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

Good morning, ladies and gentlemen. I'm Declan Moylan, and I'm the Chairman and Independent Non-Executive Director of the company. And I'd like to welcome you to the 2023 Annual General Meeting of Irish Residential Properties REIT plc. It's just gone 11:30 a.m., and I've been informed that we do have a quorum. So I'm now declaring the meeting open. Before proceeding with the formalities of the meeting, I'd like to begin by introducing the people who are seated at the table beside me and certain other personnel who are in the room. Seated at the table are Margaret Sweeney, our CEO and Executive Director of the company; Aidan O'Hogan, Independent Non-Executive Director and Senior Independent Director; Brian Fagan, Chief Financial Officer and Executive Director of the company; Joan Garahy, Independent Non-Executive Director, Chair of the Audit Committee and incoming Senior Independent Director; Hugh Scott-Barrett, Independent Non-Executive Director; Tom Kavanagh, Independent Non-Executive Director; Stefanie Frensch, Independent Non-Executive Director; Phillip Burns, Non-Executive Director; and Anna-Marie Curry, Company Secretary and General Counsel. I'd also like to introduce Denise Turner, who has been nominated by the Board as a new independent Non-Executive Director. I think Denise is in the body of the room, perhaps, Denise, you might just raise your hand. There we go. Just to identify yourself. You're very welcome. Also present in the room are David Moran, Audit Partner from KPMG, the company's auditors for the financial year 2022 as well as Conor O'Dwyer and David Byers, partners of McCann FitzGerald, the company's legal advisers. We greatly value shareholder engagement and the opportunity the AGM provides each year to meet and communicate with our shareholders. We've provided conference call facilities and a live webcast facility for any shareholder who is unable to be with us in person as well as the ability of shareholders to vote and ask questions at the AGM in person today. Shareholders were given the opportunity to submit any questions relating to items on the agenda in advance of this meeting. We've encouraged shareholders to exercise their rights by voting in advance of the AGM through the appointment of proxies. Now the annual report and notice of Annual General Meeting were sent to shareholders and published on the company's website on the 3rd of April 2023. And so I propose taking the notice of meeting as read. Before I hand over to the CEO, I'd like to make some preliminary remarks myself. 2022 was a year of progress and delivery for IRES. We delivered a strong performance and successfully completed the internalization of the management company. This strong performance has continued into the first quarter of 2023 on which Margaret will touch shortly. The Board has seen some important changes during the year and has been engaged in extensive shareholder engagement. As outlined in the annual report and in our notice of AGM, having served 9 years on the Board as a Non-Executive Director as well as being the current Senior Independent Director and Chair of the Remuneration Committee, our colleague Aidan O'Hogan is stepping down from the Board with effect from the end of this AGM and is not seeking reelection today. And on behalf of the Board, I want to thank Aidan for his support as Senior Independent Director and his significant contribution to IRES over the past 9 years. Joan Garahy is proposed to succeed Aidan as Senior Independent Director. And as such, Joan will oversee my announced transition as Chairman over the coming year. Following formal search processes with external consultants in March 2023, we announced the proposed appointment with effect from today of Denise Turner, who is a wealth of real estate experience in Ireland and the wider European real estate sector. While in September last year, we appointed Hugh Scott-Barrett as an additional board member and Hugh brings over 20 years of real estate asset management and banking experience to the Board. Following the internalization of the company in 2022, we have refreshed the Board to ensure that it has all the requisite skills to meet the needs of the company. We have a Board which I am confident has the skills and experience to navigate the challenges that we face. I'm particularly delighted to say that in a sector that has some way to progress with gender diversity, the IRES Board proposed today has 44% female representation. And I should also note that we're one of only 2 Irish-listed companies with a female CEO. And in addition, 40% of our leadership team is female. And as Chairman, I'm delighted with this progress, and in particular, in this sector. And I know that diversity is a matter that is central to policy for you, our shareholders. Now it's frustrating that despite the strong performance of management and the wider team, the current share price does not reflect the value of the business. Challenging macroeconomic conditions, including higher interest rates and inflation have impacted the whole of the real estate sector. And whilst IRES has outperformed the sector, we understand that it's a small comfort to investors and to the Board. In addition, specifically in Ireland, the current rental cap has impacted the growth outlook. Against this backdrop, the Board has continued to focus on all options to create value for shareholders and to ensure that we continue to build a sustainable business, creating long-term value for all our stakeholders. In the run-up to this AGM, there has been a series of public letters issued by Vision Capital to IRES shareholders, highlighting views on some of the resolutions to be voted on today. The Board has carefully considered the matters raised and published responses available for all shareholders through several updates to the market and on our corporate website. As I mentioned, the Board has sought to engage constructively with all shareholders over the course of the year. It has at all times acted in the interest of all stakeholders. The Board has been encouraged by the feedback and the responses of the majority of shareholders and recommends that shareholders vote in favor of all the resolutions proposed. Where there is dissent, the Board will continue to engage and to listen and to address the concerns constructively, but in the interest of all shareholders. Despite the macro challenges we face, with our modern, sustainable and diverse portfolio, our strong operations and the fundamentals underpinning the business, the Board has confidence in the strategy and in the management of this business. And we believe that this will be reflected by the market in due course. With that, I'll now turn over to our CEO, Margaret Sweeney, to give a short presentation on the performance of the business, including the recent update we made to the market over the past couple of days. Margaret?

