Growthpoint Properties Australia
Growthpoint Properties Australia Trust ARSN 120 121 002
Growthpoint Properties Australia Limited ABN 33 124 093 901 AFSL 316409
www.growthpoint.com.au
a window into
our operations,
strategy &
performance
2016 Annual Report
For the year ended 30 June 2016
Building B, 211 Wellington Road, Mulgrave, VIC
Photography by eyesinthesky.com.au
2016 Annual Summary
A concise version of the annual report is
available to download via the following link.
2016 Annual Summary
For the year ended 30 June 2016
growthpoint.com.au/investor-centre/
financial-results/annual-results/
SPACE TO THRIVE
Building B, 211 Wellington Road,
Mulgrave, VIC
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Introduction from the Chairman &
Managing Director
FY16 was primarily focussed on $328.0 million of asset
acquisitions, the potential $321.0 million takeover of GM, and
leasing over 59,000 sqm in FY16 and a further 39,432 sqm since
30 June 2016.
In FY16, Growthpoint:
1. provided Securityholders with a total
return of 7.4%1;
2. exceeded distributable income
guidance and met distribution
guidance;
3. recorded a 7.7% increase net
tangible assets per security to
$2.67;
4. made a $321 million takeover offer
for the GPT Metro Office Fund
(GMF);
5. acquired $328.0 million of assets in
five separate transactions;
6. completed over 59,000 sqm of
leasing with a further 39,432 sqm
completed since 30 June 2016;
7. maintained it’s investment grade
credit rating, from Moody’s, of Baa2;
Significant leasing helped
maintain excellent property
portfolio
Over 59,000 sqm of leasing was
completed in FY16 taking portfolio
occupancy to 99% from 97%.
Notably, the occupancy at 333 Ann
Street Brisbane increased from 41%
to 77%.
Since 30 June 2016, a further
39,432 sqm has been leased
including 23,156 sqm to Country
Road and David Jones for their new
corporate head office in Richmond,
Victoria for 14.5 years taking the pro
forma WALE at 30 June 2016 to
6.9 years. Potential lease expiries in
FY18 have been reduced from 9%
at 30 June 2015 to 4% as at the
date of this report and from 6% to
2% for FY19.
8. continued to diversify the sources of
its debt capital; and
Thank you for your support for
Growthpoint Properties Australia.
Geoff Tomlinson
Independent Chairman
Assets, profit and
Securityholder
returns continue
to grow
Distributions
per stapled security
FY17*
FY16
FY15
FY14
FY13
FY12
Growth
21.3¢
+6.8%
20.5¢
+4.1%
19.7¢
19.0¢
18.3¢
17.6¢
+3.7%
+3.8%
+4.0%
+2.9%
* Distribution guidance only
Distributable income
per stapled security
Timothy Collyer
Managing Director
FY17*
FY16
FY15
FY14
FY13
FY12
Growth
22.2¢ +1.4%
21.9¢
+3.3%
21.2¢
+6.0%
20.0¢
19.3¢
17.7¢
+3.6%
+9.0%
-2.2%
Other key statistics
(as at 30 June 2016)
i $1.8 billion
market capitalisation
i $224.3 million
FY16 statutory profit
i $2.67 NTA per stapled
security
i 15.9% FY16 return on
equity
i 42.6% balance sheet
gearing
i 99% occupancy
i 6.9 year WALE1
1. Pro forma, including leasing announced post
30 June 2016.
Property portfolio value
as at 30 June
FY16
FY15
FY14
FY13
FY12
$2.8B
$2.4B
$2.1B
$1.7B
$1.6B
Over the five years to 30 June 2016
Growthpoint has acquired $1,321.4m
of assets and recorded $212.4m in net
property valuation gains.
21
9. established and resourced a
sustainability program.
Market guidance exceeded
Distributable income of 21.9 cps was
achieved; significantly above FY16
guidance of at least 21.3 cps and 3.3%
higher than FY15. Distributions totalling
20.5 cps will be paid to Securityholders
for FY16 in line with guidance and 4.1%
above FY15. Growthpoint has provided
distributable income guidance of at
least 22.2 cps for FY17 (4.2% higher
than guidance for FY16) and distribution
guidance of 21.3 cps (4.1% higher than
FY16).
Geoff Tomlinson,
Independent Chairman
& Director
Timothy Collyer,
Managing Director
Growthpoint Properties Australia
Limited
1. Distributions plus security price appreciation. Source: UBS Investment Research.
* Guidance only
Distributable income for FY16 was
$126.0m (FY15: $118.9m).
17
Total Securityholder return
comparison
per annum, over 5 years to 30 June 20161
GOZ
A-REIT2
19.6%
18.0%
Shares3
7.2%
1. Source: UBS Investment Research
2. S&P/ASX 300 Prop Index
3. S&P/ASX Acc. Index
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Directors’ Report
Business Overview
Introduction from the Chairman
6
& Managing Director
8
Transparent business model
9
FY16 leasing success
GMF takeover
10
Objectives & goals for sustainable growth 12
Financial Management
Financial Management
Distributable income
Five year performance summary
Portfolio Review
Property Portfolio Overview
Office Portfolio Review
Industrial Portfolio Review
Tenant overview
Operating Sustainably
Operating sustainably
Board of Directors
Executive Management
Remuneration report
Additional information
Financial Report
Table of Contents
Financial Statements
Notes to the Financial Statements
– Basis of preparation
– Operating results, assets and liabilities
– Capital structure and financing costs
– Other notes
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
14
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30
35
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49
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57
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59
69
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88
89
90
Additional Information
92
About Growthpoint South Africa
93
Securityholder Information
94
2016 Securityholder Calendar
95
Index
Acknowledgement of traditional custodians 96
98
Glossary
99
Company Directory
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Index
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the 2016 Annual Report and the
2016 Sustainability Report is
on page 95.
51
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Glossary
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97
About this Report
This is the Annual Report for Growthpoint Properties Australia (comprising
Growthpoint Properties Australia Limited, Growthpoint Properties Australia Trust
and their controlled entities) for the year ended 30 June 2016. It is available online at
growthpoint.com.au and in hard copy. Persons can request a hard copy through any
of the communication methods listed on the inside back cover of this report.
This report (including the Sustainability Report) provides readers with an overview of
Growthpoint’s business including summaries of the strategies, objectives, assets,
operating model, achievements, key risks and opportunities at 22 August 2016 as
well as detailed financial information over the last one and five year periods. There
are also references which enable readers to obtain more information should they
wish to.
About the Directors’ Report
The Directors’ Report which follows is signed in Melbourne on 22 August 2016 in
accordance with a resolution of the Directors of Growthpoint Properties Australia
Limited.
The Directors’ Report comprises pages 4 to 49 of this report and the 2016
Sustainability Report (refer below) except where referenced otherwise.
2016 Growthpoint Annual Reporting Suite
2016 Annual Report
An integrated report summarising financial, operational
and Sustainability performance. Available in hard copy
and online at growthpoint.com.au/investor-centre/
financial-results/annual-results/
2016 Annual Summary A concise version of the Annual Report sent to all
Securityholders.
2016 Sustainability
Report
2016 Financial data
pack
Provides detailed information on corporate responsibility
and sustainability performance and objectives. Available
for download at growthpoint.com.au/sustainability/
operating-sustainably/
Provides the financial data from financial and operational
performance as excel files for greater flexibility in analysis.
Available for download at growthpoint.com.au/investor-
centre/financial-results/annual-results/
What is
Growthpoint?
Growthpoint is an ASX-listed landlord with
a mandate to invest in Australian office,
industrial and retail real property with a
portfolio currently worth $2.8 billion.
Growthpoint is included in the S&P/ASX
200 Index (among other indices).
Owners of Growthpoint’s securities own
both the real properties and the manager
of those properties. All properties are
100% owned by Growthpoint on its
balance sheet so Growthpoint’s owners
have an interest in all of the properties
Growthpoint owns.
Stapled Securities
Growthpoint
Properties
Australia Limited
Manager
Growthpoint
Properties
Australia Trust
Our mission
The Group seeks to provide investors
with a tradeable security producing
consistently growing income returns
and long-term capital appreciation.
Our investment philosophy
To be a pure landlord, with 100% of
income derived from rent under leases
to quality tenants for commercial real
estate.
Our investment offering
Growthpoint is an ASX listed real estate
investment trust or A-REIT (ASX Code:
GOZ), with a mandate to invest in
Australian property in the industrial,
office and retail sectors.
Properties
The four pillars of our investment
offering are:
Growthpoint’s history
1. 100% investment in Australia
Growthpoint commenced in its current
form in 2009 with $650 million of industrial
property. It has grown and diversified to
now own $1.6 billion of office property
and $1.2 billion of industrial property
in every Australian State and in the
Australian Capital Territory.
What we do
Growthpoint seeks to provide investors
with a continually growing income stream
with 100% of income derived from rent
of properties Growthpoint owns and
manages.
How we do it
Growthpoint acquires modern, well-
located properties leased to quality
tenants and holds these assets for the
medium to long term.
All of the Group’s properties are located in
Australia where our management understands
the key markets. We have increased the
diversification of the portfolio to cover every State
in Australia and the Australian Capital Territory.
2. Not a developer
The Group does not operate a property
development business and does not intend
to take on any significant development risk.
It will likely continue to purchase properties
to be developed, fund construction of
developments, or enter a joint venture where the
Group becomes the owner of the property on
completion but only where material leases are in
place.
3. No funds management
The Group does not have a funds management
business nor does it intend to become a fund
manager. The Group intends only to manage
a portfolio of properties that it owns, and
accordingly the Group’s income is, and will
continue to be, derived solely from rental income.
4. Internalised management
The Group has internalised management
via a stapled entity structure. Securityholders
own both the property trust and the manager/
responsible entity. There are no fees payable to
external managers for operating the business and
no conflicts of interest between Securityholders
and the manager/responsible entity.
6
Directors’ Report
Introduction from
the Chairman &
Managing Director
Total Securityholder return
comparison
per annum, over 5 years to 30 June 20161
GOZ
A-REIT2
19.6%
18.0%
In FY16, Growthpoint:
1. provided Securityholders with a 7.4%4
total return;
2. exceeded distributable income
guidance and met distribution
guidance;
3. closed at a record high 30 June
security price of $3.15 and continued
to increase since;
4.
recorded a 7.7% increase in net
tangible assets per security to $2.67;
5. made a $321 million takeover offer for
the GPT Metro Office Fund (GMF);
6. acquired $328.0 million of assets in five
separate transactions;
7. completed over 59,000 sqm of leasing
with a further 39,432 sqm completed
since 30 June 2016;
8. maintained its investment grade credit
rating from Moody’s of Baa2;
Shares3
7.2%
9. continued to diversify the sources of its
debt capital; and
10. established and resourced a
sustainability program.
Market guidance exceeded
Distributable income of 21.9 cps was
achieved; significantly above guidance
of at least 21.3 cps provided at the start
of FY16 and 3.3% higher than FY15.
Distributions totalling 20.5 cps will be paid
to Securityholders for FY16 in line with
guidance and 4.1% above FY15.
1. Source: UBS Investment Research.
2. S&P/ASX 300 Prop Index.
3. S&P/ASX Acc. Index.
4. Distributions plus security price appreciation.
5.
Source: UBS Investment Research.
Includes indications to accept via an institutional
acceptance facility which are conditional on
Growthpoint's offer being unconditional.
6. Pro forma at 1 July 2016 and excluding other
possible impacts.
Growthpoint has provided distributable
income guidance of at least 22.2 cps for
FY17 (4.2% higher than guidance for FY16)
and distribution guidance of 21.3 cps
(3.9% higher than FY16). Guidance may be
impacted by the takeover (refer below) as
well as capital management initiatives
(refer to pages 13-14 for more details).
13
GMF takeover expected to
complete in FY17
Following an extensive due diligence
process and engagement with the existing
manager, Growthpoint formally launched
a $321 million takeover offer of GMF on
1 July 2016.
As at the date of this report, Growthpoint
had received acceptances totalling
46.97%5 of GMF units and expects to gain
control of the fund during FY17. The key
outstanding condition of Growthpoint’s
current offer is minimum acceptances of
not less than 50.1% of GMF’s unitholders.
90% acceptances are required before
Growthpoint can compulsorily acquire
the remainder of outstanding GMF units.
Should Growthpoint acquire 50.1% but less
than 90% of GMF units by the end of the
offer period, Growthpoint currently intends
to replace the current responsible entity
with the Company and continue to run the
fund as a separately listed entity.
Growthpoint expects that obtaining 100%
of GMF will be 4.9% accretive to its FY17
distributable income guidance6. Acquiring
50.1% is expected to be 4.1% accretive
Geoff Tomlinson
Independent Chairman
Timothy Collyer
Managing Director
Growthpoint Properties Australia Annual Report 2016 to its FY17 distributable income guidance6
with the accretion increasing incrementally
between 50.1% and 100%.
Among other benefits such as greater
market capitalisation, scale and diversity,
GMF will increase Growthpoint’s NSW
exposure from 20.0% to 24.7% and
increase Growthpoint’s office exposure from
56.0% to 59.5%; both of which are stated
objectives for Growthpoint.
10
Refer to pages 10-11 for more details
on GMF.
$328.0 million of accretive
acquisitions
In FY16, Growthpoint acquired three
office assets in Victoria and Canberra for
$286.9 million and two industrial assets in
New South Wales and South Australia for
$41.1 million. The assets are distributable
income enhancing and continue
Growthpoint’s diversification of assets and
tenants.
25
33
Refer to pages 25 and 33 for
more details.
Significant leasing helped
maintain an excellent property
portfolio
Over 59,000 sqm of leasing was completed
in FY16 taking portfolio occupancy to 99%
from 97% at 30 June 2015. Notably, the
occupancy at 333 Ann Street Brisbane
increased from 41% to 77% over FY16.
Refer to pages 23 and 30 for
more details.
23
30
Since 30 June 2016, a further 39,432 sqm
has been leased including 23,156 sqm to
Country Road and David Jones for their
new corporate head office in Richmond,
Victoria for a weighted average lease term
of 14.5 years from commencement. After
including this leasing, the pro forma WALE
at 30 June 2016 was 6.9 years compared
with 6.7 years at 30 June 2015 despite
one year passing. Potential lease expiries
in FY18 have been reduced from 9% at
30 June 2015 to 4% as at the date of this
report and from 6% to 2% for FY19.
Thank you for your support for Growthpoint
Properties Australia.
Geoff Tomlinson
Independent
Chairman
& Director
Timothy Collyer
Managing
Director
Growthpoint Properties Australia Limited
Key performance highlights
7
Other key statistics
(as at 30 June 2016)
i $1.8 billion
market capitalisation
i 118th largest entity
on ASX by market
capitalisation
i $224.3 million
FY16 statutory profit
i $2.67 NTA per stapled
security
i 15.9% FY16 return on
equity
i 42.6% balance sheet
gearing
i 99% occupancy
i 6.9 years WALE8
Assets, profit and
Securityholder
returns continue
to grow
Total Securityholder return
per annum7
FY16 7.4%
FY15
36.4%
FY14
10.8%
FY13
23.6%
FY12
21.6%
Property portfolio value
as at 30 June
FY16
FY15
FY14
FY13
FY12
$2.8B
$2.4B
$2.1B
$1.7B
$1.6B
Over the five years to 30 June 2016
Growthpoint has acquired $1,321.4m
of assets and recorded $212.4m in net
property valuation gains.
21
Distributions
per stapled security
FY17*
FY16
FY15
FY14
FY13
FY12
FY16 was primarily focused
on $328.0 million of asset
acquisitions, the potential
$321.0 million takeover of
GMF, and leasing with over
59,000 sqm leased in FY16
and a further 39,432 sqm
leased since 30 June 2016.
Growth
21.3¢
+3.9%
20.5¢
+4.1%
19.7¢
19.0¢
18.3¢
17.6¢
+3.7%
+3.8%
+4.0%
+2.9%
* Distribution guidance only excluding any change
which the Directors may determine as a result of a
successful GMF takeover.
Distributable income
per stapled security
Growth
FY17*
at least 22.2¢ +1.4%
FY16
FY15
FY14
FY13
FY12
21.9¢
+3.3%
21.2¢
+6.0%
20.0¢
19.3¢
17.7¢
+3.6%
+9.0%
-2.2%
* Distribution guidance only, excluding any change
which the Directors may determine as a result
of a successful GMF takeover and any capital
management initiatives.
Distributable income for FY16 was
$126.0m (FY15: $118.9m).
17
7. Source: UBS Investment Research.
8. Pro forma, including leasing announced post
30 June 2016.
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8
Directors’ Report
Transparent business model
16
FY16: Distributions
of $118.1m paid to
Securityholders, 20.5cps
(FY15: $110.7m, 19.7cps).
Payout ratio of 93.7%
(FY15: 93.1%).
6
Distributions:
Return as much of the
remaining property income to
Securityholders as deemed
prudent.
5
Pay Costs:
Pay interest costs on debt capital
and operating and management
costs.
17
FY16: Operating costs (excl.
debt costs) of $10.4m or
0.4% of average gross assets
(FY15: $9.1m, 0.4%).
14
FY16: $40.1m new equity
capital & $250m new debt
capital (FY15: $73.7m and
$200m).
1
Raise
Capital:
Raise equity capital from
Securityholders in Australia and
elsewhere and debt capital
(currently from all four major
Australian banks and four
offshore lenders).
2
Quality Assets:
Acquire well built, well located
Australian commercial property.
3
Income from
Leases:
Lease vacant space and
collect rent from tenants.
4
Asset
Management:
Maintain and improve assets
through capital expenditure, repairs
and maintenance.
Sell assets that no longer meet
investment criteria.
16
34
FY16: $7m of capital works
undertaken (FY15: $6m).
One industrial property
sold for $10.1m (FY15: two
industrial properties sold for
$26.7m).
25
33
FY16: Three
office and two
industrial properties
purchased for a total
of $328.0m (FY15:
three industrial and
one office property
$119.5m).
23
30
FY16: Over
59,000sqm of new
and extended leases
(FY15: 69,000sqm);
99% occupancy
(FY15: 97%);
$181.2m net property
income (FY15: $171.8m).
Growthpoint Properties Australia Annual Report 2016 6.4 years WALE
at 30 June 2016
(30 June 2015: 1.9 years)
FY16 leasing
success (office)
Growthpoint achieved significant
leasing success in FY16 to
high calibre tenants such as
MasterCard, Jacobs Group, Fuji
Xerox and Fluor Australia.
Educational institutions University
of the Sunshine Coast and
Federation University have also
taken over 4,500 sqm of office
space in Brisbane.
Leasing success FY16
9
A4, 52 Merivale Street,
South Brisbane, QLD
L7: Topcon Positioning Systems
NLA: 1,235sqm | Term: 10.0 years
L6: Fluor Australia
NLA: 567sqm | Term: 5.0 years
L5: Fuji Xerox Australia
NLA: 1,239sqm | Term: 7.0 years
L1, L2, Mezzanine & Ground:
University of the Sunshine Coast
NLA: 2,004sqm | Term: 10.0 years
Mezzanine: Fuji Xerox Australia
NLA: 186sqm | Term: 7.0 years
5.4 years WALE
at 30 June 2016
(30 June 2015: 2.3 years)
333 Ann Street,
Brisbane, QLD
A1, 32 Cordelia Street,
South Brisbane, QLD
L23: QER
NLA: 679sqm | Term: 5.4 years
L22: Prosperity Services
NLA: 410sqm | Term: 5.2 years
L17: Superloop
NLA: 867sqm | Term: 4.1 years
L15: MedHealth
NLA: 867sqm | Term: 7.1 years
L13 & L14: MasterCard
NLA: 1,318sqm | Term: 5.6 years
L5, L6 & L7: Federation University
NLA: 2,556sqm | Term: 7.7 years
Ground, L3, L4, L5, L6
& L7: Jacobs Group
NLA: 6,896sqm | Term: 11.4 years
L2: Jacobs Group
NLA: 1,311sqm
Term: 1.4 years
L1: Jacobs Group
NLA: 1,315sqm
Term: 1.5 years
Ground: Club Vitality
NLA: 235sqm
Term: 8.0 years
7.3 years WALE
at 30 June 2016
(30 June 2015: 3.3 years)
Ground & L1: Rail Control
Systems
NLA: 291sqm | Term: 3.1 years
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10
Directors’ Report
Takeover offer for
GPT Metro Office
Fund (GMF)9
On 1 July 2016, Growthpoint
announced a $321 million off-market
takeover offer for ASX listed GMF.
GMF owns six assets valued at
$440.3 million, key details of which
are shown on this page and the
next.
As at the date of this report,
Growthpoint had received
acceptances totalling 46.97%10 of
GMF units and expects to complete
the takeover during FY17.
As well as adding six well-leased
A-grade office properties to the
Growthpoint portfolio, the GMF
takeover is expected to increase
Growthpoint’s FY17 distributable
income guidance by 4.9% to
23.4 cps11, Growthpoint's market
capitalisation to over $2.1 billion
and the liquidity of Growthpoint's
securities.
Growthpoint expects to increase
FY17 net property income by
$28.2 million per annum11 and
reduce GMF's operating costs
through synergies.
15 Green Square Close,
Fortitude Valley, QLD
109 Burwood Road,
Hawthorn, VIC
The Optus Centre is located within the
growing Fortitude Valley precinct, two
kilometres from the Brisbane CBD and
benefits from being at the northern
gateway of the Brisbane CBD. It is a
modern 5 star Green Star (by design)
building with large 1,500 sqm floor
plates.
Vantage is located in Hawthorn, six
kilometres east of the Melbourne CBD.
The A-Grade office building has five
office floors and a car park for 455
vehicles. The property benefits from
its prominent corner location, is close
to a range of amenities and is easily
accessible via car, tram or train.
Lettable area:
16,587 sqm
Site area:
2,519 sqm
Major tenant:
Queensland
Urban Utilities
Book value:
$127.1m
Cap rate:
6.75%
WALE:
5.7 years
500M
Book value:
$72.9m
Cap rate:
7.0%
WALE:
4.7 years
Lettable area:
12,477 sqm
Site area:
3,529 sqm
Major tenant:
Orora
Aaron Hockly
Chief Operating Officer
9.
Information on this page is taken from GMF's
ASX releases and are as at 30 June 2016.
10. Includes indications to accept via an institutional
acceptance facility which are conditional on
Growthpoint's offer being unconditional.
11. Pro forma, assumes 100% ownership on 1 July
2016 and excluding other potential impacts.
Brisbane
CBD
500M
Melbourne
CBD
Growthpoint Properties Australia Annual Report 2016 GMF Takeover
11
GMF key statistics
(as at 30 June 2016)
— $440.3 million total
property value
— 6.70% average
capitalisation rate
— 15.5% of Growthpoint’s
property portfolio
— 94.9% occupancy
— 5.5 year WALE
— 100% A-grade office
Sydney Olympic Park,
NSW
Located 16 kilometres west of Sydney’s
CBD, Sydney Olympic Park was
redeveloped for the 2000 Sydney Olympics
and is home to many of New South Wales’
key cultural and sporting facilities including
ANZ Stadium as well as several corporate
head offices.
M2
M4
1KM
Sydney
CBD
5 Murray Rose Avenue
5 Murray Rose Avenue has five levels
and a 6 star Green Star (as built) rating.
The asset is award-winning, being
recognised by the Property Council
of Australia for Best Sustainable
Development in 2014 and the Urban
Development Institute of Australia
NSW for Excellence in Sustainable
Development in 2013.
Book value:
$90.5m
Cap rate:
6.25%
WALE:
7.8 years
Lettable area:
12,386 sqm
Site area:
3,826 sqm
Major tenant:
Lion
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3 Murray Rose Avenue
3 Murray Rose Avenue is a campus style
business park A-Grade office building.
The five level suburban office building
was completed in March 2015 and was
developed as the national headquarters
for Samsung. The property incorporates
modern urban design and has achieved
a 5 star Green Star Design Rating. The
asset has a 5 star Green Star (as built)
rating and 5 star NABERS Energy and
Water Ratings.
Book value:
$91.5m
Cap rate:
6.50%
WALE:
5.7 years
Lettable area:
13,423 sqm
Site area:
3,980 sqm
Major tenant:
Samsung
Quad 3, 8 Parkview Drive
Quad 3 is part of the Quad Business
Park which is characterised by low rise
buildings set in a parkland environment,
with large floorplates, good natural
light and a high car parking ratio.
The building comprises three levels
and is located close to significant
infrastructure, public recreational and
retail amenities.
Book value:
$29.3m
Cap rate:
7.25%
WALE:
2.9 years
Lettable area:
5,244 sqm
Site area:
6,635 sqm
Major tenant:
Alstom Australia
Quad 2, 8 Parkview Drive
Quad 2 is also part of the Quad
Business Park. The building comprises
four levels and is located close to
significant infrastructure, public
recreational and retail amenities.
Book value:
$29.0m
Cap rate:
7.25%
WALE:
3.1 years
Lettable area:
5,145 sqm
Site area:
7,788 sqm
Major tenant:
Universities
Admissions
Centre
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12
Directors’ Report
Objectives and goals for
sustainable growth
As shown below, Growthpoint achieved most of its stated objectives and
goals for FY16 and will seek to build on these in FY17.
Increase
distributions to
Securityholders
1
Carefully expand
and diversify
property portfolio
2
Existing property
assets enhanced
3
FY16 Goals
i Distributions growing each distribution
FY16 Goals
i Only acquire assets which enhance the
FY16 Goals
i Leasing of vacant space and leasing or
period.
i Certainty of growth obtained through an
increasing WARR.
quality or returns of the portfolio over the
long-term.
i Assets diversified by sector, location, size
i Undertake income accretive acquisitions.
and tenant.
FY16 Achievements
% 4.1% increase in distributions from
FY15 to FY16 and 1% increase from
first to second half distributions.
% WARR increased from 3.0% at 30
June 2015 to 3.1% at 30 June 2016
due to leasing and acquisitions.
15
21
% $328.0 million of acquisitions
undertaken at an average yield
of 6.8% and a WARR of 3.7%.
25
33
FY17 Goals
No change from FY16.
i Assets acquired at or below the
Group’s belief of fair value supported by
independent valuations and which are
expected to increase in value over time.
FY16 Achievements
% The assets acquired by Growthpoint in
FY16 are of a similar or higher
quality to the existing portfolio
and have a WALE of 7.2 years.
25
33
% Growthpoint owns 58 assets in strategic
locations in every Australian State and
the Australian Capital Territory. Assets
are 56%/44% split between office and
industrial. Asset values range from
$1.2 million to $280.0 million. Out of its
116 tenants, only Woolworths, which
leases six grocery distribution centres
from Growthpoint, contributes more
than 10% of the Group’s income.
20
FY17 Goals
As per FY16 plus:
• Consider asset divestments.
• Complete takeover of GPT Metro
Office Fund.
34
10
renewal of potential lease expiries.
i Retaining tenants where possible through
regular contact with representatives and
timely responses to requests.
i Capital works undertaken to maintain or
improve the value of assets and/or retain
or attract tenants.
FY16 Achievements
% Over 59,000sqm of new and
extended leasing undertaken. The
occupancy rate at 30 June 2016
was 99%.
20
% Meetings held with all tenants with leases
potentially expiring over the next two
years. Tenant retention rate of 78.5% for
the five years to 30 June 2016.
% $7 million of capital works undertaken
plus $14.8 million tenant requested
expansions, services upgrades and
façade improvements.
FY17 Goals
As per FY16 plus:
• Significant development and/or change
of use to be considered for some assets.
Growthpoint Properties Australia Annual Report 2016 Strategy
13
255 London Circuit,
Canberra, ACT
Sustainable growth
means ensuring
Growthpoint's business
assets, revenue and
expenses are able to be
continued. It includes
enhancing people and
limiting our impact on the
environment.
