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2017 Annual Report
For the year ended 30 June 2017
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
What’s inside
Directors’ Report
Business Overview
FY17 Highlights
Chairman’s report
Managing Director’s report
FY17 Overview
Transparent business model
Objectives and goals
Leasing success
Development opportunity
Sustainability review
Financial Management
Strategic execution
Financial management
Funds From Operation
Five-year performance summary
Portfolio Review
Property portfolio overview
Office portfolio review
Industrial portfolio review
Governance
Board of Directors
Executive management
Remuneration report
Additional information
Financial Report
Contents
Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
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10
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38
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54
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63
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98
Detailed Portfolio information
Additional Information
Glossary
104
106
inside back cover
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 2017. It is available online at www.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 21 August 2017 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 21 August 2017 in accordance with a resolution of the Directors of Growthpoint
Properties Australia Limited.
The Directors’ Report comprises pages 4 to 55 of this report and the 2017 Sustainability Report, except where referenced otherwise.
Growthpoint Properties Australia / 2
2017 Annual Report
Our goal is to operate sustainably and
provide investors with growing income
returns and long-term capital appreciation
from properties we own and manage
Timothy Collyer
Managing Director
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Funds From Operations (FFO)
$166.1m
25.5cps, an increase of 11.4% on FY16
Securityholder return over 5 years1
16.4% p.a.
2.2% p.a. above S&P/ASX 300 Accumulation Index1
Return on Equity (ROE) for FY17
18.6%
1. UBS Investment Research: Annual compound returns.
Directors’ Report
FY17 Highlights
Growth in
assets, profit and
Securityholder
returns
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Distributions
per stapled security
21.5¢
an increase of 4.9% on FY16
Earnings per stapled security
42.7¢
an increase of 12% on FY16
Portfolio occupancy
99%
Consistent with 30 June 2016
Property portfolio value
$3.3b
15.9% above 30 June 2016
New assets purchased/developed
$469.9m
at an average yield of 7.0%
Strategic asset sales of
$259.1m
at an average yield of 7.9%
5
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Chairman’s Report
Building long-term
sustainable returns for
investors
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FY17 was a transformational
year for Growthpoint Properties
Australia.
During the year, the Group set targets
to achieve a better diversified portfolio
of assets, with a greater concentration
in the office segment and New South
Wales which we believe are positioned to
generate superior and sustainable returns
for Securityholders over the medium term.
These targets were successfully achieved
with the portfolio reweighting materially
into the office sector (56% to 66%) and the
higher growth state of NSW (20% to 26%)
after the successful takeover of the GPT
Metro Office Fund (GMF). This transaction
was funded via additional equity issuance
as well as strategic asset sales in properties
that no longer met the groups risk and
return hurdles, or where we believed values
had been maximised. Pleasingly, additional
debt required to initially fund the transaction
was paid down over the second half of the
financial year, with gearing closing FY17 at
39.0% (43.1% at 30 June 2016).
Growthpoint also entered the US Private
Placement (USPP) market for the first time
raising AUD208 million in new debt funding.
Proceeds from the transaction were used
to repay shorter term bank debt falling
due later this calendar year. The USPP
transaction also saw the weighted average
debt maturity of the Group extend out to
5 years at 30 June 2017, our reliance on
Australian bank debt fall to 55% and the
level of fixed/hedged debt of the Group
increase to 75%.
The Board has also been bolstered by the
appointment of Josephine Sukkar AM as an
additional independent director (announced
on 25 July 2017). Josephine brings to the
Board significant development expertise
with over 27 years experience in Australia’s
construction industry and I look forward
to her commencing on 1 October 2017.
This appointment takes Growthpoint’s
independent directors above 60% and
increases female representation on the
board to 25%.
Pleasingly, Growthpoint continued to
outperform the benchmark S&P/ASX300
A-REIT Accumulation Index by an
impressive 11.9% over FY17 delivering a
total return to Securityholders of 6.3%1.
The Group also continues to outperform
over three and five year periods, delivering
average returns of 15.9% per annum
and 16.4% per annum, respectively,
outperforming the S&P/ASX300 A-REIT
Accumulation Index by 3.7% per annum
and 2.2% per annum, respectively1.
FY17 has been a busy year with several
successes. FY18 will see us continue to
focus on creating value and sustainable
earnings for our Securityholders.
On behalf of the Board, I would like to
thank all our Securityholders for their
continued support of Growthpoint. I would
also like to thank our staff, tenants, third
party suppliers, debt providers, directors
and other stakeholders for their contribution
to our success.
Geoff Tomlinson
Independent Chairman & Director
Growthpoint Properties Australia Limited
Geoffrey Tomlinson
Independent Chairman
& Director
Total Securityholder return
comparison over 1, 3 and
5 years (%)
15.9
12.2
16.4
14.2
6.3
-5.6
1 year
3 years
5 years
Growthpoint1
S&P/ASX 300 A-REIT accumulation
index1
Distributions (¢)
per stapled security
18.3
19.0
19.7
20.5
21.5
22.0
FY13
FY14
FY15
FY16
FY17
FY18*
*Distribution guidance only.
1. Source: UBS Investment Research: Annual compound returns.
Growthpoint Properties Australia / 6
2017 Annual Report
Managing Director’s Report
Property portfolio reweighted
into segments and geographies
that offer superior long-term value
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Timothy Collyer
Managing Director
Total portfolio value ($b)
as at 30 June
3.3
2.8
2.4
2.1
1.7
2013
2014
2015
2016
2017
Portfolio occupancy (%)
as at 30 June
98
98
97
99
99
2013
2014
2015
2016
2017
1. Only includes transactions announced in FY17.
Includes completion of development fund-
2.
through.
3. Using restated gearing as per Growthpoint’s
announcements in February 2017.
Growthpoint achieved excellent operational
results in FY17 in another year of the Group
setting clear goals and achieving them. Key
highlights from the year were:
• $278.1 million in statutory profit, an
increase of 26.8% on FY16, and FFO of
25.5 cents per security, an increase of
11.4% on FY16.
• Annual distributions of 21.5 cps, an
increase of 4.9% on FY16.
• Recorded a 10.3% increase in NTA per
security, up from $2.61 at 30 June 2016
to $2.88.
• Over $729 million1 in property
transactions completed, reweighting into
the office property sector and NSW.
• 94,921 sqm of new and extended
leasing, maintaining portfolio occupancy
at 99%.
• Balance sheet gearing reduced from
43.1% at 30 June 2016 to 39.0% at
30 June 2017.
• Successful completion of our first USPP
debt issuance, further diversifying the
Group’s sources of debt funding and
increasing the weighted average debt
maturity from 4.2 years at 30 June 2016,
to 5.0 years at 30 June 2017.
• The average NABERS energy rating for
the office portfolio increased from 4.2
stars at 30 June 2016 to 4.5 stars at 30
June 2017.
The key transactional highlight was the
acquisition of the GPT Metro Office Fund
(“GMF”) which completed in October 2016
after an extensive due diligence process.
The GMF properties have performed
extremely well since the acquisition with
additional leasing success increasing the
weighted average occupancy to 98% from
96% since the takeover. Favourable market
conditions have led to a 9.0% valuation
uplift since acquisition, equating to
$39.3 million. In total, Growthpoint acquired
an additional $469.9 million2 worth of
property over FY17 with a further $46 million
of industrial properties and an 18.2% stake in
the ASX-listed Industria REIT (ASX: IDR) for
$68 million acquired since 30 June 2017.
Importantly, we were also able to take
advantage of strong pricing conditions
to divest a number of assets either
considered ‘non-core’ to the Group, or
assets we believed had reached their
peak value to Growthpoint. An industrial
portfolio was sold to Mapletree Logistics in
December 2016 consisting of four assets
for $142.2 million. This was followed by
the sale of an office building at 1231-1241
Sandgate Road, Nundah, QLD which was
originally purchased for $77.9 million as a
fund through development in 2012. The sale
for $106.3 million was announced in March
2017 (with settlement occurring in July 2017),
delivering Growthpoint an ungeared internal
rate of return of 14.7% over the ownership
period.
These sales helped the Group to reduce
gearing by 4.1%3 to 39.0%. This lower level
of gearing, coupled with the successful issue
of AUD208 million long term debt finance in
the USPP market, leaves the balance sheet
in a good position as we move into FY18.
With our portfolio materially reweighted
into preferred markets, and with additional
investment and portfolio enhancement
opportunities ahead, including potential M&A
and development, we believe we are well
positioned for FY18 and beyond.
Timothy Collyer
Managing Director
Growthpoint Properties Australia Limited
Growthpoint Properties Australia / 7
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Returns
4.9%
increase in distributions
per security to 21.5cps
(FY16: 20.5cps)
11.4%
Increase in Funds From
Operations to 25.5cps
(FY16: 22.9cps)
10.3%
increase in net tangible
assets (NTA) to $2.88
(FY16: $2.61)
Directors’ Report
FY17 Overview
Disciplined
growth
continues in
FY17
Aaron Hockly
Chief Operating Officer
8
Property
Capital
management
Sustainability
Portfolio reweighted into
sectors where we see
long-term value
% NSW exposure increased
% Office exposure
increased
$469.9m1
New assets purchased
(FY16: $328.0m)
$259.1m
Strategic asset sales
(FY16: $10.1m)
NSW exposure
increased to
26%
(30 June 2016: 20%)
Office portfolio
increased to
66%
of total property portfolio
(30 June 2016: 56%)
1.
Includes development fund-through costs.
% Lower gearing
% Increased average
% Higher percentage of
fixed debt
% Increased debt maturity
% More diversified sources
of funding
5.0yrs
weighted average debt
maturity (WADM)
(30 June 2016: 4.2 years)
10.0%
increase in percentage
of fixed/hedged debt to 75%
(30 June 2016: 65%)
4.1%
decrease in gearing to 39.0%
(30 June 2016: 43.1%)
portfolio NABERS energy
rating to 4.5 stars
% Increased gender
diversity of employees
% Targeting net zero
emissions across
all properties under
operational control by
2050
43%
of employees
are female
(30 June 2016: 35%)
4.5
average NABERS
energy rating
(30 June 2016: 4.2 stars)
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Directors’ Report
Our transparent business
model
One of Growthpoint’s competitive advantages is having
transparency of its income and expenses. This is enabled by
our clear business model which is highlighted below:
Acquire
real estate
FOR SALE
Acquire well built, well
located Australian
commercial real estate
FY17
Six office properties
purchased for a total
of $469.9m1
Income
from leases
Lease vacant space
and collect rent from
tenants
FY17
94,921sqm of new
and extended leases
99% occupancy and
$223.3m net
property income
1.
Includes development fund-through costs but excludes a further $46 million industrial properties
and 18.2% stake in Industria REIT (ASX: IDR) acquired post balance date.
How we create
wealth
Raise
Capital
Raise equity capital
from Securityholders
and debt capital
FY17
$245.7m new equity
capital and $208.5m
new debt capital raised
19
10
Asset
Management
Pay costs
Maintain and improve
assets. Sell assets
that no longer meet
investment criteria
FY17
$10.0m of capital works
undertaken.
Five industrial properties
and one office property
sold for $259.1m
Pay management
and operating costs,
as well as
interest costs on
debt capital
FY17
Operating costs (excl.
debt costs) of $12.4m
or 0.39% of average
gross assets
Distributions
Return as much
of the remaining
property income to
Securityholders as
deemed prudent
FY17
Distributions of $140.1m
paid to Securityholders,
21.5cps. Payout ratio of
84% of FFO
22
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Directors’ Report
Strategy
Objectives and goals for
sustainable growth
Increase
distributions
Reposition
& diversify
property
portfolio
Enhance
existing
assets
FY18 Objectives
FY18 Objectives
FY18 Objectives
– Growth in Securityholder distributions.
– Only acquire assets which enhance the
– Leasing of vacant space and leasing or
– Certainty of growth obtained through an
increasing weighted average rent review
(WARR).
– Undertake acquisitions of real property
(direct and indirect) which enhance or
secure income.
quality and/or returns of the portfolio over
the long-term.
– Continue to reposition property portfolio
towards sectors and geographies
expected to provide stable and growing
returns.
– Assets acquired at or below the Group’s
belief of fair value and which we expect
to increase in value over time.
– Consider further asset sales which
enhance the portfolio, maximise the
medium term IRR and/or de-risk the
Group’s income.
renewal of potential lease expiries.
– Retaining tenants where possible through
regular contact with representatives and
timely responses to requests.
– Capital works undertaken to maintain or
improve the value of assets and/or retain
or attract tenants.
– Potential development and/or change of
use to be further progressed for some
assets.
FY17 Achievements
FY17 Achievements
FY17 Achievements
% 4.9% increase in distributions per
% Significant reweighting into office (56%
% Over 94,921sqm of new and extended
leasing undertaken. The occupancy rate
at 30 June 2017 was 99%.
% Meetings held with all tenants with leases
potentially expiring over the next two
years. Tenant retention rate of 74% for
the five years to 30 June 2017.
% Development approval in place for a new
20,000 sqm office building in Richmond,
Victoria.
security from FY16 to FY17.
to 66%).
% WARR increased from 3.1% at 30 June
2016 to 3.3% at 30 June 2017 due to
leasing and acquisitions and targeted
disposals.
% $469.9 million of acquisitions/
development undertaken at an average
yield of 7.0% at the time of acquisition.
% Increased exposure to NSW (20% to
26%).
% Took advantage of strong pricing
conditions to divest a number of assets
either considered ‘non-core’ to the
Group, or assets we believed had
reached their peak value, including:
– Industrial portfolio sale to Mapletree
Logistics in December (4 assets sold
for $142.2 million); and
– Sale of 1231-1241 Sandgate Road,
Nundah QLD, originally purchased
for $77.9 million as a fund through
development in 2012 (sold for
$106.3 million in March 2017,
settlement occurred in July 2017).
Growthpoint Properties Australia / 12
2017 Annual Report
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Increase
liquidity and
free float
Borrow
prudently
Operate
sustainably
FY18 Objectives
FY18 Objectives
FY18 Objectives
– Inclusion in major indexes.
– Maintain gearing within 35%-45% range.
– Process for achievement of new
– Increase equity capital where
– Maintain diversity of sources and tenor
appropriate.
of debt.
– Increase free float of Growthpoint’s
securities.
– Increase liquidity of Growthpoint's
securities.
– Additional capital markets issuance to
be considered if further debt capital
required.
– Ensure fixed debt is within the target
range of 65% to 100%.
sustainability objectives introduced.
– Focus on long-term value rather than
short-term profits.
– 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.
FY17 Achievements
FY17 Achievements
FY17 Achievements
% Increased average NABERS rating to 4.5
stars (from 4.2 stars as at 30 June 2016).
% 43% of the Group's Employees are
female, up from 35% as at 30 June
2016.
% Continued inclusion in S&P/ASX200.
% Balance sheet gearing at 30 June 2017
% $245.7million of new equity was raised
via the distribution reinvestment plan and
associated with the acquisition of GMF.
× Liquidity of Growthpoint’s securities
marginally increased from FY16 to FY17,
with 126,231,132 securities traded in
FY17 compared to 121,359,340 in FY16.
% Increased free float by $90 million,
from $634 million at 30 June 2016 to
$724 million at 30 June 2017.
1. Using restated gearing as per Growthpoint’s
announcements in February 2017.
was 39.0% down from 43.1% at 30 June
20161.
% The weighted average debt maturity
was 5.0 years at 30 June 2017; up from
4.2 years at 30 June 2016.
% Successfully secured long term debt
finance of AUD208 million via the USPP
market:
– improving diversification,
– extending the company’s debt
maturity profile to 5.0 years at 30 June
2017,
– increasing the level of fixed/hedged
debt to 75%, and
– increasing debt capital markets
issuance to 50% of total debt drawn
(balance existing bank debt).
Growthpoint Properties Australia / 13
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Directors’ Report
Leasing success
94,921 sqm of office and industrial
space successfully leased in FY17;
occupancy maintained at 99%
Growthpoint’s modern portfolio and experienced asset management team,
led by Michael Green, Head of Property, again achieved significant leasing
results maintaining 99% occupancy in FY17.
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NLA (sqm)
23,156
NLA (sqm)
26,517
NLA (sqm)
4,358
New national head offices
for David Jones and
Country Road Group
Buildings 1 and 2, 572-576 Swan Street,
Richmond, Victoria
• Office accommodation
• 23,156 sqm net lettable area, with 679
car parks
Lease to The Workwear
Group, a wholly owned
subsidiary of Wesfarmers
Ltd
120 Link Road, Melbourne Airport,
Victoria
• Logistics warehouse
• 26,517 sqm
• Weighted average lease expiry
14.5 years from commencement
• Lease term of 10 years, commenced
1 July 2017
• Fixed rent increases of 3.00% per annum
for first four years and 3.25% per annum
thereafter
• Enables potential development of
Building 3
• Rent increases greater of CPI and 3.50%
per annum
New lease to existing tenant
Orora Limited
109 Burwood Road, Hawthorn, Victoria
• Office accommodation
• 4,358 sqm
• Lease term of 8 years, commenced
14 June 2017
• Fixed rent increases of 3.25% per annum
Growthpoint Properties Australia / 14
2017 Annual Report
Development opportunity
New generation office development
proposed for Richmond, Victoria
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NABERS energy
& water rating target
Green Star
Credentials target
PCA A Grade
innovative office
5.0
5.0
20,000sqm
The new Richmond office development will offer the Melbourne metro office market a new
benchmark in quality and amenity. Located in a prominent and commanding position at the front
of the Botanicca Corporate Park, this new generation of office design is perfectly suited for major
local and international corporate offices.
Development approval is in place for a new office building at Richmond on land currently owned by Growthpoint, with the
ability to deliver the project within 18 months of a pre-commitment to lease all or a substantial part of this development.
