ANNUAL REPORT
2020
CONTENTS
04
Financial Highlights
19
Annual Financial
Report
147
Corporate Governance
Statement
06
Chair's Report
10
CEO's Report
20 Directors’ Report
68 Auditor’s Independence Declaration
70 Consolidated Statements of
Profit or Loss
71 Consolidated Statements of
Other Comprehensive Income
72 Consolidated Balance Sheets
73
Consolidated Statements of
Changes in Equity
75 Consolidated Statements of
Cash Flows
76 Notes to the Financial Statements
142 Directors’ Declaration
143 Independent Auditor’s Report
2
CROMWELL PROPERT Y G R OU P I 2 0 2 0 A NNU A L R E P OR T
165
Securityholder
Information
Cromwell Property Group
Cromwell Property Group (ASX:CMW) (Cromwell) is a
Real Estate Investor and Manager with operations on
three continents and a global investor base. As at 30
June 2020, Cromwell had a market capitalisation of
A$2.4 billion, a direct property investment portfolio in
Australia valued at A$3.0 billion and total assets under
management of A$11.5 billion across Australia, New
Zealand and Europe.
Cromwell is included in the S&P/ASX 200 and the
FTSE EPRA/NAREIT Global Real Estate Index.
THIS DOCUMENT IS ISSUED BY
Cromwell Property Group
consisting of
Cromwell Corporation Limited ABN 44 001 056 980
and
Cromwell Diversified Property Trust
ARSN 102 982 598 ABN 30 074 537 051
(the responsible entity of which is
Cromwell Property Securities Limited
AFSL 238052 ABN 11 079 147 809)
Level 19, 200 Mary Street, Brisbane QLD 4000
Phone: +61 7 3225 7777
Fax:
+61 7 3225 7788
Web: www.cromwellpropertygroup.com
invest@cromwell.com.au
Email:
SECURITYHOLDER ENQUIRIES
All enquiries and correspondence regarding your
security-holding should be directed to Cromwell’s
Investor Services Team on 1300 268 078.
C ROMWE LL P ROPE RTY GROU P I 2 0 20 ANN UA L REPORT
3
FINANCIAL
HIGHLIGHTS
Assets under management
$11.5 billion
FY20 operating profit
$221.2 million
up 27.0%
Distributions of 7.50 cps
↑3.4%
meeting original guidance
NTA per unit
$0.99
(FY19 $0.97)
Gearing
41.6%
FY20 operating profit per security
WALE
↑3.5%
to 8.50 cps
6.4 years
4
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Objective
To provide securityholders with an
attractive combination of stable
long-term cash flows, demonstrated
asset enhancement capabilities and
transactional profits, and low risk exposure
to Asian capital flows and European real
estate markets.
FY21 distribution guidance of
7.50 cents
per security
Distribution per security yield
8.20%
based on the closing price of
91.5 cents at 26 August 2020
Financial Results Summary
Statutory profit ($M)
Statutory profit (cents per security)
FY20
181.1
6.96
FY19
Change
159.9
$13.3
7.53
(7.6%)
Direct Property Investment ($M)
172.2
136.1
26.5%
Indirect Property Investment ($M)
Funds and Asset Management ($M)
55.9
40.8
45.4
28.5
23.1%
43.2%
Total Segment Results ($M)
268.9
210.0
28.0%
Operating profit ($M)
Operating profit (cents per security)
221.2
8.50
174.2
27.0%
8.21
3.5%
Distributions ($M)
195.5
157.5
24.1%
Distributions (cents per security)
Payout Ratio (%)
7.50
88%
7.25
90%
3.4%
(2.1%)
Financial Position
Total Assets
Total Liabilities
Net assets
Jun-20
(Actual) ($M)
Jun-19
(Actual) ($M)
4,990.5
(2,401.5)
3,695.7
(1,512.7)
2,589.0
2,183.0
Securities on issue (‘000)
NTA per security
(including interest rate swaps)
Gearing(1)
Gearing (look-through)(1)
2,612.9
$0.99
41.6%
47.5%
2,236.6
$0.97
35.0%
42.3%
(1)
Gearing calculated as (total borrowings less cash)/(total tangible assets less cash).
Look through gearing adjusts for 30.7% interest in CEREIT, 94% interest in Ursynów,
28% interest in Portgate, 50% in Oyster and 50% interest in LDK.
5
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
CHAIR’S REPORT
The entire Board is conscious of the legacy left by Geoff
and Michelle, and the other directors who preceded them.
We are determined to stay true to their example,
to Cromwell’s values and to always do what is right for
all Cromwell’s securityholders.
COVID-19 response
COVID-19 has created unprecedented uncertainty and
dislocation within the global economy and commercial
real estate markets. Cromwell experienced the impact of
the virus earlier than most with our Milan office moving to
working from home in February. We took the opportunity
then to plan and prepare for what was to come. The Board’s
priorities since that time have been to:
• ensure the safety and wellbeing of our people and their
families;
• to work through pandemic issues with our 3,000+
tenant-customers;
• to minimise and mitigate the commercial and financial
impact of the pandemic on the business; and
• to safeguard the interests of our securityholders and
investors.
Cromwell continued to operate smoothly despite the whole
business moving to working from home in March, and while
some of our people have since begun to work from the
office once again, others have yet to return. Irrespective
of where they are, they have all demonstrated a strong
collective commitment to our mission and values. I am
proud that the business has been able to stand beside them
throughout the last few months.
Strategic review
Our Strategic Review, the results of which were presented
to the Cromwell Board in June 2020, has validated our
belief that this is a resilient business that will continue
to perform as markets recover. The Board is confident
that Cromwell’s business model is robust and resilient,
and that the strategy is appropriate to deliver returns for
securityholders within the Board’s risk tolerance.
FY20 was notable, not just for the impact COVID-19
has had on all of our lives, but also in terms of testing
the resilience of the Cromwell business and its people,
and their continued ability to deliver for Cromwell’s
securityholders. CEO Paul Weightman details the FY20
results in his report, but on behalf of the Cromwell Board,
I would like to extend my thanks to the whole Cromwell
family for their efforts in delivering excellent results in a
difficult and challenging operating environment.
Board refresh
The year also saw a successful refresh of Cromwell’s
Board. The Annual General Meeting in November 2019
saw the retirement of Non-executive Director, Ms Michelle
McKellar, after 12 years of exemplary service and Chair, Mr
Geoffrey H Levy, AO, also retired on 26 February 2020 after
successfully onboarding our two new independent Non-
executive Directors, Ms Lisa Scenna and Ms Tanya Cox.
Michelle joined the Board in 2007 and Geoff joined a year
later in 2008. Both were active contributors to the Board
and its Committees in their time at Cromwell, highly
valued for their advice and wise counsel through a period
which has seen significant growth and value creation for
Cromwell securityholders. I had the honour of succeeding
Geoff as Chair and have been ably assisted by Mr Andrew
Fay in his role as Deputy Chair, as well as Lisa, Tanya
and our other independent no-executive director Ms Jane
Tongs, over the last few months.
6
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT I would like to emphasise the last part of the statement.
We have 14,000 securityholders, the majority of whom
are retired and we know that the consistency, and
reliability, of Cromwell’s distributions is something they
value. The entreaties that we should change strategy,
sell core portfolio assets, transition to a more of a funds
management model would introduce a higher level of risk
to the business. We do not think this is in the best interests
of all securityholders, nor in anyway appropriate in the
middle of a pandemic.
Cromwell Property Group Foundation
Finally, it is also pleasing to see the good work of the
Cromwell Property Group Foundation continue. I believe
it is important to be mindful of others who may be doing it
tough, and to look for ways that we can help and contribute
back into the communities in which we all live and work.
The Foundation has now donated more than $1 million to
worthy causes relevant to the mature-aged community in
Australia, and alongside the other local contributions made
by our people in the other countries in which we operate, I
am proud that we are able to make a lasting difference in
the lives of those who may be less fortunate than ourselves.
The details of the Foundations 2020 beneficiaries are shown
on page 8.
On behalf of the Cromwell Board I would like to thank
securityholders for their ongoing support.
Leon Blitz
Chair
Cromwell Property Group
7
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Cromwell Property Group Foundation
2020 beneficiaries
On 18 August 2020, the Cromwell Property Group
Foundation (Foundation) announced Active
Rehabilitation, Bolton Clarke, Griffith University,
MercyCare and the Lady Musgrave Trust as
beneficiaries of its FY20 fundraising activities.
A total of $166,400 was donated in FY20, which takes the
total donations of the Foundation to more than $1 million
since its 2014 inception.
“The Foundation surpassing $1 million in donations is a
significant milestone,” stated Foundation President and
Cromwell CEO, Paul Weightman.
“With a focus on charities and causes that fly under the
radar, the Foundation has supported tangible change
to the mature-age community. This has continued in
2020, with Active Rehabilitation, Bolton Clarke, Griffith
University, MercyCare and The Lady Musgrave Trust all
working towards important positive change to the lives of
many.”
Active Rehabilitation Research Foundation - $33,900
The Active Rehabilitation Research Foundation has
been provided with $33,900 in an attempt to identify
and prevent people at risk of falling, before they feel
dizzy and fall. Patients with deficits of the vestibular
system (within the inner ear) often suffer from the
symptoms of dizziness, imbalance and vertigo. The most
common effect of these deficits is a ‘fall’, which can have
catastrophic consequences, particularly for the elderly.
Active Rehabilitation’s initial research will
immediately provide evidence to influence screening
recommendations in all those over 60 years of age
admitted to a hospital and provide essential information
to plan further research to evaluate the best way to
manage patients with deficits of the vestibular system.
Active Rehabilitation Research Foundation CEO, John
Fitzgerald stated, “We are delighted to have been chosen
as a beneficiary for the 2020 grants from the Cromwell
Property Group Foundation.”
“The vestibular research we will undertake in the
mature-age patients of our community is very important.
It is a wonderful opportunity for smaller, efficient non-
university and non-government research foundations
like ours who traditionally struggle to attract research
funding.”
Bolton Clarke - $17,500
Bolton Clarke offers nursing services, resources
and real community support to help people age well,
delivering more than one million days of residential aged
care and more than four million home visits every year.
Bolton Clarke has been provided with $17,500 to fund the
Be Healthy & Active programme. Targeted at Australians
aged 60 and over, the programme provides practical and
accessible education in the community to improve health
outcomes, reduce avoidable disease and suffering, and
therefore reduce the demand on health services.
The Be Healthy & Active programme currently consists
of ten free health education sessions on topics ranging
from falls prevention to nutrition, bladder health and
dementia. Since it began in late 2015, more than 700
health sessions have been delivered across the country
to more than 20,000 people.
The programme is supported by five free online
information videos and downloadable resources.
Sessions can be delivered online or in person and in
multiple languages to provide broad community access
to important health information.
“The Cromwell Property Group Foundation funding will
allow us to reach more older people across Australia
with accessible health information to support their
wellbeing and help them stay connected and informed,”
said National Be Healthy & Active Manager, Kerry
Rendell.
MercyCare and Griffith University - $75,000
MercyCare and Griffith University have been provided
with $75,000 in FY20, with another $75,000 planned for
FY21 for their Intergenerational Project.
MercyCare is a leading provider of Aged Care and Early
Learning, plus a host of services for those experiencing
disadvantage, with the vision for individuals and
8
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT communities to thrive. To make this a reality means
grappling with these problems of social isolation and
loneliness, cognitive decline and cognitive delay, and all
the implications facing the most senior and junior people
in care.
The approach, which has had success overseas, is now
being led by Griffith University in Australia, and brings
together individuals at either end of the age spectrum to
forge relationships based around mutual activities and
strengths.
Anneke Fitzgerald, PhD, a Professor of Health
Management at Griffith University stated, “COVID-19 has
led us to think about the use of technology and the idea
of virtual intergenerational practice. With the Cromwell
Property Group Foundation's help, we will be able to
develop this further, so that while confined, generations
are not disconnected. We will use video-conferencing
technology for connecting older people and school
children.”
The Lady Musgrave Trust - $40,000
Established in 1885, The Lady Musgrave Trust (the
Trust) is one of Queensland’s oldest charities, which
provides life-saving services to vulnerable women and
their children when they are facing critical homeless
situations as a result of domestic violence, family
breakdown and poverty.
The Foundation has added to its $40,000 FY19 donation
with a further $40,000 in 2020. This year’s donation
contributed to the Trust’s Annual Forum held on 5
August 2020 and the production and distribution of ‘The
Handy Guide for Older Women’ launched at the event.
The Lady Musgrave Trust’s CEO, Karen Lyon Reid, said
“The ABS Census Data identified a 31% increase in
older women’s homelessness over five years, which was
alarming. We knew we needed to take action to address
this critical issue.”
“The Cromwell Property Group Foundation strongly
believes in supporting community - it is their values that
will help us to make significant progress in our charity
work and particularly this project. We are grateful to
Cromwell for their support and collaboration on this
project.”
About the Cromwell Property Group Foundation
The Cromwell Property Group Foundation was
established in 2014 to support charities or
organisations that provide support to, or conduct
research into, causes relevant to the mature aged
community. To date, the Foundation has donated
over $1 million to numerous causes, resulting in
significant change to countless lives.
Donations to the Cromwell Property Group
Foundation of more than $2 are tax deductible. To
donate, request a grant or seek more information,
visit www.cromwellfoundation.org.au
FY20 Beneficiaries
$33,900
$17,500
$75,000
$40,000
$166,400
was donated in FY20
9
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT CEO’S
REPORT
of a once in a lifetime pandemic. This is a great result and
one of which we are very proud.
The 2020 calendar year will continue to be a difficult one.
COVID-19 is having, and will continue to have, a significant
impact on economies, real estate markets, tenant-
customers and friends, families and loved ones around the
world. It will continue to impact us for months to come.
Cromwell’s strategy seeks to balance risk and return. It
is based on an underlying principle of resilience and a
commitment to invest in IT, systems and people to ensure
that we can manage through unforeseen events and
market dislocations. These initiatives have enabled us
to manage the business remotely, work from home and
operate smoothly throughout the last few months.
Given our strong tenant skew towards government and
larger ASX-listed entities, rental collection was relatively
unimpacted by COVID-19. In our Australian portfolio,
the Government’s Code of Conduct applied to 93 SMEs
representing less than 10% of gross passing income and a
total of $9.6 million was waived or deferred between March
and 30 June 2020, representing less than 4% of total rent.
Our ‘Invest to Manage’ strategy also continues to deliver
good results and provide the business with future growth
opportunities. These opportunities include Victoria
Avenue, Chatswood, Cromwell Polish Retail Fund (CPRF)
and a number of other emerging funds management
opportunities within Europe.
On Thursday 27 August, Cromwell Property Group reported
full-year (FY20) statutory profit of $181.1 million, up 13.3%
on the prior year (FY19 $159.9 million).
Operating profit, considered by the Directors to best reflect
underlying earnings, was $221.2 million, up 27.0% on
last years’ result. This was equivalent to 8.50 cents per
security, beating our original FY20 earnings guidance of
8.30 cents per security by 0.20 cents per security.
Distributions of 7.50 cents per security were up 3.4%,
meeting our original guidance despite being in the middle
10
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Strategy Summary
Direct
Property
Investment
Indirect
Property
Investment
Funds
and Asset
Management
Core
Core+
Defensive government base, long WALE, strong covenants, low capex and structured growth
Generate leasing upside and take advantage of short term market trends
Active/For sale
Drive outperformance from repositioning and asset enhancement or alternatively
capital recycling
CEREIT
CEREIT provides stable and growing distributions, access to Asian capital
LDK
CPRF
Significant opportunity to scale-up LDK JV and establish a sizeable Seniors Living business
Temporarily warehoused as part of ‘Invest to Manage’ strategy. Targeting eventual 20
to 30% stake
Platform repositioning complete and ready to deploy operational leverage
Europe
New opportunities to scale-up platform – European Logistics and proposed Data
Centres Funds
Deliver continued growth in quality and resilience of CEREIT portfolio
A/NZ
Consistent long term recurring revenue within A/NZ FM and high margins from
retail syndicates
Capital Management
‘Through the cycle’ target gearing range of 30% to 40% with leverage capacity to be
used on a short term basis to execute the ‘Invest to Manage’ strategy
FY20 Group Financial Highlights
Earnings and Distributions
Platform
Financial Position
↑
Underlying operating profit
$221 million
up 27.0% (FY19 $174 million)
Direct Property Investment
$3.0 billion value
5.6% WACR
6.2 year WALE
$1.1bn development pipeline
Underlying operating profit
per security
8.50 cents
3.5% above FY19 (8.21 cps)
↑
Indirect Property Investment
CEREIT
€394 million
book value
(30.7% interest)
CPRE(1)
€452 million
independent
external valuation
↑
Distributions per security
7.50 cents
3.4% above FY19 (7.25 cps)
Funds and asset management
$8.2 billion total AUM
$5.8 billion AUM in Europe
(78% recurring)
$2.4 billion AUM in A/NZ
(1)
(2)
Excludes equity accounted interest in Ursynow.
Cash and cash equivalents plus undrawn commitments.
NTA per unit
$0.99
(FY19 $0.97)
Debt tenor
3.2 years
Liquidity(2)
$667
million
Gearing
41.6%
Interest rate
hedging
66% /
2.6 years
Next debt
maturity
March
2022
11
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Capital Management Update
During the year, as COVID-19 hit, and to manage costs, we
reduced all discretionary expenditure and stopped non-
essential hires and travel. Our careful management of
costs will continue into FY21.
Our strategy states that gearing may rise above its stated
target range of 30% to 40% on a short-term basis to
accommodate our ‘Invest to Manage’ opportunities.
Direct Property Segment Update
In our direct property investment segment profit was
$172.2 million, 26.5% higher than the previous year driven
by development profit at Northpoint and strong like-for-like
Net Operating Income (NOI) growth above the rolling 3.0%
target.
The direct property portfolio is valued at $3.0 billion and is
split into three components:
Gearing is currently 1.6 percentage points above the
target range, in line with strategy, as we are currently
warehousing CPRF. We will deleverage over time as the
fund is sold down and I should point out that the sell-
down of the CPRF, would, in its own right, see gearing
comfortably reduce well into the lower end of the target
range.
Overall, our cost of debt remains at historic lows, we
have no material upcoming debt expiries, ample liquidity
and strong cashflows underpinned by high credit quality
government tenants with substantial headroom to
covenants.
We are in an extremely strong position.
Group Gearing (2009 to 2020)
55
50
45
40
35
30
25
Target Gearing Range
CMW Gearing
• The Core portfolio comprises ten assets representing
78% of the portfolio by value and has a WALE of 7.5
years. It has occupancy of 99.2% and has generated NOI
growth of 3.6%;
• The Core+ portfolio comprises six assets or 20% of the
portfolio by value, has 96.4% occupancy, a WALE of 3.0
years and NOI growth of 5.8%; and
• The Active/Held for Sale portfolio consists of five assets
(2% portfolio) to be sold or repositioned.
During the year, the weighted average cap rate improved
to 5.57% with a fair value increase in investment property
of $65.2 million net of property improvements, lease costs
and incentives, due in part to market cap rate compression
evident from the strong competition in the market for long
WALE government backed leases.
The Core and Core+ portfolios continue to generate
strong NOI growth well above our rolling target of 3.0%
and we have strong line of sight to a $1.1 billion pipeline
of development work including the opportunity with
BlackRock at 475 Victoria Avenue, Chatswood and the DA
lodged for a new 18,000 sqm PCA A-grade office building at
19 National Circuit in Canberra.
12
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Direct Property Portfolio Snapshot
Key Core/Core+ Portfolio Metrics(1)
e
r
o
C
+
e
r
o
C
l
a
t
o
T
/
e
v
i
t
c
A
e
l
a
s
r
o
F
Properties
10
Book value
$2.35 billion
WACR
5.34%
WALE
7.5 years
Occupancy
99.2%
NOI growth
3.6%
Properties
6
Book value
$0.60 billion
WACR
6.49%
WALE
3.0 years
Occupancy
96.4%
NOI growth
5.8%
Properties
16
Book value
$2.95 billion
WACR
5.57%
WALE
6.4 years
Occupancy
98.4%
NOI growth
4.1%
Properties
5
Book value
$0.06 billion
WACR
7.25%
WALE
0.3 years
Occupancy
38.0%
NOI growth
(64.8%)%
(1)
NOI growth calculated on a like-for-like basis. All other metrics as at 30 June 2020.
Artist Impression: 19 National Circuit Canberra
13
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
stopped as the Polish government announced the closure
of all non-essential stores in response to COVID-19. Most
tenant-customers were able to reopen in May with footfall
returning to close to 2019 levels in June.
The Polish law stipulates that tenants must serve notice
to renegotiate their lease within three months of re-
opening. If they fail to do so, then rent during the mandated
closure period becomes payable and they lose the right to
renegotiate.
I should point out that unlike in Australia, there is no waiver
or abatement of rent. Rent remains payable, the lease is
simply reprofiled or extended. This process, however, does
take time and so far 111 tenant-customers have agreed
lease variations with another 162 still to go.
For the June quarter, overall cash collection for the
portfolio was 64% and it is expected that further amounts
will be collected once negotiations conclude with each
tenant-customer. The total FY20 operating profit impact of
rent not charged during the lockdown period was
€2.6 million.
We will recommence the sell-down of CPRF once these
negotiations complete and the post COVID-19 landscape
becomes clearer. In the meantime, returns from the Fund
are accretive to earnings and we are happy to hold these
resilient hypermarket, grocery and DIY anchored assets on
our balance sheet and collect the rents.
At LDK, our 50% Seniors Living joint venture, 210
apartments were successfully completed at Greenway
Views at the end of April and 77 apartments have since
been sold. We have a high level of conviction in the Seniors
Living thematic and the LDK model and we are identifying
further village sites to add scale to the joint venture.
Indirect Property Investment Segment
In the indirect property segment, operating profit was
$55.9 million, up 23.1% from $45.4 million in the prior
year. The increase was mainly driven by CPRF, while the
Cromwell European REIT (or CEREIT) was the largest
contributor with first half 2020 Net Property Income of
€57.7 million, up 6.6% with distributions of 1.74 euro cents
per unit.
Our 30.7% stake in CEREIT is now worth over $645 million.
This is significant securityholder value creation from a
standing start in 2017.
CEREIT adopts Cromwell’s high governance and compliance
standards and its unwavering focus on unitholders’ best
interests was reflected in it being ranked 7th in the listed
real estate investment trusts and business trusts section
in the Singapore Governance and Transparency Index 2020.
This is a great result.
In October 2019, we acquired all third-party investor
interests in CPRF and began the process to restructure the
Fund to what’s called an authorised investment fund, so
that it can be offered to investors. In March, this process
CEREIT
Book value
€394
million
AUM
€2.1
billion
WACR
6.4%
Key Statistics
Sector diversification
Geographic diversification
WALE
4.6
years
Occupancy
94.8%
Properties
95(1)
6%
63%
31%
4%6%
8%
12%
29%
19%
22%
Light Industrial/
Logistics
Office
Others(2)
The Netherlands
Poland
Finland
Italy
France
Germany
Denmark
Includes Sangerhausen property acquired after 30 June 2020.
Others include three government-let campuses, one leisure/retail property and one hotel in Italy.
(1)
(2)
14
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT CPRF Properties
15
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT European FUM by Region (€bn)
Evolution of European FUM
€0.2
€1.0
€0.4
€0.6
€0.2
€0.8
€0.3
Italy
UK
Benelux
Nordics
CEE
Germany
France
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-
3.4
3.9
3.8
3.5
78%
36%
49%
0%
Jun-17
Jun-18
Jun-19
Jun-20
European FUM ($B)
% recurring FUM
8.0
75%
Medium term
target
Funds And Asset Management
Segment
In the funds and asset management segment profit was
$40.8 million, up 43.2% from $28.5 million. Total external
funds under management, or FUM, was $8.2 billion, split
into $2.2 billion of retail and $6.0 billion of wholesale
FUM, the latter reducing post the $600 million sale of
Northpoint Tower.
In Europe, our local teams spent the last few months
working with 2,200 tenant-customers on COVID-19
responses and negotiating support packages for
approximately 780 tenant customers in ten different
countries.
The quality of the FUM in the platform also continues to
improve with 78% of total FUM representing recurring
permanent or long-dated capital. Despite current
challenges with COVID-19, Cromwell has a number of
new growth opportunities to continue to build towards its
medium-term target of €8 billion.
In the retail investor segment, the withdrawal window for
the Cromwell Direct Property Fund closed on 31 July 2020.
Investors representing 90.1% of issued capital elected
to continue their investment, a testament to DPF’s track
record of delivering regular, reliable monthly income.
Outlook
The next twelve months will continue to be impacted by
the largest ongoing economic and health crisis of this
generation. Most global economies are in recession with
the last quarter of calendar 2020 possibly the first quarter
of growth we will see anywhere since COVID-19 emerged.
Challenges remain ahead. There is no vaccine, international
travel is not feasible, further waves are possible and there is
no doubt that all major economies are suffering. Cromwell
has a strong balance sheet with ample liquidity and 45% of
gross passing income sourced from government entities. Our
cashflows are more than sufficient to comfortably service
debt. We are in an extremely strong position.
Going forward operating profit will be hard to forecast
accurately, in large part because of the unpredictability of
transactional revenues, but we have enough confidence in the
resilience of our forward operating earnings and cash flows
to maintain guidance for distributions at the current level.
FY21 Distribution guidance of 7.50 cents per security
represents a distributions per security yield of 8.20%, based
on a closing price of 91.5 cents per security on
26 August 2020.
Guidance remains subject to there being no material adverse
change in market conditions, other unforeseen events or
change in control or change in strategy.
I would like to thank all of Cromwell’s employees who have
worked tirelessly to execute our strategy and to my fellow
Directors for their support and counsel during the year.
Yours sincerely
Paul Weightman
CEO
Cromwell Property Group
16
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Blaak 555, Rotterdam
The Netherlands
17
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT CONTENTS
20
Director's Report
44
Remuneration
Report
68
Auditor's Independence
Declaration
69
Financial
Statements
70 Consolidated Statements of Profit
or Loss
71 Consolidated Statements of
Other Comprehensive Income
72 Consolidated Balance Sheets
73 Consolidated Statements of Changes
in Equity
75 Consolidated Statements of
Cash Flows
76
Notes to the Financial
Statements
142
Directors Declaration
143
Independent Auditor's Report
147
Corporate Governance
Statement
165
Securityholder
Information
DIRECTORY
Board of Directors:
Leon Blitz
Andrew Fay
Tanya Cox
Lisa Scenna
Jane Tongs
Paul Weightman
Company Secretary:
Lucy Laakso
Securities Registry:
Link Market Services Limited
Level 21, 10 Eagle Street
Brisbane QLD 4000
Registered Office:
Level 19, 200 Mary Street
Brisbane QLD 4000
Tel: +61 7 3225 7777
Fax: +61 7 3225 7788
Web: www.cromwellpropertygroup.com
Listing:
Cromwell Property Group
is listed on the
Australian Securities Exchange
(ASX code:CMW)
Auditor:
Deloitte Touche Tohmatsu
Level 23, Riverside Centre
123 Eagle Street
Brisbane QLD 4000
All ASX and media releases as well as company news can be found on our webpage www.cromwellpropertygroup.com
18
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
FINANCIALS
Cromwell Property Group
Annual Financial Report
30 June 2020
Consisting of the combined consolidated Financial Reports of
Cromwell Corporation Limited (ABN 44 001 056 980) and
Cromwell Diversified Property Trust (ARSN 102 982 598)
Cromwell Corporation Limited
ABN 44 001 056 980
Level 19, 200 Mary Street
Brisbane QLD 4000
Cromwell Diversified Property Trust
ARSN 102 982 598
Responsible entity:
Cromwell Property Securities Limited
ABN 11 079 147 809 AFSL 238052
Level 19, 200 Mary Street
Brisbane QLD 4000
19
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT DIRECTORS’ REPORT
The Directors of Cromwell Corporation Limited and Cromwell Property Securities Limited as responsible entity for the
Cromwell Diversified Property Trust (collectively referred to as “the Directors”) present their report together with the
consolidated financial statements for the year ended 30 June 2020 for both:
• the Cromwell Property Group (“Cromwell”) consisting of Cromwell Corporation Limited (“the Company”) and its
controlled entities and the Cromwell Diversified Property Trust (“the CDPT”) and its controlled entities; and
• the CDPT and its controlled entities (“the Trust”).
The shares of the Company and units of the CDPT are combined and issued as stapled securities in Cromwell. The shares
of the Company and units of CDPT cannot be traded separately and can only be traded as stapled securities.
Principal activities
The principal activities of Cromwell during the financial year consisted of property investment (both direct and indirect),
funds management and asset and property management. The Trust’s principal activity during the financial year was
property investment (both direct and indirect). There were no significant changes in the nature of Cromwell’s or the
Trust’s principal activities during the financial year.
Strategy
Cromwell has adopted an “Invest to Manage” strategy to drive the medium-term growth of distributions and
securityholder value. The Invest to Manage strategy prioritises investments where returns can be enhanced. The strategy
uses existing balance sheet liquidity and asset recycling to fund a range of initiatives that build enterprise value, adding
to medium-term earnings, generating a higher total shareholder return. Cromwell is executing the strategy by deploying
capital to its three business segments:
• Direct investment portfolio - growing our secure cash flow generating property portfolio:
• Maintain an allocation in our direct portfolio to Core assets that provide a strong, secure and resilient cash
flow, long WALE, strong covenants and low capex requirements which should deliver year on year growth in net
operating property income of 3%;
• Maintain an allocation in our direct portfolio to Core + assets from which we can generate value and take
advantage of short term market trends;
• Maintain an allocation in our direct portfolio to Active assets that give us the opportunity to generate
outperformance from repositioning and asset enhancement.
• Indirect investments portfolio - harnessing our unique integrated fund and asset management platform to grow
revenue from the funds we manage:
• Make indirect investments, including co-investments, with selected capital partners in listed and unlisted funds
that we manage that exceed our benchmark risk adjusted returns, and in doing so generate transactional and
recurring returns and fund and asset management revenues.
• Funds and asset management platform - generating additional returns and increased asset values from selective asset
enhancement initiatives:
• Generate long term recurring revenue from our retail funds management platform that offers quality products to
our retail investors that are based on a disciplined approach to asset selection;
• Invest in our fund and asset management platform to grow enterprise value and to be a partner of choice for
global capital providers.
Impact of COVID-19 upon operations
COVID-19, a respiratory illness, was declared a world-wide pandemic by the World Health Organisation in March 2020.
Immediately following the global outbreak of COVID-19, Cromwell enacted its Business Continuity Plan (BCP) and
transitioned most of its international workforce to remote work arrangements. Many of Cromwell’s tenants, clients,
suppliers and banking counterparties also enacted similar arrangements. These actions, coupled with Cromwell’s prior
20
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT investment in systems, processes and people has ensured there has been minimal disruption to the operation of any of
Cromwell’s business segments due to COVID-19.
Cromwell’s robust risk management framework continues to be applied across operating segments and management
continues to monitor the impact of COVID-19 on Cromwell’s risk profile. Non-financial risks emerging from global
movement restrictions, and remote working by our staff, counterparties, clients and suppliers, are being identified,
assessed, managed and governed through the timely application of Cromwell’s risk management framework. We are
aware of the emotional and psychological impact on our staff and continue to explore and develop programs to help them
through this period.
Cromwell has considered the impact of COVID-19 and other market volatility in preparing these financial statements.
Whilst the specific areas of judgement noted previously did not change, the impact of COVID-19 has resulted in the wider
application of judgement within those identified areas. Given the dynamic and evolving nature of the COVID-19 pandemic,
limited recent experience of the economic and financial impacts of such a pandemic, and the short duration between
the declaration of the pandemic and the preparation of the annual report, changes to the estimates and outcomes that
have been applied in the measurement of Cromwell’s assets and liabilities may arise in the future. It should be noted
that against a background of relative uncertainty surrounding how COVID-19 and its social and economic consequences
will unfold, these estimates represent the Directors’ views as they existed at 30 June 2020 and through to the date of this
report.
Key items and related disclosures that have been impacted by COVID-19 were as follows:
• Rental income and recoverable outgoings – notwithstanding Cromwell’s and Trust’s tenant population being heavily
skewed towards government, ASX-listed entities and other robust tenants, given the recent rental market volatility,
management engaged with all tenants in Australia and Poland in order to achieve the best possible commercial
outcomes for all parties. This process resulted in tenants (204) being provided with appropriate rent relief in the form
of rental waivers ($6.2 million or 2% of total rental income) and deferred payment plans (resulting in the deferred
collection of $7.7 million for periods ranging from 3 months to 24 months), coupled with lease extensions (amortisation
cost $0.8 million to 30 June 2020).
• Investment properties - Cromwell reviewed the appropriateness of inputs into investment property valuations. This
process included a comprehensive review and update of relevant cash flow information taking into account the impacts
of COVID-19. Other than those properties classified as being held for sale, all investment properties were externally
valued at 30 June 2020.
• Interest in associates and joint ventures and investments in subsidiaries - Cromwell’s investments in associates and
joint ventures were assessed for indicators of impairment. Where indicators of impairment were identified Cromwell
tested the carrying amount by comparing the investment’s recoverable amount with its carrying value. No investments
were found to be impaired.
• Receivable, loan assets, and amounts due from subsidiaries - in response to COVID-19 management has undertaken
a review of its relevant tenant receivable and loan asset portfolios, loans to subsidiaries and other financial asset
exposures. This process involved a thorough examination of all receivable balances to assess the extent of expected
credit losses that should be recognised.
Economic uncertainties currently prevailing around the world make it challenging to forecast the future, but Cromwell
remains positive given its robust asset portfolio, with a large exposure to government tenants, ASX listed and non-SME
tenants, and existing funds management business and growing property management platform.
Result for the year – execution of strategy positions Cromwell to deliver strong,
resilient returns
Key outcomes of Cromwell’s application of the “Invest to manage” strategy during the year ended 30 June 2020 are:
• Statutory profit up 13.2% to $181.1 million compared with prior year;
• Operating profit up 27.0% to $221.2 million compared with prior year;
• Investment property fair values increase $17.5 million during the year;
• Operating profit impact of relief granted to tenants of $6.2 million in the year (statutory profit impact $7.0 million);
• Gearing level of 42% currently sits outside target range;
• Distributions unimpacted by COVID-19;
• Gross assets of approximately $5.0 billion at year end;
• Assets under management $11.5 billion at year end.
21
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Key financial metrics
Financial performance
Total assets under management ($B)
Total cost of relief granted to tenants for the year ($M)
Total revenue and other income for the year ($M)
EBITDA ($M) (1)
Statutory profit for the year ($M)
Statutory profit per stapled security for the year (basic) (cents)
Operating profit for the year ($M)
Operating profit per stapled security for the year (cents)
Dividends / distributions for the year ($M)
Dividends / distributions per stapled security for the year (cents)
Financial position
Total assets ($M)
Net assets ($M)
Net tangible assets ($M)(2)
Net debt ($M)(3)
Gearing (%)(4)
Stapled securities issued (M)
NTA per stapled security
Cromwell
2020
2019
11.5
7.0
494.7
327.3
181.1
6.96
221.2
8.50
195.5
7.50
4,990.5
2,589.0
2,573.4
1,975.9
42%
2,612.9
$0.99
11.9
-
457.3
257.6
159.9
7.53
174.2
8.21
157.5
7.25
3,695.7
2,183.0
2,176.2
1,254.8
35%
2,236.6
$0.97
(1) Earnings before interest, tax, depreciation and amortisation.
(2) Net assets less deferred tax assets, intangible assets and deferred tax liabilities.
(3) Borrowings less cash and cash equivalents and restricted cash.
(4) Net debt divided by total tangible assets less cash and cash equivalents.
Financial performance
Cromwell recorded a statutory profit of $181.1 million for the year ended 30 June 2020 (2019: $159.9 million). The Trust
recorded a statutory profit of $153.8 million for the year ended 30 June 2020 (2019: $163.4 million).
Statutory profit includes a number of items which are non-cash in nature or occur infrequently and/or relate to realised or
unrealised changes in the values of assets and liabilities and in the opinion of the Directors, should be adjusted in order to
allow securityholders to gain a better understanding of Cromwell’s operating profit. Operating profit is considered by the
Directors to reflect the underlying earnings of Cromwell. It is a key metric taken into account in determining distributions
but is a measure which is not calculated in accordance with International Financial Reporting Standards (“IFRS”) and has
not been reviewed by Cromwell’s auditor. There has been no significant change to the methodology of the calculation
of operating profit since Cromwell stapled in 2007 other than the inclusion of items, such as foreign currency, which are
associated with the ongoing growth of the business.
The most significant items that impacted statutory profit of Cromwell for the year and which are not considered a
component of underlying operating profit were:
• An increase in the fair value of investment properties of $17.5 million (2019: increase of $86.4 million);
• Other transaction costs (including property acquisition costs of $16.2 million in relation to the acquisition of 400 George
Street, QLD) incurred in the course of business of $23.4 million (2019: $2.9 million);
• Lease incentive and lease cost amortisation of $29.2 million (2019: $20.8 million); and
• Net non-operating losses in relation to equity accounted investments of $14.8 million (2019: gain of $1.6 million).
Cromwell recorded an operating profit of $221.2 million for the year ended 30 June 2020, a 27% increase over the
operating profit of $172.4 million for the previous corresponding year.
22
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT A reconciliation of operating profit, as assessed by the Directors, to statutory profit is as follows:
Cromwell
Operating profit
Reconciliation to profit for the year
Gain on sale of investment properties
Loss on disposal of other assets
Other transaction costs
Operating lease costs
Fair value net gains / (losses):
Investment properties
Derivative financial instruments
Investments at fair value through profit or loss
Non-cash property investment income / (expense):
Straight-line lease income
Lease incentive amortisation
Lease cost amortisation
Other non-cash expenses or non-recurring items:
Amortisation of loan transaction costs
Finance costs attributable to discounted lease incentives
Net exchange loss on foreign currency borrowings
Costs in relation to asset classified as held for sale
Decrease in recoverable amounts
Amortisation and depreciation(1)
Relating to equity accounted investments(2)
Net foreign exchange losses
Restructure costs
Net tax losses utilised(3)
Profit for the year
2020
$M
221.2
3.3
(3.6)
(23.4)
3.1
17.5
18.4
(4.3)
9.7
(25.7)
(3.5)
(10.0)
(0.8)
(1.8)
-
(4.3)
(7.4)
(14.8)
(3.0)
-
10.5
181.1
2019
$M
174.2
0.7
(0.3)
(2.9)
-
86.4
(10.5)
(9.2)
9.3
(18.8)
(2.0)
(7.8)
-
(12.7)
(35.3)
(0.4)
(2.4)
1.6
(3.0)
0.3
(7.3)
159.9
(1) Comprises depreciation of plant and equipment and right of use assets and amortisation of intangible assets.
(2) Comprises fair value adjustments included in share of profit of equity accounted entities.
(3) Comprises tax expense attributable to changes in deferred tax assets recognised as a result of carried forward tax losses.
OPERATING PROFIT PER SECURITY
Operating profit on a per security basis is considered by the Directors to be the most important measure of underlying
financial performance for Cromwell as it reflects the underlying earnings of Cromwell as well as the impact of changes in
the number of securities on issue. Operating profit and distributions on a per security basis are shown below.
Statutory profit per stapled security
Operating profit per stapled security
Distributions per stapled security
2020
Cents
6.96
8.50
7.50
2019
Cents
7.53
8.21
7.25
23
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Operating profit per security for the year was 8.50 cents (2019: 8.21 cents). This represents an increase of approximately
4% over the prior year and above guidance. The change in operating profit per security has arisen as a result of a number
of key factors, mainly:
• Increased earnings generated from the accretive impact of the Australian and Polish investment properties acquired in
addition to development fees earned;
• Increased earnings generated by the European platform from performance fees;
• Offset by an increase in operating tax expense.
DIVIDENDS / DISTRIBUTIONS
The table below shows details of Cromwell’s and the Trust’s quarterly dividends and distributions paid during the year:
Dividend
per security
Distribution
per security
Total per
security
Total
$M
Franked
amount per
security Record date
Payment
date
2020
Interim distribution
Interim distribution
Interim distribution
Final distribution
2019
Interim distribution
Interim distribution
Interim distribution
Final distribution
-
-
-
-
-
-
-
-
1.8750¢
1.8750¢
1.8750¢
1.8750¢
7.5000¢
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
1.8750¢
1.8750¢
1.8750¢
1.8750¢
7.5000¢
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
48.7
48.8
49.0
49.0
195.5
36.1
40.4(1)
40.5
40.5
157.5
30-Sep-19
22-Nov-19
31-Dec-19
21-Feb-20
31-Mar-20
22-May-20
30-Jun-20
21-Aug-20
28-Sep-18
23-Nov-18
31-Dec-18
22-Feb-19
29-Mar-19
24-May-19
28-Jun-19
23-Aug-19
-
-
-
-
-
-
-
-
-
-
(1) Includes an amount of $2,667,000 for both Cromwell and the Trust in excess of the pro-rata entitlement for the quarterly distribution paid to those
securityholders who acquired securities in December 2018 as part of the non-renounceable entitlement offer.
ANALYSIS OF SEGMENT PERFORMANCE
The contribution to operating profit of each of the 3 segments of Cromwell and the reconciliation to total operating profit is
set out below:
Direct property investment (i)
Indirect property investment (ii)
Funds and asset management (iii)
Total segment results
Finance income
Management and administration costs
Income tax expense
Operating profit
2020
%
64.0%
20.8%
15.2%
100.0%
2019
%
64.8%
21.6%
13.6%
100.0%
2020
$M
172.2
55.9
40.8
268.9
5.8
(39.2)
(14.3)
221.2
2019
$M
136.1
45.4
28.5
210.0
4.8
(39.6)
(1.0)
174.2
24
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (i) Direct property investment
Summary information at 30 June 2020 about the direct property investment portfolio is included below:
Portfolio
(%)
Carrying
amount
($M)
Like for
Like NOI
Growth
(%)
WALE
(years)
Occupancy
(%)
Capitalisation
rate
(%)
Discount
rate
(%)
Fair value
adjustment
($M)
78%
20%
2%
2,347.4
596.0
3.6%
5.6%
7.5 yrs
3.0 yrs
62.3
(49.0%)
0.3 yrs
100%
3,005.7
11.3%
6.2 yrs
69%
28%
3%
1,742.4
697.7
80.8
3.3%
5.5%
121.2%
100%
2,520.9
5.5%
9.4 yrs
3.1 yrs
0.6 yrs
6.9 yrs
99.2%
96.4%
38.0%
90.9%
99.2%
95.4%
52.8%
91.7%
5.4%
6.5%
7.3%
5.6%
5.5%
6.0%
6.0%
5.8%
6.4%
6.7%
7.8%
6.5%
6.8%
6.9%
0.7%
6.7%
92.2
14.7
(23.5)
83.4
86.8
32.6
(33.0)
86.4
Portfolio(1)
2020
Core
Core+
Active / held for sale
Total
2019
Core
Core+
Active
Total
(1) Includes 100% owned assets and assets classified as held for sale
Impact of COVID-19
As a component of the governmental response to COVID-19 in Australia, a commercial Code of Conduct was developed
and legislated in each State and Territory requiring landlords to provide rent relief to relevant qualifying tenants. The Code
of Conduct required landlords to provide relief for a period of up to six months to relevant qualifying tenants in the form of
rent waivers and rent payment deferral. These measures were designed to reflect a proportionate sharing of the revenue
loss experienced by tenants as a result of the impacts of COVID-19. Cromwell has also agreed to provide assistance to
some tenants that are not eligible under the Code of Conduct but who have been materially impacted by the COVID-19
pandemic.
Tenant rent collections from the Direct portfolio were relatively unimpacted by the onset of the COVID-19 pandemic.
The tenant population is heavily skewed towards government, ASX-listed and other larger entities that were either not
materially impacted by the pandemic or not eligible for relief. This resulted in only a small amount of rent being waived
($1.9 million) or deferred ($7.7 million) during the latter part of the year.
Further information at 30 June 2020 about the composition of the Direct property investment portfolio and its related
tenant profile are below:
Lease extensions provided
Tenant relief provided
Rental value
of extension
($M)
Amortisation
of incentives
($M)
Rent waived
($M)
Total impact
on Profit &
loss statement
($M)
Rent deferred
($M)
15.5
-
-
15.5
-
-
-
-
0.5
1.4
-
1.9
0.5
1.4
-
1.9
6.9
0.8
-
7.7
Period
(years)
10.3
0.7
-
11.0
Portfolio
Core
Core+
Active / held for sale
Total
25
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The tenant mix in Cromwell’s Australian property portfolio is weighed to Government and ASX-listed tenants which has
proven resilient in the current economic conditions.
Tenant mix
Govt & Govt
agencies
(%)
Transport
(%)
Professional
services
(%)
Technology
(%)
Retail
(%)
53%
17%
-
45%
25%
-
-
18%
11%
47%
3%
20%
6%
21%
-
9%
2%
4%
-
3%
Other
(%)
3%
11%
97%
5%
Portfolio
Core
Core+
Active / held for sale
Total
Tenants most impacted by COVID-19 were Retail and Transport (including Qantas).
Valuations
The same high quality tenant characteristics that led to net property income remaining robust played a significant role
in valuations of the Direct property portfolio remaining relatively unimpacted by the onset of the COVID-19 pandemic and
resilient considering the circumstances. It should be noted valuers indicated that, as a result of the COVID-19 pandemic,
there is material valuation uncertainty as at 30 June 2020 due to there being limited transactional evidence available for
the period since the pandemic began, as well as uncertainty surrounding future market rent levels compared with pre-
pandemic levels.
Valuations for the direct portfolio increased by $65.2 million during the year (2019: $74.8 million), net of property
improvements, leasing incentives and lease costs. This is equivalent to an increase in value of approximately 2.6% or 2.5
cents per stapled security from June 2019 valuations.
Change in valuations, net of property improvements, lease costs and incentives
Non-cash adjustments for straight-lining of rentals and lease amortisation
Increase in fair value of investment properties
2020
$M
65.2
18.2
83.4
2019
$M
74.9
11.5
86.4
Core Portfolio
This component of the portfolio is composed of properties that have a long term WALE with near full occupancy which
have an expectation of low incentive and CAPEX expenditures going forward.
The Core portfolio consists of 10 assets and represents 78% of Cromwell’s total direct portfolio by value. Net fair value
increases of $92.2 million were primarily the result of the value of strong tenant covenants at 2-24 Rawson Place, NSW
and 700 Collins Street, VIC, whilst valuations in respect of the remainder of the portfolio remained robust. Like for like
NOI growth was 3.6% for the year which was above the target growth of 3.0%.
The increase in scale of the portfolio was driven by the acquisition of 400 George Street, QLD for $525.5 million, offset by
the disposal of Farrer Place, NSW.
Core + Portfolio
This component of the portfolio is composed of properties that have a medium term WALE with material leasing upside
opportunities going forward.
The Core + portfolio consists of the same 6 assets as the prior year and represents 20% of Cromwell’s total direct portfolio
by value. Like for like NOI growth was 5.6%.
Net fair value increases of $14.7 million were primarily the result of continued positive leasing outcomes at 200 Mary
Street, QLD and market recognition of the potential at 475 Victoria Avenue, NSW. These were offset by a diminution of
value recorded in respect of TGA Complex, ACT, as the WALE on this building declines.
26
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Active Portfolio
This component of the portfolio is composed of properties that are vacant (or near vacant) and or are actively being
marketed or repositioned. Information in respect of the properties that compose this segment of the portfolio is below:
• Wakefield Street, SA - currently vacant. Subsequent to year end Cromwell and the Trust exchanged contracts to sell
the property. This transaction is due to settle in September 2020.
• 13 Keltie Street, ACT - currently vacant. Immediately prior to year end Cromwell and the Trust exchanged contracts to
sell the property. This transaction is due to settle in October 2020.
• 19 National Circuit, ACT - currently vacant. Cromwell is in the process of finalising development approval to increase
the usable space and gross lettable area of the property.
• Tuggeranong Office Park, ACT – vacant land. Cromwell is in the process of identifying opportunities for the realisation
or use of the property.
(ii) Indirect property investment
CPRF
On 6 November 2019, Cromwell acquired all third-party investor interests in the Cromwell Polish Retail Fund (CPRF).
The CPRF portfolio contains six catchment-dominating shopping centres, plus a significant interest in a seventh, in
Poland. Notwithstanding the onset of COVID-19, Poland is currently experiencing sustained positive trends in desirable
demographic metrics such as consumer disposable income, consumer spending and retail sales. The combined value
of the investment properties acquired at exchange was $938.8 million (€584.9 million) along with an interest in another
property part owned with Unibail-Rodamco-Westfield, which is accounted for as an equity accounted investment.
The portfolio is currently being repositioned into a saleable fund and will be offered to capital partners as soon as current
economic conditions improve.
The portfolio was independently valued as at 30 June 2020 and summary information is included below:
Property
Janki, Warszawa
Korona, Wrocław
Ster, Szczecin
Rondo, Bydgoszcz
Tulipan Łódź
Kometa, Toruń
Total
Portfolio
(%)
Carrying
amount
($M)
WALE
(years)
Occupancy
(%)
Capitalisation
rate
(%)
Fair value
adjustment
($M)
50%
19%
13%
12%
3%
3%
100%
372.3
141.2
94.9
89.8
25.4
23.0
746.6
4.4 yrs
5.2 yrs
3.3 yrs
5.0 yrs
6.1 yrs
6.7 yrs
4.7 yrs
91.2%
99.5%
88.8%
96.9%
100.0%
100.0%
94.8%
5.8%
6.8%
7.3%
7.0%
7.3%
7.3%
6.4%
(34.9)
(14.7)
(10.9)
(3.5)
(1.1)
(0.8)
(65.9)
Impact of COVID-19
As a result of the COVID-19 pandemic the Polish government issued on 13 March 2020 a decree that all retail centres with
a trading area in excess of 2,000 square metres were to be closed, except for essential tenants including supermarkets,
pharmacies and DIY stores. This was known as the “Anti-crisis shield” and included Cromwell’s portfolio. Subsequently,
on 1 April 2020, the Polish government enacted a law temporarily suspending all lease contracts for tenants of retail
centres affected by the mandatory closures. As compensation for landlords, tenants were required to offer a minimum six
months lease extension plus the period of the lock-down. On 18 May 2020 all retail centres were allowed to reopen, except
for tenancies engaged in leisure-related activities such as cinemas and gymnasiums (these were allowed to re-open in
June 2020). The closure affected approximately 63% of the lettable space in Cromwell’s portfolio with the remaining 37%
occupied by tenants allowed to trade during the lock-down. The total financial impact of lost rental and outgoings was
$4.3 million.
In order to support its tenants following the re-opening, Cromwell has also agreed to provide, or is in the process of
providing, rental relief in the form of short-term rent discounts and / or short-term turnover-based rent for the period
since re-opening until early 2021 in return for lease extensions beyond the mandatory lease extension described above.
