BEST PROPERTIES BEST MARKET FUNDAMENTALS + BEST MANAGEMENT. = Best Long-Term Shareholder Value

Transcription

1 BEST PROPERTIES BEST MARKET FUNDAMENTALS + BEST MANAGEMENT = Best Long-Term Shareholder Value Irish Residential Properties REIT plc Annual Report 2015

2 Irish Residential Properties REIT plc Annual Report 2015 Profile Irish Residential Properties REIT plc ( I-RES or the Company ) is a growth-oriented Real Estate Investment Trust ( REIT ) that owns 2,064 apartments in Dublin, Ireland. As the largest non-governmental residential landlord in Ireland, the Company is focused on acquiring, holding and professionally managing interests in multi-unit residential rental properties in Ireland and developing sites included in its property portfolio. The Company s shares are listed on the Irish Stock Exchange (ISE: IRES). For more information, please visit the Company s website at B Irish Residential Properties REIT plc Annual Report 2015

3 Contents REVIEW 2 Financial and Operational Highlights 4 Best Properties 6 Best Market Fundamentals 8 Best Management 10 Chairman s Statement 12 Chief Executive Officer s Statement 17 IRES Fund Management, Investment Manager Statement 18 Market Update 21 Portfolio Overview 28 Investment Policy and Strategy GOVERNANCE 34 I-RES Board of Directors 36 CAPREIT and IRES Fund Management Senior Management 38 Corporate Governance Statement 45 Report of the Audit Committee 49 Report of the Remuneration Committee 52 Report of the Nomination Committee 53 Report of the Directors 65 Statement of Directors Responsibility FINANCIAL STATEMENTS 66 Independent Auditors Report to the members of Irish Residential Properties REIT plc 72 Consolidated Statement of Financial Position 73 Consolidated Statement of Profit and Loss and Other Comprehensive Income 74 Consolidated Statement of Changes in Equity 75 Consolidated Statement of Cash Flows 76 Notes to Financial Statements 96 Company Statement of Financial Position 97 Company Statement of Changes in Equity 98 Company Statement of Cash Flows 99 Notes to Company Financial Statements 105 Glossary of Terms IBC Forward-Looking Statements Shareholder Information Annual Report 2015 Irish Residential Properties REIT plc 1

4 Irish Residential Properties REIT plc Annual Report 2015 Highlights 31 December December 2014 FINANCIAL Revenue ( millions) (1) Net Profit ( millions) (1) Basic EPRA EPS (cents) (1) Basic NAV and EPRA NAV per share (cents) Pro-forma NAV per share (cents) Diluted EPRA NAV per share (cents) Total return 15.3% (2) 5.9% Loan to Value 8.6% 37.6% OPERATIONAL Gross Yield at Fair Value (3) 6.2% 6.0% Net Rental Income Margin 80.8% 78.8% (1) Occupancy Rate 96.0% 99.7% Average Monthly Rent ( ) 1,372 1,250 (1) For the period 2 July 2013 to 31 December (2) Total return is calculated assuming shares have been held since the initial offering and based on a share price of as at 8 February 2015 and including dividends declared to date. (3) Adjusted for fair value of development land. 2 Irish Residential Properties REIT plc Annual Report 2015

5 BEST PROPERTIES BEST MARKET FUNDAMENTALS + BEST MANAGEMENT = Best Long-Term Shareholder Value Accomplishments to 31 December 2015 > Successful equity issuance in March 2015, raising net proceeds of approximately 204 million used for acquisitions and to partly repay the credit facility > Strategic acquisitions of 410 high-quality apartments; million invested in Dublin during the year > Dividends of 1.8 million paid in 2015 in respect of the 2014 accounting period since 31 December 2015 > Arranged a new credit facility with a reduced margin and five-year term > A further two properties (442 apartments and eight apartments, respectively) were acquired for 83 million and c. 2.3 million, respectively (including VAT, but excluding other transaction costs) > Dividends declared of 13.1 million (dividends per share of 3.15 cents) for the 2015 fiscal year > Announced first development for the construction of 68 apartments at Block B2B, which is expected to have a gross yield in the range of 8.5% to 9.0% Annual Report 2015 Irish Residential Properties REIT plc 3

6 BEST PROPERTIES I-RES has built a welllocated, highest quality and modern property portfolio with a weighted average age of only 7.9 years. By managing properties close to one another, I-RES is capturing cost synergies that could generate further benefits for shareholders. 8 Finglas Whitehall Inchicore Drimnagh 10 Donnybrook 14 Churchtown 5 Tallaght Sandyford Property Portfolio Building Date Number of Property Location Year Built Class Acquired Suites Owned 1 Kings Court Smithfield, D Luxury 10 Sep Grande Central Sandyford, D Luxury 10 Sep Priorsgate Tallaght, D Luxury 10 Sep Camac Crescent Inchicore, D Luxury 10 Sep The Laurels Tallaght, D Mid-tier 27 Jun The Marker Docklands, D Luxury 18 Jul Beacon South Quarter (1) Sandyford, D /2008 Luxury 7 Oct Charlestown Finglas, D Luxury 7 Oct Bakers Yard Portland Street North, D1 2007/2008 Mid-tier 7 Oct Lansdowne Gate Drimnagh, D Luxury 7 Oct Rockbrook Grande Central Sandyford, D Luxury 31 Mar Rockbrook South Central Sandyford, D Luxury 31 Mar Tyrone Court Inchicore, D Mid-tier 05 Jun Bessboro Terenure, D Mid-tier 11 Dec Total owned portfolio as at 31 December , Tallaght Cross West Tallaght, D Mid-tier 15 Jan Forum Sandyford, D Luxury 17 Feb Total owned portfolio as at date of this Report 2,064 (1) This includes eight additional apartments purchased on 6 November Irish Residential Properties REIT plc Annual Report 2015

7 Beacon South Quarter 225 residential apartments Sandyford, Dublin 18 The development was constructed in 2007/2008 and is a landmark mixed-use development on 13 acres. Annual Report 2015 Irish Residential Properties REIT plc 5

8 BEST MARKET FUNDAMENTALS We continue to see strengthening fundamentals in the residential rental business, as Ireland s GNP is improving, unemployment is falling and the overall population is growing. In addition, there is little new supply of residential housing coming to the market and new housing starts are expected to remain well under forecasted requirements. Strong Real Estate Fundamentals 1 Significant supply and demand imbalance helps support the rental market 2 Strengthening Irish economy, with upward pressure being applied on employee compensation 3 Strong pipeline of future acquisitions available through Ireland s National Asset Management Agency ( NAMA ) and private market opportunities 4 Intensification opportunity to add approximately 600 to 650 apartments with significant infrastructure in place, subject to planning and any other approvals 5 Increasing apartment rental sector caused by various factors such as the central bank mortgage limits and the growing Irish population Strong Market Demand The continued shortage of housing supply in Dublin helps support the rental market Growing Irish Economy Strong 2015 GNP growth and a strong forecast for 2016 Growing Irish Population Growing immigrant and young population of renters (highest birth rate in Europe) 8.0% 3.5% HOUSING COMPLETIONS ,891 HOUSING REQUIRED , % 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 6.9% 5.7% 4.6% 3.3% 3.3% F 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Irish Residential Properties REIT plc Annual Report 2015

9 Tallaght Cross West 442 residential apartments Tallaght, Dublin 24 The development was constructed in 2008 and consists of 507 residential apartments, of which 442 are owned by the Company. Annual Report 2015 Irish Residential Properties REIT plc 7

10 BEST MANAGEMENT From left to right: Charles Coyle, Vice President, Acquisitions; Daniel Mack, Associate; Darren O Neill, Regional Accounting Officer; Jodi Lieberman, Chief Human Resources Officer; Scott Cryer, Chief Financial Officer; Corinne Pruzanski, General Counsel and Corporate Secretary; Thomas Schwartz, President and Chief Executive Officer, CAPREIT; Mark Kenney, Chief Operating Officer; and Roberto Israel, Chief Information Officer. I-RES fully-integrated management platform, between the Dublin office of IRES Fund Management Limited ( IRES Fund Management or the Investment Manager ) and the CAPREIT Limited Partnership ( CAPREIT LP ) head office resources, is driving solid increases in organic growth. Both IRES Fund Management and CAPREIT LP are subsidiaries of Canadian Apartment Properties Real Estate Investment Trust ( CAPREIT ). Proven Investment Manager 1 Experienced investment manager with a track record of growth and value creation in the residential sector 2 CAPREIT is fully aligned with I-RES shareholders, with an indirect 15.7% beneficial ownership interest 3 Proven acquisition acumen in the residential sector 4 Strong leadership team specialising in residential real estate 5 Dedicated local team of 26 experienced staff in the Dublin office as of 31 December 2015, supported by the CAPREIT LP platform 6 Benefits from CAPREIT LP s infrastructure and resources available to I-RES, including management, due diligence, finance, training, risk management, marketing, legal and information technology 7 On 1 November 2015, IRES Fund Management became the alternative investment fund manager for I-RES 8 Irish Residential Properties REIT plc Annual Report 2015

11 The Marker 84 residential apartments Grand Canal Dock, Dublin 2 Within walking distance of the Dublin Convention Centre, the O2 Arena, Aviva Stadium, Croke Park and Grafton Street, The Marker has access to the DART at Barrow Street and the LUAS tram line in the North Docklands. Annual Report 2015 Irish Residential Properties REIT plc 9

