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DUBLIN, Jan. 29, 2024 /PRNewswire/ — Vision Capital Corporation, together with its affiliates, (collectively referred to as “Vision“, “we“, “us” or “our“), a significant shareholder of Irish Residential Properties REIT plc (ISE: IRES) – (“IRES,” the “REIT“, or the “Company“) owning over 26 million ordinary shares representing approximately 5.01% of IRES’ ordinary shares, are providing additional information to:

1. our open letters to IRES shareholders on April 12^th, 2023, and April 24^th, 2023 (the “April 2023 Vision Letters“),
2. the extraordinary general meeting requisition letter dated December 18^th, 2023 (the “Vision EGM Requisition Letter“),
3. the circular published by IRES on January 8^th, 2024 (the “IRES Circular“),
4. our response letter dated January 18^th, 2024, (the “Vision Response Letter“),
5. the press release issued by IRES on January 24^th, 2024, (the “24^th Jan IRES Press Release“), and
6. the EGM presentation issued by IRES on January 25^th, 2024 (the “IRES EGM Presentation“).

Vision acknowledges Canadian Apartment Properties REIT’s (“CAPREIT”) public support of Vision’s initiatives and proposed resolutions for the extraordinary general meeting (“EGM”) of IRES scheduled for February 16^th, 2024. It is notable that CAPREIT is the largest shareholder of IRES owing approximately 19% of its outstanding ordinary shares. Vision believes CAPREIT is amongst the most knowledgeable parties involved with IRES given that it founded IRES, acquired almost all of its assets during its eight-year tenure as the Company’s manager, and Mr. Mark Kenney, the CEO of CAPREIT, personally sat on the IRES Board until July 2021 and has witnessed first-hand the governance practices of the Board.

For the benefit of all shareholders collectively, we respectfully encourage IRES shareholders to act by voting “FOR” each of the resolutions advanced by Vision at the EGM well in advance of the deadline of 11:00 a.m. on February 14^th, 2024.

In the 24^th Jan IRES Press Release and the IRES EGM Presentation, the Current Board continues to misrepresent and mislead shareholders regarding the action plan recommended by Vision. The Vision plan and specific resolutions at the EGM require the refreshed Board to employ “reasonable” and “best endeavours” in its pursuit of the sale of IRES either en bloc, or by way of asset sales over 24 months, and in no way has, or does, Vision recommend any distressed sale, ‘fire’ sale, or predetermined outcome as erroneously claimed by IRES. To ensure absolute clarity, Vision’s requisition proposes that the independent Board would use its reasonable and best endeavours to consider any and all options, excluding the continued status quo of IRES as a publicly listed REIT. This review should be conducted over a reasonable timeframe with the goal of optimising value for all of its shareholders.

As such, the most fundamental difference between IRES’ proposed strategic review and Vision’s recommended action plan is the failure of IRES to acknowledge, and whole-heartedly commit to, the fact that the REIT structure in Ireland has proven not only to be unviable for years but also not in the interests of optimising value for its shareholders¹. Irrespective of the views held by Vision or the Current Board, which have been the subject of many pages of disclosure on many issues of concern, it is crucial to acknowledge the reality that the market has accepted and established this fact. In contrast to the inaction of the entrenched and misaligned Current Board of IRES, all other previously Irish-listed REITs’ management teams and boards of directors took proactive measures and engaged in transactions to cease their status as publicly-traded REITs in Ireland, achieving valuations for their shareholders that met or exceeded their IFRS valuations.

The 24^th Jan IRES Press Release and IRES EGM Presentation completely ignore and are not responsive to many pertinent details set out in the Vision Response Letter, most notably:

• lack of reasonable care used by the Current Board in publishing the IRES EGM Presentation;
• absence of alignment of interest of the Current Board to its shareholders;
• omitting from the Chronology of Events that, in 2022, IRES committed to Vision that it would undertake a strategic review and publicly disclose its results, which it did not then do;
• lack of acknowledgement of the facts presented by Vision regarding the “cherry-picked” and flawed comparable set used by IRES for benchmarking to misrepresent its operational performance;
• continuing to use misleading data on the relative share price performance of IRES by including the period after the first Vision Letter of April 12^th, 2023 in its calculation of total shareholder returns (and therefore includes price appreciation which Vision’s campaign has surfaced);
• making inaccurate and misleading assertions that Vision’s proposal is reliant on the sale of properties to government and non-profit organisations;
• continuing to purport its effective development program despite the Rockbrook sale;
• failing to address the promised cost savings from the internalisation of management that have not materialised;
• misleadingly criticising Vision’s strategic review as one that is self-serving and not in the best interest of all shareholders, and the assertion that Vision is pursuing “short-term” liquidity; and,
• continuing to make misleading claims about the independence of Vision’s director nominees.

