ASX release
BWR – a total return REIT – 2017 results
14 August 2016
Gross Assets
BlackWall’s total return REIT, BWR, has capped off a
strong year declaring a final distribution of 6.5 cents per
unit taking the full year distribution to 11 cents per unit.
Distributions from the Trust are 100% tax deferred, and
for the full year equate to a 8.4% per annum yield on the
last closing price or 9.2% against the issue price of the
rights issue and placement which closed earlier this year.
On top of this, net tangible assets have grown by 10% to
$1.40 per unit.
Debt
NTA
EPU
$163 million - up 18%
42% LVR
$93.3 million - $1.40 pu
27 cpu – up 15%
“Along with its stable property portfolio BWR also participates in BlackWall’s more dynamic deep value plays.
The past 12 months have seen a number of these mature,” said BlackWall CEO Stuart Brown, “because the
Trust is relatively small, such investments can have a significant effect on NTA and earnings.” Over the past
three years BWR has generated a total return of 40%.
In its 2016 report, BlackWall pointed to both the Bakehouse Quarter and 55 Pyrmont Bridge Road as
potential sources of capital growth. In June 2017, an option arrangement with respect to the Bakehouse was
entered into at $380 million and BlackWall announced it had completed the turn-around of 55 Pyrmont
Bridge Road, which was revalued at $111 million. The combined effect has been to add 20 cents per unit to
the Trust’s NTA which will grow by a further 13 cents per unit if the sale of the Bakehouse Quarter completes
in late 2018.
The Bakehouse Quarter is a large scale mixed use precinct located in North Strathfield Sydney that has been
developed by the group for almost 20 years. 55 Pyrmont Bridge Road is a 14,500 sqm media and technology
hub on Sydney’s CBD fringe, acquired in a distressed debt deal structured by BlackWall with NAB. BWR holds
significant stakes in both projects along with other investors, in syndicates structured and managed by
BlackWall.
“We have always said that the Bakehouse would be re-rated so the value gain should not be a surprise to
BWR investors,” said Mr Brown, “however, more significant for BWR is the fact that the investment will be
converted to cash and we can re-deploy it into active positions. We would expect to be able to grow our asset
base by up to $100 million over the next few years.”
The Trust has also reported progress with the leasing up of Canberra North in the ACT. BWR grew a small
investment in the property to 100% ownership in June 2016. Previously the building was leased to Telstra
and is a prominent office building in the Northbourne Avenue commercial zone adjacent to the Dickson retail
precinct.
BlackWall has been repositioning it as a multi-tenant commercial hub including its flexible space provider
WOTSO WorkSpace. In June 2016, the property was generating annualised gross revenue of $1.5 million,
which has grown by 47% to $2.2 million. Fully let, the building is expected to generate gross revenue of just
over $3 million.
Canberra North will soon benefit from the completion of the Canberra Metro providing light rail services
from Gungahlin to the CBD. “The Dickson interchange linking local bus services with the new light rail system
is being constructed in front of our building” said Mr Brown.
For more information contact Stuart Brown (Chief Executive Officer) or Tim Brown (Chief Financial Officer)
on + 612 9033 8611.
BLACKWALL PROPERTY TRUST
BLACKWALL FUND SERVICES LIMITED
ABN 68 450 446 602
|
|
(Responsible Entity) ABN 39 079 608 825 (AFSL No. 220242)
| www.blackwall.com.au
Level 1, 50 Yeo Street, Neutral Bay, Sydney NSW 2089 Australia
2089
Fax +61 2 9033 8600
Tel +61 2 9033 8611
PO Box 612, Neutral Bay, NSW
|
BLACKWALL
TY T UST
PROPER
R
ANNUAL
REPORT
JUNE 2017
ASX:BWR
CONTENTS
BLACKWALL
TY T UST
PROPER
R
03
04
05
06
07
11
12
21
23
Directors’ Report - 2017 Results
Consolidated Balance Sheet
Consolidated Statement of Profit or Loss
Statement of Cash Flows and Changes in Equity
Directors’ Report - Management Commentary
ARSN: 109 684 773
Responsible Entity: BlackWall Fund Services Limited
Address:
50 Yeo Street,
Neutral Bay, NSW, 2089
ABN:
39 079 608 825
Telephone: +612 9033 8611
Directors’ Report - ASX Additional Information
Email:
info@blackwall.com.au
Notes to the Financial Statements
Auditors Independence Declaration and Audit Report
Directors’ Report - Continued
Website:
www.blackwall.com.au
Registry: Computershare Investor Services
GPO Box 2975
Melbourne VIC 3001
www.computershare.com.au
Directors’ Report
2017 Result
03
Significant Results
Profit up 55% to $16.8 million
NTA up 27% to $93.3 million
BWR is a total return property investment trust. It generates recurring, tax effective distributions
from a stable property portfolio and NTA growth through development, turn-around and
opportunistic investments. The 2017 result is indicative of our approach. Some examples of our
more dynamic outcomes are:
• BWR underwrites a capital raising to acquire NAB’s position in 55 Pyrmont Bridge Road,
•
growing BWR’s investment from $2.8 million to $7.6 million.
55 Pyrmont Bridge Road turnaround complete, independent valuation at $111 million (up
from $80 million) generating a value uplift in BWR’s investment of 9 cents per BWR unit.
• BlackWall negotiates an option arrangement to sell the Bakehouse Quarter for $380
million, growing BWR’s NTA by 6 cents per unit.
• BWR revalues its Bakehouse Quarter investment assuming a property value of $300
•
million growing BWR’s NTA by 5 cents per unit.
If the option is exercised and the sale settles (late 2018) BWR’s NTA will grow by a further
13 cents per unit and cash will grow by $30 million.
• BWR completes a $12 million capital raising.
• BWR acquires 162 Macquarie Street, Hobart.
At 30 June 2017, the Trust has carried forward revenue tax losses of $17 million and capital
losses of $17.3 million.
2017
Final Distribution
6.5 cents per unit
to be paid on
18th October
100% tax deferred
2017
Units on issue _ 66.6 million
Gross assets __ $163 million
Gearing ______ 42%
NTA _________ $93.3 million
NTA per unit ___ $1.40
Profit ________ $16.8 million
EPU _________ 27 cents
In the past 3 years BWR has generated an average total return of
13% per annum
$93 m
$66 m
23 cpu
$72 m
27 cpu
Track Record & Outlook
BWR has generated a total return of 39% since July 2014 (distributions plus ASX price
growth).
14 cpu
If the Bakehouse Quarter completes as expected, the Trust will have a larger and more liquid
capital base which will be deployed in activities similar to those listed above. That is, deep
value plays aimed at outperforming passive property investments. Some of these will no doubt
present opportunities for WOTSO WorkSpace.
2015
2016
2017
Earnings
Net Assets
BLACKWALLPROPERRTYTUST
Financial Statements
Consolidated Balance Sheet at 30 June 2017
04
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total current assets
Non-current Assets
Property investment portfolio
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Other liabilities
Borrowings
Interest rate hedges
Total current liabilities
Non-current liabilities
Borrowings
Interest rate hedges
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
NOTE
3
4
5
6
7
8
8
8
8
2017
$’000
1,690
5,078
173
6,941
156,293
156,293
163,234
631
383
-
296
1,310
68,882
368
69,250
70,560
92,674
2016
$’000
2,154
256
151
2,561
136,197
136,197
138,758
3,252
248
62,000
47
65,547
-
1,397
1,397
66,944
71,814
EQUITY
Issued capital
Retained earnings/ (accumulated losses)
Outside equity interests
TOTAL EQUITY
Net tangible assets (excludes interest hedges)
Number of units on issue
NTA per unit
136,036
(43,362)
-
92,674
93,338
66,635,378
$1.40
126,216
(55,042)
640
71,814
73,258
57,837,613
$1.27
BWR’s property investments are by direct ownership or as positions in property investment
structures originated and managed by BlackWall. Each of the property investment structures
invest in single assets and are mandated to hold and develop a particular property. As such, we
treat these properties no differently to those held entirely by the Trust. Where possible, BWR aims
to grow its investment in these structures as it has in 55 Pyrmont Bridge Road this year.
