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
2018 Annual Report
For the year ended 30 June 2018
2
Growthpoint Properties Australia
2018 Annual Report
All areas of the business
continue to contribute to
a common goal; delivering
sustainable income returns and
long-term capital appreciation
for Securityholders from
properties we own and manage
Geoff Tomlinson,
Chairman
A1, 32 Cordelia Street and
A4, 52 Merivale Street, South Brisbane, QLD
Growthpoint Properties Australia
2018 Annual Report
3
About the
Directors’ Report
The Directors’ Report which
follows is signed in Melbourne on
16 August 2018 in accordance
with a resolution of the Directors of
Growthpoint Properties Australia
Limited.
The Directors’ Report comprises
pages 4 to 53 of this report except
where referenced otherwise.
Further information can
be found in the 2018
Sustainability report
Download from
growthpoint.com.au/
sustainability/operating-
sustainably/
What’s inside
Directors’ Report
Business Overview
FY18 Highlights
Chairman’s report
Managing Director’s report
FY18 strategy and outlook
Sustainability review
Financial Management
Strategic execution
Financial management
Funds From Operations
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
Additional information
Detailed Portfolio information
About Growthpoint South Africa
Securityholder information
Frequently asked questions
Securityholder calendar
Glossary
Contact details
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About this Report
This is the Annual Report for Growthpoint Properties Australia (comprising Growthpoint
Properties Australia Limited, Growthpoint Properties Australia Trust and its controlled entities)
for the year ended 30 June 2018. 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 provides readers with an overview of Growthpoint’s business including summaries
of the strategies, objectives, assets, operating model, achievements, key risks and
opportunities at 16 August 2018 as well as detailed financial information over the last six
months, one year and five year periods. There are also references which enable readers to
obtain more information should they wish to.
4
Growthpoint Properties Australia
2018 Annual Report
FY18 Highlights
3.3%
25.0cps
Increase in distributions
per security to 22.2cps
(FY17: 21.5cps)
Funds From
Operations
(FY17: 25.5cps)
10.8%
Increase in net tangible
assets to $3.19
(FY17: $2.88)
Returns
$3.4bn
Property portfolio value
(FY17: $3.3bn)
$205.4m
New assets purchased1
(FY17: $469.9m)
$90.8m
Strategic asset sales
(FY17: $259.1m)
Property
_ Lower gearing
_ Higher percentage of
fixed debt
_ Maintained debt
maturity
Capital
management
7%
Increase in percentage of
fixed debt to 82%
(30 June 2017: 75%)
5.0yrs
Weighted average debt
maturity (WADM)
(30 June 2017: 5.0yrs)
33.9%
Gearing
Decrease of 460bps
(30 June 2017: 38.5%)
Sustainability
_ Increased average
portfolio NABERS
energy rating to
4.6 stars
_ Increased gender
diversity of employees
_ Targeting net zero
emissions across
all properties under
operational control by
2050
50%
of employees are
female
(30 June 2017: 43%)
4.6s
Average NABERS
Energy rating
(30 June 2017: 4.5 stars)
1.
Includes acquisition of 836 Wellington Street, West Perth, WA for $91.3 million announced 18 July 2018.
Growthpoint Properties Australia
Growthpoint Properties Australia
2018 Annual Report
2018 Annual Report
5
We are constantly reviewing
new markets and opportunities.
While the market for some direct
assets is priced competitively,
there remain a number of other
avenues for growth open to the
Group
Timothy Collyer,
Managing Director
75 Dorcas Street, South Melbourne, VIC
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 6
Growthpoint Properties Australia
2018 Annual Report
A1, 32 Cordelia Street, South Brisbane, QLD
Growthpoint Properties Australia
2018 Annual Report
7
Total Securityholder return over
1, 3 & 5 years (%)1
22.3
16.2
13.2
11.8
12.2
10.0
1 year
3 years
5 years
Growthpoint
S&P/ASX 300 A-REIT
accumulation index
Chairman’s Report
Consistent and transparent business model
Dear Securityholders,
The 2018 financial year was another
strong year for Growthpoint with the
Group continuing on a path of executing
on its promises and growing distributions
for Securityholders.
Over the year investors in Growthpoint
securities achieved a total return of
22.3%, outperforming the ASX300
A-REIT Acc Index by 10.1 percentage
points, an excellent achievement and
validation of the Group’s portfolio
strategy and execution. Importantly this
outperformance extends to longer term
time periods, with outperformance also
achieved over 3 and 5 years (see chart
on the right of page).
In October 2017 we introduced a new
Board member in Josephine Sukkar AM.
Josephine joins as the Group’s fourth
Independent Director and brings with her
significant construction expertise with
over 27 years running a large building
company in Sydney. Importantly, this
coincides with the Group commencing
construction of a high-quality, A-grade
office building on vacant land at the
Botanicca Corporate Park in the inner-
city Melbourne suburb of Richmond.
Josephine’s appointment brings female
representation on the Board to 25%
(from 14% at 30 June 2017).
Recognising the increasing burden of
energy costs for our tenants, and with
a view to reducing our carbon footprint
as an organisation, Growthpoint has
identified a number of potential solar
projects it will look to progress over
FY19. Investment in these projects
demonstrates a genuine commitment
to renewable energy being made by
the Group, while importantly making
our property portfolio more efficient to
attract the highest quality tenants. More
information on these projects can be
found in the Group’s FY18 Sustainability
Report.
To ensure the Group is maintaining pace
with best practice across the sector,
PwC were asked as part of their annual
engagement to review the existing
executive remuneration framework.
The Nomination, Remuneration and
HR Committee has recommended to
implement three key changes from FY19
it believes will further align the interests
of Securityholders with Management
remuneration. More information on the
Group’s remuneration can be found
on pages 37 to 52 of this report.
37
We believe the Group is well positioned
to take advantage of a number of exciting
new opportunities to continue growing
the business in a sustainable way.
With strong support from our majority
Securityholder, Growthpoint Properties
Limited, we enter FY19 with enthusiasm
and a belief that we can continue
delivering the best outcomes for our
Securityholders, creating additional value
from properties we own and continuing
to grow our portfolio.
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 employees, tenants, third party
suppliers, debt providers, directors and
other stakeholders for their continued
contribution to our success.
Geoff Tomlinson
Independent Chairman & Director
Growthpoint Properties Australia Limited
1. Source: UBS Investment Research: Annual compound returns to 30 June 2018.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 8
Growthpoint Properties Australia
2018 Annual Report
333 Ann Street, Brisbane, QLD
Growthpoint Properties Australia
2018 Annual Report
9
Managing Director’s Report
Growthpoint delivers another year of positive operational
performance and financial returns
Total portfolio value ($b)
as at 30 June
3.3
3.4
2.8
2.4
2.1
2014
2015
2016
2017
2018
Portfolio occupancy (%)
as at 30 June
98
97
99
99
98
2014
2015
2016
2017
2018
to $2.30 per IDR security and an
attractive DPS yield of 7.2%. Post-FY18
balance date, Growthpoint entered into
transaction documents for the acquisition
of 836 Wellington Road, West Perth for
$91.3 million. This is Growthpoint’s first
office investment in Perth after a long
period of due diligence on the Perth
office property market which is showing
clear signs of a turnaround.
