Charter Hall
Group
Annual Report
2017
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R E SILIE N T
W T H
G R O
OUR
STRATEGY
We use our property expertise to access,
deploy, manage and invest equity in our
core real estate sectors – office, retail and
industrial – to create value and generate
superior returns for our customers.
ACCESS
Accessing equity
from listed,
wholesale and
retail investors
DEPLOY
Creating value
through attractive
investment
opportunities
MANAGE
Funds management,
asset management,
leasing and
development
services
INVEST
Investing alongside
our capital
partners
FY17
$2.3b
gross equity raised
5 YEAR
$8.1b
gross equity raised
$5.2b
gross transactions
$3.0b
acquisitions
$2.3b
divestments
$17.3b
transactions
$11.7b
acquisitions
$5.6b
divestments
$2.4b
FUM growth
329
assets
7.7years
Weighted Average
Lease Expiry (WALE)
$11.4b
FUM growth
144
additional properties
$430m
increase in PI1 to $1.5b
39%
19.8%
Total Property
Investment Return2
$1,050m
increase in PI
220%
14.7p.a.
Total Property
Investment Return2
1. PI refers to the Property Investment Portfolio
2. Total Property Investment Return calculated as distributions received from funds plus the growth in investment value divided by the opening investment value of the
Property Investment Portfolio. This excludes any investments held for less than a year.
COVER IMAGE
333 George St,
Sydney NSW
INSIDE FRONT
COVER IMAGE
1 Martin Place,
Sydney NSW
C E
S T R A T E GIC
R E SILIE N
Our integrated business model,
coupled with our highly skilled team
across investment management, asset
management, property management
and project delivery provides a
differentiated experience that delivers
sustainable returns for our investors
and positive outcomes for our tenant
customers, people and the community.
Charter Hall Group (ASX:CHC) is a
stapled security comprising a share
in Charter Hall Limited (CHL), the
operating funds management business,
and a unit in Charter Hall Property
Trust (CHPT), which predominantly
co-invests in the funds and
partnerships managed by the Group.
O
N
U R
To be the s m art
VISIO
property choice.
best and m ost highly
To be A ustralia’s
investm ent and funds
regarded property
m anage m ent business.
U R G
O A L
O
R E SILIE N T
W T H
G R O
WHAT SETS
US APART
As a property funds and investment
manager we own and manage a
commercial property portfolio valued
at $19.8 billion comprising 329 office,
retail and industrial and logistics
properties on behalf of our institutional
and retail investors.
Charter Hall Group
02
2017
HIGHLIGHTS
04
CHAIR’S REPORT
06
MD & GROUP
CEO LETTER
08
PROPERTY FUNDS
MANAGEMENT
PERFORMANCE
10
OFFICE
14
RETAIL
16
CASE STUDIES
18
INTEGRATED
SUSTAINABILITY
12
INDUSTRIAL
& LOGISTICS
23
BOARD OF
DIRECTORS
24
FINANCIAL
REPORT
22
EXECUTIVE
COMMITTEE
112
INVESTOR
INFORMATION
113
CORPORATE
DIRECTORY
Annual Report 2017 01
GROUP
HIGHLIGHTS
OUT PERFORMANCE
OVER 1, 3, 5 YEARS (% P.A.)
Property Investment Portfolio
MSCI IPD Index Performance
1 YEAR P.A.
3 YEARS P.A.
5 YEARS P.A.
12.0%
11.6%
16.1%
14.7%
10.3%
19.8%
H T S
H LIG
2 0 1 7
HIG
02 Charter Hall Group
Drystone Industrial Estate, VIC
SECTOR
HIGHLIGHTS
9.2
8.5
W A LE Y R S
6.5
9 8.5 %
O C C U P A N C Y
111
$5.5 b
9 7.4 %
1 6 8
9 7.5 %
P O R TF O LIO
5 0
$5.2 b
F U M
$9.1 b
U S T RIA L
R E T AIL
O F FIC E
D
IN
DIVERSIFICATION BY EQUITY SOURCE
Wholesale Equity 65%
Retail Equity 14%
Listed Fund 21%
$4.1m
$2.8m
$12.9m
OPERATING EARNINGS
35.9cps
18.1%
1. Total Platform Return is calculated as
the distribution per security plus the
growth in NTA per security divided
by the opening NTA per security
adjusted for contributed equity.
STATUTORY PROFIT AFTER TAX
$ 257.6m
19.7%
TOTAL PLATFORM RETURN1
27.6%
FUNDS UNDER MANAGEMENT (FUM)
$19.8b
13.7%
PROPERTY INVESTMENT PORTFOLIO
$1.5b
BALANCE SHEET GEARING
0%
Annual Report 2017 03
CHAIR’S
REPORT
DAVID
CLARKE
Chair
04 Charter Hall Group
WELCOME TO THE
CHARTER HALL GROUP
2017 ANNUAL REPORT
Dear Securityholders,
Charter Hall Group has produced another
solid full year financial result, delivering
growth in the 2017 financial year across
all key metrics to provide shared value
to our securityholders and investors, our
tenants, our people and the communities
we operate in.
The Group continues to perform strongly,
driven by a purposeful strategy that has
been judiciously executed to deliver a
record result.
This continues our solid growth trajectory
which, in the past five years, has resulted
in the Group delivering compound average
growth of 11.6% in operating earnings per
security and compound average growth of
10.5% in distributions per security.
Our ranking as one of the highest
performing A-REITs in the ASX 200 Property
Accumulation Index endures. In the 2017
financial year, we continued to focus on our
strategy to access, deploy, manage and invest
equity alongside our investment partners in
our core real estate sectors to deliver a total
property investment return of 19.8%.
continues to have no net debt on balance
sheet, and look-through gearing has fallen
to a conservative 20.1%.
This places the Group in an excellent
position to capitalise on opportunities across
its investment portfolio, with some $3 billion
in available investment capacity across
our platform.
A high performing, diverse and
engaged culture
As a business, we have a clear vision to
deliver innovation supported by inclusion
and diversity. An inclusive and diverse culture
delivers greater equality, and better ideas.
The achievement of such a culture requires
practical action and unrelenting focus.
The question we considered at a Board
and Executive level was ‘What do we need
to do to make a real difference and how
will diversity and inclusion support our
business strategy?’
In response, we have a very clear policy
that sets gender targets for leadership
levels and further commits to gender-
balanced shortlists and hiring panels for
all leadership positions.
Sustainable balance sheet
Your Board has purposefully engaged
the management team to focus on
maintaining a best in class approach to
capital management. As a result, the Group
Another important aspect to achieving
a high performing, diverse and engaged
culture is a focus on internal talent. Charter
Hall’s unique operating model, as well as the
level and type of activity across the Group
“ The Group continues to
perform strongly, driven
by a purposeful strategy
that has been judiciously
executed to deliver a
record result.”
Outlook
The strong financial position of Charter
Hall Group, and the quality and diversity
of its underlying investments, which it
holds through direct property, partnerships
and funds are well positioned for resilient
performance.
The focus of your Board is in providing
clear governance and oversight to assist
management in continuing to create
sustainable, long-term investment returns
through diligent value creation and prudent
capital management.
As we continue to build on the Group’s
solid foundations, I take this opportunity
to thank our customers, investors and
securityholders and our highly skilled
people for their continued support.
means that we are able to provide a wide
variety of opportunities for our people to
develop and grow their career with us.
To ensure that we are building our talent
pipeline and that our people see clear
career pathways for themselves in the
business we look at transferrable skills and
provide employees the opportunity to work
anywhere in the business.
Our commitment also extends to attracting
young talent to grow our talent pipeline and
facilitate greater innovation. Our partnership
with Western Sydney University and the
University of Technology Sydney as part
of the Charter Hall Scholarship Program
is testament to this.
A strong board with a diverse skill set
The Charter Hall Board continues to
comprise a majority of independent
directors, in line with best practice.
During the period, Mr Peter Kahan
resigned from the Charter Hall Group
board effective 20 December 2016. We
thank him for the significant contribution
he made during his seven-year tenure as
a non-executive director.
Mr David Ross was appointed as an
Independent Director of the Charter Hall
Group with effect from 20th December
2016. Mr Ross has 30 years’ experience
in the property industry in Australia and
overseas, including a total of 8 years
as Chief Executive Officer of GPT and
Global Chief Executive Officer, Real Estate
Investments for Lend Lease.
I encourage all our securityholders to
familiarise themselves with your directors –
our biographies can be found on page 30
of the Directors Report.
Sustainability and community
We are committed to creating shared
value outcomes in our business through
the key pillars of environment, workplace
and community, and are proud to be
collaborating with our industry partners,
GBCA, NABERS, GRESB and WELL
Building Institute to expand our Green
Star footprint.
During the period, Charter Hall became
the largest Green Star rated portfolio in
Australia with 178 performance ratings
across assets we manage. We’ve also
improved our NABERS energy rating in
our office portfolio to 4.5 and had our
retail portfolio rated 3.77. We will continue
to look to further improve upon these
positions and lift our portfolio ratings.
We are also proud to partner with the
international movement, Pledge 1%, which
integrates our business commitment with
investment in our communities, through our
people, our places and our partnerships.
Annual Report 2017 05
MD & GROUP
CEO LETTER
DAVID
HARRISON
Managing Director
& Group Chief
Executive Officer
Charter Hall Group has delivered a
record result in the 2017 financial
year as we continued to focus on
accessing, deploying, managing
and investing capital to deliver
secure and growing income for
our capital partners and investors.
RESILIENT
GROWTH
Performance highlights
In a period of intense activity, the 2017
financial year was marked by a record
$5.2 billion of gross property transactions
as our teams worked collaboratively to drive
value for our funds, partnership investors
and securityholders.
At the property level, we executed 646
leases – covering 729,000 square metres
of space – with a healthy weighted average
rent review of 3.5% across the portfolio.
The strength of the Group’s financial
performance can be seen across all our
key financial metrics:
• Statutory profit after tax grew 19.7% to
$257.6 million
• Operating earnings per security pre-tax
grew by 33.3% to 40.5 cents per security
• Operating earnings per security post-tax
grew by 18.1% to 35.9 cents per security
• Net tangible assets grew 56 cents per
security to $3.60, up 18.1%, and
• Distributions grew 11.5%, to 30.0 cents
per security.
Following another active 12 months of
securing equity flows, deployment via
development and acquisitions, together with
the successful IPO of the Charter Hall Long
WALE REIT (ASX:CLW), we have achieved
Funds Under Management growth of 13.7%
to $19.8 billion.
06 Charter Hall Group
Our balance sheet Property Investment
portfolio has also grown, rising to $1.5 billion
in value and generating an attractive 6.9%
property investment yield during FY17.
Delivering sustainable returns
We continue to curate our portfolios with
a risk-adjusted focus on optimising returns,
and delivering resilience and durable cash
flows by enhancing tenant quality, extending
WALE and driving income growth.
The Group successfully raised and deployed
additional equity over the year into a range
of new fund initiatives as well as investing
alongside our capital partners into our
existing vehicles.
Our Property Investments have continued
to outperform their respective benchmarks,
with the Group’s Property Investments
delivering 14.7% per annum return over
the 5 years to 30 June 2017. As a result,
our Property Investments, outperformed
the MSCI/IPD Unlisted Wholesale Pooled
Property Funds Index which returned
10.3% over the same period.
Delivering on strategy
Performance and new fund innovation
continue to reap significant rewards for the
Group, delivering strong equity flows across
our diversified equity sources.
We raised a record $2.3 billion of gross
equity over the year, taking gross equity
flows to $8.1 billion over the past five years.
Notably, all equity sources contributed
to this growth during FY17.
Across our investment portfolios, the
$5.2 billion of record gross transactions
included $2.3 billion of divestments as we
sought to crystallise gains for our investors
and enhance portfolios.
We have now made over $5.6 billion
of divestments over a five-year period,
successfully repositioning our funds to drive
sustainable returns and lock in realised
returns. Preservation of capital and driving
resilient income remain core strategies.
The 13.7% growth in our overall funds
under management has been driven by
net acquisitions, development capex and
net revaluations, with completed office
developments contributing strongly to
valuation growth.
Maintaining a strong balance sheet
The Group’s balance sheet remains
ungeared with $174 million of cash on
hand as at June 30, providing us with
sufficient scope to capitalise on current
market conditions, with $3 billion of available
investment capacity across the platform.
We continue to extend and deepen our
relationships across both the banking and
debt capital markets and, during the year,
we completed three US private placements,
raising $548 million and delivering increased
debt tenor, enhanced Fund liquidity and
diversification of lending sources.
Growth in property investment earnings
Our Property Investment Portfolio represents
the ‘Invest’ part of our strategy which provides
a strong alignment of interest with our investor
customers. This alignment of interest
ensures our investors and securityholders
prosper together, collectively benefitting
from our property and investment expertise.
The Group’s investments are well diversified
across sectors and funds. During the
period, our Property Investment Portfolio
grew significantly by 39% and is now over
$1.5 billion in value. This was a result of
$304 million of net investments and
$118 million of positive net revaluations,
aided by our recent successful equity raising.
Property Investment Portfolio earnings grew
8.2%, primarily driven by weighted average
rent review growth of 3.6 %, complemented
by strong market rental revision in the Office
sector and the $304 million increase of net
investments in the Property Investment
Portfolio during the year.
The Group property investments chart
shows the growth of our total Property
Investment Portfolio to $1.5 billion and our
co-investment yield, which was relatively
stable over the past year, at 6.9%.
High quality, diversified
property portfolio
The weighted average lease expiry (WALE)
of the Property Investment Portfolio is high
relative to our peers at 7.4 years, but did
decline year on year, reflecting a strategic
change in the portfolio composition.
The Group swapped most of its stake in
the Long WALE Investment Partnership into
an equity position in the listed Charter Hall
Long WALE REIT, moving a portion of our
investments from a WALE of 17.2 years to
a WALE of 11.8 years. We still maintain our
exposure to these assets, but now in a more
diversified portfolio.
Our tenant retention remains high, at 76.2%,
albeit our team has capitalised on some
vacancy opportunities in Sydney to capture
rental upside through tenant movement, taking
advantage of the strength in the Sydney
office leasing market. This contributed
positively to an uplift in our weighted
average rent review from 3.4% to 3.6%.
Growth in funds management
Our Property Funds Management portfolio is
well-diversified, having grown to 329 properties,
leased to 2,658 tenants and delivering nearly
$1.5 billion dollars of gross rental income.
We have continued to diversify our equity
sources, which now comprises:
• 65% Wholesale equity
• 21% listed equity (comprising Charter Hall
Retail REIT (CQR) and the successful IPO of
Charter Hall Long WALE REIT (CLW)), and
• 14% equity in our market-leading
Charter Hall Direct delivering a significant
earnings contribution.
We also continue to focus on delivering a
sustainable and resilient return through property
sector diversity, with 46% of our investments
in Office; 26% in Industrial, and 28% in Retail.
That resilience exists across all our assets.
In the Retail sector, for instance, more than
35% of the portfolio is in Long WALE assets
leased to the market leader Bunnings in
Hardware, and ALH and Dan Murphy’s in
pubs and big box retail liquor stores.
Investment Management revenue increased
41% year on year, contributing nearly 75%
to FY17’s Property Funds Management
revenue, while funds management fees grew
nearly 20% – a result of new fund creation,
property acquisitions by existing funds,
and valuation gains.
Development skills a core competency
The Group currently has $1.9 billion of
committed development projects with a
forward pipeline of identified projects of
$2.8 billion.
All development activity takes place in our
managed funds, which have mandates that
permit development, refurbishment and
repositioning of assets to enhance value and
expand their core investment holdings.
These developments will generate high quality,
long leased commercial property for our funds,
at yields in excess of current transaction
pricing. This also provides attractive
incremental FUM growth for Charter Hall and
enhances our credentials to attract capital.
Outlook and guidance
Looking forward, we remain confident in
the underlying strength of our Australian
portfolio, which is well diversified to position
us strongly through market cycles.
We believe the investment landscape will
continue to accommodate growth based
on; the relative attractiveness of real assets,
continued forecast equity flows into real asset
fund managers with strong track records,
and asset values remaining well supported.
As a result, we expect to see continued
support for our business model, which
benefits from multiple sources of equity
flows towards high quality real estate.
With another active year ahead of us,
we will be as focused as ever on delivering
our strategy to access, deploy, manage
and invest alongside our listed, retail and
wholesale investors.
Based on no material change in current
market conditions and having regard to the
18% earnings growth achieved in FY17 over
FY16, our FY18 guidance is for operating
earnings per security post-tax to be no less
than FY17 of 35.9 cents per security.
The distribution payout ratio is expected
to normalise and fall within our longer-
term target range, being 85% to 95% of
Operating Earnings Per Security post-tax
on a full-year basis.
Finally, I would like to thank our people
based around Australia for their continued
hard work and dedication toward achieving
these results. And on behalf of our senior
executive management team, I thank you,
our securityholders, for your continued trust
in us as we deliver for you.
Annual Report 2017 07
GROUP PROPERTY INVESTMENTS
Investment Portfolio
Co-investment Yield (%)
7.7
7.5
7.4
$1527m
$1098m
6.9
$944m
$720m
$603m
$530.1m
JUN-12 JUN-13
JUN-14 JUN-15
JUN-16
JUN-17
PROPERTY FUNDS MANAGEMENT
EARNINGS DRIVER
FUM
PFM EBITDA Margin (%)
$19.8b
$17.5b
50
$13.6b
37
35
$8.4b $9.9b
29
29
$11.5b
31
JUN 12 JUN 13 JUN 14 JUN 15 JUN 16 JUN 17
FUNDS UNDER MANAGEMENT
GROWTH
Retail
Listed
Wholesale
$13.6b
1.9
2.2
9.5
$11.5b
1.7
2.0
7.8
$19.8b
$17.5b
2.8
2.5
2.5
12.5
4.1
12.9
JUN-14
JUN-15 JUN-16
JUN-17
PROPERTY FUNDS
MANAGEMENT
PERFORMANCE
GROSS TRANSACTIONS
Office
Other
Retail
Industrial
$5,215m
$3,742m
$2,295m
$3,023m
$105m
$704m
$1,004m
$1,211m
$2,629m
$1,527m
$603m
$1,156m
$870m
$1,104m
$1,816m
$902m
$1,313m
FY14
FY15
FY16
FY17
“ FY17 has been a record year for transactions as
we continue to focus on delivering a sustainable
and resilient return to our investors through
property sector diversity.”
SEAN MCMAHON, CHIEF INVESTMENT OFFICER
FUM BY EQUITY SOURCE
WALE BY SECTOR
Wholesale equity
Retail equity
Listed fund
Office
Retail
Industrial
$19.8b
2.8
4.1
$17.5b
2.5
2.5
12.4
12.9
$13.6b
1.9
2.2
9.5
$11.4b
1.7
2.0
7.8
$9.9b
1.7
1.8
6.5
$8.4b
1.5
1.6
5.4
9.2yrs
8.5yrs
6.5yrs
JUN-12
JUN-13 JUN-14
JUN-15
JUN-16
JUN-17
18.7%
CAGR1
Office
Retail
Industrial
ASSET TYPE DIVERSIFICATION
TOP TEN TENANTS
Office
Retail
Industrial
Diversified – Long WALE
11.8%
11.2%
8.3%
18%
10%
26%
Woolworths
Wesfarmers
Government
Telstra
3.0%
Commonwealth Bank
2.6%
Macquarie Bank
1.8%
Metcash
1.7%
Suncorp Metway
1.3%
Aurizon
1.0%
Westpac
0.9%
$19.8b
Funds Under
Management
46%
08 Charter Hall Group
WA
46
Properties
valued at $2.7b
NT
2
Properties
valued at $0.1b
SA
21
Properties
valued at $1.0b
PORTFOLIO OVERVIEW2
NT
Office
Retail
Industrial
SA
Office
Retail
Industrial
VIC
Office
Retail
Industrial
WA
Office
Retail
Industrial
NSW / ACT
Office
Retail
Industrial
TAS
Office
Retail
Industrial
0
1
1
4
10
7
11
28
32
QLD
77
Properties
valued at $3.7b
NSW / ACT
104
Properties
valued at $7.9b
VIC
71
Properties
valued at $4.3b
TAS
7
Properties
valued at $0.2b
QLD
Office
Retail
Industrial
10
48
19
9
22
15
15
54
35
1
5
1
1. Compound Annual Growth Rate (CAGR) from 30 June 2012 to 30 June 2017
2. Excludes one New Zealand asset acquired June 2017
Annual Report 2017 09
OFFICE
Members of the Charter Hall
Office Team (Clockwise from left):
Adrian Taylor, Dawn Wilson, Margaret Liu,
Andrew Borger and Lorraine Lee.
10 Charter Hall Group
“ As one of the largest
managers of CBD office
properties in Australia,
our proactive asset
management strategy
means we are focused
on portfolio composition,
through selectively
disposing of non-core
assets and acquiring,
re-developing or
repositioning existing
assets to ensure they
remain attractive to our
tenant customers and
deliver enhanced value
for our investors.”
ADRIAN TAYLOR,
GROUP EXECUTIVE – OFFICE
$2.09b
TOTAL
DEVELOPMENT
PIPELINE
$9.1b
FUM
6.5yrs
WALE
50
PROPERTIES
5.87%
CAP RATE
98.5%
OCCUPANCY
$594m
CHC INVESTMENT
For case studies, please visit
charterhallFY17.reportonline.com.au/
chc/#our-sector
What are your strategy and key
areas of focus for Charter Hall’s
office sector?
Our strategy remains to proactively manage
our portfolio to create enhanced value for
our investors and tenant customers.
We manage 50 properties that supply
one million sqm of CBD office space
nationally with a strong focus on the
length of leases and on continually
improving the quality and composition
of our portfolio.
FY17 has seen our $9.1 billion national
office portfolio deliver strong returns to
our capital partners across wholesale,
institutional and retail equity sources.
Our ability to attract equity reflects
investor confidence in our performance
and how, through our strong
relationships, we can optimise our
portfolio composition via continually
improving our existing assets, acquiring
suitable assets or disposing non-
core assets and originating organic
development opportunities. We are
not asset accumulators; we are asset
managers concerned with the quality,
diversity and performance of our
portfolio. Our competitive advantage
is the skill base and relationships
possessed by our team and active
management of our portfolio.
What are the performance
highlights for office in FY17?
The performance of our portfolio in the
past year has been very strong with
occupancy of our assets at 98.5%.
Funds under management have
increased to $9.1billion and our WALE is
very healthy at 6.5 years. The underlying
performance of the funds is top quartile
and sector leading. For example; our
largest wholesale office fund, the Charter
Hall Prime Office Fund (CPOF), provided
investors with a 19.2% return in fiscal
2017, the highest return of all funds in the
Mercer/IPD Australia Unlisted Wholesale
Index. CPOF also formed several new
domestic and international investor
relationships during an oversubscribed
equity raising of $541 million.
CPOF’s $3.4 billion Prime-Grade
portfolio of 21 office properties is well
positioned with over 80% located in the
strong performing eastern seaboard
states with an occupancy level of 98%
and an average WALE of 6.4 years.
With a young portfolio reflecting a
weighted average asset age of just
nine years, CPOF acquired 50% of the
NSW government leased 105 Philip St,
Parramatta, and post balance date
acquired Melbourne Waters Docklands
Head Quarters, providing a combined
11 year WALE.
Post balance date, we announced the
appointment of Matthew Brown as Fund
Manager of CPOF. Mr Brown joins the
Fund from GIC where he held the position
of Senior Vice President – Deputy Head
Asia, Real Estate and has twenty years of
Australian and international commercial
property investment experience.
Together with a significant development
pipeline, CPOF is well placed to grow its
portfolio and continue its outperformance.
Similarly, the $2.6 billion wholesale
Charter Hall Office Trust (CHOT) has also
delivered exceptional returns: more than
45% in FY17 with an average return of
18% over five years.
The Group’s market leading unlisted Direct
Office Fund (DOF) has also accepted a
further $250 million in equity from investors
since September 2016 and in total has
raised $500 million since reopening in
2015 and continues to see further equity
inflow in the new financial year.
The combined impact from both equity
raisings and prudent capital management
initiatives will see the Group continue
to access a pipeline of high quality
geographically diverse assets across
the office sector.
How have your customer
relationships developed in the
past year?
We partner in different ways with our
customers depending on their needs
and relationships with Charter Hall. Over
the past year, we have received positive
responses to customer feedback from
both investor and tenant customers. Our
investor client feedback is very positive
with four years of continual improvement.
On the tenant side, our ratings also
improved and level of engagement the
highest we have recorded.
A significant development in the past
year is the work we have done to turn
our business further out to face the
customer. We work with our sector
colleagues in retail and industrial to map
our customers’ future needs and provide
a whole of property requirement service.
In office asset management in particular,
we are putting a customer lens over how
we operate. We appointed a new head
of office asset management who has
20 years’ experience as a tenant
customer. A significant change is to
our lease documentation, which is
more tenant-friendly, bringing a more
considered approach to negotiations and
cutting time and expense for tenants.
We also created a new role, Innovation
Lead – Office, that is dedicated to
bringing innovative solutions to our
business and our tenancies.
What innovative solutions are you
providing your tenant customers?
One innovation is Flexispace, a meeting
and workspace solution for Charter Hall
customers at our No.1 Martin Place
building, who may have a short term
need for meeting, workspace or event
areas. Flexispace recognises the dynamic
nature of business and the need for
organisations to be able to easily expand
and contract their space requirements.
Within our own tenancy at No.1 Martin
Place, we also trialled an Australian first
technology called Comfy. One of the
challenges that we have been trying to
solve is how we provide a superior tenant
occupant experience. Comfy helps us
achieve part of this by using machine
learning, to understand the comfort
requirements of individuals and adjusts
the temperature to suit.
We will aim to introduce this technology
and others across our portfolio as part
of our effort to offer an integral suite of
services that will assist the Group to provide
a new level of customer experience.
What are the main challenges and
opportunities in the near future?
Our team is focussed on sustainable,
long-term returns for investors and we
are confident we will continue to be top
performers in the office space market.
As we take a through the cycle view
on investing, our office portfolios are
well positioned to continue to deliver a
balanced income stream, underpinned
by the quality of our tenants’ profile and
the strength and length of our leases,
which typically have annual fixed rental
increases of over 3.5%.
Placing energy in our innovative customer
initiatives is an investment in our future
and we will continue to deliver more for
our tenant customers, and as always,
we will focus on the quality, strength and
resilience of our portfolios.
Annual Report 2017 11
INDUSTRIAL
&
LOGISTICS
“ As one of Australia’s
leading managers and
developers of industrial
and logistics real estate,
our focus is on owning
and managing a
geographically diverse
portfolio of high quality
properties with strong
tenant covenants, whilst
harnessing and growing
relationships with our
tenant customers across
all sectors of our
business.”
SEAN MCMAHON,
CHIEF INVESTMENT OFFICER
$1.65b
TOTAL
DEVELOPMENT
PIPELINE
$5.2b
FUM
9.2yrs
WALE
111
PROPERTIES
6.4%
CAP RATE
97.4%
OCCUPANCY
$409m
CHC INVESTMENT
For more information, please visit
charterhallFY17.reportonline.com.au/
chc/#our-sector
Members of the Charter Hall Industrial Team
(From left): Richard Mason, Simon Greig
and Kerri Leech.
12 Charter Hall Group
What are the key areas of focus for
Charter Hall’s Industrial sector?
We are one of Australia’s leading
managers and developers of industrial
and logistics real estate, and we are
focused on sustainable and stable growth
to provide our investors with resilient and
attractive returns. We achieve this by
securing strategic industrial investments
that will add to the quality of the portfolio,
and by developing a deep understanding
of our customers’ logistics requirements.
This year, we grew our funds under
management to $5.2 billion, up from
$4.5 billion last year. Through acquisitions,
divestment of non-core assets and organic
development opportunities we continue
to enhance existing tenant relationships
and attract new tenants to our national
portfolio. Our integrated business model
provides end to end solutions for our
tenant customers and is a scalable
platform that benefits from economies of
scale generated by our continued growth.
What are the performance
highlights for FY17?
We have increased our number of
properties from 87 in FY16 to 111
properties in FY17, with a robust
occupancy of 97.4% and Weighted
Average Lease Expiry (WALE) of 9.2
years. Our focus on portfolio quality
in the industrial sector resulted in the
divestment of $941 million of non-core
properties and the acquisition of
$1.35 million of properties.
Our industrial and logistics funds
remain among the strongest performing
wholesale and unlisted funds in Australia,
according to the MSCI/IPD Unlisted
Wholesale Property Fund Index.
Over a five-year period (30 June 2012
to 30 June 2017), our largest industrial
fund, the Charter Hall Prime Industrial
Fund (CPIF), has delivered a 12.0%
investment return and our Core Logistics
Partnership (CLP) fund has delivered
13.1% investment return.
During the year, CPIF closed a $300 million
equity raising oversubscribed, with the
raising following the $450 million raised
in FY16. In addition, in March 2017, the
fund enhanced and increased the tenor
of its debt-funding platform, raising
AUD$350 million (equivalent) through a
US Private Placement (USPP) transaction.
The industrial sector has been a key
growth sector for Charter Hall during
the past five years, with the portfolio
now representing 27% of the Group’s
$19.8 billion funds under management.
Where are the opportunities
for innovative solutions?
How are you strengthening
your partnerships?
Our portfolio enjoys a strong 60%
repeat business rate and high tenant
retention of 74%, enabling us to take a
holistic view of our customers’ needs,
right throughout the supply chain from
warehousing to the consumer.
During the past year, we made several
strategic acquisitions and divestments of
assets to strengthen both the quality of
our funds and our client relationships.
Notably, the acquisition by Charter Hall
Prime Industrial Fund (CPIF) of a high
quality, strategically located facility at
220-260 Orchard Road, Richlands,
Queensland from Coca Cola Amatil on a
20-year sale and lease back arrangement
strengthens our relationship with Coca
Cola Amatil and demonstrates our
ability to partner with customers across
our industrial platform. The acquisition,
subject to subdivision, improves CPIF’s
WALE from 7.8 years to 8.5 years and
increases the fund’s weighting to another
high-quality tenant in the east coast
industrial market.
Leveraging the Group’s sector expertise
and relationships, we also acquired,
on behalf of the ASX listed Charter Hall
Long WALE REIT, a portfolio of ten
properties from Recycling & Recovery Pty
Limited (SUEZ) for a total consideration
of $65.9 million. The triple net portfolio
lease to SUEZ, a high calibre tenant
that has a leading position in the waste
recycling sector, has a portfolio WALE of
15 years and is consistent with the REIT’s
investment strategy of acquiring assets
with long leases to high quality tenants
with leading market positions.
We strengthened our customer
partnerships across our sectors,
particularly with tenant customers
Wesfarmers and Woolworths, who
occupy space across our industrial,
office and retail sectors. During the
period, we acquired the purpose-
designed Woolworths South Dandenong
facility, which comprises a state of the
art logistics distribution centre, currently
under construction.
We also completed 45,000sqm of
industrial lease transactions in Canning
Vale in Perth including deals with
Automotive Holdings Group and Visy
Logistics who are also tenant customers
in our retail sector.
Our ability to harvest innovative ideas
and processes across our three sectors
gives our industrial customers access to
property solutions across office and retail.
This applies to systems, technology,
sustainability, leasing, financing and
resource management.
We are at the forefront of new technology
and automation, with the Woolworths
South Dandenong facility incorporating
the latest design standards. It features
leading material handling, and sortation
and distribution systems with high
clearance warehousing. Access and
loading is provided via 63 loading docks,
with the site accommodating up to
B-Triple heavy vehicle movements.
What are the challenges and
opportunities in the near future?
We will remain focused on securing strategic
industrial investments that will add to the
quality of the portfolio and deliver earnings
per unit growth for our capital partners.
Our in-house development team has a
$657 million active pipeline of committed
industrial projects that will enhance income
yield and returns to our investor customers.
Our focus on building a portfolio of well-
located, high quality assets that have
quality tenants with long leases provides
us both resilience and strength to
succeed in the markets we operate in.
We seek to optimise value in growth
markets and, in less active markets such
as Perth, we are completing leasing deals
well ahead of our forecasts, and ensuring
that our portfolio of assets is fit for purpose
and situated in strategic locations.
The logistics sector is expected to be
a beneficiary of ecommerce and we
forecast this megatrend to increase net
demand for space in the logistics market
and are positioning our platform to
service these requirements.
Sustainability continues to be at the
forefront of our strategy and as rising
power costs and automation grows, we will
continue to innovate to reduce operating
overheads for our tenant customers and
future proof our asset base.
Cross sector relationships with high
quality tenants offer opportunities that
increase in quality and value each year.
Our commitment to working with our
sector teams on improved solutions for
our cross-sector tenant customers will
strengthen further.
Annual Report 2017 13
RETAIL
Members of the Charter Hall Retail Team
(From left): Greg Chubb, Ben Ellis
and Yvette Keatings.
14 Charter Hall Group
“ As the leading owner and
manager of Australian
convenience based
supermarket anchored
shopping centres and
with a portfolio of
hardware, automotive
showroom and
hospitality assets, we are
providing a secure and
growing income stream
for our investors,
building positive
partnerships with our
tenant customers and
creating great places
to work for our people.”
GREG CHUBB,
GROUP EXECUTIVE – RETAIL
$5.5b
FUM
8.5yrs
WALE
168
PROPERTIES
6.08%
CAP RATE
97.5%
OCCUPANCY
For more information, please visit
charterhallFY17.reportonline.com.au/
chc/#our-sector
team members swam to Rottnest Island
to raise funds for the local Surf Life
Saving Club. This type of deep level of
community engagement is encouraged
and supported by the Charter Hall Group
through its shared values framework.
Community engagement extends to
our sustainable approach to designing,
developing and enhancing efficiencies
in our assets. In 2017, we met our
sustainability target for the Charter Hall
Retail REIT by achieving a Green Star
portfolio rating on our existing portfolio
and Green Star ratings on all new
developments.
What are the main challenges and
opportunities in the near future?
Retail is a competitive environment, and
much has been written about the threat
of online to traditional retail stores. Our
non-discretionary convenience and
community based retail presence is
focused on consumers’ every-day needs
ensuring our resilience and relevance in
an ever evolving retail landscape. Our
150 retail professionals operate in more
than 100 communities across Australia.
This plays a strong part in our success
due to a deep understanding of those
communities and the ability of our people
in our centres, to respond quickly to our
tenants and their customers’ needs.
We appreciate that our shoppers have
a choice and we are retaining their long-
term loyalty by providing an enjoyable
and safe in centre experience, convenient
retail choices and high quality amenity.
What are your strategy and key
areas of focus for Charter Hall’s
retail sector?
Our strategy in the retail sector is
to continue to provide a secure and
growing income stream for our investors.
We do this in two ways; one is through
non-discretionary convenience based
shopping centres and the other is through
single-tenant long-leased assets with
tenant customers including Bunnings
and ALH Group.
We have 168 properties in our portfolio
valued at $5.5 billion, an increase in
value of 11.5% since June 2016. Those
properties are mostly non-discretionary
supermarket-anchored shopping centres,
plus Bunnings Warehouse properties,
ALH Hospitality venues, and Automotive
Holdings Group automotive showrooms.
Another key part of our growth strategy
is our exposure to Australia’s leading
retail companies; Woolworths and
Wesfarmers. We are harnessing an
understanding of their property needs
across our Retail, Office and Industrial
and Logistics sectors to provide total
solutions for their property requirements.
What are the performance
highlights for retail in FY17?
We’ve grown our funds in non-
discretionary supermarket-anchored
shopping centres and long leased
product. Funds under management have
increased to $5.5 billion and we have a
healthy WALE of 8.5 years.
Our focus on retention of our tenant
customers and our team of property
specialists, has paid off with occupancy
at 97.5%. We have renewed 90% of
our leases during the period and expect
our high occupancy and strong WALE
to continue.
During the past year, we have been
actively divesting smaller assets with
limited prospects for growth and
reinvesting those funds into higher growth
potential assets via both development
opportunities and acquisition.
How have your investor and
tenant partnerships developed
in the past year?
During the year we created a new
wholesale property partnership for retail
shopping centre assets, by co-investing
with one of Australia’s largest super funds
MTAA Super, to acquire Campbelltown
Mall in an off market transaction for a total
purchase price of $197 million, reflecting
a market capitalisation rate of 6.00%.
We have also been strengthening
partnerships with our tenant customers
completing 450 specialty leasing
transactions along with delivering
brand new centre facilities and major
redevelopments like Secret Harbour
Shopping Centre in Perth, a $60 million
project for our CQR fund.
Furthermore, our team of retail specialists
continue to focus on gaining insights into
both current and future tenant customer
requirements and are dedicated to
ensuring that we build and maintain
positive partnerships across our entire
tenant customer base.