The carrying values of the property investment portfolio are summarised below. BWR’s interest in
55 Pyrmont Bridge Road and the Canberra North property are held on the basis of independent
valuations dated June and March 2017 respectively. BWR’s interest in the Bakehouse Quarter
has been revalued based on an underlying property value of $300 million. Please refer to the
Directors’ Report - Management Commentary section for further information on the carrying
value. Hobart is carried at its acquisition cost plus capital expenditure. The carrying values of all
other assets are based on Director valuations. In determining these, the Directors have had regard
to independent valuations completed in June 2016 and take into account movements in rental
income, development activity and lease duration.
Property Investment Portfolio ($’000)
Commercial
Canberra North, ACT
Varsity Lakes, QLD
Pyrmont Bridge Road, NSW
Hobart, TAS
Canberra South, ACT
Mixed Use
Bakehouse Quarter, NSW
Big Box Retail/Entertainment
Sippy Downs, QLD
Woods Action Centre, NSW
Industrial
Yandina, QLD
Toowoomba, QLD
Coolum, QLD
Total property investment portfolio
Ownership
100%
100%
27%
100%
100%
Holding
Value
25,000
18,000
13,677
8,400
8,100
Passing
Yield
5.90%
6.40%
6.70%
5.30%
7.40%
Fully Let
Yield
10.00%
7.90%
7.20%
8.20%
7.40%
2016
25,000
18,000
2,800
-
8,000
14%
28,216
-
-
20,100
100%
-
100%
100%
-
26,200
-
7.20%
-
8.00%
-
26,200
1,497
22,200
6,500
-
156,293
11.90%
9.60%
-
11.90%
9.60%
-
24,700
6,500
3,400
136,197
For full address details see the Directory of Properties on page 10.
BLACKWALLPROPERRTYTUST
Financial Statements
Consolidated Statement of Profit or Loss for year ending 30 June 2017
05
NOTE
Revenue
Property income
Net gain / (loss) on assets
Interest income
Telstra lease payout
Total revenue
Property outgoings
Depreciation expense
Finance costs
Administration expenses
Transaction expenses
Profit from continuing operations
Profit / (loss) from discontinued operations
Profit for the year
Other comprehensive income
Profit and other comprehensive income for the year
2
2
Profit and other comprehensive income attributable to:
Owners of the Trust
Outside equity interests
2017
$’000
10,994
15,658
13
-
26,665
(2,885)
(2,672)
(2,897)
(1,365)
-
16,846
-
16,846
-
16,846
16,846
-
16,846
2016
$’000
9,882
4,297
113
5,000
19,292
(2,126)
(2,138)
(2,260)
(1,103)
(700)
10,965
(121)
10,844
-
10,844
10,909
(65)
10,844
Earnings per unit
Basic earnings per unit
Calculated as follows:
Profit for the year
Weighted average number of units for EPU
27.0 cents
23.4 cents
16,846
62,371,703
10,909
46,590,966
The movement in carrying values of BWR’s investments are reflected in the Statement of Profit or
Loss Statement through gains on assets. A reconciliation of these movements for the year is set
out below.
Often BWR will hold real estate through investment structures originated and managed by
BlackWall. In some cases, these structures will have carried forward tax losses, often derived
from the development process. Where this is the case, distributions are received as returns of
capital. To account for this, distributions are applied against the carrying value of the position in the
Balance Sheet and then shown in the P&L as an unrealised gain. In the period to June 2017 the
distributions from both the Bakehouse Quarter and 55 Pyrmont Bridge Road were such returns of
capital. As explained earlier in this report both of these positions have also seen significant value
increases.
Net gain / (loss) on assets ($’000)
Bakehouse Quarter, NSW
Pyrmont Bridge Road, NSW
Yandina, QLD
Sippy Downs, QLD
Coolum, QLD
Varsity Lakes, QLD
Toowoomba, QLD
Canberra South, ACT
Hobart, TAS
Canberra North, ACT
Total net gain / (loss) on property investment portfolio
Gain on sale of BWR units from option transaction
Gain on sale of other financial assets
Net gain / (loss) on interest rate hedges
Total net gain / (loss) on assets
2017
8,680
6,258
(2,054)
321
245
391
132
285
(226)
110
14,142
735
-
780
15,658
2016
232
4
358
4,597
(499)
(5)
591
(416)
-
-
4,862
-
253
(818)
4,297
BLACKWALLPROPERRTYTUST
Financial Statements
Statement of Cash Flows and Changes in Equity for year ending 30 June 2017
Consolidated Statement of Cash Flows
Reconciliation of Operating Cash Flows ($’000)
Cash flows from operating activities
Receipts from tenants
Payments to suppliers
Interest paid
Interest received
Distributions received
Borrowing costs paid
Receipts from Telstra lease payout
Net cash flows from operating activities
Cash flows from investing activities
Purchase of Hobart property
Payment for additional Pyrmont investment
Proceeds from sale of Coolum property
Payment for additional Bakehouse Quarter investment
Payment for BlackWall Telstra House Trust units
Proceeds from sale of other investments
Payment for capital expenditure
Returns of capital from Bakehouse Quarter
Proceeds from sale of Bald Rock Hotel
Proceeds from redemption of Bakehouse Bonds
Payment for other investments
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of units
Distributions paid
Payments for purchase of BWR units from option transaction
Proceeds from Hobart borrowings
Increase in Canberra North borrowings
Payment for capital raising costs
Payment for buy-back of units
Repayment of borrowings
Net cash flows used in financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the year
Less opening balance of subsidiaries that have left the group
Cash and cash equivalents at end of the year
2017
$’000
12,128
(6,645)
(2,630)
14
61
(163)
-
2,765
(8,135)
(3,633)
3,600
(2,195)
(1,851)
1,810
(676)
459
-
-
-
(10,621)
10,512
(5,232)
(4,537)
3,882
3,000
(197)
(27)
-
7,401
(455)
2,154
(9)
1,690
2016
$’000
9,991
(5,452)
(2,294)
113
1,002
-
5,500
8,860
-
-
-
-
-
1,709
(160)
627
855
1,680
(331)
4,380
-
(5,591)
-
-
(1,611)
(4,200)
(11,402)
1,838
316
-
2,154
Profit for the year
Non-cash flows in profit:
Net gain on assets
Depreciation and amortisation
Straight-line rental income
RE fees settled in BWR units
Changes in operating assets and liabilities:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in other assets
Increase / (decrease) in trade and other payables
Increase / (decrease) in other liabilities
Net cash flows from operating activities
2017
16,846
(15,658)
2,745
(611)
180
185
(22)
(1,035)
135
2,765
Consolidated Statement of Changes in Equity ($’000)
Balance at 1 July 2016
Issue of units
Transaction costs on units issued
On-market buy-back
Profit for the year
Distributions paid
Balance at 30 June 2017
Buy-back since 30 June
Balance at signing date
8,807
Retained Attributable
to
Owners of
the Parent
71,174
9,884
(738)
(11)
16,846
(5,219)
92,674
Earnings /
Issued
Issued (Accumulated
Capital
Losses)
No.’000
Capital
(55,042)
57,838 126,216
10,569
53
(738)
(11)
-
-
66,636 136,036
-
66,636 136,036
-
16,846
(5,219)
(43,362)
(9)
-
-
-
06
2016
10,844
(4,297)
2,138
(303)
-
131
(23)
499
(129)
8,860
Outside
Equity
Interests
Total
Equity
640 71,814
9,244
(640)
(738)
-
(11)
- 16,846
-
(5,219)
- 92,674
Balance at 1 July 2015
Issue of units
On-market buy-back
Profit for the year
Distributions paid
Disposal of Bald Rock Fund
Balance at 30 June 2016
46,693 113,364
14,469
12,477
(1,617)
(1,332)
-
-
-
-
-
-
57,838 126,216
(49,255)
(4,940)
-
10,909
(11,756)
-
(55,042)
64,109
9,529
(1,617)
10,909
(11,756)
-
71,174
3,033 67,142
7,921
(1,608)
(1,617)
-
(65) 10,844
- (11,756)
(720)
(720)
640 71,814
The Trust raised $12 million through a rights issue and placement at $1.20 per unit. During the period, the Trust entered into
an arrangement under which it acquired a call option to purchase 4.32 million of its own units at a price of $1.05 per unit. The
Trust completed this transaction and used the resulting units to partially settle the rights issue and placement at $1.20 per unit
BLACKWALLPROPERRTYTUST
Directors’ Report
Management Commentary
The Bakehouse Quarter
This property is held in a special purpose trust managed by BlackWall, known as the Kirela
Development Unit Trust (Kirela). At June 2016, the property was held at a value of $270 million
equating to a carrying value of BWR’s position at $20.1 million. In April 2017 BWR increased its
investment in Kirela from 13.0% to 14.4%. This acquisition was priced at the $270 million property
value.