Good day, everyone, and thank you all for coming. I know some of you have traveled a good distance. So thank you for making that effort and for coming to the AGM today. So on one of these, I have to take my glasses off to read and then put them on. And just on the slides, you will see that our key performance indicators for 2022, which was another year of progress and delivery for IRES REIT. And we delivered a strong performance across all of the key metrics and also completed the internalization of the management of the company. And that included transition of functions as well as putting new technology right across the whole business. And as you can see from our trading update issued yesterday, we continue with that strong momentum on performance into 2023, and I'll touch on that later. So the -- we also have to ensure that in terms of our good performance where we stack up against our peers who are also running residential rental businesses, and we look at that across other companies similar to IRES in U.K. and across Europe. And the graphs on this slide actually demonstrate the delivery of a sector-leading performance by IRES. Our occupancy levels reached an all-time high of 99.4% at December last year. And while you expect that from the demand in the market is significant, our leasing and operations teams are still faced with many challenges, both during COVID during the pandemic and also through into this year. And it does take quite a bit of work to achieve that full occupancy and to optimize it at a level of 99.4%, which you can see is very much market leading. We've also consistently grown our net rental income year-on-year, and our NRI margin, that's a net rental income margin, has also outperformed our peers over the last number of years, achieving 77.5% in 2022. And this was despite the environment Declan mentioned of inflationary pressures and also -- and Ireland local property taxes, which apply to apartments from last year. And the last 2 years has also seen us putting in significant change across the company. As I mentioned, transitioning from an externally managed REIT to being fully internally managed. And this was planned and completed from the initial termination notice of the external manager in April 2021 over the following 12 months into 2022. One of the matters that does actually create a challenge for the business, we operate all of our business under the rent pressure zones, and we're subject to the current rent cap of 2%, which was introduced in December '21. And that is challenging in the current environment of inflationary pressures, increasing interest rates. And also as a leading provider of private rented residential accommodation in Ireland, we believe the company does have a meaningful role to play in discussion and formulation of the regulatory framework that supports development in the sector. And just to assure you, as shareholders, we are actively engaged as a Board and management team with the industry and with government to try and help frame a more supportive and appropriate policy that meets the needs of all stakeholders in the sector. Then looking at some of the developments during 2022. We do focus on portfolio optimization, capital allocation and also asset management, and that's never more important than with the current macro environment that actually started emerging post COVID. So there's a very close focus on that by the management team. We did add 238 new apartments to the portfolio in 2022. The one on the left-hand side is actually the School Yard, that's on the North Circular Road, which is not too far from here. And we -- that was actually developed as Ireland's first LEED-gold residential building, which we're very proud of. We also took delivery of Tara View, which is the building on the top right, that's on the Merrion Road, which is an outstanding location for residential, and we took delivery of that in August of last year. And we decided we would actually progress with the sale of 5 luxury townhouses that come with that development as we believe that's much more accretive for shareholders. We also sold Hampton Wood in August 2022 at a 3.5% net initial yield, which realized a significant profit on cost and also an uplift on the preceding valuation. We had entered into a long lease on that property first and then served better value for shareholders in disposing off the asset with the lease in place, and that as we felt we could add limited further value into that asset. It's worth also noting that the environment for a viable development of large-scale apartment buildings became very challenging post COVID, and as 2022 evolved, particularly with the macro dynamics that were at play. And we determined that the most optimal way to realize value from Rockbrook site was actually -- which had planning permission in place was rather than add development risk into the business itself that we would actually sell it on. And so we completed that sale in Q1 of this year, achieving a very good price for it. I mentioned earlier that we applied new technology right across the business. That's market-leading technology for residential property. And this gives the company a clear competitive advantage as well as an additional asset. We have a very outstanding platform now for owning this company and also opportunities to use that further to add other opportunities for service efficiencies, unlocking operational capability with residents and also allowing us systems flexibility to offer that platform to third-party opportunities, which hopefully will add additional revenue and deliver shareholder returns into the future. Just moving as well, I know we're close to -- lots of our shareholders' own strategies and policies is actually sustainability and operating responsible businesses. And I should assure you that focusing on sustainability remains very much at the forefront of our business. And IRES' vision is to be the provider of choice for the IRES Living sector known for excellent service for operating responsibly and also protecting the environment by ensuring we minimize our environmental impact and also by ensuring we also contribute to the local communities that we engage with. And I think that's really central to the type of business we actually provide homes to a lot of people every night. So that whole community integration is a very core part of our teams work on the ground. And you can see from the slide in front of you that we're delivering across a whole range of initiatives in support of our ESG strategy, which we also have aligned with UN's sustainable development goals. And in particular, I should probably -- talk about 2 key stakeholders for us: our residents in our apartments and houses and also our employees. They're very much central to our strategy and also delivering value for you, our shareholders. And I'm delighted to say we achieved a 92% satisfaction score in our first employee survey post internalization that we carried out in December of last year. We also seek feedback from our residents. We actually get a very big significant response to regular customer service that we do, and it gives us a very good sense of their satisfaction and things that we can improve on, and that will be further enabled by the I-RES Living app that we actually are launching as well this month. We've also been working on decarbonizing our portfolio, and we aim to reduce our Scope 1 carbon emissions by 30% in 2023. We reduced our Scope 2 greenhouse gas emissions by 26% last year, and we have a range of measures in place to try and continue progress here. And our target is to keep reducing that further in '23. We've also 100% renewable energy sourced for all common areas in our apartment properties and also across our offices. And we have a range of other biodiversity initiatives and other sustainability objectives, including engaging with local communities, which is very important to our team in IRES on the ground and our employees. And we have many examples of work we do in partnership with local hospitals, community and sporting groups. Just looking then in terms of looking at coming into this year and looking forward, you'll see on this slide that the fundamentals for this business remain strong as to the market fundamentals in which we operate. Like in Ireland, we have strong population growth, very strong, actually unique in Europe, continuing strong economic growth and also continued job creation. So we have a clear competitive advantage in the market. And as a result of the strategic decisions taken over the last few years, we actually believe that this provides a good base for the company in terms of moving forward. We do recognize that the current rent cap structure is a challenge, and that's something, as I mentioned, that we are very actively working on. The macroeconomic backdrop in '22 and continuing into '23 is still uncertain. Declan mentioned some of the challenges in relation to that and how it impacts on the share price. And that's also very much a focus by the company and the Board. So we're focused very much now on a number of business drivers to ensure the business continues to perform and that the value inherent in the business is recognized by the market. And these include maintaining our focus on operational excellence, disciplined capital allocation, including disposal of assets. And you would have seen that we're seeking to dispose off noncore assets in excess of EUR 100 million in the short term. We're also very focused on prudent balance sheet management in these times. And also, as I mentioned, we engage with government and key industry stakeholders to support delivery of housing objectives and a more effective regulatory framework. I've gone through some of the initiatives on sustainability, and we're also, I should say, we had to lay the quality of our properties and the credentials in terms of building energy ratings that were up on the slide previously. They're actually probably unmatched, and we continue to target reductions and bring those in line with the climate and environmental strategies, and also those set out by the government. And I should say we're continuing to evaluate options and opportunities for scaling the business accretively, and also in terms of looking at the long term for this business. As I referenced earlier, and you can see from the figures on the right-hand side, we continued that momentum on our strong performance into Q1 2023, increasing revenue by 4.9% year-on-year and maintaining occupancy and collection rates above 99%. The company does maintain its focus on a prudent balance sheet management, and we extended the maturity of our RCF facility. That's with the syndicate of 4 banks in 2022. We extended that out on the same terms as we put in place in 2019 so that actually the earliest maturity on that is 2026. And also, we added in greater flexibility for alternative sources of finance for the company as well as part of the flexibility without RCF. So at the end of Q1 of this year, that's the end of March, our LTV is 43.1%, and we have no debt maturities before 2026, and our debt is staggered out to 2032. What's important as well for shareholders, and the Board is very mindful of, the Board will seek to return excess capital to shareholders where appropriate in an efficient manner. We recognize the dividend continues to be an important part of the IRES investment case, and IRES REIT status offers a predictable income stream, which we recognize as attractive to many of our shareholders. So I suppose to conclude, I'd like to assure you, our shareholders, that the management and the Board's continuous focus is to look at all the options to create value for shareholders and ensure we continue to build a sustainable business, creating long-term value for all our stakeholders. So thank you very much.

