2018
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
79
139
Inside back cover
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 2018
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 .................................................................................................................................. 34
2. Investment properties ............................................................................................................................................ 34
3. Equity accounted investments ................................................................................................................................ 37
4. Trade and other receivables ................................................................................................................................... 39
5. Intangible assets ..................................................................................................................................................... 40
6. Inventories .............................................................................................................................................................. 41
7. Payables .................................................................................................................................................................. 41
8. Provisions ............................................................................................................................................................... 42
9. Taxation ................................................................................................................................................................... 43
Capital structure .......................................................................................................................................................... 45
10. Equity and reserves ................................................................................................................................................ 45
11. Earnings per stapled security ................................................................................................................................ 47
12. Distributions paid and payable ............................................................................................................................... 48
13. Borrowings ............................................................................................................................................................. 48
14. Financial risk management ................................................................................................................................... 49
Other disclosure items ................................................................................................................................................ 55
15. Cash flow information ............................................................................................................................................ 55
16. Commitments ......................................................................................................................................................... 56
17. Contingent liabilities .............................................................................................................................................. 56
18. Security based payments ....................................................................................................................................... 56
19. Related party transactions .................................................................................................................................... 58
20. Auditor’s remuneration .......................................................................................................................................... 59
21. Parent entity financial information......................................................................................................................... 59
22. Fair value disclosures ............................................................................................................................................ 60
23. Accounting policies ................................................................................................................................................. 63
24. Adoption of new accounting standards .................................................................................................................. 69
25. Events subsequent to reporting date ..................................................................................................................... 70
Directors’ Declaration ................................................................................................................................................................... 71
Independent Auditor’s Report ...................................................................................................................................................... 72
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 GPT’s internet site, GPT has ensured that its 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 GPT’s website: www.gpt.com.au.
1
Directors’ Report
Year ended 31 December 2018
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 2018. 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 $14.0 billion diversified portfolio of high quality Australian retail, office and logistics
property assets and together with GPT’s funds management platform the Group has $24.0 billion of property assets under
management (AUM).
GPT owns some of Australia’s most prominent real estate assets, including the Melbourne Central and Highpoint Shopping
Centre in Melbourne, Australia Square, 1 Farrer Place and Citigroup Centre in Sydney 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 $9.6 billion. GPT is one of the top 50 listed stocks on the ASX
by market capitalisation as at 31 December 2018.
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 2018 GPT achieved a
Total Return of 15.8 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 2018 GPT achieved an MER of 30 basis points.
GPT focuses on maintaining a strong balance sheet. GPT’s gearing as at 31 December 2018 was 26.3 per cent and it has
maintained a weighted average debt expiry of greater than 6 years. The average cost of debt for 2018 was 4.2 per cent.
GPT Portfolio
SOURCES OF DRAWN DEBT
Retail 44%
Office 42%
Logistics 14%
Retail Portfolio
• 13 shopping centres
Office Portfolio
• 25 assets
Logistics Portfolio
• 28 assets
• 940,000 sqm GLA*
• 1,150,000 sqm NLA**
• 870,000 sqm GLA*
• 3,200 + tenants
• $6.2b portfolio
• $10.0b AUM
* Gross lettable area
** Net lettable area
• 550 + tenants
• 80 + tenants
• $5.9b portfolio
• $1.9b portfolio
• $12.1b AUM
• $1.9b AUM
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. 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. FFO and AFFO have
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:
For the year ended
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
Funds from Operations (FFO)
Other non-FFO items:
Valuation increase
Financial instruments mark to market and net foreign exchange loss
Other items2
Net profit for the year 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)
31 Dec 18
$M
31 Dec 171
$M
Change
%
318.6
7.6
326.2
267.7
1.0
268.7
104.8
5.1
109.9
42.6
(34.2)
(124.4)
(14.2)
574.6
910.7
(39.6)
6.0
1,451.7
31.84
574.6
(53.2)
(60.9)
460.5
459.5
25.46
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)
(1.0)
1,268.0
30.77
554.2
(54.4)
(53.5)
446.3
443.2
24.60
1.8%
43.4%
2.4%
8.0%
(9.1%)
8.0%
12.3%
628.6%
16.9%
15.1%
(11.8%)
(21.5%)
(27.9%)
3.7%
26.9%
(1,265.5%)
700.0%
14.5%
3.5%
3.7%
2.2%
(13.8%)
3.2%
3.7%
3.5%
1 The 31 December 2017 net profit for the year after tax has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
2 Other items include impairment expenses, amortisation of intangibles, profit on disposal of assets and related tax impact.
Operating result
GPT delivered FFO of $574.6 million for the 2018 financial year, an increase of 3.7 per cent on the prior year. This translated
into FFO per security of 31.84 cents, up 3.5 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 $1,451.7 million, an increase of 14.5 per cent on the prior year, driven by $910.7 million
in property valuation increases offset by higher 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 2018
Distribution
For the financial year ended 31 December 2018, distributions paid and payable to stapled securityholders totalled $459.5 million
(2017: $443.2 million), representing an annual distribution of 25.46 cents, up 3.5 per cent on 2017 (2017: 24.60 cents). This includes
12.85 cents ($231.9 million) in respect of the second half of 2018, which was declared on 19 December 2018 and is expected to be
paid on 28 February 2019. The payout ratio for the year ended 31 December 2018 is 99.8 per cent of AFFO (2017: 99.3 per cent).
16.9%
15.2%
12.5%
8.2%
Total Return at the direct investment
portfolio level was 12.5 per cent for 2018
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
97.8%
(2017: 96.8%)
Weighted average lease
expiry (WALE)
4.9 years
(2017: 5.2 years)
Structured rental reviews
$6.20 billion portfolio
including GPT’s equity
interest in the GPT
Wholesale Shopping
Centre Fund
(2017: $5.85 billion)
99.6%
(2017: 99.6%)
4.0 years
(2017: 4.1 years)
74% of specialty income
subject to average
increases of 4.8%
(2017: 74% subject to
average increases of 4.7%)
$5.93 billion portfolio
including GPT’s equity
interest in the GPT
Wholesale Office Fund
(2017: $4.90 billion)
$1.89 billion portfolio
(2017: $1.55 billion)
97.1%
(2017: 95.2%)
5.2 years
(2017: 5.6 years)
97.2%
(2017: 96.1%)
7.1 years
(2017: 7.6 years)
85% of income subject to
average increases of 3.9%
(2017: 91% subject to
average increases of 3.9%)
91% of income subject to
average increases of 3.3%
(2017: 91% subject to
average increases of 3.3%)
Comparable income
growth
Weighted average
capitalisation rate
3.8%
(2017: 4.4%)
5.02%
(2017: 5.27%)
2.2%
(2017: 3.8%)
4.88%
(2017: 5.10%)
5.8%
(2017: 5.0%)
4.95%
(2017: 5.18%)
2.8%
(2017: 4.0%)
5.78%
(2017: 6.31%)
Retail
(i) Operations net income
The retail portfolio achieved a net revaluation uplift of $161.0 million in 2018, including GPT’s equity interest in the GPT
Wholesale Shopping Centre Fund (GWSCF). The positive revaluation has been driven by a combination of net income
growth and firming in valuation metrics, with favourable valuations achieved on Melbourne Central, Westfield Penrith and
Charlestown Square.
Like for like income growth of 2.2 per cent was driven by underlying structured rent increases and ongoing active remixing of
the portfolio. Retail sales have improved over the 12 month period to December 2018, with annual weighted total centre sales
up 2.4 per cent and total specialty sales up 3.6 per cent. The portfolio remains well leased with occupancy at 99.6 per cent.
(ii) Development net income
During 2018, the focus has been on the delivery of the $432.0 million Sunshine Plaza retail expansion (GPT share: $216.0 million).
The development has been delayed due to inclement weather resulting in a staged opening in November 2018 and the major
launch scheduled for March 2019.
During 2018, the business unit contributed $7.6 million to FFO (2017: $5.3 million).
4
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018
Office
Operations net income
Logistics
Operations net income
The office portfolio achieved a net revaluation uplift of
$598.5 million in 2018, including GPT’s equity interest in
the GPT Wholesale Office Fund (GWOF), as a result of high
occupancy, strong market rental growth and continued
firming of investment metrics. The positive revaluation
has been primarily driven by the Group’s Sydney assets,
in particular MLC Centre, 2 Park St, Australia Square and
Farrer Place.
Like for like income growth of 5.8 per cent was achieved as
a result of leasing success leading to strong rental growth
and continued high levels of occupancy at 97.1 per cent
(including signed leases). The assets which were the main
contributors to income growth were Melbourne Central
Tower, Australia Square, Farrer Place and MLC Centre.
Also, the September 2018 acquisition of 60 Station Street,
Parramatta has had a positive contribution to headline
income growth.
Development net income
During the year the 15,800sqm 4 Murray Rose development
was successfully completed at Sydney Olympic Park. The
asset was delivered on time and within budget and is 81%
leased at the year end with the Rural Fire Service taking
59% of the building. The development has delivered a
development yield on cost over 7.5%.
Construction has commenced on the new 26,000sqm tower
at 32 Smith Street, Parramatta following the acquisition
of the site in 2017. The pre-committed tenant for the new
tower is QBE, who will occupy approximately 50% of the
building. Practical completion is due in late 2020.
The team is well progressed with a number of repositioning
projects in Melbourne at 100 Queen Street, Melbourne
Central Tower, CBW and 530 Collins Street.
Funds Management
As at and for the year ended 31 December 2018
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
$151.2 million in 2018. This uplift is attributed to continued
investor demand for 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 7.1 years and like for
like income growth is strong at 2.8 per cent.
Development net income
During the year the Group continued to successfully
develop high quality logistics facilities to increase the
portfolio quality and scale. At Huntingwood, the 11,000sqm
warehouse reached practical completion in August 2018.
The building was leased to Cahill Transport Group. Also, at
50 Old Wallgrove Road in Eastern Creek construction of a
30,000sqm facility was completed in January 2019. By the
time of signing this financial report, 100% of the asset has
been leased to ACR Supply Partners.
Work continues to develop out and replenish the logistics
land bank. This includes the November 2018 acquisition
of 8.9 hectares of land in Melbourne which provides the
opportunity to develop 48,000sqm of new logistics facilities.
GWOF
$7.8b
18
23.83%
GWSCF
$4.8b
8
28.57%
Total
$12.6b
26
N/A
$1,524.0m
$1,013.7m
$2,537.7m
12.7%
$69.8m
$36.3m
4.8%
$46.3m
$21.9m
N/A
$116.1m
$58.2m
5
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 GWOF
GWOF’s portfolio value increased to $7.8 billion, up $0.7 billion
from 2017 and the fund delivered a one year equity IRR of
12.7 per cent. The management fee income earned from
GWOF for 2018 increased by $2.9 million as compared to 2017
due to strong upward revaluations across the portfolio.
As a result of GPT not participating in the Fund’s
Distribution Reinvestment Plan (DRP) and equity raising in
December 2018, GPT’s ownership reduced to 23.83 per cent
(2017: 24.95 per cent).
GWSCF
The fund delivered a one year equity IRR of 4.8 per cent.
GWSCF’s portfolio value decreased to $4.8 billion,
down $0.1 billion from 2017, primarily driven by the
sale of GWSCF’s 83.33 per cent share in Homemaker
City, Maribyrnong in December 2018 offset by upward
revaluations. Management fee income earned from GWSCF
of $21.9 million has increased by $4.6 million as compared
to 2017. This was due to the acquisition of an additional
25 per cent interest in Highpoint Shopping Centre for
$660.0 million and Homemaker City, Maribyrnong for
$20.0 million in September 2017.
Balance sheet
• Total Return of 15.8 per cent (2017: 15.2 per cent) being
the growth of NTA per stapled security of 54 cents to
$5.58 plus the distribution paid/payable per stapled
security of 25.46 cents, divided by the opening NTA per
stapled security.
• Total core assets increased by 13.8 per cent primarily
due to acquisitions, development capital expenditure and
positive property revaluations.
• Total borrowings increased by 24.7 per cent due to
acquisitions, development capital expenditure and fair
value adjustments of $116.1 million to the carrying value
of foreign currency debt.
Capital management
Cost of debt
Net gearing
Weighted average
debt maturity
Hedging
S&P/Moody’s credit rating
31 Dec 18
31 Dec 17
Change
4.2%
26.3%
4.2%
Unchanged
24.4% Up by 190bps
6.3 years
7.1 years
Down 0.8
years
83.0%
76.0%
Up 7%
A stable/
A2 stable
A stable/
A2 stable
Unchanged
As a result of GPT not participating in the Fund’s DRP, GPT’s
ownership is now 28.57 per cent (2017: 28.80 per cent).
GPT continues to maintain a strong focus on capital
management.
Key highlights for the year include:
• weighted average cost of debt for the year is
4.2 per cent, unchanged from the previous year;
• net gearing2 increased to 26.3 per cent (2017:
24.4 per cent), which is in line with the lower end of
GPT’s target gearing range of 25 to 35 per cent. This was
a result of debt funding acquisitions and development
capital expenditure during the period offset by strong
revaluation gains;
• available liquidity through cash and undrawn facilities
(inclusive of forward starting facilities available to GPT)
is $1,059.5 million (2017: $1,095.1 million); and
• net tangible assets reduced by a $32.0 million loss
on net mark to market movements on derivatives
and borrowings.
Management expenses
Corporate overheads increased to $34.2 million (2017:
$30.6 million) during the year due to increases in
regulatory fees and Directors and Officers insurance
and higher unallocated technology costs for automation.
Total management and administration expenses across
all segments slightly reduced to $73.0 million (2017:
$73.4 million) resulting in a lower MER of 30 basis points
for 2018 (2017: 34 basis points).
Financial position
Net
Assets
31 Dec 18
$M
Net
Assets
31 Dec 171
$M
Change
%
Core
Retail
Office
Logistics
6,299.2
5,921.9
1,958.8
5,938.4
4,884.4
1,639.3
Total core assets
14,179.9
12,462.1
Financing and corporate assets
598.1
495.2
Total assets
Borrowings
Other liabilities
Total liabilities
Net assets
Total number of ordinary
stapled securities (million)
14,778.0
12,957.3
4,114.9
3,300.6
562.5
4,677.4
10,100.6
1,804.9
550.8
3,851.4
9,105.9
1,801.6
6.1%
21.2%
19.5%
13.8%
20.8%
14.1%
24.7%
2.1%
21.4%
10.9%
0.2%
NTA ($)
5.58
5.04
10.7%
1 The 31 December 2017 net assets have been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
2 Calculated net of cash and excludes any fair value adjustment on foreign bonds and their associated cross currency derivative asset positions.
6
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018
Cash flows
The cash balance as at December 2018 increased to $58.7 million (2017: $49.9 million).
Operating activities
The following table shows the reconciliation from FFO to the cash flow from operating activities:
For the year ended
FFO
(Less): non-cash items included in FFO
Less: interest capitalised on developments
Add/(less): net movement in inventory
Timing difference in receivables and payables
Net cash inflows from operating activities
Add: interest capitalised on developments
(Less)/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 18
$M
31 Dec 17
$M
574.6
(25.5)
(13.7)
5.8
(7.2)
534.0
13.7
(5.8)
–
(53.2)
(39.7)
449.0
554.2
(17.2)
(8.6)
(19.0)
26.1
535.5
8.6
19.0
(30.4)
(54.4)
(27.0)
451.3
Change
%
3.7%
(48.3%)
(59.3%)
130.5%
(127.6%)
(0.3%)
59.3%
(130.5%)
100.0%
2.2%
(47.0%)
(0.5%)
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 retains a portfolio of high quality assets with high
occupancy levels and structured rental growth. As at
31 December 2018, the Group’s balance sheet is in a strong
position, with a smooth, long debt expiry profile and net
gearing at the lower end of the Group’s target range of
25 to 35 per cent.
Retail
GPT’s portfolio delivered total centre sales growth
2.4 per cent whilst specialties sales per square metre grew
2.5 per cent for the 12 months to 31 December 2018. The
retail portfolio is well positioned with 85 per cent located in
NSW and VIC and in markets with strong population growth.
GPT is planning on capturing this growth by investing in assets
to offer engaging places for its customers aimed at driving
sales productivity, stimulating retailer demand and delivering
long term investment returns. Progress continues to be
made with mixed use developments at Melbourne Central
and Rouse Hill which will be opportunities for GPT to deliver
leading examples on how retail assets need to evolve and
adapt to meet the changing needs of today’s retail consumer.
Office
GPT is progressing its future development pipeline in Sydney
and Melbourne. Engagement continues with authorities
for a proposed new office tower and retail precinct of up
to 70,000sqm at Darling Park in Sydney. In Melbourne, the
Group is seeking a pre-commitment tenant for a proposed
20,000sqm office tower at Melbourne Central.
The Sydney and Melbourne CBD office markets in Australia
experienced solid conditions in 2018, with demand being
above long-term averages, low levels of net supply and
tightening vacancy rates. Sydney and Melbourne reached
vacancy rates of 4.1 per cent and 3.75 per cent respectively.
These markets should experience ongoing tight vacancy
conditions in 2019 with little new supply to come online and
ongoing healthy levels of demand.
Logistics
An improving industrial economy driven by the growth in
e-commerce, continues to fuel the demand for warehousing.
New entrants and existing retailers seeking to expand into
key locations is adding further pressure on the availability of
land resulting in double digit increases of land values in prime
locations. The investment market remains strong with assets
transacting at yields firmer than previous market peaks.
The medium term outlook is for Sydney and Melbourne to
continue to benefit as preferred locations, given population
nodes and strong and improving infrastructure. GPT will
seek to increase exposure to the sector through development
opportunities and acquisitions.
7
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 Funds management
GPT has a large funds management platform which has
experienced significant growth in the value of assets
under management over the past five years. The funds
management team will continue to actively manage the
existing portfolios, with new acquisitions, divestments
and developments in line with the relevant investment
objectives of each fund.
Guidance for 2019
In 2019 GPT expects to deliver 4 per cent growth in FFO per
ordinary security and 4 per cent growth in distribution per
ordinary security. Achieving this target is subject to risks
detailed in the following section.
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. The Sustainability and
Risk Committee, the Audit Committee and through them,
the Board, receive reports on GPT’s risk management
practices and control systems including the effectiveness
of GPT’s management of its material business risks.
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 requires 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 31000:2018: Risk Management.
The key components of the approach include the following:
• the GPT Board, Leadership Team, employees and
contractors all understand their risk management
accountabilities, promote the risk awareness and
risk management culture and apply risk processes to
achieve the organisation’s objectives;
• specialist risk management expertise is developed and
maintained internally and provides coaching, guidance
and advice;
• risks are identified and assessed in a timely and
consistent manner;
• controls are effectively designed, embedded and
assessed;
• material operational risks and critical controls are
monitored and reported to provide transparency and
assurance that the risk profile is aligned with GPT’s risk
appetite, strategy and values; and
• macro-economic factors that may impact the business
are considered and monitored.
The risk appetite set by the Board considers the most significant, material risks to which GPT is exposed and provides the
Board with ongoing monitoring of risk exposures which may arise over the short, medium and long term. The following table
sets out material operational risks and issues, the potential 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
• Lower distributions
• Lower NTA
• Credit ratings downgrade
Adverse changes in market
conditions
Development
Developments do not perform
in line with forecast
• Lower distributions
• Lower NTA
• Credit ratings downgrade
• Lower distributions
• Lower NTA
• Credit ratings downgrade
• Robust investment approval process
• Formal due diligence process
• Active asset management
• Experienced internal management capability
• Diversified multi-asset portfolio
• Limit single asset exposure
• Robust capital allocation process
• Diversified multi-asset portfolio
• Limit single asset exposure
• Robust investment approval process
• Oversight by Project Control Group (PCG)
• Experienced internal management capability
• Limit exposure to assets under development
• Limit exposure to individual contractors
• Minimum leasing pre-commitments prior to
construction commencement
8
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 Risk Category
Risk/Issue
Potential Strategic Impact
Mitigation
Leasing
Inability to lease assets in line
with forecast
• Lower distributions
• Lower NTA
• Credit ratings downgrade
Capital
management,
including
macro-
economic
factors
Re-financing and liquidity risk
• Ability to meet debt maturities
• Limits ability to execute strategy
• Credit ratings downgrade
• Failure to continue as a going concern
• Large and diversified tenant base
• Ongoing investment to maintain quality of
property portfolio
• Experienced leasing team
• Limit single tenant exposure
• 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
• Lower distributions
• Interest rate exposures are actively hedged
Health and
safety
Incidents causing injury
to tenants, visitors to the
properties, employees and/or
contractors
• Harm to the tenants, visitors to
GPT’s properties, employees and/or
contractors
• Formalised Health and Safety management
system including policies and procedures for
managing safety
• Criminal/civil proceedings and resultant
• Training and education of employees and
People and
culture
Inability to attract, retain and
develop talented people and
provide an inclusive workplace
Inability to maintain a high
performing, ethical, and values
based workplace
This includes the consideration
of risk culture and specifically
conduct risk
reputation damage
contractors
• Financial impact of remediation
and restoration
• Failure to provide an environment that
• Background and reference checks on
enables employees to excel
• Failure to provide a safe working
environment free of harassment,
bullying and discrimination
• Limits the ability to achieve business
objectives in line with GPT’s values
commencement
• Whistleblower officer
• Annual Performance management process
setting objectives to promote clarity and
accountability
• Remedial performance management and
disciplinary action
• Monitoring of risk culture and conduct risk
• Discretionary incentive system and
Clawback Policy
• Benchmarking and setting competitive
remuneration
• Development planning
• Succession planning
• Talent management processes
• Promotion of GPT Values
• Code of conduct
• Conflicts of interest register
• Compliance training
• Grievance resolution process
• Diversity & Inclusion policies, guidelines
and training
Environmental
and social
sustainability
Inability to operate in a manner
that does not compromise
the health of ecosystems and
meets accepted social norms
• Negative impact to the communities,
the environment and the ecosystems
that GPT operates in
• Limits the ability to deliver the business
• Formalised Environment and Sustainability
management system including policies and
procedures for managing environmental and
social sustainability risks
This includes consideration
of climate change, energy
intensity, community wellbeing
and supply chain integrity
objectives and strategy
• Criminal/civil proceedings and resultant
reputation damage
• Financial impact of remediation
and restoration
• Climate related risks and potential
financial impacts are assessed
within GPT’s enterprise-wide risk
management framework
Information
security
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 business
objectives and strategy
• Technology risk management framework
• Privacy policy, guidelines and procedures
• Criminal/civil proceedings and resultant
reputation damage
• Financial impact of remediation
and restoration
9
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 2. Environmental regulation
3.
Events subsequent to reporting date
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 significant 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.
In managing the portfolio, GPT monitors and assesses
physical and transitional risks arising from climate change.
These risks are considered in GPT’s investment and portfolio
management decisions, as well as decisions to upgrade
buildings in anticipation of a low carbon future. GPT discloses
emissions data and climate strategy on its website. GPT
continues to take an active leadership role in transitioning
towards a low carbon future, participating in climate change
public policy development through involvement in:
• the Property Council of Australia;
• the Green Building Council of Australia;
On 16 January 2019, the Group announced the proposed
sale of its 50 per cent share of the MLC Centre. Proceeds
from the planned sale will initially repay debt prior to be
being reinvested into the development pipeline.
Other than the above, the Directors are not aware of any
matter or circumstances occurring since 31 December
2018 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.
4. Directors and secretary
Information on directors
Vickki McFadden – Chairman (appointed as a Non-
Executive Director 1 March 2018 and Chairman
from 2 May 2018)
Vickki was appointed to the Board on 1 March 2018 and
is also a member of the Nomination and Remuneration
Committee. She brings a broad range of skills and
experience to the Group gained during an 18 year career
spanning investment banking, corporate finance and
corporate law, and through her current and previous
board-level positions.
• the City of Sydney Better Building Partnership; and
• demonstration projects partnering with the Australian
Vickki currently holds Non-Executive directorships in the
following listed entities and other entities:
Renewable Energy Agency.
GPT has achieved a Group-wide reduction of 42% in energy
intensity, and a 56% reduction in emissions intensity
since 2005. GPT is currently developing its Energy Master
Plan which will continue the implementation of energy
efficiency programs. GPT will seek to further decouple
emissions from its energy requirements through renewable
energy purchases, electrification of gas infrastructure and
implementation of demand response programs. GPT’s
comprehensive Climate Change and Energy Policy is
available on GPT’s website.
GPT is 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
enables 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 2018 within the
required timeframe.
More information about GPT’s participation in the NGER
program is available at www.gpt.com.au.
• Tabcorp Holdings Limited (since 2017);
• Newcrest Mining Limited (since 2016); and
• Myer Family Investments Pty Limited (since 2011).
She is also President of the Takeovers Panel, a Member of
Chief Executive Women and a Member of the Advisory Board
and Executive Committee of the UNSW Business School.
Vickki was previously Chairman of Eftpos Payments
Australia Limited, Chairman of Skilled Group Limited (prior
to its acquisition by Programmed Maintenance Services
Limited) (Director from 2005 to 2015 and Chairman
from 2010 to 2015), a non-executive director of Leighton
Holdings Limited, and a Managing Director of Investment
Banking at Merrill Lynch Australia.
As at the date of this report she holds 50,000 GPT
stapled securities.
Rob Ferguson – Chairman (retired 2 May 2018)
Rob joined the Board in May 2009 and was 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:
• Watermark Market Neutral Fund Limited (since
2013); and
• Smartward Limited (since 2012).
10
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 He was also a Non-Executive Chairman of IMF Bentham
Limited from 2004 to January 2015, Chairman of Primary
Health Care Limited from 2009 to July 2018, and a Director
of Tyro Payments Limited from 2005 to July 2018.
As at the date of his retirement he held 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 30 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 821,765 GPT
stapled securities.
Brendan Crotty (retired on 9 November 2018)
Brendan was appointed to the Board in December 2009
and was 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 the Chairman of the National Housing
Finance and Investment Corporation (since 2018), a
director of Brickworks Limited (since 2008) and Chairman
of Cloud FX Pte Ltd. Brendan was previously Chairman of
Western Sydney Parklands Trust.
As at the date of this retirement he held 67,092 GPT
stapled securities.
Eileen Doyle
Eileen was appointed to the Board in March 2010. She is
also the Chairman of the Sustainability and Risk Committee
and a member of the Audit Committee and Nomination and
Remuneration Committee (retired as a member in November
2018). 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); and
• 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) and a Director of Sunway Berhad
in Malaysia (since 2011). Swe Guan is also a member of the
Investment Committee of CIMB Trust Cap Advisors and was
formerly a Director of Global Logistics Property in Singapore
until January 2018.
As at the date of this report, he holds 39,000 GPT
stapled securities.
Michelle Somerville
Michelle was appointed to the Board in December 2015
and is also the Chairman 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); and
• 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 36,663 GPT
stapled securities.
Gene Tilbrook
Gene was appointed to the Board in May 2010 and is
also the Chairman 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); and
• 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.
11
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 Angus McNaughton (appointed 1 November 2018)
Angus was appointed to the Board in November 2018 and
is also a member of the Nomination and Remuneration
Committee and the Audit Committee. He brings extensive
experience in property investment.
Angus was previously the CEO and Managing Director of
Vicinity Centres from August 2015 until December 2017.
Prior to that time, Angus served as the Managing Director
Property for Colonial First State Global Asset Management
from 2011, before becoming the CEO and Managing
Director of ASX-listed Novion Property Group in 2014.
Angus led Novion through to the completion of the merger
between Novion and Federation Centres, renamed as
Vicinity Centres, in June 2015.
Angus does not currently hold any Non-Executive Director
roles in other listed entities.
He was also previously Director, Real Estate of First State
Investments in Singapore and Chief Executive Officer of
Kiwi Income Property Trust in New Zealand.
As at the date of this report he does not hold 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
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
Number of
meetings
attended
Vickki McFadden1
Rob Ferguson
Robert Johnston1
Brendan Crotty
Eileen Doyle
Swe Guan Lim
Angus McNaughton
Michelle Somerville
Gene Tilbrook
10
3
11
9
11
11
3
11
11
10
3
11
9
11
11
3
11
10
-
-
-
4
5
5
1
5
-
-
-
-
3
3
5
1
5
-
4
2
-
-
5
-
2
-
6
4
2
-
-
5
-
2
-
6
-
-
-
3
4
4
-
4
-
-
-
-
3
4
4
-
4
-
1 Vickki McFadden and Bob Johnston also attended meetings of the Committees as non-members.
12
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 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 auditors; 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 2018 6. Remuneration report
The Nomination and 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 ensure that the GPT Group’s remuneration platform is both market competitive and fair to all stakeholders;
aligns performance measures to the achievement of GPT’s strategic objectives; and communicates the remuneration outcomes
clearly and transparently.
Governance
Who are the
members of the
Committee?
What is the scope
of work of the
Committee?
Who is included in
the Remuneration
Report?
The Committee consists of the following three Non-Executive Directors:
• Gene Tilbrook (Committee Chairman);
• Vickki McFadden; and
• Angus McNaughton.
2018 saw renewal and change on the Committee in line with changes to the Board:
• Rob Ferguson retired at the GPT AGM on 2 May 2018;
• Vickki McFadden joined GPT on 1 March 2018, and was appointed Chairman of GPT from 3 May 2018;
• Angus McNaughton joined GPT on 1 November 2018; and
• Eileen Doyle stepped down from the Committee on 8 November 2018.
In 2018 the Committee undertook the following activities on behalf of the Board:
• oversee the management of culture;
• implement, monitor, evaluate and oversee GPT’s remuneration framework;
• review and approve remuneration levels for the Board, Chief Executive Officer and key management personnel;
• review and approve key performance indicators for the Chief Executive Officer and assess the Chief Executive
Officer’s performance against those key performance indicators;
• review compliance with legal and regulatory requirements associated with the activities of the Committee;
• oversee the succession planning process for the Board, CEO and Leadership Team;
• implement procedures for the evaluation of the performance of the Board and Board committees;
• approve and oversee the implementation of GPT’s diversity & inclusion strategy, initiatives and policies;
• approve and oversee initiatives around talent development and employee engagement; and
• any other related matters regarding executives or the Board.
Effective 1 January 2019 a Human Resources and Remuneration Committee (HRRC) was formed with the same
membership as noted above. In addition, a Nomination Committee was formed consisting of the full Board1.
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 2018
Platform component Key decisions and outcomes
Base Pay (Fixed)
• Implemented the annual review of employee base pay effective 1 January 2018, with an average increase of 2.57%.
• Following benchmarking, implemented an annual review of Non-Executive Director base and committee fees effective
1 January 2018, with an average increase of 3.12% to bring Non-Executive Directors remuneration closer to market.
Short Term Incentive
Compensation (STIC)
• Maintained Funds from Operations (FFO) growth per security as the primary measure of Group financial performance.
• The Group achieved an FFO growth per security outcome of 3.5% which generated a STIC pool maximum of
$15.4 million.
• Maintained a deferred equity component of STIC vesting in one tranche at the end of the year following the conclusion
of the performance period.
Long Term Incentive
(LTI) Compensation
• Achieved a compound annual Total Return2 for the 2016-18 period of 15.50%, exceeding the benchmark of 9.75%
for maximum award, and delivered a Total Securityholder Return (TSR)3 of 32.76% which exceeded the ASX 200
AREIT Accumulation Index (the Index) performance of 26.60%.
• As a result, the vesting outcome for the 2016-18 LTI plan was 82.71% of the performance rights for each of the
Other employee
ownership plans
24 participants in the LTI plan.
• Launched the 2018-2020 LTI with two performance measures, Total Return and Relative TSR.
• Maintained the same performance hurdles and ranges as the prior year’s LTI plan.
• Aligned the vesting schedule for both performance measures such that 10% of the performance rights for each
measure vest at Threshold performance, with straightline pro-rata vesting through to 100% at the maximum
performance level.
• Continued the General Employee Security Ownership Plan (GESOP) for 105 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 264 employees ineligible for GESOP.
Under BBESOP, subject to GPT achieving the annual FFO growth per security target, 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 and
governance
• Utilised external advice on market compensation benchmarks and practice, prevailing regulatory and governance
standards, and drafting of incentive plan documentation from EY and Conari Partners4.