We recently collaborated with Monash
University to develop and measure
an annual Net Promoter Score and
Relationship Satisfaction Matrix. Insights
from this survey showed our customers
advised overall positive satisfaction
with our relationship management and
pleasingly, 7 out of 10 tenant customers
strongly believe they will renew leases
within the portfolio and consider further
opportunities for growth with Charter Hall
as a preferred Retail property partner.
We continue to deepen our valuable
partnership with both Westfarmers
and Woolworths and have expanded
our relationship with ALDI. In the past
year we opened two new ALDI stores
and acquired an additional two due to
acquisitions.
Building strong partnerships with both our
investor and tenant customers through
active management of our funds and
centres reflects our strength, resilience
and growth mindset.
How are you engaging with your
communities?
Understanding our communities is key
to our performance. We are accessing
real time, high quality customer data,
which enables us to manage our tenancy
mix by better understanding shopper
preferences such as brands, stores,
experience and centre functionality. Free,
fast wifi is now available in a number of
our centres, which, along with benefitting
shoppers, provides further insights into
how and where they are engaging with
our tenant customers.
We have contributed more than 3,500
square metres of space (valued at
$500,000) to community groups and
we support initiatives in the regional
communities served by our shopping
centres. For example, our Secret Harbour
Annual Report 2017 15
CASE STUDY
DIVERSIFIED EQUITY SOURCES
“ As an investment and fund
manager, we understand that
performance is everything.
Over the past five years we
have accessed $8.1 billion in
gross equity from wholesale,
retail and listed investors and
deployed this into $11.7 billion
of acquisitions across our core
real estate sectors.”
RICHARD STACKER, GROUP EXECUTIVE –
GLOBAL INVESTOR RELATIONS
Charter Hall Group has continued to attract investors
to our real estate funds management platform with
$2.3 billion of gross equity raised from domestic and
international investors across all equity sources in the
past year. We deployed this equity into $3 billion of
acquisitions in our core real estate sectors – office,
industrial and logistics and retail – to create value
and generate superior returns for our customers.
“The Group is in an excellent position to
capitalise on opportunities across its
investment portfolio, with some $3 billion
of equity and undrawn debt available as
investment capacity.”
The addition of 18 new local and offshore wholesale
investors supporting capital raisings validates our
high performance as does the fact that 10% of those
funds raised came from international high net worth
investors, a reflection of the quality of our real estate
portfolio and the strength of the Australian commercial
real estate market.
Investors have been attracted to our investment
management platform based on a focus on real
assets and in the global context, Australian funds
rank highly among other countries in Asia Pacific.
During the period, the Group’s $3.4 billion flagship
office fund, the Charter Hall Prime Office Fund
(CPOF) completed an equity raising of over $500m,
oversubscribed. CPOF, which provided investors with
a 19.2% return in fiscal 2017, the highest return of all
funds in the Mercer/IPD Australia Unlisted Wholesale
Index, was accepted into the core series index from
July 2017 based on a gearing level of less than 30%.
The Group’s largest industrial fund, the $2.4 billion
wholesale Charter Hall Prime Industrial Fund
(CPIF), closed its $300 million equity raising, also
oversubscribed and was on top of the $450 million
raised in FY16. The fund also enhanced and
increased the tenor of its debt-funding platform in
March 2017, raising AUD$350 million (equivalent)
through a US Private Placement (USPP) transaction.
Both CPOF and CPIF are expected to open for
further equity in FY18. CPOF continues to focus on
the office markets in the strong eastern seaboard
states, where it has a strong pipeline of build to
hold opportunities. CPIF will continue to leverage
its strong relationships with tenant customers in
delivering new purpose built industrial facilities and
when strategically acquiring assets.
The Group’s market leading unlisted Direct Office Fund
(DOF) has also accepted a further $250 million in equity
from investors during the period and in total has raised
$500 million since reopening in 2015 and continues to
see further equity inflow in the new financial year.
The Charter Hall Direct business was acknowledged
during the year for its high performance awarded the
“Property Fund of the Year” at Money Management
/Lonsec’s 2017 Fund Manager of the Year Awards
along with the “Commercial Property – SMSF
Member” award at the CoreData Self Managed
Super Fund Awards 2017.
The equity raisings have strengthened the funds’
balance sheets, provided capital for new build-to-hold
assets, enhanced current assets and given us further
capacity for acquisitions. Providing solutions for our
tenant customers across office, industrial and retail
also helps us to deliver results for our investors and
capital partners.
Wholesale Pooled Funds
Wholesale Partnerships
Listed Funds1
Direct Funds2
Gross equity raised
16 Charter Hall Group
Equity flows includes
equity raised or returned
only and excludes undrawn
equity commitments
1. Listed Funds include
equity raised in CHC,
CQR and CLW
2. Funds and syndicates for
retail, SMSF and high net
worth investors
FY16
$m
606
467
76
318
FY17
$m
776
217
988
355
FY14
$m
651
261
260
277
FY15
$m
653
598
274
180
1,449
1,705
1,467
2,336
CASE STUDY
CREATING SHARED VALUE WITH PLEDGE 1%
“ We are proud to be the first
Australian property company
to commit to Pledge 1%.
Our Pledge initiative aligns
with our Shared Value
Framework and demonstrates
our approach to investing in
our people, customers and
the communities in which
we operate.”
NATALIE DEVLIN, GROUP EXECUTIVE –
PEOPLE, BRAND & COMMUNITY
• Developed a new partnership with WithYouWithMe
that solves the problem of effectively transitioning
personnel from the Australian Defence Force
to the Australian private sector. As part of the
program we have taken on our first ex veteran,
who is working across our Retail Operations in
Western Australia.
• Provided more than $1 million ‘in kind’ contribution
of retail and office space across more than 100
communities around Australia; and
•
Contributed $500,000 to community partners
either directly or through matching employees’
donations.
The exciting aspect about Pledge 1% is that it
formally recognises the great work our people,
our customers and the Group already contribute.
As we strive to become Australia’s best and most
highly regarded property investment and funds
management business, we acknowledge that our
focus on creating a Shared Value Framework requires
a cohesive, Group-wide approach to sustainability
and corporate responsibility.
“Salesforce is dedicated to changing the
way companies think about corporate
philanthropy. Today, we’re excited that
Charter Hall is joining us in giving their
resources back to the community. This
is another great example of the power
that business has to create change in
our communities.”
SUZANNE DIBIANCA, EVP OF CORPORATE
RELATIONS AND CHIEF PHILANTHROPY OFFICER,
SALESFORCE
Annual Report 2017 17
Charter Hall has joined Pledge 1% – the first
property company in Australia to do so. Pledge
1% is a philanthropic movement that encourages
organisations to create a culture of giving.
We are joining an impressive network of companies
across the globe, including Atlassian and Salesforce,
who have spearheaded their own philanthropic efforts
through the Pledge 1% movement.
“We are thrilled that Charter Hall has
joined the Pledge 1% movement and is
committed to sharing its success with
the community. Employees, shareholders,
customers, and the community all benefit
when a company builds giving back into
its DNA. It’s one of the best decisions
we ever made.”
SCOTT FARQUHAR, CO-FOUNDER AND CO-CEO,
ATLASSIAN
Pledge 1% enables part of our Shared Value
Framework, where we focus on three key themes;
eco-innovation, place creation and wellbeing
extended through how we engage with our people, in
our assets, and the communities in which we operate.
By pledging 1% of our people’s time, use of our
places and support to our community partners, we
are creating a difference that delivers a positive impact
for our investors, our people and the communities in
which we work and operate.
Charter Hall has always had a strong commitment
to giving back to its people and the communities in
which it operates and during the period Charter Hall’s
people and teams:
• Supported 24 charities through workplace giving
including preparing meals for the homeless,
sorting clothes for domestic violence shelters,
care for animals, planting trees and building
playgrounds for sick children
• Supported our three national community partners
which comprise the Property Industry Foundation
(PIF), Foundation for Young Australians, and
Australian Red Cross through training, mentoring
and donations
INTEGRATED
SUSTAINABILITY
At Charter Hall, we have integrated sustainability and community into
our business to create a shared value framework.
To become Australia’s best and most highly recognised property investment and
funds management business, we acknowledge that this requires a cohesive,
Group-wide approach to sustainability and corporate responsibility that addresses
all aspects of the property value chain.
Charter Hall’s Shared Value Framework recognises the UN Sustainable
Development Goals and is aligned with the four pillars that underpin our corporate
strategy: product, performance, people and partner. Our framework focusses on
three key themes that will create Eco-Innovation, Place Creation and Wellbeing,
with our people, in our assets and the communities in which we operate.
SUSTAINABILITY
18 Charter Hall Group
UN
Sustainable
Development
Goal
2017
Commitments
2017
Performance
FY20
Targets
FY25
Targets
Aspirational
Targets
ECO INNOVATION
Resilience
Implementation
of climate change
framework.
Create environmental
management
framework.
Implement emergency
management
framework.
Partner with Australian
Red Cross to provide
resilience programs
and resources.
Climate Change
Adaptation Plan
prepared for retail and
industrial development.
Environmental
Management
Framework
commenced.
Emergency
management framework
commenced in office
portfolio.
5 Australian Red Cross
Resilience programs
in 4 states with 60
employees participating
to build their resilience
and preparedness.
Enhancing Environmental Performance
All assets have climate
change adaptation plans.
Capital improvements
in portfolio in line
with Climate Change
Adaptation plans.
Resilient
communities
and future
proofed
assets.
All assets have
environmental management
plans to AS 14001.
Maintain certified EMS
to ISO 14001.
Emergency management
framework extended
across portfolio.
Fully integrated
emergency
management
framework.
Expanded employee and
community resilience
programs.
Green Star
Performance ratings
for office, retail and
industrial portfolios.
5 Star Green Star
ratings sought
on all new large
developments.
NABERS ratings in
retail centres over
15,000sqm.
Renewable energy
on all new large
retail and industrial
developments.
Development and
implementation of
Waste Management
Strategy.
Pilot recycling de-fit
projects in retail, office
and industrial assets.
178 Green Star
Performance Ratings
across Office, Retail and
Industrial assets.
18 Green Star Design
and As Built Ratings
across our Office
Developments.
Pathway to 2 degree
reduction in emissions.
Achieve 2 Degree
reduction in emissions.
Achieving
net zero.
3 Star average Green Star
Performance Rating across
the Group.
5 Star Green Star Design
and As Built ratings
sought on all new large
developments.
4.5 Star Average
NABERS Weighted
Rating for Office Assets.
3.5 Star Average
NABERS Weighted
Rating for Retail Assets.
4.75 Star Average
NABERS Weighted Rating
for Office Assets.
5 Star Average NABERS
Weighted Rating for
Office Assets.
3.75 Star Average
NABERS Weighted Rating
for Retail Assets.
4 Star Average NABERS
Weighted Rating for
Retail Assets.
Renewable energy
creation in portfolio.
Implementation of solar
projects across Retail
portfolio.
Renewable energy on
all new large retail and
industrial developments.
50% Waste Diversion in
Retail and Office Assets.
Ongoing implementation
of tenant and community
sustainability programs.
70% Waste Diversion
in Retail and Office
Assets.
Renewable energy
approved and construction
commenced on all new
large retail and industrial
developments. Eight
assets currently have
475kW of solar PV
installed, generating
698MWh per annum.
Waste management
strategy in Office and
Retail.
Green lease provisions in
office, retail and industrial
with Office leases
achieving a BBP Gold
Standard rating.
Tenant and Community
Environmental Programs
underway.
Annual Report 2017 19
SUSTAINABILITY
UN
Sustainable
Development
Goal
2017
Commitments
2017
Performance
FY20
Targets
FY25
Targets
Aspirational
Targets
PLACE CREATION
Fit for the Future
Expansion of RISE
talent development
program.
TED Tuesdays bringing
global thinking into the
business.
Stakeholder
engagement plans for
all new developments.
Pilot an employment
project in a new
development.
Culture of Innovation
Develop a place
impact index which
measures our
success in place and
collective impact.
Pilot community hub
concepts in retail
properties.
Create innovative
spaces in partnership
with network of
innovative enterprises.
Engage with our
tenants and our
supply chain to create
innovation in place.
Community Investment
Approach Pledge 1%.
Our People:
Our Places: Our
Partnerships.
Partner with
Foundation for Young
Australians Innovation
Nation program.
20 Charter Hall Group
Connect employee
and customer value
propositions to enhance
the customer experience.
Shape the way we
acquire and develop
talent to align with a
future of work.
Creation of
the largest
community
hub network
in Australia.
Stakeholder engagement
plans prepared for 100%
developments.
100% of
developments
and assets have
stakeholder
engagement plans.
Employment strategy
developed for all
developments.
Employment
projects in all new
developments.
Place Index implemented
across the portfolio.
Provision of a menu of
benefits and programs
for our buildings and
our communities.
Ongoing place
experience ratings
across our portfolio.
Leader in
innovative
place creation
in our
communities.
Community hubs in all
large retail assets.
Create a national network
of innovation enterprises.
National programs with
communities and partners
to curate creative and
community programs in
all large assets.
Continued Pledge
1% Our People:
Our Places: Our
Partnerships.
Continued Pledge 1%
Our People: Our Places:
Our Partnerships.
Continued youth and
enterprise mentoring.
Innovation through
inclusion commenced.
TED Tuesdays
continued with
the addition of live
speakers aligned to
our business themes.
Stakeholder
engagement plans
implemented in office
and retail developments.
Employment approach
developed to be
incorporated into office
developments, to
commence in FY18.
Place Index developed
and piloted in retail and
industrial assets.
Community innovation
implemented through
our Pledge 1% use of
our Places, including
art galleries, co-working
with childcare, pop up
community event space
and social enterprise.
Our Pledge made
a difference in our
communities through
• Our People: 34% of
Our People undertook
161 Volunteer Days.
• Our Places:
contributed 17,798
sqm of space, valued
at $1.4 million for use
by community groups.
• Our Partnerships
donated $500,000
towards services and
programs through our
community partners.
10 young Social
entrepreneurs mentored
by Charter Hall employees
through the Foundation
for Young Australians
Innovation Nation Program.
UN
Sustainable
Development
Goal
2017
Commitments
2017
Performance
FY20
Targets
FY25
Targets
Aspirational
Targets
WELL building
accreditation sought for
all large Charter Hall state
offices and in new office
developments.
Leader in
health and
wellbeing
in our
communities.
Expansion of new
technologies across
the portfolio.
Enhanced Customer
satisfaction experience
in our assets.
Human Rights Framework
commenced and an
ethical review undertaken
on one development
project.
Integrated sustainable
and equitable supply
chain into assets and
developments.
Development of social
procurement strategy
and expansion across
our supply chain.
Green, social
and indigenous
enterprises in the
Charter Hall supply
chain.
WELLBEING
Creating Healthy Minds,
Spaces and Environments
Pilot WELL building
standard in a Charter
Hall tenancy.
Pilot new technologies
in environmental quality
monitors in key office
tenancies.
Investigate a Human
Rights Framework.
Engage with our
tenants and our
supply chain to create
innovation in place.
Partner with
community and
social enterprises,
to promote physical
and mental health
outcomes Partner
community group
to deliver healthy
lifestyles.
Procure Social
Enterprises that
deliver fresh and
healthy food
products.
Charter Hall Melbourne
and Perth Offices
registered for WELL
Building Interiors
Certification.
Three office
development projects,
in Melbourne, Brisbane
and Adelaide registered
for WELL Building Core
and Shell Certification.
Pilots undertaken on
indoor environmental
wellbeing technologies,
include trialling SAMBA
and Comfy in Charter
Hall tenancies.
Human Rights
Framework
commenced and
an ethical review
undertaken on one
development project.
Major suppliers
engaged on social
procurement and the
social procurement
approach integrated
into national contracts
executed in FY17.
Charter Hall partnered
with community and
social enterprises
to hold yoga and
wellbeing programs,
for our people
as well as school
holiday programs for
the children of our
employees.
Social enterprises
procured to deliver
healthy food options.
With our stakeholders
develop Healthy
Lifestyles Strategy for
our assets and our
communities.
Wellbeing Survey
undertaken for Charter
Hall Employees by our
Employee Assistance
Provider.
Wellbeing programs /
facilities available to
all large assets and
employees.
Wellbeing Strategy for
our people and our
places developed and
implemented.
Our people, our tenants
and our communities
have access to fresh
and healthy food.
Annual Report 2017 21
EXECUTIVE
COMMITTEE
1
3
5
7
22 Charter Hall Group
2
4
6
8
1. DAVID HARRISON
Managing Director and Group CEO
B.Bus (Land Economy); FAPI;
GDipAppFin
David has more than 30 years of
property market experience across
office, retail and industrial sectors in
multiple geographies globally. As Charter
Hall Managing Director and Group CEO,
David is responsible for all aspects of
the Charter Hall business, with specific
focus on strategy. He continues to
build the momentum of a $19.8 billion
investment portfolio and is recognised
as a multi-core sector market leader.
David is an executive member of various
Fund Boards and Partnership Investment
Committees, Chair of the Executive
Property Valuation Committee and
Executive Leadership Group.
David has overseen the growth
of the Charter Hall Group from
$500 million to $19.8 billion of assets
under management. David has been
principally responsible for transactions
exceeding $30 billion of commercial,
retail and industrial property assets.
David holds a Bachelor of Business
Degree (Land Economy) from the
University of Western Sydney, is a
Fellow of the Australian Property
Institute (FAPI) and holds a Graduate
Diploma in Applied Finance from the
Securities Institute of Australia.
2. SEAN MCMAHON
Chief Investment Officer
Sean has 30 years of property and
investment banking experience in the
real estate sector and has been active
in the listed, wholesale and direct capital
markets. Sean is responsible for the
Group’s strategy and balance sheet
investments, mergers and acquisitions,
with oversight for multi sector disciplines
including property transactions, together
with corporate development.
He brings a wealth of experience
across investment markets, diversified
across office, industrial and retail
sectors, and has been responsible for
driving the development of corporate
strategies, capital allocation and
reinvestment programs.
Prior to joining Charter Hall, Sean
worked at national diversified property
group Australand (now known as
Frasers) as Chief Investment Officer and
was previously responsible for investment
and development for all commercial,
industrial and retail property.
3. RUSSELL PROUTT
Chief Financial Officer
B.Bus
Russell joined Charter Hall in August
2017 and brings over 25 years’ finance
experience to the Group. His experience
has included property and infrastructure
investment management in North
America, Australia and broader Asia as
well as extensive M&A and financing
capability across global markets.
He has a breadth of knowledge across
commercial property markets and broad
experience across infrastructure and
private equity investments, mergers and
acquisitions, transactions and finance
functions.
4. RICHARD STACKER
Group Executive – Global Investor
Relations
B.Bus
Richard is the Global Head of Investor
Relations responsible for the Investor
Relations function and the Direct
business where he is an Executive
Director on the responsible entity’s
Board. Richard has over 25 years
of experience in real estate funds
management, real estate finance,
mergers and acquisitions, accounting
and risk management. Prior to joining
Charter Hall Group, Richard was
a Division Director of Macquarie
Group Limited and Chief Executive
Officer of Macquarie Direct Property
Management Limited. Previous to
that, Richard was a General Manager
with Lend Lease Corporation
Limited and a senior manager with
PricewaterhouseCoopers.
He has a Bachelor of Business
and is a member of the Institute of
Chartered Accountants in Australia.
5. ADRIAN TAYLOR
Group Executive – Office
B.Bus, CPA, GDipAppFin, FRIC
Adrian leads the $9.1 billion office
platform including setting the Wholesale
office funds strategy and objectives in
conjunction with the Charter Hall Fund
Managers and Investors and guides
the asset management, property
management, and technical service
and development teams.
He has extensive capital transaction
and capital management experience
including debt and equity raising and
deep joint venture experience in Australia
and the US. He spent 15 years in listed
REIT markets as General Manager,
7. NATALIE DEVLIN
Group Executive – People, Brand
and Community
BA, Postgrad Dip in MR Management
(Dean’s List Award)
Natalie is responsible for culture,
internal and external brand,
organisational capability, sustainability
and community investment. She is
focused on achieving our aspiration to
be ‘the place for people in property’ by
creating an authentic and differentiated
employee, customer and community
experience for the Group.
Natalie’s previous roles include Head
of People and Development at Valad
Property Group, where she established
the human resources function during
its rapid growth period, and Head of
HR, Asia Pacific for a multinational
publishing company, where she
transformed their operating model.
8. AIDAN COLEMAN
Chief Technology Officer
BTech, MBT
Aidan is responsible for providing
leadership and direction for all strategic
IT activities associated with supporting
IT’s contribution to the organisation’s
key business initiatives.
Aidan has over 20 years’ technology
experience across a range of
industries and geographies including
property, funds management, retail,
media, consumer goods, consulting,
financial services and telco. Prior to
joining Charter Hall, Aidan worked at
Stockland, NewsCorp, Diageo and
Accenture.
Chief Investment Officer and Chief
Executive Officer of the Charter Hall
Office REIT prior to its privatisation.
In his prior role as Head of Wholesale
investment, he ran the investment
management functions across office,
retail and industrial sectors.
Adrian graduated with a Bachelor of
Business from Monash University, is a
Certified Practising Accountant, Fellow
of the Financial Services Institute
of Australasia, a fellow of the Royal
Institute of Chartered Surveyors and is
involved in numerous property industry
groups including being Deputy Chair
of the ICMD Division Council of the
Property Council of Australia.
6. GREG CHUBB
Group Executive – Retail
B.Bus (Land Economics)
Greg joined Charter Hall in 2014 as
Head of Retail and is responsible for
leading the Charter Hall Retail strategy
associated with the Group’s $5.4 billion
non-discretionary retail portfolio
of shopping centres, hardware,
hospitality and automotive assets.
He was appointed to the Charter
Hall Retail REIT (CQR) board as an
Executive Director in February 2016.
Greg leads the team of 170 retail
specialists responsible for the
Group’s funds, property, asset and
development management activities
Australia-wide.
Prior to joining Charter Hall, Greg
was Property Director at Coles
Supermarkets Australia and
Managing Director/Head of Retail
for Sandalwood/Jones Lang LaSalle
in Greater China, and has also held
executive leadership roles at Mirvac
and Lend Lease.
Greg holds a Bachelor of Business
Degree (Land Economy) from Western
Sydney University and is a Fellow of
the Australian Property Institute (FAPI)
and a Registered Valuer.
BOARD OF
DIRECTORS
1
3
5
2
4
6
1. DAVID CLARKE
Chairman
2. ANNE BRENNAN
Non-Executive Director
3. PHILIP GARLING
Non-Executive Director
4. DAVID ROSS
Non-Executive Director
5. KAREN MOSES
Non-Executive Director
6. DAVID HARRISON
Managing Director and Group CEO
See pages 30 – 32 for Director bios.
Annual Report 2017 23
FINANCIAL REPORT AND OTHER INFORMATION
FOR THE YEAR ENDED 30 JUNE 2017
Comprising the stapling of ordinary shares in Charter Hall Limited (ACN 113 531 150)
and units in the Charter Hall Property Trust (ARSN 113 339 147)
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statements of Comprehensive Income
Consolidated balance sheets
Consolidated statement of changes in equity – Charter Hall Group
Consolidated statement of changes in equity – Charter Hall Property Trust Group
Consolidated cash flow statements
Notes to the consolidated financial statements
1 Summary of significant accounting policies
2 Critical accounting estimates and judgements
3 Segment information
4 Revenue
5 Expenses
6
Income tax expense
7 Distributions paid and payable
8 Earnings per stapled security
9 Cash and cash equivalents
10 Trade and other receivables
11 Investments accounted for using the equity method
12 Investment properties
13 Intangible assets
14 Property, plant and equipment
15 Deferred tax assets and liabilities
16 Trade and other payables
17 Provisions
18 Interest bearing liabilities
19 Contributed equity
20 Reserves
21 Accumulated losses
22 Remuneration of auditors
23 Reconciliation of profit after tax to net cash inflow from operating activities
24 Capital and financial risk management
25 Fair value measurement
26 Related parties
27 Controlled entities
28 Investments in associates
29 Investments in joint ventures
30 Interests in unconsolidated structured entities
31 Commitments
32 Contingent liabilities
33 Security-based benefits expense
34 Parent entity financial information
35 Deed of cross guarantee
36 Events occurring after the reporting date
Directors’ declaration to securityholders
Independent Auditor’s Report
24 Charter Hall Group
25
52
53
54
55
56
57
58
58
65
65
69
69
70
71
72
73
73
74
74
75
76
76
77
78
78
79
80
81
81
82
82
86
87
89
91
97
98
99
100
100
101
102
103
104
105
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
The Directors of Charter Hall Limited and the Directors of Charter Hall Funds Management Limited, the Responsible Entity (RE) of
Charter Hall Property Trust, present their report together with the consolidated financial report of the Charter Hall Group (Group or
CHC) and the consolidated financial report of the Charter Hall Property Trust Group (CHPT) for the year ended 30 June 2017, and the
Independent Auditor’s Report thereon. The financial report of the Group comprises Charter Hall Limited (Company or CHL) and its
controlled entities, which include Charter Hall Funds Management Limited as the RE of Charter Hall Property Trust (Trust). The financial report
of the Charter Hall Property Trust Group comprises the Trust and its controlled entities.
Charter Hall Limited and Charter Hall Funds Management Limited have identical Boards of Directors. The term Board hereafter should be
read as a reference to both these Boards.
The units in the Trust are ‘stapled’ to the shares in the Company. A stapled security comprises one Company share and one Trust unit.
The stapled securities cannot be traded or dealt with separately.
Directors
The following persons were Directors of the Group during the year and up to the date of this report, unless noted otherwise:
• David Clarke
• Anne Brennan
• Philip Garling
• David Harrison
• Karen Moses
• David Ross
– Chair and Non-Executive Independent Director
– Non-Executive Independent Director
– Non-Executive Independent Director
– Managing Director and Group CEO
– Non-Executive Independent Director (appointed 1 September 2016)
– Non-Executive Independent Director (appointed 20 December 2016)
Former Directors
• Peter Kahan
• Colin McGowan
– Non-Executive Director (resigned 20 December 2016)
– Non-Executive Independent Director (resigned 9 November 2016)
Principal activities
During the year, the principal activities of the Group consisted of:
(a) Investment in property funds; and
(b) Property funds management.
No significant changes in the nature of the activities of the Group occurred during the year.
Distributions – Charter Hall Group
Distributions paid/declared to members during the year were as follows:
Final ordinary distribution for the six months ended 30 June 2017
of 15.6 cents per stapled security payable on 31 August 2017
Interim ordinary distribution for the six months ended 31 December 2016
of 14.4 cents per stapled security paid on 28 February 2017
Final ordinary distribution for the six months ended 30 June 2016
of 13.6 cents per stapled security paid on 25 August 2016
Interim ordinary distribution for the six months ended 31 December 2015
of 13.3 cents per stapled security paid on 26 February 2016
Total distributions paid and payable
2017
$’000
72,661
59,431
–
–
132,092
2016
$’000
–
–
56,129
54,419
110,548
Review and results of operations
The Group recorded a statutory profit after tax attributable to stapled securityholders for the financial year to 30 June 2017 of $257.6 million
compared to a profit of $215.2 million for the year ended 30 June 2016.
Operating earnings amounted to $151.2 million for the year to 30 June 2017, compared to $124.7 million for the year ended 30 June 2016, an
increase of 21.3% over the prior period. Operating earnings is split between property investments of $85.0 million (30 June 2016: $78.5 million)
and property funds management of $66.2 million (30 June 2016: $46.2 million).
Annual Report 2017 25
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Review and results of operations continued
The operating earnings information included in the table below has not been subject to any specific audit procedures by our auditor but has
been extracted from Note 3: Segment information of the accompanying financial report.
Operating earnings attributable to stapled securityholders
Realised and unrealised gains/(losses) on derivatives1
Net fair value movements on investments and property1
Amortisation and impairment of intangibles
Impairment of investment in joint venture
Non-operating deferred income tax expense
Gain on disposal of property investments and inventory1
Other1
Statutory profit after tax attributable to stapled securityholders
1 Includes the Group’s proportionate share of non-operating items of equity accounted investments on a look-through basis.
Basic weighted average number of stapled securities per Note 8 (‘000s)
Basic earnings per stapled security per Note 8 (cents)
Operating earnings per stapled security (OEPS) per Note 3 (cents)
The 30 June 2017 financial results with comparatives are summarised as follows:
2017
$’000
151,173
8,166
118,314
(4,342)
(10,494)
(4,118)
3,890
(5,028)
257,561
2017
420,838
61.2
35.9
2016
$’000
124,735
(10,339)
107,757
(8,517)
–
(1,714)
6,114
(2,796)
215,240
2016
409,980
52.5
30.4
Revenue ($ million)1
Statutory profit after tax for stapled securityholders ($ million)
Statutory earnings per stapled security (EPS) (cents)
Operating earnings for stapled securityholders ($ million)2
Operating earnings per stapled security (cents)2
Distributions to stapled securityholders ($ million)
Distribution per stapled security (cents)
Total assets ($ million)
Total liabilities ($ million)
Net assets attributable to stapled securityholders ($ million)
Stapled securities on issue (million)
Net assets per stapled security ($)
Net tangible assets (NTA) attributable to stapled securityholders
($ million)
NTA per stapled security ($)3
Balance sheet gearing4
Funds under management (FUM) ($ billion)
Charter Hall Group
Charter Hall Property
Trust Group
2017
213.4
257.6
61.2
151.2
35.9
132.1
30.0
1,873.0
150.8
1,722.2
465.8
3.70
1,674.9
3.60
0.00%
19.8
2016
165.3
215.2
52.5
124.7
30.4
110.5
26.9
1,415.6
104.5
1,311.1
412.7
3.18
1,256.3
3.04
0.00%
17.5
2017
19.7
218.0
51.8
n/a
n/a
132.1
30.0
1,612.8
76.8
1,536.0
465.8
3.30
1,536.0
3.30
0.00%
n/a
2016
37.2
197.3
48.1
n/a
n/a
110.5
26.9
1,251.6
56.5
1,195.1
412.7
2.90
1,195.1
2.90
0.00%
n/a
1 Gross revenue does not include share of net profits of associates and joint ventures of $207.2 million (30 June 2016: $168.3 million).
2 Excludes fair value adjustments, gains or losses on the sale of investments, amortisation and/or impairment of intangible assets, non-operating deferred
tax expense and other unrealised or one-off items.
3 Net tangible assets (NTA) per stapled security ($) is calculated using assets less liabilities, net of intangible assets and related deferred tax.
4 Gearing is calculated by using debt drawn net of cash divided by total assets net of cash.
Operating earnings per stapled security (OEPS) has increased 18.1% from 30.4 cents for the year ended 30 June 2016 to 35.9 cents
for the year ended 30 June 2017.
Annual distribution per stapled security (DPS) has increased 11.5% from 26.9 cents for the year ended 30 June 2016 to 30.0 cents
for the year ended 30 June 2017.
Net Tangible Assets per stapled security (NTA) at 30 June 2017 is $3.60, an increase of 18.4% over $3.04 at 30 June 2016.
26 Charter Hall Group
Funds Under Management (FUM) increased from $17.5 billion at 30 June 2016 to $19.8 billion at 30 June 2017 due to the establishment
of new funds Charter Hall Long Wale REIT and Charter Hall Prime Retail Fund, significant valuation uplifts, property acquisitions and
developments in Charter Hall Office Trust, Charter Hall Prime Office Fund, Charter Hall Prime Industrial Fund, Charter Hall Direct Office Fund,
Charter Hall Direct Industrial Fund No. 4, Charter Hall Retail REIT and investment properties acquired directly by the Charter Hall Group.
Property Investments
The Group’s property investments are classified into the following real estate sectors:
• Office;
•
Industrial;
• Retail; and
• Diversified.
The following table summarises the key metrics for the property investments of the Group:
Ownership
stake
Charter
Hall
investment
FY 17
Charter
Hall
investment
income1
Weighted
average
lease
expiry
Weighted
average
market
cap rate
Weighted
average
discount
rate
Weighted
Average
rental
reviews
FY 17
Charter
Hall
investment
yield2
(%)
($m)
($m)
(years)
(%)
(%)
(%)
(%)
Office
Charter Hall Prime Office Fund (CPOF)
Charter Hall Office Trust (CHOT)
Brisbane Square Wholesale
Fund (BSWF)
Charter Hall PFA Direct Fund (PFA)3
Industrial
Core Logistics Partnership Trust (CLP)
Charter Hall Prime Industrial Fund (CPIF)
Charter Hall Direct Industrial
Fund No.4 (DIF4)
Retail
Charter Hall Retail REIT (CQR)4
Charter Hall Prime Retail Fund (CPRF)
Retail Partnership No. 6 Trust (RP6)4
BP Fund 1 (BP1)6
Long WALE Investment
Partnership (LWIP)5
BP Fund 2 (BP2)6
Long WALE Investment
Partnership 2 (LWIP2)5
TTP Wholesale Fund (TTP)4,6
Retail Partnership No. 2 (RP2)4
Diversified
Charter Hall Long WALE REIT (CLW)
10.5
14.3
16.8
0.1
13.8
6.0
21.2
18.6
38.0
20.0
8.4
5.0
13.2
10.0
10.0
5.0
20.0
549.1
236.4
212.9
99.6
0.2
285.8
139.2
117.1
29.5
486.0
321.2
44.8
34.3
28.4
19.0
13.8
10.1
8.0
6.4
166.0
166.0
25.3
11.7
13.4
0.2
–
16.5
9.9
6.2
0.4
34.0
21.1
1.9
2.1
1.5
5.2
0.7
0.7
0.4
0.4
6.6
6.6
Property investment – subtotal
1,486.9
82.4
5.6
6.4
4.6
6.8
7.0
9.1
9.6
7.7
11.6
6.8
6.8
4.1
3.3
9.8
17.2
11.8
18.0
3.8
4.8
11.5
11.8
7.4
5.8
5.9
5.5
6.1
7.6
6.4
6.3
6.4
6.5
6.1
6.3
5.8
5.8
5.5
6.0
5.7
6.0
6.3
5.8
6.5
6.2
6.1
7.1
7.2
7.0
7.3
8.2
7.4
7.6
7.6
6.0
7.4
7.4
7.5
7.7
7.3
7.4
7.4
7.4
7.5
7.5
7.4
7.4
7.3
3.7
3.8
3.7
3.6
3.5
3.0
3.0
3.0
3.0
3.9
4.1
4.4
3.3
2.7
2.0
2.7
2.0
4.1
4.5
2.9
2.8
3.6
7.3
6.2
8.6
6.0
7.8
6.2
6.3
6.1
6.6
7.3
7.7
6.3
6.5
6.1
7.7
4.8
7.3
5.8
7.1
6.3
6.3
6.9
Commercial and Industrial
Property Pty Limited (CIP)
Investments disposed/other7
Total
50.0%
–
19.5
40.3
1,546.7
1.5
0.9
84.8
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 Charter Hall Group property investment operating income per segment, Note 3(b) of the financial report.
2 Yield = Operating earnings divided by investment value at start of the year adjusted for investments/divestments during the period. Excludes MTM movements
in NTA during the year.
3 Formerly PFA Diversified Property Trust.
4 Average rent reviews is contracted weighted average rent increases of specialty tenants.
5 The LWIP and LWIP2 rental increase is CPI, uncapped.
6 These funds comprise the Long WALE Hardware Partnership (LWHP).
7 Directly owned property, Charter Hall Opportunity Fund 4, Charter Hall Opportunity Fund 5, Coles Truganina and Woolworths Dandenong.
Annual Report 2017 27
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Review and results of operations continued
Property Investments continued
A summary of the significant activities of each of the Group’s
property investments is provided below:
(a) Office
Charter Hall Prime Office Fund (CPOF)
CPOF is a wholesale-pooled fund that invests in high-quality office
buildings located in Australia’s major capital cities. CPOF owns an
interest in 21 assets valued at $3.4 billion.
Charter Hall Office Trust (CHOT)
CHOT is an unlisted wholesale partnership that invests in a
diversified portfolio of office properties primarily located in Australian
CBDs. CHOT owns an interest in 10 high-grade office assets valued
at $2.6 billion.
Brisbane Square Wholesale Fund (BSWF)
BSWF is an unlisted fund which owns two assets valued at over
$1 billion.
Charter Hall PFA Direct Fund (PFA)
PFA is an unlisted fund diversified across geographic locations,
tenant profiles and lease expiries in Australia.
Industrial
(b)
Core Logistics Partnership Trust (CLP)
CLP is a wholesale industrial partnership which owns an interest
in 23 assets valued at $1.3 billion.
Charter Hall Prime Industrial Fund (CPIF)
CPIF is a wholesale industrial pooled fund focused on sourcing
properties in the industrial and logistics sectors of major Australian
capital cities. It includes both core and enhanced investment-grade
property assets. CPIF owns an interest in 47 assets valued at
$2.3 billion.
Charter Hall Direct Industrial Fund No.4 (DIF4)
DIF4 is an unlisted property fund investing in quality Australian
industrial properties and also in the Charter Hall managed Core
Logistics Partnership.
