Charter Hall Group
Annual Report
2021
Contents
Strategy
Purpose
FY21 Performance Highlights
Chair Message
Managing Director &
Group CEO Message
Capital Sources
Industrial & Logitics
Long WALE Retail
Office
Convenience Retail
Social Infrastructure
Charter Hall Direct
Sustainability
Board of Directors
Executive Committee
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6
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That’s why over the past three decades, we’ve been
investing in the value of place and developing mutually
successful relationships with many of Australia’s
best-known companies.
Today, we’re a fully integrated property investment group,
managing 1,388 Office, Industrial & Logistics, Retail and
Social Infrastructure properties with a total portfolio value
of $52.3 billion.
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.
Directors' Report and Financial Report 44
Securityholder Analysis
Investor Information
Contact Details
Corporate Directory
148
150
151
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Contents | 3
30 years’
Experience
Charter Hall Group (CHC or the Group) believes the
best investments begin when people and businesses
work together towards shared goals.
Cover, clockwise from top left: Drystone Industrial Estate, Truganina Vic; Charter Hall image of couple viewing investments on digital tablet;
1 Shelley Street, Sydney NSW; Pacific Square, Maroubra NSW.
Above: No.1 Martin Place, Sydney NSW.
Charter Hall Group
Annual Report 2021
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.
Above: Midwest Logistics Hub, Truganina Vic.
Access
Accessing equity from listed,
wholesale and retail investors.
Deploy
Creating value through attractive
investment opportunities.
Manage
Fund and asset management,
leasing and development services.
Invest
Investing alongside our capital
partners.
r
a
e
y
1
r
a
e
y
3
r
a
e
y
5
$5.3bn
Gross equity raised
$13.8bn
Gross equity raised
$17.8bn
Gross equity raised
$10.1bn
Gross transactions
$2.1bn
Divestments
$8.0bn
Acquisitions
$23.3bn
Gross transactions
$3.9bn
Divestments
$19.4bn
Acquisitions
$32.1bn
Gross transactions
$7.2bn
$24.9bn
Divestments
Acquisitions
$52.3bn
$381m (↑18.8%)
Funds Under Management (FUM)
Increase in Property Investment (PI)
$11.7bn
FUM growth
$29.1bn
FUM growth
$34.8bn
FUM growth
15.0%
Total PI return
$703m (↑41.2%)
Increase in PI
11.3%
Total PI return
$1.3bn (↑119.4%)
Increase in PI
13.4%
Total PI return
Charter Hall Group
Annual Report 2021
Purpose
We create better futures by driving value and mutual
success. With partnership at the heart of our approach, we
work closely with our tenant customers, investors, people
and communities to unlock hidden value, provide superior
returns and help businesses and individuals succeed.
Our tenant customers
Our community
We use our national reach and local market expertise to deliver
inventive, sustainable solutions for businesses. As cross-sector
specialists, we take an active partnership approach with our
tenant customers, thinking laterally to solve their holistic needs,
working together to create solutions that fulfil their requirements
across office, retail, warehousing and distribution. Our commitment
to tenant customers runs deep, and we continue to challenge
ourselves to go above and beyond in our service.
Our goal is to stimulate positive impacts for communities.
We foster meaningful employment in order to help build better
futures for vulnerable young Australians and support healthier
outcomes for all. We continue to work closely with a range of
community partners through our long-standing commitment
to the Pledge 1% movement, supporting more than 100
organisations by investing our spaces, profits and our
people’s time.
Our investors
Our environment
Sustainability is a strategic priority for us, and is embedded
across our platform. We continue to deliver sustainable
outcomes with long-term impact, including making meaningful
progress toward our Pathway to Net Zero by 2030 target. We
partner with our customers, investors and capital partners to
actively seek out opportunities to create environmental and
social value, alongside financial outcomes, driving us to make
decisions that have wide reaching benefits for our industry and
the world.
We have built a reputation for innovative investment funds that
enable investors to realise their aspirations. We work hard to
create stable investments with greater potential to generate
consistent, superior returns. We invest alongside our capital
partners to achieve mutual success. Our focus on quality,
well-located assets with long-term leases, delivers stability,
returns and growth through market cycles.
Our people
Our people are the heart of our business and enable us to go
above and beyond for our partners and customers. We support
them to perform at their best, provide learning opportunities
to accelerate their growth, and facilitate them in having multiple
careers with us. Our open, flexible workplace fosters a
collaborative environment and, together with our many
benefits, enables people to flourish.
Right: Charter Hall Head Office, No.1 Martin Place, Sydney NSW.
Purpose | 7
FY21 Performance
Highlights1
Funds management
Property investments
Balance sheet
$52.3bn
Funds under management
(FUM) ↑29.0%
$2.4bn
Property Investment
portfolio
14.8%
NTA growth
$10.1bn
Gross transactions
6.6%
Property Funds
Management yield2
15.0%
Total Property Investment
Return3
5.0%
Balance sheet gearing
6.1%
Property Investment yield
$544m
Investment capacity
1. Figures and statistics throughout this presentation are for the 12 months to 30 June 2021 unless otherwise stated.
2. 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 2021.
3. Total Property Investment (PI) 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 2021. This excludes investments in new vehicles held for less than a year and investments in Direct funds.
Right: Chifley Tower, Sydney NSW.
Group returns
28.2% p.a.
10 year Total
Shareholder Return
12.3% p.a.
10 year OEPS growth
8.3% p.a.
10 year NTA growth
FY21 Performance Highlights | 9
Charter Hall Group Annual Report 2021 Charter Hall Group
Annual Report 2021
A strong and adaptable strategy, clear purpose
and, above all, the trust and partnerships we have
built with our people, customers and communities,
have enabled us to deliver record performance in
an uncertain and challenging environment.
Chair
Message
Dear Securityholder
Looking to the future
This financial year, we continued to face challenges due to the
COVID-19 pandemic. Despite some reprieve, much of the year
saw disruptions for many businesses. While the pandemic itself
is still far from over, I was impressed to see our people working
closely with our customers and communities to navigate the
challenges and create positive outcomes.
Charter Hall has grown considerably over the course of three
decades, both in size and complexity. We now partner with
some of Australia’s biggest corporates, with many of our
engagements having evolved into multi-level and cross-sector
relationships, driven largely by the trust developed over the
course of our partnerships.
Our performance
Against this backdrop, I am delighted to report that Charter
Hall achieved record growth, ending the year with $52.3 billion
in funds under management (FUM), which now makes us the
largest sector-diversified commercial property portfolio
in Australia.
Throughout the year, we continued to partner with our customers
across all our sectors to meet their evolving property needs.
Our future success relies on the continued strength of these
relationships, as well as our ability to harness the talent within
our business to continue delivering outstanding results for our
customers, partners, and investors.
We recognise that the breadth and depth of our leadership
team serves as the basis to take the Group to the next
level. That’s why, this year, we made it a priority to reset our
remuneration structure with retention plans in place for our
leadership team. By investing in our people, we are ensuring
our path forward as the business ramps up its growth plans.
Our focus on stability, growth and returns for our securityhold-
ers has also driven superior performance across our funds and
continues to attract investor equity, with $5.3 billion of gross
equity flows for the year.
In line with our philosophy of mutual success, Charter Hall’s
plans also include building future success for our partners. We
firmly believe that by investing in the value of place, we are
creating better outcomes for the long term.
Our current portfolio comprises 1,388 properties, with a
lettable area of 9 million square metres and delivering almost
$2.5 billion in net rental income per year.
We have always said that long-term performance is the
true test of success. As we celebrate Charter Hall’s 30th
anniversary, our current result is further evidence of our ability
to consistently deliver superior returns to our securityholders,
with a total shareholder return of 64.1% in FY21.
David Clarke
Chair Message | 11
Section | 11
Charter Hall Group
Annual Report 2021
Meaningful action on
climate change
Each year, we go further in our commitment to our ESG
objectives. In the wake of updated projections released by
the International Panel on Climate Change, delivering on our
climate initiatives has never been more important. We continue
to make significant progress each year and believe that by
partnering with our tenants and investors, we can unlock
further opportunities to drive meaningful change and secure
a better future for all.
We have actively aligned our climate resilience roadmap to
the recommendations of the Task Force on Climate-Related
Financial Disclosures (TCFD) to ensure meaningful steps from
Board level to meet our objectives.
Pleasingly, we have made significant progress towards our
Pathway to Net Zero by 2030 target, even accelerating that
timeline where possible. Our Industrial & Logistics portfolio
has committed to achieving Net Zero Carbon in operations
by 2022 for Scope 1 and Scope 2 related emissions and our
Retail portfolio recently announced that it will achieve Net Zero
Carbon in operations by 2025.
We have also begun proactively working with contractors
and suppliers to reduce impacts across our supply chain
and engaged with our tenant customers to find solutions to
mitigate their energy-related emissions. Currently, 54% of the
41MW of our installed solar supplies directly to our tenants.
As businesses around the country continue to plan their return
to office, supporting healthier workplace assets is as important
as ever. We have worked with the International WELL Building
Institute to baseline human health and wellness, with a focus
on measuring and improving the indoor environment in our
workplace assets for our tenants. This year, we became one
of the first groups globally to achieve a WELL Portfolio Score
across 900,000 square metres of real estate.
As a signatory to the United Nations Global Compact, we
continue to engage to advance the Sustainable Development
Goals and embed its principles in our strategy and culture. We
were proud this year to be recognised in the 2020 PRI Leaders
Group for our work in climate reporting.
Creating social value
Our commitment to social investment in communities is
driven largely through Pledge 1%. Through this philanthropic
movement, Charter Hall has been investing in more than 100
charitable organisations to support communities in need.
We donated $739,000 through our community partnerships,
and, in a year where volunteering was impacted by COVID-19,
our people spent 1,200 hours in the community. We also
donated over 41,000 square metres in space, valued at over
$1.8 million, for community use.
Right: GPO Exchange, Adelaide SA.
We are passionate about building better futures for vulnerable
youth within the community. We have established partnerships
with four state-based social enterprises targeting 1,200
meaningful employment opportunities by 2030. Again, this
is about taking actions that tackle employment impacts linked
to COVID-19.
For the first time, we used our supply chain to create social
value, contracting with Two Good Co. to supply our Office
portfolio with soap. In turn, this creates employment outcomes
for survivors of domestic violence and supplies meals and care
packages to women in shelters across Australia.
We now require all employees to complete training on modern
slavery on an annual basis in line with our obligations under the
Modern Slavery Act. Our Modern Slavery and Human Rights
Working Group monitors our modern slavery and human rights
risk across our business and supply chain.
We have also developed a Reconciliation Action Plan (RAP),
which is under review by Reconciliation Australia.
Serving customers and
securityholders
Despite ongoing uncertainty, Charter Hall continues to
gain momentum. Record equity flows demonstrate that our
customer-centric approach continues to receive investor
support.
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. Our
repeat tenant metrics, retention rates and customer interviews
clearly show the Group has demonstrated an equal focus on
both our tenants and investors.
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 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 includes our continued
commitment to gender diversity, where we now have 30%
female participation in senior executive positions and 55%
across our workplace. This approach puts the Group in a
strong position to pursue further growth.
Our current portfolio comprises 1,388
properties, with a lettable area of
9 million square meters and delivers
almost $2.5 billion in net rental income
per year.
Outlook
As many of the world’s biggest economies start to open up
again, the outlook for economic growth in Australia remains
uncertain due to ongoing pandemic-related challenges.
Global interest rates are generally expected to remain low with
inflation and wages growth in Australia forecast to continue to
lag targets.
30 years on from when Charter Hall began, we are very proud
of where we are as a company and we continue to have
ambitious goals for the future.
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
for their passion and commitment in delivering this year’s
record performance.
Our leadership team remains focussed on fostering strong
partnerships and growing our platform in a sustainable way,
delivering resilience for the business and returns for security-
holders and capital partners. We are confident that our diverse
portfolio, sector-leading lease duration and high-quality tenant
covenants will enable us to deliver mutual success and better
outcomes for all.
Director
& Group CEO
David Clarke
Chair
In terms of opportunities, we have access to $6.7 billion in
available investment capacity through existing cash balances
and available lines in our funds and on our balance sheet. This
capacity offers us resilience against any short-term volatility,
and an ability to move quickly to capture opportunities, while
also providing a meaningful avenue for growth.
Chair Message | 13
Charter Hall Group
Annual Report 2021
David Harrison
Our growth over 30 years has been
built on a foundation of partnership
and mutual success. That continues
to drive us today.
Managing Director
& Group CEO
Message
Dear Securityholder
Financial year 2021 (FY21) continued to challenge global
economies and businesses, with the COVID-19 pandemic
persisting as we closed out the year. Despite these challenges,
Charter Hall generated record fund growth and equity inflows
across the business.
We continued to drive market leading transaction volumes
and outperform respective benchmarks across most of our
funds and partnerships. At the same time, we maintained
a razor-sharp focus on our customers, as evidenced by
continued leasing and pre leasing of developments, results
from our customer surveys and a leading volume of sale and
leaseback transactions with corporate customers.
Overall, FUM grew by $11.7 billion or 29% for the year, deploying
capital for our investors and generating FUM and earnings
growth for securityholders.
This year, we celebrated an important milestone – 30 years
since the founding of Charter Hall and our 16th financial year
as a publicly listed Group. It was an incredible opportunity to
connect with our people (past and present), tenant customers,
partners and investors to reflect on the relationships that we’ve
built, the impact that we've had, and to show our gratitude to
everyone who has played a role in our success. Our growth
over 30 years has been built on a foundation of partnership
and mutual success. That continues to drive us today.
Since our ASX listing in 2005, we have grown from $1 billion
in FUM to more than $52 billion. In FY21 alone, we generated
record gross equity flows of $5.3 billion, achieved $11.7 billion
of FUM growth and delivered total shareholder return for the
Group of 64.1%.
It’s important to reflect on where we came from, but I am
most encouraged by where we are going. Our focus remains
on delivering sustainable growth for securityholders and
replenishing capital within funds and partnerships as we
continue to deploy capital through develop-to-core strategies
and selective acquisitions. With a curated portfolio of 1,388
high quality assets, we will continue to make enhancements
through asset diversification and Long WALE and we continue
to pick strategies and sectors that will outperform the return
benchmarks expected by our investors.
Resilience in the face of
economic setback
Our approach to resilience ensured that our business
continued to grow despite significant setbacks for many parts
of the Australian economy. I want to acknowledge that this
simply could not have happened without our people, who
took the evolving situation in their stride, ultimately delivering
incredible results for our customers, partners and investors.
The Industrial & Logistics sector performed particularly well
during the year. We first took the lead in this sector with the
inception of our flagship wholesale industrial fund in 2007.
Subsequent multiple strategies across all equity segments
mean we have been well positioned to capitalise on the
accelerating demand for modern, purpose-built, highly
efficient facilities and warehouses. We’ve seen this through
strong leasing demand for our 60-hectare MidWest Logistics
Hub, attracting key tenant customers such as Coles, Uniqlo,
Toll, Bridgestone and Inghams. At our recently completed
Tradecoast Industrial Park in Brisbane, we attracted major
customers such as Amazon, Australia Post and DHL.
Managing Director & Group CEO Message | 15
Section | 15
Charter Hall Group
Annual Report 2021
In our Office sector, our new developments and leasing activity
remained strong because we were able to adapt and meet
the evolving needs of our tenants. Our strong performance in
Office, despite continued uncertainty in the sector, means we
remain confident in the long-term outlook and firmly believe
that modern workplaces will continue to play a critical role for
the majority of businesses and the economy.
Our non-discretionary convenience Retail portfolio again
demonstrated resilience, as we partnered with our tenants to
ensure our retail centres remained open throughout the year.
Similarly, within our Social Infrastructure portfolio, the essential
nature of childcare was proven, with centres remaining open
during the COVID-19 pandemic and associated restrictions and
supported by government funding that further demonstrates
its importance to the economy.
Long term performance
Financially, we continue to be disciplined and self funded
from a growth perspective via a consistent 6% per annum
distribution growth policy that has facilitated retained cash
earnings to reinvest in the growth of the business.
Importantly, our growth in earnings comes after-tax. On
a post-tax basis, we have delivered sector-leading 14.5%
operating earnings per security (OEPS) growth rate (CAGR)
annually over the last five years. Tax paid earnings also deliver
valuable franking credits for our securityholders, which, when
combined, provided total pre-tax OEPS of 74.2cps.
Over the 16 years since listing, Charter Hall generated a total
shareholder return of 18.2% compounded annually versus the
A-REIT Index S&P/ASX 200 (GICS) Property Accumulation
Index return of 4.8% over the same period. We also
outperformed the ASX100 and 200 Indices over this period.
Quality property funds
management portfolio
Our property funds management portfolio is well-diversified
comprising 1,388 properties, with a lettable area of
9 million square metres and delivering almost $2.5 billion
in net rental income per year. Group FUM WALE has increased
to 9.1 years and the weighted average capitalisation rate firmed
to 4.8%, together with continued portfolio curation that has
enhanced the low risk profile and high quality of our funds and
partnerships.
Significant growth in FUM
Group FUM grew by a record $11.7 billion to $52.3 billion in
12 months, driven by net acquisitions, net valuation growth
and development expenditure.
We have been active in acquiring and divesting assets. In
FY21 we recorded $2.1 billion of divestments, more than double
that of previous years. $8 billion of acquisitions also exceeded
activity in prior years, resulting in net acquisition growth of
$5.9 billion.
All our sectors have been active, led by our Industrial &
Logistics and Office sectors. They accounted for one-third of
our overall transaction activity, respectively. Long WALE Retail
made up a further 24%, with Social Infrastructure at 10% and
Shopping Centre Retail at 1%.
Our portfolio curation and delivery of strategy contributed
to $4.1 billion of net valuation growth during the year, which
equates to a 10% increase in the Group’s net FUM during
FY21. Our Industrial & Logistics and Long WALE triple net
lease portfolios have been stand-out net valuation growth
performers. Of course, this growth also reflects the trust placed
in us, as custodians of capital, to wisely manage and invest
on behalf of our investors.
Active development pipeline
$1.8 billion of development capex during FY21 continued to
make a meaningful contribution to both FUM growth and
portfolio curation.
The Group is progressing various developments across its
portfolios, creating modern investment grade properties and
adding significant value through enhancing income yield and
total returns. Our development completions for FY21 add
significant incremental stabilised income to our portfolios.
Our total development pipeline now stands at $8.8 billion,
approximately half committed and under construction,
providing for future portfolio curation and FUM growth.
Our $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
enhance our ability to attract capital. The average lease term of
pre-committed developments across Industrial & Logistics and
Office is approximately 10 years by income and value.
Our Office pipeline also continues to deliver attractive
development returns and new office buildings, despite
uncertainty in the market due to COVID-19. This year, we
commenced construction on our new office development
at 555 Collins Street in Melbourne and announced a major
pre-lease agreement with Amazon. The 60 King William
Street, Adelaide project is 70% preleased to a commonwealth
government tenant customer, whilst the Industrial & Logistics
platform has secured major preleases to Coles, Australia Post,
Ingham’s, Amazon and extended leases to major customers
Woolworths, Metcash, Coles and Chemist Warehouse.
Right from top: Only About Children, Northcote Vic; Arnott's Distribution Centre, Huntingwood NSW.
We also recently announced that Australia Post would
become an anchor tenant at our new 32,000 square metre
development 480 Swan Street, Richmond Vic, underpinning
the strength of our cross-sector relationship and the value of
our precinct approach in new office development projects.
Valued relationships with
our tenant customers
Strong relationships with our tenant customers continue to be
an essential strategic focus. We are always looking for new
ways to support our customers and actively partner with them
to provide inventive solutions to meet their needs.
Our success with our tenants is reflected in the high level of
repeat business – in fact, 76% of our tenant customers lease
more than one tenancy from us. We see these businesses
as more than just tenants. We view our relationship as a
partnership which allows us to better meet their property
needs, driving increased tenant retention.
81% of tenants who had a lease expiring with us in the past
12 months are now re-leasing with us. Importantly, this benefits
securityholders by producing earnings resilience across our
property investment portfolio and feeds back into transactions,
with our significant sale and leaseback activity providing
off-market opportunities across sectors to grow our funds.
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. These
earnings are characterised by the high quality of our tenants,
the diversity of sectors, and the lack of concentration risk.
The portfolio has grown to $2.4 billion, or 19% over the year,
reflecting our strategy to invest alongside our capital partners
and the growth achieved in underlying asset values. The
portfolio has delivered an attractive 6.1% Property Investment
yield, with further capacity for new investments from retained
earnings and recycling of capital from co-investment stakes
into new growth opportunities.
Occupancy is broadly stable, and through active asset
management, the property investment portfolio WALE has
increased to 9.1 years. Our weighted average rent review
remains attractive at 3.1%. The number of properties has also
increased significantly to 1,322, as we continue to expand and
diversify our investments. We believe the Group’s Property
Investment portfolio is a very defensive, well diversified, core
investment portfolio.
Charter Hall Group
Annual Report 2021
Culture is our bedrock
Our greatest asset is the people who work here, along with
the executives and non-executive directors that represent
investors on our various Boards of listed and unlisted funds. We
never underestimate the breadth of experience and talent our
sector-diverse business provides to our customers.
Our culture has long been one of our key strengths. Many
of our people faced challenges this year as the pandemic
persisted and intermittent lockdowns were enforced. We
continued to focus on ways to support them, improve
wellbeing and remain connected.
Pleasingly, this was reflected in the continued strength of
our employee engagement for FY21, with 95% of our people
reporting that they would recommend Charter Hall as a good
place to work. We do not take these scores for granted and
are incredibly proud of the engagement we have seen across
the business. We continue to prioritise maintaining a happy,
healthy and engaged workforce.
When we look at our people, we see the next generation of
leaders in property. Our role is to provide our people with the
experience, training and tools they require to succeed.
We’re always looking for new ways to support our
tenants – actively partnering with them to provide
innovative solutions to fulfill their exact needs.
We continued to invest in renewables and have doubled
onsite solar in the last year generating 58.9GWh of electricity.
We have also secured 100% renewable electricity from offsite
sources for assets within our operational control across our
Industrial & Logistics and Office portfolios. This switch for
Office will reduce Group Scope 2 emission by more than 65%,
encompassing 1.5 million square metres of workplace assets
and representing more than $19 billion in gross asset value.
Our transition away from fossil fuel energy sources is well
underway. We are investing to future-proof our workplace
developments through energy efficiency measures, including a
shift toward all electric buildings powered by renewables, in line
with our market transition strategies.
We believe these steps and the scale of our portfolio, position
the Group well to continue making meaningful progress against
our Net Zero Carbon in operations target for Scope 1 and Scope
2 emissions and address climate related risks and opportunities.
Outlook and guidance
Based on no material adverse change in current market
conditions, FY22 earnings guidance is for post-tax OEPS of
no less than 75cps. FY22 distribution per security guidance
is for 6% growth over FY21.
My thanks, on behalf of the Executive Committee, to all our
people for 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 investors and tenants for continuing
to be part of our Charter Hall Group community.
David Harrison
Managing Director & Group CEO
This includes personalised learning to develop skills and
capabilities aligned to their development goals and career
aspirations, as well as providing diverse opportunities to move
laterally within the business.
We were very proud this year to be named on the 2021 AFR
BOSS Best Places to Work List, and ranked second overall on
the Property, Construction and Transport list, from nearly 700
nominated organisations across Australia and New Zealand.
This recognition is a testament to our diverse and inclusive
culture, which enables our people to be their best self, and do
their best work.
