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Report
2018
BLACKWALL
TY T UST
PROPER
R
CONTENTS
03 2018 Results
04 Directors’ Report
08
Statement of Cash Flows
18 Directors’ Report - Continued
09 Statement of Changes in Equity
22 Directors’ Declaration
06 Statement of Profit or Loss
and Balance Sheet
10 Notes to the Financial Statements 23 Auditor’s Independence
Declaration and Report
2018 Results
Units on issue
66.6 million
Gross assets
$273 million
Gearing
44%
NTA per unit
$1.55
Distributions
Final
5 cpu to be paid
17 October 2018
Total for 2018
10 cpu
Total Return Trust
We refer to BWR as a total return REIT, that is, we focus
on a combination of the distributions we pay plus the
NTA growth we generate. Although this is not a unique
concept to the LPT market, we think the means by which
we achieve it differentiates the Trust from its larger peers.
looks
In managing the Trust, BlackWall
for active
opportunistic, development and distressed situations.
In the short term these positions may negatively impact
on the earnings per unit but once mature should grow
both earnings and NTA per unit beyond general market
movements. The graph shows the Trust’s total return
performance over the past 4 years.
Total Return from $1 Invested in July 2014
$2.00
$1.75
$1.50
$1.25
$1.00
2014
2015
2016
2017
2018
Directors’ Report
BWR to Grow Balance Sheet Liquidity
Post Transaction Strategy
Bakehouse Quarter Update
For over 25 years BlackWall’s founders have adopted a
patient property investment philosophy. We aim to acquire
real estate at a discount with the intention of owning it for the
long term. We grow rent by creating leasing opportunities
through adaptive reuse and development. Our debt levels
reflect our assets’ cash flow rather than the amount a
financier will lend from time to time. If we sell an asset it is
when we have exhausted it’s growth opportunities or the
after tax capital gains on sale are more than the returns
we can make by holding the asset. Our intention is that
the cash generated by the transactions described earlier
is allocated in accordance with this philosophy.
Our strategy will mean that, for a period, BWR’s earnings
per unit are stagnant or may decline. However, if we can
identify and execute opportunities of the kind we have in
the past we expect BWR can significantly grow both NTA
per unit and distributable earnings.
Later we give an update on the sale of the Bakehouse
Quarter, one of BWR’s largest investment positions. As
you will see, we are confident that the sale will complete
in late February 2019. Because of this we have written
the value of the Bakehouse Quarter investment up to $36
million which reflects the sale price. Once completion
occurs, this amount will be cash on the Trust’s balance
sheet.
On the back of the Bakehouse Quarter sale, BlackWall
is structuring a proposal, subject to BWR unitholder
approval, for the Trust to make a takeover bid for the
Kirela Development Unit Trust (Kirela) - the owner of the
Bakehouse Quarter. This offer will be by way of cash or
BWR units as consideration for all of Kirela unitholders’
position in Kirela. Although the extent of take up of the
offer is not certain we expect it to add $100 million of cash
to the BWR balance sheet. As part of this transaction,
BlackWall will also seek approval for BWR to make the
following investments:
1. The acquisition of BlackWall’s position in the Pyrmont
Bridge Trust;
2. The acquisition of the properties housing WOTSO
Adelaide and WOTSO Fortitude Valley.
If the offer and transactions proceed it is likely the Trust will
have over $120 million of cash.
In June 2017 Yuhu Group entered into a call option to
purchase the Bakehouse Quarter paying a $38 million
option fee. The option was exercisable between 1 July
and 31 August 2018 with settlement within 2 months, that
is, no later than 31 October 2018.
Recently Yuhu and BlackWall (on behalf of Kirela) agreed
an amendment to the option arrangement as follows:
• settlement is to occur on 20 February 2019;
• Yuhu may make a payment of $5 million to extend the
option by 1 month up to three times - that is the period
in which the option can be exercised may be extended
by a maximum of three months on the payment of $15
million in total; and
• Yuhu has agreed to make a pre-payment of the
purchase price of $5 million in early December 2018.
At the date of this report Yuhu has served an Option
Extension Notice and paid the $5 million fee extending
the call option to 30 September 2018. We expect that
Yuhu will extend the call option at the end of September
and again at the end of October paying a total of $15m in
option extension fees.
As was the case with the initial $38 million option fee paid
in June 2017, these payments are non-refundable and
released to Kirela when received.