12 Colm Ó Nualláin Chairman Chairman s Statement I am pleased to present the Group s (1) results for the year ended 31December 2015, being the first full year of I-RES operations. >> In March 2015, the Company raised gross proceeds of 215 million through the issuance of 215 million ordinary shares (the Capital Raise ), which, together with the 200 million raised in the initial offering in April 2014, brings the total gross proceeds raised to 415 million. During the year ended 31 December 2015, the Group acquired a further 410 apartments for a total acquisition cost of million (including VAT and other transaction costs), bringing its total number of apartments to 1,614 as at 31 December I-RES continues to be the largest non-governmental residential landlord in Ireland. As at 31 December 2015, the Group had invested approximately 441 million (including VAT and other transaction costs) across 13 locations in the Dublin area, funded through a combination of equity and debt. Financial Results The Group has generated strong rental growth and maintained a high level of occupancy across the portfolio during the year, indicative of the strong market fundamentals in the Irish residential rental sector. The portfolio Gross Yield at fair value was 6.2% as at 31 December 2015, compared to 6.0% as at 31 December 2014, adjusted for the fair value of development land. Basic EPS and Basic EPRA EPS for the period were 8.4 cents and 3.3 cents, respectively, for the year ended 31 December Basic NAV and EPRA NAV was million, with Basic NAV and EPRA NAV per share of cents as at 31 December Basic NAV and EPRA NAV per share increased by 4.8% for the year ended 31 December 2015, compared to 31 December 2014, driven by property valuation increases and rental profit in the period, partially offset by equity transaction costs. Dividends On 9 February 2016, the directors of the board (the Directors ) declared an interim dividend of 13.1 million (dividends per share of 3.15 cents) for the 2015 accounting period, to be paid on 21 March 2016 to shareholders on record on 19 February (1) This report ( Report ) incorporates the financial information of the Company and its wholly-owned subsidiary, IRES Residential Properties Limited, together referred to as the Group, for the period from 1 January 2015 to 31 December Irish Residential Properties REIT plc Annual Report 2015

13 Investment Manager The Company s board of directors (the Board ) is very satisfied with the significant contribution that the Investment Manager and senior management (as well as the other staff) of CAPREIT LP have made. As of 31 December 2015, there were 26 staff located in Dublin providing dedicated and experienced support to the I-RES portfolio. On 28 October 2015, IRES Fund Management became authorised by the Central Bank of Ireland as an alternative investment fund manager under the European Union (Alternative Investment Fund Managers) Regulations, 2013 (the AIFM Regulations ). On 1 November 2015, IRES Fund Management was appointed by the Company as its new alternative investment fund manager in accordance with the AIFM Regulations and replaced the existing alternative investment fund manager. Events Subsequent to 31 December 2015 On 14 January 2016, the Company signed a new revolving and accordion credit facility of up to 250 million, which can be extended to 350 million subject to certain terms and conditions (the New Revolving Credit Facility ). On 15 January 2016, the Company acquired a further 442 apartments, commercial space and associated underground car parking for a total purchase price of 83 million (including VAT, but excluding other transaction costs), funded by the New Revolving Credit Facility. On 17 February 2016, the Company acquired a further eight apartments and 11 basement car parking spaces at the Forum, located in Sandyford, Dublin 18, for a total purchase price of c. 2.3 million (including VAT, but excluding other transaction costs), funded by the Company s cash on hand. Effective 21 March 2016, I-RES will be added to the FTSE EPRA/NAREIT Global Real Estate Index Series, EMEA region (the EPRA Index ). Outlook In summary, the Board is pleased with the Group s performance. We believe the positive economic outlook for Ireland and its property market will lead to increased demand in the residential rental sector, which should result in continued improvement in the performance of the Company over a sustainable and long-term basis. Colm Ó Nualláin Chairman Annual Report 2015 Irish Residential Properties REIT plc 11

14 David Ehrlich Chief Executive Officer Chief Executive Officer s Statement 2015 was a busy and productive year for I-RES. In March 2015, the Company raised gross proceeds of 215 million through the issuance of 215 million ordinary shares, which, together with the 200 million raised in the initial offering in April 2014, brought the total gross proceeds raised to 415 million. As the most active consolidator in the Irish residential rental sector, I-RES completed the accretive acquisition of 410 apartments and 4,665 sq. m. (50,214 sq. ft.) of ancillary commercial space during the year. This increased our apartment count by 34% to 1,614 extremely high-quality, well-located apartments in the Dublin area near important transportation links and employment centres. Operationally, we generated solid increases in our key operational performance benchmarks, driven primarily by strong organic growth resulting from high occupancies and solid increases in monthly rents on renewals and turnovers. In 2015, approximately 25% renewed in each of quarter one and quarter two and 15% and 10% were renewed in quarter three and quarter four, respectively. Also, approximately 20% of the apartments turned over in On 14 January 2016, the Company signed a new revolving and accordion credit facility of up to 250 million, which can be extended to 350 million subject to certain terms and conditions. This new facility replaces the 60 million revolving credit facility which was due to mature in August The new facility has a reduced margin and a five-year term. In addition, subsequent to the year ended 31 December 2015, the Company acquired a further 442 apartments and 18,344 sq. m. (197,460 sq. ft.) of commercial space and associated underground car parking at Tallaght Cross West, located in Tallaght, Dublin 24, for a total purchase price of 83 million (including VAT, but excluding other transaction costs). The acquisition was mainly funded by our New Revolving Credit Facility. On 17 February 2016, the Company acquired a further eight apartments and 11 basement car parking spaces at the Forum, located in Sandyford, Dublin 18, for a total purchase price of c. 2.3 million (including VAT, but excluding other transaction costs), funded by the Company s cash on hand. With this acquisition, our total portfolio consists of 2,064 apartments at a total investment of 529 million to date (including VAT and other acquisition costs). 12 Irish Residential Properties REIT plc Annual Report 2015

15 Rockbrook Portfolio 270 residential apartments Sandyford, Dublin 18 The development consists of 270 residential apartments and mixed-use commercial space of approximately 4,665 sq. m. (50,214 sq. ft.). The portfolio also includes a development site of approximately 1.13 hectares (2.8 acres) and associated basement car parking. Annual Report 2015 Irish Residential Properties REIT plc 13

16 Chief Executive Officer s Statement (cont d) Financial Results Balance Sheet of the Group: 31 December December 2014 Total Property Value ( millions) Basic and EPRA Net Asset Value ( millions) Basic and EPRA NAV per Share (cents) Number of Apartments 1,614 1,204 Bank Indebtedness ( millions) Group Total Gearing 8.6% 37.6% Year ended 2 July 2013 to Income Statement of the Group: 31 December December 2014 Gross Rental Income ( millions) Net Rental Income ( millions) Profit ( millions) Basic EPS (cents) Diluted EPS (cents) Basic EPRA EPS (cents) The property portfolio was valued at million at 31 December 2015, with total net borrowings of 41.5 million, compared to million at the end of 2014, with total net borrowings of million. For the year ended 2015, there was a significant 6.7% increase in value for the properties held as at 31 December The Group s loan to value ratio was 8.6%. Basic NAV and EPRA NAV were million for the year, with Basic NAV and EPRA NAV per share of cents in 2015, up 4.8% from 99.5 cents in The Company s Pro-forma NAV per share as at 31 December 2015 was cents, adjusting for acquisition transaction costs. Importantly, we have recovered all the costs incurred in connection with our Capital Raise in 2015 and the costs incurred with our acquisitions through appreciation in the fair value of the portfolio. The main drivers of the valuation movement in the year were primarily continued rental growth as a result of effective management, achieved together with the continued increasing demand for high-quality rental accommodation and slight yield compression. Average monthly rent increased to 1,372 per apartment as at 31 December 2015, up from 1,250 at 31 December 2014, largely due to strong rental increases in monthly rental rates on renewals and turnovers during the year. Occupancy levels remained strong throughout the year, mirroring the strong market fundamentals in the Irish residential rental sector. As at 31 December 2015, the property portfolio had an annualised passing rent of 28.2 million, representing a Gross Yield at cost of approximately 6.9% (excluding the estimated cost for development land) and a net rental income ( NRI ) margin of approximately 80.8%. Basic EPS was 8.4 cents and EPRA Basic EPS was 3.3 cents for the year ended 31 December Irish Residential Properties REIT plc Annual Report 2015

17 We believe we have one of the highest quality rental property portfolios in any market, characterised by quite new, well-maintained buildings, large, attractive and modern apartments, and property management programmes aimed at ensuring our residents needs are met quickly and efficiently. DAVID EHRLICH, Chief Executive Officer Dividends Under the Irish REIT regime, subject to having sufficient distributable reserves, the Company is required to distribute to shareholders at least 85% of the Property Income of its Property Rental Business for each financial year. Accordingly, in 2015, the Board paid dividends of approximately 1.8 million for the 2014 accounting period. On 9 February 2016, the Directors declared an interim dividend of 13.1 million (dividends per share of 3.15 cents) for the 2015 accounting period, to be paid on 21 March 2016 to shareholders on record on 19 February Investment Manager We are very satisfied with the significant contribution that the Investment Manager and senior management (as well as the other staff) of CAPREIT LP have made. As of 31 December 2015, there were 26 staff located in Dublin employed by IRES Fund Management providing dedicated and experienced support to the I-RES portfolio. On 28 October 2015, IRES Fund Management became authorised by the Central Bank of Ireland as an alternative investment fund manager under the AIFM Regulations. On 1 November 2015, IRES Fund Management was appointed by the Company as its new alternative investment fund manager in accordance with the AIFM Regulations and replaced the existing alternative investment fund manager. Outlook Strong Market Fundamentals Ireland s GNP is improving, unemployment is falling and the overall population is growing. As labour market conditions continue to tighten, upward pressure is being applied on employee compensation, which, together with a range of tax cuts introduced in the most recent budget, should boost disposable incomes. Ireland s economy is expected to continue to grow in 2016, with consumer demand, trade and investment expected to increase going forward as consumer confidence remains solid. In addition, there is little new supply of residential housing coming to market, and new housing starts are expected to remain well under forecasted requirements over the next number of years. As a result, we continue to see strengthening fundamentals in the residential rental business. Acquisition and Development Opportunities We continue to evaluate a significant pipeline of future acquisition opportunities available through NAMA as well as off-market sources. As at 31 December 2015, the Company has an acquisition (including development) capacity in excess of 300 million based on a target gearing of 45%, of which c million has been used subsequent to year end to purchase a property and for other miscellaneous payments. (Capacity as of the date of this Report is in excess of 200 million based on a target gearing of 45%.) Using this available financing under the New Revolving Credit Facility, the Company will enhance returns to shareholders. Annual Report 2015 Irish Residential Properties REIT plc 15