Importantly these acquisitions were
funded by asset sales which achieved
attractive prices. An example of this is
522-550 Wellington Road, Mulgrave,
Victoria which sold in December 2017
for $90.75 million, representing a
37.7% premium to the 30 June 2017
book valuation. Achieving a high price
on exit and re-investing proceeds into
new markets where we believe will
achieve long-term upside is a strategy
management will continue to deploy.
We are constantly reviewing new markets
and opportunities to generate the best
outcomes for Securityholders. To this end
the Group has a pipeline of development
and expansion projects it will look to
undertake over the next two years,
including the exciting development of a
new, 19,300 square metre (sqm) A-Grade
office building in Richmond, Victoria.
Transactions over the year coupled with
further uplift in valuations helped reduce
gearing by 460 bps to 33.9% giving
the Group significant flexibility moving
forward. This lower level of gearing,
coupled with the successful extension
of bank debt leaves the balance sheet
in an excellent position to explore further
growth opportunities as we move into
FY19.
Timothy Collyer
Managing Director
Growthpoint Properties Australia Limited
Dear Securityholders,
On behalf of Growthpoint’s management
team, I am pleased to present the FY18
Annual Report which demonstrates
another strong year of operational
performance and financial returns for
Securityholders. Over the year the Group
achieved a record statutory profit of
$357.7 million and delivered an above-
sector total return of 22.3% to our
Securityholders. Other key highlights over
the year were:
t Statutory earnings of 53.5 cents per
security (cps), which is the highest
reported EPS of any year since
Growthpoint’s inception in 2009
t FFO of 25.0 cps, a decrease of 2.0%
on FY17
t Annual distribution of 22.2 cps, an
increase of 3.3% on FY17
t 10.8% increase in NTA per security, up
from $2.88 at 30 June 2017 to $3.19
t Completed over $257.2 million in
property and equity transactions,
taking advantage of strong pricing to
sell property and reinvest favourably
into markets we know and understand
t Undertook 132,433 sqm of new and
extended leasing, equating to 13% of
total portfolio lettable area, maintaining
portfolio occupancy at 98%
t Reduced gearing by 460 basis points
(bps), from 38.5% at 30 June 2017
to 33.9% giving the Group significant
flexibility to take advantage of growth
opportunities should they arise
t Successfully extended near-term debt
maturities, maintaining the Group’s
weighted average debt maturity at
5 years, with no refinancing required
until September 2020
t Increased the average NABERS
energy rating for the office portfolio
from 4.5 stars at 30 June 2017 to
4.6 stars at 30 June 2018
Continued repositioning of the portfolio
was achieved via transactions weighted
towards the first half, with the Group
acquiring four adjoining, modern
industrial warehouses at Perth Airport,
Western Australia for $46 million,
providing an initial passing yield of 8.1%.
We also announced the acquisition of
an 18.2% interest in Industria REIT for
approximately $68.1 million, equating
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 10
Growthpoint Properties Australia
2018 Annual Report
Considered investment decisions in
competitive direct property market
Market opportunities not limited to direct property acquisition
LISTED
MARKET
NEW
DIRECT
MARKETS
RETAIL
MARKET
REVIEW
18.2%
Stake in Industria REIT
(ASX: IDR)
t Acquired stake in July
2017 for $2.30 per
security ($68.1 million)
t Value as at 30 June
2018: $2.65 per
security ($78.5 million)
t Continue to evaluate
IDR whilst receiving
attractive income yield
$91.3m
Inaugural investment into
Perth office market
t Long period of due
diligence on Perth office
market
t Recovery in Perth to
be driven by recent
improvement in business
investment and removal
of substantial sub-
leasing from the market
over a recent period of
subdued development
Completed detailed
review of retail market
in May 2018
t Continue to believe no
investment in retail is
correct strategy at this
time
t Difficult to identify
catalyst for rebound in
consumer spending
t Sector undergoing
significant structural
change
t Expect significant retail
property to be on the
market over next 12-24
months and yields to
rise for some retail
property categories
BIDDING ON
DIRECT
PROPERTY
INVESTMENTS
$1.5bn
Opportunities
reviewed in FY18
$0.8bn
Opportunities
bid on in FY18
$137.3m
Direct properties
acquired1
8.3 yr
WALE
‘AAA’
rated
Tenant
1.
Includes acquisition of 836 Wellington Street, West Perth, WA for $91.3 million,
expected to settle in October 2018.
Portfolio opportunities to maximise value
STRATEGIC
DIVESTMENTS
INTERNAL DEVELOPMENT
OPPORTUNITIES
Sell property with residential
conversion upside
Pipeline of >$200m in development
and expansion opportunities, led by:
522-550 Wellington Road,
Mulgrave, VIC sold for
$90.8 million – 37.7%
premium to book value
Quads 2 & 3, Sydney
Olympic Park, NSW –
Marketing commenced
July 2018
Botanicca 3 development
at Richmond, VIC –
development yield on cost
between 7.5% and 8.5%
Gepps Cross Expansion,
SA – Negotiating with
tenant regarding potential
$50 to $60 million
expansion
Growthpoint Properties Australia
2018 Annual Report
11
Robust capital position
well placed for future growth
BALANCE
SHEET
EQUITY
CAPITAL
33.9%
Gearing – reduced by 460bps,
below bottom of target gearing
range
$320m
Undrawn debt
5yrs
WADM – maintained due to
extension of near-term debt
facilities
Good access to equity
capital
t Supportive majority
Securityholder in
Growthpoint Properties
Limited (JSE code: GRT)
t GRT has a stated
internationalisation strategy
to increase offshore EBITDA
contribution to 30% (from
15%)
t Ongoing support from
domestic and other offshore
institutional investors
Capacity to take
advantage of the right
opportunities
As the market for direct assets
on Australia’s Eastern seaboard
continues to be priced competitively
there remain a number of avenues
for growth open to the Group with
the balance sheet well positioned to
provide support
Timothy Collyer
Manging Director
836 Wellington Street, West Perth, WA
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 12 Growthpoint Properties Australia
2018 Annual Report
FY18 Sustainability Highlights
Environment
Targeting net zero
emissions by 2050
across all properties
under operational
control
4.6
4.5
FY17
FY18
4.6s
Average NABERS
Energy rating
(FY17: 4.5 stars)
C B
CY16
CY17
B
2017 CDP Climate
Performance score
(CY16: C rating)
50%
$47,786
of employees are women
(30 June 2017: 43%)
Donations
(FY17: $30,617)
Social
Governance
Baa2
grade credit rating
maintained since
November 2015
Improved board diversity
to 25% female
(30 June 2017: 14%)
Operations
$524.3m
Economic Value Provided in
FY181 comprising $248.2m
Generated Value2 and
$276.0m Distributed Value3
(FY17: $564.2m)
$21.9m
Taxes paid in FY184 equating to
8.6% of revenue
(FY17: $27.2m, 10.4% of revenue)
1. Economic Value Provided is the sum of Economic Value Generated and Economic Value Distributed (calculated in accordance with GRI methodology).
2. Economic Value Generated is the sum of cash receipts from customers plus interest received.
3. Economic Value Distributed is the sum of Director and employee wages and benefits, payments to providers of capital, payments to Australian governments
and all other cash expenses
4. Consists of stamp duty, net GST, income tax, payroll tax and mortgage duties calculated in accordance with GRI methodology.