If the arrangement proceeds described above, prior to
Christmas Yuhu will have paid up to $58 million in call
option fees and pre-payments which will be deducted
from the purchase price ($380 million) to be paid on
settlement in February 2019.
4
BlackWall Property Trust - June 2018 55 Pyrmont Bridge Road
Canberra North
If the Bakehouse Quarter sale completes, the Trust
will grow its investment in 55 Pyrmont Bridge Road. At
December 2017 the Trust’s control of 55 Pyrmont Bridge
Road was such that it was consolidated onto the balance
sheet. This project is a good example of the type of
turnaround deals we hope to find.
In 2014 BlackWall structured the acquisition of the then
half empty office building. That transaction was a complex
distressed debt purchase in joint venture with NAB at
a value of $80 million. Since then the asset has been
repositioned, is fully tenanted and NAB’s investment has
been purchased. The property was independently valued
at $111 million in June 2017.
BlackWall has successfully completed negotiations with
the property’s largest tenant, US telco, Verizon, who
occupies roughly 4,500 sqm. Under this deal Verizon has
committed a further term of 5 years through to November
2023, with two additional option terms of 5 years each. The
terms of this deal have been signed off commercially and
the lease is being drafted. To reflect the Verizon renewal
the directors have adjusted the value of the property up by
$6 million from the last independent valuation.
Below is an extract from the 2017 Annual Report:
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.
Since June 2017 the demand for WOTSO’s flexible office
space has grown. To meet this demand Canberra North
has been repositioned to allow all areas of the building to
attract and house WOTSO’s tenants. This change has led
to a restructure of the arrangement between WOTSO and
BWR, as building owner. The conventional lease structure
has been replaced with a management arrangement. Like
a hotel management arrangement, all revenue goes to the
property owner and all operating costs are covered from
that revenue with WOTSO earning a fee based on turnover.
Under the new structure, the revenue projections set out
in the above extract (which were based on conventional
lease arrangements) will be exceeded. The current
annualised gross revenue is now $2.8 million and fully-let
gross revenue should reach $4 million.
5
BlackWall Property Trust - June 2018 Financial Statements
Consolidated Balance Sheet
at 30 June 2018
Consolidated Statement of Profit or Loss
for the year ended 30 June 2018
Note
2018
$’000
2017
$’000
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Bakehouse Quarter investment
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
Equity
Issued capital
Retained earnings / (accumulated losses)
Attributable to owners of the Trust
Non Controlling Interests
Total Equity
Net tangible assets
Number of units on issue
NTA per unit
6
Note
3
5
6
7
7
7
7
2018
$’000
1,083
115
36,133
131
37,462
2017
$’000
1,690
5,078
28,216
173
35,157
235,350
235,350
128,077
128,077
272,812
163,234
1,471
713
53,882
255
56,321
65,000
57
65,057
631
383
-
296
1,310
68,882
368
69,250
Revenue
Property income
Net gain / (loss) on assets
Interest income
Other income
Total Revenue
Expenses
Property outgoings
Depreciation expense
Finance costs
Administration expenses
Amortisation of lease incentive
Loss on sale of assets
Total Expenses
Profit From Continuing Operations
Profit from discontinued operations
Profit for the year
Other comprehensive income
121,378
70,560
Profit and other comprehensive income
151,434
92,674
Profit and other comprehensive income attributable to:
136,036
(33,040)
102,996
48,438
151,434
136,036
(43,362)
92,674
-
92,674
102,996
66,635,378
$1.55
92,674
66,635,378
$1.39
Owners of the Trust
Non Controlling Interests
Earnings Per Unit
Basic earnings per unit
Calculated as follows:
Profit for the year
Weighted average number of units for EPU
4
2
19,075
20,457
19
4
10,994
15,658
13
-
39,555
26,665
(6,025)
(4,025)
(4,133)
(1,920)
(396)
(8)
(2,885)
(2,672)
(2,897)
(1,365)
-
-
(16,507)
(9,819)
23,048
-
23,048
-
23,048
17,985
5,063
23,048
16,846
-
16,846
-
16,846
16,846
-
16,846
27.0 cents
27.0 cents
17,985
16,846
66,635,378
62,371,703
BlackWall Property Trust - June 2018 Directors’ Report Management Commentary
BWR’s property investments are by direct ownership or as positions in property investment structures
originated and managed by BlackWall. Where possible, and if appropriate, BWR aims to grow its investment
in these structures. The Trust’s investment in 55 Pyrmont Bridge Road is such that the Trust has control of
the entity holding the asset. As a consequence, the asset has been consolidated on to the BWR balance
sheet from 31 December 2017.