Thanks, Margaret, for that update. Now as I noted earlier, to facilitate shareholder communication, shareholders who wished to do so in advance were invited to submit questions relating to items on the agenda of the AGM by e-mailing the Company Secretary. And the Company Secretary informs me that no questions were submitted by e-mail.

So I'd now like to proceed by dealing with questions from shareholders on items on the agenda of the AGM. I propose dealing with questions on any matter relevant to the business of this meeting at the outset before we move on to the voting process. So if you have a question, please raise your hand. And I'd ask you to state your name and confirm you're a shareholder. And if you're a proxy or a corporate representative, please tell me which shareholder you represent. All questions should be directed to me as Chairman of the meeting. And I'll either answer them myself or redirect them to one of my colleagues on the Board as appropriate. So any questions? Yes, sir. Yes, Mr. O'Sullivan. The microphone is coming.

Have you any more acquisitions in the pipeline after selling the site there that you mentioned? Or...

Have we any more acquisitions immediately in the pipeline?

Yes. Thank you. Any more acquisitions in the pipeline after selling the site.

Okay. Well, we're always on the alert, Mr. O'Sullivan, for investment opportunities. We have nothing to announce at the moment. We survey the markets with care. And if opportunities of a suitable type come up, we will, of course, participate if value is too big off. But we have nothing to announce just at this time. This gentleman on the left.