Growthpoint Properties Australia
2018 Annual Report 13
Planned renewable energy projects being
investigated through FY19
599 Main North Rd,
Gepps Cross, SA
t Negotiating with
tenant regarding
$50 to $60 million expansion of
Gepps Cross
t Exploring the use of sustainable
energy options including the
proposed addition of a 1.6MW
solar farm
Botanicca 3, 572-576 Swan St,
Richmond, VIC
t Design and construct building
contract for the Botanicca 3
development includes provision for
a total of 120kW solar photovoltaic
roof mounted installation.
t Detailed design is currently
underway
t Structural and spatial provision for
future battery storage infrastructure
(for connection to solar PV system)
is being considered as part of the
project
t Project completion scheduled for
second half of CY20
Planned solar
installations
75 Dorcas St,
South Melbourne, VIC
t Feasibility study completed
to identify most viable solar
projects within Growthpoint portfolio
t Dorcas Street suitable investment
proposition based on:
— Size of roof
— Payback period
— Percentage offset of existing
energy usage
t Systems to generate up to 200kW
t Estimated savings of ~300tCO2-e per
annum
t Emissions saving equivalent to taking
66 cars off the road for a full year
t Project to progress through FY19
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information Dion Andrews
Chief Financial Officer
Pascal Moutou
Finance Manager
14 Growthpoint Properties Australia
2018 Annual Report
120 Northcorp Boulevard, Broadmeadows, VIC
Financial Management
Further progress on balance sheet strategy
Strategic
Execution
Maintain gearing
within 35%-45%
range
Maintained
average debt
maturity
Growthpoint Properties Australia
2018 Annual Report 15
Increase fixed
debt percentage
7%
82%
38.5%
4.6%
5.0yrs
5.0yrs
75%
33.9%
FY171
FY182
FY17
FY18
FY17
FY18
Securityholders benefited from a number of accretive acquisitions made over the year which helped to
improve on our initial Funds From Operations guidance by 5.9% (from at least 23.6 cents per security), while
asset sales above book value and strong revaluation gains supported further reductions in gearing, leaving
the balance sheet well positioned to take advantage of the right opportunities.
Highlights
for FY18
tFFO of 25.0 cents per
security
tDistributions of 22.2 cents
per security equating to a
payout ratio of 88.8%
tGearing of 33.9%, down 460
basis points from 30 June
20171
tNTA per security of $3.19,
10.8% above 30 June 2017
tMaintained a weighted
average debt maturity of
5.0 years; and
tIncreased the overall level of
fixed debt to 82%, from 75%
at 30 June 2017
Progress on Financial
Management strategy
Over the year the Group extended
$515 million of near term bank debt
expiring in mid-FY19 to maintain a
weighted average debt maturity of 5
years. After significant work in FY17
to further diversify the Group’s debt
funding profile, the Group now retains
a good balance between shorter term,
more flexible bank debt and longer term
fixed debt. The Group will continue to
act quickly and decisively on upcoming
expiries, the first being in September
2020, and will look to all available
debt markets for the best solution for
Securityholders when new debt is
required.
Gearing 33.9% as at 30 June 2018
Gearing as at 30 June 2018 was 33.9%,
down from 38.5%1 as at 30 June 2017,
below the bottom of the target range of
35% - 45%.
17
The chart on page 17 tracks the
events that impacted gearing
during the year.
At financial year end the Group held
$320 million of undrawn debt facilities
as it pursues a number of growth
opportunities. Over time, as part of
a prudent gearing strategy, holding
approximately $100 million in undrawn
debt will to allow for flexibility in
transactions, while aiming to minimise
the cost burden of holding undrawn debt
lines.
Fixed debt percentage
increased to 82%
At 30 June 2018, fixed debt was 82%,
up from 75% at 30 June 2017. The
weighted average fixed debt maturity
is 5.5 years which means a high
percentage of debt is protected for the
medium term against any future interest
rate rises.
1. Gearing calculation changed during the period from interest bearing liabilities divided by total assets to interest bearing liabilities less cash divided by total assets
less cash. This change brings Growthpoint’s gearing calculation more closely in line with industry peers.
2. Gearing at 30 June 2018 below target gearing range. See page 17 of this report for pro forma.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 16
Growthpoint Properties Australia
2018 Annual Report
Financial Management continued
Increasing Distributions and
FFO per security
The graph at right illustrates the increase
in distributions and FFO per security
over five years, including FY19 guidance.
Growthpoint has been able to achieve
its medium-term target of growing
distributions by 3%-4% annually, based
on a high percentage of fixed income
increases in leases (WARR of 3.3%) and
a high proportion of debt costs being
fixed. This, along with low operating
expenses of approximately 0.4% of
average gross assets per annum, has
allowed the Group to grow distributions
at a CAGR of 3.9% for the five years up
to and including FY18.
Importantly, as the graph shows, over
the same time period Growthpoint has
been able to grow FFO at a higher rate of
4.0%, ensuring that distribution growth is
covered by earnings growth.
Long-term growth in FFO and distributions (cps)
26.0
25.0
24.0
23.0
22.0
21.0
20.0
19.0
18.0
25.5
25.0
22.2
21.5
At least
24.6
23.0
4.0%
CAGR
3.9%
CAGR
22.9
20.5
21.8
19.7
20.2
19.0
FFO per security
Distributions per security
FY14
FY15
FY16
FY17
FY18
FY19
Outlook for FY19
Movements in NTA per stapled security ($)
Subject to market conditions, the
Group expects FY19 FFO to be at least
24.6 cents per stapled security and
distributions to be 23.0 cents per stapled
security, representing a 3.6% increase in
distributions to Securityholders. This is
within the Group’s medium-term target
range of 3-4% increase in distributions
per security growth per annum and
equates to a FY19 payout ratio to FFO
being a maximum 93.5%.
FY19 guidance takes into account the
West Perth acquisition announced 18
July 2018, up to $110 million of asset
sales expected to take place throughout
FY19 and the Dividend Reinvestment
Plan activated for the August 2018
distribution.
Growthpoint will continue to distribute
as much FFO as is reasonably prudent
to Securityholders. In determining its
payout ratio, Growthpoint will consider
its capital expenditure, tenant incentive
and working capital requirements over
the medium term as well as current
and anticipated business and financial
conditions, especially as they relate to
raising debt and equity capital.
+$0.04
+$0.01
+$0.01
$3.19
+$0.25
$2.88
10.8%
increase since
30 June 2017
30 June 2017
Property
revaluations
Profit on
property sale
Financial
instruments
revaluations
Equity raising
(DRP)
& retained
earnings
30 June 2018
Key debt metrics and changes during FY18
Gross assets
Interest bearing liabilities
Total debt facilities
Undrawn debt
Gearing1
Weighted average interest rate
Weighted average debt maturity
Annual Interest Coverage Ratio (ICR) / Covenant ICR
Actual Loan to Value Ratio (LVR) / Covenant LVR
Weighted average fixed debt maturity
% of debt fixed
Debt providers
$'000
$'000
$'000
$'000
%
%
years
times
%
years
%
no.