We continue to emphasise diversity and inclusion across
the business and actively seek to attract and retain talented
people from a wide range of experiences, backgrounds and
perspectives to cultivate our inventive spirit.
As a Board and management team, we recognise that the
importance of diversity and inclusion goes beyond hiring diverse
candidates. It must involve celebrating diversity - ensuring a
sense of belonging and creating value for all our people.
This year, Charter Hall was also named an Employee of Choice
for Gender Equality citation holder by the Workplace Gender
Equality Agency, recognising us as an industry leader for our
efforts in career development, gender-balance recruitment,
flexible work practices, degendered parental leave schemes
and pay equity.
As members of Pride in Diversity and the property industry
initiative Interbuild, we continue to grow our network of allies
and LGBT+ employees nationally, at the same time as we have
moved up the ranks in the Australian Workplace Equality Index.
We are proud of our achievements, and we will continue to
prioritise making all our people feel supported and valued and
ensure that they see a future for themselves at Charter Hall.
Accelerating our
environmental goals
We know that ESG investment continues to be a key thematic
for investors assessing their portfolios. Our continued and
increasing focus on ESG positions the business for success
and will be a source of competitive differentiation.
Sustainability is central to how we conduct our business
and always has been. Our goal is to be a role model in the
Australian property sector by creating environmental and social
value alongside sustainable growth and returns. This year, we
have made demonstrable progress on our climate initiatives.
Across the Group, we have reduced our carbon emission
intensity (Scope 1 and 2) by 7% since FY17, despite a 37%
increase in area over that time. As of 30 June 2021, we had
240 Green Star certified buildings across the portfolio,
maintaining Australia’s largest Green Star footprint.
Sod turning event at 555 Collins Street, Melbourne Vic.
Managing Director & Group CEO Message | 19
Charter Hall Group
Annual Report 2021
Capital
Sources
Wholesale pooled
and partnerships
Listed
Charter Hall Direct
$33.3bn
FUM
$10.8bn
FUM
97.3%
Occupancy
4.62%
Capitalisation rate
26.3%
Gearing
8.3yrs
WALE
$1.4bn
CHC investment
1. Held at accounting value not market value.
Right: 2 Market Street, Sydney NSW.
98.2%
Occupancy
5.23%
Capitalisation rate
25.4%
Gearing
11.0yrs
WALE
$0.7bn
CHC investment1
$8.2bn
FUM
98.6%
Occupancy
4.89%
Capitalisation rate
29.6%
Gearing
8.9yrs
WALE
$0.3bn
CHC investment
The diversity of our property portfolio
and 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.
Charter Hall Group
Annual Report 2021
Industrial &
Logistics
“Our sector continues to see surging demand for existing and newly
developed industrial & logistics facilities. This has been driven by structural
trends in consumer shopping towards online retail, the need to increase
stock levels to sure up supply chains for COVID-19 disruptions and
increasing automation in facilities for greater efficiency and lower labour
costs. With one of the largest national portfolios and a multi-billion dollar
development pipeline, we have a demonstrated track record in partnering
with our tenant customers across the country to meet their needs and
these ongoing structural trends.”
Richard Stacker
Industrial & Logistics CEO
Clockwise from above: Woolworths Distribution Centre, Dandenong Vic; Australia Post, Chullora NSW.
$15.5bn
Total FUM
4.4%
Capitalisation rate
226
Properties
11.0yrs
WALE
$3.0bn
Development pipeline
Industrial & Logistics | 23
Long WALE
Retail
“Our high quality portfolio of long WALE retail properties is
leased to blue chip tenants including Bunnings, bp, Ampol
and Endeavour Group. We continue to grow the portfolio to
further enhance quality, focusing on acquisition via sale and
leaseback and attractive triple net lease structures. These factors
provide a secure and growing income stream and capital growth
to investors.”
Avi Anger
Fund Manager, Charter Hall Long WALE REIT
Clockwise from above: Bunnings Warehouse, South Mackay Qld; bp, Forestville NSW.
$6.7bn
Total FUM
4.7%
Capitalisation rate
634
Properties
13.5yrs
WALE
$0.1bn
Development pipeline
Long WALE Retail | 25
$22.8bn
Total FUM
4.8%
Capitalisation rate
82
Properties
6.7yrs
WALE
$5.4bn
Development pipeline
Office | 27
Office
“Our approach to partnership has helped us maintain our
position as one of the largest owners and managers of CBD
office properties, working with many of Australia’s most iconic
businesses to create the best workplace environments for their
people. We have a long track record in delivering placemaking
precincts that go beyond the workplace and offer our
customers amenity-rich experiences.”
Carmel Hourigan
Office CEO
Clockwise from above: Wesley Place, 130 Lonsdale Street, Melbourne Vic; 12 Shelley Street, Sydney NSW.
Convenience
Retail
“As the leading owner and manager of property for convenience
retailers, we have curated a portfolio that has demonstrated
resilience and provides essential goods and services to local
communities, providing a stable and growing income stream for
investors. We have built deep, long-term relationships with many
of Australia’s leading convenience retailers which will continue to
provide resilience for our investors.”
Greg Chubb
Retail CEO
Clockwise from above: Secret Harbour Square, Secret Harbour WA; Secret Harbour Square, Secret Harbour WA; Bass Hill Plaza, NSW.
$3.8bn
Total FUM
6.1%
Capitalisation rate
51
Properties
5.5yrs
WALE
$0.1bn
Development pipeline
Convenience Retail | 29
Social
Infrastructure
“As the largest owner of childcare centres in Australia, our social
infrastructure portfolio facilitates the provision of essential social
and community services. Our Social Infrastructure REIT (ASX: CQE)
is well positioned, with resilient and growing income, low gearing
and $207 million of investment capacity.”
Travis Butcher
Fund Manager, Charter Hall Social Infrastructure REIT
Clockwise from above: Only About Children Childcare Centre, Northcote Vic; Mater Corporate Headquarters and Training Facilities, Newstead Qld.
$3.4bn
Total FUM
4.9%
Capitalisation rate
395
Properties
15.6yrs
WALE
$0.2bn
Development pipeline
Social Infrastructure | 31
Charter Hall Group
Annual Report 2021
Charter Hall
Direct
“As one of Australia’s leading direct property fund managers,
Charter Hall Direct features quality properties on long-term
leases and delivers stable returns with potential for capital
growth. Investing across sectors, the Direct business delivers
outperformance against the benchmark and offers retail investors
diversification benefits and access to regular income and returns.”
Steven Bennett
Direct CEO
Above: DHL, Altona Vic.
Direct funds net return since inception
Direct funds net return since inception
The active Direct Funds have returned an average 1 of 13.5% p.a. outperforming the benchmark2 by 6.0%.
Funds have returned an average1 of 13.5% p.a., outperforming their respective benchmarks2 by 6%
Australian Industrial & Logistics (%p.a.)
Australian Diversified / Long WALE (%p.a.)
Australian Office (%p.a.)
Benchmark (% p.a.)
15.8%
15.0%
19.9%
Funds open for investment
15.3%
17.6%
8.6%
8.5%
8.4%
10.4%
10.3%
5.8%
6.2%
11.1%
8.5%
6.7%
3.1%
DIF2 (WS)3
2013-2021
DIF3 (WS)3
2014-2021
BW Trust
2014-2021
LWF3
2017-2021
PFA (Ordinary)
2017-2021
DOF (WSA)3
2014-2021
DIF43
2016-2021
WPS14
2020-2021
Based on simple average of returns.
Benchmark refers to the MSCI/IPD Unlisted Core Wholesale Property Fund Index as at June 2021. Past performance is not a reliable indicator of future performance
1.
2.
3. DIF2, DIF3, DIF4, LWF, DOF – returns assume Bonus Units or Entitlement Offer as per respective PDS.
4. WPS1 is open to investment by Wholesale Clients only, being a person or entity who satisfies the requirements of section 761Gof the Corporations Act
1. Based on simple average of returns.
2. Benchmark refers to the MSCI/IPD Unlisted Core Wholesale Property Fund Index as at June 2021. Past performance is not a reliable indicator of future performance.
3. DIF2, DIF3, DIF4, LWF, DOF – returns assume Bonus Units or Entitlement Offer as per respective PDS.
4. WPS1 is open to investment by Wholesale Clients only, being a person or entity who satisfies the requirements of section 761G of the Corporations Act..
Charter Hall Maxim Property Securities Fund (Maxim) returns
Charter Hall Maxim Property Securities Fund (Maxim) returns
Maxim Property exceeded the S&P/ASX 300 A-REIT Accumulation Index benchmark over all time periods1.
Maxim exceeded the benchmark over all time periods1
Maxim performance (%)1
Benchmark performance (%)2
36.6
33.9
10.5
8.2
8.8
6.2
13.2
12.0
12 months
3 years
5 years
10 years
Past performance is not a reliable indicator of future performance.
1.
1. Past performance is not a reliable indicator of future performance. Performance is calculated on an after fees basis but before tax.
2. Benchmark is the S&P / ASX 300 Accumulation Index.
Charter Hall Direct | 33
Direct | 33
Sustainability
Three things drive our Group. Our commitment to
mutual success underpins our goals; active partnership
governs our relationships; and our insistence on being
a sustainable business over the long term shapes our
strategy and actions.
Over the last 30 years, we’ve consistently delivered sustainable
outcomes that have a positive impact and influence on our
business, our sector and the wider world: from our first Green
Star rating in 2006 to making meaningful progress towards our
Net Zero Carbon target in 2021.
The 17 United Nations Sustainable Development Goals (SDGs)
are the blueprint to achieve a better and more sustainable
future. Charter Hall seeks to align our responses and targets to
the UN Sustainable Development Goals.
As we plan our journey to 2050, sustainability remains a
strategic priority across our platforms. It’s integrated into how
we think and work. It’s the lens we use to assess, manage and
achieve our environmental, social and governance (ESG) goals.
It’s also part of how we work in partnership with our customers,
to create long-term risk adjusted returns for investors and
healthier places for people and our planet.
Environment:
Climate Resilience
We are working in partnership with our customers to deliver meaningful action on climate change.
Focus areas
Progress this year
Looking forward
Carbon and climate
change
Resilience
and adaptation
– We became a signatory to the WGBC Net Zero Carbon
We intend to:
Commitment. This initiative aligns with our target of Net Zero
for Scope 1 and 2 emissions by 2030.
– We recorded a 7%1 reduction in our carbon emission intensity
(Scope 1 and 2) since FY17, despite a 37%1 increase in area
over that time.
– We were recognised for our work in climate reporting with
two noteworthy awards:
– 2020 PRI Leaders Group for climate related disclosure; and
– 2020 GRESB Industrial Global Development Leader for our
industrial fund, CPIF.
Develop a local
nature-based offset
strategy for residual
emissions during FY22.
Develop a Scope 3
emissions target aligned
to science-based target
methodology during
FY23.
– We completed physical risk assessments portfolio wide.
We intend to:
– We commenced Climate Change and Adaptation Plans
(CCAP) for our Industrial & Logistics portfolio (now 70%
complete by floor area) based on RCP8.5 as a worst case
scenario.
Continue implementing
CCAP for our Office and
Retail sectors as well as
incorporating CCAP into
the onboarding of new
assets.
Focus areas
Progress this year
Looking forward
Energy efficiency
– We exceeded our FY25 NABERS Energy targets early by
We intend to:
achieving:
– 5.04 Star NABERS Energy weighted average rating for
Office portfolio; and
– 4.60 Star NABERS Energy weighted average for Retail sites
>15,000sqm.
– We saw six of our funds included in the Top 10 NABERS
Energy Sustainable Portfolio Index.
– We maintained Australia’s largest Green Star footprint, with
240 Green Star certified buildings.
Establish new NABERS
targets at both portfolio
and asset levels by FY22.
Expand our coverage of
NABERS ratings to Retail
sites <15,000sqm.
Clean energy
– We installed 41MW Solar PV with the potential to generate
We intend to:
58.9GWh of electricity (equivalent to powering 8,305 homes).
– We procured 100% offsite renewable electricity for our
Industrial & Logistics portfolio.
Continue installing Solar
PV across our sectors
where it is commercially
feasible.
Achieve 100% offsite
renewables for the Office
portfolio by FY22 and for
the Retail portfolio
by FY25.
Water
– We exceeded FY25/30 NABERS Water targets early by
We intend to:
achieving:
– 4.04 Star NABERS Water weighted average rating for Retail
sites >15,000sqm; and
– 4.61 Star NABERS Water average rating for Office portfolio.
Establish new NABERS
targets at portfolio and
asset level by FY22.
Waste
– We implemented waste management plans at all the sites
We intend to:
where we manage waste.
– We increased our organics waste stream to include over 60%
of our Office assets, and piloted Anaerobic digestion systems
at select Retail sites.
– We improved waste data integrity through alignment with the
Better Buildings Partnership.
Prepare a waste strategy
aligned to circular
economy principles by
FY22.
1. As at FY20, we will be reporting our FY21 environmental data in our 2021 Sustainability Report.
Sustainability | 35
Charter Hall Group Annual Report 2021
Social:
Strong Communities
We are always looking for ways to increase the strengths of the communities in which we operate.
Focus areas
Progress this year
Looking forward
– We continued to lead with purpose in our quest to lift the
We intend to:
Social value: Through
partnership, deliver
positive impacts for the
communities in which we
operate
futures of communities through our ongoing participation in
the Pledge 1% initiative:
– We donated $739,000 to social enterprises and
charitable organisations;
– We provided >41,000sqm of space, valued at over
$1.8 million to community groups; and
– 35% of our employees volunteered a total of 1,200
hours in communities, in a year impacted by COVID-19
restrictions.
Employment opportunities
– We established state-based partnerships with four social
enterprises to support employment for vulnerable youth.
These partnerships will enable over 100 employment
opportunities per year.
– We supported 11 youths to receive employment training and
at Kick Start cafes in NSW. Our support saw >4,500 hours
of trainee hours worked. Since our partnership began,
12 trainees have graduated from the program.
Employee: Creating a
diverse and inclusive
culture and environment
within our own community
– We achieved 90% employee engagement. 95% of our
We intend to:
Sustain levels
of engagement
that align with us
being a global high
performing culture.
people recommend Charter Hall as a good place to work.
– We recorded not only strong results across all our culture
measures but also a high performing employee experience
compared to benchmarks.
– We achieved WGEA Employer of Choice for Gender
Equality citation.
– We continued to grow our LGBT+ network of allies and to
improve our ranking in the Australian Workplace Equality
Index.
– Ranked second in Property, Construction
& Transport category in 2021 AFR BOSS Best Places to
Work list.
Continue to
contribute 1% of our
profits, space and
people’s time to
community partners
each year to help
them achieve positive
social impacts.
Increase our
employee
volunteering to
6,000 hours in the
community by FY25.
We intend to:
Continue to support
disadvantaged
youth by creating
400 meaningful
youth employment
outcomes by FY25.
Those opportunities
will increase to 1200
youth employment
outcomes by 2030.
Focus areas
Progress this year
Health, safety and
wellbeing
– We were recognised by International WELL Building Institute
(IWBI) as a being part of a small group of global leaders in
the adoption of the WELL portfolio as global pioneers of
human health and wellness in the workspace, achieving
a WELL Portfolio1 rating across more than 900,000sqm of
office space, benefiting >38,000 of our customers.
– We cared for our customers through COVID-19 with rent
relief, hygiene initiatives, adaptation of digital engagement
and support with returning to workplace.
– We achieved a 4.48 Star NABERS Indoor Environment
weighted average rating for the Office portfolio.
– We recorded a lost time injury and lost time injury frequency
rate of zero, and a total recordable injury frequency rate of 1.11.
Looking forward
We intend to:
Implement
new incident
management
software so that we
can consistently
capture data across
the Group.
Increase coverage
of the WELL
portfolio rating to
1,200,000sqm by
FY22.
First Nations engagement
– We submitted our inaugural Reconciliation Action Plan (RAP)
We intend to:
for review with Reconciliation Australia.
– We partnered with indigenous author Maree Yoelu (McCarthy)
and local schools across our Retail communities to create a
children’s storybook, ‘Dancing for Country’ for NAIDOC Week.
– We celebrated First Nations history and cultures with
art activations at a range of our Retail and Office assets
including No.1 Martin Place, NSW; 130 Lonsdale Street, Vic;
Raine Square, WA; and GPO Exchange, SA.
– We partnered with local WA indigenous group Blak Lash, to
design digital acknowledgment of country for lift screens at
our Office properties.
– Included smoking ceremonies and Welcome to Country for
each new Office development.
Launch our RAP
in early FY22. We
will then focus on
bringing our RAP to
life in a meaningful
and purposeful way.
Nurturing wellbeing
This year, we provided our people with the wellbeing resources and tools they need to
approach each day with confidence, safely adapt to new working conditions and help
customers and stakeholders better navigate uncertainty.
What we did
What happened as a result
– Introduced Black Dog Institute ‘Managing for Team Well-Being’ sessions focused
on developing the skills needed to identify and address mental health challenges.
Work environment continues to
be highly regarded by our people:
– Introduced the Banksia Project ‘Connection Room’ program that allows people
to join a safe space where they can share personal stories and tips on coping
strategies.
– Introduced ‘Financial Well-Being’ sessions focused on wealth creation
and protection.
– Produced ‘Managing for Team Productivity’ and ‘Well-Being for Kids’ resources
and activities.
– Updated Domestic Violence and Mental Health disclosures to allow for alternate
work location, increased flex in hours, ‘safe word’ communication and ‘critical
worker’ access to sites during lockdown.
– Implemented new space booking and utilisation technologies to support the
safe return of our people to our offices.
– Supported our people in Victoria through prolonged lockdown, with 10 days
personal leave for home-schooling.
83%
agree we promote a healthy
work environment, 18% above
the Australian norm.
76%
favoured our wellbeing
approach, 14% above the
Australian norm.
35%
uptake of home-schooling leave.
1. WELL is administered by the International Well Building Institute. Its goal is to measure and advance human health and wellness in buildings.
Sustainability | 37
Charter Hall Group Annual Report 2021
Charter Hall Group
Annual Report 2021
Governance:
Responsible Business
We want our systems and practices to reflect a high standard of corporate governance and for our culture values
to demonstrate exemplary ethical standards
Focus areas
Outcomes and progress
Looking forward
Climate related risks and opportunities
Global climate change will generate impacts on the environment and in the communities in which we operate that
will pose a serious challenge to our business. In response, we’ve initiated a range of actions and partnerships with
our customers to create low carbon solutions across our Office, Industrial & Logistics, Retail and Social Infrastructure
assets and funds.
These are some of the measures we’ve taken this year:
We made sure all our people:
We intend to:
Governance
– Our Board continued to oversee Group sustainability strategy and policies (including our approach to
climate change and integrating ESG) through the Audit Risk and Compliance Committee (ARCC).
Ethics: Conduct business
activities in line with the
highest ethical standards
– Received learning on governance and risk
management policies, including our Code of Conduct.
– All employees undertook training relating to business
ethics and management's approach to compliance
and ethical business practice and our social license
to operate. Scored over 90% in Group employee
engagement.
– Joined the Ethical Alliance (managed by The Ethics
Centre). This community of organisations is committed
to leading, inspiring and shaping better futures.
Continue to embed
values-based decision
making into everything
we do.
Data security: Actively
protect the privacy of
individuals and companies
– We joined the Sustainable Digitalisation Project as a
Silver Member to be part of an industry approach to
responsible, ethical and sustainable digitalisation.
– We actively engaged in the Property Council of
Australia’s Cyber Security Roundtable to address
emerging cyber threats as an industry.
– We reported no major cyber security incidents for
the year. Our cyber security strategy is modelled on
the internationally recognised standard ISO27001 and
audited annually.
Responsible supply
chain: Create an integrated
sustainable supply chain
strategy and ensure delivery
on UNGC commitment
– We identified five suppliers for independent review to
identify opportunities for improving their risk ratings.
– We implemented a Supplier Code of Conduct
outlining mandatory modern slavery compliance for
all our suppliers.
– All employees received modern slavery refresher
training, including training on the process of reporting
issues if employees find or suspect modern slavery in
our operations or supply chains.
We intend to:
Embed and continuously
evolve information security
and privacy practices in our
operations.
Continue to drive
technology and innovation
to enhance experience
and wellbeing, operate
efficiently and sustainably,
and safeguard against risk.
We intend to:
In FY22 we will identify the
next tranche of suppliers to
be invited to complete the
modern slavery pre-qual-
ification, with a focus on
suppliers in the industries
identified as most high risk
for Charter Hall, specifically
cleaning, security and
maintenance.
Publish our annual UN
Global Compact and
Modern Slavery Statement
in FY22.
– Our Executive and Non-Executive Directors engaged on Climate Change and Scenarios.
– Our Executive Committee continued to have strategic oversight of ESG strategy and implementation,
bolstered by the establishment of an ESG Committee to drive platform wide alignment and
implementation.
– We established a cross-business TCFD Working Group that includes representation from the Chief
Financial Officer, Chief Investment Officer, Chief Experience Officer, General Counsel and Company
Secretary, and Group Head of Risk and Compliance.
Strategy
– We developed and disclosed our Scenarios.
– We published our TCFD approach.
Risk
management
Metrics and
targets
– We made a commitment to being Net Zero Carbon in operation by 2030 (Scope 1 & Scope 2).
– We created a climate and carbon transaction framework for acquisition and investment strategies.
– We completed physical risk assessments portfolio wide.
– We commenced CCAP for Industrial & Logistics sector (70% complete by floor area) using RCP8.5
as our worst case scenario. CCAP for our Office and Retail sectors will commence in FY22.
Business Operations:
Target:
Established Net Zero
Carbon Scope 1 &
Scope 2 by 2030
Target:
100% renewables
for Scope 2
Achieved:
7%1 reduction in
carbon emission
intensity (Scope 1
and 2) since FY17,
despite a 37%1
increase in area
New Projects:
– We piloted Net Zero
developments (embodied carbon
and construction emissions) at
two childcare centres located
within Retail shopping centres in
WA.
– We piloted Climate Active certified
construction services on 140
Lonsdale Street, Melbourne
development.
– We are designing for Net Zero
in operations at 60 King William
Street, Adelaide development.
Climate
scenarios
As a business our strategy has adopted two scenarios to test resilience
and enable us to prepare for physical and transitional risks.
Transition to a low
carbon economy
(RCP2.6) scenario
Business-as-usual
(RCP8.5)
scenario
Outcome:
Not likely to exceed 2°C by 2100 in
accordance with the Paris Agreement
Outcome:
Likely to exceed 4°C+
by 2100
1. As at FY20. We will be reporting our FY21 environmental data in our 2021 Sustainability Report.
Sustainability | 39
Board of
Directors
Helping hold us accountable to our own
aspirations are our Board of Directors,
making use of their significant expertise
spanning decades and industries.
David Harrison
Managing Director & Group CEO
From Left: Jacqueline Chow, Independent Non-Executive Director;
Karen Moses, Independent Non-Executive Director;
Philip Garling, Independent Non-Executive Director;
David Clarke, Chair/Independent Non-Executive Director;
David Harrison, Managing Director & Group CEO;
David Ross, Independent Non-Executive Director;
Greg Paramor AO, Independent Non-Executive Director;
See pages 50-52 for Director bios.
Board of Directors | 41
Steven Bennett
Direct CEO
BBA
Steven oversees more than $8 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 ongoing management of the property portfolio.
Steven is an immediate past President of the Property Funds
Association of Australia. In this position he worked to further
the goals of the Association which included representing the
interests of direct property investors and managers and providing
a forum for research and education.
