I-RES Reaffirms Shareholders Should Reject ALL EGM Proposals

For immediate release

24 January 2024

Irish Residential Properties REIT plc

I-RES Reaffirms Shareholders Should Reject ALL EGM Proposals

Board to pursue comprehensive Strategic Review in the interest of ALL shareholders

The Board of Irish Residential Properties REIT plc (the “Company” or “I-RES”) has today addressed key issues raised by Vision Capital Corporation’s (“Vision”) Press Release (“Vision Documents”) of 18 January 2024. 

The Board recommends I-RES Shareholders vote against all EGM resolutions proposed by Vision (a 5% shareholder in I-RES ) and notes the following key points:

• I-RES’ Strategic Review will be conducted in ALL shareholders’ interests without pre-conditions by a highly experienced independent Board, supported by external advisors in finance and real estate, with progress updates by the Board to Shareholders
• I-RES has delivered strong operational management of a high-quality portfolio, externally validated, at a lower cost and with relative outperformance against relevant European residential peers on TSR and discount to NAV metrics over 1 and 3 years
• I-RES Board has a proven balance of real estate, public listed and Irish and international experience, recently refreshed with the addition of three new independent directors since 2021, appointed under transparent and planned governance processes

1. I-RES’ Strategic Review will be conducted in ALL shareholders’ interests

The recently announced I-RES Strategic Review will be led by a highly experienced independent non-executive Director, Hugh Scott-Barrett, who joined the Board in September 2022, and was recently appointed Chair Designate of I-RES. It will be conducted with external financial and real estate advice and, as detailed in the Circular, will consider all options under the stewardship of an independent, skilled Board, and in the interests of all Shareholders with progress updates to be provided to the market.

The Board strongly refutes Vision’s claims that the existing Board cannot be trusted to lead the announced Strategic Review. Vision has cited the Company’s strategic updates since internalisation as evidence that the proposed Strategic Review will be ‘entrenched’ and ‘self-serving’. The Board believes Vision’s narrow focus on its objective of near-term liquidity in I-RES and distance from European market conditions has made it challenging to find agreement with Vision in previous discussions, despite the Board’s continued constructive attempts to find alignment.

The I-RES Board is concerned that a proposed Board controlled by Vision Director Nominees will not be open and objective to alternative value maximisation outcomes in the interests of all Shareholders and will be committed to execute the Vision ‘action plan’. The limited detail provided by Vision around its plan does not highlight for Shareholders the risks (including strategic, operational efficiency, refinancing, tax and employee retention) in an accelerated sales process. The outline of Vision’s proposal appears to place significant weight on asset sales to Government and non-profit organisations of affordable housing units. The Board notes there is no Government policy to indicate that Vision’s stated objectives in this context can be achieved and asks Shareholders to be cautious around Vision’s unattributed claims in this regard.

The Board has always made it clear that it is open to and will consider all options and is concerned Vision’s proposals seek to commit I-RES to an accelerated process and potential public auction which could compromise future value and the interests of all Shareholders.

2. I-RES Board and Management have delivered strong operational management of a high-quality portfolio

The Board has confidence in the quality and value of I-RES’ assets and has been pro-active in its efforts to address the valuation discount experienced by I-RES and the wider European real estate sector. The Board regards Vision’s claims around high cost, asset neglect and mismanagement to be without foundation.

The Board strongly rejects any claim that I-RES has walked away from any development opportunities due to poor financial management. I-RES has a strong track record and has delivered its development projects in volatile macroeconomic conditions, including its post internalisation track record with the successful addition of 238 residential units. There has been a clear focus on effective and accretive portfolio management, risk management and value for Shareholders, and developments have been disposed of where the viability of the project had changed. Key factors influencing these decisions have been related to macro-economic factors including build cost Inflation and evolving rent regulation in Ireland, in particular, the imposition of the 2% rent cap in December 2021.

In the Circular to Shareholders of 8 January 2024 (the “I-RES Circular”), I-RES has provided details of its external cost benchmarking versus its European residential peers which show that I-RES’ costs in 2023 are below that of its peers (13% as a percentage of revenue, below an average of 16% for those peers). The Board rejects Vision’s unsubstantiated statements that agents believe they may be able to operate similar portfolios at a cost of approximately 50% of I-RES, which is not evident across any of the European residential listed peer group.