Items influencing gearing1 for the year ended 30 June 2018
Growthpoint Properties Australia
2018 Annual Report 17
30 June 2018
30 June 2017
Change
3,474,569
1,197,555
1,523,482
320,000
33.9
4.4
5.0
3.9 / 1.6
36.1 / 60
5.5
82
17
3,328,372
1,299,380
1,473,482
167,856
38.5
4.3
5.0
4.1 / 1.6
40.2 / 60
6.4
75
17
146,197
(101,825)
50,000
152,144
(4.6)
0.1
–
(0.2) / –
(1.9) / –
(0.9)
7
–
460bps
reduction since
30 June 2017
+1.8%
36.3%
40%
39%
38%
37%
36%
35%
34%
33%
32%
31%
30%
38.5%
+3.0%
-3.6%
+1.3%
+0.7%
-0.1%
-2.0%
+0.5%
33.9%2
-1.6%
-2.2%
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1. Gearing calculation changed during the period from interest bearing liabilities divided by total assets to interest bearing liabilities less cash divided by total assets
less cash. This change brings Growthpoint’s gearing calculation more closely in line with industry peers.
2. Numbers may not sum due to rounding.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information
18
Growthpoint Properties Australia
2018 Annual 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.
Reconciliation from statutory profit to FFO
Profit after tax
Less non-FFO items:
- Straight line adjustment to property revenue
- Net changes in fair value of investment property
- (Profit) / loss on sale of investment property
- Net change in fair value of investment in securities
- Net change in fair value of derivatives
- Depreciation
- Amortisation of incentives
- Deferred tax benefit
FY18
$’000
FY17
$’000
357,709
278,090
(5,962)
(166,958)
(24,419)
(10,368)
573
293
16,327
(117)
(2,522)
(118,157)
1,123
-
(2,382)
162
9,969
(185)
FFO
167,078
166,098
Change
% Change
$’000
79,619
(3,440)
(48,801)
(25,542)
(10,368)
2,955
131
6,358
68
980
%
28.6
0.6
The FY18 payout ratio, calculated as distributions on ordinary stapled securities divided by FFO, was 88.8% (FY17: 84.3%).
Details about distribution components under the attribution managed investment trust or “AMIT” regime (only relevant for the full year
distribution) and Fund Payment amounts (only relevant for foreign holders) will be made available on Growthpoint’s website on or before
the relevant distribution date.
For more information go to:
growthpoint.com.au/investor-centre/distributions/
Operating and capital expenses
Operating expenses
Total operating expenses
Average gross assets value
Operating expenses to average
Capital expenditure
Total portfolio capex
Average property asset value
Capital expenditure to average property portfolio value
FY18
FY17
13,362
12,385
3,377,737
3,204,716
0.40
0.39
FY18
FY17
10,315
10,042
3,236,038
2,915,710
0.32
0.34
$'000
$'000
%
$'000
$'000
%
Growthpoint Properties Australia
2018 Annual Report 19
Five year performance summary
Long-term sustainable returns
As at 30 June
2018
2017
2016
2015
2014
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
Funds From Operations per security
Distributions per security
Total Securityholder return1
Return on equity
Gearing (at 30 June)
NTA per security (at 30 June)
$m
$m
$m
$m
¢
¢
¢
%
%
%
$
466.3
357.7
383.4
278.1
302.1
219.4
361.5
283.0
198.5
117.3
3,474.6
2,157.0
3,328.4
2,879.6
2,407.1
2,128.8
1,901.5
1,522.4
1,411.5
1,165.1
53.5
25.0
22.2
22.3
18.5
33.9
3.19
42.7
25.5
21.5
6.3
18.6
38.5
38.1
22.9
20.5
7.4
13.5
41.2
50.4
21.8
19.7
36.4
23.9
36.3
25.7
20.2
19.0
10.8
17.5
40.3
2.88
2.61
2.48
2.16
Market capitalisation (at 30 June)
$m
2,438.1
2,076.6
1,836.8
1,781.1
1,323.3
Other information
Number of securities on issue (at 30 June)
No. 675,384,368
661,340,472
583,125,744
569,027,781
540,115,360
Market capitalisation and free float ($m)
Market Capitalisation
Free float
105%
increase in free float
since 30 June 2014
Total debt facilities (%)
as at 30 June 2018
43%
Other debt
capital
markets
57%
Major Australian
Banks
2,438.1
2,076.6
1,781.1
1,836.8
1,323.3
623.9
633.7
409.2
724.4
840.0
June 2014
June 2015
June 2016
June 2017
June 2018
1. Source: UBS Investment Research.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 20
Growthpoint Properties Australia
2018 Annual Report
Property Portfolio
overview
Portfolio lease expiry profile (%)
per financial year, by income
Major lease expiries
Industrial
Office
Michael Green
Chief Investment Officer
ANZ 2.4%
Optus 1.7%
Linfox 1.3%
Woolworths 10.9%
Samsung 2.7%
Downer EDI 1.7%
Laminex 1.1%
NSW Police 8.7%
Lion 2.6%
Linfox 1.7%
Peabody 1.6%
Tas Hydro 1.2%
30
26
Office properties
– equal to 26 at
30 June 2017
31
Industrial properties
– down from 32 at
30 June 2017
98%
Portfolio occupancy
– down from 99% at
30 June 2017
Central SEQ 2.1%
Fox Sports 1.9%
21
21
Monash Uni 1.5%
SA Gov 1.0%
11
6
8
2
1
Vacant
FY19
FY20
FY21
FY22
FY23
FY24
FY25+
Top ten tenants
by passing rent, as at 30 June 2018
NPI per State / Territory ($m)
for the year ended 30 June 2018
Woolworths
NSW Police
Commonwealth of Australia
Country Road / David Jones
Linfox
Samsung Electronics
Lion
ANZ Banking Group
Jacobs Group
Queensland Urban Utilities
Total / weighted Average
Balance of portfolio
%
15
9
5
4
4
3
3
2
2
2
49
51
WALE
(yrs)
9.4
2.8
12.5
16.8
49.5
$213.6m
65.8
56.8
Victoria
New South Wales
Queensland
South Australia
Western Australia
Australian Capital Territory
Tasmania
4.5
5.9
7.8
13.9
4.9
3.7
5.8
1.7
7.0
4.8
5.9
4.7
Total portfolio
100
5.3
Growthpoint Properties Australia
2018 Annual Report 21
Five year performance summary
As at 30 June
Number of properties
Total value
Occupancy
2018
2017
2016
2015
2014
no.
$m
%
57
58
58
53
51
3,356.1
3,283.8
2,832.6
2,372.5
2,093.7
98
99
99
97
98
Like-for-like value change
$m / % of asset value
193.8 / 6.2
138.6 / 5.2
130.2 / 5.5
186.0 / 9.0
52.1 / 3.0
Total lettable area
sqm
1,003,444
1,056,336
1,109,545
1,050,611
1,036,740
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
years
%
years
%
$
$
$m
no.
