More annual reports from Cromwell Group:
2022 ReportPeers and competitors of Cromwell Group:
Paramount GroupAnnual Report
2022
P.14
Annual Financial
Report
16 Directors’ Report
59 Auditor’s Independence Declaration
61 Consolidated Statements of
Comprehensive Income
62 Consolidated Balance Sheets
63
Consolidated Statements of
Changes in Equity
65 Consolidated Statements of
Cash Flows
66 Notes to the Financial Statements
127 Directors’ Declaration
128
Independent Auditor’s Report
P.04
Financial
Highlights
P.06
Chair's Report
P.08
CEO's Report
2
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
P.132
Corporate Governance
Statement
P.154
Securityholder
Information
Cromwell Property Group
Cromwell Property Group (Cromwell) is a real estate investor
and fund manager with operations on three continents and a
global investor base. As at 30 June 2022, Cromwell had a market
capitalisation of $2.0 billion, a direct property investment portfolio
valued at $3.0 billion and total assets under management of $12.0
billion across Australia, New Zealand and Europe.
Cromwell is included in the S&P/ASX 200 and the FTSE EPRA/
NAREIT Global Real Estate Index.
This document is issued by
Cromwell Property Group
consisting of
Cromwell Corporation Limited ABN 44 001 056 980 and
Cromwell Diversified Property Trust
ARSN 102 982 598 ABN 30 074 537 051
the responsible entity of which is
Cromwell Property Securities Limited
AFSL 238052 ABN 11 079 147 809
Level 19, 200 Mary Street, Brisbane QLD 4000
Phone: +61 7 3225 7777
Fax:
+61 7 3225 7788
Web: www.cromwellpropertygroup.com
Email:
invest@cromwell.com.au
Securityholder enquiries
All enquiries and correspondence regarding your security-holding
should be directed to Cromwell’s Investor Services Team on 1300
268 078 (within Australia) or +61 7 3225 7777 (outside Australia).
3
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Financial highlights
Financial Results summary
Statutory profit ($m)
Statutory profit (cps)
Operating profit ($m)
Operating profit (cps)
Distributions ($m)
Distributions (cps)
Payout ratio
FY22
263.2
10.05
201.0
7.68
170.3
6.50
FY21
308.2
11.78
192.2
7.35
183.1
7.00
Change
(14.6%)
(14.7%)
4.6%
4.5%
(7.0%)
(7.1%)
84.7%
95.3%
(11.1%)
FY22 segment profit versus prior comparable period
Fund and asset management ($m)
Co-investments ($m)
Investment portfolio ($m)
Segment results ($m)
Finance income ($m)
Corporate costs(1) ($m)
Income tax expense ($m)
Operating profit ($m)
Operating profit (cps)
AUM ($b)
FY22
49.7
61.9
144.5
256.1
1.6
(47.1)
(9.6)
201.0
7.68
$12.0
FY21
44.6
46.5
144.1
235.2
4.6
(38.7)
(8.9)
192.2
7.35
$11.9
(1)
Includes non-segment specific corporate costs pertaining to Group level functions such as finance and tax, legal, risk and
compliance, corporate secretarial and marketing and other corporate services
Financial Position
Total Assets ($m)
Total Liabilities ($m)
Net assets ($m)
Securities on issue (m)
NTA per security (including interest rate derivatives)
Gearing(2)
(2) Calculated as (Total borrowings less cash) / (Total tangible assets less cash).
FY22
5,054.2
2,343.8
2,710.4
2,618.9
$1.04
39.6%
Change
11.4%
33.1%
0.3%
8.9%
(65.2%)
21.7%
7.9%
4.6%
4.5%
(0.8%)
FY21
5,008.9
2,343.6
2,665.3
2,617.5
$1.02
41.8%
4
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
Strategic summary
New strategy
Cromwell’s vision is to be a trusted,
global real estate fund manager,
with local presence
Streamlining internal processes and
procedures, including simplification of
global operating structure for improved
processes, cost savings and scalability
Simplifying the business, moving to
capital light model, managing assets
on behalf of third-party clients.
Establishment of an
externally managed REIT
Sale of non-core assets
Focus on our people
Previously announced launch
of portfolio of Australian office
assets into separate listed REIT
remains a strategic priority
Ongoing sale of assets that no
longer align with our strategy,
including exit from CPRF,
CIULF and LDK
Key management appointments
completed, readying Cromwell
for the next phase of growth
Majority of preparatory legal, tax
and restructuring work complete
Transaction will be launched
when market conditions
are conducive
Completed sale of four non-core
assets in Australia, supplying
the proceeds to debt reduction,
bringing gear down to 39.6%,
within target range
Further non-core sale proceeds
to be used to reduce gearing,
support future mandate
opportunities and investigate
strategically aligned funds
management platforms
in Australia
Implementation of key initiatives
focused on equality and diversity
Continue to improve culture
to inspire trust, transparency,
authenticity and creativity
Align defined behaviours
and values to create an
inclusive, open workplace
and diverse workforce
5
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Chair’s Report
Dear fellow Securityholder,
Through a year of transition, Cromwell has welcomed new
leadership and set out a vision and strategy with a focus on
growth to seek to drive securityholder value. Below are key
changes and initiatives over the last 12 months.
Board composition, new strategy and vision
In July 2021, Cromwell appointed Ms Jialei Tang as a Non-
executive Director to the Cromwell Board, rounding out
our board renewal process. Cromwell now has a diversified
board consisting of eight directors with 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
Cromwell and the environment in which it operates and can
effectively assess management’s performance in meeting
agreed objectives and goals.
Our new Managing Director and Chief Executive Officer,
Jonathan Callaghan, joined Cromwell at the start of
October 2021. Jonathan is an outstanding leader and we
are confident that his deep experience and skills in property
and funds management will drive Cromwell forward for the
benefit of securityholders.
In November 2021, we introduced Cromwell’s strategy
and vision to simplify the Group structure, with the view
to transition to a more capital-light real estate funds
management model. The Board believes this strategy will
drive long-term value for securityholders.
As part of this transition, Cromwell announced its intention
to explore the establishment of a separately listed,
Cromwell-managed Australian real estate investment trust
(AREIT). The REIT will comprise high-quality office assets,
in which Cromwell will own a substantial interest alongside
existing Cromwell securityholders, who will also receive
6
units in the REIT. Significant work has been undertaken
towards listing the new externally managed AREIT, and
while market conditions have delayed our objective, this
remains a key priority for the Group in FY23. The Board has
confidence in the Executive Team to execute our strategy
with support from the broader Australian and European
teams as timing proves right.
We are, however, pleased to report that we have made
good progress on several other initiatives to support our
stated strategy:
• We have progressed on the disposal programme of
non-core assets in Australia, applying the proceeds to
debt reduction, bringing gearing down to 39.6%, within
target range.
•
In Europe, the business is well positioned for the next
phase of change continuing our pivot to seek to become
a capital light global fund manager.
• We have a renewed focus on the Australian Funds
Management business, with DPF, our flagship unlisted
retail fund acquiring two assets and positive net inflows
of $90 million in this fund.
• We have updated to our operating structure in Australia
and in Europe, including key hires who each bring a
huge amount of experience to our business including:
• Michelle Dance, Fund Manager for
Australian Portfolio
• Peta Tilse, Head of Retail Funds Management
• Andrew Creighton, Head of Investment
Management, Europe
• We have streamlined the business globally across
operating structures for alignment and scalability.
• We have introduced a programme of key initiatives
which aim to retain and support our valuable people
and attract new talent to the business to help underpin
the business’s new clear strategy.
These achievements are a testament to our people given
the challenges of the 2022 financial year with global
markets impacted by COVID-19, the war in Ukraine,
growing inflation and increasing interest rates, which have
led to increased volatility and uncertainty across many
sectors and countries.
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Chair’s Report
ESG Strategy
We are currently reviewing our ESG programme and setting
new baselines and targets as we place more emphasis on
this area as part of our refreshed strategy.
Some notable ESG initiatives ongoing across both
Europe and Australia are the development of a Group
ESG strategy using a globally harmonised approach to
decarbonise our business toward Net Zero; the setting
of emissions baselines for energy consumption, waste
management and carbon in each of our operating regions;
and the development and registration of an Australian
Reconciliation Action Plan, with roll-out due to occur
through FY23. We are also pleased that we have maintained
a high level of performance for our governance pillar,
including compliance, training and disclosure principles
and increased integration between risk management, ESG
performance and safety governance, including reporting
and oversight.
We look forward to sharing more details with you in our
Sustainability Report.
On behalf of the Cromwell Board, I would like to thank all
securityholders for their support during the year. We enter
FY23 with a renewed focus and dedication to continue
the execution of our new strategy and vision and have an
optimistic outlook for the year ahead.
Dr Gary Weiss, AM
Chair
Cromwell Property Group
Focus on our people
Our Values
During the 2022 financial year, we undertook an extensive
internal consultation exercise with our people to refresh
Cromwell’s corporate values in line with our stated vision
and strategy. Our new corporate values will authentically
define our entire team, allowing us to build stronger
foundations of how we operate, behave, and interact on a
daily basis, and will drive our decision making, acting as
means of accountability within our business.
The refreshed corporate values are expected to be
launched early in the 2023 financial year and will be
disclosed on the website and in the Board-approved Code
of Conduct.
Delivering for our people
Our people are the backbone of our business and will
provide the essential support needed to execute our
strategy. We are committed to providing them with an
equal and inclusive workplace. We are pleased to have
achieved the global diversification objective of 40:40:20 at
three of the six levels of the business, the Cromwell Board,
Team Leaders and Emerging Leaders, with further work
occurring to achieve this at all employee levels.
We have also introduced a programme of initiatives,
such as global agile working policies and flexible leave
initiatives, which aim to retain our valuable people and
attract new talent to strengthen the business further.
Contributing to our communities
We are proud of our people and their activity within the
community. A significant contribution I would like to
highlight is our Poland Team’s dedication and hands-on
assistance in helping Ukrainians who left their homes and
fled to Poland after the Russian government’s invasion
of Ukraine.
Our team on the ground assisted emergency efforts by
providing emergency accommodation and provisions. In
addition, the wider European and Australian employees
donated their own money to assist and Cromwell was proud
to match these donations. These activities are a testament
to the quality of Cromwell’s people, who have supported
their colleagues and local communities while remaining
focused on their roles and objectives.
7
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
CEO’s Report
GROUP GEARING
FY22 Results Overview
On Thursday 25 August 2022, Cromwell reported full-year
FY22 statutory profit of $263.2 million, equivalent to 10.05
cents per security. This represents a 15% decrease on the
prior year, due to a lower share of statutory profit from
equity accounted investments, lower revaluation gains on
investment properties, higher tax expenses over the period
and higher corporate costs relating to insurance premiums,
which will normalise for FY23.
FY22 operating profit of $201.0 million, equivalent to
7.68 cents per security, was up 5% (FY21 $192.2 million)
driven by higher funds management profit and improved
performance of the Cromwell Polish Retail Fund (CPRF)
portfolio.
Gearing was reduced to 39.6% at the end of the period,
as a result of four non-core asset sales. This returned
Cromwell’s gearing to within its stated target range of
30-40%. Look-through gearing also reduced to 44.8% at
the end of the period. Cromwell’s average cost of debt,
including hedging, decreased to 2.42% (FY21 2.69%),
with weighted average debt maturity of 2.9 years (by
commitments). Cromwell maintains a strong Interest
Coverage Ratio (ICR) of 6.3x.
FY22
Results Overview
$263.2m
$201.0m
6.50 cents PER SECURITY
STATUTORY PROFIT (FY21 $308.2m)
OPERATING PROFIT (FY21 $192.2m)
FY22 DISTRIBUTIONS
Equivalent to 10.05 cents
per security
Equivalent to 7.68 cents
per security
(FY21 11.78 cents per security)
(FY21 7.35 cents per security)
$1.04
Gearing
reduced to
39.6%
NET TANGIBLE ASSETS PER UNIT
(FY21 41.8%)
(FY21 $1.02)
within Cromwell’s target
range of 30-40%
representing a payout ratio on
operating profit of 85% and 98%
of Adjusted Funds From
Operations (AFFO)
$12.0 billion
TOTAL ASSETS UNDER MANAGEMENT (AUM)
(FY21 $11.9 billion)
8
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
CEO’s Report
DEBT EXPIRY PROFILE
Investment Portfolio
$800 M
$700 M
$600 M
$500 M
$400 M
$300 M
$200 M
$100 M
)
M
$
(
e
c
n
a
l
a
B
t
i
b
e
D
Australian
Banks
International
Banks
Convertible
Bonds
FY2023
FY2024
FY2025
FY2026
FY2027
FY2028
$0.0 M
$0.0 M $350.1 M $60.0 M $575.0 M $0.0 M
$0.8 M $812.6 M $388.1 M $65.3 M $0.0 M $80.0 M
$205.0 M $0.0 M $0.0 M $0.0 M $0.0 M $0.0 M
Cromwell undertook a Convertible Bond buy back in
June 2022 with a 41.3% (€95.1 million) take up. A further
57.6% (€132.5 million) was repurchased on 1 August
2022, leaving 1.1% (€2.4 million), which will be redeemed
on 9 September 2022.
Cromwell paid distributions of 6.50 cents per security in
the year, representing a payout ratio on operating profit
of 85% and 98% of AFFO, a slight reduction on the prior
period ended 30 June 2021.
Cromwell’s investment portfolio consists of 13
Australian office assets.
Cromwell’s Australian office assets were valued at
$3.0 billion at 30 June 2022, marginally above June 2021
valuation of $2.9 billion. Cromwell's Net Tangible Assets
increased to $1.04 (FY21 $1.02).
Cromwell’s investment portfolio operating profit was
up marginally at $144.5 million (FY21 $144.1 million),
largely driven by a portfolio of well-located assets and
a stable income stream heavily weighted to government
tenants, accounting for 49% of rental income.
The investment portfolio remains stable, with portfolio
valuations marginally increased on FY21 on a like-for-
like basis. Cromwell occupancy increased to 95.6%, up
from 94.7%, as a result of various leasing and asset
management initiatives to drive tenant engagement.
During the financial year, the leasing team executed
41 leases over 52,000 sqm with a number of longer
leases written more recently, reflective of tenants having
a clearer picture of their office needs for their staff.
The portfolio has a long-weighted average lease expiry
(WALE) of 5.9 years, with no more than 10% of the
portfolio expiring each year until 2026.
INCOME DIVERSIFICATION
BY STATE
INCOME DIVERSIFICATION
BY TENANT TYPE
INVESTMENT PORTFOLIO
Key Statistics
ACT
NSW
QLD
VIC
Government Authority
Listed Company/
Subsidiary
Private Company
SMEs
ASSETS
13
PORTFOLIO VALUE
$3.0 billion
WALE
5.9 years
WACR
5.2%
OCCUPANCY
95.6%
9
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
Occupancy remains strong across the Australian portfolio
given the long WALE, strong tenant credit quality and
tenants increasingly committing to longer lease terms
despite recent low physical occupancy across the market.
Cromwell is confident strong tenant engagement and clear
understanding of the market demands will assist ongoing
leasing success.
In the near term, Cromwell will continue to focus on active
asset management and supporting tenants to adapt to the
hybrid work environment - with an emphasis on wellbeing,
improved gathering places and collaboration areas,
building amenity and technology that supports hybrid
working and distributed workforces.
Level 14 Fitout 207 Kent Street, Sydney, Australia
The weighted average capitalisation rate (WACR) of 5.2%
marginally improved from 5.4% at FY21.The Investment
portfolio is substantially weighted to government tenants,
making up 49% of gross income.
Cromwell progressed its strategy to sell down non-core
assets in its Australian portfolio during the period. The
non-core asset sales for the year included 200 Mary
Street, Brisbane for $108.5 million; Village Cinema Centre,
Geelong for $19.0 million; TGA Complex, Symonston, for
$21.5 million; and Regent Cinema Centre, Albury for
$18.5 million. All assets were sold above current
carrying value.
The proceeds from the sale of these non-core assets
released capital of more than $160 million, which was used
to repay debt, and has seen Cromwell return to its targeted
gearing range of 30-40%.
10
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT FUND & ASSET MANAGEMENT
Key Statistics
TOTAL THIRD-PARTY AUM
$ 7.8 billion
EUROPE
$5.1 billion
(FY21 $5.1 billion)
AUSTRALIA / NEW ZEALAND
$2.7 billion
(FY21 $2.7 billion)
ASSETS
216
NEW COMMITTED EUROPEAN MANDATES
€ 800 million GAV
TENANT-CUSTOMERS
2,300+
Fund and Asset Management
Cromwell’s fund and asset management activities
delivered operating profit of $49.7 million for the period
(FY21 $44.6 million).
Funds under management in the European business is
$5.1 billion. Five new European mandates were originated,
with a total end value of €800 million. A total of
€121 million has already been invested into new assets and
a further four asset purchases valued at €200.5 million
are nearing completion.
The Cromwell European REIT (CEREIT) portfolio recorded
a 4.6% uplift in gross asset value to €2.6 billion (FY21 109
assets valued at €2.3 billion) with a 95.4% occupancy rate
(by net lettable area). The 110+ properties are managed by
Cromwell’s experienced local teams in Europe, with CEREIT
focused on buying value add assets, where active asset
management can improve leasing outcomes and overall
value. They continue to focus on increasing their allocation
to well-located and tenanted industrial and logistics assets.
Cromwell strengthened its European team during the
period with the appointment of Andrew Creighton, Head of
Investment Management, Europe to oversee and execute
all investment and asset management activities.
Retail funds grew during the period to $2.5 billion (FY21
$2.4 billion), with net inflows of $60 million demonstrating
investors’ ongoing appetite for stable, income producing
unlisted investments.
The Cromwell Direct Property Fund saw net inflows of just
over $90 million, with key transactions during the year
including the acquisition of 100 Creek Street, Brisbane
for $184 million and 95 Grenfell Street, Adelaide for
$81 million, along with the sale of Bunnings, Munno Para
West for $48 million. During the year, gross assets grew to
$780 million from $543 million.
Cromwell Riverpark Trust, which is fully subscribed,
commenced the sale process of Energex House during the
financial year, although did not complete due to a decline
in market conditions which resulted in the counterparty not
completing. A new campaign will be launched shortly.
Cromwell Property Trust 12, which is also fully subscribed,
has a single remaining asset in Dandenong, Victoria, with
sole tenant Australian Tax Office. The asset achieved a 16%
valuation uplift in October 2021, now valued at $124 million,
up from $107 million in FY21. The fund has a distribution
yield of 4.8%, based on a distribution rate of 5.75 cpu p.a.
and a NTA per unit of $1.19 as at 30 June 2022.
In New Zealand, Oyster Property Group (50% interest)
assets under management was stable at NZD$2.1 billion
(FY21 NZD$2.1 billion). FY22 share of operating profit was
$3 million (FY21 $3.8 million).
11
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Co-investments
Cromwell’s co-investments recorded operating profit of
$61.9 million for the full year, an increase of 33.1% from
FY21 ($46.5 million).
Cromwell’s 28% equity accounted share of Cromwell
European REITs operating profit for the financial year was
$41.9 million, down on June 2021 profit of $43.3 million.
The REIT paid a distribution to Cromwell of $34.5 million
for the financial year. As at 30 June 2022 Cromwell’s equity
stake is held at $600 million.
Cromwell recorded an operating profit of $22.8 million
for the Cromwell Polish Retail Fund (CPRF). The portfolio
of seven shopping centres was valued at $720 million,
inclusive of the 50% interest in the Ursynów asset with
Unibail-Rodamco. The valuation for the portfolio is down
from last financial year, reflecting the geo-political tension
in the region. These centres are anchored by large French
grocery giant Auchan, representing 30% of gross portfolio
rent, providing stable income. Total rental invoice collection
periods have returned to pre-COVID-19 levels, on improved
footfall and in-store turnover.
Cromwell has identified these assets as non-core for
investors particularly in light of the risk associated with
ongoing regional political unrest. It is expected that taking
individual assets to market will support the repatriation
capital more quickly than selling the portfolio as a whole.
Operating profit was $2.4 million for the Cromwell Italy
Urban Logistics Fund (CIULF) portfolio. Valuations were up
Centrum Janki, Poland
$5 million to $91 million for the seven logistics assets in
northern Italy, a key logistics hub for the region
Cromwell has identified CIULF assets as being non-core
given the low return yield which does not meet the return
profile required by investors for a new pan-European fund.
The assets are mature with limited opportunity to add
further value through active asset management, which is
Cromwell’s core strength.
AREIT: Strategy Update
In February 2022, Cromwell announced its intention to
explore the establishment of a separately listed, Cromwell-
managed, Australian real estate investment trust (AREIT)
comprising high-quality office assets as part of a transition
to more capital light real estate funds management model.
Significant work has been done towards listing a new
externally managed AREIT which will hold a material portion
of Cromwell’s existing Australian investment portfolio.
The initial response from securityholders on this initiative
has been positive, and the AREIT will be launched when
Cromwell is confident that market conditions will support
a successful listing.
The AREIT is a key step towards achieving a capital
efficient business model and will provide investors with two
investment vehicles with different risk and return profiles.
12
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
Outlook
Cromwell enters FY23 with a clear strategy and vision,
where we will leverage growth opportunities that come
from being a capital efficient business, with a focus on fund
and asset management. The simplification of Cromwell
platform will guide our future priorities and unlock value for
securityholders.
We will continue to take a prudent approach to capital
management in determining the right time to launch new
initiatives, given the current more challenging operating
environment. At the same time, Cromwell is well positioned to
withstand these challenges.
We believe that with inhouse global capability throughout the
real estate lifecycle from researched trends, ESG expertise
and asset management track record will put us in a good
position to drive performance of the investment portfolio
through tenant retention and continue to grow our funds under
management operations.
We expect interest rate speculation will moderate, stabilising
current financial market conditions, while in Australia, strong
employment will continue to support real estate fundamentals
with office occupancy improving and leasing metrics showing
positive momentum.
A distribution of 1.375 cents per security is expected to be paid
for the September 2022 quarter, reflecting the anticipated fall
in funds management activity, as well as the earnings impact
of the asset sales programme until such time as the capital
realised from those sales can be reinvested. The Board will
provide distribution guidance on a quarterly basis.
I would like to thank everyone at Cromwell for their dedication
and hard work over the last year. It has truly been a great team
effort and I have very much appreciated the support since
taking on the role of CEO in October 2021.
Yours sincerely,
Jonathan Callaghan
CEO
Cromwell Property Group
End-of-trip facilities
400 George Street, Brisbane, Australia
13
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
CONTENTS
P.16
Directors' Report
P.59
Auditor's Independence
Declaration
P.60
Financial Statements
P.61 Consolidated Statements of
Comprehensive Income
P.62 Consolidated Balance Sheets
P.63 Consolidated Statements of
Changes in Equity
P.65 Consolidated Statements of
Cash Flows
P.66
Notes to the Financial
Statements
P.67 About this report
P.71 Results
P.84 Operating assets
P.93 Finance and capital structure
P.110 Group structure
P.116 Other items
P.127
Directors' Declaration
P.128
Independent Auditor's
Report
P.132
Corporate
Governance
Statement
P.154
Securityholder
Information
DIRECTORY
Board of Directors:
Gary Weiss AM
Eng Peng Ooi
Robert Blain
Tanya Cox
Joseph Gersh AM
Lisa Scenna
Jialei Tang
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
Web: www.cromwellpropertygroup.com
Listing:
Cromwell Property Group
is listed on the
Australian Securities Exchange
(ASX: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
14
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
FINANCIALS
Cromwell Property Group
Annual Financial Report
30 June 2022
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
15
CROMWELL PROPERTY GROUP I 2022 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 2022 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.
In order to comply with the provisions of the Corporations Act 2001 (Cth), the Directors Report follows.
Principal activities
The principal activities of Cromwell and the Trust, which did not change significantly through the year, are summarised
below:
Fund and asset
management
Co-investments
Fund management represents activities in relation to the establishment and management of
external funds for institutional and retail investors. Asset management includes property and
facility management, leasing and project management and development related activities. These
activities are carried out by Cromwell itself and by associates and contributes related fee revenues
or the relevant share of profit of each investee to the consolidated results.
This activity includes Cromwell’s investments in assets warehoused while being repositioned for
deployment into the fund and asset management business and assets it may not fully own or
over which it cannot exercise unilateral control. This includes interests in investment property
portfolios in Poland (CPRF) and Italy (CIULF), the Cromwell European Real Estate Investment
Trust (CEREIT), and other investment vehicles. This activity contributes net rental income and the
relevant share of profit of each investee to consolidated results.
Investment
portfolio
This involves the ownership of investment properties located in Australia. These properties are
held for long term investment purposes and primarily contribute net rental income and associated
cash flows to results.
16
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Key results and metrics
Financial performance
Total assets under management ($B)
Total revenue and other income for the year ($M)
Statutory profit for the year ($M)
Statutory profit per stapled security for the year (basic) (cents)
Results from operations:
Funds and asset management ($M)
Co-investments ($M)
Investment portfolio ($M)
Unallocated items ($M)
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 ($M)(1)
Net debt ($M)(2)
Gearing (%)(3)
Stapled securities issued (M)
NTA per stapled security
2022
2021
2020
2019
12.0
568.8
263.2
10.05
49.7
61.9
144.5
(55.1)
201.0
7.68
170.3
6.50
5,054.2
2,710.4
2,721.2
1,879.5
39.6%
2,618.9
$1.04
11.9
595.0
308.2
11.78
44.6
46.5
144.1
(43.0)
192.2
7.35
183.1
7.00
5,008.9
2,665.3
2,656.7
2,021.2
41.8%
2,617.5
$1.02
11.5
494.7
177.6
6.83
74.5
41.1
155.0
(49.4)
221.2
8.50
195.5
7.50
4,984.5
2,583.4
2,573.4
1,975.9
41.6%
2,612.9
$0.99
11.9
457.3
159.9
7.53
32.6
45.4
132.5
(36.2)
174.3
8.21
157.5
7.25
3,695.7
2,183.0
2,176.2
1,254.8
35.0%
2,236.6
$0.97
(1) Net assets less deferred tax assets, intangible assets, leased assets and leased liabilities, 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.
Financial performance
STATUTORY PROFIT
Cromwell recorded a statutory profit after tax of $263.2 million for the year ended 30 June 2022 (2021: $308.2 million). The
Trust recorded a statutory profit after tax of $274.9 million for the year ended 30 June 2022 (2021: $293.9 million).
OPERATING PROFIT
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 for 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.
Operating profit is not a measure which is 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.
Cromwell recorded an operating profit of $201.0 million for the year ended 30 June 2022 compared with $192.2 million for
the previous year.
17
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT A reconciliation of operating profit, as assessed by the Directors, to statutory profit after tax is as follows:
Cromwell
Operating profit
Reconciliation to profit after tax
Gain on sale of investment properties
Fair value net gains - Investment properties
Fair value net gains - Derivative financial instruments
Lease cost and incentive amortisation and rent straight-lining
Relating to equity accounted investments(1)
Net exchange gain on foreign currency borrowings
Tax (expense) / benefit relating to non-operating items
Other non-cash expenses or non-recurring items(2)
Profit after tax
(1) Comprises fair value adjustments included in share of profit of equity accounted entities.
(2) These expenses include but are not limited to:
• Amortisation of loan transaction costs.
• Amortisation of intangible assets and depreciation of property, plant and equipment.
• Other transaction costs.
2022
$M
201.0
11.8
54.0
55.4
(23.1)
(15.9)
28.0
(16.5)
(31.5)
263.2
2021
$M
192.2
5.9
97.5
14.2
(26.6)
30.9
26.1
7.8
(39.8)
308.2
Operating profit per security for the year was 7.68 cents (2021: 7.35 cents). This represents an increase of approximately
4.5% over the prior year. Operating profit is analysed within each segment in the following section.
ANALYSIS OF SEGMENT PERFORMANCE
The contribution to operating profit of each of the 3 segments of Cromwell and the reconciliation to total operating profit is
set out in the upcoming sections.
18
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Fund and Asset Management
Financial highlights in relation to fund and asset management include:
Total
Australia
Europe
Joint ventures
Fee and other revenues ($M)
Development income ($M)
Share of operating profit ($M)
Expenses attributable ($M)
Operating profit ($M)
Assets under management ($B)
AUSTRALIA
Retail fund management
2022
95.5
18.5
11.7
76.0
49.7
12.0
2021
101.6
25.6
7.6
90.2
44.6
11.9
2022
34.2
-
-
16.5
17.7
4.5
2021
37.1
-
-
16.4
20.7
4.7
2022
61.2
2.3
7.7
59.4
11.8
5.9
2021
64.4
17.3
(0.2)
73.8
7.7
5.9
A breakdown of retail fund management results is below:
Recurring fee income
Transactional fee income
Performance fee income
Total fee and other revenue
Costs attributable
Operating profit
2022
2021
-
16.2
4.0
-
20.2
1.6
2022
$M
9.0
5.4
5.2
19.6
6.2
13.4
-
8.3
7.9
-
16.2
1.3
2021
$M
8.1
2.4
13.2
23.7
5.4
18.3
Retail fund management profit decreased from $18.3 million in the prior year to $13.4 million for the year ended 30 June
2022. This is primarily due to Cromwell receiving $9.7 million in performance fees during the prior year in respect of the
performance and extension of Cromwell Property Trust 12 which was not matched in the current year.
Significant events during the year included:
• Cromwell Ipswich City Heart Fund – the fund sold its sole investment property and has been wound up. This had led to
a $2.9 million performance fee being recognised during the year.
• Cromwell Riverpark Trust – the term of the fund expired and securityholder feedback indicated they had a preference to
have their capital returned. The major tenant, Energex, signed a 5-year lease extension which led to a net $13.8 million
fair value increase during the year. The property is expected to be sold during the 2023 financial year.
• Cromwell Direct Property Fund – the fund acquired $266.1 million of property and sold $48.8 million. Net assets
increased $85.3 million due to positive investor inflows and a statutory profit of $21.8 million.
• Cromwell Phoenix Opportunities Fund - performed positively during the period and outperformed relevant benchmarks.
• Cromwell Phoenix Property Securities Fund – outperformed against its benchmark.
Total assets under management was $1.5 billion (June 2021: $1.4 billion).
Cromwell remains committed to investing in increasing the scale and diversification of its retail funds management
business, which it believes is highly complementary to its property and facilities management activities.
Wholesale fund management
A breakdown of wholesale fund management results is below:
Recurring fee income
Development income
Total fee and other revenue
Operating profit
2022
2021
$M
1.0
-
1.0
1.0
$M
1.0
-
1.0
1.0
19
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT During the year wholesale funds management activities related to the management of the Northpoint tower and the
project at 475 Victoria Avenue, Chatswood NSW. Operating profit remained steady at $1.0 million (2021: $1.0 million)
Property management
A breakdown of property management results is below:
Recurring fee income
Costs attributable
Operating profit
2022
$M
13.5
10.3
3.2
Property management profit increased to $3.2 million (2021: $1.6 million) as a result of an increase in leasing
commissions received along with a decrease in employee benefits expense.
EUROPE
A breakdown of European fund management results is below:
Fee and revenue
Recurring fee income
Development income
Performance fee income
Transactional fee income
Total fee and other revenue
Costs attributable
Employee benefits expense:
Performance fee-related
Other
Other operational costs
Total costs attributable
Operating profit
2022
$M
53.9
2.3
2.0
5.4
63.6
1.2
45.8
12.5
59.5
4.1
2021
$M
12.6
11.0
1.6
2021
$M
52.0
17.3
7.7
4.7
81.7
1.9
45.5
26.4
73.8
7.9
The European fund management business continues to execute the strategy of securing longer-term and more secure
revenue sources. The business generated an operating profit of $4.1 million (2021: $7.9 million) for the year, reflective
of the downturn in transactional activity due to COVID-19, the ongoing war in Ukraine, the sharp increase in the cost of
energy and the increase in interest rates as the central European banks attempt to come to grips with increasing inflation
across Europe.
At 30 June 2022 the European fund management business had €3.9 billion ($5.9 billion) assets under management (2021:
€3.7 billion ($5.9 billion)).
JOINT VENTURES
LDK
During the year Cromwell and the Trust recorded $16.2 million (2021: $8.3 million) finance income for the year in respect
of development-related loans made to LDK. The loans have been utilised by LDK to construct the village at Greenway and
acquire the Landings retirement village. This revenue has increased on the previous year as the loans were re-structured
during the previous period.
The interest in LDK and the related loan portfolio to the same have been classified as a disposal group held for sale. This
is because this portfolio of assets is now considered non-core to the Cromwell business and will be sold within the
next year.
20
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Phoenix - Australia
Phoenix Portfolios Pty Ltd performed extremely well during the year and Cromwell recognised a share of operating profit
of $1.0 million for the year (2021: $0.9 million).
Oyster - New Zealand
Oyster Property Group’s assets under management remained constant at NZD$2.1 billion at year end (2021: NZD$2.1
billion). Cromwell recognised a share of operating profit of $3.0 million for the year (2021: $3.8 million).