18 Chief Executive Officer s Statement (cont d) The current planning guidelines and the high cost of new construction will make it difficult for the severe shortage of accommodation to be rectified, at least over the short to medium term. The Company will benefit in two ways; firstly, it helps it to continue to build on its strong operational performance, and secondly, the Company has capacity at its existing properties to build between approximately 600 to 650 apartments, subject to required planning and any other necessary approvals. With respect to the Rockbrook Portfolio, approximately 470 apartments can be built. The planning process was postponed while we awaited the introduction of the new building regulations. We believe the effect will be to lower development costs. We are in the process of preparing a planning application under the revised regulations. We expect to begin development of the first phase of 68 units at Block B2B, Beacon South Quarter, Sandyford, Dublin 18, imminently and to have them available for rent in approximately 16 months. Based on management s expectations of rents at the time of letting and the fixed price cost of completion, the apartments are expected to have a gross yield in the range of 8.5% to 9%. We believe these sites can be developed and leased on a highly accretive basis as infrastructure, particularly multi-storey parking, has largely been completed and paid for as part of the acquisition of those sites. Industry-Leading Property Management Our fully-integrated management platform, between the Dublin office of IRES Fund Management and the CAPREIT LP head office resources, both of which are subsidiaries of CAPREIT, is driving solid increases in organic growth, and we are confident this progress will continue as our property portfolio increases in size. We believe we have one of the highest quality rental property portfolios in any market, characterised by quite new, well-built, wellmaintained buildings, large, attractive and modern apartments, and property management programmes aimed at ensuring our residents needs are met quickly and efficiently. We are confident that the quality of the portfolio and market fundamentals will continue to drive strong occupancies and increasing monthly rents over the long term. Finally, as we further increase the size and scale of our property portfolio, we will benefit from economies of scale and operating synergies, enhancing our organic growth. I wish to thank the Board of Directors for all of their hard work this past year. We are excited about our future and look forward to keeping you apprised of our progress. David Ehrlich Chief Executive Officer 16 Irish Residential Properties REIT plc Annual Report 2015

19 Thomas Schwartz Director of IRES Fund Management IRES Fund Management s Statement We are pleased with our progress in growing I-RES portfolio and enhancing its property operations. The strengthening fundamentals in the Irish multi-unit residential rental market are compelling, and we believe there are significant opportunities to further increase the size and scale of the Company s property portfolio and generate continued solid organic growth. On 28 October 2015, IRES Fund Management became authorised by the Central Bank as an alternative investment fund manager under the AIFM Regulations. On 1 November 2015, IRES Fund Management was appointed by the Company as its alternative investment fund manager in accordance with the AIFM Regulations. IRES Fund Management is supported by CAPREIT LP. On completion of the I-RES initial offering, CAPREIT acquired an indirect beneficial interest in the Company. With the completion of the Company s Capital Raise on 26 March 2015, CAPREIT indirectly made a further investment, bringing CAPREIT s ownership interest at 31 December 2015 to 15.7% (total invested 63.5 million). CAPREIT continues to be well aligned with all I-RES shareholders. Our goal is to build I-RES into the residential landlord of choice in Ireland through professional property management, a rigorous focus on property maintenance, building and maintaining good relations with residents and responding quickly and efficiently to their needs, and attracting, retaining and training the best operating team in Dublin. We are bringing a dedicated professionalism to the Irish residential rental sector with proven property management programmes. I-RES has the benefit of CAPREIT LP s team of senior executives (including myself). CAPREIT LP s resources available to I-RES include management, due diligence, finance, training, risk management, marketing, legal, information technology and other expertise provided by a significant number of specialists. In addition, I-RES benefits from CAPREIT LP s infrastructure, including an industry-leading IT platform, and its practices that have been developed and successfully implemented in Canada over the past 18 years. As of 31 December 2015, we had 26 staff located in Dublin taking advantage of CAPREIT LP s systems and working seamlessly with its resources in Toronto, including the number of senior people who are also in Ireland on a regular basis. We are confident that through our attention to detail, we can continue to maintain high occupancy levels and achieve ongoing rental growth to generate strong cash flows over the long term. We have proven we can source and complete acquisitions, and we will continue to build on this success going forward. Thomas Schwartz Director of IRES Fund Management Annual Report 2015 Irish Residential Properties REIT plc 17

20 Market Update The significant supply/demand imbalance previously noted by I-RES continues to be a feature of the Irish residential property market. In Dublin, where all of I-RES current portfolio is located, the situation is even more acute, with only 2,891 residential completions recorded in 2015, which compares to the ESRI s estimate of new household formation in the city of nearly 8,000 per annum. Data from the Department of Environment, Community and Local Government ( DoECLG ) shows that only 12,666 residential housing units were completed across Ireland in While this is 15% above the outturn for 2014, this level of output is well below the Economic and Social Research Institute ( ESRI ) s estimate, using county-level analysis, of annual new household formation (18,000). Apart from new household formation, other drivers of demand are supportive as noted below. Total employment in Ireland has increased for 12 successive quarters (to the end of Q3 2015), with the numbers at work having increased by 139,700 (+7.6%) from the Q trough. The employment components of all three Irish Purchasing Managers Indices ( PMI ) the Investec Services PMI, Investec Manufacturing PMI, and Ulster Bank s Construction PMI suggest that this momentum continued through Q and into the new year. The latest (January 2016) Monthly Unemployment release from the Central Statistics Office ( CSO ) shows that the rate of unemployment has fallen to a seven-year low of 8.6%. As labour market conditions continue to tighten, upward pressure is being applied on employee compensation. CSO data show that average weekly earnings rose 2.7% year-overyear in Q Disposable incomes are also being boosted by tax cuts. In October the government unveiled a range of tax cuts in its budget, with reforms to the Universal Social Charge and Income Tax alone set to cost 589 million in It is estimated that, all else being equal, these measures will boost disposable incomes by approximately 0.6%. Given the supportive demand drivers and muted new build activity, it is no surprise to see that Irish residential property prices continue to increase. The latest Residential Property Price Index ( RPPI ) release from the CSO reveals that national prices rose at an annual pace of 6.6% in December The RPPI also shows that the cumulative improvement in national prices from the 2013 trough is 35.4%, although it should be noted that prices are still 33.5% below the September 2007 peak. 18 Irish Residential Properties REIT plc Annual Report 2015

21 Key Market Indicators +7.6 % % +2.7 % Employment growth over the last 12 quarters Average rent increase in Dublin year-over-year Q Increase in average weekly earnings year-over-year Q With that being said, there has been a moderation in the annual rate of inflation in the Irish housing market (as per the RPPI), from a high of 16.8% in March 2015 to the current reading. The subindices of the RPPI also show a somewhat more pronounced softening in the annual rate of growth in Dublin prices, from 25.1% in August 2014 to 2.6% in December The introduction of new mortgage lending rules from the Central Bank of Ireland ( CBI ), which took effect in February 2015, has been a key factor behind the moderation in price inflation. The CBI introduced loan-to-value (80%, or 90% in the case of most first-time buyers) and loan-to-income (3.5x) ceilings which apply to the majority of Irish mortgage lending. These rules have had a more significant impact in the Dublin market, where prices are materially higher than in the rest of the country (data on asking prices from the country s largest property website, Daft.ie, show that in Dublin these stood at 306,613, versus 164,838 in the rest of the country, in Q4 2015). However, while tighter mortgage lending standards are impacting price inflation, particularly in Dublin, they are failing to dampen demand for residential property, as evidenced by rising private rents. The Private Rent Index of the Consumer Price Index ( CPI ) was +9.6% year-over-year in December 2015, helping the cumulative increase in rents from the December 2010 trough to 37.1%. At in December 2015, the CPI Private Rent Index is at an all-time high. Regional data from the Private Residential Tenancies Board ( PRTB ), a government agency tasked with ensuring the proper functioning of the rental market, show that average rents for a two-bedroom apartment in Dublin were +11.1% year-over-year in Q In a bid to cool the rate of increase in rents, the Minister for the Environment, Alan Kelly, proposed the introduction of hard rent controls linked to the CPI. This was met with opposition from a variety of sources, leading to the compromise of the rent certainty measures unveiled in November The most meaningful aspect of these measures is that they will serve to limit the number of rent reviews to one every 24 months (most residential tenancies in Ireland were previously reviewed annually). Daft.ie data show that the national stock of units available to rent has fallen to just 3,600 on 1 February 2016, the lowest in the history of the series (which began in 2006). CSO Planning Permissions data show that permission was granted for only 785 apartments in 2014, the lowest annual outturn in the history of the series (which dates back to 1975). The latest data show that permission was granted for 1,331 apartments in the first nine months of 2015, but this is still well below what might be considered a normal level of activity (the average annual number of apartment permissions since 1975 is 7,721). In summary, a combination of robust demand and supply shortages suggests that the path of least resistance for both prices and rents is to the upside, at least until meaningful new supply begins to come onstream. As well, the CBI mortgage rules should help to cause rental inflation continuing to outstrip price growth. Annual Report 2015 Irish Residential Properties REIT plc 19

22 Lansdowne Gate 224 residential apartments Drimnagh, Dublin 12 The development was constructed in 2005 and is located adjacent to the LUAS light rail system, 5 km from the city centre and within walking distance of numerous large employers, as well as shopping and leisure facilities. 20 Irish Residential Properties REIT plc Annual Report 2015