10.6
6.2
5.3
3.3
9.6
6.5
6.1
3.3
3,345
3,109
238
213.6
142
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
Annual rent review type2 (%)
as at 30 June 2018
Tenant type (%)
by income, as at 30 June 2018
Sector diversity (%)
by property value, as at 30 June 2018
17
67
7
1
8
Fixed 2.00-2.99%
Fixed 3.00-3.99%
Fixed over 4.00%
CPI
CPI +1.00%
20
24
56
Listed company
Government owned
Private company & other
Industrial
Office
34
66
1. Assumes CPI change of 2.1% per annum as per Australian Bureau of Statistics released for FY18.
2. Leases that have a minimum lease increase, typically 3%, or CPI are shown as the minimum fixed rate for the above.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 22
Growthpoint Properties Australia
2018 Annual Report
Property Portfolio overview continued
Tenant use (%)
as at 30 June 2018
1222
32
61
Office
Logistics / Distribution
Manufacturing
Retail
Car parking
Other
Acquisition method (%)
since inception, as at 30 June 2018
17
18
38
27
Direct (on-market)
M&A
Development fund through
Direct (off-market)
2
6%
Western Australia
$211.7m
– Industrial $211.7m
Growthpoint Properties Australia
2018 Annual Report 23
Geographic diversity (%)
by property value, as at 30 June 2018
Office properties
Industrial properties
(number of assets)
87% of
properties
located on
Eastern
seaboard
26%
Queensland
$876.9m
– Office $632.0m
– Industrial $244.9m
27%
New South Wales
$893.5m
– Office $699.3m
– Industrial $194.3m
5%
Australian Capital
Territory
$167.5m
– Office $167.5m
29%
Victoria
$971.4m
– Office $601.8m
– Industrial $369.6m
7
4
2
4
6
5
2
8 16
6%
South Australia
$208.4m
– Office $82.0m
– Industrial $126.4m
1
1%
Tasmania
$26.7m
– Office $26.7m
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 24
Growthpoint Properties Australia
2018 Annual Report
Office Portfolio
Review
Office portfolio
key statistics
(as at 30 June 2018)
— $2,209.3 million
total value
— 286,430 sqm
total lettable area
— 6.0% weighted average
capitalisation rate
— 66% of total property
portfolio
— 98% occupancy
— 5.5 year WALE
— 3.5% WARR
— 26 assets
Tenants by Industry (%)
by income, as at 30 June 2018
2
6
8
30
11
11
15
Government
Resources, Infrastructure & Construction
IT, Media & Telecommunications
Financial Services
Retail
Other Consumer & Business Services
Education
Health
1. From October 2018.
Geographic diversity (%)
by property value, as at 30 June 2018
4 1
7
27
32
29
NSW
QLD
VIC
ACT
SA
TAS
Top ten office tenants
by passing rent, as at 30 June 2018
WALE
(yrs)
%
NSW Police
13
Commonwealth of Australia
Country Road Group
Samsung Electronics
Lion
ANZ Banking Group
Jacobs Group
Queensland Urban Utilities
Fox Sports
Monash University
Total / weighted Average
Balance of portfolio
8
6
4
4
4
4
3
3
3
52
48
5.9
7.8
13.9
3.7
5.8
1.7
7.0
4.8
4.5
2.5
6.4
4.4
Total portfolio
100
5.5
Summary
Growthpoint’s office portfolio achieved
valuation like-for-like growth of
$132.4 million (6.4%) over FY18,
additional leasing of 17,092 sqm and
maintained occupancy at 98%.
The main drivers for office demand
remained positive in FY18, with solid
employment growth and business
confidence and conditions tracking
above long run averages. Most major
office markets recorded positive net
absorption over the period, leading to
downward pressure on incentives and
rent growth in most Eastern seaboard
office markets.
Acquisitions
After a significant transactional year
in FY17, there were no direct office
transactions made in the year to 30 June
2018.
Post-balance date on 18 July 2018
Growthpoint entered into transaction
documents for the acquisition of
836 Wellington Street, West Perth for
$91.3 million reflecting a market yield
of 6.25%. The property is 100% leased
to the Commonwealth of Australia
(Department of Home Affairs) with a
remaining lease term of 8.3 years1 and
annual fixed rent reviews of 3.75%.
Built in 2009, the property is a modern
A-Grade office building consisting of
11,973 sqm over 6 floors with 138
secured car bays. The building has
strong environmental credentials with a
5.5 Star NABERS Energy rating and a 4
Star NABERS Water rating.
FY18 was another successful period of
leasing for Growthpoint with 6.0% of total
office portfolio lettable area leased over
the year. Highlights include:
t Renewal of lease to Westpac Banking
Corporation at 7 Laffer Drive, Bedford
Park, South Australia for a further 7
years. The lease renewal to Westpac
begins in July 2018 and comprises
6,343 sqm with fixed rent increases of
3.00% per annum.
17
Leasing
Property team
Andrew Kirsch
Asset Manager
Cathy Ciurlino
Asset Manager
Nathan Lansell
Manager – Analytics & Valuations
Growthpoint Properties Australia
2018 Annual Report 25
333 Ann Street, Brisbane, QLD
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 26
Growthpoint Properties Australia
2018 Annual Report
Office Portfolio Review continued
Leasing (continued)
t Further leasing success at 333 Ann
Street, Brisbane, Queensland brings
total occupancy to 95%, from 44% at
30 June 2015. LGIA Super signed a
new 10 year lease comprising 867 sqm
in addition to extending their existing
lease of 1,734 sqm by over 3 years.
t A new lease at 109 Burwood Road,
Hawthorn, Victoria to Flow Power who
committed to 1,193 sqm for 5 years
from March 2018. The lease to Flow
Power provides for fixed rent increases
of 3.75% per annum.
Growthpoint’s major tenants in Buildings
1 and 2 within the Botanicca Corporate
Park in Richmond, Country Road/David
Jones, have commenced moving into
their new national headquarters. Building
1’s fitout is complete and being occupied
by 700 employees, while fitout works
have commenced on Building 2 with
completion expected in September 2018.
Valuation
Continued investor appetite for office
assets along Australia’s Eastern
seaboard and improving market rent
fundamentals resulted in valuation
increases across Growthpoint’s office
portfolio. Since 30 June 2017, the value
of the office property portfolio (excluding
acquisitions and disposals) increased
by $132.4 million or 6.4% on a like-
for-like basis. The weighted average
capitalisation rate across the office
portfolio tightened from 6.3% to 6.0%.
Valuation highlights include:
t 109 Burwood Rd, Hawthorn, Victoria
($16.8 million or 18.8% increase);
t Building 2, 572-576 Swan St,
Richmond, Victoria ($9.7 million or
12.0% increase); and
t 7 Laffer Dr, Bedford Park, South
Australia ($4.5 million or 29.0%
increase).
Five year performance summary - office portfolio
As at 30 June
2018
2017
2016
2015
2014
Portfolio value
Total properties
Weighted average cap rate
% of Growthpoint portfolio
Occupancy
WALE
$m
no.
%
%
%
years
2,209.3
2,180.4
1,596.2
1,206.6
1,049.8
26
6.0
66
98
5.5
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
Total lettable area
sqm 286,430
299,955
235,389
191,953
179,175
Average rent
(per sqm, per annum)
NPI
WARR
$
$m
%
547
540
132.6
136.8
3.5
3.5
533
87.8
3.4
538
87.1
3.2
516
65.8
3.5
Portfolio lease expiry profile (%)
per financial year, by income
NPI per State / Territory ($m)
for the year ended 30 June 2018
2.8
7.5
9.4
45.1
28
28
$132.6m
32.5
11
11
11
8
2
1
Vacant
FY19
FY20
FY21
FY22
FY23
FY24
FY25+
35.3
New South Wales
Victoria
Queensland
Australian Capital Territory
South Australia
Tasmania
Growthpoint Properties Australia
2018 Annual Report 27
Buildings B & C
211 Wellington Rd,
Mulgrave
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 28
Growthpoint Properties Australia
2018 Annual Report
Industrial Portfolio
Review
Industrial portfolio
key statistics
(as at 30 June 2018)
— $1,146.8 million
total value
— 717,014 sqm
total lettable area
— 6.6% weighted average
capitalisation rate
— 34% of total property
portfolio
— 99% occupancy
— 4.9 year WALE
— 2.8% WARR
— 31 assets
Tenants by Industry (%)
by income, as at 30 June 2018
6
12
25
57
Retail
Logistics
Manufacturing
Other consumer & business services
Geographic diversity (%)
by property value, as at 30 June 2018
11
17
32
19
21
VIC
QLD
WA
NSW
SA
Top ten industrial tenants
by passing rent, as at 30 June 2018
Woolworths
Linfox
Australian Postal Corporation
Brown & Watson International
Paper Australia
Reward Supply Co.