Co-Investments
Financial highlights in relation to Co-investments include:
Total
CPRF
CIULF
CEREIT
Other investments
2022
73.7
2021
61.6
2022
69.1
2021
57.2
2022
4.6
2021
4.4
2022
2021
2022
2021
45.4
45.1
3.5
7.0
1.8
-
46.5
(3.7)
94.5
5.1
22.8
(11.8)
90.6
4.1
61.9
(3.5)
91.7
4.7
-
1.8
-
9.1
(6.5)
93.8
4.5
-
-
2.4
8.3
-
-
2.6
2.8
100.0
100.0
8.8
9.8
-
-
41.9
43.3
-
-
29.7
30.5
-
-
-
-
-
-
-
-
7.0
7.0
-
-
-
-
-
-
1.8
4.3
-
-
-
-
-
100.0% 100.0% 100.0% 100.0%
27.8% 28.0%
1,434.5
1,475.2
720.1
759.3
91.1
86.3
600.0
620.7
23.3
8.9
Rental income
and recoverable
outgoings ($M)
Share of operating
profit ($M)
Distribution income
($M)
Operating profit ($M)
Net fair value
(losses) / gains ($M)
Occupancy rate (%)
WALE (years)
Ownership share (%)
Investment value
($M)
CPRF
On 24 February 2022, Russia launched a wide-ranging attack on Ukraine, a country that borders Poland. The resulting
economic sanctions placed on Russia by the West, Russia’s cessation of supplying gas to Western European Nations
and the influx of refugees into Poland have caused significant economic disruption to the entire European region. These
issues were further complicated by economies rebounding far quicker from COVID-19 downturns than most central banks
had forecast, resulting in significant interest rate rises in the last two months of the financial year. Overall, the full impact
of the current geopolitical and economic conditions in Poland have yet to be fully reflected in the performance of CPRF.
There were no further lockdowns in Poland during the year due to the COVID-19. Metrics such as footfall and in-store
turnover have improved significantly since June 2021 and collection periods have returned to normal. As a result,
Operating Profit of CPRF was $22.8 million (2021: $9.1 million).
Only one tenant in the portfolio was subject to economic sanctions owing to that tenant’s capital funding originating from
Russia. That tenant has gone into insolvency and no longer trades out of any of the properties in the portfolio.
The full impact the ongoing war in Ukraine will have on the portfolio is uncertain. However, the impact of rising energy
costs and other inflationary pressures will become felt in the 2023 financial year and it is expected the portfolio’s
performance will be negatively impacted.
Decrease in valuations, net of property improvements, lease costs and incentives
Non-cash adjustments for straight-lining of rentals and lease amortisation
Acquisition transaction costs
Decrease in fair value of investment properties
2022
$M
(13.2)
1.4
-
(11.8)
2021
$M
(7.0)
3.5
(3.0)
(6.5)
21
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
A component of the CPRF portfolio is a 50.0% interest in CH Ursynów sp. z o.o., (Ursynów) (June 2021: 50.0%), an entity
that owns a retail asset in Poland, the remaining equity is owned by Unibail-Rodamco Westfield B.V. (URW). During the
year Cromwell and the joint venture partner contributed loans of €17.0 million ($26.8 million) each, which the joint venture
itself used to repay an external debt facility that fell due. The investment property that underpins the joint venture was
independently valued at 30 June 2022 at €104.6 million ($158.9 million); (June 2021: €104.0 million, $164.2 million).
Overall, the valuations were negatively impacted by geopolitical issues in Eastern Europe resulting in an extremely limited
number of property transactions in Poland coupled with a rapid increase in inflation largely caused by a significant
increase in energy costs.
This portfolio of assets has been financed by both the Polish Euro asset level facility and the revolving Euro / GBP facility.
Applicable finance costs for the year being $9.6 million (June 2021: $10.9 million).
CIULF
The Cromwell Italy Urban Logistics Fund (CIULF) portfolio contains seven logistics assets in Italy. The portfolio is currently
fully let to and occupied by one tenant, logistics giant DHL, whose own activities have remained robust through the year.
Hence, this portfolio has not been negatively impacted by COVID-19.
The portfolio is currently warehoused and will form the seed portfolio for a fund to be offered to capital partners as soon
as current economic conditions allow.
All seven of the properties were independently valued at 30 June 2022 resulting in a $8.3 million increase in fair value
(June 2021: $6.1 million), net of property improvements, leasing incentives and lease costs.
Change in valuations, net of property improvements, lease costs and incentives
Acquisition transaction costs
Increase in fair value of investment properties
2022
$M
8.3
-
8.3
2021
$M
6.1
(3.3)
2.8
The discount and terminal yield rates applicable to the Italian portfolio, key indicators of investment real estate value, have
improved on the prior year.
This portfolio of assets has been financed by the Italian Euro facilities. Applicable finance costs for the year being
$0.9 million (June 2021: $0.7 million).
CEREIT
Cromwell continues to manage and sponsor CEREIT, a SGX-listed real estate investment trust. At 30 June 2022 Cromwell
owned 27.8% of CEREIT (June 2021: 28.0%), whilst CEREIT itself had 116 properties with a fair value of €2.6 billion (June
2021: 109 properties with a fair value of €2.3 billion) located across Europe. CEREIT’s property and tenant portfolios
have been relatively unimpacted by COVID-19. Occupancy has remained steady at 95.4% (2021: 94.6%) and the COVID-19
pandemic has had a minimal impact on tenant collections. External valuations as at 30 June 2022 were conducted for 113
properties representing approximately 97% of CEREIT’s portfolio by value resulting in net fair value gains of €11.2 million
(June 2021: external valuations were conducted for 67 properties representing approximately 80% of CEREIT’s portfolio by
value resulting in net fair value gains of €43.4 million).
During the year Cromwell recognised operating profit of $41.9 million (June 2021: $43.3 million) and received $34.5 million
in distributions (June 2021: $50.3 million).
This investment has been primarily financed utilising the issue of Euro-denominated convertible bonds, applicable finance
costs for the year being $8.8 million (June 2021: $9.0 million).
OTHER INVESTMENTS
Cromwell currently has co-investments in Australian and European real estate investment mandates which are accounted
for as investments at fair value through profit or loss. Cromwell receives distributions from these co-investments which
also support the funds management business. During the year the balance of co-investments held by Cromwell increased
primarily due to a $20.0 million investment in the Cromwell Direct Property Fund, which is managed by Cromwell Funds
Management Limited, a subsidiary of the Company.
22
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Investment Portfolio
Financial highlights in relation to investment portfolio include:
Rental income and recoverable outgoings ($M)
Operating profit ($M)
Net fair value gains ($M)
Portfolio value ($M)
Occupancy rate (%)
WALE (years)
Capitalisation rate (%)
2022
$M
215.2
144.5
57.5
2021
$M
217.3
144.1
101.2
2,973.7
3,063.1
95.6
5.9
5.2
94.7
6.1
5.4
The tenant mix in Cromwell’s Australian property portfolio is weighted to Government and ASX-listed tenants which has
proven resilient in the current economic conditions. As a consequence tenant rent collections from the Australian property
portfolio have been relatively unimpacted by the onset of the COVID-19 pandemic. Only a small amount of rent has been
waived ($0.3 million) with no deferred rent concessions made during the year.
Owing to the development opportunity at 19 National Circuit, Barton ACT, ownership of the property was transferred from
the Trust to the Company for a contract price of $10.0 million. This led to the reclassification of this property to inventory.
During the year the Trust disposed of the following non-core investment properties: Village Cinema, Geelong, VIC for $19.0
million (net of required capital expenditure); 200 Mary Street, QLD for $108.5 million; Regent Cinema, Albury, NSW for
$18.5 million; and the TGA Complex, ACT for $21.5 million.
The weighted average lease term was 5.9 years, only marginally below June 2021 (6.1 years) given the weighting of the
disposal of the larger assets that had WALEs less than 2 years, coupled with lease extensions and new lease deals which
is reflected by the increase in occupancy from 94.7% (June 2021) to 95.6% (June 2022).
Valuations for the Australia portfolio increased by $79.1 million during the year (2021: $78.3 million), net of property
improvements, leasing incentives and lease costs.
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
2022
$M
79.1
(21.6)
57.5
2021
$M
78.3
22.9
101.2
The weighted average capitalisation rate, a key indicator of investment real estate, tightened by 0.16 on a portfolio basis
and 0.07 on a like-for-like basis for held assets. The greatest movement occurred between Jun-21 and Dec-21 with
no significant change from Dec-21 to June 22. The rate compression has been most prevalent in relation to properties
located in NSW & ACT, driven by weighting towards government tenants and positive leasing outcomes. Resultant fair
value increases followed this geographical trend with material fair value increases attributable to 475 Victoria Avenue
NSW ($15.5 million), 207 Kent Street, NSW ($12.0 million), 203 Coward Street, NSW ($10.0 million) and Soward Way, ACT
($9.7 million).
This portfolio of assets has been financed by the secured bilateral facilities (SBFL). Applicable finance costs for the year
were $23.7 million (June 2021: $20.6 million).
23
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Finance costs
Interest expense in relation to borrowings for the year decreased to $54.6 million (2021: $59.9 million). The decrease in
interest expense is in largely as a result of the $5.4 million decrease in interest associated with swap contracts given that
CMW has shifted towards interest cap contracts over the more recent financial years. The average interest rate for the
current year decreased to 2.31% (2021: 2.33%).
The net fair value gain in relation to derivative financial instruments of $55.4 million (2021: $14.2 million) primarily arose
as a result of the revaluation of interest rate swap and cap contracts, which resulted in the recognition of net gains of
$50.2 million for the year (2021: $14.6 million). Cromwell has hedged future interest rates through various types of
interest rate derivatives (predominately interest rate caps) with 51% of its borrowings at year end hedged or fixed to
minimise the risk of changes in interest rates in the future (2021: 82%). All hedging contracts expire between February
2023 and October 2025.
Capital management
Cromwell’s debt platform is underpinned by a facility secured against selected assets within the Australian property
portfolio and has considerable headroom against its covenants. The loan to value ratio covenant is set at 60% versus
the actual ratio which stands at 45.7% at balance date, resulting in headroom under the covenant of $674.0 million. The
WALE covenant is set at 3.0 years versus the actual WALE of 5.8 years for the selected assets and interest cover ratio is
2.0 times versus the actual interest cover of 6.3 times.
DEBT
Gearing improved to 39.6% during the year and brings Cromwell’s gearing inside its target range of between 30% - 40%
through the cycle.
Cromwell’s main loan facility (senior secured bilateral loan facilities under a Common Terms Deed) is secured against
selected investment properties in the Australian portfolio. This facility’s performance against loan covenants at balance
date reinforces 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
45.7%
5.8 years
6.3 times
Limit
60.0%
Headroom
$674.0 million
3.0 years
2.8 years
2.0 times
$111.7 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 44.8%.
Other than the Convertible Bond, which is unsecured, all other loan facilities are asset level financing with no reference to
group level gearing.
LIQUIDITY
As at 30 June 2022 Cromwell had $286.0 million of cash (2021: $142.3 million) and undrawn bank facilities totalling $360.9
million (2021: $534.9 million). Subsequent to year end, following the repayment of the convertible bond, Cromwell will
have undrawn bank facilities totalling $276.9 million.
EQUITY
An additional 1.4 million stapled securities were issued during the year at an average issue price of $0.23, composed
entirely of securities issued following the exercise of performance rights.
Net tangible assets (NTA) per security has increased during the year from $1.02 to $1.04, primarily as a result of
favourable movements in the mark to market valuations of CMW’s derivatives and fair value gains on investment
properties.
24
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Strategy
Cromwell will continue to focus on its global real estate funds management business which is diversified across regions,
sectors and capital sources. Cromwell will source, manage and develop real estate assets on behalf of our third-party
capital partners and retail investors.
Execution of our strategy will be achieved via the following initiatives:
• Cromwell will create funds and new real estate product opportunities for our diverse set of capital partners – we will
aim to fill gaps in the market and deliver value by being innovative and listening closely to our investors’ requirements;
• Servicing our investors will be at the core of what we do and we will use our real estate expertise to protect our
investors’ capital and create value for them;
• On behalf of our investors, Cromwell will seek to develop and repurpose assets in strategic locations using our strong
development capabilities, creating a pipeline of assets for different funds;
• Cromwell will co-invest in our managed funds to align interests; and
• Cromwell remains well progressed in establishing a separately listed, Cromwell-managed, real estate investment trust
(REIT) (the establishment of which remains subject to board, regulatory and securityholder approvals), comprising
high-quality Australian office assets, in which Cromwell will own a substantial interest alongside existing Cromwell
securityholders who will also receive units in the REIT. The launch of the new REIT has been delayed until market
conditions are more conducive to launching a vehicle of its nature.
Outlook
While the world is now learning to live with COVID-19, new challenges are presenting themselves which are likely to
impact Cromwell’s operations in both Australia and Europe in both the near and short term. Global geopolitical instability
has caused impacts to both supply chains and energy costs. Economies have also rebounded from COVID-19 lockdowns
faster and sharper than most central banks forecast. These forces have led to inflation which in turn has led to central
banks tightening monetary policy. These uncertain economic conditions have led to investors pausing in releasing
investment capacity as they wait to see the full impact all these events will have on the various economies around the
world. Cromwell expects this will result in continued subdued levels of transactional activity within its funds management
business in all geographical areas in which Cromwell operates.
The ongoing war in Ukraine and the high level of inflation in Poland, driven by significantly higher energy costs (which will
not be fully recoverable from tenants), are factors that will see the performance of CPRF likely decrease in 2023. The full
impact on the portfolio is currently unknown and any escalation in the war could have unforeseen consequences on the
economy of Poland.
In such volatile economic conditions, maintaining a strong balance sheet is paramount. Following the sale of several
non-core assets during 2022, Cromwell gearing is now at 39.6% which is within target range of 30% to 40%. Cromwell
maintains sufficient liquidity and ample loan covenant headroom. Further sales of non-core assets in 2023 will see
gearing decrease further but will also mean Cromwell will hold sufficient liquidity to capitalise on fund management
opportunities as they emerge.
A distribution of 1.375 cents per security is expected to be paid for the September quarter, reflecting the anticipated fall in
funds management transactional activity, as well as the earnings impact of the asset sales program until such time as the
capital realised from those sales can be reinvested. The Board will provide distribution guidance on a quarterly basis.
Risks
Cromwell has an enterprise-wide risk management framework which provides a comprehensive approach to identifying,
assessing and managing risk aligned with AS/NZS ISO 31000:208. The framework ensures appropriate oversight of risk
and includes policies and processes reflecting an integrated risk management approach and recognises that everyone at
Cromwell has a role to play in effectively managing risk.
Cromwell actively identifies and manages the risks that may impact its operations, strategy and outlook, and considers
megatrends and external insights to respond to emerging areas of risk. The Board is ultimately accountable for risk
management and is supported in its ongoing oversight by separate committees to review and assess key risks and
ensure they are managed appropriately. The Investment Committee is responsible for overseeing and reviewing all
major transactions including investment in and divestment of assets. The Audit and Risk Committee is responsible for
overseeing and reviewing the effectiveness of Cromwell’s risk management framework in responding to the various
exposures to risk Cromwell has in the course of its business. Effective 1 July 2022, the Audit and Risk Committee was
reconstituted as an Audit Committee and as an Environmental-Social-Governance (ESG) and Risk Committee.
25
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Cromwell’s key risks and the core controls and mitigants to assist in managing them are described below:
Key Risk
Description
Mitigation
Performance
• Delivering distributions that
meet market guidance and
expectations
• Board approved strategy continuously reviewed with processes
to monitor and manage performance to ensure maximisation of
security value and best operational structures
• Ensuring that investments and
developments perform in line
with expectations
• Investment governance framework ensuring structured
investment and divestment approval processes
• Investment Committee and management regular review of
• Retaining and growing AUM
performance of investments and developments against targets
Capital
management
• Ensuring continuous access
to debt and equity markets to
support Cromwell’s sustainable
growth
• Transition of European investments to long term, secure,
reliable revenue streams
• Board approved gearing range through the cycle reduced to 30%
- 40% and regularly monitored
• Prudent capital management informed by cash flow forecasting
and sensitivity analysis. Regular reviews of available liquidity
matched to capital requirements and monthly Board reporting
• Long dated debt expiry profile
• Diversification of debt funding sources
• Spreading of debt maturities
People and
culture
• Ensuring Cromwell has access
to and can retain key talent
• Investment in our staff with focused learning and development
plans
• Maintaining Cromwell’s strong,
• Promotion of group wide values and conduct standards
adaptive and open culture
• Fostering an inclusive workplace culture, supported by policies
and forums, including the Diversity and Inclusion Working Group
to promote equity and fairness
• Succession planning and leadership development for senior
staff
• Fostering the development of key talent
• Competitive remuneration and benefits
• Effective performance management and review
• Staff engagement and feedback mechanisms
• Various staff wellbeing initiatives
Health, Safety
and Wellbeing
• Ensuring the health, safety
and wellbeing of Cromwell’s
staff, contractors, visitors and
occupants
• Education, awareness and training programs to make our
Directors, Officers and Staff aware of health, safety and
wellbeing (HSW) and promote a positive safety culture across
our business
• Preventing death or serious
injury at any Cromwell owned
or controlled property or in the
course of employment with
Cromwell
• Formal HSW policies and programs in place and reviewed
regularly at Cromwell owned properties and operational
locations
• Wellbeing Program promotes pursuing healthy lifestyles and
self-care to staff and provides practical tools and advice
• Employee Assistance Program makes a wide network of
health professionals available to staff to discuss any issues in
confidence
• Code of Conduct establishes required standards of behaviour
across the Group, with complementary Whistleblower
protection, Grievance resolution and escalation mechanisms to
promote a safe environment
• Group wide Supplier Code of Conduct and Procurement Policy
extends Cromwell’s corporate expectations to our suppliers and
service providers
26
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Key Risk
Description
Mitigation
Sustainability
and
Environment,
Social and
Governance
Technology and
data security
• Delivering sustainable
• Sustainability Framework outlining goals and accountabilities
outcomes for investors and
other stakeholders
for relevant focus areas, i.e., environment, stakeholders,
economic, social and governance
• Understanding, responding to
and managing the impacts of
changing environmental and
social conditions that could
affect our people, assets and
business operations
• Ensure that information
management systems are
resilient and able to meet
business needs
• Ensure availability and integrity
of critical IT infrastructure &
applications
• Ensure Cromwell remains
compliant with data protection
requirements, and provides
measures to protect against
cyber-attack
• Participation in benchmarking and assessment activities to
measure our progress year on year and inform future ambitions
• Comprehensive reporting including Sustainability Report, TCFD
disclosures and Modern Slavery Statements
• Risks and potential impacts of ESG matters, including climate,
managed within our enterprise risk management framework
• Active engagement with our stakeholders and communities to
contribute to society positively and relevantly
• Maintaining suitable policies, guidelines and procedures
to support secure business operations and standards for
information management and privacy
• Executing regular cyber-security evaluations, training, testing,
and vulnerability mitigation activities
• Maintaining ISO 27001 certification for critical technology
services
• Maintaining and testing suitable business continuity plans and
procedures
• Providing robust vendor selection and assessment methodology
with ongoing performance due diligence
Leasing
• Ensuring that assets are
• Defensive portfolio with long WALE
Governance
and compliance
leased in accordance with
asset management plans and
forecasts
• Maintain a portfolio of high
quality commercially attractive
property assets that respond
to tenant demand and market
expectations ensuring
consistent, predictable
occupancy and income returns
• Large and diversified tenant base
• Experienced leasing team
• Active asset management with focus on repositioning,
refurbishing and re-leasing properties to enhance returns
• Strategic asset management plans to ensure optimisation
of asset use and assist return expectations over the asset’s
lifecycle
• Ensuring continuous
• Training programs addressing key compliance requirements in
compliance with regulatory
requirements
• Meeting stakeholder and
investor expectations
place across the business
• Board approved Policies and key frameworks that facilitate good
governance and drive appropriate accountability and oversight
• Board approved Tax Risk Management Policy ensures ongoing
REIT status
• Independent Compliance Committee with direct reporting to
the Board to ensure oversight of compliance objectives and
obligations under compliance plans and regulation
• Appropriate assurance activities for areas of potential
compliance and governance risk
• Cromwell’s Culture and Values expectations clearly articulated
to all staff and interlinked with performance reviews and
incentives
27
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Climate-related financial disclosure
Cromwell is a supporter of the Task Force on Climate-related Financial Disclosure (TCFD) recommendations and
recognises the potential risks and opportunities arising from climate change and a transition to a low-carbon economy.
The TCFD recommendations provide a consistent reporting framework to enable financiers, investors, insurers and
other stakeholders to understand an organisation’s material climate related risks and the financial implications and the
approach undertaken to manage them.
Cromwell provides detailed annual updates on its approach to climate change governance, strategy, risk management and
metrics and targets in its reporting. Together, Cromwell’s CDP submission, Sustainability Report and relevant statements
regarding the Sustainable Finance Disclosure Regulations cover the four core elements and 11 disclosures of the TCFD
recommendations. They are available on Cromwell’s website at www.cromwellpropertygroup.com/sustainability.
A summary of these details that follows the TCFD disclosure recommendations representing core elements of the
organisation’s operation and Cromwell’s response is described below:
TCFD thematic
element
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
organisation’s
businesses,
strategy, and
financial
planning
where such
information is
material.
Overview of the TCFD Recommended Disclosures and Cromwell’s response
Reference
The Group Sustainability Committee is responsible for identifying climate-related
risks and opportunities. Members of the global leadership team or senior leaders
of the business are responsible for ensuring risks and actions are appropriately
identified and the risk register is updated in relation to the sustainability framework.
Section 1
Governance
The Audit and Risk Committee 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 Audit and Risk
Committee meets a minimum of six times a year to receive reports, updates and
presentations on risks and sustainability measures across the business including
reports on sustainability and climate change activities. Effective 1 July 2022, the Audit
and Risk Committee was reconstituted as an Audit Committee and as an ESG and
Risk Committee.
Transactions teams, led by the Chief Investment Officer, are responsible for preparing
briefing papers including detailed technical, financial and legal reviews on proposed
acquisitions.
Reviews include comprehensive checklists and property inspections to identify current
and future vulnerabilities to impacts from climate change.
The Investment Committee or the Board (where applicable) has oversight and
approval of asset acquisitions and disposals, including consideration of climate
change risk.
Cromwell operates its business in a complex social, economic and physical
environment, managing assets of differing types and quality and in differing
geographies.
Section 2
Strategy
As an investor and asset manager, Cromwell considers that the greatest material
risks posed from climate change are likely to be from:
• Physical risks from severe weather events directly impacting and damaging assets
owned and managed; and
• Indirect impacts, such as increasing operational costs from rising insurance
premiums, energy costs, carbon charges and taxes, legislation and operational
costs resulting from increased temperature extremities and wear and tear to
operating plant and equipment.
Cromwell’s climate adaption strategy is to ensure that the impacts from climate
change are understood and responded to in the short, medium and long term.
Developing strategies that ensure property assets remain resilient to climate change
whilst setting pathways to improve performance and respond to market demand
presents a significant opportunity for Cromwell to underpin the long-term value of
property assets.
28
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT TCFD thematic
element
Overview of the TCFD Recommended Disclosures and Cromwell’s response
Reference
Cromwell actively engages with retail and institutional investors and tenant-
customers. Minimum performance standards for new development and
refurbishments and ongoing performance targets influence materials purchasing and
engagement with suppliers to support sustainability targets.
Cromwell has a climate change position policy to support internal assessment,
reporting and management of identified risks. Climate adaptation objectives
ensure resilience to physical impacts whilst also adopting opportunities to invest in
sustainable development and support a transition to low carbon outcomes. Where
Cromwell maintains operational control of property assets, strategies are in place
to deliver opportunities to embrace sustainable development solutions for capital
works, investment in new plant and equipment and the adoption of renewable energy
solutions and technologies.
Risk
Management
Disclose how
the organisation
identifies,
assesses,
and manages
climate-related
risks.
Cromwell maintains a comprehensive enterprise risk management system. In
adopting this approach, the objective has been to integrate the impact of climate
risks within enterprise risk considerations and to further identify the impact of the
sustainability and climate risk management approach as a mitigant and control to
organisational risk. Enterprise risks are mapped to the sustainability framework and
linked to identified material topics (as reported in the annual Sustainability Report).
Mitigation strategies for climate risk are applied within the business.
Risk reviews are undertaken with each risk owner by the Head of Risk and
Compliance and these reviews are included in reports to the Audit and Risk
Committee. Effective 1 July 2022, the Audit and Risk Committee was reconstituted as
an Audit Committee and as an ESG and Risk Committee.
Section
3 Risk
Management
Metrics and
targets
Disclose the
metrics and
targets used
to assess and
manage relevant
climate-related
risks and
opportunities
where such
information is
material.
Cromwell reviews of the actual and potential impacts of climate change across its
operations. Assessment of the risk to properties from acute physical events related to
weather extremities and longer-term chronic effects relies on and is informed by the
growing body of climate science research and engagement with insurers, financiers
and industry organisations. For example, capital works plans and forecast expenditure
spanning multiple years are prepared for each property asset. The capital expenditure
plan is prepared at acquisition and updated annually to address the replacement of
ageing plant, equipment and building fabric. Plans include consideration against the
outcomes from materiality assessments and sustainability objectives are factored into
determining the risk and opportunity to respond to long term systematic change to
climate.
Cromwell discloses sustainability performance and sets out progress against targets
in an annual Sustainability Report in the transition to net zero emissions. Cromwell is
committed to measuring corporate emissions and emissions reduction. Initiatives to
reduce emissions are assessed based on the carbon management hierarchy of avoid,
reduce, replace and offset. Cromwell maintains net zero certification from Climate
Active for its Australian corporate operations.
Section 4
Metrics and
Targets
Cromwell recognises that the greatest impact from reducing emissions is within
its property assets. Cromwell manages property assets in Australia and Europe.
Where practicable, Cromwell actively seeks to apply a consistent approach to
asset management across jurisdictions. Wherever possible and where Cromwell
has operational control, energy consumption, emissions, waste, water usage and
associated environmental data is tracked and reported. This reporting continues to be
expanded and improved over time.
Setting targets enables Cromwell to adopt a systematic and disciplined approach
toward improving efficiency and reducing emissions. Long-term targets have been set
to achieve zero carbon emissions across directly owned properties within operational
control. This will be achieved through a combination of energy efficiency measures,
investment in on site renewables and purchase of green power and offsets to bridge
any gap. This year, Cromwell continued to make further progress towards the
emissions intensity target set for its portfolio.
The annual Sustainability Report provides data and further information on Cromwell’s
corporate and property portfolio performance and the actions implemented to achieve
long-term targets.
29
CROMWELL PROPERTY GROUP I 2022 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:
Director since:
18 September 2020
Chair since:
17 March 2021
Board Committee
membership:
Member of the Audit
Committee
Member of the ESG and Risk
Committee
Member of the Investment
Committee
Member of the Nomination
and Remuneration Committee
Independent:
No
Dr Gary Weiss AM
Non-executive Chair LLB (Hons), LLM, JSD, 69
Listed Company Directorships (held within the last three years):
Chair – Ardent Leisure Group Limited (2017 – current)
Executive Director – Ariadne Australia Limited (1989 – current)
Chair – Estia Health Limited (2016 – current)
Non-executive Director – Hearts and Minds Investments Limited (2018 – current)
Non-executive Director – Thorney Opportunities Ltd (2013 – current)
Chair – Ridley Corporation Limited (2010 – 2020)
Non-executive Director – The Straits Trading Company Limited (2014 – 2020)
Skills and Experience
Dr Weiss has substantial board and board committee experience at both listed and non-
listed entities. Dr Weiss is currently Chair of Ardent Leisure Group Limited and Estia
Health Limited, an Executive Director of Ariadne Australia Limited and a Non-Executive
Director of Hearts and Minds Investments Limited, Thorney Opportunities Ltd, the Victor
Chang Cardiac Research Institute and The Centre for Independent Studies. Dr Weiss is
also a Commissioner of the Australian Rugby League Commission.
Dr Weiss served as Chair of Ridley Corporation Limited, Clearview Wealth Limited and
Coats Group plc. Dr Weiss is a former Non-executive Director of The Straits Trading
Company Limited, a former Executive Director of Industrial Equity Ltd, Whitlam, Turnbull
& Co and Guinness Peat Group plc, and has served on the boards of numerous other
companies, including Westfield Group, Premier Investments Limited and Tower Australia
Limited. Dr Weiss has been involved in overseeing large businesses with operations in
many regions including Asia Pacific, Europe, China, India and the United States and is
familiar with investments across a wide range of industries and sectors, including real
estate.
In 2019, Dr Weiss was awarded the Member (AM) in the General Division of the Order of
Australia for significant services to business and the community.
Dr Weiss holds an LLB (Hons) and LLM from the Victoria University of Wellington and
a Doctor of the Science of Law (JSD) from Cornell University. He was admitted as a
Barrister and Solicitor of the Supreme Court of New Zealand, a Barrister and Solicitor of
the Supreme Court of Victoria and as a Solicitor of the Supreme Court of
New South Wales.
30
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Director since:
8 March 2021
Deputy Chair since:
17 March 2021
Board Committee
membership:
Chair of the Audit Committee
Member of the ESG
and Risk Committee
Independent:
Yes
Mr Eng Peng Ooi
Non-executive Deputy Chair BCom, Member of the Certified Practising Accountants of Australia,
Member of the Singapore Institute of Directors, 66
Listed Company Directorships (held within the last three years):
Non-executive Director – Manager of Cromwell European REIT (2021 – current)
Deputy Chair – Manager of ESR-LOGOS REIT (formerly known as ESR-REIT) (2021 – 1
July 2022)
Chair – Manager of ESR-LOGOS REIT (formerly known as ESR-REIT) (2017 – 2021)
Non-executive Director – Manager of ESR-LOGOS REIT (formerly known as ESR-REIT)
(2012 – 1 July 2022)
Non-executive Director – Perennial Real Estate Holdings Limited (2015 – 2020)
Skills and Experience
Mr Ooi has more than 35 years of real estate experience, including in property
investment, development, project management, fund investment and management and
capital partnerships in Australia and across Asia.
Mr Ooi joined Lendlease in 1981, working in various finance roles in Sydney, before taking
on the role of Chief Financial Officer, Asia in the late 1990s. Later, Mr Ooi returned to
Sydney with Lendlease and fulfilled the roles of Chief Financial Officer of Lendlease
Development (2000 – 2002), Global Chief Financial Officer of Lendlease Investment
Management (2002 – 2003) and Asia Pacific Chief Financial Officer,
Lendlease Communities (2003 – 2005).
From 2006 to 2010, Mr Ooi was the Asia Chief Executive Officer, Lendlease Investment
Management and Retail, based in Singapore. Mr Ooi subsequently established the
development business and retail funds, and successfully developed capital partnerships,
forming strong relationships across Asia. In 2010, Mr Ooi was appointed Asia Chief
Executive Officer for Lendlease.
Since retiring from his executive career in late 2011, Mr Ooi has gained board and board
committee experience at both listed and non-listed entities across Asia Pacific. Mr Ooi is
a Non-executive Director of Cromwell EREIT Management Pte. Ltd., the manager of SGX-
listed Cromwell European REIT. Since 2016, Mr Ooi has been a Non-executive Director
of Savant Global Capital Pty Ltd, a specialist investment management and real estate
advisory platform.
Mr Ooi served as a Non-executive Director of ESR-LOGOS Funds Management (S)
Limited (formerly known as ESR Funds Management (S) Limited), the manager of
SGX-listed ESR-LOGOS REIT (formerly known as ESR-REIT), from 2012 until 1 July
2022. Mr Ooi served as Chair from 2017 to 30 June 2021 and, after almost nine years
as independent Non-executive Director, was redesignated as Deputy Chair and non-
independent Non-executive Director effective 1 July 2021. Mr Ooi was a Member (and
the former Chair) of ESR-LOGOS REIT (formerly known as ESR-REIT)’s Nominating and
Remuneration Committee, a Member of its Audit, Risk Management and Compliance
Committee and the Chair of its Executive Committee.
In addition, Mr Ooi was previously a Non-executive Director of formerly-SGX-listed
Perennial Real Estate Holdings Limited (2015 – 2020), Frasers Property Australia (2014 –
2018) and Perennial China Retail Trust Management Pte. Ltd. (2012 – 2014).
Mr Ooi holds a Bachelor of Commerce from the University of New South Wales and is
a Member of the Certified Practising Accountants of Australia and a Member of the
Singapore Institute of Directors.
31
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Mr Robert Blain
Non-executive Director FAPI, FRICS, 67
Skills and Experience
Mr Blain has more than 40 years of real estate experience, including in property and
asset management, strategic development, cross border activity and capital markets in
Australia and across Asia.
After pursuing rural infrastructure interests, Mr Blain commenced his corporate career
in Sydney in the late 1970s, obtaining a real estate licence and working for several years
with LJ Hooker. He joined the Colliers Jardine Group as Sales Director before being
appointed as Regional Service Director, Capital Markets APAC. From 1995 to 1998, Mr
Blain held the position of Regional Investment Director based in Singapore and, in 1999,
was appointed Australia Director. Mr Blain’s last role at the Colliers Jardine Group was
as Chief Executive, New South Wales.
In 2002, Mr Blain joined CBRE as Managing Director, CBRE Hong Kong and China, based
in Hong Kong. In 2003, he was appointed Chief Executive Officer, CBRE Asia and, in 2005,
became Chair and Chief Executive Officer, CBRE Asia Pacific. Mr Blain was responsible
for CBRE’s activities across Asia Pacific and was a member of the Global Operating
Committee, based in the United States, driving CBRE’s global business strategy.
In 2014, Mr Blain transitioned to the role of Executive Chair, CBRE Asia Pacific and
focussed on CBRE’s major clients and building strong relationships across the region. In
2019, Mr Blain retired from his Executive Chair and Global Operating Committee roles at
CBRE and returned to Australia.
Mr Blain is a Fellow of the Australian Property Institute and Fellow of the Royal Institute
of Chartered Surveyors.
Mr Jonathan Callaghan
Managing Director and Chief Executive Officer BSc (Hons), LLB (Hons), MAppFin, 51
Skills and Experience
Mr Callaghan joined Cromwell as Chief Executive Officer in October 2021. Prior to this,
he was at Investa Property Group where he started as General Counsel and Company
Secretary in 2006 before being appointed Joint Managing Director and Finance Director
in 2013 and Chief Executive Officer in 2016.
