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2020 Introduction
Introduction
Welcome to The GPT Group 2020 Annual Report.
The Group has changed its corporate reporting this year to describe how we create value for investors
and other stakeholders. GPT’s Annual Report is prepared with reference to the International Integrated
Reporting Framework to communicate our strategy and our ability to create value over the short, medium
and long term. We also report on our performance and progress in financial, environmental, social and
governance matters.
GPT welcomes feedback from investors and stakeholders on this integrated Annual Report, as we continue to refine and enhance
our corporate reporting.
In this report references to ‘GPT’, ‘Group’, ‘we’, ‘us’ and ‘our’ refer to The GPT Group, unless otherwise stated. Information in this
Annual Report is stated as at 31 December 2020 unless otherwise indicated. References in this report to a ‘year’, ‘2020’ and ‘FY20’ refer
to the financial year ended 31 December 2020 unless otherwise stated. All values are expressed in Australian currency unless otherwise
indicated. Key statistics for the Retail and Office divisions include The GPT Group’s weighted interest in the GPT Wholesale Shopping
Centre Fund (GWSCF) and the GPT Wholesale Office Fund (GWOF) respectively.
Reporting suite
The 2020 Annual Report is the primary document in our reporting suite. It summarises the value created by GPT’s business activities
together with the annual financial report for the Group. Further information is available in our broader reporting suite, which includes:
Results Presentation and Data Pack
Property Compendium
Climate Disclosure Statement
Annual Result 2020
Data Pack
A summary of GPT’s
operating and financial
performance and key
developments in our
business and portfolio,
accompanied by a data
supplement released
every six months.
Consolidated
information about
the assets in the
Group's property
portfolio.
Property Compendium
A statement of the steps
we are taking to identify,
assess and manage
climate change risks and
opportunities, prepared
in accordance with
TCFD recommendations.
Prepared with reference to
the recommendations of the
Task Force on Climate-related
Financial Disclosures
Released February 2021
Climate Disclosure
Statement 2020
Corporate Governance Statement
Tax Transparency Report
Sustainability Report
A statement of how
GPT addresses the ASX
Corporate Governance
Council’s Corporate
Governance Principles
and Recommendations
(4th Edition).
A report in
accordance with
the voluntary Tax
Transparency Code
as part of the Group's
commitment to tax
transparency.
In accordance with the Australian
Board of Taxation Voluntary Tax
Transparency Code.
Tax Transparency
Report 2020
In accordance with the
ASX Corporate Governance Council’s
Corporate Governance Principles
and Recommendations (4th Edition)
Corporate Governance
Statement 2020
A detailed report
of our sustainability
policies, priorities
and progress along
with future targets,
released annually.
(To be released
March 2021.)
Sustainability Report 2020
Cover image: One One One Eagle Street, Brisbane
GPT acknowledges the Traditional Custodians of the lands on which our business and assets operate,
and recognise their ongoing connection to land, waters and community. We pay our respects to
First Nations Elders past, present and emerging.
20202020The GPT Group | Annual Report 2020 BUSINESS
OVERVIEW
HOW WE
CREATE VALUE
Contents
01. Overview
02. About GPT
04. Letter to Securityholders
08. Responding to COVID-19
10. Megatrends
12. Our Strategy
28. Performance and Prospects
28. Group Performance
32. Office
33. Logistics
34. Retail
35. Funds Management
67. Financial Statements
68. Consolidated Statement
of Comprehensive Income
69. Consolidated Statement
of Financial Position
70. Consolidated Statement
of Changes in Equity
14. Our Business Model
36. Prospects
16. How We Create Value
18. Growing and predictable earnings
20. Thriving places
22. Empowered people
24. Sustainable environment
26. Prospering customers, suppliers and
communities
38. Risk Management
39. Key risks
42. Climate-related risks
44. Governance
47. Director biographies
50. Directors' Report
52. Remuneration Report
66. Auditor’s Independence Declaration
71. Consolidated Statement of Cash Flows
72. Notes to the Financial Statements
117. Directors' Declaration
118. Independent Auditor’s Report
125. Securityholder Information
126. Investor calendar
127. Corporate directory
Navigating this report
The below icons are used throughout this report to indicate where an activity affects or contributes to how GPT creates value.
Value we create
Growing
and predictable
earnings
Thriving
places
Empowered
people
Sustainable
environment
Prospering
customers, suppliers
and communities
1
PERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Business Overview
About GPT
GPT is a vertically integrated diversified property group that owns and actively
manages its $24.4 billion portfolio of high quality Australian office, logistics and retail assets.
The Group leverages its real estate management platform to enhance returns through
property development and funds management.
Listed on the Australian Securities
Exchange (ASX) since 1971, today The GPT
Group is a constituent of the S&P/ASX 50
with a substantial investor base of more
than 32,000 securityholders.
Our vision
To be the most respected property
company in Australia in the eyes of
our investors, people, customers and
communities.
Our purpose
To create value for investors by
providing high quality real estate
spaces that enable people to excel and
our customers and communities to
prosper in a sustainable way.
Our values
Each day, our core values guide our
employees as they work to deliver
on our purpose.
Safety First – Everyone, Always
We care about people above
everything else.
Deliver Today, Create Tomorrow
We focus on the present and
the future to deliver consistent,
dependable performance.
Value Differences, Play as a Team
We embrace our diverse
backgrounds, experiences and
perspectives, working together
for the best outcome.
Raise the Bar
We think big, take initiative, share
ideas and challenge the status quo.
Speak Up
We are courageous and speak up
about things that matter.
Portfolio diversity across locations
Darwin, 2%
1 Retail
Melbourne, 38%
11 Office
10 Logistics
5 Retail
South East
Queensland, 10%
2 Office
4 Logistics
1 Retail
NSW, 50%
11 Office
27 Logistics
5 Retail
3,600+
Tenants
32,000+
Securityholders
~500
Employees
~$8.8b
Market capitalisation
2
The GPT Group | Annual Report 2020
BUSINESS
OVERVIEW
Our portfolio
GPT owns a diversified portfolio of high quality properties across Australia.
Office
» 24 assets
» 1,000,000 sqm NLA
» 360+ tenants 1
Logistics
» 41 assets
» 1,140,000 sqm GLA
» 90+ tenants
Retail
» 12 shopping centres
» 960,000 sqm GLA
» 3,100+ tenants
» $5.6 billion GPT owned portfolio
» $3.0 billion GPT owned portfolio
» $5.5 billion GPT owned portfolio
» $12.9 billion assets under management
» $3.0 billion assets under management
» $8.5 billion assets under management
77
properties
$24.4b
Assets under management
Portfolio diversity across
asset classes
1. Excludes retail tenants.
50 Old Wallgrove Road, Eastern Creek, NSW
3
40% Office39% Retail 21% LogisticsHOW WE CREATE VALUEPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020
Business Overview
Letter to Securityholders
This year, the Group has adopted an integrated reporting approach in our Annual Report to communicate
our strategy and ability to create value over the short, medium and long term. This reflects the way the Group
incorporates financial, environmental, social and governance matters in its strategic business decisions.
The effects of the COVID-19 pandemic resulted in a challenging year for the Group. We commenced 2020
with strong momentum and the expectation of delivering earnings and distribution growth. However, the
onset of COVID-19 rapidly changed the operating landscape and we had to adapt our approach swiftly.
The Group responded well to the uncertainty and evolving challenges, maintaining a strong focus on working
with our customers to help them operate successfully and safely through the pandemic, whilst continuing
to execute on strategy and positioning the business to benefit from the emerging economic recovery.
2020 Annual Result
The impacts of COVID-19 have resulted in
both lower net operating income, reflecting
the rent relief provided to our tenants, and
a material reduction in the valuation of our
Retail portfolio.
Notwithstanding the impacts of the
pandemic, the Group delivered Funds
From Operations (FFO) of $554.7 million
for the 12 months to 31 December 2020,
down 9.6 per cent on the prior year.
The Group recorded a statutory net loss
after tax in 2020 of $213.1 million compared
to a statutory net profit after tax of
$880.0 million in 2019. With the additional
securities issued in 2019 as part of the
equity raising, FFO per security decreased
12.9 per cent to 28.48 cents. Net tangible
assets per security was down 4.0 per cent
to $5.57 1 and Total Return for the year
was -2.4 per cent, reflecting the property
valuation decline.
A second half 2020 distribution of
13.2 cents per security was declared on
15 February 2021, resulting in a full year
distribution of 22.5 cents per security.
This is down 15.0 per cent compared
to the 2019 full year distribution of
26.48 cents per security and reflects
the impact of COVID-19 on income and
operating cashflows, and the additional
securities on issue.
GPT's portfolio of high quality Office
assets continued to deliver strong results.
Operating net income was $280.2 million,
up 1.8 per cent on 2019. The portfolio has
a weighted average lease expiry (WALE)
in excess of five years and occupancy
of 94.9 per cent.2 Despite government
restrictions and subdued leasing conditions,
the Group concluded 99,600 square metres
of signed leases across the portfolio, with
an additional 26,500 square metres under
Heads of Agreement. In the second half of
the year, leasing volumes improved, with the
number of Heads of Agreement executed
doubling from the first half of the year.
All Office assets were independently
revalued as at 31 December 2020, resulting
in a valuation decline of 1.2 per cent or
$73.8 million over the year and a weighted
average capitalisation rate (WACR) of
4.89 per cent.
Vickki McFadden
Chairman
4
The Group divested its interest in
Farrer Place, Sydney in line with the
30 June 2020 book value of $584.6 million
in December 2020.
GPT’s Logistics portfolio delivered
outstanding results in 2020, with operating
net income growth of 15.2 per cent to
$139.3 million, and comparable income
growth of 3.1 per cent. The portfolio has
high occupancy of 99.8 per cent and a long
WALE of 6.7 years. All Logistics assets were
independently revalued 3 as at 31 December
2020, resulting in a valuation uplift of
9.3 per cent or $227.8 million over the year,
attributed to strong investor demand for
high quality logistics assets. The WACR for
the portfolio firmed to 4.84 per cent.
Government restrictions and the
mandatory Code of Conduct in response
to COVID-19, heavily impacted the
performance of shopping centres in 2020.
In addition to the impacts of the Code of
Conduct, the implications of restrictions
imposed in Victoria from July to November
2020, weighed heavily on the Group’s Retail
portfolio performance.
Approximately 400 leasing deals were
completed during the year and Retail
portfolio occupancy was 98.0 per cent at
31 December 2020. A higher level of rental
collection rates in the second half of the
year and the completion of 83 per cent
of COVID-19 rental arrangements,
strengthened the full year financial result
from the portfolio, compared to the first
half. Operating net income for the Retail
portfolio was $220.8 million for the year
down 31.3 per cent, impacted by lower
property income primarily due to rental
assistance provided to our tenants, and
provisions for expected credit losses
in the portfolio.
The GPT Group | Annual Report 2020
BUSINESS
OVERVIEW
Bob Johnston
Chief Executive Officer
and Managing Director
With the exception of Melbourne Central,
which is in the heart of the Melbourne CBD,
there was a strong rebound of customer
visitations to our shopping centres once
restrictions were eased and customers
were able to return back to our assets.
Excluding Melbourne Central, our customer
visitation numbers in December 2020 were
approximately 95 per cent of December
2019 levels. Solid sales growth was evident
following the easing of restrictions,
indicating that people were very keen to
return to shopping centres.
All Retail assets were independently
revalued as at 31 December 2020, resulting
in a revaluation decline of 13.7 per cent
or $866.5 million over the year. The
largest component was the revaluation
of Melbourne Central, one of Australia’s
leading retail destinations, which has
unfortunately been impacted by the
delayed reopening of the Melbourne
CBD and our borders being closed to
international tourists and students.
The WACR for the portfolio softened
to 5.06 per cent.
Our Funds Management business
provides access to third party capital
and continues to deliver growth for
the Group. With $12.9 billion in assets
under management, consisting of the
GPT Wholesale Office Fund (GWOF) and
the GPT Wholesale Shopping Centre Fund
(GWSCF), with assets of $9.0 billion and
$3.9 billion respectively, the platform
has significant scale. Funds Management
earnings of $47.2 million was up 1.9 per cent
on the prior year.
In response to the high level of
uncertainty in the period, the Group
reduced or deferred spending on
non-essential and discretionary items
across the business. Developments
planned at Rouse Hill and Melbourne
Central have been deferred until such time
as market conditions are more favourable,
but remain strategic opportunities for
the Group. In addition, the 2020 Short
Term Incentive Compensation Scheme
and the 2020-2022 Long Term Incentive
Scheme were withdrawn.
The Group maintained a strong balance
sheet position and a prudent approach
to capital management during the year
given the uncertainty of the economic
impact of COVID-19 on our tenants, the
timing of the expected recovery and
the potential impact on asset valuations.
The Board and Management undertook
detailed scenario modelling to ensure the
Group was well placed to navigate through
the unprecedented events. Gearing
as at 31 December 2020 was a modest
23.2 per cent, with $1.8 billion of available
liquidity held in cash and undrawn bank
facilities. The Group maintains strong
A/A2 credit ratings from S&P and
Moody’s respectively.
Executing on strategy to create
long term value
Owning and managing a diversified portfolio
of high quality real estate in Australia’s
largest cities is core to our strategy and
provides us with the opportunity to benefit
from sectors with favourable trends while
reshaping our exposure to others.
Our aim is to deliver growing and
predictable earnings and maximise total
returns for investors over the long term
through the successful execution of
our strategy. The Group leverages its
extensive real estate experience to create
value through disciplined investment,
development, asset management and
funds management.
Portfolio growth in the logistics sector
has been a core strategic focus over the
past three years and the Group has made
strong progress in securing development
and investment opportunities in
this sector. This has resulted in our
Logistics portfolio doubling since 2017
to $3.0 billion, including growth of
$542.5 million or 22 per cent in 2020.
Given the structural tailwinds from
e-commerce and supply chain
transformation, growth in logistics in
high-tenant demand locations will continue
to be an ongoing focus for the Group.
GPT’s Logistics development pipeline has
an estimated end value of approximately
$1 billion.4
1. Includes all right-of-use assets of GPT Group.
2. Excludes assets under or held for development.
3. Excludes assets held for sale and acquired during the second half of the year.
4. Estimated end value on completion of underway and pipeline projects at GPT share.
5
HOW WE CREATE VALUEPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Business Overview
Letter to Securityholders (continued)
In February 2021, we announced a capital
partnership with Canadian real estate
firm QuadReal Property Group. The 50:50
joint venture has an objective to acquire
and develop a high quality portfolio of
Australian prime logistics assets, with a
targeted investment of $800 million. GPT
will provide development and management
services to the partnership. This is
consistent with our strategy to grow our
position in the logistics sector and to
expand our Funds Management platform.
In December 2020, GWOF achieved its
carbon neutral operating portfolio target.
Each of GWOF’s operating assets were
independently certified as carbon neutral
using the NABERS verification pathway
of the Australian Government’s Climate
Active for Buildings, in alignment with the
International Greenhouse Gas Protocol.
The Green Building Council of Australia
has recognised this outcome as a first for
a national property portfolio within the
World Green Building Council network.
The sale of the Group's interest in Farrer
Place in Sydney during the year, reinforces
our existing balance sheet capacity and
ensures that we have ample capacity
to grow our exposure to logistics and
to pursue other opportunities that may
emerge in line with our strategic focus.
We also progressed two Office
developments in the period. At 32 Smith,
practical completion was achieved in
January 2021. The asset is 70 per cent
leased including Heads of Agreement
and we expect to make further leasing
progress in 2021 given it is a new landmark
building in the growing Parramatta CBD.
Queen & Collins, Melbourne, being
redeveloped for GWOF, is expected to
reach practical completion in May 2021, and
is currently 20 per cent leased including
Heads of Agreement.
GPT is advancing six Office projects through
planning ahead of the next market cycle,
which are expected to have an end value of
approximately $3.5 billion 5 on completion.
Climate change and sustainability
Recognising the importance of continued
action to address climate change, in
August 2020 GPT announced a target to
achieve carbon neutral operations across
all managed assets by 2024, six years
ahead of our original 2030 target.
6
GPT recognises the importance of
identifying, managing, and transparently
reporting on climate change risks
and opportunities that could have a
material impact on GPT’s assets and on
the communities in which we operate.
Our second Climate Disclosure Statement
was released in February 2021 and outlines
our progress and priorities in addressing
climate-related risk, in accordance with
the Task Force on Climate-related Financial
Disclosures (TCFD). The statement is
available on GPT’s website.
GPT’s success depends on strong,
productive relationships with our tenants,
customers, supply chain partners, and local
communities. The Group contributes to
the community by acting as a responsible
business in accordance with our
commitments and obligations. We respect
and uphold human rights in line with the
United Nations Guiding Principles on
Business and Human Rights and continue
to take action to enhance transparency
in this area.
During 2020, we released the Group’s
Human Rights Statement, which articulates
our long-standing commitment to
respecting human rights across our
operations and in our engagement with third
parties. Demonstrating this commitment,
GPT’s inaugural Modern Slavery Statement
was released in December 2020 and
articulates the actions we have taken and
propose to take to identify and prevent
modern slavery taking place within our
operations and across our supply chains.
Our ongoing work to promote reconciliation
saw the Group progress or complete
97 per cent of the actions from our Stretch
Reconciliation Action Plan during 2020, as
we offered our communities and our people
the opportunity to explore the culture
and traditions of First Nations people
through our reconciliation commitments
and activities.
Safety at GPT
Safety remains a core value and key priority
for everyone at GPT. This unequivocal
focus on safety extends across our people,
tenants, customers, communities and
supply partners.
In addition to the launch of a new Safety
Procedures Manual during the year
following a business-wide review of our
safety management systems, 97 per cent
of our people participated in a Safety
Leadership Program. The program focused
on the importance of safety and providing
leaders with the skills to lead and influence
behaviours and beliefs that are essential for
a strong safety culture.
This year with the emergence of COVID-19,
GPT participated with key industry bodies
to determine common asset level safety
standards and practices in accordance
with health advice. Additional resources
and funds were also deployed to ensure
we maintained safe environments across
our portfolio and within our premises.
Diversity and inclusion
The Group continued to make progress
towards our diversity and inclusion targets
during 2020, and we were named an
Employer of Choice for Gender Equality
by the Workplace Gender Equality Agency
(WGEA) for the third consecutive year.
GPT was also recognised for the first time
as a Bronze Employer for LGBTIQ+ inclusion
in the Australian Workplace Equality Index
(AWEI) small employer category. The
Group’s CEO continues to be an active
member of the Property Male Champions
of Change which focusses on developing
strategies to improve inclusion and reduce
gender bias.
5. Includes both GPT direct and Funds opportunities.
The GPT Group | Annual Report 2020
BUSINESS
OVERVIEW
Corporate governance and
Board renewal
Good corporate governance is a central
part of GPT’s commitment to our
securityholders. The Board strives to
ensure that GPT meets high standards
of governance across our operations.
The Board is committed to maintaining
a diversity of skills, experience and
attributes amongst its members. The Board
continued our proactive process of Board
succession and renewal during the year,
with the appointment of Robert Whitfield
AM and the retirement of Gene Tilbrook.
Rob Whitfield AM joined the Board
in May 2020 and brings extensive
experience in banking, finance and the
public sector, which will be a valuable
contribution to the Board, enhancing the
Board’s skills and experience. Rob will be
standing for election at the 2021 Annual
General Meeting.
After more than ten years of service,
Gene Tilbrook retired from the Board
at the end of December 2020. During
his tenure, Gene made a substantial
and valuable contribution to the Board,
particularly in his service on and leadership
of the Sustainability and Risk Committee,
and as a member of the Nomination
and the Audit Committee. We thank
Gene for his commitment and valuable
contribution to GPT.
We extend our thanks to the Board for their
efforts in steering the Group through the
unprecedented challenges of 2020, and for
their support and guidance to management
as the demands on their time, experience
and expertise intensified during the year.
2021 outlook
GPT remains well positioned, with a strong
balance sheet, a high quality portfolio,
an experienced management team and
a strategy to create long term value for
securityholders.
Acknowledging there continues to be a
high level of uncertainty in our operating
environment, we are optimistic about the
outlook for 2021. Following the lifting of
COVID-19 restrictions and with the planned
rollout of vaccines gaining momentum,
we expect potential risk of disruption to
operations to reduce over the course of
2021, particularly in the second half.
Favourable economic indicators such as
strong consumer confidence, robust jobs
growth, high household savings rates and
a more buoyant housing market are strong
indicators of a solid economic recovery.
However, the path of the recovery may
be uneven and disrupted by unexpected
events and the differing approaches taken
by each state government. Melbourne’s
CBD in particular is currently lagging in its
recovery when compared to Sydney and
this will have a bearing on the recovery
of assets like Melbourne Central. We have
strong conviction that Melbourne
Central will recover and once again be
a key destination.
Due to the uncertain operating conditions,
we are not providing earnings and
distribution guidance for 2021 at this
time. We will continue to monitor trading
conditions, and currently expect to provide
2021 earnings and distribution guidance
with the release of our March 2021 Quarter
Operational Update.
On behalf of the Board and management,
we extend our thanks to our employees
for their commitment, hard work and
resilience during this challenging year.
Finally, we thank our investors for their
continued support of GPT.
Vickki McFadden
Chairman
Bob Johnston
Chief Executive Officer
and Managing Director
32 Smith, Parramatta, NSW
(Artist's impression)
7
HOW WE CREATE VALUEPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Business Overview
Our financial position
Given the effect of government measures
and the uncertainty of the duration of
the pandemic, we withdrew guidance for
2020 Funds From Operations (FFO) and
distributions on 19 March.
GPT has remained in a strong financial
position throughout the year, with prudent
gearing, limited near term debt maturities
and significant available liquidity. The Group
maintains A/A2 credit ratings from S&P and
Moody’s respectively. Our strong financial
position has allowed the Group to continue
to progress our strategic priorities
while providing the flexibility to manage
through the current challenging operating
environment.
We increased the frequency of asset
valuations to provide investors with an
independent assessment of the immediate
and longer term effect of the pandemic on
the value of our assets. Our directly owned
retail assets were valued at the end of
May and all investment assets were valued
at the end of June and again at the end
of December as the pandemic’s effects
became more apparent.
The Group reduced or deferred spending
on non-essential and discretionary items
across the business. In addition, the 2020
Short Term Incentive Compensation
scheme and the 2020 – 2022 Long
Term Incentive scheme were withdrawn.
In April, we deferred the commencement
of the Rouse Hill Town Centre retail
expansion and the Melbourne Central
office and retail development until such
time as market conditions are more
supportive. These initiatives have helped to
ensure that we remain in a strong financial
position and are well-positioned for the
post-pandemic recovery.
In June GPT announced that as a result
of the uncertainty created by the effects
of the COVID-19 pandemic and the
application of the mandatory Code of
Conduct, the Group adjusted the timing
of the declaration of its distributions to
coincide with the release of the Group’s
financial results in February and August
each year. In addition, the Group amended
its distribution payout policy to align with
free cashflow.
MORE ON PAGE 28.
Responding to COVID-19
The significant effects of the
COVID-19 pandemic have been
felt across Australia and around
the world for much of 2020. GPT
acted swiftly and decisively to
understand and respond to the
pandemic as it emerged and
continued throughout the year.
The health, safety and wellbeing of our
people, customers, and the public has been
at the forefront of our considerations and
decisions, in accordance with our core
value of ‘Safety first – everyone, always’.
We have adapted our operations to adhere
to government and health advice while
supporting our people, tenants, customers,
and the public who visit our assets. The
Group has maintained our strong capital
position despite the pandemic’s significant
economic impact.
Our operations
At the Group level, we reviewed the
Risk Management Framework to ensure
it remained effective in the changed
operating environment, with its
implementation adapted to manage risk
effectively in these circumstances. We
increased the frequency of key risk reviews
by the Leadership Team and the Board. A
COVID-19 Response Team and COVID-19
Working Group were formed to enhance
our risk governance and co-ordinate our
actions and communications. Our Business
Continuity Plan was enhanced to include
a Pandemic Response Guide. A range of
operational protocols were established to
address new or adjusted activities, such as
tenant rent negotiations, health and safety,
and cyber security.
MORE ON PAGE 38.
GPT participated with key industry bodies
to determine common asset-level safety
standards and practices in accordance
with health advice and to effectively
implement the mandatory Code of
Conduct for commercial tenancies
as it was legislated by state and
territory governments.
At our assets and workplaces, the Group
acted quickly to protect our people and
support our customers and tenants,
introducing physical distancing and
hygiene measures in accordance with
government directives and health advice.
The frequency of cleaning increased across
all GPT assets and additional signage was
introduced. We helped tenants that were
able to continue trading to put in place
COVID-safe plans. We have continued to
adapt our approach as circumstances have
changed to ensure that our assets can
operate safely and effectively.
We prepared our shopping centres to be
able to ramp up operations safely when
restrictions eased, providing customers
and retailers with the confidence that our
shopping centres were safe places with
appropriate measures in place to manage
physical distancing. We also provided
'click and collect' services in our centre
car parks.
Our office asset teams focused on
providing COVID-safe spaces for
our tenants to return as government
restrictions eased, ranging from new
physical distancing signage and increased
cleaning across the portfolio, to
management of common areas and lifts,
and investment in touchless technology
and enhanced air conditioning systems.
We communicated closely with our
logistics tenants, who continued to operate
their facilities as supply chain movements
remained essential, particularly for food,
pharmaceuticals, and general consumables.
8
The GPT Group | Annual Report 2020
BUSINESS
OVERVIEW
Our people
Safety is a core value of GPT and so our
people were well prepared to respond
to the pandemic and in no doubt that
their safety, as well as that of our tenants,
customers, communities and supply
partners, was paramount.
Our people based in our corporate offices
were directed to work from home between
March and June, with rotational and split
teams introduced for those needed on site
at our assets. For our Victorian employees,
work from home arrangements continued
in line with government directives.
Our existing technology infrastructure
enabled a seamless transition to remote
work with further enhancements
implemented rapidly to improve
the experience. Our cyber security
infrastructure was also strengthened.
A central information hub was
established for our people to access
all pandemic-related communications,
remote work instructions and resources,
and information to support their mental
health and wellbeing. Specific programs
to assist employees with mental fitness
and to assist people managers to create
resilient teams were undertaken. The
Employee Assistance Program (EAP)
remained available to all employees and
their immediate family members for those
seeking confidential counselling support.
We adapted our internal communications
rhythm, increasing the frequency of CEO
and Leadership Team updates and virtual
employee town hall events. Workplace
COVID Safety sessions were offered to all
employees to provide information about
managing the pandemic in our workplace
and asset environments. A remote working
guide was developed to assist employees
in creating a suitable working from
home environment.
Our tenants and customers
Announced in April 2020 by the National
Cabinet, the Code of Conduct for
commercial tenancies required commercial
property landlords including GPT to provide
cashflow relief, through a combination
of rent forgiveness and deferment, to
qualifying small to medium enterprises
(SMEs) proportionate to their reduction
in revenue for the pandemic period.
The Code was legislated in all states for a
defined six month period, with extensions
later mandated in several jurisdictions in
response to continued mobility restrictions
and challenging economic conditions.
We have engaged with our tenants
in a proactive and considered way so
that we, and our tenants, emerge from
the pandemic in a position to grow our
respective businesses. Agreements under
the Code are negotiated individually with
each tenant on a case by case basis. The
process has taken some time to conclude
given the complexity of the application of
the Code, the nuances of the regulations
in each state and the number of tenants
involved. The rent relief provided under
the Code has impacted the Group’s
financial result.
MORE ON PAGE 28.
Our supply chain partners
We increased communications with our
suppliers to understand how the pandemic
was affecting their operations and to
support them in ensuring the continuity
of supply of products and services to us.
We placed strong emphasis on ensuring
that our suppliers’ employees remained
safe, healthy and well during challenging
operating circumstances.
GPT recognised that the pandemic may
have increased the risk of modern slavery
in parts of our supply chain during this
year. In response, we worked closely with
our suppliers and consulted with industry
groups and peers to identify and address
potential issues.
Our communities
Through our assets, we offered support to
our local communities by sharing wellbeing
resources and information through our
online platforms, hosting COVID-19 testing
centres at some assets in consultation
with government and health authorities,
and transforming our planned in-person
events into activities that could be enjoyed
at home.
MORE ON PAGE 21.
9
HOW WE CREATE VALUEPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Business Overview
Megatrends
A key consideration in formulating the Group's strategy is the impact of megatrends that continue to shape
how people live, work, and play and the spaces businesses need in order to thrive.
Emerging trends provide opportunities and challenges for the Group in creating value over the short, medium and long term.
They include matters affecting the economy, environment, technology, society, regulation and politics. The key trends and potential
implications currently shaping our strategy and business activities are set out below.1
Urbanisation, densification
and enabling infrastructure
Demographic change, evolving
communities and inequality
Transformative technology and
blurring boundaries
Population, jobs, and economic growth
concentrated in major cities and
demographic change are impacting
patterns of urban life and economic
activity.
Governments are being required
to make a significant investment
in enabling social and economic
infrastructure to improve the liveability
and affordability of major cities. This
has been curbed during the COVID-19
pandemic but is expected to rebound.
Demographic change is driving
needs around health care, retirement,
workplace flexibility, and workforce
diversity.
Australia’s income and wealth
inequality is increasing. Millennials and
Gen Z now represent almost half our
workforce and one out of every three
dollars spent, and they have distinctly
different spending habits from previous
generations.2
Broad based and rapid technological
change, including automation, is
transforming and disrupting traditional
ways that society and businesses
operate, communicate, and interact.
Hypervigilance in cybersecurity will
be necessary to ensure operational
continuity, customer and broad
stakeholder confidence.
GPT's response
GPT's response
GPT's response
» Ensure our real estate portfolio is
concentrated in markets which
will benefit from urbanisation,
densification and enabling
infrastructure.
» Continue to allocate capital to
markets that are likely to benefit from
existing and future infrastructure
investment.
» Consider viability of mixed-use
developments to increase the social
value of properties within existing
site footprints.
» Continue to invest in our properties
to evolve our offering and meet the
changing preferences of customers
and the communities in which
we operate.
» Unlock additional productivity within
the Group’s workforce via flexible
work arrangements, work-anywhere
technology, changed expectations
regarding workplace attendance,
and continued active promotion of
diversity and inclusion.
» Leverage technological advances
to enhance service offerings for
customers at our properties.
» Remain vigilant across our employees,
partners, core systems and
operations regarding privacy, data
security, and business continuity to
earn and retain stakeholder trust as
the role of technology changes.
» Grow our capital allocation in sectors
that will benefit from transformative
technology, such as logistics.
» Maintain strong customer, supplier
and stakeholder relationships to
enable rapid adaptation of operations
and supply chains if needed.
1. Sydney Business Insights, Austrade, CSIRO, GPT Strategy Team.
2. Alphabeta strategy x economics paper, "How Millennials Manage Money: Facts on the spending habits of young Australians".
10
The GPT Group | Annual Report 2020
BUSINESS
OVERVIEW
HOW WE
CREATE VALUE
GETTY IMAGE USED HERE
Wembley Business Park, Berrinba, Qld (artist's impression)
Empowering individuals
and hyper‑connectivity
Environment, resource scarcity
and resilience
Economic power shifts, geopolitical
risk and unfunded liabilities
Technological advances, ubiquitous
connectivity, improvements in
access to education and health are
empowering individuals.
Social media platforms have
fundamentally changed the way
people communicate, interact, and
organise their lives. They have an
increasing expectation for experience,
personalisation, and customisation,
as well as remote access following
its widespread adoption during the
COVID-19 pandemic.
Growing populations and household
wealth will increase pressure on
environmental resources, including food,
water, energy and mineral resources.
At the same time, the impacts of
human-induced climate change may be
rapid and unpredictable.
Climate change, protecting the
environment, natural disasters and
pandemics are of increasing concern.
Over the coming years we will see a
restructuring of the global economy
with non-OECD economies expected
to account for 57 per cent of the global
output by 2030, creating new patterns of
trade and investment.1
This growth is also giving rise to a new
middle class or “mass affluent” with two-
thirds of the global middle class to reside in
Asia Pacific by 2030.1 At the same time, the
most indebted economies in the world are
also the richer ones and retirees are facing
underfunded pension plans. During the
pandemic, governments and central banks
have demonstrated a willingness to take
action to ensure economies recover.
GPT's response
GPT's response
GPT's response
» Continue to invest in technology
» Progress towards the Group’s
that improves connectivity with our
customers, removing friction points
and enhancing their experience.
carbon neutral targets while actively
managing the potential risks of
climate change.
» Maintain initiatives to continually
improve our investment strategy and
asset selection criteria to incorporate
the ongoing impact of technological
advances and evolving customer
expectations.
» Continue to partner with our retailers
to evolve our shopping centres to
meet the expectations of shoppers for
enhanced experience, personalisation
and customisation.
» Work with our office customers to
ensure that our buildings remain
destinations of choice for their
teams to collaborate, team-build
and professionally develop based
on unparalleled connectivity and
purpose-built spaces.
» Develop climate resilience strategies
as outlined in our Climate Disclosure
Statement.
» Continue to enhance the efficient
operations of our properties to use
fewer natural resources, produce
less waste and fewer emissions,
and achieve intensity and efficiency
targets.
» Consider how new technologies,
innovations and partnerships can
provide new ways of managing and
monitoring the environmental impact
of our properties and operations.
» Use external ratings, accreditations
and benchmarks to validate that our
properties and developments meet or
exceed best practice standards.
» Continue to focus on financial and
capital management with a strong
balance sheet, appropriate gearing,
and an approach consistent with stable
‘A category’ credit ratings.
» Continue to develop the GPT Funds
Management platform to access
alternative sources of capital, fund
growth opportunities and deliver returns
for the Group.