Increase liquidity
and value of
Growthpoint
securities
4
Borrow
prudently
5
Operate
sustainably
6
FY16 Goals
i Inclusion in major indexes.
i Increase equity capital where
appropriate.
i Engage with research analysts to
increase and improve coverage.
i Increase liquidity of Growthpoint's
securities.
FY16 Achievements
% Remained in S&P/ASX200 (plus other
indices).
% $40.1 million of new equity
was raised via the distribution
reinvestment plan with the proceeds
being used to fund acquisitions and
capital works.
76
× Research coverage reduced from seven
to six analysts.
× Liquidity of Growthpoint's securities
was flat from FY15 to FY16, with
121,359,340 securities traded in FY16
compared to 132,622,827 in FY15.
FY17 Goals
No change from FY16.
FY16 Goals
i Maintain gearing within 35%-45% range.
i Extend average debt maturity.
i Diversify sources and tenor of debt.
i Additional capital markets issuance to be
considered.
FY16 Goals
i Refine sustainability objectives.
i Focus on long-term value rather than
short-term profits.
i Improve gender diversity of directors and
employees.
FY16 Achievements
% Balance sheet gearing at 30 June
2016 was 42.6%.
14
× The weighted average debt maturity was
4.2 years at 30 June 2016; down from
4.7 years at 30 June 2015.
% Growthpoint entered into $250m of
new debt capital market facilities for 7
years in December 2015, with proceeds
used to repay domestic bank debt. In
addition Growthpoint terminated three
interest rate swaps with face values of
$265 million (at cost of $10.5 million) and
entered into four new interest rate swaps
with a face value of $150 million and a
weighted average maturity of 5 years.
FY17 Goals
As per FY16 plus:
• Ensure fixed debt is within the target
range of 75% to 100% after current
transactions are completed.
FY16 Achievements
% Sustainability objectives have
7
been refined (refer pages 7-9 of
Sustainability Report for more details).
% The property portfolio, capital
management strategy and established
sustainability targets have been built with
long-term value creation in mind.
× 35% of the Group's employees (six out
of 17) are female, down from 40% as at
30 June 2015 (six out of 15).
FY17 Goals
• Monitor compliance with sustainability
objectives and improve integration of
sustainability practices within business
operations.
• Continue to focus on long-term value
rather than short-term profits.
• Seek additional female director (target
date 2020).
2016 Sustainability Report
(available online only)
More details about sustainability can be
found in Growthpoint's 2016 Sustainability
Report.
investors.growthpoint.com.au/
SustainabilityReport/2016
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14
Directors’ Report
Financial
Management
During FY16, Growthpoint used its
balance sheet to support further
growth in the business by acquiring
five quality properties. Robust
distribution growth has been
supported by lower interest rates
on debt and slightly higher gearing
(but within the Group’s target
range) than in FY15.
NTA per security increased
7.7% to $2.67 over FY16
Dion Andrews
Chief Financial Officer
Highlights for FY16 include:
• A 3.3% increase in distributable income
to 21.9 cps.
• Distribution guidance of 20.5 cps met,
representing a payout ratio of 93.7%.
• FY17 distribution guidance of 21.3
cps provided (excluding the GMF
takeover see page 10, and any capital
management initiatives, refer below),
representing growth of 3.9%.
• NTA per security increased 7.7% to
$2.67.
• Moody’s rating of Baa2 confirmed with
stable outlook.
• Further fixed debt issuance with
AUD$250 million 7-year debt at an all-in
cost of 4.46% per annum, helping to
further diversify sources of debt and
lengthen the debt tenor.
Strategic execution in FY16
In the 2015 Annual Report, we outlined the
Group’s financial management goals for
FY16 as:
• Maintain gearing within 35% to 45%
range.
• Extend average debt maturity.
• Diversify sources and tenor of debt.
• Additional capital markets issuance to be
considered.
Our performance in each of these areas
follows.
Balance sheet gearing 42.6% as at
30 June 2016
Balance sheet gearing as at 30 June
2016 was 42.6%, up from 37.0% as at
30 June 2015 and within the target range
of 35% to 45%. Debt usage increased by
$351.4 million over the year to support
the acquisition of five new properties for
$328.0 million (plus transaction costs). Debt
funding these acquisitions during a time
when Growthpoint’s cost of debt has been
falling has helped support growth in the
Group’s distributions. A large proportion of
this debt increase has been fixed for seven
years meaning that this driver of distribution
growth is sustainable over the medium to
long term.
Movements in NTA per stapled security
Prudent financial
management strategies
have been adopted by
Growthpoint to match
debt levels with asset
quality and WALE, fix
debt for as long as
practicable (having
regard to the cost), and
raise capital (debt and
equity) to fund property
acquisitions.
Extend average debt maturity
The weighted average debt maturity
decreased by 0.5 years to 4.2 years,
despite 12 months passing. The Group still
aims to increase the weighted average debt
maturity where possible.
Diversify sources and tenor of debt
In December 2015, the Group entered into
$250 million of seven-year fixed debt with
three new financiers. This had the effect of
increasing the number of financiers from
five to eight and thus further diversified the
sources of debt for Growthpoint. It also
helped further diversify the tenor of debt.
All-in debt costs lowered to 4.1% per
annum
The all in debt cost for the Group reduced
from 4.8% per annum at the beginning
of the year to 4.1% per annum at 30
June 2016. The reduction occurred due
to the issue of fixed debt in December
2015 as outlined above and a concurrent
reorganisation of the interest rate swap
book where $265 million of existing swaps
were terminated and $150 million of new,
longer dated and lower fixed rate interest
rate swaps were entered into.
Refer to the graph, on the opposite page,
which illustrates debt costs and gearing
levels over the last six years.
FY 17 Outlook
Debt capital management
Growthpoint is awaiting the outcome of
its takeover proposal for GPT Metro Office
$2.48
30 June 15
+16.6¢
Property revaluations / profit on property sale
-1.0¢
+3.4¢
$2.67
Interest rate swap revaluations
Equity raising & retained earnings
30 June 16
Growthpoint Properties Australia Annual Report 2016 Other key statistics
(as at 30 June 2016)
— 65% debt fixed
— 42.6% balance sheet
gearing
— 4.2 years weighted
average debt maturity
— 5.7 years weighted
average fixed rate debt
maturity
— $1.2 billion drawn debt
— $1.4 billion debt facilities
Fund (GMF) and the proposed sale of four
industrial properties and their respective
impacts on the level of gearing. If gearing
exceeds the top of the 35% to 45% target
range post these transactions, then the
Group can reduce gearing through various
capital management initiatives such as:
• Dividend Reinvestment Plan (DRP)
– Growthpoint maintains a DRP,
whereby Securityholders can reinvest
their distributions into newly issued
Growthpoint Securities, typically at a
discount to the market price. The historic
average take-up for Growthpoint’s
seven prior DRP’s has been 74%.
Assuming this continues, the FY17
annual distribution of approximately
$140.4 million, approximately
$104.2 million could be raised this year
alone. Growthpoint could consider
underwriting the DRP.
• Property disposals – Growthpoint could
sell assets.
• Equity raising – Growthpoint has raised
$1,113.1 million of equity since August
2009 which has funded the growth of
its business and the property portfolio.
Should circumstances be opportune,
Growthpoint could reduce gearing by
raising equity solely for that purpose
or in conjunction with future property
acquisitions.
Growthpoint will continue to consider the
diversity of its debt sources, debt tenor and
level of gearing to balance prudent financial
management with the current portfolio and
its growth in future.
Growthpoint may seek to execute a further
debt capital issuance in FY17 to further
diversify its sources of debt and lengthen
the weighted average maturity profile whilst
the current low interest rate environment
persists. It will repay short term bank debt
Financial Management
15
Market capitalisation and free float
as at 30 June
$633.7m
$623.9m
$1,836.8m
$1,781.1m
$1,323.3m
$409.2m
$271.3m
$233.2m
$966.8m
$796.9m
Market Capitalisation
Free float
2016
2015
2014
2013
2012
Interest rate hedging
Maturity
date
Time to
maturity
Jul 18
Feb 19
Feb 19
Nov 19
Jun 20
Jun 20
Dec 20
Jun 21
2.0yrs
2.6yrs
2.6yrs
3.3yrs
4.0yrs
4.0yrs
4.5yrs
5.0yrs
Fixed
Rate
3.20%
3.57%
3.55%
3.70%
2.36%
2.36%
2.42%
2.48%
Weighted
average
3.4yrs
3.06%
Gearing & cost of debt
as at 30 June
g
n
i
r
a
e
G
t
e
e
h
S
e
c
n
a
a
B
l
65%
60%
55%
50%
45%
40%
35%
30%
25%
0%
$60m
$50m
$50m
$50m
$50m
$50m
$25m
$25m
Including Growthpoint's $450m of fixed interest
rate debt, the weighted average maturity
of fixed debt increases to 5.7 years and the
weighted average fixed rate reduces to 2.88%.
t
b
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d
f
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-
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A
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
0%
2011
2012
2013
2014
2015
2016
56.1%
45.6%
46.8%
40.9%
37.0%
42.6%
7.7%
7.3%
6.7%
5.8%
4.8%
4.1%
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16
Directors’ Report
Summary of movements in value over FY16
Property type
Industrial portfolio
Office portfolio
Total portfolio
Properties
at 30 June
2015
Value at
30 June 2015
Capex
for full year
Property
acquisitions
& expansions
Property
disposals
Revaluation
gain / (loss)
Valuation at
30 June
2016
Change due to
revaluation12
Properties
at 30 June
2016
No.
36
17
53
$m
1,165
1,179
2,344
$m
3
4
7
$m
42
306
348
$m
-
-
-
$m
26
78
104
$m
1,236
1,566
2,803
%
2.2
6.6
4.4
No.
38
20
58
Key debt metrics and changes during FY16
Gross assets
Interest bearing liabilities
Total debt facilities
Undrawn debt
Balance sheet gearing
Weighted average interest rate
Weighted average debt maturity
Annual Interest Coverage Ratio (ICR) / Covenant ICR
Actual Loan to Value Ratio (LVR) / Covenant LVR
Weighted average fixed debt maturity
% of debt fixed
$'000
$'000
$'000
$'000
%
%
years
times
%
years
%
30 June 2016
30 June 2015
Change
2,914,034
1,242,226
1,375,000
126,728
42.6
4.1
4.2
4.1 / 1.6
45.2 / 60
5.7
65
2,407,147
890,445
1,125,000
506,887
351,781
250,000
228,174
(101,446)
37.0
4.8
4.7
3.9 / 1.6
39.4 / 60
5.0
75
5.6
(0.7)
(0.5)
0.2 / -
5.8 / -
0.7
(10)
NAB, CBA, WBC, ANZ,
two US life insurers, one
Japanese bank and one
Chinese bank
NAB, CBA, WBC, ANZ,
and one US life insurer
Debt providers
FY16 Distributions
Total
distributions
Distributions
per security
$'000
58,072
60,062
cps
10.20
10.30
118,134
20.50
1H16
2H16
Total
The total distribution is 55.5% tax deferred and
0.9% tax free. Refer to note 3.6 on page 77 for
more distribution details.
77
FY17 distribution guidance
of 21.3 cps provided,
representing growth of
3.9% from FY16
12. This figure includes assets held for sale and
are presented before straightline adjustments.
Properties currently held for sale will be classed
as a disposal when settlement of any sale occurs.
with any funds raised if there are no other
immediate applications such as property
acquisitions.
It will also seek to extend the tenor of debt
maturities to more closely align with fixed
debt maturities.
Growthpoint is targeting undrawn and
uncommitted debt of circa $100 million to
allow for flexibility in transactions without
excessive cost drag from holding undrawn
debt lines.
Growthpoint’s policy is to have between
75% and 100% of drawn debt fixed and
to try and match the weighted average
maturity of fixed debt with the weighted
average of its total debt maturities. At 30
June 2016, 65% of debt was fixed with
a weighted average maturity of 5.7 years
(versus a weighted average maturity of
total debt drawn of 4.2 years). Growthpoint
will act to bring the fixed percentage back
within the target range and this is expected
to occur as a result of the completion of
the transactions outlined above. If not, the
Group will either enter further interest rate
swaps or replace floating rate bank debt
with an issuance of fixed interest rate debt.
Distributions forecast to increase to
21.3 cps
The Group seeks to return as much
distributable income to investors as
is prudent (after allowing for portfolio
requirements of capital expenditure and
payment of lease incentives). The payout
ratio for FY16 was 93.7% compared
with 93.1% in FY15. Growthpoint does
not foresee the payout ratio falling below
90% over the medium term given the
requirements of the current portfolio.
Distributions are forecast to increase from
FY16 by 3.9% to 21.3 cps for FY17, based
on distributable income of at least 22.2 cps.
Growthpoint Properties Australia Annual Report 2016
Financial Management
17
Distributable income
Distributable income is the net profit available for distribution from the Group which excludes accounting adjustments such as fair value
movements to the value of investment property and interest rate swaps, depreciation and profits on sale of investment properties.
Distributable income is non-IFRS financial information and has not been subject to review by the Group’s external auditors.
Distributable income has been provided to allow Securityholders to identify that income which is available to distribute to them and will
assist in the assessment of relative performance of the Group.
The table below provides a reconciliation of distributable income from statutory profit.
Reconciliation from statutory profit to distributable income
Profit after tax
Less non-distributable items:
- Straight line adjustment to property revenue
- Net changes in fair value of investments
- Profit on sale of investment properties
- Net loss on derivatives
- Depreciation
Distributable income
FY16
$’000
FY15
$’000
224,269
283,004
(7,426)
(96,583)
(163)
5,824
128
(6,569)
(168,579)
(363)
11,280
137
126,049
118,910
Change
$’000
(58,735)
(857)
71,996
200
(5,456)
(9)
7,139
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Change
%
(20.8)
6.0
The payout ratio, calculated as distributions on ordinary stapled securities divided by distributable income, was 93.7% (FY15: 93.1%).
The table below summarises those components that make up distributable income earned.
Components of distributable income
Property income
Property expenses
Net property income
Interest income
Total operating income
Borrowing costs
Operational and trust expenses (less depreciation)
Operating and trust expenses
Tax expense
Distributable income
FY16
$’000
208,626
(27,457)
181,169
559
181,728
(44,982)
(10,279)
(55,261)
FY15
$’000
197,240
(25,441)
171,799
761
172,560
(44,292)
(8,986)
(53,278)
(418)
(372)
126,049
118,910
Change
$’000
11,386
(2,016)
9,370
(202)
9,168
(690)
(1,293)
(1,983)
(46)
7,139
Change
%
5.8
7.9
5.5
(26.5)
5.3
1.6
14.4
3.7
12.4
6.0
The total distribution for FY16 is 55.5% tax deferred and 0.9% tax free.
Operating expenses
Total operating expenses
Average gross asset value
Operating expenses to average gross assets
$’000
$’000
%
FY16
10,407
FY15
9,123
FY14
8,498
2,588,089
2,211,504
1,810,053
0.40
0.41
0.47
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Directors’ Report
75 Dorcas Street,
South Melbourne, VIC
Growthpoint Properties Australia Annual Report 2016 Financial Management
19
Five year
performance
summary
The five year performance
summary below highlights the
Group's steady increases to
distributable income, distributions
and NTA per security over time.
Security Price
as at 30 June
Distributions
per stapled security
2016
2015
2014
2013
2012
2011
$3.15
$3.13
$2.45
$2.40
$2.21
$1.93
FY17*
FY16
FY15
FY14
FY13
FY12
Growth
21.3¢
+3.9%
20.5¢
+4.1%
19.7¢
19.0¢
18.3¢
17.6¢
+3.7%
+3.8%
+4.0%
+2.9%
* Distribution guidance only excluding any change
which the Directors may determine as a result of a
successful GMF takeover.
For the five years ended 30 June 2016
FY16
FY15
FY14
FY13
FY12
Financial performance
Investment income
Profit for the period
Financial position
Total assets (at 30 June)
Total equity (at 30 June)
Securityholder value
Basic and diluted earnings per security
Distributable income per security
Distributions per security
Total Securityholder return13
Return on equity
Balance sheet gearing
NTA per security (at 30 June)
$m
$m
$m
$m
¢
¢
¢
%
%
%
$
307.0
224.3
361.5
283.0
198.5
117.3
171.5
94.0
115.8
49.5
2,914.0
1,556.8
2,407.1
1,411.5
2,128.8
1,165.1
1,680.4
804.1
1,607.1
733.2
38.9
21.9
20.5
7.4
15.9
42.7
2.67
50.4
21.2
19.7
36.4
23.9
37.0
2.48
25.7
20.0
19.0
10.8
17.5
40.9
2.16
23.7
19.3
18.3
23.6
13.1
46.8
2.00
15.2
17.7
17.6
21.6
4.8
45.6
1.93
Market capitalisation (at 30 June)
$m
1,836.8
1,781.1
1,323.3
966.8
796.9
Other information
Number of securities on issue (at 30 June)
No.
583,125,744
569,027,781 540,115,360
402,830,366
379,476,246
13. Total Securityholder return for year. Source: UBS Investment Research.
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Directors’ Report
Property Portfolio
Overview
The property portfolio was
enhanced with $328.0 million
of property acquired and over
59,000sqm of new and extended
leasing during FY16. The property
portfolio has 99% occupancy,
weighted average annual rent
reviews of 3.1% and a weighted
average lease expiry of 6.9 years14.
The property portfolio is valued at
over $2.83 billion and it continues
to maintain a quality tenant base
which includes Commonwealth
and State government tenants,
Woolworths, Linfox, ANZ Banking
Group and GE Capital.
Michael Green
Head of Property
The key metrics highlight
a successful year of
acquisitions and leasing.
The portfolio continues to
deliver a steady income
stream with a long WALE of
6.9 years14 and a reduction
in the portfolio lease
expiries over the next three
financial years.
Sector diversity
by property value as at 30 June 2016
Geographic diversity
by property value as at 30 June 2016
44%
Industrial
56%
Office
VIC 35%
QLD 27%
NSW 20%
SA 7%
ACT 5%
WA 5%
TAS 1%
Tenant type (%)
by gross income as at 30 June 2016
Top ten tenants
by passing rent as at 30 June 2016
Woolworths
NSW Police
Commonwealth of Australia
GE Capital Finance
Australasia15
Linfox
Jacobs Group
Energex
ANZ Banking Group
Fox Sports
Star Track Express
Total / Weighted Average
Listed entity 58%
Government owned 25%
Private company & other 17%
Annual rent review type*
as at 30 June 2016
21.6%
Fixed 2.00-2.99%
Balance of portfolio
63.0% Fixed 3.00-3.99%
WALE
(yrs)
6.1
7.9
9.7
1.715
6.9
7.5
11.4
3.7
6.5
3.0
6.614
5.7
%
21
9
6
5
4
3
3
2
2
2
57
43
7.2%
6.9%
1.3%
Fixed over 4.00%
Total portfolio
100
6.914
CPI
CPI +1.00%
* Leases that have a minimum lease increase,
typically 3%, or CPI are shown as the minimum fixed
rate for the above.
Net property income per State /
Territory
for the year ended 30 June 2016
$46.9m
$38.1m
$59.4m
VIC
QLD
NSW
SA
WA
ACT
TAS
$15.9m
$9.6m
$8.6m
$2.7m
14. Pro forma, including leasing announced post 30 June 2016.
15. The leases to Country Road / David Jones announced after 30 June 2016, with a weighted average lease term from commencement of 14.5 years, will replace the
existing lease to GE Capital Finance Australasia upon the lease expiry.
Growthpoint Properties Australia Annual Report 2016 Portfolio Review
21
Five year performance summary
As at 30 June
Number of properties
Total value
Occupancy
FY1616
FY1519
FY14
FY13
FY12
no.
$m
%
58
2,832.6
99
53
51
44
42
2,372.5
2,093.7
1,694.5
1,634.8
97
98
98
99
Like-for-like value change
$m / % of asset value
130.2 / 5.5
186.0 / 9.0
52.1 / 3.0
30.6 / 2.0
37.0 / 3.2
Total lettable area
Weighted average property age
Weighted average valuation cap rate
WALE
WARR18
Average value (per sqm)
Average rent (per sqm, per annum)
FY net property income
Number of tenants
Portfolio lease expiry profile17
per financial year, by income
1%
3%
4%
2%
11%
6%
sqm
years
%
years
%
$
$
$m
no.
1,109,545
1,050,611
1,036,740
917,989
900,676
9.2
6.9
6.917
3.1
2,553
198
181.2
116
8.3
7.3
6.7
3.0
2,258
183
171.8
97
7.9
7.9
6.9
3.2
2,019
171
148.7
90
6.6
8.4
6.8
3.1
1,846
162
133.4
90
6.0
8.3
7.2
3.2
1,815
161
108.9
87
Building 2,
572-576 Swan Street,
Richmond, VIC
Vacant
FY17
FY18
FY19
FY20
FY21
73%
FY22+
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from 3%
at 30 June
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Reduced
from 9%
at 30 June
2016
Reduced
from 6%
at 30 June
2015
Increased
from 61%
at 30 June
2015
Since 30 June 2016, Growthpoint
has leased over 23,000 sqm to
Country Road and David Jones for
a weighted average lease term of
14.5 years expiring on 30 June 203220.
16. Includes Building C, 211 Wellington Road, Mulgrave, Victoria at its 'on
completion' valuation.
17. Pro forma, including leasing announced post 30 June 2016.
18. Assumes Consumer Price Index change of 1.0% per annum as per Australian
Bureau of Statistics release for FY16.
19. Includes Building B, 211 Wellington Road, Mulgrave, Victoria at its 'on
completion' valuation.
20. Before renewal options.
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Directors’ Report
Office Portfolio
Review
Growthpoint acquired three well
leased modern office buildings
in FY16 with a collective value of
$287.8 million. Leasing success
continued with more than
27,400 sqm of office space leased
over FY16 increasing occupancy to
98% across the office portfolio.
Andrew Kirsch
Asset Manager
Significant leasing
success was achieved
in Brisbane in FY16 with
the SW1 Complex 100%
leased and occupancy at
333 Ann Street increasing
from 41% to 77%.
21. Pro forma, including leasing announced post
30 June 2016.
22. Includes Building C, 211 Wellington Road,
Mulgrave, Victoria at its on completion valuation.
23. Includes Building B, 211 Wellington Road,
Mulgrave, Victoria at its on completion valuation.
Office Acquisitions
During the year Growthpoint acquired three
new office properties for a combined value
of $286.9 million.
In November 2015 Growthpoint announced
the purchase of Building C, 211 Wellington
Road, Mulgrave, Victoria as a fund-through
development for approximately $50.9
million, providing a 7.25% initial yield on
completion. The five level office building of
10,295 sqm is currently under construction
and due for completion around September
2016. The building is targeting a 5 star
NABERS rating and 5 star Green Star
rating (by design) and will be 47% leased
to BMW Australia Finance Limited for
five years from practical completion. The
developer will provide a five year rental
guarantee for any space not leased at
completion. The property adjoins Building
B, 211 Wellington Road, Mulgrave, Victoria,
which Growthpoint acquired in 2014 and is
majority leased to Monash University. As of
30 June 2016 the value of Building B was
$67.0 million.
In January 2016, 255 London Circuit,
Canberra, Australian Capital Territory, was
purchased for $70.0 million, providing a
6.5% initial yield. The building is a modern
six level A-grade office property, occupied
fully by the Australian Government
(Department of Foreign Affairs and Trade
– DFAT). At the time of acquisition, the
remaining lease term was 11.6 years,
providing a long term secure lease with
fixed annual reviews of 3.8%. The property
has a 5 star Green Star rating (by design)
and a 4.5 star NABERS rating.
In June 2016, Growthpoint acquired
75 Dorcas Street, South Melbourne,
Victoria for $166.0 million, providing a 6.6%
initial yield. The property, of 23,811 sqm
and 690 car spaces, is leased to, among
other tenants, ANZ Banking Group (57.7%
of area), Mondelez Australia (19.2%) and
BMW Australia (15.4%) and has a weighted
average lease expiry of 5.4 years. The
building occupies a prime location in South
Growthpoint owns
20 CBD and metro office
properties which are
over 90% A-grade, 83%
weighted to Brisbane,
Melbourne and Sydney
and have a 7.8 year21
WALE. Its buildings are
generally modern with
high green credentials
and all are well-leased
to top government and
business tenants.
Tenants by Industry
by gross income, as at 30 June 2016
Government 37%
Financial Services 22%
Resources, Infrastructure & Construction 20%
IT, Media & Telecommunications 7%
Education 6%
Other Consumer & Business Services 5%
Health 3%
Melbourne approximately 400 metres west
of St Kilda Road. Constructed in 2002 and
further refurbished in 2015, the property
adds to the quality of Growthpoint’s
modern well leased office portfolio.
Five year performance summary - office
As at 30 June
Portfolio value
Total properties
Weighted average cap rate
% of Growthpoint portfolio
Occupancy
WALE
$m
no.
%
%
%
FY1622
FY1523
FY14
1,596.2
1,206.6
1,049.8
FY13
797.3
FY12
800.6
20
6.8
56
98
17
7.3
51
94
6.8
16
7.8
50
97
6.5
15
8.4
47
97
5.7
15
8.3
49
98
6.0
years
7.821
Total lettable area
sqm 235,389
191,953
179,175
147,405
146,916
Average rent
(per sqm, per annum)
$
533
538
516
501
488
Growthpoint Properties Australia Annual Report 2016 Office Portfolio Review
23
Portfolio lease expiry profile24
per financial year, by income
Geographic diversity
by property value as at 30 June 2016
Net property income per State /
Territory
for the year ended 30 June 2016
2%
1%
3%
2%
9%
9%
Vacant
FY17
FY18
FY19
FY20
FY21
74%
FY22+
QLD 32%
VIC 27%
NSW 24%
ACT 10%
SA 5%
TAS 2%
$28.2m
$27.0m
$14.2m
$8.6m
$7.1m
$2.7m
QLD
NSW
VIC*
ACT
SA
TAS
*Note: 75 Dorcas St, South Melbourne, Victoria
settled in June 2016, so minimal FY16 income was
received for this $166m property.
Focus on Leasing
Office Growth
Over the past 12 months, Growthpoint’s
office portfolio has increased by
$389.6 million to total $1,596.2 million
from $286.9 million of quality and accretive
acquisitions and net valuation gains of
$101.8 million.
Valuation highlights include:
• 1 Charles Street, Parramatta, NSW:
An increase of $18.5 million, highlighting
the strong demand for quality assets
with secure income profiles particularly
in markets with low vacancy rates. Since
Growthpoint purchased the asset in
June 2014, the value of the property has
increased by $38.9 million predominantly
due to capitalisation rates which have
tightened by 75 basis points.
• A4, 52 Merivale Street, South
Brisbane, QLD: The value increased
$14.3 million or 24% during FY16. The
increase was driven by the new and
extended leases which improved the
WALE from 2.6 to 6.4 years leading to
100% occupancy as well as improving
conditions for prime well leased property.
• 333 Ann Street, Brisbane, QLD: The
recent leasing success has pushed the
value of the building up by $11.5 million
over FY16 to $102.5 million. The
significant improvement in building
occupancy, through close to 7,000 sqm
of new leasing to high calibre tenants,
drove this result.
Growthpoint again worked hard to focus on
office leasing in FY16. Throughout the past
year more than 27,400 sqm of office space
was leased, with the majority of the leasing
success in Brisbane.
333 Ann Street, Brisbane, QLD
In FY16, close to 7,000 sqm of space
was leased in 333 Ann Street increasing
occupancy from 41% to 77% with only
3,850 sqm available for lease as at
30 June 2016. Several major new tenants
were introduced to the building including
MasterCard (1,318 sqm), Federation
University (2,556 sqm) and Superloop
(867 sqm). The targeted leasing strategy
also positively impacted on the property’s
valuation.