1 Further information about the role and responsibility of both the HRRC and the Nomination Committees is set out in their respective Charters, which are
available on GPT’s website (www.gpt.com.au). No additional fees are paid for membership of the Nomination Committee.
2 Total Return is defined as the sum of the change in Net Tangible Assets (NTA) and 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 2018, 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 2018 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 FFO
growth per security
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 and 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
FFO growth per security,
and earnings at portfolio,
fund and/or property level as
relevant.
• 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 50% cash
and 50% 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% 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
FFO growth per security.
• 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 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 2018 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 2018 remuneration arrangements were as follows:
Base pay: $1,460,000.
STIC: $0 to $1,825,000 (i.e. 0% to 125% of base pay) based on performance, paid in equal proportions
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 $2,190,000 (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
Base pay
STIC5
LTI
Mark Fookes
$820,000
$0 to $820,000
$0 to $820,000
Anastasia Clarke
$800,000
$0 to $800,000
$0 to $800,000
Termination by Company for cause No notice requirement or termination benefits (other than accrued entitlements).
Termination by Company (other)
3 months’ notice. Severance payments may be made subject to GPT policy and capped at the three year
average of the executive’s annual base (fixed) pay. Treatment of unvested STIC and LTI will be at the Board’s
discretion under the terms of the relevant plans and GPT policy.
Post-employment restraints
12 months non-solicitation of GPT employees.
3. Compensation mix at maximum STIC and LTI outcomes
Executive KMP
Bob Johnston
Position
Chief Executive Officer and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Base pay
26.7%
33.4%
33.4%
STI
33.3%
33.3%
33.3%
LTI
40.0%
33.3%
33.3%
Fixed remuneration
Variable or “at risk” remuneration6
5 The STIC is paid in an equal mix of cash and deferred GPT securities, with the securities component vesting 1 year after the conclusion of the performance year.
6 The percentage of each component of total remuneration is calculated with reference to maximum or stretch potential outcomes as set out under Remuneration
Package in Tables 1 and 2 above.
16
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 Group Financial Performance and Incentive Outcomes
1. Five year Group financial performance
Total Securityholder Return (TSR) (%)
Total Return (%)
NTA (per security) ($)
FFO (per security) (cents)
Security price at end of calendar year ($)
2018
7.0
15.8
5.58
31.8
5.34
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
2. Summary of CEO objectives and performance outcomes
Performance measure
Reason chosen
Weighting Performance outcomes
Financial
FFO growth per security
targets.
Strategy
Performance
Strategy objectives
focused on exploring
growth opportunities
for GPT group, as
well as development
and implementation
of strategic plans for
each division.
Operational objectives
focused on driving
performance of the
investment portfolio,
key milestones in the
development pipeline,
and other projects.
FFO growth per
security 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.
70%
10%
15%
People
People objectives
centred on increasing
employee engagement,
driving GPT’s diversity
and inclusion agenda,
and operational
excellence.
Maintaining a high
performing executive
team and achieving
engagement and
diversity goals is key
to GPT’s performance.
5%
The Group delivered FFO growth per security of 3.5% in 2018.
This was in excess of the Group’s target of 3% growth but
below the stretch objective set by the Board.
Management continued to execute on strategies approved
by the Board. This included securing new acquisitions in
the Office and Logistics sector and advancing plans for
development opportunities at Melbourne Central.
Management did not achieve a successful outcome of the
sale of Wollongong Central and progress on unlocking
opportunities at Sydney Olympic Park and Camellia was
behind target.
GPT’s Total Shareholder Return was 7.03% versus 3.95%
for the ASX AREIT 200 Accumulation Index.
Occupancy remains high across the Group’s portfolio and
like for like Net Operating Income (NOI) growth of 3.8% was
achieved, however the like for like NOI growth for the retail
portfolio was below target.
Office lease expiries in 2020 and 2021 continued to be a
focus for management however stretch target objectives
were not achieved.
Established the Operational Excellence PCG and delivered
business efficiencies through the use of technology,
streamlined decision making, and enhanced asset
management support to the funds management platform.
Pre-commitment for the 32 Smith Street development was
achieved and Development Approval conditions satisfied
allowing the commencement of the project, with the
development on plan to deliver targeted returns.
Progress was made on the Sunshine Plaza development but
final completion has been delayed to the end of Q1 2019.
Achieved Workplace Gender Equality Agency (WGEA)
Employer of Choice for Gender Equality citation in
February 2018 recognising GPT’s performance as among
the best employers.
Increased the percentage of females in the top 50% of
the business (measured by remuneration) from 42.24%
at the end of 2017 to 45.65%.
Launched GPT’s second Reconciliation Action Plan
(RAP), maintained participation of First Nations
employees in the permanent workforce at 1%, and
signed a 10 year agreement with Career Trackers to
expand its internship program.
Increased GPT’s score in the Australian Workplace
Equality Index (AWEI) survey from 42 to 79, 16 points
higher than the property sector average.
17
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 3. 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
generate STIC recommendations.
The 2018 STIC outcomes for the KMP are in Table 4 below, while STIC determination for the balance of the eligible
employees7 is to occur in March 2019, which is post the issue of the 2018 Remuneration Report. For the Group, FFO growth
per security performance hurdles are set for the year. For 2017, the Group delivered an FFO growth per security outcome of
3.0 per cent and generated a maximum amount of $13.8 million for the STIC pool, representing 64 per cent of the aggregate
of STIC participants' maximum STIC potential, of which $13.4 million was ultimately distributed to employees based on the
performance of the individual and their business unit/team against Group and individual KPI’s.
The following table shows the distribution of the 2017 STIC outcomes as a percentage of the individuals maximum
STIC opportunity.
2017 STIC Received as a % of Maximum STIC potential
Percentage of STIC participants
0-50%
3.79%
50-60%
11.36%
60-70%
71.97%
70-80%
80-90%
90-100%
8.33%
4.55%
0.0%
4. 2018 STIC outcomes by Executive KMP8
Executive KMP
Position
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Actual STIC
awarded
$1,227,000
$575,000
$575,000
Actual STIC
awarded as a % of
maximum STIC
% of maximum
STIC award
forfeited
Cash
component
Equity component
(# of GPT
securities)9
67.23%
32.77%
$613,500
117,788
71.88%
70.12%
28.12%
29.88%
$287,500
$287,500
55,198
55,198
5. Group performance measures for LTI Plans currently relevant
LTI performance
measurement
period
LTI
2016 2016–18
Performance measure
Performance measure
hurdle
Weighting
Results
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT) (the Index)
10% of rights vest at Index
performance, up to 100%
at Index plus 10% (pro
rata vesting in between)
50%
GPT’s TSR
performance
exceeded the
Index by 6.16%
Vesting % by
performance
measure
Overall Plan
Vesting
Outcome (%)
65.41%
82.71%
2017 2017–19
2018 2018–20
Total Return
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
Total Return
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
Total Return
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)
10% of rights vest at Index
performance, up to 100%
at Index plus 10% (pro
rata vesting in between)
10% of rights vest at
8.5% Total Return, up
to 100% at 10.0% Total
Return (pro-rata vesting
in between)
50%
15.50%
100.00%
50%
N/A
N/A
50%
N/A
N/A
N/A
50%
N/A
N/A
50%
N/A
N/A
N/A
i.e. excluding the KMP.
7
8 Excluding the impact of movements in the GPT security price on deferred STIC value received.
9 The number of deferred GPT securities granted are calculated by dividing 50% of the Actual STIC awarded by GPT’s Q4 2017 Volume Weighted Average Security
Price (VWAP) of $5.2085. The deferred GPT securities will vest subject to service on 31 December 2019.
18
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 6. 2016-2018 LTI outcomes by Executive KMP
Senior Executive
Position
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
450,257
139,365
171,527
372,385
115,262
141,862
77,872
24,103
29,665
7. LTI outcomes – fair value and maximum value recognised in future years10
Executive KMP
Year
Grant date
Bob Johnston
Chief Executive Officer and
Managing Director
2018
10 May 2018
2017
22 May 2017
Anastasia Clarke
2018
29 March 2018
Chief Financial Officer
2017
21 February 2017
Mark Fookes
2018
29 March 2018
Chief Operating Officer
2017
21 February 2017
Fair value per
performance right
Performance
rights granted as
at 31 Dec 18
Maximum value to
be recognised in
future years
Vesting date
$2.62
$2.66
$2.62
$2.66
$2.62
$2.66
420,467
452,206
153,595
157,563
157,435
172,269
31 Dec 20
31 Dec 19
31 Dec 20
31 Dec 19
31 Dec 20
31 Dec 19
$1,222,712
$955,709
$438,169
$293,563
$459,154
$320,962
8. Reported remuneration – Executive KMP – Actual Amounts Received11
Fixed pay
Variable or “at risk”12
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Total
Year
2018
2017
2018
2017
2018
2017
2018
2017
Base pay Superannuation
$1,439,710
$1,415,168
$779,710
$730,168
$799,710
$800,168
$3,019,130
$2,945,504
$20,290
$19,832
$20,290
$19,832
$20,290
$19,832
$60,870
$59,496
Other13
$8,354
$3,299
$5,275
$2,480
$10,585
$4,326
$24,214
$10,105
STIC
LTI
Total
$1,237,259
$1,972,002
$4,677,615
$1,195,801
$1,867,471
$4,501,571
$579,807
$523,556
$579,807
$565,442
$610,381
$1,995,463
$455,426
$1,731,462
$751,244
$2,161,636
$844,845
$2,234,613
$2,396,873
$3,333,627
$8,834,714
$2,284,799
$3,167,742
$8,467,646
9. Reported remuneration – Executive KMP – AIFRS Accounting14
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
2018
2017
2018
2017
2018
2017
2018
2017
Base pay Superannuation
$1,520,636
$1,376,680
$794,923
$775,348
$825,109
$840,325
$3,140,668
$2,992,353
$20,290
$19,832
$20,290
$19,832
$20,290
$19,832
$60,870
$59,496
Other
$8,354
$3,299
$5,275
$2,480
$10,585
$4,326
$24,214
$10,105
STIC (cash
plus accrual)
LTI award
accrual15
Total
$1,210,570
$1,168,869
$3,928,719
$1,219,543
$1,166,796
$3,786,150
$548,232
$569,961
$559,068
$669,971
$414,417
$1,783,137
$382,324
$1,749,945
$467,160
$1,882,212
$515,208
$2,049,662
$2,317,870
$2,050,446
$7,594,068
$2,459,475
$2,064,328
$7,585,757
10 For the avoidance of doubt, the GPT incentive plans (i.e. STIC and LTI) use face value grants of performance rights based on the VWAP of GPT securities for
specified periods; reference to fair value per performance right is included in this table to comply with accounting standards.
11 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.
12 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; 2018: $5.2956 (2017: $5.2085).
13 Other may include death and total/permanent disability insurance premiums, service awards, GPT superannuation plan administration fees, professional
memberships, subscriptions and/or other benefits.
14 This table provides a breakdown of remuneration for executive KMP in accordance with statutory requirements and Australian accounting standards.
15 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.
19
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 10. GPT security ownership – Executive KMP as at 31 December 2018
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
GPT
Holdings
(start of
period)16
Employee Security Schemes (ESS)
2018 DSTIC
2016–18
LTI
TOTAL ESS
for 2018
Purchase
/(Sales)
during
period17
GPT
Holdings
(end of
period)18
Gross Value
of GPT
Holdings19
MSHR
Guideline20
821,765
117,788
372,385
490,173
–
1,311,938
$6,947,499
$2,190,000
462,585
55,198
115,262
170,460
(223,839)
409,206
$2,166,991
$800,000
1,118,268
55,198
141,862
197,060
(156,013)
1,159,315
$6,139,269
$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 201821
(# of rights)
Performance rights still on foot at 31/12/1822
(# of rights)
Performance rights
135,278
45,702
53,184
872,673
311,158
329,704
16 GPT Holdings (start of period) include GPT securities obtained as sign on grants (Mr Johnston only), DSTIC up to and including 2017, LTI plans up to and
including the 2015-17 LTI plan, and private holdings.
17 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 2018 calendar year.
18 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. Note that some of the securities do not become actual holdings for the individual until after the conclusion of the performance year
when Group results are known which allow the conversion of performance rights under the various plan terms.
19 The GPT Holdings (end of period) multiplied by GPT’s fourth quarter 2018 VWAP of $5.2956 to derive a dollar value.
20 GPT’s Minimum Security Holding Requirement (MSHR) guideline requires the CEO to acquire and maintain a holding equal to 150% of base salary. For other
KMP and 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.
21 The sum of performance rights that were awarded to a participant in the 2016-2018 LTI that did not vest at the end of the 2016-2018 performance period, and
as a result, lapsed and/or performance rights granted under the 2018 DSTIC that also lapsed.
22 The total of unvested performance rights currently on foot excluding any GPT securities or performance rights that may have lapsed up to 31 December 2018.
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 2017-19 and 2018-20 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 2018 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; and
– 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 (having regard to
GPT’s industry sector and market capitalisation).
• External independent advice on remuneration levels for Non-Executive Directors is sought annually. In the event
that a review results in changes, 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 fees23,24
Board Base Fee
Audit Committee
Sustainability and Risk
Committee
Nomination and
Remuneration Committee
Chairman
Members
Year
2018
2017
2018
2017
$400,000
$380,000
$152,000
$148,000
$37,000
$36,000
$18,500
$18,000
$31,000
$30,000
$15,500
$15,000
2. Reported remuneration – Non-Executive Directors – AIFRS accounting25,26
Non-Executive Director – Current
Vickki McFadden28
Chairman
Eileen Doyle
Swe Guan Lim
Angus McNaughton29
Michelle Somerville
Gene Tilbrook
Non-Executive Director – Former
Rob Ferguson30
Brendan Crotty31
Total
Year
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Salary and fees
Superannuation
Other27
Fixed pay
$289,851
–
$214,596
$203,500
$186,000
$181,000
$27,917
–
$204,500
$192,750
$183,000
$178,000
$137,949
$380,000
$159,292
$181,000
$1,403,105
$1,316,250
$16,481
–
$20,094
$19,333
$17,670
$17,195
$2,652
–
$19,428
$18,311
$17,385
$16,910
$8,617
$19,832
$15,133
$17,195
$117,460
$108,776
–
–
–
–
$908
$287
–
–
–
–
$1,103
$380
–
–
–
–
$2,011
$667
$31,000
$30,000
$15,500
$15,000
Total
$306,332
–
$234,690
$222,833
$204,578
$198,482
$30,569
–
$223,928
$211,061
$201,488
$195,290
$146,566
$399,832
$174,425
$198,195
$1,522,576
$1,425,693
23 ‘Chairman’ used in this sense may refer to the chairperson of the board or a particular committee.
24 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.
25 This table provides a breakdown of remuneration for Non-Executive Directors in accordance with statutory requirements and Australian accounting standards.
26 No termination benefits were paid during the financial year.
27 Other may include death and total/permanent disability insurance premiums and/or GPT superannuation plan administration fees.
28 Ms McFadden joined GPT on 1 March 2018, and was appointed Chairman of GPT from 3 May 2018.
29 Mr McNaughton joined GPT on 1 November 2018.
30 Mr Ferguson retired from the GPT Board on 2 May 2018.
31 Mr Crotty retired from the GPT Board on 8 November 2018.
21
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018
3. Non-Executive Director – GPT security holdings
Non-Executive Director
Balance 31/12/17
Purchase/(Sale)
Balance 31/12/18
Private holdings (# of securities)
Minimum security holding requirement (MSHR)
MSHR guideline33
Gross value32
Vickki McFadden
Eileen Doyle
Swe Guan Lim
Angus McNaughton
Michelle Somerville
Gene Tilbrook
–
45,462
15,800
–
16,157
48,546
50,000
–
23,200
–
20,506
–
50,000
45,462
39,000
–
36,663
48,546
$264,780
$240,749
$206,528
–
$194,153
$257,080
$400,000
$152,000
$152,000
$152,000
$152,000
$152,000
32 Non-Executive Directors holdings multiplied by GPT’s fourth quarter 2018 VWAP of $5.2956 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.
Vickki McFadden
Chairman
Sydney
11 February 2019
Bob Johnston
Chief Executive Officer and Managing Director
22
Annual Financial Report of The GPT GroupDirectors’ Report – Year ended 31 December 2018 Auditor’s Independence Declaration
As lead auditor for the audit of General Property Trust for the year ended 31 December 2018,
I declare that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of General Property Trust and the entities it controlled during
the period.
Susan Horlin
Partner
PricewaterhouseCoopers
Sydney
11 February 2019
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
23
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 2018
Note
31 Dec 18
$M
31 Dec 171
$M
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
Derecognition of available for sale financial asset
Net gain on disposal of assets
Gain on financial liability at amortised cost
Net foreign exchange gain
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
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
Movement in hedging reserve
Movement in fair value of cash flow hedges
Revaluation of available for sale financial asset
Movement in net foreign exchange translation reserve
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
Basic earnings per unit attributable to ordinary securityholders of the Trust
Earnings per unit (cents per unit) – profit from continuing operations
Earnings per unit (cents per unit) – profit from discontinued operations
Earnings per unit (cents per unit) – Total
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
Earnings per security (cents per security) – profit from discontinued operations
Earnings per security (cents per security) – Total
634.1
79.2
34.4
4.8
752.5
637.2
497.8
1.4
–
1.3
2.4
0.1
1,140.2
1,892.7
163.2
71.5
27.4
2.0
5.2
11.3
125.8
40.0
1.5
447.9
610.6
70.2
15.0
10.8
706.6
481.0
442.8
1.3
10.7
–
2.2
–
938.0
1,644.6
158.3
71.7
14.4
1.7
6.0
5.4
103.7
5.7
0.2
367.1
1,444.8
1,277.5
9.5
1,435.3
16.4
1,451.7
10.9
(3.8)
–
(16.8)
(9.7)
1,442.0
1,442.4
(0.4)
10.3
1,267.2
0.8
1,268.0
(2.5)
(6.9)
(7.1)
–
(16.5)
1,251.5
1,250.7
0.8
1,417.7
34.0
1,248.2
19.8
1,424.8
17.2
1,238.8
12.7
77.7
0.9
78.6
79.5
0.9
80.4
69.3
–
69.3
70.4
–
70.4
9(a)
10(b)
10(b)
10(b)
10(b)
11(a)
11(a)
11(a)
11(b)
11(b)
11(b)
1 The 31 December 2017 Consolidated Statement of Comprehensive Income has been restated as a result of the adoption of new accounting standards. Refer to
note 24(a).
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 2018
ASSETS
Current assets
Cash and cash equivalents
Trade receivables
Other receivables
Inventories
Derivative assets
Prepayments
Other assets
Current tax 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 the Trust securityholders
Securityholders of other entities stapled to the Trust
Contributed equity
Reserves
Accumulated losses
Total equity of other stapled securityholders
Total equity
Note
4(a)
4(b)
6
14(b)
9(b)
2
3
5
6
14(b)
9(c)
7
9(b)
13
14(b)
8
13
14(b)
8
10(a)
10(b)
10(c)
10(a)
10(b)
10(c)
31 Dec 18
$M
31 Dec 171
$M
58.7
51.4
52.5
31.0
1.5
12.8
22.8
0.8
231.5
10,128.8
3,905.9
26.8
113.3
12.7
338.9
20.1
–
14,546.5
14,778.0
411.0
–
516.0
4.0
26.2
957.2
3,598.9
120.2
1.1
3,720.2
4,677.4
10,100.6
7,825.7
(33.5)
2,790.0
10,582.2
325.9
37.9
(845.4)
(481.6)
10,100.6
49.9
48.4
47.5
11.8
3.4
7.0
23.0
–
191.0
8,745.7
3,561.8
30.9
140.4
9.9
257.7
16.9
3.0
12,766.3
12,957.3
384.7
8.6
19.9
9.1
28.1
450.4
3,280.7
118.0
2.3
3,401.0
3,851.4
9,105.9
7,814.8
(40.6)
1,828.4
9,602.6
325.7
57.0
(879.4)
(496.7)
9,105.9
1 The 31 December 2017 Consolidated Statement of Financial Position has been restated as a result of the adoption of new accounting standards. Refer to
note 24(a).
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
25
Annual Financial Report of The GPT Group
2
6
Equity attributable to Securityholders
At 1 January 2017
Revaluation of available for sale financial asset net of tax
Movement in hedging reserve
Movement in fair value of cash flow hedges
Other comprehensive income for the year
Profit for the year
Total comprehensive income for the year
Note
10(b)
10(b)
10(b)
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 20171
Equity attributable to Securityholders
At 1 January 20181
Movement in foreign exchange translation reserve
Movement in hedging reserve
Movement in fair value of cash flow hedges
Other comprehensive income for the year
Profit for the year
Total comprehensive income for the year
10(a)
10(b)
10(c)
12
10(b)
10(b)
10(b)
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 2018
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
7,804.3
(31.2)
1,022.8
8,795.9
325.5
–
–
–
–
–
–
10.5
–
–
–
–
(2.5)
(6.9)
(9.4)
–
(9.4)
–
–
–
–
–
–
–
–
–
(2.5)
(6.9)
(9.4)
1,248.2
1,248.2
1,248.2
1,238.8
–
–
10.5
–
0.6
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
–
–
(0.5)
–
(7.1)
–
–
(7.1)
19.8
12.7
0.2
4.6
(0.5)
–
(7.1)
(2.5)
(6.9)
(16.5)
1,268.0
1,251.5
10.7
4.6
0.1
(443.2)
9,105.9
7,814.8
(40.6)
1,828.4
9,602.6
325.7
57.0
(879.4)
(496.7)
7,814.8
(40.6)
1,828.4
9,602.6
325.7
–
–
–
–
–
–
10.9
–
–
–
–
10.9
(3.8)
7.1
–
7.1
–
–
–
–
–
–
–
–
–
10.9
(3.8)
7.1
1,417.7
1,417.7
1,417.7
1,424.8
–
–
10.9
–
3.4
3.4
(459.5)
(459.5)
–
–
–
–
–
–
0.2
–
–
–
57.0
(16.8)
–
–
(16.8)
–
(16.8)
–
(2.3)
–
–
(879.4)
(496.7)
9,105.9
–
–
–
–
34.0
34.0
–
–
–
–
(16.8)
(16.8)
–
–
(16.8)
34.0
17.2
10.9
(3.8)
(9.7)
1,451.7
1,442.0
0.2
(2.3)
11.1
(2.3)
–
–
3.4
(459.5)
7,825.7
(33.5)
2,790.0 10,582.2
325.9
37.9
(845.4)
(481.6)
10,100.6
1 The 31 December 2017 Consolidated Statement of Changes in Equity have been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
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
8
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 2018
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
Payments 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(a)
Cash flows from investing activities
Payments for 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 asset
Capital return from joint venture
Net cash outflows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment for termination of derivatives
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
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Note
31 Dec 18
$M
31 Dec 17
$M
809.4
(286.8)
28.9
(21.4)
161.3
–
1.4
(20.9)
(137.9)
534.0
(419.5)
(81.8)
(270.5)
13.3
(2.9)
(3.4)
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)
(10.8)
(158.3)
–
1.9
10.7
–
(773.7)
(470.4)
2,862.1
1,434.1
(2,164.4)
(1,066.9)
–
(449.2)
248.5
8.8
49.9
58.7
(3.1)
(435.6)
(71.5)
(6.4)
56.3
49.9
27
Annual Financial Report of The GPT Group
Notes to the Financial Statements
Year ended 31 December 2018
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 25 – 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
Result for the year
1. Segment information
GPT’s operating segments are described in the following
table. 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
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.
Logistics
Ownership, development (including mixed use)
and management of logistics assets.
Funds
Management
Management of two Australian wholesale property
funds in the retail and office sectors.
Corporate
Cash and other assets and borrowings and
associated hedges plus resulting net finance
costs, management operating costs and income
tax expense.
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 2018
The segment financial information provided to the chief operating decision maker for the year ended 31 December 2018 is
set out below:
Logistics
$M
Funds
Management
$M
Corporate
$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)
Management & administrative expenses
b(v)
Operations Net Income
Development management fees
Development revenue
Development costs
Development management expenses
Development Net Income
b(vi)
b(vii)
b(v)
Interest income
Finance costs
Net Finance Costs
Retail
$M
370.5
(103.0)
46.3
15.0
(10.2)
318.6
2.6
6.6
–
(1.6)
7.6
–
–
–
Office
$M
253.3
(53.1)
69.8
5.8
(8.1)
267.7
1.7
–
–
(0.7)
1.0
–
–
–
127.4
(21.0)
–
0.2
(1.8)
104.8
0.5
38.5
(33.1)
(0.8)
5.1
–
–
–
Segment Result Before Tax
326.2
268.7
109.9
Income tax expense
Funds from Operations (FFO)
b(viii)
b(i)
–
–
–
326.2
268.7
109.9
–
–
–
58.2
(15.6)
42.6
–
–
–
–
–
–
–
–
42.6
–
42.6
–
–
–
–
(34.2)
(34.2)
–
–
–
–
–
1.4
(125.8)
(124.4)
(158.6)
(14.2)
(172.8)
Total
$M
751.2
(177.1)
116.1
79.2
(69.9)
699.5
4.8
45.1
(33.1)
(3.1)
13.7
1.4
(125.8)
(124.4)
588.8
(14.2)
574.6
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
Equity accounted investments
Inventories
Other non-current assets
Total Non-Current Assets
Total Assets
Current and non-current liabilities
Total Liabilities
Net Assets
16.9
16.9
5,154.9
1,055.1
62.1
10.2
6,282.3
6,299.2
–
–
–
–
14.1
14.1
3,080.5
2,840.8
–
0.6
1,893.4
–
51.2
0.1
5,921.9
1,944.7
5,921.9
1,958.8
–
–
–
–
6,299.2
5,921.9
1,958.8
–
–
–
–
–
–
–
–
–
–
–
200.5
200.5
231.5
231.5
–
10,128.8
10.0
3,905.9
–
387.6
113.3
398.5
397.6
14,546.5
598.1
14,778.0
4,677.4
4,677.4
4,677.4
4,677.4
(4,079.3)
10,100.6
29
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
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:
Financial performance by segment
Rent from investment properties
Property expenses and outgoings
Income from Funds
Fee income
Note
b(ii)
b(iii)
b(iv)
Management & administrative expenses
b(v)
Retail
$M
360.1
(98.8)
46.5
15.0
(9.7)
Office
$M
239.2
(57.6)
68.8
4.4
(7.0)
Operations Net Income
313.1
247.8
Development fees
Development revenue
Development costs
Development management expenses
Development Net Income
b(vi)
b(vii)
b(v)
Interest income
Finance costs
Net Finance Costs
9.0
10.8
(5.2)
(9.3)
5.3
–
–
–
1.6
–
–
(0.5)
1.1
–
–
–
Segment Result Before Tax
Income tax expense
Funds from Operations (FFO)
b(viii)
b(i)
318.4
248.9
–
–
318.4
248.9
Logistics
$M
112.5
(17.4)
–
0.1
(1.9)
93.3
0.2
10.4
(9.2)
(0.7)
0.7
–
–
–
94.0
–
94.0
Funds
Management
$M
Corporate
$M
–
–
–
50.7
(13.7)
37.0
–
–
–
–
–
–
–
–
37.0
–
37.0
–
–
–
–
(30.6)
(30.6)
–
–
–
–
–
1.3
(103.7)
(102.4)
(133.0)
(11.1)
(144.1)
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
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
Equity accounted investments1
Inventories
Other non-current assets
Total Non-Current Assets
Total Assets
Current and non-current liabilities
Total Liabilities
Net Assets
–
–
–
–
11.8
11.8
4,818.7
1,047.1
62.4
10.2
5,938.4
5,938.4
–
–
2,379.4
2,504.7
–
0.3
1,547.6
–
78.0
1.9
4,884.4
1,627.5
4,884.4
1,639.3
–
–
–
–
5,938.4
4,884.4
1,639.3
–
–
–
–
–
–
–
–
–
–
–
179.2
179.2
191.0
191.0
–
8,745.7
10.0
3,561.8
–
306.0
140.4
318.4
316.0
12,766.3
495.2
12,957.3
3,851.4
3,851.4
3,851.4
3,851.4
(3,356.2)
9,105.9
1 The 31 December 2017 equity accounted investments balance has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
30
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(b) Reconciliation of segment result to the Consolidated Statement of Comprehensive Income
31 Dec 18
$M
31 Dec 171
$M
(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 rental income
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
Gain on financial liability at amortised cost
Financial instruments mark to market and net foreign exchange loss
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 rental income
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
574.6
637.2
314.1
(46.1)
5.5
910.7
(40.0)
(1.5)
(0.5)
2.4
(39.6)
18.3
(11.4)
(0.9)
6.0
554.2
481.0
263.9
(38.9)
11.7
717.7
(5.7)
(0.2)
0.8
2.2
(2.9)
10.7
(5.4)
(6.3)
(1.0)
1,451.7
1,268.0
751.2
(76.5)
(46.1)
5.5
634.1
711.8
(74.0)
(38.9)
11.7
610.6
(177.1)
13.9
(173.8)
15.5
(163.2)
(158.3)
1 The 31 December 2017 reconciliation of segment result to the statement of comprehensive income has been restated as a result of the adoption of new
accounting standards. Refer to note 24(a).
31
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(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
Development revenue – equity accounted investments
Development costs – equity accounted investments
Development revenue
Adjustments
Fair value gain and other adjustments to equity accounted investments
Transition to AASB 9
Consolidated Statement of Comprehensive Income
Share of after tax profit of equity accounted investments
(v) Management and administration expenses
Segment result
Operations
Development
Less: depreciation expense
Adjustment
Other
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) Development costs
Segment result
Development costs
Development costs – equity accounted investments
Consolidated Statement of Comprehensive Income
Development costs
(viii) Income tax expense
Segment result
Income tax expense
Adjustment
Tax impact of reconciling items from segment result to net profit for the year
Consolidated Statement of Comprehensive Income
Income tax expense
31 Dec 18
$M
31 Dec 171
$M
116.1
76.5
(13.9)
10.7
(5.7)
–
314.1
–
497.8
(69.9)
(3.1)
2.0
(0.5)
(71.5)
45.1
(10.7)
34.4
(33.1)
5.7
(27.4)
115.3
74.0
(15.5)
–
–
6.2
263.9
(1.1)
442.8
(62.9)
(10.5)
1.7
–
(71.7)
21.2
(6.2)
15.0
(14.4)
–
(14.4)
(14.2)
(11.1)
4.7
(9.5)
0.8
(10.3)
1 The 31 December 2017 reconciliation of segment result to the statement of comprehensive income has been restated as a result of the adoption of new
accounting standards. Refer to note 24(a).
32
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(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
Other assets
Net assets
Revenue
Expenses
31 Dec 18
$M
31 Dec 17
$M
13.4
(0.1)
13.3
(12.0)
17.0
–
18.3
12.0
–
12.0
10.7
–
10.7
(10.7)
–
10.7
10.7
–
10.7
10.7
Rental revenue from investment properties is recognised
on a straight line 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 straight line
basis over the lease term. Contingent rental income is
recognised as revenue in the period in which it is earned.
Revenue from dividends and distributions is recognised
when they are declared.
Interest income is recognised on an accruals basis using
the effective interest method.
Refer to note 23(e)(iv) for further information relating to
revenue policies adopted under AASB 15 Revenue from
Contracts with Customers.
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 the relevant capitalisation rate taking
into account the group’s weighted average cost of debt.