Late in the 2017 financial year BlackWall negotiated an agreement with respect to those parts of
the Bakehouse Quarter shaded red in the photo opposite. The agreement reached is a call option
under which the counterparty:
•
has the right to purchase the relevant parts of the Bakehouse Quarter for a price of $380
million;
has paid a non-refundable option fee of $38 million;
•
• may exercise the option at any time between 1 July 2018 and 31 August 2018; and
• may nominate a third party to complete the purchase.
If the option is exercised, completion of the ensuing property sale is contracted to occur within
2 months of the exercise date and the option fee is deducted from the purchase price. If the
counterparty does not exercise the option before 31 August 2018, then Kirela will retain the
property and the option fee paid.
The Bakehouse Quarter
Below is a reconciliation of the carrying value of BWR’s position in Kirela.
As the arrangement is a call option, the counterparty has the right but not the obligation to
purchase the property. To reflect the transaction, for the year ending 30 June 2017, we have
written up the value of the Bakehouse Quarter to $300 million and have brought to account the
option fee paid (less transaction costs and distributions paid). The effect of this is to increase the
carrying value of BWR’s Kirela holding from $20.1 million to $28.2 million. This uplift equates to
11 cents per BWR unit.
June 2016
Bakehouse Quarter
Other assets
Bank debt
Net assets
BWR’s position (13%)
If the counterparty exercises the option and completes the purchase, a further 13 cents per unit
will be added to BWR’s NTA and BWR’s cash will grow by roughly $30 million.
June 2017
Bakehouse Quarter
Option fee after costs and special distribution
Bank debt
Net assets
BWR’s position (14.4%)
Assume Option Exercised & Completed
Building L
Net sale proceeds and option fee after costs
Net assets
BWR’s position (14.4%)
07
($ million)
270
10
(125)
155
20.1
300
21
(125)
196
28.2
15
241
256
36.8
BLACKWALLPROPERRTYTUST
The part of the Bakehouse Quarter shaded blue is known as Building L. This property is a 5
level structure currently used as car parking. In the short term, BlackWall is converting part of
the ground floor into a precinct featuring a collection of shipping container and cart food offers.
In addition, the building can be converted to accommodate up to 6,000 sqm of commercial,
showroom or retail space. As Building L is not part of the larger transaction, it will continue to be
held by Kirela and should generate further growth and recurring income for BWR.
08
Canberra North
Canberra North was previously 100% occupied by Telstra (and was then known as Telstra House).
The property is a prominent office building in the Northbourne Avenue commercial zone and
adjacent to the Dickson retail precinct. Since Telstra vacated the building, BlackWall has been
repositioning it as a multi-tenant commercial hub including a WOTSO WorkSpace.
In June 2016, the property was generating annualised gross revenue of $1.5 million which has
grown by 47% to $2.2 million. Fully-let, the building is expected to generate gross revenue of $3
million.
Canberra North will soon benefit from the completion of the Canberra Metro providing light rail
from Gungahlin to the CBD. In fact, the Dickson interchange linking local bus services with the
new light rail system is being constructed in front of our building.
Bakehouse Quarter Food Precinct
Canberra North - Lobby
BLACKWALLPROPERRTYTUST 55 Pyrmont Bridge Road
This position was originally structured as a distressed debt joint venture with National Australia
Bank, in late 2014. BlackWall established the Pyrmont Bridge Trust to acquire control of the
substantially vacant 55 Pyrmont Bridge Road, Pyrmont. The transaction was priced at an $80
million property value. NAB provided $50 million in senior debt and $15 million in equity along with
the $15 million invested by the Pyrmont Bridge Trust.
Over the past 12 months, BWR acquired a position of just over $4 million in the Pyrmont Bridge
Trust. In late 2016 the Pyrmont Bridge Trust undertook a rights issue to acquire NAB’s interest.
BWR participated in the rights issue and underwrote the shortfall resulting in it making a further
$3.6 million investment. All of BWR’s interest was acquired at a price equating to the original $80
million transaction value. In June 2017 the property was independently valued at $111 million. This
resulted in the carrying value of BWR’s investment being increased by $6.1 million.
Asset Sales
As described earlier in this report, BWR holds investments either as direct real estate holdings or
through property investment structures originated and managed by BlackWall. Where the latter
applies, BWR aims to grow its position to a point of control or complete ownership. BWR formerly
held an investment in the Woods Action Centre. This investment was a small minority position with
little prospect of BWR growing its position and, accordingly, was sold for cash at its carrying value.
The Trust holds two industrial assets located in Yandina and Toowoomba, Queensland. Each
of these properties are legacy investments made by the Trust’s previous manager and are not
consistent with BlackWall’s strategy. If an appropriate price is achieved, these assets may be
sold. In this regard, our decision will be driven by the return on capital we expect from the cash
generated by a sale compared to the implied yield at the potential sale price.
09
55 Pyrmont Bridge Road
55 Pyrmont Bridge Road - Lobby
BLACKWALLPROPERRTYTUST Subsequent Events
Directory of Properties
To the best of the Directors’ knowledge, since the end of the financial year there have been no
matters or circumstances except for the comments above that have materially affected the Trust’s
operations or may materially affect its operations, state of affairs or the results of operations in
future financial years.
Property
Canberra North
Varsity Lakes
Pyrmont Bridge Road
Hobart
Canberra South
Bakehouse Quarter
Sippy Downs
Woods Action Centre
Yandina
Toowoomba
Property address
490 Northbourne Ave, Dickson ACT 2602
194 Varsity Pde, Varsity Lakes QLD 4227
55 Pyrmont Bridge Rd, Pyrmont 2009
162 Macquarie St, Hobart 7000
10-14 Wormald St, Symonston ACT 2609
George St, North Strathfield 2137
30 Chancellor Village Blvd, Sippy Downs QLD 4556
850 Woodville Rd, Villawood 2163
54 Pioneer Rd, Yandina 4561
50 Industrial Ave, Toowoomba 4350
10
BLACKWALLPROPERRTYTUST Directors’ Report
ASX Additional Information
11
Additional information required by the Australian Securities Exchange and not shown elsewhere in
this report is as follows. The unitholder information set out below was current as at 8 August 2017.