The Board also notes that assertions by Vision relying on unattributed comments on the asset quality of the portfolio are inconsistent with external validation from internationally recognised benchmarks such as the Global Real Estate Sustainability Benchmark (“GRESB”) and independent ESG rating assessments. External benchmarks show consistently strong ratings for the portfolio and Annual Resident Surveys also report consistently high tenant satisfaction across the 99% occupied properties.

I-RES therefore reiterates that it has a balanced and high-quality portfolio, well-managed by I-RES in the interests of all Shareholders.

3. I-RES Board has a proven balance of real estate, public listed and local and international experience 

The current I-RES Board has a proven balance of real estate, public listed and local and international experience. It is a highly qualified Board with deep real estate expertise, relevant financial, investment, operational and listed board experience, recently refreshed with the addition of three new independent directors since 2021, appointed under transparent governance processes supplementing the Board’s skills in key areas and with planned managed transitions.

Vision’s Documents obscure details and affiliations in relation to its nominees that the Board believes could compromise their independence. Vision’s Documents do not disclose that Richard Nesbitt has been on the Advisory Board (https://visioncap.ca/team) to Vision since 2014. Vision claims Amy Freedman is not an employee of Ewing Morris (a 0.7% shareholder) and is an advisor, yet this does not appear to be the case from the Ewing Morris website (https://ewingmorris.com/team/) which refers to her as a “Partner and Head of Engagement Fund Investing”. In addition, the Board believes Colm Lauder (the former research analyst at Goodbody Stockbrokers and currently a journalist) is engaged by Vision in the promotion of its investor and media campaign.

Vision’s proposal is to reconstitute the current majority Irish-led Board (66%), entirely appropriate for a 100% domestic-focused real estate company, into a Board controlled by Vision Director Nominees and comprised of mainly non-Irish directors (66%). There would be no executive membership, with no CEO or CFO on the Board (in breach of the UK and Irish Corporate Governance Code). The Board notes none of the Vision Director Nominees has direct operational experience of running a European listed real estate company. The Board does not consider this outcome could be in I-RES Shareholders’ interests.  

Summary – Board recommends I-RES Shareholders vote against all Vision’s EGM resolutions

The Board is mindful of the potential impact this ongoing conflict launched by Vision has on stakeholders and disappointed this has continued into 2024. The Board recognises that it is in the interests of all stakeholders that this conflict is resolved.

The Board continues to recommend Shareholders vote against all resolutions proposed by Vision at the forthcoming EGM. I-RES reiterates that it will review all value maximisation options with an independent, skilled Board in the interests of all Shareholders.

END

For further information please contact:

For Investor Relations at Irish Residential Properties REIT plc:

Luke Ferriter, Investor Relations investors@iresreit.ie  Tel: +353 (0) 1 563 4000

Margaret Sweeney, Chief Executive Officer Tel: +353 (0) 1 557 0974

For Media Queries:

Padraig McKeon, I-RES PR and Communications Tel: + 353 (0) 87 231 2632

Jonathan Neilan, FTI Consulting ires@fticonsulting.com  Tel: +353 (0) 86 231 4135

About Irish Residential Properties REIT plc

Irish Residential Properties REIT plc (“I-RES”) is a growth oriented Real Estate Investment Trust providing quality professionally managed homes in sustainable communities in Ireland. The Group owns 3,734 apartments and houses for private rental in Dublin and Cork. I-RES aims to be the provider of choice for the Irish living sector, known for excellent service and for operating responsibly, minimising its environmental impact, and maximising its contribution to the community. The Company's shares are listed on Euronext Dublin. Further information at www.iresreit.ie.

Important notices

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or solicitation of any offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of any vote or approval in any jurisdiction, whether pursuant to this announcement or otherwise.

The release, distribution or publication of this announcement in jurisdictions outside Ireland may be restricted by laws of the relevant jurisdictions and therefore persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Peer comparisons

This announcement contains statements concerning the relative financial position and/or performance of I-RES compared to nine peer companies operating in the European residential market. These statements are based on financial information published generally by the following companies each of which has been selected as it is a regulated European-based company operating in the residential rental market of comparable size to I-RES (i.e., with a meaningful free float market capitalisation of less than €1,500 million): Phoenix Spree Deutschland Ltd; Peach Property Group AG; HEBA Fastighets AB; KlaraBo Sverige AB; Svenska Nyttobostader AB1; European Residential REIT; Home Invest Belgium SA; Neobo Fastigheter AB; and John Mattson Fastighets AB.

Responsibility Statement

The directors of I-RES accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.