33
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
Operating assets and liabilities
2. Investment properties
Retail
Office
Logistics
Properties under development
Total investment properties
(a) Retail
Casuarina Square, NT
Charlestown Square, NSW
Highpoint Shopping Centre, VIC
Homemaker City, Maribyrnong, VIC2
Westfield Penrith, NSW
Sunshine Plaza, QLD
Plaza Parade, QLD
Rouse Hill Town Centre, NSW
Melbourne Central, VIC – retail portion3
Total Retail
(b) Office
Note
31 Dec 18
$M
31 Dec 17
$M
(a)
(b)
(c)
(d)
(e)
5,154.9
4,818.7
3,018.5
2,306.8
1,773.6
1,498.6
181.8
121.6
10,128.8
8,745.7
Ownership
interest1
%
Acquisition
date
Latest
independent
valuation
date
Valuer
Fair value
31 Dec 18
$M
Fair value
31 Dec 17
$M
Pacific Highway, Charlestown, NSW
100.0 Oct 2002/Jul 2003
Jun 2018
Knight Frank Valuations
50.0
100.0
Oct 1973
Dec 1977
Dec 2018
Savills Australia
Jun 2018
Knight Frank Valuations
16.7
16.7
50.0
Aug 2009
Aug 2009
Jun 1971
Dec 2018
CB Richard Ellis Pty Ltd
435.0
Jun 2018
CB Richard Ellis Pty Ltd
Jun 2018
M3 Property
**50.0 Dec 1992/Sep 2004
Dec 2018
CB Richard Ellis Pty Ltd
50.0
100.0
Jun 1999
Dec 2005
Dec 2018
CB Richard Ellis Pty Ltd
Dec 2018
CB Richard Ellis Pty Ltd
100.0 May 1999/May 2001
Dec 2018
Savills Australia
1,513.0
1,383.2
Australia Square, Sydney, NSW
MLC Centre, Sydney, NSW
One One One Eagle Street, Brisbane, QLD
Melbourne Central, VIC – office portion3
50.0
50.0
33.3
Sep 1981
Apr 1987
Apr 1984
Dec 2018
Colliers International
Dec 2018
Jones Lang LaSalle
Dec 2018
CB Richard Ellis Pty Ltd
100.0 May 1999/May 2001
Dec 2018
CB Richard Ellis Pty Ltd
Corner of Bourke and William, VIC
60 Station Street, Parramatta, NSW4
100.0
4 Murray Rose Avenue, Sydney Olympic Park, NSW5 *100.0
50.0
Oct 2014
Sep 2018
May 2002
Dec 2018
Savills Australia
Dec 2018
Colliers International
Dec 2018
Cushman & Wakefield
Total Office
300.8
969.3
8.0
–
716.3
564.0
13.3
635.2
322.6
924.8
6.6
434.2
11.7
669.5
449.3
10.0
606.8
5,154.9
4,818.7
557.5
775.0
300.0
603.0
380.0
278.0
125.0
444.2
662.2
293.7
546.7
360.0
–
–
3,018.5
2,306.8
1 Freehold, unless otherwise marked with an * which denotes leasehold and ** denotes a combination of freehold and leasehold respectively.
2 On 12 December 2018 GPT sold its 16.67% interest in Homemaker City, Maribyrnong, for consideration of $13.4 million.
3 Melbourne Central: 71.5% Retail and 28.5% Office (31 Dec 2017: 71.7% Retail and 28.3% Office). Melbourne Central – Retail Includes 100% of Melbourne
Central car park and 100% of 202 Little Lonsdale Street.
4 On 6 September 2018 GPT acquired a 100% interest in 60 Station Street, Parramatta for total consideration of $292.9 million (including transaction costs of
$15.3 million).
5 Following practical completion in October 2018, 4 Murray Rose Avenue, Olympic Park has been reclassified from properties under development to investment
property in the Office portfolio.
34
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
Ownership
interest1
%
Acquisition
date
Latest
independent
valuation
date
Valuer
Fair value
31 Dec 18
$M
Fair value
31 Dec 17
$M
(c) Logistics
Citiwest Industrial Estate, Altona North, VIC
Quad 1, Sydney Olympic Park, NSW
Quad 4, Sydney Olympic Park, NSW
100.0
*100.0
*100.0
Aug 1994
Jun 2001
Jun 2004
Dec 2018
Dec 2018
Dec 2018
Savills Australia
M3 Property
M3 Property
90.0
28.0
58.0
Sydney Olympic Park Town Centre, NSW
*100.0 Jun 2001–Apr 2013
Dec 2018
Jones Lang LaSalle
121.5
Rosehill Business Park, Camellia, NSW
16-34 Templar Road, Erskine Park, NSW
67-75 Templar Road, Erskine Park, NSW
Austrak Business Park, Somerton, VIC
4 Holker Street, Newington, NSW
372-374 Victoria Street, Wetherill Park, NSW
18-24 Abbott Road, Seven Hills, NSW
Citiport Business Park, Port Melbourne, VIC
83 Derby Street, Silverwater, NSW
10 Interchange Drive, Eastern Creek, NSW
407 Pembroke Road, Minto, NSW
38 Pine Road, Yennora, NSW
16-28 Quarry Road, Yatala, QLD
59 Forest Way, Karawatha, QLD
29-55 Lockwood Road, Erskine Park, NSW
36-52 Templar Road, Erskine Park, NSW
54-70 Templar Road, Erskine Park, NSW
1A Huntingwood Drive, Huntingwood, NSW
1B Huntingwood Drive, Huntingwood, NSW
55 Whitelaw Place, Wacol, QLD
54 Eastern Creek Drive, Eastern Creek, NSW
Sunshine Business Estate, Sunshine, VIC2
396 Mount Derrimut Road, Derrimut, VIC3
399 Boundary Road, Truganina, VIC4
Total Logistics
(d) Property under development
407 Pembroke Rd, Minto, NSW
Austrak Business Park, Somerton, VIC
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
50.0
50 Old Wallgrove Road, Eastern Creek, NSW
100.0
4 Murray Rose Avenue, Sydney Olympic Park, NSW5 *100.0
32 Smith, Parramatta, NSW
100.0
21 Shiny Dr & 2, 6 & 10 Prosperity St, Truganina, VIC6 100.0
Total Properties under development
May 1998
Jun 2008
Jun 2008
Oct 2003
Mar 2006
Jul 2006
Oct 2006
Mar 2012
Aug 2012
Aug 2012
Oct 2008
Nov 2013
Nov 2013
Dec 2012
Jun 2008
Jun 2008
Jun 2008
Oct 2016
Oct 2016
Dec 2016
Apr 2016
Jan 2018
Nov 2018
Dec 2018
Oct 2008
Oct 2003
Jun 2016
May 2002
Mar 2017
Nov 2018
81.6
24.0
51.5
90.2
81.4
58.3
24.2
Dec 2018
Savills Australia
Dec 2018
Colliers International
Dec 2018
CB Richard Ellis Pty Ltd
86.0
65.0
26.0
Dec 2018
Jones Lang LaSalle
182.4
170.5
Dec 2018
Jones Lang LaSalle
Dec 2018
Dec 2018
M3 Property
Savills Australia
Dec 2018
Jones Lang LaSalle
Dec 2018
Savills Australia
Dec 2018
Jones Lang LaSalle
Dec 2018
CB Richard Ellis Pty Ltd
Dec 2018
Colliers International
Dec 2018
Dec 2018
Dec 2018
Savills Australia
Savills Australia
Savills Australia
Dec 2018
Jones Lang LaSalle
Dec 2018
M3 Property
Dec 2018
CB Richard Ellis Pty Ltd
Dec 2018
CB Richard Ellis Pty Ltd
Dec 2018
Savills Australia
Dec 2018
CB Richard Ellis Pty Ltd
Dec 2018
CB Richard Ellis Pty Ltd
Nov 2018
Nov 2018
Savills Australia
Savills Australia
35.5
26.5
39.3
82.5
40.0
33.3
30.5
61.0
44.8
114.0
104.5
107.0
152.0
46.0
25.5
16.5
51.8
78.0
12.4
15.6
33.0
24.8
34.6
75.8
34.8
33.2
25.5
52.9
44.3
108.0
98.1
98.3
145.0
41.3
9.6
15.0
42.7
–
–
–
1,773.6
1,498.6
Dec 2018
CB Richard Ellis Pty Ltd
Dec 2018
Jones Lang LaSalle
Dec 2018
Savills Australia
–
–
Dec 2018
CB Richard Ellis Pty Ltd
Nov 2018
Jones Lang LaSalle
5.8
32.8
60.2
–
62.0
21.0
5.6
21.7
21.7
33.0
39.6
–
181.8
121.6
1 Freehold, unless otherwise marked with an * which denotes leasehold and ** denotes a combination of freehold and leasehold respectively.
2 On 24 January 2018 GPT acquired a 100% interest in four logistics assets in Sunshine, Victoria for total consideration of $78.3 million (including transaction
costs of $4.3 million).
3 On 1 November 2018 GPT acquired a 100% interest in 396 Mount Derrimut Road, Derrimut for total consideration of $13.1 million (including transaction costs
of $0.7 million).
4 On 20 December 2018 GPT acquired a 100% interest in 399 Boundary Road, Truganina for total consideration of $16.7 million (including transaction costs of
$1.1 million).
5 Following practical completion in October 2018, 4 Murray Rose Avenue, Olympic Park has been reclassified from properties under development to investment
property in the Office portfolio.
6 On 16 November 2018 GPT acquired a 100% interest in 21 Shiny Drive and 2, 6 & 10 Prosperity Street, Truganina for total consideration of $22.3 million
(including transaction costs of $1.3 million).
35
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(e) Reconciliation
Carrying amount at the beginning of the year
4,818.7
2,306.8
1,498.6
121.6
8,745.7
7,944.9
Retail
$M
Office
$M
Logistics
$M
Properties under
development
$M
31 Dec 18
$M
31 Dec 17
$M
Additions – operating capital expenditure
Additions – development capital expenditure
Additions – interest capitalised1
Asset acquisitions
Transfers from properties under development
Transfer to inventory
Transfers from inventory
Disposals
Fair value adjustments
Lease incentives (includes rent free)
Leasing costs
Amortisation of lease incentives and costs
Straightlining of leases
26.5
148.8
7.1
–
–
(9.0)
–
(12.0)
168.6
14.0
3.7
(12.8)
1.3
15.8
13.6
0.3
292.9
125.0
–
–
–
264.5
21.7
3.1
(24.5)
(0.7)
5.6
24.6
0.4
108.1
–
–
–
–
133.2
5.9
1.1
(8.8)
4.9
–
86.1
5.9
22.3
(125.0)
–
–
–
70.9
–
–
–
–
47.9
273.1
13.7
423.3
–
(9.0)
–
(12.0)
637.2
41.6
7.9
(46.1)
5.5
50.9
215.8
8.6
33.0
–
–
2.8
(5.5)
481.0
36.3
5.1
(38.9)
11.7
Carrying amount at the end of the year
5,154.9
3,018.5
1,773.6
181.8
10,128.8
8,745.7
1 A capitalisation interest rate of 4.2% (2017: 5.4%) 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) Lease receivables
Lease amounts to be received 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
31 Dec 18
$M
31 Dec 17
$M
523.9
1,417.8
989.0
2,930.7
467.5
1,285.6
979.9
2,733.0
Lease amounts to be received includes future amounts to be received on non-cancellable operating leases, not recognised in the
financial statements at balance date. A proportion of this balance includes amounts receivable for recovery of operating costs
on gross and semi-gross leases which will be accounted for as revenue from contracts with customers as this income is earned.
The remainder will be accounted for as lease income as it is earned. Amounts receivable under non-cancellable operating leases
where GPT’s right to consideration for a service directly corresponds with the value of the service provided to the customer have
not been included (for example, variable amounts payable by tenants for their share of the operating costs of the asset).
36
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018 3. Equity accounted investments
Investments in joint ventures
Investments in associates1
Total equity accounted investments
(a) Details of equity accounted investments
Note
(a)(i)
(a)(ii)
31 Dec 18
$M
31 Dec 17
$M
1,358.2
2,547.7
3,905.9
1,135.0
2,426.8
3,561.8
Name
(i) Joint ventures
2 Park Street Trust2
1 Farrer Place Trust2
Horton Trust
Lendlease GPT (Rouse Hill) Pty Limited2,3
Erskine Park Joint Venture
DPT Operator Pty Limited
Total investment in joint venture entities
(ii) Associates
GPT Wholesale Office Fund1,2,4
GPT Wholesale Shopping Centre Fund2,5
GPT Funds Management Limited
Total investments in associates
Ownership Interest
Principal Activity
31 Dec 18
%
31 Dec 17
%
31 Dec 18
$M
31 Dec 17
$M
Investment property
Investment property
Investment property
Property development
Property development
Management
Investment property
Investment property
Funds management
50.00
50.00
50.00
50.00
50.00
50.00
23.83
28.57
100.00
50.00
50.00
50.00
50.00
50.00
50.00
24.95
28.80
100.00
763.1
553.6
30.1
11.3
–
0.1
630.1
465.9
27.0
11.9
–
0.1
1,358.2
1,135.0
1,524.0
1,013.7
10.0
2,547.7
1,408.6
1,008.2
10.0
2,426.8
1 The 31 December 2017 balance of investments in associates has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
2 The entity has a 30 June balance date.
3 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.
4 Ownership has decreased as a result of GPT not participating in the subsequent Distribution Reinvestment Plan (DRP) during the year and the equity raising in
December 2018.
5 Ownership has decreased as a result of GPT not participating in the subsequent Distribution Reinvestment Plan (DRP) during the year.
37
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(b) Summarised financial information for associates and joint ventures
The information disclosed reflects the amounts presented in the 31 December 2018 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 18
$M
31 Dec 17
$M
31 Dec 18
$M
31 Dec 17
$M
31 Dec 18
$M
31 Dec 17
$M
31 Dec 18
$M
31 Dec 17
$M
13.7
2.0
15.7
9.8
1.8
11.6
12.1
5.8
17.9
10.9
7.1
18.0
Total non-current assets
1,525.0
1,260.0
1,129.1
953.5
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
14.4
0.1
14.5
–
–
9.4
2.0
11.4
–
–
32.0
7.8
39.8
–
–
33.0
6.7
39.7
–
–
12.3
0.1
12.4
72.5
1.9
–
1.9
–
–
17.6
8.2
25.8
63.9
2.8
0.1
2.9
8.8
8.8
38.1
7.9
46.0
38.3
17.1
55.4
2,726.6
2,277.4
48.3
7.9
56.2
–
–
45.2
8.8
54.0
8.8
8.8
Net assets
1,526.2
1,260.2
1,107.2
931.8
83.0
78.0
2,716.4
2,270.0
64.8
16.0
–
–
–
(2.8)
78.0
39.0
4.6
16.0
16.0
2,270.0
2,008.8
544.9
323.2
1.6
(3.7)
20.0
(116.4)
–
–
36.0
(98.0)
2,716.4
2,270.0
1,358.2
1,135.0
146.8
544.9
544.9
140.0
323.2
323.2
Reconciliation to carrying amounts:
Opening net assets 1 January
Profit for the year
Capital injection
Capital reduction
Issue of equity
1,260.2
1,095.8
323.1
197.6
931.8
202.7
–
–
848.2
109.6
–
–
–
–
24.6
15.7
11.4
78.0
19.1
1.6
(3.7)
–
–
–
4.3
Distributions paid/payable
(61.4)
(57.8)
(43.0)
(37.4)
(12.0)
Closing net assets
GPT’s share
1,526.2
1,260.2
1,107.2
931.8
763.1
630.1
553.6
465.9
Summarised statement of comprehensive income
Revenue
Profit for the year
Total comprehensive income
67.2
323.1
323.1
73.0
197.6
197.6
58.0
202.7
202.7
62.4
109.6
109.6
83.0
41.5
21.6
19.1
19.1
38
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(ii) Associates
GPT Wholesale
Office Fund
GPT Wholesale
Shopping
Centre Fund
GPT Funds
Management
Limited
Total
31 Dec 18
$M
31 Dec 171
$M
31 Dec 18
$M
31 Dec 17
$M
31 Dec 18
$M
31 Dec 17
$M
31 Dec 18
$M
31 Dec 17
$M
Total current assets
83.0
68.1
34.5
51.8
10.0
10.0
127.5
129.9
Total non-current assets
7,734.5
7,032.8
4,809.3
4,799.6
Total current liabilities
148.4
156.5
98.1
129.4
Total non-current liabilities
1,273.4
1,299.1
1,197.3
1,221.5
–
–
–
–
–
–
246.5
2,470.7
12,543.8
11,832.4
Net assets
6,395.7
5,645.3
3,548.4
3,500.5
10.0
10.0
9,954.1
Reconciliation to carrying amounts:
Opening net assets 1 January
5,645.3
5,230.7
3,500.5
3,253.0
10.0
10.0
9,155.8
Profit for the year
Issue of equity
715.1
284.6
684.1
–
164.7
28.6
400.6
7.2
Distributions paid/payable
(249.3)
(269.5)
(145.4)
(160.3)
Closing net assets
GPT’s share
6,395.7
5,645.3
3,548.4
3,500.5
1,524.0
1,408.6
1,013.7
1,008.2
Summarised statement of comprehensive income
Revenue
Profit for the year
Total comprehensive income
Distributions received/receivable
from their associates
465.7
715.1
715.1
500.3
684.1
684.1
325.0
164.7
164.7
294.9
400.6
400.6
37.2
39.5
–
–
–
–
–
10.0
10.0
–
–
–
–
–
–
–
10.0
10.0
–
–
–
–
879.8
313.2
(394.7)
9,954.1
2,547.7
790.7
879.8
879.8
285.9
2,520.6
9,155.8
8,493.7
1,084.7
7.2
(429.8)
9,155.8
2,426.8
795.2
1,084.7
1,084.7
37.2
39.5
1 The 31 December 2017 balance of investments in associates has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
4. Trade and other receivables
(a) Trade receivables
Current assets
Trade receivables1
Accrued income
Related party receivables2
Less: impairment of trade receivables
Total current trade receivables
31 Dec 18
$M
31 Dec 17
$M
15.9
12.6
25.1
(2.2)
51.4
10.6
17.4
21.3
(0.9)
48.4
1 This includes trade receivables relating to revenue from contracts with customers. Refer to note 24(b) for the methodology of apportionment between trade
receivables relating to AASB 15 revenue and other trade receivables balances.
2 The related party receivables are on commercial terms and conditions.
39
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
The following table shows the ageing analysis of GPT’s trade receivables.
Retail
Office
Logistics
Corporate
Less: impairment of trade receivables
Total loans and receivables
(b) Other receivables
Current assets
Distributions receivable from associates
Distributions receivable from joint ventures
Other receivables
Total current other receivables
0-30
days
$M
3.6
15.2
1.6
27.1
–
47.5
31-60
days
$M
0.2
0.3
0.3
0.2
–
1.0
31 Dec 18
61-90
days
$M
(0.1)
2.0
–
0.2
–
2.1
90+
days
$M
2.0
0.7
–
0.3
(2.2)
0.8
Total
$M
5.7
18.2
1.9
27.8
(2.2)
51.4
31 Dec 17
31-60
days
$M
61-90
days
$M
0.7
0.2
–
–
–
–
0.1
–
–
–
0-30
days
$M
6.9
13.2
2.5
23.0
–
45.6
0.9
0.1
90+
days
$M
2.1
0.5
0.1
–
(0.9)
1.8
Total
$M
9.7
14.0
2.6
23.0
(0.9)
48.4
31 Dec 18
$M
31 Dec 17
$M
26.7
13.7
12.1
52.5
26.3
12.9
8.3
47.5
Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest
rate method less any allowance.
All loans and receivables with maturities greater than 12 months after the balance date are classified as non-current assets.
Refer to note 23(e) (iv) for the accounting policies for trade and other receivables and other information relating to the
adoption of AASB 9 Financial Instruments.
5. Intangible assets
Costs
Balance as at 31 December 2016
Additions
Disposals
Transfer to other assets
Balance as at 31 December 2017
Additions
Balance as at 31 December 2018
Accumulated amortisation and impairment
Balance as at 31 December 2016
Amortisation
Impairment
Disposals
Balance as at 31 December 2017
Amortisation
Balance as at 31 December 2018
Carrying amounts
Balance as at 31 December 2017
Balance as at 31 December 2018
40
Management
rights
$M
IT development
and software
$M
Total
$M
122.9
4.7
(11.4)
2.8
119.0
1.1
120.1
67.1
4.7
(11.4)
2.8
63.2
1.1
64.3
(42.5)
(87.6)
(5.7)
(5.9)
11.4
(42.7)
(5.1)
(47.8)
20.5
16.5
(6.0)
(5.9)
11.4
(88.1)
(5.2)
(93.3)
30.9
26.8
55.8
–
–
–
55.8
–
55.8
(45.1)
(0.3)
–
–
(45.4)
(0.1)
(45.5)
10.4
10.3
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
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.
6. Inventories
Development properties
Current inventories
Development properties
Non-current inventories
Total inventories
31 Dec 18
$M
31 Dec 17
$M
31.0
31.0
113.3
113.3
144.3
11.8
11.8
140.4
140.4
152.2
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 of $11.4 million has been recognised for the year ended 31 December 2018 (2017:
Impairment expense reversal of $0.4 million).
7. Payables
Trade payables and accruals
GST payables
Distribution payable to stapled securityholders
Interest payable
Levies payable
Other payables
Total payables
31 Dec 18
$M
31 Dec 17
$M
128.0
2.5
231.9
16.0
17.6
15.0
411.0
124.5
1.1
221.6
17.6
15.1
4.8
384.7
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.
41
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018 8. Provisions
Current provisions
Employee benefits
Other
Total current provisions
Non-current provisions
Employee benefits
Total non-current provisions
31 Dec 18
$M
31 Dec 17
$M
12.2
14.0
26.2
1.1
1.1
10.1
18.0
28.1
2.3
2.3
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.
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
31 Dec 18
$M
115.6
31 Dec 17
$M
114.5
42
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
9. Taxation
(a) Income tax expense
Current income tax expense
Deferred income tax credit
Income tax expense in the Statement of Comprehensive Income
Income tax expense attributable to:
Profit from continuing operations
Aggregate income tax expense
31 Dec 18
$M
31 Dec 17
$M
13.2
(3.7)
9.5
9.5
9.5
(b) Reconciliation of accounting profit to income tax expense and current tax (asset)/liability1
Net profit for the year excluding income tax expense
1,461.2
Less: Trust profit not subject to tax
Profit which is subject to taxation
Prima facie income tax at 30% tax rate (2017: 30%)
Tax effect of amounts not deductible/assessable in calculating income tax expense:
Adjustments for income tax for prior years
Previously unrecognised tax losses
Non-deductible revaluation items in the Company
Non-assessable income
Other tax adjustments
Income tax expense
Add/(less) amounts to reconcile to current tax (asset)/liability:
Temporary differences:
Employee benefits
Provisions and accruals
Dividends received
Other deferred tax asset charged to income
Movement in reserves
Opening balance:
Tax losses transferred from deferred tax asset
Tax adjustments:
Movement in reserves
Tax payments made to tax authorities
Current tax (asset)/liability
(c) Deferred tax assets
Employee benefits
Provisions and accruals
Other
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
(1,488.4)
(27.2)
(8.2)
–
–
22.5
(5.3)
0.5
9.5
0.5
–
–
2.7
0.5
8.6
(1.7)
(20.9)
(0.8)
15.9
2.9
1.3
20.1
16.9
3.7
(0.5)
–
20.1
1 The 31 December 2017 accounting profit has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
20.0
(9.7)
10.3
10.3
10.3
1,278.3
(1,273.4)
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
15.4
2.9
(1.4)
16.9
7.5
9.7
1.7
(2.0)
16.9
43
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(d) Effective tax rate
Adoption of Voluntary Tax Transparency Code
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 following table, using:
• accounting profit before tax adjusted to exclude transactions which are not reflected in the calculation of income tax
expense, including;
– trust taxable income which is attributed in full to its securityholders; and
– non tax related material items in the Company; and
• tax expense adjusted to exclude carry forward tax losses that have been recognised and prior year under/overstatements.
Net profit for the year before income tax expense
Exclude:
Trust profit not subject to tax
Non-deductible revaluation items in the Company
Amounts released from foreign currency translation reserve
Equity accounted profits from joint ventures in the Company
Distribution received from joint ventures taxable to the Company
Profit used to calculate effective tax rate
Income tax expense
Exclude:
Carry forward tax losses recognised
Prior year (under)/overstatements
Income tax expense used to calculate effective tax rate
Effective tax rate
31 Dec 18
$M
1,461.2
31 Dec 171
$M
1,278.3
(1,488.4)
(1,273.4)
75.1
(17.0)
(5.9)
4.8
29.8
9.5
–
–
9.5
32%
34.1
–
(6.2)
–
32.8
10.3
0.4
(0.2)
10.5
32%
1 The 31 December 2017 Net profit for the year excluding income tax expense and Trust profit not subject to tax have been restated as a result of the adoption of
new accounting standards. Refer to note 24(a).
Trusts
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 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 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; and
– 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.
44
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
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 2018, 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.
10. Equity and reserves
(a) Contributed equity
Other entities
stapled to the
Trust
$M
Trust
$M
Total
$M
Number
Ordinary stapled securities
Opening securities on issue 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 and contributed equity at 31 December 2017
1,801,640,882
7,814.8
325.7
8,140.5
Opening securities on issue at 1 January 2018
Securities issued – Long Term Incentive Plan
Securities issued – Deferred Short Term Incentive Plan
Securities issued – Broad Based Employee Security Ownership Plan
1,801,640,882
7,814.8
325.7
8,140.5
2,332,026
875,344
42,174
6.6
4.1
0.2
0.1
0.1
–
6.7
4.2
0.2
Closing securities on issue and contributed equity at 31 December 2018
1,804,890,426
7,825.7
325.9
8,151.6
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.
45
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(b) Reserves
Foreign currency
translation
reserve
Cash flow
hedge reserve
Cost of
hedging reserve
Employee
incentive
scheme reserve
Other
entities
stapled
to GPT
$M
Other
entities
stapled
to GPT
$M
Trust
$M
35.1
(7.8)
Trust
$M
(26.4)
Balance at 1 January 2017
Revaluation of available for
sale financial asset, net of tax
Derecognition of available for
sale financial asset, net of tax
Movement in hedging reserve
Movement in fair value of cash
flow hedges
Security-based payment
transactions, net of tax
–
–
–
–
–
–
–
–
–
–
–
–
–
(6.9)
–
Balance at 31 December 2017
(26.4)
35.1
(14.7)
Balance at 1 January 2018
(26.4)
35.1
(14.7)
Net foreign exchange
translation adjustments
Movement in hedging reserve
Movement in fair value of cash
flow hedges
Security-based payment
transactions, net of tax
–
–
–
–
(16.8)
–
–
–
–
–
(3.8)
–
Balance at 31 December 2018
(26.4)
18.3
(18.5)
Nature and purpose of reserves
Foreign currency translation reserve
Other
entities
stapled
to GPT
$M
Trust
$M
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other
entities
stapled
to GPT
$M
17.3
–
–
–
–
4.6
21.9
21.9
–
–
–
(2.3)
19.6
Trust
$M
3.0
–
–
(2.5)
–
–
0.5
0.5
–
10.9
–
–
11.4
–
–
–
–
–
–
–
–
–
–
–
–
–
Available for
sale reserve
Total reserve
Other
entities
stapled
to GPT
$M
Other
entities
stapled
to GPT
$M
Trust
$M
Trust
$M
–
–
–
–
–
–
–
–
–
–
–
–
–
7.1
(31.2)
59.5
1.0
(8.1)
–
–
–
–
–
–
–
–
–
–
–
–
(2.5)
(6.9)
1.0
(8.1)
–
–
–
4.6
(40.6)
57.0
(40.6)
57.0
–
(16.8)
10.9
(3.8)
–
–
–
(33.5)
(2.3)
37.9
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.
Cost of hedging reserve
The reserve records the changes in the fair value of the currency basis spread that is part of cross currency swaps used to
hedge foreign denominated borrowings, but is excluded from the hedge designations. This reserve is inclusive of share of
cost of hedging reserve of equity accounted investments. Refer to note 23(e)(iv) for further details.
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.
46
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018 (c) Retained earnings/accumulated losses
Note
Consolidated entity
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 20171
Balance at 1 January 2018
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 2018
Trust
$M
1,022.8
1,248.2
(443.2)
0.6
1,828.4
1,828.4
1,417.7
(459.5)
3.4
2,790.0
Other entities
stapled to GPT
$M
(898.7)
19.8
–
(0.5)
(879.4)
(879.4)
34.0
–
–
Total
$M
124.1
1,268.0
(443.2)
0.1
949.0
949.0
1,451.7
(459.5)
3.4
(845.4)
1,944.6
1 The 31 December 2017 retained earnings/accumulated losses balance has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
11. Earnings per stapled security
(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 the 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 stapled securityholders
of The GPT Group
31 Dec 18
Cents
31 Dec 18
Cents
31 Dec 17
Cents
31 Dec 17
Cents
Basic
Diluted
Basic
Diluted
77.7
0.9
78.6
79.5
0.9
80.4
77.5
0.9
78.4
79.4
0.9
80.3
69.3
–
69.3
70.4
–
70.4
69.2
–
69.2
70.3
–
70.3
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
1,401.3
1,401.3
1,247.4
1,247.4
Net profit from discontinued operations attributable to the securityholders of the Trust
16.4
16.4
0.8
0.8
Basic and diluted earnings of the Trust
Add: Net profit from continuing 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
WANOS used as the denominator in calculating basic earnings per ordinary stapled security
Performance security rights at weighted average basis1
WANOS used as the denominator in calculating diluted earnings per ordinary
stapled security
1,417.7
1,417.7
1,248.2
1,248.2
34.0
34.0
34.0
34.0
19.8
19.8
19.8
19.8
1,451.7
1,451.7
1,268.0
1,268.0
Millions
Millions
Millions
Millions
1,804.4
1,804.4
1,801.1
1,801.1
2.7
1,807.1
2.4
1,803.5
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.
47
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
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
2018
6 month period ended 30 June 2018
6 month period ended 31 December 20181
Total distributions paid/payable for the year
2017
6 month period ended 30 June 2017
6 month period ended 31 December 2017
Total distributions paid/payable for the year
Cents per
stapled security
Total amount
$M
12.61
12.85
25.46
12.30
12.30
24.60
227.6
231.9
459.5
221.6
221.6
443.2
1 The December 2018 half yearly distribution of 12.85 cents per stapled security has been declared on 19 December 2018 and is expected to be paid on 28 February 2019
based on the record date of 31 December 2018.
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 through profit and loss – unsecured1
Non-current borrowings at amortised cost – secured
Non-current borrowings
Total borrowings2 – carrying amount
Total borrowings3 – fair value
31 Dec 18
$M
31 Dec 17
$M
427.5
88.5
516.0
2,101.4
1,484.9
12.6
3,598.9
4,114.9
4,170.0
–
19.9
19.9
1,911.9
1,280.5
88.3
3,280.7
3,300.6
3,347.8
1 Cumulative fair value adjustments are shown in the table on the next page.
2
3 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
Including unamortised establishment costs, fair value and other adjustments.
market observable inputs (level 2) and unobservable inputs (level 3). This excludes unamortised establishment costs.
All borrowings with maturities greater than 12 months after reporting date are classified as non-current liabilities.
When the terms of a financial liability are modified, AASB 9 Financial Instruments requires an entity to perform an
assessment to determine whether the modified terms are substantially different from the existing financial liability. Where
a modification is substantial, it will be accounted for as an extinguishment of the original financial liability and a recognition
of a new financial liability. Where the modification does not result in extinguishment, the difference between the existing
carrying amount of the financial liability and the modified cash flows discounted at the original effective interest rate is
recognised in the Statement of Comprehensive Income as gain/loss on modification of financial liability. GPT management
have assessed the modification of terms requirements within AASB 9 Financial Instruments and have concluded that these
will not have a material impact for the Group.
48
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
The following table outlines the cumulative amount of fair value hedge adjustments that are included in the carrying amount
of borrowings in the statement of financial position.