Unless stated otherwise, the carrying values are based on Director valuations having regard to independent
valuations save that the Bakehouse Quarter investment carrying value has been adjusted to reflect the sale
transaction described earlier. As settlement is to occur in February 2019 the investment is held as a current
asset.
The movement in carrying values of BWR’s investments are reflected in the Statement of Profit or Loss
through gains on assets. In addition to the Bakehouse, the most significant event in the portfolio is the
renewal of the Verizon lease at 55 Pyrmont Bridge Road. Verizon occupies roughly 4,500 sqm of the
building’s 14,500 sqm net lettable area under a 5-year lease expiring in November 2018. BlackWall has
negotiated for Verizon to take up a new 5 year term to November 2023, with an option for a further 5 years.
From time to time, real estate investment structures in which BWR is invested 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 Statement of Profit or Loss as an unrealized gain.
At June 2018 BWR had $16 million in carried forward capital and $19 million in revenue tax losses. Because
of this, distributions from the Trust have been paid as tax deferred returns of capital. If the transaction with
respect to the Bakehouse completes, most, if not all of the tax losses will be taken up and distributions in
the future are likely to be revenue with some tax deferred components.
Property Investment Portfolio ($’000)
Ownership
Passing
Yield
Fully Let
Yield
2018
2017
Commercial
Canberra North, ACT
Varsity Lakes, QLD
Pyrmont Bridge Road, NSW*
Hobart, TAS
Canberra South, ACT
Mixed Use
Bakehouse Quarter, NSW
Sippy Downs, QLD
Industrial
Yandina, QLD
Toowoomba, QLD
100%
100%
32%
100%
100%
14%
100%
100%
100%
5.70%
6.10%
6.50%
7.70%
2.60%
6.50%
6.10%
9.70%
7.60%
6.60%
8.00%
7.20%
6.60%
7.10%
13.60%
2.20%
13.60%
7.40%
30,000
18,200
117,000
8,800
8,250
36,133
26,400
20,100
6,600
Total property investment portfolio
*Consolidated in the 2018 financial year and the property value has been written up from $111 million to $117 million.
271,483
Reconciliation of Property Investment Portfolio
($’000)
25,000
18,000
13,677
8,400
8,100
28,216
26,200
22,200
6,500
156,293
2017
136,197
5,461
8,680
6,258
110
694
593
622
(2,626)
(2,054)
(190)
(1,473)
-
7,800
909
(3,400)
(1,288)
2018
156,293
99,319
8,679
6,240
4,761
2,346
1,998
850
(4,421)
(1,921)
(1,900)
(743)
(18)
-
-
-
-
271,483
156,293
36,133
235,350
271,483
28,216
128,077
156,293
7
Opening Balance
Pyrmont net acquisition / consolidation
Revaluation of Bakehouse Quarter
Revaluation of Pyrmont
Revaluation of Canberra North
Revaluation of Other property investments
Capital improvements
Straight-line rental income
Depreciation
Revaluation of Yandina
Returns of capital – Pyrmont
Returns of capital – Bakehouse Quarter
Other disposal
Hobart acquisition
Bakehouse Quarter net acquisition
Coolum property sale
Other property investment sales
Closing Balance
Disclosed as follows:
Bakehouse Quarter investment – current asset
Property investment portfolio – non-current asset
Total
BlackWall Property Trust - June 2018 Financial Statements
Consolidated Statement of Cash Flows
for the year ended 30 June 2018
Reconciliation of Operating Cash Flows ($’000)
Profit for the year
Non-cash flows in profit:
Depreciation and amortisation
Net gain on assets
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
2018
23,048
4,401
(20,449)
(850)
-
(268)
184
235
305
6,606
2017
16,846
2,745
(15,658)
(611)
180
185
(22)
(1,035)
135
2,765
Cash Flows From Operating Activities
Receipts from tenants
Payments to suppliers
Interest paid
Distributions received from Woods Pipes
Interest received
Borrowing costs paid
Net Cash Flows From / (Used in) Operating Activities
Cash Flows From Investing Activities
Proceeds from sale of The Woods units