» Position GPT as an attractive investment
to a variety of funding sources including
domestic and international pension and
superannuation funds.
» Communicate our sector-leading
ESG credentials to current and potential
investors.
» Pursue opportunities to assist with
supply chain security for Australian
businesses focused on localisation.
1. Organisation for Economic Co-operation and Development (OECD) Development Centre, Working Paper No. 285, "The Emerging Middle Class in Developing Countries".
11
PERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Business Overview
Our Strategy
GPT's strategy aims to deliver
growing and predictable
earnings for investors through
owning, developing and managing
a diversified portfolio of high
quality real estate.
Our strategy is influenced by the
megatrends that continue to shape
how people live, work and play and the
spaces businesses need in order to
thrive. Some of these trends accelerated
in 2020, presenting both opportunities
and challenges.
Owning and managing a diversified
portfolio of high quality real estate
in Australia’s largest cities is core to
our strategy and provides us with the
opportunity to benefit from sectors with
favourable trends while reshaping our
exposure to others.
Our strategy leverages our
extensive real estate experience
to create value through disciplined
investment, development, asset
management, and funds management.
Portfolio growth in the Logistics
sector has been a core focus
over the last three years and the
Group has made strong progress
in securing development and
investment opportunities in this
sector. This continues to be an
ongoing focus given the structural
tailwinds from e-commerce and
supply chain management.
Business model
Strategic priorities
T
N
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DS M A N A G
N
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F
IN
V
E
S
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M
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N
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Our values
Safety first – everyone, always
Deliver today, create tomorrow
Value differences, play as a team
A
S
S
E
T
M
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N
A
G
E
M
ENT
Raise the bar
Speak up
V E L O P MENT
E
D
Grow our high quality real estate portfolio through
developments and acquisitions in Australia's largest
property markets
Exceed customer expectations by leveraging
our extensive real estate skills to deliver
leading asset management and sustainability
performance
Extend our capital partnerships with investors
through unlisted real estate funds and direct
mandates to deliver attractive risk adjusted
returns over the long term
Maintain disciplined and prudent capital
management
12
38A Pine Road, Yennora, NSW
The GPT Group | Annual Report 2020
BUSINESS
OVERVIEW
HOW WE
CREATE VALUE
REALISING OPPORTUNITIES IN LOGISTICS
GPT is delivering on our strategy of growing the
Logistics portfolio, capitalising on the demand
for quality assets and enhancing the Group’s
portfolio diversity. The Logistics portfolio has grown
significantly, from $1.5 billion in December 2017 to
$3.0 billion today 1, and now makes up 21 per cent
of the Group’s investment portfolio. At December
2020 the portfolio is 99.8 per cent occupied with
a weighted average lease expiry of 6.7 years.
Growth has been achieved through a combination
of acquisitions and developments, along with
valuation uplift and capital investments in our assets.
Significant growth occurred during 2019 with the
acquisition of $212 million of quality leased assets
in Sydney and Melbourne, with several offering
scope for future development. An equity raising
in June 2019 secured additional capital to support
the portfolio’s continued growth whilst maintaining
a strong balance sheet position.
We continued this momentum into 2020 with the
portfolio growing 22 per cent in the 12 months.
Four developments were completed across Sydney
and Brisbane, adding 90,000 square metres to
the portfolio. We also acquired $205 million of
investment assets in the established Melbourne
industrial precincts of Truganina and Port Melbourne.
1. As at 31 December 2020.
21-23 Wirraway Drive, Port Melbourne, Vic
Over 70 per cent of Logistics income is generated
from customers that are ASX listed groups and
multi-nationals. Market vacancy remains low,
underpinned by trends impacting the sector
including e-commerce, supply chain transformation
and urbanisation.
The Group’s development pipeline, inclusive of
projects underway, has an expected end value
on completion of approximately $1 billion.
On 15 February 2021, we announced that we had
entered into a capital partnership with QuadReal
Property Group to jointly acquire and develop a
high quality portfolio of Logistics assets in the
GPT QuadReal Logistics Trust. This partnership will
deliver attractive returns over the long-term and
further boost the Group’s exposure to the strongly
performing logistics sector.
We continue to execute on our Logistics growth
strategy, capitalising on development opportunities
within our existing landbank and assessing
acquisitions to create value for securityholders.
13
PERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Business Overview
Our Business Model
There are four core activities in GPT’s business model. We invest in, develop and manage Australian real estate assets and funds
to create value for our stakeholders.
Investment
Combining our property expertise with our understanding of the
economic drivers and market dynamics of each sector enables
GPT to capitalise on opportunities, acquiring and divesting
properties at the right time to deliver reliable returns for our
investors.
Together with our directly held assets, GPT co-invests capital to
benefit from the returns that can be derived from high quality core
assets in wholesale funds and joint ventures.
Development
Our development capability and pipeline enables the creation
of new opportunities and enhances the value of our well located
existing properties for the Group and our third party investors.
Our placemaking expertise provides added benefit, ensuring
that the properties we design and develop are sustainable and
prosperous places for our tenants, customers and communities.
Asset Management
We manage $24.4 billion of commercial properties in the office,
logistics and retail sectors. We apply our portfolio and asset
management skills to ensure that we attract, secure and retain
tenants, delight and satisfy our customers and visitors, operate
efficiently and sustainably, and aim to deliver growing and
predictable earnings for investors.
Funds Management
Our funds management and partnerships platform manages
$12.9 billion of investments focused on the Australian office
and retail sectors, leveraging our skills and experience to enhance
returns for fund investors and capital partners.
GPT invests alongside fund investors and capital partners to
jointly access income and growth opportunities. The funds
management platform provides the Group with income through
funds management, property management and development
management fees.
Rouse Hill Town Centre, NSW
14
The GPT Group | Annual Report 2020
BUSINESS
OVERVIEW
HOW WE
CREATE VALUE
32 Smith, Parramatta, NSW (Artist's impression)
CREATING VALUE THROUGH DEVELOPMENT IN PARRAMATTA
The development of 32 Smith in Parramatta
demonstrates the value that GPT’s business
model creates for our stakeholders.
GPT acquired the site in May 2017 for $31.2 million
and secured planning approval for its enhanced
use as a commercial building. Our vision aligned
with that of Parramatta City Council, the Greater
Sydney Commission and the NSW Government
to develop Parramatta as Sydney’s second CBD.
For investors, 32 Smith provides returns in the
growing Parramatta market which is benefiting
from current and proposed future transport
infrastructure investment.
The building’s major tenant was secured in
December 2018 as development works began.
Construction continued throughout 2020 with
the necessary social distancing and other
adjustments due to the COVID-19 pandemic
being adhered to by the construction team.
We have engaged with the land’s Traditional
Custodians, the Darug People, throughout the
development to respectfully share their culture
and history within the precinct. Artworks in
the building’s indoor and outdoor spaces connect
visitors to the nearby Parramatta River, sharing
stories of country and culture unique to this part
of Parramatta.
32 Smith is designed to operate efficiently.
It has been awarded a 6 Star Green Star – Design
rating from the Green Building Council of Australia
and GPT is targeting a 6 Star NABERS Energy
(with Green Power) rating to externally verify
the building’s energy efficiency when completed.
The building achieved practical completion in
January 2021 and is 70 per cent leased including
Heads of Agreement. Increased floor area was
achieved through the approval of an additional
mezzanine floor, with a Heads of Agreement in
place. The development is expected to have an
end value of more than $330 million and deliver
a yield on cost of more than 6.4 per cent.
15
PERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 THE GPT
GROUP
OUR STRATEGIC
FOCUS
How We Create Value
OPERATIONAL
PERFORMANCE
How We Create Value
Our vision
To be the most respected property company
in Australia in the eyes of our investors,
people, customers and communities.
Our purpose
To create value for investors by providing high
quality real estate spaces that enable people to
excel and our customers and communities to
prosper in a sustainable way.
To deliver our purpose, GPT uses resources and inputs
in our business activities to create value for our stakeholders.
Key inputs into the Group are our investors, real estate, our
people, environmental resources, and our customers, suppliers
and communities.
Through the application of our business model, GPT creates
value in the form of growing and predictable earnings,
thriving places, empowered people, a sustainable environment,
and prospering customers, suppliers, and communities.
This process of value creation is illustrated in the diagram below.
Inputs
Business model
T
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DS M A N A G
N
U
F
IN
V
E
S
T
M
E
N
T
T
N
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M
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G
A
N
A
M
K
S
RI
E
C
N
A
N
R
E
V
O
G
Office
Logistics
Retail
Funds
A
S
S
E
T
M
A
N
A
G
E
M
ENT
V E L O P MENT
E
D
Our investors
Equity and debt investors who
provide capital to support
strategy execution and growth.
Real estate
Buildings and land that we
own, manage and develop.
Our people
The capabilities and effort of
the people in our workforce.
Environment
Natural resources and environments
impacted by our business activities.
Our customers,
suppliers,
and communities
Relationships with customers, suppliers
and communities in the locations where
we operate.
16
The GPT Group | Annual Report 2020
HOW WE
CREATE VALUE
8 Exhibition Street, Melbourne, Vic
Value created
Growing and predictable earnings
Our aim is to deliver growing and predictable earnings and maximise total returns for our
investors, through the successful execution of our strategy.
MORE ON PAGE 18-19
Thriving places
Our properties are community places where people come together for work, connection and enjoyment.
MORE ON PAGE 20-21
Empowered people
Through their effort and continued development, our skilled, engaged and motivated workforce
deliver on our purpose to create value for customers, investors and communities.
MORE ON PAGE 22-23
Sustainable environment
We develop and manage sustainable places that operate efficiently and minimise our impact
on the environment.
MORE ON PAGE 24-25
Prospering customers, suppliers and communities
Strong relationships with customers, supply chain partners, and communities enable us
to meet their current and emerging needs and ensure our mutual future success.
MORE ON PAGE 26-27
17
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020
How We Create Value
Growing and predictable earnings
Our aim is to deliver growing and predictable earnings and maximise total returns over the long term,
through the successful execution of our strategy.
Group Five Year Funds From Operations (FFO) ($M)
554.2
574.6
613.7
554.7
537.0
2016
2017
2018
2019
2020
Group Five Year Total Return (%)
15.5
15.2
15.8
8.7
2016
2017
2018
2019
2020
-2.4
Creating value
Clearly 2020 has been impacted by the
COVID-19 pandemic and the necessary
government measures put in place to
protect lives.
GPT uses financial resources sourced from
our debt and equity investors to fund the
Group’s investments and developments.
We generate income in the form of
rents from our portfolio of diversified
properties and fees from our funds
management activities. Distributions
are based on free cash flow generated.
We have a payout policy to distribute
between 95 to 105 per cent of free cash
flow. In addition to income, the capital
growth of our portfolio drives the total
return for our investors.
Effective capital management is essential
to meeting the Group’s ongoing funding
requirements and to ensure we generate
sustained returns to investors over the
long term.
The Group maintains its long term
commitment to a target gearing range
of 25 to 35 per cent and stable investment
grade credit ratings in the "A" range.
1818
The GPT Group | Annual Report 2020
HOW WE
CREATE VALUE
Engaging with stakeholders
2020 performance
GPT undertakes regular structured
engagement with investors to understand
their views on our strategy, performance,
financial position, and governance
together with their current and emerging
focus areas. This provides an opportunity
to receive their feedback and to address
their questions.
We also participate in external benchmarks
and indices to compare our performance
with that of our peers.
This investor engagement and
benchmarking, alongside regulatory
requirements, shapes the nature and
extent of information we report.
Related risks and opportunities
» Portfolio operating and financial
performance
» Development, and
» Capital management.
$554.7m
Funds from Operations (FFO)
-$213.1m
Statutory loss after tax
28.48¢
FFO per security
22.5¢
Free cash flow per security
$5.57
NTA per security 1
23.2%
Gearing
-12.9%
FFO per security growth
22.5¢
Distribution per security
-2.4%
Total Return
3.1%
Weighted average cost of debt
7.8 years
Weighted average debt term
A/A2
S&P (stable) / Moody's (stable)
580 George Street, Sydney, NSW
1. Includes all right-of-use assets of GPT Group.
19
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 How We Create Value
Thriving places
Our properties are community places where people come together for work, connection and enjoyment.
2020 performance
Creating value
Engaging with stakeholders
GPT engages with our tenants, customers
and communities to understand how our
properties can enable them to thrive. Our
‘voice of the customer’ programs provide
us with insights into what works well and
what could be improved at the places we
manage, as do our strong relationships with
current and prospective tenants and local
community groups.
These insights guide how we develop,
operate and enhance our properties so
that they thrive – be it by offering relevant
events and experiences, providing flexible
spaces for start-ups and existing tenants,
changing how people move through the
local area, or sharing local First Nations
history and culture.
Related risks and opportunities
» Portfolio operating and
financial performance
» Development
» Health and safety, and
» Environmental and social
sustainability.
Our real estate assets – office buildings,
logistics facilities and retail shopping
centres – are the core of our business and
our ability to create value.
Our active management of each asset
ensures we meet the needs of our
customers, operate efficiently and
sustainably, and are enjoyable places to be.
By meeting these needs, our places are
desirable destinations where our tenants
can succeed and where customers and
communities want to visit to work, shop,
transit, and socialise.
When the time is right, we develop new
assets and enhance existing assets to
meet tenant, customer and community
needs and grow returns for our investors.
Thriving places are safe and inclusive. Our
asset teams are focused on identifying
and eliminating safety incidents and risks
from our properties and our developments
as we strive for our goal of zero injuries.
Ensuring our properties, facilities and local
events are culturally sensitive and safe for
all people boosts community engagement,
economic development and asset
productivity. This includes recognising
the Traditional Custodians of the lands on
which we operate.
Places thrive when they are connected
to their communities. Our properties
are dynamic places where people come
together and we apply our planning, design
and management expertise to create
opportunities for them to connect.
Our properties are workplaces for
businesses of all shapes and sizes that
contribute to the Australian economy.
From family-owned small businesses
to major government departments and
development construction sites, GPT
provides places where thousands of
people work each day.
98.4%
Portfolio occupancy
4.7years
Portfolio Weighted Average
Lease Expiry
4.95%
Portfolio Weighted Average
Capitalisation Rate
Charlestown Square, NSW
20
The GPT Group | Annual Report 2020
HOW WE
CREATE VALUE
Charlestown Square, NSW
NAVIGATING THE PANDEMIC, TOGETHER
When government restrictions were
implemented in response to the COVID-19
pandemic, GPT swiftly adjusted our
operations to accommodate physical
distancing for the safety of our customers,
tenants and centre teams.
From March 2020 onwards, our asset teams
across retail, office and logistics acted
quickly to ensure the ongoing health and
safety of our people, tenants, customers
and communities.
As fewer people visited our shopping
centres in accordance with government
restrictions, our retail teams quickly
transformed our planned in-centre
events to instead support our customers
during their time at home. We distributed
more than 21,000 activity packs for little
shoppers across the country during
restrictions while ensuring their visits
remained safe in line with government
and health advice.
We supported our tenants during this
period, guided by the Code of Conduct
for commercial tenancies. We continue
to provide appropriate levels of support
with the aim of ensuring that we can
all emerge from the pandemic in a
sustainable position.
As restrictions eased in some areas, we
launched a series of ‘Feel Good Fun Fest’
in-centre events to encourage customers
to come together and return to centres
safely. The events and accompanying
marketing campaign supported our
retailers and customers as they adjusted
to the changed retail environment.
Concurrently, we accelerated the
development of convenience focused
initiatives. New order-ahead drive through
and 'click and collect' food services were
launched soon after restrictions were
implemented, helping our retailers and
their customers to stay connected during
this time.
Retail Runner, a digital centre-based ‘click
and collect’ service, was also developed
for customers seeking quick, contactless
shopping options. Retail Runner launched at
Rouse Hill Town Centre in early December
to assist customers and support tenants in
the lead up to Christmas.
Together with our retailers and customers,
we celebrated a COVID-safe Christmas
with events, sales, and celebrations that
safely shared the magic of Christmas with
our local communities at the end of a
challenging year.
FIND OUT MORE ABOUT OUR RESPONSE TO
COVID-19 ON PAGE 8.
21
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 How We Create Value
Empowered people
Through their effort and continued development, our skilled, engaged and motivated workforce deliver on our
purpose to create value for customers, investors and communities.
2020 performance
Creating value
Engaging with stakeholders
97%
Employees completed our
Safety Leadership Program
48.3%
Females in top quartile
3rd year
Recognised as an
Employer of Choice for
Gender Equality (WGEA)
Bronze
Employer for LGBTI+ inclusion,
small employer (AWEI)
86%
Employees felt GPT helped them
to navigate the pandemic more easily
Our people are central to GPT’s ability
to deliver on our strategy and generate
value for our stakeholders. Their passion,
expertise, and capability drives our
business activities and shapes our
corporate culture.
Our ability to attract, engage and retain a
motivated and empowered workforce is
central to our shared success. We foster
an inclusive and high performing work
environment that provides our people with
flexibility and development opportunities.
Our people are empowered when everyone
feels represented, so we seek to be a
diverse and inclusive workplace that offers
opportunities for learning, development
and growth to everyone.
Our work environment influences the
wellbeing of our people, so we encourage
our employees to develop lifelong healthy
habits to support their wellbeing and
productivity beyond their time at work.
In this environment, our high-calibre, loyal
and engaged employees help to generate
superior business outcomes. Through their
efforts and actions, our people embody
our culture and give life to our purpose
and values.
GPT has a consultative work environment
where employee views are sought
out, respected, and acted upon where
appropriate. Typically, GPT conducts an
employee engagement survey every
18 to 24 months and pulse surveys on
focused topics during the intervening
period. Our results demonstrate strong
employee alignment to our vision, purpose,
values and strategy. Employee Pulse
Surveys were conducted throughout
2020 to gauge our people's wellbeing
and satisfaction with their altered
work arrangements, and to identify
priorities and opportunities to provide
additional support.
GPT’s participation in external assessments
such as the Workplace Gender Equality
Agency’s Employer of Choice for Gender
Equality citation and the Australian
Workplace Equality Index for LGBTIQ+
inclusion, help us to measure our progress
and identify further actions we can take
to ensure our work environment remains
inclusive and engaging.
Related risks and opportunities
» People and culture
» Health and safety, and
» Portfolio operating and financial
performance.
22
GPT Sydney office, NSW
The GPT Group | Annual Report 2020
HOW WE
CREATE VALUE
ENHANCING OUR SAFETY CULTURE
GPT restated our strong commitment to safety
across our assets and operations in 2019,
culminating in safety being nominated as one
of our core values. This renewed safety focus
prepared our teams well to respond to the
COVID-19 pandemic knowing that the safety of
our people, tenants, customers, communities and
supply partners was paramount.
A collaborative business-wide review of our
safety management systems culminated in the
launch of a new Safety Procedures Manual in May.
Training and regular communications ensured
that all GPT people are aware of these enhanced
safety systems and their role in delivering safer
outcomes across our business activities.
Communication remains important as the Group
continues to strengthen our safety culture. A
monthly safety update shares lessons from recent
safety incidents and near misses, celebrates
positive safety performance, highlights risk areas,
and communicates legislative updates.
Mental health and wellbeing are important
aspects of our safety culture. Our Wellness@GPT
program continued in 2020, with events such as
virtual yoga, virtual trivia, mental fitness webinars,
and physical fitness challenges providing
opportunities for our people to enhance their
wellbeing – particularly while working remotely.
Our regular wellbeing newsletter and
communications encourage our people to
consider their wellbeing and take action to
enhance it, by using sick leave to properly recover
from illness, carer’s leave to support families
working and learning from home, or by using
mental health days.
Throughout September and October, the Group
delivered a bespoke employee Safety Leadership
Program to 97 per cent of our employees. The
program focused on effective safety decision
making, understanding and developing key safety
behaviours, and the part that each person plays
in injury prevention as we work to achieve our
goal of zero injuries. Employees reported that the
program has personalised safety, and highlighted
how proactive risk management and the personal
ownership of safety support our shared goal of
preventing all work-related injuries. The Safety
Leadership Program has further enabled our
people to improve the effectiveness of the safety
conversations that we have internally and with
our contractors, tenants, suppliers, and members
of the public.
By actively enhancing the safety leadership
across the Group, together with our focus on
eliminating incidents and measuring safety
performance, we continue to demonstrate our
‘Safety First’ value, putting our people first above
everything else.
23
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 How We Create Value
Sustainable environment
We develop and manage sustainable places that operate efficiently and minimise our impact
on the environment.
2020 performance
Creating value
Engaging with stakeholders
75%
Reduction in
emissions intensity
from 2005 baseline
54%
Reduction in
energy intensity
from 2005 baseline
62%
Reduction in
water intensity
from 2005 baseline
33%
Closed loop
waste recovery
in 2020
2nd
Ranked real estate
company globally
in the DJSI
5 star
GRESB status
(maximum)
100%
GWOF's operating
assets certified
carbon neutral 1
1. Excludes assets under development
and ineligible for NABERS for Offices.
We rely on natural resources to develop
and operate our properties. Commercial
buildings use electricity which can produce
emissions. Buildings generate waste from
their development and daily operations,
and use water for air-conditioning,
amenities such as bathrooms and kitchens,
and maintaining landscaping. Development
activities can affect biodiversity.
GPT minimises our impact on the
environment across our operations
and aims to ensure the future resilience
of our properties to foreseeable
environmental changes. Comprehensive
operations management systems and
processes enable us to monitor and
measure performance and set targets
to improve building efficiency and reduce
environmental impact. Developments are
designed so that they can be constructed
and operated with reduced environmental
impact and operated efficiently
upon completion.
We are committed to being a positive
contributor to the environment across
our property operations and development
activities, informed by our restorative
approach to addressing the residual
environmental impacts of our direct
activities. This approach creates value
by restoring the environment, while
ensuring our buildings remain resilient
as the environment changes to deliver
shared benefits for our investors, local
communities and stakeholders.
Our carbon neutral journey
GPT participates in external surveys and
benchmarks on environmental, social and
governance (ESG) matters – primarily the
Dow Jones Sustainability Index (DJSI)
Corporate Sustainability Assessment
and GRESB real estate assessment –
to enable our stakeholders to assess the
progress of the Group and our wholesale
funds. These benchmarks enable us to
identify and understand the changing
stakeholder expectations in relation to ESG,
how our performance aligns with those
expectations, and how it compares to our
global real estate peers.
Our understanding of sustainable property
operations, environmental issues, and
stakeholder expectations influences
whether and how we create value
through our sustainable operations and
informs our assessment of the material
risks and opportunities arising from our
environmental impact.
Related risks and opportunities
» Portfolio operating and financial
performance
» Development, and
» Environmental and social
sustainability.
2011
Corporate
operations
certified
carbon neutral
2017
Set carbon
neutral 2030
target for asset
operations
2020
Set new carbon
neutral 2024
target for
managed asset
operations
2020
GWOF
operating
buildings
certified
carbon neutral
2024
Target for
carbon neutral
certification of
managed asset
operations
2030
Target for carbon
neutral certification
of jointly owned
and non-managed
asset operations
24
The GPT Group | Annual Report 2020
HOW WE
CREATE VALUE
CARBON NEUTRAL 2024
Recognising the importance of continued
action to address climate change, in August
GPT announced our new target to achieve
carbon neutral operations across all
managed assets by 2024, six years ahead
of our original 2030 target.
The implementation of our Energy Master
Plan, which began in 2019, has enabled
the Group to make substantial progress
towards carbon neutral operations by:
» Increasing renewable energy use
including energy generated by on-site
solar photovoltaic projects
» Optimising asset operations and
equipment to use less energy and
manage loads
» Exploring on-site energy storage
solutions, and
» Offsetting emissions that can’t
be eliminated through Australian
reforestation projects.
CBW, 181 William and 550 Bourke Streets, Melbourne, Vic
Carbon Neutral 2024 furthers our strong
track record on reducing emissions.
Our corporate operations became carbon
neutral in 2011 and have remained so
for ten years. In 2017, we set our original
target to achieve carbon neutral asset
operations by 2030. The GPT Wholesale
Office Fund (GWOF) achieved its carbon
neutral portfolio operations target in
December 2020.
Reducing the energy use of our properties
also makes good business sense. GPT
has delivered significant energy savings
on our 2005 baseline, reducing emissions
intensity by 75 per cent and energy
intensity by 54 per cent. The Group has
cumulatively avoided 1.8 million tonnes of
CO2-e emissions and cumulatively saved
$249.5 million in energy costs since 2005.
Find out more
GPT's Climate Disclosure
Statement is available on our website:
www.gpt.com.au.
25
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 How We Create Value
Prospering customers, suppliers and communities
Strong relationships with customers, supply chain partners, and communities enable us to meet their current
and emerging needs and ensure our mutual future success.
2020 performance
Creating value
Engaging with stakeholders
$7.9m
Community investment
81%
Employees supported
The GPT Foundation
93%
Suppliers paid on time 1
Inaugural
Modern Slavery
Statement published
97%
Reconciliation Action
Plan actions progressed
or completed
1. Calculated from the date of invoice receipt.
GPT collaborates with our partners and
stakeholders to create value for our
customers, suppliers and communities.
We work together to understand how we
can best support them, make a valuable
contribution, and progress towards our
shared goals. Strong relationships with GPT
Foundation partners, First Nations partners,
and community groups enable us to make
relevant and meaningful contributions.
GPT are committed to the Australian
Supplier Payment Code as we believe
paying business suppliers on time supports
supplier business viability. We aim to pay all
our suppliers on time.
We regularly engage with our supply chain
partners to understand their experience
of working with GPT and identify how we
can improve, while ensuring their ongoing
performance and alignment through
regular meetings, reporting, contact
reviews and risk assessments.
Related risks and opportunities
» Environmental and social
sustainability
» Health and safety, and
» Portfolio operating and financial
performance.
GPT cannot succeed without strong,
productive relationships with our tenants,
customers, supply chain partners, and
local communities. We foster trusted
relationships and work collaboratively
with these stakeholders to inform our
business activities, such as development
and placemaking, and build prosperous
and sustainable futures.
GPT contributes to the community
by acting as a responsible business in
accordance with our commitments and
obligations. We respect and uphold human
rights in line with the United Nations
Guiding Principles on Business and Human
Rights and continue to take action to
enhance transparency in this area.
We maintain strong relationships with our
tenants and customers, which are informed
by research and data insights to ensure that
we understand their current and emerging
needs so that our properties support their
prosperity today and into the future.
Our properties contribute to their local
communities by providing employment
opportunities and places, events and
experiences where people can come
together and which everyone can enjoy.
We offer our communities the opportunity
to explore the culture and traditions of First
Nations people through our reconciliation
commitments and activities.
We seek to build productive long-term
partnerships with our suppliers and work
together to source ethical and sustainable
products and to support us in delivering on
our commitments.
Our people participate in community
volunteering and employee giving in
support of The GPT Foundation’s charitable
partners and local community groups
and charities.
26
Casuarina Square, NT
The GPT Group | Annual Report 2020
HOW WE
CREATE VALUE
Charlestown Square, NSW
RECOGNISING FIRST NATIONS PEOPLES, HISTORY AND CULTURE
GPT is committed to fostering respect and
understanding for the world’s longest surviving
cultures and communities, Australia’s First
Nations people.
As one of Australia’s largest property companies
with assets along the Eastern seaboard and
in Darwin, GPT can help to close the gap that
exists between First Nations Australians and
the broader community. This includes improving
employment and education opportunities and
economic engagement.
We are continuing to deliver on the
commitments made in our second Reconciliation
Action Plan (RAP), our Stretch RAP which
launched in 2018.
GPT has made substantial progress against our
Stretch RAP objectives, with 97 per cent of RAP
actions progressed during 2020 to promote
positive change for First Nations people and
participate in the reconciliation movement.
During 2020, we progressed our efforts to
recognise traditional custodians at our assets.
GPT managed assets display Acknowledgement
of Country information on their websites and
on digital and physical signage at our buildings
to recognise and pay respects to the land’s
traditional owners and long history.
Recognising First Nations peoples and history is
informing our development activities. We sought
the guidance and partnership of the Darug
people to together determine how First Nations
culture and art could be incorporated into our
32 Smith office development in Parramatta.
The resulting design features throughout the
precinct respectfully share stories of country
and culture unique to the local area. Lessons
from this valuable engagement will inform how
we engage with Traditional Custodians for
developments in the future.
First Nations engagement also informs
our asset operations. Our retail shopping
centres are community hubs, so we strive
to maintain mutually beneficial relationships
with First Nations people, communities and
organisations to promote greater awareness
and understanding of reconciliation and to
support positive outcomes.
Our workforce is strongly engaged with the
opportunities and challenges of reconciliation.
62 per cent of GPT employees have completed
voluntary ‘Reconciliation at GPT’ online learning
since its launch in March 2020, and there was
high employee participation in RAP events
during the year. Internal communications have
encouraged our people to learn more about the
Uluru Statement from the Heart and understand
the importance of constitutional recognition as
part of our shared reconciliation journey.
We are continuing to learn and build strong
partnerships with First Nations communities,
businesses and organisations at an asset level
and in our corporate activities to play our part in
reconciliation and promoting positive change for
Australia’s First Nations people.
27
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSRISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Performance and Prospects
Distribution
During the period, the Group amended its distribution payout
policy to align with free cash flow. Under the amended payout
policy, GPT targets to distribute 95 to 105 per cent of free cash
flow, defined as operating cash flow less maintenance and leasing
capex and inventory movements. GPT’s previous policy was
to distribute 95 to 105 percent of Adjusted Funds from Operations
(AFFO), defined as FFO less maintenance and leasing capex.
Distributions are now declared at the date the Directors sign
the financial statements, rather than prior to the balance date.
Distributions payable to stapled securityholders relating to the
year ended 31 December 2020 totalled $438.3 million (2019:
$514.3 million), representing an annual distribution of 22.5 cents,
down 15.0 per cent on 2019 (2019: 26.48 cents) as a result of the
impact of COVID-19 on income and operating cash flows. This
includes 13.2 cents ($257.1 million) in respect of the second half
of 2020, which was declared on 15 February 2021 and is expected
to be paid on 26 February 2021. The second half distribution
is 1.3 per cent lower than the 31 December 2019 distribution
of 13.37 cents. The decrease in the second half distribution is
driven by the impact of COVID-19 partially offset by a reduction in
maintenance capex and lease incentives. The payout ratio for the
year ended 31 December 2020 is 100 per cent of free cash flow.
Management expenses
Total management and administration expenses of $68.2 million
across all segments (2019: $76.6 million) and corporate overheads
of $26.1 million (2019: $35.3 million) decreased due to a focus
on reducing discretionary spend, withdrawal of the 2020 Short
Term Incentive Compensation Scheme and the 2020 – 2022 Long
Term Incentive Scheme and receiving JobKeeper assistance of
$8.8 million from the Federal Government.
2020 Group FFO earnings composition (%)
Funds Management 7
Logistics 20
Retail 32
Office 41
Group Performance
While GPT commenced 2020 with solid momentum, the Group’s
performance for the financial year ended 31 December 2020 has
been impacted by the measures implemented in response to the
COVID-19 pandemic.
As part of the government response to the pandemic,
a commercial tenancies Code of Conduct was developed and
legislated in each state and territory requiring landlords to provide
rent relief to qualifying tenants impacted by the government
mandated measures. The Code of Conduct requires landlords
to provide relief to qualifying tenants in the form of rent waivers
and rent payment deferral.
In response to the high level of uncertainty and the unprecedented
circumstances, the Group reduced or deferred spending on non-
essential and discretionary items across the business. The Rouse
Hill retail expansion and the Melbourne Central office and retail
development were deferred until such time as market conditions
are more favourable. In addition, the 2020 Short Term Incentive
Compensation scheme and the 2020 – 2022 Long Term Incentive
scheme were withdrawn.
Funds From Operations (FFO)
Funds from Operations (FFO) represents GPT’s underlying
earnings from its operations. This is determined by adjusting
statutory net profit after tax under Australian Accounting
Standards for certain items which are non-cash, unrealised
or capital in nature. FFO includes impairment losses related
to uncollected trade receivables.
GPT delivered FFO of $554.7 million for the year ended 31
December 2020, a decrease of 9.6 per cent on the prior
comparable period. With the additional securities issued in 2019 as
part of the equity raising, FFO per security decreased 12.9 per cent
to 28.48 cents.
GPT’s statutory net loss after tax was $213.1 million, a decrease
of 124.2 per cent on the prior comparable period, predominantly
due to negative property valuation movements of $712.5 million
(2019: positive revaluation of $342.2 million).
The Group’s 12 month Total Return was negative 2.4 per cent
(2019: positive 8.7 per cent) as a result of a reduction in NTA
per stapled security of 23 cents to $5.57 1 for the year ended
31 December 2020.
The Group's processed and accrued rent waivers and an estimate
of loss for uncollected rent up to 31 December (COVID-19
allowances) was $95.3 million and has been expensed in FFO.
Included in the result is government assistance from JobKeeper of
$8.8 million to September 2020 and land tax relief of $0.7 million.