Nominal amount
Unamortised borrowing costs
Amortised cost
Cumulative fair value hedge adjustments
Carrying amount
The maturity profile of borrowings as at 31 December 2018 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
Less: commercial paper4
Total financing resources available at the end of the year
31 Dec 18
$M
31 Dec 17
$M
1,221.8
(4.3)
1,217.5
267.4
1,484.9
Used
facility1
$M
516.0
1,513.7
1,796.8
3,826.5
1,131.8
(2.5)
1,129.3
151.2
1,280.5
Unused
facility2,3
$M
–
1,178.3
–
1,178.3
58.7
1,237.0
(177.5)
1,059.5
Total
facility1,2,3
$M
516.0
2,692.0
1,796.8
5,004.8
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 Drawings on GPT’s uncommitted commercial paper program are in addition to GPT’s committed facilities and are classified as current borrowings. These drawings
may be refinanced by non-current unsecured undrawn bank loan facilities.
Including $200 million of forward starting facilities available to GPT.
3
4 GPT’s commercial paper program is an uncommitted line with a maturity period of generally three months or less and is therefore excluded from available liquidity.
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 2018 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) Derivatives
GPT enters into derivative transactions to manage exposure to market risks and volatility of financial outcomes that arise
as part of normal business operations. GPT’s treasury policy requires hedging 100% of its foreign currency exposure in
respect to foreign currency borrowings and therefore applies a hedge ratio of 1:1. GPT’s policy is for the critical terms of the
cross currency swaps to align with the hedged item. GPT determines the existence of an economic relationship between the
hedging instrument and the hedged item based on notional amounts, currency, reference interest rates, tenors, maturities
and timing of cashflows. GPT assesses whether the derivative designated in each hedging relationship is expected to be and
has been effective in offsetting changes in cashflows of the hedged item using the hypothetical derivative method.
49
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
In these hedge relationships, the main sources of ineffectiveness are:
• the effect of the counterparty and GPT’s own credit risk on the fair value of the swaps, which is not reflected in the fair
value of the hedged item; and
• changes in swap rates will impact the fair value of the Australian dollar margin and implied foreign currency
margin respectively.
In order to qualify for hedge accounting, prospective hedge effectiveness testing must meet all of the following criteria:
• an economic relationship exists between the hedged item and hedging instrument;
• the effect of credit risk does not dominate the value changes resulting from the economic relationship; and
• the hedge ratio is the same as that resulting from actual amounts of hedged items and hedging instruments for
risk management.
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. 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. 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 prospective hedge effectiveness. Foreign currency basis
spreads have been excluded from GPT’s designated fair value and cash flow hedge relationships.
Hedge accounting is discontinued when the hedging instrument expires, is terminated, or is no longer in an effective
hedge relationship.
The following table shows the carrying amount and nominal amount of each component of borrowings and derivative
financial instruments categorised by hedge type.
31 Dec 18
31 Dec 17
Nominal
amount
$M
Net
Assets
$M
Net
Liabilities1
$M
Movement
$M
Nominal
amount
$M
Net
Assets
$M
Net
Liabilities1
$M
Movement
$M
Borrowings by hedge designation
Fair value hedges
(1,221.8)
–
(1,489.2)
(206.2)
(1,131.8)
–
(1,283.0)
(340.2)
Derivatives by hedge designation
Fair value hedges
Cash flow hedges
1,221.8
1,221.8
(21.1)
286.5
265.4
(3.0)
2.2
(0.8)
(26.6)
148.9
122.3
1,131.8
1,131.8
17.4
140.0
157.4
(14.9)
(0.2)
(15.1)
(2.0)
(70.2)
(72.2)
1 Excludes unamortised establishment costs.
The following table shows the nominal amount of derivatives designated in cash flow and fair value hedge relationships in
time bands based on the maturity of the derivatives.
31 Dec 18
0 to 12
months
$M
1 to 5
years
$M
Over 5
years
$M
Total
$M
0 to 12
months
$M
31 Dec 17
1 to 5
years
$M
Over 5
years
$M
Total
$M
Cross currency interest rate swaps
Nominal amount
Average receive fixed interest rate
–
–
–
–
1,221.8
1,221.8
3.7%
N/A
–
–
–
–
1,131.8
1,131.8
3.7%
N/A
50
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(i) Fair value hedges
All changes in the fair value of the underlying item relating to the hedged risk (movements in benchmark interest rates) are
recognised in the income statement together with the changes in the fair value of derivatives. The net difference is recorded
in the income statement as ineffectiveness. The carrying value of borrowings in effective fair value hedge relationships is
adjusted for gains or losses attributable to the risk(s) being hedged.
The following table shows the gain/(loss) recognised in net impact of foreign currency borrowings and associated hedging
loss in the Consolidated Statement of Comprehensive Income related to hedge ineffectiveness from fair value hedges.
Change in value of hedged item used to measure ineffectiveness
Change in value of hedging instrument to measure ineffectiveness
Net gain/(loss) from ineffectiveness
31 Dec 18
Gain/(loss)
$M
31 Dec 17
Gain/(loss)
$M
(116.1)
114.6
(1.5)
63.2
(63.4)
(0.2)
(ii) Cash flow hedges
The portion of the gain or loss on the hedging instrument that is effective (offsets the movement on the hedged item
attributable to interest rates and foreign exchange movements) is recognised directly in the cash flow hedge reserve in equity
and any ineffective portion is recognised as net impact of foreign currency borrowings and associated hedging loss directly in
the income statement.
No hedge relationships have been discontinued during the year. Therefore there is no balance in the cash flow hedge reserve
from any hedge relationship for which hedge accounting is no longer applied. There were no amounts transferred from the
cash flow hedge reserve to profit or loss during the year (2017: $nil).
During the current and prior financial years, there was no material impact on profit or loss resulting from ineffectiveness of
cash flow hedges.
(b) 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 following table provides a summary of GPT’s
gross interest rate risk exposure as at 31 December 2018 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
Interest rate risk – sensitivity analysis
Gross exposure
Net exposure
31 Dec 18
$M
31 Dec 17
$M
31 Dec 18
$M
31 Dec 17
$M
2,346.8
1,479.7
3,826.5
2,056.8
1,065.5
3,122.3
3,190.0
636.5
3,826.5
2,370.0
752.3
3,122.3
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
31 Dec 18
(+1%)
$M
31 Dec 18
(-1%)
$M
31 Dec 17
(+1%)
$M
31 Dec 17
(-1%)
$M
0.6
(6.4)
(0.6)
6.4
0.5
(7.5)
(0.5)
7.5
51
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
Hedging interest rate risk
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 18
$M
31 Dec 17
$M
1.5
338.9
340.4
108.2
232.2
4.0
120.2
124.2
108.2
16.0
3.4
257.7
261.1
95.9
165.2
9.1
118.0
127.1
95.9
31.2
All of GPT’s derivatives were valued using market observable inputs (level 2) with the exception of a year on year inflation
swap as at 31 December 2017. 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.
52
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(c) 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 18
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
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
411.0
–
–
–
–
–
–
–
411.0
384.7
–
8.6
–
–
–
–
–
–
384.7
8.6
516.0
312.7
1,201.0 1,796.8 3,826.5
20.0
513.5
982.0 1,606.8 3,122.3
136.3
132.2
299.4
392.3
960.2
128.2
114.2
279.1
433.6
955.1
23.3
22.2
54.6
11.5
111.6
23.8
21.7
36.5
6.8
88.8
Total liabilities
1,086.6
467.1
1,555.0 2,200.6 5,309.3
565.3
649.4
1,297.6 2,047.2 4,559.5
Less cash and cash equivalents
58.7
–
–
–
58.7
49.9
–
–
–
49.9
Total liquidity exposure
Projected interest income on derivative assets2
1,027.9
467.1
1,555.0 2,200.6 5,250.6
515.4
649.4
1,297.6 2,047.2 4,509.6
19.9
12.5
16.2
33.1
81.7
34.3
31.6
59.5
64.4
189.8
Net liquidity exposure
1,008.0
454.6
1,538.8 2,167.5 5,168.9
481.1
617.8
1,238.1 1,982.8 4,319.8
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 2018
and 31 December 2017 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.
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.
2
(d) 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, counterparties 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 2018, 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.
53
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(e) 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 18
$M
31 Dec 17
$M
31 Dec 18
$M
31 Dec 17
$M
31 Dec 18
$M
31 Dec 17
$M
–
–
–
–
–
–
1.2
–
1.2
0.3
–
0.3
–
211.0
211.0
–
1,182.2
1,182.2
0.1
118.2
118.3
–
1,096.1
1,096.1
–
53.6
53.6
–
307.0
307.0
–
24.1
24.1
–
186.9
186.9
Assets
Cash and cash equivalents
Derivative financial instruments
Liabilities
Other liabilities
Borrowings1
1 Excluding unamortised establishment costs
(f) 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 recognised at an amount equal to
lifetime ECL. Refer to 23(e)(iv) for the calculation of lifetime ECL. 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 2018 is the carrying amounts of financial assets recognised on
GPT’s Consolidated Statement of Financial Position. For more information refer to note 4.
54
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
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 on financial liability at amortised cost
Impairment expense
Share of after tax profit of equity accounted investments (net of distributions)
Profit on disposal of assets
Decrecognition of available for sale financial asset
Depreciation and amortisation
Non-cash employee benefits – security based payments
Non-cash revenue adjustments
Interest capitalised
Profit on sale of inventories
Proceeds from sale of inventories
Payment for inventories
(Increase)/decrease in operating assets
(Decrease)/increase in operating liabilities
Net foreign exchange loss/(gain)
Other
Net cash inflows from operating activities
1 The 31 December 2017 cash flow reconciliation has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
(b) Net debt reconciliation
Reconciliation of net debt movements during the financial year:
Net debt as at 1 January 2017
Cash flows
Foreign exchange adjustments
Other non-cash movements
Net debt as at 31 December 2017
Net debt as at 1 January 2018
Cash flows
Foreign exchange adjustments
Other non-cash movements
Net debt as at 31 December 2018
Borrowings
due within
1 year
$M
(48.8)
28.8
–
0.1
(19.9)
(19.9)
(157.5)
–
(338.6)
(516.0)
Cash
$M
56.3
(6.4)
–
–
49.9
49.9
8.8
–
–
58.7
31 Dec 18
$M
1,451.7
(637.2)
31 Dec 171
$M
1,268.0
(481.0)
40.0
1.5
(2.4)
11.3
(335.2)
(18.3)
–
7.2
10.7
24.1
(13.7)
(1.7)
28.9
(21.4)
(12.0)
(6.0)
0.5
6.0
534.0
Borrowings
due after
1 year
$M
(2,947.8)
(396.0)
63.2
(0.1)
5.7
0.2
(2.2)
5.4
(283.9)
–
(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
Total
$M
(2,940.3)
(373.6)
63.2
–
(3,280.7)
(3,250.7)
(3,280.7)
(3,250.7)
(540.2)
(116.1)
338.1
(688.9)
(116.1)
(0.5)
(3,598.9)
(4,056.2)
55
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
16. Commitments
(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
(b) Operating lease commitments
31 Dec 18
$M
31 Dec 17
$M
52.7
44.9
14.6
177.7
4.9
294.8
101.2
23.1
6.1
48.3
1.4
180.1
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 18
$M
31 Dec 17
$M
5.7
18.0
14.3
38.0
3.2
6.2
–
9.4
31 Dec 18
$M
108.2
108.2
31 Dec 17
$M
31.8
31.8
17. Contingent liabilities
(b) BBESOP
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 2018, GPT has no material contingent
liabilities which need to be disclosed.
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.
18. Security based payments
(c) DSTI
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.
56
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 any subsequent
plans, all the awarded stapled securities will vest one year
after conversion, subject to continued employment up to
the vesting date.
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(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. Fair value of the performance rights issued under DSTI is determined using the security price. 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 2017
Rights granted during 2017
Rights forfeited during 2017
Rights converted to GPT stapled securities during 20171
Rights outstanding at 31 December 2017
Rights outstanding at 1 January 2018
Rights granted during 2018
Rights forfeited during 2018
Rights converted to GPT stapled securities during 20182
Rights outstanding at 31 December 2018
2018 LTI
$2.62
$4.74
7.0%
2018 DSTI
$5.34
$5.34
N/A
29 March 2018
29 March 2018
31 December 2020
31 December 2019
$4.74
$4.74
3 years (2 years remaining)
2 years (1 year remaining)
5.4%
2.1%
18.0%
Number of rights
LTI
8,607,534
2,854,675
(323,771)
(2,792,225)
8,346,213
8,346,213
2,712,482
(879,580)
(2,332,026)
7,847,089
DSTI
1,212,639
1,338,498
(357,284)
(855,355)
1,338,498
1,338,498
1,308,548
(550,030)
(875,344)
1,221,672
4.8%
N/A
N/A
Total
9,820,173
4,193,173
(681,055)
(3,647,580)
9,684,711
9,684,711
4,021,030
(1,429,610)
(3,207,370)
9,068,761
1 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.
2 Rights under the 2017 DSTI plan were converted to GPT stapled securities on 19 March 2018 and rights under the 2015 LTI Plan were converted to GPT stapled
securities on 13 February 2018.
57
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
Securities outstanding at 1 January 2017
Securities granted during 2017
Securities vested during 2017
Securities outstanding at 31 December 2017
Securities outstanding at 1 January 2018
Securities granted during 2018
Securities vested during 2018
Securities outstanding at 31 December 2018
19. Related party transactions
General Property Trust is the ultimate parent entity.
Number of stapled securities
GESOP
60,756
53,982
(60,756)
53,982
53,982
62,609
(53,982)
62,609
BBESOP
92,761
48,480
(17,688)
123,553
123,553
37,488
(46,277)
114,764
Total
153,517
102,462
(78,444)
177,535
177,535
100,097
(100,259)
177,373
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
Total key management personnel compensation
31 Dec 18
$’000
31 Dec 17
$’000
6,943.4
178.3
2,050.4
9,172.1
6,778.9
168.3
2,064.3
9,011.5
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
31 Dec 18
$’000
31 Dec 17
$’000
Contributions to superannuation funds on behalf of employees
(6,172.5)
(5,704.0)
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
Distributions received/receivable from joint ventures
Distributions received/receivable from associates
Payroll costs recharged to associates
Other transactions
Loans (advanced to)/repaid from joint ventures
Increase in units in joint ventures
Increase in units in associates
58
58,233.0
17,654.2
5,196.5
1,406.0
6,356.4
58,183.6
104,331.3
9,519.9
50,744.1
15,660.8
6,963.9
(597.3)
6,441.7
48,783.5
110,030.9
9,396.8
1,839.1
(10,926.9)
–
146.0
(17,915.2)
(139,818.3)
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
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 18
$’000
31 Dec 17
$’000
1,266.2
1,266.2
1,245.2
1,245.2
197.7
197.7
1,463.9
170.3
–
170.3
1,634.2
208.5
208.5
1,453.7
58.0
3.5
61.5
1,515.2
Parent entity
31 Dec 18
$M
31 Dec 171
$M
102.3
15,431.9
15,534.2
313.1
4,533.2
4,846.3
10,687.9
7,849.1
(5.9)
2,844.7
10,687.9
1,815.9
1,815.9
32.7
32.4
3.9
177.7
246.7
148.2
12,964.2
13,112.4
383.8
3,424.6
3,808.4
9,304.0
7,833.9
(13.5)
1,483.6
9,304.0
1,258.3
1,258.3
92.4
11.8
3.9
48.3
156.4
59
1 The 31 December 2017 parent entity information has been restated as a result of the adoption of new accounting standards. Refer to note 24(a).
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
Inter-co loan receivables are considered to be low risk, and therefore the impairment provision is determined as 12 months
expected credit losses. Applying the expected credit risk model does not result in any loss allowance being recognised in 2018.
The parent entity had a deficiency of current net assets of $210.8 million (2017: $235.6 million) arising as a result of the
inclusion of the provision for distribution payable to stapled securityholders. The parent has access to cash and undrawn
financing facilities of $1,059.5 million as set out in note 13.
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.
(i) Fair value measurement, valuation techniques and inputs
A description of the valuation techniques and key inputs are included in the following table:
Class of
assets/liabilities
Fair value
hierarchy1
Valuation
technique
Inputs used to
measure fair value
Retail
Level 3
Office
Level 3
Discounted
cash flow (DCF)
and income
capitalisation
method
DCF and income
capitalisation
method
Unobservable
inputs
31 Dec 2018
Unobservable
inputs
31 Dec 2017
3.1% – 3.6%
3.0% – 3.7%
10 year average specialty market
rental growth
Gross market rent (per sqm p.a.)
$1,279 – $2,306
$1,280 – $2,252
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
4.1% – 5.5%
4.4% – 5.8%
6.3% – 7.0%
4.3% – 5.5%
4.5% – 5.8%
6.3% – 7.3%
Net market rent (per sqm p.a.)
$410 – $1,605
$420 – $1,450
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Lease incentives (gross)
Logistics
Level 3
DCF and income
capitalisation
method
Net market rent (per sqm p.a.)
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Lease incentives (gross)
Properties
under
development
Level 3
Income
capitalisation
method, or land rate
Net market rent (per sqm p.a.)
Adopted capitalisation rate
Derivative financial
instruments
Level 2
DCF (adjusted for
counterparty
credit worthiness)
Level 3
Foreign currency
borrowings
Level 2
DCF
Land rate (per sqm)
Interest rates
Basis
CPI
Volatility
Foreign exchange rates
Interest rates
CPI volatility
Interest rates
Foreign exchange rates
3.1% – 4.2%
4.6% – 5.5%
5.0% – 5.8%
6.4% – 6.8%
3.1% – 4.0%
5.0% – 5.5%
5.3% – 5.8%
6.6% – 7.0%
17.5% – 35.0%
23.3% – 35.0%
$56 – $490
2.8% – 3.1%
5.25% – 7.25%
5.50% – 7.50%
6.75% – 7.75%
$68 – $385
2.8% – 3.4%
5.5% – 8.0%
6.0% – 8.3%
7.0% – 8.5%
10.0% – 25.0%
10.0% – 25.0%
$118 – $635
5.1% – 5.5%
$1,122 – $25,425
$115 – $410
5.8% – 6.8%
$122 – $945
Not applicable – all inputs are market
observable inputs
Not applicable – market observable input
N/A
0.91%
Not applicable – all inputs are market
observable inputs
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).
60
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
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.
(ii) 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.
61
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018 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
Sydney Olympic Park Town Centre.
The masterplan for Sydney Olympic Park provides long term opportunities for the Town Centre to significantly increase the
floor space developed within the precinct, subject to development and planning approvals. The assets are currently leased
and any future redevelopment is also subject to the expiration of these leases.
(iii) Sensitivity information – investment properties
Significant inputs
Net market rent
Fair value measurement sensitivity to
significant increase in input
Fair value measurement sensitivity to
significant decrease in input
10 year average specialty market rental growth
Increase
Decrease
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Lease incentives
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.
62
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018 (iv) 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 2017
Fair value movements in profit or loss
Transfers from level 3 to level 2
Closing balance 31 December 2017
Opening balance 1 January 2018
Fair value movements in profit or loss
Closing balance 31 December 2018
Sensitivities
Financial assets
at fair value
through profit
and loss
$M
9.3
–
(9.3)
–
–
–
–
Derivative
liabilities
$M
(12.3)
7.2
–
(5.1)
(5.1)
5.1
–
Total
$M
(3.0)
7.2
(9.3)
(5.1)
(5.1)
5.1
–
The following table summarises the impact from the change of significant inputs on GPT’s profit and on equity for the year.
Change of significant input
1% increase in interest rates – gain
1% decrease in interest rates – loss
31 Dec 18
$M
31 Dec 17
$M
–
–
–
(5.1)
1.4
(1.5)
Fair value of level 3 derivatives
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 2018 of $725.7 million arises as a result of the inclusion of the provision
for distribution payable to stapled securityholders and an increase in current borrowings. GPT has access to cash and
undrawn financing facilities of $1,059.5 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.
Comparatives in the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and notes to
the financial statements have been restated to the current year presentation. There was no effect on the profit for the year.
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 11 February 2019.
63
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(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 23.83 per cent equity interest in GPT Wholesale
Office Fund (GWOF) and 28.57 per cent equity interest
in GPT Wholesale Shopping Centre Fund (GWSCF) as
at 31 December 2018. 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 Funds’ 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.
64
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) 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.
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018 (ii) 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.
(d) New and amended accounting standards and interpretations adopted from 1 January 2018
GPT has adopted AASB 9 and AASB 15 at 1 January 2018. AASB 9 addresses the classification, measurement and de-
recognition of financial assets and financial liabilities. AASB 15 contains a single model that applies to contracts with
customers and two approaches to recognising revenue: at a point in time or over time.
There have been 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
2018, with the exception of the adoption of AASB 9. The impact of AASB 9 is a $1.1 million reduction in the value of equity
accounted investments and retained earnings in equity. Refer to note 24(a). There has been no financial impact as a result of
adopting AASB 15 and new disclosures have been included where required.
(e) Changes in accounting policies
AASB 9 Financial Instruments
The requirements of AASB 9 represent a significant change from AASB 139 Financial Instruments: Recognition and
Measurement. The nature and effects of the key changes to GPT’s accounting policies resulting from the adoption of AASB 9
are summarised below.
(i) Classification and measurement of financial assets and financial liabilities
On 1 January 2018 (the date of initial application of AASB 9), GPT’s management has assessed which business models apply
to the financial assets held by the group and has classified its financial instruments into the appropriate AASB 9 categories.
The adoption of AASB 9 has not impacted the carrying value of financial assets but has resulted in classification changes on
initial application at 1 January 2018 which is shown in the following table:
Original classification under
AASB 139
New classification under
AASB 9
Original carrying amount
under AASB 139
31 Dec 17
$M
New carrying amount
under AASB 9
31 Dec 17
$M
Financial Assets
Trade receivables
Loans and receivables
Other receivables
Loans and receivables
Other assets
Loans and receivables
Available for sale
financial asset
Available for sale
financial asset
Financial assets at
amortised cost
Financial assets at
amortised cost
Financial assets at
amortised cost
Financial assets at fair
value through profit
and loss
48.4
47.5
23.0
–
48.4
47.5
23.0
–
Loans and receivables are classified and measured at amortised cost. GPT holds these financial assets in order to collect the
contractual cash flows, and the contractual terms are solely payments of outstanding principal and interest on the principal
amount outstanding. Available for sale financial assets are classified and measured at fair value through profit and loss.
AASB 9 requires that all financial liabilities be subsequently classified at amortised cost, except in certain circumstances.
None of these circumstances apply to GPT and accordingly there is no change to the classification of GPT’s payables and
borrowings on adoption of AASB 9.
65
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
(ii) Impairment of financial assets
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with
an ‘expected credit loss’ (ECL) model. The new impairment
model applies to financial assets measured at amortised
cost, contract assets and debt investments at fair value
through other comprehensive income (FVOCI), but not to
investments in equity instruments. Under AASB 9, credit
losses are recognised earlier than under AASB 139. GPT
has assessed the impact of the adoption of an ECL model
under AASB 9 and an adjustment to the opening balance
has been recognised (see note 24(a)).
(iii) Derivatives and hedge accounting
On 1 January 2018 (the date of initial application of AASB 9),
GPT has elected to adopt the new general hedge accounting
model in AASB 9. There has been no impact with the adoption
of AASB 9 on GPT’s derivatives and hedge accounting. GPT’s
risk management strategies and hedge documentation
are aligned with the requirements of AASB 9 and therefore
hedging relationships are treated as continuing.
(iv) Accounting policies
Policy applicable from 1 January 2018
AASB 9 contains three principal classification categories
for financial assets:
• measured at amortised cost;
•
fair value through other comprehensive income
(FVOCI); and
•
fair value through profit and loss (FVTPL).
The classification depends on the entity’s business model
for managing the financial assets and the contractual
terms of the cash flows.
Financial assets at amortised cost
Loans and receivables
Loans and receivables are initially recognised at fair value and
subsequently at amortised cost using the effective interest
rate method less any allowance under the ECL model.
All loans and receivables with maturities greater than
12 months after the balance date are classified as non-
current assets.
Recoverability of receivables
At each reporting date, GPT assesses whether financial
assets carried at amortised cost are ‘credit-impaired’.
A financial asset is ‘credit-impaired’ when one or more
events that have a detrimental impact on the estimated
future cash flows of the financial asset have occurred.
GPT recognises loss allowances at an amount equal
to lifetime ECL on trade and other receivables. Loss
allowances for financial assets measured at amortised cost
are deducted from the gross carrying amount of the assets.
Lifetime ECLs are the ECLs that result from all possible
default events over the expected life of the trade receivable
and are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to
GPT in accordance with the contract and the cash flows that
GPT expects to receive). A default on trade receivables is
when the counterparty fails to make contractual payments
66
when they fall due and management determines that
collection of the debt should no longer be pursued.
GPT analyses the age of outstanding receivable balances
and applies historical default percentages adjusted for
other current observable data as a means to estimate
lifetime ECL. Other current observable data may include:
•
•
forecasts of economic conditions such as unemployment,
interest rates, gross domestic product and inflation;
financial difficulties of a counterparty or probability that
a counterparty will enter bankruptcy; and
• conditions specific to the asset to which the
receivable relates.
Debts that are known to be uncollectable are written off
when identified.
Derivatives and hedge accounting
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.
When cross currency interest rate swaps are used to hedge
the market risks of borrowings denominated in foreign
currencies, GPT does not designate the currency basis
spread as part of the hedging instrument within the hedge
relationship.
Currency basis spread is a liquidity premium that is
charged for exchanging different currencies, and changes
over time impacting the fair value of cross currency swaps.
The changes in the fair value of currency basis spread are
recognised in other comprehensive income in the hedging
reserve in equity. Until 31 December 2017, GPT recognised
these changes in the cash flow hedge reserve.
(v) Transition
Changes in accounting policies resulting from the adoption
of AASB 9 have been applied retrospectively.
The impact on GPT’s previously reported financial position
at 31 December 2017, as a result of the adoption AASB 9
and its application retrospectively, is detailed in note 24(a).
AASB 15 Revenue from Contracts with Customers
The requirements of AASB 15 replace AASB 118 Revenue
and AASB 111 Construction Contracts. AASB 15 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.
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018 (vi) Classification and measurement of revenue
Revenue is recognised over time if:
• the customer simultaneously receives and consumes the benefits as the entity performs;
• the customer controls the asset as the entity creates or enhances it; or
• the seller’s performance does not create an asset for which the seller has an alternative use and there is a right to
payment for performance to date.
Where the above criteria is not met, revenue is recognised at a point in time.
The following table summarises the changes in terminology with respect to the timing of revenue recognition between AASB
111 and AASB 118 compared to AASB 15 and the new revenue recognition policies under AASB 15. From GPT’s assessment
of when performance obligations are satisfied, there is no change in the timing of revenue recognition when comparing the
previous accounting policies to those now under AASB 15.
Type of revenue
Description
Recoveries revenue
Recharge revenue
Fund management
fees
Fee income – property
management fees
Fee income – property
management leasing
fees – over time
The Group recovers the costs associated with general building
and tenancy operation from lessees in accordance with specific
clauses within lease agreements. These are invoiced monthly
based on an annual estimate. The consideration for the current
month is due on the first day of the month. Revenue is recognised
as the estimated costs are consumed by the tenant. Should any
adjustment be required based on actual costs incurred, this is
recognised in the statement of financial performance within the
same reporting period and billed annually.
The Group recovers costs for any additional specific services
requested by the lessee under the lease agreement. These costs
are recovered in accordance with specific clauses within the
lease agreements. Revenue from recharges is recognised as the
services are provided. The lessee is invoiced on a monthly basis,
where applicable. The consideration for the current month is due
on the first day of the month.
The Company provides fund management services to GPT
Wholesale Office Fund (GWOF) and GPT Wholesale Shopping
Centre Fund (GWSCF) (the Funds) in accordance with the Funds
constitutions. The services are utilised on an ongoing basis and
revenue is calculated and recognised in accordance with the
relevant constitution. The fees are invoiced on a quarterly basis
and consideration is payable within 21 days of the quarter end.
The Company provides property management services to the
owners of property assets in accordance with property services
agreements. The services are utilised on an ongoing basis and
revenue is calculated and recognised in accordance with the
specific agreement. The fees are invoiced monthly with variable
payment terms depending on the individual agreements.
Should an adjustment, as calculated in accordance with the
property services agreement be required, this is recognised
in the statement of financial performance within the same
reporting period.
Under some property management agreements, the Company
provides a lease management service to the owners. These
services are delivered on an ongoing basis and revenue is
recognised monthly, calculated in accordance with the property
management agreement. The fees are invoiced monthly with
variable payment terms depending on the individual agreements.
Revenue recognition
policy under AASB 111,
AASB 17 and AASB 118
Revenue recognition
policy under
AASB 15
Recognised on an
accruals basis based on
the contract terms
Over time
Revenue recognised
when costs are incurred
Over time
Recognised on an
accruals basis based on
the contract terms.
Over time
Recognised on an
accruals basis based on
the contract terms.
Over time
Recognised on an
accruals basis based on
the contract terms.
Over time
Fee income – property
management leasing
fees – point in time
Under some property management agreements, the Company
provides a lease management service to the owners. The revenue
is recognised when the specific service is delivered (e.g. on lease
execution) and consideration is due 30 days from invoice date.
Recognised in the period
in which the services are
rendered.
Point in time
67
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018 Type of revenue
Description
Development
management fees
The Company provides development management services to
the owners of property assets in accordance with development
management agreements. Revenue is calculated and recognised
in accordance with the specific agreement. The fees are invoiced
on a monthly basis, in arrears, and consideration is due 30 days
from invoice date.
Development revenue
Sale of inventory
(vii) Transition
The Company provides development management services to
the owners of property assets in accordance with development
management agreements. Revenue is calculated in accordance
with the specific agreement and invoiced in accordance with the
contract terms. Consideration is due from the customer based on
the specific terms agreed in the contract and is recognised when
the Company has control of the benefit.
Proceeds from the sale of inventory are recognised by the
Company in accordance with a specific contract entered into with
another party for the delivery of inventory. Revenue is calculated
in accordance with the contract. Consideration is payable in
accordance with the contract. Revenue is recognised when control
has been transferred to the buyer.
Revenue recognition
policy under AASB 111,
AASB 17 and AASB 118
Revenue recognition
policy under
AASB 15
If the agreement includes
an hourly fee, the
revenue is recognised in
the period in which the
services are rendered.
If the agreement
includes a fixed price, the
revenue is recognised
in proportion to the
value of the works as a
percentage of the total
project cost delivered
until the completion
of the associated
development works.
Recognised in the period
in which the services are
rendered.
Over time
Over time
Point in time
When significant risk and
rewards are transferred.
Point in time
Changes in accounting policies resulting from the adoption of AASB 15 have been applied retrospectively. There has been no
impact on GPT’s previously reported financial position as a result of the adoption AASB 15.
Application of Standard
1 January 2019
(f) New accounting standards and interpretations issued but not yet adopted
The following standards and amendments to standards are relevant to GPT.
Reference
Description
AASB 16 Leases
AASB 16 sets out the principles for the recognition, measurement, presentation
and disclosure of leases. It 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 Consolidated Statement of Financial Position and both a depreciation and
interest charge in the Consolidated Statement of Comprehensive Income. In
contrast, lessor accounting for lease income is not expected to change with the
adoption of the new standard other than the separation of service income from
lease income for disclosure purposes as a result of the adoption of AASB 15.
The new leasing model requires the recognition of operating leases on the
Consolidated Statement of Financial Position. In relation to these operating
leases, if GPT had adopted the new standard from 1 January 2018, management
estimates that net profit before tax for the year ended 31 December 2018
would increase by approximately $0.1 million. Assets at 31 December 2018
would increase by approximately $18.9 million and liabilities would increase by
approximately $19.9 million.
In addition, lease liabilities arising from leasehold arrangements which are
currently recognised as a component of Investment Properties will be separately
disclosed in the Statement of Financial Position.