Growthpoint forecasts an on-completion value of approximately $140 million and an estimated yield on cost between
7% and 9%.
Growthpoint Properties Australia / 15
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Directors’ Report
FY17 Sustainability
Highlights
Securityholders and
other stakeholders
at the core of
everything we do
Steve Lee
Manager – Projects and
Sustainability
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NABERS average energy rating
4.5
(30 June 2016: 4.2 stars)
CY16 Scope 1 & 2 GHG
emissions intensity
65 kg CO2-e
/sqm
Gender diversity of employees
43%
(30 June 2016: 35% women)
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Taxes paid in FY173
$27.2m
(FY16: $28.8m)
Taxes % of revenue
10.40%
(FY16: 13.80%)
Submissions to CDP
and GRESB benchmarking
Economic value provided in FY171
$564.2m
(FY16: $524.1m)
Comprising:
Economic value generated
during FY171,2
$269.2m
(FY16: $221.8m)
Economic value distributed
during FY171
$295.0m
(FY16: $302.3m)
1. Calculated in accordance with GRI methodology. Only cash receipts and
payments have been included.
2. Cash receipts from customers plus interest received.
3. Consists of stamp duty, net GST, income tax, payroll tax and mortgage
duties calculated in accordance with GRI methodology.
17
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Financial Management
Excellent earnings growth,
lower gearing, diversified
sources of debt funding
and longer duration
achieved in FY17
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Financial Management
Growthpoint continued to strengthen its capital position over FY17,
whilst supporting the Group’s transaction activity and portfolio
repositioning. The Group successfully extended the tenor of its fixed
debt, achieving in the process a better funding mix, lower interest
rate risk and greater certainty around debt structure. We believe this
will enable us to generate higher, more sustainable returns over the
long-term. Gearing was also reduced over FY17.
Dion Andrews
Chief Financial Officer
Strategic Execution
Maintain gearing
within 35%-45%
range
45%
35%
43.1%
39.0%
-4.1%
Extend average
debt maturity
$245.7 million
new equity in FY17
5.5
5.0
4.5
4.0
3.5
5.0 yrs
4.2 yrs
+0.8
years
2H16 DRP
($42.2m)
GMF acquisition
($139.8m)
1H17 DRP
($63.7m)
FY16
FY17
FY16
FY17
FY17
Diversify debt
sources
Increase fixed debt
percentage
Total debt facilities
as at 30 June 2016
Total debt facilities
as at 30 June 2017
33%
67%
45%
55%
Other debt capital markets1
Major Australian Banks
80
75
70
65
60
75%
65%
+10%
FY16
FY17
1. Consists of two offshore life insurers, three offshore banks and USPP investors.
Growthpoint Properties Australia / 19
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Items influencing balance sheet gearing over 2017 (%)
48%
47%
46%
45%
44%
43%
42%
41%
40%
39%
38%
37%
36%
35%
43.10%
+3.47%
-3.53%
-0.35%
41.96%
-0.73%
-0.31%
-1.83%
39.04%
-0.78%
39.07%
-0.07%
+0.88%
-2.04%
+1.26%
F
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Highlights for FY17 include:
• 11.4% increase for the year in FFO per
security to 25.5 cents
• Distribution guidance of 21.5 cents per
security met, representing a payout ratio
to FFO of 84.3%
• NTA per security increased from $2.61
to $2.88
• Further fixed debt issuance via the USPP
market with AUD208 million issued
over 10 and 12 year tranches, further
diversifying the Group’s sources of
funding and lengthening the debt tenor
Strategic execution in FY17
In the 2016 Annual Report, we outlined the
Group’s financial management goals for
FY17 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.
• Ensure fixed debt is within the target
range of 75% to 100%
Below we outline our performance during
the year on each of these areas.
Balance sheet gearing 39.0% as at 30
June 2017
Balance sheet gearing as at 30 June 2017
was 39.0%, down from 43.1%2 as at 30
June 2016 and within the target range.
The Group has looked to control the level
of gearing via the sale of properties that
do not meet its risk and return profiles
and where it believes values have been
maximised.
Extend average debt maturity
The weighted average debt maturity
increased by 0.8 years to 5.0 years as
the Group issued longer tenor debt to the
USPP market and used the proceeds to
repay shorter tenor bank debt.
Diversify sources and tenor of debt with
additional capital market issuance
The issue of the USPP debt after a
successful US roadshow brought nine
new debt investors into the Group across
two new maturities in 2027 and 2029.
Growthpoint continues to assess the
various debt markets open to it to ensure
the debt portfolio remains well diversified by
both source and tenor.
Fixed debt at 75% and the weighted
average maturity of fixed debt increased
During the year, Growthpoint changed
its fixed debt target range from 75-100%
to 65-100% to provide more flexibility to
the Group. At 30 June 2017, fixed debt
was 75%, up from 65% a year earlier. The
Group has also extended the weighted
average maturity of fixed debt from
5.7 years to 6.4 years. This means more of
the debt is protected for longer against any
future interest rate rises.
FY18 Outlook
Debt capital management
Post the settlement of the three property
transactions either announced or settled
post balance date, pro forma gearing is
39.1% with an all-in cost of debt of 4.3%
and a weighted average maturity of 5.0
years. There is a balanced mix between
shorter term, more flexible bank debt and
longer term fixed debt from other sources.
Growthpoint will strive to keep this strong
debt capital position in place post any
transactions entered into over the coming
year.
Growthpoint is targeting undrawn and
uncommitted debt of approximately
$100 million to allow for flexibility in
transactions without excessive cost drag
from holding undrawn debt lines.
Distributions forecast to increase to
22.0cps
The Group seeks to return as much of
Funds From Operations (FFO) to investors
as is prudent. The payout ratio of FFO
considered to be prudent will take into
account forecast capital expenditure and
lease incentive costs over the medium-
term, recognising that the quantum of
leasing incentives granted can vary from
year to year.
The payout ratio for FY17 was 84.3%
compared with 89.5% in FY16.
Growthpoint does not foresee the payout
ratio falling below 85% over the medium-
term given the requirements of the current
portfolio.
Distributions are forecast to increase by
2.3% to 22.0cps for FY18, based on FFO
of at least 23.6cps.
1. Full impact included although acquisitions not due to complete until later in FY18.
2. Gearing restated as per Growthpoint’s announcements in February 2017.
Growthpoint Properties Australia / 20
2017 Annual Report
Financial Management
Summary of movements in value over FY17
Properties
at 30 June
2016
Value at
30 June
2016
Capex for
full year
Property
acquisitions
&
expansions
Property
disposals
Lease
incentives
and leasing
costs net
movement
Straight
lining of
revenue
adjustment
Revaluation
gain
No.
38
20
58
$m
$m
$m
$m
1,236
1,566
5
5
–
(166)
509
–
2,803
10
509
(166)
(12)
19
7
(6)
8
2
$m
46
72
118
3,283
Valuation
at
30 June
20171
$m
1,103
2,179
Change
due to
revaluation
Properties
at 30 June
20171
%
3.7
4.6
8.3
No.
31
26
57
Property type
Industrial portfolio
Office portfolio
Total portfolio
Key debt metrics and changes during FY17
Gross assets
Interest bearing debt
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 hedged
Debt providers
$'000
$'000
$'000
$'000
%
%
years
times
%
years
%
Number
30 June 2017
30 June 2016
Change
3,328,372
1,299,380
1,473,482
167,856
39.0
4.3
5.0
4.1 / 1.6
40.2 / 60
6.4
75
17
2,879,605
1,242,226
1,375,000
126,728
43.1
4.1
4.2
4.1 / 1.6
45.2 / 60
5.7
65
8
Market capitalisation and free float ($m)
as at 30 June
Movements in NTA ($)
per stapled security
Market Capitalisation
Free float
2,076.6
1,781.1
1,836.8
1,323.3
966.8
409.2
271.3
623.9
633.7
724.4
2013
2014
2015
2016
2017
2.90
2.85
2.80
2.75
2.70
2.65
2.60
2.55
2.50
+0.4¢
+8.9¢
$2.61
+17.7¢
30 June 16
Property
revaluations
and loss on
property sale
Swap
revaluations
Equity raising
& retained
earnings
30 June 17
448,767
57,154
98,482
41,128
(4.1)
0.2
0.8
- / -
(5) / -
0.7
10
9
$2.88
10.3%
increase
1. These figures include assets held for sale. Properties currently held for sale will be classed as disposed when settlement of any sale occurs (therefore excludes
10 Gassman Drive, Yatala, QLD).
Growthpoint Properties Australia / 21
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Funds From Operations (FFO)
FFO 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, profits or losses on sale of investment properties, deferred tax
and amortisation of tenant incentives. FFO is non-IFRS financial information and has not been subject to review by the Group’s external
auditors.
FFO 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 FFO from statutory profit. Distributable income is also displayed this year to allow comparison
to forecast distributable income provided at the beginning of FY17 as well as prior years. As the Group intends to report on an FFO basis
going forward, distributable income will no longer be provided for reporting purposes.
Reconciliation from statutory profit to FFO
Profit after tax
278,090
219,377
FY17
$’000
Restated
FY16
$’000
Less non-distributable items:
– Straight line adjustment to property revenue
– Net changes in fair value of investments
– Loss / (profit) on sale of investment properties
– Net (gain) / loss on derivatives
– Depreciation
Distributable income
FFO adjustments
Amortisation of incentives
Deferred tax benefit
FFO
Change
%
26.8
Change
$’000
58,713
4,904
(26,466)
1,286
(8,206)
34
(2,522)
(118,157)
1,123
(2,382)
162
(7,426)
(91,691)
(163)
5,824
128
156,314
126,049
30,265
24.0
9,969
(185)
6,224
(159)
3,745
(26)
166,098
132,114
33,984
25.7
The payout ratio, calculated as distributions on ordinary stapled securities divided by FFO, was 84.3% (FY16: 89.5%).
Operating and capital expenses
Operating expenses
Total operating expenses
Average gross asset value
Operating expenses to average gross assets
Capital expenditure
Total portfolio capital expenditure
Average property asset value
Capital expenditure to average property portfolio value
Growthpoint Properties Australia / 22
2017 Annual Report
$’000
$’000
%
$’000
$’000
%
FY17
12,385
FY16
10,407
FY15
9,123
3,204,716
2,588,089
2,211,504
0.39
0.40
0.41
FY17
10,042
FY16
6,976
FY15
5,920
3,204,716
2,588,089
2,218,736
0.31
0.27
0.27
Financial Management
Financial Management
Five years of
outperformance
Years ended 30 June
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
Funds From Operations per security
Distributions per security
Total Securityholder return1
Return on equity
Balance sheet gearing (at 30 June)
NTA per security (at 30 June)
$m
$m
$m
$m
¢
¢
¢
¢
%
%
%
$
Pascal Moutou
Finance Manager
FY17
Restated
FY16
FY15
FY14
FY13
383.4
278.1
302.1
219.4
361.5
283.0
198.5
117.3
171.5
94.0
3,328.4
1,901.5
2,879.6
2,407.1
1,522.4
1,411.5
2,128.8
1,165.1
1,680.4
804.1
42.7
24.0
25.5
21.5
6.3
18.6
39.0
38.1
21.9
22.9
20.5
7.4
13.5
43.1
50.4
21.2
21.8
19.7
36.4
23.9
37.0
25.7
20.0
20.2
19.0
10.8
17.5
40.9
2.88
2.61
2.48
2.16
23.7
19.3
19.4
18.3
23.6
13.1
46.8
2.00
966.8
Market capitalisation (at 30 June)
$m
2,076.6
1,836.8
1,781.1
1,323.3
Other information
Number of securities on issue (at 30 June)
No.
661,340,472
583,125,744 569,027,781
540,115,360
402,830,366
1. Source: UBS Investment Research.
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23
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Directors’ Report
Portfolio Review
Portfolio value increased
and reweighted into
segments positioned
for long-term
outperformance
D
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24
Michael Green
Head of Property
Over the course of FY17
Growthpoint reweighted
the portfolio into segments
positioned for superior long-
term growth and saw good
growth in overall valuations;
a result of strong market
conditions and first mover
advantage into non-CBD
office assets. Significant
leasing over the year helped
us retain high occupancy at
99% across the portfolio.
Sector diversity (%)
by property value as at 30 June 2017
34%
Industrial
66%
Office
26
32
Office properties
– up from 20 at
30 June 2016
Industrial properties
– down from 38 at
30 June 2016
Five year performance summary
As at 30 June
Number of properties
Total value
Occupancy
2017
2016
2015
2014
2013
no.
$m
%
58
58
53
51
44
3,283.8
2,832.6
2,372.5
2,093.7
1,694.5
99
99
97
98
98
Like-for-like value change
$m / % of asset value
138.6 / 5.2
130.2 / 5.5
186.0 / 9.0
52.1 / 3.0
30.6 / 2.0
Total lettable area
Weighted average property age
Weighted average valuation cap rate
WALE
WARR1
Average value (per sqm)
Average rent (per sqm, per annum)
FY net property income
Number of tenants
sqm
years
%
years
%
$
$
$m
no.
1,056,336
1,109,545
1,050,611
1,036,740
917,989
9.6
6.5
6.1
3.3
3,109
231
223.3
145
9.2
6.9
6.9
3.1
2,553
198
181.2
116
8.3
7.3
6.7
3.0
2,258
183
171.8
97
7.9
7.9
6.9
3.2
2,019
171
148.7
90
6.6
8.4
6.8
3.1
1,846
162
133.4
90
Top ten tenants (%)
by passing rent as at 30 June 2017
Net property income per State /
Territory for FY17 ($m)
Portfolio lease expiry profile (%)
per financial year, by income
47
Woolworths
NSW Police
Commonwealth of Australia
Linfox
GE Capital Finance
Australasia2
Samsung Electronics
Lion
Energex
ANZ Banking Group
Jacobs Group
Total / weighted Average
Balance of portfolio
Total portfolio
%
17
8
5
4
3
3
3
2
2
2
49
51
100
WALE
(yrs)
5.3
6.9
8.8
5.9
13.1
4.7
6.8
10.4
2.7
7.8
6.8
5.4
6.1
71.9
55.6
56.0
16.4
9.8
10.9
2.7
4
3
1
21
11
6
7
TAS
WA
ACT
SA
NSW
QLD
VIC
Vacant
FY18
FY19
FY20
FY21
FY22
FY23
FY24+
Annual rent review type (%)3
as at 30 June 2017
Geographic diversity (%)
by property value as at 30 June 2017
Fixed 3.00-
3.99% 67%
Fixed 2.00-
2.99% 17%
Fixed over
4.00% 10%
CPI 5%
CPI+1.00% 1%
VIC 29%
QLD 28%
NSW 26%
SA 6%
ACT 5%
WA 5%
TAS 1%
1. Assumes CPI change of 1.9% per annum as per Australian Bureau of Statistics release for FY17.
2. A lease to Country Road / David Jones with a lease term from commencement of 14.25 years, will replace the existing lease to GE Capital Finance Australasia upon
the lease expiry.
3. Leases that have a minimum lease increase, typically 3%, or CPI are shown as the minimum fixed rate for the above.
Growthpoint Properties Australia / 25
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview 8 Properties
38% of office portfolio
New South Wales
& Australian Capital Territory
8 Properties
32% of office portfolio
Queensland
Address
New South Wales
Lettable
area WALE
Book
value
Address
sqm
yrs
$’000
Lettable
area WALE
Book
value
sqm
yrs
$’000
1 Charles St
32,356
6.9 303,500
15 Green Square Cl
16,442
4.7 138,000
Bldg C,
219-247 Pacific Hwy
14,496
5.6 115,000
5 Murray Rose Ave
12,386
6.8 97,000
333 Ann St
16,369
5.3 121,000
1231-1241
Sandgate Rd1
12,980
9.3 103,500
3 Murray Rose Ave
13,423
4.7 97,000
CB1, 22 Cordelia St
11,529
4.9 99,000
102 Bennelong Pkwy
5,244
2.1 29,800
A1, 32 Cordelia St
10,052
7.7 81,200
6 Parkview Dr
5,145
2.3 28,500
A4, 52 Merivale St
9,405
5.6 79,000
Sub-total
83,050
5.9 670,800
CB2, 42 Merivale St
6,598
7.6 57,200
Australian Capital Territory
10-12 Mort St
15,398
7.7 87,000
Car Park, 32 Cordelia
St & 52 Merivale St
0
2.4 26,000
255 London Cct
8,972 10.2 72,000
Total/Weighted Average
83,375
5.9 704,900
Sub-total
24,370
8.8 159,000
Total/Weighted Average 107,420
6.2 829,800
1.
Included as settlement post 30 June 2017.