23 Portfolio Overview The following table provides an overview of the Group s property portfolio as at 31 December Commercial Space Average # of Apts. Total # Value as at Owned Monthly Rent Property and Location Year Built Date Acquired Owned (1) of Apts. (1)(8) 31 Dec 2015 (1) (sq. m.) (1) per Apt. (1)(2)(3) Occupancy (1)(2) Kings Court, Smithfield Sep m 566 1, % Grande Central, Sandyford (4) Sep m 1, % Priorsgate, Tallaght Sep m 2,538 1, % Camac Crescent, Inchicore Sep m 1, % The Laurels, Tallaght Jun m 190 1, % The Marker, Docklands Jul m 1,218 2, % Beacon South Quarter, Sandyford (5) 2007/ Oct (5) m 2,395 1, % Charlestown, Finglas Oct m 1, % Bakers Yard, Portland Street North 2007/ Oct m 792 1, % Lansdowne Gate, Drimnagh Oct m 1, % Rockbrook Grande Central, Sandyford (4) Mar m 3,529 1, % Rockbrook South Central, Sandyford Mar m 1,136 1, % Tyrone Court, Inchicore Jun m 1, % Bessboro, Terenure Dec m 1, % Total owned portfolio as at 31 December , m 12,364 1,372 (6) 96.0% (6) Tallaght Cross West, Tallaght Jan m (7) 18,344 1,006 (7) 88.5% (7) Forum, Sandyford Feb m (7) 469 (7) 37.5% (7) Total properties owned as at the date of this Report 2, m 30,708 1,290 (6) 94.1% (6) (1) As at 31 December (2) Based on residential apartments. (3) Average monthly rent (AMR) is defined as actual residential rents, net of vacancies, divided by the total number of apartments owned in the property. (4) Total number of owned apartments at Grande Central as of 31 December 2015 is 146. (5) Includes eight additional apartments purchased on 6 November (6) Weighted average, by number of apartments owned. (7) For Tallaght Cross West and the Forum, the fair value is the purchase price including VAT but excluding other transaction costs; the AMR and occupancy are as at the date of acquisition. (8) Total number of apartments in the development. Annual Report 2015 Irish Residential Properties REIT plc 21

24 Portfolio Overview (cont d) Kings Court 83 residential apartments Smithfield, Dublin 7 Grande Central 65 residential apartments Sandyford, Dublin 18 Priorsgate 102 residential apartments Tallaght, Dublin 24 The Company acquired Kings Court, located in Smithfield, Dublin 7, in September The development was constructed in 2006 and is a residential development consisting of 83 residential apartments dispersed over four blocks and 566 sq. m. (6,093 sq. ft.) of commercial space, all of which is owned by the Company. The entire development is constructed over a common basement with 65 car park spaces. The Company s 83 residential apartments consist of 25 one-bedroom, 54 two-bedroom and four three-bedroom residential apartments. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of c million as at 31 December The annualised rent roll at 31 December 2015 for both residential and commercial was c. 1.3 million, giving a gross yield of about 7.7% (approximate gross yield of 10.6% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy for residential apartments was at approximately 98.8%. The Company acquired Grande Central, located in Sandyford, Dublin 18, in September The development was constructed in 2007 and is a residential development located within the suburb of Sandyford, Dublin 18, approximately 8 km south of Dublin City Centre. The development is on a 0.5-hectare site and consists of a purposebuilt apartment block with 195 residential apartments, of which 65 are owned by the Company (which includes two additional residential apartments that were acquired in August and October 2014). The entire development is constructed over a common basement with a single car park space per residential apartment. The Company s 65 residential apartments consist of 10 one-bedroom, 34 two-bedroom and 21 three-bedroom residential apartments. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of c million as at 31 December The annualised rent roll at 31 December 2015 was c. 1.2 million, giving a gross yield of about 6.2% (approximate gross yield of 10.6% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy was at approximately 100%. The Company acquired Priorsgate, located in Tallaght, Dublin 24, in September The development was constructed in 2007 and is a residential development on a 2.6-acre site located approximately 10 km southwest of Dublin City Centre. The development consists of 198 residential apartments dispersed over three blocks, of which 102 are owned by the Company. The Company also owns eight adjacent commercial units with a total of 2,538 sq. m. (27,316 sq. ft.) of space. The entire development is constructed over a common basement with a single car park space per residential apartment. Included with the property is an adjoining detached building on a site of 0.18 hectare (0.44 acre) known as Bruce House Site. The Company s 102 residential apartments, which are dispersed over the three blocks, consist of 49 one-bedroom, 47 two-bedroom, five three-bedroom and one fourbedroom residential apartments. The purchase price was c. 9.0 million (including VAT, but excluding other transaction costs), compared to a value of c million at 31 December The annualised rent roll at 31 December 2015 for both residential and commercial was c. 1.4 million, giving a gross yield of about 8.2% (approximate gross yield of 16.0% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy for residential apartments was at approximately 98%. 22 Irish Residential Properties REIT plc Annual Report 2015

25 Camac Crescent 90 residential apartments Inchicore, Dublin 8 The Laurels 19 residential apartments Tallaght, Dublin 24 The Marker Residences 84 residential apartments Grand Canal Dock, Dublin 2 The Company acquired Camac Crescent, located in Inchicore, Dublin 8, in September The development was constructed in 2008 and is a residential development on a 0.56-hectare site located in Inchicore, Dublin 8, approximately 3 km west of Dublin City Centre. The development consists of 110 residential apartments dispersed over six blocks, of which 90 are owned by the Company. The entire development is constructed over a common basement with a single car park space per residential apartment. The Company s 90 residential apartments consist of 21 one-bedroom, 49 two-bedroom and 20 three-bedroom residential apartments. The purchase price was c. 9.9 million (including VAT, but excluding other transaction costs), compared to a value of c million as at 31 December The annualised rent roll at 31 December 2015 was c. 1.3 million, giving a gross yield of about 7.4% (approximate gross yield of 13.3% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy was at approximately 98.9%. The Company acquired the Laurels, located in Tallaght, Dublin 24, in June The development was constructed in 2007 and consists of 19 residential apartments, all of which are owned by the Company. The Company also owns 190 sq. m. (2,045 sq. ft.) of commercial space in the form of one large unit which could be split into two units. The Laurels consists of four one-bedroom, 13 two-bedroom and two three-bedroom residential apartments. The purchase price was c. 2.1 million (including VAT, but excluding other transaction costs), compared to a value of c. 2.8 million as at 31 December The annualised rent roll at 31 December 2015 for both residential and commercial was c. 0.3 million, giving a gross yield of about 9.0% (approximate gross yield of 11.8% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy for the residential apartments was at approximately 94.7%. The Company acquired the Marker Residences, located in the Grand Canal Dock area of Dublin 2, in July The development was constructed in 2012 and consists of 105 luxury residential apartments, of which 84 were acquired by the Company, and approximately 1,218 sq. m. (13,111 sq. ft.) of commercial space, all of which was acquired by the Company. The Company s 84 residential apartments are all two-bedroom residential apartments. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of c million at 31 December The annualised rent roll at 31 December 2015 for both residential and commercial was c. 2.7 million, giving a gross yield of about 4.8% (approximate gross yield of 5.4% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy for the residential apartments was at approximately 96.4%. Annual Report 2015 Irish Residential Properties REIT plc 23

26 Portfolio Overview (cont d) Beacon South Quarter 225 residential apartments Sandyford, Dublin 18 Charlestown 235 residential apartments Finglas, Dublin 11 The Company acquired Beacon South Quarter, located in Sandyford, Dublin 18, in October The development was constructed in 2007/2008 and is a landmark mixed-use development on 13 acres. A number of major employers are located in the immediate neighbourhood, including Vodafone, Merrill Lynch and Microsoft, and the development is adjacent to the LUAS light rail line to the city centre. The Beacon South Quarter development includes many high-end occupiers, including private medical care, leisure and a selection of food and lifestyle shops. The development consists of 850 luxury residential apartments, of which 225 are owned by the Company. The Company s 225 residential apartments consist of 26 one-bedroom, 173 two-bedroom and 26 three-bedroom residential apartments. The Company also owns approximately 2,395 sq. m. (25,777 sq. ft.) of ancillary commercial space within the development. In addition, the Company owns three adjacent development sites and 6,847 sq. m. (73,701 sq. ft.) of commercial space. The Company initially acquired 217 apartments on 7 October 2014 for a purchase price of c million (including VAT, but excluding other transaction costs) and on 6 November 2015, the Company acquired an additional eight apartments and eight car parking spaces for a purchase price of 2.24 million (including VAT, but excluding other transaction costs). At 31 December 2015, the property was valued at c million. The annualised rent roll at that time for both residential and commercial was c. 4.8 million, giving a gross yield of about 5.8% (approximate gross yield of 5.7% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy for the residential apartments was at approximately 93.3%. The Company acquired Charlestown in October 2014, a mixed-use development set on 40 acres in Finglas, Dublin 11. The development was constructed in 2007 and consists of 285 residential apartments, of which 235 are owned by the Company. The overall development comprises facilities for tenants including a shopping centre, a medical centre and a variety of leisure and restaurant operators. The property is located approximately 9.5 km from Dublin City Centre and 8 km from Dublin airport and is adjacent to the main M50 and M2 transportation corridors. The Company s 235 residential apartments consist of 36 one-bedroom, 164 twobedroom and 35 three-bedroom residential apartments. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of c million as at 31 December The annualised rent roll at 31 December 2015 was c. 3.3 million, giving a gross yield of about 6.0% (approximate gross yield of 6.4% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy was at approximately 94.5%. 24 Irish Residential Properties REIT plc Annual Report 2015

