Irish Residential Properties REIT Plc (IRES) Earnings Call Transcript & Summary

Good morning, and welcome to the Irish Residential Properties REIT Annual General Meeting conference call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Declan Moylan, Chairman. Please go ahead.

Good morning, ladies and gentlemen. This is Declan Moylan. First of all, just to confirm to you, there is not a facility, in fact, for asking questions as will become apparent from the remarks, which I'm just about to make. Good morning to you all. I am Declan Moylan. I'm the Chairman and an Independent Nonexecutive Director of the company. And I'd like to start by welcoming you all to the 2020 Annual General Meeting of Irish Residential Properties REIT plc. Under the company's Articles of Association, the quorum required for the meeting is 3 persons entitled to vote upon the business to be transacted, each one being a shareholder or a proxy for a shareholder or a duly authorized representative of corporate shareholder. Margaret Sweeney, CEO and Executive Director; together with Aidan O‘Hogan, Independent Nonexecutive Director and Senior Independent Director; and I, Declan Moylan, the Chairman, are here at the company's registered office in South Dock House, Dublin in satisfaction of the quorum requirements, and we are the sole attendees physically present at the meeting. We do have a quorum present, and it's just after 10:00, so I declare the meeting to be open. We are joined on the conference call this morning by other Directors: Phillip Burns, Nonexecutive Director; Joan Garahy, Independent Nonexecutive Director; Tom Kavanagh, Independent Nonexecutive Director; and Mark Kenney, Non-Executive Director. We also have our company Secretary, Elise Lenser. Also present on the call are Priyanka Taneja, our Chief Financial Officer; Sean O'Keefe and David Moran from KPMG, the company's auditors for the financial year 2019; Conor O'Dwyer and Gill Lohan of McCann FitzGerald, who are the company's legal advisers; representatives from Computershare, our registrar; and most important of all, you, our shareholders. The coronavirus, COVID-19 pandemic presents an unprecedented situation for IRES REIT in the context of this year's AGM. As a consequence of the extension of the COVID-19 emergency measures introduced by the Irish government, which require people to stay at home and restrict public gatherings to limit the spread of COVID-19, unfortunately, shareholders are unable to attend the AGM this year. The Board of Directors of the company gave careful consideration to arrangements for holding this year's AGM, taking into account, among other things, first, the ongoing restrictions on public gatherings imposed by the Irish government as a result of the COVID-19 pandemic and the continuing uncertainty regarding future public gatherings in Ireland for the foreseeable future; second, the health and safety of our shareholders and the officers of the company; third, the requirements and procedures for the company to hold an AGM under Irish company law and its constitution; four, the applicable rights of shareholders; and five, the approach taken by other listed -- Irish-listed companies to holding their annual general meetings in 2020 in light of the COVID-19 pandemic. Having considered those matters, the Board of Directors of the company was and remain satisfied that the arrangements for the holding of this year's Annual General Meeting today are set out in the announcement made by the company on 11th May 2020, including the arrangements allowing for shareholders to listen to the proceedings of the AGM remotely by teleconference, for questions relating to items on the agenda of the AGM to be submitted in advance and for all shareholders to submit proxy forms so that their votes may be counted at the Annual General Meeting are all in order. We value shareholder engagement and the opportunity to meet and communicate with our shareholders every year at the AGM, and we very much regret that this year's meeting cannot proceed in the way that the company and our shareholders are customarily used to. However, we have endeavored to keep these proceedings as informative and as interactive as is reasonably practical within the confines of our technology and the legal requirements in Ireland for Annual General Meetings. Now moving on. The annual report and the Notice of Annual General Meeting were sent to shareholders and published on the company's website on the 16th of April 2020. And so with no objection, the meeting will take the Notice of Annual General Meeting as read. This morning, we issued an AGM statement, which I will now read to you before we commence the formalities of the meeting. The forward-looking statements disclaimer included at the end of the AGM statement as published on the company's website should be taken as read into the AGM statement, which now follows. This is the AGM statement. IRES delivered another strong financial performance in 2019, generating an increase of 22.7% in operating revenues, while also growing the property portfolio by a significant 37% through continued investment and aligned with our overall strategy. These results were delivered through very effective management and a high-quality service offering across our leading residential rental portfolio and opportunistic investment. Our stable dividend strategy continued with the final dividend in respect of 2019 of EUR 16.2 million being paid to shareholders on the 23rd of March 2020. The coronavirus, COVID-19 pandemic has created significant uncertainty in every aspect of life, and the company's utmost priority as we navigate this difficult period, remains the health, safety and well-being of our officers, our employees, our residents, our shareholders and our business partners. The evolving situation presented by the pandemic plus government restrictions introduced in order to mitigate its spread could impact the company's business and could have impacts which we cannot foresee at this time. However, we are confident that the quality of our property portfolio and the strength of our balance sheet provides great resilience through this period. And together with the experience of our Board, our CEO and our investment manager, IRES Fund Management Limited, the company will be well positioned to navigate this challenging future period. As announced in our trading update on 6th May 2020, the company has so far maintained strong occupancy and rent collection levels across the portfolio, and we'll continue to work constructively with our tenants during this period. We have a diversified, high-quality property portfolio located close to transport hubs, schools and major employers and principally located in Dublin, which continues to see strong demand due to the ongoing housing shortage here. Overall supply of new housing and apartments is expected to be impacted by the ongoing restrictions due to COVID-19. However, the company has continued to add to its portfolio in 2020 with the addition of 73 new apartments in Dublin at Waterside and at Tallaght Cross West. The initial lifting of restrictions on building sites on 18th May 2020 saw our development sites in Dublin at Hansfield Wood and Bakers Yard reopen. We have a pipeline of opportunities for growth, and we foresee further opportunities for the company to continue its successful growth strategy as this crisis period subsides and the economic environment improves. IRES has a robust balance sheet with strong liquidity in place as well as an ongoing strong cash flow from its operating business. The company's refinancing of its revolving credit facility in 2019 as well as the private placement of notes of approximately EUR 200 million equivalent in early March 2020 has provided the company with significant funding and liquidity at attractive low rates of interest, as well as long-term laddered maturity of our debt, ranging from 2024 to 2032. I'm pleased to be able to reassure you, our shareholders, that we believe our people are coping very well with this unprecedented situation. We have a strong Board, a strong management team that has a proven track record of dealing with major shocks and challenges over the last 20 years, and they're working hard to navigate our business through this evolving situation with great agility and focus. We're conscious of our responsibilities to our people, to our business, to other stakeholders and to society, and the company, together with our business partners, are supporting hospitals and frontline health staff with the provision of accommodation and car parking facilities during this crisis. We're also using this time to work on plans to make our operations more effective and efficient and looking for growth opportunities which may arise out of the crisis. I want to convey the gratitude of myself and the Board to you, our shareholders, for your continued support for the business, and my gratitude to the CEO and the investment manager and their respective employees who have been working tirelessly on your behalf while also working under significant challenges which exist as Ireland deals with this COVID-19 pandemic. As a result of the proactive measures taken by the company in recent years and our belief in the underlying strength of the Irish residential rental market, we believe that we're well positioned to manage through this challenging time, and we remain confident in the long-term outlook for the business. Now ladies and gentlemen, that was the AGM statement. I'm now reverting to the order of business of the AGM, and I'm now asking our Chief Executive Officer, Margaret Sweeney, to say a few words.

