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ANNUAL
FINANCIAL
REPORT
Contents
Annual Financial Report of The GPT Group
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Supplementary Information
Corporate Directory
1
71
130
132
Corporate Governance
The GPT Group (GPT or the Group) comprises GPT Management Holdings Limited (ACN 113 510 188) (GPTMHL) and General Property
Trust (Trust). GPT RE Limited (ACN 107 426 504) (GPTRE) AFSL (286511) is the Responsible Entity of the Trust.
GPT’s stapled securities are listed on the Australian Securities Exchange (ASX).
The third edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (Principles)
provides a framework for good corporate governance for listed entities. GPT’s Corporate Governance Statement sets out how the
Group has complied with the Principles.
The Group’s Corporate Governance Statement is available on GPT’s website at:
www.gpt.com.au/About-GPT/Corporate-Governance/Principles-and-Policies. GPT has also lodged an Appendix 4G
(Key to Disclosures – Corporate Governance Principles and Recommendations) with the ASX.
Annual Financial Report of
The GPT Group
Year ended 31 December 2017
Contents
Directors’ Report ............................................................................................................................................................................ 2
Auditor’s Independence Declaration ............................................................................................................................................ 23
Financial Statements .................................................................................................................................................................... 24
Consolidated Statement of Comprehensive Income ............................................................................................................ 24
Consolidated Statement of Financial Position .................................................................................................................... 25
Consolidated Statement of Changes in Equity ..................................................................................................................... 26
Consolidated Statement of Cash Flows ............................................................................................................................... 27
Notes to the Financial Statements ..................................................................................................................................... 28
Result for the year ....................................................................................................................................................... 28
1. Segment information .............................................................................................................................................. 28
Operating assets and liabilities .................................................................................................................................. 33
2. Investment properties ............................................................................................................................................ 33
3. Equity accounted investments ................................................................................................................................ 36
4. Loans and receivables ............................................................................................................................................ 38
5. Intangible assets ..................................................................................................................................................... 39
6. Inventories .............................................................................................................................................................. 40
7. Payables .................................................................................................................................................................. 40
8. Provisions ............................................................................................................................................................... 40
9. Taxation ................................................................................................................................................................... 41
Capital structure .......................................................................................................................................................... 43
10. Equity and reserves ................................................................................................................................................ 44
11. Earnings per stapled security ................................................................................................................................ 46
12. Distributions paid and payable ............................................................................................................................... 47
13. Borrowings ............................................................................................................................................................. 47
14. Financial risk management ................................................................................................................................... 48
Other disclosure items ................................................................................................................................................ 52
15. Cash flow information ............................................................................................................................................ 52
16 Commitments ......................................................................................................................................................... 52
17. Contingent liabilities .............................................................................................................................................. 53
18. Security based payments ....................................................................................................................................... 53
19. Related party transactions .................................................................................................................................... 55
20. Auditor’s remuneration .......................................................................................................................................... 56
21. Parent entity financial information......................................................................................................................... 56
22. Fair value disclosures ............................................................................................................................................ 57
23. Accounting policies ................................................................................................................................................. 60
24. Events subsequent to reporting date ..................................................................................................................... 62
Directors’ Declaration ................................................................................................................................................................... 63
Independent Auditor’s Report ...................................................................................................................................................... 64
The GPT Group (GPT) comprises General Property Trust (Trust) and its controlled entities and GPT Management Holdings
Limited (Company) and its controlled entities.
General Property Trust is a registered scheme, registered and domiciled in Australia. GPT RE Limited is the Responsible Entity
of General Property Trust. GPT Management Holdings Limited is a company limited by shares, incorporated and domiciled in
Australia. GPT RE Limited is a wholly owned controlled entity of GPT Management Holdings Limited.
Through our internet site, we have ensured that our corporate reporting is timely, complete and available globally at minimum
cost to the Trust. All press releases, financial reports and other information are available on our website: www.gpt.com.au.
1
Directors’ Report
Year ended 31 December 2017
The Directors of GPT RE Limited, the Responsible Entity of General Property Trust, present their report together with the
financial statements of the General Property Trust (the Trust) and its controlled entities (the consolidated entity) for the
financial year ended 31 December 2017. The consolidated entity together with GPT Management Holdings Limited and its
controlled entities form the stapled entity, The GPT Group (GPT).
General Property Trust is a registered scheme, GPT Management Holdings Limited is a company limited by shares, and GPT
RE Limited is a company limited by shares, each of which is incorporated and domiciled in Australia. The registered office
and principal place of business is the MLC Centre, Level 51, 19 Martin Place, Sydney NSW 2000.
1. Operating and financial review
About GPT
GPT is an owner and manager of a $12.3 billion diversified portfolio of high quality Australian retail, office and logistics
property assets and together with GPT’s funds management platform the Group has $21.5 billion of property assets under
management (AUM).
GPT owns some of Australia’s most significant real estate assets, including the MLC Centre and Australia Square in Sydney,
Melbourne Central and Highpoint Shopping Centre in Melbourne and One One One Eagle Street in Brisbane.
Listed on the Australian Securities Exchange (ASX) since 1971, GPT is today one of Australia’s largest diversified listed
property groups with a market capitalisation of approximately $9.2 billion. GPT is one of the top 50 listed stocks on the ASX
by market capitalisation as at 31 December 2017.
GPT’s strategy is focussed on leveraging its extensive real estate experience to deliver strong returns through disciplined
investment, asset management and development. The development capability has a focus on creating value for
securityholders through the enhancement of the core investment portfolio and in the creation of new investment assets.
A key performance measure for GPT is Total Return. Total Return is calculated as the change in Net Tangible Assets (NTA)
per security plus distributions per security declared over the year, divided by the NTA per security at the beginning of the
year. This focus on Total Return is aligned with securityholders’ long term investment aspirations. In 2017 GPT achieved a
Total Return of 15.2 per cent.
GPT targets a Management Expense Ratio (MER) of less than 45 basis points. MER is calculated as management expenses
as a percentage of assets under management. In 2017 GPT achieved an MER of 34 basis points.
GPT focuses on maintaining a strong balance sheet. GPT has moderate gearing and significant investment capacity giving
it the flexibility to execute on investment opportunities as they arise. In 2017 the Weighted Average Cost of Debt was
4.2 per cent with net gearing at 24.4 per cent at year end.
Retail Portfolio
• 13 shopping centres
Office Portfolio
• 22 assets
Logistics Portfolio
• 28 assets
• 940,000 sqm GLA*
• 1,110,000 sqm NLA**
• 780,000 sqm GLA
• 3,200 + tenants
• $5.9b portfolio
• $9.6b AUM
* Gross lettable area
** Net lettable area
• 470 + tenants
• 70 + tenants
• $4.9b portfolio
• $1.5b portfolio
• $10.4b AUM
• $1.5b AUM
GPT Portfolio
SOURCES OF DRAWN DEBT
Retail 47%
Office 40%
Logistics 13%
2
Annual Financial Report of The GPT Group
Review of operations
Funds from Operations (FFO) represents GPT’s underlying and recurring earnings from its operations. This is determined by
adjusting statutory net profit after tax under Australian Accounting Standards for certain items which are non-cash, unrealised or
capital in nature. FFO has been determined in accordance with the guidelines issued by the Property Council of Australia.
The reconciliation of FFO to net profit after tax is set out below:
31 Dec 17
$M
31 Dec 16
$M
Change
%
Retail
– Operations net income
– Development net income
Office
– Operations net income
– Development net income
Logistics
– Operations net income
– Development net income
Funds management net income
Corporate management expenses
Net finance costs
Income tax expense
Non-core
Funds from Operations (FFO)
Other non-FFO items:
Valuation increase
Financial instruments mark to market and net foreign exchange loss
Other items1
Net profit after tax
FFO per ordinary stapled security (cents)
Funds from Operations (FFO)
Maintenance capex
Lease incentives
Adjusted Funds from Operations (AFFO)
Distribution paid and payable
Distribution per ordinary stapled security (cents)
313.1
5.3
318.4
247.8
1.1
248.9
93.3
0.7
94.0
37.0
(30.6)
(102.4)
(11.1)
–
554.2
717.7
(2.9)
0.1
1,269.1
30.77
554.2
(54.4)
(53.5)
446.3
443.2
24.6
288.3
5.8
294.1
223.9
1.1
225.0
92.7
2.7
95.4
61.0
(29.8)
(100.0)
(14.0)
5.3
537.0
611.6
(23.0)
27.1
1,152.7
29.88
537.0
(45.4)
(70.1)
421.5
420.7
23.4
8.6%
(8.6%)
8.3%
10.7%
0.0%
10.6%
0.6%
(74.1%)
(1.5%)
(39.3%)
(2.7%)
(2.4%)
20.7%
(100.0%)
3.2%
17.3%
87.4%
(99.6%)
10.1%
3.0%
3.2%
(19.8%)
23.7%
5.9%
5.3%
5.1%
1 Other items include impairment and amortisation of intangibles, profit on disposal of assets and related tax impact.
Operating result
GPT delivered FFO of $554.2 million for the 2017 financial year, an increase of 3.2 per cent on the prior year. This translated
into FFO per security of 30.77 cents, up 3.0 per cent. The result was driven by strong contributions from the investment
portfolio of high quality Australian retail, office and logistics properties.
GPT’s statutory net profit after tax is $1,269.1 million, an increase of 10.1 per cent on the prior year, driven by $717.7 million in
property valuation increases and a lower negative mark to market and net foreign exchange movement of financial instruments.
3
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017
14.5%
11.1%
12.5%
11.2%
Total Return at the direct investment
portfolio level was 12.5 per cent for 2017
with the split between portfolios detailed
in the chart on the left.
Retail
(inc GPT Wholesale
Shopping Centre
Fund Interest)
Office
(inc GPT Wholesale
Office
Fund Interest)
Logistics
Total Portfolio
(inc Equity
Interests)
GPT has maintained strong metrics across its core portfolios:
Overall Portfolios
Retail Portfolio
Office Portfolio
Logistics Portfolio
Value of Portfolio
Occupancy
96.8%
(2016: 97.1%)
Weighted average lease
expiry (WALE)
5.2 years
(2016: 5.1 years)
Structured rental reviews
$5.85 billion portfolio
including GPT’s equity
interest in the GPT
Wholesale Shopping
Centre Fund
(2016: $5.32 billion)
99.6%
(2016: 99.6%)
4.1 years*
(2016: 4.0 years)
74% of speciality income
subject to average
increases of 4.7%
(2016: 74% subject to
average increases of 4.7%)
$4.90 billion portfolio
including GPT’s equity
interest in the GPT
Wholesale Office Fund
(2016: $4.34 billion)
$1.55 billion portfolio
(2016: $1.40 billion)
95.2%
(2016: 97.0%)
5.6 years
(2016: 5.5 years)
96.1%
(2016: 95.3%)
7.6 years
(2016: 7.9 years)
91% of income subject to
average increases of 3.9%
(2016: 90% subject to
average increases of 3.9%)
91% of income subject to
average increases of 3.3%
(2016: 93% subject to
average increases of 3.3%)
Comparable income
growth
Weighted average
capitalisation rate
4.4%
(2016: 4.5%)
5.27%
(2016: 5.58%)
3.8%
(2016: 3.8%)
5.10%
(2016: 5.39%)
5.0%
(2016: 6.3%)
5.18%
(2016: 5.55%)
4.0%
(2016: 1.4%)
6.31%
(2016: 6.54%)
* The methodology to determine WALE at December 2017 has been revised to exclude holdovers.
Retail
Operations net income
The retail portfolio achieved a net revaluation uplift of $281.4 million in 2017, including GPT’s equity interest in the GPT Wholesale
Shopping Centre Fund (GWSCF). The positive revaluation is predominantly the result of favourable valuations at Melbourne
Central, Highpoint Shopping Centre and Westfield Penrith, in addition to the contribution from GWSCF. The positive revaluation
across the portfolio has been driven by a combination of net income growth and firming in valuation metrics.
Like for like income growth of 3.8 per cent was driven by structured rental increases and continued strength in leasing
metrics including a focus on active remixing. Retail sales have moderated over the 12 month period to December 2017
consistent with the broader market, with total centre sales up 1.7 per cent and specialty annual sales up 0.3 per cent. The
portfolio remains well leased with occupancy at 99.6 per cent.
Development net income
The retail development team has focused on master planning and delivery of development opportunities within its $1.6 billion
development pipeline. In 2017, this includes the delivery of the $68.0 million repositioning of Wollongong Central. The remix
has introduced David Jones to the asset and was completed on schedule in October 2017. The $422.0 million (GPT share
$211.0 million) Sunshine Plaza retail expansion is expected to be completed in the last quarter of 2018.
During 2017, retail development contributed $5.3 million to GPT’s FFO (2016: $5.8 million) from the sale of residential land
parcels at Rouse Hill.
4
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017
Office
Operations net income
Logistics
Operations net income
The office portfolio achieved a net revaluation uplift of
$374.1 million in 2017, including GPT’s equity interest
in the GPT Wholesale Office Fund (GWOF), as a result of
continued high occupancy levels, market rental growth
and firming investment metrics. The positive revaluation
has been driven by favourable valuations at MLC Centre,
Citigroup Centre, Australia Square and Farrer Place.
Like for like income growth of 5.0 per cent was achieved as
a result of leasing success leading to strong rental growth
and continued high levels of occupancy at 95.2 per cent
(including signed leases). The assets which were the main
contributors to income growth were Citigroup Centre, MLC
Centre and One One One Eagle Street.
Development net income
The team has focused on progressing a number of
repositioning projects at Melbourne Central Tower, CBW
and 750 Collins Street in Melbourne and MLC Centre
in Sydney. Progress is also being made on the planning
approval for a new tower at Darling Park.
Following the successful pre-commitment lease of
9,240sqm to the Rural Fire Service, construction has
commenced on a 15,680sqm campus building on the
4 Murray Rose site at Sydney Olympic Park. Completion is
expected in late 2018.
The acquisition of an office development site of 2,439sqm
in the heart of Parramatta’s commercial district settled
in March 2017. This site will provide the opportunity to
develop an office building of over 26,000sqm, with the
development application submitted.
Funds Management
As at and for the year ended 31 December 2017
Funds under Management
Number of Assets
GPT Interest
GPT Investment
One year Equity IRR (post-fees)
Share of profit – FFO
Funds Management fee income
The logistics portfolio achieved a net revaluation uplift of
$62.1 million in 2017. This uplift is attributed to continued
investor interest in quality logistics assets which led to
a firming of investment metrics combined with positive
leasing outcomes. The weighted average lease expiry has
been maintained at a long duration of 7.6 years.
Development net income
In 2017 the logistics development business completed
construction of four new logistics facilities totalling
70,000sqm at Seven Hills, Eastern Creek and Huntingwood
in Sydney and Wacol in Brisbane. 100 per cent of this space
has been leased. At the Huntingwood site, construction
has commenced to develop an 11,000sqm warehouse on
the adjoining land parcel to the existing building recently
leased to IVE Group for 10 years. Planning approval is also
in place and earthworks completed on Lot 21 Old Wallgrove
Road site at Eastern Creek for a 30,000sqm facility.
GWOF
$7.1b
17
24.95%
GWSCF
$4.9b
8
28.80%
Total
$12.0b
25
–
$1,409.7m
$1,008.2m
$2,417.9m
13.4%
$68.8m
$33.4m
12.5%
$46.5m
$17.3m
N/A
$115.3m
$50.7m
The performance of the Wholesale Funds was strong, with GWOF achieving a one year equity IRR of 13.4 per cent and GWSCF
achieving a one year equity IRR of 12.5 per cent.
5
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 GWOF
Management expenses
Management expenses increased to $73.4 million
(2016: $71.0 million) predominantly caused by lower
intercompany income elimination and moderate expense
increases. In 2017 GPT achieved an MER of 34 basis
points (2016: 37 basis points).
Non-core operations
Joint venture
In October 2017, GPT received a return of capital of
$10.7 million in respect of its 5.3 per cent interest in BGP
Holding Plc (BGP). BGP was classified as an available for
sale financial asset with a carrying value of $9.3 million
at 31 December 2016. In 2017, following the return of
capital the asset has been revalued and derecognised
in the Consolidated Statement of Financial Position and
$10.7 million has been recognised in the Consolidated
Statement of Comprehensive Income as profit on
derecognition of available for sale financial asset.
Distribution
GPT’s distribution policy is a payout ratio of approximately
95-105 per cent of Adjusted Funds from Operations (AFFO)
which is broadly defined as FFO less maintenance capex
and lease incentives.
For the financial year ended 31 December 2017,
distributions paid and payable to stapled securityholders
totalled $443.2 million (2016: $420.7 million), representing
an annual distribution of 24.6 cents, up 5.1 per cent on
2016 (2016: 23.4 cents). This includes 12.3 cents ($221.6
million) in respect of the second half of 2017, which was
declared on 20 December 2017 and is expected to be paid
on 28 February 2018. The payout ratio for the year ended
31 December 2017 is 99.3 per cent (2016: 99.8 per cent).
GWOF’s portfolio value increased to $7.1 billion, up
$0.5 billion compared to 2016. The management fee
income earned from GWOF decreased by $23.0 million
as compared to 2016, primarily due to performance fee
income of $28.1 million being earned in 2016 which will
not be earned in future in accordance with the revised
Fund Terms. This was partially offset by higher base
management fee income of $5.1 million due to strong
upward revaluations across the portfolio, net new asset
acquisitions and a higher base management fee structure
compared with 2016.
In June 2017, GPT acquired a further 16.3 million securities
in GWOF for $23.2 million, increasing GPT’s ownership
interest from 24.53 per cent to 24.95 per cent.
GWSCF
GWSCF’s portfolio value increased to $4.9 billion, up
$1.1 billion compared to 2016. This was primarily due
to the acquisition of an additional 25 per cent interest in
September 2017 in Highpoint Shopping Centre for $660.0
million and Homemaker City, Maribyrnong for $20.0
million coupled with upward revaluations across the
portfolio. Management fee income earned from GWSCF of
$17.3 million has remained stable as compared to 2016.
In May 2017, GPT acquired a further 115.6 million
securities in GWSCF for $116.6 million, increasing GPT’s
ownership interest from 25.29 per cent to 28.80 per cent.
Fund Terms Review
On 20 February 2017, GWSCF held an Extraordinary
General Meeting (EGM) in relation to changes in the
terms of GWSCF. At the EGM, investors approved all seven
resolutions put to the meeting.
The key changes included:
• removal of the performance fee structure from
1 April 2017;
•
introduction of an Investor Representation Committee; and
• other amendments to operational policies and
investor rights.
Investor Liquidity Review
On 31 March 2017, the first investor 10 year liquidity review
concluded which allowed GWSCF securityholders to notify
GPT Funds Management Limited (as Responsible Entity of
GWSCF) whether they required liquidity. The outcome of
the review was that binding requests for liquidity for a total
of 78,474,213 securities, being 2.4 per cent of securities on
issue, were submitted. This equated to $79.8 million at the
31 March 2017 current unit value of $1.0174. All requests
for liquidity were met within the June 2017 quarter.
6
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 Financial position
Capital management
Net
Assets
31 Dec 17
$M
Net
Assets
31 Dec 16
$M
5,938.4
5,391.4
4,885.5
4,327.9
1,639.3
1,485.4
Core
Retail
Office
Logistics
Total core assets
12,463.2
11,204.7
Change
%
10.1%
12.9%
10.4%
11.2%
Non-core
–
39.7
(100.0%)
Financing and corporate assets
495.2
573.5
(13.7%)
Total assets
Borrowings
Other liabilities
Total liabilities
Net assets
12,958.4
11,817.9
9.7%
3,300.6
2,996.6
10.1%
550.8
539.1
3,851.4
3,535.7
2.2%
8.9%
Cost of debt
Net gearing
31 Dec 17
31 Dec 16
Change
4.20%
24.4%
4.25% Down by 5bps
23.7%
Up by 70bps
Weighted average
debt maturity
7.1 years
6.5 years
Up 0.6 years
Hedging
S&P/Moody’s
credit rating
76%
57%
Up 19%
A stable/A2
stable
A stable/
A3 stable
Upgrade
GPT continues to maintain a strong focus on capital
management, key highlights for the year include:
• reduced weighted average cost of debt by 5 basis points
due to lower fixed and floating interest rates offset by
higher margins;
• upgrade of GPT’s long term Moody’s rating from
A3 (stable) to A2 (stable);
9,107.0
8,282.2
10.0%
• net gearing1 increased to 24.4 per cent (2016: 23.7
Total number of ordinary
stapled securities (million)
1,801.6
1,798.0
0.2%
NTA ($)
5.04
4.59
9.8%
Balance sheet
• Total Return of 15.2 per cent (2016: 15.5 per cent) being
the growth of NTA per stapled security of 45 cents to
$5.04 plus the distribution paid/payable per stapled
security of 24.6 cents, divided by the opening NTA per
stapled security.
• Total core assets increased by 11.2 per cent primarily
due to development capital expenditure, positive
property revaluations and further investment in the
wholesale funds.
• Total borrowings increased by $304.0 million due to net
asset investments offset by fair value adjustments of
$63.2 million to the carrying value of foreign currency debt.
per cent), which is slightly below GPT’s target gearing
range of 25 to 35 per cent. This was a result of net asset
investments and development expenditure during the year;
• available liquidity through cash and undrawn facilities
(inclusive of forward starting facilities available to GPT)
is $1,095.1 million (2016: $785.8 million);
•
investment capacity at 30 per cent net gearing is
$1,030.0 million (2016: $1,040.0 million);
• net tangible assets were impacted by a $12.5 million
loss on net mark to market movements on derivatives
and borrowings. This is due to a decrease in market
swap rates during the period and different valuation
methodologies on the fair value of foreign debt and their
associated hedging contracts.
1 Calculated net of cash and excludes any fair value adjustment on foreign
bonds and their associated cross currency derivative asset positions.
7
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017
Cash flows
The cash balance as at December 2017 decreased to $49.9 million (2016: $56.3 million).
Operating activities
The following table shows the reconciliation from FFO to the cash flow from operating activities:
For the year ended
FFO
(Less)/add: non-cash items included in FFO
Less: interest capitalised on developments
Less: net movement in inventory
Timing difference in receivables and payables
Net cash inflows from operating activities
Add: interest capitalised on developments
Add: net movement in inventory
Less: dividend income from available for sale investment
Less: maintenance capex
Less: lease incentives (excluding rent free)
Free cash flow
31 Dec 17
$M
31 Dec 16
$M
554.2
(17.2)
(8.6)
(19.0)
26.1
535.5
8.6
19.0
(30.4)
(54.4)
(27.0)
451.3
537.0
2.7
(8.5)
(5.3)
0.3
526.2
8.5
5.3
–
(45.4)
(41.5)
453.1
Change
%
3.2%
(737.0%)
(1.2%)
(258.5%)
Lge
1.8%
1.2%
258.5%
100.0%
(19.8%)
34.9%
(0.4%)
The Non-IFRS information included above has not been audited in accordance with Australian Auditing Standards, but has
been derived from note 1 and note 15 of the accompanying financial statements.
Prospects
Group
GPT is well positioned with high quality assets and high
levels of occupancy. As at 31 December 2017, the Group’s
balance sheet is in a strong position, with a smooth, long
debt expiry profile and net gearing slightly below the
Group’s target range of 25 to 35 per cent.
Retail
Australian retail sales grew 2.7 per cent for the year to
31 December 2017 led by the Eastern states. This has
supported the performance of the GPT portfolio with more
than 85 per cent of the portfolio located in NSW and VIC. Total
centre sales grew 1.7 per cent whilst specialties sales per
square metre grew 2.2 per cent.
Office
The Sydney and Melbourne office markets continued
to deliver exceptional growth in net effective rents and
asset valuations. The Sydney office market is expected to
continue to enjoy favourable leasing conditions as supply
remains limited through until 2020. The Melbourne office
market is expected to see an elevated level of supply over
the next 3 years however absorption is also expected to
remain strong keeping vacancy rates low and upward
pressure on net effective rents. GPT’s office portfolio
weighting in the Sydney and Melbourne markets should
benefit from these favourable market conditions.
Logistics
The investment market for institutional grade product has
been strong over the past 24 months, with quality assets
and portfolios transacting at yields firmer than at previous
market peaks. Despite a modest rental growth outlook and
increasing supply, assets with long WALE, good rent review
structures and secure covenants have been well sought
after. The medium term outlook is for a stabilisation of
yields as this investment activity tapers off, while rents are
likely to remain stable. GPT’s desire to increase exposure to
the sector will see a continued focus on development.
Funds management
GPT has a strong funds management platform which has
experienced significant growth over the past five years. The
funds management team will continue to actively manage
the existing portfolios, with new acquisitions, divestments
and developments reviewed based on meeting the relevant
investment objectives of the respective funds.
Guidance for 2018
In 2018 GPT expects to deliver approximately 3 per cent
growth in FFO per ordinary security and approximately
3 per cent growth in distribution per ordinary security.
Achieving this target is subject to risks detailed in the
following section.
8
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017
Risks
The Board is ultimately accountable for corporate
governance and the appropriate management of risk.
The Board determines the risk appetite and oversees the
risk profile to ensure activities are consistent with GPT’s
strategy and values. The Sustainability and Risk Committee
and the Audit Committee support the Board and are
responsible for overseeing and reviewing the effectiveness
of the risk management framework.
GPT has an active enterprise-wide risk management
framework. Within this framework the Board has adopted
a policy setting out the principles, objectives and approach
established to maintain GPT’s commitment to integrated
risk management. GPT recognises the requirement
for effective risk management as a core capability and
consequently all employees are expected to be managers
of risk. GPT’s risk management approach incorporates
culture, people, processes and systems to enable the
organisation to realise potential opportunities whilst
managing adverse effects. The approach is consistent with
AS/NZS ISO 31000:2009: Risk Management.
Employees, contractors, the Leadership Team, the
Sustainability and Risk Committee, the Audit Committee
and through them, the Board:
• report on or receive reports on GPT’s risk management
practices and control systems including the
effectiveness of GPT’s management of its material
business risks;
• promote risk awareness and assess the risk
management culture;
• develop and maintain internal specialist risk
management expertise;
•
identify and assess risks in a timely and consistent
manner;
• design, embed and assess the effectiveness of controls;
• provide transparency and assurance that the risk profile
is aligned with GPT’s strategy, values and risk appetite.
The risk appetite considers the most significant, material risks to which GPT is exposed. The following table sets out
material risks and issues, the potential strategic impact to GPT and the ways in which they may be mitigated:
Risk Category
Risk/Issue
Potential Strategic Impact
Mitigation
Investment
mandate
Investments do not perform in
line with forecast
Volatility and speed of adverse
changes in market conditions,
including competition and
digital disruption
Development
Leasing
Developments do not perform
in line with forecast
Inability to lease assets in line
with forecast
• Investments deliver lower investment
• Formal deal management process
performance than target
• Credit rating downgrade
• Active asset management including
regular forecasting and monitoring of
performance
• High quality property portfolio
• Development program to enhance
asset returns
• Comprehensive asset insurance program
• Investments deliver lower investment
• Holistic capital management
returns than target
• Large multi asset portfolio
• Monitoring of asset concentration
• Digital strategy
• Developments deliver lower returns
• Formal development approval and
than target
management process
• Investments deliver lower investment
• Large and diversified tenant base
performance than target
Capital
management,
including
macro-
economic
factors
Re-financing and liquidity risk
• Limits ability to meet debt maturities
• Constrains future growth
• Limits ability to execute strategy
• May impact distributions
• Failure to continue as a going concern
• High quality property portfolio
• Experienced leasing team
• Development program to enhance asset
returns
• Diversity of funding sources and spreading
of debt maturities with a long weighted
average debt term
• Maintaining a minimum liquidity buffer
in cash and surplus committed credit
facilities for the forward rolling twelve-
month period
Interest rate risk – higher
interest rate cost than forecast
• Detrimental impact to investment
• Interest rate exposures are actively hedged
performance
• Adversely affect GPT’s operating
results
9
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 Risk Category
Risk/Issue
Potential Strategic Impact
Mitigation
Health and
safety
Incidents causing injury
to tenants, visitors to the
properties, employees and/or
contractors
• Criminal/civil proceedings and
resultant reputation damage
• Financial impact of remediation and
• Formalised health and safety management
system including policies and procedures
for managing safety
restoration
• Training and education of staff and
People
Inability to attract, retain and
develop talented people and
provide an inclusive workplace
Environmental
and Social
Sustainability
Information
security
Inability to continue operating
in a manner that does not
compromise the health
of ecosystems and meets
accepted social norms
This includes the
consideration of climate
change, energy (initiatives,
security and cost), community
and supply chain
Risk of loss of data, breach
of confidentiality, regulatory
breach (privacy) and/or
reputational impact including
as a result from a cyber attack
• Limits the ability to deliver the
• Competitive remuneration
contractors
business objectives and strategy
• Limits the ability to deliver the
business objectives and strategy
• Criminal/civil proceedings and
resultant reputation damage
• Financial impact of remediation and
restoration
• Structured development planning
• Succession planning and talent
management
• Diversity & Inclusion Working Group
• Diversity & Inclusion policies, guidelines
and training
• Formalised environment and sustainability
management system including policies and
procedures for managing environmental
and social sustainability risks
• Limits the ability to deliver the
• Technology risk management framework
business objectives and strategy
• Criminal/civil proceedings and
resultant reputation damage
• Financial impact of remediation and
restoration
• Privacy policy, guidelines and procedures
3. Events subsequent to
reporting date
On 24 January 2018, GPT acquired 4 logistics assets in
Sunshine, Victoria for a total consideration of $74.0 million.
Other than the above, the Directors are not aware
of any matter or circumstances occurring since
31 December 2017 that has significantly or may
significantly affect the operations of GPT, the results
of those operations or the state of affairs of GPT in the
subsequent financial years.
2. Environmental regulation
GPT has policies and procedures in place that are designed
to ensure that where operations are subject to any
particular and significant environmental regulation under
a law of Australia (for example property development and
property management), those obligations are identified
and appropriately addressed. This includes obtaining and
complying with conditions of relevant authority consents and
approvals and obtaining necessary licences. GPT is not aware
of any breaches of any environmental regulations under
the laws of the Commonwealth of Australia or of a State or
Territory of Australia and has not incurred any significant
liabilities under any such environmental legislation.
GPT is also subject to the reporting requirements of the
National Greenhouse and Energy Reporting Act 2007
(“NGER Act”). The NGER Act requires GPT to report its
annual greenhouse gas emissions and energy use. The
measurement period for GPT is 1 July to 30 June each
year. GPT has implemented systems and processes for
the collection and calculation of the data required which
enabled submission of its report to the Department of
Climate Change and Energy Efficiency within the legislative
deadline of 31 October each year. GPT has submitted its
report to the Department of Climate Change and Energy
Efficiency for the period ended 30 June 2017 within the
required timeframe.
More information about GPT’s participation in the NGER
program is available at www.gpt.com.au.
10
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 4. Directors and secretary
Eileen Doyle
Information on directors
Rob Ferguson – Chairman
Rob joined the Board in May 2009 and is also a member of
the Nomination and Remuneration Committee. He brings a
wealth of knowledge and experience in finance, investment
management and property as well as corporate governance.
Rob currently holds Non-Executive directorships in the
following listed and other entities:
• Primary Health Care Limited (since 2009) – Chairman
• Watermark Market Neutral Fund Limited (since 2013)
• Tyro Payments Limited (since 2005)
• Smartward Limited (since 2012).
He was also a Non-Executive Chairman of IMF Bentham
Limited from 2004 to January 2015.
As at the date of this report, he holds 207,628 GPT
stapled securities.
Robert Johnston – Chief Executive Officer and
Managing Director
Bob was appointed to the Board as Chief Executive Officer
and Managing Director in September 2015. He has 29 years
experience in the property sector including investment,
development, project management and construction in
Australia, Asia, the US and UK. Prior to joining GPT, Bob was
the Managing Director of listed Australand Property Group
which became Frasers Australand in September 2014.
As at the date of this report, he holds 343,264 GPT stapled
securities.
Brendan Crotty
Brendan was appointed to the Board in December 2009
and is also a member of the Audit Committee and the
Sustainability and Risk Committee. He brings extensive
property industry experience to the Board, including
17 years as Managing Director of Australand until his
retirement in 2007.
Brendan is currently a director of Brickworks Limited
(since 2008) and Chairman of Cloud FX Pte Ltd. Brendan
resigned from his role as Chairman of Western Sydney
Parklands Trust on 31 December 2017.
As at the date of this report, he holds 67,092 GPT
stapled securities.
Eileen was appointed to the Board in March 2010. She is
also the Chair of the Sustainability and Risk Committee
and a member of the Nomination and Remuneration
and Audit Committees. She has diverse and substantial
business experience having held senior executive roles
and directorships in a wide range of industries, including
research, financial services, building and construction,
steel, mining, logistics and export. Eileen is also a Fellow
of the Australian Academy of Technological Sciences
and Engineering.
Eileen currently holds the position of Non-Executive
Director in the following listed and other entities:
• Boral Limited (since 2010)
• Oil Search Limited (since 2016).
Eileen was also previously a director of Bradken Limited
from 2011 to November 2015.
As at the date of this report, she holds 45,462 GPT
stapled securities.
Swe Guan Lim
Swe Guan was appointed to the Board in March 2015
and is also a member of the Audit Committee and the
Sustainability and Risk Committee. Swe Guan brings
significant Australian real estate skills and experience
and capital markets knowledge to the Board, having spent
most of his executive career as a Managing Director in the
Government Investment Corporation (GIC) in Singapore.
Swe Guan is currently Chairman of Cromwell European
REIT in Singapore (since 2017), a director of Sunway Berhad
in Malaysia (since 2011) and Global Logistics Properties in
Singapore (since 2012). Swe Guan is also a member of the
Investment Committee of CIMB Trust Cap Advisors.
As at the date of this report, he holds 15,800 GPT
stapled securities.
Michelle Somerville
Michelle was appointed to the Board in December 2015 and
is also the Chair of the Audit Committee and a member of
the Sustainability and Risk Committee. She was previously
a partner of KPMG for nearly 14 years specialising in
external audit and advising Australian and international
clients both listed and unlisted primarily in the financial
services market in relation to business, finance risk and
governance issues.
Michelle currently holds the position of Non-Executive
Director in the following entities:
• Bank Australia Limited (since 2014)
• Challenger Retirement and Investment Services Ltd
(since 2014)
• Save the Children (Australia) (since 2012)
• Down Syndrome Australia (since 2011).
Michelle is also an independent consultant to the UniSuper
Ltd Audit, Risk and Compliance Committee since 2015.
As at the date of this report, she holds 16,157 GPT
stapled securities.
11
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 Gene Tilbrook
Gene was appointed to the Board in May 2010 and is also
the Chair of the Nomination and Remuneration Committee.
He brings extensive experience in finance, corporate
strategy, investments and capital management.
Gene currently holds the position of Non-Executive Director
in the following listed entities:
• Orica Limited (since 2013)
• Woodside Petroleum Limited (since 2014).
Gene was also a Director of listed entities Transpacific
Industries Group Limited from 2009 to 2013, Fletcher
Building Limited from 2009 to April 2015, and Aurizon
Holdings Limited from 2010 to February 2016.
As at the date of this report, he holds 48,546 GPT
stapled securities.
James Coyne – General Counsel and Company
Secretary
James is responsible for the legal, compliance and
company secretarial activities of GPT. He was appointed
as the General Counsel and Company Secretary of GPT
in 2004. His previous experience includes company
secretarial and legal roles in construction, infrastructure,
and the real estate funds management industry (listed and
unlisted).
Lisa Bau – Senior Legal Counsel and Company
Secretary
Lisa was appointed as a Company Secretary of GPT in
September 2015. Her previous experience includes legal
roles in mergers and acquisitions, capital markets, funds
management and corporate advisory.
Attendance of directors at meetings
The number of Board meetings, including meetings of Board Committees, held during the financial year and the number of
those meetings attended by each Director is set out below:
Board
Audit Committee
Nomination and
Remuneration Committee
Sustainability and Risk
Committee
Number of
meetings
attended
Number of
meetings
eligible to
attend
Number of
meetings
attended
Number of
meetings
eligible to
attend
Number of
meetings
attended
Number of
meetings
eligible to
attend
Number of
meetings
attended
Number of
meetings
eligible to
attend
Rob Ferguson
Michelle Somerville
Gene Tilbrook
Eileen Doyle
12
12
12
12
12
12
12
12
12
12
12
12
12
12
–
–
4
3
4
4
–
–
–
4
3
4
4
–
6
–
–
6
–
–
6
6
–
–
6
–
–
6
–
–
4
4
4
3
–
–
–
4
4
4
3
–
Chair
Rob Ferguson
Robert Johnston
Brendan Crotty
Eileen Doyle
Swe Guan Lim
Michelle Somerville
Gene Tilbrook
12
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 5. Other disclosures
Non-audit services
Indemnification and insurance of
directors, officers and auditor
GPT provides a Deed of Indemnity and Access (Deed) in
favour of each of the Directors and Officers of GPT and its
subsidiary companies and each person who acts or has
acted as a representative of GPT serving as an officer of
another entity at the request of GPT. The Deed indemnifies
these persons on a full indemnity basis to the extent
permitted by law for losses, liabilities, costs and charges
incurred as a Director or Officer of GPT, its subsidiaries or
such other entities.
Subject to specified exclusions, the liabilities insured are
for costs that may be incurred in defending civil or criminal
proceedings that may be brought against Directors and
Officers in their capacity as Directors and Officers of GPT,
its subsidiary companies or such other entities, and other
payments arising from liabilities incurred by the Directors
and Officers in connection with such proceedings. GPT has
agreed to indemnify the auditors out of the assets of GPT if
GPT has breached the agreement under which the auditors
are appointed.
During the financial year, GPT paid insurance premiums to
insure the Directors and Officers of GPT and its subsidiary
companies. The terms of the contract prohibit the
disclosure of the premiums paid.