Returns of capital from Pyrmont Bridge Trust
Returns of capital from Bakehouse Quarter
Cash acquired on consolidation of Pyrmont
Proceeds from sale of other investments
Payment for additional Pyrmont investment
Payment for capital expenditure
Proceeds from sale of Coolum property
Purchase of Hobart property
Payment for additional Bakehouse Quarter investment
Payment for BlackWall Telstra House Trust units
Net Cash Flows From / (Used in) Investing Activities
Cash Flows From Financing Activities
Distributions paid
Repayment of other borrowings
Repayment of bank borrowings
Proceeds from issue of units
Proceeds from Hobart borrowings
Increase in Canberra North borrowings
Payments for purchase of BWR units
Payment for capital raising costs
Payment for buy-back of units
Net Cash Flows From / (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 Period
8
2018
$’000
20,132
(9,576)
(3,969)
-
19
-
6,606
3,992
2,470
1,568
62
9
(3,772)
(1,998)
-
-
-
-
2,331
(8,244)
(1,100)
(200)
-
-
-
-
-
-
(9,544)
(607)
1,690
-
1,083
2017
$’000
12,128
(6,645)
(2,630)
61
14
(163)
2,765
-
-
459
-
1,810
(3,633)
(676)
3,600
(8,135)
(2,195)
(1,851)
(10,621)
(5,232)
-
-
10,512
3,882
3,000
(4,537)
(197)
(27)
7,401
(455)
2,154
(9)
1,690
BlackWall Property Trust - June 2018 Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
Balance at 1 July 2017
Acquisition of subsidiary
Profit for the year
Distributions paid
Balance at 30 June 2018
Buy-back since 30 June
Balance at signing date
Balance at 1 July 2016
Issue of units
Transaction costs on units
On-market buy-back
Profit / (loss) for the period
Distributions paid
Balance at 30 June 2017
Issued Capital
No.’000
66,636
Issued Capital
$’000
136,036
-
-
-
66,636
-
66,636
57,838
8,807
-
(9)
-
-
-
-
-
136,036
-
136,036
126,216
10,569
(738)
(11)
-
-
66,636
136,036
Retained Earnings /
(Accumulated Losses)
$’000
Attributable to Owners
of the parent
$’000
Non Controlling
Interests
$’000
(43,362)
-
17,985
(7,663)
(33,040)
(55,042)
53
-
-
16,846
(5,219)
(43,362)
92,674
-
17,985
(7,663)
102,996
71,174
9,884
(738)
(11)
16,846
(5,219)
92,674
-
43,956
5,063
(581)
48,438
640
(640)
-
-
-
-
-
Total Equity
$’000
92,674
43,956
23,048
(8,244)
151,434
71,814
9,244
(738)
(11)
16,846
(5,219)
92,674
9
BlackWall Property Trust - June 2018 Notes
1. Segment Reporting
The Trust operates in one business segment being the ownership and leasing of investment properties in
Australia.
2. Expenses ($’000)
Administration expenses:
Responsible entity fees
Compliance expenses (listing, registry etc)
Total
2018
1,388
532
1,920
3. Current Assets – Trade and Other Receivables ($’000)
Trade and other receivables
Asset sale (The Woods)
Distributions
Other
Total
2018
-
-
115
115
No debtors have been provided for as at 30 June 2018 (2017: $Nil) or at the date of this report.
4. Net gain / (loss) on assets ($’000)
Bakehouse Quarter, NSW
Pyrmont Bridge Road, NSW
Canberra North, ACT
Varsity Lakes, QLD
Hobart, TAS
Canberra South, ACT
Sippy Downs, QLD
Toowoomba, QLD
Yandina, QLD
Coolum, QLD
Total net gain / (loss) on property investment portfolio
Net gain / (loss) on interest rate hedges
Gain on sale of BWR units from option transaction
Total net gain / (loss) on assets
10
2018
8,679
6,240
4,761
852
484
433
370
208
(1,921)
-
20,106
351
-
20,457
2017
923
442
1,365
2017
3,992
1,015
71
5,078
2017
8,680
6,258
110
391
(226)
285
321
132
14,142
780
735
15,658
5. Current Liabilities – Trade and Other Payables ($’000)
Trade payables
Related parties – BlackWall Limited
Other parties
Tenant deposits
Total
6. Current Liabilities – Other Liabilities ($’000)
Rental income received in advance
Total
7. Borrowings and Interest Rate Hedges
Borrowings
2018
116
1,187
168
1,471
2018
713
713
2017
1
454
176
631
2017
383
383
All facilities are priced off BBSY. The total undrawn balance across all facilities is less than $200k.