(c) Retail
Charter Hall Retail REIT (CQR)
CQR is an Australian Real Estate Investment Trust (REIT) listed on
the Australian Securities Exchange (ASX) (ASX: CQR) and invests
in neighbourhood and sub-regional shopping centres anchored by
Coles and Woolworths supermarkets. CQR’s portfolio comprises
an interest in 71 properties valued at $2.8 billion.
Charter Hall Prime Retail Fund (CPRF)
CPRF is a wholesale fund which owns Campbelltown Shopping
Centre valued at over $200 million.
Retail Partnership No.6 Trust (RP6)
RP6 is a wholesale retail fund focusing on neighbourhood and
sub-regional shopping centres. RP6 owns two assets valued at
over $250 million.
Long WALE Hardware Partnership (LWHP)
The combined BP1, BP2 and TTP Funds are collectively referred
to as the Long WALE Hardware Partnership (LWHP), which owns
assets valued at over $700 million.
BP Fund 1 (BP1)
BP1 is a wholesale fund which owns 12 freestanding warehouse
properties valued at over $500 million.
28 Charter Hall Group
BP Fund 2 (BP2)
BP2 is a wholesale fund which owns four freestanding warehouse
properties valued at almost $150 million.
TTP Wholesale Fund (TTP)
TTP is a wholesale fund which owns the Keperra Square shopping
centre in Brisbane valued at over $80 million.
Long WALE Investment Partnership (LWIP)
LWIP is a wholesale partnership which owns 57 hospitality assets
valued at over $720 million. These assets are leased to ALH under
triple net leases.
Long WALE Investment Partnership 2 (LWIP2)
LWIP2 is a wholesale partnership which owns nine hospitality assets
valued at over $150 million.
Retail Partnership No.2 (RP2)
RP2 is a wholesale retail fund which owns the Bateau Bay Square
shopping centre valued at over $220 million on the Central Coast
of New South Wales.
(d) Diversified
Charter Hall Long WALE REIT (CLW)
CLW is a REIT listed on the ASX (ASX: CLW) and invests in high
quality Australasian real estate assets that are predominantly leased
to corporate and government tenants on long-term leases. CLW’s
portfolio comprises an interest in 79 properties valued at $1.4 billion.
(e) Wholesale mandates
The Group originates and manages segregated mandates for direct
property investments either in joint venture with funds such as CPOF
or CQR or as 100% owned assets by our clients. The total property
value of wholesale mandates is $1.0 billion.
(f) Direct investor funds
The Group manages equity raised from retail investors via advisers,
high net worth individuals and through direct distribution channels.
The total FUM of these retail funds and single asset syndicates
is $2.9 billion.
(g) Commercial and Industrial Property Pty Limited (CIP)
The Group has a 50% interest in CIP, an industrial development
business.
Property Funds Management
The Property funds Management business provides investment
management, asset management, property management,
development management and leasing and transaction services to
the Group’s $19.8 billion funds management portfolio. The use of an
integrated property services model, which earns fees from providing
these services to the managed portfolio, enhances the Group’s
returns from capital invested. The Group also provides services to
segregated mandates looking to capitalise on its property and funds
management expertise. The Property funds Management business
contributed $66.2 million in operating earnings to the Group.
During the year, total funds under management increased by
$2.3 billion to $19.8 billion. The movement was a result of additional
capital expenditure and valuation uplifts, along with the Group’s
managed funds acquiring approximately $3.0 billion and divesting
approximately $2.2 billion of property.
Significant changes in the state of affairs
Significant Group matters during the year, in addition to the review
of operations above, were as follows:
• The Group invested $46.0 million into Charter Hall Prime Retail
Fund (CPRF), representing a 38.0% holding.
• The Group invested $73.3 million into Charter Hall Retail REIT
(CQR), increasing its holding from 14.3% at 30 June 2016 to
18.6% at 30 June 2017.
• The Group invested $35.2 million into Charter Hall Opportunity
Fund No. 5 (CHOF5), increasing its holding from 16.7% to
100% at 30 June 2017. Following the investment, the Group
sold the investment property held by CHOF5 for proceeds
of $68.3 million. The proceeds were partly used to repay
CHOF5 debt with the remaining balance held in cash.
• The Group invested $165.4 million into Charter Hall Long
WALE REIT (CLW), representing a 20.0% holding.
• The Group invested $100.6 million into Brisbane Square
Wholesale Fund (BSWF), representing a 16.8% holding.
• The Group invested a further $20.0 million into Charter Hall
Prime Industrial Fund (CPIF), increasing its holding to 6.0%.
• The Group invested a further $30.0 million into Charter Hall
Prime Office Fund (CPOF), increasing its holding to 10.5%.
• The Group invested a total of $35.9 million into Charter Hall
Direct Industrial Fund No. 4 (DIF4) acquisition units and sold
a total of $6.4 million, at 30 June 2017 this represents
a 21.2% holding. It also extended a $9.7 million loan to
DIF4 which was subsequently repaid prior to 30 June 2017.
• The Group sold $152.2 million of its investment in Long
WALE Investment Partnership (LWIP), reducing its holding
from 50% to 5%.
• The Group sold $19.2 million of its investment in Core
Logistics Partnership (CLP), reducing its holding from 16.1%
at 30 June 2016 to 13.8% at 30 June 2017.
• The Group acquired 50% of the Coles Distribution Centre in
Truganina, Vic for $51.3 million in August 2016. The Group sold
CHPT Dandenong Trust, which held a 26% interest in CH DC
Fund, which owns 225 Glasscocks Road, Dandenong South,
Vic, to Charter Hall Long WALE REIT in November 2016 for
$58.9 million.
• The Group acquired investment properties, held directly by the
Group at 30 June 2017, for $41.1 million.
Matters subsequent to the end of the period
The following event has occurred subsequent to 30 June 2017:
• In August 2017, the CHPT $125 million debt facility was
extended by two years with the maturity date changing to
August 2020.
Except for the matters discussed above, no other matter or
circumstance has arisen since 30 June 2017 that has significantly
affected, or may significantly affect:
(a) The Group’s operations in future financial years; or
(b) The results of those operations in future financial years; or
(c) The Group’s state of affairs in future financial years.
Likely developments and expected results
of operations
Business strategy and prospects
Charter Hall’s strategy is to use its specialist property expertise
to access, deploy and manage equity invested in Retail, Office,
Industrial property and diversified property fund portfolios. Charter
Hall invests alongside equity partners to create value and provide
superior returns for clients and Charter Hall securityholders.
Charter Hall is well positioned to benefit from projected growth of
capital inflows from investors seeking property investments driven
by the attractive spreads between property yields and long-term
interest rates. During the last 12 months, Charter Hall has seen
positive equity flows across all sectors from listed, wholesale and
retail investors.
Property Investment portfolio
The property investment portfolio composition is primarily driven
by co-investment requirements where, typically, between 10 – 20%
of the equity in a fund is contributed by Charter Hall. In addition to
these co-investments, the Group may invest a higher proportion
in certain funds to reweight its investment portfolio, and continues
to review opportunities to increase the proportion of retail and
industrial investments and extend the overall WALE of its property
investment portfolio.
The Group regularly reviews the performance of its property
investment portfolio and relevant economic drivers to actively
manage performance at an asset level in each fund.
The material business risks faced by the property investment
portfolio that may have an effect on financial performance of the
Group include interest rate risk, refinancing risk, lease defaults or
extended vacancies, portfolio concentration risks and changes
in economic or industry factors impacting tenants or the ability to
source suitable investment opportunities.
Property funds management platform
The Group manages property investments on behalf of listed,
wholesale and direct investors and has strict policies in place
to ensure appropriate governance procedures are in place to
meet fiduciary responsibilities and manage any conflicts of interest.
Charter Hall provides a suite of services including investment
management, asset management, property management,
transaction services, development services, treasury, finance, legal
and custodian services based on each fund’s individual requirements.
The Group regularly reviews investor requirements and preferences
for an investment partner in the Australian core real estate sectors
and transaction structures that would meet their requirements.
The material business risks faced by the property funds management
platform that may have an effect on the financial performance of
the Group include not delivering on investor expectations leading to
loss of FUM or management rights, loss of key personnel impacting
service delivery, economic factors impacting fee streams, access to
capital and economic factors impacting property valuations.
Annual Report 2017 29
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Information on Directors
David Clarke
Chair/Independent Non-Executive Director
Experience and expertise
David joined the Board of Charter Hall Group on 10 April 2014,
and was appointed Chair of the Board on 12 November 2014.
David has over 35 years’ experience in investment banking, funds
management, property finance and retail banking. David was
Chief Executive Officer of Investec Bank (Australia) Limited from
2009 to 2013.
Prior to joining Investec Bank, David was the CEO of Allco Finance
Group and a Director of AMP Limited, following five years at
Westpac Banking Corporation where he held a number of senior
roles including Chief Executive of the Wealth Management Business,
BT Financial Group. David also was previously an Executive Director
at Lend Lease Corporation Limited, Chief Executive of MLC Limited,
and prior to this was Chief Executive Officer of Lloyds Merchant
Bank in London.
David holds a Bachelor of Laws degree.
Other current listed company directorships
Austbrokers Holdings Limited
Former listed company directorships in last three years
Nil
Special responsibilities
Chair of the Nominations Committee
Member of the Audit, Risk and Compliance Committee
Member of the Investment Committee
Interests in securities
45,875 stapled securities in Charter Hall Group via an
indirect interest
Anne Brennan
Independent Non Executive Director
Experience and expertise
Anne joined the Board of Charter Hall Group on 6 October 2010
and is on the board of a number of other companies. Anne is an
experienced executive and has held senior management roles in
both large corporates and professional services firms.
During her executive career, Anne was the CFO at CSR and the
Finance Director of the Coates Group. Prior to her executive roles,
Anne was a partner in three professional services firms: KPMG,
Arthur Andersen and Ernst & Young. Anne has more than 25 years’
experience in audit, corporate finance and transaction services.
Anne was also a member of the national executive team and
a board member of Ernst & Young.
Anne holds a Bachelor of Commerce (Honours) degree, is a Fellow
of the Institute of Chartered Accountants in Australia and a Fellow of
the Australian Institute of Company Directors.
Other current listed company directorships
Argo Investments Limited
Myer Holdings Limited
Nufarm Limited
Former listed company directorships in last three years
Echo Entertainment Group Limited
Special responsibilities
Chair of Remuneration and Human Resources Committee
Member of Audit, Risk and Compliance Committee
Interests in securities
30,000 stapled securities in Charter Hall Group via direct and
indirect interests
30 Charter Hall Group
Philip Garling
Independent Non-Executive Director
Experience and expertise
Philip joined the Board of the Charter Hall Group on
25 February 2013.
Philip has over 35 years’ experience in property and infrastructure,
development, operations and asset and investment management.
His executive career included nine years as Global Head
of Infrastructure at AMP Capital Investors and 22 years at
Lend Lease Corporation, including five years as CEO of
Lend Lease Capital Services.
Philip holds a Bachelor of Building from the University of NSW,
has completed the Advanced Management Program at the
Australian Institute of Management and the Advanced Diploma at
the Australian Institute of Company Directors. He is a Fellow of the
Australian Institute of Company Directors, Australian Institute of
Building and Institution of Engineers, Australia.
Other current listed company directorships
Downer EDI Limited
Spotless Group Holdings Ltd
Former listed company directorships in last three years
Australian Renewable Fuels Limited (Chair)
Special responsibilities
Chair of the Audit, Risk and Compliance Committee (from
26 February 2016 until 9 November 2016)
Member of the Nominations Committee
David Harrison
Managing Director and Group CEO
Experience and expertise
David has 31 years of property market experience across office,
retail and industrial sectors in multiple geographies globally.
As Charter Hall’s Managing Director and Group CEO, David is
responsible for all aspects of the Charter Hall business, with specific
focus on strategy and continuing the momentum from building
an Investment Manager recognised as a multi-core sector market
leader. David is an executive member of various Fund Boards and
Partnership Investment Committees, Chair of the Executive Property
Valuation Committee and Executive Leadership Committee.
David has overseen the growth of the Charter Hall Group from
$500 million to $19.8 billion of assets under management in 13 years.
David holds a Bachelor of Business Degree (Land Economy) from
the University of Western Sydney, is a Fellow of the Australian
Property Institute (FAPI) and holds a Graduate Diploma in Applied
Finance from the Securities Institute of Australia.
David is a Director and Vice-President of the Property Council of
Australia and Chair of the Audit and Risk Committee. David is also
a member of the Property Male Champions of Change.
Other current listed company directorships
Charter Hall Retail REIT
Charter Hall Long WALE REIT
Former listed company directorships in last three years
Nil
Member of the Remuneration and Human Resources Committee
Chair of the Investment Committee
Special responsibilities
Member of the Investment Committee
Interests in securities
16,759 stapled securities in Charter Hall Group via a direct interest
Interests in securities
207,026 stapled securities in Charter Hall Group via direct interests
and 1,441,773 stapled securities in Charter Hall Group via indirect
interests. 799,336 performance rights and 43,420 service rights in
the Charter Hall Performance Rights and Options Plan; performance
rights, service rights and options vest after performance and service
conditions are met.
Annual Report 2017 31
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Information on Directors continued
Karen Moses
Independent Non-Executive Director
Experience and expertise
Karen joined the Board of Charter Hall Group on 1 September 2016
and was appointed Chair of the Audit, Risk and Compliance
Committee on 9 November 2016. Karen has over 30 years’
corporate experience in the energy industry spanning oil, gas,
electricity and coal commodities, has gained her experience both
within Australia and overseas and has most recently been a panel
member of the Finkel review. She was recently appointed to the
position of Non-Executive Director of Orica Limited (July 2016) and
her other directorships include Non-Executive Director of Boral
Limited (since March 2016), Sydney Symphony Limited and Sydney
Symphony Holdings Pty Limited (December 2015), Sydney Dance
Company (May 2012) and SAS Trustee Corporation (March 2012).
Karen holds a Bachelor of Economics and a Diploma of Education
from the University of Sydney.
Other current listed company directorships
Orica Ltd (ASX: ORI)
Boral Limited (ASX: BLD)
Former listed company directorships in last three years
Origin Energy Ltd (ASX: ORG)
Special responsibilities
Chair of Audit, Risk and Compliance Committee
Interests in securities
8,137 via a direct interest
David Ross
Independent Non-Executive Director
Experience and expertise
David joined the Board of the Charter Hall Group on
20 December 2016.
David has over 30 years’ corporate experience in the property industry
and has gained his experience both within Australia and overseas,
including a total of eight years as Chief Executive Officer of GPT and
Global Chief Executive Officer, Real Estate Investments for Lend Lease.
David is the Chair of Arena REIT, which owns, manages and
develops property in the childcare and healthcare sectors.
Previously, David held executive positions at GPT, Lend Lease
and Babcock & Brown. Prior board appointments include a
non-executive directorship with Sydney Swans Foundation Limited.
David holds a Bachelor of Commerce from the University of
Western Australia and an Associate Diploma in Valuation from
Curtin University in Western Australia.
David is also a Fellow of the Australian Institute of Company Directors.
Other current listed company directorships
Arena REIT
Former listed company directorships in last three years
Nil
Special responsibilities
Member of Audit, Risk and Compliance Committee (from
25 January 2017 to 2 June 2017)
Member of Nominations Committee
Member of Investment Committee
Member of Remuneration and Human Resources Committee
Interests in securities
Nil
32 Charter Hall Group
Former Directors
Peter Kahan
Non-Executive Director (until 20 December 2016)
Experience and expertise
Peter joined the Board of Charter Hall Group on 1 October 2009,
following an investment in the Charter Hall Group by The Gandel
Group (Gandel) and resigned on 20 December 2016.
Peter is the Executive Deputy Chair of Gandel and has over 20 years
of property and funds management experience. He joined Gandel in
1994 and was the Group’s CEO from 2007 to 2012. Prior to this, Peter
worked as a Chartered Accountant and held senior financial positions
in various industry sectors. From 2002 to 2006, he was a director of
Gandel Retail Management Pty Ltd and Colonial First State Property
Retail Pty Ltd, a leading property and fund manager managing a
portfolio of approximately $8 billion of retail assets in Australia.
Peter is a member of the Institute of Chartered Accountants
Australia and New Zealand and the Australian Institute of Company
Directors. He holds Bachelor of Commerce and Bachelor of
Accountancy degrees from the University of The Witwatersrand
Johannesburg, South Africa.
Other current listed company directorships
Vicinity Limited and Vicinity Centres RE Limited
Former listed company directorships in last three years
Novion Limited
Special responsibilities
N/A – no longer a Director of Charter Hall Group
Interests in securities
N/A – no longer a Director of Charter Hall Group
Colin McGowan
Independent Non-Executive Director (until 9 November 2016)
Experience and expertise
Colin joined the Board of the Charter Hall Group on 6 April 2005
and resigned on 9 November 2016.
Colin was formerly CEO of the listed AMP Diversified Property Trust,
Executive Vice President of Bankers Trust (Australia), founding Fund
Manager of the BT Property Trust and founding Fund Manager of
the Advance Property Fund.
He is a qualified valuer, a Fellow of the Australian Property Institute
and a Senior Fellow of the Financial Services Institute of Australasia
(formally SIA). He was the honorary SIA National Principal Lecturer
and Task Force Chair for the Graduate Diploma’s Property Investment
Analysis course – a position he held for 11 years until 2003.
Other current listed company directorships
Nil
Former listed company directorships in last three years
Nil
Special responsibilities
N/A – no longer a Director of Charter Hall Group
Company Secretaries
Mark Bryant was appointed as joint Company Secretary for Charter Hall Group on 24 August 2015. Tracey Jordan resigned as Company
Secretary on 1 March 2017. Mark is now the sole Company Secretary.
Mark holds a Bachelor of Business (Accounting) and a Bachelor of Laws (Hons) and has over 13 years’ experience as a solicitor, including
advising on listed company governance, securities law, funds management, real estate and general corporate law. Mark is the Group
General Counsel and Company Secretary for the Charter Hall Group.
Tracey has more than 25 years’ experience in real estate and funds management, with extensive knowledge of real estate transactions,
structuring, funds management, compliance and corporate governance. Prior to joining Charter Hall, Tracey was National Manager, Unlisted
Property Funds and Senior Legal Counsel at Stockland. Tracey was also a Senior Associate for King & Wood Mallesons in its Canberra office
in the Property and Projects division from 1999 to October 2005.
Tracey is a Solicitor of the Supreme Court of NSW, and has been admitted to the Supreme Court of the Australian Capital Territory and the
High Court of Australia. She holds a Bachelor of Arts and Bachelor of Laws from the University of Sydney.
Meetings of Directors
The number of meetings of the Group’s Board of Directors and of each Committee of the Board held during the year ended 30 June 2017,
and the number of meetings attended by each Director were:
Full meetings of
the Board of Directors
Audit, Risk and
Compliance Committee
Investment
Committee
Nomination
Committee
Remuneration
and HR Committee
A Brennan
D Clarke
P Garling
D Harrison
P Kahan1
C McGowan2
K Moses3
D Ross4
A
10
10
9
10
6
4
7
5
B
10
10
10
10
6
5
8
5
A
4
4
1
*
2
*
3
1
B
4
4
15
*
2
*
3
16
A
*
1
1
*
*
*
*
1
B
*
1
1
*
*
*
*
1
A
*
2
2
*
*
*
*
2
B
*
2
2
*
*
*
*
2
A
6
*
3
*
3
2
*
1
B
6
*
6
*
3
2
*
1
A = Number of meetings attended.
B = Number of meetings held during the time the Director held office or was a member of the stated Committee during the year.
* = Not a member of the stated Committee.
1 Peter Kahan resigned 20 December 2016.
2 Colin McGowan resigned 9 November 2016.
3 Karen Moses appointed 1 September 2016.
4 David Ross appointed 20 December 2016.
5 Philip Garling resigned from committee 9 November 2016.
6 David Ross resigned from committee 2 June 2017.
Annual Report 2017 33
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Remuneration Report Summary
Charter Hall Limited is pleased to present its Remuneration Report (Report) for the year ended 30 June 2017. The table below outlines the
key changes made in 2017 and outcomes achieved in 2017.
Component
Key changes in FY 2017
Key management
personnel (KMP)
The appointment of Sean McMahon as Chief Investment Officer on 18 August 2016 and the departure of
Paul Altschwager as Chief Financial Officer is reflected in our KMP changes. Russell Proutt was appointed
as Chief Financial Officer with a commencement date of 20 July 2017. In the ensuing period, Philip
Schretzmeyer and Anne Edwards acted as joint Chief Financial Officers whilst also fulfilling their regular duties.
Long term incentive (LTI)
Introduced changes to the existing total securityholder return (TSR) performance measures for the FY 2017
grant. The range for the absolute performance measure was changed from 10% to 13% per annum to
9% to 12% per annum and the comparator group and performance measures for relative TSR was refined
(section 3.5).
Non-Executive
Directors (NED)
Appointment of Karen Moses on 1 September 2016 and David Ross on 20 December 2016 replacing retiring
Directors; Colin McGowan on 9 November 2016 and Peter Kahan on 20 December 2016.
Component
Key remuneration outcomes in FY 2017
Fixed remuneration
Reported Executives’ fixed annual remuneration (FAR) increased on average 3.2% in the annual review.
Short term incentive (STI) Based on performance of Group OEPS, an above target STI pool (129%) was awarded across the Group
(section 3.4).
Long term incentive
As a result of the TSR performance over the three years to 30 June 2016 (FY 2014 grant), 50% of the
performance rights vested in August 2016. The absolute TSR measure was exceeded. therefore 50% of the
LTI vested. The relative TSR did not meet the threshold therefore 50% of the LTI was forfeited (section 3.5).
The Special LTI grant for the former Joint Managing Directors (JMD) (David Harrison and David Southon)
granted in November 2013 on signing of renegotiated contracts (section 3.5) met most but not all of the
performance measures and as a result 100% of the Special LTI was forfeited.
Remuneration mix
Reviewed and adjusted the remuneration mix for some Reported Executives with the objective of increasing
the ‘at risk’ components to better enable Charter Hall to reward executives when challenging performance
measures are met (section 3.2) and to align with external market remuneration.
Other security plans
Continued the General Employee Securities Plan ($1,000 grant) for eligible employees not participating
in the LTI.
Pay equity review
Continued to review gender pay equity as part of our annual remuneration review process.
Non-Executive Directors NED base fees increased effective 1 July 2016 (section 5) by 2.5%.
Remuneration Report – unaudited
Actual remuneration received in FY 2017 – unaudited
The actual remuneration presented in the following table provides the remuneration Reported Executives received during the financial year
ended 30 June 2017. This voluntary disclosure is provided to increase transparency and includes:
• fixed pay and other benefits for 2017;
• 2016 cash STI paid during 2017; and
• the value of any LTI and STI award that vested during 2017.
The actual remuneration presented is distinct from the audited disclosed remuneration (as required by section 308(C) of the Corporations Act
2001 (Cth) (Act)) in the Financial Report on page 44, which is calculated in accordance with statutory obligations and accounting standards.
The numbers in the audited disclosed remuneration include accounting values for current and prior years’ LTI grants which have not been
(have not or may not be) received, as they are dependent on performance hurdles and service conditions being met.
34 Charter Hall Group
Name
Executive Director
D Harrison
Other Reported Executives
G Chubb4
P Ford
S McMahon5
A Taylor
Former Reported Executive
P Altschwager6
Totals
Salary and
other benefits1
Short term
incentive2
Value of
securities
vested3
$
$
$
Total
$
1,301,901
1,118,467
1,185,726
3,606,094
631,901
473,558
699,336
700,738
215,752
185,986
–
292,200
415,934
42,929
–
327,371
1,263,587
702,473
699,336
1,320,309
385,094
175,327
495,564
1,055,985
4,192,528
1,987,732
2,467,524
8,647,784
% of
remuneration
consisting
of rights
%
32.9
32.9
6.1
–
24.8
46.9
28.5
1 Other benefits include superannuation and non-monetary benefits including car parking and salary continuance.
2 Values relate to STI paid in FY 2017 as cash for FY 2016 performance.
3 Values relate to value at vesting date for the FY 2014 LTI allocation (grant date of 20 November 2013), the second tranche of 2014 deferred STI and the first
tranche of 2015 deferred STI, each of which vested on 31 August 2016 (value is determined by the price of the securities at vesting).
4 On 19 December 2014, G Chubb was awarded 197,370 service rights vesting in three equal tranches: with the final tranche of 65,790 vesting on 30 June 2017
to the value of $376,977 (value is determined by the price of the securities at vesting).
5 S McMahon commenced on 18 August 2016; his remuneration is pro-rata from this period.
6 P Altschwager ceased being a KMP on 7 December 2016 and remained employed by the Group until 31 December 2016. This table shows only his actual
remuneration whilst employed, and excludes his separation arrangements.
Remuneration Report – audited
1. Key management personnel – audited
This Report outlines the remuneration policies and practices that apply to Charter Hall’s KMP for the year ended 30 June 2017. The KMP
include the Non-Executive Directors, Executive Directors and other Reported Executives who are responsible for the Group’s strategy.
Name
Non-Executive Directors
David Clarke
Anne Brennan
Phil Garling
Karen Moses
David Ross
Former Non-Executive Directors
Peter Kahan
Colin McGowan
Executive Director
David Harrison
Other Reported Executives
Greg Chubb
Paul Ford
Sean McMahon
Adrian Taylor
Former Reported Executive
Role
Chair
Director
Director
Director
Director
Director
Director
Term as KMP
Full Year
Full Year
Full Year
Part Year (appointed 1 Sept 2016)
Part Year (appointed 20 Dec 2016)
Part Year (resigned 20 Dec 2016)
Part Year (resigned 9 Nov 2016)
Managing Director & Group Chief Executive Officer
Full Year
Group Executive – Retail
Group Executive – Industrial
Chief Investment Officer
Group Executive – Office
Full Year
Full Year
Part Year (appointed 18 Aug 2016)
Full Year
Paul Altschwager
Chief Financial Officer
Part Year (ceased 7 Dec 2016)
The Report has been prepared and audited in accordance with the requirements of the Act.
Annual Report 2017 35
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Remuneration Report – audited continued
2. Remuneration governance
Charter Hall’s Board and the Remuneration and Human Resources Committee (the Committee) are responsible for setting and overseeing
remuneration policy for the Group.
Members of
the Committee
The Committee is appointed by the Board and comprised solely of NEDs:
• Anne Brennan (Chair of the Committee)
• Philip Garling
• Peter Kahan (resigned 20 December 2016)
• Colin McGowan (resigned 9 November 2016)
• David Ross (appointed to the Committee 2 June 2017)
Role of the Committee
Charter Hall’s Board and the Committee are responsible for setting and overseeing remuneration policy
for the Group.
In summary, the Committee provides advice and recommendations to the Board for approval on:
• the Group’s Human Resources strategy;
• remuneration policy for executives;
• fixed annual remuneration and incentive outcomes for executives;
• any other remuneration matters that relate to executives.
• criteria for reviewing the performance of the Managing Director;
•
•
incentive plans for all employees; and
fees for NEDs of the Group and fund committees.
The specific responsibilities of the Board and the Committee are detailed in their respective charters,
which are available on the Group website at www.charterhall.com.au.
Attendance
Other Directors of the Board, the Managing Director and the Group Executive – People, Brand and
Community attend Committee meetings by invitation. Importantly, executives (including the Managing
Director), do not attend meetings, or sections of meetings, where agenda items for discussion relate to their
own remuneration outcomes.
Remuneration & risk
management
Risk is managed at various points in the executive remuneration framework through:
• part deferral of STI awards into service rights over two years;
• LTI performance hurdles that reflect the long-term performance of the business, measured over three
years with an additional one year holding lock;
• clawback on unvested deferred STI and unvested LTI for material misstatement and financial
misrepresentation;
• minimum shareholding for Independent Directors; and
• Board discretion on performance outcomes.
External advisors and
remuneration consultants
Where necessary, the Committee seeks support from independent experts and advisors. Remuneration
consultants provide information on market trends in respect of KMP remuneration structures and
benchmarking information on KMP remuneration levels. Other external advisors (including legal practitioners)
assist with the administration of the Group’s remuneration plans and ensure that the appropriate legal
parameters are applied and employment contracts are in place.
The Committee independently appoints its remuneration consultants and engages with them in a manner
in which any information provided is not subject to undue influence by management.
The information provided by external advisors is used as an input to the Committee’s considerations and
decision making only. The Board has ultimate decision making authority over matters of remuneration
structure and outcomes.
During the FY 2017 period the Committee appointed independent advisors Egan Associates to provide
guidance to the Board, along with previously appointed Ernst & Young. Work undertaken during FY 2017
did not constitute a remuneration recommendation for the purposes of the Corporations Act 2001.
36 Charter Hall Group
3. Executive remuneration framework
3.1 Executive remuneration strategy
Charter Hall’s remuneration philosophy is aimed at rewarding performance. This is achieved by attracting and retaining talented
people who are motivated to achieve challenging performance targets aligned with both the business strategy and the long-term
interests of securityholders.
The following illustrates the link between business strategy and remuneration outcomes:
Business strategy
To access, deploy, manage and co-invest equity to create value and provide superior income and capital returns for our clients and
securityholders through:
• delivering outperformance for both managed fund/partnership investors and CHC securityholders
• optimising total return on invested capital
• growing sustainable earnings and maintaining resilience via long WALE portfolios and through strong customer relationships
• developing a scalable and efficient platform
• recruiting, retaining and motivating a high performance team
• maintaining a through-the-cycle OEPS pre-tax growth range of 5% to 7% per annum
Remuneration strategy
Create sustainable securityholder value by:
• assessing performance and STI outcomes against financial and
non-financial key performance indicators (KPI) linked to strategy
• deferring a portion of STI into equity for executives
• aligning LTI performance hurdles with securityholders’
Attract, retain and motivate talent by:
• rewarding superior performance
• offering competitive total remuneration
• creating retention mechanisms
• ensuring remuneration strategy is simple, transparent
expected returns
and consistent
• ensuring a significant ‘at-risk’ component of total remuneration
FAR
Remuneration ‘at risk’ and subject to performance outcomes
Remuneration components
FAR
• Reported Executives increased
by 3.2% in FY 2017
STI
• OEPS target, and
• measured against KPIs (50% financial
and 50% non-financial)
Delivered as
cash (67%)
Deferred equity
(33%) over two years
LTI
• equal measures of absolute TSR
and relative TSR (comparator group)
• three year performance measures
additional one year holding lock
Remuneration outcomes
Remuneration ‘at risk’ and subject to performance outcomes
STI
• FY 2017 OEPS performance above
target led to an increased STI pool
(129%)
• 50% of deferred STI for FY 2015
and FY 2016 vested
LTI
• FY 2014 LTI grant 50% vested
(31 August 2016) based on the
performance of absolute TSR with
50% relative TSR forfeited
• JMD Special LTI grant (awarded
4 November 2013) did not meet all
performance conditions and did not vest
• FY 2015 LTI grant will fully vest
(31 August 2017) based on performance
of relative and absolute TSR
Annual Report 2017 37
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
120
100
80
60
40
20
0
Remuneration Report – audited continued
3. Executive remuneration framework continued
3.2 Remuneration mix
Executive remuneration is structured as a mixture of fixed and variable ‘at-risk’ STI and LTI components. While fixed remuneration is
designed to provide a base level of remuneration, the ‘at-risk’ STI and LTI components reward executives when challenging performance
measures are met or exceeded.
The figures below for all Reported Executives show the percentage mix of fixed versus ‘at-risk’ for ‘on target’ total remuneration.
The ‘maximum’ total remuneration for the Managing Director shows the mix of fixed versus ‘at-risk’ as a percentage of ‘on target’
remuneration. This reflects the maximum STI of up to 150% of the target STI due to strong Company and executive outperformance.
Other Reported Executives also have the potential to earn up to 150% of target STI.
33%
50%
33%
33%
33%
33%
28%
28%
44%
15%
28%
57%
12%
27%
61%
15%
30%
55%
LTI
STI
FAR
Target
Maximum
Chief Investment
Officer
Group Executive
– Retail
Group Executive
– Industrial
Group Executive
– Office
Managing Director
Other Reported Executives
3.3 Fixed remuneration
Composition
Review process
Fixed remuneration comprises cash base salary, statutory superannuation contributions and other
nominated benefits.
Fixed remuneration is targeted at the median of the market and is reviewed annually, effective 1 July,
benchmarked against equivalent roles in the market recognising:
•
• the market environment for each individual’s skills and capabilities.
individual performance; and
Benchmarking
The following comparator group is used when determining the Reported Executives remuneration:
•
industry related companies: based on entities in the S&P/ASX 200 Australian Real Estate and Investment
Trust (A-REIT) industry group.
Executive Director
outcomes
The fixed remuneration of the Managing Director, Mr Harrison, did not increase in the FY 2017 annual
remuneration review. His last review was received when he was appointed Managing Director, reflecting
his change in role (1 February 2016).
Other Reported
Executives
Other Reported Executives’ fixed remuneration increased by an average of 4% in the annual
remuneration review.
38 Charter Hall Group
3.4 Short term incentive
Purpose
The STI is an ‘at-risk’ incentive awarded annually, which is designed to reward executives,
subject to performance against agreed financial and non-financial KPIs.
Gateway for STI
A Group financial gateway of 90 – 95% of budgeted OEPS must be met before any STI entitlement
is available, with the Board retaining overall discretion on performance achievement.
Determining and
assessing the STI pool
The size of the pool is determined by the Board, upon advice from the Committee, based on achieving a
budgeted OEPS target. The Board retains discretion to increase or decrease the overall STI pool available,
based on its assessment of the overall performance throughout the year.
In consultation with the Committee, the Board assesses the Group’s financial performance and the
performance of all Reported Executives against agreed KPIs.
Maximum STI potential
The maximum STI potential for all employees is 150% of their STI target, enabling recognition for outperformance.
Performance targets
The STI measures are set to ensure appropriate focus on achievement of Group, divisional and individual
performance targets that are aligned with implementation of Charter Hall’s overall strategy.
KPIs are typically split between 50% financial and 50% non-financial, based on a balanced scorecard
approach, which encourages executives to take a holistic approach to enhancing and protecting
securityholder value.
Delivery
For all executives, STI is delivered in the form of cash (67%) and deferred service rights (33%).
Service rights are deferred over two years, with 50% vesting at the end of year one and 50% at the end of
year two. The number of rights granted to an executive is determined based on an independent fair value
calculation by Deloitte using the Black-Scholes valuation method. If an executive’s employment terminates
prior to expiry of the relevant vesting period, the service rights will be forfeited or remain ‘on foot’, subject to
the Board’s discretion to determine ‘good leaver’ status.
Managing Director’s KPIs
The Managing Director’s scorecard is divided into three performance goals, Financial, Customer and Leadership and Collaboration. For each
of these goals there will be performance measures aligned to our core strategic objectives of growth and resilience.
Below is a summary of the Managing Director’s performance measures and KPIs for FY 2017 as assessed by the Board.
Performance goal
Measures
Financial (50%)
Customer (25%)
Including Group OEPS; growth in funds under management; return on equity; net financial
equity flows and property funds management margin.
Delivering exceptional customer experience and satisfaction and continuous improvement
and innovation.
Exceeded
Status
Exceeded
Leadership &
Collaboration (25%)
Talent optimisation, leadership contribution, succession planning, employee engagement
initiatives and drive diverse and inclusive culture.
Achieved
Other Reported Executives KPIs
KPIs for other Reported Executives are broadly similar to that of the Managing Director and are focused on individual areas of accountability.
Performance goal
Measures
Financial (50%)
Including Group and Divisional financials on investment earnings; growth in funds under
management; operating earnings before interest, tax, depreciation and amortisation; funds
management margin or divisional budget financial initiatives.
Customer (25%)
Including customer experience, service and satisfaction offerings.
Leadership &
Collaboration (25%)
Including leadership contribution, talent and engagement.
Status
Exceeded
Exceeded
Achieved
Annual Report 2017 39
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Remuneration Report – audited continued
3. Executive remuneration framework continued
3.4 Short term incentive continued
Group FY 2017 performance outcomes
In FY 2017, Charter Hall’s OEPS was 35.9 cents, which was 18.1% above the FY 2016 OEPS. The table below shows Charter Hall’s
OEPS (cps) over a four year period:
OEPS
25.3
27.5
18.1% growth
35.9
30.4
FY 2014
FY 2015
FY 2016
FY2017
FY 2017 STI Outcomes
In FY 2017, 129% of the target STI pool was awarded across the Group, recognising the outperformance of
the Group’s OEPS against budget and, as determined by the Board.
The below table shows the short term incentive outcomes for Reported Executives for 2017.