Prior to joining Charter Hall, Steven worked for Macquarie Bank
for seven years in Sydney and London. Steven has 20 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
Sheridan joined Charter Hall in 2019 with 21 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 across multiple global markets.
Sheridan is responsible for all strategic and operational aspects
of technology at Charter Hall, is Vice Chair of the Property Council
of Australia’s Cyber Security Roundtable and an Associate
Professor and Industry Advisory Committee member for the
property economics undergraduate programs at UTS.
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.
David Harrison
Managing Director & Group CEO
BBus (Land Economics), FAPI, GradDip Applied Finance
See page 51.
Russell Proutt
Chief Financial Officer
BCom (Hons), CA, CBV
Russell joined Charter Hall in 2017 and brings over 31 years’
finance experience to the Group, including 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 as 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 Stacker
Industrial & Logistics CEO
BBA (Accounting and Finance)
Richard has over 27 years of experience in real estate funds
management, real estate finance, accounting and risk
management. With experience across core property 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
60 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 having
previously headed this business.
Prior to joining Charter Hall, Richard held the roles of Division
Director of Macquarie Group and CEO of Macquarie Direct
Property Management Limited; General Manager with Lendlease
Corporation; and 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
Natalie has 24 years' of experience across Asia Pacific,
leading and implementing organisational development and
transformational change. In her 10 years at Charter Hall, she
has focused on defining and bringing to life its unique market
proposition, built upon a philosophy of “better futures and mutual
success” for its customers, employees and communities. Using
the levers of capability, brand, culture and workplace, Natalie has
been integral to how we scale and transform the Group, driving
cross sector connectivity and ensuring we retain our inventive
spirit as we grow. She has driven the Group’s ESG strategy,
including its ongoing commitment to creating strong local
communities and tangible outcomes for vulnerable Australians,
as well as the development of our Pathway to Net Zero by 2030.
Passionate about continuous improvement, 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.
Sean McMahon
Chief Investment Officer
BBus (Property)
Sean has 31 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 property
transactions and corporate development.
He brings a wealth of experience across investment markets,
diversified 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 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 this, Sean was a senior executive in the Property
Investment Banking division for at Macquarie Bank.
Executive
Committee
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
31 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.
Carmel Hourigan
Office CEO
BBus (Land Economics), GradDip Finance and Investment
Carmel has over 29 years' industry experience, spanning key
senior leadership positions and roles in funds management,
research and advisory services.
Joining Charter Hall in 2020, Carmel is leading the $22 billion
office sector from end to end including funds management,
asset management, development and property management
teams. She helps develop the overall strategy and objectives
for the office funds in conjunction with the Charter Hall Fund
Managers and investors, and guides the portfolio management,
capital transactions, treasury and trust management teams to
execute strategy.
Prior to joining Charter Hall, Carmel held the position of Global
Head of Real Estate at AMP Capital, in addition to overseeing
their strategic global real estate partnerships and real estate
investment committees. Prior to AMP Capital, Carmel held senior
positions at GPT Group, Lend Lease and Challenger Financial
Services Group.
Carmel formerly sat on the Property Council of Australia Board
of Directors and was Vice President. She also served as Special
Advisor to the Property Male Champions of Change group and is
a Fellow of the Australian Property Institute.
Above, from left: Greg Chubb, Retail CEO; Carmel Hourigan, Office CEO; Steven Bennett, Direct CEO; Sheridan Ware, Chief Information and Technology Officer;
David Harrison, Managing Director & Group CEO; Russell Proutt, Chief Financial Officer; Richard Stacker, Industrial & Logistics CEO; Natalie Devlin, Chief Experience Officer;
Sean McMahon, Chief Investment Officer.
Charter Hall Group
Annual Report 2021
Directors’ Report
and Financial Report
For the year ended
30 June 2021
Contents
Directors' report
45
Auditor's independence declaration
82
Consolidated statements
of comprehensive income
Consolidated balance sheets
83
85
Consolidated statement of
changes in equity - Charter Hall Group 86
Consolidated statement of
changes in equity
- Charter Hall Property Trust Group
87
Consolidated cash flow statements
88
Notes to the
consolidated financial statements
89
Directors' declaration to securityholders 138
Independent auditor's report
139
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
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 2021, 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.
Anne Brennan
Jacqueline Chow
Philip Garling
‒ David Clarke
‒
‒
‒
‒ David Harrison
‒
Karen Moses
‒ Greg Paramor AO
‒ David Ross
‒ Chair and Independent Non-Executive Director
Independent Non-Executive Director (resigned 31 May 2021)
‒
Independent Non-Executive Director (appointed 17 February 2021)
‒
‒
Independent Non-Executive Director
‒ Managing Director and Group CEO
Independent Non-Executive Director
‒
Independent Non-Executive Director
‒
Independent Non-Executive Director
‒
Distributions/Dividends – Charter Hall Group
Distributions/dividends paid/payable to stapled securityholders during the year were as follows:
Final ordinary distribution of 11.61 cents and ordinary dividend of 7.7 cents per stapled security for the
six months ended 30 June 2021 payable on 31 August 2021
Interim ordinary distribution of 11.10 cents and interim ordinary dividend of 7.45 cents per stapled
security for the six months ended 31 December 2020 paid on 26 February 2021
Total Distributions/Dividends paid and payable to stapled securityholders
2021
$'m
90.0
86.4
176.4
Operating and financial review
The Group recorded a statutory profit after tax attributable to stapled securityholders for the year to 30 June 2021 of $476.8 million
compared to a profit of $345.9 million for the year ended 30 June 2020.
Operating earnings amounted to $284.3 million for the year to 30 June 2021, compared to $322.8 million for the year ended 30 June
2020, a decrease of 11.9%. 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.
Operating earnings attributable to stapled securityholders
Add: Net fair value movements on equity accounted investments1
Add: Net gain on disposal of property investments1
Less: 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 pursuit 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.
2021
$'m
284.3
228.0
0.5
(1.5)
7.2
(6.9)
(15.9)
(4.6)
(1.5)
(12.8)
476.8
2020
$'m
322.8
67.8
6.9
2.2
(14.9)
(13.6)
(6.0)
(4.4)
(6.9)
(8.0)
345.9
3
Directors’ Report and Financial Report | 45
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Directors’ report
For the year ended 30 June 2021
Operating and financial review continued
The 30 June 2021 financial results with comparatives are summarised as follows:
Operating and financial review continued
The following table summarises the key metrics for the property investments of the Group:
Revenue ($ 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
2021
668.0
476.8
102.4
284.3
61.0
37.9
123.0
34.2
319.5
3,284.7
775.9
2,508.8
137.5
2,371.3
465.8
5.09
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
Charter Hall Property
Trust Group
2021
26.7
310.5
66.7
n/a
n/a
22.7
n/a
n/a
n/a
2,658.5
615.2
2,043.3
137.5
1,905.8
465.8
4.09
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
2,286.5
4.91
5.0%
52,288.9
1,992.4
4.28
0.0%
40,549.3
1,905.8
4.09
n/a
n/a
1,716.2
3.68
n/a
n/a
1 Gross revenue does not include the Group’s share of net profits of associates and joint ventures of $314.0 million (2020: $162.3 million).
2 Segment earnings and revenue is used by the Board in assessing the performance and allocating of resources to its operating segments.
3 Represents the 67.7% (2020: 60.4%) non-controlling interest share of the Charter Hall Direct Long WALE Fund (DLWF) formerly Charter Hall Direct Diversified
Consumer Staples Fund (DCSF).
4 NTA attributable to stapled securityholders and NTA per stapled security ($) are calculated using assets less liabilities, net of intangible assets and related deferred tax
and non-controlling interests in DLWF. NTA includes right of use assets.
5 Gearing is calculated as interest-bearing debt drawn (excluding hedged foreign exchange movements subsequent to the related debt drawing date and DLWF net of
cash, divided by total assets net of cash, derivative assets and DLWF).
Property investment
Property investment provides the Group with yields from its co-investments in Group funds. During the year property investment
contributed $123.0 million (2020: $120.0 million) in segment earnings to the Group.
Industrial & Logistics;
The Group’s property investments are classified into the following real estate sectors:
‒
‒ Long WALE Retail;
‒ Office;
‒ Social Infrastructure;
‒ Shopping Centre Retail; and
‒ Diversified.
Ownership
stake
(%)
Industrial & Logistics
Charter Hall Prime Industrial Fund (CPIF)
Core Logistics Partnership Trust (CLP)
Charter Hall PGGM Industrial Partnership (CHPIP)
Long WALE Retail
Long WALE Hardware Partnership (LWHP)
CH DJ Trust (CHDJT)
Charter Hall AP Fund (CHAPF)
Other Long WALE Retail investments
Office
Charter Hall Office Trust (CHOT)
Charter Hall Prime Office Fund (CPOF)
Charter Hall Direct Office Fund (DOF)
Charter Hall Direct PFA Fund (PFA)
Brisbane Square Wholesale Fund (BSWF)
Other Office investments
Social infrastructure
Charter Hall Social Infrastructure REIT (ASX: CQE)
Charter Hall Exchange Wholesale Trust (CHEWT)
Shopping Centre Retail
Charter Hall Retail REIT (ASX: CQR)
Other Shopping Centre Retail investments
Diversified
Charter Hall Long WALE REIT (ASX: CLW)
Charter Hall Direct Long WALE Fund (DLWF)3
Charter Hall DVP Fund (DVP)
1.8
4.8
12.0
14.1
50.0
5.0
15.7
5.1
7.7
7.9
16.8
8.8
13.9
10.6
11.3
32.3
11.5
average
FY2021 Weighted Weighted Weighted Weighted
average
average
lease market cap discount
rate
rate
expiry
(%)
(%)
(years)
FY2021
average Charter Hall
rental investment
yield2
(%)
Charter Hall
investment
income1
($m)
reviews
(%)
Charter Hall
investment
($m)
118.8
76.2
25.7
167.4
73.6
39.7
29.3
270.8
270.6
141.1
104.0
102.4
61.4
98.9
59.4
238.5
0.3
369.7
51.3
49.0
6.0
4.2
0.9
7.2
1.4
1.1
1.6
17.4
14.4
0.6
1.1
9.0
4.6
5.1
3.3
15.6
4.3
18.5
3.4
1.5
10.8
9.1
10.6
8.0
19.7
18.6
n/a
6.6
6.8
8.2
7.3
7.4
n/a
15.2
19.1
7.5
n/a
13.2
6.8
6.6
n/a
9.1
4.3
4.2
4.5
4.5
5.0
4.7
n/a
4.6
4.7
4.9
5.2
5.4
n/a
5.5
3.8
5.8
n/a
4.8
5.4
4.9
n/a
4.9
5.7
5.9
5.7
5.9
6.8
5.2
n/a
6.0
6.0
6.0
6.3
6.5
n/a
n/a
5.6
6.5
n/a
5.7
6.2
5.9
n/a
6.0
2.9
3.0
2.5
2.7
2.5
1.0
n/a
3.6
3.7
3.5
3.3
3.5
n/a
2.9
3.1
4.1
n/a
3.0
2.6
3.4
n/a
3.1
4.8
6.0
5.5
5.3
6.0
4.8
n/a
6.3
4.8
4.7
7.9
8.6
n/a
5.6
6.6
7.4
n/a
6.4
6.1
4.0
n/a
6.1
Other investments
Property Investment Total
60.6
2,408.7
1.8
123.0
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 DLWF adjusted for non-controlling interest share of 67.7%.
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 $34.2 million
(2020: $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 $52.3 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 $319.5 million (2020: $412.3 million) in segment
revenue to the Group.
4
5
Directors’ Report and Financial Report | 47
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
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 $6.9m impairment was recorded for the Group’s investment in Charter Hall Long WALE REIT in the first half of FY21. 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:
−
Investment in associates Note 2(b);
− Revenue Note 4(a);
−
Intangibles Note 12(b);
− Fair value measurement Note 23(d).
Directors’ report
For the year ended 30 June 2021
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
No matter or circumstance has arisen since 30 June 2021 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 complements 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, and
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 continues to progress its alignment with the
Taskforce for Climate-related Financial Disclosures (TCFD)
recommendations and in the reporting period management has
created a dedicated ESG Committee to drive platform wide
alignment and implementation against the TCFD. These
frameworks and policies can be found at www.charterhall.com.au
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 to 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.
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.
6
7
Directors’ Report and Financial Report | 49
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
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.
Other current listed company directorships
Argo Investments Limited
Nufarm Limited
Tabcorp Holdings Limited
Spark Infrastructure RE Limited
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.
Former listed company directorships in last three years
Metcash Limited
Special responsibilities as at 31 May 2021
N/A
Interests in securities
N/A
Jacqueline Chow
Independent Non-Executive Director
Experience and expertise
An experienced Non-Executive Director, Jacqueline is currently a
Non-Executive Director of Coles Group and nib Holdings Limited
and also consults to McKinsey as a Senior Advisor in their
Transformation Group. Prior to commencing her Non-Executive
career, Ms Chow held senior positions at Accenture, the Kellogg
Company, Campbell’s and most recently, as the Chief Operating
Officer, Global Consumer and Food Service for Fonterra.
Jacqueline holds a Bachelor of Science (Hons) from the
University of NSW and holds a Master of Business Administration
(Dean’s Distinguished Service Award) from the Kellogg School of
Management at Northwestern University.
Jacqueline joined the Board 17 February 2021.
Other current listed company directorships
Coles Group Limited
nib Holdings Limited
Special responsibilities as at 30 June 2021
Member of the Audit, Risk and Compliance Committee
Interests in securities
500 stapled securities in Charter Hall Group
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 Lendlease 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 as at 30 June 2021
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.
Anne retired from the Board on 31 May 2021.
Directors’ report
For the year ended 30 June 2021
Information on Directors continued
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
Lendlease Corporation, including five years as CEO of Lendlease
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
Nil
Special responsibilities as at 30 June 2021
Member of the Nominations Committee
Member of the Remuneration and Human Resources Committee
Chair of the Investment Committee
Interests in securities
18,351 stapled securities in Charter Hall Group via a direct
interest
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 of
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 $52.3 billion of assets under management in 15
years.
David holds a Bachelor of Business Degree (Land Economy)
from the University of Western Sydney, is a Fellow of the
Australian Property Institute (FAPI) and holds a Graduate
Diploma in Applied Finance from the Securities Institute of
Australia.
David is the National President of the Property Council of
Australia and chair of the Nominations and Financial
Management Committees.
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 Social Infrastructure REIT (Alternative Director)
Former listed company directorships in last three years
Nil
Special responsibilities as at 30 June 2021
Member of the Investment Committee
Interests in securities
571,690 stapled securities in Charter Hall Group via direct
interests and 841,773 stapled securities in Charter Hall Group via
indirect interests.
David also holds 797,386 performance rights,114,902 service
rights in the Charter Hall Performance Rights and Options Plan
as well as 176,181 STI Service Rights.
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
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 as at 30 June 2021
Chair of the Audit, Risk and Compliance Committee
Member of the Remuneration and Human Resources Committee
Interests in securities
23,137 stapled securities in Charter Hall Group via indirect
interests
8
9
Directors’ Report and Financial Report | 51
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
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
2021, and the number of meetings attended by each Director were:
Full meetings of the
Board of Directors
A
10
9
2
10
10
10
10
10
B
10
9
2
10
10
10
10
10
Audit, Risk and
Compliance
Committee
A
5
4
1
*
*
5
4
1
B
5
4
1
*
*
5
4
1⁴
Investment
Committee
A
4
*
*
4
4
*
4
4
B
4
*
*
4
4
*
4
4
Nomination
Committee
A
2
*
*
2
*
*
*
2
B
2
*
*
2
*
*⁷
*
2⁸
Remuneration and
HR Committee
B
*
5
*
6
*
2⁵
2³
6⁶
A
*
5
*
6
*
2
2
6
D Clarke
A Brennan1
J Chow2
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.
1 Anne Brennan resigned 31 May 2021.
2 Jacqueline Chow appointed 17 February 2021.
3 Greg Paramor appointed to the committee 1 April 2021.
4 David Ross appointed to the committee 1 April 2021.
5 Karen Moses appointed to the committee 1 April 2021.
6 David Ross appointed as Chair to the committee 26 March 2021.
7 Karen Moses appointed to the committee 1 July 2021.
8 David Ross retired from the committee 1 July 2021.
Directors’ report
For the year ended 30 June 2021
Information on Directors continued
Greg Paramor AO
Independent Non-Executive Director
Experience and expertise
Greg joined the Board of the Charter Hall Group on 30 November
2018.
David Ross
Independent Non-Executive Director
Experience and expertise
David joined the Board of the Charter Hall Group on 20
December 2016.
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, the
Sydney Swans Foundation and Eureka Group Holdings
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
Eureka Group Holdings Limited
Former listed company directorships in last three years
Folkestone Limited
Special responsibilities as at 30 June 2021
Member of the Remuneration and Human Resources Committee
Member of the Investment Committee
Interests in securities
14,300 stapled securities in Charter Hall Group via indirect
interests
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 Lendlease.
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, Lendlease
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 as at 30 June 2021
Chair of the Remuneration and Human Resources Committee
Member of the Nominations Committee
Member of the Investment Committee
Member of the Audit, Risk and Compliance Committee
Interests in securities
10,000 stapled securities in Charter Hall Group via indirect
interests
Company Secretary
Mark Bryant was appointed as Company Secretary on 24 August 2015.
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.
Mark is the General Counsel and Company Secretary for the Charter Hall Group.
10
11
Directors’ Report and Financial Report | 53
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report
Dear Securityholders,
On behalf of the Board, we are pleased to present this Remuneration Report for Charter Hall which focuses on our executive
remuneration strategy and outcomes, in addition to Charter Hall’s people and culture highlights for the financial year ended 30 June
2021 (FY2021).
From early in calendar year 2020 the Covid-19 pandemic has impacted communities, the economy and businesses. While the
Charter Hall business finished FY2020 in good shape, in light of this external environment, the Board determined there would be no
changes to the structure or increases to remuneration for the Group’s Executives in FY2021.
Despite the backdrop of challenging operating conditions and uncertainty, the Board is proud of the way management has continued
to focus on creating an inclusive culture where people are able to perform at their best, delivering strong returns for investors and
working in partnership with tenant customers to navigate through this period of uncertainty.
In FY2021 the Group achieved outperformance of the target Group Operating Earnings Per Security (OEPS) and shared this success
with all employees through full payout of the Short Term Incentive (STI). Assessment of individual performance scorecards has
resulted in 138.5% of the total target STI amount being awarded to eligible employees across the Group, including the three Reported
Executives who were awarded the maximum STI payout at 150% of the target.
In addition, the FY2019 Long Term Incentive (LTI) reached the end of its three-year performance period on 30 June 2021 and will
fully vest on 31 August 2021 (subject to a further one-year holding lock) due to:
•
•
the aggregate OEPS over the performance period equivalent to a 22.5% compound average growth rate (CAGR) exceeding
the upper end of the required aggregate OEPS performance measure; and
the Relative Total Shareholder Return (TSR) measure achieving the top rank against the 16 REITs in the comparator group
from the S&P/ASX200 A-REIT Accumulation Index with a TSR of 155.9% (an equivalent CAGR of 36.8%) over the three
year performance period.
Our people have shown extraordinary resilience through this challenging year, and we have continued to look for ways to improve
wellbeing and build a culture that our people are proud of. This is reflected in our people and culture highlights for the year:
90% Engagement result with a 95% participation rate
97% of our people say ‘they would recommend Charter Hall as a good place to work”
•
•
• Recognised as a finalist in the 2021 AFR Boss Best Place to Work List
• Awarded an Employer of Choice for Gender Equality by the Workplace Gender Equality Agency (WGEA)
• One of the first organisations globally to achieve a WELL Portfolio Score from the International WELL Building Institute (IWBI)
for the work on enhancing wellness in buildings for Charter Hall’s employees and tenants
• Recognised as a finalist in the Australian HR Awards for the 2021 Best Health and Wellbeing Program
Changes to FY2022 Remuneration
Due to the significant growth in the Charter Hall business over the last two years and with no increase to remuneration in FY2021,
Ferguson Partners were engaged to conduct a targeted peer group remuneration benchmarking analysis for key senior roles to ensure
that their remuneration is at market. Over this period, Charter Hall’s market capitalisation has increased by 43% from $5.04 billion (as
at 30 June 2019) to $7.23 billion (as at 30 June 2021) and the Group’s Funds Under Management (FUM) has increased by 72% from
$30.4 billion (as at 30 June 2019) to $52.3 billion (as at 30 June 2021).
As a result of the benchmarking data provided in the Ferguson Partners report, changes are being introduced in FY2022 both in terms
of quantum and mix of the fixed and variable remuneration components for the Managing Director and CEO (Managing Director) and
Other Reported Executives. While the increases are material they reflect the growth and current position of the Group and are
necessary to bring remuneration into line with market. The increase for the Managing Director is all in ‘at risk’ components and for the
Other Reported Executives on average 88% is in ‘at risk’ components. The overall increase in ‘on target’ Total Remuneration for all
employees in the Group as at 1 July 2021 for FY2022 is approximately 10%, including all three Reported Executives. The details of the
changes to take effect in FY2022 for the Managing Director and Other Reported Executives are included in this Remuneration Report.
As the Group embarks on the next period of growth, the Board has also considered the leadership, expertise and experience critical to
the ongoing outperformance of Charter Hall. While the Board and the Committee believe that the current executive remuneration
framework is sound based upon market comparators, continuity of leadership and a high performing team as well as succession
planning are critical in what is currently a highly competitive landscape for executive leadership and talent.
As a result, a Retention and Outperformance Plan is being introduced in FY2022, designed to enable meaningful participation in
outperformance of returns to security holders, through Performance Rights earned over a 5 year period. Rewards will only be earned if
Group TSR over the next five years strongly outperforms on a Relative TSR basis and achieves a minimum Absolute TSR and then
vests for each participant only if they meet individual non-financial performance expectations and behaviour consistent with the Group’s
purpose and values, to the satisfaction of the Board. The FY2022 Retention and Outperformance Plan is a one-off award in addition to
the regular annual total target remuneration for FY2022 only.
In designing this Plan the Board considered its desire for the Managing Director to continue his successful long-term leadership of
Charter Hall and to retain and incentivise the high performing team of other key senior management roles critical to continuing to:
•
•
•
partner with our tenant customers and communities to achieve their business objectives;
provide investment opportunities and competitive investment returns to our investors; and
deliver strong and competitive TSR outperformance for our Charter Hall securityholders.
Further details on the Retention and Outperformance Plan are included in this Remuneration Report and awards under this Plan
proposed to be made to the Managing Director will be voted on by securityholders at the FY2021 AGM later this year. Details of the
Plan will be included in the Notice of Meeting and Explanatory Memorandum.
Non-Executive Directors (NED) fees were last independently reviewed relative to market four years ago. Due to the growth of the
Charter Hall Group since then, EY were engaged to provide market benchmarking data in relation to NED Board and Committee fees
to assist with a review to take effect in FY2022. A summary of the changes is included in this Remuneration Report. Based upon the
market data provided it is intended that the maximum aggregate NED fee pool of $1.7 million be increased to $2.0 million subject to the
approval of securityholders at this year’s 2021 AGM.
We invite you to read Charter Hall’s Remuneration Report and trust you will find that it clearly articulates the links between the Group’s
strategy, performance, and executive remuneration outcomes. The directors believe that the Group has regularly outperformed its
competitors and our people, including our executive team, have shown exceptional resilience, and delivered consistent FUM growth in
these uncertain times. The Board believes that the FY2021 remuneration outcomes are fair and justified in light of our financial
performance and the value delivered to our securityholders in security price increase and dividends. We welcome your feedback on
Charter Hall’s remuneration practices and disclosures and look forward to your continued support at the 2021 AGM.
