A B B B C C C D1 and below On going Total Indoor Environmental Quality ( IEQ ) parameters such as water quality, air quality, thermal comfort, and emissions from materials and finishes have been considered in the design of all new schemes, as per LEED requirements, to control for and maximise occupant wellbeing. In all future developments and refurbishment projects, we will continue to identify new opportunities to further improve the IEQ of the spaces we create. We aim to create positive working environments, which maximise natural light and indoor air quality.

58 54 Strategic Report Sustainability Review continued 3. Managing our existing assets in an environmentally friendly way In November, we had the first in a series of annual sustainability workshops, where all asset management stakeholders convened to discuss our sustainability strategy, current performance of assets across our portfolio and priorities for the year ahead. This workshop series between sustainability experts, asset management teams, development teams, property managers and building managers acts as a forum of communication across our portfolio, with the objective of achieving consistency in reporting whilst identifying efficiencies in our supply chain. Having completed the GRESB dry run in summer, this inaugural workshop included a discussion of results to steer objectives for the year ahead, with the aim of maximising opportunity to improve our performance in line with GRESB requirements by summer, the time of our first formal GRESB submission. Implementation and measurement were both key areas of focus; procedures for data collection and monitoring were established for energy, water, and waste, which include uniform reporting requirements and a baseline against which future performance will be assessed. Our supply chain was additionally reviewed, resulting in amendments to the two to three yearly tender process to incorporate set sustainability requirements for incoming suppliers. A second workshop is scheduled for early November. 4. We are mindful that the public space in our properties should offer a positive environment for our stakeholders and our neighbours. Following the works undertaken in to enhance common areas at Westend Retail Park, we have continued with the ongoing development of Central Park to create a more engaging space for the estate and local community. We continue to seek opportunities to improve our positive impact on the public realm, for example through community initiatives such as Live Work Grow, an engagement programme at Central Park consisting of an interactive online portal and a variety of events, which aims to create a sense of community in an out of town location. The programme receives consistently positive feedback from tenants, and to further its development we are continuing to collaborate with our tenants to ensure that a relevant and meaningful programme continues which supports respective tenant health and wellbeing programmes. We continue to seek opportunities to improve our positive impact on the public realm, for example through community initiatives such as Live Work Grow. 5. Working with stakeholders, we have identified the need for enhanced engagement with occupiers, supplier and the broader community to improve environmental, social and ultimately economic outcomes. Tenants our asset management team has regular engagement with our tenants through a variety of forums; making it a priority to engage on planned capital expenditure projects to ensure that service charge monies are directed to works from which our tenants benefit most. This strengthens the landlord tenant relationship, enabling a sound understanding of tenant needs. Supply chain in tandem with our property managers, we have reviewed and strengthened sustainability requirements throughout our supplier tender process. We have recently tendered out for several services, including waste and cleaning contractors, introducing the new request for sustainability disclosure in tender documentation. This significantly broadens the reach of our strategy, has the potential to substantially reduce the operational environmental impacts associated with our portfolio, and further strengthens our health and safety protocols. Investors communication on our performance to investors is key to our sustainability strategy. Our recently launched Sustainability Communications Strategy has been designed to ensure that investors are informed on Green REIT s sustainability performance, notably through our participation in GRESB. Furthermore, we are in the process of benchmarking our performance against EPRA Sustainability Best Practices Recommendations, looking to carry out a formal submission to the programme over the medium term.

59 Green REIT plc Annual Report and Accounts 55 Strategic Report Governance Section Financial Information Supplementary Information New Build Certification We place great importance on the benefits that our stakeholders, namely our tenants, derive from a quality working environment with efficient services throughout. Through our sustainability strategy it is our policy to maximise these benefits through LEED BD+C: Core & Shell certification. For all newly built assets, we target at least LEED Gold standard, increasing this ambition to LEED Platinum where feasible. Shower facility at George s Quay Since Green REIT was first established in 2013 our portfolio has evolved, from one largely focused on acquisition to a broadly stabilised portfolio with asset management and development priorities. Over the past 12 months we have completed and successfully let both Building H in Central Park and 32 Molesworth Street to achieve LEED Gold certification at both assets. Property LEED Core & Shell Status One Albert Quay Awarded Gold Building H, Central Park Awarded Gold 32 Molesworth Street Awarded Gold One Molesworth Street On target for Platinum 4 5 Harcourt Road On target for Gold Building I, Central Park On target for Gold George s Quay Estate Through our sustainability strategy and ongoing commitments to improve our portfolio, we identified the need for improved cyclist facilities at our George s Quay Estate, which serves as a place of work for more than 3,000 office based employees. As a first step in this process, we provided secure storage facilities for up to 200 bicycles and applied for planning permission to convert under-utilised space, beneath disused railway arches, to high-quality shower and changing facilities. These works are now complete and include 16 shower rooms, changing and drying facilities. The new facilities look to encourage the uptake of cycling to work amongst site occupiers and visitors, reducing environmental impacts associated with travel to and from the Estate, whilst supporting individual health and wellbeing. Shower facility at George s Quay