Directors’ Report
Office
Property
Portfolio
as at 30 June 2017
104
For a detailed table of
individual office property
metrics please refer to
page 104
26
7 Properties
2 Properties
1 Property
25% of office portfolio
4% of office portfolio
1% of office portfolio
Victoria
Address
South Australia
Tasmania
Lettable
area WALE
Book
value
Address
Lettable
area WALE
Book
value
Address
sqm
yrs
$’000
sqm
yrs
$’000
Lettable
area WALE
Book
value
sqm
yrs
$’000
75 Dorcas St
23,811
4.4 180,000
33-39 Richmond Rd
11,835
6.1 62,000
89 Cambridge Park Dr
6,876
6.8 27,000
Total/Weighted Average
6,876
6.8 27,000
109 Burwood Rd
12,403
6.2 89,250
7 Laffer Dr
6,639
1.1 15,500
Bldg 2,
572-576 Swan St
Bldg B, 211
Wellington Rd
Bldgs 1 & 3,
572-576 Swan St
Bldg C,
211 Wellington Rd
Car Park,
572-576 Swan St
14,602 15.0 80,900
Total/Weighted Average
18,474
4.6 77,500
12,780
3.5 72,400
9,909 12.1 62,000
10,305
5.0 55,500
–
0.7
1,125
Total/Weighted Average
83,810
7.4 541,175
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
17 Properties
38% of industrial
portfolio
Victoria
5 Properties
21% of industrial
portfolio
Queensland
Address
Lettable
area WALE
Book
value
Address
sqm
yrs
$’000
Lettable
area WALE
Book
value
sqm
yrs
$’000
120 Northcorp Blvd
58,320
4.1 77,700
70 Distribution St
76,109
4.7 205,000
522-550 Wellington Rd 68,144
4.1 65,900
13 Business St
8,951
2.2 15,000
1500 Ferntree Gully Rd
& 8 Henderson Rd
22,009
8.4 42,300
40 Annandale Rd
44,424
2.0 33,000
9-11 Drake Blvd
25,743
4.3 31,350
5 Viola Pl
3 Viola Pl
10 Gassman Dr
14,726
3,431
3,188
0.0
5.7
0.3
8,000
2,100
01
130 Sharps Rd
28,100
5.0 24,500
Total/Weighted Average 106,405
4.0 230,100
120-132 Atlantic Dr
12,864 11.5 24,100
Lots 2, 3 & 4,
44-54 Raglan St
26,980
2.2 23,100
120 Link Rd
26,517 10.0 15,500
20 Southern Crt
11,430
5.5 15,250
60 Annandale Rd
16,276 10.8 13,000
6 Kingston Park Crt
7,645
4.9 12,150
3 Millennium Crt
8,040
3.7 11,000
31 Garden St
8,919
1.4 10,100
19 Southern Crt
6,455
45-55 South Centre Rd 14,082
75 Annandale Rd
10,280
1.8
0.1
2.3
8,100
7,850
7,150
Total/Weighted Average
396,228
4.9 422,050
1. Treated as sold for reporting purposes as at 30 June 2017.
Directors’ Report
Industrial
Property
Portfolio
as at 30 June 2017
105
For a detailed table
of individual industrial
property metrics please
refer to page 105
Growthpoint Properties Australia / 28
2017 Annual Report
5 Properties
16% of industrial
portfolio
New South Wales
1 Property
14% of industrial
portfolio
Western Australia
4 Properties
11% of industrial
portfolio
South Australia
Address
Lettable
area WALE
Book
value
Address
Lettable
area WALE
Book
value
Address
sqm
yrs
$’000
sqm
yrs
$’000
Lettable
area WALE
Book
value
sqm
yrs
$’000
27-49 Lenore Dr
29,476
6.2 63,500
20 Colquhoun Rd
80,374
8.3 152,800
599 Main North Rd
67,238
4.1 73,400
6-7 John Morphett Pl
24,881
2.8 45,000
51-65 Lenore Dr
3,720 10.7 32,000
34 Reddalls Rd
355 13.3 24,000
81 Derby St
7,984
5.2 16,600
Total/Weighted Average
66,416
6.8 181,100
Total/Weighted Average
80,374
8.3 152,800
1-3 Pope Crt
14,459
3.4 21,250
12-16 Butler Blvd
16,800
3.4 14,300
10 Butler Blvd
8,461
0.6
8,400
Total/Weighted Average 106,958
3.5 117,350
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Growthpoint Properties Australia / 29
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Directors’ Report
Office Portfolio Review
FY17 acquisitions
build on high quality
office assets
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Acquisitions and Disposals
Leasing
Growthpoint’s office portfolio grew
significantly over FY17 due primarily to the
successful take-over of the GPT Metro
Office Fund (GMF). GMF comprised six
office assets including four in NSW helping
to achieve Growthpoint’s strategy of
increasing its NSW office exposure. The
transaction was met with significant support
from GMF unitholders with over 95.5%
acceptances received by 1 October 2016.
The GMF acquisition was the single largest
transaction in which the Group has been
involved ($440.3 million) and highlights
the deep M&A and transactional expertise
at Growthpoint. Since assuming control
of GMF on 1 October 2016, the market
value of the properties has increased by
$39.3 million, or 9% and the weighted
average occupancy has increased from
96% to 98%.
Whilst the current tightening of office
yields makes further office acquisitions
difficult, it provides opportunities for the
Group to divest assets which (a) are
considered non-core (typically due to size
or location), (b) have reached their peak
value to Growthpoint (typically due to
leasing completed, building age or WALE)
or (c) present an income or value risk to
Growthpoint (typically due to a potential
vacancy in a particular period).
Growthpoint sold one office property during
the year: 1231-1241 Sandgate Road,
Nundah, QLD (settlement occurred in July
2017). Originally purchased for $77.9 million
as a fund through development in 2012,
this property was sold for $106.3 million.
Among other achievements at this building,
Growthpoint implemented its strategy
of providing quality retail offerings to
complement the office accommodation.
The sale proceeds have been used to pay
down existing debt as part of the Group’s
stated capital management program.
FY17 was another successful year of
leasing for Growthpoint with more than
41,159 sqm leased across the office
portfolio addressing several key potential
lease expiries. Highlights include:
• Two new leases for the new David Jones
and Country Road national headquarters
totalling 23,156 sqm at Buildings 1 & 2,
572-576 Swan Street Richmond VIC.
The leases have a weighted average
lease term of 14.5 years and the tenants
will undertake substantial fit out works
to the buildings creating a world class
working environment. Growthpoint has
also obtained a planning permit for the
adjacent site, creating the opportunity
for a 20,000 sqm A-grade office
development.
• An 8 year lease extension to Orora
Limited at 109 Burwood Road,
Hawthorn, VIC. Orora has leased 4,358
sqm on Levels 1 and 2, with fixed annual
rent increases of 3.25%. This building
was acquired as part of the takeover of
GMF.
• Richard Crookes Constructions leased
the last remaining floor at Building C,
Gore Hill Technology Park, 219-247
Pacific Highway, Artarmon, NSW and
commenced occupation in May 2017.
The lease is for 2,350 sqm on Level 3
and was conditional upon a favourable
rezoning for the building, which was
achieved and now provides flexibility for
future use of the building.
The development of Building C,
211 Wellington Road, Mulgrave, VIC is now
complete and leases have been agreed
with BMW Finance Australia, Guardian
Child Care Centres, Corning Optical
Communications and Toshiba (Australia).
The remainder of the building (under a five
year rental guarantee from the developer,
Frasers Property Australia, until October
2021) is being marketed for lease.
Andrew Kirsch
Asset Manager
Cathy Ciurlino
Asset Manager
Office portfolio
key statistics
(as at 30 June 2017)
— $2,180.4 million
total value
— 299,955 sqm
total lettable area
— 6.3% weighted average
capitalisation rate
— 66% of Growthpoint’s
property portfolio
— 98% occupancy
— 6.5 year WALE
— 3.5% WARR
— 26 assets
Growthpoint Properties Australia / 31
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Nathan Lansell
Property Analyst
Valuation
Over the past 12 months, Growthpoint’s
office portfolio has increased by $584.2
million to total $2,180.4 million, the result
of accretive acquisitions and strong
valuation gains. Since 30 June 2016,
the value of the office property portfolio
(excluding acquisitions and disposals)
increased by $104.6 million or 6.6% on a
like-for-like basis. The weighted average
capitalisation rate across Growthpoint’s
office property portfolio is 6.3% at 30 June
2017 down from 6.8% at 30 June 2016.
Valuation highlights include: 1 Charles
Street, Parramatta, NSW ($23.5 million or
8% increase), 333 Ann Street, Brisbane,
QLD ($18.5 million or 18% increase) and
75 Dorcas Street, South Melbourne, VIC
($14.0 million or 8% increase).
Looking Forward
The yield compression cycle continued
with prime yields across most Sydney,
Melbourne and Brisbane office markets
tightening by as much as 0.5%. The
likelihood of market conditions remaining
at current levels is unknown, however
a number of industry participants have
formed a common view that the markets
are performing at yields considered to be at
or near the top of the cycle. Future growth
is likely to be driven by improving tenancy
conditions such as rental growth, reduction
of incentives and reduced vacancy
downtime to varying degrees across the
different office markets.
Growthpoint Properties Australia / 32
2017 Annual Report
Five year performance summary - office portfolio
As at 30 June
Portfolio value
Total properties
Weighted average cap rate
% of Growthpoint portfolio
Occupancy
WALE
$m
no.
%
%
%
years
Restated
2016
2017
2015
2014
2013
2,180.40
1,596.20 1,206.60 1,049.80
797.3
26
6.3
66
98
6.5
20
6.8
56
98
7.8
17
7.3
51
94
6.8
16
7.8
50
97
6.5
15
8.4
47
97
5.7
Total lettable area
sqm
299,955
235,389
191,953
179,175
147,405
Average rent
(per sqm, per annum)
NPI
WARR
$
$m
%
540
136.8
3.5
533
87.8
3.4
538
87.1
3.2
516
65.8
3.5
501
63.2
3.5
Portfolio lease expiry profile (%)
per financial year, by income
55
NPI per State / Territory ($m)
for the year ended 30 June 2017
43.8
37.8
34.2
10
7
11
9
2
4
2
10.9
7.4
2.7
Vacant
FY18
FY19
FY20
FY21
FY22
FY23
FY24+
TAS
SA
ACT
VIC
QLD
NSW
Tenants by Industry
by income, as at 30 June 2017
Geographic diversity (%)
by property value as at 30 June 2017
QLD 32%
NSW 31%
VIC 25%
ACT 7%
SA 4%
TAS 1%
Government 31.8%
Resources, Infrastructure & Construction 16.6%
Financial Services 15.5%
IT, Media & Telecommunications 13.8%
Other Consumer & Business Services 7.5%
Retail 6.4%
Education 5.9%
Health 2.5%
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Directors’ Report
Directors’ Report
Industrial Portfolio Review
Substantial $1.1 billion
industrial portfolio
de-risked via strategic
asset sales
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Acquisitions and Disposals
Leasing
Growthpoint took advantage of market
conditions in FY17 to divest a number of
non-core assets and de-risk and reposition
the portfolio for future growth. The industrial
asset sales also played a leading role in the
Group’s strategy to re-allocate capital into
the NSW office market.
FY17 divestments:
• a portfolio of four logistics properties
in Victoria was sold to Mapletree
Logistics Trust of Singapore for $142.2
million, $0.4 million above their previous
aggregate book value;
• 29 Business Street, Yatala, Queensland
was sold to a private investor for $10.65
million a day before expiry of the lease to
CMC Coil Steels. The price represented
a 3% premium to book value;
• contract of sale exchanged on
10 Gassman Drive, Yatala, Queensland
with settlement occurring in July 2017.
The purchaser, an owner occupier,
paid $4.8 million for the 3,188 sqm
warehouse, representing a 7% premium
to book value; and
• settlement of the sale of 670 Macarthur
Avenue, Pinkenba, Queensland occurred
in September 2016. This property was
sold to a private investor for $10.1
million, 4% above its book value.
The Group continues to assess
opportunities to acquire industrial properties
with a disciplined approach. On 13 July
2017 the Group exchanged contracts for
the acquisition of four adjoining, modern
industrial warehouses at Perth Airport in
Western Australia for $46.0 million providing
an initial passing yield of 8.13%. The
properties are fully leased to seven tenants
with a WALE of 6.4 years. Settlement of the
acquisition is expected to occur in the first
half of FY181. The properties are located
near the Group’s Woolworths Regional
Distribution Centre.
Several significant leasing transactions were
achieved in FY17:
• 120 Link Road, Melbourne Airport,
Victoria was leased to The Workwear
Group, a wholly owned subsidiary of
Wesfarmers Ltd, only two months after
it was vacated by The Reject Shop.
This 26,517 sqm distribution centre was
leased for 10 years from 1 July 2017 and
saw strong demand during the leasing
campaign from logistics companies and
online retailers. The new lease has annual
rent increases to the greater of CPI and
3.5%.
• The lease of 1500 Ferntree Gully Road,
Knoxfield, Victoria to PFD Food Services
was renewed for a further 7 years. The
lease is for 2,985 sqm of office space
on the larger industrial property which
was due to expire in August 2019. The
lease now expires on 31 August 2026
and provides for fixed rent increases of
3.25% per annum.
• The lease of the 10,280 sqm property at
75 Annandale Road, Melbourne Airport,
Victoria to Neovia Logistics was renewed
for a further 3 years from 6 November
2016. The lease has fixed rent increases
of 3.75% per annum.
• The lease of the 16,276 sqm property at
60 Annandale Road, Melbourne Airport,
Victoria to Willow Ware Australia was
renewed for a further 10 years. The lease
now expires on 3 May 2028. The lease
has fixed rent increases of 3.25% per
annum.
• The lease of the 7,984 sqm property
at 81 Derby Street, Silverwater, New
South Wales to IVE Group Australia was
renewed for a further 5 years. The lease
now expires on 17 September 2022 and
has annual rent increases to the greater
of CPI and 3%.
• On 1 August 2017 the Group leased
45-55 South Centre Road, Melbourne
Airport, Victoria to Direct Couriers. The
14,082 sqm office/warehouse was
leased for 10 years with annual rent
increases to the greater of CPI and 3.5%.
Andrew Fitt
Senior Asset Manager
Julian Smith
Asset Manager
Industrial portfolio
key statistics
(as at 30 June 2017)
— $1,103.4 million
total value
— 756,381 sqm
total lettable area
— 6.9% weighted average
capitalisation rate
— 34% of Growthpoint’s
property portfolio
— 100% occupancy
— 5.2 year WALE
— 2.8% WARR
— 32 assets
1. The sale contract contains conditions to settlement such as third party consents and completion of vendor works which could delay the anticipated completion date.
Growthpoint Properties Australia / 35
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Five year performance summary - industrial portfolio
As at 30 June
Portfolio value
Total properties
Weighted average cap rate
% of Growthpoint portfolio
Occupancy
WALE
Restated
2016
2017
2015
2014
2013
$m
no.
%
%
%
years
1,103.4
1,236.3
1,165.9
1,043.9
897.2
32
6.9
34
100
5.2
38
7.1
44
100
5.9
36
7.3
49
100
6.5
35
8.0
50
99
7.3
29
8.3
53
100
7.9
Total lettable area
sqm
756,381
874,156
858,658
857,565
770,584
Average rent
(per sqm, per annum)
NPI
WARR
$
$m
%
110
86.5
2.8
109
93.4
2.7
104
84.7
2.7
99
82.9
2.9
97
70.2
2.7
Portfolio lease expiry profile (%)
per financial year, by income
NPI per State / Territory ($m)
for the year ended 30 June 2017
41
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37.8
14
4
3
4
3
0
18.2
11.7
9.0
9.8
Vacant
FY18
FY19
FY20
FY21
FY22
FY23
FY24+
SA
WA
NSW
QLD
VIC
Tenants by Industry
by income, as at 30 June 2017
Geographic diversity (%)
by property value as at 30 June 2017
VIC 38%
QLD 21%
NSW 16%
WA 14%
SA 11%
Retail 59.7%
Logistics 20.9%
Manufacturing 13.4%
Other Consumer & Business Services 6.0%
Directors’ Report
Expansions/Capital
Improvements
Associated with the extension of the lease
of 60 Annandale Road, Growthpoint and
Willow Ware Australia agreed to investigate
an expansion of the warehouse by 5,000
sqm. A planning permit has been obtained
and construction is expected to occur in
FY18.
The Group is in discussions with a number
of tenants regarding building expansions
and associated lease extensions and hopes
to announce details of a number of exciting
projects in the year ahead.
Valuation
The value of the industrial property
portfolio (excluding disposals) increased by
$34.0 million over FY17 or 3.2% on a like-
for-like basis.
The weighted average capitalisation rate
across Growthpoint’s industrial property
portfolio is 6.9% at 30 June 2017 down
from 7.1% at 30 June 2016.
Valuation highlights include:
• 20 Colquhoun Road, Perth Airport,
Western Australia ($6.8 million or 5%
increase),
• 1500 Ferntree Gully Road and
8 Henderson Road, Knoxfield, Victoria
($3.1 million or 8% increase), and
• 120 Link Road, Melbourne Airport,
Victoria ($3.0 million or 14% increase).
Looking Ahead
The Group’s recent capital transaction
activity has resulted in a reweighting
towards office and away from industrial,
but industrial/logistics assets remain a
core investment sector for the Group. The
Group will continue to monitor the market
and consider further transactions which are
accretive to distributions and attractive for
total Securityholder returns.
Growthpoint Properties Australia / 36
2017 Annual Report
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Directors’ Report
Board of Directors
Another high calibre
director joins the
Growthpoint Board
in FY18
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Independent Directors
Board diversity (as at 30 June 2017)
Board expertise matrix (no.)
as at 30 June 2017
Independence
Listed entity
Property industry
Property valuation
Accounting
Corporate finance
Australian Financial Services
Corporate Governance
Legal
Compliance
Audit
Risk
Full bios on all Directors
can be found online at
www.growthpoint.com.au/about/board/
1 Geoffrey Tomlinson
Independent Chairman
& Director
2 Timothy Collyer
Managing Director
3 Maxine Brenner
Independent Director
4 Estienne de Klerk
Director
5 Grant Jackson
Independent Director
6 Francois Marais
Independent Director
7 Norbert Sasse
Director
8 Josephine Sukkar AM
Independent Director
1 Geoffrey Tomlinson (69)
Independent Chairman (since
1 July 2014) and Director (since
1 September 2013)
BEC
44 years’ experience in the
financial services industry.
Committees: Audit, Risk &
Compliance and Nomination,
Remuneration & HR
Current Australian
directorships of public
companies1: Calibre Limited
and IRESS Limited.