During the year PricewaterhouseCoopers, GPT’s auditor, has
performed other services in addition to their statutory duties.
Details of the amounts paid to the auditor, which includes
amounts paid for non-audit services and other assurance
services, are set out in note 20 to the financial statements.
The Directors have considered the non-audit services and
other assurance services provided by the auditor during the
financial year. In accordance with advice received from the
Audit Committee, the Directors are satisfied that the provision
of non-audit services by the auditor is compatible with, and
did not compromise, the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
• the Audit Committee reviewed the non-audit services
and other assurance services at the time of appointment
to ensure that they did not impact upon the integrity and
objectivity of the auditor;
• the Board’s own review conducted in conjunction
with the Audit Committee concluded that the auditor
independence was not compromised, having regard to
the Board’s policy with respect to the engagement of
GPT’s auditor; and
• the fact that none of the non-audit services provided by
PricewaterhouseCoopers during the financial year had
the characteristics of management, decision-making,
self-review, advocacy or joint sharing of risks.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act 2001 is
set out on page 23 and forms part of the Directors’ Report.
Rounding of amounts
The amounts contained in this report and in the financial
statements have been rounded to the nearest hundred
thousand dollars unless otherwise stated (where rounding
is applicable) under the option available to GPT under
ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191. GPT is an entity to which the
Instrument applies.
13
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 6. Remuneration report
The Nomination & Remuneration Committee (the Committee) of the Board presents the Remuneration Report (Report) for
the GPT Group. This Report has been audited in accordance with section 308(3C) of the Corporations Act 2001.
The Board aims to communicate the remuneration outcomes with full transparency; demonstrate that the GPT Group’s
remuneration platform is both market competitive and fair to all stakeholders; and align performance measures to the
achievement of GPT’s strategic objectives.
Governance
Who are the
members of the
Committee?
What is the scope
of work of the
Committee?
The Committee consists of 3 Non-Executive Directors:
• Gene Tilbrook (Committee Chairman)
• Eileen Doyle
• Rob Ferguson.
The Committee provides advice and recommendations to the Board on:
• Criteria for selection of Directors;
• Nominations for appointment of Directors;
• Criteria for reviewing the performance of Directors individually and the GPT Board collectively;
• Remuneration policies for Directors and Committee members;
• Remuneration amounts for Directors from within the overall Directors fee cap approved by securityholders;
• Remuneration policy for the Chief Executive Officer (CEO) and employees;
• Incentive plans for the CEO and employees, including exercising discretion where appropriate in determining
short term incentive compensation (STIC) and long term incentive compensation (LTI) outcomes; and
• Any other related matters regarding executives or the Board1.
Who is included in
the Remuneration
Report?
GPT’s Key Management Personnel (KMP) are the individuals responsible for planning, controlling and managing
the GPT Group (being the Non-Executive Directors, CEO, Chief Financial Officer (CFO), and the Chief Operating
Officer (COO)).
Committee key decisions and remuneration outcomes in 2017
Platform component Key decisions and outcomes
Base pay (Fixed)
• Implemented the annual review of employee base pay effective 1 January 2017, with an average increase of 3.6%.
• Implemented an average increase of 3.0% in Non-Executive Director base fees effective 1 January 2017. This
was the first review of base fees since 1 January 2015.
Short term incentive
compensation (STIC)
Long term incentive
(LTI) compensation
Other employee
ownership plans
• The Group achieved an EPS growth outcome of 3.0% which generated a STIC pool of $13.8 million.
• The Group achieved a compound annual Total Return2 for the 2015-17 period of 14.05%, exceeding the maximum
target of 9.75%, and delivered a Total Security-holder Return (TSR)3 of 44.34% which ranked 5th against the
comparator group.
• As a result, the vesting outcome for the 2015-17 LTI plan was 83.29% of the performance rights for each of the
23 participants in the LTI plan.
• Launched the 2017-2019 LTI with two performance measures, Total Return and Relative TSR.
• Strengthened the performance hurdle for vesting under the Total Return measure to commence at 8.5% and
reach maximum at 10%.
• Continued the General Employee Security Ownership Plan (GESOP) for 137 STIC eligible employees not in the
LTI. Under GESOP each participant receives an amount equal to 10% of their STIC (less tax) delivered in GPT
securities, which must be held for at least 1 year.
• Continued the Broad Based Employee Security Ownership Plan (BBESOP) for 281 employees ineligible for
GESOP. Under BBESOP, participants receive $1,000 worth of GPT securities that cannot be transferred or sold
until the earlier of 3 years from the allocation date or cessation of employment (or $1,000 cash (less tax) at the
election of the individual).
Policy & governance
• Utilised external advice on market compensation benchmarks and practice, prevailing regulatory and
governance standards, and drafting of incentive plan documentation from Ernst & Young and Conari Partners4.
Diversity
• Completed an organisation wide gender pay equity audit and launched GPT’s Gender Equality Policy.
• GPT’s CEO Bob Johnston is a member of the Property Male Champions of Change, and was also appointed a
Gender Pay Equity Ambassador by the Workplace Gender Equality Agency (WGEA).
• Increased the percentage of females in senior leadership roles from 36.7% at the end of 2016 to 41.4%.
• Maintained participation of First Nations employees in the permanent workforce at 1%.
• Launched GPT’s LGBTI Strategy and established an ally network.
1 Further information about the role and responsibility of the Committee is set out in its Charter which is available on GPT’s website (www.gpt.com.au).
2 Total Return is defined as the sum of the change in Net Tangible Assets (NTA) plus distributions over the performance period, divided by the NTA at the
beginning of the performance period.
3 TSR represents an investor’s return, calculated as the percentage difference between an initial amount invested in stapled securities and the final value of
those stapled securities at the end of the relevant period, assuming distributions were reinvested.
4 During 2017, no remuneration recommendations in relation to Key Management Personnel, as defined by Division 1 of Part 1.2 of Chapter 1 of the Corporations
Act 2001, were made by these or other consultants.
14
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 GPT’s vision and financial goals linked to remuneration structures
GPT’s vision and financial goals
To be the most respected
property company in Australia
in the eyes of our Investors,
People, Customers and
Communities
Total Return > 8.5%
Generate competitive Relative
Total Securityholder Return
Generate competitive EPS
growth
Base pay (Fixed)
STIC (variable)
LTI (variable)
Total remuneration components
• Base level of reward.
• Discretionary, at risk, and
• Set around Australian market
median using external
benchmark data (including
AON Hewitt and the Financial
Institutions Remuneration
Group (FIRG)).
• Reviewed based on
employee’s responsibilities,
experience, skill and
performance.
• External & internal relativities
considered.
with aggregate STIC funding
aligned to overall Group
financial outcomes.
• Set around market median
for target performance with
potential to achieve top
quartile for stretch outcomes.
• Determined by GPT and
individual performance
against a mix of balanced
scorecard measures which
include financial & non-
financial measures.
• Financial measures include
EPS growth, portfolio, fund
and/or property level metrics.
• Non-financial objectives focus
on execution of strategy,
delivery of key projects and
developments, and people
and culture objectives.
• Delivered in cash, or
(for senior executives), a
combination of cash and
equity with deferred vesting
for 1 year.
• Discretionary, at risk, and
aligned to overall Group
financial outcomes.
• Set around market median
for target performance with
potential to achieve top
quartile for stretch outcomes.
• Vesting determined by GPT
performance against Total
Return and Relative TSR
financial performance.
• Relative TSR is measured
against ASX200 AREIT
Accumulation Index
(including GPT).
• Assessed over a 3 year
performance period, no
re-testing.
• No value derived unless GPT
meets or exceeds defined
performance measures.
• Delivered in GPT securities to
align executive and security
holder interests.
Other employee ownership plans
(variable)
GESOP
• For STIC eligible individuals
who are ineligible for LTI.
• Equal to 10% of their STIC
(less tax) delivered in GPT
securities, which must be
held for at least 1 year.
BBESOP
• For individuals ineligible for
STIC or LTI.
• GPT must achieve at least
Target outcome on annual
EPS growth.
• A grant of $1,000 worth of
GPT securities which must
be held until the earlier of 3
years from the allocation date
or cessation of employment
(or $1,000 cash (less tax) at
the election of the individual).
Attract, retain, motivate and reward high calibre executives to
deliver superior performance by providing:
Align executive rewards to GPT’s performance and security holder
interests by:
• Competitive rewards.
• Opportunity to achieve incentives beyond base pay based on
high performance.
• Assessing incentives against financial and non-financial business
measures that are aligned with GPT strategy.
• Delivering a meaningful component of executive remuneration in
the form of equity subject to performance hurdles being achieved.
15
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 Employment Terms
1. Employment terms – Chief Executive Officer and Managing Director
Term
Contract duration
Conditions
Open ended.
Termination by Executive
6 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package
Bob Johnston’s 2017 remuneration arrangements were as follows:
• Fixed pay: $1,435,000.
• STIC: $0 to $1,793,750 (i.e. 0% to 125% of base pay) based on performance and paid in an equal
mix of cash and deferred GPT securities, with the securities component vesting one year after the
conclusion of the performance year.
• LTI: A grant of performance rights with the face value at time of grant of $2,152,500 (i.e. 150% of base
pay) with vesting outcomes dependent on performance and continued service, and delivered in restricted
GPT securities.
Termination by Company for cause No notice requirement or termination benefits (other than accrued entitlements).
Termination by Company (other)
12 months’ notice. Treatment of unvested STIC and LTI will be at the Board’s discretion under the terms of
the relevant plans and GPT policy.
Post-employment restraints
6 months non-compete, and 12 months non-solicitation of GPT employees.
External Directorships
Clawback Policy
Bob Johnston is a Director on the Boards of the Property Industry Foundation (PIF) and the Property Council
of Australia (PCA). He does not receive remuneration for these roles.
All GPT employees who participate in STIC and LTI are subject to remuneration being clawed back if the
recipient has acted fraudulently, dishonestly, or where there has been a material misstatement or omission
in the Group’s financial statements leading to the receipt of an unfair benefit.
2. Employment terms – Executive KMP
Term
Contract duration
Conditions
Open ended.
Termination by Executive
3 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package
Component
Fixed pay
STIC5
LTI
Mark Fookes
$820,000
$0 to $820,000
$0 to $820,000
Anastasia Clarke
$750,000
$0 to $750,000
$0 to $750,000
Termination by Company for cause No notice requirement or termination benefits (other than accrued entitlements).
Termination by Company (other)
3 months’ notice. Severance payments may be made subject to GPT policy and capped at the three year
average of the executive’s annual base (fixed) pay. Treatment of unvested STIC and LTI will be at the Board’s
discretion under the terms of the relevant plans and GPT policy.
Post-employment restraints
12 months non-solicitation of GPT employees.
3. Compensation mix at maximum STIC and LTI outcomes
Executive KMP
Bob Johnston
Position
Chief Executive Officer and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Fixed remuneration
Variable or “at risk” remuneration6
Base pay
26.7%
33.4%
33.4%
STI
33.3%
33.3%
33.3%
LTI
40.0%
33.3%
33.3%
5 The STIC is paid in an equal mix of cash and deferred GPT securities, with the securities component vesting 1 year after the conclusion of the performance year.
6 The percentage of each component of total remuneration is calculated with reference to maximum or stretch potential outcomes as set out under Remuneration
Package in Tables 1 and 2 above.
16
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 Group Financial Performance & Incentive Outcomes
1. Five year Group financial performance
Total Securityholder Return (TSR) %
Total Return %
NTA (per security) $
FFO (per security)7 cents
Security price at end of calendar year $
2017
6.6
15.2
5.04
30.8
5.11
2016
10.1
15.5
4.59
29.9
5.03
2015
15.4
11.5
4.17
28.3
4.78
2014
34.5
9.6
3.94
26.8
4.35
2013
4.1
8.5
3.79
25.7
3.40
2. Summary of CEO Objectives and Performance Outcomes
Performance measure
Reason chosen
Weighting
Performance outcomes
Financial
Strategy
Performance
70%
15%
10%
Earnings per security
(EPS) and EPS growth
targets.
Strategy objectives
focussed on exploring
growth opportunities
for GPT group, as well
as development and
implementation of strategy
plans for each division.
Operational objectives
focussed on driving
performance of the
investment portfolio and
on fund term reviews,
fund performance,
key milestones in the
development pipeline, and
other projects.
EPS is a key financial
measure of GPT’s
performance.
Developing,
communicating and
implementing GPT’s
strategy will underpin
GPT’s medium term
activities.
Focus on delivery
of investment and
fund performance,
conversion of the
development pipeline
and operational
efficiency to optimise
GPT’s performance.
People
People objectives centred
on increasing employee
engagement, driving our
diversity and inclusion
agenda, and leadership
team performance.
Maintaining a high
performing executive
team and achieving
engagement and
diversity goals is key
to GPT’s performance.
5%
The Group delivered EPS of 30.8 cents and EPS growth of
3.0% for 2017. This was consistent with budget but below
the stretch objective set by the Board.
Strategy plans have been developed and updated
for each division, approved by the Board, and
implementation of plans is on-track.
Acquisition opportunities consistent with strategy
were targeted throughout the year but the Group was
unsuccessful in securing major new opportunities that
met the Group’s return expectations.
GWSCF performance was a 1 year equity IRR of 12.5%,
and fund terms were successfully renewed.
GWOF performance was a 1 year equity IRR of 13.4%,
and GPT acquired a further $23.2m worth of units to take
the Group’s position to 25%.
The expansion of the Rouse Hill Town Centre was
delayed due to changing retail market conditions and
authority delays have hampered progress on the mixed-
use opportunities at Sydney Olympic Park and Camellia.
The Darling Park Stage 4 opportunity has been further
advanced. $88.5m of Logistics development projects
were completed at Seven Hills, Huntingwood and Wacol,
with a further $126.5m of projects underway.
The Sunshine Plaza redevelopment is expected to be
completed successfully in the 4th Quarter of 2018. The
Group has also successfully completed the repositioning
of Wollongong Central.
Employee engagement has been independently
assessed and the Group’s sustainable engagement score
increased 3% to 82%.
Gender diversity remained a focus for 2017 with female
representation in senior leadership roles increasing
to 41.4%.
Aboriginal and Torres Strait Islander representation in
the permanent workforce has remained steady at 1%.
Strategies have been implemented to ensure that GPT
is an inclusive organisation for all including our LGBTI,
Aboriginal and Torres Strait Islander employees.
The Leadership Team and senior cohort completed
Hogan Profiles as part of leadership development
activities to help drive business performance.
3. 2017 STIC Framework
The CEO objectives are cascaded (in full or in part) to KMP and all STIC participants where applicable. Performance measures
and weightings may vary according to areas of responsibility for each STIC participant. Group and segment financial KPI’s and
performance KPI’s in relation to occupancy, leasing, progress on developments, investment performance and operational
efficiency are included. Performance objectives are then measured to determine performance outcomes and recommended STIC.
For the Group, EPS Growth performance hurdles are set for the year. For 2017, with the Group delivering an EPS Growth outcome
of 3.0 per cent, an amount of $13.8 million was derived for the STIC pool, representing 64 per cent of the aggregate of STIC
participants’ maximum STIC potential (2016: 69 per cent). The proportion of the available STIC pool for each individual participant
is then determined by the performance of the individual and their business unit/team against Group and individual KPI’s.
7 Represents Realised Operating Income (ROI) until 2013.
17
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 Final allocation of the STIC pool for 2017 among the balance of the eligible employees8 is to occur post the issue of the 2017
Remuneration Report in March 2018. The following table shows the distribution of 2016 STIC outcomes as a percentage of
the individuals’ maximum STIC opportunity.
2016 STIC Received as a % of STIC potential
Percentage of STIC participants
0–50%
6.0%
50–60%
60–70%
70–80%
80-–90%
90–100%
6.9%
31.9%
44.9%
10.3%
0.0%
4. 2017 STIC outcomes by Executive KMP9
Executive KMP
Position
Bob Johnston
Chief Executive Officer and
Managing Director
Actual STIC
awarded
Actual STIC
awarded as a % of
maximum STIC
% of maximum
STIC award
forfeited
Cash
component
Equity component
(# of GPT
securities)10
$1,142,000
63.67%
36.33%
$571,000
119,958
Anastasia Clarke
Chief Financial Officer
$500,000
Mark Fookes
Chief Operating Officer
$540,000
66.67%
65.85%
33.33%
34.15%
$250,000
$270,000
52,521
56,723
5. Group performance measures for LTI Plans
LTI
performance
measurement
period
LTI
2015
2015–17
2016
2016–18
2017
2017–19
Performance measure
Relative TSR versus
comparator group
Total Return
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
Total Return
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
Total Return
Performance measure
hurdle
Weighting Results
50% of rights vest at 51st
percentile, up to 100% at
the 75th percentile (pro rata
vesting in between)
50%
TSR of 44.34%.
Relative TSR of 5th out of 11
participants, placing GPT at
the 58.96th percentile.
Vesting % by
performance
measure
66.58%
25% of rights vest at 9%
Total Return, up to 100%
at 9.75% Total Return (pro-
rata vesting in between)
10% of rights vest at Index
performance, up to 100%
at Index plus 10% (pro rata
vesting in between)
0% of rights vest at 8%
Total Return, up to 100% at
9.5% Total Return (pro-rata
vesting in between)
10% of rights vest at Index
performance, up to 100%
at Index plus 10% (pro rata
vesting in between)
0% of rights vest at 8.5%
Total Return, up to 100%
at 10.0% Total Return (pro-
rata vesting in between)
50%
Compound TR of 14.05%
100%
50%
N/A
50%
N/A
50%
N/A
50%
N/A
N/A
N/A
N/A
N/A
6. 2015-2017 LTI outcomes by Executive KMP
Executive KMP
Performance rights granted
Performance rights vested
Performance rights lapsed
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
430,476
104,981
194,747
358,543
87,439
162,205
71,933
17,542
32,542
i.e. excluding the KMP.
8
9 Excluding the impact of movements in the GPT security price on deferred STIC value received.
10 The number of deferred GPT securities granted are calculated by dividing 50% of the Actual STIC awarded by GPT’s Q4 2016 VWAP of $4.76. The deferred GPT
securities will vest subject to service on 31 December 2018.
18
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 7. LTI outcomes – fair value and maximum value recognised in future years11
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Year
2017
2016
2017
2016
2017
2016
Grant date
22 May 17
16 May 16
21 February 17
16 May 16
21 February 17
16 May 16
Fair value per
performance
right
Performance
rights granted as
at 31 Dec 17
$2.66
$2.96
$2.66
$2.96
$2.66
$2.96
452,206
450,257
157,563
139,365
172,269
171,527
Maximum value
to be recognised
in future years
$955,709
$903,120
$293,563
$314,439
$320,962
$387,004
Vesting date
31 Dec 19
31 Dec 18
31 Dec 19
31 Dec 18
31 Dec 19
31 Dec 18
8. Reported remuneration – Executive KMP – Actual Amounts Received12
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Total
Year
2017
2016
2017
2016
2017
2016
2017
2016
Fixed pay
Variable or “at risk”13
Base pay Superannuation
Other14
STIC
LTI
Total
$1,415,168
$1,300,883
$730,168
$630,538
$800,168
$780,538
$2,945,504
$2,711,959
$19,832
$19,462
$19,832
$19,462
$19,832
$19,462
$59,496
$58,386
$3,299
$1,195,801
$1,867,471
$4,501,571
$5,677
$1,143,136
–
$2,469,158
$2,480
$2,334
$4,326
$6,999
$523,556
$455,426
$1,731,462
$481,107
$517,555
$1,650,996
$565,442
$844,845
$2,234,613
$571,233
$979,499
$2,357,731
$10,105
$2,284,799
$3,167,742
$8,467,646
$15,010
$2,195,476
$1,497,054
$6,477,885
9. Reported remuneration – Executive KMP – AIFRS Accounting15
Fixed pay
Variable or “at risk”
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Total
Year
2017
2016
2017
2016
2017
2016
2017
2016
Base pay
Superannuation
Other
STIC
(cash plus
accrual)16
LTI award
accrual17
Grant or
vesting of
non STI or LTI
performance
rights18
Total
$1,376,680
$1,390,757
$775,348
$633,714
$840,325
$784,411
$2,992,353
$2,808,882
$19,832
$3,299
$1,219,543 $1,166,796
-
$3,786,150
$19,462
$5,677
$936,837
$694,626
$64,319
$3,111,678
$19,832
$2,480
$569,961
$382,324
$19,462
$2,334
$495,523
$290,933
$19,832
$4,326
$669,971
$515,208
$19,462
$6,999
$720,099
$481,598
$59,496 $10,105
$2,459,475 $2,064,328
-
-
-
-
-
$1,749,945
$1,441,966
$2,049,662
$2,012,569
$7,585,757
$58,386
$15,010
$2,152,459
$1,467,157
$64,319
$6,566,213
11 For the avoidance of doubt, the GPT incentive plans (i.e. STIC and LTI) use face value grants of performance rights based on the volume weighted average security price
(VWAP) of GPT securities for specified periods; reference to fair value per performance right is included in this table to comply with accounting standards.
12 This table discloses the cash and other benefit amounts actually received by GPT’s executive KMP, as distinct from the accounting expense. As a result, it does
not align to Australian Accounting Standards.
13 Gross dollar values for the equity components have been calculated by multiplying the number of securities by GPT’s fourth quarter VWAP for the applicable
year; 2017: $5.2085 (2016: $4.76).
14 Other may include death & total/permanent disability insurance premiums, service awards, GPT superannuation plan administration fees, and/or other benefits.
15 This table provides a breakdown of remuneration for executive KMP in accordance with statutory requirements and Australian Accounting Standards.
16 The accrual accounting valuation of the deferred securities in Mr. Johnston’s 2015 STIC are included in the 2016 number as they were approved for issue at the 2016 AGM.
17 This column records the amount of the fair value of performance rights under the various LTI plans expensed in the relevant financial years, and does not represent
actual LTI awards made to executives or the face value grant method.
18 Grant or vesting of one-off non STI or LTI performance rights includes an accounting valuation of the sign on package for Mr. Johnston.
19
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017
10. GPT security ownership – Executive KMP as at 31 December 2017
GPT
Holdings
(start of
period)19
330,695
486,402
1,008,431
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Sign on
performance
rights
converting in
2017
Employee Security Schemes
(ESS)
2017
DSTIC
2015-17
LTI
TOTAL
ESS for
2017
Purchase
/(Sales)
during
period20
GPT
Holdings
(end of
period)21
Gross Value
of GPT
Holdings22
MSHR
Guideline23
12,569
119,958
358,543
478,501
–
821,765
$4,280,163
$2,152,500
–
–
52,521
87,439
139,960
(163,777)
462,585
$2,409,374
$750,000
56,723
162,205
218,928
(109,091)
1,118,268
$5,824,499
$820,000
11. GPT performance rights – Executive KMP
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Performance rights that lapsed in 201724
(# of rights)
Performance rights still on foot at 31/12/1725
(# of rights)
Performance rights
140,394
43,802
61,953
902,463
296,928
343,796
19 GPT Holdings (start of period) may include GPT securities obtained as sign on grants (Mr Johnston only), DSTIC up to and including 2016, LTI plans up to and including
the 2014-16 LTI plan, and private holdings.
20 Movement in GPT security holdings as a result of the sale of vested, unrestricted security holdings and/or the sale or purchase of additional private holdings on the
individuals own account during the 2017 calendar year.
21 GPT Holdings (end of period) is the sum of GPT Holdings (start of the period) plus DSTIC and LTI securities obtained under ESS and adjusted for any purchases or sales
during the period.
22 The GPT Holdings (end of period) multiplied by GPT’s fourth quarter 2017 VWAP of $5.2085 to derive a dollar value.
23 GPT’s MSHR guideline requires the CEO to acquire and maintain a holding equal to 150% of base salary. For Leadership Team members the holding requirement is
equal to 100% of base salary. Individuals have four years from commencement of employment to achieve the MSHR before it is assessed for the first time.
24 The sum of performance rights that were awarded to a participant in the 2015 LTI that did not vest at the end of the 2015-2017 performance period, and as a result,
lapsed and/or performance rights granted under the 2017 DSTIC that also lapsed.
25 The total of unvested performance rights currently on foot excluding any GPT securities or performance rights that may have lapsed up to 31 December 2017. This
represents the current maximum number of additional GPT securities to which the individual may become entitled subject to satisfying the applicable performance
measures in the 2016-18 and 2017-19 LTI plans on foot; as such, these performance rights represent the incentive opportunity over multiple future years, are subject
to performance and hence “at risk”, and as a result may never vest.
20
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017 Remuneration – Non-Executive Directors
What are the key elements
of the Non-Executive
Director Remuneration
Policy?
• The Board determines the remuneration structure for Non-Executive Directors based on
recommendations from the Committee.
• Non-Executive Directors are paid one fee for participation as a Director in all GPT related companies
(principally GPT RE Limited, the Responsible Entity of General Property Trust and GPT Management
Holdings Limited).
• Non-Executive Director remuneration is composed of three main elements:
– Main Board fees
– Committee fees
– Superannuation contributions at the statutory superannuation guarantee contribution rate.
• Non-Executive Directors do not participate in any short or long term incentive arrangements and are not
entitled to any retirement benefits other than compulsory superannuation.
• Non-Executive Director remuneration is set by reference to comparable entities listed on the ASX (based
on GPT’s industry sector and market capitalisation).
• External independent advice on remuneration levels for Non-Executive Directors is sought on an annual
basis. In the event that a review is conducted, the new Board and Committee fees are effective from the 1st
of January in the applicable year and advised in the ensuing Remuneration Report.
• Fees (including superannuation) paid to Non-Executive Directors are subject to an aggregate limit of
$1,800,000 per annum, which was approved by GPT security holders at the Annual General Meeting on 5
May 2015. As an executive director, Mr Johnston does not receive fees from this pool as he is remunerated
as one of GPT’s senior executives.
1. Board and committee fees26,27
Chairman
Members
Year
2017
2016
2017
2016
Board Base Fee
Audit Committee
$380,000
$362,500
$148,000
$145,000
$36,000
$36,000
$18,000
$18,000
Sustainability and
Risk Committee
Nomination and
Remuneration
Committee
$30,000
$30,000
$15,000
$15,000
2. Reported remuneration – Non-Executive Directors – AIFRS accounting28,29
Non-Executive Director
– Current
Rob Ferguson
Chairman
Brendan Crotty
Eileen Doyle
Swe Guan Lim
Michelle Somerville
Gene Tilbrook
Year
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Non-Executive Director – Former
Anne McDonald31
2017
Total
2016
2017
2016
Salary and fees
Superannuation
Other30
Fixed pay
$380,000
$362,500
$181,000
$181,333
$203,500
$190,000
$181,000
$178,000
$192,750
$174,723
$178,000
$175,000
–
$62,422
$1,316,250
$1,323,978
$19,832
$19,462
$17,195
$17,227
$19,333
$18,050
$17,195
$16,910
$18,311
$16,599
$16,910
$16,625
–
$5,930
$108,776
$110,803
–
–
–
–
–
–
$287
$615
-
-
$380
$767
–
$641
$667
$2,023
$30,000
$30,000
$15,000
$15,000
Total
$399,832
$381,962
$198,195
$198,560
$222,833
$208,050
$198,482
$195,525
$211,061
$191,322
$195,290
$192,392
–
$68,993
$1,425,693
$1,436,804
26 ‘Chairman’ used in this sense may refer to the chairperson of the board or a particular committee.
27 In addition to the fees noted in the table, all non-executive directors receive reimbursement for reasonable travel, accommodation and other expenses incurred while
undertaking GPT business.
28 This table provides a breakdown of remuneration for Non-Executive Directors in accordance with statutory requirements and Australian Accounting Standards.
29 No termination benefits were paid during the financial year.
30 Other may include death & total/permanent disability insurance premiums and/or GPT superannuation plan administration fees.
31 Ms. McDonald retired from the GPT Board on 4 May 2016.
21
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017
3. Non-Executive Director – GPT securityholdings
Non-Executive Director
Balance 31/12/16
Purchase/(Sale)
Balance 31/12/17
Private holdings (# of securities)
Minimum securityholding requirement (MSHR)
MSHR guideline33
Gross value32
Rob Ferguson
Brendan Crotty
Eileen Doyle
Swe Guan Lim
Michelle Somerville
Gene Tilbrook
207,628
67,092
45,462
–
2,912
48,546
–
–
–
15,800
13,245
–
207,628
$1,081,430
67,092
45,462
15,800
16,157
48,546
$349,449
$236,789
$82,294
$84,154
$252,852
$380,000
$148,000
$148,000
$148,000
$148,000
$148,000
32 Non-Executive Directors holdings multiplied by GPT’s fourth quarter 2017 VWAP of $5.2085 to derive a dollar value.
33 The MSHR for Non-Executive Directors is equal to 100% of base fees. Individuals have four years from commencement of employment to achieve the MSHR before it
is assessed for the first time.
The Directors’ Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors of the
GPT Group.
Rob Ferguson
Chairman
Sydney
13 February 2018
Bob Johnston
Chief Executive Officer and Managing Director
22
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2017
23
Annual Financial Report of The GPT Group Annual Financial Report of The GPT Group
Financial Statements
Consolidated Statement of Comprehensive Income
Year ended 31 December 2017
Revenue
Rent from investment properties
Property and fund management fees
Development revenue
Development management fees
Other income
Fair value gain on investment properties
Share of after tax profit of equity accounted investments
Interest revenue
Dividend income
Derecognition of available for sale financial asset
Net profit on disposal of assets
Gain on financial liability at amortised cost
Reversal of prior period impairment expense
Total revenue and other income
Expenses
Property expenses and outgoings
Management and other administration costs
Development costs
Depreciation expense
Amortisation expense
Impairment expense
Finance costs
Net loss on fair value movements of derivatives
Net impact of foreign currency borrowings and associated hedging loss/(gain)
Net foreign exchange loss
Total expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Profit from discontinued operations
Net profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss, net of tax
Changes in the fair value of cash flow hedges
Revaluation of available for sale financial asset
Net foreign exchange translation adjustments
Total other comprehensive income
Total comprehensive income for the year
Total comprehensive income for the year from continuing operations
Total comprehensive income for the year from discontinued operations
Net profit attributable to:
– Securityholders of the Trust
– Securityholders of other entities stapled to the Trust
Total comprehensive income attributable to:
– Securityholders of the Trust
– Securityholders of other entities stapled to the Trust
Note
31 Dec 17
$M
31 Dec 16
$M
610.6
70.2
15.0
10.8
706.6
481.0
443.9
1.3
–
10.7
–
2.2
–
939.1
1,645.7
158.3
71.7
14.4
1.7
6.0
5.4
103.7
5.7
0.2
–
367.1
584.1
96.7
22.4
2.0
705.2
418.1
375.4
2.6
30.4
–
12.8
1.6
0.4
841.3
1,546.5
157.3
69.1
13.1
1.9
5.4
6.0
102.6
26.6
(2.2)
0.1
379.9
1,278.6
1,166.6
9(a)
10.3
22.4
10(b)
10(b)
10(b)
1,268.3
0.8
1,269.1
1,144.2
8.5
1,152.7
(9.4)
(7.1)
–
(16.5)
1,252.6
1,251.8
0.8
14.5
(1.5)
(0.8)
12.2
1,164.9
1,157.2
7.7
1,249.3
19.8
1,048.8
103.9
1,239.9
12.7
1,061.5
103.4
Basic earnings per unit attributable to ordinary securityholders of the Trust
Earnings per unit (cents per unit) – profit from continuing operations
Basic earnings per stapled security attributable to ordinary stapled securityholders of the GPT Group
Earnings per stapled security (cents per stapled security) – profit from continuing operations
11(a)
11(b)
69.3
57.9
70.4
63.7
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
24
Consolidated Statement of Financial Position
As at 31 December 2017
Note
31 Dec 17
$M
31 Dec 16
$M
ASSETS
Current assets
Cash and cash equivalents
Loans and receivables
Inventories
Derivative assets
Prepayments
Other assets
Total current assets
Non-current assets
Investment properties
Equity accounted investments
Intangible assets
Inventories
Property, plant and equipment
Derivative assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Current tax liabilities
Borrowings
Derivative liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Securityholders of the Trust (parent entity)
Contributed equity
Reserves
Retained earnings
Total equity of Trust securityholders
Securityholders of other entities stapled to the Trust
Contributed equity
Reserves
Accumulated losses
Total equity of other stapled securityholders
Total equity
4
6
14(a)
2
3
5
6
14(a)
9
7
9
13
14(a)
8
13
14(a)
8
10(a)
10(b)
10(c)
10(a)
10(b)
10(c)
49.9
118.9
11.8
3.4
7.0
–
56.3
149.2
4.5
–
4.7
9.3
191.0
224.0
8,745.7
3,562.9
30.9
140.4
9.9
257.7
16.9
3.0
12,767.4
12,958.4
374.9
8.6
19.9
9.1
37.9
450.4
3,280.7
118.0
2.3
3,401.0
3,851.4
9,107.0
7,814.8
(40.6)
1,829.5
9,603.7
325.7
57.0
(879.4)
(496.7)
9,107.0
7,944.9
3,120.2
35.3
131.4
13.5
337.2
7.5
3.9
11,593.9
11,817.9
378.3
–
48.8
–
30.5
457.6
2,947.8
128.5
1.8
3,078.1
3,535.7
8,282.2
7,804.3
(31.2)
1,022.8
8,795.9
325.5
59.5
(898.7)
(513.7)
8,282.2
25
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Annual Financial Report of The GPT Group
2
6
Equity attributable to Securityholders
At 1 January 2016
Revaluation of available for sale financial asset net of tax
Foreign currency translation reserve
Cash flow hedge reserve
Other comprehensive income for the year
Profit for the year
Total comprehensive income for the year
Transactions with Securityholders in their capacity as
Securityholders
Issue of stapled securities
Reclassification of redemption deficit of exchangeable securities
to retained earnings
Movement in employee incentive scheme reserve net of tax
Reclassification of employee incentive security scheme reserve
to retained earnings/accumulated losses
Distributions paid and payable
At 31 December 2016
Equity attributable to Securityholders
At 1 January 2017
Movement in available for sale reserve net of tax
Cash flow hedge reserve
Other comprehensive income for the year
Profit for the year
Total comprehensive income for the year
Transactions with Securityholders in their capacity as
Securityholders
Issue of stapled securities
Movement in employee incentive scheme reserve net of tax
Reclassification of employee incentive security scheme reserve
to retained earnings/accumulated losses
Distributions paid and payable
At 31 December 2017
Note
10(b)
10(b)
10(b)
10(a)
10(a)
10(b)
10(c)
12
10(b)
10(b)
10(a)
10(b)
10(c)
12
General Property Trust
Other entities stapled to the General Property Trust
Contributed
equity
$M
Reserves
$M
Retained
earnings
$M
Contributed
equity
$M
Total
$M
Reserves
$M
Accumulated
losses
$M
Total
$M
Total
equity
$M
7,709.4
(43.9)
477.8
8,143.3
325.3
–
–
–
–
–
–
10.4
84.5
–
–
–
–
(1.8)
14.5
12.7
–
12.7
–
–
–
–
–
–
–
–
–
–
(1.8)
14.5
12.7
1,048.8
1,048.8
1,048.8
1,061.5
–
–
–
–
–
–
–
10.4
0.2
(84.5)
–
1.4
–
–
1.4
(420.7)
(420.7)
–
–
–
–
59.1
(1.5)
1.0
–
(0.5)
–
(0.5)
–
–
0.9
–
–
(1,002.6)
(618.2)
7,525.1
–
–
–
–
103.9
103.9
–
–
–
–
–
(1.5)
1.0
–
(0.5)
103.9
103.4
0.2
–
0.9
–
–
(1.5)
(0.8)
14.5
12.2
1,152.7
1,164.9
10.6
–
0.9
1.4
(420.7)
7,804.3
(31.2)
1,022.8
8,795.9
325.5
59.5
(898.7)
(513.7)
8,282.2
7,804.3
(31.2)
1,022.8
8,795.9
325.5
–
–
–
–
–
10.5
–
–
–
–
(9.4)
(9.4)
–
(9.4)
–
–
–
–
–
–
–
–
(9.4)
(9.4)
1,249.3
1,249.3
1,249.3
1,239.9
–
–
0.6
10.5
–
0.6
(443.2)
(443.2)
–
–
–
–
–
0.2
–
–
–
59.5
(7.1)
–
(7.1)
–
(7.1)
–
4.6
–
–
(898.7)
(513.7)
8,282.2
–
–
–
19.8
19.8
(7.1)
–
(7.1)
19.8
12.7
(7.1)
(9.4)
(16.5)
1,269.1
1,252.6
–
–
0.2
4.6
(0.5)
(0.5)
10.7
4.6
0.1
–
–
(443.2)
7,814.8
(40.6)
1,829.5
9,603.7
325.7
57.0
(879.4)
(496.7)
9,107.0
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Y
e
a
r
e
n
d
e
d
3
1
D
e
c
e
m
b
e
r
2
0
1
7
C
o
n
s
o
l
i
d
a
t
e
d
S
t
a
t
e
m
e
n
t
o
f
C
h
a
n
g
e
s
i
n
E
q
u
i
t
y
Annual Financial Report of The GPT Group
Consolidated Statement of Cash Flows
Year ended 31 December 2017
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)
Payments in the course of operations (inclusive of GST)
Proceeds from sale of inventories
Payment for inventories
Distributions received from equity accounted investments
Dividend received from available for sale investment
Interest received
Income taxes paid
Finance costs paid
Net cash inflows from operating activities
15
Cash flows from investing activities
Acquisition of investment properties
Payments for operating capital expenditure on investment properties
Payments for development capital expenditure on investment properties
Proceeds from disposal of assets
Payments for property, plant and equipment
Payments for intangibles
Investment in equity accounted investments
Capital return from available for sale financial asset
Proceeds from disposal of equity accounted investments
Proceeds from loan repayments
Loans advanced
Net cash outflows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment for termination of derivatives
Purchase of securities for the employee incentive scheme
Distributions paid to securityholders
Net cash outflows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
31 Dec 17
$M
31 Dec 16
$M
733.8
(267.3)
7.6
(25.1)
171.7
30.4
1.3
(6.9)
(110.0)
535.5
(33.0)
(84.1)
(205.3)
5.5
(1.1)
(4.8)
(158.3)
10.7
–
–
–
769.2
(273.7)
12.6
(16.1)
119.1
–
23.7
–
(108.6)
526.2
(70.4)
(82.9)
(124.6)
283.0
(0.7)
(4.8)
(384.0)
–
48.2
156.7
(1.6)
(470.4)
(181.1)
1,434.1
(1,066.9)
(3.1)
–
(435.6)
(71.5)
(6.4)
56.3
49.9
2,464.7
(2,407.0)
(1.5)
(1.2)
(413.1)
(358.1)
(13.0)
69.3
56.3
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
27
Annual Financial Report of The GPT Group
Result for the year
1. Segment information
GPT’s operating segments are described in the table
below. The chief operating decision makers monitor the
performance of the business on the basis of Funds from
Operations (FFO) for each segment. FFO represents GPT’s
underlying and recurring earnings from its operations, and
is determined by adjusting the statutory net profit after
tax for items which are non-cash, unrealised or capital
in nature. FFO has been determined in accordance with
guidelines issued by the Property Council of Australia.