60 56 Strategic Report Sustainability Review continued C Case Studies 32 Molesworth Street Dublin 2 32 Molesworth Street Through the recent re-development of 32 Molesworth Street, we transformed a 17th Century protected building into a highquality, modern workplace. Comprising a fully refurbished original structure and a new modern office space to the rear, 32 Molesworth Street now incorporates both a courtyard and a frameless full-height atrium; maximising natural light in an asset where this had previously been limited. Other features of the new space include: energy-efficient heating, ventilation and air conditioning ( HVAC ) equipment linked to the asset s building management system ( BMS ) for streamlined operation; an automated, energy-efficient ventilation strategy for maximised user comfort; energy-efficient LED lighting systems; water-efficient sanitary ware throughout; a sedum green roof and landscaped courtyard; cycle facilities for occupants and visitors, including a cycle ramp, storage, showers and changing facilities; and salvaged brickwork and recycled steel beams. The project achieved LEED BD+C: Core & Shell Gold certification and was awarded Commercial Office Building of Year at the Irish Building & Design Awards. Green Property REIT Ventures, the Company s Investment Manager, has subsequently taken a sub-lease from the overriding tenant at the building, completing a full fit-out and move to the new space in August. The tenant space is on target to achieve LEED ID+C: Commercial Interiors Gold certification. Factors considered in site section and fit-out design include: the availability of amenities and public transport links; the supportive sustainability principles of the LEED BD+C: Core & Shell Gold certification in the base build; the fit-out works are projected to achieve maximum points under LEED s Energy and Atmosphere category, made possible by the scheme s new energy-efficient envelope and plant; the introduction of daylight to both maximise occupant experience and minimise operational energy costs; the incorporation of Energy Star-compliant appliances, efficient LED lighting fixtures and energy-saving fan coil units; and the maximisation of indoor air quality through filtered fresh air, supplied throughout at 30% above best practice thresholds for ventilation, as defined by ASHRAE Throughout the construction process, waste diversion from landfill is expected to have exceeded 75%. Prior to handover, the space was flushed to ensure that any remaining contaminants from the construction works were minimised. As per the Company s sustainability strategy, we will continue to monitor the sustainability performance of 32 Molesworth Street throughout operation to identify any opportunities for improvement.

61 Green REIT plc Annual Report and Accounts 57 Strategic Report Governance Section Financial Information Supplementary Information Atrium lobby of 32 Molesworth Street

62 58 Strategic Report Sustainability Review continued C Case Studies Building H, Central Park Completed in March, Building H is a 14,700 square metre (158,244 square feet) office development built on a green-field site, adjacent to our existing Central Park Estate. The building was completed in March and is let in its entirety to Allied Irish Banks. The new site benefits from excellent public transport connections, with direct tram, bus, and rail links to Dublin s city centre and beyond. As an extension of our existing Central Park Estate, the building also benefits from the Park s Live Work Grow community initiative. Key sustainable design features at the project include: Building H Central Park rainwater harvesting technologies; a state of the art façade system; automated lighting controls, including daylight control, to all building areas ; energy-efficient LED lighting design; and water-efficient sanitary ware throughout. The project was awarded LEED BD+C: Core & Shell Gold certification. Atrium lobby of Building H, Central Park

63 Green REIT plc Annual Report and Accounts 59 Strategic Report Governance Section Financial Information Supplementary Information Building H, Central Park

64 60 Strategic Report Sustainability Review continued C Case Studies Cape & Commercial House, Westend Office Park Following upgrade works completed at our Westend Estate in both to the car park at Westend Retail Park and to HVAC services at Cape & Commercial House, Westend Office Park we carried out an upgrade to common areas at both Cape & Commercial House in. These works included: Cape & Commercial House Westend Office Park a refreshed common area, including a new energy efficient LED lighting system and new air conditioning units; refurbished bathrooms, incorporating water-efficient sanitary ware and energy-efficient LED lighting; and an upgrade to existing fire safety systems. Reception lobby of Cape House

65 Green REIT plc Annual Report and Accounts 61 Strategic Report Governance Section Financial Information Supplementary Information Commercial House common area upgrade Post completion of HVAC works Westend Retail Park

66 62 Strategic Report The Management Team Our portfolio is managed by Green Property REIT Ventures. Led by Stephen Vernon and Pat Gunne, this is one of the Irish property market s most experienced management teams. Three factors put us is in a prime position to act on investment opportunities ahead of the market: our rich management experience, our extensive network of industry relationships and the scale of our operation. The members of the management team have been wellknown within the Irish and UK real estate markets for many years, and have established relationships in these markets, including with commercial real estate lenders, property funds, planning authorities, tenants and private investors. These relationships have enabled members of the management team to access both off-market and more widely marketed real estate transactions and to access debt financing packages in the various phases of the economic cycle during the past 20 years. The Company s properties are managed by our Investment Manager, Green Property REIT Ventures DAC. Brief biographies of the members of the management team are set out below. Stephen Vernon Chairman Please see page 67 for details. Pat Gunne Chief Executive Please see page 67 for details.

