Charter Hall
Group
Annual Report
2020
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Contents
Strategy
Purpose
FY20 performance highlights
Chair letter
Managing Director & Group
CEO letter
Capital sources
Industrial & Logistics
Long WALE Retail
Office
Convenience Retail
Social Infrastructure
Direct
Sustainability
Leadership
Directors’ report and
financial report
Securityholder analysis
Investor information
Contact details
Corporate directory
To view our Corporate
Governance Statement, go
to charterhall.com.au/about-
us/corporate-governance
With over 29 years’ experience, Charter Hall
Group (CHC or the Group) is one of Australia’s
leading fully integrated property groups.
With a reputation for resilience, we use our property expertise to
access, deploy, manage and invest equity across the core sectors
of office, industrial & logistics, retail and social infrastructure.
Our integrated offering and approach to partnership means that as
both investor and manager, we can build value and deliver solutions
designed for long term success, across market cycles.
Cover image:
Wesley Place, 130 Lonsdale Street,
Melbourne VIC
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3
Charter Hall Group Annual Report 2020
Strategy
We use our property expertise to access, deploy, manage
and invest in our core real estate sectors to create
value and generate superior returns for customers.
ALDI Distribution Centre,
Prestons NSW
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.
1 YEAR
Gross equity
raised
$5.1bn
Gross
transactions
$8.3bn
Funds under
management (FUM)
Increase in property
investment (PI)
to $2.0bn
$40.5bn
$184m
↑33.2%
↑10.0%
Acquisitions
Properties
1,104
$7.3bn
Divestments
$1.0bn
5 YEARS
Gross equity
raised
Gross
transactions
FUM
growth
$14.0bn
$25.8bn
$27.0bn
Acquisitions
$19.9bn
Divestments
$5.8bn
Total property
investment return
10.0%
Increase
in PI
$1.1bn
↑114.8%
Total property
investment return
13.1%
Strategy
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5
Charter Hall Group Annual Report 2020
Purpose
At Charter Hall we’re all
about achieving better
futures and mutual
success. It’s a philosophy
that underpins our
operating model and
our commitment to all
our stakeholders.
Our tenants
We’re always looking for new ways
to help businesses grow. Working in
close partnership with our tenants,
we seek out innovative solutions
to fulfil their exact needs.
As cross-sector specialists, we think
laterally to solve a business’ holistic
needs, providing an integrated
solution to their office, warehousing
and distribution requirements.
Our commitment to our tenants
runs deep, and we continue to
challenge ourselves to go above
and beyond in our service.
Our investors
We work harder to create stable
investments with greater potential to
generate consistent, superior returns.
We invest alongside our capital
partners, because we believe that
fundamental to long-term success, is
mutual success. Our focus on quality,
well located assets with long-term
leases, together with our ability to
unlock hidden value, creates a balance
between stability, returns and growth.
Our community
Every year we do more to strengthen
communities. Our philosophy of mutual
success is the reason why we were
the first Australian property company
to join the international Pledge 1%
movement. Through our long-standing
commitment to Pledge 1% we give our
spaces, profits and our people’s time
to support vulnerable Australians.
Our people
We have a genuine desire to see people
perform at their best and advance
their careers. We actively leverage our
unique operating model to give people
learning opportunities that accelerate
their growth and potential. Our open,
flexible workplace fosters a collaborative
environment and, together with our many
benefits, enables people to flourish.
Our environment
We put our environmental commitment
into action. Our climate resilience strategy
extends across our diversified business
model and supports our long-term
investments to meet future challenges.
We’ve reinforced our standing as the
company with Australia’s largest Green
Star rated portfolio, and are investing
in renewables and managing down all
forms of waste to reduce our footprint.
Purpose
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7
Charter Hall Group Annual Report 2020
Charter Hall Group
Annual Report 2020
FY20
performance
highlights1
Group
returns
Property
investments
Funds
management
Investment
capacity
Operating earnings
(post tax) and
OEPS growth
$323m
↑46.3%
Property
investment portfolio
Funds under
management (FUM)
Group investment
capacity 5
$2.0bn
↑10.0%
$40.5bn
$5.0bn
↑33.2%
Distributions
per security
Total property
investment return3
Gross
transactions
10.0%
$8.3bn
Balance sheet
NTA growth
9.6%
35.7cps
↑6.0%
NTA per security
$4.28
Total platform
return2
18.8%
Property investment
yield
Property funds
management yield4
Balance sheet
gearing
6.2%
10.5%
0%
Look-through
gearing
29.1%
FY20 performance highlights
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9
Woolworths
Distribution Centre,
Dandenong South
VIC
1. Figures and statistics are for the 12 months to 30 June 2020 unless otherwise stated.
2. Total platform return is calculated as growth in net tangible assets (NTA) per security plus distributions per security divided by the opening NTA per
security for the 12 months to 30 June 2020.
3. Total property investment return is calculated as distributions received from funds plus growth in investment value divided by the opening investment
value of the PI portfolio for the 12 months to 30 June 2020. This excludes investments in new vehicles held for less than a year and investments in Direct funds.
4. Property funds management (PFM) yield is calculated as PFM operating earnings post tax per security (includes 50% allocation of net interest) divided by the
opening NTA per security for the 12 months to 30 June 2020.
5. Investment capacity calculated as cash plus undrawn debt facilities for CHC and the funds management platform. At 30 June 2020, cash was $1.4bn.
A strong and
adaptable strategy,
clear purpose, deep
values and, above
all, the trust and
partnerships we
have built with our
people, investors,
customers and
communities, have
seen us stay the
course in a year
that has tested
all Australians.
David Clarke
Chair
Right
Chair letter
Dear Securityholder
This has been a year of challenges
for business and society. With a
backdrop of weak economic growth,
bushfires and the onset of COVID-19,
we have all been forced to adapt
and respond to an uncertain external
environment. Against this backdrop,
I am pleased to report that Charter
Hall has enjoyed strong momentum
by focusing on its strategic pillars of
access, deploy, manage, and invest.
Our approach of partnering with
our tenants to meet their property
needs continues to deliver results for
securityholders, with operating earnings
per security (OEPS) growth of 46%
over the previous financial year. Annual
dividend growth continued with an
increase of 6% over FY19. Our focus on
delivering resilient and growing income
streams for our investors has driven the
performance of our funds and continues
to attract investor equity, with $5.1
billion of equity inflows for the year.
While this annual report measures our
performance for the year to 30 June
2020, we see long term performance as
the true test of success. This is Charter
Hall’s 15th year as a listed company
and in that time, we have delivered
securityholders a total shareholder return
of 15.7% return per year on average.
COVID-19
Working in partnership dominated our
approach to the challenges presented
by COVID-19. With the onset of the
pandemic, we moved quickly and
decisively to establish working from
home routines for our people in non-
frontline roles. We also launched a
number of wellbeing initiatives to support
our people to realise their individual
potential, work productively and
contribute to our community. So, I was
particularly pleased to see that 87% of
our people reported “good” or “excellent”
levels of wellbeing. Recognising too that
we needed to partner with our customers
to resolve issues that affected us all,
our teams introduced new hygiene
regimes, changed our environments
to accommodate social distancing
and communicated tirelessly with our
customers to keep them updated.
Looking Ahead
Taking an active approach to
partnership builds trust and resilience
across our many relationships. We
work with some of Australia’s biggest
corporates and our relationships are
multi-levelled and multi-sectored.
Our current portfolio
comprises more than
1,300 properties,
with over 4,000
tenancies, delivering
over $2.1 billion of net
rental income a year.
Today, with your support, we manage
and invest in one of Australia’s leading
real estate platforms. Our funds under
management (FUM) of $41.8 billion
as at 20 August 2020 represents the
largest sector diversified commercial
property portfolio in Australia.
Entrepreneurial spirit runs deep within
Charter Hall. We continue to be an active
market participant, investing alongside
our capital partners to access attractive
investment opportunities. Our focus
on high quality assets leased to quality
tenants on long weighted average
leases is unchanged. These assets
are the most enduring in value and
underpin the resilience of our portfolios.
Strengthening our diversity
The range and extent of our activities
requires many inputs to be effective and
competitive. We depend on talented
people and their different experiences,
backgrounds and perspectives to drive
our growth and sustain our future. As
a Board and management team, we
realise the importance of creating equity,
removing barriers to inclusion, and
genuinely engaging with internal and
external communities to drive long-term
organisational and systemic change.
This year, we were recognised by the
Women’s Index (Future Super) as one
of the leading ASX listed companies
to demonstrate gender equality. ▶
David Harrison
Managing Director
& Group CEO
Left
Rising to the
challenge,
together
Chair letter
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11
Charter Hall Group Annual Report 2020 We continue our involvement with
the Property Council of Australia’s
500 Women in Property. We now
have 30.4% female participation
in senior executive positions and
54.6% across our workplace.
Through our membership of Pride in
Diversity and the property industry
initiative Interbuild, we have also
continued to grow our support for
LGBT+ employees nationally.
The new ways of working emerging
as a result of COVID-19 underline
the importance of ensuring all our
people feel supported and valued,
and that they see a place and a future
for themselves at Charter Hall.
Serving our customers
and securityholders
As your Board, we focus on providing
clear governance and oversight to assist
management in continuing to deliver for
stakeholders. Our role is to serve you and
to maintain and build trust. Embedding a
high standard of ethics into our business
and building belief and goodwill in the
Group, and the people who manage
your investment is paramount.
Despite an uncertain external
environment in FY20, I am pleased
to report that Charter Hall continues
to gain momentum in the business.
In particular, the record equity flows
demonstrate our customer centric
approach continues to be supported
by our investor customers. Additionally,
the repeat tenant customer metrics,
retention rates and customer interviews
suggest the Group has an equal focus
on both tenant and investor customers.
One of our roles as your Board is to
ensure that the team remains focused on
delivering against the Group’s strategy,
whilst ensuring all stakeholders are fairly
treated and the culture of “doing the
right thing” permeates throughout the
Group. While our results demonstrate
our performance focus, front and centre
for us is our role as guardians of other
people’s capital over the long term.
That’s why our purpose, developed
with input from investors, tenants
and employees, is about achieving
better futures and mutual success
through bringing aspirations to life.
The Charter Hall Board continues to
comprise a majority of independent
directors, in line with best practice.
All Directors actively engage in the
business to ensure the continued
execution of the Group strategy. Our
Non-Executive Directors apply a
diverse mix of skills and expertise to
provide a strong overall contribution
to the success of the Group. This
approach puts the Group in a resilient
position to pursue further growth.
Our climate resilience
approach
The built environment in Australia
represents 23% of the country’s carbon
emissions, so the environmental
impacts of what we do are potentially
far reaching. This year, we have
again stepped up our efforts to be a
sustainable organisation. We now have
212 Green Star Performance ratings
across the portfolio - maintaining
Australia’s largest Green Star footprint.
We continue to see improvements in
our NABERS energy ratings across
our sectors. This year we became the
largest office portfolio to participate in
the NABERS Sustainable Portfolios Index
2020. All our funds and 62 commercial
assets are included in the Index, with
our Charter Hall Long WALE REIT (CLW)
placed in the top three portfolios.
Our values ensure we remain strong
as we grow and nurture the business
through this turbulent time of
technological, environmental, community
expectation and societal change.
We have mapped our
future against various
climate scenarios and
defined our pathway
to net zero for Scope 1
and 2 emissions for the
whole Group by 2030.
Further, our industrial & logistics portfolio
has committed to achieving net zero
Scope 1 and 2 emissions by 2022.
We’ve increased our renewable energy
footprint from 2.5MW in 2018 to 21MW of
solar PV installed across the portfolio. Our
retail power purchase agreements (PPAs)
with Clean Peak Energy and Solgen will
help the Group realise our short-term
sustainability targets and contribute
towards our longer-term aspirations. Last
year, our retail team began an ambitious
solar power and battery storage rollout
plan that will over time see us generate
31,000MWh of 100% renewable energy
across our retail centres. We now have
first and second stage agreements in
place for solar systems at 28 of our
convenience-plus retail centres.
Our climate governance initiatives this
year have also included developing
a roadmap to align with the
recommendations of the Taskforce for
Climate-related Financial Disclosures
(TCFD). This roadmap recognises that
in order for us to deliver on our purpose
of securing a better future for all, we
have a responsibility to understand the
potential impact of climate change and
to take active, meaningful steps from
Board level to mitigate the impact.
As a signatory to the United Nations
Global Compact, we continue to engage
in collaborative projects to advance the
Sustainable Development Goals and
make the UN Global Compact and its
principles part of our strategy and culture.
This year, all our employees completed
training in our obligations under the
Modern Slavery Act and a survey
of our priority 1 suppliers showed a
strong understanding of the basic
facts around modern slavery. Our
Modern Slavery and Human Rights
Working Group monitors our modern
slavery and human rights risk.
Our commitment to
communities
The double impacts of the Australian
bushfires and COVID-19 prompted
us to step up our involvement with
communities even further. Through
our commitment to the philanthropic
movement Pledge 1%, our people are
heavily engaged in our communities.
They contributed 2,000 hours in
volunteering, and we donated over
45,000sqm in space, valued at
$1.9 million, for community use.
We donated $933,000 to assist
communities, including $500,000 for
bushfire relief and long-term recovery.
Recognising that COVID-19 has put
households under a lot of stress,
we continued our support of social
enterprises, including Two Good Co.,
which helps vulnerable women who
have experienced domestic violence.
We also reviewed our community
investment approach to ensure that
we were continuing to engage with
communities in the most effective ways.
Through this review, we identified that
creating inclusion through employment
of vulnerable young Australians provides
a pathway to address social issues
impacting communities in which we
operate. This will now be the focus
of our community investment.
Outlook
Economic growth in Australia faces a
challenging future, with the impacts
of COVID-19 set to continue to disrupt
the outlook. Globally, the backdrop
is similarly challenged, with lower
interest rates expected in many
geographies for an extended period.
We remain well positioned, with a
leadership team focused on delivering
results for our securityholders and capital
partners. Across our platform we have
high-quality assets and sector-leading
lease expiry terms delivering resilient
performance and shared growth. We
have access to over $5 billion in available
investment capacity through existing
cash balances, and available lines in
our funds and on our balance sheet.
This capacity provides a resilience
against any short-term volatility, and
an ability to move quickly to capture
opportunities, while also providing a
meaningful avenue for future growth.
I would like to take this opportunity
to thank tenants, investors and
securityholders for your support, my
fellow Directors and the Executive
Committee for your dedication and
our people and their families for your
passion, commitment and sacrifice
throughout a very difficult year to
deliver remarkable performances.
David Clarke
Chair
GPO Exchange
10 Franklin Street,
Adelaide SA
Chair letter
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13
Charter Hall Group Annual Report 2020 Managing Director
& Group CEO letter
A year of continued
momentum delivers
strong growth despite the
challenging environment.
“
Dear Securityholder
Financial year 2020 will be remembered
by many as the year COVID-19 arrived
and the significant changes this brought.
As for many organisations, FY20 was a
year of two halves for Charter Hall, with
the first half characterised by strong
FUM growth driven by acquisitions and
net valuation increases, with the second
half seeing more subdued acquisition
led growth and stabilising valuations as
a result of COVID-19. Pleasingly overall,
FY20 delivered $10 billion of FUM growth,
continued outperformance for our
fund/partnership investors and strong
earnings growth for shareholders.
Charter Hall has celebrated its 15th year
as a publicly listed A-REIT where we have
published investor returns since inception
in the form of return on contributed
equity (ROCE), which has outperformed
all major indices.
Net equity inflows are a
sign of healthy support
from investors, with
FY20 providing a record
$5 billion of gross inflows
and all our sources of
capital contributing.
In fact, over the past 10 years the growth
in FUM from each equity source has been
consistently averaging 20-25% across
each segment, ranging from wholesale
unlisted fund/partnership inflows,
through to listed A-REIT inflows and our
market leading Direct business.
As we celebrate our 15th year as a listed
company, our focus remains on delivering
sustainable growth for securityholders
and replenishing capital within funds and
partnerships so we continue to deploy
through develop-to-core strategies and
selective acquisitions. Ultimately, we will
curate and enhance portfolios through
diversification, WALE enhancement
and tenant composition diversity and
improvement.
COVID-19
There is little doubt that COVID-19 has
been a test for society and business
this year. Charter Hall, along with other
businesses, was forced to quickly adapt
to the changing circumstances, enact our
pandemic plan and move staff out of the
offices to work from home. Fortunately,
business continuity was not interrupted.
Charter Hall’s strategy of investing in
long WALE assets leads to defensive
and resilient portfolios. While Charter
Hall has not been immune to the effects
of COVID-19, the impacts have been
limited through our focus on assets with
long leases to high quality tenants in
predominantly defensive industries. Small
to medium enterprises (SMEs) represent
only 10.2% of tenants across the funds
platform, a much smaller proportion than
other listed REITs.
More broadly, COVID-19 has seen
accelerating demand for access to
industrial & logistics assets, something
we have actively pivoted towards. Flows
into Charter Hall Direct funds have
averaged $95 million a month during
FY20, while wholesale pooled and
partnership funds have also continued
to see inflows. Momentum in sale and
leaseback transactions continues to grow
across corporate Australia and the Group
is well positioned to take advantage of
reduced buyer competition.
Performance
I am pleased to report a 46.2% increase
in OEPS to 69.3 cents per security (cps).
Further, we have continued to generate
leading REIT sector distribution per
security growth of 6.0% to 35.7cps,
whilst retaining a significant proportion
of earnings via a distribution payout ratio
of 52%.
Importantly, the growth in earnings
also comes after-tax. When compared
to peers on a pre-tax basis, we have
delivered sector-leading 25.8% OEPS
growth rate (CAGR) annually over the last
five years. Tax paid also delivers valuable
franking credits for our securityholders.
Over the 15 years
since listing, Charter
Hall has generated
a Total Shareholder
Return (TSR) of 15.7%
compounded annually
versus the A-REIT index
S&P/ASX 200 (GICS)
Property Accumulation
Index return of 3.1% over
the same time period.
Quality property funds
management portfolio
Our property funds management
portfolio is well-diversified comprising
over 1,300 properties, with over 4,000
tenancies delivering in excess of
$2.1 billion of net rental income. Group
FUM WALE has increased to 8.6 years
and the weighted average cap rate
firmed to 5.27%, reflecting the high
quality and low risk profile of our portfolio.
Significant growth in funds
under management
We have been active in acquiring and
divesting assets during the period.
Group FUM grew by a record $10.1
billion to $40.5 billion in 12 months, and
a further $1.3 billion since 1 July 2020.
Furthermore, this growth reflects the
trust placed in us as custodians of
capital to wisely manage and invest
on behalf of our investor customers.
Developments continue to be a
meaningful contributor, while our focus
on driving total returns has seen net
revaluations also lift significantly during
the period. Development capex of
$1.3 billion and net revaluations of
$1.4 billion have been meaningful
drivers of FUM growth. ▶
Managing Director & Group CEO letter
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15
Charter Hall Group Annual Report 2020 Transactions
Active deployment of capital is an
integral part of our business. This year
we completed $8.3 billion of gross
transactions. All our sectors have
been busy, but activity has been led
by our office and industrial & logistics
sectors deploying capital after recent
capital-raising activity.
Active development pipeline
The Group continues to progress
various developments across its
portfolios, creating investment grade
properties and adding significant value
through enhancing income yield and total
returns. Our development completions
have added $1.7 billion to FUM in the last
12 months. Our total development pipeline
now stands at $6.8 billion and continues
to attract capital and deliver FUM growth.
The Group’s $2.3 billion industrial
& logistics development pipeline is
predominantly pre-leased to high
quality tenants and will generate
institutional quality long-leased assets
for our funds. It will provide attractive
incremental FUM growth and enhances
our credentials to attract capital.
Our office pipeline also continues to
deliver attractive development returns
and new office buildings. The recent
completion of Wesley Place created
a $700 million premium grade office
building, 100% pre-leased 12 months
prior to completion, with an 11 year WALE
leased to high quality tenants such as
Telstra Super, Uniting Church, Vanguard,
Commonwealth Government, CBUS and
Australian Super.
Valued relationships
with our tenants
Across the platform we enjoy strong
tenant customer relationships. We’re
always looking for new ways to support
our tenants – actively partnering
with them to provide innovative
solutions to fulfil their exact needs.
In fact, 74% of our tenant customers
lease more than one tenancy from us.
That ability to partner with our tenants
and meet their entire property needs
drives tenant retention. Of the tenants
who had a lease expiring with us in the
past 12 months, 86.5% re-leased with us.
Importantly, this benefits shareholders by
producing earnings resilience across our
property investment portfolio and also
feeds back into transactions, with our
significant sale and leaseback activity
providing off-market opportunities to
grow our funds.
A resilient property
investment portfolio
Our property investment portfolio
provides a strong alignment of interest
with our investor customers, while also
ensuring that securityholders benefit
from our property expertise. Our earnings
here are characterised by the high quality
of our tenants, the diversity of sectors,
and the lack of concentration risk, or
single asset exposure.
The portfolio has grown
to $2.0 billion, or 10%
over the year, reflecting
our on-going investment
alongside our capital
partners and growth in
underlying asset values.
The portfolio has delivered an
attractive 6.2% property investment
yield, while there is also capacity
for new investments from retained
earnings and recycling co-investment
stakes into new growth.
Occupancy is broadly stable, and through
active asset management the property
investment portfolio WALE has increased
to 8.7 years. Our weighted average rent
review remains attractive at 3.3% and
the number of properties has increased
significantly to over 1,000, largely
reflecting our investment in the
bp portfolio.
With our largest single asset exposure
being 1.4% of the Group’s balance sheet
property investment portfolio and our
top 10 assets only representing 7.4% of
net income generated, we believe the
Group’s Property Investment portfolio
is a very defensive, well diversified, core
investment portfolio.
Culture the bedrock
of the business
This year, we continued to look for ways
to improve wellbeing and resilience within
our culture. We did this by increasing our
diversity to give us a more informed and
open minded workforce, and addressing
pay equity gaps to ensure everyone feels
valued. We empowered and encouraged
those whose voices are most easily lost
– the young, the vulnerable, our LGBTQ+
community – to feel safe and included.
Our employee engagement score for
FY20 was higher than ever, which is
especially pleasing given the challenges
and disruptions that everyone has faced.
The increase in engagement reinforces
the importance of purpose and values
in building a culture that nurtures people
and helps them make the most of their
potential. Our own surveys show that
97% of our people are proud to work here
– a metric that the Executive Committee
and I are very proud of.
We also pride ourselves on being an
organisation that builds people up. Our
particular way of developing talent –
leveraged around our operating model,
our purpose and our culture – is another
reason people thrive at Charter Hall.
This year we launched ‘Learning’, an
integrated, personalised learning platform
to help our people develop skills and
capabilities aligned to their development
goals and career aspirations. The new
platform builds on all the experience-
based opportunities we make available,
enabling everyone to stay curious and
continue to learn.
The platform really came into its own
during lockdown, supporting us to
be adaptable and efficiently embrace
remote working, with valuable learning
resources like creating a productive
workspace and using videocalls, as well
as providing self-care tips to nurture
connection and support wellbeing.
Important progress
towards sustainability
We stepped up our journey towards
being a role model in the Australian
property sector for sustainability. This
year, we not only established climate
resilience metrics that will progress us
towards a low carbon economy, we also
analysed our business to find out how
resilient we would be in the face of a
range of climate scenarios. On that basis,
we confirmed our pathway to net zero
by 2030 and developed the roadmap to
align with the recommendations of the
Taskforce on Climate-related Financial
Disclosure.
Setting up a cross-business Energy
Committee saw us tighten our
procurement processes and make
significant savings on our utility costs –
a good first step in our goal to commit
to renewable energy by 2025.
We already have Australia’s largest Green
Star footprint. This year, we not only
increased our Green Star and NABERS
ratings across the Group, we also
reduced our Scope 1 and 2 emissions
by 8%, installed 21MW of solar power
and our industrial & logistics portfolio
committed to net zero Scope 1 and
2 emissions by as early as 2022. Our
efforts were also recognised in the highly
regarded NABERS Sustainable Portfolios
Index which listed eight of our office
funds in the top 11 in the Index.
Outlook and guidance
Since year end, we have grown FUM
from $40.5 billion to $41.8 billion. Post
balance date and considering recent
transaction activity, investment capacity
stands at over $5 billion, plus committed
but undrawn equity commitments in
wholesale funds and partnerships.
Based on no material change in current
market conditions, FUM growth already
achieved in FY21 and assuming the
COVID-19 operating environment does
not deteriorate markedly from here, FY21
guidance is for post-tax OEPS of 51.0cps.
FY21 distribution per security guidance is
for 6% growth over FY20.
My thanks, on behalf of the Executive
Committee, to all our people for all their
hard work this year. I would also like to
thank the Charter Hall Group Board for
their continued strategic guidance along
with the Independent Directors of our
Fund Responsible Entity Boards. Our
strategy of using our property expertise
to create value and generate superior
returns for our customers underpins our
ability to continue to deliver returns for
securityholders.
Finally, thank you to all our tenant and
investor customers for continuing
to be part of our Charter Hall Group
community.
David Harrison
Managing Director
& Group CEO
Chullora Logistics
Park (Australia Post),
Chullora NSW
Managing Director & Group CEO letter
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17
Charter Hall Group Annual Report 2020 Capital sources
The diversity of our property portfolio and unique business
model means we offer a wide range of investment options.
Our approach to investment uses partnership and financial
discipline to deliver stability and long-term growth.
Wholesale Pooled
and Partnerships
FUM
$26.3bn
Gearing
32%
Occupancy
97%
Cap rate
5.1%
WALE
7.7yrs
CHC investment
$1.3bn
Clockwise from
left to right:
ALDI Distribution Centre,
Dandenong VIC
242 Exhibition Street,
Melbourne VIC
10 Shelley Street,
Sydney NSW
Listed
FUM
$8.2bn
Occupancy
98%
Cap rate
5.8%
Gearing
23%
WALE
10.7yrs
CHC investment1
$0.7bn
Charter Hall Direct
FUM
$6.1bn
Gearing
28%
Occupancy
98%
Cap rate
5.4%
WALE
9.0yrs
CHC investment
$0.1bn
1. Held at accounting value not market value.
Capital sources
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19
Charter Hall Group Annual Report 2020 Industrial & Logistics
A continued growing trend in online retail spending,
accelerated significantly by restrictions on
consumers during COVID-19, has increased the
demand for our assets. With a large development
book and national footprint, our local state-based
teams are well positioned to partner with our tenant
customers and meet their real estate needs.