68
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
24. Adoption of new accounting standards
(a) AASB 9 Financial Instruments – impact of adoption
As set out in note 23, GPT has adopted AASB 9. The impact on GPT’s 31 December 2018 Consolidated Statement of
Comprehensive Income, Consolidated Statement of Financial Position and Consolidated Statement of Changes in Equity as a
result of applying AASB 9 retrospectively is as follows:
31 Dec 17
Prior year
$M
Decrease
$M
31 Dec 17
Restated
$M
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Extract)
Other income
Share of after tax profit of equity accounted investments
Total other income
Total revenue and other income
Profit before income tax expense
Profit after income tax expense
Net profit for the year
Total comprehensive income for the year
Total comprehensive income for the year from continuing operations
Net profit attributable to:
- Securityholders of the Trust
Total comprehensive income attributable to:
- Securityholders of the Trust
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Extract)
ASSETS
Non-current assets
Equity accounted investments
Total non-current assets
Total assets
EQUITY
Securityholders of the Trust (parent entity)
Retained earnings
Total equity of the Trust securityholders
Total equity
443.9
939.1
1,645.7
1,278.6
1,268.3
1,269.1
1,252.6
1,251.8
1,249.3
1,239.9
3,562.9
12,767.4
12,958.4
1,829.5
9,603.7
9,107.0
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
(1.1)
442.8
938.0
1,644.6
1,277.5
1,267.2
1,268.0
1,251.5
1,250.7
1,248.2
1,238.8
3,561.8
12,766.3
12,957.3
1,828.4
9,602.6
9,105.9
69
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Extract)
Year ended 31 Dec 2017
Equity attributable to Securityholders
Profit for the year
Decrease
Profit for the year – restated
Total comprehensive income for the year
Decrease
Total comprehensive income for the year – restated
Equity attributable to Securityholders at 31 Dec 2017
Decrease
Equity attributable to Securityholders at 31 Dec 2017 – restated
General Property Trust
Consolidated
Retained
earnings
$M
Total
equity
$M
Total
equity
$M
1,249.3
(1.1)
1,248.2
1,249.3
(1.1)
1,248.2
1,829.5
(1.1)
1,828.4
1,249.3
(1.1)
1,248.2
1,239.9
(1.1)
1,238.8
9,603.7
(1.1)
9,602.6
1,269.1
(1.1)
1,268.0
1,252.6
(1.1)
1,251.5
9,107.0
(1.1)
9,105.9
(b) AASB 15 Revenue from Contracts with Customers – impact of adoption
As set out in note 23, GPT has adopted AASB 15. There have been no changes to GPT’s financial performance and position as
a result of the adoption of this standard.
Lease Revenue
Segment Result
Lease revenue
Recoveries and recharge revenue
Share of rent from investment properties in equity accounted investments
Less:
Share of rent from investment properties in equity accounted investments
Amortisation of lease incentives and costs
Straightlining of leases
Consolidated Statement of Comprehensive Income
Rent from investment properties
Rent from investment properties
31 Dec 18
31 Dec 17
Retail
$M
Office
$M
Logistics
$M
Total
$M
Retail
$M
Office
$M
Logistics
$M
Total
$M
286.7
145.7
117.9
550.3
279.0
136.5
105.1 520.6
81.9
1.9
32.9
74.7
9.5
124.3
-
76.6
79.3
1.8
30.3
72.4
7.4 117.0
-
74.2
370.5
253.3
127.4
751.2
360.1
239.2
112.5 711.8
(76.5)
(46.1)
5.5
634.1
(74.0)
(38.9)
11.7
610.6
Rent from investment properties is recognised and measured in accordance with AASB 16 Leases. In addition to revenue generated
directly from the lease, rent from investment properties includes non-lease revenue earned from tenants, predominantly in
relation to recovery of asset operating costs, which is recognised and measured under AASB 15 Revenue from Contracts with
Customers. Details on the classification and measurement of this non-lease revenue is disclosed in note 23(e)(iv).
25. Events subsequent to reporting date
On 16 January 2019, the Group announced the proposed sale of its 50 per cent share of the MLC Centre. Proceeds from the
planned sale will initially repay debt prior to be being reinvested into the development pipeline.
Other than the above, the Directors are not aware of any matter or circumstance occurring since 31 December 2018 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.
70
Annual Financial Report of The GPT GroupNotes to the Financial Statements – Year ended 31 December 2018
Directors’ Declaration
Year ended 31 December 2018
In the Directors of the Responsible Entity’s opinion:
(a) The consolidated financial statements and notes set out on pages 24 to 70 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 2018 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 2018 of $725.7 million arises as
a result of the inclusion of the provision for distribution payable to stapled securityholders and an increase in current
borrowings. GPT has access to cash and undrawn financing facilities of $1,059.5 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.
Vickki McFadden
Chairman
GPT RE Limited
Sydney
11 February 2019
Bob Johnston
Chief Executive Officer and Managing Director
71
Annual Financial Report of The GPT Group
Independent auditor’s report
To the stapled security holders of The GPT Group
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of General Property Trust (GPT) (the Registered Scheme) and its
controlled entities (together, the Group or The GPT Group) is in accordance with the Corporations Act
2001, including:
(a) giving a true and fair view of the Group's financial position as at 31 December 2018 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
Basis for opinion
●
●
●
●
●
●
the consolidated statement of financial position as at 31 December 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
•
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
67
72
Annual Financial Report of The GPT Group
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
•
•
•
•
•
● For the purpose of our audit
we used overall Group
materiality of $28.7 million,
which represents
approximately 5% of the
Group’s Funds from
Operations (FFO).
Materiality
Audit scope
Key audit matters
● Amongst other relevant
topics, we communicated the
following key audit matters to
the Audit Committee:
● The structure of the Group is
commonly referred to as a
'stapled group'. In a stapled
group, the securities of two or
more entities are 'stapled'
together and cannot be traded
separately. In the case of the
Group, the units in GPT have
been stapled to the shares in
GPT Management Holdings
Limited (GPT MH). For the
purposes of consolidation
accounting, GPT is the
'deemed' parent and the
financial report reflects the
consolidation of GPT and its
controlled entities and GPT
MH and its controlled entities.
● We applied this threshold,
•
Valuation of investment
properties (including
those under
development)
Carrying value of
inventories
Valuation of derivatives
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
● These are further described in
our audit procedures and to
the Key audit matters section
evaluate the effect of
of our report.
misstatements on the
financial report as a whole.
−
−
● We chose FFO because, in our
−
● Our audit focused on where the
view, it is the key
performance indicator used
Group made subjective
by security holders to
judgements; for example
measure the performance of
significant accounting
the Group. An explanation of
estimates involving
what is included in FFO is
assumptions and inherently
located in Note 1, Segment
uncertain future events.
information.
● We selected 5% based on our
● The Group holds equity
accounted investments in two
68
73
Annual Financial Report of The GPT Group
professional judgement
noting it is also within the
range of commonly accepted
profit related thresholds.
wholesale real estate
investment funds. The auditors
of these funds (“component
auditors”) assisted in
performing procedures on
behalf of the Group
engagement team.
● We determined the level of
involvement we needed to have
in the audit work performed by
the component auditors to be
able to conclude whether
sufficient appropriate audit
evidence had been obtained.
This included written
instructions and active
dialogue throughout the year.
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
How our audit addressed the key audit
matter
We obtained the latest independent property market
reports to develop an understanding of the prevailing
market conditions in which the Group invests.
Key audit matters
•
•
•
•
•
Key audit matter
Valuation of investment properties
(including those under development)
$10,128.8 million (2017: $8,745.7 million) Refer to
note 2
•
The Group’s investment property portfolio is
comprised of office, retail and logistics properties
including properties under development in those
categories.
We discussed the specifics of the portfolio of
properties with management including new leases
entered into during the year, lease expiries, capital
expenditure, vacancy rates and other specific risk
factors to identify specific properties for further
testing.
For a sample of leases, we compared the rental
income used in the external valuation and internal
tolerance check models to the tenancy schedule.
Investment properties are valued at fair value at
reporting date using either the income capitalisation
approach or the discounted cash flow approach. The
value of investment properties is dependent on the
valuation methodology adopted and the inputs into
the valuation model. Factors such as prevailing
market conditions, the individual nature, condition
and location of each property and the expected future
income for each property directly impact fair values.
Amongst others, the following assumptions are key in
establishing fair value:
We compared the Group’s market capitalisation rates
and discount rates by location and asset grade to a
range we determined reasonable based on benchmark
market data. Where capitalisation rates and discount
rates fell outside of our anticipated ranges, we
considered the rationale for the adopted metric.
In addition to the above, for selected properties under
69
74
Annual Financial Report of The GPT Group
• Capitalisation rate
• Discount rate.
development we:
• Compared key inputs in the ‘as if complete’
valuation to underlying support; and
External valuations
• On a sample basis, compared key assumptions used
within the development’s ‘cost to complete’ schedule
to underlying support, for example, expected future
costs to subcontractor agreements.
In accordance with the Group’s valuation policy, all
investment properties must be externally valued by an
independent valuation expert at least once every 12
months. If a property is not externally valued at
balance date, an internal tolerance check is performed
to determine whether the book value (most recent
valuation plus capital expenditure) is in line with
management’s estimate of fair value or whether an
external valuation is required.
For all properties externally valued, we agreed the fair
value per the final valuation reports to the Group’s
We considered this a key audit matter because of the:
accounting records.
• Relative size of the investment property balance in
the consolidated statement of financial position.
• Quantum of revaluation gains that directly impact
the consolidated statement of comprehensive income
through the fair value gain on investment properties.
•
• Inherently subjective nature of investment property
valuations due to the use of assumptions in the
•
valuation methodology.
•
• Sensitivity of valuations to key input assumptions,
specifically capitalisation and discount rates.
•
•
• Assessed the competency and capabilities of
management’s expert, i.e. the external valuer and
confirmed that the Group followed its policy of
rotating valuation firms at least every two years.
• Read a sample of the valuers’ terms of engagement
to identify any clauses that might affect their
objectivity or impose limitations on their work.
For a sample of external valuations we:
Internal tolerance check
We confirmed with management that the
capitalisation and discounted cash flow models
utilised for the internal tolerance checks were
consistent with the prior period. For a sample of
internal tolerance checks, we compared key inputs to
supporting documentation, compared key
assumptions to market benchmarking data and
performed recalculations over the internal tolerance
check models.
•
For each project we obtained the Group’s latest
feasibility models and discussed with management
matters such as the overall project strategy, cost
movements and claims (where applicable).
Carrying value of inventories
$144.3 million (2017: $152.2 million) Refer to note 6
The Group develops a portfolio of sites for future sale
which is classified as inventory. The Group’s
Using the information gained from these discussions
inventories are held at the lower of the cost and net
and our prior year knowledge of the business, we used
realisable value for each inventory project.
a risk based approach to select a sample of projects to
perform net realisable value testing. For the sample of
The cost of the inventory includes the cost of
selected projects we:
acquisition, development, finance costs and all other
costs directly related to specific projects including an
allocation of direct overhead expenses.
We considered the carrying value of inventories a key
audit matter given the significant judgement required
• Further discussed with management the life cycle of
the project, key project risks, changes to project
strategy, current and future estimated sales prices,
70
75
Annual Financial Report of The GPT Group
by the Group in estimating future selling prices, costs
to complete projects and selling costs. These
judgments may have a material impact on the
calculation of net realisable value and therefore in
determining whether the value of a project should be
written down (impaired). During the year ended 31
December 2018 an impairment of $11.4m was
recognised.
construction progress and costs and any new and
previous impairments.
• Compared the estimated selling prices to market
sales data in similar locations or to recent sales in the
project.
• Compared the forecasted costs to complete for the
project to the relevant construction contracts (if
available) or to construction cost estimates.
• Compared the carrying value to the net realisable
value (NRV) to identify projects with potential
impairments.
• Obtained the transfer agreement for the
development site transferred from investment
property to inventory during the year and agreed the
transfer price in the agreement to the external
valuation.
We developed an understanding of the movements in
the derivative balances during the year. We obtained
independent counterparty confirmations to confirm
the existence of each derivative at year end.
• Traced a sample of capital expenditure additions to
supporting documentation and tested whether they
were valid costs that could be capitalised in
accordance with the requirements of Australian
Accounting Standards.
•
•
•
•
Valuation of derivatives
•
$216.2 million ($134.0 million) (net valuation
including current assets, non-current assets, current
liabilities and non-current liabilities) Refer to note 14
•
The Group issues debt denominated in both foreign
and domestic currencies as part of its funding strategy
and enters into derivative transactions to manage the
associated foreign exchange and interest rate risk.
The Group holds a portfolio of derivative instruments
including Cross Currency Interest Rate Swaps
(CCIRS), Interest Rate Swaps (IRS) and other
derivatives.
The Group only applies hedge accounting to the
borrowings denominated in foreign currencies. Risk
arising from borrowings denominated in foreign
currencies is managed with CCIRS. The CCIRS are in
hedge accounting relationships with the HKD and
USD bonds disclosed in the consolidated statement of
financial position. Other derivatives are not in hedge
accounting relationships.
Through inquiry with management and inspection of
a sample of hedge documentation, we identified the
application of hedge accounting on new and existing
derivative instruments.
• Together with PwC treasury specialists, we
independently calculated the fair value of the
derivatives, independently sourcing market data
inputs used in the valuation calculations.
We selected a sample of derivative balances to test
based on material instrument type. For each sample:
• We agreed the key terms of the derivatives back to
the individual counterparty contracts.
To test the application of hedge accounting in
accordance with Australian Accounting Standards, we
performed the following procedures in conjunction
The Group has transitioned to the hedge accounting
71
76
Annual Financial Report of The GPT Group
•
•
•
•
•
requirements under AASB 9 Financial Instruments
during the period.
We considered the valuation of derivatives to be a key
audit matter because of the:
• Nature and complexity involved in valuing
derivative instruments.
with PwC treasury specialists for a sample of hedge
relationships:
• Assessed whether the Group’s hedge documentation,
designation and effectiveness testing approach was in
accordance with the hedge accounting requirements
of Australian Accounting Standards.
• Relative size of the derivative balances and potential
for variability in the size of these balances year on
year.
• Assessed whether the hedge effectiveness criteria
continued to be met.
• Inspected the hedge documentation for new hedge
relationships to assess whether hedge accounting
criteria were met.
• Complexity involved in the application of hedge
accounting in accordance with Australian Accounting
Standards.
• Assessed the appropriateness of hedge accounting
journals across the relevant accounts (cash flow hedge
reserve, cost of hedging reserve, fair value adjustment
of the borrowings and profit or loss) based on changes
in fair value of the hedge accounted derivatives and
underlying hedged items. The recognition and
presentation of gains and losses was agreed to the
consolidated statement of comprehensive income.
Other information
The directors of the responsible entity of GPT, GPT RE limited (the directors) are responsible for the
other information. The other information comprises the information included in the Group’s Annual
Financial Report for the year ended 31 December 2018, but does not include the financial report and
our auditor’s report thereon.
•
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
72
77
Annual Financial Report of The GPT Group
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor's report.
•
•
•
•
•
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 14 to 22 of the Directors Report for the
year ended 31 December 2018.
In our opinion, the remuneration report of The GPT Group for the year ended 31 December 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
•
The directors are responsible for the preparation and presentation of the remuneration report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
Susan Horlin
Partner
Bianca Buckman
Partner
Sydney
11 February 2019
73
78
Annual Financial Report of The GPT Group Annual Financial Report of GPT Management
Holdings Limited and its Controlled Entities
Year ended 31 December 2018
Contents
Directors’ Report .......................................................................................................................................................................... 80
Auditor’s independence declaration ............................................................................................................................................. 98
Financial Statements .................................................................................................................................................................... 99
Consolidated Statement of Comprehensive Income ............................................................................................................ 99
Consolidated Statement of Financial Position ................................................................................................................... 100
Consolidated Statement of Changes in Equity ................................................................................................................... 101
Consolidated Statement of Cash Flows ............................................................................................................................ 102
Notes to the Financial Statements ..................................................................................................................................... 103
Result for the year ..................................................................................................................................................... 103
1. Segment information ............................................................................................................................................ 103
Operating assets and liabilities ................................................................................................................................ 104
2. Equity accounted investments .............................................................................................................................. 104
3. Trade receivables .................................................................................................................................................. 105
4. Intangible assets ................................................................................................................................................... 106
5. Inventories ............................................................................................................................................................ 107
6. Property, plant and equipment............................................................................................................................. 107
7. Other assets ......................................................................................................................................................... 108
8. Payables ................................................................................................................................................................ 109
9. Provisions ............................................................................................................................................................. 109
10. Taxation ................................................................................................................................................................. 110
Capital structure ........................................................................................................................................................ 112
11. Equity and reserves .............................................................................................................................................. 112
12. Earnings per share ............................................................................................................................................... 113
13. Dividends paid and payable .................................................................................................................................. 114
14. Borrowings ........................................................................................................................................................... 114
15. Financial risk management ................................................................................................................................. 115
Other disclosure items .............................................................................................................................................. 118
16. Cash flow information .......................................................................................................................................... 118
17. Commitments ....................................................................................................................................................... 119
18. Contingent liabilities ............................................................................................................................................ 119
19. Security based payments ..................................................................................................................................... 119
20. Related party transactions .................................................................................................................................. 121
21. Auditors remuneration ......................................................................................................................................... 123
22. Parent entity financial information ....................................................................................................................... 123
23. Fair value disclosures .......................................................................................................................................... 124
24. Discontinued operations and available for sale financial assets ......................................................................... 124
25. Accounting policies ............................................................................................................................................... 125
26. Events subsequent to reporting date ................................................................................................................... 129
Directors’ Declaration ................................................................................................................................................................. 130
Independent Auditor’s Report .................................................................................................................................................... 131
Supplementary information ........................................................................................................................................................ 139
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 GPT’s internet site, GPT has ensured that its 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 GPT’s website: www.gpt.com.au.
79
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Directors’ Report
Year ended 31 December 2018
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 2018. The Consolidated Entity is
stapled to the General Property Trust (GPT 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 $14.0 billion diversified
portfolio of high quality Australian retail, office and
logistics property assets and together with GPT’s funds
management platform the Group has $24.0 billion of
property assets under management (AUM).
GPT owns some of Australia’s most prominent real estate
assets, including Melbourne Central and Highpoint
Shopping Centre in Melbourne, Australia Square, 1 Farrer
Place and Citigroup Centre in Sydney 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
$9.6 billion. GPT is one of the top 50 listed stocks on the ASX
by market capitalisation as at 31 December 2018.
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 2018
GPT achieved a Total Return of 15.8 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 2018 GPT
achieved an MER of 30 basis points.
GPT focuses on maintaining a strong balance sheet. GPT’s
gearing as at 31 December 2018 was 26.3 per cent and it has
maintained a weighted average debt expiry of greater than
6 years. The average cost of debt for 2018 was 4.2 per cent.
Review of operations
The Consolidated Entity’s financial performance for the year ended 31 December 2018 is summarised below.
The net loss after tax for the year ended 31 December 2018 is $40,962,000 (2017: $14,222,000).
Property management fees
Development management fees and revenue
Fund management fees
Management costs recharged
Proceeds from sale of inventory
Other income
Expenses
(Loss)/profit from continuing operations before income tax expense
Income tax expense
Loss after income tax for continuing operations
Loss from discontinued operations
Net loss for the year
80
31 Dec 18
$’000
31 Dec 17
$’000
Change
%
43,511
21,634
84,619
32,059
28,883
5,688
38,863
32,039
77,206
32,334
10,358
18,368
(234,159)
(203,315)
(17,765)
(7,670)
(25,435)
(15,527)
(40,962)
5,853
(6,406)
(553)
(13,669)
(14,222)
12%
(32%)
10%
(1%)
179%
(69%)
15%
(404%)
20%
4,499%
14%
188%
Consolidated Entity result
Logistics
The increase in the net loss compared with 2017 is mainly
attributable to a decrease in development management
revenue, the derecognition of available for sale financial
assets in 2017, an increase in expenses due to revaluations
of financial arrangements and a higher loss from
discontinued operations. This is partially offset by an
increase in proceeds from the sale of inventory, property
management fees and funds management fees.
Property management
Retail
The Consolidated Entity is responsible for property
management activities across the retail sector. Property
management fees increased to $29,025,000 in 2018 as a
result of higher base and turnover rent and growth from
redevelopments, offset by lower energy income.
Office
The Consolidated Entity is responsible for property
management activities across the office sector. Property
management fees increased to $12,208,000 in 2018 as a
result of higher leasing fees and membership income from
Space & Co.
Logistics
The Consolidated Entity is responsible for property
management activities across the logistics sector.
Property management fees increased to $2,278,000
in 2018 as a result of property acquisitions and
development completions.
Development management
Retail
During 2018, the focus has been on the delivery of the
$432.0 million Sunshine Plaza retail expansion (GPT
share: $216.0 million). The development has been delayed
due to inclement weather resulting in a staged opening
in November 2018 and the major launch scheduled for
March 2019.
During 2018, the business unit contributed $7.6 million to
GPT’s Funds from Operations (FFO) (2017: $5.3 million).
Office
During the year the 15,800sqm 4 Murray Rose development
was successfully completed at Sydney Olympic Park.
The asset was delivered on time and within budget and
is 81 per cent leased at the year end with the Rural Fire
Service taking 59 per cent of the building. The development
has delivered a development yield on cost over 7.5 per cent.
Construction has commenced on the new 26,000sqm tower
at 32 Smith Street, Parramatta following the acquisition of
the site last year. The pre-committed tenant for the new
tower is QBE, who will occupy approximately 50 per cent of
the building. Practical completion is due in late 2020.
The team is well progressed with a number of repositioning
projects in Melbourne at 100 Queen St, Melbourne Central
Tower, CBW and 530 Collins Street.
During the year the Group continued to successfully
develop high quality logistics facilities to increase the
portfolio quality and scale. At Huntingwood, the 11,000sqm
warehouse reached practical completion in August 2018.
The building was leased to Cahill Transport Group. Also,
at 50 Old Wallgrove Road in Eastern Creek construction of
a 30,000sqm facility was completed in January 2019. By
the time of signing this financial report, 100 per cent of the
asset has been leased to ACR Supply Partners.
Work continues to develop out and replenish the logistics
land bank. This includes the November 2018 acquisition
of 8.9 hectares of land in Melbourne which provides the
opportunity to develop 48,000sqm of new logistics facilities.
Funds Management
GPT Wholesale Office Fund (GWOF)
GWOF’s portfolio value increased to $7.8 billion, up
$0.7 billion from 2017 and the fund delivered a one year
equity IRR of 12.7 per cent. The management fee income
earned from GWOF for 2018 increased by $2.9 million as
compared to 2017 due to strong upward revaluations across
the portfolio.
As a result of GPT not participating in the Fund’s
Distribution Reinvestment Plan (DRP) and equity raising in
December 2018, GPT’s ownership reduced to 23.83 per cent
(2017: 24.95 per cent).
GPT Wholesale Shopping Centre Fund (GWSCF)
The fund delivered a one year equity IRR of 4.8 per cent.
GWSCF’s portfolio value decreased to $4.8 billion, down
$0.1 billion from 2017. This was primarily driven by the
sale of GWSCF’s 83.33 per cent share in Homemaker
City, Maribyrnong in December 2018 offset by upward
revaluations. Management fee income earned from GWSCF
of $21.9 million has increased by $4.6 million as compared
to 2017. This was due to the acquisition of an additional
25 per cent interest in Highpoint Shopping Centre for
$660.0 million and Homemaker City, Maribyrnong for
$20.0 million in September 2017.
As a result of GPT not participating in the Fund’s DRP, GPT’s
ownership is now 28.57 per cent (2017: 28.80 per cent).
Management costs recharged
Management costs recharged are in line with prior year.
During the year GPT’s MER (Management Expense Ratio)
decreased to 30 basis points (2017: 34 basis points).
Expenses
Expenses increased to $234,159,000 in 2018 (2017:
$203,315,000) as a result of revaluations of financial
arrangements, impairment expense and higher costs
related to the sale of inventory.
81
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Financial position
Financing activities
31 Dec 18
$’000
31 Dec 17
$’000
Change
%
Current assets
Non-current assets
Total assets
Current liabilities
107,299
133,715
239,101
266,955
346,400
400,670
70,751
129,304
Non-current liabilities
175,759
115,471
Total liabilities
Net assets
246,510
244,775
99,890
155,895
(20%)
(10%)
(14%)
(45%)
52%
1%
(36%)
Total assets decreased by 14 per cent to $346,400,000 in
2018 (2017: $400,670,000) due to reduced trade receivables
and loan receivables.
Total liabilities increased by 1 per cent and remains in line
with prior year at $246,510,000 in 2018 (2017: $244,775,000).
Capital management
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 are revalued to
fair value each reporting period.
Cash flows
The cash balance as at 31 December 2018 decreased to
$19,259,000 (2017: $20,033,000).
Operating activities
Net cash inflows from operating activities have increased
in 2018 to $87,913,000 (2017: $31,458,000) due to proceeds
from related party receivables, offset by income taxes
paid in 2018 and dividends received from available for sale
financial assets in 2017.
The following table shows the reconciliation from net loss
to the cash flow from operating activities:
Net loss for the year
(40,962)
(14,222)
188%
31 Dec 18
$’000
31 Dec 17
$’000
Change
%
Non-cash items included in
net loss
Capital return from available
for sale financial asset
Timing difference
Net cash flows from
operating activities
Investing activities
94,419
62,207
52%
–
(10,699)
34,456
(5,828)
(100%)
(691%)
87,913
31,458
179%
Net cash flows from investing activities have decreased to
outflows of $5,371,000 in 2018 (2017: inflows of $6,165,000)
due to the capital return from available for sale financial
asset in 2017.
82
Net cash outflows from financing activities have increased
to $83,316,000 in 2018 (2017: $35,432,000) due to
repayment of related party borrowings and the purchase of
securities for the employee incentive scheme.
Dividends
The Directors have not declared any dividends for the year
ended 31 December 2018 (2017: nil).
Prospects
Group
GPT retains a portfolio of high quality assets with high
occupancy levels and structured rental growth. As at
31 December 2018, the Group’s balance sheet is in a strong
position, with a smooth, long debt expiry profile and net
gearing at the lower end of the Group’s target range of 25
to 35 per cent.
Retail
GPT’s portfolio delivered total centre sales growth of
2.4 per cent whilst specialties sales per square metre grew
2.5 per cent for the 12 months to 31 December 2018. The retail
portfolio is well positioned with 85 per cent located in NSW
and VIC and in markets with strong population growth. GPT
is planning on capturing this growth by investing in assets to
offer engaging places for its customers aimed at driving sales
productivity, stimulating retailer demand and delivering long
term investment returns. Progress continues to be made with
mixed use developments at Melbourne Central and Rouse
Hill which will be opportunities for GPT to deliver leading
examples on how retail assets need to evolve and adapt to
meet the changing needs of today’s retail consumer.
Office
GPT is progressing its future development pipeline in Sydney
and Melbourne. Engagement continues with authorities
for a proposed new office tower and retail precinct of up
to 70,000sqm at Darling Park in Sydney. In Melbourne, the
Group is seeking a pre-commitment tenant for a proposed
20,000sqm office tower at Melbourne Central.
The Sydney and Melbourne CBD office markets in Australia
experienced solid conditions in 2018, with demand being
above long-term averages, low levels of net supply and
tightening vacancy rates. Sydney and Melbourne reached
vacancy rates of 4.1 per cent and 3.75 per cent respectively.
These markets should experience ongoing tight vacancy
conditions in 2019 with little new supply to come online and
ongoing healthy levels of demand.
Logistics
An improving industrial economy driven by the growth in
e-commerce, continues to fuel the demand for warehousing.
New entrants and existing retailers seeking to expand into
key locations is adding further pressure on the availability of
land resulting in double digit increases of land values in prime
locations. The investment market remains strong with assets
transacting at yields firmer than previous market peaks.
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
The medium term outlook is for Sydney and Melbourne to
continue to benefit as preferred locations, given population
nodes and strong and improving infrastructure. GPT will
seek to increase exposure to the sector through development
opportunities and acquisitions.
Funds management
GPT has a large funds management platform which has
experienced significant growth in the value of assets under
management over the past five years. The funds management
team will continue to actively manage the existing portfolios,
with new acquisitions, divestments and developments in line
with the relevant investment objectives of each fund.
Guidance for 2019
In 2019 GPT expects to deliver 4 per cent growth in FFO per
ordinary security and 4 per cent growth in distribution per
ordinary security. Achieving this target is subject to risks
detailed in the following section.
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. The Sustainability and
Risk Committee, the Audit Committee and through them,
the Board, receive reports on GPT’s risk management
practices and control systems including the effectiveness
of GPT’s management of its material business risks.
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 requires 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 31000:2018: Risk Management.
The key components of the approach include the following:
• the GPT Board, Leadership Team, employees and
contractors all understand their risk management
accountabilities, promote the risk awareness and
risk management culture and apply risk processes to
achieve the organisation’s objectives;
• specialist risk management expertise is developed and
maintained internally and provides coaching, guidance
and advice;
• risks are identified and assessed in a timely and
consistent manner;
• controls are effectively designed, embedded and
assessed;
• material operational risks and critical controls are
monitored and reported to provide transparency and
assurance that the risk profile is aligned with GPT’s risk
appetite, strategy and values; and
• Macro-economic factors that may impact the business
are considered and monitored.
The risk appetite set by the Board considers the most significant, material risks to which GPT is exposed and provides the
Board with ongoing monitoring of risk exposures which may arise over the short, medium and long term. The following table
sets out material operational risks and issues, the potential 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
• Lower distributions
• Lower NTA
• Credit ratings downgrade
Development
Adverse changes in
market conditions
Developments do
not perform in line
with forecast
• Lower distributions
• Lower NTA
• Credit ratings downgrade
• Lower distributions
• Lower NTA
• Credit ratings downgrade
• Robust investment approval process
• Formal due diligence process
• Active asset management
• Experienced internal management capability
• Diversified multi-asset portfolio
• Limit single asset exposure
• Robust capital allocation process
• Diversified multi-asset portfolio
• Limit single asset exposure
• Robust investment approval process
• Oversight by Project Control Group (PCG)
• Experienced internal management capability
• Limit exposure to assets under development
• Limit exposure to individual contractors
• Minimum leasing pre-commitments prior to
construction commencement
83
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Risk Category
Risk/Issue
Potential Strategic Impact
Mitigation
Leasing
Inability to lease assets in
line with forecast
• Lower distributions
• Lower NTA
• Credit ratings downgrade
• Large and diversified tenant base
• Ongoing investment to maintain quality of
property portfolio
• Experienced leasing team
• Limit single tenant exposure
Capital
management,
including macro-
economic factors
Re-financing and
liquidity risk
Health and safety
Interest rate risk –
higher interest rate cost
than forecast
Incidents causing injury
to tenants, visitors to the
properties, employees
and/or contractors
• Ability to meet debt maturities
• Limits ability to execute strategy
• Credit ratings
• Failure to continue as a going
concern
• 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
• Lower distributions
• Interest rate exposures are actively hedged
• Harm to the tenants, visitors to
• Formalised Health and Safety management
GPT’s properties, employees and/
or contractors
system including policies and procedures for
managing safety
• Criminal/civic proceedings and
resultant reputation damage
• Financial impact of remediation
and restoration
• Training and education of employees and
contractors
People and culture Inability to attract, retain
• Failure to provide an environment
• Background and reference checks on
that enables people to excel
commencement
and develop talented
people and provide an
inclusive workplace
Inability to maintain a
high performing, ethical,
and values based
workplace
This includes the
consideration of risk
culture and specifically
conduct risk
• Failure to provide a safe working
environment free of harassment,
bullying and discrimination
• Limits the ability to achieve
business objectives in line with
GPT’s values
• Whistleblower officer
• Annual performance management process setting
objectives to promote clarity and accountability
• Remedial performance management and
disciplinary action
• Monitoring of risk culture and conduct risk
• Discretionary incentive system and
Clawback Policy
• Benchmarking and setting competitive
remuneration
• Development planning
• Succession planning
• Talent management processes
• Promotion of GPT Values
• Code of conduct
• Conflicts of interest register
• Compliance training
• Grievance resolution process
• Diversity & Inclusion policies, guidelines
and training
• Formalised Environment and Sustainability
management system including policies and
procedures for managing environmental and
social sustainability risks
• Climate related risks and potential financial
impacts are assessed within GPT’s enterprise-
wide risk management framework
• Technology risk management framework
• Privacy policy, guidelines and procedures
Environmental
and social
sustainability
Information
security
Inability to operate in a
manner that does not
compromise the health
of ecosystems and meets
accepted social norms
This includes
consideration of climate
change, energy intensity,
community wellbeing and
supply chain integrity
Risk of loss of data,
breach of confidentiality,
regulatory breach
(privacy) and/or
reputational impact
including as a result from
a cyber attack
• Negative impact to the communities,
the environment and the ecosystems
that GPT operates in
• Limits the ability to deliver the
business objectives and strategy
• Criminal/civic proceedings and
resultant reputation damage
• Financial impact of remediation
and restoration
• Limits the ability to deliver the
business objectives and strategy
• Criminal/civic proceedings and
resultant reputation damage
• Financial impact of remediation
and restoration
84
Directors’ Report – Year ended 31 December 2018Annual 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 significant 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.