67 Green REIT plc Annual Report and Accounts 63 Strategic Report Governance Section Financial Information Supplementary Information Caroline McCarthy Chief Investment Officer Caroline joined Green Property REIT Ventures in September 2013 as Chief Investment Officer. She is responsible for Investment Management, sourcing new acquisitions and disposals, and maximising opportunities that match the investment objectives of the Company. In addition, she manages the bi-annual Independent Valuation process and is part of the Sustainability Committee. Prior to joining she was an executive director and head of the Capital Markets team of CBRE in Ireland from March 2005 to February Prior to joining CBRE in 2003, Caroline established the property investment team within Bank of Ireland Private Banking. She also previously served in a variety of roles in property investment in the UK including King Sturge (now JLL) and Hill Samuel Asset Management (now Scottish Widows). Caroline is an Associate of the Royal Institution of Chartered Surveyors and a Member of the Society of Chartered Surveyors. Niall O Buachalla Chief Operations Officer, Green REIT plc Company Secretary Niall joined Green Property REIT Ventures in January 2014 as Chief Operations Officer. His role is to co-ordinate the operations of Green REIT plc, including financial reporting and investor relations. Niall is also the Company Secretary of Green REIT plc and of the sub-committees of its Board. Niall was co-founder and Finance Director of Burlington Real Estate Limited in late 2012 and prior to that he joined Treasury Holdings in June 2003 in the project finance area and was involved in raising capital for its large-scale developments and acquisitions in Ireland, the UK and in China. He became Group Finance Director of Treasury Holdings and was responsible for the group finance function until late Niall is a Fellow of Chartered Accountants Ireland, having qualified with Arthur Andersen in Dublin in Paul Culhane Development Director Paul is Development Director of Green Property REIT Ventures having joined in early He has delivered numerous office, retail, industrial and leisure projects since joining and is directly responsible for the implementation of Green REIT plc s development programme, where we are on site at five locations. Prior to joining Green Property REIT Ventures, he held the position of development Director with CBRE Ireland from early 1997 where he was responsible for identifying, structuring and disposing of a number of the largest development projects undertaken in Ireland at that time. Ronan Webster Asset Management Director Ronan joined Green Property REIT Ventures in October 2011 as a Director, working on the reorganisation, management and disposal of a number of bank and private equity loan portfolios. Ronan is responsible for leasing and implementation of our asset management strategy. Prior to joining Green Property REIT Ventures he was a board Director of CBRE in Ireland from 1998 to 2011, where he served a variety of clients including public companies, pension funds, banks and large office occupiers in acquiring and disposing of property in Ireland and the UK. Prior to joining CBRE in 1998, Ronan held roles with Equis Corporate Realty Advisors in Menlo Park, California and DTZ Sherry FitzGerald (now Cushman & Wakefield). Ronan is a member of the Sustainability Committee. He is a Fellow of the Royal Institution of Chartered Surveyors.

68 64 Governance Section Introduction to Corporate Governance Robust governance is key to giving our shareholders confidence that their Company is being properly managed. The Board maintains high standards of corporate governance by developing and implementing policies and procedures in compliance with the corporate governance codes and best practice.

69 Green REIT plc Annual Report and Accounts 65 Strategic Report Governance Section Corporate Governance Framework Financial Information Supplementary Information The Board of Directors The Board has overall responsibility for strategic direction, investment policy and corporate governance. Gary Kennedy Independent Non Executive Director & Chairman Jerome Kennedy Independent Non-Executive Director Thom Wernink Independent Non-Executive Director & Senior Independent Director Gary McGann Independent Non-Executive Director Stephen Vernon Non-Executive Director Pat Gunne Non-Executive Director Board Committees Audit Committee Nomination Committee Remuneration Committee Disclosure Committee Chairman Jerome Kennedy Gary Kennedy Thom Wernink Pat Gunne Members Thom Wernink Gary McGann Thom Wernink Jerome Kennedy Stephen Vernon Gary Kennedy Jerome Kennedy Niall O Buachalla Investment Manager Stephen Vernon Chairman Pat Gunne Chief Executive Caroline McCarthy Chief Investment Officer Niall O Buachalla Chief Operating Officer Paul Culhane Development Director Ronan Webster Asset Management Director

70 66 Governance Section Board of Directors