SW1 South Brisbane, QLD
SW1 continues to attract high quality
office and retail tenants. 100% occupancy
was achieved during FY16, across the
four office buildings which make up SW1,
totalling 37,584 sqm of lettable area. Major
leasing transactions included:
• Jacobs Group signing a new 11.4 year
lease over 6,896 sqm within the A1
Building. The new lease provides for
annual fixed 3.75% increases.
• The University of the Sunshine Coast
entering into a 10 year lease over
2,004 sqm within the A4 Building. The
University has chosen SW1 to house its
new South Brisbane Campus, offering
staff offices, teaching areas and student
engagement spaces.
• New leases to Fuji Xerox Australia
(1,425 sqm), Topcon Positioning
Systems (1,235 sqm) and Fluor
Australia (567 sqm) which saw existing
tenants retained, or new tenants taking
potentially expiring space without any
vacancy downtime.
Office portfolio
key statistics
(as at 30 June 2016)
— $1,596.2 million total value
— 235,389 sqm total lettable
area
— 6.8% weighted average
capitalisation rate
— 56% of Growthpoint’s
property portfolio
— 98% occupancy
— 7.8 years WALE24
— 3.4% WARR25
— 20 assets
Quality acquisitions and
a focus on leasing during
FY16 have contributed to a
portfolio valuation gain of
$101.8 million on a like-for-
like basis.
24. Pro forma, including leasing announced post
30 June 2016.
25. Assumes Consumer Price Index change of 1.0%
per annum as per Australian Bureau of Statistics
release for FY16.
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Directors’ Report
Office Portfolio26
Address
Book Value
Valuer
$
Cap
rate
%
Major tenant WALE
Lettable
area
Site
area
years
sqm
sqm
75 Dorcas St
South
Melbourne
VIC
166,000,000
Savills
6.75 ANZ Banking Group
5.4
23,811
9,632
Car Park, 572-576 Swan St
Richmond
1231-1241 Sandgate Rd
Nundah
333 Ann St
Brisbane
VIC
QLD
QLD
1,200,000
Urbis
13.50
103,500,000
Directors
6.50
Energex
10.3
12,980
5,597
102,500,000
Knight Frank
7.25 Federation University
Bldg 2, 572-576 Swan St
Richmond
Bldg B, 211 Wellington Rd
Mulgrave
VIC
VIC
82,000,000
Urbis
67,000,000
Directors
7.00
7.25
Bldgs 1 & 3, 572-576 Swan St Richmond
VIC
57,800,000
Urbis
7.00
Bldg C, 211 Wellington Rd26
Mulgrave
VIC
51,800,000
Directors
7.25
CB1, 22 Cordelia St
South Brisbane QLD
92,500,000
CBRE
A1, 32 Cordelia St
South Brisbane QLD
74,800,000
Directors
A4, 52 Merivale St
South Brisbane QLD
72,800,000
Knight Frank
CB2, 42 Merivale St
South Brisbane QLD
52,400,000
Directors
Car Park, 32 Cordelia St
& 52 Merivale St
South Brisbane QLD
18,000,000
Directors
33-39 Richmond Rd
Keswick
SA
62,000,000
Knight Frank
6.75
6.50
6.63
6.75
6.25
7.75
GE Capital Finance
Australasia
Monash University
GE Capital Finance
Australasia
BMW Australia
Finance
GE Capital Finance
Australasia
1.7
4.5
14,660
7,201
12,780
11,040
1.7
10,250
16,819
5.0
10,295
11,070
1.7
–
3,756
Downer EDI Mining
Jacobs Group
University of the
Sunshine Coast
Peabody Energy
Secure Parking
Coffey Corporate
Westpac Banking
Corporation
5.4
5.9
7.3
6.4
8.6
3.4
7.0
2.1
7.9
5.7
16,457
1,563
11,529
5,772
10,052
2,667
9,405
2,331
6,598
3,158
–
9,319
11,835
4,169
6,639
33,090
32,356
6,460
14,496
4,212
7 Laffer Dr
1 Charles St
Bedford Park
SA
16,400,000
Knight Frank
11.75
Parramatta
NSW 280,000,000
Bldg C, 219-247 Pacific Hwy
Artarmon
NSW 111,000,000
Directors
Directors
6.25
6.50
NSW Police
Fox Sports
89 Cambridge Park Dr
Cambridge
TAS
27,000,000
Directors
8.25
10-12 Mort St
Canberra
ACT
87,500,000
JLL
6.75
255 London Cct
Canberra
ACT
70,025,000
Directors
6.00
Hydro Tasmania
Consulting
Commonwealth of
Australia
Commonwealth of
Australia
7.8
6,876
28,080
8.7
15,398
3,064
11.2
8,972
2,945
Total / Weighted Average
1,596,225,000
6.78
6.827 235,389 171,945
Major office
tenants include
NSW Police (16% of
income), Commonwealth
of Australia (10%) and
GE Capital Finance
Australasia (9%)
26. Includes Building C, 211 Wellington Road, Mulgrave, Victoria at its ‘on completion’ valuation.
27. Pro forma, including leasing announced post 30 June 2016.
Growthpoint Properties Australia Annual Report 2016 Office Portfolio Review
25
75 Dorcas Street, South
Melbourne, VIC
Major Tenant: ANZ Banking Group
Book Value: $166.0 million
WALE: 5.4 years | Cap rate: 6.75%
A 3.5 star NABERS energy rated, 11
level A-grade office, showroom and car
park building with 690 car parks. The
building was constructed in 2002 and
partly refurbished in 2015.
255 London Circuit,
Canberra, ACT
Major Tenant: Commonwealth of
Australia
Book Value: $70.0 million
WALE: 11.2 years | Cap rate: 6.00%
A six level A-grade office building
including 134 basement car parks. The
property has a 5 star Green Star rating
(by design) and 4.5 star NABERS energy
rating.
Artist representation
Quality office
acquisitions increased
distributable income
and tenant diversity
Accretive acquisitions during FY16
included two fully leased modern office
buildings in Canberra and Melbourne with
the Commonwealth of Australia and ANZ
Banking Group as the respective major
tenants. Growthpoint has also funded
the development of a new office building
substantially pre-leased to BMW Australia
Finance.
Office portfolio value
at 30 June
FY16
FY15
FY14
$1,596.2m
$1,206.6m
$1,049.8m
FY13
$797.3m
FY12
$800.6m
Building C, 211 Wellington
Road, Mulgrave, VIC
Major Tenant: BMW Australia Finance
Book value: $51.8 million
WALE: 5.0 years | Cap rate: 7.25%
A five level office building plus five level car
park with a total of 598 spaces, currently
under development. The building is
targeting a 5 star NABERS energy rating
and 5 star Green Star rating (by design),
and completion is expected in September
2016.
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26
Directors’ Report
Rental income remains stable due to
high quality and diversified tenant base
Through strategic acquisitions and focused leasing efforts, Growthpoint
has a diversified portfolio of assets with a diversified tenant base
in a range of industries including government, financial services,
infrastructure, telecommunications, education and health. This has
enabled Growthpoint to maintain a stable rental income stream across
its portfolio despite the slowdown in certain sectors of the market,
particularly resources.
Queensland multi-tenanted office assets
24
The remaining nine office
properties not included on
the following pages are
single tenanted. Details of all
office properties are included
on page 24.
CB1, 22 Cordelia Street, South Brisbane, QLD
Total NLA 11,529 sqm | Occupancy 100%
A1, 32 Cordelia Street, South Brisbane, QLD
Total NLA 10,052 sqm | Occupancy 100%
University of the Sunshine Coast
CB2, 42 Merivale Street, South Brisbane, QLD
Total NLA 6,598 sqm | Occupancy 100%
A4, 52 Merivale Street, South Brisbane, QLD
Total NLA 9,405 sqm | Occupancy 100%
Growthpoint Properties Australia Annual Report 2016 Queensland multi-tenanted office assets (continued)
333 Ann Street,
Brisbane, QLD
Office Portfolio Review
27
Energex
(levels 3-7)
1231-1241 Sandgate Road, Nundah, QLD
Total NLA 12,980 sqm | Occupancy 100%
QER
St Hilliers Property
Close to 7,000 sqm of
space was leased within
333 Ann Street for FY16,
increasing occupancy
of the building from
41% at 30 June 2015 to
77% at 30 June 2016.
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333 Ann Street, Brisbane, QLD
Total NLA 16,457 sqm | Occupancy 77%
28
Directors’ Report
Victorian multi-tenanted office assets
BMW Australia / Developer Rent Guarantee
Building B, 211 Wellington Road, Mulgrave, VIC
Total NLA 12,780 sqm | Occupancy 100%
75 Dorcas Street, South Melbourne, VIC
Total NLA 23,811 sqm | Occupancy 100%
South Australian multi-tenanted office asset
The Media Store
Developer Rent Guarantee
Building C, 211 Wellington Road, Mulgrave, VIC
Total NLA 10,295 sqm | Occupancy 100%28
New South Wales multi-tenanted office asset
WorldPark, 33-39 Richmond Road, Keswick, SA
Total NLA 11,835 sqm | Occupancy 100%
Building C, 219-247 Pacific Highway, Artarmon, NSW
Total NLA 14,496 sqm | Occupancy 100%
28. Currently under development with completion expected in September 2016.
29. Currently subject to developer guarantee.
Growthpoint Properties Australia Annual Report 2016 Office Portfolio Review
29
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Building C, 219-247 Pacific Highway,
Artarmon, NSW
30
Directors’ Report
Industrial Portfolio
Review
During FY16 Growthpoint achieved
success in extending leases well in
advance of the lease expiry dates
with ASX-listed tenants such as
Orora and Coventry Group. The
portfolio was expanded through
$41.1 million of acquisitions and a
valuation gain of 2.4% on a like-
for-like basis.
Andrew Fitt
Senior Asset Manager
Virtual property tour
Take a virtual tour of Growthpoint’s
largest industrial asset and one of
the largest distribution centres in the
Southern Hemisphere at:
vimeo.com/
growthpointaustralia/larapinta-
virtual-property-tour
Leasing
Growthpoint maintained 100% occupancy
of its industrial property portfolio and
continued its track record of renewing
leases well ahead of potential lease expiry
dates.
Key leasing transactions during FY16
included:
• renewing the lease of 3 Millennium Court,
Knoxfield, Victoria to ASX-listed Orora
Limited, for 8,040 sqm, for a further five
years from 1 March 2016. The lease has
fixed rent increases of 3.5% per annum;
• renewing the lease of Building 2,
670 Macarthur Avenue, Pinkenba,
Queensland to ASX-listed Coventry
Group Limited for three years from 1
February 2016. The lease has annual CPI
rent increases to a minimum of 3%;
• leasing the Group’s 11,430 sqm
warehouse at 20 Southern Court,
Keysborough, Victoria to Sales Force
National Pty Ltd trading as Zenexus for
a term of 7.2 years from October 2015.
The lease has fixed rent increases of 3%
per annum. This property was previously
under a rental guarantee from developers
Frasers Property (formerly Australand)
with less than 3.5 years remaining; and
• renewing the lease of 75 Annandale
Road, Melbourne Airport, Victoria to
Neovia Logistics for three years from
6 November 2016. This 10,280 sqm
warehouse is the national distribution
centre for Jaguar and Land Rover parts.
The lease has fixed rent increases of
3.75% per annum.
The Group is also in advanced negotiations
to renew leases to tenants which expire in
FY18 and beyond.
Acquisitions
In July 2015, Growthpoint purchased a
multi-tenanted industrial property at 1-3
Pope Court, Beverley, South Australia, in
Adelaide’s inner western industrial precinct.
Growthpoint's industrial
portfolio is one of the
highest quality of any
A-REIT. Approximately
90% of the portfolio
comprises large
distribution/logistics
warehousing with
nearly 50% leased
to Woolworths for its
grocery supply chain.
Tenants by Industry
by gross income, as at 30 June 2016
Retail 59%
Logistics 20%
Manufacturing 14%
Other Consumer & Business Services 7%
The purchase price of $20.8 million
provided an initial passing yield of 7.75%.
The property was newly constructed with
a WALE at acquisition of 5.3 years and a
WARR of 3.2%.
The Group acquired a 14.1 hectare
industrial property in Wollongong, New
South Wales for $20.3 million in October
2015 with a 15 year lease to Patrick
Autocare Pty Ltd (subsidiary of top 50 ASX
listed Asciano Limited). The property is
operated as a car storage facility close to
Five year performance summary - industrial
As at 30 June
Portfolio value
Total properties
Weighted average cap rate
% of Growthpoint portfolio
Occupancy
WALE
FY16
FY15
FY14
1,236.3
1,165.9
1,043.9
FY13
897.2
FY12
834.2
38
7.1
44
100
5.930
36
7.3
49
100
6.5
35
8.0
50
99
7.3
29
8.3
53
100
7.9
27
8.4
51
100
8.5
$m
no.
%
%
%
years
Total lettable area
sqm
874,156
858,658
857,565
770,584
753,760
30. Pro forma, including leasing announced post
30 June 2016.
Average rent
(per sqm, per annum)
$
109
104
99
97
96
Growthpoint Properties Australia Annual Report 2016 Industrial Portfolio Review
31
Net property income per State /
Territory
for the year ended 30 June 2016
$45.2m
$18.7m
$11.1m
$9.6m
$8.8m
VIC
QLD
NSW
WA
SA
Industrial portfolio
key statistics
(as at 30 June 2016)
— $1,236.3 million total value
— 874,156 sqm total lettable
area
— 7.1% weighted average
capitalisation rate
— 44% of Growthpoint’s
property portfolio
— 100% occupancy
— 5.9 years31 WALE
— 2.7%32 WARR
— 38 assets
Portfolio lease expiry profile31
per financial year, by income
Geographic diversity
by property value as at 30 June 2016
0%
5%
3%
3%
3%
15%
Vacant
FY17
FY18
FY19
FY20
FY21
71%
FY22+
Growthpoint maintained
100% occupancy in its
industrial portfolio with
steady leasing success
during FY16.
NSW’s main port for vehicle imports. The
acquisition provided an initial passing yield
of 7.0% and the lease has fixed 4.0% rent
increases per annum.
Disposals
In June 2016, the Group exchanged
contracts to sell 670 Macarthur Avenue,
Pinkenba, Queensland to a private investor
for $10.1 million (above its 31 December
2015 book value of $9.75 million).
The Group has also highlighted its intention
to sell non-core assets and recycle into
assets which better meet its investment
criteria, however, no further contracts of
sale had been agreed as of the date of this
report.
Expansions and capital
Improvements
Growthpoint funded capital improvements
to 101-103 William Angliss Drive, Laverton
North, Victoria at a cost of approximately
$1.5 million adding approximately
$123,000 per annum to the annual rent
of the property. The rent, including the
increase from the Growthpoint funded
improvements, increases by 3.5% per
annum and there are 12.7 years remaining
on the lease as at 30 June 2016.
VIC 45%
QLD 20%
NSW 14%
WA 12%
SA 9%
Valuation
The value of the industrial property portfolio
(before acquisitions) increased by $28.4
million over the year prior to 30 June 2016
or 2.4% on a like-for-like basis.
The weighted average capitalisation rate
across Growthpoint’s industrial property
portfolio is 7.1% at 30 June 2016, down
from 7.3% at 30 June 2015.
Looking Ahead
Although Growthpoint expects to reduce
its weighting to industrial (as a percentage
of the total portfolio) over the next 12
months, a significant portfolio well in excess
of $1 billion is expected to be maintained.
The industrial portfolio continues to be
underpinned by six Woolworths grocery
distribution centres (the Group’s sole
exposure to Woolworths) representing
nearly half of the industrial portfolio’s
income and approximately 20.8% of the
total portfolio income.
Demand for industrial property is expected
to remain robust in FY17, in particular
driven by internet retailing and increasing
imports of consumer and manufactured
goods and products. Growthpoint will
continue to focus on maintaining 100%
occupancy of its industrial property portfolio
by actively engaging with tenants well in
advance of their lease expiries. The Group
will continue to assess new acquisition
opportunities for quality modern assets
which meet Growthpoint’s strict investment
criteria.
31. Pro forma, including leasing announced post 30 June 2016.
32. Assumes Consumer Price Index change of 1.0% per annum as per Australian
Bureau of Statistics release for FY16.
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32
Directors’ Report
Industrial Portfolio
Address
Book Value
Valuer
$
Cap
rate
%
Major
tenant WALE
Lettable
area
years
sqm
Site
area
sqm
120 Northcorp Blvd
Broadmeadows
28 Bilston Dr*
Wodonga
522-550 Wellington Rd
Mulgrave
VIC
VIC
VIC
77,700,000 m3property 7.25
69,239,916 Held for sale
-
64,500,000
Directors 7.00
1500 Ferntree Gully Rd
& 8 Henderson Rd
Knoxfield
VIC
39,250,000
CBRE 6.50
40 Annandale Rd
Melbourne Airport VIC
34,600,000
Savills 9.25
9-11 Drake Blvd
Altona
VIC
31,300,000
Directors 6.75
101-103 William Angliss Dr* Laverton North
213-215 Robinsons Rd*
Ravenhall
VIC
VIC
27,730,593 Held for sale
26,958,717 Held for sale
-
-
Woolworths
Woolworths
Woolworths
Brown & Watson
International
Star Track
Peter Stevens
Motorcycles
Scott’s Refrigerated
Freightways
Fuji Xerox
130 Sharps Rd
Melbourne Airport VIC
23,600,000
Directors 8.50
Laminex Group
5.1
5.1
5.1
7.3
3.0
58,320
250,000
57,440
250,000
68,144
191,200
22,009
40,844
44,424
75,325
5.3
25,743
41,730
12.7
8,871
37,350
9.0
6.0
21,092
45,020
28,100
47,446
120-132 Atlantic Dr
Keysborough
VIC
22,350,000
Directors 6.25
Symbion
12.5
12,864
26,181
Lots 2, 3 & 4,
44-54 Raglan St
365 Fitzgerald Rd*
Preston
Derrimut
20 Southern Crt
Keysborough
VIC
VIC
VIC
21,650,000
Directors 8.25
Paper Australia
17,842,617 Held for sale
-
Bridgestone Australia
14,350,000
Savills 6.75
Sales Force National
120 Link Rd
Melbourne Airport VIC
14,000,000
Directors 8.50
The Reject Shop
60 Annandale Rd
Melbourne Airport VIC
12,800,000
Urbis 8.00
Willow Ware Australia
6 Kingston Park Crt
3 Millennium Crt
31 Garden St
Knoxfield
Knoxfield
Kilsyth
VIC
VIC
VIC
11,700,000
CBRE 6.75
NGK Spark Plug
10,800,000
Directors 7.00
Orora
9,750,000
Directors 7.00
Cummins Filtration
45-55 South Centre Rd
Melbourne Airport VIC
8,000,000
Directors 8.50
Willow Ware Australia
19 Southern Crt
Keysborough
VIC
8,000,000
Savills 7.25
Transms
75 Annandale Rd
Melbourne Airport VIC
7,100,000
Urbis 8.25 Neovia Logistics Services
70 Distribution St
Larapinta
13 Business St
29 Business St
Yatala
Yatala
670 Macarthur Ave*
Pinkenba
QLD
QLD
QLD
QLD
200,800,000
Directors 7.00
Woolworths
14,850,000
Directors 7.75
Reward Supply Co.
10,400,000
JLL 7.75
CMC Coil Steels
9,915,845 Held for sale
- Reliance Worldwide Corp
5 Viola Pl
Brisbane Airport QLD
8,500,000
Directors 9.50
GPC Asia Pacific
10 Gassman Dr
Yatala
QLD
4,800,000
JLL 7.25
Norman Ellison Carpets
3 Viola Pl
Brisbane Airport QLD
1,950,000
Directors 8.25 Cargo Transport Systems
20 Colquhoun Rd
Perth Airport
WA
146,000,000
Directors 6.50
Woolworths
27-49 Lenore Dr
Erskine Park
6-7 John Morphett Pl
Erskine Park
51-65 Lenore Dr
Erskine Park
NSW
NSW
NSW
60,900,000
JLL 6.25
45,000,000
Directors 6.50
30,000,000
Directors 6.00
Linfox
Linfox
Linfox
34 Reddalls Rd
Kembla Grange
NSW
21,000,000
JLL 6.75
Patrick Autocare
81 Derby St
Silverwater
NSW
15,100,000
Directors 7.00
IVE Group Australia
599 Main North Rd
Gepps Cross
1-3 Pope Crt
Beverley
12-16 Butler Blvd
Adelaide Airport
10 Butler Blvd
Adelaide Airport
SA
SA
SA
SA
70,300,000
Directors 7.25
Woolworths
21,100,000 m3property 7.75
Aluminium Specialties
Group
14,100,000
Directors 9.00
Cheap as Chips
8,400,000
Directors 8.75
Toll Transport
3.2
3.7
6.5
0.6
1.8
5.9
4.7
2.4
0.7
2.8
3.3
5.7
3.2
0.8
3.3
1.0
1.3
6.7
9.3
7.2
3.8
11.7
14.3
1.2
5.1
4.4
4.4
1.6
26,980
42,280
16,114
29,860
11,430
19,210
26,517
51,434
16,276
34,726
7,645
8,040
8,919
12,795
14,750
17,610
14,082
24,799
6,455
11,650
10,280
16,930
76,109
250,900
8,951
8,680
5,578
18,630
16,460
10,360
14,726
35,166
3,188
3,431
6,480
12,483
80,374
193,936
29,476
76,490
24,881
82,280
3,720
36,720
355
141,100
7,984
13,490
67,238
233,500
14,459
25,660
16,800
30,621
8,461
16,100
Totals / Weighted Average
1,236,337,688
7.10
Major industrial tenants
include Woolworths
(48% of industrial)
& Linfox (9%)
5.933 874,156 2,481,516
* Assets held for sale have their 30 June 2016 book value calculated as contract price or terms sheet price less disposal costs.
33. Pro forma as at 30 June 2016 including leasing completed prior to the date of this report.
Growthpoint Properties Australia Annual Report 2016 Industrial Portfolio Review
33
Industrial property portfolio locations
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Perth
Adelaide
Brisbane
Sydney
Wollongong
Existing industrial properties
New industrial acquisitions for FY16
Melbourne
Wodonga
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1-3 Pope Court,
Beverley, SA
Major Tenant: Aluminium Specialties
Group
Book Value: $21.1 million
WALE: 4.4 years | Cap rate: 7.75%
A newly constructed warehouse
currently split into three separate
tenancies but able to be reconfigured to
meet future tenant demand.
34 Reddalls Road,
Kembla Grange, NSW
Major Tenant: Patrick Autocare
Book Value: $21.0 million
WALE: 14.3 years | Cap rate: 6.75%
A motor vehicle storage facility
comprising bitumen sealed pavement,
hail mesh, security gatehouse and
perimeter fencing plus vehicle wash bay
facility.
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Creating value with
quality industrial
acquisitions
In FY16 Growthpoint’s industrial
portfolio was enhanced with two
accretive acquisitions in New
South Wales and South Australia
totalling $41.1 million with
weighted average lease expiries of
14.3 and 4.4 years respectively34.
The two properties are fully leased
to major tenants such as Patrick
Autocare (subsidiary of ASX-listed
Asciano), Aluminium Specialties
Group, Pro-Pac Packaging and
K.W. Doggett.
Vera Lee
Legal Counsel
Industrial Portfolio value
at 30 June
FY16
FY15
FY14
FY13
FY12
$1,236.3m
$1,165.9m
$1,043.9m
$897.2m
$834.2m
34. As at 30 June 2016.
34
Directors’ Report
1 Charles Street,
Parramatta, NSW
Growthpoint Properties Australia Annual Report 2016 Tenant overview
35
Diversified tenant base creates stable,
long-term rental income
Growthpoint’s strategy of leasing to and retaining high quality tenants
for the medium to long term has created a sustainable rental stream.
58% of Growthpoint’s tenants are listed entities and a further 25% are
government or government owned entities, delivering a strong financial
covenant. The diversified and high quality tenant base provides secure
rental income.
Tenant type
by gross income as at 30 June 2016
Tenants by industry
by gross income as at 30 June 2016
Listed entity 58%
Government owned 25%
Private company & other 17%
Tenants use
by gross income as at 30 June 2016
Retail 26%
Government 21%
Financial Services 12%
Resources, Infrastructure & Construction 11%
Logistics 9%
Manufacturing 6%
Other Consumer & Business Services 6%
IT, Media & Telecommunications 4%
Education 3%
Health 2%
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Logistics / Distribution 40%
Manufacturing 4%
Retail 2%
Car Parking 1%
Other 1%
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36
Directors’ Report
Operating
Sustainably
Growthpoint
has developed
a sustainability
program which
encompasses
environmental, social
and governance (ESG)
reporting.
Sustainability
initiatives focused on
Securityholders, tenants
and other stakeholders
as well as the broader
community, have been
established to help ensure
Growthpoint remains a
sustainable business.
2016 Sustainability Report
(available online only)
Growthpoint Properties Australia
Growthpoint Properties Australia Trust ARSN 120 121 002
Growthpoint Properties Australia Limited ABN 33 124 093 901 AFSL 316409
www.growthpoint.com.au
a window into
our sustainability
program and
performance
2016 Sustainability Report
For the year ended 30 June 2016
To reduce paper and
enable fulsome reporting,
a separate, online only
Sustainability Report has
been produced.
Appointment of sustainability
manager
Growthpoint’s project manager, Steve
Lee, has had his role expanded to include
sustainability management. As a large part
of Growthpoint’s sustainability program
involves environmental monitoring and
improving performance, Steve’s significant
experience in these matters will be
increasingly important for Growthpoint.
investors.growthpoint.com.au/
SustainabilityReport/2016/
Global sustainability
benchmarking
The Sustainability Report includes:
1. Growthpoint’s approach to sustainability
including an overview of its program and
matters considered material.
2. An overview of specific environmental,
social and governance objectives and
performance.
3. Environmental sustainability including:
— NABERS ratings;
— Green Star ratings; and
— greenhouse gas emissions data.
4. Social sustainability including:
— health and safety;
— community contributions; and
— employee well-being, diversity and
training.
5. Governance including:
— overview of governance;
— due diligence processes;
— approach to risk;
— a "SWOT" analysis on Growthpoint;
— approach to challenges and
uncertainties;
— biographies of directors and executive
management;
— reporting and management structure;
— outsourcing overview; and
— Corporate Governance Statement.
6. Global Reporting Initiative (GRI) Index.
In FY16, Growthpoint participated in the
following for the first time.
Carbon Disclosure Project (CDP)
CDP is a global initiative to “transform the
way the world does business to prevent
dangerous climate change and protect our
natural resources”35. CDP collects data,
primarily in relation to carbon emissions,
from a range of primarily listed entities to
help reveal risk for investors. Most of the
S&P/ASX 200 constituents contribute to the
annual survey and Growthpoint received an
invitation to participate for the first time in
2016 following its inclusion in the S&P/ASX
200 index in 2015. Results are expected
to be released in November 2016. Further
details are available at:
www.cdp.net
Global Real Estate Benchmarking
(GRESB)
“GRESB is an industry-driven organization
committed to assessing the ESG
performance of real assets globally,
including real estate portfolios and
infrastructure assets. More than 200
members, of which about 60 are pension
funds and their fiduciaries, use the GRESB
data in their investment management and
engagement process, with a clear goal
to optimize the risk/return profile of their
investments.”36 Growthpoint participated in
the annual GRESB survey for the first time
in 2016 with the results due in September
2016. Further details available at:
www.gresb.com
Steve Lee
Manager – Projects
& Sustainability
35. Source https://www.cdp.net/en-US/Pages/About-Us.aspx
36. Source: https://www.gresb.com/about
Growthpoint Properties Australia Annual Report 2016 Global Reporting Initiative (GRI)
“GRI is an international independent organization
that helps businesses, governments and other
organizations understand and communicate
the impact of business on critical sustainability
issues such as climate change, human rights,
corruption and many others.”37 GRI aims to
ensure consistency of ESG reporting across
different countries, entities and industries.