2 Timothy Collyer (49)
Managing Director (since 12 July
2010)
B.Bus (Prop), Grad Dip Fin & Inv,
AAPI, F Fin, MAICD
Over 28 years’ experience in
A-REITs and unlisted property
funds, property investment,
development and valuations.
Current Australian
directorships of public
companies1: Nil
3 Maxine Brenner (55)
Independent Director (since
19 March 2012)
BA, LLB
Maxine has over 26 years’
experience in corporate
advisory, mergers and
acquisition, financial and legal
advisory work.
Committees: Audit, Risk &
Compliance (Chair)
Current Australian
directorships of public
companies1: Orica Limited,
Origin Energy Limited and
Qantas Airways Limited
4 Estienne de Klerk (48)
Director2 (since 5 August 2009)
BCom (Industrial Psych), BCom
(Hons) (Marketing), BCom (Hons)
(Acc), CA (SA)
Over 20 years’ experience in
banking and property finance
and over 15 years’ in the listed
property market.
Committees: Audit, Risk &
Compliance
Current Australian
directorships of public
companies1: Nil
In addition to Group entities.
1.
2. Not deemed independent as Managing Director of GRT.
3. Not deemed independent as CEO of GRT.
5 Grant Jackson (51)
Independent Director (since
5 August 2009)
Assoc. Dip. Valuations, FAPI
Over 31 years’ experience in the
property industry, including 27
years as a qualified valuer.
7 Norbert Sasse (52)
Director3 (since 5 August 2009)
BCom (Hons) (Acc), CA (SA)
Over 21 years’ experience in
corporate finance and over
14 years’ experience in the listed
property market.
Committees: Audit, Risk &
Compliance
Committees: Nomination,
Remuneration & HR (Chair)
Current Australian
directorships of public
companies1: Chief Executive
Officer and Director of
m3property (and related entities)
6 Francois Marais (62)
Independent Director (since
5 August 2009)
BCom, LLB, H Dip (Company
Law)
Over 26 years’ experience in the
listed property market.
Committees: Nomination,
Remuneration & HR
Current Australian
directorships of public
companies1: Nil
Current Australian
directorships of public
companies1: Nil
8 Josephine Sukkar AM (53)
Independent Director
(commencing 1 October 2017)
BSc (Hons), Grad Dip Ed
Over 27 years’ experience in the
construction industry.
Committees: Nomination,
Remuneration & HR (from 1
October 2017)
Current Australian
directorships of public
companies1: Opera Australia,
Buildcorp Foundation Ltd and
Sydney University Football Club
Foundation Ltd.
Growthpoint Properties Australia / 39
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Directors’ Report
Executive Management
Consistent
management
team since 2009
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Michael Green
Head of Property
Timothy Collyer
Managing Director
Dion Andrews
Chief Financial Officer
Aaron Hockly
Chief Operating Officer
1 Dion Andrews (44)
Chief Financial Officer, Company
Secretary (since 8 May 2014)
3 Michael Green (37)
Head of Property
B.Bus (Prop)
B.Bus, FCCA
Over 16 years’ experience in
accounting roles in a corporate
capacity.
Over 15 years’ experience in
listed and unlisted property
fund management, property
investment and development.
2 Timothy Collyer (49)
Managing Director (since 12 July
2010)
B.Bus (Prop), Grad Dip Fin & Inv,
AAPI, F Fin, MAICD
Over 28 years’ experience in
A-REITs and unlisted property
funds, property investment,
development and valuations.
4 Aaron Hockly (39)
Chief Operating Officer, Company
Secretary (since 13 October
2009)
BA, LLB, GDLP, GradDipAcg,
MAppFin, FCIS, MAICD, FGIA,
SAFin
Over 16 years’ experience
in corporate governance,
financial services, corporate
and commercial law, property
finance and M&A.
Full bios on all Executive Management can be
found online at growthpoint.com.au/about/
executive-management/
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Directors’ Report
Remuneration report
Our remuneration
structures are designed to
align compensation with
financial and non-financial
outcomes of the Group,
with the best interests of
Securityholders always the
primary consideration
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Remuneration Report
What’s inside
About the Remuneration Report
About the Remuneration Report
Overview of FY17 remuneration
Executive remuneration for FY17
Short-Term incentives
Long-Term incentives
Non-executive director remuneration
FY18 remuneration (unaudited)
Other information
Nomination, Remuneration &
HR Committee
Executive Director Remuneration
and Service Contract
Director and Senior Executive Reviews
43
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44
45
46
49
50
51
51
52
53
References to distributable
income
In FY17, Growthpoint announced that
it would change its reporting to FFO
rather than distributable income going
forward. As the Group’s remuneration
targets (particularly for STI purposes)
were set in FY16 using distributable
income, this Remuneration Report
continues to refer to distributable
income. It is expected that the FY18
Remuneration Report will only refer
to FFO.
1. Source: UBS Investment Research.
The Directors present this “Remuneration Report” for
the Group for the year ended 30 June 2017. This report
summarises key compensation policies and provides detailed
information on the compensation for Directors and other Key
Management Personnel.
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).
Overview of FY17 remuneration
The FY17 remuneration report reflects a year of strong growth
in Securityholder returns and achievement of Growthpoint’s
stated strategic objectives, as well as improved outcomes in the
development of people and culture.
2017 distributable income per security grew by 9.6% when compared to the
previous year. This marks the seventh year Growthpoint has grown distributable
income per security, delivering a compound annual growth rate of 8.0% over this
period.
Distributable income per security for the year ended 30 June 2017 exceeded
guidance by 1.8 cents or 8.1%.
Total Securityholder return of 6.3% exceeded the benchmark S&P/ASX A-REIT
300 accumulation index by 11.9 percentage points (the index returned -5.6%).1
Key Management Personnel remuneration structures continue to be heavily
weighted towards ‘at risk’ components to better align compensation with
Securityholder outcomes and over 50% of the Managing Director’s remuneration
is ‘at risk’.
Long-term Incentive (“LTI”) share plan policies have remained broadly unchanged
since 2012, and continue to be 100% benchmarked relative to the S&P/ASX
A-REIT 300 accumulation index.
The Group’s Short-term Incentive (“STI”) plan focuses on aligning financial
outcomes for Securityholders with Key Management Personnel remuneration.
Stretch targets are also in place for financial outperformance versus guidance.
The Nomination, Remuneration and HR committee meets at least four times per
year (there were six meetings during FY17) to consider the appropriateness of
remuneration policies and has engaged PwC to provide benchmarking and related
remuneration advice. Growthpoint also continues to take investor feedback into
account when considering remuneration and remuneration reporting.
44
Growthpoint’s remuneration practices substantially comply with best practice
governance guidelines, as outlined on page 44 of the 2017 Sustainability
report.
Growthpoint Properties Australia / 43
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview 3. The components of remuneration for
each Employee are:
a) total fixed remuneration (including
applicable superannuation);
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 FY17 STI and the
FY18 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 89
for details of senior executive
holdings).
89
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.
Executive
Remuneration
for FY17
Remuneration paid and payable
The total remuneration paid or payable
47
50
to the Employees who are Key
Management Personnel for FY17
is listed on page 47 of this report
and the proposed remuneration
parameters for FY18 are on page 50.
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.
Directors’ Report
There are currently 23
Employees (“Employees”)
of the Group, including the
Managing Director and 3
other Key Management
Personnel (“Key Management
Personnel”).
Executive remuneration
FY17 (%)
Managing Director
At Risk
25.4%
32.6%
42.0%
Fixed
Other Key Management
Personnel
At Risk
23.9%
23.7%
52.4%
Fixed
Fixed
At risk - cash
At risk - Equity
Growthpoint Properties Australia / 44
2017 Annual Report
Remuneration Report
Non-financial performance criteria for Short-term Incentives (STI) for FY17
Components of STI paid (%)
Performance
criteria
FY17
performance measures
FY17
Achievement
Company strategy
1. Consideration of significant acquisition or M&A
96.7%
(9% of total)*
opportunities.
2. Asset acquisitions.
3. Asset disposals.
Property
operations
(9% of total)*
Stakeholder
engagement
(6% of total)*
4. Capital management initiatives.
5. Strategic portfolio asset management initiatives
1. Vacancy rate.
100%
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.
97.5%
2. Quality and frequency of ASX announcements
and reporting.
3. Information provided to Non-Executive Directors.
4. Engagement with debt providers.
5. Credit rating.
Development of
people and culture
(6% of total)*
1. Employee retention.
2. Employee survey results.
3. Diversity initiatives.
100%
4. Development of Growthpoint culture.
5. Employee training.
Total non-financial score
98.5%
*Pre-stretch target which relates to financial component.
8.1
11.0
7.3
6.9
66.7
7.4
7.7
5.0
5.1
74.8
100
90
80
70
60
50
40
30
20
10
0
FY16
FY17
Non-financial – company strategy
Non-financial – property operations
Non-financial – stakeholder engagement
Non-financial – development of people and
culture
Financial
Percentage achievement of
maximum STI
– FY17: 99.6%
– FY16: 69.8%
46
Find out more information on
page 46
Short-Term Incentives (“STI”)
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 and other Key Management
Personnel
2. Employees
A performance review is undertaken
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;
a) Financial criteria – 70% of total
The financial criteria is based upon
achieving budgeted distributable income
(22.2 cps for FY17 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 23.3
cps). If distributable income per security
is below budget, the Board has discretion
whether to grant achievement under the
financial criteria. For FY17 the achievement
was 125% for the financial criteria due to
achievement of 24.0 cps.
b) Non-financial criteria – 30% of total
The non-financial criteria is based upon
the performance criteria in the table above.
The criteria are 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.
2. Employee STI Criteria
Employees, other than the EMT, have their
STI determined based upon individual
performance reviews, achievement of
individual key performance indicators
(KPIs) and their personal contribution to
the Group’s success throughout a financial
year. The STI amounts are determined
by either the Managing Director or the
Committee based on recommendations by
the Managing Director.
Growthpoint Properties Australia / 45
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Short-term Incentives paid to EMT ($)
FY17
FY16
Max
Actual1
Max
Actual2
$
$
$
$
T. Collyer (Managing Director)
Financial (maximum includes stretch target)
774,375
774,375
743,750
464,933
Non-financial - company strategy
79,650
76,995
76,500
56,100
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 Index4 over
a rolling 3 year period5 using the following
methodology:
• At or below the 50th percentile - 0%.
Non-financial - property operations
79,650
79,650
76,500
76,500
• At the 51st percentile - 50%.
Non-financial - stakeholder engagement
53,100
51,773
51,000
51,000
Non-financial - development of people & culture
53,100
53,100
51,000
48,450
Total
1,039,875 1,035,893
998,750
696,983
A. Hockly (Chief Operating Officer)
Financial (maximum includes stretch target)
181,125
181,125
173,250
108,302
Non-financial - company strategy
18,630
18,009
17,820
13,068
Non-financial - property operations
18,630
18,630
17,820
17,820
Non-financial - stakeholder engagement
12,420
12,110
11,880
11,880
Non-financial - development of people & culture
12,420
12,420
11,880
11,286
Total
243,225
242,294
232,650
162,356
D. Andrews (Chief Financial Officer)
Financial (maximum includes stretch target)
181,125
181,125
168,000
105,020
Non-financial - company strategy
18,630
18,009
17,280
12,672
Non-financial - property operations
18,630
18,630
17,280
17,280
Non-financial - stakeholder engagement
12,420
12,110
11,520
11,520
Non-financial - development of people & culture
12,420
12,420
11,520
10,944
Total
243,225
242,294
225,600
157,436
M. Green (Head of Property)
Financial (maximum includes stretch target)
183,750
183,750
168,000
105,020
Non-financial - company strategy
18,900
18,270
17,280
12,672
Non-financial - property operations
18,900
18,900
17,280
17,280
Non-financial - stakeholder engagement
12,600
12,285
11,520
11,520
Non-financial - development of people & culture
12,600
12,600
11,520
10,944
Total
246,750
245,805
225,600
157,436
Long-Term Incentives (“LTI”)
LTI performance measures
The Group has had 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, the
EMT and Employees are issued securities
as part of their remuneration without having
to pay any amounts for them.
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 LTIs for
FY16, FY17 and FY18 are3:
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.
• 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”). The LTI Maximum
for other Key Management Personnel is 70%
of TFR. Other Employees currently have LTI
Maximums of 20%-30% of their respective
TFR. Refer to the table on page 47 for details
of TFR for senior executives for FY16
and FY17 and to page 50 for details of
proposed TFR for senior executives for
FY18.
47
50
1. Although these amounts relate to FY17 it will be paid in FY18 and so will appear in the 2018 Annual Report remuneration tables.
2. Although these amounts relate to FY16 they were paid in FY17 and so appear in the remuneration table on page 47.
3. 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.
4. 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.
5. 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.
Growthpoint Properties Australia / 46
2017 Annual Report
Remuneration Report
Details of performance rights issued in FY17
Plan
identification
Plan
participants
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 FY17
Issue date
FY16 Plan
T. Collyer (Managing Director)
29/11/16
FY16 Plan
A. Hockly (Chief Operating Officer)
18/10/16
FY16 Plan
D. Andrews (Chief Financial Officer)
18/10/16
FY16 Plan
M. Green (Head of Property)
18/10/16
$
85,001
24,750
24,002
24,002
FY15 Plan
T. Collyer (Managing Director)
29/11/16
131,985
FY15 Plan
A. Hockly (Chief Operating Officer)
18/10/16
FY15 Plan
D. Andrews (Chief Financial Officer)
18/10/16
FY15 Plan
M. Green (Head of Property)
18/10/16
30,375
28,564
28,564
FY14 Plan
T. Collyer (Managing Director)
18/10/16
131,081
FY14 Plan
A. Hockly (Chief Operating Officer)
18/10/16
FY14 Plan
D. Andrews (Chief Financial Officer)
18/10/16
FY14 Plan
M. Green (Head of Property)
18/10/16
29,792
27,663
27,663
FY13 Plan
T. Collyer (Managing Director)
18/10/16
138,040
FY13 Plan
A. Hockly (Chief Operating Officer)
18/10/16
FY13 Plan
D. Andrews (Chief Financial Officer)
18/10/16
FY13 Plan
M. Green (Head of Property)
18/10/16
30,813
28,348
27,731
Key Management Personnel remuneration
Short-term
Post
employment
Salary
and fees
$
Cash
bonus1
$
Non-
monetary
benefits
Super-
annuation
benefits
$
$
For the year to 30 June 2017
T. Collyer (Managing Director)
868,275
696,983
1,378
30,000
A. Hockly (Chief Operating Officer)
320,175
162,356
D. Andrews (Chief Financial Officer)
320,175
157,436
M. Green (Head of Property)
325,250
157,436
-
-
-
30,000
30,000
30,000
For the year to 30 June 2016
T. Collyer (Managing Director)
832,750
942,986
1,378
30,000
A. Hockly (Chief Operating Officer)
304,950
173,614
D. Andrews (Chief Financial Officer)
294,800
163,255
M. Green (Head of Property)
294,800
163,255
-
-
-
30,000
30,000
30,000
No.
26,235
7,639
7,408
7,408
40,736
9,375
8,816
8,816
40,457
9,195
8,538
8,538
42,605
9,510
8,749
8,559
Share
based
payments
Other
long-term
Termination
benefits
Options
and rights
$
$
$
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
-
-
-
-
Total
$
$
-
-
-
-
-
-
-
-
-
543,951
2,140,587
-
161,984
674,515
-
158,601
666,212
-
159,781
672,467
-
543,014
2,350,128
-
138,884
647,449
-
132,273
620,328
-
132,022
620,077
%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
S300A (1) (e) (i)
proportion of
remuneration
performance
related
%
58%
48%
47%
47%
63%
48%
48%
48%
1. Refers to when cash bonus was paid although it relates to the previous financial year.
Growthpoint Properties Australia / 47
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Directors’ Report
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.
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
LTI Maximum for the Managing Director & other Key Management Personnel
FY17 Plan
FY16 Plan
LTI
Maximum
of TFR
LTI
Maximum
LTI
Estimate*
LTI
Maximum
of TFR
LTI
Maximum
LTI
Actual
%
$
$
%
$
$
80
708,000
552,240
80
680,000
340,000
70
241,500
188,370
60
198,000
99,000
70
241,500
188,370
60
192,000
96,000
T. Collyer
(Managing Director)
A. Hockly
(Chief Operating Officer)
D. Andrews
(Chief Financial Officer)
M. Green
(Head of Property
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.
FY17 Achievement
The LTI Maximum for the Managing Director
and other Key Management Personnel for
the year ended 30 June 2016 is at left. The
LTI Achievement cannot be calculated until
the release of the benchmark data for the
year ended 30 June 2017 so an estimated
fair value at issue date is provided at left.
The estimated LTI Achievement is included
in an equity reserve in the year to 30 June
2017, 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 FY17, 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:
70
245,000
191,100
60
192,000
96,000
1. FY13 – 98.6% of $30,000 = $29,580
1,436,000 1,120,080
1,262,000
631,000
LTI Estimate
78%
LTI Actual
50%
*Estimated at 78% achievement on the basis of recent historical performance.
Number of performance rights
Names
1 July 2016
Granted
Vested
30 June 2017
T. Collyer (Managing Director)
203,122
104,940
(107,428)
200,634
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 have been
eligible to receive 6,168 Growthpoint
Properties Australia securities in October
2015 comprising the following LTI Awards:
A. Hockly (Chief Operating Officer)
46,515
30,556
(26,209)
D. Andrews (Chief Financial Officer)
43,524
29,632
(24,762)
M. Green (Head of Property)
43,524
29,632
(24,762)
50,862
48,394
48,394
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)
Growthpoint Properties Australia / 48
2017 Annual Report
Remuneration Report
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
5. All Non-Executive Directors’ fees are
The total remuneration paid to Non-
Executive Directors for FY17 is listed below
and the proposed FY18 remuneration
is on page 50.