The Trust has 66,635,378 units on issue after buying back 8,724 units and issuing 8,806,489
new BWR units. All units carry one vote per unit without restrictions. All units are quoted on the
Australian Securities Exchange (ASX: BWR).
3. Substantial Unitholders
The Trust’s substantial unitholders are set out below:
Investor
BlackWall Limited
Pelorus Private Equity Limited
Seph Glew
Sandhurst Trustees Ltd
Paul Tressider
Robin Tedder
Units (No.)
10,880,665
7,970,317
7,239,351
5,847,669
5,132,512
4,727,067
Units (%)
16.33
11.96
10.86
8.78
7.70
7.09
1. Unitholders
The Trust’s top 20 largest unitholdings were:
Investor
Lymkeesh Pty Ltd
1 BlackWall Limited
2 Pelorus Private Equity Limited
3 Sandhurst Trustees Ltd
4 Seno Management Pty Ltd
5 Mr Archibald Geoffrey Loudon
6 Vintage Capital Pty Limited
7 Sao Investments Pty Ltd
8
9 Alerik Pty Ltd
10 Koonta Pty Ltd
11 Mr Peter Robin Joy
12 Koonta Pty Ltd
13 Castlebay Pty Limited
14 Pinnatus Pty Ltd
15 Glenahilty Ltd
16 Rigi Investments Pty Ltd
17 Plane Sailing Trails Pty Ltd
18 Methuselah Capital Management Pty Ltd
19 Lymkeesh Pty Ltd
20 Mr Richard Hill and Mrs Evelyn Hill
Units (No.)
10,880,665
7,970,317
5,847,669
3,930,251
3,707,894
2,839,525
1,600,000
1,459,917
1,375,000
1,032,532
1,000,000
799,735
685,799
679,320
670,746
572,534
508,739
444,651
397,595
354,901
Units (%)
16.33
11.96
8.78
5.90
5.56
4.26
2.40
2.19
2.06
1.55
1.50
1.20
1.03
1.02
1.01
0.86
0.76
0.67
0.60
0.53
2. Distribution of Unitholders
The distribution of unitholders by size of holding was:
Category
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Total number of unitholders
No. of Holders
339
604
213
325
58
1,539
BLACKWALLPROPERRTYTUST
Financial Statements
Notes
1. Segment Reporting
5. Reconciliation of Property Investment Portfolio ($’000)
The Trust currently operates in one business segment being the ownership and leasing of
investment properties in Australia.
2. Expenses ($’000)
Transaction fees:
Telstra acquisition and in-specie pub units distribution
Total
Administration expenses:
Responsible entity fees
Compliance expenses (listing, registry etc)
Other fund expenses
Total
3. Current Assets - Trade and Other Receivables ($’000)
Trade and other receivables
Asset sale (The Woods)
Distributions
Other
Total
2017
-
-
923
442
-
1,365
2017
3,992
1,015
71
5,078
2016
700
700
775
159
169
1,103
2016
-
-
256
256
The asset sale and distributions have been settled. No debtors have been provided for as at
30 June 2017 (2016 :$Nil) or at the date of this report.
4. Current Assets - Other Assets ($’000)
Prepayments
Borrowing costs
Total
2017
-
173
173
2016
151
-
151
Opening balance
Hobart acquisition
Pyrmont net acquisition
Bakehouse Quarter net acquisition
Capital improvements
Coolum property sale
Other property investment sales
Revaluation of Bakehouse Quarter
Revaluation of Pyrmont
Revaluation of Yandina
Revaluation of Other property investments
Returns of capital – Bakehouse Quarter
Returns of capital – Pyrmont
Depreciation
Straight-line rental income
Canberra North acquisition
Bakehouse bond redemption
Returns of capital – Other
Closing Balance
2017
136,197
7,800
5,461
909
593
(3,400)
(1,288)
8,680
6,258
(2,054)
804
(1,473)
(190)
(2,626)
622
-
-
-
156,293
6. Current Liabilities - Trade and Other Payables ($’000)
Trade payables:
Related parties – BlackWall Limited
Other parties
Tenant deposits
Total
7. Current Liabilities - Other Liabilities ($’000)
Rental income received in advance
Total
2017
1
454
176
631
2017
383
383
12
2016
115,614
-
1,308
20,000
160
-
(8,856)
212
4
(50)
5,266
(112)
-
(2,138)
303
25,000
(20,000)
(514)
136,197
2016
165
2,890
197
3,252
2016
248
248
BLACKWALLPROPERRTYTUST
8. Current and Non-current liabilities – Borrowings and Interest Rate Hedges
9. Distributions
13
Borrowings
June 2017
Total
June 2016
Total
Facility Size
$’000
Bank
Undrawn
$’000
NAB
NAB
NAB
NAB
NAB
50,000
15,000
3,882
68,882
50,000
12,000
62,000
-
-
-
-
-
Expiry
Date
10/18
09/19
02/19
Reference
Margin
BBSY
BBSY
BBSY
2.10%
2.10%
2.10%
07/16
07/16
BBSY
BBSY
1.95%
1.80%
The Trust has no borrowings which are classified as current (2016: $62 million).
Interest Rate Hedges
Size
Bank
NAB
NAB
$’000
Type
Floor
Cap
Expiry
20,000
30,000
50,000
Collar
Collar
2.72%
2.24%
4.55%
3.24%
07/19
01/20
NAB
NAB
NAB
20,000
32,000
9,500
61,500
Collar
Collar
Swap Fixed at 4.7% 08/16
2.72%
2.24%
4.55%
3.24%
07/19
01/20
MTM
Value
$’000
355
309
664
668
729
47
1,444
June 2017
Total
June 2016
Total
All of the above hedges are out of the money to the values shown. Of them, $296,000 are
considered current liabilities (2016: $47,000).
The gain or loss from valuing the interest rate collar at fair value is recognised in profit or loss.
As the current interest rate is below the floor rates, any further interest rate reduction will not
have a profit or loss impact.
Refer to the Interest Rate Hedges and Financial Instruments notes below for further details.
A distribution of 6.5 cents per unit has been declared to be paid on 18 October 2017.
Distributions paid before the balance date are listed below:
Prior year final distribution
Current year interim distribution
Total
2017
4 cpu
4.5 cpu
2017
$’000
2,313
2,906
5,219
2016
6 cpu
6 cpu
2016
$’000
2,749
2,790
5,539
In addition, in June 2016 an in-specie distribution of Pelathon Pub Group units was made
returning a total of $6.2 million in capital to unitholders. The distribution was on the basis of
2.48 Pelathon units for every BWR unit held.
10. Lease Commitments Receivable ($’000)
Future minimum rent receivable under non-cancellable operating leases as at 30 June are
as follows:
Receivable within 1 year
Receivable within 2 – 5 years
Receivable for more than 5 years
Total
11. Commitments and Contingencies
2017
8,849
25,332
10,361
44,542
2016
8,590
27,473
15,644
51,707
There were no operating leases, capital commitments or contingencies as at 30 June 2017
(2016: Nil).
12. Subsequent Events
Apart from subsequent events disclosed in the Directors’ report, to the best of the Directors’
knowledge, since the end of the financial year there have been no other matters or
circumstances that have materially affected the Trust’s operations or may materially affect its
operations, state of affairs or the results of operations in future financial years.