Growthpoint’s FY16 reporting suite has been
prepared in accordance with GRI G4 guidelines.
Interested readers should refer to the
GRI index at page 44 of the Sustainability
Report. Further details are available at:
44
www.globalreporting.org
Among other considerations, Growthpoint
has decided to participate in the above
benchmarking to:
1. Provide investors with requested information.
2. Promote itself to current and potential
investors.
3. Benchmark itself against its peers.
4. Use the questions and results as prompts for
the development of Growthpoint’s business.
5. Better understand risk.
6. Help meet stakeholder and community
expectations.
Growthpoint SA
Growthpoint SA has an extensive sustainability
program which has been developed over many
years. Further details are available at:
growthpoint.co.za/Pages/
CorporateSocialInvestment.aspx
Growthpoint has attempted to replicate
Growthpoint SA’s model to the extent relevant
for Growthpoint’s business having regard to its
much smaller size and the different expectations
of investors, employees and other stakeholders
in Australia compared to South Africa.
Operating Sustainably overview
37
Our approach to
Sustainability
Environment
Growthpoint's sustainability
model is intended to lead to:
Specific initiatives
1 sustainability of
Growthpoint as a vehicle
to increase Securityholder
wealth;
2 sustainability of the
communities and physical
environments in which
Growthpoint operates and
invests; and
3 better, more transparent
and more measurable
performance by
Growthpoint.
Decrease environmental impact by
reducing energy/water consumption
and green house gas emissions
across the portfolio
Develop program for measuring and
reporting environmental impact
Implement additional monitoring
infrastructure within office properties
Improve NABERS energy ratings
across office portfolio and enhance
buildings for tenants
Improve sustainability procurement
processes and practices for our
capital expenditure program
No environmental fines or penalties
imposed on the group
Social
Governance
Specific initiatives
Specific initiatives
Donations and workplace giving
program
Develop partnerships with
community organisation in areas that
Growthpoint operates in
Employees to undertake volunteering
each year
Employees to receive regular work
health and safety checks
Providing continuing professional
development or training each
financial year for employees
Diversity objectives created and
worked towards
No workplace injuries
Obtain and retain investment grade
rating to help secure capital when
required
Introduction of internal audit function
using an audit plan by external
consultants
Comprehensive compliance and
risk framework is maintained and is
independently audited by external
auditors
To improve investor communications
Business updates will be provided at
least each calendar quarter
No significant breaches of trust
compliance plan or the Groups
policies, procedures or constituent
documents
37. Source: https://www.globalreporting.org/Information/about-gri/Pages/default.aspx
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Directors’ Report
Board of
Directors
Full bios on all Directors can be
found online at growthpoint.
com.au/about/board/
Geoffrey Tomlinson (68)
Independent Chairman & Director
Timothy Collyer (48)
Managing Director
Maxine Brenner (54)
Independent Director
BEC
Chairman since 1 July 2014,
Director since 1 September 2013
Committees: Audit, Risk &
Compliance and Nomination,
Remuneration & HR
Current Australian directorships
of public companies38: Calibre
Limited and IRESS Limited.
B.Bus (Prop), Grad Dip Fin & Inv,
AAPI, F Fin, MAICD
BA, LLB
Director since 12 July 2010
Current Australian directorships
of public companies38: Nil
Director since 19 March 2012
Committees: Audit, Risk &
Compliance (Chair)
Current Australian directorships
of public companies38: Orica
Limited, Origin Energy Limited
and Qantas Airways Limited
Estienne de Klerk (47)
Director39
Grant Jackson (50)
Independent Director
Francois Marais (61)
Independent Director
Norbert Sasse (51)
Director40
BCom (Industrial Psych), BCom
(Hons) (Marketing), BCom (Hons)
(Accounting), CA (SA)
Director since 5 August 2009
Committees: Audit, Risk &
Compliance
Current Australian directorships
of public companies38: Nil
Executive
Management
Full bios on all Executive
Management can be found
online at growthpoint.
com.au/about/executive-
management/
Assoc. Dip. Valuations, FAPI
BCom, LLB, H Dip (Company Law)
BCom (Hons) (Acc), CA (SA)
Director since 5 August 2009
Committees: Audit, Risk &
Compliance
Current Australian directorships
of public companies38: Chief
Executive Officer and Director of
m3property (and related entities)
Director since 5 August 2009
Committees: Nomination,
Remuneration & HR
Director since 5 August 2009
Committees: Nomination,
Remuneration & HR (Chair)
Current Australian directorships
of public companies38: Nil
Current Australian directorships
of public companies38: Nil
Aaron Hockly (38)
Chief Operating Officer
BA, LLB, GDLP, GradDipAcg,
MAppFin, FCIS, MAICD, FGIA,
SAFin
Michael Green (36)
Head of Property
B.Bus (Prop)
Dion Andrews (43)
Chief Financial Officer
B.Bus, FCCA
38. In addition to Group entities.
39. Not deemed independent as Managing Director of GRT.
40. Not deemed independent as CEO of GRT.
Growthpoint Properties Australia Annual Report 2016 Remuneration
report
The Directors present this
“Remuneration Report” for the
Group for the year ended 30 June
2016. This report summarises
key compensation policies and
provides detailed information on
the compensation for Directors and
other key management personnel.
Over the last five years, as
the business has grown,
Growthpoint has increased
remuneration to retain
market competitiveness.
Remuneration report
39
This Remuneration Report
is divided into the following
sections:
1. Nomination, Remuneration & HR
Committee.
2. Non-Executive Director Remuneration.
3. Executive Director Remuneration.
4. Employee Remuneration.
5. Short-term Incentives (“STI”).
6. Long-term Incentives (“LTI”).
7. Director and Senior Executive
Performance Reviews.
8. FY17 Remuneration.
The specific remuneration arrangements
described in the report apply to
the Managing Director and the key
management personnel as defined in AASB
124 and to the Company Secretaries as
defined in section 300A of the Corporations
Act 2001 (Cth).
A brief look inside:
• Remuneration policies are
designed to encourage performance
which leads to consistently increasing
total Securityholder returns
• Attracting and retaining excellent
employees is critical to the Group’s
success
• The Nomination, Remuneration &
HR Committee seeks to provide a
consistent remuneration strategy
over the medium term and
minimise significant changes to
the remuneration structure. This
helps ensure (1) remuneration
motivates employees appropriately
and (2) Securityholders have a clear
understanding of Growthpoint’s
remuneration strategies and why/how
management is incentivised
• This report has been expanded
following Securityholder feedback
Impact of performance on Securityholders’ wealth
FY16
FY15
FY14
FY13
FY12
Profit attributable to Securityholders
$’000 224,269 283,004 117,348
93,956
49,487
Dividends and distributions paid
$’000 118,134 110,685
86,790
72,590
57,383
Distribution per stapled security
Closing stapled security price
Change in stapled security price
Total Securityholder return41
Return on equity
$
$
$
%
%
0.205
0.197
0.190
0.183
0.176
3.15
0.02
3.13
0.68
2.45
0.05
2.40
0.30
2.10
0.21
7.4
36.4
10.8
23.6
21.6
15.9
23.9
17.5
13.1
4.8
Board meeting attendance (FY16)
Names
Meetings eligible to attend
Attendance
12
12
12
12
12
12
12
11
10
10
11
9
12
9
Geoffrey Tomlinson
Grant Jackson
Francois Marais
Norbert Sasse
Estienne de Klerk
Timothy Collyer
Maxine Brenner
41. Source: UBS Investment Research.
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c) Link rewards to the creation of value for
Securityholders.
of remuneration for all Directors and
employees based on:
40
Directors’ Report
Nomination, Remuneration & HR
Committee
The Nomination, Remuneration &
HR Committee advises the Board on
compensation policies and practices
generally, and makes specific
recommendations on compensation
packages and other terms of engagement
for non-executive directors, executive
directors and other senior executives. The
Committee also periodically reviews the
compensation arrangements for other
employees.
Delegated authority
The Nomination, Remuneration & HR
Committee operates under delegated
authority from the Board. The duties of the
Committee in relation to remuneration are
to:
a) Recommend, for adoption by the
Board, a remuneration package for the
Chairman of the Board and the other
Directors on a not less than annual
basis.
d) Limit severance payments on
termination to pre-established
contractual arrangements that do
not commit the Group to making
unjustified payments in the event of non-
performance.
Impact of performance on
Securityholders’ wealth
In considering the Group’s performance
and benefits for Securityholders’ wealth,
the Nomination, Remuneration & HR
Committee has regard to the financial
39
measures in the table on page 39
in respect of the five financial years
ended 30 June 2016.
Committee members
The members of the Nomination,
Remuneration & HR Committee during the
year and at the date of this Report are:
• Norbert Sasse (Chair) – non-executive
director
b) Recommend, for adoption by the Board,
• Francois Marais – independent, non-
a remuneration package, including
bonus incentives and related key
performance indicators, for the most
senior executive officer of the Group
both on appointment and on a not less
than annual basis.
c) Review the most senior executive
officer’s recommendations for the
remuneration packages, including bonus
incentives and related key performance
indicators, of other Group employees
both on appointment and on a not less
than annual basis.
d) Review the most senior executive
officer’s recommendations for any bonus
payments which are in excess of that
delegated to the most senior executive
officer under the Group’s “Delegations of
Authority Policy”. The Committee cannot
approve payments which exceed the
bonus pool approved by the Board
without Board approval.
e) Make recommendations to the Board
in relation to the introduction of, and
amendments to, any employee share
plan established by the Group.
Remuneration objectives
In carrying out its remuneration functions,
the Nomination, Remuneration & HR
Committee shall have regard to the
following objectives:
a) Provide competitive rewards to attract,
motivate and retain highly skilled
directors and management.
b) Set challenging but achievable
objectives for short and long-term
incentive plans.
executive director
• Geoff Tomlinson – independent, non-
executive director
Remuneration consultants
During the year, the Nomination,
Remuneration & HR Committee engaged
PwC as an independent remuneration
consultant to provide advice on the Group’s
remuneration structure and levels for
Directors and senior executives. PwC was
paid a total of $28,050 for providing these
services. The Company did not engage
PwC for any other work during FY16.
The Committee ensured that PwC was
free from undue influence from those
key management personnel that it was
making recommendations on by ensuring
that they had no involvement in the
appointment of PwC and were directed
not to discuss any aspect of remuneration
with the consultant. Further, PwC
were directed to deliver the final report
containing their recommendations directly
to the Nomination, Remuneration & HR
Committee. The Committee is satisfied on
behalf of the Board that PwC remained free
from undue influence due to following these
procedures and PwC have also certified in
writing that this was the case.
The Committee also had regard to
additional third party industry remuneration
benchmarking surveys.
Remuneration reviews
The Nomination, Remuneration & HR
Committee reviews the appropriate levels
1. Remuneration advice and benchmarking
from PwC.
2. Remuneration surveys.
3. Benchmarking against peers.
4. Recommendations from the Managing
Director (excluding in relation to his own
remuneration).
Non-executive Director
Remuneration
There are currently six Non-Executive
Directors. An aggregate pool of $1,000,000
available for the remuneration of Non-
Executive Directors was approved by
shareholders at the Company’s Annual
General Meeting in November 2013.
Remuneration paid and payable
46
47
The total remuneration paid to Non-
Executive Directors for FY16 are listed
on page 46 of this report and the
proposed FY17 remuneration is on
page 47.
Principles of remuneration for Non-
Executive Directors
The principles of non-executive director
remuneration are:
1. Non-Executive Directors should receive
total remuneration at market rates for
equivalent positions at listed Australian
entities of similar size (measured by
market capitalisation and gross assets),
complexity and Non-Executive Director
workload having regard to the industry
in which the Group operates.
2. Fees are set at a level to attract and
retain suitably qualified and experienced
persons to the Board.
3. The Chairman is entitled to a base
annual fee and is not eligible for any
additional fees for chairing or being a
member of any Board committees.
4. All Non-Executive Directors other than
the Chairman are entitled to a base
annual fee plus additional fees for being
a chair or a member of a committee.
5. All Non-Executive Directors’ fees are
paid on a base fee basis rather than per
meeting.
6. All Non-Executive Directors’ fees
are to be paid in cash and include
superannuation where applicable.
Where Australian GST is applicable,
this is paid in addition to the relevant
director’s fees.
7. Non-Executive Directors are not
currently required to hold any securities
in the Group but are encouraged to
do so. At the date of this Report, all
Growthpoint Properties Australia Annual Report 2016 Directors hold securities in the Group
(refer to page 81 for details of Director
holdings).
81
8. Non-Executive Directors are not entitled
to any termination or similar payments
upon retirement or other departure from
office.
9. In addition to remuneration, Non-
Executive Directors may claim expenses
such as travel and accommodation
costs reasonably incurred in fulfilling
their duties.
10. With the prior approval of the Chairman,
Non-Executive Directors may obtain
independent advice at the Company’s
cost.
Executive Director Remuneration
and Service Contract
There is currently only one executive
director being the Managing Director,
Timothy Collyer.
Remuneration paid and payable
46
The total remuneration paid or payable
to the Managing Director for FY16
is listed on page 46 of this report
and the proposed remuneration
parameters for FY17 are on page 47.
47
Service contract
The Managing Director has a contract of
employment dated 22 August 2016 with
the Group that specifies the duties and
obligations to be fulfilled by the Managing
Director and provides that the Board and
the Managing Director will, early in each
financial year, consult to agree objectives
for achievement during that year. Changes
to the Managing Directors’ remuneration
requires full Board approval and, in certain
circumstances, Securityholder approval.
The Managing Director can resign by
providing six months’ written notice. The
Group can terminate his employment
immediately for serious misconduct,
bankruptcy, material breach of his
employment agreement, failure to comply
with a reasonable and lawful direction by
the Board, committing an act which brings
the Group into disrepute or conviction of
an offence punishable by imprisonment.
In addition, the Group can terminate the
Managing Director’s employment without
cause with not less than nine months’
severance pay.
On termination as Managing Director, he
must resign as a director of any Group
entity and he is restrained from a number
of activities in competition with or to the
detriment of the Group for a period of 12
months from the date of termination.
Remuneration report
41
Principles of remuneration for the
Managing Director
The principles of remuneration for the
Managing Director are:
1. The Managing Director should receive
total remuneration which is competitive
with rates for an equivalent position at
listed and unlisted Australian entities
of similar size (measured by market
capitalisation and gross assets),
complexity and workload having regard
to the industry in which the Group
operates and the relative profit and
expenses versus the Group’s peers.
2. The Managing Director’s total
remuneration should be set at a level
to attract and retain a suitably qualified
and experienced person to this role
and tailored to encourage Group
performance which is in the best
interests of all Securityholders.
3. The components of the Managing
Director’s remuneration are:
a) total fixed remuneration (including
applicable superannuation);
b) if specified performance criteria are
met, eligibility to receive a short-term
incentive (“STI”) bonus payable in
cash in respect of each financial year
up to a maximum set by the Board.
Refer to page 42 for measures for the
FY16 STI and the FY17 STI;
42
c) long-term incentive (“LTI”) plan under
which, upon attainment of specified
criteria, the Managing Director is
eligible to receive securities in the
Group that vest over time to help
ensure alignment of the Managing
Director’s interests with those of
Securityholders;
d) life, TPD and income protection
insurance cover payable to the
Managing Director;
e) five weeks annual leave;
f) personal, long-service and other
leave to the extent required by law or
under any Group policy; and
g) car parking, airline club membership,
gym membership and other similar
benefits as considered appropriate.
4. The Managing Director is not eligible for
any additional fees for chairing or being a
member of any Board committee, acting
as an officer of the Company or being
a responsible manager or key person
under the Company’s AFSL.
5. The Managing Director is not currently
required to hold any securities in the
Group but is encouraged to do so. At
the date of this Report, the Managing
Director holds securities in the Group
(refer to page 81 for details of director
holdings).
81
6. The Managing Director is entitled to
receive certain payments including
the vesting of all unvested securities
under the LTI if the Company decides
to terminate his position without cause
including through redundancy. Refer to
page 47 for more details of redundancy
entitlements.
47
Employee Remuneration
There are currently 16 employees of the
Group who are not Directors (“Employees”).
Remuneration paid and payable
The total remuneration paid or payable
to the Employees who are Key
Management Personnel for FY16
is listed on page 46 of this report
and the proposed remuneration
parameters for FY17 are on page 47.
46
47
Service contracts
It is the Group’s policy that service
contracts are unlimited in term but capable
of termination on six months’ notice or
less and that the Group retains the right
to terminate the contract immediately, by
making payment equal to a payment in
lieu of notice. Employees are also entitled
to receive certain statutory entitlements
on termination of employment including
accrued annual and long service leave,
together with any superannuation benefits
and, if applicable, redundancy payments
in accordance with a redundancy policy
approved by the Nomination, Remuneration
& HR Committee. Service contracts
outline the components of compensation
paid to each Employee (including all key
management persons) but does not
prescribe how compensation levels may be
modified each year.
Principles of remuneration for
Employees
The principles of remuneration for
Employees are:
1. Employees should receive total
remuneration which is competitive with
rates for similar roles with listed and
unlisted Australian entities having regard
to each person’s skills and experience,
the complexity, value to the Group and
workload of the particular role and the
industry in which the Group operates.
2. The total remuneration for Employees
should be set at a level to attract
and retain suitably qualified and
experienced persons to each respective
role and tailored to encourage Group
performance which is in the best
interests of all Securityholders.
3. The components of remuneration for
each Employee are:
a) total fixed remuneration (including
applicable superannuation);
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Directors’ Report
b) if specified performance criteria are
met, eligibility to receive a short-term
incentive bonus payable in cash
in respect of each financial year
as determined by the Managing
Director and/or the Nomination,
Remuneration & HR Committee up
to a maximum amount set by the
Board. Refer to the table below for
measures for the FY16 STI and the
FY17 STI;
c) long-term incentive plan under
which, upon attainment of
specified criteria, each Employee
is eligible to receive securities in
the Group that vest over time to
help ensure alignment of each
Employee’s interests with those of
Securityholders;
d) life, TPD and income protection
insurance cover payable to the
Employee; and
e) annual, personal, long-service and
other leave to the extent required by
law or under any Group policy.
4. Employees are not eligible for any
additional fees for additional roles within
the Group such as acting as an officer
of the Company or being a responsible
manager under the Company’s AFSL.
5. Employees are not currently required to
hold any securities in the Group but are
encouraged to do so. At the date of this
Report, most Employees hold securities
in the Group (refer to page 81 for details
of senior executive holdings).
81
6. Employees are entitled to receive certain
payments including the vesting of all
unvested securities under the LTI if
the Company decides to terminate a
position without cause including through
redundancy.
near the end of each financial year to
determine if an STI should be payable to
each employee, respectively, including the
Managing Director, based on performance
targets set at the start of the financial
year. Any reward to the Managing Director
requires Board approval. STI payments are
made in August following the financial year
in which they were earned.
1. EMT STI Criteria
The STI is divided into two criteria, namely;
Short-Term Incentives (“STI”)
a) Financial criteria – 70% of total
In advance of each financial year the
Nomination, Remuneration & HR
Committee, in consultation with the
Managing Director, and with assistance
from remuneration consultants, establish
performance targets and reward levels
for STIs in respect of the year ahead. STI
assessment is divided into two categories
for:
1. Executive Management Team (EMT).
The EMT comprises the Managing
Director, Chief Operating Officer, Chief
Financial Officer and Head of Property
The financial criteria is based upon
achieving budgeted distributable income
(21.3 cps for FY16 providing a 50% score)
with the opportunity for outperformance,
up to 125% achievement, of criteria via a
“stretch target” for distributable income
per security in excess of budget (up to
22.9 cps). If distributable income per
security is below budget, the Board has
discretion whether to grant achievement
under the financial criteria. For FY16 the
achievement was 78% for the financial
criteria due to achievement of 21.9 cps.
2. Employees
b) Non-financial criteria – 30% of total
A performance review is undertaken
Non-financial performance criteria for Short-term Incentives (STI) for FY16
Performance
criteria
FY16
performance measures
FY16
Achievement
Company strategy
1. Consideration of significant acquisition or M&A
88%
(9% of total)
opportunities.
2. Asset acquisitions.
3. Asset disposals.
4. Capital management initiatives.
5. Strategic portfolio asset management initiatives
The non-financial criteria is based upon
the performance criteria in the table at
left. The criteria is reviewed and approved
by the Committee before the start of the
financial year and then monitored on a
quarterly basis, with an overall assessment
approved by the Committee post the end
of the financial year. The quarterly review
involves the Chairman of the Group and
Managing Director jointly analysing actual
performance against the criteria and
preparation of a report to the Committee.
The non-financial performance criteria for
FY16 are outlined in the table at left.
Property
operations
(9% of total)
Stakeholder
engagement
(6% of total)
1. Vacancy rate.
100%
2. Employee STI Criteria
2. Non-recoverable property costs to income ratio.
3. Total rental arrears as a % of collectables.
4. Leasing outcomes versus budget.
5. Portfolio metrics (WALE, WARR, average building
age etc).
1. Investor relations initiatives and investor feedback.
100%
2. Quality and frequency of ASX announcements
and reporting.
3. Information provided to Non-Executive Directors.
4. Engagement with debt providers.
5. Credit rating.
Employees, other than the EMT, have their
STI determined based upon individual
performance reviews, achievement
of individual KPI’s and their personal
contribution to the Group’s success
throughout a financial year. The STI
amounts are based on recommendations to
the Committee by the Managing Director.
Development of
people and culture
(6% of total)
1. Employee retention.
2. Employee survey results.
3. Diversity initiatives.
95%
4. Development of Growthpoint culture.
5. Employee training.
Total non-financial score
91% / 100%
FY17 performance
measures are substantially
the same as FY16, however
the weighting given to each
may vary slightly
Growthpoint Properties Australia Annual Report 2016 Long-Term Incentives (“LTI”)
The Group has an Employee Securities
Plan (“the Plan”) in place for all Employees
and the Managing Director since 2011.
The Plan is designed to link Employees’
remuneration with the long-term goals and
performance of the Group with the aim of
consistently increasing total Securityholder
return.
All securities issued under the LTI are
issued on a zero cost basis. In other
words, directors and employees are issued
securities as part of their remuneration
without having to pay any amounts for
them.
LTI performance measures
The performance measures for the LTI are
reviewed in advance of each financial year
by the Nomination, Remuneration & HR
Committee and/or the Board.
The performance measures for the FY16
LTI and the FY17 LTI are42:
a) Total Securityholder returns (“TSR”) –
Weighting 50%
TSR reflects the amount of dividends or
distributions paid/payable by the Group
plus the change in the trading price of the
Group’s securities over the financial year.
TSR is calculated as a percentage return
on the opening trading price of the Group’s
securities on the first day of the financial
year.
TSR is benchmarked relative to the S&P/
ASX A-REIT 300 Accumulation Index43 over
a rolling 3 year period44 using the following
methodology:
• At or below the 50th percentile - 0%.
• At the 51st percentile - 50%.
• Above the 51st percentile but below the
76th percentile - 50%, plus 2% for each
percentile above the 51st percentile.
• At or above the 76th percentile - 100%.
b) Return on equity (“ROE”) – Weighting
50%
ROE reflects the amount of dividends or
distributions paid/payable by the Group
plus the change in the Group’s net tangible
assets over the financial year. ROE is
calculated as a percentage return on the
Group’s net tangible assets as at the first
day of the financial year.
ROE is benchmarked relative to the ROEs
of constituents of the S&P/ASX A-REIT 300
Index over a rolling 3 year period using the
following methodology:
• Below the benchmark return - 0%.
• At the benchmark - 50%.
• 0.1% - 1.9% above the benchmark –
51.25% - 75% in increments of 1.125%
for each 0.1% above the benchmark
• 2% or more above the benchmark -
100%.
LTI Maximum
In advance of each financial year, the Board
and/or the Nomination, Remuneration &
HR Committee will establish an LTI pool
in respect of the upcoming financial year
and determine the maximum incentive
which can be achieved by each Employee
(“LTI Maximum”). Under the terms of
his employment contract, the Managing
Director’s LTI Maximum is 80% of his
total fixed remuneration (“TFR”). Other
employees currently have LTI Maximums
of 20%, 30% or 60% of their respective
TFR. Refer to the table on page 46
for details of TFR for senior executives
for FY15 and FY16 and to page 47
for details of TFR for senior executives
for FY17.
47
46
Remuneration report
43
All securities issued under the
LTI are issued on a zero cost
basis. In other words, directors
and employees are issued
securities as part of their
remuneration without having to
pay any amounts for them.
LTI Minimum
There is no minimum grant under the LTI.
Accordingly, if minimum performance
measures are not achieved, no grant will be
made under the LTI.
LTI Achievement
In early October of each year, the
Nomination, Remuneration & HR
Committee assesses the achievement of
the performance measures listed above to
determine a percentage achieved for the
previous financial year (“LTI Achievement”)
LTI Awards
The LTI Maximum multiplied by the LTI
Achievement provides the “LTI Award” for
each employee for the relevant financial
year.
For FY14 LTIs and beyond, the LTI Award
is translated into an equivalent value of the
Group’s securities through dividing the LTI
Award by the volume weighted average
price of the securities over the 20 trading
days prior to 30 September following the
financial year to which the LTI relates.
This gives a total number of securities
to be issued to each Employee for each
subsequent vesting.
Long-term Incentives (LTI) maximum for directors and other key management personnel
LTI Maximum of
TFR
LTI Maximum
LTI Estimate
LTI Maximum of
TFR
LTI Maximum
LTI Actual
FY16
FY15
%
80
60
60
60
$
680,000
198,000
192,000
192,000
1,262,000
$
530,400
154,440
149,760
149,760
984,360
%
80
50
50
50
$
649,880
150,000
141,700
141,700
$
519,904
120,000
113,360
113,360
1,083,280
866,624
T. Collyer
A. Hockly
D. Andrews
M. Green
42. Prior to FY15, an additional measure, “Distributable Income”, was used. However, this now forms part of the STI and so has been removed from the LTI. Readers can
refer to previous annual reports available on the Group’s website if they require information in relation to previous LTIs.
43. The benchmark only includes those constituents of the ASX REIT 300 that have a comparable trading history. For example, it they have listed, merged or demerged
within three years they are excluded.
44. For LTIs prior to FY14, this was taken from the date the Group became a stapled entity to the end of the tranche vesting period as a full three year history was not
available.
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44
Directors’ Report
Details of performance rights issued in FY16
Plan
identification
Plan
participants
Issue date
Value of securities
issued on conversion of
performance rights
Number of securities
issued on conversion of
performance rights
Value of
performance
rights still to vest
Percentage of
plan that vested
during FY16
FY15 Plan
FY15 Plan
FY15 Plan
FY15 Plan
FY14 Plan
FY14 Plan
FY14 Plan
FY14 Plan
FY13 Plan
FY13 Plan
FY13 Plan
FY13 Plan
FY12 Plan
FY12 Plan
FY12 Plan
FY12 Plan
T. Collyer
A. Hockly
D. Andrews
M. Green
T. Collyer
A. Hockly
D. Andrews
M. Green
T. Collyer
A. Hockly
D. Andrews
M. Green
T. Collyer
A. Hockly
D. Andrews
M. Green
27/11/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
9/10/15
$
127,097
29,250
27,505
27,505
126,226
28,688
26,639
26,639
138,040
30,813
28,348
27,731
98,791
21,954
20,033
19,209
No.
40,736
9,375
8,816
8,816
40,457
9,195
8,538
8,538
44,244
9,876
9,086
8,888
31,664
7,036
6,421
6,157
$
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
138,040
30,813
28,348
27,731
-
-
-
-
%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25% of the securities to be issued to
each Employee based on the LTI Award
are issued to each Employee in October
or November of each of the following
four years. Each such vesting is subject
to the Employee remaining employed by
Growthpoint at the relevant date subject
to certain contractual exceptions such as
a redundancy and in the discretion of the
Board (e.g. in the case of a “good leaver”).