The Workwear Group
Autocare Services
Symbion
Total / weighted Average
Balance of portfolio
WALE
(yrs)
%
44
11
5
3
3
2
2
2
2
2
76
24
4.5
4.9
6.0
4.0
7.1
1.2
1.2
9.0
12.3
10.5
5.0
4.8
Total portfolio
100
4.9
Summary
FY18 was a busy year for Growthpoint’s
industrial portfolio, with a number of
significant transactions and leasing
activity contributing to a solid underlying
performance. Industrial remains a highly
sought-after segment of the property
market, both from the perspective of
tenancy with new online e-commerce
business entering the market, and from
domestic and offshore investors with an
appetite for well-located assets. This high
level of interest was reflected in another
strong period of like-for-like valuation
growth of $61.4 million, or 5.9%,
excellent leasing outcomes to high quality
tenants (over 115,340 sqm leased) and
occupancy high at 99%.
The main drivers of industrial demand
remain largely positive, with solid export
levels, strong population growth and
continued growth in e-commerce retail.
Plans for major infrastructure investment
by State and Federal governments with
a focus on transport infrastructure,
particularly in New South Wales and
Victoria is also expected to be a long-
term driver of demand.
Growthpoint was involved in two major
industrial transactions over FY18, both of
which generated positive outcomes for
the Group:
Sale of 522-550 Wellington Road,
Mulgrave, Victoria
In November 2017, Growthpoint
announced it had entered into contracts
for the sale of 522-550 Wellington Road,
Mulgrave, Victoria for $90.75 million,
representing a 37.7% premium to
the 30 June 2017 book valuation of
$65.9 million. The income yield on the
sale price was a record 5.2% per annum
for a Woolworths distribution centre.
The sale of Mulgrave was a particularly
favourable outcome for Growthpoint’s
Securityholders and an endorsement
of the Group’s highly desirable property
portfolio.
The sale was consistent with
management’s stated intention which
was to seek to realise material upside
in the sale of assets with future
development potential to a higher and
better use.
Acquisitions and Divestments
Laminex Group
Property team
Andrew Fitt
Senior Asset Manager
Julian Smith
Asset Manager
Jeanette Otto
Analyst
Growthpoint Properties Australia
2018 Annual Report
29
10 Hugh Edwards Drive, Perth Airport, WA
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 30
Growthpoint Properties Australia
2018 Annual Report
Industrial Portfolio Review continued
Acquisitions and Divestments
(continued)
Acquisition of $46 million industrial
portfolio at Perth Airport
In July 2017, Growthpoint announced
it had exchanged contracts for the
acquisition of four adjoining, modern
industrial warehouses at 36 and 58
Tarlton Crescent and 2 and 10 Hugh
Edwards Drive, Perth Airport, Western
Australia for $46 million, providing an
initial passing yield of 8.13%.
The properties are leased to high quality
tenants, with an attractive WALE and
were at a compelling yield relative to
yields for recent comparable transactions
on Australia’s Eastern seaboard. The
assets are located near the Group’s sole
existing property in Western Australia,
being a Woolworths distribution centre at
Perth Airport.
Leasing
Several significant leasing transactions
were achieved in FY18, the highlights of
which were:
t In March 2018, the Group finalised a 5
year lease renewal to Australian Postal
Corporation at 40 Annandale Road,
Melbourne Airport, Victoria. The lease
covers a lettable area of 44,424 sqm
with 86 car spaces and annual rent
increases of 3.75%
t On 1 August 2017, the Group
leased 101-111 South Centre Road,
Melbourne Airport, Victoria to Direct
Couriers. The 14,082 sqm office/
warehouse was leased for 10.2 years
with annual rent increases to the
greater of CPI and 3.5%
Valuation
The value of the industrial property
portfolio increased by $61.4 million or
5.9% over FY18 on a like-for-like basis.
The weighted average capitalisation rate
across Growthpoint’s industrial property
portfolio is 6.6% at 30 June 2018 down
from 6.9% at 30 June 2017.
Valuation highlights include:
t 70 Distribution Street, Larapinta,
Queensland ($15.0 million or 7.3%
increase);
t 20 Colquhoun Road, Perth Airport,
Western Australia ($11.0 million or
7.2% increase);
Five year performance summary - industrial portfolio
As at 30 June
2018
2017
2016
2015
2014
Portfolio value
Total properties
Weighted average cap rate
% of Growthpoint portfolio
Occupancy
WALE
$m
no.
%
%
%
years
1,146.8
1,103.4
1,236.3
1,165.9
1,043.9
31
6.6
34
99
4.9
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
Total lettable area
sqm 717,014
756,381
874,156
858,658
857,565
Average rent
(per sqm, per annum)
NPI
WARR
$
$m
%
116
81.1
2.8
110
86.5
2.8
109
93.4
2.7
104
84.7
2.7
99
82.9
2.9
Portfolio lease expiry profile (%)
per financial year, by income
NPI per State / Territory ($m)
for the year ended 30 June 2018
38
9.3
33
11.7
30.5
$81.1m
12.5
17.1
Victoria
Queensland
Western Australia
New South Wales
South Australia
10
2
1
3
8
5
Vacant
FY19
FY20
FY21
FY22
FY23
FY24
FY25+
t 599 Main North Road, Gepps Cross,
South Australia ($5.6 million or 7.6%
increase); and
t 27-49 Lenore Drive, Erskine Park, New
South Wales ($5.3 million or 8.3%
increase).
Growthpoint Properties Australia
2018 Annual Report
31
Perth CBD
Perth Industrial
Acquisition
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 32
Growthpoint Properties Australia
2018 Annual Report
Board of Directors
4
1. Geoffrey Tomlinson (70)
BEC
3. Maxine Brenner (56)
BA, LLB
5. Grant Jackson (52)
Assoc. Dip. Valuations, FAPI
7. Norbert Sasse (53)
BCom (Hons) (Acc), CA (SA)
Independent Director (since
19 March 2012)
Independent Director (since
5 August 2009)
Independent Chairman (since
1 July 2014) and Director (since
1 September 2013)
Over 45 years’ experience in the
financial services industry.
Committees: Audit, Risk &
Compliance and Nomination,
Remuneration & HR
Current Australian
directorships of listed public
companies1: IRESS Limited
2. Timothy Collyer (50)
B.Bus (Prop), Grad Dip Fin & Inv,
AAPI, F Fin, MAICD
Managing Director (since 12 July
2010)
Over 29 years’ experience in
A-REITs and unlisted property
funds, property investment,
development and valuations.
Current Australian
directorships of listed public
companies1: Nil
Maxine has over 27 years’
experience in corporate advisory,
mergers and acquisition, financial
and legal advisory work.