Vision’s detailed response to the aforementioned misrepresentations is set out below.

• Lack of reasonable care used by the Current Board in publishing the IRES EGM Presentation, reflecting poor governance

On page 2 of the IRES EGM Presentation, under “Responsibility Statement”, the directors of IRES include the responsibility statement required by the Irish Takeover Panel Act, 1997, Takeover Rules 2022 that “The Directors of the Company accept responsibility for the information contained in the presentation. To the best of the knowledge and belief of the Directors (who have taken reasonable care to ensure that such is the case) the information contained in this presentation is in accordance with the facts and does not omit anything likely to affect the import of such information” (emphasis added). We query the seriousness with which the directors approached this required responsibility given the “cherry-picked”, misleading, and flawed comparison sets that they chose to use, and by failing to provide any response whatsoever to the detailed analyses presented in the Vision Response Letter? Even if the IRES Circular was, after the fact and upon reviewing the Vision Response Letter, recognised by the Current Board to have inaccurate, misleading, or omitted information, they cannot now claim to not have knowledge of these deficiencies. It would therefore appear that the Current Board has failed to exercise reasonable care by choosing to continue to ignore the information.

• Absence of alignment of interest of the Current Board to its shareholders

Pursuant to the public disclosure as of January 12^th, 2024, the non-executive members of the Current Board (after the retirement of the Current Chair and CEO) owned collectively only 185,979 shares (which represents a 0.04% ownership stake of IRES)², highlighting the Current Board’s lack of “skin in the game” and misalignment with shareholders.

• Omitting from the Chronology of Events that, in 2022, IRES committed to Vision that it would undertake a strategic review and publicly disclose its results, which it did not do

The IRES Circular and IRES EGM Presentation reflect an egregious example of IRES’ poor governance by failing to disclose its 2022 Strategic Review which resulted in the continuation of the “status quo” of IRES as an Irish-listed REIT. Even after this omission was documented in detail in Vision’s Response letter³, IRES’ entrenched and misaligned Current Board has continued to omit this most pertinent information of direct relevance to the requisitioning of an EGM by Vision.

• Lack of acknowledgement of the facts presented by Vision regarding the “cherry-picked” and flawed comparable set used by IRES for benchmarking to misrepresent its operational performance

The 24^th Jan IRES Press Release and IRES EGM Presentation continue to misrepresent key financial metrics by using a “cherry-picked” and flawed comparison set and fail to address or respond to any of the relevant facts and information provided, and extensively discussed, by Vision in the Vision Response Letter, Section V, including:

“It is appropriate that the breadth of stakeholders involved in this matter consider the uniqueness of the real estate asset class as compared to other industry sectors and public companies. It is crucial to recognise the unique difference between real estate and other asset classes and public companies. Notably, the private property market far surpasses the publicly traded real estate sector in size, creating an arbitrage opportunity between the two. This forms the core of the opportunity being considered at the EGM – to implement a well-researched action plan to surface the value inherent in the real estate within one of the most favourable globally imbalanced supply and demand markets. This potential value significantly exceeds the implied value present in the Unaffected Market Price of IRES’ common shares as well as the recent trading price. For example, Blackstone, a leading global asset manager, has recognised this and has undertaken 50 acquisitions of REITs globally since they first formed their real estate group. Often the most efficient path to acquire a real estate portfolio is to acquire the assets from publicly traded REITs.”

It is noteworthy that, most recently, on January 19^th, 2024, Tricon Residential Inc., a real estate corporation listed on the NYSE and TSX with an enterprise value of $6.6 billion (approximately €6.1 billion), and one of the leading global owners and managers of single-family rental homes announced that it had entered into an agreement to be acquired by Blackstone. The acquisition price is set at a 30% premium to Tricon’s closing price on the previous day.