As each grant in respect of FY14 and
beyond is on the basis of a fixed number
of securities rather than a fixed value,
Employees are exposed to variations in the
Group’s security price for securities which
are yet to vest (as well as for any securities
they already hold).
For LTIs prior to FY14, 25% of the LTI
Award is translated into an equivalent value
in the Group’s securities through dividing
the LTI Award by the volume weighted
average price of the securities over the
20 trading days prior to 30 September of
each year of vesting. This calculation is
undertaken in respect of each issue so the
value of each vesting remains constant
for each Employee but the number of
securities changes according to changes in
the security price.
The LTI is cumulative meaning that
employees can receive up to four issues of
securities in a particular year in respect of
four prior financial years. Subject to some
exceptions, securities immediately vest in
the case of a takeover of the Group or an
Employee being made redundant.
ASX Listing Rules
In accordance with ASX Listing Rule
10.14, the issue of any stapled securities
to the Managing Director is subject to
Securityholder approval. It is intended that
such approval be obtained at the Group’s
annual general meeting each year and,
if approved, stapled securities be issued
shortly after the relevant meeting.
FY16 Achievement
The LTI Maximum for the Managing Director
and other key management personnel for
the year ended 30 June 2016 is given in
the table on page 43. The LTI Achievement
cannot be calculated until the release
of the benchmark data for the year
ended 30 June 2016 so an estimated
43
fair value at issue date is provided. The
estimated LTI Achievement is included in an
equity reserve in the year to 30 June 2016,
pro-rated over the period to which any
securities under the LTI are issued.
As there is no minimum LTI Award, if none
of the benchmarks were achieved for FY16,
the LTI Award would be $0.
Hedging of issues by employees
Under the Group’s “Securities Trading
Policy” persons eligible to be granted
securities as part of their remuneration are
prohibited from entering a transaction if the
transaction effectively operates to hedge
or limit the economic risk of securities
allocated under the incentive plan during
the period those securities remain unvested
or subject to restrictions under the terms of
the plan.
Worked example of LTI (unaudited)
Sam Sample is a manager at Growthpoint
with a TFR of $100,000. His TFR has
not changed for three years and his LTI
Maximum is $30,000 (being 30% of his
TFR).
The LTI Achievement for the financial years
since his employment commenced were:
1. FY13 – 98.6% of $30,000 = $29,580
2. FY14 – 80.0% of $30,000 = $24,000
3. FY 15 - 78.0% of $30,000 = $23,400
The volume weighted average price for
the 20 trading days prior to 30 September
2015 was $3.12.
As a result, Mr Sample would be eligible
to receive 6,168 Growthpoint Properties
Australia securities in October 2015
Growthpoint Properties Australia Annual Report 2016 Remuneration report
45
Number of performance rights
Names
T. Collyer
A. Hockly
D. Andrews
M. Green
1 July 2015
121,371
27,585
25,614
25,614
Granted
162,944
37,500
35,264
35,264
Vested
30 June 2016
(81,193)
(18,570)
(17,354)
(17,354)
203,122
46,515
43,524
43,524
Senior Executive Reviews
STI
For the EMT, an STI award may be payable
in respect of FY17 based on the following
measures:
1) Financial criteria – 70%
The financial criteria is based upon
achieving or outperforming budgeted
distributable income per security for the
financial year.
2) Non-financial measures (30%
weighting) comprising those matters for
FY16 (listed on page 42)
42
Refer to the table on page 42 for
more details about STI performance
measures.
An STI award for FY17 may be payable to
other employees primarily on the basis of
personal contribution to the achievement of
any or all of the above.
The Managing Director’s performance
is formally considered annually by
the Nomination, Remuneration & HR
Committee and, based on this formal
assessment, the Committee makes
remuneration recommendations to the
Board. In making its assessment, the
42
Committee considers, among other
things, the STI performance measures
listed on page 42.
The Managing Director reviews the
performance of the other senior
executives and makes recommendations
to the Nomination, Remuneration & HR
Committee on their remuneration
based, in part, on the STI performance
measures listed on page 42.
42
FY17 Remuneration (unaudited)
To assist readers of this Report to
understand how Directors and Employees
are remunerated for the year ahead and
to understand the performance the board
and the Nomination, Remuneration & HR
Committee are trying to encourage through
remuneration, FY17 remuneration has been
provided below.
This information is in addition to that
required by the Corporations Act 2001
(Cth) and, as a result, has not been audited.
Remuneration listed below is subject
to a range of factors including persons
remaining employed by the Company in
their current role for all of FY17.
LTI
The LTI for FY17 has not changed from
FY16 other than TFRs which have
increased for all employees. Refer to page
43 for details about the LTI for FY16
and, accordingly, the FY17 LTI.
43
47
The figures included on page 47 are
the maximum available for award
under this scheme in respect of FY17.
comprising the following LTI Awards:
1. FY13 – 2,370 ($29,580/$3.12/4)
2. FY14 – 1,923 ($24,000/$3.12/4)
3. FY15 – 1,875 ($23,400/$3.12/4)
Director and Senior Executive
Reviews
Director reviews
The performance of the Board and
individual Directors is regularly considered
by the Chairman who, from time to time,
arranges Board meetings to specifically
consider the function of the Board,
the strategy of the Group and to hear
any concerns/feedback directors. The
Chairman typically meets with each
individual Director not less than once
per year. A relevant Board meeting and
individual meetings all occurred in FY16.
The Chair of each Board sub-committee
also regularly considers the performance of
the committee he or she chairs.
Board composition
The Board currently comprises Directors
with extensive experience and expertise in
property, finance, law, investment banking,
accounting and corporate governance.
Refer to pages 30-31 of the 2016
Sustainability Report for full profiles of
each Director.
30
Being a property company, the Board has
expressed a particular desire to ensure
it comprises directors with extensive
Australian commercial property knowledge.
The Managing Director and Grant Jackson
have had, and continue to have, extensive
careers in Australian commercial property
and have held, and continue to hold,
senior positions in the property industry.
The Board is eager to ensure that where
Board members are replaced, the Board’s
property experience is not diminished.
Succession planning for directors
The Nomination, Remuneration & HR
Committee has developed plans for the
succession and/or temporary replacement
of the Chairman and the Managing Director.
Director training
To ensure the Board has sufficient
knowledge to discharge its duties, the
Company Secretary co-ordinates an
annual training program which includes
presentations (verbal and written) from the
Group’s lawyers, auditors and property
managers as well as from investment
banks, real estate service providers
and leading governance and training
organisations.
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Short-term
Post
employment
Share
based
payments
Cash
bonus
Non-
monetary
benefits
Super-
annuation
benefits
Other
long-term
Termination
benefits
Options
and rights
46
Directors’ Report
Directors’ and Executive Officers’ Remuneration (FY16)
For the year to
30 June 2016
Directors (current)
G. Tomlinson (Chairman)
G. Jackson
F. Marais
N. Sasse
E. de Klerk
M. Brenner
Executives (current)
Salary
and fees
$
162,100
94,520
101,000
106,000
103,500
101,644
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
15,400
8,979
-
-
-
9,656
T. Collyer (Managing Director)
832,750
942,986
1,378
30,000
A. Hockly
(Chief Operating Officer)
D. Andrews
(Chief Financial Officer)
304,950
173,614
294,800
163,255
M. Green (Head of Property)
294,800
163,255
-
-
-
30,000
30,000
30,000
Directors’ and Executive Officers’ Remuneration (FY15)
For the year to
30 June 2015
Directors (current)
Salary
and fees
$
G. Tomlinson (Chairman)
153,185
G. Jackson
F. Marais
N. Sasse
E. de Klerk
M. Brenner
Directors (former)
L. Shaddock45
Executives (current)
94,041
95,000
100,000
97,500
95,890
38,527
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
14,553
8,934
-
-
-
9,110
-
T. Collyer (Managing Director)
796,281
939,727
12,828
18,444
A. Hockly (Company Secretary &
General Counsel)
D. Andrews
(Chief Financial Officer)
273,972
173,014
2,412
26,027
257,626
162,691
5,033
24,474
M. Green (Head of Property)
257,626
162,691
2,182
24,474
45. L Shaddock retired on 26 November 2014.
S300A (1) (e) (i)
proportion of
remuneration
performance
related
%
0%
0%
0%
0%
0%
0%
63%
48%
48%
48%
S300A (1) (e) (i)
proportion of
remuneration
performance
related
%
0%
0%
0%
0%
0%
0%
0%
64%
50%
49%
50%
$
-
-
-
-
-
-
$
-
-
-
-
-
-
Total
$
177,500
103,500
101,000
106,000
103,500
111,300
-
543,014
2,350,128
-
138,884
647,449
-
132,273
620,328
-
132,022
620,077
Total
$
167,738
102,975
95,000
100,000
97,500
105,000
$
-
-
-
-
-
-
-
38,527
$
-
-
-
-
-
-
-
-
554,460 2,321,740
-
126,037
601,462
-
-
117,584
567,408
116,869
563,842
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
Short-term
Post
employment
Share
based
payments
Cash
bonus
Non-
monetary
benefits
Super-
annuation
benefits
Other
long-term
Termination
benefits
Options
and rights
Growthpoint Properties Australia Annual Report 2016
Remuneration report
47
FY17 Remuneration (unaudited)
Total Fixed Remuneration
(Including superannuation
(“TFR”)
Short-term
Incentive
(maximum)
Long-term
Incentive
(maximum) Other Benefits
Termination
Payments
(without cause
for redundancy
or similar by the
Company)
Termination
notice
(without
cause)
Nil
Nil
Nil
Nil
Nil
Ineligible for additional
committee fees
Nil
Nil
Nil
Nil
Nil
Chairman
Geoff Tomlinson
Non-Executive
Directors
$186,700 (5.2% increase from
FY16)
$97,400 (base fee 5.0% increase
from FY16) plus fees for acting
as:
– Chair – Audit, Risk &
Compliance Committee -
$19,500 (5.0% increase)
– Member – Audit, Risk &
Compliance Committee -
$11,600 (7.5% increase)
– Chair – Nomination,
Remuneration & HR
Committee - $15,200 (15.0%
increase)
– Member – Nomination,
Remuneration & HR
Committee - $10,300 (25.0%
increase)
Restraint
of trade
period
Nil
Nil
Managing Director
Timothy Collyer
$885,000
(4.1% increase on FY16)
117.5%
of TFR
80%
of TFR
– Gym membership
– Payment of up to
Six months’
notice
Chief Operating Officer
Aaron Hockly
$345,000
(4.5% increase on FY16)
70.5%
of TFR
60% of TFR
Chief Financial Officer
Dion Andrews
$345,000
(7.8% increase on FY16)
70.5%
of TFR
60% of TFR
Head of Property
Michael Green
$350,000
(9.4% increase on FY16)
70.5%
of TFR
60% of TFR
1.5% of TFR in lieu of
premium for Life, TPD
and Income Protection
Cover
Payment of up to 1.5%
of the TFR in lieu of
Life, TPD and Income
Protection cover
Payment of up to 1.5%
of the TFR in lieu of
Life, TPD and Income
Protection cover
Payment of up to 1.5%
of the TFR in lieu of
Life, TPD and Income
Protection cover
Three
months’
notice
Three
months’
notice
Three
months’
notice
Other
Management
Staff
Various
Other Staff
Various
30%
of TFR
30%
of TFR
20%
of TFR
20%
of TFR
Payment of up to 1.5%
of the TFR in lieu of
Life, TPD and Income
Protection cover
One month
(By either
party)
Payment of up to 1.5%
of the TFR in lieu of
Life, TPD and Income
Protection cover
One month
(By either
party)
12 months
3 months
3 months
3 months
3 months
0-3 months
Nine months’ notice
and Redundancy
Policy benefits.
Unvested LTI grants
remain on foot.
Redundancy Policy
benefits plus vesting
of any granted but
unvested options
under LTI
Redundancy Policy
benefits plus vesting
of any granted but
unvested options
under LTI
Redundancy Policy
benefits plus vesting
of any granted but
unvested options
under LTI
Redundancy Policy
benefits plus vesting
of any granted but
unvested options
under LTI
Redundancy Policy
benefits plus vesting
of any granted but
unvested options
under LTI
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48
Directors’ Report
120 Northcorp Boulevard,
Broadmeadows, VIC
Growthpoint Properties Australia Annual Report 2016 Additional
information
Rounding
The Group is of a kind referred to
in ASIC Corporations (Rounding
in Directors' / Financial Reports)
Instrument 2016/191 and in
accordance with that Instrument,
all financial information presented in
Australian dollars has been rounded to
the nearest thousand unless otherwise
stated.
Indemnification and Insurance of
Directors, Officers and Auditor
The Company has entered into a Deed
of Indemnity, Insurance and Access with
each of its directors, Aaron Hockly (Chief
Operating Officer), Dion Andrews (Chief
Financial Officer) and Michael Green (Head
of Property) providing these persons
with an indemnity, to the fullest extent
permitted by law, against all losses and
liabilities incurred in their respective role
for the Company. The Deeds also require
the Company to grant the indemnified
person with access to certain Company
documents and insure the indemnified
persons.
In compliance with the Deeds referred to
above, the Company insured its Directors
and officers against liability to third parties
and for costs incurred in defending any
legal proceedings that may be brought
against them in their capacity as Directors
or officers of the Group. This excludes a
liability which arises out of a wilful breach of
duty or improper use of inside information.
The premium also insures the entity for
any indemnity payments it may make to its
Officers in respect of costs and liabilities
incurred. Disclosure of the premium
payable is prohibited under the conditions
of the policy.
In addition, Growthpoint SA, the Group’s
majority Securityholder, has undertaken
to those Directors and officers of the
Group who are not also Directors of
Growthpoint Properties Limited that to
the extent D&O insurance is not available
due to (1) the insolvency of the Group or
(2) limitations on claims arising from Peter
David Steingrad & others v BFSL 2007
Limited & Others, HC, Auckland, CIV-
2011 – 404 – 611 15 September 2011 and
Court of Appeal decision CA 674/2011
(20 December 2012), it will provide the
directors and officers the same level of
financial recourse had the insurance been
available. The undertaking expires on the
earlier of a superior court in Australia or
New Zealand finally determining that the
principles of the aforementioned case
should not be followed and Growthpoint
Properties Limited ceasing to hold (whether
beneficially or otherwise) more than 50%
of the shares in Growthpoint Properties
Australia Limited.
The Auditor is indemnified by the Group
against claims from third parties arising
from the provision of audit services except
where prohibited by the Corporations Act
2001 (Cth) or due to negligence, fraudulent
conduct, dishonesty or breach of trust by
the auditor.
Additional information
49
49
Non-Audit services
During the year KPMG, the Group’s auditor,
has performed certain other services in
addition to the audit and review of the
financial statement.
The Board has considered the non-audit
services providing during the year by the
auditor are satisfied that the provision of
those non-audit services during the year
by the auditor is compatible with and did
not compromise, the auditor independence
requirements of the Corporations Act 2001
(Cth) for the following reasons:
• all non-audit services were subject to
the corporate governance procedures
adopted by the Group and have
been reviewed by the Audit, Risk &
Compliance Committee to ensure they
do not impact the integrity and objectivity
of the auditor; and
• the non-audit services provided do
not undermine the general principals
relating to auditor independence as
set out in APES 110 Code of Ethics for
Professional Accountants, as they did not
involve reviewing or auditing the auditor’s
own work, acting in a management or
decision making capacity for the Group,
acting as an advocate for the Group or
jointly sharing risks and rewards.
Details of the amounts paid to the auditor
of the Group, KPMG, and its network firms
for audit and non-audit services provided
during the year are set out below.
2016
$
Services other than audit and
review of financial statements:
Other regulatory audit services
58,276
Other assurance service and due
diligence services
86,943
Audit and review of financial
statements
Total paid to KPMG
154,324
299,543
Environmental Regulations
As a Trustee of a property owner, the Group
is subject to the normal environmental
regulations of landowners within Australia.
The Directors are not aware of any
significant breaches during the year.
Auditors’ Independence
Declaration
A copy of the auditor’s independence
89
declaration as required under section
307C of the Corporations Act 2001
(Cth) is set out on page 89.
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Brisbane
CBD
CB2, 42 MERIVALE STREET
CB1, 22 CORDELIA STREET
About the Financial Report
This report covers Growthpoint Properties
Australia Limited, Growthpoint Properties
Australia Trust and its controlled
entities, together being a stapled group.
Growthpoint Properties Australia Limited
is the Responsible Entity for Growthpoint
Properties Australia Trust. The financial
report is presented in Australian currency.
Growthpoint Properties Australia Trust
and its Responsible Entity, Growthpoint
Properties Australia Limited, are both
domiciled in Australia. The Responsible
Entity’s registered office and principal
place of business is Level 22, 357
Collins Street, Melbourne, Victoria, 3000,
Australia.
A description of the nature of the stapled
group’s operations and its principal
activities is included in the Directors’
Report which is not part of the financial
report.
The financial report was authorised for
issue by the Directors on 22 August 2016.
The Directors have the power to amend
and reissue the financial report.
References to “the year” in this report
refer to the year ended 30 June 2016
unless the context requires otherwise.
References to “balance date” in this
report refer to 30 June 2016 unless the
context requires otherwise.
Growthpoint Properties Australia Annual Report 2016 Aerial view of South Brisbane, QLD
Financial Report
For the year ended 30 June 2016
Financial Statements
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Section 1: Basis of preparation
52
53
54
56
57
Section 2: Operating results, assets and liabilities 59
2.1 Revenue and segment information
2.2 Investment properties
2.3 Non-current assets held for sale
2.4 Trade and other assets
2.5 Trade and other liabilities
2.6 Cash flow information
59
60
66
66
67
68
Section 3: Capital structure and financing costs
69
3.1 Interest bearing liabilities
3.2 Borrowing costs
3.3 Derivative financial instruments
3.4 Financial risk management
3.5 Contributed equity and reserves
3.6 Distributions
3.7 Earnings per stapled security (“EPS”)
3.8 Share-based payment arrangements
Section 4: Other notes
4.1 Key management personnel compensation
4.2 Related party transactions
4.3 Taxation
4.4 Contingent liabilities
4.5 Commitments
4.6 Controlled entities
4.7 Parent entity disclosures
4.8 Remuneration of auditors
4.9 Subsequent events
Declarations / Reports
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report
69
70
71
72
76
77
78
78
80
80
82
82
84
84
84
86
86
87
88
89
90
A4, 52 MERIVALE STREET
A1, 32 CORDELIA STREET
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Financial Report
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
For the year ended 30 June 2016
Notes
2016
$’000
Restated
2015
$’000
Revenue
Property revenue
Straight line adjustment to property revenue
2.1
208,626
7,426
197,240
6,569
Net changes in fair value of investment properties
2.2
96,583
168,579
Profit on sale of investment properties
Unrealised profit on assets held for sale
Net change in fair value of derivatives
Loss on settlement of derivatives
Net investment income
Expenses
Property expenses
Other expenses from ordinary activities
Total expenses
-
163
4,647
(10,471)
306,974
(27,457)
(10,407)
(37,864)
363
-
1,542
(12,822)
361,471
(25,441)
(9,123)
(34,564)
Profit from operating activities
269,110
326,907
Interest income
Borrowing costs
Net finance costs
Profit before income tax
Income tax expense
Profit for the period
Profit attributable to:
Owners of the Trust
Owners of the Company
3.2
559
(44,982)
(44,423)
761
(44,292)
(43,531)
224,687
283,376
4.3
(418)
(372)
224,269
283,004
224,444
(175)
224,269
283,175
(171)
283,004
Distribution to Securityholders
3.6
(118,134)
(110,685)
Change in net assets attributable to Securityholders / Total Comprehensive Income
106,135
172,319
Basic and diluted earnings per stapled security (cents)
3.7
38.9
50.4
Refer to section 2.1 for further information on the restatement for the year to 30 June 2015.
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
Growthpoint Properties Australia Annual Report 2016 Financial Statements
53
Consolidated Statement of Financial Position
As at 30 June 2016
Current assets
Cash and cash equivalents
Trade and other assets
Assets held for sale
Total current assets
Non-current assets
Trade and other assets
Plant & equipment
Investment properties
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other liabilities
Distribution to Securityholders
Current tax payable
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
Securityholders’ funds
Contributed equity
Reserves
Accumulated profits
Notes
2.4
2.3
2.4
2016
$’000
70,661
39,636
151,688
261,985
58,556
195
Restated
2015
$’000
26,858
35,638
-
62,496
51,129
312
2.2
2,592,589
2,292,711
709
499
2,652,049
2,344,651
2,914,034
2,407,147
2.5
3.6
3.1
3.3
38,978
60,062
574
99,614
28,291
56,334
560
85,185
1,242,226
15,353
1,257,579
890,445
20,000
910,445
1,357,193
995,630
1,556,841
1,411,517
3.5
1,414,012
1,376,011
5,036
137,793
3,847
31,659
Total Securityholders’ funds
1,556,841
1,411,517
Refer to section 2.1 for further information on the restatement as at 30 June 2015.
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
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Financial Report
Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
Share-
based
payments
reserve
Deferred
tax
expenses
charged to
equity
Contributed
equity
Profits
reserve
Accumulated
profits
$’000
$’000
$’000
$’000
$’000
Total
$’000
Balance at 30 June 2015
1,376,011
3,369
471
7
31,659
1,411,517
Total comprehensive income for the year
Profit after tax for the year
Total other comprehensive income
Total comprehensive income for the year
-
-
-
Transactions with Securityholders in their
capacity as Securityholders:
Contributions of equity, net of transaction costs
38,001
Distributions provided or paid
Share-based payment transactions
Deferred tax expense charged to equity
-
-
-
Total transactions with Securityholders
38,001
-
-
-
-
-
1,137
-
1,137
-
-
-
-
-
-
51
51
-
-
-
-
-
-
-
-
224,269
224,269
-
-
224,269
224,269
-
38,001
(118,134)
(118,134)
-
-
1,137
51
(118,134)
(78,945)
Balance at 30 June 2016
1,414,012
4,506
522
7
137,794
1,556,841
Total recognised income and expense for the
year is attributable to:
- Trust
- Company
Growthpoint Properties Australia
224,444
(175)
224,269
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Growthpoint Properties Australia Annual Report 2016 Consolidated Statement of Changes in Equity (continued)
Financial Statements
55
For the year ended 30 June 2015
Share-
based
payments
reserve
Deferred
tax
expenses
charged to
equity
Contributed
equity
Profits
reserve
Accumulated
profits /
(losses)
$’000
$’000
$’000
$’000
$’000
Total
$’000
Balance at 30 June 2014
1,303,009
2,257
461
7
(140,660)
1,165,074
Total comprehensive income for the year
Profit after tax for the year
Total other comprehensive income
Total comprehensive income for the year
-
-
-
Transactions with Securityholders in their
capacity as Securityholders:
Contributions of equity, net of transaction costs
73,002
Distributions provided or paid
Share-based payment transactions
Deferred tax expense charged to equity
-
-
-
Total transactions with Securityholders
73,002
-
-
-
-
-
1,112
-
1,112
-
-
-
-
-
-
10
10
-
-
-
-
-
-
-
-
283,004
283,004
-
-
283,004
283,004
-
73,002
(110,685)
(110,685)
-
-
1,112
10
(110,685)
(36,561)
Balance at 30 June 2015
1,376,011
3,369
471
7
31,659
1,411,517
Total recognised income and expense for the
year is attributable to:
- Trust
- Company
Growthpoint Properties Australia
283,175
(171)
283,004
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
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Financial Report
Consolidated Cash Flow Statement
For the year ended 30 June 2016
Notes
Cash flows from operating activities
Cash receipts from customers
Cash payments to suppliers
Cash generated from operating activities
Interest paid
Taxes paid
Net cash inflow from operating activities
2.6 (b)
Cash flows from investing activities
Interest received
Net proceeds from sale of investment properties
Payments for investment properties
Payments for plant & equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from external borrowings
Repayment of external borrowings
Proceeds from equity raising
Equity raising costs
Payment for settlement of derivatives
Distributions paid to Securityholders
Net cash (outflow)/inflow from financing activities
Net inflow in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
2.6 (a)
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
2016
$’000
221,286
(42,252)
179,034
(44,647)
(565)
133,822
559
-
(355,138)
(11)
2015
$’000
204,407
(66,405)
138,002
(45,263)
(352)
92,387
761
26,700
(93,477)
(15)
(354,590)
(66,031)
719,584
(368,138)
40,132
(2,131)
(10,471)
(114,405)
264,571
43,803
26,858
70,661
378,044
(357,842)
73,746
(744)
(12,822)
(101,201)
(20,819)
5,537
21,321
26,858
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
57
Notes to the Financial Statements
Section 1: Basis of preparation
in this section ...
This section shows the basis of reporting for the Group and relevant new accounting standards, amendments and interpretations,
whether these are effective in FY16 or later years. We explain how these changes are expected to impact the financial position
and performance of the Group.
Reporting entity
Growthpoint Properties Australia was formed by the stapling of two entities: Growthpoint Properties Australia Limited (“the Company”)
and Growthpoint Properties Australia Trust and its controlled entities (“the Trust”). The Company is the Responsible Entity for the Trust.
Growthpoint Properties Australia is also referred to as “the Group”.
The Group was established for the purpose of facilitating a joint quotation of the Company and the Trust and their controlled entities
on the Australian Securities Exchange (ASX Code: GOZ). The constitutions of the Company and the Trust ensure that, for so long as
the two entities remain jointly quoted, the number of shares in the Company and the number of units in the Trust shall be equal and the
shareholders of the Company and the unitholders in the Trust are identical. The Company, both in its personal capacity and in its capacity
as the Responsible Entity of the Trust, must at all times act in the best interests of the Group. The Group is a for profit entity.
The consolidated financial report includes financial statements for Growthpoint Properties Australia, the stapled consolidated Group, which
is domiciled in Australia as at, and for the twelve months ended, 30 June 2016. The Group’s registered address is Level 22, 357 Collins
Street, Melbourne, Victoria 3000, Australia.
The ultimate parent entity of the Group is Growthpoint SA.
Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian
Accounting Standards (AASB’s) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The
consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting
Standards Board (IASB).
The consolidated financial statements were authorised for issue by the Board on 22 August 2016.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the
Consolidated Statement of Financial Position:
• derivative financial instruments measured at fair value;
• assets held for sale are measured at fair value;
• investment property is measured at fair value; and
• share-based payment arrangements are measured at fair value.
Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Group’s functional currency.
The Group is of a kind referred to in ASIC Corporations (Rounding in Directors' / Financial Reports) Instrument 2016/191 and in
accordance with that Instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand unless
otherwise stated.
Use of estimates, assumptions and judgements
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may
differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimates are revised and in any future periods affected.
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Financial Report
Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the
consolidated financial statements and information about assumptions and estimation uncertainties that have a significant risk of resulting in
a material adjustment within the next financial year are included in the following notes:
• Note 2.2 – Investment properties;
• Note 2.3 – Assets held for sale;
• Note 3.3 – Derivative financial instruments; and
• Note 3.8 – Share-based payment arrangements.
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial
assets and liabilities. When applicable, information regarding the method of determining fair value and about the assumptions made in
determining fair value is disclosed in the note specific to that asset or liability.
New Standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 January
2016, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set
out below. The Group does not plan to adopt these standards early.
IFRS 9 Financial Instruments
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9
includes revised guidance on the classification and measurement of financial instruments including a new expected credit loss model for
calculating impairment on financial assets and the new general hedge accounting requirements. It also carries forward the guidance on
recognition and derecognition of financial instruments from IAS 39.
IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group does not
plan to early adopt this standard and the extent of the impact on the classification and measurement of the financial instruments (if any)
has not been determined.
IFRS 15 Revenue from contracts with customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing
revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.
IFRS 15 is effective for the FY18 annual reporting period for the Group with early adoption permitted. The Group does not plan to early
adopt this standard and the extent of the impact on revenue (if any) has not been determined.
IFRS 16 Leases
IFRS 16 removes the classification of leases as either operating leases or finance leases, for the lessee, effectively treating all leases as
finance leases.
Short-term leases (less than 12 months) and leases of low-value assets (such as personal computers) are exempt from the lease
accounting requirements.
There are also changes in accounting over the life of the leases. In particular, companies will now recognise a front-loaded pattern of
expense for most leases, even when they pay constant annual rentals.
Lessor accounting remains similar to current practice (i.e. lessors continue to classify leases as finance and operating leases).
IFRS 16 is effective for the FY19 annual reporting period for the Group with early adoption permitted. The Group does not plan to early
adopt this standard and the extent of the impact on revenue or expense (if any) has not been determined.
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
59
Section 2: Operating results, assets and liabilities
in this section ...
This section shows the assets used to generate the Group’s trading performance and provides information on the office and
industrial property segments that make up that performance. It also shows the liabilities incurred as a result. Liabilities relating to
the Group’s financing activities are addressed in Section 3.
On the following pages there are sections covering investment property, other non-current assets, acquisitions and disposals,
other payables due after more than one year and provisions.
2.1 Revenue and segment information
Accounting policies
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable as detailed below for each category of revenue. All
revenue is stated net of the amount of goods and services tax (GST). Revenue from investment properties is recognised on a straight-line
basis over the life of the lease for leases where the revenue under the lease terms is fixed and determinable. For leases where the revenue
is determined with reference to market reviews, inflationary measures or other variables, revenue is not straight-lined and is recognised in
accordance with the lease terms applicable for the period.
During the year, the Group has adopted a change to its policy with regards to revenue recognition, specifically in regards to straight-lining
revenue over the life of the lease. Previously, contingent income earned during the lease was recognised as incurred and the straight-line
calculation adjusted to include that contingent income until lease end. The Group’s accounting policy now excludes any contingent income
for straight line purposes as it is not determinable at the beginning of a lease. This increases the predictability of the calculation, therefore
increasing the relevance and reliability of the figure for users of the accounts.
The impact of this accounting policy change is nil for the Profit for the Year as per the Consolidated Statement of Profit or Loss and Other
Comprehensive Income both in the current year and prior corresponding period.
The impact of this accounting policy change is nil for Net Assets as per the Consolidated Statement of Financial Position as at 30 June
2016 and 30 June 2015.
Segment results
Segment results that are reported to the Group’s Managing Director (the chief operating decision maker) include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly head office expenses,
interest expense and income tax assets and liabilities.
Segmental information
The Group operates wholly within Australia and derives rental income solely from property investments. The Group segments net property
income and property revaluations into Office and Industrial segments and those results are shown below:
Statement of comprehensive income for the year to June 2016
Revenue, excluding straight line lease adjustment
Property expenses
Net Property Income Segment results
Net changes in fair value of investment properties
Segment results
Income not assigned to segments
Expenses not assigned to segments
Net profit before income tax
Office
$’000
Industrial
$’000
Total
$’000
101,219
(13,459)
87,760
75,037
162,797
107,407
(13,998)
93,409
21,546
114,955
208,626
(27,457)
181,169
96,583
277,752
2,324
(55,389)
224,687
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Financial Report
2.1 Revenue and segment information (continued)
Statement of comprehensive income for the year to June 2015
Revenue, excluding straight line lease adjustment
Property expenses
Net Property Income Segment results
Net changes in fair value of investment properties
Segment results
Losses not assigned to segments
Expenses not assigned to segments
Net profit before income tax
Office
$’000
Industrial
$’000
Total
$’000
99,506
(12,436)
87,070
87,257
174,327
97,734
(13,005)
84,729
81,322
166,051
197,240
(25,441)
171,799
168,579
340,378
(3,587)
(53,415)
283,376
Property values are also reported by segment and this information is reported in note 2.2.
Major customer
Revenue from one customer, Woolworths Limited, of the Group’s Industrial segment represents $47,705,000 (FY15: $46,172,000) of the
Group’s total revenue.
2.2 Investment properties
Accounting policies
Investment property
Investment property is property held either to earn rental income or for capital appreciation or both, but not for sale in the ordinary
course of business, use in the production or supply of goods or services or for administrative purposes. Investment properties are initially
measured at cost including transaction costs. Costs incurred subsequent to initial acquisition are capitalised when it is probable that
future economic benefits in excess of the originally assessed performance of the asset will flow to the entity and the cost of that capital
expenditure can be measured reliably. All other costs are expensed in the profit and loss in the period incurred.
Subsequent to initial recognition as assets, investment properties are revalued to fair value. Directors revalue the property investments on
the basis of valuations determined by them or independent valuers on a periodic basis. The Group assesses at each balance date whether
these valuations appropriately reflect the fair value of investment properties.
Any gains or losses arising from changes in fair value of the properties are recognised in the Consolidated Statement of Profit or Loss and
Other Comprehensive Income in the period in which they arise.
Lease incentives and commissions
Any lease incentives provided to a tenant under the terms of a lease such as fit-outs or rent free periods are recognised as a reduction of
revenue on a straight-line basis over the term of the lease.
Leasing commissions paid to agents on signing of lease agreements are recognised as a reduction of revenue on a straight-line basis over
the term of the lease.
Determination of fair value
An external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the
location and category of property being valued generally values the Group’s most, if not all, investment property portfolio each financial
year. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the
valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each
acted knowledgably and willingly.
In the absence of current prices in an active market, the valuations are prepared by considering the net present value of the estimated
cash flows expected from ownership of the property, a discounted cash flow valuation. A discount rate or target internal rate of return that
reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation.
Valuations reflect, where appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to
be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between the Group and
the lessee, and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary
increases, it is assumed that all notices and when appropriate counter-notices, have been served validly and within the appropriate time.
Growthpoint Properties Australia Annual Report 2016 2.2 Investment properties (continued)
Investment Properties Value
Industrial Properties
Victoria
Notes to the Financial Statements
61
Latest External Valuation Consolidated Book Value
Date
Valuation
30-Jun-16
30-Jun-15
$’000
$’000
$’000
120 Northcorp Boulevard
Broadmeadows
28 Bilston Drive (i)
522-550 Wellington Road
Wodonga
Mulgrave
1500 Ferntree Gully Road & 8 Henderson Road
Knoxfield
VIC
VIC
VIC
VIC
30-Jun-16
31-Dec-15
31-Dec-15
30-Jun-16
40 Annandale Road
9-11 Drake Boulevard
101-103 William Angliss Drive (i)
213-215 Robinsons Road (i)
130 Sharps Road
120-132 Atlantic Drive
Lots 2-4, 44-54 Raglan Street
365 Fitzgerald Road (i)
20 Southern Court
120 Link Road
60 Annandale Road
6 Kingston Park Court
3 Millennium Court
31 Garden Street
Melbourne Airport
VIC
30-Jun-16
Altona
Laverton North
Ravenhall
VIC
VIC
VIC
31-Dec-15
31-Dec-15
30-Jun-15
Melbourne Airport
VIC
31-Dec-15
Keysborough
Preston
Derrimut
Keysborough
VIC
VIC
VIC
VIC
31-Dec-15
31-Dec-15
30-Jun-15
30-Jun-16
Melbourne Airport
VIC
31-Dec-15
Melbourne Airport
VIC
30-Jun-16
Knoxfield
Knoxfield
Kilsyth
VIC
VIC
VIC
30-Jun-16
31-Dec-15
31-Dec-15
45-55 South Centre Road
Melbourne Airport
VIC
31-Dec-15
Keysborough
VIC
30-Jun-16
Melbourne Airport
VIC
30-Jun-16
77,700
72,500
63,000
39,250
34,600
30,900
28,000
26,400
21,500
22,350
21,650
17,400
14,350
14,000
12,800
11,700
10,450
9,600
8,550
8,000
7,100
77,700
-
64,500
39,250
34,600
31,300
-
-
23,600
22,350
21,650
-
14,350
14,000
12,800
11,700
10,800
9,750
8,000
8,000
7,100
76,700
80,500
60,700
36,550
37,100
29,600
24,100
26,400
24,800
21,000
21,400
17,400
13,400
17,350
12,600
11,100
9,250
9,100
8,300
7,825
6,900
19 Southern Court
75 Annandale Road
Queensland
70 Distribution Street
13 Business Street
29 Business Street
670 Macarthur Avenue (i)
5 Viola Place
10 Gassman Drive
3 Viola Place
Western Australia
20 Colquhoun Road
New South Wales
27-49 Lenore Drive
Larapinta
Yatala
Yatala
Pinkenba
Brisbane Airport
Yatala
Brisbane Airport
QLD
QLD
QLD
QLD
QLD
QLD
QLD
31-Dec-15
198,500
200,800
193,500
31-Dec-15
30-Jun-16
30-Jun-15
30-Jun-15
30-Jun-16
31-Dec-15
14,850
10,400
8,800
8,500
4,800
1,950
14,850
10,400
-
8,500
4,800
1,950
15,050
11,900
8,800
8,500
5,000
2,500
Perth Airport
WA
31-Dec-15
141,000
146,000
134,000
Erskine Park
NSW
30-Jun-16
6-7 John Morphett Place
Erskine Park
NSW
31-Dec-15
51-65 Lenore Drive
34 Reddalls Road
81 Derby Street
Erskine Park
NSW
31-Dec-15
Kembla Grange
NSW
30-Jun-16
Silverwater
NSW
31-Dec-15
60,900
44,500
29,500
21,000
15,500
60,900
45,000
30,000
21,000
15,100
58,250
42,500
28,000
-
14,600
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2.2 Investment properties (continued)
Industrial Properties
South Australia
599 Main North Road
1-3 Pope Court
12-16 Butler Boulevard
10 Butler Boulevard
Latest External Valuation Consolidated Book Value
Date
Valuation
30-Jun-16
30-Jun-15
$’000
$’000
$’000
Gepps Cross
Beverley
Adelaide Airport
Adelaide Airport
SA
SA
SA
SA
31-Dec-15
70,000
70,300
68,500
30-Jun-16
31-Dec-15
31-Dec-15
21,100
14,100
8,600
21,100
14,100
8,400
-
14,200
8,500
Total Industrial Properties
1,225,800
1,084,650
1,165,875
Office Properties
Victoria
75 Dorcas Street (ii)
Building 2, 572-576 Swan Street
Building B, 211 Wellington Road
Buildings 1&3, 572-576 Swan Street
Building C, 211 Wellington Road (iii)
Car Park, 572-576 Swan Street
Queensland
1231-1241 Sandgate Road
333 Ann Street
CB1, 22 Cordelia Street
A1, 32 Cordelia Street
A4, 52 Merivale Street
CB2, 42 Merivale Street
South Melbourne
Richmond
Mulgrave
Richmond
Mulgrave
Richmond
Nundah
Brisbane
South Brisbane
South Brisbane
South Brisbane
South Brisbane
Car Park, 32 Cordelia Street & 52 Merivale Street
South Brisbane
South Australia
WorldPark, 33-39 Richmond Road
7 Laffer Drive
New South Wales
1 Charles Street
Building C, 219-247 Pacific Highway
Tasmania
Keswick
Bedford Park
Latest External Valuation Consolidated Book Value
Date
Valuation
30-Jun-16
30-Jun-15
$’000
$’000
$’000
30-Jun-16
166,000
166,000
30-Jun-16
31-Dec-15
30-Jun-16
30-Sep-15
30-Jun-16
82,000
66,600
57,800
50,875
1,200
82,000
67,000
57,800
22,070
1,200
31-Dec-15
99,000
103,500
30-Jun-16
102,500
102,500
30-Jun-16
31-Dec-15
30-Jun-16
31-Dec-15
31-Dec-15
92,500
71,000
72,800
52,250
18,000
92,500
74,800
72,800
52,400
18,000
-
78,500
34,015
54,850
-
1,200
93,200
91,000
83,000
65,250
58,500
48,300
14,650
30-Jun-16
30-Jun-16
62,000
16,400
62,000
16,400
61,000
16,700
VIC
VIC
VIC
VIC
VIC
VIC
QLD
QLD
QLD
QLD
QLD
QLD
QLD
SA
SA
Parramatta
Artarmon
NSW
NSW
31-Dec-15
277,500
280,000
261,500
31-Dec-15
108,500
111,000
103,500
89 Cambridge Park Drive
Cambridge
TAS
31-Dec-15
27,000
27,000
27,800
Australian Capital Territory
10-12 Mort Street
255 London Circuit
Total Office Properties
Sub-totals
Canberra
Canberra
ACT
ACT
30-Jun-16
31-Oct-15
87,500
70,025
87,500
70,025
85,000
-
1,581,450
1,566,495
1,177,965
2,807,250
2,651,145
2,343,840
Less: Non-current trade receivables (rental income recognised on a straight line basis)
(58,556)
(51,129)
Total investment properties
2,592,589
2,292,711
(i) These properties have been transferred to assets available for sale. (ii) This property was acquired in June 2016 (iii) This property is a development fund through (see
Contractual Obligations section below). The external valuation is “as complete” whereas the current book value is at fair value less cost to complete.
Growthpoint Properties Australia Annual Report 2016
Notes to the Financial Statements
63
2.2 Investment properties (continued)
Valuation basis
The basis of the valuation of investment properties is fair value being the amounts for which the properties could be exchanged between
willing parties in an arm’s length transaction, based on current prices in an active market for comparable properties in similar location and
condition and subject to similar leases.
External valuations were conducted by Jones Lang LaSalle, Savills, Urbis, Knight Frank, CBRE and m3property. The fair value of
properties not externally valued as at 30 June 2016 were based solely on Directors' valuations.
At each reporting date, the Directors update their assessment of the fair value of each property in accordance with the Group accounting
policy detailed above.
The Group determines a property’s value within a range of reasonable fair value estimates and, in making that assessment, considers
information from a variety of sources including:
• Current prices for comparable investment properties, as adjusted to reflect differences for location, building quality, tenancy profile and
other factors.
• Discounted cash flow projections based on estimates of future cash flows.
• Capitalised income projections based upon a property’s estimated net market income, and a capitalisation rate derived from analysis of
market evidence.
At reporting date, the key assumptions and inputs into the valuation techniques used by the Group in determining fair value were in the
following ranges for the Group’s portfolio of industrial properties:
Discount rate
Terminal yield
Capitalisation rate
Expected vacancy period
Rental growth rate
For the office portfolio the following ranges were used:
Discount rate
Terminal yield
Capitalisation rate
Expected vacancy period
Rental growth rate
Commentary on Discount Rates
Date of Valuation
Weighted average 10-year discount rate used to value the Group’s properties
10-year bond rate
Implied property risk premium
2016
2015
7.5% - 9.8%
8.0% - 10.0%
6.8% - 11.5% 6.8% - 11.5%
6.0% - 9.5%
6.5% - 9.8%
3-12 months
3-12 months
2.5% - 5.0%
2.5% - 5.0%
2016
2015
6.8% - 10.0% 8.0% - 10.3%
6.3% - 11.8%
7.3% - 11.8%
6.0% - 11.8% 6.8% - 12.0%
6-12 months
6-12 months
3.1% - 4.5%
3.1% - 4.5%
30-Jun-16
30-Jun-15
7.89%
1.98%
5.91%
8.5%
3.0%
5.5%
As the above table shows, over the 12 months to 30 June 2016 discount rates utilised in the valuation of the Group’s property portfolio
have tightened (lowered). Over this same period the implied property risk premium has increased by approximately 41 basis points. The
implied property risk premium is the difference between the weighted average discount rate and the 10 year Australian Government bond
rate. The increase in the implied property risk premium is due to a greater fall in the government bond yield (103 basis points) relative to the
reduction in the Group’s weighted average discount rate (61 basis points) over the 12 months to 30 June 2016.
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2.2 Investment properties (continued)
Commentary on Capitalisation Rates
Industrial
The market for industrial investments remains robust with strong demand prevailing for well-located and secured industrial investments
from all buyer types including local REIT, wholesale funds and a number of foreign investors. Strong competition for relatively few available
assets has led to further yield compression over the past 12 months of between 0 and 25 basis points at both ends of the prime yield
range and the higher quality end of secondary yields. Yields are now generally placed at levels recorded during the peak market preceding
the Global Financial Crisis. Transactional activity over the past 12 months has provided good evidence for the Group’s own industrial
properties. The weighted average capitalisation rate used to value the industrial portfolio firmed from 7.34% to 7.10% over the year to 30
June 2016.
Office
Capital remains readily available for new investment in the office sector creating continued strong demand, especially for prime quality
assets in both CBD and fringe markets providing long lease terms, modern improvements and fixed rent increases. The A-REIT and
offshore investors represent the most active buyer profile. Yields continued to tighten in most markets, particularly for prime and A-grade
assets, compressing between 25 and 75 basis points. However, in contrast to the buoyant investment market, conditions within office
leasing markets generally remain challenging.
Following some new leasing deals and lease extensions to existing tenants, a further improved investment market and the acquisition of
255 London Circuit, Canberra (capitalisation rate 6.00%) and 75 Dorcas Street, South Melbourne (capitalisation rate 6.75%), the weighted
average capitalisation rate used in valuing the office portfolio has firmed from 7.25% to 6.78% over the year to 30 June 2016.
Uncertainty around property valuations
Fair value of investment property is the price at which the property could be exchanged between knowledgeable, willing parties in an arm’s
length transaction. A “willing seller” is not a forced seller prepared to sell at any price. The best evidence of fair value is given by current
prices in an active market for comparable property in terms of investment characteristics such as location, lettable area and land area,
building characteristics, property condition, lease terms and rental income potential, amongst others.
The fair value of investment property has been assessed to reflect market conditions at the end of the reporting period. While this
represents the best estimates of fair value as at the balance sheet date, market uncertainty means that if investment property is sold in
future the price achieved may be higher or lower than the most recent valuation, or higher or lower than the fair value recorded in the
financial statements.
An increase in discount rates, terminal yields, capitalisation rates and expected vacancy periods would decrease the value of investment
property. Conversely, a decrease in these inputs would increase the value of investment property.
An increase in rental growth rates would increase the value of investment property, whereas a decrease would decrease the value of
investment property.
Contractual obligations
At 30 June 2016, the following contractual obligations relating to expansions at existing investment properties are in place:
• Under an expansion clause in the current lease the tenant at 5 Viola Place, Brisbane Airport, Queensland can request a 6,250 sqm
expansion at any point during the term (which currently expires on 30 June 2017). The Group would be responsible for funding this
expansion. Upon completion the lease would be re-set so that at least seven years remained and rent would be charged on the
additional lettable area constructed under the expansion clause.
• Under an expansion clause in the current lease the tenant at 120-132 Atlantic Drive, Keysborough, Victoria can request a 3,000 sqm
expansion at any point during the term (which currently expires on 20 December 2028). The Group would be responsible for funding
this expansion. Upon completion the lease would be re-set so that at least seven years remained and rent would be charged on the
additional lettable area constructed under the expansion clause.
The two property expansions detailed above have an estimated aggregate cost of not more than $9.0 million
The Group also has an obligation in June 2019 to make available $6.0 million to the tenant at 1 Charles Street, Parramatta, New South
Wales to spend on capital expenditure or refurbishment at the property.
The Group has entered into a development agreement and other documents to fund the construction of Building C, 211 Wellington Road,
Mulgrave, Victoria. Practical completion of this office building is expected to occur in September 2016. At 30 June 2016, the cost to
complete this property is $29.7 million under the development agreement.
Growthpoint Properties Australia Annual Report 2016 2.2 Investment properties (continued)
Amounts recognised in profit and loss for investment properties
Rental income
Straight line adjustment to rental income
Net gain from fair value adjustment
Profit on sale of investment properties
Unrealised profit on assets held for sale
Direct operating expenses from property that generated rental income
Notes to the Financial Statements
65
2016
$’000
208,626
7,426
96,583
-
163
(27,457)
285,341
2015
$’000
197,240
6,569
168,579
363
-
(25,441)
347,310
Leasing arrangements
The majority of the investment properties are leased to tenants under non-cancellable, long-term operating leases with rent payable
monthly. The minimum lease payments under these leases are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2016
$’000
206,862
736,407
480,018
2015
$’000
179,901
660,164
498,651
1,423,287
1,338,716
10 (30 June 2015: 10) of the investment properties are held on a leasehold basis with non-cancellable, long-term operating leases with
ground rent payable monthly. The minimum lease payments under these leases payable by the Trust are as follows:
Within one year
Later than one year but not later than five years
Later than five years
Reconciliation of value of investment properties
At fair value
Opening balance
Acquisitions
Capital expenditure
Disposals
Unrealised gain on assets held for sale
Net gain on disposals
Transfer (to) / from available for sale
Net gain from fair value adjustment
Closing balance at 30 June
2016
$’000
3,399
5,725
605
9,728
2016
$’000
2015
$’000
3,040
5,242
-
8,282
2015
$’000
2,292,711
2,030,790
347,844
6,976
-
163
-
(151,688)
96,583
94,989
6,941
(26,700)
-
363
17,741
168,579
2,592,589
2,292,711
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2.3 Non-current assets held for sale
Accounting policy
Non-current assets that are expected to be recovered primarily through sale rather than through continuing use are classified as held for
sale. Immediately before classification as held for sale, the assets are re-measured in accordance with the Group’s accounting policies.
Thereafter the assets are measured at the lower of their carrying amount and fair value with the exception of investment property which
continues to be measured in accordance with accounting policy note 2.2.
At 30 June 2016 there were five properties classed as held for sale (30 June 2015: Nil) and their value is shown on the table below:
Value at 30 June 2016
Industrial Properties
28 Bilston Drive
213-215 Robinsons Road
Wodonga
Ravenhall
99 and 101-103 William Angliss Drive
Laverton North
365 Fitzgerald Road
670 Macarthur Avenue (i)
Total
Derrimut
Pinkenba
VIC
VIC
VIC
VIC
QLD
$’000
69,240
26,959
27,731
17,843
9,916
151,688
(i) A contract of sale was entered into for this property in June 2016, with settlement due by 8 September 2016.
2.4 Trade and other assets
Accounting policy
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate
method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade and other debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off.
A provision for impairment of receivables is established when there is objective evidence that all amounts due will not be able to be
collected according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or significant delinquency in payments are considered indicators that the trade
receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present
value of the estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are
not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income
within property revenue. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a
subsequent period, it is written off. Subsequent recoveries of amounts previously written off are credited against property revenue in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Impairment
A financial asset not carried at fair value through profit or loss (meaning the asset value has not been increased or decreased to accord
with its assessed market value) is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A
financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor,
restructuring of an amount due to the Group on terms that the Group would not otherwise normally consider, indications that a debtor or
issuer will enter bankruptcy and the disappearance of an active market for a security. In addition, for an investment in an equity security, a
significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
The Group considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant
receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then
collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are
collectively assessed for impairment by grouping together receivables with similar risk characteristics.
In assessing collectively for impairment, the Group uses historical trends of the probability of default, timing of recoveries and the amount
of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual
losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount
and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in
the Consolidated Statement of Profit or Loss and Other Comprehensive Income and reflected in an allowance account against receivables.
Growthpoint Properties Australia Annual Report 2016
Notes to the Financial Statements
67
2.4 Trade and other assets (continued)
If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively
to an event occurring after the impairment loss was recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive
Income, then the impairment loss is reversed, with the amount of the reversal recognised in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is
recognised in other comprehensive income.
Determination of fair value
The fair value of trade and other assets is estimated as the present value of future cash flows, discounted at the market rate of interest at
the reporting date. This fair value is determined for disclosure purposes.
Trade and other assets can be analysed as follows:
Current
Rent receivables
GST receivable
Prepayments
Unamortised tenant incentives
Impaired rent receivables
As at 30 June 2016, there were no impaired rent receivables (30 June 2015: nil).
Non-current
Rent receivables
2016
$’000
1,392
-
6,896
31,348
39,636
2016
$’000
58,556
58,556
2015
$’000
3,788
533
4,913
26,404
35,638
2015
$’000
51,129
51,129
Rent receivables represent the non-current portion of straight-line rental income receivable (refer note 2.1).
2.5 Trade and other liabilities
Accounting policies
These amounts represent liabilities for goods and services provided to the Group prior to the end of the reporting period and which are
unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other liabilities are initially recognised at
fair value, net of transaction costs incurred and are subsequently measured at amortised cost.
Trade and other liabilities can be analysed as follows:
Trade payables
Non-trade payables
GST payable
Accrued expenses - other
Prepaid rent
2016
$’000
620
519
2,001
17,580
18,258
38,978
2015
$’000
664
464
-
14,449
12,714
28,291
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2.6 Cash flow information
Accounting policies
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date
that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term
commitments.
Cash flow information
(a) Reconciliation of cash at end of year
2016
$’000
2015
$’000
Cash and cash equivalents balance
70,661
26,858
(b) Reconciliation of net operating profit to net cash inflow from operating activities
Net profit for the period
Fair value adjustment to investment property
Profit on sale of investment properties
Unrealised profit on assets held for sale
Fair value adjustment to derivatives
Loss on settlement of derivatives
Amortisation of borrowing costs
Interest received
Depreciation
Change in operating assets and liabilities, net of effects from purchase of controlled entity:
- Increase in receivables
- Increase in prepayments
- Increase in deferred tax asset
- Increase in payables
224,269
283,004
(96,583)
(168,579)
-
(163)
(4,647)
10,471
1,685
(559)
128
(5,049)
(8,277)
(210)
12,757
(363)
-
(1,542)
12,822
2,033
(761)
137
(6,303)
(28,431)
(202)
572
Net cash inflow from operating activities
133,822
92,387
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
69
Section 3: Capital structure and financing costs
in this section ...
This section outlines how the Group manages its capital and related financing costs.
3.1 Interest bearing liabilities
Accounting policies
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Consolidated
Statement of Profit or Loss and Other Comprehensive Income over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the date of the Consolidated Statement of Financial Position.
Interest bearing liabilities
The table below summarises the movements in the Group’s interest bearing liabilities during the year.
Secured loans
Syndicated bank facility
- Facility A
- Facility B
- Facility C
- Facility D
- Facility E
Loan note 1
Loan note 2
Loan note 3
Fixed bank facility 1
Total loans
Opening
balance 1 July
2015
Movement
during period
Balance as at
30 June 2016
Facility limit
Maturity
$’000
$’000
$’000
$’000
255,000
255,000
86,826
-
100,000
200,000
-
-
-
-
-
101,446
-
-
-
100,000
60,000
90,000
255,000
255,000
188,272
-
100,000
200,000
100,000
60,000
90,000
255,000
255,000
245,000
70,000
100,000
200,000
100,000
60,000
90,000
896,826
351,446
1,248,272
1,375,000
Dec-17
Dec-18
Dec-19
Dec-19
Jun-19
Mar-25
Dec-22
Dec-22
Dec-22
Less unamortised upfront costs
Total interest bearing liabilities
(6,381)
890,445
335
(6,046)
351,781
1,242,226
The weighted average all-in interest rate (including bank margin and amortisation of upfront fees paid) at 30 June 2016 was 4.13% per
annum (30 June 2015: 4.76% per annum). Refer to note 3.3 for details on interest rate swaps.
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3.1 Interest bearing liabilities (continued)
Fair value
The carrying amounts are not materially different to the fair values of borrowings at balance sheet date since the interest payable on those
borrowings is close to current market rates.
Assets pledged as security
The bank loans, Loan Notes and bills payable by the Group are secured by first ranking mortgages over the Group’s real property interests,
including those classified as investment properties.