The LVR (loan to value ratio) shown below is calculated against the carrying value in these financial statements
with the facility LVR covenant shown in parenthesis.
Security
Various*
Hobart
Total current
Pyrmont
Canberra North
Total non-current
Total June 2018
Various*
(2,054)
Canberra North
245
Hobart
Total June 2017
LVR
43% (65%)
44% (50%)
43% (90%)
50% (61%)
39% (65%)
60% (61%)
46% (50%)
Balance
$’000
50,000
3,882
53,882
50,000
15,000
65,000
118,882
50,000
15,000
3,882
68,882
Expiry
10/18
02/19
12/19
09/19
10/18
09/19
02/19
Margin
2.10%
2.10%
2.20%
2.10%
2.10%
2.10%
2.10%
Lender
NAB
NAB
NAB
NAB
NAB
NAB
NAB
*Secured against all assets held by the Trust save those specifically mentioned above.
BlackWall Property Trust - June 2018 Interest Rate Hedges
9. Distributions
Bank
$’000
Type
Floor
Cap
Expiry
June 2018
Total
June 2017
Total
NAB
NAB
NAB
NAB
20,000
30,000
50,000
20,000
30,000
50,000
Collar
Collar
2.72%
2.24%
4.55%
3.24%
Collar
Collar
2.72%
2.24%
4.55%
3.24%
07/19
01/20
07/19
01/20
MTM
Value
$’000
(166)
(146)
(312)
(355)
(309)
(664)
A distribution of 5.0 cents per unit has been declared to be paid on 17 October 2018. Distributions paid before
the balance date are listed below:
Prior year final distribution
Current year interim distribution
Total
2018
6.5 cpu
5.0 cpu
2018
$’000
4,331
3,332
7,663
2017
4.0 cpu
4.5 cpu
2017
$’000
2,313
2,906
5,219
10. Lease Commitments Receivable ($’000)
Balance Sheet - the mark to market value of all interest rate hedged are calculated at 30 June and shown in
Future minimum rent receivable under non-cancellable operating leases as at 30 June are as follows:
this note as a negative number if they are out of the money and a positive if they are in the money. The value
is prorated to the remaining hedge term and the portion with less than 12 months to run carried as a current
liability / asset with the balance as non-current.
Profit or Loss - the gain or loss on interest rate hedge valuation is recognized in the net gain / (loss) on assets.
8. Acquisition of Subsidiary ($’000)
In December 2017 the Trust gained control of 55 Pyrmont Bridge Road through control of the following
Receivable within 1 year
Receivable within 2 – 5 years
Receivable for more than 5 years
Total
2018
16,306
33,517
24,795
74,618
2017
8,849
25,332
10,361
44,542
entities:
•
•
Pyrmont Bridge Property Pty Limited (PBP) – the registered proprietor of the property; and
There were no operating leases, capital commitments or contingencies as at 30 June 2018 (June 2017: Nil).
11. Commitments and Contingencies
Pyrmont Bridge Trust (PBT) – a wholesale investment trust, managed by BlackWall which holds a $55
million subordinated debt instrument secured by a registered second mortgage over the property.
12. Subsequent Events
Special note should be taken of the update in relation to the sale of the Bakehouse Quarter, the Verizon lease
at 55 Pyrmont Bridge Road and the acquisition proposal all of which are explained on pages 4 and 5 of this
report. Other than these matters, to the best of the Directors’ knowledge, 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.
As BWR controls both entities the subordinated debt instrument held by PBT eliminates on consolidation.
Interests in both PBP and PBT held by third parties are show as non controlling interests.
The assets and liabilities recognised are as follows:
Cash
Borrowing costs
Property investment
Trade payables
Borrowings
Net assets acquired
Less: non-controlling interests
Group share of assets acquired
The purchase of the investments was paid in cash, and there were no acquisition related costs.
Fair value
$’000
63
146
111,000
(534)
(51,300)
59,375
(44,001)
15,374
11
BlackWall Property Trust - June 2018 13. Controlled Entities
Name
Parent entity:
BlackWall Property Trust
Controlled entity of parent entity:
Yandina Sub-Trust
BlackWall Telstra House Trust
BlackWall Hobart Unit Trust
Pyrmont Bridge Property Pty Limited
Pyrmont Bridge Trust
Parent and controlled entities are all domiciled in Australia.