His career at Investa included overseeing management of the Investa Commercial
Property Fund, which at the time of his departure was the top performing core office
fund over two, three, five and seven-year time horizons. During his tenure, Investa was
widely regarded as an industry leader and was recognised in the Australian Financial
Review BOSS Best Places to Work list for 2021 in property. Earlier in his career,
Jonathan spent time at law firms Gilbert & Tobin and Corrs Chambers Westgarth.
Mr Callaghan holds a Master of Applied Finance from Macquarie University and a
Bachelor of Science (Hons) and Bachelor of Laws (Hons) from the University of Sydney.
Mr Callaghan is a Member of the Property Champions of Change Coalition.
Director since:
8 March 2021
Board Committee
membership:
Chair of the Investment
Committee
Member of the Nomination
and Remuneration
Committee
Independent:
Yes
Director since:
7 October 2021
Board Committee
membership:
N/A
Independent:
No
32
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Ms Tanya Cox
Non-executive Director MBA, Grad Dip Applied Corporate Governance, FAICD, FGIA, 61
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. She is a former Non-executive Director of BuildingIQ, Inc and
OtherLevels Holdings Ltd. Ms Cox is Chair of Cromwell Funds Management Limited,
Chair of Equiem Holdings Pty Ltd, former Chair of the World Green Building Council and
former Chair and current Director of the Green Building Council of Australia. Ms Cox is
a Director of Campus Living Villages Pty Limited, Fender Katsalidis (Aust) Pty Ltd and
Niche Environment and Heritage Pty Ltd. Ms Cox was a member of the NSW Climate
Change Council until it disbanded on 30 June 2021 and 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 and of the Governance Institute of
Australia and is a Member of Chief Executive Women.
Mr Joseph Gersh AM
Non-executive Director BCom, LLB (Hons), 66
Skills and Experience
Mr Gersh is currently Executive Chairman of Gersh Investment Partners Ltd and
a government appointed Non-executive Director of the Australian Broadcasting
Corporation (ABC). Mr Gersh is also a Director of the Sydney Institute in an honorary
capacity.
Mr Gersh was formerly the inaugural Chairman of the Australian Reinsurance Pool
Corporation, foundation Director of the Reserve Bank of Australia's Payments System
Board and Director of the Federal Airports Corporation. Mr Gersh is a former senior
partner and Chairman of the Management Committee of law firm, Arnold Bloch Leibler.
One of his principal areas of expertise is major property development and, in particular,
the construction of hotels, shopping centres, land subdivisions, apartments and office
towers.
33
Director since:
21 October 2019
Board Committee
membership:
Chair of the Nomination and
Remuneration Committee
Member of the Audit
Committee
Member of the ESG and
Risk Committee
Independent:
Yes
Director since:
18 September 2020
Board Committee
membership:
Member of the Investment
Committee
Independent:
Yes
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Mr Gersh previously served as Deputy Chairman of the Australia Council for the Arts, as
Chairman of Artbank (which is part of the Australian Government Office for the Arts) and
as Chairman of the National Institute of Circus Arts.
In 2006, Mr Gersh was awarded the Member (AM) in the General Division of the Order of
Australia for significant services to business, government, the arts and the community.
Mr Gersh holds a Bachelor of Commerce and Bachelor of Laws (Hons) from the
University of Melbourne.
Ms Lisa Scenna
Non-executive Director B.Comm, Fellow of Chartered Accountants Australia and New Zealand,
MAICD, 54
Listed Company Directorships (held within the last three years):
Non-executive Director – Harworth Group plc (2020 – current)
Non-executive Director – Genuit 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 Genuit Group plc and is a Member of its Audit
Committee, Nomination Committee and Remuneration Committee. Ms Scenna is a Non-
executive Director of Harworth Group plc and is a Member of its Audit Committee and
Remuneration Committee. Genuit 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 Fellow of Chartered Accountants Australia and New Zealand and a Member of the
Australian Institute of Company Directors.
Director since:
21 October 2019
Board Committee
membership:
Chair of the ESG and Risk
Committee
Member of the Audit
Committee
Member of the Nomination
and Remuneration Committee
Independent:
Yes
34
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Director since:
9 July 2021
Board Committee
membership:
Member of the Investment
Committee
Independent:
No
Ms Jialei Tang
Non-executive Director BFA Architectural Design, BA in Liberal Arts, 27
Skills and Experience
Ms Tang has investment, executive and board experience in diverse industries including
finance, real estate, hospitality, pharmaceuticals and technology, as well as across many
geographies and jurisdictions including Singapore, the United States and China.
In the real estate sector, Ms Tang is actively involved in the evaluation, acquisition and
planning of sea port terminal real estate, the development of the new UBS Singapore
headquarters and the 1468-unit Parc Clematis residential complex in Singapore. Since
2019, Ms Tang has been the Chief Executive Officer of Silver City Properties, LLC, a
residential property investment and management company in the United States which
owns and manages properties in New York. In the same year, Ms Tang took on the role
as director at Ariva Hospitality Pte. Ltd., a hospitality management company, directing its
rebranding and operations with a focus on sustainability while overseeing its expansion
plans into the fund space.
Ms Tang joined the board (as an alternate director) of TauRx Pharmaceuticals Ltd in
2019, whose drug for therapeutic treatment of Alzheimer’s Disease is in its phase III
trials and will seek FDA, EMA and NMPA approval upon successful results. She also
handles the communication and strategic planning for the family office’s philanthropy
including support for education, the Olympic movement, refugee relief and healthcare.
Ms Tang holds a double degree, Bachelor of Fine Arts in Architectural Design from
the Parsons School of Design and Bachelor of Arts in Liberal Arts (Epistemology and
Language) from Eugene Lang College of Liberal Arts at The New School. Ms Tang is a
Graduate of the Australian Institute of Company Directors and is pursuing a Master in
Urban Planning at Harvard University, with graduation due in 2023.
35
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Appointed since:
10 August 2015
Ms Lucy Laakso
Company Secretary and Corporate Counsel B.Bus, MBA (Corporate Governance), Juris
Doctor (First Class Honours)
Skills and Experience
Ms Laakso has more than 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.
She also worked at ASX listed Suncorp Group Limited in areas including corporate
secretariat, compliance and business banking. Ms Laakso has private practice
experience at Norton Rose Fulbright and inhouse legal experience at a fund manager.
Ms Laakso is the Chair of Cromwell's Australian Diversity and Inclusion Committee and
was a Sponsor in the Property Council of Australia's 500 Women in Property programme
for 2020-2021.
Ms Laakso holds a Juris Doctor (First Class Honours), an MBA (specialising in Corporate
Governance) and a Bachelor of Business and is a Graduate of the Australian Institute of
Company Directors.
DIRECTORS’ MEETINGS
The following table sets out the number of Directors’ meetings (including committees of the Board of Directors)
held during the financial year and the number of meetings attended by each Director (where a director or member
of committee).
Directors
Notes
Board of Directors
Audit and Risk
Committee
Investment
Committee
Nomination and
Remuneration
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
EP Ooi
R Blain
G Weiss
Elected 18
September 2020
Appointed 8
March 2021
Appointed 8
March 2021
J Callaghan(1) Appointed 7
October 2021
Appointed 21
October 2019
Elected 18
September 2020
Appointed 21
October 2019
Appointed 9 July
2021
L Scenna
J Gersh
J Tang
T Cox
11
11
11
7
11
11
11
11
11
11
11
7
11
11
11
11
6
6
-
-
6
2
6
-
6
6
-
-
6
2
6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
-
4
-
4
2
4
-
2
-
4
-
4
2
4
-
(1) Mr Callaghan commenced as Chief Executive Officer on 5 October 2021 and, in addition, was appointed as Managing Director on 7 October 2021.
36
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
Letter from the Chair
A message from the Chair, Nomination and Remuneration Committee
Dear Securityholder
On behalf of the Board, I am pleased to present the Remuneration Report for the financial year
ended 30 June 2022.
PERFORMANCE AND REMUNERATION OUTCOMES
2022 was a year of change for Cromwell. Jonathan Callaghan commenced as Group CEO on 5
October 2021 and has worked alongside the Board to redefine Cromwell’s vision, to set the forward
strategy and to create cultural change.
Significant progress was made towards Cromwell’s objective to transition to a more traditional
Funds Management business but a change of this magnitude will span multiple financial years.
Jonathan has restructured the business to focus on growth and made meaningful improvements
to Cromwell’s culture, including implementing Diversity and Inclusion targets, improving leave and
other benefits and introducing a competitive remuneration framework for the broader business.
Alongside this, achieving Operating Earnings of 7.68cps delivered a 4.5% increase on the prior year.
Ms Tanya Cox
Chair, Nomination
and Remuneration
Committee
The KMP STI Plan had a financial gateway of 90% of the Operating Earnings Budget, which was exceeded. Jonathan’s
commencement in October created the opportunity to revise and reset the Group’s strategy. Therefore, KPIs set at the
commencement of the year did not closely reflect Cromwell’s developing strategic objectives, under the new CEO. As a
result, not all KPIs were achieved in full but the Board is pleased with both the progress made by the team during the year,
as well as the strong financial performance of the Group.
The KMP Long-Term Incentive (LTI) Plan has three equally weighted hurdles applicable to FY22; Total Return (TR), Return
on Contributed Equity (ROCE) and Total Securityholder Return (TSR). 32.7% of the ROCE allocation will vest in FY22, and
32.5% of the TR allocation will vest. The three-year TSR hurdle was not met. The payout ratio for the only KMP granted
performance rights under the “forward looking” LTI plan in July 2019 will be 21%. The total cost to Cromwell over the last
three years will be in excess to the face value that will vest under the plan. From 1 July 2022, the KMP LTI Plan hurdles
have been reviewed and amended. Going forward there will be two hurdles, being TSR and TR. The hurdle for TSR will
remain unchanged. The hurdle for TR will be set as the 10-year bond rate on the day of grant, plus 300 basis points and
will be tested once at the end of the relevant three-year period.
The Diminishing Deferred Payment Plan reached maturity during the year and one KMP realised benefits under the Plan.
BOARD AND EXECUTIVE MANAGEMENT CHANGES
As previously mentioned, Jonathan Callaghan commenced as CEO on 5 October 2021. Jialei Tang was appointed as a
Non-Executive Director on 9 July 2021.
CHANGES TO REMUNERATION POLICY
Much effort has been dedicated to improving the Cromwell Remuneration Framework in the years leading up to 2022,
therefore there were few changes during the year. The Nomination and Remuneration Committee (Committee) did
however, resolve to remove continued employment as a vesting condition on the deferred component of the KMP Deferred
STI Plan, on the basis that the award had been earned and malus and clawback provisions were still in place.
FY23 APPROACH TO REMUNERATION
After an external benchmarking process, KMP remuneration, both fixed and variable, will remain unchanged in FY23. As
described above, the Committee has reviewed the appropriateness of the KMP LTI Plan targets and resolved to amend
these in 2023, from three equally weighted targets (ROCE, Total Return and Relative TSR) to two equally weighted targets
of TR and Relative TSR.
37
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT NON-EXECUTIVE DIRECTOR REMUNERATION
As disclosed in the FY21 Remuneration Report, during calendar year 2021, the Board commissioned an external
independent review of Board and Committee fees. At that time, the Directors’ fee cap had been last approved by
securityholders in 2011 and Directors’ fees had not been reviewed since 2017. The resulting report identified that:
• the base board fee plus committee fees paid to the board chair were below the peer group median
• the base board fee paid to Non-executive Directors was below the peer group median
• the audit and risk committee chair and member fees were below the peer group median
• the nomination and remuneration committee chair and member fees were below the peer group median
• with the appointment of a seventh director, policy fee headroom was 2%
The report assessed, and the Nomination and Remuneration Committee supported, an increase in Board and Committee
fees and an increase in the fee pool, conditional upon receiving securityholder support for the fee pool increase at the
company’s AGM to be held in November 2021. At Cromwell’s AGM in November 2021, the resolution to increase the fee
pool from $1,000,000 per annum to $1,500,000 per annum effective from 1 July 2021 was carried by way of a poll. Having
received securityholder approval to increase the fee pool, Non-executive Director fees were adjusted effective 1 July 2021,
in line with the independent report’s assessment.
We hope you find this Remuneration Report transparent and informative. The Board and Nomination and Remuneration
Committee remain committed to ensuring management are rewarded for the right behaviours and outcomes and their
remuneration is aligned to market expectations and the long-term interests of securityholders.
Yours sincerely,
Ms Tanya Cox
Chair, Nomination and Remuneration Committee
38
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
REMUNERATION REPORT
Table of Contents
The remuneration report is presented for the financial year ending 30 June 2022. 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.
P.54
5. Additional Disclosures
5.1. At risk cash awards and
performance rights vesting
and forfeiture in 2022
54
5.2. Equity based compensation
for the CEO and other KMP 55
5.3. Security holdings
5.4. Loans to Key Management
Personnel
56
56
P.40
1. Remuneration
Overview
1.1. Key Management Personnel 40
1.2. Executive appointment
arrangements
40
P.41
2. Remuneration Strategy
and Governance
2.1. Cromwell’s Remuneration
Strategy
2.2. Remuneration Mix
41
42
2.3. Remuneration Time Horizon 42
2.4. How variable remuneration
is structured
43
2.5. Employment Contract Terms
and Conditions
45
P.46
3. Cromwell Performance
and Remuneration
Outcomes
3.1. Cromwell’s five-year
performance summary
3.2. STI Scorecard
3.3. Executive KMP STI
Outcomes
3.4. Executive KMP LTI
Performance
3.5. Executive actual
remuneration
3.6. Executive statutory
remuneration
46
48
49
49
51
51
P.52
4. Non-executive Director
Remuneration
4.1. Board remuneration
2.6. Remuneration Governance 45
structure
4.2. Total remuneration for
Non-executive Directors
52
52
4.3. Non-executive Directors’
security holding requirement 53
4.4. Non-executive Directors’
remuneration table
53
39
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
1. Remuneration Overview
1.1 KEY MANAGEMENT PERSONNEL
In this report, Key Management Personnel (KMP) are those with the authority and responsibility for planning, directing and
controlling the activities of the Group, either directly or indirectly.
Name
Position / Title
Term
Current Non-executive Directors
Gary Weiss AM
Non-executive Director
Full year
Non-executive Chair
Eng Peng Ooi
Non-executive Director (independent)
Full year
Non-executive Deputy Chair (independent)
Robert Blain
Non-executive Director (independent)
Full year
Tanya Cox
Non-executive Director (independent)
Full year
Joseph Gersh AM
Non-executive Director (independent)
Full year
Lisa Scenna
Non-executive Director (independent)
Full year
Current
securityholding
150,000
195,208
-
210,000
140,000
125,000
Jane Tongs
Non-executive Director
Appointed 9 July 2021
123,346,692
Former Non-executive Directors
Leon Blitz
Andrew Fay
Non-executive Chair (independent)
Retired 18 November 2020
Non-executive Deputy Chair (independent) Retired 18 November 2020
John Humphrey
Non-executive Director (independent)
Appointed 8 September 2020
Not applicable
Not applicable
Not applicable
Retired 18 November 2020
Jane Tongs
Non-executive Director (independent)
Retired 17 March 2021
Not applicable
Non-executive Chair (independent)
Elected 18 November 2020 and
Retired 17 March 2021
Executive Director
Jonathan Callaghan
Other Executive KMP
Chief Executive Officer
Managing Director
Commenced 5 October 2021
Appointed 7 October 2021
-
Michael Wilde
Acting Chief Executive Officer
1 July 2021 - 4 October 2021
1,010,956
Chief Financial Officer
5 October 2021 - 30 June 2022
Brett Hinton
Acting Chief Financial Officer
1 July 2021 - 4 October 2021
Not applicable
Former Executive Director
Paul Weightman
Chief Executive Officer/Managing Director Retired 31 October 2020
Not applicable
Former Executive KMP
Robert Percy
Chief Investment Officer
Ceased to be KMP on 1 July 2021
Not applicable
Jodie Clark
Chief Operations Officer
Ceased employment 31 March 2021
Not applicable
1.2 EXECUTIVE APPOINTMENT ARRANGEMENTS
On 5 October 2021, Jonathan Callaghan commenced as Chief Executive Officer. Prior to 5 October 2021, Michael Wilde
was Acting Chief Executive Officer and Brett Hinton was Acting Chief Financial Officer. On 5 October 2021, Michael Wilde
re-commenced as Chief Financial Officer and Brett Hinton no longer qualified as KMP. Robert Percy was determined to no
longer qualify as KMP effective 1 July 2021 following the streamlining of roles across the Group.
40
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 2. Remuneration Strategy and Governance
2.1 CROMWELL’S REMUNERATION STRATEGY
Our Purpose
To be a trusted global Real Estate Fund Manager known for our transparency, authenticity and creativity.
Our Strategic Objectives
Simplify the business
Grow Funds under
Management
Grow Capital Relationships
Focus on People and Platform
Our Values
Our Remuneration Principles
Attract proven high
performers
Motivate achievement of strategic
objectives
Create securityholder
alignment
Retain proven high
performers
Encourage
behaviours
consistent with our
values
Fixed
Fixed Remuneration
Benchmarked to market, Fixed
Remuneration is used as a tool to
attract executives with the skills and
experience required to execute the
strategy.
Base salary, superannuation and non-
financial benefits.
KMP Remuneration Structure
STI
Short-Term Incentive
LTI
Long-Term Incentive
STI drives achievement of short-term
strategic objectives.
Designed to improve retention and create
securityholder alignment.
50% paid in cash
At the end of three years:
50% paid in securities and deferred
for one year.
100% vests in staple securities
50% is released immediately
50% is deferred in holding lock for a further
12 months.
Reviewed annually against comparable organisations
Minimum Securityholding Requirement
The CEO is required to hold a minimum of 100% of gross Fixed Remuneration in Cromwell stapled securities within 4 years of
commencement.
Other executive KMP are required to hold a minimum of 50% of Fixed Remuneration (within 4 years of 1 July 2019 or becoming
KMP). Securities in STI and LTI holding lock are included in KMP total holdings.
41
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 2.2 REMUNERATION MIX
The following diagram illustrates the remuneration mix at maximum potential for Key Management Personnel.
Fixed Remuneration
Short term
Long term
Variable remuneration
Current KMP
CEO
CFO
Former KMP
Acting CEO
Acting CFO
37%
50%
39%
50%
31.5%
25%
23%
25%
31.5%
25%
38%
25%
2.3 REMUNERATION TIME HORIZON
The following diagram provides an illustration of how 2022 financial year remuneration will be delivered.
Fixed remuneration
Base salary, superannuation
and other non-financial
benefits
STI – cash component
STI – deferred component
LTI – vested component
LTI – deferred component
2022
2023
2024
2025
42
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 2.4 HOW VARIABLE REMUNERATION IS STRUCTURED
Short-Term Incentive (STI)
Purpose
Value
To drive the achievement of short-term strategic objectives.
% of Fixed Remuneration
Target
Current KMP
CEO
CFO
Former KMP
Acting CEO
Acting CFO*
85%
50%
60%
50%
Performance
Measures
All KMP STI’s are subject to the following gateways:
1.
2.
Achieving 90% of earnings guidance or Board approved budgeted earnings where no guidance is
provided; and
Scoring a minimum of Meeting Expectations against Cromwell’s values-based Behavioural
Competencies.
If either of the gateways are not met, no STI is payable.
Individual STI outcomes are determined on the basis of group performance against a mix of financial and
non-financial measures. More information can be found on the KMP STI Performance Measures in the STI
Scorecard.
Financial Measures
Non-financial Measures
Current KMP
CEO
CFO
Former KMP
Acting CEO
Acting CFO
90%
65%
90%
65%
10%
35%
10%
35%
Reason for
performance
measures
Calculation of
awards
The Board considers that a mix of financial and non-financial measures are appropriate and that they
are aligned with Cromwell’s strategy and values. Performance measures are reviewed annually, and the
Board has discretion to review and amend the measures during the performance period where significant
unforeseen events have occurred which are outside the control of management, or where formulaic
application is likely to produce a material and perverse outcome.
Value of awards are calculated as follows:
Fixed Remuneration x Target STI opportunity % x Achievement Score against Performance Measures
Delivery of
awards
50% of the STI awarded is delivered in cash and 50% is delivered in securities and deferred for a further 12
months.** All securities are purchased on market.
In the event the recipient ceases to be employed:
• before the award date, the recipient is ineligible to receive an award***
• after the STI is awarded, securities in holding lock remain in holding lock until the release date
provided the employee is deemed to be a good leaver
Malus and Clawback clauses allow deferred 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.
In the event of a change of control, any STI award deferred in securities will be released.
Clawback
Change of
Control
* The Acting CFO was eligible for a Diminishing Deferred Payment of up to 80%, of his Base salary, less any incentive payments received between October
2020 and December 2021, if he remained employed as at 31 December 2021. This payment was delivered in cash.
** For the financial years ending 30 June 2022 and 30 June 2023, the CEO will receive 20% of his 50% cash component in Cromwell Securities.
*** With the exception of the CEO who does not have a continued employment hurdle on the deferred component of his STI.
43
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT KMP Long Term Incentive (LTI)
Purpose
To create securityholder alignment and encourage retention.
Value
% of Fixed Remuneration
Target
Allocation method
Current KMP
CEO
CFO
Former KMP
Acting CEO
Acting CFO
85%
50%
100%
50%
Face value
Face value
Face value
Face value
Performance
Measures
For each measure, 25% vests at the lower bound with straight line vesting to 100% at the maximum
threshold.
33.33%
Total Return
Total Return = (Distributions + Change in NTA)/Opening NTA.
Performance is tested annually, and the addition of each year’s outcome
is awarded at the end of 3 years. The TR hurdle range is 8.5%-11.5%.
Equity Issues that significantly impact NTA will be considered, as well
as significant write downs in intangible assets.
33.33%
Return on Contributed Equity (ROCE)
ROCE = Operating Profit/Weighted Average Contributed Equity.
Performance is tested annually, and the addition of each year’s outcome
is awarded at the end of 3 years. The ROCE hurdle range is 8.5%-11.5%.
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 the measurement period.
Below Median - 0% vesting
Reason for
performance
measures
Total Return aligns the underlying absolute returns that securityholder’s experience.
ROCE best reflects the sustainable returns achieved on securityholders’ contributed equity and is accepted
as a good measure of the performance of management. Over the medium to long term an improving ROCE
has been shown to correlate with upward stapled security price movements and hence returns experienced
by securityholders.
Calculation of
awards
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 succeeding the annual results
announcement.
Delivery of
awards
At the end of the 3 year performance period, 100% of the award vests, with 50% released and 50% deferred
in holding lock for a further 12 months. All securities are purchased on market.
In the event the recipient ceases to be employed:
• before the vesting date, all rights to securities are forfeit
• after the vesting date, securities in holding lock remain in holding lock until the release date provided the
employee is deemed to be a good leaver
Clawback
Malus and Clawback clauses allow unvested and deferred 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.
Change of
Control
In the case of a change of control, performance rights will be tested and will pro rata vest in line with
achievement against performance measures.
44
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 2.5 EMPLOYMENT CONTRACT TERMS & CONDITIONS
All executive KMP are employed on Employment Contracts that detail the components of remuneration paid and frequency
of review but do not describe how remuneration levels are modified from year to year. The contracts do not provide for a
fixed term however they can be terminated on specified notice (with the exception of gross misconduct when they can be
terminated without notice).
Termination by Company
Termination by Executive KMP
CEO and other
Executive KMP
Notice Period
6 months
3 months – Acting CFO
Impact on incentives
If an executive KMP is determined to be a good
leaver unvested performance rights and deferred
securities remain on foot. If an executive KMP
is determined to be a bad leaver, unvested and
deferred securities are forfeit, with the exception
of the CEO.
Notice Period
6 months, with the option of payment in lieu
(lump sum)
3 months – Acting CFO
Termination by Redundancy
Between 1 July 2021 and 31 December 2021,
employees and executive KMP terminated
by way of redundancy were entitled to an
Enhanced Severance Package, calculated as
4 weeks base pay plus 3 weeks base pay for each
completed year of service, capped at six months
base pay*.
Impact on incentives
If an executive KMP is determined to be a good
leaver deferred securities remain on foot. If an
executive KMP is determined to be a bad leaver
all deferred securities are forfeit, with the
exception of the CEO.
* The Enhanced Severance amount is higher than the statutory severance and is paid in lieu of this.
2.6 REMUNERATION GOVERNANCE
The Board has appointed a Nomination and Remuneration Committee (Committee) responsible for reviewing, monitoring
and making recommendations in relation to the appointment, performance and remuneration of the KMP.
Board
The Board is responsible for setting the executive remuneration strategy,
monitoring KMP performance and approving the executive Key Performance
Indicators
Nomination and Remuneration Committee
The Committee is the main governing body for KMP appointment and remuneration.
The Committee is responsible for implementation of the Remuneration Principles.
Full charter available at:
https://www.cromwellpropertygroup.com/__data/assets/pdf_file/0028/16579/CG_
Nomination-and-Remuneration-Committee-Charter_approved-June-2020.pdf
Management
Provides recommendations on reward strategy design and implementation
to the Committee.
From time to time Management may seek remuneration advice.
External advisors
Provide expert independent
information on
remuneration for KMP.
Remuneration consultants are appointed from time to time to provide independent information and advice.
45
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 3. Cromwell Performance and Remuneration Outcomes
3.1 CROMWELL’S FIVE-YEAR PERFORMANCE SUMMARY
The remuneration outcomes of executive KMP vary with short-term and long-term performance outcomes. The graphs
and tables below show executive KMP remuneration outcomes and Cromwell’s core financial performance measures over
the past five years.
Cromwell's Five-year Performance Summary
Short-Term Measures
Long-Term Measures
EPS
Cents
AUM
$Bn
Total Return
%
ROCE
%
8.5
8.4
8.2
12.0
18.5
11.9
11.9
10.4
10.0
9.8
8.8
8.4
7.7
7.4
11.5
11.6
8.4
10.1
8.8
4.9
'18
'19
'20
'21
'22
'18
'19
'20
'21
'22
'18
'19
'20
'21
'22
'18
'19
'20
'21
'22
STI and LTI Outcomes
STI (average % of target)
LTI (% of maximum)
LTI excludes backward looking LTI scheme
2018
94%
84%
2019
91%
82%
2020
71%
38%
2021
0%
32%
2022
71%
27%
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 2022
400
350
300
250
200
150
100
50
0
46
Cromwell Property Group
S&P/ASX 300 A-REIT Accumulation Index
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-
1
3
9
1
-
n
u
J
-
0
3
9
1
-
c
e
D
-
1
3
0
2
-
n
u
J
-
0
3
0
2
-
c
e
D
-
1
3
1
2
-
n
u
J
-
0
3
1
2
-
c
e
D
-
1
3
2
2
-
n
u
J
-
0
3
2
2
-
c
e
D
-
1
3
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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.
CMW Annualised Performance Returns to 30 June 2022
9.3%
9.5%
6.2%
4.6%
1.6%
(0.2%)
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
-12%
4.6%
5.0%
3.2%
(1.9%)
(1.8%)
(4.2%)
(6.6%)
(6.2%)
(11.2%)
CMW Total Return
S&P / ASX 300 A-REIT Accumulation Index
CMW Excess Performance
(6.6%)
(11.2%)
4.6%
(6.2%)
(1.9%)
(4.2%)
3.2%
5.0%
(1.8%)
9.3%
9.5%
(0.2%)
6.2%
1.6%
4.6%
1 year
1 year
3 year
3 year
5 year
5 year
10 year
10 year
15 year
15 year
The impact of a very subdued stapled security price, largely due to the ongoing uncertainty of COVID-19 on Cromwell’s
European operations and the ongoing level of corporate activity, has significantly impacted the annualised performance of
Cromwell over the last three years. This has had a flow on impact to all other return periods.
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.
As a result of the three-year performance of Cromwell, the TSR LTI Hurdle for the period from 1 July 2019 to 30 June 2022
paid out 0%.
47
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 3.2 STI SCORECARD
Objective
Key Results
Commentary
FINANCIAL GATEWAY
Achieve a minimum
of 90% of Operating
Earnings budget
The board approved target operating
earnings for FY22 was set at 7.62cps and the
associated earnings gateway at 6.86cps.
FINANCIAL PERFORMANCE
Financial
Operating Earnings per
Security of 7.62cps
The Group achieved an Operating Earnings
per Security of 7.68cps
Capital &
Product
Development
Property
& Funds
Management
Successful execution of
strategy as adopted by
the Board
A significant amount of work was conducted
on three key corporate transactions. These
transactions will take multiple financial
years to execute.
Achieve European
capital budget of €225m
€68m was achieved.
Achieve target new
European FUM of €1.2bn
Achieve target new
Retail FUM of $300m
€325m of new European FUM was achieved.
$260m of new Retail FUM was achieved.
Rating
Achieved
Achieved
Partially
achieved
Partially
achieved
Partially
achieved
Partially
achieved
NON-FINANCIAL PERFORMANCE
Operational
Achieve FY22 Gender
Diversity Targets
Streamlining and
improving cross-platform
operations
Implement management
accounting structure and
enterprise forecasting
system
Measured the Gender Pay Gap and set target
for improvement, improved gap by 10%
globally and 15% in Australia.
Set 40:40:20 gender diversity target at each
leadership level, achieved target at Board,
Team Leader and Emerging Leader Level
globally and the Senior Leader, Team Leader
and Emerging Leader Level in Australia.
The restructure of human resources across
the global platform has commenced.
Strong progress made with go-live
scheduled for December 2022.
Outperformed
Achieved
Partially
achieved
Partially
achieved
Sustainability
Implement Group
Sustainability Strategy
Consultant engaged to guide development
of Sustainability Strategy to be finalised in
early 2023.
Partially
achieved
KMP
Responsible
All
All
All
CEO
CEO
CEO
All
All
CFO
CFO
CEO
48
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 3.3 EXECUTIVE KMP STI OUTCOMES
Behavioural
Gateway
Target STI
(as % of FR)
STI Awarded
STI Forfeit
$
$
Current KMP
CEO
Jonathan Callaghan
CFO
Michael Wilde
Former KMP
Acting CFO
Brett Hinton
Met
Met
Met
* for the period 5 October 2021 – 30 June 2022.
**for the period 1 July 2021 to 4 October 2021.
*** for the period 5 October 2021 to 30 June 2022.
**** for the period 1 July 2021 to 4 October 2021.
3.4 EXECUTIVE KMP LTI PERFORMANCE
*85%
$471,750
$157,250
**60%/***50%
$318,750
$167,350
****50%
$38,025
$16,575
There are currently two LTI plans in operation for executive KMP, being an historic “backward looking” plan and the
current “forward looking” LTI plan.
The new “forward looking” LTI Plan was introduced on 1 July 2019. The following Performance Rights (PRP) have been
granted under this Plan:
J Callaghan
Total
B Hinton
Total
M Wilde
Total
No of performance
rights granted
706,563
706,563
279,365
279,365
679,601
857,008
355,214
1,891,823
Allocation
date
5 Oct 2021
Financial years
tested
Expiry
date
2022 - 2024
30 Sep 2024
1 Jul 2021
2022 - 2024
30 Sep 2024
1 Jul 2021
1 Jul 2020
1 Jul 2019
2022 - 2024
2021 - 2023
2020 - 2022
30 Sep 2024
30 Sep 2023
30 Sep 2022
Performance Rights granted under the above Plan will be tested, at the vesting date, against the following performance
hurdles and the resulting number of Performance Rights will vest. Upon vesting, an equivalent number of Stapled
Securities will be issued to the holder, 50% of which will remain in holding lock for a further 12 months.
Plan
Performance period start date
2022 KMP
LTI Plan
1 Jul 2021
Performance
period end date
30 Jun 2024
Vesting conditions
• 33.3% Total Return (8.5% - 11.5%)
• 33.3% ROCE (8.5% - 11.5%)
• 33.3% Relative TSR (50th – 75th
percentile)
2021 KMP
LTI Plan
1 Jul 2020
2020 KMP
LTI Plan
1 Jul 2019
30 Jun 2023
• 33.3% Total Return (8.5% - 11.5%)
• 33.3% ROCE (8.5% - 11.5%)
• 33.3% Relative TSR (50th – 75th
percentile)
30 Jun 2022
• 33.3% Total Return (8.5% - 11.5%)
• 33.3% ROCE (8.5% - 11.5%)
• 33.3% Relative TSR (50th – 75th
percentile)
49
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
The targets set for the 2022, 2021 and 2020 plans and performance against each target is as follows:
Total Return
Target range
Achieved
Vesting percentage
Return on Contributed Equity
Target range
Achieved
Vesting Percentage
Relative Total Shareholder Return
Target range
Achieved
Vesting Percentage
2022
2021
2020
8.5%-11.5%
8.5%-11.5%
8.5%-11.5%
8.8%
32.5%
10.1%
64.9%
4.9%
0.0%
8.5%-11.5%
8.5%-11.5%
8.5%-11.5%
8.8%
32.7%
8.4%
0.0%
9.8%
56.4%
50th percentile to 75th percentile of S&P/ASX300 A-REIT Index
Below median
0.0%
N/A
N/A
N/A
N/A
The “backward looking” LTI Plan was discontinued for executive KMP on 30 June 2019.