As such, Vision believes IRES and its advisers have cherry-picked a data set that was not sufficiently explained or contextualised, potentially to further mislead shareholders. What is more, the comparator data set chosen by the Current Board appears largely irrelevant to the pertinent issues regarding the optimal strategies to maximise value for IRES shareholders. In any event, it is crucial to highlight that IRES’ disclosures and misrepresentations do not adequately address the following points:

• Rental apartments are one of the most highly sought-after asset classes by institutional and smaller investors globally, through all market cycles. While the source of capital for real estate investments comes from a wide array of domestic and international institutional investors, family offices, and private investors, investment decisions and valuation for real estate are primarily driven by local market supply and demand dynamics, local decision-making, local economic conditions, and local regulatory factors. These local considerations outweigh global market trends. It is noteworthy that all previous Irish public REITs have been sold or privatised. Consequently, there are no other Irish competitors in this sector by definition. Accordingly, the relevance of the private market value of the properties owned by IRES discussed above is of particular importance as the relevant valuation consideration in this situation.
• Notwithstanding the above fact:
  • IRES arbitrarily picks a “comparable” set comprising predominantly Swedish-based companies. The median market cap of this set is less than 40% of IRES’ market cap as at 12 January 2024⁴, as outlined in the Vision Response Letter.
  • Many of these “comparator” companies have significant income outside of residential real estate (such as commercial or office).
  • Some of the “comparator” companies had large non-recurring expenses such as expenses related to the termination of a CFO, or expenses related to listing shares on the relevant stock exchange.
  • Some of the “comparator” companies appear to have different business models when compared to IRES.
  • One of the “comparator” companies is externally managed.
• According to Vision’s own analysis of general and administrative expenses (“G&A”)⁵, IRES underperformed compared to the median of IRES’ “cherry-picked” and flawed comparison set in three key metrics: 1) G&A as a % of total revenues, 2) G&A as a % of total assets, and 3) G&A per residential unit owned. Specifically, IRES ranked as the least efficient company in terms of G&A per residential unit when compared to the nine companies in the” cherry-picked” and flawed comparable set. The cost per unit for IRES is €2,865, significantly higher than the peer set median of €1,251 per unit, as outlined in ‘Section V’ of the Vision Response Letter.
• Even after detailed disclosure and analysis in the Vision Response Letter, the 24^th Jan IRES Press Release and the IRES EGM Presentation continue to misrepresent numerous valuation and share price performance metrics; in particular, utilising data sets that extend to January 4^th, 2024, which includes the nine-month-period since Vision initiated its active engagement on April 12^th, 2023. In doing so, IRES attempts to take credit for Vision’s initiatives, which, to repeat, it has consistently opposed!
• It is also noteworthy that the unaffected share price on April 11^th, 2023, which is the date prior to the first Vision Letter dated April 12^th, 2023, (the “Unaffected Share Price”) is below the IPO price of €1.00, nine years earlier!
• Continuing to use misleading data on the relative share price performance of IRES by including the period after the first Vision Letter of April 12^th, 2023 in its calculation of total shareholder returns (and therefore includes price appreciation which Vision’s campaign has surfaced)

The increase in the share price of IRES’ ordinary shares from the Unaffected Share Price of €0.94 to the January 25^th, 2024, closing price of €1.186 reflects a share price return of 26.17%. Vision believes that this significant increase in the share price is primarily attributable to the active engagement initiated by Vision, the related enthusiasm by shareholders at the prospect of finally surfacing value, and the resolutions Vision has advanced for the EGM.

Furthermore, on page 25 of the IRES EGM Presentation, the Current Board has disclosed that its open-ended and far-reaching strategic review has an undetermined timeline and is expected to extend beyond two years. The potential outcome includes the maintenance of the status quo, with the Company continuing as an independent Irish-listed REIT. Based on our extensive experience in similar situations and analysing the plethora of publicly available data, all shareholders should have significant concern regarding the potential for this outcome. If the current entrenched and misaligned Current Board remain in place after the EGM, there is a serious risk of a precipitous decline in the share price, potentially reverting to a trading range of the prior Unaffected Share Price of €0.94. Shareholders should be wary of this potential scenario.

• Making inaccurate and misleading assertions that Vision’s proposal is reliant on the sale of properties to government and non-profit organisations

In its more recent communications (including what we suspect are IRES’ engagement with the media to distort the focus of Vision’s action plan), and in what Vision believes is a desperate misrepresentation, and mischaracterisation of Vision’s proposal, IRES has misled shareholders by suggesting that our plan relies heavily on property sales to government and non-profit organisations. There is no basis for this misleading misrepresentation and what appears, in Vision’s view, to be a “scorched earth” initiative to maintain the entrenched and misaligned Current Board. Sales to government-funded or non-profit organisations are just one possibility that Vision set out in the Vision Response Letter, and Vision’s action plan is not reliant upon such sales.