Committees: Audit, Risk &
Compliance (Chair)
Current Australian
directorships of listed public
companies1: Orica Limited,
Origin Energy Limited and
Qantas Airways Limited
4. Estienne de Klerk (49)
BCom (Industrial Psych), BCom
(Hons) (Marketing), BCom (Hons)
(Acc), CA (SA)
Director2 (since 5 August 2009)
Over 21 years’ experience in
banking and property finance
and over 15 years’ in the listed
property market.
Committees: Audit, Risk &
Compliance
Current Australian
directorships of listed public
companies: Nil
Over 32 years’ experience in the
property industry, including 28
years as a qualified valuer.
Director4 (since 5 August 2009)
Over 22 years’ experience in
corporate finance and over
15 years’ experience in the listed
property market.
Committees: Audit, Risk &
Compliance
Committees: Nomination,
Remuneration & HR (Chair)
Current Australian
directorships of listed public
companies1: Nil
Current Australian
directorships of listed public
companies: Nil
6. Francois Marais (63)
BCom, LLB, H Dip (Company Law)
8. Josephine Sukkar AM (54)
BSc (Hons), Grad Dip Ed
Director3 (since 5 August 2009)
Over 27 years’ experience in the
listed property market.
Committees: Nomination,
Remuneration & HR
Current Australian
directorships of listed public
companies: Nil
Independent Director (since
1 October 2017)
Over 28 years’ experience in the
construction industry.
Committees: Nomination,
Remuneration & HR
Current Australian
directorships of listed public
companies: Nil
In addition to Group entities.
1.
2. Not deemed independent as South African CEO of Growthpoint Properties Limited (GRT).
3. Not deemed independent as Chairman of GRT.
4. Not deemed independent as Group CEO of GRT.
1526378 Growthpoint Properties Australia
2018 Annual Report
33
Independent Directors
Board diversity
Board expertise matrix (no.)
Independence
Listed entity
Property industry
Property valuation
Accounting
Corporate finance
Financial Services
Corporate Governance
Legal
Compliance
Audit
Risk
Full bios on all Directors
can be found online at
www.growthpoint.com.au/
about/board/
A4, 52 Merivale Street, South Brisbane, QLD
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 34
Growthpoint Properties Australia
2018 Annual Report
Executive Management
1 Timothy Collyer
B.Bus (Prop), Grad Dip Fin & Inv,
AAPI, F Fin, MAICD
Managing Director
(since 12 July 2010)
Over 29 years’ experience in
A-REITs and unlisted property
funds, property investment,
development and valuations.
2 Michael Green
B.Bus (Prop)
Chief Investment Officer
Over 16 years’ experience in
listed and unlisted property
fund management, property
investment and development.
3 Dion Andrews
B.Bus, FCCA, MAICD
Chief Financial Officer, Company
Secretary (since 8 May 2014)
Over 17 years’ experience in
accounting roles in a corporate
capacity.
4 Yien Hong1
LLB (Hons), B.Comm, B.Arts,
MAICD
General Counsel & Company
Secretary (since 13 April 2018)
Over 20 years’ experience
across debt finance, property,
funds, M&A, structured finance,
derivatives and project finance
as well as risk management and
governance.
Full bios on all Executive
Management can be found
online at growthpoint.
com.au/about/executive-
management/
1. Yien Hong has been appointed Company Secretary and General Counsel on a 12-month
contract while Aaron Hockly is on parental leave. He is expected to return on 13 April 2019.
1324 Growthpoint Properties Australia
2018 Annual Report
35
Building C, 219-247 Pacific Highway, Artarmon, NSW
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 36
Growthpoint Properties Australia
2018 Annual Report
Building C, 211 Wellington Road, Mulgrave, VIC
Remuneration report
Letter from the Chair of the Nomination,
Remuneration and HR Committee
Dear Securityholders,
On behalf of the Board of Growthpoint
Properties Australia, I am pleased to
present our FY18 Remuneration Report.
Our remuneration structures have been
designed to align compensation for Key
Management Personnel (KMP) with both
financial and non-financial outcomes
of the Group as they relate to strategy
and performance. This framework has
been established with the intention of
generating the best long-term outcomes
for Growthpoint’s Securityholders, its
employees and the community. The
primary objective of the Group remains
to provide investors with a growing
income stream and long-term capital
appreciation. Remuneration of KMP at
Growthpoint is therefore tied closely to
the success in achieving these objectives
in a sustainable way.
Pleasingly, the FY18 remuneration report
reflects another year of strong growth
in Securityholder returns. Declared
distributions over FY18 amounted to
22.2 cents per security, representing
3.3% growth on FY17. This, coupled
with strong share price growth over the
year delivered Securityholders with Total
Securityholder Return (TSR) of 22.3%1
to 30 June 2018, exceeding the ASX
A-REIT 300 Accumulation Index return
of 13.2%1. This continues a long period
of outperformance on this metric for the
Group, as can be seen from the graph
at right.
Funds From Operations (FFO) over the
year was also strong at 25.0 cents per
security following upgrades to guidance
in October 2017. While FFO per security
reduced by 2.0% versus FY17, this
largely related to a “spike” in the prior
year due to the timing of the takeover
of the GPT Metro Office Property Fund.
The Board recognises the Group’s ability
to continue growing distributions for
Compound annual growth rates (CAGR)
Securityholders relies predominantly on
its ability to continue growing earnings,
and growth in these financial outcomes
will continue to be linked as they have
been over the long-term. The table below
provides medium to long-term growth
rates for FFO and distributions per
security.
The Board is also pleased to report
strong sustainability outcomes over
the year. Our GRESB score for 2017
increased by 18.5% over the 2016
achievement. The Group also delivered
an above-average CDP score of B. More
information on the Group’s performance
on sustainability can be found in the
FY18 Sustainability Report.
What’s changed
There was little change in the
remuneration framework between FY17
and FY18, with only the performance
criteria of the non-financial component of
the KMP Short-Term Incentive (STI)
changing. The reasons for this change
40
are discussed in the section on STI
on page 40.
While feedback on Growthpoint’s
remuneration framework continues
to be positive, to ensure the Group is
maintaining pace with best practice
across the sector, PwC were asked
as part of their annual engagement
to review the existing executive
remuneration framework and provide
alternative remuneration frameworks
for consideration by the Nomination,
Remuneration and HR Committee (the
Committee) for FY19 and beyond. This
analysis included a high-level overview of
business metrics used by competitors as
well as the broader market.
The Committee has recommended to
implement three key changes having
regard to the PwC analysis for the
Group’s FY19 remuneration structure.
FY13
FY16
FY18
2 year
CAGR
5 year
CAGR
FFO per security (cents)
Distribution per security (cents)
19.4
18.3
22.9
20.5
25.0
22.2
4.5%
4.1%
NTA per security (cents)
200.0
261.0
320.0
10.7%
5.2%
3.9%
9.9%
1. Source: UBS Investment Research: Annual compound returns to 30 June 2018.
Growthpoint Properties Australia
2018 Annual Report 37
Strong growth in
Securityholder returns (%)1
22.3
16.2
12.2
13.2
11.8
10.0
1 year
3 years
compound
5 years
compound
Growthpoint TSR
ASX300-REIT Index TSR
These are:
t Change the backward-looking LTI
structure to a forward-looking structure
to align more closely with market
practice;
t Introduce deferral for part of the STI
awarded to KMP, with two thirds paid as
cash and one third paid in Performance
Rights which vest over two years; and
t Introduce a Minimum Securityholding
Requirement (MSR) whereby Non-
Executive Directors are required to
hold 100% of their base fees, the
Managing Director 100% of Total
Fixed Remuneration (TFR) and other
KMP 50% of their TFR in Growthpoint
securities.