Thank you, Declan. Good morning to everyone. I'm delighted that you could all join us here online today in these unprecedented times. We are taking our responsibility for preventing spread of the coronavirus very seriously by complying with the emergency measures announced by the Irish government on the 27th of March and the health authorities' recommendations right across the business. Our people have been tremendous in adapting to this new environment, and at the same time, fully carrying on the business of managing over 3,700 of parkings and houses right across Dublin and in Cork. In response to the emergency situation, we set out a framework for managing through the COVID-19 crisis period, and we published this on the 16th of March on our website so that's just available for all our shareholders and stakeholders. Ensuring our residents continue to receive quality service and communication has been an important objective for us, as we are all spending more time in our homes, working and living as well as doing homeschooling and child care. The team in IRES has reached out to all of our residents and have continued to provide essential maintenance and service support. I would usually make a presentation to you, our shareholders, at the AGM on the key highlights of the business. However, given the circumstances this year, we issued a trading statement to you on the 6th of May to provide you with an update on the key business operations and financial performance metrics, including the impact of COVID-19 over the last 4 months -- over the first 4 months of 2020. Today, we have issued a further update on our AGM statement, which you have just heard from our Chairman. In addition, we plan to make available an updated investor presentation on our website later this week. You will be aware of the continuing housing supply challenge in Ireland, and it has therefore been very important to ensure that available accommodation is let up effectively during this time as demand for good quality accommodation is very strong. We took delivery, as Declan mentioned, of 73 new apartments in the first 3 months of 2020, and we're doing virtual lease-up of available accommodation whilst complying with the emergency measures announced by the Irish government and respecting the social distancing measures, among others, advised by the health authorities. I want to assure you that the business has been resilient over the last months during this unprecedented situation, showing strong rent collection rates and occupancy levels continuing close to 99%. As you know, this is an evolving situation in Ireland. We don't know what the road ahead is like. However, I can assure you that as CEO and all the employees of the investment manager, we are working closely to manage the business on your behalf. Thank you for your time this morning, and I look forward to meeting you all in person again, I hope, in the not-too-distant future.