To ensure absolute clarity, Vision’s requisition proposes that the Board would use its reasonable and best endeavours to consider any and all options, excluding the continued status of IRES as a publicly listed REIT. This review should be conducted over a reasonable timeframe with the goal of optimising value for all of its shareholders.

It is evident that the objectives of government policies, non-profit boards, and property market companies are subject to fluctuations in property markets, regulatory changes, and financial market conditions. In this context, it is a stunning and hypocritical indictment that IRES has specifically chosen to criticise Vision for the possibility of suggesting that sales of select affordable housing properties to government-sponsored or non-profit organizations may be feasible, when IRES itself, as part of its €100 million disposition program announced just nine months ago in April 2023, had sold 194 residential units in West Dublin for a total consideration of approximately €72 million to Tuath Housing, one of Ireland’s largest Approved Housing Bodies⁶!

Furthermore, should government-funded or non-profit associations choose to acquire properties from IRES with a mandate to preserve an inventory of affordable apartments (as is so significantly needed in Dublin), it is evident that, based on the valuation implied by IRES’ recent share price or its IFRS net asset value, such associations would have the opportunity to secure these properties at a valuation well below the replacement cost value it would entail developing new affordable apartments in Dublin.

• Continuing to purport its effective development program despite the Rockbrook sale

The Current Board has not adequately responded to the details in the Vision Response Letter, which highlighted the circumstances surrounding IRES’ disposal of the Rockbrook, Sandyford development site to the Comer Group⁷, a leading developer. Notably, this transaction occurred shortly after the site was promoted as a key pillar of IRES’ growth strategy. A perplexing aspect is how the Comer Group was able to begin construction mere months after finalising the deal with IRES. One might surmise that IRES may have lacked the capability to develop the land independently, potentially due to its inferior development capabilities, compared to its industry peers. Alternatively, it raises concerns about potential mismanagement of the balance sheet, hindering the Company’s ability to cost-effectively and efficiently raise equity capital, or perhaps a combination of both⁸.

• Failing to address the promised cost savings from the internalisation of management that have not materialised

The IRES EGM Presentation fails to address the disclosure in the Vision Response Letter as to the fact that the promised cost savings from the termination of the Investment Management Agreement with CAPREIT have not been realised.

• Misleadingly criticising Vision’s strategic review as one that is self-serving and not in the best interest of all shareholders, and the assertion that Vision is pursuing “short-term” liquidity

In response to IRES’ incomprehensible and nonsensical claim that Vision’s strategic review is self-serving at the expense of other shareholders, we invite IRES to explain, in plain English, how it believes Vision’s recommended strategic review is self-serving. To re-iterate, again, Vision simply is attempting to do what Vision believes the Current Board has failed to do, which is to surface value for ALL individual and institutional shareholders on a PROPORTIONAL BASIS based on shareholders’ ownership. Vision stands to benefit in the same manner, and on a proportional basis, as every other shareholder.

• Continuing to make misleading claims about the independence of Vision’s director nominees.

IRES continues to repeatedly make false claims regarding Vision and the director nominees proposed for election by IRES shareholders. For the avoidance of doubt, Vision, following verification with one of Ireland’s leading corporate and securities law firms, affirms that all of Vision’s proposed director nominees meet the criteria for independence as outlined in the UK Corporate Governance Code (the “Code”).

Vision re-iterates that it categorically does not have connections with Ewing Morris nor Ms. Amy Freedman, other than Vision’s nomination of Ms. Freedman as a director nominee for consideration by IRES’ shareholders for election to IRES’ Board. Ewing Morris, as an independent shareholder, supports Vision’s initiative. Any other insinuations or suggestions by IRES otherwise are simply misleading and inaccurate.

Regarding IRES’ claims against Mr. Colm Lauder being “engaged by Vision”, this is unequivocally false and inflammatory. Vision has not offered, nor has Mr. Lauder requested, any compensation from Vision with respect to his involvement as a director nominee for IRES. For the avoidance of doubt, Vision does not have any connection with Mr. Lauder other than Vision’s nomination of him as a director for consideration by shareholders for election to IRES’ Board.

Furthermore, Vision does not ‘obfuscate’ Richard Nesbitt’s advisory role to Vision as, even by IRES’ own admission, he is listed clearly, visibly, and proudly on Vision’s website as an Advisory Board member. It is important to clarify that Mr. Nesbitt is not employed by Vision; rather, he serves solely as an advisor in his capacity as a member of Vision’s Advisory Board without any authority or control over Vision’s operations. Nevertheless, Vision has witnessed first-hand his exemplary ethics and independence of thought and action, as well as his unique experience, reputation and skill set acquired through many years serving as the Chief Operating Officer of one the 50 largest banks globally, the CEO of one of the world’s largest stock exchanges, and CEO of the Global Risk Institute. It is objectively evident that Mr. Nesbitt would be a highly valuable addition to the IRES Board.