Firstly, just for process, are you going...

Sorry, could you just indicate your name and who you represent?

My name is Jeffrey Olin. I'm the President and CEO of Vision Capital Corporation. And the funds that we manage are 5% shareholder, and we commenced being a shareholder at the time of the IPO in 2014. Thank you for hosting my questions this morning. As a matter of process, I just want to understand, are you taking all questions now? Would you prefer to address the questions related to resolutions as they come forward?

My preference, Mr. Olin, is that I would take questions now. And thus, people will have the benefit of the responses to those questions when the time comes to vote.

Thank you. So I have a number of questions. I will try to be pertinent and respectful of your time, and thank you in that regard. My first question is, in your press release dated April 17, 2023, you noted that you were seeking to sell $100 million approximately of -- sorry, EUR 100 million -- I've now only come from Canada for this meeting, my apologies, EUR 100 million of noncore assets. Now noncore typically refers to assets that are either of lesser quality or properties in smaller markets or assets in which you have a small holding as a percentage of the total assets or assets not within your strategic asset class focus, for example, office or industrial, properties within the context of a residential portfolio will be noncore or owning just one apartment building in Spain when the balance of the portfolio is concentrated in Ireland. Now several media sources reported the proposed sale of the Marker which we are located nearby and involving exclusive negotiations with Irish Life Investment Management. And since the Marker is amongst the most premier apartment buildings in Ireland and a linchpin of any public or private multifamily rental portfolio, and since IRES operates in a few markets within Ireland, how is it that Marker can be described in any manner as noncore?

Well, thank you very much, Mr. Olin, I'll deal with that question first. And obviously, if you have further questions, we'll come to them.

Please.

At the beginning of your remarks there, you sought to define what noncore meant. I wouldn't actually concur with your definition. IRES' market position or the position of its assets is largely mid-market. The strength of this portfolio and its focus and, I think, its success largely derives from the fact that it has a very significant market position in the middle of the market, not at the top end, not at the bottom end, but in the middle. So if you talk about disposing core assets, you would look either upwards, towards the top, or downwards, towards the bottom, where the focus of the company is along the middle of the market. So it's possible that you could define the Marker apartments as noncore because they are slightly out of alignment with the rest of the portfolio. Likewise, if there were an apartment block of lesser quality or less performing, or as you say, an apartment that we didn't have major holding within all the units, that would also be defined as noncore. The fact, however, that apartments are noncore doesn't necessarily make them a target for disposal. It would only become a target for disposal if the economic case justified that. The Marker, I would think, probably would become -- would sit in the definition of noncore, but as you know and as we have made clear, there was no arrangement or a deal made on the Marker, so there was nothing to announce.

So the Marker is a premier property and a material asset that comprises a significant percentage of the company's overall asset base. And if the media reports regarding these exclusive negotiations are true, why have you determined that no disclosure regarding this planned sale is appropriate in the context of a highly contested election of directors and other resolution for today's meetings? And if the reports are not true, then why is it that the company continues to fail to update the market on this issue, which is likely to mislead the public and continue to represent an unknown overhang on the price of IRES ordinary shares?

First of all, this company can't bear any responsibility for media reports, particularly inaccurate media reports. Let me make that clear. We can't respond to inaccurate media reports. The fact of the matter is that there is nothing to announce with regards to the Marker. No deal has been done. No deal was done. Our approaches with regards to the Marker, our approaches with regard to other apartment buildings, all of which will be considered on their merits. There was no deal done on the Marker. It's not our practice to speculate in the course of any negotiation or in the hope that something might happen. It's our practice to announce when something has happened.

You mentioned the recent, not so recent any longer, spike in interest rates and the recent spike in interest rates are in the context of the persistence of inflationary pressures, which you mentioned. And this is one of the most well telegraphed cycles of interest rates in history, beginning in early 2022. Accordingly, a research analyst from Davy, Colin Grant, highlighted the significant amount of exposure to interest rate risk due to the REIT's very high level of variable rate debt in the first half 2022 earnings conference call. As of June 30, 2022, the REIT had EUR 473 million of unhedged variable rate debt. As a result of the company's failure to act even to hedge a portion of this exposure until December 14 and the increase of 2.2%, 220 basis points in the Euribor from June 30 to December 31, and I would note over 320 basis points until today, the annual increase in interest expense as a result of this failure to hedge would be approximately EUR 10 million; over a 5-year period, EUR 50 million; and based on your 3-year average FFO, or funds from operations, cash flow multiple of 17x, the result of IRES management, this management, of the balance sheet led to destruction of approximately EUR 170 million in value, which we would note is approximately 30% of the REIT's current equity market cap. Why was the REIT so slow to manage this risk and reduce this exposure, particularly when it was so well telegraphed and highlighted by stakeholders?

First of all, we don't accept that the timing of the hedging transaction was late. I'll hand over to the Chief Financial Officer to make his remarks on that.