Segment
Retail
Office
Logistics
Funds
Management
Corporate
Types of products and services which generate
the segment result
Ownership, development (including mixed use)
and management of predominantly regional and
sub-regional shopping centres as well as GPT’s
equity investment in GPT Wholesale Shopping
Centre Fund.
Ownership, development (including mixed use)
and management of prime CBD office properties
with some associated retail space as well as GPT’s
equity investment in GPT Wholesale Office Fund.
Ownership, development (including mixed use)
and management of logistics and business park
assets as well as GPT’s equity investment in GPT
Metro Office Fund until GPT divested its interest on
1 July 2016.
Management of two Australian wholesale
property funds in the retail and office sectors. And
management of one Australian listed property
fund in the metropolitan office and business park
sector until 30 September 2016.
Cash and other assets and borrowings and
associated hedges plus resulting net finance
costs, management operating costs and income
tax expense.
Notes to the Financial Statements
Year ended 31 December 2017
These are the consolidated financial statements of the
consolidated entity, GPT Group (GPT), which consists of
General Property Trust (the Trust), GPT Management Holdings
Limited (the Company) and their controlled entities.
The notes to these financial statements have been
organised into sections to help users find and understand
the information they need to know. Additional information
has also been provided where it is helpful to understand
GPT’s performance.
The notes to the financial statements are organised into the
following sections:
Note 1 – Result for the year: focuses on results and
performance of GPT.
Notes 2 to 9 – Operating assets and liabilities: provides
information on the assets and liabilities used to generate
GPT’s trading performance.
Notes 10 to 14 – Capital structure: outlines how GPT
manages its capital structure and various financial risks.
Notes 15 to 24 – Other disclosure items: provides
information on other items that must be disclosed to
comply with Australian Accounting Standards and other
regulatory pronouncements.
Key judgements, estimates and assumptions
In applying GPT’s accounting policies, management has
made a number of judgements, estimates and assumptions
regarding future events.
The following judgements and estimates have the potential
to have a material impact on the financial statements:
Area of judgements and
estimates
Assumptions underlying
Note
Management rights with
indefinite life
Impairment trigger and
recoverable amounts
IT development and software
Inventories
Impairment trigger and
recoverable amounts
Lower of cost and net
realisable value
Deferred tax assets
Recoverability
Security based payments
Fair value
5
5
6
9
18
22
22
Fair value
Fair value
Assessment of control
versus disclosure
guidance
23(b)
Investment properties
Derivatives
Investment in equity
accounted investments
28
Annual Financial Report of The GPT Group (a) Segment financial information
31 December 2017
The segment financial information provided to the chief operating decision maker for the year ended 31 December 2017 is
set out below.
Retail
$M
Office
$M
Logistics
$M
Funds
Management
$M
Corporate
$M
Total Core
$M
Non-Core
$M
Financial performance by segment
Rent from investment properties
Property expenses and outgoings
Income from Funds
Fee income
Note
b(ii)
b(iii)
b(iv)
360.1
239.2
(98.8)
(57.6)
46.5
15.0
68.8
4.4
Management & administrative
expenses
b(v)
(9.7)
(7.0)
Operations Net Income
313.1
247.8
Development fees
Development revenue
b(vi)
Development costs
Development management
expenses
Development Net Income
Interest income
Finance costs
Net Finance Costs
9.0
10.8
(5.2)
1.6
–
–
b(v)
(9.3)
(0.5)
5.3
1.1
–
–
–
–
–
–
Segment Result Before Tax
Income tax expense
Funds from Operations (FFO)
318.4
248.9
–
–
318.4
248.9
b(vii)
b(i)
112.5
(17.4)
–
0.1
(1.9)
93.3
0.2
10.4
(9.2)
(0.7)
0.7
–
–
–
94.0
–
94.0
–
–
–
50.7
–
–
–
–
711.8
(173.8)
115.3
70.2
(13.7)
(30.6)
(62.9)
37.0
(30.6)
660.6
–
–
–
–
–
–
–
–
–
–
–
–
–
1.3
10.8
21.2
(14.4)
(10.5)
7.1
1.3
(103.7)
(103.7)
(102.4)
(102.4)
37.0
(133.0)
–
(11.1)
37.0
(144.1)
565.3
(11.1)
554.2
Reconciliation of segment assets and liabilities to the Consolidated Statement of Financial Position
Current assets
Current assets
Total current assets
Non-current assets
Investment properties
–
–
–
–
11.8
11.8
4,818.7 2,379.4
1,547.6
Equity accounted investments
1,047.1 2,505.8
Inventories
Other non-current assets
Total non-current assets
Total assets
Current and non-current liabilities
Total liabilities
Net assets
62.4
10.2
–
0.3
–
78.0
1.9
5,938.4 4,885.5
1,627.5
5,938.4 4,885.5
1,639.3
–
–
–
–
–
–
5,938.4 4,885.5
1,639.3
–
–
–
–
–
–
–
–
–
–
–
Total
$M
711.8
(173.8)
115.3
70.2
(62.9)
660.6
10.8
21.2
(14.4)
(10.5)
7.1
1.3
(103.7)
(102.4)
565.3
(11.1)
554.2
191.0
191.0
8,745.7
3,562.9
140.4
318.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
179.2
179.2
191.0
191.0
–
8,745.7
10.0
3,562.9
–
306.0
140.4
318.4
316.0
12,767.4
– 12,767.4
495.2
12,958.4
– 12,958.4
3,851.4
3,851.4
3,851.4
3,851.4
(3,356.2)
9,107.0
–
–
–
3,851.4
3,851.4
9,107.0
29
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
31 December 2016
The segment financial information provided to the chief operating decision maker for the year ended 31 December 2016 is
set out below.
Financial performance by segment
Note
Retail
$M
Office
$M
Logistics
$M
Funds
Management
$M
Corporate
$M
Total Core
$M
Non-Core
$M
Rent from investment properties b(ii)
348.9
220.4
Property expenses and outgoings b(iii)
(102.2)
(52.6)
Income from Funds
b(iv)
Fee income
Performance Fee income
Management & administrative
expenses
38.7
14.6
–
59.4
5.7
–
b(v)
(11.7)
(9.0)
Operations Net Income
288.3
223.9
Development fees
Development revenue
b(vi)
Development costs
Share of profit from associate
b(iv)
0.3
8.1
(2.3)
–
1.6
–
–
–
Development management
expenses
b(v)
(0.3)
(0.5)
Development Net Income
5.8
1.1
Interest income
Finance costs
Net Finance Costs
–
–
–
–
–
–
Segment Result Before Tax
294.1
225.0
Income tax expense
Funds from Operations (FFO)
b(vii)
b(i)
–
–
294.1
225.0
109.1
(16.0)
1.4
0.8
–
(2.6)
92.7
0.1
15.8
(10.8)
0.1
(2.5)
2.7
–
–
–
95.4
–
95.4
–
–
–
47.5
28.1
(14.6)
61.0
–
–
–
–
–
–
–
–
–
61.0
–
61.0
–
–
–
–
–
(29.8)
(29.8)
–
–
–
–
–
–
2.6
(102.6)
(100.0)
(129.8)
(14.0)
(143.8)
678.4
(170.8)
99.5
68.6
28.1
(67.7)
636.1
2.0
23.9
(13.1)
0.1
(3.3)
9.6
2.6
(102.6)
(100.0)
545.7
(14.0)
531.7
Total
$M
678.4
(170.8)
99.5
68.6
28.1
(67.7)
636.1
2.0
23.9
(13.1)
0.1
(3.3)
9.6
7.9
–
–
–
–
–
–
–
–
–
–
–
–
–
5.3
–
(102.6)
5.3
(94.7)
5.3
–
5.3
551.0
(14.0)
537.0
Reconciliation of segment assets and liabilities to the Consolidated Statement of Financial Position
Current assets
Current assets
Total current assets
Non-current assets
–
–
–
–
4.5
4.5
Investment properties
4,468.6
2,071.5
1,404.8
Equity accounted investments
855.0
2,255.2
Inventories
Other non-current assets
57.4
10.4
–
1.2
–
74.0
2.1
Total non-current assets
5,391.4
4,327.9
1,480.9
Total assets
5,391.4
4,327.9
1,485.4
Current and non-current
liabilities
Total liabilities
Net assets
–
–
–
–
–
–
5,391.4
4,327.9
1,485.4
–
–
–
–
–
–
–
–
–
–
–
179.8
179.8
–
10.0
–
383.7
393.7
573.5
184.3
184.3
39.7
39.7
224.0
224.0
7,944.9
3,120.2
131.4
397.4
–
–
–
–
7,944.9
3,120.2
131.4
397.4
11,593.9
– 11,593.9
11,778.2
39.7 11,817.9
3,535.7
3,535.7
3,535.7
(2,962.2)
3,535.7
8,242.5
–
–
3,535.7
3,535.7
39.7
8,282.2
30
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(b) Reconciliation of segment result to the Consolidated Statement of Comprehensive Income
(i) FFO to Net profit for the year
Segment result
FFO
Adjustments
Fair value gain on investment properties
Fair value gain and other adjustments to equity accounted investments
Amortisation of lease incentives and costs
Straightlining of leases
Valuation increase
Net loss on fair value movement of derivatives
Net impact of foreign currency borrowings and associated hedging loss
Net foreign exchange loss
Gain on financial liability at amortised cost
Financial instruments mark to market and net foreign exchange loss
Dividend income
Net gain on disposal of assets
Impairment expense
Other items
Total other items
Consolidated Statement of Comprehensive Income
Net profit for the year
(ii) Rent from investment properties
Segment result
Rent from investment properties
Less: share of rent from investment properties in equity accounted investments
Adjustments
Amortisation of lease incentives and costs
Straightlining of leases
Consolidated Statement of Comprehensive Income
Rent from investment properties
(iii) Property expenses and outgoings
Segment result
Property expenses and outgoings
Less: share of property expenses and outgoings in equity accounted investments
Consolidated Statement of Comprehensive Income
Property expenses and outgoings
(iv) Share of after tax profit of equity accounted investments
Segment result
Income from Funds
Share of rent from investment properties in equity accounted investments
Share of property expenses and outgoings in equity accounted investments
Share of profit from associate
Development revenue
Adjustment
Fair value gain and other adjustments to equity accounted investments
Consolidated Statement of Comprehensive Income
Share of after tax profit of equity accounted investments
31 Dec 17
$M
31 Dec 16
$M
554.2
537.0
481.0
263.9
(38.9)
11.7
717.7
(5.7)
(0.2)
0.8
2.2
(2.9)
–
10.7
(5.4)
(5.2)
0.1
418.1
223.0
(43.1)
13.6
611.6
(26.6)
2.2
(0.2)
1.6
(23.0)
30.4
15.9
0.6
(19.8)
27.1
1,269.1
1,152.7
711.8
(74.0)
(38.9)
11.7
678.4
(64.8)
(43.1)
13.6
610.6
584.1
(173.8)
15.5
(170.8)
13.5
(158.3)
(157.3)
115.3
74.0
(15.5)
–
6.2
99.5
64.8
(13.5)
0.1
1.5
263.9
223.0
443.9
375.4
31
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(v) Management and administration expenses
Segment result
Operations
Development
Less: depreciation expense
Consolidated Statement of Comprehensive Income
Management and administration expenses
(vi) Development revenue
Segment result
Development revenue
Share of after tax profit of equity accounted investments
Consolidated Statement of Comprehensive Income
Development revenue
(vii) Income tax expense
Segment result
Income tax expense
Adjustment
31 Dec 17
$M
31 Dec 16
$M
(62.9)
(10.5)
1.7
(67.7)
(3.3)
1.9
(71.7)
(69.1)
21.2
(6.2)
15.0
23.9
(1.5)
22.4
(11.1)
(14.0)
Tax impact of reconciling items from segment result to net profit for the year
0.8
(8.4)
Consolidated Statement of Comprehensive Income
Income tax expense
(c) Net profit on disposal and derecognition of assets
Details of disposals/capital returns during the year:
Cash consideration
Less: transaction costs
Net consideration
Carrying amount of net assets sold/derecognised
Foreign exchange gain realised on disposal/derecognition
Transfer from reserves
Profit on sale and derecognition before income tax
The carrying amounts of assets and liabilities as at the date of disposal/derecognition were:
Investment properties
Equity accounted investments
Other assets
Other liabilities
Net assets
Revenue
(10.3)
(22.4)
Non-core
$M
31 Dec 17
$M
31 Dec 16
$M
10.7
–
10.7
(10.7)
–
10.7
10.7
–
–
10.7
–
10.7
10.7
–
10.7
336.0
(4.2)
331.8
(10.7)
(316.7)
–
10.7
10.7
–
–
10.7
–
10.7
0.8
–
15.9
270.5
39.2
8.3
(1.3)
316.7
Rental revenue from investment properties is recognised on a straightline basis over the lease term. An asset is also
recognised as a component of investment properties relating to fixed increases in operating lease rentals in future periods.
When GPT provides lease incentives to tenants, any costs are recognised on a straightline basis over the lease term.
Contingent rental income is recognised as revenue in the period in which it is earned.
Property, development and fund management fee revenue is recognised on an accruals basis, in accordance with the terms
of the relevant contracts.
Development revenue is recognised as and when GPT is entitled to the benefits.
Revenue from dividends and distributions is recognised when they are declared.
32
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
Interest income is recognised on an accruals basis using
the effective interest method.
Profit or loss on disposal of an asset is recognised as
the difference between the carrying amount and the net
proceeds from disposal. Where revenue is obtained from
the sale of properties or assets, it is recognised when the
significant risks and rewards have transferred to the buyer.
Expenses
Property expenses and outgoings which include rates,
taxes and other property outgoings, are recognised on an
accruals basis.
Finance costs
Finance costs include interest, amortisation of discounts
or premiums relating to borrowings and amortisation
of ancillary costs incurred in connection with the
arrangement of borrowings. Finance costs are expensed as
incurred unless they relate to a qualifying asset.
A qualifying asset is an asset under development which
generally takes a substantial period of time to bring to
its intended use or sale. Finance costs incurred for the
acquisition and construction of a qualifying asset are
capitalised to the cost of the asset for the period of time
that is required to complete the asset. Where funds are
borrowed specifically for a development project, finance
costs associated with the development facility are capitalised.
Where funds are used from group borrowings, finance costs
are capitalised using an appropriate capitalisation rate.
Operating assets and liabilities
2. Investment properties
Retail
Office
Logistics
Properties under development
Total investment properties
Note
31 Dec 17
$M
31 Dec 16
$M
(a)
(b)
(c)
(d)
(e)
4,818.7
4,468.6
2,306.8
2,068.1
1,498.6
1,317.3
121.6
90.9
8,745.7
7,944.9
Ownership
interest5
%
Acquisition
date
Latest
independent
valuation
date
Valuer
Fair value
31 Dec 17
$M
Fair value
31 Dec 16
$M
(a) Retail
Casuarina Square, NT
Charlestown Square, NSW
50.0
100.0
Oct 1973
Dec 1977
Pacific Highway, Charlestown, NSW
100.0
Oct 2002/Jul 2003
Jun 2017
Sep 2017
CB Richard Ellis Pty Ltd
Jun 2017
Sep 2017
Sep 2017
M3 Property
M3 Property
Savills Australia
Savills Australia
Jun 2017
Knight Frank Valuations
16.7
16.7
50.0
Aug 2009
Aug 2009
Jun 1971
**50.0 Dec 1992/Sep 2004
Dec 2017
50.0
100.0
Jun 1999
Dec 2005
Dec 2017
Dec 2017
M3 Property
M3 Property
M3 Property
100.0 May 1999/May 2001
Dec 2017
CB Richard Ellis Pty Ltd
Highpoint Shopping Centre, VIC
Homemaker City, Maribyrnong, VIC
Westfield Penrith, NSW
Sunshine Plaza, QLD
Plaza Parade, QLD
Rouse Hill Town Centre, NSW
Melbourne Central, VIC – retail portion1
Total Retail
(b) Office
Australia Square, Sydney, NSW
MLC Centre, Sydney, NSW
One One One Eagle Street, Brisbane, QLD
Melbourne Central, VIC – office portion1
50.0
50.0
33.3
Sep 1981
Apr 1987
Apr 1984
Jun 2017
Colliers International
Jun 2017
Knight Frank Valuations
Dec 2017
CB Richard Ellis Pty Ltd
100.0 May 1999/May 2001
Jun 2017
Jones Lang LaSalle
Corner of Bourke and William, VIC
50.0
Oct 2014
Dec 2017
Jones Lang LaSalle
Total Office
322.6
924.8
6.6
434.2
11.7
669.5
449.3
10.0
606.8
313.0
885.5
7.1
373.4
9.8
636.2
380.5
10.3
578.8
1,383.2
4,818.7
1,274.0
4,468.6
444.2
662.2
293.7
546.7
360.0
402.6
531.5
284.2
513.5
336.3
2,306.8
2,068.1
1 Melbourne Central: 71.7% Retail and 28.3% Office (31 Dec 2016: 71.3% Retail and 28.7% Office). Melbourne Central – Retail Includes 100% of Melbourne
Central car park and 100% of 202 Little Lonsdale Street.
33
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
Ownership
interest5
%
Acquisition
date
Latest
independent
valuation
date
Valuer
Fair value
31 Dec 17
$M
Fair value
31 Dec 16
$M
(c) Logistics
Citi-West Industrial Estate, Altona North, VIC
100.0
Aug 1994
Dec 2017
CB Richard Ellis Pty Ltd
Quad 1, Sydney Olympic Park, NSW
*100.0
Jun 2001
Jun 2017
Quad 4, Sydney Olympic Park, NSW
*100.0
Jun 2004
Jun 2017
M3 Property
M3 Property
6 Herb Elliott Avenue, Sydney Olympic Park, NSW
*100.0
Jun 2010
Jun 2017
Knight Frank Valuations
8 Herb Elliott Avenue, Sydney Olympic Park, NSW
*100.0
Aug 2004
Jun 2017
Knight Frank Valuations
3 Figtree Drive, Sydney Olympic Park, NSW
*100.0
Apr 2013
Jun 2017
Knight Frank Valuations
5 Figtree Drive, Sydney Olympic Park, NSW
*100.0
Jul 2005
Jun 2017
Knight Frank Valuations
7 Figtree Drive, Sydney Olympic Park, NSW
*100.0
Jul 2004
Jun 2017
Knight Frank Valuations
Rosehill Business Park, Camellia, NSW
100.0 May 1998
Dec 2017
CB Richard Ellis Pty Ltd
16–34 Templar Road, Erskine Park, NSW
100.0
Jun 2008
Dec 2017
Colliers International
67–75 Templar Road, Erskine Park, NSW
100.0
Jun 2008
Dec 2017
Savills Australia
81.6
24.0
51.5
12.0
11.7
24.5
26.7
15.3
81.4
58.3
24.2
70.6
23.4
49.3
11.1
11.3
24.0
26.5
15.0
79.4
54.5
23.5
Austrak Business Park, Somerton, VIC
50.0
Oct 2003
Dec 2017
Jones Lang LaSalle
170.5
165.4
4 Holker Street, Newington, NSW
100.0 Mar 2006
Dec 2017
CB Richard Ellis Pty Ltd
372–374 Victoria Street, Wetherill Park, NSW
18–24 Abbott Road, Seven Hills, NSW2
100.0
100.0
Jul 2006
Dec 2017
CB Richard Ellis Pty Ltd
Oct 2006
Jun 2017
CB Richard Ellis Pty Ltd
Citiport Business Park, Port Melbourne, VIC
100.0 Mar 2012
Jun 2017
Savills Australia
83 Derby Street, Silverwater, NSW
100.0
Aug 2012
Dec 2017
Jones Lang LaSalle
10 Interchange Drive, Eastern Creek, NSW
100.0
Aug 2012
Dec 2017
Jones Lang LaSalle
407 Pembroke Road, Minto, NSW
50.0
Oct 2008
Jun 2017
Jones Lang LaSalle
Corner Pine Road and Loftus Road, Yennora, NSW
100.0
Nov 2013
Jun 2017
M3 Property
16-28 Quarry Road, Yatala, QLD
100.0
Nov 2013
Dec 2017
CB Richard Ellis Pty Ltd
33.0
24.8
34.6
75.8
34.8
33.2
25.5
52.9
44.3
29.0
21.8
–
71.0
31.8
32.0
26.5
52.2
43.2
Toll NQX, Karawatha, QLD
100.0
Dec 2012
Jun 2017
CB Richard Ellis Pty Ltd
108.0
102.5
TNT, 29–55 Lockwood Road, Erskine Park, NSW
100.0
Jun 2008
Jun 2017
Savills Australia
RAND, 36–52 Templar Road, Erskine Park, NSW
100.0
Jun 2008
Jun 2017
Jones Lang LaSalle
RRM, 54–70 Templar Road, Erskine Park, NSW
100.0
Jun 2008
Jun 2017
M3 Property
1 Huntingwood Drive, Huntingwood, NSW
Loscam Metroplex, Wacol, QLD2
Lot 2012 Eastern Creek Drive, Eastern Creek, NSW2
100.0
Oct 2016
Jun 2017
CB Richard Ellis Pty Ltd
100.0
Dec 2016
Jun 2017
Jones Lang LaSalle
100.0
Apr 2016
Dec 2017
CB Richard Ellis Pty Ltd
Total Logistics
(d) Property under Development
Erskine Park, NSW3
407 Pembroke Rd, Minto, NSW
Austrak Business Park, Somerton, VIC
18–24 Abbott Road, Seven Hills, NSW2
4 Murray Rose Drive, Sydney Olympic Park, NSW
Lot 2012 Eastern Creek Drive, Eastern Creek, NSW2
Lot 21 Old Wallgrove Road, Eastern Creek, NSW
Loscam Metroplex, Wacol, QLD2
32 Smith, Parramatta, NSW4
Total Properties under development
100.0
Jun 2008
Jun 2015
CB Richard Ellis Pty Ltd
50.0
50.0
Oct 2008
Jun 2016
M3 Property
Oct 2003
Dec 2017
Jones Lang LaSalle
100.0
Oct 2006
Jun 2017
CB Richard Ellis Pty Ltd
*100.0 May 2002
Dec 2017
CB Richard Ellis Pty Ltd
100.0
Apr 2016
Dec 2017
CB Richard Ellis Pty Ltd
100.0
Jun 2016
-
-
100.0
Dec 2016
Jun 2017
Jones Lang LaSalle
100.0 Mar 2017
-
-
98.1
98.3
145.0
50.9
15.0
42.7
85.5
97.0
138.0
32.8
–
–
1,498.6
1,317.3
–
5.6
21.7
–
33.0
–
21.7
–
39.6
121.6
5.5
5.5
19.4
14.7
3.4
18.9
17.1
6.4
–
90.9
2 Following practical completion in April, May and October 2017 respectively, 18-24 Abbott Road, Seven Hills, Loscam Metroplex, Wacol and Lot 2012 Eastern
Creek Drive, Eastern Creek have been reclassified from properties under development to investment property in the Logistics portfolio.
3 On 8 February 2017 GPT sold its 100% interest in Lot 101, 16 Lockwood Road, Erskine Park for a consideration of $5.5 million.
4 On 17 March 2017 GPT acquired a 100% interest in 32 Smith, Parramatta for a total consideration for $33.0 million (including transaction costs of $1.8 million).
5 Freehold, unless otherwise marked with a * which denotes leasehold and ** denotes a combination of freehold and leasehold respectively.
34
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(e) Reconciliation
Retail
$M
Office
$M
Logistics
$M
Properties
under
development
$M
Carrying amount at the beginning of the year
4,468.6
2,068.1
1,317.3
Additions – operating capital expenditure
Additions – development capital expenditure
Additions – interest capitalised1
Asset acquisitions
Transfers from properties under development
Transfers from inventory
Lease incentives
Amortisation of lease incentives and costs
Disposals
Fair value adjustments
Leasing costs
Straightlining of leases
22.9
91.6
2.9
–
–
–
14.3
(11.4)
–
223.6
3.7
2.5
19.5
27.1
–
–
–
–
14.4
(21.4)
–
197.7
0.8
0.6
8.5
23.4
1.3
–
76.1
2.8
7.6
(6.1)
–
58.5
0.6
8.6
90.9
–
73.7
4.4
33.0
(76.1)
–
–
–
(5.5)
1.2
–
–
31 Dec 17
$M
31 Dec 16
$M
7,944.9
7,372.8
50.9
215.8
8.6
33.0
–
2.8
36.3
(38.9)
(5.5)
481.0
5.1
11.7
38.4
128.8
4.5
71.3
–
(30.1)
47.3
(42.5)
(82.4)
417.5
5.7
13.6
Carrying amount at the end of the year
4,818.7
2,306.8
1,498.6
121.6
8,745.7
7,944.9
1 A capitalisation interest rate of 5.4% (2016: 5.3%) has been applied when capitalising interest on qualifying assets.
Land and buildings which are held to earn rental income or for capital appreciation or for both, and which are not wholly
occupied by GPT, are classified as investment properties.
Investment properties are initially recognised at cost and subsequently stated at fair value at each balance date. Fair value
is based on the latest independent valuation adjusting for capital expenditure and capitalisation and amortisation of lease
incentives since the date of the independent valuation report. Any change in fair value is recognised in the Consolidated
Statement of Comprehensive Income in the period.
Properties under development are stated at fair value at each balance date. Fair value is assessed with reference to
reliable estimates of future cash flows, status of the development and the associated risk profile. Finance costs incurred on
properties undergoing development are included in the cost of the development.
Lease incentives provided by GPT to lessees are included in the measurement of fair value of investment property and are
amortised over the lease term using a straightline basis.
Critical judgements are made by GPT in respect of the fair values of investment properties. Fair values are reviewed
regularly by management with reference to independent property valuations, recent offers and market conditions, using
generally accepted market practices. The valuation process, critical assumptions underlying the valuations and information
on sensitivity are disclosed in note 22.
(f) Operating lease receivables
Non-cancellable operating lease receivables not recognised in the financial statements at balance date are as follows:
Due within one year
Due between one and five years
Due after five years
Total operating lease receivables
Consolidated entity
31 Dec 17
$M
31 Dec 16
$M
467.5
460.4
1,285.6
1,234.5
979.9
942.2
2,733.0
2,637.1
35
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
3. Equity accounted investments
Investments in joint ventures
Investments in associates
Total equity accounted investments
(a) Details of equity accounted investments
Note
(a)(i)
(a)(ii)
31 Dec 17
$M
31 Dec 16
$M
1,135.0
2,427.9
3,562.9
1,004.4
2,115.8
3,120.2
Name
(i) Joint ventures
2 Park Street Trust1
1 Farrer Place Trust1
Horton Trust
Lendlease GPT (Rouse Hill) Pty Limited1,2
DPT Operator Pty Limited
Total investment in joint venture entities
(ii) Associates
GPT Wholesale Office Fund1,3
GPT Wholesale Shopping Centre Fund1,4
GPT Funds Management Limited
Total investments in associates
1 The entity has a 30 June balance date.
Ownership Interest
Principal Activity
31 Dec 17
%
31 Dec 16
%
31 Dec 17
$M
31 Dec 16
$M
Investment property
Investment property
Investment property
Property development
Management
Investment property
Investment property
Funds management
50.00
50.00
50.00
50.00
50.00
24.95
28.80
100.00
50.00
50.00
50.00
50.00
50.00
24.53
25.29
100.00
630.1
465.9
27.0
11.9
0.1
547.9
424.1
26.6
5.7
0.1
1,135.0
1,004.4
1,409.7
1,008.2
10.0
2,427.9
1,283.1
822.7
10.0
2,115.8
2 GPT has a 50% interest in Lendlease GPT (Rouse Hill) Pty Limited, a joint venture developing residential and commercial land at Rouse Hill, in partnership with
Urban Growth and the NSW Department of Planning.
3
4
In June 2017, GPT acquired an additional 16.3 million units in GWOF.
In May 2017, GPT acquired an additional 115.6 million units in GWSCF.
36
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(b) Summarised financial information for associates and joint ventures
The information disclosed reflects the amounts presented in the 31 December 2017 financial results of the relevant associates and
joint ventures and not GPT’s share of those amounts. They have been amended to reflect adjustments made by GPT when using
the equity method, including fair value adjustments and modifications for differences in accounting policies.
(i) Joint ventures
Current assets
Cash and cash equivalents
Other current assets
Total current assets
2 Park Street Trust
1 Farrer Place Trust
Others
Total
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
9.8
1.8
11.6
5.5
1.2
6.7
10.9
7.1
18.0
12.3
4.9
17.2
Total non-current assets
1,260.0
1,109.0
953.5
870.2
Current liabilities
Financial liabilities (excluding trade
payables, other payables and provisions)
Other current liabilities
Total current liabilities
Non-current liabilities
Financial liabilities (excluding trade
payables, other payables and provisions)
Total non-current liabilities
9.4
2.0
11.4
–
–
19.9
–
19.9
–
–
33.0
6.7
39.7
–
–
33.3
5.9
39.2
–
–
17.6
8.2
25.8
63.9
2.8
0.1
2.9
8.8
8.8
17.1
1.4
18.5
38.3
17.1
55.4
34.9
7.5
42.4
67.6
2,277.4
2,046.8
13.2
–
13.2
8.1
8.1
45.2
8.8
54.0
8.8
8.8
66.4
5.9
72.3
8.1
8.1
Net assets
1,260.2
1,095.8
931.8
848.2
78.0
64.8
2,270.0
2,008.8
Reconciliation to carrying amounts:
Opening net assets 1 January
1,095.8
Profit for the year
Issue of equity
Distributions paid/payable
Closing net assets
GPT’s share
197.6
24.6
(57.8)
984.9
151.7
8.9
(49.7)
1,260.2
1,095.8
630.1
547.9
Summarised statement of comprehensive income
Revenue
Profit for the year
Total comprehensive income
73.0
197.6
197.6
60.4
151.7
151.7
848.2
109.6
11.4
(37.4)
931.8
465.9
62.4
109.6
109.6
730.8
124.3
27.4
(34.3)
848.2
424.1
76.8
124.3
124.3
64.8
16.0
–
(2.8)
78.0
39.0
4.6
16.0
16.0
5.6
–
61.6
2,008.8
1,777.3
323.2
281.6
36.0
(2.4)
(98.0)
36.3
(86.4)
64.8
2,270.0
2,008.8
32.4
1,135.0
1,004.4
23.2
5.6
5.6
140.0
323.2
323.2
160.4
281.6
281.6
37
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(ii) Associates
GPT Wholesale
Office Fund
GPT Wholesale Shopping
Centre Fund
Others
Total
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
Total current assets
72.6
137.3
51.8
44.5
10.0
10.0
134.4
191.8
Total non-current assets
7,032.8
6,461.4
4,799.6
3,714.3
Total current liabilities
156.5
163.8
129.4
Total non-current liabilities
1,299.1
1,204.2
1,221.5
326.9
178.9
–
–
–
–
–
–
11,832.4
10,175.7
285.9
490.7
2,520.6
1,383.1
Net assets
5,649.8
5,230.7
3,500.5
3,253.0
10.0
10.0
9,160.3
8,493.7
Reconciliation to carrying amounts:
Opening net assets 1 January
5,230.7
4,797.8
3,253.0
3,082.5
10.0
287.0
8,493.7
8,167.3
Profit for the year
Issue/(sale) of equity
688.6
685.7
400.6
348.6
–
–
7.2
–
Distributions paid/payable
(269.5)
(252.8)
(160.3)
(178.1)
Closing net assets
GPT’s share
5,649.8
5,230.7
3,500.5
3,253.0
1,409.7
1,283.1
1,008.2
822.7
Summarised statement of comprehensive income
Revenue
Profit for the year
Total comprehensive income
500.3
688.6
688.6
507.9
685.7
685.7
294.9
400.6
400.6
304.3
348.6
348.6
Distributions received/receivable
from their associates
39.5
44.8
–
–
–
–
–
10.0
10.0
–
–
–
–
33.0
1,089.2
1,067.3
(287.0)
7.2
(23.0)
(429.8)
(287.0)
(453.9)
10.0
9,160.3
8,493.7
10.0
2,427.9
2,115.8
18.1
795.2
830.3
33.0
1,089.2
1,067.3
33.0
1,089.2
1,067.3
–
39.5
44.8
4. Loans and receivables
Current assets
Trade receivables
Less: impairment of trade receivables
Distributions receivable from joint ventures
Distributions receivable from associates
Dividends receivable from investments
Related party receivables1
Levies asset
Other receivables
Total current loans and receivables
31 Dec 17
$M
31 Dec 16
$M
10.6
(0.9)
9.7
12.9
26.3
–
21.3
15.1
33.6
8.5
(1.0)
7.5
22.5
29.4
30.4
17.8
13.9
27.7
118.9
149.2
1 The related party receivables are on commercial terms and conditions.
The table below shows the ageing analysis of GPT’s loans and receivables.
31 Dec 17
31 Dec 16
0-30
days
$M
116.3
–
116.3
31-60
days
$M
61-90
days
$M
90+
days
$M
Total
$M
0-30
days
$M
31-60
days
$M
61-90
days
$M
90+
days
$M
Total
$M
0.8
–
0.8
0.1
2.6
119.8
146.3
–
(0.9)
(0.9)
–
0.1
1.7
118.9
146.3
0.5
–
0.5
0.1
3.3
150.2
–
(1.0)
(1.0)
0.1
2.3
149.2
Current receivables
Impairment of current receivables
Total loans and receivables
38
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest
rate method less any allowance for impairment. All loans and receivables with maturities greater than 12 months after
balance date are classified as non-current assets.
Recoverability of trade receivables
Recoverability of trade receivables is assessed on an ongoing basis. Impairment is recognised in the Consolidated Statement
of Comprehensive Income when there is objective evidence that GPT will not be able to collect the debts. Financial difficulties
of the debtor, probability that the debtor will enter bankruptcy or financial re-organisation and default or delinquency in
payments are considered objective evidence of impairment. See note 14(e) for more information on management of credit
risk relating to trade receivables.
The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if
the effect of discounting is immaterial. Debts that are known to be uncollectable are written off when identified.
5. Intangible assets
Costs
Balance as at 31 December 2015
Additions
Balance as at 31 December 2016
Additions
Disposals
Transfers
Balance as at 31 December 2017
Accumulated amortisation and impairment
Balance as at 31 December 2015
Amortisation
Balance as at 31 December 2016
Amortisation
Impairment
Disposals
Balance as at 31 December 2017
Carrying amounts
Balance as at 31 December 2016
Balance as at 31 December 2017
Management
rights
$M
IT development
and software
$M
55.8
–
55.8
–
–
–
55.8
(44.8)
(0.3)
(45.1)
(0.3)
–
–
61.9
5.2
67.1
4.7
(11.4)
2.8
63.2
(37.4)
(5.1)
(42.5)
(5.7)
(5.9)
11.4
Total
$M
117.7
5.2
122.9
4.7
(11.4)
2.8
119.0
(82.2)
(5.4)
(87.6)
(6.0)
(5.9)
11.4
(45.4)
(42.7)
(88.1)
10.7
10.4
24.6
20.5
35.3
30.9
Management rights
Management rights include property management and development management rights. Rights are initially measured at
cost and subsequently amortised over their useful life, which ranges from 5 to 10 years.
For the management rights of Highpoint Shopping Centre, management considers the useful life as indefinite as there is
no fixed term included in the management agreement. Therefore, GPT tests for impairment at balance date. Assets are
impaired if the carrying value exceeds their recoverable amount. The recoverable amount is determined using a multiples
approach. A range of multiples from 10-15x have been used in the calculation.
IT development and software
Costs incurred in developing systems and acquiring software and licenses that will contribute future financial benefits are
capitalised. These include external direct costs of materials and services and direct payroll and payroll related costs of
employees’ time spent on the project. Amortisation is calculated on a straightline basis over the length of time over which
the benefits are expected to be received, generally ranging from 3 to 10 years.
IT development and software are assessed for impairment at each reporting date by evaluating if any impairment triggers
exist. Where impairment triggers exist, management calculate the recoverable amount. The asset will be impaired if the
carrying value exceeds the recoverable amount. Critical judgements are made by GPT in setting appropriate impairment
triggers and assumptions used to determine the recoverable amount.
39
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
6. Inventories
Development properties
Current inventories
Development properties
Non-current inventories
Total inventories
31 Dec 17
$M
31 Dec 16
$M
11.8
11.8
140.4
140.4
152.2
4.5
4.5
131.4
131.4
135.9
Development properties held as inventory to be sold are stated at the lower of cost and net realisable value.
Cost
Cost includes the cost of acquisition, development, finance costs and all other costs directly related to specific projects
including an allocation of direct overhead expenses. Post completion of the development, finance costs and other holding
charges are expensed as incurred.