40
35
30
25
20
15
10
5
0
Name
Executive Director
D Harrison
Other Reported Executives
G Chubb
P Ford
S McMahon2
A Taylor
Former Reported Executive
P Altschwager2
STI
earned
Paid
in cash
Deferred
into service
rights
Target
STI of
fixed pay
STI earned
compared
to target
$
$
$
%
%
1,820,000
1,213,333
606,667
100%
140%
403,000
260,000
594,570
566,109
268,667
173,333
396,380
377,406
134,333
86,667
198,190
188,703
134,783
134,783
–
49%
43%
61%
56%
50%
130%
130%
140%
145%
70%
30%
% of
target STI
opportunity
forfeited1
%
0%
0%
0%
0%
0%
1 The STI was not earned; the Act requires this disclosure as forfeiture.
2 STI pro-rata for period employed.
3.5 Long term incentive
Purpose
Participants
Type of equity awarded
40 Charter Hall Group
The LTI aligns key employee rewards with sustainable growth in securityholder value over time. It also plays
an important role in employee retention.
All Reported Executives, executives, Fund Managers and selected other managers, comprising approximately
7% of employees.
The LTI is governed by the Performance Rights and Options Plan (PROP), under which either rights or options
to stapled securities are granted to participants. Each performance right entitles the participant to one
stapled security in the Charter Hall Group for nil consideration at the time of vesting, subject to meeting the
performance hurdles outlined below. For FY 2017 detail see specific grant allocation (section 6.2).
Valuation
The number of rights granted to an executive is determined based on an independent fair value calculation
by Deloitte using the Black-Scholes valuation method.
Performance measures,
vesting schedule and
holding lock
For the FY 2017 LTI allocation, the two performance hurdles that apply to the performance rights for vesting
over a three year period commencing 1 July 2016 were:
• Absolute TSR (50%) – vesting occurs on a straight line basis if the compound total return is between
9% and 12% per annum, with 50% vesting at the lower end of the range and 100% vesting at the higher
end of the range.
• Relative TSR (50%) – vesting occurs on a straight line basis if the total compounded return when Charter
Hall’s return is ranked against a comparator group of the S&P/ASX 200 A-REIT Accumulation Index
(XPJAI), is between the 50th and the 75th percentile. Vesting starts at 50% at the lower end of the range
with 100% vesting at the higher end of the range. The comparator group for the relative TSR grant is:
– Abacus Property Group (ABP)
– BWP Trust (BWP)
– Cromwell Property Group (CMW)
– Charter Hall Retail REIT (CQR)
– Dexus Property Group (DXS)
– Goodman Group (GMG)
– Growthpoint Properties Australia (GOZ)
– GPT Group (GPT)
– Iron Mountain Incorporated (INM)
– Investa Office Fund (IOF)
– Mirvac Group (MGR)
– National Storage REIT (NSR)
– SCentre Group (SCG)
– Shopping Centres Australasia Property Group (SCP)
– Stockland (SGP)
– Vicinity Centres (VCX)
Any performance rights that fail to meet these performance hurdles by 30 June 2019 will lapse. Performance
rights which vest will be subject to a further one year holding lock.
Rationale for change to
performance conditions
TSR measures the overall returns that a company has provided for its securityholders, reflecting share price
movements and reinvestment of dividends over a specified period.
During FY 2017, adjustments have been made to both absolute and relative TSR measure. Key considerations
of the Board when reviewing the performance conditions have been ensuring any performance measure is
aligned with the Group’s securityholders investment returns and with the business strategy to access, deploy,
manage and co-invest equity to create value and provide superior income and capital returns for our clients
and securityholders.
Absolute TSR provides a strong link to Charter Hall’s business strategy of co-investing in managed funds with
absolute and total return hurdles. Charter Hall’s original absolute TSR hurdle of 10% to 13% was established
in 2010. For the FY 2017 grant, the Board approved an adjustment to 9% to 12% to reflect changes in the
cost of capital and bond yield benchmarks over the past six years, which when compared to sector peers is
above market (a high return compared to peers).
Relative TSR is the most widely used LTI hurdle adopted in Australia. It ensures that value is only delivered to
participants if the investment return actually received by CHC securityholders is sufficiently high relative to the
return they could have received by investing in a portfolio of alternative A-REIT sector stocks over the same period.
For the FY 2017 grant, the Board refined the relative TSR measure and comparator group. In the past,
Charter Hall has taken a whole of index approach and set the gateway at the index and then a straight
line to 1.1 times this index. A review of our peers noted that for those which have a relative TSR measure, the
measurement commonly used is a 50th to 75th percentile measurement. Consideration of the performance
of the index as a whole results in the larger cap stocks being up-weighted, and can disadvantage the smaller
cap stocks. The move to the ranking of performance of each index participant in the comparator group
removes this weighting effect.
The Board revised the original S&P/ASX200 A-REIT Accumulation Index (XPJAI) measurement group
to a defined comparator group as outlined above. The comparator group is the S&P/ASX200 A-REIT
Accumulation Index (XPJAI) as at 1 July 2016 excluding Westfield Corporation (WFD), due to assets being
held outside Australia and Charter Hall Group (CHC). The Board is able to determine the treatment of the
companies in the comparator group at its discretion.
Annual Report 2017 41
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Remuneration Report – audited continued
3. Executive remuneration framework continued
3.5 Long term incentive continued
Cessation of employment
provisions
For the FY 2017 LTI allocation, the following provisions apply in the case of cessation of a participant’s employment:
• Misconduct: all unvested performance rights are forfeited unless the Board determines otherwise;
• Resignation or where a participant breaches a post-termination restriction in their employment contract:
all unvested performance rights are forfeited unless the Board determines otherwise; and
• All other leavers, including good leavers: all unvested performance rights lapse with effect from the date of
cessation of employment, unless the Board allows part or all to vest early or remain on foot subject to the
original terms of grant.
Change of control
provisions
The Board, in its absolute discretion, may determine that all or a specified number of a participant’s
unvested performance rights vest. In doing so, the Board has regard to whether the performance is in line
with the performance conditions over the period from the date of the grant of the performance right to the
date of the relevant event.
Treatment of dividends
Participants who hold performance rights are not entitled to receive any distributions or dividends declared by
the Group until the performance rights are exercised and held as stapled securities.
Hedging and margin
lending prohibitions
In accordance with the Corporations Act 2001, all KMP are prohibited from hedging or otherwise protecting
the value of unvested stapled securities.
Special LTI grant
for JMDs
Following securityholder approval, as part of their contract renewal effective 4 November 2013,
the former JMDs received a special allocation of three year performance rights. D Harrison received
300,000 performance rights and D Southon 100,000 performance rights.
The vesting of these performance rights is subject to both service and performance conditions over the three
year period:
• Absolute TSR Performance – measured over a performance period from 1 July 2013 to 30 June 2016;
• Relative TSR Performance – measured over a performance period from 1 July 2013 to 30 June 2016; and
• Annual Milestones – set annually and measured over a performance period from 4 October 2013 to
4 October 2016.
All measures need to be met for any Special LTI to become available. As the relative TSR did not meet the
performance measure, 100% of the performance rights were forfeited.
The following graphs demonstrate how the Group’s TSR (including stapled security price movements and distributions) has performed
relative to the ASX A-REIT Accumulation Index for the three years to 30 June 2016 (FY 2014 LTI performance period) and three years to
30 June 2017 (FY 2015 LTI performance period).
170%
160%
150%
140%
130%
120%
110%
100%
90%
80%
170%
160%
150%
140%
130%
120%
110%
100%
90%
80%
As at 30 June 2016
CHC: 154%
Index: 166%
As at 30 June 2017
CHC: 153%
Index: 140%
Jun 13
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
CHC
A-REIT Accumulation Index
CHC
A-REIT Accumulation Index
FY 2014 LTI period (vesting date 31 August 2016) FY 2015 LTI period (vesting date 31 August 2017)
42 Charter Hall Group
Outcomes
• The FY 2014 LTI had a vesting date of 1 July 2016. As a result of the TSR performance over the three
years to 30 June 2016, 50% vested based on absolute performance and 50% was forfeited based on
relative performance.
– Absolute TSR – For the three years to 30 June 2016, Charter Hall stapled securities achieved
a compound average growth rate of 15%. This performance is in excess of the absolute TSR
outperformance hurdle of 13% per annum.
– Relative performance – For the three years to 30 June 2016, Charter Hall did not outperform the
S&P/ASX 200 A-REIT Accumulation Index and did not meet the 1.0 times relative TSR threshold and
therefore did not vest.
• The FY 2015 LTI has a vesting date of 31 August 2017. As a result of the TSR performance over the three
years to 30 June 2017, the performance hurdles were exceeded and 100% of the performance rights will
vest based on absolute and relative performance.
3.6 Group summary of performance and total remuneration outcomes
The tables below provide information on Charter Hall’s performance against key metrics over the last five years and the relationship to
Reported Executives’ total remuneration, both fixed and ‘at risk’. Charter Hall’s STI is weighted towards growth in OEPS and the LTI provides
an important link between remuneration and TSR.
Key performance metrics
Statutory profit after tax for stapled securityholders ($000s)
Operating earnings for stapled securityholders ($000s)
Operating earnings per stapled security (cents)
Statutory earnings per stapled security (EPS) (cents)
Growth in OEPS %
Distribution per stapled security (cents)
Stapled security price at 30 June ($)
S&P/ASX 200 A-REIT Accumulation Index (XPJAI)
– Jul – Jun (%)
Total securityholder return – Jul – Jun (%)
2013
54,842
68,750
22.9
18.3
10.8
20.2
3.87
24.3
80.6
2014
82,116
81,163
25.3
25.6
10.4
22.3
4.26
11.1
16.3
2015
2016
117,885
98,799
27.5
32.8
8.7
24.2
4.52
20.3
11.8
215,240
124,735
30.4
52.5
10.5
26.9
5.06
23.2
18.3
2017
257,561
151,173
35.9
61.2
18.1
30.0
5.50
(6.3)
15.2
Reported Executives total remuneration summary
2013
2014
2015
20161
20172
Fixed payments ($)
STI accounting expense ($)
LTI accounting expense ($)3
Earned remuneration ($)4
5,978,392
2,659,913
2,369,843
6,122,898
3,381,549
2,169,193
4,776,471
3,037,030
1,746,018
6,774,805
5,070,682
1,761,639
4,120,280
3,778,462
931,165
11,008,148
11,673,640
9,559,519
13,607,126
8,829,907
On target total remuneration ($)
11,216,962
11,984,905
9,257,989
12,198,875
7,864,408
Earned remuneration relative to target remuneration –
over/(under) (%)
(2%)
(3%)
4%
12%
12%
Includes remuneration for Mr Southon’s 2017 notice period and excludes his redundancy payments.
Includes remuneration for Mr Altschwager for his period of KMP and excludes his separation arrangements and the STI payment reported for Mr Southon in 2017.
1
2
3 The LTI expense attributed to the Reported Executives reflects the statutory accounting expense under AASB2.
4 Earned remuneration for the Reported Executives is the sum of their fixed payments, the STI accounting expense and the LTI accounting expense.
Annual Report 2017 43
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Remuneration Report – audited continued
4. Executive remuneration in detail
4.1 Total remuneration of Reported Executives
The following table details the total remuneration of the Reported Executives of the Group for FY 2016 and FY 2017.
Short-term benefits
Post
employ-
ment
benefits
Security-
based payment
Other
long-term
benefits
Termin-
ation
benefits
Cash
short-term
incentive
Annual
leave1
Non-
monetary
benefits2
Super-
annuation
Salary
Securities,
options
and
perform-
ance
rights
Security-
based
short-term
incentive
Long
service
leave1
Termin-
ation
benefits
Name
$
$
$
$
$
$
$
$
$
Total
$
Executive Director
D Harrison
2017
2016
1,280,384 1,213,333
1,171,259 1,118,467
(147,108)
87,976
1,901
1,276
19,616
19,308
606,667
559,233
429,177
506,418
22,751
57,643
– 3,426,721
– 3,521,580
610,384
592,692
Other Reported Executives
G Chubb
2017
2016
P Ford
2017
2016
S McMahon
2017
A Taylor
2017
2016
673,704
645,692
448,754
391,559
677,820
268,667
215,752
173,333
185,986
396,380
377,406
292,200
(24,834)
10,165
11,988
(8,588)
1,901
1,337
5,188
9,748
19,616
19,308
134,333
107,876
161,457
311,720
19,616
19,308
86,667
–
26,536
24,703
11,561
10,857
15,348
14,853
– 1,183,084
– 1,269,707
–
–
787,430
637,569
14,118
1,901
19,616
198,190
209,733
12,213
– 1,529,971
(17,057)
(2,672)
7,418
12,362
19,616
19,308
188,703
146,100
75,641
78,165
23,125
11,638
– 1,348,556
– 1,202,793
–
197,190
Former Reported Executives (ex CHC)
D Southon
2017
2016
2017
Notice
Period3
Separation3
2016
Actuals3
P Altschwager4
2017
2016
328,648
–
637,458
–
134,783
175,327
375,287
732,092
1,093,092
732,416
52,413
–
(22,462)
–
24,407
–
–
–
–
–
–
–
197,190
2,481
–
11,442
–
164,324
–
142,677
211,157
11,356
– 1,350,799
– 1,112,400 1,323,557
14,477
19,308
366,208
375,226
19,468
– 2,597,733
5,646
1,276
9,808
19,308
–
87,663
28,621
164,294
–
14,635
893,344 1,447,489
– 1,219,002
Former Reported Executives
S Dundas5
2016
R Stacker5
480,692
175,760
(14,094)
1,276
19,308
87,880
59,306
8,750
19,308
108,947
99,130
(64,615)
107,887
1,214,560
931,165
84,998
893,344
9,920,441
165,906
1,628,231
1,972,796
84,585
1,112,400 14,930,683
–
–
818,878
989,065
2016
580,692
217,895
24,306
Total 2017 4,066,333
2,761,092
(162,893)
Total 2016 6,325,228
3,442,451
151,451
3,402
23,955
47,635
44 Charter Hall Group
% of total
remun-
eration
consisting
of rights
%
30
30
25
33
14
4
27
20
19
–
23
16
29
2
21
18
21
22
31
1 Shows the movement in leave accruals for the year.
2 Non-monetary benefits include car parking benefits and salary continuance.
3 Mr Southon ceased as KMP in his role as Joint Managing Director effective 1 February 2016.
In accordance with Mr Southon’s employment agreement and the announcement to the market on 1 February 2016, Mr Southon was entitled during his
12 month notice period to the following: he continued to be eligible for STI; no future LTI grants were awarded; previous service rights awarded under his STI
and performance rights under his LTI remained on foot and vest at the originally intended vesting date to the extent that the performance conditions (where
applicable) are satisfied; and a 12 month redundancy payment based on fixed remuneration was paid at the end of his notice period.
The presentation of Mr Southon’s remuneration has been split into three components. Actual 2016 represents his remuneration for 12 months to 30 June 2016,
including five months of his notice period to 30 June 2016. The 2017 notice period represents the remuneration he received during FY 2017 as he continued as
an employee during his notice period until 31 January 2017. For FY 2017, the STI opportunity was shown at target amount as it may be earned in the event of
performance criteria being met. The performance criteria were met and the actual amount paid is $690,161. The difference to the previously reported amount is
shown in the 2017 data. The separation line reflects the redundancy payment he received on termination of his employment. The separation benefits include the
remaining security-based expense for unvested incentives as at 31 January 2017 which remain on foot and may vest at the same time as all other participants.
None of these benefits are termination benefits for the purposes of the Corporations Act termination benefits cap.
In accordance with Mr Altschwager’s employment agreement, Mr Altschwager is entitled to six months’ notice period. The termination benefits value also includes
the remaining security-based expense for unvested incentives as at 31 December 2016 which remain on foot and may vest at the same time as all other participants
and statutory leave entitlements. None of these benefits are termination benefits for the purposes of the Corporations Act termination benefits cap.
4
5 Mr Dundas and Mr Stacker ceased as KMP effective 1 February 2016 but remained employed by the Group as Fund Manager, Charter Hall Retail REIT and
Head of Investor Relations respectively. Remuneration shown is for full year.
4.2 Key terms of employment
The remuneration and other terms of employment for Reported Executives are formalised in employment contracts. Each of these contracts
provides for participation in the Group’s STI and LTI programs (as described above) and payment of other benefits.
The terms and conditions of employment of each executive reflect market conditions at the time of their contract. All Reported Executives’
contracts are ongoing in duration. The material terms of the employment agreements for the Executive Directors and Reported
Executives are summarised below:
Name
Executive Director
D Harrison
Other Reported Executives
G Chubb
P Ford
S McMahon
A Taylor2
Former Reported Executive
Position
Minimum notice period1
Employee
Charter Hall
Managing Director and Group CEO
6 months
12 months
Group Executive – Retail
Group Executive – Industrial
Chief Investment Officer
Group Executive – Office
3 months
3 months
6 months
3 months
3 months
3 months
6 months
3 months
P Altschwager
Chief Financial Officer
3 months
6 months
1 No notice period is required for termination by the Company for serious or wilful misconduct by the employee.
2 Termination payments under Adrian Taylor’s contract equals nine months base salary plus one month per year of service to a maximum of 12 months base salary.
Charter Hall’s redundancy policy applies to all employees, including Reported Executives, and is calculated based on notice period plus
four weeks pay for each completed year of service, with a minimum payment of eight weeks and a maximum of 52 weeks. Payments are
calculated on the base rate of pay on ordinary hours worked and exclude any incentive-based payments or bonuses. The employment
contract for the Managing Director does not include a redundancy provision.
Other than as described above, the Reported Executives’ contracts do not provide for any termination benefits aside from payment in lieu
of notice (where applicable). Treatment of unvested incentives is dealt with in accordance with the terms of the grant (refer to STI and LTI
commentary in section 3).
Annual Report 2017 45
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Remuneration Report – audited continued
5. Non-Executive Director remuneration
Policy
Benchmarking
The Committee makes recommendations to the Board on the total level of remuneration of the Chair and other
Non-Executive Directors, including any additional fees payable to Directors for membership of Board committees.
industry practice and best principles of corporate governance;
Fees are set by reference to the following considerations:
•
• responsibilities and risks attaching to the role of NEDs;
• the time commitment expected of NEDs on Group matters; and
• reference to fees paid to NEDs of other comparable companies.
NED fees are periodically reviewed to ensure they remain in line with general industry practice and reflect proper
compensation for duties undertaken. External independent advice is sought in these circumstances.
Fee framework
NED fees, including committee fees, are set by the Board within the aggregate amount of $1.3 million per annum
as approved by securityholders at the AGM in November 2014.
Under the current framework, NEDs, other than the Chair, receive (inclusive of superannuation):
• Board base fee; and
• Committee fees.
The Chair receives an all-inclusive fee.
NEDs are also entitled to be reimbursed for all business-related expenses, including travel on Charter Hall
business, incurred in the discharge of their duties in accordance with Charter Hall’s Constitution.
In accordance with principles of good corporate governance, NEDs do not receive any benefits upon retirement
under any retirement benefits schemes (other than statutory superannuation) and NEDs are not eligible to
participate in any of Charter Hall’s employee incentive schemes.
Remuneration
outcomes
The Chair’s fee structure was increased to $307,500 per annum and the base fees for NEDs was increased
to $123,000 per annum, both effective 1 July 2016.
No changes to Committee Chairs and members’ fees occurred.
Minimum shareholding
requirement
Minimum shareholding requirements were implemented in FY 2016 requiring Independent Directors to hold CHC
securities to the value of $50,000 (being approximately a year’s base fee, net of tax) to be purchased over a
three year period. The valuation is based on the value of the securities at the time of purchase.
Summary of fee framework per annum
Board
Chair
Member
Audit Risk and Compliance Committee
Chair
Member
Remuneration and Human Resources Committee
Chair
Member
Nomination Committee
Chair
Member
Investment Committee1
Chair
Member
2017
$
2016
$
307,500
123,000
300,000
120,000
30,000
15,000
25,000
13,879
2,060
2,060
–
–
30,000
15,000
25,000
13,879
2,060
2,060
–
–
1 The Investment Committee members have previously received no remuneration for the Committee fees, this will be reviewed in FY 2018.
46 Charter Hall Group
Non-Executive Director remuneration
Non-Executive Directors
D Clarke
A Brennan
P Garling
K Moses
D Ross
Former Non-Executive Directors
D Deverall1
P Kahan
C McGowan
TOTAL
1 Mr Deverall resigned effective 26 February 2016.
6. Appendix – further detail
6.1 Securityholdings
Key management personnel securityholdings
Name
Directors of Charter Hall Limited
Ordinary stapled securities
D Clarke
A Brennan
P Garling
K Moses2
D Ross3
Former Directors
P Kahan4
C McGowan5
Executive Director
D Harrison
Other Reported Executives
G Chubb
P Ford
S McMahon
A Taylor
Former Reported Executive
P Altschwager6
2017
fees
$
307,500
163,000
159,287
124,659
73,035
–
72,004
49,256
948,741
2016
fees
$
300,000
165,305
144,117
–
–
109,583
141,016
133,879
993,900
Opening
balance at
30 Jun 2016
Stapled
securities
acquired1
Rights and
options
exercised
Stapled
securities
sold
Closing
balance at
30 Jun 2017
43,138
30,000
9,435
–
–
–
10,000
1,441,773
–
–
–
61,605
2,737
–
7,324
8,137
–
–
–
–
72,581
7,622
–
57,066
–
86,707
–
–
–
–
–
–
–
–
–
–
–
–
–
(10,000)
45,875
30,000
16,759
8,137
–
–
–
207,026
–
1,648,799
–
–
–
–
–
(72,581)
(7,622)
–
(57,066)
–
–
–
61,605
(86,707)
–
Includes securities acquired under the security purchase plan.
1
2 Appointed as Board Member on 1 September 2016. Includes a deemed acquisition of 5,400 stapled securities that K Moses held at time of appointment.
3 Appointed as Board Member on 20 December 2016.
4 Resigned as Board Member on 20 December 2016. Prior to his resignation, Mr Kahan was a representative of the Group’s major securityholder, Gandel Group.
Mr Kahan did not hold any securities in his own right.
5 Resigned as Board Member on 9 November 2016. Deemed disposal of all stapled securityholdings as no longer a director of the Group.
6 Deemed disposal of all stapled securityholders as no longer a KMP of the Group.
Annual Report 2017 47
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Remuneration Report – audited continued
6. Appendix – further detail continued
6.2 Performance Rights and Options Plan details
Performance rights and service rights outstanding under the PROP.
Performance rights
Year of issue
2015
2016
2017
Securities
Exercise price
Vesting conditions
918,240
879,695
877,183
Nil
Nil
Nil
Absolute and relative performance criteria
Absolute and relative performance criteria
Absolute and relative performance criteria
Total performance rights outstanding
2,675,118
Service rights
Year of issue
2015
2016
2017
2017
Total service rights issued
Securities
Exercise price
Vesting conditions
65,790
179,364
59,056
268,876
573,086
Nil
Nil
Nil
Nil
Service conditions
Service conditions – Deferred STI
Service conditions
Service conditions – Deferred STI
Valuation model inputs
The Black-Scholes methodology is used for allocation purposes while the Monte Carlo method is used for accounting purposes.
The accounting value determined using a Monte Carlo simulation valuation is in accordance with AASB 2.
The model inputs for the PROP performance rights plan issued during FY 2014 to FY 2017 to assess the fair value are as follows:
Performance rights
Grant date1
Stapled security price at grant date
Opening TSR measurement price
Fair value of right
Expected price volatility
Risk-free interest rate
Service rights
Grant date
Stapled security price at grant date
Fair value of right
Expected price volatility
Risk-free interest rate
FY 2014
FY 2014
FY 2015
FY 2016
FY 2017
20/11/2013
20/11/2013
19/12/2014
30/11/2015
25/11/2016
$3.68
$2.34
$1.42
30.4%
2.9%
$3.68
$3.89
$1.11
30.4%
3.0%
$4.68
$4.23
$2.09
30.4%
3.0%
$4.47
$4.64
$1.41
24.0%
2.1%
$4.55
$5.11
$1.39
17.1%
1.8%
FY 2014
FY 2015
FY 2015
FY 2016
FY 2017
20/11/2013
19/12/2014
19/12/2014
30/11/2015
25/11/2016
$3.68
$3.42
27.4%
2.6%
$4.68
$4.28
26.5%
2.5%
$4.68
$4.36
24.6%
2.5%
$4.47
$4.37
25.4%
2.0%
$4.55
$4.26
21.8%
1.8%
1 The grant date reflects the date the rights were allocated whilst participants are eligible and performance period commences from 1 July of the relevant
financial year.
Number of performance and service rights issued and outstanding to Reported Executives as at 30 June 2017:
LTI performance rights
Sign on (service rights)
STI deferred (service rights)
FY 2015
FY 2016
FY 2017
Total
FY 2015
FY 2017
Total
FY 2016
FY 2017
Total
248,371
250,965
330,178
829,514
–
–
–
43,420
119,240
162,660
42,135
15,450
–
48,315
39,490
15,005
–
49,099
36,991
20,786
112,934
118,616
51,241
112,934
46,018
143,432
65,790
–
–
–
–
–
59,056
–
65,790
–
59,056
6,791
–
–
–
17,523
23,002
–
–
31,152
29,793
–
–
48,675
Executive Director
D Harrison
Other Reported
Executives
G Chubb
P Ford
S McMahon
A Taylor
48 Charter Hall Group
Reported Executives rights – details by plan
Type of equity
Executive Director
D Harrison
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
Other Reported Executives
G Chubb
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Service Rights
LTI Service Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
P Ford
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
S McMahon
LTI Performance Rights
LTI Service Rights
A Taylor
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
Former Reported Executives
P Altschwager
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
STI Deferred Rights
Rights
previously
granted
Rights
granted
during
the year
Rights
held
at
30 June
2017
Fair value
per right
at grant
date
No. vested
and
exercised
during
the year
Grant
date
No.
forfeited
during
the year
Fair value
to be
expensed
in future
years1
Vesting
date
231,707
300,000
248,371
250,965
–
47,752
43,420
43,420
–
–
–
–
–
–
330,178
–
–
–
59,620
59,620
– 20–Nov–13
– 20–Nov–13
248,371 19–Dec–14
250,965 30–Nov–15
330,178 25–Nov–16
– 19–Dec–14
– 30–Nov–15
43,420 30–Nov–15
59,620 25–Nov–16
59,620 25–Nov–16
42,135
39,490
–
65,790
65,790
6,791
6,791
–
–
15,244
15,450
15,005
–
–
–
36,991
–
–
–
–
11,501
11,501
–
–
–
20,786
42,135 19–Dec–14
39,490 30–Nov–15
36,991 25–Nov–16
– 19–Dec–14
65,790 19–Dec–14
– 30–Nov–15
6,791 30–Nov–15
11,501 25–Nov–16
11,501 25–Nov–16
– 20–Nov–13
15,450 19–Dec–14
15,005 30–Nov–15
20,786 25–Nov–16
–
–
112,934
59,056
112,934 25–Nov–16
59,056 25–Nov–16
47,561
48,315
49,099
–
15,763
17,523
17,522
–
–
106,708
101,967
95,356
–
14,933
18,420
18,419
–
–
–
–
–
46,018
–
–
–
15,576
15,576
–
–
–
88,937
–
–
–
9,346
9,346
– 20–Nov–13
48,315 19–Dec–14
49,099 30–Nov–15
46,018 25–Nov–16
– 19–Dec–14
– 30–Nov–15
17,522 30–Nov–15
15,576 25–Nov–16
15,576 25–Nov–16
– 20–Nov–13
101,967 19–Dec–14
– 30–Nov–15
– 25–Nov–16
– 19–Dec–14
– 30–Nov–15
18,419 30–Nov–15
9,346 25–Nov–16
9,346 25–Nov–16
$1.42
$1.11
$2.09
$1.41
$1.39
$4.23
$4.38
$4.16
$4.37
$4.15
$2.09
$1.41
$1.39
$4.27
$4.03
$4.38
$4.16
$4.37
$4.15
$1.42
$2.09
$1.41
$1.39
$1.41
$4.29
$1.42
$2.09
$1.41
$1.39
$4.23
$4.38
$4.16
$4.37
$4.15
$1.42
$2.09
$1.41
$1.39
$4.23
$4.38
$4.16
$4.37
$4.15
231,707
–
–
–
–
47,752
43,420
–
–
–
–
–
–
65,790
–
6,791
–
–
–
15,244
–
–
–
–
–
47,561
–
–
–
15,763
17,523
–
–
–
–
300,000
–
1–Jul–16
–
4–Oct–16
–
– 31–Aug–17
– 31–Aug–18 $130,595
– 31–Aug–19 $314,163
–
– 31–Aug–16
–
– 31–Aug–16
–
– 31–Aug–17
–
– 31–Aug–17
–
– 31–Aug–18
– 31–Aug–17
– 31–Aug–18
– 31–Aug–19
30–Jun–16
–
–
30–Jun–17
– 31–Aug–16
– 31–Aug–17
– 31–Aug–17
– 31–Aug–18
–
1–Jul–16
– 31–Aug–17
– 31–Aug–18
– 31–Aug–19
–
$20,549
$35,227
–
–
–
–
–
–
–
–
7,808
19,795
– 31–Aug–19
– 31–Aug–17
107,549
93,047
–
1–Jul–16
– 31–Aug–17
– 31–Aug–18
– 31–Aug–19
– 31–Aug–16
– 31–Aug–16
– 31–Aug–17
– 31–Aug–17
– 31–Aug–18
–
–
25,550
43,824
–
–
–
–
–
106,708
–
–
–
14,933
18,420
–
–
–
1–Jul–16
–
– 31–Aug–17
95,356 31–Aug–18
88,937 31–Aug–19
– 31–Aug–16
– 31–Aug–16
– 31–Aug–17
– 31–Aug–17
– 31–Aug–18
–
–
–
–
–
–
–
–
–
1 The maximum value of the grants yet to vest is the fair value amount at the grant date yet to be reflected in the Group’s consolidated income statement.
The minimum future value is $nil as the future performance and service conditions may not be met.
Annual Report 2017 49
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Indemnification and insurance of directors, officers and auditor
During the year, the Charter Hall Group contributed to the premium for a contract insuring all directors, secretaries, executive officers and
officers of the Charter Hall Group and of each related body corporate of the Group, with the balance of the premium paid by funds managed
by members of the Charter Hall Group. The insurance does not provide any cover for the independent auditor of the Charter Hall Group or of
a related party of the Charter Hall Group. In accordance with usual commercial practice, the insurance contract prohibits disclosure of details
of the nature of the liabilities covered by the insurance, the limit of indemnity and the amount of the premium paid under the contract.
So long as the officers of the Responsible Entity act in accordance with the Charter Hall Property Trust’s constitution and the Corporations
Act 2001, the officers are indemnified out of the assets of the Charter Hall Property Trust against losses incurred while acting on behalf of the
Charter Hall Property Trust. The Charter Hall Group indemnifies the auditor (PricewaterhouseCoopers Australia) against any liability (including
legal costs) for third party claims arising from a breach by the Charter Hall Group of the auditor’s engagement terms, except where prohibited
by the Corporations Act 2001.
Non-audit services
The Company may decide to employ the auditor on assignments additional to its statutory audit duties where the auditor’s expertise and
experience with the Group are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for non audit services provided during the year are set out below.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit, Risk and Compliance
Committee, is satisfied that the provision of the non audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non audit services by the auditor, as set out below,
did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non audit services have been reviewed by the Audit, Risk and Compliance Committee to ensure they do not impact the impartiality
and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
During the year, the following fees were paid or payable for non-audit services provided by the auditor of the Charter Hall Group and Charter
Hall Property Trust Group, its related practices and non related audit firms:
PricewaterhouseCoopers Australian firm
Taxation services
Charter Hall Group
Charter Hall Property
Trust Group
2017
$
2016
$
2017
$
2016
$
135,781
228,744
–
–
Environmental regulation
The Charter Hall Group recognises that sustainability is more than protecting the natural environment; it is about responding to the needs
of our customers, achieving our long-term commercial goals and working in partnership with our stakeholders to improve environmental and
social outcomes. Our Group Sustainability Policy outlines our commitments to achieving a leading role in a sustainable future.
The Group ensures compliance with applicable environmental standards and regulations and reports its greenhouse gas emissions
and energy use on an annual basis under the National Greenhouse and Energy Reporting Act 2007. Charter Hall emissions reports are
independently audited and in October 2017 the Group will report to the Clean Energy Regulator emissions for the measurement period
1 July 2016 to 30 June 2017. To mitigate its carbon emissions, the Group continues to implement resource efficiency measures across
its portfolio of assets and is also exploring renewable energy generation opportunities within its retail and industrial portfolios.
Charter Hall also voluntarily reports annually to international organisations, such as the Dow Jones Sustainability Index (DJSI), United Nations
Principles for Responsible Investment (PRI) and the Carbon Disclosure Project (CDP). Charter Hall has recently submitted its 2017 DJSI, PRI
and CDP reports, which address Charter Hall sustainability practices and emissions from 1 July 2015 to 30 June 2016. Charter Hall funds
(CQR, CHOT, CPOF, DOF, CPIF and CLP) also voluntarily report to the Global Real Estate Sustainability Benchmark (GRESB). These funds have
recently submitted their 2017 GRESB reports, which also address Charter Hall sustainability practices and emissions from 1 July 2015 to
30 June 2016.
To the best of the Directors’ knowledge, the operations of the Group have been undertaken in compliance with the applicable environmental
regulations that apply to the Group’s activities.
50 Charter Hall Group
Tax Governance Statement
Charter Hall Group has adopted the Board of Taxation’s Tax Transparency Code (TTC) at 30 June 2017. As part of the TTC, Charter Hall has
published a Tax Governance Statement (TGS) which details Charter Hall Group’s corporate structure and tax corporate governance systems.
Charter Hall Group’s TGS can be found on our website at www.charterhall.com.au.
Proceedings on behalf of the Company
Section 237 of the Corporations Act 2001 allows for a person to apply to the Court to bring proceedings on behalf of the Company,
or to intervene in any proceedings to which the Company is a party, in certain circumstances.
No person has made such an application and no proceedings have been brought or intervened in on behalf of the Company with the Court
under this section.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 52.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations Instrument (Rounding in Financial/Directors’ Reports) 2016/91, relating to
the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that
instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
Directors’ authorisation
The Directors’ Report is made in accordance with a resolution of the Directors. The financial statements were authorised for issue by the
Directors on 23 August 2017. The Directors have the power to amend and re-issue the Financial Statements.
David Clarke
Chair
Sydney
23 August 2017
Annual Report 2017 51
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Charter Hall Limited and Charter Hall Property Trust for the year
ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Charter Hall Limited and the entities it controlled during the period
and Charter Hall Property Trust and the entities it controlled during the period.