50
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 Chairman or a member of a
committee.
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
Directors hold securities in the Group
89
(refer to page 89 for details of
Director holdings).
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.
Non-executive Director Remuneration
For the year to 30 June 2017
G. Tomlinson (Chairman)
M. Brenner
E. de Klerk
G. Jackson
F. Marais
N. Sasse
For the year to 30 June 2016
G. Tomlinson (Chairman)
M. Brenner
E. de Klerk
G. Jackson
F. Marais
N. Sasse
Salary
and fees
$
170,502
106,758
109,000
99,543
107,700
112,600
162,100
101,644
103,500
94,520
101,000
106,000
Short-term
Post
employment
Share
based
payments
Cash
bonus
Non-
monetary
benefits
Super-
annuation
benefits
Other
long-term
Termination
benefits
Options
and rights
$
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
$
16,198
10,142
-
9,457
-
-
15,400
9,656
-
8,979
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
186,700
116,900
109,000
109,000
107,700
112,600
177,500
111,300
103,500
103,500
101,000
106,000
S300A (1) (e) (i)
proportion of
remuneration
performance
related
%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Growthpoint Properties Australia / 49
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Directors’ Report
FY18 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, FY18 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 FY18.
FY18 Remuneration (unaudited)
Total Fixed Remuneration
(Including superannuation
(“TFR”)
Short-term
Incentive
(maximum)
Long-term
Incentive
(maximum)
Chairman
$196,035 (5.0% increase from FY 17)
Nil
Geoff Tomlinson
Non-Executive
Directors
$100,332 (base fee 3.0% increase from
FY17) plus fees for acting as:
Nil
Nil
Nil
Termination
notice
(without
cause)
Termination Payments
(without cause for
redundancy or similar
by the Company)
Restraint
of trade
period
Nil
Nil
Nil
Nil
Nil
Nil
Other Benefits
Nil
Ineligible for additional
committee fees
Nil
– Chairman – Audit, Risk & Compliance
Committee - $20,085 (3.0% increase)
– Member – Audit, Risk & Compliance
Committee - $11,948 (3.0% increase)
– Chairman – Nomination, Remuneration
& HR Committee - $15,960 (5.0%
increase)
– Member – Nomination, Remuneration
& HR Committee - $10,609 (3.0%
increase)
$920,400 (4.0% increase from FY 17)
$367,425 (6.5% increase from FY 17)
$367,425 (6.5% increase from FY 17)
$372,750 (6.5% increase from FY 17)
Managing
Director
Timothy Collyer
Chief
Operating
Officer
Aaron Hockly
Chief Financial
Officer
Dion Andrews
Head of
Property
Michael Green
Various
Other
Management
Staff
Other Staff
Various
117.5% of
TFR*
82.3% of
TFR*
82.3% of
TFR*
82.3% of
TFR*
30.0% of
TFR*
20.0% of
TFR*
80% of TFR
– Gym membership
– Payment of up to
1.5% of TFR in lieu
of premium for Life,
TPD and Income
Protection Cover
Six months'
notice
Nine months' notice
and Redundancy Policy
benefits. Unvested LTI
grants remain on foot
12 months
70.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
70.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
70.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
30.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
20.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
Six months'
notice
Six months'
notice
Six months'
notice
One month
(By either
party)
One month
(By either
party)
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
6 months
6 months
6 months
3 months
0-3
months
*Inclusive of a stretch target that relates to ‘Financial’ component.
Growthpoint Properties Australia / 50
2017 Annual Report
Remuneration Report
LTI
The structure of the LTI for FY18 has not
changed from FY17. Refer to page 48
for details about the LTI for FY17
and, accordingly, the FY18 LTI.
48
50
The figures included in the table
on page 50 are the maximum
available for award under this
scheme in respect of FY18.
STI
For the EMT, an STI award may be
payable in respect of FY18 based on the
following measures:
1) Financial criteria – 70% (subject to
a stretch target)
The financial criteria is based upon
achieving or outperforming budgeted
Funds From Operations (“FFO”) per
security for the financial year.
2) Non-financial measures (30%
weighting) comprising those matters
for FY17 (listed on page 45)
45
Refer to the table on page
45 for more details about STI
performance measures.
Employees, other than the EMT,
have their STI determined based
upon individual performance reviews,
achievement of individual KPIs and their
personal contribution to the Group’s
success throughout a financial year. The
STI amounts are determined by either
the Managing Director or the Committee
based on recommendations by the
Managing Director.
Other information
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.
b) Recommend, for adoption by the Board,
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.
c) Link rewards to the creation of value for
Securityholders.
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 measures in the
table below in respect of the five financial
years ended 30 June 2017.
Impact of performance on Securityholders’ wealth
FY17
FY16
FY15
FY14
FY13
Profit attributable to Securityholders
$’000 278,090 219,3771 283,004 117,348
93,956
Dividends and distributions paid
$’000 140,077
118,134 110,685
86,790
72,590
Distribution per stapled security
Highest closing price in FY
Lowest closing price in FY
Closing stapled security price
Change in stapled security price
Total Securityholder return2
Return on equity
¢
¢
¢
$
$
%
%
21.5
3.49
3.00
3.14
(0.01)
20.5
3.39
2.92
3.15
0.02
19.7
3.32
2.44
3.13
0.68
19.0
2.63
2.32
2.45
0.05
18.3
2.60
2.04
2.40
0.30
6.3
7.4
36.4
10.8
23.6
18.6
13.51
23.9
17.5
13.1
1. Restated as per ASX announcement February 2017.
2. Source UBS Investment Research.
Growthpoint Properties Australia / 51
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Committee members
The members of the Nomination,
Remuneration & HR Committee during the
year and at the date of this Report are:
• Norbert Sasse (Chairman)
– non-executive director
• Francois Marais – independent,
non-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 $40,800 for providing these
services. The Company did not engage
PwC for any other work during FY17.
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
of remuneration for all Directors and
Employees based on:
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).
Growthpoint Properties Australia / 52
2017 Annual Report
Executive Director Remuneration
and Service Contract
There is currently only one executive
director being the Managing Director,
Timothy Collyer.
Remuneration paid and payable
47
50
The total remuneration paid or payable
to the Managing Director for FY17
is listed on page 47 of this report
and the proposed remuneration
parameters for FY18 are on page 50.
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.
Principles of remuneration for the
Managing Director
The principles of remuneration for the
Managing Director are:
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 45 for measures
for the FY17 STI and the FY18
STI;
45
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 directly
to the Managing Director (in lieu of
premium);
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 89 for details
of director holdings).
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
50
including through redundancy.
Refer to page 50 for more details
of redundancy entitlements.
1. The Managing Director should receive
89
Remuneration Report
Meetings of Directors (FY17)
Board member
G. Tomlinson (Chairman)
M. Brenner
T. Collyer (Managing Director)1,2
E. de Klerk
G. Jackson
F. Marais
N. Sasse
Growthpoint Board
Audit, Risk & Compliance
Committee
Nomination, Remuneration
& HR Committee
eligible
to attend
attended
eligible
to attend
attended
eligible
to attend
attended
10
10
10
10
10
10
10
10
10
10
9
10
9
9
5
5
–
5
5
–
–
5
5
5
5
5
–
–
6
–
–
–
–
6
6
6
–
6
–
–
6
6
1. As Managing Director, Timothy Collyer, has a standing invitation to all committee meetings, unless its members determine otherwise, but is not a member of the
Nomination, Remuneration & HR Committee. Mr Collyer is not present for any part of meetings which consider his remuneration except to answer questions from the
Committee.
2. As Managing Director, Timothy Collyer, has a standing invitation to all committee meetings, unless its members determine otherwise, but is not a member of the Audit,
Risk & Compliance Committee.
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 45.
45
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.
Senior Executive Reviews
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
Committee considers, among other things,
the STI performance measures listed
on page 45.
45
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 FY17.
The Chairman 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 the Growthpoint website for full
profiles of each Director:
growthpoint.com.au/about/board/
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.
Growthpoint Properties Australia / 53
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Directors’ Report
Additional
information
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54
Additional information
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.
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.
2017
$
Services other than audit and
review of financial statements:
Other regulatory audit services
58,728
Other assurance service and due
diligence services
9,600
Audit and review of financial
statements
124,522
192,850
Non-Audit services
Total paid to KPMG
During the year KPMG, the Group’s auditor,
has performed certain other services in
addition to the audit and review of the
financial statements.
The Board has considered the non-audit
services providing during the year by the
auditor and 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.
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
97
A copy of the auditor’s independence
declaration as required under section
307C of the Corporations Act 2001
(Cth) is set out on page 97.
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.
Growthpoint Properties Australia / 55
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Financial Report
Financial Report
for the year ended
30 June 2017
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56
Financial Report
What’s inside
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
Section 2: Operating results, assets and liabilities
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
Section 3: Capital structure and financing costs
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
58
59
60
62
63
65
65
66
73
74
75
75
76
76
77
78
80
83
85
86
86
88
88
90
90
92
92
92
94
94
95
96
97
98
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 31, 35 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 21 August 2017. The Directors have the
power to amend and reissue the financial report.
References to “the year” or “FY17” in this report refer
to the year ended 30 June 2017 unless the context
requires otherwise. References to “FY18” and “FY19”
relate to the twelve months ending 30 June in the year
listed.
References to “balance date” in this report refer to
30 June 2017 unless the context requires otherwise.
22
For a detailed reconciliation from statutory profit to
Funds From Operations (FFO), please refer to page
22 of the Directors Report.
Growthpoint Properties Australia / 57
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Financial Report
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2017
Notes
Revenue
Property revenue
Straight line adjustment to property revenue
Net changes in fair value of investment properties
Loss 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
Profit from operating activities
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
2017
$’000
Restated
2016
$’000
261,463
2,522
118,157
(1,123)
-
16,161
(13,779)
383,401
(38,145)
(12,385)
(50,530)
208,626
7,426
91,691
-
163
4,647
(10,471)
302,082
(27,457)
(10,407)
(37,864)
332,871
264,218
501
(55,232)
(54,731)
559
(44,982)
(44,423)
278,140
219,795
2.1
2.2
2.2
2.2
2.1
3.2
4.3
(50)
(418)
278,090
219,377
279,324
(1,234)
278,090
219,552
(175)
219,377
Distribution to Securityholders
3.6
(140,077)
(118,134)
Change in net assets attributable to Securityholders / Total Comprehensive Income
138,013
101,243
Basic and diluted earnings per stapled security (cents)
3.7
42.7
38.1
Refer to section 2.2 for further information on the restatement for the year to 30 June 2016.
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
Growthpoint Properties Australia / 58
2017 Annual Report
Financial Statements
Consolidated Statement
of Financial Position
As at 30 June 2017
Notes
Current assets
Cash and cash equivalents
Trade and other assets
Assets held for sale
Total current assets
Non-current assets
Plant & equipment
Investment properties
Derivative financial instruments
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
Total Securityholders’ funds
2.4
2.3
2.2
3.3
4.3
2.5
3.6
3.1
3.3
2017
$’000
31,459
10,891
103,500
145,850
Restated
2016
$’000
70,661
5,207
151,688
227,556
1,197
195
3,180,275
2,651,145
121
929
-
709
3,182,522
2,652,049
3,328,372
2,879,605
48,750
72,086
235
121,071
38,978
60,062
574
99,614
1,299,380
1,242,226
6,440
15,353
1,305,820
1,257,579
1,426,891
1,357,193
1,901,481
1,522,412
3.5
1,653,735
1,414,012
6,369
241,377
5,036
103,364
1,901,481
1,522,412
Refer to section 2.2 for further information on the restatement as at 30 June 2016.
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 2017
Balance at 30 June 2016
Contributed
equity
$’000
1,414,012
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
239,723
Distributions provided or paid
Share-based payment transactions
Deferred tax expense charged to equity
-
-
-
Total transactions with Securityholders
239,723
$’000
4,506
-
-
-
-
-
1,319
-
1,319
Share-based
payments
reserve
Deferred tax
expenses
charged to
equity
Profits
reserve
Accumulated
profits
$’000
$’000
$’000
Total
$’000
522
7
103,365
1,522,412
-
-
-
-
-
-
15
15
-
-
-
-
-
-
-
-
278,090
278,090
-
-
278,090
278,090
-
239,723
(140,077)
(140,077)
-
-
1,319
15
(140,077)
100,980
Balance at 30 June 2017
1,653,735
5,825
537
7
241,377
1,901,481
Total recognised income and expense for the
year is attributable to:
- Trust
- Company
Growthpoint Properties Australia
279,324
(1,234)
278,090
Growthpoint Properties Australia / 60
2017 Annual Report
Financial Statements
For the year ended 30 June 2016
Contributed
equity
Share-based
payments
reserve
Deferred tax
expenses
charged to
equity
Profits
reserve
Accumulated
profits /
(losses)
Restated
Total
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 30 June 2015
1,376,011
3,369
471
7
2,122
1,381,980
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
-
-
-
-
-
-
-
-
219,377
219,377
-
-
219,377
219,377
-
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
103,365
1,522,412
Total recognised income and expense for the
year is attributable to:
- Trust
- Company
Growthpoint Properties Australia
219,552
(175)
219,377
Refer to section 2.2 for further information on the restatement as at 30 June 2016.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
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Consolidated
Cash Flow Statement
For the year ended 30 June 2017
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 (outflow)/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.
2017
$’000
268,716
(53,125)
215,591
(53,496)
(595)
161,500
501
161,574
(227,845)
(1,281)
(67,051)
903,354
(981,000)
103,864
(6,013)
(13,779)
(140,077)
(133,651)
(39,202)
70,661
31,459
2016
$’000
221,286
(42,252)
179,034
(44,647)
(565)
133,822
559
-
(355,138)
(11)
(354,590)
719,584
(368,138)
40,132
(2,131)
(10,471)
(114,405)
264,571
43,803
26,858
70,661
Growthpoint Properties Australia / 62
2017 Annual Report
Notes to the Financial Statements
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 FY17 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 2017. The Group’s registered address is Level 31, 35 Collins
Street, Melbourne, Victoria 3000, Australia.
The ultimate parent entity of the Group is Growthpoint Properties Limited.
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 21 August 2017.
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.
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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.
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
2017, 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. The effect of the Standard has been examined and would not have any material impact on the Group
once implemented.
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. The effect of the Standard has been examined and would not have any material impact on the Group once
implemented.
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. The effect of the Standard has been examined and would not have any material impact on the Group once
implemented.
Growthpoint Properties Australia / 64
2017 Annual Report
Notes to the Financial Statements
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 and
other payables.
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.
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 ended 30 June 2017
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
160,396
(23,583)
136,813
72,221
209,034
101,067
(14,562)
86,505
45,936
132,441
261,463
(38,145)
223,318
118,157
341,475
4,282
(67,617)
278,140
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Financial Report
2.1 Revenue and segment information (cont.)
Segmental information (cont.)
Statement of comprehensive income for the year ended 30 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
Restated
Total
$’000
101,219
(13,459)
87,760
70,735
158,495
107,407
(13,998)
93,409
20,956
114,365
208,626
(27,457)
181,169
91,691
272,860
2,324
(55,389)
219,795
Property values are also reported by segment and this information is reported in note 2.2.
Major customer
Revenues from one customer, Woolworths Limited, of the Group’s Industrial segment represents $45,650,000 (2016: $47,705,000) of the
Group’s total revenues.
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 entire 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.
Growthpoint Properties Australia / 66
2017 Annual Report
Notes to the Financial Statements
2.2 Investment properties (cont.)
Determination of fair value (cont.)
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.
Revised accounting treatment of tenant incentives
During the year, the Group altered its treatment of determining fair value revaluation adjustments related to investment property by
including the balance of unamortised tenant incentives previously recognised as an asset (in Trade and Other Assets) separate to the
investment property to which it applied. The impact of this change is:
• On the Consolidated Statement of Financial Position as at 30 June 2016, decrease Current Trade and Other Assets by $34,429,000
and decreased Accumulated Profits by $34,429,000. This restatement had a corresponding impact on reported balance sheet gearing.
• On the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year to 30 June 2016, decrease Net
Changes in Fair Value of Investment Properties by $4,892,000, which consequently reduces Profit for the Period by the same amount.
Basic and Diluted Earnings Per Security is also reduced to 38.1 cents for that year from 38.9 cents previously reported.
• On the Consolidated Statement of Changes in Equity, the opening balance of Accumulated Profits at 30 June 2015 reduces by
$29,537,000, the Profit After Tax for the year to 30 June 2016 reduces by $4,892,000 and the closing balance of Accumulated Profits at
30 June 2016 reduces by $34,429,000.
For consistency with the treatment of tenant incentives outlined above, the Group adopted a change to its accounting policy with regards
to the presentation of straight line adjustments to rental income. It has derecognised straight line rent receivables as a separate asset and
included them as a component of the value of investment property.
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 the 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 2017 and 30 June 2016.
On the Consolidated Statement of Financial Position as at 30 June 2016 the effect is to decrease Non-Current Trade and Other Assets by
$58,556,000 and increase Investment Properties by $58,556,000. This restatement has a nil impact on reported Net Assets.