1. Includes all right-of-use assets of GPT Group.
28
The GPT Group | Annual Report 2020
PERFORMANCE
AND PROSPECTS
Funds From Operations ($M)
FFO Reconciliation
For the year ended
574.6
613.7
554.7
Retail
31 Dec 20
$M
31 Dec 19
$M
Change
%
2018
2019
2020
- Operations net income
- Development net income
Office
- Operations net income
- Development net income
Logistics
- Operations net income
- Development net income
FFO per ordinary stapled security (cents)
31.84
32.68
Funds management net income
Corporate management
expenses
28.48
Net finance costs
2018
2019
2020
Distribution per ordinary stapled security (cents)
13.11
13.37
13.2
9.3
1H 19
2H 19
1H 20
2H 20
Income tax expense
Funds from Operations (FFO)
Non-FFO items:
Valuation (decrease)/increase
Financial instruments mark
to market and net foreign
exchange movements
Other items
Net (loss)/profit for the year
after tax
FFO per ordinary stapled
security (cents)
Funds from Operations (FFO) 1
Maintenance capex
Lease incentives
Adjusted Funds from
Operations (AFFO) 1
Distributions 2
Distribution per ordinary stapled
security (cents) 2
220.8
4.9
225.7
280.2
1.7
281.9
139.3
0.1
139.4
47.2
(26.1)
321.6
4.4
326.0
(30.8%)
275.3
1.0
276.3
120.9
0.1
121.0
46.3
2.0%
15.2%
1.9%
(35.3)
(26.1%)
(102.7)
(108.0)
(10.7)
554.7
(12.6)
613.7
(4.9%)
(15.1%)
(9.6%)
(712.5)
(52.2)
342.2
(308.2%)
(82.7)
(36.9%)
(3.1)
6.8
(145.6%)
(213.1)
880.0
(124.2%)
28.48
32.68
(12.9%)
554.7
(32.0)
(59.0)
463.7
438.3
22.50
613.7
(9.6%)
(55.2)
(42.0%)
(61.0)
497.5
514.3
26.48
(3.3%)
(6.8%)
(14.8%)
(15.0%)
1. FFO and AFFO have been determined in accordance with the guidelines issued by the Property Council of Australia.
2. A provision for the final distribution of 13.2 cents per security has not been recognised as at 31 December 2020 and the distribution declaration has been disclosed
as a subsequent event.
29
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Performance and Prospects
Group Performance (continued)
Total Return (%)
The unlevered Total Return at the investment portfolio level was negative 0.8 per cent for 2020 with each portfolios’ performance
detailed in the following chart.
Retail
(Inc GWSCF Interest)
Office
(Inc GWOF Interest)
Logistics
9.2
15.1
Total Portfolio
(Inc Equity Interests)
3.4
(13.6)
4.8
(1.6)
3.2
5.9
4.4
(5.2)
(0.8)
(10.2)
Income Return
Capital Return
Total Return
Financial Position
Balance sheet
» All investment properties were independently revalued as
at 31 December 1 by valuers with appropriate experience and
expertise. The independent valuations contained material
valuation uncertainty clauses given the impacts of COVID-19
and reduced levels of transactional evidence during the period.
The valuations can be relied upon at the date of valuation
however, a higher level of valuation uncertainty than normal
is assumed.
» The independent valuations contain judgements relating to
the impact of COVID-19, which generally include an estimate
of rent concessions that may be required to be provided to
tenants impacted by COVID-19 including requirements under
the Code of Conduct. In addition, the independent valuations
include a number of assumptions, estimates and judgements
on the future performance of each property including
market rents, growth rates, occupancy, capital expenditure
and investment metrics. Total portfolio assets decreased by
4.8 per cent in the year to 31 December 2020 due to negative
property valuation movements offset by net investment in
acquisitions and developments.
» The Group’s 12 month Total Return was negative 2.4 per cent
(2019: positive 8.7 per cent) as a result of a reduction in NTA
per stapled security of 23 cents to $5.57 for the twelve months
to 31 December. The negative levered Total Return is due to
negative property valuation movements and derivative mark
to market losses.
» Total borrowings increased due to $225.2 million of net
cash drawn to fund acquisitions and development capital
expenditure offset by $35.3 million of non-cash movements
including fair value adjustments to the carrying value of
foreign currency borrowings.
Net Assets
31 Dec 20
$M
Net Assets
31 Dec 19
$M
Change
%
Portfolio assets
Retail
Office
Logistics
5,651.4
5,623.7
3,010.8
Total portfolio assets
14,285.9
15,002.3
1,072.7
865.5
6,429.4
(12.1%)
6,102.7
2,470.2
(7.8%)
21.9%
(4.8%)
23.9%
Financing and
corporate assets
Total assets
Borrowings
Other liabilities
Total liabilities
Net assets
Total number of
ordinary stapled
securities (million)
15,358.6
15,867.8
(3.2%)
4,087.4
382.0
4,469.4
10,889.2
1,947.9
3,897.5
4.9%
643.7
(40.7%)
4,541.2
11,326.6
1,947.9
(1.6%)
(3.9%)
—
NTA ($ per security) 2
5.57
5.80
(4.0%)
1. Excludes assets held for sale and acquired during the second half of the year.
2. Includes all right-of-use assets of GPT Group. 2020 does not include a provision for the distribution of 13.2 cents per security declared on 15 February 2021.
30
The GPT Group | Annual Report 2020
PERFORMANCE
AND PROSPECTS
Capital management
GPT continues to maintain a strong focus on capital management.
Key matters for the year include:
» Net gearing 1 increased to 23.2 per cent (31 December 2019:
22.1 per cent). This was a result of development capital
expenditure and acquisitions net of asset sales, along with a
decrease in asset valuations during the period.
» In February 2020, the Group issued A$300 million domestic
medium term notes for a 12 year term at a margin of 160 basis
points over 3 month BBSW. In the second half of the year, the
Group further issued various HKD private placements totalling
A$191.7 million for an average term of approximately 11 years at
an average margin of 173 basis points over 3 month BBSW.
» Weighted average cost of debt for the year was 3.1 per cent,
down from 3.6 per cent in the year ended 31 December 2019.
» In conjunction with the sale of Farrer Place, the Group
terminated hedges totalling $36.2 million to maintain hedging
at desired levels.
» Mark to market movements on derivatives and borrowings has
reduced net tangible assets by $76.3 million as a result of lower
interest rates.
31 Dec 20
31 Dec 19
Change
Cost of debt
3.1%
3.6%
Down by
50bps
Net gearing
23.2%
22.1% Up by 110bps
Weighted average
debt maturity
7.8 years
7.7 years
Up 0.1 years
Interest rate hedging
88%
82%
Up 6%
S&P/Moody’s credit
rating
A stable/
A2 stable
A stable/
A2 stable
Sources of funds (%)
Domestic bank debt 2
CPI Bonds 2
Secured bank debt 3
USPP 41
Commercial Paper 14
Domestic MTNs 26
Foreign MTNs 12
As at 31 December 2020
Going concern
Due to the uncertainty created by COVID-19, GPT has performed
additional procedures in relation to assessing going concern.
GPT is of the opinion that it is able to meet its liabilities and
commitments as and when they fall due for at least a period
of 12 months from the reporting date. In reaching this position,
GPT has taken into account the following factors:
» Available liquidity, through cash and undrawn facilities, of
$1,790.1 million (after allowing for refinancing of $514.0 million
of outstanding commercial paper as at 31 December 2020);
» Weighted average debt expiry of 7.8 years, with $5.0 million of
debt (excluding commercial paper outstanding) due between
the date of this report and 31 December 2021;
» Interest rate hedging level of 75 per cent over the next
12 months;
» Primary covenant gearing of 25.1 per cent, compared to a
covenant level of 50.0 per cent;
» Interest cover ratio at 31 December 2020 of 6.4 times, compared
to a covenant level of 2.0 times; and
» Sensitivity analysis has been conducted which indicate that
GPT will continue to comply with its covenants, including
adequate levels of headroom for both the gearing and interest
cover ratios, and that GPT will have adequate cash flows
to remain solvent.
Cash flows
The cash balance as at December 2020 increased to $372.5 million
(2019: $104.2 million). The following table shows the reconciliation
from FFO to the cash flow from operating activities and free
cash flow:
FFO
Less: non-cash items
included in FFO
(Less)/add: net
movement in inventory
Movements in working
capital and reserves
Net cash inflows from
operating activities
Add/(less): net
movement in inventory
Less: maintenance
capex and lease
incentives (excluding
rent free)
Free cash flow
31 Dec 20
$M
31 Dec 19
$M
Change
%
554.7
(44.1)
(9.0)
(11.4)
613.7
(31.2)
(9.6%)
41.3%
31.8
(128.3%)
0.3
Lge
490.2
614.6
(20.2%)
9.0
(31.8)
(128.3%)
(60.9)
(84.7)
(28.1%)
438.3
498.1
(12.0%)
The reduction in free cash flow is largely driven by the impact
of COVID-19 on operating cash flows.
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 16 of the accompanying
financial statements.
Unchanged
For the year ended
1 Calculated net of cash and the cross currency derivative positions hedging the foreign bonds, lease liabilities in relation to investment properties and excludes
the right-of-use assets in relation to leases.
31
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Performance and Prospects
Performance
Operations net income
All assets in the Office portfolio were independently valued as at
31 December with valuations reducing by $73.8 million during the year
(-1.2 per cent), including GPT’s equity interest in the GPT Wholesale
Office Fund (GWOF). This revaluation loss was primarily due to revised
leasing assumptions and lower rental growth rates given increases
in vacancy levels across the key markets.
In the second half, the Group’s 25 per cent interest in Farrer Place,
Sydney was divested for $584.6 million, delivering a total return of
12 per cent average per annum over the past five years.
Office occupancy at December 2020 moderated to 94.9 per cent as
a result of lease expiries in the year and the portfolio has a WALE of
5.1 years.
Operations net income growth for the year ended 31 December 2020
was 1.8 per cent, as a result of annual fixed increases and portfolio
composition changes, partially offset by lower occupancy and
COVID-19 related allowances in the period. During the period, most
office tenants implemented work from home arrangements however
net rent collection for the twelve month period to 31 December
remained robust at 98 per cent.
Lift traffic across a sample of assets showed increasing rates of
customer attendance to the office through the second half from
lows in April 2020. Attendance remains highest in Brisbane followed
by Sydney, while Melbourne attendance remained subdued with
restrictions still being eased in 2021. To facilitate return to work plans,
GPT has worked closely with customers and has successfully piloted a
number of “healthy building” initiatives at 580 George Street, Sydney
with a wider portfolio roll-out currently underway. This includes the
delivery of improved air quality through upgrade of air filtration and
the installation of ultraviolet air treatment units in air conditioning
handling plant. Touch-free lift and building access controls have been
implemented via a mobile app.
Management has engaged with qualifying tenants to provide rent
relief and has reduced net income by $11.5 million for processed and
expected rent waivers and an estimate of loss for uncollected rent.
Across 690 tenants in the managed portfolio, at the end of the period
241 rent relief arrangements had been agreed, of which 147 relate to
retail tenants.
Development net income
Development net income increased to $1.7 million as a result of higher
fees from increased development activity in the portfolio.
The development of the 6 Green Star – Design rated office building,
32 Smith in Parramatta, reached practical completion in January 2021.
An increase in floor area has been achieved through the creation of
an additional mezzanine level. The office development now consists
of 27,200sqm of high quality accommodation and is 70 per cent
leased including terms agreed, with QBE leasing 50 per cent for a
10 year term.
Lobby upgrades at Melbourne Central Tower, 550 Bourke Street,
530 Collins Street and 8 Exhibition Street were undertaken in 2020,
and the refurbishment of Queen & Collins is expected to reach
completion in the first half of 2021.
Office
$5.6 b
Office portfolio value 1
(2019: $6.1 billion)
94.9%
Office portfolio occupancy 2
(2019: 98.3%)
5.1 years
Office portfolio Weighted Average Lease
Expiry (2019: 5.3 years)
83%
Office income subject to average
increases of 3.8% (2019: 85% subject
to average increases of 3.9%)
4.89%
Office portfolio Weighted Average
Capitalisation Rate (2019: 4.85%)
3.2%
Office Total Return
(2019: 10.0%)
$3.5b+
Expected end value of
Office development pipeline 3
1. Includes GPT’s interest in the
GPT Wholesale Office Fund.
2. Excludes assets under or held
for development.
3. Includes GPT direct and
Fund opportunities.
32
The GPT Group | Annual Report 2020
PERFORMANCE
AND PROSPECTS
Logistics
Performance
Operations net income
All assets in the Logistics portfolio were independently valued as
at 31 December 1 resulting in a net revaluation uplift of $227.8 million
(9.3 per cent). This uplift is attributed to strong investor demand
for high quality logistics assets, which led to a firming of
investment metrics, combined with positive leasing outcomes.
Operations net income increased 15.2 per cent on the prior year,
as a result of development completions, acquisitions and higher
occupancy, partially offset by COVID-19 related allowances.
Comparable income growth for the portfolio was 3.1 per cent.
Logistics occupancy remains high at 99.8 per cent and the
portfolio has a weighted average lease expiry of 6.7 years.
The Group continued to grow the Logistics portfolio in 2020,
with four development completions adding 90,000sqm along with
three investment acquisitions contributing a further 75,100sqm.
All developments and acquisitions are fully leased. In the second
half, the acquisition of Foundation Estate in Truganina was
concluded, following the acquisition of 1 Botero Place, Truganina
and 21-23 Wirraway Drive, Port Melbourne earlier in the year.
The divestment of 16-28 Quarry Road, Yatala was successfully
completed in December 2020, resulting in net proceeds of
$58.2 million to be redeployed into the development pipeline.
The portfolio now totals $3.0 billion, growing by 22 per cent
in 2020.
During the period the Group established the GPT QuadReal
Logistics Trust with Canadian based QuadReal. This $800 million
partnership will focus on Logistics investment and development
opportunities, with GPT to provide investment, property and
development management services.
1. Excludes assets held for sale and acquired during the second half of the year.
Net rent collection for the Logistics portfolio was 100 per cent for
the twelve months to 31 December. Management has engaged
with qualifying tenants to provide rent relief and has reduced net
income by $0.3 million for processed rent waivers and an estimate
of loss for uncollected rent within the logistics portfolio.
Development net income
During 2020 the Group delivered four projects in Sydney
and Brisbane. In September 2020, the 50,200sqm facility at
128 Andrews Road, Penrith reached practical completion, and
is leased to Visy for a 10 year term. This adds to three projects
completed in the first half in Berrinba and Yennora, with facilities
fully leased to tenants including DHL and JB Hi-Fi.
The Group continues to build out the development pipeline,
with a 17,100sqm facility at 42 Cox Place, Glendenning reaching
practical completion in February 2021. In Brisbane, a 16,300sqm
speculative facility is underway at the Group’s Berrinba estate
and in Melbourne two facilities are expected to be completed
at the Gateway Logistics Hub in Truganina, with one facility
subject to the finalisation of an Agreement for Lease with the
pre-commitment tenant (Heads of Agreement in place).
Two further land parcels have been secured, with a 1.8 hectare site
adjacent to the newly acquired Foundation Estate in Truganina,
and a 3.5 hectare parcel in Wacol, Brisbane to be settled in 2021 as
part of the QuadReal joint venture partnership, where a 17,100sqm
facility is expected to be completed in the second half of 2021.
The development pipeline, inclusive of land holdings and projects
underway, is expected to have an end value on completion of
approximately $1 billion.
$3.0b
Logistics portfolio value
(2019: $2.4 billion)
99.8%
Logistics portfolio occupancy
(2019: 94.4%)
6.7years
Logistics portfolio Weighted Average
Lease Expiry (2019: 7.3 years)
93%
Logistics income subject to average
rent increases of 3.2% (2019: 93% subject
to average increases of 3.1%)
4.84%
Logistics portfolio Weighted Average
Capitalisation Rate (2019: 5.40%)
15.1%
Logistics Total Return
(2019: 12.1%)
$1b
Estimated end value of
Logistics development pipeline
33
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Retail
$5.5b
Retail portfolio value 1
(2019: $6.3 billion)
98.0%
Retail portfolio occupancy (2019: 99.6%)
3.6 years
Retail portfolio Weighted Average
Lease Expiry (2019: 3.9 years)
70%
Specialty income subject to average rent
increases of 4.6% (2019: 75% subject to
average increases of 4.7%)
5.06%
Retail portfolio Weighted Average
Capitalisation Rate (2019: 4.89%)
-10.2%
Retail Total Return (2019: 4.4%)
Performance and Prospects
Performance
Operations net income
All assets in the Retail portfolio were independently valued as at
31 December resulting in a negative revaluation of $866.5 million
(-13.7 per cent) for the full 12 months to December 2020, including
GPT’s equity interest in the GPT Wholesale Shopping Centre Fund
(GWSCF). The majority of this negative revaluation was accounted
for in the first half to June, with valuations in the second half
declining $204.5 million or 3.6 per cent. The largest impact was due
to the revaluation of Melbourne Central, given the asset has been
impacted by the COVID-19 restrictions and the delayed reopening
of the Melbourne CBD. The revaluation loss reflects the independent
valuers adjustment of net income forecasts to allow for a period of
stabilisation as the trading performance of the portfolio recovers
post the impact of the COVID-19 restrictions, in addition to lower
market rents and forecast growth rates.
Operations net income was down 31.3 per cent, primarily due to a
reduction of 28.0 per cent in net property revenue. Management has
engaged with qualifying tenants to provide rent relief and net income
has reduced by $83.5 million for processed and expected rent waivers
and an estimate of loss for uncollected rent. Across 3,191 tenants in
the portfolio, at the end of the period 2,426 rent relief arrangements
had been concluded.2 Given the changed trading environment,
proactive measures were taken to reduce property expenses,
resulting in savings of 12.5 per cent over the prior comparable period.
Portfolio occupancy as at 31 December 2020 was 98.0 per cent in
line with 30 June 2020 (31 December 2019: 99.6 per cent). Net rent
collection for the twelve month period to 31 December was
88 per cent.
The table below provides an overview of the key portfolio statistics
for the period of January to December 2020:
Portfolio
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Centre Sales Growth 3
-5.2% -39.6% -32.7% -13.2%
Centre Sales Growth 3
(excluding Victoria)
Monthly Traffic 3 as % of Prior
Year (excluding Melbourne
Central)
-3.2% -29.4%
-4.3%
0.8%
96%
65%
77%
91%
% of Stores Opened
84%
67%
63%
94%
Development net income
Development net income was $4.9 million, being a favourable variance
of $0.5 million to prior year due to the recognition of profits from the
sale of the Rouse Hill Central Precinct super lot during the period.
34
1. Includes GPT’s equity interest in the GPT Wholesale Shopping Centre Fund.
2. Includes tenants where no relief is required.
3. Excludes Sunshine Plaza (development impacted centre). Metrics compare the
quarter to the same quarter in the prior year.
The GPT Group | Annual Report 2020
PERFORMANCE
AND PROSPECTS
Funds Management
Performance
GPT Wholesale Office Fund (GWOF)
The fund delivered a one year equity IRR of 2.0 per cent.
GWOF’s total assets increased to $9.0 billion, up $0.2 billion
from 31 December 2019. The management fee income earned
from GWOF for the year ended 31 December 2020 increased by
$2.0 million as compared to 31 December 2019 due to the increase
in the asset value of the portfolio.
In May 2020, GWOF closed its successful $289 million equity
raising with a total of $339 million of equity raised in the year
inclusive of the Distribution Reinvestment Plan (DRP). As a result
of GPT not participating in GWOF’s equity raising or DRP, GPT’s
ownership reduced to 21.87 per cent (Dec 2019: 22.93 per cent).
Investor participation in GWOF’s DRP has reduced from 41.9 per
cent at December 2019 to 6.6 per cent at December 2020.
Due to the uncertainty created by COVID-19, in the first half
GWOF secured additional loan facilities of $230 million, extended
bank loan maturity dates and reduced or deferred spending
on non-essential capital expenditure. GWOF complied with all
financial covenants during the period.
As at 31 December 2020, GWOF’s net gearing was 16.3 per cent, in
the lower half of GWOF’s target gearing range of 10 to 30 per cent.
GWOF has $759.1 million of available liquidity held in cash and
undrawn bank facilities, with no debt maturing until May 2022.
GWOF maintains an A- (stable) credit rating from S&P.
GPT Wholesale Shopping Centre Fund (GWSCF)
The fund delivered a one year equity IRR of negative
20.0 per cent. GWSCF’s total assets decreased to $3.9 billion,
down $0.6 billion from 31 December 2019, primarily driven by
asset devaluations and reduced income, both of which have been
impacted by COVID-19. The management fee income earned
from GWSCF for the year ended 31 December 2020 decreased
$2.8 million as compared to 31 December 2019 due to the
decrease in the asset value of the portfolio.
GPT’s ownership in GWSCF is 28.48 per cent (Dec 2019:
28.49 per cent).
Due to the uncertainty created by COVID-19 on GWSCF income,
in the first half the fund secured covenant waivers from its lenders
for the period up to and including 31 December 2020. Had these
waivers not been in place, GWSCF would still have complied
with all financial covenants. GWSCF undertook further capital
management initiatives including reduced or deferred spending
on non-essential capital expenditure and reduced the distributions
to $0.7 million for the year.
As at 31 December 2020, GWSCF’s net gearing was 27.9 per cent
and remains within the target gearing range of 10 to 30 per cent.
GWSCF has $256.3 million of available liquidity held in cash and
undrawn bank facilities, with no debt maturing until July 2023.
GWSCF’s credit rating with S&P is BBB+ (negative).
As at and for the year ended
31 December 2020
GWOF
GWSCF
Total
Assets under management
$9.0b
$3.9b
$12.9b
Number of assets
GPT Interest
GPT Investment
19
7
26
21.87%
28.48%
$1,579.6m $759.3m $2,338.9m
One year equity IRR (post-fees)
2.0%
(20.0%)
Income from Funds
$70.5m
$28.3m
$98.8m
Funds Management fee income
$42.3m
$18.8m
$61.1m
$12.9b
Assets under management
(2019: $13.3 billion)
26
Total assets (2019: 25)
$98.8m
Total income from funds
(2019: $117.7 million)
$61.1m
GPT Funds Management fee
income (2019: $61.9 million)
35
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Performance and Prospects
Prospects
Group
The global COVID-19 pandemic is
unprecedented and has been a major
disruption for the Australian economy.
This disruption has accelerated trends
including on-line retailing and working
from home arrangements.
Australian governments, businesses and
the community acted swiftly to control
community transmission of COVID-19 and
while restrictions remain in place, most
parts of the economy have re-opened
and we are optimistic we will see an
ongoing economic recovery through the
course of 2021. The recovery is unlikely
to be even and some sectors will take
longer than others to get back to pre-
pandemic activity levels. Australia’s CBD’s
are a prime example of this, with office
utilisation continuing to be relatively low
as government restrictions remain in place
and the health of employees is prioritised
by businesses. The near term outlook for
the Group is influenced by a number of
factors, and Management considers that it
has applied its best judgement in outlining
the Group’s prospects in the current
market conditions.
The Group remains well placed despite the
ongoing uncertainty with a strong balance
sheet, a diversified portfolio of high quality
assets and a proactive management team.
Rent collection improved significantly
in the fourth quarter of 2020 resulting in
94 per cent of net rent being collected
for the full year and we expect that with
an improving economic outlook this trend
should continue.
As at 31 December 2020, the Group’s net
gearing was 23.2 per cent, with cash and
undrawn bank facilities totalling $1.8 billion.
GPT has also retained its credit ratings of
A (stable )/A2 (stable) by S&P and Moody’s
respectively.
36
Office
The requirement to work from home during
the pandemic has accelerated the use of
business technology for communication
and virtual meetings. Employee surveys
suggest that there has also been benefits
to work-life balance and more effective
use of time otherwise spent commuting.
It is likely that we will see broader adoption
of hybrid work practices, with a higher
proportion of employees choosing to work
from home for part of their working week
in the future.
Retail
Over the past 12 months, the Retail
portfolio has been impacted by the various
government measures implemented to
slow the spread of COVID-19, particularly
in our Victorian assets. Encouragingly
we have evidenced customers quickly
returning to more familiar shopping
behaviours once measures have eased.
Excluding our Melbourne Central asset,
customer visitation across the portfolio
in December 2020 was at 95 per cent of
2019 levels.
While Melbourne Central’s performance
has been significantly impacted by
pandemic related restrictions over the
past 12 months, it remains one of Australia’s
leading retail assets and was the most
productive shopping centre in Australia
prior to the onset of COVID-19. We expect
that asset performance will recover,
however this may take longer than the
broader retail portfolio given the centre’s
CBD location and reliance on office worker,
student and tourist related foot traffic.
Economic indicators such as consumer
confidence and household savings rates
are at their highest levels for many years
and a more buoyant housing market
should provide support for retail sales
growth in 2021. Offsetting this, we are
expecting a challenging retail leasing
environment as retailers continue to
recover from the impacts of COVID-19
and adapt their business models to
respond to customer trends.
However, we expect the continued need
for businesses to have work environments
that enable collaboration and innovation,
assist with shaping organisational culture
and to help facilitate experiential training
and development.
During 2020, vacancy rates in eastern
seaboard markets have increased, as
a result of new supply and subdued
demand. Vacancy rates are likely to stay
elevated during 2021 leading to increased
incentives and softening of effective rents.
We do however expect that there will
be businesses that take the opportunity
to upgrade their space and seek out
accommodation in better quality office
buildings. The Group’s Office portfolio
of high quality, prime grade assets has
a weighted average lease expiry of
approximately five years and is expected
to remain resilient given the quality of our
assets, our customer relationships, and
the diversification of our tenant base.
Logistics
Our Logistics assets continued to deliver
strong results for the Group through
the period. Increasing penetration of
e-commerce and growing investment
in supply chain infrastructure is expected
to underpin continued demand for prime
logistics space. Vacancy rates remain low
in the core eastern seaboard markets.
Since 2017, the value of the Logistics
portfolio has doubled to $3.0 billion.
We have a high quality portfolio, with
approximately 45 per cent developed by
GPT, demonstrating our focus on product
creation. The Group has a Logistics
development pipeline with an estimated
end value of approximately $1 billion which
positions the Group to continue its growth
in this sector.
The GPT Group | Annual Report 2020
PERFORMANCE
AND PROSPECTS
Funds Management
Our Funds Management platform has
maintained significant scale over the
period, with $12.9 billion in assets under
management. GWOF closed its successful
$289 million equity raising in May 2020,
with a total of $339 million raised during
the year inclusive of DRP. Five new
investors were introduced to GPT’s funds
platform in 2020.
To further accelerate the Group’s growth
in the logistics sector, GPT has established
a capital partnership with Canadian based
QuadReal to invest in prime logistics
property in Australia. GPT will provide
development and management services
to the partnership, with a target of
deploying $800 million of capital on a 50:50
basis over the next two to three years,
through a combination of acquisitions
and developments.
Capital partnering is an important means
by which to fulfil our dual strategic
priorities of growing the Logistics portfolio
and expanding our Funds Management
platform, while leveraging the Group’s
extensive real estate capabilities.
Guidance
GPT remains well positioned, with a strong
balance sheet, a high quality portfolio,
an experienced management team and
a strategy to create long term value for
securityholders.
We are optimistic about the outlook for
2021, although we recognise that there is
still likely to be a high level of uncertainty
in our operating environment for a period.
The lifting of COVID-19 restrictions and
with the planned rollout of vaccines gaining
momentum, we expect potential risk of
disruption to operations to reduce over
the course of 2021 and particularly in the
second half.
Due to the uncertain operating conditions,
we are not providing earnings and
distribution guidance for 2021 at this
time. We will continue to monitor trading
conditions, and currently expect to provide
2021 earnings and distribution guidance
with the release of our March 2021 Quarter
Operational Update.
Artist's impression
GENERATING VALUE FOR FUND
INVESTORS THROUGH THE REDEVELOPMENT
OF QUEEN & COLLINS
The GPT Wholesale Office Fund (GWOF) continues
to convert its development pipeline into premium
office buildings that deliver distinctive tenant experiences
and excellent sustainability outcomes.
Located in Melbourne’s city centre, the Fund’s
Queen & Collins redevelopment is transforming the 34-level
landmark tower and adjacent heritage buildings into a
boutique office precinct that blends its heritage gothic
character with contemporary design.
Central to the new precinct is the substantial enhancement
of building entrances, lobbies and street-level connection,
complemented by 1,100 square metres of high quality
ground level retail.
A ceremonial fire dish will become a prominent gathering
place within the building’s southern square and will be
used for traditional smoking ceremonies. The sculpture was
developed in consultation with the Traditional Custodians
of Melbourne and First Nations architect Jefa Greenaway.
Its design reflects the local topography and nearby First
Nations places of significance acknowledging the First
Nations heritage and continued connection to country.
Sustainability is also front of mind, with Queen & Collins
targeting carbon neutral certification as well as 5 Star Green
Star and NABERS 4.5 Star Energy and 4 Star Water ratings.
Tenants will benefit from premium health and wellness
facilities including substantial bicycle parking.
Construction commenced in December 2019 and
continued throughout 2020 in accordance with government
restrictions, with completion expected in the first half
of 2021.
Combined with its central location in the western end
of Melbourne’s CBD, the revitalisation of Queen & Collins
is appealing to organisations seeking distinctive office
space and is approximately 20 per cent leased including
Heads of Agreement.
When completed, Queen & Collins will have a net lettable
area of approximately 35,000 square metres.
37
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Risk Management
Risk Management
GPT's approach to risk
management incorporates
culture, people, processes and
systems to enable the Group to
realise potential opportunities
while managing potential
adverse effects.
Our commitment to integrated risk
management ensures an enterprise-wide
approach to the identification, assessment
and management of risk, consistent with
AS/NZS ISO 31000:2018.
GPT's Risk Management Framework is
overseen by the Board and consists of
the following key elements:
1. Risk Policy – The Risk Policy sets
out the Group’s approach to risk
management, which is reviewed annually
by the Sustainability and Risk Committee
(a Board sub-committee). The Risk
Policy is available on GPT's website.
Risk Management Framework
n
o
i
t
a
t
l
u
s
n
o
C
d
n
a
n
o
i
t
a
c
i
n
u
m
m
o
C
Risk Policy
Risk Appetite
Risk Governance
Risk Culture
Risk Management Processes and Systems
Identification | Assessment | Treatment | Assurance and Reporting
M
o
n
i
t
o
r
i
n
g
a
n
d
R
e
v
i
e
w
2. Risk Appetite – The Board sets GPT’s
risk appetite to align with our vision,
purpose and strategy. This is articulated
in the Group’s Risk Appetite Statement,
against which all key investment
decisions are measured.
4. Risk Culture – GPT maintains a
transparent and accountable culture
where risk is actively considered and
managed in our day-to-day activities.
Risk culture is assessed as part of all
internal audits.
3. Risk Governance – The Board is supported
in its oversight of the Risk Management
Framework by the Sustainability and
Risk Committee, which reviews the
effectiveness of the Framework, and by the
Audit Committee, the Leadership Team and
the Investment Committee.
5. Risk Management Processes and
Systems – GPT has robust processes
and systems in place for the
identification, assessment, treatment,
assurance and reporting of risk.
Adapting to COVID-19
The COVID-19 pandemic heightened a number of existing risks for GPT during 2020. We responded proactively at both the
governance and operational levels. In all aspects of our approach we have prioritised health and safety, followed government
guidance and directives, and been flexible as the situation continues to evolve.
The focus of our risk management response has been in the areas set out below.
Health and Safety
The health and safety of our people, customers, contractors and other users of our assets has been our priority throughout the
pandemic. We have consulted widely in our industry and beyond, and implemented best practice safety initiatives across our
portfolio. These include cleaning, hygiene and social distancing measures, COVID-19 awareness training, and wellbeing support
for our people.
MORE ON PAGE 8.
Governance
During 2020, GPT reviewed its Risk Management Framework to ensure it remained effective in the COVID-19 operating
environment, where a large number of GPT employees were working remotely and certain operations were required to be
performed differently. No change was made to the structure of the framework, however changes have been made to the way
it was implemented in order to ensure appropriate risk management during this time. These changes include enhancement of
the risk governance structure to include a COVID-19 Response Team and a COVID-19 Working Group, increased frequency of
key risk reviews by the Leadership Team, and a review of the 2020 Audit Plan to align with revised key risks. GPT’s Risk Appetite
was also reviewed by the Leadership Team and the Board to consider the impact of COVID-19.
MORE ON PAGE 8.
38
38
The GPT Group | Annual Report 2020
RISK
MANAGEMENT
Key risks
The following table sets out GPT’s material risks and our actions in response to them. Included in the table is an indication of the change
in the level of each risk during the year.
Risks
Our Response
Change in
Risk for 2020
Value Creation
Inputs Affected
Portfolio Operating and
Financial Performance
Our portfolio operating
and financial performance
is influenced by internal
and external factors
including our investment
decisions, market
conditions, interest rates,
economic factors and
potential disruption.
» A portfolio diversified by sector and geography
» Structured review of market conditions twice a year,
including briefings from economists
» Scenario modelling and stress testing of assumptions
to inform decisions
» A disciplined investment and divestment approval
process, including extensive due diligence requirements
» A development pipeline to enhance asset returns and
maintain asset quality
» Active management of our assets, including leasing, to
ensure a large and diversified tenant base with limited
single tenant exposure
» Experienced and capable management, supplemented
with external capabilities where appropriate
» A structured program of investor engagement
Development
» A disciplined acquisition and development approval
Development provides
the Group with access to
new, high quality assets.
Delivering assets that
exceed our risk adjusted
return requirements and
meet our sustainability
objectives is critical to
our success.
process, including extensive due diligence requirements
» Oversight of developments through regular
cross-functional Project Control Group meetings
» Scenario modelling and stress testing of assumptions
to inform decisions
» Experienced management capability
» Limits on the proportion of the portfolio under
development at any time
» Limits on individual contractor exposure
» Appropriate minimum leasing pre-commitments to be
achieved prior to construction commencement
Financial pressure
on retail and
office tenants and
ongoing disruption
throughout 2020 as
a result of COVID-19
has increased risk
to GPT’s financial
performance.
GPT’s development
pipeline remains
strong despite the
deferral of some
retail and office
projects in 2020
due to the impacts
of COVID-19.
Development
activity in the
Logistics portfolio
increased during the
year.