Wayne Andrews
Partner
PricewaterhouseCoopers
Sydney
23 August 2017
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650 Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
52 Charter Hall Group
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Income
Revenue
Share of net profit of investments accounted for using the
equity method
Net gain on sale of investments and inventory
Net gain on investment in associates at fair value
Foreign exchange gains
Total income
Expenses
Depreciation
Finance costs
Net loss on investment in associates at fair value
Impairment of investments in joint ventures
Net fair value adjustments on investment properties
Amortisation and reversal of impairment of intangibles
Asset management fees
Employee costs
Administration and other expenses
Total expenses
Profit before tax
Income tax expense
Profit for the year
Profit for the year as attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Equity accounted fair value movements in cash flow hedges
Other comprehensive income for the year, net of tax
Charter Hall Group
Charter Hall Property
Trust Group
Note
2017
$’000
2016
$’000
2017
$’000
2016
$’000
4
213,393
165,287
19,717
37,212
28,29
28
5
5
28
29
12
5,13
5
5
6
207,192
3,244
–
–
423,829
(3,475)
(1,522)
(17)
(10,494)
(712)
(4,343)
–
(100,921)
(21,186)
(142,670)
281,159
(23,598)
257,561
168,284
5,976
4,016
35
343,598
(2,604)
(1,742)
–
–
–
(8,517)
–
(95,512)
(18,269)
(126,644)
216,954
(1,714)
215,240
198,034
3,720
–
–
221,471
157,905
978
4,016
–
200,111
–
(1,295)
(17)
–
(712)
–
(1,382)
–
(114)
(3,520)
–
(1,562)
–
–
–
–
(1,193)
–
(87)
(2,842)
217,951
–
217,951
197,269
–
197,269
39,610
17,971
–
–
217,951
257,561
197,269
215,240
217,951
217,951
197,269
197,269
20
20
(8)
(442)
(450)
227
(181)
46
(8)
(442)
(450)
227
(181)
46
Total comprehensive income for the year
257,111
215,286
217,501
197,315
Total comprehensive income for the year is attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Total comprehensive income for the year
Basic earnings per security (cents) attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Basic earnings per stapled security (cents) attributable
to stapled securityholders of Charter Hall Group
8(a)
Diluted earnings per security (cents) attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Diluted earnings per stapled security (cents) attributable
to stapled securityholders of Charter Hall Group
8(b)
39,610
17,971
–
–
217,501
257,111
197,315
215,286
217,501
217,501
197,315
197,315
9.4
51.8
61.2
9.3
51.4
60.7
4.4
48.1
52.5
4.3
47.7
52.0
n/a
51.8
n/a
n/a
51.4
n/a
n/a
48.1
n/a
n/a
47.7
n/a
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
Annual Report 2017 53
CONSOLIDATED BALANCE SHEETS
AS AT 30 JUNE 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Trade and other receivables
Investments in associates at fair value through profit or loss
Investments accounted for using the equity method
Investment properties
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity holders of Charter Hall Limited
Contributed equity
Reserves
Accumulated losses
Parent entity interest
Equity holders of Charter Hall Property Trust
Contributed equity
Reserves
Accumulated profit/(losses)
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Total equity
Charter Hall Group
Charter Hall Property
Trust Group
Note
2017
$’000
Restated1
2016
$’000
2017
$’000
2016
$’000
9
10
10
28
11
12
13
14
15
16
17
16
17
15
19(a)
20
21
19(a)
20
21
174,418
66,203
240,621
–
29,690
1,476,630
40,350
65,400
18,764
1,582
145,358
48,687
194,045
–
208
1,136,727
–
69,743
14,855
–
53,377
29,936
83,313
73,175
29,690
1,386,261
40,350
–
–
–
43,321
26,684
70,005
139,860
208
1,041,502
–
–
–
–
1,632,416
1,221,533
1,529,476
1,181,570
1,873,037
1,415,578
1,612,789
1,251,575
127,415
1,892
129,307
6,479
1,303
13,677
21,459
150,766
86,894
1,680
88,574
5,193
1,334
9,393
15,920
104,494
76,786
–
76,786
56,488
–
56,488
–
–
–
–
–
–
–
–
76,786
56,488
1,722,271
1,311,084
1,536,003
1,195,087
284,956
(44,614)
(54,074)
186,268
256,049
(45,533)
(94,519)
115,997
–
–
–
–
–
–
–
–
1,456,853
(450)
79,600
1,201,346
–
(6,259)
1,456,853
(450)
79,600
1,201,346
–
(6,259)
1,536,003
1,195,087
1,536,003
1,195,087
1,722,271
1,311,084
1,536,003
1,195,087
1 Details of the restated deferred tax liability are included in note 15.
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
54 Charter Hall Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY –
CHARTER HALL GROUP
FOR THE YEAR ENDED 30 JUNE 2017
Attributable to the owners
of Charter Hall Limited
Contributed
equity
$’000
Reserves
$’000
Accumulated
profit/(losses)
$’000
Note
Restated balance at
1 July 2015
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with equity
holders in their capacity as
equity holders:
Contributions of equity, net of
issue costs
Buyback and issuance of
securities for exercised
performance rights
Transfer due to deferred
compensation payable in
service rights
Distribution provided for or paid
Security-based benefit expense
Equity accounted fair value
movements in cash flow
hedges
Restated balance at
30 June 2016
Balance at 1 July 2016
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with equity
holders in their capacity as
equity holders:
Contributions of equity, net of
issue costs
Buyback and issuance of
securities for exercised
performance rights
Tax recognised direct to equity
Transfer due to deferred
compensation payable in
service rights
Distribution provided for or paid
Security-based benefit expense
Transfer unvested securities to
accumulated losses
Balance at 30 June 2017
Non-
controlling
interest
$’000
Total
equity
$’000
1,088,746
197,269
46
1,185,548
215,240
46
197,315
215,286
Total
$’000
96,802
17,971
–
17,971
(112,490)
17,971
–
17,971
–
–
–
–
–
–
–
2,550
23,525
26,075
(5,129)
(3,951)
(9,080)
1,722
–
2,081
–
1,224
–
(110,548)
–
1,722
(110,548)
2,081
–
–
(90,974)
(89,750)
253,907
–
–
–
19(b)
2,550
(44,615)
–
–
–
–
7
(408)
(4,721)
–
–
–
–
2,142
1,722
–
2,081
–
(918)
256,049
(45,533)
(94,519)
115,997
1,195,087
1,311,084
256,049
–
–
–
19(b)
28,347
(45,533)
–
–
–
–
(94,519)
39,610
–
39,610
115,997
39,610
–
39,610
1,195,087
217,951
(450)
1,311,084
257,561
(450)
217,501
257,111
–
28,347
257,991
286,338
(273)
833
(2,439)
1,710
–
(358)
(2,712)
2,185
(2,484)
–
(5,196)
2,185
7
–
–
–
–
28,907
284,956
1,427
–
1,414
(1,193)
919
–
–
–
1,193
835
1,427
–
1,414
–
–
(132,092)
–
1,427
(132,092)
1,414
–
–
30,661
123,415
154,076
(44,614)
(54,074)
186,268
1,536,003
1,722,271
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Annual Report 2017 55
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY –
CHARTER HALL PROPERTY TRUST GROUP
FOR THE YEAR ENDED 30 JUNE 2017
Attributable to the owners of the
Charter Hall Property Trust Group
Balance at 1 July 2015
Profit for the year
Other comprehensive income
Total comprehensive income/(loss)
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of issue costs
Buyback and issuance of securities for exercised
performance rights
Distribution provided for or paid
Balance at 30 June 2016
Balance at 1 July 2016
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of issue costs
Buyback and issuance of securities for exercised
performance rights
Distribution provided for or paid
Balance at 30 June 2017
Note
Contributed
equity
$’000
1,181,772
–
–
–
19(b)
23,525
7
(3,951)
–
19,574
1,201,346
1,201,346
–
–
–
(46)
–
46
46
–
–
–
–
–
Reserves
$’000
Accumulated
profit/(losses)
$’000
Total
equity
$’000
1,088,746
197,269
46
197,315
(92,980)
197,269
–
197,269
–
23,525
–
(110,548)
(110,548)
(3,951)
(110,548)
(90,974)
(6,259)
1,195,087
–
–
(450)
(450)
(6,259)
217,951
–
217,951
1,195,087
217,951
(450)
217,501
19(b)
257,991
7
(2,484)
–
255,507
1,456,853
–
–
–
–
–
257,991
–
(132,092)
(132,092)
(2,484)
(132,092)
123,415
(450)
79,600
1,536,003
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
56 Charter Hall Group
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
Charter Hall Group
Charter Hall Property
Trust Group
Note
2017
$’000
2016
$’000
2017
$’000
2016
$’000
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Distributions and dividends from investments
Net cash inflow from operating activities
23
Cash flows from investing activities
Payments for property, plant and equipment, net of lease
incentive received
Proceeds on disposal of investment property
Payments for investment properties
Payment for acquisition of subsidiary, net of cash acquired
Investments in associates and joint ventures
Proceeds on disposal and return of capital from
investments in associates and joint ventures
Loans to associates, joint ventures and related parties
Repayments of loans to associates, joint ventures and
related parties
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Proceeds from issues/(buy back) of stapled securities
Proceeds from borrowings
Repayment of borrowings
Distributions paid to stapled securityholders
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash
equivalents
217,845
(138,957)
2,222
(1,279)
76,483
156,314
(4,599)
67,238
(40,537)
(25,233)
(383,950)
174,609
(116,320)
2,609
(1,121)
70,549
130,326
(4,917)
15,874
–
–
(160,988)
10,679
(2,384)
267
(1,181)
72,518
79,899
19,778
(3,141)
237
(976)
63,028
78,926
–
–
(40,537)
–
(379,846)
–
–
–
–
(160,238)
119,940
(11,699)
102,674
(11,730)
123,634
(407,595)
102,696
(215,625)
21,234
9,145
494,555
(257,606)
(49,942)
(209,789)
281,238
88,800
(124,125)
(115,561)
130,352
29,060
145,358
16,996
–
–
(103,644)
(86,648)
(6,264)
151,593
255,507
88,800
(88,800)
(115,561)
139,946
10,056
43,321
284,595
11,428
19,574
–
–
(103,644)
(84,070)
6,284
37,037
–
29
–
–
Cash and cash equivalents at the end of the year
9
174,418
145,358
53,377
43,321
The above consolidated cash flow statements should be read in conjunction with the accompanying notes.
Annual Report 2017 57
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1 Summary of significant accounting policies
The significant policies which have been adopted in the preparation
of these consolidated financial statements for the year ended
30 June 2017 are set out below. These policies have been
consistently applied to the years presented, unless otherwise stated.
(a) Basis of preparation
The Charter Hall Group (Group, CHC or Charter Hall) is a ‘stapled’
entity comprising Charter Hall Limited (Company or CHL) and its
controlled entities, and Charter Hall Property Trust (Trust or CHPT) and
its controlled entities (Charter Hall Property Trust Group). The shares in
the Company are stapled to the units in the Trust. The stapled securities
cannot be traded or dealt with separately. The stapled securities of
the Group are listed on the Australian Securities Exchange (ASX).
CHL has been identified as the parent entity in relation to the stapling.
The two Charter Hall entities comprising the stapled group remain
separate legal entities in accordance with the Corporations
Act 2001, and are each required to comply with the reporting
and disclosure requirements of Accounting Standards and the
Corporations Act 2001.
As permitted by ASIC Corporations (Stapled Group Reports)
Instrument 2015/838, this financial report is a combined financial
report that presents the consolidated financial statements and
accompanying notes of both the Charter Hall Group and the
Charter Hall Property Trust Group.
The financial report of the Charter Hall Group comprises CHL and
its controlled entities, including Charter Hall Funds Management
Limited (Responsible Entity) as responsible entity for CHPT and
CHPT and its controlled entities. The results and equity, not directly
owned by CHL, of CHPT have been treated and disclosed as a
non-controlling interest. Whilst the results and equity of CHPT are
disclosed as a non-controlling interest, the stapled securityholders
of CHL are the same as the stapled securityholders of CHPT. The
financial report of the Charter Hall Property Trust Group comprises
the Trust and its controlled entities.
These general purpose financial statements have been prepared
in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board
and the Corporations Act 2001. The Charter Hall Group and Charter
Hall Property Trust Group are for-profit entities for the purpose of
preparing the consolidated financial statements.
On 6 June 2005, CHL acquired Charter Hall Holdings Pty Ltd (CHH).
Under the terms of AASB 3 Business Combinations, CHH was
deemed to be the accounting acquirer in this business combination.
This transaction has therefore been accounted for as a reverse
acquisition under AASB 3. Accordingly, the consolidated financial
statements of the Group have been prepared as a continuation of
the consolidated financial statements of CHH. CHH, as the deemed
acquirer, has acquisition accounted for CHL as at 6 June 2005.
58 Charter Hall Group
Group references in accounting policies
The accounting policies in Note 1 apply to both the Group and
Charter Hall Property Trust Group unless otherwise stated in the
relevant policy.
Compliance with IFRS
The consolidated financial statements of the Group also comply with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Historical cost convention
The consolidated financial statements have been prepared on
a historical cost basis, except for the following:
•
investments in associates at fair value through profit or loss
– measured at fair value;
investments in financial assets held at fair value – measured
at fair value.
•
New and amended standards adopted
No new accounting standards or amendments have come into
effect for the year ended 30 June 2017 that affect the Group’s
operations or reporting requirements.
(b) Principles of consolidation
(i) Controlled entities
The consolidated financial statements of the Charter Hall Group
and the Charter Hall Property Trust Group incorporate the assets and
liabilities of all controlled entities as at 30 June 2017 and their results
for the year then ended.
The Group controls an entity when the Group 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. Controlled entities are fully consolidated
from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of
controlled entities have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of controlled
entities are shown separately in the consolidated statement
of comprehensive income, consolidated balance sheet and
consolidated statement of changes in equity respectively.
Investments in associates
(ii)
Associates are entities over which the Group has significant
influence but not control or joint control. Investments in associates
are accounted for in the consolidated balance sheet at either fair
value through profit or loss (CHPT only) or by using the equity
method (CHPT and CHL). On initial recognition, the Group elects
to account for investments in associates at either fair value through
profit or loss or using the equity method based on assessment of
the expected strategy for the investment.
Under the equity accounted method, the Group’s share of the
associates’ post acquisition net profit after income tax expense is
recognised in the consolidated statement of comprehensive income.
The cumulative post-acquisition movements are adjusted against
the carrying amount of the investment. Distributions and dividends
received from associates are recognised in the consolidated financial
report as a reduction of the carrying amount of the investment.
Investments in associates at fair value through profit or loss are
initially recognised at fair value and transaction costs are expensed
in the consolidated statement of comprehensive income.
(iii) Joint arrangements
Under AASB 11 Joint Arrangements, investments in joint
arrangements are classified as either joint operations or joint ventures.
The classification depends on the contractual rights and obligations of
each investor, rather than the legal structure of the joint arrangement.
Joint operations
The Group recognises its direct right to the assets, liabilities,
revenues and expenses of joint operations and its share of any jointly
held or incurred assets, liabilities, revenues and expenses. These
have been incorporated in the consolidated financial statements
under the appropriate headings.
Joint ventures
Interests in joint ventures are accounted for using the equity
method, with investments initially recognised at cost and adjusted
thereafter to recognise the Group’s share of post-acquisition profits
or losses of the investee in profit or loss, and the Group’s share of
movements in other comprehensive income of the investee in other
comprehensive income. Dividends received or receivable from joint
ventures are recognised as a reduction in the carrying amount
of the investment.
When the Group’s share of losses in an equity accounted investment
equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the Group does not recognise
further losses, unless it has incurred obligations or made payments
on behalf of the other entity.
Unrealised gains on transactions between the Group and its joint
venture entities are eliminated to the extent of the Group’s interest
in these entities. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees
have been aligned where necessary to ensure consistency with the
policies adopted by the Group.
(iv) Changes in ownership interests
When the Group ceases to equity account for an investment because
of a loss of joint control or significant influence, any retained interest
in the entity is remeasured to its fair value with the change in carrying
amount recognised in profit or loss. This fair value becomes the
initial carrying amount for the purposes of subsequently accounting
for the retained interest as a joint venture entity or financial asset. In
addition, any amounts previously recognised in other comprehensive
income in respect of that entity are accounted for as if the Group had
directly disposed of the related assets or liabilities. This may mean
that amounts previously recognised in other comprehensive income
are reclassified to profit or loss. The Group treats transactions with
non-controlling interests that do not result in a loss of control as
transactions with equity owners of the Group.
If the ownership interest in a joint venture entity or an associate
is reduced but joint control or significant influence is retained,
only a proportionate share of the amounts previously recognised
in other comprehensive income is reclassified to profit or loss
where appropriate.
(c) Segment reporting
Segment information is reported in a manner that is consistent with
internal reporting provided to the chief operating decision maker.
The chief operating decision maker is responsible for allocating
resources and assessing performance of the operating segments.
(d) Foreign currency translation
(i) Functional and presentation currencies
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the functional
currency). The consolidated financial statements are presented
in Australian dollars, which is CHL’s and CHPT’s functional and
presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the consolidated statement of
comprehensive income, except when they are deferred in equity as
qualifying cash flow hedges and qualifying net investment hedges or
are attributable to part of the net investment in a foreign operation.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the fair
value gain or loss.
(iii) Foreign operations
The results and financial position of foreign operations that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• assets and liabilities for each consolidated balance sheet
presented are translated at the closing rate at the date of that
consolidated balance sheet;
• income and expenses for each income statement and
consolidated statement of comprehensive income are translated
at average exchange rates; and
• all resulting exchange differences are recognised in other
comprehensive income.
(iv) Foreign currency translation
On consolidation, exchange differences arising from the translation
of any net investment in foreign entities, and of borrowings and other
financial instruments designated as hedges of such investments, are
recognised in other comprehensive income. On disposal of interests
in foreign controlled entities, the cumulative foreign exchange
gains/losses relating to these investments are transferred to the
consolidated statement of comprehensive income in accordance
with the requirements of AASB 121 The Effect of Changes in Foreign
Exchange Rates.
Annual Report 2017 59
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1 Summary of significant accounting
policies continued
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received
or receivable. Amounts disclosed as revenue are net of returns,
trade allowances and amounts collected on behalf of third parties.
Revenue is recognised for the major business activities as follows:
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair
value of the acquirer’s share of the net identifiable assets acquired
is recorded as goodwill. If those amounts are less than the fair
value of the net identifiable assets of the subsidiary acquired and
the measurement of all amounts has been reviewed, the difference
is recognised directly in profit or loss as a bargain purchase.
(i) Management fees and expense recoveries
Management fees and expense recoveries are brought to account
on an accruals basis when the services have been performed
and, if not received at the reporting date, are reflected in the
consolidated balance sheet as a receivable.
Where management fees are derived in respect of an acquisition or
disposal of property, the fees are recognised where services have
been performed and the fee can be reliably estimated.
(ii) Performance and transaction fees
Performance fees are only recognised when the services have
been performed and the amount can be reliably measured and it is
probable the performance fee criteria will be met. Transaction fees are
recognised when the services have been performed and the fee can
be reliably estimated. Detailed calculations are completed and the
risks associated with the fee are assessed when deciding when it is
appropriate to recognise revenue. Further information is provided in
the critical accounting estimates and judgements in Note 2.
Interest income
(iii)
Interest income is recognised on a time proportion basis using the
effective interest method. When a receivable is impaired, the Group
reduces the carrying amount to its recoverable amount, being the
estimated future cash flows discounted at the original effective interest
rate of the instrument, and continues unwinding the discount as
interest income. Interest income on impaired loans is recognised using
the original effective interest rate.
(iv) Distributions
Distributions are recognised as revenue when the right to receive
payment is established.
(v) Other investment-related revenue
Other investment-related revenue represents amounts received
in relation to investment commitments and rebates relating to
investments and is recognised where the right to receive payment
is established.
(f) Business combinations
The acquisition method of accounting is used to account for all
business combinations, including business combinations involving
entities or businesses under common control, regardless of whether
equity instruments or other assets are acquired. The consideration
transferred for the acquisition of a subsidiary comprises the fair
values of the assets transferred, the liabilities incurred and the equity
interests issued. The consideration transferred also includes the
fair value of any contingent consideration arrangement and the fair
value of any pre-existing equity interest in the subsidiary. Acquisition-
related costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their
fair values at the acquisition date. On an acquisition-by-acquisition
basis, any non-controlling interest in the acquiree is recognised
either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net identifiable assets.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity’s incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions.
Contingent consideration is classified either as equity or a financial
liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in
profit or loss.
Income tax
(g)
The current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the end of the reporting
period in the countries where the Group’s controlled entities and
associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provision where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets
are recovered or liabilities are settled, based on those tax rates
which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the
deferred tax asset or liability. No deferred tax asset or liability is
recognised in relation to these temporary differences if they arose
in a transaction, other than a business combination, that at the
time of the transaction did not affect either accounting profit or
taxable profit or loss.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax liabilities and assets are not recognised for temporary
differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able
to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets and liabilities and when
the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where the entity has a
legally enforceable right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to
the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
60 Charter Hall Group
Impairment of assets
(h)
Assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not
be recoverable.
(iii) Held to maturity investments
Held to maturity investments are non-derivative financial assets
with fixed or determinable payments and fixed maturities that
management has the positive intention and ability to hold to maturity.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less
costs of disposal and value-in-use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely independent
of the cash inflows from other assets or groups of assets (cash
generating units). Non-financial assets that suffered impairment in
prior years are reviewed for possible reversal of the impairment at
each reporting date.
(i) Cash and cash equivalents
For the purpose of presentation in the cash flow statement, cash
and cash equivalents includes cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities
in the consolidated balance sheet.
(j) Trade and other receivables
Trade and other receivables are recognised initially at fair value
and subsequently measured at amortised cost, less provision for
doubtful debts. Trade receivables are due for settlement no more
than 30 days from the date of recognition.
Collectability of trade receivables is reviewed on an ongoing basis.
Debts which are known to be uncollectible are written off in the year
in which they are identified. A provision for doubtful debts is raised
where there is objective evidence that the Group will not collect all
amounts due. The amount of the provision is the difference between
the carrying amount and estimated future cash flows. Cash flows
relating to current receivables are not discounted.
(k) Other financial assets
Classification
The Group classifies its other financial assets in the following
categories: financial assets at fair value through profit or loss, loans
and receivables, held to maturity investments and available-for-sale
financial assets. The classification depends on the purpose for
which the investments were acquired. Management determines the
classification of its investments at initial recognition and, in the case
of assets classified as held to maturity, re-evaluates this designation
at each reporting date.
Financial assets at fair value through profit or loss
(i)
Financial assets at fair value through profit or loss are financial
assets held for trading. A financial asset held for trading is classified
in this category if acquired principally for the purpose of selling in the
short term. Derivatives are classified as held for trading unless they
are designated as hedges. Assets in this category are classified as
current assets if they are expected to be settled within 12 months;
otherwise they are classified as non-current.
Loans and receivables
(ii)
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
They arise when the Group provides money, goods or services
directly to a debtor with no intention of selling the receivable.
They are included in current assets, except for those with maturities
greater than 12 months after the reporting date.
(iv) Available for sale financial assets
Available-for-sale financial assets, comprising principally marketable
equity securities, are non-derivative financial assets that are
either designated in this category or not classified in any of the
other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12 months
of the reporting date.
Recognition and derecognition
Regular way purchases and sales of investments are recognised
at trade date – the date on which the Group commits to purchase
or sell the asset. Investments are initially recognised at fair value plus
transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets at fair value through profit or
loss are initially recognised at fair value and transaction costs are
expensed in the consolidated statement of comprehensive income.
Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been transferred
and the Group has transferred substantially all the risks and rewards
of ownership.
Subsequent measurement
Available-for-sale financial assets and financial assets at fair
value through profit or loss are subsequently carried at fair value.
Loans and receivables and held to maturity investments are
carried at amortised cost using the effective interest method.
Gains or losses arising from changes in the fair value of financial
assets at fair value through profit or loss, excluding interest and
distribution income, are presented in the consolidated statement
of comprehensive income in the year in which they arise.
The fair values of quoted investments are based on current bid
prices. If the market for a financial asset is not active (and for
unlisted securities), the Group establishes fair value by using
valuation techniques. These include the use of recent arm’s length
transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, and option pricing
models making maximum use of market inputs and relying as
little as possible on entity specific inputs. Further details on how
the fair value of financial instruments is determined are disclosed
in Note 1(w) and Note 25.
Impairment
The Group assesses at each reporting date whether there is
objective evidence that a financial asset or group of financial assets
is impaired. In the case of equity securities classified as available for
sale, a significant or prolonged decline in the fair value of a security
below its cost is considered in determining whether the security is
impaired. If any such evidence exists for available-for-sale financial
assets, the cumulative loss – measured as the difference between
the acquisition cost and the current fair value, less any impairment
loss on that financial asset previously recognised in the consolidated
statement of comprehensive income – is removed from equity and
recognised in the consolidated statement of comprehensive income.
Impairment losses recognised in the consolidated statement of
comprehensive income on equity instruments classified as available
for sale are not reversed through the consolidated statement of
comprehensive income.
Annual Report 2017 61
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1 Summary of significant accounting
policies continued
(l) Plant and equipment
Plant and equipment is stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to
the acquisition of plant and equipment.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will
flow to the Group and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to the consolidated
statement of comprehensive income during the financial year in
which they are incurred.
Depreciation on other assets is calculated using the straight line
method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives, as follows:
• Furniture, fittings and equipment
• Fixtures
• Software
3 to 10 years
5 to 10 years
3 to 5 years
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount (Note 1(h)).
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the
consolidated statement of comprehensive income.
(m) Investment properties
Investment properties comprise investment interests in land and
buildings (including integral plant and equipment) held for the
purpose of producing rental income, including properties that are
under construction for future use as investment properties.
Initially, investment properties are measured at cost including
transaction costs. Subsequent to initial recognition, the investment
properties are stated at fair value. Fair value of investment property
is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at
the measurement date. The best evidence of fair value is given by
current prices in an active market for similar property in the same
location and condition. Gains and losses arising from changes in the
fair values of investment properties are included in the consolidated
statement of comprehensive income in the year in which they arise.
At each balance date, the fair values of the investment properties are
assessed by the Responsible Entity with reference to independent
valuation reports or through appropriate valuation techniques
adopted by the Responsible Entity. Specific circumstances of the
owner are not taken into account. Further information relating to
valuation techniques can be found in Note 25(c).
Where the Group disposes of a property at fair value in an arm’s
length transaction, the carrying value immediately prior to the sale is
adjusted to the transaction price, and the adjustment is recorded in
the consolidated statement of comprehensive income within net fair
value gain/(loss) on investment property.
The carrying amount of investment properties recorded in the
consolidated balance sheet takes into consideration components
relating to lease incentives, leasing costs and assets relating to fixed
increases in operating lease rentals in future years.
62 Charter Hall Group
Intangibles
Intangibles – indefinite life assets
(n)
(i)
Intangibles with no fixed life are not amortised as they have
an indefinite life. Intangibles with an indefinite life are tested for
impairment annually, or more frequently if events or changes in
circumstances indicate that they might be impaired, and are carried
at cost less accumulated impairment losses. Intangibles are allocated
to cash generating units for the purpose of impairment testing.
(ii) Management Rights – finite life assets
Management rights with a fixed life are amortised using the straight
line method over their useful life. Management rights of Charter Hall
Office Trust (CHOT) are amortised over nine years.
(o) Trade and other payables
Liabilities are recognised for amounts to be paid in the future for goods
and services received, whether or not billed to the Group. The amounts
are unsecured and are usually paid within 30 days of recognition.
Trade and other payables are presented as current liabilities unless
payment is not due within 12 months after the reporting period.
They are recognised initially at their fair value and subsequently
measured at amortised cost using the effective interest method.
(p) Borrowings
Borrowings are initially recognised at fair value, net of transaction
costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs)
and the redemption amount is recognised in the consolidated
statement of comprehensive income over the period of the borrowing
using the effective interest rate method. Fees paid on the establishment
of loan facilities are recognised as transaction costs of the loan
to the extent that it is probable that some or all of the facility will
be drawn down. If the facility has not been drawn down the fee is
capitalised as a prepayment and amortised over the period of the
facility to which it relates.
Borrowings are removed from the consolidated balance sheet when
the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss as
other income or finance costs.
Where the terms of a financial liability are renegotiated and the entity
issues equity instruments to a creditor to extinguish all or part of the
liability (debt for equity swap), a gain or loss is recognised in profit
or loss, which is measured as the difference between the carrying
amount of the financial liability and the fair value of the equity
instruments issued.
Borrowings are classified as current liabilities unless the Group has
an unconditional right to defer settlement of the liability for at least
12 months after the reporting period.
(q) Borrowing costs
Borrowing costs associated with the acquisition or construction of a
qualifying asset, including interest expense, are capitalised as part of
the cost of that asset during the period that is required to complete
and prepare the asset for its intended use. Borrowing costs not
associated with qualifying assets are expensed.
(r) Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and
the amount can be reliably estimated. Provisions are not recognised
for future operating losses.
(s) Goods and Services Tax (GST)
Revenues, expenses and assets (with the exception of receivables)
are recognised net of the amount of associated GST, unless the
GST incurred is not recoverable from the taxation authority. In this
case, it is recognised as part of the cost of acquisition of the asset
or as part of the expense.
Receivables and payables are inclusive of GST. The net amount of
GST recoverable from or payable to the tax authority is included in
receivables or payables in the consolidated balance sheet.
Cash flows relating to GST are included in the consolidated
statement of cash flows on a gross basis. The GST components
of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented
as operating cash flows.
(t) Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits
and annual leave expected to be settled within 12 months of the
reporting date, are recognised in other payables in respect of
employees’ services up to the reporting date and are measured
at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
Liabilities for other employee entitlements which are not expected
to be paid or settled within 12 months of reporting date are accrued
in respect of all employees at present values of future amounts
expected to be paid, based on a projected weighted average
increase in wage and salary rates. Expected future payments are
discounted using a corporate bond rate with terms to maturity that
match, as closely as possible, the estimated future cash outflows.
(iii) Retirement benefit obligations
Contributions to employee defined contribution superannuation
funds are recognised as an expense as they become payable.
(iv) Security-based benefits
Security-based compensation benefits are provided to employees via
the Charter Hall Performance Rights and Options Plan (PROP) and the
General Employee Security Plan (GESP). Information relating to these
schemes is set out in Note 33. For PROP, the fair value at grant date
is independently valued using a Monte Carlo simulation pricing model
that takes into account the exercise price, the term of the option,
impact of dilution, stapled security price at grant date, expected
price volatility of the underlying stapled security, expected dividend
yield and the risk-free interest rate for the term of the option and
market vesting conditions but excludes the impact of any non-market
vesting conditions (for example, profitability and sales growth targets).
Non-market vesting conditions are included in assumptions about
the number of stapled securities that are expected to vest. At each
reporting date, the entity revises its estimate of the number of stapled
securities that are expected to vest. The employee benefits expense
recognised each year takes into account the most recent estimate.
Upon the vesting of stapled securities, the balance of the stapled
security-based benefits reserve relating to those stapled securities is
transferred to equity, net of any directly attributable transaction costs.
For GESP, eligible employees are entitled to receive up to $1,000 in
stapled securities based on the stapled security price on the grant
date. The cost of the stapled securities bought on market to settle the
award liability is included in employee benefits expense. The stapled
securities are held in trust on behalf of eligible employees until the
earlier of the completion of three years’ service or termination.
(v) Bonus plans
Charter Hall recognises a liability and an expense for amounts
payable to employees. Charter Hall recognises a provision where
contractually obliged or where there is a past practice that has
created a constructive obligation.
(vi) Termination benefits
Termination benefits are payable when employment is terminated by the
Group before the normal retirement date, or when an employee accepts
voluntary redundancy in exchange for these benefits. The Group
recognises termination benefits at the earlier of the following dates:
(a) when the Group can no longer withdraw the offer of those
benefits; and
(b) when the entity recognises costs for a restructuring that is within
the scope of AASB 137 and involves the payment of termination
benefits. In the case of an offer made to encourage voluntary
redundancy, the termination benefits are measured based
on the number of employees expected to accept the offer.
Benefits falling due more than 12 months after the end of the
reporting period are discounted to present value.
(u) Contributed equity
Ordinary stapled securities are classified as equity. Incremental costs
directly attributable to the issue of new stapled securities or options
are shown in equity as a deduction, net of tax, from the proceeds.
(v) Distributions paid and payable
A liability is recognised for the amount of any distribution declared
by the Group on or before the end of the reporting period but not
distributed at balance date.
(w) Fair value estimation
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure purposes.
A fair value measurement of a non-financial asset takes into account
the Group’s ability to generate economic benefits by using the
asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use.
The fair value of financial instruments traded in active markets
is determined using quoted market prices at the balance date.
The quoted market price used for financial assets held by the Group
is the current bid price; the appropriate quoted market price for
financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active
market is determined using valuation techniques. The Group uses
a variety of methods and makes assumptions that are based on
market conditions existing at each balance date. Other techniques,
such as estimated discounted cash flows, are used to determine fair
value for the remaining financial instruments.
Certain unlisted property securities have been designated on
initial recognition to be treated at fair value through profit or loss.
Movements in fair value during the period have been recognised
in the consolidated statement of comprehensive income.
These assets have been acquired with the intention of being long-
term investments. Where the assets in this category are expected
to be sold within 12 months, they are classified as current assets;
otherwise they are classified as non-current.
The nominal value less estimated credit adjustments of trade
receivables and payables approximate their fair values. The fair value of
financial liabilities for disclosure purposes is estimated by discounting
the future contractual cash flows at the current market interest rate
that is available to the Group for similar financial instruments.
Annual Report 2017 63
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
1 Summary of significant accounting
policies continued
(x) Earnings per stapled security
Basic earnings per stapled security from continuing operations is
determined by dividing profit from continuing operations attributable
to the stapled securityholders by the weighted average number of
ordinary stapled securities on issue during the year.
Basic earnings per stapled security is determined by dividing the
profit by the weighted average number of ordinary stapled securities
on issue during the year.
Diluted earnings per stapled security from continuing operations is
determined by dividing profit from continuing operations attributable
to the stapled securityholders by the weighted average number of
ordinary stapled securities and dilutive potential ordinary stapled
securities on issue during the year.
Diluted earnings per stapled security is determined by dividing the profit
by the weighted average number of ordinary stapled securities and
dilutive potential ordinary stapled securities on issue during the year.
(y) Parent entity financial information
The financial information for the parent entity of the Charter Hall
Group, Charter Hall Limited, and for the parent entity of the Charter
Hall Property Trust Group, Charter Hall Property Trust, disclosed
in Note 34, has been prepared on the same basis as the Group’s
financial statements except as set out below:
Investments in controlled entities
(i)
Investments in controlled entities, associates and joint ventures
are accounted for at cost or fair value through profit or loss in the
financial statements of the parent entity. Such investments include
both investments in equity securities issued by the controlled entity
and other parent entity interests that in substance form part of the
parent entity’s investment in the controlled entity. These include
investments in the form of interest-free loans which have no fixed
contractual term and which have been provided to the controlled
entity as an additional source of long-term capital.
Dividends and distributions received from controlled entities,
associates and joint ventures are recognised in the parent entity’s
statement of comprehensive income, rather than deducted from
the carrying amount of these investments.
(ii) Receivables and payables
Trade amounts receivable from controlled entities in the normal
course of business and other amounts advanced on commercial
terms and conditions are included in receivables. Similarly, amounts
payable to controlled entities are included in payables.
(iii) Recoverable amount of assets
The carrying amounts of investments in controlled entities, associates
and joint ventures valued on the cost basis are reviewed to determine
whether they are in excess of their recoverable amount at balance
date. If the carrying value exceeds their recoverable amount, the
assets are written down to the lower value. The write-down is
expensed in the year in which it occurs.
(iv) Tax consolidation legislation
The head entity, Charter Hall Limited, and the controlled entities
in the tax consolidated group continue to account for their own
current and deferred tax amounts. These tax amounts are measured
as if each entity in the tax consolidated group continues to be a
standalone taxpayer in its own right.
64 Charter Hall Group
In addition to its own current and deferred tax amounts, Charter Hall
Limited also recognises the current tax liabilities (or assets) and the
deferred tax assets arising from unused tax losses and unused tax
credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under a tax funding agreement with the
tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the Group. Details about the tax
funding agreement are disclosed in Note 6.
Any difference between the amounts assumed and amounts
receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly owned
tax consolidated entities.
(z)
Impact of new standards and interpretations issued
but not yet adopted by the Group
Certain new accounting standards and interpretations have been
published that are not mandatory for the year ended 30 June 2017
but are available for early adoption. The impact of these new
standards and interpretations (to the extent relevant to the Group)
is set out below:
(i) AASB 9 Financial Instruments (applicable 1 January 2018)
AASB 9 Financial Instruments addresses the classification,
measurement and derecognition of financial assets and liabilities
and sets out new rules for hedge accounting. Management has
completed a preliminary assessment and does not expect any
changes to the above. AASB 9 only permits the recognition of fair
value gains and losses in other comprehensive income if they relate
to equity investments that are not held for trading. Fair value gains
and losses on available-for-sale debt investments, for example,
would therefore have to be recognised directly in the statement of
comprehensive income. The Group has not yet decided when to
adopt AASB 9 and management is currently assessing the impact
of the new standard.
(ii)
AASB 15 Revenue from Contracts with Customers
(applicable 1 January 2018)
The standard is based on the principle that revenue is recognised
when control of a good or service is transferred to a customer,
so the notion of control replaces the notion of risks and rewards.
It applies to all contracts with customers, excluding leases, financial
instruments and insurance contracts. The basis of the new standard
is a new five step model that involves identifying the contract
with the customer, identifying performance obligations under the
contract, determining the transaction price in exchange for satisfying
those performance obligations and recognising revenue as or when
each performance obligation is satisfied. Variable consideration
should be estimated and included in the transaction price to the
extent it is highly probable that the cumulative amount of revenue
recognised will not be significantly reversed.
AASB 15 requires reporting entities to provide users of financial
statements with more informative, relevant disclosures. The Group
has completed a preliminary assessment of the implications of the
new standard to its operational and financial results.
The Group will adopt the standard in the financial year beginning
1 July 2018, applying the standard retrospectively, which may
involve an adjustment to opening retained earnings to recognise
the cumulative effect of applying the standard.
(iii) AASB 16 Leases (applicable 1 January 2019 – early adoption
allowed if AASB 15 is adopted at the same time)
The standard will affect primarily the accounting by lessees and
will result in the recognition of almost all leases on balance sheet.
The standard removes the current distinction between operating
and financing leases and requires recognition of an asset.
The income statement will also be affected because the total expense
is typically higher in the earlier years of a lease and lower in later years.
Additionally, operating expense will be replaced with interest and
depreciation, so key metrics such as Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA) will change. The accounting
by lessors will not significantly change. Management has completed
a preliminary assessment that the operating lease commitments, as
disclosed in Note 31, will result in the recognition of a right-of-use
asset and a corresponding lease liability and how this will affect the
Group’s results. The standard will primarily impact the Group’s office
leases as lessee.