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Current
Floating charge
Cash and cash equivalents
Receivables
Assets available for sale
Non-current
First ranking mortgage
Investment properties
Receivables
Floating charge
Plant and equipment
Deferred tax assets
Total non-current assets pledged as security
Total assets pledged as security
3.2 Borrowing costs
Accounting policies
2016
$’000
2015
$’000
70,661
39,636
151,688
261,985
26,858
35,638
-
62,496
2,592,589
2,292,711
58,556
51,129
195
709
312
499
2,652,049
2,914,034
2,344,651
2,407,147
Borrowing costs are interest and other costs incurred in connection with interest bearing liabilities including derivatives and recognised as
expenses in the period in which they are incurred, except where they are incurred for the construction of any qualifying asset where they
are capitalised during the period of time that is required to complete and prepare the asset for its intended use.
Borrowing costs can be analysed as follows:
Bank interest expense and charges
Amortisation of borrowing costs
2016
$’000
43,297
1,685
44,982
2015
$’000
42,259
2,033
44,292
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
71
3.3 Derivative financial instruments
Accounting policies
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their
fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument.
The Group takes out certain derivative contracts as part of its financial risk management, however, it has not elected to designate these to
qualify for hedge accounting.
Interest rate swaps
Changes in fair value of such derivative instruments that do not qualify for hedge accounting are recognised immediately in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Determination of fair value
The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated
future cash flows based on the terms and maturity of each contract and using market interest rates for a substitute instrument at the
measurement date.
Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and
counterparty when appropriate.
Derivative financial instruments
Derivative financial instruments can be analysed as follows:
Interest rate swap contracts – carried at fair value through profit and loss:
Total non-current derivative financial instrument liabilities
2016
$’000
15,353
15,353
2015
$’000
20,000
20,000
Instruments used by the Group
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in interest
rates in accordance with the Group’s financial risk management policies (refer to note 3.4). The gain or loss from re-measuring the interest
rate swaps at fair value is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income immediately.
Interest rate swap contracts – carried at fair value through profit and loss
Swaps in effect at 30 June 2016 covered 29% (30 June 2015: 53%) of the loan principal outstanding. With total fixed interest rate debt of
$450 million outstanding (30 June 2015: $200 million), the total fixed interest rate coverage of outstanding principle is 65% (30 June 2015:
75%).
The average fixed interest rate of swaps at 30 June 2016 was 3.06% per annum (30 June 2015: 3.70% per annum) and the variable
interest rate (excluding bank margin) is 1.89% per annum (30 June 2015: 2.10% per annum) at balance date. See table below for further
details of swaps in effect at 30 June 2016:
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Counter Party
ANZ
Westpac
ANZ
NAB
NAB
CBA
ANZ
WBC
Total / Weighted average
Amount
of Swap
$’000
50,000
50,000
50,000
60,000
25,000
25,000
50,000
50,000
360,000
Swap Expiry
Fixed Rate
Jul-2018
Feb-2019
Feb-2019
Nov-2019
Jun-2020
Jun-2020
Dec-2020
Jun-2021
%
3.20%
3.57%
3.55%
3.70%
2.36%
2.36%
2.42%
2.48%
3.06%
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Term to
Maturity
Years
2.0
2.6
2.6
3.3
4.0
4.0
4.5
5.0
3.4
The contracts require settlement of net interest receivable or payable each 30 days. The settlement dates generally coincide with the dates
on which interest is payable on the underlying debt. The contracts are settled on a net basis.
At balance date these contracts were liabilities with a fair value of $15,353,000 (30 June 2015: liabilities of $20,000,000) for the Group. In
the year ended 30 June 2016 there was a gain from the increase in fair value of $4,647,000 for the Group (FY15: gain of $1,542,000).
72
Financial Report
3.3 Derivative financial instruments (continued)
Fair value hierarchy
The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
30 June 2016
Derivative financial liabilities
30 June 2015
Derivative financial liabilities
Level 1
$’000
-
-
-
-
Level 2
$’000
15,353
15,353
20,000
20,000
Level 3
$’000
-
-
-
-
Total
$’000
15,353
15,353
20,000
20,000
The fair value of investment properties has been categorised as Level 3 in the fair value hierarchy based on the significant unobservable
inputs into the valuation techniques used.
3.4 Financial risk management
Overview
The Group has exposure to the following risks from their use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk (including interest rate risk).
This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for
measuring and managing risk, and the management of capital as well as relevant quantitative disclosure on risks.
Risk management framework
The Board has overall responsibility for the oversight of the risk management framework. The Board has established an Audit, Risk and
Compliance Committee, which is responsible for monitoring risk management policies and making appropriate recommendations to the
Board. The Committee reports regularly to the Board on its activities. The Managing Director and management have responsibility for
establishing the risk management framework and providing a regular report to the Board in relation to risks facing the Group.
Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls,
and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand their roles and obligations.
22
Refer to page 22 of the Group’s 2016 Sustainability Report for more details.
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
73
3.4 Financial risk management (continued)
Financial instruments used by the Group
The Group’s principal financial instruments, other than derivatives, comprise bank loans and Loan Notes.
The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial
assets and liabilities such as other receivables and payables, which arise directly from its operations. The Group also enters into derivative
transactions (interest rate swaps) to manage the interest rate risks arising from the Group’s operations. It is the Group’s policy that no
speculative trading in financial instruments shall be undertaken. The main risk arising from the Group’s financial instruments is cash flow
interest rate risk. The Board of Directors reviews and agrees policies for managing this risk and this is summarised below.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the
basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are
disclosed in the relevant note to the financial statements.
Derivative financial instruments
The Group is exposed to financial risk from movement in interest rates. To reduce its exposure to adverse fluctuations in interest rates,
the Group has employed the use of interest rate swaps whereby the Group agrees with a bank to exchange at specified intervals, the
difference between fixed rate and floating rate interest amounts calculated by reference to an agreed notional principal amount. Any
amounts paid or received relating to interest rate swaps are recognised as adjustments to interest expense over the life of each swap
contract, thereby adjusting the effective interest rate on the underlying obligations.
The gain or loss from re-measuring the interest rate swaps at fair value is recognised in the Consolidated Statement of Profit or Loss and
Other Comprehensive Income immediately, as hedge accounting under AASB 139 has not been adopted.
Credit risk
Credit risk is the risk that counterparties to a financial asset will fail to discharge their obligations, causing the Group to incur a financial
loss.
For cash and current receivables, the maximum exposure to credit risk at the reporting date is the carrying amount of each class of
receivable.
The Group has significant derivative financial instruments held with four major Australian banks, NAB, Westpac, ANZ and CBA,
counterparties which are considered to be high quality financial institutions. At balance sheet date, the fair value of the financial instruments
is in a liability position.
At the balance sheet date, the agreed notional principal amount of interest rate swap contracts in effect for the Group is $360,000,000 (30
June 2015: $475,000,000) with a fair value at the reporting date of a liability of $15,353,000 (30 June 2015: liability of $20,000,000).
The Group manages credit risk and the losses which could arise from default by ensuring that parties to contractual arrangements are of
an appropriate credit rating, or do not show a history of defaults. Cash at bank is held with a major Australian bank.
Tenants for each of the properties held by the Group are assessed for creditworthiness before a new lease commences. This assessment
is also undertaken where the Group acquires a tenanted property. If necessary, a new tenant will be required to provide lease security
(such as personal, director or bank guarantees, a security deposit, letter of credit or some other form of security) before the tenancy is
approved. Tenant receivables are monitored by property managers and the Group’s asset managers on a monthly basis. If any amounts
owing under a lease are overdue these are followed up for payment. Where payments are outstanding for a longer period than allowed
under the lease, action to remedy the breach of the lease can be pursued, including legal action or the calling of security held by the Group
under the lease. Where it is assessed it is not likely that the amount outstanding will be received by the Group an allowance is made for the
debt being doubtful.
For developers from whom coupon interest is receivable by the Group over the course of a development, the Group assesses the
creditworthiness of a developer counterparty prior to entering into a binding contractual relationship.
Due to the financial strength of the developer of the property that is under construction at Building C, 211 Wellington Road, Mulgrave
Victoria, no additional security was deemed necessary.
Net fair values
The carrying values of the Group’s financial assets and liabilities included in the statement of financial position approximate their fair
values. Refer to the individual notes to these accounts regarding these assets and liabilities for the methods and assumptions adopted in
determining net fair values.
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3.4 Financial risk management (continued)
Market risk
Market risk is the risk that counterparties to the Group's floating rate debt change the rate at which interest is charged on that debt due to
underlying changes in the debt market.
A potential market risk to the Group arises from changes in interest rates relating to its Syndicated Facility amounting to $798,272,000 at
balance sheet date (30 June 2015: $696,826,000).
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in interest
rates.
The following table sets out the carrying amount of the financial instruments that are exposed to interest rate risk.
Financial assets
Cash and cash equivalents
Financial liabilities
Derivative financial instruments
Interest bearing liabilities – fixed debt
Interest bearing liabilities – hedged (i)
Interest bearing liabilities – unhedged
(i) Note – hedge accounting has not been adopted.
Fixed/ Floating
Floating
Floating
Fixed
Fixed
Floating
2016
$’000
70,661
70,661
15,353
450,000
360,000
438,272
1,263,625
2015
$’000
26,858
26,858
20,000
200,000
475,000
221,826
916,826
The following sensitivity analysis is based on the interest rate risk exposures in existence at balance sheet date. At 30 June 2016, if interest
rates had moved, as illustrated in the table below, with all other variables held constant, net profit and equity would have been affected as
follows:
+100 bps
Cash and borrowings
Interest rate derivatives
-100 bps
Cash and borrowings
Interest rate derivatives
Post Tax Profit - Higher/(Lower)
2016
$’000
(3,676)
5,895
2,219
3,676
(4,170)
(494)
2015
$’000
(1,950)
14,335
12,385
1,950
(14,625)
(12,675)
As can be seen from the table above, the movements in profit are primarily due to fair value gains or losses on financial derivatives from
an interest rate increase or decrease. These fair value gains or losses would be unrealised and non-cash in nature unless the interest rate
swaps were closed or sold.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations in relation to investment activities or other operations of the
Group. The Group manages its liquidity risk by ensuring that on a daily basis there is sufficient cash on hand or available loan facilities
to meet the contractual obligations of financial liabilities as they fall due. The Board sets budgets to monitor cash flows. In addition, the
Company, as an Australian Financial Services Licensee, is required to prepare a rolling 12 month cashflow projection approved by the
Directors. As at the balance sheet date, the Group had cash and cash equivalents totalling $70,661,000 (30 June 2015: $26,858,000).
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
75
3.4 Financial risk management (continued)
Financing arrangements
The Group had access to the following borrowing facilities as at the balance sheet date:
Syndicated bank facility
Total facility
Used at balance date
Unused at balance date
Fixed debt
Total facility
Used at balance date
Unused at balance date
Total unused bank facilities
Maturities of financial liabilities
2016
$’000
2015
$’000
925,000
798,272
126,728
925,000
696,826
228,174
450,000
450,000
-
200,000
200,000
-
126,728
228,174
The maturity of financial liabilities (including trade and other payables, provision for distribution, provision for current tax payable, derivative
financial instruments and interest bearing liabilities) at reporting date is shown below, based on the contractual terms of each liability in
place at reporting date. The amounts disclosed are based on undiscounted cash flows, including interest payments based on variable
rates at 30 June 2016.
Carrying
amount
Total
contractual
cash flow
6 months
or less
$’000
$’000
$’000
6 to 12
months
$’000
1 to 5
years
$’000
More than
5 years
$’000
2016
Non-derivative financial liabilities
Bank loans and Loan Notes
1,248,272
1,504,946
224,606
Trade and other liabilities
81,282
81,281
1,329,554
1,586,227
77,546
302,152
22,661
3,439
26,100
128,903
1,128,776
-
296
128,903
1,129,072
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Derivative financial liabilities
Interest rate swaps used for hedging
2015
Non-derivative financial liabilities
Bank loans
Trade and other liabilities
Derivative financial liabilities
Interest rate swaps used for hedging
15,353
15,353
22,295
22,295
2,420
2,420
2,542
2,542
17,333
17,333
-
-
896,826
1,077,011
72,350
969,176
72,350
1,149,361
14,624
72,350
86,974
12,811
835,833
213,743
-
-
-
12,811
835,833
213,743
20,000
20,000
20,311
20,311
2,933
2,933
3,161
3,161
14,216
14,216
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Financial Report
3.5 Contributed equity and reserves
Accounting policies
Share capital
Stapled securities are classified as equity. Incremental costs directly attributable to the issue of stapled securities are recognised as a
deduction from equity, net of any tax effects.
Distributions and dividends
Provision is made for the amount of any distribution or dividend declared, determined or publicly recommended by the Directors on or
before the end of the period but not distributed at the balance sheet date.
Contributed Equity
Contributed equity can be analysed as follows:
2016
No. (‘000)
2016
$’000
2015
No. (‘000)
2015
$’000
Opening balance at 1 July
569,028
1,376,011
540,115
1,303,009
Issue of ordinary stapled securities during the year:
Distribution reinvestment plans
Securities issued through Employee Incentive Plans
Costs of raising capital
13,791
307
-
14,098
40,132
-
(2,131)
38,001
28,626
287
-
28,913
73,746
-
(744)
73,002
Closing balance at 30 June
583,126
1,414,012
569,028
1,376,011
Ordinary stapled securities
Ordinary stapled securities entitle the holder to participate in dividends and distributions and the proceeds on winding up of the Group in
proportion to the number of and the amounts paid on the stapled securities held.
On a show of hands every holder of ordinary stapled securities present at a meeting in person or by proxy, is entitled to one vote, and
upon a poll each unit is entitled to one vote.
Distribution Reinvestment Plan
The Distribution Reinvestment Plan was operative for the 31 December 2015 and 30 June 2016 distributions of the Group.
Capital risk management
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern, so that the Group can continue to
provide returns for Securityholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends and distributions paid to Securityholders,
return capital to Securityholders, vary the level of borrowings, issue new securities or sell assets.
During the year, the Group implemented several capital management initiatives, namely:
• The Distribution Reinvestment Plan was in operation for the 31 December 2015 distribution, raising a total of $40,132,000 for this issue
of 13,791,132 new stapled securities.
• In November 2015, Moody’s confirmed the Group’s independent credit rating of Baa2 on senior secured debt with a stable outlook.
• In December the Group entered into $250 million of new debt facilities with three new financiers. These facilities were fixed for 7 years at
an all-in weighted average interest rate of 4.46% per annum. Proceeds were initially used to repay existing bank debt.
• In addition to the fixed debt issue outlined above, the Group reorganised its interest rate swaps by terminating $265 million of existing
swaps and entering into $150 million of new interest rate swaps to keep the percentage of fixed debt within its target range of 75%-
100% at that time.
• As at 30 June 2016 the Group had total debt facilities of $1,375,000,000 of which $126,728,000 was undrawn at balance date.
The Group monitors capital by using a number of measures, such as gearing, interest cover and loan to valuation ratio. The gearing ratio is
calculated by dividing interest bearing liabilities by total assets.
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
77
3.5 Contributed equity and reserves (continued)
The Group has a target gearing range of 35% - 45%. At 30 June 2016, the gearing ratio was 42.6% (30 June 2015: 37.0%). The gearing
ratios at 30 June 2016 and 30 June 2015 were calculated as follows:
Total interest bearing liabilities
Total assets
Gearing ratio
Nature and purpose of reserves
Share-based payments reserve
2016
$’000
1,242,226
2,914,034
42.6%
2015
$’000
890,445
2,407,147
37.0%
The share-based payments reserve comprises the transfer of the portion of the fair value of the total cost recognised under the Employee
Incentive Plans in operation and is the portion of the fair value of the total cost recognised of the unissued securities, which remain
conditional on employment with the Group at the relevant vesting date. Refer to Note 3.8 for more information.
Deferred tax expense charged to equity
This reserve comprises deferred tax balances attributable to amounts that are also recognised directly in equity. Refer to Note 4.3 for
further information.
Profits reserve
The profits reserve comprises the transfer of net profit in the Company for the year (if any) and contains profits available for distribution as
dividends in future years. There were no dividends distributed from the profits reserve during the year (30 June 2015: nil).
3.6 Distributions
Period for distribution
Half year to 31 December 2015
Half year to 30 June 2016
Total distribution for FY16
Half year to 31 December 2014
Half year to 30 June 2015
Total distribution for FY15
Total
distribution
Total stapled
securities
$’000
(’000)
58,072
60,062
118,134
54,351
56,334
110,685
569,335
583,126
554,603
569,028
Distributions
per stapled
security
(cents)
10.20
10.30
20.50
9.80
9.90
19.70
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Financial Report
3.7 Earnings per stapled security (“EPS”)
Earnings per stapled security
Basic EPS is determined by dividing the profit or loss attributable to equity holders of the Group by the weighted average number of
equivalent securities outstanding during the financial year.
Profit attributable to equity holders of the Group
Weighted average number of stapled securities on issue for the year
Basic & diluted earnings per stapled security
3.8 Share-based payment arrangements
Accounting policies
Share-based payment transactions
2016
2015
224,269,000
283,004,000
576,154,817
561,755,958
38.9 cents
50.4 cents
The grant-date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount
recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that
meet the related service and non-market performance conditions at the vesting date.
Determination of fair values
Fair value is calculated based on the present value of the performance right on the date of issuance in future periods, discounted at a
market-related discount rate.
Share-based payment arrangements
At 30 June 2016, the Group has the following share-based payment arrangements:
Employee Incentive Plans FY13, FY14, FY15 and FY16
The Group has introduced employee incentive plans for all employees (including the Managing Director). The plans are designed to
43
link employees’ remuneration with the long-term goals and performance of the Group and the maximisation of wealth for its
Securityholders. The current measures for the plans, which are reviewed regularly by the Nomination, Remuneration & HR Committee
and/or the Board are described in full on pages 43-44 (in the remuneration report section of the Directors’ report).
Under each plan, each eligible employee is sent a letter of invitation to the plan which outlines the percentage of their base salary that
they can earn as performance rights. Acceptance of this invitation is the grant date for those performance rights. The percentage of the
maximum possible earnings for each employee is determined by the percentage of the measures under each plan that are achieved.
Subject to the employee remaining employed by the Group, on or about 30 September of each year the employee will receive 25% of his
or her performance rights, as they vest, by the issue of stapled securities in the Group. Securities will be issued for an equivalent amount at
an issue price per security based on the volume weighted average price of the securities over the first 20 trading days in September prior
to either:
1. The vesting date of the first tranche of each plan for plans after FY13, or
2. Each vesting date for the FY13 plan and prior.
Any director in the plan will have their grant ratified at the Group’s Annual General Meeting and following approval will be issued their
securities on the same basis as the employees. The performance rights are cumulative and, subject to some exceptions, immediately vest
in the case of a takeover of the Group or a redundancy.
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
79
3.8 Share-based payment arrangements (continued)
During the year, the first tranche of the FY15 and second tranche of the FY14 Employee Incentive Plan performance rights was determined
with the results shown on the table below:
Plan identification Plan participants
Tranche
FY15 Plan
FY15 Plan
FY14 Plan
FY14 Plan
Director
Employees
Director
Employees
1
1
2
2
Cost
$
127,097
137,656
126,226
123,568
The first tranche of the FY15 Employee Incentive Plan performance rights vested during the year.
The fair value of performance rights under the FY16 Employee Incentive Plan was determined on the grant date of those rights and then
“trued-up” at 30 June 2016 where allowed. The fair value of these rights for the director is estimated as $530,400 and for other employees
$636,514. This estimate is based on achieving 78.0% of the maximum payable under the FY16 plan. This is seen as a reasonable estimate
of fair value as it is based on the percentage achieved for comparable elements from the FY15 plan, adjusted for information available
on likely achievement as at 30 June 2016. The actual costs of performance rights cannot be determined until FY17 and the first issue of
securities under the 2016 plan will not occur until FY17.
During the year, $1,138,000 was recognised in the share based payments reserve (30 June 2015: $1,112,000). This represents the
amounts recognised under the four plans in operation and is the portion of the fair value of the total cost recognised of the unissued
securities, which remain conditional on employment with the Group at the relevant vesting date.
As of the date of the report, the number of equity shares to be granted and vested in the future cannot be determined until the rights fully
vest.
The table below outlines the value of performance rights granted during the year to 30 June 2016, where those values can be determined.
It also outlines the value of performance rights that were issued as stapled securities in the Group.
Plan
identification
Plan participants
Issue date
FY15 Plan
FY15 Plan
FY14 Plan
FY14 Plan
FY13 Plan
FY13 Plan
FY12 Plan
FY12 Plan
Director
27/11/2015
Other employees
9/10/2015
Director
9/10/2015
Other employees
9/10/2015
Director
9/10/2015
Other employees
9/10/2015
Director
9/10/2015
Other employees
9/10/2015
Value of securities
issued on
conversion of
performance
rights
Number of
securities issued
on conversion
of performance
rights
Value of
performance
rights still to vest
Percentage
of plan that
vested during
FY16
$
127,097
137,656
126,226
123,568
138,040
122,538
98,791
83,389
No.
40,736
44,122
40,457
39,605
44,244
39,276
31,664
26,727
$
N/A
N/A
N/A
N/A
138,040
122,538
-
-
%
25%
25%
25%
25%
25%
25%
25%
25%
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Financial Report
Section 4: Other notes
in this section ...
This section covers key management's compensation and related party transactions. It also examines the tax of the Company,
and, the remuneration of the Group's auditor.
4.1 Key management personnel compensation
Accounting policies
Employee benefits - Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will
have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised
as an employee benefit expense in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the periods during
which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a
reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of
the period in which the employees render the service are discounted to their present value.
Employee benefits - Termination benefits
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal,
to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result
of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the
Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be
estimated reliably. If benefits are payable more than 12 months after the reporting period, they are discounted to their present value.
Employee benefits - Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a
present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be
estimated reliably.
Compensation
The key management personnel compensation comprised:
Short-term employee benefits
Post-employment benefits
Share-based payments
2016
$
2015
$
3,840,553
3,720,226
154,035
946,193
126,015
914,950
4,940,781
4,761,191
Individual directors and executive’s compensation disclosures
Information regarding individual director’s and executive’s compensation and equity instruments disclosure as required by Corporations
Regulation 2M.3.03 is provided in the remuneration report section of the directors’ report.
Apart from the details disclosed in this note, no Director has entered into a material contract with the Group since the end of the previous
financial year and there were no material contracts involving Directors’ interests existing at year-end.
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
81
4.1 Key management personnel compensation (continued)
Movements in securities
The movement in the number of ordinary stapled securities in the Group held, directly, indirectly or beneficially, by each key management
person, including their related parties, is as follows:
2016
Securityholder
G. Jackson
N. Sasse
E. de Klerk
T. Collyer
F. Marais
A. Hockly
D. Andrews
M. Green
G. Tomlinson
M. Brenner
Opening
securities
1 July
Securities
granted as
compensation
Acquired
securities
Disposed
securities
Closing
securities
30 June
No.
139,807
1,249,950
1,308,721
468,511
129,896
68,434
87,990
86,525
57,323
7,000
No.
-
-
-
157,101
-
35,482
32,861
32,399
-
-
No.
No.
No.
4,900
43,812
45,871
-
4,555
3,642
-
-
2,009
245
-
-
-
-
-
-
-
(86,525)
-
-
144,707
1,293,762
1,354,592
625,612
134,451
107,558
120,851
32,399
59,332
7,245
During the year to 30 June 2016, a total of 257,843 stapled securities with a total value of $804,465 were issued to key management
personnel upon vesting of performance rights under Employee Incentive Plans.
2015
Securityholder
G. Jackson
L. Shaddock (i)
N. Sasse
E. de Klerk
T. Collyer
F. Marais
A. Hockly
D. Andrews
M. Green
G. Tomlinson
M. Brenner
Opening
securities
1 July
Securities
granted as
compensation
No.
No.
139,807
550,001
1,164,881
1,219,975
315,165
81,800
48,346
56,394
55,449
55,337
-
-
-
-
-
153,346
-
34,236
31,596
31,076
-
-
Acquired
securities
Disposed
securities
Closing
securities
30 June
No.
-
-
85,069
88,746
-
48,096
5,852
-
-
1,986
7,000
No.
No.
-
-
-
-
-
-
(20,000)
-
-
-
-
139,807
n/a
1,249,950
1,308,721
468,511
129,896
68,434
87,990
86,525
57,323
7,000
(i) Lyn Shaddock retired as director on 26 November 2014.
During the year to 30 June 2015, a total of 250,254 stapled securities with a total value of $693,200 were issued to key management
personnel upon vesting of performance rights under Employee Incentive Plans.
Key management personnel loan disclosures
The Group has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their personally
related entities at any time during the reporting period.
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Financial Report
4.2 Related party transactions
Responsible Entity
The current Responsible Entity of Growthpoint Properties Australia Trust is Growthpoint Properties Australia Limited. It has acted in that
role since its appointment on 5 August 2009.
Responsible Entity’s/manager’s fees and other transactions
Under the current stapled structure, the management of the Trust is internalised and no Responsible Entity or management fees are paid
to external parties. No performance fee or other fees were paid or payable during the year.
Director transactions
A number of Directors, or their related parties, hold positions in other entities that result in them having control or significant influence over
the financial or operating policies of those entities.
One of these entities transacted with the Group in the reporting period. The terms and conditions of the transaction were no more
favourable than those available, or which might reasonably be expected to be available, on similar transactions with non-related parties on
an arm’s length basis.
The aggregate value of transactions and outstanding balances relating to directors and entities over which they have significant control or
significant influence were as follows:
Director
G. Jackson (i)
Transaction
2016
$
2015
$
Valuation
33,142
13,200
(i) The Group used the valuation services of m3property, a company that Mr Jackson is a director of, to independently value 6 properties (FY15: 3). Amounts were
billed based on normal market rates for such services and were due and payable under normal payment terms and Mr Jackson was not directly involved in the Group’s
engagement of m3property. The expense of valuation services provided by m3property represented 9% of the total valuation expense for the year (2015: 6%)
At 30 June 2016, $13,642 was payable for valuation services (30 June 2015: nil).
Transactions with significant shareholders
There were no transactions with significant shareholders during the year (FY15: nil).
There were no balances outstanding from transactions with significant shareholders as at 30 June 2016 (30 June 2015: nil).
4.3 Taxation
Accounting policies
Income Tax
Under current income tax legislation, no income tax is payable by the Trust provided taxable income is fully distributed to Securityholders
or the Securityholders become presently entitled to all the taxable income.
For the Company, income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except
to the extent that they relate to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted at reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial
recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit
or loss, and taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates (and laws)
that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses. Deferred tax assets are reviewed each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Growthpoint Properties Australia Annual Report 2016 4.3 Taxation (continued)
Income tax expense
The tables below relate to income tax for the Company only.
Income tax expense:
Current tax expense
Deferred tax benefit
Over provision from prior year
Numerical reconciliation of income tax expense to prima facie tax payable:
Profit before income tax expense
Income tax expense using the Company’s domestic rate of 30%
Increase in income tax due to:
Non-deductible expenses
Prior year losses now recognised
Change in unrecognised temporary differences
Over provision of prior year income tax
Notes to the Financial Statements
83
2016
$’000
577
(159)
-
418
2016
$’000
243
73
2015
$’000
560
(192)
4
372
2015
$’000
202
61
345
307
-
-
-
-
-
4
418
372
The applicable weighted average effective tax rate for the Company is as follows:
172%
184%
As at 30 June 2016, the Company had franking credits of $1,301,001 available to it (30 June 2015: $737,000).