Thanks, Jeff. Jeff, as part of internalization, there was a long list of things to do. Obviously, an early focus was to manage financial risk. And initially, we concentrated on extension of our RCF facility to ensure that we had no near-term repayments or refinancings. We negotiated an extension out to 2026 on the same terms as the 2019 facility. At the same time, we negotiated with our banks for an option to put in place alternative financing to give us future flexibility around repaying and/or refinancing the RCF. This would enable us to do perhaps another notes program to repay part of the existing RCF. Once we transitioned the treasury function, we started looking at the most optimal way to achieve future cost certainty of finance expenses. We engaged with our banks. This was a technically difficult and complex exercise. In the first instance, we had to amend the RCF to enable hedging of that facility. There were a number of [indiscernible] to negotiation. We needed to avoid daily collateralization. We've sought to execute this process as efficiently and expeditiously as possible. We have achieved that. We have hedging in place, which provides certainty over our medium-term financing costs. 72% of our drawn debt is fully fixed.

Yes, 28% is not -- so I mean, based on the letter IRES sent to Vision and a select number of other shareholders on March 31, 2023, you noted that Mr. Fagan was given a raise to fully incentivize him to drive, "financial, operational and strategy performance." Respectfully, to your answer, sir, this has clearly not worked as the balance sheet mismanagement has led to the noted disruption of EUR 170 million of shareholder value. And strategically, the only thing that appears to have been done is to further use this reach cherish funds to deflect and defend the Board from considering and taking action on bona-fide strategic issues that might result in servicing value. So in light of this fact, we ask you, sir, what financial and strategic performance by the CFO are you talking about? And as the management of the company's finances and balance sheet is the core responsibility of the CEO -- CFO, sorry, how does this destruction of long-term shareholder value warrant a material increase in salary for the CFO who was just recently hired?

CFO has given you the history of the restructuring of the arrangements in question. We don't accept that the CFO is not performing in accordance with his brief.

Okay. So as an explanation, or I should say, rationalization for increasing the salary of the CFO, the annual report noted that it was a result of an unanticipated material increase in the CFO's responsibility related to the internalization of the management of the company. Since this internalization of the manager was contemplated, negotiated and known at the time of Mr. Fagan's initial hire and in light of the balance sheet issues I've already highlighted, can you please disclose to shareholders what were the real factors to rationalize this increase in his salary?

This company has gone through a significant transformation. Up until last year, it was externally managed by a subsidiary of a Canadian company called CAPREIT. We paid a fee to CAPREIT in relation to that management function. A year ago, the management arrangements were internalized and we took the entire structure in-house ourselves. CAPREIT served a notice of termination on us with regard to their management function. And we took responsibility for the entire management of the business from that point onwards. The level of responsibility falling on the Chief Financial Officer whom you're referring obviously increased to a massive extent due to the fact that all of the responsibility now rested within the internalized management structure, which was not before that the case.

Yes. I'm aware of the history, but your answer isn't really responsive to my question in terms of this was all known at the time of Mr. Fagan's hire. So -- anyway, we will move on. In your press release dated April 17, 2023, management suggested that it was not a good time to look to sell the company. This was the same reply given to Vision in 2021 when the concerns that were set out in our letter of April 12 were first presented to the company. Since 2021 was, objectively speaking, a great time to sell assets, isn't it a reasonable conclusion that the Board and management suggest that there is never a good time to consider the sale of this lame-duck REIT?

The answer to that question, Mr. Olin, is no. The Board has a fiduciary responsibility at all times to read the market as the market stands at all times and to reach a responsible conclusion as to what to do with this business. What you're now asking me is whether this is the right time to sell the company. Maybe you are throwing doubts on our capability to do that, but I don't think you should do so because an objective analysis of current market conditions shows, in our view, that there could not be a worse time to sell this company than at a time of high interest rates, high inflation and the rental cap in Ireland. It would be an unwise thing to do, in our view, to put the company up for sale in these circumstances, particularly where the share price sits. We believe rather that to continue trading in a proper and organized fashion and to wait until the cyclical -- the inevitable cyclical change comes in the European real estate market. And to keep it steady as she goes until conditions improve is the right thing to do. It may be that in due course, a time will come for the sale of this company that might be in the judgment of the Board to be correct. That time is not now.

So in that context, in the letters Vision sent in 2021 and on April 12, 2023, Vision set out a number of fundamental issues related to the inefficiency of the REIT structure as a vehicle for growth for IRES, the overall lack of trading liquidity, the limited investor universe and challenges in raising capital. These are extremely critical factors to operate effectively as a public entity in any jurisdiction. To this moment, while IRES has significant commentary on many matters, Vision nor shareholders have received any responses to these concerns. Why have you refused to discuss these most fundamental considerations, which at their core are the only reasons for a company such as IRES to be public in the first place? And why have you refused to consider, notwithstanding your protestation, other paths to service value for shareholders?