IRES claims that not having a CEO or CFO on the proposed Board would be in breach of the Code. This is misleading as the Code applies on a ‘comply or explain’ basis. Due to the recent resignation of IRES’ CEO, the new CEO is not known at this time, and the refreshed Board, once selected, could appoint such a person to fill any vacancy arising on the Board.

For absolute clarity, and in response to IRES’ continued fear-mongering and inflammatory insinuations regarding the Code: the Code offers flexibility and, in applying the Code, companies are entitled to ‘comply or explain’ with the provisions of the Code. It is not a rigid set of rules as appears to be portrayed by IRES. In the extraordinary circumstances of the EGM, Vision, based on the advice of its Irish legal advisors, believes it would be more than reasonable for IRES to explain any departures from the Code if they were determined to have arisen. Furthermore, the directors proposed for election by shareholders at the EGM are independent of Vision, and would independently represent the interests of all shareholders, and none of Vision or any other shareholder identified in the IRES EGM Presentation are significant shareholders for the purposes of the Code.

On a topical and relevant note, on January 22^nd, 2024, the Financial Reporting Council (FRC) announced upcoming “important revisions to the UK Corporate Governance Code”.

Significantly, the release in respect of the revised Code states that “The FRC encourages Boards, investors and their advisors to actively support the flexibility within the “Comply or Explain” approach to ensure governance expectations are better tailored to the specific circumstances of each company.” In relation to the ‘comply or explain’ principle, Financial Reporting Council’s CEO Richard Moriarty added:

“It is important that the flexibility of the ‘comply or explain’ principle is properly utilised. The FRC is clear that compliance can mean either complying with the Code provisions as set out or providing a cogent and justified explanation for why a provision is not suitable in the specific circumstances for the company whilst demonstrating the principles of good governance. Frankly, a good explanation illustrates better governance more than a situation where a Board defaults to compliance with a specific Code provision that manifestly doesn’t suit its circumstances but where the Board lacks the confidence to make the explanation”.

Vision’s initiatives, including the requisitioning of an EGM, are a clear and concerted effort to ensure a strong, capable board is in place to properly execute a strategy that finally delivers value to all shareholders, something this Current Board and management have failed to do.

It is increasingly apparent that Vision serves as the voice for a much larger percentage of both individual and institutional shareholders who share similar concerns and views, as articulated in our public communications. Since the release of the initial Vision Letter on April 12^th, 2023, many institutional and individual shareholders have expressed their support for Vision’s initiatives.

In any event, the inaccurate and inflammatory statements by IRES regarding the proposed nominees are a moot point. Since Vision’s holdings represent a 5% ownership stake in IRES, in order for the nominees proposed for on the agenda at the EGM to be elected, they would require a minimum support of an additional 45% of voting shareholders independent of Vision.

The founders and principals of Vision bring a breadth and depth of experience of direct relevance to the matters under consideration at the EGM. This includes roles such as long-standing top-ranked real estate research analysts, managing directors at global investment banks, corporate operating real estate executives, and multiple award-winning real estate dedicated portfolio managers. Additionally, this experience has been complemented by roles serving as chairs of public company boards, audit committees, independent special committees, and expert witnesses on behalf of securities commissions and government-appointed Parliamentary committees examining financial and tax issues. In our collective experience spanning over 100 years, we have never encountered a board as consistently brazen, misaligned, and entrenched with a poor track record of corporate governance as we have observed at IRES. To date, we have received strong support from shareholders, and we have yet to see any evidence of engaged investors endorsing the current status quo.

Vision has retained the services of shareholder-advisory firm Morrow Sodali. While we are not soliciting proxies for the February 16^th, 2024 EGM, we encourage any IRES shareholder who shares our concerns or has any questions, to contact Morrow Sodali at +44 208 089 3286, or 1.888.777.2092 toll-free in North America (+1.289.695.3075 collect), or by e-mail at [email protected] for further assistance.

No Offer or Solicitation

This press release is not intended to, and does not, constitute or form part of any offer, invitation, request to cooperate or solicitation in respect of any securities or the solicitation of any vote, approval or cooperation in any jurisdiction. The release, distribution or publication of this announcement in jurisdictions outside of 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.

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