The following Performance Rights have been allocated and remain on-foot or vested during 2022 under this Plan:
No of performance
rights granted
Exercise
Price
M Wilde
Total
B Hinton
Total
172,518
186,012
358,530
167,508
225,299
392,807
$0.00
$0.00
$0.50
$0.50
Allocation
date
30 Jun 2019
30 Jun 2018
Expiry
date
1 Oct 2022
Unvested
6 Nov 2021
Vested during FY22
30 Jun 2019
30 Jun 2018
1 Oct 2022
6 Nov 2021
Unvested
Cancelled by
employee
Performance Rights granted under the above Plan were tested on the allocation date, against specific performance
hurdles and the resulting number of Performance Rights were granted. The Performance Rights generally vest three
years after grant date provided the below ongoing conditions are met during the vesting period:
• continuing employment, and
• achievement of a minimum score of “Solid Performance” against individual KPIs,
assessed annually during the three-year period
50
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 3.5 EXECUTIVE ACTUAL REMUNERATION
The table below outlines the remuneration actually received during FY22.
Salary and
fees
$
J Callaghan (1) 2022
701,068
M Wilde (2)
B Hinton (3)
Total
remuneration
2022
2022
2022
1,006,027
163,836
1,870,931
12,180
Short-term
Non-
monetary
benefits
$
9,000
12,180
-
Post-
employment
Security based payments
At-risk cash
bonus
Super-
annuation
Deferred STI
award
LTI
scheme
Total
$
-
-
-
-
$
17,676
23,568
5,892
47,136
$
-
$
-
$
727,744
193,223
160,570 1,395,568
-
-
169,728
193,223
160,570 2,293,040
(1) Mr Callaghan commenced as CEO on 5 October 2021.
(2) Mr Wilde was the Acting CEO until 4 October 2021 and the CFO from 5 October 2021 to 30 June 2022.
(3) Mr Hinton was the Acting CFO from 1 July 2021 to 4 October 2021. He ceased being a KMP on 5 October 2021.
3.6 EXECUTIVE STATUTORY REMUNERATION
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 (1)
Non-
monetary
benefits
At-risk
cash
bonus
Diminishing
deferred
payment
Post-employment
Super-
annuation
Termination
benefits
Long-
term
Security based
payments
Long
service
leave
Deferred
STI
award
LTI
scheme
Total
$
$
$
$
$
$
$
$
$
Executive KMP
J Callaghan (2)
2022
735,306
9,000
235,875
M Wilde (3)
B Hinton (4)
R Percy (5)
2022
2021
2022
2021
2021
J Clark (7)
Total
remuneration
2021
2022
2021
920,555
12,180
159,375
1,027,147
12,180
110,906
330,427
-
-
687,062
15,401
738,872
11,700
-
19,013
-
-
-
-
P Weightman(6) 2021
879,597
7,800
$
-
-
-
62,832
91,869
231,371
17,676
23,568
21,694
5,892
10,847
21,694
-
-
-
-
-
-
-
-
21,694
1,526,657
16,271
827,315
11,996
235,875
106,580
1,352,308
(53,506) 159,375
283,042
1,504,589
81,398
-
257,561
1,399,980
2,670
19,012
35,656
255,981
20,871
11,062
12,431
10,561
-
-
-
-
43,725
497,739
195,248
1,161,838
419,940
2,868,119
-
1,604,719
1,766,767
21,180
414,263
62,832
47,136
-
(38,840) 414,262
425,278
3,112,878
3,663,105
47,081
-
323,240
92,000
2,353,972
136,323
-
916,474
7,532,395
(1) Includes any change in accruals for annual leave.
(2) Mr Callaghan commenced as CEO on 5 October 2021. For the financial years ending 30 June 2022 and 30 June 2023, Mr Callaghan will receive 40% of
the value of his at-risk cash bonus in the form of Cromwell securities.
(3) Mr Wilde was the Acting CEO until 4 October 2021 and the CFO from 5 October 2021 to 30 June 2022.
(4) Mr Hinton was the Acting CFO from 1 July 2021 to 4 October 2021. He ceased being a KMP on 5 October 2021.
(5) Mr Percy ceased to be a KMP on 1 July 2021.
(6) Mr Weightman retired on 31 December 2020.
(7) Ms Clark ceased employment on 31 March 2021.
51
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
4. Non-executive Director Remuneration
4.1 BOARD REMUNERATION STRUCTURE
The Board determines remuneration of Non-executive Directors within the maximum amount approved by securityholders
from time to time. This maximum currently stands at $1,500,000 (2021: $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.
4.2 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 stapled security-
based compensation plans and are not provided with retirement benefits other than statutory superannuation.
Chair(1)
Non-executive Director
Audit and Risk Committee – Chair
Audit and Risk Committee – Member
Investment Committee – Chair(2)
Investment Committee – Member(2)
Nomination and Remuneration Committee – Chair(2)
Nomination and Remuneration Committee – Member
(1) The Board Chair fee is an all-inclusive board chair fee and includes all committee responsibilities.
(2) From 24 February 2021.
2022
$
292,500
133,000
32,000
16,000
17,000
8,500
30,000
15,000
2021
$
223,052
102,484
20,868
13,911
10,000
5,000
10,000
5,796
Fee review
As disclosed in the FY21 Remuneration Report, during calendar year 2021, the Board commissioned an external
independent review of Board and Committee fees. At that time, the Directors’ fee cap had been last approved by
securityholders in 2011 and Directors’ fees had not been reviewed since 2017. The resulting review report identified that:
• the base board fee plus committee fees paid to the board chair were below the peer group median
• the base board fee paid to NEDs was below the peer group median
• the audit and risk committee chair and member fees were below the peer group median
• the nomination and remuneration committee chair and member fees were below the peer group median
• with the appointment of a seventh director, policy fee headroom was 2%
The report assessed, and the Nomination and Remuneration Committee supported, an increase in Board and Committee
fees and an increase in the fee pool, conditional upon receiving securityholder support for the fee pool increase at the
company’s AGM to be held in November 2021. At Cromwell’s AGM in November 2021, the resolution to increase the fee
pool from $1,000,000 per annum to $1,500,000 per annum effective from 1 July 2021 was carried by way of a poll. Having
received securityholder approval to increase the fee pool, Non-executive Director fees were adjusted effective 1 July 2021,
in line with the independent reports assessment.
Fees for subsidiary boards
Mr Ooi is Non-executive Director (appointed 15 September 2021) of Cromwell EREIT Management Pte Ltd (CEM), a 100%
owned subsidiary of the Company, domiciled in Singapore. Mr Ooi is also the Chair of the Sustainability Committee for
CEM (appointed Chair on 1 January 2022). The annual fees for being a Non-executive Director of CEM is SGD$80,000 and
the annual fee for Sustainability Committee Chair is SGD$40,000. During 2022, Mr Ooi earned AUD$83,107.84 from CEM.
Ms Cox is Chair of the Board of Cromwell Funds Management Ltd (CFML), a 100% owned subsidiary of the Company.
The annual fee for the Chair of the Board of CFML is $55,000 (inclusive of superannuation). During 2022, Ms Cox earned
$77,838 from CFML which included an amount relating to the prior financial year.
52
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 4.3 NON-EXECUTIVE DIRECTORS’ SECURITY HOLDING REQUIREMENT
Non-executive Directors are required to have a minimum holding of Cromwell Property Group stapled securities
equivalent to the Non-executive Director annual fee within three years of their start date. Non-executive Directors are
bound by Cromwell’s Securities Trading Policy, which is available on Cromwell’s website. No additional remuneration is
provided to Non-executive Directors to purchase these stapled securities.
4.4 NON-EXECUTIVE DIRECTORS’ REMUNERATION TABLE
The table below outlines the cash remuneration and benefits received by each Non-executive Director during the year
in accordance with applicable statutory accounting rules. Remuneration includes fees from subsidiary boards where
applicable.
Non-executive directors:
G Weiss (1)
E P Ooi (2)
R Blain (3)
T Cox
J Gersh (4)
L Scenna (5)
J Tang (6)
L Blitz (7)
A Fay (8)
J Humphrey (9)
J Tongs (10)
Total remuneration
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2021
2021
2021
2022
2021
Director fees
$
288,043
110,647
156,068
30,450
154,478
29,106
167,531
114,617
137,969
76,983
170,613
125,390
138,081
94,368
47,211
20,538
114,471
1,212,783
763,781
Subsidiary
board fees
Non-monetary
benefits
Post-
employment
benefits
(superannuation)
$
-
-
83,108
-
-
-
73,462
-
-
-
-
-
-
-
-
-
-
156,570
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
11,784
10,511
15,607
2,893
15,448
2,765
21,273
10,889
13,797
7,313
-
-
-
-
4,485
1,951
10,875
77,909
51,682
Total
$
299,827
121,158
254,783
33,343
169,926
31,871
262,266
125,506
151,766
84,296
170,613
125,390
138,081
94,368
51,696
22,489
125,346
1,447,262
815,463
(1) Dr Weiss was elected on 18 September 2020 and elected as Chair 17 March 2021.
(2) Mr Ooi was appointed on 8 March 2021 and elected as Deputy Chair 17 March 2021.
(3) Mr Blain was appointed on 8 March 2021.
(4) Mr Gersh was elected on 18 September 2020.
(5) Ms Scenna was appointed on 21 October 2019.
(6) Ms Tang was appointed on 9 July 2021.
(7) Mr Blitz retired on 18 November 2020.
(8) Mr Fay retired on 18 November 2020.
(9) Mr Humphrey was appointed on 8 September 2020 and retired on 18 November 2020.
(10) Ms Tongs retired on 17 March 2021.
53
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 5. Additional Disclosures
5.1 AT RISK CASH AWARDS AND PERFORMANCE RIGHTS VESTING AND FORFEITED IN 2022
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
Cash bonus paid
Cash bonus forfeited
%
75%
66%
70%
%
25%
34%
30%
Years options
granted
Options vested in
2022
Options forfeited
in 2022
Years options may
vest
Maximum value of
grant to vest
Equity-based compensation
2022
2019
2020
2020
2021
2022
2019
%
-
100.0%
-
21%
-
-
-
%
-
-
-
79%
-
-
100%(1)
2025
-
2023
-
2024
2025
-
$
213,092
-
15,582
-
105,672
205,026
-
J Callaghan
M Wilde
B Hinton
J Callaghan
M Wilde
B Hinton
(1) Cancelled by employee
54
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 5.2 EQUITY BASED COMPENSATION FOR THE CEO AND OTHER KMP
Details of the PRP are set out in sections 2.4 and 3.4 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
Exercise price
No of performance
rights granted
Assessed value per
right at grant date
7-Nov-18
4-Oct-19
4-Oct-19
27-Mar-20
27-Mar-20
23-Dec-20
23-Dec-20
23-Dec-20
11-Nov-21
11-Nov-21
11-Nov-21
6-Nov-21
1-Oct-22
1-Oct-22
1-Sep-22
1-Sep-22
30-Sep-23
30-Sep-23
30-Sep-23
30-Sep-24
30-Sep-24
30-Sep-24
-
-
$0.50
-
-
-
-
-
-
-
-
186,012
172,518
167,508
236,809
118,405
102,133
571,338
285,670
158,002
924,109
462,055
80.8¢
106.3¢
57.5¢
63.0¢
30.2¢
76.9¢
69.5¢
34.5¢
64.6¢
65.3¢
34.5¢
Details of changes during the 2022 financial year in performance rights on issue to Key Management Personnel under the
PRP are set out below.
J Callaghan
M Wilde
B Hinton
Opening
balance
-
Granted
706,563 (1)
Exercised
Forfeited
Lapsed
-
-
1,193,170
1,057,183 (2)
(186,012) (3)
(281,616)
494,940
437,367 (4)
-
-
1,688,110
2,201,113
(186,012)
(281,616)
-
-
(225,299)
(225,299)
(1) The fair value at grant date was $388,845.
(2) The fair value at grant date was $592,375.
(3) The fair value at grant date was $150,335. The face value at exercise date was $160,570. Exercise price was fully paid.
(4) The fair value at grant date was $255,844.
Closing
balance
706,563
1,782,725
707,008
3,196,296
55
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 5.3 SECURITY HOLDINGS
The number of Cromwell stapled securities held during the 2022 financial year by Key Management Personnel of
Cromwell, including their personally related parties are as follows:
Balance at 1 July
Performance
rights exercised
Received as
deferred STI
Net purchases
(sales)
Balance at 30
June
Non-executive
directors:
G Weiss
E P Ooi
R Blain
T Cox
J Gersh
L Scenna
J Tang
Executive KMP:
J Callaghan
M Wilde
100,000
-
-
90,000
-
55,000
123,346,692
-
824,944
124,416,636
-
-
-
-
-
-
-
-
186,012
186,012
5.4 LOANS TO KEY MANAGEMENT PERSONNEL
Cromwell has provided no loans to any Key Management Personnel.
End of Remuneration Report
-
-
-
-
-
-
-
-
-
-
50,000
195,208
-
120,000
140,000
70,000
-
-
-
150,000
195,208
-
210,000
140,000
125,000
123,346,692
-
1,010,956
575,208
125,177,856
56
CROMWELL PROPERTY GROUP I 2022 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 27, no matter or circumstance has arisen since 30 June 2022 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 15 in the accompanying financial report. There were
2,618,866,699 (2021: 2,617,470,675) 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 $4,911.2 million (2021: $4,861.6 million). Net assets
attributable to unitholders of the Trust were $2,615.4 million (2021: $2,556.4 million) equating to $0.98 per unit (2021:
$0.98 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 2022 was $6,246,328 (2021: $8,347,858). This amount is comprised of fixed remuneration of
$5,695,314 and variable remuneration of $551,014 (2021: $7,431,384 and $916,474 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.
57
CROMWELL PROPERTY GROUP I 2022 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 327B 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 and Risk Committee
to ensure they do not impact the impartiality and objectivity of the auditor. Effective 1 July 2022, the Audit and Risk
Committee was reconstituted as an Audit Committee and as an ESG and Risk Committee.
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
Other reporting services
International consulting services
Tax compliance services – Australia
Tax compliance and other services – overseas
Total remuneration for non-audit services
2022
$
452,765
45,940
17,567
17,015
-
533,287
2021
$
-
-
-
18,690
9,118
27,808
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 $1,255,100
(2021: $1,476,200).
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,
pursuant to 298(2) of the Corporations Act 2001 (Cth).
Dr Gary Weiss AM
Chair
24 August 2022
58
CROMWELL PROPERTY GROUP I 2022 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
24 August 2022
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 2022, 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.
59
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT FINANCIAL STATEMENTS
Table of Contents
P.61
Consolidated Statements
of Comprehensive
Income
P.63
Consolidated Statements
of Changes in Equity
P.62
Consolidated Balance
Sheets
P.65
Consolidated Statements
of Cash Flows
P.66
Notes to the Financial
Statements
P.67 About this report
P.71 Results
P.84 Operating assets
P.93 Finance and capital structure
P.110 Group structure
P.116 Other items
60
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Consolidated Statements of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2022
Notes
5(a)
8(g)
9(f)
16(a)
6(a)
6(b)
6(c)
7(c)
Revenue
Other income
Net fair value gains from investment properties
Net fair value gains from derivative financial instruments
Share of profit of equity accounted investments
Net foreign currency gains
Gain on sale of investment properties
Other income
Total revenue and other income
Expenses
Property expenses and outgoings
Fund management costs
Cost of development
Employee benefits expense
Administrative and other expenses
Finance costs
Net fair value loss from investments at fair value through
profit and loss
Other transaction costs
Total expenses
Profit before income tax
Income tax expense
Profit after tax
Profit / (loss) after tax is attributable to securityholders:
Attributable to the Company
Attributable to the Trust
Attributable to non-controlling interests
Profit after tax
Other comprehensive loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Transfer of FVOCI reserve to profit or loss
Income tax relating to this item
16(a)
16(a)
Other comprehensive loss, net of tax
Total comprehensive income
Total comprehensive income / (loss) is attributable to securityholders:
19(b)
Attributable to the Company
Attributable to the Trust
19(c)
Attributable to non-controlling interests
Total comprehensive income
Earnings per security
Cromwell
Trust
2022
$M
377.6
54.0
55.4
41.3
26.4
11.8
2.3
2021
$M
375.5
97.5
14.2
75.3
26.6
5.9
-
2022
$M
283.4
54.0
55.4
38.8
24.1
11.8
-
2021
$M
266.8
97.5
14.2
55.5
23.7
5.9
-
568.8
595.0
467.5
463.6
64.8
7.6
-
80.7
50.7
73.0
1.7
3.0
281.5
287.3
24.1
263.2
(10.5)
273.7
-
263.2
(45.2)
(2.3)
-
(47.5)
215.7
(13.3)
229.0
-
215.7
58.5
7.8
14.9
80.5
43.8
71.5
2.0
7.7
286.7
308.3
0.1
308.2
14.3
293.8
0.1
308.2
(45.2)
-
-
(45.2)
263.0
11.0
252.0
-
263.0
74.3
-
-
-
30.0
72.6
-
2.8
179.7
287.8
12.9
274.9
-
273.7
1.2
274.9
(44.7)
-
-
(44.7)
230.2
-
229.0
1.2
230.2
68.3
-
-
-
28.3
70.9
-
2.1
169.6
294.0
0.1
293.9
-
293.8
0.1
293.9
(41.9)
-
-
(41.9)
252.0
-
251.9
0.1
252.0
Basic earnings per stapled security (cents)
Diluted earnings per stapled security (cents)
3(b)
3(b)
10.05¢
10.02¢
11.78¢
11.74¢
10.45¢
10.42¢
11.23¢
11.19¢
The above Consolidated Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
61
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Consolidated Balance Sheets
AS AT 30 JUNE 2022
Current assets
Cash and cash equivalents
Receivables
Derivative financial instruments
Current tax assets
Disposal group held for sale
Other current assets
Total current assets
Non-current assets
Investment properties
Equity accounted investments
Investments at fair value through profit or loss
Inventories
Derivative financial instruments
Receivables
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Unearned income
Dividends / distributions payable
Interest bearing liabilities
Derivative financial instruments
Provisions
Current tax liabilities
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 attributable to securityholders
Contributed equity
Reserves
Retained earnings
Equity attributable to securityholders
Comprising
Total equity attributable to the Company
Total equity attributable to the CDPT
Equity attributable to securityholders
Non-controlling interests
Total equity
Notes
13(b)
12(a)
20(a)
8(f)
9(a)
10(a)
8(e)
12(a)
13(b)
7(d)
13(c)
4(a)
11(a)
12(a)
11(a)
12(a)
7(d)
15(b)
16(a)
19(b)
19(c)
Cromwell
Trust
2022
$M
286.0
38.2
13.3
2.4
160.4
7.0
507.3
3,740.0
670.7
23.3
15.3
42.6
28.5
25.2
0.5
0.8
4,546.9
5,054.2
73.3
16.3
42.6
211.7
-
4.7
2.3
350.9
1,980.0
-
0.7
12.2
1,992.9
2,343.8
2,710.4
2,280.1
(31.5)
461.8
2,710.4
95.0
2,615.4
2,710.4
-
2021
$M
142.3
80.0
-
2.9
-
7.3
232.5
3,863.5
712.5
8.9
-
11.3
148.7
22.0
1.1
8.4
4,776.4
5,008.9
83.1
12.1
42.5
3.8
8.6
5.3
1.6
157.0
2,182.4
2.8
0.8
0.6
2,186.6
2,343.6
2,665.3
2,279.8
16.6
368.9
2,665.3
108.9
2,556.4
2,665.3
-
2022
$M
212.8
16.9
13.3
-
105.7
2.3
351.0
3,740.0
641.5
20.4
-
42.6
114.9
-
-
0.8
4,560.2
4,911.2
53.3
15.1
42.6
206.2
-
-
1.8
319.0
1,964.7
-
-
12.1
1,976.8
2,295.8
2,615.4
2,072.8
(56.6)
599.2
2,615.4
-
2,615.4
2,615.4
-
2,710.4
2,665.3
2,615.4
2021
$M
83.7
55.1
-
0.8
-
1.3
140.9
3,863.5
662.0
-
-
11.3
183.9
-
-
-
4,720.7
4,861.6
60.8
12.1
42.5
0.4
8.6
-
0.8
125.2
2,168.9
2.8
-
0.6
2,172.3
2,297.5
2,564.1
2,072.5
(11.9)
495.8
2,556.4
-
2,556.4
2,556.4
7.7
2,564.1
The above Consolidated Balance Sheets should be read in conjunction with the accompanying notes.
62
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Consolidated Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2022
Cromwell
Attributable to Equity Holders of Cromwell
Contributed
equity
$M
Notes
Reserves
$M
Retained
earnings
$M
Total
$M
Balance at 1 July 2020
2,278.5
61.1
243.8
2,583.4
Profit for the year
Other comprehensive loss
Total comprehensive income
Transactions with equity holders in their
capacity as equity holders:
Contributions of equity, net of equity issue costs
Dividends / distributions paid / payable
Employee performance rights
Total transactions with equity holders
Balance as at 30 June 2021
Profit for the year
Other comprehensive loss
Total comprehensive income
Transactions with equity holders in their
capacity as equity holders:
Contributions of equity, net of equity issue costs
Dividends / distributions paid / payable
Acquisition of treasury securities
Employee performance rights
Total transactions with equity holders
Balance as at 30 June 2022
-
-
-
1.3
-
-
1.3
-
(45.2)
(45.2)
-
-
0.7
0.7
2,279.8
16.6
-
-
-
0.3
-
-
-
0.3
-
(47.5)
(47.5)
-
-
(0.5)
(0.1)
(0.6)
2,280.1
(31.5)
308.2
-
308.2
-
(183.1)
-
(183.1)
368.9
263.2
-
263.2
-
(170.3)
-
-
(170.3)
461.8
308.2
(45.2)
263.0
1.3
(183.1)
0.7
(181.1)
2,665.3
263.2
(47.5)
215.7
0.3
(170.3)
(0.5)
(0.1)
(170.6)
2,710.4
15(b)
4(a)
16(a)
15(b)
4(a)
16(a)
16(a)
The above Consolidated Statements of Changes in Equity should be read in conjunction with accompanying notes.
63
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Consolidated Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2022
Trust
Notes
$M
$M
$M
$M
Contributed
equity
Reserve
Retained
earnings
Total
Non-
controlling
interests
$M
Total
$M
Attributable to Equity Holders of the CDPT
Balance at 1 July 2020
2,071.4
30.0
385.0
2,486.4
8.3
2,494.7
Profit for the year
Other comprehensive loss
Total comprehensive income
Transactions with equity holders in
their capacity as equity holders:
Contributions of equity, net of equity
issue costs
Distributions paid / payable
Total transactions with equity holders
15(b)
4(a)
-
-
-
1.1
-
1.1
-
(41.9)
(41.9)
293.9
-
293.9
293.9
(41.9)
252.0
-
-
-
-
1.1
(183.1)
(183.1)
(183.1)
(182.0)
Balance as at 30 June 2021
2,072.5
(11.9)
495.8
2,556.4
Profit for the year
Other comprehensive loss
Total comprehensive income
Transactions with equity holders in
their capacity as equity holders:
Contributions of equity, net of equity
issue costs
Distributions paid / payable
Disposal of non-controlling interest
Total transactions with equity holders
15(b)
4(a)
-
-
-
0.3
-
-
0.3
-
(44.7)
(44.7)
273.7
-
273.7
273.7
(44.7)
229.0
-
-
-
-
-
0.3
(170.3)
-
(170.3)
(170.3)
-
(170.0)
-
-
-
-
(0.6)
(0.6)
7.7
1.2
-
1.2
-
(0.3)
(8.6)
(8.9)
293.9
(41.9)
252.0
1.1
(183.7)
(182.6)
2,564.1
274.9
(44.7)
230.2
0.3
(170.6)
(8.6)
(178.9)
Balance as at 30 June 2022
2,072.8
(56.6)
599.2
2,615.4
-
2,615.4
The above Consolidated Statements of Changes in Equity should be read in conjunction with accompanying notes.
64
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Consolidated Statements of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2022
Note
Cash flows from operating activities
Receipts in the course of operations
Payments in the course of operations
Distributions received
Interest received
Finance costs paid
Income tax paid
Net cash provided by operating activities
22(b)
Cash flows from investing activities
Proceeds from sale of investment properties
Payments for investment properties
Proceeds from sale of 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
Payments for property, plant and equipment
Proceeds from vendor finance loan
Repayment of loans to related entities and directors
Loans to related entities and directors
Payments for other transaction costs
Net cash provided by / (used in) investing activities
Cash flows from financing activities
Proceeds from interest bearing liabilities
Repayment of interest bearing liabilities
Payments for lease liabilities
Payment of loan transaction costs
Payments for settlement of derivative financial instruments
Proceeds from issue of stapled securities
Payments for units redeemed by NCI
Payments for treasury securities
Payment of dividends / distributions
Net cash 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
Cromwell
Trust
2022
$M
395.4
(224.0)
51.3
9.7
(54.3)
(2.9)
175.2
162.0
(20.9)
0.3
4.1
(20.6)
0.4
(0.2)
(0.6)
27.0
24.4
(46.2)
(3.0)
126.7
474.0
(447.2)
(4.5)
(2.2)
(0.3)
0.3
-
(0.5)
(170.2)
(150.6)
151.3
142.3
(7.6)
286.0
2021
$M
413.5
(219.6)
54.3
8.8
(59.0)
(7.4)
190.6
23.0
(126.3)
2.5
-
(0.7)
2.3
(0.5)
(1.7)
-
71.1
(18.8)
(9.1)
(58.2)
338.1
(311.9)
(5.1)
(3.6)
(4.9)
1.4
-
-
(190.6)
(176.6)
(44.2)
194.1
(7.6)
142.3
2022
$M
297.3
(117.5)
34.6
6.5
(54.3)
(0.5)
166.1
162.0
(20.9)
-
-
(20.0)
-
-
-
27.0
26.1
(50.6)
(2.8)
120.8
474.0
(447.2)
(0.3)
(2.2)
(0.3)
0.3
(8.6)
-
(170.2)
(154.5)
132.4
83.7
(3.3)
212.8
2021
$M
298.3
(122.9)
49.4
8.9
(58.8)
(0.3)
174.6
23.0
(126.4)
-
-
-
-
-
-
-
78.7
(15.0)
(1.9)
(41.6)
338.1
(304.5)
(0.4)
(3.6)
(4.9)
1.1
-
-
(189.6)
(163.8)
(30.8)
117.8
(3.3)
83.7
The above Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes.
65
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2022
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 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:
P.116
Other Items
20. Assets held for sale
21. Leased assets and
related leases
22. Cash flow information
23. Security based payments
24. Related parties
25. Auditors’ remuneration
26. Unrecognised items
27. Subsequent events
116
117
119
121
123
125
126
126
P.93
Finance and Capital
Structure
11. Interest bearing liabilities
93
12. Derivative financial
instruments
13. Other financial assets and
financial liabilities
14. Financial risk
management
15. Contributed equity
16. Reserves
96
98
100
107
108
P.110
Group Structure
17. Parent entity disclosures
18. Controlled entities
110
111
19. Equity attributable to the
Company and non-controlling
interests (CDPT)
114
P.67
About this report
1. Basis of preparation
67
P.71
Results
2. Operating segment
information
3. Earnings per security
4. Distributions
5. Revenue
6. Employee benefits,
administrative, finance and
other expenses
7. Income tax
P.84
Operating Assets
8. Investment properties
9. Equity accounted
investments
10. Investments at fair value
through profit or loss
71
75
76
77
79
81
84
88
92
66
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
About this report
This section of the annual financial report provides an overview of the basis upon which the financial statements of
Cromwell and the Trust have been prepared. Accounting policies relating to balances and transactions for which
specific note disclosure is presented in this financial report are contained in the relevant note. Accounting policies for
other balances and transactions are also contained in this section.
1. Basis of preparation
Shares of Cromwell Corporation Limited (Company) and units of Cromwell Diversified Property Trust (CDPT) are stapled
to one another forming the Cromwell Property Group and are quoted as a single stapled security on the ASX under the
code CMW. 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.
As permitted by ASIC Corporations (Stapled Group Reports) Instrument 2015/838 the consolidated financial statements and
accompanying notes of the Cromwell Property Group (Cromwell), consisting of the Company and its controlled entities and
CDPT and its controlled entities are presented jointly with the consolidated financial statements and accompanying notes
of the CDPT and its controlled entities (Trust). In the consolidated financial statements of Cromwell equity attributable to
the Trust is presented as a non-controlling interest.
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. Cromwell’s and Trust’s current assets exceed current
liabilities by $156.4 million and $32.0 million respectively at 30 June 2022 (30 June 2021: $75.5 million and $15.7 million).
In addition, at 30 June 2022, Cromwell and the Trust had available a total of $360.9 million of undrawn but committed bank
debt facilities (2021: $534.9 million) and $286.0 million and $212.8 million of cash (2021: $142.3 million and $83.7 million).
STATEMENT OF COMPLIANCE
The consolidated financial statements of Cromwell and the Trust are general purpose financial statements which have
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 statements also comply with International Financial Reporting Standards (IFRS) and Interpretations as
adopted by the International Accounting Standards Board (IASB).
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
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 amounts in these
consolidated financial statements have been rounded off to the nearest one hundred thousand dollars, unless otherwise
indicated.
PRESENTATIONAL CHANGES AND COMPARATIVES
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
67
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT a)
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). This,
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 materially, 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, changes to the estimates and outcomes that have been
applied in the measurement of Cromwell’s assets and liabilities may arise in the future.
Key items and related disclosures that have been impacted by COVID-19 were as follows:
• Rental income and recoverable outgoings – management engaged with all tenants in Australia, Poland and Italy in
order to ensure the commercial welfare of all parties. In Australia this process resulted in tenants being provided with
rent relief in the form of rental waivers of $0.3 million (June 2021: $0.6 million) and no deferred payment plans (June
2021: deferred payment plans resulting in the deferred collection of $9.6 million for periods ranging from 3 months
to 24 months were agreed). Neither Italy nor Poland were impacted during the period. For further information refer to
note 5.
•
•
Investment properties – management reviewed the appropriateness of inputs into investment property valuations,
taking into account the impacts of COVID-19. At balance date the adopted valuations for 22 of Cromwell’s investment
properties are based on independent external valuations representing 93.7% of the value of the portfolio. Disclosures
with respect to Cromwell’s investment properties are provided in note 8.
Interest in associates and joint ventures and investments in subsidiaries – Cromwell’s investments in associates
and joint ventures were assessed for indicators of impairment. No investments were found to be impaired.
Disclosures with respect to Cromwell’s equity accounted interests is provided in note 9.
• 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 13(b).
b) 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.
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. 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 at year end 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
68
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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 and CDPT. A list of subsidiaries is included in the notes.
c) 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 Comprehensive Income,
within finance costs. All other foreign exchange gains and losses are presented in the Statement of Comprehensive
Income 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 Comprehensive Income 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 Comprehensive Income 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.
The following material spot and average rates were used:
Euro
Polish Złoty
d)
Impairment of assets
Spot rate
Average rate
2022
0.66
3.09
2021
0.63
2.86
2022
0.64
2.94
2021
0.63
2.83
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.
69
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
e)
Inventories
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.
f) Property, plant and equipment
Property, plant and equipment relate to equipment used in the day-to-day operations of Cromwell as well as right-to-use
assets for property, plant and equipment held under operating leases.
Owned property, plant and equipment is initially recognised at cost and subsequently carried at cost less accumulated
depreciation and impairment losses. Owned property, plant and equipment is depreciated on a straight-line basis over the
period of the useful life of the asset.
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. Right-of-use assets are
subsequently measured as cost less accumulated depreciation and impairments losses. For further information in
relation to leased assets see note 21.
g) 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 trade
and other payables. Cash flows are included in the Statement of Cashflows 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 cash flows from operating activities.
h) 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.
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.
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
Other financial assets and financial liabilities
Fair value of financial instruments
Assets held for sale
Note
5
8
9
13
14
20
i) 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. There are
no new relevant accounting standards and interpretations that have been adopted in the current financial year.
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 Cromwell or the Trust.
70
CROMWELL PROPERTY GROUP I 2022 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, the earnings per security calculation,
details of distributions as well as information about Cromwell’s revenue, expense and income tax items.
2. Operating segment information
A) OVERVIEW
Operating segments are distinct business activities from which Cromwell may earn revenues and incur expenses.
Cromwell reports the results of its operating segments on a regular basis to its Chief Executive Officer (CEO), the group’s
chief operating decision maker (CODM), in order to assess the performance of each of Cromwell’s operating segments and
allocate resources to them.
Operating segments below are reported in a manner consistent with the internal reporting provided to the CEO. These are
explained below.
Operating segments:
Business activity:
Funds and asset
management
Co-investments
Funds management represents activities in relation to the establishment and management
of external funds for institutional and retail investors. Asset management includes property
and facility management, leasing and project management and development related activities.
These activities are carried out by Cromwell itself and by associates (including the LDK Seniors
living joint venture and others) and contribute related fee revenues or the relevant share of
profit of each investee to the consolidated results.
This activity includes Cromwell’s investments in assets warehoused whilst being repositioned
for deployment into the fund and asset management business and assets it may not fully
own or over which it cannot exercise unilateral control. This includes interests in investment
property portfolios in Poland (CPRF) and Italy (CIULF), the Cromwell European Real Estate
Investment Trust (CEREIT), and other investment vehicles. This activity contributes net rental
income and the relevant share of profit of each investee to the consolidated results.
Investment portfolio
This involves the ownership of investment properties located in Australia. These properties
are held for long term investment purposes and primarily contribute net rental income and
associated cash flows to results.
This format has changed to reflect what is now presented to the CEO appointed since the last balance date. Below is a
summary of the material changes:
•
Funds and asset management – in order to better reflect the economic aspects of the investment in the LDK Senior
living joint venture, information in relation the same is now reported solely within the Funds and asset management
segment. This has resulted in no change to the segment results compared to the prior comparative period, however
segment assets and liabilities have been reclassified where applicable to reflect changes in allocation.