Net realisable value (NRV)
The NRV is the estimated selling price in the ordinary course of business less estimated costs to sell. At each reporting date,
management reviews these estimates by taking into consideration:
• the most reliable evidence; and
• any events which confirm conditions existing at the year end and cause any fluctuations of selling price and costs to sell.
The amount of any write down is recognised as an impairment expense in the Consolidated Statement of Comprehensive
Income. An impairment expense reversal of $0.4 million has been recognised for the year ended 31 December 2017 (2016:
Impairment expense of $6.0 million).
7. Payables
Trade payables and accruals
GST payables
Distribution payable to stapled securityholders
Interest payable
Other payables
Total payables
31 Dec 17
$M
31 Dec 16
$M
124.5
1.1
221.6
17.6
10.1
374.9
133.1
1.1
214.0
18.0
12.1
378.3
Trade payables and accruals represent liabilities for goods and services provided to GPT prior to the end of the financial year
which are unpaid. They are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method.
8. Provisions
Current provisions
Employee benefits
Provision for levies
Other
Total current provisions
Non-current provisions
Employee benefits
Total non-current provisions
31 Dec 17
$M
31 Dec 16
$M
10.1
15.1
12.7
37.9
2.3
2.3
9.0
13.9
7.6
30.5
1.8
1.8
Provisions are recognised when:
• GPT has a present obligation (legal or constructive) as a result of a past event;
it is probable that resources will be expended to settle the obligation; and
•
• a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the obligation.
40
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
Provision for employee benefits
The provision for employee benefits represents annual leave and long service leave entitlements accrued for employees. The
employee benefit liability expected to be settled within twelve months after the end of the reporting period is recognised in
current liabilities.
Employee benefits expenses in the Consolidated Statement of Comprehensive Income
Employee benefits expenses
9. Taxation
(a) Income tax expense
Current income tax expense
Deferred income tax (credit)/expense
Income tax expense in the Statement of Comprehensive Income
Income tax expense attributable to:
Profit from continuing operations
Profit from discontinued operations
Aggregate income tax expense
(b) Reconciliation of accounting profit to income tax expense and current tax liability
Net profit for the year excluding income tax expense
Less: Trust profit not subject to tax
Profit which is subject to taxation
Prima facie income tax at 30% tax rate (2016: 30%)
Tax effect of amounts not deductible/assessable in calculating income tax expense:
Adjustments for income tax for prior years
Previously unrecognised tax losses
Revaluation and amortisation
Non assessable income
Other tax adjustments
Income tax expense
Add/(less) amounts to reconcile to current tax liability:
Temporary differences:
Employee benefits
Provisions and accruals
Dividends received/(receivable)
Other deferred tax asset charged to income
Movement in reserves
Opening balance:
Tax losses transferred from deferred tax asset
Tax losses and adjustments:
Tax losses recognised
Prior tax losses utilised
Movement in reserves
Prior year adjustments
Tax payments made to tax authorities
Current tax liability
31 Dec 17
$M
31 Dec 16
$M
114.5
115.1
31 Dec 17
$M
31 Dec 16
$M
20.0
(9.7)
10.3
10.3
–
10.3
1,279.4
(1,274.5)
4.9
1.5
0.2
(0.4)
10.0
(6.1)
5.1
10.3
0.7
(0.3)
9.1
1.9
(1.7)
(2.0)
–
–
(2.5)
–
(6.9)
8.6
–
22.4
22.4
22.4
–
22.4
1,175.1
(1,132.6)
42.5
12.8
0.5
(15.2)
26.2
(4.0)
2.1
22.4
0.7
0.3
(9.1)
(0.9)
(0.3)
–
15.2
(27.8)
–
(0.5)
–
–
41
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(c) Deferred tax assets
Employee benefits
Provisions and accruals
Other
Tax losses recognised
Net deferred tax asset
Movement in temporary differences during the year
Opening balance at beginning of the year
Credited to the Statement of Comprehensive Income
Movement in reserves
Utilisation of tax losses
Closing balance at end of the year
(d) Effective tax rate
Adoption of Voluntary Tax Transparency Code
31 Dec 17
$M
31 Dec 16
$M
15.4
2.9
(1.4)
–
16.9
7.5
9.7
1.7
(2.0)
16.9
14.7
3.2
(12.4)
2.0
7.5
30.2
6.6
(0.3)
(29.0)
7.5
The Board of Taxation has released a voluntary Tax Transparency Code (TTC). The TTC sets out a recommended set of
principles and minimum standards regarding the disclosure of tax information for businesses. GPT is committed to the TTC.
The non-IFRS income tax disclosures below and in note 9(b) include the recommended additional disclosures.
The Australian Accounting Standards Board have issued a Draft Appendix to the TTC outlining the method to calculate the
effective tax rate as shown in the table below, using:
• accounting profit before tax adjusted to exclude transactions which are not reflected in the calculation of income tax
expense; and
• tax expense adjusted to exclude carry forward tax losses that have been recognised and prior year under/overstatements.
Net profit for the year excluding income tax expense
Less: Trust profit not subject to tax
Add: non-deductible revaluation items in the Company
Less: equity accounted profits from joint ventures in the Company
Profit used to calculate effective tax rate
Income tax expense
Add: carry forward tax losses recognised
Less: prior year under/overstatements
Income tax expense used to calculate effective tax rate
Effective tax rate
Trusts
31 Dec 17
$M
1,279.4
(1,274.5)
31 Dec 16
$M
1,175.1
(1,132.6)
34.1
(6.2)
32.8
10.3
0.4
(0.2)
10.5
32%
81.8
(1.5)
122.8
22.4
15.2
(0.5)
37.1
30%
Property investments are held by the Trust for the purposes of earning rental income. Under current tax legislation, the Trust
is not liable for income tax provided the taxable income of the Trust including realised capital gains is attributed in full to its
securityholders each financial year. Securityholders are subject to income tax at their own marginal tax rates on amounts
attributable to them.
Company and other taxable entities
Income tax expense for the financial year is the tax payable on the current year’s taxable income. This is adjusted by changes
in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
42
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
Deferred income tax liabilities and assets – recognition
Deferred income tax liabilities are recognised for all taxable temporary differences.
Deferred income tax assets are recognised for all deductible temporary differences, carried forward unused tax assets and unused
tax losses, to the extent it is probable that taxable profit will be available to utilise them. The carrying amount of deferred income
tax assets is reviewed and reduced to the extent that it is no longer probable that sufficient taxable profit will be available.
Deferred income tax liabilities and assets – measurement
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the
balance sheet date.
Deferred income tax is provided on temporary differences at the reporting date between accounting carrying amounts and
the tax cost bases of assets and liabilities, other than for the following:
• where taxable temporary differences relate to investments in subsidiaries, associates and interests in joint ventures:
– deferred tax liabilities are not recognised if the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the foreseeable future;
– deferred tax assets are not recognised if it is not probable that the temporary differences will reverse in the foreseeable
future and taxable profit will not be available to utilise the temporary differences.
Tax relating to equity items
Income taxes relating to items recognised directly in equity are recognised in equity and not in the Consolidated Statement of
Comprehensive Income.
Capital structure
Capital is defined as the combination of securityholders’ equity, reserves and net debt (borrowings less cash). The Board
is responsible for monitoring and approving the capital management framework within which management operates.
The purpose of the framework is to safeguard GPT’s ability to continue as a going concern while optimising its debt and
equity structure. GPT aims to maintain a capital structure which includes net gearing levels within a range of 25 to 35 per
cent (based on net debt, less fair value adjustment on foreign bonds to total tangible assets, less cash and cross currency
derivative assets) that is consistent with a stable investment grade credit rating in the “A category”.
At 31 December 2017, GPT is credit rated A (stable)/A2 (stable) by Standard and Poor’s (S&P) and Moody’s Investor Services
(Moody’s) respectively. The ratings are important as they reflect the investment grade credit rating of GPT which allows access
to global capital markets to fund its development pipeline and future acquisition investment opportunities. The stronger ratings
improve both the availability of capital, in terms of amount and tenor, and reduce the cost at which it can be obtained.
GPT is able to vary the capital mix by:
•
issuing stapled securities;
• buying back stapled securities;
• activating the distribution reinvestment plan;
• adjusting the amount of distributions paid to stapled securityholders;
• selling assets to reduce borrowings; or
•
increasing borrowings.
43
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017 10. Equity and reserves
(a) Contributed equity
(i) Ordinary stapled securities
Number
Other entities
stapled to GPT
$M
Trust
$M
Total
$M
Opening securities on issue as at 1 January 2016
1,794,816,529
7,793.9
325.3
8,119.2
Securities issued – Long Term Incentive Plan
Securities issued – Deferred Short Term Incentive Plan
Securities issued – Broad Based Employee Security Ownership Plan
2,102,805
978,834
57,400
5.6
4.5
0.3
0.1
0.1
–
5.7
4.6
0.3
Closing securities on issue as at 31 December 2016
1,797,955,568
7,804.3
325.5
8,129.8
Opening securities on issue as at 1 January 2017
1,797,955,568
7,804.3
325.5
8,129.8
Securities issued – Long Term Incentive Plan
Securities issued – Deferred Short Term Incentive Plan
Securities issued – Broad Based Employee Security Ownership Plan
Securities issued – Employee Incentive Plan
2,763,052
855,355
54,338
12,569
6.0
4.2
0.2
0.1
0.1
0.1
–
–
6.1
4.3
0.2
0.1
Closing securities on issue as at 31 December 2017
1,801,640,882
7,814.8
325.7
8,140.5
(ii) Exchangeable securities
Opening securities on issue as at 1 January 2016
Transfer to retained earnings
Closing securities on issue as at 31 December 2016
Total contributed equity – 31 December 2016
Total contributed equity – 31 December 2017
–
–
–
–
–
(84.5)
84.5
–
7,804.3
7,814.8
–
–
–
(84.5)
84.5
–
325.5
8,129.8
325.7
8,140.5
Ordinary stapled securities are classified as equity and recognised at the fair value of the consideration received by GPT. Any
transaction costs arising on the issue and buy back of ordinary securities are recognised directly in equity as a reduction, net
of tax, of the proceeds received.
44
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(b) Reserves
Foreign currency
translation
reserve
Cash flow hedge
reserve
Employee
incentive
scheme reserve
Available for
sale reserve
Total reserve
Other
entities
stapled
to GPT
$M
34.1
Trust
$M
(24.6)
–
–
(1.8)
1.0
–
–
–
–
Trust
$M
(19.3)
–
–
14.5
–
Balance at 1 January 2016
Revaluation of available for sale
financial asset, net of tax
Net foreign exchange translation
adjustments
Changes in the fair value of cash
flow hedges
Security-based payment
transactions, net of tax
Balance at 31 December 2016
(26.4)
35.1
(4.8)
Balance at 1 January 2017
(26.4)
35.1
(4.8)
Revaluation of available for sale
financial asset, net of tax
Derecognition of available for sale
financial asset, net of tax
Changes in the fair value of cash
flow hedges
Security-based payment
transactions, net of tax
–
–
–
–
–
–
–
–
–
–
(9.4)
–
Balance at 31 December 2017
(26.4)
35.1
(14.2)
Nature and purpose of reserves
Foreign currency translation reserve
Other
entities
stapled
to GPT
$M
Trust
$M
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other
entities
stapled
to GPT
$M
16.4
–
–
–
0.9
17.3
17.3
–
–
–
4.6
21.9
Other
entities
stapled
to GPT
$M
8.6
(1.5)
–
–
–
Other
entities
stapled
to GPT
$M
59.1
Trust
$M
(43.9)
–
(1.5)
(1.8)
1.0
14.5
–
–
0.9
7.1
(31.2)
59.5
7.1
(31.2)
59.5
1.0
(8.1)
–
–
–
–
–
1.0
(8.1)
(9.4)
–
–
4.6
(40.6)
57.0
Trust
$M
–
–
–
–
–
–
–
–
–
–
–
–
The reserve is used to record exchange differences arising on translation of foreign controlled entities and associated
funding of foreign controlled entities. The movement in the reserve is recognised in the net profit when the investment in the
foreign controlled entity is disposed.
Cash flow hedge reserve
The reserve records the portion of the unrealised gain or loss on a hedging instrument in a cash flow hedge that is determined to
be an effective hedge relationship inclusive of share of cash flow hedge reserve of equity accounted investments.
Employee incentive scheme reserve
The reserve is used to recognise the fair value of equity-settled security based payments provided to employees, including key
management personnel, as part of their remuneration. Refer to note 18 for further details of the security based payments.
Available for sale reserve
The reserve is used to recognise the changes in the fair value of the available for sale financial assets.
45
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(c) Retained earnings/accumulated losses
Consolidated entity
Balance at 1 January 2016
Net profit for the financial year
Less: Distributions paid/payable to ordinary stapled securityholders
12
Reclassification of redemption deficit of exchangeable securities to retained earnings
Reclassification of employee incentive security scheme reserve to retained earnings/
accumulated losses
Balance at 31 December 2016
Balance at 1 January 2017
Net profit for the financial year
Less: Distributions paid/payable to ordinary stapled securityholders
12
Reclassification of employee incentive security scheme reserve to retained earnings/
accumulated losses
Balance at 31 December 2017
11. Earnings per stapled security
Trust
$M
Other entities
stapled to GPT
$M
Total
$M
Note
477.8
1,048.8
(420.7)
(84.5)
1.4
(1,002.6)
(524.8)
103.9
1,152.7
–
–
–
(420.7)
(84.5)
1.4
1,022.8
(898.7)
124.1
1,022.8
1,249.3
(443.2)
(898.7)
124.1
19.8
1,269.1
–
(443.2)
0.6
(0.5)
0.1
1,829.5
(879.4)
950.1
(a) Attributable to ordinary securityholders of the Trust
Basic and diluted earnings per security – profit from continuing operations
Basic and diluted earnings per security – profit from discontinued operations
Total basic and diluted earnings per security attributable to ordinary securityholders
of the Trust
(b) Attributable to ordinary stapled securityholders of GPT Group
Basic and diluted earnings per security – profit from continuing operations
Basic and diluted earnings per security – profit from discontinued operations
Total basic and diluted earnings per security attributable to ordinary stapled securityholders
of The GPT Group
31 Dec 17
Cents
31 Dec 17
Cents
31 Dec 16
Cents
31 Dec 16
Cents
Basic
Diluted
Basic
Diluted
69.3
–
69.3
70.4
–
70.4
69.2
–
69.2
70.3
–
70.3
57.9
0.5
58.4
63.7
0.5
64.2
57.8
0.5
58.3
63.6
0.5
64.1
The earnings and weighted average number of ordinary securities (WANOS) used in the calculations of basic and diluted earnings per ordinary
stapled security are as follows:
(c) Reconciliation of earnings used in calculating earnings per ordinary stapled security
$M
$M
$M
$M
Net profit from continuing operations attributable to the securityholders of the Trust
1,248.5
1,248.5
1,040.4
1,040.4
Net profit from discontinued operations attributable to the securityholders of the Trust
0.8
0.8
8.4
8.4
Basic and diluted earnings of the Trust
1,249.3
1,249.3
1,048.8
1,048.8
Add: Net profit from continuing operations attributable to the securityholders of other stapled entities
19.8
19.8
103.8
103.8
Add: Net profit from discontinued operations attributable to the securityholders of other
stapled entities
Basic and diluted earnings of the Company
Basic and diluted earnings of The GPT Group
(d) WANOS
–
–
0.1
0.1
19.8
19.8
103.9
103.9
1,269.1
1,269.1
1,152.7
1,152.7
Millions
Millions
Millions
Millions
WANOS used as the denominator in calculating basic earnings per ordinary stapled security
1,801.1
1,801.1
1,797.4
1,797.4
Performance security rights at weighted average basis1
WANOS used as the denominator in calculating diluted earnings per ordinary stapled security
2.4
1,803.5
2.7
1,800.1
1 Performance security rights granted under the employee incentive schemes are only included in dilutive earnings per ordinary stapled security where the
performance hurdles are met as at the year end.
46
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
Calculation of earnings per stapled security
Basic earnings per stapled security is calculated as net profit attributable to ordinary stapled securityholders of GPT, divided
by the weighted average number of ordinary stapled securities outstanding during the financial year which is adjusted for
bonus elements in ordinary stapled securities issued during the financial year. Diluted earnings per stapled security is
calculated as net profit attributable to ordinary stapled securityholders of GPT divided by the weighted average number of
ordinary stapled securities and dilutive potential ordinary stapled securities. Where there is no difference between basic
earnings per stapled security and diluted earnings per stapled security, the term basic and diluted earnings per stapled
ordinary security is used.
12. Distributions paid and payable
Distributions are paid to GPT stapled securityholders half yearly.
Distributions paid/payable
2017
6 month period ended 30 June 2017
6 month period ended 31 December 20171
Total distributions paid/payable for the year
2016
6 month period ended 30 June 2016
6 month period ended 31 December 2016
Total distributions paid/payable for the year
Cents per
stapled
security
Total amount
$M
12.3
12.3
24.6
11.5
11.9
23.4
221.6
221.6
443.2
206.7
214.0
420.7
1 December 2017 half yearly distribution of 12.3 cents per stapled security has been declared on 20 December 2017 and is expected to be paid on 28 February
2018 based on the record date of 29 December 2017.
13. Borrowings
Current borrowings at amortised cost – unsecured
Current borrowings at amortised cost – secured
Current borrowings
Non-current borrowings at amortised cost – unsecured
Non-current borrowings at fair value – unsecured
Non-current borrowings at amortised cost – secured
Non-current borrowings
Total borrowings1 – carrying amount
Total borrowings2 – fair value
31 Dec 17
$M
31 Dec 16
$M
–
19.9
19.9
1,911.9
1,280.5
88.3
3,280.7
3,300.6
30.0
18.8
48.8
1,920.5
940.0
87.3
2,947.8
2,996.6
3,347.8
3,014.4
1
Including unamortised establishment costs, fair value and other adjustments.
2 For the majority of the borrowings, the carrying amount is a reasonable approximation of fair value. Where material difference arises, the fair value is calculated
using market observable inputs (level 2) and unobservable inputs (level 3). This excludes unamortised establishment costs.
Borrowings are either initially recognised at fair value and subsequently measured at amortised cost using the effective
interest rate method or at their fair value. Under the amortised cost method, any transaction fees, costs, discounts and
premiums directly related to the borrowings are recognised in the Consolidated Statement of Comprehensive Income over
the expected life of the borrowings unless there is an effective fair value hedge of the borrowings, in which case a fair value
adjustment will be applied based on the mark to market movement in the benchmark component of the borrowings and this
movement is recognised in the Consolidated Statement of Comprehensive Income.
All borrowings with maturities greater than 12 months after reporting date are classified as non-current liabilities.
47
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
The maturity profile of borrowings is as follows:
Due within one year
Due between one and five years
Due after five years
Cash and cash equivalents
Total financing resources available at the end of the year
Total
facility1,2
$M
32.2
2,178.5
1,606.8
3,817.5
Used
facility1
$M
20.0
1,495.5
1,606.8
3,122.3
Unused
facility2
$M
12.2
683.0
–
695.2
49.9
745.1
1 Excluding unamortised establishment costs, and fair value and other adjustments. This reflects the contractual cashflows payable on maturity of the borrowings
taking into account historical exchange rates under cross currency swaps entered into to hedge the foreign currency denominated borrowings.
2 There are a further $350 million of forward starting facilities available to GPT.
Cash and cash equivalents includes cash on hand, cash at bank and short term money market deposits.
Debt covenants
GPT’s borrowings are subject to a range of covenants, according to the specific purpose and nature of the loans. Most bank
facilities include one or more of the following covenants:
• Gearing: total debt must not exceed 50 per cent of total tangible assets; and
•
Interest coverage: the ratio of earnings before interest and taxes (EBIT) to finance costs is not to be less than 2 times.
A breach of these covenants may trigger consequences ranging from rectifying and/or repricing to repayment of outstanding
amounts. GPT performed a review of debt covenants as at 31 December 2017 and no breaches were identified.
14. Financial risk management
The GPT Board approve GPT’s treasury policy which:
• establishes a framework for the management of risks inherent to the capital structure;
• defines the role of GPT’s treasury; and
• sets out the policies, limits, monitoring and reporting requirements for cash, borrowings, liquidity, credit risk, foreign
exchange, interest rate and other derivative instruments.
(a) Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. GPT’s primary interest rate risk arises from borrowings. The table below provides a summary of GPT’s gross
interest rate risk exposure as at 31 December 2017 on interest bearing borrowings as well as the net effect of interest rate
risk management transactions. This excludes unamortised establishment costs and fair value and other adjustments.
Fixed rate interest-bearing borrowings
Floating rate interest-bearing borrowings
Gross exposure
Net exposure
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
2,056.8
1,065.5
3,122.3
1,653.3
1,098.4
2,751.7
2,370.0
752.3
3,122.3
1,575.0
1,176.7
2,751.7
48
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
Interest rate risk – sensitivity analysis
The impact on interest expense and interest revenue of a 1 per cent increase or decrease in market interest rates is shown
below. Interest expense is sensitive to movements in market interest rates on floating rate debt (net of any derivatives).
A 1 per cent increase or decrease is used for consistency of reporting interest rate risk across GPT and represents
management’s assessment of the potential change in interest rates.
Impact on statement of comprehensive income
Impact on interest revenue increase/(decrease)
Impact on interest expense (increase)/decrease
Hedging interest rate risk
31 Dec 17
(+1%)
$M
31 Dec 17
(-1%)
$M
31 Dec 16
(+1%)
$M
31 Dec 16
(-1%)
$M
0.5
(7.5)
(0.5)
7.5
0.7
(11.8)
(0.7)
11.8
Interest rate risk inherent on borrowings issued at floating rates is managed by entering into interest rate swaps that are
used to convert a portion of floating interest rate borrowings to fixed interest rates, which reduces GPT’s exposure to interest
rate volatility.
The derivative financial instruments used to hedge interest rate risk which are presented in the Consolidated Statement of
Financial Position comprise the following:
Current derivative assets
Non-current derivative assets
Total derivative assets
Subject to master netting but not offset
Net derivative assets post offset
Current derivative liabilities
Non-current derivative liabilities
Total derivative liabilities
Subject to master netting but not offset
Net derivative liabilities post offset
31 Dec 17
$M
31 Dec 16
$M
3.4
257.7
261.1
95.9
165.2
9.1
118.0
127.1
95.9
31.2
–
337.2
337.2
113.0
224.2
–
128.5
128.5
113.0
15.5
All of GPT’s derivatives were valued using market observable inputs (level 2) with the exception of a year on year inflation
swap. For additional fair value disclosures refer to note 22.
Derivative financial assets and liabilities are not offset in the Consolidated Statement of Financial Position. Agreements with
derivative counterparties are based on the ISDA (International Swap Derivatives Association) Master Agreement, which in
certain circumstances (such as default) confers a right to set-off the position owing/receivable to a single counterparty to a
net position as long as all outstanding derivatives with that counterparty are terminated. As GPT does not presently have a
legally enforceable right to set-off, these amounts have not been offset in the Consolidated Statement of Financial Position,
but have been presented separately.
Derivatives are carried in the Consolidated Statement of Financial Position at fair value and classified according to their
contractual maturities. If they do not qualify for hedge accounting, changes in fair value are recognised in the Consolidated
Statement of Comprehensive Income including gains or losses on maturity or close-out. Where derivatives qualify for hedge
accounting and are designated in hedge relationships, the recognition of any gain or loss depends on the nature of the item being
hedged. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or
loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. For cash
flow hedges, the effective portion of changes in the fair value of derivatives is recognised in other comprehensive income and
accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
GPT applies hedge accounting to borrowings denominated in foreign currencies only. GPT designates and documents the
relationship between hedging instruments and hedged items and the proposed effectiveness of the risk management
objective the hedge relationship addresses. On an ongoing basis, GPT documents its assessment of retrospective and
prospective hedge effectiveness.
Hedge accounting is discontinued when the hedging instrument expires, is terminated, or is no longer in an effective
hedge relationship.
49
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(b) Liquidity risk
Liquidity risk is the risk that GPT, as a result of its operations:
• will not have sufficient funds to settle a transaction on the due date;
• will be forced to sell financial assets at a value which is less than what they are worth; or
• may be unable to settle or recover a financial asset at all.
GPT manages liquidity risk by:
• maintaining sufficient cash;
• maintaining an adequate amount of committed credit facilities;
• maintaining a minimum liquidity buffer in cash and surplus committed facilities for the forward rolling twelve month period;
• minimising debt maturity concentration risk by diversifying sources and spreading maturity dates of committed credit
facilities and maintaining a minimum weighted average debt maturity of 4 years; and
• maintaining the ability to close out market positions.
The following table provides an analysis of the undiscounted contractual maturities of liabilities which forms part of GPT’s
assessment of liquidity risk:
31 Dec 17
1 year
or less
$M
Over 1
year to
2 years
$M
Over 2
years to
5 years
$M
Over 5
years
$M
Total
$M
1 year
or less
$M
31 Dec 16
Over 1
year to
2 years
$M
Over 2
years to
5 years
$M
Over 5
years
$M
Total
$M
Liabilities
Non-derivatives
Payables
Current tax liabilities
Borrowings
Projected finance cost on
borrowings1
Derivatives
Projected finance cost on
derivative liabilities1,2
374.9
8.6
–
–
–
–
–
–
374.9
8.6
378.3
–
–
–
–
–
–
–
378.3
–
20.0
513.5
982.0 1,606.8 3,122.3
48.8
375.0
1,074.6
1,253.3 2,751.7
128.2
114.2
279.1
433.6
955.1
110.4
109.6
231.9
338.7
790.6
23.8
21.7
36.5
6.8
88.8
20.0
24.9
47.4
17.3
109.6
Total liabilities
555.5
649.4
1,297.6 2,047.2 4,549.7
557.5
509.5
1,353.9
1,609.3 4,030.2
Less cash and cash equivalents
49.9
–
–
–
49.9
56.3
–
–
–
56.3
Total liquidity exposure
505.6
649.4
1,297.6 2,047.2 4,499.8
501.2
509.5
1,353.9
1,609.3 3,973.9
Projected interest income on
derivative assets2
34.3
31.6
59.5
64.4
189.8
14.5
22.1
35.7
42.2
114.5
Net liquidity exposure
471.3
617.8
1,238.1 1,982.8 4,310.0
486.7
487.4
1,318.2
1,567.1 3,859.4
1 Projection is based on the likely outcome of contracts given the interest rates, margins, forecast exchange rates and interest rate forward curves as at 31
December 2017 and 31 December 2016 up until the contractual maturity of the contract. The projection is based on future non-discounted cash flows and does
not ascribe any value to optionality on any instrument which may be included in the current market values. Projected interest on foreign currency borrowings
is shown after the impact of associated hedging.
2
In accordance with AASB 7, the future value of contractual cash flows of non-derivative and derivative liabilities only is to be included in liquidity risk disclosures. As
derivatives are exchanges of cash flows, the positive cash flows from derivative assets have been disclosed separately to provide a more meaningful analysis of GPT’s
net liquidity exposure. The methodology used in calculating projected interest income on derivative assets is consistent with the above liquidity risk disclosures.
(c) Refinancing risk
Refinancing risk is the risk that credit is unavailable or available at unfavourable interest rates and credit market conditions
resulting in an unacceptable increase in GPT’s interest cost. Refinancing risk arises when GPT is required to obtain debt to
fund existing and new debt positions. GPT manages this risk by spreading sources and maturities of borrowings in order to
minimise debt concentration risk, allow averaging of credit margins over time and reducing refinance amounts.
As at 31 December 2017, GPT’s exposure to refinancing risk can be monitored by the spreading of its contractual maturities
on borrowings in the liquidity risk table above or with the information in note 13.
50
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(d) Foreign exchange risk
Foreign exchange risk refers to the risk that the value of a financial commitment, asset or liability will fluctuate due to
changes in foreign exchange rates. GPT’s foreign exchange risk arises primarily from:
•
firm commitments of highly probable forecast transactions for receipts and payments settled in foreign currencies or with
prices dependent on foreign currencies; and
•
investments in foreign assets.
The foreign exchange risk arising from borrowings denominated in foreign currency is managed with cross currency interest
rate swaps which convert foreign currency exposures into Australian dollar exposures. Sensitivity to foreign exchange is
deemed insignificant.
Foreign currency assets and liabilities
The following table shows the Australian dollar equivalents of amounts within the Consolidated Statement of Financial
Position which are denominated in foreign currencies.
Euros
United States Dollars
Hong Kong Dollars
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
31 Dec 17
$M
31 Dec 16
$M
1.2
–
–
1.2
0.3
–
0.3
1.2
9.3
–
10.5
0.3
–
0.3
0.1
–
118.2
118.3
–
1,096.1
1,096.1
0.2
–
178.6
178.8
–
746.2
746.2
–
–
24.1
24.1
–
186.9
186.9
–
–
35.8
35.8
–
196.6
196.6
Assets
Cash and cash equivalents
Interests in unlisted investments
Derivative financial instruments
Liabilities
Other liabilities
Borrowings1
1 Excluding unamortised establishment costs
(e) Credit risk
Credit risk is the risk that a contracting entity will not complete its obligations under a contractual agreement, resulting in
a financial loss to GPT. GPT has exposure to credit risk on all financial assets included on the Consolidated Statement of
Financial Position.
GPT manages this risk by:
• establishing credit limits for financial institutions and monitoring credit exposures for customers to ensure that GPT only
trades and invests with approved counterparties;
•
investing and transacting derivatives with multiple counterparties that have a minimum long term credit rating of A- from
S&P, or equivalent if an S&P rating is not available, minimising exposure to any one counterparty;
• providing loans into joint ventures, associates and third parties, only where GPT is comfortable with the underlying
property exposure within that entity;
• regularly monitoring loans and receivables balances;
• regularly monitoring the performance of its associates, joint ventures and third parties; and
• obtaining collateral as security (where appropriate).
Receivables are reviewed regularly throughout the year. A provision for doubtful debts is made where collection is deemed
uncertain. GPT’s policy is to hold collateral as security over tenants via bank guarantees (or less frequently collateral such as
bond deposits or cash).
The maximum exposure to credit risk as at 31 December 2017 is the carrying amounts of financial assets recognised on
GPT’s Consolidated Statement of Financial Position. For more information refer to note 4.
51
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
Other Disclosure Items
15. Cash flow information
(a) Cash flows from operating activities
Reconciliation of net profit after tax to net cash inflows from operating activities:
Net profit for the year
Fair value gain on investment properties
Fair value loss on derivatives
Net impact of foreign currency borrowings and associated hedging loss/(gain)
Gain on financial liability at amortised cost
Impairment expense
Share of after tax profit of equity accounted investments (net of distributions)
Derecognition of available for sale financial asset
Net gain on disposal of assets
Depreciation and amortisation
Non-cash employee benefits – security based payments
Non-cash revenue adjustments
Interest capitalised
Profit on sale of inventory
Proceeds from sale of inventory
Payment for inventories
Decrease in operating assets
Increase/(decrease) in operating liabilities
Net foreign exchange (gain)/loss
Reversal of prior period impairment
Other
Net cash inflows from operating activities
(b) Net debt reconciliation
Reconciliation of net debt movements during the financial year:
31 Dec 17
$M
1,269.1
(481.0)
5.7
0.2
(2.2)
5.4
(285.0)
(10.7)
–
7.7
13.2
8.5
(8.6)
(1.5)
7.6
(25.1)
21.3
5.6
(0.8)
–
6.1
535.5
31 Dec 16
$M
1,152.7
(418.1)
26.6
(2.2)
(1.6)
6.0
(236.9)
–
(15.9)
7.3
11.9
14.8
(8.5)
(1.8)
12.6
(16.1)
2.4
(9.0)
0.2
(0.4)
2.2
526.2
Net debt as at 31 December 2016
Cash flows
Foreign exchange adjustments
Other non-cash movements
Net debt as at 31 December 2017
16 Commitments
Borrowings
due within
1 year
$M
Borrowings
due after
1 year
$M
Total
$M
(48.8)
28.8
–
0.1
(2,947.8)
(2,940.3)
(396.0)
(373.6)
63.2
(0.1)
63.2
–
(19.9)
(3,280.7)
(3,250.7)
Cash
$M
56.3
(6.4)
–
–
49.9
(a) Capital expenditure commitments
Commitments arising from contracts principally relating to the purchase and development of investment properties
contracted for at balance date but not recognised on the Consolidated Statement of Financial Position.
Retail
Office
Logistics
Properties under development
Corporate
Total capital expenditure commitments
52
31 Dec 17
$M
31 Dec 16
$M
101.2
23.1
6.1
48.3
1.4
144.7
40.4
4.6
9.9
0.4
180.1
200.0
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(b) Operating lease commitments
Operating lease commitments are contracted non-cancellable future minimum lease payments expected to be payable but
not recognised on the Consolidated Statement of Financial Position.
Due within one year
Due between one and five years
Over five years
Total operating lease commitments
(c) Commitments relating to equity accounted investments
GPT’s share of equity accounted investments’ commitments at balance date are set out below:
Capital expenditure
Total joint ventures and associates’ commitments
31 Dec 17
$M
31 Dec 16
$M
3.2
6.2
–
9.4
2.8
8.2
–
11.0
31 Dec 17
$M
31 Dec 16
$M
31.8
31.8
22.6
22.6
17. Contingent liabilities
A contingent liability is a liability that is not sufficiently certain
to qualify for recognition as a provision where uncertainty may
exist regarding the outcome of future events.
As at the end of 2017, GPT has no material contingent
liabilities which need to be disclosed.
converting to restricted GPT stapled securities to the extent
the performance conditions are met. For the 2014 and 2015
plans, half of the awarded stapled securities will vest one year
after conversion with the remaining half vesting two years
after conversion, subject to continued employment up to the
vesting dates. For the 2016 and 2017 plans, all the awarded
stapled securities will vest one year after conversion, subject
to continued employment up to the vesting date.
18. Security based payments
(d) LTI
GPT currently has four employee security schemes – the
General Employee Security Ownership Plan (GESOP), the
Broad Based Employee Security Ownership Plan (BBESOP),
the Deferred Short Term Incentive Plan (DSTI) and the Long
Term Incentive (LTI) Scheme.
(a) GESOP
The Board believes in creating ways for employees to build
an ownership stake in the business. As a result, the Board
introduced the GESOP in March 2010 for individuals who do
not participate in the LTI.
Under the plan individuals who participate receive an
additional benefit equivalent to 10 per cent of their short
term incentives (STIC) which is (after the deduction of
income tax) invested in GPT securities to be held for a
minimum of 1 year.
(b) BBESOP
Under the plan individuals who are not eligible to participate
in any other employee security scheme may receive $1,000
worth of GPT securities or $1,000 cash if GPT achieves at
least target level performance. Securities must be held for the
earlier of 3 years or the end of employment.
(c) DSTI
Since 2014, STIC is delivered to the senior executives as 50
per cent in cash and 50 per cent in GPT stapled securities
(a deferred component). The deferred component is initially
awarded in the form of performance rights, with the rights
At the 2009 AGM, GPT securityholders approved the
introduction of a LTI plan based on performance rights.
Any subsequent amendments to the LTI plan have been
approved by GPT securityholders.
The LTI plan covers each 3 year period. Awards under the LTI
to eligible participants are in the form of performance rights
which convert to GPT stapled securities for nil consideration
if specified performance conditions for the applicable 3 year
period are satisfied. Please refer to the Remuneration Report
for detail on the performance conditions.
The Board determines those executives eligible to
participate in the plan and, for each participating executive,
grants a number of performance rights calculated as a
percentage of their base salary divided by GPT’s volume
weighted average price (VWAP) for the final quarter of the
year preceding the plan launch.
Fair value of performance rights issued under DSTI and LTI
The fair value of the performance rights is recognised
as an employee benefit expense with a corresponding
increase in the employee security scheme reserve in equity.
Fair value is measured at grant date, recognised over the
period during which the employees become unconditionally
entitled to the rights and is adjusted to reflect market
vesting conditions. Non-market vesting conditions are
included in assumptions about the number of rights that
are expected to be vested. At each reporting date, GPT
revises its estimate of the number of performance rights
that are expected to be exercisable and the employee
53
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
benefit expense recognised each reporting period takes into account the most recent estimate. The impact of the revision
to original estimates, if any, is recognised in the Consolidated Statement of Comprehensive Income with a corresponding
adjustment to equity.
Fair value of the performance rights issued under LTI is determined using the Monte Carlo simulation and the Black Scholes
methodologies then applying a discount on lack of marketability. Fair value of the performance rights issued under DSTI
is determined using the security price then applying a discount on lack of marketability. The following key inputs are taken
into account:
Fair value of rights
Security price at valuation date
Total Securityholder Return
Grant dates
Expected vesting dates
Security price at the grant date
Expected life
Distribution yield
Risk free interest rate
Volatilty1
1 The volatility is based on the historic volatility of the security.
(e) Summary table of all employee security schemes
Rights outstanding at 1 January 2016
Rights granted during 2016
Rights forfeited during 2016
Rights converted to GPT stapled securities during 20161
Rights outstanding at 31 December 2016
Rights outstanding at 1 January 2017
Rights granted during 2017
Rights forfeited during 2017
Rights converted to GPT stapled securities during 20172
Rights outstanding at 31 December 2017
2017 LTI
2017 DSTI
$2.66
$4.88
6.6%
$4.86
$5.11
N/A
21 February 2017
21 February 2017
31 December 2019
31 December 2018
$4.88
$4.88
3 years (2 years remaining)
2 years (1 year remaining)
4.8%
2.0%
18.4%
4.8%
N/A
N/A
Number of rights
DSTI
1,282,432
1,313,947
(345,461)
LTI
Total
8,917,888
10,200,320
3,024,264
4,338,211
(977,775)
(1,323,236)
(1,038,279)
(2,356,843)
(3,395,122)
1,212,639
8,607,534
9,820,173
1,212,639
1,338,498
(357,284)
(855,355)
8,607,534
2,854,675
(323,771)
9,820,173
4,193,173
(681,055)
(2,792,225)
(3,647,580)
1,338,498
8,346,213
9,684,711
1 Rights under the 2015 DSTI plan were converted to GPT stapled securities on 21 March 2016 and rights under the 2013 LTI Plan were converted to GPT stapled
securities on 18 February 2016.