27 Bakers Yard 85 residential apartments Portland Street North, Dublin 1 Lansdowne Gate 224 residential apartments Drimnagh, Dublin 12 The Company acquired Bakers Yard in October 2014, an apartment development on 1.4 acres adjacent to Dublin City Centre in Dublin 1. The development was constructed in 2007/2008 and is within walking distance of many large government and private sector employers, as well as local and national public transport infrastructure. The development consists of 132 residential apartments, of which 85 are owned by the Company. The Company also owns approximately 792 sq. m. (8,525 sq. ft.) of ancillary commercial space within the development. In addition, the Company owns an adjoining 0.45-acre site with planning consent for a further 55 residential apartments and three ground-floor commercial units. The Company s 85 residential apartments consist of 13 one-bedroom, 60 two-bedroom and 12 three-bedroom residential apartments. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of c million as at 31 December The annualised rent roll at 31 December 2015 for both residential and commercial was c. 1.4 million, giving a gross yield of about 7.2% (approximate gross yield of 8.1% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy for the residential apartments was at approximately 98.8%. The Company acquired Lansdowne Gate in October 2014, a superior quality development on 5.5 acres in Drimnagh, Dublin 12. The development was constructed in 2005 and is located adjacent to the LUAS light rail system, 5 km from the city centre and within walking distance of numerous larger employers, as well as shopping and leisure facilities. The development consists of 280 residential apartments, of which 224 are owned by the Company, set in 11 blocks over semibasement car parking, with the benefit of a centralised district heating system, landscaped gardens and a children s playground. The Company s 224 residential apartments consist of 23 one-bedroom, 146 two-bedroom and 55 three-bedroom residential apartments. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of c million as at 31 December The annualised rent roll at 31 December 2015 was c. 3.6 million, giving a gross yield of about 5.9% (approximate gross yield of 5.9% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy was at approximately 97.3%. Annual Report 2015 Irish Residential Properties REIT plc 25

28 Portfolio Overview (cont d) Rockbrook Grande Central and Rockbrook South Central ( Rockbrook Portfolio ) 270 residential apartments Sandyford, Dublin 18 The Company acquired the Rockbrook Portfolio, located in Sandyford, Dublin 18, in March 2015 via the acquisition of IRES Residential Properties Limited. The development consists of 270 residential apartments, and mixed-use commercial space of approximately 4,665 sq. m. (50,214 sq. ft.). The portfolio also includes a development site of approximately 1.13 hectares (2.8 acres) and associated basement car parking. The property is located close to the Stillorgan LUAS light rail system stop, in an area serviced by numerous bus routes. Located nearby are the UPMC Beacon Hospital and large employers such as Microsoft, Vodafone, Volkswagen and Bewleys. The Company s 270 residential apartments consist of 46 one-bedroom, 203 two-bedroom and 21 three-bedroom residential apartments. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of c million as at 31 December The annualised rent roll at 31 December 2015 was c. 4.9 million, giving a gross yield of about 5.3% (approximate gross yield of 5.6% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy was at approximately 95.9%. Tyrone Court 92 residential apartments Inchicore, Dublin 8 The Company acquired Tyrone Court, located in Inchicore, Dublin 8, in June The development was constructed in 2014 and consists of 128 apartments across four residential apartment blocks, of which 92 are owned by the Company. The Company also owns a three-storey detached crèche building extending to approximately 310 sq. m. (3,336 sq. ft.). The Company s 92 residential apartments consist of four three-bedroom duplex units, three three-bedroom, 62 two-bedroom and 23 one-bedroom apartments. The property is located in an established residential area, close to Drimnagh Station, which is a 15-minute commute to City Centre. Located nearby are St. James s Hospital, Inchicore College, the Central Criminal Court and Heuston Station, all of which provide a strong employment centre and tenant market. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of c million as at 31 December The annualised rent roll at 31 December 2015 was c. 1.4 million, giving a gross yield of about 7.2% (approximate gross yield of 7.4% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy was at approximately 92.4%. Bessboro 40 residential apartments Terenure, Dublin 6 The Company acquired Bessboro, located in Terenure, Dublin 6, in December The development was constructed in 2008 and consists of 40 residential apartments, all of which are owned by the Company. The Company s 40 residential apartments consist of six one-bedroom, 32 two-bedroom and two three-bedroom apartments. Bessboro provides a strong suburban location only 7 km from Dublin City Centre and 4.6 km from the M50 motorway. The location provides a range of amenities including shops, schools, bars and restaurants, all within walking distance of Bessboro. The scheme is also in close proximity to Bushy Park, golf and rugby clubs. The purchase price was c million (including VAT, but excluding other transaction costs), compared to a value of 12.2 million as at 31 December The annualised rent roll at 31 December 2015 was c. 0.6 million, giving a gross yield of about 4.7% (approximate gross yield of 4.7% based on the original purchase price including VAT, but excluding other acquisition costs) and occupancy was at approximately 90%. The yield profile is anticipated to improve as approximately 82% of the existing leases, which are currently well below market rents, will be renewed within the next 12 months. 26 Irish Residential Properties REIT plc Annual Report 2015

29 Tallaght Cross West 442 residential apartments Tallaght, Dublin 24 Forum 8 residential apartments Sandyford, Dublin 18 The Company acquired Tallaght Cross West, located in Tallaght, Dublin 24, in January The development was constructed in 2008 and consists of 507 residential apartments, of which 442 residential apartments are owned by the Company. The Company also owns 18,344 sq. m. (197,460 sq. ft.) of commercial space and associated underground car parking. Tallaght Cross West has recently undergone significant capital expenditures to complete the fit out of the apartments. The vendor commenced a residential leasing programme for all 442 units in September 2015 and 15% of the apartments remained unleased at closing on 15 January The Company s 442 residential apartments consist of 161 one-bedroom, 237 two-bedroom and 44 three-bedroom residential apartments. The purchase price was c. 83 million (including VAT, but excluding other transaction costs). On closing, the 442 apartments had annualised passing residential rents of 5.3 million at 88% occupancy, generating a gross yield of 7.4% based on the original purchase price appointed to the apartments, including VAT, but excluding other transaction costs. The current commercial annualised passing rent is c million at 10% occupancy. Based on current annualised passing residential rents on closing and lease up of the remaining 12% of unleased apartments at market rents, it will generate a gross yield of 8.5%. The Company acquired the Forum, located in Sandyford, Dublin 18, in February The development was constructed in 2007 and consists of 127 residential apartments, of which eight residential apartments and 11 basement car parking spaces are owned by the Company. The Forum is located on the LUAS tram line and next to the Royal College of Surgeons Sandyford facility. The development is also adjacent to the Company s Rockbrook and Beacon South Quarter portfolios. The Company s eight residential apartments consist of one one-bedroom and seven two-bedroom residential apartments. The purchase price was c. 2.3 million (including VAT, but excluding other transaction costs). Annual Report 2015 Irish Residential Properties REIT plc 27

30 Investment Policy and Strategy Business Model IRES Fund Management applies the following professional business model to the growing I-RES property portfolio: (i) make strategic and accretive acquisitions to both maintain the outstanding quality of the portfolio and diversify and expand the size and scale of the Company s property portfolio. (ii) apply proven property operating programmes to increase cash flows. (iii) reduce operating costs through efficient energy management initiatives and sophisticated purchasing programmes. (iv) employ a hands-on approach to managing properties to maximise occupancies and rents. Investment Policy The Company s aim is to assemble a portfolio within its focus activity of acquiring, holding and managing investments primarily focused on apartment residential real estate located on the island of Ireland and ancillary and/or strategically located commercial property, for third-party rental, on the island of Ireland principally within the greater Dublin area and other major urban centres on the island of Ireland (the Focus Activity ). The vast majority of such properties acquired will form the Company s property investment portfolio for thirdparty rental. The Company may also acquire properties and portfolios which include other assets, subject always to a maximum limit of 20% of the overall gross value of property assets, provided there is a disposal plan in place in connection with such assets, which have been deemed non-strategic and do not meet the Company s investment objectives or which could otherwise have an adverse effect on the Company s status as an Irish REIT. The Board intends to focus on creating both sustainable income and strong capital returns. The Company may also acquire indebtedness secured by properties (including in respect of buy-to-let properties) within its Focus Activity where it intends to gain title to and control over the underlying property. There is no limit on the proportion of the Company s portfolio that consists of indebtedness secured by properties. The Board intends to focus on properties which require active management and which are expected to benefit from the expertise of its management team, which includes employees of CAPREIT LP (the Management Team ). The Company will also have the ability to enter into a variety of investment structures, including joint ventures, acquisitions of controlling interests, acquisitions of minority interests or other structures, including, but not limited to, for revenueproducing purposes in the ordinary course of business, within the parameters stipulated in the Irish REIT regime. There is no limit imposed on the proportion of the Company s portfolio that may be held through such structures. Warehousing and Pipeline Arrangements If the Company is unable to participate in sales processes for property investments because it has insufficient funds and/ or debt financing available to it, including where its gearing is at or close to the maximum permitted level under the Irish REIT regime, the Company is permitted to acquire property investments that meet the criteria specified in its Investment Policy (including the acquisition of shares in property holding companies) from time to time in accordance with the terms of warehousing or pipeline arrangements entered into or to be entered into by it with third parties, in each case, without shareholder approval and for a price calculated on a basis that has been approved in advance by the Directors of the Company. 28 Irish Residential Properties REIT plc Annual Report 2015