Thank you, Margaret, for that update. As I noted earlier, to facilitate shareholder communication, shareholders who wish to submit questions relating to items on the agenda of the Annual General Meeting, in accordance with our rights under Irish law, we're invited to do so in advance by e-mailing the company's Secretary. Such validly posed questions, together with the company's response to such validly posed questions, in accordance with its obligations under the Irish Companies Act 2014, were posted to the company's website at www.iresreit.ie in advance of this AGM. These will now also be addressed now at this meeting. In doing so, please note that each of such questions was posed in respect of resolution 1 as it appears in the Notice of Annual General Meeting. And that's a resolution to receive and consider the financial statements of the company for the year ending 31st December 2019, and the reports of the Directors and auditors thereon.

I'm now going to recite these questions and the answers for you. I'm going to ask Margaret Sweeney to read the first question together with the company's response because it relates to the Chairman's fees.

So the first question is as follows: Why did the Chairman's fees increased from EUR 100,000 in 2018 to EUR 134,000 in 2019? The company's response to this question posed by the shareholder: As disclosed in the 2018 Annual Report, in late 2018, the Remuneration Committee engaged Consultants, Willis Towers Watson, which has no -- who have no relationship with the company, its subsidiary, Irish Residential Properties Limited, or any individual director to review and benchmark the company's executive and non-executive director remuneration. As disclosed on Page 67 of the 2019 Annual Report, following that review, the Remuneration Committee, with Declan Moylan as Chairman recused, recommended to the Board that the fees of the Chairman should be increased from EUR 100,000 to EUR 140,000 per annum with effect from 21st, February 2019. The Board adopted this recommendation. No other changes were made to non-executive director fees in 2019. In determining this level, the Remuneration Committee took into account a comparison with levels and a comparable group of Irish and U.K. REITs and the constituents of the ISEQ 20 and the significant increase in the company's scale since the fees were last reviewed.