David Clarke
Chair - Board
David Ross
Chair – Remuneration and Human Resources Committee
12
13
Directors’ Report and Financial Report | 55
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Summary of Remuneration Changes for FY2022
Changes to Total Target Remuneration
Remuneration for Charter Hall’s Group Executives was last independently reviewed, relative to the market, two years ago. Since then
Charter Hall’s market capitalisation has increased by 43% from $5.04 billion (as at 30 June 2019) to $7.23 billion (as at 30 June 2021)
and the Group’s FUM has increased by 72% from $30.4 billion (as at 30 June 2019) to $52.3 billion (as at 30 June 2021). Based on the
findings of the remuneration benchmarking conducted by Ferguson Partners which included larger companies in the S&P/ASX 200
Australian Real Estate and Investment Trust (A-REIT) industry group, executive pay when compared to peer group companies does
not reflect the growth in the Group and its current position. It should be noted that Ferguson Partners did not provide any remuneration
recommendation for the purposes of the Corporations Act 2001 (Cth) (Act).
The changes approved by the Board for implementation in FY2022 intend to bring the remuneration of Reported Executives in line with
the market. These changes include:
•
•
•
an increase in Total Target Remuneration (TTR) for the Managing Director of 28.6%, all of which is in ‘at risk’ components;
an increase in TTR for the CIO and CFO of 24% and 20% respectively, including a restructure of the fixed and ‘at risk’ variable
components to that of peers (one-third fixed, one-third STI and one-third LTI). On average 88% of the increases are in the ‘at
risk’ components; and
an overall increase of 10% in TTR for all employees in the Group as at 1 July 2021, effective FY2022, including the three
Reported Executives.
The following table outlines the current and the approved FY2022 remuneration, at target, for the Reported Executives.
Name
Managing Director
David Harrison
2022
2021
Chief Investment Officer
Sean McMahon
2022
2021
Chief Financial Officer
Russell Proutt
2022
2021
Fixed Annual
Remuneration
(FAR)
$
Short Term
Incentive (STI)
Long Term
Incentive (LTI)
$
$
Total Target
Remuneration
(TTR)
$
% of TTR in ‘at
risk’
components
1,500,000
1,500,000
2,250,000
1,500,000
3,000,000
2,250,000
6,750,000
5,250,000
925,000
850,000
925,000
719,070
925,000
671,132
2,775,000
2,240,202
865,000
820,000
865,000
641,000
865,000
705,100
2,595,000
2,166,100
77.8%
71.4%
66.7%
62.1%
66.7%
62.1%
Retention and Outperformance Plan Award in FY2022
In FY2022, a Retention and Outperformance Plan is being introduced as a one-off award and as an additional retention mechanism to
reward participants if Group TSR over the next five years strongly outperforms on a Relative TSR basis and achieves a minimum
Absolute TSR. This award vests, for each participant, only if they meet individual non-financial performance expectations and
behaviours consistent with the Group’s purpose and values, to the satisfaction of the Board.
The Retention and Outperformance Plan is in addition to regular annual remuneration.
The terms of the FY2022 Retention and Outperformance Plan are set out below and the purpose and rationale for elements of the Plan
are provided following the table below.
Directors’ report
For the year ended 30 June 2021
FY2022 Retention and Outperformance Plan Terms
5.0 million Performance Rights
Represents approximately 1% of issued and
outstanding securities (465.8 million total securities
outstanding as at 1 July 2021)
Managing Director, Other Reported Executives and other senior executives across the Group
5-year period commencing 1 July 2021 and ending 30 June 2026
Financial Performance Measures
1. Gateway Relative TSR performance measure: Top three TSR rank against the comparator
group over the performance period. The comparator group consists of the S&P/ASX 200 A-REIT
Accumulation Index constituents as at 1 July 2021 however, including Centuria Capital Group
(which was added to the S&P/ASX 200 A-REIT Accumulation Index on 16 July 2021) and
excluding Uniball-Rodamco-Westfield SE.
2. Absolute TSR performance measure: TSR performance range from a minimum TSR equivalent
to a 12% CAGR to a TSR equivalent to a 15% CAGR over the performance period, with 40%
vesting at a TSR equivalent to a 12% CAGR prorated straight-line to 100% vesting at a TSR
equivalent to a 15% CAGR.
For example
TSR % Achieved (5-year CAGR)
Award % Achieved
12%
40%
13%
60%
14%
80%
15%
100%
Non-Financial Performance Measures
Gateway Non-Financial performance measure: for each participant vesting only occurs if they meet
individual non-financial performance expectations and behaviour consistent with the Group’s purpose
and values, to the satisfaction of the Board.
$15.21 representing the VWAP for the month of June 2021.
Subject to meeting the performance conditions (as noted above), the Performance Rights will vest
following 30 June 2026, however, any securities allocated will remain subject to a holding lock for two
years until 30 June 2028.
The allocated Performance Rights will not have any rights to vote or receive any distributions during
the performance period.
During the two-year holding lock period between 30 June 2026 and 30 June 2028, Plan participants
will receive declared distributions on securities allocated to the participant on vesting of their
Performance Rights.
In the event of resignation (other than genuine retirement) or termination for cause or termination for
poor performance (as determined by the Board), prior to the end of the holding lock period, all
unvested rights and restricted securities will lapse, unless the Board determines otherwise. In any
other circumstances unless the Board determines otherwise, a pro rata portion of rights (calculated
based on the portion of the performance period that has elapsed up until the date of termination) and
all restricted securities will continue to remain on foot and, subject to the original terms of the offer, as
though the Executive had not ceased employment.
The Board has discretion to reduce, including to nil, unvested rights in certain circumstances to
ensure participants do not obtain any inappropriate benefit. The circumstances in which the Board
may exercise this discretion include, for example, where the Board determines that an Executive has
acted fraudulently, dishonestly, or has engaged in gross misconduct or has acted in a manner which
brings the Group into disrepute.
In accordance with the Corporations Act 2001, all participants are prohibited from hedging or
otherwise protecting the value of unvested stapled securities.
The Board, in its absolute discretion, may determine the manner in which the rights will be dealt with.
Performance
Rights Pool
Participants
Performance
Period
Performance
Measures
Initial Price for
determining TSR
Vesting
Distribution and
Voting Rights
Cessation of
Employment
Preventing
Inappropriate
Benefits
Hedging
Change of
Control
Provisions
Purpose of the Plan
As the Group embarks on the next period of growth continuity of leadership and retaining a high performing team are critical to the
ongoing outperformance of Charter Hall in what is currently a highly competitive landscape for executive leadership and talent. The
Plan is designed to complement the current annual remuneration framework by providing an additional retention mechanism and
reward for outperformance.
It enables meaningful participation in outperformance of returns to security holders, through Performance Rights earned over a 5 year
period. Rewards will only be earned if Group TSR performance over the next five years strongly outperforms on a Relative TSR basis
and achieves a minimum Absolute TSR and then vests for each Participant only if they meet individual performance expectations and
behaviours consistent with the Group’s purpose and values, to the satisfaction of the Board.
14
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Directors’ Report and Financial Report | 57
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Current NED Fees and changes to take effect in FY2022
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
2021
$
2022
$
393,600
157,590
465,000
175,000
42,025
21,010
31,515
15,755
3,150
3,150
15,755
10,505
55,000
25,000
40,000
18,500
5,000
5,000
17,000
12,000
A review of the maximum aggregate NED fee pool was also undertaken relative to comparable companies. The current maximum
aggregate NED fee pool is $1.7 million which was approved by securityholders at the 2017 AGM. Due to the increase in NED fees to
take effect in FY2022 and to allow for future increases and the potential for an additional NED, it is intended that the current maximum
aggregate NED fee pool of $1.7 million is increased to $2.0 million subject to the approval of securityholders at this year’s 2021 AGM.
Directors’ report
For the year ended 30 June 2021
What is the average annual issue of Charter Hall securities under this Plan and the LTI Plan?
Under the FY2022 Retention & Outperformance Plan a maximum of 1.07% of securities on issue are issued at full vesting at the end of
the 5-year performance period (or equivalent to 0.21% pa) and approximately 0.18% of securities on issue are currently issued at full
vesting under the LTI Plan each year. This means on average approx. 0.39% of securities on issue are issued each year at 100%
vesting across both plans.
Financial Performance Measures
The first performance measure is a relative performance gateway and requires a top-3 ranking in terms of TSR over the performance
period against the comparator group. A top-3 position would be equivalent to an 89th percentile position. Across the peer group, for
those REITs that have a Relative TSR measure in their LTI plans, 100% vesting typically occurs at a 75th percentile Relative TSR
performance. The measure in this Retention and Outperformance Plan serves to ensure that the Absolute TSR performance (second
measure) is sufficient on a Relative TSR performance basis.
If the first measure is achieved, the second performance measure has an Absolute TSR performance gateway measure equivalent
to a 12% CAGR over the performance period. At this gateway threshold, 40% of the performance rights would vest (subject to holding
lock period) with up to 100% vesting if the TSR over the performance period is equivalent to a 15% CAGR or greater; with vesting
prorated between these performance hurdles based on actual TSR achieved.
The 12%-15% CAGR range for the TSR measure has been selected as it represents strong absolute performance and requires
significant ongoing OEPS growth over the 5-year performance period, particularly in circumstances where there is no increase in
Charter Hall’s price earnings multiple. While Charter Hall has achieved higher TSR over the last five years this has been as a result of
both strong OEPS growth and a significant increase in its price earnings multiple in an environment of declining interest rates and real
asset appreciation. If there continues to be increases in price earnings multiples that contribute materially to the TSR performance of
Charter Hall then the relative TSR performance gateway measure will establish whether Charter Hall’s Absolute TSR is in the top three
of the S&P/ASX 200 A-REIT Index constituents to qualify for vesting.
When considered in combination with the Relative TSR measure, the structure requires both sector leading performance and absolute
returns in excess of long-term market averages as measured by the S&P/ASX200 A-REIT Index.
Why is this a 5-year Plan with a 2-year holding lock?
The Plan is designed to complement the existing Remuneration structure. The 5 year performance period of the Plan is intentionally
longer than the LTI Plan period and the 2 year holding lock is designed to act as an additional retention mechanism with participants
having additional Charter Hall equity ownership.
Changes to NED Fees and Maximum Aggregate NED Fee Pool
NED fees were last independently reviewed relative to market four years ago. Since then Charter Hall’s market capitalisation has
increased by 182% from $2.56 billion (as at 30 June 2017) to $7.23 billion (as at 30 June 2021) and the Group’s FUM has increased by
164% from $19.8 billion (as at 30 June 2017) to $52.3 billion (as at 30 June 2021). This growth has increased the operational intensity,
accountability (both legal and financial) and the responsibilities of Board members towards securityholders. Accordingly, EY were
engaged to provide current market benchmarking data in relation to NED Board and Committee fees to assist with a review to align
NED fees with market for comparable companies. This review took into account the Group’s current market capitalisation, FUM,
business complexity and intensity.
A summary of the current NED fees and the increased fees based upon the independent market benchmarking data review to take
effect in FY2022 are set out below.
16
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Directors’ Report and Financial Report | 59
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Directors’ report
For the year ended 30 June 2021
FY2021 Remuneration Outcome Summary
Charter Hall Limited is pleased to present its Remuneration Report (Report) for the year ended 30 June 2021 (FY2021). The table
below outlines the key remuneration changes made in FY2021 and outcomes achieved in FY2021.
Remuneration at a Glance for FY2021
Delivery
Fixed Annual
Remuneration (FAR)
(Section 3.3)
‘On target’ Total
Remuneration and
Remuneration Mix
(Section 3.2)
Outcome
The FAR for the Managing Director and Other Reported Executives remained unchanged in FY2021
and no increases were awarded to any of the Reported Executives.
No changes were made to the ‘on target’ Total Remuneration and ‘at risk’ components for the Managing
Director and the Other Reported Executives.
Short Term Incentive (STI)
(Section 3.4)
Group OEPS was 61 cents, which was approximately 20% above target FY2021 OEPS. Assessment of
individual performance scorecards has resulted in 138.5% of the total target STI amount to be awarded
to eligible employees across the Group. For all Group Executives (including the Reported Executives),
STI is delivered in the form of cash (67%) and deferred service rights (33%).
Long Term Incentive (LTI)
(Section 3.5)
Non-Executive Directors
(NED)
(Section 5)
The FY2018 grant vested in full on 31 August 2020 as a result of performance exceeding absolute and
Relative TSR hurdles over the three years to 30 June 2020.
The FY2019 LTI grant reached the end of its three-year performance period on 30 June 2021 and as a
result of performance exceeding Relative TSR and aggregate OEPS hurdles over the three years to 30
June 2021 will vest at 100% on 31 August 2021 and will be subject to a further one-year holding lock.
There was no increase to the NED fee pool and individual NED fees in FY2021.
Remuneration Report Summary
Actual remuneration received in FY2021
The following table presents the actual remuneration that was received by Reported Executives during the financial year ended 30
June 2021. This voluntary disclosure is provided to increase transparency and includes:
‒
fixed pay and other benefits for FY2021;
‒ 2020 cash STI paid during FY2021; and
‒
the value of any LTI and STI award that vested during FY2021.
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 McMahon
R Proutt
Totals
Salary
and other
benefits1
$
Short Term
Incentive2
$
Value of
securities
vested3
$
% of
remuneration
consisting of
rights
%
Total
$
1,501,373
–
4,772,519
6,273,892
851,373
821,373
3,174,119
359,537
–
359,537
1,702,744
2,138,515
8,613,778
2,913,654
2,959,888
12,147,434
76.1
58.4
72.2
70.9
1 Other benefits include superannuation and non-monetary benefits.
2 Values relate to STI paid in FY2021 in cash for FY2020 performance; D Harrison elected to voluntarily defer 100% of the cash component of his FY2020 STI into rights;
S McMahon elected to voluntarily defer 50% of the cash component of his FY2020 STI into rights and R Proutt elected to voluntarily defer 100% of the cash component
of his FY2020 STI into rights.
3 Values calculated using the two-day VWAP (volume-weighted average price) 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.
18
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Directors’ Report and Financial Report | 61
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report
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 2021. 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
Jacqueline Chow
Managing Director
David Harrison
Other Reported Executives
Sean McMahon
Russell Proutt
Role
Chair
Director
Director
Director
Director
Director
Director
Term as KMP
Full Year
Part Year - retired 31 May 2021
Full Year
Full Year
Full Year
Full Year
Part Year - appointed 17 February 2021
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.
Remuneration Report
2. Remuneration governance
Charter 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.
SECURITYHOLDERS
BOARD
The Board reviews, challenges and approves 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.
External Advisors
The Board and the Committee
may seek advice from
independent experts and
advisors.
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.
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 , 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 ultimately through
Board and Committee
intervention as and when
required.
Remuneration and Human Resources
Committee
Members
- David Ross (Chair)1
- Anne Brennan2
- Philip Garling
- Karen Moses3
- Greg Paramor3
Role
Oversees our remuneration philosophy
while considering strategic objectives,
culture and values, risk management
framework and long-term financial
sustainability.
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 Boards) and submits
these for Board approval.
Charter
Specific responsibilities are detailed in the
Committee’s Charter and reviewed
annually.
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.
1 David Ross was appointed the Chair of the Remuneration and Human Resources Committee on 26 March 2021.
2 Anne Brennan stepped down from the role of Chair of the Remuneration and Human Resources Committee effective 26 March 2021. She
remained a member until her retirement from the Board effective 31 May 2021.
3 Karen Moses and Greg Paramor were appointed to the Remuneration and Human Resources Committee effective 1 April 2021.
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.
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Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report
3. Executive remuneration framework
Charter 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
FY2021. 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
STI
LTI
FAR
STI
LTI
Fixed Annual Remuneration comprises of
cash base salary, statutory superannuation
contributions and other nominated benefits.
‘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.
‘At risk’ equity awards that are subject to
long-term performance conditions.
100% is delivered as performance rights.
STI cash
delivered
Deferred STI vests
in 2 equal tranches
over 2 years
Vesting after 4 years, equal measures of
Relative TSR and OEPS growth
REMUNERATION OUTCOMES FY2021
There was no change to Managing Director’s FAR in FY2021.
FAR for Other Reported Executives did not change in FY2021. (Section 3.3).
The outperformance of 20% above target FY2021 OEPS has resulted in 138.5% 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 FY2019 (second tranche) and FY2020 (first tranche) deferred service rights in full.
FY2018 LTI award reached the end of its three-year performance period on 30 June 2020 and vested at 100%
on 31 August 2020 and was subject to a further one-year holding lock.
FY2019 LTI award reached the end of its three-year performance period on 30 June 2021 and will vest at 100%
on 31 August 2021 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.
Remuneration Report
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 components on target that
apply for FY2021. 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 and, 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
Other Reported
Executives
The Managing Director’s FAR remained unchanged at $1,500,000 in FY2021.
FAR for the CFO and the CIO remained unchanged in FY2021.
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Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report
Features
Approach
Voluntary Deferral
of Cash Component
of STI
Cessation of
Employment
Preventing
Inappropriate
Benefits
Under the FY2021 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 grant. 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 value calculation prepared by
Deloitte using the Black-Scholes-Merton valuation method, which discounts for dividends/distributions
forgone during the deferral period.
In the event of resignation (other than genuine retirement) or termination for cause or termination for poor
performance (as determined by the Board), all unvested mandatorily deferred STI in service rights will
lapse, unless the Board determines otherwise. In any other circumstances unless the Board determines
otherwise, the rights will continue to remain on foot and, subject to the original terms of the offer, as
though the Executive had not ceased employment.
For the mandatorily deferred STI component, the Board has discretion to reduce, including to nil,
unvested rights in certain circumstances to ensure Executives do not obtain an inappropriate benefit. The
circumstances in which the Board may exercise this discretion include, for example, where the Board
determines that an Executive has acted fraudulently, dishonestly, or has engaged in gross misconduct or
has acted in a manner which brings the Group into disrepute.
Directors’ report
For the year ended 30 June 2021
Remuneration Report
3.4 Short Term Incentive
FY2021 STI Award – Key Features
Approach
Features
Purpose
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
Determining and
assessing
achievement of STI
Target
Individual
Opportunity
Performance
Targets
Group: A financial gateway of 95% of target OEPS 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.
The percentage achievement of STI Target is determined by the Board, upon advice from the Committee,
based on actual OEPS achieved relative to 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.
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
Culture/Leadership/Collaboration with 50% financial and 50% non-financial split between Customer and
Culture/Leadership/Collaboration. 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 culture, leadership and collaboration have been chosen as KPI categories
because they represent important elements of Charter Hall’s core strategic objectives. Each of these
categories has measures of ‘Growth’ and ‘Resilience’. Whilst ‘Growth’ measures are focused on building
the Group’s capability across all KPI categories, ‘Resilience’ measures drive sustainable growth and
encourage risk management.
Role
Financial/Securityholder
Customer
Managing Director
CFO
CIO
50%
50%
50%
30%
30%
25%
Culture, Leadership and
Collaboration
20%
20%
25%
In consultation with the Committee, the Board assesses the Group’s financial performance and the
performance of all Reported Executives against agreed KPIs.
Determining and
Assessing
Performance
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; and
payout above Gateway for STI is up to a maximum (150% of STI target).
Board Discretion
Delivery
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.
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 value
calculation prepared by Deloitte using the Black-Scholes-Merton valuation method, which discounts for
dividends/distributions forgone during the deferral period.
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Directors’ report
For the year ended 30 June 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report
STI Performance Outcomes for Financial Year Ending 30 June 2021 – Managing Director
Growth and resilience measures are assessed in each of the performance categories in the Managing Director’s scorecard.
Remuneration Report
Group FY2021 performance outcomes
In FY2021, Charter Hall’s OEPS was 61 cents, which was 13.2% above the FY2020 OEPS (excluding the CHOT performance fee).
The table below shows Charter Hall’s OEPS (cps) over a five-year period:
Performance
Category and
Weighting
Financial
50%
Customer
30%
Culture, Leadership
and Collaboration
20%
Measure
Performance Outcome
Rating
- Group OEPS growth
- Growth in funds under
management
- Outperformance of Funds to
relevant indices
- Maintaining Group investment
-
capacity
Securing and exceeding
budgeted net equity flows
-
- Customer and investor
satisfaction surveys
ESG focus and resourcing
strategies
Effectiveness of customer
retention strategies
-
Succession planning
-
- Diversity and Inclusion
-
Employee engagement and
turnover
Fund NED engagement levels
-
-
-
-
- OEPS growth to 61cps
-
FUM growth of $11.8bn
-
Fund outperformance in
relevant indices
Increase in investment
capacity to $6.7bn
Equity flows achieved were
more than 100% above
Budget
Total platform return of
23.6%
Strong tenant and investor
customer relationships as
evidenced through survey
results
2020 PRI Leaders Group for
climate reporting
Investment in the capability
and number of resources in
Group ESG
Key talent appointments and
rotations at Executive and
Executive-1 levels
-
-
-
-
Outstanding
Outstanding
46.3% incl.CHOT
Perf. Fee
36.8% ex-CHOT
Perf. Fee
69.3
15.4
53.9
13.2% ex-CHOT
Perf. Fee
61.0
61.0
35.9
5.0% incl. CHOT
Perf. Fee
(5.8%) ex-CHOT
Perf. Fee
35.9
37.7
3.9
33.8
25.5% incl. CHOT
Perf. Fee
47.4
8.0
16.6% ex-CHOT
Perf. Fee
39.4
- WGEA Employer of choice
-
-
for gender equality
90% engagement result with
95% participation
Positive Fund NED feedback
across all funds
Outstanding
FY2017
1
FY2018
FY2019
FY2020
2
FY2021
CHOT Perf. Fee Actual
Ex-CHOT Perf. Fee Actual
1
2
The first year CHC recognised operating tax expense of 4.6 cps.
No CHOT Performance Fee recognised in FY2021
STI Performance Outcomes for Financial Year Ending 30 June 2021 – Other Reported Executives
FY2021 STI outcomes
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
KPI
Financial
Including Group and Divisional financials and investment earnings; growth in funds
under management; and divisional specific financial initiatives.
Performance
Rating
Outstanding
Customer and Strategy
Culture, Leadership and
Collaboration
Including customer experience, service and satisfaction measures for funds and
tenants.
Outstanding
Including leadership contribution, succession, talent, diversity and engagement.
Outstanding
Name
Managing Director
D Harrison
Other Reported Executives
S McMahon2
R Proutt3
1 To be paid on 15 September 2021
The outperformance of 20% above target FY2021 OEPS in FY2021 allows for 150% of the total
target STI amount to be awarded similar to 150% in FY2020 and 128% in FY2019. Assessment of
individual performance scorecards has resulted in 138.5% of the total target STI amount to be
awarded, in September 2021, to eligible employees across the Group.
The below table shows the STI outcomes for Reported Executives for 2021.
Reported Executives on average received an outcome of 150% of STI target for FY2021. This is
based on individual achievement against KPIs including evidence of behaviour in line with values and
overall leadership team contribution to the Group.
Voluntary
STI earned Paid in cash1
$
$
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
539,303
–
179,768
641,000
359,535
320,500
85%
78%
150%
150%
100%
100%
2 S McMahon has elected to voluntarily defer 25% of the cash component of his FY21 STI into rights for a 3-year period
3 R Proutt has elected to voluntarily defer 100% of the cash component of his FY21 STI into rights for a 3-year period
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Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report
3.5 Long Term Incentive
FY2021 LTI Plan – Key Features
Approach
Features
Purpose
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
Directors’ report
For the year ended 30 June 2021
Remuneration Report
Type of equity
awarded
Performance
Period
Valuation
Vesting
Conditions
OEPS
Performance
Measure (50% of
LTI Allocation)
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.