BLACKWALLPROPERRTYTUST
13. Controlled Entities
(c) Related Entity Transactions
14
Name
Country of incorporation
Parent entity:
BlackWall Property Trust
Controlled entity of parent entity:
Yandina Sub-Trust
BlackWall Telstra House Trust
BlackWall Hobart Unit Trust
BlackWall Opportunities Fund
14. Related Party Transactions
(a) Related Entities
Percentage Owned
2016
2017
In accordance with the terms of the Trust Constitution and the Information Memorandum, the
Responsible Entity is entitled to receive a management fee based on 0.65% p.a. of the value
of the Trust’s assets and the recovery of other administrative costs.
Australia
100%
100%
Australia
Australia
Australia
Australia
100%
100%
100%
-
100%
100%
-
76.59%
All transactions with related parties were made on normal commercial terms and conditions,
at market rates and were approved by the Board. Related party transactions that occurred
during the year are as follows:
Expenses
Remuneration paid to Responsible Entity
Property management, leasing fees and accounting fees
Transaction fees
2017
$’000
922
501
74
1,497
2016
$’000
867
508
691
2,066
In these financial statements, related parties are parties as defined by AASB 124 Related
Party Disclosures rather than the definition of related parties under the Corporations Act
2001 and ASX Listing Rules.
Revenue
WOTSO WorkSpace rent, outgoings and utilities
Refer to Directors’ Report for Key Management Personnel’s relevant interests in the Trust.
738
420
(b) Interests in Related Parties
15. Parent Entity Disclosures
As at year end the Trust owned units in the following funds. The funds and the Trust have a
common Responsible Entity or are related entities of BlackWall:
The following summarises the financial information of the Trust’s parent entity, BlackWall
Property Trust, as at and for the year ended 30 June.
Unlisted Funds / Entities
Kirela Development Unit Trust
Pyrmont Bridge Trust
Bakehouse Quarter Trust
WRV Unit Trust
Bakehouse Bonds
Woods PIPES Fund
BlackWall Telstra House Trust
Planloc Preference Shares
BlackWall Penrith Fund No. 3
Holdings (No.’000)
2016
2017
74
82
2,800
7,599
2
-
1,497
-
-
-
-
-
-
-
-
-
-
-
$’000
Distribution / ROC Received
2016
112
-
-
140
550
80
1
92
24
4,999
2017
1,473
190
-
-
-
16
-
-
-
1,679
Profit for the year
Total comprehensive income for the year
Financial position:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2017
$’000
17,964
17,964
6,801
143,730
150,531
(182)
(50,000)
(50,182)
100,349
2016
$’000
11,141
11,141
2,321
120,472
122,793
(48,610)
(1,397)
(50,007)
72,786
For further details refer to the Reconciliation of Property Investment Portfolio table. Income
received from Kirela and Pyrmont were in the form of returns of capital.
The parent entity had no contingencies at 30 June 2017 (2016: Nil). The parent entity has not
entered into any capital commitments as at 30 June 2017 (2016: Nil).
BLACKWALLPROPERRTYTUST
16. Financial Instruments
(a) Financial risk management
The main risks the Trust is exposed to through its financial instruments are market risk
(including interest rate risk and price risk), credit risk and liquidity risk. The Trust’s principal
financial instruments are property investment structures and borrowings (including interest
rate hedges). Additionally, the Trust has various other financial instruments such as cash,
trade debtors and trade creditors, which arise directly from its operations.
This note presents information about the Trust’s exposure to each of the above risks, their
objectives, policies and processes for measuring and managing risk, and the management
of capital.
The Board of Directors of the Responsible Entity has overall responsibility for the establishment
and overseeing of the risk management framework. The Board monitors the Trust’s risk
exposure by regularly reviewing finance and property markets. Major financial instruments
held by the Trust which are subject to financial risk analysis are as follows:
Financial assets
Property investment structures
Financial liabilities
Borrowings
2017
$’000
41,893
68,882
2016
$’000
24,397
62,000
The property investment structures referred to above represent the Trust’s investment in
Pyrmont and The Bakehouse Quarter.
(b) Capital management
The Trust’s objectives when managing capital are to:
•
safeguard its ability to continue as a going concern, so that it can continue to provide
returns for unitholders and benefits for other stakeholders, and
• maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Trust may adjust the amount of return
of capital paid to unitholders, issue new units, buy-back units, purchase or sell assets.
15
(c) Liquidity risk
The major liquidity risk faced by the Trust is its ability to realise assets. The Trust has
borrowings of $69 million and total gross assets of $163 million, of which $156 million are
income producing real estate assets for which there is a deep and active market. At the end
of the reporting period, the Trust held the following financial arrangements:
$’000
At 30 June 2017
Financial assets
Cash and cash equivalents
Trade and other receivables
Property investment structures
Financial liabilities
Trade and other payables
Other liabilities
Borrowings
Interest rate hedges
At 30 June 2016
Financial assets
Cash and cash equivalents
Trade and other receivables
Property investment structures
Financial liabilities
Trade and other payables
Other liabilities
Borrowings
Interest rate hedges
Maturing
within 1 year
Maturing
2 – 5 years
Maturing
over 5 years
1,690
5,078
6,768
455
383
838
2,154
256
-
2,410
3,252
248
62,000
47
65,547
-
-
41,893
41,893
176
68,882
664
69,722
-
-
24,397
24,397
-
-
-
1,397
1,397
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
1,690
5,078
41,893
48,661
631
383
68,882
664
70,560
2,154
256
24,397
26,807
3,252
248
62,000
1,444
66,944
BLACKWALLPROPERRTYTUST
(d) Fair value measurements
(i) Fair value hierarchy
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by
level of the following fair value measurement hierarchy:
•
•
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for
the asset, either directly (as prices) or indirectly (derived from prices); and
Level 3 - Inputs for the asset that are not based on observable market data (unobservable
inputs).
•
The Trust currently does not have any assets or liabilities that are traded in an active market.
The fair value of financial assets and financial liabilities that are not traded in an active market
is determined using valuation techniques. For investments in related party unlisted unit trusts,
fair values are determined by reference to published unit prices of these investments which
are based on the net tangible assets of the investments.
The following table presents the Trust’s financial assets and financial liabilities measured at fair
value as at 30 June. Refer to the Critical Accounting Estimates and Judgment note for further
details of assumptions used and how fair values are measured.
At 30 June 2017 ($‘000)
Property investment portfolio
Interest rate hedges
At 30 June 2016 ($‘000)
Property investment portfolio
Interest rate hedges
Level 1
Level 2
Level 3
Total
-
-
-
-
-
(664)
41,893
-
-
(1,444)
24,397
-
41,893
(664)
24,397
(1,444)
(ii) Valuation techniques used to derive Level 3 fair values
16
17. Critical Accounting Estimates and Judgments
The Directors of the Responsible Entity evaluate estimates and judgments incorporated into
the financial statements based on historical knowledge and best available current information.
Estimates assume a reasonable expectation of future events and are based on current trends
and economic data, obtained both externally and within the Trust.
Key estimates – impairment
The Trust assesses impairment at each reporting date by evaluating conditions specific to
the Trust that may lead to impairment of assets. Refer to Trade and Other Receivables note
for impairment details.
Key estimates – financial assets
The property investment portfolio contains a portion of financial assets being property
investment structures at FVTPL. All gains and losses in relation to financial assets are
recognised in profit or loss. The fair value of the unlisted securities is determined by reference
to the net assets of the underlying entities.