In principle agreements have been reached with 111 tenants for rental relief representing 40% of the net lettable space of
relevant tenants. Under applicable accounting standards rental relief granted to tenants by mutual agreement are treated
as lease modifications with the financial impact recognised on a straight-line basis over the remaining lease term. The
amortisation of these lease incentives provided to tenants was $0.8 million to year end.
27
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Further information at 30 June 2020 about tenant relief is presented below:
Lease extensions provided
Tenant relief provided
Period
(years)
Rental value
of extension
($M)
Amortisation
of incentives
($M)
Rent waived /
discounted
($M)
Total impact
on Profit &
loss statement
($M)
Rent deferred
($M)
0.9
0.9
1.0
1.1
-
-
3.9
7.5
2.8
1.4
1.3
-
-
13.0
0.4
0.2
0.1
0.1
-
-
0.8
2.2
1.0
0.5
0.5
0.1
-
4.3
2.6
1.2
0.6
0.6
0.1
-
5.1
-
-
-
-
-
-
-
Property
Janki, Warszawa
Korona, Wrocław
Ster, Szczecin
Rondo, Bydgoszcz
Tulipan Łódź
Kometa, Toruń
Total
The tenant mix in the Polish property portfolio is outlined below. Tenants deemed to be essential services by the Polish
Government included grocery stores, pharmacies and medical centres and these have remained open during the current
pandemic. Tenants most impacted by COVID-19 were cinemas, gymnasiums and travel agencies.
Essential
services
(%)
22%
35%
40%
47%
87%
99%
37%
Tenant mix
Fashion
(%)
Food / beauty
(%)
Travel
(%)
55%
30%
26%
17%
-
-
36%
11%
13%
22%
10%
-
-
12%
1%
1%
-
1%
-
-
1%
Fitness /
cinema
(%)
-
10%
-
4%
-
-
3%
Other
(%)
11%
11%
12%
21%
13%
1%
11%
Property
Janki, Warszawa
Korona, Wrocław
Ster, Szczecin
Rondo, Bydgoszcz
Tulipan Łódź
Kometa, Toruń
Total
Valuations
Cromwell’s six 100% owned Polish retail properties warehoused within the Cromwell Polish Retail Fund were
independently valued at 30 June 2020 resulting in a $65.9 million decrease. Valuers noted that, as a result of the COVID-19
pandemic, there is a material valuation uncertainty as at 30 June 2020 with limited transactional evidence available for
the period since the outbreak of COVID-19 and uncertainty whether market rent levels have reduced compared with pre-
Covid levels. To compensate for this uncertainty the valuers assumed an increase in capitalisation rates of approximately
25 basis points across the portfolio while leaving market rent assumptions at pre-COVID levels. Additionally, the valuers
assumed a three months rent-free period since the re-opening after the lockdown for tenants that were forced by the
Polish government to be closed during the COVID-19’s lockdown - in accordance with the Polish government's opening
schedule. Agreements reached with tenants post year-end on rental relief and compensating lease extensions were not
taken into account.
As a result, valuations of properties with hypermarkets occupying a large portion of the net lettable space decreased to a
lesser extent, such as the Rondo, Kometa and Tulipan, decreasing in value between 3.4% and 4.2%, while the other three
properties with a higher portion of other retail tenants being Janki, Korona and Ster, decreased in value compared with
acquisition price by a higher margin between 8.6% and 10.3%.
Ursynòw
As a component of the CPRF transaction, Cromwell and the Trust acquired a 94.1% interest in CH Ursynów sp. z o.o.,
(Ursynów), an entity that owns a retail asset in Poland, for $49.4 million. The remaining 5.9% equity is owned by Unibail-
Rodamco-Westfield B.V. (URW). Owing to the terms of a shareholder agreement between Cromwell and the Trust and
URW the arrangement has been classified as a joint venture. During the period since acquisition (November 2019) to year
end, Cromwell and the Trust recognised operating profit of $3.7 million in respect of this investment.
28
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
The tenant mix in the Ursynów property is outlined below.
Essential
services
(%)
19%
Fashion
(%)
Food / beauty
(%)
14%
8%
Travel
(%)
42%
Fitness /
cinema
(%)
-%
Other
(%)
17%
Ursynów
Tenant mix
CEREIT
Cromwell owned 30.7% (2019: 35.8%) of CEREIT at the end of the year. Cromwell accounts for its holding in CEREIT as an
equity accounted investment. The share of operating profit recorded for the year was $48.7 million (2019: $44.6 million).
The CEREIT’s distribution per unit for the first half of the year was €2.03 cents per unit and on 15 August 2020 a
distribution in respect of the second half of the year was announced as €1.74 cents per unit. Owing to their resilient
composition, CEREIT’s property and tenant portfolios have been relatively unimpacted by COVID-19. Occupancy has
remained stable at 94.7% and only €0.4 million in rent income has been abated and €3.0 million has been provided for
in respect of uncollected rentals due to the COVID-19 pandemic. External valuations as at 30 June 2020 were conducted
for 22 properties representing approximately 50% of CEREIT’s portfolio by value at 31 December 2019, with their net
valuation falling by only 2.0% or €17.7 million. At 30 June 2020, CEREIT had 94 properties (2019: 97) and a portfolio value
of €2.1 billion (2019: €1.8 billion) located in Denmark, Netherlands, Italy, Finland, Germany, Poland and France. Property
acquisitions have been funded from the disposal of existing investment properties and by a capital raising by CEREIT in
June / July 2019 (note: Cromwell did not participate in this private placement which saw new units in CEREIT issued in
July 2019).
The continued successful growth of CEREIT has been achieved by harnessing Cromwell’s integrated European asset
management platform and its ability to identify and execute off-market property acquisitions.
Northpoint
On 23 September 2019 Cromwell completed the disposal of the 50% interest in the joint venture vehicle that held the
property at 100 Miller Street, North Sydney (Northpoint). The interest was sold for a contract price of $150.0 million, the
proceeds of which were recycled to acquire the property at 400 George Street, Brisbane. The transaction also crystallised
a $32.0 million development fee, based upon capital appreciation derived by the property trust in respect of the Northpoint
redevelopment project managed by Cromwell in the period 2016 to 2018, which added considerable value to the property.
Co-Investments
Cromwell has co-investments in both Australian unlisted property trusts and European real estate investment mandates.
Co-investment levels range from 1% to 28% and are accounted for as investments at fair value through profit or loss, or,
as is the case with Portgate, an equity accounted investment. Cromwell receives distributions or a share of profit from its
co-investments which also support the funds management business. Cromwell may also, from time to time, warehouse
assets to use as seed portfolios for new funds or mandates. Owing to divestments during the year the balance of co-
investments held by Cromwell at year end was $12.9 million (June 2019: $28.4 million).
(iii) Funds and asset management
Retail funds management
Retail funds management profit decreased to $8.3 million for the year ended 30 June 2020 from $13.6 million for the year
ended 30 June 2019. During the year Cromwell received $1.6 million (2019: $8.7 million) in performance and acquisition
fees from retail funds management activities due to the timing of performance fee revenues (generally based upon fund
rollover dates) being episodic in nature. Total retail funds under management decreased to $2.2 billion from $2.3 billion at
30 June 2019.
Cromwell remains committed to increasing the size and diversification of its funds management business, which it
believes is highly complementary to its internally managed property portfolio and property and facilities management
activities. We continue to invest in a number of initiatives across our retail funds management business which will allow
us to continually improve our service offering to investors in both Cromwell and our unlisted funds.
29
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Direct Property Funds
Further information at 30 June 2020 about the composition of the Direct property funds are below:
Operating profit
Net tangible assets
Tenant relief provided
Total
($’000)
Per security
(cents)
Distributions
per security
(cents)
Total
($’000)
Per security
($)
Rent waived
($’000)
Rent
deferred
($’000)
19,234
6,877
7.55
9.05
7.25
345,492
$1.18
366.0
355.0
9.00
106,747
$1.40
-
-
13,268
14.58
11.75
186,025
$2.04
180.7
48.4
6,562
12.50
11.25
78,372
$1.49
41.3
-
12,946
6,603
7.66
8.69
7.00
223,577
$1.18
8.75
102,102
$1.34
12,859
14.13
11.50
184,047
$2.02
5,928
11.29
11.00
76,284
$1.45
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Fund
2020
Cromwell Direct
Property Fund
Cromwell Property
Trust 12
Cromwell Riverpark
Trust
Cromwell Ipswich City
Heart Trust
2019
Cromwell Direct
Property Fund
Cromwell Property
Trust 12
Cromwell Riverpark
Trust
Cromwell Ipswich City
Heart Trust
Tenant rent collections from the retail funds management property portfolio were similarly unimpacted by the onset of the
COVID-19 pandemic. The tenant population is skewed towards government, ASX-listed and other larger entities that were
either not materially impacted by the pandemic or not eligible for relief. This resulted in only a small amount of rent being
waived or deferred during the latter part of the year.
The same high-quality tenant characteristics that have led to Cromwell’s own net property income remaining robust have
also played a significant role in valuations of the retail funds management property portfolio being relatively unimpacted
by the onset of the COVID-19 pandemic and valuations have remained relatively resilient considering the circumstances.
On 1 July 2020, the first full liquidity event for the Cromwell Direct Property Fund commenced. The Product Disclosure
Statement for the fund specified that after expiry of the Initial Term in July 2020, Cromwell Funds Management Limited
(as responsible entity) would give all investors an opportunity to withdraw from the fund (the “Liquidity Event”). The Trust
extension notice period commenced on 1 July 2020 and concluded on 31 July 2020. On 3 August 2020, due to the outcome
of the liquidity event, Cromwell Funds Management Limited announced the extension of Cromwell Direct Property Fund
for a second term, with withdrawal requests totalling only 9.9% of issued capital (these will be funded by a combination of
existing cash reserves and undrawn debt).
30
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Property Securities Funds
Information at 30 June 2020 about the composition of the Property securities funds are below:
Statutory profit / (loss)
Net assets
Annual return
performance (1)
Total
($’000)
Per
security
(cents)
Distributions
per security
(cents)
Total
($’000)
Per
security
($)
Fund
performance
(%)
Relevant
benchmark
(%)
(60,870)
(27.62)
5.91
231,761
$1.00
(20.5%)
(20.7%)
1,879
10.64
14.90
32,794
$1.87
7.2%
(5.7%)
29,924
15.04
10.69
275,448
$1.32
12.5%
19.4%
1,318
7.26
15.88
34,029
$1.91
5.7%
1.9%
Fund
2020
Cromwell Phoenix
Property Securities Fund
Cromwell Phoenix
Opportunities Funds
2019
Cromwell Phoenix Property
Securities Fund
Cromwell Phoenix
Opportunities Funds
(1)
Calculated after fees and costs.
The performance of Cromwell Phoenix Property Securities Fund was heavily impacted by market sell-off as a result of the
COVID-19 pandemic. The fund remains liquid and outperformed its benchmark for the year.
Cromwell Phoenix Opportunities Fund (a microcap securities fund) performed extremely well against both the sentiment
of the financial markets as a whole and its own benchmark for the year.
During the current year the Cromwell Australian Property Fund was closed and investors paid out final distributions.
During the prior year the Cromwell Phoenix Core Listed Property Fund was also closed and investors paid out final
distributions.
Oyster
Oyster Property Group’s assets under management increased to NZD$2.0 billion at 30 June 2020 (30 June 2019: NZD$1.7
billion).
Cromwell recognised a share of profit of $2.5 million for the year (2019: $1.4 million).
Wholesale funds management
The European business continues to execute the strategy of securing longer-term and more secure revenue sources.
Wholesale funds management profit increased to $30.1 million (2019: $14.0 million) as the investment in processes and
people begin to deliver a more sustainable and versatile business along with earning significant performance fees during
FY20.
The European funds management business contributed $29.2 million (2019: $7.9 million) after convertible bond finance
costs.
During the year the European business traded almost €1.0 billion of real estate assets (2019: €1.3 billion). The resulting
acquisition and disposal fees amounted to $12.3 million (2019: $15.5 million) out of total funds management fees of $108.0
million (2019: $71.1 million). Acquisition fees included $4.9 million (2019: $5.0 million) for CEREIT. The European funds
management business also received performance fees (promotes) during the year of $36.7 million (2019: $1.2 million).
As at 30 June 2020 the European funds management business had €3.5 billion ($5.8 billion) assets under management
(30 June 2019: €3.8 billion ($6.1 billion)).
31
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
The movement in AUM for the European business for 2020 was as follows:
Balance at 30 June 2019
Acquisitions
Disposals
Revaluations
Balance at 30 June 2020
Percentage of AUM
CEREIT
€’M
1,808
303
(85)
49
2,075
59%
Korean
Mandate
€’M
88
-
-
3
91
3%
CPRF
€’M
535
-
-
24
559
16%
EDF
€’M
301
-
(131)
(17)
153
4%
Other
Mandates
€’M
1,021
-
(428)
67
660
18%
Total
€’M
3,753
303
(644)
126
3,538
100%
The European business continues to broaden its focus from Private Equity Funds and Mandates towards longer term,
more secure revenue sources. Following further acquisitions by CEREIT and the transfer of CPRF assets into CDPT, the
European business now has 78% (2019: 50%) of its AUM in long-term mandates.
The revenue mix from the year prior to the IPO of CEREIT until balance date demonstrates the steady increase in recurring
income.
Revenue
Recurring
Transactional
Performance
Total
2017
$’M
47.9
12.7
17.5
78.1
2018
$’M
51.9
20.3
8.3
80.5
2019
$’M
54.4
15.5
1.2
71.1
2020
$’M
59.0
12.3
36.7
108.0
During the year Cromwell exercised its pre-emptive right to acquire third party investor interests in CPRF and the portfolio
was acquired in November 2019. This portfolio is currently being repositioned into a saleable structure which will be
offered to institutional investors at the earliest opportunity. The portfolio is accretive to operating earnings in its current
form and it is expected to remain so until sold in accordance with Cromwell’s invest to manage strategy.
The remaining AUM, making up 22% of total AUM at balance date, is held in 16 mandates ranging in size from
€9.0 million to €153.3 million with various end dates between September 2020 and June 2023. Mandates with AUM valued
at €428 million are expected to expire over the course of the next 12 months, with disposals on expiry generating disposal
fees and performance fees for Cromwell. Growth in CEREIT and new funds or mandates are expected to offset the value
of the expiring mandates.
Asset management
Asset Services
Australian asset services recorded an operating profit for the year of $2.4 million (2019: profit of $0.9 million). This was
largely due to the timing of project management and leasing activities and also reflects an increase in the scale of the
Australian portfolio.
LDK
Cromwell holds a 50% interest in the LDK Healthcare Unit Trust (LDK), a joint venture conducting a Seniors living business
created in 2018. During 2018, Cromwell and LDK commenced a project to repurpose the Cromwell-owned property at
Tuggeranong Office Park in the ACT into a Seniors living village under a Development lease. This was subsequently sold to
LDK in May 2019. 210 suites at Greenway have been completed and sales have commenced. To the end of June 2020, 27
units had been settled and a further 29 units had been sold but were yet to be settled.
LDK also operates one of Sydney’s premium Seniors villages, The Landings at Turramurra (The Landings). The site
comprises 220 architecturally designed, spacious dwellings. This site continues to operate profitably. During the year
97% of residents chose to move from their historic deferred management fee arrangement to the new LDK membership
model.
LDK made its first profit during the year which, when offset against initial expected start-up losses, led to Cromwell
absorbing a life to date profit during the year of $6.7 million.
32
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Finance costs
Interest expense for the year increased to $58.3 million (2019: $47.6 million). The increase in interest expense is in line
with increased borrowings used to acquire investment properties in Australia and Poland, all of which have been accretive
to earnings.
To support Cromwell’s liquidity position during the initial onset of the COVID-19 pandemic, all undrawn facilities were
drawn down in full in March 2020, and a further $100 million facility was sourced and drawn in full. Holding the liquidity
in cash on the balance sheet rather than in the revolving credit facilities resulted in additional finance costs of $1.5
million. Prior to balance date $432 million of cash was repaid to the revolving credit facilities given more certainty over the
strength of credit markets.
A further facility of $113.1 million has been entered into in relation to the asset enhancement initiative at 475 Victoria
Avenue, NSW. This facility was drawn to $72.2 million at balance date.
The average interest rate decreased from 3.35% for the year ended 30 June 2019 to 2.84% for the year ended 30 June
2020.
The net fair value gain in relation to derivative financial instruments of $18.4 million (2019: loss of $10.5 million) primarily
arose as a result of the revaluation of the conversion features in relation to the convertible bonds, which was a gain of
$23.7 million for the year (2019: $3.0 million gain). Cromwell’s policy to hedge a significant portion of future interest
expense with hedging instruments resulted in a loss for the year of $5.3 million (2019: $13.5 million loss) due to ongoing
decreasing market interest rates now making the liabilities in respect of these instruments greater than the same time
last year. Cromwell has hedged future interest rates through various types of interest rate swaps and caps with 67% of
its debt at 30 June 2020 (2019: 97%) hedged or fixed to minimise the risk of changes in interest rates in the future. All
hedging contracts expire between July 2020 and July 2024.
FINANCIAL POSITION
Total assets ($M)
Net assets ($M)
Net tangible assets ($M) (1)
Net debt ($M)(2)
Gearing (%)(3)
Stapled securities issued (M)
NTA per stapled security
NTA per stapled security (excluding interest rate derivatives)
(1) Net assets less deferred tax assets, intangible assets and deferred tax liabilities.
(2) Borrowings less cash and cash equivalents and restricted cash.
(3) Net debt divided by total tangible assets less cash and cash equivalents.
Cromwell
As at
Trust
As at
2020
4,990.5
2,589.0
2,573.4
1,975.9
42%
2,612.9
$0.99
$0.99
2019
3,695.7
2,183.0
2,176.2
1,254.8
35%
2,236.6
$0.97
$0.99
2020
4,834.0
2,484.7
2,495.8
2,044.5
43%
2,612.9
$0.96
$0.96
2019
3,654.1
2,183.8
2,188.4
1,301.3
36%
2,236.6
$0.97
$0.99
Investment property
For the year ended 30 June 2020 Cromwell’s approach to property valuations was substantially consistent with prior
years, being in accordance with the established Valuations policy, but with an added emphasis in relation to the impact
of COVID-19 upon inputs relevant to the valuation model for each property. At balance date the valuations for 22 of
Cromwell’s investment properties are based on independent external valuations representing 95% of the value of the
portfolio. Investment properties held for sale were valued with reference to the relevant sale price. The weighted average
capitalisation rate (WACR) was 5.7% across the portfolio, compared with 5.8% at June 2019.
Debt
Net debt increased by $721.1 million due to total borrowings increasing by $835.7 million. The proceeds from the
additional borrowings has been used to acquire the property at 400 George Street, QLD and the Polish investment property
portfolio. Gearing increased from 35% to 42% during the year as a result of the increase in borrowings. Notwithstanding
the current low interest rate environment, this places Cromwell’s gearing outside of the range of between 30% - 40%
33
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT through the cycle range. It is expected that Cromwell’s gearing will oscillate around the range depending upon investment
deployment.
Cromwell’s main loan facility (bilateral loan facility) is secured against selected Core and Core+ investment properties in
the Australian portfolio. This facility’s performance against loan covenants at balance date demonstrates the ability of
Cromwell to carry higher gearing levels without impacting the ongoing operations of the business.
Covenant
Loan to value
WALE
Interest cover
Actual
36.3%
6.5 yrs
Limit
60.0%
3.0 yrs
Headroom
$1,119.9 million
3.5 yrs
5.0 times
2.0 times
$74.3 million
Cromwell’s Euro / GBP revolving credit facility has a look-through gearing covenant of 65.0% versus balance date actual
look-through gearing of 47.5%.
All other loan facilities are asset level financing with no reference to group level gearing.
Liquidity
As at 30 June 2020 Cromwell had $194.1 million of cash (2019: $101.6 million) and undrawn bank facilities totalling $472.9
million (2019: $780.7 million).
Equity
An additional 376.2 million stapled securities were issued during the year at an average issue price of $1.15, comprising
the 354.4 million securities issued under the Security placement and SPP in July 2019, the operation of the distribution
reinvestment plan for the first half of the year which resulted in the issue of 16.9 million securities during the year, and a
further 4.9 million securities issued following the exercise of performance rights.
NTA per security has increased during the year from $0.97 to $0.99, primarily as a result of an overall increase in scale
due to accretive acquisitions (most notably increases in direct investment property and equity accounted investment
valuations), and the issue of additional securities at a premium to NTA.
OUTLOOK
Cromwell’s financial results clearly demonstrate the strength, resilience and defensive nature of its property portfolio with
its weighting towards government and government agency tenants. Cromwell’s Directors intend to ensure that Cromwell
will continue to have access to the strong and stable cash flow derived from this portfolio, which will enable it to pay
reliable distributions and to continue to support those tenants most in need of assistance from their landlord, including
the nation’s national air transport carrier.
While real estate transactions in Europe and Australia have been subdued over the last quarter of FY20, Cromwell remains
well placed to work with a range of capital partners to take advantage of future opportunities as they arise. The Polish
retail assets have seen turnover return to levels similar to levels prior to the beginning of the COVID-19 pandemic.
Cromwell enjoys a relationship with a network of loyal retail investors in Australia whom it treats with the utmost respect
and can expect their ongoing support for future retail funds management opportunities that may eventuate from the
current economic conditions.
Cromwell has a strong balance sheet with sufficient liquidity and ample loan covenant headroom to maintain operations
well into the future and to continue to invest into our direct and indirect portfolio and our fund and asset management
platform.
The environment in which Cromwell operates remains challenging. In Australia, the Code of Conduct is likely to be
extended for a significant part of FY21 which will limit the growth in net operating income of the Australian Portfolio.
This will be offset by the likelihood that the Polish retail assets, which have been accretive to earnings, will remain
on the balance sheet for longer than originally expected. Cromwell is comfortable holding these defensive assets,
weighted as they are to grocery, hypermarket and DIY tenants with long leases, and which offer greater stability than
many other property asset classes and markets such as hospitality, leisure and entertainment, conventions and the UK
and US. Cromwell’s ability to continue to rely on the strong and stable cash flows of its Australian property portfolio and
other defensive assets may be impacted by any change in control and strategy, which could have an impact on future
distributions.
34
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Distribution and operating profit
Given the uncertainty of the current environment, Cromwell is not providing operating profit guidance for FY21 at this time.
Cromwell provides distribution guidance for FY21 of 7.50cps. Cromwell’s ability to continue to provide distributions to
investors is subject to any change of control and the outcomes associated with such an event. Furthermore, any alteration
in the current economic conditions of Cromwell and our tenants, the continuing changing landscape of the COVID-19
pandemic and responses by various governments may impact on the level of distributions declared during FY21.
Risks
Cromwell actively identifies and manages the risks and megatrends that may impact its operations, strategy and outlook.
The Board is ultimately accountable for corporate governance and the management of risk. The Board has separate
committees to review and assess key risks. The Investment Committee is responsible for overseeing and reviewing
all major transactions. The Audit and Risk Committee is responsible for overseeing and reviewing the effectiveness of
Cromwell’s risk management framework.
Cromwell has an active enterprise-wide risk management framework which recognises that all senior managers have a
role to play in the effective management of risk. Risks are identified and assessed in a timely and consistent manner with
regular reporting back to the Board from management via the Audit and Risk Committee.
Cromwell’s key risks and the controls in place to mitigate those risks are outlined in the table below:
Key Risk
Description
Mitigation
Performance
Inability to meet market guidance
and deliver distributions.
Investments that do not perform in
line with expectations.
Loss of AUM.
Capital
Management
Ensuring continuous access
to debt and equity markets to
support the sustainability of
Cromwell.
People and
Culture
Ensuring Cromwell has access to
and can retain key talent.
Maintaining Cromwell’s culture.
Information and
data security
Leasing
Ensuring no loss of data, breaches
of confidentiality.
Ensuring continuity of IT
applications.
Ensuring no negative impact on
tenants and investors.
Inability to lease assets in line
with asset management plans and
forecasts.
Governance and
compliance
Ensuring continuous compliance
with regulatory requirements.
Meeting stakeholder and investor
expectations.
• Board approved “Invest to Manage” strategy continuously reviewed
with processes to monitor and manage performance
• Defensive core portfolio with market leading WALE ensures cash flow
for 6 years
• Investment Committee and regular review of performance of
investments against targets
• Transition of Europe to long term, secure, reliable revenue streams
• Board approved gearing range through the cycle reduced to 30% -
40%
• Prudent capital management with cash flow forecasting and
sensitivity analysis. Available liquidity matched to capital
requirements reviewed monthly and reported to the Board
• Long dated debt expiry profile
• Diversification of debt funding sources
• Spreading of debt maturities
• We invest in our staff with focused learning and development plans
• Diversity and inclusion Working Group
• Succession planning for senior staff
• Competitive remuneration
• Performance management and review
• Annual engagement surveys of staff
• Regular training, testing and disaster recovery activities
• Privacy policy, guidelines and procedures
• Disaster recovery and business continuity plan
• Defensive portfolio with long WALE
• Large and diversified tenant base
• Experienced leasing team
• Active asset management with focus on repositioning, refurbishing
and re-leasing properties to enhance returns
• Independent Compliance Committee with direct reporting into the
Audit and Risk Committee
• Board approved Tax Risk Management Policy ensures ongoing REIT
status
• Cromwell Culture and Values entrenched in performance reviews
35
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Health and
safety
Ensuring the health, safety and
wellbeing of all staff.
• Prevention of death or serious injury at any Cromwell owned or
controlled property
• Staff wellbeing program encourages the pursuit of healthy lifestyles
• Employee assistance program provides staff with access to a wide
network of health professionals to discuss any issues in confidence
• Regular façade audits of properties
• Work health and safety programs in place at owned properties
CLIMATE CHANGE ADAPTATION
Cromwell is a supporter of the Task Force on Climate-related Financial Disclosure (TCFD) recommendations and
recognise the potential risks and opportunities arising from climate change and a transition to a low-carbon economy.
The TCFD recommendations are voluntary in nature and were introduced to support a consistent reporting approach to
enable financiers, investors, insurers and other stakeholders to understand an organisations material climate related
risks, and the financial implications and approach being undertaken to manage them.
Cromwell prepared a climate-related disclosure statement in 2019 providing a position statement on each of the 4 core
elements and 11 disclosures that form the TCFD recommendations. Our intention is to update this statement annually as
part of the sustainability report to include greater detail on the targets we have set and our progress towards meeting the
recommendations. These disclosure statements and annual sustainability report can be found on Cromwell’s website at
www.cromwellpropertygroup.com/sustainability or by following the link to
https://www.cromwellpropertygroup.com/sustainability/climate-related-financial-disclosure-statement
The Task Force structured the disclosure recommendations around four thematic areas that represent core elements of
an organisations operations. These recommended elements and Cromwell’s response is represented below:
TCFD thematic element
Overview of the TCFD Recommended Disclosures and Cromwell’s
response
Reference
Section 1 Governance
Section 2 Strategy
Governance
Disclose the organisation’s
governance around
climate-related risks and
opportunities
Strategy
Disclose the actual and
potential impacts of
climate-related risks
and opportunities on the
organization’s businesses,
strategy, and financial
planning where such
information is material.
The Group Sustainability Committee, chaired by the Chief Sustainability
Officer (CSO), is responsible for identifying climate-related risks and
opportunities.
The Audit and Risk Committee (ARC) is responsible for monitoring the
effectiveness of the sustainability framework and advising the Board on
the progress and actions undertaken on sustainability and corporate
risk management.
The Board’s oversight of climate-related risks and Management’s role in
assessing and managing risks and opportunities is detailed in the TCFD
Statement
Our business operates in a complex social, economic and physical
environment, managing assets of differing types and quality and in
differing geographies. Our objective is to provide stable, secure and
growing distributions to unitholders, with the potential for capital growth.
As investors and asset managers, the greatest material risks posed
from climate change are likely to be from physical risks directly
impacting upon the assets we own and manage, and the indirect risks
associated with our management operations. This may be in the form of
direct impacts such as weather-related events and the costs to protect
property from damage or indirect impacts from increases in operations
costs due to increased temperatures, energy costs and insurance
Our climate adaption strategy is to ensure that we understand and
respond to the impacts from climate change in the short, medium and
long term. Cromwell considers climate risks and impacts over the
following time frames:
• Short term = 1 to 3 years
• Medium term = 4 to 7 years (leading to 2030)
• Long term = 8 to 15 years (up to and post 2030, leading to 2040)
This information is then used to determine risk mitigation strategies
where appropriate.
36
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Risk Management
Disclose how the
organization identifies,
assesses, and manages
climate-related risks.
Metrics and targets
Disclose the metrics and
targets used to assess
and manage relevant
climate-related risks and
opportunities where such
information is material.
Section 3 Risk
Management
Cromwell has introduced formal reviews of the impact from climate
change across its operations. Assessment of the risk from acute
physical events related to weather extremities and longer term
chronic effects continue to be considered as the depth of knowledge
is increased through ongoing evaluation utilising the growing body
of climate science, future environmental impact forecasts, scenario
testing and through engagement with insurers financiers and industry
organisations.
The process for identifying, assessing and managing climate-related
risks and how the process is integrated into risk management
framework is detailed in the TCFD Statement
Cromwell has disclosed its sustainability performance for more than
ten years and reports annually in accordance with the Global Reporting
Initiative (GRI).
Section 4 Metrics and
Targets
Each year our annual sustainability report sets out the boundaries for
reporting and provides a breakdown between the properties for which
Cromwell has ownership and direct management control of operations.
Cromwell has set targets to respond to the transition to net zero
emissions and in FY20 obtained net zero certification from Climate
Active for its Australian corporate operations.
Cromwell recognises that the greatest impact from reducing emissions
is within its property assets. For the Australian assets where Cromwell
has operational control, energy consumption and emissions intensity
has been tracked for ten years.
Our annual Sustainability Report provides access to data tables that
further provide information on our corporate emissions, energy and
performance certification for our property portfolios and the actions we
are implementing to achieve our long-term targets.
Further details on our metrics and targets are also contained in the
TCFD Statement.
37
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT DIRECTORS
The Directors of Cromwell Corporation Limited and Cromwell Property Securities Limited as responsible entity of the CDPT
(“responsible entity”) during the year and up to the date of this report are:
Mr Leon Blitz – Non-executive Chair
B.Com (Hons), C.A. (S.A.), 56
Director since:
Chair since:
28 June 2017
26 February 2020
Board Committee membership: Member of the Investment Committee
Member of the Nomination and Remuneration Committee
Independent:
Yes
Skills and Experience
Mr Blitz is the co-founder and CEO of Grovepoint, a London-based private equity and FCA
regulated investment management firm which manages and invests principal, institutional and
family office funds.
Through his role at Investec Bank, which over 20 years included Head of Principal Investments,
Private Banking and Property Lending, Mr Blitz developed a deep understanding of property,
banking and risk management. He also managed acquisition and integration processes for the
Investec Group in UK and European jurisdictions.
Mr Blitz has a significant track record as a deal maker and fundraiser and has extensive
experience in working with high performance management teams to develop and execute
corporate strategies and implementation plans. He has acted as a Non-executive Director of
a number of companies in the UK and Europe and is on the governance and advisory board of
a London-based industrial investment holding company, as well as playing a leading role in
governing a number of LLP investment and GP management partnerships.
Mr Blitz is the Chair of an international London-based chamber of commerce and plays a
leadership role in a number of charitable and communal organisations. He is a Chartered
Accountant, and trained at Arthur Andersen.
Mr Andrew Fay - Non-executive Deputy Chair
BAgEc (Hons), A Fin, 55
Director since:
Deputy Chair since:
15 October 2018
26 February 2020
Board Committee membership: Member of the Audit and Risk Committee
Member of the Investment Committee
Member of the Nomination and Remuneration Committee
Independent:
Yes
Listed Company Directorships (held within the last three years):
Non-executive Director – Pendal Group Limited (2011 – current)
Non-executive Director – Spark Infrastructure Group (2010 – current)
Non-executive Director – Gateway Lifestyle Group (2015 – 2018)
Skills and Experience
Mr Fay has over 30 years’ experience in the financial services industry, bringing extensive
knowledge of investment and funds management, including the property asset classes. Whilst
a large part of his executive career was as a professional investor, he has also been directly
involved in advising and determining the strategic direction of businesses including being involved
in a range of merger and acquisition activities. These businesses come from a diverse range of
industries, including internet, medical devices, microbiology, renewable energy, financial services
and property, and have given him considerable experience in operating in international markets.
During his 14 years at Deutsche Asset Management (Australia) Ltd he held a number of senior
38
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
positions including Chair, CEO Australia, Regional Chief Investment Officer (CIO) Asia-Pacific
and CIO Australia. He was also Chair of Deutsche Managed Investments Ltd, Tasman Lifestyle
Continuum Ltd and a Non-executive Director of Gateway Lifestyle Group. Mr Fay is a former
Director of DB Real Estate Australia Ltd and South Australian Power Networks Pty Ltd. Earlier
in his career, he held various investment roles at AMP Capital and was also a member of the
Investment Board Committee of the Financial Services Council from 1998 to 2006. Mr Fay has
substantial Board Committee experience having chaired both Remuneration and Nomination and
Audit and Risk Committees for Top 100 ASX listed entities. He is currently a Non-executive Director
of J O Hambro Capital Management Holdings Ltd, and is a consultant to Microbiogen Pty Ltd.
Ms Tanya Cox - Non-executive Director
MBA, Grad Dip Applied Corporate Governance, FAICD, FGIA, 59
Director since:
21 October 2019
Board Committee membership:
Chair of the Nomination and Remuneration Committee
Member of the Audit and Risk Committee
Independent:
Yes
Listed Company Directorships (held within the last three years):
Non-executive Director – OtherLevels Holdings Ltd (2015 – 2020)
Non-executive Director – BuildingIQ. Inc (2015 – 2019)
Skills and Experience
Ms Cox has over 15 years of board experience and extensive executive experience in sustainability,
property, finance and funds management. Ms Cox began her career at the Bank of New Zealand
and over an 11 year period succeeded to the role of General Manager of Finance, Operations and
IT. Ms Cox led similar functions at the managed fund custodian Ausmaq Limited, before joining
Rothschild & Co Australia Limited as Director and Chief Operating Officer for the Australian
operations. During her tenure at Rothschild & Co Australia Limited, Ms Cox was a member of
several Executive Committees, including Chair of the Risk Committee and a member of the
Investment Committee.
In 2003, Ms Cox joined Dexus as Chief Operating Officer and Company Secretary, with her
responsibilities expanding in 2012 to include the role of Executive General Manager – Property
Services. During her tenure at Dexus, Ms Cox was a member of the Executive Committee
and the Investment Committee, and her responsibilities included oversight of all operational
aspects of the business including corporate responsibility and sustainability, marketing and
communications, information technology, operational risk management, corporate governance
and company secretarial practices.
Since retiring from her executive career in 2014, Ms Cox has gained board experience at listed
companies through former Non-executive Director roles at BuildingIQ, Inc and at OtherLevels
Holdings Ltd (delisted 10 August 2020). Ms Cox is Chair of Equiem Holdings Pty Ltd, Chair of the
World Green Building Council, Former Chair and current Director of the Green Building Council
of Australia and Member of the NSW Climate Change Council. Ms Cox is a former Director of Low
Carbon Australia.
Ms Cox holds a Master of Business Administration from the Australian Graduate School of
Management at University of New South Wales and a Graduate Diploma in Applied Corporate
Governance from the Governance Institute of Australia. Ms Cox is a Fellow of the Australian
Institute of Company Directors, the Governance Institute of Australia (formerly known as the
Institute of Chartered Secretaries & Administrators) and is a Member of Chief Executive Women.
39
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Ms Lisa Scenna - Non-executive Director
B.Comm, Member of Chartered Accountants Australia and New Zealand, MAICD, 52
Director since:
21 October 2019
Board Committee membership:
Chair of the Investment Committee
Member of the Audit and Risk Committee
Independent:
Yes
Listed Company Directorships (held within the last three years):
Non-executive Director – Harworth Group plc (effective 1 September 2020)
Non-executive Director – Polypipe Group plc (2019 – current)
Skills and Experience
Ms Scenna has over 25 years of executive experience in property and asset management and
funds/investment management in both the United Kingdom and Australia. Ms Scenna joined
Westfield Group in 1994 and progressed to the role of Head of Investor Relations. Ms Scenna
moved to Stockland Group as General Manager – Finance and Business Development and rose
through the group to the role of UK Joint Managing Director in 2007. In this role, Ms Scenna was
responsible for establishing Stockland Group in the UK, had full responsibility for the regional
operations and was involved in a number of acquisitions and integrations.
In 2009, Ms Scenna left Stockland Group to stay in the UK and accepted the role of Group Head
of Explore at Laing O’Rourke, the country’s largest privately-owned construction solutions
provider. For just under three years, Ms Scenna led the Explore Investments and Explore Living
businesses across Europe, Canada, the Middle East and Australasia. In this role, Ms Scenna led
the infrastructure investing activities globally and worked with clients and investors to build Laing
O’Rourke’s direct infrastructure portfolio held in co-ownership with a number of institutional
investors across the UK, Australia and Canada.
In 2013, Ms Scenna joined UK construction and regeneration company, Morgan Sindall Group
plc, as the Managing Director of their Investments business. During her tenure, Ms Scenna was
a Director of the Morgan Sindall Investments Board. Through her extensive executive experience
in the UK, Ms Scenna has developed strong connections with local authorities, developers and
investors and has a deep understanding of the drivers for competitors.
Ms Scenna is a Non-executive Director of Polypipe Group plc and, effective 1 September 2020,
a Non-executive Director and Member of the Remuneration Committee of Harworth Group plc.
Polypipe Group plc and Harworth Group plc are listed on the London Stock Exchange.
Ms Scenna is the former Deputy Chair of the Private Infrastructure Development Group’s
Supervisory Board and has played a leadership role in charitable organisations.
Ms Scenna holds a Bachelor of Commerce from the University of New South Wales and is a
member of Chartered Accountants Australia and New Zealand and the Australian Institute of
Company Directors.
Ms Jane Tongs - Non-executive Director
B.Bus, MBA, FCA, FCPA, MAICD, 60
Director since:
26 November 2014
Board Committee membership:
Chair of the Audit and Risk Committee
Independent:
Yes
Listed Company Directorships (held within the last three years):
Chair – Netwealth Group Limited (2000 – current)
Skills and Experience
Ms Tongs has over 30 years of management expertise, serving on the boards of insurance, funds
management, property and other financial services entities. She has extensive experience in
profitably growing businesses and enhancing the profitability of established businesses. Current
40
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
examples are Netwealth Group Limited, Warakirri Asset Management Ltd and Hollard Insurance
Company Pty Ltd. Her previous property experience includes Non-executive Director positions
at AIMS Fund Management Limited (formerly MacarthurCook Fund Management Limited), AIMS
Investment Managers Ltd (formerly MacarthurCook Investment Managers Ltd), Little Real Estate
Pty Ltd (formerly Run Ltd), the Heine Property Group and Warakirri Agricultural Trusts. She
was a Non-executive Director of the Australian Energy Market Operator and of Catholic Church
Insurance Limited and served as a Member and Company Director to the Advisory Board of the
South Australian Financing Authority. She developed her leadership and management experience
earlier in her career, specifically as Partner at PricewaterhouseCoopers, specialising in the
financial services sector and litigation support.
Along with her deep expertise in finance, her board experience is vast with over 20 years’
experience as a Chair, Chair of Audit and Risk Committees and Non-executive Director. She is
currently Chair of Netwealth Group Limited and of the Lendlease Australian Prime Property Fund
Investors Committee and a Non-executive Director of Warakirri Asset Management Ltd, Hollard
Insurance Company Pty Ltd and Brighton Grammar School. Ms Tongs is a Fellow of Chartered
Accountants Australia and New Zealand and of CPA Australia and a member of the Australian
Institute of Company Directors.
Mr Paul Weightman - Managing Director / Chief Executive Officer
B.Com, B.Law, 58
Director since:
6 August 1998
Board Committee membership: Member of the Investment Committee
Independent:
No
Skills and Experience
Mr Weightman was a founding Director of Cromwell, acted as its Executive Chair from 1998 to
2008 and has acted in his current role since 2008, driving Cromwell’s strategic development from
a small retail syndicator to an ASX200 international real estate investor and funds manager. He
practised as a solicitor for more than 20 years, acted as Managing Partner of a national law firm
and continues to hold a practising certificate as a solicitor of the Supreme Court of Queensland.
Mr Weightman is also a Fellow of the Royal Institution of Chartered Surveyors and is an approved
person registered with the Financial Conduct Authority (UK).
Mr Weightman sits on the Boards of Cromwell Investment Services Limited and Cromwell EREIT
Management Pte. Ltd., the latter of which is a licensed REIT manager with the Monetary Authority
of Singapore and the manager of Cromwell European REIT.
He has extensive Australian and international experience in real estate investment and
management and has legal, commercial and corporate experience in areas including mergers
and acquisitions, revenue matters, property development, corporate and financial structuring,
public listings, joint ventures and funds management.
Mr Geoffrey Levy (AO) (retired) - Non-Executive Chair
B.Com, LLB, FFIN, MAICD, 61
Director and Chair since:
17 April 2008
Director until retired:
26 February 2020
Independent:
Yes
Skills and Experience
Mr Levy has over 30 years of significant experience in banking and finance, funds management,
mergers and acquisitions and corporate commercial law. He held the position of Partner at
Freehills, Hollingdale and Page (now Herbert Smith Freehills) earlier in his career as well as
Principal of Wentworth Associates, which was later acquired by Investec Bank (Australia) Ltd in
41
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
2001. At Investec Bank (Australia) Ltd, he became the Chief Executive Officer, and the Executive
Chair from 2001 to 2008, and thereafter as Non-executive Deputy Chair until 2014.
Mr Levy’s extensive ASX listed board experience, over three decades, includes Non-executive
Directorships at Hoyts Cinemas Ltd, Ten Network Holdings Ltd, Specialty Fashion Group Ltd,
Mirvac Ltd, Rebel Sports Ltd, Freedom Furniture Ltd and STW Ltd. He has also been an Executive
and Non-executive director on a number of property and private equity funds and non-listed
companies.
He also has vast regulatory and policy experience gained through chairing various Federal and
State Government entities, taskforces and panels, including as Deputy Chair of the Australian
Sports Anti-Doping Authority, Chair of Film Finance Corporation Australia Ltd, Chair of the NSW
Government Property Asset Utilisation Taskforce and Chair of the NSW Attorney General Review
into the Public Purpose Fund. He was also appointed as the Attache to the South African Olympic
Team at the 2000 Olympic Games.
He is currently the Executive Chair of Monash Private Capital and its groups of companies and
funds. He is also a founding partner of Our Innovation Fund, a venture capital firm investing in
high growth innovative digital businesses and is highly considered as a veteran investor in the
Tech start-up Ecosystems. In June 2005, he was appointed an Officer in the Order of Australia
in the Queen’s Birthday Honours List for his significant contributions to sports, the arts and
philanthropy.
Ms Michelle McKellar (retired) - Non-executive Director
FAICD, FPINZ, 65
Director since:
1 March 2007
Director until retired:
28 November 2019
Board Committee membership:
Chair of the Investment Committee
Member of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
Independent:
Yes
Skills and Experience
Ms McKellar has over 30 years of property and portfolio management experience in senior
roles throughout the Asia-Pacific. Ms McKellar established the CBRE business in New Zealand
which she grew successfully for 12 years before being appointed as CBRE’s Hong Kong-based
Managing Director and Chief Operating Officer Greater China. During her career at CBRE, which
encompassed major investment transactions, she was responsible for introducing a significant
amount of Asian foreign investment into the region. She subsequently served as the CEO of Jen
Group of Companies, overseeing an extensive commercial and retail property portfolio across
South East Asia, Australia and New Zealand. Ms McKellar is also a founding Director of China
based QSR (quick service restaurants) company – Dash Brands – established in 2007 in Shanghai
and remained as Non-executive Director until 2017. Dash Brands acquired Domino’s Pizza China
in 2011 and owns the master franchise for China. In each of these roles encompassing real
estate, property development and the QSR industry, she developed key relationships and gained
deep property expertise that provides valuable insights into the nuances of the markets across
Asia Pacific. Ms McKellar also served as Chair and Non-executive Director at Oyster Property
Group, a leading New Zealand commercial property and fund manager which is 50% owned by
Cromwell Property Group.
Ms McKellar is a Fellow of the Australian Institute of Company Directors and a Fellow of the
Property Institute of New Zealand. She also sits on the advisory Board of the University of
Auckland’s Business School’s Department of Property and continues to mentor graduates in the
industry. She currently serves as CEO of Australian based family company McKellar Property
Group and Joint Managing Director of MAP Group, a New Zealand based property consultancy and
advisory firm.
42
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Mr David Blight (resigned) - Non-executive Director
B.AppSc (Valuation), 58
Director
Director until resigned:
Independent:
1 June 2018
19 July 2019
No
Listed Company Directorships (held within the last three years):
Non-executive Director – Japara Healthcare Limited (2014 – current)
Non-executive Director – Lifestyle Communities Limited (2018 – current)
Skills and Experience
Mr Blight is currently Director and CEO of ARA Australia, the Australian business of the Singapore
based ARA Group, which is a substantial securityholder of Cromwell Property Group. He is also
Non-executive Director and Chair of the Remuneration and Nomination Committee for Japara
Healthcare Limited, an ASX listed residential aged care business and Non-executive Director of
Lifestyle Communities Limited. Mr Blight has been in the real estate investment and development
industry for nearly 35 years both in Australia and globally. He was previously Chair & CEO of the
global ING Real Estate Investment Management business and Vice Chair of ING Real Estate,
overseeing real estate assets of circa $150 billion while based in The Netherlands.
Ms Lucy Laakso – Company Secretary
B.Bus, MBA (Corporate Governance), Juris Doctor (First Class Honours), GAICD
Appointed since:
10 August 2015
Skills and Experience
Ms Laakso has 20 years of corporate and financial services experience, having worked as a
legal practitioner and in the areas of company secretariat, corporate governance, compliance
and business banking. Prior to joining Cromwell, Ms Laakso was a manager in the company
secretariat/compliance team at Access Capital Advisers (now Whitehelm Capital). She also
worked at ASX listed Suncorp Group Limited in areas including corporate secretariat, compliance
and business banking. Ms Laakso also has private practice experience at Norton Rose Fulbright
and inhouse legal experience at a fund manager. She is a member of two Property Council of
Australia national committees: the National Risk Roundtable and the Corporate Governance and
Regulation Committee.
DIRECTORS' MEETINGS
Directors
Board of Directors
Nomination and
Remuneration
Committee
Audit and Risk
Committee
Investment Committee
Meetings
attended
Meetings
eligible to
attend
Meetings
attended
Meetings
eligible to
attend
Meetings
attended
Meetings
eligible to
attend
Meetings
attended
Meetings
eligible to
attend
37
39
34
33
40
39
20
9
-
40
40
34
34
40
40
20
11
-
9
9
7
1
3
-
-
2
-
9
9
7
1
3
-
-
2
-
6
9
4
3
9
-
-
4
-
6
9
4
3
9
-
-
4
-
1
1
-
-
-
1
-
1
-
1
1
-
-
-
1
-
1
-
L Blitz
A Fay
T Cox (1)
L Scenna(1)
J Tongs
P Weightman
G Levy(2)
M McKellar(3)
D Blight(4)
(1) Appointed 21 October 2019.
(2) Retired 26 February 2020.
(3) Retired 28 November 2019.
(4) Resigned 19 July 2019.
43
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Remuneration report
A Message from the Chair, Nomination and Remuneration Committee
Dear Securityholder
On behalf of the Board, I am pleased to present Cromwell’s Remuneration Report for the year ended 30 June 2020 (FY20).
OUR UNIQUE BUSINESS
As our long standing securityholders are aware Cromwell is unique in its A-REIT peer group. Cromwell has approximately
60% of its balance sheet invested in direct property assets in Australia, 16% invested in the Polish Retail Fund, which
will be sold down to third party investors post the Covid-19 pandemic, and the remainder invested in domestic and
international property securities. Cromwell also manages approximately $4.9 billion of direct property assets in 14
countries across Europe on behalf of third party investors.
Our long standing securityholders will also be aware that your CEO, and the Cromwell executive team, have been
successfully managing your investment for many years. As a result, your CEO, over the past two decades has personally
amassed a holding of more than 26.6 million Cromwell securities, a far greater holding than any A-REIT CEO and a
position that forges a very close alignment with Cromwell securityholders.
For these reasons, Cromwell’s remuneration structure does not closely reflect the remuneration structure of its A-REIT
peers, but over the past two years, has been progressively modified to incorporate elements of our peers’ remuneration
frameworks, while retaining those characteristics that, in the view of the Nomination and Remuneration Committee, are
most likely to create long-term value for securityholders by rewarding employees for safeguarding and promoting the
interests of our tenants, clients and capital partners.
YEAR IN REVIEW
The first half of FY20 saw Cromwell continue to deliver on its Invest to Manage strategy, acquiring 400 George Street,
Brisbane for circa $525 million and the Cromwell Polish Retail fund. The financial results for the first half of FY20 were
particularly strong with operating profit of $134.1 million (an increase of 62% over the prior corresponding period). This
equated to operating profit per security of 5.18 cents per security, an increase of 26% over the prior corresponding period.
The second half of FY20 has, of course been dominated by COVID-19. Cromwell’s financial results clearly demonstrate the
quality and resilience of the Australian property portfolio, with its significant weighting to Government, government agency
and listed tenants. Since the start of the Coronavirus pandemic, Cromwell has been working closely with its tenants to
provide financial assistance. The Polish retail assets have also performed well during this period. Understandably, given
the current situation, we have been unable to start marketing the new fund to investors who will ultimately acquire the
Polish retail assets, but you should be aware that holding the Polish assets is accretive to earnings and is expected to
remain so until sold when the environment improves. This investment has temporarily increased our gearing to a level
outside our target range of 30% - 40%, but again, with interest rates at an all-time low, we are comfortable for this to
continue until the environment improves.
Cromwell is very proud of what it has achieved during these difficult times:
• its overall financial performance was not materially impacted by COVID-19
• in fact, notwithstanding COVID-19, Cromwell will exceed its original FY20 earnings guidance
• Cromwell paid its forecast 2020 distribution in full
• Cromwell has not laid off or furloughed any employees
• Cromwell has not sought or accepted any assistance from the Government
• Cromwell maintained the health and safety of its employees and the integrity of its assets
• Cromwell incurred additional interest cost in drawing available debt as a defensive measure
• Cromwell has provided assistance to SMEs who were materially impacted by the COVID-19 crisis, and
• Cromwell has provided financial assistance to its largest tenant (Qantas), via lease payment deferral
The results delivered by Cromwell during these times are testament to the quality and professionalism of Cromwell’s
management and staff and the product of a carefully selected property portfolio that has proven to be resilient and
sustainable in earning income and providing consistent distributions to securityholders.