2 Rights under the 2016 DSTI plan were converted to GPT stapled securities on 20 March 2017 and rights under the 2014 LTI Plan were converted to GPT stapled
securities on 14 February 2017.
Number of stapled securities
GESOP
67,728
72,985
(79,957)
60,756
60,756
53,982
(60,756)
53,982
BBESOP
53,846
57,400
(18,485)
92,761
92,761
48,480
(17,688)
123,553
Total
121,574
130,385
(98,442)
153,517
153,517
102,462
(78,444)
177,535
Securities outstanding at 1 January 2016
Securities granted during 2016
Securities vested during 2016
Securities outstanding at 31 December 2016
Securities outstanding at 1 January 2017
Securities granted during 2017
Securities vested during 2017
Securities outstanding at 31 December 2017
54
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
19. Related party transactions
General Property Trust is the ultimate parent entity.
Equity interests in joint ventures and associates are set out in note 3. Loans provided to joint ventures and associates as part
of the funding of those arrangements are set out in note 4.
Key management personnel
Key management personnel compensation was as follows:
Short term employee benefits
Post employment benefits
Long term incentive award accrual
Other long term benefits
Total key management personnel compensation
31 Dec 17
$’000
31 Dec 16
$’000
6,778.9
168.3
2,064.3
–
9,011.5
6,302.4
169.2
1,467.2
64.3
8,003.1
Information regarding individual Directors’ and Senior Executives’ remuneration is provided in the Remuneration Report.
There have been no other transactions with key management personnel during the year.
Transactions with related parties
Transactions with related parties other than associates and joint ventures
Expenses
Contributions to superannuation funds on behalf of employees
(5,704.0)
(5,766.6)
Consolidated entity
31 Dec 17
$’000
31 Dec 16
$’000
Transactions with associates and joint ventures
Revenue and expenses
Responsible Entity fees from associates
Property management fees
Development management fees from associates
Rent expense
Management fees from associates
Performance fee from associate
Distributions received/receivable from joint ventures
Distributions received/receivable from associates
Payroll costs recharged to associates
Other transactions
Loans advanced to joint ventures
Loan repayments from joint ventures
Increase in units in joint ventures
Increase in units in associates
Divestment of units in associate
50,744.1
15,660.8
6,963.9
(597.3)
6,441.7
–
48,783.5
110,030.9
9,396.8
46,800.5
14,622.4
6,200.4
(462.5)
6,003.3
28,121.6
44,472.3
95,284.1
9,065.3
–
146.0
(1,593.9)
18,700.0
(17,915.2)
(18,078.4)
(139,818.3)
(365,966.6)
–
38,998.2
55
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
20. Auditor’s remuneration
Audit services
PricewaterhouseCoopers Australia
Statutory audit and review of financial reports
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australia
Regulatory and contractually required audits
Total remuneration for other assurance services
Total remuneration for audit and assurance services
Non audit related services
PricewaterhouseCoopers Australia
Other services
Taxation services
Total remuneration for non audit related services
Total auditor’s remuneration
21. Parent entity financial information
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Equity attributable to secutityholders of the parent entity
Contributed equity
Reserves
Retained earnings
Total equity
Profit attributable to members of the parent entity
Total comprehensive income for the year, net of tax, attributable to members of the parent entity
Capital expenditure commitments
Retail
Office
Logistics
Properties under development
Total capital expenditure commitments
31 Dec 17
$’000
31 Dec 16
$’000
1,245.2
1,245.2
1,142.8
1,142.8
208.5
208.5
220.7
220.7
1,453.7
1,363.5
58.0
3.5
61.5
18.0
–
18.0
1,515.2
1,381.5
Parent entity
31 Dec 17
$M
31 Dec 16
$M
148.2
12,965.3
13,113.5
383.8
3,424.6
3,808.4
9,305.1
7,833.9
(13.5)
1,484.7
9,305.1
1,259.4
1,259.4
92.4
11.8
3.9
48.3
156.4
161.5
11,775.7
11,937.2
439.2
3,019.0
3,458.2
8,479.0
7,816.1
(4.8)
667.7
8,479.0
1,217.8
1,217.8
141.9
26.5
2.5
–
170.9
As at 31 December 2017, the parent entity had a deficiency of current net assets of $235.6 million (2016: $277.7 million)
arising as a result of the inclusion of the provision for distribution payable to stapled securityholders. The parent has access
to undrawn financing facilities of $1,045.2 million as set out in note 13.
56
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
22. Fair value disclosures
The most significant categories of assets for which fair values are used are investment properties and financial instruments.
Information about how those values are calculated, including the valuation process, critical assumptions underlying the
valuations, information on sensitivity and other information required by the accounting standards, is provided in this note.
(a) Fair value measurement, valuation techniques and inputs
A description of the valuation techniques and key inputs are included in the table below:
Class of
assets/liabilities
Fair value
hierarchy1
Valuation
technique
Inputs used to
measure fair value
Retail2
Level 3
Office
Level 3
Discounted
cash flow (DCF)
and income
capitalisation
method
DCF and income
capitalisation
method
Logistics
Level 3
DCF and income
capitalisation
method
Properties
under development
Level 3
Derivative financial
instruments
Level 2
Income
capitalisation
method, or land rate
Discounted cash
flow (DCF) (adjusted
for counterparty
creditworthiness)
Level 3
Foreign currency
borrowings
Level 2
DCF
Unobservable
inputs
31 Dec 2017
Unobservable
inputs
31 Dec 2016
3.0% – 3.7%
3.2% – 3.9%
10 year average specialty market
rental growth
Gross market rent (per sqm p.a.)
$1,280 – $2,252 $1,254 – $2,127
Adopted capitalisation rate
4.3% – 5.5%
4.8% – 5.8%
Adopted terminal yield
4.5% – 5.8%
5.0% – 6.0%
Adopted discount rate
6.3% – 7.3%
7.3% – 7.8%
Net market rent (per sqm p.a.)
$420 – $1,450
$400 – $1,400
10 year average market rental growth 3.1% – 4.0%
3.2% – 4.1%
Adopted capitalisation rate
5.0% – 5.5%
5.2% – 5.8%
Adopted terminal yield
Adopted discount rate
5.3% – 5.8%
5.6% – 6.1%
6.6% – 7.0%
6.8% – 7.3%
Lease incentives (gross)
23.3% – 35.0%
23.3% – 37.5%
Net market rent (per sqm p.a.)
$68- $385
$63- $500
10 year average market rental growth 2.8% – 3.4%
2.8% – 3.7%
Adopted capitalisation rate
5.5% – 8.0%
5.8% – 8.3%
Adopted terminal yield
Adopted discount rate
6.0% – 8.3%
6.3% – 8.5%
7.0% – 8.5%
7.3% – 8.5%
Lease incentives (gross)
10.0% – 25.0%
10.0% – 25.0%
Net market rent (per sqm p.a.)
$115 – $410
$53 – $410
Adopted capitalisation rate
5.8% – 6.8%
6.0% – 6.8%
Land rate (per sqm)
$122 – $945
$108 – $672
Interest rates
Basis
CPI
Volatility
Foreign exchange rates
Interest rates
CPI volatility
Interest rates
Foreign exchange rates
Not applicable – all inputs are market
observable inputs
Not applicable – market observable input
0.91%
0.94%
Not applicable – all inputs are market
observable inputs
Available for sale
financial assets
2016: Level 3
DCF
Discount rate
Not applicable
20%
Foreign exchange rates
Not applicable
Not applicable – market
observable input
1 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 (i.e. as prices) or indirectly
(i.e. derived from prices).
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
2 Excludes Homemaker City, Maribyrnong in order not to skew the range of inputs.
57
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
DCF method
Under the DCF method, the fair value is estimated using explicit assumptions regarding the benefits and liabilities of
ownership over the assets’ or liabilities’ life including an exit or terminal value. The DCF method involves the projection
of a series of cash flows from the assets or liabilities. To this projected cash flow series, an appropriate, market-
derived discount rate is applied to establish the present value of the cash flow stream associated with the assets or
liabilities.
Income capitalisation
method
This method involves assessing the total net market income receivable from the property and capitalising this in
perpetuity to derive a capital value, with allowances for capital expenditure and reversions.
Gross market rent
Net market rent
10 year average
specialty market rental
growth
10 year average
market rental growth
A gross market rent is the estimated amount of rent for which a property or space within a property should lease
between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper
marketing and wherein the parties have each acted knowledgeably, prudently and without compulsion. The gross
market rent is all inclusive and takes into account outgoings and potential turnover rent.
A net market rent is the estimated amount for which a property or space within a property should lease between a
willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing
and wherein the parties have each acted knowledgeably, prudently and without compulsion. In a net rent, the owner
recovers outgoings from the tenant on a pro-rata basis (where applicable).
An average of a 10 year period of forecast annual percentage growth rates in Retail specialty tenancy rents. Specialty
tenants are those tenancies with a gross lettable area of less than 400 square metres (excludes ATMs and kiosks).
The expected annual rate of change in market rent over a 10 year forecast period.
Adopted capitalisation
rate
The rate at which net market income is capitalised to determine the value of a property. The rate is determined with
regards to market evidence and the prior external valuation.
Adopted terminal yield
The capitalisation rate used to convert income into an indication of the anticipated value of the property at the end of
the holding period when carrying out a discounted cash flow calculation. The rate is determined with regards to market
evidence and the prior external valuation.
Adopted discount rate
The rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Theoretically
it should reflect the opportunity cost of capital, that is, the rate of return the capital can earn if put to other uses having
similar risk. The rate is determined with regards to market evidence and the prior external valuation.
Land rate (per sqm)
The land rate is the market land value per sqm.
Lease incentives
A lease incentive is often provided to a lessee upon the commencement of a lease. Incentives can be a combination of,
or, one of the following: a rent free period, a fit-out contribution, a cash contribution or rental abatement.
Counterparty credit
worthiness
Credit value adjustments are applied to derivatives assets based on that counterparty’s credit risk using the observable
credit default swaps curve as a benchmark for credit risk.
Debit value adjustments are applied to derivatives liabilities based on GPT’s credit risk using GPT’s credit default
swaps curve as a benchmark for credit risk.
(b) Valuation process – investment properties
GPT manages the semi-annual valuation process to ensure that investment properties are held at fair value in GPT’s
accounts and that GPT is compliant with applicable regulations (for example the Corporations Act 2001 and ASIC
regulations), the GPT RE Constitution and Compliance Plan.
GPT has a Valuation Committee (committee) which is comprised of the Chief Operating Officer, Chief Financial Officer, Head
of Funds Management and Head of Capital Transactions.
The purpose of the committee is to:
• approve the panel of independent valuers;
• review valuation inputs and assumptions;
• provide an escalation process where there are differences of opinion from various team members responsible for the
valuation;
• oversee the finalisation of the valuations; and
• review the external valuation sign-off and any comments that have been noted.
All external valuations and internal tolerance checks are reviewed by the valuation committee prior to these being presented
to the Board for approval.
External valuations
GPT’s external valuations are performed by independent professionally qualified valuers who hold recognised relevant
professional qualifications and have specialised expertise in the investment properties being valued. Selected independent
valuation firms form part of a panel approved by the committee. Each valuation firm is limited to undertaking consecutive
valuations of a property for a maximum period of two years.
The Valuation Policy requires an external valuation at least annually for all completed investment properties. Properties
under development with value of $100 million or greater are externally valued at least every six months. Unimproved land is
externally valued at least every three years.
58
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017 Internal tolerance checks
Every six months, with the exception of properties externally valued, an internal tolerance check is prepared. The internal
tolerance check involves the preparation of a DCF and income capitalisation valuation for each investment property. These
are produced using a capitalisation rate, terminal yield and discount rates based on comparable market evidence and recent
external valuation parameters. The tolerance measurement will typically be a mid-point of these two approaches.
These internal tolerance checks are used to determine whether the book value is in line with the fair value or whether an
external valuation is required.
The valuation of the properties under development is determined by a development feasibility analysis for each parcel of land
within each asset. The development feasibility is prepared on an “as if complete” basis and is a combination of the income
capitalisation method and where appropriate, the discounted cash flow method. The cost to complete the development
includes development costs, finance costs and an appropriate profit and risk margin. These costs are deducted from the “as
if complete” valuation to determine the “as is” basis or “current fair value.”
Fair value of vacant land parcels is based on the market land value per square metre.
Highest and best use
Fair value for investment properties is calculated for the highest and best use whether or not current use reflects highest and best
use. For all GPT investment properties current use equates to the highest and best use, with the exception of the following:
• 3 Figtree Drive, Sydney Olympic Park;
• 7 Figtree Drive, Sydney Olympic Park;
• 6 Herb Elliott Avenue, Sydney Olympic Park; and
• 8 Herb Elliott Avenue, Sydney Olympic Park.
After the zoning application is approved, the underlying zoning of 3 and 7 Figtree Drive and 6 and 8 Herb Elliott Avenue, all
located at Sydney Olympic Park, will allow for mixed use development which would provide significantly higher floor space
ratio than what is currently being achieved. These properties are currently being leased and any potential redevelopment is
subject to the expiry of these leases.
(c) Sensitivity information – investment properties
Significant inputs
Net market rent
10 year average specialty market rental growth
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Lease incentives
Fair value measurement sensitivity to
significant increase in input
Fair value measurement sensitivity to
significant decrease in input
Increase
Decrease
Decrease
Increase
Generally, if the assumption made for the adopted capitalisation rate changes, the adopted terminal yield will change in the
same direction. The adopted capitalisation rate forms part of the income capitalisation approach and the adopted terminal
yield forms part of the discounted cash flow approach. The mid-point of the two valuations is then typically adopted.
Discounted cash flow approach
When assessing a discounted cash flow, the adopted discount rate and adopted terminal yield have a strong interrelationship
because the discount rate will determine the rate at which the terminal value is discounted to the present value. In theory, an
increase (softening) in the adopted discount rate and a decrease (tightening) in the adopted terminal yield could potentially
offset the impact on fair value, and vice versa. If both the discount rate and terminal yield moved in the same direction, the
impact on fair value would be magnified.
Income capitalisation approach
When calculating income capitalisation, the net market rent has a strong interrelationship with the adopted capitalisation
rate. This is because the methodology involves assessing the total net market income receivable from the property and
capitalising this in perpetuity to derive a capital value. In theory, an increase in the net market rent and an increase
(softening) in the adopted capitalisation rate could potentially offset the impact to the fair value, and vice versa. If the net
market rent increases but the capitalisation rate goes down (or vice versa), this may magnify the impact on fair value.
59
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017 (d) Financial instruments
The following table presents the changes in level 3 instruments for recurring fair value measurements. GPT’s policy is to
recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Opening balance 1 January 2016
Fair value movements in profit or loss
Fair value movements in other comprehensive income
Closing balance 31 December 2016
Opening balance 1 January 2017
Fair value movements in profit or loss
Transfers from level 3 to level 2
Closing balance 31 December 2017
Sensitivities
Available for sale
financial asset
$M
Derivative
liabilities
$M
8.6
–
0.7
9.3
9.3
–
(9.3)
–
(18.4)
6.1
–
(12.3)
(12.3)
7.2
–
(5.1)
Total
$M
(9.8)
6.1
0.7
(3.0)
(3.0)
7.2
(9.3)
(5.1)
The table below summarises the impact from the change of significant inputs on GPT’s profit and on equity for the year.
Change of significant input
31 Dec 17
$M
31 Dec 16
$M
1% increase in interest rates – gain
1% decrease in interest rates – loss
5% increase in discount rate – loss
5% decrease in discount rate – gain
(5.1)
1.4
(1.5)
–
–
–
(12.3)
3.5
(3.5)
9.3
(0.6)
0.6
Fair value of level 3 derivatives
Fair value of level 3 available for sale financial asset
23. Accounting policies
(a) Basis of preparation
The financial report has been prepared:
•
in accordance with the requirements of the Trust’s Constitution, Corporations Act 2001, Australian Accounting Standards
(AAS) and other authoritative pronouncements of the Australian Accounting Standards Board and International Financial
Reporting Standards;
• on a going concern basis in the belief that GPT will realise its assets and settle its liabilities and commitments in the
normal course of business and for at least the amounts stated in the financial statements. The net deficiency of current
assets over current liabilities at 31 December 2017 of $259.4 million arises as a result of the inclusion of the provision for
distribution payable to stapled securityholders. GPT has access to undrawn financing facilities of $1,045.2 million as set
out in note 13;
• under the historical cost convention, as modified by the revaluation for financial assets and liabilities and investment
properties at fair value through the Consolidated Statement of Comprehensive Income;
• using consistent accounting policies with adjustments to bring into line any dissimilar accounting policies being adopted
by the controlled entities, associates or joint ventures; and
•
in Australian dollars with all values rounded in the nearest hundred thousand dollars in accordance with ASIC
Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, unless otherwise stated.
In accordance with Australian Accounting Standards, the stapled entity reflects the consolidated entity. Equity attributable to
other stapled entities is a form of non-controlling interest and, in the consolidated entity column, represents the contributed
equity of the Company.
As a result of the stapling, investors in GPT will receive payments from each component of the stapled security comprising
distributions from the Trust and dividends from the Company.
The financial report was approved by the Board of Directors on 13 February 2018.
60
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017
(b) Basis of consolidation
Controlled entities
The consolidated financial statements of GPT report the
assets, liabilities and results of all controlled entities for
the financial year.
Controlled entities are all entities over which GPT has
control. GPT controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its
power to direct the activities of the entity.
Controlled entities are consolidated from the date on which
control is obtained to the date on which control is disposed.
The acquisition of controlled entities is accounted for using
the acquisition method of accounting. All intercompany
balances and transactions, income and expenses and
profits and losses resulting from intra-group transactions
have been eliminated.
Associates
Associates are entities over which GPT has significant
influence but not control, generally accompanying a
shareholding of between 10% and 50% of the voting rights.
Management considered if GPT controls its associates (GPT
Wholesale Shopping Centre Fund and GPT Wholesale Office
Fund) and concluded that it does not based on the following
considerations.
GPT has a 24.95% equity interest in GPT Wholesale Office
Fund (GWOF) and 28.80% equity interest in GPT Wholesale
Shopping Centre Fund (GWSCF) as at 31 December 2017.
GPT Funds Management Limited (GPTFM), which is wholly
owned by the GPT Group is the responsible entity (RE) of
the Funds. The Board of GPT FM comprises six directors, of
which GPT can only appoint two. As a result, the Group has
significant influence over GPT FM and accordingly accounts
for it as an associate using the equity method. The Group
also has significant influence over the Fund’s and accounts
for its interests in them using the equity method.
Investments in associates are accounted for using the equity
method. Under this method, GPT’s investment in associates
is carried in the Consolidated Statement of Financial Position
at cost plus post acquisition changes in GPT’s share of net
assets. GPT’s share of the associates’ result is reflected in the
Consolidated Statement of Comprehensive Income. Where
GPT’s share of losses in associates equals or exceeds its
interest in the associate, including any other unsecured long
term receivables, GPT does not recognise any further losses,
unless it has incurred obligations or made payments on
behalf of the associate.
Joint arrangements
Investments in joint arrangements are classified as
either joint operations or joint ventures depending on
the contractual rights and obligations each investor has,
rather than the legal structure of the joint arrangement.
GPT has assessed the nature of its joint arrangements and
determined it has both joint operations and joint ventures.
Joint operations
GPT has significant co-ownership interests in a number of
properties through unincorporated joint ventures. These
interests are held directly and jointly as tenants in common.
GPT recognises its direct share of jointly held assets,
liabilities, revenues and expenses in the consolidated
financial statements under the appropriate headings. The
investment properties that are directly owned as tenants in
common are disclosed in note 2.
Joint ventures
Investments in joint ventures are accounted for in the
Consolidated Statement of Financial Position using the equity
method which is the same method adopted for associates.
(c) Other accounting policies
Significant accounting policies that summarise the
recognition and measurement basis used and are relevant
to an understanding of the financial statements are
provided throughout the notes to the financial statements.
Other accounting policies include:
(i) Available for sale financial assets
Available for sale financial assets are recognised at fair
value. Gains/losses arising from changes in the fair value
of the carrying amount of available for sale financial assets
are recognised in other comprehensive income.
(ii) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of
the GPT entities are measured using the currency of the
primary economic environment in which they operate (‘the
functional 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.
Foreign operations
Non-monetary items that are measured in terms of
historical cost are converted using the exchange rate as
at the date of the initial transaction. Non-monetary items
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 of non-monetary
items, such as equities held at fair value through profit or
loss, are reported as part of the fair value gain or loss.
Exchange differences arising on monetary items that
form part of the net investment in a foreign operation are
taken against a foreign currency translation reserve on
consolidation.
Where forward foreign exchange contracts are entered
into to cover any anticipated excesses of revenue less
expenses within foreign joint ventures, they are converted
at the ruling rates of exchange at the reporting period. The
resulting foreign exchange gains and losses are taken to
the Consolidated Statement of Comprehensive Income.
(iii) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST (or equivalent tax in overseas locations)
except where the GST incurred on purchase of goods
and services is not recoverable from the tax authority, in
which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as
applicable. Receivables and payables are stated inclusive
61
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017 of the amount of GST. The net amount of GST receivable from, or payable to, the taxation authority is included with other
receivables or payables in the Consolidated Statement of Financial Position.
Cash flows are presented on a gross basis in the Statement of Cash flows. The GST components of cash flows arising from
investing or financing activities which are recoverable from, or payable to, the taxation authority are presented as operating
cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
(d) New and amended accounting standards and interpretations adopted from 1 January 2017
There are no significant changes to GPT’s financial performance and position as a result of the adoption of the new and amended
accounting standards and interpretations effective for annual reporting periods beginning on or after 1 January 2017.
(e) New accounting standards and interpretations issued but not yet adopted
The following standards and amendments to standards are relevant to GPT.
Reference
Description
AASB 9 Financial Instruments
AASB 15 Revenue from
Contracts with Customers
AASB 16 Leases
AASB 9 addresses the classification, measurement and de-recognition of financial assets
and financial liabilities, introduces expanded disclosure requirements, a new impairment
(expected credit loss) model and changes in presentation. When adopted, this could change
the classification and measurement of financial assets and financial liabilities.
The new expected credit loss model for calculating impairment on financial assets will not
have a material impact on the provision for doubtful debts.
The new hedging rules align hedge accounting more closely with the reporting entity’s risk
management practices. As a general rule it will be easier to apply hedge accounting going
forward. Changes in own credit risk in respect of liabilities designated at fair value through
profit and loss must now be presented in other comprehensive income.
Debt modifications where the impact results in a change in the present value of expected
cashflows of less than 10%, taking into account other qualitative factors, will be taken
immediately through the Consolidated Statement of Comprehensive Income unless the
modifications are reset or entered at market rates. This will not have a material impact for
GPT, as all previous modifications have been entered at market rates.
GPT will apply the standard from 1 January 2018.
AASB 15 will replace AASB 118 Revenue and AASB 111 Construction Contracts. It is based
on the principle that revenue is recognised when control of a good or service is transferred
to a customer. It contains a single model that applies to contracts with customers and two
approaches to recognising revenue: at a point in time or over time. The model features a
contract–based five-step analysis of transactions to determine whether, how much and
when revenue is recognised. It applies to all contracts with customers except leases,
financial instruments and insurance contracts. It requires reporting entities to provide users
of financial statements with more informative and relevant disclosures.
GPT will apply the standard from 1 January 2018. It is not expected that the application of
this standard will have a material impact on the financial results, however some changes in
the presentation of certain revenue items and additional disclosures will be required. The
disclosure changes will have a greater impact on GPT from 1 January 2019 as there are
certain revenue streams such as outgoings income that will continue to be accounted for
under AASB 117 Leases until the adoption of AASB 16 Leases from 1 January 2019.
AASB 16 will change the way lessees account for leases by eliminating the current dual
accounting model which distinguishes between on-balance sheet finance leases and
off-balance sheet operating leases. Instead, there will be a single, on-balance sheet
accounting model that is similar to the current finance lease accounting. Where GPT is the
lessee, this new treatment will result in recognition of a right of use asset along with the
associated lease liability in the balance sheet and both a depreciation and interest charge in
the Consolidated Statement of Comprehensive Income. In contrast, lessor accounting will
remain similar to current practice.
The new leasing model requires the recognition of operating leases on the balance sheet. If
GPT had adopted the new standard from 1 January 2017, management estimates that net
profit before tax for the 12 months to 31 December 2017 would decrease by approximately
$0.1 million. Assets at 31 December 2017 would increase by approximately $4.0 million and
liabilities would increase by $6.3 million.
Application of
Standard
1 January 2018
1 January 2018
1 January 2019
24. Events subsequent to reporting date
On 24 January 2018, GPT acquired 4 logistics assets in Sunshine, Victoria for a total consideration of $74.0 million.
Other than the above, the Directors are not aware of any matter or circumstance occurring since 31 December 2017 that has
significantly or may significantly affect the operations of GPT, the results of those operations or the state of affairs of GPT in
subsequent financial years.
62
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2017 Directors’ Declaration
Year ended 31 December 2017
In the Directors of the Responsible Entity’s opinion:
(a) The consolidated financial statements and notes set out on pages 24 to 62 are in accordance with the Corporations Act
2001, including:
• complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
• giving a true and fair view of GPT’s financial position as at 31 December 2017 and of its performance for the financial
year ended on that date; and
(b) the consolidated financial statements and notes comply with International Financial Reporting Standards as disclosed in
note 23 to the financial statements.
(c) There are reasonable grounds to believe that GPT will be able to pay its debts as and when they become due and
payable. The net deficiency of current assets over current liabilities at 31 December 2017 of $259.4 million arises as a
result of the inclusion of the provision for distribution payable to stapled securityholders. GPT has access to undrawn
financing facilities of $1,045.2 million as set out in note 13 to the financial statements.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer as required by
Section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Rob Ferguson
Chairman
GPT RE Limited
Sydney
13 February 2018
Bob Johnston
Chief Executive Officer and Managing Director
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Annual Financial Report of The GPT Group Annual Financial Report of GPT Management
Holdings Limited and its Controlled Entities
Year ended 31 December 2017
Contents
Directors’ Report .......................................................................................................................................................................... 72
Auditor’s Independence Declaration ............................................................................................................................................ 89
Financial Statements .................................................................................................................................................................... 90
Consolidated Statement of Comprehensive Income ............................................................................................................ 90
Consolidated Statement of Financial Position ..................................................................................................................... 91
Consolidated Statement of Changes in Equity ..................................................................................................................... 92
Consolidated Statement of Cash Flows ............................................................................................................................... 93
Notes to the Financial Statements ....................................................................................................................................... 94
Result for the year ....................................................................................................................................................... 94
1. Segment information .............................................................................................................................................. 94
Operating assets and liabilities .................................................................................................................................. 95
2. Equity accounted investments ................................................................................................................................ 95
3. Loans and receivables ............................................................................................................................................ 97
4. Intangible assets ..................................................................................................................................................... 98
5. Inventories .............................................................................................................................................................. 99
6. Property, plant and equipment............................................................................................................................. 100
7. Other assets ......................................................................................................................................................... 101
8. Payables ................................................................................................................................................................ 101
9. Provisions ............................................................................................................................................................. 101
10. Taxation ................................................................................................................................................................. 102
Capital Structure ....................................................................................................................................................... 104
11. Equity and reserves .............................................................................................................................................. 104
12. Earnings per share ............................................................................................................................................... 106
13. Dividends paid and payable .................................................................................................................................. 106
14. Borrowings ........................................................................................................................................................... 106
15. Financial risk management ................................................................................................................................. 107
Other disclosure items .............................................................................................................................................. 110
16. Cash flow information .......................................................................................................................................... 110
17. Commitments ....................................................................................................................................................... 111
18. Contingent liabilities ............................................................................................................................................ 111
19. Security based payments ..................................................................................................................................... 111
20. Related party transactions .................................................................................................................................. 113
21. Auditors remuneration ......................................................................................................................................... 115
22. Parent entity financial information....................................................................................................................... 115
23. Fair value disclosures .......................................................................................................................................... 116
24. Discontinued operations and available for sale financial assets ......................................................................... 117
25. Accounting policies ............................................................................................................................................... 118
26. Events subsequent to reporting date ................................................................................................................... 120
Directors’ Declaration ................................................................................................................................................................. 121
Independent Auditor’s Report .................................................................................................................................................... 122
This financial report covers both GPT Management Holdings Limited (the Company) as an individual entity and the Consolidated
Entity consisting of GPT Management Holdings Limited and its controlled entities.
GPT Management Holdings Limited is a company limited by shares, incorporated and domiciled in Australia.
Through our internet site, we have ensured that our corporate reporting is timely, complete and available globally at minimum
cost to the Company. All press releases, financial reports and other information is available on our website: www.gpt.com.au.
71
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Directors’ Report
Year ended 31 December 2017
The Directors of GPT Management Holdings Limited (the
Company), present their report together with the financial
statements of GPT Management Holdings Limited and its
controlled entities (the Consolidated Entity) for the financial
year ended 31 December 2017. The Consolidated Entity is
stapled to the General Property Trust and the GPT Group
(GPT or the Group) financial statements include the results
of the stapled entity as a whole.
GPT Management Holdings Limited is a company limited
by shares, incorporated and domiciled in Australia. The
registered office and principal place of business is MLC
Centre, Level 51, 19 Martin Place, Sydney NSW 2000.
1. Operating and financial review
About GPT
GPT is an owner and manager of a $12.3 billion diversified
portfolio of high quality Australian retail, office and
logistics property assets and together with GPT’s funds
management platform the Group has $21.5 billion of
property assets under management (AUM).
GPT owns some of Australia’s most significant real estate
assets, including the MLC Centre and Australia Square in
Sydney, Melbourne Central and Highpoint Shopping Centre
in Melbourne and One One One Eagle Street in Brisbane.
Listed on the Australian Securities Exchange (ASX) since
1971, GPT is today one of Australia’s largest diversified listed
property groups with a market capitalisation of approximately
$9.2 billion. GPT is one of the top 50 listed stocks on the ASX
by market capitalisation as at 31 December 2017.
GPT’s strategy is focused on leveraging its extensive
real estate experience to deliver strong returns
through disciplined investment, asset management
and development. The development capability has a
focus on creating value for securityholders through the
enhancement of the core investment portfolio and in the
creation of new investment assets.
A key performance measure for GPT is Total Return. Total
Return is calculated as the change in Net Tangible Assets
(NTA) per security plus distributions per security declared
over the year, divided by the NTA per security at the
beginning of the year. This focus on Total Return is aligned
with securityholders’ long term investment aspirations. In
2017 GPT achieved a Total Return of 15.2 per cent.
GPT targets a Management Expense Ratio (MER) of less
than 45 basis points. MER is calculated as management
expenses as a percentage of assets under management. In
2017 GPT achieved an MER of 34 basis points.
GPT focuses on maintaining a strong balance sheet. GPT has
moderate gearing and significant investment capacity giving
it the flexibility to execute on investment opportunities as
they arise. In 2017 the Weighted Average Cost of Debt was
4.2 per cent with net gearing at 24.4 per cent.
Review of operations
The Consolidated Entity’s financial performance for the year ended 31 December 2017 is summarised below.
The net loss after tax for the year ended 31 December 2017 is $14,222,000 (2016: net profit of $19,821,000).
Property management fees
Development management fees and revenue
Fund management fees
Management costs recharged
Proceeds from sale of inventory
Other income
Expenses
Profit from continuing operations before income tax expense
Income tax expense
(Loss)/profit after income tax for continuing operations
Loss from discontinued operations
Net (loss)/profit for the year
72
31 Dec 17
$’000
31 Dec 16
$’000
38,863
32,039
77,206
32,334
10,358
18,368
41,227
69,232
99,044
33,009
12,532
48,173
(203,315)
(231,697)
5,853
(6,406)
(553)
(13,669)
(14,222)
71,520
(22,649)
48,871
(29,050)
19,821
Change
%
(6%)
(54%)
(22%)
(2%)
(17%)
(62%)
12%
(92%)
72%
(101%)
53%
(172%)
Consolidated Entity result
Logistics
The decrease in earnings after tax compared with 2016
is mainly attributable to decreases in development
management revenue, performance management fees
earned for GPT Wholesale Office Fund (GWOF), proceeds
from sale of inventory and other income. This is partially
offset by a decrease in expenses.
Property management
Retail
The Consolidated Entity is responsible for property
management activities across the retail sector. Property
management fees decreased to $28,986,000 in 2017
as a result of lower development leasing fees due to
the completion of a redevelopment in 2016 and lower
energy income.
Office
The Consolidated Entity is responsible for property
management activities across the office sector. Property
management fees increased to $7,920,000 in 2017 as a
result of higher membership income from Space & Co.
Logistics
The Consolidated Entity is responsible for property
management activities across the logistics sector. Property
management fees decreased to $1,957,000 in 2017 as a
result of lower occupancy in the portfolio.
Development management
Retail
The retail development team has focused on master
planning and delivery of development opportunities within
its $1.6 billion development pipeline. In 2017, this includes
the delivery of the $68.0 million repositioning of Wollongong
Central. The remix has introduced David Jones to the asset
and was completed on schedule in October 2017.
During 2017, retail development contributed $5.3 million
to profit from continuing operations before income tax
expense (2016: $5.8 million) from the sale of residential
land parcels at Rouse Hill.
Office
The office development team has focused on progressing
a number of repositioning projects at Melbourne Central
Tower, CBW and 750 Collins Street in Melbourne and MLC
Centre in Sydney. Progress is also being made on the
planning approval for a new tower at Darling Park.
Following the successful pre-commitment lease of
9,240sqm to the Rural Fire Service, construction has
commenced on a 15,680sqm campus building on the
4 Murray Rose site at Sydney Olympic Park. Completion
is expected in late 2018.
The acquisition of an office development site of 2,439sqm
in the heart of Parramatta’s commercial district settled
in March 2017. This site will provide the opportunity to
develop an office building of over 28,000sqm, with the
development application submitted.
In 2017, the logistics development business completed
construction of four new logistics facilities totalling
70,000sqm at Seven Hills, Eastern Creek and Huntingwood
in Sydney and Wacol in Brisbane. 100 per cent of this space
has been leased. At the Huntingwood site, construction
has commenced to develop an 11,000sqm warehouse on
the adjoining land parcel to the existing building recently
leased to IVE Group for 10 years. Planning approval is also
in place and earthworks completed on Lot 21 Old Wallgrove
Road site at Eastern Creek for a 30,000sqm facility.
Funds Management
GPT Wholesale Office Fund (GWOF)
GWOF’s portfolio value increased to $7.1 billion, up $0.5 billion
compared to 2016. The management fee income earned
from GWOF decreased by $23.0 million as compared to 2016,
primarily due to performance fee income of $28.1 million
being earned in 2016 which will not be earned in the future in
accordance with the revised Fund Terms. This was partially
offset by higher base management fee income of $5.1 million
due to strong upward revaluations across the portfolio, net
new asset acquisitions and a higher base management fee
structure compared with 2016.
In June 2017, GPT acquired a further 16.3 million securities
in GWOF for $23.2 million, increasing GPT’s ownership
interest from 24.53 per cent to 24.95 per cent.
GPT Wholesale Shopping Centre Fund (GWSCF)
GWSCF’s portfolio value increased to $4.9 billion, up
$1.1 billion compared to 2016. This was primarily due
to the acquisition of an additional 25 per cent interest
in September 2017 in Highpoint Shopping Centre for
$660.0 million and Homemaker City, Maribyrnong for
$20.0 million coupled with upward revaluations across the
portfolio. Management fee income earned from GWSCF of
$17.3 million has remained stable as compared to 2016.
In May 2017, GPT acquired a further 115.6 million
securities in GWSCF for $116.6 million, increasing GPT’s
ownership interest from 25.29 per cent to 28.80 per cent.
Fund Terms Review
On 20 February 2017, GWSCF held an Extraordinary
General Meeting (EGM) in relation to changes in the
terms of GWSCF. At the EGM, investors approved all seven
resolutions put to the meeting.
The key changes included:
• removal of the performance fee structure from
1 April 2017;
•
introduction of an Investor Representation
Committee; and
• other amendments to operational policies and
investor rights.
73
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Investor Liquidity Review
Capital management
On 31 March 2017, the first investor liquidity 10 year review
concluded which allowed GWSCF securityholders to notify
GPT Funds Management Limited (as Responsible Entity of
GWSCF) whether they required liquidity. The outcome of
the review was that binding requests for liquidity for a total
of 78,474,213 securities, being 2.4 per cent of securities on
issue, were submitted. This equated to $79.8 million at the
31 March 2017 current unit value of $1.0174. All requests
for liquidity were met within the June 2017 quarter.
Management expenses
Management expenses increased to $73.4 million
(2016: $71.0 million) predominantly caused by lower
intercompany income elimination and moderate expense
increases. In 2017, GPT achieved an MER of 34 basis points
(2016: 37 basis points).
Non-core operations
Joint venture
In October 2017, the Consolidated Entity received a return
of capital of $10.7 million in respect of its 5.3 per cent
interest in BGP Holding Plc (BGP). BGP was classified as
an available for sale financial asset with a carrying value
of $9.3 million at 31 December 2016. In 2017, following
the return of capital the asset has been revalued and
derecognised in the Consolidated Statement of Financial
Position and $10.7 million has been recognised in the
Consolidated Statement of Comprehensive Income as profit
on derecognition of available for sale financial asset.
Financial position
31 Dec 17
$’000
31 Dec 16
$’000
Change
%
Current assets
Non-current assets
Total assets
Current liabilities
133,715
134,583
266,955
249,851
400,670
384,434
129,304
104,536
Non-current liabilities
115,471
98,080
(1%)
7%
4%
24%
18%
21%
The Consolidated Entity has an external loan relating to the
Metroplex joint venture.