Richard Stacker
Industrial & Logistics CEO“
47
Leasing deals executed
across 769,000sqm
$2.0bn
Gross transactions
34
$2.3bn
Development projects
Completion value
Clockwise from top:
Dandenong Distribution Centre,
Dandenong South VIC
Coles Distribution Centre,
Adelaide SA
Chullora Logistics Park,
Chullora NSW
Industrial & Logistics
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21
Charter Hall Group Annual Report 2020 Long WALE
Retail
“
Our investments in long WALE retail
assets provide greater diversification
and earnings resilience for investors. We
continued our momentum in securing
significant off-market sale and leaseback
portfolios from major corporates.
Avi Anger
Fund Manager, Charter Hall Long WALE REIT
346
Number of
properties
$1.4bn
Gross
transactions
$4.0bn
FUM Value
12.3yrs
Weighted Average
Lease Expiry (WALE)
Top to Bottom:
Kawana Waters Hotel,
Kawana Waters QLD
Bunnings Warehouse,
South Mackay QLD
bp, Forestville NSW
Long WALE Retail
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23
Charter Hall Group Annual Report 2020 “
161
Leasing deals executed
across 157,000sqm
Office
As one of the largest owners
and managers of CBD office
properties, we partner with our
tenant customers to create the
best workplace environments and
are driven to deliver enhanced
value for our investors.
David Harrison
Managing Director & Group CEO
$3.6bn
Gross transactions
13
$4.2bn
Development projects
Completion value
Clockwise from top left:
105 Phillip Street,
Parramatta NSW
Wesley Place, 130 Lonsdale
Street, Melbourne VIC
1 Nicholson Street,
Melbourne VIC
12 Shelley Street,
Sydney NSW
Office
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25
Charter Hall Group Annual Report 2020 Retail CEO“
Convenience
Retail
As the leading owner and manager
of property for convenience retailers,
we’ve curated a portfolio that services
local communities and delivers a
resilient and growing income stream
for investors. By partnering with
leading convenience retailers to meet
their property needs we continue
to improve the resilience of income
and extend our portfolio WALE.
Greg Chubb
363 $0.5bn
Leasing deals
executed across
56,000sqm
Gross
transactions
2
Development
projects
$0.1bn
Development spend
Leases executed
across
9
15,000sqm
to majors
Top and bottom
centre:
Pacific Square
Shopping Centre,
Maroubra NSW
Bottom left
and right:
Rockdale Plaza,
Rockdale NSW
Convenience Retail
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27
Charter Hall Group Annual Report 2020 Social
Infrastructure
“
Our social infrastructure property portfolio
facilitates the provision of essential social
and community services for Australians.
We’re the largest owner of early learning
centres in the country, and despite the
challenges of the COVID-19 pandemic,
our listed REIT is well capitalised and
well positioned to take advantage of
opportunities that may emerge.
Travis Butcher
Fund Manager, Charter Hall Social Infrastructure REIT
146
Leasing deals executed
across 93,000sqm
$0.8bn
Gross transactions
24
$0.1bn
Development projects
Development spend
Images:
CQE Centre,
Hawthorn VIC
Social Infrastructure
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29
Charter Hall Group Annual Report 2020 18.9%
15
13.8%
13.0%
10
8.6%
8.5%
8.5%
9.8%
6.2%
11.2%
9.6%
7.7%
7.0%
5
0
DIF2 (WS)
2013-2020
DIF3 (WS)
2014-2020
DIF4
2016-2020
BW Trust
2014-2020
DAT
DAT2
2015-2020
2016-2020
Direct
Charter Hall Direct is Australia’s
leading direct property fund
manager. Featuring quality
properties on long-term leases
and delivering stable returns with
the potential for capital growth,
the Direct business performed
strongly and enjoyed a record
12-month period of net inflows.
Steven Bennett
Direct CEO“
15.1%
9.7%
4.9%
5.4%
8.5%
7.9%
Direct funds net return since inception1
LWF³
2017-2020
PFA (Ordinary)
2017-2020
DOF (WSA)
2017-2020
The active Direct funds have returned 13.0% p.a, out performing the benchmark2 by 4.4%.
Net Return (% p.a.)
Australian
Industrial & Logistics
Australian
Retail
Australian
Diversified
Australian
Office
Benchmark (% p.a.)
15
13.8%
13.0%
10
8.6%
8.5%
5
0
18.9%
15.1%
11.2%
9.8%
6.2%
8.5%
9.6%
9.7%
7.7%
7.9%
7.0%
8.5%
4.9%
5.4%
DIF2 (WS)
2013-2020
DIF3 (WS)
2014-2020
DIF4
2016-2020
BW Trust
2014-2020
DAT
2015-2020
DAT2
2016-2020
LWF³
2017-2020
PFA (Ordinary)
2017-2020
DOF (WSA)
2017-2020
1. Returns are inclusive of bonus units where applicable.
2. Benchmark refers to the MSCI/IPD Unlisted Core Wholesale Property Fund Index at June 2020.
3. LWF was previously known as DCSF, however was relaunched with a name change in September 2020.
Net Return (% p.a.)
Australian
Industrial & Logistics
Australian
Retail
Australian
Diversified
Australian
Office
Benchmark (% p.a.)
Top left:
10 Shelley Street,
Sydney NSW
Top right:
Bunnings Claremont,
Perth WA
Bottom:
Mainfreight
Logistics Facility,
Prestons NSW
Direct
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31
Charter Hall Group Annual Report 2020 Sustainability
We’ve focused our
environmental, social
and governance initiatives
on where we can have
the greatest impact
and influence – acting
on climate change,
increasing the strength
of our communities and
embedding a high standard
of ethics in our actions.
Environment
Social
Governance
Our focus
Act on climate change
Increase the strength of
communities
Embed a high standard of
ethics into our actions
Alignment with
UN Sustainable
Development Goals
What’s most important
Climate resilience
Strong communities
Responsible business
How we’re responding
Carbon: Net zero Scope 1 and
2 emissions by 2030
Community: Pledging 1% to enable 500 meaningful
employment outcomes for young people by 2030
Ethics: Strengthening business ethics
and compliance
Energy: Operational portfolio powered
by renewable energy by 2030
Adaptation: Understanding and
managing climate risk and adaptation
Biodiversity: Investing in a carbon
offset project to offset operational and
construction emissions by 2030
Water: Conserving water resources
Waste: Investigating circular
economy to reduce waste and
introduce closed loop practices
Customer: Enabling enhanced customer
satisfaction experience in our assets
Employee: Creating a diverse and inclusive
culture and environment
Health, safety and wellbeing: Maintaining high
standards of safety; championing mental, physical
and social wellbeing and WELL environments
Responsible supply chain: Creating an
integrated sustainable supply chain strategy
across our business and ensuring we deliver on
our commitment to the UN Global Compact
Data security: Actively protecting the
privacy of individuals and companies
How we measure success – Reduction of greenhouse gas emissions
– Pledge 1% metrics
– Annual UN Global Compact
in line with our pathway to net zero
– Increase in renewable energy uptake
– Benchmarking against NABERS
and Green Star standards
– Percent of assets covered by
climate adaptation plans
– Tenant and employee satisfaction
– Inaugural Modern Slavery statement in FY21
– Health and safety data
– Engagement data
– Survey results on diversity and inclusion
– WELL accreditation (leading global tool for
advancing health and wellbeing in buildings)
– Customer, investor and employee feedback
– 100% employees undertake ethics
compliance training
– Alignment of data approach to
ISO 27001 framework
Sustainability
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33
Charter Hall Group Annual Report 2020 FY20 sustainability
highlights
Environment
21MW
100%
solar PV installed, with
potential to generate 32GWh
of energy, equivalent to
powering 2,150 homes
industrial & logistics
portfolio committed to
net zero Scope 1 and 2
emissions by 2022
8%
reduction in Scope
1 and 2 emissions
intensity from FY19
212
Green Star Performance
ratings across the portfolio
– maintaining Australia’s
largest Green Star
footprint
9%
reduction in water intensity
compared to FY191
Social
93%
employee
engagement score
2,000
hours of employee
volunteering
45k +
sqm
in Pledge 1% space,
valued at $1.9 million
provided for
community use
$933k
donated to the community
through our partnerships,
including $500k for
bushfire relief and recovery
Governance
100%
employees
completed modern
slavery training
84%
of priority 1 suppliers
completed or
commenced
pre-qualification
survey2
101
priority 1 suppliers
invited to complete
a modern slavery pre-
qualification survey2
TCFD
alignment underway
FY20 sustainability highlights
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35
1. Water only includes assets that are in
operational control.
2. Source: Property Council of Australia,
Informed 365 portal.
Charter Hall Group Annual Report 2020 Leadership
Executive
Committee
for our investors. “
Powered by purpose,
our executives create
value and generate
superior returns
David Harrison
Managing Director
& Group CEO
From Left:
Greg Chubb
Steven Bennett
Sheridan Ware
David Harrison
Russell Proutt
Richard Stacker
Natalie Devlin
Sean McMahon
Leadership
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37
Charter Hall Group Annual Report 2020 Board of
Directors
Executive
Committee
David Clarke
Chair/Independent
Non-Executive Director
Karen Moses
Independent
Non-Executive Director
Anne Brennan
Independent
Non-Executive Director
Greg Paramor AO
Non-Executive Director
Philip Garling
Independent
Non-Executive Director
David Harrison
Managing Director
and Group CEO
See pages 48-50
for Director bios.
David Ross
Independent
Non-Executive Director
David Harrison
Managing Director
& Group CEO
BBus (Land Economics),
FAPI, GDipAppFin
See page 49.
Greg Chubb
Retail CEO
BBus (Land Economics), FAPI
Greg is Fund Manager of the Charter
Hall Retail REIT and Charter Hall’s
Retail CEO, having joined the Group in
2014 with 30 years’ property market
experience. Greg is responsible for all
management aspects of the retail funds
management platform to deliver value
creation within the retail portfolio and
optimise returns for our investors.
Prior to joining Charter Hall, Greg was the
Property Director at Coles Supermarkets
Australia and Managing Director and
Head of Retail for Sandalwood/Jones
Lang LaSalle in Greater China. Greg
has also held executive leadership
roles at Mirvac and Lendlease.
Greg holds a Bachelor of Business
Degree (Land Economics) from the
University of Western Sydney, is a Fellow
of the Australian Property Institute
(FAPI) and is Joint Deputy Chair of the
Shopping Centre Council of Australia.
Steven Bennett
Direct CEO
BBA
Steven oversees more than $6 billion
of assets under management across
multiple award-winning unlisted property
products supported by retail, SMSF
and high net worth investors. Steven’s
key responsibilities include all aspects
of investment management from
identifying and sourcing property assets,
structuring, debt financing, creation and
launching of new property funds, capital
raising, investor relations, stakeholder
engagement and the ongoing
management of the property portfolio.
Prior to joining Charter Hall, Steven
worked for Macquarie Bank
for seven years in Sydney and
London. Steven has 18 years of
experience in funds management,
banking, property, accounting and
consultancy and is a member of The
Institute of Chartered Accountants
in Australia and New Zealand.
Sheridan Ware
Chief Information and Technology Officer
BA, MBA
Richard Stacker
Industrial & Logistics CEO
BBA (Accounting and Finance)
Sean McMahon
Chief Investment Officer
BBus (Property)
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 & logistics 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 office, industrial
& logistics and retail property.
Before joining Frasers, Sean spent
seven years at Macquarie Bank as
a senior executive in the Property
Investment Banking division
undertaking property finance,
structured finance, funds management
and joint venture transactions.
Sheridan joined Charter Hall in 2019
with 20 years’ experience helping
companies drive commercial value and
increased customer engagement through
cultural and digital transformation. She
has worked across a wide range of
industries – including commercial real
estate, government and not-for-profit
– and across multiple global markets.
Sheridan is responsible for all strategic
and operational aspects of technology
at Charter Hall and is a key contributor
to the Property Council of Australia’s
CIO Cyber Security Roundtable.
Prior to joining Charter Hall, Sheridan
spent 11 years at Cushman & Wakefield
in a variety of roles covering strategy,
business transformation and technology;
most recently as Chief Information Officer
of their Asia Pacific business. She has
won multiple awards for her contributions
to thought leadership in the commercial
real estate field.
Russell Proutt
Chief Financial Officer
BCom (Hons), CA, CBV
Russell joined Charter Hall in 2017 and
brings over 25 years’ finance experience
to the Group. His experience includes
property and infrastructure investment
management in North America, Australia
and broader Asia as well as extensive
M&A and financing capability across
global markets.
Prior to joining Charter Hall, Russell was
with Brookfield Asset Management
for 12 years and a Managing Partner
based in Canada and, most recently,
Australia where he worked in property
and infrastructure sectors throughout
the Asian region. Prior to joining
Brookfield, Russell spent 15 years in
investment banking and the financial
services sector in North America.
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.
Richard has over 25 years of experience
in real estate funds management,
real estate finance, accounting and
risk management. With experience
across all sectors, he has led the
establishment, structuring and
management of new funds, overseeing
the transactional, development,
asset and property management.
In 2018, Richard became CEO of
Charter Hall’s industrial & logistics real
estate business following his role as
Head of Global Investor Relations. In this
role, Richard leads a team of 50 industrial
& logistics property specialists, including
investment management, development,
asset and property management
professionals. Richard is also a Board
member of Charter Hall’s unlisted retail
investor business, Charter Hall Direct.
Prior to joining Charter Hall, Richard
was a Division Director of Macquarie
Group and Chief Executive Officer of
Macquarie Direct Property Management
Limited. Previously to that, Richard was
a General Manager with Lendlease
Corporation Limited and a senior
manager with PricewaterhouseCoopers.
He is a member of the Institute of
Chartered Accountants in Australia.
Natalie Devlin
Chief Experience Officer
BA, Postgrad Dip in MR Management
Responsible for brand, people and
culture, workplace, sustainability and
community investment, Natalie is
focused on enabling the organisation
to deliver on our unique market
proposition, providing a differentiated
experience and bringing to life our
philosophy of “Better Future and Mutual
Success” for all our stakeholders.
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 its operating model.
Leadership
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39
Charter Hall Group Annual Report 2020 Directors’ report and
financial report
For the year ended
30 June 2020
Contents
Directors’ report
Auditor’s independence declaration
Consolidated statements of
comprehensive income
Consolidated balance sheets
Consolidated statement of changes in equity
– Charter Hall Group
– Charter Hall Property Trust Group
Consolidated cash flow statements
Notes to the consolidated financial statements
Directors’ declaration to securityholders
Independent auditor’s report
42
73
74
76
77
78
79
80
130
131
Directors’ report and financial report
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41
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
Directors’ report
For the year ended 30 June 2020
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 2020, 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) and CHPT
and its controlled entities. 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.
– Chair and Independent Non-Executive Director
‒ David Clarke
Independent Non-Executive Director
–
‒ Anne Brennan
–
Independent Non-Executive Director
‒ Philip Garling
– Managing Director and Group CEO
‒ David Harrison
Independent Non-Executive Director
‒ Karen Moses
–
Independent Non-Executive Director
‒ Greg Paramor AO –
Independent Non-Executive Director
–
‒ David Ross
Distributions/Dividends – Charter Hall Group
Distributions/dividends paid/payable to stapled securityholders during the year were as follows:
Final ordinary distribution of 7.72 cents and ordinary dividend of 10.5 cents per stapled security for the
six months ended 30 June 2020 payable on 31 August 2020
Interim ordinary distribution of 10.5 cents and interim ordinary dividend of 7 cents per stapled security for
the six months ended 31 December 2019 paid on 28 February 2020
Total Distributions/Dividends paid and payable to stapled securityholders
2020
$'m
84.9
81.5
166.4
Operating and financial review
The Group recorded a statutory profit after tax attributable to stapled securityholders for the year to 30 June 2020 of $345.9 million
compared to a profit of $235.3 million for the year ended 30 June 2019.
Operating earnings amounted to $322.8 million for the year to 30 June 2020, compared to $220.7 million for the year ended 30 June
2019, an increase of 46.3%. Operating earnings is a financial measure which represents statutory profit after tax adjusted for the items
in the table below. Operating earnings is used by the Board to make strategic decisions and as a guide to assessing an appropriate
distribution to declare.
The operating earnings information included in the table below has not been subject to any specific audit procedures but has been
extracted from segment information in Note 1 of the accompanying financial report.
Operating earnings attributable to stapled securityholders
Add: Net fair value movements on equity accounted investments1
Add: Gain on disposal of property investments1
Add: Non-operating income tax benefit/(expense)
Less: Realised and unrealised net gains/(losses) on derivatives1
Less: Impairment of equity accounted investments
Less: Performance fees expense1
Less: Non-operating business combination acquisition costs
Less: Amortisation of intangibles
Less: Other1
Statutory profit after tax attributable to stapled securityholders
2020
$'m
322.8
67.8
6.9
2.2
(14.9)
(13.6)
(6.0)
(4.4)
(6.9)
(8.0)
345.9
2019
$'m
220.7
75.8
1.9
(7.3)
(29.0)
–
(7.0)
(8.3)
(4.1)
(7.4)
235.3
Operating and financial review continued
The 30 June 2020 financial results with comparatives are summarised as follows:
Revenue ($ million)1
Statutory profit after tax for stapled securityholders ($ million)
Statutory earnings per stapled security (EPS) (cents)
Operating earnings for stapled securityholders ($ million)
Operating earnings per stapled security (cents)
Distribution/dividend per stapled security (cents)
Property investment segment earnings ($ million)2
Development investment segment earnings ($ million)2
Property funds management segment revenue ($ million)2
Total assets ($ million)
Total liabilities ($ million)
Total net assets ($ million)
Net assets attributable to non-controlling interest ($ million)3
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)4
NTA per stapled security ($)4
Balance sheet gearing5
Funds under management (FUM) ($ million)
Charter Hall Group
2020
553.8
345.9
74.3
322.8
69.3
35.7
120.0
17.1
412.3
2,759.7
614.0
2,145.7
65.5
2,080.2
465.8
4.47
2019
378.5
235.3
50.5
220.7
47.4
33.7
110.8
7.8
262.9
2,453.6
493.7
1,959.9
50.3
1,909.6
465.8
4.10
Charter Hall Property
Trust Group
2020
31.1
144.5
31.0
n/a
n/a
18.2
n/a
n/a
n/a
2,217.3
435.6
1,781.7
65.5
1,716.2
465.8
3.68
2019
37.5
144.3
31.0
n/a
n/a
19.0
n/a
n/a
n/a
2,078.3
359.3
1,719.0
50.3
1,668.7
465.8
3.58
1,992.4
4.28
0.0%
40,537.0
1,817.0
3.90
5.7%
30,425.6
1,716.2
3.68
n/a
n/a
1,668.7
3.58
n/a
n/a
1 Gross revenue does not include the Group’s share of net profits of associates and joint ventures of $162.3 million (2019: $146.2 million).
2 Segment earnings and revenue is used by the Board in assessing the performance and allocating of resources to its operating segments.
3 Represents the 60.4% (2019: 58.1%) non-controlling interest share of the Charter Hall Direct Diversified Consumer Staples Fund (DCSF).
4 NTA attributable to stapled securityholders and NTA per stapled security ($) are calculated using assets less liabilities, net of intangible assets and related deferred tax
and non-controlling interests in DCSF.
5 Gearing is calculated as interest-bearing debt drawn (excluding hedged foreign exchange movements subsequent to the related debt drawing date and DCSF) net of
cash, divided by total assets net of cash, derivative assets and DCSF.
Property investment
Property investment provides the Group with yields from its co-investments in Group funds. During the year property investment
contributed $120.0 million in segment earnings to the Group.
The Group’s property investments are classified into the following real estate sectors:
‒ Office;
‒
Industrial & Logistics;
‒ Shopping Centre Retail;
‒ Long WALE Retail;
‒ Social infrastructure; and
‒ Diversified.
1 Includes the Group's proportionate share of non-operating items of equity accounted investments on a look-through basis.
Directors’ report and financial report
4
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5
43
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
Operating and financial review continued
Significant changes in the state of affairs
In preparing its financial statements the Group has considered the current and ongoing impact that the COVID-19 pandemic has had
on its business operations.
A $13.6m impairment was recorded for the Group’s investments in Charter Hall Retail REIT and Charter Social Infrastructure REIT.
Other than this impairment, the Group’s strategic focus on resilient property investments and funds management revenue streams
has contributed to the COVID-19 pandemic having no identifiable material adverse impact on the Group's financial result.
With the potential and uncertain economic impacts of COVID-19, future property valuations, investment and development activity and
property funds management revenue could be adversely impacted.
Further disclosure is included in the following notes:
Investments in Associates Note 2(b);
‒
‒ Revenue Note 4(a);
‒
‒ Fair Value measurement Note 22(d).
Intangibles Note 11(b);
Directors’ report
For the year ended 30 June 2020
Operating and financial review continued
The following table summarises the key metrics for the property investments of the Group:
Ownership Charter Hall
investment
($m)
stake
(%)
average
FY2020 Weighted Weighted Weighted Weighted
average
average
lease market cap discount
rate
rate
expiry
(%)
(%)
(years)
FY2020
average Charter Hall
rental investment
yield2
(%)
Charter Hall
investment
income1
($m)
reviews
(%)
Office
Charter Hall Prime Office Fund (CPOF)
Charter Hall Office Trust (CHOT)
Brisbane Square Wholesale Fund (BSWF)
Charter Hall Australian Investment Trust (CHAIT)
Counter Cyclical Trust (CCT)
201 Elizabeth Street
Industrial & Logistics
Charter Hall Prime Industrial Fund (CPIF)
Core Logistics Partnership Trust (CLP)
Shopping Centre Retail
Charter Hall Retail REIT (ASX: CQR)3
Charter Hall Prime Retail Fund (CPRF)
Long WALE Retail
Long WALE Hardware Partnership (LWHP)
Charter Hall BP Partnership (BPP)
Long WALE Investment Partnerships (LWIPs)4
Social Infrastructure
Charter Hall Social Infrastructure REIT (ASX: CQE)
Charter Hall Exchanges Trust (CHET)
Diversified
Charter Hall Long WALE REIT (ASX: CLW)
Discretionary Consumer Staples Fund (DCSF)5
Charter Hall DVP Fund (DVP)
Other investments
Property Investment Total
6.2
15.7
16.8
10.0
5.0
5.9
3.6
6.9
9.9
29.4
13.4
2.5
1.9
8.9
21.8
12.2
39.6
13.0
312.9
293.5
101.8
18.2
11.5
9.6
131.4
85.0
207.9
47.3
123.6
12.8
11.6
90.8
70.1
14.5
16.2
7.7
1.5
0.7
0.2
6.7
5.5
19.9
4.1
5.5
1.6
0.7
5.4
3.6
271.4
43.0
35.5
150.0
2,027.9
15.9
3.5
1.2
5.6
120.0
7.0
6.3
6.7
3.6
6.2
2.7
10.2
9.7
7.2
4.3
8.0
19.4
14.4
12.7
20.1
14.0
6.8
3.2
n/a
8.7
4.9
4.8
5.5
6.5
5.8
5.0
5.1
5.2
6.0
6.2
5.0
5.0
5.7
6.2
4.4
5.4
5.8
4.8
n/a
5.3
6.4
6.3
6.7
7.0
6.4
6.5
6.5
6.5
6.7
7.1
6.5
n/a
n/a
n/a
6.1
6.6
6.8
6.3
n/a
6.5
3.7
3.8
3.8
3.7
3.6
4.0
2.9
3.0
4.1
4.1
2.7
1.0
1.2
2.1
1.5
2.2
3.1
3.9
n/a
3.3
4.8
6.4
7.4
8.8
6.1
3.5
5.3
6.0
7.4
7.2
5.3
9.1
6.8
5.7
6.0
6.7
10.5
3.9
n/a
6.2
1 Charter Hall Group property investment segment earnings per segment information in Note 1(b) of the financial report.
2 Yield = Operating earnings divided by investment value at start of the year adjusted for investments/divestments during the year.
Excludes MTM movements in NTA during the year.
3 Average rent reviews are contracted weighted average rent increases of specialty tenants.
4
5 DCSF adjusted for non-controlling interest share of 60.4%.
Includes the Group’s investment in the LWIP and LWIP2. Their rental increase is CPI, uncapped.
Development investment
Development investment provides the Group with development profits and interest income from its development assets held directly on
balance sheet and through co-investments in development ventures. During the year development investment contributed $17.1 million
in segment earnings to the Group.
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 $40.5 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. During the year the property funds management business contributed $412.3 million in segment revenue to the Group
(including CHOT performance fee $98.2m).
Directors’ report and financial report
6
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
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 or organisational conduct leading to loss of FUM
or management rights, loss of key personnel impacting service
delivery, economic factors impacting fee streams or property
valuations, development risk and access to capital.
Directors’ report
For the year ended 30 June 2020
Principal activities
During the year, the principal activities of the Group consisted of:
(a) Investment in property funds;
(b) Development investment; and
(c) Property funds management.
No significant changes in the nature of the activities of the Group
occurred during the year.
Matters subsequent to the end of the period
The following events have occurred subsequent to 30 June 2020:
•
•
In July 2020, Charter Hall Group sold its entire 5%
holding in Waypoint REIT (ASX: WPR) for $2.61 per
WPR security totalling $101.6m, and will receive a
distribution of 7.41 cents per WPR security. Charter Hall
Long WALE REIT also sold its 5% holding for the same
price.
In August 2020, a partnership created by the Charter
Hall Group and an international sovereign wealth fund
acquired a 49% interest in a property trust which owns a
$1.46 billion portfolio of convenience retail service
centres leased to Ampol Limited (ASX: ALD). Charter
Hall Group will own 5% or $34m of the Charter Hall
partnership, or a look-through interest of 2.45% in the
Ampol portfolio.
Except for the matters discussed above, no matter or
circumstance has arisen since 30 June 2020 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
The Group’s strategy is to use its specialist property expertise to
access, deploy and manage equity invested in office, industrial,
retail, diversified and social infrastructure property portfolios.
Charter Hall Group invests alongside equity partners to create
value and provide superior returns for clients and the Group’s
securityholders. Growth is driven by a strong development
capability that adds value for fund/partnership investors, whilst
deployment through acquisitions compliments the development
capability to deploy the equity raised from investors in line with
each property strategy.
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, the Group has seen
positive equity flows across all sectors from listed, wholesale and
retail investors.
Various risks could impact the Group’s financial performance, the
potential nature and impact of these risks can change over time.
The Group actively manages risks in line with the Group’s
Corporate Governance Framework and the Risk Management
Policy. In addition to the business risks referenced below, key
strategic and operational risks include breaches of cyber security
and privacy, work, health and safety, as well as environmental
(including climate change), social, governance and regulatory
risks. The Group is now preparing to align with the Taskforce for
Climate-related Financial Disclosures (TCFD) recommendations.
These frameworks and policies can be found at
www.charterhall.com.au/sustainability.
Property investment portfolio
The property investment portfolio of the Group is primarily
composed of co-investments in funds and partnerships, where,
typically, between 5-20% of the equity in a fund is contributed by
Charter Hall. The percentage stake may be higher than the long-
term target at origination of the fund or partnership but will fall
toward the long-term target over time with external equity flows.