Performance Rights are subject to a four-year performance period commencing on 1 July 2020 and ending on
30 June 2024.
The number of rights granted to a participant is determined based on an independent value calculation
prepared by Deloitte using the Black-Scholes-Merton valuation method, which discounts for
dividends/distributions forgone during the deferral period.
Relative TSR
Performance
Measure (50% of
LTI Allocation)
Performance Rights will vest subject to the satisfaction of the following performance conditions measured over
the performance period:
-
50% of Performance Rights are subject to an aggregate operating earnings per security (OEPS) growth
hurdle; and
50% of Performance Rights are subject to a relative total securityholder return (TSR) hurdle.
-
The OEPS performance measure involves setting an aggregate total value of OEPS to be earned over the
entire performance period (i.e. for a 4-year performance period, the aggregate total value of OEPS will be
year one OEPS, plus year two OEPS, plus year three OEPS, plus year four OEPS). The aggregate OEPS
performance measure has a minimum and stretch hurdle set by growing the commencement year OEPS (i.e.
the actual OEPS for the financial year end prior to the performance period) by the OEPS growth rates of 5%
per annum compound for the minimum aggregate OEPS hurdle and 7% per annum compound for the stretch
aggregate OEPS hurdle. For FY2021 LTI, the Board has set the commencement OEPS as the FY2020
adjusted OEPS of 53.9 cps (after tax) which is the FY2020 actual OEPS result of 69.3 cps (after tax) less the
Charter Hall Office Trust (CHOT) performance fee of 15.4 cps (after tax) recognised during the period.
If the aggregate OEPS achieved over the four-year
performance period is:
Less than an aggregate OEPS (after tax) of 244.13
cps (based on a 5% CAGR)
Equal to aggregate OEPS (after tax) of 244.13 cps
(based on a 5% CAGR)
More than an aggregate OEPS (after tax) of 244.13
cps (based on a 5% CAGR) but less than an
aggregate OEPS (after tax) of 256.27 cps (based on a
7% CAGR)
Equal to or more than an aggregate OEPS (after tax)
of 256.27 cps (based on a 7% CAGR)
Percentage of Performance Rights subject to
the aggregate OEPS performance measure
which may vest
0%
50%
Pro rata straight line vesting between 50% -
100%
100%
Rationale for
Performance
Measures
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 comparator group for the FY2021 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 the Charter
Hall Group relative TSR when ranked to a
comparator group of the S&P/ASX 200 A-REIT
Accumulation Index is:
Less than the comparator group 50th percentile
Equal to the comparator group 50th percentile
More than the comparator group 50th percentile
and less than 75th percentile
Percentage of Performance Rights subject to the
relative TSR performance measure which may vest
0%
50%
Pro rata straight line vesting between 50% - 100%
Exceeds the comparator group 75th percentile
100%
During 2018, the Board reviewed the LTI performance measures 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 measure with an aggregate OEPS performance measure.
For FY2020 and FY2021, the Board agreed the same performance hurdles for Relative TSR and OEPS
growth would apply.
The aggregate OEPS performance measure was selected because it is within the Executive’s ability to
influence and is a key driver of securityholder returns and therefore aligns performance with returns to
securityholders. The Board excluded the CHOT performance fee from the aggregate OEPS hurdles and
actual OEPS performance in the FY2019, FY2020 and FY2021 LTI Plans, however, all other performance
fees are included. The OEPS growth rates used to set the aggregate OEPS performance hurdles of 5% per
annum compound for the minimum aggregate OEPS hurdle and 7% per annum compound for the stretch
aggregate OEPS hurdle applied for the FY2019, FY2020 and FY2021 LTI plans and 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.
The aggregate OEPS performance measure was selected because Charter Hall’s OEPS can fluctuate due to
performance and transaction fee income, and the Board believes that aggregate OEPS allows for OEPS to be
considered over the entire performance period.
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
performance measure used 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 investment returns provided
by the comparator group over the same period.
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Remuneration Report
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 the Performance Rights. The
following table sets out the three alternatives they can elect to apply as their voluntary restricted period. The
periods identified below will commence at vesting date.
Voluntary
Restriction Period
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%
-
-
Following vesting of the Performance Rights, the restricted stapled securities allocated to participants will not
be subject to forfeiture upon termination and participants will be entitled to receive declared distributions
during the restricted period.
Distributions
Cessation of
Employment
Preventing
Inappropriate
Benefits
Distributions are not provided on Performance Rights as the number of rights allocated to each participant
takes into account distributions foregone during the performance period
In the event of resignation (other than genuine retirement) or termination for cause or termination for poor
performance, all unvested Performance Rights will lapse, unless the Board determines otherwise. In any other
circumstances unless the Board determines otherwise, the Performance Rights will continue to remain on foot
and, subject to the original terms of the offer, as though the Executive had not ceased employment.
The Board has discretion to reduce, including to nil, unvested rights in certain circumstances to ensure
Executives do not obtain an inappropriate benefit. The circumstances in which the Board may exercise this
discretion include for example, if the Board determines that an Executive has acted fraudulently or dishonestly
or engaged in gross misconduct, or has acted in a manner which brings the Group into disrepute.
Directors’ report
For the year ended 30 June 2021
Remuneration Report
Group performance outcomes
Absolute TSR (FY2018 LTI) – The Group delivered a TSR (including stapled security price movements and distributions) over the three
years to 30 June 2020 (FY2018 LTI performance period) of 89% equivalent to a 24% CAGR exceeding the upper end of the Absolute
TSR performance hurdle which required a 12% CAGR over the three year performance period.
Relative TSR (FY2018 LTI) – The TSR for the three year performance period was 89% equivalent to a 23.6% CAGR achieving the 93rd
percentile rank of the 16 REITs in the comparator group from the S&P/ASX200 A-REIT Accumulation Index.
OEPS (FY2019 LTI) – The Group delivered aggregate OEPS of 154.4 cents over the three years to 30 June 2021 (FY2019 LTI
performance period) equivalent to a 22.5% CAGR exceeding the upper end of the performance hurdle aggregate OEPS of 116.4 cents
based upon a 7% CAGR over the three year performance period.
Relative TSR (FY2019 LTI) – The TSR for the three year performance period was 155.9% equivalent to a 36.8% CAGR achieving the
top rank of the 16 REITs in the comparator group from the S&P/ASX200 A-REIT Accumulation Index.
The following graphs illustrate the Group’s TSR compared with the comparator group’s 50th and 75th percentile throughout the FY2018
and FY2019 LTI performance periods.
FY2018 LTI performance period
CHC
Comparator group 50th Percentile
Comparator group 75th Percentile
CHC: 89%
75th Comparator Group: 29%
50th Comparator Group: 10%
190%
170%
150%
130%
110%
90%
70%
50%
30%
10%
-10%
-30%
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
FY2019 LTI performance period
CHC
Comparator group 50th percentile
Comparator group 75th percentile
CHC: 155%
75th Comparator Group: 46%
50th Comparator Group: 29%
170%
150%
130%
110%
90%
70%
50%
30%
10%
-10%
-30%
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-21
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Directors’ Report and Financial Report | 73
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report
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 FY2020 and FY2021.
Short-term benefits
Post-
employ-
ment
benefits
Security-based
payments
Mandatory
security-
based
short-term
incentive
$
Securities
options
and
perform-
ance
rights
$
Voluntarily
deferred
short-term
incentive
$
Other
long-term
benefits
Long
service
leave1
$
% of total
remun-
eration
consisting
Total of rights6
%
$
Cash
short-term
incentive
$
Non-
Super-
Annual monetary
leave1 benefits2 annuation
$
$
$
(30,413)
14,794
1,373
1,688
–
21,694
21,003 1,500,000
26,251
750,000 1,681,249
750,000 1,178,229 (161,106)
5,428,460
4,783,605
(3,458)
(9,391)
1,373
1,688
21,694
21,003
179,768
359,535
359,535
359,535
516,163
375,087
14,876
17,389
2,457,559
2,313,378
(19,879)
23,752
(53,750)
29,155
1,373
1,688
4,119
5,064
14,351
545,050
320,500
641,000
21,694
15,034
641,000
459,005
320,500
21,003
65,082
55,478
820,768 1,430,035 2,742,462
63,009 2,500,535 1,430,035 2,012,321 (128,683)
2,322,395
2,280,979
10,208,414
9,377,962
45
72
43
47
65
62
49
63
1,478,306 1,500,000
–
1,478,997
Salary
$
Name
Managing Director
D Harrison3
2021
2020
Other Reported Executives
S McMahon4
2021
2020
R Proutt5
2021
2020
Total 2021
Total 2020
798,306
798,997
828,306
828,997
–
–
3,104,918 2,039,303
359,535
3,106,991
539,303
359,535
1 Shows the movement in leave accruals for the year.
2 Non-monetary benefits for FY2021 is salary continuance insurance.
3 D Harrison had 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 25% of the cash component of his FY2021 STI into rights for a 3-year period; in FY2020 he had elected to 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 FY2021 STI into rights for a 3-year period; in FY2020 he had elected to defer 100% of his
FY2020 cash STI into rights (50% deferred for a 3-year period and 50% for a 5-year period).
6 Includes Voluntarily deferred short term incentive, Mandatory security based short term incentive and Securities options and performance rights.
Directors’ report
For the year ended 30 June 2021
Remuneration Report
Outcomes
‒ The FY2018 LTI had 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 TSR performance hurdles
were exceeded and 100% of the performance rights vested and was subject to a further
one-year holding lock.
‒ The FY2019 LTI has a vesting date of 31 August 2021. As a result of the TSR performance
and aggregate OEPS achieved over the three years to 30 June 2021, the relative TSR
performance hurdles and aggregate OEPS hurdles were exceeded and 100% of the
performance rights will vest and be subject to a further one-year holding lock.
‒ Further details of the terms of these awards are set out in the relevant prior year
remuneration reports.
TSR for Charter Hall versus comparable indices is outlined below
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)
CHC¹
S&P ASX 100
S&P ASX 200 A-REIT
MSCI World REITs
1 Year
64.1%
27.9%
33.2%
30.5%
3 Years
37.9%
9.9%
7.7%
9.6%
5 Years
10 Years
30.3%
11.3%
5.8%
7.6%
28.2%
9.5%
11.8%
8.2%
1 Source UBS. Annualised TSR of 36.8% for LTI purposes is calculated using June VWAP as opening and closing prices
3.6 Deferred STI and LTI Rights Awarded – Additional Terms and Conditions
Deferred STI and LTI Awards are subject to some additional terms and conditions as per below:
Change of control
provisions
Hedging and margin
lending prohibitions
The Board, in its absolute discretion, may determine the manner in which the rights will be dealt with.
In accordance with the Corporations Act 2001, all participants are prohibited from hedging or otherwise
protecting the value of unvested stapled securities.
3.7 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 (%)
1 The opening share price at 1 July 2017 was $5.50.
2017
257.6
61.2
151.2
35.9
18.1
35.9
18.1
30.0
5.50
15.2
2018
250.2
53.7
175.8
37.7
5.0
33.8
-6.0
31.8
6.52
24.6
2019
235.3
50.5
220.7
47.4
25.5
39.4
16.6
33.7
10.83
72.4
2020
345.9
74.3
322.8
69.3
46.3
53.9
36.8
35.7
9.69
-7.4
2021
476.8
102.4
284.3
61.0
-12.0
61.0
13.2
37.9
15.52
64.1
The table below provides information on Reported Executives’ total remuneration, both fixed and ‘at risk’ compared to target total
remuneration. Charter Hall’s STI is weighted towards growth in OEPS and the LTI provides an important link between remuneration
and TSR.
Reported Executives total remuneration summary
Fixed payments ($)
STI accounting expense ($)
LTI accounting expense ($)1
Earned remuneration ($)2
On target total remuneration ($)
Earned remuneration relative to target remuneration – over/(under) (%)
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.
2020
3,075,536
4,290,105
2,012,321
9,377,962
7,947,927
18%
2021
3,175,847
4,290,105
2,742,462
10,208,414
8,778,379
16%
32
33
Directors’ Report and Financial Report | 75
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report - continued
4. Executive remuneration in detail continued
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 and payment of other benefits.
All Reported Executives’ contracts are ongoing in duration. The notice period for the Managing Director and Other Reported Executives
are summarised below:
Position
Name
Managing Director
David Harrison2
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.
2 Where the Managing Director gives notice of his cessation of employment, he is entitled to a restraint payment of a maximum of six month equivalent fixed remuneration
so long as he complies with the terms of his employment agreement for the period of six months following his cessation.
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).
5. Non-Executive Director remuneration
Policy
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.
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.
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.
The Chair and member committee fees remained unchanged in FY2021.
Benchmarking
Fee framework
Remuneration outcomes
Minimum shareholding
guidelines
Directors’ report
For the year ended 30 June 2021
Remuneration Report - continued
5. Non-Executive Director remuneration continued
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 Brennan1
P Garling
K Moses2
D Ross3
G Paramor4
Jacqueline Chow5
Total
2021
$
2020
$
393,600
157,590
393,600
157,590
42,025
21,010
31,515
15,755
3,150
3,150
15,755
10,505
42,025
21,010
31,515
15,755
3,150
3,150
15,755
10,505
2021 fees
$
2020 fees
$
393,600
189,998
192,250
203,554
196,421
187,791
65,454
1,429,068
393,600
210,115
192,250
199,615
187,000
189,105
–
1,371,685
1
2
3
4
5
Anne Brennan retired from the Board effective 31 May 2021.
Karen Moses was appointed as a member to the Remuneration and Human Resources Committee effective 1 April 2021 and the Nomination Committee effective 1
July 2021, in addition to her current committee memberships.
David Ross was appointed the Chair of the Remuneration and Human Resources Committee and a member to the Audit, Risk and Compliance Committee effective 26
March 2021 and 1 April 2021 respectively, in addition to his current committee memberships, and retired from the Nomination Committee effective 1 July 2021.
Greg Paramor retired from the Audit, Risk and Compliance Committee and was appointed as a member to the Remuneration and Human Resources Committee
effective 1 April 2021, in addition to his current committee memberships.
Jacqueline Chow was appointed to the Board and as a member to the Audit, Risk and Compliance Committee effective 17 February 2021.
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.
34
35
Directors’ Report and Financial Report | 77
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Remuneration Report
6. Appendix – further detail
6.1 Securityholdings
Key management personnel securityholdings
Name
Directors of Charter Hall Limited
Ordinary stapled securities
D Clarke
A Brennan1
P Garling
K Moses
D Ross
G Paramor
J Chow2
Managing Director
D Harrison
Other Reported Executives
S McMahon
R Proutt
Opening
balance at
30 Jun 2020
Stapled
securities
acquired
Rights and
options
exercised
Stapled
securities
sold
Closing
balance at
30 Jun 2021
45,875
30,000
16,759
23,137
10,000
14,300
–
–
–
1,592
–
–
–
500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45,875
–
18,351
23,137
10,000
14,300
500
1,378,977
70,000
377,764
(413,278)
1,413,463
261,530
69,979
–
–
134,779
169,272
(84,016)
(61,091)
312,293
178,160
1 Anne Brennan retired from the Board on 31 May 2021
2 Jacqueline Chow was appointed to the Board on 17 February 2021
6.2 Performance Rights and Option Plan details
Performance rights and service rights outstanding under the PROP
Performance rights
Financial year of grant
2019
2020
2021
Total performance rights outstanding
Securities
979,346
698,325
838,798
2,516,469
Exercise price
Nil
Nil
Nil
Vesting conditions
OEPS and relative performance criteria
OEPS and relative performance criteria
OEPS and relative performance criteria
Service rights
Financial year of grant
2019
2020
2020
2021
2021
2021
Total service rights issued
Securities
387,596
89,448
260,000
219,856
672,282
100,000
1,729,182
Exercise price
Nil
Nil
Nil
Nil
Nil
Nil
Vesting conditions
Service conditions
Service conditions - Deferred STI
Service conditions
Service conditions - Deferred STI
Voluntary Deferred STI
Service conditions
Directors’ report
For the year ended 30 June 2021
Remuneration Report - audited continued
6. Appendix – further detail continued
Valuation model
The Black-Scholes-Merton methodology which discounts for dividends/distributions foregone 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
2020
Rights
forfeited Rights held
at 30 June
2021
during
the year
Fair value
per right
at grant
date ($)
Grant
date
Vesting
date
Fair value
to be
expensed
in future
years ($)1
294,664
304,238
113,706
113,705
- 294,664
- –
-
-
-
-
-
- 265,737
49,120
33,980
33,980
-
-
-
- 40,461
- 40,461
- 84,918
- 91,263
49,120
33,980
-
-
-
-
-
- 100,763
-
100,763
98,287
33,917
33,916
–
–
- 79,264
-
-
-
-
19,854
14,162
14,161
-
-
–
- 19,396
- 19,396
- 40,708
19,854
14,162
-
-
-
-
- – 23-Nov-17
28-Nov-18
- 304,238
25-Nov-19
- 113,706
25-Nov-19
- 113,705
- 265,737
26-Nov-20
- – 28-Nov-18
- – 25-Nov-19
25-Nov-19
-
26-Nov-20
-
26-Nov-20
-
15-Sep-20
-
15-Sep-20
-
33,980
40,461
40,461
84,918
91,263
98,287
33,917
33,916
79,264
- – 23-Nov-17
28-Nov-18
-
25-Nov-19
-
25-Nov-19
-
-
26-Nov-20
- – 28-Nov-18
- – 25-Nov-19
25-Nov-19
-
26-Nov-20
-
26-Nov-20
-
15-Sep-20
-
14,161
19,396
19,396
40,708
2.65
5.09
7.10
7.01
10.33
6.54
10.44
10.11
12.85
12.51
11.37
10.73
2.65
5.09
7.10
7.01
10.33
6.54
10.44
10.11
12.85
12.51
11.37
31-Aug-20 –
81,534
31-Aug-21
297,012
31-Aug-22
31-Aug-23
413,711
31-Aug-24 2,084,374
31-Aug-20
31-Aug-20
31-Aug-21
31-Aug-21
31-Aug-22
31-Aug-23
31-Aug-25
-
-
-
-
-
-
-
31-Aug-20 –
26,340
31-Aug-21
88,596
31-Aug-22
123,401
31-Aug-23
31-Aug-24
621,727
31-Aug-20
31-Aug-20
31-Aug-21
31-Aug-21
31-Aug-22
31-Aug-23
-
-
-
-
-
-
108,181
104,689
35,633
35,633
31,489
17,095
12,507
12,506
- 108,181
-
-
-
-
-
-
-
31,489
17,095
12,507
-
-
-
-
- 83,276
- – 23-Nov-17
28-Nov-18
- 104,689
25-Nov-19
35,633
-
25-Nov-19
35,633
-
-
26-Nov-20
83,276
- – 23-Nov-17
- – 28-Nov-18
- – 25-Nov-19
25-Nov-19
-
26-Nov-20
-
26-Nov-20
-
15-Sep-20
-
15-Sep-20
-
12,506
17,290
17,290
36,288
38,999
2.65
5.09
7.10
7.01
10.33
5.41
6.54
10.44
10.11
12.85
12.51
11.37
10.73
31-Aug-20
31-Aug-21
31-Aug-22
31-Aug-23
31-Aug-24
20-Jul-20
31-Aug-20
31-Aug-20
31-Aug-21
31-Aug-21
31-Aug-22
31-Aug-23
31-Aug-25
28,056
93,078
129,650
653,196
-
-
-
-
-
-
-
-
-
-
-
-
-
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
- 17,290
- 17,290
- 36,288
- 38,999
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
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 Performance Rights
LTI Service 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
STI Deferred Service Rights
36
37
Directors’ Report and Financial Report | 79
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.
Charter Hall Group Annual Report 2021
Charter Hall Group Directors' Report 2021
Charter Hall Group Directors' Report 2021
Directors’ report
For the year ended 30 June 2021
Directors’ report – 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 DLWF
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
2021
$
2020
$
Charter Hall Property
Trust Group
2021
$
2020
$
9,300
98,800
–
9,100
1,472
10,772
5,944
104,744
–
–
10,772
60,000
60,000
164,744
1,472
1,472
–
–
1,472
5,944
15,044
–
–
15,044
Directors’ report
For the year ended 30 June 2021
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.
The Group is actively addressing and managing environmental
impacts to achieve the following commitments:
• Net Zero Scope 1 and 2 emissions by 2030
•
50% diversion of waste from landfill by 2025
•
4.5 Star National Australian Built Environment Rating System
(NABERS) Water weighted average portfolio rating for Office
and Retail by 2030
5 Star NABERS Energy weighted average portfolio rating for
Office by 2025
4.5 Star NABERS Energy weighted average portfolio rating
for Retail by 2025
•
•
Charter Hall actively benchmarks our environmental performance
through Green Star Performance, WELL portfolio and NABERS.
Charter Hall voluntarily reports annually to international
organisations, such as the United Nations Principles for
Responsible Investment (PRI), Dow Jones Sustainability Index
(DJSI), and Global Real Estate Sustainability Benchmark
(GRESB). This year we submitted the Annual Transparency
Report to the PRI, responded to the DJSI Reports for the CHC,
CQR and CLW Funds, GRESB Real Estate Asset Reports for
CQR, RP1, RP2, RP6, CPOF, DOF, CHOT, PFA, BSWF,CHAIT,
CCT, DIF4, DVP, CLW, CHPIP, CPIF, CPRF, CLP, DLWF and
LWHP and GRESB Public Disclosure Statements for CLW, CQR,
CHC, and CQE.
Labour practices
Charter Hall Group became a signatory to the UN Global
Compact on 8 March 2019. The Human Rights Policy and the
Charter Hall Supplier Code of Conduct 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 82.
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 23 August 2021. The Directors have the
power to amend and re-issue the Financial Statements.
David Clarke
Chair
Sydney
23 August 2021
38
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Directors’ Report and Financial Report | 81
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Auditor’s independence declaration
Consolidated statements of comprehensive income
For the year ended 30 June 2021
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 2021, I declare that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Charter Hall Limited and the entities it controlled during the period
and Charter Hall Property Trust and the entities it controlled during the period.
E A Barron
Partner
PricewaterhouseCoopers
Sydney
23 August 2021
Income
Revenue
Share of net profit from equity accounted investments
method
Net gain on sale of investments
Other net fair value adjustments
Total income
Expenses
Employee costs
Development costs
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 Long WALE Fund
(non-controlling interest)
Profit for the year
Note
4
2,3
5
5
5
6
19
Charter Hall Group
2021
$'m
2020
$'m
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
668.0
553.8
26.7
31.1
314.0
0.4
29.0
1,011.4
(148.0)
(245.5)
(31.0)
(9.9)
(16.2)
–
(2.6)
(453.2)
558.2
(62.6)
495.6
166.3
310.5
476.8
18.8
495.6
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
297.1
0.4
29.0
353.2
–
–
(7.4)
(9.6)
(6.9)
–
–
(23.9)
329.3
–
329.3
145.0
15.5
–
191.6
–
–
(6.2)
(13.5)
(13.6)
(2.8)
(8.8)
(44.9)
146.7
–
146.7
201.4
–
–
144.5
310.5
144.5
345.9
310.5
144.5
2.2
348.1
18.8
329.3
2.2
146.7
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.