This company has been a REIT since the IPO since its inception. The case put to investors at that time and the case which continues to be put to investors is that the Irish market is the logical and correct place to have this company listed. This is where the company is based. This is where the company's assets are. This is the location which the Board is familiar with. The investors in this company were invited to come into a REIT structure and a great number of them came into the REIT structure because of the obligation of this company to distribute at least 85% of its profits by way of annual dividend. The Board is dedicated to the REIT structure because of the commitment which has been made to investors in order to release dividends in an orderly fashion. We're obliged by law to release 85% of our profits. We tried to do better. That is what our investors joined for. That is what we deliver. We don't think that relocating the listing to another market is going to improve the situation. If you're implying that the company should be sold out of public ownership, that may, indeed, as I said in the answer to my last question, be a rational thing to look at if market conditions appeared correct. Market conditions in the view of the Board couldn't be worse at the moment for that.

So as IRES asset base shrinks and it has limitations on its ability to effectively and profitably generate growth, the burden of its excessive general and administration expense, due to what we respectfully say are bloated Board and executive management salaries and costs will increasingly use SERP value from shareholders. Are you complacent in accepting this reality? Or are you prepared to reduce your G&A overhead cost? Is this not a further reason to service value from your premier real estate portfolio to cease the future erosion of shareholder value?

In answering that question, I'd like to give you a slightly different context. First of all, the major strategic move made by this company over the last year was the internalization of the management. That internalization did not increase costs such as you may suggest. That internalization in fact, saved money. And that was one of the drivers behind the decision towards internalization, as we communicated to shareholders. We don't accept that this is a bloated company. There's an implication in some of your communications that this is sort of a closed company, which is entrenched in its own self-perpetuation, that couldn't be further from the truth. This is an open company with an advanced sense of its own fiduciary responsibility -- an open Board with an advanced sense of its own fiduciary responsibility to deliver value for shareholders. We reject any suggestion that the overheads are excessive. And we say that if in the future a time comes to release value by delisting in some fashion, we would look at that with an open mind. Now is not the time.

So IRES is one of the largest housing platforms in Ireland, we would suggest has some corporate and community responsibility to provide much immediate housing to the supply-constrained markets in Ireland. Maintaining your existing publicly traded REIT structure, it's clearly not supportive of this objective. You need to look no further than the Rockbrook development site, which you acquired in 2015 and you sold last month to a developer group here in Dublin. How is it that this group was miraculously able to prime this site for construction a mere few months after they purchased it from you? Is it because your REIT structure requires you to distribute the majority of your cash flow as you described? Or is it because you trade at a 40% discount to net asset value, and in equity, grades would be dilutive? Or is it because you levered up your company so much that you would now be unable to take additional debt and risk losing REIT status? We believe it's all of the above, but we'd love to hear your thoughts.

The answer is none of the above. In these conditions, it would be too risky to enter on a large scale development for a company of this size. In these conditions, when the asset which you described was acquired, it was certainly a good prospect as development could have occurred in a sensible organized fashion. However, with the rise in interest rates and with the change in economic conditions, it's not just because of the REIT structure but any entity heading into a very significant development of over 400 units would be facing a very risky related situation, and we couldn't continence that in the current circumstances.

And I'm almost done here. Vision is but one shareholder. And we've incurred many thousands of euros of legal and other expenses as well as our time to, frankly, the benefit of all shareholders. Vision's ownership at 5% of the company is 25x the total of the 9 IRES Board of Directors combined. You have what appears to be an unlimited budget where you spent millions of euros of shareholders' money to defend what we would respectively say is the entrenchment of this Board, essentially guaranteeing your jobs at shareholder expense. Can you please disclose to us how much money has been spent with Rothschild, other financial advisers, PR consultants, legal and other consultants over the last 2 years on non-day-to-day strategic matters?

The answer to that question is any public limited company needs advisers. We need advisers like any POC does. I reject the idea of the concept of the allegation that our spend is unusual or excessive. We've gone through a very significant period of transition in this company, particularly with regard to the internalization. We've also gone through various requirements for communication with -- public communication with the media regarding the changed status and the changed development of this company. It's our duty to communicate our developing situation. It is not an indulgence. I'd object the idea that this Board is self-perpetuating or that it wishes to remain in receipt of fees for its own sake. This is a Board with a high sense of fiduciary duty, and I reject any suggestion to the contrary.

Just to summarize, my last question, respectfully, to your rejection. IRES, you can't raise equity capital to your massive share discount to net asset value, which is further exacerbated by the complete lack of trading liquidity on the Irish Stock Exchange. It can't raise additional debt without risking it to REIT status. It can't retain cash flow to fund growth initiatives because of the REIT status. And it can't develop housing for the Irish market, which is critically undersupplied. So we ask this Board, please, why does IRES need to continue to exist as a publicly traded REIT if not to continue to pay this Board and management's bloated compensation at the expense of literally every other stakeholder involved? Thank you.

Thank you very much, Mr. Olin. Just to say in conclusion that I reject the idea that this Board is self-perpetuating or closed to suggestion or is motivated in some way by self-enrichment, that could not be further from the truth. Look at the qualification to this Board. You'll see them in the annual report. You'll see the quality of the individuals involved. I say to you that this Board is, in fact, in difficult conditions producing a steady and respectable and -- a return with tremendous potential. And I believe that if we continue to trade in an organized fashion, we will, in due course, when the market turns and real estate is cyclical when the market turns, it would be to the benefit -- to the great benefit of shareholders. That is the view of this Board. I know you want us to sell the company in the meantime. We don't want to do that because we don't believe it's the correct time. We believe there could not be a worse time. I've said that before. I don't like to repeat myself, but I have to make my views clear. Thank you very much for your contribution. Yes, sir. This gentlemen, I think. I'd be with you in a sec. Yes, sir.