44
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT RESPONSE TO FIRST STRIKE
During the FY19 year the Nomination and Remuneration Committee undertook the following initiatives:
• appointed an independent Non-Executive Director as Chair
• sought advice from two independent remuneration experts regarding best practice executive KMP remuneration
frameworks
• engaged with and incorporated feedback from securityholders and proxy houses on the FY20 remuneration framework
• established STI KPIs and LTI hurdles that rewarded executives for successful delivery of the “Invest to Manage”
Strategy and aligned executive remuneration outcomes with the experience of shareholders
• increased transparency, clarity and detail provided in the Remuneration Report
Prior to the AGM in November 2019, Cromwell received positive feedback from multiple proxy advisors and institutional
securityholders regarding the Remuneration Framework outlined in the Remuneration Report. However, on a poll at the
AGM in November 2019, 52.99% of votes cast were cast against the resolution to adopt the Remuneration Report. Of those
votes cast against the resolution, 88.56% were cast by the disclosed holdings of two investor groups.
In February 2020 I took over as independent Chair of the Nomination and Remuneration Committee from Andy Fay and
undertook a further review of the Cromwell remuneration framework. Consistent with investors and proxy advisers,
I supported the view that the FY20 framework was a significant improvement on the previous framework, including
that more remuneration was “at risk”, the weighting towards medium and long-term security rewards increased,
the framework more closely aligned with Cromwell peers, it pays fairly for skills and achievement and incentivises
outperformance.
As a result, only a limited number of changes have been incorporated in the FY21 remuneration framework, although we
will continue to review and refine our remuneration arrangements, to ensure they deliver on our goals, account for the
ever-changing business environment, legislative reform and they reflect feedback from our investors and their advisors.
At the Annual General Meeting in November 2020 we will seek your support of this Report.
Yours Sincerely
Tanya Cox
Chair, Nomination and Remuneration Committee
45
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT REMUNERATION REPORT
The remuneration report is presented for the financial year ending 30 June 2020. The report forms part of the Directors’
Report and has been prepared and audited in accordance with the requirements of the Corporations Act 2001 (Cth).
This report is where we explain how performance has been linked to reward outcomes that forge a clear alignment
between Cromwell staff and securityholders.
47
55
Remuneration Overview
CEO Remuneration for 2020
51
Remuneration Governance
51
51
Role of the Nomination and
Remuneration Committee
Services from Remuneration
Consultants
52
Objective of Remuneration
52
Key Management Personnel
53
2020 Performance
55
Fixed remuneration
55 At risk cash award
(short term incentive)
56 At risk equity element
58
Remuneration mix
58 Total expensed/ accrued
remuneration for the CEO
58
Other Executive KMP
Remuneration for 2020
58
Fixed remuneration
58 At risk cash award
(short term incentive)
59 At risk equity element
61
Remuneration mix
61
Non-executive Directors
Remuneration
61
Board Remuneration Structure
61
Total Remuneration for Non-
executive Directors
62
Remuneration and Conditions
of Employment of the KMP
62 Cash and at risk awards
expensed or accrued in 2020
63
63
64
At risk cash awards and performance
rights vesting and forfeiture in 2020
Equity based compensation for the
CEO and other KMP
Employment Contract and
Termination Provisions
65
Securityholdings
65
Loans to Key Management Personnel
65
Other Transactions with Key
Management Personnel
46
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
1. Remuneration Overview
Set out below is a summary of the FY20 CEO and other executive KMP remuneration framework as well as the key
changes proposed for FY21. Some of the proposed changes in FY21 will require shareholder approval at Cromwell’s
November 2020 Annual General Meeting.
Key Questions
FY20
Proposed in FY21
Were any changes
made to the CEO’s
remuneration
structure in FY20
and are there any
proposed for FY21?
No change to the total opportunity or the mix between at risk
(61%) and fixed pay (39%).
See below for proposed
changes to LTI.
LTI hurdles encompass three hurdles one of which is a relative
TSR measure.
An official clawback policy on unvested rights and deferred
securities is in place.
Director discretion applies where a formulaic application
of relevant remuneration metrics would lead to perverse
outcomes.
For LTI grants issued under
the FY20 LTI scheme and STI
awards issued as securities,
the VWAP period for FY21 will
be the 10 days immediately
succeeding the full year
results.
CEO’s remuneration:
Maximum opportunity set at $900,000.
No changes proposed.
Short term incentive
(STI)
STI KPI hurdles 80%/20% financial to non-financial.
An STI gateway in place being 95% of earnings guidance and
adhering to cultural related expectations including acting
ethically and responsibly.
Any exceptional awards remain subject to the cap of $900,000
and Operating EPS guidance having been achieved.
Where any STI KPI is missed by more than 10% of the lower
end of the stretch performance range there is board discretion
when determining the award of any exceptional bonus for
another KPI.
Any STI award will be paid in cash given the relative size of the
CEO’s shareholding of over 17.7 times fixed remuneration at 30
June 2020. This will be reviewed if the CEO’s shareholding falls
below 3 times Fixed Remuneration.
47
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Proposed in FY21
At the AGM in November 2019,
securityholders voted against
the grant of Performance
Rights and stapled securities
to the CEO.
The LTI is an important
component of Cromwell’s
Remuneration Framework
as it rewards performance
in line with the experience of
securityholders.
If the grant of Performance
Rights and stapled securities
to the CEO is not approved at
the next AGM, the board has
determined that Cromwell will
acquire the stapled securities
on market.
Key Questions
FY20
CEO’s remuneration:
Long-term incentive
(LTI):
The LTI opportunity remains at $1,500,000.
The CEO currently has performance rights under the 2019 LTI
scheme approved at the 2018 AGM which have two LTI KPI
hurdles, linked to Total Return and ROCE, as well as the LTI
scheme in existence prior to that AGM.
From FY20 onwards, the new LTI scheme (outlined below) was
intended to commence but was voted against at the 2019 AGM:
FY20 LTI Scheme
Two LTI KPI hurdles are linked to delivering Cromwell’s long-
term strategy and remain a measure of Total Return and
ROCE, being a target range of 8.5% - 11.5%.
The measurement period is 3 years with a fixed stretch range
set for each hurdle over the 3-year period.
A third KPI hurdle is a measurement of the Relative TSR will be
point to point over the three-year period.
The three LTI KPI hurdles are evenly weighted.
LTI securities that are awarded will vest at three years with
50% placed in a trading lock for a further year. Securities in
a trading lock will participate in distributions. There is no
retesting of the KPI.
Vesting starts at 25% at the lower bound of the stretch target,
straight-line vesting to 100% at the upper bound.
Good leaver and Change of Control provisions apply to
unvested securities at a pro rata rate and will be tested. The
board does retain discretion.
See section 6.3 for further details.
Were any changes
made to the other
Executive KMP’s
remuneration
structure in FY20
and are there any
proposed for FY21?
The remuneration structure of other executive KMP includes
an STI opportunity, the FY20 LTI Scheme and the prior LTI
scheme.
Fixed Remuneration for FY21
has been frozen.
50% of any STI will be deferred as securities for one year.
An official clawback policy on unvested rights and deferred
securities has been introduced.
Director discretion applies where a formulaic application
of relevant remuneration metrics would lead to perverse
outcomes.
48
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Proposed in FY21
No changes proposed
Key Questions
FY20
Other KMP
remuneration:
Short term incentive
(STI)
For other executive KMP the STI opportunity is set at between
50% - 100% of fixed remuneration.
The STI KPIs have at least 50% financial to non-financial
hurdles set by the CEO and reviewed by the Board. Most STI
KPIs have stretch target ranges to achieve varying rewards for
varying levels of outperformance.
50% of the award is deferred as securities for one year and is
eligible for distributions during the deferred period.
In the event of a change in control the securities will fully vest.
An STI gateway is in place being 95% of earnings guidance
and adhering to cultural related expectations including acting
ethically and responsibly.
If an executive KMP is determined to be a Good leaver
(retirement, health etc) then unvested securities remain on
foot with Board discretion to accelerate vesting. If an executive
KMP is determined to be a Bad leaver, unvested securities are
forfeited.
Board discretion may be exercised where formulaic application
is likely to produce a material and perverse remuneration
outcome.
Malus and Claw Back clauses allow unvested securities to
be clawed back where a recipient has acted fraudulently,
dishonestly or where there has been a material misstatement
or omission in Cromwell’s financial statements leading to
receipt of an unfair benefit. This may also occur where an
executive KMP fails to meet cultural related expectations
including acting ethically and responsibly.
Other KMP
remuneration:
Long-term incentive
(LTI):
For other executive KMP the LTI opportunity is set at 50% of
Fixed Remuneration for the FY20 LTI scheme.
No changes proposed
49
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Remuneration overview / key questions
Other Key questions
Cromwell’s response
For FY20, Cromwell provided Operating EPS guidance of
8.30cps and DPS guidance of 7.50cps. Despite the impact of
COVID-19, Cromwell paid distributions to securityholders in
line with guidance and achieved earnings ahead of guidance.
This was made possible because of Cromwell’s resilient
Australian property portfolio, holding CPRF on the balance
sheet from acquisition to balance date, the continued strong
performance of CEREIT and the strong half-year result which
was underpinned by significant performance fees earned in
Europe.
At the beginning of the year Cromwell also outlined its “Invest
to Manage” strategy objectives. A key component of this
strategy was the steady growth in stable AUM in Europe. Prior
to 31 December 2019, Cromwell had secured €303m of AUM on
behalf of CEREIT and acquired the CPRF portfolio. By the end
of January 2020, Cromwell had €390m of transactions either
contracted or in exclusivity, expecting to complete in FY20. In
addition, Cromwell was well advanced on approximately €400m
of transactions with various capital partners that had a high
probability of success. However, due to COVID-19, Cromwell
was only able to complete a further €38m by 30 June 2020,
which resulted in total AUM in Europe decreasing during the
year.
Total Shareholder Return in FY20 was negative 16% (FY19:
positive 11%), compared with negative 21% for the S&P/ASX
300 A-REIT accumulation index. Cromwell has outperformed
the S&P/ASX 300 A-REIT accumulation index over the last 1, 3,
5, 10 and 15 years.
No STI or LTI hurdles or KPIs were adjusted to compensate
KMP for the negative impact of COVID-19.
As a result of the above performance the CEO was awarded
61% of his maximum STI opportunity for FY20 (FY19: 89%).
No. The maximum amount approved by securityholders
currently stands at $1,000,000, which has not changed from
2017.
Further information
Link between remuneration
and performance - refer to
section 4.0
Refer to section 7.0.
PRPs approved by securityholders and issued in 2017, vested in
2020, the performance hurdles of which were tested annually
for 3 years.
Refer Section 5.3 and Section
6.3 and summary 8.3
1,597,640 LTI performance rights were granted to KMP in
2020. 594,683 were granted under the prior LTI scheme and
1,002,957 were granted under the FY20 LTI scheme.
3,452,043 LTI performance rights vested and were exercised by
KMP in 2020. All performance rights that vested related to the
prior LTI scheme.
1. How is the Group’s
performance
reflected in
this year’s
remuneration
outcomes?
2. Were there any
changes made
to total Non-
executive Directors'
remuneration pool
in 2020?
3. Did any LTI awards
vest in 2020?
50
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Other Changes for FY20
4. Minimum KMP
Securityolding
Requirement
Non-Executive Directors are required to hold a minimum of one year’s fees, within 3 years from
July 2019 or their start date.
The CEO is required to hold a minimum of 150% of fixed remuneration as securities.
Other executive KMP are required to hold a minimum of 50% of Fixed Remuneration within
four years. Securities in STI and LTI holding lock are included in KMP total holdings. Director
discretion may be exercised based on a staff member’s personal circumstances.
5. KMP security
issues
FY20 STI and LTI security grants will be calculated using a Face Value methodology, with no
adjustment for distributions.
6. Board base fees
and committee fees
On 1 July 2019, fees and payments to non-executive Directors increased by CPI which was 1.3%.
There was no increase to Board or Committee fees on 1 July 2020.
7. Additional KMPs
From 1 July 2019 the Chief Investment Officer became a KMP.
for FY20
8. Notice Periods for
Executive KMPs
All Executive KMP had their 2-way notice periods standardised to 6 months.
2. Remuneration Governance
2.1 ROLE OF THE NOMINATION AND REMUNERATION COMMITTEE
The Board has appointed a Nomination and Remuneration Committee (“Committee”). The Committee oversees the
remuneration framework and monitors remuneration outcomes. In doing so, it considers the interests of securityholders
and the behaviours the Group wishes to promote.
The Board reviews and approves, on an annual basis, the remuneration of Cromwell’s KMP, based on the recommendation
of the Committee.
During the financial year the members of the Committee were:
Ms T Cox
Mr A Fay
Non-executive Director – joined the Committee on 21 October 2019 and appointed Chair on 26 March 2020
Non-executive Director and Chair until 25 March 2020
Mr L Blitz
Non-executive Director
Ms M McKellar
Non-executive Director – retired from the Committee on 28 November 2019
Ms L Scenna
Non-executive Director – joined the Committee on 21 October 2019 and retired from the Committee on 25
March 2020
Ms J Tongs
Non-executive Director – retired from the Committee on 25 March 2020
The Committee operates independently of Cromwell Management and may engage remuneration advisers directly.
Management makes recommendations to the Nomination and Remuneration Committee in relation to the development
and implementation of reward strategy and structure. The CEO provides his recommendation to the Committee on fixed
pay and incentive outcomes for his direct reports.
Further information on the role and activities of the Committee is available on Cromwell’s website and the Corporate
Governance Statement to be released with the Annual Report.
2.2 SERVICES FROM REMUNERATION CONSULTANTS
During the year the Committee engaged the services of Guerdon Associates to advise on the refinement of the short-term
and long-term executive incentive schemes and the impact of COVID-19 on remuneration practices. Guerdon Associates
did not provide a remuneration recommendation as defined by Section 9B of the Corporations Act 2001. Members of the
Committee have consulted directly with a range of proxy advisors and institutional investors to understand their viewpoint
51
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT on issues relating to remuneration generally and have discussed with them the nature and circumstances of Cromwell’s
business operations and economic environments in which it operates.
2.3 OBJECTIVE OF REMUNERATION
The objective of the Cromwell remuneration strategy is to support and drive the execution of the Cromwell business
strategy, which is to utilise our unique Australian and international platform to grow value for securityholders in a
sustainable manner. Cromwell’s remuneration strategy is designed to align behaviours with Cromwell’s strategic
objectives.
Cromwell’s remuneration framework makes provision for:
• Fixed remuneration (FR) which is benchmarked to market and used as a tool to attract and retain executives with the
skills and experience needed to respond to the challenges of achieving Cromwell’s strategic objectives and observing
Cromwell behaviours and values.
• Short-term incentives, where deemed appropriate by the Board, to drive short term objectives such as operational
improvement, cultural transformation and the pursuit of new growth opportunities to position the Group to achieve its
strategic objectives.
• Long-term incentives that are used as both a retention tool and to create alignment between employees and the
objectives of securityholders in securing sustainable returns.
Cromwell strives to create an executive remuneration framework that drives a performance culture, ensuring there is a
strong link between executive pay and the achievement of company strategies and value to securityholders.
3. Key Management Personnel
In this report, key management personnel (KMP) are those individuals having the authority and responsibility for planning,
directing and controlling the activities of the Group, either directly or indirectly.
They comprise:
• Non-executive Directors
• The Executive Director – who is the CEO Paul Weightman
• Other Executives considered KMP
Name
Position / Title
Independent Non-executive Directors
Non-executive Chair
Full year – appointed Chair on 26 February 2020
Non-executive Deputy Chair
Full year – Deputy Chair from 26 February 2020
Leon Blitz
Andrew Fay
Tanya Cox
Lisa Scenna
Jane Tongs
Geoff Levy
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Chair
Michelle McKellar
Non-executive Director
Non-Independent Non-executive Director
Commenced 21 October 2019
Commenced 21 October 2019
Full year
Retired 26 February 2020
Retired 28 November 2019
David Blight
Non-executive Director
Resigned 19 July 2019
Executive Director
Paul Weightman
Chief Executive Officer
Other Executives
Michael Wilde
Chief Financial Officer
Full year
Full year
Jodie Clark
Robert Percy
Chief Operations Officer, Property Licensee
Full year
Chief Investment Officer
Full year
52
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 4. 2020 Performance
Cromwell has committed to an “Invest to Manage” strategy to drive medium-term growth in Cromwell distributions and
security price. This will be achieved by:
• maintaining and enhancing our Australian secured cash flow generating platform and adding value through selective
Australian asset enhancement initiatives;
• leveraging our unique international property management platform to grow revenue from funds we manage.
Our ability to successfully deliver on CEREIT’s growth objectives in FY20 was underpinned by Cromwell’s integrated
European funds management platform and its ability to identify and execute off-market property acquisitions. Following
on from the success of CEREIT, the European platform established a Korean mandate for €88m and secured the Cromwell
Polish Retail Fund, which will be launched as a new fund once the economic environment improves.
The success of this strategy is demonstrated by the growth in Assets under Management and the transition from short-
term mandates to long-term stable funds under management in Europe, as shown in the table below.
Australia
Europe – Short Term
Europe – Stable
New Zealand
Assets Under Management
Financial Year
2020
2019
2018
2017
2016
$’M
4,839
4,992
4,705
4,516
4,303
$’M
1,273
3,009
3,905
5,006
5,506
$’M
4,516
3,072
2,193
–
–
$’M
917
816
681
572
469
Total
$’M
11,545
11,889
11,484
10,094
10,278
Cromwell aims to deliver consistent cash flow returns from the core properties in its direct property portfolio. The core
assets in the direct property portfolio consist of 10 properties worth $2.3 billion with a combined weighted average lease
expiry of 7.5 years and 99% occupancy. The growth in like for like net operating income (NOI) derived from the core
portfolio over the last 3 years has been consistently above the target of 3% and was 3.6% in FY20.
Portfolio
Core
Core +
Like for Like NOI growth
2020
3.6%
5.6%
2019
3.3%
5.5%
2018
4.6%
1.6%
Cromwell’s key financial measures for the last five years are set out below:
2020
2019
2018
2017
2016
Operating earnings per security
8.5 cents
8.2 cents
8.4 cents
8.7 cents
9.4 cents*
Distribution per security
7.5 cents
7.3 cents**
8.3 cents
8.3 cents
8.2 cents
Gearing
Like for like KMP remuneration
as % of operating earnings
42%
3.8%
35%
4.0%
37%
3.9%
45%
4.5%
43%
3.0%
* 2016 operating earnings exceeded expectations due to transactional revenue from one-off performance fees from
Cromwell Box Hill Trust and the opportunistic investment in the Investa Office Fund. When these items are considered,
Cromwell has seen sustained consistent earnings levels from 2015 through to the current financial year, despite
significant investment into the European platform and the impact of COVID-19. At the same time, KMP remuneration has
remained below 5% of operating earnings, despite increasing the number of KMP, which reflects Cromwell’s adherence to
a disciplined approach to managing the business for the benefit of securityholders.
** In 2019, as part of the “Invest to Manage” strategy, Cromwell adjusted its distribution policy down from 95% - 100% of
operating earnings to 85% - 95% of operating earnings. The surplus funds will be reinvested into investment opportunities
to accelerate the growth of the funds management platform.
53
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 400
350
300
250
200
150
100
50
0
CMW Excess Performance
S&P / ASX 300 A-REIT Accum. Index
CMW Total Return
Total return of Cromwell securities
The chart below illustrates Cromwell’s performance against the S&P / ASX300 A-REIT Accumulation Index since stapling in
2006.
Cromwell Performance vs S&P / ASX 300 A-REIT Accumulation Index to 30 June 2020
400
350
300
250
200
150
100
50
0
Cromwell Property Group
S&P/ASX 300 A-REIT Accumulation Index
20
15
10
5
0
6
0
-
c
e
D
-
1
3
7
0
-
n
u
J
-
0
3
7
0
-
c
e
D
-
1
3
8
0
-
n
u
J
-
0
3
8
0
-
c
e
D
-
1
3
9
0
-
n
u
J
-
0
3
9
0
-
c
e
D
-
1
3
0
1
-
n
u
J
-
0
3
0
1
-
c
e
D
-
1
3
1
1
-
c
e
D
-
1
3
1
1
-
n
u
J
-
0
3
-5
-10
-15
2
1
-
n
u
J
-
0
3
2
1
-
c
e
D
-
1
3
3
1
-
n
u
J
-
0
3
3
1
-
c
e
D
-
1
3
4
1
-
n
u
J
-
0
3
4
1
-
c
e
D
-
1
3
5
1
-
n
u
J
-
0
3
5
1
-
c
e
D
-
1
3
6
1
-
n
u
J
-
0
3
6
1
-
c
e
D
-
1
3
7
1
-
n
u
J
-
0
3
7
1
-
c
e
D
-
1
3
8
1
-
n
u
J
-
0
3
8
1
-
c
e
D
-
1
3
9
1
-
n
u
J
-
0
3
9
1
-
c
e
D
-
1
3
0
2
-
n
u
J
-
0
3
-20
Total Securityholder Returns (Annualised)
Cromwell’s Total Securityholder Return (TSR) over the last 1, 3, 5, 10 and 15 years relative to benchmark indices is shown
below.
10 year
15 year
1 year
3 year
5 year
-25
Cromwell Annualised Performance Returns to 30 June 2020
17.4%
14.3%
11.5%
9.4%
6.0%
4.6%
3.6%
2.3%
5.4%
4.7%
0.7%
2.1%
3.1%
(16.1%)
(20.7%)
1 year
3 year
5 year
10 year
15 year
20
15
10
5
0
-5
-10
-15
-20
-25
Cromwell Total Return
S&P / ASX 300 A-REIT Accumulation Index
Cromwell Excess Performance
-16.1%
-20.7%
4.6%
6.0%
2.3%
3.6%
5.4%
4.7%
0.7%
11.5%
9.4%
2.1%
17.4%
3.1%
14.3%
Over all periods Cromwell has outperformed the Property Index.
The Board believes execution of the “Invest to Manage” strategy will result in both sustainable long-term earnings
and higher overall returns to securityholders. Over the course of any short-term period, the total securityholder
return of Cromwell will vary against the index. Over the medium term, the overall performance of Cromwell should be
demonstrated in sustained operating earnings and growth in total securityholder returns. The LTI hurdles implemented
for all KMP will reward the achievement of medium-term returns.
54
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 5.0 CEO Remuneration for 2020
5.1 FIXED REMUNERATION
All employees receive a remuneration package that includes a fixed pay component. The fixed remuneration comprises
cash salary, superannuation and other salary sacrificed benefits.
Fixed remuneration is a set amount reflecting the role complexity, responsibilities and skill levels required, with reference
to the market.
FY20 Strategy and Performance Link
• To attract, retain and motivate executives with the right capability and experience to achieve results in the geographic
regions in which Cromwell operates or has set strategic objectives.
• Reviewed annually by the Board, who consider performance during the year, relevant external market data, tenure and
experience.
• Cromwell’s approach is to initially set fixed remuneration at a level that allows progressive increases to apply as the
individual performs in their role and becomes more experienced.
5.2 AT RISK CASH AWARD (SHORT TERM INCENTIVE)
Short term incentives are included as part of the CEO remuneration package as the CEO has a material impact on the key
marginal drivers of operating earnings in any given financial year.
The purpose of the STI award is to focus the CEO’s efforts on those key marginal drivers and outcomes that are priorities
for Cromwell for the relevant financial year and to motivate the CEO to strive and reward him to achieve stretch
performance objectives that assist the achievement of Cromwell’s strategic agenda.
Short term incentives are paid in cash and once paid there are no forfeiture provisions.
An STI gateway is in place, being 95% of earnings guidance and adhering to cultural related expectations, including acting
ethically and responsibly.
FY20 Strategy and Performance Link
Limited to a maximum of $900,000. The 2020 performance measures for the CEO were:
• 20% linked to the operating profit per stapled security;
• 20% linked to achieving funds management transactional income targets in Europe and Australia;
• 10% linked to achieving funds management recurring income targets in Australia;
• 10% linked to NOI growth of Core portfolio;
• 20% linked to European platform growth strategy (excluding CPRF);
• 20% linked to culture, succession planning, technology systems, Seniors Living strategy and sustainability scores.
KPI’s were weighted 80% to financial measures and 20% non-financial, with the majority of non-financial targets being
measurable.
55
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
The Board’s assessment of the CEO’s STI performance against key performance indicators for 2020 is provided in the
following table:
Key performance indicator – 2020
Commentary
Weighting
%
Opportunity
$
Awarded
$
Earnings per security
Actual operating EPS of 8.50 cps
20%
180,000
157,500
Minimum target – 8.20 cps
Outperformance target – 8.60 cps
Transactional Income
Minimum target – $42 million
Outperformance target – $62 million
EU AUM growth target
Minimum target – €750 million
Outperformance target – €1,000
million
Like for Like NOI Growth – core assets
Minimum target – 3%
Outperformance target – 3.5%
AU funds management income
Minimum target – $9 million
Outperformance target – $10.5 million
People, leadership and environment
Actual transactional income of $51
million was achieved in 2020
20%
180,000
130,500
EU AUM target specifically excluded any
AUM acquired by the Group. This means
CPRF was excluded from the results.
Final result was €303 million
Actual like for like NOI growth for
the core assets was 3.6%. This was
greater than the upper hurdle of 3.5%.
The board has discretion to award an
additional amount of $22,500 in the
event of outperformance but has chosen
not to do so.
Actual AU funds management income of
$9.1 million was achieved
Set targets relate to culture, succession
planning, improving European and Group
systems, progress of development at
Greenway and sustainability outcomes of
GRESB/DJSI
20%
180,000
-
10%
90,000
90,000
10%
90,000
48,000
20%
180,000
135,000
Total bonus awarded
900,000
561,000
5.3 AT RISK EQUITY ELEMENT
2019 LTI Scheme
As outlined in the 2018 remuneration report and approved by securityholders at the 2018 AGM, the LTI scheme for the CEO
was amended in the 2019 year. Under the 2019 scheme the CEO receives $1,500,000 of performance rights granted under
the face value methodology. The rights vest over three years if the below hurdles and vesting conditions are met. The
board sets minimum and outperformance targets annually.
Hurdle
Weighting Vesting
Total Return
(Operating earnings plus change in NTA)/opening NTA
3 year rolling test
Nil exercise price
Face value methodology
Return on Contributed Equity
(Operating earnings plus NTA impact from completed
projects)/Average weighted contributed equity
3 year rolling test
Nil exercise price
Face value methodology
25%
75%
Vesting
Below minimum target – nil
Minimum target – 50% vest
Between minimum and outperformance target –
straight-line vesting from 50% to 100%.
Above outperformance target – board has no discretion
to award above the maximum.
Vesting
Below minimum target – nil
Minimum target – 50% vest
Between minimum and outperformance target –
straight-line vesting from 50% to 100%.
Above outperformance target – board has no discretion
to award above the maximum.
56
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The targets set for 2018, 2019 and 2020 and performance against each target are as follows:
Total Return
Target range
Achieved
Vesting Percentage
Return on Contributed Equity
Target range
Achieved
Vesting Percentage
2020
2019
2018
9.0%-12.0%
9.0%-10.0%
9.0%-12.0%
5.9%
0.0%
9.4%
69.9%
19.5%
100.0%
9.0%-12.0%
8.0%-10.0%
8.0%-18.0%
9.8%
62.6%
9.5%
86.4%
13.6%
78.2%
Based on the performance from 2018 to 2020, of the 899,297 performance rights granted on 21 December 2018, 638,074
will vest and 261,223 are forfeit.
Prior LTI Scheme
Prior to 2019, the following LTI scheme was in operation:
Two equally weighted measures were used:
1.) Meeting key performance indicators (KPIs) - 50%.
KPIs were tailored for each KMP to reflect the responsibilities of their role, as well as their expected contribution
to the achievement of Cromwell’s objectives. KPIs were designed to best incentivise each KMP to meet Cromwell’s
objectives, effectively aligning their interests with securityholders.
Measurement:
Although specific KPIs for each KMP are different each KMP’s performance is assessed according to a traditional
balanced scorecard methodology. The balanced scorecard assigns performance and responsibility criteria across
four broad categories, which align executive and securityholder experience through achievement of strategic
objectives and securityholder ownership.
2.) Achievement of Cromwell Employee Values - 50%.
Cromwell sees its culture and values as an essential element to its success, especially considering the integration of
the European business and its expanding geographical reach. Ensuring cultural alignment with Cromwell’s values is
critical to ensure behaviour is appropriate and processes are consistent.
Measurement:
All staff are assessed on their demonstration of Cromwell’s Values as part of their annual performance review.
Year of
Performance
LTI Vesting
Period
2018
21 Dec 2018 -
7 Nov 2021
2017
16 Feb 2018 -
30 Sep 2020
Performance Measures and Hurdles
In FY18 LTIs were awarded on the same basis of
assessment against KPIs as the KPIs for STIs. In
the year the CEO achieved 94% of his KPIs and was
allocated performance rights on this basis.
To vest the annual hurdles in each year of the option
period must be met. The hurdles were met in 2019
and 2020. Results for 2021 are still to occur.
In FY17 LTIs were awarded on the same basis of
assessment against KPIs as the KPIs for STIs. In
the year the CEO achieved 75% of his KPIs and was
allocated performance rights on this basis.
To vest the CEO must meet 70% of annual hurdles
in two out of the three years comprising the vesting
period. This hurdle has been achieved.
KPI %
Achieved
Maximum
Possible
Grant
Actual
Number
Granted
94%
1,964,448
1,846,581
75%
2,442,933
1,832,200
57
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
5.4 REMUNERATION MIX
A significant component of the CEO Remuneration is linked to short and long-term company performance to assist in
aligning the CEO’s interest with those of securityholders. A higher portion of the CEO remuneration is at risk as he has
the greatest scope to influence Cromwell’s long-term performance.
CEO maximum opportunity at risk remuneration: 61%
5.5 TOTAL EXPENSED/ACCRUED REMUNERATION FOR THE CEO
The total expensed/accrued remuneration of the CEO is as follows:
Total Expensed/Accrued Remuneration - CEO
Fixed remuneration (inclusive of movement in annual
leave, superannuation and other benefits)
Long service leave accrual
STI awarded
LTI – security-based payment expense
Total Expensed/Accrued Remuneration - CEO
2020
$
2019
$
2018
$
2017
$
1,659,132
1,656,986
1,617,931
1,827,634
25,005
561,000
1,012,717
3,257,854
25,005
797,225
1,456,435
3,935,651
220
846,000
471,532
84,188
1,400,000
481,166
2,935,683
3,792,988
Since 2017, the CEO’s remuneration has been progressively shifted from fixed remuneration to at-risk remuneration and
from cash awards to equity-based awards.
6.0 Other Executive KMP Remuneration for 2020
6.1 FIXED REMUNERATION
All employees receive a remuneration package that includes a fixed remuneration component. The fixed remuneration
comprises cash salary, superannuation and other salary sacrificed benefits.
6.2 AT RISK CASH AWARD (SHORT TERM INCENTIVE)
STI opportunity is set at between 50% - 100% of fixed remuneration.
STI KPIs have at least 50% financial hurdles set by the CEO and reviewed by the Board. Most STI KPIs have stretch target
ranges to deliver varying rewards for varying levels of outperformance.
Unlike the CEO, 50% of STI awards are deferred as securities for one year. Other Executive KMP are eligible for
distributions during this period.
An STI gateway is in place being 95% of earnings guidance and adhering to cultural related expectations including acting
ethically and responsibly.
FY20 Strategy and Performance Link - CIO
Limited to a maximum of 100% of fixed remuneration. The 2020 performance measures for the CIO were:
• 20% linked to the operating profit per stapled security;
• 20% linked to achieving funds management transactional income targets in Europe and Australia;
• 10% linked to achieving funds management recurring income targets in Australia;
• 10% linked to NOI growth of Core portfolio;
• 20% linked to European platform growth strategy (excluding CPRF); and
• 20% linked to improvement in Sustainability indices, staff turnover and staff engagement.
KPI’s were weighted 80% to financial measures and 20% non-financial, with the majority of non-financial targets being
measurable. The CIO was awarded 62% of his potential bonus for 2020.
58
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT FY20 Strategy and Performance Link – CFO and COO
Limited to a maximum of 50% of fixed remuneration. The 2020 performance measures for the CFO and COO were:
• 10% linked to the operating profit per stapled security;
• 15% linked to cost control in the European platform;
• 10% linked to earnings in the European platform;
• 15% linked to cost control at a Group level; and
• Remaining 50% linked to staff turnover, staff engagement, internal reporting, improved learning and development
metrics and Sustainability indices.
KPI’s were weighted 50% to financial measures and 50% non-financial, with the majority of non-financial targets being
measurable. The CFO and COO were both awarded 88% of their potential bonus for 2020.
6.3 AT RISK EQUITY ELEMENT
FY20 LTI Scheme
All executive KMP participate in the same LTI scheme.
The number of performance rights granted is calculated under the face value methodology based on the VWAP of
Cromwell’s security price for the 10 days immediately preceding and 10 days immediately succeeding 30 June with no
adjustment for distributions.
Two performance hurdles align with the Board agreed strategy and are measured each year, the average over the 3 years
used to determine vesting. The final measure is Relative TSR, using a point to point measurement.
KPI target ranges are fixed for 3 years and measured over 3 years.
For each LTI hurdle 25% vests at the lower bound with straight line vesting to 100% at the maximum threshold.
At 3 years 50% of performance rights which have vested are held in a trading lock for one year following the vesting date.
The 50% of securities held in the trading lock are entitled to distributions.
Hurdles
33.33% Total Return.
Total Return = (Distributions + Change in NTA)/Opening NTA.
Measured as an average of each of the 3 years. The hurdle is 8.5%-11.5% over the period. Equity Issues that significantly
impact NTA will be considered, as well as significant write downs in intangible assets. In the case of a write down
of intangible assets this would impact negatively on the achieved performance. Where significant value is created in
management driven asset enhancements, this should be reflected in the NTA and hence improve the overall return.
This hurdle aligns the underlying absolute returns that shareholders experience but removes the general listed market
movements which is out of the control of management.
The stretch target range is consistent with moving from the prior Operating Earnings to Distributions, reflects the current
low return environment and is consistent with stretch target returns determined by the successful implementation of
Cromwell’s “Invest to Manage” strategy.
33.33% Return on Contributed Equity (ROCE)
ROCE=Operating Profit/Weighted Average Contributed Equity.
Measured as an average of each of the 3 years. With a ROCE hurdle range of 8.5%-11.5%.
This measure was chosen as it best reflects the sustainable returns achieved on shareholders contributed equity. By
removing the NTA created from completed projects a far more stable and relevant stretch target range can be set which
is accepted as being a good measure of the performance of management. Over the medium to long term an improving
ROCE (as defined) has been shown to correlate with upward share price movements and hence returns experienced by
shareholders.
The upper end of the stretch target range has only been achieved once in the last 6 years and if achieved and based on
historical multiples would result in mid-teen total per annum returns to shareholders (before distribution reinvestment).
This would result in achievement of the stretch targets contained in the successful implementation of Cromwell’s “Invest
to Manage” strategy.
59
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 33.33% Relative TSR
Measured against the S&P/ASX300 A-REIT Accumulation Index on a percentile basis with 50th percentile lower bound and
75th percentile upper bound. Measured once over measurement period.
Below Median - 0% vesting
Other conditions
For LTI, in the event of a successful takeover, KPI hurdles are tested and vest on a pro-rata basis based on achievement of
the hurdles. Board discretion applies for amounts greater than pro-rata.
If the staff member is determined to be a Good leaver (retirement, redundancy etc) unvested rights and securities remain
on foot and are tested based on the normal vesting schedule. There is Board discretion to accelerate vesting after
considering personal circumstances of the executive KMP (e.g. illness) and quantum of outstanding award. If an executive
KMP is determined a Bad leaver then unvested rights and securities are forfeited.
The Board is able to exercise discretion where formulaic application is likely to produce a material and perverse
remuneration outcome.
Malus and Claw Back clause allowing unvested rights and securities to be clawed back where a recipient has acted
fraudulently, dishonestly or where there has been a material misstatement or omission in Cromwell’s financial statements
leading to the receipt of an unfair benefit. This may also occur where the executive KMP fails to meet the cultural related
expectation including acting ethically and responsibly.
The targets set for 2020 and performance against each target are as follows:
Total Return
Target range
Achieved
Vesting Percentage
Return on Contributed Equity
Target range
Achieved
Vesting Percentage
2020
8.5%-11.5%
4.9%
0.0%
8.5%-11.5%
9.8%
56.4%
Details of performance rights granted under the FY20 LTI Scheme are as follows:
M Wilde
J Clark
R Percy
No of performance
rights granted
355,214
355,214
292,529
Grant date
Financial years tested
27-Mar-2020
27-Mar-2020
27-Mar-2020
2020 – 2022
2020 – 2022
2020 – 2022
Expiry date
30-Sep-2022
30-Sep-2022
30-Sep-2022
60
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Prior LTI Scheme
Prior to 2019, the LTI scheme outlined in section 5.3 was in operation:
Year of Performance
LTI vesting period
KPI % Achieved
Michael Wilde – Chief Financial Officer
Maximum
Possible Grant
Actual Number
Granted
2019
2018
2017
4 Oct 2019 – 1 Oct 2022
7 Nov 2018 – 7 Nov 2021
16 Feb 2018 – 1 Nov 2020
Jodie Clark – Chief Operations Officer
2019
2018
2017
4 Oct 2019 – 1 Oct 2022
7 Nov 2018 – 7 Nov 2021
16 Feb 2018 – 1 Nov 2020
Robert Percy – Chief Investment Officer
94%
86%
100%
94%
93%
100%
183,529
216,584
218,852
182,553
216,584
235,312
172,518
186,012
218,852
171,600
200,569
235,312
2019
4 Oct 2019 – 1 Oct 2022
89%
281,535
250,566
6.4 REMUNERATION MIX
Other executive KMP at risk remuneration ranges between 50%-60%.
7.0 Non-executive Directors Remuneration
7.1 BOARD REMUNERATION STRUCTURE
Fees and payments to Non-executive Directors reflect the market in line with the demands which are made on, and the
responsibilities of, the Directors. The Board determines remuneration of Non-executive Directors within the maximum
amount approved by securityholders from time to time. This maximum currently stands at $1,000,000 per annum in total
for fees to be divided among the Non-executive Directors in such a proportion and manner as they agree. Fees are set so
that:
• Cromwell Non-executive Directors are remunerated fairly for their services, recognising the workload, and level of
skills and experience required for the role;
• Cromwell can attract and retain talented Non-executive Directors; and
• Fees are in line with market practice.
7.2 TOTAL REMUNERATION FOR NON-EXECUTIVE DIRECTORS
Non-executive Directors are paid a fixed remuneration, comprising base and committee fees or salary and superannuation
(as applicable). Non-executive Directors do not receive bonus payments or participate in security-based compensation
plans and are not provided with retirement benefits other than statutory superannuation.
Chair
Non-executive Director
Audit & Risk Committee – Chair
Audit & Risk Committee – Member
Nomination & Remuneration Committee – Chair
Nomination & Remuneration Committee – Member
Investment Committee
2020
$
223,052
102,484
20,868
13,911
8,695
5,796
-
2019
$
220,189
101,168
20,600
13,732
8,583
5,721
-
Consistent with prior years, from 1 July 2019, fees and payments to Non-executive Directors were increased by CPI. Non-
executive Director fees were not increased on 1 July 2020.
61
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
8.0 Remuneration and Conditions of Employment of the KMP
8.1 CASH AND AT RISK AWARDS EXPENSED OR ACCRUED IN 2020
The table below outlines the cash remuneration and at-risk cash awards received as well as the value of equity-based
compensation expensed during the year in accordance with applicable statutory accounting rules.
Short-term
Salary(8)
and fees
$
Non-
monetary
benefits
$
At-risk
cash
bonus
$
Total
short
term
$
Post-
employment
Super-
annuation
$
Long-
term
Long
service
leave
$
Security based
payments
Deferred
STI
award
LTI
scheme
$
Total
$
Non-executive Directors:
L Blitz
A Fay(1)
T Cox(2)
L Scenna(3)
J Tongs
G Levy(4)
2020
2019
2020
2019
2020
2020
2020
2019
2020
2019
155,482
120,579
113,577
75,761
75,739
74,816
116,652
116,388
14,263
11,824
6,977
-
-
-
7,903
-
139,406
12,120
201,014
-
M McKellar(5)
2020
53,546
14,208
D Blight(6)
2019
2020
2019
120,579
7,107
92,358
-
-
-
Executive management group (EMG):
-
-
-
-
-
-
-
-
-
-
-
-
-
-
169,745
132,403
120,554
75,761
75,739
74,816
124,555
116,388
151,526
201,014
67,754
120,579
7,107
92,358
-
-
10,790
7,197
7,195
-
11,082
11,057
13,244
19,083
-
-
675
8,774
-
-
-
-
-
-
-
-
-
-
-
-
-
-
P Weightman 2020
1,609,610
28,519
561,000
2,199,129
21,003
25,005
2019
1,617,302
19,153
797,225
2,433,680
20,531
25,005
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
169,745
132,403
131,344
82,958
82,934
74,816
135,637
127,445
164,770
220,097
67,754
120,579
7,782
101,132
1,012,717
3,257,854
1,456,435
3,935,651
M Wilde
J Clark
R Percy (7)
2020
2019
2020
2019
2020
824,599
26,143
187,708
1,038,450
21,003
21,365
187,708
230,410
1,498,936
801,034
15,055
100,000
916,089
20,531
34,468
-
132,377
1,103,465
850,235
22,119
187,708
1,060,062
21,003
19,981
187,708
240,128
1,528,882
798,018
14,052
100,000
912,070
20,531
21,309
-
144,498
1,098,408
676,385
25,046
215,250
916,681
21,003
12,752
215,250
160,341
1,326,027
Total
2020
4,697,154
157,298
1,151,666
6,006,118
126,998
79,103
590,666
1,643,596
8,446,481
remuneration 2019
3,985,799
60,084
997,225
5,043,108
107,704
80,782
-
1,733,310
6,964,904
(1) Mr Fay was appointed on 15 October 2018.
(2) Ms Cox was appointed on 21 October 2019.
(3) Ms Scenna was appointed on 21 October 2019.
(4) Mr Levy retired on 26 February 2020.
(5) Ms McKellar retired on 28 November 2019.
(6) Mr Blight was appointed on 1 June 2018 and resigned 19 July 2019.
(7) Mr Percy became a KMP on 1 July 2019.
(8) Includes any change in accruals for annual leave.
62
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 8.2 AT RISK CASH AWARDS AND PERFORMANCE RIGHTS VESTING AND FORFEITURE IN 2020
For each at risk cash award and grant of performance rights options (equity-based compensation) included in the tables
above, the percentage of the available at-risk cash bonus paid, or equity-based compensation that vested, during the year
and the percentage that was forfeited because the person did not meet the service and performance criteria is set out
below.
The performance rights are subject to vesting conditions as outlined above. No performance rights will vest if the
conditions are not satisfied, hence the minimum value of performance rights yet to vest is $nil. The maximum value of the
performance rights yet to vest has been determined as the amount of the grant date fair value of the performance rights
that is yet to be expensed at balance date. References to options in the table below relate to performance rights.
At-risk cash bonus
Equity based compensation
Cash bonus
paid
%
Cash bonus
forfeited
%
62.3%
88.3%
88.3%
61.5%
37.7%
11.7%
11.7%
38.5%
Years
options
granted
2018/19
2018/19/20
2018/19/20
2018/19/20
Options
vested in
2020
%
92.9%(1)
100.0%(2)
100.0%(2)
100.0%(2)
Options
forfeited in
2020
%
Years
options may
vest
Maximum
value of
grant to vest
$
7.1%(1)
2021/22
-
-
-
2021/22/23
2021/22/23
2021/22/23
827,939
345,145
350,933
260,982
P Weightman
M Wilde
J Clark
R Percy
(1) Related to performance rights issued in 2016 and 2019
(2) Related to performance rights issued in 2016
8.3 EQUITY BASED COMPENSATION FOR THE CEO AND OTHER KMP
Details of the PRP are set out in part 5.2 of the remuneration report.
All Executive Directors and employees of Cromwell are considered for participation in the PRP subject to a minimum
period of service and level of remuneration, which may be waived by the Committee. Grants to Executive Directors are
subject to securityholder approval.
Consideration for granting performance rights, grant periods, vesting and exercise dates, exercise periods and exercise
prices are determined by the Board or Committee in each case. Performance rights carry no voting rights. When
exercised, each performance right is convertible into one stapled security.
The terms and conditions of each grant of performance rights under the PRP affecting remuneration for Key Management
Personnel in the current or future reporting periods are included in the table below:
Grant date
Expiry date
16-Feb-2018
1-Nov-2020
16-Feb-2018
1-Nov-2020
07-Nov-2018
06-Nov-2021
07-Nov-2018
06-Nov-2021
21-Dec-2018
06-Nov-2021
21-Dec-2018
30-Sep-2020
21-Dec-2018
30-Sep-2021
04-Oct-2019
01-Oct-2020
04-Oct-2019
01-Oct-2020
27-Mar-2020
01-Sep-2022
27-Mar-2020
01-Sep-2022
Exercise price
No of performance
rights granted
Assessed value per right
at grant date
-
$0.50
-
$0.50
$0.50
-
-
-
$0.50
-
-
454,164
2,136,616
386,581
278,531
1,846,581
899,297
1,606,038
344,118
250,566
668,638
334,319
75.9¢
28.8¢
80.8¢
34.0¢
35.4¢
72.2¢
87.6¢
106.3¢
57.5¢
63.0¢
30.2¢
63
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Details of changes during the 2020 year in performance rights on issue to Key Management Personnel under the PRP are
set out below.
Granted
Exercised
Forfeited
Lapsed Closing balance
P Weightman
M Wilde
J Clark
R Percy
Opening
balance
8,972,641
535,022
582,877
969,131
-
(2,788,525)(4)
(261,223)
527,732(1)
526,814(2)
543,095(3)
(130,158)(5)
(146,996)(6)
(386,364)(7)
-
-
-
-
11,059,671
1,597,640
(3,452,043)
-
-
-
-
-
5,922,893
932,596
962,695
1,125,862
8,944,046
(1) The fair value at grant date was $368,248.
(2) The fair value at grant date was $367,273.
(3) The fair value at grant date was $296,285.
(4) The fair value at grant date was $613,476. The face value at exercise date was $1,868,312. Exercise price was fully paid.
(5) The fair value at grant date was $87,987. The face value at exercise date was $171,809. Exercise price was fully paid.
(6) The fair value at grant date was $99,369. The face value at exercise date was $194,035. Exercise price was fully paid.
(7) The fair value at grant date was $80,750. The face value at exercise date was $316,818. Exercise price was fully paid.
The assessed fair value at grant date of performance rights granted is allocated equally over the period from grant date to
vesting date, and the amount is included in the remuneration tables in section 8.1 of the remuneration report.
A total of 3,366,613 performance rights were granted during 2020 (2019: 5,145,726) of which 1,597,640 (2019: 4,738,497)
were issued to Key Management Personnel. No approval for the issue of these performance rights was obtained under
ASX Listing Rule 10.14. The model inputs for performance rights granted during the 2020 year are disclosed in note 21.
Plan rules contain a restriction on removing the “at risk” aspect of the instruments granted to executives. Plan
participants may not enter into any transaction designed to remove the “at risk” aspect of an instrument before it vests
without explicit approval from the Board.
8.4 EMPLOYMENT CONTRACTS AND TERMINATION PROVISIONS
Paul Weightman (CEO)
Remuneration and other terms of employment for the Chief Executive Officer are formalised in an employment
agreement. Cromwell may terminate the agreement without notice for gross misconduct; otherwise, Cromwell may
terminate the agreement on six months’ notice, or payment of entitlements for this period in lieu of notice. Mr Weightman
may terminate the agreement at any time with six months’ notice. Other major provisions of the agreement are as follows:
• Term of agreement – Commencing 1 July 2006, no fixed termination date.
• Base salary, exclusive of superannuation, of $1,500,000, to be reviewed annually by the Nomination and Remuneration
Committee.
• Performance cash bonus of up to $900,000 with KPI targets to be reviewed annually by the Nomination and
Remuneration Committee.
• Long term incentive of up to $1,500,000 by way of Performance Rights with vesting hurdles reviewed annually by the
Nomination and Remuneration Committee.
All other executives
Remuneration and other terms of employment for other executives are contained under standard employment contracts.
There are no termination payments due under the contracts other than statutory entitlements for accrued leave.
Remuneration is reviewed annually.
Termination provisions
There are no fixed term conditions in executive employment contracts. Minimum termination periods for executives are
outlined below and adhered to in all cases except in the case of serious breaches of the employment contract.
Notice period employee
Managing Director / CEO
All other key management personnel
Notice period Cromwell
6 months
6 months
6 months
6 months
64
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
8.5 SECURITYHOLDINGS
The number of stapled securities in Cromwell held during the year by key management personnel of Cromwell, including
their personally related parties are as follows:
Balance at 1 July
Performance rights
exercised
Net purchases
(sales)
Balance at 30 June
Non-executive directors:
Mr L Blitz
Mr A Fay
Ms T Cox
Ms L Scenna
Ms J Tongs
Executive Management Group (EMG):
-
646,155
-
-
297,321
Mr P Weightman
Mr M Wilde
Ms J Clark
Mr R Percy
23,846,806
324,536
350,936
596,357
26,062,111
-
-
-
-
-
2,788,525
130,158
146,996
386,364
3,452,043
550,000
26,086
90,000
55,000
82,586
-
(63,504)
-
-
550,000
672,241
90,000
55,000
379,907
26,635,331
391,190
497,932
982,721
740,168
30,254,322
8.6 LOANS TO KEY MANAGEMENT PERSONNEL
Cromwell has provided loans to Mr Weightman, a Director of the Company, for the exercise of his employee options under
Cromwell’s Performance Rights Plan. Each loan term is three years, limited recourse and interest free. The outstanding
balance at balance date was $2,736,980 (2019: $1,960,001).
8.7 OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Cromwell rents an apartment, located at 185 Macquarie Street, Sydney, which is owned by Mr Weightman, a Director of the
Company. Total rent paid during 2020 was $96,200 (2019: $114,396). At balance date an amount of $8,017 (2019: $9,533)
was payable. The payment of rent is on normal commercial terms and conditions and at market rates.
The lease expired on 30 June 2020 and has not been renewed by Cromwell.
End of Remuneration Report
65
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Significant changes in the state of affairs
Changes in the state of affairs of Cromwell during the financial year are set out within the financial report. There were no
significant changes in the state of affairs of Cromwell during the financial year other than as disclosed in this report and
the accompanying financial report.