(aa) Comparative information
Where necessary, comparative information has been adjusted to
conform with changes in presentation in the current year.
(ab) Rounding of amounts
Under the option provided by ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 issued by
the Australian Securities and Investments Commission relating to the
‘rounding off’ of amounts in the financial statements, amounts in
the Company and the Trust’s consolidated financial statements have
been rounded to the nearest thousand dollars in accordance with
that ASIC Corporations Instrument, unless otherwise indicated.
2 Critical accounting estimates and
judgements
The Charter Hall Group and Charter Hall Property Trust Group make
estimates and assumptions concerning the future. Estimates and
judgements are continually evaluated and are based on experience
and other factors, including expectations of future events that may
have a financial impact on the entity and that are believed to be
reasonable under the circumstances. The resulting accounting
estimates will, by definition, seldom equal the related actual results.
The estimates or assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below:
(a) Classification and carrying value of investments
The Group controls an entity when the Group 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 over
the entity. Critical judgements are made in assessing whether
an investee entity is controlled or subject to significant influence
or joint control. These judgements include an assessment of
the nature, extent and financial effects of the Group’s interest in
investee entities, including the nature and effects of its contractual
relationship with the entity or with other investors.
Investments in associates are accounted for at either fair value
through profit or loss (CHPT only) or by using the equity method
(CHPT and CHL). CHPT designates investments in associates as fair
value through profit or loss or equity accounted on a case by case
basis taking the investment strategy into consideration.
Management regularly reviews equity accounted investments for
impairment and remeasures investments carried at fair value through
profit or loss by reference to changes in circumstances or contractual
arrangements, external independent property valuations and market
conditions, using generally accepted market practices. When a
recoverable amount is estimated through a value in use calculation,
critical judgements and estimates are made regarding future cash
flows and an appropriate discount rate. When a fair value is estimated
through an earnings valuation, critical judgements and estimates are
made in relation to the earnings measure and appropriate multiple.
Critical judgement is made in assessing the manner in which the
cost of indefinite life intangible assets is expected to be recovered
and corresponding deferred tax liability. Critical judgements and
accounting estimates are made in assessing the extent to which the
utilisation of tax losses carried forward is considered probable and
the corresponding deferred tax asset recognised.
(b) Performance fee recognition
Critical judgements and estimates are made by the Charter Hall Group
in respect of recognising performance fee revenue. Performance fees
are only recognised when services have been performed and they
can be reliably estimated and are probable. Detailed calculations are
completed and the risks associated with the fee are assessed when
deciding when it is appropriate to recognise revenue.
(c) Valuation of intangibles
Critical judgements and estimates are made by the Charter Hall Group
in assessing the recoverable amount of intangibles acquired, where the
funds to which those intangibles relate have an indefinite life. Intangibles
are considered to have an indefinite useful life if there is no foreseeable
limit to the period over which the asset is expected to generate net
cash inflows for the entity. Refer to Note 13 for further details.
3 Segment information
(a) Description of segments
Charter Hall Property Trust Group
The Board allocates resources and assesses the performance of
operating segments for the entire Charter Hall Group. Results are
not separately identified and reported according to the legal
structure of the Charter Hall Group and therefore segment
information for CHPT is not prepared and provided to the chief
operating decision maker.
Charter Hall Group
Management has determined the operating segments based on
the reports reviewed by the Board that are used to make strategic
decisions. The Board is responsible for allocating resources and
assessing performance of the operating segments.
Operating earnings is a financial measure which represents statutory
profit after tax adjusted for proportionally consolidated fair value
adjustments, gains or losses on sale of investments, amortisation
and/or impairment of intangible assets, deferred tax expense and
other unrealised or one-off items. Operating earnings is the primary
measure of the Group’s underlying and recurring earnings from
its operations. Operating earnings is used by the Board to make
strategic decisions and as a guide to assessing an appropriate
distribution to declare.
The Board has identified the following two reportable segments,
the performance of which it monitors separately.
Property Investments
This segment comprises investments in property funds.
Property Funds Management
This segment comprises funds management services, property
management services and other property services.
Annual Report 2017 65
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3 Segment information continued
(a) Description of segments continued
Charter Hall Group
Corporate costs which were previously unallocated in the June 2016 financial report are now included in the property funds management
segment. The impact of this reclassification is a decrease of property funds management operating earnings from $71,380,000 to
$46,234,000 in June 2016. The reallocation has a $nil net effect on the total operating earnings.
(b) Proportionally consolidated operating segments
The operating segments provided to the Board for the reportable segments for the year ended 30 June 2017 are as follows:
30 June 2017
Property rental income1
Property expenses1
Management fee revenue
Net property development EBITDA2
Net operating expenses
Corporate expenses3
EBITDA
EBITDA as a % of total EBITDA
Inter-segment fees and expenses4
Depreciation and amortisation expense
Net interest expense
Income tax expense5
Operating earnings
Basic weighted average number of stapled securities (‘000)
Operating earnings per stapled security (cents)
Other segment items
Realised gains/(losses) on disposal of investments6
EBITDA as a % of total EBITDA, including realised gains/(losses)7
Property
Investments
$’000
Property
Funds
Management
$’000
157,447
(31,441)
–
3,568
(1,039)
–
128,535
66.0%
(14,072)
(195)
(28,647)
(666)
84,955
–
–
158,719
–
(68,348)
(24,178)
66,193
34.0%
22,980
(3,475)
–
(19,480)
66,218
32,570
70.9%
29.1%
Total
$’000
157,447
(31,441)
158,719
3,568
(69,387)
(24,178)
194,728
8,908
(3,670)
(28,647)
(20,146)
151,173
420,838
35.9 cps
1 Property rental income and property expenses are calculated on a proportionate equity accounted look-through basis.
2 Net property development EBITDA is the Group’s share of EBITDA from its investment in CIP, an industrial development business.
3 Corporate expenses includes the costs to manage the listed stapled entity of CHC and non-sector costs of managing the group wide platform including the
Board, CEO, CFO, heads of group wide functions (People and IT), group finance, CHC investor relations, group marketing, corporate share of security-based
benefits expense and restructuring costs.
Inter-segment fees and expenses are made up of fees and expenses paid by the funds to the Group whether treated as expenses or capitalised by the fund.
4
5 Current income tax expense in Property investments represents the Group’s share of Commercial and Industrial Property Pty Ltd’s income tax expense.
6 Realised gains/(losses) are calculated on property disposals based on sales price less historical acquisition costs plus capital expenditure on a look-through
basis, excluding fair value movements.
7 This proportionate equity accounted ratio is calculated by dividing the Property investment EBITDA plus the realised gains/(losses) on disposal of investments
by the total EBITDA plus realised gains/(losses) on disposal of investments.
66 Charter Hall Group
30 June 2016
Property rental income1
Property expenses1
Management fee revenue
Net property development EBITDA2
Net operating expenses
Corporate expenses3
EBITDA
EBITDA as a % of total EBITDA
Inter-segment fees and expenses4
Depreciation and amortisation expense
Net interest expense
Income tax expense
Operating earnings
Basic weighted average number of stapled securities (‘000)
Operating earnings per stapled security (cents)
Other segment items
Realised gains/(losses) on disposal of investments5
EBITDA as a % of total EBITDA, including realised gains/(losses)6
Property
Investments
$’000
Property
Funds
Management
$’000
146,743
(28,846)
–
6,229
(1,134)
–
122,992
78.7%
(11,352)
(585)
(31,180)
(1,374)
78,501
–
–
119,546
–
(61,854)
(24,495)
33,197
21.3%
15,641
(2,604)
–
–
46,234
22,356
81.4%
18.6%
Total
$’000
146,743
(28,846)
119,546
6,229
(62,988)
(24,495)
156,189
4,289
(3,189)
(31,180)
(1,374)
124,735
409,980
30.4 cps
1 Property rental income and property expenses are calculated on a look-through basis.
2 Net property development EBITDA is the Group’s share of EBITDA from its investment in CIP, an industrial development business.
3 Corporate expenses includes the costs to manage the listed stapled entity of CHC and non-sector costs of managing the group wide platform including the
Board, CEO, CFO, heads of group wide functions (People and IT), group finance, CHC investor relations, group marketing, corporate share of security-based
benefits expense and restructuring costs.
4
Inter-segment fees and expenses are made up of fees and expenses paid by the funds to the Group whether treated as expenses or capitalised by the fund.
5 Realised gains/(losses) are calculated on property disposals based on sales price less historical acquisition costs plus capital expenditure on a look-through
basis, excluding fair value movements.
6 This proportionate equity accounted ratio is calculated by dividing the Property investment EBITDA plus the realised gains/(losses) on disposal of investments
by the total EBITDA plus realised gains/(losses) on disposal of investments.
Refer to Note 8 for statutory earnings per stapled security figures.
Annual Report 2017 67
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3 Segment information continued
(c)
The reconciliation of operating earnings to statutory profit after tax attributable to stapled securityholders
is shown below:
Operating earnings attributable to stapled securityholders
Realised and unrealised gains/(losses) on derivatives1
Net fair value movements on investments and property1
Amortisation and impairment of intangibles
Impairment of investment in joint venture
Non-operating deferred income tax expense
Gain on disposal of property investments and inventory1
Other1
Statutory profit after tax attributable to stapled securityholders
2017
$’000
151,173
8,166
118,314
(4,342)
(10,494)
(4,118)
3,890
(5,028)
257,561
2016
$’000
124,735
(10,339)
107,757
(8,517)
–
(1,714)
6,114
(2,796)
215,240
1
Includes the Group’s proportionate share of non-operating items of equity accounted investments on a look-through basis.
(d) Reconciliation of operating earnings from the property investments segment to the share of net profit of
investments accounted for using the equity method and the net gain on investment in associates at fair value in
the statement of comprehensive income
Operating earnings – investments
Add: non-operating equity accounted profit
Less: fair value distributions in operating income
Add: net gain/(loss) on investment in associates at fair value
Add: other operating expenses
Less: net operating interest income
Less: rental income
Share of net profit of investments accounted for using the equity method
Net gain/(loss) on investment in associates at fair value
2017
$’000
84,955
122,830
(377)
(17)
1,038
(1,192)
(62)
207,175
207,192
(17)
207,175
(e) Reconciliation of property funds management income stated above to revenue per the statement of
comprehensive income
Management revenue
Inter-segment revenue
Less: recoveries eliminated against expenses
Property funds management revenue
Add: recovery of property and fund-related expenses
Add: interest income
Add: distributions received for investments accounted for at fair value
Add: rental income
Revenue per statement of comprehensive income
Geographical segments are immaterial as the vast majority of the Group’s income is from Australian sources. Assets and liabilities have not
been reported on a segmented basis as the Board is focused on the consolidated balance sheet.
68 Charter Hall Group
2016
$’000
78,501
93,378
(3,610)
4,016
1,133
(1,118)
–
172,300
168,284
4,016
172,300
2016
$’000
119,546
15,641
(2,171)
133,016
26,052
2,609
3,610
–
2017
$’000
158,719
22,980
(3,189)
178,510
31,729
2,715
377
62
213,393
165,287
4 Revenue
Sales revenue
Gross rental income
Management fees and expense recoveries
Transaction and performance fees
Other revenue
Interest
Distributions/dividends1
Other investment-related revenue
Total other revenue
Total revenue
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
62
156,492
53,747
210,301
2,742
350
–
3,092
–
130,751
28,317
159,068
2,609
3,610
–
6,219
213,393
165,287
62
–
–
62
9,005
350
10,300
19,655
19,717
–
–
–
–
13,291
3,610
20,311
37,212
37,212
1 Represents the distribution of income from investments in associates accounted for at fair value by the Group and Charter Hall Property Trust Group.
Revenue excludes share of net profits of equity accounted associates and joint ventures. Refer to Notes 28 and 29 for further details.
5 Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Plant and equipment
Impairment of joint ventures
Impairment of investments in joint ventures
Amortisation and impairment of intangibles
Intangibles – amortisation
Intangibles – reversal of impairment
Total amortisation and impairment
Finance costs
Interest and finance charges paid/payable
Employee costs
Employee benefit expenses
Restructuring costs
Security-based benefits expense
Payroll tax
Total employee costs
Administration and other expenses
Legal and consulting costs
Rent expense and occupancy costs
Communication and IT expenses
Other expenses
Total administration and other expenses
21,186
18,269
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
3,475
2,604
10,494
–
5,143
(800)
4,343
8,517
–
8,517
–
–
–
–
–
–
–
–
–
–
1,522
1,742
1,295
1,562
94,528
243
1,414
4,736
100,921
5,008
3,267
5,534
7,377
83,878
5,057
2,081
4,496
95,512
3,673
2,848
4,914
6,834
–
–
–
–
–
–
–
30
84
114
–
–
–
–
–
–
–
–
87
87
Annual Report 2017 69
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
6
Income tax expense
Income tax expense
(a)
Current tax expense/(benefit)
Deferred income tax expense
Deferred income tax expense
Decrease/(increase) in deferred tax assets for the tax
consolidated group
Increase in deferred tax liabilities for the tax consolidated group
Increase in deferred tax assets for entities outside the tax
consolidated group
(b)
Reconciliation of income tax expense/(benefit)
to prima facie tax payable
Profit before income tax expense
Prima facie tax expense at the Australian tax rate of 30%
Tax effect of amounts which are not deductible/(taxable)
in calculating taxable income:
Charter Hall Property Trust income
Non-allowable expenses
Other allowable deductions
Share-based payments expense
Sundry items
Net tax refund on foreign subsidiaries
Capital gain sheltered by unrecognised capital losses
Non-taxable dividends, net of equity accounted profit
Impairment of equity accounted investment
Recognition of deferred tax asset on previously unrecognised
income tax losses
Income sheltered by losses in subsidiary outside of the tax
consolidated group
Amounts under/(over) provided in respect of prior years
Income tax expense
(c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting
period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited
to equity:
Current tax: Deduction for rights vesting in excess of the
cumulative expense for the share-based payments
Deferred tax: Estimated future deduction for rights vesting,
in excess of the cumulative expense for the rights
Deferred tax: Unwind of deferred tax assets on rights which
failed to meet vesting conditions
70 Charter Hall Group
Charter Hall Group
Charter Hall Property
Trust Group
Note
15
15
15
2017
$’000
19,544
4,054
23,598
768
4,868
(1,582)
4,054
2016
$’000
(73)
1,787
1,714
(135)
1,922
–
1,787
2017
$’000
2016
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
281,159
84,348
216,954
65,086
217,951
65,385
197,269
59,181
(65,385)
80
(135)
–
(9)
–
–
(1,245)
3,148
(1,582)
(307)
4,685
23,598
(833)
(1,710)
358
(2,185)
(59,181)
2,541
(38)
(3,857)
155
(73)
(1,718)
(1,117)
–
–
–
(84)
1,714
–
–
–
–
(65,385)
–
–
–
–
–
–
–
–
(59,181)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(d) Tax consolidation legislation
Charter Hall Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation with effect from
1 July 2003. The accounting policy in relation to this legislation is set out in Note 1(g).
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which, in
the opinion of the Directors, limits the joint and several liability of the wholly owned entities in the case of a default by the head entity,
Charter Hall Limited.
The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate Charter Hall Limited
for any current tax payable assumed and are compensated by Charter Hall Limited for any current tax receivable and deferred tax assets
relating to unused tax losses or unused tax credits that are transferred to Charter Hall Limited under the tax consolidation legislation.
The funding amounts are determined by reference to the amounts recognised in the wholly owned entities’ financial statements.
(e) Charter Hall Property Trust
Under current Australian income tax legislation, the Trust is not liable for income tax on its taxable income (including any assessable
component of capital gains) provided that the unitholders are presently entitled to the income of the Trust.
(f) Capital tax losses – Charter Hall Group
At 30 June 2017, the Group has approximately $12.8 million (2016: $11.2 million) of tax effected unrecognised capital tax losses.
7 Distributions paid and payable
Ordinary stapled securities
Final ordinary distribution for the six months ended 30 June 2017 of
15.6 cents per stapled security payable on 31 August 2017
Interim ordinary distribution for the six months ended
31 December 2016 of 14.4 cents per stapled security paid on
28 February 2017
Final ordinary distribution for the six months ended
30 June 2016 of 13.6 cents per stapled security paid on
25 August 2016
Interim ordinary distribution for the six months ended
31 December 2015 of 13.3 cents per stapled security paid on
26 February 2016
Total distributions paid and payable
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
72,661
59,431
–
–
132,092
–
–
56,129
54,419
110,548
72,661
59,431
–
–
132,092
–
–
56,129
54,419
110,548
Franking credits available in the parent entity (Charter Hall Limited) for subsequent financial years based on a tax rate of 30% (2016: 30%)
are $3.3 million (2016: $3.3 million).
Annual Report 2017 71
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
8 Earnings per stapled security
(a) Basic earnings per security attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust (non-controlling interest)
Stapled securityholders of Charter Hall Group
(b) Diluted earnings per security attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust (non-controlling interest)
Stapled securityholders of Charter Hall Group
(c) Reconciliations of earnings used in calculating earnings
per stapled security
Equity holders of Charter Hall Limited
Charter Hall Group
Charter Hall Property
Trust Group
2017
Cents
2016
Cents
2017
Cents
2016
Cents
9.4
51.8
61.2
9.3
51.4
60.7
4.4
48.1
52.5
4.3
47.7
52.0
n/a
51.8
n/a
n/a
51.4
n/a
n/a
48.1
n/a
n/a
47.7
n/a
2017
$’000
2016
$’000
2017
$’000
2016
$’000
39,610
17,971
n/a
n/a
Profit attributable to the ordinary stapled securityholders of the Group used
in calculating basic and diluted earnings per stapled security
257,561
215,240
217,951
197,269
2017
Number
2016
Number
2017
Number
2016
Number
(d) Weighted average number of stapled securities used
as the denominator
Weighted average number of ordinary stapled securities used as the
denominator in calculating basic earnings per stapled security
Adjustments for calculation of diluted earnings per stapled security:
Performance rights
Service rights
Weighted average number of ordinary stapled securities and potential
ordinary stapled securities used as the denominator in calculating diluted
earnings per stapled security
420,838,262 409,979,949 420,838,262 409,979,949
2,881,070
546,854
3,324,586
733,776
2,881,070
546,854
3,324,586
733,776
424,266,186 414,038,311 424,266,186 414,038,311
Information concerning the classification of securities
(e)
Performance rights, service rights issued under the Charter Hall Performance Rights and Options Plan
The performance and service rights are unquoted securities. Conversion to stapled securities and vesting to executives is subject to service
and performance conditions.
Stapled securities issued under the General Employee Share Plan (GESP)
Stapled securities issued under the GESP are purchased on market on behalf of eligible employees but held in trust until the earlier of the
completion of three years’ service or termination. No adjustment to diluted earnings per stapled security is required under the GESP.
72 Charter Hall Group
9 Cash and cash equivalents
Cash at bank and on hand
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
174,418
145,358
53,377
43,321
These amounts earn fixed and floating interest rates of between 1.6% and 2.5% (2016: 1.8% and 2.0%).
10 Trade and other receivables
Current
Trade receivables
Loans to joint ventures
Loans to associates
Distributions receivable
Other receivables
Prepayments
Non-current
Loan receivable from Charter Hall Limited
Note
26(e)
26(e)
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
27,938
8,500
750
27,432
854
729
66,203
–
–
2016
$’000
14,008
6,500
2,586
24,379
985
229
48,687
–
–
2017
$’000
2,698
–
750
26,344
144
–
29,936
73,175
73,175
2016
$’000
2,330
–
2,586
21,768
–
–
26,684
139,860
139,860
(a) Bad and doubtful trade receivables
During the year, the Charter Hall Group and Charter Hall Property Trust Group incurred $nil expense (2016: $nil) in respect of provisioning
for bad and doubtful trade receivables.
(b) Fair values
Receivables are carried at amounts that approximate their fair value.
(c) Credit risk
There is a limited concentration of credit risk as the majority of current and non-current receivables are due from related parties of Charter
Hall Group and Charter Hall Property Trust Group. Refer to Note 24 for more information on the risk management policy of the Charter Hall
Group and Charter Hall Property Trust Group.
The ageing of trade receivables at the reporting date was as follows:
Current
1 to 3 months
3 to 6 months
More than 6 months
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
27,850
20
30
38
27,938
2016
$’000
13,604
344
3
57
14,008
2017
$’000
2,698
–
–
–
2,698
2016
$’000
2,330
–
–
–
2,330
As at 30 June 2017, Charter Hall Group had trade receivables of $0.1 million (2016: $0.4 million) past due but not impaired. Charter Hall
Property Trust had $nil receivables past due (2016: $nil).
Annual Report 2017 73
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
11 Investments accounted for using the equity method
Investments in associates
Investments in joint venture entities
Charter Hall Group
Charter Hall Property
Trust Group
Note
28
29
2017
$’000
1,218,160
258,470
2016
$’000
851,371
285,356
2017
$’000
1,147,241
239,020
2016
$’000
784,609
256,893
1,476,630
1,136,727
1,386,261
1,041,502
Investments in associates represent units in listed and unlisted Charter Hall managed funds which are accounted for using the equity
method. Refer to Note 28(a) for carrying value of investments in associates. Investments in joint venture entities represent joint venture
interests in Australia which are accounted for using the equity method. Refer to Note 29(a) for carrying value of investments in joint
venture entities.
12 Investment properties
During the year, the Group established a new controlled entity investment fund, Charter Hall Direct Consumer Staples Fund, to facilitate the
purchase of a portfolio of investment properties.
A reconciliation of the carrying amount of investment properties at the beginning and end of the year is set out below:
Opening balance
Additions
Net loss from fair value adjustment
Disposals
Closing balance
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
–
108,300
(712)
(67,238)
40,350
2016
$’000
–
–
–
–
–
2017
$’000
–
41,062
(712)
–
40,350
2016
$’000
–
–
–
–
–
Key valuation assumptions used in the determination of the investment properties’ fair value and the Group’s valuation policy are
disclosed in Note 25.
Leasing arrangements
The investment properties, excluding development properties, are leased to tenants under long-term operating leases with rentals payable
monthly. Minimum lease payments under non-cancellable operating leases of investment properties not recognised in the financial
statements are receivable as follows:
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2,350
7,292
12,679
22,321
2016
$’000
–
–
–
–
2017
$’000
2,350
7,292
12,679
22,321
2016
$’000
–
–
–
–
Due within one year
Due between one and five years
Over five years
74 Charter Hall Group
13 Intangible assets
In March 2010, the Charter Hall Group completed a transaction to acquire the majority of Macquarie Group’s core real estate management
platform. This transaction was structured to secure the management rights (i.e. future management fee revenue) of Macquarie Office Trust
(now Charter Hall Office Trust), Macquarie CountryWide Trust (now Charter Hall Retail REIT) and Macquarie Direct Property Fund (now Charter
Hall Direct Office Fund). The excess of consideration paid over net tangible assets acquired represents the value of these management rights.
With the exception of management rights held over Charter Hall Office Trust (CHOT), management considers that the management rights
have an indefinite life as there are no finite terms in the underlying agreements and the Charter Hall Group has no intention to cease
managing these funds. On 1 May 2012, Charter Hall Office REIT (CQO) was privatised and CQO changed from a listed REIT to a wholesale
unit trust (CHOT) with liquidity reviews every five years. In November 2016, CHOT’s investors agreed to extend the life of the fund by three
years to 30 April 2020. The amortisation period for the CHOT management rights has also been extended prospectively by three years.
The Group is amortising the associated intangible assets over a nine year period from 1 May 2012, which includes an additional year to
source liquidity were the fund to be wound up as a result of a liquidity review.
On 15 August 2012, a subsidiary of the Group paid the previous manager of Charter Hall Direct PFA Trust (PFA) to facilitate the appointment
of a Group subsidiary as the responsible entity of PFA. As PFA is an open ended fund with no termination date or review event contemplated
in its constitution, these facilitation payments have been treated as an intangible asset which is considered to have an indefinite useful life.
Indefinite life intangibles
Charter Hall Retail REIT
Opening and closing balance
Charter Hall Direct Office Fund
Opening and closing balance
Charter Hall Direct PFA Trust
Opening balance
Reversal of impairment
Closing balance
Total indefinite life intangibles
Finite life intangibles
Charter Hall Office Trust
Opening balance
Amortisation charge
Closing balance
At balance date
Cost
Accumulated amortisation
Total finite life intangibles
Total intangible assets
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
42,288
42,288
7,423
7,423
4,417
800
5,217
4,417
–
4,417
54,928
54,128
15,615
(5,143)
10,472
50,283
(39,811)
10,472
65,400
24,132
(8,517)
15,615
50,283
(34,668)
15,615
69,743
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
All indefinite life intangible assets recognised on the consolidated balance sheet are subject to an annual impairment assessment. The impairment
assessments support the carrying values and the methodology applied is an assessment of value in use based on discounted cash flows.
Key assumptions used for the indefinite life intangible impairment calculations are as follows:
• cash flow projections covering a three year period based on financial budgets approved by management. Cash flows beyond the
three-year period are extrapolated using estimated growth rates appropriate for the business;
• pre-tax discount rate range of 14 – 16% (2016: 14 – 16%) which is in excess of the Group’s weighted average cost of capital;
• growth after three years of 2 – 3% (2016: 2 – 3%) per annum; and
• terminal value multiple of 7.0 – 8.0 times earnings (2016: 7.0 – 8.0 times).
Impairment is tested at the cash generating unit (CGU) level being each fund which generates management fee income.
Annual Report 2017 75
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
14 Property, plant and equipment
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At balance date
Cost
Accumulated depreciation
Net book amount
15 Deferred tax assets and liabilities
Deferred tax assets comprises temporary differences attributable to:
Tax losses carried forward1
Deferred tax assets comprises temporary differences attributable to:
Tax losses carried forward
Employee benefits
Other
Deferred tax liabilities comprises temporary differences
attributable to:
Intangible assets
Investment in associates
Other
Net deferred tax liabilities
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
14,855
7,384
–
(3,475)
18,764
29,275
(10,511)
18,764
2016
$’000
11,931
6,289
(761)
(2,604)
14,855
21,890
(7,035)
14,855
2017
$’000
2016
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
1,582
–
11,886
467
12,353
(18,055)
(6,364)
(1,611)
(26,030)
(13,677)
Restated
2016
$’000
–
1,494
8,968
1,307
11,769
(14,913)
(5,387)
(862)
(21,162)
(9,393)
2017
$’000
2016
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Tax losses carried forward in 2017 were acquired following the acquisition of Charter Hall Opportunity Fund No.5 (CHOF5) as a wholly owned entity. CHOF5
does not form part of the Charter Hall tax consolidated group and therefore is not included in the net deferred tax liability balance on the Balance Sheet.
Change in accounting policy and retrospective application
During the year, the Group changed its accounting policy in relation to the recognition of deferred income tax on its intangible assets.
This change was made to reflect the view of the IFRS Interpretations Committee (IFRIC), published in November 2016, that the carrying
amounts of intangible assets with indefinite useful lives may not necessarily be recovered through sale, but also through use.
Based on the IFRIC guidance, the Group has determined that it is appropriate to retrospectively change its accounting policy in relation to
the assumed method of recovery of its intangible assets from recovery through sale to recovery through use. As the benefits of the intangible
assets flow to the Group in the form of management fees over time, this is considered to provide reliable and more relevant information.
The impact of this change in accounting policy on the 2017 and previously reported 2016 and 2015 balance sheets is an increase of
$14,913,000 of deferred tax liabilities and an increase to accumulated losses of $14,913,000. There was no impact on the statement
of comprehensive income.
76 Charter Hall Group
A reconciliation of the carrying amount of deferred tax assets for the tax consolidated group at the beginning and end of the current and
previous years is set out below:
Charter Hall Group
Balance at 1 July 2015
Charged/(credited) to income statement
Balance at 30 June 2016
Charged/(credited) to income statement
Charged/(credited) directly to equity
Balance at 30 June 2017
Note
6
6
Tax losses
carried
forward
$’000
Employee
benefits
$’000
5,836
(4,342)
1,494
(1,494)
–
5,616
3,352
8,968
1,566
1,352
–
11,886
Other
$’000
182
1,125
1,307
(840)
–
467
Total
$’000
11,634
135
11,769
(768)
1,352
12,353
A reconciliation of the carrying amount of deferred tax liabilities for the tax consolidated group at the beginning and end of the current and
previous years is set out below:
Charter Hall Group
Balance at 1 July 2015 (Restated)
Charged/(credited) to income statement
Balance at 30 June 2016 (Restated)
Charged/(credited) to income statement
Balance at 30 June 2017
16 Trade and other payables
Current
Trade payables
Accruals
Distribution payable
GST payable
Annual leave liability
Employee benefits liability
Other payables
Income tax payable
Lease incentive liability
Non-current
Lease incentive liability
All current liabilities are expected to be settled within 12 months.
Intangible
assets
$’000
Investment
in associate
$’000
Note
Other
$’000
Total
$’000
6
6
14,913
–
14,913
3,142
18,055
4,108
1,279
5,387
977
6,364
219
643
862
749
1,611
19,240
1,922
21,162
4,868
26,030
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
1,137
3,271
72,661
765
3,473
21,715
4,536
18,711
1,146
127,415
2016
$’000
421
5,970
56,129
2,149
3,110
17,404
630
–
1,081
86,894
2017
$’000
2016
$’000
–
467
72,661
(92)
–
–
3,750
–
–
76,786
–
359
56,129
(66)
–
–
66
–
–
56,488
6,479
5,193
–
–
Annual Report 2017 77
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
17 Provisions
Current
Employee benefits – long service leave
Non-current
Employee benefits – long service leave
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
1,892
1,680
1,303
1,334
–
–
–
–
18 Interest bearing liabilities
Charter Hall Property Trust loan
The $100 million debt facility was increased to $125 million in December 2016 with the maturity date unchanged at August 2018.
At 30 June 2017, drawn borrowings of $nil (30 June 2016: $nil) and bank guarantees of $14.3 million (30 June 2016: $26.0 million)
had been utilised under this facility, which under the terms of the agreement reduce the available facility. No liability is recognised for
bank guarantees.
The carrying amounts of assets pledged as security for borrowings are:
Non-current
First ranking security
Investment in associates
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
1,415,951
1,041,710
1,415,951
1,041,710
(a) Financial arrangements
The Charter Hall Group and Charter Hall Property Trust Group had unrestricted access at reporting date to the following lines of credit:
Total facilities
Used at reporting date
Unused at reporting date
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
125,000
(14,267)
110,733
2016
$’000
100,000
(26,049)
73,951
2017
$’000
125,000
(14,267)
110,733
2016
$’000
100,000
(26,049)
73,951
(b) Gearing
Gearing is a measure used to monitor levels of debt capital used by the business to fund its operations. This ratio is calculated as interest
bearing debt divided by total assets with both net of cash and cash equivalents.
The gearing ratio of the Charter Hall Group at 30 June 2017 was nil % (30 June 2016: nil %) and Charter Hall Property Trust Group
nil % (30 June 2016: nil %). Debt covenants are monitored regularly to ensure compliance and reported to the debt provider on a six
monthly basis. The Group Treasurer is responsible for negotiating new debt facilities and monitoring compliance with covenants.
78 Charter Hall Group
19 Contributed equity
(a) Security capital
Charter Hall Limited
Charter Hall Property Trust
2017
Securities
2016
Securities
2017
$’000
2016
$’000
284,956
1,456,853
256,049
1,201,346
Ordinary securities – stapled securities, fully paid
465,777,131 412,717,802
1,741,809
1,457,395
(b) Movements in ordinary stapled security capital
Details
Number of
securities1
Average
issue price
Opening balance at 1 July 2015
Buyback and issuance of securities for exercised performance
and service rights1
Issuance under DRP2
Closing balance at 30 June 2016
Less: Transaction costs on stapled security issues
Closing balance per accounts at 30 June 2016
Buyback and issuance of securities for exercised performance
and service rights3
Tax recognised directly in equity
Issued under institutional placement4
Balance at 30 June 2017
Less: Transaction costs on stapled security issues
406,817,856
–
5,899,946
412,717,802
412,717,802
–
–
53,059,329
465,777,131
$2.26
$4.45
$2.63
–
$5.48
Charter Hall
Limited
$’000
Charter Hall
Property
Trust
$’000
Total
$’000
253,907
1,181,772
1,435,679
(408)
2,563
256,062
(13)
(3,951)
23,669
(4,359)
26,232
1,201,490
(144)
1,457,552
(157)
256,049
1,201,346
1,457,395
(273)
833
28,786
285,395
(439)
(2,484)
–
261,979
(2,757)
833
290,765
1,460,841
(3,988)
1,746,236
(4,427)
Balance per accounts at 30 June 2017
465,777,131
284,956
1,456,853
1,741,809
1 1,926,951 stapled securities bought on market at an average value of $4.37, offset by the exercise of 1,581,344 performance rights with a value of $1.91
and 474,902 service rights with an average value of $3.41.
2 2,345,435 stapled securities issued in September 2015 with an issue price of $4.60 and 3,554,511 issued in February 2016 with an issue price of $4.34.
3 879,616 stapled securities bought on market at an average value of $5.74, offset by the exercise of 445,518 performance rights with a value of $1.16 and
434,098 service rights with an average value of $4.11.
4 53,059,239 stapled securities issued under Institutional Placement and Security Purchase Plan in May 2017 with an issue price of $5.48.
(c) Ordinary stapled securities
Ordinary stapled securities entitle the holder to participate in distributions/dividends and the proceeds on winding up of the Company/Trust
in proportion to the number of and amounts paid on the stapled securities held.
On a show of hands, every holder of ordinary stapled securities present at a meeting in person or by proxy is entitled to one vote and upon
a poll, each holder is entitled to one vote per security that they hold.
(d) Distribution Re-investment Plan
The Group has established a Distribution Re-investment Plan (DRP) under which holders of ordinary stapled securities may elect to have
all or part of their distribution satisfied by the issue of new ordinary stapled securities rather than by being paid in cash. The DRP was
in operation for the distribution paid on 26 February 2016, however was suspended for the distribution paid on 25 August 2016 and
subsequent distributions.
Annual Report 2017 79
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
20 Reserves
Business combination reserve
Security-based benefits reserve
Other reserves
Charter Hall Limited
Charter Hall Property Trust
Movements:
Business combination reserve
Opening and closing balance
Security-based benefits reserve
Opening balance
Security-based benefits expense
Transfer due to deferred compensation payable in performance rights
Transferred to equity on options and performance rights exercised
Transfer unvested securities to accumulated losses
Closing balance
Other reserves
Opening balance
Exchange differences on translation of foreign operations
Equity accounted fair value movements in cash flow hedges
Deferred tax asset recognised directly in equity
Closing balance
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
(52,000)
5,676
1,260
(45,064)
(44,614)
(450)
(45,064)
2016
$’000
(52,000)
6,467
–
(45,533)
(45,533)
–
(45,533)
2017
$’000
–
–
(450)
(450)
–
(450)
(450)
2016
$’000
–
–
–
–
–
–
–
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
(52,000)
(52,000)
6,467
1,414
1,427
(2,439)
(1,193)
5,676
–
(8)
(442)
1,710
1,260
7,385
2,081
1,722
(4,721)
–
6,467
(46)
227
(181)
–
–
–
–
–
–
–
–
–
(8)
(442)
–
(450)
–
–
–
–
–
–
(46)
227
(181)
–
–
(a) Business combination reserve
This reserve relates to the reverse acquisition at the initial public offering (IPO) in 2005. This is the amount that relates to the investment
in CHH that is not eliminated by paid in capital. No goodwill is recognised as this transaction is the result of a reverse acquisition.
(b) Security based benefits reserve
The security based benefits reserve is used to recognise the fair value of rights and options issued under the PROP.
80 Charter Hall Group
(c) Other reserves
Exchange differences arising on translation of foreign controlled entities and the Charter Hall Group’s and Charter Hall Property Trust Group’s
share of foreign exchange differences arising from the equity accounted investments are recognised in other comprehensive income as
described in Note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the
net investment is disposed of.
Equity accounted fair value movements in cash flow hedges is the equity accounted portion of the gains or losses on hedging instruments
in cash flow hedges that are determined to be an effective hedge relationship.
Deferred tax credits recognised directly in equity relate to the excess of the expected future tax deduction on performance and service rights
on issue over the cumulative fair value expensed to date.