Key estimates – fair values of investment properties
The Trust carries its investment properties at fair value with changes in the fair values recognised
in profit or loss. At the end of each reporting period, the Directors of the Responsible Entity
update their assessment of the fair value of each property, taking into account the most
recent independent valuations. The key assumptions used in this determination are set out
in Property Investment Portfolio table on page 4. If there are any material changes in the
key assumptions due to changes in economic conditions, the fair value of the investment
properties may differ and may need to be re-estimated.
18. Statement of Significant Accounting Policies
The financial statements cover BlackWall Property Trust and its controlled entities (refer
Controlled Entities note). BlackWall Property Trust is a managed investment scheme
registered in Australia. All controlled funds are established and domiciled in Australia.
The fair value of the unlisted securities is determined by reference to the net assets of the
underlying entities. All these instruments are included in Level 3.
The financial statements for the Trust were authorised for issue in accordance with a resolution
of the Directors of the Responsible Entity on the date they were issued.
There were no transfers between Level 1, 2 and 3 financial instruments during the year. For all
other financial assets and financial liabilities, carrying value is an approximation of fair value.
Basis of Preparation
These financial statements are general purpose financial statements that have been prepared
in accordance with Australian Accounting Standards and other authoritative pronouncements
of the Australian Accounting Standards Board and the Corporations Act 2001.
BLACKWALLPROPERRTYTUST
17
The financial statements of the Trust also comply with IFRS as issued by the International
Accounting Standards Board.
The financial statements have been prepared on an accruals basis and are based on historical
costs modified by the revaluation of selected non-current assets, financial assets and financial
liabilities for which the fair value basis of accounting has been applied.
The Trust is a group of the kind referred to in ASIC Class Order 2016/191 and, in accordance
with that Class Order, amounts in the Directors’ Report and the financial statements are
rounded off to the nearest thousand dollars, unless otherwise indicated.
The following is a summary of the material accounting policies adopted by the Trust in the
preparation of the financial statements. The accounting policies have been consistently
applied, unless otherwise stated.
Going concern
These financial statements have been prepared on a going concern basis, which contemplates
continuity of normal business activities and the realisation of assets and settlement of liabilities
in the ordinary course of business.
Comparative figures
Principles of Consolidation
Controlled entities
The consolidated financial statements comprise the financial statements of the Trust (refer
to the Controlled Entities note). The controlled entity has a June financial year end and uses
consistent accounting policies. Investments in the controlled entity held by the parent entity
are accounted for at cost less any impairment charges (refer to the Parent Entity Disclosures
note).
Subsidiaries are all those entities over which the consolidated entity has control. The
consolidated entity controls an entity when the consolidated entity is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the consolidated entity. They are
de-consolidated from the date that control ceases.
Inter-entity balances
All inter-entity balances and transactions between entities in the Trust, including any
unrealised profits or losses, have been eliminated on consolidation. Accounting policies of
the controlled entity have been changed where necessary to ensure consistencies with those
policies applied by the parent entity.
When required by Accounting Standards, comparative figures have been adjusted to conform
to changes in presentation for the current financial year. Any change of presentation has been
made in order to make the financial statements more relevant and useful to the user.
Impairment of assets
Segment Reporting
AASB 8 requires operating segments to be identified on the basis of internal reports about
components of the Trust that are regularly reviewed by the chief operating decision maker in
order to allocate resources to the segment and to assess its performance.
The Trust invests in property in Australia and reports to management in a single segment. As
a result, there is only one segment to report for the Trust.
Presentation currency
Both the functional and presentation currency of the Trust is Australian dollars.
At each reporting date, the Trust reviews the carrying values of its assets to determine
whether there is any indication that those assets have been impaired.
If such an indication exists, the recoverable amount of the asset, being the higher of the
asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying
value. In assessing value in use, either the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset, or the income of the asset is
capitalised at its relevant capitalisation rate.
BLACKWALLPROPERRTYTUST 18
An impairment loss is recognised if the carrying value of an asset exceeds its recoverable
amount. Impairment losses are expensed to the income statement.
Loans and receivables
Impairment losses recognised in prior periods are assessed at each reporting date for any
indication that the loss has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss has been recognised.
Financial Instruments
Interest rate hedges
The Trust uses derivative financial instruments such as interest rate swaps to hedge its risks
associated with interest rates. Such derivative financial instruments are initially recognised at
fair value on the date the derivative contract is entered into and are subsequently remeasured
to fair value. Derivatives are carried as assets when their net fair value is positive and as
liabilities when their net fair value is negative.
The fair values of interest rate swap and collar are determined by reference to market values
for similar instruments. Any gains or losses arising from changes in the fair value of derivatives
are taken directly to profit or loss for the year.
Non-derivative financial instruments
Loans and receivables including loans to related entities. Gains and losses are recognised
in profit and loss when the loans and receivables are derecognised or impaired, as well as
through the amortisation process.
Fair value
For investments in unlisted unit trusts, fair values are determined by reference to published
unit prices of these investments which are based on the net tangible assets of each of the
investments.
Impairment
At each reporting date, the Trust assesses whether there is objective evidence that a financial
instrument has been impaired. A financial instrument is considered to be impaired if objective
evidence indicates that one or more events have had a negative effect on the estimated future
cash flows of that asset.
Individually significant financial instruments are tested for impairment on an individual basis.
The remaining financial assets are assessed collectively in groups that share similar credit risk
characteristics.
Impairment losses are recognised in the statement of profit or loss and other comprehensive
income.
Non-derivative financial instruments comprise financial assets (including property investment
structures), loans and borrowings, and trade and other payables.
Financial liabilities
Non-derivative financial instruments are recognised at fair value plus, for instruments not at
fair value through profit or loss, any directly attributable transaction costs. Subsequent to
initial recognition non- derivative financial instruments are measured as described below.
Recognition
A financial instrument is recognised if the Trust becomes a party to the contractual provisions
of the instrument. Financial assets are recognised if the Trust’s contractual rights to the cash
flow from the financial assets expire or if the Trust transfers the financial assets to another
party without retaining control or substantially all risks and rewards of the asset. Purchases
and sales of financial assets are accounted for at trade date, i.e. the date that the Trust
commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Trust’s
obligations specified in the contract expire or are discharged or cancelled.
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt
less principal payments and unrealised movements.
Financial assets (property investment portfolio)
The property investment portfolio contains a portion of financial assets being property
investment structures at FVTPL. All gains and losses in relation to financial assets are
recognised in profit or loss. The Trust classifies its financial assets in the following measurement
categories: those to be measured subsequently at fair value and those to be measured at
amortised cost. The classification depends on the Trust’s business model for managing the
financial assets and the contractual terms of the cash flows.
All equity investments are measured at fair value. Equity investments that are held for trading
are measured at fair value through profit or loss.
BLACKWALLPROPERRTYTUST 19
Measurement
Trade and other payables
At initial recognition, the Trust measures a financial asset at its fair value. Transaction costs
of financial assets carried at fair value through profit or loss are expensed in profit or loss.
The Trust subsequently measures all equity investments at fair value. Changes in the fair
value of financial assets at fair value through profit or loss are recognised in profit or loss as
applicable.
Held for sale properties
Properties are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather through continuing use and a sale is considered highly
probable. They are measured at their carrying amount. Any subsequent increases or
decreases in carrying amount is recognised in the profit and loss.