40
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Directors’ Report and Financial Report | 83
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Consolidated statements of comprehensive income continued
For the year ended 30 June 2021
Consolidated balance sheets
As at 30 June 2021
Charter Hall Group
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/(loss) 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
Long WALE 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
19
2021
$'m
495.6
0.1
(4.4)
–
(4.3)
491.3
166.3
306.2
472.5
18.8
491.3
35.7
66.7
8(a)
102.4
35.4
66.1
Diluted earnings per stapled security (cents) attributable to
stapled securityholders of Charter Hall Group
8(b)
101.5
Charter Hall Property
Trust Group
2021
$'m
329.3
2020
$'m
146.7
0.1
(4.4)
–
(4.3)
325.0
(0.1)
1.5
(1.3)
0.1
146.8
–
–
2020
$'m
348.1
(0.2)
1.5
(1.3)
–
348.1
201.3
144.6
306.2
144.6
345.9
306.2
144.6
2.2
348.1
18.8
325.0
2.2
146.8
43.3
31.0
74.3
42.9
30.8
73.7
n/a
66.7
n/a
n/a
66.1
n/a
n/a
31.0
n/a
n/a
30.8
n/a
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
Assets
Current assets
Cash and cash equivalents
Receivables and other assets
Development assets
Derivative financial instruments
Assets classified as held for sale
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
Development 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
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)
Note
9
16
10
9
16
2
2,3
11
12
13
14
15
16
14
16
15
13
17(a)
18
17(a)
18
Charter Hall Group
2021
$'m
351.9
119.3
0.4
4.4
23.1
499.1
5.9
30.5
–
46.2
49.8
2,321.6
193.2
114.7
14.4
9.3
–
2,785.6
3,284.7
170.4
1.4
17.6
–
4.5
–
193.9
3.8
–
549.2
10.7
18.3
582.0
775.9
2,508.8
290.8
(24.4)
199.1
465.5
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
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
71.3
42.9
–
4.4
23.1
141.7
12.3
30.5
–
46.2
–
2,234.6
193.2
–
–
–
–
2,516.8
2,658.5
66.0
–
–
–
–
–
66.0
–
–
549.2
–
–
549.2
615.2
2,043.3
–
–
–
–
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
–
–
–
–
1,426.0
(1.5)
481.3
1,436.8
2.8
276.6
1,426.0
(1.5)
481.3
1,436.8
2.8
276.6
1,905.8
1,716.2
1,905.8
1,716.2
Non-controlling interest in Charter Hall Direct Long WALE Fund
Total equity
19
137.5
2,508.8
65.5
2,145.7
137.5
2,043.3
65.5
1,781.7
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
42
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Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Consolidated statement of changes in equity – Charter Hall Group
For the year ended 30 June 2021
Consolidated statement of changes in equity – Charter Hall Property Trust Group
For the year ended 30 June 2021
Attributable to the owners of
Charter Hall Limited
Charter Hall
Group
Attributable to the owners of the
Charter Hall Property Trust Group
Contributed
Accumulated
equity Reserves profit/(losses)
$'m
$'m
(11.0)
(34.8)
(0.7)
–
(11.7)
(34.8)
$'m
286.7
–
286.7
Non-
controlling
interest
$'m
1,719.0
–
1,719.0
Total
$'m
240.9
(0.7)
240.2
Note
Balance at 1 July 2019
Change in accounting policy
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
Balance at 1 July 2020
Change in accounting policy
Adjusted balance at 1 July 2020
Profit for the year
Other comprehensive loss
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 2021
6(c)
7
33(a)
6(c)
7
–
–
–
–
(1.6)
4.0
–
–
–
–
2.4
289.1
289.1
–
289.1
–
–
–
–
(2.3)
4.0
–
–
–
–
1.7
290.8
–
(0.1)
(0.1)
–
(6.7)
(3.5)
2.1
9.7
–
–
1.6
(33.3)
(33.3)
–
(33.3)
–
–
–
–
(7.3)
1.2
8.0
7.0
–
–
8.9
(24.4)
Total
equity
$'m
1,959.9
(0.7)
1,959.2
348.1
–
348.1
201.4
–
201.4
201.4
(0.1)
201.3
146.7
0.1
146.8
–
–
–
–
–
(81.5)
–
(81.5)
108.2
108.2
(4.8)
103.4
166.3
–
166.3
–
–
–
–
–
(70.6)
–
(70.6)
199.1
–
17.1
17.1
(8.3)
0.5
(11.7)
–
2.1
9.7
(81.5)
–
(77.5)
364.0
364.0
(4.8)
359.2
166.3
–
166.3
–
–
(89.1)
(0.4)
(84.1)
1,781.7
1,781.7
–
1,781.7
329.3
(4.3)
325.0
–
58.6
(9.6)
5.2
(10.8)
–
8.0
7.0
(70.6)
–
(60.0)
465.5
–
–
(110.8)
(0.4)
(63.4)
2,043.3
(20.0)
0.5
2.1
9.7
(170.6)
(0.4)
(161.6)
2,145.7
2,145.7
(4.8)
2,140.9
495.6
(4.3)
491.3
58.6
(20.4)
5.2
8.0
7.0
(181.4)
(0.4)
(123.4)
2,508.8
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
Balance at 1 July 2020
Profit for the year
Other comprehensive 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
Dividend/distribution provided for or paid
Transactions with non-controlling interests
Balance at 30 June 2021
Note
Contributed
Accumulated
equity Reserves profit/(losses)
$'m
$'m
217.0
3.2
144.5
–
–
0.1
144.5
0.1
$'m
1,448.5
–
–
–
Non-
controlling
interest
$'m
50.3
2.2
–
2.2
Total
$'m
1,668.7
144.5
0.1
144.6
Total
equity
$'m
1,719.0
146.7
0.1
146.8
17(b)
–
–
–
–
17.1
17.1
7
7
(11.7)
–
–
(11.7)
1,436.8
1,436.8
–
–
–
–
–
(0.5)
(0.5)
2.8
2.8
–
(4.3)
(4.3)
–
(84.9)
–
(84.9)
276.6
276.6
310.5
–
310.5
(11.7)
(84.9)
(0.5)
(97.1)
1,716.2
1,716.2
310.5
(4.3)
306.2
–
(4.2)
0.1
13.0
65.5
65.5
18.8
–
18.8
(11.7)
(89.1)
(0.4)
(84.1)
1,781.7
1,781.7
329.3
(4.3)
325.0
–
–
–
–
58.6
58.6
(10.8)
–
–
(10.8)
1,426.0
–
–
–
–
(1.5)
–
(105.8)
–
(105.8)
481.3
(10.8)
(105.8)
–
(116.6)
1,905.8
–
(5.0)
(0.4)
53.2
137.5
(10.8)
(110.8)
(0.4)
(63.4)
2,043.3
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
44
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Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Consolidated cash flow statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Note
21
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)
Payments for investment properties
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
2021
$'m
700.5
(497.1)
(75.1)
1.0
(7.8)
104.1
225.6
(5.6)
(22.7)
(557.7)
401.5
(1.7)
5.9
(180.3)
(20.5)
(1.7)
269.0
(45.5)
(8.3)
(3.3)
54.3
(5.0)
(171.3)
67.7
113.0
238.9
351.9
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
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
28.5
(10.9)
0.4
0.1
(7.1)
98.7
109.7
–
(22.7)
(553.2)
391.7
(612.5)
587.3
(209.4)
(16.7)
(1.7)
269.0
(45.5)
(8.3)
(0.1)
54.3
(5.0)
(87.7)
158.3
58.6
12.7
71.3
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
The above consolidated cash flow statements should be read in conjunction with the accompanying notes.
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
‒ Note 3
‒ Note 4
‒ Note 12
‒ Note 25
Investments in associates
Investments in joint ventures
Revenue
Intangible assets
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 $6.9m impairment was recorded for the Group’s investment in Charter Hall Long WALE 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.
Investments in associates Note 2(b);
Further disclosure is included in the following notes;
‒
‒ Revenue Note 4(a);
‒
‒ Fair value measurement Note 23(d).
Intangibles Note 12(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.
Net operating expenses excluding costs of sales 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.
46
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Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
1 Segment information continued
(b) Operating segments
The operating segments reported to the Board for the year ended 30 June 2021 are as follows:
Property investment segment earnings
Development Investment
Development investment revenue
Development costs
Other
Total 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)
2021
$'m
123.0
275.2
(245.5)
4.5
34.2
254.6
64.9
319.5
476.7
(85.3)
(29.8)
361.6
(7.8)
(8.4)
345.4
(61.1)
284.3
465.8
61.0
2020
$'m
120.0
70.2
(66.1)
13.0
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
Refer to Note 8 for statutory earnings per stapled security figures.
(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: Net gain on disposal of property investments1
Less: 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 pursuit 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.
2021
$'m
284.3
228.0
0.5
(1.5)
7.2
(6.9)
(15.9)
(4.6)
(1.5)
(12.8)
476.8
2020
$'m
322.8
67.8
6.9
2.2
(14.9)
(13.6)
(6.0)
(4.4)
(6.9)
(8.0)
345.9
Notes to the consolidated financial statements
For the year ended 30 June 2021
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
Add: Non-operating equity accounted profit
Less: Net rental income
Less: Distributions in operating income
Segment earnings – development investments
Less: Development revenue
Add: Development costs
Less: Interest income on development investments
2021
$'m
123.0
191.9
(3.5)
(0.9)
310.5
34.2
(275.2)
245.5
(1.0)
3.5
2020
$'m
120.0
38.9
(3.3)
(3.6)
152.0
17.1
(70.2)
66.1
(2.7)
10.3
Share of net profit of investments accounted for using the equity method
314.0
162.3
(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: development revenue
Add: rental income
Add: interest income
Add: distributions received for investments accounted for at fair value
Revenue per statement of comprehensive income
2021
$'m
254.6
64.9
319.5
57.5
275.2
12.9
2.0
0.9
668.0
2020
$'m
357.1
55.2
412.3
53.4
70.2
10.9
3.4
3.6
553.8
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.
48
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Directors’ Report and Financial Report | 91
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Investment in associates
2
(a) Carrying amounts
All associates are incorporated and operate in Australia. Refer to Note 33(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
CH Deep Value AREIT Partnership Trust
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
Charter Hall AP Fund
Deep Value Partnership
Charter Hall Direct PFA Fund
Charter Hall Direct Office Fund
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
2021
%
2020
%
2021
$'m
2020
$'m
Property investment
Property investment
12.5
9.0
15.1
9.0
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
5.1
15.7
1.8
4.8
13.9
5.0
11.5
7.9
7.7
10.6
11.3
8.8
6.2
15.7
3.6
6.9
21.8
–
13.0
–
–
9.9
12.2
8.9
27.3
18.5
0.4
46.2
270.6
270.8
118.8
76.2
59.4
39.7
49.0
104.0
141.1
63.2
20.4
5.0
0.5
25.9
312.9
293.5
131.4
85.0
70.1
–
35.5
–
–
50.1
238.5
369.7
98.9
1,899.9
1,946.1
207.9
271.4
90.8
1,548.6
1,574.5
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 22.
2 The entity has a 31 December balance date.
3 Fair value at the ASX closing price as at 30 June 2021 was $230.3 million (30 June 2020: $189.3 million).
4 Fair value at the ASX closing price as at 30 June 2021 was $335.8 million (30 June 2020: $255.5 million).
5 Fair value at the ASX closing price as at 30 June 2021 was $111.2 million (30 June 2020: $75.1 million).
Notes to the consolidated financial statements
For the year ended 30 June 2021
2
Investment in associates continued
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
CH Deep Value AREIT Partnership Trust
Other associates
Equity accounted
Unlisted
Charter Hall Prime Office Fund
Charter Hall Office Trust2
Core Logistics Partnership
Charter Hall Exchange Wholesale Trust
Charter Hall AP Fund
Charter Hall Prime Industrial Fund
Deep Value Partnership
Charter Hall Direct PFA Fund
Charter Hall Direct Office Fund
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
2021
%
2020
%
2021
$'m
2020
$'m
Property investment
Property investment
12.5
9.0
15.1
9.0
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
4.8
15.7
4.8
13.9
5.0
0.6
11.5
7.9
7.7
10.6
11.3
8.8
5.9
15.7
6.9
21.8
–
1.7
13.0
–
–
9.9
12.2
8.9
27.3
18.5
0.4
46.2
254.0
270.8
76.2
59.4
39.7
37.3
49.0
104.0
141.1
67.4
20.4
5.0
0.5
25.9
297.1
293.5
85.0
70.1
–
62.2
35.5
–
–
48.5
238.5
369.7
123.8
1,830.9
1,877.1
207.9
271.4
115.7
1,486.9
1,512.8
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 22.
2 The entity has a 31 December balance date.
3 Fair value at the ASX closing price as at 30 June 2021 was $230.3 million (30 June 2020: $189.3 million).
4 Fair value at the ASX closing price as at 30 June 2021 was $335.8 million (30 June 2020: $255.5 million).
5 Fair value at the ASX closing price as at 30 June 2021 was $111.2 million (30 June 2020: $75.1 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 amount for the Charter Hall Long WALE REIT investment
was estimated through a value in use calculation with the following critical judgements and estimates:
‒ 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 11%;
‒ growth after 5 years of 1% per annum; and
‒
terminal value multiple of 14 times earnings.
As a result of these estimates, impairment of $6.9m was recorded for Charter Hall Long WALE REIT in the first half of FY21. If the
terminal value multiplier assumptions were to increase/decrease by 1x, value in use would increase/decrease by 5.1%.
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 investments in associates are outlined in Note 23(d).
50
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Directors’ Report and Financial Report | 93
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
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
(f) Reconciliation of net assets of associates to carrying amounts of equity accounted investments
Opening balance
Investment
Net gain/(loss) on investment in associates at fair value
Disposal of units
Closing balance
Charter Hall Group
2021
$'m
25.9
10.0
10.3
–
46.2
2020
$'m
26.0
5.2
(5.1)
(0.2)
25.9
Charter Hall Property
Trust Group
2021
$'m
25.9
10.0
10.3
–
46.2
2020
$'m
26.0
5.2
(5.1)
(0.2)
25.9
(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
2021
$'m
1,548.6
404.2
263.8
(92.0)
(0.6)
(6.9)
(183.8)
(33.4)
1,899.9
2020
$'m
1,438.5
293.5
146.4
(84.9)
(0.6)
(13.6)
(203.7)
(27.0)
1,548.6
Charter Hall Property
Trust Group
2021
$'m
1,486.9
404.2
249.1
(85.3)
(0.6)
(6.9)
(183.1)
(33.4)
1,830.9
2020
$'m
1,376.5
293.4
137.8
(79.9)
(0.6)
(13.6)
(199.7)
(27.0)
1,486.9
(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 Charter Hall
Charter Hall Charter Hall Prime Office Long WALE
REIT
Office Trust Retail REIT
$'m
$'m
Fund
$'m
$'m
2021
Summarised balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Summarised statement of comprehensive income:
Revenue
Profit for the year from continuing operations
Other comprehensive loss
Total comprehensive income
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
50.6
3,409.0
51.0
1,688.9
1,719.7
100.0
151.8
–
151.8
143.0
3,463.9
43.1
1,700.1
1,863.7
110.5
377.3
–
377.3
46.9
3,294.1
113.8
922.0
2,305.2
191.6
291.2
(5.9)
285.3
104.7
3,005.4
98.4
869.6
2,142.1
206.1
44.2
1.2
45.4
419.7
6,537.4
117.2
1,504.0
5,335.9
345.4
527.8
(4.6)
523.2
165.4
6,641.9
101.2
1,655.9
5,050.2
310.9
283.5
1.0
284.5
113.2
4,574.2
71.4
1,336.9
3,279.1
154.6
618.3
(0.4)
617.9
59.6
3,026.9
50.6
850.0
2,185.9
126.7
122.4
–
122.4
Charter Hall Group
2021
Net assets of associate
Group's share in %
Group's share in $
Other movements not accounted for under the equity
method1
Carrying amount
Movements in carrying amounts:
Opening balance
Investment
Share of profit after income tax
Other comprehensive income/(loss)
Distributions received/receivable
Divestment
Return of capital
Closing balance
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
Charter Hall Charter Hall
Charter Hall Charter Hall Prime Office Long WALE
REIT
Office Trust Retail REIT
$'m
$'m
Fund
$'m
$'m
1,719.7
15.7%
270.0
2,305.2
10.6%
244.4
5,335.9
5.1%
272.1
3,279.1
11.3%
370.5
0.8
270.8
293.5
–
23.8
–
(13.1)
–
(33.4)
270.8
(5.9)
238.5
207.9
15.1
29.8
(0.4)
(13.8)
(0.1)
–
238.5
(1.5)
270.6
312.9
9.8
29.1
(0.3)
(14.4)
(66.5)
–
270.6
(0.8)
369.7
271.4
53.6
70.8
0.1
(18.8)
(7.4)
–
369.7
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 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.
52
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Directors’ Report and Financial Report | 95
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
2
Investment in associates continued
Charter Hall Property Trust Group
2021
Net assets of associate
Group's share in %
Group's share in $
Other movements not accounted for under the equity
method1
Carrying amount
Movements in carrying amounts:
Opening balance
Investment
Share of profit after income tax
Other comprehensive income/(loss)
Distributions received/receivable
Divestment
Return of capital
Closing balance
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
Charter Hall Charter Hall
Charter Hall Charter Hall Prime Office Long WALE
REIT
Office Trust Retail REIT
$'m
$'m
Fund
$'m
$'m
1,719.7
15.7%
270.0
2,305.2
10.6%
244.4
5,335.9
4.8%
256.1
3,279.1
11.3%
370.5
0.8
270.8
293.5
–
23.8
–
(13.1)
–
(33.4)
270.8
(5.9)
238.5
207.9
15.1
29.8
(0.4)
(13.8)
(0.1)
–
238.5
(2.1)
254.0
297.1
9.8
27.4
(0.2)
(13.6)
–
(66.5)
254.0
(0.8)
369.7
271.4
53.6
70.8
0.1
(18.8)
(7.4)
–
369.7
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
Notes to the consolidated financial statements
For the year ended 30 June 2021
Investments in joint ventures
3
(a) Carrying amounts
All joint ventures are incorporated and operate in Australia. Refer to Note 33(c) 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
Equity accounted
Unlisted
Brisbane Square Wholesale Fund
Long WALE Hardware Partnership1
Charter Hall Prime Retail Fund
Charter Hall PGGM Industrial Partnership
CH DJ Trust
Other joint ventures
Total investments in joint ventures
Principal activity
Property investment
Property investment
Property investment
Property investment
Property investment
Ownership interest
Carrying amount
2021
%
2020
%
2021
$'m
2020
$'m
16.8
14.1
–
12.0
50.0
16.8
13.4
29.4
12.0
–
102.4
167.4
–
25.7
73.6
52.6
421.7
421.7
101.8
123.6
47.3
6.1
–
48.0
326.8
326.8
1 Ownership interest as at 30 June 2021 is calculated as the weighted average holding of BP Fund 1 and BP Fund 2 (2020: 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
Equity accounted
Unlisted
Brisbane Square Wholesale Fund
Long WALE Hardware Partnership1
Charter Hall Prime Retail Fund
Charter Hall PGGM Industrial Partnership
CH DJ Trust
Other joint ventures
Total investments in joint ventures
Principal activity
Property investment
Property investment
Property investment
Property investment
Property investment
Ownership interest
Carrying amount
2021
%
2020
%
2021
$'m
2020
$'m
16.8
14.1
–
12.0
50.0
16.8
13.4
29.4
12.0
–
102.4
167.4
–
25.7
73.6
34.6
403.7
403.7
101.8
123.6
47.3
6.1
–
27.8
306.6
306.6
1 Ownership interest as at 30 June 2021 is calculated as the weighted average holding of BP Fund 1 and BP Fund 2 (2020: calculated as the weighted average holding of
BP Fund 1, BP Fund 2 and TTP Wholesale Fund).
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 $602.6
million (2020: $129.5 million) relating to investment properties and development commitments.
Charter Hall Office Trust’s (CHOT) capital expenditure contracted for at the reporting date but not recognised as liabilities was $187.9
million (2020: $199.1 million) relating to investment properties and development commitments.
54
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Directors’ Report and Financial Report | 97
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
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 financial information and movements in carrying amounts
Movements in aggregate carrying amount:
Opening balance
Investment
Share of profit after income tax
Distributions received/receivable
Return of capital
Closing balance
Charter Hall Group
2021
$'m
326.8
148.6
50.2
(22.9)
(81.0)
421.7
2020
$'m
315.8
73.0
15.0
(28.0)
(49.0)
326.8
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
306.6
145.6
48.0
(22.9)
(73.6)
403.7
304.7
60.0
7.3
(18.0)
(47.4)
306.6
(d) 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
2021
$'m
254.6
64.9
275.2
12.9
607.6
2020
$'m
357.1
55.2
70.2
10.9
493.4
Charter Hall Property
Trust Group
2021
$'m
–
0.1
–
12.9
13.0
2020
$'m
–
(0.1)
–
10.9
10.8
Other revenue
Recovery of property and fund-related expenses
–
Interest
4.2
Distributions/Dividends4
4.7
Other investment-related revenue
11.4
20.3
Total other revenue
Total revenue5
31.1
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
57.5
2.0
0.9
–
60.4
668.0
53.4
3.4
3.6
–
60.4
553.8
–
2.0
1.0
10.7
13.7
26.7
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.
Critical judgements are also made by the Group in respect of recognising development revenue. Detailed forecasts of total
development costs are inputs that are used to estimate the satisfaction of the development performance obligation over time.
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
2021
$'m
2020
$'m
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
133.7
6.8
7.5
148.0
3.7
2.0
10.7
8.9
5.7
31.0
7.8
1.5
6.9
16.2
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
–
–
–
–
–
–
4.8
–
2.6
7.4
–
–
6.9
6.9
–
–
–
–
–
–
3.7
–
2.5
6.2
–
–
13.6
13.6
56
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Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
6
Income tax expense
6
Income tax expense continued
(a) Income tax expense
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
Decrease/(increase) 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
2021
$'m
57.8
4.9
(0.1)
62.6
(2.1)
5.5
1.5
4.9
2020
$'m
99.4
(20.8)
–
78.6
(3.8)
(17.0)
–
(20.8)
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(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
Recognition of previously unrecognised tax losses
Other adjustments
Income tax expense
(c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting
period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to equity:
Current tax: Deduction for rights vesting in excess of the
cumulative fair value expense
Deferred tax: Estimated future deduction for rights vesting, in
excess of the cumulative fair value expense
558.2
167.5
426.7
128.0
329.3
98.8
146.7
44.0
(98.8)
(7.7)
1.6
62.6
(44.0)
–
(5.4)
78.6
(98.8)
–
–
–
(44.0)
–
–
–
(4.0)
(1.2)
(5.2)
(4.0)
3.5
(0.5)
–
–
–
–
–
–
(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.
(f) Tax losses – Charter Hall Group
At 30 June 2021, the Group has nil (2020: $7.7 million) tax effected unrecognised income tax losses.
At 30 June 2021, the Group has approximately $22.9 million (2020: $21.5 million) of tax effected unrecognised capital tax losses.
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.
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 11.61 cents and ordinary dividend of
7.7 cents per stapled security for the six months ended 30 June
2021 payable on 31 August 2021
Interim ordinary distribution of 11.10 cents and interim ordinary
dividend of 7.45 cents per stapled security for the six months
ended 31 December 2020 paid on 26 February 2021
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 paid on 31 August 2020
Charter Hall Group
2021
$'m
2020
$'m
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
90.0
86.4
–
–
54.1
51.7
–
–
–
84.9
–
36.0
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
Distributions paid and payable to Charter Hall Direct Long WALE
Fund non-controlling interests
4.2
89.1
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.