Our investors
Real estate
Our people
Environment
Our customers,
suppliers and
communities
Our investors
Real estate
Our people
Environment
Our customers,
suppliers and
communities
Capital Management
» Target gearing range of 25 to 35 per cent
Our investors
Effective capital
management is
imperative to meet
the Group’s ongoing
funding requirements
and to withstand market
volatility.
consistent with stable investment grade credit ratings
in the “A” range
» Maintenance of a minimum liquidity buffer in cash and
surplus committed credit facilities
» Diversified funding sources
» Maintenance of a long weighted average debt term,
with limits on the maximum amount of debt expiring in
any 12 month period
» Hedging of interest rates to keep exposure within
prescribed limits
» Limits on currency exposure
» Limits on exposure to counterparties
KEY
Risk increased
No change in risk
Risk decreased
Prudent gearing and
significant liquidity
were maintained
throughout 2020.
39
BUSINESS OVERVIEWHOW WE CREATE VALUEPERFORMANCE AND PROSPECTSDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Risk Management
Change in
Risk for 2020
Value Creation
Inputs Affected
Key risks (continued)
Risks
Our Response
Health and Safety
» A culture of safety first and integration of safety risk
GPT is committed to
promoting and protecting
the health, safety and
wellbeing of its people,
customers, contractors
and all users of our
assets.
management across the business
» Comprehensive health and safety management systems
» Training and education of employees and induction of
contractors
» Engagement of specialist safety consultants to assist in
identifying risks and appropriate mitigation actions
» Prompt and thorough investigation of all safety
incidents to ascertain root causes and prevent future
occurrences
» Participation in knowledge sharing within the industry
» Comprehensive Crisis Management and Business
Continuity Plans, tested annually
COVID-19 presents
a risk to the health,
safety and wellbeing
of our employees,
customers,
contractors and
users of our assets.
People and Culture
» Active adoption and promotion of GPT’s values
Real estate
Our people
Our customers,
suppliers and
communities
Our investors
Our people
Our ongoing success
depends on our ability
to attract, engage and
retain a motivated
and high-performing
workforce to deliver our
strategic objectives and
an inclusive culture that
supports GPT's core
values.
Environmental and Social
Sustainability
Delivering sustainable
outcomes for investors,
customers, communities
and the environment,
today and for future
generations, is essential.
GPT understands and
recognises that changes
to the environment can
affect our assets and
business operations.
» A comprehensive employee Code of Conduct, including
consequences for non-compliance
» Employee Engagement Surveys every 18 to 24 months
with action plans to address results
» An annual performance management process, setting
objectives and accountability
COVID-19 has
disrupted the way
GPT employees
work potentially
leading to longer
term change.
» Promotion of an inclusive workplace culture where
differences are valued, supported by policies and
training
» Monitoring of both risk culture and conduct risk
» An incentive system with capacity for discretionary
adjustments and clawback policy
» Benchmarking and setting competitive remuneration
» Development and succession planning
» Workforce planning
» A portfolio of climate resilient assets that we own,
develop and maintain through asset-level investment,
divestment and capital expenditure strategies.
» A world-class Environment and Sustainability
Management System, including policies and procedures
for managing environmental and social sustainability risks
» Participation in the Dow Jones Sustainability Index,
Global Real Estate Sustainability Benchmark and other
industry benchmarks
» Climate related risks and potential financial impacts
are assessed within GPT’s enterprise-wide Risk
Management Framework
» Climate change reporting in line with the
recommendations of the Task Force on Climate-related
Financial Disclosures
» Active community engagement via The GPT Foundation,
GPT’s Reconciliation Action Plan and other targeted
programs
» A Modern Slavery Statement and program of work in
response to Modern Slavery legislation
COVID-19 has
disrupted our
supply chains which
may increase the
vulnerability of
workers in those
supply chains.
Our investors
Real estate
Our people
Environment
Our customers,
suppliers and
communities
Risk increased
No change in risk
Risk decreased
KEY
40
The GPT Group | Annual Report 2020
RISK
MANAGEMENT
Risks
Our Response
Change in
Risk for 2020
Value Creation
Inputs Affected
Technology and Cyber
Security
Our ability to prevent
critical outages, ensure
ongoing available system
access and respond to
major cyber security
threats and breaches
of our information
technology systems is
vital to ensure ongoing
business continuity and
the safety of people and
assets.
» A comprehensive technology risk management
framework including third party risk management
procedures around cyber security
» Information Management policy, guidelines and
standards
» Privacy policy, guidelines and procedures
» Compulsory cyber security awareness training twice a
year
» Annual security testing completed by a specialist
external security firm, including penetration testing,
phishing exercises and social engineering testing
» A comprehensive Cyber Security Incident Response
Plan
» A Disaster Recovery Plan including annual disaster
recovery testing
» Technology solutions in place to monitor GPT platforms
and provide alerts to anomalous behaviour
» Regular updates to technology hardware and software
incorporating recommended security patches
» External specialist security operations monitoring
» Annual cyber risk assessments
» An Information Security Risk and Compliance
Committee overseeing information security
» Alignment to the National Institute of Standards and
Technology (NIST) Cyber Security Framework
Compliance and
Regulation
» An experienced management team with Legal, Tax,
Finance, Compliance and Risk Management expertise
We ensure compliance
with all applicable
regulatory requirements
through our established
policies and frameworks.
» Engagement of external expert advisors as required
» An internal and external audit program overseen by the
Audit Committee of the Board
» Active management of the Group’s Compliance Plans, in
accordance with the requirements of the Corporations
Law
» Internal committees such as a Continuous Disclosure
Committee, a Data Privacy Committee and a Cyber
Security Governance Committee to monitor key
compliance risks
» An Anti-money Laundering and Counter-terrorism
Financing Policy, a Conflicts Management Policy, a
Whistleblower Policy, a Code of Conduct and other
internal policies and procedures which are reviewed and
enforced
» An ongoing program of training which addresses all key
compliance requirements
» Active involvement in the Property Council of Australia
and other industry bodies
KEY
Risk increased
No change in risk
Risk decreased
Real estate
Our people
Our customers,
suppliers and
communities
Increased and
sustained remote
working during
the pandemic has
increased the risk of
cyber-attacks.
Our investors
Real estate
Our people
Environment
Our customers,
suppliers and
communities
41
BUSINESS OVERVIEWHOW WE CREATE VALUEPERFORMANCE AND PROSPECTSDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Risk Management
Climate-related risks
GPT outlines the steps that we
are taking to identify, assess and
manage climate-related risks
and opportunities in the Group’s
Climate Disclosure Statement
(Statement). Summarised
below, the Statement has been
prepared with reference to the
recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD) and is available
on GPT’s website.
Climate change is a global challenge.
The science is clear: ongoing carbon
emissions are contributing to dangerous
levels of climate change, resulting in an
increase in the frequency and intensity of
climate-related events around the world.
Leadership and action to curb emissions
is essential. In many countries, including
Australia, market expectations and
government policy are shifting to address
this challenge.
As the owner and manager of a
$24.4 billion portfolio of office, logistics
and retail properties across Australia, GPT
recognises the importance of identifying,
managing, and transparently reporting on
climate change risks and opportunities
that could have a material impact on GPT’s
assets and on the communities in which
we operate.
During 2020, GPT completed a number
of key actions outlined in our inaugural
Climate Disclosure Statement and in doing
so, consolidated our position as a market
leader in this area. These actions included
the carbon neutral certification of GWOF's
operating buildings, setting carbon neutral
certification targets for the GPT and
GWSCF portfolios, and commencing a
program of asset-level hazard identification
and adaptation planning.
Governance
GPT’s approach to managing climate
change risk is overseen by the Board
and the Sustainability and Risk
Committee (SRC). Management report
to the SRC on sustainability matters such
as climate change risks and opportunities,
compliance with GPT's Environmental
Management System and the delivery
of environmental performance targets.
GPT’s Chief Executive Officer and
Managing Director (CEO) is accountable
for ensuring that the Group is identifying,
assessing and managing material risks,
including climate change and other
sustainability risks, in accordance with
GPT’s Risk Management Framework.
The Chief Risk Officer manages
the Sustainability Team, which is
responsible for formulating and ensuring
implementation of GPT’s sustainability
initiatives across the Group. The
Sustainability Team work closely with
business unit managers to achieve this.
Strategy
The proactive identification and
management of key risks and
opportunities, including those related to
climate change, supports the achievement
of the Group’s strategy.
Our business strategy of owning, managing
and developing a diversified, high quality
portfolio of property assets principally
located in the economically stable and
resilient cities of Melbourne, Sydney and
Brisbane positions us well to manage
stresses and shocks, including those from
climate change.
This strategy also supports a long-
term approach to investment in quality
initiatives that enable us to achieve our
sustainability goals, such as tools to inform
building design and operations, and climate
scenario modelling. This benefits our
tenants and our broader stakeholders, and
improves the resilience of our assets to the
impacts of physical climate risks.
GPT has adopted two global warming
scenarios to model the potential future
impacts of climate change on our business
and the resilience of our strategy.
These scenarios are aligned with the
Representative Concentration Pathways
2.6 and 8.5, which describe different
climate futures depending on the volume
of future greenhouse gas emissions.
These scenarios have been used to test
GPT’s business strategy and to develop
responses that address climate-related
risks and opportunities. Through a series
of internal workshops facilitated by an
external advisor, we determined the risks,
opportunities and strategy response by
considering potential transitional impacts
and potential physical impacts to GPT’s
assets or the regions they are located in.
A detailed summary of the scenarios
adopted by GPT and the potential
impacts identified by this analysis
can be found in the Group’s Climate
Disclosure Statement.
The resilience of environmental resources
and processes is fundamental to our
continued ability to conduct our business
activities and deliver financial returns
now and into a low carbon future. For
over a decade, we have improved the
energy efficiency of our buildings and
reduced their emissions. To date, GPT
has cumulatively avoided $249.5 million
in energy costs and 1.8 million tonnes
of carbon dioxide equivalent (CO2-e)
compared to our 2005 baseline.
In August 2020, we revised our target for all
GPT managed assets to be carbon neutral
by 2024, bringing the former target date of
2030 forward by six years.
Demonstrating our international leadership,
the GWOF portfolio of operating premium
and A-grade office buildings completed
Carbon Neutral Certification for their
operations in December 2020.
Our carbon neutral targets are a key driver
of our climate strategy, with our actions
guided by the GPT Energy Master Plan.
42
The GPT Group | Annual Report 2020
RISK
MANAGEMENT
Risk Management
GPT recognises that effective risk
management is fundamental to achieving
our strategic and operational objectives.
By understanding and effectively managing
risk, GPT can create and protect value,
providing greater certainty and confidence
for investors, employees, partners, and the
communities in which we operate.
Applying our enterprise-wide Risk
Management Framework, GPT’s Risk Team
monitors the operation of risk management
processes and assists in the identification,
assessment, treatment and monitoring of
identified risks. The Risk Team supports
the GPT Leadership Team, the GPT Board,
the Funds Management Board and their
respective committees, in ensuring that the
business is managing risk appropriately.
Climate change risk is included on
GPT’s Key Risk Dashboard, which is
reviewed every six months by the Board
Sustainability and Risk Committee and
quarterly by the Leadership Team. The
Committee also receives quarterly
updates on the status of the actions and
commitments disclosed in the metrics and
targets section set out in GPT’s Climate
Disclosure Statement, which is available on
GPT’s website: www.gpt.com.au.
GPT’s cross-functional TCFD Reference
Group meets regularly to identify
and assess the existing climate-related
risks and opportunities for each of the
climate scenarios we have adopted,
and to discuss and capture any new
risks and opportunities.
During 2020, GPT conducted a desktop
scenario hazard analysis of 61 assets to
identify climate-related physical risks
based on their location, delivering on a
commitment made in our first Climate
Disclosure Statement. A detailed summary
of this asset-level climate hazard
identification assessment can be found in
the Group’s Climate Disclosure Statement.
Metrics and Targets
GPT monitors our direct climate
change impacts and reports on
emissions, energy, water and waste for
each property annually. Our Environmental
Data Pack includes a portfolio-level
summary for all key metrics — electricity,
water, fuels, materials, recycling and
emissions — since 2005.
GPT obtains external assurance over
sustainability performance data including
the following climate change metrics:
energy consumption and energy
production in base building and tenancies,
Scope 1 and Scope 2 greenhouse gas
emissions, water consumption, waste
generated, and materials recycled
by grade.
GPT sets annual operational targets for
energy, water and waste at an asset
level, driven by operational optimisation
programs and capital upgrades. Medium
to long term operational emissions targets
are also set at a portfolio level to inform
energy procurement and offsets.
The operation of GPT’s business premises
and corporate activities, including travel
and consumables, has been on a carbon
neutral basis since 2011. GPT obtains
external validation of its carbon neutral
status through the Australian Government’s
Climate Active certification, which covers
material Scope 1, 2 and 3 emissions.
Next Steps
In 2021, the Group will continue to
incorporate climate change risks
and opportunities into our business
decision making.
We will complete further detailed analysis
of climate scenarios and incorporate
results into the Group’s five year strategic
plans. Where appropriate, we will develop
asset-level climate adaptation plans.
In the coming year, we will further our
efforts to forecast the embodied carbon
in the construction of new developments
and consider ways to reduce it. This work
will enable GPT to establish embodied
carbon metrics and understand where
opportunities exist to set targets in
the future.
The Group will continue its ongoing
analysis of climate change risks and
opportunities, the results of which will
continue to be embedded into how
GPT does business.
Find out more
GPT’s Climate Disclosure
Statement is available on
our website: www.gpt.com.au.
GPT Net Zero vs Australia Paris Agreement 1
GPT Net Zero vs Australia Paris Agreement 1
100
100
80
80
60
60
40
40
20
20
0
0
GWOF
GWOF
carbon
carbon
neutral
neutral
GPT
Target: GPT
managed assets
managed assets
and GWSCF
and GWSCF
Australia Paris
Australia Paris
Agreement
Agreement 2
GPT
Target: GPT
non-managed
non-managed
assets
assets
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2013
2013
2014
2014
2015
2015
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
2024
2024
2025
2025
2026
2026
2027
2027
2028
2028
2029
2029
2030
2030
Australia Paris
Australia Paris
GPT Total Emissions
GPT Total Emissions
GPT Emissions Intensity (Scope 1 & 2)
GPT Emissions Intensity (Scope 1 & 2)
1. Calculated using Australia 2005’s absolute emission as start point with subsequent years absolute emissions normalised to that point to compare changes in
emissions over time (indexed). GPT’s emissions are calculated using this indexed technique against our 2005 emissions baseline and are assured to 2020.
2. Australia’s emissions projections 2019, Commonwealth of Australia 2019.
43
BUSINESS OVERVIEWHOW WE CREATE VALUEPERFORMANCE AND PROSPECTSDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020 Governance
Good corporate governance is a central part of GPT’s commitment to our securityholders.
The Board strives to ensure that GPT meets high standards of governance across our operations.
The Board and Committees
The Board comprises seven 1 non-executive independent
Directors and one Executive Director, with the Chairman
being an independent non-executive Director.
The Board has established four committees – the Audit
Committee, Human Resources and Remuneration Committee,
Nomination Committee, and Sustainability and Risk Committee
– to assist it in carrying out its responsibilities. Each Committee
has a formal charter setting out its responsibilities and functions,
which is approved by the Board and reviewed at least every
two years. The Board and Committee Charters are available
on the GPT website.
The Chairman of each Committee is an independent
non-executive Director with the appropriate qualifications
and experience to carry out that role.
The Board and Committees receive regular, and as required,
reports and briefings from members of the Leadership
Team and senior management.
Find out more
The Board and Committee Charters and GPT
Corporate Governance Statement are available
on the GPT website: www.gpt.com.au
Board skills and experience
The Board is committed to ensuring that the Board has a collective
mix of skills, experience, expertise and diversity. The Board also
seeks to have a mix of tenure for directors to balance those who
have established knowledge of GPT’s business and history, with
those who bring a fresh perspective and different insights.
The Board has identified the skills and experience set out on
page 45 as those required for GPT’s Directors to provide effective
governance and direction for the Group.
For each of the skills and experience identified, the level of
experience is assessed using a set of objective criteria which
include: tertiary qualifications; relevant industry experience or
qualifications; and length of experience at a senior level.
For the ‘Technical’ areas identified, the Board looks to have several
members with extensive experience gained in senior executive
or professional roles. For the ‘General’ areas, more widely spread
exposure, across executive, professional and board roles is
regarded by the Board as essential.
Having assessed its composition and the results of the analysis
set out above, the Board considers that it has the appropriate
mix of skills and experience to enable it to discharge its
responsibilities.
Corporate Governance Framework
GPT Board
Audit
Committee
Human
Resources &
Remuneration
Committee
Nomination
Committee
Sustainability
& Risk
Committee
Independent
Assurance
and Advice
Chief Executive Officer and Managing Director
Leadership Team
Delegation
Accountability
Board focus areas in 2020
The GPT Board was actively engaged in its governance
responsibilities throughout the year, fulfilling their role in
accordance with the Board and Committee charters.
A significant area of Board focus was, and continues to be,
the impact of the COVID-19 pandemic on the Group from
the perspective of:
» Financial performance: The Board reviewed and monitored
scenario analysis relating to the potential effects of the
pandemic on the Group’s operations and earnings.
» Non-financial performance: The Board reviewed GPT’s risk
management framework to ensure that it remained effective in
the changed operating environment, with particular focus on
the ongoing impacts of the pandemic on the health and safety
of GPT’s employees, tenants and customers.
» The Board also considered the longer term impacts of the
pandemic on GPT’s strategy.
Other focus areas for the Board during the year included:
» Board succession with the appointment of Robert Whitfield
AM to the Board.
» Oversight of the systems and processes supporting
the management of GPT’s culture.
» Reinforcing GPT’s strong commitment to safety and
continued improvement of GPT’s safety leadership and culture.
» The Group’s strategic initiatives to create long term value,
including through the growth of the Logistics portfolio.
» Sustainability initiatives, including the Group’s 2024 carbon
neutral target in the managed portfolio and the release
of the Group’s first Climate Disclosure Statement.
» Strategy and initiatives around talent development,
employee engagement and diversity and inclusion.
1. Gene Tilbrook retired from the Board on 31 December 2020.
44
GovernanceThe GPT Group | Annual Report 2020 Attendance of Directors at meetings
The number of Board meetings, including meetings of Board Committees, held during the year and the number of those meetings
attended by each Director is set out below.
Board
Audit
Committee
Human Resources
& Remuneration
Committee
Nomination
Committee
Sustainability &
Risk Committee
No.
meetings
Attended
No.
meetings
Attended
No.
meetings
Attended
No.
meetings
Attended
No.
meetings
Attended
19
19
19
19
19
19
19
11
19
19
19
19
19
19
18
11
—
—
—
6
—
6
6
4
—
—
—
6
—
6
6
4
5
—
5
5
3
—
—
—
5
—
5
5
3
—
—
—
2
2
2
2
2
2
2
0
2
2
2
2
2
2
2
0
—
—
4
—
4
4
4
3
—
—
4
—
4
4
4
3
Director
Vickki McFadden 1
Bob Johnston 1
Tracey Horton AO
Angus McNaughton
Mark Menhinnitt
Michelle Somerville
Gene Tilbrook
Robert Whitfield AM
1. Vickki McFadden and Bob Johnston attended all meetings of the Committees as non-members. All Directors may attend any Committee meeting.
Skills and Experience
Technical
» Property – Investment and Funds Management
» Property – Asset Management
» Property – Development
» Sustainability in the Built Environment
» Finance and Capital Management
» Accounting and Audit
» Mergers and Acquisitions
» Strategy
General
» Risk Management
» Chairman of a substantial Board or Committee
» ASX 100 Senior Executive or Director
» Health and Safety
» Governance
» Legal, regulatory, compliance
» HR and Remuneration
» Digital Transformation
General experience
Significant experience and/or tertiary qualifications
Experience in some aspects
Extensive experience and/or tertiary qualifications
Board Tenure (years)
7+
4-6
0-1
2-3
Board Gender Diversity
Female
Male
45
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020RISK MANAGEMENTSECURITYHOLDER INFORMATIONHOW WE CREATE VALUE Modern Slavery
GPT understands and takes seriously our responsibility to
uphold high ethical standards in our business practices and
decision-making. A critical part of this is respecting the human
rights of everyone we deal with, directly and indirectly.
Modern slavery covers a range of unethical practices that
result in serious exploitations of other people for personal or
commercial gain. It can include forced labour, debt bondage
and human trafficking.
GPT’s Modern Slavery Statement, which was released in
December 2020, articulates the actions we have taken and
propose to take to identify and prevent modern slavery taking
place within our operations and across our supply chains.
Find out more
The GPT Human Rights Statement and Modern Slavery
Statement are available on our website: www.gpt.com.au
Tax Transparency
Consistent with our commitment to good corporate governance,
GPT is committed to managing the Group’s tax obligations
responsibly and in compliance with all laws and regulations.
The GPT Group is a stapled entity, a common arrangement in
the Australian real estate sector. Each GPT security listed on
the ASX is comprised of a share in GPT Management Holdings
Limited (GMH) that is ‘stapled’ to a unit in General Property Trust
(GPT) that trades on the ASX. GPT is a unit trust that is treated
separately to GMH for Australian tax purposes.
Tax Risk Management Framework
The Group has a long-standing Tax Risk Management Framework
that is endorsed by the Audit Committee and reflects the Group’s
low risk appetite with respect to taxation. By applying this
Framework, GPT is able to manage its tax obligations efficiently
and ensure compliance with all tax laws and mitigate transaction-
related tax risks.
Our tax contribution
The payment of applicable taxes is an important aspect of GPT’s
contribution to the Australian economy. The GPT Group’s real
estate investment assets are held in a trust (GPT) that is owned
by securityholders. Under Australian tax law rental income
arising from real estate investments is taxed in the hands of
securityholders. All other profits that arise from trading activities
are earned by GMH and subject to Australian corporate taxation.
GPT is also subject to goods and services tax, stamp duty, council
rates, land tax, payroll tax, fringe benefits tax, and remits ‘pay as
you go’ withholding taxes on behalf of employees and investors.
Tax Transparency Code
The GPT Group has adopted the voluntary Tax Transparency
Code (TTC) developed by the Board of Taxation. The TTC
recommends a set of principles and minimum standards for
the disclosure to tax information by businesses.
GPT publishes a Tax Transparency Report annually, in accordance
with our commitment to tax transparency and the TTC.
Tax disclosures
GPT discloses information regarding taxation in the Group
Annual Report.
MORE ON PAGE 93.
Find out more
The GPT Tax Transparency Report is available on our
website: www.gpt.com.au
46
GovernanceThe GPT Group | Annual Report 2020Governance Director biographies
Vickki McFadden
Chairman
Independent Non‑Executive Director
Bob Johnston
Chief Executive Officer & Managing Director
Executive Director
Tracey Horton AO
Independent Non‑Executive Director
Term
Bob joined the Board in September 2015
Term
Tracey joined the Board in May 2019
Term
Vickki joined the Board in March 2018
and was appointed Chairman in May 2018
Skills, Experience and Qualifications
Vickki brings a broad range of skills and
experience to the Group gained during
a 20 year career spanning investment
banking, corporate finance and corporate
law, and through her current and previous
board level positions.
Vickki holds a Bachelor of Commerce
and a Bachelor of Laws. She is a member
Chief Executive Women and the Australian
Institute of Company Directors.
She was also previously President of
the Australian Takeovers Panel, a Non-
Executive Director of Myer Family
Investments Pty Limited and a Member of
the Executive Council and Advisory Board
of the UNSW Business School.
Listed Company Directorships
(held within the last 3 years)
Skills, Experience and Qualifications
Bob has over 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.
Bob holds a Bachelor of Engineering (Hons).
Listed Company Directorships
(held within the last 3 years)
Nil
Other Current Appointments
» Director of the Property Council
of Australia
» Chairman of the Property Industry
Foundation
» Newcrest Mining Limited (since 2016)
Board Committee Memberships
» Tabcorp Holdings Limited (2017 – 2020)
» Member of the Nomination Committee
Other Current Appointments
» Non-Executive Director Allianz Australia
Limited
GPT Security Holding
(as at the date of the report)
1,689,078 stapled securities
Board Committee Memberships
» Chairman of the Nomination Committee
» Member of the Human Resources
& Remuneration Committee
GPT Security Holding
(as at the date of the report)
112,525 stapled securities
Skills, Experience and Qualifications
Tracey has held executive and senior
management roles with Bain & Company
in North America, and in Australia with
Poynton and Partners and the Reserve Bank
of Australia.
Tracey holds a Bachelor of Economics
(Hons) and a Masters of Business
Administration (MBA). She is a Fellow of the
Australian Institute of Company Directors.
She was also previously a Non-Executive
Director of Skilled Group and Automotive
Holdings Group, President of the Chamber of
Commerce and Industry (WA) and Winthrop
Professor and Dean of the University of
Western Australia Business School.
Listed Company Directorships
(held within the last 3 years)
» Nearmap Ltd (since 2019)
» Navitas Limited (2012 – 2019)
Other Current Appointments
» Deputy Chairman Australian Institute
of Company Directors National Board
» Member of the Australian Takeovers Panel
» Commissioner of Tourism WA
» Chair of the Australian Industry and Skills
Committee
Board Committee Memberships
» Chairman of the Human Resources
& Remuneration Committee
» Member of the Sustainability &
Risk Committee
» Member of the Nomination Committee
GPT Security Holding
(as at the date of the report)
22,525 stapled securities
47
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020RISK MANAGEMENTSECURITYHOLDER INFORMATIONHOW WE CREATE VALUE
Director biographies
Angus McNaughton
Independent Non‑Executive Director
Mark Menhinnitt
Independent Non‑Executive Director
Michelle Somerville
Independent Non‑Executive Director
Term
Angus joined the Board in November 2018
Term
Mark joined the Board in October 2019
Term
Michelle joined the Board in December 2015
Skills, Experience and Qualifications
Angus brings extensive experience in
property investment, development and
management and funds investment to the
Board.
Angus was previously the CEO and
Managing Director of Vicinity Centres,
Managing Director Property for Colonial
First State Global Asset Management and
CEO and Managing Director of ASX-listed
Novion Property Group in 2014 which
merged with Federation Centres and
became known as Vicinity in June 2015.
Angus holds a Bachelor of Management
Studies (Hons) and is a Fellow of the
Australian Property Institute and a
Graduate Member of the Australian
Institute of Company Directors.
Listed Company Directorships
(held within the last 3 years)
Nil
Other Current Appointments
Member of the REST Due Diligence
Committee
Board Committee Memberships
» Member of the Audit Committee
» Member of the Human Resources &
Remuneration Committee
» Member of the Nomination Committee
GPT Security Holding
(as at the date of the report)
25,088 stapled securities
Skills, Experience and Qualifications
Mark has significant investment
management, construction, development
and urban regeneration experience in the
real estate and infrastructure sectors,
drawn from his 30 year career at Lendlease
including as CEO of Lendlease Australia.
Mark holds a Masters of Applied Finance,
and a Bachelor of Engineering. He is
a Graduate Member of the Australian
Institute of Company Directors and fellow
of the Governance Institute of Australia.
Listed Company Directorships
(held within the last 3 years)
Nil
Other Current Appointments
» Chairman and Non-Executive Director of
Fluent Property Pty Ltd
» Non-Executive Director of Underground
Construction Alliance Pty Ltd
Board Committee Memberships
» Member of the Human Resources &
Remuneration Committee
» Member of the Sustainability & Risk
Committee
» Member of the Nomination Committee
GPT Security Holding
(as at the date of the report)
30,000 stapled securities
Skills, Experience and Qualifications
Michelle 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 holds a Bachelor of Business
and a Masters of Applied Finance. She
is a Graduate Member of the Australian
Institute of Company Directors and a
Fellow Chartered Accountant.
She was also previously an independent
consultant to the UniSuper Ltd Audit,
Risk and Compliance Committee and a
Non-Executive Director of Bank Australia
Limited, Challenger Retirement and
Investment Services Ltd, Save the Children
(Australia) and Down Syndrome Australia.
Listed Company Directorships
(held within the last 3 years)
» IOOF Holdings Limited (since 2019)
Other Current Appointments
Nil
Board Committee Memberships
» Chairman of the Audit Committee
» Member of the Sustainability & Risk
Committee
» Member of the Nomination Committee
GPT Security Holding
(as at the date of the report)
36,663 stapled securities
48
The GPT Group | Annual Report 2020Governance Company
Secretary
biographies
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.
Gene Tilbrook
Independent Non‑Executive Director
Robert Whitfield AM
Independent Non‑Executive Director
Term
Gene joined the Board in May 2010
and retired on 31 December 2020
Skills, Experience and Qualifications
Gene brings extensive experience in
finance, corporate, strategy, investments
and capital management to the Board.
Gene holds a Bachelor of Science and
an MBA. He is a Fellow of the Australian
Institute of Company Directors.
Gene was also previously a Non-Executive
Director of Aurizon Holdings and Fletcher
Building and an Executive Director of
Wesfarmers Limited.
Listed Company Directorships
(held within the last 3 years)
» Orica Limited (since 2013)
» Woodside Petroleum Limited (since 2014)
Other Current Appointments
» Director of the Bell Shakespeare
Company
Board Committee Memberships
» Chairman of the Sustainability & Risk
Committee
Term
Rob joined the Board in May 2020
Skills, Experience and Qualifications
Rob has significant banking and finance
experience in senior management roles
across the public and private sectors. This
includes a 30 year career with Westpac
Banking Corporation where he held various
senior management positions, including
Chief Executive Officer of the Institutional
Bank, Chief Risk Officer, Group Treasurer
and Chairman of the Asia Advisory Board.
Rob holds a Bachelor of Commerce, a
Post-Graduate degree in Banking & Finance
and completed the Harvard Advanced
Management Program. He is a senior
fellow of the Financial Services Institute of
Australasia and a Fellow of the Australian
Institute of Company Directors.
Rob was also previously Chairman and
Director of NSW Treasury Corporation
and Secretary of NSW Treasury and NSW
Industrial Relations.
Listed Company Directorships
(held within the last 3 years)
» Member of the Audit Committee
» Commonwealth Bank Australia Limited
» Member of the Nomination Committee
(since 2017)
GPT Security Holding
(as at the date of retirement
from the Board)
51,071 stapled securities
» Transurban Group (since 2020)
Other Current Appointments
Nil
Board Committee Memberships
» Member of the Audit Committee
» Member of the Sustainability & Risk
Committee 1
» Member of the Nomination Committee
GPT Security Holding
(as at the date of the report)
Nil
1. Chairman from 1 January 2021
49
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020RISK MANAGEMENTSECURITYHOLDER INFORMATIONHOW WE CREATE VALUE Directors’ Report
Events subsequent to reporting date
The COVID-19 pandemic has created unprecedented economic
and societal impacts and there remains significant uncertainty.
In the event the COVID-19 impacts are more severe or prolonged
than anticipated, this may have further adverse impacts to the
fair value of the Group’s investment properties and its operating
result. At the reporting date a definitive assessment of the future
effects of COVID-19 on the Group cannot be made, as the impact
will depend on the magnitude and duration of the economic
downturn, with the full range of possible effects unknown.
On 15 February 2021, the Directors declared a distribution for
the half year ended 31 December 2020 of 13.20 cents, being
$257.1 million which is expected to be paid on 26 February 2021.
On 15 February 2021, the Group announced an on-market buy-back
of up to 5 per cent of GPT’s ordinary securities on issue.
Other than the above, the Directors are not aware of any matter
or circumstances occurring since 31 December 2020 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.
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.
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.
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.
Directors' Report
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 trust consolidated entity) for the year
ended 31 December 2020. The trust consolidated entity together
with GPT Management Holdings Limited and its controlled entities
form the stapled entity, The GPT Group (GPT or The Group).
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.
The Directors’ Report for the year ended 31 December 2020
has been prepared in accordance with the requirements of the
Corporations Act 2001 and includes the following information:
» Operating and Financial Review, including information on the
Group’s operations, financial position, business strategies and
prospects, on pages 2 to 43
» Information on the Directors and Company Secretary on pages
47 to 49
» Board and committee meetings attendance on page 45
» Remuneration Report on pages 52 to 64, and
» Auditor’s Independence Declaration on page 66.
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.
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 consumption and generation from
1 July to 30 June each year. GPT has implemented systems and
processes for the collection and calculation of the data required.
The data is assured by EY and submitted to the Australian
Government Clean Energy Regulator within the legislative
deadline of 31 October each year. GPT has complied with the
Regulator’s submissions requirements for the period ended
30 June 2020 within the required timeframe.
Find out more
Information about GPT’s participation in the NGER
program is available on our website: www.gpt.com.au.
50
50
The GPT Group | Annual Report 2020 Directors’ Report
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 22 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 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 66 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.
51
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020DIRECTORS' REPORTRISK MANAGEMENTGOVERNANCESECURITYHOLDER INFORMATIONHOW WE CREATE VALUE INTRODUCTION FROM THE CHAIRMAN OF THE HUMAN RESOURCES AND REMUNERATION COMMITTEE
On behalf of the Human Resources and Remuneration Committee (HRRC) of the Board, I am pleased to present the 2020 Remuneration
Report for the GPT Group.
During 2020, guided by our 'Safety First - Everyone, Always' value, the HRRC played an active role in understanding the impact of the
COVID-19 pandemic on the wellbeing of our people and management's response to the resulting challenges. Areas of focus included
monitoring the results of Employee Pulse Surveys undertaken throughout the year, and employee use of support mechanisms including
the Employee Assistance Program, mental health days and access to domestic and family violence support. I am proud of how our people
responded to these and other operational challenges posed by the pandemic throughout the year. A summary of the organisation's
response in that regard is available on pages 8-9 of the Annual Report.