The Consolidated Entity has non-current, related party
borrowings from GPT Trust and its subsidiaries. Under
Australian Accounting Standards, the loans must be
revalued to fair value each reporting period.
Cash flows
The cash balance as at 31 December 2017 increased to
$20,033,000 (2016: $17,842,000).
Operating activities
Net cash inflows from operating activities have decreased
in 2017 to $13,943,000 (2016: $55,605,000) due to the
removal of the performance fee structure and reduced
funds management fees resulting from the sale of GPT
Metro Office Fund (GMF) in 2016.
The following table shows the reconciliation from net
(loss)/profit to the cash flow from operating activities:
Net (loss)/profit for the year
(14,222)
19,822
(172%)
31 Dec 17
$’000
31 Dec 16
$’000
Change
%
Non-cash items included in
net (loss)/profit
Capital return from available
for sale financial asset
Timing difference
Net cash flows from
operating activities
Investing activities
62,207
76,880
(19%)
(10,699)
(12,429)
(23,343)
(28,668)
14%
19%
13,943
55,605
(75%)
Net cash inflows from investing activities have increased
to $6,165,000 in 2017 (2016: $5,048,000) due to a decline in
property, plant and equipment acquisitions during the year.
Financing activities
Net cash outflows from financing activities have decreased
to $17,917,000 in 2017 (2016: $73,191,000) due to a decline
in the repayment of related party borrowings.
Total liabilities
Net assets
244,775
202,616
155,895
181,818
(14%)
Dividends
Total assets remains in line with prior year at $400,670,000
in 2017 (2016: $384,434,000).
The Directors have not declared any dividends for the year
ended 31 December 2017 (2016: nil).
Total liabilities increased by 21 per cent to $244,775,000 in
2017 (2016: $202,616,000) due to increased borrowings to
fund inventory development.
74
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Risks
The Board is ultimately accountable for corporate
governance and the appropriate management of risk.
The Board determines the risk appetite and oversees the
risk profile to ensure activities are consistent with GPT’s
strategy and values. The Sustainability and Risk Committee
and the Audit Committee support the Board and are
responsible for overseeing and reviewing the effectiveness
of the risk management framework.
GPT has an active enterprise-wide risk management
framework. Within this framework the Board has adopted
a policy setting out the principles, objectives and approach
established to maintain GPT’s commitment to integrated
risk management. GPT recognises the requirement
for effective risk management as a core capability and
consequently all employees are expected to be managers
of risk. GPT’s risk management approach incorporates
culture, people, processes and systems to enable the
organisation to realise potential opportunities whilst
managing adverse effects. The approach is consistent with
AS/NZS ISO 31000:2009: Risk Management.
Employees, contractors, the Leadership Team, the
Sustainability and Risk Committee, the Audit Committee
and through them, the Board:
• report on or receive reports on GPT’s risk management
practices and control systems including the
effectiveness of GPT’s management of its material
business risks;
• promote risk awareness and assess the risk
management culture;
• develop and maintain internal specialist risk
management expertise;
•
identify and assess risks in a timely and
consistent manner;
• design, embed and assess the effectiveness of
controls; and
• provide transparency and assurance that the risk profile
is aligned with GPT’s strategy, values and risk appetite.
Prospects
Group
GPT is well positioned with high quality assets and high
levels of occupancy. As at 31 December 2017, the Group’s
balance sheet is in a strong position, with a smooth, long
debt expiry profile and net gearing slightly below the
Group’s target range of 25 per cent to 35 per cent.
Retail
Australian retail sales grew 2.7 per cent for the year to
31 December 2017 led by the Eastern states. This has
supported the performance of the GPT portfolio with more
than 85 per cent of the portfolio located in NSW and VIC. Total
centre sales grew 1.7 per cent whilst specialties sales per
square metre grew 2.2 per cent.
Office
The Sydney and Melbourne office markets continued
to deliver exceptional growth in net effective rents and
asset valuations. The Sydney office market is expected to
continue to enjoy favourable leasing conditions as supply
remains limited through until 2020. The Melbourne office
market is expected to see an elevated level of supply over
the next 3 years however absorption is also expected to
remain strong keeping vacancy rates low and upward
pressure on net effective rents. GPT’s office portfolio
weighting in the Sydney and Melbourne markets should
benefit from these favourable market conditions.
Logistics
The investment market for institutional grade product has
been strong over the past 24 months, with quality assets
and portfolios transacting at yields firmer than at previous
market peaks. Despite a modest rental growth outlook and
increasing supply, assets with long WALE, good rent review
structures and secure covenants have been well sought
after. The medium term outlook is for a stabilisation of
yields as this investment activity tapers off, while rents are
likely to remain stable. GPT’s desire to increase exposure to
the sector will see a continued focus on development.
Funds management
GPT has a strong funds management platform which has
experienced significant growth over the past five years. The
funds management team will continue to actively manage
the existing portfolios, with new acquisitions, divestments
and developments reviewed based on meeting the relevant
investment objectives of the respective funds.
Guidance for 2018
In 2018, GPT expects to deliver approximately 3 per cent
growth in Funds From Operations (FFO) per ordinary
security and approximately 3 per cent growth in distribution
per ordinary security. Achieving this target is subject to
risks detailed in the following section.
75
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities The risk appetite considers the most significant, material risks to which GPT is exposed. The following table sets out
material risks and issues, the potential strategic impact to GPT and the ways in which they may be mitigated:
Risk Category
Risk/Issue
Potential Strategic Impact
Mitigation
Investment
mandate
Investments do not perform in line
with forecast
• Investments deliver lower
investment performance
than target
• Credit rating downgrade
Volatility and speed of adverse changes
in market conditions, including
competition and digital disruption
• Investments deliver lower
investment returns than target
• Formal deal management process
• Active asset management
including regular forecasting and
monitoring of performance
• High quality property portfolio
• Development program to enhance
asset returns
• Comprehensive asset
insurance program
• Holistic capital management
• Large multi asset portfolio
• Monitoring of asset concentration
• Digital strategy
Development
Leasing
Capital
management,
including macro-
economic factors
Developments do not perform in line
with forecast
• Developments deliver lower
• Formal development approval and
returns than target
management process
Inability to lease assets in line with
forecast
• Investments deliver lower
investment performance than target
Re-financing and liquidity risk
• Limits ability to meet debt
maturities
• Constrains future growth
• Limits ability to execute strategy
• May impact distributions
• Failure to continue as a
going concern
• Large and diversified tenant base
• High quality property portfolio
• Experienced leasing team
• Development program to enhance
asset returns
• Diversity of funding sources and
spreading of debt maturities with a
long weighted average debt term
• Maintaining a minimum liquidity
buffer in cash and surplus
committed credit facilities for the
forward rolling twelve-month period
Interest rate risk – higher interest rate
cost than forecast
• Detrimental impact to
investment performance
• Interest rate exposures are
actively hedged
Health and safety
Incidents causing injury to tenants,
visitors to the properties, employees
and/or contractors
• Adversely affect GPT’s
operating results
• Criminal/civil proceedings and
resultant reputation damage
• Financial impact of remediation
and restoration
People
Inability to attract, retain and develop
talented people and provide an
inclusive workplace
• Limits the ability to deliver the
business objectives and strategy
• Formalised Health and Safety
management system including
policies and procedures for
managing safety
• Training and education of staff
and contractors
• Competitive remuneration
• Structured development planning
• Succession planning and talent
management
• Diversity & Inclusion Working Group
• Diversity & Inclusion policies,
guidelines and training
Environmental
and social
sustainability
Information
security
Inability to continue operating in a
manner that does not compromise
the health of ecosystems and meets
accepted social norms
This includes the consideration of
climate change, energy (initiatives,
security and cost), community and
supply chain
Risk of loss of data, breach of
confidentiality, regulatory breach
(privacy) and/or reputational
impact including as a result from a
cyber attack
• Limits the ability to deliver the
• Formalised Environment and
business objectives and strategy
• Criminal/civil proceedings and
resultant reputation damage
• Financial impact of remediation
and restoration
Sustainability management system
including policies and procedures
for managing environmental and
social sustainability risks
• Limits the ability to deliver the
• Technology risk management
business objectives and strategy
framework
• Criminal/civil proceedings and
resultant reputation damage
• Financial impact of remediation
and restoration
• Privacy policy, guidelines and
procedures
76
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 2. Environmental regulation
GPT has policies and procedures in place that are designed
to ensure that where operations are subject to any
particular and significant environmental regulation under
a law of Australia (for example property development and
property management), those obligations are identified
and appropriately addressed. This includes obtaining and
complying with conditions of relevant authority consents and
approvals and obtaining necessary licences. GPT is not aware
of any breaches of any environmental regulations under
the laws of the Commonwealth of Australia or of a State or
Territory of Australia and has not incurred any significant
liabilities under any such environmental legislation.
GPT is also subject to the reporting requirements of the
National Greenhouse and Energy Reporting Act 2007
(“NGER Act”). The NGER Act requires GPT to report its
annual greenhouse gas emissions and energy use. The
measurement period for GPT is 1 July to 30 June each
year. GPT has implemented systems and processes for
the collection and calculation of the data required which
enabled submission of its report to the Department of
Climate Change and Energy Efficiency within the legislative
deadline of 31 October each year. GPT has submitted its
report to the Department of Climate Change and Energy
Efficiency for the period ended 30 June 2017 within the
required timeframe.
More information about GPT’s participation in the NGER
program is available at www.gpt.com.au.
3. Events subsequent to
reporting date
On 15 January 2018, the Consolidated Entity sold
vacant land at 368 Wembley Road, Berrinba for a total
consideration of $4,100,000.
Other than the above, the Directors are not aware of any
matter or circumstances occurring since 31 December 2017
that has significantly or may significantly affect the
operations of the Consolidated Entity, the results of those
operations or the state of affairs of the Consolidated Entity in
the subsequent financial years.
4. Directors and secretary
Information on directors
Rob Ferguson – Chairman
Rob joined the Board in May 2009 and is also a member
of the Nomination and Remuneration Committee. He
brings a wealth of knowledge and experience in finance,
investment management and property as well as corporate
governance.
Rob currently holds Non-Executive directorships in the
following listed and other entities:
• Primary Health Care Limited (since 2009) – Chairman
• Watermark Market Neutral Fund Limited (since 2013)
• Tyro Payments Limited (since 2005)
• Smartward Limited (since 2012).
He was also a Non-Executive Chairman of IMF Bentham
Limited from 2004 to January 2015.
As at the date of this report, he holds 207,628 GPT
stapled securities.
Robert Johnston – Chief Executive Officer and
Managing Director
Bob was appointed to the Board as Chief Executive Officer
and Managing Director in September 2015. He has 29 years
experience in the property sector including investment,
development, project management and construction in
Australia, Asia, the US and UK. Prior to joining GPT, Bob was
the Managing Director of listed Australand Property Group
which became Frasers Australand in September 2014.
As at the date of this report, he holds 343,264 GPT
stapled securities.
Brendan Crotty
Brendan was appointed to the Board in December 2009
and is also a member of the Audit Committee and the
Sustainability and Risk Committee. He brings extensive
property industry experience to the Board, including
17 years as Managing Director of Australand until his
retirement in 2007.
Brendan is currently a director of Brickworks Limited
(since 2008) and Chairman of Cloud FX Pte Ltd. Brendan
resigned from his role as Chairman of Western Sydney
Parklands Trust on 31 December 2017.
As at the date of this report, he holds 67,092 GPT
stapled securities.
77
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Eileen Doyle
Gene Tilbrook
Gene was appointed to the Board in May 2010 and is also
the Chair of the Nomination and Remuneration Committee.
He brings extensive experience in finance, corporate
strategy, investments and capital management.
Gene currently holds the position of Non-Executive Director
in the following listed entities:
• Orica Limited (since 2013)
• Woodside Petroleum Limited (since 2014).
Gene was also a Director of listed entities Transpacific
Industries Group Limited from 2009 to 2013, Fletcher
Building Limited from 2009 to April 2015, and Aurizon
Holdings Limited from 2010 to February 2016.
As at the date of this report, he holds 48,546 GPT
stapled securities.
James Coyne – General Counsel and
Company Secretary
James is responsible for the legal, compliance and company
secretarial activities of GPT. He was appointed as the General
Counsel and Company Secretary of GPT in 2004. His previous
experience includes company secretarial and legal roles
in construction, infrastructure, and the real estate funds
management industry (listed and unlisted).
Lisa Bau – Senior Legal Counsel and
Company Secretary
Lisa was appointed as a Company Secretary of GPT in
September 2015. Her previous experience includes legal
roles in mergers and acquisitions, capital markets, funds
management and corporate advisory.
Eileen was appointed to the Board in March 2010. She is
also the Chair of the Sustainability and Risk Committee
and a member of the Nomination and Remuneration
and Audit Committees. She has diverse and substantial
business experience having held senior executive roles
and directorships in a wide range of industries, including
research, financial services, building and construction,
steel, mining, logistics and export. Eileen is also a Fellow
of the Australian Academy of Technological Sciences
and Engineering.
Eileen currently holds the position of Non-Executive
Director in the following listed and other entities:
• Boral Limited (since 2010)
• Oil Search Limited (since 2016).
Eileen was also previously a director of Bradken Limited
from 2011 to November 2015.
As at the date of this report, she holds 45,462 GPT
stapled securities.
Swe Guan Lim
Swe Guan was appointed to the Board in March 2015
and is also a member of the Audit Committee and the
Sustainability and Risk Committee. Swe Guan brings
significant Australian real estate skills and experience
and capital markets knowledge to the Board, having spent
most of his executive career as a Managing Director in the
Government Investment Corporation (GIC) in Singapore.
Swe Guan is currently Chairman of Cromwell European
REIT in Singapore (since 2017), a director of Sunway Berhad
in Malaysia (since 2011) and Global Logistics Properties in
Singapore (since 2012). Swe Guan is also a member of the
Investment Committee of CIMB Trust Cap Advisors.
As at the date of this report, he holds 15,800 GPT
stapled securities.
Michelle Somerville
Michelle was appointed to the Board in December 2015 and
is also the Chair of the Audit Committee and a member of
the Sustainability and Risk Committee. She was previously a
partner of KPMG for nearly 14 years specialising in external
audit and advising Australian and international clients both
listed and unlisted primarily in the financial services market in
relation to business, finance risk and governance issues.
Michelle currently holds the position of Non-Executive
Director in the following entities:
• Bank Australia Limited (since 2014)
• Challenger Retirement and Investment Services Ltd
(since 2014)
• Save the Children (Australia) (since 2012)
• Down Syndrome Australia (since 2011).
Michelle is also an independent consultant to the UniSuper
Ltd Audit, Risk and Compliance Committee since 2015.
As at the date of this report, she holds 16,157 GPT
stapled securities.
78
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Attendance of directors at meetings
The number of Board meetings, including meetings of Board Committees, held during the financial year and the number of
those meetings attended by each Director is set out below:
Board
Audit Committee
Nomination and
Remuneration Committee
Sustainability and Risk
Committee
Number of
meetings
attended
Number of
meetings
eligible to
attend
Number of
meetings
attended
Number of
meetings
eligible to
attend
Number of
meetings
attended
Number of
meetings
eligible to
attend
Number of
meetings
attended
Number of
meetings
eligible to
attend
Rob Ferguson
Michelle Somerville
Gene Tilbrook
Eileen Doyle
12
12
12
12
12
12
12
12
12
12
12
12
12
12
–
–
4
3
4
4
–
–
–
4
3
4
4
–
6
–
–
6
–
–
6
6
–
–
6
–
–
6
–
–
4
4
4
3
–
–
–
4
4
4
3
–
Chair
Rob Ferguson
Robert Johnston
Brendan Crotty
Eileen Doyle
Swe Guan Lim
Michelle Somerville
Gene Tilbrook
5. Other disclosures
Indemnification and insurance of
directors, officers and auditor
GPT provides a Deed of Indemnity and Access (Deed) in favour
of each of the Directors and Officers of GPT and its subsidiary
companies and each person who acts or has acted as a
representative of GPT serving as an officer of another entity at
the request of GPT. The Deed indemnifies these persons on a
full indemnity basis to the extent permitted by law for losses,
liabilities, costs and charges incurred as a Director or Officer
of GPT, its subsidiaries or such other entities.
Subject to specified exclusions, the liabilities insured are
for costs that may be incurred in defending civil or criminal
proceedings that may be brought against Directors and
Officers in their capacity as Directors and Officers of GPT,
its subsidiary companies or such other entities, and other
payments arising from liabilities incurred by the Directors
and Officers in connection with such proceedings. GPT has
agreed to indemnify the auditors out of the assets of GPT if
GPT has breached the agreement under which the auditors
are appointed.
During the financial year, GPT paid insurance premiums to
insure the Directors and Officers of GPT and its subsidiary
companies. The terms of the contract prohibit the
disclosure of the premiums paid.
Non-audit services
During the year PricewaterhouseCoopers, GPT’s auditor, has
performed other services in addition to their statutory duties.
Details of the amounts paid to the auditor, which includes
amounts paid for non-audit services and other assurance
services, are set out in note 21 to the financial statements.
The Directors have considered the non-audit services and
other assurance services provided by the auditor during the
financial year. In accordance with advice received from the
Audit Committee, the Directors are satisfied that the provision
of non-audit services by the auditor is compatible with, and
did not compromise, the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
• the Audit Committee reviewed the non-audit services
and other assurance services at the time of appointment
to ensure that they did not impact upon the integrity and
objectivity of the auditor;
• the Board’s own review conducted in conjunction
with the Audit Committee concluded that the auditor
independence was not compromised, having regard to
the Board’s policy with respect to the engagement of
GPT’s auditor; and
• the fact that none of the non-audit services provided by
PricewaterhouseCoopers during the financial year had
the characteristics of management, decision-making,
self-review, advocacy or joint sharing of risks.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act 2001 is
set out on page 89 and forms part of the Directors’ Report.
Rounding of amounts
The amounts contained in this report and in the
financial statements have been rounded to the nearest
thousand dollars unless otherwise stated (where
rounding is applicable) under the option available to the
Consolidated Entity under ASIC Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191.
The Consolidated Entity is an entity to which the
Instrument applies.
79
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 6. Remuneration report
The Nomination & Remuneration Committee (the Committee) of the Board presents the Remuneration Report (Report) for
the GPT Group. This Report has been audited in accordance with section 308(3C) of the Corporations Act 2001.
The Board aims to communicate the remuneration outcomes with full transparency; demonstrate that the GPT Group’s
remuneration platform is both market competitive and fair to all stakeholders; and align performance measures to the
achievement of GPT’s strategic objectives.
Governance
Who are the
members of the
Committee?
What is the scope
of work of the
Committee?
The Committee consists of 3 Non-Executive Directors:
• Gene Tilbrook (Committee Chairman)
• Eileen Doyle
• Rob Ferguson
The Committee provides advice and recommendations to the Board on:
• Criteria for selection of Directors;
• Nominations for appointment of Directors;
• Criteria for reviewing the performance of Directors individually and the GPT Board collectively;
• Remuneration policies for Directors and Committee members;
• Remuneration amounts for Directors from within the overall Directors fee cap approved by securityholders;
• Remuneration policy for the Chief Executive Officer (CEO) and employees;
• Incentive plans for the CEO and employees, including exercising discretion where appropriate in determining
short term incentive compensation (STIC) and long term incentive compensation (LTI) outcomes; and
• Any other related matters regarding executives or the Board1.
Who is included in
the Remuneration
Report?
GPT’s Key Management Personnel (KMP) are the individuals responsible for planning, controlling and managing
the GPT Group (being the Non-Executive Directors, CEO, Chief Financial Officer (CFO), and the Chief Operating
Officer (COO)).
Committee key decisions and remuneration outcomes in 2017
Platform component Key decisions and outcomes
Base pay (Fixed)
• Implemented the annual review of employee base pay effective 1 January 2017, with an average increase of
Short term incentive
compensation (STIC)
Long term incentive
(LTI) compensation
Other employee
ownership plans
3.6 per cent.
• Implemented an average increase of 3.0 per cent in Non-Executive Director base fees effective 1 January 2017.
This was the first review of base fees since 1 January 2015.
• The Group achieved an EPS growth outcome of 3.0 per cent which generated a STIC pool of $13.8 million.
• The Group achieved a compound annual Total Return2 for the 2015-17 period of 14.05 per cent, exceeding the
maximum target of 9.75 per cent, and delivered a Total Securityholder Return (TSR)3 of 44.34 per cent which
ranked 5th against the comparator group.
• As a result, the vesting outcome for the 2015-17 LTI plan was 83.29 per cent of the performance rights for each
of the 23 participants in the LTI plan.
• Launched the 2017-2019 LTI with two performance measures, Total Return and Relative TSR.
• Strengthened the performance hurdle for vesting under the Total Return measure to commence at 8.5 per cent
and reach maximum at 10 per cent.
• Continued the General Employee Security Ownership Plan (GESOP) for 137 STIC eligible employees not in the
LTI. Under GESOP each participant receives an amount equal to 10 per cent of their STIC (less tax) delivered in
GPT securities, which must be held for at least 1 year.
• Continued the Broad Based Employee Security Ownership Plan (BBESOP) for 281 employees ineligible for
GESOP. Under BBESOP, participants receive $1,000 worth of GPT securities that cannot be transferred or sold
until the earlier of 3 years from the allocation date or cessation of employment (or $1,000 cash (less tax) at the
election of the individual).
Policy & governance
• Utilised external advice on market compensation benchmarks and practice, prevailing regulatory and governance
standards, and drafting of incentive plan documentation from Ernst & Young and Conari Partners4.
Diversity
• Completed an organisation wide gender pay equity audit and launched GPT’s Gender Equality Policy.
• GPT’s CEO Bob Johnston is a member of the Property Male Champions of Change, and was also appointed a
Gender Pay Equity Ambassador by the Workplace Gender Equality Agency (WGEA).
• Increased the percentage of females in senior leadership roles from 36.7 per cent at the end of 2016 to 41.4 per cent.
• Maintained participation of First Nations employees in the permanent workforce at 1 per cent.
• Launched GPT’s LGBTI Strategy and established an ally network.
1 Further information about the role and responsibility of the Committee is set out in its Charter which is available on GPT’s website (www.gpt.com.au).
2 Total Return is defined as the sum of the change in Net Tangible Assets (NTA) plus distributions over the performance period, divided by the NTA at the
beginning of the performance period.
3 TSR represents an investor’s return, calculated as the percentage difference between an initial amount invested in stapled securities and the final value of
those stapled securities at the end of the relevant period, assuming distributions were reinvested.
4 During 2017, no remuneration recommendations in relation to Key Management Personnel, as defined by Division 1 of Part 1.2 of Chapter 1 of the Corporations
Act 2001, were made by these or other consultants.
80
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities GPT’s vision and financial goals linked to remuneration structures
GPT’s vision & financial goals
To be the most respected
property company in Australia
in the eyes of our Investors,
People, Customers
and Communities
Total Return > 8.5 per cent
Generate competitive Relative
Total Securityholder Return
Generate competitive
EPS growth
Base pay (Fixed)
STIC (variable)
LTI (variable)
Total remuneration components
• Base level of reward.
• Discretionary, at risk, and
• Set around Australian market
median using external
benchmark data (including
AON Hewitt and the Financial
Institutions Remuneration
Group (FIRG)).
• Reviewed based on
employee’s responsibilities,
experience, skill and
performance.
• External & internal
relativities considered.
with aggregate STIC funding
aligned to overall Group
financial outcomes.
• Set around market median
for target performance with
potential to achieve top
quartile for stretch outcomes.
• Determined by GPT and
individual performance
against a mix of balanced
scorecard measures which
include financial and non-
financial measures.
• Financial measures include
EPS growth, portfolio, fund
and/or property level metrics.
• Non-financial objectives focus
on execution of strategy,
delivery of key projects and
developments, and people and
culture objectives.
• Delivered in cash, or (for senior
executives), a combination of
cash and equity with deferred
vesting for 1 year.
• Discretionary, at risk, and
aligned to overall Group
financial outcomes.
• Set around market median
for target performance with
potential to achieve top
quartile for stretch outcomes.
• Vesting determined by GPT
performance against Total
Return and Relative TSR
financial performance.
• Relative TSR is measured
against ASX200 AREIT
Accumulation Index
(including GPT).
• Assessed over a 3 year
performance period, no
re-testing.
• No value derived unless GPT
meets or exceeds defined
performance measures.
• Delivered in GPT securities
to align executive and
securityholder interests.
Other employee ownership plans
(variable)
GESOP
• For STIC eligible individuals
who are ineligible for LTI.
• Equal to 10 per cent of their
STIC (less tax) delivered in
GPT securities, which must be
held for at least 1 year.
BBESOP
• For individuals ineligible for
STIC or LTI.
• GPT must achieve at least
Target outcome on annual
EPS growth.
• A grant of $1,000 worth of
GPT securities which must
be held until the earlier of
3 years from the allocation
date or cessation of
employment (or $1,000 cash
(less tax) at the election of
the individual).
Attract, retain, motivate and reward high calibre executives to
deliver superior performance by providing:
Align executive rewards to GPT’s performance and securityholder
interests by:
• Competitive rewards.
• Opportunity to achieve incentives beyond base pay based on
high performance.
• Assessing incentives against financial and non-financial
business measures that are aligned with GPT strategy.
• Delivering a meaningful component of executive remuneration in
the form of equity subject to performance hurdles being achieved.
81
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Employment Terms
1. Employment terms – Chief Executive Officer and Managing Director
Term
Contract duration
Conditions
Open ended.
Termination by Executive
6 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package
Bob Johnston’s 2017 remuneration arrangements were as follows:
• Fixed pay: $1,435,000.
• STIC: $0 to $1,793,750 (i.e. 0 per cent to 125 per cent of base pay) based on performance and paid in an
equal mix of cash and deferred GPT securities, with the securities component vesting one year after the
conclusion of the performance year.
• LTI: A grant of performance rights with the face value at time of grant of $2,152,500 (i.e. 150 per cent
of base pay) with vesting outcomes dependent on performance and continued service, and delivered in
restricted GPT securities.
Termination by Company
for cause
No notice requirement or termination benefits (other than accrued entitlements).
Termination by Company
(other)
12 months’ notice. Treatment of unvested STIC and LTI will be at the Board’s discretion under the terms of the
relevant plans and GPT policy.
Post-employment restraints
6 months non-compete, and 12 months non-solicitation of GPT employees.
External Directorships
Bob Johnston is a Director on the Boards of the Property Industry Foundation (PIF) and the Property Council of
Australia (PCA). He does not receive remuneration for these roles.
Clawback Policy
All GPT employees who participate in STIC and LTI are subject to remuneration being clawed back if the
recipient has acted fraudulently, dishonestly, or where there has been a material misstatement or omission in
the Group’s financial statements leading to the receipt of an unfair benefit.
2. Employment terms – Executive KMP
Term
Contract duration
Conditions
Open ended.
Termination by Executive
3 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package
Component
Fixed pay
STIC5
LTI
Mark Fookes
$820,000
$0 to $820,000
$0 to $820,000
Anastasia Clarke
$750,000
$0 to $750,000
$0 to $750,000
Termination by Company
for cause
Termination by Company
(other)
No notice requirement or termination benefits (other than accrued entitlements).
3 months’ notice. Severance payments may be made subject to GPT policy and capped at the three year average
of the executive’s annual base (fixed) pay. Treatment of unvested STIC and LTI will be at the Board’s discretion
under the terms of the relevant plans and GPT policy.
Post-employment restraints
12 months non-solicitation of GPT employees.
3. Compensation mix at maximum STIC and LTI outcomes
Executive KMP
Position
Bob Johnston
Chief Executive Officer and Managing Director
Anastasia Clarke Chief Financial Officer
Mark Fookes
Chief Operating Officer
Base pay
26.7%
33.4%
33.4%
STI
33.3%
33.3%
33.3%
LTI
40.0%
33.3%
33.3%
Fixed remuneration
Variable or “at risk” remuneration6
5 The STIC is paid in an equal mix of cash and deferred GPT securities, with the securities component vesting 1 year after the conclusion of the performance year.
6 The percentage of each component of total remuneration is calculated with reference to maximum or stretch potential outcomes as set out under Remuneration
Package in Tables 1 and 2 above.
82
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Group Financial Performance & Incentive Outcomes
1. Five year Group financial performance
Total Securityholder Return (TSR) (%)
Total Return (%)
NTA (per security) ($)
FFO (per security)7 (cents)
Security price at end of calendar year ($)
2017
6.6
15.2
5.04
30.8
5.11
2016
10.1
15.5
4.59
29.9
5.03
2015
15.4
11.5
4.17
28.3
4.78
2014
34.5
9.6
3.94
26.8
4.35
2013
4.1
8.5
3.79
25.7
3.40
2. Summary of CEO Objectives and Performance Outcomes
Financial
Strategy
Performance
Performance measure
Earnings per security
(EPS) and EPS growth
targets.
Strategy objectives
focussed on exploring
growth opportunities
for GPT group, as well
as development &
implementation of strategy
plans for each division.
Operational objectives
focused on driving
performance of the
investment portfolio and
on fund term reviews,
fund performance,
key milestones in the
development pipeline,
and other projects.
Reason chosen
EPS is a key
financial
measure of GPT’s
performance.
Developing,
communicating
and implementing
GPT’s strategy
will underpin
GPT’s medium
term activities.
Focus on delivery
of investment
and fund
performance,
conversion of
the development
pipeline and
operational
efficiency to
optimise GPT’s
performance.
People
People objectives centred
on increasing employee
engagement, driving our
diversity and inclusion
agenda, and leadership
team performance.
Maintaining a
high performing
executive team
and achieving
engagement and
diversity goals
is key to GPT’s
performance.
Weighting
70%
Performance outcomes
The Group delivered EPS of 30.8 cents and EPS growth of
3.0 per cent for 2017. This was consistent with budget but
below the stretch objective set by the Board.
15%
10%
5%
Strategy plans have been developed and updated for each
division, approved by the Board, and implementation of
plans is on-track.
Acquisition opportunities consistent with strategy
were targeted throughout the year but the Group was
unsuccessful in securing major new opportunities that
met the Group’s return expectations.
GWSCF performance was a 1 year equity IRR of
12.5 per cent, and fund terms were successfully renewed.
GWOF performance was a 1 year equity IRR of
13.4 per cent, and GPT acquired a further $23.2m worth
of units to take the Group’s position to 25 per cent.
The expansion of the Rouse Hill Town Centre was delayed
due to changing retail market conditions and authority
delays have hampered progress on the mixed-use
opportunities at Sydney Olympic Park and Camellia.
The Darling Park Stage 4 opportunity has been further
advanced. $88.5m of Logistics development projects were
completed at Seven Hills, Huntingwood and Wacol, with a
further $126.5m of projects underway.
The Sunshine Plaza redevelopment is expected to be
completed successfully in the 4th Quarter of 2018. The
Group has also successfully completed the repositioning
of Wollongong Central.
Employee engagement has been independently assessed
and the Group’s sustainable engagement score increased
3 per cent to 82 per cent.
Gender diversity remained a focus for 2017 with female
representation in senior leadership roles increasing to
41.4 per cent.
Aboriginal and Torres Strait Islander representation in the
permanent workforce has remained steady at 1 per cent.
Strategies have been implemented to ensure that GPT
is an inclusive organisation for all including our LGBTI,
Aboriginal and Torres Strait Islander employees.
The Leadership Team and senior cohort completed Hogan
Profiles as part of leadership development activities to
help drive business performance.
7 Represents Realised Operating Income (ROI) until 2013.
83
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 3. 2017 STIC Framework
The CEO objectives are cascaded (in full or in part) to KMP and all STIC participants where applicable. Performance
measures and weightings may vary according to areas of responsibility for each STIC participant. Group and segment
financial KPI’s and performance KPI’s in relation to occupancy, leasing, progress on developments, investment performance
and operational efficiency are included. Performance objectives are then measured to determine performance outcomes and
recommended STIC.
For the Group, EPS Growth performance hurdles are set for the year. For 2017, with the Group delivering an EPS Growth
outcome of 3.0 per cent, an amount of $13.8 million was derived for the STIC pool, representing 64 per cent of the aggregate
of STIC participants’ maximum STIC potential (2016: 69 per cent). The proportion of the available STIC pool for each
individual participant is then determined by the performance of the individual and their business unit/team against Group
and individual KPI’s.
Final allocation of the STIC pool for 2017 among the balance of the eligible employees8 is to occur post the issue of the 2017
Remuneration Report in March 2018. The following table shows the distribution of 2016 STIC outcomes as a percentage of
the individuals’ maximum STIC opportunity.
2016 STIC Received as a % of STIC potential
Percentage of STIC participants
0–50%
6.0%
50–60%
6.9%
60–70%
31.9%
70–80%
44.9%
80–90%
90–100%
10.3%
0.0%
4. 2017 STIC outcomes by Executive KMP9
Executive KMP
Position
Bob Johnston
Chief Executive Officer
and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Actual STIC
awarded
$1,142,000
$500,000
$540,000
Actual STIC
awarded as a % of
maximum STIC
% of maximum
STIC award
forfeited
Cash
component
Equity component
(# of GPT
securities)10
63.67%
66.67%
65.85%
36.33%
$571,000
119,958
33.33%
34.15%
$250,000
$270,000
52,521
56,723
8
i.e. excluding the KMP.
9 Excluding the impact of movements in the GPT security price on deferred STIC value received.
10 The number of deferred GPT securities granted are calculated by dividing 50 per cent of the Actual STIC awarded by GPT’s Q4 2016 VWAP of $4.76. The deferred
GPT securities will vest subject to service on 31 December 2018.
84
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Performance measure
Performance measure hurdle
Weighting
Results
5. Group performance measures for LTI Plans
LTI
performance
measurement
period
LTI
2015
2015-17
2016
2016-18
2017
2017-19
Relative TSR versus
comparator group
50 per cent of rights vest at 51st
percentile, up to 100 per cent
at the 75th percentile (pro rata
vesting in between)
Total Return
Relative TSR versus ASX200
AREIT Accumulation Index
(including GPT)
Total Return
Relative TSR versus ASX200
AREIT Accumulation Index
(including GPT)
Total Return
25 per cent of rights vest at 9 per
cent Total Return, up to 100 per
cent at 9.75 per cent Total Return
(pro-rata vesting in between)
10 per cent of rights vest at Index
performance, up to 100 per cent
at Index plus 10 per cent (pro rata
vesting in between)
0 per cent of rights vest at 8 per
cent Total Return, up to 100 per
cent at 9.5 per cent Total Return
(pro-rata vesting in between)
10 per cent of rights vest at Index
performance, up to 100 per cent
at Index plus 10 per cent (pro rata
vesting in between)
0 per cent of rights vest at 8.5 per
cent Total Return, up to 100 per
cent at 10.0 per cent Total Return
(pro-rata vesting in between)
Vesting % by
performance
measure
66.58%
50%
TSR of
44.34 per cent.
Relative TSR
of 5th out of 11
participants,
placing GPT at the
58.96th percentile.
50%
Compound TR of
14.05 per cent.
100%
50%
N/A
N/A
50%
N/A
N/A
50%
N/A
N/A
50%
N/A
N/A
6. 2015-2017 LTI outcomes by Executive KMP
Senior Executive
Position
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Performance
rights granted
Performance
rights vested
Performance
rights lapsed
430,476
104,981
194,747
358,543
87,439
162,205
71,933
17,542
32,542
7. LTI outcomes – fair value and maximum value recognised in future years11
Executive KMP
Bob Johnston
Chief Executive Officer
and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
LTI
Outcome
2017
2016
2017
2016
2017
2016
Grant date
22 May 2017
16 May 2016
21 February 2017
16 May 2016
21 February 2017
16 May 2016
Fair value per
performance right
Performance
rights granted as at
31 Dec 17
$2.66
$2.96
$2.66
$2.96
$2.66
$2.96
452,206
450,257
157,563
139,365
172,269
171,527
Vesting date
31 Dec 19
31 Dec 18
31 Dec 19
31 Dec 18
31 Dec 19
31 Dec 18
Maximum value to
be recognised in
future years
$955,709
$903,120
$293,563
$314,439
$320,962
$387,004
11 For the avoidance of doubt, the GPT incentive plans (i.e. STIC and LTI) use face value grants of performance rights based on the volume weighted average security
price (VWAP) of GPT securities for specified periods; reference to fair value per performance right is included in this table to comply with accounting standards.
85
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 8. Reported remuneration – Executive KMP – Actual Amounts Received12
Fixed pay
Variable or “at risk”13
Executive KMP
Bob Johnston
Chief Executive Officer
and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Total
Year
Base pay
Superannuation
Other14
2017
$1,415,168
$19,832
$3,299
2016
$1,300,883
$19,462
$5,677
2017
2016
2017
2016
2017
2016
$730,168
$630,538
$800,168
$780,538
$2,945,504
$2,711,959
$19,832
$2,480
$19,462
$2,334
$19,832
$4,326
$19,462
$6,999
$59,496
$10,105
$58,386
$15,010
STIC
$1,195,801
$1,143,136
$523,556
$481,107
$565,442
$571,233
$2,284,799
$2,195,476
LTI
$1,867,471
–
$455,426
$517,555
$844,845
$979,499
$3,167,742
$1,497,054
Total
$4,501,571
$2,469,158
$1,731,462
$1,650,996
$2,234,613
$2,357,731
$8,467,646
$6,477,885
9. Reported remuneration – Executive KMP – AIFRS Accounting15
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Total
Fixed pay
Variable or “at risk”
Year
Base pay
Superannuation
Other
STIC
(cash plus
accrual)16
LTI award
accrual17
Grant or
vesting of
non STI or LTI
performance
rights18
Total
2017
$1,376,680
$19,832
$3,299
$1,219,543
$1,166,796
–
$3,786,150
2016
$1,390,757
$19,462
$5,677
$936,837
$694,626
$64,319
$3,111,678
2017
2016
2017
2016
2017
2016
$775,348
$633,714
$840,325
$784,411
$2,992,353
$2,808,882
$19,832
$2,480
$569,961
$382,324
$19,462
$2,334
$495,523
$290,933
$19,832
$4,326
$669,971
$515,208
$19,462
$6,999
$720,099
$481,598
$59,496
$10,105
$2,459,475
$2,064,328
–
–
–
–
–
$1,749,945
$1,441,966
$2,049,662
$2,012,569
$7,585,757
$58,386
$15,010
$2,152,459
$1,467,157
$64,319
$6,566,213
10. GPT security ownership – Executive KMP as at 31 December 2017
GPT
Holdings
(start of
period)19
330,695
486,402
1,008,431
Executive KMP
Bob Johnston
Chief Executive Officer
and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Sign on
performance
rights
converting
in 2017
Employee Security Schemes
(ESS)
2017
DSTIC
2015-
17 LTI
TOTAL ESS
for 2017
Purchase
/(Sales)
during
period20
GPT
Holdings
(end of
period)21
Gross
Value
of GPT
Holdings22
MSHR
Guideline23
12,569
119,958
358,543
478,501
–
821,765
$4,280,163
$2,152,500
–
–
52,521
87,439
139,960
(163,777)
462,585
$2,409,374
$750,000
56,723
162,205
218,928
(109,091)
1,118,268
$5,824,499
$820,000
12 This table discloses the cash and other benefit amounts actually received by GPT’s executive KMP, as distinct from the accounting expense. As a result, it does
not align to Australian Accounting Standards.