David McCabe is my name. I've been a shareholder from the very beginning. I have 2 questions. One for you, Chairman. And one for Brian Fagan. The one for you is I'm quoting from your Chairman's statement. We delivered a strong performance across all key metrics. I turn back a few pages to Page 5. And I'd see the interim dividend was reduced, the final dividend was reduced. The group gearing went from 40% to 43%. The market capitalization was down about 30%. And earnings were down marginally, too. So my question is very simple. Part of where is the strong performance that you congratulate yourself on? It's certainly not on the financials that shareholders are interested in.

Thank you, Mr. McCabe. It's nice to see you again. And I know you're a loyal shareholder.

I'm older and [indiscernible] every year, but bear with me.

Mr. McCabe, you don't look as. The strong performance, I think, is the steady performance right through the internalization process. That has been a crucial transition for this company. It's really something which was strategically thought out extremely well and enforced extremely well, and we've come out the other side of it. There was a drop in the dividend certainly. But that was largely due to a series of one-off expenses around the internalization process. The Board is totally dedicated to the dividend -- to dividend -- maintenance and dividend increase where possible. We understand that the motivation of a lot of our shareholders, particularly small shareholders, relates to the dividend. And the Board is really sensitive to that. And we would hope and we expect that matters will improve significantly due to the careful stewardship that our management team is showing with regard to the assets. Just to say, in case it's necessary to say it, that this Board has total confidence in the management of this company and the executive management of this company and believes that its confidence is being repaid and will continue to be repaid. And your concerns about the dividend are noted, and the Board is really conscious of that going forward. I hope when you come to see us next year that you'll have something better to say to us about the dividend. I hope that.

It's not just the dividend I was talking about, but I mentioned 4 financials and let it pass. My second question is for Brian Fagan. Now I'm a banker and many syndicated loan I've put together in my heyday in the '80s and '90s. Well, when I read the details of the syndicated loan arrangements set out on Page 167, I think. I have to ask you a few questions. Why did you go a secured lending route? All I can say is the costs -- the legal costs, understand duty must have been millions and millions. In all the lending I did, we only took security and syndicated loans if there was a real risk, if there was a worry that company was in trouble. I'm not going to mention names, but if I did, you would know these names, semi-states, Dublin public companies. So why -- my first question is, why did you not go unsecured? Here you are, you're paying a margin of 1.75% over DIBOR. You have to restructure that during the year. And I would -- can only imagine the costs that you've incurred on the restructuring. The loan to value -- I won't go into all of the details, but that's my message. Why did you give security to the lenders rather than have a syndicated arrangement of unsecured loans?

Brian Fagan, would you care to deal with that?

David, thank you for all your questions. Okay. So first off, what I would say is that the syndicated facilities with the banking syndicate were originally put in place in 2018. They were then extended into 2019. And then following internalization, they were extended further now out to 2026, okay? In relation to the requirements of the banks back into 2018 and their requirement right for a secured facility, that was subject to a negotiation at that time. I wasn't part of the old negotiations, like I have been part of all the negotiations since. And I would imagine if we were putting in place a new facility now that the banks would require a secured facility. I appreciate all the experience you have had in terms of lots of syndicated loans over the years. I also have many years experience of dealing with banks and dealing with syndicates. And in my experience, in the property industry, banks always look for security over the fixed assets, okay? The fact that banks always look for lots and lots and lots of security and your job is to try to reduce or mitigate preventive security.

But all I would say is [indiscernible]

We will take that on Board, David. And look, what I would say and I think the important thing is, the really important thing for the group is that we do not have any near-term repayments or refinancings before 2026. That is the key thing for this group at the moment.

Thank you very much, Brian. This gentleman here, I think, is waiting.

I'm waiting on edge, Mr. Chairman. My name is [ Phil Dogan ], a small disillusioned shareholder, because my holding in IRES has decreased by 28%. Now I look for some comfort in the outlook statements in the annual report of the 3, yours, CEO and CFO. And I thought they were very bland and unsupported, if you like. Now, the CEO made herself available before the meeting during coffee, and I expressed my frustrations to her, and I appreciate that because it doesn't at all happen at AGMs. Now the presentation which she made, I think, overcame the disillusionment I had with a rather bland statement in the annual report. Now in relation to the price, the 28% that I don't sleep at night over, you might -- I'm sure you know what the share prices, as I recall them, 21st -- 23rd of October '19 -- 2021, EUR 1.62; a year ago, 4th May 2022, EUR 1.46; 2 days ago, EUR 1.03. Now you mentioned in the report, the policy of aligning bonuses with the movement of shares up or down. Now that doesn't seem to have happened from the eye-watering bonuses I've seen awarded to the CEO and the CFO. And as I say, I can't align those water -- jaw-dropping figures with your statement that you align bonuses with share prices up or down. So like one of the previous speakers, and I know, you've answered my -- this question, I do have concerns about the future of IRES and felt that maybe you should get up the pitch like Hibernia, IRES and some other one as well and earlier one that I can't recall. So you're the last remaining player on the trust -- of property trust platform and I take your point that you'll make a decision when the time is right, and I appreciate that. Thank you.