• Co-investments – formally known as Indirect property investment. The CPRF and CIULF investment property
portfolios have been included in this segment (for the segment assets and liabilities disclosure in note 2(e) to reflect
these assets being made ready for marketing to investors by the European funds management business). This has
resulted in no change to the segment results compared to the prior comparative period, however segment assets and
liabilities have been reclassified where applicable to reflect changes in allocation.
•
Investment portfolio – formally known as Direct property investment and no longer includes the CPRF and CIULF
investment property portfolios.
71
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
B) SEGMENT RESULTS
The table below shows the segment results as presented to the CEO in his capacity as CODM. Commentary on the
segment results is included in the Directors’ Report.
Funds
and asset
management
Co-investments
Investment
portfolio
2022
Segment revenue
Rental income and recoverable outgoings
Operating profit of equity accounted investments
Development income (1)
Fund and asset management fees
Distributions
$M
-
11.7
18.5
95.5
-
$M
73.7
45.4
-
-
7.0
Total segment revenue
125.7
126.1
$M
215.2
-
-
-
-
215.2
41.4
-
1.0
42.4
172.8
28.3
144.5
Cromwell
$M
288.9
57.1
18.5
95.5
7.0
467.0
73.1
70.0
14.6
157.7
309.3
53.2
256.1
1.6
(47.1)
(9.6)
201.0
-
65.7
10.3
76.0
49.7
-
49.7
31.7
4.3
3.3
39.3
86.8
24.9
61.9
Funds
and asset
management
Co-investments
Investment
portfolio
Cromwell
$M
-
7.6
25.6
101.6
-
134.8
-
14.9
66.3
9.0
90.2
44.6
-
44.6
$M
61.6
45.1
-
-
1.8
108.5
24.9
-
4.9
3.7
33.5
75.0
28.5
46.5
$M
217.3
-
-
-
-
217.3
41.5
-
-
1.3
42.8
174.5
30.4
144.1
$M
278.9
52.7
25.6
101.6
1.8
460.6
66.4
14.9
71.2
14.0
166.5
294.1
58.9
235.2
4.6
(38.7)
(8.9)
192.2
Segment expenses
Property expenses
Fund and asset management direct costs
Other expenses
Total segment expenses
EBITDA
Finance costs
Segment profit after finance costs
Unallocated items
Finance income
Corporate costs (2)
Income tax expense
Segment profit
2021
Segment revenue
Rental income and recoverable outgoings
Operating profit of equity accounted investments
Development income (1)
Fund and asset management fees
Distributions
Total segment revenue
Segment expenses
Property expenses
Development costs
Fund and asset management direct costs
Other expenses
Total segment expenses
EBITDA
Finance costs
Segment profit after finance costs
Unallocated items
Finance income
Corporate costs (2)
Income tax expense
Segment profit
(1) Includes finance income attributable to development loans and fee revenue.
(2) Includes non-segment specific corporate costs pertaining to Group level functions.
72
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT C) RECONCILIATION OF SEGMENT PROFIT TO PROFIT AFTER TAX
Segment profit
Reconciliation to profit after tax
Gain on sale of investment properties
Fair value gains from investment properties
Fair value gains from derivative financial instruments
Lease cost and incentive amortisation and rent straight-lining
Relating to equity accounted investments (1)
Net exchange gain on foreign currency borrowings
Tax (expense) / benefit relating to non-operating items
Other non-cash expenses or non-recurring items (2)
Profit after tax
(1) Comprises fair value adjustments included in share of profit of equity accounted entities.
(2) These expenses include but are not limited to:
• Amortisation of loan transaction costs.
• Amortisation of intangible assets and depreciation of property, plant and equipment.
• Other transaction costs.
Cromwell
2022
$M
201.0
11.8
54.0
55.4
(23.1)
(15.9)
28.0
(16.5)
(31.5)
263.2
2021
$M
192.2
5.9
97.5
14.2
(26.6)
30.9
26.1
7.8
(39.8)
308.2
D) RECONCILIATION OF TOTAL SEGMENT REVENUE TO TOTAL REVENUE
Total segment revenue reconciles to total revenue as shown in the Consolidated Statement of Comprehensive Income as
follows:
Total segment revenue
Reconciliation to total revenue:
Inter-segmental management fee revenue
Straight-line lease income
Lease incentive amortisation
Operating profit from equity accounted investments
Finance income
Total revenue
E)
SEGMENT ASSETS AND LIABILITIES
2022
$M
467.0
(13.0)
6.0
(26.9)
(57.1)
1.6
377.6
2021
$M
460.6
(13.0)
3.7
(27.7)
(52.7)
4.6
375.5
2022
Segment assets
Segment liabilities
Segment net assets
Other segment information
Equity accounted investments
Acquisition / (disposal) of non-current segment assets (1):
Investments in associates
Investments at fair value through profit or loss
Intangible assets
Funds
and asset
management
Co-investments
Investment
portfolio
Cromwell
$M
335.2
48.8
286.4
19.9
(6.6)
-
0.1
$M
1,520.7
834.2
686.5
650.8
(1.1)
16.4
-
$M
3,198.3
1,460.8
1,737.5
-
-
-
-
$M
5,054.2
2,343.8
2,710.4
670.7
(7.7)
16.4
0.1
(1) For additions to investment property, forming part of the Investment portfolio segment, refer to note 8.
73
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
2021
Segment assets
Segment liabilities
Segment net assets
Other segment information
Equity accounted investments
Acquisition / (disposal) of non-current segment assets (1):
Investments in associates
Investments at fair value through profit or loss
Intangible assets
Funds and
asset
management
Co-investments
Investment
portfolio
Cromwell
$M
312.3
48.2
264.1
40.3
(2.5)
-
0.5
$M
1,518.5
1,027.3
491.2
672.2
(0.8)
(1.6)
-
$M
3,178.1
1,268.1
1,910.0
-
-
-
-
$M
5,008.9
2,343.6
2,665.3
712.5
(3.3)
(1.6)
0.5
(1) For additions to investment property, forming part of the Investment portfolio segment, refer to note 8.
F) 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.
Geographic location
Australia
United Kingdom and Europe
Asia
New Zealand
Total
Major customers
Revenue from external customers
Non-current operating assets
2022
$M
278.8
135.7
49.6
2.9
467.0
2021
$M
286.3
119.6
51.0
3.7
460.6
2022
$M
3,064.2
866.1
600.5
16.1
4,546.9
2021
$M
3,252.8
885.0
621.6
17.0
4,776.4
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 Investment portfolio segment.
Major customer
Commonwealth of Australia
Qantas Airways Limited
New South Wales State Government
Total income from major customers
G) ACCOUNTING POLICY
Segment allocation
2022
$M
48.1
34.0
29.2
111.3
2021
$M
47.2
32.8
29.1
109.1
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.
Property expenses and outgoings which include rates, taxes and other property outgoings and other expenses are
recognised on an accruals basis.
74
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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
Segment profit, 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.
3. Earnings per security
A) OVERVIEW
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 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. 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.
B) EARNINGS PER STAPLED SECURITY / TRUST UNIT
Basic earnings per security (cents)
Diluted earnings per security (cents)
Earnings used to calculate basic and diluted
earnings per security:
Cromwell
Company
Trust
2022
10.05
10.02
2021
11.78
11.74
2022
(0.40)
(0.40)
2021
0.55
0.54
2022
10.45
10.42
2021
11.23
11.19
Profit for the year attributable to securityholders ($M)
263.2
308.2
(10.5)
14.4
273.7
293.9
Weighted average number of securities used in
calculating basic and diluted earnings per security:
Weighted average number of securities used in
calculating basic earnings per security (millions)
2,618.3
2,616.1
2,618.3
2,616.1
2,618.3
2,616.1
Effect of performance rights on issue (millions)
9.4
9.7
9.4
9.7
9.4
9.7
Weighted average number of securities used in
calculating diluted earnings per security (millions)
2,627.7
2,625.8
2,627.7
2,625.8
2,627.7
2,625.8
C)
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.
Convertible bond
The remaining convertible bonds on issue are considered to be potential ordinary stapled securities, however have not
been included in the determination of diluted earnings.
Subsequent to year end, the Optional Put, which was available to bond holders was exercised by 1,325 of the remaining
1,349 bond holders in exchange for cash equal to 100% of the face value. The convertible bonds of €132.5 million ($193.4
million) plus any accrued interest was paid to the bond holders by Cromwell on 1 August 2022 utilising cash on hand and
existing debt facilities. The remaining 24 bonds will be compulsorily acquired by Cromwell within calendar year 2022 in
accordance with the terms and conditions of the bonds.
As a result of this conversion, the convertible bonds are considered anti-dilutive.
75
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT D) ACCOUNTING POLICY
Basic earnings per security
Basic earnings per security is calculated by dividing profit attributable to security holders 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.
4. Distributions
A) OVERVIEW
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.
Distributions paid / payable by Cromwell and the Trust during the year were as follows:
2022
19 November 2021
18 February 2022
20 May 2022
19 August 2022
Total
2021
20 November 2020
19 February 2021
21 May 2021
20 August 2021
2022
cents
1.6250¢
1.6250¢
1.6250¢
1.6250¢
6.5000¢
2021
cents
1.8750¢
1.8750¢
1.6250¢
1.6250¢
7.0000¢
2022
$M
42.5
42.6
42.6
42.6
2021
$M
49.0
49.1
42.5
42.5
170.3
183.1
There were no dividends paid or payable by the Company in respect of the 2021 and 2022 financial years. All of Cromwell’s
and the Trust’s distributions are unfranked.
B) 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 2022 is $15,301,200 (2021: $14,190,400).
76
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 5. Revenue
A) OVERVIEW
Cromwell derives revenue from its three main business activities / operating segments (described in note 2). These
revenue sources and the revenue items relating to them are as follows:
Funds and asset management:
Co-investments:
Investment portfolio:
Funds management represents activities in relation to the establishment and
management of external funds for institutional and retail investors. Asset management
includes property and facility management, leasing and project management and
development related activities. These activities are carried out by Cromwell itself and
by associates (including the LDK Seniors living joint venture and others) and contribute
related fee revenues or the relevant share of profit of each investee to the consolidated
results.
This activity includes Cromwell’s investments in assets warehoused whilst being
repositioned for deployment into the fund and asset management business and assets
it may not fully own or over which it cannot exercise unilateral control. This includes
interests in investment property portfolios in Poland (CPRF) and Italy (CIULF), the
Cromwell European Real Estate Investment Trust (CEREIT), and other investment
vehicles. This activity contributes net rental income and the relevant share of profit of
each investee to the consolidated results.
This involves the ownership of investment properties located in Australia. These
properties are held for long term investment purposes and primarily contribute net
rental income and associated cash flows to results.
The table below presents information about revenue items recognised from contracts with customers and other sources:
Rental income – lease components
Recoverable outgoings – non-lease components
Rental income and recoverable outgoings
Other revenue from contracts with customers:
Fund and asset management fees
Development sales and fees
Total revenue
Other revenue items recognised:
Interest
Distributions
Other revenue
Total other revenue
Total revenue
Cromwell
Trust
2022
$M
218.5
49.4
267.9
84.6
-
352.5
18.0
7.0
0.1
25.1
2021
$M
209.2
45.6
254.8
90.8
15.0
360.6
12.9
1.8
0.2
14.9
2022
$M
219.5
48.0
267.5
-
-
2021
$M
209.4
44.6
254.0
-
-
267.5
254.0
15.1
0.8
-
15.9
12.8
-
-
12.8
377.6
375.5
283.4
266.8
77
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT B) DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS
The table below presents information about the disaggregation of revenue items from Cromwell’s contracts with
relevant customers:
Cromwell
Trust
2022
$M
2021
$M
31.3
18.1
49.4
51.6
6.7
11.3
2.1
8.2
4.7
84.6
-
134.0
89.7
44.3
134.0
28.1
17.5
45.6
50.9
20.9
7.1
4.4
4.3
3.2
90.8
15.0
151.4
86.6
64.8
151.4
2022
$M
31.4
16.6
48.0
-
-
-
-
-
-
-
-
48.0
31.4
16.6
48.0
2021
$M
28.2
16.4
44.6
-
-
-
-
-
-
-
-
44.6
28.2
16.4
44.6
Rental income and recoverable outgoings – non-lease components:
Recoverable outgoings (1)
Cost recoveries (2)
Total rental income and recoverable outgoings – non-lease
components
Fund and asset management fees:
Fund and asset management fees (1)
Performance fees (2)
Asset acquisition and sale fees (2)
Project management fees (1)
Leasing fees (2)
Property management fees (1)
Total fund and asset management fees
Development sales and fees:
Development sales and fees (2)
Total revenue from contracts with customers
Timing of recognition of revenue items
Recognised over time
Recognised at point in time
Total revenue from contracts with customers
[1) Revenue recognised over time.
[2] Revenue recognised at point in time.
C) ACCOUNTING POLICIES
Rental income and recoverable outgoings
Rental income and recoverable outgoings comprises rental income from tenants under operating leases of investment
properties and amounts charged to tenants for property outgoings such rates, levies, utilities, cleaning etc.
Rental income is recognised on a straight-line basis over the lease term. Lease incentives granted are considered an
integral part of the total rental income and are recognised as a reduction in rental income over the term of the lease,
on a straight-line basis. Amounts charged for outgoings to tenants are expense recoveries and is recognised upon
incurring the expense.
Fund and asset management fees
Revenue from management services is measured based on the consideration specified in the contract with the
customer and recognised when control over the service is transferred to the customer. Fee income derived from
investment management and property services is recognised progressively as the services are provided.
Asset acquisition and disposal, project management and leasing fees are recognised upon completion of the service
when the customer derives the benefit from the service.
Performance fee income is recognised progressively as the services are provided but only when the revenue can
be reliably measured, and it becomes highly probably that there will be no significant reversal of revenue in future.
Performance fees are generally dependent on certain performance obligation specified in the contract with the customer
in respect of the management of the customer’s assets or the outcome of transactions on behalf of customers.
Development sales and fees
Development sales comprises income from the disposal of property inventories. Revenue is recognised at the point in
time that control of the asset has been transferred to the customer, generally upon legal settlement date.
Development management fees are derived from the provision of development management services. Revenue is
recognised over time as the service is performed.
78
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Unearned income
Payments from tenants and customers in relation to future periods, which are not due and payable are recognised as
unearned income in the Balance Sheet.
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 loan receivables.
Distributions
Revenue from distributions is earned from investments and is recognised when the right to receipt is established.
D) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Performance fees
Cromwell exercises judgement in estimating the amount of variable consideration 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 – rental income and related collections were relatively unimpacted by COVID-19 due to the tenant population
being heavily skewed towards government and other tenants in markets not materially impacted by the pandemic.
Poland – Poland was not subject to lockdowns during the year. However, as a result of lockdowns during the prior year,
during which rent and service charges were invoiced but collections slowed, Cromwell and the Trust have chosen to
conservatively recognise an expected credit loss provision at 30 June 2022 of €1.2 million ($1.8 million) at balance date
(June 2021: €1.0 million, $1.5 million).
Italy – due to the nature of the cornerstone tenant and the geographical location of the properties no COVID-19-related
support has been requested nor granted and none is expected for the foreseeable future.
For further information in relation to the treatment of expected credit losses in relation to receivables see notes 13 and
14.
6. Employee benefits, administrative, finance and other expenses
This note provides further details about Cromwell’s other operating business expenses, including Cromwell’s employee
benefits expenses and its components as well as items included in administrative and other expenses and finance costs.
A)
EMPLOYEE BENEFITS EXPENSE
Salaries and wages, including bonuses and on-costs
Directors fees
Contributions to defined contribution superannuation plans
Security-based payments
Restructure costs
Other employee benefits expense
Total employee benefits expense
Cromwell
Trust
2022
$M
66.2
2.0
4.1
-
5.0
3.4
80.7
2021
$M
65.0
1.3
3.6
2.1
4.6
3.9
80.5
2022
$M
2021
$M
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT B)
ADMINISTRATIVE AND OTHER EXPENSES
Audit, taxation and other professional fees
Administrative and overhead costs
Fund administration costs
Amortisation and depreciation
Other
Total administrative and other expenses
C)
FINANCE COSTS
Interest on borrowings
Interest on lease liabilities
Amortisation of loan transaction costs
Net exchange (gains)/losses relating to finance costs
Total finance costs
Cromwell
Trust
2022
$M
7.3
35.6
-
6.0
1.8
50.7
2021
$M
8.2
30.2
-
5.4
-
43.8
2022
$M
3.4
2.8
22.2
0.2
1.4
30.0
Cromwell
Trust
2022
$M
54.6
0.7
17.9
(0.2)
73.0
2021
$M
59.9
0.7
10.5
0.4
71.5
2022
$M
54.6
0.3
17.9
(0.2)
72.6
2021
$M
4.2
1.7
22.2
0.2
-
28.3
2021
$M
59.7
0.3
10.5
0.4
70.9
D) ACCOUNTING POLICIES
Salaries, wages and other short-term employee benefits obligations
Salaries, wages, including non-monetary benefits, and annual leave where there is no unconditional right to defer
settlement 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.
Bonuses
A liability is recognised for bonuses where contractually obliged or where there is a past practice that has created a
constructive obligation.
Superannuation
Contributions are made to defined contribution superannuation funds and expensed as they become payable.
Other long-term employee benefits 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 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
Security-based compensation benefits are provided to employees via Cromwell’s Performance Rights Plan (PRP).
Further information about the PRP is set out in note 23.
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.
80
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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.
Finance costs
Information about Cromwell’s exposure to interest rate changes is provided in note 14(e).
7.
Income tax
A) OVERVIEW
Income tax expense comprises current and deferred tax expense. Current tax expense is the income tax payable on
expected taxable income for the financial year and adjustments to tax payable in respect of previous financial years.
Deferred tax expense is the result of different income and expense recognition principles between accounting standards
and tax laws and represents the future tax consequences of recovering or settling the carrying amount of an asset or
liability. Deferred tax liabilities are recognised for all taxable temporary differences whereas deferred tax assets are
recognised for all deductible temporary differences and unused tax losses.
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. However, the Trust also controls a number of corporate entities that are subject to income tax.
Income tax shown for the Trust represents taxation of those corporate entities.
B)
INCOME TAX EXPENSE
Current tax expense
Deferred tax expense / (benefit)
Adjustment in relation to prior periods – current tax
Adjustment in relation to prior periods – deferred tax
Income tax expense
Deferred tax expense / (benefit)
Decrease / (increase) in deferred tax assets
Increase / (decrease) in deferred tax liabilities
Total deferred tax expense / (benefit)
Cromwell
Trust
2022
$M
3.6
20.9
0.4
(0.8)
24.1
8.5
11.6
20.1
2021
$M
1.3
(1.3)
1.4
(1.3)
0.1
0.7
(3.3)
(2.6)
2022
$M
2.4
10.7
(0.1)
(0.1)
12.9
(0.8)
11.4
10.6
2021
$M
1.1
(0.8)
(0.2)
-
0.1
1.3
(2.1)
(0.8)
81
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT C) RECONCILIATION BETWEEN INCOME TAX EXPENSE AND PROFIT BEFORE INCOME TAX
Cromwell
Trust
2022
$M
287.3
86.2
(67.5)
4.1
(2.4)
5.2
-
(0.4)
(1.1)
24.1
2021
$M
308.3
92.5
(68.9)
2.7
(9.4)
(15.5)
(0.7)
0.1
(0.7)
0.1
2022
$M
287.8
86.3
(67.4)
4.3
(0.7)
(7.0)
-
(0.2)
(2.4)
12.9
2021
$M
294.0
88.2
(68.9)
1.8
(5.8)
(13.2)
(0.7)
(0.2)
(1.1)
0.1
Cromwell
Trust
2022
$M
2021
$M
2022
$M
2021
$M
(3.6)
(0.3)
0.1
0.3
0.3
4.0
0.8
8.4
(9.2)
0.9
0.7
-
0.8
(8.3)
-
3.5
2.1
2.2
8.9
8.4
8.3
(0.8)
0.8
0.1
-
8.4
-
(0.3)
-
0.3
0.3
0.5
0.8
-
0.8
-
-
-
0.8
Cromwell
Trust
2022
$M
2.3
2.7
0.3
-
76.0
4.2
85.5
2021
$M
4.4
0.1
0.2
0.5
78.8
0.7
84.7
2022
$M
-
0.1
0.3
-
28.2
1.2
29.8
-
-
-
-
-
-
-
1.6
(1.3)
-
-
(0.3)
-
2021
$M
4.4
0.1
0.2
0.5
34.2
0.7
40.1
Profit before income tax
Tax at Australian tax rate of 30% (2021: 30%)
Tax effect of amounts which are not deductible / (taxable) in
calculating taxable income:
Trust income
Fair value movements not deductible
Net non-deductible expenses
Movement in tax losses and deferred tax assets (recognised) /
derecognised
Movement in initial recognition exemption
Adjustment in relation to prior periods
Difference in overseas tax rates
Income tax expense
D) 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
(Charged) / credited to profit or loss
Credited to comprehensive income
Adjustment in relation to prior periods
Other movements
Balance at 30 June
ii) Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the
following items:
Investments in subsidiaries
Unrealised foreign exchange losses
Derivatives
Borrowing costs
Tax losses
Other items
Total deferred tax assets not recognised
82
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT iii) Tax losses by year of expiration
The gross amount of tax losses carried forward that have not been
recognised by their expiration date is as follows:
Not later than one year
Later than one year and not later than three years
Later than three years and not later than six years
Later than six years and not later than seventeen years
Unlimited
Gross amount of tax losses not recognised
Tax effect of total losses not recognised
iv) Deferred tax liabilities
Deferred tax liabilities are attributable to:
Interests in managed investment schemes
Interests in other investments
Investment properties
Tax losses recognised
Transactions costs and other items
Total deferred tax liabilities
Movements:
Balance at 1 July
Charged / (Credited) to profit or loss
Adjustment in relation to prior periods
Other movements
Balance at 30 June
E) ACCOUNTING POLICY
Income tax
Cromwell
Trust
2022
$M
0.7
16.2
14.8
28.1
232.8
292.6
76.0
2022
$M
12.2
0.6
3.4
(0.3)
(3.7)
12.2
0.6
11.7
(0.1)
-
12.2
2021
$M
14.1
4.1
42.7
21.6
228.5
311.0
78.8
Cromwell
2021
$M
-
1.7
1.0
(0.3)
(1.8)
0.6
4.1
(2.1)
(1.2)
(0.2)
0.6
2022
$M
0.7
16.2
14.8
28.1
61.0
120.8
28.2
2022
$M
12.0
0.5
3.4
(0.3)
(3.5)
12.1
0.6
11.5
(0.1)
0.1
12.1
Trust
2021
$M
14.1
4.1
42.7
21.5
69.3
151.7
34.2
2021
$M
-
1.3
1.0
-
(1.7)
0.6
3.2
(2.1)
-
(0.5)
0.6
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 combinations 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. 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 head entity, in conjunction with
other members of the tax-consolidated group, has also entered into a tax sharing agreement.
83
CROMWELL PROPERTY GROUP I 2022 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 and investments at fair value through profit or loss.
8. Investment properties
A) OVERVIEW
Investment properties are land, buildings or both held solely for the purpose of earning rental income and / or for capital
appreciation. This note provides a detailed overview of Cromwell’s investment property portfolio, including details of
movements during the financial year.
B) 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
Capital works:
Construction costs
Finance costs capitalised
Property improvements
Lifecycle
Disposals
Reclassified to:
Held for sale(1)
Inventory
Straight-line lease income
Lease costs and incentive costs
Amortisation (2)
Net gain from fair value adjustments
Foreign exchange differences
Balance at 30 June
2022
$M
3,863.5
-
0.2
-
13.9
6.0
(132.3)
(19.0)
(10.0)
6.0
17.4
(29.3)
54.0
(30.4)
2021
$M
3,752.3
89.3
1.8
0.8
7.5
1.2
(44.0)
-
-
3.7
11.6
(30.3)
97.5
(27.9)
2022
$M
3,863.5
-
0.2
-
13.9
6.0
(142.3)
(19.0)
-
6.0
17.4
(29.3)
54.0
(30.4)
2021
$M
3,752.3
89.3
1.8
0.8
7.5
1.2
(44.0)
-
-
3.7
11.6
(30.3)
97.5
(27.9)
3,740.0
3,863.5
3,740.0
3,863.5
(1) Village Cinema, Geelong, VIC was reclassified as held for sale on 31 December 2021 and subsequently
disposed in May 2022 as noted in paragraph d) below.
(2) Pertains to the amortisation of lease costs, lease incentive costs and right-of-use assets.
C)
INVESTMENT PROPERTIES ACQUIRED
During the 2021 financial year, Cromwell completed the acquisition of seven logistics assets in Italy for $83.1 million,
which are held in the Cromwell Urban Logistics Fund (CIULF).
D)
INVESTMENT PROPERTIES SOLD / RECLASSIFIED AS HELD FOR SALE
During the current financial year the Trust disposed of the following properties: Village Cinema, Geelong, VIC for $19.0
million (net of required capital expenditure); 200 Mary Street, QLD for $108.5 million; Regent Cinema, Albury, NSW for
$18.5 million; and the TGA Complex, ACT for $21.5 million.
During the 2021 financial year the Trust disposed of 13 Keltie Street, ACT for $20.0 million and Wakefield Street, SA for
$30.0 million, $6.0 million above the last valuations.
E)
INVESTMENT PROPERTIES RECLASSIFIED AS INVENTORY
During the current financial year Cromwell reclassified the investment property at 19 National Circuit, Barton, ACT
as an inventory asset. This is due to its intended redevelopment for future sale. To facilitate this ownership, the asset
was transferred from the Trust to the Cromwell Development Trust (a subsidiary of Cromwell Corporation Limited) for
a contract price of $10.0 million. Costs totalling $5.3 million were incurred from the date the asset was classified as
Inventory to 30 June 2022, with the Inventory carrying amount totalling $15.3 million at 30 June 2022.
84
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
F) DETAILS OF CROMWELL’S INVESTMENT PROPERTY PORTFOLIO
Independent valuation
Carrying amount
Australia
400 George Street, Brisbane QLD
HQ North, Fortitude Valley QLD
200 Mary Street, Brisbane QLD
203 Coward Street, Mascot NSW
2-24 Rawson Place, Sydney NSW
207 Kent Street, Sydney NSW
475 Victoria Avenue, Chatswood NSW
2-6 Station Street, Penrith NSW
84 Crown Street, Wollongong NSW
117 Bull Street, Newcastle NSW
Regent Cinema Centre, Albury NSW
243 Northbourne Avenue, Lyneham ACT
Soward Way, Greenway ACT
TGA Complex, Symonston ACT
19 National Circuit, Barton ACT (1)
Tuggeranong Office Park,
Tuggeranong ACT
Ownership
Title
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Leasehold
Leasehold
Leasehold
Leasehold
Asset
class
Office
Office
Office
Office
Office
Office
Office
Office
Office
Office
Retail
Office
Office
Office
Office
Date
Jun-22
Jun-22
N/A
Jun-22
Jun-22
Jun-22
Dec-21
Dec-21
Jun-22
Dec-21
N/A
Jun-22
Jun-22
N/A
N/A
100%
Leasehold
Land
May-19
Amount
$M
542.0
241.0
-
560.0
320.0
317.0
135.5
57.5
51.0
33.0
-
35.7
319.7
-
-
7.5
2022
$M
542.0
241.0
-
560.0
320.0
317.0
135.5
57.5
51.0
33.0
-
35.7
319.7
-
-
8.3
700 Collins Street, Melbourne VIC
Village Cinemas, Geelong VIC
100%
100%
Freehold
Freehold
Office
Retail
Jun-22
N/A
353.0
353.0
-
-
2021
$M
542.0
240.0
90.0
550.0
315.0
305.0
120.0
52.5
51.0
31.5
14.0
33.8
310.0
20.0
10.0
8.3
352.0
18.0
Poland
Janki, Janki, Warszawa
Korona, Psie Pole, Wrocław
Ster, Pogodno, Szczecin
Rondo, Wilczak, Bydgoszcz
Tulipan, Widzew, Łódź
Kometa, Koniuchy, Toruń
Italy
Carugate, Milan
Campegine, Reggio Emilia
Torri di Quartesolo, Vicenza
Verona, Verona
Bologna Interporto, Bologna
Campogalliano, Modena
San Mauro Torinese, Turin
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Freehold
Leasehold
Leasehold
Freehold
Freehold
Leasehold
Retail
Retail
Retail
Retail
Retail
Retail
Jun-22
Jun-22
Jun-22
Jun-22
Jun-22
Jun-22
Freehold
Logistics
Jun-22
Freehold
Logistics
Jun-22
Freehold
Logistics
Jun-22
Freehold
Logistics
Jun-22
Freehold
Logistics
Jun-22
Freehold
Logistics
Jun-22
Freehold
Logistics
Jun-22
Total – investment property portfolio
Add: Right-of-use assets – Polish leasehold properties
Total – investment properties
(1) Reclassified as inventory during the period.
2,972.9
2,973.7
3,063.1
341.4
124.0
80.4
83.7
20.8
19.0
341.4
124.0
80.4
83.7
20.8
19.0
357.1
133.5
87.3
85.2
24.5
20.2
669.3
669.3
707.8
38.9
17.2
9.1
8.6
8.8
4.8
3.7
38.9
17.2
9.1
8.6
8.8
4.8
3.7
37.1
15.8
8.7
8.5
8.1
4.6
3.5
91.1
91.1
86.3
3,733.3
3,734.1
3,857.2
-
5.9
6.3
3,733.3
3,740.0
3,863.5
85
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
G) CRITICAL ACCOUNTING ESTIMATES - REVALUATION OF INVESTMENT PROPERTY PORTFOLIO
Cromwell’s investment properties, with an aggregate carrying amount of $3,740.0 million (2021: $3,863.5 million)
represent a significant balance on Cromwell’s and the Trust’s Balance Sheets. Investment properties are measured
at fair value using valuation methods that utilise inputs based upon estimates.
All property valuations utilise valuation models based on discounted cash flow (DCF) models or income capitalisation
models (or a combination of both) supported by recent market sales evidence. See note 8(h) below for further
information in relation to the valuation of investment properties.
At balance date the adopted valuations for 22 of Cromwell’s investment properties are based on independent
external valuations representing 93.7% 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
(other than land only) to be valued by an independent professionally qualified valuer with a recognised relevant
professional qualification at least once every two years.
Impact of COVID-19 and other global economic impacts on property valuations
For the year ended 30 June 2022 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 and other global economic impacts (such as global geopolitical instability and tightened monetary policy) upon
inputs relevant to the valuation model for each property.
It should be noted that external valuers have specified in their reports that their valuations at 30 June 2022 were
performed in an unusual market context, notably the absence of transactions initiated after the outbreak of the COVID-19
pandemic and difficulties associated with estimating the outlook for changes in the investment property market given
the nature of the recent health crisis and other global economic impacts, and they were working within the context of
valuation uncertainty.
The table below shows the year end revaluation gains / (losses) for each portfolio.
Australia
Poland
Italy
Total revaluation gain
H) FAIR VALUE MEASUREMENT
Cromwell
2022
$M
57.5
(11.8)
8.3
54.0
2021
$M
101.2
(6.5)
2.8
97.5
As noted below in Cromwell’s accounting policy, investment properties are measured at fair value. The fair value of
Cromwell’s investment properties is determined using property valuation models that rely on the use of inputs that are
not based on readily observable market data. Such valuation methods for determining fair value are called level 3 fair
value measurements. These valuation methods and inputs are described in more detail below.
Valuation methodologies
Income
capitalisation
method
DCF method
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.
Under the DCF method, a property’s fair value is estimated using 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 expected cash flows from a real property asset
over a period of time (generally five years) discounted to present value using an appropriate
discount rate. An exit terminal value is added to the present value of the property cash
flows using an appropriate terminal yield, to derive the value of the property.
Both methods require the determination of net market rent for a particular property, being the income capitalised or
used to determine the present value of cash flows from the properties.
86
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
Unobservable inputs
Annual net property income
Capitalisation rate
Discount rate
Terminal yield
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.
The rate at which net market income is capitalised to determine the value of the property.
The rate is determined with regard 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 regard to
market evidence (and the prior external valuation for internal valuations).
The capitalisation rate used to estimate the residual value of the cash flows associated with
the investment property at the end of the expected holding period.
Changes in these unobservable inputs have the following impact on the valuation of the properties:
Inputs
Annual net property income
Capitalisation rate
Discount rate
Terminal yield
Impact of increase
in input on fair
value
Impact of decrease
in input on fair
value
Increase
Decrease
Decrease
Decrease
Decrease
Increase
Increase
Increase
Range and weighted average of unobservable inputs used in the valuation methods to determine the fair value of
Cromwell’s investment properties in the current and prior year are as follows:
Annual net
property income
($M)
Capitalisation rate
(%)
Discount rate
(%)
Terminal yield
(%)
Range
Weighted
average
Range
Weighted
average
Range
Weighted
average
Range
Weighted
average
2022
Australia (1)
Poland (2)
Italy (3)
1.9 – 32.4
1.7 – 22.5
0.1 – 1.2
Portfolio
0.1 – 32.4
2021
Australia (1)
1.3 – 31.3
Poland (2)
1.4 – 13.7
Italy (3)
Portfolio
0.1 – 1.2
0.1 – 31.3
20.7
15.1
0.8
19.2
19.9
9.4
0.7
17.4
4.6 – 6.8
N/A
N/A
4.6 – 6.8
4.8 – 9.5
5.8 – 7.4
N/A
4.8 – 9.5
5.2
N/A
N/A
5.2
5.3
6.5
N/A
5.6
5.3 – 7.5
7.8 – 9.7
5.2 – 5.8
5.2 – 9.7
5.8 – 9.8
N/A
5.0 – 5.5
5.0 – 9.8
5.9
8.5
5.3
6.4
6.2
N/A
5.1
6.2
5.0 – 7.3
6.4 – 8.0
4.3 – 5.0
4.3 – 8.0
5.0 – 9.8
N/A
5.2 – 5.9
5.0 – 9.8
5.6
7.0
4.5
5.8
5.7
N/A
5.4
5.7
(1) DCF models / income capitalisation models (and unobservable inputs therein) are not applied in certain cases
(e.g. H.F.S. assets, vacant assets, etc) where this is not considered an appropriate method of valuation for the particular asset.