Investment Properties Value
Industrial Properties
Victoria
120 Northcorp Boulevard
522-550 Wellington Road
Broadmeadows
Mulgrave
1500 Ferntree Gully Road & 8 Henderson Road
Knoxfield
40 Annandale Road
9-11 Drake Boulevard
130 Sharps Road
120-132 Atlantic Drive
Lots 2-4, 44-54 Raglan Street
20 Southern Court
120 Link Road
60 Annandale Road
6 Kingston Park Court
3 Millennium Court
Melbourne Airport
Altona
Melbourne Airport
Keysborough
Preston
Keysborough
Melbourne Airport
Melbourne Airport
Knoxfield
Knoxfield
Latest External Valuation Consolidated Book Value
Date
Valuation
30-Jun-17
30-Jun-16
$’000
$’000
$’000
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
30-Jun-17
31-Dec-16
30-Jun-17
30-Jun-17
31-Dec-16
31-Dec-16
31-Dec-16
31-Dec-16
30-Jun-17
31-Dec-16
30-Jun-17
30-Jun-17
31-Dec-16
77,700
65,500
42,300
33,000
31,350
24,500
23,500
22,500
15,250
14,100
13,000
12,150
11,000
77,700
65,900
42,300
33,000
31,350
24,500
24,100
23,100
15,250
15,500
13,000
12,150
11,000
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
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Financial Report
2.2 Investment properties (cont.)
Investment Property Values (cont.)
Industrial Properties
31 Garden Street
45-55 South Centre Road
19 Southern Court
75 Annandale Road
Queensland
70 Distribution Street
13 Business Street
29 Business Street (i)
5 Viola Place
10 Gassman Drive (ii)
3 Viola Place
Western Australia
20 Colquhoun Road
New South Wales
27-49 Lenore Drive
6-7 John Morphett Place
51-65 Lenore Drive
34 Reddalls Road
81 Derby Street
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-17
30-Jun-16
$’000
$’000
$’000
31-Dec-16
31-Dec-16
30-Jun-17
30-Jun-17
9,900
7,850
8,100
7,150
10,100
7,850
8,100
7,150
9,750
8,000
8,000
7,100
31-Dec-16
201,000
205,000
200,800
31-Dec-16
15,000
15,000
30-Jun-16
10,400
-
31-Dec-16
30-Jun-16
31-Dec-16
8,500
8,000
4,800
-
1,970
2,100
14,850
10,400
8,500
4,800
1,950
Kilsyth
Melbourne Airport
Keysborough
Melbourne Airport
Larapinta
Yatala
Yatala
Brisbane Airport
Yatala
Brisbane Airport
VIC
VIC
VIC
VIC
QLD
QLD
QLD
QLD
QLD
QLD
Perth Airport
WA
31-Dec-16
150,000
152,800
146,000
Erskine Park
Erskine Park
Erskine Park
Kembla Grange
Silverwater
Gepps Cross
Beverley
Adelaide Airport
Adelaide Airport
NSW
NSW
NSW
NSW
NSW
SA
SA
SA
SA
30-Jun-17
31-Dec-16
31-Dec-16
30-Jun-17
31-Dec-16
31-Dec-16
30-Jun-17
31-Dec-16
31-Dec-16
63,500
45,000
31,000
24,000
16,200
73,000
21,250
14,000
8,550
63,500
45,000
32,000
24,000
16,600
73,400
21,250
14,300
8,400
60,900
45,000
30,000
21,000
15,100
70,300
21,100
14,100
8,400
Total Industrial Properties
1,107,020
1,103,400
1,084,650
(i) This property was sold in September 2016.
(ii) This property was sold in July 2017.
Growthpoint Properties Australia / 68
2017 Annual Report
Notes to the Financial Statements
2.2 Investment properties (cont.)
Investment Property Values (cont.)
Office Properties
Victoria
75 Dorcas Street
Building 2, 572-576 Swan Street
Building B, 211 Wellington Road
Buildings 1&3, 572-576 Swan Street
Building C, 211 Wellington Road
Carpark, 572-576 Swan Street
Vantage, 109 Burwood Road (iii)
Queensland
1231-1241 Sandgate Road (iv)
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
Hawthorn
Nundah
Brisbane
South Brisbane
South Brisbane
South Brisbane
South Brisbane
Car Park, 32 Cordelia Street & 52 Merivale Street South Brisbane
Optus Centre, 15 Green Square Close (iii)
Fortitude Valley
South Australia
World Park, 33-39 Richmond Road
7 Laffer Drive
New South Wales
1 Charles Street
Building C, 219-247 Pacific Highway
5 Murray Rose Avenue (iii)
3 Murray Rose Avenue (iii)
Keswick
Bedford Park
Parramatta
Artarmon
Latest External Valuation Consolidated Book Value
Date
Valuation
30-Jun-17
30-Jun-16
$’000
$’000
$’000
VIC
VIC
VIC
VIC
VIC
VIC
VIC
QLD
QLD
QLD
QLD
QLD
QLD
QLD
QLD
SA
SA
30-Jun-17
180,000
180,000
166,000
30-Jun-17
31-Dec-16
31-Dec-16
31-Dec-16
30-Jun-17
80,900
70,400
60,300
53,000
1,125
30-Jun-17
89,250
80,900
72,400
62,000
55,500
1,125
89,250
82,000
67,000
57,800
22,070
1,200
-
31-Dec-16
103,500
-
103,500
30-Jun-17
121,000
121,000
102,500
30-Jun-17
31-Dec-16
30-Jun-17
31-Dec-16
31-Dec-16
99,000
77,750
79,000
55,500
25,750
99,000
81,200
79,000
57,200
26,000
92,500
74,800
72,800
52,400
18,000
30-Jun-17
138,000
138,000
-
30-Jun-17
30-Jun-17
62,000
15,500
62,000
15,500
62,000
16,400
NSW 31-Dec-16
292,000
303,500
280,000
NSW 31-Dec-16
115,000
115,000
111,000
Quad 2, 6 Parkview Drive (iii)
Sydney Olympic Park NSW 31-Dec-16
Quad 3, 102 Bennelong Parkway (iii)
Sydney Olympic Park NSW 30-Jun-17
Sydney Olympic Park NSW 31-Dec-16
Sydney Olympic Park NSW 30-Jun-17
93,500
97,000
28,500
29,800
97,000
97,000
28,500
29,800
-
-
-
-
Tasmania
89 Cambridge Park Drive
Australian Capital Territory
10-12 Mort Street
255 London Circuit
Total Office Properties
Cambridge
TAS
31-Dec-16
27,000
27,000
27,000
Canberra
Canberra
ACT
ACT
30-Jun-17
31-Dec-16
87,000
72,000
87,000
72,000
87,500
70,025
2,153,775
2,076,875
1,566,495
Total investment properties
3,260,795
3,180,275
2,651,145
(iii) These properties were acquired in October 2016.
(iv) This property has been transferred to assets available for sale.
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Financial Report
2.2 Investment properties (cont.)
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 JLL, Savills, Urbis, CBRE, Knight Frank, Colliers, m3property and LMW. The fair value of properties
not externally valued as at 30 June 2017 were based solely on Director 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
2017
2016
7.3% - 8.5%
7.5% - 9.8%
6.3% - 10.0%
6.8% - 11.5%
5.8% - 9.0%
6.0% - 9.5%
3-12 months
3-12 months
2.5% - 5.0%
2.5% - 5.0%
2017
2016
6.8% - 10.5%
6.8% - 10.0%
6.3% - 10.3%
6.3% - 11.8%
5.5% - 13.4%
6.0% - 11.8%
6-12 months
6-12 months
3.0% - 4.5%
3.1% - 4.5%
30-Jun-17
30-Jun-16
7.49%
2.60%
4.89%
7.89%
1.98%
5.91%
As the above table shows, over the 12 months to 30 June 2017 discount rates utilised in the valuation of the Group’s property portfolio
have tightened (lowered) by approximately 40 basis points. Over the same period the implied property risk premium has decreased by
approximately 102 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 decrease in the implied property risk premium is in part due to further tightening of the
Group’s weighted average discount rate in addition to a strong recovery in government bond yields (62 basis points) since 30 June 2016.
Growthpoint Properties Australia / 70
2017 Annual Report
Notes to the Financial Statements
2.2 Investment properties (cont.)
Commentary on Capitalisation Rates
Industrial
The major Eastern seaboard industrial markets continue to be characterised by a large volume of existing capital with limited opportunities
for new investment. Domestic and international REITs remain the most active buyers. Melbourne and Sydney remain the focal point of
investor attention given their stronger local economies. Investors continue to seek larger assets with long WALEs which provide stable
income, however opportunities are limited given vendors reluctance to dispose of assets due to the difficulty in replacing income. Yields
have continued to compress in most markets, the result of strong investor appetite and limited stock, compressing by between 0 and 50
basis points. The weighted average capitalisation rate used in valuing the industrial portfolio has firmed from 7.1% to 6.9% over the 12
months to 30 June 2017.
Office
Capital remains readily available for new investment in the office sector supporting 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 sector
and offshore investors continue to represent the most active buyer profile. Investor focus remains on Eastern seaboard cities, particularly
Sydney and Melbourne, although limited opportunity in these markets has prompted investors to consider other markets (e.g. Brisbane).
Yields continued to tighten in most markets, particularly for prime and A-grade assets in the Eastern states of Australia, compressing by
between 25 and 75 basis points. The weighted average capitalisation rate used in valuing the office portfolio has firmed from 6.8% to 6.3%
over the 12 months to 30 June 2017.
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, the current 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, where as a decrease would decrease the value of
investment property.
Contractual obligations
At 30 June 2017, the following contractual obligations relating to expansions at existing investment property are in place:
• Under an expansion clause in the current lease the tenant at 120-132 Atlantic Drive, Keysborough, Victoria can request a 3,000 square
metre 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.
• Under a warehouse expansion clause in the current lease to Brown & Watson International Pty Ltd at 1500 Ferntree Gully Road,
Knoxfield, Victoria, the tenant can request an expansion of the warehouse over the vacant land at any point during the initial term prior
to the latest date for exercising the first option (which is 13 August 2024). 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 a formula utilising the
construction costs under the warehouse expansion clause.
• Under an expansion clause in the current lease at 60 Annandale Road, Melbourne Airport, Victoria (which currently expires on 3 May
2028), the Group is responsible for funding a 5,000 square metre expansion of the property. Upon completion of the expansion works
the lease would be re-set so that at least ten years remained and rent would be charged on the additional lettable area constructed
under the expansion clause.
• The 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.
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2.2 Investment properties (cont.)
Amounts recognised in profit and loss for investment properties
Rental income
Straight line adjustment to rental income
Net gain from fair value adjustment
Loss on sale of investment properties
Unrealised gain on assets held for sale
Direct operating expenses from property that generated rental income
2017
$’000
261,463
2,522
118,157
(1,123)
-
(38,145)
342,874
Restated
2016
$’000
208,626
7,426
91,691
-
163
(27,457)
280,449
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
2017
$’000
228,397
819,366
476,081
2016
$’000
206,862
736,407
480,018
1,523,844
1,423,287
10 (2016: 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
2017
$’000
2,261
4,722
148
7,131
2016
$’000
3,399
5,725
605
9,728
Growthpoint Properties Australia / 72
2017 Annual Report
Notes to the Financial Statements
2.2 Investment properties (cont.)
Reconciliation of value of investment properties
At fair value
Opening balance
Acquisitions
Capital expenditure
Lease incentives and leasing costs
Amortisation of lease incentives and leasing costs
Disposals
Net loss on disposals
Unrealised gain on assets held for sale
Transfer to available for sale
Straight lining of revenue adjustment
Net gain from fair value adjustment
Closing balance at 30 June
2.3 Non-current assets held for sale
Accounting policy
2017
$’000
Restated
2016
$’000
2,651,145
2,343,840
510,867
10,042
17,238
(9,969)
(15,103)
(1,123)
-
347,844
6,976
11,116
(6,224)
-
-
163
(103,500)
(151,688)
2,522
118,157
7,426
91,691
3,180,275
2,651,145
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.
As at 30 June 2017, there was one property classed as held for sale (2016: 5) and its value is shown on the table below:
28 Bilston Drive, Wodonga, VIC
213-215 Robinsons Road, Ravenhall, VIC
99 and 101-103 William Angliss Drive, Laverton North, VIC
365 Fitzgerald Road, Derrimut, VIC
670 Macarthur Avenue, Pinkenba, QLD
1231-1241 Sandgate Road, Nundah, QLD (i)
Total
(i) This property transacted and settled on 7 July 2017, refer to Note 4.9 for further information.
2017
$’000
-
-
-
-
-
103,500
103,500
2016
$’000
69,240
26,959
27,730
17,843
9,916
-
151,688
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Financial Report
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 assets 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.
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
Prepayments
Proceeds from sale of investment properties
Impaired rent receivables
As at 30 June 2017, there were no impaired rent receivables (2016: nil).
Growthpoint Properties Australia / 74
2017 Annual Report
2017
Restated 2016
$’000
$’000
1,335
4,756
4,800
10,891
1,392
3,815
-
5,207
Notes to the Financial Statements
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
2.6 Cash flow information
Accounting policies
Cash and cash equivalents
2017
$’000
2,350
586
2,040
23,453
20,321
48,750
2016
$’000
620
519
2,001
17,580
18,258
38,978
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
Cash and cash equivalents balance
(b) Reconciliation of net operating profit to net cash inflow from operating activities
Net profit for the period
Fair value adjustment to investment property
Loss 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 lease incentives and leasing costs
– Increase in receivables
– Increase in prepayments
– Increase in deferred tax asset
– Increase in payables
2017
Restated 2016
$’000
$’000
31,459
70,661
278,090
219,377
(118,157)
(91,691)
1,123
-
(16,161)
13,779
2,412
(501)
162
(7,304)
(5,141)
(2,612)
(221)
16,031
-
(163)
(4,647)
10,471
1,685
(559)
128
(4,892)
(5,049)
(3,385)
(210)
12,757
Net cash inflow from operating activities
161,500
133,822
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Financial Report
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
– Facility G
– Facility I
– Facility H
Loan note 1
Loan note 2
Loan note 3
Fixed bank facility 1
USPP 1
USPP 2
USPP 3
Total loans
Less unamortised upfront costs
Total interest bearing liabilities
Opening
balance
1 July 2016
Movement
during period
Balance
as at
30 June 2017
Facility limit
Maturity
$’000
$’000
$’000
$’000
255,000
255,000
188,272
-
100,000
-
-
-
200,000
100,000
60,000
90,000
-
-
-
1,248,272
(6,046)
1,242,226
(255,000)
(155,000)
56,728
52,144
-
150,000
-
-
-
-
-
-
130,344
52,138
26,000
57,354
(200)
57,154
-
100,000
245,000
52,144
100,000
150,000
-
-
200,000
100,000
60,000
90,000
130,344
52,138
26,000
-
100,000
245,000
70,000
100,000
150,000
75,000
75,000
200,000
100,000
60,000
90,000
130,344
52,138
26,000
1,305,626
1,473,482
(6,246)
1,299,380
N/A
Dec-18
Dec-19
Dec-19
Jun-19
Sep-21
Nov-20
Sep-20
Mar-25
Dec-22
Dec-22
Dec-22
Jun-27
Jun-29
Jun-29
During the year, the Group issued debt into the United States Private Placement (USPP) market, with two of the tranches denominated
in United States Dollars (USD). These amounts and the interest payable on them have been converted to Australian Dollars (AUD) via the
Group entering into Cross Currency Swaps (CCS).
The weighted average all-in interest rate (including bank margin and amortisation of upfront fees paid) at 30 June 2017 was 4.29% per
annum (2016: 4.13% per annum). Refer to note 3.3 for details on interest rate and cross currency swaps.
Growthpoint Properties Australia / 76
2017 Annual Report
Notes to the Financial Statements
3.1 Interest bearing liabilities (cont.)
Interest bearing liabilities (cont.)
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, USPP 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 held for sale
Non-current
First mortgage
Investment properties
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
2017
$’000
Restated
2016
$’000
31,459
10,891
103,500
145,850
70,661
5,207
151,688
227,556
3,180,275
2,651,145
1,197
929
195
709
3,182,401
3,328,251
2,652,049
2,879,605
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
2017
$’000
52,821
2,411
55,232
2016
$’000
43,297
1,685
44,982
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Financial Report
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 and cross currency 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 and cross currency swaps are 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 assets
Total non-current derivative financial instrument liabilities
2017
$’000
121
(6,440)
(6,319)
2016
$’000
-
15,353
15,353
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 and currency 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 and cross currency 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 2017 covered 25% (30 June 2016: 29%) of the loan principal outstanding. With total fixed interest rate debt of
$984 million outstanding (30 June 2016: $450 million), the total fixed interest rate coverage of outstanding principle is 75% (30 June 2016:
65%).
The average fixed interest rate of swaps at 30 June 2017 was 2.30% per annum (2016: 3.06% per annum) and the variable interest rate
(excluding bank margin) is 1.68% per annum (30 June 16: 1.89% per annum) at balance date. See table below for further details of swaps
in effect at 30 June 2017:
Counter Party
Interest rate swaps
NAB
CBA
CBA
ANZ
Westpac
Westpac
ANZ
Total / Weighted average
Growthpoint Properties Australia / 78
2017 Annual Report
Amount
of Swap
$’000
25,000
75,000
25,000
50,000
50,000
50,000
50,000
325,000
Swap Expiry
Fixed Rate
Jun-2020
Jun-2020
Jun-2020
Dec-2020
May-2021
Jun-2021
Jun-2021
%
2.36%
2.20%
2.36%
2.42%
2.10%
2.48%
2.33%
2.30%
Term to
Maturity
Years
3.0
3.0
3.0
3.5
3.9
4.0
4.0
3.5
Notes to the Financial Statements
3.3 Derivative financial instruments (cont.)
Derivative financial instruments (cont.)
Instruments used by the Group (cont.)
Interest rate swap contracts – carried at fair value through profit and loss (cont.)
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 $6,319,000 (30 June 16: liabilities of $15,353,000) for the Group. In the
year ended 30 June 2017 there was a gain from the increase in fair value of $16,161,000 for the Group (2016: gain of $4,647,000).