Thank you, Margaret. I will now proceed to read out the remaining questions together with the company's response to each. Next question. Given the engagement of the external investment manager, what are the duties and responsibility of the Chief Executive Officer? And the company's response is: As disclosed in the Division of Responsibilities Statement available at www.iresreit.ie, the CEO is accountable to the Board for the effective overall management of the company. The primary responsibilities of the CEO include, among other things, developing a long-term strategy and vision for the company, which enhances shareholder value; strategy and implementation for acquisitions and financings; implementation of major corporate policies; ensuring that the day-to-day business affairs of the company are appropriately managed by the company's investment manager and other service providers; and keeping the Board aware of the company's performance and events affecting its business, including opportunities in the marketplace and also adverse or positive developments. The next question reads as follows: In relation to the CEO's salary of EUR 400,000 per annum, did the Remuneration Committee take into account in making comparisons that the company has an external investment manager, whereas in other REITs and ISEQ 20 companies, the CEO is actually responsible for managing the company and its business, employees, properties, et cetera? It is noted from Page 51 of the 2019 Annual Report that including the CEO, the company has 3 employees. The company's response to that question is: Yes, the fact that the company is externally managed was taken into consideration by the Remuneration Committee. The next question reads: Has any provision been made in the accounts for any liability resulting from any omission or misstatement in the company's IPO prospectus and/or the company's 2014 Annual Report and Accounts. The response to that question is: As the company does not believe that any omission or misstatement was made in the company's IPO prospectus and/or in the company's 2014 Annual Report and Accounts, having regard to all applicable legal disclosure obligations, no such provision has been made in the company's accounts. And that concludes the question-and-answer portion of the business.

I now move on to the formal business of the meeting, where we consider and vote on the resolutions. There are 16 resolutions in total to be proposed, taking account of the requirement to propose each resolution regarding the reelection of each director separately as a separate resolution. The proposed resolutions are considered to be in line with market practice and take account a relevant institutional shareholder guidelines and principles. Let me outline for you the voting procedure, which we're going to follow today. This year, given the emergency measures introduced by the Irish government requiring people to stay at home and restricting public gatherings and the consequences of this for shareholder attendance at the meeting, voting will be done by way of a poll on each of the resolutions put to the meeting. Voting by poll allows you, our shareholders, the opportunity to participate in the decision-making of the company by having your votes recorded in proportion to the number of shares you hold. Voting by poll is permitted by the company's constitution if demanded by the Chairman of the meeting. Accordingly, pursuant to Article 66 of the Articles of Association of the company, as Chairman, I hereby demand voting by poll on the resolutions to be put to the meeting today. For the avoidance of doubt, the proxy is validly received by the company in accordance with the relevant procedure and code of requirements will be included in the polls. For your information only, the total number of proxy votes excluding votes withheld received by the Chairman in respect of each resolution represents approximately 68% of the total issued share capital of the company. We've appointed Computershare, the company's registrar, to act as scrutineers. And for convenience, I now direct that the poll on all the resolutions will be held at the end of this Annual General Meeting. I will now formally propose each of the resolutions separately to the meeting. As the full text of each resolution is included at Pages 6 to 10 of the Notice of AGM, I don't intend to read out the full text of each resolution. As I said, there are 16 resolutions. The first resolution is as follows. The first item of business is a resolution to receive and consider the financial statements of the company for the year ending 31st December 2019 and the reports of the directors and auditors thereon. A copy of the annual report containing this information was sent to shareholders and was published on the company's website on the 16th of April 2020. I therefore propose resolution #1, that the financial statements of the company for the year ended 31st December 2019 and the reports of the directors and auditors thereon be received and considered. The poll on resolution 1 will be held at the end of this AGM. I now move to resolution 2. This relates to the reelection of directors. All the directors come up for reelection in accordance with Article 91 of the Articles of Association. The biographical details of all Directors appear on Pages 42 to 44 of the 2019 Annual Report. I now propose resolution 2a, that Phillip Burns be reelected as a director of the company. The poll on resolution 2a will be held at the end of the meeting as before. I now propose resolution 2b, that Joan Garahy be reelected as a director of the company. The poll on resolution 2b will be held at the end of the meeting. I now propose Resolution 2c, that Tom Kavanagh be reelected as a director of the company. The poll on resolution 2c will be held at the end of the meeting. I now propose Resolution 2d, that Mark Kenney be reelected as a director of the company. The poll on resolution 2d will be held at the end of the meeting. I will now ask Margaret Sweeney to propose the next resolution because it relates to my own reelection.

I propose resolution 2e, that Declan Moylan be reelected as a director of the company. The poll on Resolution 2e will be held at the end of meeting.