The Group regularly reviews the performance of its property
investment portfolio and may reduce its investment in funds to
reinvest into new partnerships or funds that drive FUM growth
and align with new partners. Sector diversification, industry
diversification and earnings growth of each fund/partnership
co-investment, together with associated funds management
earnings derived from each fund/partnership combine to provide
a matrix from which the balance sheet capital is allocated. 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, development
risk, joint venture risk and changes in economic or industry
factors impacting tenants, property values or the ability to source
suitable investment opportunities.
Development investment portfolio
The development investment portfolio comprises development
assets held directly on balance sheet and co-investments in
development associates and joint ventures. Primarily,
development investments will drive stabilised investment
opportunities made available to our funds.
The Group regularly reviews the performance of its development
investments and relevant economic drivers to actively manage
performance of each development.
The business risks faced by the development investment portfolio
that may have an effect on financial performance of the Group
include interest rate risk, refinancing risk, development risk,
construction risk, joint venture risk and changes in economic or
industry factors impacting customers, property values 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.
Directors’ report and financial report
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
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
AUB Group 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
35 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
New Zealand and a Fellow of the Australian Institute of Company
Directors.
Other current listed company directorships
Argo Investments Limited
Nufarm Limited
Directors’ report and financial report
Tabcorp Holdings Limited
Spark Infrastructure RE Limited
Former listed company directorships in last three years
Metcash Limited
Myer Holdings Limited
Special responsibilities
Chair of the Remuneration and Human Resources Committee
Member of the Audit, Risk and Compliance Committee
Interests in securities
30,000 stapled securities in Charter Hall Group via direct and
indirect interests
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,
and 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
Former listed company directorships in last three years
Spotless Group Holdings Ltd
Special responsibilities
Member of the Nominations Committee
Member of the Remuneration and Human Resources Committee
Chair of the Investment Committee
Interests in securities
16,759 stapled securities in Charter Hall Group via a
direct interest
Directors’ report
For the year ended 30 June 2020
Information on Directors continued
David Harrison
Managing Director and Group CEO
Experience and expertise
David has over 30 years’ 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, and 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 $40.5 billion of assets under management in
15 years.
Executive Director, Finance and Strategy and Chief Operating
Officer.
Karen holds a Bachelor of Economics and a Diploma of
Education from the University of Sydney.
Other current listed company directorships
Orica Ltd
Boral Limited
Former listed company directorships in last three years
Nil
Special responsibilities
Chair of the Audit, Risk and Compliance Committee
Interests in securities
23,137 stapled securities in Charter Hall Group via indirect
interests
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.
Greg Paramor AO
Independent Non-Executive Director
Experience and expertise
Greg joined the Board of the Charter Hall Group on
30 November 2018.
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
Charter Hall Education Trust (Alternative Director)
Former listed company directorships in last three years
Nil
Special responsibilities
Member of the Investment Committee
Interests in securities
537,204 stapled securities in Charter Hall Group via direct
interests and 841,773 stapled securities in Charter Hall Group via
indirect interests. 826,313 performance rights and 117,080
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.
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, gaining her experience both
within Australia and overseas. During her executive career, Karen
was a senior executive at Origin Energy including the roles of
Greg has been involved in the real estate and funds management
industry for more than 40 years, and was the co-founder of Equity
Real Estate Partners, Growth Equities Mutual, Paladin Australia
and the James Fielding Group.
Greg was the CEO of Mirvac Group between 2004 and 2008.
Greg is a past president of the Property Council of Australia and
past president of Investment Funds Association, a Fellow of the
Australian Property Institute and The Royal Institute of Chartered
Surveyors. Greg is a board member of the Sydney Swans and
the immediate past Chair of LJ Hooker. Greg is an Independent
Non-Executive Director of Juwai Limited. Greg was awarded an
Officer in the General Division (AO) of the Order of Australia in
January 2015 for his distinguished service to the community
through executive roles in a range of fields, including breast
cancer research, the not-for-profit sector and real estate and
property investment industries.
Other current listed company directorships
Nil
Former listed company directorships in last three years
Folkestone Limited
Charter Hall Education Trust (Alternative Director)
Special responsibilities
Member of the Audit, Risk and Compliance Committee
Member of the Investment Committee
Interests in securities
14,300 stapled securities in Charter Hall Group via indirect
interests
10
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
Information on Directors continued
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.
Other current listed company directorships
Arena REIT
Former listed company directorships in last three years
Nil
Special responsibilities
Member of the Nominations Committee
Member of the Investment Committee
Member of the Remuneration and Human Resources Committee
Interests in securities
10,000 stapled securities in Charter Hall Group via
indirect interests
Directors’ report
For the year ended 30 June 2020
Remuneration Report Summary
Charter Hall Limited is pleased to present its Remuneration Report (Report) for the year ended 30 June 2020. The table below outlines
the key remuneration changes made in 2020 and outcomes achieved in 2020.
Key changes in FY2020
Component
Executive Minimum
Securityholding
(Section 6.1)
Changes to Long Term
Incentive (LTI) Plan
(Section 3.5)
Change
During FY2020, a mandatory minimum securityholding requirement was introduced for all Group
Executives, including the Managing Director and Group CEO (Managing Director) and Other Reported
Executives to align to long term securityholder interests and business performance. All Group
Executives must accumulate Charter Hall securities equal to 100% of their respective pre-tax Fixed
Annual Remuneration (FAR) over a four-year period from the date of adoption of this requirement or
from the date of appointment as an Executive, as applicable.
The performance period has been increased from three to four years and the mandatory holding lock
period of one year, post vesting, has now been removed. Transition arrangements have been
introduced for the FY2020 LTI grant.
All Group Executives can now also make an upfront election of a voluntary restriction period of 5, 6 or
7 years, from the vesting date, to apply to 25%, 50%, 75% or 100% of their allocated stapled securities
on vesting of each tranche.
All Group Executives have the option to elect to receive up to 100% of payment, of the cash
component of their STI, in the form of rights to acquire CHC securities. These rights will vest based on
the Executive’s elected deferral period of 3, 5 or 7 years, from the date of award.
Company Secretary
Mark Bryant was appointed as joint Company Secretary for Charter Hall Group on 24 August 2015 and has been the sole Company
Secretary since 1 March 2017.
Optional Deferral of Cash
Component of Short Term
Incentive (STI)
(Section 3.4)
Mark holds a Bachelor of Business (Accounting), a Bachelor of Laws (Hons), a Graduate Certificate in Legal Practice, and is admitted
as a lawyer of the Supreme Court of NSW. Mark has over 15 years’ experience as a lawyer, including advising on listed company
governance, securities law, funds management, real estate and general corporate law.
Remuneration at a Glance for FY2020
Mark is the Group General Counsel and Company Secretary for the Charter Hall Group.
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
2020, and the number of meetings attended by each Director were:
Full meetings of the
Board of Directors
A
9
9
9
9
9
8
9
B
9
9
9
9
9
9
9
Audit, Risk and
Compliance
Committee
A
5
5
*
*
5
4
*
B
5
5
*
*
5
5
*
Investment
Committee
B
A
*
*
3
3
3
3
3
3
*
*
3
3
3
3
Nomination
Committee
B
A
*
*
-
-
-
-
*
*
*
*
*
*
-
-
Remuneration and
HR Committee
B
6
*
6
*
*
*
6
A
6
*
5
*
*
*
6
A Brennan
D Clarke
P Garling
D Harrison
K Moses
G Paramor
D Ross
Not a member of the stated Committee.
*
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.
Delivery
FAR
(Section 3.3)
Outcome
The Managing Director’s FAR was increased by 4.9% to $1,500,000, effective 1 July 2019 following an
independent benchmark review.
FAR for Other Reported Executives was also reviewed and increased by 4.4% on average, effective
1 July 2019.
Effective 1 July 2019, the Managing Director’s ‘on target’ Total Remuneration was increased to
$5,250,000 and Other Reported Executives’ FAR and ‘at risk’ components were also increased, in part
to recognise the change in LTI performance period from three to four years.
Group OEPS (excluding the CHOT performance fee) was 53.9 cents, which was 36.8% above the
FY2019 OEPS (excluding the CHOT performance fee) and 20.2% above target FY2020 OEPS
(excluding the CHOT performance fee). Assessment of individual performance scorecards has resulted
in 140% of the total target STI amount to be awarded to eligible employees across the Group. For all
executives, STI is delivered in the form of cash (67%) and deferred service rights (33%).
The FY2017 grant vested in full on 31 August 2019 as a result of the performance against absolute and
relative TSR hurdles over the three years to 30 June 2019 (Section 3.5).
The FY2018 LTI award reached the end of its three-year performance period on 30 June 2020 and will
vest at 100% on 31 August 2020 and will be subject to a further one-year holding lock.
There was no increase to the NED fee pool in FY2020. NED fees increased by 2.5% in FY2020.
‘On target’ Total
Remuneration and
Remuneration Mix
(Section 3.2)
STI
(Section 3.4)
LTI
(Section 3.5)
Non-Executive Directors
(NED)
(Section 5)
Directors’ report and financial report
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51
Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
Actual remuneration received in FY2020
The following table presents the actual remuneration that was received by Reported Executives during the financial year ended
30 June 2020. This voluntary disclosure is provided to increase transparency and includes:
‒
fixed pay and other benefits for 2020;
‒ 2019 cash STI paid during 2020; and
‒
the value of any LTI and STI award that vested during 2020.
The actual remuneration presented in the table below is distinct from the disclosed remuneration (as required by section 308(C) of the
Corporations Act 2001 (Cth) (Act)) in section 4.1 of this Report, which is calculated in accordance with statutory obligations and
accounting standards. The numbers in section 4.1 include accounting values for current and prior years’ LTI grants which have not
been (or may not be) received, as they are dependent on performance hurdles and service conditions being met.
Name
Managing Director
D Harrison
Other Reported Executives
S McMahon4
R Proutt
Totals
Salary
and other
benefits1
$
Short Term
Incentive2
$
Value of
securities
vested3
$
% of
remuneration
consisting of
rights
%
Total
$
1,501,688
1,430,000
5,567,630
8,499,318
851,688
821,688
3,175,064
595,960
526,320
2,552,280
2,580,349
1,020,467
9,168,446
4,027,997
2,368,475
14,895,790
65.5
64.1
43.1
61.6
1 Other benefits include superannuation and non-monetary benefits.
2 Values relate to STI paid in FY2020 in cash for FY2019 performance.
3 Values calculated using the two-day VWAP up until the vesting date applied to the number of rights vesting for LTI performance rights, STI deferred service rights and
any sign-on service rights.
4 Value of vested securities includes an extra grant of service rights allocated in recognition of the dual roles S McMahon undertook in FY2018 which vested in full on
31 August 2019.
Directors’ report
For the year ended 30 June 2020
1. Key Management Personnel
This Report outlines the remuneration policies and practices that apply to Charter Hall’s Key Management Personnel (KMP) for the
year ended 30 June 2020. The KMP include the Non-Executive Directors, Managing Director and Other Reported Executives.
Name
Non-Executive Directors
David Clarke
Anne Brennan
Philip Garling
Karen Moses
David Ross
Greg Paramor AO
Managing Director
David Harrison
Other Reported Executives
Sean McMahon
Russell Proutt
Role
Chair
Director
Director
Director
Director
Director
Term as KMP
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Managing Director and Group CEO
Full Year
Chief Investment Officer
Chief Financial Officer
Full Year
Full Year
The Report has been prepared and audited in accordance with the requirements of the Act.
Directors’ report and financial report
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Charter Hall Group Annual Report 2020 Directors’ report and financial report
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55
Charter Hall Group Annual Financial Report 2020 Directors’ report For the year ended 30 June 2020 16 2.Remuneration governanceCharter Hall’s Board and the Remuneration and Human Resources Committee (the Committee) are responsible for overseeing remuneration policy for the Group. The following diagram illustrates Charter Hall’s remuneration governance framework. 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. Managing Director and Management The Managing Director makes recommendations to the Committee regarding Executives’ remuneration. These recommendations take into account performance, culture and values. Together with management, the Managing Director also provides information and recommendations for deliberation and implements arrangements once they have been approved. SECURITYHOLDERS Risk Management The Committee has access to the Group’s personnel including those in the Risk, Finance and People teams. The Committee considers updates from these teams, External and Internal Audit and other Board Committees (as appropriate), on relevant risk matters, including remuneration outcomes, adjustments, and alignment of remuneration with our strategy, values, risk appetite and expected standards of conduct. Risk is also managed at various points in the executive remuneration framework including throughout the performance management process and through Board and Committee intervention as and when required. External Advisors The Board and the Committee seek advice from independent experts and advisors, when necessary, on various matters, including remuneration. The Committee independently appoints its remuneration consultants and external advisors and engages with them in a manner which ensures that any information provided is not subject to undue influence by management. Remuneration and Human Resources Committee Members -Anne Brennan (Chair)-Philip Garling-David RossRole Oversees our remuneration philosophy while considering strategic objectives, culture and values, risk management framework and long-term financial soundness. Reviews and provides guidance and, as appropriate, endorses management recommendations on remuneration matters (including FAR, STI and LTI for executives), fees for the NEDs (of both Group and the fund committees) and submits these for Board approval. Charter Specific responsibilities are detailed in the Committee’s Charter and reviewed annually. BOARD The Board reviews, challenges and approves (as applicable) the recommendations of the Committee around policy, performance, the remuneration arrangements for all Group Executives (Executives) and Non-Executive Directors (NEDs) and the remuneration policies and processes for the wider Group. Charter Hall Group Annual Financial Report 2020 Directors’ report For the year ended 30 June 2020 17 3.Executive remuneration frameworkCharter Hall’s remuneration framework is designed to attract and retain talented people by rewarding them for achieving performance outcomes that are aligned with our purpose, culture and values, business strategy, risk appetite and the long-term interests of our customers and securityholders. 3.1 Executive remuneration strategy The below diagram illustrates the remuneration framework that applied to the Managing Director and Other Reported Executives in FY2020. It also outlines the link between Charter Hall’s business and remuneration strategies. OUR PURPOSE We create better futures by bringing aspirations to life. OUR VALUES Active Partnership We believe that if everyone benefits, we benefit Genuine Insight We use expertise to unlock resilient growth Inventive Spirit We create with purpose and discipline Powered by Drive We put our passion into action OUR BUSINESS STRATEGY To access, deploy, manage and invest equity in core real estate sectors, creating value and generating superior returns for our customers and securityholders through: -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; and recruiting, retaining and motivating a high performing team.OUR REMUNERATION PRINCIPLES Deliver long term results for securityholders Attract, retain and motivate top talent Be simple, transparent and consistent Drive appropriate risk culture and employee conduct Component Delivery Current Year Year 1 Year 2 Year 3 Year 4 FAR Fixed Annual Remuneration comprises of cash base salary, statutory superannuation contributions and other nominated benefits. STI ‘At risk’ and subject to performance outcomes (OEPS and financial and non-financial KPIs including evidence of behaviour in line with values). 67% is paid as cash and 33% is deferred as service rights. LTI ‘At risk’ equity awards that are subject to long-term performance conditions. 100% is delivered as performance rights. REMUNERATION OUTCOMES FY2020 FAR The Managing Director’s FAR increased by 4.9% to $1,500,000, effective 1 July 2019. FAR for Other Reported Executives increased by 4.4% on average, effective 1 July 2019. (Section 3.3). STI The outperformance of 20.2% above target FY2020 OEPS (excluding the CHOT performance fee) has resulted in 140% of the total target STI amount to be awarded to eligible employees across the Group, based on the assessment of individual performance scorecards. Vesting of FY2018 (second tranche) and FY2019 (first tranche) deferred service rights in full. LTI FY2017 LTI award reached the end of its three-year performance period on 30 June 2019 and vested at 100% on 31 August 2019 and was subject to a further one-year holding lock. FY2018 LTI award reached the end of its three-year performance period on 30 June 2020 and will vest at 100% on 31 August 2020 and will be subject to a further one-year holding lock. Mandatory Security holding Requirement CEO and other Executives must accumulate Charter Hall securities equal to 100% of pre-tax FAR over a four-year period from the date of adoption of this requirement or from the date of appointment as an Executive, as applicable and maintain it on an on-going basis. Deferred STI vests in 2 equal tranches over 2 years Vesting after 4 years, equal measures of Relative TSR and OEPS growth STI cash delivered Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
3.4 Short Term Incentive
FY2020 STI Award – Key Features
Features
Purpose
Approach
STI is an ‘at-risk’ incentive awarded annually, subject to performance against agreed financial and non-
financial Key Performance Indicators (KPIs) including evidence of behaviour in line with values.
Participants
All Executives
Gateway for STI
Group: A financial gateway of 95% of target OEPS excluding the CHOT performance fee must be met
before any STI entitlement is available, with the Board retaining overall discretion on performance
achievement.
Individual: To help us maintain an effective risk management culture, all Executives must complete risk
and compliance training during the performance year (including Code of Conduct training) to ensure they
fully understand their role and comply with relevant legislative requirements.
Both gateways need to be met for any STI to be awarded.
Determining and
assessing
achievement of STI
target
The percentage achievement of STI target is determined by the Board, upon advice from the Committee,
based on achieving an OEPS target. The Board retains the discretion to increase or decrease the
percentage of overall STI target achieved, based on its assessment of the overall performance throughout
the year.
Individual
opportunity
Performance targets
Determining and
assessing
performance
Board Discretion
The maximum STI potential for all employees is 150% of their STI target, enabling recognition for
outperformance.
Individual STI outcomes are determined on the basis of Group and individual performance through a
Balanced Scorecard. The Scorecard is split into three elements: Financial; Customer; and
Leadership/Collaboration/Culture with 50% financial and 50% non-financial split between Customer and
Leadership/Collaboration/Culture. For each of these elements there are KPIs aligned to our core strategic
objectives of Growth and Resilience.
The Board believes that having a mix of financial and non-financial KPIs will provide measurable
performance criteria strongly linked to year-on-year securityholder returns and encourage the
achievement of individual goals consistent with the Group’s overall objectives. The scorecard elements of
financial, customer and leadership, culture and collaboration have been chosen because they represent
important elements of Charter Hall’s core strategic objectives of Growth and Resilience.
Role
Financial/Securityholder
Customer
Managing Director
CFO
CIO
50%
50%
50%
30%
30%
20%
Leadership, Culture
and Collaboration
20%
20%
30%
In consultation with the Committee, the Board assesses the Group’s financial performance and the
performance of all Reported Executives against agreed KPIs.
The Board applies the following general principles when determining and measuring performance goals
and any STI incentive for the Executives:
STI outcomes should always align with the market reported results, with any adjustments being
consistent with business performance and behaviour aligned to Group values;
‘on target’ performance aligns with the Board approved target for the financial year;
each STI or LTI performance condition or target is measured independently; and
payout above Gateway for STI is up to a maximum (150% of STI target).
-
-
-
-
These principles for assessing performance were chosen because they are, as far as practicable,
objective and fair and the most appropriate way to assess the Executives’ individual contribution and
determine remuneration outcomes in alignment with the financial performance of the Group.
Once the Balanced Scorecard has been assessed and performance against KPIs has been determined,
the outcome is subject to Board discretion. The Board may modify the performance outcomes upwards or
downwards taking into account risk related matters, behaviour in line with values and expected standards
of conduct.
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Charter Hall Group Annual Financial Report 2020 Directors’ report For the year ended 30 June 2020 18 3.2 Remuneration mix Executive remuneration is structured as a mixture of fixed and variable ‘at-risk’ STI and LTI components. While fixed annual remuneration is designed to provide a base level of remuneration, the ‘at-risk’ STI and LTI components reward executives when pre-agreed performance measures are met or exceeded. The figures below for all Reported Executives show the percentage mix of fixed versus ‘at-risk’ remuneration based on the maximum STI of up to 150% of the target STI. All Reported Executives have the potential to earn up to 150% of target STI. 3.3 Fixed Annual Remuneration Composition FAR comprises cash base salary, statutory superannuation contributions and other nominated benefits. Benchmarking and Review FAR is targeted at the median of the property market and is reviewed regularly, effective 1 July 2019, benchmarked against equivalent roles in the market recognising: -individual performance; and-the market environment for each individual’s skills and capabilities.Comparator Group The entities in the S&P/ASX 200 Australian Real Estate and Investment Trust (A-REIT) industry group are included in the comparator Group used to determine the Reported Executives’ remuneration. Charter Hall Managing Director outcome The Managing Director’s FAR increased by 4.9% to $1,500,000 in FY2020, effective 1 July 2019. In determining the Managing Director’s remuneration and appropriate remuneration mix, the Committee and the Chair of the Board jointly commissioned an independent benchmarking report by Conari Partners. The review had regard to: -the significant FUM growth over the past few years resulting in the growth of the organisation;-the operational intensity and transaction activity;-the remuneration for CEOs in the REIT sector with varying attributes, specifically considering theCEO FAR remuneration payable by nine industry specific comparator entities; and-the Managing Director’s current role.Other Reported Executives FAR for the CFO and the CIO increased by 2.5% and 6.25% respectively, effective 1 July 2019, owing to the significant growth in FUM and corresponding growth of the organisation. Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
Directors’ report
For the year ended 30 June 2020
Features
Delivery
Voluntary Deferral
of Cash Component
of STI
Approach
STI Performance Outcomes for Financial Year Ending 30 June 2020 – Managing Director
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 reviewed by Deloitte using the Black-Scholes-Merton valuation method.
Under the FY2020 STI Plan Executives and certain senior managers had an option to elect to receive up
to 100% of their cash STI payment in the form of rights to acquire CHC securities. These rights will vest
based on the employee’s elected deferral period of 3, 5 or 7 years from the date of award. These rights
will be subject to Charter Hall’s Performance Rights and Options Plan (PROP) however, will not be
subject to performance conditions or forfeiture on termination of employment. The number of rights
granted to an Executive or a senior manager is determined based on an independent fair value
calculation reviewed by Deloitte using the Black-Scholes-Merton valuation method and therefore no
distributions will be paid on these rights during the restricted period.
Growth and resilience measures are assessed in each of the performance categories in the Managing Director’s scorecard.
Performance
Category and
Weighting
Financial
50%
Measure
Performance Outcome
Rating
- Group OEPS growth
Equity flow growth
-
- Growth in funds under management
- Maintaining Group investment
capacity
- OEPS growth of 46.3% and 36.8%
Outstanding
excluding the CHOT performance fee
Equity flows of $5bn
FUM growth of $10.1bn, 33%
increase on FY2019
Increase in investment capacity to
$5bn
Total platform return of 19.1%
Customer
30%
Delivering exceptional customer
experience with continuous improvement
and innovation. Including:
- Customer satisfaction surveys
Inflows from new investors
-
Leadership, Culture
and Collaboration
20%
Engagement
-
- Diversity
-
Succession planning
Strong tenant and investor customer
relationships as evidenced through
survey results
6 new wholesale partnerships
secured
Outstanding
93% engagement result with 95%
participation
Outstanding
-
-
-
-
-
-
-
-
- Group total turnover of 10.5% with
regrettable turnover at 5.3%
Achievement of gender diversity
measures with 30% female
representation at Senior Management
level
Internal and external appointments
into key roles that provide succession
options for Executive roles
-
STI Performance Outcomes for Financial Year Ending 30 June 2020 – Other Reported Executives
KPIs for other Reported Executives are aligned to that of the Managing Director. These are focused on growth and resilience measures
in individual areas of accountability.
Scorecard
Financial
KPI
Including Group and Divisional financials and investment earnings; growth in
funds under management; and divisional specific financial initiatives.
Rating
Outstanding
Customer and Strategy
Including customer experience, service and satisfaction measures for funds
and tenants.
Outstanding
Leadership, Culture and
Collaboration
Including leadership contribution, succession, talent, diversity and
engagement.
Outstanding
The Group maintained earnings guidance through COVID-19 and performance measures were exceeded across all categories. The
outperformance resulted in 150% of STI target being achieved and Reported Executives received on average 150% of STI target for
FY2020. No Board discretion was applied to Executive’s STI outcomes.
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
Directors’ report
For the year ended 30 June 2020
Group FY2020 performance outcomes
In FY2020, Charter Hall’s OEPS was 69.3 cents, which was 46.3% above the FY2019 OEPS. The table below shows Charter Hall’s
OEPS (cps) over a five-year period:
Name
Managing Director
D Harrison2
Other Reported Executives
S McMahon3
R Proutt4
STI earned Paid in cash1
$
$
Voluntary
deferral into
rights
$
Mandatory
deferral
into service
rights
$
Target STI earned STI earned
STI of compared to compared to
target maximum
%
fixed pay
%
%
2,250,000
–
1,500,000
750,000
100%
150%
100%
1,078,605
961,500
359,535
–
359,535
641,000
359,535
320,500
85%
78%
150%
150%
100%
100%
1 To be paid on 15 September 2020.
2 D Harrison has elected to voluntarily defer 100% of the cash component of his FY2020 STI into rights; 50% is being deferred for a 3-year period and 50% for a
5-year period.
3 S McMahon has elected to voluntarily defer 50% of the cash component of his FY2020 STI into rights for a 3-year period.
4 R Proutt has elected to voluntarily defer 100% of the cash component of his FY2020 STI into rights; 50% is being deferred for a 3-year period and 50% for a 5-year period.
1 The first year CHC recognised operating tax expense of 4.6 cps.
FY2020 STI outcomes
Consistent with FY2018 and FY2019, for FY2020, the Board, on advice from the Committee, elected
to exclude the CHOT performance fee amount (post tax) from both the target and the actual OEPS
achieved due to the potential volatility and the significance of the earnings contributed by this fee
during the period.
The outperformance of 20.2% above target FY2020 OEPS (excluding the CHOT performance fee) in
FY2020 allows for 150% of the total target STI amount to be awarded which compares to 128% in
FY2019 and 120% in FY2018. Assessment of individual performance scorecards has resulted in
140% of the total target STI amount to be awarded, in September 2020, to eligible employees across
the Group.
The adjacent table shows the STI outcomes for Reported Executives for 2020.
Reported Executives on average received an outcome of 150% of STI target for FY2020. This is
based on individual achievement against KPIs including evidence of behaviour in line with values and
overall leadership team contribution to the Group.
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
3.5 Long Term Incentive
FY2020 LTI Plan – Key Features
Features
Purpose
Approach
LTI is ‘at risk’ and aligns with the long-term interests of securityholders and business performance. It also plays
an important role in employee retention.
Participants
All Executives, Fund Managers and selected other managers, comprising approximately 7% of permanent
employees.
Type of Equity
Awarded
The LTI is governed by the Performance Rights and Options Plan (PROP), under which rights 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 FY2020 detail, see specific grant allocation in Section 6.2.
Transition
Arrangements
With the introduction of the four-year vesting period, transition arrangements are in place for FY2020 LTI, where
performance rights will vest in two equal tranches at the end of year 3 (50%) and year 4 (50%).