21 Accumulated losses
Opening balance
Profit for the year
Distributions
Transfer unvested securities to accumulated losses
Deferred tax asset recognised directly to equity
Closing balance
Charter Hall Limited
Charter Hall Property Trust
Closing balance
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
(100,778)
257,561
(132,092)
1,193
(358)
25,526
(54,074)
79,600
25,526
Restated
2016
$’000
(205,470)
215,240
(110,548)
–
–
(100,778)
(94,519)
(6,259)
(100,778)
2017
$’000
(6,259)
217,951
(132,092)
–
–
79,600
–
79,600
79,600
Restated
2016
$’000
(92,980)
197,269
(110,548)
–
–
(6,259)
–
(6,259)
(6,259)
22 Remuneration of auditors
During the year, the following fees were paid or payable for services provided by the auditors of the Charter Hall Group and Charter Hall
Property Trust Group, their related practices and non related audit firms:
(a) Audit services
PricewaterhouseCoopers – Australian Firm
Audit and review of financial reports
Other assurance services
Total remuneration for audit services
(b) Taxation services
PricewaterhouseCoopers – Australian Firm
Taxation services
Total remuneration for taxation services
Charter Hall Group
Charter Hall Property
Trust Group
2017
$
2016
$
2017
$
2016
$
304,750
18,000
322,750
312,000
–
312,000
135,781
135,781
228,744
–
7,000
–
7,000
–
–
7,000
–
7,000
–
–
Annual Report 2017 81
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
23 Reconciliation of profit after tax to net cash inflow from operating activities
Profit after tax for the year
Non-cash items:
Amortisation and impairment of intangibles
Impairment of joint ventures
Depreciation and amortisation
Non-cash security-based benefits expense
Net loss/(gain) on sale of investments, property and derivatives
Fair value adjustments
Foreign exchange movements
Change in assets and liabilities, net of effects from purchase
of controlled entity:
(Increase)/decrease in trade debtors and other receivables
Increase/(decrease) in trade creditors and accruals
Share of profit from investment in associates and joint venture entities
(Increase)/decrease for net deferred income tax
Net cash inflow from operating activities
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
257,561
215,240
217,951
197,269
4,343
10,494
3,617
1,413
(3,244)
729
–
8,517
–
3,019
2,081
(5,976)
(4,016)
(29)
–
–
141
–
(3,720)
729
–
(11,420)
20,053
(129,935)
2,703
156,314
999
10,048
(101,344)
1,787
130,326
(9,393)
57
(125,866)
–
79,899
–
–
416
–
(978)
(4,016)
–
(15,216)
69
(98,618)
–
78,926
Distribution and interest income received on investments has been classified as cash flow from operating activities.
24 Capital and financial risk management
(a) Capital risk management
The key capital risk management objective of the Charter Hall Group and Charter Hall Property Trust Group is to optimise returns through
the mix of available capital sources whilst complying with statutory and constitutional capital requirements, and complying with the covenant
requirements of the finance facility. The capital management approach is regularly reviewed by management and the Board as part of the overall
strategy. The capital mix can be altered by issuing new units, electing to have the DRP underwritten, adjusting the amount of distributions
paid, activating a unit buyback program or selling assets.
(b) Financial risk management
Both the Charter Hall Group and Charter Hall Property Trust Group activities expose it to a variety of financial risks: market risk (price risk,
interest rate risk and foreign exchange risk), credit risk and liquidity risk. The Group’s overall risk management framework focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. From time
to time, the Group uses derivative financial instruments such as interest rate swaps and option contracts to hedge certain risk exposures.
Risk management is carried out by the Group Treasurer, the Chief Financial Officer and the Managing Director and Group CEO in
consultation with senior management, the Audit, Risk and Compliance Committee and the Board of Directors. The Group Treasurer
identifies, evaluates and hedges financial risks in close cooperation with the Chief Financial Officer. The Board provides guidance for overall
risk management, as well as covering specific areas, such as mitigating price, interest rate and credit risks, the use of derivative financial
instruments and investing excess liquidity.
82 Charter Hall Group
(i) Market risk
Unlisted unit price risk
The Group is exposed to unlisted unit price risk. This arises from investments in unlisted property funds managed by the Group. These funds
invest in direct property. Charter Hall manages all the funds that the Group invests in and its executives have a sound understanding of the
underlying property values and trends that give rise to price risk. The carrying value of investments in associates at fair value through profit
or loss is measured with reference to the funds’ unit prices which are determined in accordance with the funds’ respective constitutions.
The key determinant of the unit price is the underlying property values which are approved by the respective fund board or investment
committee and the Executive Property Valuation Committee.
The following table illustrates the potential impact a change in unlisted unit prices by +/-10% would have on the Charter Hall Group and
Charter Hall Property Trust Group’s profit and equity. The movement in the price variable has been determined based on management’s best
estimate, having regard to a number of factors, including historical levels of price movement, historical correlation of the Group’s investments
with the relevant benchmark and market volatility. However, actual movements in the price may be greater or less than anticipated due to a
number of factors. As a result, historic price variations are not a definitive indicator of future price variations.
Charter Hall Group
2017
Assets – Charter Hall Group
Investments in associates at fair value through profit or loss
2016
Assets – Charter Hall Group
Investments in associates at fair value through profit or loss
Charter Hall Property Trust Group
2017
Assets – Charter Hall Property Trust Group
Investments in associates at fair value through profit or loss
2016
Assets – Charter Hall Property Trust Group
-10%
+10%
Carrying
amount
$’000
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
29,690
(2,969)
(2,969)
2,969
2,969
208
(21)
(21)
21
21
29,690
(2,969)
(2,969)
2,969
2,969
Investments in associates at fair value through profit or loss
208
(21)
(21)
21
21
Cash flow and fair value interest rate risk
The Charter Hall Group has no long-term interest bearing assets.
Charter Hall Property Trust has a loan receivable from Charter Hall Limited which is an unsecured stapled loan maturing on 30 June 2021
with interest charged on an arm’s length basis. Refer to note 26(e) for further details.
The Charter Hall Group’s and Charter Hall Property Trust Group’s external interest rate risk arises from the $125 million loan facility.
At 30 June 2017 no borrowings were drawn on this facility (2016: $nil). Borrowings drawn at variable rates expose both Groups to cash flow
interest rate risk. Borrowings drawn at fixed rates expose both Groups to fair value interest rate risk. The Charter Hall Group and Charter Hall
Property Trust Group’s policy is to fix rates between 50–100% of core borrowings for the anticipated debt term. Core borrowings are defined
as being the level of borrowings that are expected to be held for a period of more than two years. The Group did not hold any derivatives as
at 30 June 2017.
Annual Report 2017 83
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
24 Capital and financial risk management continued
(b) Financial risk management continued
(ii)
As the Group has no drawn debt, interest rate risk exposure is minimal.
Interest rate risk exposure
The Charter Hall Property Trust’s exposure arises predominantly from an unsecured stapled loan maturing on 30 June 2021 receivable from
Charter Hall Limited bearing variable interest rates.
Interest rate sensitivity analysis
The following tables illustrate the potential impact a change in interest rates of +/-1% would have on the Charter Hall Group and Charter Hall
Property Trust Group’s profit and equity.
Effective
interest
rate
Fair
value
$’000
Carrying
amount
$’000
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
-1%
+1%
Charter Hall Group
2017
Financial assets
Cash and cash equivalents
2016
Financial assets
Cash and cash equivalents
Charter Hall Property
Trust Group
2017
Financial assets
Cash and cash equivalents
Loan receivable from Charter
Hall Ltd
Total increase/(decrease)
2016
Financial assets
Cash and cash equivalents
Loan receivable from Charter
Hall Ltd
Total increase/(decrease)
2.5%
174,418
174,418
(1,744)
(1,744)
1,744
1,744
2.0%
145,358
145,358
(1,454)
(1,454)
1,454
1,454
2.5%
53,377
53,377
(534)
(534)
534
9.3%
73,175
73,175
(732)
(1,266)
(732)
(1,266)
732
1,266
2.0%
43,321
43,321
(433)
(433)
433
9.7%
139,860
139,860
(1,399)
(1,832)
(1,399)
(1,832)
1,399
1,832
534
732
1,266
433
1,399
1,832
The fair value of interest-bearing liabilities is inclusive of costs which would be incurred on settlement of a liability, and is based upon market
prices, where a market exists, or by discounting the expected future cash flows by the current interest rates for liabilities with similar risk profiles.
(iii) Foreign exchange risk
The Charter Hall Group’s principal exposure to foreign exchange risk arises from its investments in foreign subsidiaries. The major asset held by
foreign subsidiaries is cash in foreign denominated bank accounts. The Charter Hall Property Trust Group does not have any exposure of this type.
84 Charter Hall Group
(c) Credit risk
The Charter Hall Group and Charter Hall Property Trust Group have policies in place to ensure that sales of services are made to customers
with appropriate credit histories.
50% of the Charter Hall Group’s income is derived from management fees, transaction and other fees from related parties. 49% of the
Charter Hall Group’s income is derived from equity accounted investments in property funds and distributions from investments in property
funds held at fair value through the profit and loss. The balance relates to interest income, gross rental income and gains on sales of
investments and inventory.
89% of the Charter Hall Property Trust Group’s income is derived from equity accounted investments in property funds and distributions from
investments in property funds held at fair value through profit and loss.
All tenants in the underlying property funds for Charter Hall Group and the Charter Hall Property Trust Group are assessed for creditworthiness,
taking into account their financial position, past experience and other factors. Refer to Note 10(c) for more information on credit risk.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Charter Hall Group and Charter Hall
Property Trust Group have policies that limit the amount of credit exposure to any one financial institution.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed
credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the Charter Hall Group
and Charter Hall Property Trust Group aim at maintaining flexibility in funding by keeping committed credit lines available.
Maturities of financial liabilities
The following table provides the contractual maturity of Charter Hall Group’s and Charter Hall Property Trust Group’s financial liabilities.
The amounts presented represent the future contractual undiscounted principal and interest cash flows and therefore do not equate to the
value shown in the balance sheet. Repayments which are subject to notice are treated as if notice were given immediately.
Charter Hall Group
2017
Trade and other payables
2016
Trade and other payables
Charter Hall Property Trust Group
2017
Trade and other payables
2016
Trade and other payables
Carrying
amount
$’000
Less
than
1 year
$’000
Between
1 and 2
years
$’000
Over
2 years
$’000
Total
cash
flows
$’000
133,894
127,415
1,146
5,333
133,894
92,087
86,894
790
4,403
92,087
76,786
76,786
56,488
56,488
–
–
–
–
76,786
56,488
Annual Report 2017 85
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25 Fair value measurement
(a) Recognised fair value measurement
The Charter Hall Group and the Charter Hall Property Trust Group measure and recognise the following assets and liabilities at fair value on a
recurring basis:
•
•
Investments in associates at fair value through profit and loss (refer to Note 28).
Investment properties.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
(i) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
(ii) Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices); and
(iii) Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table presents the Charter Hall Group and Charter Hall Property Trust Group’s assets and liabilities measured and recognised
at fair value:
Charter Hall Group
30 June 2017
Investments in associates at fair value through profit and loss
Investment properties
Total assets
30 June 2016
Investments in associates at fair value through profit and loss
Total assets
Charter Hall Property Trust Group
30 June 2017
Investments in associates at fair value through profit and loss
Investment properties
Total assets
30 June 2016
Investments in associates at fair value through profit and loss
Total assets
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
29,690
40,350
70,040
208
208
29,690
40,350
70,040
208
208
29,690
40,350
70,040
208
208
29,690
40,350
70,040
208
208
There have been no transfers between Level 1, Level 2 and Level 3 during the period.
(b) Disclosed fair values
The carrying amounts of current trade receivables and payables approximate their fair values due to their short-term nature. The fair value
of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate
that is available to the Charter Hall Group and Charter Hall Property Trust Group for similar financial instruments. The fair value of current
borrowings approximates the carrying amount, as the impact of discounting is not significant.
(c) Valuation techniques used to derive Level 3 fair values
Investments in associates
The fair value of investments in associates held at fair value through profit and loss, which are investments in unlisted securities, are
determined giving consideration to the unit prices and net assets of the underlying funds. The unit prices and net asset values are largely
driven by the fair values of investment properties and derivatives held by the funds. Recent arm’s length transactions, if any, are also taken
into consideration.
The fair value of investments in associates at fair value through profit or loss is impacted by the price per security of the investment.
An increase to the price per security results in an increase to the fair value of the investment.
86 Charter Hall Group
Investment property
The fair value measurement of investment property takes into account the Group’s ability to generate economic benefits by using the
asset in its highest and best use.
The use of independent external valuers is on a rotational basis at least once every 12 months, or earlier, where the Responsible Entity
deems it appropriate or believes there may be a material change in the carrying value of the property.
Where an independent valuation is not obtained, the fair value is determined using Discounted Cash Flow and income capitalisation
methods. The table below identifies the inputs, which are not based on observable market data, used to measure the fair value (Level 3) of
the investment properties:
2017
Term
Discounted Cash Flow
(DCF) method
Income capitalisation
method
Gross market rent
Capitalisation rate
Terminal yield
Adopted
capitalisation
rate
(% p.a.)
Adopted
terminal
yield
(% p.a.)
Adopted
discount rate
(% p.a.)
Fair value
$’000
40,350
6.8–8.5
7.0–9.0
7.5–9.3
Definition
A method in which a discount rate is applied to future expected income streams to estimate the present value.
A valuation approach that provides an indication of value by converting future cash flows to a single current
capital value.
The estimated amount for which an interest in real property should be leased to a major tenant on the
valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length
transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and
without compulsion.
The return represented by the income produced by an investment, expressed as a percentage.
A percentage return applied to the expected net income following a hypothetical sale at the end of the cash
flow period.
Discount rate
A rate of return used to convert a future monetary sum or cash flow into present value.
Movement in the inputs are likely to have an impact on the fair value of investment properties. An increase in gross market rent will likely lead
to an increase in fair value. A decrease in adopted capitalisation rate, adopted terminal yield or adopted discount rate will likely lead to an
increase in fair value.
26 Related parties
(a) Parent entity
The parent entity of the Charter Hall Group is Charter Hall Limited. The parent entity of the Charter Hall Property Trust Group is the Charter
Hall Property Trust.
(b) Controlled entities
Interests in controlled entities are set out in Note 27.
(c) Key management personnel
The following persons were considered key management personnel (excluding Non-Executive Directors) during the year:
Executive director
D Harrison
Other key management personnel
G Chubb
P Ford
S McMahon1
A Taylor
Former key management personnel
P Altschwager2
1 Commenced being key management personnel on 18 August 2016.
2 Ceased being key management personnel on 7 December 2016.
Annual Report 2017 87
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
26 Related parties continued
(c) Key management personnel continued
Former key management personnel continued
Below are the aggregate amounts paid or payable to key management personnel (including Non-Executive Directors):
Charter Hall Group
Charter Hall Property
Trust Group
2017
$
2016
$
2017
$
2016
$
3,988,438
948,741
3,975,652
107,887
931,165
23,955
893,344
6,561,264
993,900
5,070,682
165,906
1,972,796
47,635
1,112,400
10,869,182
15,924,583
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Charter Hall Group
Charter Hall Property
Trust Group
2017
$
2016
$
2017
$
2016
$
7,320,825
2,342,380
44,596,526
63,449,515
48,557,784
658,290
204,765
3,901,109
11,004,826
4,216,980
1,603,926
50,430
8,079,222
10,619,575
1,976,327
7,000,934
1,806,214
8,573,615
53,178,149
39,816,970
427,524
303,796
5,399,262
5,332,194
4,411,135
1,485,338
45,290
4,997,852
7,853,635
1,817,967
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,300,164
20,310,647
Salary and fees
Non-Executive Director remuneration
Short-term incentives
Superannuation
Value of securities vested
Non-monetary benefits
Termination benefits
(d) Transactions with related parties
The following income was earned from related parties during the year:
Associates
Accounting cost recoveries
Marketing cost recoveries
Transaction and performance fees
Management and development fees
Property management fees and cost recoveries
Joint ventures
Accounting cost recoveries
Marketing cost recoveries
Transaction and performance fees
Management and development fees
Property management fees and cost recoveries
Other
Accounting cost recoveries
Marketing cost recoveries
Transaction and performance fees
Management and development fees
Property management fees and cost recoveries
Investment-related revenue
88 Charter Hall Group
The following balances arising through the normal course of business were due from related parties at balance date:
Associates
Management fee receivables
Other receivables
Joint ventures
Management fee receivables
Other receivables
Other
Management fee receivables
Other receivables
(e) Loans to/(from) related parties
Loans to joint ventures
Opening balances
Loans advanced
Loan repayments received
Closing balance
Loans to other related parties
Opening balances
Loans advanced
Loan repayments received
Closing balance
Loans to Charter Hall Limited
Opening balance
Loans advanced
Loan repayments received
Interest charged
Closing balance
Charter Hall Group
Charter Hall Property
Trust Group
2017
$
2016
$
2017
$
2016
$
8,368,874
13,518,435
6,017,451
4,831,481
2,282,187
1,180,909
860,520
423,351
682,148
677,194
1,412,695
1,132,936
–
–
–
–
–
–
–
–
–
–
–
–
Charter Hall Group
Charter Hall Property
Trust Group
2017
$
2016
$
2017
$
2016
$
6,500,000
2,000,000
–
6,500,000
9,144,662
(9,144,662)
8,500,000
6,500,000
–
–
–
–
–
9,144,662
(9,144,662)
–
2,585,658
19,398,622
(21,234,280)
–
2,585,658
–
2,585,658
19,398,622
(21,234,280)
–
2,585,658
–
750,000
2,585,658
750,000
2,585,658
–
–
–
–
–
– 139,860,499 198,426,764
– 397,896,815 203,960,533
– (473,320,830) (275,450,051)
12,923,253
–
8,738,212
–
73,174,696 139,860,499
No provisions for doubtful debts have been raised in relation to any outstanding balances.
The loan to CHL comprises an unsecured stapled loan maturing on 30 June 2021. Interest is charged on an arm’s length basis which,
at 30 June 2017, amounted to a weighted average rate of 9.30% (June 2016: 9.97%).
(f) Fees paid to the Responsible Entity or its associates
Fees paid to the Responsible Entity of the Charter Hall Property Trust, and its associates, by the Charter Hall Property Trust Group amounted
to $1,382,000 (2016: $1,193,000). At 30 June 2017, related fees payable amounted to $414,000 (2016: $311,000).
27 Controlled entities
The consolidated financial statements of the Charter Hall Group incorporate the assets, liabilities and results of the following controlled
entities in accordance with the accounting policy described in Note 1(b):
Annual Report 2017 89
Country of
incorporation Principal activity
Class of
securities
2017
%
2016
%
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
27 Controlled entities continued
(a) Details of controlled entities of the Charter Hall Group
Name of entity
Controlled entities of Charter Hall Limited
Charter Hall Holdings Pty Limited
CH La Trobe Trust
Controlled entities of Charter Hall
Holdings Pty Ltd
Bieson Pty Limited
Charter Hall Nominees Pty Limited
Charter Hall Asset Services Pty Limited
Charter Hall Development Services Pty Ltd
Charter Hall Direct Property Management Limited
Charter Hall Escrow Agent Pty Limited
Charter Hall Funds Management Limited
Charter Hall Holdings Investment Trust
Charter Hall Holdings Real Estate Pty Limited
Charter Hall International Office Pty Limited
Charter Hall Investment Management Limited
Charter Hall (NZ) Pty Limited
Charter Hall Office Collins Street Pty Limited
Charter Hall Office Investments Pty Limited
Charter Hall Opportunity Fund No.5
Charter Hall Opportunity Fund No.5 Bringelly Trust
Charter Hall Wholesale Management Limited
Charter Hall Real Estate Inc
CHREI US Office LLC
CHREI US Retail LLC
Charter Hall Real Estate Europe Limited
Charter Hall Real Estate Management
Services (ACT) Pty Limited
Charter Hall Real Estate Management
Services (NSW) Pty Limited
Charter Hall Real Estate Management
Services (QLD and NT) Pty Limited
Charter Hall Real Estate Management
Services (SA) Pty Limited
Charter Hall Real Estate Management
Services (TAS) Pty Limited
Charter Hall Real Estate Management
Services (VIC) Pty Limited
Charter Hall Real Estate Management
Services (WA) Pty Limited
Charter Hall Retail Management Limited
Visokoi Pty Limited
Votraint No.1622 Pty Limited
Charter Hall WALE Limited
Controlled entities of Charter Hall Property Trust
Charter Hall Co-Investment Trust1
CHC CDC Holding Trust
CHPT RP2 Trust
CHPT Dandenong Trust
Charter Hall Direct Consumer Staples Fund
Australia
Australia
Property management
Property investment
Ordinary
Ordinary
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
UK
Trustee company
Trustee company
Property management
Property management
Responsible entity
Holding company
Responsible entity
Holding company
Holding company
Holding company
Responsible entity
Property management
Holding company
Holding company
Property development
Property development
Responsible entity
Property management
Property management
Property management
Property management
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Australia
Property management
Ordinary
Australia
Property management
Ordinary
Australia
Property management
Ordinary
Australia
Property management
Ordinary
Australia
Property management
Ordinary
Australia
Property management
Ordinary
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Property management
Responsible entity
Trustee company
Trustee company
Responsible entity
Property investment
Property investment
Property investment
Property investment
Property investment
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
DCSF NZ Trust
New Zealand Property investment
1 Charter Hall Co-Investment Trust is an entity which was set up by Charter Hall Property Trust to hold its investments in Charter Hall Retail REIT (CQR), Charter
Hall Office Trust (CHOT), BP Fund 1 (BP1), BP Fund 2 (BP2), Core Logistics Partnership (CLP), TTP Wholesale Fund (TTP), Retail Partnership No.6 Trust (RP6),
Charter Hall Prime Retail Fund (CPRF), Brisbane Square Wholesale Fund (BSWF) and Charter Hall Long WALE REIT (CLW).
90 Charter Hall Group
(b) Details of controlled entities of the Charter Hall Property Trust Group
Name of entity
Controlled entities of Charter Hall
Property Trust
Charter Hall Co-Investment Trust1
CHC CDC Holding Trust
CHPT RP2 Trust
CHPT Dandenong Trust
Charter Hall Direct Consumer Staples Fund
Country of
incorporation
Principal activity
Class of
securities
2017
%
2016
%
Australia
Australia
Australia
Australia
Australia
Property investment
Property investment
Property investment
Property investment
Property investment
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
–
100
100
100
100
100
100
–
–
DCSF NZ Trust
New Zealand
Property investment
1 Charter Hall Co-Investment Trust is an entity which was set up by Charter Hall Property Trust to hold its investments in Charter Hall Retail REIT (CQR), Charter
Hall Office Trust (CHOT), BP Fund 1 (BP1), BP Fund 2 (BP2), Core Logistics Partnership (CLP), TTP Wholesale Fund (TTP), Retail Partnership No.6 Trust (RP6),
Charter Hall Prime Retail Fund (CPRF), Brisbane Square Wholesale Fund (BSWF) and Charter Hall Long WALE REIT (CLW).
28 Investments in associates
(a) Carrying amounts
Information relating to associates is set out below. All associates are incorporated and operate in Australia.
Unless otherwise noted all associates have a 30 June year end.
Charter Hall Group
Name of entity
Principal activity
Ownership Interest
Carrying amount
2017
%
2016
%
2017
$’000
2016
$’000
Accounted for at fair value through profit or loss:1
Unlisted
Charter Hall Direct Industrial Fund No.42
Charter Hall Direct PFA Fund
Property investment
Property investment
21.2
0.1
Equity accounted
Unlisted
Charter Hall Prime Office Fund
Charter Hall Office Trust3
Core Logistics Partnership
Charter Hall Prime Industrial Fund
Long WALE Investment Partnership4
Retail Partnership No.2 Trust
Charter Hall Opportunity Fund No.55
Charter Hall Opportunity Fund No.4
Listed
Charter Hall Retail REIT6
Charter Hall Long WALE REIT7
Total investments in associates
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property development
Property development
Property investment
Property investment
10.5
14.3
13.8
6.0
5.0
5.0
100.0
–
18.6
20.0
–
0.1
10.7
14.3
16.1
6.8
–
5.0
16.7
3.0
14.3
–
29,472
218
29,690
236,426
212,859
139,154
117,128
19,011
6,440
–
–
321,171
165,971
1,218,160
1,247,850
–
208
208
183,301
164,107
170,040
94,801
–
6,051
6,337
18
226,716
–
851,371
851,579
1 These investments comprise units in certain unlisted Charter Hall managed funds which have been designated at fair value through profit or loss. Changes in
2
fair values of investments in associates at fair value through profit or loss are recorded in fair value adjustments in the consolidated statement of comprehensive
income. Information about the Charter Hall Group and Charter Hall Property Trust Group’s material exposure to share and unit price risk is provided in Note 24.
Initial acquisition of DIF4 units in December 2016 was settled in a single transaction involving the simultaneous sale of CLP units to DIF4 for $20.0 million offset by
advancing a loan to DIF4 of $9.7 million and acquisition of units for $6.4 million with the balance settled in cash. The loan was repaid progressively in December
2016 and January 2017 and the units redeemed in February 2017. CHC’s current holding of DIF4 units was acquired progressively in April and May 2017.
3 The entity has a 31 December balance date.
4 Reclassified from joint venture to associate on reduction of ownership to 14.8% and a change in voting arrangements. The reduction in ownership was settled by
the sale of LWIP units to Charter Hall Long Wale REIT (CLW) for $152.2 million offset by acquisition of CLW units for $134.2 million with the balance settled in cash.
5 On 25 January 2017, CHL acquired 500 units of CHOF5 to increase the Group’s ownership to 100%. This investment has been consolidated since this date.
6 Fair value at the ASX closing price as at 30 June 2017 was $306.6 million (30 June 2016: $274.5 million).
7 Fair value at the ASX closing price as at 30 June 2017 was $171.2 (30 June 2016: n/a).
Annual Report 2017 91
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28 Investments in associates continued
(a) Carrying amounts continued
Charter Hall Property Trust Group
Ownership Interest
Carrying amount
Name of entity
Principal activity
Accounted for at fair value through profit or loss:
Unlisted
Charter Hall Direct Industrial Fund No.41
Charter Hall Direct PFA Fund
Property investment
Property investment
Equity accounted
Unlisted
Charter Hall Prime Office Fund
Charter Hall Office Trust2
Core Logistics Partnership
Charter Hall Prime Industrial Fund
Long WALE Investment Partnership3
Retail Partnership No.2 Trust
Charter Hall Opportunity Fund No.5
Listed
Charter Hall Retail REIT4
Charter Hall Long WALE REIT5
Total investments in associates
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property development
Property investment
Property investment
2017
%
2016
%
2017
$’000
2016
$’000
21.2
0.1
10.0
14.3
13.8
2.9
5.0
5.0
7.5
18.6
20.0
–
0.1
10.0
14.3
16.1
3.3
–
5.0
–
14.3
–
29,472
218
29,690
223,028
212,859
139,154
56,436
19,011
6,440
3,171
321,171
165,971
1,147,241
1,176,931
–
208
208
171,359
164,107
170,040
46,336
–
6,051
–
226,716
–
784,609
784,817
1
Initial acquisition of DIF4 units in December 2016 was settled in a single transaction involving the simultaneous sale of CLP units to DIF4 for $20.0 million offset by
advancing a loan to DIF4 of $9.7 million and acquisition of units for $6.4 million with the balance settled in cash. The loan was repaid progressively in December 2016
and January 2017 and the units redeemed in February 2017. CHC’s current holding of DIF4 units was acquired progressively in April and May 2017.
2 The entity has a 31 December balance date.
3 Reclassified from joint venture to associate on reduction of ownership to 14.8% and a change in voting arrangements. The reduction in ownership was settled by
the sale of LWIP units to Charter Hall Long Wale REIT (CLW) for $152.2 million offset by acquisition of CLW units for $134.2 million with the balance settled in cash.
4 Fair value at the ASX closing price as at 30 June 2017 was $306.6 million (30 June 2016: $274.5 million).
5 Fair value at the ASX closing price as at 30 June 2017 was $171.2 (30 June 2016: n/a).
(b) Summarised movements in carrying amounts of associates accounted for at fair value through profit or loss
Opening balance
Investment
Net (loss)/gain on investment in associates at fair value
Disposal of units
Gain on disposal
Closing balance
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
208
35,900
(17)
(6,441)
40
29,690
2016
$’000
65,535
–
4,016
(70,321)
978
208
2017
$’000
208
35,900
(17)
(6,441)
40
29,690
2016
$’000
65,535
–
4,016
(70,321)
978
208
92 Charter Hall Group
(c) Summarised movements in carrying amounts of equity accounted associates
Opening balance
Investment
Share of profit after income tax
Distributions received/receivable
Share of movement in reserves
Return of capital
Disposal of units
Transfer of associate acquired as subsidiary1
Transfer from investment in joint ventures2
Closing balance
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
851,371
288,726
192,814
(72,152)
(450)
(32,797)
(19,241)
(7,330)
17,219
2016
$’000
655,980
153,530
123,029
(53,163)
47
(32,176)
–
–
4,124
2017
$’000
784,609
280,899
185,151
(68,173)
(450)
(32,773)
(19,241)
–
17,219
1,218,160
851,371
1,147,241
2016
$’000
592,722
152,890
115,799
(48,797)
47
(32,176)
–
–
4,124
784,609
1 CHOF5 was reclassified in 2017 from associate to controlled entity on increase of ownership to 100%.
2 LWIP was reclassified in 2017 from joint venture to associate on reduction of ownership to 5% and a change in voting arrangements. Retail Partnership No.2
Trust was reclassified in 2016 from joint venture to associate on reduction of ownership to 5% and a change in voting arrangements.
(d) Summarised financial information for material associates
The tables below provide summarised financial information for the associates that are material to CHC and CHPT. Materiality is assessed on
the investments’ contribution to Group income and net assets. The information presented reflects the amounts in the financial statements of
the associates, not the Group’s proportionate share.
2017
Summarised balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Summarised statement of comprehensive income:
Revenue
Profit for the year from continuing operations
Other comprehensive loss
Total comprehensive income
2016
Summarised balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Summarised statement of comprehensive income:
Revenue
Profit for the year from continuing operations
Loss from discontinued operations
Other comprehensive income
Total comprehensive income
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Prime Office
Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Long WALE
REIT
$’000
53,755
2,589,298
57,029
1,098,983
245,048
2,462,227
96,281
936,450
128,299
2,986,262
105,771
742,761
33,450
1,318,442
28,431
321,572
12,157
1,180,468
17,686
357,553
1,487,041
1,674,544
2,266,029
1,001,889
817,386
146,941
523,068
(1)
523,067
215,462
251,271
(2,159)
247,858
202,155
333,745
–
333,745
97,819
101,681
–
101,681
45,550
34,583
–
34,583
235,495
2,120,610
53,726
1,156,704
54,689
2,394,257
92,594
824,074
43,384
2,388,833
66,926
626,083
58,678
1,463,573
39,100
430,200
1,145,675
1,532,278
1,739,208
1,052,951
213,540
288,375
–
1,593
289,968
211,855
180,628
–
–
180,628
159,920
219,488
–
–
219,488
93,206
112,874
–
–
112,874
–
–
–
–
–
–
–
–
–
–
Annual Report 2017 93
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28 Investments in associates continued
(e) Reconciliation of net assets of associates to carrying amounts of equity accounted investments
Charter Hall Group
2017
Net assets of associate
Group’s share in %
Group’s share in $
Other movements not accounted for under
the equity method1
Carrying amount
Movements in carrying amounts:
Opening balance
Investment
Disposal
Share of profit after income tax
Other comprehensive loss
Distributions received/receivable
Return of capital
Closing balance
2016
Net assets of associate
Group’s share in %
Group’s share in $
Other movements not accounted for under
the equity method1
Carrying amount
Movements in carrying amounts:
Opening balance
Investment
Share of profit after income tax
Other comprehensive income/(loss)
Distributions received/receivable
Return on capital
Closing balance
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Prime Office
Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Long WALE
REIT
$’000
1,487,041
14.3
212,647
1,674,544
18.6
311,465
2,266,029
10.5
237,933
1,001,889
13.8
138,261
212
212,859
9,706
321,171
(1,507)
893
236,426
139,154
164,107
–
–
74,799
(8)
(10,309)
(15,730)
212,859
226,716
73,306
–
42,637
(442)
(21,046)
–
321,171
183,301
30,000
–
34,812
–
(11,687)
–
236,426
170,040
–
(19,241)
15,231
–
(9,833)
(17,043)
139,154
1,145,675
14.3
163,832
1,532,278
14.3
219,116
1,739,208
10.7
186,095
1,052,951
16.1
169,525
275
164,107
7,600
226,716
(2,794)
515
183,301
170,040
163,959
–
41,217
228
(9,121)
(32,176)
164,107
146,968
70,890
25,242
(181)
(16,203)
–
226,716
168,603
–
25,023
–
(10,325)
–
183,301
95,712
66,000
17,769
–
(9,441)
–
170,040
817,386
20.0
163,477
2,494
165,971
–
165,428
–
7,192
–
(6,649)
–
165,971
–
–
–
–
–
–
–
–
–
–
–
–
1 Other movements are primarily due to the funds issuing new units to external investors at a price above or below the underlying net assets of the fund or, for
listed investments, where the Group has acquired units on market at a price different to the fund’s NTA.
94 Charter Hall Group
Charter Hall Property Trust
2017
Net assets of associate
Group’s share in %
Group’s share in $
Other movements not accounted for under
the equity method1
Carrying amount
Movements in carrying amounts:
Opening balance
Investment
Disposal
Share of profit after income tax
Other comprehensive loss
Distributions received/receivable
Return of capital
Closing balance
2016
Net assets of associate
Group’s share in %
Group’s share in $
Other movements not accounted for under
the equity method1
Carrying amount
Movements in carrying amounts:
Opening balance
Investment
Share of profit after income tax
Other comprehensive income/(loss)
Distributions received/receivable
Disposal
Closing balance
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Prime Office
Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Long WALE
REIT
$’000
1,487,041
14.3
212,647
1,674,544
18.6
311,465
2,266,029
9.9
224,337
1,001,889
13.8
138,261
212
212,859
9,706
321,171
(1,309)
893
223,028
139,154
164,107
–
–
74,799
(8)
(10,309)
(15,730)
212,859
226,716
73,306
–
42,637
(442)
(21,046)
–
321,171
171,359
30,000
–
32,606
–
(10,937)
–
223,028
170,040
–
(19,241)
15,231
–
(9,833)
(17,043)
139,154
1,145,675
14.3
163,832
1,532,278
14.3
219,116
1,739,208
10.0
173,921
1,052,951
16.1
169,525
275
164,107
7,600
226,716
(2,562)
515
171,359
170,040
163,959
–
41,217
228
(9,121)
(32,176)
164,107
146,968
70,890
25,242
(181)
(16,203)
–
226,716
157,628
–
23,377
–
(9,646)
–
171,359
95,712
66,000
17,769
–
(9,441)
–
170,040
817,386
20.0
163,477
2,494
165,971
–
165,428
–
7,192
–
(6,649)
–
165,971
–
–
–
–
–
–
–
–
–
–
–
–
1 Other movements are primarily due to the funds issuing new units to external investors at a price above or below the underlying net assets of the fund or, for
listed investments, where the Group has acquired units on market at a price different to the fund’s NTA.
Annual Report 2017 95
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28 Investments in associates continued
(f) Summarised financial information and movement in carrying amounts of other equity accounted associates
The following table shows the Group’s share of the summarised profit and loss of equity accounted associates that are not material to the
Group, and a reconciliation of the movement in the aggregated carrying amount of these investments.
Aggregate amount of the Group’s share of:
Profit/(loss) from continuing operations
Total comprehensive income
Movements in aggregate carrying amount:
Opening balance
Reclassification from material associates1
Investment
Share of profit after income tax
Distributions received/receivable
Return of capital
Transfer from investments in joint ventures
Closing balance
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
18,138
18,138
12,406
94,801
19,990
18,138
(12,627)
(7,348)
17,219
2016
$’000
3,340
3,340
5,799
–
640
3,340
(1,497)
–
4,124
142,579
12,406
2017
$’000
12,687
12,687
6,051
46,336
12,161
12,687
(9,396)
–
17,219
85,058
2016
$’000
3,424
3,424
–
–
–
3,424
(1,497)
–
4,124
6,051
1 Charter Hall Prime Industrial Fund was reclassified from material associates during the year, as a result of the listing of the Charter Hall Long WALE REIT during
the year ended 30 June 2017.
(g) Commitments and contingent liabilities of associates
Charter Hall Office Trust’s (CHOT) capital expenditure contracted for at the reporting date but not recognised as liabilities was $18.1 million
(2016: $16.3 million). In addition, CHOT’s share of significant capital expenditure contracted for at the reporting date but not recognised as
liabilities through joint venture entities was $12.1 million (2016: $21.1 million).
CHOT has a contingent liability for a performance fee payable on 30 April 2020. As at 30 June 2017 this is estimated to be $84.6 million.
This amount is reflected in the 30 June 2017 CHOT unit price and reflects 30 June 2017 independent valuations. Valuation movements
between 30 June 2017 and 30 April 2020 will impact the final amount payable. It is noted that the contingent liability of $84.6 million is in
addition to the interim performance fee of $12.9 million paid in May 2017 on sold properties.
Charter Hall Retail REIT (CQR) has entered into contracts for the acquisition, construction and development of properties in Australia.