As the pandemic escalated in Q1, 2020 and having regard to the impact on the Group's financial performance and the experience
of investors and customers, the Committee endorsed management's recommendation to withdraw both the Short Term Incentive
Compensation (STIC) and Long Term Incentive (LTI) schemes for the year. Other measures implemented to enable a reduction in Group
discretionary spend included reducing headcount and placing a temporary hold on all recruitment. Management also withdrew other
employee ownership schemes, including the General Employee Security Ownership Plan (GESOP) and Broad Based Employee Ownership
Plan (BBESOP) for the 2020 performance period. The HRRC has recently approved the reinstatement of the STIC and LTI and the
employee ownership programs for 2021 following more stable market conditions.
Despite the impacts of the pandemic on the Group's financial performance, the Leadership Team and GPT employees have worked
incredibly hard to deliver strong operational performance against our non-financial strategic objectives. An assessment of performance
is available in the Group Scorecard on pages 57-58. As the STIC and LTI schemes were withdrawn, no payments were made with regard
to the non-financial strategic objectives.
Prior to the pandemic, an annual review of employee base pay was implemented effective 1 January 2020, with an overall increase of
2.31 per cent. For 2021, the Committee approved a modest budget to implement a base pay review. Senior executives who are eligible
to participate in the LTI plan will not receive base salary increases in 2021. This decision was made with respect to GPT’s remuneration
principles of aligning to investor outcomes and Group financial performance within the competitive landscape.
Following benchmarking, no adjustments were made to Non-Executive Director fees for 2020 or 2021 other than an increase of 4.65 per
cent in the Chairman's fee to bring remuneration closer to market.
From a governance perspective, the HRRC reviewed the Committee Charter, Minimum Security Holding and Clawback Policies to ensure
they remain contemporary and fit for purpose. Looking ahead, we remain focussed on continuing to provide a remuneration platform
that strikes an appropriate balance between retaining and motivating our people to deliver superior performance while aligning reward
outcomes to the securityholder experience. We welcome feedback and comments from investors and stakeholders regarding this
Remuneration Report.
Tracey Horton AO
Chairman of the Human Resources & Remuneration Committee
The information provided in this Report has been audited in
accordance with section 308(3C) of the Corporations Act 2001.
Sydney
15 February 2021
52
52
Remuneration ReportThe GPT Group | Annual Report 2020 Directors’ Report REMUNERATION FRAMEWORK
GPT's remuneration framework is designed to support the Group's strategy and reward our people for its successful execution and
performance. The remuneration principles are the foundation of the framework, and the diagram below describes the typical delivery
for remuneration and rewards. The framework also provides a basis for the Board to exercise discretion when determining remuneration
outcomes. The framework’s application was evident when Management recommended, and the Board endorsed that the STIC and LTI
Plans be withdrawn for 2020.
Our Vision
Our Purpose
To be the most respected property company in Australia in
the eyes of our investors, people, customers and communities
To create value for investors by providing high quality real estate
spaces that enable people to excel and our customers and
communities to prosper in a sustainable way
Growing and
predictable earnings
Thriving places
Empowered people
Sustainable
environment
Prospering customers,
suppliers and communities
How We Create Value
Attract and retain high calibre
executives and employees
Align to investor outcomes
and behaviour consistent with
GPT values
Determine with reference to
Group and individual financial
and non-financial performance
Drive focus and encourage
our people to think and act like
an owner
GPT’s Remuneration Principles
The timeline below outlines how remuneration is delivered, noting that the 2020 STIC and LTI plans were withdrawn.
Component
Year 1
Year 2
Year 3
Year 4
Executive Remuneration Components 1
Fixed Remuneration
Salary and statutory superannuation
STIC
2020
STIC withdrawn
1 year performance period
» Y1 STIC performance
period commences
» Y1 STIC performance
tested
» Y1 STIC award delivered
in Q1, Y2 - 50% cash /
50% deferred equity
(vesting 31 Dec Y2) 3
LTI
2020‑2022
LTI withdrawn
» Y1 LTI performance period
commences
» Performance rights for Y1
LTI granted in Q1, Y1 2 using
prior Dec 30-day VWAP
» Y1–Y3 LTI performance
tested
» Securities immediately
vest, unless holding lock
nominated 4
Q1, Y1
31 Dec, Y1
Q1, Y2
31 Dec, Y2
31 Dec, Y3
Q1, Y4
Performance rights granted
Performance tested, deferred equity granted and cash award paid
Securities vest
Performance tested, eligible performance rights convert to securities
Other Employee Ownership Schemes 5
GESOP
» For STIC eligible individuals who are ineligible for LTI
BBESOP
» For individuals ineligible for STIC or LTI
» Equal to 10% of STIC outcome (less tax)
» GPT must achieve at least Target outcome on annual FFO
» Delivered in GPT securities around the same time as the cash
growth per security for the plan to operate
STIC payment and must be held for at least one year
» Awarded as either:
› $1,000 cash (less tax) or
› 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
1. Eligibility to participate in the STIC, LTI, GESOP and BBESOP schemes is generally limited to individuals who are employed on a permanent basis, satisfy the minimum service criteria
applicable under each scheme, have not given or received notice of cessation of employment and are not subject to any formal performance management process.
2. The CEO's performance rights are granted following the relevant resolution's approval at the Annual General Meeting.
3. Where deferred securities are awarded, the number allocated is determined by dividing 50% of the value of the total STIC by the 30-day VWAP immediately before the end of the
performance period. The value of the award on the conversion date may vary as a result of security price having increased or decreased since that point in time. Any award for non
LTI eligible employees is delivered as 100% cash.
4. Participants may elect at the commencement of the LTI plan to apply additional dealing restrictions of up to a maximum of 4 years post vesting. A taxing point will arise in the
financial year securities vest and become unrestricted.
5. Management also withdrew these plans in respect of the 2020 performance period.
53
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020DIRECTORS' REPORTRISK MANAGEMENTGOVERNANCESECURITYHOLDER INFORMATIONHOW WE CREATE VALUE GPT’s values and culture
GPT provides an environment where our people can realise their potential and consistently deliver high performance. Our diverse
workforce benefits from a dynamic and flexible work environment, advanced systems, mobile technology and a lean management
structure to achieve efficient and productive outcomes. These key elements that drive value are underpinned by GPT's shared sense
of purpose – to create value for investors by providing high quality real estate spaces that enable people to excel and our customers
and communities to prosper in a sustainable way – and a culture that emphasises the following core values:
Safety First -
Everyone, Always
Deliver Today,
Create Tomorrow
Value Differences,
Play as a Team
Speak Up
Raise the Bar
2020 presented an uncertain and challenging operating environment for the business and its stakeholders. The resilience, dedication
and collective effort of our people to respond to the challenges of the pandemic brought the strength of GPT's organisational values
and culture to the fore. Key areas of focus throughout the year, monitored by the Human Resources and Remuneration Committee via
a quarterly review of the Culture Dashboard included:
Focus Area
Commentary
Safety is the number one priority for every employee, underpinned by our ‘Safety First – Everyone, Always’
value. We all play a part in ensuring that our colleagues, stakeholders and visitors to our assets go home
safely. We implemented initiatives to continue to embed our safety first culture including a refresh of our
Safety Policy, and the launch of a consolidated Safety Procedures Manual, and the delivery of a Safety
Leadership program with 97 per cent employee participation. An ongoing focus on employee wellbeing was
of paramount importance during the pandemic. We provided virtual opportunities for employees to enhance
their wellbeing across the four dimensions of our Wellness@GPT program - Mind, Body, Purpose, Place -
with a particular focus on mental fitness and resilience. Managing for Team Wellness sessions also equipped
people managers to support their teams. The Board and management closely monitored utilisation of the
Employee Assistance Program, mental health days and access to domestic and family violence support on
a de-identified basis.
GPT has an energised and enabled high calibre workforce, characterised by strong levels of employee
engagement. Engaged, energised and enabled employees are more likely to deliver to superior business
outcomes. We provide a consultative work environment where employee views are sought out, respected,
and where appropriate, acted upon. Employee Pulse Surveys were conducted throughout the year, which
allowed us to gauge our people's wellbeing and satisfaction with their altered work arrangements, including
working from home or working in reduced or split on-site teams due to physical distancing restrictions. The
results were used to identify priorities and opportunities to provide additional support to our people and
assist them in their continued performance and development.
GPT is committed to creating a diverse and inclusive workplace by providing equal opportunity in all aspects
of employment. GPT is an inclusive employer where differences such as sexuality, sex, gender identity,
race, beliefs, age or abilities are valued. The Board and management recognise that a diverse workforce
reflects GPT’s diverse customer base and generates diversity in thought that enhances decision making
processes and Group performance. In February 2020, GPT received its third consecutive Workplace Gender
Equality Agency (WGEA) Employer of Choice citation recognising GPT’s performance in this area as among
Australia's best employers. Sponsorship of the Property Council of Australia 500 Women in Property
program continued as did GPT’s commitment to the CareerTrackers Indigenous Internship Program.
The Group was also pleased to be named as a Bronze employer for LGBTIQ+ inclusion in the Australian
Workplace Equality Index Small Employer category.
GPT is proud of our reputation for applying the highest ethical and moral standards in all dealings. The Code
of Conduct (the Code) describes the standard of behaviour expected of all employees, and aligns to GPT’s
vision to be the most respected property company in Australia. Directors monitor breaches concerning
the Code and EEO and Workplace Behaviour Policy, complaints received and any warnings issued during
the reporting period. GPT regularly reinforces its expectations of employees via compulsory training
and direct communications from management.
GPT’s approach to risk management incorporates culture, people, processes and systems to enable the
organisation to realise potential opportunities whilst managing possible unintended adverse effects. GPT
seeks to maintain a transparent and accountable culture where all employees are encouraged to actively
consider, discuss and respond to risk as part of their daily activities. Directors monitor a broad number of
organisational risk culture indicators, including metrics measuring internal audits, compliance, unauthorised
breaches of the Risk Appetite Statement, and reports to the Whistleblower Officer.
Safety
Engagement
Equal Opportunity
Behaviour and
Consequences
Risk Culture
54
Remuneration ReportThe GPT Group | Annual Report 2020 Directors’ Report KEY MANAGEMENT PERSONNEL
GPT’s Remuneration Report discloses information regarding our Key Management Personnel (KMP). KMPs 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)).
EMPLOYMENT TERMS
The information regarding the STIC and LTI participation for the CEO and other Executive KMPs below reflects their maximum level
of opportunity. As detailed on page 52, both plans were withdrawn in respect of the 2020 performance period and correspondingly
no award will be made under either plan.
1.
Term
Employment terms – Chief Executive Officer and Managing Director
Conditions
Contract duration
Open ended.
Termination by Executive
6 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package
Bob Johnston’s remuneration arrangements are as follows:
Fixed remuneration: $1,460,000.
STIC: $0 to $1,825,000 (i.e. 0% to 125% of base pay) based on performance, equally weighted against
financial and non-financial objectives with any award also subject to the Group achieving FFO performance
targets set by the Board at the beginning of each performance period. 50% of the award paid in cash and
50% delivered as deferred GPT securities 1. The securities component vests 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 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
External Directorships
6 months non-compete, and 12 months non-solicitation of GPT employees.
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.
1. The percentages vary dependent on the movement of the GPT security price during the performance period. See footnote 3 on page 53.
55
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020DIRECTORS' REPORTRISK MANAGEMENTGOVERNANCESECURITYHOLDER INFORMATIONHOW WE CREATE VALUE 2. Employment terms – Executive KMP
Term
Conditions
Contract duration
Open ended.
Termination by Executive
3 months’ notice. GPT may elect to make a payment in lieu of notice.
Remuneration Package
Anastasia Clarke and Mark Fookes’ remuneration arrangements are as follows:
Fixed Remuneration: outlined in table below.
STIC: 0% to 100% of base pay based on performance equally weighted against financial and non-financial
objectives with any award also subject to the Group achieving FFO performance targets set by the Board
at the beginning of each performance period. 50% of the award paid in cash and 50% delivered as deferred
GPT Securities.1 The securities component vests one year after the conclusion of the performance year.
LTI: A grant of performance rights with the face value at time of grant equivalent to 100% of base pay with
vesting outcomes dependent on performance and continued service, and delivered in GPT securities.
Component
Anastasia Clarke
Fixed remuneration
$875,000
Mark Fookes
$840,000
STIC
LTI
$0 to $875,000
$0 to $840,000
$0 to $875,000
$0 to $840,000
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.
12 months non-solicitation of GPT employees.
Termination by Company
for cause
Termination by Company
(other)
Post-employment
restraints
1. The percentages vary dependent on the movement of the GPT security price during the performance period. See footnote 3 on page 53.
3. Compensation mix at maximum STIC and LTI outcomes
The percentage of each component of variable or ‘at risk’ remuneration is calculated with reference to maximum or stretch potential
opportunity as set out in the Remuneration Packages detailed in Tables 1 and 2 of the Employment Terms section. It does not reflect the
actual remuneration paid during the period.
Executive KMP
Bob Johnston
Chief Executive Officer and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
4. Executive compensation
Fixed Remuneration
Variable or “at risk” remuneration
Base Pay
STIC
LTI
26.7%
33.3%
40.0%
33.4%
33.3%
33.3%
33.4%
33.3%
33.3%
As outlined throughout this Remuneration Report, in response to the pandemic's impact on the Group's financial performance and
investors and customers' experience, Management recommended and the Board concurred that the Group's STIC and LTI plan for the
year be withdrawn. Therefore, fixed remuneration (consisting of base pay and statutory remuneration) as detailed in Tables 1 and 2 of the
Employment Terms section was the only form of compensation delivered to executives (and other employees) in 2020.
56
Remuneration ReportThe GPT Group | Annual Report 2020 Directors’ Report GROUP FINANCIAL PERFORMANCE AND INCENTIVE OUTCOMES
1. Five year Group financial performance
Total Securityholder Return (TSR) 1
Total Return
NTA2 per security
FFO per security
FFO per security growth
Security price at end of calendar year
%
%
$
cents
%
$
2020
(17.7)
(2.4)
5.57
28.48
(12.9)
4.50
2019
9.6
8.7
5.80
32.68
2.6
5.60
2018
9.6
15.8
5.58
31.84
3.5
5.34
2017
6.6
15.2
5.04
30.77
3.0
5.11
2016
10.1
15.5
4.59
29.88
5.6
5.03
1. TSR is calculated as the percentage growth in GPT’s security price from the last trading date of the previous financial year to the last trading date of the current financial year,
together with the value of distributions received during the year, assuming that all of those distributions are reinvested into new securities. For LTI purposes, the average security
price for the last 30 trading days is utilised in the calculation of the TSR.
2. Includes all right-of-use assets of GPT Group.
2. Summary of Group Scorecard objectives and performance outcomes
As outlined in the Letter from the Committee Chairman on page 52 of this report, in early 2020 Management recommended
and the Committee concurred that the Group’s FY20 STIC program be withdrawn.
Notwithstanding that no STIC was paid for 2020, the Group assessed the performance against the scorecard and this assessment
is summarised in the table below.
Category
Performance measure
Achievement Commentary
Safety and
People
Develop Safety Leadership
Program and ensure
more than 75 per cent
of employees undertake
training in 2020
Culture Dashboard tracking
at or above target
Progressing diversity and
inclusion objectives including
achievement of 40:40:20
gender balance at all levels
of the organisation, and
First Nations representation
among employees at
2.2 per cent
Financial
FFO and distribution growth
per security target of at least
3.5 per cent
» Safety Leadership program launched and the target for completion
of Safety Leadership training was exceeded with 97 per cent of
employees having completed this by year end.
» Indicators on the Culture Dashboard are tracking at or above our
target position.
» Pulse surveys of employees indicated that 86% agreed that the
measures GPT had put in place to support them during the pandemic
had helped them to navigate through this period more easily than may
have otherwise been the case.
» 40:40:20 gender balance was achieved at the Board and among the
overall Management and Professional cohorts. GPT also received
its third consecutive Workplace Gender Equality Agency (WGEA)
Employer of Choice for Gender Equality citation in February 2020, and
increased the percentage of females in the top quartile from 46 per
cent in 2019 to 48 per cent in 2020. The Group was also recognised as
a Bronze employer for LGBTIQ+ inclusion in the Australian Workplace
Equality Index Small Employer category. Regrettably, our ability to
enhance First Nations representation was impacted by the deferral of
recruitment in response to pandemic.
» Prior to March, GPT was well placed to achieve its FFO growth target.
Management responded to the economic disruption created by
COVID-19 by immediately implementing measures to reduce operating
costs, defer all unnecessary expenditure and recruitment.
» Negotiations with tenants regarding rental relief in accordance with
the commercial tenancies Code of Conduct became a primary area
of focus, as well as the implementation of a customer engagement
plan for a successful COVID safe return to our assets. Throughout the
period, prudent gearing and significant liquidity was maintained and
limited near term debt maturities achieved.
KEY
Stretch
Between Target and Stretch
Target
Between Threshold and Target
Threshold
Below threshold
57
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020DIRECTORS' REPORTRISK MANAGEMENTGOVERNANCESECURITYHOLDER INFORMATIONHOW WE CREATE VALUE
Category
Performance measure
Achievement Commentary
Strategy
Portfolio occupancy greater
than 96.5% at year end
Achieved 98.4 per cent occupancy for combined Retail, Office and
Logistics portfolio.
Increase the Group’s
exposure to the Logistics
sector through appropriate
acquisitions and
developments
Practical completion of
32 Smith, Parramatta and
Queen & Collins Office
developments in line with
development targets
Secure a new capital
partnership
Raise at least $300 million of
new equity for GWOF
Achieve carbon neutral
certification for GWOF
portfolio. Implement strategy
for GPT managed portfolio
to achieve Carbon Neutral
status by 2024
Reduction in operational
emissions, energy, waste and
water consumption. Increase
recycling level of waste
Develop and publish the
Group’s first Modern Slavery
Policy by Dec 2020
Achieve 2020 commitments
in the Group’s Stretch
Reconciliation Plan (2018-21)
Environment
and Social
Responsibility
Four logistics developments were completed in the period and
successfully leased. A further four logistics developments were
commenced or committed to and $205 million of logistics assets
were acquired.
Both developments were delayed as a result of COVID-19
disruptions. 32 Smith achieved practical completion in January 2021
and Queen & Collins is expected to achieve practical completion in
the first half of 2021.
Secured an $800 million Logistics capital partnership with QuadReal.
Completed capital raising securing $289 million of $300 million target
for GWOF. This result was considered a success in the context of the
prevailing market conditions.
GWOF portfolio certified as carbon neutral in 2020. Strategy approved
for GPT managed portfolio to reach this target by 2024.
Targets to reduce emissions, energy and water consumption and
increase waste recycling achieved.
Modern Slavery Statement published and initiatives to demonstrate
ongoing progress identified.
97.0 per cent of RAP action items were progressed or completed during
the year, including:
» Launch of First Nations Engagement Strategy;
» More than 60 per cent participation rate in voluntary employee online
learning module;
» All active development projects included First Nations consultation;
and
» NAIDOC and National Reconciliation week campaigns held at each GPT
Retail and Office asset.
KEY
Stretch
Between Target and Stretch
Target
Between Threshold and Target
Threshold
Below threshold
58
Remuneration ReportThe GPT Group | Annual Report 2020 Directors’ Report
3. 2020 STIC outcomes by Executive KMP
The 2020 STIC outcomes for the KMP are below. STIC outcomes for the balance of the eligible employees 1 are ordinarily
determined in March post the issue of the Remuneration Report however no awards will be made to any employee in respect
of the 2020 performance period.
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
$0
$0
$0
0%
0%
0%
100%
100%
100%
Cash
component
$0
$0
$0
Equity
component
(# of GPT
securities) 2
0
0
0
1. i.e. excluding the KMP.
2. Had the 2020 STIC plan been operative the number of deferred GPT securities granted would be calculated by dividing 50% of the Actual STIC awarded by GPT’s 30-day VWAP
of $4.6576 immediately before the end of the performance period and vested subject to service on 31 December 2021.
4. Group performance measures for LTI Plans currently relevant
LTI performance
measurement
period
Performance
measure
LTI
Performance
measure hurdle
2018
2018-20
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
– 10% of PR vest at Index
performance, up to 100% at
Index plus 10% (pro-rata vesting
in between)
Total Return
10% of PR vest at 8.5% Total
Return, up to 100% at 10.0%
Total Return (pro-rata vesting
in between)
2019
2019-21
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
10% of PR vest at Index
performance, up to 100% at
Index plus 10% (pro-rata vesting
in between)
Total Return
10% of PR vest at 8.5% Total
Return, up to 100% at 10.0%
Total Return (pro-rata vesting
in between)
2020 2020-22
Relative TSR versus
ASX200 AREIT
Accumulation Index
(including GPT)
10% of PR vest at Index
performance, up to 100% at
Index plus 10% (pro-rata vesting
in between)
Total Return
10% of PR vest at 7.5% Total
Return, up to 100% at 9.0%
Total Return (pro-rata vesting
in between)
Weighting
Results
Vesting % by
performance
measure
Overall
Plan Vesting
Outcome
%
0%
0%
50%
50%
TSR result
was beneath
the Index by
19.11%
Compound
TR result
of 7.10% is
beneath
threshold
50%
N/A
N/A
50%
N/A
N/A
—
N/A
50%
50%
2020-22 LTI withdrawn
5. 2018-2020 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
420,467
153,595
157,435
—
—
—
420,467
153,595
157,435
59
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020DIRECTORS' REPORTRISK MANAGEMENTGOVERNANCESECURITYHOLDER INFORMATIONHOW WE CREATE VALUE
6. LTI outcomes – fair value and maximum value recognised in future years 1
Executive KMP
Bob Johnston Chief Executive
Officer & Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Plan
2020
2019
2020
2019
2020
2019
Grant date
—
24 May 2019
—
2 April 2019
—
2 April 2019
Fair value per
performance right 2
Performance
rights granted
as at 31 Dec 20
—
$3.18
—
$3.94
—
$3.94
—
413,551
—
160,511
—
156,734
Maximum value to
be recognised in
future years
—
$118,759
—
$72,008
—
$70,313
Vesting date
—
31 Dec 21
—
31 Dec 21
—
31 Dec 21
1. 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.
2. Reflects fair value per performance right as at the grant date.
7. Reported remuneration – Executive KMP – Actual Amounts Received 1
Fixed Pay
Variable or "at risk" 2
Executive KMP
Bob Johnston Chief Executive
Officer & Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Total
Plan
2020
2019
2020
2019
2020
2019
2020
2019
Base Pay Superannuation
$1,438,709
$1,439,233
$853,709
$829,233
$818,709
$809,233
$3,111,127
$3,077,699
$21,348
$20,767
$21,348
$20,767
$21,348
$20,767
$64,044
$62,301
Other 3
$7,061
$8,455
$3,840
$4,985
$7,279
$10,050
$18,180
$23,490
STIC
LTI
Total
$0
$1,314,232
$0
$1,556,288
$0
$683,828
$0
$651,774
$0
$542,260
$0
$592,872
$0
$2,649,834
$0
$2,691,420
$1,467,118
$4,338,975
$878,897
$2,081,073
$847,336
$2,084,696
$3,193,351
$8,504,744
1. 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.
2. Gross dollar values for the equity components have been calculated by multiplying the number of securities by GPT's 2019 VWAP ($6.0209). Future awards under this plan will be
calculated with reference to the 30-day VWAP immediately before the end of the relevant performance period.
3. Other may include death and total/permanent disability insurance premiums, service awards, GPT superannuation plan administration fees, professional memberships,
subscriptions and/or other benefits.
8. Reported remuneration – Executive KMP – AIFRS Accounting 1
Executive KMP
Bob Johnston Chief Executive
Officer & Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
Total
Fixed Pay
Variable or "at risk"2
Plan
2020
2019
2020
2019
2020
2019
2020
2019
Base Pay Superannuation
$1,468,141
$1,418,885
$867,590
$860,899
$852,887
$827,474
$3,188,618
$3,107,258
$21,348
$20,767
$21,348
$20,767
$21,348
$20,767
$64,044
$62,301
Other
$7,061
$8,455
$3,840
$4,985
$7,279
$10,050
STIC
LTI
Total
$338,592
$189,658
$2,024,800
$1,302,460
$1,038,467
$3,789,034
$161,843
$104,161
$1,158,782
$658,420
$405,098
$1,950,169
$154,255
$636,642
$103,261
$419,781
$1,139,030
$1,914,714
$18,180
$654,690
$397,080
$4,322,612
$23,490
$2,597,522
$1,863,346
$7,653,917
1. This table provides a breakdown of remuneration for executive KMP in accordance with statutory requirements and Australian accounting standards.
2. This column records the amount of the fair value of the awards under the various STIC and LTI plans expensed in the relevant financial years, and does not represent actual awards
made to executives or the face value grant method.
60
Remuneration ReportThe GPT Group | Annual Report 2020 Directors’ Report 9. GPT security ownership – Executive KMP as at 31 December 2020
Executive KMP
(start of period) 1
GPT
Holdings
Employee Security Schemes (ESS)
2020
DSTIC
2018-20
LTI
Total ESS
for 2020
Purchase/
(Sales)
during period 2
GPT
Holdings
(end of period) 3
Gross
Value of
GPT
Holdings 4
MSHR
Guideline 5
Bob Johnston
Chief Executive Officer
and Managing Director
Anastasia Clarke
Chief Financial Officer
Mark Fookes
Chief Operating Officer
1,689,078
389,581
1,222,362
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1,689,078
$7,867,050
$2,190,000
(154,153)
235,428
$1,096,529
$875,000
Nil
1,222,362
$5,693,273
$840,000
1. GPT Holdings (start of period) include GPT securities obtained as sign on grants (Mr Johnston only), DSTIC up to and including 2019, LTI plans up to and including the 2017-19 LTI plan
and private holdings.
2. 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 2020 calendar year.
3. 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.
4. The GPT Holdings (end of period) multiplied by GPT’s December 2020 30-day VWAP of $4.6576 to derive a dollar value.
5. 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.
10. 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 2020 1
Performance rights
still on foot at 31 Dec 20 2
420,467
153,595
157,435
413,551
160,511
156,734
1. The sum of performance rights that were awarded to a participant in the 2018-2020 LTI that did not vest at the end of the performance period, and as a result, lapsed and/or
performance rights that may have been granted under the 2020 DSTIC that also lapsed had that plan been operative.
2. The total of unvested performance rights currently on foot excluding any GPT securities or performance rights that may have lapsed up to 31 December 2020. 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 2019-2021 LTI
plan on foot. plan. As such, these performance rights represent the incentive opportunity over future years, are subject to performance and hence “at risk”, and as a result, may
never vest.
61
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020DIRECTORS' REPORTRISK MANAGEMENTGOVERNANCESECURITYHOLDER INFORMATIONHOW WE CREATE VALUE
GOVERNANCE
Who are the
members
of the Committee?
What is the scope
of work of the
Committee?
The Committee consists of the following four Non-Executive Directors:
» Tracey Horton AO (HRRC Chairman)
» Vickki McFadden
» Angus McNaughton
» Mark Menhinnitt
The Committee operates in accordance with the HRRC Charter and undertakes the following activities on behalf of
the Board:
» Oversee the management of culture
» Consider and recommend any changes to the remuneration framework to the Board for approval
» Oversee the implementation of key policies and practices in support of GPT’s remuneration framework and from
time to time, review their appropriateness
» Periodically review and make recommendations to the Board for approval in relation to the remuneration for
Non-Executive Directors
» Review annually and make recommendations to the Board for approval in relation to the remuneration package
for the CEO and any other executive Director. In consultation with the CEO, review and approve remuneration
packages for the Leadership Team (excluding the CEO) and approve the annual salary review budget for all other
employees
» Recommend to the Board for approval the key performance indicators for the CEO and having regard to the
performance assessment undertaken by the Chairman of the Board, recommend to the Board incentive plan
outcomes for the CEO to the Board for approval
» Review the annual Remuneration Report and make recommendations to the Board for its inclusion in the
Annual Report
» Review and monitor the succession plan for the Leadership Team (excluding the CEO, which is a responsibility
of the Nomination Committee 1)
» Review and approve GPT’s diversity & inclusion strategy, and oversee the implementation of key processes
and procedures in support of this and report progress to the Board
» Monitor and oversee talent development and employee engagement initiatives, and oversee the implementation
of processes and procedures to support the implementation of those initiatives.
1. The full Board are members of the Nomination Committee and no additional fees are paid for membership. Further information about the role and responsibility of committees is
set out in their respective Charters, which are available on GPT’s website: www.gpt.com.au.
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 Human Resources and Remuneration 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 Directors are subject to the Group’s Minimum Security Holding Policy as detailed on page 66 of
this Report.
» 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
1 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.
62
Remuneration ReportThe GPT Group | Annual Report 2020 Directors’ Report 1. Board and committee fees1,2
Chairman
Members
2020
2019
2020
2019
Board Fee
$450,000
$430,000
$170,000
$170,000
Audit
Committee
$40,000
$40,000
$20,000
$20,000
Sustainability and
Risk Committee
Human Resources and
Remuneration Committee
$34,000
$34,000
$17,000
$17,000
$34,000
$34,000
$17,000
$17,000
1.
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.
2. Fees for Non-Executive Directors are inclusive of superannuation.
2. Reported remuneration – Non-Executive Directors – AIFRS accounting 1,2
Fixed Pay
Non-Executive Director - Current
Fees
Superannuation
Other 3
Vickki McFadden
Chairman
Tracey Horton AO 4
Mark Menhinnitt 5
Angus McNaughton
Michelle Somerville
Gene Tilbrook
Robert Whitfield AM 6
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
$428,652
$409,233
$201,826
$132,695
$184,453
$38,813
$189,041
$192,124
$207,306
$207,306
$204,566
$197,750
$97,729
—
$21,348
$20,767
$19,173
$12,606
$17,523
$3,687
$17,959
$18,252
$19,694
$19,694
$19,434
$18,786
$9,284
—
Non-Executive Director – Former
Fees
Superannuation
Fixed Pay
Swe Guan Lim 8
Eileen Doyle 9
Total
2020
2019
2020
2019
2020
2019
—
$189,041
—
$76,843
$1,513,573
$1,433,805
—
$17,959
—
$7,300
$124,415
$119,051
—
—
—
—
—
—
—
—
—
—
$859
$1,377
—
—
Other 7
—
$507
—
—
$859
$1,884
1. This table provides a breakdown of remuneration for Non-Executive Directors in accordance with statutory requirements and Australian accounting standards.
2. No termination benefits were paid during the financial year.
3. Other may include death and total/permanent disability insurance premiums and/or GPT superannuation plan administration fees.
4. Ms Horton joined GPT on 1 May 2019, and was appointed Chairman of the Human Resources and Remuneration Committee from 16 May 2019.
5. Mr Menhinnitt joined GPT on 1 October 2019.
6. Mr Whitfield joined GPT on 14 May 2020.
7. See Footnote 3, above.
8. Mr Lim retired from the GPT Board on 31 December 2019.
9. Ms Doyle retired from the GPT Board on 15 May 2019.
Total
$450,000
$430,000
$220,999
$145,301
$201,976
$42,500
$207,000
$210,376
$227,000
$227,000
$224,859
$217,913
$107,013
—
Total
—
$207,507
—
$84,143
$1,638,847
$1,564,740
63
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020DIRECTORS' REPORTRISK MANAGEMENTGOVERNANCESECURITYHOLDER INFORMATIONHOW WE CREATE VALUE 3. Non-Executive Director – GPT security holdings
Non-Executive Director
Vickki McFadden
Tracey Horton AO
Angus McNaughton
Mark Menhinnitt
Michelle Somerville
Gene Tilbrook
Robert Whitfield AM 3
Private holdings (# of securities)
Minimum security holding requirement (MSHR)
Balance
31 Dec 19
Purchase
/(Sale)
Balance
31 Dec 20
MSHR
assessment 1
MSHR
guideline 2
MSHR
assessment date
52,525
60,000
112,525
$527,976
$450,000
7,525
8,196
15,000
36,663
51,071
—
15,000
16,892
15,000
—
—
—
March 2022
May 2023
22,525
25,088
$121,358
$170,000
$149,898
$170,000
November 2022
30,000
$164,475
$170,000
October 2023
36,663
51,071
—
$179,936
$170,000
December 2020
$237,868
$170,000
—
$170,000
May 2020
May 2024
1. The MSHR is assessed by the higher of cost or the current market value (derived by multiplying the number of holdings at the end of the period by GPT's December 2020 30-day
VWAP of $4.6576).
2. 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.
3. Mr Whitfield was appointed to the Board in May 2020.
REMUNERATION ADVISORS
During the year, advisors did not provide any remuneration recommendations in relation to KMPs, as defined in Section 9B of the
Corporations Act 2001.
CLAWBACK AND MALUS
GPT’s Clawback Policy provides the Board with the discretion to modify remuneration outcomes as a result of adverse circumstances
that arise or become known after remuneration has been granted, paid or vested. Individuals who participate in the STIC and LTI are
subject to these awards being adjusted, cancelled or clawed back if a trigger event occurs. No trigger events occurred in 2020, and the
Board did not enact the Clawback Policy during the reporting period.
MINIMUM SECURITY HOLDING REQUIREMENT
GPT’s Minimum Security Holding Policy requires Non-Executive Directors, the CEO, other KMPs and members of the Leadership Team
to build (initially over four years from appointment) and maintain a minimum holding of GPT securities. The guideline requires the CEO
to maintain a holding equal to 150% of base salary. For Non-Executive Directors, other KMP and Leadership Team members, the MSHR is
equal to 100% of base salary or fees.