14. Auditor’s Remuneration ($’000)
Remuneration of ESV for:
Audit and assurance services
Total
15. Related Party Transactions
(a) Related Entities
Percentage Owned
2018
100%
100%
100%
100%
32%
25%
2017
100%
100%
100%
100%
-
27%
(c) Related Entity Transactions
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.
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
Revenue
2018
$’000
1,335
582
-
1,917
2017
$000
922
501
74
1,497
2018
2017
52
52
43
43
WOTSO WorkSpace rent, outgoings and utilities
1,219
738
Refer to Directors’ Report for Key Management Personnel’s relevant interests in the Trust.
16. Parent Entity Disclosures
The following summarises the financial information of the Trust’s parent entity, BlackWall Property Trust, as at
and for the year ended 30 June.
In these financial statements, related parties are parties as defined by AASB 124 Related Party Disclosures
Profit for the year
rather than the definition of related parties under the Corporations Act 2001 and ASX Listing Rules.
Total comprehensive income for the year
(b) Interests in Related Parties
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:
Unlisted Funds / Entities
Kirela Development Unit Trust
Pyrmont Bridge Trust
Bakehouse Quarter Trust
Woods PIPES Fund
Holdings (No.’000)
$’000 Distribution
2018
82
-
-
-
2017
82
7,599
2
-
2018
742
2,280
1
-
2017
1,473
190
-
16
3,023
1,679
For further details refer to the Reconciliation of Property Investment Portfolio table. Income received from
Kirela was in the form of returns of capital. Pyrmont Bridge Trust has been consolidated from January 2018.
12
Financial position:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
The parent entity had no contingencies at 30 June 2018 (2017: Nil). The parent entity has not entered into any
capital commitments as at 30 June 2018 (2017: Nil).
2018
$’000
9,302
9,302
661
153,908
154,569
(50,606)
(1,975)
(52,581)
2017
$000
17,964
17,964
6,801
143,730
150,531
(182)
(50,000)
(50,182)
101,988
100,349
BlackWall Property Trust - June 2018 17. Financial Risk Management
Financial risk management
Liquidity risk
The major liquidity risk faced by the Trust is its ability to realise assets. The Trust has borrowings of $119
million and total gross assets of $273 million, of which $235 million are income producing real estate assets
The main risks the Trust is exposed to through its financial instruments are market risk (including interest
for which there is a deep and active market. At the end of the reporting period, the Trust held the following
rate risk and price risk), credit risk and liquidity risk. The Trust’s principal financial instruments are property
financial arrangements:
investment structures and borrowings (including interest rate hedges). Additionally, the Trust has various other
financial instruments such as 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:
$’000
At 30 June 2018
Financial liabilities
Trade and other payables
Other liabilities
Borrowings
Interest rate hedges
Financial assets
Property investment structures
Financial liabilities
Borrowings
2018
$’000
2017
$000
At 30 June 2017
36,133
41,893
Financial liabilities
Trade and other payables
118,882
68,882
Other liabilities
The property investment structures referred to above represent the Trust’s investment in The Bakehouse
Quarter (2017: The Bakehouse Quarter and Pyrmont).
Borrowings
Interest rate hedges
Sensitivity analysis
The Group is not exposed to any material credit or liquidity risks.
In relation to interest rate risk, if interest rates on borrowings were to increase by 1% profit before tax would
Fair value measurements
Fair value hierarchy
Maturing
Maturing
Maturing
Within 1 year
2 – 5 years
over 5 years
Total
1,303
713
53,882
255
56,153
455
383
-
-
838
168
-
65,000
57
65,225
176
-
68,882
664
69,722
-
-
-
-
-
-
-
-
-
-
1,471
713
118,882
312
121,378
631
383
68,882
664
70,560
be reduced by $1,189,000.
Capital management
The Trust’s objectives when managing capital are to:
•
safeguard its ability to continue as a going concern, so that it can continue to provide returns
for unitholders and benefits for other stakeholders, and
• maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Trust may adjust the amount of return of capital paid to
unitholders, issue new units, buy-back units, purchase or sell assets.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
•
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the
asset, either directly (as prices) or indirectly (derived from prices); and
•
Level 3 – Inputs for the asset that are not based on observable market data (unobservable
inputs).