31 The Company will not invest more than 20% of its gross assets, directly or indirectly, in a single underlying asset, or in one or more collective investment undertakings, or be more than 20% exposed to the creditworthiness or solvency of any one counterparty. Investment Criteria and Portfolio Characteristics The Board intends that the portfolio of real estate assets already acquired (and to be acquired) by the Company already have (and will normally have) a majority of the following characteristics: (a) Apartment residential properties across the affordable, mid-tier and luxury accommodation sectors and ancillary and/or strategically located commercial property located in the greater Dublin area and other urban centres on the island of Ireland; (b) Scope for short- and medium-term value enhancement through active asset management; (c) Opportunities to enhance the quality of the property; (d) Opportunities to create tangible value by undertaking initiatives to develop a sense of community among tenants consistent with the Management Team s Canadian practices and expertise; (e) Properties at Cap Rates that the Company believes are attractive considering all factors, including growth potential, location, building quality, market and economic conditions and other relevant considerations, having regard to the Target Shareholder Return; (f) Properties which can be acquired at close to (and ideally below) replacement cost; (g) Properties which have strong prospects of generating income in the short to medium term in order to support the Company s dividend policy; (h) Properties providing value enhancement opportunities through intensification, redevelopment or project completion, with such properties to be held for the purposes of the Company s Property Rental Business, where the Investment Manager believes that this can be effected on a basis that will add value to the Company s portfolio, subject always to the aggregate costs to be incurred in respect of assets under development at any time not exceeding 15% of the Company s most recently published net asset value; and (i) Properties in markets where there is strong and/or improving demand for apartment residential rental accommodation and ancillary and/or strategically located commercial property. Investment Sourcing Many members of the Management Team have track records in acquiring multi-unit residential real estate investments which they have demonstrated in Canada, where they have grown CAPREIT s property holdings from 2,900 residential apartments located primarily in Ontario and Nova Scotia to 46,790 apartments and land lease sites from coast to coast in Canada as at 31 December The Directors believe that the Company has a proven acquisition strategy, owning 338 apartments at its initial offering in April 2014 and now owning 2,064 apartments as at the date of this Report and is well placed to secure and develop properties which meet its investment criteria due to the Management Team s acquisition experience, established relationships and availability of equity capital and debt financing. The Board is currently evaluating a number of potential property investments in line with the Investment Policy. Banking Institutions/Receivers/Borrowers The excessive use of gearing in the development of Irish residential real estate, particularly in the middle part of the last decade, and the subsequent severe re-pricing in values has resulted in banking institutions that provided credit for such developments having significant legacy exposure, both directly and indirectly, to Irish residential real estate assets. The Board believes that, based on the Central Bank of Ireland s quarterly resolution targets for mortgage arrears, the banks operating in the Irish banking sector will have developed various strategies, including divestment of properties with respect to their legacy real estate exposures and apartment residential real estate assets that have not been transferred to NAMA. The Board also believes that assets may become available directly from Irish banks and from receivers appointed over the assets, from borrowers who are selling under the guidance of the banks or receivers and from private owners. In addition, legislation was enacted in February 2013 providing for the winding-up of Irish Bank Resolution Corporation Limited (formerly Anglo Irish Bank). The Board believes that property sales by any or all of these entities could result in opportunities for the Company to acquire Irish apartment residential real estate assets at attractive price levels. Annual Report 2015 Irish Residential Properties REIT plc 29

32 Investment Policy and Strategy (cont d) National Asset Management Agency ( NAMA ) NAMA was established in December 2009 as one of a number of initiatives taken by Ireland to address the problems which arose in Ireland s banking sector as the result of excessive property lending. Having initially acquired property and construction loan assets from participating Irish financial institutions over 2010 and 2011, since then NAMA s focus has been on managing its balance sheet down towards zero as soon as it is commercially practicable. NAMA s primary commercial objective is to redeem all of its senior debt before the end of 2018, while it also aims to redeem its subordinated debt by 1 March 2020 and generate a surplus by the time its work has been completed. In order to meet its primary commercial objective, NAMA will manage and invest in its asset base so as to maximise its incomeproducing potential and disposal value. In this regard, the agency has also outlined plans for the delivery of Grade A office accommodation in the Dublin Docklands Strategic Development Zone (SDZ) and residential property in the Greater Dublin Area. The asset side of the core NAMA balance sheet peaked at 30.7 billion in Q and since then it has steadily decreased to the latest (Q3 2015) level of 11.4 billion. Of the 30.2 billion of senior debt originally issued in exchange for NAMA s initial loan assets, some 9.1 billion remained in issue at the end of Q NAMA aims to further reduce this to c. 6.0 billion by the end of 2016, which implies that further disposals are likely over the coming months. Indeed, the agency says (see NAMA Annual Statement 2016) that it will act to sustain the positive momentum in the market by ensuring that a pipeline of asset portfolios is available for sale to international and domestic investors. The Company continues to expect NAMA s orderly disposal of certain of its real estate asset-backed loan portfolios to create further liquidity within the Irish property investment market. Purchasers of such portfolios may also seek to dispose of some or all of the underlying real estate assets acquired. Moreover, the Directors continue to believe that the disposal of real estate assets held by debtors or NAMA and receivers acting on behalf of debtors or NAMA will also be a source of opportunities for the Company. Private Equity Investors A number of institutions, such as the commercial banks and NAMA, have sold Irish real estate and asset-backed loan portfolios in recent years to international private equity firms and to the Company. The Board believes that further Irish real estate-related assets will be offered for sale over the coming year, possibly including some supply arising from the recycling of assets by private equity investors who purchased assets earlier in the cycle. This will provide opportunities for the Company to acquire assets that meet its investment criteria. Gearing The Company seeks to use gearing to enhance shareholder returns over the long term. The level of gearing is monitored carefully by the Board in light of the cost of borrowing and the Company may seek to use hedging where considered appropriate to mitigate interest rate risk. The Board intends that gearing, represented by the Company s aggregate borrowings as a percentage of the market value of the Company s total assets, will not exceed the 50% maximum permitted under the Irish REIT regime. The Board reviews the Company s gearing policy (including the level of gearing) from time to time in light of then-current economic conditions, relative costs of debt and equity capital, fair value of the Company s assets, growth and acquisition opportunities and other factors the Board may deem appropriate, with the result that the Company s level of gearing may be lower than 50%. Given the stability of the apartment residential sector, 45% gearing is currently considered prudent by the Board. Restrictions Pursuant to the Irish REIT regime, the Company is required, among other things, to conduct a Property Rental Business consisting of at least three properties, with the market value of any one property being no more than 40% of the total market value of the properties in the Company s Property Rental Business. The Company has a three-year grace period from the date of becoming an Irish REIT to comply with these requirements. The Company complies with these requirements as at the date of this Report as it already owns apartment residential properties in 10 separate locations, none of which currently accounts for more than 40% of the aggregate market value of those existing properties. Further, under the Irish REIT regime at least 75% of the Company s annual Aggregate Income must be derived from its Property Rental Business and at least 75% of the market value of its assets, including uninvested cash, must relate to its Property Rental Business. 30 Irish Residential Properties REIT plc Annual Report 2015

33 Key Operational and Financial Performance Indicators To assist investors in monitoring and evaluating the Group s achievement of its objectives, the Group has defined a number of key operating and performance indicators to measure the success of its operating and financial strategies: KEY PERFORMANCE INDICATORS AS AT 31 DECEMBER 2015 Average Monthly Rent Growth (1) 9.2% Through active property management strategies, the lease administration system and proactive capital investment programmes, IRES Fund Management strives to increase rents as market conditions will permit. Occupancy 96.0% Although occupancy was 99.7% at the beginning of the year, IRES Fund Management managed occupancy to maximise the revenues in 2015 while creating opportunities for market rental increases in 2016, considering the new rent legislation allows for rental increases every two years (instead of annually). Net Rental Income 80.8% By applying proven property operating programmes, IRES Fund Management strives to achieve an annual net operating income margin that is approximately 80% of operating revenues. Gross Yield at Fair Value 6.2% Through generating higher revenues compared to last year, and maintaining high occupancies, IRES Fund Management has increased the gross yield for the total portfolio. EPRA EPS (cents) 3.3 Higher EPRA EPS compared to last reported period, 2 July 2013 to 31 December 2014 of 1.6 cents. EPRA NAV per Share Focus on growing asset value and maximising shareholder value through active and efficient asset and property management. Pro-forma NAV per Share Calculated as net asset value excluding one-off acquisition transaction costs incurred in relation to all the property purchases subsequent to 31 December The 3rd party valuator adjusts for all transaction cost on acquisitions that a purchaser will pay, notwithstanding that the intention of I-RES is to hold it for the very long term. (1) Based on properties held as at 31 December Average monthly rent is defined as actual residential rents, net of vacancies, divided by the total number of apartments owned in the property. Annual Report 2015 Irish Residential Properties REIT plc 31

34 Investment Policy and Strategy (cont d) Operational and Financial Results The Group has generated strong rental growth and maintained a high level of occupancy across the portfolio during the year, indicative of the strong market fundamentals in the Irish residential rental sector. Average monthly rent increased to 1,372 per apartment as at 31 December 2015, up from 1,250 at 31 December 2014, largely due to strong increases in monthly rental rates on renewals and turnovers during the year. Occupancy levels remained strong throughout the year, mirroring the strong market fundamentals in the Irish residential rental sector. The portfolio Gross Yield at fair value was 6.2% as at 31 December 2015, compared to 6.0% as at 31 December 2014, adjusted for the fair value of development land, and a NRI margin of approximately 80.8% for the year Basic EPS and Basic EPRA EPS for the period were 8.4 cents and 3.3 cents, respectively, for the year ended 31 December Basic NAV and EPRA NAV was million, with Basic NAV and EPRA NAV per share of cents as at 31 December Basic NAV and EPRA NAV per share increased by 4.8% for the year ended 31 December 2015, compared to 31 December 2014, driven by property valuation increases and rental profit in the period, partially offset by equity and acquisition transaction costs. Importantly, the Company has recovered all the costs incurred in connection with our Capital Raise in 2015 and the costs incurred with our acquisitions through appreciation in the fair value of the portfolio. The property portfolio was valued at million at 31 December 2015, with total net borrowings of 41.5 million. The Group s loan to value ratio was 8.6% as at 31 December Irish Residential Properties REIT plc Annual Report 2015