Subsequent events
Other than as disclosed in note 26, no matter or circumstance has arisen since 30 June 2020 that has significantly affected
or may significantly affect:
• Cromwell’s operations in future financial years; or
• the results of those operations in future financial years; or
• Cromwell’s state of affairs in future financial years.
Environmental regulation
The Directors are not aware of any particular and significant environmental regulation under a law of the Commonwealth,
State or Territory relevant to Cromwell.
Trust Disclosures
ISSUED UNITS
Units issued in the Trust during the year are set out in note 12 in the accompanying financial report. There were
2,612,871,600 (2019: 2,236,642,691) issued units in the Trust at balance date.
VALUE OF SCHEME ASSETS
The total carrying value of the Trust’s assets as at year end was $4,834.0 million (2019: 3,654.1 million). Net assets
attributable to unitholders of the Trust were $2,494.7 million (2019: $2,183.8 million) equating to $0.96 per unit (2019:
$0.99 per unit).
The Trust’s assets are valued in accordance with policies stated in notes to the financial statements.
ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD) REMUNERATION DISCLOSURE
The senior management and staff of Cromwell whose actions have a material impact on the risk profile of the Trust are
considered to be the key management personnel identified in the Remuneration Report which is included in this Directors’
Report.
The amount of the aggregate remuneration paid by Cromwell to those key management personnel in respect of the
financial year ending 30 June 2020 was $8,446,481 (2019: $6,964,904). This amount is comprised of fixed remuneration of
$4,469,887 and variable remuneration of $3,976,594 (2019: $4,234,369 and $2,730,535 respectively).
This remuneration disclosure is being made to satisfy Cromwell Property Securities Limited’s obligations under AIFMD.
References to “remuneration”, “staff” and “senior management” should be construed accordingly.
Indemnifying officers or auditor
Subject to the following, no indemnity or insurance premium was paid during the financial year for a person who is or has
been an officer of Cromwell. The constitution of the Company provides that to the extent permitted by law, a person who is
or has been an officer of the Company is indemnified against certain liabilities and costs incurred by them in their capacity
as an officer of the Company.
Further, the Company has entered into a Deed of access, insurance and indemnity with each of the Directors and the
company secretary. Under the deed, the Company agrees to, amongst other things:
• indemnify the officer to the extent permitted by law against certain liabilities and legal costs incurred by the officer as
an officer of the Company and its subsidiaries;
• maintain and pay the premium on an insurance policy in respect of the officer; and
• provide the officer with access to board papers and other documents provided or available to the officer as an officer of
the Company and its subsidiaries.
66
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Cromwell has paid premiums for directors’ and officers’ liability insurance with respect to the Directors, company
secretary and senior management as permitted under the Corporations Act 2001 (Cth). The terms of the policy prohibit
disclosure of the nature of the liabilities covered and the premiums payable under the policy. No indemnities have been
given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been an
auditor of the Company or any of its controlled entities.
Rounding of amounts
Cromwell is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that instrument amounts in the Directors’ report have been rounded off to the nearest
one hundred thousand dollars, or in certain cases to the nearest dollar, unless otherwise indicated.
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001 (Cth).
The Company may decide to employ Deloitte Touche Tohmatsu on assignments additional to their statutory duties where
the auditor’s expertise and experience with the Company and/or Cromwell are important.
The Directors have considered the position and, in accordance with advice received from the Audit & Risk Committee, are
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 (Cth). 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 (Cth)
as none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants and all non-audit services have been reviewed by the Audit & Risk Committee to ensure
they do not impact the impartiality and objectivity of the auditor.
Details of the amounts paid or payable to the auditor and its related parties for non-audit services provided to Cromwell
are set out below:
Non-audit services
Due diligence services
Tax compliance services – Australia
Tax compliance and other services - overseas
Total remuneration for non-audit services
2020
$
111,801
34,436
44,261
190,478
2019
$
208,050
30,800
181,300
420,150
During the year, Deloitte, as auditor, received remuneration for audit and other services relating to other entities for
which Cromwell EREIT Management Pte. Ltd and Cromwell Investment Services Limited, both controlled entities, act as
responsible entity. The remuneration was disclosed in the relevant entity’s financial reports and totalled $1,272,200 (2019:
$1,542,700).
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 (Cth)
accompanies this report.
The Directors’ Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors.
PL Weightman
Director
Dated this 26th day of August 2020
67
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Riverside Centre
123 Eagle Street
Brisbane QLD 4000
GPO Box 1463
Brisbane QLD 4001 Australia
DX: 10307SSE
Tel: +61 (0) 7 3308 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Board of Directors
Cromwell Corporation Limited and
Cromwell Property Securities Limited
(as responsible entity for Cromwell Diversified Property Trust)
Level 19, 200 Mary Street
Brisbane QLD 4000
26 August 2020
Dear Directors
Auditor’s Independence Declaration
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the Board of Directors of Cromwell Corporation
Limited and Cromwell Property Securities Limited as responsible entity for Cromwell
Diversified Property Trust.
As lead audit partner for the audit of the financial report of Cromwell Property Group (the
stapled entity which comprises Cromwell Corporation Limited, Cromwell Diversified
Property Trust and the entities they controlled at the end of the year or from time to time
during the year) and Cromwell Diversified Property Trust for the year ended 30 June 2020,
I declare that to the best of my knowledge and belief, there have been no contraventions
of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
David Rodgers
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
68
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT FINANCIAL STATEMENTS
70
73
76
Consolidated Statements of
Profit or Loss
Consolidated Statements of
Changes in Equity
Notes to the Financial
Statements
75
Consolidated Statements of
Cash Flows
77 About this report
81
Results
94
Operating Assets
106 Finance and Capital Structure
123 Group Structure
126 Other Items
71
Consolidated Statements
of Other Comprehensive
IncomeIncome
72
Consolidated Balance Sheets
69
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Consolidated Statements of Profit or Loss
FOR THE YEAR ENDED 30 JUNE 2020
Cromwell
Trust
Notes
2020
$M
2019
$M
2020
$M
2019
$M
Continuing operations
Revenue
Rental income and recoverable outgoings
Funds management fees
Development sales and fees
Interest
Distributions
Other revenue
Total revenue
Other income
Fair value net gains from:
Investment properties
Derivative financial instruments
Share of profit of equity accounted investments
Net foreign currency gains
Gain on sale of investment property
Total revenue and other income
Expenses
Property expenses and outgoings
Funds management costs
Property development costs
Finance costs
Employee benefits expense
Administration and overhead costs
Amortisation and depreciation
Fair value net loss from:
Derivative financial instruments
Investments at fair value through profit or loss
Other transaction costs
Loss on disposal of other assets
Costs in relation to asset classified as held for sale
Decrease in recoverable amounts
Net foreign currency losses
Total expenses
Profit before income tax
Income tax expense/(benefit)
Profit for the year from continuing operations
Profit/(loss) for the year is attributable to:
Company shareholders
Trust unitholders
Non-controlling interests
Profit for the year from continuing operations
Earnings per security
Basic earnings per company share / trust unit (cents)
Diluted earnings per company share / trust unit (cents)
Basic earnings per stapled security (cents)
Diluted earnings per stapled security (cents)
5(a)
7(d)
8(f),(g)
7(g)
10(d)
23(a)
8(f),(g)
6(c)
4(c)
4(c)
4(d)
4(d)
253.8
122.1
32.0
5.8
2.0
0.3
416.0
17.5
18.4
39.5
–
3.3
494.7
57.2
8.7
–
71.4
90.2
36.5
7.4
–
4.3
23.4
3.6
–
4.3
2.8
309.8
184.9
3.8
181.1
29.1
152.0
–
181.1
1.12¢
1.12¢
6.96¢
6.94¢
253.2
–
–
9.0
–
0.2
262.4
17.5
18.4
32.4
–
3.3
334.0
64.9
–
–
69.5
–
24.3
–
–
–
19.0
3.4
–
–
4.2
185.3
148.7
(5.1)
153.8
–
152.0
1.8
153.8
5.91¢
5.89¢
197.8
–
–
8.5
–
0.1
206.4
86.4
–
51.4
2.0
0.7
346.9
39.1
–
–
67.8
–
16.5
–
10.5
–
1.8
–
35.3
–
–
171.0
175.9
12.5
163.4
–
162.8
0.6
163.4
7.71¢
7.67¢
198.5
99.2
9.5
4.8
2.5
0.1
314.6
86.4
–
55.6
–
0.7
457.3
34.0
2.0
5.9
68.1
71.4
43.7
2.4
10.5
9.2
2.9
0.3
35.3
0.4
3.0
289.1
168.2
8.3
159.9
(2.9)
162.8
–
159.9
(0.15¢)
(0.15¢)
7.53¢
7.50¢
The above consolidated statements of profit or loss should be read in conjunction with the accompanying notes.
70
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Consolidated Statements of Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2020
Cromwell
Trust
2020
$M
2019
$M
2020
$M
2019
$M
Profit for the year
181.1
159.9
153.8
163.4
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Income tax relating to this item
Other comprehensive income, net of tax
Total comprehensive income
Total comprehensive income is attributable to:
Company shareholders
Trust unitholders
Non-controlling interests
Total comprehensive income
(3.5)
–
(3.5)
177.6
25.0
152.6
–
177.6
34.3
–
34.3
194.2
(0.4)
194.6
–
194.2
0.6
–
0.6
154.4
–
152.6
1.8
154.4
31.8
–
31.8
195.2
–
194.6
0.6
195.2
The above consolidated statements of other comprehensive income should be read in conjunction with the accompanying
notes.
71
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Consolidated Balance Sheets
AS AT 30 JUNE 2020
Cromwell
Notes
18(c)
7(b)
8(a)
7(b)
8(a)
9(a)
18(c)
19(a)
6(e)
18(d)
10(a)
11(a)
10(a)
11(a)
6(e)
12(a)
13(a)
Current assets
Cash and cash equivalents
Receivables
Inventories
Current tax assets
Other current assets
Investment properties classified as held for sale
Equity accounted investments classified as held for sale
Total current assets
Non-current assets
Investment properties
Equity accounted investments
Investments at fair value through profit or loss
Receivables
Intangible assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Dividends / distributions payable
Interest bearing liabilities
Derivative financial instruments
Provisions
Current tax liability
Unearned income
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Derivative financial instruments
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings / (accumulated losses)
Equity attributable to shareholders / unitholders
Non-controlling interests
Trust unitholders
Non-controlling interests
Total equity
2020
$M
194.1
50.3
15.4
1.6
8.7
270.1
44.0
49.8
363.9
3,708.3
668.2
12.9
201.0
7.6
20.3
8.3
4,626.6
4,990.5
111.1
49.0
3.7
13.1
6.8
4.9
13.9
202.5
2,187.5
6.2
0.8
4.5
2,199.0
2,401.5
2,589.0
207.1
28.1
(170.6)
64.6
2,524.4
–
2,589.0
2019
$M
101.6
72.9
15.6
0.9
8.0
199.0
–
150.4
349.4
2,520.9
664.1
22.6
121.3
4.5
5.9
7.0
3,346.3
3,695.7
60.3
40.5
88.0
32.4
5.6
0.7
6.9
234.4
1,268.4
4.7
0.5
4.7
1,278.3
1,512.7
2,183.0
138.4
29.4
(199.7)
(31.9)
2,214.9
–
2,183.0
Trust
2020
$M
117.8
30.9
–
0.7
3.0
152.4
44.0
47.3
243.7
3,708.3
633.7
–
246.7
–
–
1.6
4,590.3
4,834.0
85.6
49.0
0.4
13.1
–
–
13.6
161.7
2,168.2
6.2
–
3.2
2,177.6
2,339.3
2,494.7
2,071.4
30.0
385.0
2,486.4
–
8.3
2,494.7
2019
$M
47.7
182.7
–
–
1.9
232.3
–
148.4
380.7
2,520.9
626.3
0.8
125.4
–
–
–
3,273.4
3,654.1
31.8
40.5
88.0
32.4
–
0.4
6.9
200.0
1,261.0
4.7
–
4.6
1,270.3
1,470.3
2,183.8
1,719.0
29.4
428.5
2,176.9
–
6.9
2,183.8
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
72
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Consolidated Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2020
Cromwell
Attributable to Equity Holders of the Company
2020
Contributed
equity
$M
Other
reserves
$M
Accumulated
losses
$M
Notes
Total
$M
Non-
controlling
interests
(Trust)
$M
Total
equity
$M
Balance at 1 July 2019
138.4
29.4
(199.7)
(31.9)
2,214.9
2,183.0
Profit for the year
Other comprehensive income
Total comprehensive income
–
–
–
–
(4.1)
(4.1)
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of
equity issue costs
Dividends / distributions
paid / payable
Employee performance rights
Total transactions with equity
holders
12(c)
3(b)
68.7
–
–
68.7
–
–
2.8
2.8
29.1
–
29.1
–
–
–
–
Balance as at 30 June 2020
207.1
28.1
(170.6)
29.1
(4.1)
25.0
152.0
181.1
0.6
(3.5)
152.6
177.6
68.7
352.4
421.1
–
2.8
71.5
64.6
(195.5)
(195.5)
–
2.8
156.9
228.4
2,524.4
2,589.0
Attributable to Equity Holders of the Company
2019
Contributed
equity
$M
Other
reserves
$M
Accumulated
losses
$M
Notes
Total
$M
Non-
controlling
interests
(Trust)
$M
Total
equity
$M
Balance at 1 July 2018
118.9
24.3
(196.8)
(53.6)
1,955.1
1,901.5
Profit / (loss) for the year
Other comprehensive income
Total comprehensive income
–
–
–
–
2.5
2.5
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of
equity issue costs
Dividends / distributions
paid / payable
Employee performance rights
Total transactions with equity
holders
12(c)
3(b)
19.5
–
–
19.5
–
–
2.6
2.6
(2.9)
–
(2.9)
–
–
–
–
(2.9)
2.5
(0.4)
162.8
159.9
31.8
34.3
194.6
194.2
19.5
222.7
242.2
–
2.6
22.1
(157.5)
(157.5)
–
65.2
2.6
87.3
Balance as at 30 June 2019
138.4
29.4
(199.7)
(31.9)
2,214.9
2,183.0
The above consolidated statements of changes in equity should be read in conjunction with accompanying notes.
73
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Consolidated Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2020
Trust
Attributable to Equity Holders of the CDPT
Contributed
equity
Other
reserves
Retained
earnings
2020
Notes
$M
Balance at 1 July 2019
1,719.0
Profit for the year
Other comprehensive income
Total comprehensive income
–
–
–
$M
29.4
–
0.6
0.6
Transactions with equity holders in their capacity as equity holders:
$M
Total
$M
428.5
2,176.9
152.0
152.0
–
0.6
152.0
152.6
Non-
controlling
interests
$M
6.9
1.8
–
1.8
Total
equity
$M
2,183.8
153.8
0.6
154.4
Contributions of equity, net
of equity issue costs
12(c)
352.4
Distributions paid / payable
3(b)
–
Total transactions with
equity holders
352.4
–
–
–
–
352.4
–
352.4
(195.5)
(195.5)
(0.4)
(195.9)
(195.5)
156.9
(0.4)
156.5
Balance as at 30 June 2020
2,071.4
30.0
385.0
2,486.4
8.3
2,494.7
Attributable to Equity Holders of the CDPT
Contributed
equity
Other
reserves
Accumulated
losses
2019
Notes
$M
Balance at 1 July 2018
1,496.3
Profit for the year
Other comprehensive
income
Total comprehensive income
–
–
–
$M
(2.4)
–
31.8
31.8
Transactions with equity holders in their capacity as equity holders:
$M
Total
$M
423.2
1,917.1
162.8
162.8
–
31.8
162.8
194.6
Contributions of equity, net
of equity issue costs
12(c)
222.7
Distributions paid / payable
3(b)
Total transactions with
equity holders
–
222.7
–
–
–
–
222.7
(157.5)
(157.5)
(157.5)
65.2
Non-
controlling
interests
$M
6.3
0.6
–
0.6
–
–
–
Total
equity
$M
1,923.4
163.4
31.8
195.2
222.7
(157.5)
65.2
Balance as at 30 June 2019
1,719.0
29.4
428.5
2,176.9
6.9
2,183.8
The above consolidated statements of changes in equity should be read in conjunction with accompanying notes.
74
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Consolidated Statements of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2020
Cromwell
Trust
Note
20(c)
Cash flows from operating activities
Receipts in the course of operations
Payments in the course of operations
Interest received
Distributions received
Finance costs paid
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from sale of investment properties
Payments for investment properties
Proceeds from sale of equity accounted investments
Payments for equity accounted investments
Proceeds from sale of investments at fair value through
profit or loss
Payments for investments at fair value through profit or loss
Receipt of capital return distributions from investments at
fair value through profit or loss
Payments for intangible assets
Proceeds from the sale of property, plant and equipment
Payments for property, plant and equipment
Repayment of loans to related entities and directors
Loans to related entities and directors
Payments for other transaction costs
Net cash used in investing activities
Cash flows from financing activities
Proceeds from interest bearing liabilities
Repayment of interest bearing liabilities
Payment of loan transaction costs
Payments for settlement of derivative financial instruments
Proceeds from issue of stapled securities
Payment of equity issue transaction costs
Payment of dividends/distributions
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Effects of exchange rate changes on cash and cash
equivalents
Cash and cash equivalents at 30 June
2020
$M
375.4
(170.0)
5.2
57.6
(59.9)
(7.1)
201.2
155.0
(1,306.0)
169.8
(50.2)
3.5
–
1.0
(5.5)
–
(1.1)
57.1
(134.1)
(23.4)
(1,133.9)
2,050.4
(1,243.8)
(4.5)
–
408.1
(9.4)
(166.0)
1,034.8
102.1
101.6
(9.6)
194.1
2019
$M
331.3
(200.8)
4.3
47.7
(47.3)
(0.2)
135.0
0.9
(40.2)
–
(129.3)
2.5
(0.9)
–
(3.3)
0.1
(4.2)
5.0
(65.3)
(2.9)
(237.6)
178.5
(250.7)
(4.4)
(12.3)
229.2
(4.0)
(141.3)
(5.0)
(107.6)
204.6
4.6
101.6
2020
$M
275.8
(87.3)
14.9
55.6
(59.7)
(4.1)
195.2
155.0
(1,306.0)
149.0
(50.1)
–
–
–
–
–
–
100.7
(113.4)
(19.0)
(1,083.8)
2,050.4
(1,243.8)
(4.5)
–
343.3
(8.3)
(169.6)
967.5
78.9
47.7
(8.8)
117.8
2019
$M
227.6
(72.2)
8.1
42.7
(47.2)
(0.2)
158.8
0.9
(40.2)
–
(137.2)
0.5
–
–
–
–
–
11.8
(48.3)
(1.8)
(214.3)
171.0
(250.7)
(4.4)
(12.3)
209.7
(4.0)
(141.3)
(32.0)
(87.5)
137.6
(2.4)
47.7
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
75
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Table of Contents
Cromwell’s annual financial report has been prepared in a format designed to provide users of the financial report with
a clearer understanding of relevant balances and transactions that drive Cromwell’s financial performance and financial
position free of immaterial and superfluous information. Plain English is used in commentary or explanatory sections
of the notes to the financial statements to also improve readability of the financial report. Additionally, amounts in the
consolidated financial statements have now been rounded off to the nearest one hundred thousand dollars, unless
otherwise indicated, in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191.
The notes have been organised into the following six sections for reduced complexity and ease of navigation:
About this Report
1 Basis of preparation
Results
2 Operating segment information
3 Distributions
4 Earnings per security
5 Revenue
6 Income tax
Operating Assets
7 Investment properties
8 Equity accounted investments
9 Investments at fair value through profit or loss
Finance and Capital Structure
10 Interest bearing liabilities
11 Derivative financial instruments
12 Contributed equity
13 Reserves
14 Financial risk management
Group Structure
15 Parent entity disclosures
16 Controlled entities
Other Items
17 Leased assets and related leases
18 Other financial assets and financial liabilities
19 Intangible assets
20 Cash flow information
21 Security based payments
22 Related parties
23 Employee benefits expense
24 Auditors’ remuneration
25 Unrecognised items
26 Subsequent events
76
77
81
85
85
87
90
94
99
104
106
110
111
113
114
123
124
126
128
130
130
133
135
138
140
141
141
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT About This Report
This section provides an overview of Cromwell’s accounting policies that relate to the preparation of the financial report
as a whole and do not relate to specific items. Accounting policies for specific items in the Consolidated balance sheets
or Consolidated statements of profit or loss have been included in the relevant note.
1. Basis of preparation
Cromwell Property Group (“Cromwell”) was formed by the stapling of Cromwell Corporation Limited (“the Company”)
and its controlled entities, and Cromwell Diversified Property Trust (“CDPT”) and its controlled entities (“the Trust”). The
financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting
Standards (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board (AASB)
and the Corporations Act 2001 (Cth). The Financial Reports of Cromwell and the Trust have been presented jointly in
accordance with ASIC Corporations (Stapled Group Reports) Instrument 2015/838 relating to combining accounts under
stapling and for the purpose of fulfilling the requirements of the Australian Securities Exchange. Cromwell and the Trust
are for-profit entities for the purpose of preparing the financial statements.
This financial report has been prepared on a going concern basis. The Group’s and Trust’s current assets exceed current
liabilities by $161.4 million and $82.0 million respectively at 30 June 2020 (30 June 2019: $115.0 million and
$180.7 million). In addition, at 30 June 2020, the Group and Trust had available a total of $472.9 million of undrawn but
committed bank debt facilities (2019: $780.7 million) and $194.1 million and $117.8 million of cash (2019: $101.6 million
and $47.7 million).
COMPLIANCE WITH IFRS
The financial report complies with the International Financial Reporting Standards (IFRS) and interpretations adopted by
the International Accounting Standards Board.
HISTORICAL COST CONVENTION
The financial report is prepared on the historical cost basis except for the following:
• investment properties are measured at fair value;
• derivative financial instruments are measured at fair value;
• investments at fair value through profit or loss are measured at fair value; and,
• receivables at fair value through profit or loss are measured at fair value.
ROUNDING OF AMOUNTS
Cromwell is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that instrument amounts in the Directors’ report and financial report have been rounded
off to the nearest one hundred thousand dollars, or in certain cases to the nearest dollar, unless otherwise indicated.
COMPARATIVES
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
a) Critical accounting estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and are
based on historical or professional experience and other factors such as expectations about future events. Revisions to
accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
77
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
The areas that involved a higher degree of judgement or complexity and may need material adjustment if estimates and
assumptions made in preparation of these financial statements are incorrect are:
Area of estimation
Revenue
Fair value of investment property
Equity accounted investments
Fair value of financial instruments
Note
5
7
8
14
b) Impacts of COVID-19 upon financial statement preparation
COVID-19, a respiratory illness, was declared a world-wide pandemic by the World Health Organisation in March 2020.
Immediately following the global outbreak of COVID-19, Cromwell enacted its Business Continuity Plan (“BCP”) and
transitioned its global workforce to remote work arrangements with many of Cromwell’s tenants, clients, suppliers and
banking counterparties also enacting similar arrangements. These actions, coupled with Cromwell’s prior investment in
systems, processes and people has ensured there has been no material interruption to the operation of any of Cromwell’s
business segments due to COVID-19.
However, COVID-19 itself, as well as measures to slow the spread of the virus, have had a significant impact on global
economies and equity, debt and other financial markets. Cromwell has considered the impact of COVID-19 and other
market volatility in preparing these financial statements. Whilst the specific areas of judgement noted previously did not
change, the impact of COVID-19 has resulted in the wider application of judgement within those identified areas. Given the
dynamic and evolving nature of the COVID-19 pandemic, limited recent experience of the economic and financial impacts
of such a pandemic, and the short duration between the declaration of the pandemic and the preparation of the annual
report, changes to the estimates and outcomes that have been applied in the measurement of Cromwell’s assets and
liabilities may arise in the future. It should be noted that against a background of relative uncertainty surrounding how
COVID-19 and its social and economic consequences will unfold, these estimates represent the Directors’ views as they
existed at 30 June 2020.
Key items and related disclosures that have been impacted by COVID-19 were as follows:
• Rental income and recoverable outgoings – notwithstanding Cromwell’s and Trust’s tenant population being heavily
skewed towards government, ASX-listed entities and other robust tenants (see note 2(g)), given recent rental market
volatility, management engaged with all tenants in Australia and Poland in order to achieve the best possible
commercial outcomes for all parties. This process resulted in tenants (168) being provided with appropriate rent relief
in the form of rental waivers ($6.2 million) and deferred payment plans (resulting in the deferred collection of
$7.7 million for periods ranging from 3 months to 24 months), coupled with lease extensions (amortisation cost $0.8
million to 30 June 2020). For further information refer to note 5.
• Investment properties - management reviewed the appropriateness of inputs into investment property valuations. This
process included a comprehensive review and update of relevant cash flow information taking into account the impacts
of COVID-19. Other than those properties classified as being held for sale and 475 Victoria Avenue, NSW, all investment
properties were externally valued at 30 June 2020. Disclosures with respect to Cromwell’s investment properties are
provided in note 7.
• Interest in associates and joint ventures and investments in subsidiaries - Cromwell’s investments in associates and
joint ventures were assessed for indicators of impairment. Where indicators of impairment were identified Cromwell
tested the carrying amount by comparing the investment’s recoverable amount with its carrying value. No investments
were found to be impaired. Disclosures with respect to Cromwell’s equity accounted interests is provided in note 8.
• Receivable, loan assets, and amounts due from subsidiaries - in response to COVID-19 management has undertaken
a review of its relevant tenant receivable and loan asset portfolios, loans to subsidiaries and other financial asset
exposures. This process involved a thorough examination of all receivable balances to assess the extent of expected
credit losses that should be recognised. Relevant risk management disclosures are included in note 14.
c) Basis of consolidation
Stapling
The stapling of the Company and CDPT was approved at separate meetings of the respective shareholders and unitholders
on 6 December 2006. Following approval of the stapling, shares in the Company and units in the Trust were stapled to one
another and are quoted as a single security on the Australian Securities Exchange.
78
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Australian Accounting Standards require an acquirer to be identified and an in-substance acquisition to be recognised. In
relation to the stapling of the Company and CDPT, the Company is identified as having acquired control over the assets of
CDPT.
The Trust’s contributed equity and retained earnings/accumulated losses are shown as a non-controlling interest in this
Financial Report in accordance with AASB 3 Business Combinations. Even though the interests of the equity holders of the
identified acquiree (the Trust) are treated as non-controlling interests the equity holders of the acquiree are also equity
holders in the acquirer (the Company) by virtue of the stapling arrangement.
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries as at 30 June 2020 and the
results of all subsidiaries for the year then ended. Subsidiaries are entities controlled by Cromwell. Control exists when
Cromwell 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. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date that control ceases.
The acquisition method of accounting is used to account for the business combinations by Cromwell Inter-entity
transactions, balances and unrealised gains on transactions between Cromwell entities are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by Cromwell.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the Statement of comprehensive
income and the Balance sheet respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company. A list of
subsidiaries is included in note 16 to the consolidated financial statements.
d) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of Cromwell’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 the Company’s and the Trust’s functional and presentation currency.
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 attributable to part of
the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented
in the Statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the
Statement of profit or loss on a net basis. 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.
Foreign operations
Subsidiaries, joint arrangements and associates that have functional currencies different from the presentation currency
translate their Statement of profit or loss items using the average exchange rate for the year. Assets and liabilities are
translated using exchange rates prevailing at balance date. Exchange variations resulting from the retranslation at closing
rate of the net investment in foreign operations, together with their differences between their Statement of profit or
loss items translated at average rates and closing rates, are recognised in the foreign currency translation reserve. For
the purpose of foreign currency translation, the net investment in a foreign operation is determined inclusive of foreign
currency intercompany balances. The balance of the foreign currency translation reserve relating to a foreign operation
that is disposed of, or partially disposed of, is recognised in the Statement of comprehensive income at the time of
disposal.
79
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The following spot and average rates were used:
Euro
Singaporean Dollar
Polish Złoty
New Zealand Dollar
Spot rate
Average rate
2020
0.61
0.96
0.37
1.07
2019
0.62
0.95
–
1.05
2020
0.61
0.93
0.37
1.05
2019
0.63
0.98
–
1.07
e) Impairment of assets
At each reporting date, and whenever events or changes in circumstances occur, Cromwell assesses whether there is any
indication that any relevant asset may be impaired. Where an indicator of impairment exists, Cromwell makes a formal
estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is
considered impaired and 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 to sell 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). Assets other than goodwill that have been previously impaired are reviewed for possible reversal of the
impairment at each reporting date.
Inventories
f)
Inventories relate to land and property developments that are held for sale in the normal course of business. Inventories
are carried at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the normal
course of business, less the estimated costs of completion and selling expenses.
g) New accounting standards and interpretations adopted by Cromwell and the Trust
Cromwell and the Trust have adopted all applicable new Australian accounting standards and interpretations. Hence, the
accounting standards detailed below are now applicable for the first time for the year ended 30 June 2020:
Application date of the Standard
Application date to Cromwell
– period commencing
AASB 16 Leases(1)
AASB Interpretation 23 Uncertainty over
Income Tax Treatments(2)
1 Jan 2019
1 Jan 2019
1 Jul 2019
1 Jul 2019
(1) For further information see note 17.
(2) For further information see note 6.
There are currently no relevant accounting standards and interpretations that have been issued or amended but are not
yet effective and have not been adopted by Cromwell or the Trust.
80
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Results
This section of the annual financial report provides further information on Cromwell’s and the Trust’s financial
performance, including the performance of each of Cromwell’s three segments, details of quarterly distributions, the
earnings per security calculation as well as details about Cromwell’s income tax items.
2. Operating segment information
(A) OVERVIEW
Operating segments are distinct business activities from which an entity earns revenues and incurs expenses and the
results of which are regularly reviewed by the chief operating decision maker (CODM). Cromwell has three operating
segments which are regularly reviewed by the Chief Executive Officer (CEO), Cromwell’s CODM, in order to make decisions
about resource allocation and to assess the performance of Cromwell. Segment profit / (loss), also referred to as
operating profit, is considered to reflect the underlying earnings of Cromwell and is a key metric taken into account in
determining distributions for Cromwell.
Operating segments below are reported in a manner consistent with the internal reporting provided to the CEO.
Cromwell’s operating segments:
Business activity
Direct property investment
The ownership of investment properties located throughout Australia. This includes
investment properties held by the Trust.
Indirect property investment
Cromwell’s investment in the Polish investment property portfolio and equity
accounted investments in CEREIT and other European collective investment vehicles.
Funds and asset management
Funds management represents activities in relation to the establishment and
management of external funds for retail investors and wholesale funds. Asset
management includes property and facility management, leasing and project
management.
At 30 June 2020, Cromwell managed a number of external retail funds with combined
assets under management of $2.2 billion (30 June 2019: $2.3 billion) and external
wholesale funds in Cromwell's European business, with combined assets under
management of $6.0 billion (30 June 2019: $6.1 billion).
(B) ACCOUNTING POLICY
Segment allocation
Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the
relevant portion that can be allocated to the segment on a reasonable basis. While most of these assets can be
directly attributable to individual segments, the carrying amounts of certain assets used jointly by segments are
allocated based on reasonable estimates of usage.
Segment revenues, expenses and results include transactions between segments. Such transactions are priced on an
“arms-length” basis and are eliminated on consolidation.
Property expenses and outgoings which include rates, taxes and other property outgoings and other expenses are
recognised on an accruals basis.
EBITDA
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is a measure of financial performance and is
used as an alternative to operating profit or statutory profit.
Segment profit / (loss)
Segment profit / (loss), internally referred to as operating profit, is based on income and expenses excluding
adjustments for unrealised fair value adjustments and write downs, gains or losses on all sale of investment
properties and certain other non-cash income and expense items.
81
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (C) SEGMENT RESULTS
The table below shows segment results as presented to the CEO in his capacity as CODM. For further commentary on
individual segment results refer to the Directors’ Report:
2020
Segment revenue
Rental income and recoverable outgoings
Operating profit of equity accounted investments
Development sales and fees
Funds and asset management fees
Distributions
Total segment revenue
Segment expenses
Property expenses
Funds and asset management direct costs
Other expenses
Total segment expenses
EBITDA
Finance costs
Segment profit after finance costs
Unallocated items
Finance income
Corporate costs(1)
Income tax expense
Segment profit
Direct
property
investment
$M
Indirect
property
investment
$M
Funds
and asset
management
$M
Cromwell
$M
228.9
–
32.0
–
–
260.9
45.2
–
1.2
46.4
214.5
42.3
172.2
40.9
51.4
–
–
2.0
94.3
17.4
3.4
5.1
25.9
68.4
12.5
55.9
–
2.9
–
132.9
–
135.8
–
80.8
10.6
91.4
44.4
3.6
40.8
269.8
54.3
32.0
132.9
2.0
491.0
62.6
84.2
16.9
163.7
327.3
58.4
268.9
5.8
(39.2)
(14.3)
221.2
(1) Includes non-segment specific corporate costs pertaining to Group level functions such as finance and tax, legal, risk and compliance, corporate
secretarial and marketing and other corporate services.
2019
Segment revenue
Rental income and recoverable outgoings
Operating profit of equity accounted investments
Development sales and fees
Funds and asset management fees
Distributions
Total segment revenue
Segment expenses
Property expenses
Development costs
Funds and asset management direct costs
Other expenses
Total segment expenses
EBITDA
Finance costs
Segment profit after finance costs
Unallocated items
Finance income
Corporate costs(1)
Income tax expense
Segment profit
Direct
property
investment
$M
Indirect
property
investment
$M
Funds
and asset
management
$M
Cromwell
$M
208.0
–
9.5
–
–
217.5
38.1
5.9
–
1.2
45.2
172.3
36.2
136.1
–
51.8
–
–
2.5
54.3
–
–
–
3.4
3.4
50.9
5.5
45.4
–
2.2
–
105.4
–
107.6
–
–
60.7
12.5
73.2
34.4
5.9
28.5
208.0
54.0
9.5
105.4
2.5
379.4
38.1
5.9
60.7
17.1
121.8
257.6
47.6
210.0
4.8
(39.6)
(1.0)
174.2
(1) Includes non-segment specific corporate costs pertaining to Group level functions such as finance and tax, legal, risk and compliance, corporate
secretarial and marketing and other corporate services.
82
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT A reconciliation of total segment profit to statutory profit as per Consolidated Statement of Profit or Loss is provided in
section (d) below:
(D) RECONCILIATION OF SEGMENT PROFIT TO STATUTORY PROFIT
Segment profit
Reconciliation to profit for the year
Gain on sale of investment properties
Loss on disposal of other assets
Other transaction costs
Operating lease costs
Fair value net gain / (losses):
Investment properties
Derivative financial instruments
Investments at fair value through profit or loss
Non-cash property investment income / (expense):
Straight-line lease income
Lease incentive amortisation
Lease cost amortisation
Other non-cash expenses or non-recurring items
Amortisation of loan transaction costs
Finance costs attributable to discounted lease incentives
Net exchange loss on foreign currency borrowings
Costs in relation to asset classified as held for sale
Decrease in recoverable amounts
Amortisation and depreciation(1)
Relating to equity accounted investments(2)
Net foreign exchange losses
Restructure costs
Net tax losses utilised(3)
Profit for the year
Cromwell
2020
$M
221.2
2019
$M
174.2
3.3
(3.6)
(23.4)
3.1
17.5
18.4
(4.3)
9.7
(25.7)
(3.5)
(10.0)
(0.8)
(1.8)
–
(4.3)
(7.4)
(14.8)
(3.0)
–
10.5
0.7
(0.3)
(2.9)
–
86.4
(10.5)
(9.2)
9.3
(18.8)
(2.0)
(7.8)
–
(12.7)
(35.3)
(0.4)
(2.4)
1.6
(3.0)
0.3
(7.3)
181.1
159.9
(1)
(2)
(3)
Comprises depreciation of plant and equipment and right of use assets and amortisation of intangible assets.
Comprises fair value adjustments included in share of profit of equity accounted entities.
Comprises tax expense attributable to changes in deferred tax assets recognised as a result of carried forward tax losses.
(E) RECONCILIATION OF TOTAL SEGMENT REVENUE TO TOTAL REVENUE AND OTHER INCOME
Total segment revenue reconciles to total revenue and other income as shown in the consolidated Statement of profit or
loss as follows:
Total segment revenue
Reconciliation to total revenue and other income:
Inter-segmental management fee revenue
Straight-line lease income
Lease incentive amortisation
Gain on sale of investment properties
Fair value net gain from investment properties
Operating profit from equity accounted investments
Interest revenue
Total revenue and other income
2020
$M
491.0
7.9
9.7
(25.7)
3.3
17.5
(14.8)
5.8
494.7
2019
$M
379.4
(6.1)
9.3
(18.8)
0.7
86.4
1.6
4.8
457.3
83
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (F) SEGMENT ASSETS AND LIABILITIES
2020
Segment assets
Segment liabilities
Segment net assets
Other segment information
Equity accounted investments
Acquisition / (disposal) of non-current segment asset (1):
Investments in associates
Investments at fair value through profit or loss
Intangible assets
Direct property
investment
$M
3,277.9
1,604.0
1,673.9
Indirect
property
investment
$M
1,523.4
731.4
792.0
6.7
692.7
–
–
–
65.4
–
0.3
Funds and asset
management
$M
189.2
66.1
123.1
18.6
3.0
(3.8)
2.8
(1) For additions to investment property, forming part of the Direct property investment segment, refer to Note 7.
2019
Segment assets
Segment liabilities
Segment net assets
Other segment information
Equity accounted investments
Acquisition of non-current segment assets(1):
Investments in associates
Investments at fair value through profit or loss
Intangible assets
Direct property
investment
$M
Indirect
property
investment
$M
Funds and asset
management
$M
2,709.5
980.7
1,728.8
150.4
3.0
–
–
800.1
436.6
363.5
641.4
148.7
–
0.3
186.1
95.4
90.7
22.7
–
(7.9)
1.9
Cromwell
$M
4,990.5
2,401.5
2,589.0
718.0
68.4
(3.8)
3.1
Cromwell
$M
3,695.7
1,512.7
2,183.0
814.5
151.7
(7.9)
2.2
(1) For additions to investment property, forming part of the Direct property investment segment, refer to Note 7.
(G) OTHER SEGMENT INFORMATION
Geographic information
Cromwell has operations in four distinct geographical markets. These are Australia through the Cromwell Property Group
and the Australian funds it manages, United Kingdom and Europe through its European business (including the property
portfolio in Poland), Asia through its investment in the Singapore-listed CEREIT and New Zealand through its Oyster
Property Funds Limited joint venture.
Non-current assets for the purpose of the disclosure below include investment property, equity accounted investments
and investments at fair value through profit or loss.
Revenue from external customers Non-current operating assets
2020
$M
335.5
142.1
11.0
2.4
491.0
2019
$M
357.3
9.4
11.2
1.5
379.4
2020
$M
3,181.3
783.8
646.3
15.2
4,626.6
2019
$M
2,667.7
24.0
641.4
13.2
3,346.3
Geographic location
Australia
United Kingdom and Europe
Asia
New Zealand
Total
84
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Major customers
Major customers of Cromwell that account for more than 10% of Cromwell’s segmental revenue are listed below. All of
these customers form part of the Direct property investment segment.
Major customer
Commonwealth of Australia
Qantas Airways Limited
New South Wales State Government
Total income from major customers
3. Distributions
(A) OVERVIEW
2020
$M
44.9
31.8
29.3
106.0
2019
$M
36.3
31.7
30.0
98.0
Cromwell’s objective is to generate sustainable returns for our securityholders, including stable annual distributions.
When determining distribution rates Cromwell’s board considers a number of factors, including forecast earnings,
anticipated capital and lease incentive expenditure requirements over the next three to five years and expected economic
conditions. Cromwell aims to return 85 – 95% of profit of Cromwell’s three segments (operating profit) which excludes
unrealised fair value adjustments and other non-cash income and expenses (refer to note 2).
(B) DISTRIBUTIONS FOR THE YEAR
Distributions paid / payable by Cromwell and the Trust during the year were as follows:
2020
2019
22 November 2019
23 November 2018
21 February 2020
22 February 2019(1)
22 May 2020
24 May 2019
21 August 2020
23 August 2019
Total
2020
cents
1.8750¢
1.8750¢
1.8750¢
1.8750¢
7.5000¢
2019
cents
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
2020
$M
48.7
48.8
49.0
49.0
195.5
2019
$M
36.1
40.4
40.5
40.5
157.5
(1) Includes an amount of $2,667,000 for both Cromwell and the Trust in excess of the pro-rata entitlement for the quarterly distribution paid to those
securityholders who acquired securities in December 2018 as part of the non-renounceable entitlement offer.
There were no dividends paid or payable by the Company in respect of the 2020 and 2019 financial years. All of Cromwell’s
and the Trust’s distributions are unfranked.
(C) FRANKING CREDITS
Currently, Cromwell’s distributions are paid from the Trust. Franking credits are only available for future dividends paid by
the Company. The Company’s franking account balance as at 30 June 2020 is $13,851,000 (2019: $8,616,000).
4. Earnings per security
(A) OVERVIEW
This note provides information about Cromwell’s earnings on a per security basis. Earnings per security (EPS) is a
measure that makes it easier for users of Cromwell’s financial report to compare Cromwell’s performance between
different reporting periods. Accounting standards require the disclosure of two EPS measures, basic EPS and diluted
EPS. Basic EPS information provides a measure of interests of each ordinary issued security of the parent entity in the
performance of the entity over the reporting period while diluted EPS information provides the same information but
takes into account the effect of all dilutive potential ordinary securities outstanding during the period, such as Cromwell’s
performance rights.
85
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Below in (c) earnings per share of the Company, the parent entity of Cromwell, and its controlled entities (“CCL”) and
earnings per unit of the Trust are presented as required by accounting standards. As both measures do not provide an EPS
measure for the Cromwell group as a whole, (d) provides earnings per stapled security information.
(B) ACCOUNTING POLICY
Basic earnings per security
Basic earnings per security is calculated by dividing profit / (loss) attributable to securityholders of the Company /
Trust / Cromwell, excluding any costs of servicing equity other than ordinary shares, by the weighted average number
of ordinary securities outstanding during the financial year, adjusted for bonus elements in ordinary securities issued
during the year.
Diluted earnings per security
Diluted earnings per security adjusts the figures used in the determination of basic earnings per security to take into
account the after income tax effect of interest and other financing costs associated with potentially ordinary securities
and the weighted average number of securities assumed to have been issued for no consideration in relation to dilutive
potential ordinary securities.
(C) EARNINGS PER SHARE / UNIT
Basic earnings per company share / trust unit (cents)
Diluted earnings per company share / trust unit (cents)
Earnings used to calculate basic and diluted earnings per company
share / trust unit:
Profit for the year ($M)
Less: Profit attributable to non-controlling interests ($M)
Profit / (loss) attributable to ordinary equity holders of Company
/ Trust ($M)
(D) EARNINGS PER STAPLED SECURITY
Basic earnings per stapled security (cents)
Diluted earnings per stapled security (cents)
Company
Trust
2020
1.12
1.12
181.1
(152.0)
29.1
2019
(0.15)
(0.15)
159.9
(162.8)
(2.9)
2020
5.91
5.89
152.0
1.8
153.8
2019
7.71
7.67
162.8
0.6
163.4
Cromwell
2020
6.96
6.94
2019
7.53
7.50
Earnings used to calculate basic and diluted earnings per stapled security:
Profit for the year attributable to ordinary stapled securityholders of Cromwell ($M)
181.1
159.9
Weighted average number of stapled securities used in calculating earnings per company
share / trust unit / stapled security:
Weighted average number of securities used in calculating basic earnings per company
share / trust unit / stapled security (number)
2,600,448,765
2,121,577,087
Adjustment for calculation of diluted earnings per company share / trust unit:
Performance rights (number)
Weighted average number of ordinary securities and potential ordinary securities used
in calculating earnings per company share / trust unit / stapled security (number)
9,467,485
8,880,788
2,609,916,250
2,130,457,875
86
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (E)
INFORMATION IN RELATION TO THE CLASSIFICATION OF SECURITIES
Performance rights
Performance rights granted under Cromwell’s Performance Rights Plan are considered to be potential ordinary stapled
securities and have been included in the determination of diluted earnings per stapled security to the extent to which they
are dilutive. The performance rights have not been included in the determination of basic earnings per stapled security.
Details relating to Cromwell’s performance rights are set out in note 21.
Convertible bond
The remaining convertible bond on issue is considered to be potential ordinary stapled securities, however has not been
included in the determination of diluted earnings. The ASX market price of Cromwell stapled securities at year end is below
the convertible bond conversion price of $1.1656. Therefore, the convertible bonds are currently considered to be antidilutive.
5. Revenue
(A) OVERVIEW
Cromwell recognises revenue to which AASB 15 Revenue from contracts with customers pertains from the transfer
of goods and services over time and at a point in time in respect of relevant non-lease elements of rental income and
recoverable outgoings, funds management fees and development sales.
The table below presents information about revenue recognised from contracts with customers accounted for in
accordance with AASB 15, revenue from investment properties accounted for in accordance with AASB 16 Leases (which
supersedes AASB 117 Leases from 1 July 2019), revenue accounted for in accordance with AASB 9 Financial Instruments
and revenue accounted for in accordance with AASB 128 Investments in Associates and Joint Ventures:
Cromwell
Trust
2020
$M
43.0
210.8
253.8
122.1
32.0
407.9
5.8
2.0
0.3
8.1
416.0
2019
$M
32.7
165.8
198.5
99.2
9.5
307.2
4.8
2.5
0.1
7.4
314.6
2020
$M
42.0
211.2
253.2
–
–
253.2
9.0
–
0.2
9.2
262.4
2019
$M
31.6
166.2
197.8
–
–
197.8
8.5
–
0.1
8.6
206.4
Rental income and recoverable outgoings – non-lease
components (AASB 15)
Rental income – lease component (AASB 16 and AASB
117 (1))
Rental income and recoverable outgoings
Other revenue recognised under AASB 15:
Funds management fees
Development sales and fees
Total revenue from contracts with customers
Revenue recognised under AASB 9 and AASB 140:
Interest
Distributions
Other revenue
Total other revenue
Total revenue
(1) Comparative period revenue was recognised under AASB 117 Leases.
(B) ACCOUNTING POLICY
Revenue - General
Rental revenue – non-lease components
Cromwell has many contracts with tenants that contain a lease coupled with an agreement to sell other goods or
services (non-lease components). For these contracts the non-lease components are identified and accounted for
separately from the lease components in accordance with AASB 15.
AASB 15 requires Cromwell to allocate consideration in a contract between the lease and non-lease components on a
stand-alone selling price basis. Cromwell generally enters into “gross” leases where the stand-alone selling prices for
the lease and non-lease components are separately stipulated and therefore no allocation estimate is required to be
performed.
87
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Depending on the nature of the non-lease component, the performance obligation is either satisfied at a point in time
or over time. Where Cromwell becomes entitled to the present right to payment for the service, revenue is recognised
at a point in time. Where the tenant simultaneously receives and consumes the benefits of the service, revenue is
recognised over time. Relevant non-lease components include payments for maintenance activities, common area
cleaning and air conditioning and other goods and services transferred to tenants.
Payment for the non-lease components is generally due in advance, immediately prior to the time the service is
provided.
Funds management fees
Funds management fee revenue is recognised in respect of the following types of service contracts with customers:
• Property (asset) management and fund administration services - these services are provided to customers as a
series of distinct goods or services that are substantially the same and transferred over time, either separately or in
combination as an integrated offering, and are treated as a single performance obligation. Variable consideration is
allocated to each distinct increment of service and recognised as revenue as the service is performed over time.
• Equity raising, loan establishment, acquisition, project management and leasing services - due to the specialised
nature of these services, the customer does not benefit from the process undertaken, but rather the outcome.
Cromwell is only entitled to payment for services upon the successful completion of the contract. Hence, revenue is
recognised at a point in time, upon completion of the service.
• Performance fees - contracts with customers identify performance obligations with regard to the outcome
Cromwell achieves in respect of its management of assets or transactions on behalf of customers. The performance
obligation is satisfied at a point in time, at the completion of the service or fulfilment of the transaction on behalf of
customers. Revenue is constrained and not recognised until the successful completion of the service or transaction
when it becomes highly probably that there will be no significant reversal of revenue in future and Cromwell has a
present right to payment (also see (c) below).
Payment for these services is generally due within 30 days from the time the service is successfully completed.
Development revenue
Development sales comprises income from the disposal of property inventories and from the provision of development
management services. Revenue is recognised at the point in time that control of the asset has been transferred to the
customer, generally upon legal settlement date.
Payment for these services is generally due on settlement date of the sale.
Revenue – Other income
Rental income
Rental income from investment property is recognised on a straight-line basis over the lease term. Lease incentives
granted are considered an integral part of the total rental revenue and are recognised as a reduction in rental income
over the term of the lease, on a straight-line basis.
Share of profit of equity accounted investments
Information with respect to Cromwell’s equity accounted interests is provided in note 8.
Interest revenue
Interest revenue is recognised as it accrues using the effective interest method. Interest revenue is predominately
earned from financial assets including cash and trade and other receivables and is recognised under AASB 9.
Distributions
Revenue from distributions is earned from investments and is recognised under AASB 9 when Cromwell’s right to
receipt is established.
Contract liabilities (unearned income)
Cromwell sometimes receives payments from customers in relation to future periods whereby the underlying receipt is
not actually due and payable to Cromwell. This results in a contract liability being recognised upon receipt of the cash
which is recognised in Cromwell’s Balance sheet as unearned income.
88
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (C) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Performance fees
Certain contracts with customers identify performance obligations with regard to the outcome Cromwell achieves
in respect of its management of assets or transactions on behalf of customers (performance fees), as well as the
relevant stand-alone selling price in relation to the satisfaction of the same. The consideration in relation to these
contracts is in the form of performance fees linked to the variable returns generated by Cromwell on the customer’s
behalf. Applying the expected value method, Cromwell estimates the amount of variable consideration that it will
be entitled to under the relevant contract and constrains the amount of revenue recognised to the amount that is
considered highly probable will not result in a significant reversal. Variable consideration is assessed at each reporting
period to account for any changes in circumstances.
Impact of COVID-19
Australia - collections were relatively unimpacted by the government relief measures imposed to combat COVID-19
due to most of the tenant population being heavily skewed towards government and other tenants in markets not
heavily impacted by the pandemic. However, tenant relief measures introduced (and granted) differed slightly between
jurisdictions and included rent waivers and deferred payment plans (sometimes coupled with lease term extensions).
Not all of these lease renegotiations have been completed and certain estimates have been made to reflect the most
likely outcome of these using all available pertinent information available.