The Trust currently does not have any assets or liabilities that are traded in an active market.
The fair value of financial assets and financial liabilities that are not traded in an active market is determined
using valuation techniques. For investments in related party unlisted unit trusts, fair values are determined
by reference to published unit prices of these investments which are based on the net tangible assets of the
investments.
13
BlackWall Property Trust - June 2018 The following table presents the Trust’s financial assets and financial liabilities measured at fair value as at 30
The following table is a reconciliation of the movements in financial assets classified as Level 3 for the year
June. Refer to the Critical Accounting Estimates and Judgement note for further details of assumptions used
ended 30 June:
and how fair values are measured.
Level 1
Level 2
Level 3
Total
At 30 June 2018 ($’000)
Property investment portfolio
Interest rate hedges
At 30 June 2017 ($’000)
Property investment portfolio
Interest rate hedges
-
-
-
-
-
(312)
-
(664)
36,133
-
41,893
-
Valuation techniques used to derive Level 3 fair values
36,133
(312)
At 30 June 2018
Balance at the beginning of the year
Purchase of Pyrmont units
Return of capital
Fair value movement through the profit and loss
41,893
Consolidation of Pyrmont
(664)
Other
Balance at the end of the year
The fair value of the unlisted securities is determined by reference to the net assets of the underlying entities.
At 30 June 2017
All these instruments are included in Level 3.
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
Balance at the beginning of the year
Purchase of investments
Sale of investments
Return of capital
Significant unobservable inputs within the income capitalisation method associated with the valuations of the
Fair value movement through the profit and loss
property investment portfolio are as follows:
Balance at the end of the year
$’000
41,893
3,772
(2,643)
8,515
(15,388)
(16)
36,133
24,397
12,300
(6,597)
(2,949)
14,742
41,893
Significant unobservable inputs used to
measure fair value
Capitalisation rate (%)
Net market rent ($ per sqm)
Range of
unobservable
inputs
6.5 – 10.2
116 – 1,043
Impact of
increase in
input on fair
value
Decrease
Increase
Impact of
decrease in
input on fair
value
Increase
18. Critical Accounting Estimates and Judgements
The Directors of the Responsible Entity evaluate estimates and judgements 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
Decrease
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. If there are any material changes
14
BlackWall Property Trust - June 2018 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.
Comparative figures
19 . Changes in Liabilities Arising from Financing Activities ($’000)
Total liabilities from financing activities as at 1 July 2016
(62,000)
(62,000)
Net cash from / (used in) financing activities – Hobart borrowings
Net cash from / (used in) financing activities – Canberra North borrowings
(3,882)
(3,000)
(3,882)
(3,000)
Borrowings
Total
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.
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
Total liabilities from financing activities as at 30 June 2017
(68,882)
(68,882)
segment and to assess its performance.
Net cash from / (used in) financing activities
Acquisition of Pyrmont
1,300
(51,300)
1,300
(51,300)
Total liabilities from financing activities as at 30 June 2018
(118,882)
(118,882)
20. Statement of Significant Accounting Policies
The financial statements cover BlackWall Property Trust and its controlled entities. BlackWall Property Trust
is a managed investment scheme registered in Australia. All controlled funds are established and domiciled
in Australia.
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.
Principles of Consolidation
The financial statements for the Trust were authorised for issue in accordance with a resolution of the Directors
Controlled entities
of the Responsible Entity on the date they were issued.
Basis of Preparation
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
These financial statements are general purpose financial statements that have been prepared in accordance
charges (refer to the Parent Entity Disclosures note).
with Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.
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
The financial statements of the Trust also comply with IFRS as issued by the International Accounting
involvement with the entity and has the ability to affect those returns through its power to direct the activities of
Standards Board.
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.
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
Inter-entity balances
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.
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.
The following is a summary of the material accounting policies adopted by the Trust in the preparation of the
Impairment of assets
financial statements. The accounting policies have been consistently applied, unless otherwise stated.
At each reporting date, the Trust reviews the carrying values of its assets to determine whether there is any
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.
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
15
BlackWall Property Trust - June 2018 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
Fair value
the asset is capitalised at its relevant capitalisation rate.
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.
An impairment loss is recognised if the carrying value of an asset exceeds its recoverable amount. Impairment
losses are expensed to the income statement.
Impairment
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
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.
depreciation or amortisation, if no impairment loss has been recognised.