35 Governance Annual Report 2015 Irish Residential Properties REIT plc 33

36 I-RES Board of Directors Colm Ó Nualláin Independent Non-Executive Chairman Declan Moylan Independent Non-Executive Deputy Chairman and Senior Independent Director Aidan O Hogan Independent Non-Executive Director Thomas Schwartz Non-Executive Director (Nominee of IRES Fund Management) APPOINTED: 31 March 2014 as Director NATIONALITY: Irish COMMITTEE MEMBERSHIP: Audit Committee: Appointed 31 March 2014 Remuneration Committee: Appointed 31 March 2014 Nomination Committee: Appointed 31 March 2014 Colm Ó Nualláin recently retired after more than 20 years as Finance Director of Grafton Group plc, a leading builders merchant group quoted on the London Stock Exchange. Mr Ó Nualláin is a qualified Chartered Accountant with international experience and has previously held senior financial positions in a number of public and semi-state companies. APPOINTED: 31 March 2014 as Director NATIONALITY: Irish COMMITTEE MEMBERSHIP: Audit Committee: Appointed 31 March 2014 Remuneration Committee: Appointed 31 March 2014 Nomination Committee: Appointed 31 March 2014 Declan Moylan is a solicitor admitted in Ireland, with over 40 years experience in business law practice and in practice management. From 1999 until 2008, he served as managing partner of Mason Hayes & Curran, and subsequently as chairman of Mason Hayes & Curran from 2008 to Mr Moylan is currently of counsel to Mason Hayes & Curran (which role expires on 31 March 2016). He is a member of the Law Society of Ireland, the Law Society of England and Wales, the International Bar Association and the Irish Centre for European Law. Mr Moylan is a director of several Irish registered companies and is also an external member of the audit committee of the Office of Ireland s Director of Public Prosecutions. In November 2015, he was appointed by the Minister for Arts, Culture and Gaeltacht to the board of the Irish Museum of Modern Art. APPOINTED: 31 March 2014 as Director NATIONALITY: Irish COMMITTEE MEMBERSHIP: Audit Committee: Appointed 31 March 2014 Remuneration Committee: Appointed 31 March 2014 Nomination Committee: Appointed 31 March 2014 Aidan O Hogan is a fellow of the Society of Chartered Surveyors Ireland and past president of the Irish Association of Valuers Institute. In 2009, Mr O Hogan retired as chairman of Savills Ireland after 40 years as a real estate professional. Mr O Hogan is currently chairman of Property Industry Ireland. Mr O Hogan was previously managing director and chairman of Hamilton Osborne King for almost 20 years. He is also a non-executive director of Cairn Homes plc. APPOINTED: 5 March 2014 as Director NATIONALITY: Canadian COMMITTEE MEMBERSHIP: Small Transactions: Appointed 22 July 2014 Thomas Schwartz, with over 35 years of real estate experience, is a director of IRES Fund Management. Mr Schwartz qualified as a Chartered Accountant in 1975 and went on to pursue a career in real estate development. Mr Schwartz founded Intraurban Projects to specialise in the development of new housing projects in mature communities. Intraurban has built and developed over 2,500 housing units serving all market segments and, through York Heritage Properties, has participated in the development, 34 Irish Residential Properties REIT plc Annual Report 2015

37 construction and management of over 600,000 sq. ft. of commercial space. In 1997, Mr Schwartz founded CAPREIT (TSX: CAR.UN), Canada s first apartment real estate investment trust. Mr Schwartz is currently President and Chief Executive Officer of CAPREIT and has supervised CAPREIT s growth from 2,900 residential apartments to 46,790, with an estimated total asset value of approximately C$7.1 billion as at 31 December Mr Schwartz is active in industry and government affairs and is currently on the Board of Trustees of CAPREIT; the board of Chartwell Retirement Residences companies (TSX: CSH.UN); and the Board of Directors of the Mount Sinai Hospital Foundation. Mr Schwartz is also a member of the Schulich School of Business Advisory Council Program in Real Estate and Infrastructure. David Ehrlich Executive Director APPOINTED: 13 January 2014 as Director NATIONALITY: Canadian COMMITTEE MEMBERSHIP: Small Transactions: Appointed 22 July 2014 David Ehrlich is Chief Executive Officer of I-RES. Mr Ehrlich graduated from Dalhousie Law School in 1977 and has been a member of the Nova Scotia Barristers Society since 1979 (and a continuing member of the Law Society of Upper Canada since 1986). For over 10 years, until 31 December 2013, Mr Ehrlich was a senior partner at Stikeman Elliott LLP, a leading Canadian business law firm with offices in the principal cities of Canada as well as in New York, London and Sydney. During his years practising as a lawyer, Mr Ehrlich acted for a number of Canada s leading real estate investment trusts, investment banks, life insurance companies, banks, pension funds, developers, property owners, asset managers and governmental agencies. Since 1986, he has focused his practice on the public real estate markets and was involved in creating the real estate investment trust industry in Canada from its inception, including the formation of CAPREIT. Mr Ehrlich has been involved in all significant aspects of CAPREIT s acquisition, financing and capital market activities and has worked closely with all of its senior management. Mr Ehrlich is also a Trustee of CAPREIT. Annual Report 2015 Irish Residential Properties REIT plc 35

38 CAPREIT and IRES Fund Management Senior Management Thomas Schwartz President and Chief Executive Officer of CAPREIT Mark Kenney Chief Operating Officer of CAPREIT Scott Cryer Chief Financial Officer of CAPREIT Corinne Pruzanski General Counsel and Corporate Secretary of CAPREIT See Board of Directors profiles for further details. With over 24 years of experience in the multi-unit residential rental property sector and as Chief Operating Officer of CAPREIT, Mark Kenney is actively involved in creating and implementing company policy, directing the property management team, overseeing marketing, procurement and energy initiatives, and performing operational due diligence on potential acquisitions. Prior to joining CAPREIT in 1998, Mr Kenney held a senior position at Realstar Management Partnership, overseeing portfolios in Western Canada and Northern Ontario, as well as leadership roles at Greenwin Property Management and Tridel, where he managed various property portfolios in the Greater Toronto Area. Mr Kenney is the vice-chairman of the Federation of Rental-Housing Providers of Ontario and was a founding director of the Greater Toronto Apartment Association from 1998 to Mr Kenney holds a bachelor of economics degree from Carleton University. Scott Cryer joined CAPREIT in 2009 and is currently Chief Financial Officer. Mr Cryer most recently held the position of Vice President, Financial Reporting. Prior to joining CAPREIT, Mr Cryer had an 11-year career with increasing responsibility in the Real Estate Assurance and Advisory practice of Deloitte & Touche LLP. Mr Cryer received his Chartered Accountant designation in 2000 and holds a bachelor of economics degree from the University of Western Ontario. Corinne Pruzanski joined CAPREIT as General Counsel and Corporate Secretary in 2011 with responsibility for all legal and governance matters relating to CAPREIT, including CAPREIT s acquisitions, dispositions, financing arrangements and compliance with laws. Ms Pruzanski is also company secretary to IRES Fund Management Limited. Prior to joining CAPREIT, Ms Pruzanski was a partner at the law firm Stikeman Elliott LLP, which she joined as an associate in 2004 after working as a lawyer in New York for seven years. Ms Pruzanski was admitted to the Bar in Ontario in 1996 and in New York in 1997, and holds a bachelor of law degree from the University of British Columbia and a bachelor of arts degree from York University. 36 Irish Residential Properties REIT plc Annual Report 2015

39 Roberto Israel Chief Information Officer of CAPREIT Charles Coyle Vice President, Acquisitions Jodi Lieberman Chief Human Resources Officer of CAPREIT Roberto Israel joined CAPREIT as Chief Information Officer in 2015 with more than 18 years of experience in Information Technology. Mr Israel was formerly Managing Director at PricewaterhouseCoopers LLP, where he was the National Forensic Technology Services practice leader and also directed PricewaterhouseCoopers technology real estate consulting practice. Prior to joining PricewaterhouseCoopers, Mr Israel held a variety of consulting, project management and IT systems roles with several leading companies including Deloitte & Touche LLP, Canadian Imperial Bank of Commerce, Manulife Financial and IBM Global Services. Mr Israel holds a Masters of Business Administration specialized in Strategic Management and Management Information Systems from York University s Schulich School of Business, and a Bachelor of Science in Computer Science from the University of Western Ontario. He also holds a Project Management Professional (PMP) designation from the Project Management Institute and is certified in Information Technology Infrastructure Library (ITIL). With over 18 years of property investment and development experience, Charles Coyle was appointed by IRES Fund Management as Vice President, Acquisitions in December Prior to his appointment, Mr Coyle was employed in a senior position with NAMA executing asset management strategies across significant residential and commercial property portfolios. During his last 12 months with NAMA, Mr Coyle was the Senior Property advisor with specific responsibility for developing and implementing strategy across the NAMA residential portfolio. Prior to that, Mr Coyle worked with Goodbody Stockbrokers sourcing, structuring, financing and managing property transactions on behalf of private clients. Over the past two decades, Mr Coyle has been involved in property transactions valued at in excess of 2 billion. Following the completion of an MA in property and law at City University, London, Mr Coyle qualified as a Chartered Surveyor in 2000 with CB Richard Ellis and spent five years working in their Central London investment team. Jodi Lieberman joined CAPREIT in 2009 and has been instrumental in developing the Human Resources function at the company. Ms Lieberman has over 17 years of professional HR experience with large organizations such as Labatt Brewing Company, TELUS Mobility and Bentall Kennedy, and is responsible for leading the alignment of CAPREIT s human resources strategy with its overall business strategy. Ms Lieberman has contributed significantly to the creation of a collaborative HR team, capable of meeting CAPREIT s growing needs by uniting training and development, recruitment and retention, benefits and disability management, employee relations, office services, and compensation and payroll. As recognition for Ms Lieberman s and the team s accomplishments, CAPREIT has been named one of Canada s 50 Best Employers for 2014 and 2015 by Aon Hewitt. Ms Lieberman has an Honours BA in Sociology from York University and has completed her graduate Certificate in Human Resources from Seneca College. Annual Report 2015 Irish Residential Properties REIT plc 37