Performance
Period
Tranche 1 (50% of performance rights) – 3 years from 1 July 2019 to 30 June 2022
Tranche 2 (50% of performance rights) – 4 years from 1 July 2019 to 30 June 2023
Valuation
The number of rights granted to an Executive is determined based on an independent fair value calculation by
Deloitte using the Black-Scholes-Merton valuation method.
Vesting
Conditions
OEPS
Performance
Condition (50%
of LTI
Allocation)
Each tranche of performance rights is subject to the following performance conditions:
-
50% of performance rights in each tranche are subject to operating earnings per security (OEPS) growth
hurdle; and
50% of performance rights in each tranche are subject to a relative total securityholder return (TSR) hurdle.
-
For FY2020 LTI, the Board has set the commencement OEPS as the FY2019 adjusted OEPS of 39.4 cps (after
tax) which is the FY2019 actual OEPS result of 47.4 cps (after tax) less the Charter Hall Office Trust (CHOT)
performance fee of 8.0 cps (after tax) recognised during the period. The actual aggregate OEPS (after tax)
achieved during the relevant performance period will also exclude any recognised CHOT performance fee (after
tax) to assess performance against the hurdles.
If for each of the two tranches, the OEPS achieves
a CAGR over the relevant performance period of:
Percentage of performance rights of each
tranche which may vest
0%
50%
Less than 5% per annum or
Aggregate OEPS (after tax) of:
For Tranche 1: less than 130.42 cps
For Tranche 2: less than 178.31 cps
Equal to 5% per annum or
Aggregate OEPS (after tax) of:
For Tranche 1: equal to 130.42
For Tranche 2: equal to 178.31 cps
More than 5% but less than 7% per annum or
Aggregate OEPS (after tax) of:
For Tranche 1: between 130.42 cps and 135.53 cps
For Tranche 2: between 178.31 cps and 187.18 cps
7% or more per annum or
Aggregate OEPS (after tax) of:
For Tranche 1: more than or equal to 135.53 cps
For Tranche 2: more than or equal to 187.18 cps
Directors’ report
For the year ended 30 June 2020
Relative TSR
Performance
Condition
(50% of LTI
Allocation)
Performance is determined based on the Group’s total ASX shareholder return (assuming distributions are
reinvested) ranking against the members of the comparator group over the performance measurement period.
The Board determines who is included in that comparator group and how the companies in that group are to be
treated.
The Board has determined the following A-REIT comparator group for the FY2020 LTI:
Abacus Property Group (ABP)
BWP Trust (BWP)
Cromwell Property Group (CMW)
Charter Hall Retail REIT (CQR)
Charter Hall Long Wale REIT (CLW)
Dexus Property Group (DXS)
Goodman Group (GMG)
Growthpoint Properties Australia (GOZ)
Mirvac Group (MGR)
National Storage REIT (NSR)
Scentre Group (SCG)
GPT Group (GPT)
Stockland (SGP)
Vicinity Centres (VCX)
Waypoint REIT (WPR)
Shopping Centres Australasia Property Group (SCP)
If, over the relevant performance period for each of the two
tranches, the Charter Hall Group relative TSR (compounded)
when ranked to a comparator group of the S&P/ASX 200 A-REIT
Accumulation Index is:
Less than the comparator group 50th percentile
Percentage of performance rights of
each tranche which may vest
0%
Equal to the comparator group 50th percentile
More than the comparator group 50th percentile and less than
75th percentile
50%
Pro rata straight line vesting
between 50% - 100%
Exceeds the comparator group 75th percentile
100%
During 2018, the Board reviewed the LTI performance conditions to ensure they continue to align with
securityholder expectations and with Charter Hall’s current strategy. Following the review, the Board determined
in FY2019 to retain the Relative TSR performance measure and replace the Absolute TSR performance hurdle
with an Operating Earnings Per Security (OEPS) growth measure.
For FY2020, the Board agreed the same performance hurdles for Relative TSR and OEPS growth would apply.
The OEPS growth measure aligns the PROP with commercial long-term performance which is within the
executive’s ability to influence and aligns with securityholder expectations. The performance hurdles of 5%
(50% vesting) and 7% (100% vesting), that have applied for the FY2019 and FY2020 LTI plans, have been set
with reference to:
average EPS growth of the constituents of the comparator group;
growth opportunities for the Group; and
the risk appetite of the Group for resilient and achievable long-term earnings growth.
-
-
-
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. 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 returns they could have received by investing
in a portfolio of alternative A-REIT sector stocks over the same period.
Rationale for
Performance
Measures
Pro rata straight line vesting between 50%
- 100%
100%
Voluntary
Restriction
Period
At the time of rights allocation, Executives can make an upfront election to apply a voluntary restricted period to
25%, 50%, 75% or 100% of stapled securities allocated to them on vesting of each tranche. In relation to the
proportion that they elect to be subject to the voluntary restricted period, the following table sets out the three
alternatives they can elect to apply as their voluntary restricted period for each tranche. The periods identified
below will commence at vesting date of each tranche.
Option A
Option B
Option C
3 years
20%
25%
33%
4 years
20%
25%
33%
5 years
20%
25%
34%
6 years
20%
25%
-
7 years
20%
-
-
Distributions
Distributions are not provided on performance rights.
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
TSR for Charter Hall versus comparable indices is outlined below
Although the one-year returns have been impacted by COVID-19, Charter Hall has outperformed its peer group with significant
outperformance over the longer term. The following table compares the total securityholder return for Charter Hall against various
indices.
Annualised TSR
(p.a. compound)
CHC
S&P ASX 100
S&P ASX 200 A-REIT
MSCI World REITs
1 Year
(7.4%)
(7.8%)
(21.3%)
(9.0%)
3 Years
5 Years
10 Years
25.8%
5.2%
2.0%
2.5%
22.1%
5.8%
4.4%
4.5%
21.5%
8.0%
9.2%
8.5%
3.6 Group summary of performance and total remuneration outcomes
The table below provides information on Charter Hall’s performance against key metrics over the last five years.
Key performance metrics
Statutory profit after tax for stapled securityholders ($m)
Statutory earnings per stapled security (EPS) (cents)
Operating earnings for stapled securityholders ($m)
Operating earnings per stapled security (cents)
Growth in OEPS %
Operating earnings per stapled security (ex CHOT performance fee)
(cents)
Growth in OEPS (ex CHOT performance fee) %
Distribution per stapled security (cents)
Stapled security price at 30 June ($)1
CHC total securityholder return – Jul to Jun (%)
2016
215.2
52.5
124.7
30.4
10.5
30.4
10.5
26.9
5.06
18.3
2017
257.6
61.2
151.2
35.9
18.1
35.9
18.1
30.0
5.50
15.2
2018
250.2
53.7
175.8
37.7
5.0
33.8
-6.0
31.8
6.52
24.6
2019
235.3
50.5
220.7
47.4
25.5
39.4
16.6
33.7
10.83
72.4
2020
345.9
74.3
322.8
69.3
46.3
53.9
36.8
35.7
9.69
-7.4
The table below provides information on Reported Executives’ total remuneration, both fixed and ‘at risk’ compared to target total
remuneration. Charter Hall’s STI is weighted towards growth in OEPS and the LTI provides an important link between remuneration
and TSR.
Reported Executives total remuneration summary
Fixed payments ($)
STI accounting expense ($)
LTI accounting expense ($)1
Earned remuneration ($)2
On target total remuneration ($)
Earned remuneration relative to target remuneration – over/(under) (%)
2019
3,117,452
3,828,420
1,654,108
8,599,980
7,416,060
16%
2020
3,075,536
4,290,105
2,012,321
9,377,962
7,947,927
18%
1 The LTI expense attributed to the Reported Executives reflects the statutory accounting expense under AASB2.
2 Earned remuneration for the Reported Executives is the sum of their fixed payments, STI and LTI expenses recognised.
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Charter Hall Group Annual Financial Report 2020 Directors’ report For the year ended 30 June 2020 26 Group performance outcomes Absolute TSR – The Group delivered a compound TSR (including stapled security price movements and distributions) over the three years to 30 June 2019 (FY2017 LTI performance period) of 36% per annum and three years to 30 June 2020 (FY2018 LTI performance period) of 24% per annum, both exceeding the Absolute TSR stretch performance hurdles of 12% and 12% respectively. Relative TSR – The following graphs also illustrate the Group’s TSR compared with the comparator group 50th and 75th percentile throughout the FY2017 and FY2018 LTI performance periods. FY2017 LTI performance period FY2018 LTI performance period Outcomes ‒ The FY2017 LTI had a vesting date of 31 August 2019. As a result of the TSR performance over the three years to 30 June 2019, the absolute and relative performance hurdles were exceeded and 100% of the performance rights vested and was subject to a further one-year holding lock. ‒ The FY2018 LTI has a vesting date of 31 August 2020. As a result of the TSR performance over the three years to 30 June 2020, the absolute and relative performance hurdles were exceeded and 100% of the performance rights will vest and be subject to a further one-year holding lock. Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
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 FY2019 and FY2020.
Short-term benefits
Post-
employ-
ment
benefits
Cash
short-term
incentive
$
Non-
Annual monetary
Super-
leave1 benefits2 annuation
$
$
$
Security-based
payments
Voluntarily
deferred
short-term
incentive
$
Mandatory
security-
based
short-term
incentive
$
Securities
options
and
perform-
ance
rights
$
Other
long-term
benefits
Long
service
leave1
$
% of total
remun-
eration
consisting
of rights
%
Total
$
14,794
23,100
1,688
1,621
21,003 1,500,000
–
20,531
750,000 1,178,229
864,899
715,000
(161,106) 4,783,605
25,026 4,489,646
(9,391)
6,462
1,688
1,621
21,003
20,531
359,535
–
359,535
297,980
375,087
286,827
17,389 2,313,378
14,001 2,002,851
23,752
–
29,155
29,562
1,688
1,621
5,064
4,863
641,000
–
459,005
21,003
20,531
502,382
63,009 2,500,535 1,430,035 2,012,321
– 1,276,140 1,654,108
61,593
320,500
263,160
15,034 2,280,979
14,000 2,107,483
(128,683) 9,377,962
53,027 8,599,980
40
30
32
29
34
36
37
34
–
1,478,997
1,409,469 1,430,000
Salary
$
Name
Managing Director
D Harrison3
2020
2019
Other Reported Executives
S McMahon4
2020
2019
R Proutt5
2020
2019
Total 2020
Total 2019
828,997
779,469
–
798,997
526,320
779,469
359,535
3,106,991
2,968,407 2,552,280
359,535
595,960
1 Shows the movement in leave accruals for the year.
2 Non-monetary benefits for FY2020 is salary continuance insurance.
3 D Harrison has elected to voluntarily defer 100% of the cash component of his FY2020 STI into rights; 50% is being deferred for a 3-year period and 50% for a
5-year period.
4 S McMahon has elected to voluntarily defer 50% of the cash component of his FY2020 STI into rights for a 3-year period.
5 R Proutt has elected to voluntarily defer 100% of the cash component of his FY2020 STI into rights; 50% is being deferred for a 3-year period and 50% for a 5-year period.
Directors’ report
For the year ended 30 June 2020
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 Managing Director and Other
Reported Executives are summarised below:
Position
Name
Managing Director
David Harrison
Other Reported Executives
Sean McMahon
Russell Proutt
Chief Investment Officer
Chief Financial Officer
Managing Director and Group CEO
Minimum Notice Period1
Employee Charter Hall
6 months
12 months
6 months
6 months
6 months
6 months
1 No notice period is required for termination by the Company for serious or wilful misconduct by the employee.
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).
5. Non-Executive Director remuneration
Policy
Benchmarking
Fee framework
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;
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.
Fees are set by reference to the following considerations:
‒
‒
‒
‒
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.
NED fees, including committee fees, are set by the Board within the aggregate amount of $1.7 million
per annum as approved by securityholders at the AGM in November 2017.
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 Board determined to increase the Chair and member committee fees as detailed in the table
below by 2.5%, effective 1 July 2019.
The Board agreed to the following changes in NED fees within the current aggregate fee pool:
‒ The Board Chair’s fee increased from $384,000 to $393,600;
‒ Board member base fees increased from $153,750 to $157,590; and
‒ Board Committees fees increased for both Chair and members.
Minimum shareholding
guidelines
Minimum shareholding guidelines were increased in FY2019 requiring Independent Directors to hold
CHC securities to the value of $90,000 (previously $50,000). This minimum shareholding guideline is
approximately a year’s base fee (net of tax) and is to be purchased over a three-year period. The
valuation is based on the value of the securities at the time of purchase.
Directors’ report and financial report
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67
Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
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 Committee
Chair
Member
Non-Executive Director remuneration
Non-Executive Directors
D Clarke
A Brennan
P Garling
K Moses
D Ross
G Paramor1
Total
2020
$
2019
$
393,600
157,590
384,000
153,750
42,025
21,010
31,515
15,755
3,150
3,150
15,755
10,505
41,000
20,500
30,750
15,375
3,075
3,075
15,375
10,250
2020 fees
$
2019 fees
$
393,600
210,115
192,250
199,615
187,000
189,105
1,371,685
384,000
205,000
187,575
194,750
182,450
116,011
1,269,786
1
Greg Paramor AO was appointed a Non-Executive Director on 15 November 2018. His FY2019 remuneration reflects time in the role.
Directors’ report
For the year ended 30 June 2020
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 Moses
D Ross
G Paramor
Managing Director
D Harrison
Other Reported Executives
S McMahon
R Proutt
Opening
balance at
30 Jun 2019
Stapled
securities
acquired
Rights and
options
exercised
Stapled
securities
sold
Closing
balance at
30 Jun 2020
45,875
30,000
16,759
23,137
–
–
–
–
–
–
10,000
14,300
–
–
–
–
–
–
–
–
–
–
–
–
45,875
30,000
16,759
23,137
10,000
14,300
1,299,764
–
436,879
(357,666)
1,378,977
77,867
–
–
7,000
202,474
80,074
(18,811)
(17,095)
261,530
69,979
6.2 Performance Rights and Option Plan details
Performance rights and service rights outstanding under the PROP
Performance rights
Year of issue
2018
2019
2020
Total performance rights outstanding
Service rights
Year of issue
2018
2019
2019
2020
2020
Total service rights issued
Securities
821,840
979,346
698,324
2,499,510
Securities
31,489
122,308
872,091
178,903
260,000
1,464,791
Exercise price
Nil
Nil
Nil
Vesting conditions
Absolute and relative performance criteria
OEPS and relative performance criteria
OEPS and relative performance criteria
Exercise price
Nil
Nil
Nil
Nil
Nil
Vesting conditions
Service conditions
Service conditions - Deferred STI
Service conditions
Service conditions - Deferred STI
Service conditions
Directors’ report and financial report
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69
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
Directors’ report
For the year ended 30 June 2020
Valuation model
The Black-Scholes-Merton methodology is used for allocation purposes for all rights and accounting purposes for non-market based
performance rights. The Monte Carlo method is used for accounting purposes for market based performance rights. The accounting
value determined using a Monte Carlo simulation valuation is in accordance with AASB 2.
Reported Executive rights – details by plan
Rights
Rights vested and
exercised
during
the year
granted
during
the year
Rights held
at 30 June
2019
Rights
forfeited Rights held
at 30 June
2020
during
the year
Fair value
per right
at grant
date ($)
Grant
date
Vesting
date
Fair value
to be
expensed
in future
years ($)1
330,178
294,664
304,238
–
–
57,580
49,121
49,120
–
–
112,934
100,763
98,287
–
–
18,811
19,854
50,875
19,854
–
–
108,181
104,689
–
–
62,979
31,489
17,095
17,095
–
–
–
–
–
113,706
113,705
–
–
–
33,980
33,980
–
–
–
33,917
33,916
–
–
–
–
14,162
14,161
–
–
35,633
35,633
–
–
–
–
12,507
12,506
330,178
–
–
–
–
57,580
49,121
–
–
–
112,934
–
–
–
–
18,811
19,854
50,875
–
–
–
–
–
–
–
62,979
–
17,095
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
294,664
304,238
113,706
113,705
–
–
49,120
33,980
33,980
–
100,763
98,287
33,917
33,916
–
–
–
19,854
14,162
14,161
108,181
104,689
35,633
35,633
–
31,489
–
17,095
12,507
12,506
25-Nov-16
23-Nov-17
28-Nov-18
25-Nov-19
25-Nov-19
23-Nov-17
28-Nov-18
28-Nov-18
25-Nov-19
25-Nov-19
25-Nov-16
23-Nov-17
28-Nov-18
25-Nov-19
25-Nov-19
23-Nov-17
28-Nov-18
28-Nov-18
28-Nov-18
25-Nov-19
25-Nov-19
23-Nov-17
28-Nov-18
25-Nov-19
25-Nov-19
23-Nov-17
23-Nov-17
28-Nov-18
28-Nov-18
25-Nov-19
25-Nov-19
1.39
2.65
5.09
7.10
7.01
5.65
6.84
6.54
10.44
10.11
1.39
2.65
5.09
7.10
7.01
5.65
6.84
6.84
6.54
10.44
10.11
2.65
5.09
7.10
7.01
5.68
5.41
6.84
6.54
10.44
10.11
–
31-Aug-19
41,907
31-Aug-20
31-Aug-21 1,073,236
560,780
31-Aug-22
31-Aug-23
611,500
31-Aug-19
31-Aug-19
31-Aug-20
31-Aug-20
31-Aug-21
–
–
–
–
–
31-Aug-19
31-Aug-20
31-Aug-21
31-Aug-22
31-Aug-23
31-Aug-19
31-Aug-19
31-Aug-19
31-Aug-20
31-Aug-20
31-Aug-21
31-Aug-20
31-Aug-21
31-Aug-22
31-Aug-23
20-Jul-19
20-Jul-20
31-Aug-19
31-Aug-20
31-Aug-20
31-Aug-21
–
14,330
346,720
167,275
182,398
–
–
–
–
–
–
15,385
369,304
175,738
191,634
–
62,435
–
–
–
–
Type of equity
Managing Director
D Harrison
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
Other Reported Executives
S McMahon
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
R Proutt
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Service Rights
LTI Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
STI Deferred Service Rights
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.
6.3 Other Transactions with KMP
There were no loans made, guaranteed or secured, directly or indirectly, by the Company and any of its subsidiaries to KMP or their
related parties during the year. There were no other transactions between the Company or any of its subsidiaries and any KMP or their
related parties during the year.
Directors’ report – unaudited continued
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 and its related practices by the
Charter Hall Group and Charter Hall Property Trust Group:
PricewaterhouseCoopers – Australian Firm
Taxation services
PricewaterhouseCoopers – New Zealand Firm
Taxation services for DCSF
PricewaterhouseCoopers – United States
Taxation services
Total remuneration for taxation services
Advisory services
PricewaterhouseCoopers Australian firm
Accounting advice
Total remuneration for advisory services
Total remuneration for non-audit services
Charter Hall Group
2020
$
2019
$
Charter Hall Property
Trust Group
2020
$
2019
$
98,800
135,370
9,100
34,520
5,944
13,164
5,944
13,164
–
104,744
78,846
227,380
–
15,044
–
47,684
60,000
60,000
164,744
36,990
36,990
264,370
–
–
15,044
–
–
47,684
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71
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Directors’ report
For the year ended 30 June 2020
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 and can be found at
https://www.charterhall.com.au/About-Us/corporate-
governance/corporate-governance-charter-hall-group.
The Group has processes in place to comply with applicable
environmental standards and regulations. The Group reports its
greenhouse gas emissions and energy use on an annual basis
under the National Greenhouse and Energy Reporting Act 2007.
Charter Hall environmental data is independently audited and in
October 2020 the Group will report to the Clean Energy Regulator
emissions for the measurement period 1 July 2019 to 30 June
2020. To mitigate its carbon emissions, the Group has adopted a
Net Zero target of Scope 1 and Scope 2 emissions by 2030 and
continues to implement resource efficiency measures across its
portfolio of assets and is also exploring renewable energy
generation opportunities within its office, retail and industrial
portfolios.
Charter Hall also voluntarily reports annually to international
organisations, such as the United Nations Principles for
Responsible Investment (PRI), Dow Jones Sustainability Index
(DJSI), FTSE4Good and the Carbon Disclosure Project (CDP).
Charter Hall has recently submitted its 2020 PRI Report and DJSI
Report (along with DJSI Reports for CQR and CLW), which
address Charter Hall’s environment, social and governance
(ESG) practices and emissions from 1 July 2018 to 30 June 2019.
Charter Hall funds (CQR, RP2, RP6, CPRF, CHOT, CPOF, DOF,
PFA, BSWF, CCT, CPIF, CLP, DIF4, CLW and DVP) also
voluntarily report to the Global Real Estate Sustainability
Benchmark (GRESB). These funds have recently submitted their
2019 GRESB reports, which also address Charter Hall
sustainability practices and emissions from 1 July 2018 to
30 June 2019.
Labour practices
Charter Hall Group became a signatory to the UN Global
Compact on 8 March 2019. Charter Hall Group released its
Human Rights Policy in November 2018 and adopted the
Charter Hall Supplier Code of Conduct in February 2019. These
governance policies and practices can be found at
https://www.charterhall.com.au/About-Us/corporate-
governance/corporate-governance-charter-hall-group and outline
our commitment to manage our operations in line with the UN
Guiding Principles, the UN Global Compact and international and
Australian Modern Slavery legislation, which reflects both our
business needs and the expectations of our customers and key
stakeholders.
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 73.
Rounding of amounts
The Company and the Trust is of a kind referred to in ASIC
Corporations Instrument (Rounding in Financial/Directors’
Reports) 2016/191, 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
hundred thousand dollars, or in certain cases, to the nearest
dollar.
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 20 August 2020. The Directors have the
power to amend and re-issue the Financial Statements.