Poland – tenant collections were relatively unimpacted by the government “Anti-crisis shield” measures imposed to
combat COVID-19 due to most collections being generated by tenants exempted from these measures (these being
hypermarkets, pharmacies and other essential services). However, other than the lockdown and related closures
(which have now discontinued), government measures included the mandated renegotiation of all commercial leases
in Poland. Not all of these lease renegotiations have been completed and certain estimates have been made to reflect
the most likely outcome of these using all available pertinent information available.
For further information in relation to the treatment of expected credit losses in relation to receivables see note 14(b).
(D) DISAGGREGATION OF REVENUE FROM CONTRACTS
The tables below present information about the disaggregation of revenue items from Cromwell’s contracts with relevant
customers:
Cromwell
Direct property investment
Rental income
Development sales and fees
Funds and asset management
Funds management fees
Total revenue from contracts with customers
2020
2019
Point
in time
$M
Over
time
$M
Other(1)
$M
Total
$M
Point in
time
$M
Over
time
$M
Other(1)
$M
Total
$M
11.0
32.0
58.2
101.2
32.0
210.8
253.8
–
63.9
95.9
–
–
210.8
32.0
122.1
407.9
12.2
9.5
37.2
58.9
20.5
165.8
198.4
–
62.0
82.5
–
–
9.5
99.2
165.8
307.1
(1) Includes rental income derived from sources other than those recognised and measured in accordance with AASB 15 Revenue from Contracts with
Customers.
Trust
Rental income
Total revenue from contracts with customers
Point
in time
$M
10.0
10.0
2020
Over
time
$M
32.0
32.0
Other(1)
$M
211.2
211.2
2019
Point in
time
$M
11.0
11.0
Total
$M
253.2
253.2
Over
time
$M
20.6
20.6
Other(1
$M)
166.2
166.2
Total
$M
197.8
197.8
(1) Includes rental income derived from sources other than those recognised and measured in accordance with AASB 15 Revenue from Contracts with
Customers.
89
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 6. Income tax
(A) OVERVIEW
This note provides detailed information about Cromwell’s income tax items and accounting policies. This includes a
reconciliation of income tax expense if Australia’s company income tax rate of 30% was applied to Cromwell’s profit before
income tax as shown in the Statement of profit or loss to the actual income tax expense / benefit as well as an analysis of
Cromwell deferred tax balances.
Accounting standards require the application of the “balance sheet method” to account for Cromwell’s income tax.
Accounting profit does not always equal taxable income. There are a number of timing differences between the recognition
of accounting expenses and the availability of tax deductions or when revenue is recognised for accounting purpose and
tax purposes. These timing differences reverse over time but they are recognised as deferred tax assets and deferred tax
liabilities in the balance sheet until they are fully reversed. This is referred to as the “balance sheet method”.
Taxation of the Trust
Under current Australian income tax legislation, the Trust and its sub-Trusts are not liable for income tax on their taxable
income (including assessable realised capital gains) provided that the unitholders are presently entitled to the income of
the Trust. During the prior year the Trust acquired controlling interests in a number of corporate entities that are subject
to income tax. The income tax applicable to these corporate entities is represented below.
(B) ACCOUNTING POLICY
Income tax
Cromwell’s income tax expense for the period is the tax payable on the current period’s taxable income adjusted by
changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to
measure the deferred tax asset or liability.
Deferred tax is not recognised for the recognition of goodwill on business combination and 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 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. Current and deferred
tax balances attributable to amounts recognised in other comprehensive income or directly in equity are also
recognised in other comprehensive income or directly in equity.
Tax consolidation
The Company and its wholly-owned entities (this excludes the Trust and its controlled entities and foreign entities
controlled by the Company) have formed a tax-consolidated group and are taxed as a single entity. The head entity
within the tax-consolidated group is Cromwell Corporation Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the
members of the tax-consolidated group are recognised in the separate financial statements of the members of the
tax-consolidated group, using the ‘separate taxpayer within group’ approach by reference to the carrying amounts
of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax
consolidation.
Any current tax liabilities or assets and deferred tax assets arising from unused tax losses of the subsidiaries are
assumed by the head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to (from)
other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts referred to in
the following section. Any difference between these amounts is recognised by the Company as an equity contribution
or distribution.
90
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the
extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the
asset can be utilised. Any subsequent period adjustment to deferred tax assets arising from unused tax losses, as a
result of revised assessments of the probability of recoverability, is recognised by the head entity only.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding
arrangement, which sets out the funding obligations of members of the tax-consolidated group in respect of tax
amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability
(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head
entity recognising an inter-entity receivable (payable) equal in amount to the tax liability (asset) assumed. The inter-
entity receivable (payable) is at call.
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of
the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.
The head entity, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing
agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between
the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the
financial statements in respect of this agreement, as payment of any amounts under the tax sharing agreement is
considered remote.
AASB Interpretation 23 Uncertainty over Income Tax Treatments
The AASB has issued a new interpretation in order to reduce diversity in practice regarding the recognition and
measurement of current tax liabilities, deferred tax liabilities and deferred tax assets as defined by paragraph 5 of AASB
112 Income Taxes. The interpretation is applied to the determination of taxable profit (or losses), tax bases, unused tax
losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments. The interpretation
requires an entity to use judgement to determine whether each tax treatment should be considered independently or
whether some tax treatments should be considered together. Cromwell has applied IFRIC 23 from 1 July 2019.
Cromwell maintains and executes robust and comprehensive income tax management procedures and no material
contentious or uncertain tax positions have currently been identified. Hence, the impact of the application of this
interpretation has been considered immaterial.
(C) INCOME TAX EXPENSE
Current tax expense
Deferred tax expense
Adjustment in relation to prior periods
Income tax expense
Deferred tax expense
(Increase) in deferred tax assets
Decrease / (increase) in deferred tax liabilities
Total deferred tax expense
Cromwell
Trust
2020
$M
10.6
(4.2)
(2.6)
3.8
(1.7)
(5.0)
(6.7)
2019
2020
$M
1.4
7.1
(0.2)
8.3
(5.0)
12.1
7.1
$M
2.9
(5.3)
(2.7)
(5.1)
(1.7)
(6.2)
(7.9)
2019
$M
0.3
12.1
0.1
12.5
–
12.1
12.1
91
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (D) NUMERICAL RECONCILIATION BETWEEN INCOME TAX EXPENSE / (BENEFIT) AND PRE-TAX PROFIT
Cromwell
Trust
Profit before income tax
Tax at Australian tax rate of 30% (2019: 30%)
Tax effect of amounts which are not
deductible / (taxable) in calculating taxable income:
Trust income – refer above for Taxation of the Trust
Fair value movements not deductible
Non-deductible income
Movement in tax losses recognised
Movement in initial recognition exemption
Tax credits foregone on foreign earnings
Adjustment in relation to prior periods
Difference in overseas tax rates
Income tax expense/(benefit)
(E) DEFERRED TAX
(i) Deferred tax assets
Deferred tax assets are attributable to:
Interests in managed investment schemes
Investment properties
Employee benefits
Transaction costs and sundry items
Unrealised foreign currency gains
Tax losses recognised
Total deferred tax assets
Movements:
Balance at 1 July
Credited/(charged) to profit or loss
Credited/(charged) to other comprehensive income
Adjustment in relation to prior periods
Other movements
Balance at 30 June
2020
$M
184.9
55.5
(52.5)
(2.9)
(2.4)
(1.7)
6.4
2.4
(2.7)
1.7
3.8
2019
$M
168.2
50.5
(35.1)
(0.3)
(9.1)
2.2
–
–
(0.1)
0.2
8.3
2020
$M
148.7
44.6
(52.5)
(2.6)
(4.0)
0.6
6.4
2.4
(2.6)
2.6
(5.1)
Cromwell
Trust
2020
$M
(4.1)
(0.7)
2.6
2.9
1.8
5.8
8.3
7.0
(0.7)
(0.3)
2.4
(0.1)
8.3
2019
$M
(1.7)
–
2.0
2.6
1.5
2.6
7.0
1.7
5.0
0.3
–
–
7.0
2020
$M
–
(0.7)
–
1.0
–
1.3
1.6
–
(0.9)
–
2.6
(0.1)
1.6
2019
$M
175.9
52.8
(35.1)
–
(5.2)
–
–
–
–
–
12.5
2019
$M
–
–
–
–
–
–
–
–
–
–
–
–
–
The amount of temporary differences and carried forward tax losses recognised as a deferred tax asset is based on
projected earnings over a limited period that the Directors considered to be probable. Projected earnings are re-assessed
at each reporting date. Unrecognised tax losses at balance date were $26,646,300 (2019: $28,957,000).
92
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (ii) Deferred tax liabilities
Deferred tax liabilities are attributable to:
Interests in managed investment schemes
Interests in other investments
Receivables
Total deferred tax liabilities
Movements:
Balance at 1 July
Credited/(charged) to profit or loss
Credited/(charged) to other comprehensive income
Adjustment in relation to prior periods
Balance at 30 June
Cromwell
Trust
2020
$M
3.2
1.4
(0.1)
4.5
4.7
(4.9)
4.8
(0.1)
4.5
2019
$M
4.7
–
–
4.7
9.7
12.1
(17.1)
–
4.7
2020
$M
3.2
–
–
3.2
4.6
(6.2)
4.8
–
3.2
2019
$M
4.6
–
–
4.6
9.7
12.1
(17.2)
–
4.6
The deferred tax liability relates to an overseas tax jurisdiction. In accordance with AASB 112 Income Taxes the deferred tax
liability was not offset against the deferred tax assets of the Group, which relate to the Australian tax jurisdiction.
93
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Operating Assets
This section of the annual financial report provides further information on Cromwell’s and the Trust’s operating assets.
These are assets that individually contribute to Cromwell’s revenue and include investment properties, equity accounted
investments, investments in unlisted securities and leased assets and related leases.
7. Investment properties
(A) OVERVIEW
Investment properties are properties (land, building or both) held solely for the purpose of earning rental income and / or
for capital appreciation. Cromwell’s investment property portfolio comprises 26 (2019: 19) commercial properties of which
18 (2019: 17) properties are predominantly office use with the remaining 8 (2019: 2) being retail properties and vacant land.
This note provides further details on Cromwell’s investment property portfolio, including details of individual properties,
details of sales and acquisitions as well as details on the fair value measurement of the properties.
(B) DETAILS OF CROMWELL’S AND THE TRUST’S INVESTMENT PROPERTIES
Portfolio Title
Independent valuation
Amount
$M
Date
Carrying amount
as at
2020
$M
2019
$M
Fair value adjustment
for the year ended
2019
$M
2020
$M
Core+
Core
Core
Core
Core+
Core
Core+
Core
Core
Core
Core
Core+
Core
Core+
Core+
H.F.S.
Active
Active
Core
Core
H.F.S.
(1)
(1)
(1)
(1)
(2)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(2)
(2)
(2)
(2)
(2)
(2)
(1)
(1)
(1)
Jun 2020
Jun 2020
Jun 2020
Jun 2020
Jun 2020
Jun 2020
PART SOLD
Jun 2020
Jun 2020
SOLD
Jun 2020
Jun 2020
Jun 2020
Jun 2020
Jun 2020
N/A
Jun 2020
May 2019
Jun 2020
Jun 2020
N/A
96.0
525.0
242.0
520.0
297.0
300.0
120.0
51.0
37.5
–
29.3
12.5
290.0
40.5
29.8
–
10.0
8.3
337.0
15.6
–
2,961.5
96.0
525.0
242.0
520.0
297.0
300.0
120.2
51.0
37.5
–
29.3
12.5
290.0
40.5
29.8
–
10.0
8.3
337.0
15.6
–
2,961.7
80.0
–
232.0
502.0
298.0
260.0
232.0
48.5
36.5
32.0
28.5
7.2
280.4
50.0
30.5
14.0
8.8
7.5
306.0
16.5
50.5
2,520.9
16.5
(13.8)
9.1
14.1
(1.4)
40.0
6.3
2.5
0.8
–
0.7
3.0
8.0
(9.8)
0.1
(0.3)
(0.3)
-
31.7
(0.9)
(22.9)
83.4
5.7
–
3.6
7.2
17.8
15.0
20.5
5.5
2.5
2.5
2.7
(7.9)
16.9
(7.2)
3.7
(10.0)
(27.2)
–
30.0
0.9
4.2
86.4
Australia
200 Mary Street, QLD
400 George Street, QLD
HQ North, QLD
203 Coward Street, NSW
207 Kent Street, NSW
2-24 Rawson Place, NSW
475 Victoria Avenue, NSW (4)
2-6 Station Street, NSW
84 Crown Street, NSW
11 Farrer Place, NSW
117 Bull Street, NSW
Regent Cinema Centre, NSW
Soward Way, ACT
TGA Complex, ACT
243 Northbourne Avenue, ACT
13 Keltie Street, ACT
19 National Circuit, ACT
Tuggeranong Office Park, ACT
700 Collins Street, VIC
Village Cinemas, VIC
Wakefield Street, SA
Total - Australia
Poland
Janki, Warszawa
Korona, Wrocław
Ster, Szczecin
Rondo, Bydgoszcz
Pol
Pol
Pol
Pol
Pol
Pol
(1)
(3)
(3)
(1)
(1)
(3)
Jun 2020
Jun 2020
Jun 2020
Jun 2020
Jun 2020
Jun 2020
372.3
138.9
91.9
89.8
25.4
21.6
739.9
3,701.4
372.3
141.2
94.9
89.8
25.4
23.0
746.6
3,708.3
–
–
–
–
–
–
–
2,520.9
(34.9)
(14.7)
(10.9)
(3.5)
(1.1)
(0.8)
(65.9)
17.5
–
–
–
–
–
–
–
86.4
Tulipan Łódź
Kometa, Toruń
Total - Poland
Total investment properties
Held for sale
–
13 Keltie Street, ACT
–
Wakefield Street, SA
Total - Held for sale
–
Total – all investment properties
86.4
Title: (1) Freehold, (2) Leasehold, (3) Carrying value includes right of use assets recognised under relevant accounting standards.(4) 50% ownership interest
H.F.S. – property classified as held for sale.
14.0
30.0
44.0
3,752.3
–
–
–
2,520.9
–
–
–
3,701.4
–
–
–
17.5
H.F.S.
H.F.S.
N/A
N/A
(2)
(1)
94
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (C) ACCOUNTING POLICY
Investment properties
Investment properties are initially measured at cost including transaction costs and subsequently measured at fair value,
with any change therein recognised in profit or loss.
Fair value is based upon active market prices, given the assets’ highest and best use, adjusted if necessary, for any
difference in the nature, location or condition of the relevant asset. If this information is not available, Cromwell uses
alternative valuation methods such as discounted cash flow projections or the capitalised earnings approach. The highest
and best use of an investment property refers to the use of the investment property by market participants that would
maximise the value of that investment property.
The carrying value of the investment property includes components relating to lease incentives and other items relating to
the maintenance of, or increases in, lease rentals in future periods.
Investment properties under construction are classified as investment property and carried at fair value. Finance costs
incurred on investment properties under construction are included in the construction costs.
Lease incentives
Lessees may be offered incentives as an inducement to enter into non-cancellable operating leases. These incentives
may take various forms including up front cash payments, rent free periods, rental abatements over the period or a
contribution to certain lessee costs such as fit out costs or relocation costs. They are recognised as an asset in the
Balance sheet as a component of the carrying amount of investment property and amortised over the lease period as a
reduction of rental income.
Initial direct leasing costs
Initial direct leasing costs incurred by Cromwell in negotiating and arranging operating leases are recognised as an asset
in the Balance sheet as a component of the carrying amount of investment property and are amortised as an expense on a
straight-line basis over the lease term.
(D) CRITICAL ACCOUNTING ESTIMATES (FAIR VALUE MEASUREMENT)
Cromwell’s investment properties, with an aggregate carrying amount of $3,752.3 million (2019: $2,520.9 million), are
measured using the fair value model as described in AASB 140 Investment Property. Fair value is defined as 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.
Property valuations
At balance date the adopted valuations for 22 of Cromwell’s investment properties are based on independent external
valuations representing 95% of the value of the portfolio. The balance of the portfolio is subject to internal valuations
having regard to previous external valuations and comparable sales evidence, or, in the case of investment properties held
for sale, with reference to the relevant sale price. Cromwell’s valuation policy requires all properties to be valued by an
independent professionally qualified valuer with a recognised relevant professional qualification at least once every two
years.
All property valuations utilise a combination of valuation models based on discounted cash flow (“DCF”) models and
income capitalisation models supported by recent market sales evidence.
Impact of COVID-19 on property valuations
For the year ended 30 June 2020 Cromwell’s approach to property valuations was substantially consistent with prior
years, being in accordance with the established Valuations policy, but with an added emphasis in relation to the impact of
COVID-19 upon inputs relevant to the valuation model for each property. Whilst recent sales data is currently scarce due
to a material contraction of transactional activity, information in relation to the various inputs to the valuation models,
most particularly capitalisation and discount rates, each of which can be adjusted to reflect COVID-19 has become more
readily available. Further, underlying net property income data, including forecast data in relation to tenant occupancies
and recoveries has become more reliable as the COVID-19 crisis has progressed and the underlying market dynamic has
become less opaque.
It should be noted that external valuers have specified in their reports that their valuations at 30 June 2020 were
performed in an unusual market context, notably the absence of transactions initiated after the outbreak of the pandemic
and difficulties associated with estimating the outlook for changes in the investment property market given the nature of
95
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT the recent health crisis, and they were working within the context of material valuation uncertainty.
Movements in relevant significant unobservable inputs are represented in the table below. Key points to note:
• Annual net property income (reflective of weighted average lease expiry (“WALE”) and occupancy) is an extremely
influential input. DCF models are used to value the investment properties by assessing the impact of future cash flows
associated with ownership of the investment property. Notwithstanding the application of government Code of Conduct
legislation, due to the resilient nature of the tenant population projected cash flow collections from tenants have not
been materially negatively impacted by COVID-19 during the year. This has led to investment property valuations
remaining robust.
• Adopted capitalisation rates – these are based upon existing market evidence at the time the valuation is prepared and
reflect the quality of the underlying investment property itself as well as the quality of the tenant population therein.
These have not moved significantly during the year which is reflected in the fair values of the investment property
portfolio remaining robust at year end despite some market headwinds.
For further information in respect of valuation methodologies adopted and input data utilised see the table below.
Methodologies and key inputs used to measure fair value
DCF method
Income
capitalisation
method
Under the DCF method, a property’s fair value is estimated using explicit assumptions regarding
the benefits and liabilities of ownership over the asset’s life including an exit terminal value. The
DCF method involves the projection of a series of cash flows on a real property asset. To this
projected cash flow series, an appropriate, market derived discount rate is applied to establish
the present value of the income stream associated with the real property.
This method involves assessing the total net market income receivable from the property and
capitalising this perpetually, using an appropriate, market derived capitalisation rate, to derive
a capital value, with allowances for capital expenditure reversions such as lease incentives and
required capital works payable in the near future and overs / unders when comparing market
rent with passing rent.
Annual net property
income
Annual net property income is the contracted amount for which the property space is leased. In
the net property income, the property owner recovers outgoings from the tenant.
Market rent
Adopted
capitalisation rate
Adopted discount
rate
Market rent is the estimated amount for which a property or space within a property could
be leased between a willing lessor and a willing lessee on appropriate lease terms in an
arm’s length transaction, after proper marketing and wherein the parties have each acted
knowledgeably, prudently and without compulsion.
The rate at which net market income is capitalised to determine the value of the property. The
rate is determined with regards to market evidence (and the prior external valuation for internal
valuations).
The rate of return used to convert a monetary sum, payable or receivable in the future, into
present value. It reflects the opportunity cost of capital, that is, the rate of return the capital
can earn if put to other uses having similar risk. The rate is determined with regards to market
evidence (and the prior external valuation for internal valuations).
Weighted average
lease expiry (“WALE”)
WALE of a property is measured across all tenants’ remaining lease terms (in years) and is
weighted with the tenants’ income against total combined income.
Occupancy
Property occupancy is used to measure the proportion of the lettable space of a property that is
occupied by tenants under current lease contracts.
All the significant inputs noted above are not observable market data, hence investment property valuations are
considered level 3 fair value measurements (refer fair value hierarchy described in note 14).
Sensitivity information
The sensitivity to changes in the significant unobservable inputs and the fair value of investment properties are as follows:
Inputs
Capitalisation rate
Discount rate
Annual net property income
WALE
Occupancy
96
Impact of increase in input on fair value
Impact of decrease in input on fair value
Decrease
Decrease
Increase
Increase
Increase
Increase
Increase
Decrease
Decrease
Decrease
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT d
e
t
h
g
i
e
W
e
g
a
r
e
v
a
e
g
n
a
R
d
e
t
h
g
i
e
W
e
g
a
r
e
v
a
e
g
n
a
R
d
e
t
h
g
i
e
W
e
g
a
r
e
v
a
e
g
n
a
R
d
e
t
h
g
i
e
W
e
g
a
r
e
v
a
e
g
n
a
R
d
e
t
h
g
i
e
W
e
g
a
r
e
v
a
e
g
n
a
R
d
e
t
h
g
i
e
W
e
g
a
r
e
v
a
e
g
n
a
R
d
l
e
i
y
l
a
n
m
r
e
T
i
)
%
(
y
c
n
a
p
u
c
c
O
)
%
(
E
L
A
W
)
s
r
a
e
y
(
e
m
o
c
n
i
)
M
$
(
)
%
(
)
%
(
y
t
r
e
p
o
r
p
t
e
n
l
a
u
n
n
A
e
t
a
r
t
n
u
o
c
s
i
D
e
t
a
r
n
o
i
t
a
s
i
l
a
t
i
p
a
C
:
s
w
o
l
l
o
f
s
a
e
r
a
s
e
i
t
r
e
p
o
r
p
t
n
e
m
t
s
e
v
n
i
s
’
l
l
e
w
m
o
r
C
f
o
s
n
o
i
t
a
u
l
a
v
e
h
t
h
t
i
i
w
d
e
t
a
c
o
s
s
a
s
t
u
p
n
i
e
l
b
a
v
r
e
s
b
o
n
u
t
n
a
c
i
f
i
n
g
S
i
7
.
5
0
.
7
5
.
7
3
.
7
–
3
.
5
2
.
9
9
0
.
0
0
1
–
6
.
6
9
0
.
9
–
3
.
6
4
.
6
9
0
.
0
0
1
–
3
.
6
8
5
.
7
–
0
.
0
0
.
8
3
0
.
0
0
1
–
0
.
0
A
/
N
)
2
(
A
/
N
)
2
(
8
.
4
9
0
.
0
0
1
–
8
.
8
8
0
.
6
)
3
(
0
.
9
–
0
.
0
)
3
(
3
.
2
9
0
.
0
0
1
–
0
.
0
9
.
5
4
.
6
5
.
7
1
.
6
0
.
9
–
3
.
5
3
.
1
1
–
3
.
5
5
.
7
–
0
.
0
3
.
1
1
–
0
.
0
2
.
9
9
9
.
1
9
4
.
3
7
0
.
8
9
0
.
0
0
1
–
4
.
4
9
0
.
0
0
1
–
5
.
1
9
0
.
0
0
1
–
0
.
0
0
.
0
0
1
–
0
.
0
5
.
7
0
.
3
3
.
0
7
.
4
9
.
5
4
.
9
5
.
3
6
.
0
6
.
7
2
.
2
1
-
4
.
4
2
.
0
2
0
.
0
3
–
3
.
1
2
.
8
–
0
.
2
3
.
2
1
3
.
6
1
–
1
.
1
1
.
2
–
2
.
0
4
.
5
4
.
1
1
–
0
.
0
4
.
6
7
.
6
8
.
7
0
.
8
–
3
.
6
0
.
8
–
0
.
6
8
.
7
–
0
.
0
7
.
6
–
3
.
3
2
.
2
1
–
0
.
0
5
.
3
1
–
7
.
5
2
.
5
–
7
.
0
7
.
0
–
5
.
0
5
.
3
1
–
1
.
0
3
.
6
9
.
5
1
2
.
7
1
0
.
5
1
0
.
4
2
.
5
1
8
.
8
–
1
.
1
0
.
0
3
–
0
.
0
A
/
N
)
2
(
A
/
N
)
2
(
2
.
5
)
3
(
0
.
8
–
0
.
0
)
3
(
3
.
5
2
–
4
.
1
0
.
0
2
–
4
.
1
9
.
5
–
5
.
0
3
.
5
2
–
0
.
0
8
.
6
9
.
6
7
.
0
7
.
6
0
.
9
–
5
.
6
0
.
2
1
–
3
.
6
3
.
6
–
0
.
0
0
.
2
1
–
3
.
6
4
.
5
5
.
6
3
.
7
4
.
6
7
.
5
5
.
5
0
.
6
0
.
6
8
.
5
0
.
7
–
0
.
5
0
2
0
2
e
r
o
C
8
.
8
–
8
.
5
+
e
r
o
C
3
.
7
–
0
.
0
)
1
(
.
.
.
S
F
H
/
e
v
i
t
c
A
3
.
7
–
8
.
5
8
.
8
–
0
.
0
o
i
l
o
f
t
r
o
P
d
n
a
l
o
P
5
.
8
–
0
.
5
0
.
1
1
–
9
.
4
5
.
8
–
3
.
6
)
1
(
.
.
S
F
H
.
9
1
0
2
e
r
o
C
+
e
r
o
C
/
e
v
i
t
c
A
0
.
1
1
–
0
.
5
o
i
l
o
f
t
r
o
P
.
t
e
s
s
a
r
a
l
u
c
i
t
r
a
p
e
h
t
r
o
f
n
o
i
t
a
u
l
a
v
f
o
d
o
h
t
e
m
e
t
a
i
r
p
o
r
p
p
a
n
a
d
e
r
e
d
s
n
o
c
i
t
o
n
s
i
i
s
h
t
e
r
e
h
w
s
t
e
s
s
a
.
.
S
F
H
.
/
e
v
i
t
c
A
o
t
d
e
i
l
p
p
a
t
o
n
e
r
a
s
t
u
p
n
i
e
l
b
a
v
r
e
s
b
o
n
u
e
h
T
.
y
g
o
l
o
d
o
h
t
e
m
n
o
i
t
a
u
l
a
v
h
s
i
l
o
P
n
i
c
i
r
t
e
m
t
n
e
l
a
v
i
u
q
e
o
N
.
y
l
n
o
o
i
l
o
f
t
r
o
p
n
a
i
l
a
r
t
s
u
A
)
1
(
)
2
(
)
3
(
97
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
(E) MOVEMENTS IN INVESTMENT PROPERTIES
A reconciliation of the carrying amounts of investment properties at the beginning and the end of the financial year is set
out below.
Cromwell
Trust
Balance at 1 July
Acquisitions(1)
Capital works:
Construction costs
Finance costs capitalised
Property improvements
Lifecycle
Disposals
Straight-line lease income
Lease costs and incentive costs
Amortisation(2)
Net gain from fair value adjustments
Foreign exchange differences
Balance at 30 June
2020
$M
2,520.9
1,286.0
0.2
0.1
13.4
0.7
(150.8)
9.7
68.6
(29.2)
17.5
15.2
2019
$M
2,451.1
–
–
–
21.9
1.9
(54.5)
9.3
25.6
(20.8)
86.4
–
2020
$M
2,520.9
1,286.0
0.2
0.1
13.4
0.7
(150.8)
9.7
68.6
(29.2)
17.5
15.2
2019
$M
2,451.1
–
–
–
21.9
1.9
(54.5)
9.3
25.6
(20.8)
86.4
–
3,752.3
2,520.9
3,752.3
2,520.9
(1) Includes right-of-use assets acquired as a component of the Polish portfolio.
(2) Pertains to the amortisation of lease costs, lease incentive costs and right-of-use assets.
(F) INVESTMENT PROPERTY ACQUIRED – 400 GEORGE STREET, QLD
On 19 September 2019 Cromwell and the Trust completed the acquisition of 400 George Street, Brisbane, for $524.5
million. The building is approximately ten years old, has a net lettable area of 43,978 sqm, a current WALE of 4.8 years and
is currently 99.6% occupied. Acquisition costs were approximately $16.2 million. These costs account for the majority of
the fair value adjustment recorded in respect of the property.
(G) INVESTMENT PROPERTIES ACQUIRED – CROMWELL POLISH RETAIL FUND (CPRF)
On 6 November 2019, Cromwell completed the acquisition of all third-party investor interests in the CPRF. The CPRF
portfolio consists of six retail centres in Poland. The combined value of the properties acquired at exchange was $770.6
million (€482.0 million).
(H) INVESTMENT PROPERTIES SOLD
Details of the investment properties sold during the period are as follows:
Gross sale
price
Carrying amount
at 30 June 2019
Last independent
valuation
Gain on sale
recognised
$M
120.0
35.0
155.0
$M
232.0
32.0
264.0
$M
238.0
30.2
268.2
$M
0.4
2.9
3.3
475 Victoria Avenue, NSW (1)
11 Farrer Place, NSW
Total investment properties sold
(1) Pertains to the sale of 50% interest in the building only.
Details of investment properties sold during the prior year are as follows:
Tuggeranong Office Park, ACT(1)
Sturton Rd, SA (Lot 203)
Total investment properties sold
Gross sale
price
Carrying amount
at 30 June 2018
Last independent
valuation
Gain on sale
recognised
$M
54.5
0.9
55.4
$M
45.0
0.9
45.9
$M
45.0
0.9
45.9
$M
0.7
-
0.7
(1) A significant portion of the Tuggeranong property was transferred from the Trust to an associate, LDK Healthcare Unit Trust (“LDK”), during the prior
year as part of the planned transformation into Seniors Living units and associated facilities. The remaining portion of the site has been retained by the
Trust in order to take advantage of future asset enhancement initiatives. See note 8 for further information in relation to Cromwell’s investment in LDK.
98
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (I) AMOUNTS RECOGNISED IN PROFIT OR LOSS FOR INVESTMENT PROPERTIES
Rental income and recoverable outgoings
Property expenses and outgoings
Total amounts recognised in profit or loss for investment
properties
Cromwell
Trust
2020
$M
253.8
(57.2)
196.6
2019
$M
198.5
(34.0)
164.5
2020
$M
253.2
(64.9)
188.3
2019
$M
197.8
(39.1)
158.7
(J) NON-CANCELLABLE OPERATING LEASE RECEIVABLE FROM INVESTMENT PROPERTY TENANTS
The investment properties are generally leased to tenants on long-term operating leases with rentals payable monthly.
Minimum lease payments under the non-cancellable operating leases of Cromwell’s investment properties not recognised
in the financial statements are receivable as follows:
Cromwell
Trust
2020
$M
191.7
625.7
584.7
2019
$M
149.8
485.0
641.6
2020
$M
191.7
625.7
584.7
2019
$M
149.8
485.0
641.6
1,402.1
1,276.4
1,402.1
1,276.4
Within one year
Later than one year but not later than five years
Later than five years
Total non-cancellable operating lease receivable from
investment property tenants
8. Equity accounted investments
(A) OVERVIEW
This note provides an overview and detailed financial information of Cromwell’s and the Trust’s investments that are
accounted for using the equity method of accounting. These include joint arrangements where Cromwell or the Trust
have joint control over an investee together with one or more joint venture partners (these can take the form of either joint
arrangements or joint ventures depending upon the contractual rights and obligations of each party) and investments
in associates, which are entities over which Cromwell is presumed to have significant influence but not control or joint
control by virtue of holding 20% or more of the associates’ issued capital and voting rights, but less than 50%.
Cromwell’s and the Trust’s equity accounted investments are as follows:
Equity accounted investments
CEREIT
LDK
Others
Equity accounted investments
Held for sale
Ursynów
Other - Portgate
CPA
Total – Held for sale
Total – all equity accounted
investments
Cromwell
Trust
2020
2019
2020
2019
%
$M
%
$M
%
$M
%
$M
30.7
50.0
94.1
28.3
–
645.4
6.7
16.1
668.2
47.3
2.5
–
49.8
718.0
35.8
50.0
–
–
50.0
641.4
–
22.7
664.1
–
–
150.4
150.4
814.5
30.1
–
94.1
–
–
633.2
–
0.5
633.7
47.3
–
–
47.3
681.0
35.0
–
–
–
–
50.0
626.3
–
–
626.3
–
–
148.4
148.4
774.7
99
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (B) ACCOUNTING POLICY
Interests in associates and joint venture entities are accounted for in Cromwell’s financial statements using the
equity method. Cromwell’s share of its associates and joint ventures’ post-acquisition profits or losses is recognised
in profit or loss and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative
post-acquisition movements are adjusted against the carrying amount of the investment. Dividends or distributions
receivable from associates and joint ventures are recognised in Cromwell’s financial statements as a reduction of the
carrying amount of the investment.
When Cromwell’s share of losses in an associate or joint venture equals or exceeds its investment in the joint venture,
including any other relevant unsecured receivables, Cromwell does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate or joint venture. Unrealised gains on transactions between
Cromwell its associates and joint ventures are eliminated to the extent of Cromwell’s investment in the associate or
joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
(C) DETAILS OF ASSOCIATE
Cromwell European Real Estate Investment Trust
Cromwell European Real Estate Investment Trust (“CEREIT”) is a Singapore-based real estate investment trust
established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of income-
producing real estate assets in Europe. Cromwell and the Trust owned 30.7% and 30.1% (2019: 35.8% and 35.0%)
of CEREIT respectively at the end of the year. CEREIT is managed by a subsidiary of Cromwell, Cromwell EREIT
Management Pte. Ltd., which operates strictly within the listing rules imposed by the Singapore Stock Exchange
and which has its own independent Board. As such, Cromwell and the Trust are considered able to exert significant
influence, but not control, over the entity and therefore the investment has been classified as an equity-accounted
investment.
(D) DETAILS OF JOINT VENTURES
LDK Healthcare Unit Trust
During the 2018 financial year, Cromwell acquired 50% of the units in the LDK Healthcare Unit Trust (LDK), an aged care
operation. The remaining 50% of the units in LDK are held by a single investor, Aspire LDK Unit Trust (Aspire). A unit
holder agreement between Cromwell and Aspire limits the power of the trustee to management of ongoing operations
of LDK. All decisions about relevant activities of LDK require unanimous consent of the two unitholders. It has therefore
been determined that joint control of the arrangement exists between Cromwell and Aspire. Both parties have rights to
the net assets of the arrangement through the establishment of the separate LDK vehicle. The arrangement is therefore
classified as a joint venture.
Oyster
Oyster is a New Zealand based retail property fund syndicator that provides fund and property management services
throughout New Zealand. Oyster is jointly owned by Cromwell and six original Oyster shareholders. Oyster is classified
as a joint venture as the board of Oyster comprises three representatives appointed by the six investors and three
representatives from Cromwell with no deciding or “chair’s” vote. A shareholder agreement between Cromwell and the six
investors outlines how Oyster will be managed.
(E) DETAILS OF EQUITY ACCOUNTED INVESTMENTS CLASSIFIED AS HELD FOR SALE
Ursynów
On 6 November 2019, Cromwell completed the acquisition of all third-party investor interests in the Cromwell Polish Retail
Fund (CPRF). A material asset acquired as an outcome of this transaction was CPRF’s 94.1% interest in CH Ursynów sp.
z o.o. (Ursynów), an entity that owns a retail asset in Poland. The remaining 5.9% equity is owned by Unibail-Rodamco
Westfield B.V. (URW).
A shareholder agreement between Cromwell and URW limits the power of the manager (a subsidiary of URW) to
management of the ongoing operations of Ursynów. All decisions about relevant activities of Ursynów require the
unanimous consent of the two shareholders. It has therefore been determined that joint control of the arrangement exists
between Cromwell and URW. Both parties have rights to the net assets of the arrangement through the establishment of
a separate Ursynów vehicle. The arrangement is therefore classified as a joint venture.
100
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT During the year URW exercised an option to acquire all the equity it did not already own in the joint venture from Cromwell
and the Trust. The investment has been classified as held for sale at 30 June 2020 to reflect this.
Portgate
During 2016 Cromwell acquired 28% of the issued units by Portgate Estate Unit Trust for a consideration of $13,620,000,
including acquisition costs. During the year the final $2.5 million of acquisition consideration was paid. Portgate was
established for the ownership of land, comprising an existing site and a development site at the Port of Brisbane.
The existing site contains tenanted warehouses. All the relevant activities of Portgate are managed and approved by
a management committee requiring unanimous consent on all decisions. Cromwell and the trustee each provide two
representatives to the management committee. The entity is therefore classified as an equity-accounted investment.
On 1 July 2020 Cromwell exchanged contracts to sell its 28% interest in Portgate to a third party acquirer for $2.5 million.
The Portgate investment was classified as held for sale at 30 June 2020 to reflect this.
Cromwell Partners Trust and CPT Operations Pty Limited (CPA)
On 1 July 2019 Cromwell and the Trust exchanged contracts to sell its 50% interest in Northpoint (“CPA”) for $300.0 million
to Early Light International (ELI). The CPA investment was classified as held for sale at 30 June 2019 to reflect this. The
sale completed in September 2019.
Prior to the sale, Cromwell and the Trust held a 50% interest in the units of Cromwell Partners Trust and 50% of the
shares in CPT Operations Pty Limited, together known as “CPA”. Cromwell Partners Trust owned the $600.0 million
Northpoint Building in the North Sydney CBD, whilst CPT Operations Pty Limited manages the associated carpark and
hotel businesses. Subsequent to the sale 100% of the interests in CPA are held by ELI. Until the change of control a unit
holder agreement between the Trust and ELI limited the power of the trustee to management of the ongoing operations of
CPA and all decisions about relevant activities of CPA required unanimous consent of the two unitholders. The entity was
therefore classified as a joint venture.
101
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT (F) SUMMARISED FINANCIAL INFORMATION FOR JOINT VENTURES AND EQUITY ACCOUNTED INVESTMENTS
OWNED BY CROMWELL
As at 30 June 2020
$M
As at 30 June 2019
$M
CEREIT Ursynów
CPA
LDK
Other
Total CEREIT
CPA
LDK Other
Total
Summarised balance sheets:
Cash and cash equivalents
Other current assets
Total current assets
Investment properties
Other non-current assets
Total non-current assets
Total assets
Financial liabilities
Other current liabilities
Total current liabilities
Financial liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Carrying amount of investment:
Cromwell’s share of equity
(%)
Cromwell’s share of net
assets
Costs in relation to asset
classified as held for sale
Unpaid investment
consideration
Goodwill
258.5
63.0
321.5
3,384.0
10.5
3,394.5
3,716.0
0.7
122.1
122.8
1,436.9
52.3
1,489.2
1,612.0
2,104.0
5.8
2.5
8.3
174.7
0.1
174.8
183.1
90.8
1.8
92.6
30.9
9.2
40.1
132.7
50.4
30.7
94.1
645.4
47.3
-
-
-
-
-
-
Carrying amount
645.4
47.3
Movement in carrying amounts:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Opening balance at 1 July
641.4
-
150.4
Investment – net of loans
from investees
Disposals
Share of profit / (loss)
Less: dividends / distributions
received
Costs in relation to asset
classified as held for sale
Increase / (decrease) to
recoverable amount
(18.6)
35.6
(28.1)
-
-
Foreign exchange difference
Carrying amount at 30 June
(0.9)
645.4
1.3
47.3
Summarised statements of comprehensive income:
9.7
3.2
12.9
504.6
3.8
508.4
521.3
253.2
47.3
300.5
207.0
0.5
207.5
508.0
13.3
12.4
6.0
18.4
55.0
21.2
76.2
94.6
9.3
2.0
11.3
62.8
286.4
74.7
361.1
91.6
57.4
149.0
13.5
3.0
16.5
1.6
5.8
7.4
4,118.3
2,969.8
598.5
351.2
35.6
28.3
1.8
0.5
4,153.9
2,998.1
600.3
351.7
4,515.0
3,147.1
616.8
359.1
354.0
173.2
527.2
207.6
73.1
280.7
6.8
0.2
7.0
221.6
5.0
226.6
1,737.6
1,075.4
233.9
25.9
-
62.0
-
4.5
117.3
62.8
74.1
20.5
1,799.6
1,075.4
238.4
143.2
2,326.8
1,356.1
245.4
369.8
2,188.2
1,791.0
371.4
(10.7)
14.5
9.8
24.3
55.0
13.4
68.4
92.7
7.6
1.3
8.9
31.4
30.8
62.2
71.1
21.6
121.2
76.0
197.2
3,974.5
44.0
4,018.5
4,215.7
443.6
79.6
523.2
1,366.6
152.6
1,519.2
2,042.4
2,173.3
50.0
-
-
35.8
50.0
50.0
-
-
6.7
12.0
711.4
641.4
185.7
-
-
6.6
18.6
-
-
6.6
-
-
-
(35.3)
-
-
718.0
641.4
150.4
22.7
814.5
495.6
186.3
-
-
-
6.7
-
-
-
16.0
49.4
-
0.9
66.3
148.7
-
(151.2)
-
(169.8)
(3.4)
0.8
(1)6.7
(0.2)
39.5
-
53.0
3.0
-
0.4
-
-
-
-
-
-
-
-
-
-
-
-
6.7
-
-
(4.1)
(0.7)
18.6
(28.1)
(67.6)
(4.0)
-
(4.1)
(0.3)
-
-
11.7
(35.3)
-
-
718.0
641.4
150.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18.6
845.7
-
(35.3)
(2.5)
(2.5)
6.6
22.7
6.6
814.5
20.5
702.4
-
-
2.2
151.7
-
55.6
(0.2)
(71.6)
-
-
0.2
22.7
(35.3)
-
11.9
814.5
Revenue
Expenses
222.1
(105.6)
8.4
3.8
42.6
26.7
303.6
232.1
35.2
2.0
38.7
308.0
(12.0)
(2.2)
(18.6)
(28.4)
(166.8)
(84.1)
(34.4)
(10.9)
(31.8)
(161.2)
Total comprehensive income
/ (loss)
116.5
(3.6)
1.6
24.0
(1.7)
136.8
148.0
0.8
(8.9)
Cromwell’s share in %
Share of profit / (loss)
30.7
35.6
94.1
50.0
50.0
-
-
(3.4)
0.8
(1) 6.7
(0.2)
39.5
35.8
53.0
50.0
50.0
0.4
-
6.9
-
2.2
146.8
-
55.6
(1) Includes prior year losses recouped during the current year.
102
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
(G) SUMMARISED FINANCIAL INFORMATION FOR JOINT VENTURES AND EQUITY ACCOUNTED INVESTMENTS
OWNED BY THE TRUST
As at 30 June 2020
$M
As at 30 June 2019
$M
CEREIT Ursynów
CPA
Other
Total
CEREIT
CPA
Total
Summarised balance sheets:
Cash and cash equivalents
Other current assets
Total current assets
258.5
63.0
321.5
5.8
2.5
8.3
Investment properties
3,384.0
174.7
Other non-current assets
Total non-current assets
Total assets
Financial liabilities
Other current liabilities
Total current liabilities
Financial liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Carrying amount of investment:
Trust’s share of equity (%)
Trust’s share of net assets
Costs in relation to asset
classified as held for sale
10.5
3,394.5
3,716.0
0.7
122.1
122.8
1,436.9
52.3
1,489.2
1,612.0
2,104.0
30.1
633.2
-
0.1
174.8
183.1
90.8
1.8
92.6
30.9
9.2
40.1
132.7
50.4
94.1
47.3
-
Carrying amount
633.2
47.3
Movement in carrying amounts:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Opening balance at 1 July
626.3
-
148.4
Investment – net of loans to
investees
Disposals
-
-
49.4
-
-
(149.2)
Share of profit / (loss)
35.0
(3.4)
0.8
Less: dividends / distributions
received
Costs in relation to asset
classified as held for sale
Increase / (decrease) to
recoverable amount
(27.8)
-
-
-
-
-
Foreign exchange difference
Carrying amount at 30 June
(0.3)
633.2
1.3
47.3
Summarised statements of comprehensive income:
Revenue
Expenses
Total comprehensive income /
(loss)
Trust’s share in %
Share of profit / (loss)
222.1
8.4
(105.6)
(12.0)
116.5
30.1
35.0
(3.6)
94.1
(3.4)
-
-
-
-
-
3.8
(2.2)
1.6
50.0
0.8
-
0.5
0.5
-
-
-
-
-
-
-
-
-
-
-
0.5
-
0.5
-
0.5
-
-
-
-
-
-
264.3
66.0
330.3
91.6
57.4
149.0
11.4
1.4
12.8
103.0
58.8
161.8
3,558.7
2,969.8
598.5
3,568.3
1,467.8
1,075.4
233.9
1,309.3
10.6
28.3
3,569.3
2,998.1
0.5
3,899.6
3,147.1
91.5
123.9
215.4
207.6
73.1
280.7
61.5
-
1,529.3
1,075.4
1,744.7
1,356.1
0.5
2,154.9
1,791.0
-
681.0
35.0
626.3
0.3
598.8
611.6
6.1
-
6.1
28.6
3,596.9
3,758.7
213.7
73.1
286.8
4.5
238.4
244.5
367.1
50.0
183.7
4.5
1,313.8
1,600.6
2,158.1
-
810.0
-
-
(35.3)
(35.3)
681.0
626.3
148.4
774.7
774.7
484.8
184.5
669.3
49.9
141.8
(149.2)
32.4
-
51.8
(27.8)
(66.7)
-
-
1.0
-
-
14.6
626.3
3.0
-
(0.4)
(3.4)
144.8
-
51.4
(70.1)
(35.3)
(35.3)
-
-
148.4
-
14.6
774.7
0.5
681.0
-
-
-
234.3
(119.8)
232.1
(84.1)
29.7
308.0
(30.5)
(161.2)
114.5
148.0
(0.8)
146.8
50.0
-
-
32.4
35.0
51.8
50.0
(0.4)
-
51.4
103
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
(H) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires management to make judgements and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The judgements
and assumptions regarding the investments in Cromwell European Real Estate Investment Trust (CEREIT) and
LDK Healthcare Pty Ltd (LDK) are detailed below.
Cromwell European Real Estate Investment Trust
The CEREIT has been classified as being an associate and accounted for as an equity-accounted investment. The
determination of this was based on an assessment that Cromwell and the Trust are considered to be able to exert
significant influence, but not control, over the entity. This determination is pursuant to the assessment of control
under Accounting Standards and the consideration of key factors regarding the management of CEREIT as governed by
Cromwell’s Capital Markets Service Licence as issued by the Monetary Authority of Singapore (MAS) and the composition
of the Board.
Cromwell’s investment in CEREIT was assessed for indicators of impairment. This process included investigations
by management in relation to salient components of the CEREIT operations and financial metrics and an analysis of
movements in the CEREIT’s price on the Singapore Stock Market (SGX). Whilst the CEREIT share price on the SGX was
below that of the weighted average price at which Cromwell and the Trust acquired their investments due to market
sentiment in respect of the current pandemic, the diminution in price was not considered to be either significant or
prolonged. Hence, no indicators of impairment were identified and no impairment was recognised as a result.
LDK Healthcare Unit Trust
LDK has been classified as a joint venture and accounted for as an equity-accounted investment. The determination of this
was based on an assessment that Cromwell can only exercise joint control over the relevant decisions but not control, over
the entity. This determination is pursuant to the assessment of control under Accounting Standards and the consideration
of key factors regarding the management of LDK, the composition of the Board and other relevant agreements and joint
control over relevant decisions.
9. Investments at fair value through profit or loss
A)
OVERVIEW
This note provides an overview and detailed financial information of Cromwell’s and the Trust’s investments that are
classified as financial assets at fair value through profit or loss. Below is information about Cromwell’s and the Trust’s
investments in unlisted property related entities whereby Cromwell and the Trust hold less than 20% of the issued capital
in the investee and also any other relevant financial assets of the same classification. Such investments are classified as
investments at fair value through profit or loss which are carried at fair value in the Balance sheet with adjustments to
the fair value recorded in profit or loss and include investments in Cromwell managed unlisted funds, co-investments in
European wholesale funds managed by Cromwell and any other relevant financial assets.
Investment in Cromwell unlisted funds
Investment in wholesale funds
Investment in other financial asset
Total investments at fair value through profit or loss
Cromwell
Trust
2020
$M
-
12.9
-
12.9
2019
$M
0.8
18.0
3.8
22.6
2020
$M
-
-
-
-
2019
$M
0.8
-
-
0.8
For methods used to measure the fair value measurement of Cromwell’s and the Trust’s investments at fair value through
profit or loss, including information in relation to the impact of COVID-19 refer to note 14.
104
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT B) ACCOUNTING POLICY
Investments at fair value through profit or loss are financial assets held for trading which are acquired principally for
the purpose of selling in the short term with the intention of making a profit. Financial assets at fair value through
profit or loss also include financial assets which upon initial recognition are designated as such. These include
financial assets that are not held for trading purposes and which may be sold. These are investments in exchange
traded equity instruments and unlisted trusts.
At initial recognition, Cromwell measures a financial asset at its fair value. Transaction costs of financial assets
carried at fair value through profit or loss are expensed in the Statement of profit or loss.
Subsequent to initial recognition, Cromwell continues to measure all equity investments at fair value. The fair values
of quoted investments are based on current bid prices. If the market for a financial asset is not active (e.g. for unlisted
securities), Cromwell establishes fair value by using valuation techniques. These include reference to the fair values
of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the
same, discounted cash flow analysis and pricing models to reflect the issuer’s specific circumstances.
Changes in the fair value of equity investments at fair value through profit or loss are recognised in the Statement of
profit or loss as applicable.
105
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Finance and Capital Structure
This section of the annual financial report provides further information on Cromwell’s debt finance and associated
costs, Cromwell’s contributed equity as well as fair value disclosures in relation to financial instruments.
Capital is defined as the combination of securityholders’ equity, reserves and net debt (borrowings less cash). The
Board of Directors is responsible for Cromwell’s capital management strategy. Capital management is an integral part
of Cromwell’s risk management framework and seeks to safeguard Cromwell’s ability to continue as a going concern
while maximising securityholder value through optimising the level and use of capital resources and the mix of debt
and equity funding. Cromwell’s preferred portfolio gearing range is 30% - 40%.
10.
Interest bearing liabilities
A)
OVERVIEW
Cromwell and the Trust borrow funds from financial institutions and investors (the latter in the form of convertible bonds)
to partly fund the acquisition of income producing assets, such as investment properties, securities or businesses. A
significant proportion of these borrowings are generally fixed either directly or through the use of interest rate swaps/
options and have a fixed term. This note provides information about Cromwell’s debt facilities, including maturity dates,
security provided and facility limits.