In managing the portfolio, GPT monitors and assesses
physical and transitional risks arising from climate change.
These risks are considered in GPT’s investment and portfolio
management decisions, as well as decisions to upgrade
buildings in anticipation of a low carbon future. GPT discloses
emissions data and climate strategy on its website. GPT
continues to take an active leadership role in transitioning
towards a low carbon future, participating in climate change
public policy development through involvement in:
• the Property Council of Australia;
• the Green Building Council of Australia;
• the City of Sydney Better Building Partnership; and
• demonstration projects partnering with the Australian
Renewable Energy Agency.
GPT has achieved a Group-wide reduction of 42 per cent in
energy intensity, and a 56 per cent reduction in emissions
intensity since 2005. GPT is currently developing its Energy
Master Plan which will continue the implementation of
energy efficiency programs. GPT will seek to further
decouple emissions from its energy requirements through
renewable energy purchases, electrification of gas
infrastructure and implementation of demand response
programs. GPT’s comprehensive Climate Change and
Energy Policy is available on GPT’s website.
GPT is 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 enables 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 2018 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
The Directors are not aware of any matter or circumstances
occurring since 31 December 2018 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
Vickki McFadden – Chairman (appointed as a
Non-Executive Director 1 March 2018 and
Chairman from 2 May 2018)
Vickki was appointed to the Board on 1 March 2018 and is also
a member of the Nomination and Remuneration Committee.
She brings a broad range of skills and experience to the Group
gained during an 18 year career spanning investment banking,
corporate finance and corporate law, and through her current
and previous board-level positions.
Vickki currently holds Non-Executive directorships in the
following listed entities and other entities:
• Tabcorp Holdings Limited (since 2017);
• Newcrest Mining Limited (since 2016); and
• Myer Family Investments Pty Limited (since 2011).
She is also President of the Takeovers Panel, a Member of
Chief Executive Women and a Member of the Advisory Board
and Executive Committee of the UNSW Business School.
Vickki was previously Chairman of Eftpos Payments
Australia Limited, Chairman of Skilled Group Limited (prior
to its acquisition by Programmed Maintenance Services
Limited) (Director from 2005 to 2015 and Chairman
from 2010 to 2015), a non-executive Director of Leighton
Holdings Limited, and a Managing Director of Investment
Banking at Merrill Lynch Australia.
As at the date of this report she holds 50,000 GPT
stapled securities.
Rob Ferguson – Chairman (retired 2 May 2018)
Rob joined the Board in May 2009 and was 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:
• Watermark Market Neutral Fund Limited
(since 2013); and
• Smartward Limited (since 2012).
He was also a Non-Executive Chairman of IMF Bentham
Limited from 2004 to January 2015, Chairman of Primary
Health Care Limited from 2009 to July 2018, and a Director
of Tyro Payments Limited from 2005 to July 2018.
As at the date of his retirement he held 207,628 GPT
stapled securities.
85
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 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 30 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 821,765 GPT
stapled securities.
Brendan Crotty (retired on 9 November 2018)
Brendan was appointed to the Board in December 2009
and was 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 the Chairman of the National Housing
Finance and Investment Corporation (since 2018), a
Director of Brickworks Limited (since 2008) and Chairman
of Cloud FX Pte Ltd. Brendan was previously Chairman of
Western Sydney Parklands Trust.
As at the date of this retirement he held 67,092 GPT
stapled securities.
Eileen Doyle
Eileen was appointed to the Board in March 2010. She is
also the Chairman of the Sustainability and Risk Committee
and a member of the Audit Committee and Nomination
and Remuneration Committee (retired as a member
in November 2018). 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); and
• 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.
86
Swe Guan is currently Chairman of Cromwell European REIT
in Singapore (since 2017), and a Director of Sunway Berhad
in Malaysia (since 2011). Swe Guan is also a member of the
Investment Committee of CIMB Trust Cap Advisors and was
formerly a Director of Global Logistics Property in Singapore
until January 2018.
As at the date of this report, he holds 39,000 GPT
stapled securities.
Michelle Somerville
Michelle was appointed to the Board in December 2015 and is
also the Chairman 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); and
• 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 36,663 GPT
stapled securities.
Gene Tilbrook
Gene was appointed to the Board in May 2010 and is
also the Chairman 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); and
• 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.
Angus McNaughton (appointed 1 November 2018)
Angus was appointed to the Board in November 2018 and
is also a member of the Nomination and Remuneration
Committee and the Audit Committee. He brings extensive
experience in property investment.
Angus was previously the CEO and Managing Director of
Vicinity Centres from August 2015 until December 2017. Prior
to that time, Angus served as the Managing Director Property
for Colonial First State Global Asset Management from 2011,
before becoming the CEO and Managing Director of ASX-listed
Novion Property Group in 2014. Angus led Novion through to
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities the completion of the merger between Novion and Federation
Centres, renamed as Vicinity Centres, in June 2015.
James Coyne – General Counsel and
Company Secretary
Angus does not currently hold any Non-Executive Director
roles in other listed entities.
He was also previously Director, Real Estate of First State
Investments in Singapore and Chief Executive Officer of
Kiwi Income Property Trust in New Zealand.
As at the date of this report he does not hold GPT
stapled securities.
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
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
Number of
meetings
attended
Vickki McFadden1
Rob Ferguson
Robert Johnston1
Brendan Crotty
Eileen Doyle
Swe Guan Lim
Angus McNaughton
Michelle Somerville
Gene Tilbrook
10
3
11
9
11
11
3
11
11
10
3
11
9
11
11
3
11
10
–
–
–
4
5
5
1
5
–
–
–
–
3
3
5
1
5
–
4
2
–
–
5
–
2
–
6
4
2
–
–
5
–
2
–
6
–
–
–
3
4
4
–
4
–
–
–
–
3
4
4
–
4
–
1. Vickki McFadden and Bob Johnston also attended meetings of the Committees as non-members.
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.
87
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 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 98 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.
6. Remuneration report
The Nomination and 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 ensure that the GPT Group’s remuneration platform is both market competitive and fair to all stakeholders;
aligns performance measures to the achievement of GPT’s strategic objectives; and communicates the remuneration outcomes
clearly and transparently.
Governance
Who are the
members of the
Committee?
What is the scope
of work of the
Committee?
The Committee consists of the following three Non-Executive Directors:
• Gene Tilbrook (Committee Chairman);
• Vickki McFadden; and
• Angus McNaughton.
2018 saw renewal and change on the Committee in line with changes to the Board:
• Rob Ferguson retired at the GPT AGM on 2 May 2018;
• Vickki McFadden joined GPT on 1 March 2018, and was appointed Chairman of GPT from 3 May 2018;
• Angus McNaughton joined GPT on 1 November 2018; and
• Eileen Doyle stepped down from the Committee on 8 November 2018.
In 2018 the Committee undertook the following activities on behalf of the Board:
• oversee the management of culture;
• implement, monitor, evaluate and oversee GPT’s remuneration framework;
• review and approve remuneration levels for the Board, Chief Executive Officer and key management personnel;
• review and approve key performance indicators for the Chief Executive Officer and assess the Chief Executive
Officer’s performance against those key performance indicators;
• review compliance with legal and regulatory requirements associated with the activities of the Committee;
• oversee the succession planning process for the Board, CEO and Leadership Team;
• implement procedures for the evaluation of the performance of the Board and Board committees;
• approve and oversee the implementation of GPT’s diversity & inclusion strategy, initiatives and policies;
• approve and oversee initiatives around talent development and employee engagement;
• any other related matters regarding executives or the Board; and
Effective 1 January 2019 a Human Resources and Remuneration Committee (HRRC) was formed with the same
membership as noted above. In addition, a Nomination Committee was formed consisting of the full 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)).
1 Further information about the role and responsibility of both the HRRC and the Nomination Committees is set out in their respective Charters, which are
available on GPT’s website (www.gpt.com.au). No additional fees are paid for membership of the Nomination Committee.
88
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Committee key decisions and remuneration outcomes in 2018
Platform component Key decisions and outcomes
Base Pay (Fixed)
• Implemented the annual review of employee base pay effective 1 January 2018, with an average increase of
2.57%.
• Following benchmarking, implemented an annual review of Non-Executive Director base and committee fees
effective 1 January 2018, with an average increase of 3.12% to bring the Non-Executive Directors’ remuneration
closer to market.
Short Term Incentive
Compensation (STIC)
• Maintained Funds from Operations (FFO) growth per security as the primary measure of Group
financial performance.
• The Group achieved an FFO growth per security outcome of 3.5% which generated a STIC pool maximum of
$15.4 million.
• Maintained a deferred equity component of STIC vesting in one tranche at the end of the year following the
conclusion of the performance period.
Long Term Incentive
(LTI) Compensation
• Achieved a compound annual Total Return2 for the 2016-18 period of 15.50%, exceeding the benchmark of 9.75%
for maximum award, and delivered a Total Securityholder Return (TSR)3 of 32.76% which exceeded the ASX 200
AREIT Accumulation Index (the Index) performance of 26.60%.
• As a result, the vesting outcome for the 2016-18 LTI plan was 82.71% of the performance rights for each of the
24 participants in the LTI plan.
• Launched the 2018-2020 LTI with two performance measures, Total Return and Relative TSR.
• Maintained the same performance hurdles and ranges as the prior year’s LTI plan.
• Aligned the vesting schedule for both performance measures such that 10% of the performance rights for each
measure vest at Threshold performance, with straight line pro-rata vesting through to 100% at the maximum
performance level.
Other employee
ownership plans
• Continued the General Employee Security Ownership Plan (GESOP) for 105 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 264 employees ineligible for
GESOP. Under BBESOP, subject to GPT achieving the annual FFO growth per security target, 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 and
governance
• Utilised external advice on market compensation benchmarks and practice, prevailing regulatory and
governance standards, and drafting of incentive plan documentation from EY and Conari Partners4.
2 Total Return is defined as the sum of the change in Net Tangible Assets (NTA) and 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 2018, 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.
89
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 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 FFO
growth per security
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 and 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
FFO growth per security,
and earnings at portfolio,
fund and/or property level as
relevant.
• 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
50% cash and 50% 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% 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
FFO growth per security.
• 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 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.
90
Directors’ Report – Year ended 31 December 2018Annual 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 2018 remuneration arrangements were as follows:
• Base pay: $1,460,000
• STIC: $0 to $1,825,000 (ie 0% to 125% of base pay) based on performance, paid in equal proportions 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 $2,190,000 (ie 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
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
Base pay
STIC5
LTI
Mark Fookes
$820,000
$0 to $820,000
$0 to $820,000
Anastasia Clarke
$800,000
$0 to $800,000
$0 to $800,000
Termination by Company
for cause
Termination by Company
(other)
No notice requirement or termination benefits (other than accrued entitlements).
3 months’ notice. Severance payments may be made subject to GPT policy and capped at the three year average
of the executive’s annual base (fixed) pay. Treatment of unvested STIC and LTI will be at the Board’s discretion
under the terms of the relevant plans and GPT policy.
Post-employment restraints
12 months non-solicitation of GPT employees.
3. Compensation mix at maximum STIC and LTI outcomes
Executive KMP
Position
Bob Johnston
Chief Executive Officer and Managing Director
Anastasia Clarke Chief Financial Officer
Mark Fookes
Chief Operating Officer
Base pay
26.7%
33.4%
33.4%
STI
33.3%
33.3%
33.3%
LTI
40.0%
33.3%
33.3%
Fixed remuneration
Variable or “at risk” remuneration6
5 The STIC is paid in an equal mix of cash and deferred GPT securities, with the securities component vesting 1 year after the conclusion of the performance year.
6 The percentage of each component of total remuneration is calculated with reference to maximum or stretch potential outcomes as set out under Remuneration
Package in Tables 1 and 2 above.
91
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Group Financial Performance and Incentive Outcomes
1. Five year Group financial performance
Total Securityholder Return (TSR) (%)
Total Return (%)
NTA (per security) ($)
FFO (per security) (cents)
Security price at end of calendar year ($)
2018
7.0
15.8
5.58
31.8
5.34
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
2. Summary of CEO Objectives and Performance Outcomes
Performance measure Reason chosen
Weighting
Performance outcomes
Financial
FFO growth per
security targets.
Strategy
Performance
Strategy objectives
focused on exploring
growth opportunities
for GPT group, as
well as development
and implementation
of strategic plans for
each division.
Operational objectives
focused on driving
performance of the
investment portfolio,
key milestones in the
development pipeline,
and other projects.
70%
10%
15%
FFO growth
per security 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
5%
People objectives
centred on increasing
employee engagement,
driving GPT’s diversity
and inclusion agenda,
and operational
excellence.
Maintaining a
high performing
executive team
and achieving
engagement and
diversity goals
is key to GPT’s
performance.
The Group delivered FFO growth per security of 3.5% in 2018. This
was in excess of the Group’s target of 3% growth but below the
stretch objective set by the Board.
Management continued to execute on strategies approved by
the Board. This included securing new acquisitions in the Office
and Logistics sector and advancing plans for development
opportunities at Melbourne Central.
Management did not achieve a successful outcome of the sale
of Wollongong Central and progress on unlocking opportunities
at Sydney Olympic Park and Camellia was behind target.
GPT’s Total Shareholder Return was 7.03% versus 3.95% for
the ASX AREIT 200 Accumulation Index.
Occupancy remains high across the Group’s portfolio and
like for like Net Operating Income (NOI) growth of 3.8% was
achieved, however the like for like NOI growth for the retail
portfolio was below target.
Office lease expiries in 2020 and 2021 continued to be a focus for
management however stretch target objectives were not achieved.
Established the Operational Excellence PCG and delivered
business efficiencies through the use of technology,
streamlined decision making, and enhanced asset
management support to the funds management platform.
Pre-commitment for the 32 Smith Street development was
achieved and Development Approval conditions satisfied
allowing the commencement of the project, with the
development on plan to deliver targeted returns.
Progress was made on the Sunshine Plaza development but final
completion has been delayed to the end of Q1 2019.
Achieved Workplace Gender Equality Agency (WGEA) Employer
of Choice for Gender Equality citation in February 2018
recognising GPT’s performance as among the best employers.
Increased the percentage of females in the top 50% of the
business (measured by remuneration) from 42.24% at the end
of 2017 to 45.65%.
Launched GPT’s second Reconciliation Action Plan (RAP),
maintained participation of First Nations employees in the
permanent workforce at 1%, and signed a 10 year agreement with
Career Trackers to expand its internship program.
Increased GPT’s score in the Australian Workplace Equality
Index (AWEI) survey from 42 to 79, 16 points higher than the
property sector average.
3. 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. GPT 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
generate STIC recommendations.
92
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities The 2018 STIC outcomes for the KMP are in Table 4, below, while STIC determination for the balance of the eligible
employees7 is to occur in March 2019, which is post the issue of the 2018 Remuneration Report. For the Group, FFO growth
per security performance hurdles are set for the year. For 2017, the Group delivered an FFO growth per security outcome of
3.0 per cent and generated a maximum amount of $13.8 million for the STIC pool, representing 64 per cent of the aggregate
of STIC participants’ maximum STIC potential, of which $13.4 million was ultimately distributed to employees based on the
performance of the individual and their business unit/team against Group and individual KPI’s.
For the Group, FFO growth per security performance hurdles are set for the year. For 2017, the Group delivered an
FFO growth per security outcome of 3.0 per cent and generated a maximum amount of $13.8 million for the STIC pool,
representing 64 per cent of the aggregate of STIC participants’ maximum STIC potential, of which $13.4 million was
ultimately distributed to employees based on the performance of the individual and their business unit/team against Group
and individual KPI’s.
The following table shows the distribution of the 2017 STIC outcomes as a percentage of the individual’s maximum
STIC opportunity.
2017 STIC Received as a % of Maximum STIC potential
Percentage of STIC participants
0–50%
3.79%
50–60%
60–70%
70–80%
80–90%
90–100%
11.36%
71.97%
8.33%
4.55%
0.0%
4. 2018 STIC outcomes by Executive KMP8
Executive KMP
Position
Bob Johnston
Chief Executive Officer
and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Actual STIC
awarded
Actual STIC
awarded as a % of
maximum STIC
% of maximum
STIC award
forfeited
Cash
component
Equity component
(# of GPT
securities)9
$1,227,000
$575,000
$575,000
67.23%
71.88%
70.12%
32.77%
28.12%
29.88%
$613,500
$287,500
$287,500
117,788
55,198
55,198
5. Group performance measures for LTI Plans currently relevant
LTI
performance
measurement
period
LTI
2016
2016-18
Performance
measure
Performance measure
hurdle
Weighting
Results
10% of rights vest at Index
performance, up to 100%
at Index plus 10% (pro rata
vesting in between)
50%
GPT’s TSR
performance
exceeded the
Index by 6.16%
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT) (the
Index)
Total Return
0% of rights vest at 8%
Total Return, up to 100%
at 9.5% Total Return (pro-
rata vesting in between)
50%
15.50%
100.00%
82.71%
Vesting % by
performance
measure
Overall Plan
Vesting
Outcome (%)
65.41%
2017
2017-19
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
10% of rights vest at Index
performance, up to 100%
at Index plus 10% (pro rata
vesting in between)
50%
N/A
N/A
2018
2018-20
Total Return
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
Total Return
0% of rights vest at 8.5%
Total Return, up to 100%
at 10.0% 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)
10% of rights vest at
8.5% Total Return, up
to 100% at 10.0% Total
Return (pro-rata vesting in
between)
50%
N/A
N/A
N/A
50%
N/A
N/A
50%
N/A
N/A
N/A
i.e. excluding the KMP.
7
8 Excluding the impact of movements in the GPT security price on deferred STIC value received.
9 The number of deferred GPT securities granted are calculated by dividing 50% of the Actual STIC awarded by GPT’s fourth quarter 2017 Volume Weighted Average
Security Price (VWAP) of $5.2085. The deferred GPT securities will vest subject to service on 31 December 2019.
93
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 6. 2016–2018 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
450,257
139,365
171,527
372,385
115,262
141,862
77,872
24,103
29,665
7. LTI outcomes – fair value and maximum value recognised in future years10
Executive KMP
Bob Johnston
Chief Executive Officer
and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Year
2018
2017
2018
2017
2018
2017
Grant date
10 May 2018
22 May 2017
29 March 2018
21 February 2017
29 March 2018
21 February 2017
Fair value per
performance right
Performance
rights granted as
at 31 Dec 18
$2.62
$2.66
$2.62
$2.66
$2.62
$2.66
420,467
452,206
153,595
157,563
157,435
172,269
Vesting date
31 Dec 20
31 Dec 19
31 Dec 20
31 Dec 19
31 Dec 20
31 Dec 19
Maximum value to
be recognised in
future years
$1,222,712
$955,709
$438,169
$293,563
$459,154
$320,962
8. Reported remuneration – Executive KMP – Actual Amounts Received11
Fixed pay
Variable or “at risk”12
Executive KMP
Bob Johnston
Chief Executive Officer and
Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Total
Year
2018
2017
2018
2017
2018
2017
2018
2017
Base pay Superannuation
$1,439,710
$1,415,168
$779,710
$730,168
$799,710
$800,168
$3,019,130
$2,945,504
$20,290
$19,832
$20,290
$19,832
$20,290
$19,832
$60,870
$59,496
Other13
$8,354
$3,299
$5,275
$2,480
$10,585
$4,326
$24,214
$10,105
STIC
LTI
Total
$1,237,259
$1,972,002
$4,677,615
$1,195,801
$1,867,471
$4,501,571
$579,807
$523,556
$579,807
$565,442
$610,381
$455,426
$751,244
$844,845
$1,995,463
$1,731,462
$2,161,636
$2,234,613
$2,396,873
$3,333,627
$8,834,714
$2,284,799
$3,167,742
$8,467,646
10 For the avoidance of doubt, the GPT incentive plans (ie STIC and LTI) use face value grants of performance rights based on the VWAP of GPT securities for specified
periods; reference to fair value per performance right is included in this table to comply with accounting standards.
11 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.
12 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;
2018: $5.2956 (2017: $5.2085).
13 Other may include death and total/permanent disability insurance premiums, service awards, GPT superannuation plan administration fees, professional
memberships, subscriptions and/or other benefits.
94
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 9. Reported remuneration – Executive KMP – AIFRS Accounting14
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
2018
2017
2018
2017
2018
2017
2018
2017
Base pay Superannuation
$1,520,636
$1,376,680
$794,923
$775,348
$825,109
$840,325
$3,140,668
$2,992,353
$20,290
$19,832
$20,290
$19,832
$20,290
$19,832
$60,870
$59,496
Other
$8,354
$3,299
$5,275
$2,480
$10,585
$4,326
$24,214
$10,105
STIC (cash plus
accrual)
LTI award
accrual15
Total
$1,210,570
$1,168,869
$3,928,719
$1,219,543
$1,166,796
$3,786,150
$548,232
$569,961
$559,068
$669,971
$414,417
$382,324
$467,160
$515,208
$1,783,137
$1,749,945
$1,882,212
$2,049,662
$2,317,870
$2,050,446
$7,594,068
$2,459,475
$2,064,328
$7,585,757
10. GPT security ownership – Executive KMP as at 31 December 2018
GPT
Holdings
(start of
period)16
Employee Security Schemes (ESS)
2018 DSTIC
2016-18 LTI
TOTAL ESS
for 2018
Purchase
/(Sales)
during
period17
GPT
Holdings
(end of
period)18
Gross Value
of GPT
Holdings19
MSHR
Guideline20
821,765
117,788
372,385
490,173
–
1,311,938
$6,947,499
$2,190,000
462,585
55,198
115,262
170,460
(223,839)
409,206
$2,166,991
$800,000
1,118,268
55,198
141,862
197,060
(156,013)
1,159,315
$6,139,269
$820,000
Executive KMP
Bob Johnston
Chief Executive Officer
and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
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
Performance rights
that lapsed in 201821
(# of rights)
Performance rights
still on foot at 31/12/1822
(# of rights)
135,278
45,702
53,184
872,673
311,158
329,704
14 This table provides a breakdown of remuneration for executive KMP in accordance with statutory requirements and Australian accounting standards.
15 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.
16 GPT Holdings (start of period) include GPT securities obtained as sign on grants (Mr Johnston only), DSTIC up to and including 2017, LTI plans up to and including
the 2015-17 LTI plan, and private holdings.
17 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 2018 calendar year.
18 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. Note that some of the securities do not become actual holdings for the individual until after the conclusion of the performance year when
Group results are known which allow the conversion of performance rights under the various plan terms.
19 The GPT Holdings (end of period) multiplied by GPT’s fourth quarter 2018 VWAP of $5.2956 to derive a dollar value.
20 GPT’s Minimum Security Holding Requirement (MSHR) guideline requires the CEO to acquire and maintain a holding equal to 150% of base salary. For other KMP
and 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.
21 The sum of performance rights that were awarded to a participant in the 2016-2018 LTI that did not vest at the end of the 2016-2018 performance period, and as a
result, lapsed and/or performance rights granted under the 2018 DSTIC that also lapsed.
22 The total of unvested performance rights currently on foot excluding any GPT securities or performance rights that may have lapsed up to 31 December 2018.
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 2017-19 and 2018-20 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.
95
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities 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 GPT Trust and GPT Management Holdings Limited).
• Non-Executive Director remuneration is composed of three main elements:
– Main Board fees
– Committee fees, and
– 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 (having
regard to GPT’s industry sector and market capitalisation).
• External independent advice on remuneration levels for Non-Executive Directors is sought annually. In
the event that a review results in changes, 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 fees23,24
Chairman
Members
Year
2018
2017
2018
2017
Board Base Fee
Audit Committee
Sustainability and
Risk Committee
Nomination and
Remuneration Committee
$400,000
$380,000
$152,000
$148,000
$37,000
$36,000
$18,500
$18,000
$31,000
$30,000
$15,500
$15,000
$31,000
$30,000
$15,500
$15,000
2. Reported remuneration – Non-Executive Directors – AIFRS accounting25,26
Fixed pay
Non-Executive Director
Year
Salary and fees
Superannuation
Other27
Total
Current
Vickki McFadden28
Chairman
Eileen Doyle
Swe Guan Lim
Angus McNaughton29
Michelle Somerville
Gene Tilbrook
Former
Rob Ferguson30
Brendan Crotty31
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
$289,851
–
$214,596
$203,500
$186,000
$181,000
$27,917
–
$204,500
$192,750
$183,000
$178,000
$137,949
$380,000
$159,292
$181,000
$1,403,105
$1,316,250
$16,481
–
$20,094
$19,333
$17,670
$17,195
$2,652
–
$19,428
$18,311
$17,385
$16,910
$8,617
$19,832
$15,133
$17,195
$117,460
$108,776
–
–
–
–
$908
$287
–
–
–
–
$1,103
$380
–
–
–
–
$2,011
$667
$306,332
–
$234,690
$222,833
$204,578
$198,482
$30,569
–
$223,928
$211,061
$201,488
$195,290
$146,566
$399,832
$174,425
$198,195
$1,522,576
$1,425,693
23 ‘Chairman’ used in this sense may refer to the chairperson of the board or a particular committee.
24 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.
25 This table provides a breakdown of remuneration for Non-Executive Directors in accordance with statutory requirements and Australian accounting standards.
26 No termination benefits were paid during the financial year.
27 Other may include death and total/permanent disability insurance premiums and/or GPT superannuation plan administration fees.
28 Ms McFadden joined GPT on 1 March 2018, and was appointed Chairman of GPT from 3 May 2018.
29 Mr McNaughton joined GPT on 1 November 2018.
30 Mr Ferguson retired from the GPT Board on 2 May 2018.
31 Mr Crotty retired from the GPT Board on 8 November 2018.
96
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
3. Non-Executive Director – GPT security holdings
Non-Executive Director
Vickki McFadden
Eileen Doyle
Swe Guan Lim
Angus McNaughton
Michelle Somerville
Gene Tilbrook
Private holdings (# of securities)
Minimum security holding requirement (MSHR)
Balance
31/12/17
Purchase/(Sale)
Balance
31/12/18
Gross value32
MSHR guideline33
-
45,462
15,800
-
16,157
48,546
50,000
-
23,200
-
20,506
-
50,000
45,462
39,000
-
36,663
48,546
$264,780
$240,749
$206,528
-
$194,153
$257,080
$400,000
$152,000
$152,000
$152,000
$152,000
$152,000
The Directors’ Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors of GPT
Management Holdings Limited.
Vickki McFadden
Chairman
Sydney
11 February 2019
Bob Johnston
Chief Executive Officer and Managing Director
32 Non-Executive Directors holdings multiplied by GPT’s fourth quarter 2018 VWAP of $5.2956 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.
97
Directors’ Report – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of GPT Management Holdings Limited for the year ended
31 December 2018, I declare that to the best of my knowledge and belief, there have been:
As lead auditor for the audit of GPT Management Holdings Limited for the year ended
Auditor’s Independence Declaration
31 December 2018, I declare that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001
in relation to the audit; and
As lead auditor for the audit of GPT Management Holdings Limited for the year ended
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001
31 December 2018, I declare that to the best of my knowledge and belief, there have been:
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
in relation to the audit; and
This declaration is in respect of GPT Management Holdings Limited and the entities it controlled
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
during the period.
This declaration is in respect of GPT Management Holdings Limited and the entities it controlled
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
during the period.
in relation to the audit; and
This declaration is in respect of GPT Management Holdings Limited and the entities it controlled
during the period.
Susan Horlin
Partner
Susan Horlin
PricewaterhouseCoopers
Partner
PricewaterhouseCoopers
Susan Horlin
Partner
PricewaterhouseCoopers
Sydney
11 February 2019
Sydney
11 February 2019
Sydney
11 February 2019
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
Liability limited by a scheme approved under Professional Standards Legislation.
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
19
Liability limited by a scheme approved under Professional Standards Legislation.
19
19
98
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Financial Statements
Consolidated Statement of Comprehensive Income
Year ended 31 December 2018
Note
31 Dec 18
$’000
31 Dec 17
$’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
Interest revenue
Profit on the sale of other assets
Proceeds from sale of inventory
Derecognition of available for sale financial asset
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
(Loss)/profit before income tax
Income tax expense
Loss after income tax from continuing operations
Loss from discontinued operations
Net loss 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 loss for the year
Net (loss)/profit attributable to:
- Members of the Company
- Non-controlling interest
Total comprehensive (loss)/income attributable to:
- Members of the Company
- Non-controlling interest
2(c)
10(a)
24(b)
11(b)
11(b)
84,619
43,511
21,634
–
–
32,059
181,823
5,003
685
–
28,883
–
34,571
216,394
121,435
27,214
9,014
–
4,762
5,766
2,014
5,205
42,018
11,256
1,263
4,212
234,159
(17,765)
7,670
(25,435)
(15,527)
(40,962)
77,206
38,863
24,601
7,438
331
32,334
180,773
6,237
572
4
10,358
10,699
27,870
208,643
123,124
8,976
8,879
8,237
4,597
5,098
1,867
6,041
20,164
5,334
2,332
8,141
202,790
5,853
6,406
(553)
(13,669)
(14,222)
(16,770)
–
(57,732)
30
(7,125)
(21,317)
(41,524)
562
(18,776)
4,554
(58,294)
562
(25,871)
4,554
Earnings per share attributable to the ordinary equity holders of the Company
Basic and diluted earnings per share (cents per share) from continuing operations
Basic and diluted earnings per share (cents per share) – Total
12(a)
12(a)
(1.44)
(2.30)
(0.28)
(1.04)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
99
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Consolidated Statement of Financial Position
At 31 December 2018
ASSETS
Current assets
Cash and cash equivalents
Trade receivables
Other receivables
Loan receivables
Current tax asset
Inventories
Prepayments
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Inventories
Equity accounted investments
Deferred tax asset
Deferred acquisition costs
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Current tax liability
Provisions
Borrowings
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
Note
3
20
10(b)
5
4
6
5
2
10(c)
7
8
10(b)
9
14
14
9
11(a)
11(b)
11(c)
31 Dec 18
$’000
31 Dec 17
$’000
19,259
45,476
4,507
–
763
34,654
2,640
107,299
26,799
12,661
143,618
21,423
21,091
545
12,964
239,101
346,400
36,889
–
33,862
–
70,751
154,618
13,602
7,539
175,759
246,510
99,890
20,033
62,895
630
37,032
–
11,808
1,317
133,715
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
325,855
19,794
325,703
37,803
(261,799)
(220,275)
83,850
16,040
99,890
143,231
12,664
155,895
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
100
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Equity attributable to Company Members
At 1 January 2017
Revaluation of available for sale financial asset net of tax
Derecognition of available for sale financial asset
Foreign currency translation reserve
Other comprehensive income for the year
(Loss)/profit for the year
Total comprehensive income for the year
Transactions with Members in their capacity as Members
Issue of securities
Movement in employee incentive security scheme reserve
net of tax
Reclassification of employee incentive security scheme
reserve to accumulated losses
Distributions
At 31 December 2017
Equity attributable to Company Members
At 1 January 2018
Foreign currency translation reserve
Other comprehensive income for the year
(Loss)/profit for the year
Total comprehensive income for the year
Transactions with Members in their capacity as Members
Return of capital
Issue of securities
Movement in employee incentive security scheme reserve
net of tax
Distributions
At 31 December 2018
Note
11(b)
11(b)
11(b)
11(c)
11(a)
11(b)
11(b)
11(c)
11(b)
11(c)
11(a)
11(b)
11(c)
Company
Non-controlling interests
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
Total
$’000
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
Total
$’000
Total
equity
$’000
325,512
44,683
(201,041)
169,154
22,060
–
–
–
–
–
–
983
(8,108)
30
(7,095)
–
–
–
–
983
(8,108)
30
(7,095)
–
(18,776)
(18,776)
(7,095)
(18,776)
(25,871)
191
–
–
–
–
(243)
458
–
–
–
(458)
–
191
(243)
–
–
–
–
–
–
–
–
–
–
–
–
325,703
37,803
(220,275)
143,231
22,060
325,703
37,803
(220,275)
143,231
22,060
–
–
–
–
–
152
–
–
(16,770)
(16,770)
–
–
(16,770)
(16,770)
–
(41,524)
(41,524)
(16,770)
(41,524)
(58,294)
–
–
(1,239)
–
–
–
–
–
–
152
(1,239)
–
–
–
–
–
(888)
–
–
–
325,855
19,794
(261,799)
83,850
21,172
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9,396)
12,664
181,818
–
–
–
–
–
–
–
–
4,554
4,554
4,554
4,554
–
–
–
–
–
–
(4,554)
(9,396)
(4,554)
12,664
983
(8,108)
30
(7,095)
(14,222)
(21,317)
191
(243)
–
(4,554)
155,895
(9,396)
12,664
155,895
–
–
562
562
–
–
–
–
–
562
562
(888)
–
–
3,702
(5,132)
3,702
16,040
(16,770)
(16,770)
(40,962)
(57,732)
(888)
152
(1,239)
3,702
99,890
Y
e
a
r
e
n
d
e
d
3
1
D
e
c
e
m
b
e
r
2
0
1
8
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
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
1
0
1
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Consolidated Statement of Cash Flows
Year ended 31 December 2018
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 the sale of inventories
Payments for inventories
Receipts from development activities
Payments for development activities
Distributions received from equity accounted investments
Interest received
Finance costs paid
Dividend received from available for sale financial asset
Income taxes paid
Net cash inflows from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Payments for intangibles
Return of capital from equity accounted investment
Capital return from available for sale financial asset
Net cash (outflows)/inflows from investing activities
Cash flows from financing activities
Repayment of related party borrowings
Proceeds from related party borrowings
Repayments of borrowings
Proceeds from borrowings
Purchase of securities for the employee incentive scheme
Net cash outflows from financing activities
Net cash (decrease)/increase 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 18
$’000
31 Dec 17
$’000
16(a)
264,045
(164,193)
28,883
(24,502)
–
–
4,770
685
(899)
–
20,876
87,913
–
(3,007)
(3,326)
962
–
(5,371)
(206,305)
145,668
(28,404)
20,932
(15,207)
(83,316)
(774)
20,033
19,259
149,423
(137,730)
10,358
(51,951)
41,686
(3,904)
–
572
(991)
30,437
(6,442)
31,458
1,279
(1,119)
(4,694)
–
10,699
6,165
(35,181)
16,256
(14,681)
15,705
(17,531)
(35,432)
2,191
17,842
20,033
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
102
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Notes to the Financial Statements
Year ended 31 December 2018
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.