5.0
181.4
4.2
170.6
5.0
110.8
176.4
166.4
105.8
84.9
48.9
81.5
–
–
Franking credits available in the parent entity (Charter Hall Limited) for dividends payable in subsequent financial years based on a tax
rate of 30% (2020: 30%) are $137.1 million (2020: $112.6 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.
58
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Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
8 Earnings per stapled security
9 Receivables and other assets
(a) Basic earnings per security attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust (non-controlling
interest)
Stapled securityholders of Charter Hall Group
(b) Diluted earnings per security attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust (non-controlling
interest)
Stapled securityholders of Charter Hall Group
Charter Hall Group
2021
Cents
2020
Cents
Charter Hall Property
Trust Group
2021
Cents
2020
Cents
35.7
66.7
102.4
35.4
66.1
101.5
43.3
31.0
74.3
42.9
30.8
73.7
n/a
66.7
n/a
n/a
66.1
n/a
n/a
31.0
n/a
n/a
30.8
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.
(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
2021
$'m
2020
$'m
2021
$'m
2020
$'m
166.3
201.3
n/a
n/a
476.8
345.9
310.5
144.5
2021
Number
2020
Number
2021
Number
2020
Number
465,777,131 465,777,131
465,777,131 465,777,131
2,313,656
1,683,436
2,366,433
1,471,057
2,313,656
1,683,436
2,366,433
1,471,057
469,774,223 469,614,621
469,774,223 469,614,621
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.
Current
Trade receivables
Contract assets
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
24(e)
24(e)
24(e)
Charter Hall Group
2021
$'m
59.4
6.7
4.3
35.4
13.5
119.3
5.8
–
0.1
5.9
2020
$'m
35.4
–
7.3
30.2
6.4
79.3
10.2
–
2.1
12.3
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
6.6
–
–
34.1
2.2
42.9
–
12.3
–
12.3
7.8
–
–
28.8
–
36.6
–
–
–
–
(a) Bad and doubtful trade receivables
During the year, the Charter Hall Group and Charter Hall Property Trust Group incurred $nil expense (2020: $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 22 for more information on the risk management policy of the
Charter Hall Group and Charter Hall Property Trust Group.
The ageing of trade receivables at the reporting date was as follows:
Current
1 to 3 months
3 to 6 months
More than 6 months
Charter Hall Group
2021
$'m
58.4
1.0
–
–
59.4
2020
$'m
34.9
0.5
–
–
35.4
Charter Hall Property
Trust Group
2021
$'m
6.6
–
–
–
6.6
2020
$'m
7.8
–
–
–
7.8
As at 30 June 2021, Charter Hall Group had trade receivables of $nil (2020: $nil) past due but not impaired. Charter Hall Property Trust
Group had $nil (2020: $nil) receivables past due but not impaired.
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.
60
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Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
10 Assets classified as held for sale
In June 2021, two investment properties with a combined carrying amount of $23.1m held by Charter Hall Direct Long WALE Fund
(DLWF), met the criteria to be reclassified as held for sale assets. Sale of these properties is expected to occur in August 2021.
DLWF Properties
Charter Hall Group
2021
$'m
23.1
23.1
2020
$'m
–
–
Charter Hall Property
Trust Group
2021
$'m
23.1
23.1
2020
$'m
–
–
Investment properties
11
(a) Carrying amounts
The Group’s controlled entity investment fund, Charter Hall Direct Long WALE Fund (DLWF), 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
Reclass to assets held for sale
Closing balance
Charter Hall Group
2021
$'m
173.8
22.1
20.4
(23.1)
193.2
2020
$'m
118.5
55.8
(0.5)
–
173.8
Charter Hall Property
Trust Group
2021
$'m
173.8
22.1
20.4
(23.1)
193.2
2020
$'m
118.5
55.8
(0.5)
–
173.8
Key valuation assumptions used in the determination of the investment properties’ fair value and the Group’s valuation policy are
disclosed Note 23(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
2021
$'m
13.0
54.2
23.6
90.8
2020
$'m
9.3
37.1
30.8
77.2
Charter Hall Property
Trust Group
2021
$'m
13.0
54.2
23.6
90.8
2020
$'m
9.3
37.1
30.8
77.2
Notes to the consolidated financial statements
For the year ended 30 June 2021
12
Intangible assets
Indefinite life intangibles – management rights
Charter Hall Retail REIT
Charter Hall Social Infrastructure REIT
Other indefinite life intangibles
Disposals
Total closing indefinite life intangibles
Finite life intangibles – management rights
Opening balance
Amortisation charge
Closing balance
At balance date – finite life intangibles
Cost
Accumulated amortisation
Total finite life intangibles
Goodwill
Opening and closing balance
Total intangible assets
Charter Hall Group
2021
$'m
42.3
46.4
15.3
(2.7)
101.3
5.0
(1.5)
3.5
58.5
(55.0)
3.5
9.9
114.7
2020
$'m
42.3
46.4
15.3
–
104.0
11.9
(6.9)
5.0
58.5
(53.5)
5.0
9.9
118.9
Charter Hall Property
Trust Group
2021
$'m
2020
$'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:
‒ 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 of 12.5% (2020: 8.5-11.5%);
‒ growth after three years of 2.0% (2020: 1.9-2.3%) per annum;
terminal value multiple of 10 times earnings (2020: 7.5 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.
62
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Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
13 Deferred tax assets and liabilities
14 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
Other
Charter Hall Group
2021
$'m
2020
$'m
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
–
1.5
24.8
6.0
30.8
29.9
16.4
2.8
49.1
(18.3)
21.5
4.0
25.5
31.1
11.9
0.7
43.7
(18.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Net deferred tax liabilities
1
30 June 2020: 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.
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
2021
$'m
35.1
2.7
90.0
42.6
170.4
–
2.5
1.3
3.8
2020
$'m
19.2
2.3
84.9
43.7
150.1
–
2.6
1.2
3.8
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
11.9
–
54.1
–
66.0
–
–
–
–
7.0
–
36.0
–
43.0
20.6
–
–
20.6
24(e)
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.
15 Borrowings
Current liabilities
Loans – related parties
Non-current liabilities
Bonds
Cash advance facilities (DLWF)
Medium term notes
Less: unamortised transaction costs
Charter Hall Group
2021
$'m
2020
$'m
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
–
15.9
–
–
259.3
40.0
253.5
(3.6)
549.2
300.2
66.5
–
(2.5)
364.2
259.3
40.0
253.5
(3.6)
549.2
300.2
66.5
–
(2.5)
364.2
64
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Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
15 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 $30.0 million (2020: $20.0 million) unsecured facility to support the
bank guarantees with maturity in May 2026. At 30 June 2021, drawn borrowings of $nil (2020: $nil) and bank guarantees of $22.6
million (2020: $19.3 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
2021, the carrying amount of the bonds at the prevailing spot rate was A$259.3 million (2020: A$300.2 million) including a
fair value adjustment of A$25.9 million (2020: A$46.8 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.
‒ A$250 million fixed rate unsecured medium term note (MTN) was issued in April 2021 and matures in April 2031.
‒ The Group has entered into an interest rate swap agreement that hedges the Group’s exposure to changes in fair value of
the MTN due to interest rate movements. The swap agreement entitles the Group to receive a fixed coupon rate equal to the
fixed coupon rate payable and pays a rate at the Bank Bill Swap Rate plus a margin. At 30 June 2021, the carrying amount
of the note was A$253.5 million, including a fair value adjustment of A$3.5 million. The carrying amount is offset by the fair
value of the swap.
DLWF Facility
The fund has two revolving debt facilities of A$80.0 million (2020: A$80.0 million) and NZ$7.0 million (2020: NZ$7.0 million), secured
against the fund’s investment properties (see Note 11). The facilities have a maturity date of July 2024. At 30 June 2021, drawn
borrowings of A$33.5 million (2020: A$61.0 million) and NZ$7.0 million (2020: 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 DLWF)
net of cash, divided by total assets net of cash, derivative assets and DLWF.
The gearing ratio of the Charter Hall Group and Charter Hall Property Trust Group at 30 June 2021 was 5.0% (30 June 2020: nil). Debt
covenants are monitored regularly to ensure compliance and reported to the debt provider on a six-monthly basis. The Group
Treasurer is responsible for negotiating new debt facilities and monitoring compliance with covenants.
15 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
2021
Borrowings
Loans – related parties
Derivative financial instruments hedging debt
Borrowing costs
Cash
2020
Borrowings
Loans - related parties
Derivative financial instruments hedging debt
Borrowing costs
Cash
Charter Hall Property Trust Group
2021
Borrowings
Derivative financial instruments hedging debt
Borrowing costs
Funding received from/(paid) to Charter Hall Limited
Cash
2020
Borrowings
Derivative financial instruments hedging debt
Borrowing costs
Funding to (paid)/received from Charter Hall Limited
Cash
Movement
in derivates
and foreign
exchange
$'m
Movement
in borrowing
costs
$'m
Opening
balance
$'m
Movement
in cash
$'m
Closing
balance
$'m
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
–
–
30.9
–
–
30.9
–
–
(31.6)
–
–
(31.6)
–
30.9
–
–
–
30.9
–
(31.6)
–
–
–
(31.6)
–
–
–
(1.1)
–
(1.1)
–
–
–
0.5
–
0.5
–
–
(1.1)
–
–
(1.1)
–
–
0.5
–
–
0.5
186.1
(15.9)
–
–
(113.0)
57.2
66.2
8.4
–
–
(125.0)
(50.4)
186.1
–
–
(32.9)
(58.6)
94.6
66.2
–
–
62.7
37.3
166.2
552.8
–
(34.9)
(3.6)
(351.9)
162.4
366.7
15.9
(65.8)
(2.5)
(238.9)
75.4
552.8
(34.9)
(3.6)
(12.3)
(71.3)
430.7
366.7
(65.8)
(2.5)
20.6
(12.7)
306.3
66
67
Directors’ Report and Financial Report | 109
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
16 Derivative financial instruments
18 Reserves
Current assets
Cross currency interest rate swaps - cash flow hedge
Interest rate swaps - fair value hedge
Non-current assets
Cross currency interest rate swaps - cash flow hedge
Interest rate swaps - fair value hedge
Current liabilities
Interest rate swaps - fair value hedge
Non-current liabilities
Interest rate swaps - non-hedge accounting
Charter Hall Group
2021
$'m
3.3
1.1
4.4
27.9
2.6
30.5
–
–
–
–
2020
$'m
3.6
–
3.6
70.0
–
70.0
0.1
0.1
7.7
7.7
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
3.3
1.1
4.4
27.9
2.6
30.5
–
–
–
–
3.6
–
3.6
70.0
–
70.0
0.1
0.1
7.7
7.7
Key valuation assumptions used in the determination of the fair value of derivative financial instruments and the Group’s valuation
policy are disclosed note 23(c).
17 Contributed equity
(a) Movements in ordinary stapled security capital
Weighted
Details
Opening balance at 1 July 2019
Buyback and issuance of securities for exercised
performance and service rights1
Tax recognised directly in equity
Closing balance at 30 June 2020
Closing balance per accounts at 30 June 2020
Buyback and issuance of securities for exercised
performance and service rights2
Tax recognised directly in equity
Closing balance at 30 June 2021
Closing balance per accounts at 30 June 2021
Number of
securities
465,777,131
–
–
465,777,131
465,777,131
–
–
465,777,131
465,777,131
issue price
average Charter Hall
Limited
$'m
Charter Hall
Property
Trust
$'m
$3.98
$4.63
286.7
1,448.5
(1.6)
4.0
289.1
289.1
(2.3)
4.0
290.8
290.8
(11.7)
–
1,436.8
1,436.8
(10.8)
–
1,426.0
1,426.0
Total
$'m
1,735.2
(13.3)
4.0
1,725.9
1,725.9
(13.1)
4.0
1,716.8
1,716.8
1
2
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.
1,549,587 stapled securities bought on-market at an average value of $13.11, offset by the exercise of 821,840 performance rights with a fair value of $2.65 and 727,747
service rights with an average value of $6.85.
(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
2021
$'m
(52.0)
24.0
0.8
(1.4)
0.3
2.4
(25.9)
(24.4)
(1.5)
(25.9)
2020
$'m
(52.0)
16.2
4.8
(1.0)
0.3
1.2
(30.5)
(33.3)
2.8
(30.5)
Charter Hall Property
Trust Group
2021
$'m
–
–
0.8
(1.4)
0.3
(1.2)
(1.5)
–
(1.5)
(1.5)
2020
$'m
–
–
4.8
(1.0)
0.3
(1.3)
2.8
–
2.8
2.8
(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.
19 Non-controlling interests
During the year, the Group decreased its holding in the Charter Hall Direct Long WALE Fund, formerly Charter Hall Direct Diversified
Consumer Staples Fund (DCSF), from 39.6% to 32.3% (2020: from 41.9% to 39.6%), increasing the non-controlling interest from
60.4% to 67.7%. The net subscriptions for units were $14.5 million (2020: $2.0 million proceeds on redemption), paid in cash.
There is no difference between the redemption proceeds and amount transferred to non-controlling interests (2020: $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 loss
Total comprehensive income
Comprehensive income allocated to non-controlling
Charter Hall Group
2021
$'m
36.9
4.0
32.9
209.9
39.7
170.2
203.1
137.5
2021
$'m
13.6
30.1
–
30.1
18.8
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
Charter Hall Property
Trust Group
2021
$'m
36.9
4.0
32.9
209.9
39.7
170.2
203.1
137.5
2020
$'m
3.0
1.0
2.0
173.8
67.3
106.5
108.5
65.5
2021
$'m
13.6
30.1
–
30.1
18.8
2020
$'m
10.9
3.2
(0.1)
3.1
2.2
68
69
Directors’ Report and Financial Report | 111
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
22 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.
20 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 DLWF
Other assurance services
Total remuneration for audit services
(b) Taxation services
PricewaterhouseCoopers – Australian Firm
Taxation services
PricewaterhouseCoopers – New Zealand Firm
Taxation services for DLWF
Total remuneration for taxation services
(c) Advisory services
PricewaterhouseCoopers – Australian Firm
Accounting advice
Total remuneration for advisory services
Charter Hall Group
2021
$
2020
$
Charter Hall Property
Trust Group
2021
$
2020
$
457,970
48,153
12,550
518,673
585,126
30,259
7,721
623,106
11,310
48,153
–
59,463
8,529
30,259
–
38,788
9,300
98,800
–
9,100
1,472
10,772
5,944
104,744
1,472
1,472
5,944
15,044
–
–
60,000
60,000
–
–
–
–
21 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
2021
$'m
495.6
1.5
6.9
7.8
7.0
(0.4)
(30.9)
2.0
–
(16.6)
26.2
(42.8)
(211.2)
(19.5)
225.6
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
Charter Hall Property
Trust Group
2021
$'m
329.3
2020
$'m
146.7
–
6.9
1.5
–
(0.4)
(30.9)
2.0
(0.9)
0.2
1.0
–
(199.0)
–
109.7
–
13.6
1.3
–
(15.5)
8.5
2.8
0.3
(6.4)
(0.6)
–
(46.0)
–
104.7
Distributions and interest income received on investments has been classified as cash flow from operating activities.
70
71
Directors’ Report and Financial Report | 113
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
22 Capital and financial risk management continued
22 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
2021
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
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
Charter Hall Property Trust Group
2021
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
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
10%
Impact on
Profit
and Equity
$'m
Carrying
amount
$'m
46.2
–
25.9
101.2
46.2
–
25.9
101.2
4.6
–
2.6
10.1
4.6
–
2.6
10.1
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 $10.1 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 24(e) for further details.
The Group’s and CHPT’s external interest rate risk arises from the debt facilities disclosed in Note 15. 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 15 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 2021, with all other variables remaining constant.
Charter Hall Group
2021
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Total increase/(decrease)
2020
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Total increase/(decrease)
Charter Hall Property Trust Group
2021
Financial assets
Cash and cash equivalents
Loan receivable from Charter Hall Ltd
Financial liabilities
Borrowings
Total increase/(decrease)
2020
Financial assets
Cash and cash equivalents
Financial liabilities
Loan payable to Charter Hall Ltd
Borrowings
Total increase/(decrease)
Effective
interest rate
Fair value
$'m
Carrying
amount
$'m
1%
Impact on
Profit
and Equity
$'m
0.3%
351.9
351.9
1.3%
552.8
552.8
(200.9)
1.0%
238.9
238.9
3.0%
366.7
0.3%
4.4%
71.3
12.3
1.3%
552.8
366.7
(137.8)
71.3
12.3
552.8
(469.2)
1.0%
12.7
12.7
6.6%
3.0%
20.6
366.7
20.6
366.7
–
3.5
(5.0)
(1.5)
2.4
–
2.4
0.7
0.1
(5.0)
(4.2)
0.1
0.2
–
0.1
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.
72
73
Directors’ Report and Financial Report | 115
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
22 Capital and financial risk management continued
22 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 16 for derivatives held by the Group.
The Group’s accounting policy for its fair value and cash flow hedges is set out in Note 33(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 and fixed rate medium term note. The Group enters into cross currency
interest rate swaps and interest rate swaps that have critical terms that match 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% (2020: 100%) of the foreign denominated debt outstanding. The
payable variable AUD interest rates of the swaps are 2.0% (2020: 2.0%) above the 90-day bank bill swap rate which at the end of the
reporting period was 0.1% (2020: 0.2%) and the receivable USD fixed rates of the loans are 4.6% (2020: 4.6%).
Interest rate swaps currently in place for the medium term note cover 100% of debt outstanding. The receivable fixed interest rate of
the swaps currently in place is 3.1% and the payable is the 90-day bank bill swap rate plus 1.50% margin.
See Note 15(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 and 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
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
2021
2020
Charter Hall Property
Trust Group
2021
2020
31.2
231.5
73.6
231.5
31.2
231.5
73.6
231.5
August-2028 August-2028 August-2028 August-2028
1:1
1:1
1:1
(42.4)
41.0
33.3
(32.0)
1:1
(42.4)
41.0
3.7
250.0
April-2031
1:1
3.7
(3.5)
–
–
n/a
n/a
–
–
3.7
250.0
April-2031
1:1
3.7
(3.5)
33.3
(32.0)
–
–
n/a
n/a
–
–
(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 64.5% of its income from management fees, development revenue, transaction and other fees from related parties.
A further 31.1% 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.
CHPT derives 84.4% 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 and 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.
74
75
Directors’ Report and Financial Report | 117
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
22 Capital and financial risk management continued
Charter Hall Group
2021
Trade and other payables
Borrowings
Total financial liabilities
2020
Trade and other payables
Borrowings
Derivative financial instruments
Net contractual amounts payable/(receivable)
Total financial liabilities
Charter Hall Property Trust Group
2021
Trade and other payables
Borrowings
Total financial liabilities
2020
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
174.2
552.8
727.0
153.9
382.6
7.8
544.3
66.0
552.8
618.8
63.6
366.7
7.8
438.1
170.4
–
170.4
150.1
15.9
2.3
168.3
66.0
–
66.0
43.0
–
2.3
45.3
0.2
40.0
40.2
0.1
66.5
5.7
72.3
–
40.0
40.0
20.6
66.5
5.7
92.8
3.6
512.8
516.4
3.7
300.2
–
303.9
–
512.8
512.8
–
300.2
–
300.2
174.2
552.8
727.0
153.9
382.6
8.0
544.5
66.0
552.8
618.8
63.6
366.7
8.0
438.3
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 2021, there was a gross liability position of $nil (2020: $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 2021
23 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)
‒
‒ Assets held for sale (Note 10)
‒
‒ Derivatives (Note 16)
Investment properties (Note 11)
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement
hierarchy:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
(i)
(ii) Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices); and
(iii) Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
76
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Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
23 Fair value measurement continued
23 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:
Level 1
$'m
Level 2
$'m
Level 3
$'m
Total
$'m
Charter Hall Group
2021
Investments in associates at fair value through profit and
loss
Investment properties
Derivative financial instruments
Assets classified as held for sale
Total assets
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
Charter Hall Property Trust Group
2021
Investments in associates at fair value through profit and
loss
Investment properties
Derivative financial instruments
Assets classified as held for sale
Total assets
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
–
–
–
–
–
101.2
–
–
–
101.2
–
–
–
–
–
–
–
101.2
–
–
–
101.2
–
–
–
–
34.9
–
34.9
–
–
–
73.6
73.6
(7.8)
(7.8)
–
–
34.9
–
34.9
–
–
–
73.6
73.6
(7.8)
(7.8)
46.2
193.2
–
23.1
262.5
46.2
193.2
34.9
23.1
297.4
–
101.2
25.9
173.8
–
199.7
–
–
46.2
193.2
–
23.1
262.5
25.9
173.8
73.6
374.5
(7.8)
(7.8)
46.2
193.2
34.9
23.1
297.4
–
101.2
25.9
173.8
–
199.7
–
–
25.9
173.8
73.6
374.5
(7.8)
(7.8)
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.
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.
2021
2020
Term
Discounted Cash
Flow (DCF) method
Income capitalisation
method
Gross market rent
Capitalisation rate
Terminal yield
Discount rate
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 by 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 2021 (91.7% by value on a look-through basis).
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.
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.)
4.9-6.5
5.2-7.3
Fair value
$'m
193.2
173.8
Adopted
terminal
yield
(% p.a.)
5.1-7.8
5.3-8.8
Adopted
discount
rate
(% p.a.)
5.5-7.5
6.0-8.0
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.
78
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Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
24 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 25.
(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
2021
$'000
3,107
1,429
4,290
65
2,743
4
11,638
2020
$'000
3,008
1,372
4,290
63
2,012
5
10,750
Charter Hall Property
Trust Group
2021
$'000
–
–
–
–
–
–
–
2020
$'000
–
–
–
–
–
–
–
Detailed remuneration disclosures are provided in the Remuneration Report on pages 54 to 79.
(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
Development revenue
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
2021
$'000
2020
$'000
Charter Hall Property
Trust Group
2021
$'000
2020
$'000
12,524
3,251
49,174
172,871
68,775
155,551
920
244
3,103
29,448
10,104
119,691
1,232
60
14,585
8,277
2,497
–
652,307
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,742
10,742
–
–
–
–
–
11,383
11,383
During the year the Group sold holdings in related party entities to other related parties totalling $198.3m (2020: $205.6m).
Notes to the consolidated financial statements
For the year ended 30 June 2021
24 Related parties continued
The following balances arising through the normal course of business were due from related parties at balance date:
Associates
Management fee receivables
Other receivables
Joint ventures
Management fee receivables
Other receivables
Other
Management fee receivables
Other receivables
(e) Loans to/(from) related parties
Loans to joint ventures
Opening balances
Loans advanced
Loan repayments received
Interest charged
Interest received/receivable
Closing balance
Loans from joint ventures
Opening balances
Loan repayments made
Closing balance
Loans to other related parties
Opening balances
Loans advanced
Loan repayments received
Interest received/receivable
Closing balance
Loans from other related parties
Opening balances
Loans advanced
Loan repayments made
Closing balance
Loans to/(from) Charter Hall Limited
Opening balances
Loans advanced
Loan repayments received
Interest received/receivable
Closing balance
Charter Hall Group
2021
$'000
19,600
23,852
6,354
2,399
1,168
8,082
61,455
2020
$'000
13,453
7,221
2,408
1,158
2,358
1,778
28,376
Charter Hall Property
Trust Group
2021
$'000
2020
$'000
–
–
–
–
–
–
-
–
–
–
–
–
–
-
Charter Hall Group
2021
$'000
2020
$'000
Charter Hall Property
Trust Group
2021
$'000
2020
$'000
4,397
–
(1,376)
–
239
3,260
–
–
–
13,168
7,320
(14,286)
747
6,949
15,948
–
(15,948)
–
–
–
–
–
–
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
-
–
–
–
–
-
–
–
-
–
–
–
–
-
–
–
–
-
38,919
–
(38,900)
812
(831)
-
–
–
-
–
–
–
–
-
–
–
–
-
–
–
–
–
–
(20,581)
618,339
(587,292)
1,815
12,281
43,161
379,618
(446,340)
2,980
(20,581)
No provisions for expected credit losses have been raised in relation to any outstanding balances.