Okay. But thank you very much for those remarks. I'm going to pass one of those questions to the Chairman of the Remuneration Company (sic) [ Remuneration Committee ] in a minute. But before -- our Remuneration Committee, I should say, in a minute. But before I do that, the Board shares your frustration about the share price. I mean the Board is deeply unhappy about this. We believe that a large portion of the difficulty arises because of the very poor condition of the European real estate market. And we believe that IRES' share price was depressed, is not as badly damaged as many other players in the European real estate market. However, we do believe that by sticking to our mission and by being extremely careful in the day-to-day administration and running of the company, we can keep matters together to take advantage of the coming upturn, the cyclical upturn in the European real estate and the Irish real estate market, which will undoubtedly, we believe, enhance the share price. We understand it's frustrating. We share those frustrations. Would Aidan like to have a very brief comment on bonuses.

Just on the bonuses, the metrics on which the bonuses are decided are set out in the report. I'd followed rigorously...

[indiscernible]

One quantifiable basis for contributing the bonus that they should be covered by the salary, not by the bonus. And I saw the bonus, maybe not early because of my frustrations as linked to the poor share price.

They're clearly set out. But -- and I think also in relation to the long-term performance. I think it's worth noting that the ones that were awarded in 2020 have paid out nothing.

[indiscernible]

You need to look at the numbers and see large numbers, but the eventual delivery...

I looked at the numbers. I sorted my [indiscernible]

Thank you very much for your contribution. Yes, sir?

Chairman, can you hear me?

Just give me a moment.

Chairman, my name is Peter [indiscernible]. And I have a few questions here that I'd like to go through in relation to the report. But I'd like to start off. I think the -- one of the main points and one of the main concerns, I think, is from the -- in relation to bank indebtedness, bank debt, Page 167. And the requirement is a 50% LTV in terms of the loan covenant. And as of the end of the year, it was 43%. So this morning, interest rates rose as you may be aware by 0.25%. And I wonder what impact that will have on the investment portfolio and in terms of valuation.

Sorry. First of all, I can't answer that question because I don't know. You're correct in pointing out that there is a limit of 50% on the LTV. And it's the Board's job to manage that as part of its balance sheet management. And the Board really takes a very careful note of that LTV limit. And it's Board's job to make sure that it's not breached. There were various steps the Board takes in that regard, such as the prudent disposal of assets that we discussed earlier to make sure that matters are kept within the limits. So you can be assured that, that matter receives very close attention. I can't apply an individual interest rate increase and give you a financial result of that. All I can say to you in general terms is one of the primary responsibilities of the Board is to make sure that the LTV is very closely monitored and that I assure you happens. It's a matter of great responsibility for us, and that we will keep under genuine constant review.

Thank you, Chairman. Are you not saying to the valuers, listen, what happens if interest rates go up 0.25%, 0.5%, 0.75%. At what stage -- think back to 1992, 1993, interest rates, overnight rates, and I know there were particular reasons for it to move to 18%, 1-8, okay? We're far -- we're away -- we're not away from that. But what I'm asking you at what particular rate are you worried? And at what particular rate, sure you must have said to the valuers. Tell us at what rate is this going to -- are we concerned?

Okay. I have 2 things to say about that. First of all, the valuers' function. And what that would say to me is, the valuers' function is simply one of evaluation. The valuers' function doesn't in any way relate to interest rates. They simply value the property objectively and give the result. So it's not really a matter for them. What I would say to comfort you is, and I refer you back to what the Chief Financial Officer said earlier on. And what I would say to comfort you is that the hedging program, which has been undertaken, in fact, removes a lot of the risks that you're worried about. Also, please bear in mind what the Chief Financial Officer said about the staggering out until, I think, 2032, of the repayments. So there is no immediate crisis in view. There is no major repayment days, in fact, until 2026, and it's laddered out until 2020 or 2032. So I would not be too concerned about that. And it's a matter that the Board keeps on...

I'm not concerned about -- too much about the actual interest rate and in terms of the cover -- interest cover. It's more the LTV that I'm concerned about. And I suppose my question is in -- on the banks, how -- in terms of the covenants, are they looking at these? What by agreement on a quarterly basis, half yearly, yearly basis? I mean, at what stage do the banks say to you, listen, you've breached and please repay the loans.

Happily, that just hasn't arisen. The banks have no need to communicate anything of this sort to us. In fact, the type of arrangements we've negotiated with the banks, in fact, minimize the risk if that type of event should arise. What you can do is make the best policy decisions as you can and minimize the risk to the best extent you can. And I think the Board has done that, and I think the Chief Financial Officer has done a great job on that respect.