(2) For 30 June 2022, there was a change in valuer in respect of the Polish investment properties. The new valuer utilised the DCF methodology only.
The previous valuer’s utilised the Capitalisation Rate methodology only.
(3) No equivalent metric in Italian valuation methodologies utilised.
Sensitivity analysis
Significant judgement is required when assessing the fair value of investment property, especially in the current global
economic environment. Owing to this significant judgement, a sensitivity analysis is included below. The sensitivity analysis
shows the impact on the carrying values of directly held investment properties of an increase or decrease of 0.50% on the
capitalisation rate, discount rate and terminal yields as at 30 June 2022.
Australia
Poland
Italy
Total
Cromwell
2022
$M
0.50%
(287.9)
(46.3)
(8.6)
(342.8)
2022
$M
(0.50%)
320.1
53.9
9.5
383.5
87
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
I) NON-CANCELLABLE OPERATING LEASE RECEIVABLE FROM INVESTMENT PROPERTY TENANTS
The table below reflects the gross property income, excluding recoverable outgoings and lease incentives, based on
existing lease agreements. It assumes, that leases will not be extended by tenants beyond the current lease period, even if
the lease contains options for lease extensions by tenants.
Cromwell
Trust
2022
$M
213.9
705.7
486.0
2021
$M
221.9
714.8
532.1
2022
$M
213.9
705.5
486.0
2021
$M
221.9
714.8
532.1
1,405.6
1,468.8
1,405.6
1,468.8
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
J) 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 and / 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.
9. 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%.
88
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Cromwell’s and the Trust’s equity accounted investments are as follows:
Equity accounted
investments
CEREIT
Ursynów
LDK
Others
Equity accounted
investments
%
27.8
50.0
-
Cromwell
2022
$M
600.0
50.8
-
19.9
670.7
%
28.0
50.0
50.0
2021
$M
620.7
51.5
21.4
18.9
712.5
%
27.4
50.0
-
Trust
2022
$M
590.7
50.8
-
-
641.5
%
27.5
50.0
-
50.0
2021
$M
610.0
51.5
-
0.5
662.0
B) DETAILS OF ASSOCIATE
Cromwell European Real Estate Investment Trust
Cromwell and the Trust have an investment in CEREIT with a carrying amount of $600.0 million (2021: $620.7 million) and
$590.7 million (2021: $610.0 million) respectively. CEREIT is a real estate investment trust (REIT) listed on the mainboard
of the Singapore Exchange (SGX) managed by Cromwell through its 100% owned subsidiary Cromwell EREIT Management
Pte. Ltd. (the “Manager”). CEREIT invests in commercial property, mainly office and urban logistics, in western and central
Europe with a current portfolio of 115 properties located in 10 European countries with an aggregate portfolio value of
€2.6 billion ($3.9 billion). The Manager of CEREIT has its own majority independent board of directors acting solely in
the interest of all CEREIT unitholders. As such, Cromwell and the Trust does not control CEREIT, however has significant
influence by virtue of their unitholdings.
C) DETAILS OF JOINT VENTURES
Ursynów
Cromwell and the Trust have an investment in Ursynów with a carrying amount of $50.8 million (2021: $51.5 million).
Ursynów forms part of the Cromwell Polish Retail Fund (CPRF). Ursynów is a Polish company limited by shares that owns
a single retail asset in Warsaw, Poland. Cromwell and the Trust hold 50% of the voting rights of the company. The other
50% is held by joint venture partner, Unibail Rodamco Westfield (URW). The company is governed by a supervisory board
that decides on all relevant activities of the company. Both investors have equal participation rights in the supervisory
board and all decisions require unanimous consent establishing joint control.
During the current financial year Cromwell and its joint venture partner contributed loans of $26.8 million (€17.0 million)
each, which the joint venture used to repay an external debt facility. This balance receivable from Ursynów at 30 June 2022
was $25.4 million (€16.7 million).
LDK Healthcare Unit Trust
Cromwell has an investment in LDK which was reclassified as held for sale as of 31 December 2021, refer to note 20 for
further information.
Other joint ventures and associates
Other equity accounted investments include Cromwell’s investment in Oyster Property Funds Limited (Oyster) (50%
interest, 2021: 50%), a New Zealand based fund and property manager which is jointly owned with six other shareholders,
and Phoenix portfolio’s (45% interest, 2021: 45%), an Australian based equity fund manager. An investment in CARVAC Pty
Ltd (CARVAC) (50% interest, 2021: 50%), an Australian based company which operates the car park in Cromwell’s Victoria
Avenue Chastwood investment property.
In Europe, Cromwell has investments in Stirling Development Agency Limited (SDA) (50% interest, 2021: 50%) a UK based
property developer; Redhouse Holdings Limited (Redhouse) (50% interest, 2021: 50%) a UK based property developer;
and Dasos Cromwell RE Management Company Sarl (Dasos) (50% interest, 2021: nil) a Luxembourg based property
investment manager.
During the financial year, Cromwell’s investment in Cromwell Phoenix Global Opportunities Fund (GOF) was diluted
from its previous 50% holding to below 20% as the Fund was opened to the public on 26 October 2021, it is now included
in Cromwell’s investments at fair value through Profit or Loss. In addition, Cromwell’s investment in Talbot Green
Developments Limited (Talbot Green) (nil interest, 2021: 50%), a UK based property developer was sold.
89
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT D) 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.
E) 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), Ursynów and LDK Healthcare Pty Ltd (LDK) are detailed below.
Cromwell European Real Estate Investment Trust
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 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. The CEREIT unit price (€1.95) on the
Singapore Exchange (SGX) was 22.8% below the carrying value per unit, and the fair value of the investment using the
quoted market price on the SGX per unit would be $463.2m, which is $136.8m below the carrying value.
If there is a significant or prolonged decline in the fair value of an investment in an equity instrument below its
carrying value, it is regarded as objective evidence of impairment. Given the fair value of the equity instrument
using the quoted market price on the SGX was greater than carrying value at 31 December 2021, Cromwell does not
consider the decline prolonged. Cromwell has also considered whether there has been a significant decline in the
fair value of Cromwell’s equity accounted investment. This process included investigations by Cromwell in relation to
CEREIT operations including external valuations performed at 30 June 2022.
Following this assessment, Cromwell do not consider the diminution of the unit price on the SGX to be an indicator
of a significant decline in the fair value of the investment considering the majority of the CEREIT’s assets are held
at fair value, which supports the carrying value of the investment, and Cromwell has no current plans to realise the
investment. This position suggests that the decline in CEREIT’s unit price on the SGX does not represent a significant
or prolonged decline in the fair value of the investment below its carrying value at 30 June 2022, hence no impairment
was recognised. Cromwell has continued to monitor indicators of impairment including unit price, the valuation of
underlying CEREIT portfolio assets and market transactions to identify if additional impairment indicators existed as at
30 June 2022.
Ursynów
Cromwell and the Trust can only exercise joint control over the relevant decisions but not control, over the entity.
This determination is pursuant to the assessment of control and the consideration of key factors regarding the
management of Ursynów, the composition of the Board and other relevant agreements and joint control over relevant
decisions.
LDK Healthcare Unit Trust
The investment in LDK has been classified as held for sale due to meeting the relevant criteria for classification.
See note 20 for further information.
90
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT l
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91
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
10. Investments at fair value through profit or loss
A) OVERVIEW
This note provides an overview and detailed financial information of Cromwell’s investments that are classified as financial
assets at fair value through profit or loss. Below is information about Cromwell’s investments in unlisted property related
entities whereby Cromwell holds less than 20% of the issued capital in the investee. 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 co-investments in European wholesale funds managed by Cromwell and
any other relevant financial assets.
Investment in Cromwell unlisted fund
Investment in wholesale funds
Total investments at fair value through profit or loss
Cromwell
Trust
2022
$M
20.4
2.9
23.3
2021
$M
-
8.9
8.9
2022
$M
20.4
-
20.4
2021
$M
-
-
-
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 Comprehensive Income.
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
Comprehensive Income as applicable.
For methods used to measure the fair value measurement of Cromwell’s and the Trust’s investments at fair value
through profit or loss refer to note 14.
92
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Finance and Capital Structure
This section of the annual financial report provides further information on Cromwell’s and the Trust’s capital that
comprises debt and stapled securityholders’ equity and reserves. 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.
This section outlines the financial risks that Cromwell and the Trust are exposed to and how these risks are managed
as part of Cromwell’s capital management.
11. 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. A significant proportion of these borrowings are generally fixed
either directly or through the use of interest rate swaps/options/caps and have a fixed term. This note provides information
about Cromwell’s debt facilities, including maturity dates, security provided and facility limits.
Cromwell
Trust
2022
2021
2022
2021
Limit
$M
Drawn
$M
Limit
$M
Drawn
$M
Limit
$M
Drawn
$M
Limit
$M
Drawn
$M
205.0
-
0.8
205.8
341.9
-
-
205.0
5.9
0.8
211.7
283.4
-
20.3
1,560.0
113.1
270.7
45.3
1,293.5
77.2
270.7
45.3
-
-
-
-
-
3.8
-
3.8
355.2
350.8
-
1,560.0
113.1
281.3
52.0
319.7
350.8
18.9
1,099.0
74.7
281.3
52.0
205.0
-
0.8
205.8
341.9
-
-
205.0
0.4
0.8
206.2
283.4
-
5.0
1,560.0
113.1
270.7
45.3
1,293.5
77.2
270.7
45.3
-
-
-
-
-
0.4
-
0.4
355.2
350.8
-
1,560.0
113.1
281.3
52.0
319.7
350.8
5.4
1,099.0
74.7
281.3
52.0
Current
Unsecured
Convertible bond
Lease liabilities
Secured
Italian Euro facilities
Total current
Non-current
Unsecured
Euro / GBP facility
Convertible bond
Lease liabilities
Secured
Bilateral loan facilities
Development loan facility – AUD
Polish Euro facilities
Italian Euro facilities
Unamortised transaction costs
-
(10.4)
-
(14.0)
-
(10.4)
-
(14.0)
Total non-current
2,331.0
1,980.0
2,712.4
2,182.4
2,331.0
1,964.7
2,712.4
2,168.9
Total interest bearing liabilities
2,536.8
2,191.7
2,712.4
2,186.2
2,536.8
2,170.9
2,712.4
2,169.3
93
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT B) MATURITY PROFILE
At balance date, the notional principal amounts and period of expiry of all of Cromwell’s and the Trust’s interest bearing
liabilities, excluding lease liabilities, is as follows:
1 Year - FY23
2 Years - FY24
3 Years - FY25
4 Years - FY26
5 Years - FY27
6 Years - FY28
7 Years - FY29
C) DETAILS OF FACILITIES
i)
Euro / GBP facility
Cromwell
Trust
2022
$M
205.8
571.6
648.2
125.3
575.0
50.0
-
2021
$M
-
725.8
305.1
700.5
366.1
-
80.0
2022
$M
205.8
571.6
648.2
125.3
575.0
50.0
-
2021
$M
-
725.8
305.1
700.5
366.1
-
80.0
This revolving facility is syndicated and allows drawdowns in Euro. Interest was payable in arrears, calculated as EURIBOR
plus a margin. All principal amounts outstanding are due at the expiry of the facility in September 2023.
ii) Secured bilateral loan facilities
Secured Bilateral Loan Facilities (SBLF) can be held with multiple providers. All SBLFs are secured pari passu by first
registered mortgages over a pool of investment properties. Interest is payable quarterly in arrears calculated as BBSY rate
plus a loan margin except for one facility (see below). Each provider individually contracts its commitment amount, expiry
date and fee structure and can be repaid individually.
Details of SBLFs for Cromwell and the Trust by their expiry date are as follows:
Facilities expiring Jun-23
Facilities expiring Mar-24
Facilities expiring Jun-24
Facilities expiring Mar-25
Facilities expiring Jun-25
Facilities expiring Feb-26
Facilities expiring Jun-26
Facilities expiring Jun-27
Facilities expiring Feb-28
Total SBLF’s
2022
2021
Limit
$M
-
-
200.0
50.0
575.0
20.0
60.0
575.0
80.0
Drawn
$M
-
-
17.5
50.0
521.0
20.0
60.0
575.0
50.0
Limit
$M
325.0
50.0
200.0
50.0
525.0
20.0
250.0
60.0
80.0
Drawn
$M
225.0
-
200.0
-
275.0
20.0
239.0
60.0
80.0
1,560.0
1,293.5
1,560.0
1,099.0
iii) Development loan facility - AUD
This is two secured facilities in relation to the asset enhancement initiative at the property at 475 Victoria Avenue, NSW.
Interest is payable both quarterly (Facility A) and monthly (Facility B) in arrears is calculated as BBSY rate plus a loan
margin. The facility expires in April 2025.
iv) Polish Euro facilities
These facilities are secured by first registered mortgage over investment property held by CPRF. Interest is payable
quarterly in arrears calculated as the 3-month EURIBOR rate plus a margin. During the year one of the existing facilities
was repaid and replaced with a new facility expiring in June 2024. The other facility expires in July 2023.
v)
Italian loan facilities
During the prior year Cromwell and the Trust entered into a secured facility in relation to the investment into the Cromwell
Italy Urban Logistics Fund. Interest is payable quarterly in arrears calculated as the EURIBOR rate plus a loan margin.
The facility is composed of three tranches with expiry dates in October 2022 and October 2025 with the third fully repaid
and cancelled in July 2022.
94
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
vi) Convertible bonds
During the 2018 financial year 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).
In June 2022, Cromwell issued a market notice to all bond holders offering to redeem the bonds in cash for 99.75% of the
face value. As a result of this process 951 of the 2300 bonds were redeemed, totalling $142.0 million (€94.9 million).
Subsequent to year end, the Optional Put, which was available to bond holders was exercised by 1,325 of the remaining
1,349 bond holders in exchange for cash equal to 100% of the face value. The convertible bonds of €132.5 million ($193.4
million) plus any accrued interest was paid to the bond holders by Cromwell on 1 August 2022 utilising cash on hand and
existing debt facilities. The remaining 24 bonds will be compulsorily acquired by Cromwell within calendar year 2022 in
accordance with the terms and conditions of the bonds.
vii) Convertible bond – conversion features
The conversion feature of the convertible bonds represents an embedded derivative financial instrument in the host debt
contract. The embedded derivative was measured at fair value and deducted from the carrying amount of the convertible
bond (which is carried at amortised cost) and separately disclosed as a derivative financial liability on the face of the
Balance Sheet.
Considering the transactions that have occurred subsequent to year end that are detailed in note 11(c)(vi), the conversion
feature has been valued at $nil as at 30 June 2022.
Convertible bond – movements
Face value of bonds issued – March 2018
Derivative financial instruments – conversion feature
Convertible bond carrying amount at inception
Movements in previous years
Carrying amount at 1 July
Amortisation - effective interest rate
Redemption of bonds
Movements in exchange rate
Total carrying amount at year end
viii) Lease liabilities
Cromwell
Trust
2022
$M
370.0
(23.5)
346.5
4.3
350.8
11.9
(142.0)
(15.7)
205.0
2021
$M
370.0
(23.5)
346.5
13.7
360.2
3.3
-
(12.7)
350.8
2022
$M
370.0
(23.5)
346.5
4.3
350.8
11.9
(142.0)
(15.7)
205.0
2021
$M
370.0
(23.5)
346.5
13.7
360.2
3.3
-
(12.7)
350.8
Cromwell recognises lease liabilities and related right-of-use assets in respect of various premises, property, plant and
equipment and motor vehicle leases. The leases in respect of assets in Australia, Europe and Singapore have varying
terms and are subject to varying rates of interest. See note 21 for further information.
Below is a maturity table of minimum lease payments in relation to leases in existence at the reporting date.
Within one year
Later than one year but not later than five years
Greater than five years
Total lease commitments
D) ACCOUNTING POLICIES
Cromwell
Trust
2022
$M
5.9
15.7
15.3
36.9
2021
$M
3.8
11.1
7.8
22.7
2022
$M
0.4
1.5
13.0
14.9
2021
$M
0.4
1.9
3.5
5.8
Interest bearing liabilities are initially recognised at fair value, net of transaction costs incurred. Interest bearing
liabilities 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 interest bearing liability portion of a convertible bond is determined using a market interest rate
for an equivalent non-convertible bond. This amount is recorded as an interest bearing liability on an amortised cost
95
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
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, otherwise it is included in shareholders’ equity.
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 21.
12. 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. Derivative financial instruments are accounted for at fair value. The
table below is a summary of Cromwell’s and the Trust’s fair values of derivative financial instruments disclosed in the
Consolidated Balance Sheet.
Cromwell
Trust
Current assets
Interest rate cap contracts
Non-current assets
Interest rate cap contracts
Total derivative financial instruments (assets)
Current liabilities
Interest rate swap contracts
Conversion feature – convertible bond
Non-current liabilities
Interest rate swap contracts
Total derivative financial instruments (liabilities)
2022
$M
13.3
13.3
42.6
55.9
-
-
-
-
-
2021
$M
-
-
11.3
11.3
3.1
5.5
8.6
2.8
11.4
2022
$M
13.3
13.3
42.6
55.9
-
-
-
-
-
2021
$M
-
-
11.3
11.3
3.1
5.5
8.6
2.8
11.4
B)
INTEREST RATE SWAP AND CAP CONTRACTS
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.
Maturity profile
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
2022
$M
2021
$M
145.0
187.8
252.0
400.0
575.0
150.6
-
652.0
Less than 1 year
1 – 2 years
2 – 3 years
3 – 5 years
96
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Hedging profile
The table below provides an overview of the hedging of Cromwell’s and the Trust’s borrowings through interest rate cap
and interest rate swap contracts as balance date:
2022
2021
Hedge
contract
notional
Average
strike
price
Interest
bearing
liability
Percent
hedged
Hedge
contract
notional
Average
strike
price
Interest
bearing
liability
Percent
hedged
$M
%
$M
%
$M
%
$M
%
Secured bilateral loan facility
Interest rate cap contracts
Interest rate swap contracts
Fixed rate loan
Total – Secured bilateral loan facility
Secured loan facilities
Interest rate cap contracts
Secured Polish Euro facility 1
Interest rate cap contracts
Secured Polish Euro facility 2
Interest rate swap contracts
Secured Italian Euro facilities 1 and 2
Euro / GBP facility
Interest rate cap contract
Convertible Bond
Total
0.28%
1.37%
3.20%
400.0
180.0
60.0
640.0
60.0
520.0
420.0
60.0
1.30%
1.87%
3.20%
1,293.5
49.48%
1,000.0
1,099.0
90.99%
72.0
1.00%
77.2
93.26%
72.0
1.00%
74.7
96.39%
60.7
2.00%
101.2
59.88%
65.0
0.00%
105.1
145.0
-
-
-
205.0
(0.28%)
-
-
-
2.50%
169.5
46.1
283.4
-
205.0
85.55%
-
-
-
100%
150.6
-
-
150.0
350.8
(0.28%)
-
-
0.28%
2.50%
176.2
52.0
319.7
350.8
85.47%
-
-
-
100%
1,122.7
2,175.9
51.59%
1,788.4
2,177.5
82.13%
C) CONVERSION FEATURE – CONVERTIBLE BOND
The conversion option amount represents the additional value provided to convertible bond holders compared with 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.
Subsequent to year end, the Optional Put, which was available to bond holders was exercised by 1,325 of the remaining
1,349 bond holders in exchange for cash equal to 100% of the face value. The convertible bonds of €132.5 million ($193.4
million) plus any accrued interest was paid to the bond holders by Cromwell on 1 August 2022 utilising cash on hand and
existing debt facilities. The remaining 24 bonds will be compulsorily acquired by Cromwell within calendar year 2022 in
accordance with the terms and conditions of the bonds. Therefore, the fair value of the derivative at 30 June 2022 is $nil.
Movements of the conversion features since issue of the convertible bonds is as follows:
Derivative financial liability at 1 July
Fair value (gain) / loss
Foreign exchange difference
Balance at 30 June
Cromwell and Trust
2022
2021
$M
5.5
(5.2)
(0.3)
-
$M
5.3
0.4
(0.2)
5.5
For details about the fair value measurement of Cromwell’s and the Trust’s financial instruments refer to note 14(g).
D) ACCOUNTING POLICY
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.
97
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 13. 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) RECEIVABLES
Current
Trade and other receivables at amortised cost
Loan at amortised cost – vendor finance
Loans at amortised cost - other
Receivables – current
Non-current
Loans at amortised cost – joint venture partners
Loans at amortised cost – inter-group
Loans at amortised cost – other (1)
Total receivables – non-current
(1) Includes loans to related parties.
Loan – vendor finance
Cromwell
Trust
2022
$M
34.5
-
3.7
38.2
25.4
-
3.1
28.5
2021
$M
48.8
27.0
4.2
80.0
146.2
-
2.5
148.7
2022
$M
16.9
-
-
16.9
25.4
89.5
-
114.9
2021
$M
28.1
27.0
-
55.1
109.3
74.6
-
183.9
In the prior year Cromwell and the Trust provided a $27.0 million loan facility to the acquirer of the Wakefield Street, SA,
property. The loan, which attracted an interest rate of 7.0%, was fully repaid during the year.
Loans – joint venture partners
LDK joint venture
On the 31 December 2022, the LDK loans were reclassified as held for sale, refer to note 20 further information regarding
the loans.
Ursynów joint venture
During the current financial year Cromwell and the Trust contributed a loan of $26.8 million (€17.0 million) to Ursynów,
which the joint venture used to repay an external debt facility. The balance receivable at year end was $25.4 million
(2021: $nil).
Loans - inter-group
The Trust has provided a loan facility to the Company of €100.0 million. The loan balance was €54.8 million ($83.3 million)
(2021: €47.2 million ($74.6 million)) at balance date. The facility is unsecured and expires in February 2029.
During the current financial year the Trust provided a new loan facility to the Company of $30.0 million in relation to the
transfer of the development property at 19 National Circuit, ACT. The loan balance at year end was $6.1 million (June
2021: $nil). The facility is unsecured and expires in September 2026.
98
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT C) TRADE AND OTHER PAYABLES
Trade and other payables
Lease incentives payables
Tenant security deposits
Trade and other payables
Cromwell
Trust
2022
$M
40.7
31.1
1.5
73.3
2021
$M
36.8
44.5
1.8
83.1
2022
$M
20.7
31.1
1.5
53.3
2021
$M
14.5
44.5
1.8
60.8
D) 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.
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.
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.
99
CROMWELL PROPERTY GROUP I 2022 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.
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’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’s risk exposures and techniques used to manage these are summarised below:
Risk
Definition of risk
Cromwell’s exposure
Cromwell’s management of risk
Credit risk
(Section 14(b))
The risk a counterparty
will default on its
contractual obligations
under a financial
instrument resulting
in a financial loss to
Cromwell.
• Cash and cash
equivalents;
• Receivables;
• Derivative financial
instruments;
•
•
Investments in equity
accounted investments;
Investments at fair value
through profit or loss;
• Assets held for sale.
Cromwell manages this risk by:
• establishing credit limits for counterparties
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;
regularly monitoring loans and receivables
on an ongoing basis; and
regularly monitoring the performance of
associates on an ongoing basis.
•
•
Liquidity risk
(Section 14(c))
The risk Cromwell will
default on its contractual
obligations under a
financial instrument.
• Payables;
•
Interest bearing
liabilities;
• Derivative financial
Cromwell manages this by:
• maintaining sufficient cash reserves and
undrawn finance facilities to meet ongoing
liquidity requirements;
instruments.
• preparation of rolling forecasts of short-term
and long-term liquidity requirements;
• monitoring maturity profile of interest
bearing liabilities and putting in place
strategies to ensure all maturing interest
bearing liabilities are refinanced significantly
ahead of maturity.
Market risk –
price risk
(Section 14(d))
The risk that the fair value
of financial assets at fair
value through profit or
loss will fluctuate.
•
Investments at fair value
through profit or loss.
Cromwell has minimal exposure to this risk and
therefore does not actively manage this risk.
Market risk –
interest rate risk
(Section 14(e))
The risk that the fair value
or cash flows of financial
instruments will fluctuate
due to changes in market
interest rates.
• Borrowings at variable
or fixed rates;
• Derivative financial
instruments.
Cromwell manages this risk through interest
rate hedging arrangements (swap or cap
contracts) on not less than 50% of Cromwell’s
borrowings.
100
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Market risk –
foreign exchange
risk
(Section 14(f))
The risk that the fair
value of a foreign
currency asset or
liability will fluctuate
due to changes in
foreign currency rates.
• Cash and cash
equivalents;
•
•
Investments in foreign
subsidiaries;
Investments in foreign
equity accounted
investments;
• Foreign currency
borrowings.
Cromwell manages this risk by financing
Cromwell’s foreign currency investments
through foreign currency borrowings
providing a natural hedge.
B) CREDIT RISK
The maximum exposure to credit risk at balance date is the carrying amount of financial assets recognised in the
Consolidated Balance Sheet of Cromwell. Cromwell and the Trust hold collateral as security in relation to the following:
•
Loans at amortised cost – LDK – these loans are secured by first and second ranking mortgages over relevant
investment properties and other assets within the LDK structure. Refer to note 20 for further information.
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.
C) LIQUIDITY RISK
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
Greater
than 1
year - 3
years
1 year
or less
4-5
years
Over 5
years
$M
$M
$M
$M
Total
$M
Greater
than 1
year - 3
years
1 year
or less
4-5
years
Over 5
years
$M
$M
$M
$M
73.3
42.6
-
-
-
-
-
-
73.3
53.3
42.6
42.6
-
-
-
-
-
-
Total
$M
53.3
42.6
265.9
620.8 1,431.6
51.4 2,369.7
265.9
620.8
1,431.6
51.4
2,369.7
2022
Trade and other
payables
Dividends / distribution
payable
Interest bearing
liabilities
Lease liabilities
Total financial liabilities
387.7
628.6 1,439.4
66.7 2,522.5
362.2
621.5
1,432.4
5.9
7.8
7.9
15.3
36.9
0.4
0.7
0.8
13.0
64.4
14.9
2,480.5
2021
Trade and other payables
Dividends / distribution
payable
Interest bearing liabilities
Lease liabilities
Derivative financial
instruments
83.1
42.5
49.6
3.8
3.1
-
-
-
-
-
-
83.1
42.5
766.8
5.6
1,435.8
5.5
83.2
7.8
2,335.4
22.7
1.5
1.3
-
5.9
60.8
42.5
49.6
0.4
3.1
-
-
-
-
-
-
60.8
42.5
766.8
1.0
1,435.8
0.9
83.2
3.5
2,335.4
5.8
1.5
1.3
-
5.9
Total financial liabilities
182.1
773.9
1,442.6
91.0
2,489.6
156.4
769.3
1,438.0
86.7
2,450.4
101
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT D) MARKET RISK – PRICE RISK
Cromwell and the Trust are exposed to price risk in relation to its unlisted equity securities (refer note 10). The impact to
Cromwell and the Trust of a 10% decrease in the value of the investment in the unlisted equity securities is a decrease
to Profit and Equity of $2.3 million for Cromwell and $2.0m for the Trust. The impact to Cromwell and the Trust of a 10%
increase in the value of the investment in the unlisted equity securities is an increase to Profit and Equity of $2.3 million
for Cromwell and $2.0m for the Trust.
E) MARKET RISK – INTEREST RATE RISK
Cromwell’s interest rate risk primarily arises from interest bearing liabilities. Interest bearing liabilities issued at variable
rates expose Cromwell to cash flow interest rate risk. Interest bearing liabilities 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
interest bearing liabilities. At balance date interest on a total of 51.59% (2021: 82.13%) of Cromwell’s total borrowings is
hedged through fixed rate interest rate swap and cap contracts which effectively fix or limit the amount of variable interest
paid. 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 12.
The below table shows the impact on profit after tax and equity if interest rates changed by 100 basis points based on net
interest bearing liabilities and interest rate derivatives held at year-end with all other variables held constant. The impact
on profit after tax and equity includes impact on finance costs (cash flow risk) and the fair value of derivative financial
instruments (fair value risk).
Interest rate increase / (decrease) of:
2022
Cromwell
Trust
2021
Cromwell
Trust
Profit
$M
(9.0)
(9.8)
(9.7)
(10.3)
+1%
Equity
$M
(9.0)
(9.8)
(9.7)
(10.3)
Profit
$M
9.0
9.8
9.7
10.3
-1%
Equity
$M
9.0
9.8
9.7
10.3
F) MARKET RISK – FOREIGN EXCHANGE RISK
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a
currency that is not the functional currency of the relevant currency of the relevant group entity.
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 or Polish Zloty. No hedge accounting was applied in relation to
the net investment in the foreign subsidiaries.
Cromwell’s and the Trust’s exposure to Euro foreign currency risk due to the ownership, funding and operation of the
investment property portfolios in Poland and Italy and the investment in CEREIT as well as overseas subsidiaries,
expressed in Australian dollars, was as follows:
Euro foreign currency risk
Cash and cash equivalents
Receivables
Interest bearing liabilities – financial institutions
Interest bearing liabilities – convertible bond
Derivative financial instruments – conversion feature
Other
Total exposure
Cromwell
Trust
2022
$M
1.0
-
(283.4)
(205.0)
-
(1.3)
(488.7)
2021
$M
34.7
-
(319.7)
(350.8)
(5.5)
(2.3)
(643.6)
2022
$M
1.0
83.3
(283.4)
(205.0)
-
0.8
(403.3)
2021
$M
34.7
74.6
(319.7)
(350.8)
(5.5)
(2.3)
(569.0)
102
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT A change in the exchange rate of the Euro would have resulted in the following impact on Cromwell’s profit after tax and
equity:
Euro – Australian Dollar gains 1 cent in exchange
Euro – Australian Dollar loses 1 cent in exchange
2022
2021
Profit
Equity
$M
7.3
(7.5)
$M
7.3
(7.5)
Profit
$M
10.0
(10.3)
Equity
$M
10.0
(10.3)
Cromwell and the Trust also have exposure to Polish Złoty foreign currency risk due to the ownership and operation of the
investment property portfolio in Poland. Expressed in Australian dollars, this was as follows:
Polish Złoty foreign currency risk
Cash and cash equivalents
Receivables
Other
Total exposure
Cromwell
Trust
2022
$M
15.5
25.4
0.6
41.5
2021
$M
28.6
-
0.4
29.0
2022
$M
15.5
25.4
0.6
41.5
2021
$M
28.6
-
0.4
29.0
A change in the exchange rate of the Polish Złoty of 1 cent would not result in a material impact on Cromwell’s profit after
tax and equity.
G) FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
Cromwell uses a number of methods to determine the fair value of its financial assets and financial liabilities. 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 2022 and 30 June 2021 and the type of fair value measurement applied:
Level 2
$M
Notes
2022
Level 3
Total
Level 2
Level 3
Total
2021
$M
$M
$M
$M
$M
Cromwell
Financial assets at fair value
Investments at fair value through profit
or loss
Unlisted equity securities
10(a)
20.4
Derivative financial instruments
Interest rate caps
12(a)
Total financial assets at fair value
Financial liabilities at fair value
Derivative financial instruments
Interest rate swaps
Conversion feature
Total financial liabilities at fair value
12(a)
12(a)
55.9
76.3
-
-
-
2.9
-
2.9
-
-
-
23.3
55.9
79.2
-
-
-
-
11.3
11.3
5.9
5.5
11.4
8.9
-
8.9
-
-
-
8.9
11.3
20.2
5.9
5.5
11.4
103
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Trust
Notes
$M
$M
$M
$M
$M
Level 2
2022
Level 3
Total
Level 2
2021
Level 3
Financial assets at fair value
Investments at fair value through
profit or loss
Unlisted equity securities
10(a)
20.4
Derivative financial instruments
Interest rate caps
12(a)
Total financial assets at fair value
Financial liabilities at fair value
Derivative financial instruments
Interest rate swaps
Conversion feature
Total financial liabilities at fair value
12(a)
12(a)
55.9
76.3
-
-
-
-
-
-
-
-
-
20.4
55.9
76.3
-
-
-
-
11.3
11.3
5.9
5.5
11.4
-
-
-
-
-
-
Total
$M
-
11.3
11.3
5.9
5.5
11.4
There were no transfers between the levels of fair value measurement during the current and prior financial years.
H) DISCLOSED FAIR VALUES
i) Valuation techniques used to derive Level 1 fair values
At balance date, Cromwell held no Level 1 assets. 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.
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 and
interest rate cap derivatives (over-the-counter derivatives). The fair value of these derivatives has been determined using
pricing models 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.
Fair value of conversion feature – convertible bond
The fair value of the convertible bond conversion feature was determined in the previous year 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.
104
CROMWELL PROPERTY GROUP I 2022 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
2022
$M
8.9
0.5
(4.5)
(1.7)
(0.3)
2.9
2021
$M
12.9
0.7
(2.3)
(2.0)
(0.4)
8.9
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.
I) ACCOUNTING POLICY
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 Comprehensive Income.
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 interest 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 Comprehensive Income.
Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off.
105
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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 Comprehensive Income 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 Financial Instruments, 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. This resulted in no expected
credit losses to be recognised.
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.
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 Comprehensive Income 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).
106
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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 comprehensive income.
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 12(d).
15. Contributed equity
A) OVERVIEW
Issued capital of Cromwell includes ordinary shares in Cromwell Corporation Limited and ordinary units of Cromwell
Diversified Property Trust which are stapled to create Cromwell’s stapled securities. The shares of the Company and units
of the CDPT cannot be traded separately and can only be traded as 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.
Cromwell’s and the Trust’s issued capital at year-end were as follows:
Cromwell stapled
securities
2022
M
2021
M
Issued capital
2,618.9
2,617.5
Company shares
CDPT units
2022
$M
207.3
2021
$M
207.3
2022
$M
2021
$M
2,072.8
2,072.5
107
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT B) 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 at 1 July 2020
Exercise of performance rights
Balance at 30 June 2021
2,612,871,600
4,599,075
2,617,470,675
30.0¢
Issue
price
5.2¢
$M
2,278.5
1.3
2,279.8
$M
207.1
0.2
207.3
Issue
price
24.8¢
Exercise of performance rights
1,396,024
22.5¢
0.3
4.2¢
-
18.3¢
Balance at 30 June 2022
2,618,866,699
2,280.1
207.3
$M
2,071.4
1.1
2,072.5
0.3
2,072.8
C) 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 securities 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.
16. 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 disclosed in the Consolidated Balance Sheet and a description of the nature and
purpose of each reserve.
Security based payments
reserve (SBP)
This reserve is used to recognise the fair value of equity settled security based
payments in respect of employee services. Refer to note 24 for details of Cromwell’s
security based payments.
Fair value through other
comprehensive income
reserve (FVTOCI)
This reserve records changes in the fair value of investments classified as being at
fair value through other comprehensive income. The amount recorded in the reserve
relates to a pre-stapling interest of a subsidiary of the Company in a subsidiary trust
of the Trust. Upon the disposal of the interest in the subsidiary on 30 June 2022, the
reserve was released into Other Comprehensive Income.
Treasury securities reserve
Foreign currency translation
reserve (FCTR)
The treasury securities reserve represents the cost of the securities Cromwell
purchased in the market and are held to satisfy options under the Group’s
Performance Rights Plans. The number of ordinary shares held at year end was
700,000 (2021: nil) which were purchased for $0.5 million (2021: $nil).
This reserve records exchange differences arising on the translation of the
foreign subsidiaries. In addition, any foreign currency differences arising from
inter-group loans are also transferred to the foreign currency translation reserve
upon consolidation as such loans form part of the net investment in the foreign
subsidiary.
108
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Security based
payments
reserve
Fair value
through other
comprehensive
income reserve
Treasury
securities reserve
Foreign currency
translation
reserve
Total other
reserves
Cromwell
$M
Trust
$M
Cromwell
$M
Trust
$M
Cromwell
$M
Trust
$M
Cromwell
$M
Trust
$M
Cromwell
$M
Balance at 1 July 2020
Net security based
payments
Foreign exchange
differences recognised
in other comprehensive
income
13.2
0.7
-
Balance at 30 June 2021
13.9
Net security based
payments
Foreign exchange
differences recognised
in other comprehensive
income
Acquisition of treasury
securities
Transfer of FVOCI reserve
to Profit & Loss
(0.1)
-
-
-
Balance at 30 June 2022
13.8
-
-
-
-
-
-
-
-
-
2.3
-
-
2.3
-
-
-
(2.3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.5)
-
(0.5)
-
-
-
-
-
-
-
-
-
45.6
30.0
-
-
61.1
0.7
Trust
$M
30.0
-
(45.2)
(41.9)
(45.2)
(41.9)
0.4
(11.9)
16.6
(11.9)
-
-
(0.1)
-
(45.2)
(44.7)
(45.2)
(44.7)
-
-
-
-
(0.5)
(2.3)
-
-
(44.8)
(56.6)
(31.5)
(56.6)
109
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Group Structure
This section of the annual financial report provides information about the Cromwell Property Group structure
including parent entity information and information about controlled entities (subsidiaries).
17. Parent entity disclosures
A) OVERVIEW
The Corporations Act 2001 (Cth) requires the disclosure of summarised financial information for the parent entity of a
consolidated group. Further, Australian Accounting Standards require stapled groups to identify the parent entity of the
group and identify equity attributable to the parent entity separately from other entities stapled to the parent entity.
The parent entity of the Cromwell stapled group is Cromwell Corporation Limited (the Company). The parent entity of the
Trust group is Cromwell Diversified Property Trust (CDPT).
B) SUMMARISED FINANCIAL INFORMATION OF THE COMPANY AND CDPT
Results
(Loss) / profit after tax
Total comprehensive income / (loss)
Financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
C) COMMITMENTS
Company
CDPT
2022
$M
(4.2)
(4.2)
17.1
167.3
-
91.6
75.7
207.3
13.3
(144.9)
75.7
2021
$M
8.7
8.7
6.2
154.0
0.1
73.0
81.0
207.3
14.4
(140.7)
81.0
2022
$M
166.9
166.9
172.9
3,150.6
52.3
1,421.9
1,728.7
2,072.8
-
(344.1)
1,728.7
2021
$M
165.5
165.5
67.4
3,153.5
57.1
1,421.8
1,731.7
2,072.5
-
(340.8)
1,731.7
At balance date the Company and CDPT had no commitments (2021: none) in relation to capital expenditure contracted for
but not recognised as liabilities.
D) GUARANTEES PROVIDED
The Company and CDPT have both provided guarantees in relation to the convertible bonds disclosed at note 11(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.
E) CONTINGENT LIABILITIES
At balance date the Company and CDPT had no contingent liabilities (2021: none).
F) ACCOUNTING POLICY
The financial information for the Company and CDPT is prepared on the same basis as the consolidated financial
statements, except for:
•
Investments in subsidiaries and equity accounted investments – these 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.
110
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT • Tax consolidation legislation – the Company is the head entity of a tax consolidated group as outlined in note 7.
As the head entity, the Company recognises the current tax balances and the deferred tax assets for unused tax
losses and credits assumed from other members as well as its own current and deferred tax amounts. Amounts
receivable from or payable to the other members are recognised by the Company as intercompany receivables or
payables.
18. Controlled entities
A) COMPANY AND ITS CONTROLLED ENTITIES
Name
Cromwell Aged Care Holdings Pty Ltd
Cromwell BT Pty Ltd
Cromwell Capital Pty Ltd
Cromwell Development Trust
Cromwell Finance Pty Ltd
Cromwell Funds Management Limited
Cromwell Holdings No 1 Pty Ltd
Cromwell Holdings No 2 Pty Ltd
Cromwell CMW Holdings 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 Reit Holdings Pty Limited
Cromwell Carparking 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.
Czech Republic
Cromwell Denmark A/S
Cromwell Finland O/Y
Cromwell France SAS
Cromwell EREIT Management Germany GmbH
Cromwell Germany GmbH
Cromwell Property Group Italy SRL
CPRF GP S.à r.l.
Cromwell EREIT Management Luxembourg S.à r..
Cromwell Investment Luxembourg S.à r.l.
Cromwell REIM Luxembourg S.à r.l.
Cromwell Central Europe B.V.
Cromwell Netherlands B.V.
Cromwell Property Group Poland Sp Zoo
Cromwell EREIT Management Pte. Ltd.
Cromwell Sweden A/B
Denmark
Finland
France
Germany
Germany
Italy
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Netherlands
Netherlands
Poland
Singapore
Sweden
Cromwell Asset Management UK Limited
United Kingdom
Country of
Registration
Equity Holding
2022 %
2021 %
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
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
111
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Name
Cromwell Capital Ventures UK Limited
Cromwell CEE Coinvest LP
Cromwell CEE Development Holdings Limited
Cromwell CEE Promote LP
Cromwell CEREIT Holdings Limited
Cromwell Coinvest CEIF LP
Cromwell Coinvest CEVAF l LP
Cromwell Coinvest ECV LP
Cromwell Corporate Secretarial Limited
Cromwell Development Holdings UK Limited
Cromwell Development Management UK Limited
Cromwell Director Limited
Cromwell Europe Limited
Cromwell European Holdings Limited
Cromwell European Management Services Limited
Cromwell GP
Cromwell Holdings Europe Limited
Cromwell Investment Holdings UK Limited
Cromwell Investment Management Services Limited
Cromwell Investment Services Limited
Cromwell Management Holdings Limited
Cromwell Poland Retail LLP
Cromwell Poland Retail UK Limited
Cromwell Promote CEIF LP
Cromwell Promote CEVAF l LP
Cromwell Promote CPRF LP
Cromwell Promote ECV LP
Cromwell Promote HIG LP
Cromwell WBP Poland LP
Cromwell YCM Coinvest LP
Cromwell YCM Promote LP
D.U.K.E. Combined GP Limited
Equity Partnerships (Osprey) Limited
IO Management Services Limited
Parc D’Activities 1 GP Limited
The IO Group Limited
Valad Salfords Custodian Limited
B) TRUST AND ITS CONTROLLED ENTITIES
Name
CDPT Finance Pty Ltd
CDPT Finance No. 2 Pty Ltd
Cromwell Diversified Property Trust No. 2
Cromwell Diversified Property Trust No. 3
Cromwell George Street Trust
Cromwell Holdings Trust No 1
112
Country of
Registration
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Country of
Registration
Australia
Australia
Australia
Australia
Australia
Australia
Equity Holding
2022 %
2021 %
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
97
100
100
87
100
-
100
100
100
100
100
100
100
83
100
90
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
97
100
100
88
100
100
100
100
100
100
Equity Holding
2022 %
2021 %
100
100
100
100
100
100
100
100
100
100
100
100
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Name
Cromwell Holding Trust No 2
Cromwell Holdings Trust No 4
Cromwell HQ North Head Trust
Cromwell HQ North Trust
Cromwell Italy Partnership
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
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
Exhibition Head Trust
EXM Trust
Mascot Head Trust
Mascot Trust
Tuggeranong Head Trust
Tuggeranong Trust
Cromwell Italy Urban Logistics Fund
CPRF S.C.A.
Cromwell Logistics Fund
Next Real Estate Polish Retail S.à r.l.
Next Real Estate Polish Retail Holdco 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
HEL Poland Sp Zoo
Country of
Registration
Equity Holding
2022 %
2021 %
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Italy
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Poland
Poland
Poland
Poland
Poland
Poland
Poland
Poland
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
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
Cromwell Singapore Holdings Pte. Ltd.
Singapore
All new entities have been incorporated or acquired 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 of in the current year.
113
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
19. Equity attributable to the Company and CDPT
A) OVERVIEW
Stapled entities are required to separately identify equity attributable to the parent entity from equity attributable to other
entities stapled to the parent.
B) EQUITY ATTRIBUTABLE TO THE COMPANY
The table below summarises equity, profit for the year and total comprehensive income for the year attributable to the
Company.
Attributable to Equity Holders of the Company
FVTOCI
reserve
Treasury
securities
reserve
FCT
reserve
Accumulated
losses
$M
$M
$M
$M
2.3
-
-
-
-
-
-
2.3
-
(2.3)
(2.3)
-
-
-
-
15.6
-
(3.3)
(3.3)
-
-
-
12.3
-
(0.5)
(0.5)
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.5)
-
(0.5)
(0.5)
Total
$M
97.0
14.3
(3.3)
11.0
0.2
0.7
0.9
(141.2)
14.3
-
14.3
-
-
-
(126.9)
108.9
(10.5)
-
(10.5)
(10.5)
(2.8)
(13.3)
-
-
-
(0.5)
(0.1)
(0.6)
11.8
(137.4)
95.0
Contributed
equity
$M
207.1
-
-
-
0.2
-
0.2
SBP
reserve
$M
13.2
-
-
-
-
0.7
0.7
Balance at 1 July 2020
Profit for the year
Other comprehensive loss
Total comprehensive income
Transactions with equity holders
in their capacity as equity
holders:
Contributions of equity, net of
equity issue costs
Employee performance rights
Total transactions with equity
holders
Balance as at 30 June 2021
207.3
13.9
Profit for the year
Other comprehensive loss
Total comprehensive loss
Transactions with equity holders
in their capacity as equity
holders:
Acquisition of treasury shares
Employee performance rights
Total transactions with equity
holders
-
-
-
-
-
-
Balance as at 30 June 2022
207.3
-
-
-
-
(0.1)
(0.1)
13.8
114
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT C) EQUITY ATTRIBUTABLE TO CDPT
The table below summarises equity, profit for the year and total comprehensive income for the year attributable to CDPT,
the entity stapled to the Company.
Balance at 1 July 2020
Profit after tax
Other comprehensive loss
Total comprehensive income / (loss)
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of equity issue costs
Distributions paid / payable
Total transactions with equity holders
Balance as at 30 June 2021
Profit after tax
Other comprehensive loss
Total comprehensive income / (loss)
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of equity issue costs
Distributions paid / payable
Total transactions with equity holders
Balance as at 30 June 2022
Attributable to Equity Holders of the CDPT
Contributed
equity
Reserve
Retained
earnings
$M
2,071.4
-
-
-
1.1
-
1.1
2,072.5
-
-
-
0.3
-
0.3
$M
30.0
-
(41.9)
(41.9)
-
-
-
(11.9)
-
(44.7)
(44.7)
-
-
-
2,072.8
(56.6)
$M
385.0
293.9
-
293.9
-
(183.1)
(183.1)
495.8
273.7
-
273.7
-
(170.3)
(170.3)
599.2
Total
$M
2,486.4
293.9
(41.9)
252.0
1.1
(183.1)
(182.0)
2,556.4
273.7
(44.7)
229.0
0.3
(170.3)
(170.0)
2,615.4
115
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Other Items
This section of the annual financial report provides information about individually significant items to the Balance
Sheets, Statements of Comprehensive Income and Cash Flow Statements and items that are required to be disclosed
by Australian Accounting Standards.
20. Assets held for sale
A) OVERVIEW
Non-current assets are classified as held for sale if their carrying amounts will be recovered principally through a sale
transaction rather than through continuing use. This condition is met only when the sale is highly probable and the asset
is available for immediate sale in its present condition. Management must be committed to the sale, which should be
expected to qualify for recognition as such within one year from the date of classification.
Assets held for sale at reporting date are as follows:
Disposal group - LDK
Interest in joint venture
Loans at amortised cost – joint venture
Total – assets held for sale
Disposal group - LDK
Cromwell
Trust
2022
$M
12.0
148.4
160.4
2021
$M
-
-
-
2022
$M
-
105.7
105.7
2021
$M
-
-
-
The interest in the LDK joint venture, as well as the loan portfolio, have been classified as a disposal group held for
sale. This is because these assets meet the criteria to be held for sale and it is managements intention that the carrying
amount of these assets will be recovered through a single sale transaction.
LDK is a senior living operator currently operating two senior living villages, being Greenway Views in Tuggeranong, ACT
and The Landings in North Turramurra on the Upper North Shore of Sydney, NSW. Cromwell holds 50% of the units in
LDK with the other 50% held by a single investor. By virtue of the unitholder agreement all decisions about the relevant
activities of LDK require unanimous consent of both unitholders indicating joint control. Both parties have only rights to
the net assets of the venture which is therefore classed as a joint venture that is equity accounted. Currently, Cromwell
has rights to all profits from LDK until a certain internal rate of return (IRR) threshold is achieved in respect of its capital
invested at which point in time profits will be shared between the joint venture partners.
Interest in joint venture
The interest in joint venture of $12.0 million has been recognised at the lower of carrying amount when the interest was
classified as held for sale (being 31 December 2021) and fair value less costs to sell.
Working capital loan
Cromwell and the Trust have provided LDK with a ‘Working capital loan’ facility terminating on 31 December 2023. The
maximum loan facility is $10.0 million with an interest rate of 12%. The balance receivable at year end was $6.3 million
(2021: $4.3 million).
“Waterfall” loans
Cromwell and the Trust have provided a number of loan facilities to LDK. The facilities are secured by second ranking
mortgages over the investment properties owned by LDK. The balance receivable at year end was $142.1 million (2021:
$141.9 million).
These facilities 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.
No impairment losses have been recognised in the current and prior years in respect of assets held for sale.
116
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT B) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The interest in joint venture of $12.0 million has been recognised at the lower of carrying amount when the interest
was classified as held for sale (being 31 December 2021) and fair value less costs to sell. The loans at amortised cost
of $148.4 million reflect the amortised cost of the loans. The carrying value of the disposal group of $160.4 million is
supported by the net assets of LDK which includes investment properties which are held at fair value as at 30 June
2022.
At this point in time management intends to recover the disposal group through a sale process.
21. Leased assets and related leases
A) OVERVIEW
Cromwell and the Trust are lessees in a number of leasing arrangements. Leases grant Cromwell and the Trust the
“right-of-use” for the leased asset for the contractual period of the lease in return for fixed lease payments. The right-of-
use is recognised as an asset within the Balance Sheet category the relating leased asset would ordinarily be classified in
and depreciated over the shorter of the contractual lease period or the useful life of the leased asset. The present value of
remaining lease payments is recognised as a liability within borrowings.
Cromwell and the Trust are lessees in the following leasing arrangements:
•
•
•
Leasehold land – leases of land upon which some of Cromwell’s and the Trust investment properties are situated
(leasehold properties). The right-of-use assets relating to such lease leases are recognised within investment
properties. See note 8 for more information in relation to Cromwell’s and the Trust’s investment properties situated
on leasehold land.
Office leases – leases of office space in Australia, Singapore and Europe. The relating right-of-use assets are
recognised within property, plant and equipment.
Equipment leases – leases of office equipment. The right-of-use assets are recognised within property, plant &
equipment.
117
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT B) AMOUNTS RECOGNISED IN THE FINANCIAL STATEMENTS
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 2022 (see note 11(c) also for further information):
Right-of-use assets
Reconciliation of movements in right-of-use assets:
Right-of-use assets recognised on 1 July 2020
Additions
Disposals, terminations and modifications
Amortisation (4)
Foreign exchange movements
Balance as at 30 June 2021
Additions
Disposals, terminations and modifications
Amortisation (4)
Foreign exchange movements
Right-of-use assets at 30 June 2022
Lease liabilities
Reconciliation of movements in lease liabilities:
Lease liabilities recognised on 1 July 2020
Additions
Principle payments
Finance costs (5)
Disposals, terminations and modifications
Foreign exchange movements
Balance as at 30 June 2021
Additions
Principle payments
Finance costs (5)
Disposals, terminations and modifications
Foreign exchange movements
Lease liabilities at 30 June 2022
Payments in relation to lease liabilities recognised above (6):
2021
2022
Investment
property (1) (2)
Office
premises (3)
Property,
plant and
equipment (3)
$M
$M
$M
6.7
-
-
(0.2)
(0.2)
6.3
-
-
(0.2)
(0.2)
5.9
6.3
-
(0.4)
0.3
-
(0.4)
5.8
-
(0.3)
0.3
-
(0.5)
5.3
(0.4)
(0.3)
12.9
5.5
(1.1)
(2.3)
0.1
15.1
6.0
(0.4)
(3.1)
(0.5)
17.1
13.0
5.5
(3.7)
0.4
(0.4)
1.1
15.9
6.3
(3.6)
0.4
(0.6)
(0.5)
17.9
(3.7)
(3.6)
1.4
0.6
(0.2)
(0.4)
(0.1)
1.3
2.5
(0.1)
(0.6)
0.1
3.2
1.4
0.6
(1.0)
-
-
-
1.0
2.6
(0.6)
-
-
-
3.0
(1.0)
(0.6)
Total
$M
21.0
6.1
(1.3)
(2.9)
(0.2)
22.7
8.5
(0.5)
(3.9)
(0.6)
26.2
20.7
6.1
(5.1)
0.7
(0.4)
0.7
22.7
8.9
(4.5)
0.7
(0.6)
(1.0)
26.2
(5.1)
(4.5)
(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 8 for further information.
(3) Right-of-use assets included as a component of Property, plant and equipment in the Consolidated Balance Sheet.
(4) Included as a component of Administration and other expenses in the Consolidated Statement of Comprehensive Income.
(5) Included as a component of Finance costs in the Consolidated Statement of Comprehensive Income.
(6) Represents total cash flows in respect of leases.
118
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
C) ACCOUNTING POLICY
Accounting as lessee
Cromwell recognised a lease liability and a corresponding right-of-use asset at the commencement of a lease.
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 borrowings.
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. 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.
22. 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) RECONCILIATION OF PROFIT AFTER TAX TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Cromwell
Trust
Profit after tax
Amortisation and depreciation
Amortisation of lease costs and incentives
Capitalised 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 gain
Amortisation of loan transaction costs
Gain on sale of investment properties
Gain on disposal of other assets
Asset, fund and development management fees non-cash settled
Impact of dilution of equity holding / impairment
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
(Increase) / decrease in Tax assets / liabilities
(Increase) / decrease in Other current assets
Increase / (decrease) in Trade and other payables
Increase / (decrease) in Provisions
Increase / (decrease) in Unearned income
2022
$M
263.2
6.0
29.0
(17.2)
3.4
(6.0)
-
3.2
(26.7)
17.9
(11.8)
(2.3)
1.1
1.7
1.1
(54.0)
(55.4)
1.7
3.0
6.6
18.9
0.4
(12.0)
(0.8)
4.2
2021
$M
308.2
5.4
30.1
-
2.3
(3.7)
0.7
(31.2)
(26.4)
10.5
(5.9)
-
-
8.6
1.0
(97.5)
(14.2)
2.0
7.7
(3.5)
(6.2)
1.4
4.6
(1.4)
(1.9)
2022
$M
274.9
0.2
29.0
(17.2)
0.3
(6.0)
-
(4.8)
(25.5)
17.9
(11.8)
-
-
1.4
1.1
(54.0)
(55.4)
-
2.8
4.0
12.4
(1.0)
(5.3)
-
3.1
2021
$M
293.9
0.2
30.1
-
0.1
(3.7)
-
(13.4)
(23.5)
10.5
(5.9)
-
-
7.4
1.0
(97.5)
(14.2)
-
2.1
(2.8)
(0.2)
1.7
(9.6)
-
(1.6)
Net cash provided by operating activities
175.2
190.6
166.1
174.6
119
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Non-cash financing and investing transactions
Stapled securities / units issued on reinvestment of distributions
CEREIT fees received in units:
Acquisition fees
Restructure costs
Non-cash financing and investing transactions
Cromwell
Trust
2022
$M
-
0.1
(1.2)
(1.1)
2021
$M
-
-
0.8
0.8
2022
$M
2021
$M
-
-
-
-
-
-
-
-
C) RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Interest
bearing
liabilities
Dividends /
distributions
payable
Derivative
financial
instruments
$M
19.3
-
-
-
-
4.9
-
4.9
1.4
(14.2)
-
-
-
11.4
-
-
-
-
(0.3)
-
(0.3)
-
(11.1)
-
-
-
Total
$M
2,259.5
338.1
(311.9)
(5.1)
(3.6)
4.9
(190.6)
(168.2)
(38.0)
(14.2)
6.4
10.5
184.1
2,240.1
474.0
(447.2)
(4.5)
(2.2)
(0.3)
(170.2)
(150.4)
(41.5)
(11.1)
9.0
17.9
170.3
-
2,234.3
Cromwell
Opening balance at 1 July 2020
Changes from financing cash flows:
Proceeds from borrowings
Repayments of borrowings
Payments for lease liabilities
Payment of loan transaction costs
Payments for derivative financial instruments
Payment of dividends / distributions
Total changes from financing cash flows
Other movements:
Exchange rate gains / losses
Fair value net gains / losses
Other lease liability movements
Amortisation of loan transaction costs
Distributions for the year
Balance at 30 June 2021
Changes from financing cash flows:
Proceeds from borrowings
Repayments of borrowings
Payments for lease liabilities
Payment of loan transaction costs
Payments for derivative financial instruments
Payment of dividends / distributions
Total changes from financing cash flows
Other movements:
Exchange rate gains / losses
Fair value net gains / losses
Other lease liability movements
Amortisation of loan transaction costs
Distributions for the year
Balance at 30 June 2022
$M
2,191.2
338.1
(311.9)
(5.1)
(3.6)
-
-
17.5
(39.4)
-
6.4
10.5
-
2,186.2
474.0
(447.2)
(4.5)
(2.2)
-
-
20.1
(41.5)
-
9.0
17.9
-
2,191.7
$M
49.0
-
-
-
-
-
(190.6)
(190.6)
-
-
-
-
184.1
42.5
-
-
-
-
-
(170.2)
(170.2)
-
-
-
-
170.3
42.6
120
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Interest
bearing
liabilities
Dividends /
distributions
payable
Derivative
financial
instruments
Trust
Opening balance at 1 July 2020
Changes from financing cash flows:
Proceeds from borrowings
Repayments of borrowings
Payments for lease liabilities
Payment of loan transaction costs
Payments for derivative financial instruments
Payment of dividends / distributions
Total changes from financing cash flows
Other movements:
Exchange rate gains / losses
Other lease liability movements
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 2021
Changes from financing cash flows:
Proceeds from borrowings
Repayments of borrowings
Payments for lease liabilities
Payment of loan transaction costs
Payments for derivative financial instruments
Payment of dividends / distributions
Total changes from financing cash flows
Other movements:
Exchange rate gains / losses
Fair value net gains / losses
Other lease liability movements
Amortisation of loan transaction costs
Distributions for the year
Balance at 30 June 2022
D) ACCOUNTING POLICY
$M
2,168.6
338.1
(304.5)
(0.4)
(3.6)
-
-
29.6
(39.7)
-
0.3
10.5
-
2,169.3
474.0
(447.2)
(0.3)
(2.2)
-
-
24.3
(40.9)
-
0.3
17.9
-
2,170.9
$M
49.0
-
-
-
-
-
(189.6)
(189.6)
-
-
-
-
183.1
42.5
-
-
-
-
-
(170.2)
(170.2)
-
-
-
-
170.3
42.6
$M
19.3
-
-
-
-
4.9
-
4.9
1.4
(14.2)
-
-
-
11.4
-
-
-
-
(0.3)
-
(0.3)
-
(11.1)
-
-
-
Total
$M
2,236.9
338.1
(304.5)
(0.4)
(3.6)
4.9
(189.6)
(155.1)
(38.3)
(14.2)
0.3
10.5
183.1
2,223.2
474.0
(447.2)
(0.3)
(2.2)
(0.3)
(170.2)
(146.2)
(40.9)
(11.1)
0.3
17.9
170.3
-
2,213.5
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.
23. 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.
121
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT B) PRP
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 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/distributions 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.
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 / lapsed during the year
As at 30 June
Vested and exercisable
2022
2021
Weighted
average
exercise price
Number of
performance
rights
Weighted
average
exercise price
Number of
performance
rights
$0.12
10,185,693
-
$0.22
$0.08
$0.06
-
3,814,473
(1,396,024)
(4,556,202)
8,047,940
-
$0.26
-
$0.30
$0.03
$0.12
-
13,818,156
5,969,553
(7,585,942)
(2,016,074)
10,185,693
-
The weighted average price per security at the date of exercise of options exercised during the year ended 30 June 2022
was $0.88 (2021: $0.87). No options expired during the years covered in the table above.
The weighted average remaining contractual life of the 8,047,940 performance rights outstanding at the end of the
financial year (2021: 10,185,693) was 1.33 years (2021: 1.5 years).
Fair value of performance rights granted
The fair value of performance rights granted during the year was between $0.65 and $1.00 per option for PRP with an
exercise price of $nil (2021: fair value between $0.77 and $1.04 and an exercise price of $nil).
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):
Share price at grant date(s):
Expected price volatility:
Expected dividend yield(s):
Risk free interest rate(s):
Expiry date(s):
2022
$0.00
11-Nov-21 & 12-Apr-22
$0.82 to $0.87
20% - 25%
7.88% to 7.93%
0.16% to 0.19%
30-Sept-24
2021
$0.00
23-Dec-20
$0.88
40%
8.5%
0.11%
30-Jul-23 and 30-Sept-23
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.
122
CROMWELL PROPERTY GROUP I 2022 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:
Performance rights issued under the PRP
Cromwell
Trust
2022
$M
-
2021
$M
2.1
2022
$M
-
2021
$M
-
See note 6(d) for information in relation the accounting policy in relation to security based payments.
24. Related parties
A) OVERVIEW
Related parties 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
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Security-based payments
Total key management personnel compensation
Loans to key management personnel
Cromwell
2022
$
5,573,907
148,613
(27,206)
551,014
6,246,328
2021
$
7,151,179
143,882
136,323
916,474
8,347,358
In the prior financial year, Cromwell provided loans to Mr P Weightman, a now former Director of the Company, for the
exercise of his employee options under Cromwell’s Performance Rights Plan. Each loan term was three years, limited
recourse and interest free. The final balance owing of $3,080,000 was repaid during the year 2021 financial year with the
facility then cancelled.
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 17.
ii)
Transactions with joint ventures and associates
Cromwell European Real Estate Investment Trust
Cromwell and the Trust hold 27.8% and 27.4% interests in CEREIT (2021: 28.0% and 27.5% - refer to note 9(b) for further
details). Cromwell and the Trust received $34.5 million and $34.0 million in distributions from CEREIT during the year
(2021: $50.3 million and $49.4 million).
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.
123
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT The following income was earned by Cromwell from CEREIT:
Paid / payable by CEREIT to Cromwell and its subsidiaries:
Asset management fees
Development sales
Fund management fees
Leasing fees
Project management fees
Distributions
Balances outstanding with CEREIT at year end:
Aggregate amounts receivable
Oyster Property Funds Limited
Cromwell
2022
$M
27.9
-
11.1
3.8
2.7
34.5
2021
$M
25.2
15.0
11.1
2.5
1.7
50.3
12.8
12.0
During the 2021 financial year, the Trust provided a NZD-denominated short-term loan facility of $17.1 million in
aggregate to a subsidiary of Oyster for the initial funding of a property syndication. The Trust earned a fee of $475,000 for
the provision of this facility, which was never drawn upon and has now ceased.
LDK Healthcare Unit Trust
Cromwell holds a 50% interest in the LDK Healthcare Unit Trust (LDK), a joint venture conducting an aged care operation.
Cromwell has the following loans and related party transactions with the LDK joint venture:
a) Working capital loans
Refer to note 20 for further information.
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 20 for further
information.
c)
Project management fees
During the prior year Cromwell provided project management services to a subsidiary of LDK in relation to the
development of the LDK ‘Greenway Views’ aged care facility. Cromwell derived $nil in project management fees at normal
commercial terms during the year (2021: $0.9 million).
Ursynów
Cromwell derived $nil in property management fees at normal commercial terms during the year (2021: $0.7 million).
During the current financial year Cromwell and its joint venture partner contributed loans of €17.0 million ($26.8 million)
each, which the joint venture used to repay an external debt facility that fell due. This amount remains receivable from
Ursynów at 30 June 2022. During the period the loan facility was utilised by Ursynów interest accrued/paid to Cromwell
was €0.5 million ($0.8 million).
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.
124
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
The Trust made the following payments to and received income from CCL and its subsidiaries:
Paid / payable by the Trust to the Company and its subsidiaries:
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
Trust
2021
$M
20.0
6.3
0.6
0.7
1.0
2.2
2.2
0.7
74.6
2022
$M
20.1
6.3
2.2
0.2
1.0
2.3
2.6
2.2
89.5
The amount receivable from the Company and its subsidiaries includes loans of $89.5 million (2021: $74.6 million).
For further details regarding these loans refer to note 13(b).
25. 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 Touche Tohmatsu 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
Other reporting services
International consulting services
Australian taxation advice
International taxation advice
Cromwell
Trust
2022
$
2021
$
2022
$
2021
$
508,241
7,500
882,961
130,000
452,760
7,000
793,588
25,000
1,528,702
1,278,348
452,765
45,940
17,567
17,015
-
-
-
-
18,690
9,118
380,542
-
460,644
-
841,185
452,765
45,940
-
-
-
340,020
-
376,192
-
716,212
-
-
-
-
-
Total remuneration of Deloitte Touche Tohmatsu
2,061,989
1,306,156
1,339,890
716,212
Pitcher Partners
Audit and other assurance services
Auditing of the Trust’s compliance plan
Audit of Statements of Outgoings
Other services
Valuation services
Total remuneration of Pitcher Partners
Total auditors’ remuneration
41,000
26,600
67,600
17,300
84,900
39,000
27,000
66,000
11,000
77,000
41,000
26,600
67,600
-
67,600
2,146,889
1,383,156
1,407,490
39,000
27,000
66,000
-
66,000
782,212
125
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 26. 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
Consolidated Balance Sheet. This note provides details of any such items.
B) COMMITMENTS
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
Cromwell
Trust
2022
2021
2022
2021
$M
1.7
2.4
4.1
$M
6.2
-
6.2
$M
1.7
2.4
4.1
$M
6.2
-
6.2
C) CONTINGENT ASSETS AND CONTINGENT LIABILITIES
The Directors are not aware of any material contingent assets or contingent liabilities of Cromwell or the Trust (2021:
$nil).
27. Subsequent events
Convertible bonds
Subsequent to year end, the Optional Put, which was available to bond holders was exercised by 1,325 of the remaining
1,349 bond holders in exchange for cash equal to 100% of the face value. The convertible bonds of €132.5 million ($193.4
million) plus any accrued interest was paid to the bond holders by Cromwell on 1 August 2022 utilising cash on hand and
existing debt facilities. The remaining 24 bonds will be compulsorily acquired by Cromwell within calendar year 2022 in
accordance with the terms and conditions of the bonds.
Other than those disclosed above, no matter or circumstance has arisen since 30 June 2022 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.