The commitments of CQR total $203.3 million (2016: $28.0 million). These commitments have not been recognised as liabilities in the
consolidated financial statements of CQR.
Charter Hall Prime Office Fund’s capital expenditure contracted for at the reporting date but not recognised as liabilities was $85.2 million
(2016: $83.8 million) relating to investment properties. These commitments include capital expenditure commitments of $10.6 million
(2016: $25.2 million) relating to property development and $15.6 million relating to property settlements. In addition, the Fund’s share of
the committed expenditure through investments in financial assets at fair value is $110.0 million (2016: $360.2 million).
Core Logistics Partnership’s capital expenditure contracted for at the reporting date but not recognised as liabilities was $33.1 million
(2016: $92.4 million).
Charter Hall Long Wale REIT has a $49.4 million equity commitment to CH DC Fund being the balance owing on partially paid units. In addition,
as at 30 June 2017, the REIT has a commitment under an unconditional agreement to acquire Bunnings, South Mackay QLD for $28.5 million.
Charter Hall Prime Industrial Fund’s capital expenditure contracted for at the reporting date but not recognised as liabilities was
$276.7 million (2016: $102.2 million). In addition, the Fund has a $91.2 million (2016: $96.0 million) equity commitment to CH DC Fund
being the balance owing on partially paid units.
96 Charter Hall Group
29 Investments in joint ventures
(a) Carrying amounts
Information relating to joint ventures is set out below. All joint ventures are incorporated and operate in Australia.
Unless otherwise noted all associates have a 30 June year end.
Charter Hall Group
Name of entity
Principal activity
2017
%
2016
%
2017
$’000
2016
$’000
Ownership interest
Carrying amount
Charter Hall Group
Unlisted
Brisbane Square Wholesale Fund
Charter Hall Prime Retail Fund
Retail Partnership No.6 Trust
Commercial and Industrial Property Pty Ltd
BP Fund 11
BP Fund 21
Long WALE Investment Partnership 2
TTP Wholesale Fund (TTP)1
CIP CH (Bringelly) Pty Limited
Long WALE Investment Partnership2
CH DC Fund
Property investment
Property investment
Property investment
Property development
Property investment
Property investment
Property investment
Property investment
Property development
Property investment
Property development
16.8
38.0
20.0
50.0
8.4
13.2
10.0
10.0
50.0
–
–
–
–
20.0
50.0
10.0
13.2
10.0
10.0
–
50.0
26.0
99,594
44,834
34,251
19,450
28,443
13,793
10,108
7,997
–
–
–
258,470
–
–
32,249
28,463
23,767
14,992
8,433
7,603
–
165,246
4,603
285,356
1 These funds comprise the Long WALE Hardware Partnership. During the period there was a $2.0 million capital distribution from BP Fund 2 which was settled
by a simultaneous capital call in the BP Fund.
2 Reclassified from joint venture to associate on reduction of ownership to 5.0% and a change in voting arrangements. The reduction in ownership was settled by
the sale of LWIP units to CLW for $152.2 million offset by acquisition of CLW units for $134.2 million with the balance settled in cash.
Charter Hall Property Trust Group
Name of entity
Unlisted
Brisbane Square Wholesale Fund
Charter Hall Prime Retail Fund
Retail Partnership No.6 Trust
BP Fund 11
BP Fund 21
Long WALE Investment Partnership 2
TTP Wholesale Fund (TTP)1
Long WALE Investment Partnership2
CH DC Fund
Ownership interest
Carrying amount
Principal activity
2017
%
2016
%
2017
$’000
2016
$’000
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property development
16.8
38.0
20.0
8.4
13.2
10.0
10.0
–
–
–
–
20.0
10.0
13.2
10.0
10.0
50.0
26.0
99,594
44,834
34,251
28,443
13,793
10,108
7,997
–
–
239,020
–
–
32,249
23,767
14,992
8,433
7,603
165,246
4,603
256,893
1 These funds comprise the Long WALE Hardware Partnership. During the period there was a $2.0 million capital distribution from BP Fund 2 which was settled
by a simultaneous capital call in the BP Fund.
2 Reclassified from joint venture to associate on reduction of ownership to 5.0% and a change in voting arrangements. The reduction in ownership was settled by
the sale of LWIP units to CLW for $152.2 million offset by acquisition of CLW units for $134.2 million with the balance settled in cash.
Annual Report 2017 97
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
29 Investments in joint ventures continued
(b) Summarised financial information and movements in carrying amounts
Movements in aggregate carrying amount:
Opening balance
Investment
Share of profit after income tax
Distributions received/receivable
Impairment of carrying amount
Return of capital
Disposal of units
Transfer to investments in associates
Closing balance
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
2017
$’000
2016
$’000
285,356
149,679
14,378
(8,500)
(10,494)
(1,973)
(152,757)
(17,219)
258,470
257,885
52,334
45,255
(20,940)
–
(198)
(44,856)
(4,124)
285,356
256,893
149,679
12,883
(8,486)
–
(1,973)
(152,757)
(17,219)
239,020
227,867
22,945
42,106
(16,236)
–
(198)
(15,467)
(4,124)
256,893
The Group’s investment in Commercial and Industrial Property Pty Ltd was impaired to its recoverable amount of $19.5 million, which was
determined by reference to the investment’s fair value less costs of disposal. The main valuation inputs used were an EBIT of $8.9 million
and earnings multiple of 8.1 times.
(c) Commitments and contingent liabilities of joint ventures
BP Fund 1’s capital commitments contracted for at the reporting date but not recognised as liabilities was $178.3 million (2016: $39.6 million)
estimated to settle in September 2017.
BP Fund 2’s capital commitments contracted for at the reporting date but not recognised as liabilities was $70.9 million (2016: $nil)
estimated to settle in September 2017.
30 Interests in unconsolidated structured entities
The Charter Hall Group considers its investments in associates and joint ventures to be unconsolidated structured entities. An unconsolidated
structured entity is an entity where the Group’s voting rights are not the sole factor in determining whether control over an entity exists.
Where the Group determines that control over an entity does not exist, the entity is recognised as an associate or joint venture of the Group
for reporting purposes.
The activity and objective of the unconsolidated structured entities of the Group include property investment for annuity income and medium
to long-term capital growth and/or development profit.
98 Charter Hall Group
The aggregate of all the Group’s interests and maximum exposure to loss in unconsolidated structured entities, being the Group’s interests in
associates and joint ventures, are included in the table below:
Current assets
Trade receivables
Distributions receivable
Loans to associates and joint ventures
Investments accounted for using the equity method
Total current assets
Non-current assets
Investments in associates at fair value through profit or loss
Investments accounted for using the equity method
Total non-current assets
Total carrying amount of interests in unconsolidated
structured entities
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
1,025
27,432
9,250
144
37,851
2016
$’000
508
24,379
6,500
–
31,387
2017
$’000
–
26,344
–
–
26,344
2016
$’000
–
21,768
–
–
21,768
29,690
1,477,295
208
1,136,727
29,691
1,376,432
208
1,041,502
1,506,985
1,136,935
1,406,123
1,041,710
1,544,836
1,168,322
1,432,467
1,063,478
Total funds under management in unconsolidated structured entities
18,388,650
14,462,645
18,375,700
14,294,852
There are no additional arrangements that would expose the Charter Hall Group or Charter Hall Property Trust Group to losses beyond the
carrying amounts.
During the year, the Charter Hall Group earned fees from structured entities in its capacity as investment manager. Refer to Note 26 for
further information.
No financial support has been provided to the funds beyond the loans disclosed in the above table.
31 Commitments
(a) Lease commitments – Group as lessee
Due within one year
Due between one and five years
Over five years
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
3,445
14,372
6,411
24,228
2016
$’000
3,943
14,186
10,353
28,482
2017
$’000
2016
$’000
–
–
–
–
–
–
–
–
Commitments are payable in relation to non-cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities.
Annual Report 2017 99
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
31 Commitments continued
Capital commitments
Charter Hall Group
The Group had no contracted capital commitments as at 30 June 2017 (30 June 2016: $nil).
Charter Hall Property Trust Group
The Trust Group had no contracted capital commitments as at 30 June 2017 (30 June 2016: $nil).
32 Contingent liabilities
The Group did not have any contingent liabilities as at 30 June 2017 (30 June 2016: $nil) other than the bank guarantees of $14.3 million
provided for under the bank facility (refer to Note 18(a)).
33 Security-based benefits expense
(a) Charter Hall – Performance Rights and Options Plan (PROP)
The performance rights and options are unquoted securities and conversion to stapled securities and vesting to executives are subject to
service and performance conditions which are discussed in the Remuneration Report.
Charter Hall Group and Charter Hall Property Trust Group
2014
Number
2015
Number
2016
Number
2017
Number
Total
Number
1,422,660
–
–
–
–
1,051,804
–
–
–
–
1,085,276
–
1,422,660
1,051,804
1,085,276
–
–
–
998,453
998,453
1,422,660
1,051,804
1,085,276
998,453
4,558,193
(131,633)
(845,509)
(72,713)
(60,851)
(54,138)
(151,443)
–
(121,270)
(258,484)
(1,179,073)
–
(445,518)
–
–
–
–
–
–
–
(445,518)
–
918,240
879,695
877,183
2,675,118
403,582
–
–
–
403,582
(4,699)
–
–
554,401
–
–
554,401
–
–
409,195
–
409,195
–
–
–
344,548
344,548
403,582
554,401
409,195
344,548
1,711,726
–
–
–
(10,422)
–
(16,616)
(4,699)
(27,038)
(398,883)
–
–
(244,306)
(244,305)
65,790
(19,295)
(200,114)
179,364
–
–
327,932
(662,484)
(444,419)
573,086
Performance rights
Rights issued 22/11/13
Rights issued 19/12/14
Rights issued 30/11/15
Rights issued 25/11/16
Performance rights issued
Number of rights forfeited/lapsed
Prior years
Current year
Number of rights vested
Prior years
Current year
Closing balance
Service rights
Rights issued 22/11/13
Rights issued 19/12/14
Rights issued 30/11/15
Rights issued 25/11/16
Service rights issued
Number of rights forfeited/lapsed
Prior years
Current year
Number of rights vested
Prior years
Current year
Closing balance
100 Charter Hall Group
(b) PROP expense
Total expenses related to the PROP recognised during the year as part of employee benefit expense were as follows:
Performance rights and option plan
Charter Hall Group
Charter Hall Property
Trust Group
2017
$’000
1,414
2016
$’000
2,081
2017
$’000
–
2016
$’000
–
All PROP expenses were recognised in operating expenses during the year (2016: $0.7 million of operating expenses and $1.4 million of
non-operating expenses).
(c) Option inputs
The Black-Scholes or Monte Carlo method, as applicable, is utilised for valuation and accounting purposes. The model inputs for the PROP
issued during FY 2014 through FY 2017 to assess the fair value are as follows:
Performance rights
Grant date
Stapled security price at grant date
Opening TSR measurement price
Fair value of right
Expected price volatility
Risk-free interest rate
Service rights
Grant date
Stapled security price at grant date
Fair value of right
Expected price volatility
Risk-free interest rate
20/11/2013
20/11/2013
19/12/2014
30/11/2015
25/11/2016
$ 3.68
$ 2.34
$ 1.42
30.4%
2.9%
$ 3.68
$ 3.89
$ 1.11
30.4%
3.0%
$ 4.68
$ 4.23
$ 2.09
30.4%
2.5%
$ 4.47
$ 4.64
$ 1.41
24.0%
2.1%
$ 4.55
$ 5.11
$ 1.39
21.2%
1.9%
20/11/2013
19/12/2014
19/12/2014
30/11/2015
25/11/2016
$ 3.68
$ 3.42
27.4%
2.6%
$ 4.68
$ 4.28
26.5%
2.5%
$ 4.68
$ 4.36
24.6%
2.5%
$ 4.47
$ 4.37
25.4%
2.0%
$ 4.55
$ 4.26
21.8%
1.8%
(d) Charter Hall General Employee Security Plan (GESP)
During the year, eligible employees received up to $1,000 (2016: $1,000) in stapled securities which vested immediately on issue but
are held in trust until the earlier of the completion of three years’ service or termination. An expense of $350,000 (2016: $325,000) was
recognised in relation to this plan during the year.
34 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity of the Charter Hall Group, being Charter Hall Limited, and the Charter Hall Property
Trust Group, being the Charter Hall Property Trust, show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Accumulated losses
Net equity
Profit/(loss) for the year
Total comprehensive profit/(loss) for the year
Charter Hall Group
2017
$’000
8,986
177,539
85,899
85,899
2016
$’000
8,036
204,671
116,507
116,507
Charter Hall Property
Trust Group
2017
$’000
2016
$’000
62,631
1,300,926
56,276
1,081,246
73,166
73,166
56,557
56,557
232,123
(140,483)
204,049
(115,884)
1,456,853
(229,093)
1,201,359
(176,670)
91,640
20,013
20,013
88,165
1,227,760
1,024,689
(3,572)
(3,572)
52,729
52,729
58,721
58,721
Annual Report 2017 101
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
34 Parent entity financial information continued
(a) Summary financial information continued
Notwithstanding the net current liability, Charter Hall Limited has been prepared on a going concern basis. Charter Hall Limited has net
assets of $91.6 million and substantial cash and cash equivalents, held within Charter Hall Holdings Pty Ltd (CHH) with which Charter Hall
Limited is party to a deed of cross guarantee (refer to note 35), to support liquidity.
Notwithstanding the net current liability, Charter Hall Property Trust has been prepared on a going concern basis. Charter Hall Property Trust
has total net assets of $1.2 billion, and liquidity through the inter-staple loan with Charter Hall Limited.
(b) Contingent liabilities of the parent entity
Charter Hall Limited and Charter Hall Property Trust had no contingent liabilities as at 30 June 2017 (30 June 2016: $nil) other than the bank
guarantees of $14.3 million provided for under the bank facility held by Charter Hall Property Trust (refer to Note 18(a)).
(c) Contractual commitments
As at 30 June 2017, Charter Hall Limited and Charter Hall Property Trust had no contractual commitments (2016: $nil).
35 Deed of cross guarantee
Charter Hall Group
Charter Hall Limited and its wholly owned subsidiary, Charter Hall Holdings Pty Ltd (CHH), are parties to a deed of cross guarantee
under which each company guarantees the debts of the other. By entering into the deed, CHH has been relieved from the requirement
to prepare financial statements and a directors’ report under ASIC Instrument 2016/785 issued by the Australian Securities and
Investments Commission.
(a) Consolidated statement of comprehensive income and summary of movements in consolidated accumulated losses
The above companies represent a ‘closed group’ for the purposes of the Instrument and, as there are no other parties to the deed of cross
guarantee that are controlled by Charter Hall Limited, they also represent the ‘extended closed group’.
Set out as follows is a consolidated statement of comprehensive income and a summary of movements in consolidated accumulated losses
for the year of the closed group consisting of Charter Hall Limited and Charter Hall Holdings Pty Ltd.
Statement of comprehensive income
Revenue
Depreciation
Finance costs
Foreign exchange (loss)/gain
Share of net gain of associates accounted for using the equity method
Amortisation and impairment of intangibles
Other expenses
Profit/(loss) before income tax
Income tax benefit
Profit/(loss) for the year
Summary of movements in consolidated accumulated losses
Accumulated losses at the beginning of the financial year
Profit for the year
Accumulated losses at the end of the financial year
2017
$’000
205,729
(3,475)
(9,947)
(156)
2,493
(5,142)
(131,154)
58,348
(23,614)
34,734
(99,557)
34,734
(64,823)
Restated
2016
$’000
145,055
(2,604)
(12,937)
153
3,066
(8,517)
(106,217)
17,999
545
18,544
(118,101)
18,544
(99,557)
102 Charter Hall Group
(b) Balance sheet
Set out below is a consolidated balance sheet of the closed group consisting of Charter Hall Limited and Charter Hall Holdings Pty Ltd.
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Trade and other receivables
Investments accounted for using the equity method
Investment in associates at fair value through profit or loss
Investments in controlled entities
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Loans from Charter Hall Property Trust
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
2017
$’000
Restated
2016
$’000
117,466
44,756
162,222
824
59,078
15,074
55,662
18,764
65,400
214,802
377,024
46,695
1,892
48,587
6,479
129,665
7,358
1,303
144,805
193,392
183,633
291,405
(42,948)
(64,824)
183,633
92,912
35,989
128,901
829
34,819
15,074
49,662
14,855
69,743
195,847
324,748
25,000
1,680
26,680
5,193
158,398
4,048
1,334
179,838
206,518
118,230
263,320
(45,533)
(99,557)
118,230
36 Events occurring after the reporting date
The following event has occurred subsequent to 30 June 2017:
•
In August 2017, the CHPT $125 million debt facility was extended by two years with the maturity date changing to August 2020.
Except for the matters discussed above, no other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or
may significantly affect:
(a) The Group’s operations in future financial years; or
(b) The results of those operations in future financial years; or
(c) The Group’s state of affairs in future financial years.
Annual Report 2017 103
DIRECTORS’ DECLARATION TO SECURITYHOLDERS
FOR THE YEAR ENDED 30 JUNE 2017
In the opinion of the Directors of Charter Hall Limited (Company), and the Directors of the Responsible Entity of Charter Hall Property Trust
(Trust), Charter Hall Funds Management Limited (collectively referred to as the Directors):
(a) the financial statements and notes of Charter Hall Limited and its controlled entities including Charter Hall Property Trust and its
controlled entities (Charter Hall Group) and Charter Hall Property Trust and its controlled entities (Charter Hall Property Trust Group) set
out on pages 53 to 103 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 Charter Hall Group’s and Charter Hall Property Trust Group’s financial position as at 30 June 2017 and of
their performance for the year ended on that date; and
(b) there are reasonable grounds to believe that both Charter Hall Limited and the Charter Hall Property Trust will be able to pay their debts
as and when they become due and payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in
Note 35 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in Note 35.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The Directors have been given the declarations by the Managing Director and Group CEO and Joint Acting Chief Financial Officers required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
David Clarke
Chair
Sydney
23 August 2017
104 Charter Hall Group
INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Independent auditor’s report
To the securityholders of Charter Hall Limited and Charter Hall Property Trust
Report on the audit of the financial reports
Our opinion
In our opinion:
The accompanying financial reports of Charter Hall Group and Charter Hall Property Trust Group are
in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of Charter Hall Group's and Charter Hall Property Trust Group’s
financial positions as at 30 June 2017 and of their financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
We have audited the accompanying financial reports of Charter Hall Group and Charter Hall Property
Trust Group which comprise:
the consolidated balance sheets as at 30 June 2017
the consolidated statements of comprehensive income for the year then ended
the consolidated statement of changes in equity – Charter Hall Group for the year then ended
the consolidated statement of changes in equity – Charter Hall Property Trust Group for the
year then ended
the consolidated cash flow statements for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration for Charter Hall Group and Charter Hall Property Trust Group.
The Charter Hall Group comprises Charter Hall Limited and the entities it controlled at year’s end or
from time to time during the financial year and Charter Hall Property Trust and the entities it
controlled at year’s end or from time to time during the financial year. The Charter Hall Property Trust
Group comprises Charter Hall Property Trust and the entities it controlled at year’s end or from time
to time during the financial year.
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
reports section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Annual Report 2017 105
INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Independence
We are independent of Charter Hall Group and Charter Hall Property Trust 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 reports in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial reports as a whole, taking into account the operational and management
structure of Charter Hall Group and Charter Hall Property Trust Group, their accounting processes
and controls and the industry in which they operate.
Materiality
For the purpose of our audit of Charter Hall Group we used overall materiality of $7.5 million, which
represents approximately 5% of Charter Hall Group’s operating earnings.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
We chose operating earnings (an adjusted profit metric) as the benchmark because, in our view, it is a
generally accepted industry metric against which the performance of Charter Hall Group is regularly
measured.
We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable profit-related materiality thresholds.
Audit Scope
Our audit focused on where the directors made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
The group audit team identified separate components of Charter Hall Group and Charter Hall Property Trust
106 Charter Hall Group
Group representing individually financially significant equity accounted investments and instructed
component audit teams to perform audit procedures on those components.
At the group level, procedures were performed over group transactions, other financial statement line items
and financial report disclosures.
The work performed by component audit teams, together with the additional procedures performed at the
group level provided us with sufficient evidence for our opinion on the financial reports as a whole.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial reports for the current period. The key audit matters were addressed in the
context of our audit of the Charter Hall Group and Charter Hall Property Trust Group financial reports
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters. Further, any commentary on the outcomes of a particular audit procedure is made in that
context. We communicated the key audit matters to the Audit, Risk and Compliance Committee.
Key audit matter
How our audit addressed the key audit matter
Investments accounted for using the equity
method
(Refer to note 11)
Charter Hall Group and Charter Hall Property Trust
Group invest in certain underlying funds managed by the
Charter Hall Group. These funds comprise listed and
unlisted funds which invest in a range of office,
industrial, retail and diversified property portfolios.
These investments are typically classified as Associates or
Joint Ventures as the investor is considered to have
significant influence or joint control. Charter Hall Group
also holds an equity accounted investment in an unlisted
property development company, Commercial and
Industrial Property Pty Limited (CIP).
Investments in Associates and Joint Ventures contribute
a significant proportion of total income and total assets.
Given the significance of these investments to the results
and balance sheets, we consider this to be a key audit
matter. These investments are presented in the
Consolidated Statements of Comprehensive Income and
Consolidated Balance Sheets respectively as follows:
Share of net profit of investments accounted for
using the equity method (Charter Hall Group
$207 million and Charter Hall Property Trust
Group $198 million)
Investments accounted for using the equity
method (Charter Hall Group $1,477 million and
Charter Hall Property Trust Group $1,386
million).
To assess the carrying amount and classification of
Investments accounted for using the equity method
our audit included the following procedures:
Updating our understanding of market
conditions relating to the investments and
discussing with management the particular
circumstances affecting the investments
Reperforming the equity method of accounting
calculations for a sample of material
investments by reference to underlying investee
financial information
For a sample of material acquisitions made
during the year, we agreed transaction details to
appropriate source documents and considered
the relevant accounting classification of the
investment in accordance with Australian
Accounting Standards
Assessed the carrying value of a sample of
equity accounted investments for impairment
indicators by reference to the investor’s share of
the investee’s net assets or market capitalisation
for listed investments as appropriate.
Together with PwC internal valuation experts we
considered the Group’s impairment assessment of its
investment in CIP and assessed the key estimates and
assumptions adopted by the Group in performing
Annual Report 2017 107
INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Key audit matter
How our audit addressed the key audit matter
Australian Accounting Standards require that these
investments are initially recognised at cost and adjusted
thereafter for the post-acquisition change in the
investor’s share of the investee’s total comprehensive
income and distributions.
Revenue recognition - Charter Hall Group
(Refer to note 4)
Charter Hall Group revenue for the year ended 30 June
2017 was $213 million. This revenue is substantially
derived from funds management activities and comprises
recurring and non-recurring fee revenue.
Recurring fee revenue includes fund management fees,
property management fees and expense recoveries. Non-
recurring fee revenue includes transaction and
performance fees.
We considered revenue recognition to be a key audit
matter due to the:
increased judgement and complexity in relation to
the recognition and measurement of performance
fees
financial significance of revenue to the Charter Hall
Group results.
Intangible assets – management rights –
Charter Hall Group
(Refer to note 13)
Charter Hall Group’s intangible assets comprise
management rights in relation to four of the Group’s
managed funds. These assets had a carrying value of $65
million at 30 June 2017.
Other than the Charter Hall Office Trust management
rights, these management rights are considered to have
indefinite useful lives and accordingly an annual
impairment test is required by Australian Accounting
Standards.
Charter Hall Group performed an impairment test for
each of the management rights assets with indefinite
useful lives by calculating the value in use of each asset.
These tests require judgement in relation to key
assumptions which are applied to future revenue
forecasts. The key assumptions used include growth
rates, discount rates and terminal value multipliers. As a
that assessment.
Our procedures included evaluating the design and
implementation of relevant controls relating to the
recognition and measurement of revenue.
We recalculated revenue for a sample of fees based on
management agreements or trust constitutions and
traced a sample of receipts to bank statements as
appropriate.
For a sample of impairment tests performed by the
Charter Hall Group over management rights assets
with indefinite useful lives, our audit included the
following procedures:
We evaluated cash flow forecasts and the
process by which they were developed,
including performing tests over the
mathematical accuracy of the underlying
calculations and comparing forecasts to
approved budgets
We compared the current year (2017) results
with figures included in the forecasts made in
the prior period (2016) to assess the historical
reliability of management’s forecasting process
We obtained input from PwC valuation experts
and considered the methodology applied and
assessed the appropriateness of key
108 Charter Hall Group
Key audit matter
How our audit addressed the key audit matter
assumptions used.
We also considered whether there were any
impairment indicators in relation to the Group’s
management rights held over the Charter Hall Office
Trust by reference to the underlying performance of
the Fund and related fee revenue.
result of the judgement required in determining key
assumptions, we considered this to be a key audit matter.
The impairment tests performed by Charter Hall Group
at 30 June 2017 supported the carrying value of each
management rights asset.
The Charter Hall Group also performed an assessment of
the carrying amount of the management rights in relation
to Charter Hall Office Trust for impairment indicators at
30 June 2017 and determined that there were no
impairment indicators.
Other information
The directors are responsible for the other information. The other information comprises the
Directors’ Report (but does not include the financial report and our auditor’s report thereon), which
we obtained prior to the date of this auditor's report. We also expect other information which will be
included in the Annual Report to be made available to us after the date of this auditor’s report,
including the Chair’s Report, MD and Group CEO’s letter, Corporate Governance Statement,
Securityholder Analysis and other information on the performance of the Group for the year.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above 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 on the other information that we obtained prior to the date of
this auditor’s report, 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.
When we read the other information not yet received as identified above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use
our professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial reports
The directors of Charter Hall Limited and the directors of Charter Hall Funds Management Limited,
the Responsible Entity of Charter Hall Property Trust (collectively referred to as “the directors”) are
responsible for the preparation of financial reports that give 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 financial reports that give a true and fair
view and are free from material misstatement, whether due to fraud or error.
Annual Report 2017 109
INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
In preparing the financial reports, the directors are responsible for assessing the groups’ ability 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 Groups or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial reports
Our objectives are to obtain reasonable assurance about whether the financial reports as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinions. 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/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 18 to 33 of the directors’ report for the
year ended 30 June 2017.
35
49
In our opinion, the remuneration report of Charter Hall Limited for the year ended 30 June 2017
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of Charter Hall Limited are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Wayne Andrews
Partner
Sydney
23 August 2017
110 Charter Hall Group
SECURITYHOLDER ANALYSIS
A. Distribution of equity stapled securityholders as at 26 September 2017
Range
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable
Stapled
Securities held
% of issued
stapled securities
No. of Holders
447,770,271
2,805,002
7,254,256
3,896,426
3,638,577
412,599
465,777,131
3,274
96.13
0.60
1.56
0.84
0.78
0.09
100.00
0.00
56
42
387
539
1,273
1,165
3,462
336
B. Top 20 registered equity securityholders as at 26 September 2017
Rank Name
A/C designation
Stapled
securities held
%IC
of issued
securities
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
AMP LIFE LIMITED
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED
MUTUAL TRUST PTY LTD
MILTON CORPORATION LIMITED
BNP PARIBAS NOMS (NZ) LTD
PORTMIST PTY LIMITED
IOOF INVESTMENT MANAGEMENT LIMITED
RBC INVESTOR SERVICES AUSTRALIA
NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED-GSCO ECA
BOND STREET CUSTODIANS LIMITED
SBN NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED – A/C 3
Total
Balance of register
Grand total
<10004 ACCOUNT>
170,332,331
121,758,581
45,649,429
43,109,586
18,155,801
13,387,803
5,140,251
4,518,097
3,859,101
1,748,021
1,617,000
1,465,775
1,441,773
1,371,554
1,298,788
1,198,456
1,121,573
868,800
767,259
726,994
439,536,973
26,240,158
465,777,131
36.57
26.14
9.80
9.26
3.90
2.87
1.10
0.97
0.83
0.38
0.35
0.31
0.31
0.29
0.28
0.26
0.24
0.19
0.16
0.16
94.37
5.63
100.00
C. Substantial securityholder notices as at 26 September 2017
Ordinary securities
Cohen & Steers Inc and bodies controlled by Cohen & Steer, Inc.
The Vanguard Group
Commonwealth Bank of Australia
FIL Limited
Date of change
8 Sep 17
23 Sep 2016
23 Sep 2016
23 Jun 2016
Stapled
securities held
%
securities held
23,518,073
24,384,021
24,252,576
36,777,962
5.05
5.91
5.87
8.91
Annual Report 2017 111
INVESTOR INFORMATION
How do I invest in Charter Hall?
Charter Hall Group securities are listed on the Australian Securities
Exchange (ASX:CHC).
Securityholders will need to use the services of a stockbroker or an
online broking facility to invest in Charter Hall.
Where can I find more information about
Charter Hall?
Charter Hall’s website, www.charterhall.com.au contains extensive
information on our Board and management team, corporate
governance, sustainability, our property portfolio and all investor
communications including distribution and tax information, reports
and presentations. The website also provides information on the
broader Charter Hall Group including other managed funds available
for investment. You can also register your details on our website
to receive ASX announcements by an email alert as they are
being released. To register your details, please visit our website at
www.charterhall.com.au and subscribe to updates.
Can I receive my Annual Report electronically?
Charter Hall provides its annual report in both PDF and online
formats (HTML). You can elect via the Investor Login facility on our
website to receive notification that this report is available online.
Alternatively, you can elect to receive the report in hard copy.
How do I receive payment of my distribution?
Charter Hall Group pays its distribution via direct credit. This enables
you to receive automatic payment of your distributions quickly and
securely. You can nominate any Australian or New Zealand bank,
building society, credit union or cash management account for direct
payment by downloading a direct credit form using the Investor
Login facility and sending it to Link Market Services. On the day of
payment, you will be sent a statement via post or email confirming
that the payment has been made and setting out details of the
payment. The Group no longer pays distributions by cheque.
Can I reinvest my distribution?
When operating, the Distribution Reinvestment Plan (DRP) allows
you to have your distributions reinvested in additional securities in
Charter Hall, rather than having your distributions paid to you. If you
would like to participate in the DRP, you can do so online using the
Investor Login facility available on our website, or you can complete
a DRP Application Form available from our registry.
Do I need to supply my Tax File Number?
You are not required by law to supply your Tax File Number (TFN),
Australian Business Number (ABN) or exemption. However, if you do
not provide these details, withholding tax may be deducted at the
highest marginal rate from your distributions. If you wish to provide
your TFN, ABN or exemption, please contact Link Market Services
on 1300 303 063 or your sponsoring broker. You can also update
your details directly using the Investor Login facility on our website.
How do I complete my annual tax return for the
distributions I receive from Charter Hall?
At the end of each financial year, we issue securityholders with an
Annual Taxation Statement. This statement includes information
required to complete your tax return. The distributions paid in
February and August are required to be included in your tax return
for the financial year the income was earned, that is, the distribution
income paid in August 2017 should be included in your 2017
financial year tax return.
How do I make a complaint?
Securityholders wishing to lodge a complaint should do so in writing
and forward it to the Compliance Manager, Charter Hall Group at the
address shown in the Directory. In the event that a complaint cannot
be resolved within a reasonable timeframe (usually 45 days) or you
are not satisfied with our response, you can seek assistance from
the Financial Ombudsman Service (FOS), an independent dispute
resolution scheme available to those investors who have first raised
their complaint with us and who remain dissatisfied. FOS’s contact
details are below:
Financial Ombudsman Service
GPO Box 3
Melbourne VIC 3001
Tel: 1300 780 808
Fax: + 61 3 9613 6399
Email: info@fos.org.au
Web: www.fos.org.au
112 Charter Hall Group
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CONTACT DETAILS
CORPORATE DIRECTORY
Registry
To access information on your holding or update/
change your details including name, address, tax file number,
payment instructions and document requests, contact:
Directors
David Clarke (Chair), Anne Brennan, Philip Garling,
David Harrison, Karen Moses and David Ross
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Tel:
1300 303 063 (within Australia)
+61 2 8280 7134 (outside Australia)
Fax: +61 2 9287 0303
Email: charterhall.reits@linkmarketservices.com.au
Web: www.linkmarketservices.com.au
Investor Relations
All other enquiries related to Charter Hall Group
can be directed to Investor Relations:
Charter Hall Group
GPO Box 2704
Sydney NSW 2001
Tel:
1300 365 585 (local call cost)
+61 2 8651 9000 (outside Australia)
Fax: +61 2 9221 4655
Email: reits@charterhall.com.au
Web: www.charterhall.com.au
Company Secretary
Mark Bryant
ASX Code
Charter Hall Group stapled securities are listed on the
Australian Securities Exchange (ASX: CHC).
Principal registered office in Australia
Level 20, No.1 Martin Place
Sydney NSW 2000
Tel:
+61 2 8651 9000
Auditor
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay, Barangaroo
Sydney NSW 2000
Important notice
This Annual Report has been prepared and issued by Charter Hall
Limited (ABN 57 113 531 150) and Charter Hall Funds Management
Limited (ABN 31 082 991 786 AFSL 262861) (CHFML) as Responsible
Entity of the Charter Hall Property Trust (together, the Charter Hall
Group or the Group). The information contained in this report has been
compiled to comply with legal and regulatory requirements and to assist
the recipient in assessing the performance of the Group independently
and does not relate to, and is not relevant for, any other purpose.
This report is not intended to be and does not constitute an offer
or a recommendation to acquire any securities in the Charter
Hall Group. This report does not take into account the personal
objectives, financial situation or needs of any investor. Before
investing in Charter Hall Group securities, you should consider your
own objectives, financial situation and needs and seek independent
financial, legal and/or taxation advice. Historical performance is not
a reliable indicator of future performance. Due care and attention
has been exercised in the preparation of forward looking statements.
However, any forward looking statements contained in this report
are not guarantees or predictions of future performance and, by their
very nature, are subject to uncertainties and contingencies, many of
which are outside the control of the Group. Actual results may vary
materially from any forward looking statements contained in this
report. Readers are cautioned not to place undue reliance on any
forward looking statements. Except as required by applicable law,
the Group does not undertake any obligation to publicly update or
review any forward looking statements, whether as a result of new
information or future events.
The receipt of this report by any person and any information
contained herein or subsequently communicated to any person
in connection with the Charter Hall Group is not to be taken as
constituting the giving of investment, legal or tax advice by the
Charter Hall Group nor any of their related bodies corporate, directors
or employees to any such person. Neither the Charter Hall Group,
their related bodies corporate, directors, employees nor any other
person who may be taken to have been involved in the preparation
of this report represents or warrants that the information contained
in this report, provided either orally or in writing to a recipient in the
course of its evaluation of the Charter Hall Group or the matters
contained in this report, is accurate or complete.
CHFML does not receive fees in respect of the general financial
product advice it may provide; however, entities within the Charter
Hall Group receive fees for operating the Charter Hall Property Trust
in accordance with its constitution. Entities within the Group may
also receive fees for managing the assets of, and providing resources
to the Charter Hall Property Trust. All information herein is current
as at 30 June 2016 unless otherwise stated. All references to dollars
($) or A$ are Australian Dollars unless otherwise stated.
Information regarding US Investors/US Persons:
Each person that holds Charter Hall Group securities that is in the
United States (US) or is a US Person is required to be a Qualified
Institutional Buyer/Qualified Purchaser (QIB/QP) at the time of the
acquisition of any Charter Hall Group securities, and is required to
make the representations in the confirmation letter or subscription
agreement as of the time it acquired the applicable securities.
The securities can only be resold or transferred in a regular brokered
transaction on the ASX in accordance with Rule 903 or 904 of
Regulation S, where neither it nor any person acting on its behalf
knows or has reason to know, that the sale has been prearranged
with, or that the purchaser is, in the United States or a US Person
(e.g. no prearranged trades (‘special crossing’) with US Persons or
other off-market transactions). To the maximum extent permitted
by law, the Charter Hall Group reserves the right to (i) request any
person that they deem to be in the United States or a US Person,
who was not at the time of acquisition of the securities a QIB/QP, to
sell its securities, (ii) refuse to record any subsequent sale or transfer
of securities to a person in the United States or a US Person, and
(iii) take such other action as they deem necessary or appropriate
to enable the Charter Hall Group to maintain the exception from
registration under Section 3(c)(7) of the Investment Company Act.
If you are not the beneficial owner of securities in the Charter Hall
Group, you must pass this information to the beneficial owner of
the securities.
Complaints handling
A formal complaints handling procedure is in place for the Group.
CHFML is a member of the Financial Ombudsman Service (FOS).
Complaints should in the first instance be directed to CHFML.
If you have any enquiries or complaints, please contact the
Compliance Manager on +61 2 8651 9000.
© Charter Hall
www.charterhall.com.au