64
Remuneration ReportThe GPT Group | Annual Report 2020 Directors’ Report
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
15 February 2021
Bob Johnston
Chief Executive Officer
and Managing Director
Sydney
15 February 2021
65
BUSINESS OVERVIEWPERFORMANCE AND PROSPECTSFINANCIAL STATEMENTSThe GPT Group | Annual Report 2020DIRECTORS' REPORTRISK MANAGEMENTGOVERNANCESECURITYHOLDER INFORMATIONHOW WE CREATE VALUE Auditor’s Independence Declaration
Auditor's Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of General Property Trust for the year ended 31 December 2020, 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
15 February 2021
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.
66
The GPT Group | Annual Report 2020 Financial
Statements
Contents
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
NOTES TO THE FINANCIAL STATEMENTS
RESULT FOR THE YEAR
1. Segment information
OPERATING ASSETS AND LIABILITIES
2. Investment properties
3. Equity accounted investments
4. Trade and other receivables
5. Intangible assets
6. Inventories
7. Payables
8. Provisions
9. Taxation
CAPITAL STRUCTURE
10. Equity and reserves
11 Earnings per stapled security
12. Distributions paid and payable
13. Borrowings
14. Financial risk management
15. Other fair value disclosures
OTHER DISCLOSURE ITEMS
16. Cash flow information
17. Lease revenue
18. Commitments
19. Contingent liabilities
20. Security based payments
21. Related party transactions
22. Auditor’s remuneration
23. Parent entity financial information
24. Accounting policies
25. Events subsequent to reporting date
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
68
69
70
71
72
72
77
77
86
89
90
91
92
92
93
95
95
97
98
98
100
105
105
105
106
107
107
107
109
110
110
111
116
117
118
67
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS Consolidated Statement of Comprehensive Income
Year ended 31 December 2020
Financial Statements
Revenue
Rent from investment properties
Property and fund management fees
Development revenue
Development management fees
Fair value adjustments and other income
Fair value (loss)/gain on investment properties
Share of after tax (loss)/profit of equity accounted investments
Interest revenue
Gain on financial liability at amortised cost
Net foreign exchange gain
Total revenue, fair value adjustments and other income
Expenses
Property expenses and outgoings
Management and other administration costs
Development costs
Depreciation expense
Amortisation and impairment of software
Other amortisation expense
Other impairment expense/(reversal)
Impairment loss on trade and other receivables
Finance costs
Net loss on fair value movements of derivatives
Net impact of foreign currency borrowings and associated hedging loss
Total expenses
(Loss)/profit before income tax expense
Income tax expense
Net (loss)/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
Total other comprehensive income
Note
17
5
14(b)
9(a)
10(c)
10(c)
31 Dec 20
$M
31 Dec 19
$M
625.8
83.5
1.2
6.2
716.7
(365.6)
(99.4)
1.1
2.1
0.4
(461.4)
255.3
157.8
63.3
1.0
3.5
7.4
0.1
3.4
62.4
105.7
39.6
15.1
459.3
(204.0)
9.1
(213.1)
(22.4)
(1.7)
(24.1)
653.8
89.0
58.6
5.6
807.0
310.8
266.3
1.5
2.5
—
581.1
1,388.1
170.2
81.7
52.8
1.9
4.9
0.1
(12.1)
0.9
110.7
74.4
10.8
496.3
891.8
11.8
880.0
(6.3)
16.3
10.0
Total comprehensive (loss)/income for the year
(237.2)
890.0
Net (loss)/profit attributable to:
» Securityholders of the Trust
» Securityholders of other entities stapled to the Trust
Total comprehensive (loss)/income attributable to:
» Securityholders of the Trust
» Securityholders of other entities stapled to the Trust
(240.1)
27.0
(264.2)
27.0
850.4
29.6
860.4
29.6
Basic earnings per unit attributable to ordinary securityholders of the Trust
Earnings per unit (cents per unit) – (loss)/profit from continuing operations
11(a)
(12.3)
45.3
Basic earnings per stapled security attributable to ordinary stapled securityholders of the GPT Group
Earnings per stapled security (cents per stapled security) – (loss)/profit from continuing operations
11(b)
(10.9)
46.9
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
68
The GPT Group | Annual Report 2020 Consolidated Statement of Financial Position
As at 31 December 2020
Assets
Current assets
Cash and cash equivalents
Trade receivables
Other receivables
Inventories
Derivative assets
Prepayments
Other assets
Current tax assets
Assets classified as held for sale – investment properties
Total current assets
Non-current assets
Investment properties
Equity accounted investments
Intangible assets
Inventories
Property, plant and equipment
Derivative assets
Right-of-use assets
Deferred tax assets
Other assets
Total non‑current assets
Total assets
Liabilities
Current liabilities
Payables
Borrowings
Derivative liabilities
Lease liabilities – other property leases
Provisions
Current tax liabilities
Total current liabilities
Non-current liabilities
Borrowings
Derivative liabilities
Lease liabilities – investment properties
Lease liabilities – other property leases
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
31 Dec 20
$M
31 Dec 19
$M
4(a)
4(b)
6
14(a)
9(c)
2(a)(v)
2(a)
3
5
6
14(a)
9(d)
7
13
14(a)
8
9(c)
13
14(a)
2(a)
8
10(a)
10(c)
10(d)
10(a)
10(c)
10(d)
372.5
62.7
30.7
53.6
19.2
11.1
41.6
—
591.4
108.5
699.9
10,323.6
3,723.8
41.5
41.9
10.6
461.1
40.6
9.6
6.0
104.2
46.9
48.4
9.4
7.1
7.8
32.8
2.2
258.8
—
258.8
10,327.5
4,543.0
35.3
77.8
10.5
530.8
51.6
20.5
12.0
14,658.7
15,609.0
15,358.6
15,867.8
180.5
519.0
4.0
7.5
29.7
2.0
742.7
3,568.4
109.6
7.8
39.8
1.1
3,726.7
4,469.4
10,889.2
456.4
478.1
2.7
6.8
27.3
—
971.3
3,419.4
95.5
6.4
47.4
1.2
3,569.9
4,541.2
11,326.6
8,673.2
(47.6)
2,700.9
8,673.2
(23.5)
3,123.5
11,326.5
11,773.2
332.0
19.6
(788.9)
(437.3)
332.0
37.3
(815.9)
(446.6)
10,889.2
11,326.6
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
69
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS Consolidated Statement of Changes in Equity
Year ended 31 December 2020
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70
Financial StatementsThe GPT Group | Annual Report 2020
Consolidated Statement of Cash Flows
Year ended 31 December 2020
Note
31 Dec 20
$M
31 Dec 19
$M
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
Interest received
Income taxes refunded/(paid)
Finance costs paid
Net cash inflows from operating activities
16(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 investment properties (net of transaction costs)
Payments for property, plant and equipment
Payments for intangibles
Investment in equity accounted investments
Proceeds from disposal of equity accounted investments
Net cash inflows/(outflows) from investing activities
Cash flows from financing activities
Proceeds from issue of stapled securities (net of transaction costs)
Proceeds from borrowings
Repayment of borrowings
Repayment of principal elements of lease payments
Payment for termination and restructure of derivatives
Distributions paid to securityholders
Net cash outflows from financing activities
Net 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
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
716.9
(279.1)
1.2
(10.0)
159.5
1.3
1.3
(100.9)
490.2
(245.7)
(60.6)
(265.6)
61.8
(3.6)
(14.5)
(9.2)
583.9
46.5
—
2,417.9
(2,201.7)
(6.8)
(36.2)
(441.6)
(268.4)
268.3
104.2
372.5
820.0
(289.4)
58.6
(21.0)
168.4
1.4
(10.2)
(113.2)
614.6
(280.7)
(89.6)
(284.0)
796.3
(1.0)
(13.5)
(540.8)
—
(413.3)
853.6
2,701.7
(3,081.9)
(6.2)
(137.2)
(485.8)
(155.8)
45.5
58.7
104.2
71
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS Notes to the Financial Statements
Year ended 31 December 2020
These are the consolidated financial statements of the
consolidated entity, GPT Group (GPT or the Group), 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 15 – CAPITAL STRUCTURE: outlines how GPT
manages its capital structure and various financial risks.
Notes 16 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 COVID-19 pandemic has created heightened levels of
economic uncertainty, resulting in management’s judgements
and estimates having a greater impact on the result for the period
than would normally be the case.
GPT has assessed key judgements and estimates in light of
COVID-19 and adjusted underlying assumptions accordingly.
Management has made key assumptions relating to the levels of
debt forgiveness (rent waivers) to be provided to tenants (including
both SME tenants as defined by the commercial tenancy Code of
Conduct, and other impacted tenants). While steady progress has
been made in finalising leasing deals under the Code of Conduct,
there are still a number of deals that remain unresolved. Therefore,
management has used their judgement to determine estimated
amounts of rent waivers for the year to 31 December 2020.
These have been reflected as a write-off of trade receivables.
For remaining uncollected trade receivables at 31 December 2020,
management has assessed that there is an increased level of
risk associated with the collection of these balances due to the
financial impacts of the pandemic on tenants. Management has
therefore made material judgements in relation to the likelihood
of collecting these amounts, which have been reflected in the
estimated credit loss allowance for trade receivables. See note 4.
Future uncertainty caused by COVID-19 has also impacted
estimates of future investment property income and investment
property prices, resulting in significant impacts to the valuations
of some investment properties. GPT has had all investment
properties independently valued by expert valuers who have
included estimates of the impacts of COVID-19 in the valuations,
both in the short term and any consequential impacts to
the medium and long term on general market conditions.
Management has reviewed the investment property valuations for
both accuracy and the reasonableness of the assumptions used
to determine fair value. A sensitivity analysis has been included in
note 2(d), showing indicative movements in investment property
valuations should certain key metrics differ from those assumed in
the valuations.
The following judgements, estimates and assumptions have the
potential to have a material impact on the financial statements:
Area of judgements and estimates
Assumptions underlying
Lease liabilities
Investment properties*
Trade receivables*
Management rights
IT development and software
Inventories
Deferred tax assets
Security based payments
Equity accounted investments
Right-of-use assets*
Lease term, incremental borrowing rate
Fair value
Measurement of expected credit loss
Impairment trigger and recoverable amounts
Impairment trigger and recoverable amounts
Lower of cost and net realisable value
Recoverability
Fair value
Assessment of control versus disclosure guidance
Recoverable amount
Items marked with * contain judgements and estimates which have been significantly impacted by COVID-19.
Note
2
2
4
5
5
6
9
20
24(c)
24(d)(vii)
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 certain items which are non-cash, unrealised or capital in
nature. FFO includes impairment losses related to uncollected trade receivables. FFO has been determined in accordance with guidelines
issued by the Property Council of Australia.
72
Financial StatementsThe GPT Group | Annual Report 2020 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 as well as net finance costs, corporate
management and administration expenses and income tax expense.
a) Segment financial information
31 December 2020
The segment financial information provided to the chief operating decision makers for the year ended 31 December 2020 is set out below:
Financial performance by segment
Rent from investment properties
Property expenses and outgoings
Income from Funds
Fee income
Management & administrative expenses
Operations Net Income
Development management fees
Development revenue
Development costs
Development management expenses
Development Net Income
Interest revenue
Finance costs
Net Finance Costs
Segment Result Before Tax
Income tax expense
Funds from Operations (FFO)
Note
b(ii)
b(iii)
b(iv)
b(v)
b(vi)
b(vii)
b(viii)
b(ix)
b(x)
b(i)
Retail
$M
287.3
(93.1)
28.3
10.4
(12.1)
220.8
1.9
4.6
—
(1.6)
4.9
—
—
—
225.7
—
225.7
Office
$M
273.5
(57.3)
70.5
3.6
(10.1)
280.2
4.5
—
—
(2.8)
1.7
—
—
—
281.9
—
281.9
Logistics
$M
Funds
Management
$M
Corporate
$M
169.9
(29.1)
—
—
(1.5)
139.3
—
1.2
(1.0)
(0.1)
0.1
—
—
—
139.4
—
139.4
—
—
—
61.1
(13.9)
47.2
—
—
—
—
—
—
—
—
47.2
—
47.2
—
—
—
—
(26.1)
(26.1)
—
—
—
—
—
1.1
(103.8)
(102.7)
(128.8)
(10.7)
(139.5)
Reconciliation of segment assets and liabilities to the Consolidated Statement of Financial Position
Office
$M
Logistics
$M
Funds
Management
$M
Corporate
$M
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
Retail
$M
46.9
46.9
4,753.9
803.3
37.1
10.2
5,604.5
5,65 1.4
7.8
7.8
—
—
122.0
122.0
2,691.8
2,910.5
—
21.4
5,623.7
5,623.7
24.6
24.6
2,877.9
—
4.8
6.1
2,888.8
3,010.8
31.9
31.9
5,643.6
5,599.1
2,978.9
531.0
531.0
—
10.0
—
531.7
541.7
—
—
—
—
—
—
—
—
—
—
—
1,072.7
15,358.6
4,405.1
4,469.4
4.405.1
4,469.4
(3,332.4)
10,889.2
73
Total
$M
730.7
(179.5)
98.8
75.1
(63.7)
661.4
6.4
5.8
(1.0)
(4.5)
6.7
1.1
(103.8)
(102.7)
565.4
(10.7)
554.7
Total
$M
699.9
699.9
10,323.6
3,723.8
41.9
569.4
14,658.7
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS 31 December 2019
The segment financial information provided to the chief operating decision makers for the year ended 31 December 2019 is set out below:
Financial performance by segment
Rent from investment properties
Property expenses and outgoings
Income from Funds
Fee income
Management & administrative expenses
Operations Net Income
Development management fees
Development revenue
Development costs
Development management expenses
Development Net Income
Interest revenue
Finance costs
Net Finance Costs
Segment Result Before Tax
Income tax expense
Funds from Operations (FFO)
Note
b(ii)
b(iii)
b(iv)
b(v)
b(vi)
b(vii)
b(viii)
b(ix)
b(x)
b(i)
Retail
$M
376.3
(106.4)
45.5
14.5
(8.3)
321.6
2.4
21.9
(17.0)
(2.9)
4.4
—
—
—
326.0
—
326.0
Office
$M
266.1
(57.0)
72.2
4.3
(10.3)
275.3
3.1
—
—
(2.1)
1.0
—
—
—
276.3
—
276.3
Logistics
$M
Funds
Management
$M
Corporate
$M
147.0
(24.9)
—
0.1
(1.3)
120.9
0.1
36.7
(35.9)
(0.8)
0.1
—
—
—
121.0
—
121.0
—
—
—
61.9
(15.6)
46.3
—
—
—
—
—
—
—
—
46.3
—
46.3
—
—
—
—
(35.3)
(35.3)
—
—
—
—
—
1.5
(109.5)
(108.0)
(143.3)
(12.6)
(155.9)
Reconciliation of segment assets and liabilities to the Consolidated Statement of Financial Position
Retail
$M
Office
$M
Logistics
$M
Funds
Management
$M
Corporate
$M
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
—
—
—
—
13.7
13.7
5,356.6
990.8
71.8
10.2
6,429.4
6,429.4
6.4
6.4
2,532.5
3,542.2
—
28.0
6,102.7
6,102.7
25.9
25.9
2,438.4
—
6.0
12.1
2,456.5
2,470.2
31.9
31.9
6,423.0
6,076.8
2,438.3
—
—
—
—
—
—
—
—
—
—
—
74
Total
$M
789.4
(188.3)
117.7
80.8
(70.8)
728.8
5.6
58.6
(52.9)
(5.8)
5.5
1.5
(109.5)
(108.0)
626.3
(12.6)
613.7
Total
$M
258.8
258.8
10,327.5
4,543.0
77.8
660.7
245.1
245.1
—
10.0
—
610.4
620.4
15,609.0
865.5
15,867.8
4,477.0
4,477.0
4,541.2
4,541.2
(3,611.5)
11,326.6
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 b) Reconciliation of segment result to the Consolidated Statement of Comprehensive Income
FFO to Net (loss)/profit for the year
i)
Segment result
FFO
Adjustments
Fair value (loss)/gain on investment properties
Fair value (loss)/gain and other adjustments to equity accounted investments
Amortisation of lease incentives and costs
Straightlining of rental income
Valuation (decrease)/increase
Net loss on fair value movement of derivatives
Net impact of foreign currency borrowings and associated hedging loss
Net foreign exchange gain
Gain on financial liability at amortised cost
Financial instruments mark to market and net foreign exchange movements
Impairment (expense)/reversal
Other items
Total other items
Consolidated Statement of Comprehensive Income
Net (loss)/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
Eliminations of intra-group lease payments
Adjustments
Amortisation of lease incentives and costs
Straightlining of rental income
Impairment loss on trade and other receivables
Consolidated Statement of Comprehensive Income
Rent from investment properties
iii) Property expenses and outgoings
Segment result
Property expenses and outgoings
Less: share of property expenses and outgoings in equity accounted investments
Consolidated Statement of Comprehensive Income
Property expenses and outgoings
iv) Share of after tax profit of equity accounted investments
Segment result
Income from funds
Share of rent from investment properties in equity accounted investments
Share of property expenses and outgoings in equity accounted investments
Development revenue – equity accounted investments
Development costs – equity accounted investments
Adjustments
Fair value (loss)/gain and other adjustments to equity accounted investments
Consolidated Statement of Comprehensive Income
Share of after tax (loss)/profit of equity accounted investments
31 Dec 20
$M
31 Dec 19
$M
554.7
613.7
(365.6)
(295.4)
(56.9)
5.4
(712.5)
(39.6)
(15.1)
0.4
2.1
(52.2)
(3.4)
0.3
(3.1)
310.8
72.6
(47.8)
6.6
342.2
(74.4)
(10.8)
—
2.5
(82.7)
12.1
(5.3)
6.8
(213.1)
880.0
730.7
(114.3)
(1.5)
(56.9)
5.4
62.4
789.4
(94.2)
(1.1)
(47.8)
6.6
0.9
625.8
653.8
(179.5)
21.7
(188.3)
18.1
(157.8)
(170.2)
98.8
114.3
(21.7)
4.6
—
(295.4)
117.7
94.2
(18.1)
—
(0.1)
72.6
(99.4)
266.3
75
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS Notes to the Financial Statements
Year ended 31 December 2020
v) Fee income
Segment result
Fee income
Adjustments
Management expenses offset in fee income
Consolidated Statement of Comprehensive Income
Property and fund management fees
vi) Management and administration expenses
Segment result
Operations
Development
Eliminations of intra-group lease payments
Transfer to Finance costs – leases
Less: depreciation expense
Less: impairment and amortisation of software
Less: other amortisation expense
Less: other impairment expense
Adjustments
Other
Management expenses recognised within fee income
Consolidated Statement of Comprehensive Income
Management and other administration costs
vii) Development revenue
Segment result
Development revenue
Less: share of after tax profit of equity accounted investments
Consolidated Statement of Comprehensive Income
Development revenue
viii) Development costs
Segment result
Development costs
Less: share of after tax loss of equity accounted investments
Consolidated Statement of Comprehensive Income
Development costs
ix) Finance costs
Segment result
Finance costs – borrowings
Finance costs – leases
Consolidated Statement of Comprehensive Income
Finance costs
Income tax expense
x)
Segment result
Income tax expense
Adjustment
Tax impact of reconciling items from segment result to net (loss)/profit for the year
Consolidated Statement of Comprehensive Income
Income tax expense
76
31 Dec 20
$M
31 Dec 19
$M
75.1
8.4
80.8
8.2
83.5
89.0
(63.7)
(4.5)
1.5
1.9
3.5
7.4
0.1
0.1
(1.2)
(8.4)
(70.8)
(5.8)
1.1
1.2
1.9
—
—
—
(1.1)
(8.2)
(63.3)
(81.7)
5.8
(4.6)
58.6
—
1.2
58.6
(1.0)
—
(52.9)
0.1
(1.0)
(52.8)
(103.8)
(1.9)
(109.5)
(1.2)
(105.7)
(110.7)
(10.7)
(12.6)
1.6
0.8
(9.1)
(11.8)
Financial StatementsThe GPT Group | Annual Report 2020 c) Net profit on disposal and derecognition of assets
Details of disposals during the year:
Cash consideration
Less: transaction costs
Net consideration
Carrying amount of net assets sold
Profit on sale and derecognition before income tax
The carrying amounts of assets and liabilities as at the date of disposal were:
Investment properties
Equity accounted investments
Net assets
OPERATING ASSETS AND LIABILITIES
2.
Investment Properties
31 Dec 20
$M
31 Dec 19
$M
650.0
(4.5)
645.5
800.0
(3.7)
796.3
(645.5)
(796.3)
—
—
61.8
583.7
645.5
796.3
—
796.3
Basis of valuation
In line with the Valuation Policy, GPT independently values each asset (including investment property assets disclosed within equity
accounted investments) at least annually. However, in light of the current economic environment, the Group independently valued all
investment properties as at the reporting date (excluding assets held for sale and acquired during the second half of the year).
These valuations were undertaken having regards to the following factors:
» The government legislated the Code of Conduct for commercial tenancies, in addition to implementing various health and other
economic measures which have impacted GPT’s properties, tenants and cash flows;
» Independent valuers will analyse and then reflect transaction evidence in their key valuation assumptions, including capitalisation and
discount rates, when the evidence becomes available. The fair value assessment of GPT’s portfolio as at the reporting date includes an
estimate of the impacts of COVID-19 using information available at the time of preparation of the financial statements, including the
impact of rent relief estimated to be granted to tenants. Independent valuers have also adjusted a number of assumptions, including
increasing allowances for incentives and lease up periods for current vacancies and near term lease expiries and lowering forecast
market rental growth rates; and
» In the event that COVID-19 impacts are more severe or prolonged than anticipated, this may have a further adverse impact on the fair
value of GPT’s investment properties.
The independent valuations contained material valuation uncertainty clauses given the impacts of COVID-19. The valuations can be relied
upon at the date of valuation however, a higher level of valuation uncertainty than normal is assumed.
GPT provides factual information to the independent valuers, including passing rent information, outstanding incentives and capital
expenditure forecasts which the independent valuers then use to form their own assessment. Management has reviewed the investment
property valuations for both accuracy and reasonableness of the assumptions used to determine fair value. The fair values, as assessed
by the independent valuers, are shown in the following tables.
a)
Investment properties
Retail
Office
Logistics
Properties under development
Total investment properties
Investment
properties
Less lease
liabilities
31 Dec 20
Fair value
Investment
properties
Less lease
liabilities
31 Dec 19
Note
(i)
(ii)
(iii)
(iv)
(vi)
$M
4,753.9
2,437.8
2,666.7
465.2
10,323.6
$M
(7.8)
—
—
—
(7.8)
$M
4,746.1
2,437.8
2,666.7
465.2
$M
5,356.6
2,410.5
2,223.8
336.6
10,315.8
10,327.5
$M
(6.4)
—
—
—
(6.4)
Fair value
$M
5,350.2
2,410.5
2,223.8
336.6
10,321.1
77
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS e
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3
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020
vi) Reconciliation
Opening balance at the beginning of the year
Additions – operating capital expenditure
Additions – development capital expenditure
Additions – interest capitalised 1
Asset acquisitions
Transfers to assets held for sale
Transfers to/(from) properties under development
Transfer from inventory
Ground leases of investment properties
Disposals
Fair value adjustments
Lease incentives (includes rent free)
Leasing costs
Amortisation of lease incentives and costs
Straightlining of leases
Office
$M
Logistics
$M
Properties
under
development
$M
31 Dec 20
$M
31 Dec 19
$M
2,410.5
6.1
22.3
0.3
—
—
—
—
—
—
(0.7)
22.4
2.0
(23.9)
(1.2)
2,223.8
8.0
8.9
—
205.0
(103.0)
182.7
—
—
(58.2)
197.2
10.8
1.7
(16.5)
6.3
336.6
—
194.5
9.5
40.7
—
(182.7)
—
—
—
66.4
—
—
—
0.2
10,327.5
28.4
247.4
10.3
245.7
(108.5)
—
—
1.4
(61.8)
(365.6)
43.7
6.6
(56.9)
5.4
10,128.8
51.4
269.1
9.5
296.4
—
—
39.6
6.4
(796.3)
310.8
44.8
8.2
(47.8)
6.6
Retail
$M
5,356.6
14.3
21.7
0.5
—
(5.5)
—
—
1.4
(3.6)
(628.5)
10.5
2.9
(16.5)
0.1
Closing balance at the end of the year
4,753.9
2,437.8
2,666.7
465.2
10,323.6
10,327.5
1. A capitalisation interest rate of 3.1% (2019: 3.6%) 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.
81
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS b) Fair value measurement, valuation techniques and inputs
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 transactions and market conditions, using generally accepted
market practices. A description of the valuation techniques and key inputs are included in the following table:
Class
of assets
Retail
Fair value
hierarchy 1
Valuation
technique
Level 3
Discounted
cash flow (DCF)
and income
capitalisation
method
Office
Level 3
DCF and income
capitalisation
method
Logistics
Level 3
DCF and income
capitalisation
method
Inputs used to measure fair value
Gross market rent (per sqm p.a.)
10 year average specialty market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Lease incentives (gross)
COVID-19 allowance (% of annual income)
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)
COVID-19 allowance (% of annual income)
Net market rent (per sqm p.a.)
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Lease incentives (net)
COVID-19 allowance (% of annual income)
Level 3
Properties
under
development
Income
capitalisation
method, or land
rate
Net market rent (per sqm p.a.)
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Land rate (per sqm)
Profit and risk factor
1. Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Unobservable inputs
31 Dec 20
Unobservable inputs
31 Dec 19
$1,382 – $2,238
2.4% – 3.1%
4.50% – 6.25%
4.75% – 6.50%
6.00% – 7.00%
7.3% – 12.5%
7.3% – 20.1%
$430 – $1,435
2.5% – 3.7%
4.75% – 5.75%
5.00% – 6.00%
6.13% – 6.50%
10.0% – 38.5%
– 52.0%
0%
$70 – $530
2.6% – 3.4%
4.38% – 5.75%
4.63% – 6.00%
6.00% – 6.75%
8.3% – 30.0%
– 25.0%
0%
$109 – $655
5.00% – 5.25%
5.00% – 5.63%
6.00% – 6.38%
$250 – $500
15.0% – 16.9%
$1,330 – $2,423
2.8% – 3.6%
4.25% – 6.00%
4.50% – 6.25%
6.25% – 7.00%
5.0% – 7.5%
—
$425 – $1,620
3.3% – 4.3%
4.39% – 5.50%
4.63% – 5.75%
6.25% – 6.75%
15.0% – 37.5%
—
$65 – $515
2.8% – 3.2%
4.63% – 7.00%
5.00% – 7.25%
6.25% – 7.50%
10.0% – 30.0%
—
$85 – $655
5.13% – 5.63%
5.50% – 6.00%
6.50% – 6.63%
$217 – $531
5.0% – 15.0%
82
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 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
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.
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 and
excludes the building outgoings or cleaning costs paid by the tenant.
10 year average
specialty market
rental growth
The expected annual rate of change in market rent over a 10 year forecast period in specialty tenancy rents.
Specialty tenants are those tenancies with a gross lettable area of less than 400 square metres (excludes ATMs
and kiosks).
10 year average
market rental growth
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.
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.
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.
Land rate (per sqm)
The land rate is the market land value per sqm.
Profit and risk factor
The profit and risk factor is applied to the remaining costs of a development to reflect a target margin required
to complete the project. The factor will vary depending on the remaining leasing or construction required.
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.
COVID-19 allowance
The COVID-19 allowance reflects the anticipated prospective rent relief granted to tenants in accordance with
the Code of Conduct principles.
83
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS c) 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, Head of Transactions, Deputy Chief Financial Officer and General Counsel.
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 independent valuation sign-off and any comments that have been noted.
All independent valuations and internal tolerance checks are reviewed by the committee prior to these being presented to the Board
for approval.
Independent valuations
GPT’s independent 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. Where an exceptional circumstance arises, the extension of the valuer’s term must be approved by the relevant Board.
The Valuation Policy requires an independent valuation at least annually for all completed investment properties. Properties under
development with value of $100 million or greater are independently valued at least every six months. Unimproved land is independently
valued at least every three years. Additional valuations will be completed in the event an internal tolerance check identifies the
requirement for an independent valuation.
In 2020, given the uncertainty caused by COVID-19, all properties were independently valued at both 30 June and 31 December 1.
Internal tolerance checks
Every six months, with the exception of properties independently 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 independent 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 independent
valuation is required.
Properties under development
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.”
The fair value of vacant land parcels is based on the market land value per square metre.
Highest and best use
The fair value of investment properties is calculated based on 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. It is noted that the determination is exclusive of 5 Figtree Drive, Sydney
Olympic Park which has been determined by the independent valuer as at 31 December 2020 to retain its highest and best use as a
logistics asset.
1. Excludes assets held for sale and acquired during the second half of the year.
84
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 d) Sensitivity information – investment properties
Critical judgements are made by GPT in respect of the fair values of investment properties (including investment properties within equity
accounted investments). Fair values are reviewed regularly by management with reference to independent property valuations, recent
offers and market conditions, and using generally accepted market practices. The valuation process, critical assumptions underlying the
valuations and information on sensitivity are disclosed below and in note 2(b).
An independent valuer will typically conduct both an income capitalisation valuation and a discounted cash flow (DCF) valuation for each
asset, which informs a range of valuation outcomes. The valuer will then apply their expertise in determining an adopted value, which may
include adopting one of these specific approaches or a mid-point of these two approaches.
Given the higher prevalence of DCF based valuations, management have included a sensitivity table reflecting potential movements in
key DCF valuation variables, being discount rate and the market income growth rate. In conducting the sensitivity analysis, management
have selected sample of two assets for each portfolio, for which key metrics are typical of the portfolio to which they relate. For those
assets, the independent valuer conducted the sensitivity analysis in the following tables. Results for individual assets may differ based on
each asset’s particular attributes and market conditions.
The table below shows the sensitivity of the valuation to movements in the key variables of discount rate and market rental growth rates.
i)
Retail valuation sensitivity
Discount Rate
Impact to valuation
10 Year Specialty Growth Rate
Impact to valuation
ii) Office valuation sensitivity
Discount Rate
Impact to valuation
10 Year Growth Rate
Impact to valuation
iii) Logistics valuation sensitivity
Discount Rate
Impact to valuation
10 Year Growth Rate
Impact to valuation
e) Lease receivables
Lease amounts to be received not recognised in the financial statements at balance date are as follows:
Less than 1 year
2 years
3 years
4 years
5 years
Due after five years
Total operating lease receivables
(0.25%)
2.0%
(0.25%)
(1.6%)
0.25%
(2.0%)
0.25%
1.7%
(0.25%)
0.25%
2.1%
(2.1%)
(0.25%)
(2.0%)
0.25%
1.9%
(0.25%)
0.25%
1.9%
(1.9%)
(0.25%)
(1.8%)
0.25%
1.9%
31 Dec 20
$M
31 Dec 19
$M
550.0
478.1
398.5
337.9
278.1
1,021.2
3,063.8
524.2
469.0
413.0
340.4
282.9
1,100.2
3,129.7
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). Leases have only been included where
there is an active lease in place and renewal has not been assumed unless there is reasonable certainty that the tenant intends to renew.
85
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS 3. Equity Accounted Investments
Investments in joint ventures
Investments in associates
Total equity accounted investments
a) Details of equity accounted investments
Name
i)
Joint ventures
2 Park Street Trust 1
1 Farrer Place Trust 1,2
Horton Trust
Lendlease GPT (Rouse Hill) Pty Limited 1,3
Total investment in joint venture entities
ii) Associates
GPT Wholesale Office Fund 1,4
GPT Wholesale Shopping Centre Fund 1,5
GPT Funds Management Limited
Darling Park Trust 1
DPT Operator Pty Limited 1
DPT Operator No.2 Pty Limited 1
Total investments in associates
Note
(a)(i)
(a)(ii)
31 Dec 20
$M
848.6
2,875.2
31 Dec 19
$M
1,431.1
3,111.9
3,723.8
4,543.0
Principal Activity
31 Dec 20
%
31 Dec 19
%
31 Dec 20
$M
31 Dec 19
$M
Ownership Interest
Investment property
Investment property
Investment property
Property development
Investment property
Investment property
Funds management
Investment property
Management
Management
50.00
—
50.00
50.00
21.87
28.48
100.00
41.67
91.67
91.67
50.00
50.00
50.00
50.00
22.93
28.49
100.00
41.67
91.67
91.67
804.6
—
28.1
15.9
848.6
1,579.6
759.3
10.0
526.3
—
—
2,875.2
795.8
594.3
29.7
11.3
1,431.1
1,610.6
949.8
10.0
541.5
—
—
3,111.9
1. The entity has a 30 June balance date.
2. On 14 December 2020, GPT disposed of its interest in 1 Farrer Place Trust.
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 Distribution Reinvestment Plan (DRP) and equity raisings which occurred during the year.
5. Ownership has decreased as a result of GPT not participating in the DRP during the year.
For those joint ventures with investment property as the principal activity refer to note 2 for details on key judgements and estimates
relating to the valuation of these investment properties, including how COVID-19 impacts have been addressed.
For those joint ventures where the principal activity is property development refer to note 6 for details on key judgements and estimates.