40 Corporate Governance Statement Introduction The Board is committed to developing and maintaining a high standard of corporate governance. The Board considers that the Company has complied with the relevant requirements and procedures as set out by the Irish Corporate Governance Annex to the UK Corporate Governance Code ( Irish Annex ) (to be found at Irish-Corporate-Governance-Annex.pdf), UK Corporate Governance Code 2014 ( UK Code ) (to be found at UK-Corporate-Governance-Code-2014.pdf) and the Association of Investment Companies Code of Corporate Governance ( AIC Code ) (to be found at uploads/files/aiccodeofcorporategovernancefeb15.pdf) throughout the last financial year under review other than as set out below on page 44. This Report, including the Corporate Governance Statement, can be accessed electronically on our website at The Board of Directors The Board is responsible for providing governance and stewardship to the Company and its business. This includes establishing goals for management and monitoring the achievement of these goals. The Company appointed IRES Fund Management as its alternative investment fund manager as of 1 November 2015, pursuant to the terms of an investment management agreement between the Company and IRES Fund Management (as amended from time to time) (the Investment Management Agreement ), to provide the Company with portfolio management, risk management and other services in relation to assets or properties which may be acquired or held or disposed of by the Company ( Investments ) and to act with day-to-day authority, power and responsibility for the Investments. Prior to 1 November 2015, the Company had appointed Gandon Alternative Fund Management Limited ( GAFM ) as its alternative investment fund manager pursuant to the terms of an AIFM agreement between the Company and GAFM (as amended from time to time). The Board oversees the performance of the Investment Manager and the Company s activities. The Investment Manager has discretionary authority to enter into transactions for and on behalf of the Company, except for certain matters that require the consent of the Board. Authority on certain matters is reserved to the Board. Unless required to be performed by the Investment Manager as a matter of law or in order to respond to a bona fide emergency, the Company s prior written approval is required for certain matters, including: any acquisition/disposal of a property investment or the entry into any agreement to acquire/dispose of a property investment; any new financing or refinancing, including associated hedging arrangements, entered into in respect of a property investment; any capital expenditure on a property investment in excess of an approved budget; any proposed lease event where the rent referable to the relevant lease is greater than 7.5% of the aggregate rental income of the Company; any acquisition or the entry into any agreement to acquire any property investment through a joint venture or coinvestment structure; any disposal of any right, title or interest in any of the Company s properties at less than its acquisitions cost; and in relation to the valuation of the Company s properties, any variation from the RICS Red Book. The Board is at all times free to offer ideas to the Investment Manager relating to the structure of a transaction so as to provide the Company the greatest value. In addition, the Board makes certain other key decisions, including: formulation and monitoring of Company strategy; the Company s risk management and internal control systems; dividend policy; and review of the performance and contractual arrangements with the Investment Manager. Directors are expected to participate in all scheduled Board meetings as well as each annual general meeting. The Chairman oversees the conduct of all Board meetings including ensuring that all aspects of the Group s activities receive appropriate attention. All Directors are furnished with the information necessary to assist them in the performance of their duties. The Board meets at least four (4) times each calendar year and, prior to such meetings taking place, an agenda and board papers are circulated to the Directors so that they are adequately prepared for the meetings. 38 Irish Residential Properties REIT plc Annual Report 2015

41 The Company Secretary is responsible for the procedural aspects of the Board meetings. Directors have access to Elise Lenser, the Company Secretary, and, where appropriate, are entitled to have access to independent professional advice at the expense of the Company. As required by the UK Code, the Chairman has held meetings during the year with the non-executive Directors without the presence of the executive Directors. Any director appointed to the Board by the Directors will be subject to election by the shareholders of the Company at the first annual general meeting after his or her appointment. Furthermore, under the Articles of Association, all Directors must retire each year and may seek re-election. Details of the remuneration of Directors are set out in the Directors remuneration report on page 50. The Articles of Association of the Company provide that the number of directors that may be appointed cannot be more than nine (9) nor less than two (2) and that two Directors present at a directors meeting shall be a quorum. The size and composition of the Board is reviewed regularly to ensure that the Board has an appropriate mix of expertise and experience. On appointment, new directors are provided with induction training. In addition, Directors are invited to tour part of the Company s property portfolio with the Chief Executive Officer or a senior representative of IRES Fund Management in order to familiarise themselves with the Company s operations, property management and a segment of the property portfolio. This meeting also provides new directors with an opportunity to ask any questions they may have on the nature and operations of the business, and on the implementation of the Company s business strategy. The Board also arranges for presentations from IRES Fund Management and the Company s other advisors on matters relevant to the Company s business. The Nomination Committee, on behalf of the Board, assesses the training needs of the Directors on at least an annual basis. The Board carries out an evaluation of its performance on an annual basis. The evaluation reviews the balance of skills, experience, independence and knowledge of the Board and the effectiveness of the Board and its committees in their workings. Directors are also evaluated individually to assess their contribution and effectiveness. The evaluation is facilitated using a self-evaluation questionnaire-based approach and a member of the Nomination Committee reports to the Board on the results of the evaluation at a board meeting. The Board considers that the use of individual questionnaires and follow-up meetings, if deemed necessary, ensures the most robust and objective approach possible. The senior independent non-executive director (the Senior Independent Director ) also meets with the non-executive Directors (other than the Chairman) to appraise the Chairman s performance. The Board completed the performance evaluation process in March The various phases of the performance evaluation are set out below: Evaluation questionnaires were provided to each of the Directors to appraise the performance of the Board as a whole, the committees of which they are a member, their individual performance and the performance of each other Director. The results of the performance evaluation process were presented to the Board at a board meeting held on 11 March 2016; Declan Moylan, the Senior Independent Director, met with the non-executive Directors (other than the Chairman) to appraise the Chairman s performance; Each of the Audit Committee, the Remuneration Committee and the Nomination Committee reviewed their own performance; At the board meeting on 11 March 2016 the Board discussed its own performance, the performance of the committees and the performance of individual Directors, including the Chairman. The Company does not require an external facilitator for the performance evaluation process on the basis that the Company is a smaller company for the purposes of the Irish Annex. The Board has requested the Audit Committee to make an assessment of the Group s position and performance and report back. As at the date of this Report, there are five (5) Directors on the Board. The Chief Executive Officer, David Ehrlich, is an Executive Director. Colm Ó Nualláin, Aidan O Hogan, Declan Moylan and Thomas Schwartz are Non-Executive Directors. The biographies of all the Directors appear in this Report on pages 34 to 35. Colm Ó Nualláin (the Chairman), Declan Moylan (Deputy Chairman and Senior Independent Director) and Aidan O Hogan are each considered independent for the purposes of the Listing Rules. The Directors have determined that although Declan Moylan was a partner in Mason Hayes & Curran and remains of counsel to that firm, which has a material business relationship with the Company, he may nonetheless be considered to be independent as he has retired from the partnership of Mason Annual Report 2015 Irish Residential Properties REIT plc 39

42 Corporate Governance Statement (cont d) Hayes & Curran and the Directors are satisfied that his prior membership in the partnership of that firm and current role as of counsel to that firm (which role expires on 31 March 2016) and is an honorary role for which Declan Moylan receives only an honorarium, but does not share in the profits of the firm, has not and will not adversely affect the independence of his views and his contribution as a Director. Declan Moylan is the Senior Independent Director within the meaning of the Listing Rules. Thomas Schwartz is not considered to be independent due to his connection with CAPREIT, which is a significant shareholder of both the Company and IRES Fund Management (the Investment Manager). Thomas Schwartz is a trustee of CAPREIT and a trustee or director of each of CAPREIT s subsidiaries, including IRES Fund Management. He is also the chief executive officer and president of CAPREIT and each of its Canadian subsidiaries. Pursuant to the terms of the Investment Management Agreement, IRES Fund Management is entitled to nominate and require the Company to appoint one person as a non-executive director. Thomas Schwartz is IRES Fund Management s nominee. The Board has a strong focus on property investment management to allow it access to a good knowledge base. As highlighted in the biographies of the Directors on pages 34 to 35, each of the Directors brings a different set of skills and experience to the Board. The Directors diverse skill sets facilitate the consideration of issues at meetings of the Board from a range of perspectives. The division of responsibilities between the Chairman and the Chief Executive Officer has been clearly established, set out in writing and agreed to by the Board. Given the growth of the Company, the Board, on the recommendation of the Nomination Committee, thought it advisable to increase the size of the Board. Accordingly, the Board, on the recommendation of the Nomination Committee, has appointed Margaret Sweeney and Phillip Burns as independent nonexecutive directors effective 23 March Given that Ms Sweeney and Mr Burns have had no involvement in the activities of the Company in the period under review, the Board was of the view that their appointments should only be effective after the approval and issuance of this Report and the financial statements included therein. Margaret Sweeney (Nationality: Irish) Margaret Sweeney qualified as a Chartered Accountant with KPMG in 1985 and worked with the firm for 15 years. She has held a number of senior positions including CEO of Dublin Airport Authority plc and Postbank Ireland Limited and has worked in Ireland and overseas with international shareholders, business partners and funders. She is currently a non-executive director on the board of Dalata Hotel Group plc and a number of private companies. She sits on the Council of the Institute of Chartered Accountants in Ireland and the Governing Body of Dublin City University. She is a Fellow of Chartered Accountants Ireland and holds the Diploma in Company Direction from the Institute of Directors. Ms Sweeney has been a non-executive director on a number of boards in Ireland and internationally including Aer Rianta International plc, Flughafen Dusseldorf GmbH, Birmingham International Airport, Hamburg Airport, Shannon College of Hotel Management and Teagasc (Irish Agriculture and Food Development Authority). Ms Sweeney served as President of the Dublin Chamber of Commerce from 2008 to Phillip Burns (Nationality: American and British) Phillip Burns is the Founder and a Principal of Maple Knoll Capital and has been involved as a principal or advisor in transactions with an aggregate value of over 20.0 billion, with more than 70% centred around real estate across multiple geographies. Mr Burns has also been involved with raising in excess of 11.0 billion of equity for principal investment, including over 2.4 billion dedicated to real estate. Previously, Mr Burns was CEO of Corestate Capital, an investment manager focused on distressed real estate transactions in Europe. Prior to this, he was a Managing Director at Terra Firma Capital Partners, where he specialised in infrastructure, real estate and credit. Mr Burns also worked for Goldman Sachs, where he focused on mortgage finance, real estate and general corporate finance, and was a corporate attorney at Skadden Arps. Mr Burns holds a Bachelor of Science in Aerospace Engineering from the University of Michigan and a Juris Doctor, summa cum laude, from Syracuse University. 40 Irish Residential Properties REIT plc Annual Report 2015