13 Gross dollar values for the equity components have been calculated by multiplying the number of securities by GPT’s fourth quarter VWAP for the applicable
year; 2017: $5.2085 (2016: $4.76).
14 Other may include death & total/permanent disability insurance premiums, service awards, GPT superannuation plan administration fees, and/or other benefits.
15 This table provides a breakdown of remuneration for executive KMP in accordance with statutory requirements and Australian Accounting Standards.
16 The accrual accounting valuation of the deferred securities in Mr. Johnston’s 2015 STIC are included in the 2016 number as they were approved for issue at the
2016 AGM.
17 This column records the amount of the fair value of performance rights under the various LTI plans expensed in the relevant financial years, and does not
represent actual LTI awards made to executives or the face value grant method.
18 Grant or vesting of one-off non STI or LTI performance rights includes an accounting valuation of the sign on package for Mr. Johnston.
19 GPT Holdings (start of period) may include GPT securities obtained as sign on grants (Mr Johnston only), DSTIC up to and including 2016, LTI plans up to and
including the 2014-16 LTI plan, and private holdings.
20 Movement in GPT security holdings as a result of the sale of vested, unrestricted security holdings and/or the sale or purchase of additional private holdings
on the individuals own account during the 2017 calendar year.
21 GPT Holdings (end of period) is the sum of GPT Holdings (start of the period) plus DSTIC and LTI securities obtained under ESS and adjusted for any purchases
or sales during the period.
22 The GPT Holdings (end of period) multiplied by GPT’s fourth quarter 2017 VWAP of $5.2085 to derive a dollar value.
23 GPT’s MSHR guideline requires the CEO to acquire and maintain a holding equal to 150 per cent of base salary. For Leadership Team members the holding
requirement is equal to 100 per cent of base salary. Individuals have four years from commencement of employment to achieve the MSHR before it is assessed
for the first time.
86
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 11. GPT performance rights – Executive KMP
Executive KMP
Position
Bob Johnston
Chief Executive Officer and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Remuneration – Non-Executive Directors
Performance rights
Performance rights that lapsed
in 201724 (# of rights)
Performance rights still on foot
at 31/12/1725 (# of rights)
140,394
43,802
61,953
902,463
296,928
343,796
What are the key
elements of the Non-
Executive Director
Remuneration Policy?
• The Board determines the remuneration structure for Non-Executive Directors based on recommendations
from the Committee.
• Non-Executive Directors are paid one fee for participation as a Director in all GPT related companies (principally
GPT RE Limited, the Responsible Entity of General Property Trust and GPT Management Holdings Limited).
• Non-Executive Director remuneration is composed of three main elements:
– Main Board fees
– Committee fees
– Superannuation contributions at the statutory superannuation guarantee contribution rate.
• Non-Executive Directors do not participate in any short or long term incentive arrangements and are not
entitled to any retirement benefits other than compulsory superannuation.
• Non-Executive Director remuneration is set by reference to comparable entities listed on the ASX (based on
GPT’s industry sector and market capitalisation).
• External independent advice on remuneration levels for Non-Executive Directors is sought on an annual
basis. In the event that a review is conducted, the new Board and Committee fees are effective from the 1st of
January in the applicable year and advised in the ensuing Remuneration Report.
• Fees (including superannuation) paid to Non-Executive Directors are subject to an aggregate limit of
$1,800,000 per annum, which was approved by GPT securityholders at the Annual General Meeting on
5 May 2015. As an executive director, Mr Johnston does not receive fees from this pool as he is remunerated
as one of GPT’s senior executives.
1. Board and committee fees26, 27
Chairman
Members
Year
2017
2016
2017
2016
Board Base Fee
Audit Committee
Sustainability and
Risk Committee
Nomination and
Remuneration Committee
$380,000
$362,500
$148,000
$145,000
$36,000
$36,000
$18,000
$18,000
$30,000
$30,000
$15,000
$15,000
$30,000
$30,000
$15,000
$15,000
24 The sum of performance rights that were awarded to a participant in the 2015 LTI that did not vest at the end of the 2015-2017 performance period, and as a result,
lapsed and/or performance rights granted under the 2017 DSTIC that also lapsed.
25 The total of unvested performance rights currently on foot excluding any GPT securities or performance rights that may have lapsed up to 31 December 2017. This
represents the current maximum number of additional GPT securities to which the individual may become entitled subject to satisfying the applicable performance
measures in the 2016-18 and 2017-19 LTI plans on foot; as such, these performance rights represent the incentive opportunity over multiple future years, are subject
to performance and hence “at risk”, and as a result may never vest.
26 ‘Chairman’ used in this sense may refer to the chairperson of the board or a particular committee.
27 In addition to the fees noted in the table, all non-executive directors receive reimbursement for reasonable travel, accommodation and other expenses incurred while
undertaking GPT business.
87
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
2. Reported remuneration – Non-Executive Directors – AIFRS accounting28, 29
Non-Executive Director – Current
Rob Ferguson
Chairman
Brendan Crotty
Eileen Doyle
Swe Guan Lim
Michelle Somerville
Gene Tilbrook
Non-Executive Director – Former
Anne McDonald31
Total
Year
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Fixed pay
Salary & fees
Superannuation
Other30
$380,000
$362,500
$181,000
$181,333
$203,500
$190,000
$181,000
$178,000
$192,750
$174,723
$178,000
$175,000
–
$62,422
$1,316,250
$1,323,978
$19,832
$19,462
$17,195
$17,227
$19,333
$18,050
$17,195
$16,910
$18,311
$16,599
$16,910
$16,625
–
$5,930
$108,776
$110,803
–
–
–
–
–
–
$287
$615
–
–
$380
$767
–
$641
$667
$2,023
Total
$399,832
$381,962
$198,195
$198,560
$222,833
$208,050
$198,482
$195,525
$211,061
$191,322
$195,290
$192,392
–
$68,993
$1,425,693
$1,436,804
3. Non-Executive Director – GPT securityholdings
Non-Executive Director
Balance 31/12/16
Purchase/(Sale)
Balance 31/12/17
Private holdings (# of securities)
Minimum securityholding requirement (MSHR)
MSHR guideline33
Gross value32
Rob Ferguson
Brendan Crotty
Eileen Doyle
Swe Guan Lim
Michelle Somerville
Gene Tilbrook
207,628
67,092
45,462
–
2,912
48,546
–
–
–
15,800
13,245
–
207,628
67,092
45,462
15,800
16,157
48,546
$1,081,430
$349,449
$236,789
$82,294
$84,154
$252,852
$380,000
$148,000
$148,000
$148,000
$148,000
$148,000
28 This table provides a breakdown of remuneration for non-executive directors in accordance with statutory requirements and Australian accounting standards.
29 No termination benefits were paid during the financial year.
30 Other may include death & total/permanent disability insurance premiums and/or GPT superannuation plan administration fees.
31 Ms. McDonald retired from the GPT Board on 4 May 2016.
32 Non-executive directors holdings multiplied by GPT’s fourth quarter 2017 VWAP of $5.2085 to derive a dollar value.
33 The MSHR for non-executive directors is equal to 100 per cent of base fees. Individuals have four years from commencement of employment to achieve the
MSHR before it is assessed for the first time.
The Directors’ Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors of the
GPT Group.
Bob Johnston
Chief Executive Officer and Managing Director
Rob Ferguson
Chairman
Sydney
13 February 2018
88
Directors’ Report – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
89
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Financial Statements
Consolidated Statement of Comprehensive Income
Year ended 31 December 2017
Note
31 Dec 17
$’000
31 Dec 16
$’000
Revenue
Fund management fees
Property management fees
Development management fees
Development revenue
Other revenue
Management costs recharged
Other income
Share of after tax profit of equity accounted investments
Dividend income
Interest revenue
Reversal of prior period impairment expense
Derecognition of available for sale financial asset
Profit on the sale of other assets
Proceeds from sale of inventory
Total revenue and other income
Expenses
Remuneration expenses
Cost of sale of inventory
Property expenses and outgoings
Development expenses
Repairs and maintenance
Professional fees
Depreciation
Amortisation
Revaluation of financial arrangements
Impairment expense
Finance costs
Other expenses
Total expenses
Profit before income tax
Income tax expense
(Loss)/profit after income tax for continuing operations
Loss from discontinued operations
Net (loss)/profit for the year
Other comprehensive income from discontinued operations
Items that may be reclassified to profit and loss
Net foreign exchange translation adjustments
Revaluation of available for sale financial asset
Total comprehensive income for the year
Net (loss)/profit attributable to:
– Members of the Company
– Non-controlling interest
Total comprehensive income attributable to:
– Members of the Company
– Non-controlling interest
Basic earnings per share attributable to the ordinary equity holders of the Company
Basic earnings per share (cents per share) from continuing operations
Basic earnings per share (cents per share) – Total
77,206
38,863
24,601
7,438
331
32,334
180,773
6,237
–
572
525
10,699
4
10,358
28,395
209,168
123,124
8,976
8,879
8,237
4,597
5,098
1,867
6,041
20,164
5,859
2,332
8,141
203,315
5,853
6,406
(553)
(13,669)
(14,222)
30
(7,125)
(21,317)
(18,776)
4,554
(25,871)
4,554
(0.28)
(1.04)
99,044
41,227
15,144
54,088
1,442
33,009
243,954
1,532
30,437
1,889
411
–
12,462
12,532
59,263
303,217
120,972
10,822
8,550
2,156
3,885
7,800
2,112
5,401
52,619
5,952
3,277
8,151
231,697
71,520
22,649
48,871
(29,050)
19,821
907
458
21,186
15,399
4,422
16,764
4,422
2.47
0.85
2(c)
10(a)
24(b)
11(b)
11(b)
12(a)
12(a)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
90
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Consolidated Statement of Financial Position
As at 31 December 2017
Note
31 Dec 17
$’000
31 Dec 16
$’000
Assets
Current assets
Cash and cash equivalents
Loans and receivables
Inventories
Prepayments
Available for sale financial asset
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Inventories
Equity accounted investments
Loans and receivables
Deferred tax assets
Deferred acquisition costs
Other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Payables
Current tax liability
Provisions
Borrowings
Deferred revenue
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity attributable to Company members
Non-controlling interests
Total equity
3
5
4
6
5
2
3
10(c)
7
8
10(b)
9
14
14
9
11(a)
11(b)
11(c)
20,033
100,557
11,808
1,317
–
17,842
99,055
7,304
1,086
9,296
133,715
134,583
30,901
9,910
177,410
21,988
–
17,763
1,198
7,785
266,955
400,670
62,109
8,559
38,715
19,921
–
129,304
99,146
10,250
6,075
115,471
244,775
155,895
35,256
14,900
128,607
15,752
37,033
7,550
1,852
8,901
249,851
384,434
49,449
–
28,690
18,812
7,585
104,536
82,426
9,217
6,437
98,080
202,616
181,818
325,703
37,803
325,512
44,683
(220,275)
(201,041)
143,231
12,664
155,895
169,154
12,664
181,818
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
91
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Consolidated Statement of Changes in Equity
Year ended 31 December 2017
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T
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Consolidated Statement of Cash Flows
Year ended 31 December 2017
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)
Payments in the course of operations (inclusive of GST)
Payments for inventories
Proceeds from sale of inventories
Receipts from development activities
Payments for development activities
Income taxes paid
Dividend received from available for sale financial asset
Interest received
Finance costs paid
Net cash inflows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Proceeds from the sale of property, plant and equipment
Proceeds from the sale of other assets
Proceeds on disposal of equity accounted investment
Capital return from available for sale financial asset
Net cash inflows from investing activities
Cash flows from financing activities
Loan to related parties
Proceeds from repayment of related party loans
Repayment of related party borrowings
Proceeds from related party borrowings
Proceeds from borrowings
Repayments of borrowings
Purchase of securities for the employee incentive scheme
Net cash outflows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
31 Dec 17
$’000
31 Dec 16
$’000
149,423
223,472
16
(155,245)
(51,951)
10,358
41,686
(3,904)
(6,442)
30,437
572
(991)
13,943
(1,119)
(4,694)
1,279
–
–
10,699
6,165
(149,121)
(48,298)
12,532
16,621
–
–
–
1,892
(1,493)
55,605
(2,594)
(4,786)
–
11,177
1,251
–
5,048
–
–
(29,486)
18,697
(35,181)
(100,677)
16,256
15,705
(14,681)
(16)
40,995
7,177
(8,707)
(1,190)
(17,917)
(73,191)
2,191
17,842
20,033
(12,538)
30,380
17,842
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
93
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Notes to the Financial Statements
Year ended 31 December 2017
These are the consolidated financial statements of GPT
Management Holdings Limited and its controlled entities
(the Consolidated Entity).
The notes to these financial statements have been
organised into sections to help users find and understand
the information they need to know. Additional information
has also been provided where it is helpful to understand
the Consolidated Entity’s performance.
The notes to the financial statements are organised into the
following sections:
Note 1 – Result for the year: focuses on results and
performance of the Consolidated Entity.
Notes 2 to 10 – Operating assets and liabilities: provides
information on the assets and liabilities used to generate
the Consolidated Entity’s trading performance.
Notes 11 to 15 – Capital structure: outlines how the
Consolidated Entity manages its capital structure and
various financial risks.
Notes 16 to 26 – Other disclosure items: provides
information on other items that must be disclosed to
comply with Australian Accounting Standards and other
regulatory pronouncements.
Key judgements, estimates and assumptions
In applying the Consolidated Entity’s accounting policies,
management has made a number of judgements,
estimates and assumptions regarding future events.
The following judgements and estimates have the potential
to have a material impact on the financial statements:
Area of judgements
and estimates
Assumptions underlying
Note
Loan receivables
Recoverability
Management rights with
indefinite life
Impairment trigger and
recoverable amounts
IT development and software Impairment trigger and
Inventories
recoverable amounts
Lower of cost and net
realisable value
Deferred tax assets
Recoverability
Security based payments
Fair value
Fair value
3
4
4
5
10
19
23
Assessment of control
versus disclosure guidance
25(b)
Investment in financial
assets
Investment in equity
accounted investments
94
Result for the year
1. Segment information
The chief operating decision makers monitor the
performance of the business in a manner consistent with
that of the financial report. Refer to the Consolidated
Statement of Comprehensive Income for the segment
financial performance and the Consolidated Statement of
Financial Position for the total assets and liabilities.
Revenue
Rental revenue from investment properties is recognised
on a straightline basis over the lease term. An asset is also
recognised as a component of investment properties relating
to fixed increases in operating lease rentals in future periods.
When the Company provides lease incentives to tenants, any
costs are recognised on a straightline basis over the lease
term. Contingent rental income is recognised as revenue in
the period in which it is earned.
Property, development and fund management fee revenue
is recognised on an accruals basis, in accordance with the
terms of the relevant contracts.
Development revenue is recognised as and when the
Company is entitled to the benefits.
Revenue from dividends and distributions is recognised
when they are declared.
Interest income is recognised on an accruals basis using
the effective interest method.
Profit or loss on disposal of an asset is recognised as
the difference between the carrying amount and the net
proceeds from disposal. Where revenue is obtained from
the sale of properties or assets, it is recognised when the
significant risks and rewards have transferred to the buyer.
Expenses
Property expenses and outgoings which include rates,
taxes and other property outgoings, are recognised on an
accruals basis.
Finance costs
Finance costs include interest, amortisation of discounts
or premiums relating to borrowings and amortisation
of ancillary costs incurred in connection with the
arrangement of borrowings. Finance costs are expensed as
incurred unless they relate to a qualifying asset.
A qualifying asset is an asset under development which
generally takes a substantial period of time to bring to
its intended use or sale. Finance costs incurred for the
acquisition and construction of a qualifying asset are
capitalised to the cost of the asset for the period of time
that is required to complete the asset. Where funds are
borrowed specifically for a development project, finance
costs associated with the development facility are capitalised.
Where funds are used from group borrowings, finance costs
are capitalised using an appropriate capitalisation rate.
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Operating assets and liabilities
2. Equity accounted investments
Investments in joint ventures and associates
Total equity accounted investments
(a) Details of equity accounted investments
Name
(i) Joint ventures
DPT Operator Pty Limited
Lendlease GPT (Rouse Hill) Pty Limited1,2
Chullora Trust 13
Erskine Park Trust
Total investment in joint ventures
(ii) Associates
GPT Funds Management Limited
Total investment in associates
Note
(a)
31 Dec 17
$’000
31 Dec 16
$’000
21,988
21,988
15,752
15,752
Ownership Interest
Principal Activity
2017
%
2016
%
31 Dec 17
$’000
31 Dec 16
$’000
Managing property
Property development
Property development
Property development
50.00
50.00
–
50.00
50.00
50.00
50.00
50.00
89
11,896
–
3
88
5,660
2
2
Funds management
100.00
100.00
11,988
5,752
10,000
10,000
10,000
10,000
1 The Consolidated Entity has a 50 per cent interest in Lendlease GPT (Rouse Hill) Pty Limited, a joint venture developing residential and commercial land at
Rouse Hill, in partnership with Urban Growth and the NSW Department of Planning.
2 The Consolidated Entity’s interest is held through a subsidiary that is 52 per cent owned by GMH and 48 per cent owned by GPT Trust.
3 Chullora Trust 1 was wound up on 13 December 2017.
(b) Summarised financial information for joint ventures and associates
The information disclosed reflects the amounts presented in the financial results of the relevant joint ventures and associates and
not the Consolidated Entity’s share of those amounts. They have been amended to reflect adjustments made by the entity when
using the equity method, including fair value adjustments and modifications for differences in accounting policy.
Cash and cash equivalents
Other assets
Property investments and loans
Total assets
Liabilities
Total liabilities
Net assets
Consolidated entity’s share
31 Dec 17
$’000
31 Dec 16
$’000
25,966
18,635
17,408
62,009
28,180
28,180
33,829
21,988
26,538
19,540
14,400
60,478
38,974
38,974
21,504
15,752
95
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(c) Share of joint ventures and associates’ net profits
Revenue
Expenses
Profit before income tax expense
Income tax expense
Negative net assets not recognised
Total net profit
Share of net profits of joint ventures and associated interests
(d) Share of joint ventures and associates commitments and contingent liabilities
Capital expenditure commitments
Total joint venture commitments
31 Dec 17
$’000
12,478
(3)
12,475
(1)
12,474
–
12,474
6,237
31 Dec 16
$’000
23,129
(20,068)
3,061
(1)
3,060
4
3,064
1,532
31 Dec 17
$’000
31 Dec 16
$’000
168
168
1,084
1,084
The capital expenditure commitments in the Consolidated Entity’s joint ventures at 31 December 2017 relate to Lendlease
GPT (Rouse Hill) Pty Limited (2016: Lendlease GPT (Rouse Hill) Pty Limited).
(e) Reconciliation of the carrying amount of investments in joint ventures and associates
Carrying amount at the beginning of the year
Reversal of negative net assets
Share of joint venture entities’ net operating profit
Distributions received/receivable from joint ventures
Carrying amount at the end of the year
31 Dec 17
$’000
31 Dec 16
$’000
15,752
14,274
–
6,237
(1)
21,988
(2)
1,532
(52)
15,752
96
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Current loans and
receivables
Non-current loans and
receivables
3. Loans and receivables
Current assets
Trade receivables1
Less: impairment of trade receivables
Dividends receivable from other investments
Other debtors
Related party receivables2
Loans to related parties
Total current loans and receivables
Non-current assets
Loans to related parties
Total non-current loans and receivables
31 Dec 17
$’000
31 Dec 16
$’000
23,950
(12)
23,938
–
2,104
37,483
37,032
20,866
(1)
20,865
30,437
3,297
44,456
–
100,557
99,055
–
–
37,033
37,033
1 The trade receivables balance includes amounts receivable from GWOF and GWSCF. See note 20 for more details on related party transactions.
2 The related party receivables are from GPT Trust and have been agreed on commercial terms and conditions.
The table below shows the ageing analysis of the Consolidated Entity’s loans and receivables.
31 Dec 17
31 Dec 16
Not Due
$’000
0-30
days
$’000
31-60
days
$’000
61-90
days
$’000
90+
days
$’000
Total
$’000
Not
Due
$’000
0-30
days
$’000
31-60
days
$’000
61-90
days
$’000
90+
days
$’000
Total
$’000
37,032
59,767
504
– 3,254 100,557
– 96,137
584
32
2,302
99,055
Total loans and receivables
37,032
59,767
–
–
–
504
–
–
– 37,033
–
–
–
–
37,033
– 3,254 100,557 37,033 96,137
584
32
2,302
136,088
Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest
rate method less any allowance for impairment. All loans and receivables with maturities greater than 12 months after the
balance date are classified as non-current assets.
Recoverability of trade receivables
Recoverability of trade receivables is assessed on an ongoing basis. Impairment is recognised in the Consolidated Statement
of Comprehensive Income when there is objective evidence that the Consolidated Entity will not be able to collect the debts.
Financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial re-organisation and default
or delinquency in payments are considered objective evidence of impairment. See note 15(e) for more information on
management of credit risk in relation to trade receivables.
The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if
the effect of discounting is immaterial. Debts that are known to be uncollectable are written off when identified.
Recoverability of loan receivables
At the end of each reporting period, the Consolidated Entity assesses whether there is objective evidence that a loan
receivable is impaired. The amount of the impairment is measured as the difference between the loan receivable’s carrying
amount and the present value of estimated future cash flows discounted at the loan receivable’s original effective interest
rate. The carrying amount of the loan receivable is reduced and the amount of the loss is recognised in the Consolidated
Statement of Comprehensive Income. In a subsequent period, if the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously
recognised impairment loss is recognised in the Consolidated Statement of Comprehensive Income.
97
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
4. Intangible assets
Cost
At 1 January 2016
Additions
Transfers
At 31 December 2016
Additions
Transfers
Disposals
At 31 December 2017
Accumulated amortisation and impairment
At 1 January 2016
Amortisation
At 31 December 2016
Amortisation
Disposals
Impairment
At 31 December 2017
Carrying amounts
At 31 December 2016
At 31 December 2017
Management rights
Management
rights
$’000
IT development
and software
$’000
55,817
8
–
55,825
–
–
–
55,825
(44,751)
(343)
(45,094)
(326)
–
–
62,050
4,918
189
67,157
4,702
2,843
(11,467)
63,235
(37,574)
(5,058)
(42,632)
(5,715)
11,467
(5,859)
Total
$’000
117,867
4,926
189
122,982
4,702
2,843
(11,467)
119,060
(82,325)
(5,401)
(87,726)
(6,041)
11,467
(5,859)
(45,420)
(42,739)
(88,159)
10,731
10,405
24,525
20,496
35,256
30,901
Management rights include property management and development management rights. Rights are initially measured at
cost and rights with a definite life are subsequently amortised over their useful life, which ranges from 5 to 10 years.
For the management rights of Highpoint Shopping Centre, management considers the useful life as indefinite as there is no
fixed term included in the management agreement. Therefore, the Consolidated Entity tests for impairment at balance date.
Assets are impaired if the carrying value exceeds their recoverable amount. The recoverable amount is determined using a
multiples approach. A range of multiples from 10-15x have been used in the calculation.
IT development and software
Costs incurred in developing systems and acquiring software and licenses that will contribute future financial benefits are
capitalised. These include external direct costs of materials and services and direct payroll and payroll related costs of
employees’ time spent on the project. Amortisation is calculated on a straightline basis over the length of time over which
the benefits are expected to be received, generally ranging from 3 to 10 years.
IT development and software are assessed for impairment at each reporting date by evaluating if any impairment triggers
exist. Where impairment triggers exist, management calculate the recoverable amount. The asset will be impaired if the
carrying amount exceeds the recoverable amount. Critical judgements are made by management in setting appropriate
impairment triggers and assumptions used to determine the recoverable amount.
98
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
5. Inventories
Development properties
Current inventories
Development properties
Non-current inventories
Total inventories
31 Dec 17
$’000
31 Dec 16
$’000
11,808
11,808
177,410
177,410
189,218
7,304
7,304
128,607
128,607
135,911
Development properties held as inventory to be sold are stated at the lower of cost and net realisable value.
Cost
Cost includes the cost of acquisition, development, finance costs and all other costs directly related to specific projects
including an allocation of direct overhead expenses. Post completion of the development, finance costs and other holding
charges are expensed as incurred.
Net realisable value (NRV)
The NRV is the estimated selling price in the ordinary course of business less estimated costs to sell. At each reporting date,
management reviews these estimates by taking into consideration:
• the most reliable evidence; and
• any events which confirm conditions existing at the year end and cause any fluctuations of selling price and costs to sell.
The amount of any inventories write down is recognised as an impairment expense in the Consolidated Statement of
Comprehensive Income. An impairment expense reversal of $357,000 has been recognised for the year ended 31 December 2017
(2016: Impairment expense of $5,952,000).
99
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
6. Property, plant and equipment
Computers
At cost
Less: accumulated depreciation and impairment
Total computers
Office, fixtures and fittings
At cost
Less: accumulated depreciation and impairment
Total office, fixtures and fittings
Total property, plant and equipment
31 Dec 17
$’000
31 Dec 16
$’000
15,092
(11,077)
4,015
12,683
(6,788)
5,895
9,910
15,069
(10,062)
5,007
15,828
(5,935)
9,893
14,900
Reconciliations of the carrying amount of property, plant and equipment at the beginning and end of the financial year are
set out below:
At 1 January 2016
Opening carrying value
Additions
Disposals
Transfers
Depreciation
At 31 December 2016
At 1 January 2017
Opening carrying value
Additions
Disposals
Transfers
Depreciation
At 31 December 2017
Computers
$’000
Office fixtures &
fittings
$’000
4,827
1,605
–
(189)
(1,236)
5,007
5,007
980
(1,341)
383
(1,014)
4,015
9,308
1,463
–
–
(878)
9,893
9,893
81
–
(3,226)
(853)
5,895
Total
$’000
14,135
3,068
–
(189)
(2,114)
14,900
14,900
1,061
(1,341)
(2,843)
(1,867)
9,910
The value of property, plant and equipment is measured as the cost of the asset less depreciation and impairment. The cost of the
asset includes acquisition costs and any costs directly attributable to bring the asset to the location and condition necessary for it
to be capable of operating in the manner intended by management. Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to the Consolidated Statement of Comprehensive Income during the financial period in which they are incurred.
Depreciation
Items of property, plant and equipment are depreciated on a straightline basis over their useful lives. The estimated useful
life is between 3 and 40 years.
Impairment
The Consolidated Entity tests property, plant and equipment for impairment where there is an indicator that the asset
may be impaired. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Disposals
Gains and losses on disposals are determined by comparing proceeds from disposals with the carrying amount of the property,
plant and equipment and are included in the Consolidated Statement of Comprehensive Income in the year of disposal.
100
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
7. Other assets
Lease incentive asset
Investment in financial asset
Total other assets
8. Payables
Trade payables1
Accruals
Other payables
Total payables
31 Dec 17
$’000
31 Dec 16
$’000
3,493
4,292
7,785
4,083
4,818
8,901
31 Dec 17
$’000
31 Dec 16
$’000
27,813
27,689
6,607
62,109
14,041
28,029
7,379
49,449
1
Includes a $10,461,283 distribution payable (2016: $5,907,633) to General Property Trust (Trust) for the Trust’s 48 per cent ownership of GPT Residential (Rouse
Hill) Trust of which the Consolidated Entity has control.
Trade payables and accruals represent liabilities for goods and services provided to the Consolidated Entity prior to the end
of the financial year which are unpaid. They are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method.
9. Provisions
Current provisions
Employee benefits
Other
Total current provisions
Non-current provisions
Employee benefits
Other
Total non-current provisions
As at 1 January 2016
Arising during the year
Utilised during the year
As at 31 December 2016
As at 1 January 2017
Arising during the year
Utilised during the year
As at 31 December 2017
31 Dec 17
$’000
31 Dec 16
$’000
29,159
9,556
38,715
9,553
697
10,250
Other
$’000
3,628
772
(716)
3,684
3,684
7,143
(574)
Employee
benefits
$’000
31,395
30,826
(27,998)
34,223
34,223
29,337
(24,848)
38,712
10,253
25,608
3,082
28,690
8,615
602
9,217
Total
$’000
35,023
31,598
(28,714)
37,907
37,907
36,480
(25,422)
48,965
Provisions are recognised when:
• the Consolidated Entity has a present obligation (legal or constructive) as a result of a past event;
•
it is probable that resources will be expended to settle the obligation; and
• a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the obligation.
101
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Provision for employee benefits
The provision for employee benefits represents annual leave, long service leave and parental leave entitlements accrued for
employees. The employee benefit liability expected to be settled within twelve months after the end of the reporting period
is recognised in current liabilities. The non-current provision relates to entitlements, including long service leave, which
are due to be payable after more than twelve months from the balance sheet date. It is measured as the present value of
expected future payments for the service provided by employees up to the reporting date. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at balance date on high quality corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows. Employee benefit on-costs are recognised together with
the employee benefits and included in employee benefit liabilities.
10. Taxation
(a) Income tax expense
Current income tax expense
Deferred income tax (credit)/expense
Income tax expense in the Statement of Comprehensive Income
Income tax expense/(credit) attributable to:
Profit from continuing operations
Loss from discontinued operations
Aggregate income tax expense
(b) Reconciliation of income tax (credit)/expense to prima facie tax payable
Profit from continuing operations before income tax expense
Loss from discontinued operations before income tax expense
Net (loss)/profit before income tax expense
Prima facie income tax (credit)/expense at 30% tax rate (2016: 30%)
Tax effect of amounts not deductible/assessable in calculating income tax expense:
Prior year adjustments
Previously unrecognised tax losses
Revaluation and amortisation
Non assessable income:
Derecognition of available for sale financial asset
Other non-assessable income
Other tax adjustments:
Release of gain from available for sale reserve
Other income
Permanent differences arising from non-deductible amounts
Income tax expense
Add/(less) amounts to reconcile to current tax liability:
Temporary differences:
Employee benefits
Provisions and accruals
Dividends received/(receivable)
Other deferred tax asset charged to income
Movement in reserves
Opening balance:
Tax losses transferred from deferred tax asset
Tax losses and adjustments:
Tax losses recognised
Prior tax losses recognised
Prior year adjustments
Tax payments made to tax authorities
Current tax liability
102
31 Dec 17
$’000
31 Dec 16
$’000
17,012
(10,606)
6,406
6,406
–
6,406
–
22,648
22,648
22,649
(1)
22,648
31 Dec 17
$’000
31 Dec 16
$’000
5,853
(13,669)
(7,816)
71,520
(29,051)
42,469
(2,345)
12,741
175
(421)
10,028
(3,210)
(2,865)
2,592
1,480
972
6,406
713
(236)
9,131
2,616
(1,618)
484
(13,186)
26,235
–
(3,985)
–
–
359
22,648
766
309
(9,131)
1,167
(39)
(2,011)
–
–
–
–
(6,442)
8,559
13,186
(28,424)
(482)
–
–
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(c) Deferred tax assets
Employee credits
Provisions and accruals
Other
Tax losses recognised
Net deferred tax asset
Movement in temporary differences during the year
Opening balance at the beginning of the year
Credited to the Consolidated Statement of Comprehensive Income
Movement in reserves
Utilisation of tax losses
Closing balance at the end of the year
(d) Effective tax rate
Adoption of Voluntary Tax Transparency Code
31 Dec 17
$’000
15,449
2,947
(633)
–
17,763
7,550
10,606
1,618
(2,011)
17,763
31 Dec 16
$’000
14,736
3,183
(12,380)
2,011
7,550
30,240
6,335
(39)
(28,986)
7,550
The Board of Taxation has released a voluntary Tax Transparency Code (TTC). The TTC sets out a recommended set of principles
and minimum standards regarding the disclosure of tax information for businesses. The Consolidated Entity is committed to the
TTC. The non-IFRS income tax disclosures below and in note 10(b) include the recommended additional disclosures.
The Australian Accounting Standards Board have issued a Draft Appendix to the TTC outlining the method to calculate the
effective tax rate as shown in the table below, using:
• accounting profit before tax adjusted to exclude transactions which are not reflected in the calculation of income tax
expense; and
• tax expense adjusted to exclude carry forward tax losses that have been recognised and prior year under/overstatements.
Net (loss)/profit for the year excluding income tax expense
Add: non-deductible revaluation items
Less: equity accounted profits from joint ventures
Profit used to calculate effective tax rate
Income tax expense
Add: carry forward tax losses recognised
Less: prior year under/overstatements
Income tax expense used to calculate effective tax rate
Effective tax rate
Income tax expense
31 Dec 17
$’000
31 Dec 16
$’000
(7,816)
33,657
(6,237)
19,604
6,406
421
(175)
6,652
34%
42,469
81,772
(1,478)
122,763
22,648
13,186
(484)
35,350
29%
Income tax expense for the financial year is the tax payable on the current year’s taxable income. This is adjusted by changes
in deferred tax assets and liabilities attributable to temporary differences and for unused tax losses.
Deferred income tax liabilities and assets – recognition
Deferred income tax liabilities are recognised for all taxable temporary differences.
Deferred income tax assets are recognised for all deductible temporary differences, carried forward unused tax assets and
unused tax losses, to the extent it is probable that taxable profit will be available to utilise them. The carrying amount of
deferred income tax assets is reviewed and reduced to the extent that it is no longer probable that sufficient taxable profit
will be available.
Deferred income tax assets and liabilities – measurement
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the
balance sheet date.
103
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Deferred income tax is provided on temporary differences at the reporting date between accounting carrying amounts and
the tax cost bases of assets and liabilities, other than for the following:
• where taxable temporary differences relate to investments in subsidiaries, associates and interests in joint ventures:
– deferred tax liabilities are not recognised if the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the foreseeable future;
– deferred tax assets are not recognised if it is not probable that the temporary differences will reverse in the foreseeable
future and taxable profit will not be available to utilise the temporary differences.
Tax relating to equity items
Income taxes relating to items recognised directly in equity are recognised in equity and not in Consolidated Statement of
Comprehensive Income.
Capital Structure
11. Equity and reserves
(a) Contributed equity
Ordinary stapled securities
Opening securities on issue as at 1 January 2016
Securities issued – Long Term Incentive Plan
Securities issued – Deferred Short Term Incentive Plan
Securities issued – Broad Based Employee Security Ownership Plan
Closing securities on issue as at 31 December 2016
Opening securities on issue as at 1 January 2017
Securities issued – Long Term Incentive Plan
Securities issued – Deferred Short Term Incentive Plan
Securities issued – Broad Based Employee Security Ownership Plan
Securities issued – Employee Incentive Plan
Closing securities on issue as at 31 December 2017
Number
$’000
1,794,816,529
325,328
2,102,805
978,834
57,400
100
79
5
1,797,955,568
325,512
1,797,955,568
325,512
2,763,052
855,355
54,338
12,569
109
76
5
1
1,801,640,882
325,703
Ordinary securities are classified as equity and recognised at the fair value of the consideration received by the Consolidated
Entity. Any transaction costs arising on the issue and buy back of ordinary securities are recognised directly in equity as a
reduction, net of tax, of the proceeds received.
104
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(b) Reserves
Balance at 1 January 2016
Net foreign exchange translation adjustments
Employee incentive schemes expense
Tax on incentives valued at reporting date
Purchase of securities
Issue of securities
Revaluation of available for sale financial asset, net of tax
Balance at 31 December 2016
Balance at 1 January 2017
Net foreign exchange translation adjustments
Reclassification to accumulated losses
Employee incentive schemes expense
Tax on incentives valued at reporting date
Purchase of securities
Issue of securities
Revaluation of available for sale financial asset, net of tax
Derecognition of available for sale financial asset, net of tax
Foreign Currency
Translation Reserve
$’000
Employee Incentive
Scheme Reserve
$’000
Fair Value
Reserve
$’000
34,006
907
–
–
–
–
–
34,913
34,913
30
–
–
–
–
–
–
–
3,069
6,667
–
788
157
(1,190)
(179)
–
2,645
2,645
–
458
624
(552)
(131)
(184)
–
–
2,860
–
–
–
–
–
458
7,125
7,125
–
–
–
–
–
–
983
(8,108)
–
Total
Reserve
$’000
43,742
907
788
157
(1,190)
(179)
458
44,683
44,683
30
458
624
(552)
(131)
(184)
983
(8,108)
37,803
Balance at 31 December 2017
34,943
Nature and purpose of reserves
Foreign currency translation reserve
The reserve is used to record exchange differences arising on translation of foreign controlled entities and associated
funding of foreign controlled entities. The movement in the reserve is recognised in the net profit when the investment in the
foreign controlled entity is disposed.