Current
Unsecured
Convertible bonds
Lease liabilities
Total current
Non-current
Secured
Loans – financial institutions
Unsecured
Loans – financial institutions
Convertible bonds
Lease liabilities
Unamortised transaction costs
Total non-current
Total
Secured loans – financial institutions
Unsecured loans – financial institutions
Unsecured convertible bonds
Lease liabilities
Unamortised transaction costs
Total interest bearing liabilities
B) ACCOUNTING POLICY
Cromwell
Trust
2020
$M
2019
$M
2020
$M
2019
$M
-
3.7
3.7
88.0
-
88.0
-
0.4
0.4
88.0
-
88.0
1,458.8
931.5
1,451.2
924.1
368.2
360.2
17.6
(17.3)
2,187.5
1,458.8
368.2
360.2
21.3
(17.3)
2,191.2
-
353.3
-
(16.4)
1,268.4
931.5
-
441.3
-
(16.4)
1,356.4
368.2
360.2
5.9
(17.3)
2,168.2
1,451.2
368.2
360.2
6.3
(17.3)
2,168.6
-
353.3
-
(16.4)
1,261.0
924.1
-
441.3
-
(16.4)
1,349.0
Interest bearing liabilities are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost using the effective interest rate method. Under this method fees, costs,
discounts and premiums directly related to the financial liability are spread over its expected life.
The fair value of the borrowing portion of a convertible bond is determined using a market interest rate for an equivalent
non-convertible bond. This amount is recorded as a borrowing liability on an amortised cost basis until extinguished
on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the derivative conversion feature.
This is recognised as a financial liability if the convertible bond does not meet the “fixed-for-fixed” rule contained in
AASB 132 Financial Instruments: Presentation, otherwise it is included in shareholders’ equity.
106
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Borrowing costs incurred on funds borrowed for the construction of a property are capitalised, forming part of the
construction cost of the asset. Capitalisation ceases upon practical completion of the property. Other borrowing costs
are expensed.
For information in respect of accounting policies in relation to lease liabilities see note 17.
(C) DETAILS OF INTEREST BEARING LIABILITIES
Note
Secured
Maturity
Date
Polish Euro facility 1
Polish Euro facility 2
Secured bilateral loan facilities
Secured bilateral loan facilities
Secured bilateral loan facilities
Secured bilateral loan facilities
Secured bilateral loan facilities
Secured loan facilities
Convertible bond – 2020
Convertible bond – 2025
Euro facility
Euro / GBP facility
Lease liabilities
Total facilities
(i)
(ii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iv)
(v)
(vi)
(viii)
(ix)
(x)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
No
Mar-22
Feb-23
Jun-23
Jun-24
Jun-26
Mar-24
Mar-25
May-25
Feb-20
Mar-25
May-22
Sep-22
(x)
2020
2019
Facility
$M
168.4
182.6
1,100.0
200.0
60.0
50.0
50.0
113.1
-
360.2
7.6
368.2
21.3
Utilised
$M
Facility
$M
Utilised
$M
168.4
182.6
768.0
200.0
60.0
-
-
72.2
-
360.2
7.6
368.2
21.3
-
-
1,100.0
200.0
60.0
-
-
-
88.0
353.3
7.6
364.6
-
-
-
663.9
200.0
60.0
-
-
-
88.0
353.3
7.6
-
-
2,681.4
2,208.5
2,173.5
1,372.8
i) Polish Euro facility 1
On 6 November 2019, Cromwell completed the acquisition of all third-party investor interests in the Cromwell Polish Retail
Fund (CPRF). As an outcome of the acquisition transaction Cromwell and the Trust assumed this Euro facility. The facility
is secured by first registered mortgage over an investment property held by CPRF. Interest is payable quarterly in arrears
calculated as the 3-month EURIBOR rate plus a margin. The loan balance at acquisition was $164.0 million (€101.0
million). During the year the facility was extended for one year to March 2022, a further $19.3 million (€12.0 million) was
drawn down and repayments of $16.4 million (€10.0 million) were made. All principal amounts outstanding are due at the
expiry of the facility in March 2022.
ii) Polish Euro facility 2
On 6 November 2019, Cromwell completed the acquisition of all third-party investor interests in the Cromwell Polish Retail
Fund (CPRF). As an outcome of the acquisition transaction Cromwell and the Trust assumed this Euro facility. The facility
is secured by first registered mortgage over investment properties held by CPRF. Interest is payable quarterly in arrears
calculated as 3-month EURIBOR rate plus a margin. The loan balance at acquisition was $188.2 million (€115.8 million).
During the year repayments of $6.9 million (€4.2 million) were made. All principal amounts outstanding are due at the
expiry of the facility in February 2023.
iii) Secured Bilateral Loan Facilities
Secured Bilateral Loan Facilities (SBLF) can be held with multiple providers. All SBLFs are contracted under a Common
Terms Deed Poll and are secured pari passu by first registered mortgages over a select pool of investment properties
held by the Cromwell Security Trust. All principal amounts outstanding are due at the expiry of the facilities. Each
provider individually contracts its commitment amount and expiry date (see table above for more detail) and fee structure.
Cromwell is able to repay and refinance individual providers. Interest is payable quarterly in arrears calculated as BBSY
rate plus a loan margin. During the year repayments of $1,040.9 million were made (2019: $336.1 million) and $1,145.0
million was drawn down from the facility (2019: $260.0 million).
107
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT iv) Secured loan facility
During the prior year, Cromwell and the Trust entered into a new secured facility in relation to the asset enhancement
initiative at the property at 475 Victoria Avenue, NSW. The facility is $113.1 million and expires in May 2025. The facility
was drawn to $72.2 million at 30 June 2020. The principal amount outstanding will be due at the expiry of the facility.
v) Convertible bond - 2020
As a result of the convertible bond repurchase in 2018 (see (vi) below for details), at 30 June 2019, 548 convertible bonds
with a face value of €100,000 each were on issue with a gross face value of €54.8 million or $88.0 million. The bonds
bore an interest rate of 2% and were convertible into stapled securities of Cromwell at the option of the holder from 41
days after issue date up to seven business days prior to the final maturity date on 4 February 2020 at which point all
remaining bonds were mandatorily redeemed by Cromwell. The conversion price was $1.1431 per stapled security. The
fixed conversion translation rate was $1.4230 per Euro. The conversion was fully settled in cash on the maturity date of 4
February 2020.
vi) Convertible bond - 2025
In 2018, Cromwell issued 2,300 convertible bonds with a face value of €100,000 each, amounting to a total gross face value
of €230.0 million ($370.0 million on date of issue). The bonds bear an interest rate of 2.5%. The bonds are convertible into
stapled securities of Cromwell at the option of the holder from 40 days after issue date up to seven business days prior
to the final maturity date on 29 March 2025, at which point all remaining bonds are mandatorily redeemed by Cromwell.
The conversion price is $1.153 at year end (30 June 2019: $1.1656) per stapled security, subject to adjustments such as
consolidation or subdivision of stapled securities, bonus issues or any issues at less than the prevailing market price of
Cromwell's stapled securities, other than issues upon exercise of performance rights issued to Cromwell's employees.
The fixed conversion translation rate is $1.5936 per Euro. Any conversion may be settled in cash, stapled securities of
Cromwell or a combination thereof at the discretion of Cromwell.
Proceeds of the bonds issued in 2018 were used to repurchase 952 convertible bonds with a face value of €100,000
issued in February 2015. In total, €95.2 million ($153.1 million) of the convertible bonds issued in February 2015 were
repurchased during the year ended 30 June 2018. The remaining proceeds were used to repay debt and for other liquidity
purposes.
vii) Convertible bonds – conversion features
The conversion feature of the convertible bonds represents an embedded derivative financial instrument in the host debt
contract. The embedded derivative is measured at fair value and deducted from the carrying amount of the convertible
bonds (which are carried at amortised cost) and separately disclosed as a derivative financial liability on the face of
the balance sheet. The conversion feature represents the parent entity’s obligation under the convertible bond terms
and conditions to issue Cromwell stapled securities should bond holders exercise their conversion option. The Trust’s
borrowing obligation in respect of the convertible bond is considered to be the gross amount payable of the convertible
bonds.
The convertible bonds are presented in the statements of financial position as noted below:
Cromwell
Trust
Convertible bond – issued February 2015,
expired February 2020.
Face value of bond issued – February 2015
Derivative financial instruments – conversion feature
Convertible bond carrying amount at inception
Movements in exchange rate and amortisation of conversion
feature – previous periods
Repurchase of bonds – previous periods
Carrying amount at 1 July
Restatement of conversion feature – prior period
Amortisation and derecognition of conversion features to account
for effective interest rate and repurchase – current period
Movements in exchange rate – current period
Repurchase of bonds
Carrying amount at year end
2020
$M
220.1
(17.9)
202.2
38.9
(153.1)
88.0
-
0.9
0.9
(89.8)
-
2019
$M
220.1
(17.9)
202.2
37.3
(153.1)
86.4
(2.2)
1.4
2.4
-
88.0
2020
$M
220.1
(17.9)
202.2
38.9
(153.1)
88.0
-
0.9
0.9
(89.8)
-
2019
$M
220.1
-
220.1
19.4
(153.1)
86.4
(2.2)
1.4
2.4
-
88.0
108
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Convertible bond – issued March 2018,
expires March 2025.
Face value of bonds issued – March 2018
Derivative financial instruments – conversion feature
Convertible bond carrying amount at inception
Movements in exchange rate and amortisation of conversion
feature – previous periods
Carrying amount at 1 July
Amortisation to account for effective interest rate
Movements in exchange rate – current period
Carrying amount at year end
Total carrying amount at year end
Cromwell
Trust
2020
$M
370.0
(23.5)
346.5
6.8
353.3
3.2
3.7
360.2
360.2
2019
$M
370.0
(23.5)
346.5
(6.2)
340.3
3.3
9.7
353.3
441.3
2020
$M
370.0
(23.5)
346.5
6.8
353.3
3.2
3.7
360.2
360.2
2019
$M
370.0
(23.5)
346.5
(6.2)
340.3
3.3
9.7
353.3
441.3
The conversion feature of the convertible bonds represents an embedded derivative financial instrument in the host debt
contract. The embedded derivative is measured at fair value and deducted from the carrying amount of the convertible bonds
(which are carried at amortised cost) and separately disclosed as a derivative financial liability on the face of the balance
sheet. The conversion feature represents the parent entity’s obligation under the convertible bond terms and conditions to
issue Cromwell stapled securities should bond holders exercise their conversion option. The Trust’s borrowing obligation in
respect of the convertible bonds is considered to be the gross amount payable of the convertible bonds.
viii) Euro facility
In 2018, Cromwell and the Trust entered into a €4.7million ($7.6 million) facility with a four-year term, at which time all principal
amounts outstanding are due. The facility was fully drawn at year end (30 June 2019: fully drawn). The facility is secured
with a registered mortgage over a single asset, with interest payable monthly in arrears calculated as EURIBOR plus a margin.
ix) Euro / GBP facility
In June 2019 Cromwell and the Trust entered into a multi-currency €225.0 million Euro / GBP revolver facility. The revolver
is a syndicated facility allowing drawdowns in both Euro and GBP. The term of the facility is 3 years at which time all
principal amounts outstanding are due. Interest is payable in arrears, calculated as EURIBOR / LIBOR plus a margin. The
facility was fully drawn to €225.0 million ($368.2 million) at year end due to €280.5 million ($461.7 million) being drawn
down on the facility whilst repayments of €55.5 million ($90.0 million) were made.
x) Operating lease liabilities
Cromwell recognised lease liabilities and related right-of-use assets in respect of various premises, property, plant and
equipment and motor vehicle leases from 1 July 2019 as a result of the adoption of AASB 16 Leases. The leases for assets
in Australia, Europe and Singapore, have varying terms and are subject to varying rates of interest.
Below is a maturity table of minimum lease payments in relation to operating leases in existence at the reporting date.
Cromwell
Trust
Within one year
Later than one year but not later than five years
Greater than five years
Total operating lease commitments
D)
FINANCE COSTS
Interest on borrowings
Interest on lease liabilities
Amortisation of loan transaction costs
Net exchange losses on foreign currency borrowings
Total finance costs
Information about Cromwell’s exposure to interest rate changes is provided in note 14.
2020
$M
2019
$M
2020
$M
4.1
10.3
6.9
21.3
2019
$M
3.7
8.5
2.9
15.1
-
-
-
-
Cromwell
Trust
2020
$M
58.3
1.3
10.0
1.8
71.4
2019
$M
47.6
-
7.8
12.7
68.1
2020
$M
58.1
0.9
9.8
0.7
69.5
-
-
-
-
2019
$M
47.5
-
7.5
12.8
67.8
109
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 11. Derivative financial instruments
A)
OVERVIEW
Cromwell’s and the Trust’s derivative financial instruments consist of interest rate swap and interest rate cap contracts
and the conversion option on the convertible bond issued in March 2018. Interest rate swap contracts are used to fix
interest on floating rate borrowings and interest rate cap contracts are used to cap interest on floating rate borrowings.
The conversion option amount represents the additional value provided to convertible bond holders compared to the same
corporate bond that would have no feature to convert the bonds into Cromwell stapled securities at the end or during
the term of the bond. For accounting purposes such a conversion feature is accounted for separately from the bond as a
derivative financial instrument and is carried at fair value.
Current liabilities
Interest rate swap contracts
Conversion feature – convertible bond
Non-current liabilities
Interest rate swap contracts
Total derivative financial instruments
B) ACCOUNTING POLICY
Cromwell
Trust
2020
$M
2019
$M
2020
$M
7.8
5.3
13.1
6.2
19.3
3.9
28.5
32.4
4.7
37.1
7.8
5.3
13.1
6.2
19.3
2019
$M
3.9
28.5
32.4
4.7
37.1
Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured to fair value at balance date. Derivatives are carried as assets when
their fair value is positive and as liabilities when their fair value is negative.
Cromwell enters into interest rate swap and cap agreements that are used to convert certain variable interest rate
borrowings to fixed interest rates. An interest rate swap is a type of interest rate derivative in which Cromwell and the
Trust enter into a number of agreements to fix interest rates on floating rate borrowings. An interest rate cap is a type
of interest rate derivative in which Cromwell and the Trust receive payments at the end of each period if the interest
rate exceeds the agreed fixed rate. These derivatives are entered into with the objective of hedging the risk of adverse
interest rate fluctuations. Further details of derivative financial instruments are disclosed in note 14(f).
Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured to fair value at balance date. The resultant gain or loss is recognised
immediately in the Statement of profit or loss.
C)
INTEREST RATE SWAP AND CAP CONTRACTS
Relevant information pertaining to the cap and swap portfolio entered into during the year is below:
• Interest rate caps - fix interest on floating rate on notional borrowings of $363.7 million at rates between 0.04% -
2.25%.
• Interest rate swaps - fix interest on floating rate on notional borrowings of $669.8 million at rates between 0.04% -
2.27%.
110
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT D)
SWAP AND CAP MATURITIES
The table below shows the movements in the notional amounts of cap and swap coverage for Cromwell and the Trust
going forward:
Date
July 2018
June 2019
July 2019
Description
Opening balance
Additional interest rate swaps
Expiring interest rate swaps /caps
November 2019 New interest rate swaps
July 2020
April 2021
July 2021
Expiring interest rate swaps /caps
Expiring interest rate swaps /caps
Expiring interest rate swaps /caps
February 2023
Expiring interest rate swaps /caps
July 2024
Expiring interest rate swaps
Cromwell and Trust
Movement
$M
Notional amount
$M
-
180.0
(90.0)
252.4
(90.0)
(96.3)
(510.0)
(156.1)
(180.0)
690.0
870.0
780.0
1,032.4
942.4
846.1
336.1
180.0
-
At balance date, the notional principal amounts and period of expiry of all of Cromwell’s and the Trust’s interest rate swap
and cap contracts is as follows:
Cromwell and Trust
Less than 1 year
1 – 2 years
2 – 3 years
3 – 5 years
2020
$M
186.3
510.0
156.1
180.0
E)
BOND CONVERSION FEATURE MOVEMENTS
The movement of the conversion features since recognition since issue of the convertible bonds is as follows:
Derivative financial liability at 1 July
Restatement of conversion feature
Fair value loss / (gain)
Foreign exchange difference
Balance at 30 June
Cromwell and Trust
2020
$M
28.5
-
(23.6)
0.4
5.3
2019
$M
90.0
90.0
510.0
180.0
2019
$M
28.5
(2.2)
3.0
(0.8)
28.5
For details about the fair value measurement of Cromwell’s and the Trust’s financial instruments refer to note 14(f).
12. Contributed equity
A)
OVERVIEW
The shares of Cromwell Corporation Limited (the “Company”) and the units of Cromwell Diversified Property Trust (the
“CDPT”) are combined and issued as stapled securities. The shares of the Company and units of the CDPT cannot be
traded separately and can only be traded as stapled securities.
Below is a summary of contributed equity of the Company and the CDPT separately and for Cromwell’s combined stapled
securities. The basis of allocation of the issue price of stapled securities to Company shares and CDPT units post stapling
is determined by agreement between the Company and the CDPT as set out in the Stapling Deed.
111
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Cromwell stapled securities
Company shares
CDPT units
Contributed equity
2,278.5
1,857.4
2020
$M
2019
$M
2020
$M
207.1
2019
$M
138.4
2020
$M
2019
$M
2,071.4
1,719.0
B) ACCOUNTING POLICY
The ordinary shares of the Company are stapled with the units of the Trust and are together referred to as stapled
securities. Stapled securities are classified as equity. Incremental costs directly attributable to the issue of new shares,
units or options are shown in equity as a deduction, net of tax, from the proceeds.
Where any group company purchases Cromwell’s equity instruments, for example as the result of a share buy-back or a
share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income
taxes) is deducted from equity attributable to the securityholders as treasury shares until the securities are cancelled
or reissued. Where such ordinary securities are subsequently reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax effects, is included in equity attributable to
securityholders.
C) MOVEMENTS IN CONTRIBUTED EQUITY
The following reconciliation summarises the movements in contributed equity. Issues of a similar nature have been
grouped and the issue price shown is the weighted average. Detailed information on each issue of stapled securities is
publicly available via the ASX.
Cromwell stapled
securities
Company shares
CDPT units
Number of
securities
Issue
price
Opening balance 1 July 2018
1,985,324,674
Exercise of performance rights
2,375,686
36.3¢
Distribution reinvestment plan(1)
16,640,700
108.1¢
Security placement and SPP
232,301,631
98.0¢
Equity issue costs
-
-
Balance at 30 June 2019
2,236,642,691
Exercise of performance rights
4,920,055
Distribution reinvestment plan(1)
16,927,663
Security placement and SPP
354,381,191
Equity issue costs
-
39.7¢
124.3¢
115.0¢
-
$M
1,615.2
0.9
18.0
227.7
(4.4)
1,857.4
1.9
21.0
407.6
(9.4)
Balance at 30 June 2020
2,612,871,600
2,278.5
Issue
price
1.3¢
5.9¢
8.1¢
-
6.3¢
21.2¢
18.6¢
-
$M
118.9
0.1
1.0
18.8
(0.4)
138.4
0.3
3.6
65.9
(1.1)
207.1
Issue
price
35.0¢
102.2¢
89.9¢
-
33.4¢
103.1¢
96.4¢
-
$M
1,496.3
0.8
17.0
208.9
(4.0)
1,719.0
1.6
17.4
341.7
(8.3)
2,071.4
(1) The Company / CDPT has established a dividend/distribution reinvestment plan under which holders of stapled securities may elect to have all of their
dividend/distribution entitlement satisfied by the issue of new stapled ordinary securities rather than being paid in cash. Stapled securities are issued
under the plan at a discount to the market price as determined by the Directors before each dividend / distribution. The plan has been suspended since
the payment of the December 2019 Distribution in February 2020.
During the year, Cromwell executed a Security Placement and Share Purchase Plan to eligible securityholders, which
resulted in 354,381,191 securities being issued, raising approximately $407.6 million. The proceeds were used to fund
Cromwell’s property at 400 George Street and the investment property portfolio in Poland.
D)
STAPLED SECURITIES
Stapled securities entitle the holder to participate in dividends and distributions as declared from time to time and the
proceeds on winding up. On a show of hands every holder of stapled securities present at a meeting in person, or by proxy,
is entitled to one vote, and upon a poll each stapled security is entitled to one vote.
112
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
13. Reserves
A)
OVERVIEW
Reserves are balances that form part of equity that record other comprehensive income amounts that are retained in the
business and not distributed until such time the underlying balance sheet item is realised. This note provides information
about movements in the other reserves line item of the Balance sheet and a description of the nature and purpose of each
reserve.
Security based
payments reserve
Fair value
through other
comprehensive
income reserve
Foreign currency
translation reserve
Total other reserves
Cromwell
$M
Trust
$M
Cromwell
$M
Trust
$M
Cromwell
$M
Trust
$M
Cromwell
$M
Balance at 1 July 2018
Security based payments
Foreign exchange differences
recognised in other
comprehensive income
Attributable to non-controlling
interests
Balance at 30 June 2019
Security based payments
Foreign exchange differences
recognised in other
comprehensive income
Attributable to non-controlling
interests
7.8
2.6
-
-
10.4
2.8
-
-
Balance at 30 June 2020
13.2
-
-
-
-
-
-
-
-
-
2.3
-
-
-
2.3
-
-
-
2.3
-
-
-
-
-
-
-
-
-
14.2
-
2.5
(2.4)
-
31.8
24.3
2.6
2.5
-
-
-
16.7
-
(4.1)
29.4
-
0.6
29.4
2.8
(4.1)
Trust
$M
(2.4)
-
31.8
-
29.4
-
0.6
-
-
-
-
12.6
30.0
28.1
30.0
Security based payments reserve
The security based payments reserve is used to recognise the fair value of equity settled security based payments for
employee services. Refer to note 21 for details of Cromwell’s security based payments.
Fair value through other comprehensive income reserve
Changes in the fair value of investments classified as being at fair value through other comprehensive income are taken to
the relevant revaluation reserve.
For Cromwell the balance at year end comprises a reserve of a subsidiary attributable to its pre-stapling interest in a trust
which continues to be held. For Cromwell there was no movement in the relevant revaluation reserve over the last two
financial years.
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive
income and accumulated in the foreign currency translation reserve. Where applicable, any foreign currency differences
arising from inter-group loans are transferred to the foreign currency translation reserve upon consolidation as such
loans form part of the net investment in the respective controlled entity. The cumulative amount recognised in the foreign
currency translation reserve is reclassified to profit or loss when the net investment is disposed of.
113
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 14. Financial risk management
A)
OVERVIEW
Cromwell’s activities expose it to a variety of financial risks which include credit risk, liquidity risk and market risk. This
note provides information about Cromwell’s risk management strategy in relation to each of the above financial risks to
which Cromwell is exposed.
Cromwell’s overall risk management program focuses on managing these risks and seeks to minimise potential adverse
effects on the financial performance of Cromwell. Cromwell uses derivative financial instruments such as interest rate
derivatives to hedge certain risk exposures. Cromwell seeks to deal only with creditworthy counterparties. Liquidity risk is
monitored through the use of future rolling cash flow forecasts.
Cromwell’s management of treasury activities is centralised and governed by policies approved by the Directors who
monitor the operating compliance and performance as required. Cromwell has policies for overall risk management
as well as policies covering specific areas such as identifying risk exposure, analysing and deciding upon strategies,
performance measurement, the segregation of duties and other controls around the treasury and cash management
functions.
Cromwell and the Trust hold the following financial instruments:
Type of financial
instrument
Financial assets
Cash and cash equivalents
Receivables
Receivables
Investments at fair value through profit
or loss
Total financial assets
Financial liabilities
Trade and other payables
Dividends / distributions payable
Interest bearing liabilities
Derivative financial instruments
Total financial liabilities
(1)
(1)
(2)
(2)
(1)
(1)
(1)
(2)
Type of financial instrument per AASB 9 Financial Instruments:
(1) At amortised cost; and
(2) At fair value through profit or loss.
B) ACCOUNTING POLICY
Cromwell
Trust
2020
$M
194.1
91.6
159.7
12.9
458.3
111.1
49.0
2,191.2
19.3
2,370.6
2019
$M
101.6
81.6
112.6
22.6
318.4
60.1
40.5
1,356.4
37.1
1,494.1
2020
$M
117.8
117.9
159.7
-
395.4
85.6
49.0
2,168.6
19.3
2,322.5
2019
$M
47.7
260.3
47.8
0.8
356.6
31.8
40.5
1,349.0
37.1
1,458.4
The accounting policies with respect to the initial recognition, measurement, classification and subsequent
measurement of Cromwell’s financial assets and financial liabilities are detailed below.
Initial recognition and measurement
Financial assets and financial liabilities are recognised in Cromwell’s Balance sheet when it becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. On initial recognition, financial assets
and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are
recognised net of transaction costs directly attributable to the acquisition of these financial assets or financial liabilities.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in the Statement of profit or loss.
114
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Financial assets
Classification and subsequent recognition and measurement
Subsequent to initial recognition Cromwell classifies its financial assets in the following measurement categories:
• Those to be measured at fair value (either through other comprehensive income, or through profit or loss); and
• Those to be measured at amortised cost.
The classification depends upon the whether the objective of Cromwell’s relevant business model is to hold financial
assets in order to collect contractual cash flows (business model test) and whether the contractual terms of the cash
flows give rise on specified dates to cash flows that are solely payments of principal and interest (cash flow test).
Financial assets recognised at amortised cost
Trade and other receivables are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest and are measured at amortised cost. Interest income from these financial assets is
included in finance income using the effective interest rate method.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount
and the sum of the consideration received and receivable is recognised in the Statement of profit or loss.
Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible
are written off.
Financial assets recognised at fair value through profit or loss
Assets that do not meet the criteria for amortised cost or recognition at fair value through other comprehensive income
are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at
fair value through profit or loss is recognised in the Statement of profit or loss and presented net within other gains /
(losses) in the period in which it arises.
Impairment
Cromwell recognises a loss allowance for expected credit losses on trade receivables that are measured at amortised
cost and contract assets. The amount of expected credit losses is updated at each reporting date to reflect changes in
credit risk since initial recognition of the respective financial instrument.
For trade receivables, Cromwell applies the simplified approach permitted by AASB 9, which requires expected lifetime
credit losses to be recognised from initial recognition of the receivables. The expected credit losses on these financial
assets are estimated using a provision matrix based on Cromwell’s historical credit loss experience adjusted for factors
that are specific to the debtors, general economic conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including time value of money where appropriate.
Cromwell impairs a financial asset when there is information indicating that the debtor is in severe financial difficulty
and there is no realistic prospect of recovery.
Response to COVID-19
As a result of COVID-19 Cromwell has undertaken a comprehensive review of the tenant receivables schedule. Any and
all tenant receivables not considered to be recoverable have been fully provided for and are not included in the tenant
receivables balance at year end.
Cromwell has also undertaken a review of its loan asset portfolio (including loans carried at fair value and loans carried
at amortised cost). This process involved a thorough examination of all loan receivable balances with counterparties
to assess the extent of expected credit losses that should be recognised. However, no indicators of impairment were
identified and no impairment was recognised as a result.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of
the contractual arrangements and the definitions of a financial liability and an equity instrument.
115
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities.
Equity instruments issued by Cromwell are recognised at the value of the proceeds received, net of direct issue costs.
Repurchase of the Cromwell’s own equity instruments is recognised and deducted directly in equity. No gain or loss
is recognised in the Statement of profit or loss on the purchase, sale, issue or cancellation of Cromwell’s own equity
instruments.
Compound instruments
The component parts of convertible loan notes issued by Cromwell are classified separately as financial liabilities and
equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and
an equity instrument. A conversion option that will not be settled by the exchange of a fixed amount of cash or another
financial asset for a fixed number of the Cromwell’s own equity instruments is an embedded derivative and not an
equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a
similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective
interest method until extinguished upon conversion or at the instrument’s maturity date.
The conversion option classified as an embedded derivative is determined by deducting the amount of the liability
component from the fair value of the compound instrument in its entirety. This component is recognised and classified
as a financial liability and categorised as being at fair value through profit or loss. This amount is subsequently
remeasured (see “Embedded derivatives” section below).
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at fair value
through profit or loss.
Financial liabilities subsequently measured at amortised cost
Financial liabilities that are not contingent consideration of an acquirer in a business combination, held-for-trading,
or designated as at fair value through profit or loss, are subsequently measured at amortised cost using the effective
interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments (including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where
appropriate) a shorter period, to the amortised cost of a financial liability.
Derecognition of financial liabilities
Cromwell derecognises financial liabilities when, and only when, its obligations are discharged, cancelled or have
expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid
and payable is recognised in the Statement of profit or loss.
When Cromwell exchanges one debt instrument for another with substantially different terms with an existing lender,
such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new
financial liability. Similarly, Cromwell accounts for the substantial modification of terms of an existing liability or part of
it as an extinguishment of the original financial liability and the recognition of a new financial liability.
Derivative financial instruments
For information in relation to the accounting policies for derivative financial instruments, refer note 11(b).
Embedded derivatives
An embedded derivative is a component of a hybrid contract that also includes a non-derivative host – with the effect
that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. Derivatives
embedded in hybrid contracts with hosts that are financial liabilities are treated as separate derivatives when they meet
the definition of a derivative, their risks and characteristics are not closely aligned to those of the host contracts and
the host contracts are not measured at fair value through profit or loss.
116
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT C)
CREDIT RISK
Credit risk is the risk that a counterparty will default on its contractual obligations under a financial instrument and result
in a financial loss to Cromwell. Cromwell has exposure to credit risk on all financial assets included in the Balance sheet
except investments at fair value through profit or loss.
Cromwell manages this risk by:
• establishing credit limits for customers and managing exposure to individual entities;
• monitoring the credit quality of all financial assets in order to identify any potential adverse changes in credit quality;
• derivative counterparties and cash transactions, when utilised, are transacted with high credit quality financial
institutions;
• providing loans to associates and joint ventures where Cromwell is comfortable with the underlying exposure;
• regularly monitoring loans and receivables on an ongoing basis; and
• regularly monitoring the performance of associates on an ongoing basis.
The maximum exposure to credit risk at balance date is the carrying amount of financial assets recognised in the Balance
sheet of Cromwell. Cromwell holds no significant collateral as security.
Cash is held with Australian, New Zealand, United Kingdom, Singapore and European financial institutions. Interest rate
derivative counterparties are all Australian and European financial institutions.
Note: as a result of COVID-19 Cromwell has undertaken a comprehensive review of tenant receivables. All tenant
receivables not considered to be recoverable have been fully provided for.
D)
LIQUIDITY RISK
Prudent liquidity risk management implies maintaining sufficient cash reserves and undrawn finance facilities to meet
the ongoing operational requirements of the business. It is Cromwell’s policy to maintain sufficient funds in cash and cash
equivalents to meet expected near term operational requirements. Cromwell prepares and monitors rolling forecasts of
liquidity requirements on the basis of expected cash flow. Cromwell monitors the maturity profile of borrowings and puts
in place strategies designed to ensure that all maturing borrowings are refinanced in the required timeframes.
The contractual maturity of Cromwell’s and the Trust’s financial liabilities at balance date are shown in the table below.
It shows undiscounted contractual cash flows required to discharge Cromwell’s financial liabilities, including interest at
current market rates.
Cromwell
Trust
1 year
or less
$M
2-3
years
$M
4-5
years
$M
Over 5
years
$M
1 year
or less
$M
Total
$M
2-3
years
$M
4-5
years
$M
Over 5
years
$M
Total
$M
2020
Trade and other payables
Dividends / distribution
payable
111.1
49.0
-
-
-
-
-
-
111.1
49.0
Interest bearing liabilities
35.5
211.8
1,987.3
61.2
2,295.8
Derivative financial
instruments
9.6
3.7
6.0
-
19.3
85.6
49.0
35.4
9.6
-
-
-
-
-
-
85.6
49.0
204.1
1,987.3
61.2 2,288.0
3.7
6.0
-
19.3
Total financial liabilities
205.2
215.5
1,993.3
61.2
2,475.2
179.6
207.8
1,993.3
61.2 2,441.9
2019
Trade and other payables
Dividends / distribution
payable
Interest bearing liabilities
Derivative financial
instruments
60.1
40.5
45.4
15.1
-
-
-
-
-
-
60.1 31.8
40.5 40.5
-
-
-
-
-
-
31.8
40.5
43.5
13.5
970.9
14.7
74.0
1,133.8 45.2
-
43.3 15.1
43.3
13.5
970.7
14.7
74.0
-
1,133.2
43.3
Total financial liabilities
161.1
57.0
985.6
74.0
1,277.7 132.6
56.8
985.4
74.0
1,248.8
117
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT E) MARKET RISK
Market risk is the risk that the fair value or future cash flows of Cromwell’s financial instruments fluctuate due to market
price changes. Cromwell is exposed to the following market risks:
• Price risk – unlisted equity securities;
• Interest rate risk; and
• Foreign exchange risk.
Price risk – Unlisted equity securities
Cromwell and the Trust are exposed to price risk in relation to its unlisted equity securities (refer note 9), although this
exposure is currently immaterial.
Cromwell and the Trust use the ASX closing price to determine the fair value of their listed securities. For unlisted
securities Cromwell and the Trust use the fair value of the net assets of the unlisted entity to determine the fair value of
their investments. The fair value of the net assets of unlisted entities is predominantly dependent on the market value of
the investment properties they hold. Any movement in the market value of the investment properties will impact on the
fair value of Cromwell and the Trust’s investment. These valuations have been impacted by COVID-19 in a similar fashion
as for the investment properties held by Cromwell and the Trust.
Interest rate risk
Cromwell’s interest rate risk primarily arises from borrowings. Borrowings issued at variable rates expose Cromwell to
cash flow interest rate risk. Borrowings issued at fixed rates expose Cromwell to fair value interest rate risk. Cromwell’s
policy is to effectively maintain hedging arrangements on not less than 50% of its borrowings. At balance date interest on
a total of 66% (2019: 97%) of Cromwell’s total borrowings is effectively fixed by being at fixed rates or through interest rate
swap and cap contracts.
For details about notional amounts and expiries of Cromwell’s and the Trust’s interest rate swap and interest rate cap
contracts refer to note 11.
Sensitivity analysis – interest rate risk
The table below details Cromwell’s sensitivity to movements in the year end interest rates, based on the borrowings
and interest rate derivatives held at balance date with all other variables held constant and assuming all Cromwell’s
borrowings and interest rate derivatives moved in correlation with the movement in year end interest rates.
Interest rate increase / (decrease) of:
2020
Cromwell
Trust
2019
Cromwell
Trust
+1%
-1%
Profit
$M
(9.4)
(10.1)
(3.8)
(4.3)
Equity
$M
(9.4)
(10.1)
(3.8)
(4.3)
Profit
$M
Equity
$M
9.4
10.1
3.8
4.3
9.4
10.1
3.8
4.3
Foreign exchange risk
Cromwell’s foreign exchange risk primarily arises from its investments in foreign subsidiaries and the investment in
CEREIT. The functional currency of these entities is Euro. The acquisition of the foreign subsidiaries was financed through
a convertible bond also denominated in Euro effectively providing a natural hedge against foreign exchange movements
between the Australian Dollar and the Euro. No hedge accounting was applied in relation to the net investment in the
foreign subsidiaries.
118
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Cromwell’s and the Trust’s exposure to Euro foreign currency risk at the end of the year, expressed in Australian dollars,
was as follows:
Cash and cash equivalents
Equity accounted investments
Borrowings – financial institutions
Borrowings – convertible bond
Derivative financial instruments – conversion feature
Other
Net exposure
Cromwell
Trust
2020
$M
10.1
692.7
(726.8)
(360.2)
(5.3)
(0.7)
(390.2)
2019
$M
19.3
648.4
-
(441.3)
(28.5)
(2.7)
195.2
2020
$M
8.7
680.5
(719.2)
(360.2)
(5.3)
(1.1)
(396.6)
2019
$M
19.3
620.4
-
(441.3)
(28.5)
3.3
173.2
Cromwell’s and the Trust’s also have exposure to Polish Złoty foreign currency risk due to the operation of the investment
property portfolio in Poland. Expressed in Australian dollars, this was as follows:
Cash and cash equivalents
Receivables
Other
Net exposure
Cromwell
Trust
2020
$M
21.3
30.9
0.5
52.7
2019
$M
-
-
-
-
2020
$M
21.3
30.9
0.5
52.7
Amounts recognised in profit or loss and other comprehensive income
Cromwell
Trust
Amounts recognised in profit or loss
Net foreign exchange (losses) / gains
Exchange losses on foreign currency borrowings
included in finance costs
Total expense recognised in profit or loss
Amounts recognised in other comprehensive income
Translation of foreign operations
Translation differences on inter-group loans that form
part of the net investment in the foreign operation
Total amount recognised in other comprehensive
income
Sensitivity analysis – foreign exchange risk
Euro – Australian Dollar gains 1 cent in exchange
Euro – Australian Dollar loses 1 cent in exchange
2020
$M
(2.8)
(1.8)
(4.6)
(3.9)
0.6
(3.3)
Profit
$M
5.9
(6.1)
2019
$M
(3.0)
(12.7)
(15.7)
2.5
8.8
11.3
2020
$M
(4.2)
(0.7)
(4.9)
0.6
-
0.6
2019
$M
-
-
-
-
2019
$M
2.0
(12.8)
(10.8)
8.8
-
8.8
2020
2019
Equity
$M
3.2
(3.3)
Profit
$M
8.6
(8.8)
Equity
$M
8.6
(8.8)
119
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
F)
FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
Cromwell uses a number of methods to determine the fair value of its financial instruments as described in AASB 13 Fair
Value Measurement. The methods comprise the following:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The table below presents Cromwell’s and the Trust’s financial assets and liabilities measured and carried at fair value at
30 June 2020 and 30 June 2019:
Notes
Level 2
$M
2020
Level 3
$M
Total
$M
Level 2
$M
2019
Level 3
$M
Total
$M
Cromwell
Financial assets at fair value
Receivables
Loans at fair value through profit or loss –
associate
Investments at fair value through profit or loss
Unlisted equity securities
Other financial asset
Total financial assets at fair value
Financial liabilities at fair value
Derivative financial instruments
Interest rate swaps
Conversion features
Total financial liabilities at fair value
Trust
Financial assets at fair value
18(c)
9(a)
9(a)
11(a)
11(a)
-
-
-
-
159.9
159.9
-
112.6
112.6
12.9
-
12.9
-
172.8
172.8
0.8
-
0.8
18.0
3.8
18.8
3.8
134.4
135.2
14.0
5.3
19.3
-
-
-
14.0
5.3
19.3
8.6
28.5
37.1
-
-
-
Notes
Level 2
$M
2020
Level 3
$M
Total
$M
Level 2
$M
2019
Level 3
$M
Investments at fair value through profit or loss
Unlisted equity securities
9(a)
Total financial assets at fair value
Financial liabilities at fair value
Derivative financial instruments
Interest rate swaps
Conversion features
Total financial liabilities at fair value
11(a)
11(a)
-
-
14.0
5.3
19.3
-
-
-
-
-
-
-
0.8
0.8
14.0
5.3
19.3
8.6
28.5
37.1
-
-
-
-
-
There were no transfers between the levels of the fair value hierarchy during the reporting period.
120
8.6
28.5
37.1
Total
$M
0.8
0.8
8.6
28.5
37.1
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT G) DISCLOSED FAIR VALUES
The fair values of investments at fair value through profit or loss (Levels 2 and 3) and derivative financial instruments
(Level 2) are disclosed in the Balance sheet.
The carrying amounts of receivables, other current assets and payables are assumed to approximate their fair values
due to their short-term nature. The fair value of non-current borrowings (other than the convertible bond) is estimated
by discounting the future contractual cash flows at the current market interest rates that are available to Cromwell for
similar financial instruments. The fair value of these borrowings is not materially different from the carrying value due to
their relatively short-term nature.
The convertible bonds are traded on the Singapore Exchange (SGX). At balance date the fair value of issued convertible
bonds was €222.5 million ($364.1 million) (2019: €287.3 million ($465.6 million)) compared to a carrying amount of €220.1
million ($360.2 million) (2019: €272.3 million ($441.3 million)).
i) Valuation techniques used to derive Level 1 fair values
At balance date, Cromwell held no Level 1 assets. However, in prior years Cromwell has held Level 1 assets including
listed equity securities. The fair value of financial assets traded in active markets is based on their quoted market prices at
the end of the reporting period without any deduction for estimated future selling costs.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from
an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
ii) Valuation techniques used to derive Level 2 fair values
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
These valuation techniques maximise the use of observable market data, assessed for the impact of COVID-19 where
it is applicable and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in Level 2.
Fair value of investments at fair value through profit or loss
Level 2 assets held by Cromwell include unlisted equity securities in Cromwell managed investment schemes. The fair
value of these financial instruments is based upon the net tangible assets as publicly reported by the underlying unlisted
entity, adjusted for inherent risk where appropriate.
Fair value of interest rate swaps and caps
Level 2 financial assets and financial liabilities held by Cromwell include “Vanilla” fixed to floating interest rate swap,
interest rate cap and cross currency swap derivatives (over-the-counter derivatives). The fair value of these derivatives
has been determined using a pricing model based on discounted cash flow analysis which incorporates assumptions
supported by observable market data at balance date including market expectations of future interest rates and discount
rates adjusted for any specific features of the derivatives and counterparty or own credit risk. All counterparties to interest
rate derivatives are Australian financial institutions.
Fair value of conversion feature – convertible bond
The fair value of the convertible bond conversion feature has been determined by comparing the market value of the
convertible bond to the value of a bond with the same terms and conditions but without an equity conversion feature (bond
floor). The difference between the two types of bonds is considered to represent the fair value of the conversion feature of
the convertible bond.
iii) Valuation techniques used to derive Level 3 fair values
If the fair value of financial instruments is determined using valuation techniques and if one or more of the significant
inputs is not based on observable market data, the instrument is included in level 3.
121
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value
hierarchy:
Investments at fair value through profit or loss
Opening balance as at 1 July
Additions
Disposals
Fair value loss
Foreign exchange difference
Balance at 30 June
Cromwell
2020
$M
21.8
-
(4.6)
(4.3)
-
12.9
2019
$M
31.7
0.9
(9.9)
(1.3)
0.4
21.8
Fair value of investments at fair value through profit or loss
Level 3 assets held by Cromwell include co-investments in Cromwell Europe managed wholesale property funds. The
fair value of these investments is determined based on the value of the underlying assets held by the fund. The assets of
the fund are subject to regular external valuations which are based on discounted net cash inflows from expected future
income and/or comparable sales of similar assets. Appropriate discount rates determined by the independent valuer are
used to determine the present value of the net cash inflows based on a market interest rate adjusted for the risk premium
specific to each asset.
Receivable held at fair value through profit or loss
Level 3 assets held by Cromwell and the Trust include loans to the LDK joint venture. The fair value of these loans is based
on the relevant discounted net cash inflows from expected future inflows of principal and interest. The present value of
the net cash inflows is based on relevant interest rates adjusted for credit and liquidity risks specific to each loan, whilst
compensating Cromwell and the Trust with an appropriate profit margin.
The fair value is determined using valuation techniques that are not supported by prices from an observable market. The
fair value of these assets recognised in the Balance sheet could change significantly if the underlying assumptions made
in estimating the fair values were significantly changed.
122
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Group Structure
This section provides information about the Cromwell Property Group structure including parent entity information and
information about controlled entities (subsidiaries).
15. Parent entity disclosures
A)
OVERVIEW
The financial information below on Cromwell’s parent entity Cromwell Corporation Limited (the “Company”) and the
Trust’s parent entity Cromwell Diversified Property Trust (the “CDPT”) as stand-alone entities has been provided in
accordance with the requirements of the Corporations Act 2001 (Cth).
B)
ACCOUNTING POLICY
The financial information of the parent entities of Cromwell and the Trust has been prepared on the same basis as the
consolidated financial statements except for investments in subsidiaries and equity accounted investments.
Investments in subsidiaries and equity accounted investments are accounted for at cost less accumulated impairment
charges in the financial report of the parent entity. Distributions and dividends received from subsidiaries and equity
accounted investments are not eliminated and recognised in profit or loss.
C)
SUMMARISED FINANCIAL INFORMATION
Cromwell
CDPT
Results
Profit / (loss) for the year
Total comprehensive income for the year
Financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets / (liabilities)
Equity
Contributed equity
Security based payments reserve
Reserves
Retained earnings / (accumulated losses)
Total equity
D)
COMMITMENTS
2020
$M
17.7
17.7
52.9
161.1
-
97.3
63.8
206.6
13.2
1.5
(157.5)
63.8
2019
$M
(8.7)
(8.7)
90.0
196.8
10.1
223.3
(26.5)
138.4
10.4
(0.1)
(175.2)
(26.5)
2020
$M
157.9
157.9
78.2
3,170.7
72.7
1,422.5
1,748.2
2019
$M
37.9
37.9
13.2
2,388.0
64.8
954.6
1,433.4
2,071.4
1,719.0
-
-
-
-
(323.2)
1,748.2
(285.6)
1,433.4
At balance date the Company and CDPT had no commitments (2019: none) in relation to capital expenditure contracted for
but not recognised as liabilities.
E)
GUARANTEES PROVIDED
The Company and CDPT have both provided guarantees in relation to the convertible bonds disclosed at Note 10(c). Both
entities unconditionally and irrevocably guarantee the due and punctual payment of all amounts at any time becoming due
and payable in respect of the convertible bond. These guarantees were provided in a prior year.
F)
CONTINGENT LIABILITIES
At balance date the Company and CDPT had no contingent liabilities (2019: none).
123
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 16. Controlled entities
A)
COMPANY AND ITS CONTROLLED ENTITIES
Name
Equity Holding
Country of
registration
2020
%
2019
%
Name
Cromwell Aged Care Holdings Pty Ltd
Australia
100
Cromwell Altona Fund
Cromwell BT Pty Ltd
Cromwell Capital Pty Ltd
Cromwell Finance Pty Ltd
Cromwell Funds Management Limited
Cromwell Holdings No 1 Pty Ltd
Cromwell Holdings No 2 Pty Ltd
Cromwell Infrastructure Pty Ltd
Cromwell Operations Pty Ltd
Cromwell Project & Technical Solutions
Pty Ltd
Cromwell Property Securities Limited
Cromwell Property Services Pty Ltd
Cromwell Real Estate Partners Pty Ltd
Cromwell Seven Hills Pty Limited
Lovett Developments Pty Limited
Marcoola Developments Pty Ltd
Valad Australia Pty Ltd
Votraint No. 662 Pty Limited
Gateshead Investments Limited
Upperastoria Trading & Investments
Limited
Cromwell Property Group Czech Republic
s.r.o.
LiNK Hradec Králové s.r.o.
Cromwell Denmark A/S
Cromwell Finland O/Y
Cromwell France SAS
Cromwell Germany GmbH
Equity Partnerships Fund Management
(Guernsey) Limited
Nordic Aktiv General Partner Limited
Nordic Aktiv General Partner 2 Limited
German Aktiv Co-op Limited
German Aktiv General Partner Limited
Cromwell Property Group Hungary Kft
Cromwell Property Group Italy SRL
CPRF GP S.à r.l.
Cromwell CPR Promote S.à r.l.
Cromwell EREIT Management
Luxembourg S.à r.l.
Czech Republic
100
100
Cromwell European Management
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Cyprus
Cyprus
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Czech Republic
Denmark
Finland
France
Germany
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Hungary
Italy
Luxembourg
Luxembourg
Luxembourg
90
100
100
100
100
100
100
100
-
-
-
100
100
100
100
100
100
100
100
100
100
-
100
-
100
100
90
100
100
100
100
100
100
100
100
100
100
100
-
100
-
100
-
100
100
100
100
100
100
100
100
100
Equity Holding
Country of
Registration
2020
%
2019
%
Sweden
100
United Kingdom 100
100
100
United Kingdom 100
100
United Kingdom 100
United Kingdom 100
Cromwell Sweden A/B
Cromwell Asset Management UK
Limited
Cromwell Capital Ventures UK
Limited
Cromwell CEE Coinvest LP
Cromwell CEE Development Holdings
Limited
100
100
100
100
90
100
90
100
100
100
100
100
100
100
Cromwell CEE Promote LP
United Kingdom
83
Cromwell CEREIT Holdings Limited
United Kingdom 100
Cromwell Coinvest CEIF LP
United Kingdom
90
Cromwell Coinvest CEVAF l LP
United Kingdom 100
Cromwell Coinvest ECV LP
Cromwell Corporate Secretarial
Limited
Cromwell Corporate Secretarial No.
2 Limited
Cromwell Development Holdings UK
Limited
Cromwell Development Management
UK Limited
United Kingdom
90
United Kingdom 100
United Kingdom
-
100
United Kingdom 100
100
United Kingdom 100
100
Cromwell Director Limited
Cromwell Europe Limited
United Kingdom 100
United Kingdom 100
Cromwell European Holdings Limited
United Kingdom 100
Services Limited
Cromwell GP
United Kingdom 100
United Kingdom 100
Cromwell Holdings Europe Limited
United Kingdom 100
Cromwell Investment Holdings
UK Limited
United Kingdom 100
100
Cromwell Investment Management
Services Limited
Cromwell Investment Services
Limited
Cromwell Management Holdings
Limited
United Kingdom 100
United Kingdom 100
100
100
United Kingdom 100
100
Cromwell Poland Retail LLP
United Kingdom 100
Cromwell Poland Retail UK Limited
United Kingdom 100
Cromwell Promote CEIF LP
United Kingdom 100
Cromwell Promote CEVAF l LP
United Kingdom 100
Cromwell Promote CPRF LP
Cromwell Promote ECV LP
Cromwell Promote HIG LP
Cromwell WBP Poland LP
Cromwell YCM Coinvest LP
Cromwell YCM Promote LP
United Kingdom 100
United Kingdom 100
United Kingdom 100
United Kingdom 100
United Kingdom 100
United Kingdom 100
D.U.K.E. (Cheetham Hill) Limited
United Kingdom
-
D.U.K.E. Combined GP Limited
United Kingdom 100
Equity Partnerships (Osprey) Limited
United Kingdom 100
IO Management Services Limited
United Kingdom 100
Parc D’Activities 1 GP Limited
United Kingdom 100
PFM Coinvestment Partner Limited
United Kingdom
-
The IO Group Limited
United Kingdom 100
Valad Salfords Custodian Limited
United Kingdom 100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Cromwell Investment Luxembourg S.à r.l.
Luxembourg
Cromwell Italy Urban Logistics S.à r.l.
Cromwell Luxembourg SA
Cromwell REIM Luxembourg S.à r.l.
Cromwell Central Europe B.V.
Cromwell Netherlands B.V.
