Publication of Circular
Hibernia REIT plc ("Hibernia" or the "Company") announces that it has issued a Circular to Shareholders (the "Circular") containing a notice of an Extraordinary General Meeting to be held at The Marker Hotel, Grand Canal Square, Docklands, Dublin 2, Ireland at 2.30 p.m. on 26 October 2016 in order to consider a proposed amendment to the Relative Performance Fee calculation methodology (the "Amendment") and consequently the Deferred Consideration element of the Internalisation transaction previously approved by Shareholders on 27 October 2015.
The purpose of the proposed Amendment is to ensure that the Relative Performance Fee works as intended to align the interests of Shareholders and the Management Team until the expiry of all existing Performance Fee arrangements in November 2018. Under the Irish Listing Rules and the UK Listing Rules the proposed Amendment is classified as a Related Party Transaction.
· As it was documented in the Company's IPO Prospectus, the Relative Performance Fee is calculated based on the total return of the Company's Property Portfolio excluding properties purchased, sold or under development in a quarter against the Reference Index (SCSI / IPD Ireland Quarterly Property Index - All Property) during each Accounting Period. The exclusion of assets under development means any profits (or losses) generated through the change in value of such assets under development between commencement of development and practical completion less the cost of development are not included for the purposes of the calculation of the Relative Performance Fee.
· The exclusion of properties under development from the calculation methodology goes against the intention for the Relative Performance Fee to incentivise the Management Team to deliver outperformance of the Irish property market and ensure good alignment of interests with Shareholders. While remaining within the limit for development of 15 per cent. of the last reported Net Asset Value per the Company's investment policy, the Company has a number of committed development schemes in progress and a substantial pipeline of potential future developments. These developments occupy a significant proportion of the Management Team's resources, have already delivered positive returns for Shareholders and could deliver significant further returns for Shareholders over the period to expiry of the IMA in November 2018.
· To date, no Relative Performance Fees have been payable: from inception to 31 March 2016 (the most recent measurement period) the Company is cumulatively 7.5 per cent. behind the Reference Index under the current calculation methodology and under the terms of the Relative Performance Fee will need to outperform the Reference Index by 7.5 per cent. before any fees will be payable. If, over the same time period (i.e. from the Company's IPO to 31 March 2016), the Company's development assets (and the profits they have generated for Shareholders, excluding Purchase Costs) had been included, the Company would have outperformed the Reference Index cumulatively by 1.5 per cent. (which would have equated to a Relative Performance Fee payable of c. €1.3m).
Proposed amendments to Relative Performance Fee calculation
· Include assets under development and assets bought (excluding Purchase Costs) and sold in a quarter in the calculation of the annual total return of the Company's Property Portfolio compared against the Reference Index;
· Start measurement under this amended methodology from 1 April 2016 until the expiry of the Performance Fee arrangements in November 2018. There will be no back-dating of the new methodology to the IPO (under which the Investment Manager / Management Team would have been due a Relative Performance Fee of c. €1.3m, as described above) but neither will the underperformance under the existing methodology be carried forward. The rolling Reference Index driven high watermark will therefore start again from 1 April 2016 (e.g. if the Company underperforms compared against the Reference Index in the year ended 31 March 2017, then this underperformance will be carried forward in subsequent Accounting Periods and any Relative Performance Fee will only be payable where any negative historic Relative Performance Percentage when combined with the Company's Relative Performance Percentage in any Accounting Period, results in a positive number); and
· Reduce the rate of any fee payable from 50 per cent. of 30 per cent. of any outperformance by the Company's Property Portfolio of the Reference Index to 50 per cent. of 20 per cent. of any outperformance of the same index (i.e. effective rate reduced from 15 per cent. of any outperformance to 10 per cent. of any outperformance).
In all other aspects the Relative Performance Fee and the method of calculating it would remain unchanged and as such any Relative Performance Fee payable will continue to be satisfied over 90% in Ordinary Shares with the balance in cash as described in the Circular.
The Board, which has been so advised by Credit Suisse and Goodbody, considers the Amendment to be fair and reasonable so far as the Shareholders of the Company are concerned. In providing advice to the Board, Credit Suisse and Goodbody have taken into account the Board's commercial assessments of the Amendment. In addition, the Board considers the Resolution to be in the best interests of the Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolution.
As related parties who are also Directors, Kevin Nowlan, William Nowlan and Thomas Edwards-Moss have taken no part in the Board's consideration of the Amendment or the Resolution and will not vote their own shares (9,359,018 Ordinary Shares representing approximately 1.37 per cent. of the Total Ordinary Shares in Issue) on the Resolution and will take all reasonable steps to ensure that each of their associates who are beneficially interested in Ordinary Shares will not vote on the Resolution. Furthermore, none of Frank Kenny, Frank O'Neill, Richard Ball and Sean O'Dwyer will vote their own shares (6,260,848 Ordinary Shares representing approximately 0.91 per cent. of the Total Ordinary Shares in Issue) on the Resolution and will take all reasonable steps to ensure that each of their associates who are beneficially interested in Ordinary Shares will not vote on the Resolution.
All members of the Board who hold beneficial interests in Ordinary Shares (other than Kevin Nowlan, William Nowlan and Thomas Edwards-Moss who shall not be entitled to vote at the Extraordinary General Meeting) (1,453,801 Ordinary Shares represent approximately 0.21 per cent. of the Total Ordinary Shares in Issue) intend to vote in favour of the Resolution.
Capitalised terms used in this announcement and not otherwise defined shall have the meaning given to them in the Circular.
Hibernia REIT plc +353 1 536 9100
Kevin Nowlan, Chief Executive Officer
Tom Edwards-Moss, Chief Financial Officer
Credit Suisse (UK Sponsor) +44 207 888 8888
Goodbody (Irish Sponsor) +353 1 667 0400
Doug Keatinge: +353 86 037 4163, [email protected]
Jill Farrelly: +353 87 738 6608, [email protected]
About Hibernia REIT plc
Hibernia REIT plc is an Irish Real Estate Investment Trust ("REIT") and is listed on the Irish and London Stock Exchanges. The principal activity of the Company is to acquire and hold investments in Irish property (primarily commercial property) with a view to maximising shareholder returns.
Note regarding Times and Dates
The times and dates set out above and mentioned in the Circular, the Form of Proxy, and in any other document issued in connection with the transaction are subject to change by the Company, in which event details of the new times and dates will be notified to the Irish Stock Exchange, the UK Listing Authority, the London Stock Exchange and, where necessary and appropriate, to Shareholders.
A copy of the circular has been forwarded to the Irish Stock Exchange and will shortly be available for inspection at the following address:
Company Announcements Office
Irish Stock Exchange
28 Anglesea Street
Copies of the Circular will also be available shortly in electronic form on the Company's website (www.hiberniareit.com) and for inspection in physical form between the hours of 9:30 a.m. and 5:30 p.m. on any business day from the date of this Circular until the Extraordinary General Meeting at the offices of the Company at South Dock House, Hanover Quay, Dublin 2, Ireland and on the document viewing facility on the UK National Storage Mechanism (http://www.morningstar.co.uk/uk/NSM).
This information is provided by RNS