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 is recognised on a straightline basis over
the lease term. When the consolidated entity provides
lease incentives to tenants, any costs are recognised on a
straightline basis over the lease term.
Revenue from dividends and distributions are recognised
when they are declared.
Interest income is recognised on an accruals basis using
the effective interest method.
Refer to note 25(e) for information relating to revenue
policies adopted under AASB 15 Revenue from Contracts
with Customers.
Key judgements, estimates and assumptions
Expenses
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
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
Investment in financial
assets
Investment in equity
accounted investments
Fair value
Assessment of control
versus disclosure guidance
25(b)
4
4
5
10
19
23
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 the relevant
capitalisation rate taking into account the Group’s weighted
average cost of debt.
103
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Operating assets and liabilities
2. Equity accounted investments
Investments in joint ventures
Investments in 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
Erskine Park Trust
Total investment in joint ventures
(ii) Associates
GPT Funds Management Limited
Total investment in associates
Note
(a)(i)
(a)(ii)
31 Dec 18
$’000
31 Dec 17
$’000
11,423
10,000
21,423
11,988
10,000
21,988
Ownership interest
Principal activity
31 Dec 18
%
31 Dec 17
%
31 Dec 18
$’000
31 Dec 17
$’000
Management
Property development
Property development
50.00
50.00
50.00
50.00
50.00
50.00
Funds management
100.00
100.00
90
11,324
9
89
11,896
3
11,423
11,988
10,000
10,000
10,000
10,000
1 The entity has a 30 June balance date. 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. The Consolidated Entity’s interest is held
through a subsidiary that is 52 per cent owned by the Consolidated Entity and 48 per cent owned by GPT Trust.
(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.
31 Dec 18
$’000
31 Dec 17
$’000
21,817
18,464
11,812
52,093
19,755
19,755
32,338
21,169
254
21,423
25,966
18,488
17,408
61,862
28,180
28,180
33,682
21,841
147
21,988
Cash and cash equivalents
Other assets
Property investments and loans
Total assets
Liabilities
Total liabilities
Net assets
Consolidated entity’s share of net assets
Additional ownership costs
Total equity accounted investment
104
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(c) Share of after tax profit of equity accounted investments
Revenue
Expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Share of after tax profit of joint ventures and associates
Additional ownership costs
Share of after tax profit of equity accounted investments
(d) Reconciliation of the carrying amount of investments in joint ventures and associates
Carrying value at 1 January 2018
Return of capital
Share of after tax profit of joint ventures and associates
Distributions received/receivable
Carrying value at 31 December 2018
Additional ownership costs
Carrying amount of equity accounted investments
3. Trade receivables
Trade receivables1
Less: impairment of trade receivables
Accrued income
Related party receivables2
Trade receivables
31 Dec 18
$’000
31 Dec 17
$’000
24,052
(12,201)
11,851
(1)
11,850
5,925
(922)
5,003
12,478
(3)
12,475
(1)
12,474
6,237
–
6,237
31 Dec 18
$’000
31 Dec 17
$’000
21,988
(1,850)
5,925
(4,747)
21,316
107
21,423
15,752
–
6,237
(1)
21,988
–
21,988
31 Dec 18
$’000
31 Dec 17
$’000
30,948
(622)
30,326
188
14,962
45,476
23,950
(12)
23,938
1,474
37,483
62,895
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 receivables.
31 Dec 18
31 Dec 17
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
Trade receivables
Impairment of trade
receivables
188 39,259
1,122
3,434
2,095 46,098
1,474
57,675
504
–
–
–
–
(622)
(622)
–
–
–
Total trade receivables
188 39,259
1,122
3,434
1,473 45,476
1,474
57,675
504
–
–
–
3,254
62,907
(12)
(12)
3,242
62,895
Refer to note 25(e) for the accounting policies for Trade Receivables and other information relating to the adoption of AASB 9
Financial Instruments.
105
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
4. Intangible assets
Cost
At 1 January 2017
Additions
Transfers
Disposals
At 31 December 2017
Additions
Transfers
At 31 December 2018
Accumulated amortisation and impairment
At 1 January 2017
Amortisation
Disposal
Impairment
At 31 December 2017
Amortisation
At 31 December 2018
Carrying amounts
At 31 December 2017
At 31 December 2018
Management rights
Management
rights
$’000
IT development
and software
$’000
55,825
–
–
–
55,825
–
–
55,825
(45,094)
(326)
–
–
(45,420)
(138)
(45,558)
10,405
10,267
67,157
4,702
2,843
(11,467)
63,235
3,498
(2,395)
64,338
(42,632)
(5,715)
11,467
(5,859)
(42,739)
(5,067)
(47,806)
20,496
16,532
Total
$’000
122,982
4,702
2,843
(11,467)
119,060
3,498
(2,395)
120,163
(87,726)
(6,041)
11,467
(5,859)
(88,159)
(5,205)
(93,364)
30,901
26,799
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 has been assessed at 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.
106
Notes to the Financial Statements – Year ended 31 December 2018Annual 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 18
$’000
31 Dec 17
$’000
34,654
34,654
143,618
143,618
178,272
11,808
11,808
177,410
177,410
189,218
An impairment expense has been recognised for the year ended 31 December 2018 of $11,391,000 in relation to Metroplex.
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.
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 18
$’000
31 Dec 17
$’000
15,008
(12,314)
2,694
17,532
(7,565)
9,967
12,661
15,092
(11,077)
4,015
12,683
(6,788)
5,895
9,910
107
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
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 2017
Opening carrying value
Additions
Disposals
Transfers
Depreciation
At 31 December 2017
At 1 January 2018
Opening carrying value
Additions
Transfers
Depreciation
At 31 December 2018
Computers
$’000
Office fixtures
& fittings
$’000
5,007
980
(1,341)
383
(1,014)
4,015
4,015
–
(84)
(1,237)
2,694
9,893
81
–
(3,226)
(853)
5,895
5,895
2,578
2,271
(777)
9,967
Total
$’000
14,900
1,061
(1,341)
(2,843)
(1,867)
9,910
9,910
2,578
2,187
(2,014)
12,661
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.
7. Other assets
Lease incentive asset
Investment in financial asset
Other financial asset
Total other assets
108
31 Dec 18
$’000
31 Dec 17
$’000
5,338
4,576
3,050
12,964
3,493
4,292
–
7,785
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
8. Payables
Trade payables1
Accruals
Other payables
Total payables
31 Dec 18
$’000
31 Dec 17
$’000
1,932
24,813
10,144
36,889
27,813
27,689
6,607
62,109
1 2017 includes a $10,461,283 distribution payable to GPT Trust for GPT 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
Total provisions
As at 1 January 2017
Arising during the year
Utilised during the year
As at 31 December 2017
As at 1 January 2018
Arising during the year
Utilised during the year
As at 31 December 2018
31 Dec 18
$’000
31 Dec 17
$’000
29,623
4,239
33,862
11,942
1,660
13,602
47,464
Other
$’000
3,684
7,143
(574)
10,253
10,253
1,641
(5,995)
5,899
29,159
9,556
38,715
9,553
697
10,250
48,965
Total
$’000
37,907
36,480
(25,422)
48,965
48,965
23,009
(24,510)
47,464
Employee benefits
$’000
34,223
29,337
(24,848)
38,712
38,712
21,368
(18,515)
41,565
Provisions are recognised when:
• the Consolidated Entity has a present obligation (legal or constructive) as a result of a past event;
•
• a reliable estimate can be made of the amount of the obligation.
it is probable that resources will be expended to settle the obligation; and
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the obligation.
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.
109
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
31 Dec 18
$’000
31 Dec 17
$’000
11,554
(3,884)
7,670
7,670
7,670
17,012
(10,606)
6,406
6,406
6,406
31 Dec 18
$’000
31 Dec 17
$’000
(17,765)
(15,527)
(33,292)
5,853
(13,669)
(7,816)
(9,988)
(2,345)
–
–
22,525
–
(222)
(5,086)
–
–
441
7,670
457
(84)
–
2,955
556
175
(421)
10,028
(3,210)
(2,865)
–
2,592
1,480
972
6,406
713
(236)
9,131
2,616
(1,618)
8,559
(2,011)
(20,876)
(763)
(6,442)
8,559
10. Taxation
(a) Income tax expense
Current income tax expense
Deferred income tax credit
Income tax expense in the Consolidated Statement of Comprehensive Income
Income tax expense attributable to:
Loss from continuing operations
Aggregate income tax expense
(b) Reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Loss from discontinued operations before income tax expense
Net loss before income tax expense
Prima facie income tax credit at 30% tax rate (2017: 30%)
Tax effect of amounts not deductible/assessable in calculating income tax expense:
Prior year adjustments
Previously unrecognised tax losses
Non-deductible revaluation items
Non assessable income:
Derecognition of available for sale financial asset
Other non-assessable income
Other tax adjustments:
Release of amounts from foreign currency translation reserve
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 (asset)/liability:
Temporary differences:
Employee benefits
Provisions and accruals
Dividends received
Other deferred tax asset charged to income
Movement in reserves
Opening balance:
Balance transferred from prior period
Tax adjustments:
Tax payments made to tax authorities
Current tax (asset)/liability
110
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(c) Deferred tax asset
Employee credits
Provisions and accruals
Other
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
Other/utilisation of tax losses
Closing balance at the end of the year
(d) Effective tax rate
Net loss for the year excluding income tax expense
Add: non-deductible revaluation items
Less: amounts released from foreign currency translation reserve
Less: equity accounted profits from joint ventures
Add: distribution received from joint ventures taxable to 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
Adoption of Voluntary Tax Transparency Code
31 Dec 18
$’000
31 Dec 17
$’000
15,906
2,863
2,322
21,091
17,763
3,884
(556)
–
21,091
15,449
2,947
(633)
17,763
7,550
10,606
1,618
(2,011)
17,763
31 Dec 18
$’000
31 Dec 17
$’000
(33,292)
75,082
(16,953)
(5,925)
4,770
23,682
7,670
–
–
7,670
32%
(7,816)
33,657
–
(6,237)
–
19,604
6,406
421
(175)
6,652
34%
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 above 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 above, 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.
Income tax expense
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.
111
Notes to the Financial Statements – Year ended 31 December 2018Annual 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; and
– 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
11. Equity and reserves
(a) Contributed equity
Ordinary stapled securities
Opening securities on issue 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 at 31 December 2017
Opening securities on issue at 1 January 2018
Securities issued – Long Term Incentive Plan
Securities issued – Deferred Short Term Incentive Plan
Securities issued – Broad Based Employee Security Ownership Plan
Number
$’000
1,797,955,568
325,512
2,763,052
855,355
54,338
12,569
1,801,640,882
1,801,640,882
2,332,026
875,344
42,174
109
76
5
1
325,703
325,703
92
57
3
Closing securities on issue at 31 December 2018
1,804,890,426
325,855
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.
(b) Reserves
Balance at 1 January 2017
Net foreign exchange translation adjustments
Reclassification to accumulated losses
Employee incentive schemes expense, net of tax
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
Balance at 31 December 2017
Balance at 1 January 2018
Net foreign exchange translation adjustments
Employee incentive schemes expense, net of tax
Tax on incentives valued at reporting date
Issue of securities
Balance at 31 December 2018
112
Foreign Currency
Translation Reserve
$’000
Employee Incentive
Scheme Reserve
$’000
Fair Value
Reserve
$’000
Total Reserve
$’000
34,913
30
–
–
–
–
–
–
–
34,943
34,943
(16,770)
–
–
–
18,173
2,645
7,125
44,683
–
458
624
(552)
(131)
(184)
–
–
2,860
2,860
–
(531)
(556)
(152)
1,621
–
–
–
–
–
–
983
(8,108)
–
–
–
–
–
–
–
30
458
624
(552)
(131)
(184)
983
(8,108)
37,803
37,803
(16,770)
(531)
(556)
(152)
19,794
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
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 2017
Net (loss)/profit for the year
Reclassification from employee incentive security scheme
Distributions
Balance at 31 December 2017
Balance at 1 January 2018
Net (loss)/profit for the year
Distributions
Balance at 31 December 2018
12. Earnings per share
(a) Basic and diluted earnings per share
Basic and diluted earnings per share – loss from continuing operations
Basic and diluted loss per share – loss from discontinued operations
Total basic and diluted earnings per share
Company
$’000
(201,041)
(18,776)
(458)
–
(220,275)
(220,275)
(41,524)
–
(261,799)
Non-controlling
interest
$’000
(9,396)
4,554
–
(4,554)
(9,396)
(9,396)
562
3,702
(5,132)
31 Dec 18
Cents
(1.44)
(0.86)
(2.30)
(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 from continuing operations
Loss from discontinued operations
Profit attributed to external non-controlling interest
(c) WANOS
31 Dec 18
$’000
(25,997)
(15,527)
562
(40,962)
Total
$’000
(210,437)
(14,222)
(458)
(4,554)
(229,671)
(229,671)
(40,962)
3,702
(266,931)
31 Dec 17
Cents
(0.28)
(0.76)
(1.04)
31 Dec 17
$’000
(5,107)
(13,669)
4,554
(14,222)
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
31 Dec 18
Number of shares
‘000s
31 Dec 17
Number of shares
‘000s
1,804,400
2,654
1,807,054
1,801,095
2,410
1,803,505
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.
113
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
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 2018 financial year (2017: nil).
14. Borrowings
Current borrowings at amortised cost – secured
Current borrowings
Non-current borrowings at amortised cost – secured
Related party borrowings from GPT Trust at amortised cost
Non-current borrowings
Total borrowings
1
Including unamortised establishment costs.
31 Dec 18
31 Dec 17
Carrying amount1
$’000
Fair value2
$’000
Carrying amount1
$’000
Fair value2
$’000
-
-
12,587
142,031
154,618
154,618
-
-
12,636
142,031
154,667
154,667
19,921
19,921
-
99,146
99,146
119,067
19,980
19,980
-
99,625
99,625
119,605
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.
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 2018, in accordance with the loan agreement. As a result, a revaluation loss
of $75,000,000 (2017: $34,097,679) for both continuing ($42,461,499) and discontinued ($32,538,501) operations has been
recognised in the Consolidated Statement of Comprehensive Income. The following borrowings were revalued to nil at 31
December 2018 (Dec 2017: nil):
• the amount outstanding on the loan facility to GPT Management Holdings Limited at 31 December 2018 is $332,527,776
(Dec 2017: $348,797,027). $16,269,251 was repaid during the period. This facility expires on 31 December 2030
• the amount outstanding on the loan facility to GPT International Pty Limited at 31 December 2018 is $59,359,269
(Dec 2017: $75,628,519). $16,269,250 was repaid during the period. This facility expires on 12 June 2032
• the amount outstanding on the loan facility to Voyages Hotels & Resorts (Loan 1) at 31 December 2018 is $16,347,082
(Dec 2017: $32,616,333). $16,269,251 was repaid during the period. This facility expires on 30 June 2032
• the amount outstanding on the loan facility to Voyages Hotels & Resorts (Loan 2) at 31 December 2018 is $31,683,609
(Dec 2017: $47,952,859). $16,269,250 was repaid during the period. This facility expires on 3 January 2035
• the amount outstanding on the loan facility to GPT Property Management Ltd was fully repaid during the year,
totalling $9,922,998.
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.
When the terms of a financial liability are modified, AASB 9 requires an entity to perform an assessment to determine
whether the modified terms are substantially different from the existing financial liability. Where a modification is
substantial, it will be accounted for as an extinguishment of the original financial liability and a recognition of a new financial
liability. Where the modification does not result in extinguishment, the difference between the existing carrying amount
of the financial liability and the modified cash flows discounted at the original effective interest rate is recognised in the
Consolidated Statement of Comprehensive Income as gain/loss on modification of financial liability. The Consolidated Entity
has assessed the modification of terms requirements within AASB 9 and have concluded that for intercompany loans with
modifications these were deemed to be substantial resulting in extinguishment. Accordingly there has been no gain/loss
recognised in the Consolidated Statement of Comprehensive Income.
114
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
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
–
36,154
668,618
704,772
–
31,860
562,724
594,584
–
4,294
105,894
110,188
19,259
129,447
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 2018 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
2018
$’000
–
154,618
154,618
2017
$’000
48,353
70,714
119,067
2018
$’000
–
154,618
154,618
2017
$’000
48,353
70,714
119,067
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
2018
(+1%)
$’000
193
(1,547)
(1,354)
2018
(-1%)
$’000
(193)
1,547
1,354
2017
(+1%)
$’000
200
(708)
(508)
2017
(-1%)
$’000
(200)
708
508
115
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(b) Liquidity risk
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.
Liabilities
Non-derivatives
Payables
Current tax liability
Borrowings1
1 year
or less
$’000
36,889
–
–
31 Dec 18
Over 1
year to
2 years
$’000
Over 2
years to
5 years
$’000
31 Dec 17
Over 5
years
$’000
Total
$’000
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
–
–
–
–
–
–
36,889
62,109
–
8,559
–
–
–
–
–
–
62,109
8,559
31,860
– 562,724
594,584
19,980
28,353
39,224 546,487 634,044
Projected interest cost on borrowings
10,429
9,569
27,097
5,993
53,088
7,646
4,804
5,928
5,669
24,047
Total liabilities
47,318
41,429
27,097 568,717
684,561
98,294
33,157
45,152 552,156 728,759
Less cash and equivalents
19,259
–
–
–
19,259
20,033
–
–
–
20,033
Total liquidity exposure
28,059
41,429
27,097 568,717
665,302
78,261
33,157
45,152 552,156 708,726
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, counterparties 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 2018, 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.
116
Notes to the Financial Statements – Year ended 31 December 2018Annual 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
Liabilities
Other liabilities
(e) Credit risk
Euros
United States Dollars
31 Dec 18
$’000
31 Dec 17
$’000
31 Dec 18
$’000
31 Dec 17
$’000
–
–
–
–
1,151
1,151
304
304
–
–
–
–
133
133
–
–
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
on their 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.
The maximum exposure to credit risk as at 31 December 2018 is the carrying amounts of financial assets recognised on the
Consolidated Statement of Financial Position. For more information, refer to note 3.
117
Notes to the Financial Statements – Year ended 31 December 2018Annual 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 loss after tax to net cash inflows from operating activities:
Net loss for the year
Share of after tax profit of equity accounted investments (net of distributions)
Loss on disposal of assets
Capital return from available for sale financial asset
Impairment expense
Profit on transfer from foreign cash translation reserve
Non-cash employee benefits – security based payments
Fair value movement of investment in GPT Trust
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 sale of inventory
Payments for inventories
Proceeds from inventories
Decrease in operating assets
(Increase)/decrease in operating liabilities
Other
Net cash inflows from operating activities
(b) Net debt reconciliation
Reconciliation of net debt movements during the financial year:
Net debt as at 31 December 2017
Cash flows
Other non-cash movements
Net debt as at 31 December 2018
Borrowings
due within
1 year
$’000
(19,921)
19,980
(59)
–
Cash
$’000
20,033
(774)
–
19,259
31 Dec 18
$’000
(40,962)
(233)
–
–
11,256
(16,954)
16,608
(443)
(5,910)
–
392
2,014
5,205
653
5,260
75,000
(1,669)
(24,502)
28,883
47,589
(15,401)
1,127
87,913
Borrowings
due after
1 year
$’000
(99,146)
(26,872)
(28,600)
31 Dec 17
$’000
(14,222)
(6,237)
62
(10,699)
5,334
–
21,781
(295)
(10,486)
(3,252)
476
1,867
6,041
654
11,394
34,098
(1,382)
(51,951)
10,358
18,534
18,615
768
31,458
Total
$’000
(99,034)
(7,666)
(28,659)
(154,618)
(135,359)
118
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
17. Commitments
(a) Capital expenditure commitments
Capital expenditure commitments at 31 December 2018 were $10,019,000 (2017: $1,401,000).
Commitments arise from the purchase of plant and equipment and intangibles, which have been contracted for at balance
date but not recognised on 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 18
$’000
31 Dec 17
$’000
9,191
24,917
18,882
52,990
6,430
15,049
5,495
26,974
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.
(c) Commitments relating to equity accounted investments
Capital expenditure commitments
Total joint venture and associates commitments
31 Dec 18
$’000
31 Dec 17
$’000
40
40
168
168
The capital expenditure commitments in the Consolidated Entity’s equity accounted investments at 31 December 2018 relate
to Lendlease GPT (Rouse Hill) Pty Limited (2017: Lendlease GPT (Rouse Hill) Pty Limited).
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 GPT Trust’s obligations
under the note purchase and guarantee agreements in relation to US Private Placement issuances totalling US$850,000,000
until December 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 any subsequent plans, all the
awarded stapled securities will vest one year after conversion, subject to continued employment up to the vesting date.
119
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(d) LTI
At the 2009 Annual General Meeting (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. Fair value of the performance rights issued under DSTI is determined using the security price. 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.
2018 LTI
$3.64
$5.34
7.0%
2018 DSTI
$5.34
$5.34
N/A
29 March 2018
29 March 2018
31 December 2020
31 December 2019
$4.74
$4.74
3 years (2 years remaining)
2 years (1 year remaining)
4.8%
1.9%
15.8%
4.8%
N/A
N/A
120
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
(e) Summary table of all employee security schemes
Rights outstanding at 1 January 2017
Rights granted during 2017
Rights forfeited during 2017
Rights converted to GPT stapled securities during 20171
Rights outstanding at 31 December 2017
Rights outstanding at 1 January 2018
Rights granted during 2018
Rights forfeited during 2018
Rights converted to GPT stapled securities during 20182
Rights outstanding at 31 December 2018
DSTI
1,212,639
1,338,498
(357,284)
(855,355)
1,338,498
1,338,498
1,308,548
(550,030)
(875,344)
1,221,672
Number of rights
LTI
8,607,534
2,854,675
(323,771)
(2,792,225)
8,346,213
8,346,213
2,712,482
(879,580)
(2,332,026)
7,847,089
Total
9,820,173
4,193,173
(681,055)
(3,647,580)
9,684,711
9,684,711
4,021,030
(1,429,610)
(3,207,370)
9,068,761
1 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.
2 Rights under the 2017 DSTI plan were converted to GPT stapled securities on 19 March 2018 and rights under the 2015 LTI Plan were converted to GPT stapled
securities on 13 February 2018.
Securities outstanding at 1 January 2017
Securities granted during 2017
Securities vested during 2017
Securities outstanding at 31 December 2017
Securities outstanding at 1 January 2018
Securities granted during 2018
Securities vested during 2018
Securities outstanding at 31 December 2018
20. Related party transactions
Number of stapled securities
GESOP
60,756
53,982
(60,756)
53,982
53,982
62,609
(53,982)
62,609
BBESOP
92,761
48,480
(17,688)
123,553
123,553
37,488
(46,277)
114,764
Total
153,517
102,462
(78,444)
177,535
177,535
100,097
(100,259)
177,373
GPT Management Holdings Limited is the ultimate parent entity. The Consolidated Entity is stapled to GPT Trust and 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 GPT 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
Total key management personnel compensation
31 Dec 18
$
6,943,395
178,330
2,050,446
9,172,171
31 Dec 17
$
6,778,850
168,272
2,064,328
9,011,450
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.
121
Notes to the Financial Statements – Year ended 31 December 2018Annual 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 GPT Trust:
Revenue and expenses
Fund management fees from GPT Trust
Property management fees from GPT Trust
Development management fees from GPT Trust
Option fees received from GPT Trust
Management costs recharged from GPT Trust
Property rent and outgoings paid to GPT Trust
Interest paid to GPT Trust
Receivables
Current receivables
Loan receivable
Other non-current financial asset receivable
Other transactions
Revaluation of arrangements with GPT Trust – continued and discontinued operations
Purchase of inventory from GPT Trust
Transactions with employees
31 Dec 18
$
31 Dec 17
$
25,087,668
25,282,904
14,160,874
14,469,095
20,472,495
15,650,457
538,500
–
7,516,215
7,095,234
(3,774,934)
(3,661,067)
(5,725,395)
(11,309,992)
14,961,590
37,483,052
–
37,032,383
3,050,000
-
75,000,000
34,097,679
5,925,000
2,799,125
Contributions to superannuation funds on behalf of employees
(6,172,487)
(5,703,954)
58,232,953
50,744,061
17,654,198
15,660,782
5,196,484
6,963,854
657,717
653,208
5,698,709
5,788,457
9,519,877
9,396,803
(1,406,006)
(597,294)
7,200,079
9,089,187
14,934,895
12,926,671
Transactions with GWOF and GWSCF:
Revenue
Responsible Entity fees
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 fund management fee receivable
122
Notes to the Financial Statements – Year ended 31 December 2018Annual 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
Other services
Taxation services
Total remuneration for non-audit related services
Total auditor’s 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
31 Dec 18
$
31 Dec 17
$
278,996
278,996
345,846
345,846
257,813
257,813
536,809
99,818
99,818
445,664
15,300
–
15,300
552,109
–
3,500
3,500
449,164
Parent entity
31 Dec 18
$’000
31 Dec 17
$’000
387,757
116,561
504,318
208,364
21,139
229,503
274,815
288,431
117,756
406,187
176,788
99,146
275,934
130,253
325,855
325,703
4,426
5,667
(55,466)
(201,117)
274,815
130,253
145,651
145,651
9,191
24,917
18,882
52,990
5,190
5,190
6,430
15,049
5,495
26,974
123
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Capital expenditure commitments
The parent entity has $7,893,000 capital expenditure commitments at 31 December 2018 (2017: $807,000).
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 where set out below.
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 and critical assumptions underlying the valuations are disclosed below.
(a) 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 18
31 Dec 17
Investment in
financial assets
Level 2
Market price
Market price
Not applicable – observable input
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
(ie as prices) or indirectly (ie derived from prices).
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
24. Discontinued operations and available for sale financial assets
(a) Discontinued operations
At 31 December 2018, 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 The
Citco Group Limited.
(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
Loss after income tax of discontinued operations
Net cash outflow from operating activities
Net decrease in cash from discontinued operations
31 Dec 18
$’000
31 Dec 17
$’000
17,015
(32,542)
(15,527)
–
(13,669)
(13,669)
–
–
(15,527)
(13,669)
–
–
13
13
During the year, GPT Europe 2 Sarl in Luxembourg and Hamburg Trust HTG USA 3 GmbH & Co KG, a foreign entity which
held Series D Preferred Units in Babcock & Brown Residential Operating Partnership LP, were wound-up. This resulted in
the recognition of a $16,770,000 foreign exchange gain in discontinued operations.
124
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Discontinued operation
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 $10,699,000 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 was derecognised in
the Consolidated Statement of Financial Position and
$10,699,000 was 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. 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.
25. Accounting policies
(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 $110,188,000 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.
Comparatives in the Consolidated Statement of
Comprehensive Income, Consolidated Statement of Financial
Position and notes to the financial statements have been
restated to the current year presentation. There was no effect
on the loss for the year.
The financial report was approved by the Board of Directors
on 11 February 2019.
(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, expenses, profits
and losses resulting from intra-group transactions have
been eliminated.
Associates
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.
125
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Joint arrangements
(ii) 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 Consolidated
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.
(iii) 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 2018
The Consolidated Entity has adopted AASB 9 and AASB
15 at 1 January 2018. AASB 9 addresses the classification,
measurement and de-recognition of financial assets and
financial liabilities. AASB 15 contains a single model that
applies to contracts with customers and two approaches to
recognising revenue: at a point in time or over time.
There have been no significant changes to the Consolidated
Entity’s financial performance and position as a result of
the adoption of new and amended accounting standards
and interpretations effective for annual reporting periods
beginning on or after 1 January 2018. New disclosures have
been included as required.
(e) Changes in accounting policies
AASB 9 Financial Instruments
The requirements of AASB 9 represent a significant change
from AASB 139 Financial Instruments. The nature and
effects of the key changes to the Consolidated Entity’s
accounting policies resulting from the adoption of AASB 9
are summarised below.
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) 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.
126
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities (i) Classification and measurement of financial assets and financial liabilities
On 1 January 2018 (the date of initial application of AASB 9), the Consolidated Entity’s management assessed which business
models apply to the financial assets held and has classified its financial instruments into the appropriate AASB 9 categories.
The adoption of AASB 9 has not impacted the carrying value of financial assets but has resulted in classification changes on
initial application at 1 January 2018 which is shown in the following table:
Original classification
under AASB 139
New classification under
AASB 9
Financial assets
Original carrying amount
under AASB 139
31 Dec 17
$’000
New carrying amount
under AASB 9
31 Dec 17
$’000
Trade receivables
Loans and receivables
Financial assets at amortised cost
Other receivables
Loans and receivables
Financial assets at amortised cost
Loan receivables
Loans and receivables
Financial assets at amortised cost
62,895
630
37,032
62,895
630
37,032
Loans and receivables are classified and measured at
amortised cost. The Consolidated Entity holds these financial
assets in order to collect the contractual cash flows and
the contractual terms are solely payments of outstanding
principal and interest on the principal amount outstanding.