Cromwell Norway A/S
Cromwell Property Group Poland Sp Zoo
Cromwell Poland Sp Zoo
Cromwell Property Group Romania SRL
Cromwell EREIT Management Pte. Ltd
Luxembourg
Luxembourg
Luxembourg
Netherlands
Netherlands
Norway
Poland
Poland
Romania
Singapore
124
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT B)
TRUST AND ITS CONTROLLED ENTITIES
Equity Holding
Country of
registration
2020
%
2019
%
Equity Holding
Country of
registration
2020
%
2019
%
Name
CDPT Finance Pty Ltd
CDPT Finance No. 2 Pty Ltd
Cromwell Accumulation Fund
Cromwell Bundall Corporate Centre
Head Trust
Australia
Australia
Australia
Australia
Cromwell Bundall Corporate Centre Trust
Australia
Cromwell CPF Fund No. 1
Australia
Cromwell Diversified Property Trust No. 2
Australia
Cromwell Diversified Property Trust No. 3
Australia
Cromwell George Street Trust
Cromwell Holdings Trust No 1
Cromwell Holding Trust No 2
Cromwell Holdings Trust No 4
Cromwell HQ North Head Trust
Cromwell HQ North Trust
Cromwell Mary Street Property Trust
Cromwell Mary Street Planned
Investment
Cromwell McKell Building Trust
Cromwell Newcastle Trust
Cromwell Poland Holdings Trust
Cromwell Northbourne Planned
Investment
Cromwell NSW Portfolio Trust
Cromwell Penrith Trust
Cromwell Poland Holdings Trust
Cromwell Property Fund
Cromwell Property Fund Trust No 2
Cromwell Property Fund Trust No 3
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Name
Cromwell Queanbeyan Trust
Cromwell SPV Finance Pty Ltd
Cromwell Symantec House Trust
Cromwell TGA Planned Investment
Cromwell VAC Finance Pty Ltd
Cromwell Wakefield Property Trust
Cromwell Wollongong Trust
EXM Head Trust
100
100
100
100
100
100
100
100
-
EXM Trust
100 Mascot Head Trust
100 Mascot Trust
100
100
100
Tuggeranong Head Trust
Tuggeranong Trust
CPRF S.C.A.
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Luxembourg
100 Next Real Estate Polish Retail S.à r.l.
Luxembourg
92 Next Real Estate Polish Retail Holdco
Luxembourg
S.à r.l.
CH Bydgoszcz Sp Zoo
CH Toruń Sp Zoo
CH Janki Sp Zoo
CH Łódź Sp Zoo
CH Szczecin Sp Zoo
CH Wrocław Sp Zoo
CPRF Co Sp Zoo
100
100
100
100
100
100
- HEL Poland Sp Zoo
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
100
100
100
Cromwell Singapore Holdings Pte. Ltd.
Singapore
Cromwell European Finance Limited
United
Kingdom
100
100
-
-
-
-
100
100
100
100
100
100
100
100
100
92
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
-
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
100
100
All new entities have been incorporated during the year. There were no business combinations during the year. Entities, which
Cromwell or the Trust controlled in the prior year with no equity holding in the current year have either been deregistered or
disposed in the current year.
125
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Other Items
This section of the annual financial report provides information about individually significant items to the Balance
sheets, Profit and loss statements and Cash flow statements and items that are required to be disclosed by Australian
Accounting Standards.
17. Leased assets and related leases
The AASB has issued a new standard for leases, AASB 16 Leases, which has replaced AASB 117 Leases. Cromwell has
applied AASB 16 from 1 July 2019 using the ‘cumulative catch-up approach’ permitted by the standard. A summary of
material changes to the accounting policies is provided below:
A) ACCOUNTING POLICY
Accounting as lessor
Cromwell and the Trust enter into lease agreements as a lessor with respect to its investment properties. All these
leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. When a
contract includes both lease and non-lease components Cromwell and the Trust apply AASB 15 Revenue from Contracts
with Customers to allocate the consideration under the contract to each component and account for the lease component
as a lease in accordance with AASB 16 and the non-lease component as a service contract in accordance with AASB 15.
Initial direct costs incurred in negotiating and arranging such operating leases are added to the carrying value of the
leased asset (investment property) and amortised on a straight-line basis over the lease term.
Accounting as lessee
Previously Cromwell determined at contract inception whether an arrangement is or contains a lease in accordance
with IFRIC 4 Determining Whether an Arrangement Contains a Lease. Under AASB 16 Cromwell assesses whether a
contract is or contains a lease based upon the definition of ‘lease’ within the standard.
On transition to AASB 16 Cromwell applied the new definition of lease to all existing leases to determine whether the
underlying contract is or contains a lease. This has resulted in some contracts not previously identified as leases under
AASB 117 and IFRIC 4 being classified and recognised as leases under AASB 16.
The accounting standard introduces a single accounting model for leases by lessees and effectively does away with the
operating lease concept. It requires all relevant operating leases, which were not previously recorded on the balance
sheet, to be recognised on the balance sheet as a financial liability with a corresponding right-of-use asset, except
for short-term leases and leases of low value assets (for these leases Cromwell recognises the lease payments as
an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more
representative of the pattern in which economic benefits from the leased assets are consumed).
The lease liability is initially measured as the present value of the lease payments that are unpaid at the commencement
date, discounted using the rate implicit in the lease or relevant incremental borrowing rate. Subsequently the lease
liability is adjusted for interest and lease payments, as well as the impact of lease modifications. The lease liability is
presented as a component of Interest bearing liabilities in the balance sheet (see note 10).
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made
at or before commencement, less any lease incentives received and any initial direct costs. The right-of-use asset is
subsequently measured as cost less accumulated depreciation and impairments. Make-good or restoration obligations
are provided for in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets.
Right-of-use assets are presented as a component of Investment property and Property, plant and equipment in the
Balance sheet.
Right-of-use assets are depreciated on a straight-line basis over the shorter period of the lease term and useful life of
the underlying asset. Impairments are measured in accordance with AASB 136 Impairment of Assets.
Transition
The new standard applies to a number of lease contracts Cromwell has entered into in respect of office premises,
property, plant and equipment and motor vehicles. For the year ended 30 June 2020, Cromwell has adopted AASB 16
by applying the ‘cumulative catch-up approach’ allowed by the standard from 1 July 2019.
126
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT At transition lease liabilities were measured at the present value of the remaining lease payments, discounted at
Cromwell’s incremental borrowing rate at 1 July 2019. Right-of-use assets are measured at either:
• their carrying amount as if AASB 16 had been applied since the commencement date, discounted using the lessee’s
incremental borrowing rate at the date of initial application; or
• an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. Cromwell
applied this approach to all the leases.
• Cromwell used the following practical expedients when applying AASB 16 to leases previously classified as operating
leases under AASB 17:
• applied a discount rate to portfolios of leases with similar characteristics;
• applied the exemption not to recognise right-of-use assets and liabilities in respect of leases with terms of less than
12 months;
• excluded initial direct costs from measuring right-of-use assets at the date of initial recognition.
B)
FINANCIAL IMPACT OF ADOPTION OF AASB 16
On transition Cromwell recognised an additional $15.6 million of right-of-use assets and $15.6 million of lease liabilities.
When measuring lease liabilities, Cromwell discounted lease payments using relevant incremental borrowing rates at 1
July 2019. The weighted-average rate applied is 2.5%.
The below table shows the information in relation to Cromwell and Trust’s leased assets and relevant lease liabilities for
the year ending and as at 30 June 2020:
Investment
property(1)(2)
$M
Office
premises(3)
$M
Property,
plant and
equipment(3)
$M
Total
$M
Operating lease commitment at 30 June 2019 as disclosed in
Cromwell’s consolidated financial statements
Discounted using the incremental borrowing rate at 1 July 2019
Extensions and termination options reasonably certain to be exercised
Lease commitments derecognised under AASB 16 definition
Lease liabilities and corresponding right-of-use assets recognised
on 1 July 2019
Reconciliation of movements in lease liabilities:
Lease liabilities recognised on 1 July 2019
Additions
Payments
Finance costs(4)
Disposals, terminations and modifications
Lease liabilities at 30 June 2020
Classified as a component of interest bearing liabilities:
Current
Non-current
Lease liabilities at 30 June 2020
Reconciliation of movements in relation to right-of-use assets:
Right-of-use assets recognised on 1 July 2019
Additions
Disposals, terminations and modifications
Amortisation(5)
Right-of-use assets at 30 June 2020
Reconciliation of cash flows in relation to leases:
Payments in relation to lease liabilities recognised above
Total cash flows in respect of lease for the year ended 30 June 2020
-
-
-
-
-
-
6.9
(0.4)
0.2
(0.4)
6.3
0.4
5.9
6.3
-
6.9
-
(0.1)
6.8
(0.4)
(0.4)
13.8
(1.1)
2.0
(0.2)
14.5
14.3
3.1
(2.9)
0.4
(1.9)
13.0
2.6
10.4
13.0
14.3
3.1
(2.0)
(2.6)
12.8
(2.9)
(2.9)
1.2
15.0
(0.1)
-
-
(1.2)
2.0
(0.2)
1.1
15.6
1.1
1.1
(0.7)
-
(0.1)
1.4
0.6
0.8
1.4
1.1
1.1
(0.2)
(0.6)
1.4
(0.7)
(0.7)
15.4
11.1
(4.0)
0.6
(2.4)
20.7
3.6
17.1
20.7
15.4
11.1
(2.2)
(3.3)
21.0
(4.0)
(4.0)
(1) Represents relevant information in respect of the Trust.
(2) Right-of-use assets included as a component of Investment property In the Balance sheet. See note 7 for further information.
(3) Right-of-use assets included as a component of Property, plant and equipment in the Balance sheet.
(4) Included as a component of Finance costs in the statement of profit or loss.
(5) Included as a component of Amortisation and depreciation in the Statement of profit or loss.
127
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 18. Other financial assets and financial liabilities
A)
OVERVIEW
This note provides further information about material financial assets and liabilities that are incidental to Cromwell’s and
the Trust’s trading activities, being receivables and trade and other payables, as well as information about restricted cash.
B)
ACCOUNTING POLICY
Trade receivables and loans at amortised cost
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less
any expected credit losses. Operating lease receivables of investment properties are due on the first day of each month,
payable in advance.
Loans at fair value through profit or loss
Loans at fair value through profit or loss are recognised initially at fair value and subsequently measured at fair value
using techniques detailed in note 14(g)(iii).
Note: as a result of COVID-19 Cromwell has undertaken a comprehensive review of tenant receivables. All tenant
receivables not considered to be recoverable have been fully provided for.
In addition, the recoverability and measurement of loans to related parties was assessed against the backdrop of COVID-19.
Recoverability was assessed based upon financial and non-financial information provided by the borrowers. Recoverability
was found to not be negatively impacted. The inputs into the relevant valuation models used to determine the recoverable
amount of the loans was also scrutinised and amended where appropriate to reflect any impacts of COVID-19.
Trade payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost. These
amounts represent liabilities for goods and services provided to Cromwell prior to the end of the year and which are
unpaid. The amounts are usually unsecured and paid within 30-60 days of recognition.
C)
RECEIVABLES
Current
Contract assets at amortised cost
Trade and other receivables at amortised cost
Loans at amortised cost – associates and related parties
Receivables – current
Non-current
Loans at amortised cost – related parties
Loans at fair value through profit or loss – associate
Trust loans at amortised cost – related party
Receivables – non-current
Loans – related parties
Cromwell
Trust
2020
$M
2.0
47.8
0.5
50.3
41.3
159.7
-
201.0
2019
$M
1.1
66.8
5.0
72.9
8.7
112.6
-
121.3
2020
$M
1.5
29.4
-
30.9
128.6
118.1
-
246.7
2019
$M
8.0
35.0
139.7
182.7
4.3
47.8
73.3
125.4
Current loans – Oyster joint venture
During the prior year, the Trust provided a NZD $6.0 million short-term loan facility to Cromwell’s joint venture Oyster
Property Funds Limited (“Oyster”) for the initial funding of an Oyster property syndication. This facility was drawn to NZD
$1.0 million, which was fully repaid during the prior year. The facility has now ceased.
During the current year, the Trust provided several NZD-denominated short-term loan facilities of $20.5 million in
aggregate to Cromwell’s joint venture Oyster Property Funds Limited (“Oyster”) for the initial funding of Oyster property
syndications. This facility were drawn to NZD $7.5 million, all of which was fully repaid during the year.
128
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Non-current loans – LDK joint venture
i) Working capital loan
In 2018, the Trust signed a Facility Agreement (‘Working capital loan’) with LDK Corporate Unit Trust, a subsidiary of LDK
Healthcare Unit Trust, to provide a facility terminating on 31 December 2020, which was extended until 31 December 2023
during the year. The maximum loan facility is $10.0 million with an interest rate of 12%. During the year, the loan was
drawn down by a further $5.2 million and repayments of $8.8 million were made.
ii) “Waterfall” loans
During the prior year, Cromwell and the Trust provided a number of loan facilities to LDK Healthcare Unit Trust and a
number of its subsidiaries in order to assist in the development of the LDK business. These facilities are $240.8 million in
aggregate and do not constitute a component of Cromwell’s net investment in the joint venture itself due to the loans being
either secured or their settlement being planned and likely.
Interest rates attributable range from nil to BBSY plus various margins. These loans have been classified as being held at
fair value through profit or loss.
During the year, $83.1 million (2019: $112.4 million) was drawn down and $37.9 million (2019: $nil) was repaid, whilst
interest accrued at relevant rates. The total aggregate loan balance at year-end is $158.8 million (2019: $112.6 million)
(including accrued interest).
Non-current loans – Ursynów
During the year Cromwell and the Trust provided a PLN-denominated loan facility to Ursynów of PLN 100.0 million as a
component of the refinancing of the Polish investment portfolio. The loan facility expires in November 2027 and has an
interest rate applicable of 7.2%. At balance date the loan was drawn to PLN 78.6 million ($30.9 million).
Non-current loans – Trust loans
The Trust loans to CCL consist of four facilities as follows:
Unsecured loan: In a prior year the Trust provided CCL a loan facility of €107.6 million. The Euro denominated loan
facility was unsecured and was subject to an interest rate of 2.5%. The loan facility expired in February
2020 when the loan and applicable interest was repaid in full.
Unsecured loan: During the year the Trust provided CCL a loan facility of €100.0 million. CCL drew down €75.2 million
in respect of the facility during the year and made repayments of €15.3 million leaving a loan balance
of €59.9 million ($98.0 million) at balance date. The Euro denominated loan facility is unsecured and
carries an interest rate of 2.5%. The loan facility expires in February 2029.
Investment loan: In a prior year the Trust provided CCL a loan facility of $15.2 million in relation to CCL’s acquisition of
an investment. The loan was fully drawn at inception. During the year CCL fully repaid the loan and
applicable interest (2019: $nil repayments) at which time the facility was extinguished. The facility,
originally due to expire in March 2026, was unsecured and subject to an interest rate of BBSY plus a
margin.
LDK loans:
During the prior year the Trust provided CCL aggregate loan facilities of $60.7 million. During the year
CCL made repayments of $58.1 million (2019: $2.6 million) so the aggregate loan balance was repaid
and the facility was extinguished (2019: balance $58.1 million). The loan facilities were unsecured and an
interest rate of BBSY plus margin is applicable.
D)
TRADE AND OTHER PAYABLES
Trade and other payables
Lease incentives payables
Tenant security deposits
Trade and other payables
Cromwell
Trust
2020
$M
46.0
62.7
2.4
111.1
2019
$M
46.9
13.3
0.1
60.3
2020
$M
20.5
62.7
2.4
85.6
2019
$M
18.4
13.3
0.1
31.8
129
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 19. Intangible assets
A)
OVERVIEW
At the current and prior year-ends, Cromwell’s intangible assets consisted solely of software assets. The schedule below
provides information about the movements in intangible assets:
Cromwell
Software
Cost
Accumulated amortisation
Balance at 30 June
Opening balance as at 1 July
Additions
Disposals
Amortisation
Foreign exchange difference
Balance at 30 June
B)
ACCOUNTING POLICY
2020
$M
14.8
7.2
7.6
4.5
5.4
-
(2.4)
0.1
7.6
2019
$M
9.3
4.8
4.5
2.3
3.7
(1.0)
(0.6)
0.1
4.5
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Cromwell currently
carries only software as intangible assets. Software is amortised on a straight-line basis over two to five years.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is
derecognised.
20. Cash flow information
A)
OVERVIEW
This note provides further information on the consolidated cash flow statements of Cromwell and the Trust. It reconciles
profit for the year to cash flows from operating activities and information about non-cash transactions.
B) ACCOUNTING POLICY
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
• Where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost
of acquisition of an asset or as part of an item of expense, or
• For receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables. Cash flows are included in the cash flow statement on a gross basis.
The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable
to, the taxation authority is classified within operating cash flows.
130
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
C)
RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Cromwell
Trust
Net profit
Amortisation and depreciation
Amortisation of lease costs and incentives
Operating lease costs
Straight-line rentals
Security based payments
Share of (profits) / losses – equity accounted investments (net of
distributions and impairments)
Net foreign exchange loss / (gain)
Amortisation of loan transaction costs
Gain on sale of investment properties
Loss on sale of other assets
Costs in relation to asset classified as held for sale
Asset, fund and development management fees non-cash
settled
Decrease / (increase) in recoverable amounts
Finance costs attributable to discounted lease incentives
Fair value net (gain) / loss from:
Investment properties
Derivative financial instruments
Investments at fair value through profit or loss
Payment for other transaction costs
Changes in operating assets and liabilities
(Increase) / decrease in:
Receivables
Tax assets / liabilities
Other current assets
Increase / (decrease) in:
Trade and other payables
Provisions
Unearned income
Net cash provided by operating activities
D) NON-CASH TRANSACTIONS
Stapled securities / units issued on reinvestment of distributions
CEREIT fees received in units:
Acquisition fees
Management fees
Restructure costs
Total non-cash outflow transactions
2020
$M
181.1
7.4
29.2
(3.1)
(9.7)
2.8
(11.7)
4.6
10.0
(3.3)
3.6
-
(16.0)
4.3
0.8
(17.5)
(18.4)
4.3
23.4
19.0
(3.3)
(0.2)
(10.9)
1.4
3.4
201.2
Cromwell
2020
$M
21.0
12.5
3.5
-
37.0
2019
$M
159.9
2.4
20.8
-
(9.3)
2.5
13.5
10.1
7.8
(0.7)
-
35.3
(21.9)
0.4
-
(86.4)
10.5
9.2
2.9
(18.2)
(9.0)
(2.6)
5.6
1.1
1.1
135.0
2019
$M
18.0
4.9
16.4
0.6
39.9
2020
$M
153.8
-
29.2
-
(9.7)
-
(4.5)
4.9
9.8
(3.3)
3.6
-
-
-
0.8
(17.5)
(18.4)
-
19.0
15.6
(9.2)
(0.6)
18.7
-
3.0
195.2
Trust
2020
$M
17.4
-
-
-
2019
$M
163.4
-
20.8
-
(9.3)
-
15.6
10.7
7.5
(0.7)
-
35.3
-
-
-
(86.4)
10.5
-
1.8
(29.1)
12.3
(0.2)
5.4
-
1.2
158.8
2019
$M
17.0
-
-
-
17.4
17.0
131
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT E)
RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Cromwell
Opening balance 1 July 2018
Changes from financing cash flows:
Proceeds from borrowings
Repayments of borrowings
Payment of loan transaction costs
Payments for settlement of derivative
financial instruments
Payment of dividends / distributions
Total changes from financing cash flows
Other movements:
Exchange rate gains / losses
Fair value net gains / losses
Amortisation of loan transaction costs
Stapled securities / units issued on
reinvestment of distributions
Distributions for the year
Recognition of bond conversion features
Balance at 30 June 2019
Changes from financing cash flows:
Proceeds from borrowings
Repayments of borrowings
Payment of dividends / distributions
Total changes from financing cash flows
Other movements:
Exchange rate gains / losses
Fair value net gains / losses
Amortisation of loan transaction costs
Stapled securities / units issued on
reinvestment of distributions
Distributions for the year
Balance at 30 June 2020
Dividends /
distributions
payable
$M
Derivative
financial
instruments
$M
41.4
37.7
Borrowings
$M
1,412.0
178.5
(250.7)
(4.4)
-
-
(76.6)
15.4
-
7.8
-
-
(2.2)
1,356.4
2,050.4
(1,243.8)
-
806.6
(3.1)
-
10.0
-
-
2,169.9
-
-
-
(140.4)
-
(140.4)
-
-
-
(18.0)
157.5
-
40.5
-
-
(166.0)
(166.0)
-
-
-
(21.0)
195.5
49.0
-
-
-
-
(12.3)
(12.3)
0.8
8.7
-
-
-
2.2
37.1
-
-
-
-
0.6
(18.4)
-
-
-
19.3
Total
$M
1,491.1
178.5
(250.7)
(4.4)
(140.4)
(12.3)
(229.3)
16.2
8.7
7.8
(18.0)
157.5
-
1,434.0
2,050.4
(1,243.8)
(166.0)
640.6
2.5
(18.4)
10.0
(21.0)
195.5
2,238.2
132
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Dividends /
distributions
payable
$M
Derivative
financial
instruments
$M
41.4
37.7
Borrowings
$M
1,412.4
171.0
(250.7)
(4.7)
-
-
(84.3)
15.7
-
7.5
-
-
(2.2)
1,349.0
2,050.4
(1,243.8)
(4.5)
-
802.1
1.4
-
9.8
-
-
2,162.3
-
-
-
(141.4)
-
(141.4)
-
-
-
(17.0)
157.5
-
40.5
-
-
-
(169.6)
(169.6)
-
-
-
(17.4)
195.5
49.0
-
-
-
-
(12.3)
(12.3)
0.8
8.8
-
-
-
2.2
37.1
-
-
-
-
-
0.6
(18.4)
-
-
-
19.3
Total
$M
1,332.5
171.0
(250.7)
(4.7)
(141.4)
(12.3)
(238.0)
16.5
8.8
7.5
(17.0)
157.5
-
1,426.6
2,050.4
(1,243.8)
(4.5)
(169.3)
632.5
2.0
(18.4)
9.8
(17.4)
195.5
2,230.6
Trust
Opening balance 1 July 2018
Changes from financing cash flows:
Proceeds from borrowings
Repayments of borrowings
Payment of loan transaction costs
Payments for settlement of derivative
financial instruments
Payment of dividends / distributions
Total changes from financing cash flows
Other movements:
Exchange rate gains / losses
Fair value net gains / losses
Amortisation of loan transaction costs
Stapled securities / units issued on
reinvestment of distributions
Distributions for the year
Recognition of bond conversion features
Balance at 30 June 2019
Changes from financing cash flows:
Proceeds from borrowings
Repayments of borrowings
Payment of loan transaction costs
Payment of dividends / distributions
Total changes from financing cash flows
Other movements:
Exchange rate gains / losses
Fair value net gains / losses
Amortisation of loan transaction costs
Stapled securities / units issued on
reinvestment of distributions
Distributions for the year
Balance at 30 June 2020
21. Security based payments
A)
OVERVIEW
Cromwell operates a security based compensation scheme, the Performance Rights Plan (PRP). Under the PRP, eligible
employees, including executive directors, have the right to acquire Cromwell securities at a consideration of between
$0.00 and $0.50 subject to certain vesting conditions. Eligibility is by invitation of the Board of Directors and participation in
the PRP by executive directors is subject to securityholder approval. The PRP is designed to provide long-term incentives
for employees to continue employment and deliver long-term securityholder returns.
This note provides information below on the security based compensation schemes Cromwell currently operates.
B)
PRP
Cromwell established a PRP in September 2007. All full-time and part-time employees who meet minimum service,
remuneration and performance requirements, including executive directors, are eligible to participate in the PRP at the
discretion of the Board. Under the PRP, eligible employees are allocated performance rights. Each performance right
133
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT enables the participant to acquire a stapled security in Cromwell, at a future date and exercise price, subject to conditions.
The number of performance rights allocated to each participant is set by the Board or the Nomination & Remuneration
Committee and based on individual circumstances and performance.
The amount of performance rights that will vest under the PRP depends on a combination of factors which may include
Cromwell’s total securityholder returns (including price growth, dividends and capital returns), internal performance
measures and the participant’s continued employment. Performance rights allocated under the PRP generally vest in
three years. Until performance rights have vested, the participant cannot sell or otherwise deal with the performance
rights except in certain limited circumstances. It is a condition of the PRP that a participant must remain employed by
Cromwell in order for performance rights to vest. Any performance rights which have not yet vested on a participant
leaving employment must be forfeited.
Under AASB 2 Share-based Payment, the performance rights are treated as options for accounting purposes. Set out below
is a summary of movements in the number of performance rights outstanding at the end of the financial year:
As at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
As at 30 June
Vested and exercisable
2020
2019
Weighted average
exercise price
Number of
performance rights
Weighted average
exercise price
Number of
performance rights
$0.32
$0.17
$0.40
$0.00
$0.26
-
15,632,820
3,366,614
(4,920,055)
(261,223)
13,818,156
-
$0.37
$0.24
$0.36
-
$0.32
-
11,256,742
6,751,764
(2,375,686)
-
15,632,820
-
The weighted average price per security at the date of exercise of options exercised during the year ended 30 June 2020
was $1.21 (2019: $1.07). No options expired during the years covered in the table above.
The weighted average remaining contractual life of the 13,818,156 performance rights outstanding at the end of the
financial year (2019: 15,632,820) was 1.3 years (2019: 1.5 years).
Fair value of performance rights granted
The fair value of performance rights granted during the year was between $0.57 per option for PRP with an exercise price
of $0.50 and $1.06 per option for PRP with an exercise price of $nil (2019: fair value between $0.34 and $0.88).
Performance rights do not have any market-based vesting conditions. The fair values at grant date are determined using a
Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the security price at
grant date and expected price volatility of the underlying security, the expected dividend/distribution yield and the risk-free
interest rate for the term of the option. The model inputs for performance rights granted during the year included:
Exercise price:
Grant date(s):
$0.00 to $0.50 (2019: $0.00 to $0.50)
4-Oct-19 and 27-Mar-20 (2019: 7-Nov-18 and 21-Dec-18)
Share price at grant date(s):
$1.27 and $0.80 (2019: $1.023 and $0.995)
Expected price volatility:
16% and 15% (2019: 13%, 14% and 17%)
Expected dividend yield(s):
5.91% and 9.6% (2019: 7.14%, 7.25% and 8.87%)
Risk free interest rate(s):
0.78% and 0.56% (2019: 2.06%, 2.11% and 1.94%)
Expiry date(s):
31-Oct-22 and 30-Sep-22 (2019: 7-Dec-21, 30-Sep-20 and 30-Sep-21)
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any
expected changes to future volatility due to publicly available information.
134
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
C)
EXPENSE ARISING FROM SECURITY BASED PAYMENTS
Expenses arising from share-based payments recognised during the year as part of employee benefits expense were as
follows:
Cromwell
Trust
2020
$M
2.8
2019
$M
2.6
2020
$M
-
2019
$M
-
Performance rights issued under the PRP
22. Related parties
A)
OVERVIEW
Related parties are persons or entities that are related to Cromwell as defined by AASB 124 Related Party Disclosures.
These include directors and other key management personnel and their close family members and any entities they
control as well as subsidiaries, associates and joint ventures of Cromwell. They also include entities which are considered
to have significant influence over Cromwell, that is securityholders that hold more than 20% of Cromwell’s issued
securities.
This note provides information about transactions with related parties during the year. All of Cromwell’s transactions with
related parties are on normal commercial terms and conditions and at market rates.
B) KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel compensation
Cromwell
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Security-based payments
Total key management personnel compensation
2020
$
2019
$
6,006,118
5,043,108
126,998
107,704
79,103
80,782
2,234,262
1,733,310
8,446,481
6,964,904
Loans to key management personnel
Cromwell has provided loans to Mr P Weightman, a Director of the Company, for the exercise of his employee options
under Cromwell’s Performance Rights Plan. Each loan term is three years, limited recourse and interest free. The
outstanding balance at balance date was $2,736,980 (2019: $1,960,001).
Other transactions with key management personnel
Cromwell rented an apartment, located at 185 Macquarie Street, Sydney, which is owned by Mr P Weightman, a Director of
Cromwell. Total rent paid during year was $96,200 (2019: $114,396). The payment of rent is on normal commercial terms
and conditions and at market rates. The lease expired on 30 June 2020.
C)
OTHER RELATED PARTY TRANSACTIONS
i) Parent entity and subsidiaries
Cromwell Corporation Limited is the ultimate parent entity in Cromwell. Cromwell Diversified Property Trust is the
ultimate parent entity in the Trust. Details of subsidiaries for both parent entities are set out in note 16.
ii) Transactions with joint ventures and associates
Cromwell European Real Estate Investment Trust
Cromwell and the Trust hold 30.7% and 30.1% interests in CEREIT (2019: 35.8% and 35.0% - refer to note 7(c) for further
details).
Cromwell and the Trust received $28.1 million and $27.8 million in distributions from CEREIT during the year (2019: $67.6
million and $66.7 million).
135
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Cromwell EREIT Management Pte. Ltd. (“CEM”), a wholly owned subsidiary of Cromwell, is the Manager for CEREIT. A
number of other wholly owned, Europe-domiciled, subsidiaries of Cromwell provide property related services to CEREIT at
normal commercial terms.
The following income was earned by Cromwell from CEREIT:
Paid / payable by CEREIT to Cromwell and its subsidiaries:
Fund management fees
Property management fees
Leasing fees
Project management fees
Distributions
Balances outstanding with CEREIT at year end:
Distribution receivable
Aggregate amounts receivable
Cromwell
2020
$M
2019
$M
17.0
24.2
1.5
0.8
28.1
-
9.0
12.5
18.2
3.0
0.8
41.0
25.6
16.1
During the year Cromwell received 18,347,425 units in CEREIT as consideration for the part-settlement of acquisition fees
and management fees (2019: 25,953,109), which equated to $16.0 million (2019: $8.2 million).
Ursynów
As a component of the CPRF transaction Cromwell and the Trust acquired a 94.1% interest in CH Ursynów sp. z o.o.
(Ursynów - see note 8(e)), an entity that owns a retail asset in Poland. As part of the acquired fund, CPRF, there is a
PLN-denominated loan facility to Ursynów of PLN 100.0 million. The loan facility expires in November 2027 and has
an applicable interest rate of 7.2%. At balance date the loan was drawn to PLN 78.6 million ($30.9 million) and interest
equating to $1.7 million was derived in relation to the loan.
Cromwell provided property related services at normal commercial terms totalling $0.4 million for the period from
acquisition to 30 June 2020.
LDK Healthcare Unit Trust
Cromwell holds a 50% interest in the LDK Healthcare Unit Trust (LDK), a joint venture conducting an aged care operation.
During a prior year, Cromwell and LDK commenced a project to repurpose the Cromwell-owned property at Tuggeranong
Office Park in the ACT into a Seniors living village under a Development lease. During the prior year, LDK acquired the
Tuggeranong Office Park property (now known as “Greenway”) for $54.5 million, and the development lease was cancelled
(see below).
Cromwell has the following loans and related party transactions with the LDK joint venture:
a) Working capital loans
In 2018, the Trust signed a Facility Agreement (‘Working capital loan’) with LDK Corporate Unit Trust, a subsidiary of LDK
Healthcare Unit Trust, to provide a facility terminating on 31 December 2020, which was extended until 31 December 2023
during the year. The maximum loan facility is $10.0 million with an interest rate of 12%. During the year, the facility was
drawn down by a further $5.2 million and repayments of $8.8 million were made.
b) “Waterfall” loans
During the prior year, Cromwell and the Trust provided a number of loan facilities to LDK Healthcare Unit Trust and a
number of its subsidiaries in order to assist in the development of the LDK business. Refer to note 18(c)(ii) for further
information.
c) Project management fees
During the year, Cromwell provided project management services to a subsidiary of LDK in relation to the development of
the LDK 'Greenway' aged care facility. Cromwell derived $1.1million in project management fees at normal commercial
terms during the year ended 30 June 2020 (2019: $nil).
136
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Oyster Property Group Limited
During the prior year, the Trust provided a NZD $6.0 million short-term loan facility to Cromwell’s joint venture Oyster
Property Funds Limited (“Oyster”) for the initial funding of an Oyster property syndication. This facility was drawn to NZD
$1.0 million, which was fully repaid during the prior year. The facility has now ceased.
During the current year, the Trust provided facilities of NZD $20.5 million short-term loan facility to Cromwell’s joint
venture Oyster Property Funds Limited (“Oyster”) for the initial funding of an Oyster property syndication. This facility was
drawn to NZD $7.5 million, which was fully repaid during the year. The Trust derived $0.8 million in finance income in
relation to the facility to Oyster during the year.
BlackRock
During the year, the Cromwell and the Trust completed the sale of a 50% stake in the direct property at 475 Victoria
Avenue, Chatswood for $120 million to an entity managed by BlackRock Inc (BlackRock). BlackRock established the
Odyssey Sub Trust to hold their 50% direct interest in the property as tenants in common along with the Trust.
Under the various agreements with BlackRock, Cromwell provided property related services at normal commercial terms
totalling $0.1 million for the year ended 30 June 2020.
Portgate Estate Unit Trust
Cromwell holds a 28% interest in Portgate Estate Unit Trust (Portgate), which holds the Portgate property located at the
Port of Brisbane. During the year Cromwell paid an additional $2.5 million in consideration for the investment, leaving no
unpaid acquisition consideration outstanding. For further information in relation to Cromwell’s investment in Portgate see
note 8(c).
During the year Cromwell provided property management services for which Portgate paid $89,000 (2019: $87,000).
Portgate paid no distributions during the year (2019: $nil).
Cromwell Partners Trust
Cromwell and the Trust held a 50% interest in the Cromwell Partners Trust joint venture (“CPA”) which holds the
Northpoint property in North Sydney (refer to note 8 for further details). Cromwell received no distributions from CPA
during the year (2019: $3.9 million).
Cromwell Real Estate Partners Pty Ltd (“CRE”), a wholly owned subsidiary of Cromwell, acts as trustee for CPA. Cromwell
Property Services Pty Ltd and Cromwell Project and Technical Solutions Pty Ltd, wholly owned subsidiaries of Cromwell
provide property related services to CPA at normal commercial terms. The following income was earned by Cromwell
from CPA:
Paid / payable by CPA to Cromwell and its subsidiaries:
Fund management fees
Property management fees
Leasing fees
Project management fees
Distributions
Balances outstanding with CPA at year end:
Distribution receivable
Aggregate amounts receivable
Cromwell
2020
$M
2019
$M
0.7
0.8
0.1
0.2
-
-
-
2.8
0.8
0.2
0.4
3.9
1.4
2.2
iii) Transactions between the Trust and the Company and its subsidiaries (including the responsible entity
of the Trust)
Cromwell Property Securities Limited (“CPS”), a wholly owned subsidiary of Cromwell Corporation Limited (“CCL”) acts
as responsible entity for the Trust. For accounting purposes the Trust is considered to be controlled by CCL. CCL and its
subsidiaries provide a range of services to the Trust. A subsidiary of CCL rents commercial property space in a property
owned by the Trust. All transactions are performed on normal commercial terms.
137
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The Trust made the following payments to and received income from CCL and its subsidiaries:
Trust
Paid / payable by the Trust to the Company and its subsidiaries:
Development fees
Fund management fees
Property management fees
Leasing fees
Project management fees
Accounting fees
Received / receivable by the Trust from the Company and its subsidiaries:
Interest
Rent and recoverable outgoings
Balances outstanding at year-end with the Company and its subsidiaries:
Aggregate amounts payable
Aggregate amounts receivable
2020
$M
32.0
18.8
6.4
2.7
0.3
0.8
4.2
2.7
2.9
98.3
2019
$M
-
14.1
6.1
1.3
1.5
0.7
7.6
3.0
4.5
219.0
The amount receivable from the Company and its subsidiaries includes loans of $98.0 million (2019: $213.0 million). For
further details regarding these loans refer to note 18(c).
23. Employee benefits expense
A)
OVERVIEW
This note provides further details about Cromwell’s employee benefits expenses and its components, leave balances
outstanding at year end as well as employee benefits expense related accounting policies.
Salaries and wages, including bonuses and on-costs
Directors fees
Contributions to defined contribution superannuation plans
Security-based payments
Other employee benefits expense
Restructure costs reversed
Total employee benefits expense
B) ACCOUNTING POLICY
Cromwell
Trust
2020
$M
77.0
1.2
3.5
2.8
5.7
-
90.2
2019
$M
58.8
1.2
3.4
2.6
5.7
(0.3)
71.4
2020
$M
2019
$M
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, that are expected to be settled wholly within 12
months after the end of the period in which the employees render the related service are recognised in respect of
employee’s services up to the end of the reporting period and are measured at the amounts expected to be paid when
the liabilities are settled. All other short-term employee benefit obligations are presented as payables.
Superannuation
Contributions are made by Cromwell to defined contribution superannuation funds and expensed as they become
payable.
138
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Other long-term employee benefit obligations
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service. They are therefore recognised in the provision for
employee benefits and measured as the present value of expected future payments to be made in respect of services
provided by employees up to the end of the reporting period. Consideration is given to expected future wage and
salary levels, experience of employee departures and periods of service. Expected future payments are discounted
using relevant discount rates at the end of the reporting period that match, as closely as possible, the estimated future
cash outflows. Re-measurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in profit or loss.
Security-based payments
The fair value of options and performance rights granted is recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which
the employees become unconditionally entitled to the options or performance rights. The fair value at grant date is
determined using a pricing model that takes into account the exercise price, the term, the security price at grant date
and expected price volatility of the underlying security, the expected distribution yield and the risk free interest rate for
the term.
The fair value of the options or performance rights granted is adjusted to reflect the probability of market vesting
conditions being met, 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 options or
performance rights that are expected to become exercisable. At each balance date, Cromwell revises its estimate of
the number of options or performance rights that are expected to become exercisable. The employee benefit expense
recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if
any, is recognised in profit or loss with a corresponding adjustment to equity.
Bonus plans
Cromwell recognises a liability and an expense for bonuses where contractually obliged or where there is a past
practice that has created a constructive obligation.
Leave balances outstanding at year-end
Accrued annual leave at year-end of $5.1 million (2019: $4.0 million) is included in current provisions on the Balance
sheet. Based on experience, Cromwell expects substantially all employees to take the full amount of accrued annual
leave within the next 12 months.
The portion of accrued long service leave included in current provisions on the Balance sheet was $1.7 million (2019:
$1.5 million). This is the amount expected to be settled within 12 months where the employee had reached the required
service term to take the long service leave (generally 10 years). The non-current liability for long service leave included
within non-current provisions on the Balance sheet was $0.8 million (2019: $0.6 million).
139
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 24. Auditors’ remuneration
A)
OVERVIEW
The independent auditors of Cromwell in Australia (Deloitte Touche Tohmatsu) and component auditors of overseas
subsidiaries and their affiliated firms have provided a number of audit and other assurance related services as well as
other non-assurance related services to Cromwell and the Trust during the year.
Below is a summary of fees paid for various services to Deloitte and Pitcher Partners and component audit firms during
the year:
Deloitte Touche Tohmatsu
Audit and other assurance services
Auditing or reviewing of financial reports
Auditing of controlled entities’ AFS licences
Auditing of component financial reports
Other assurance services
Other services
Due diligence services
Australian taxation advice
International taxation advice
Cromwell
2020
$
2019
$
Trust
2020
$
2019
$
465,260
322,000
224,800
172,800
7,000
899,246
20,000
7,000
499,560
-
-
-
-
-
-
-
1,391,506
828,560
224,800
172,800
111,801
34,436
44,261
208,050
30,800
181,300
-
-
-
-
-
-
Total remuneration of Deloitte Touche Tohmatsu
1,582,004
1,248,710
224,800
172,800
Pitcher Partners
Audit and other assurance services
Auditing of the Trust’s compliance plan
Other services
Valuation services
Total remuneration of Pitcher Partners
Other audit firms
Other services
Tax compliance services
International tax advice on acquisitions
Total remuneration of other audit firms
Total auditors’ remuneration
36,000
36,000
14,500
50,500
34,000
34,000
25,000
59,000
36,000
36,000
34,000
34,000
-
-
36,000
34,000
241,299
175,442
416,741
367,123
73,541
440,664
2,049,245
1,748,374
217,294
175,442
392,736
653,536
-
-
-
206,800
140
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 25. Unrecognised items
A)
OVERVIEW
Items that have not been recognised on Cromwell’s and the Trust’s Balance sheet include contractual commitments for
future expenditure and contingent liabilities which are not sufficiently certain to qualify for recognition as a liability on the
Balance sheet. This note provides details of any such items.
B)
COMMITMENTS
Operating leases
Operating leases primarily comprise the lease of Cromwell’s Sydney and European office premises. The Company has
entered into a number of leases with the Trust and its subsidiaries and as such the commitment is not recognised on
consolidation.
Due to the adoption of AASB 16 Leases, $15.6 million of lease liabilities were recognised as a component of interest
bearing liabilities on 1 June 2019 (see note 17 for further information).
For further information in relation to commitments for minimum lease payments in relation to non-cancellable operating
leases in existence at the reporting date but not recognised as liabilities see note 10(c)(xiii).
Capital expenditure commitments
Commitments in relation to capital expenditure contracted for at reporting date but not recognised as a liability are as
follows:
Investment property
Capital contributions
Total capital expenditure commitments
C)
CONTINGENT LIABILITIES
Cromwell
Trust
2020
$M
5.3
-
5.3
2019
$M
8.8
0.4
9.2
2020
$M
5.3
-
5.3
2019
$M
8.8
-
8.8
The Directors are not aware of any material contingent liabilities of Cromwell or the Trust (2019: nil).
26. Subsequent events
Other than those disclosed below, no matter or circumstance has arisen since 30 June 2020 that has significantly affected
or may significantly affect:
• Cromwell’s and the Trust’s operations in future financial years; or
• the results of those operations in future financial years; or
• Cromwell’s and the Trust’s state of affairs in future financial years.
a) Sale of Wakefield Street, SA
Subsequent to balance date Cromwell and the Trust exchanged contracts to sell the property Wakefield Street, SA for
$30.0 million. The transaction is expected to settle on 21 September 2020. The investment property has been classified
as held for sale to reflect this state of affairs.
b) Sale of investment in Portgate Estate Unit Trust
Subsequent to balance date Cromwell exchanged contracts to sell its 23.8% investment in Portgate Estate Unit Trust
(“Portgate”) for $2.5 million. The transaction is expected to settle on 27 August 2020. The Portgate investment has been
classified as held for sale to reflect this state of affairs.
c) Acquisition of logistics portfolio
Subsequent to balance date Cromwell, in conjunction with a joint venture partner, signed binding agreements to purchase
seven DHL logistics assets in Italy for $85.7 million (€52.5 million) with settlement due in September 2020. Cromwell and
the Trust intend to fund its share of the acquisition from existing undrawn debt facilities.
141
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Directors' Declaration
In the opinion of the Directors of Cromwell Corporation Limited and Cromwell Property Securities Limited as Responsible
Entity for the Cromwell Diversified Property Trust (collectively referred to as “the Directors”):
the attached financial statements and notes are in accordance with the Corporations Act 2001 (Cth), including:
i) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), the
Corporations Regulations 2001 (Cth); and
ii) giving a true and fair view of Cromwell’s and the Trust’s financial position as at 30 June 2020 and of their
performance, for the financial year ended on that date; and
the financial report also complies with International Financial Reporting Standards as disclosed in About this
report - section (a) Basis of preparation; and
there are reasonable grounds to believe that Cromwell and the Trust will be able to pay its debts as and when
they become due and payable.
The Directors have been given the declarations by the chief executive officer and chief financial officer for the financial
year ended 30 June 2020 required by section 295A of the Corporations Act 2001 (Cth).
This declaration is made in accordance with a resolution of the Directors.
PL Weightman
Director
26 August 2020
Brisbane
142
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Riverside Centre
123 Eagle Street
Brisbane QLD 4000
GPO Box 1463
Brisbane QLD 4001 Australia
DX: 10307SSE
Tel: +61 (0) 7 3308 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report to the Stapled Security
Holders of Cromwell Property Group and the Unitholders
of Cromwell Diversified Property Trust
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of:
• Cromwell Property Group (the “Group”) which comprises the consolidated balance sheet as
at 30 June 2020, the consolidated statement of profit and loss and consolidated statement
of comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies and other explanatory
information, and the directors’ declaration of the consolidated stapled entity. The
consolidated stapled entity compromises Cromwell Corporation Limited (“the Company”),
Cromwell Diversified Property Trust, and the entities they controlled at the year end or from
time to time during the year; and
• Cromwell Diversified Property Trust (the “Trust”) which comprises the consolidated balance
sheet as at 30 June 2020, the consolidated statement of profit and loss and consolidated
statement of comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies and other explanatory
information, and the directors’ declaration of Cromwell Property Securities Limited (the
“Responsible Entity”), as Responsible Entity of the Trust. The consolidated entity comprises
Cromwell Diversified Property Trust and the entities it controlled at the year end or from
time to time during the year.
In our opinion, the accompanying financial report of the Group and Trust is in accordance with the
Corporations Act 2001, including:
•
•
giving a true and fair view of the Group’s and Trust’s financial position as at 30 June 2020
and of their financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional & 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 report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company and Cromwell Property Securities Limited as the
Responsible Entity for the Trust, would be in the same terms if given to the directors as at the time
of this auditor’s report.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
143
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter
Valuation of investment properties
At 30 June 2020, Cromwell Property Group
recognised investment properties valued at
$3,708.3 million as disclosed in Note 7.
The Group owns either directly or through
joint ventures a portfolio of property
consisting of property across Australia and in
Poland.
for all investment property
Valuations were carried out by third party
valuers
in
Australia and Poland. Valuations included a
material valuation uncertainty clause in their
30 June 2020 valuations. These clauses
highlight that real estate markets are
currently being impacted by the uncertainty
caused by COVID 19 and that this means
that there less certainty and consequently a
higher degree of caution should be attached
to the valuation than would normally be the
case.
represents a significant
estimation uncertainty in relation to the
valuation of investment properties.
This
Note 7 outlines the two methodologies used
by the Group:
•
•
rate
the capitalisation approach applies a
capitalisation
to normalised
market net operating income.
the discounted cash flow method
involves the projection of a series of
cash
terminal value
calculation discounted
to present
value.
flows and
The valuation process requires significant
judgment and estimation in the following key
areas:
•
• weighted
(“WALE”)
forecast cash flows
average
expiry
lease
How the scope of our audit responded to the Key
Audit Matter
Our procedures included but, were not limited to:
•
•
•
•
•
•
testing
the design and
Assessing
the
operating effectiveness of relevant controls
within management’s valuation framework
and assessing the oversight applied by the
directors
Enquiring of management to obtain an
understanding of portfolio movements and
their identification of any additional property
specific matters, as well as their assessment
of the impact of COVID-19 on the valuations,
including the material uncertainty statement
included in the valuation reports
Assessing the independence, competence and
objectivity of the external valuers, as well as
competence and objectivity of
internal
valuers.
Performing an analytical review and risk
assessment of the portfolio, assessing the key
inputs and assumptions
Testing on a sample basis, both externally and
internally valued properties, for:
‒
the completeness and accuracy of the
information in the valuation by agreeing
key inputs such as annual net operating
income to underlying records and source
evidence
the forecasts used in the valuations with
reference to current financial results such
as net property
capital
expenditure requirements, occupancy
and lease renewals; and
the mathematical accuracy of
valuation models
income,
the
‒
‒
Assessing the assumptions used in the
valuations, including the capitalisation rate
used in the capitalisation approach and the
discount rate and terminal yield used in the
discounted cashflow method with reference to
external market
transactions,
property specific factors such as tenant mix
and changes since the prior valuation.
trends &
• occupancy
•
•
• discount rates.
terminal yields
capitalisation rates; and
We also considered the appropriateness of the
disclosures included in the financial statements.
144
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
Other Information
The directors of the Company and the Responsible Entity (“the Directors”) are responsible for the
other information. The other information comprises the Directors’ Report, which we obtained prior
to the date of this auditor’s report, and also includes the following information which will be included
in the Group’s annual report (but does not include the financial report and our auditor’s report
thereon): Financial Highlights, Chairman’s Report, CEO’s Report, Corporate Governance Statement
and Securityholder Information, which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed on the other information that we obtained prior
to the date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
When we read the Financial Highlights, Chairman’s Report, CEO’s Report, Corporate Governance
Statement and Securityholder Information, 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.
Responsibilities of the Directors for the Financial Report
The directors are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud
or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group
and the Trust to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or the Trust or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s and Trust’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
145
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
•
•
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s and Trust’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group and Trust to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group and Trust to express an opinion on the
financial report. We are responsible for the direction, supervision and performance of the
Group’s and Trust’s audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 22 to 41 of the Directors’ Report
for the year ended 30 June 2020.
In our opinion, the Remuneration Report of Cromwell Property Group, for the year ended 30
June 2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company 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.
DELOITTE TOUCHE TOHMATSU
David Rodgers
Partner
Chartered Accountants
Brisbane, 26 August 2020
146
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT CORPORATE GOVERNANCE
STATEMENT
The Board is committed to Cromwell Property Group meeting securityholders’ and stakeholders’ expectations of good
corporate governance. The Board is proactive with respect to corporate governance and actively reviews developments
to determine which corporate governance arrangements are appropriate for Cromwell Property Group and its
securityholders and stakeholders.
This Corporate Governance Statement (Statement) reports on how Cromwell Property Group (or Cromwell or Group)
complied with the third edition of the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations (the Recommendations) during the 2020 financial year.
This Statement is current as at 1 September 2020 and has been approved by the Board.
Cromwell Property Group comprises Cromwell Corporation Limited (or the Company) and the Cromwell Diversified
Property Trust (or the CDPT), the Responsible Entity of which is Cromwell Property Securities Limited (or CPS).
Principle 1: Lay solid foundations for management and oversight
RECOMMENDATION 1.1
The Board of Directors of Cromwell Corporation Limited is identical to the Board of Directors of Cromwell Property
Securities Limited (together, the Board; severally, the Directors). The Board’s responsibilities include to provide leadership
to Cromwell Property Group and to set its strategic objectives. The Board has adopted a formal, written Board Charter,
which sets out the Board’s role and responsibilities, including to:
• oversee the process for ensuring timely and balanced disclosure of all ‘price sensitive’ information in accordance with
the Corporations Act 2001 (Cth) (Corporations Act) and the ASX Listing Rules; and
• ensure an appropriate risk management framework is in place and set the risk appetite within which the Board expects
management to operate.
The Board generally holds a scheduled meeting every second calendar month and additional meetings are convened as
required. As explained in Cromwell’s Business Update released via ASX announcement on 4 June 2020, one of the key
actions taken by the Board in response to the COVID-19 pandemic was to meet twice weekly with management to ensure
the impact of COVID-19 was monitored and understood and that appropriate actions were being taken. The Directors’
Report discloses the names of the Directors, the number of times that the Board met during the 2020 financial year and
the individual attendances of the Directors at those meetings. For easy reference, the information (including percentages
of total) is shown below:
Director(1)
Mr Leon Blitz (Chair) (elected as Deputy Chair 21 October 2019 and elected as
Chair 26 February 2020)
Mr Paul Weightman
Ms Tanya Cox (appointed 21 October 2019)
Mr Andrew Fay (elected as Deputy Chair 26 February 2020)
Ms Lisa Scenna (appointed 21 October 2019)
Ms Jane Tongs
Ms Michelle McKellar (retired 28 November 2019)
Mr Geoffrey Levy (Chair) (retired from Board and as Chair 26 February 2020)
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend
(100%)
37 (93%)
40 (100%)
39 (98%)
34 (100%)
39 (98%)
33 (97%)
40 (100%)
9 (82%)
20 (100%)
40 (100%)
34 (100%)
40 (100%)
34 (100%)
40 (100%)
11 (100%)
20 (100%)
(1) Mr David Blight (58), nominee of ARA Real Estate Investors XXI Pte. Ltd., resigned on 19 July 2019. During the period 1 July 2019 to 19 July 2019 inclusive,
Mr Blight attended no Cromwell Board meetings and the number of Cromwell Board meetings Mr Blight was eligible to attend was nil.