Employee incentive scheme reserve
The reserve is used to recognise the fair value of equity-settled security-based payments provided to employees, including
key management personnel, as part of their remuneration. Refer to note 19 for further details of security based payments.
Fair value reserve
The fair value reserve comprises the cumulative net change in available for sale financial assets until the assets are
derecognised or impaired.
(c) Accumulated losses
Balance at 1 January 2016
Net profit for the year
Distributions payable
Balance at 31 December 2016
Balance at 1 January 2017
Net (loss)/profit for the year
Reclassification from employee incentive security scheme
Distributions payable
Balance at 31 December 2017
Company
$’000
(216,440)
15,399
–
(201,041)
(201,041)
(18,776)
(458)
–
(220,275)
Non-controlling
interest
$’000
(9,490)
4,422
(4,328)
(9,396)
(9,396)
4,554
–
(4,554)
(9,396)
Total
$’000
(225,930)
19,821
(4,328)
(210,437)
(210,437)
(14,222)
(458)
(4,554)
(229,671)
105
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 12. Earnings per share
(a) Basic and diluted earnings per share
Basic and diluted earnings per share – (loss)/profit from continuing operations
Basic and diluted loss per share – loss from discontinued operations
Total basic and diluted earnings per ordinary share
31 Dec 17
Cents
31 Dec 16
Cents
(0.28)
(0.76)
(1.04)
2.47
(1.62)
0.85
(b) The profit used in the calculation of the basic and diluted earnings per share is as follows:
(Loss)/profit reconciliation – basic and diluted
(Loss)/profit from continuing operations
Loss from discontinued operations
Profit attributed to external non-controlling interest
(c) WANOS
31 Dec 17
$’000
(5,107)
(13,669)
4,554
(14,222)
31 Dec 16
$’000
44,449
(29,050)
4,422
19,821
The earnings and weighted average number of ordinary shares (WANOS) used in the calculations of basic and diluted
earnings per ordinary share are as follows:
WANOS used as denominator in calculating basic earnings per ordinary share
Performance security rights (weighted average basis)1
WANOS used as denominator in calculating diluted earnings per ordinary share
Number of
shares
‘000s
Number of
shares
‘000s
1,801,095
1,797,440
2,410
2,733
1,803,505
1,800,173
1 Performance security rights granted under the Long Term Incentive plan are only included in dilutive earnings per ordinary share where the performance
hurdles are met as at the year end.
Calculation of earnings per share
Basic earnings per share is calculated as net profit or loss attributable to ordinary shareholders of the Company, divided by
the weighted average number of ordinary shares outstanding during the financial year which is adjusted for bonus elements
in ordinary shares issued during the financial year.
Diluted earnings per share is calculated as net profit or loss attributable to ordinary shareholders of the Company divided by the
weighted average number of ordinary shares and dilutive potential ordinary securities. Where there is no difference between basic
earnings per share and diluted earnings per share, the term basic and diluted earnings per ordinary share is used.
13. Dividends paid and payable
No dividends have been paid or declared for the 2017 financial year (2016: nil).
14. Borrowings
Current borrowings – secured
Current borrowings
Related party borrowings from GPT Trust
Non-current borrowings
Total borrowings
1
Including unamortised establishment costs.
31 Dec 17
31 Dec 16
Carrying
amount1
$’000
19,921
19,921
99,146
99,146
Fair value2
$’000
19,980
19,980
99,625
99,625
Carrying
amount1
$’000
18,812
18,812
82,426
82,426
119,067
119,605
101,238
Fair value2
$’000
18,822
18,822
82,962
82,962
101,784
2 For the majority of borrowings, the carrying amount approximates its fair value. The fair value of fixed rate interest-bearing borrowings is estimated by
discounting the future contractual cash flows at the current market interest rate curve. Excluding unamortised establishment costs.
106
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
The unsecured borrowings are provided by GPT Trust and its subsidiaries and have been revalued based on an adjusted
working capital calculation at 31 December 2017, in accordance with the loan agreement. As a result, a revaluation loss
of $34,097,679 for both continuing ($20,458,608) and discontinued ($13,639,071) operations has been recognised in the
Consolidated Statement of Comprehensive Income (2016: loss of $82,134,865). The following borrowings were revalued to nil
at 31 December 2017 (Dec 2016: nil):
•
•
•
•
•
loan facility to GPT Management Holdings Limited was drawn to $348,797,027 (Dec 2016: $355,616,562). The facility
expires on 31 December 2030;
loan facility to GPT Property Management Ltd was drawn to $9,922,998 (Dec 2016: $16,742,534). This facility expires on
31 December 2030;
loan facility to GPT International Pty Limited was drawn to $75,628,519 (Dec 2016: $82,448,055). This facility expires on
12 June 2032;
loan facility to Voyages Hotels & Resorts (Loan 1) was drawn to $32,616,333 (Dec 2016: $39,435,869). This facility expires
on 30 June 2032;
loan facility to Voyages Hotels & Resorts (Loan 2) was drawn to $47,952,860 (Dec 2016: $54,772,395). This facility expires
on 3 January 2035.
No interest is payable in connection with the above loans from 3 September 2015. The loans are non-revolving interest free
borrowings that are revalued each reporting date in accordance with accounting standards.
Borrowings are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
rate method. Under this method, any transaction fees, costs, discounts and premiums directly related to the borrowings are
recognised in the Consolidated Statement of Comprehensive Income over the expected life of the borrowings.
All borrowings with maturities greater than 12 months after reporting date are classified as non-current liabilities.
The maturity profile of borrowings is provided below:
Due within one year
Due between one and five years
Due after five years
Cash and cash equivalents
Total financing resources available at the end of the year
1 Excludes unamortised establishment costs.
Total facility1
$’000
Used facility1
$’000
Unused facility
$’000
32,220
80,924
559,918
673,062
19,980
67,577
546,487
634,044
12,240
13,347
13,431
39,018
20,033
59,051
Cash and cash equivalents includes cash on hand, cash at bank and short term money market deposits.
15. Financial risk management
The Board approve the Consolidated Entity’s treasury policy which:
• establishes a framework for the management of risks inherent to the capital structure;
• defines the role of the Consolidated Entity’s treasury; and
• sets out the policies, limits, monitoring and reporting requirements for cash, borrowings, liquidity, credit risk, foreign
exchange and interest rate instruments.
(a) Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Consolidated Entity’s primary interest rate risk arises from interest bearing borrowings. The table below
provides a summary of the Consolidated Entity’s gross interest rate risk exposure as at 31 December 2017 on interest
bearing borrowings together with the net effect of interest rate risk management transactions. This excludes unamortised
establishment costs.
Fixed rate interest-bearing borrowings
Floating rate interest-bearing borrowings
Gross exposure
Net exposure
2017
$’000
48,353
70,715
119,068
2016
$’000
32,000
69,248
2017
$’000
48,353
70,715
101,248
119,068
2016
$’000
32,000
69,248
101,248
107
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
The impact on interest expense and interest revenue of a 1 per cent increase or decrease in market interest rates is shown below.
A 1 per cent increase or decrease is used for consistency of reporting interest rate risk across the Consolidated Entity and
represents management’s assessment of the potential change in interest rates.
Impact on Statement of Comprehensive Income
Impact on interest revenue increase/(decrease)
Impact on interest expense (increase)/decrease
(b) Liquidity risk
2017
(+1%)
$’000
200
(708)
(508)
2017
(-1%)
$’000
(200)
708
508
2016
(+1%)
$’000
278
(692)
(414)
2016
(-1%)
$’000
(278)
692
414
Liquidity risk is the risk that the Consolidated Entity, as a result of its operations:
• will not have sufficient funds to settle a transaction on the due date;
• will be forced to sell financial assets at a value which is less than what they are worth; or
• may be unable to settle or recover a financial asset at all.
The Consolidated Entity manages liquidity risk by:
• maintaining sufficient cash;
• maintaining an adequate amount of committed credit facilities;
• maintaining a minimum liquidity buffer in cash and surplus committed facilities for the forward rolling twelve month
period; and
• maintaining the ability to close out market positions.
The table below shows an analysis of the undiscounted contractual maturities of liabilities which forms part of the
Consolidated Entity’s assessment of liquidity risk.
31 Dec 17
1 year
or less
$’000
Over 1
year to
2 years
$’000
Over 2
years to
5 years
$’000
Over 5
years
$’000
Total
$’000
1 year
or less
$’000
31 Dec 16
Over 1
year to
2 years
$’000
Over 2
years to
5 years
$’000
Over 5
years
$’000
Total
$’000
62,109
8,559
–
–
–
–
–
–
62,109
49,449
8,559
–
19,980 28,353
39,224 546,487 634,044
18,822
–
–
–
–
–
–
–
49,449
–
51,224
580,217
650,263
Liabilities
Non-derivatives
Payables
Current tax liability
Borrowings1
Projected interest cost on borrowings
7,646
4,804
5,928
5,669
24,047
5,042
4,817
8,232
7,799
25,890
Total liabilities
98,294
33,157
45,152 552,156 728,759
73,313
4,817
59,456
588,016
725,602
Less cash and cash equivalents
20,033
–
–
–
20,033
17,842
–
–
–
17,842
Total liquidity exposure
78,261
33,157
45,152 552,156 708,726
55,471
4,817
59,456
588,016
707,760
1 Excluding unamortised establishment costs and fair value adjustments. Includes unsecured borrowings provided by GPT Trust and its subsidiaries which have
been revalued to nil as per note 14.
(c) Refinancing risk
Refinancing risk is the risk that credit is unavailable or available at unfavourable interest rates and credit market conditions
result in an unacceptable increase in the Consolidated Entity’s interest cost. Refinancing risk arises when the Consolidated
Entity is required to obtain debt to fund existing and new debt positions. The Consolidated Entity manages this risk by
spreading sources and maturities of borrowings in order to minimise debt concentration risk, allow averaging of credit
margins over time and reducing refinance amounts.
As at 31 December 2017, the Consolidated Entity’s exposure to refinancing risk can be monitored by the spreading of its
contractual maturities on borrowings in the liquidity risk table above or with the information in note 14.
108
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(d) Foreign exchange risk
Foreign exchange risk refers to the risk that the value of a financial commitment, asset or liability will fluctuate due to
changes in foreign exchange rates. The Consolidated Entity’s foreign exchange risk arises primarily from:
•
firm commitments of highly probable forecast transactions for receipts and payments settled in foreign currencies or with
prices dependent on foreign currencies; and
•
investments in foreign assets.
Sensitivity to foreign exchange is deemed insignificant.
Foreign currency assets and liabilities
The following table shows the Australian dollar equivalents of amounts within the Consolidated Statement of Financial
Position which are denominated in foreign currencies.
Assets
Cash and cash equivalents
Interests in unlisted investments
Liabilities
Other liabilities
(e) Credit risk
Euros
United States Dollars
31 Dec 17
$’000
31 Dec 16
$’000
31 Dec 17
$’000
31 Dec 16
$’000
1,151
–
1,151
304
304
1,152
9,296
10,448
302
302
133
–
133
–
–
145
–
145
–
–
Credit risk is the risk that a contracting entity will not complete its obligations under a contractual agreement, resulting in a
financial loss to the Consolidated Entity. The Consolidated Entity has exposure to credit risk on all financial assets included
in the Consolidated Statement of Financial Position.
The Consolidated Entity manages this risk by:
• establishing credit limits for financial institutions and monitoring credit exposures for customers to ensure that the
Consolidated Entity only trades and invests with approved counterparties;
• providing loans to joint ventures, associates and third parties, only where the Consolidated Entity is comfortable with the
underlying property exposure within that entity;
• regularly monitoring loans and receivables balances;
• regularly monitoring the performance of its associates, joint ventures and third parties; and
• obtaining collateral as security (where appropriate).
Receivables are reviewed regularly throughout the year. A provision for doubtful debts is made where collection is
deemed uncertain.
The maximum exposure to credit risk as at 31 December 2017 is the carrying amounts of financial assets recognised on the
Consolidated Statement of Financial Position. For more information, refer to note 3.
109
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Other disclosure items
16. Cash flow information
(a) Cash flows from operating activities
Reconciliation of net profit after tax to net cash inflows from operating activities:
Net (loss)/profit for the year
Share of after tax profit of equity accounted investments (net of distributions)
Proceeds from the sale of other assets
Proceeds from the disposal of equity accounted investment
Loss on disposal of assets
Capital return from available for sale financial asset
Impairment expense
Non-cash employee benefits – security based payments
Fair value movement of investment in Trust
Lease incentive amortisation
Interest capitalised
Deferred interest
Amortisation of rental abatement
Depreciation expense
Amortisation expense
Amortisation of deferred acquisition costs
Finance costs
Revaluation of financial arrangements
Profit on the sale of inventory
Payment for inventories
Proceeds from inventories
Dividends receivable
Decrease in operating assets
Increase in operating liabilities
Other
Net cash inflows from operating activities
(b) Net debt reconciliation
Reconciliation of net debt movements during the financial year:
31 Dec 17
$’000
(14,222)
(6,237)
–
–
62
(10,699)
5,501
21,781
(295)
224
(10,486)
(3,252)
476
1,867
6,041
654
11,394
34,098
(1,382)
(51,951)
10,358
–
18,534
1,100
377
13,943
Borrowings
due within
1 year
$’000
(18,812)
(1,024)
(85)
Cash
$’000
17,842
2,191
–
20,033
(19,921)
Borrowings
due after
1 year
$’000
(82,426)
18,925
(35,645)
(99,146)
Net debt as at 31 December 2016
Cash flows
Other non-cash movements
Net debt as at 31 December 2017
110
31 Dec 16
$’000
19,821
(7,602)
(11,177)
(1,252)
93
–
5,773
16,552
(361)
275
(2,941)
–
561
2,114
5,401
654
4,164
82,133
(1,710)
(48,298)
14,242
(30,437)
3,062
4,038
500
55,605
Total
$’000
(83,396)
20,092
(35,730)
(99,034)
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
17. Commitments
(a) Capital expenditure commitments
The capital expenditure commitments at 31 December 2017 were $1,401,000 (2016: $717,000). Commitments are arising
from purchase of plant and equipment and intangibles, which have been approved but not recognised as liabilities in the
Consolidated Statement of Financial Position.
(b) Operating lease commitments
Due within one year
Due between one and five years
Over five years
Total operating lease commitments
31 Dec 17
$’000
31 Dec 16
$’000
6,430
15,049
5,495
26,974
5,270
15,816
892
21,978
Operating lease commitments are contracted non-cancellable future minimum lease payments on office premises and
equipment expected to be payable but not recognised in the Consolidated Statement of Financial Position.
18. Contingent liabilities
A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where uncertainty may
exist regarding the outcome of future events.
GPT Management Holdings Ltd has provided guarantees over GPT RE Limited as responsible entity of the General Property
Trust’s obligations under the note purchase and guarantee agreements in relation to US Private Placement issuances
totalling US$850,000,000 until July 2032.
Apart from the matter referred to above, there are no other material contingent liabilities at reporting date.
19. Security based payments
GPT currently has four employee security schemes – the General Employee Security Ownership Plan (GESOP), the Broad
Based Employee Security Ownership Plan (BBESOP), the Deferred Short Term Incentive Plan (DSTI) and the Long Term
Incentive (LTI) Scheme.
(a) GESOP
The Board believes in creating ways for employees to build an ownership stake in the business. As a result, the Board
introduced the GESOP in March 2010 for individuals who do not participate in the LTI.
Under the plan individuals who participate receive an additional benefit equivalent to 10 per cent of their short term
incentives (STIC) which is (after the deduction of income tax) invested in GPT securities to be held for a minimum of 1 year.
(b) BBESOP
Under the plan individuals who are not eligible to participate in any other employee security scheme may receive $1,000
worth of GPT securities or $1,000 cash if GPT achieves at least target level performance. Securities must be held for the
earlier of 3 years or the end of employment.
(c) DSTI
Since 2014, STIC is delivered to the senior executives as 50 per cent in cash and 50 per cent in GPT stapled securities
(a deferred component). The deferred component is initially awarded in the form of performance rights, with the rights
converting to restricted GPT stapled securities to the extent the performance conditions are met. For the 2014 and 2015
plans, half of the awarded stapled securities will vest one year after conversion with the remaining half vesting two years
after conversion, subject to continued employment up to the vesting dates. For the 2016 and 2017 plans, all the awarded
stapled securities will vest one year after conversion, subject to continued employment up to the vesting date.
111
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities (d) LTI
At the 2009 AGM, GPT securityholders approved the introduction of a LTI plan based on performance rights. Any subsequent
amendments to the LTI plan have been approved by GPT securityholders.
The LTI plan covers each 3 year period. Awards under the LTI to eligible participants are in the form of performance rights
which convert to GPT stapled securities for nil consideration if specified performance conditions for the applicable 3 year
period are satisfied. Please refer to the Remuneration Report for detail on the performance conditions.
The Board determines those executives eligible to participate in the plan and, for each participating executive, grants a
number of performance rights calculated as a percentage of their base salary divided by GPT’s volume weighted average
price (VWAP) for the final quarter of the year preceding the plan launch.
Fair value of performance rights issued under DSTI and LTI
The fair value of the performance rights is recognised as an employee benefit expense with a corresponding increase in the
employee security scheme reserve in equity. Fair value is measured at grant date, recognised over the period during which
the employees become unconditionally entitled to the rights and is adjusted to reflect market vesting conditions. Non-market
vesting conditions are included in assumptions about the number of rights that are expected to be vested. At each reporting
date, GPT revises its estimate of the number of performance rights that are expected to be exercisable and the employee
benefit expense recognised each reporting period takes into account the most recent estimate. The impact of the revision
to original estimates, if any, is recognised in the Consolidated Statement of Comprehensive Income with a corresponding
adjustment to equity.
Fair value of the performance rights issued under LTI is determined using the Monte Carlo simulation and the Black Scholes
methodologies then applying a discount on lack of marketability. Fair value of the performance rights issued under DSTI
is determined using the security price then applying a discount on lack of marketability. The following key inputs are taken
into account:
Fair value of rights
Security price at valuation date
Total Securityholder Return
Grant dates
Expected vesting dates
Security Price at the grant date
Expected life
Distribution yield
Risk free interest rate
Volatilty1
1 The volatility is based on the historic volatility of the security.
2017 LTI
$3.04
$5.11
6.6%
2017 DSTI
$4.86
$5.11
N/A
21 February 2017
21 February 2017
31 December 2019
31 December 2018
$4.88
$4.88
3 years (2 years remaining)
2 years (1 year remaining)
4.8%
2.0%
17.9%
4.8%
N/A
N/A
112
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(e) Summary table of all employee security schemes
Rights outstanding at 1 January 2016
Rights granted during 2016
Rights forfeited during 2016
Rights converted to GPT stapled securities during 20161
Rights outstanding at 31 December 2016
Rights outstanding at 1 January 2017
Rights granted during 2017
Rights forfeited during 2017
Rights converted to GPT stapled securities during 20172
Rights outstanding at 31 December 2017
DSTI
1,282,432
1,313,947
(345,461)
(1,038,279)
1,212,639
1,212,639
1,338,498
(357,284)
(855,355)
1,338,498
Number of rights
LTI
8,917,888
3,024,264
(977,775)
(2,356,843)
8,607,534
8,607,534
2,854,675
(323,771)
(2,792,225)
8,346,213
Total
10,200,320
4,338,211
(1,323,236)
(3,395,122)
9,820,173
9,820,173
4,193,173
(681,055)
(3,647,580)
9,684,711
1 Rights under the 2015 DSTI plan were converted to GPT stapled securities on 21 March 2016 and rights under the 2013 LTI Plan were converted to GPT stapled
securities on 18 February 2016.
2 Rights under the 2016 DSTI plan were converted to GPT stapled securities on 20 March 2017 and rights under the 2014 LTI Plan were converted to GPT stapled
securities on 14 February 2017. 12,173 one off grants to employees converted to GPT stapled securities during 2017.
Securities outstanding at 1 January 2016
Securities granted during 2016
Securities vested during 2016
Securities outstanding at 31 December 2016
Securities outstanding at 1 January 2017
Securities granted during 2017
Securities vested during 2017
Securities outstanding at 31 December 2017
20. Related party transactions
Number of stapled securities
GESOP
67,728
72,985
(79,957)
60,756
60,756
53,982
(60,756)
53,982
BBESOP
53,846
57,400
(18,485)
92,761
92,761
48,480
(17,688)
123,553
Total
121,574
130,385
(98,442)
153,517
153,517
102,462
(78,444)
177,535
GPT Management Holdings Limited is the ultimate parent entity. The Consolidated Entity is stapled to the General Property
Trust (Trust) and the GPT Group (GPT or the Group) financial statements include the results of the stapled entity as a whole.
Equity interests in joint ventures and associates are set out in note 2. Payables and loans with Trust are set out in note 8 and
note 14 respectively.
Key management personnel
Key management personnel compensation was as follows:
Short term employee benefits
Post employment benefits
Long term incentive award accrual
Other long term benefits
Total key management personnel compensation
31 Dec 17
$
6,778,850
168,272
2,064,328
–
9,011,450
31 Dec 16
$
6,302,352
169,189
1,467,157
64,319
8,003,017
Information regarding individual Directors’ and Senior Executives’ remuneration is provided in the Remuneration Report.
There have been no other transactions with key management personnel during the year.
113
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Transactions with related parties
Transactions with related parties other than associates and joint ventures
Transactions with Trust:
Revenue and expenses
Fund management fees from Trust
Property management fees from Trust
Development management fees from Trust
Development revenue received from Trust
Management costs recharged from Trust
Property rent and outgoings paid to Trust
Interest paid to Trust
Receivables
Current receivables from Trust
Non-current receivables from Trust
Other transactions
Revaluation of arrangements with Trust – continued and discontinued operations
Purchase of inventory from Trust
Transactions with employees
31 Dec 17
$
31 Dec 16
$
25,282,904
14,469,095
15,650,457
–
7,095,234
(3,661,067)
(11,309,992)
22,110,728
13,312,704
16,046,350
2,977,130
10,809,144
(5,013,107)
(4,483,075)
74,515,435
–
44,455,512
37,033,383
34,097,679
2,799,125
82,134,865
39,243,333
Contributions to superannuation funds on behalf of employees
(5,703,954)
(5,766,595)
Transactions with GWOF, GWSCF & GMF1:
Revenue
Responsible Entity fees
Performance fee
Asset management fees
Development management fees
Directors fees recharged
Management costs recharged
Payroll costs recharged
Expense
Rent expenses
Receivables and payables
Current receivable outstanding
Current performance fee receivable
Current fund management fee receivable
1 The Consolidated Entity earned management fees in relation to GMF up to 30 September 2016.
50,744,061
–
15,660,782
6,963,854
653,208
5,788,457
9,396,803
46,800,456
28,121,621
14,622,388
6,200,389
904,351
5,098,977
9,065,297
(597,294)
(462,493)
9,089,187
–
12,926,671
6,590,602
15,318,650
13,026,175
114
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
21. Auditors remuneration
Audit services
PricewaterhouseCoopers Australia
Statutory audit and review of financial reports
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australia
Regulatory and contractually required audits
Total remuneration for other assurance service
Total remuneration for audit and assurance service
Non audit related services
PricewaterhouseCoopers Australia
Taxation services
Total remuneration for non audit related services
Total auditors remuneration
22. Parent entity financial information
Assets
Total current assets
Total non-current assets
Total assets
Liabilities
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Profit attributable to members of the parent entity
Total comprehensive income for the year attributable to members of the parent entity
Operating lease commitments
Due within one year
Due between one and five years
Over five years
Total operating lease commitments
Capital expenditure commitments
31 Dec 17
$
31 Dec 16
$
345,846
345,846
241,129
241,129
99,818
99,818
445,664
68,097
68,097
309,226
3,500
3,500
–
–
449,164
309,226
Parent entity
31 Dec 17
$’000
31 Dec 16
$’000
288,431
117,756
406,187
176,788
99,146
275,934
130,253
325,703
5,667
(201,117)
130,253
5,190
5,190
6,430
15,049
5,495
26,974
267,011
116,667
383,678
241,095
10,346
251,441
132,237
325,512
12,574
(205,849)
132,237
50,179
50,179
5,270
15,816
892
21,978
The parent entity has $807,000 capital expenditure commitments at 31 December 2017 (2016: $403,000).
Parent entity financial information
The financial information for the parent entity of the Consolidated Entity, GPT Management Holdings Limited, has been
prepared on the same basis as the consolidated financial statements, except as set out below.
115
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures are accounted for at cost in the financial statements of the parent
entity. Distributions received from subsidiaries, associates and joint ventures are recognised in the parent entity’s profit or
loss rather than being deducted from the carrying amount of these investments.
23. Fair value disclosures
Information about how the fair value of financial instruments is calculated and other information required by the accounting
standards, including the valuation process, critical assumptions underlying the valuations and information on sensitivity are
disclosed below.
The different levels of the fair value hierarchy have been defined as follows:
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
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fair value measurement, valuation techniques and inputs
Class of assets
Fair value hierarchy
Valuation technique
Inputs used to measure
fair value
Range of unobservable inputs
31 Dec 17
31 Dec 16
Investment in
financial assets
Available for sale
financial asset
DCF method
Level 2
Market price
Market price
Not applicable – observable input
2017: Not applicable
Discounted cash flow (DCF) Discount rate
Not applicable
Discount for lack of marketability
0%
0–5%
20%
2016: Level 3
Foreign currency exchange rate
Not applicable – observable input
The available for sale financial asset was valued using a discounted cash flow methodology. The expected future cash flow is
converted into Australian dollars and discounted over the estimated realisation period.
116
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
24. Discontinued operations and available for sale financial assets
(a) Discontinued operations
At 31 December 2017, there are two discontinued operations: Hotel/Tourism portfolio and Funds Management – Europe portfolio.
Hotel/Tourism
The Consolidated Entity has substantially completed its exit from the Hotel/Tourism portfolio.
Funds Management – Europe
Relates to equity investments in small closed-end funds (a legacy of GPT’s ownership of GPT Halverton) managed by
Internos Real Investors.
(b) Details of financial performance and cash flow information relating to discontinued operations
The table below sets out the financial performance and cash flow information for the discontinued operations that continue
to be owned by the Consolidated Entity at reporting date.
Revenue
Expenses
Loss before income tax
Income tax credit
Loss after income tax of discontinued operations
Net cash outflow from operating activities
Net decrease in cash from discontinued operations
Discontinued operation
31 Dec 17
$’000
31 Dec 16
$’000
–
(13,669)
(13,669)
–
(13,669)
13
13
12
(29,063)
(29,051)
(1)
(29,050)
(306)
(306)
A discontinued operation is a part of the Consolidated Entity’s business that:
•
it has disposed of or has classified as held for sale and that represents a major line of its business or geographical area of
operations; or
•
is part of a single co-ordinated plan to dispose of such a line of business or area of operations.
The results of discontinued operations are presented separately on the face of the Consolidated Statement of Comprehensive
Income and the assets and liabilities are presented separately on the face of the Consolidated Statement of Financial Position.
(c) Derecognition of available for sale financial assets
In October 2017, the Consolidated Entity received a return of capital of $10,639,000 in respect of its 5.3 per cent interest in
BGP Holding Plc (BGP). BGP was classified as an available for sale financial asset with a carrying value of $9,296,000 at
31 December 2016. In 2017, following the return of capital the asset has been derecognised in the Consolidated Statement of
Financial Position and $10,699,000 has been recognised in the Consolidated Statement of Comprehensive Income as profit
on derecognition of the available for sale financial asset.
Assets held for sale
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and
fair value less costs to sell. Investment property held for sale will continue to be carried at fair value. Non-current assets
and disposal groups 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 or
disposal group 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 a completed sale within one year from the date of classification.
117
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
25. Accounting policies
Associates
(a) Basis of preparation
The financial report has been prepared:
•
in accordance with the requirements of the Company’s
constitution, Corporations Act 2001, Australian
Accounting Standards (AAS) and other authoritative
pronouncements of the Australian Accounting Standards
Board and International Financial Reporting Standards;
• on a going concern basis in the belief that the Consolidated
Entity will realise its assets and settle its liabilities and
commitments in the normal course of business and for
at least the amounts stated in the financial statements.
The Consolidated Entity has access to undrawn financing
facilities of $39,018,000 as set out in note 14;
• under the historical cost convention, as modified by
the revaluation for financial assets and liabilities at
fair value through the Consolidated Statement of
Comprehensive Income;
• using consistent accounting policies and adjustments to
bring into line any dissimilar accounting policies being
adopted by the controlled entities, associates or joint
ventures; and
•
in Australian dollars with all values rounded to the
nearest thousand dollars, in accordance with ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, unless otherwise stated.
The financial report was approved by the Board of Directors
on 13 February 2018.
(b) Basis of consolidation
Controlled entities
The consolidated financial statements of the Consolidated
Entity report the assets, liabilities and results of all
controlled entities for the financial year.
Controlled entities are all entities over which the
Consolidated Entity has control. The Consolidated Entity
controls an entity when the Consolidated Entity is exposed
to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns
through its power to direct the activities of the entity.
Controlled entities are consolidated from the date on which
control is obtained to the date on which control is disposed.
The acquisition of controlled entities is accounted for using
the acquisition method of accounting. All intercompany
balances and transactions, income and expenses and
profits and losses resulting from intra-group transactions
have been eliminated.
Associates are entities over which the Consolidated
Entity has significant influence but not control, generally
accompanying a shareholding of between 10 per cent and
50 per cent of the voting rights.
GPT Funds Management Limited (GPTFM), which is wholly
owned by the Company is the responsible entity (RE) of the
Funds. The Board of GPTFM comprises six directors, of
which GPT can only appoint two. As a result, the Company
has significant influence over GPTFM and accordingly
accounts for it as an associate using the equity method.
Investments in associates are accounted for using the
equity method. Under this method, the Consolidated Entity’s
investment in associates is carried in the Consolidated
Statement of Financial Position at cost plus post acquisition
changes in the Consolidated Entity’s share of net assets.
The Consolidated Entity’s share of the associates’ result is
reflected in the Consolidated Statement of Comprehensive
Income. Where the Consolidated Entity’s share of losses in
associates equals or exceeds its interest in the associate,
including any other unsecured long term receivables, the
Consolidated Entity does not recognise any further losses,
unless it has incurred obligations or made payments on
behalf of the associate.
Joint arrangements
Investments in joint arrangements are classified as
either joint operations or joint ventures depending on
the contractual rights and obligations each investor has,
rather than the legal structure of the joint arrangement.
The Consolidated Entity has assessed the nature of its joint
arrangements and determined it has joint ventures only.
Joint ventures
Investments in joint ventures are accounted for in the
Consolidated Statement of Financial Position using
the equity method which is the same method adopted
for associates.
(c) Other accounting policies
Significant accounting policies that summarise the
recognition and measurement basis used and are relevant
to an understanding of the financial statements are
provided throughout the notes to the financial statements.
Other accounting policies include:
(i) Available for sale financial assets
Available for sale financial assets are recognised at fair
value. Gains/losses arising from changes in the fair value
of the carrying amount of available for sale financial assets
are recognised in other comprehensive income.
118
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities (ii) Deferred revenue
(iv) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST (or equivalent tax in overseas locations)
except where the GST incurred on purchase of goods
and services is not recoverable from the tax authority, in
which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as
applicable. Receivables and payables are stated inclusive of
the amount of GST. The net amount of GST receivable from,
or payable to, the taxation authority is included with other
receivables or payables in the Consolidated Statement of
Financial Position.
Cash flows are presented on a gross basis in the Statement
of Cash flows. The GST components of cash flows arising
from investing or financing activities which are recoverable
from, or payable to, the taxation authority are presented as
operating cash flows. Commitments and contingencies are
disclosed net of the amount of GST recoverable from, or
payable to, the taxation authority.
(v) Deferred acquisition costs
Deferred acquisition costs associated with the property
management business are costs that are directly related
to and incremental to earning property management fee
income. These costs are recorded as an asset and are
amortised in the income statement on the same basis as
the recognition of property management fee revenue.
(d) New and amended accounting standards and
interpretations adopted from 1 January 2017
There are no significant changes to the Consolidated
Entity’s financial performance and position as a result of
the adoption of the new and amended accounting standards
and interpretations effective for annual reporting periods
beginning on or after 1 January 2017.
The Consolidated Entity recognises revenue when the
amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity and
specific criteria have been met. The Consolidated Entity
bases its estimates taking into consideration the type
of transaction and the specifics of each arrangement.
Those transactions where the revenue cannot be reliably
measured and/or it is not probable that future economic
benefit will flow to the entity are recorded as deferred
revenue until such time as the transaction meets the
recognition criteria.
(iii) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of
the GPT entities are measured using the currency of the
primary economic environment in which they operate (‘the
functional 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.
Foreign operations
Non-monetary items that are measured in terms of
historical cost are converted using the exchange rate as
at the date of the initial transaction. Non-monetary items
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 of non-monetary
items, such as equities held at fair value through profit or
loss, are reported as part of the fair value gain or loss.
Exchange differences arising on monetary items that
form part of the net investment in a foreign operation
are taken against a foreign currency translation reserve
on consolidation.
Where forward foreign exchange contracts are entered
into to cover any anticipated excesses of revenue less
expenses within foreign joint ventures, they are converted
at the ruling rates of exchange at the reporting period. The
resulting foreign exchange gains and losses are taken to
the Consolidated Statement of Comprehensive Income.
119
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities (e) New accounting standards and interpretations issued but not yet adopted
The following standards and amendments to standards are relevant to the Consolidated Entity.
Reference
Description
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts
with Customers
AASB 16 Leases
AASB 9 addresses the classification, measurement and de-recognition of financial assets
and financial liabilities, introduces expanded disclosure requirements, a new impairment
(expected credit loss) model and changes in presentation. When adopted, this could change
the classification and measurement of financial assets and financial liabilities.
The new expected credit loss model for calculating impairment on financial assets will not
have a material impact on the provision for doubtful debts.
Debt modifications where the impact results in a change in the present value of expected
cashflows of less than 10 per cent, taking into account other qualitative factors, will
be taken immediately through the Consolidated Statement of Comprehensive Income
unless the modifications are reset or entered at market rates. An assessment has been
completed on all loans with external parties and it has been determined that this will not
have a material impact for the Consolidated Entity, as all previous modifications have been
entered at market rates. The impact relating to related party loans is still being assessed.
The Consolidated Entity will apply the standard from 1 January 2018.
AASB 15 will replace AASB 118 Revenue and AASB 111 Construction Contracts. It is based
on the principle that revenue is recognised when control of a good or service is transferred
to a customer. It contains a single model that applies to contracts with customers and two
approaches to recognising revenue: at a point in time or over time. The model features a
contract–based five-step analysis of transactions to determine whether, how much and
when revenue is recognised. It applies to all contracts with customers except leases,
financial instruments and insurance contracts. It requires reporting entities to provide
users of financial statements with more informative and relevant disclosures.
The Consolidated Entity will apply the standard from 1 January 2018. It is not expected
that the application of this standard will have a material impact on the financial results,
however some changes in the presentation of certain revenue items and additional
disclosures will be required.
AASB 16 will change the way lessees account for leases by eliminating the current dual
accounting model which distinguishes between on-balance sheet finance leases and
off-balance sheet operating leases. Instead, there will be a single, on-balance sheet
accounting model that is similar to the current finance lease accounting. Where the
Consolidated Entity is the lessee, this new treatment will result in recognition of a right
of use asset along with the associated lease liability in the balance sheet and both a
depreciation and interest charge in the Consolidated Statement of Comprehensive Income.
In contrast, lessor accounting will remain similar to current practice.
The new leasing model requires the recognition of operating leases on the balance sheet. If
the Consolidated Entity had adopted the new standard from 1 January 2017, management
estimates that the net profit before tax for the 12 months to 31 December 2017 would
decrease by approximately $136,220. Assets at 31 December 2017 would increase by
approximately $12,733,000 and liabilities increase by $15,068,000.
Application of
Standard
1 January 2018
1 January 2018
1 January 2019
26. Events subsequent to reporting date
On 15 January 2018, the Consolidated Entity sold vacant land at 368 Wembley Road, Berrinba for a total consideration of
$4,100,000.
Other than the above, the Directors are not aware of any matter or circumstance occurring since 31 December 2017 that has
significantly or may significantly affect the operations of the Consolidated Entity, the results of those operations or the state
of affairs of the Consolidated Entity in subsequent financial years.
120
Notes to the Financial Statements – Year ended 31 December 2017Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Directors’ Declaration
Year ended 31 December 2017
In the Directors of GPT Management Holdings Limited’s opinion:
(a) the consolidated financial statements and notes set out on pages 90 to 120 are in accordance with the Corporations
Act 2001, including:
• complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
• giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2017 and of its
performance for the financial year ended on that date; and
(b) the consolidated financial statements and notes comply with International Financial Reporting Standards as disclosed in
note 25 to the financial statements.
(c) there are reasonable grounds to believe that the Consolidated Entity 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 as required by
Section 295A of the Corporations Act 2001.
This declaration is made in accordance with the resolution of the directors.
Rob Ferguson
Chairman
Bob Johnston
Chief Executive Officer and Managing Director
GPT Management Holdings Limited
Sydney
13 February 2018
121
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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Supplementary information
Securityholder information
Substantial Securityholders
UniSuper
BlackRock Group
Vanguard Investments Australia
State Street Corporation
Voting Rights
Number of Securities
233,746,431
144,613,051
117,427,713
106,158,896
Securityholders in The GPT Group are entitled to one vote for each dollar of the value of the total securities they hold in the Group.
Distribution of Securityholders
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Total Number of Securityholders
Number of
Securityholders
Percentage of Total
Issued Securities
14,234
14,026
3,530
2,365
110
34,265
41.54
40.93
10.30
6.90
0.32
There were 955 securityholders holding less than a marketable parcel of 98 securities, based on a close price of $5.11 as at
31 December 2017, and they hold 21,647 securities.
Twenty Largest Securityholders
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
BNP Paribas Nominees Pty Ltd
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