David Clarke
Chair
Sydney
20 August 2020
Directors’ report and financial report
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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 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Auditor’s Independence Declaration As lead auditor for the audit of Charter Hall Limited and its controlled entities and Charter Hall Property Trust and its controlled entities (together “Charter Hall Group”) and Charter Hall Property Trust and its controlled entities (together “Charter Hall Property Trust Group”) for the year ended 30 June 2020, 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 inrelation 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. E A Barron Sydney Partner PricewaterhouseCoopers 20 August 2020 Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Consolidated statements of comprehensive income
For the year ended 30 June 2020
Consolidated statements of comprehensive income continued
For the year ended 30 June 2020
Note
4
2,3
5
5
6
Income
Revenue
Share of net profit from equity accounted investments
method
Net gain on sale of investments
Total income
Expenses
Employee costs
Cost of sales
Administration and other expenses
Finance costs
Depreciation, amortisation and impairment
Fair value losses from derivative financial instruments
Other net losses
Total expenses
Profit before tax
Income tax expense
Profit for the year
Profit for the year attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Profit attributable to stapled securityholders of
Charter Hall Group
Net profit attributable to Charter Hall Direct Diversified Consumer
Staples Fund (non-controlling interest)
Profit for the year
Charter Hall Group
2020
$'m
553.8
162.3
15.5
731.6
(152.3)
(66.1)
(29.3)
(14.5)
(31.1)
(2.8)
(8.8)
(304.9)
426.7
(78.6)
348.1
201.4
144.5
345.9
2.2
348.1
2019
$'m
378.5
146.2
2.7
527.4
(129.6)
(51.3)
(32.5)
(11.5)
(8.8)
(7.6)
(0.5)
(241.8)
285.6
(48.8)
236.8
91.0
144.3
235.3
1.5
236.8
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
31.1
145.0
15.5
191.6
–
–
(6.2)
(13.5)
(13.6)
(2.8)
(8.8)
(44.9)
146.7
–
146.7
–
144.5
144.5
2.2
146.7
37.5
128.8
3.7
170.0
–
–
(4.5)
(11.6)
–
(7.6)
(0.5)
(24.2)
145.8
–
145.8
–
144.3
144.3
1.5
145.8
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Changes in the fair value of cash flow hedges
Equity accounted fair value movements
Other comprehensive income for the year
Total comprehensive income for the year
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 attributable to stapled
securityholders of Charter Hall Group
Total comprehensive income attributable to Charter Hall Direct
Diversified Consumer Staples Fund (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
Diluted earnings per security (cents) attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Note
8(a)
Diluted earnings per stapled security (cents) attributable to
stapled securityholders of Charter Hall Group
8(b)
Charter Hall Group
2020
$'m
348.1
(0.2)
1.5
(1.3)
–
348.1
201.3
144.6
345.9
2.2
348.1
43.3
31.0
74.3
42.9
30.8
73.7
2019
$'m
236.8
0.1
1.4
1.3
2.8
239.6
91.9
146.1
238.0
1.6
239.6
19.5
31.0
50.5
19.4
30.7
50.1
Charter Hall Property
Trust Group
2020
$'m
146.7
2019
$'m
145.8
(0.1)
1.5
(1.3)
0.1
146.8
–
144.6
144.6
2.2
146.8
n/a
31.0
n/a
n/a
30.8
n/a
0.2
1.4
0.3
1.9
147.7
–
146.1
146.1
1.6
147.7
n/a
31.0
n/a
n/a
30.7
n/a
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
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36
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75
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Consolidated balance sheets
As at 30 June 2020
Consolidated statement of changes in equity – Charter Hall Group
For the year ended 30 June 2020
Assets
Current assets
Cash and cash equivalents
Receivables and other assets
Derivative financial instruments
Total current assets
Non-current assets
Receivables and other assets
Derivative financial instruments
Financial assets at fair value through profit or loss
Investments in associates at fair value through profit or loss
Development assets
Investments accounted for using the equity method
Investment properties
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other liabilities
Current tax liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Total current liabilities
Non-current liabilities
Trade and other liabilities
Derivative financial instruments
Borrowings
Lease liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity holders of Charter Hall Limited
Contributed equity
Reserves
Accumulated profit/(losses)
Parent entity interest
Equity holders of Charter Hall Property Trust
Contributed equity
Reserves
Accumulated profit
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Non-controlling interest in Charter Hall Direct Diversified
Consumer Staples Fund
Total equity
Note
9
15
9
15
2
2,3
10
11
12
13
14
15
13
15
14
12
16(a)
17
16(a)
17
Charter Hall Group
2020
$'m
238.9
79.3
3.6
321.8
12.3
70.0
101.2
25.9
29.6
1,875.4
173.8
118.9
20.8
8.5
1.5
2,437.9
2,759.7
150.1
38.9
15.9
4.0
0.1
209.0
3.8
7.7
364.2
11.1
18.2
405.0
614.0
2,145.7
289.1
(33.3)
108.2
364.0
2019
$'m
113.9
177.4
–
291.3
11.0
40.3
–
73.6
15.5
1,754.3
118.5
125.8
21.8
–
1.5
2,162.3
2,453.6
136.7
2.1
7.5
–
–
146.3
5.9
6.1
297.5
–
37.9
347.4
493.7
1,959.9
286.7
(34.8)
(11.0)
240.9
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
12.7
36.6
3.6
52.9
–
70.0
101.2
25.9
–
1,793.5
173.8
–
–
–
–
2,164.4
2,217.3
43.0
–
–
–
0.1
43.1
20.6
7.7
364.2
–
–
392.5
435.6
1,781.7
–
–
–
–
50.0
72.6
–
122.6
42.1
40.3
–
73.6
–
1,681.2
118.5
–
–
–
–
1,955.7
2,078.3
55.7
–
–
–
–
55.7
–
6.1
297.5
–
–
303.6
359.3
1,719.0
–
–
–
–
1,436.8
2.8
276.6
1,448.5
3.2
217.0
1,436.8
2.8
276.6
1,448.5
3.2
217.0
1,716.2
1,668.7
1,716.2
1,668.7
18
65.5
2,145.7
50.3
1,959.9
65.5
1,781.7
50.3
1,719.0
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
Balance at 1 July 2018
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
Security-based benefit expense
Dividend/distribution provided for or paid
Transactions with non-controlling interests
Balance at 30 June 2019
Balance at 1 July 2019
Change in accounting policy (see Note 32(a))
Adjusted balance at 1 July 2019
Profit for the year
Other comprehensive income/(loss)
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
Tax recognised direct to equity
Transfer due to deferred compensation payable
in service rights
Security-based benefit expense
Dividend/distribution provided for or paid
Transactions with non-controlling interests
Balance at 30 June 2020
Note
6(c)
7
6(c)
7
Attributable to the owners of
Charter Hall Limited
Contributed
Accumulated
equity Reserves profit/(losses)
$'m
$'m
(33.6)
(45.1)
91.0
–
–
0.9
91.0
0.9
$'m
285.7
–
–
–
–
–
(0.6)
1.6
–
–
–
–
1.0
286.7
286.7
–
286.7
–
–
–
–
(1.6)
4.0
–
–
–
–
2.4
289.1
(2.5)
3.1
2.0
6.8
–
–
9.4
(34.8)
(34.8)
–
(34.8)
–
(0.1)
(0.1)
–
(6.7)
(3.5)
2.1
9.7
–
–
1.6
(33.3)
–
–
–
–
–
(68.4)
–
(68.4)
(11.0)
(11.0)
(0.7)
(11.7)
201.4
–
201.4
–
–
–
–
–
(81.5)
–
(81.5)
108.2
Charter Hall
Group
Non-
controlling
interest
$'m
1,651.2
145.8
1.9
147.7
Total
$'m
207.0
91.0
0.9
91.9
Total
equity
$'m
1,858.2
236.8
2.8
239.6
–
14.4
14.4
(3.1)
4.7
2.0
6.8
(68.4)
–
(58.0)
240.9
240.9
(0.7)
240.2
201.4
(0.1)
201.3
(5.0)
–
–
–
(91.5)
2.2
(79.9)
1,719.0
1,719.0
–
1,719.0
146.7
0.1
146.8
(8.1)
4.7
2.0
6.8
(159.9)
2.2
(137.9)
1,959.9
1,959.9
(0.7)
1,959.2
348.1
–
348.1
–
17.1
17.1
(8.3)
0.5
2.1
9.7
(81.5)
–
(77.5)
364.0
(11.7)
–
–
–
(89.1)
(0.4)
(84.1)
1,781.7
(20.0)
0.5
2.1
9.7
(170.6)
(0.4)
(161.6)
2,145.7
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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38
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77
Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Consolidated statement of changes in equity – Charter Hall Property Trust Group
For the year ended 30 June 2020
Consolidated cash flow statements
For the year ended 30 June 2020
Attributable to the owners of the
Charter Hall Property Trust Group
Note
Contributed
Accumulated
equity Reserves profit/(losses)
$'m
$'m
161.2
0.9
144.3
–
–
1.8
144.3
1.8
$'m
1,453.5
–
–
–
Non-
controlling
interest
$'m
35.6
1.5
0.1
1.6
Total
$'m
1,615.6
144.3
1.8
146.1
Total
equity
$'m
1,651.2
145.8
1.9
147.7
16(b)
–
(5.0)
–
–
(5.0)
1,448.5
1,448.5
–
–
–
–
–
–
0.5
0.5
3.2
3.2
–
0.1
0.1
–
–
14.4
14.4
–
(88.5)
–
(88.5)
217.0
217.0
144.5
–
144.5
(5.0)
(88.5)
0.5
(93.0)
1,668.7
1,668.7
144.5
0.1
144.6
–
(3.0)
1.7
13.1
50.3
50.3
2.2
–
2.2
(5.0)
(91.5)
2.2
(79.9)
1,719.0
1,719.0
146.7
0.1
146.8
–
–
–
–
17.1
17.1
(11.7)
–
–
(11.7)
1,436.8
–
–
(0.5)
(0.5)
2.8
–
(84.9)
–
(84.9)
276.6
(11.7)
(84.9)
(0.5)
(97.1)
1,716.2
–
(4.2)
0.1
13.0
65.5
(11.7)
(89.1)
(0.4)
(84.1)
1,781.7
7
7
Balance at 1 July 2018
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
Dividend/distribution provided for or paid
Transactions with non-controlling interests
Balance at 30 June 2019
Balance at 1 July 2019
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
Dividend/distribution provided for or paid
Transactions with non-controlling interests
Balance at 30 June 2020
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Note
20
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Tax paid
Interest received
Interest paid
Distributions and dividends from investments
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment (net of lease
incentive received)
Proceeds on disposal of investment properties
Payments for investment properties
Payment for acquisition of subsidiary (net of cash acquired)
Investments in associates, joint ventures and financial assets
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 from associates, joint ventures and related
parties
Net cash outflow from investing activities
Buy back of stapled securities
Borrowing costs paid
Proceeds from borrowings (net of borrowing costs)
Repayment of borrowings
Payment for Settlement of Derivatives
Principal elements of lease payments
Proceeds on disposal of partial interest in a subsidiary that does
not involve loss of control
Distributions to non-controlling interests
Dividends/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
Cash and cash equivalents at the end of the year
Charter Hall Group
2020
$'m
650.3
(293.9)
(57.7)
2.1
(12.6)
114.4
402.6
(6.9)
–
(55.9)
–
(529.0)
400.1
(4.3)
51.4
(144.6)
(20.1)
(0.9)
331.1
(290.3)
(1.6)
(1.9)
16.5
(4.2)
(161.6)
(133.0)
125.0
113.9
238.9
2019
$'m
340.3
(212.5)
(48.3)
3.8
(9.7)
112.8
186.4
(5.9)
4.0
(59.0)
(192.1)
(199.5)
201.3
(39.4)
34.9
(255.7)
(8.2)
(2.0)
307.8
(72.1)
–
–
18.2
(3.1)
(152.3)
88.3
19.0
94.9
113.9
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
21.8
(8.5)
–
1.1
(12.2)
102.5
104.7
–
–
(55.9)
–
(514.8)
390.4
(375.1)
485.2
(70.2)
(17.4)
(0.8)
321.0
(286.7)
(1.6)
–
16.5
(4.2)
(98.6)
(71.8)
(37.3)
50.0
12.7
22.6
(3.9)
–
1.3
(2.2)
90.8
108.6
–
4.0
(59.0)
–
(296.9)
160.4
(496.9)
429.0
(259.4)
(7.2)
(9.5)
303.9
(45.8)
–
–
18.2
(3.1)
(88.5)
168.0
17.2
32.8
50.0
The above consolidated cash flow statements should be read in conjunction with the accompanying notes.
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79
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
1 Segment information continued
(b) Operating segments
The operating segments reported to the Board for the year ended 30 June 2020 are as follows:
Property investment segment earnings
Development investment segment earnings
Property funds management
Investment management revenue
Property services revenue
Total Property funds management segment revenue
Total segment income
Net operating expenses
Corporate expenses
EBITDA
Depreciation
Net interest expense
Operating earnings before tax
Income tax expense
Operating earnings attributable to stapled securityholders
Basic weighted average number of securities ('m)
Operating earnings per stapled security (cents)
Refer to Note 8 for statutory earnings per stapled security figures.
2020
$'m
120.0
17.1
357.1
55.2
412.3
549.4
(90.1)
(33.2)
426.1
(10.6)
(11.9)
403.6
(80.8)
322.8
465.8
69.3
2019
$'m
110.8
7.8
210.3
52.6
262.9
381.5
(78.0)
(28.3)
275.2
(4.7)
(8.3)
262.2
(41.5)
220.7
465.8
47.4
(c) The reconciliation of operating earnings to statutory profit after tax attributable to stapled securityholders is shown
below:
Operating earnings attributable to stapled securityholders
Add: Net fair value movements on equity accounted investments1
Add: Gain on disposal of property investments1
Add: Non-operating income tax benefit/(expense)
Less: Realised and unrealised net gains/(losses) on derivatives1
Less: Impairment of equity accounted investments
Less: Performance fees expense1
Less: Non-operating business combination acquisition costs
Less: Amortisation of intangibles
Less: 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.
2020
$'m
322.8
67.8
6.9
2.2
(14.9)
(13.6)
(6.0)
(4.4)
(6.9)
(8.0)
345.9
2019
$'m
220.7
75.8
1.9
(7.3)
(29.0)
–
(7.0)
(8.3)
(4.1)
(7.4)
235.3
The notes to these consolidated financial statements include additional information to assist the reader in understanding the
operations, performance and financial position of the Charter Hall Group and the Charter Hall Property Trust Group.
Critical accounting estimates and judgements
The preparation of the consolidated financial statements in conformity with Australian Accounting Standards requires the use of certain
critical accounting estimates and judgements in the process of applying accounting policies.
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 estimates or
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described
in their respective notes:
‒ Note 2
Investments in associates
‒ Note 3
Investments in joint ventures
‒ Note 4
Revenue
‒ Note 11
Intangible assets
‒ Note 12
Deferred tax
‒ Note 24
Controlled entities
In preparing its financial statements the Group has considered the current and ongoing impact that the COVID-19 pandemic has had
on its business operations. A $13.6m impairment was recorded for the Group’s investments in Charter Hall Retail REIT, and Charter
Social Infrastructure REIT. Other than this impairment, the Group’s strategic focus on resilient property investments and funds
management revenue streams has contributed to the COVID-19 pandemic having no identifiable material adverse impact on the
Group’s financial result.
With the potential and uncertain economic impacts of COVID-19, future property valuations, investment and development activity and
property funds management revenue could be adversely impacted.
Further disclosure is included in the following notes;
‒
‒ Revenue Note 4(a);
‒
‒ Fair value measurement Note 22(d).
Investments in associates Note 2(b);
Intangibles Note 11(b);
1 Segment information
(a) Description of segments
Charter Hall Group
The operating segments disclosed are based on the reports reviewed by the Board 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 the items in Note 1(c). Operating
earnings is the primary measure of the Group’s underlying and recurring earnings. Operating earnings is used by the Board to make
strategic decisions and as a guide to assessing an appropriate distribution to declare.
Segment earnings reviewed by the Board ceased to allocate net operating expenses to segments. This has been reflected in the tables
contained in this note, including restating the comparatives. This change did not impact the total segment income reported in the prior
period. In assessing the financial performance of the business, net operating expenses are primarily related to the Property Funds
Management segment.
The Board has identified the following three reportable segments, the performance of which it monitors separately.
Property investments
This segment comprises investments in property funds.
Development investments
This segment comprises investments in developments.
Property funds management
This segment comprises investment management services and property management services.
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 Board.
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
1 Segment information continued
(d) Reconciliation of earnings from the property and development investment segments to the share of net profit of
equity accounted investments
Segment earnings – property investments
Segment earnings – development investments
Segment earnings – investments
Add: Non-operating equity accounted profit
Less: Development profit
Less: Net rental income
Less: Interest income on development investments
Less: Distributions in operating income
Share of net profit of investments accounted for using the equity method
2020
$'m
120.0
17.1
137.1
38.9
(5.5)
(3.3)
(1.3)
(3.6)
162.3
2019
$'m
110.8
7.8
118.6
37.4
(2.3)
(3.3)
(1.4)
(2.8)
146.2
(e) Reconciliation of property funds management earnings stated above to revenue per the statement of comprehensive
income
Investment management revenue
Property services revenue
Segment revenue – property funds management
Add: recovery of property and fund-related expenses
Add: proceeds from sale of development assets
Add: rental income
Add: interest income
Add: distributions received for investments accounted for at fair value
Revenue per statement of comprehensive income
2020
$'m
357.1
55.2
412.3
53.4
70.2
10.9
3.4
3.6
553.8
2019
$'m
210.3
52.6
262.9
46.3
53.5
8.6
4.4
2.8
378.5
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.
Notes to the consolidated financial statements
For the year ended 30 June 2020
Investment in associates
2
(a) Carrying amounts
All associates are incorporated and operate in Australia. Refer to Note 32(e) for accounting policy information relating to associates.
Charter Hall Group
Name of entity
Accounted for at fair value through
profit or loss:1
Unlisted
Charter Hall Maxim Property Securities Fund
Other associates
Equity accounted
Unlisted
Charter Hall Prime Office Fund
Charter Hall Office Trust2
Charter Hall Prime Industrial Fund
Core Logistics Partnership
Charter Hall Exchange Wholesale Trust
Deep Value Partnership
Other associates
Listed
Charter Hall Retail REIT3
Charter Hall Long WALE REIT4
Charter Hall Social Infrastructure REIT5
Total investments in associates
Principal activity
Ownership interest
Carrying amount
2020
%
2019
%
2020
$'m
2019
$'m
Property investment
15.1
19.0
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
6.2
15.7
3.6
6.9
21.8
13.0
9.9
12.2
8.9
7.1
15.7
4.0
9.2
–
11.1
16.2
15.2
13.1
20.4
5.5
25.9
312.9
293.5
131.4
85.0
70.1
35.5
50.1
207.9
271.4
90.8
1,548.6
1,574.5
25.4
0.6
26.0
291.1
263.7
126.9
105.9
–
4.6
28.3
299.6
200.8
117.6
1,438.5
1,464.5
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 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’s material exposure to share and unit price risk is provided in Note 21.
2 The entity has a 31 December balance date.
3 Fair value at the ASX closing price as at 30 June 2020 was $189.3 million (30 June 2019: $311.7 million).
4 Fair value at the ASX closing price as at 30 June 2020 was $255.5 million (30 June 2019: $245.9 million).
5 Fair value at the ASX closing price as at 30 June 2020 was $75.1 million (30 June 2019: $143.7 million).
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44
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83
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
2
Investment in associates continued
2
Investment in associates continued
(c) 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
Return of capital
Disposal of units
Closing balance
Charter Hall Group
2020
$'m
26.0
5.2
(5.1)
–
(0.2)
25.9
2019
$'m
32.4
25.4
0.8
(1.4)
(31.2)
26.0
Charter Hall Property
Trust Group
2020
$'m
26.0
5.2
(5.1)
–
(0.2)
25.9
2019
$'m
32.4
25.4
0.8
(1.4)
(31.2)
26.0
(d) 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
Impairment of carrying amount
Divestments
Return of Capital
Closing balance
Charter Hall Group
2020
$'m
1,438.5
293.5
146.4
(84.9)
(0.6)
(13.6)
(203.7)
(27.0)
1,548.6
2019
$'m
1,336.6
202.5
125.5
(80.8)
1.7
–
(135.7)
(11.3)
1,438.5
Charter Hall Property
Trust Group
2020
$'m
1,376.5
293.4
137.8
(79.9)
(0.6)
(13.6)
(199.7)
(27.0)
1,486.9
2019
$'m
1,262.8
199.7
111.1
(73.9)
0.7
–
(114.5)
(9.4)
1,376.5
(e) 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.
Charter Hall Property Trust Group
Name of entity
Accounted for at fair value through
profit or loss:1
Unlisted
Charter Hall Maxim Property Securities Fund
Other associates
Equity accounted
Unlisted
Charter Hall Prime Office Fund
Charter Hall Office Trust2
Core Logistics Partnership
Charter Hall Exchange Wholesale Trust
Charter Hall Prime Industrial Fund
Deep Value Partnership
Other associates
Listed
Charter Hall Retail REIT3
Charter Hall Long WALE REIT4
Charter Hall Social Infrastructure REIT5
Total investments in associates
Principal activity
Ownership interest
Carrying amount
2020
%
2019
%
2020
$'m
2019
$'m
Property investment
15.1
19.0
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
5.9
15.7
6.9
21.8
1.7
13.0
9.9
12.2
8.9
6.7
15.7
9.2
–
1.9
11.1
16.2
15.2
13.1
20.4
5.5
25.9
297.1
293.5
85.0
70.1
62.2
35.5
48.5
207.9
271.4
115.7
1,486.9
1,512.8
25.4
0.6
26.0
275.6
263.7
105.9
–
61.1
4.6
22.6
299.6
200.8
142.6
1,376.5
1,402.5
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 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 Property Trust Group’s material exposure to share and unit price risk is provided in Note 21.
2 The entity has a 31 December balance date.
3 Fair value at the ASX closing price as at 30 June 2020 was $189.3 million (30 June 2019: $311.7 million).
4 Fair value at the ASX closing price as at 30 June 2020 was $255.5 million (30 June 2019: $245.9 million).
5 Fair value at the ASX closing price as at 30 June 2020 was $75.1 million (30 June 2019: $143.7 million).
(b) Critical judgements
Investments in associates are accounted for at either fair value through profit or loss or by using the equity method. 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.
Due to the difference in the fair value and carrying amounts, the recoverable amounts for the Charter Hall Retail REIT investment and
Charter Social Infrastructure REIT investment were estimated through a value in use calculation with the following critical judgements
and estimates:
‒
cash flow projections reflecting upside, base case and downside scenarios were used; applying probability weightings based on
historical market guidance accuracy;
‒ base case cash flow projections covering a 3-5 year period based on financial budgets approved by management. Cash flows
beyond the 3-5 year period are extrapolated using estimated growth rates appropriate for the business;
‒ pre-tax discount rate 7%-8%;
‒ growth after 5 years of 1-2% per annum; and
‒
terminal value multiple of 14-18 times earnings.
As a result of these estimates, impairment of $13.6m was recorded for Charter Hall Retail REIT and Charter Hall Social Infrastructure
REIT. If the multiplier assumptions were to increase/decrease by 1x, value in use would increase/decrease by 5-6%.
With the potential and uncertain economic impacts of COVID-19, future equity accounted investment values are sensitive to future
property valuations of the underlying investment properties, and could be adversely impacted.
The impacts of the estimates and assumptions for investment property are outlined in note 22(d).
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46
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
2
Investment in associates continued
2
Investment in associates continued
Charter Hall Charter Hall
Charter Hall Charter Hall Prime Office Long WALE
REIT
Office Trust Retail REIT
$'m
$'m
Fund
$'m
$'m
(f) Reconciliation of net assets of associates to carrying amounts of equity accounted investments
2020
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 income
Total comprehensive income
2019
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 income
Total comprehensive income
143.0
3,463.9
43.1
1,700.1
1,863.7
110.5
377.3
–
377.3
17.8
3,063.6
157.8
1,249.5
1,674.1
105.7
243.9
–
243.9
104.7
3,005.4
98.4
869.6
2,142.1
206.1
44.2
1.2
45.4
86.8
2,821.5
95.6
1,012.0
1,800.7
202.0
53.1
1.5
54.6
165.4
6,641.9
101.2
1,655.9
5,050.2
310.9
283.5
1.0
284.5
104.8
5,401.5
73.3
1,301.7
4,131.3
254.8
373.5
1.1
374.6
59.6
3,026.9
50.6
850.0
2,185.9
126.7
122.4
–
122.4
18.7
1,886.3
45.2
538.4
1,321.4
85.6
69.6
–
69.6
Charter Hall Group
2020
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
Impairment of carrying amount
Distributions received/receivable
Divestment
Return of capital
Closing balance
2019
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
Distributions received/receivable
Divestment
Return of capital
Closing balance
Charter Hall Charter Hall
Charter Hall Charter Hall Prime Office Long WALE
REIT
Office Trust Retail REIT
$'m
$'m
Fund
$'m
$'m
1,863.7
15.7%
292.6
2,142.1
9.9%
212.1
5,050.2
6.2%
313.1
2,185.9
12.2%
266.7
0.9
293.5
263.7
–
59.3
–
–
(12.2)
–
(17.3)
293.5
(4.2)
207.9
299.6
2.5
8.8
0.5
(9.5)
(15.5)
(78.5)
–
207.9
(0.2)
312.9
291.1
17.5
19.6
0.2
–
(14.5)
(1.0)
–
312.9
4.7
271.4
200.8
56.7
20.4
–
–
(16.2)
9.7
–
271.4
1,674.1
15.7%
262.8
1,800.7
16.2%
291.7
4,131.3
7.1%
293.3
1,321.4
15.2%
200.9
0.9
263.7
246.4
–
38.4
–
(11.7)
–
(9.4)
263.7
7.9
299.6
327.6
–
9.7
0.1
(20.5)
(17.3)
–
299.6
(2.2)
291.1
258.8
17.5
28.0
0.2
(13.4)
–
–
291.1
(0.1)
200.8
195.2
27.2
12.5
–
(13.7)
(20.4)
–
200.8
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 where the
Group has acquired units on-market at a price different to the fund's NTA (for listed investments), or where the Group has recorded an impairment to the investment in
associate.
Directors’ report and financial report
48
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87
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
2
Investment in associates continued
Charter Hall Property Trust Group
2020
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
Impairment of carrying amount
Distributions received/receivable
Divestment
Return of capital
Closing balance
2019
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
Distributions received/receivable
Divestment
Return of capital
Closing balance
Charter Hall Charter Hall
Charter Hall Charter Hall Prime Office Long WALE
REIT
Office Trust Retail REIT
$'m
$'m
Fund
$'m
$'m
1,863.7
15.7%
292.6
2,142.1
9.9%
212.1
5,050.2
5.9%
298.0
2,185.9
12.2%
266.7
0.9
293.5
263.7
–
59.3
–
–
(12.2)
–
(17.3)
293.5
(4.2)
207.9
299.6
2.5
8.8
0.5
(9.5)
(15.5)
(78.5)
–
207.9
(0.9)
297.1
275.6
17.5
18.6
0.2
–
(13.8)
1.4
(2.4)
297.1
4.7
271.4
200.8
56.7
20.4
–
–
(16.2)
9.7
–
271.4
1,674.1
15.7%
262.8
1,800.7
16.2%
291.7
4,131.3
6.7%
276.8
1,321.4
15.2%
200.9
0.9
263.7
246.4
–
38.4
–
(11.7)
–
(9.4)
263.7
7.9
299.6
327.6
–
9.7
0.1
(20.5)
(17.3)
–
299.6
(1.2)
275.6
244.1
17.5
26.4
0.2
(12.6)
–
–
275.6
(0.1)
200.8
195.2
27.2
12.5
–
(13.7)
(20.4)
–
200.8
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 where the
Group has acquired units on-market at a price different to the fund's NTA (for listed investments), or where the Group has recorded an impairment to the investment in
associate.
(g) Commitments and contingent liabilities of associates
Below are commitments and contingent liabilities of associates material to the Group’s balance sheet.
Charter Hall Prime Office Fund’s capital expenditure contracted for at the reporting date but not recognised as liabilities was
$129.5 million (2019: $471.1 million) relating to investment properties.
Charter Hall Office Trust’s (CHOT) capital expenditure contracted for at the reporting date but not recognised as liabilities was
$199.1 million (2019: nil) relating to investment properties.
Notes to the consolidated financial statements
For the year ended 30 June 2020
Investments in joint ventures
3
(a) Carrying amounts
All joint ventures are incorporated and operate in Australia. Refer to Note 32(e) for accounting policy information relating to joint
ventures.
Unless otherwise noted all joint ventures have a 30 June year end.
Charter Hall Group
Name of entity
Accounted for at fair value through
profit or loss:
Unlisted
CHAB Office Trust
Equity accounted
Unlisted
Brisbane Square Wholesale Fund
Long WALE Hardware Partnership1
Charter Hall Prime Retail Fund
Retail Partnership No. 6 Trust
Other joint ventures
Total investments in joint ventures
Principal activity
Ownership interest
Carrying amount
2020
%
2019
%
2020
$'m
2019
$'m
Property investment
–
50.0
Property investment
Property investment
Property investment
Property investment
16.8
13.4
29.4
–
16.8
13.5
29.4
20.0
–
–
101.8
123.6
47.3
–
54.1
326.8
326.8
47.6
47.6
104.8
96.5
56.6
35.9
22.0
315.8
363.4
1 Ownership interest is calculated as the weighted average holding of BP Fund 1, BP Fund 2 and TTP Wholesale Fund.
Charter Hall Property Trust Group
Name of entity
Accounted for at fair value through
profit or loss:
Unlisted
CHAB Office Trust
Equity accounted
Unlisted
Brisbane Square Wholesale Fund
Long WALE Hardware Partnership1
Charter Hall Prime Retail Fund
Retail Partnership No. 6 Trust
Other joint ventures
Total investments in joint ventures
Principal activity
Ownership interest
Carrying amount
2020
%
2019
%
2020
$'m
2019
$'m
Property investment
–
50.0
Property investment
Property investment
Property investment
Property investment
16.8
13.4
29.4
–
16.8
13.5
29.4
20.0
–
–
101.8
123.6
47.3
–
33.9
306.6
306.6
47.6
47.6
104.8
96.5
56.6
35.9
10.9
304.7
352.3
1 Ownership interest is calculated as the weighted average holding of BP Fund 1, BP Fund 2 and TTP Wholesale Fund.
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89
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
3
Investments in joint ventures continued
4 Revenue
(b) Critical judgements
Investments in joint ventures are accounted for at either fair value through profit or loss or by using the equity method. CHPT
designates investments in joint ventures 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.
(c) 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
Closing balance
Charter Hall Group
2020
$'m
47.6
–
0.4
(48.0)
–
2019
$'m
–
48.0
(0.4)
–
47.6
(d) Summarised financial information and movements in carrying amounts
Charter Hall Property
Trust Group
2020
$'m
47.6
–
0.4
(48.0)
2019
$'m
–
48.0
(0.4)
–
47.6
–
Movements in aggregate carrying amount:
Opening balance
Investment
Share of profit after income tax
Distributions received/receivable
Return of capital
Share of movement in reserves
Closing balance
Charter Hall Group
2020
$'m
315.8
73.0
15.0
(28.0)
(49.0)
–
326.8
2019
$'m
280.5
35.2
21.5
(20.4)
(0.3)
(0.7)
315.8
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
304.7
60.0
7.3
(18.0)
(47.4)
–
306.6
280.5
24.4
18.4
(17.9)
–
(0.7)
304.7
(e) Commitments and contingent liabilities of joint ventures
There are no commitments and contingent liabilities of joint ventures material to the Group's balance sheet.