The loan to CHL comprises an unsecured stapled loan maturing on 30 June 2023. Interest is charged on an arm’s length basis which,
at 30 June 2021, amounted to a weighted average rate of 4.4%. At 30 June 2020, the balance consisted of a loan from CHL to CHPT
with a weighted average interest rate of 6.6%.
(f) Fees paid to the Responsible Entity or its associates
Fees paid to the Responsible Entity of the Charter Hall Property Trust, and its associates, by the Charter Hall Property Trust Group
amounted to $4,161,000 (2020: $3,146,000). At 30 June 2021, related fees payable amounted to $1,907,000 (2020: $480,000).
80
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Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
25 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 2021 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 FLK Funds Management Limited
Charter Hall Investment Management Limited
Charter Hall Retail Management Limited
Charter Hall WALE Limited
Charter Hall Wholesale Management Limited
Charter Hall Development Services Pty Ltd
Folkestone No 3 Pty 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 Co-Investment Trust 6
Charter Hall Co-Investment Trust 7
Charter Hall Co-Investment Trust 8
Charter Hall Co-Investment Trust 9
CHPT Exchange Trust
Charter Hall Direct Long WALE Fund
CHPT RP2 Trust
CHC Finance Pty Ltd
Country of
incorporation Principal activity
Class of
securities
2021
%
2020
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Property management Ordinary
Property development
Ordinary
Property management Ordinary
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Responsible entity
Ordinary
Property development
Ordinary
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Financing entity
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
93
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
32
100
100
100
93
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
40
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 Co-Investment Trust 6
Charter Hall Co-Investment Trust 7
Charter Hall Co-Investment Trust 8
Charter Hall Co-Investment Trust 9
CHPT Exchange Trust
Charter Hall Direct Long WALE Fund
CHPT RP2 Trust
CHC Finance Pty Ltd
Country of
incorporation Principal activity
Class of
securities
2021
%
2020
%
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Financing entity
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
32
100
100
100
100
100
100
100
100
100
100
100
40
100
-
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
82
Interests in unconsolidated structured entities
26
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
2021
$'m
17.4
35.4
4.2
57.0
2020
$'m
11.0
30.2
2.4
43.6
5.9
46.2
2,321.6
2,373.7
14.3
127.1
1,875.4
2,016.8
Charter Hall Property
Trust Group
2021
$'m
2020
$'m
0.5
34.1
–
34.6
–
46.2
2,234.6
2,280.8
0.5
28.8
–
29.3
–
127.1
1,794.8
1,921.9
2,430.7
2,060.4
2,315.4
1,951.2
52,288.9
40,549.4
51,751.2
39,900.8
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 24 for
further information.
No financial support has been provided to the funds beyond the loans disclosed in the above table.
27 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
$34.4 million at 30 June 2021 (2020: $42.4 million) relating to a development joint venture.
Charter Hall Property Trust Group
The Trust Group had no contracted capital commitments as at 30 June 2021 (2020: $nil).
28 Contingent liabilities
The Group has nil contingent liabilities as at 30 June 2021 (2020: $nil) other than the bank guarantees provided for under the bank
facility held by Charter Hall Property Trust (refer to 15(a)).
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Directors’ Report and Financial Report | 125
Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
29 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 23/11/17
Rights issued 28/11/18
Rights issued 28/11/19
Rights issued 28/11/20
Performance rights issued
Number of rights forfeited/lapsed
871,739
–
–
–
871,739
2018
Number
2019
Number
2020
Number
2021
Number
Total
Number
–
1,015,843
–
–
1,015,843
–
–
713,588
–
713,588
–
–
–
838,798
838,798
871,739
1,015,843
713,588
838,798
3,439,968
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 25/11/19
Rights issued 28/11/19
Rights issued 15/09/20
Rights issued 28/11/20
Service rights issued
Number of rights forfeited/lapsed
Prior years
Current year
Number of rights vested
Prior years
Current year
Closing balance
(49,899)
–
(36,497)
–
(15,263)
–
–
–
(101,659)
–
(821,840)
–
–
979,346
–
698,325
–
838,798
(821,840)
2,516,469
353,091
–
–
–
–
–
353,091
–
1,748,977
–
–
–
–
1,748,977
–
–
178,903
260,000
–
–
438,903
–
–
–
–
672,282
319,856
992,138
353,091
1,748,977
178,903
260,000
672,282
319,856
3,533,109
(5,964)
–
(96,899)
–
–
–
–
–
(102,863)
–
(315,638)
(31,489)
–
(657,679)
(606,803)
387,596
–
(89,455)
349,448
–
–
992,138
(973,317)
(727,747)
1,729,182
(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
2021
$'m
6.8
2020
$'m
9.7
Charter Hall Property
Trust Group
2021
$'m
–
2020
$'m
–
Notes to the consolidated financial statements
For the year ended 30 June 2021
29 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 FY2021 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
rights
CHC
Service
rights –
CHC
Service
rights –
CHC
Service
rights –
CQR
Service
rights –
Mandatory
Deferred STI
Voluntary
Deferred STI
Sign-on Deferred STI
26/11/2020
$13.12
$10.33
33.5%
2.7%
0.2%
26/11/2020
$13.12
$12.68
50.5%
2.7%
0.2%
15/09/2020
$12.38
$10.74
31.5%
2.9%
0.3%
26/11/2020
$13.12
$12.28
41.3%
2.7%
0.2%
26/11/2020
$3.86
$3.57
40.9%
6.4%
0.2%
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 (2020: $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 $434,931 (2020: $468,139) 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.
84
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Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
30 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 profit/(losses)
Net equity
Profit for the year
Total comprehensive income for the year
Charter Hall Limited
Charter Hall
Property Trust
2021
$'m
296.0
562.7
64.9
455.1
290.8
(53.6)
(129.6)
107.6
74.6
74.6
2020
$'m
169.6
453.3
99.4
351.5
289.1
(53.6)
(133.7)
101.8
88.3
88.3
2021
$'m
63.7
1,797.4
60.2
321.1
1,426.0
(0.5)
50.8
1,476.3
254.1
254.1
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
Notwithstanding the net current liability, Charter Hall Property Trust has total net assets of $1.5 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 2021 (2020: $nil) other than the bank
guarantees provided for under the bank facility held by Charter Hall Property Trust (refer to Note 15(a)).
(c) Contractual commitments
As at 30 June 2021, Charter Hall Limited had no contractual commitments (2020: $nil).
As at 30 June 2021, Charter Hall Property Trust had no contractual commitments (2020: $nil).
31 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
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
Accumulated profit/(losses) at the beginning of the financial year
Profit for the year
Dividends paid/payable
Accumulated profit at the end of the financial year
2021
$'000
2020
$'000
356.0
(147.9)
(7.8)
(2.8)
–
(26.5)
171.0
(52.3)
118.7
84.5
118.7
(70.6)
132.6
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
86
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Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
31 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
Net loans payable to related entities
Loans due from Charter Hall Property Trust
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
Net loans due to related entities
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated profit
Total equity
2021
$'m
178.0
80.5
258.5
5.4
–
15.1
2.8
193.5
14.4
71.0
9.3
13.8
325.3
583.8
129.6
4.5
134.1
3.8
12.3
–
10.7
26.8
160.9
422.9
290.8
(0.5)
132.6
422.9
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
289.1
(9.4)
84.5
364.2
32 Events occurring after the reporting date
No matter or circumstance has arisen since 30 June 2021 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.
33 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 2021 are set out below. These policies have
been consistently applied to the years presented, unless
otherwise stated.
Changes in accounting policies
(a) New and amended standards adopted
The Group revised its accounting policy in relation to Software-
as-a-service (SaaS) during the year. No other new accounting
standards or amendments have come into effect for the year
ended 30 June 2021 that affect the Group’s operations or
reporting requirements.
Software-as-a-Service (SaaS) arrangements
During the year, the Group revised its accounting policy in
relation to upfront configuration and customisation costs incurred
in implementing SaaS arrangements in response to the IFRIC
agenda decision clarifying its interpretation of how current
accounting standards apply to these types of arrangements.
SaaS arrangements are service contracts providing the Group
with the right to access the cloud provider’s application software
over the contract period. Costs incurred to configure or
customise, and the ongoing fees to obtain access to the cloud
provider's application software, are recognised as operating
expenses when the services are received.
Where costs incurred are for the development of software code
that enhances or modifies, or creates additional capability to,
existing on-premise or services-as-a-platform systems and meets
the definition of and recognition criteria for an asset, these costs
are recognised as software assets and depreciated over the
useful life of the software on a straight-line basis. The useful lives
of these assets are reviewed at least at the end of each financial
year, and any change accounted for prospectively as a change in
accounting estimate.
Adjustments recognised on adoption of new policy
As a result of adopting the new SaaS policy, associated costs
previously capitalised and depreciated as software assets but
now considered to be SaaS arrangements have been identified
along with their corresponding deferred tax liability. The Group
has adopted this change in policy with the following items
affected:
- Software assets – decreased by $6.7m
- Deferred tax liability – increased by $2.0m
On adoption the impact of the above item was reflected in the
retained earnings.
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.
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).
88
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Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
33 Summary of significant accounting policies continued
33 Summary of significant accounting policies continued
Historical cost convention
The consolidated financial statements have been prepared on a
historical cost basis, except for the following:
‒
‒
‒
investment properties – measured at fair value;
investments in associates at fair value through profit or loss
– measured at fair value;
investments in financial assets held at fair value – measured
at fair value; 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 2021 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.
(d) Foreign currency translation
(i) Functional and presentation currencies
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (the functional
currency). The consolidated financial statements are presented in
Australian dollars, which is CHL’s and CHPT’s functional and
presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation at
year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the
consolidated statement of comprehensive income, except when
they are deferred in equity as qualifying cash flow hedges and
qualifying net investment hedges or are attributable to part of the
net investment in a foreign operation.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on
assets and liabilities carried at fair value are reported as part of
the fair value gain or loss.
(iii) Foreign 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.
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
90
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Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
33 Summary of significant accounting policies continued
33 Summary of significant accounting policies continued
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.
A development 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.
Proceeds from the sale of development assets are invoiced and
receivable in accordance with the relevant terms of the contract.
(f) Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits
and annual leave expected to be settled within 12 months of the
reporting date, are recognised in other payables in respect of
employees’ services up to the reporting date and are measured at
the amounts expected to be paid when the liabilities are settled.
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.
(v) Termination benefits
Termination benefits are payable when employment is terminated
by the Group before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these
benefits. The Group recognises termination benefits at the earlier
of the following dates:
(a) when the Group can no longer withdraw the offer of those
benefits; and
(b) when the entity recognises costs for a restructuring that is
within the scope of AASB 137 and involves the payment of
termination benefits. In the case of an offer made to encourage
voluntary redundancy, the termination benefits are measured
based on the number of employees expected to accept the offer.
Benefits falling due more than 12 months after the end of the
reporting period are discounted to present value.
(g) Development assets
Costs incurred in fulfilling a development contract with a customer
are recognised as a development asset.
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, a
development contract asset is recognised in the consolidated
balance sheet where the right to receive consideration remains
conditional on future performance. 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. Where consideration is received in excess of
revenue recognised, a development liability will be recognised.
Development assets are classified as non-current where the
group is not contractually entitled to payment within 12 months
from balance date.
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. Further
information relating to valuation techniques can be found in Note
23(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.
(i) Plant and equipment
Plant and equipment is stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to
the acquisition of plant and equipment.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
consolidated statement of comprehensive income during the
financial year in which they are incurred.
Depreciation on other assets is calculated using the straight-line
method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives, as follows:
‒ Furniture, fittings and equipment
‒ Fixtures
‒ Software
3 to 10 years
5 to 10 years
3 to 5 years
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount.
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
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.
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Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Charter Hall Group Financial Report 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
Notes to the consolidated financial statements
For the year ended 30 June 2021
33 Summary of significant accounting policies continued
33 Summary of significant accounting policies continued
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.
(o) Comparative information
Where necessary, comparative information has been adjusted to
conform with changes in presentation in the current year.
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.
(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.
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 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 2021 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
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.
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Charter Hall Group Annual Report 2021
Charter Hall Group Financial Report 2021
Directors’ declaration to securityholders
For the year ended 30 June 2021
Independent auditor’s report
For the year ended 30 June 2021
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 83 to 137 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 2021 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 31 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 31.
Note 33(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
Chair
Sydney
23 August 2021
96
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 Group
financial positions as at 30 June 2021 and of their financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Charter Hall Group and the Charter Hall Property Trust Group financial reports comprise:
•
•
•
•
•
•
•
the consolidated balance sheets as at 30 June 2021
the consolidated statements of comprehensive income for the year then ended
the consolidated statement of changes in equity – Charter Hall Group for the year then ended
the consolidated statement of changes in equity – Charter Hall Property Trust Group for the
year then ended
the consolidated cash flow statements for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
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 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.
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.
Directors’ Report and Financial Report | 139
97
Charter Hall Group Annual Report 2021 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 & 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 $14.2 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.
• We, as the group audit team, identified separate components of Charter Hall Group and Charter
Hall Property Trust Group representing individually significant 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 the Charter Hall Group and Charter Hall Property Trust 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
Carrying value of investments accounted
for using the equity method (Charter
Hall Group and Charter Hall Property
Trust Group)
(Refer to notes 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, social
infrastructure 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
How our audit addressed the key audit
matter
Our audit procedures included evaluating the
design of relevant controls relating to Charter
Hall Group’s and Charter Hall Property Trust
Group’s equity accounted investments process.
To assess the carrying amount of investments
accounted for using the equity method, our audit
included the following audit procedures,
amongst others:
• 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.
Evaluating the assessments made by
Charter Hall Group and Charter Hall
Property Trust Group of whether there
•
•
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Charter Hall Group Annual Report 2021 Key audit matter
How our audit addressed the key audit
matter
Key audit matter
How our audit addressed the key audit
matter
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.
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 extent of
judgement involved in light of the continued
impact and uncertainty surrounding the COVID-
19 pandemic, we consider this to be a key audit
matter.
were any indicators of impairment or
whether impairment losses recognised
in prior periods should be reversed,
including evaluating the impairment
assessment methodologies and the
significant assumptions used.
For impaired investments our
procedures included:
•
•
•
evaluating the appropriateness
of impairment assessment
methodology and significant
assumptions applied in
calculating the recoverable
amounts of the relevant
investments.
performing testing over the
mathematical accuracy of the
underlying calculations.
Assessing the reasonableness 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)
Our audit procedures included evaluating the
design of relevant controls relating to the
recognition and measurement of performance
fee revenue.
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:
•
•
estimation uncertainty associated with
estimating the period remaining from
balance sheet date to performance fee
crystallisation date and determining the
degree of probability of revenue reversal
during that period, including potential
and uncertain economic impacts of
COVID-19 on future property
valuations.
the potential financial significance of
performance fees to the Charter Hall
Group results.
For a sample of funds with performance fees
contracts we performed the following audit
procedures, amongst others:
•
• We assessed the appropriateness of
revenue recognition against the
requirements of Australian Accounting
Standards.
Evaluated the appropriateness of
significant assumptions and data used to
estimate the variable revenue in the
context of Australian Accounting
Standards and whether the judgements
made in selecting them give rise to
indicators of possible bias by Charter
Hall Group. This included:
o Agreeing the data in Charter
Hall Group’s calculations to
source documents, where
possible.
o Assessing the appropriateness
of the key factors the Charter
Hall Group considered to
evaluate the probability of a
revenue reversal by comparing
significant assumptions to those
available in the industry.
•
Tested the mathematical accuracy, on a
sample basis, of the performance fee
calculations and assessed whether they
were in accordance with the relevant
Constitution.
• Where a performance fee was paid
during the year, we inspected evidence
of payment.
Assessed the reasonableness of the
disclosures in the financial report, including
those related to estimation uncertainty,
against the requirements of Australian
Accounting Standards.
Revenue recognition – development
revenue (Charter Hall Group)
(Refer to note 4)
Our audit procedures included evaluating the
design of relevant controls relating to the
recognition and measurement of development
revenue.
Development revenue is recognised when value
is transferred to the customer (i.e. over time or
at time of sale). Judgement is applied where
development revenue is recognised on a
percentage of completion basis as it involves the
use of forward-looking assumptions including
forecast costs at completion.
We considered development revenue to be a key
audit matter because of the:
•
•
•
financial significance of this revenue
stream to Charter Hall Group’s
comprehensive income.
degree of estimation uncertainty and
judgement in relation to estimating total
project costs.
sensitivity of Charter Hall Group’s
assessment to changes in these
assumptions such as total project costs.
For a sample of projects for which development
revenue was recognised in the year we
performed the following audit procedures,
amongst others:
• Obtained the relevant development
agreements executed between Charter
Hall Group and the customer(s) and
evaluated the terms of the agreement to
develop an understanding of the
performance obligation and transaction
price.
Enquired with management on the
feasibility of projects to develop an
understanding of project status and
risks as well as percentage completion
used by Charter Hall Group in their
assessment of development revenue for
the year and forecast for future periods.
Assessed the capitalisation and forecast
of costs by, amongst other things,
agreeing them back to quantity surveyor
and independent certifier reports where
relevant.
•
•
100
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Directors’ Report and Financial Report | 143
Charter Hall Group Annual Report 2021 Key audit matter
Carrying value of indefinite life
management rights (Charter Hall
Group)
(Refer to note 12)
The Charter Hall Group's indefinite life
intangible assets comprise management rights in
relation to managed funds. These intangible
assets had a carrying value of $101.3 million at
3o June 2021.
These management rights are considered to have
indefinite useful lives and accordingly an annual
impairment test is required by Australian
Accounting Standards.
We considered the valuation of indefinite life
intangible assets a key audit matter because of
the:
•
•
degree of estimation uncertainty and
judgement in relation to estimating the
recoverable amount of indefinite life
management rights including potential
and uncertain economic impacts of
COVID-19 on future property
valuations.
sensitivity of Charter Hall Group’s
assessment to changes in significant
assumptions such as growth rates,
discount rates, and terminal value
multiples.
How our audit addressed the key audit
matter
Assessed the reasonableness of the disclosures in
the financial report, including those related to
estimation uncertainty, against the requirements
of Australian Accounting Standards.
Our audit procedures included evaluating the
design 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.
Tested management’s forecast accuracy
of estimating future distributions by
testing the previous three years
estimates to actuals.
•
• We considered the method applied and
assessed the appropriateness of the
significant assumptions including
growth rates, discount rates, and
terminal value multiples used in light of
Australian Accounting Standards.
Assessed the reasonableness of the disclosures
made in note 12, including those related to
estimation uncertainty, against the requirements
of Australian Accounting Standards.
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 2021, 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, Contact details and Corporate directory. 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 give 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 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 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.
102
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Directors’ Report and Financial Report | 145
Charter Hall Group Annual Report 2021 Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 54 to 79 of the directors’ report for
the year ended 30 June 2021.
In our opinion, the remuneration report of Charter Hall Limited for the year ended 30 June 2021
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors 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
Partner
Sydney
23 August 2021
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Directors’ Report and Financial Report | 147
Charter Hall Group Annual Report 2021 Securityholder Analysis
Distribution of equity stapled securityholders as at 29 July 2021
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
% of issued
stapled securities
No. of
Holders
440,759,376
2,444,230
7,337,857
4,680,552
8,341,233
2,213,883
465,777,131
1,228
94.63
0.52
1.58
1.00
1.79
0.48
100.00
0.00
54
34
392
651
3,486
5,666
10,283
455
Top 20 registered equity securityholders as at 29 July 2021
Rank Name
A/C designation
Stapled
securities held
%IC of issued
securities
Substantial securityholder notices as at 29 July 2021
Ordinary securities
Mitsubishi UFJ Financial Group, Inc.
Date of change
Stapled
securities held
% securities
held
13 Jan 2021
34,035,032
BlackRock Group (BlackRock Inc. and subsidiaries)
24 Sep 2020
23,402,834
Commonwealth Bank of Australia ACN 123 123 124 (CBA)
and its related bodies corporate
First Sentier Investors Holdings Pty Limited ACN 630 725 558
and its related bodies corporate listed in annexure A
27 May 2020
37,363,414
14 Feb 2020
28,958,515
7.31
5.02
8.02
6.22
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
153,082,687
126,752,954
51,725,215
35,936,842
19,815,028
17,603,578
11,284,726
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
3,808,268
MILTON CORPORATION LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24
CUSTODIAL SERV LTD
BNP PARIBAS NOMS(NZ) LTD
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
PORTMIST PTY LIMITED / DAVID HARRISON
UBS NOMINEES PTY LTD
15 WOODROSS NOMINEES PTY LTD
16
17
18
19
CERTANE CT PTY LTD
BNP PARIBAS NOMINEES PTY LTD
ONE MANAGED INVESTMENT FUNDS LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
- A/C 2
20
AMP LIFE LIMITED
Total
Balance of register
Grand total
2,556,000
1,714,986
1,461,196
1,416,416
1,413,463
981,288
904,715
816,688
786,403
718,948
638,624
581,501
433,999,526
31,777,605
32.87
27.21
11.11
7.72
4.25
3.78
2.42
0.82
0.55
0.37
0.31
0.30
0.30
0.21
0.19
0.18
0.17
0.15
0.14
0.12
93.17
6.83
465,777,131
100.00
Securityholder Analysis | 149
Charter Hall Group Annual Report 2021
Investor Information
How do I invest in Charter Hall?
Do I need to supply my Tax File Number?
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 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. The DRP is currently not available.
You are not required by law to supply your Tax File Number
(TFN), Australian Business Number (ABN) or exemption.
However, if you do not provide these details, withholding
tax may be deducted at the highest marginal rate from
your distributions. If you wish to provide your TFN, ABN or
exemption, please contact Link Market Services on
1300 303 063 or your sponsoring broker. You can also
update your details directly using the Investor Login facility
on our website.
How do I complete my annual tax return for the distributions
I receive from Charter Hall?
At the end of each financial year, we issue securityholders
with an Annual Taxation Statement. This statement includes
information required to complete your tax return. The
distributions paid in February and August are required to be
included in your tax return for the financial year the income
was earned, that is, the distribution income paid in August 2021
should be included in your 2021 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
Phone
1800 931 678
Email
info@afca.org.au
Web www.afca.org.au
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
Tel
1300 303 063 (within Australia)
+61 2 8280 7134 (outside Australia)
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
Tel
1300 365 585 (within Australia)
+61 2 8651 9000 (outside Australia)
E-mail
reits@charterhall.com.au
Web
charterhall.com.au
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), Philip Garling, David Harrison, Karen
Moses, Greg Paramor AO, David Ross and Jacqueline Chow
Company Secretary
Mark Bryant
Auditor
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay, Barangaroo
Sydney NSW 2000
Important information
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 2021 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
Charter Hall Group Annual Report 2021
charterhall.com.au/chc