Cross currency swap contracts – carried at fair value through profit and loss
Counter Party
Cross Currency Swaps
NAB
Westpac
ANZ
CBA
NAB
Westpac
ANZ
CBA
Total / Weighted average
Fair value hierarchy
Amount
of Swap
$’000
32,586
32,586
32,586
32,586
13,034
13,034
13,034
13,034
182,482
Swap Expiry
Fixed Rate
Jun-2027
Jun-2027
Jun-2027
Jun-2027
Jun-2029
Jun-2029
Jun-2029
Jun-2029
%
5.29%
5.29%
5.27%
5.26%
5.47%
5.47%
5.45%
5.44%
5.33%
Term to
Maturity
Years
10.0
10.0
10.0
10.0
12.0
12.0
12.0
12.0
10.5
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 2017
Derivative financial assets
Derivative financial liabilities
30 June 2016
Derivative financial liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
(121)
6,440
6,319
15,353
15,353
-
-
-
-
-
Total
$’000
(121)
6,440
6,139
15,353
15,353
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.
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Financial Report
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 establishment and oversight of the risk management framework. The Board has established
an Audit, Risk and Compliance Committee, which is responsible for developing and monitoring risk management policies and making
appropriate recommendations to the Board. The Committee reports regularly to the Board on its activities. In addition, the Managing
Director provides 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.
The Audit, Risk and Compliance Committee oversees how management monitor compliance with the Group’s risk management policies
and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
30
Refer to page 30 of the Group’s 2017 Sustainability Report for more details.
Financial instruments used by the Group
The Group’s principal financial instruments, other than derivatives, comprise bank loans and Loan Notes (including USPP 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 and cross currency 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 risks arising from the Group’s financial instruments
are cash flow interest rate risk and foreign exchange risk. The Board of Directors reviews and agrees policies for managing these risks and
these are 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 – interest rate swaps
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.
Derivative financial instruments – cross currency swaps
The Group is exposed to financial risk from the movement in foreign exchange rates based on its USD denominated debt. To remove
its exposure to adverse fluctuations in foreign exchange rates, the Group has employed the use of cross currency swaps which convert
foreign currency exposures into AUD exposures and convert all future payments of interest in USD to AUD. Sensitivity to foreign exchange
is therefore removed.
Growthpoint Properties Australia / 80
2017 Annual Report
Notes to the Financial Statements
3.4 Financial risk management (cont.)
Financial instruments used by the Group (cont.)
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 (refer to Note 3.3).
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.
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.
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 $647,144,000 at
balance sheet date (2016: $798,272,000).
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
Derivative financial instruments
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
Floating
Fixed
Fixed
Floating
2017
$’000
31,459
121
31,580
6,440
658,482
325,000
322,144
2016
$’000
70,661
-
70,661
15,353
450,000
360,000
438,272
1,312,066
1,263,625
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Financial Report
3.4 Financial risk management (cont.)
Financial instruments used by the Group (cont.)
Market risk (cont.)
The following sensitivity analysis is based on the interest rate risk exposures in existence at balance sheet date. At 30 June 2017, 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
Cross currency derivatives
-100 bps
Cash and borrowings
Interest rate derivatives
Cross currency derivatives
Post Tax
Profit Higher
/ (Lower)
2017
$’000
(2,907)
(9,032)
(3,055)
(14,994)
2,907
14,549
14,077
31,533
2016
$’000
(3,676)
5,895
-
2,219
3,676
(4,170)
-
(494)
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 $31,459,000 (2016: $70,661,000).
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
Growthpoint Properties Australia / 82
2017 Annual Report
2017
$’000
815,000
647,144
167,856
2016
$’000
925,000
798,272
126,728
658,482
658,482
-
450,000
450,000
-
167,856
126,728
Notes to the Financial Statements
3.4 Financial risk management (cont.)
Financial instruments used by the Group (cont.)
Maturities of financial liabilities
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 2017.
Carrying
amount
Total
contractual
cashflows
6 months
or less
$’000
$’000
$’000
6 to 12
months
$’000
1 to 5
years
$’000
More than
5 years
$’000
2017
Non-derivative financial liabilities
Bank loans and Loan Notes
1,305,626
1,320,005
(148,157)
Trade and other liabilities
100,688
100,688
1,406,314
1,420,693
95,787
(52,370)
63,436
4,901
68,337
231,727
1,172,999
-
-
231,727
1,172,999
Derivative financial liabilities
Interest rate swaps used for hedging
2016
Non-derivative financial liabilities
Bank loans
Trade and other liabilities
Derivative financial liabilities
Interest rate swaps used for hedging
3.5 Contributed equity and reserves
Accounting policies
Share capital
6,440
6,440
4,508
4,508
1,208
1,208
1,113
1,113
2,187
2,187
-
-
1,248,272
1,504,946
81,282
81,282
1,329,554
1,586,228
224,606
77,547
302,153
22,661
3,439
26,100
128,903
1,128,776
-
296
128,903
1,129,072
15,353
15,353
22,295
22,295
2,420
2,420
2,542
2,542
17,333
17,333
-
-
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.
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3.5 Contributed equity and reserves (cont.)
Contributed equity
Contributed equity can be analysed as follows:
2017
No. (‘000)
2017
$’000
2016
No. (‘000)
2016
$’000
Opening balance at 1 July
583,126
1,414,012
569,028
1,376,011
Issue of ordinary stapled securities during the year:
Securities issued on acquisition of assets
Distribution reinvestment plans
Securities issued through Employee Incentive Plans
Costs of raising capital
44,380
33,528
307
-
78,215
139,808
105,928
-
(6,013)
239,723
-
13,791
307
-
14,098
-
40,132
-
(2,131)
38,001
Closing balance at 30 June
661,341
1,653,735
583,126
1,414,012
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 2016 distribution of the Group but not the 30 June 2017
distribution.
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 2016 distribution and was underwritten, raising a total of
$63,732,000 for this issue of 19,916,215 new stapled securities.
• In December 2016, Moody’s confirmed the Group’s independent credit rating of Baa2 on senior secured debt with a stable outlook.
• In June 2017, the Group entered into AUD208 million of new USPP debt facilities with nine new financiers across three tranches:
– USD100 million (approx. AUD130 million) with a tenor of 10 years, maturing in June 2027
– USD40 million (approx. AUD52 million) with a tenor of 12 years, maturing in June 2029
– AUD26 million with a tenor of 12 years, maturing in June 2029
• The USPP debt was fully fixed to maturity at a weighted average interest rate of 5.34% per annum. Proceeds were initially used to repay
existing bank debt.
• In June 2017, the Board altered its target fixed/hedged debt to drawn debt range, expanding it from 75% - 100% to 65% - 100%. This
provides more flexibility to Growthpoint and matches the requirements of its existing debt facilities.
• In addition to the fixed debt issue outlined above, the Group reorganised its interest rate swaps by terminating $210 million of existing
swaps and entering into $175 million of new interest rate swaps to keep the percentage of fixed debt within its target range of 65%-
100% at that time.
• As at 30 June 2017 the Group had total debt facilities of $1,473,482,000 of which $167,856,000 was undrawn at balance date.
Growthpoint Properties Australia / 84
2017 Annual Report
Notes to the Financial Statements
3.5 Contributed Equity and reserves (cont.)
Capital risk management (cont.)
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.
The Group has a target gearing range of 35%-45%. At 30 June 2017, the gearing ratio was 39.0% (30 June 16: 43.1%). The gearing
ratios at 30 June 2017 and 30 June 2016 were calculated as follows:
Total interest bearing liabilities
Total assets
Gearing ratio
Nature and purpose of reserves
Share-based payments reserve
2017
$’000
1,299,380
3,328,372
39.0%
Restated
2016
$’000
1,242,226
2,879,605
43.1%
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 (2016: nil).
3.6 Distributions
Period for distribution
Half year to 31 December 2016
Half year to 30 June 2017
Total distribution for FY17
Half year to 31 December 2015
Half year to 30 June 2016
Total distribution for FY16
Total
distribution
Total stapled
securities
$’000
(’000)
67,991
72,086
140,077
58,072
60,062
118,134
641,424
661,340
569,335
583,126
Distributions
per stapled
security
(cents)
10.60
10.90
21.50
10.20
10.30
20.50
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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.
Diluted EPS adjusts the figures used in the determination of basic EPS by taking into account amounts unpaid on securities and the effect
of all dilutive potential ordinary securities.
2017
Restated
2016
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
$
No.
Cents
278,090,000
219,377,000
651,245,952
576,154,817
42.7
38.1
3.8 Share-based payment arrangements
Accounting policies
Share-based payment transactions
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 2017, the Group has the following share-based payment arrangements:
Employee Incentive Plans FY14, FY15, FY16, FY17
The Group has introduced employee incentive plans for all employees (including the Managing Director). The plans are designed to 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 page 46 (in the remuneration report section of the Directors’ report).
46
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 through 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 the vesting date of the first tranche of each plan.
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 / 86
2017 Annual Report
Notes to the Financial Statements
3.8 Share-based payment arrangements (cont.)
Share-based payment arrangements (cont.)
Employee Incentive Plans FY14, FY15, FY16, FY17 (cont.)
During the year, the first tranche of the FY16, the second tranche of the FY15 and third tranche of the FY14 Employee Incentive Plan
performance rights was determined with the results shown on the table below:
Plan identification
Plan participants
Tranche
FY16 Plan
FY16 Plan
FY15 Plan
FY15 Plan
FY14 Plan
FY14 Plan
Director
Employees
Director
Employees
Director
Employees
1
1
2
2
3
3
Cost
$
85,001
114,132
131,985
142,955
131,081
128,320
The first tranche of the FY16 Employee Incentive Plan performance rights vested during the year.
The fair value of performance rights under the FY17 Employee Incentive Plan was determined on the grant date of those rights and then
“trued-up” at 30 June 2017 where allowed. The fair value of these rights for directors is estimated at $552,240 and for other employees
$945,574. This estimate is based on achieving 78.0% of the maximum payable under the 2017 plan. This is seen as a reasonable estimate
of fair value as it is based on the percentage achieved for comparable elements from the 2015 plan, adjusted for information available
on likely achievement as at 30 June 2017. The actual costs of performance rights cannot be determined until FY18 and the first issue of
securities under the 2017 plan will not occur until FY18.
During the year, $1,319,000 was recognised in the share based payments reserve (June 16: $1,138,000). 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 2017, 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
FY16 Plan
FY16 Plan
FY15 Plan
FY15 Plan
FY14 Plan
FY14 Plan
FY13 Plan
FY13 Plan
Director
Other employees
Director
Other employees
Director
Other employees
Director
Other employees
29-Nov-16
18-Oct-16
29-Nov-16
18-Oct-16
18-Oct-16
18-Oct-16
18-Oct-16
18-Oct-16
Value of
securities
issued on
conversion of
performance
rights
Number of
securities
issued on
conversion of
performance
rights
$
No.
85,001
114,132
131,985
142,955
131,081
128,320
138,040
122,538
26,235
35,226
40,736
44,122
40,457
39,605
42,605
37,820
Value of
performance
rights still to
vest
Percentage
of plan that
vested during
FY17
$
N/A
N/A
N/A
N/A
N/A
N/A
-
-
%
25
25
25
25
25
25
25
25
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Section 4: Other notes
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
2017
$
2016
$
3,715,568
3,840,553
155,796
1,024,316
4,895,680
154,035
946,193
4,940,781
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 / 88
2017 Annual Report
Notes to the Financial Statements
4.1 Key Management Personnel compensation (cont.)
Compensation (cont.)
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:
2017
Security holder
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.
144,707
1,293,762
1,354,592
625,612
134,451
107,558
120,851
32,399
59,332
7,245
No.
-
-
-
150,033
-
35,719
33,511
33,321
-
-
No.
No.
No.
20,092
177,146
195,391
15,315
15,871
8,482
9,396
-
19,499
-
-
-
-
-
-
(151,759)
(121,501)
(18,350)
-
-
164,799
1,470,908
1,549,983
790,960
150,322
-
42,257
47,370
78,831
7,245
During the year to 30 June 2017, a total of 252,584 stapled securities with a total value of $818,372 were issued to Key Management
Personnel upon vesting of performance rights under Employee Incentive Plans.
2016
Security holder
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.
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.
Growthpoint Properties Australia / 89
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview 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
2017
$
2016
$
Valuation
52,150
33,142
(i) The Group used the valuation services of m3property, a company that Mr Jackson is a director of, to independently value 7 properties (2016: 6). 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 11% of the total valuation expense for the year (2016: 9%)
At 30 June 2017, $11,500 was payable for valuation services (2016: $13,642).
Transactions with significant shareholders
During the year, the ultimate parent entity, Growthpoint Properties Limited, provided underwriting for the December 2016 DRP. No fees were
charged for this underwriting and Securityholder approval was obtained at the November 2016 Annual General Meeting for this underwriting.
(FY16: no transactions).
There were no balances outstanding from transactions with significant shareholders as at 30 June 2017 (2016: 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 / 90
2017 Annual Report
Notes to the Financial Statements
4.3 Taxation (cont.)
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 / (loss) before income tax expense
Income tax (benefit)/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
The applicable weighted average effective tax rate for the Company is as follows (i):
2017
$’000
217
(185)
18
50
2017
$’000
(1,184)
(355)
2016
$’000
577
(159)
-
418
2016
$’000
243
73
405
345
-
-
-
50
-
-
-
-
418
172%
(i) The weighted average effective tax rate for FY 17 is not meaningful as there is a loss before tax expenses but for tax purposes there is a profit - the calculation based on
the figures in the table provides a negative tax rate which is not meaningful.
As at 30 June 2017, the Company had franking credits of $2,473,384 available to it (30 June 2016: $1,301,001).
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 2016
Charged to
profit and loss
Charged to
equity
Balance
30 June 2017
$’000
$’000
$’000
$’000
69
69
146
471
23
640
709
(71)
(71)
18
192
(4)
206
135
85
85
-
-
-
-
85
83
83
164
663
19
846
929
Growthpoint Properties Australia / 91
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Financial Report
4.3 Taxation (cont.)
Income tax expense (cont.)
Movement in temporary differences during the year (cont.)
Opening
balance
1 July 2015
Charged to
profit and loss
Charged to
equity
Balance
30 June 2016
$’000
$’000
$’000
$’000
Non-current assets:
Equity raising costs
Total
Current liabilities:
Accrued expenses
Employee benefits
Prepayments
Total
Total movement in temporary differences
4.4 Contingent liabilities
The Group has no contingent liabilities as at the date of this report (2016: nil).
4.5 Commitments
For details of commitments on properties to be expanded see Note 2.2.
60
60
53
349
37
439
499
(42)
(42)
93
122
(14)
201
159
51
51
-
-
-
-
51
69
69
146
471
23
640
709
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 / 92
2017 Annual Report
Notes to the Financial Statements
4.6 Controlled entities (cont.)
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
Nundah Property Trust
Rabinov Property Trust
Rabinov Property Trust No. 2
Rabinov Property Trust No. 3
Ann Street Property Trust
Broadmeadows Leasehold Trust
CB Property Trust
Atlantic Drive Property Trust
New South Wales 2 Property Trust
20 Southern Court Property Trust
Ravenhall Property Trust
Laverton Property Trust
Richmond Car Park Trust
Mort Street Property Trust
Erskine Park Pharmaceutical Trust
Drake Boulevard Property Trust
Erskine Park Truck Trust
Preston 2 Property Trust
Goulburn Property Trust
Erskine Park Warehouse Trust
William Angliss Drive Trust
Growthpoint Properties Australia Limited
Charles Street Property Trust
Growthpoint Nominees (Aust) Pty Limited
Wellington Road Property Trust
Growthpoint Nominees (Aust) 2 Pty Limited
1500 Ferntree Gully Road Property Trust
Eagle Farm Property Trust
6 Kingston Park Court 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 Trust
World Park Property Trust
3 Millennium Court Property Trust
Pope Street Property Trust
Kembla Grange Property Trust
211 Wellington Road Property Trust
Building C, 211 Wellington Road Property Trust
255 London Circuit Trust
75 Dorcas Street Trust
Building 2 Richmond Property Trust
Growthpoint Metro Office Fund (i)
Lot S5 Property Trust
Growthpoint Developments Pty Ltd (i)
(i) Indicates entities established or purchased during the financial year ended 30 June 2017.
Growthpoint Properties Australia / 93
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Financial Report
4.7 Parent entity disclosures
As at, and throughout, the financial year ended 30 June 2017 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
Total equity
2017
$’000
279,324
(140,077)
139,247
Restated
2016
$’000
219,552
(118,134)
101,418
128,649
3,308,924
245,874
2,897,018
164,530
1,470,229
1,838,695
136,967
1,394,546
1,502,472
1,595,415
243,280
1,838,695
1,364,011
138,461
1,502,472
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 2017 the following fees were paid or payable for services provided by the auditor of the Group:
2017
$
2016
$
124,522
58,728
154,324
58,276
9,600
192,850
86,943
299,543
Audit services - KPMG
Audit and review of financial statements
Other regulatory audit services
Non-audit services - KPMG
Other assurance and due diligence services
Growthpoint Properties Australia / 94
2017 Annual Report
Notes to the Financial Statements
4.9 Subsequent events
Assets held for sale
On 7 July 2017, the Group transacted and settled 1231-1241 Sandgate Road, Nundah, QLD, at a sale price of $106,250,000 with the net
proceeds used to pay down existing debt.
Purchase of stake in Industria REIT (“IDR”)
On 11 July 2017, the Group acquired an 18.2% interest in IDR for approximately $68.1 million, representing $2.30 per IDR security. The
acquisition was funded from undrawn debt facilities.
Acquisition of industrial portfolio
On 13 July 2017, the Group announced that it has exchanged contracts for the acquisition of four adjoining, modern industrial warehouses
at Lot 11 and Lot 1, Part Lot 9, Tarlton Crescent and Lot 6 and Lot 7, Hugh Edwards Drive, Perth Airport, WA for $46 million, providing an
initial passing yield of 8.13%. The acquisition will be initially funded from debt available under existing undrawn facilities.