Investment management revenue1,2
Property services revenue1
Development revenue3
Gross rental income
Charter Hall Group
2020
$'m
357.1
55.2
70.2
10.9
493.4
2019
$'m
210.3
52.6
53.5
8.6
325.0
Charter Hall Property
Trust Group
2020
$'m
–
(0.1)
–
10.9
10.8
2019
$'m
–
–
–
8.6
8.6
Other revenue
Recovery of property and fund-related expenses
–
Interest
15.0
Distributions/Dividends4
4.2
Other investment-related revenue
9.7
28.9
Total other revenue
Total revenue5
37.5
1 Revenue from the Group’s property and funds management business is categorised into the two main lines of operations being investment management and property
46.3
4.4
2.8
–
53.5
378.5
53.4
3.4
3.6
–
60.4
553.8
–
4.2
4.7
11.4
20.3
31.1
services.
Investment management revenue in the year ended 30 June 2020 includes $98.2 million for CHOT performance fee.
2
3 Revenue from the Group’s development investments forms part of the development segment earnings.
4 Represents the distribution of income from investments accounted for at fair value by the Group and Charter Hall Property Trust Group.
5 Revenue excludes share of net profits of equity accounted associates and joint ventures.
(a) Critical judgements
Critical judgements and estimates are made by the Group in respect of recognising performance fee revenue. Detailed calculations and
an assessment of the risks associated with the recognition of the fee are completed to inform the assessment of the appropriate
revenue to recognise. Key risks include the period remaining from balance sheet date to performance fee crystallisation date and the
degree of probability that any potential fee may unwind during that period. Key drivers of performance fees are assessed based on
historic data and prevailing economic conditions to inform judgements on the extent to which the fee can be reliably estimated.
The Group accounts for COVID-19 related rent relief agreed as a lease modification. The rent relief provided is immaterial to the
Group’s result.
With the potential and uncertain economic impacts of COVID-19, future investment management revenue is sensitive to future property
valuations and could be adversely impacted.
5 Expenses
Profit before income tax includes the following specific
expenses:
Employee costs
Employee benefit expenses
Security-based benefits expense
Payroll tax
Total employee costs
Administration and other expenses
Advertising, marketing and promotion
Occupancy costs
Accounting, professional and other costs
Communication and IT expenses
Administration expenses
Total administration and other expenses
Depreciation, amortisation and impairment
Depreciation
Amortisation
Impairment
Total depreciation, amortisation and impairment
Charter Hall Group
2020
$'m
2019
$'m
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
134.5
9.7
8.1
152.3
3.4
1.5
10.1
8.5
5.8
29.3
10.6
6.9
13.6
31.1
116.3
6.8
6.5
129.6
3.3
4.1
11.1
7.2
6.8
32.5
4.7
4.1
–
8.8
–
–
–
–
–
–
3.7
–
2.5
6.2
–
–
13.6
13.6
–
–
–
–
–
–
3.2
–
1.3
4.5
–
–
–
–
Directors’ report and financial report
52
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91
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
6
Income tax expense
6
Income tax expense continued
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
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. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation and establishes provision where appropriate on the basis of amounts expected to be paid to the tax authorities.
Income tax expense
(a)
Current tax expense
Deferred income tax expense/(benefit)
Under-provided in prior years
Deferred income tax expense/(benefit)
(Increase)/decrease in deferred tax assets for the tax
consolidated group
(Increase)/decrease in deferred tax liabilities for the tax
consolidated group
Decrease in deferred tax assets for entities outside the tax
consolidated group
Note
Charter Hall Group
2020
$'m
99.4
(20.8)
–
78.6
(3.8)
(17.0)
–
(20.8)
2019
$'m
30.4
18.0
0.4
48.8
5.5
12.4
0.1
18.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(b) Reconciliation of income tax expense 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
Other adjustments
Income tax expense
Amounts recognised directly in equity
(c)
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 fair value expense
Deferred tax: Estimated future deduction for rights vesting, in
excess of the cumulative fair value expense
426.7
128.0
285.6
85.7
146.7
44.0
145.8
43.8
(44.0)
(5.4)
78.6
(43.8)
6.9
48.8
(44.0)
–
–
(43.8)
–
–
(4.0)
3.5
(0.5)
(1.6)
(3.1)
(4.7)
–
–
–
–
–
–
(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 below in Note 6(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.
Tax losses – Charter Hall Group
(f)
At 30 June 2020, the Group has approximately $7.7 million (2019: $11.4 million) of tax effected unrecognised income tax losses.
At 30 June 2020, the Group has approximately $21.5 million (2019: $21.5 million) of tax effected unrecognised capital tax losses.
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.
7 Distributions/Dividends paid and payable
Ordinary stapled securities
Final ordinary distribution of 7.72 cents and ordinary dividend of
10.5 cents per stapled security for the six months ended
30 June 2020 payable on 31 August 2020
Interim ordinary distribution of 10.5 cents and interim ordinary
dividend of 7 cents per stapled security for the six months
ended 31 December 2019 paid on 28 February 2020
Final ordinary distribution of 10.7 cents and ordinary dividend of
6.5 cents per stapled security for the six months ended
30 June 2019 paid on 31 August 2019
Charter Hall Group
2020
$'m
2019
$'m
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
84.9
81.5
–
–
36.0
48.9
–
–
–
80.1
–
49.8
Interim ordinary distribution of 8.3 cents and interim ordinary
dividend of 8.2 cents per stapled security for the six months
ended 30 June 2019 paid on 28 February 2019
Total Distributions/Dividends paid and payable to stapled
securityholders
Distributions paid and payable to Charter Hall Direct Diversified
Consumer Staples Fund non-controlling interests
3.0
91.5
Total Distributions/Dividends paid and payable
A liability is recognised for the amount of any Distribution/Dividend declared by the Group on or before the end of the reporting period
but not paid at balance date.
3.0
159.9
4.2
170.6
4.2
89.1
156.9
166.4
84.9
88.5
76.8
38.7
–
–
Franking credits available in the parent entity (Charter Hall Limited) for dividends payable in subsequent financial years based on a tax
rate of 30% (2019: 30%) are $112.6 million (2019: $51.9 million). These amounts are calculated from the balance of the franking
account as at the end of the reporting period, adjusted for franking credits and debits that will arise from the settlement of liabilities or
receivables for income tax and dividends after the end of the year.
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Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
8 Earnings per stapled security
9 Receivables and other assets
Basic earnings per security attributable to:
(a)
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
Charter Hall Group
2020
Cents
2019
Cents
Charter Hall Property
Trust Group
2020
Cents
2019
Cents
43.3
31.0
74.3
42.9
30.8
73.7
19.5
31.0
50.5
19.4
30.7
50.1
n/a
31.0
n/a
n/a
30.8
n/a
n/a
31.0
n/a
n/a
30.7
n/a
Basic earnings per stapled security is determined by dividing profit attributable to the stapled security holders by the weighted
number of ordinary stapled securities on issue during the year.
Diluted earnings per stapled security is determined by dividing profit 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.
2020
$'m
2019
$'m
2020
$'m
2019
$'m
201.3
91.9
n/a
n/a
345.9
235.3
144.5
144.3
2020
Number
2019
Number
2020
Number
2019
Number
(c) Reconciliations of earnings used in calculating earnings
per stapled security
Equity holders of Charter Hall Limited
Profit attributable to the ordinary stapled securityholders of the
Group used in calculating basic and diluted earnings per stapled
security
(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
Current
Trade receivables
Contract assets¹
Loans to associates and joint ventures
Distributions receivable
Other receivables and assets
Non-current
Loans to associates and joint ventures
Loan receivable from Charter Hall Limited
Other receivables and assets
Note
23(e)
23(e)
Charter Hall Group
2020
$'m
35.4
–
7.3
30.2
6.4
79.3
10.2
–
2.1
12.3
2019
$'m
38.7
52.1
52.3
31.8
2.5
177.4
9.2
–
1.8
11.0
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
7.8
–
–
28.8
–
36.6
–
–
–
–
2.9
–
38.9
30.8
–
72.6
–
42.1
–
42.1
1 As at 30 June 2019, contract assets include $50.0 million relating to the CHOT performance fee.
(a) Bad and doubtful trade receivables
During the year, the Charter Hall Group and Charter Hall Property Trust Group incurred $nil expense (2019: $nil) in respect of
provisions for expected credit losses.
(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 21 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:
465,777,131 465,777,131
465,777,131 465,777,131
2,366,433
1,471,057
2,382,547
1,290,887
2,366,433
1,471,057
2,382,547
1,290,887
Current
1 to 3 months
3 to 6 months
More than 6 months
Charter Hall Group
2020
$'m
34.9
0.5
–
–
35.4
2019
$'m
38.7
–
–
–
38.7
Charter Hall Property
Trust Group
2020
$'m
7.8
–
–
–
7.8
2019
$'m
2.9
–
–
–
2.9
469,614,621 469,450,565
469,614,621 469,450,565
As at 30 June 2020, Charter Hall Group had trade receivables of $nil (2019: $nil) past due but not impaired. Charter Hall Property Trust
Group had $nil (2019: $nil) receivables past due but not impaired.
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
performance and/or service conditions.
Stapled securities issued under the General Employee Securities 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.
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 expected credit losses is processed based on historical default percentages and current
observable data including forecasts of economic conditions. 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.
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Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Investment properties
10
(a) Carrying amounts
The Group’s controlled entity investment fund, Charter Hall Direct Diversified Consumer Staples Fund, has a portfolio of investment
properties which are consolidated into the Group’s balance sheet.
A reconciliation of the carrying amount of investment properties at the beginning and end of the year is set out below:
Opening balance
Additions including acquisition costs
Fair value and other adjustments
Disposals
Closing balance
Charter Hall Group
2020
$'m
118.5
55.8
(0.5)
–
173.8
2019
$'m
63.4
60.1
(0.9)
(4.1)
118.5
Charter Hall Property
Trust Group
2020
$'m
118.5
55.8
(0.5)
–
173.8
2019
$'m
63.4
60.1
(0.9)
(4.1)
118.5
Key valuation assumptions used in the determination of the investment properties’ fair value and the Group’s valuation policy
are disclosed in Note 22(d).
(b) 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:
Due within one year
Due between one and five years
Over five years
Charter Hall Group
2020
$'m
9.3
37.1
30.8
77.2
2019
$'m
7.2
29.6
20.2
57.0
Charter Hall Property
Trust Group
2020
$'m
9.3
37.1
30.8
77.2
2019
$'m
7.2
29.6
20.2
57.0
11
Intangible assets
Indefinite life intangibles – management rights
Charter Hall Retail REIT
Opening and closing balance
Charter Hall Education Trust
Opening balance
Additions
Closing balance
Other indefinite life intangibles
Opening balance
Additions
Closing balance
Total indefinite life intangibles
Finite life intangibles – management rights
Opening balance
Additions
Amortisation charge
Closing balance
At balance date – finite life intangibles
Cost
Additions
Accumulated amortisation
Total finite life intangibles
Goodwill
Folkestone Limited
Opening balance
Additions
Closing balance
Total intangible assets
Charter Hall Group
2020
$'m
42.3
46.4
–
46.4
15.3
–
15.3
104.0
11.9
–
(6.9)
5.0
58.5
–
(53.5)
5.0
9.9
–
9.9
118.9
2019
$'m
42.3
–
46.4
46.4
12.6
2.7
15.3
104.0
7.8
8.2
(4.1)
11.9
50.3
8.2
(46.6)
11.9
–
9.9
9.9
125.8
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(a) Critical judgements
Critical judgements and estimates are made by the 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.
Intangibles – indefinite life assets
(b)
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.
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 reflecting upside, base case and downside scenarios were used, applying probability weightings;
‒
‒ base case 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 6-8% (2019: 6-12%);
‒ growth after three years of 1.9-2.3% (2019: 2-3%) per annum; and
terminal value multiple of 7.5 times earnings (2019: 10 times).
‒
With the potential and uncertain economic impacts of COVID-19, future property valuations, cash flow projections, and estimates of
recoverable amounts could be adversely impacted.
(c) Management Rights – finite life assets
Management rights with a fixed life are amortised using the straight line method over their useful life ranging from one to ten years.
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Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
12 Deferred tax assets and liabilities
13 Trade and other liabilities
Deferred tax assets comprises temporary differences attributable
to:
Tax losses carried forward1
Deferred tax assets comprises temporary differences attributable
to:
Employee benefits
Other
Deferred tax liabilities comprises temporary differences
attributable to:
Intangible assets
Investment in associates
Unearned revenue
Other
Net deferred tax liabilities
Charter Hall Group
2020
$'m
2019
$'m
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
1.5
1.5
21.5
4.0
25.5
31.1
11.9
–
0.7
43.7
(18.2)
20.6
2.2
22.8
33.2
10.6
15.6
1.3
60.7
(37.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Tax losses are held by Charter Hall Opportunity Fund No. 5 (CHOF5), 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.
(a) Critical judgements
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.
Current
Trade and other liabilities
Long service leave provision
Dividend/Distribution payable
Employee benefits liability
Non-current
Loan payable to Charter Hall Limited
Long service leave provision
Lease incentive liability
Charter Hall Group
2020
$'m
19.2
2.3
84.9
43.7
150.1
–
2.6
1.2
3.8
2019
$'m
19.3
2.2
80.1
35.1
136.7
–
2.1
3.8
5.9
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
7.0
–
36.0
–
43.0
20.6
–
–
20.6
5.9
–
49.8
–
55.7
–
–
–
–
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 or expected to be settled 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.
14 Borrowings
Current liabilities
Loans – related parties
Non-current liabilities
Bonds
Cash advance facilities (DCSF)
Less: unamortised transaction costs
Charter Hall Group
2020
$'m
15.9
300.2
66.5
(2.5)
364.2
2019
$'m
7.5
268.2
32.3
(3.0)
297.5
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
–
–
300.2
66.5
(2.5)
364.2
268.2
32.3
(3.0)
297.5
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Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
14 Borrowings continued
(a) Borrowings
Charter Hall Group
The Group’s debt platform includes the following:
‒ An unsecured $200.0 million credit facility plus an additional $20.0 million unsecured facility to support the bank guarantees with
maturity in May 2024. At 30 June 2020, drawn borrowings of $nil (2019: $nil) and bank guarantees of $19.3 million (2019: $14.3
million) had been utilised under these facilities, which under the terms of the agreements reduce the available facilities. No liability
is recognised for bank guarantees.
‒ US$175 million (A$231.5 million at issue date) bonds issued through a US Private Placement which was fully funded in August
2018 and matures in August 2028.
‒ The Group has entered into A$/US$ cross currency interest rate swap agreements that hedge the Group’s exposure to
foreign currency. The swap agreements entitle the Group to repay the bonds at A$231.5 million in August 2028. At 30 June
2020, the carrying amount of the bonds at the prevailing spot rate was A$300.2 million (2019: A$268.2 million) including a
fair value adjustment of A$46.8 million (2019: A$19.0 million). The carrying amount is offset by the fair value of the swap.
‒ The swap agreements also entitle the Group to receive interest, at semi-annual intervals, at a fixed rate on a notional
principal amount of US$175.0 million and oblige it to pay, at quarterly intervals, at a floating rate on a notional principal
amount of A$231.5 million. The swap agreements mature in August 2028.
‒ The Group has entered into interest rate swap agreements which hedge the Group’s exposure to interest rate fluctuations on a
notional principal amount of A$100.0 million. The swap agreements entitle the Group to receive floating interest and pay a fixed
rate at quarterly intervals. The agreements mature in February 2024.
DCSF Facility
The fund has two revolving debt facilities of A$80.0 million (2019: A$50.5 million) and NZ$7.0 million (2019: NZ$7.0 million), secured
against the fund’s investment properties (see Note 10). The facilities have a maturity date of July 2024. At 30 June 2020, drawn
borrowings of A$61.0 million (2019: A$26.6 million) and NZ$6.0 million (2019: NZ$6.0 million) had been utilised under these facilities
respectively.
(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 drawn (excluding hedged foreign exchange movements subsequent to the related debt drawing date and DCSF)
net of cash, divided by total assets net of cash, derivative assets and DCSF.
The gearing ratio of the Charter Hall Group and Charter Hall Property Trust Group at 30 June 2020 was 0.0% (30 June 2019: 5.7%).
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.
14 Borrowings continued
(c) Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Charter Hall Group
2020
Bank debt
Loans – related parties
Derivative financial instruments hedging debt
Borrowing costs
Cash
2019
Bank debt
Loans - related parties
Derivative financial instruments hedging debt
Borrowing costs
Fair value of USPP commitment
Cash
Charter Hall Property Trust Group
2020
Bank debt
Derivative financial instruments hedging debt
Borrowing costs
Funding (paid) to/received from Charter Hall Limited
Cash
2019
Bank debt
Derivative financial instruments hedging debt
Borrowing costs
Funding received from/(paid) to Charter Hall Limited
Fair value of USPP commitment
Cash
Movement
in derivates
and foreign
exchange
$'m
Movement
in borrowing
costs
$'m
Opening
balance
$'m
Movement
in cash
$'m
Closing
balance
$'m
300.5
7.5
(34.2)
(3.0)
(113.9)
156.9
5.4
–
1.4
(1.8)
(2.2)
(94.9)
(92.1)
300.5
(34.2)
(3.0)
(42.1)
(50.0)
171.2
5.4
1.4
(1.8)
17.7
(2.2)
(32.8)
(12.3)
–
–
(31.6)
–
–
(31.6)
–
–
(35.6)
–
2.2
–
(33.4)
–
(31.6)
–
–
–
(31.6)
–
(35.6)
–
–
2.2
–
(33.4)
–
–
–
0.5
–
0.5
–
–
–
(1.2)
–
–
(1.2)
–
–
0.5
–
–
0.5
–
–
(1.2)
–
–
–
(1.2)
66.2
8.4
–
–
(125.0)
(50.4)
295.1
7.5
–
–
–
(19.0)
283.6
66.2
–
–
62.7
37.3
166.2
295.1
–
–
(59.8)
–
(17.2)
218.1
366.7
15.9
(65.8)
(2.5)
(238.9)
75.4
300.5
7.5
(34.2)
(3.0)
–
(113.9)
156.9
366.7
(65.8)
(2.5)
20.6
(12.7)
306.3
300.5
(34.2)
(3.0)
(42.1)
–
(50.0)
171.2
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
15 Derivative financial instruments
17 Reserves
Current assets
Cross currency interest rate swaps
Non-current assets
Cross currency interest rate swaps
Current liabilities
Interest rate swaps
Non-current liabilities
Interest rate swaps
Charter Hall Group
2020
$'m
3.6
3.6
70.0
70.0
0.1
0.1
7.7
7.7
2019
$'m
–
–
40.3
40.3
–
–
6.1
6.1
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
3.6
3.6
70.0
70.0
0.1
0.1
7.7
7.7
–
–
40.3
40.3
–
–
6.1
6.1
Key valuation assumptions used in the determination of the fair value of derivative financial instruments and the Group’s
valuation policy are disclosed in note 22(c).
16 Contributed equity
(a) Movements in ordinary stapled security capital
Details
Opening balance at 1 July 2018
Buyback and issuance of securities for exercised
performance and service rights1
Tax recognised directly in equity
Closing balance at 30 June 2019
Closing balance per accounts at 30 June 2019
Buyback and issuance of securities for exercised
performance and service rights2
Tax recognised directly in equity
Closing balance at 30 June 2020
Closing balance per accounts at 30 June 2020
Number of
securities
465,777,131
–
–
465,777,131
465,777,131
–
–
465,777,131
465,777,131
Weighted
issue price
average Charter Hall
Limited
$'m
285.7
Charter Hall
Property
Trust
$'m
1,453.5
$2.25
$3.98
(0.6)
1.6
286.7
286.7
(1.6)
4.0
289.1
289.1
(5.0)
–
1,448.5
1,448.5
(11.7)
–
1,436.8
1,436.8
Total
$'m
1,739.2
(5.6)
1.6
1,735.2
1,735.2
(13.3)
4.0
1,725.9
1,725.9
1
2
1,121,489 stapled securities bought on-market at an average value of $7.20, offset by the exercise of 857,738 performance rights with a fair value of $1.41 and 263,751
service rights with an average value of $4.97.
1,641,582 stapled securities bought on-market at an average value of $12.11, offset by the exercise of 797,578 performance rights with a fair value of $1.41 and 844,004
service rights with an average value of $6.40.
(b) Ordinary stapled securities
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.
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.
(c) 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 suspended for the distribution paid on 25 August 2016 and subsequent distributions.
Business combination reserve
Security-based benefits reserve
Cash flow hedge reserve
Foreign currency basis reserve
Transactions with non-controlling interests
Other reserves
Charter Hall Limited
Charter Hall Property Trust
Charter Hall Group
2020
$'m
(52.0)
16.2
4.8
(1.0)
0.3
1.2
(30.5)
(33.3)
2.8
(30.5)
2019
$'m
(52.0)
11.2
2.5
(0.2)
0.8
6.1
(31.6)
(34.8)
3.2
(31.6)
Charter Hall Property
Trust Group
2020
$'m
–
–
4.8
(1.0)
0.3
(1.3)
2.8
–
2.8
2.8
2019
$'m
–
–
2.5
(0.2)
0.8
0.1
3.2
–
3.2
3.2
(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.
18 Non-controlling interests
During the year, the Group reduced its holding in the Charter Hall Direct Diversified Consumer Staples Fund from 41.9% to 39.6%
(2019: from 61.3% to 41.9%), increasing the non-controlling interest from 58.1% to 60.4%. The net proceeds on redemption were
$2.0 million (2019: $20.0 million), received in cash.
The difference between the redemption proceeds and amount transferred to non-controlling interests of $0.5 million (2019: $0.5 million)
has been recognised directly in equity.
Summarised balance sheet
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated non-controlling interest
Summarised statement of comprehensive income
Revenue
Profit for the period
Other comprehensive income/(loss)
Total comprehensive income
Comprehensive income allocated to non-controlling
Charter Hall Group
2020
$'m
3.0
1.0
2.0
173.8
67.3
106.5
108.5
65.5
2020
$'m
10.9
3.2
(0.1)
3.1
2.2
2019
$'m
2.2
0.8
1.4
118.6
33.5
85.1
86.5
50.3
2019
$'m
8.7
2.6
0.2
2.8
1.6
Charter Hall Property
Trust Group
2020
$'m
3.0
1.0
2.0
173.8
67.3
106.5
108.5
65.5
2019
$'m
2.2
0.8
1.4
118.6
33.5
85.1
86.5
50.3
2020
$'m
10.9
3.2
(0.1)
3.1
2.2
2019
$'m
8.7
2.6
0.2
2.8
1.6
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Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
21 Capital and financial risk management
(a) Capital risk management
The key capital risk management objective of the Group and CHPT 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 stapled security buyback program or selling assets.
(b) Financial risk management
Both the Group and CHPT 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 co-operation 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.
(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.
19 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
Audit and review of financial reports for DCSF
Other assurance services
Other assurance services for DCSF
Total remuneration for audit services
(b) Taxation services
PricewaterhouseCoopers – Australian Firm
Taxation services
PricewaterhouseCoopers – New Zealand Firm
Taxation services for DCSF
PricewaterhouseCoopers – United States Firm
Taxation services
Total remuneration for taxation services
(c) Advisory services
PricewaterhouseCoopers – Australian Firm
Accounting advice
Total remuneration for advisory services
Charter Hall Group
2020
$
2019
$
Charter Hall Property
Trust Group
2020
$
2019
$
585,126
30,259
7,721
–
623,106
367,497
38,723
103,617
1,882
511,719
8,529
30,259
–
–
38,788
6,961
38,723
–
1,882
47,566
98,800
135,370
9,100
34,520
5,944
13,164
5,944
13,164
–
104,744
78,846
227,380
–
15,044
–
47,684
60,000
60,000
36,990
36,990
–
–
–
–
20 Reconciliation of profit after tax to net cash inflow from operating activities
Profit after tax for the year
Non-cash items:
Amortisation of intangibles
Impairment of associates
Depreciation and amortisation
Non-cash security-based benefits expense
Net gain on sale of investments, property and derivatives
Fair value adjustments
Unrealised net loss on derivative financial instruments
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
Increase in development assets
Share of net profits from equity accounted investments in associates
and joint ventures
(Increase)/decrease for net deferred income tax
Net cash inflow from operating activities
Charter Hall Group
2020
$'m
348.1
6.9
13.6
11.9
9.9
(15.5)
8.5
2.8
0.3
48.4
13.9
(11.8)
(51.4)
17.0
402.6
2019
$'m
236.8
4.1
–
5.7
6.9
(2.7)
(0.2)
7.6
0.2
(61.9)
44.0
(13.7)
(36.2)
(4.2)
186.4
Charter Hall Property
Trust Group
2020
$'m
146.7
2019
$'m
145.8
–
13.6
1.3
–
(15.5)
8.5
2.8
0.3
(6.4)
(0.6)
–
(46.0)
–
104.7
–
–
1.0
–
(3.7)
(0.2)
7.6
0.2
(12.3)
11.0
–
(40.8)
–
108.6
Distributions and interest income received on investments has been classified as cash flow from operating activities.
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105
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
21 Capital and financial risk management continued
21 Capital and financial risk management continued
The following table illustrates the potential impact a change in unlisted unit prices by +/–10% would have on the Group and CHPT’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
2020
Assets – Charter Hall Group
Investments in associates at fair value through profit or loss
Investments in financial assets at fair value through profit or loss
2019
Assets – Charter Hall Group
Investments in associates at fair value through profit or loss
Investments in joint ventures at fair value through profit or loss
Charter Hall Property Trust Group
2020
Assets – Charter Hall Property Trust Group
Investments in associates at fair value through profit or loss
Investments in financial assets at fair value through profit or loss
2019
Assets – Charter Hall Property Trust Group
Investments in associates at fair value through profit or loss
Investments in joint ventures at fair value through profit or loss
10%
Impact on
Profit
and Equity
$'m
Carrying
amount
$'m
25.9
101.2
26.0
47.6
25.9
101.2
26.0
47.6
2.6
10.1
2.6
4.8
2.6
10.1
2.6
4.8
The impact on equity is the same as the impact on profit. The impact of a -10% change is the reverse of the impact shown for a +10% change.
Cash flow and fair value interest rate risk
The Group has long-term interest-bearing assets from unsecured loans receivable to development partners of $14.3 million. This
exposure is not considered to be material to the Group.
CHPT and Charter Hall Limited are part of an unsecured stapled loan arrangement maturing on 30 June 2023 with interest charged on
an arm’s length basis. Refer to Note 23(e) for further details.