Investment properties
Investment properties are measured initially at cost, including transaction costs. The carrying
amount includes the cost of replacing part of an existing investment property at the time
that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day
servicing of an investment property. Subsequent to initial recognition, investment properties
are stated at fair value, which is based on active market prices, adjusted if necessary, for
any difference in the nature, location or condition of the specific asset at the balance sheet
date. Gains or losses arising from changes in the fair values of investment properties are
recognised in profit or loss in the year in which they arise. Included in the value measurement
are adjustments for straightlining of lease income.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other
short term highly liquid investments with original maturities of three months or less, and bank
overdrafts.
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less a provision for
any uncollectable debts. An estimate for doubtful debts is made when there is objective
evidence that the Trust will not be able to collect the receivable. Financial difficulties of the
debtor and default payments are considered objective evidence of impairment. Bad debts
are written off when identified as uncollectable.
Liabilities for trade creditors are carried at cost which is the fair value of the consideration
to be paid in the future for goods or services received, whether or not billed to the Trust at
balance date. The amounts are unsecured and are usually paid within 30 days of recognition.
Interest bearing borrowings
Interest bearing borrowings are initially recognised at fair value less any related transaction
costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised
cost.
Revenue
Rent
Rent comprises rental and recovery of outgoings from property tenants. Rental income from
investment properties is accounted for on a straight-line basis over the lease term.
Lease incentives
Rent free incentives granted are recognised as an integral part of total rental income.
Cash incentives paid or payable to tenants are capitalised as part of investment properties.
Investment income
Interest income is recognised as interest accrues using the effective interest method. Property
investment structure income is recognised when the right to receive distribution has been
established.
For tax deferred distributions (returns of capital) earned from any trusts that have significant
carried forward tax losses, such distributions are brought on to the balance sheet by an
adjustment in the carrying value of the relevant investment and then reflected in the profit and
loss as an unrealised gain.
Income tax
Under current income tax legislation the Trust is not liable to Australian income tax provided
the unitholders are presently entitled to the taxable income of the Trust. The Trust has over
$17 million of carried forward revenue tax losses and $17 million carried forward capital
losses.
BLACKWALLPROPERRTYTUST 20
GST
Revenues, expenses and assets are recognised net of the amount of GST, except where
the amount of GST incurred is not recoverable from the Australian Taxation Office. In these
circumstances the GST is recognised as part of the cost of acquisition of the asset or as
part of an item of the expense. Receivables and payables in the balance sheet are shown
inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis for
the operating cash flows only.
EPU
The Trust presents basic and diluted EPU. Basic EPU is calculated by dividing the profit
or loss attributable to ordinary unitholders of the Trust by the weighted average number of
units outstanding during the period. Diluted EPU is determined by adjusting the profit or loss
attributable to ordinary unitholders and the weighted average number of units outstanding for
the effects of all dilutive potential units.
New Accounting Standards and Interpretations
Certain new accounting standards and interpretations have been published that are not
mandatory for the current reporting period. The Trust’s assessment of the impact of these
new standards and interpretations is set out below.
AASB 9 Financial Instruments (effective for annual reporting periods beginning on or after 1
January 2018)
The Trust has adopted AASB 9 early on 1 January 2013 except for the new hedging rules
which should not have any material effects to the Trust’s financial statements.
AASB 15 Revenue from Contracts with Customers (effective for annual reporting periods
beginning on or after 1 January 2018)
The new standard is based on the principle that revenue is recognised when control of a good
or service transfers to a customer. The Trust is currently assessing the effects of applying the
new standard on the financial statements and has not identified any material changes.
BLACKWALLPROPERRTYTUST Auditors Independence Declaration and Audit Report
Auditors Independence Declaration
21
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
As auditor for the audit of Blackwall Property Trust and its Controlled Entities for the year ended 30
June 2017, I declare that, to the best of my knowledge and belief, there have been:
(i) no contraventions of the auditor’s independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BLACKWALL PROPERTY TRUST AND CONTROLLED ENTITIES
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Blackwall Property Trust and its controlled entities (‘the Group’), which comprises the
consolidated balance sheet as at 30 June 2017, the consolidated statement of profit or loss, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended on pages 4,5,6, notes comprising a
summary of significant accounting policies and other explanatory information on pages 12 to 20, and the directors’
declaration of the Group.
Dated at Sydney the 14th day of August 2017.
ESV Accounting and Business Advisors
Tim Valtwies
Partner
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
§
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the
year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
§
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the
ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors
of Blackwall Fund Services Limited, the Responsible Entity of the Group, would be in the same terms if given to the directors
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial report of the current period. These matters were addressed in the context of our audit of the financial report as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
BLACKWALLPROPERRTYTUST
22
Key Audit Matter
Valuation of Property Investment Portfolio
(refer consolidated balance sheet, note 5 and 18)
As at 30 June 2017, the total property investment
portfolio of the group is valued at $156.3 million (2016:
$136.2 million) which is significant to the balance sheet.
The portfolio consists of directly owned properties valued
at $114.4 million (2016: $111.8 million) and equity
investments in property joint venture trusts of $41.9
million (2016: $24.4 million) The property investment
portfolio is recorded at fair value.
The external valuations and internal valuations make a
number of property specific key estimates and
assumptions; in particular, assumptions in relation to
market comparable yields and estimates in relation to
future rental income increases or decreases and discount
rates and other inputs.
The valuation of the property investment portfolio held is
the key driver of the net assets value and total return.
Incorrect valuation could have significant impact on the
investment valuation and, therefore, the return
generated for shareholders.
How the scope of our audit responded to the risk
Our procedures included, but were not limited to, for
both direct and indirect property joint venture trusts:
We assessed managements procedures in respect of
property valuation for external and internal valuations.
We assessed the independence and competence of the
external valuers as experts and examined the
engagement correspondence for any scope limitations or
anything which may indicate that their objectivity may be
impaired.
For both the external and internal valuations on a sample
basis, we assessed the reasonableness of the significant
judgements and assumptions applied to the valuation
model, including occupancy rates, lease incentives, lease
terms and passing yields. We agreed the key inputs to
underlying lease contracts and results.
We compared the yield and capitalisation rates to
published material for external market trends. And
discussed with management anomalies, movements and
property specific matters impacting valuations.
Internal and external valuations are used by management
to recommend to the board.
Reviewed details of option agreement to director
valuations
Other Information
The directors of the Responsible Entity (‘the directors’) are responsible for the other information. The other information
comprises the information included in the Directors’ report (pages 3, 7-11, 23, 24) which we obtained prior to the date of this
auditor’s report. but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we
are required to report that fact. We have nothing to report in this regard.
Directors’ Responsibilities for the Financial Report
The directors of the responsible entity are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Related Party Transactions
Our procedures included but were not limited to:
Auditor’s Responsibilities for the Audit of the Financial Report
During the financial year, a number of significant related
party transactions are undertaken by entities within the
Blackwall Group. The nature and amount of these related
party transactions are disclosed under note 14.
Reviewed the Group structure and processes in place to
identify related parties and inquired with management
and those charged with governance of any transactions
with those parties during the period.
Given the number of material related party transactions
occurring throughout the period, there is a risk that these
transactions are not identified, disclosed and conducted
at arm’s length.
Reviewed the minutes of meetings of the Board of
Directors and other management meetings for material
transactions.
Identified the related party transactions and on a sample
basis verified the transactions with supporting
documentation including the assumptions used by
management in determining that transactions were made
on normal commercial terms and conditions.
We also assessed the appropriateness of the related party
disclosures in note 14 to the consolidated financial
statements.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf This description forms part of our
auditor’s report.
Dated at Sydney the 14th day of August 2017
ESV Accounting and Business Advisors
Tim Valtwies
Partner
BLACKWALLPROPERRTYTUST
Directors’ Report
Continued
Information on Officeholders of the Responsible Entity
The Responsible Entity is a wholly owned subsidiary of BlackWall Limited. BlackWall’s Officeholders
comprise the board of the Responsible Entity. The Officeholders of the Responsible Entity during
or since the end of the year are set out below. Unless otherwise stated, Officeholders have been
in office since the beginning of the financial year.