The financial statements were approved by the Board of Directors and authorised for issue on 24 August 2022.
126
CROMWELL PROPERTY GROUP I 2022 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”):
a)
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; and
ii) giving a true and fair view of Cromwell’s and the Trust’ financial position as at 30 June 2022 and of their
performance, for the financial year ended on that date; and
b)
c)
the financial report also complies with International Financial Reporting Standards as disclosed in About this report
- note 1 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 2022 required by section 295A of the Corporations Act 2001 (Cth).
This declaration is made in accordance with a resolution of the Directors.
Dr Gary Weiss AM
Chair
24 August 2022
Sydney
127
CROMWELL PROPERTY GROUP I 2022 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
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrttss
Opinion
We have audited the financial reports of:
•
•
Cromwell Property Group (the “Group”) which comprises the consolidated balance sheet as at 30 June
2022, the 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 2022, the 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 reports of the Group and the Trust are in accordance with the
Corporations Act 2001, including:
• Giving a true and fair view of the Group and the Trust’s financial position as at 30 June 2022 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 reports 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 the Responsible Entity (the “directors”), would be in the same terms if given to
the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
128
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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 of the Group 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.
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt
MMaatttteerr
VVaalluuaattiioonn ooff iinnvveessttmmeenntt pprrooppeerrttiieess
Our procedures included, but were not limited to:
At 30 June 2022, Cromwell Property Group
recognised investment properties at fair value of
$3.7b as disclosed in Note 8.
The Group owns either directly or through joint
ventures a portfolio of property consisting of
properties across Australia, Italy and Poland.
Valuations were carried out by internal and third-
party valuers for all investment properties in
Australia, Italy, and Poland during the financial
year. Within the 30 June 2022 valuations, certain
included observations as to market
valuers
uncertainty caused by inflationary pressures and
tightening monetary policy. This highlights a
higher degree of caution should be attached to
the valuations than would normally be the case.
Note 8 describes the valuation methodologies
adopted by the Group:
•
•
the capitalisation approach applies a
capitalisation
to normalised
rate
market net operating income.
the discounted cash
flow method
involves the projection of cash flows
discounted to present value.
The valuation process requires judgment and
estimation in relation to the following key
valuation inputs:
•
•
•
•
•
•
net market income
net operating income
compound annual growth rates
terminal yields
capitalisation rates; and
discount rates.
Of these, capitalisation rates and discount rates
are considered to have the greatest propensity
to materially impact the fair values recognised
and involve the use of significant judgement.
•
•
•
•
•
•
the
relevant
to obtain
Understanding
controls within
management’s valuation framework and assessing
the oversight applied by the directors over the
valuation process
Enquiring of management
an
understanding of portfolio movements and their
identification of any additional property specific
matters, as well as their assessment of the impact
of inflationary pressures and tightening monetary
policy on the valuations
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, which includes an analytical review
of the key inputs and assumptions underlying the
valuations
Testing on a sample basis, both externally and
internally valued properties, for:
‐
the completeness and accuracy of
the
information in the valuation models 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 net operating income,
capital expenditure requirements, occupancy
and lease renewals; and
the mathematical accuracy of the valuation
models
‐
‐
Assessing the assumptions used in the valuations,
including the capitalisation rates and net market
income adjustments made in the capitalisation
approach, and the discount rate, compound annual
growth rate, and terminal yield used
in the
discounted cashflow method with reference to
external market trends & transactions, and property
specific factors such as tenant mix and changes
since the prior valuation.
We also assessed the appropriateness of the disclosures
included in Note 8 (Investment properties) to the financial
statements.
129
CROMWELL PROPERTY GROUP I 2022 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 and Trust’s annual
report (but does not include the financial reports 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 reports 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 reports, 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 reports
or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we
have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
When we read the 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 Reports
The directors are responsible for the preparation of the financial reports that give a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as
the directors determine is necessary to enable the preparation of the financial reports that give a true and fair
view and are free from material misstatement, whether due to fraud or error.
In preparing the financial reports, the directors are responsible for assessing the ability of the Group and the Trust
to continue as going concerns, 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 Reports
Our objectives are to obtain reasonable assurance about whether the financial reports as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial reports.
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 reports, 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 fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• 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 or the Trust’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
130
CROMWELL PROPERTY GROUP I 2022 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 or the 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 reports 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 or the Trust to cease to continue as going concerns.
• Evaluate the overall presentation, structure and content of the financial reports, including the disclosures, and
whether the financial reports represent 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 Group 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.
RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 22 to 39 of the Directors’ Report for the year ended
30 June 2022.
In our opinion, the Remuneration Report of Cromwell Property Group, for the year ended 30 June 2022, 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, 24 August 2022
131
CROMWELL PROPERTY GROUP I 2022 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 fourth edition of the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations (the Recommendations) during the 2022 financial year.
This Statement is current as at 30 June 2022 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
satisfy itself that an appropriate risk management framework that covers both financial and non-financial risks is in
place, and to 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. The Directors’ Report discloses the names of the Directors, the number of times that the Board met during the
2022 financial year and the attendances of individual Directors at those meetings. For easy reference, the information
(including percentages of total) is shown below:
Director
Dr Gary Weiss AM (Chair)
Mr Eng Peng Ooi (Deputy Chair)
Mr Robert Blain
Mr Jonathan Callaghan (appointed 7 October 2021)
Ms Tanya Cox
Mr Joseph Gersh AM
Ms Lisa Scenna
Ms Jialei Tang (appointed 9 July 2021)
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend (100%)
11 (100%)
11 (100%)
11 (100%)
7 (100%)
11 (100%)
11 (100%)
11 (100%)
11 (100%)
11 (100%)
11 (100%)
11 (100%)
7 (100%)
11 (100%)
11 (100%)
11 (100%)
11 (100%)
Management prepares Board papers to inform and focus the Board’s attention on key issues. Standing items include
progress against strategic objectives, financial performance, people, sustainability 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).
132
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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 2022 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
Mr Eng Peng Ooi (Committee Chair)
Ms Tanya Cox
Mr Joseph Gersh AM (retired from Committee 31 August 2021)
Ms Lisa Scenna
Dr Gary Weiss AM
Investment Committee
Director
Mr Robert Blain (Committee Chair)
Mr Joseph Gersh AM
Mr Eng Peng Ooi (retired from Committee 31 August 2021)
Ms Lisa Scenna (retired from Committee 31 August 2021)
Ms Jialei Tang (appointed to Committee 1 September 2021)
Dr Gary Weiss AM
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend (100%)
6 (100%)
6 (100%)
2 (100%)
6 (100%)
6 (100%)
6 (100%)
6 (100%)
2 (100%)
6 (100%)
6 (100%)
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
0 (100%)
Having regard to the review of Cromwell’s strategy that was undertaken during the 2022 financial year, matters relating to
investment strategy and transactions were considered by the Board during the reporting period.
Nomination and Remuneration Committee
Director
Ms Tanya Cox (Committee Chair)
Mr Robert Blain
Mr Joseph Gersh AM (retired from Committee 31 August 2021)
Ms Lisa Scenna
Dr Gary Weiss AM (appointed to Committee 1 September 2021)
Meetings attended
(% of meetings
eligible to attend)
Meetings eligible
to attend (100%)
4 (100%)
4 (100%)
2 (100%)
4 (100%)
2 (100%)
4 (100%)
4 (100%)
2 (100%)
4 (100%)
2 (100%)
The Board has delegated authority to the Chief Executive Officer (CEO) of Cromwell Property Group for the day-to-day
business and affairs of the Group. 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).
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
What you can find on the Corporate Governance page on our website:
Board Charter
Audit and Risk Committee Charter
(effective up to and including 30 June 2022)
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) to elect, or re-elect, a
Director to the Board, Cromwell will provide securityholders 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 a summary of the reasons
why; and
(for a candidate standing for election as a Director for the first time) a confirmation that appropriate checks into
the candidate’s background and experience have been conducted; 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 rather than in the interests of an
individual securityholder or other party; 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.
In this Statement, AGM means (together) the Annual General Meeting of the Company and the General Meeting of the CDPT.
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.
•
•
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CROMWELL PROPERTY GROUP I 2022 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;
•
•
•
guiding the continuous improvement, and 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
135
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT RECOMMENDATION 1.5
For Cromwell Property Group, diversity is both the visible and invisible differences (gender, family status, age, sexual
orientation, gender identity, disabilities, ethnicity, religious beliefs, cultural background, socio-economic background,
perspective and experience) that make each individual unique. Inclusion is about creating an environment where all
individuals feel connected, respected and valued and able to be their true and best selves. Cromwell Property Group is
committed to creating an inclusive workplace where diversity is valued and promoted.
Cromwell Property Group recognises that inclusion links very closely with its corporate values. The Group’s Diversity and
Inclusion principles stem from its values, which, in turn, are embedded in the performance management framework.
Cromwell Property Group’s Diversity and Inclusion principles are as follows:
We
recruit from a
diverse pool
We
select objectively,
based on Key Skill
Behaviours and
common values
We
address
inequality
We
call out behaviour
which doesn’t align with
these D&I Principles
We
schedule
meetings
and events
inclusively
We are
empathetic to
our people's
commitments
We ensure everyone gets an
equal opportunity
to contribute
We use
inclusive
language
We
remunerate
fairly
We recognise the
value of
diversity
We
assess
performance
objectively
We are
conscious of
our biases
Cromwell has a Board-approved Diversity and Inclusion Policy which sets out the framework the Group has in place to
achieve diversity in the composition of its Board, senior executive and broader workforce. Pursuant to the Diversity and
Inclusion 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
undertaken by the Board, with the Nomination and Remuneration Committee monitoring progress on a quarterly basis
throughout the year.
136
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT The table below shows the Group’s gender diversity objectives set for the 2022 financial year and the Group’s Australian
business’s performance against those objectives as at 30 June 2022.
Number
Group’s FY22 gender diversity objective
Group’s Australian business’s
performance as at 30 June 2022
1
2
3
4
5
We will execute Cromwell’s Diversity and Inclusion
Action Plan
Initiatives in support of the objective are largely
completed
We will measure our gender pay gap and set a baseline We have achieved the objective
We will continue to measure and report on our gender
pay gap in FY23
We will ensure pay parity
We have achieved the objective
We will achieve 40:40:20 gender diversity at all
organisational levels
We will embed diversity targets in Executive Objectives
and Key Results (OKRs) and Key Management
Personnel Short Term Incentives annually
Cromwell Board
As at 30 June 2022, the Cromwell Board comprised
eight Directors, three of whom are female (37.5%) (the
Cromwell Board comprised 33.33% female Directors as
at 30 June 2021)
Senior executive and employees
We have achieved the objective in three of our six
leadership levels
Initiatives in further support of the objective remain in
progress
We have achieved the objective
As at the date shown, the respective proportions of females and males on the Board, in senior executive positions and
across the employee workforce were as follows:
Date
Body
As at 30 June 2022
Cromwell Board
As at 30 June 2022
Senior executive1
As at 30 June 2022
Employees2
Females
(% of total)
3 (37.5%)
5 (45%)
70 (50%)
Males
(% of total)
5 (62.5%)
6 (55%)
70 (50%)
Total
(100%)
8 (100%)
11 (100%)
140 (100%)
(1) Recommendation 1.5(c)(3)(A) requires the Group to disclose how it has defined ‘senior executive’ for these purposes. In this table, ‘senior executive’
means the Australian Executive Committee, which, as at 30 June 2022, comprised: the CEO, Fund Manager, Chief Technology Officer,
Head of People – APAC, Group Head of Development, Head of Funds Management – Australia, Company Secretary and Corporate Counsel, Head of
Property Operations, Chief Investment Officer, Head of Retail Funds Management and Chief Financial Officer.
(2) Excludes the Board, senior executive, European business, Singaporean 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).
Cromwell’s latest WGEA reporting is available on the Corporate Governance page on the Group’s website.
Cromwell Board diversity information
Cromwell Property Group is pleased to disclose the following diversity information about the Cromwell Board.
GENDER DIVERSITY
CULTURAL AND
LINGUISTIC DIVERSITY
GEOGRAPHIC DIVERSITY
37.5% of Directors are female
62.5% of Directors are male
50% are culturally and
linguistically diverse (CALD)
50% are non-CALD
6 out of 8 Australia
1 out of 8 UK
1 out of 8 Singapore and US
No Cromwell Director identifies as an Australian Aboriginal and/or Torres Strait Islander person.
Cromwell Directors’ ages are shown in this Statement under recommendation 2.3.
137
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
What you can find on the Corporate Governance page on our website:
Diversity and Inclusion Policy
WGEA reporting
Nomination and Remuneration Committee Charter
Our Values
Gender Diversity Objectives
(current financial year and previous financial years)
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
In line with footnote 31 of the Recommendations, the webpage on the WGEA website where its latest Gender Equality
Indicators are available is:
www.wgea.gov.au/what-we-do/compliance-reporting/wgea-procurement-principles
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 Nomination and
Remuneration Committee meeting, with all Directors in attendance. The formal performance assessment was conducted
for the 2022 financial year; it did not raise any governance issues that needed to be addressed but, in line with Cromwell
Property Group’s deep commitment to continuous improvement, a number of continuous improvement measures were
identified for implementation during the 2023 financial year.
As shown in this Statement under recommendation 1.1, individual Directors attended 100% of the Board and Board
Committee meetings they were eligible to attend during the 2022 financial year. The Board considers periodically using
external facilitators to conduct its performance reviews. The Deputy Chair of the Board and senior independent director
is responsible for the performance evaluation of the Chair of the Board, after having canvassed the views of the other
Directors. The performance evaluation of the Chair of the Board was conducted for the 2022 financial year; the Board
remains supportive of the leadership of the Chair of the Board and no issues were raised 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
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 for the 2022 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
138
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
Principle 2: Structure the board to add value
RECOMMENDATION 2.1
Nomination and Remuneration Committee
The Board’s Nomination and Remuneration Committee has four members, three 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 and services from
appropriate external advisors (independent of management), at Cromwell Property Group’s cost; and
• may meet with external advisors without management being present.
On at least an annual basis, the Board or the Nomination and Remuneration Committee reviews the time required from a
Non-executive Director and whether Directors are meeting that requirement.
The Directors’ Report discloses the members of the Nomination and Remuneration Committee, the number of times that
the Committee met during the 2022 financial year and the individual attendances of the members at those meetings. For
easy reference, the information (including percentages of total) is shown in this Statement under recommendation 1.1.
What you can find on the Corporate Governance page on our website:
Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
139
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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. The following
table outlines detailed descriptions of the experience and skills represented by the current composition of the Board,
and considered by the Board as desirable. The Board regularly reviews and updates its Board Skills Matrix to reflect the
strategy and direction of Cromwell Property Group. The Board assesses the extent to which each skill is represented on
the Board, with Cromwell Directors rating their skills as ‘well-developed’ (strong working knowledge and experience) or
‘developed’ (solid working knowledge and some experience). As shown in the table, all skills in the Board Skills Matrix are
well represented on the Board as a whole.
M
A
s
s
i
e
W
r
D
i
o
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r
M
n
i
a
l
B
r
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n
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g
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l
l
a
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r
M
M
A
h
s
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e
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r
M
x
o
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s
M
a
n
n
e
c
S
s
M
g
n
a
T
s
M
d
e
p
o
l
e
v
e
d
-
l
l
e
w
h
t
i
w
s
r
o
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e
r
i
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d
n
a
s
r
o
t
c
e
r
i
D
f
o
r
e
b
m
u
n
(
s
l
l
i
k
s
)
d
r
a
o
B
e
r
i
t
n
e
f
o
e
g
a
t
n
e
c
r
e
p
a
s
a
s
l
l
i
k
s
d
e
p
o
l
e
v
e
d
h
t
i
w
s
r
o
t
c
e
r
i
D
a
s
a
d
n
a
s
r
o
t
c
e
r
i
D
f
o
r
e
b
m
u
n
(
)
d
r
a
o
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e
r
i
t
n
e
f
o
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g
a
t
n
e
c
r
e
p
8 (100%)
N/A
8 (100%)
N/A
7 (87.5%)
1 (12.5%)
8 (100%)
N/A
KEY
Well-developed skills: strong
working knowledge and experience
Developed skills: solid working
knowledge and some experience
Skill
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 (ie,
international) and other property market
sectors
Funds / investment management
Significant experience in, and knowledge of,
wholesale and retail funds management, in
Australia and globally
Commercial capability
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
140
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
M
A
s
s
i
e
W
r
D
i
o
O
r
M
n
i
a
l
B
r
M
n
a
h
g
a
l
l
a
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r
M
M
A
h
s
r
e
G
r
M
x
o
C
s
M
a
n
n
e
c
S
s
M
g
n
a
T
s
M
Skill
Financial acumen
Ability to understand 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
(or equivalent) 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
ESG
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
d
e
p
o
l
e
v
e
d
-
l
l
e
w
h
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i
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d
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a
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e
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f
o
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m
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(
s
l
l
i
k
s
)
d
r
a
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e
r
i
t
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f
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p
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s
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o
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e
r
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a
s
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a
s
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o
t
c
e
r
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D
f
o
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e
b
m
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n
(
)
d
r
a
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i
t
n
e
f
o
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g
a
t
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c
r
e
p
8 (100%)
N/A
8 (100%)
N/A
5 (62.5%)
3 (37.5%)
8 (100%)
N/A
4 (50%)
4 (50%)
7 (87.5%)
1 (12.5%)
141
CROMWELL PROPERTY GROUP I 2022 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.
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. As at 30 June 2022, the Board comprised eight Directors, with a Non-executive Chair, an independent Non-executive
Deputy Chair and a majority of independent Non-executive Directors:
Director (age)
First appointed
Status
Dr Gary Weiss AM (Chair) (69)
18 September 2020
Non-executive Director/Chair
Mr Eng Peng Ooi (66)
Mr Robert Blain (67)
Mr Jonathan Callaghan (51)
Ms Tanya Cox (61)
8 March 2021
8 March 2021
7 October 2021
5 October 2021
21 October 2019
Independent Non-executive Director/Deputy Chair
Independent Non-executive Director
Managing Director
Chief Executive Officer
Independent Non-executive Director
Mr Joseph Gersh AM (66)
18 September 2020
Independent Non-executive Director
Ms Lisa Scenna (54)
Ms Jialei Tang (27)
21 October 2019
9 July 2021
Independent Non-executive Director
Non-executive Director
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 likely
to be 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 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
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT RECOMMENDATION 2.4
As at 30 June 2022, the Board comprised eight Directors, with a Non-executive Chair, an independent Non-executive
Deputy Chair and a majority of independent Non-executive Directors.
The 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 – Dr Gary Weiss AM – is a Non-executive Director and the Deputy Chair of the Board and senior
independent director – Mr Eng Peng Ooi – is an independent Non-executive Director.
From 1 January 2021 to 4 October 2021, Mr Michael Wilde was the Acting CEO of Cromwell Property Group. On 5 October
2021, Mr Jonathan Callaghan commenced as the CEO of Cromwell Property Group and was appointed as an Executive
Director effective 7 October 2021.
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, if the Chair of the Board is not an independent Non-executive Director, then the Board will elect an independent
Non-executive Director as Deputy Chair of the Board or as the ‘senior independent director’. The Deputy Chair of the
Board or senior independent director will act as Chair of the Board if the Chair faces a conflict of interest.
The Board Charter sets out the responsibilities of the Chair, including:
•
•
•
•
leading the Board and Cromwell Property Group;
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.
The Recommendations note that the role of chair is demanding, requiring a significant time commitment. As shown in
this Statement under recommendation 1.1, Chair of the Board Dr Gary Weiss AM attended 100% of the Board and Board
Committee meetings he was eligible to attend during the 2022 financial year.
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 Directors can discharge their responsibilities effectively, participate fully and
actively in decision making, and add value, upon their appointment. The programme includes:
• meeting with fellow Directors and the senior executive team and receiving briefings on Cromwell Property Group’s
strategy, structure, business operations, history, culture and key risks;
•
reviewing materials and policies in relation to corporate governance, legal duties and responsibilities and key
accounting matters and directors’ responsibilities; and
•
undertaking Cromwell Property Group property asset and office site visits.
Each year, the Nomination and Remuneration Committee assesses whether the Directors, as a group, have the skills,
knowledge and experience to deal with new and emerging business and governance issues 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)
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 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 Risk and Compliance team and Finance
team. On an ongoing basis, Directors are provided with briefings on material changes to accounting standards, laws and
regulations relevant to Cromwell Property Group.
During the 2022 financial year, and in early July 2022, 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
Principle 3: Act ethically and responsibly
RECOMMENDATION 3.1
Cromwell Property Group is a ‘values led’ organisation. Its corporate values, as disclosed on the website and in the Board-
approved Code of Conduct, are as follows:
Such values underpin Cromwell Property Group’s vision, which is to be a trusted, global real estate fund manager, with a
local presence.
Cromwell Property Group’s Directors, senior executives and employees are required to act lawfully, ethically and
responsibly. This is reinforced by the values and the various practices and policies of the Group.
The Board and the senior executives reinforce Cromwell Property Group’s values in their interactions with Cromwell’s
wider team. Appropriate standards are communicated and reinforced to all employees at induction sessions, regular
refresher training and team meetings and in staff communications.
During the 2022 financial year, Cromwell Property Group undertook an extensive internal consultation exercise to refresh
its corporate values in line with its renewed vision. The refreshed corporate values are expected to be launched early in
the 2023 financial year and will be disclosed on the website and in the Board-approved Code of Conduct.
What you can find on the Corporate Governance page on our website:
Our Values
Code of Conduct
(encompassing anti-bribery and corruption)
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
RECOMMENDATION 3.2
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. To reinforce this culture, Cromwell Property Group has a Board-
approved 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 Board-approved
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, including through refresher training. The Code of Conduct is also
published on Cromwell Property Group’s website.
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 Compliance team under the direction of the Head of Risk and Compliance. 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 2022.
RECOMMENDATIONS 3.3 AND 3.4
Cromwell Property Group has a Board-approved Whistleblower Protection Policy and a 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 any unlawful, unethical or
irresponsible behaviour within Cromwell Property Group.
The Audit and Risk Committee is informed of any incidents reported under Cromwell Property Group’s Whistleblower
Protection Policy and any incidents of bribery or corruption prohibited by the Code of Conduct.
What you can find on the Corporate Governance page on our website:
Whistleblower Protection Policy
Code of Conduct
(encompassing anti-bribery and corruption)
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 Non-executive Directors and a majority 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 judgments 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.
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
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 2022 financial year and the individual
attendances of the members at those meetings. For easy reference, the information (including percentages of total) is
shown in this Statement under recommendation 1.1.
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 Cromwell Property Group’s cost; and
• may meet with external advisors without management being present.
During the 2022 financial year, the external auditor attended all of the meetings of the Audit and Risk Committee and time
was made available for the Committee to meet with the external auditor without management being present.
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.
As stated in the introduction to this Statement, the Statement is current as at 30 June 2022. Effective 1 July 2022, the Audit
and Risk Committee was reconstituted as an Audit Committee and as an Environmental-Social-Governance (ESG) and
Risk Committee.
What you can find on the Corporate Governance page on our website:
Audit and Risk Committee Charter
(effective up to and including 30 June 2022)
Audit Committee Charter
(effective on and from 1 July 2022)
ESG and Risk Committee Charter
(effective on and from 1 July 2022)
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
For any periodic corporate report that Cromwell releases to the market that is not audited or reviewed by an external
auditor, Cromwell has a robust review, verification and approval process to verify the integrity of those reports. Cromwell
undertakes an internal review and verification exercise, with material statements verified by relevant managers and
all verification materials retained in corporate records. Review by independent advisors is obtained where appropriate.
Cromwell Property Group’s Market Disclosure Protocol provides for a sign off protocol for each announcement to ensure
that Directors review and (where applicable) approve announcements prior to release; in addition, at least two Disclosure
Officers review and approve the announcement and, in accordance with ASX Listing Rule 15.5 (as amended from time to
time), authorise the lodgement of the announcement with the ASX.
Cromwell adopts this process to satisfy itself that the relevant report is materially accurate, balanced and provides
securityholders with appropriate information to make informed investment decisions.
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
What you can find on the Corporate Governance page on our website:
Market Disclosure Protocol
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
Principle 5: Make timely and balanced disclosure
RECOMMENDATIONS 5.1, 5.2 AND 5.3
Cromwell Property Group believes that all stakeholders should be informed in a timely and widely available manner of all
material information concerning the Group, including its financial position, performance, ownership and governance. 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.
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. Cromwell Property Group’s Market Disclosure Protocol provides for a sign off protocol to ensure
that Directors review and (where applicable) approve announcements prior to release.
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, a copy of the Chair’s address and the CEO’s address is released on the ASX Market Announcements Platform
before the commencement of the meeting.
Cromwell Property Group is committed to providing securityholders with the opportunity to engage and participate in
presentations and meetings, while maintaining their health and safety in light of the COVID-19 pandemic.
For the AGM on 17 November 2021, securityholders were invited to attend in-person at the Group’s Brisbane office or
to participate in the meeting ‘virtually’ through an online platform provided by Cromwell’s registry, Link Market Services
Limited. Securityholders participating ‘virtually’ were able to participate in the meeting by viewing the meeting live,
viewing and hearing the Chair’s address and the CEO’s address, viewing the presentation slides, asking questions (written
via the online platform or verbal via telephone) and voting online.
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
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;
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT •
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:
•
•
•
•
•
•
•
•
•
an overview of the Group’s current business;
a description of how the Group is structured;
a summary of the Group’s history;
a statement of the Group’s values;
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:
The Corporate Governance page on our website:
www.cromwellpropertygroup.com
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
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.
Prior to the meeting, securityholders will be provided with a notice of meeting outlining the resolutions to be voted upon.
This will be sent to securityholders in electronic or printed form (as elected) within the timeframe set by the Corporations
Act. This material relating to the meeting will be released via the ASX Market Announcements Platform and made
available on the Cromwell website.
A proxy form, allowing securityholders to appoint a proxy in the event they cannot attend the meeting, will accompany the
notice of meeting.
A copy of the Chair’s address, CEO’s address and the meeting presentation materials are released on the ASX Market
Announcements Platform before the commencement of the meeting.
At the AGM, the Chair and the CEO each address the meeting and provide securityholders with an update on the
Group’s business, governance, financial performance and prospects and any areas of concern or interest to the
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
Board and management. Cromwell will also ensure that the current external audit partner is in attendance to answer
securityholders’ questions about the audit.
Securityholders are encouraged to participate and ask questions at securityholder meetings. The Chair and CEO take any
comments and questions received from securityholders during or after their address. 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.
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, or otherwise may submit written questions about or comments on the management
of the Group. A securityholder wishing to submit a question is asked to submit the question in writing to the Company
Secretary up to 48 hours before the AGM. A list of the questions submitted is made available to securityholders attending
the AGM at or before the start of the AGM. Where appropriate, these questions and comments are addressed at the
meeting by being read out and then responded to at the meeting. At the AGM, the Chair reminds securityholders of the
opportunity to ask questions, including questions about or comments 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. Cromwell provides ‘virtual’ online participation through a platform
provided by Cromwell’s registry, Link Market Services Limited, so that securityholders can participate (including asking
questions and voting online) if they are unable to attend the meeting in person.
For the AGM on 17 November 2021, securityholders were invited to attend in-person at the Group’s Brisbane office or
to participate in the meeting ‘virtually’ through an online platform provided by Cromwell’s registry, Link Market Services
Limited. Securityholders participating ‘virtually’ were able to participate in the meeting by viewing the meeting live,
viewing and hearing the Chair’s address and the CEO’s address, viewing the presentation slides, asking questions (written
via the online platform or verbal via telephone) and voting online.
RECOMMENDATION 6.4
At the AGM on 17 November 2021 all resolutions were decided by way of a poll rather than by a show of hands.
RECOMMENDATION 6.5
Cromwell Property Group gives its securityholders the option to receive communications from the Group and from its
securities registry electronically. Most 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 Non-executive Directors and a majority 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
the ‘lessons learned’;
receiving compliance assurance and internal risk control testing reports, including reviews of the adequacy of
processes for risk management, internal control and governance;
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT •
receiving reports from management on new and emerging sources of risk and the risk controls and mitigation
measures that management has put in place to deal with those risks;
• making recommendations to the Board in relation to changes that should be made to the risk management
framework or to the risk appetite set by the Board;
•
•
reviewing the general insurance programme, and assessing and recommending to the Board for adoption the
scope, cover and cost of corporate insurance; and
receiving reports from management outlining the sustainability practices of the Group, including its assessment of
the potential impacts of climate change.
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 Cromwell Property Group’s cost; and
• may meet with external advisors without management being present.
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 2022 financial year and the individual
attendances of the members at those meetings. For easy reference, the information (including percentages of total)
is shown in this Statement under recommendation 1.1.
As stated in the introduction to this Statement, the Statement is current as at 30 June 2022. Effective 1 July 2022, the
Audit and Risk Committee was reconstituted as an Audit Committee and as an ESG and Risk Committee.
What you can find on the Corporate Governance page on our website:
Audit and Risk Committee Charter
(effective up to and including 30 June 2022)
ESG and Risk Committee Charter
(effective on and from 1 July 2022)
Audit Committee Charter
(effective on and from 1 July 2022)
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 7.2
The Board is responsible for:
•
•
satisfying itself that an appropriate risk management framework that covers both financial and non-financial risks
is in place and 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
governance and 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 assessing the efficiency and effectiveness of those systems at least
annually;
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; and
disclosing any material change to the risk profile; and
•
regularly reviewing and updating the risk profile.
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
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 2022 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.
As stated in the introduction to this Statement, the Statement is current as at 30 June 2022. Effective 1 July 2022, the Audit
and Risk Committee was reconstituted as an Audit Committee and as an ESG and Risk Committee.
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 2022 financial year, the Chair of the Compliance Committee met with the Audit
and Risk 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
(effective up to and including 30 June 2022)
Audit Committee Charter
(effective on and from 1 July 2022)
ESG and Risk Committee Charter
(effective on and from 1 July 2022)
Enterprise Risk Management Policy
Compliance Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 7.3
Although the Group does not have a designated internal audit function, throughout the year the 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. 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. In addition, over the course of the financial year, a number of external audit,
assurance, verification and independent review processes are undertaken in auditable focus areas such as work health
and safety, sustainability and cyber and information security. The findings are reported to the Audit and Risk Committee or
the Board or both.
RECOMMENDATION 7.4
The Group’s Sustainability Report discloses the extent to which the Group has material exposure to environmental or
social 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
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
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:
•
•
•
•
coherent 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.
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 and services from
appropriate external advisors (independent of management), at Cromwell Property Group’s cost; and
• may meet with external advisors without management being present.
The Board’s Nomination and Remuneration Committee has four members, all of whom are Non-executive Directors and a
majority of whom are independent Directors. The Committee is chaired by an independent Director who is not the Chair of
the Board.
The Directors’ Report discloses the members of the Nomination and Remuneration Committee, the number of times that
the Committee met during the 2022 financial year and the individual attendances of the members at those meetings. For
easy reference, the information (including percentages of total) is shown in this Statement under recommendation 1.1.
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 and are not provided with retirement benefits other than
statutory superannuation. The Group’s Non-executive Directors are required to have a minimum holding of Cromwell
Property Group stapled securities equivalent to the Non-executive Director annual fee within three years of 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).
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CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT Remuneration packages are designed to align the KMP’s interests with those of securityholders. Objectives and key
results (or OKRs) for each KMP consider their role within Cromwell generally as well as their expected contribution to the
achievement of Cromwell’s objectives. The OKRs 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:
•
•
•
Fixed component in the form of a cash salary;
An at-risk cash and equity award that is linked solely to performance of a tailored set of objectives, where appropriate;
and
At-risk longer-term equity payment. This third element is equity based remuneration aimed at alignment with
securityholder outcomes and retention.
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.
Unvested stapled securities held by a participant under Cromwell Property Group’s Stapled Security Incentive Plan lapse
in certain circumstances including where, in the Plan Committee’s opinion, they are liable to clawback under the clawback
policy. 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.
For all KMP except the CEO and Non-executive Directors, the CEO is responsible for setting OKR targets which are
reviewed by the Board and assessing annually whether those targets have been met. The OKR 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. 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; and
a Stapled Security Incentive Plan and has offered Cromwell Property Group securities to a number of senior
executives. The terms of the Group’s Stapled Security Incentive 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.
What you can find on the Corporate Governance page on our website:
Plan Rules for the Cromwell Property Group
Plan Rules for the Cromwell Property Group
Performance Rights Plan
Stapled Security Incentive Plan
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
153
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT
SECURITYHOLDER
INFORMATION
The securityholder information set out below was applicable as at 31 August 2022, unless stated otherwise.
Spread of Stapled Securityholders
Category of Holding
Number of Securities
Number of Holders
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
2,305,509,064
131,651,982
160,365,242
13,669,780
7,066,328
604,303
2,618,866,699
1,233
1,870
6,368
1,787
2,548
1,487
15,293
Unmarketable Parcels
The number of stapled securityholdings held in a less than marketable parcel was 1009.
Substantial Securityholders
Holder
ESR Cayman Limited
Tang family and related entities
Vanguard Group
Stapled Securities
Date of Notice
803,686,459
433,607,179
158,222,142
06/08/2021
19/06/2020
23/09/2021
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.
154
CROMWELL PROPERTY GROUP I 2022 ANNUAL REPORT 20 Largest Securityholders
Rank
Holder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ARA REAL ESTATE INVESTORS XXI PTE LTD
ARA REAL ESTATE INVESTORS XXI PTE LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
ARA REAL ESTATE INVESTORS 28 LIMITED
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
BNP PARIBAS NOMS PTY LTD
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