The Group’s and CHPT’s external interest rate risk arises from the debt facilities disclosed in Note 14. Borrowings drawn at variable
rates expose both the Group and CHPT to cash flow interest rate risk. Borrowings drawn at fixed rates expose both the Group and
CHPT to fair value interest rate risk. The Group’s and CHPT’s policy is to mitigate interest rate risk by ensuring that interest rates on
core borrowings for the anticipated debt term match the use of those funds. Core borrowings are defined as being the level of
borrowings that are expected to be held for a period of more than two years.
Interest rate risk exposure
(ii)
The Group’s and CHPT’s external interest rate risk arises from the debt facilities disclosed in Note 14 bearing a variable interest rate.
In addition, CHPT’s exposure arises from an unsecured stapled loan maturing on 30 June 2023 payable to Charter Hall Limited bearing
a variable interest rate.
Interest rate sensitivity analysis
The following tables illustrate the potential impact a change in interest rates of +/–1% would have on the Group and CHPT’s profit and
equity, resulting from changes in Australian interest rates applicable at 30 June 2020, with all other variables remaining constant.
Charter Hall Group
2020
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Total increase/(decrease)
2019
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Total increase/(decrease)
Charter Hall Property Trust Group
2020
Financial assets
Cash and cash equivalents
Financial liabilities
Loan payable to Charter Hall Ltd
Borrowings
Total increase/(decrease)
2019
Financial assets
Cash and cash equivalents
Loan receivable from Charter Hall Ltd
Financial liabilities
Borrowings
Total increase/(decrease)
Effective
interest rate
Fair value
$'m
Carrying
amount
$'m
1%
Impact on
Profit
and Equity
$'m
1.0%
238.9
238.9
3.0%
366.7
366.7
(127.8)
1.8%
113.9
113.9
3.9%
300.5
300.5
(196.6)
1.0%
12.7
12.7
6.6%
3.0%
20.6
366.7
1.8%
7.7%
50.0
42.1
4.7%
300.5
20.6
366.7
(374.6)
50.0
42.1
300.5
–
2.4
–
2.4
1.1
1.8
2.9
0.1
0.2
–
0.1
0.5
0.4
1.8
2.7
The impact on equity is the same as the impact on profit. The impact of a -1% change is the reverse of the impact shown for a +1% change.
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.
The effect of changes in interest rates on the Group’s and CHPT’s profit and equity shown in the table above is mainly impacted by a
change in interest payable on floating rate interest, offset by changes in the fair value of derivative financial instruments hedging this
exposure.
(iii) Foreign exchange risk
The Group and CHPT’s principal exposure to foreign exchange risk arises from its investments in foreign subsidiaries and exposure
to bond issuances denominated in US dollars. The major asset held by foreign subsidiaries is cash in foreign denominated bank
accounts. Cross currency swaps are used to convert US dollar borrowings into Australian dollar exposure.
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Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
21 Capital and financial risk management continued
21 Capital and financial risk management continued
(iv) Hedge accounting of derivatives
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument
and the hedged item. See Note 15 for derivatives held by the Group.
The Group’s accounting policy for its fair value and cash flow hedges is set out in Note 32(l).
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
The Group hedges 100% of its foreign denominated debt. The Group enters into cross currency interest rate swaps that have similar
critical terms as the hedged item, such as payment dates, maturities and notional amount. The Group uses the hypothetical derivative
method to assess effectiveness. Hedge ineffectiveness may occur due to credit/debit value adjustments and differences in critical
terms between the hedging instrument and the hedged item.
Hedging instruments used by the Group
Cross currency interest rate swaps currently in place cover 100% (2019: 100%) of the foreign denominated debt outstanding. The
payable variable AUD interest rates of the swaps are 2.0% (2019: 2.0%) above the 90-day bank bill swap rate which at the end of the
reporting period was 0.2% (2019: 1.2%) and the receivable USD fixed rates of the loans are 4.6% (2019: 4.6%).
Interest rate swaps currently in place cover 43.2% (2019: 43.2%) of debt outstanding (including debt hedged into AUD). The payable
fixed AUD interest rate of the swaps currently in place are 2.1% (2019: 2.1%) and the receivable is the 90-day bank bill swap rate.
See Note 14(a) for further details of swaps held by the Group.
Effects of hedge accounting on the financial position and performance
The effects of the cross currency interest rate swaps on the Group’s financial position and performance are as follows:
Cross currency interest rate swaps
Carrying amount
Notional amount
Maturity date
Hedge ratio¹
Change in fair value of outstanding hedging instruments since 1 July
Change in value of hedged item used to determine hedge
effectiveness
Charter Hall Group
2020
2019
Charter Hall Property
Trust Group
2020
2019
73.6
231.5
40.3
231.5
73.6
231.5
40.3
231.5
August-2028 August-2028 August-2028 August-2028
1:1
1:1
1:1
1:1
33.3
41.7
33.3
41.7
(32.0)
(38.8)
(32.0)
(38.8)
(c) Credit risk
The Group and CHPT have policies in place to ensure that sales of services are made to customers with appropriate credit histories to
minimise risk of default. A default is when the counterparty fails to fulfil its obligations under the terms of the financial asset causing
financial loss to the Group and CHPT.
The Group derives 63.7% of its income from management fees, transaction and other fees from related parties. A further 24.8% of the
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. Development revenue comprises 9.6% of the Group’s revenue, with the balance relating to
interest income and gross rental income.
CHPT derives 78.1% of its income from equity accounted investments in property funds and distributions from investments in property
funds held at fair value through profit and loss.
Where appropriate, tenants in the underlying property funds for the Group and CHPT are assessed for creditworthiness, taking into
account their financial position, past experience and other factors. Refer to Note 9(c) for more information on credit risk.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Group and CHPT have
policies that limit the amount of credit exposure to any one financial institution.
The Group and CHPT applies the AASB 9 simplified approach to measuring expected credit losses which involves a lifetime expected
loss allowance for all trade and other financial assets. The Group considers its financial asset balances to be low risk and thus the
methodology has not resulted in the recognition of an impairment of any financial assets.
The loss allowances for trade and other financial assets are based on assumptions about risk of default and expected loss rates. The
Group uses judgement in making these assumptions, based on the Group’s history, existing market conditions as well as forward
looking estimates at the end of each reporting period.
(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
Group and CHPT aim at maintaining flexibility in funding by keeping committed credit lines available.
Maturities of financial liabilities
The following table provides the contractual maturity of the Group’s and CHPT’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.
1 The underlying rate on interest rate swaps is the same as the rate exposure on the debt, therefore the hedge ratio is 1:1.
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Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
21 Capital and financial risk management continued
Charter Hall Group
2020
Trade and other payables
Borrowings
Derivative financial instruments
Net contractual amounts payable/(receivable)
Total financial liabilities
2019
Trade and other payables
Borrowings
Derivative financial instruments
Net contractual amounts payable/(receivable)
Total financial liabilities
Charter Hall Property Trust Group
2020
Trade and other payables
Borrowings
Derivative financial instruments
Net contractual amounts payable/(receivable)
Total financial liabilities
2019
Trade and other payables
Borrowings
Derivative financial instruments
Net contractual amounts payable/(receivable)
Total financial liabilities
Carrying
amount
$'m
Less than
one year
$'m
Between
one and
five years
$'m
Over
five years
$'m
Total cash
flows
$'m
153.9
382.6
7.8
544.3
142.6
308.0
6.1
456.7
63.6
366.7
7.8
438.1
55.7
300.5
6.1
362.3
150.1
15.9
2.3
168.3
136.7
7.5
2.2
146.4
43.0
–
2.3
45.3
55.7
–
2.2
57.9
0.1
66.5
5.7
72.3
2.1
32.3
8.2
42.6
–
66.5
5.7
72.2
–
32.3
8.2
40.5
3.7
300.2
–
303.9
3.8
268.2
–
272.0
–
300.2
–
300.2
–
268.2
–
268.2
153.9
382.6
8.0
544.5
142.6
308.0
10.4
461.0
43.0
366.7
8.0
417.7
55.7
300.5
10.4
366.6
Offsetting financial assets and liabilities
The Group is a party to the master agreement as published by International Swaps and Derivative Associates, Inc. (ISDA) which allows
the Group’s counterparties, under certain conditions (i.e. event of default), to set off the position owing/receivable under a derivative
contract to a net position outstanding. As at 30 June 2020, there was a gross liability position of $nil (2019: $nil) with no amounts
subject to offset.
As the Group does not have a legally enforceable right to set off, none of the financial assets or financial liabilities are offset on the
balance sheet of the Group.
Notes to the consolidated financial statements
For the year ended 30 June 2020
22 Fair value measurement
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.
(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 (Note 2)
Investments in joint ventures at fair value through profit and loss (Note 3)
Investment properties (Note 10)
‒
‒
‒
‒ Derivatives (Note 15)
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement
hierarchy:
(i)
(ii)
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset 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).
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Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
22 Fair value measurement continued
22 Fair value measurement continued
The following table presents the Charter Hall Group’s and Charter Hall Property Trust Group’s assets and liabilities measured and
recognised at fair value:
The fair value of interest rate swaps is determined using forward interest rates and the present value of the estimated future cash flows
at the balance date.
Charter Hall Group
2020
Investments in financial assets at fair value through profit
and loss
Investments in associates at fair value through profit and
loss
Investment properties
Derivative financial instruments
Total assets
Derivative financial instruments
Total liabilities
2019
Investments in joint ventures at fair value through profit and
loss
Investments in associates at fair value through profit and
loss
Investment properties
Derivative financial instruments
Total assets
Derivative financial instruments
Total liabilities
Charter Hall Property Trust Group
2020
Investments in financial assets at fair value through profit
and loss
Investments in associates at fair value through profit and
loss
Investment properties
Derivative financial instruments
Total assets
Derivative financial instruments
Total liabilities
2019
Investments in joint ventures at fair value through profit and
loss
Investments in associates at fair value through profit and
loss
Investment properties
Derivative financial instruments
Total assets
Derivative financial instruments
Total liabilities
Level 1
$'m
Level 2
$'m
Level 3
$'m
Total
$'m
101.2
–
–
–
101.2
–
–
47.6
–
–
–
47.6
–
–
101.2
–
–
–
101.2
–
–
47.6
–
–
–
47.6
–
–
–
–
–
73.6
73.6
(7.8)
(7.8)
–
–
–
40.3
40.3
(6.1)
(6.1)
–
–
–
73.6
73.6
(7.8)
(7.8)
–
–
–
40.3
40.3
(6.1)
(6.1)
–
101.2
25.9
173.8
–
199.7
–
–
25.9
173.8
73.6
374.5
(7.8)
(7.8)
–
47.6
26.0
118.5
–
144.5
–
–
26.0
118.5
40.3
232.4
(6.1)
(6.1)
–
101.2
25.9
173.8
–
199.7
–
–
25.9
173.8
73.6
374.5
(7.8)
(7.8)
–
47.6
26.0
118.5
–
144.5
–
–
26.0
118.5
40.3
232.4
(6.1)
(6.1)
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 2 fair values
Derivatives
Derivatives are classified as Level 2 on the fair value hierarchy as the inputs used to determine fair value are observable market data
but not quoted prices.
The fair value of cross currency interest rate swaps is determined using forward foreign exchange market rates and the present value
of the estimated future cash flows at the balance date.
Credit value adjustments are calculated based on the counterparty’s credit risk using the counterparty’s credit default swap curve as a
benchmark. Debit value adjustments are calculated based on the Group’s credit risk using debt financing available to the Group as a
benchmark.
(d) Valuation techniques used to derive Level 3 fair values
Investments in associates
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 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.
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. The Responsible Entity has
considered the impact of the COVID-19 pandemic with regards to the timing of obtaining independent external valuations and as a
result 100% of Investment Property was externally revalued as at 30 June 2020 (90% on a look-through basis).
With the potential and uncertain economic impacts of COVID-19, future property valuations could be adversely impacted.
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:
Adopted
capitalisation
rate
(% p.a.)
5.2-7.3
5.3-7.3
Fair value
$'m
173.8
118.5
Adopted
terminal
yield
(% p.a.)
5.3-8.8
5.3-9.5
Adopted
discount
rate
(% p.a.)
6.0-8.0
6.8-8.5
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.
A rate of return used to convert a future monetary sum or cash flow into present value.
2020
2019
Term
Discounted Cash
Flow (DCF) method
Income capitalisation
method
Gross market rent
Capitalisation rate
Terminal yield
Discount rate
Movements 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.
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Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
23 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 24.
(c) Key management personnel
Below are the aggregate amounts paid or payable to key management personnel (including Non-Executive Directors):
Salary and fees
Non-Executive Director remuneration
Short-term incentives
Superannuation
Value of securities vested
Non-monetary benefits
Charter Hall Group
2020
$'000
3,008
1,372
4,290
63
2,012
5
10,750
2019
$'000
3,051
1,270
3,828
62
1,654
5
9,870
Charter Hall Property
Trust Group
2020
$'000
–
–
–
–
–
–
–
2019
$'000
–
–
–
–
–
–
–
Detailed remuneration disclosures are provided in the Remuneration Report on pages 51 to 70.
(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
Development revenue
Other
Accounting cost recoveries
Marketing cost recoveries
Transaction and performance fees
Management and development fees
Property management fees and cost recoveries
Investment-related revenue
Charter Hall Group
2020
$'000
2019
$'000
Charter Hall Property
Trust Group
2020
$'000
2019
$'000
10,261
2,556
162,487
134,748
64,497
586
176
2,402
16,496
6,670
68,922
2,281
109
40,179
18,838
4,665
–
535,873
8,527
2,192
76,922
102,263
60,956
495
123
4,341
11,167
5,950
53,536
2,006
115
15,187
16,205
2,646
–
362,631
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,383
11,383
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,695
9,695
During the year the Group sold holdings in related party entities to other related parties as follows:
- Sale of Charter Hall Co-investment Trust 5 which holds 15% in 242 Exhibition Street Holding Trust to Charter Hall Direct Industrial
Fund ($64.3m);
- Sale of 17.5% holding in Dartmoor Wholesale Fund to Charter Hall Retail REIT ($76.6m);
- Sale of 2.05% holding in Core Logistics Partnership to Charter Hall Direct Industrial Fund No.4 ($25m);
- Sale of 0.28% holding in Core Logistics Partnership to CH Wholesale Property Series No.1 ($3.4m);
- Sale of 20% holding in Retail Partnership No.6 to Charter Hall Retail REIT ($36.3m).
Notes to the consolidated financial statements
For the year ended 30 June 2020
23 Related parties continued
The following balances arising through the normal course of business were due from related parties at balance date:
Charter Hall Group
2020
$'000
2019
$'000
Charter Hall Property
Trust Group
2020
$'000
2019
$'000
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
Loan balances from acquisition of Folkestone
Loans advanced
Loan repayments received
Interest charged
Interest received/receivable
Closing balance
Loans from joint ventures
Opening balances
Loans advanced
Loan repayments made
Closing balance
Loans to other related parties
Opening balances
Loan balances from acquisition of Folkestone
Loans advanced
Loan repayments received
Interest received/receivable
Closing balance
Loans from other related parties
Opening balances
Loans advanced
Closing balance
Loans to/(from) Charter Hall Limited
Opening balances
Loans advanced
Loan repayments received
Interest received/receivable
Closing balance
13,453
7,221
2,408
1,158
2,358
1,778
28,376
10,582
64,417
491
3,156
1,579
3,387
83,612
Charter Hall Group
2019
$'000
25,800
8,954
39,203
(26,550)
–
156
47,563
–
3,647
–
3,647
–
21,010
321
(8,339)
981
13,973
–
3,852
3,852
2020
$'000
47,563
–
140
(43,508)
812
(610)
4,397
3,647
–
(3,647)
–
13,973
–
5,133
(6,971)
1,033
13,168
3,852
12,096
15,948
–
–
–
–
–
–
–
–
–
–
–
-
–
–
–
–
–
–
-
Charter Hall Property
Trust Group
2020
$'000
2019
$'000
38,919
–
–
(38,900)
812
(831)
-
–
–
–
-
–
–
–
–
–
-
–
–
-
16,300
–
38,900
(16,300)
–
19
38,919
–
–
–
-
–
–
–
–
–
-
–
–
-
–
–
–
–
–
43,161
379,618
(446,340)
2,980
(20,581)
(17,686)
457,963
(411,488)
14,372
43,161
No provisions for expected credit losses have been raised in relation to any outstanding balances.
The loan to/(from) CHL comprises an unsecured stapled loan maturing on 30 June 2023. Interest is charged on an arm’s length basis
which, at 30 June 2020, amounted to a weighted average rate of 6.6% (2019: 7.7%).
Fees paid to the Responsible Entity or its associates
(f)
Fees paid to the Responsible Entity of the Charter Hall Property Trust, and its associates, by the Charter Hall Property Trust Group
amounted to $3,146,000 (2019: $2,723,000). At 30 June 2020, related fees payable amounted to $480,000 (2019: $1,081,000).
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Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
24 Controlled entities
(a) Critical judgements
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.
(b) Principal controlled entities of the Charter Hall Group
The Group’s principal subsidiaries where the majority of activities are undertaken as at 30 June 2020 are set out below. The country of
incorporation or registration is also their principal place of business, unless otherwise stated.
Name of entity
Controlled entities of Charter Hall Limited
Charter Hall Holdings Pty Limited
Charter Hall Opportunity Fund No. 5
Folkestone Limited
Charter Hall Social Infrastructure Limited
Charter Hall Direct Property Management Limited
Charter Hall Funds Management Limited
Charter Hall Investment Management Limited
Charter Hall Retail Management Limited
Charter Hall WALE Limited
Charter Hall Wholesale Management Limited
Controlled entities of Charter Hall Property Trust
Charter Hall Co-Investment Trust
Charter Hall Co-Investment Trust 2
Charter Hall Co-Investment Trust 3
Charter Hall Co-Investment Trust 4
Charter Hall Direct Diversified Consumer Staples Fund
CHPT RP2 Trust
Country of
incorporation Principal activity
Class of
securities
2020
%
2019
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Property management Ordinary
Ordinary
Property development
Property management Ordinary
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
93
100
100
100
100
100
100
100
100
100
100
100
100
40
100
100
93
100
100
100
100
100
100
100
100
100
100
100
–
42
100
(c) Principal controlled entities of the Charter Hall Property Trust Group
Name of entity
Controlled entities of Charter Hall Property Trust
Charter Hall Co-Investment Trust
Charter Hall Co-Investment Trust 2
Charter Hall Co-Investment Trust 3
Charter Hall Co-Investment Trust 4
Charter Hall Direct Diversified Consumer Staples Fund
CHPT RP2 Trust
Country of
incorporation Principal activity
Class of
securities
2020
%
2019
%
Australia
Australia
Australia
Australia
Australia
Australia
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
40
100
100
100
100
–
42
100
Interests in unconsolidated structured entities
25
The Charter Hall Group considers its investments in associates and joint ventures to be unconsolidated structured entities, on the basis
that 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 activities and objectives 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.
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
Total current assets
Non-current assets
Loans to related parties
Investments 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
Total funds under management in unconsolidated structured
entities
Charter Hall Group
2020
$'m
11.0
30.2
2.4
43.6
2019
$'m
7.4
31.8
38.9
78.1
14.3
127.1
1,875.4
2,016.8
22.6
73.6
1,754.3
1,850.5
Charter Hall Property
Trust Group
2020
$'m
2019
$'m
0.5
28.8
–
29.3
–
127.1
1,794.8
1,921.9
0.2
30.8
–
31.0
–
73.6
1,681.3
1,754.9
2,060.4
1,928.6
1,951.2
1,785.9
40,537.0
30,425.6
39,900.8
29,808.0
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 23 for
further information.
No financial support has been provided to the funds beyond the loans disclosed in the above table.
26 Commitments
(a) Capital commitments
Charter Hall Group
The Group has capital expenditure and a funding guarantee contracted for at the reporting date but not recognised as liabilities of
$42.4 million at 30 June 2020 (2019: $44.0 million) relating to a development joint venture.
Charter Hall Property Trust Group
The Trust Group had no contracted capital commitments as at 30 June 2020 (2019: $nil).
27 Contingent liabilities
The Group has nil contingent liabilities as at 30 June 2020 (2019: $20.0 million).
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Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
28 Security-based benefits expense
(a) Charter Hall – Performance Rights and Options Plan (PROP)
Charter Hall Group and
Charter Hall Property Trust Group
Performance rights
Rights issued 25/11/16
Rights issued 23/11/17
Rights issued 28/11/18
Rights issued 28/11/19
Performance rights issued
Number of rights forfeited/lapsed
998,453
–
–
–
998,453
2017
Number
2018
Number
2019
Number
2020
Number
Total
Number
–
871,739
–
–
871,739
–
–
1,015,843
–
1,015,843
–
–
–
713,588
713,588
998,453
871,739
1,015,843
713,588
3,599,623
Prior years
Current year
Number of rights vested
Current year
Closing balance
Service rights
Rights issued 23/11/17
Rights issued 28/11/18
Rights issued 28/11/19
Service rights issued
Number of rights forfeited/lapsed
Prior years
Current year
Number of rights vested
Prior years
Current year
Closing balance
(200,875)
–
(46,808)
(3,091)
–
(36,497)
–
(15,263)
(247,683)
(54,851)
(797,578)
–
–
–
–
–
–
–
–
–
–
–
821,840
–
979,346
–
698,325
(797,578)
2,499,511
353,091
–
–
353,091
–
1,748,977
-
1,748,977
–
–
438,912
438,912
353,091
1,748,977
438,912
2,540,980
(129,313)
(5,964)
–
(96,899)
–
–
(129,313)
(102,863)
–
(186,325)
31,489
–
(657,679)
994,399
–
–
438,912
–
(844,004)
1,464,800
(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
2020
$'m
9.7
2019
$'m
6.8
Charter Hall Property
Trust Group
2020
$'m
–
2019
$'m
–
Notes to the consolidated financial statements
For the year ended 30 June 2020
28 Security-based benefits expense continued
(c) Option inputs
The Black-Scholes or Monte Carlo method, as applicable, is utilised for valuation and accounting purposes. The model inputs to assess
the fair value of the PROP rights granted during FY2020 are as follows:
Grant date
Stapled security price at grant date1
Fair value of right
Expected volatility2
Dividend yield
Risk-free interest rate
CHC
Performance
CHC
Service
rights –
rights Deferred STI
11/25/2019
$10.69
$10.27
21.6%
3.2%
0.7%
11/25/2019
$10.69
$7.05
19.5%
3.2%
0.7%
CHC
Extra
Service
CQR
Service
rights –
rights Deferred STI
11/25/2019
$4.42
$4.07
15.7%
6.5%
0.7%
11/25/2019
$10.69
$9.50
19.9%
3.2%
0.7%
1 The grant date reflects the date the rights were allocated. Participants are eligible and performance period commences from 1 July of the relevant financial year for
performance rights.
2 Expected volatility takes into account historical market price volatility.
(d) Charter Hall General Employee Security Plan (GESP)
During the year, eligible employees received up to $1,000 (2019: $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 $468,139 (2019: $406,000) was
recognised in relation to this plan during the year. For the GESP, the cost of the stapled securities bought on-market to settle the award
liability is included in employee benefits expense.
(e) Accounting policy
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). For market-based performance rights, 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 rights, 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 rights 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 rights
that are expected to vest. For non-market based performance rights, the fair value at grant date is independently valued using the
Black-Scholes methodology. At each reporting date, the entity revises its estimate of the number of rights 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.
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Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
29 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 parent entity of
the Charter Hall Property Trust Group, being the Charter Hall Property Trust, have been prepared on the same basis as the Group’s
financial statements:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders' equity
Issued capital
Other reserves
Accumulated losses
Net equity
Profit for the year
Total comprehensive income for the year
Charter Hall Limited
Charter Hall
Property Trust
2020
$'m
169.6
453.3
99.4
351.5
289.1
(53.6)
(133.7)
101.8
88.3
88.3
2019
$'m
119.2
385.9
41.2
293.2
286.7
(53.6)
(140.4)
92.7
75.7
75.7
2020
$'m
24.3
1,771.5
40.7
345.2
1,436.8
3.1
(13.6)
1,426.3
32.6
32.6
2019
$'m
37.3
1,711.6
74.0
306.1
1,448.5
2.3
(45.3)
1,405.5
251.7
251.7
Notwithstanding the net current liability, Charter Hall Property Trust has total net assets of $1.4 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 2020 (2019: $nil) other than the bank
guarantees provided for under the bank facility held by Charter Hall Property Trust (refer to Note 14(a)).
(c) Contractual commitments
As at 30 June 2020, Charter Hall Limited had no contractual commitments (2019: $nil).
As at 30 June 2020, Charter Hall Property Trust had no contractual commitments (2019: $nil).
30 Deed of cross guarantee
Charter Hall Group
Charter Hall Limited (CHL) and its wholly owned subsidiaries, Charter Hall Holdings Pty Ltd (CHH) and Folkestone Limited (FLK), are
parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, CHH
and FLK have 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. FLK was added by assumption deed to the deed of cross
guarantee from 3 May 2019.
(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 CHL, CHH and FLK.
Statement of comprehensive income
Revenue
Net gain on sale of investments
Employee benefits expense
Depreciation and amortisation
Finance costs
Share of net profit of associates accounted for using the equity method
Other expenses
Profit before income tax
Income tax expense
Profit for the year
Equity accounted fair value movements
Other comprehensive income for the year
Accumulated losses at the beginning of the financial year
Profit for the year
Dividends paid/payable
Accumulated profit/(losses) at the end of the financial year
2020
$'000
440.0
–
(147.3)
(15.9)
(4.7)
0.1
(27.9)
244.3
(72.2)
172.1
–
–
(6.1)
172.1
(81.5)
84.5
2019
$'000
295.9
43.4
(136.0)
(7.4)
(17.3)
5.3
(44.1)
139.8
(29.8)
110.0
4.0
4.0
(47.6)
110.0
(68.5)
(6.1)
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Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
30 Deed of cross guarantee continued
(b) Balance sheet
Set out below is a consolidated balance sheet of the closed group consisting of CHL, CHH and FLK.
Assets
Current assets
Cash and cash equivalents
Receivables and other assets
Total current assets
Non-current assets
Receivables and other assets
Development assets
Loans due from Charter Hall Property Trust
Loans due from Charter Hall - FLK
Investment in associates at fair value through profit or loss
Investment in associates
Investments in controlled entities
Property, plant and equipment
Intangible assets
Right-of-use assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other liabilities
Lease liabilities
Total current liabilities
Non-current liabilities
Trade and other liabilities
Loans due to Charter Hall Property Trust
Investments in controlled entities
Net loans due to related entities
Lease liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated profit/(losses)
Total equity
2020
$'m
198.2
55.6
253.8
–
–
20.6
15.1
3.3
193.5
20.8
71.0
8.5
10.7
343.5
597.3
167.4
4.0
171.4
3.6
–
–
47.0
11.1
–
61.7
233.1
364.2
2019
$'m
52.0
97.4
149.4
55.7
1.8
–
15.1
–
182.4
22.1
76.0
–
–
353.1
502.5
91.1
–
91.1
5.9
42.1
12.6
77.2
–
23.5
161.3
252.4
250.1
289.1
(9.4)
84.5
364.2
286.7
(30.5)
(6.1)
250.1
31 Events occurring after the reporting date
The following events have occurred subsequent to 30 June 2020:
•
•
In July 2020, Charter Hall Group sold its entire 5% holding in Waypoint REIT (ASX: WPR) for $2.61 per WPR security totalling
$101.6m, and will receive a distribution of 7.41 cents per WPR security. Charter Hall Long WALE REIT also sold its 5%
holding for the same price.