Richard Hill
Non-Executive Director and Independent Chairman
Richard Hill has extensive investment banking experience and was the founding partner of the
corporate advisory firm Hill Young & Associates. Richard has invested in BlackWall’s projects since
the early 1990s. Prior to forming Hill Young, Richard held a number of Senior Executive positions
in Hong Kong and New York with HSBC. He was admitted as an attorney in New York State
and was registered by the US Securities & Exchange Commission and the Ontario Securities
Commission. He is the Chairman of Sirtex Medical Limited (listed on the ASX). In addition Richard
is Chairman of the Westmead Institute for Medical Research.
Joseph (Seph) Glew
Non-Executive Director
Seph has worked in the commercial property industry in New Zealand, the USA and Australia.
Seph has driven large scale property development and financial structuring for real estate for
over 30 years. In addition, since the early 1990s Seph has run many “turn-around” processes in
relation to distressed properties and property structures for both private and institutional property
owners.
While working for the Housing Corporation of New Zealand and then AMP, Seph qualified as a
registered valuer and holds a Bachelor of Commerce. In the 1980s he served as an Executive
Director with New Zealand based property group Chase Corporation and as a Non-Executive
Director with a number of other listed companies in New Zealand and Australia.
Robin Tedder
Non-Executive Director
Robin has worked in finance and investment since 1976 during which time he has served as the
CEO of an investment bank and as non executive director on the boards of public and private
companies in banking, insurance, funds management, property, healthcare, retail and wine. He
was a member of ASX for many years. He is the Chairman of investment company Vintage Capital
and has been an investor in BlackWall Group projects since 1997. Robin is also the Chairman of
the BlackWall Board Audit Committee.
23
Stuart Brown
Executive Director and Chief Executive Officer
Stuart has been involved in property investment for over 18 years. Stuart has run debt and equity
raising in relation to listed and unlisted real estate structures with over a half a billion dollars in
value.
In his earlier career, Stuart practised as a solicitor in the areas of real estate, mergers and
acquisitions and corporate advisory with Mallesons and Gilbert + Tobin. Stuart is an independent
Director of Coogee Boys’ Preparatory School and Randwick District Rugby Union Football Club.
Sophie Gowland
Company Secretary (Appointed 16 May 2017)
Sophie is a lawyer with 10 years of experience across legal practice and investment banking.
Sophie has practiced in the areas of corporate advisory, equity capital markets and mergers and
acquisitions with firms including Gilbert + Tobin. In her investment banking career, Sophie worked
with Credit Suisse specialising in equity capital markets. Sophie holds a Bachelor of Commerce
and Bachelor of Laws (First Class Honours) from the University of Queensland.
Sophie was preceeded as Company Secretary by Caroline Raw who resigned in September 2016
after 1.5 years as BlackWall’s Company Secretary. For the period between Ms Raw’s resignation
and Ms Gowland’s appointment, BlackWall’s CFO Tim Brown acted as interim Company Secretary.
Meeting Attendances
Director
Richard Hill
Seph Glew
Robin Tedder
Stuart Brown
No. of Board Meetings Held
10
10
10
10
Board Meeting Attendance
10
10
10
10
Key Management Personnel’s (KMP) Relevant Interests
KMP include all Directors and the Chief Financial Officer (Tim Brown). Their current relevant
interests in the Trust are shown below.
Richard Hill
Seph Glew
Robin Tedder
Stuart Brown
Tim Brown
Total
15 August 2016
517,815
5,903,435
1,621,460
481,339
41,869
8,565,918
Net change
145,224
1,335,916
3,105,607
(18,142)
28,230
4,596,835
8 August 2017
663,039
7,239,351
4,727,067
463,197
70,099
13,162,753
No salary, cash bonus or monetary benefit was paid out of the Trust’s assets to any KMP during
the year.
BLACKWALLPROPERRTYTUST
24
Options
No indemnities have been given or insurance premiums paid, during or since the end of the
financial year, for any person who is or has been an auditor to the Trust.
There were no options granted during the year ended 30 June 2017. There are no options on
issue as at the date of this report.
Corporate Governance Statement
Responsible Entity and Custodian Remuneration
The Responsible Entity’s remuneration details can be found under the Related Party Transactions
note of the financial statements.
The Custodian is The Trust Company Limited. The custody fee is calculated at the greater of
$15,000 p.a. or 0.025% p.a. of the gross asset value up to $100 million then 0.015% for gross
assets value between $100-$500 million of the Trust, plus GST. In addition, the Custodian is
entitled to be paid any out-of-pocket expenses incurred in the performance of its duties.
Interests in the Trust
At the date of this report, the Trust has 66,635,377 units on issue after 8,724 buy-back and issue
of 8,806,489 new BWR units (June 2017: 66,635,377 units on issue). The Responsible Entity and
its associates held 10.8 million units in the Trust.
Value of the Trust’s Assets
At 30 June 2017, the Trust’s assets value is set out in the Trust’s Consolidated Balance Sheet.
Refer to the Property Investment Portfolio table for valuation details.
Environmental Regulation
The Trust and its controlled entity’s operations are not regulated by any significant environmental
law or regulation under either Commonwealth or State legislation. However, the Responsible Entity
believes that the Trust and its controlled entity have adequate systems in place for the management
of its environmental requirements and is not aware of any instances of non-compliance of those
environmental requirements as they apply to the Trust.
Indemnities of Officers
During the financial year the Responsible Entity has paid premiums to insure each of the Directors
named in this report along with Officers of the Responsible Entity against all liabilities for costs and
expenses incurred by them in defending any legal proceedings arising out of their conduct while
acting in the capacity of Director or Officer of the Responsible Entity, other than conduct involving
a wilful breach of duty. The insurance policy prohibits disclosure of the nature of the liability, the
amount of the premium and the limit of liability.
A description of the Trust’s current corporate governance practices is set out in the Trust’s
corporate governance statement which can be viewed at http://www.blackwall.com.au/about-
us.html.
Auditor and Non-audit Services
$50,000 and $12,000 was paid to the auditor for audit and non-audit services respectively during
the year (2016: $55,000 and $12,000). The Directors are satisfied that the provision of non-audit
services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The nature and scope of each type of non-audit service provided means
that auditor independence was not compromised.
A copy of the auditor’s independence declaration as required under Section 307C of the
Corporations Act 2001 is set out in these financial statements.
ESV continues in office in accordance with section 327 of the Corporations Act 2001.
Rounding of Amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, and in accordance
with that legislative instrument amounts in the Directors’ Report and the financial statements are
rounded off to the nearest thousand dollars, unless otherwise indicated.
Signed in accordance with a resolution of the Board of Directors.
Stuart Brown
Director
Sydney, 14 August 2017
BLACKWALLPROPERRTYTUST 25
Directors’ Declaration
In the opinion of the Directors of BlackWall Fund Services Limited, the Responsible Entity of
BlackWall Property Trust:
(a)
the financial statements and notes are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and
other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Trust’s financial position as at 30 June 2017 and
of its performance for the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the Trust will be able to pay its debts as
and when they become due and payable.
Statement of Significant Accounting Policies confirms that the financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting
Standards Board.
The Directors of the Responsible Entity have been given the declarations by the Chief Executive
Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors of the
Responsible Entity.
Stuart Brown
Director
Sydney, 14 August 2017
BLACKWALLPROPERRTYTUST