Thank you, Margaret. I now propose resolution 2f, that Aidan O’Hogan be reelected as a director of the company. The poll on resolution 2f will be held at the end of the meeting. I now propose Resolution 2g, that Margaret Sweeney be reelected as a director of the company. The poll on resolution 2g will be held at the end of the meeting. I'm now moving to resolution 3. And I proposed resolution 3. It's a special resolution to authorize the directors to call a general meeting, other than an Annual General Meeting or a meeting for the passing of a special resolution, on not less than 14 days' clear notice. The full text of resolution 3 is on Page 6 of the Notice of AGM. The poll on resolution 3 will be held at the end of the meeting. I now propose resolution 4, to authorize the directors to fix the remuneration of the auditors in respect of the period expiring at the next AGM of the company. The poll on resolution 4 will be held at the end of the meeting. I now propose resolution 5, which is to receive and consider the remuneration policy, the full text of which is set out at Pages 60 to 63 of the 2019 Annual Report. The poll on resolution 5 will be held at the end of the meeting. I now propose resolution 6, which is a special resolution to grant a general authority to the directors to allot relevant securities up to a maximum aggregate nominal amount of EUR 26,083,947.30 on the terms set out in the Notice of AGM. The full text of resolution 6 is set out on Pages 6 to 7 of the Notice of Annual General Meeting, and the poll on resolution 6 will be held at the end of the meeting. I now propose resolution 7a. This is a special resolution to, subject to the passing of resolution 6, disapply preemption rights in connection with issues of equity securities on the term sellout in the Notice of Annual General meeting. The full text of resolution 7a is set out on Pages 7 to 8 of the Notice of AGM. The poll on Resolution 7a will be held at the end of the meeting. I now propose resolution 7b, which is a special resolution to, subject to the passing of resolution 6, disapply preemption rights for an acquisition or other specified capital investment on the terms set out in the Notice of AGM. The full text of resolution 7b is on Page 8 of the notice of AGM. The poll on resolution 7b will be held at the end of the meeting. I now propose resolution 8. Resolution 8 is a special resolution, that the company and any subsidiary of the company be authorized to make market purchases, including overseas market purchases, of ordinary shares in the share capital of the company on the terms set out in the Notice of Annual General Meeting. The full text of resolution 8 is set out on Pages 8 to 9 of the Notice of AGM. The poll on resolution 8 will be held at the end of the meeting. I now propose resolution 9. Resolution 9 is a special resolution to authorize the reallotment of treasury shares on the terms set out in the Notice of Annual General Meeting. The full text of resolution 9 is set out on Pages 9 to 10 of the Notice of AGM, and the poll on resolution 9 will be held at the end of this meeting. Now let me turn to the question of voting procedures. In accordance with the provisions of the Articles of Association of the Company, I now direct Computershare to conduct the poll on each of the resolutions just put to the meeting. As mentioned at the outset, votes may be given by the registered holders of ordinary shares present here in person or by proxy as entitled to vote. Every such holder has 1 vote for every ordinary share held. As Chairman, I will vote on behalf of those holders who have sent a valid proxy instruction to the company appointing the Chairman of the meeting to vote on their behalf. The 3 persons present in person today, including myself, have been provided with voting poll cards, and we have cast our votes as relevant, which will be added to the valid proxy votes already received in respect of each resolution. [Voting]

Accordingly, I now formally declare the poll closed. The votes cast will now be examined and verified under the scrutiny of Computershare by reference to the register of members and the list of authenticated proxies received by the company. Computershare will report the totals of the votes cast for and against the resolutions and the number of withheld votes. Can I remind shareholders that a vote withheld is not a vote in law and will not be counted in the calculation of the proportion of the votes for or against the resolution. The results of the poll will take some time to be calculated. Therefore, I am closing the meeting, following which, the results of the poll on all resolutions will be announced on the company's website as soon as possible later today. Ladies and gentlemen, subject to the poll results, that concludes the business of this meeting. And as there's no other business, I'm now bringing the formal business of the AGM to a close. I'd like to thank you for joining us today. Many thanks to you all.