In August 2020, a partnership created by the Charter Hall Group and an international sovereign wealth fund acquired a 49%
interest in a property trust which owns a $1.46 billion portfolio of convenience retail service centres leased to Ampol Limited
(ASX: ALD). Charter Hall Group will own 5% or $34m of the Charter Hall partnership, or a look through interest of 2.45% in the
Ampol portfolio.
Except for the matters discussed above, no other matter or circumstance has arisen since 30 June 2020 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.
32 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 2020 are set out below. These policies have
been consistently applied to the years presented, unless
otherwise stated.
Changes in accounting policies
The Group adopted AASB 16 Leases retrospectively from 1 July
2019. The impact of adopting this new standard is disclosed
below. No other new accounting standards or amendments have
come into effect for the year ended 30 June 2020 that affect the
Group’s operations or reporting requirements.
(a) AASB 16 Leases
The Group adopted AASB 16 Leases from 1 July 2019. In
accordance with the transition provisions in AASB 16 the new
rules have been adopted retrospectively with the cumulative
effect of initially applying the new standard recognised on 1 July
2019, under the simplified transition approach. Comparatives for
the 2019 reporting period have not been restated.
The Group’s assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
‒
fixed payments (including in-substance fixed payments),
less any lease incentives receivable;
variable lease payment that are based on an index or a rate;
‒
‒ amounts expected to be payable by the lessee under
‒
residual value guarantees;
the exercise price of an extension option if the lessee is
reasonably certain to exercise that option; and
‒ payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit
in the lease, if that rate can be determined, or the Group’s
incremental borrowing rate.
Right-of-use assets are measured at cost comprising the
following:
the amount of the initial measurement of the lease liability;
‒
‒ any lease payments made at or before the commencement
date, less any lease incentives received;
‒ any initial direct costs; and
‒
restoration costs.
The right-of-use asset is depreciated over the shorter of the
asset's useful life and the lease term on a straight-line basis. The
Group tests right-of-use assets for impairment where there is an
indicator that the asset may be impaired. 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.
The Group’s right-of-use assets are all property leases.
Payments associated with short-term leases and leases of low-
value assets (as defined in AASB 16) are recognised on a
straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less.
Low-value assets comprise IT equipment and small items of
office furniture.
Adjustments recognised on adoption of AASB 16 Leases
On adoption of AASB 16, the Group recognised lease liabilities in
relation to leases which had previously been classified as
‘operating leases’ under the principles of AASB 117 Leases.
These liabilities were measured at the present value of the
remaining lease payments, discounted using the Group’s
incremental borrowing rate as at 1 July 2019. The weighted
average lessee’s incremental borrowing rate applied to the lease
liabilities on 1 July 2019 was 2.74%.
The associated rights-of-use assets were measured at the
amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease
recognised in the balance sheet as at 1 July 2019. As a result,
the change in accounting policy affected the following items in the
balance sheet on 1 July 2019:
‒
right-of use assets – increased by $9.7 million
‒ deferred tax assets – increased by $2.4 million
‒
lease liabilities – increased by $16.4 million
‒ accruals – increased by $1.2 million
‒ other liabilities (unamortised lease incentives) – decreased
by $4.8 million
The net impact on retained earnings on 1 July 2019 was a
decrease of $0.7 million.
In applying AASB 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
‒
‒
the use of a single discount rate to a portfolio of leases with
reasonably similar characteristics; and
the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application.
The right-of-use asset is depreciated over the shorter of the
asset's useful life and the lease term on a straight-line basis. The
Group tests right-of-use assets for impairment where there is an
indicator that the asset may be impaired. 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.
The Group’s right-of-use assets are all property leases.
Significant accounting policies
(b) Controlled entities
The Charter Hall Group (Group or CHC) is a ‘stapled’ entity
comprising Charter Hall Limited (Company or CHL) and its
controlled entities, and Charter Hall Property Trust (Trust) and its
controlled entities (CHPT 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.
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Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
32 Summary of significant accounting policies continued
32 Summary of significant accounting policies continued
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, and continue to be
prepared on the going concern basis of accounting. 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 was therefore 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, acquisition accounted for CHL as
at 6 June 2005.
Group references in accounting policies
The accounting policies 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 and joint ventures at fair value
through profit or loss – measured at fair value;
investments in financial assets held at fair value – measured
at fair value; and
‒ derivative financial instruments.
(c) 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 2020 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 or by using the equity
method. On initial recognition, the Group elects to account for
investments in associates at either fair value through profit or loss
or by 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 in results
and reserves 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.
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
equity accounted investees 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.
Foreign currency translation
Functional and presentation currencies
(d)
(i)
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.
Transactions and balances
(ii)
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 currency translation
On consolidation, exchange differences arising from the
translation of borrowings, and other financial instruments
designated as hedges of such investments, are recognised in
other comprehensive income.
(e) Revenue recognition
The amount of revenue recognised in each period is based on the
delivery of performance obligations and when control has been
transferred to customers in accordance with the principles set out
in AASB 15. Where the Group enters into contracts with multiple
service components, judgement is applied to determine whether
the components are:
‒ distinct – accounted for as separate performance
obligations;
‒ not distinct – combined with other promised services until a
distinct bundle is identified; or
‒ part of a series of distinct services that are substantially the
same and have the same pattern of transfer to the
customer.
For each performance obligation identified, it is determined
whether revenue is recognised at a point in time or over time.
Revenue is recognised over time if:
‒
‒
‒
the customer simultaneously receives and consumes the
benefits provided over the life of a contract as the services
are performed;
the customer controls the asset that the Group is creating or
enhancing; or
the Group’s performance does not create an asset with an
alternative use to the Group and has an enforceable right to
payment for performance completed to date.
At contract inception, the Group estimates the consideration to
which it expects to be entitled and has rights to receive under the
contract. Variable consideration, where the Group’s performance
could result in further revenue, is only included to the extent that it
is highly probable that a significant reversal of revenue
recognised will not occur.
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Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
32 Summary of significant accounting policies continued
32 Summary of significant accounting policies continued
In assessing the amount of consideration to recognise, key
judgements and assumptions are made on a forward-looking
basis where required.
To the extent revenue has not been received at reporting date, a
receivable is recognised in the consolidated balance sheet.
Investment Management revenue
Fund management fees are received for performance obligations
fulfilled over time with revenue recognised accordingly. Fund
management fees are determined in accordance with relevant
agreements for each fund, based on the fund’s periodic (usually
monthly or quarterly) Gross Asset Value (GAV).
Generally, invoicing of funds for management fees occurs on a
quarterly basis and are receivable within 21 days.
Performance fees are for performance obligations fulfilled over
time and for which consideration is variable. The fees for each
applicable fund are determined in accordance with the relevant
agreement which stipulates out-performance of a benchmark over
a given period.
Performance fee revenue is recognised to the extent that it is
highly probable that the amount of variable consideration
recognised will not be significantly reversed when the uncertainty
is resolved. Detailed calculations and an assessment of the risks
associated with the recognition of the fee are completed to inform
the assessment of the appropriate revenue to recognise.
Invoicing of funds for performance fees occurs in accordance with
the contractual performance fee payment date.
A contract asset is recognised in the consolidated balance sheet
at each reporting date in line with revenue recognised where the
right to receive consideration remains conditional on future
performance.
Transaction fee revenue is recognised at a point in time upon
fulfillment of the performance obligation. This is usually the point
at which control of the underlying asset being transacted has
transferred to the buyer.
Transaction fees are invoiced when the performance obligation
has been fulfilled and are receivable within 21 days.
Property Services revenue
Property services primarily include property management,
development management, leasing, facilities and project
management. Revenue is recognised either over time or at a
point in time depending on the terms of the specific agreement for
each type of service. Invoicing of funds for property services fees
occurs on a monthly or quarterly basis and are receivable within
21 days.
Recovery of property and fund-related expenses revenue
Accounting, marketing and property management services
provided to managed funds are charged as an expense recovery.
Revenue is recognised over time as the performance obligations
are fulfilled. Invoicing of funds for expense recoveries occurs on a
monthly or quarterly basis depending on the recovery type and
are receivable within 21 days.
Development revenue
Where Charter Hall has control of the underlying asset, revenue
from the sale of development assets is recognised when control
has been transferred to the customer. Where development assets
have been recognised in relation to the enhancement of an asset
controlled by the customer, revenue from the realisation of the
development costs are recognised over time in accordance with
the performance obligations of the contract.
Revenue is calculated by reference to the total consideration
expected to be received in exchange for fulfilling the performance
obligations under the contract. Any variable consideration is
constrained to the amount that is highly probable to not
significantly reverse. Revenue is recognised based on the most
appropriate method that depicts the transfer of goods and
services to the customer, generally the ‘cost to cost’ method.
Proceeds from the sale of development assets are invoiced and
receivable in accordance with the relevant terms of the contract.
Employee benefits
(f)
(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.
Long service leave
(ii)
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. 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) 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.
Termination benefits
(v)
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.
(g) Development assets
Costs incurred in fulfilling a contract with a customer are
recognised as a development asset. Development costs are
classified as non-current where the group is not contractually
entitled to payment within 12 months from balance date. Where
Charter Hall has control of the asset, development costs are
recorded at the lower of cost and net realisable value. Where
Charter Hall has incurred costs in relation to the enhancement of
an asset controlled by the customer development assets are
recorded at the lower of cost or the total consideration expected
to be received less the total costs expected to be recognised as
an expense.
Investment properties
(h)
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
22(d).
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 fixed increases in
operating lease rentals in future years.
Plant and equipment
(i)
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.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the
consolidated statement of comprehensive income.
Impairment of non-monetary assets
(j)
Assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable.
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.
(k) 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 interests’
proportionate share of the acquiree’s net identifiable assets.
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
Directors’ report and financial report
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Charter Hall Group Annual Report 2020
Charter Hall Group Annual Financial Report 2020
Charter Hall Group Annual Financial Report 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
Notes to the consolidated financial statements
For the year ended 30 June 2020
32 Summary of significant accounting policies continued
32 Summary of significant accounting policies continued
currency interest rate swaps hedging fixed rate borrowings is
recognised in profit or loss within ‘Finance costs’.
Derivatives that do not qualify for hedge accounting
For derivative instruments that do not qualify for hedge
accounting, changes in the fair value of the derivative instrument
are recognised immediately in profit or loss.
(m) 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 unless there is
an effective fair value hedge of the borrowings, in which case a
fair value adjustment will be applied based on the mark to market
movement in the benchmark component of the borrowings and
this movement is recognised in profit or loss. 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.
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.
(n) 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.
(o) Comparative information
Where necessary, comparative information has been adjusted to
conform with changes in presentation in the current year.
(p) 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 hundred thousand in
accordance with that ASIC Corporations Instrument, unless
otherwise indicated.
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.
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.
Financial Instruments
Trade and other receivables
(l)
(i)
Trade and other receivables are recognised initially at fair value
and subsequently measured at amortised cost, less provision for
expected credit losses. Trade receivables are due for settlement
no more than 21 days from the date of recognition. Expected
credit losses in relation to trade receivables are reviewed on an
ongoing basis.
(ii) Other financial assets
Classification
The Group classifies its other financial assets as being measured
either:
‒ at fair value through other comprehensive income or
through profit or loss; or
‒ at amortised cost.
The means by which the assets are measured depends upon
how they are managed and the contractual terms of the cash
flows.
Measurement
At initial recognition, the Group measures a financial asset at its
fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through profit or loss
are expensed in profit or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the
Group’s business model for managing the asset and the cash
flow characteristics of the asset. Presently all the Group’s debt
instruments are classified under amortised cost.
Assets that are held for collection of contractual cash flows where
those cash flows represent solely payments of principal and
interest are measured at amortised cost. A gain or loss on a debt
investment that is subsequently measured at amortised cost and
is not part of a hedging relationship is recognised in profit or loss
when the asset is derecognised or impaired. Interest income from
these financial assets is included in finance income using the
effective interest rate method.
Impairment
(iii)
Trade receivables
For trade receivables, the Group applies the simplified approach
to providing for expected credit losses prescribed by AASB 9,
which requires the use of the lifetime expected credit loss
provision for all trade receivables from initial recognition of the
receivables.
Any impairment loss is recognised through the consolidated
statement of comprehensive income.
Debt instruments
The Group assesses on a forward-looking basis the expected
credit loss associated with its debt instruments carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
(iv) Derivatives and hedge accounting
The Group uses derivatives to hedge its exposure to interest
rates and foreign currency on foreign denominated borrowings.
Derivative financial instruments are measured and recognised at
fair value on a recurring basis.
The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and
if so, the nature of the item being hedged. The Group designates
certain derivatives as either fair value hedges or cash flow
hedges.
The full fair value of a hedging derivative is classified as a non-
current asset or liability when the remaining maturity of the
hedged item is more than 12 months; it is classified as a current
asset or liability when the remaining maturity of the hedged item
is less than 12 months.
The Group’s derivatives in place as at 30 June 2018 qualified as
fair value and cash flow hedges under AASB 9. The Group’s risk
management strategies and hedge documentation are aligned
with the requirements of AASB 9 and these relationships are
therefore treated as continuing hedges.
Fair value hedges that qualify for hedge accounting
The gain or loss relating to interest payments on interest rate
swaps hedging fixed rate borrowings is recognised in profit or
loss within finance costs. Changes in the fair value of derivative
hedging instruments and the hedged fixed rate borrowings
attributable to interest rate risk are recognised within ‘Net
gains/(losses) from derivative financial instruments’. The gain or
loss relating to the ineffective portion is also recognised in profit
or loss within ‘Net gains/(losses) from derivative financial
instruments’.
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives is
recognised in other comprehensive income and accumulated in
the cash flow hedge reserve in equity. The gain or loss relating to
the ineffective portion is recognised immediately in profit or loss
within ‘Net gains/(losses) from derivative financial instruments’.
Amounts accumulated in equity are reclassified to profit or loss in
the periods when the hedged item affects profit or loss (for
instance when the forecast transaction that is hedged takes
place). The gain or loss relating to the effective portion of cross
Directors’ report and financial report
90
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91
129
Charter Hall Group Annual Report 2020 Charter Hall Group Annual Financial Report 2020
Directors’ declaration to securityholders
For the year ended 30 June 2020
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)
(b)
(c)
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 74 to 129 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of Charter Hall Group’s and Charter Hall Property Trust Group’s financial positions as at
30 June 2020 and of their performance for the financial year ended on that date; and
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
at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group
identified in Note 30 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 30.
Note 32(b) 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 Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
David Clarke
Chairman
Sydney
20 August 2020
Directors’ report and financial report
92
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131
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 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Independent auditor’s report To the stapled securityholders of Charter Hall Group and the unitholders of Charter Hall Property Trust Report on the audit of the financial reports Our opinion In our opinion: The accompanying financial reports of Charter Hall Limited and its controlled entities and Charter Hall Property Trust and its controlled entities (together “Charter Hall Group”) and Charter Hall Property Trust and its controlled entities (together “Charter Hall Property Trust Group”) are in accordance with the Corporations Act 2001, including: (a)giving a true and fair view of the Charter Hall Group and Charter Hall Property Trust Groupfinancial positions as at 30 June 2020 and of their financial performance for the year thenended(b)complying with Australian Accounting Standards and the Corporations Regulations 2001.What we have audited The Charter Hall Group and the Charter Hall Property Trust Group financial reports comprise: •the consolidated balance sheets as at 30 June 2020•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 theyear then ended•the consolidated cash flow statements for the year then ended•the notes to the consolidated financial statements, which include a summary of significantaccounting policies•the directors’ declaration to securityholders.The Charter Hall Group comprises Charter Hall Limited and the entities it controlled at year end or from time to time during the financial year and includes Charter Hall Property Trust and the entities it controlled at year 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 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. Charter Hall Group Annual Report 2020 Directors’ report and financial report
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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 (including Independence Standards) (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 reports are 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 reports. 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 geographic 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 and Charter Hall Property Trust Group we used overall materiality of $16.2 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 reports 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 thresholds. Audit Scope • Our audit focused on where Charter Hall Group and Charter Hall Property Trust Group 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 Group representing individually financially significant equity accounted investments. Component audit teams assisted the Group engagement team to perform an audit of those components. • At both the Charter Hall Group and Charter Hall Property Trust Group level, audit procedures were performed over group transactions and financial report disclosures. • The work performed by component audit teams, together with the additional audit procedures performed at each 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 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 Carrying value of investments accounted for using the equity method (Charter Hall Group and Charter Hall Property Trust Group) (Refer to note 2 and 3) Charter Hall Group and Charter Hall Property Trust Group invest in certain underlying funds managed by Charter Hall Group. These funds comprise listed and unlisted funds which invest across 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. Investments in Associates and Joint Ventures contribute a significant proportion of total income and total assets. In accordance with Australian Accounting Standards, interests in associates and joint ventures, need to be assessed for indicators of impairment at the reporting date. If indicators of impairment exist, the recoverable amount for each investment needs to be estimated. These assessments involve significant judgements in estimating future cash flows and the rate at which they are discounted and in evaluating fair value less costs to sell. The COVID-19 pandemic has resulted in a number of these investments showing indicators of impairment at 30 June 2020. To assess the carrying amount of investments accounted for using the equity method, including the impact of COVID-19, 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 by reference to underlying investee financial information. • For a sample of material acquisitions made during the year, agreeing certain transaction details to appropriate source documents and considering the relevant accounting classification of the investment in accordance with Australian Accounting Standards. • Evaluating the assessments made by Charter Hall Group and Charter Hall Property Trust Group of whether there were any indicators of impairment, including evaluating the impairment assessment methodologies and identified the key assumptions used. • For those investments where indicators of impairment were identified, our procedures included: o together with PwC valuations Charter Hall Group Annual Report 2020 Directors’ report and financial report
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Key audit matter How our audit addressed the key audit matter Given the significance of these investments to the results and consolidated balance sheets of Charter Hall Group and Charter Hall Property Trust Group, together with the existence of impairment indicators arising from the COVID-19 pandemic, we consider this to be a key audit matter. experts, evaluated the reasonableness of the methodologies and key assumptions used to estimate the recoverable amounts of the relevant investments o performing testing over the mathematical accuracy of the underlying calculations o comparing the forecast cash flows used in the impairment models to the most up-to-date budgets approved by the Board o evaluating the historical ability to forecast future cash flows by comparing budgets with reported actual results for the past year. o assessing the appropriateness of the relevant disclosures in the financial reports in light of the requirements of Australian Accounting Standards. Revenue recognition – performance fees (Charter Hall Group) (Refer to note 4) Charter Hall Group investment management revenue for the year ended 3o June 2020 was $357.1 million which includes performance fees. Australian Accounting Standards require variable revenue, such as performance fees, to be recognised only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. We considered performance fees to be a key audit matter because of the: • extent of judgement required by the Charter Hall Group in recognising revenue, particularly as it relates to variable revenue and estimating the period remaining from balance sheet date to performance fee crystallisation date and determining the degree of probability that any potential fee may unwind during that period. • the financial significance of performance fees to the Charter Hall Group results. Our audit procedures included evaluating the design and implementation of relevant controls relating to the recognition and measurement of performance fee revenue. For a sample of performance fees, we assessed the appropriateness of revenue recognition against the requirements of Australian Accounting Standards. For a sample of contracts including performance fees, we tested the estimated variable consideration by: • Agreeing the key inputs in Charter Hall Group’s calculations to source documents, where possible. • Assessing the reasonableness of the key factors the Charter Hall Group considered to evaluate the probability of a revenue reversal. Where a performance fee was paid during the year, we inspected evidence of this payment. Key audit matter How our audit addressed the key audit matter Carrying value of indefinite life management rights (Charter Hall Group) (Refer to note 11) The Charter Hall Group's intangible assets comprise management rights in relation to managed funds. These intangible assets had a carrying value of $104.0 million at 3o June 2020. A number of these management rights are considered to have indefinite useful lives and accordingly an annual impairment test is required by Australian Accounting Standards. The 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. We considered the valuation of indefinite life intangible assets a key audit matter because of the: • judgement required by Charter Hall Group to estimate the recoverable amount of indefinite life management rights. • sensitivity of the Charter Hall Group’s assessment to changes in key assumptions such as growth rates, discount rates, and terminal value multiples. The impairment tests performed by the Charter Hall Group during the financial year concluded that no impairment was required on the carrying value of any indefinite life management rights asset. Our audit procedures included evaluating the design and implementation of relevant controls relating to indefinite life management rights. For a sample of impairment tests performed by the Charter Hall Group, our audit included the following procedures, amongst others, in conjunction with PwC valuation experts: • We evaluated the relevant cash flow forecasts, including performing tests over the mathematical accuracy of the underlying calculations and comparing the forecasts to Board approved budgets. • We compared the current year (2020) results with figures included in the forecasts made in the three immediately preceding periods (2017-2019) to assess the historical reliability of the Charter Hall Group's forecasting process. As part of our evaluation of cash flow forecasts, we performed specific inquiries to consider the impact of COVID-19 on the underlying business and how it may impact future revenue streams. • We considered the methodology applied and assessed the appropriateness of the key assumptions used in light of Australian Accounting Standards, general industry valuation practice and factors specific to the underlying cashflows. Charter Hall Group Annual Report 2020 Directors’ report and financial report
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Other information 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 other information. The other information comprises the information included in the annual report for the year ended 30 June 2020, but does not include the financial reports and our auditor’s report thereon. Prior to the date of this auditor’s report, the other information we obtained included the Directors’ report. We expect the remaining other information to be made available to us after the date of this auditor’s report. Our opinion on the financial reports does not cover the other information and accordingly we do not, and will not, express any form of assurance conclusion thereon. In connection with our audit of the financial reports, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial reports 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, 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 are responsible for the preparation of the 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 the financial reports that gives a true and fair view and are free from material misstatement, whether due to fraud or error. In preparing the financial reports, the directors are responsible for assessing the ability of the Charter Hall Group and Charter Hall Property Trust Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Charter Hall Group and Charter Hall Property Trust Group 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 opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial reports. A further description of our responsibilities for the audit of the financial reports is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 51 to 70 of the Directors’ Report for the year ended 30 June 2020. In our opinion, the remuneration report of Charter Hall Limited for the year ended 30 June 2020 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 E A Barron Sydney Partner 20 August 2020 Charter Hall Group Annual Report 2020 Securityholder analysis
A. Distribution of equity stapled securityholders as at 26 August 2020
C. Substantial securityholder notices as at 26 August 2020
% of issued
stapled securities
No. of
Holders
Ordinary securities
Commonwealth Bank of Australia
ACN 123 123 124 (CBA) and its related bodies corporate
Mitsubishi UFJ Financial Group, Inc.
First Sentier Investors Holdings Pty Limited
ACN 630 725 558 and its related bodies
corporate listed in annexure A
Date of change
26 May 2020
12 Feb 2020
12 Feb 2020
Commonwealth Bank of Australia
ACN 123 123 124 (CBA) and its related bodies corporate
13 Dec 2019
Stapled
securities
held
1,756,489
28,958,515
28,958,515
%
securities
held
0.38%
6.22%
6.22%
32,682,383
7.02%
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 parcels
Stapled
securities held
441,812,494
2,573,958
7,522,741
4,864,074
7,469,075
1,534,789
465,777,131
1,391
B. Top 20 registered equity securityholders as at 26 August 2020
Rank
Name
A/C designation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MILTON CORPORATION LIMITED
BNP PARIBAS NOMS(NZ) LTD
BNP PARIBAS NOMINEES PTY LTD
HUB24 CUSTODIAL SERV LTD
UBS NOMINEES PTY LTD
PORTMIST PTY LIMITED
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED-GSCO ECA
SARGON CT PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
AMP LIFE LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
MUTUAL TRUST PTY LTD
15
16
17
18
19
20
Total
Balance of register
Grand total
94.85
0.55
1.62
1.04
1.60
0.33
100.00
0.00
45
36
399
672
2,947
3,953
8,052
441
Stapled
securities
held
%IC of issued
securities
159,499,580
127,416,618
46,318,793
36,276,507
20,496,889
19,290,702
12,332,639
4,114,688
2,556,000
1,862,276
1,144,717
1,109,690
841,773
803,957
743,200
709,919
652,492
521,126
441,566
409,113
437,542,245
28,234,886
465,777,131
34.24
27.36
9.94
7.79
4.40
4.14
2.65
0.88
0.55
0.40
0.25
0.24
0.18
0.17
0.16
0.15
0.14
0.11
0.09
0.09
93.94
6.06
100.00
Securityholder analysis
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139
Charter Hall Group Annual Report 2020
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
as a PDF, accessible on its website.
You can elect to receive notification
that this report is available online
via your Investor Centre login.
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 2020 should be included in
your 2020 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 the
Australian Financial Complaints Authority
(AFCA), an external complaints resolution
service that has been approved by ASIC.
AFCA’s contact details are below:
Australian Financial
Complaints Authority
GPO Box 3
Melbourne VIC 3001
Tel
E-mail
Web
1800 931 678
info@afca.org.au
www.afca.org.au
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.
Contact
details
Registry
To access information on your holding or update/change
your details including name, address, tax file number,
payment instructions and document requests, contact:
Link Market Services Limited
Locked Bag A14 Sydney South NSW 1235
1300 303 063 (within Aus)
Tel
+61 2 8280 7134 (outside Aus)
E-mail charterhall.reits@linkmarketservices.com.au
Web
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
1300 365 585 (within Aus)
Tel
+61 2 8651 9000 (outside Aus)
E-mail reits@charterhall.com.au
charterhall.com.au
Web
Important information
Corporate
directory
Registered office
Level 20, No.1 Martin Place Sydney NSW 2000
Tel
ASX
Code
+61 2 8651 9000
CHC
Directors
David Clarke (Chair), Anne Brennan, Philip Garling,
David Harrison, Karen Moses, Greg Paramor AO
and David Ross
Company Secretary
Mark Bryant
Auditor
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay, Barangaroo
Sydney NSW 2000
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 its related
bodies corporate, directors or employees to any such person. Neither the Charter Hall Group, its 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 2020 unless otherwise stated.
All references to dollars ($) or A$ are to 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 a US Person, 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 it deems 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.
© Charter Hall
Investor information
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Charter Hall Group Annual Report 2020
charterhall.com.au/chc