86
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 b) Summarised financial information for associates and joint ventures
The information disclosed reflects the amounts presented in the 31 December 2020 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
Non-current assets
Investment properties and loans
Other non-current assets
Total non‑current assets
Current liabilities
Financial liabilities (excluding trade
payables, other payables and provisions)
Other current liabilities
Total current liabilities
Net assets
Reconciliation to carrying amounts:
Opening net assets 1 January
Profit for the year
Capital injection
Issue of equity
Distributions paid/payable
Disposal of units in trust
Closing net assets
GPT’s share
Summarised statement
of comprehensive income
Revenue
Profit for the year
Total comprehensive income
2 Park Street Trust
1 Farrer Place Trust
Others
Total
31 Dec 20
$M
31 Dec 19
$M
31 Dec 20
$M
31 Dec 19
$M
31 Dec 20
$M
31 Dec 19
$M
31 Dec 20
$M
31 Dec 19
$M
30.3
0.7
31.0
20.2
1.8
22.0
1,610.0
—
1,590.0
—
1,610.0
1,590.0
31.3
0.6
31.9
19.8
0.6
20.4
1,609.1
1,591.6
—
—
—
—
—
—
—
—
—
—
12.2
5.7
17.9
1,203.5
—
1,203.5
24.3
8.6
32.9
11.8
18.4
30.2
57.0
7.2
64.2
2.6
3.8
6.4
7.9
0.4
8.3
62.1
15.0
77.1
3.1
0.3
3.4
42.1
19.1
61.2
40.3
7.9
48.2
1,667.0
7.2
2,855.6
15.0
1,674.2
2,870.6
33.9
4.4
38.3
47.2
9.5
56.7
1,188.5
88.0
82.0
1,697.1
2,862.1
1,591.6
84.1
—
—
(66.6)
—
1,526.2
131.2
—
—
(65.8)
—
1,609.1
1,591.6
804.6
795.8
1,188.5
12.0
—
3.2
(35.9)
(1,167.8)
—
—
1,107.2
117.5
—
9.4
(45.6)
—
1,188.5
82.0
4.8
2.8
—
(1.6)
—
88.0
594.3
44.0
82.8
0.6
—
—
(1.4)
—
82.0
41.0
2,862.1
100.9
2.8
3.2
(104.1)
(1,167.8)
2,716.2
249.3
—
9.4
(112.8)
—
1,697.1
2,862.1
848.6
1,431.1
72.8
84.1
84.1
73.8
131.2
131.2
31.4
12.0
12.0
61.2
117.5
117.5
25.6
4.8
4.8
5.2
0.6
0.6
129.8
100.9
100.9
140.2
249.3
249.3
87
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS ii) Associates
GPT Wholesale
Office Fund
GPT
Wholesale Shopping
Centre Fund
Darling Park
Trust
GPT Funds
Management Limited
and others
Total
31 Dec 20
$M
31 Dec 19
$M
31 Dec 20
$M
31 Dec 19
$M
31 Dec 20
$M
31 Dec 19
$M
31 Dec 20
$M
31 Dec 19
$M
31 Dec 20
$M
31 Dec 19
$M
10.0
186.5
167.8
— 14,015.8 14,509.8
287.4
—
275.8
2,722.8
— 2,765.0
10.0
11,161.5
11,667.4
10.2
(0.2)
—
—
—
11,667.4 9,954.3
603.7
1,283.2
263.4
(437.2)
(496.7)
14.9
332.8
(356.9)
10.0
11.161.5
11,667.4
10.0
2,875.2
3,111.9
—
(0.2)
736.6
(496.7)
894.1
603.7
(0.2)
(496.7)
603.7
—
52.1
56.5
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
68.9
8,968.2
174.5
1,640.2
81.9
8,725.3
169.1
1,614.4
78.3
3,778.6
66.2
1,124.8
49.6
4,478.0
85.1
1,108.4
29.3
1,269.0
35.1
—
26.3
1,306.5
33.2
—
Net assets
7,222.4
7,023.7
2,665.9
3,334.1
1,263.2
1,299.6
Reconciliation to
carrying amounts:
Opening net assets 1 January
Profit/(loss) for the year
Acquisition of units in trust
Issue of equity
Distributions paid/payable
7,023.7
156.9
—
331.9
(290.1)
6,395.7
662.4
—
253.2
(287.6)
3,334.1
(668.4)
—
0.9
(0.7)
3,548.4
(104.5)
—
10.2
(120.0)
1,299.6
14.8
14.9
—
(66.1)
—
46.0
1,283.2
—
(29.6)
Closing net assets
7,222.4
7,023.7
2,665.9
3,334.1
1,263.2
1,299.6
GPT’s share
1,579.6
1,610.6
759.3
949.8
526.3
541.5
Summarised statement of
comprehensive income
Revenue
Profit/(loss) for the year
Total comprehensive
income/(loss)
Distributions
received/receivable
from their associates
413.0
156.9
550.2
662.4
224.7
(668.4)
316.5
(104.5)
98.9
14.8
27.4
46.0
156.9
662.4
(668.4)
(104.5)
14.8
46.0
52.1
56.5
—
—
—
—
10.0
—
—
—
10.0
10.0
—
—
—
—
10.0
10.0
—
—
—
—
88
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 4. Trade and Other Receivables
a) Trade receivables
Current assets
Trade receivables 1
Accrued income
Related party receivables 2
Less: impairment of trade receivables
Total current trade receivables
31 Dec 20
$M
31 Dec 19
$M
50.2
7.2
24.6
(19.3)
62.7
8.7
13.8
26.3
(1.9)
46.9
1. This includes trade receivables relating to revenue from contracts with customers. Refer to note 17 for the methodology of apportionment between trade receivables relating to
AASB 15 Revenue from Contacts with Customers and other trade receivables balances.
2. The related party receivables are on commercial terms and conditions.
The following table shows the ageing analysis of GPT’s trade receivables.
Not yet
due
$M
2.1
1.1
0.1
—
0–30
days
$M
17.5
1.3
1.7
25.8
31 Dec 20
31–60
days
$M
61–90
days
$M
6.6
0.8
—
0.3
4.6
0.2
0.2
0.1
90+
days
$M
17.5
1.5
0.5
0.1
Total
$M
48.3
4.9
2.5
26.3
(1.3)
(5.6)
(3.0)
(2.0)
(7.4)
(19.3)
Retail
Office
Logistics
Corporate
Less: impairment of
trade receivables
Total loans and receivables
2.0
40.7
4.7
3.1
12.2
62.7
31 Dec 19
31–60
days
$M
61–90
days
$M
0.6
0.1
—
0.2
—
0.9
—
—
—
0.2
—
0.2
0–30
days
$M
2.9
12.8
1.9
28.2
—
45.8
Not yet
due
$M
—
—
—
—
—
—
90+
days
$M
1.5
0.4
—
—
Total
$M
5.0
13.3
1.9
28.6
(1.9)
(1.9)
—
46.9
b) Other receivables
Current assets
Distributions receivable from associates
Distributions receivable from joint ventures
Other receivables
Total current other receivables
31 Dec 20
$M
31 Dec 19
$M
23.0
2.2
5.5
30.7
30.7
10.8
6.9
48.4
On 7 April 2020, the National Cabinet announced a mandatory commercial tenancy Code of Conduct. The Code of Conduct aims to
help small and medium enterprise (SME) tenants with a turnover of less than $50 million, that qualify for the Federal Government’s
JobKeeper program, and are suffering financial stress or hardship. The Code of Conduct sets out principles to guide discussions between
commercial landlords and SME tenants for temporary changes to leasing arrangements during the COVID-19 period and is legislated and
regulated by the states and territories.
The application of the Code of Conduct requires GPT to engage with each of our SME tenants and provide cash flow support in a fair
and proportionate manner during the COVID-19 period. Importantly, the Code of Conduct allows the Group to negotiate commercial
outcomes on a case by case basis for those SMEs most impacted. While steady progress has been made in finalising agreements under
the Code of Conduct, there are still a number of deals that remain unresolved. GPT is also engaging with its non-SME tenants who have
sought assistance but are not eligible under the Code of Conduct. Assistance provided to tenants under the Code of Conduct has taken
the form of rent waivers, rent payment deferral or a combination of the two.
Receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method less any
allowance under the ‘expected credit loss’ (ECL) model. 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.
All loans and receivables with maturities greater than 12 months after the balance date are classified as non-current assets.
Rent waivers and other write-offs
Debts which management has determined will be subject to a rent waiver, or are otherwise uncollectible have been written off as at
31 December 2020, in accordance with the requirements of AASB 9 Financial Instruments. Bad debt write offs of $44.7 million relating
to COVID-19 abatements and other non recoverable amounts have been recognised during the financial year. Waivers which have been
reflected on invoices issued to tenants and which are not relating to previous outstanding debtors, have been shown as a reduction to
rent from investment properties on the Consolidated Statement of Comprehensive Income.
89
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS Estimated credit loss allowance
For remaining trade and other receivables balances which have not been written off, management has assessed whether these balances
are “credit impaired”, and recognised a loss allowance equal to the lifetime ECL.
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 is expected to occur.
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 when they fall due and management determines that the debt is uncollectible,
or where management forgives all or part of the debt.
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.
As a result of COVID-19 GPT has reviewed its methodology to determine an estimated lifetime ECL, with historical default percentages
no longer the most appropriate means of predicting future default events. At 31 December 2020, GPT has assessed the likelihood of
future defaults and debt forgiveness taking into account several factors. These include the risk profile of the tenant, the asset location,
and tenant cash payment trends after the completion of rent relief agreements.
This has resulted in an ECL allowance of $19.3 million being recognised as at 31 December 2020. The remaining net balance of trade
receivables (excluding accrued income and related party receivables) is $30.9 million.
5.
Intangible Assets
Costs
Balance at 31 December 2018
Additions
Write off
Balance at 31 December 2019
Additions
Write off
Balance at 31 December 2020
Accumulated amortisation and impairment
Balance at 31 December 2018
Amortisation
Impairment
Write off
Balance at 31 December 2019
Amortisation
Impairment
Write off
Balance at 31 December 2020
Carrying amounts
Balance at 31 December 2019
Balance at 31 December 2020
90
Management
rights
$M
IT development
and software
$M
55.8
—
—
55.8
—
(3.8)
52.0
(45.5)
—
—
—
(45.5)
—
—
3.8
(41.7)
10.3
10.3
64.3
15.7
(4.7)
75.3
13.6
(13.2)
75.7
(47.8)
(5.0)
(2.2)
4.7
(50.3)
(5. 1)
(2.3)
13.2
(44.5)
25.0
31.2
Total
$M
120.1
15.7
(4.7)
131.1
13.6
(17.0)
127.7
(93.3)
(5.0)
(2.2)
4.7
(95.8)
(5. 1)
(2.3)
1 7.0
(86.2)
35.3
41.5
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 Management rights
Management rights include property management and development management rights. Rights are initially measured at cost and
subsequently amortised over their useful life.
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 discounted cash flow. A 13% pre-tax discount rate and
2.8% growth rate have been applied to these asset specific cash flow projections.
During the year management tested all inputs in the fair value assessment of the management rights and have adjusted these inputs
where they have been impacted by the COVID-19 pandemic. Based on this assessment management believes that the fair value of the
management rights remains appropriate and no impairment is required.
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. Costs of employees time is capitalised where new functionality is being created and ceases once operating as intended.
Amortisation is calculated on a straightline basis over the length of time over which the benefits are expected to be received, generally
ranging from 5 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.
Management has reviewed the impairment indicators for the year including the COVID-19 pandemic and have recorded an impairment
where appropriate. Impairment has arisen as a result of software obsolescence and capital management strategies employed as part
of management’s response to the COVID-19 pandemic where software development projects have either been cancelled or delayed.
Management believe the carrying value reflects the recoverable amount.
6.
Inventories
Development properties
Current inventories
Development properties
Non‑current inventories
Total inventories
31 Dec 20
$M
31 Dec 19
$M
53.6
53.6
41.9
41.9
95.5
9.4
9.4
77.8
77.8
87.2
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. A total of $2.6 million in finance costs have been capitalised to inventory for the year ended
31 December 2020 (2019: $5.4 million).
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.
Management has completed net realisable value assessments for each development taking into account the impacts of COVID-19
on these estimates including impacts on delivery timeframes and revenue assumptions, and has compared the results to the cost
of each development.
The amount of any write down is recognised as an impairment expense in the Consolidated Statement of Comprehensive Income.
An impairment expense of $0.3 million has been recognised for the year ended 31 December 2020 (2019: impairment reversal of
$15.0 million).
91
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS 7. Payables
Trade payables and accruals
GST payables
Distribution payable to stapled securityholders
Interest payable
Levies payable
Other payables
Total payables
31 Dec 20
$M
31 Dec 19
$M
108.5
3.2
—
16.6
20.1
32.1
180.5
129.9
3.8
260.4
11.1
18.9
32.3
456.4
Trade payables and accruals represent liabilities for goods and services provided to GPT prior to the end of the financial year which are
unpaid. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.
8. Provisions
Current provisions
Employee benefits
Other
Total current provisions
Non-current provisions
Employee benefits
Total non‑current provisions
31 Dec 20
$M
31 Dec 19
$M
15.3
14.4
29.7
1.1
1.1
13.4
13.9
27.3
1.2
1.2
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 20
$M
31 Dec 19
$M
86.3
115.7
92
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 9. Taxation
a)
Income tax expense
Current income tax expense
Deferred income tax expense
Income tax expense in the Statement of Comprehensive Income
Income tax expense attributable to:
Profit from continuing operations
Aggregate income tax expense
b) Reconciliation of accounting proft to income tax expense
and current tax (asset) / liability
Net (loss)/profit for the year excluding income tax expense
Less: Trust loss/(profit) not subject to tax
(Loss)/profit which is subject to taxation at 30% tax rate
Tax effect of amounts not deductible/assessable in calculating
income tax expense:
Non-deductible revaluation items in the Company
Other non-assessable income
Equity accounted profits from joint ventures in the Company
Profit used to calculate effective tax rate
Other tax adjustments
Income tax expense
Effective tax rate
c) Current tax (liabilities) / assets
Opening balance at the beginning of the year
Income tax expense
Tax (receipts from)/payments made to tax authorities
Other deferred tax asset charged to income
Movements in employee benefits
Movements in provisions and accruals
Movements in reserves
Closing balance at the end of the year
d) Deferred tax assets
Employee benefits
Provisions and accruals
Right-of-use assets
Lease liabilities
Other
Net deferred tax asset
Movement in temporary differences during the year
Opening balance at the beginning of the year
Adoption of AASB 16
Income tax expense
Movement in reserves
Closing balance at the end of the year
31 Dec 20
Gross
$M
31 Dec 20
Tax impact
$M
31 Dec 19
Gross
$M
31 Dec 19
Tax impact
$M
—
9.1
9.1
9.1
9.1
(61.2)
43.1
(18.1)
28.4
—
(1.4)
8.9
0.2
9.1
31%
10.7
1.1
11.8
11.8
11.8
891.8
(866.0)
25.8
267.5
(259.8)
7.7
20.3
(5.6)
—
40.5
(1.0)
39.5
6.1
(1.7)
—
12.1
(0.3)
11.8
29%
31 Dec 20
$M
31 Dec 19
$M
(204.0)
143.7
(60.3)
94.5
—
(4.5)
29.7
0.6
30.3
2.2
(9.1)
(1.3)
(1.8)
12.5
—
(4.5)
(2.0)
5.0
2.0
(13.4)
16.6
(0.6)
9.6
20.5
—
(9.1)
(1.8)
9.6
0.8
(11.8)
10.2
1.5
(1.5)
0.9
2.1
2.2
17.5
2.0
(17.0)
19.0
(1.0)
20.5
20.1
1.2
(1.1)
0.3
20.5
93
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS Trust
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.
Effective tax rate
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 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 note 9(b), 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.
Attribution managed investment trust regime
The Trust made an election to be an attribution managed investment trust (AMIT). Under Australia’s taxation laws, unitholders of the Trust
pay income tax to the Federal Government on taxable income that is attributed to them as part of the Trust distribution process.
In the case where a GPT unitholder is an Australian resident, the unitholder pays tax on the taxable income attributed to them at their own
applicable tax rate. Where the unitholder is a non-resident, Managed Investment Trust (MIT) withholding tax applies at the rate of 15 per
cent where the place of payment is in a country that has an exchange of information agreement with Australia. If such an agreement
does not exist, a withholding tax rate of 30 per cent or 45 per cent applies, depending on the circumstances.
94
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 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 that is consistent with a stable investment grade credit
rating in the “A category”.
At 31 December 2020, 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
Number
Ordinary stapled securities
Opening securities on issue and contributed equity at 1 January 2019
Securities issued – institutional placement
Security Purchase Plan
Transaction costs
1,804,890,426
131,795,717
11,243,173
—
7,825.7
794.3
66.3
(13.1)
Closing securities on issue and contributed equity at 31 December 2019 1,947,929,316
8,673.2
Opening securities on issue and contributed equity at 1 January 2020
1,947,929,316
8,673.2
Closing securities on issue and contributed equity at 31 December 2020 1,947,929,316
8,673.2
325.9
5.7
0.5
(0.1)
332.0
332.0
332.0
Total
$M
8,151.6
800.0
66.8
(13.2)
9,005.2
9,005.2
9,005.2
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.
b) Treasury securities
Treasury securities are securities in GPT that the Group has purchased, that are held by GPT Group Stapled Security Plan Trust for the
purpose of issuing securities under various employee security schemes. Refer to note 20 for further information. Securities issued to
employees are recognised on a first-in-first-out basis.
Opening balance 1 January 2019
Acquisition of securities by the GPT Group Stapled Securities Trust
Employee securities issued
Balance at 31 December 2019
Opening balance 1 January 2020
Acquisition of securities by the GPT Group Stapled Securities Trust
Employee securities issued
Balance at 31 December 2020
Number of
securities
59,028
774,921
(825,057)
8,892
8,892
869,071
(877,963)
—
$M
—
4.8
(4.8)
—
—
4.0
(4.0)
—
95
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS c) Reserves
Foreign currency
translation reserve
Cash flow
hedge reserve
Cost of
hedging reserve
Employee incentive
scheme reserve
Total reserves
Other
entities
stapled
to GPT
$M
18.3
—
—
—
Trust
$M
(26.4)
—
—
—
Trust
$M
(18.5)
—
16.3
—
Balance at 1 January 2019
Movement in hedging reserve
Movement in fair value of
cash flow hedges
Security-based payment
transactions, net of tax
Balance at 31 December 2019
(26.4)
18.3
(2.2)
Balance at 1 January 2020
Movement in hedging reserve
Movement in fair value of
cash flow hedges
Security-based payment
transactions, net of tax
(26.4)
—
18.3
—
—
—
—
—
(2.2)
—
(1.7)
—
Balance at 31 December 2020
(26.4)
18.3
(3.9)
Other
entities
stapled
to GPT
$M
—
—
—
—
—
—
—
—
—
—
Trust
$M
11.4
(6.3)
—
—
5.1
5.1
(22.4)
—
—
(17.3)
Other
entities
stapled
to GPT
$M
Trust
$M
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
entities
stapled
to GPT
$M
19.6
—
Other
entities
stapled
to GPT
$M
37.9
—
Trust
$M
(33.5)
(6.3)
—
16.3
—
(0.6)
19.0
—
(23.5)
19.0
—
(23.5)
(22.4)
(0.6)
37.3
37.3
—
—
(1.7)
—
(17.7)
—
(17.7)
1.3
(47.6)
19.6
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 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 that is part of cross currency interest rate swaps used to hedge
foreign currency 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 14 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 20 for further details of the security based payments.
d) Retained earnings / accumulated losses
Balance at 1 January 2019
Net profit for the financial year
Less: Distributions paid/payable to ordinary stapled securityholders
Reclassification of employee incentive security scheme reserve to
retained earnings/accumulated losses
Balance at 31 December 2019
Balance at 1 January 2020
Net (loss)/profit for the financial year
Less: Distributions paid/payable to ordinary stapled securityholders
Reclassification of employee incentive security scheme reserve to
retained earnings/accumulated losses
Balance at 31 December 2020
Note
12
12
Trust
$M
2,791.1
850.4
(514.3)
(3.7)
3,123.5
3,123.5
(240.1)
(181.2)
Other entities
stapled to GPT
$M
(845.5)
29.6
—
Total
$M
1,945.6
880.0
(514.3)
—
(3.7)
(815.9)
2,307.6
(815.9)
27.0
—
2,307.6
(213.1)
(181.2)
(1.3)
—
(1.3)
2,700.9
(788.9)
1,912.0
96
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 11. Earnings per stapled security
31 Dec 20
Cents
31 Dec 20
Cents
31 Dec 19
Cents
31 Dec 19
Cents
a) Attributable to ordinary securityholders of the Trust
Basic
Diluted
Basic
Diluted
Total basic and diluted earnings per security attributable to ordinary
securityholders of the Trust
(12.3)
(12.3)
45.3
45.2
b) Attributable to ordinary stapled securityholders of the GPT Group
Total basic and diluted earnings per security attributable to stapled
securityholders of the GPT Group
(10.9)
(10.9)
46.9
46.8
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
Basic and diluted earnings of the Trust
Basic and diluted earnings of the Company
Basic and diluted earnings of the GPT Group
d) Weighted average number of ordinary securities
WANOS used as the denominator in calculating basic earnings per
ordinary stapled security
Performance security rights at weighted average basis 1
WANOS used as the denominator in calculating diluted earnings per
ordinary stapled security
31 Dec 20
$M
31 Dec 20
$M
31 Dec 19
$M
31 Dec 19
$M
(240.1)
27.0
(213.1)
(240.1)
27.0
(213.1)
850.4
29.6
880.0
850.4
29.6
880.0
31 Dec 20
Millions
31 Dec 20
Millions
31 Dec 19
Millions
31 Dec 19
Millions
1,947.9
1,947.9
—
1,947.9
1,878.1
1,878.1
1.8
1,879.9
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.
Calculation of earnings per stapled security
Basic earnings per stapled security is calculated as net profit/loss 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/loss
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.
97
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS
12. Distributions paid and payable
Distributions are paid to GPT stapled securityholders half yearly.
Distributions paid / payable
2020
6 month period ended 30 June 2020
6 month period ended 31 December 2020 1
Total distributions paid/payable for the year
2019
6 month period ended 30 June 2019
6 month period ended 31 December 2019
Total distributions paid/payable for the year
Cents per
stapled security
Total amount
$M
9.30
—
9.30
1 3.1 1
13.37
26.48
181.2
—
181.2
253.9
260.4
514.3
1. The December 2020 half yearly distribution of 13.2 cents per security, representing 100 per cent of free cash flow, was declared on 15 February 2021 and is expected to be paid on
26 February 2021. The distribution is 1.3 per cent lower than the 31 December 2019 distribution of 13.37 cents per security as a result of the impact of COVID-19 partially offset by a
reduction in maintenance capex and lease incentives. The December 2019 payout ratio was 103.4 per cent of AFFO under GPT’s previous distribution policy.
13. Borrowings
Current borrowings at amortised cost – unsecured 1
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 – unsecured 2
Non-current borrowings at amortised cost – secured
Non‑current borrowings
Total borrowings 3 – carrying amount
Total borrowings 4 – fair value
31 Dec 20
$M
31 Dec 19
$M
514.0
5.0
519.0
1,186.2
2,294.0
88.2
3,568.4
4,087.4
473.4
4.7
478.1
1,192.4
2,138.6
88.4
3,419.4
3,897.5
4,1 24.1
3,994.1
1. Represents GPT’s commercial paper program which is an uncommitted line with a maturity period of generally three months or less and is classified as current borrowings.
These drawings are in addition to GPT’s committed facilities but may be refinanced by non-current undrawn bank loan facilities.
2. Cumulative fair value movements are shown in the following table.
3. Including unamortised establishment costs, fair value and other adjustments.
4. For the majority of borrowings, the carrying amount is a reasonable approximation of fair value. Where material difference arises, the fair value is calculated using market observable
inputs (level 2) and unobservable inputs (level 3). This excludes unamortised establishment costs.
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 Consolidated Statement of Comprehensive
Income as a gain / loss on modification of financial liabilities. GPT management has assessed the modification of terms requirements
within AASB 9 and have concluded that these will not have a material impact for the Group.
98
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020
The following table outlines the cumulative amount of fair value movements that are included in the carrying amount of borrowings in the
Consolidated Statement of Financial Position.
Nominal amount
Unamortised borrowing costs
Amortised cost
Cumulative fair value movements
Carrying amount
31 Dec 20
$M
31 Dec 19
$M
1,907.4
(6.0)
1,901.4
392.6
2,294.0
1,715.7
(6.0)
1,709.7
428.9
2,138.6
Carrying value of cross currency interest rate swaps hedging the above foreign currency borrowings is reflected in the Consolidated
Statement of Financial Position within derivative assets totalling $368.9 million (December 2019: $425.3 million) and within derivative
liabilities totalling $17.3 million (December 2019: nil).
The maturity profile of borrowings as at 31 December 2020 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 paper 2
Less: cash and cash equivalents held for the AFSL
Total financing resources available at the end of the year
Total
facility 1,2,3
$M
519.6
2,599.8
2,501.5
Used
facility 1
$M
519.0
758.8
2,401.5
5,620.9
3,679.3
Unused
facility 2,3
$M
0.6
1,841.0
100.0
1,941.6
372.5
2,314.1
(514.0)
(10.0)
1,790.1
1. Excluding unamortised establishment costs, fair value and other adjustments and $10.2 million bank guarantee facilities and its $2.1 million utilisation. This reflects the contractual
cash flows payable on maturity of the borrowings taking into account historical exchange rates under cross currency interest rate swaps entered into to hedge the foreign
currency borrowings.
2. GPT’s commercial paper program is an uncommitted line with a maturity period of generally three months or less and is classified as current borrowings. These drawings are in
addition to GPT’s committed facilities but may be refinanced by non-current undrawn bank loan facilities and are therefore excluded from available liquidity.
3. Including $100 million of forward starting facilities available to GPT.
Cash and cash equivalents includes cash on hand, cash at bank and short term money market deposits.
Debt covenants
GPT’s borrowings are subject to a range of covenants, according to the specific purpose and nature of the loans. Most bank facilities
include one or more of the following covenants:
» Gearing: total debt must not exceed 50 per cent of adjusted total tangible assets; and
» Interest coverage: the ratio of earnings before interest and taxes (EBIT) to finance costs on borrowings 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 2020 and no breaches were identified.
99
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS
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
As part of normal business operations, GPT is exposed to financial market risks which are principally interest rate risk on borrowings and
foreign exchange rate risk on foreign currency borrowings. GPT manages these risks through the use of derivative instruments including
interest rate swaps (fixed to floating, floating to fixed and floating to floating swaps), cross currency interest rate swaps and option based
derivatives. Regular coupons under these instruments are reported in finance costs in the Consolidated Statement of Comprehensive
Income along with the interest cost on borrowings to which it relates.
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 (including amortisation of upfront payment including
premiums) are recognised in net gain / loss on fair value movements of derivatives in the Consolidated Statement of Comprehensive
Income. 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. Refer to note 14(b) on hedge accounting. All of GPT’s derivatives were valued using
market observable inputs (level 2). For additional fair value disclosures refer to note 15.
Derivative Assets
Interest Rate Swaps – AUD
Cross Currency Interest Rate Swaps – fair value hedges
Cross Currency Interest Rate Swaps – fair value and cash flow hedges
Total Derivative Assets
Derivative Liabilities
Interest Rate Swaps – AUD
Cross Currency Interest Rate Swaps – fair value hedges
Cross Currency Interest Rate Swaps – fair value and cash flow hedges
Total Derivative Liabilities
Net Derivative Assets
Net Interest Rate Swaps – AUD
Net Cross Currency Interest Rate Swaps
31 Dec 20
$M
31 Dec 19
$M
1 11 .4
34.5
334.4
480.3
96.3
1 7.1
0.2
1 13 .6
366.7
1 5.1
351.6
1 1 2.6
45.3
380.0
537.9
98.2
—
—
98.2
439.7
1 4.4
425.3
GPT enters into ISDA (International Swap Derivatives Association) Master Agreements with its derivative counterparties. Under the
terms of these agreements, where certain credit events occur, there is 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. In the
event a credit event occurred, the ISDA Master Agreement would have the effect of netting, allowing a reduction to derivative assets and
derivative liabilities of the same amount of $110.7 million (2019: $94.0 million).
b) Hedge Accounting
GPT’s objective is to manage the risk of volatility in FFO and NTA and whilst economic hedges exist to manage its financial market
risks, GPT has elected to apply hedge accounting only in relation to foreign currency borrowings. Foreign exchange and interest rate
risk arising from foreign currency borrowings is managed with cross currency interest rate swaps which convert foreign currency fixed
interest rate cash flows into Australian dollar floating interest rate cash flows.
At inception of the hedge relationship, GPT designates and documents the relationship between the hedging instrument and hedged
item and the proposed effectiveness of the risk management objective the hedge relationship addresses. GPT fully hedges 100% of
its foreign currency exposure in respect of foreign currency borrowings with cross currency interest rate swaps and therefore applies
a hedge ratio of 1:1. This means that whilst there are fair value movements from period to period, there is 100% matching of cash flows,
resulting in nil fair value movements over the duration of the borrowings nor FFO impact in any period. On an ongoing basis, GPT
determines and documents its assessment of prospective hedge effectiveness of all hedge relationships.
Cross currency interest rate swaps hedging foreign currency borrowings are designated in either dual fair value and cash flow hedges or
fair value hedges only.
100
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020
Fair value hedges
A fair value hedge is a hedge of the exposure to changes in fair value of the underlying item (foreign currency borrowings) that is
attributable to a particular risk (movements in foreign benchmark interest rates and if applicable, foreign exchange rates). All changes
in the fair value of the foreign currency borrowings relating to the risk being hedged are recognised in the Consolidated Statement
of Comprehensive Income together with the changes in the fair value of cross currency interest rate swaps with the net difference
reflecting the hedge ineffectiveness.
Cash flow hedges
A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk (movements in foreign
exchange rates) associated with a liability (foreign currency borrowings). The portion of the fair value gain or loss on the hedging
instrument that is effective (that which offsets the movement on the hedged item attributable to foreign exchange movements) is
recognised in Other Comprehensive Income and accumulated in the cash flow hedge reserve in equity and any ineffective portion is
recognised as net impact of foreign currency borrowings and associated hedging gain or loss directly in the Consolidated Statement
of Comprehensive Income.
Currency basis
A component of the cross currency interest rate swap is the currency basis. This is a liquidity premium that is charged for exchanging
different currencies, and changes over time. Where currency basis have been included in fair value hedge designations, movement in
currency basis are recognised in the Consolidated Statement of Comprehensive Income. In all other cases, currency basis have been
excluded from GPT’s fair value hedge designation with movements recognised in Other Comprehensive Income and accumulated in the
cost of hedging reserve in equity.
Hedging Instruments
The following table shows the nominal amount of derivatives designated in cash flow and/or fair value hedge relationships in time bands
based on the maturity of each derivative.
Cross currency interest rate swaps
USD exposure
AUD nominal amount
Average receive fixed interest rate
Average contracted FX rate (AUD/USD)
HKD exposure
AUD nominal amount
Average receive fixed interest rate
Average contracted FX rate (AUD/HKD)
31 Dec 20
31 Dec 19
Less than
1 year
$M
1 to 5
years
$M
Over
5 years
$M
Total
$M
Less than
1 year
$M
1 to 5
years
$M
Over
5 years
$M
Total
$M
—
—
—
—
—
—
145.8
3.6%
1.0283
1,311.9
3.8%
0.8042
1,457.7
—
—
—
449.7
2.9%
6.2847
449.7
—
—
—
—
—
—
1,457.7
258.0
—
—
—
—
—
—
1,457.7
3.8%
0.8266
258.0
3.4%
6.7951
The following table shows the impact on the Consolidated Statement of Comprehensive Income relating to hedge ineffectiveness of fair
value hedges and the impact on Other Comprehensive Income relating to movements in cash flow hedges and the cost of hedging reserve.
Fair Value Hedge Movements in Net profit
Fair value movements on foreign borrowings
Movement in Fair value hedges
Net loss from fair value hedge ineffectiveness in Net profit
Movement in Hedge Reserves in OCI
Movement in Cash flow hedge reserve
Movement in Cost of hedging reserve
Share of movement in Hedge reserves in equity accounted investments
Net (decrease)/increase in Hedge Reserves in OCI
In these hedge relationships, the main sources of ineffectiveness are:
31 Dec 20
$M
31 Dec 19
$M
36.3
(51.4)
(15.1)
(1.7)
(20.5)
(1.9)
(24.1)
(161.6)
150.8
(10.8)
15.6
(5.7)
0.1
10.0
» 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 Australian and foreign swap interest rates which will impact the fair value of the Australian dollar margin and implied foreign
currency margin respectively.
101
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS
Interest rate risk
c)
GPT’s primary interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. This mainly arises from borrowings. 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 following table provides a summary of GPT’s gross interest rate risk exposure as at 31 December 2020 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 Exposure
Fixed rate borrowings
Borrowings hedged via interest rate swaps
Effective Fixed Rate Borrowings
Floating Rate Exposure
Floating rate borrowings
Borrowings hedged via interest rate swaps
Effective Floating Rate Borrowings
31 Dec 20
$M
31 Dec 19
$M
3,006.4
247.6
3,254.0
672.9
(247.6)
425.3
2,655.7
159.3
2,815.0
794.1
(159.3)
634.8
Interest rate risk – sensitivity analysis
The impact on interest expense of a 0.25 per cent increase or decrease in market interest rates is shown below. Finance costs are
sensitive to movements in market interest rates on floating rate borrowings (net of any derivatives).
Impact on Statement of Comprehensive Income
Increase in interest rates of 0.25% (2019: 1%)
Decrease in interest rates of 0.25% (2019: 1%)
d) 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;
31 Dec 20
$M
31 Dec 19
$M
(1.1)
1.1
(6.3)
6.3
» 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.
