Interim Report and Financial Statement

3 August 2023

I-RES 2023 H1 Results

Irish Residential Properties REIT plc

Results for the Six Months Ended 30 June 2023

Irish Residential Properties REIT plc (“I-RES” or the “Company”), Ireland’s leading provider of private rental accommodation issues its results for the six month period from 1 January 2023 to 30 June 2023.

Key Financial and Operational Highlights

• Strong revenue growth of 5.2% to €44.3 million for the period, driven by delivery of new assets and organic rental growth across the existing portfolio.
• Revenue performance was supported by 99.5% occupancy levels, generating consistent recurring cashflows and demonstrating the strong demand for I-RES’ high-quality properties, as well as operational effectiveness in our leasing and turnovers. 
• Delivered Net Rental Income (“NRI”) of €34.3 million, an increase of 5.1% on the same period last year, driving a 6.9% increase in adjusted EBITDA to €28.7 million. EPRA earnings increased by 11.2% to €15.0 million. 
• Maintained NRI Margin at 77.5%, an exceptional result despite the ongoing inflationary environment due to a focus on cost reduction initiatives and efficiency benefits across the business achieved through I-RES’ new internalised platform.
• Launched new vertically integrated digital platform “I-RES Living” as part of our wider operational and digital transformation strategy enhancing our offering to customers and driving efficiencies in the business.  
• Delivering on asset recycling strategy and balance sheet management with disposals of c.€22 million and with a continued focus on value-add opportunities. Post period end, we have also agreed the sale of 194 units for gross proceeds of c.€72.06 million including VAT but excluding other transaction costs. The first closing of this sale is expected before the end of August 2023 and will include 91 units for €38.12 million. This will reduce our LTV to c.43.2%. The remaining units are expected to close within this calendar year.
• As at 30 June 2023, I-RES’ portfolio had a total value of €1,426 million at a gross yield of 6.2% representing a further yield expansion of 0.3% since 31 December 2022, resulting in an IFRS NAV per share of 149.2 cents (2022: 160.0 cents). This yield expansion resulted in a non-cash charge of €56.5 million resulting in a loss before tax of €42.1 million.
• The Board intends to declare a dividend of 2.45 cents per share for H1 2023, representing a 6.5% increase on the H1 2022 interim dividend.

Commenting on the results, Margaret Sweeney, Chief Executive Officer, said:

“I-RES delivered another strong operational and financial performance for the first half of the year. We grew our revenue to €44.3 million, a 5.2% increase year-on-year, which was supported by our consistently high occupancy rate – a standout feature of the business. This strong operational performance, driven by organic rental growth across our existing portfolio and the ongoing positive financial impact of portfolio expansion, supported the increase in NRI of 5.1% to €34.3 million.

This reporting period has demonstrated the benefits of a new internalised platform, with the Company delivering cost reduction initiatives and operating efficiencies. We launched our new vertically integrated digital platform, I-RES Living, which is unique to the Irish market. The launch of I-RES Living demonstrates our commitment to leveraging technology to improve service delivery, cost efficiency and ongoing value generation for the company. 

Despite our resilient financial and operational performance, we have not been immune to the wider recalibration of real estate sector values and our portfolio value fell in the first half of the year. This non-cash revaluation of our assets reflects sector yield shifts and weakening in values across the real estate sector in response to wider macroeconomic conditions.

While uncertain conditions may persist, our performance illustrates the resilience of our high-quality assets and efficient operating model. By maintaining our focus on performance, prudent financial management and operational excellence, I am confident in our ability to continue generating attractive long-term returns for shareholders.”

Financial Highlights

(1) For definitions, method of calculation and other details, refer to the Financial Review

(2) The non-recurring costs of €5.7 million at 30 June 2022 and general and administrative expenses of €5.6 million at 30 June 2022 total the general and administrative expense costs of €11.3 million reflected in the Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2022.

Chairman’s Statement

I am pleased to report a strong financial performance by I-RES in the first six months of 2023. Our well-invested, modern portfolio and our sector leading operating platform, coupled with the underlying fundamentals of the Irish private residential market continue to deliver strong cash flow and earnings for the Company. The Irish residential real estate market remains robust. The structural demand in the Irish residential market is driven not only by the underlying strength of the Irish economy, including steady employment levels and sustained population growth, indicating a growing need for housing in Ireland, but also a long-term and structural supply shortage. Notably, results from the latest national census undertaken in 2022 show that Ireland has experienced a population increase of 8% since 2016. I-RES is well positioned to capitalise on these market dynamics and meet the increasing housing demand in Ireland. Set against this, the regulatory policy on private residential rents, in this current environment of increasing interest rates, and ongoing inflation, is particularly challenging. We therefore welcome the Department of Housing’s current proactive engagement with the residential sector and its consultation on a wide range of current challenges to find optimal solutions to meet all stakeholder needs going forward and in particular, to ensure continued investment into providing much needed supply of good quality housing in Ireland. As the leading provider of private rented residential homes in Ireland, the Company has a meaningful role to play in the discussion and formulation of a more appropriate regulatory framework for the Irish rental market and is pleased to engage meaningfully with the relevant government authorities in this regard.

Continued Execution on Strategy

We continue to operate in a challenging environment, and the Board and management team remain alert to the risks that this presents. We are focused on protecting the business from macroeconomic headwinds and implementing strategies to ensure the business is positioned for future success.

During the first half of the year, we continued to deliver on the key business drivers we set out in our 2022 Annual Report:

• Maintaining our focus on operational excellence, which delivered strong occupancy, rental growth, stable NRI margin and cash collection.
• Disciplined capital investment and recycling, including successful delivery on the asset disposal programme of €100 million announced in April 2023. We have executed c.€22 million of disposals under this programme and a further c.€74.5 million contracted for disposal bringing the total to c.€96.5 million and substantially completing the asset disposal programme announced in April.
• Prudent balance sheet management, with a focus on retiring our most expensive debt instruments first which will be significantly reduced by execution of our asset disposal programme.
• Proactive engagement with key industry stakeho