AASB 9 requires that all financial liabilities be subsequently
classified at amortised costs, except in certain
circumstances. None of these circumstances apply to the
Consolidated Entity and accordingly there is no change to
the classification and measurement of the Consolidated
Entity’s payables and borrowings on adoption of AASB 9.
(ii) Impairment of financial assets
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with
an ‘expected credit loss’ (ECL) model. The new impairment
model applies to financial assets measured at amortised
cost, contract assets and debt investments at fair value
through other comprehensive income (FVOCI), but not to
investments in equity instruments. Under AASB 9, credit
losses are recognised earlier than under AASB 139.
The Consolidated Entity has assessed the impact of the
adoption of an ECL model under AASB 9 and identified that
the impairment loss was immaterial. See ‘Recoverability of
loans and receivables’ section below for details on how ECL
amounts are determined.
(iii) Accounting policies
Policy applicable from 1 January 2018
AASB 9 contains three principal classification categories
for financial assets:
• measured at amortised cost;
•
•
fair value through other comprehensive income; and
fair value through profit and loss (FVTPL).
The classification depends on the entity’s business model
for managing the financial assets and the contractual
terms of the cash flows.
Financial assets at amortised costs
Loans and receivables
Loans and receivables are initially recognised at fair value and
subsequently at amortised cost using the effective interest
rate method less any allowance under the ECL model.
All loans and receivables with maturities greater than
12 months after the balance date are classified as non-
current assets.
Recoverability of loans and receivables
At each reporting date, the Consolidated Entity assesses
whether financial assets carried at amortised cost are ‘credit-
impaired’. A financial asset is ‘credit-impaired’ when one or
more events that have a detrimental impact on the estimated
future cash flows of the financial asset have occurred.
The Consolidated Entity recognises loss allowances
at an amount equal to lifetime ECL on trade and other
receivables. Loss allowances for financial assets measured
at amortised cost are deducted from the gross carrying
amount of the assets.
Lifetime ECLs are the ECLs that result from all possible
default events over the expected life of the trade receivable
and are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (ie the difference between the cash flows due
to the entity in accordance with the contract and the cash
flows that the Consolidated Entity expects to receive).
The Consolidated Entity analyses the age of outstanding
receivable balances and applies historical default
percentages adjusted for other current observable data as
a means to estimate lifetime ECL. Other current observable
data may include:
•
•
forecasts of economic conditions such as unemployment,
interest rates, gross domestic product and inflation; and
financial difficulties of a counterparty or probability that
a counterparty will enter bankruptcy.
Debts that are known to be uncollectable are written off
when identified.
(iv) Transition
The impact on the Consolidated Entity’s previously reported
financial position as at 31 December 2017 as a result of
the adoption AASB 9 and its application retrospectively is
immaterial to the Consolidated Entity.
127
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
AASB 15 Revenue from Contracts with Customers
The requirements of AASB 15 replace AASB 118 Revenue and AASB 111 Construction Contracts. AASB 15 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.
(v) Classification and measurement of revenue
Revenue is recognised over time if:
• the customer simultaneously receives and consumes the benefits as the entity performs;
• the customer controls the asset as the entity creates or enhances it; or
• the seller’s performance does not create an asset for which the seller has an alternative use and there is a right to
payment for performance to date.
Where the above criteria is not met, revenue is recognised at a point in time.
The table below summarises the changes in terminology with respect to the timing of revenue recognition between AASB 111
and AASB 118 compared to AASB 15 and the new revenue recognition policies under AASB 15. From the Consolidated Entity’s
assessment of when performance obligations are satisfied, there is no change in the timing of revenue recognition when
comparing the previous accounting policies to those now under AASB 15.
Type of revenue
Description
Fund management
fees
Fee income
– property
management fees
Fee income
– property
management leasing
fees – over time
The Consolidated Entity provides fund management services
to GWOF and GWSCF (the Funds) in accordance with the Funds
constitutions. The services are utilised on an ongoing basis and
revenue is calculated and recognised in accordance with the
relevant constitution. The fees are invoiced on a quarterly basis and
consideration is payable within 21 days of the quarter end.
The Consolidated Entity provides property management services
to the owners of property assets in accordance with property
services agreements. The services are utilised on an ongoing
basis and revenue is calculated and recognised in accordance
with the specific agreement. The fees are invoiced monthly
with variable payment terms depending on the individual
agreements. Should an adjustment, as calculated in accordance
with the property services agreement be required, this is
recognised in the Consolidated Statement of Comprehensive
Income within the same reporting period.
Under some property management agreements, the
Consolidated Entity provides a lease management service to
the owners. These services are delivered on an ongoing basis
and revenue is recognised monthly, calculated in accordance
with the property management agreement. The fees are
invoiced monthly with variable payment terms depending on the
individual agreements.
Fee income
– property
management leasing
fees – point in time
Under some property management agreements, the
Consolidated Entity provides leasing management services to
the owners. The revenue is recognised when the specific service
is delivered (e.g. on lease execution) and consideration is due
30 days from invoice date.
Development
management fees
The Consolidated Entity provides development management
services to the owners of property assets in accordance with
development management agreements. Revenue is calculated and
recognised in accordance with the specific agreement. The fees are
invoiced on a monthly basis, in arrears, and consideration is due
30 days from invoice date.
Revenue recognition policy
under AASB 111 and AASB 118
Recognised on an accruals
basis based on the contract
terms.
Revenue
recognition policy
under AASB 15
Over time
Recognised on an accruals
basis based on the contract
terms.
Over time
Recognised on an accruals
basis based on the contract
terms.
Over time
Recognised in the period in
which the services are rendered.
Point in time
Over time
Over time
If the agreement includes
an hourly fee, the revenue is
recognised in the period in
which the services are rendered.
If the agreement includes a fixed
price, the revenue is recognised
in proportion to the value of the
works as a percentage of the
total project cost delivered until
the completion of the associated
development works.
128
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Type of revenue
Description
Development
revenue
Sale of inventory
Sale of assets
The Consolidated Entity provides development management
services to the owners of property assets in accordance with
development management agreements. Revenue is calculated
in accordance with the specific agreement and invoiced in
accordance with the contract terms. Consideration is due from the
customer based on the specific terms agreed in the contract and is
recognised when the Consolidated Entity has control of the benefit.
Proceeds from the sale of inventory are recognised by the
Consolidated Entity in accordance with a specific contract entered
into with another party for the delivery of inventory. Revenue
is calculated in accordance with the contract. Consideration is
payable in accordance with the contract. Revenue is recognised
when control has been transferred to the buyer.
Proceeds from the sale of assets are recognised by the
Consolidated Entity in accordance with a specific contract entered
into with another party for the delivery of the asset. Revenue
is calculated in accordance with the contract. Consideration is
payable in accordance with the contract. Revenue is recognised
when control has been transferred to the buyer.
Revenue recognition policy
under AASB 111 and AASB 118
Recognised in the period in
which the title of the asset is
transferred.
Revenue
recognition policy
under AASB 15
Point in time
When significant risks and
rewards are transferred.
Point in time
When significant risks and
rewards are transferred.
Point in time
(f) New accounting standards and interpretations issued but not yet adopted
The following standards and amendments to standards are relevant to the Consolidated Entity.
Reference
AASB 16 Leases
Application of
Standard
1 January 2019
Description
AASB 16 sets out the principles for the recognition, measurement, presentation and
disclosure of leases. It 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
Consolidated Statement of Financial Position and both a depreciation and interest
charge in the Consolidated Statement of Comprehensive Income. In contrast, lessor
accounting for lease income is not expected to change with the adoption of the new
standard other than the separation of service income from lease income for disclosure
purposes as a result of the application of AASB 15.
The new leasing model requires the recognition of operating leases on the
Consolidated Statement of Financial Position. If the Consolidated Entity had adopted
the new standard from 1 January 2018, management estimates that the net loss before
tax for the year ended 31 December 2018 would decrease by approximately $224,000.
Assets at 31 December 2018 would increase by approximately $28,504,000 and
liabilities increase by $30,616,000.
26. Events subsequent to reporting date
The Directors are not aware of any matter or circumstance occurring since 31 December 2018 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.
129
Notes to the Financial Statements – Year ended 31 December 2018Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Directors’ Declaration
Year ended 31 December 2018
In the directors of GPT Management Holdings Limited’s opinion:
(a) the consolidated financial statements and notes set out on pages 99 to 129 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 2018 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.
Vickki McFadden
Chairman
Bob Johnston
Chief Executive Officer and Managing Director
GPT Management Holdings Limited
Sydney
11 February 2019
130
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Independent auditor’s report
To the members of GPT Management Holdings Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of GPT Management Holdings Limited (the Company) and its
controlled entities (together, the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 31 December 2018 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
Basis for opinion
●
●
●
●
●
●
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
•
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
49
131
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
•
•
● For the purpose of our audit
we used overall Group
•
materiality of $2.2 million,
which represents
•
approximately 1% of the
•
Group total revenue and other
income.
● We applied this threshold,
Audit scope
Key audit matters
● Amongst other relevant
● The audit scope covered the
consolidated Group which
includes GPT Management
Holdings Limited and its
controlled entities.
topics, we communicated the
following key audit matters to
the Group’s Audit Committee:
● Our audit focused on where the
−
Carrying value of
Inventories
Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
− Revenue recognition
− Remuneration expense
● These are further described in
the Key audit matters section
of our report.
•
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the
financial report as a whole.
● We chose Group total revenue
and other income as the
Group generates income from
funds management, property
management and
development management
fees, whilst expenses within
the Group are recharged to
GPT Trust which can be
altered based on the recharge
model utilised.
● We selected a 1% threshold
based on our professional
judgement, noting it is also
within the range of commonly
acceptable revenue related
thresholds.
50
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
132
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit
matter
Carrying value of Inventories
For each project we obtained the Group’s latest
$178.3 million (2017: $189.2 million) Refer to note 5
feasibility models and discussed with management
The Group develops a portfolio of sites for future sale
which is classified as inventory. The Group’s
inventories are held at the lower of the cost and net
realisable value for each inventory project.
The cost of the inventory includes the cost of
acquisition, development, finance costs and all other
costs directly related to specific projects including an
allocation of direct overhead expenses.
We considered the carrying value of inventories a key
audit matter given the relative size of the balance in
the Consolidated Statement of Financial Position and
the significant judgement required by the Group in
estimating future selling prices, costs to complete and
selling costs. These judgments may have a material
impact on the calculation of net realisable value and
therefore in determining whether the value of a
project should be written down (impaired). During
the year ended 31 December 2018 an impairment of
$11.4m was recognised.
matters such as the overall project strategy, cost
movements and claims (where applicable).
Using the information gained from these discussions
and our prior year knowledge of the business, we used
a risk based approach to select a sample of projects to
perform net realisable value testing. For the sample of
selected projects we:
• Further discussed with management the
life cycle of the project, key project risks,
changes to project strategy, current and
future estimated sales prices, construction
progress and costs and any new and
previous impairments.
• Compared the estimated selling prices to
market sales data in similar locations or to
recent sales in the project.
• Compared the forecasted costs to complete
the project to the relevant construction
contracts (if available) or to construction
cost estimates.
• Compared the carrying value to the net
realisable value (NRV) to identify projects
with potential impairments.
•
Obtained the purchase agreement for the
development site acquired during the year
and agreed this to the acquisition price
51
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities model utilised.
● We selected a 1% threshold
based on our professional
judgement, noting it is also
within the range of commonly
model utilised.
acceptable revenue related
● We selected a 1% threshold
thresholds.
based on our professional
judgement, noting it is also
within the range of commonly
acceptable revenue related
thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
Key audit matters
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
Key audit matter
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Carrying value of Inventories
$178.3 million (2017: $189.2 million) Refer to note 5
Key audit matter
How our audit addressed the key audit
matter
For each project we obtained the Group’s latest
feasibility models and discussed with management
How our audit addressed the key audit
matters such as the overall project strategy, cost
matter
movements and claims (where applicable).
The Group develops a portfolio of sites for future sale
which is classified as inventory. The Group’s
Carrying value of Inventories
inventories are held at the lower of the cost and net
$178.3 million (2017: $189.2 million) Refer to note 5
realisable value for each inventory project.
The cost of the inventory includes the cost of
The Group develops a portfolio of sites for future sale
acquisition, development, finance costs and all other
which is classified as inventory. The Group’s
costs directly related to specific projects including an
inventories are held at the lower of the cost and net
allocation of direct overhead expenses.
realisable value for each inventory project.
•
•
•
•
•
The cost of the inventory includes the cost of
We considered the carrying value of inventories a key
acquisition, development, finance costs and all other
audit matter given the relative size of the balance in
costs directly related to specific projects including an
the Consolidated Statement of Financial Position and
allocation of direct overhead expenses.
the significant judgement required by the Group in
estimating future selling prices, costs to complete and
We considered the carrying value of inventories a key
selling costs. These judgments may have a material
audit matter given the relative size of the balance in
impact on the calculation of net realisable value and
the Consolidated Statement of Financial Position and
therefore in determining whether the value of a
the significant judgement required by the Group in
project should be written down (impaired). During
estimating future selling prices, costs to complete and
the year ended 31 December 2018 an impairment of
•
selling costs. These judgments may have a material
$11.4m was recognised.
impact on the calculation of net realisable value and
therefore in determining whether the value of a
project should be written down (impaired). During
the year ended 31 December 2018 an impairment of
$11.4m was recognised.
Using the information gained from these discussions
For each project we obtained the Group’s latest
and our prior year knowledge of the business, we used
feasibility models and discussed with management
a risk based approach to select a sample of projects to
matters such as the overall project strategy, cost
perform net realisable value testing. For the sample of
movements and claims (where applicable).
selected projects we:
Using the information gained from these discussions
• Further discussed with management the
and our prior year knowledge of the business, we used
life cycle of the project, key project risks,
a risk based approach to select a sample of projects to
changes to project strategy, current and
perform net realisable value testing. For the sample of
selected projects we:
future estimated sales prices, construction
progress and costs and any new and
• Further discussed with management the
previous impairments.
life cycle of the project, key project risks,
• Compared the estimated selling prices to
changes to project strategy, current and
market sales data in similar locations or to
future estimated sales prices, construction
recent sales in the project.
progress and costs and any new and
previous impairments.
• Compared the forecasted costs to complete
the project to the relevant construction
• Compared the estimated selling prices to
contracts (if available) or to construction
market sales data in similar locations or to
cost estimates.
recent sales in the project.
• Compared the carrying value to the net
• Compared the forecasted costs to complete
realisable value (NRV) to identify projects
the project to the relevant construction
with potential impairments.
contracts (if available) or to construction
cost estimates.
•
Obtained the purchase agreement for the
development site acquired during the year
• Compared the carrying value to the net
recorded. We tested the payment to cash.
and agreed this to the acquisition price
realisable value (NRV) to identify projects
recorded. We tested the payment to cash.
with potential impairments.
Traced a sample of capital expenditure
Obtained the purchase agreement for the
Traced a sample of capital expenditure
additions to supporting documentation and
development site acquired during the year
additions to supporting documentation and
tested they were valid costs that could be
and agreed this to the acquisition price
tested they were valid costs that could be
capitalised in accordance with the
capitalised in accordance with the
requirements of Australian Accounting
requirements of Australian Accounting
Standards.
Standards.
51
•
•
•
Revenue recognition
$181.8 million (2017: $180.8 million)
Revenue recognition
$181.8 million (2017: $180.8 million)
The Group earns revenue through its role as a fund
and property manager, and through development
The Group earns revenue through its role as a fund
revenue earned through the development of property,
and property manager, and through development
either for third parties, or directly on its own account
revenue earned through the development of property,
for ultimate sale. Total revenue for the year ended 31
either for third parties, or directly on its own account
December 2018 was comprised of the following four
for ultimate sale. Total revenue for the year ended 31
streams:
December 2018 was comprised of the following four
streams:
• Fund management fees ($84.6 million).
• Fund management fees ($84.6 million).
• Property management fees ($43.5 million).
We developed an understanding of each revenue
stream and the processes for calculating and
We developed an understanding of each revenue
recording revenue. We also developed an
stream and the processes for calculating and
understanding of the process by which funds in
recording revenue. We also developed an
relation to revenue are received into the Group’s bank
understanding of the process by which funds in
accounts, and identified the key controls including
relation to revenue are received into the Group’s bank
bank account reconciliations.
accounts, and identified the key controls including
bank account reconciliations.
Fund management fees
Fund management fees
We tested a sample of fund management fees and
performed the following procedures, amongst others:
We tested a sample of fund management fees and
performed the following procedures, amongst others:
• Inspected the relevant fund constitutions to develop
an understanding of the basis upon which fund
133
51
• Property management fees ($43.5 million).
• Management costs recharged ($32.1 million).
• Management costs recharged ($32.1 million).
• Development management fees ($21.6 million).
• Development management fees ($21.6 million).
For all of the above revenue streams, a portion is
earned from other entities in The GPT Group.
For all of the above revenue streams, a portion is
earned from other entities in The GPT Group.
We considered this a key audit matter due to the size
and magnitude of revenue, and due to there being
We considered this a key audit matter due to the size
multiple revenue streams increasing the complexity of
and magnitude of revenue, and due to there being
recognition.
multiple revenue streams increasing the complexity of
recognition.
• Inspected the relevant fund constitutions to develop
management fee revenue is earned.
an understanding of the basis upon which fund
management fee revenue is earned.
• Recalculated the management fees by applying the
fee percentage per the fund’s constitution to the
• Recalculated the management fees by applying the
fund’s net assets and tracing the amount to cash
fee percentage per the fund’s constitution to the
receipts.
fund’s net assets and tracing the amount to cash
receipts.
• Agreed fund management fee corporate overhead
recharges to board approved budgets.
• Agreed fund management fee corporate overhead
recharges to board approved budgets.
Property management fees
Property management fees
For property and leasing management fees and other
property management fees we performed the
For property and leasing management fees and other
following procedures, amongst others:
property management fees we performed the
following procedures, amongst others:
• Inspected a sample of agreements to develop an
understanding of the basis upon which revenue is
• Inspected a sample of agreements to develop an
earned.
understanding of the basis upon which revenue is
earned.
• Recalculated a sample of property and leasing
management fees and traced relevant inputs to source
• Recalculated a sample of property and leasing
documentation.
management fees and traced relevant inputs to source
documentation.
• Traced a sample of other property management fees
• Traced a sample of other property management fees
52
52
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities recorded. We tested the payment to cash.
•
Traced a sample of capital expenditure
additions to supporting documentation and
tested they were valid costs that could be
capitalised in accordance with the
requirements of Australian Accounting
Standards.
Revenue recognition
$181.8 million (2017: $180.8 million)
The Group earns revenue through its role as a fund
and property manager, and through development
revenue earned through the development of property,
either for third parties, or directly on its own account
for ultimate sale. Total revenue for the year ended 31
December 2018 was comprised of the following four
streams:
We developed an understanding of each revenue
stream and the processes for calculating and
recording revenue. We also developed an
understanding of the process by which funds in
relation to revenue are received into the Group’s bank
accounts, and identified the key controls including
bank account reconciliations.
Fund management fees
We tested a sample of fund management fees and
performed the following procedures, amongst others:
• Fund management fees ($84.6 million).
• Property management fees ($43.5 million).
• Inspected the relevant fund constitutions to develop
an understanding of the basis upon which fund
management fee revenue is earned.
• Management costs recharged ($32.1 million).
• Recalculated the management fees by applying the
fee percentage per the fund’s constitution to the
fund’s net assets and tracing the amount to cash
receipts.
• Development management fees ($21.6 million).
For all of the above revenue streams, a portion is
earned from other entities in The GPT Group.
We considered this a key audit matter due to the size
and magnitude of revenue, and due to there being
multiple revenue streams increasing the complexity of
recognition.
•
•
•
•
•
Property management fees
• Agreed fund management fee corporate overhead
recharges to board approved budgets.
For property and leasing management fees and other
property management fees we performed the
following procedures, amongst others:
• Inspected a sample of agreements to develop an
understanding of the basis upon which revenue is
earned.
•
• Traced a sample of other property management fees
to relevant invoices and cash receipts.
• Recalculated a sample of property and leasing
management fees and traced relevant inputs to source
documentation.
Management costs recharged
For management costs recharged during the year, we
discussed with management the terms under which
costs are recharged by the Group to entities in The
GPT Group. Recharge arrangements are budgeted by
the Group and reviewed annually. In relation to
recharges:
52
• We developed an understanding of the budgeting
process and obtained evidence of management review
of the 2018 budget.
• We reconciled the approved management cost
recharge budget to the general ledger.
• We agreed payroll recharge amounts to the audit
procedures performed over the Group remuneration
expense.
Development management fees
134
• We developed an understanding of the Group’s
calculation methodology for charging development
management fees. This is based on an approved daily
rate and actual time spent, or management approved
project fees.
• We inspected the Board minute to obtain the
approved development management day rates.
• We recalculated a sample of development
management fees and agreed relevant inputs to the
calculation back to source data, for example timesheet
extracts.
We considered management's AASB 15 Revenue
Recognition assessment by selecting a sample of
contracts for each material revenue stream and
assessed whether they had been appropriately
recognised under the new standard.
Remuneration expense
$121.4 million (2017: $123.1 million)
Our procedures over the remuneration expense
included:
The Group is the employer of all employees who
provide services to The GPT Group. The payroll
process is administered by a third party under the
oversight and approval of the Group. The third party
provider is responsible for the processing of all
salaries and wages, including overtime, allowances
• Developing an understanding of the payroll
processes and relevant key controls.
• Testing these key controls to determine whether
they were operating effectively.
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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
to relevant invoices and cash receipts.
Management costs recharged
For management costs recharged during the year, we
discussed with management the terms under which
costs are recharged by the Group to entities in The
GPT Group. Recharge arrangements are budgeted by
the Group and reviewed annually. In relation to
recharges:
• We developed an understanding of the budgeting
process and obtained evidence of management review
of the 2018 budget.
• We reconciled the approved management cost
recharge budget to the general ledger.
• We agreed payroll recharge amounts to the audit
procedures performed over the Group remuneration
expense.
Development management fees
•
•
•
•
•
• We developed an understanding of the Group’s
calculation methodology for charging development
management fees. This is based on an approved daily
rate and actual time spent, or management approved
project fees.
• We inspected the Board minute to obtain the
approved development management day rates.
• We recalculated a sample of development
management fees and agreed relevant inputs to the
calculation back to source data, for example timesheet
extracts.
•
We considered management's AASB 15 Revenue
Recognition assessment by selecting a sample of
contracts for each material revenue stream and
assessed whether they had been appropriately
recognised under the new standard.
Remuneration expense
$121.4 million (2017: $123.1 million)
Our procedures over the remuneration expense
included:
The Group is the employer of all employees who
provide services to The GPT Group. The payroll
process is administered by a third party under the
oversight and approval of the Group. The third party
provider is responsible for the processing of all
salaries and wages, including overtime, allowances
• Testing these key controls to determine whether
they were operating effectively.
• Developing an understanding of the payroll
processes and relevant key controls.
53
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Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
and superannuation and cash bonuses, but not share
based payments. Each month a detailed payroll
journal is provided electronically by the third party
provider and uploaded into the general ledger.
• Reconciling the year to date payroll cost from the
payroll system to the general ledger.
• Comparing the total payroll expense and employee
benefit provisions for the current year to the prior
year and obtaining explanations for material
movements.
• Using data analysis tools to examine payroll
payments made during the year, we considered
unusual trends and payments that fell outside of our
expected ranges. For payments we deemed higher
risk, we traced them back to source documentation
and other evidence to investigate explanations
provided by management.
• Obtaining the Board Nomination and Remuneration
Committee approval for the 2018 bonus pool and
developing an understanding of the key performance
metrics influencing the quantum of management
bonuses.
Management bonuses are accrued throughout the
year based on potential bonus pools approved by the
Board Nomination and Remuneration Committee at
the start of the year. Bonuses are subject to
performance hurdles and final bonus amounts are
subject to approval by the Board Nomination and
Remuneration Committee prior to payment.
In addition to salaries, wages and bonuses, there are
equity incentive schemes available to eligible
employees. These schemes are a mix of short term
and long term incentive plans. Each scheme has a
number of vesting conditions, including employee
tenure, personal performance metrics, and Group
wide performance metrics, that need to be satisfied in
order for the shares to vest.
•
•
•
•
•
Two of the schemes are in the form of performance
rights which convert to GPT Group stapled securities.
The Group uses fair value techniques and models to
calculate the fair value of the rights, which requires a
level of judgement and estimation.
We considered remuneration expense as a key audit
matter due to the magnitude of this balance and the
multiple streams of employee costs included in this
balance.
For equity incentive scheme expenses, together with
PwC valuation experts, we reviewed the valuation
methodology adopted by management in valuing the
share rights subject to market and non-market
hurdles. We also:
• Assessed the reasonableness of the valuation inputs
underlying the valuation of the share rights.
• Performed parallel calculations of the share rights
that are subject to the market performance hurdle.
•
• Agreed inputs to the equity incentive scheme
accounting model to supporting documentation and
assessed the model for mathematical accuracy.
• Agreed a sample of new rights grants to the relevant
invitation letters.
Other information
The directors of the Group (the directors) are responsible for the other information. The other
information comprises the information included in the Annual Financial report for the year ended 31
December 2018, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
54
136
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
•
•
•
•
•
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
•
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 88 to 97 of the directors’ report for the
year ended 31 December 2018.
In our opinion, the remuneration report of GPT Management Holdings Limited for the year ended 31
December 2018 complies with section 300A of the Corporations Act 2001.
55
137
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities
Responsibilities
The directors are responsible for the preparation and presentation of the remuneration report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
Susan Horlin
Partner
•
•
•
•
•
11 February 2019
Partner
Bianca Buckman
Sydney
•
56
138
Annual Financial Report of GPT Management Holdings Limited and its Controlled Entities Supplementary information
Securityholder information
Substantial Securityholders
UniSuper
Vanguard Investments Australia
BlackRock Group
State Street Corporation
Voting Rights
Number of Securities
233,746,431
183,628,450
163,118,343
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
13,543
13,168
3,511
2,291
101
32,614
0.35
1.78
1.39
2.63
93.85
100.00%
There were 938 securityholders holding less than a marketable parcel of 94 securities, based on a close price of $5.34 as at
31 December 2018, and they hold 20,209 securities.
Twenty Largest Securityholders
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
AMP Life Limited
Bond Street Custodians Limited
Argo Investments Limited
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited Limited-GSCO ECA
UBS Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP
HSBC Custody Nominees (Australia) Limited - A/C 2
BNP Paribas Noms (Nz) Ltd
Netwealth Investments Limited
IOOF Investment Management Limited
Total
Total Securities on Issue
Number of Securities
Percentage of Total
Issued Securities
713,568,212
349,555,681
272,717,751
157,303,685
61,888,098
23,063,660
18,325,383
13,500,000
12,403,082
11,400,048
4,457,851
3,480,667
3,022,536
2,632,473
2,364,633
2,307,436
2,006,802
1,915,713
1,728,350
1,476,655
39.54
19.37
15.11
8.72
3.43
1.28
1.02
0.75
0.69
0.63
0.25
0.19
0.17
0.15
0.13
0.13
0.11
0.11
0.10
0.08
1,659,118,716
1,804,890,426
91.92
100.00%
139
Annual Financial Report Issue of Securities
The following table lists the issue of GPT securities during the period from 1 January 2018 to 31 December 2018. A complete list
of all securities issued since GPT’s inception in 1971 can be obtained from the Group’s website (www.gpt.com.au) or by calling the
GPT Securityholder Service Centre on 1800 025 095 (freecall within Australia).
Date
13.02.18
19.03.18
21.03.18
Description
Issue of Securities
Issue of Securities
Issue of Securities
Number of Securities
Price ($)
2,332,026
875,344
42,174
4.83
4.79
4.77
Amount ($)
11,263,686
4,192,898
201,170
Investor information
Securityholder Services
AGM Information
You can access your investment online at
www.linkmarketservices.com.au, signing in using your
SRN/HIN, Surname and Postcode. Functions available
include updating your address details, downloading a PDF
of your Annual Tax Statement and collecting FATCA/CRS
self certification.
Also online at www.linkmarketservices.com.au are
regularly requested forms relating to payment instructions,
name corrections and changes and deceased estate packs.
For assistance with altering any of your investment details,
please phone the GPT Registry on 1800 025 095 (free call
within Australia) or +61 1800 025 095 (outside Australia).
Receive Your Report Electronically
Sustainability is core to GPT’s vision and values. As part
of our sustainability initiatives we would like to offer you
the opportunity to receive notification of GPT’s investor
communications electronically, including the 2018 Annual
Financial Report and the Annual Review. We encourage
securityholders to visit www.gpt.com.au to view the online
versions of these reports.
As an investor opting to receive your securityholder updates
electronically, you will benefit by receiving prompt information
and have the convenience and security associated with
electronic delivery. There are also significant cost savings
associated with this method of communication and above all
this is a responsible and environmentally friendly option.
To receive your investor communications electronically, please
go to www.linkmarketservices.com.au and register for
online services.
GPT’s Annual General Meeting (AGM) will be held at the
Swissotel Sydney, 68 Market Street, Sydney, New South
Wales on Wednesday, 15 May 2019, commencing at
10.00am (Sydney time).
GPT encourages securityholders to attend the AGM. The AGM
will also be webcast live via GPT’s website (www.gpt.com.au)
for those securityholders who are unable to attend in person.
Additionally, the Chairman’s address will be immediately
announced to the ASX on the day.
Investor Calendar
28 February 2019 December 2018 Half Year Distribution Payment
and Annual Tax Statement
15 May 2019
Annual General Meeting
June 2019
June 2019 Half Year Distribution Announcement
12 August 2019
2019 Interim Result Announcement
August 2019
June 2019 Half Year Distribution Payment
An investor calendar is also available on GPT’s website at
www.gpt.com.au/events
Distribution Policy and Payments
GPT has a distribution policy in place that effectively aligns
the Group’s capital management framework with its business
strategy, which reflects a sustainable distribution level to
ensure a prudent approach to managing the Group’s gearing
through market and economic cycles.
GPT makes distribution payments to securityholders two
times a year, for the six months ended 30 June and the six
months ended 31 December. GPT declares and pays its
distribution in Australian dollars.
140
Supplementary information – Year ended 31 December 2018Annual Financial Report Corporate directory
The GPT Group
Comprising:
GPT Management Holdings Limited
ACN 113 510 188 and
GPT RE Limited
ACN 107 426 504
AFSL 286511
As Responsible Entity for
General Property Trust
ARSN 090 110 357
Board of Directors
Vickki McFadden (Chairman)
Bob Johnston
Eileen Doyle
Gene Tilbrook
Lim Swe Guan
Michelle Somerville
Angus McNaughton
Company Secretaries
James Coyne
Lisa Bau
Telephone: +61 2 8239 3555
Facsimile: +61 2 9225 9318
Audit Committee
Michelle Somerville (Chairman)
Lim Swe Guan
Eileen Doyle
Angus McNaughton
Nomination and Remuneration Committee1
Gene Tilbrook (Chairman)
Vickki McFadden
Angus McNaughton
Sustainability and Risk Committee
Eileen Doyle (Chairman)
Lim Swe Guan
Michelle Somerville
Registered Office
Level 51
MLC Centre
19 Martin Place
Sydney NSW 2000
Telephone: +61 2 8239 3555
Facsimile: +61 2 9225 9318
Auditors
PricewaterhouseCoopers
One International Towers Sydney,
Watermans Quay, Barangaroo
Sydney NSW 2000
Principal Registry
Link Market Services
GPT Security Registrar
Locked Bag A14
Sydney South
NSW 1235
Within Australia: 1800 025 095 (free call)
Outside Australia: +61 1800 025 095
+61 2 9287 0303
Fax:
registrars@linkmarketservices.com.au
Email:
www.linkmarketservices.com.au
Website:
Stock Exchange Quotation
GPT is listed on Australian Securities Exchange under ASX
Listing Code GPT.
1 From 1 January 2019 a Human Resources and Remuneration Committee was formed with the same membership as noted above, and a Nomination Committee
was formed consisting of the full Board.
9
1
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2
0
2
7
0
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P
G