Movement in temporary differences during the year
Non-current assets:
Equity raising costs
Total
Current liabilities:
Accrued expenses
Employee benefits
Prepayments
Total
Total movement in temporary differences
Opening
balance
1 July 2015
Charged to
profit and loss
Charged to
equity
Balance
30 June 2016
$’000
$’000
$’000
$’000
60
60
53
349
37
439
499
(42)
(42)
93
122
(14)
201
159
51
51
-
-
-
-
51
69
69
146
471
23
640
709
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Financial Report
4.3 Taxation (continued)
Non-current assets:
Equity raising costs
Total
Current liabilities:
Accrued expenses
Employee benefits
Prepayments
Total
Total movement in temporary differences
4.4 Contingent liabilities
Opening
balance
1 July 2014
Charged to
profit and loss
Charged to
equity
Balance
30 June 2015
$’000
$’000
$’000
$’000
87
87
137
23
50
210
297
(37)
(37)
(84)
326
(13)
229
192
10
10
-
-
-
-
10
60
60
53
349
37
439
499
The Group has no contingent liabilities as at the date of this report (30 June 2015: nil).
4.5 Commitments
For details of commitments on properties to be expanded see Note 2.2.
The Group has no other significant capital, lease or remuneration commitments in existence at reporting date, which have not been
recognised as liabilities in these financial statements.
4.6 Controlled entities
Accounting policies
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Where control of an entity is obtained during a period, its results are included in the
consolidated income statement from the date on which control commences. Where control of an entity ceases during a period its results
are included only for that part of the period during which control existed. The accounting policies of subsidiaries have been changed when
necessary to align them with the policies adopted by the Group.
Transaction eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expense arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated
against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
85
4.6 Controlled entities (continued)
Controlled entities
The controlled entities of the Group listed below were all domiciled in Australia and were wholly owned during the current year and prior
year, unless otherwise stated:
Wholesale Industrial Property Fund
Derrimut Property Trust
19 Southern Court Property Trust
Dandenong South Property Trust
Kilsyth 1 Property Trust
Kilsyth 2 Property Trust
Queensland Property Trust
New South Wales Property Trust
Coolaroo Property Trust
Broadmeadows Leasehold Trust
Atlantic Drive Property Trust
Nundah Property Trust
Rabinov Property Trust
Rabinov Property Trust No. 2
Rabinov Property Trust No. 3
Lot S5 Property Trust
Ann Street Property Trust
CB Property Trust
20 Southern Court Property Trust
New South Wales 2 Property Trust
Ravenhall Property Trust
Laverton 1 Property Trust
Richmond Car Park Trust
Mort Street Property Trust
Drake Boulevard Property Trust
Erskine Park Pharmaceutical Trust
Preston 2 Property Trust
Goulburn Property Trust
Erskine Park Truck Trust
Erskine Park Warehouse Trust
Growthpoint Properties Australia Limited
William Angliss Drive Trust
Growthpoint Nominees (Aust) Pty Limited
Charles Street Property Trust
Growthpoint Nominees (Aust) 2 Pty Limited
211 Wellington Road Property Trust
Eagle Farm Property Trust
1500 Ferntree Gully Road Property Trust
Yatala 1 Property Trust
Yatala 2 Property Trust
Yatala 3 Property Trust
South Brisbane 1 Property Trust
South Brisbane 2 Property Trust
SW1 Car Park Property Trust
World Park Property Trust
Building 2 Richmond Property Trust
(i) Indicates entities established during FY16.
6 Kingston Park Court Property Trust
3 Millennium Court Property Trust
Pope Street Property Trust
Kembla Grange Property Trust (i)
Building C, 211 Wellington Road Trust (i)
255 London Circuit Trust (i)
75 Dorcas Street Trust (i)
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86
Financial Report
4.7 Parent entity disclosures
As at, and throughout, the financial year ended 30 June 2016 the parent of the Group was Growthpoint Properties Australia Trust.
Result of the parent entity
Profit for the period
Other comprehensive expense
Total comprehensive income for the period
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising:
Contributed equity
Retained profits/ (losses)
Total equity
2016
$’000
2015
$’000
224,444
(118,134)
106,310
283,175
(110,685)
172,490
245,874
45,750
2,897,018
2,389,590
136,967
1,394,546
1,502,472
119,728
1,030,173
1,359,417
1,364,011
1,327,265
138,461
32,152
1,502,472
1,359,417
The contractual obligations of the parent entity are identical to those disclosed on Note 2.2
4.8 Remuneration of auditors
During the year to 30 June the following fees were paid or payable for services provided by the auditor of the Group:
Audit services - KPMG
Audit and review of financial statements
Other regulatory audit services
Non-audit services - KPMG
Other assurance and due diligence services
Total
2016
$
2015
$
154,324
58,276
131,850
55,150
86,943
299,543
-
187,000
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
87
4.9 Subsequent events
Takeover offer for GPT Metro Office Fund
On 1 July 2016, the Group announced a $321.0 million off-market takeover offer (“the offer”) for the ASX listed GPT Metro Office Fund
(“GMF”). On the same date the Group acquired 16.7 million units in GMF (12.98% of the units) for $40.9 million.
The offer of $1.25 cash and 0.3968 Growthpoint securities for each GMF unit held was valued at $2.50 per GMF unit on 1 July 2016.
Alternatively, GMF unitholders could accept $2.50 cash per unit as consideration for their GMF units.
As at the date of this report, Growthpoint had received acceptances of 33,777,738 into the offer, and a further 9,912,991 units into the
institutional acceptance facility, which are non-binding acceptances up until the point that Growthpoint announces the offer unconditional.
Combining the stake owned by Growthpoint and the acceptances in both the offer and the institutional acceptance facility, the total is
60,377,556 million units, or 46.97% of the total units. The offer has not been announced as unconditional as of the date of this report but
the takeover is expected to complete by 30 June 2017.
The impact of the takeover on Growthpoint’s results for the year to 30 June 2017 will depend on two key factors; the percentage of the
units Growthpoint owns, and the timing of the close of the takeover offer. These factors cannot be reliably estimated at this time. However,
the Group did release pro forma guidance with its takeover offer on 1 July 2016, stating that if the transaction was completed on that date
and 100% of units were owned then net profit after tax would increase by $16.8 million to $149.7 million, a 12.6% increase, for the year to
30 June 2017. 44.4 million securities would be issued in this scenario and earnings per security for the year would increase by 1.09 cents
to 23.37 cents, a 4.9% increase.
14
Updated guidance will be provided to the market once the takeover offer has concluded including other capital management
initiatives which may be pursued (refer to pages 14-15 for more details).
Assets held for sale
Four industrial assets that were held for sale at 30 June 2016 have now been withdrawn from the market and will be reclassified as
investment property. A contract to sell the asset at 670 Macarthur Avenue, Pinkenba, QLD was entered into during June 2016 and that
property is expected to settle on or before 12 September 2016.
Distribution Reinvestment Plan
On 18 July 2016, the Group announced that the issue price for securities to be issued under the DRP for the distribution to be paid on or
around 31 August 2016 will be $3.10 per stapled security.
Approximately 74.5% of Growthpoint’s distribution payable on or around 31 August 2016 will be issued new stapled securities under the
DRP raising, after allowing for withholding tax, $42.2 million for the issue of 13.6 million new stapled securities. Total stapled securities on
issue following the DRP will be approximately 596.7 million.
Leasing
On 5 August 2016, the Group entered into two new leases with Country Road Group Pty Limited, guaranteed by David Jones Pty Limited,
over Buildings 1 and 2, 572-576 Swan Street, Richmond, Victoria from, respectively, 1 July 2017 and 1 April 2018 until 30 June 2032.
The leases have a weighted average lease term of 14.5 years (from commencement) and comprise 23,156 square metres of office space.
These buildings are currently leased to GE Capital Finance Australasia until, respectively, March and February 2018. GE has agreed
to surrender its lease of Building 1 just prior to the Country Road Group commencement date. The new leases extend the WALE of
Growthpoint’s property portfolio from 6.2 years to 6.9 years at 30 June 2016 (on a pro forma basis).
Other than noted above, there has not arisen a transaction or event of an unusual nature likely to affect significantly the operations of the
business, the results of those operations or the state of affairs of the entity in future financial years from the end of the interim period to the
date of this report.
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88
Financial Report
Directors’ declaration
In the opinion of the Directors:
(a) the attached Financial Statements and notes, and the
Remuneration Report in the Directors' Report set out on pages
39 to 47 are in accordance with the Corporations Act 2001
(Cth), including:
(i) complying with Australia Accounting Standards (including
the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(ii) giving a true and fair view of the Group’s financial position
as at 30 June 2016 and of its performance for the financial
year ended on that date; and
(b) the financial report also complies with International Financial
Reporting Standards as disclosed in Note 1; and
(c) there are reasonable grounds to believe that the Group will
be able to pay its debts as and when they become due and
payable.
The Directors have been given the declarations required by Section
295A of the Corporations Act 2001 (Cth) from the Managing
Director and Chief Financial Officer for the financial year ended 30
June 2016.
This declaration is made in accordance with a resolution of the
Directors of the Group.
Timothy Collyer
Managing Director
Growthpoint Properties Australia Limited
Melbourne, 22 August 2016
Growthpoint Properties Australia Annual Report 2016 Notes to the Financial Statements
89
Auditor’s independence declaration
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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Growthpoint Properties Australia Limited, being the Responsible Entity of
Growthpoint Australia Trust
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2016 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
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KPMG
Dean Waters
Partner
Melbourne
22 August 2016
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KPMG, an Australian partnership
and a member firm of the KPMG network
of independent member firms affiliated with
KPMG International, a Swiss cooperative.
Liability limited by a scheme approved under
Professional Standards Legislation.
90
Financial Report
Independent Auditor’s report
Independent auditor’s report to the Stapled Security holders of Growthpoint
Properties Australia Limited and Growthpoint Properties Australia Trust
Report on the financial report
We have audited the accompanying financial report of Growthpoint Properties Australia (the
Group), which comprises the consolidated statement of financial position as at 30 June 2016,
consolidated statement of profit and loss and other comprehensive income, consolidated statement
of changes in equity and statement of cash flows for the year ended on that date, notes 1 to 4
comprising a summary of significant accounting policies and other explanatory information and
the directors’ declaration of the Group comprising Growthpoint Properties Australia Limited (the
Company), Growthpoint Properties Trust (the Trust), and the entities it controlled at the year’s end
or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of Growthpoint Properties Australia Limited, being the Responsible Entity of
Growthpoint Properties Australia Trust, 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 is free from material misstatement whether due
to fraud or error. In note 1, the directors also state, in accordance with Australian Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements of the
Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that
we comply with relevant ethical requirements relating to audit engagements and plan and perform
the audit to obtain reasonable assurance whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial report, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation of the financial report that gives a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents
fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true
and fair view which is consistent with our understanding of the Group’s financial position and of
its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Profession Standards Legislation.
Growthpoint Properties Australia Annual Report 2016
Independent Auditor’s report (continued)
Notes to the Financial Statements
91
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of the Group is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as
at 30 June 2016 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b)
the financial report also complies with International Financial Reporting Standards as
disclosed in note 1.
Report on the remuneration report
We have audited the Remuneration Report included in pages 39 to 47 of the directors’ report for
the year ended 30 June 2016. The directors of the Group 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 auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Growthpoint Properties Australia for the year ended 30
June 2016, complies with Section 300A of the Corporations Act 2001.
KPMG
Dean Waters
Partner
Melbourne
22 August 2016
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92
Additional Information
About Growthpoint
South Africa46
Growthpoint Properties Limited of
South Africa (”GRT”) owns 65.5%
of the securities of Growthpoint
(at 30 June 2016) and is its major
Securityholder.
GRT is the largest primary
listed South African REIT
Other information about GRT
• The largest primary listed South African
REIT
• Included in the JSE Top 40 Index
• Top ten constituent of FTSE EPRA /
NAREIT Emerging Index
• Included in the JSE Socially Responsible
R24,77
Investment (SRI) Index
• Underpinned by high-quality, physical
property assets, diversified across
sectors (Retail, Office and Industrial)
• Consistent record of growth and creating
value for investors with 7.0% compound
average annual growth in distributions
over the past 5 years
• Sustainable quality of earnings that
can be projected with a high degree of
accuracy
Growth in tangible assets and
market capitalisation (Rbn)
As at 30 June
R71.5
FY16
R103,84
R71,70
FY15
R81,98
R56,50
FY14
R62,80
R49,92
R54,14
FY13
FY12
FY11
• Well capitalised and conservatively
R40,09
geared
• Good corporate governance with
transparent reporting
• Proven management track record
• Recipient of multiple sustainability,
governance and reporting awards
• Baa2 global scale rating from Moody’s
Growthpoint represents:
• 26.7% of GRT’s gross property assets
• 27.5% of GRT’s net property income
• 14.8% of GRT’s total distributable
income
R47,13
R29.15
Tangible Assets
Market Cap
Growth in distributions
per share (¢)
FY15
FY14
FY13
FY12
FY11
R173,4
R161,3
R149,0
R139,0
R131,0
Key Facts
Listing
GRT is listed on the Johannesburg Stock Exchange (JSE)
Ranking on the JSE
32nd by market capitalisation as of 31 December 2015
Closing exchange rate used
AUD:ZAR=11.43
Market capitalisation
R63,5B / AUD5.6B
Gross assets
Net assets
R110,0B / AUD9.6B
R73,8B / AUD6.5B
Gearing (SA only)
30.5%
Distributable Income
R2,4B / AUD210.0m
ICR (SA only)
3.7 times
No. of employees (SA only)
700
Properties
474 properties in South Africa, including 50% ownership of
the prestigious V&A Waterfront
46. All information supplied by GRT (figures as at 31
December 2015).
Growthpoint Properties Australia Annual Report 2016 Additional Information
93
No. of
Securities
% of
Securities
381,773,404
65.47
Growthpoint Securityholders*
As at 30 June 2016
Securityholder Information
Top 20 Legal Securityholders
as at 30 June 2016
Rank Name
Growthpoint Properties Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Emira Property Fund
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
Sharon Investments Pty Ltd
Rabinov Holdings Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 2
RBC Investor Services Australia Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
BNP Paribas Noms (NZ) Ltd
Rabinov Holdings Pty Ltd
17. Mr Max Karl Koep
18.
19.
ABN Amro Clearing Sydney Nominees Pty Ltd
Sandhurst Trustees Ltd
20. Mr Timothy James Collyer
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
40,085,022
29,717,682
27,225,813
24,769,669
12,993,174
8,587,855
2,252,000
2,092,628
1,846,688
1,661,160
1,440,819
1,439,043
811,512
747,362
686,710
656,510
637,702
625,612
6.87
5.10
4.67
4.25
2.23
1.47
0.52
0.39
0.36
0.32
0.28
0.25
0.25
0.14
0.13
0.12
0.11
0.11
0.11
Brispot Nominees Pty Ltd
3,060,176
Total Top 20 legal holders of fully paid stapled securities
543,110,541
93.14
Total Remaining Holders Balance
40,015,203
6.86
Distribution of Securityholders
as at 30 June 2016
Range
Total holders
Securities % of Issued Capital
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Rounding
Total
823
1,361
565
718
78
383,162
3,822,036
4,167,895
18,754,243
555,998,408
0.07
0.66
0.71
3.22
95.35
-0.01
3,545
583,125,744
100.00
As at 30 June 2016, there were 583,125,744 fully-paid stapled securities held by 3,545
individual Securityholders.
GRT 65.5%
Institutional 22.5%
Retail 11.3%
Directors and employees 0.7%
Location of Growthpoint
Securityholders*
As at 30 June 2016
South Africa 74.0%
Australia 14.0%
Rest of World 12.0%
* Figures are approximate and based on
beneficial ownership.
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Additional Information
2016
Securityholder
Calendar*
22 August
• Results for the year ended 30 June 2016
announced to ASX
31 August
• Distribution paid for the half year ended
30 June 2016
• Annual Tax Statement for year ended
30 June 2016 mailed
• FY16 Annual Report sent to
Securityholders
24 November
• Annual General Meeting (webcast
available for Securityholders unable to
attend)
* Dates indicative and subject to change by
the Board.
Growthpoint Properties Australia Annual Report 2016 Additional Information
95
Growthpoint structure ............................... 5
Property market
Interactive index
Combined interactive index for 2016
Annual Report and 2016 Sustainability
Report.
Page numbers preceded by 'SR' refer to
the 2016 Sustainability Report, all other
page numbers refer to the 2016 Annual
Report.
About report ............................................. 4
Acquisitions
Takeover offer for GMF ..................10-11
Office .................................................. 25
Industrial ............................................. 33
Assets held for sale ................................ 66
Auditors
Non-audit services .............................. 49
Remuneration .................................... 86
Independence declaration .................. 89
Report ..........................................90-91
Function ........................................ SR23
Business model ........................................ 8
Board ...................................... 39,SR30-31
Expertise matrix ............................. SR30
CDP ....................................................... 36
Challenges and uncertainties
Approach to… .......................... SR28-29
Climate change ................................. SR26
Contractual obligations
Growthpoint SA ...................................... 92
Goals .................................................12-13
Governance .................................. SR20-43
GMF takeover ....................................10-11
GRESB ................................................... 36
GRI ......................................................... 37
Incentives (unamortised) to tenants ........ 67
Industrial portfolio ..............................30-33
expiry profile ....................................... 31
five year performance ......................... 30
geographic diversity ............................ 31
FY16 acquisitions .............................. 33
net property income ............................ 31
Interest rate hedging .......................... 15,17
Internal audit ...................................... SR23
Introduction ...........................................6-7
Investment philosophy .............................. 5
Key management personnel
Remuneration .................................... 80
Securityholdings ................................ 81
Long-term incentive (LTI)
Performance criteria ............................ 43
FY16 achievement .............................. 43
Performance right issued in FY16 ....... 44
Performance rights outstanding .......... 45
Hedging by employees ....................... 44
Management ..................................... SR32
structure ........................................ SR33
securityholding.................................... 81
Market capitalisation ................................. 7
Outstanding ........................................ 64
Mission ..................................................... 5
Corporate Governance Statement SR35-43
NABERS ratings ................................ SR11
Debt .............................................14-16,69
Costs ............................................. 15,70
Facilities .............................................. 69
Undrawn ............................................. 75
Derivatives/hedging ...........................73-75
Directors ................................................. 39
independence criteria .................... SR40
meeting attendance .................. 39,SR40
securityholding.................................... 81
Distributable income ............................ 7,17
NTA movement ....................................... 14
Operating expenses ............................... 17
Objectives .........................................12-13
Office portfolio ...................................22-29
expiry profile ....................................... 23
five year performance ......................... 22
geographic diversity ............................ 23
Leasing ............................................ 9,23
net property income ............................ 23
Stack plans ....................................26-28
Distributions ............................................. 7
Outsourcing .................................. SR33-34
Diversity objectives ............................ SR38
Economic
Overview ....................................... SR29
Economic impact ................................. SR4
Employees
Engagement survey ....................... SR18
Diversity ........................................ SR18
Health and safety ........................... SR19
Management structure ................... SR33
Environmental sustainability .......... SR10-16
Equity
Issued ................................................. 76
Gearing .............................................14-16
Green Star ratings ............................. SR11
Performance over 5 years ....................... 19
Distributions ........................................ 19
Financial ............................................. 19
Industrial portfolio ............................... 30
Office portfolio .................................... 22
Portfolio .............................................. 21
Security price ...................................... 19
Portfolio
Change over 5 years .......................... 21
Full list of properties .............24,32,61-62
Lease expiry profile ............................. 21
Overview........................................20-21
Top ten tenants ................................... 20
Diversification...................................... 20
Tenant overview .................................. 35
Overview................................... SR28-29
Related party transactions ...................... 82
Remuneration report ..........................39-47
FY16 remuneration ............................. 46
Long-term incentive (LTI) ..................... 43
Nomination, Remuneration
& HR Committee................................. 40
Performance reviews .......................... 45
Remuneration tables FY15 & FY16 ..... 46
Securities issued FY16 ........................ 44
Performance rights ............................. 44
Securityholder wealth.......................... 39
Short-term incentive (STI) .................... 42
Returns
Return on equity ................................. 19
Total Securityholder return
(1 & 5 years).......................................6-7
Comparative total returns ...................... 6
Risk .............................................. SR22-25
Securityholders
Management structure ................... SR23
Distribution of ..................................... 93
Legal holders ..................................... 93
Calendar 2016 .................................... 94
Segment reporting .................................. 59
Short-term incentive (STI)
Performance criteria ............................ 42
FY16 achievement ......................... 42,46
Payments ......................................46-47
Social sustainability ............... SR8,SR18-19
Strategy .................................................... 5
Sustainability ......................................... SR
Framework ...................................... SR6
Overview....................................... SR3-4
Objectives summary ..................... SR7-9
Environmental ........................... SR10-17
Social ....................................... SR18-19
Governance .............................. SR20-43
Assurance statement – GHG,
Energy & water ......................... SR14-15
Climate change risk ....................... SR26
Stakeholder engagement /
Due diligence process.................... SR21
GRI Index ................................. SR44-48
Summary of annual report ........................ 3
SWOT Analysis on Growthpoint ......... SR27
Valuation
Tax
Income tax expense.......................83-84
All tax paid ....................................... SR8
More detailed information is available
on our website growthpoint.com.
au including detailed frequently asked
questions at
growthpoint.com.au/investor-centre/
Securityholder-information/faqs
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Additional Information
Acknowledgement
of traditional custodians
Growthpoint acknowledges the traditional custodians
of the land on which its properties are situated and
pays its respects to their Elders, past and present, and
extends that respect to other indigenous Australians.
Traditional custodians
“Traditional custodian” is a term used to describe the original
Aboriginal or Torres Strait Islander peoples who inhabited an
area.
Traditional custodians today are descendants of these original
inhabitants and have continuing spiritual, cultural, political
and often physical connection with particular land where their
ancestors lived.
Why is Growthpoint making an
acknowledgement?
Growthpoint respects all people regardless of their ethnic,
cultural or linguistic background and respects the unique and
unbroken connection of Australia’s first peoples to its land.
Our acknowledgement is a symbol of this respect.
Growthpoint Properties Australia Annual Report 2016 Glossary
Fold out the back cover to find our
full glossary which can be viewed
while reading this report.
Glossary of phrases used in this report
Baa2
a debt rating issued by Moody’s equivalent to BBB issued by S&P. The
Moody’s system runs from highest to lowest Aaa Aa A Baa Ba B Caa Ca
C with the numbers 1-3 denominating modifiers of this rating i.e. Baa2 is
higher than Baa3 or Ba1.
Contributed equity
capital contributed directly by Securityholders through an equity capital
raising
directors’ valuation
a property valuation undertaken by Growthpoint’s Directors (i.e. it is
not an independent valuation) on the basis of a recommendation from
Growthpoint’s management. Typically, this process will be undertaken by
comparing recent independent valuations of similar Growthpoint property
hedged and hedging
in this report, hedging solely refers to reducing interest rate risk by
swapping floating debt for fixed debt
independent valuation
or external valuation
a property valuation undertaken by a qualified valuer in accordance with
Growthpoint’s valuation policy who is independent from the Group (i.e. not
a director, employee or related party)
internalised
management
long-term
medium-term
short-term
management is undertaken by an internal party rather than an external one.
For Growthpoint, this means that its owners own both the trust which owns
individual properties assets (the Trust) and the manager of that trust (the
Company)
at least 3 years but generally more than 7 years
typically, 1-5 years but can be up to 7 years
typically, up to 12 months
Glossary of terms
$ or dollar
refers to Australian currency unless otherwise indicated
AFSL
A-REIT
ASX
B
Board
Cap rate or
capitalisation rate
CBD
CBRE
Company or
responsible entity
cps
distributions
Australian Financial Services Licence
Australian Real Estate Investment Trust
Australian Securities Exchange
billion
the board of directors of the Company
refers to the market income produced by an asset divided by its value or cost
central business district
an international professional services and investment management firm formerly
known as CB Richard Ellis
Growthpoint Properties Australia Limited
cents per security
the amount Securityholders receive by way of income in their hand (before any tax
or brokerage costs). It is similar to a dividend by a company but it is payable by
the Trust
distributable income refer to explanation at the top of page 17 of the 2016 Annual Report
ESG
fund-through
environmental, social and corporate governance matters
a mechanism under which an entity (in this report typically Growthpoint) funds
development as completion of works occur
FY11, FY12, FY13,
FY14, FY15 and FY16
the 12 months ended on 30 June in the year listed i.e. “FY16” means the 12
months ended 30 June 2016
FY17, FY18, FY19,
FY20 and FY21
the 12 months ending 30 June in the year listed i.e. “FY17” means the 12 months
ending 30 June 2017
Gearing
GHG
GOZ
Green Star
GRESB
gross assets
interest bearing liabilities divided by total assets
greenhouse gas
the ASX trading code that Growthpoint trades under
an internationally recognised sustainability rating system issued by the Green
Building Council in Australia
Global Real Estate Sustainability Benchmark
the total value of assets before any reduction for debt secured against these
assets
Growthpoint
or the Group
Growthpoint Properties Australia comprising the Company, the Trust and their
controlled entities
Growthpoint SA
or GRT
Growthpoint Properties Limited of South Africa (Growthpoint’s majority
Securityholder) which trades on the JSE under the code “GRT”
IFRS
JLL
JSE
LTI
m
MER
NABERS
NGER
NPI
NTA
International Financial Reporting Standards
the Australian arm of Jones Lang LaSalle, an international professional services
and investment management firm
Johannesburg Stock Exchange
long term incentive
million
management expense ratio comprising all the Group’s costs other than interest
divided by the average gross assets for the year
National Australian Built Environment Rating System (a national system for
measuring environmental performance of buildings)
National Greenhouse and Energy Reporting
net property income
net tangible assets
Operational Control
operational control is defined as having the ability to introduce and implement
operating, health & safety or environmental policies and measures for a facility.
This is based on the approach for defining controlling corporations, as outlined in
NGER legislative framework.
PwC
the professional services firm previously known as PriceWaterhouseCoopers
Return on equity or
ROE
calculated as the percentage change in NTA plus the distribution for a given
period divided by the opening NTA
S&P
Standard & Poor’s
Securityholder
an owner of Growthpoint securities
sqm
STI
sustainability
square metres
short term incentive
a process for ensuring activities are able to be continued and assets and
resources are able to endure for a medium-long-term
TFR
total fixed remuneration
Total Securityholder
return
TPD
Trust
WARR
WALE
change in security price plus distributions paid or payable for the relevant period
total and permanent disability
Growthpoint Properties Australia Trust
weighted average rent review
weighted average lease expiry
Company directory
Growthpoint Properties Australia
Growthpoint Properties Australia Limited
ABN 33 124 093 901; AFSL No 316409
Growthpoint Properties Australia Trust
ARSN 120 121 002
Level 22, 357 Collins Street,
Melbourne VIC 3000 Australia
Phone: (03) 8681 2900
Fax: (03) 8681 2910
www.growthpoint.com.au
Investor Services Line: 1800 260 453
info@growthpoint.com.au
Share registry
Computershare Investor Services
Yarra Falls, 452 Johnston Street,
Abbotsford VIC 3067 Australia
Phone (within Australia): 1300 850 505
Phone (outside Australia): +61 3 9415 4000
Fax: +61 3 9473 2500
www.computershare.com
Auditor
KPMG
147 Collins Street,
Melbourne VIC 3000 Australia
Environmentally Responsible Printing
This report is printed by an ISO 14001 certified
facility employing systems to identify and
minimise areas of impact to the environment.
The report is printed on Titan Satin which is
carbon neutral and produced in an ISO 14001
accredited facility ensuring all processes
involved in production are of the highest
environmental standards. FSC Mixed Sources
Chain of Custody (CoC) certification ensures
fibre is sourced from certified plantations that
promote environmentally appropriate, socially
beneficial, and economically viable management
of the world's forests.
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2016 Annual Report
Growthpoint Properties Australia
Level 22, 357 Collins Street, Melbourne VIC Australia
Investor Services Line: 1800 260 453
www.growthpoint.com.au