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.
Growthpoint Properties Australia / 95
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview 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 42 to 53 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 2017 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 2017.
This declaration is made in accordance with a resolution of the Directors of the Group.
Timothy Collyer
Managing Director
Growthpoint Properties Australia Limited
Melbourne, 21 August 2017
Growthpoint Properties Australia / 96
2017 Annual Report
Auditor’s reports
Auditor’s Independence Declaration
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 Properties Australia Trust
I declare that, to the best of my knowledge and belief, in relation to the audit of Growthpoint Properties
Australia Limited, being the Responsible Entity of Growthpoint Properties Australia Trust for the
financial year ended 30 June 2017 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Dean Waters
Partner
Melbourne
21 August 2017
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
Professional Standards Legislation.
Growthpoint Properties Australia / 97
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Financial Report
Independent Auditor’s Report
Independent Auditor’s Report
To the stapled security holders of Growthpoint Properties Australia
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Growthpoint Properties Australia (the
Stapled Group Financial Report).
In our opinion, the accompanying Stapled
Group Financial Report is in accordance
with the Corporations Act 2001, including:
•
•
giving a true and fair view of the
Stapled Group’s financial position as
at 30 June 2017 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report of the Stapled Group comprises:
• Consolidated statement of financial position as at 30
June 2017
• Consolidated statement of profit or loss and other
comprehensive income, consolidated statement of
changes in equity, and consolidated statement of
cash flows for the year then ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
The Stapled Group consists of Growthpoint Properties
Australia Trust and the entities it controlled at the year-
end or from time to time during the financial year and
Growthpoint Properties Australia Limited.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Stapled Group, Growthpoint Properties Australia Trust and Growthpoint
Properties Australia Limited (the Responsible Entity) in accordance with the Corporations Act 2001
and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110
Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial
Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified for
the Stapled Group are:
•
•
Valuation of investment properties
Accounting recognition of rental
income and straight line adjustment
to property revenue
Key Audit Matters are those matters that, in our
professional judgment, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
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
Professional Standards Legislation.
Growthpoint Properties Australia / 98
2017 Annual Report
Auditor’s reports
Valuation of Investment Properties ($3,180 million)
Refer to Note 2.2 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The valuation of the Stapled Group’s
investment property portfolio, given it
represents the majority of the total assets of
the Stapled Group and requires significant
judgement by us, is a key audit matter.
The Stapled Group has $3.2 billion of
investment properties, which constitutes
95.6% of the Group’s total assets as at 30
June 2017.
The fair value of the investment properties was
assessed by the Board of Directors based on a
combination of external valuations conducted
by Jones Lang LaSalle, Savills, Collier, Urbis,
Knight Frank, m3property, CBRE, and
LandMark White and internally prepared
valuations. An external valuation is obtained for
each property each year.
The Stapled 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.
Our audit procedures included;
• Examining the valuations prepared by the
external property valuers to evaluate the
appropriateness of the valuation
methodologies and assumptions used in
accordance with industry practice and the
accounting standards;
• Assessing the scope, competence and
objectivity of the external valuers engaged by
the Stapled Group;
• Checking a sample of internal and external
valuations of the Stapled Group to published
reports of industry commentators for
comparable investment properties;
• Checking a sample of internal and external
valuer’s assumptions and data by comparing
key inputs to discounted cash flow projections,
such as discount rate and capitalisation rate, to
published reports of industry commentators.
We also tested, on a sample basis, other key
inputs to the valuations, such as, gross rent,
occupancy rate, lease term remaining and
lease commitments, for consistency to
existing lease contracts or published statistics;
• Checking property acquisitions and disposals
to signed contracts; and
• Considering the Stapled Group’s disclosures in
relation to the use of estimates and
judgements regarding the fair value of
investment properties and the Stapled Group’s
valuation policies adopted and fair value
disclosures for compliance with the Australian
Accounting Standards.
Growthpoint Properties Australia / 99
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Financial Report
Independent Auditor’s Report (cont.)
Accounting recognition of rental income ($261.5m) and straight line adjustment to property
revenue ($2.5m)
Refer to Note 2.1 to the Financial Report
The key audit matter
How the matter was addressed in our audit
During the course of the year, the Stapled
Group enters into new lease contracts with
existing tenants or through investment property
acquisitions. The revenue generated from all
lease contracts constitutes 68.9% of net
investment income.
Accounting recognition of rental income and
straight line adjustment to property revenue is a
key audit matter given rental income represents
a significant portion of net investment income
and the volume of new and amended leases
results in additional audit effort around the
straight line adjustment to property revenue.
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.
Our audit procedures included;
• Checking a sample of rental income for leases
subject to market reviews, to the original
signed lease contract with the terms
associated to the market reviews, and
documentation between the parties of the
revised market rates;
• For new, cancelled or variations to leases, we
checked the lease terms to the Stapled
Group’s straight line schedule used to
recognise revenue on a straight line basis; and
• Performing a recalculation of the straight line
adjustment to property revenue by using the
fixed revenue over the lease term from the
new or amended lease terms from the signed
lease contract and comparing this to the
Stapled Group’s straight line schedule.
Other Information
Other Information is financial and non-financial information in Growthpoint Properties Australia’s
annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The
Directors of the Responsible Entity are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Growthpoint Properties Australia / 100
2017 Annual Report
Auditor’s reports
Responsibilities of the Directors for the Financial Report
The Directors of the Responsible Entity are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
•
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Stapled Group’s ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Stapled Group or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report of Growthpoint Properties Australia Limited
The information below is a reproduction of our opinion on the Remuneration Report of Growthpoint
Properties Australia Limited (the Company), as the Responsible Entity of Growthpoint Properties
Australia Trust.
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Growthpoint Properties Australia
Limited for the year ended 30 June 2017,
complies with Section 300A of the
Corporations Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
the Directors’ report of the Company, also included in
pages 42-53 of Growthpoint Properties Australia’s
annual report for the year ended 30 June 2017.
Our responsibility is to express an opinion on the
Remuneration Report of the Company, based on our
audit conducted in accordance with Australian Auditing
Standards.
Growthpoint Properties Australia / 101
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Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Financial Report
Independent Auditor’s Report (cont.)
KPMG
Dean Waters
Partner
Melbourne
21 August 2017
Growthpoint Properties Australia / 102
2017 Annual Report
C
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o
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103
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview
Additional Information
Portfolio information
Office Portfolio
Address
75 Dorcas St
South Melbourne
109 Burwood Rd
Hawthorn
Bldg 2, 572-576 Swan St
Richmond
Bldg B, 211 Wellington Rd
Mulgrave
Bldgs 1 & 3, 572-576 Swan St Richmond
Bldg C, 211 Wellington Rd
Mulgrave
Car Park, 572-576 Swan St
Richmond
Book Value
Valuer
$’000
Cap
rate
Discount
rate
%
%
Major tenant WALE
Lettable
area
years
sqm
Site
area
sqm
VIC
VIC
VIC
VIC
VIC
VIC
VIC
180,000
89,250
Savills
Urbis
80,900
CBRE
72,400 Directors
6.4
6.3
5.5
6.8
62,000 Directors
5.5
55,500 Directors
6.8
1,125
CBRE 13.4
ANZ Banking
Group
4.4 23,811
9,632
Orora
6.2 12,403
3,529
GE Capital Finance
Australasia
15.0 14,602
7,201
7.3
7.5
7.0
7.5 Monash University
3.5 12,780
11,040
7.5
7.8
Country Road
Group
BMW Australia
Finance
GE Capital Finance
Australasia
–
12.1
9,909
16,819
5.0 10,305
11,070
0.7
–
3,756
15 Green Square Cl
Fortitude Valley
QLD
138,000
1231-1241 Sandgate Rd
Nundah
QLD
103,500
Knight
Frank
Held for
Sale
6.3
7.3
Queensland Urban
Utilities
4.7 16,442
2,519
–
6.5
6.5
6.3
6.4
6.3
6.0
7.5
5.8
6.3
6.0
6.3
7.0
–
7.5
Energex
9.3 12,980
5,597
Federation
University
5.3 16,369
1,563
7.5 Downer EDI Mining
4.9 11,529
5,772
7.5
7.4
7.5
7.5
8.3
7.3
7.8
7.3
7.3
7.8
7.8
9.0
7.0
6.8
7.4
Jacobs Group
7.7 10,052
2,667
University of the
Sunshine Coast
Peabody Energy
5.6
7.6
9,405
2,331
6,598
3,158
Secure Parking
2.4
–
9,319
Coffey Corporate
6.1 11,835
4,169
Westpac Banking
Corporation
1.1
6,639
33,090
NSW Police
6.9 32,356
6,460
Fox Sports
5.6 14,496
4,212
Lion
6.8 12,386
3,826
Samsung
4.7 13,423
3,980
Alstom Australia
2.1
5,244
6,635
Universities
Admissions Centre
Hydro Tasmania
Consulting
Commonwealth of
Australia
Commonwealth of
Australia
2.3
5,145
7,788
6.8
6,876
28,080
7.7 15,398
3,064
10.2
8,972
2,945
6.5 299,955 200,222
333 Ann St
CB1, 22 Cordelia St
A1, 32 Cordelia St
A4, 52 Merivale St
CB2, 42 Merivale St
Car Park, 32 Cordelia St
& 52 Merivale St
Brisbane
South Brisbane
South Brisbane
South Brisbane
South Brisbane
South Brisbane
33-39 Richmond Rd
Keswick
7 Laffer Dr
1 Charles St
Bedford Park
Parramatta
Bldg C, 219-247 Pacific Hwy
Artarmon
QLD
QLD
QLD
QLD
QLD
QLD
SA
SA
NSW
NSW
121,000
99,000
CBRE
CBRE
81,200 Directors
79,000
Colliers
57,200 Directors
26,000 Directors
62,000
JLL
15,500
JLL 10.3
10.5
303,500 Directors
115,000 Directors
5 Murray Rose Ave
Sydney Olympic Park NSW
97,000 Directors
3 Murray Rose Ave
Sydney Olympic Park NSW
102 Bennelong Pkwy
Sydney Olympic Park NSW
97,000
29,800
Savills
Savills
6 Parkview Dr
Sydney Olympic Park NSW
28,500 Directors
7.0
89 Cambridge Park Dr
Cambridge
TAS
27,000 Directors
8.3
10-12 Mort St
Canberra
ACT
87,000
Knight
Frank
6.6
255 London Cct
Canberra
ACT
72,000 Directors
5.9
Total / Weighted Average
2,180,375
6.3
Growthpoint Properties Australia / 104
2017 Annual Report
Additional Information
Portfolio information
Industrial Portfolio
Address
Book Value
Valuer
Cap
rate
Discount
rate
$’000
120 Northcorp Blvd
Broadmeadows
522-550 Wellington Rd Mulgrave
1500 Ferntree Gully Rd
& 8 Henderson Rd
Knoxfield
VIC
VIC
VIC
77,700 m3property
65,900
Directors
42,300 m3property
40 Annandale Rd
Melbourne Airport VIC
33,000
Urbis
9-11 Drake Blvd
Altona
VIC
31,350
Directors
130 Sharps Rd
Melbourne Airport VIC
24,500
Directors
120-132 Atlantic Dr
Keysborough
VIC
24,100
Directors
Lots 2, 3 & 4, 44-54
Raglan St
Preston
20 Southern Crt
Keysborough
VIC
VIC
23,100
Directors
15,250
Savills
120 Link Rd
Melbourne Airport VIC
15,500
Directors
60 Annandale Rd
Melbourne Airport VIC
13,000
Urbis
6 Kingston Park Crt
Knoxfield
3 Millennium Crt
Knoxfield
31 Garden St
Kilsyth
19 Southern Crt
Keysborough
VIC
VIC
VIC
VIC
45-55 South Centre Rd Melbourne Airport VIC
12,150 m3property
11,000
Directors
10,100
Directors
8,100
7,850
Savills
Directors
75 Annandale Rd
Melbourne Airport VIC
7,150
Urbis
70 Distribution St
Larapinta
13 Business St
Yatala
QLD
QLD
205,000
Directors
15,000
Directors
5 Viola Pl
Brisbane Airport QLD
8,000
Directors
10 Gassman Dr
Yatala
QLD
–
Assumed
Sold
3 Viola Pl
Brisbane Airport QLD
2,100
Directors
20 Colquhoun Rd
Perth Airport
27-49 Lenore Dr
Erskine Park
6-7 John Morphett Pl
Erskine Park
51-65 Lenore Dr
Erskine Park
WA
NSW
NSW
NSW
152,800
Directors
63,500
CBRE
45,000
Directors
32,000
Directors
34 Reddalls Rd
Kembla Grange
NSW
24,000
CBRE
81 Derby St
Silverwater
NSW
16,600
Directors
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
73,400
Directors
21,250
Savills
14,300
Directors
8,400
Directors
Total / Weighted Average
1,103,400
%
7.3
6.8
6.3
8.3
6.8
8.3
6.0
7.8
6.5
8.3
7.8
6.5
6.8
6.8
7.3
8.3
8.0
7.0
7.5
8.8
–
9.0
6.5
6.0
6.5
5.8
6.3
6.5
7.3
7.8
9.0
8.5
6.9
%
8.0
7.8
7.3
8.0
7.8
7.8
7.8
7.8
7.5
7.5
7.5
7.8
8.0
–
–
7.5
7.3
7.5
7.5
7.5
7.5
7.8
8.0
8.5
8.5
7.6
Major
tenant WALE
Lettable
area
years
sqm
Site
area
sqm
Woolworths
Woolworths
Brown & Watson
International
StarTrack
Peter Stevens
Motorcycles
Laminex Group
4.1
4.1
8.4
2.0
4.3
5.0
58,320
250,000
68,144
191,200
22,009
40,844
44,424
75,325
25,743
41,730
28,100
47,446
Symbion
11.5
12,864
26,181
Paper Australia
Sales Force National
2.2
5.5
26,980
42,280
11,430
19,210
7.8 The Workwear Group
10.0
26,517
51,434
7.5 Willow Ware Australia
10.8
16,276
34,726
7.3
7.5
8.0
7.5
NGK Spark Plug
Orora
Cummins Filtration
Transms
7.8 Willow Ware Australia
Neovia Logistics
Services
Woolworths
Reward Supply Co.
GPC Asia Pacific
Norman Ellison
Carpets
Cargo Transport
Systems
Woolworths
Linfox
Linfox
4.9
3.7
1.4
1.8
0.1
2.3
4.7
2.2
0.0
7,645
8,040
8,919
6,455
12,795
14,750
17,610
11,650
14,082
24,799
10,280
16,930
76,109
250,900
8,951
18,630
14,726
35,166
0.3
3,188
6,480
5.7
8.3
6.2
2.8
3,431
12,483
80,374
193,936
29,476
76,490
24,881
82,280
Linfox
10.7
3,720
36,720
Autocare Services
13.3
355
141,100
IVE Group
Woolworths
Aluminium Specialties
Group
Cheap as Chips
Toll Transport
5.2
4.1
3.4
3.4
0.6
7,984
13,490
67,238
233,500
14,459
25,660
16,800
30,621
8,461
16,100
5.2 756,381 2,092,466
Growthpoint Properties Australia / 105
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Additional Information
About Growthpoint
South Africa
GRT is the largest primary
listed South African REIT
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106
About Growthpoint South Africa
Growthpoint Properties Limited
of South Africa (“GRT”) owns
65.1% of the securities of
Growthpoint (at 30 June 2017)
and is its major Securityholder.
Other information about GRT
• Included in the JSE Top 40 Index
• Top ten constituent of FTSE EPRA /
NAREIT Emerging Index
• Included in the FTSE/JSE
Responsible Investment 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 7.2%
compound average annual growth
in distributions over the 4 years to
30 June 2016.
• Sustainable quality of earnings that
can be projected with a high degree
of accuracy
• Well capitalised and conservatively
geared
• Good corporate governance with
transparent reporting
• Proven management track record
• Recipient of multiple sustainability,
governance and reporting awards
• Baa3 global scale rating from Moody’s
Growthpoint represents:
Growth in tangible assets and market
capitalisation (Rbn)
as at 30 June 2016
116.1
Growth in distributions
(R¢)
per share, as at 30 June 2016
Tangible Assets
Market Cap
103.8
82.0
62.8
49.9
56.5
54.1
40.1
7.2%
CAGR
183.8
173.3
161.3
71.5
71.5
149.0
139.0
FY12
FY13
FY14
FY15
FY16
FY12
FY13
FY14
FY15
FY16
Key Facts (as at 31 December 2016)1
Listing
GRT is listed on the Johannesburg Stock Exchange
(JSE)
Ranking on the JSE
26th by market capitalisation
Closing exchange rate used
AUD:ZAR=10.55
Market capitalisation
Gross assets
Net assets
R73.3B / AUD6.9B
R120.4B / AUD11,4B
R76.1B / AUD7.2B
• 26.2% of GRT’s gross property assets
Gearing (SA only)
34.7%
• 24.7% of GRT’s net property income
Distributable Income
R2.7B/ AUD255m
• 15.9% of GRT’s total distributable
ICR (SA only)
income
No. of employees (SA only)
Properties
3.4 times
649
474 properties in South Africa, including 50%
ownership of the prestigious V&A Waterfront
1. All information supplied by GRT (figures as at 31 December 2016).
Growthpoint Properties Australia / 107
2017 Annual Report
Portfolio ReviewGovernanceFinancial ReportAdditional InformationFinancial ManagementBusiness Overview Additional Information
Securityholder
information
108
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1
Securityholder information
Top 20 Legal Securityholders as at 30 June 2017
Rank Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
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
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