147
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Management prepares Board papers to inform and focus the Board’s attention on key issues. Standing items include
progress against strategic objectives, financial performance and corporate governance (including compliance with
material legal and regulatory requirements and any conduct that is materially inconsistent with Cromwell Property
Group’s values and Code of Conduct).
The Board has the following long-established Board Committees to assist it in carrying out its responsibilities, to share
detailed work and to consider certain issues and functions in detail:
• Audit and Risk Committee;
• Investment Committee; and
• Nomination and Remuneration Committee.
Details of the role, responsibilities and composition of the Board Committees are contained elsewhere in this Statement.
The Directors’ Report discloses (for each Board Committee) the members of the Board Committee, the number of times
that the Board Committee met during the 2020 financial year and the individual attendances of the members at those
meetings. For easy reference, the information (including percentages of total) is shown below:
Audit and Risk Committee
Director
Ms Jane Tongs (Committee Chair)
Ms Tanya Cox (appointed to Committee 21 October 2019)
Mr Andrew Fay
Ms Lisa Scenna (appointed to Committee 16 March 2020)
Ms Michelle McKellar (retired from Committee 28 November 2019)
Mr Leon Blitz (retired from Committee 26 February 2020)
Investment Committee
Director
Ms Lisa Scenna (Committee Chair) (appointed to Committee 21 October 2019 and
appointed as Committee Chair 26 March 2020)
Mr Leon Blitz
Mr Andrew Fay
Mr Paul Weightman
Ms Michelle McKellar (Committee Chair) (retired from Committee and as
Committee Chair 28 November 2019)
Nomination and Remuneration Committee
Director
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend
(100%)
9 (100%)
6 (100%)
9 (100%)
3 (100%)
4 (100%)
6 (100%)
9 (100%)
6 (100%)
9 (100%)
3 (100%)
4 (100%)
6 (100%)
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend
(100%)
0 (0%)
1 (100%)
1 (100%)
1 (100%)
1 (100%)
0 (0%)
1 (100%)
1 (100%)
1 (100%)
1 (100%)
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend
(100%)
Ms Tanya Cox (Committee Chair) (appointed to Committee 21 October 2019 and
7 (100%)
7 (100%)
appointed as Committee Chair 26 March 2020)
Mr Leon Blitz
Mr Andrew Fay (retired as Committee Chair 26 March 2020)
Ms Michelle McKellar (retired from Committee 28 November 2019)
Ms Lisa Scenna (appointed to Committee 21 October 2019 and retired from
Committee 25 March 2020)
9 (100%)
9 (100%)
2 (100%)
1 (100%)
9 (100%)
9 (100%)
2 (100%)
1 (100%)
Ms Jane Tongs (retired from Committee 25 March 2020)
3 (100%)
3 (100%)
148
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Day to day management of Cromwell Property Group’s affairs and implementation of agreed strategic objectives are
delegated by the Board to management under the direction of the Managing Director/Chief Executive Officer (CEO). This
has been formalised in the Board Charter and the Board-approved Delegation of Authority Policy. The Board reviews these
documents at least annually to ensure their effectiveness and appropriateness (given the evolving needs of Cromwell
Property Group).
What you can find on the Corporate Governance page on our website:
• Board Charter
• Audit and Risk Committee Charter
• Nomination and Remuneration Committee Charter
• Delegation of Authority Policy
• Constitution of Cromwell Corporation Limited
• Constitution of the Cromwell Diversified Property Trust
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 1.2
Cromwell Property Group undertakes appropriate checks before appointing a Director or senior executive, or putting
forward to securityholders a candidate for election or re-election as a Director. The checks are into matters such as
the person’s character, experience, education, criminal record and bankruptcy history. The Board and Nomination and
Remuneration Committee also consider whether or not the candidate has sufficient time available, given their other roles
and activities, to meet expected time commitments to Cromwell.
When securityholders are asked at Cromwell Property Group’s annual general meeting (AGM)(2) to elect, or re-elect, a
Director to the Board, Cromwell will provide them with the following information to enable them to make an informed
decision:
• biographical information, including relevant qualifications, experience and the skills the candidate brings to the Board;
• details of any other current material directorships;
• a statement as to whether the Board supports the candidate’s election or re-election and, in line with the fourth edition
of the Recommendations, a summary of the reasons why; and
• (for a candidate standing for election as a Director for the first time) any material adverse information revealed by
background checks; details of any interest, position, association or relationship that might influence, or reasonably be
perceived to influence, in a material respect the candidate’s capacity to bring an independent judgement to bear on
issues before the Board and to act in the best interests of the Group as a whole and its securityholders generally; and a
statement from the Board as to the candidate’s independence; or
• (for a candidate standing for re-election) the term of office currently served and a statement from the Board as to the
candidate’s independence.
The information will be provided in the relevant notice of meeting. Securityholders also have the opportunity to ask
questions of candidates at the AGM.
RECOMMENDATION 1.3
Cromwell Property Group has provided each Non-executive Director with a written letter of appointment which details the
terms of their appointment, including:
• the requirement to disclose interests and any matters which could affect the Director’s independence;
• remuneration and expected time commitments;
• the requirement to comply with key corporate policies, including Cromwell Property Group’s Code of Conduct and
Securities Trading Policy;
• the requirement to seek the Chair’s consent before accepting any new role that could impact on the time commitment
expected of the Director, and to notify the Board about anything that may lead to an actual or potential conflict of
interest or duty;
• Cromwell Property Group’s policy on when Directors may seek independent professional advice at the expense of the
entity;
• indemnity and insurance arrangements and ongoing rights of access to corporate information; and
• ongoing confidentiality obligations.
(2) In this Statement, AGM means (together) the Annual General Meeting of the Company and the General Meeting of the CDPT.
149
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The CEO (an Executive Director) has a written formal job description, an employment contract (outlining the terms of
appointment as a senior executive) and a letter of appointment for the role as Executive Director.
Other senior executives have written employment contracts that outline the terms of their appointment.
Cromwell Property Group has a Board-approved Securities Trading Policy under which Directors, senior executives and
employees are restricted in their ability to deal in Cromwell Property Group securities. Appropriate closed periods are in
place during which Directors, senior executives and employees are not permitted to trade. Directors, senior executives and
employees are made aware of the policy and receive training annually. The policy is reviewed at least annually.
What you can find on the Corporate Governance page on our website:
• Code of Conduct
• Securities Trading Policy
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 1.4
The Company Secretary is accountable to the Board (through the Chair) on all matters to do with the proper functioning of
the Board.
The Company Secretary’s responsibilities include:
• advising the Board and Board Committees on governance matters;
• monitoring that Board and Board Committee policies and procedures are followed;
• coordinating the timely completion and despatch of the Board and Board Committee papers;
• ensuring that the business at the Board and Board Committee meetings is accurately captured in minutes; and
• helping to organise and facilitate the induction and professional development of Directors.
Directors can, and do, communicate directly and regularly with the Company Secretary on Board matters. Similarly, the
Company Secretary communicates directly and regularly with the Directors on such matters.
The Board Charter states that the Board is responsible for appointing and removing the Company Secretary.
What you can find on the Corporate Governance page on our website:
• Board Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 1.5
Cromwell Property Group recognises the many benefits of diversity and strives, through its recruitment and selection
practices, to ensure that a diverse range of candidates is considered and that conscious and unconscious biases that
might discriminate against candidates are avoided.
Cromwell Property Group has a Board-approved Diversity Policy which sets out the framework the Group has in place
to achieve appropriate diversity in its Board, senior executive and broader workforce. Pursuant to the Diversity Policy,
each financial year the Board (on recommendation from the Nomination and Remuneration Committee) sets measurable
objectives for achieving diversity. An annual assessment of progress against those objectives is also undertaken.
The table below shows the gender diversity objectives set for the 2020 financial year and the Group’s performance against
those objectives as at 30 June 2020.
Number FY20 gender diversity objective
The Group’s performance as at 30 June 2020
1
2
3
4
5
Develop a tangible Diversity and Inclusion Action Plan
Initiatives in support of the objective have been completed
Create a culture of respect and inclusion
Initiatives in support of the objective have been completed;
some initiatives are in progress
Create a culture that is supportive of employees
achieving their work and career goals
Initiatives in support of the objective are in progress (some
initiatives delayed due to COVID-19)
Value and foster diversity in our workforce
The Cromwell Board will have at least two female
directors
Initiatives in support of the objective have been completed;
some initiatives are in progress
The Cromwell Board has three female directors
150
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT As at the date shown, the respective proportions of males and females on the Board, in senior executive positions and
across the employee workforce were as follows:
Date
As at 30 June 2020
As at 30 June 2020
As at 30 June 2020
Body
Board
Senior executive(3)
Employees(4)
Females (% of total)
Males (% of total)
Total (100%)
3 (50%)
1 (25%)
71 (47%)
3 (50%)
3 (75%)
81 (53%)
6 (100%)
4 (100%)
152 (100%)
(3) Recommendation 1.5(c)(1) requires the Group to define what it means by ‘senior executive’. In this case, ‘senior executive’ means the key management
personnel (KMP) other than Non-executive Directors. As at 30 June 2020, the ‘senior executive’ comprised the Chief Executive Officer, the Chief
Operations Officer, the Chief Financial Officer and the Chief Investment Officer. Please refer to the FY20 Remuneration Report for further information
about KMP.
(4) Excludes European business, Singapore business, Phoenix Portfolios, Oyster Property Group and LDK Healthcare.
Cromwell Property Group is a ‘relevant employer’ under the Workplace Gender Equality Act 2012 (Cth) (WGEA). The Group’s
most recent ‘Gender Equality Indicators’, as defined in and published under the WGEA, are as follows:
Gender equality indicator
1.
2.
3.
4.
5.
6.
Gender composition of workforce
Gender composition of governing bodies
Equal remuneration between women and men
Flexible working and support for employees with family and caring responsibilities
Consultation with employees on issues concerning gender equality in the workplace
Sex-based harassment and discrimination
Cromwell’s latest WGEA Report is available on the Corporate Governance page on the Group’s website.
What you can find on the Corporate Governance page on our website:
• Diversity Policy
• Nomination and Remuneration Committee Charter
• Gender Diversity Objectives (current financial year and previous financial years)
• WGEA Report
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
What you can find on the Sustainability page on our website:
• Sustainability Report (current report and previous reports)
www.cromwellpropertygroup.com/sustainability
RECOMMENDATION 1.6
The Board undertakes an annual formal performance assessment, which includes an evaluation of the performance of
the Board, Board Committees and individual Directors and also a self-evaluation. Under the annual formal performance
assessment, Directors complete a questionnaire and can make comments or raise any issues they have in relation to the
performance. The results are compiled by the Company Secretary and discussed at a subsequent Board meeting. For
the 2020 financial year, the formal performance assessment was conducted and did not raise any governance issues that
needed to be addressed.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 1.7
Cromwell Property Group has an established, rigorous process for the performance review of all employees, including
senior executives. The performance of senior executives and whether they have met their individual key performance
indicators is formally evaluated annually by the CEO, with regular feedback being provided during the performance
period. At the time of the reviews, the professional development of the senior executive is also discussed, along with any
151
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT training which could enhance their performance. Both qualitative and quantitative measures are used in the evaluation. A
performance evaluation for each senior executive was completed during the reporting period.
Under its Charter, the Nomination and Remuneration Committee is responsible for facilitating an annual review of the
performance of the CEO (an Executive Director). This annual review was completed during the 2020 financial year.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
Principle 2: Structure the board to add value
RECOMMENDATION 2.1
Nomination and Remuneration Committee
The Board’s Nomination and Remuneration Committee has three members, all of whom are independent Directors. The
Committee is chaired by an independent Director who is not the Chair of the Board.
The Nomination and Remuneration Committee operates under a Board-approved written Charter. The Charter
sets out the Nomination and Remuneration Committee’s various responsibilities, including reviewing and making
recommendations to the Board in relation to:
• Board succession planning generally;
• induction and continuing professional development programmes for Directors;
• the development and implementation of a process for evaluating the performance of the Board, Board Committees and
Directors;
• the process for recruiting new Directors;
• the appointment, or re-election, of Directors to the Board;
• the performance and education of Directors;
• reviewing and recommending remuneration arrangements for the Directors, the CEO and senior executives; and
• ensuring succession plans are in place with regard to the CEO and other senior executives.
The Nomination and Remuneration Committee:
• may seek any information it considers necessary to fulfil its responsibilities;
• has access to management to seek explanations and information;
• may seek professional advice from employees of the Group and independent professional advice from appropriate
external advisors (at Cromwell Property Group’s cost); and
• may meet with external advisors without management being present.
The minutes of each Nomination and Remuneration Committee meeting are included in the papers for the next Board
meeting after the Committee has approved those minutes. The Chair of the Nomination and Remuneration Committee
reports the Committee’s findings to the next Board meeting after each meeting of the Committee.
The Directors’ Report discloses the members of the Nomination and Remuneration Committee, the number of times that
the Committee met during the 2020 financial year and the individual attendances of the members at those meetings. For
easy reference, the information (including percentages of total) is shown below:
Director
Ms Tanya Cox (Committee Chair) (appointed to Committee 21 October 2019 and
appointed as Committee Chair 26 March 2020)
Mr Leon Blitz
Mr Andrew Fay (retired as Committee Chair 26 March 2020)
Ms Michelle McKellar (retired from Committee 28 November 2019)
Ms Lisa Scenna (appointed to Committee 21 October 2019 and retired from
Committee 25 March 2020)
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend
(100%)
7 (100%)
7 (100%)
9 (100%)
9 (100%)
2 (100%)
1 (100%)
9 (100%)
9 (100%)
2 (100%)
1 (100%)
Ms Jane Tongs (retired from Committee 25 March 2020)
3 (100%)
3 (100%)
152
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 2.2
Board Skills Matrix
The Board reviews, on a regular basis, the mix of skills, experience, independence, knowledge and diversity represented by
Directors on the Board and determines whether the composition and mix remain appropriate for Cromwell’s purpose and
strategic objectives and whether they cover the skills needed to address existing and emerging business and governance
issues relevant to Cromwell Property Group.
The Board has adopted a Board Skills Matrix, which sets out the collective skills and attributes of the Board.
Skills and experience
Leadership and
Culture
• Non-executive Director and Board Committee experience in a publicly listed company in Australia or
overseas
• Experience at an executive level in business including the ability to assess the performance of the CEO and
senior management
• Understanding, implementing and monitoring good organisational culture
Property
and Asset
Management
• Experience in, and appropriate knowledge of, the Australian and European commercial property market in
one or more of the following areas: acquisitions and disposals; asset management; property management;
leasing; facilities management; and development
• Experience in, and knowledge of, other property markets in other relevant jurisdictions (i.e. international)
and other property market sectors
Funds/
Investment
Management
Commercial
Capability
• Significant experience in, and knowledge of, wholesale and retail funds management, in Australia and
globally
• Deep experience at a Board or executive level with a listed company(ies) in the ASX300 or international
equivalent, with an understanding of capital raising, takeovers, continuous disclosure and corporate
governance
• Ability to think strategically and identify and critically assess strategic opportunities and threats and
develop effective strategies to meet Cromwell Property Group’s identified objectives
Financial
Acumen
• Understanding of key financial statements; critically assess financial viability and performance; contribute
to financial planning; monitor operating and capital expenditure budgets; and monitor debt levels and
funding arrangements; and/or
• Experience as a partner in a top tier accounting firm, or as a CFO in a listed company in the ASX300 or
international equivalent, with a deep understanding of the accounting standards applicable to Cromwell
Property Group’s financial reports and Cromwell Property Group’s financial accountability process
Risk Oversight
• Ability to identify or recognise key risks to Cromwell Property Group across its various operations and
monitor risk management frameworks
Debt
Management
• Experience in the banking industry or in a corporate treasury department giving an understanding of the
debt market in Australia, Europe or elsewhere
People
• Experience in managing human capital, remuneration and reward, industrial relations, workplace health
and safety and strategic workforce planning
Public Policy,
Government,
Economics
• Experience with either Federal or State government ministers or departments giving a knowledge of
agendas, policies or processes
• Understanding of key macro and micro economic indicators and market cycles and their impact on
Cromwell Property Group and the environment in which it operates
Sustainability
• Demonstrate an understanding of health and safety practices
• Understanding of risks and opportunities regarding climate change
• Former or current role with direct accountability for environment practices including energy, water
management, emissions and land management
The above table outlines detailed descriptions of the experience and skills represented by the current composition of the
Board, and of those desirable by the Board. The Board regularly reviews and updates its Board Skills Matrix to reflect the
strategy and direction of Cromwell Property Group.
153
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The Board considers that its current members have an appropriate mix of skills, personal attributes and experience that
allows the Directors individually, and the Board collectively, to discharge their duties effectively and efficiently. The Board
comprises individuals who understand the business of the Group and the environment in which it operates and who can
effectively assess management’s performance in meeting agreed objectives and goals.
The Directors’ Report provides the following information about each Director:
• profile, including qualifications and experience; and
• special responsibilities and attendances at Board and Board Committee meetings. For easy reference, attendances at
meetings are reproduced in this Statement.
The Nomination and Remuneration Committee refers to the Board Skills Matrix when considering Board succession
planning and professional development initiatives for the Directors.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 2.3
The Board
The Group recognises that independent Directors are important in reassuring securityholders that the Board properly
fulfils its role. The Board comprises six Directors, with an independent Chair, an independent Deputy Chair and a majority
of independent Non-executive Directors:
Director (age)
Mr Leon Blitz (Chair) (56)
Mr Paul Weightman (58)
Ms Tanya Cox (59)
Mr Andrew Fay (55)
Ms Lisa Scenna (52)
Ms Jane Tongs (60)
First appointed
Status
28 June 2017
6 August 1998
21 October 2019
15 October 2018
21 October 2019
Independent Non-executive Director
Executive Director, Managing Director/CEO
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
26 November 2014
Independent Non-executive Director
Ms Michelle McKellar (65) retired as an independent Non-executive Director on 28 November 2019 and Mr Geoffrey Levy
(AO) (61) retired as independent Non-executive Chair and as an independent Non-executive Director on 26 February 2020.(1)
Each year, independence status is assessed using the guidelines and factors set out in the Recommendations and each
independent Non-executive Director also confirms to the Board, in writing, their continuing status as an independent
Director.
In assessing a Director’s independence status, the Board has adopted a materiality threshold of 5% of the Group’s net
operating income or 5% of the Group’s net tangible assets (as appropriate) as disclosed in its last audited financial
accounts.
The length of time that each independent Director has served on the Board is shown in the table above.
The Board is comfortable that no Director has served for a period such that their independence may have been
compromised. The Board also recognises that the interests of Cromwell Property Group and its securityholders are well
served by having a mix of Directors, some with a longer tenure with a deep understanding of Cromwell and its business
and some with a shorter tenure with fresh ideas and perspective.
Cromwell Property Group’s independent Non-executive Directors are considered by the Board to meet the test of
independence under the third edition and fourth edition of the Recommendations.
Each independent Non-executive Director has undertaken to inform the Board as soon as practical if they think their
status as an independent Director has or may have changed.
What you can find on the Corporate Governance page on our website:
• Board Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
154
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT RECOMMENDATION 2.4
The Board comprises six Directors, with an independent Chair and a majority of independent Non-executive Directors.
The independent Non-executive Directors confer periodically as a group without senior executives present.
What you can find on the Corporate Governance page on our website:
• Board Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 2.5
The Chair of the Board – Mr Geoffrey Levy (AO) to 26 February 2020 and Mr Leon Blitz from 26 February 2020 – is an
independent Non-executive Director. Mr Paul Weightman is an Executive Director and the CEO of Cromwell Property
Group. This is consistent with the Board Charter, which stipulates that the Chair of the Board will not be the same person
as the CEO and ideally will be an independent Non-executive Director.
The Board Charter sets out the responsibilities of the Chair, including:
• leading the Board;
• facilitating the effective contribution and ongoing development of all Directors;
• promoting constructive and respectful relations between Board members and between the Board and management;
and
• facilitating Board discussions to ensure that core issues facing Cromwell Property Group are addressed.
What you can find on the Corporate Governance page on our website:
• Board Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 2.6
An induction programme ensures that new independent Directors can participate fully and actively in decision making,
and add value, upon their appointment. The programme includes meeting with fellow Directors (including the CEO) and
the senior executive team, receiving briefings on Cromwell Property Group’s strategy and reviewing corporate governance
materials and policies.
Each year, the Nomination and Remuneration Committee also considers and recommends to the Board a professional
development programme for Directors. This includes training relevant to each skill area of the Board Skills Matrix and
on key issues relevant to Cromwell Property Group’s operations, financial affairs and governance. The professional
development programme is compiled in light of recent or potential developments (internal and external) as well as any
skills or knowledge gaps identified by the Nomination and Remuneration Committee. Directors also have access to the
inhouse training sessions provided by Cromwell Property Group’s Legal and Compliance team. On an ongoing basis,
Directors are provided with briefings on changes to accounting standards as well as updates on legal, regulatory and
corporate developments relevant to Cromwell Property Group.
During the 2020 financial year, prior to the implementation of restrictions associated with the COVID-19 pandemic,
Directors undertook Cromwell Property Group property asset and office site visits.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
155
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Principle 3: Act ethically and responsibly
RECOMMENDATION 3.1
Cromwell Property Group is a ‘values led’ organisation, with its corporate beliefs represented as follows:
Such values underpin Cromwell Property Group’s:
• purpose – to exist to look after people; and
• vision – to be globally recognised as the value driven real estate investor and manager of choice.
Cromwell Property Group’s Directors, senior executives and employees are required to maintain high standards of ethical
conduct. This is reinforced by the values and the various practices and policies of the Group. In line with recommendation
3.2 of the fourth edition of the Recommendations, all Directors, senior executives and employees are expected to act with
integrity and strive at all times to enhance the reputation and performance of Cromwell Property Group. The Board and
the senior executives reinforce Cromwell Property Group’s values in their interactions with Cromwell’s broader workforce.
To reinforce this culture, Cromwell Property Group has a Code of Conduct to provide guidance about the attitudes and
behaviour necessary to maintain stakeholder confidence in the integrity of Cromwell Property Group and comply with the
Group’s legal obligations.
The Code of Conduct is made available to all Directors, senior executives and employees and they are reminded of the
importance of the Code of Conduct on a regular basis. Appropriate standards are also communicated and reinforced to all
employees at induction sessions, regular refresher training and team meetings and in staff communications.
Compliance with Board-approved policies (including the Code of Conduct) is monitored via monthly checklists completed
by key management and proactive testing programmes and by investigation following any report of a breach. Compliance
monitoring is undertaken by the Legal and Compliance team under the direction of the Company Secretary who reports
directly to the Board. The Board and the Audit and Risk Committee are notified of any material breaches of the Code of
Conduct. The Directors and senior executives take appropriate and proportionate disciplinary action against those who
breach the Code of Conduct.
There were no material breaches of the Code of Conduct during financial year 2020.
In line with recommendations 3.3 and 3.4 of the fourth edition of the Recommendations, Cromwell Property Group has
a Board-approved Breach Reporting Policy, Whistleblower Protection Policy and Code of Conduct encompassing anti-
bribery and corruption. These policies actively encourage and support reporting to appropriate management of any
actual or potential breaches of the Group’s legal obligations and/or of the Code of Conduct and any concerns about poor
or unacceptable practice and misconduct in the workplace. The Audit and Risk Committee is informed of any incidents
reported under Cromwell Property Group’s Whistleblower Protection Policy.
What you can find on the ‘Our Values’ page on our website:
• Our Values
www.cromwellpropertygroup.com/about/our-values
156
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT
What you can find on the Corporate Governance page on our website:
• Code of Conduct (encompassing anti-bribery and corruption)
• Breach Reporting Policy
• Whistleblower Protection Policy
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
Principle 4: Safeguard integrity in corporate reporting
RECOMMENDATION 4.1
Audit and Risk Committee
The Board is responsible for the integrity of the Group’s corporate reporting. To assist in discharging this function, the
Board has a long-established Audit and Risk Committee. The Board’s Audit and Risk Committee has four members, all of
whom are independent Directors. The Committee is chaired by an independent Director who is not the Chair of the Board.
The Audit and Risk Committee operates under a Board-approved written Charter, which sets out the Audit and Risk
Committee’s:
• objectives, including to maintain and improve the quality, credibility and objectivity of the financial accountability
process (including financial reporting on a consolidated basis); and
• responsibilities, including reviewing and making recommendations to the Board in relation to:
• whether Cromwell Property Group’s financial statements reflect the understanding of the Audit and Risk Committee
members, and otherwise provide a true and fair view, of the financial position and performance of the Group;
• the appropriateness of any significant estimates or judgements in the financial reports (including those in any
consolidated financial statements); and
• the appointment or removal, and review of effectiveness and independence, of the external auditor.
The minutes of each Audit and Risk Committee meeting are included in the papers for the next Board meeting after the
Committee has approved those minutes. The Chair of the Audit and Risk Committee reports the Committee’s findings to
the next Board meeting after each meeting of the Committee.
The Directors’ Report discloses:
• the relevant qualifications and experience of the members of the Audit and Risk Committee; and
• the number of times that the Audit and Risk Committee met during the 2020 financial year and the individual
attendances of the members at those meetings. For easy reference, the information (including percentages of total) is
shown below:
Director
Ms Jane Tongs (Committee Chair)
Ms Tanya Cox (appointed to Committee 21 October 2019)
Mr Andrew Fay
Ms Lisa Scenna (appointed to Committee 16 March 2020)
Ms Michelle McKellar (retired from Committee 28 November 2019)
Mr Leon Blitz (retired from Committee 26 February 2020)
The Audit and Risk Committee:
Meetings attended (%
of meetings eligible to
attend)
Meetings eligible
to attend
(100%)
9 (100%)
6 (100%)
9 (100%)
3 (100%)
4 (100%)
6 (100%)
9 (100%)
6 (100%)
9 (100%)
3 (100%)
4 (100%)
6 (100%)
• may seek any information it considers necessary to fulfil its responsibilities;
• has access to management to seek explanations and information;
• has access to auditors to seek explanations and information from them (without management being present);
• may seek professional advice from employees of the Group and independent professional advice from appropriate
external advisors (at Cromwell Property Group’s cost); and
• may meet with external advisors without management being present.
During the 2020 financial year, the external auditor attended the majority of the meetings of the Audit and Risk Committee;
at those meetings, time was made available for the Committee to meet with the external auditor without management
being present.
157
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The external auditor has declared its independence to the Board and to the Audit and Risk Committee. The Board is
satisfied the standards for auditor independence and associated issues have been met.
What you can find on the Corporate Governance page on our website:
• Audit and Risk Committee Charter
• Auditor Independence Policy
• External Auditor – Selection, Appointment and Rotation
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 4.2
Before it approves the Group financial statements for a financial period, the Board receives from the CEO and CFO a
written declaration that, in their opinion, the financial records of the entity have been properly maintained and the financial
statements comply with the appropriate accounting standards and give a true and fair view of the financial position and
performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and
internal control which is operating effectively.
RECOMMENDATION 4.3
The external auditor attends the Group’s AGM and is available to answer securityholders’ questions relevant to the audit.
Principle 5: Make timely and balanced disclosure
RECOMMENDATION 5.1
Cromwell Property Group believes that all stakeholders should be informed in a timely and widely available manner of all
the major business events and risks that influence the Group. In particular, Cromwell Property Group strives to ensure
that any price sensitive material for public announcement is lodged with the ASX before external disclosure elsewhere and
posted on the Group’s website as soon as reasonably practicable after lodgement with the ASX.
The Group has a Market Disclosure Protocol which includes policies and procedures designed to ensure compliance with
the continuous disclosure obligations under the ASX Listing Rules.
In line with recommendation 5.2 of the fourth edition of the Recommendations, the Board receives copies of all market
announcements promptly after such announcements have been released. This ensures that the Board has timely visibility
of the nature and quality of information disclosed to the market and the frequency of disclosures.
When Cromwell Property Group is giving a presentation, a copy of the presentation materials is released on the ASX
Market Announcements Platform ahead of the presentation. Examples of such presentations are those delivered for half
year results and full year results and at the AGM and any general meeting.
In addition, for the AGM and any general meeting, Cromwell Property Group releases the script of the Chair’s address
and the CEO’s address. For the AGM on 28 November 2019, Cromwell provided live webcasting of the meeting so that
securityholders could hear proceedings online. For the general meeting on 30 March 2020, Cromwell took steps to
ensure all securityholders could participate while maintaining their health and safety in light of the COVID-19 pandemic.
Cromwell invited securityholders to participate in the meeting ‘virtually’ through an online platform provided by
Cromwell’s registry, Link Market Services Limited. Securityholders were able to participate in the meeting by hearing the
Chair’s address, viewing the presentation slides, asking questions and (if they had not previously lodged a proxy) voting
online. Cromwell intends to invite securityholders to participate in future AGMs and general meetings ‘virtually’ through
the online platform provided by its registry.
Cromwell Property Group is committed to providing securityholders with the opportunity to engage and participate in
presentations and meetings.
What you can find on the Corporate Governance page on our website:
• Market Disclosure Protocol
• Investor Relations Policy
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
158
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Principle 6: Respect the rights of securityholders
RECOMMENDATION 6.1
Cromwell Property Group aims to keep securityholders informed on an ongoing basis of the Group’s performance and
all major developments. Securityholders receive regular reports and the Group uses its website as its primary means
of providing information to securityholders and the broader investment community about the Group’s business, history,
corporate structure, corporate governance and financial performance.
The Corporate Governance page on the Group’s website provides:
• a link to information about the Board of Directors;
• key corporate governance documents, including constitutions, charters and policies;
• a link to key events in the Corporate Governance calendar;
• a link to a description of the Group’s stapled security dividends/distributions policy and information about the Group’s
dividend/distribution history;
• a link to download relevant securityholder forms; and
• materials referred to in this Statement.
The Group’s website also provides:
• overview of the Group’s current business;
• description of how the Group is structured;
• summary of the Group’s history;
• documents that the Group releases publicly (such as annual reports, ASX announcements, notices of meeting and
company news items);
• historical information about the market prices of Cromwell Property Group securities;
• ahead of the AGM (or any general meeting), information including time and venue and a copy of the Chair’s address, the
CEO’s address and the presentation materials;
• contact details for enquiries from securityholders, analysts or the media; and
• contact details for its securities registry.
Our website address:
www.cromwellpropertygroup.com www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
The Corporate Governance page on our website:
RECOMMENDATION 6.2
Cromwell Property Group has a Board-approved Investor Relations Policy, which has been designed to facilitate
effective two-way communication with all Cromwell securityholders (institutional and retail) and other financial market
participants, and to ensure that Cromwell gives all Cromwell securityholders and other financial market participants
easy and timely access to balanced and understandable information about Cromwell’s business, governance, financial
performance and prospects.
The Policy also sets out the policies and processes that the Group has in place to encourage participation of
securityholders and financial market participants in the AGM. This is important to the Group because it assists with
ensuring a high level of accountability and identification with the Group’s strategies and goals.
What you can find on the Corporate Governance page on our website:
• Investor Relations Policy
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 6.3
Cromwell Property Group facilitates and encourages participation at meetings of securityholders.
The Chair and the CEO each address the meeting of securityholders and provide securityholders with an update on
the Group’s business, governance and financial performance and any areas of concern or interest to the Board and
management. The Chair and CEO take any comments and questions received from securityholders during or after their
address.
159
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The current audit partner attends the AGM and is available to answer securityholders’ questions about the audit. The
notice of meeting for the AGM advises that securityholders entitled to cast their vote at the AGM may submit written
questions to the auditor relevant to the content of the auditor’s report or the conduct of the audit of the annual financial
report being considered at the AGM. A securityholder wishing to submit a question to the auditor is asked to submit the
question in writing to the Company Secretary up to a week before the AGM. A list of the questions submitted to the auditor
is made available to securityholders attending the AGM at or before the start of the AGM. At the AGM, the Chair reminds
securityholders of the opportunity to ask questions about the audit.
The Chair provides securityholders with an opportunity to ask questions about and discuss the specific resolutions put to
the meeting. Securityholders have the opportunity to ask questions about or comment on the management of the Group.
Securityholder meetings are held during business hours at the Group’s registered office in Brisbane, which is accessible
by public transport and near paid carparking locations. The notice of meeting invites securityholders to join the Directors
for morning tea or afternoon tea (as applicable) after the meeting.
For the AGM on 28 November 2019, Cromwell provided live webcasting of the meeting so that securityholders could hear
proceedings online. For the general meeting on 30 March 2020, Cromwell took steps to ensure all securityholders could
participate while maintaining their health and safety in light of the COVID-19 pandemic. Cromwell invited securityholders
to participate in the meeting ‘virtually’ through an online platform provided by Cromwell’s registry, Link Market Services
Limited. Securityholders were able to participate in the meeting by hearing the Chair’s address, viewing the presentation
slides, asking questions and (if they had not previously lodged a proxy) voting online.
At the AGM in 2019, and at the general meeting in 2020, all resolutions were decided by way of a poll rather than by a show
of hands.
RECOMMENDATION 6.4
Cromwell Property Group gives its securityholders the option to receive communications from the Group and from its
securities registry electronically. Many securityholders have elected to receive all communications electronically, while
other securityholders have elected to receive all communications electronically with payment statements received by post.
Electronic communications sent by the Group and by the securities registry are formatted in a reader friendly and printer
friendly format.
Securityholders can send communications to the Group and to the securities registry electronically. The Contact page on
the Group’s website provides the email address for contacting the Group and the securities registry.
Principle 7: Recognise and manage risk
RECOMMENDATION 7.1
Audit and Risk Committee
The Group is exposed to various risks across its business operations and recognises the importance of effectively
identifying and managing those risks so that informed decisions on risk issues can be made. The Board’s Audit and Risk
Committee has four members, all of whom are independent Directors. The Committee is chaired by an independent
Director who is not the Chair of the Board. The Audit and Risk Committee operates under a Board-approved written
Charter, which sets out the Committee’s various responsibilities, including:
• assessing the effectiveness of the internal risk control system and management’s performance against the risk
management framework, including whether management is operating within the risk appetite set by the Board;
• receiving reports from management of any actual or suspected fraud, theft or other breach of internal controls; and
• reviewing the general insurance programme, and assessing and recommending to the Board for adoption the scope,
cover and cost of corporate insurance.
The Audit and Risk Committee:
• may seek any information it considers necessary to fulfil its responsibilities;
• has access to management to seek explanations and information;
• has access to auditors to seek explanations and information from them (without management being present);
• may seek professional advice from employees of the Group and independent professional advice from appropriate
external advisors (at the Group’s cost); and
• may meet with external advisors without management being present.
160
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The minutes of each Audit and Risk Committee meeting are included in the papers for the next Board meeting after the
Committee has approved those minutes. The Chair of the Audit and Risk Committee reports the Committee’s findings to
the next Board meeting after each meeting of the Committee.
The Directors’ Report discloses:
• the relevant qualifications and experience of the members of the Audit and Risk Committee; and
• the number of times that the Audit and Risk Committee met during the 2020 financial year and the individual
attendances of the members at those meetings. For easy reference, the information (including percentages of total) is
shown below:
Director
Ms Jane Tongs (Committee Chair)
Ms Tanya Cox (appointed to Committee 21 October 2019)
Mr Andrew Fay
Ms Lisa Scenna (appointed to Committee 16 March 2020)
Ms Michelle McKellar (retired from Committee 28 November 2019)
Mr Leon Blitz (retired from Committee 26 February 2020)
Meetings attended (%
of meetings eligible to
attend)
Meetings eligible
to attend
(100%)
9 (100%)
6 (100%)
9 (100%)
3 (100%)
4 (100%)
6 (100%)
9 (100%)
6 (100%)
9 (100%)
3 (100%)
4 (100%)
6 (100%)
What you can find on the Corporate Governance page on our website:
• Audit and Risk Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 7.2
The Board is responsible for:
• ensuring an appropriate risk management framework is in place;
• setting the risk appetite within which the Board expects management to operate; and
• reviewing and ratifying systems of internal compliance and control and legal compliance to ensure appropriate
compliance frameworks and controls are in place.
As outlined in its Board-approved Charter, the Audit and Risk Committee’s responsibilities include:
• overseeing the establishment and implementation of risk management and internal compliance and control systems
and ensuring there is a mechanism for reviewing and assessing the efficiency and effectiveness of those systems at
least annually to satisfy itself that it continues to be sound;
• approving and recommending to the Board for adoption policies and procedures on risk oversight and management to
establish an effective and efficient system for:
• identifying, assessing, monitoring and managing risk;
• disclosing any material change to the risk profile; and
• regularly reviewing and updating the risk profile.
Under the direction of the CEO, management is responsible for ensuring that the Group operates within the risk appetite
set by the Board. It does so by identifying relevant business risks, designing controls to manage those risks and ensuring
those controls are appropriately implemented. The Group has adopted an Enterprise Risk Management Policy, which is
a general statement of the Group’s approach to proactive, enterprise wide risk management. There is also a wide range
of underlying internal policies and procedures, which are designed to mitigate the Group’s material business risks. The
Group’s approach to enterprise risk management is guided by relevant International Standards and regulatory guidance
and the Recommendations.
Reviews of the enterprise risk management framework were completed in the 2020 financial year. The Audit and Risk
Committee and the Board were satisfied the framework continues to be sound and that Cromwell Property Group
operates within the risk appetite set by the Board.
161
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Compliance Committee
A Compliance Committee – comprised of a majority of external members – monitors the extent to which Cromwell
Property Securities Limited (as Responsible Entity for the CDPT) complies with the CDPT’s compliance plan and the
underlying compliance framework. The Board of Cromwell Property Securities Limited receives regular reports from the
Compliance Committee. During the financial year, the Chair of the Compliance Committee meets with the Audit and Risk
Committee, with time made available for the Committee to meet with the Chair of the Compliance Committee without
management being present. The roles and responsibilities of the Compliance Committee are outlined in a Board-approved
Charter, which is reviewed annually by the Compliance Committee. The Board of the Responsible Entity may change the
Charter at any time by resolution.
What you can find on the Corporate Governance page on our website:
• Board Charter
• Audit and Risk Committee Charter
• Enterprise Risk Management Policy
• Compliance Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 7.3
The Group’s Risk and Audit Universe, aligned with the Group’s Sustainability Framework, sets out each risk description
and auditable focus area. The Risk and Audit Universe details three internal levels of control: Level One (management
oversight and operational controls, policies and processes); Level Two (monitoring governance, compliance, risk
management and reporting); and Level Three (functionally independent assessments and reviews). Level Four under the
Risk and Audit Universe comprises external audit, assurance and verification of processes.
Although the Group does not have a designated internal audit function, throughout the year the Legal and Compliance
team conducts tests of the effectiveness of the controls and the appropriateness of the monitoring strategies in place
for those risks with an inherent risk rating of Very High or High. This forms part of Level Three under the Risk and Audit
Universe. Relevant management confirm (monthly, quarterly or annually as appropriate given the residual risk rating) that
the controls remain appropriate and identify any new risks and any new controls that should be put in place. The Company
Secretary reports findings to the Audit and Risk Committee.
RECOMMENDATION 7.4
The Group’s Sustainability Report discloses the extent to which the Group has material exposure to economic,
environmental and social sustainability risks and explains how such risks are and will be managed.
What you can find on the Sustainability page on our website:
• Sustainability Report (current edition and previous editions)
www.cromwellpropertygroup.com/sustainability
Principle 8: Remunerate fairly and responsibly
RECOMMENDATION 8.1
Nomination and Remuneration Committee
The Board has a long-established Nomination and Remuneration Committee, which operates under a Board-approved
written Charter. The Charter sets out the Nomination and Remuneration Committee’s various responsibilities, including
reviewing and making recommendations to the Board in relation to:
• remuneration policies and practices to attract, retain and motivate senior executives and directors who will create value
for securityholders;
• the remuneration framework for Non-executive Directors, including the allocation of the pool of Directors’ fees;
• Executive Director and senior executive total remuneration;
• the design of any equity based incentive plan; and
• whether there is any gender or other inappropriate bias in remuneration policies and practices.
162
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The Nomination and Remuneration Committee:
• may seek any information it considers necessary to fulfil its responsibilities;
• has access to management to seek explanations and information;
• may seek professional advice from employees of the Group and independent professional advice from appropriate
external advisors (at the Group’s cost); and
• may meet with external advisors without management being present.
The minutes of each Nomination and Remuneration Committee meeting are included in the papers for the next Board
meeting after the Committee has approved those minutes. The Chair of the Nomination and Remuneration Committee
reports the Committee’s findings to the next Board meeting after each meeting of the Committee. The Nomination and
Remuneration Committee has three members, all of whom are independent Directors.
The Directors’ Report discloses the members of the Nomination and Remuneration Committee, the number of times that
the Committee met during the 2020 financial year and the individual attendances of the members at those meetings. For
easy reference, the information (including percentages of total) is shown below:
Director
Ms Tanya Cox (Committee Chair) (appointed to Committee 21 October 2019
and appointed as Committee Chair 26 March 2020)
Mr Leon Blitz
Mr Andrew Fay (retired as Committee Chair 26 March 2020)
Ms Michelle McKellar (retired from Committee 28 November 2019)
Ms Lisa Scenna (appointed to Committee 21 October 2019 and retired from
Committee 25 March 2020)
Ms Jane Tongs (retired from Committee 25 March 2020)
Meetings attended (%
of meetings eligible to
attend)
Meetings eligible
to attend
(100%)
7 (100%)
9 (100%)
9 (100%)
2 (100%)
1 (100%)
3 (100%)
7 (100%)
9 (100%)
9 (100%)
2 (100%)
1 (100%)
3 (100%)
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 8.2
The Directors’ Report (the section titled Remuneration Report) discloses information, including the policies and practices
regarding the remuneration of:
• Non-executive Directors; and
• the Executive Director and other senior executives.
The respective policies and practices reflect the different roles and responsibilities of Non-executive Directors and the
Executive Director and other senior executives.
As disclosed in the Remuneration Report, the Group’s Non-executive Directors are paid a fixed remuneration, comprising
base and committee fees or salary and superannuation (if applicable). Non-executive Directors do not receive bonus
payments or participate in security-based compensation plans, are not provided with retirement benefits other than
statutory superannuation and are required to hold a minimum of one year’s fees within three years from July 2019 or their
start date.
The Remuneration Report details the nature and amount of remuneration of the Chief Executive Officer (Executive
Director) and other senior executives (Key Management Personnel or KMP).
Remuneration packages are designed to align the KMP’s interests with those of securityholders. Key performance
indicators (KPIs) for each KMP consider their role within Cromwell generally as well as their expected contribution to the
achievement of Cromwell’s objectives. The KPIs are designed to best incentivise each KMP to meet Cromwell’s objectives
and therefore best serve the interests of securityholders. This is achieved by providing remuneration packages which
consist of the following three elements (or a combination thereof) where appropriate:
1.) Fixed component in the form of a cash salary;
2.) An at-risk cash award that is linked solely to performance of a tailored set of objectives, where appropriate; and
3.) At-risk longer-term equity payment. This third element is equity based remuneration aimed at alignment and retention.
163
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT The Group has an official clawback policy on unvested rights and deferred securities and malus and clawback clauses
allow unvested securities to be clawed back where a recipient has acted fraudulently, dishonestly or where there has
been a material misstatement or omission in the Group’s financial statements leading to receipt of an unfair benefit.
Additionally, performance rights under Cromwell Property Group’s Performance Rights Plan lapse under certain
circumstances including a determination by the Plan Committee that the performance right should lapse because the
participant, in the Plan Committee’s opinion, has committed any act of fraud, defalcation or gross misconduct in relation
to the affairs of a body corporate in the Group.
Each of the CEO, the Chief Operations Officer, the Chief Financial Officer and the Chief Investment Officer was awarded a
short-term incentive (an at-risk cash award) in the 2020 financial year. The nature of the performance based remuneration
is an ‘at risk’ payment rather than a ‘bonus’ payment.
For all KMP except the CEO and Non-executive Directors, the CEO is responsible for setting KPI targets which are
reviewed by the Board and assessing annually whether those targets have been met. The KPI targets for the CEO are set,
revised and reviewed annually by the Nomination and Remuneration Committee and the Board.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 8.3
In accordance with the remuneration policy, the Group operates a Performance Rights Plan and has issued performance
rights to a number of senior executives, including the CEO (an Executive Director).
The terms of the Group’s Performance Rights Plan do not allow participants, whether Executive Directors or other
employees, to hedge or otherwise limit the economic risk of their participation in the Plan.
Previous participation in the Performance Rights Plan by the CEO (an Executive Director) was approved by securityholders
at an AGM. Pursuant to the ASX Listing Rules, any further participation would also need to be approved by securityholders.
What you can find on the Corporate Governance page on our website:
• Plan Rules for the Cromwell Property Group Performance Rights Plan
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
164
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT SECURITYHOLDER
INFORMATION
The securityholder information set out below was applicable as at 31 August 2020, unless stated otherwise.
Spread of Stapled Securityholders
Category of Holding
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
Number of Securities
Number of Holders
2,304,540,903
128,698,991
160,477,255
12,271,670
6,422,072
460,709
2,612,871,600
1,167
1,844
6,285
1,601
2,239
1,323
14,459
Unmarketable Parcels
The number of stapled securityholdings held in a less than marketable parcel was 870.
Substantial Securityholders
Holder
ARA Group
Tang family and related entities
Vanguard Group
BlackRock Group
Stapled Securities
Date of Notice
697,239,866
433,607,179
210,756,179
130,660,437
07/08/2020
19/06/2020
16/12/2019
28/07/2020
Voting Rights
On a show of hands every securityholder present at a meeting in person or by proxy shall have one vote and, upon a
poll, every securityholder shall have effectively one vote for every security held.
165
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT 20 Largest Securityholders
Rank
Investor
Number
of Stapled
Securities Held
% Held of
Issued Stapled
Securities
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CITICORP NOMINEES PTY LIMITED
ARA REAL ESTATE INVESTORS XXI PTE LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
ARA REAL ESTATE INVESTORS XXI PTE LTD
ARA REAL ESTATE INVESTORS 28 LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
STARA INVESTMENTS PTY LTD
PAUL LOUIS WEIGHTMAN
BNP PARIBAS NOMS PTY LTD
HUMGODA INVESTMENTS PTY LTD
PANMAX PTY LTD
NEALE EDWARDS PTY LTD
WALLACE SMSF PTY LTD
STARA INVESTMENTS PTY LTD
CABET PTY LTD
BNP PARIBAS NOMS(NZ) LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
472,054,239
329,520,331
329,302,645
314,248,059
287,872,078
79,847,457
52,203,251
48,338,883
18,528,802
10,096,525
9,682,153
8,402,806
8,328,943
6,827,001
6,026,400
4,911,779
3,921,030
3,723,627
3,570,219
3,515.574
18.07%
12.61%
12.60%
12.03%
11.02%
3.06%
2.00%
1.85%
0.71%
0.39%
0.37%
0.32%
0.32%
0.26%
0.23%
0.19%
0.15%
0.14%
0.14%
0.13%
Total
2,000,921,802
76.58%
Provision of Information for Securityholders
Cromwell is committed to ensuring its securityholders are fully informed on the financial and operational status of the
Group as well as its future prospects, in accordance with the rules and guidelines of the Australian Securities Exchange
(ASX) and other regulatory bodies. The following information can also be found on the Cromwell website at
www.cromwellpropertygroup.com.
ASX LISTING
Cromwell Property Group is listed on the Australian Securities Exchange (ASX code: CMW).
SECURITYHOLDING DETAILS
Securityholders can access information on their holdings and update their details through Cromwell’s securities registry
provider:
Link Market Services Limited
Level 21, 10 Eagle Street
Brisbane Qld 4000
Telephone:
Fax:
Web:
Email:
+61 1300 554 474
+61 2 9287 0303
www.linkmarketservices.com.au
info@linkmarketservices.com.au
166
CROMWELL PROPERTY GROUP I 2020 ANNUAL REPORT Securityholders can change or update details in a number of ways:
• Send written authorisation to the registry quoting your SRN / HIN and signing the request;
• Log on to www.linkmarketservices.com.au; or
• Call the registry.
You will have to verify your identity by providing your personal details. Bank detail changes must be requested in writing or
electronically and cannot be made over the phone. Address changes must be requested in writing to the registry or your
CHESS Sponsor.
Securityholders are not obliged to quote their TFN, ABN or exemption. However, if these details are not lodged with the
registry, Cromwell is obliged to deduct tax from unfranked portions of dividend payments and distribution payments and
up to the highest marginal tax rate, depending on residency.
DISTRIBUTIONS/DIVIDENDS
Cromwell Property Group Dividends/Distributions
During the year the following distributions/dividends have been paid:
Quarter Ending
Amount per Security
Ex Date
30 June 2020
31 March 2020
1.87500 cents
1.87500 cents
29 June 2020
Record Date
30 June 2020
Payment Date
21 August 2020
30 March 2020
31 March 2020
22 May 2020
31 December 2019
1.87500 cents
30 December 2019
31 December 2019
21 February 2020
30 September 2019
1.87500 cents
27 September 2019
30 September 2019
22 November 2019
Further Information
The Cromwell website provides a comprehensive range of information on the Group, past performance and products.
The website address is www.cromwellpropertygroup.com. Requests for further information about the Group, its dealings
and key securityholder communications should be directed to:
Investor Relations Manager
Cromwell Property Group
GPO Box 1093
Brisbane QLD 4001 Australia
TEL: +61 7 3225 7777
FAX: +61 7 3225 7788
EMAIL: invest@cromwell.com.au
LISTING:
Cromwell Property Group is listed on the Australian Securities Exchange (ASX code: CMW).
SECURITIES REGISTRY:
Link Market Services Limited
Level 21, 10 Eagle Street
Brisbane QLD 4000
TEL: +61 1300 554 474
FAX: +61 2 9287 0303
WEB: www.linkmarketservices.com.au
AUDITOR:
Deloitte Touche Tohmatsu
Level 23, Riverside Centre
123 Eagle Street
Brisbane QLD 4000
TEL:
WEB: www.deloitte.com.au
+61 7 3308 7000
C ROMWE LL P ROPE RTY GROU P I 2 0 20 ANN UA L REPORT
167