Individually significant financial instruments are tested for impairment on an individual basis. The remaining
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
Non-derivative financial instruments comprise financial assets (including property investment structures),
loans and borrowings, and trade and other payables.
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.
Financial liabilities
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 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. All equity
investments are measured at fair value. Equity investments that are held for trading are measured at fair value
through profit or loss.
Measurement
At initial recognition, the Trust measures a financial asset at its fair value. Transaction costs of financial assets
Non-derivative financial instruments are recognised at fair value plus, for instruments not at fair value through
carried at fair value through profit or loss are expensed in profit or loss.
profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non- derivative
financial instruments are measured as described below.
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.
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 ow 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.
Loans and receivables
Loans and receivables include 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.
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,
16
BlackWall Property Trust - June 2018 adjusted if necessary, for any difference in the nature, location or condition of the specific asset at the balance
tax losses, such distributions are brought on to the balance sheet by an adjustment in the carrying value of
sheet date. Gains or losses arising from changes in the fair values of investment properties are recognised in
the relevant investment and then reflected in the profit and loss as an unrealised gain.
profit or loss in the year in which they arise. Included in the value measurement are adjustments for straight-
lining of lease income.
Cash and cash equivalents
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
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly
revenue tax losses and $17 million carried forward capital losses.
liquid investments with original maturities of three months or less, and bank overdrafts.
GST
Trade and other receivables
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectable
incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised
debts. An estimate for doubtful debts is made when there is objective evidence that the Trust will not be able
as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables
to collect the receivable. Financial difficulties of the debtor and default payments are considered objective
in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a
evidence of impairment. Bad debts are written off when identified as uncollectable.
gross basis for the operating cash flows only.
Trade and other payables
EPU
Liabilities for trade creditors are carried at cost which is the fair value of the consideration to be paid in the
The Trust presents basic and diluted EPU. Basic EPU is calculated by dividing the profit or loss attributable
future for goods or services received, whether or not billed to the Trust at balance date. The amounts are
to ordinary unitholders of the Trust by the weighted average number of units outstanding during the period.
unsecured and are usually paid within 30 days of recognition.
Diluted EPU is determined by adjusting the profit or loss attributable to ordinary unitholders and the weighted
Interest bearing borrowings
Interest bearing borrowings are initially recognised at fair value less any related transaction costs. Subsequent
average number of units outstanding for the effects of all dilutive potential units.
New Accounting Standards and Interpretations
to initial recognition, interest bearing borrowings are stated at amortised cost.
Certain new accounting standards and interpretations have been published that are not mandatory for the
Revenue
Rent
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)
Rent comprises rental and recovery of outgoings from property tenants. Rental income from investment
The Trust has adopted AASB 9 early on 1 January 2013.
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.
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
Cash incentives paid or payable to tenants are capitalised as part of investment properties and amortised on
financial statements and has not identified any material changes.
a straightlined basis over the lease term as a reduction in lease income.
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
17
BlackWall Property Trust - June 2018 Directors’ Report
Continued
Subsequent Events
ASX Additional Information
Special note should be taken of the update in relation to the sale of the Bakehouse Quarter, the Verizon lease
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report
at 55 Pyrmont Bridge Road and the acquisition proposal all of which are explained on pages 4 and 5 of this
is as follows. The unitholder information set out below was current as at 24 August 2018.
report. Other than these matters, to the best of the Directors’ knowledge, there have been no other matters
or circumstances that have materially affected the Trust’s operations or may materially affect its operations,
Unitholders
state of affairs or the results of operations in future financial years.
Directory of Properties
Property
Canberra North
Varsity Lakes
Property address
490 Northbourne Ave, Dickson ACT 2602
194 Varsity Pde, Varsity Lakes QLD 4227
Pyrmont Bridge Road
55 Pyrmont Bridge Rd, Pyrmont NSW 2009
Hobart
162 Macquarie St, Hobart TAS 7000
Canberra South
10-14 Wormald St, Symonston ACT 2609
Bakehouse Quarter
George St, North Strathfield NSW 2137
Sippy Downs
Yandina
Toowoomba
30 Chancellor Village Blvd, Sippy Downs QLD 4556
54 Pioneer Rd, Yandina QLD 4561
50 Industrial Ave, Toowoomba QLD 4350
The Trust’s top 20 largest unitholdings were:
Investor
BlackWall Fund Services Limited
Pelorus Private Equity Limited
Seno Management Pty Ltd
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