12 Nov 2019

Hibernia REIT: Interims show NAV, rent and dividend growth

Hibernia REIT has released interim (to end-September) H120 results which show further growth against a healthy market backdrop.

At a headline level, EPRA NAV/share was 175.7c (March 2019: 173.3c; Sept. 2018: 166.3c). Although this was a 1.4% increase in the half-year, the recent increase to stamp duty rates on commercial property (from 6% to 7.5%) will hurt NAV to the tune of 3.3c (1.9%) in H2. EPRA EPS was 2.8c (H119A: 1.8c) and an interim dividend of 1.75c has been declared (1.5c in H119). Annual contracted rent roll now stands at €62.0m (March 2019: €57.6m; Sept. 2018: €60.9m), with the 7.6% increase in the half-year due to new lettings and rent reviews. The headline vacancy rate was 12% at end-September, unchanged from end-March. This is a slight disappointment as the group had space under offer which did not complete in the period (in May, it spoke of a vacancy rate falling to 5% if all the space under offer completed). Given the ongoing strong demand for high-grade office space in the city, we expect positive progress on this front in due course. The reversionary potential of HBRN’s “in-place” CBD offices stands at €1.1m with an average period to the earlier of rent review or expiry of 2.6 years. HBRN finished the half with gearing of just 15.6%. The group had cash and undrawn facilities, net of committed development spend, of €133.3m at end-September.

It was a quieter period on the development front. HBRN’s development at 2 Cumberland Place has been expanded by 12% (an additional floor has been added) with completion expected in Q3 2020. The group has received planning (subject to an appeal) for 152,000 sq. ft. of office space at Clanwilliam Court, while it has added its 3.8 acre industrial site with mixed-use potential at Malahide Road, North Dublin to its longer-term pipeline.

All in all, another solid update from HBRN.

Farage leaves Tories to it

Sterling firmed yesterday after Brexit Party leader Nigel Farage announced that his party would not contest the 317 seats won by the Conservative Party in 2017 in the upcoming December election. Though the Brexit Party had pushed for a “Leave alliance” with the Conservatives, such efforts look to have petered out. Mr Farage announced that he had taken the decision “unilaterally” after judging the Prime Minister had recently signalled a "big shift of position" in his approach to Brexit, citing Boris Johnson’s pledge not to extend the transition period and the renegotiated Political Declaration as examples. Mr Farage has not ruled out making further concessions; after being asked whether this was his final offer, the Brexit Party leader replied “I haven’t even considered that at this moment in time. I’ve just taken 48 hours to make this decision. Allow this one to settle first”. However, the deadline for candidates to submit their nomination forms is Thursday, so Mr Farage will have to decide quickly if he is to shift his position further. 

Although UK risk sentiment was supported amid signs that the Conservatives would have a less obstructed run in the upcoming general election, the Brexit Party is still planning on taking on Labour-held constituencies. This may well split the ‘Leave’ vote in target seats that Mr Johnson is aiming to capture in his bid to win a parliamentary majority. Note also that this is in addition to the other challenges that the Conservatives face, including being squeezed by the SNP in Scotland and the Liberal Democrats in Southern England. 

With just over four weeks to go under the general election, the UK political horizon is as hazy as ever and we really cannot say with conviction that the Conservatives will gain a large or even small majority.

UK GDP disappoints

The UK economy expanded by 0.3% q/q in Q3 after a fall of 0.2% in the second quarter. The 0.3% Q3 growth outturn was a slight disappointment against the 0.4% market expectation and Investec forecast. Even so, at face value, it appears to point to a UK economy shrugging off earlier weakness and returning to moderate growth. 

However, the UK growth story is more complicated than this, with Brexit forces adding to the volatility of numbers month to month and quarter to quarter. Notably, the headline 0.3% growth pace masks a noisy and complicated story of how the UK economy performed through the period. For now, Brexit headwinds have dissipated as the threat of ‘no-deal’ in October passed and the Brexit deadline was pushed out again. The focus has clearly shifted to the UK election campaign, but Brexit uncertainties remain present and are expected to dampen economic momentum in Q4 and beyond. 

The monthly GDP dynamics suggest to us that faced with these forces, and a still subdued overseas economic backdrop, that growth momentum will likely fall back in Q4, though remain in the black. That would leave full year 2019 UK growth on track for around 1.3%, which would be the softest reading since the 4.2% fall in 2009.

Economic Releases

UK 09.30 Unemployment