102
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020
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 20
31 Dec 19
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
Borrowings
Lease liabilities
Projected finance cost
from borrowings 1
Derivatives
Projected finance cost from
derivative liabilities 1,2
180.5
519.0
7.5
—
50.0
8.5
—
—
180.5
708.8 2,401.5 3,679.3
55.1
12.8
26.3
456.4
478.2
6.8
—
88.5
7.8
—
762.0
26.9
—
456.4
2,121.1 3,449.8
60.6
1 9.1
90.1
90.6
245.6
381.9
808.2
98.1
94.1
256.5
386.1
834.8
35.6
26.9
30.2
—
92.7
28.2
30.5
61.3
1.2
121.2
Total liabilities
832.7
176.0
1,010.9 2,796.2 4,815.8
1,067.7
220.9
1,106.7 2,527.5 4,922.8
Less cash and cash equivalents
372.5
—
—
—
372.5
104.2
—
—
—
104.2
Total liquidity exposure
460.2
176.0
1,010.9 2,796.2 4,443.3
963.5
220.9
1,106.7 2,527.5 4,818.6
Projected reduction to finance
costs from derivative assets 2
38.0
17.5
33.7
13.8
103.0
31.5
30.5
24.5
24.8
1 1 1 .3
Net liquidity exposure
422.2
158.5
977.2 2,782.4 4,340.3
932.0
190.4
1,082.2 2,502.7 4,707.3
1. Projection is based on the likely outcome of contracts given the interest rates, margins, forecast interest rate forward curves as at 31 December 2020 and 31 December 2019 up
until the contractual maturity of the contract. The projection is based on future non-discounted cash flows and does not ascribe any value to optionality on any instrument which
may be included in the current market values. Projected interest on foreign currency borrowings is shown after the impact of associated hedging.
2. In accordance with AASB 7, the future value of contractual cash flows of non-derivative and derivative liabilities only is to be included in liquidity risk disclosures. As derivatives are
exchanges of cash flows, the positive cash flows from derivative assets have been disclosed separately to provide a more meaningful analysis of GPT’s net liquidity exposure. The
methodology used in calculating projected interest income on derivative assets is consistent with the above liquidity risk disclosures.
e) 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 2020, 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.
f) 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.
103
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS 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
Derivative financial instruments
Liabilities
Derivative financial instruments
Borrowings 1
1. Excluding unamortised establishment costs.
United States Dollars
Hong Kong Dollars
31 Dec 20
$M
31 Dec 19
$M
31 Dec 20
$M
31 Dec 19
$M
306.9
306.9
—
1,796.5
1,796.5
355.0
355.0
—
1,821.9
1,821.9
62.0
62.0
17.3
503.5
520.8
70.3
70.3
—
322.7
322.7
g) 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 note 4(b) 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 2020 is the carrying amounts of financial assets recognised on GPT’s
Consolidated Statement of Financial Position. For more information refer to note 4.
104
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 15. Other Fair Value Disclosures
Information about how the fair value of financial instruments is calculated and other information required by the accounting standards,
including the valuation process, critical assumptions underlying the valuations and information on sensitivity are disclosed in the
following table:
a) Fair value measurement, valuation techniques and inputs
Class of
assets / liabilities
Fair value
hierarchy 1
Valuation
technique
Derivative financial
instruments
Level 2
DCF
(adjusted for
counterparty credit
worthiness)
Inputs used to
measure fair value
» Interest rates
» Basis
» CPI
» Volatility
» Foreign exchange rates
Unobservable inputs
31 Dec 2020
Unobservable inputs
31 Dec 2019
Not applicable – all inputs are
market observable inputs
Foreign currency
borrowings
Level 2
DCF
» Interest rates
» Foreign exchange rates
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).
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.
OTHER DISCLOSURE ITEMS
16. Cash Flow Information
a) Cash flows from operating activities
Reconciliation of net (loss)/profit after tax to net cash inflows from operating activities:
Net (loss)/profit for the year
Fair value loss/(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/(reversal)
Share of after tax loss/(profit) of equity accounted investments (net of distributions)
Depreciation and amortisation
Non-cash employee benefits – security based payments
Non-cash revenue/expense adjustments
Profit on sale of inventories
Proceeds from sale of inventories
Payment for inventories
Movements in working capital and reserves (net of impairment)
Net foreign exchange gain
Other
Net cash inflows from operating activities
31 Dec 20
$M
31 Dec 19
$M
(213.1)
365.6
39.6
15.1
(2.1)
5.7
242.7
8.7
(0.4)
36.7
(0.2)
1.2
(10.0)
(2.1)
(0.4)
3.2
490.2
880.0
(310.8)
74.4
10.8
(2.5)
(12.1)
(97.0)
6.9
11.0
29.1
(5.8)
58.6
(21.0)
(10.8)
—
3.8
614.6
105
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS
b) Net debt reconciliation
Reconciliation of net debt movements during the financial year:
1 January 2019
Cash inflow/(outflow)
Foreign exchange adjustments
Opening balance adjustment on adoption of AASB 16
New leases and modification of lease
Other non-cash movements
31 December 2019
1 January 2020
Cash inflow/(outflow)
Foreign exchange adjustments
New leases and modification of lease
Other non-cash movements
31 December 2020
17. Lease Revenue
Segment Result
Lease revenue
Recovery of operating costs
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
Eliminations of intra-group lease payments
Impairment loss on trade and other receivables
Consolidated Statement of Comprehensive Income
Rent from investment properties
Cash
$M
58.7
45.5
—
—
—
—
104.2
104.2
268.3
—
—
—
372.5
Lease
liabilities
$M
Borrowings
$M
Total
net debt
$M
—
(7.8)
—
34.5
32.3
1.6
60.6
60.6
(8.5)
—
1.5
1.5
55.1
4,114.9
(380.2)
161.6
—
—
1.2
3,897.5
3,897.5
225.2
(36.3)
—
1.0
3,853.9
4,087.4
3,770.0
31 Dec 20
31 Dec 19
Retail
Office Logistics
Total
Retail
Office Logistics
Total
216.1
69.9
1 33.1
27.4
158.7
11.2
507.9
108.5
291.6
83.6
142.0
31.0
137.3
9.7
570.9
124.3
1.3
113.0
—
114.3
1.1
93.1
—
94.2
287.3
273.5
169.9
730.7
376.3
266.1
147.0
789.4
(114.3)
(56.9)
5.4
(1.5)
62.4
625.8
(94.2)
(47.8)
6.6
(1.1)
0.9
653.8
Rent from investment properties
Rent from investment properties in the Consolidated Statement of Comprehensive Income is recognised and measured in accordance
with AASB 16 Leases. This revenue is recognised on a straight line basis for the minimum contracted rent over the lease term with an
asset recognised as a component of investment properties relating to the fixed increases in operating lease rentals in future periods.
When GPT provides lease incentives to tenants, these costs are amortised against lease income on a straight line basis. Contingent
rental income is recognised as revenue in the period in which it is earned.
In addition to revenue generated directly from the lease, rent from investment properties includes non-lease revenue earned from
tenants, predominately in relation to recovery of asset operating costs, which is recognised and measured under AASB 15 Revenue from
Contracts with Customers.
Management has assessed if a rent waiver constitutes a lease modification under AASB 16 Leases and concluded that where rent
waivers relate to periods after the execution of an agreement with the tenant, this constitutes a lease modification. Rent waivers relating
to periods prior to the execution of an agreement are treated as write-offs under AASB 9 Financial Instruments where the rent waiver
offsets a receivable from the tenant (see note 4). Waivers which have been reflected on invoices issued to tenants and which are not
relating to previous outstanding debtors, have been shown as a reduction to rent from investment properties on the Consolidated
Statement of Financial Performance.
106
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 18. 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
31 Dec 20
$M
31 Dec 19
$M
22.0
97.4
17.1
42.8
0.8
180.1
31.8
86.1
12.5
188.5
3.7
322.6
In addition to the table above, during the year GPT contracted to purchase a logistics development site in Wacol, Brisbane as part of the
QuadReal joint venture partnership. Settlement is expected to occur in February 2021 for a total of $6.3 million (GPT’s 50% ownership).
This acquisition will be recognised as an equity accounted investment.
In 2019 GPT contracted to purchase a logistics development site in Kemps Creek, Sydney and paid a deposit of $6.8 million with $61.1
million committed to be paid by GPT at settlement in 2021.
In 2019, GPT has also contracted to purchase a logistics development site in Truganina, Melbourne at 865 Boundary Road for which GPT
paid a deposit of $5.1 million, with $28.9 million committed to be paid at settlement, which is expected to occur in 2022.
b) 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 20
$M
31 Dec 19
$M
76.1
76.1
133.0
133.0
19. Contingent Liabilities
A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where uncertainty may exist
regarding the outcome of future events.
As at 31 December 2020, GPT has no material contingent liabilities.
20. 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.
No rights were granted in relation to these plans during the year.
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).
The amount after the deduction of income tax is invested in GPT securities to be held for a minimum of one year. The cost of this benefit
is recognised as an expense in the Consolidated Statement of Comprehensive Income.
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 three years or the
end of employment. The cost of this benefit is recognised as an in the Consolidated Statement of Comprehensive Income.
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 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.
107
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS 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 three 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 three 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
month 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. For LTI, the fair value is measured at grant date. For DSTI, the fair value is measured at each reporting
date until the performance rights are converted to securities. Total share based payment expense based on the fair value is recognised
over the period from the grant date of the performance rights to the vesting date.
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.
Management has assessed the number of rights that are expected to vest for the 2018 and 2019 LTI plans in relation to non-market
vesting conditions (Total Return) as a result of the impacts of the COVID-19 pandemic and determined that no rights are expected to
vest. This has decreased from December 2019 where the 2018 plan was expected to vest at 100% and the 2019 plan was expected to
vest at 50% for non-market conditions, resulting in the reversal of prior period amortisation in the current period.
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.
e) Summary table of all employee security schemes
Rights outstanding at 1 January 2019
Rights granted during 2019
Rights forfeited during 2019
Rights converted to GPT stapled securities during 2019 1
Rights outstanding at 31 December 2019
Rights outstanding at 1 January 2020
Rights forfeited during 2020
Rights converted to GPT stapled securities during 2020 2
Rights outstanding at 31 December 2020
Number of rights
DSTI
LTI
Total
1,221,672
1,254,814
(466,861)
(774,921)
7,847,089
2,647,673
(887,611)
(2,146,497)
9,068,761
3,902,487
(1,354,472)
(2,921,418)
1,234,704
7,460,654
8,695,358
1,234,704
(365,633)
(869,071)
7,460,654
(1,231,237)
(1,540,959)
8,695,358
(1,596,870)
(2,410,030)
—
4,688,458
4,688,458
1. Rights under the 2018 DSTI plan were converted to GPT stapled securities on 19 March 2019 and rights under the 2016 LTI Plan were converted to GPT stapled securities on 14 February 2019.
2. Rights under the 2019 DSTI plan were converted to GPT stapled securities on 19 March 2020 and rights under the 2017 LTI Plan were converted to GPT stapled securities on 13 February 2020.
Securities outstanding at 1 January 2019
Securities granted during 2019
Securities vested during 2019
Securities outstanding at 31 December 2019
Securities outstanding at 1 January 2020
Securities granted during 2020
Securities vested during 2020
Number of stapled securities
GESOP
BBESOP
Total
62,609
48,472
(70,161)
40,920
40,920
53,226
(44,153)
1 1 4,764
30,429
(48,055)
177,373
78,901
(118,216)
97,138
138,058
97,138
46,330
(51,1 19 )
138,058
99,556
(95,272)
Securities outstanding at 31 December 2020
49,993
92,349
142,342
108
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 21. Related Party Transactions
General Property Trust is the ultimate parent entity.
Equity interests in joint ventures and associates are set out in note 3. Receivables from joint ventures and associates are on commercial
terms and conditions with detail being 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 20
$’000
31 Dec 19
$’000
5,375.3
188.5
397. 1
5,960.9
7,174.0
181.4
1,863.3
9,218.7
Information regarding individual Directors’ and Senior Executives’ remuneration is provided in the Remuneration Report.
There have been no other transactions with key management personnel during the year.
Transactions with related parties
Transactions with related parties other than associates and joint ventures
Expenses
Contributions to superannuation funds on behalf of employees
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
Increase in units in joint ventures
Decrease in units in joint ventures
Increase in units in associates
31 Dec 20
$’000
31 Dec 19
$’000
(6,643.7)
(6,521.0)
61, 101.8
12,958.7
7,221.0
4,496.2
6,753.9
51,988.5
91 ,183.9
8,390.5
61,869.6
1 6,643.5
6,831.5
4,275.8
6,240.5
56,531.6
112,817.4
9,765.8
2,977.2
(583,900.0)
6,212.2
4,924.7
—
535,322.8
109
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS 22. 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
Other assurance services
Total remuneration for other assurance services
Total remuneration for audit and assurance services
Non-audit related services
PricewaterhouseCoopers Australia
Other services
Total remuneration for non audit related services
Total auditor’s remuneration
23. 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
(Loss)/profit attributable to members of the parent entity
Total comprehensive (loss)/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 20
$’000
31 Dec 19
$’000
1,416.4
1,416.4
1,343.5
1,343.5
245.8
100.0
345.8
225.9
–
225.9
1,762.2
1,569.4
18.0
18.0
–
–
1,780.2
1,569.4
Parent entity
31 Dec 20
$’000
31 Dec 19
$’000
300.8
15,709.9
443.0
16,166.4
16,010.7
16,609.4
106.8
4,501.7
4,608.5
11,402.2
8,696.5
(18.3)
2,724.0
11,402.2
(140.2)
(140.2)
6.8
20.9
12.7
30.3
70.7
558.0
4,305.5
4,863.5
11,745.9
8,696.5
4.0
3,045.4
11,745.9
719.1
719.1
11.3
19.0
5.6
126.3
162.2
Intercompany 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 significant loss allowance being recognised in 2020.
The parent entity had current net assets of $194.0 million (2019: current net asset deficiency $115.0 million). The parent has access to
cash and undrawn financing facilities of $1,790.1 million as set out in note 13.
110
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 24. Accounting Policies
a) Basis of preparation
The financial statements are a general purpose financial report which has been prepared:
» in accordance with the requirements of the Trust’s Constitution, Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board and International Financial Reporting Standards;
» on a going concern basis. GPT has prepared an assessment of its ability to continue as a going concern, taking into account all
available information for a period of 12 months from the date of these financial statements. As set out in note 13, GPT has access
to $1,790.1 million in cash and undrawn loan facilities and future cash flow assessments have been made, taking into consideration
appropriate probability-weighted factors. GPT is confident in the belief that that it 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 net assets over current liabilities of $42.8 million arises as a result of the inclusion of borrowings due with 12 months (refer to note
24(b) for further information on going concern);
» 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 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 may 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 15 February 2021.
b) Going Concern
Due to the uncertainty created by COVID-19, GPT has performed additional procedures in relation to assessing going concern. GPT is
of the opinion that it is able to meet its liabilities and commitments as and when they fall due for at least a period of 12 months from the
reporting date. In reaching this position, GPT has taken into account the following factors:
» Available liquidity, through cash and undrawn facilities of $1,790.1 million (after allowing for refinancing of $514.0 million of outstanding
commercial paper as at 31 December 2020);
» Weighted average debt expiry of 7.8 years, with $5.0 million of debt (excluding commercial papers outstanding) due between the date
of this report and 31 December 2021;
» Interest rate hedging level of 75 per cent over the next 12 months;
» Primary covenant gearing of 25.1 per cent, compared to a covenant level of 50.0 per cent;
» Interest cover ratio at 31 December 2020 of 6.4 times, compared to a covenant level of 2.0 times; and
» Sensitivity analysis has been conducted which indicate that GPT will continue to comply with its covenants, including adequate levels
of headroom for both the gearing and interest cover ratios, and that GPT will have adequate cash flows to remain solvent.
111
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS c) 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
20 per cent and 50 per cent of the voting rights. Management considered if GPT controls its associates and concluded that it does not
based on the following considerations.
GPT has a 21.87 per cent equity interest in GPT Wholesale Office Fund (GWOF) and a 28.48 per cent equity interest in GPT Wholesale
Shopping Centre Fund (GWSCF) as at 31 December 2020. GPT Funds Management Limited (GPTFM), which is wholly owned by the GPT
Group is the Responsible Entity 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.
GPT RE Limited (GPTRE), which is wholly owned by the GPT Group owns 91.67 per cent of Darling Park Operator No.1 Pty Limited and
Darling Park Operator No.2 Pty Limited, the Trustees of Darling Park Trust and Darling Park Trust No.2. These entities are governed by a
Unitholder Committee. The Unitholder and Joint Venture Agreement stipulates that each unit holder has one member, with voting rights
in proportion to their unitholding and all resolutions must be passed unanimously. As a result, management has determined that the
Group has significant influence over these entities.
Investments in associates are accounted for using the equity method. Under this method, GPT’s investment in associates is carried
in the Consolidated Statement of Financial Position at cost plus post acquisition changes in GPT’s share of net assets. GPT’s share of
the associates’ result is reflected in the Consolidated Statement of Comprehensive Income. Where GPT’s share of losses in associates
equals or exceeds its interest in the associate, including any other unsecured long term receivables, GPT does not recognise any further
losses, unless it has incurred obligations or made payments on behalf of the associate.
Joint arrangements
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights
and obligations each investor has, rather than the legal structure of the joint arrangement. GPT has assessed the nature of its joint
arrangements and determined it has both joint operations and joint ventures.
Joint operations
GPT has significant co-ownership interests in a number of properties through unincorporated joint ventures. These interests are held
directly and jointly as tenants in common. GPT recognises its direct share of jointly held assets, liabilities, revenues and expenses in the
consolidated financial statements under the appropriate headings. The investment properties that are directly owned as tenants in
common are disclosed in note 2.
Joint ventures
Investments in joint ventures are accounted for in the Consolidated Statement of Financial Position using the equity method which is the
same method adopted for associates.
112
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 d) 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.
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.
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) Revenue
Revenue from contracts with customers
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. Management has assessed that there have been no
significant changes to the recognition of revenue as a result of the COVID-19 pandemic.
Other revenue
Rental revenue from investment properties is recognised on a straight line basis for the minimum contracted rent over the lease term
with an asset recognised as a component of investment properties relating to the fixed increases in operating lease rentals in future
periods. When GPT provides lease incentives to tenants, these costs are amortised against lease income on a straight line basis.
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 accrual basis using the effective interest method.
Management has assessed that there have been no significant changes to the recognition of other revenue as a result of the
COVID-19 pandemic.
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BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS The following table summarises the revenue recognition policies.
Type of revenue
Description
Recoveries revenue
Recharge revenue
Fund management fees
Fee income – property
management fees
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 Consolidated 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
Consolidated Statement of Financial Performance within the same reporting period.
Fee income – property
management leasing fees
– over time
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.
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.
Development
management fees
Development revenue
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.
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.
Recognised
Over time
Over time
Over time
Over time
Over time
Point in time
Over time /
point in time
Point in time
Sale of inventory
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.
Point in time
iv) Government grants
The Group has received $8.8 million under the Federal Government’s JobKeeper program. The Group has also received $0.7 million in land
tax relief. These have been accounted for as government grants under AASB 120 Accounting for Government Grants and Disclosure of
Government Assistance. The standard provides the option to present these amounts as income or as a reduction in expenses. GPT has
elected to present these amounts as a reduction in expenses as this best reflects the underlying substance of the transaction for GPT.
114
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 v) Expenses
Property expenses and outgoings which include rates, taxes and other property outgoings, are recognised on an accruals basis.
vi) Finance costs
Finance costs include interest on borrowings and regular coupons paid or received under derivative instruments hedging GPT’s interest
rate risk on a portfolio basis, 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.
vii) Leases
Payments associated with short term leases and leases of low value assets are recognised on a straight-line basis as an expense in the
Consolidated Statement of Comprehensive Income. Short-term leases are leases with a lease term of 12 months or less. Low-value
assets comprise IT equipment and small items of office furniture.
Lease liabilities are initially measured at the present value of the lease payments discounted using the interest rate implicit in the lease. If
that rate cannot be determined, GPT’s incremental borrowing rate is used. The incremental borrowing rate is calculated by interpolating
or extrapolating secondary market yields on the Group’s domestic medium term notes (MTNs) for a term equivalent to the lease. If there
are no MTNs that mature within a reasonable proximity of the lease term, indicative pricing of where the Group can price a new debt
capital market issue for a comparative term will be used in the calculation.
Lease liabilities are subsequently measured by:
» increasing the carrying amount to reflect interest on the lease liability;
» reducing the carrying amount to reflect the lease payments made; and
» remeasuring the carrying amount to reflect any reassessment or lease modifications.
Interest on the lease liability and any variable lease payments not included in the measurement of the lease liability are recognised in
the Consolidated Statement of Comprehensive Income in the period in which they relate. Interest on lease liabilities included in Finance
costs in the Consolidated Statement of Comprehensive Income totalled $1.9 million for the year.
There have been no changes to the lease term or incremental borrowing rate used for the measurement of lease liabilities as a result of
the COVID-19 pandemic.
Right-of-use assets are measured at cost less depreciation and impairment and adjusted for any remeasurement of the lease liability.
The cost of the asset include:
» the amount of the initial measurement of lease liability;
» any lease payments made at or before the commencement date less any lease incentives received;
» any initial direct costs; and
» restoration cost.
Right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term, unless they meet the definition of an investment property. Right-of-use
assets which meet the definition of an investment property form part of the investment property balance and are measured at fair value
in accordance with AASB 140 Investment Property (refer note 2 and following section on ground leases).
GPT determines the lease term as the non-cancellable period of a lease together with both:
» the periods covered by an option to extend the lease if it is reasonably certain to exercise that option; and
» periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
Management considers all the facts and circumstances that create an economic incentive to exercise an extension option or not
exercise a termination option. This assessment is reviewed if a significant event or a significant change in circumstances occurs which
affects this assessment and that is within the control of the lessee.
GPT tests right-of-use assets 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.
GPT has assessed the right-of-use assets for impairment indicators in light of the COVID-19 pandemic and has calculated the recoverable
amount where indicators exist. This has resulted in impairment expense of $2.9 million for the year.
GPT’s right-of-use assets are all property leases.
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A lease liability reflecting the leasehold arrangements of investment properties needs to be separately disclosed in the Consolidated
Statement of Financial Position and the carrying value of the investment properties will be adjusted (i.e. grossed up) so that the net of
these two amounts equals the fair value of the investment properties. The lease liabilities are calculated as the net present value of the
future lease payments discounted at the incremental borrowing rate.
e) Changes in accounting estimates
During the year there was a change in the estimated useful life of the property, plant and equipment assets related to the MLC Head
Office fitout. As the MLC asset related to this fitout is no longer owned by the Group, management has determined that the end of
the lease period, being 31 August 2025, is a more appropriate guide to determining the useful life for these assets. An adjustment has
therefore been performed for all relevant assets with a useful life beyond 31 August 2025. This has resulted in an increase to depreciation
of $1.8 million in the year ended 31 December 2020. The effect on depreciation in the following years is not expected to have a material
impact on future results.
f) New and amended accounting standards and interpretations adopted from 1 January 2020
There are no significant changes to GPT’s financial performance and position as a result of the adoption of the new and amended
accounting standards and interpretations effective for annual reporting periods beginning on or after 1 January 2020.
g) New accounting standards and interpretations issued but not yet adopted
There are no new standards or amendments to standards relevant to GPT.
25. Events subsequent to reporting date
The COVID-19 pandemic has created unprecedented economic and societal impacts and there remains significant uncertainty. In the
event the COVID-19 impacts are more severe or prolonged than anticipated, this may have further adverse impacts to the fair value
of the Group’s investment properties and its operating result. At the reporting date a definitive assessment of the future effects of
COVID-19 on the Group cannot be made, as the impact will depend on the magnitude and duration of the economic downturn, with the
full range of possible effects unknown.
On 15 February 2021, the Directors declared a distribution for the half year ended 31 December 2020 of 13.20 cents, being $257.1 million
which is expected to be paid on 26 February 2021.
On 15 February 2021, the Group announced an on-market buy-back of up to 5 per cent of GPT’s ordinary securities on issue.
Other than the above, the Directors are not aware of any matter or circumstances occurring since 31 December 2020 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.
116
Notes to the Financial StatementsYear ended 31 December 2020Financial StatementsThe GPT Group | Annual Report 2020 Directors’ Declaration
Year ended 31 December 2020
In the Directors of the Responsible Entity’s opinion:
a) The consolidated financial statements and notes set out on pages 68 to 116 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 2020 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 24
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 2020 of $42.8 million arises as a result of the inclusion of
borrowings due within 12 months. GPT has access to cash and undrawn financing facilities of $1,790.1 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
15 February 2021
Bob Johnston
Chief Executive Officer and Managing Director
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Independent Auditor’s Report
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 (the Trust) and its controlled entities and GPT Management
Holdings Limited (the Company) and its controlled entities (together, GPT, the GPT Group or the Group) is in accordance with
the Corporations Act 2001, including:
(a) giving a true and fair view of the GPT Group's financial position as at 31 December 2020 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 2020
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 significant accounting policies and other explanatory information
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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
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.
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.
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Financial StatementsThe GPT Group | Annual Report 2020
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
Audit scope
Key audit matters
●
For the purpose of our audit we
used overall Group materiality of
$27.7 million, which represents
approximately 5% of the Group’s
Funds from Operations (FFO).
●
● We applied this threshold,
together with qualitative
considerations, to determine the
scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the
effect of misstatements on the
financial report as a whole.
● We chose FFO because, in our
view, it is the key performance
indicator used by security holders
to measure the performance of the
Group. An explanation of what is
included in FFO is located in Note
1, Segment Information.
● We selected 5% based on our
professional judgement noting it is
also within the range of commonly
accepted profit related thresholds.
●
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 the Trust
have been stapled to the shares in
the Company. For the purposes of
consolidation accounting, the
Trust is the 'deemed' parent and
the financial report reflects the
consolidation of the Trust and its
controlled entities and the
Company and its controlled
entities.
●
Amongst other relevant topics, we
communicated the following key
audit matters to the Audit
Committee:
-
-
-
Valuation of investment
properties
Recoverability of trade
receivables
Carrying value of inventories
●
These are further described in the
Key audit matters section of our
report.
● Our audit focused on where the
Group made subjective
judgements; for example,
significant accounting estimates
involving assumptions and
inherently uncertain future events.
The Group holds equity accounted
investments in two wholesale real
estate investment funds. The
auditor of these funds (the
component auditor) 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 auditor to be able to
conclude whether sufficient
appropriate audit evidence had
been obtained. This included
written instructions and active
dialogue throughout the year.
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Independent Auditor’s Report
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report 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.
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties
$10,323.6 million
Refer to note 2
We tested key controls related to the data inputs provided by
the Group to external valuers, as well as key controls over
review and approval of the valuations by appropriate
management.
The Group’s investment property portfolio is comprised of
office, retail and logistics properties including properties
under development in those categories.
Investment properties are valued at fair value at reporting
date using the Group’s policy as described in Note 2. The value
of investment properties is dependent on the valuation
methodology adopted and the inputs and assumptions in the
valuation models. The following assumptions are key in
establishing fair value:
● Capitalisation rate
● Discount rate
In accordance with the Group’s valuation policy, all
investment properties (with the exception of unimproved
land) must be externally valued by an independent valuation
expert at least once every 12 months. All investment
properties have been independently valued as at 31 December
2020 (excluding assets held for sale and those acquired during
the second half of the year).
We considered this a key audit matter because of:
•
•
•
the relative size of the investment property balance
in the consolidated statement of financial position;
the inherently subjective nature of the key
assumptions that underpin the valuations, including
capitalisation and discount rates; and
the extent of judgement involved in considering the
impact of the COVID-19 pandemic on investment
property valuations.
We obtained a selection of independent property market
reports and also worked together with PwC Real Estate
experts to develop an understanding of the prevailing market
conditions and their expected impact on GPT investment
properties.
We agreed the fair value in external investment property
valuation reports to the Group’s accounting records and
assessed the competency, capability and objectivity of the
external valuers.
We met with management to discuss the specifics of the
property portfolio including significant leasing activity, capital
expenditure and vacancies impacting the portfolio.
For a sample of key data inputs to the valuations, we agreed
details to supporting documentation. For example, we agreed
a sample of rental income in valuations to lease agreements.
For a sample of properties which were assessed as being at
greater risk of material misstatement, we performed the
following procedures, amongst others, to assess the
appropriateness of key assumptions used in the Group’s
assessment of fair value. We:
•
•
•
•
obtained the valuation and held discussions with
management to develop an understanding of the
basis for assumptions used.
assessed the appropriateness of the methodology
adopted and the mathematical accuracy of
valuations.
assessed the appropriateness of the capitalisation
rate and discount rate used in the valuations by
comparing them against market data for
comparable properties.
assessed the reasonableness of other key
assumptions in the valuation by considering
observable external market data such as comparable
sales.
• met with a selection of external valuation firms to
develop an understanding of their processes,
judgement and observations including how they
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Financial StatementsThe GPT Group | Annual Report 2020
dealt with uncertainties arising from COVID-19 in
the valuations.
In addition to the above, for selected properties under
development:
•
•
we compared key data inputs in the ‘as if complete’
valuation to underlying support; and
we compared a sample of key assumptions used
within the development’s ‘cost to complete’
schedule to appropriate evidence, for example,
expected future costs were agreed to contractor
forecast advice.
We assessed the reasonableness of the Group’s disclosures
against the requirements of Australian Accounting Standards.
In particular, we considered the adequacy of the disclosures
made in Note 2 which explains the basis of valuations, as well
as the inclusion of material valuation uncertainty clauses by
the independent valuers.
We developed an understanding and evaluated the impact of
COVID-19 and the Code of Conduct on tenant rental
receivables, and the processes and controls established by the
Group to calculate actual and expected rental waivers and the
ECL model.
For a sample of executed rent abatement deeds, we agreed
relevant terms to the general ledger and the model used to
calculate actual and expected rent waivers.
For the population of tenants for which rent waivers are
expected:
•
we assessed whether the Group’s significant
assumptions to calculate the expected abatement
were appropriate, for example by comparing the
expected rebate percentage to the rebate in similar
executed deals; and
we recalculated the rent abatement for a sample of
tenants.
Recoverability of trade receivables
$50.2m
Refer to note 4
As a result of COVID-19 and the commercial tenancies Code of
Conduct legislated in each state and territory, the GPT Group
has provided a significant volume of rental waivers to tenants
during the year. Tenant debtors which have been waived, or
are expected to be waived, have been written off as
uncollectible.
For remaining trade receivables balances which have not been
written off, the Group has assessed recoverability using an
Expected Credit Loss (ECL) model.
The Group has applied judgement in establishing the
assumptions used to assess expected rental waivers as well as
in the ECL model.
•
Given the higher receivables balance and the uncertainty
arising from COVID 19, as well as the extent of judgement
involved in determining expected rental waivers and future
expected credit losses, we consider this to be a key audit
matter.
For the Group’s ECL model:
•
we developed an understanding of the methodology
applied by portfolio and the basis for significant
assumptions.
• we tested, on a sample basis, the accuracy of the
data in the model to relevant supporting
information. We also tested the model for
mathematical accuracy.
• we considered the appropriateness of the
methodology and significant assumptions. For
example we considered the impact of COVID-19 on
the risk profile of specific tenants, and on groups of
tenants across the portfolios.
for a sample of lease tenant receivables, we tested
the data that informed the Group’s significant
assumptions such as tenant cash payment trends.
•
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Independent Auditor’s Report
Carrying value of inventories
$95.5 million
Refer to note 6
The Group develops a portfolio of sites for future sale which
are 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, capitalised 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 by the Group
in estimating future selling prices and the costs to complete.
These judgements 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 or have a previous impairment reversed.
We also assessed the reasonableness of the Group’s
disclosures against the requirements of Australian Accounting
Standards, including the impact of COVID-19.
For each project we obtained the Group’s latest Net Realisable
Value (NRV) models. We developed an understanding of how
the Group identified the relevant assumptions and sources of
data that are appropriate for calculating the NRV. We
performed the following procedures, amongst others:
●
●
●
●
●
●
●
●
discussed project specifics with management, for
example the life cycle of the project, key project risks
and the impact of COVID-19 and how it has been
reflected in the NRV models.
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 advice (if
applicable).
compared the carrying value to the NRV to identify
projects with potential impairments.
traced each inventory acquisition and disposal to the
supporting settlement statement, contract and cash
support.
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.
tested the operating effectiveness of the control
surrounding the Valuation Committee’s review of
inventory valuations.
assessed the reasonableness of the disclosures relating
to inventories in the Group’s financial report against the
requirements of Australian Accounting Standards.
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Financial StatementsThe GPT Group | Annual Report 2020
Other information
The directors of GPT RE Limited, the Responsible Entity of General Property Trust, (the directors) are responsible for the other
information. The other information comprises the information included in the annual report for the year ended 31 December
2020, 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.
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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 52 to 64 of the directors report for the year ended 31 December
2020.
123
BUSINESS OVERVIEWHOW WE CREATE VALUERISK MANAGEMENTDIRECTORS' REPORTGOVERNANCEFINANCIAL STATEMENTSSECURITYHOLDER INFORMATIONThe GPT Group | Annual Report 2020PERFORMANCE AND PROSPECTS
Independent Auditor’s Report
In our opinion, the remuneration report of the GPT Group for the year ended 31 December 2020 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
Sydney
15 February 2021
124
Financial StatementsThe GPT Group | Annual Report 2020
Securityholder Information
GPT is listed on the Australian Securities Exchange (ASX) under the ASX Listing Code: GPT.
VOTING RIGHTS
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.
SECURITYHOLDERS
Substantial Securityholders
Unisuper Limited
Vanguard Group
Blackrock
State Street Corporation
Distribution of Securities
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 Securities
297,332,491
183,628,450
163,118,343
125,992,619
Number of
Securityholders
Percentage of total
issued Securities
14,277
12,280
3,589
2,555
102
32,803
0.33
1.56
1.32
2.71
94.08
100.00%
There were 1,274 securityholders holding less than a marketable parcel of 112 securities, based on a close price of $4.50 as at
31 December 2020, and they hold 47,190 securities.
Twenty Largest Securityholders
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia
BNP Paribas Nominees Pty Ltd
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