The Committee believes these changes
will further align compensation of KMP
with the interests of Securityholders. More
details on each of these changes are
included in the relevant sections of this
Remuneration Report.
The Committee and the Board remain
committed to implementing remuneration
policies that incentivise management
to carry out the strategy of the Group
in the best long-term interests of
Securityholders.
Norbert Sasse
Chair - Nomination, Remuneration
and HR Committee
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 38
Growthpoint Properties Australia
2018 Annual Report
Remuneration report
What’s inside
Executive and employee remuneration for FY18
Short-Term incentives
Long-Term incentives
Non-executive director remuneration
FY19 remuneration (unaudited)
Other information
Nomination, Remuneration and HR Committee
Executive Director Remuneration and Service Contract
Director and Senior Executive reviews
38
40
43
46
47
49
49
51
52
About the Remuneration Report
The Directors present this “Remuneration Report” for
the Group for the year ended 30 June 2018. This report
summarises key compensation policies and provides
detailed information on the compensation for Directors
and other KMP.
The specific remuneration arrangements described in the
report apply to the Managing Director and the KMP as
defined in AASB 124 and to the Company Secretaries
as defined in section 300A of the Corporations Act 2001
(Cth).
Growthpoint’s remuneration practices substantially
comply with best practice governance guidelines, as
per ASX corporate governance principles and
recommendations, as outlined on page 43 of the
2018 Sustainability report.
43
Executive and employee remuneration for FY18
There are currently 24 Employees (“Employees”) of the Group, including the Managing Director and 3 other Key Management
Personnel (“KMP”).
Remuneration paid and payable
Executive remuneration FY18 (%)
39
47
The total remuneration paid or payable to the Employees who are KMP for
FY18 is listed on page 39 of this report and the proposed remuneration
parameters for FY19 are on page 47.
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, 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 in each respective role and tailored to
encourage overall performance of the Group which is in the best interests of all
Securityholders.
3. The components of remuneration for each Employee are:
a. total fixed remuneration (including applicable superannuation);
Managing Director
At Risk
19%
43%
38%
Other Key Management
Personnel
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 as determined by
At Risk
41
the Managing Director and/or the Committee up to a maximum amount set
by the Board. Refer to the table on page 41 for measures for the FY18 STI
and the FY17 STI;
c. long-term incentive (“LTI”) plan under which, upon meeting 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.
19%
32%
49%
Fixed
Fixed
Fixed
At risk - cash
At risk - equity
Growthpoint Properties Australia
2018 Annual Report 39
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 who are not KMP 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. From 1 July 2018, the Committee implemented a Minimum
Securityholding Requirement (MSR) for KMP (refer to page 89 for details of KMP’s current holdings and details of the MSR).
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.
Total KMP remuneration FY18 and FY17
Short-term
Post
employment
Share based
payments
Period
Salary
and fees
Cash
bonus1
Non-
monetary
benefits
Super-
annuation
benefits
Other
long-term3
Termination
benefits
Options
and rights
$
$
$
$
Timothy Collyer
(Managing Director)
FY18 909,189 1,035,893
1,431
25,000
FY17
868,275
696,983
1,378
30,000
$
–
–
$
$
– 464,706 2,436,219
–
543,951 2,140,587
25,000
9,368
–
150,020
771,940
Aaron Hockly2
(Chief Operating Officer)
FY18 345,258
242,294
FY17
320,175
162,356
Dion Andrews
(Chief Financial Officer)
FY18 347,930
242,294
FY17
320,175
157,436
Michael Green
(Chief Investment Officer)
FY18 353,334
245,805
FY17
325,250
157,436
–
–
–
–
–
–
30,000
25,000
30,000
25,000
30,000
Total
FY18 1,965,079 1,766,286
1,431
100,000
FY17 1,833,875 1,174,211
1,378
120,000
–
–
–
–
–
–
–
–
161,984
674,515
–
148,590
763,814
–
158,601
666,212
–
150,232
774,371
–
159,781
672,467
–
913,548 4,746,344
– 1,024,317
4,153,780
1. Refers to when cash bonus was paid although it relates to the previous financial year.
2. Aaron Hockly’s FY18 salary was paid until the start of his parental leave on 14 April 2018. He was paid an additional 12 weeks salary under the Group’s paid
parental leave policy at that time. He is expected to return on 13 April 2019. In his absence, Yien Hong has been appointed Company Secretary and General
Counsel on a 12-month contract.
3. Refers to long service leave taken.
Total
$
S300A (1) (e) (i)
proportion of
remuneration
performance
related
%
62%
58%
51%
48%
51%
47%
51%
47%
56%
53%
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information
40
Growthpoint Properties Australia
2018 Annual Report
Remuneration report continued
Short-Term Incentives (“STI”)
In advance of each financial year the 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 KMP
2. Employees
A performance review is undertaken near the end of each financial year to determine if any STI should be payable to an employee,
respectively, including the Managing Director, based on performance targets set at the start of the financial year. Any award of STI to
the Managing Director requires Board approval. STI payments are made in August following the financial year in which they were earnt.
Key change in FY19
From FY19 onwards, the EMT STI will change, from 100% payment in cash to 66.6% payment in cash, with the remainder deferred
and awarded as rights in Growthpoint securities. Half of these rights will vest after one year and half after two years following the
date of issue. If the EMT member resigns before a vesting period ends, the relevant rights do not vest and are forfeited. The rights
will receive distributions paid by the Group equivalent to the distribution that would have been received if holding a security. Such
payment is to be made in cash on the same date such distribution is payable. No STI deferral applies to other employees.
This change has been made to further align EMT and Securityholder interests.
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 FFO per security (23.7cps for FY18 providing a 50% score) with the opportunity
for outperformance, up to 125% achievement, of criteria via a “stretch target” for FFO per security in excess of budget (up to 24.9 cps
which is 5.1% above the budgeted figure). If FFO per security is below budget, the Board has discretion whether to grant achievement
under the financial criteria. For FY18 the achievement was 125% for the financial criteria due to achievement of 25.0 cps.
b) Non-financial criteria – 30% of total
41
The non-financial criteria are based upon the performance criteria in the table on page 41. The criteria are reviewed and approved
by the Committee before the start of the financial year and then reviewed on a half yearly basis, with an overall assessment
approved by the Committee following the end of the financial year. The half year review involves the Chairman of the Group and
the Managing Director jointly analysing actual performance against the criteria and preparation of a report to the Committee.
Key change in FY18
Changes were made to the non-financial criteria of EMT STI for the FY18 outcome following a review by the Committee. These
changes have been made to further align the STI component of KMP remuneration with the goal of growing Securityholder
distributions sustainably over time. The new non-financial criteria have been chosen based on their link to the Group’s strategy and
improved measurability.
48
These non-financial performance measures were included as part of PwC’s broader review of Growthpoint’s remuneration
structures. Changes to the FY19 measures are outlined on page 48 of this report.
EMT achieved 95.8% of their maximum possible STI for 2018 against 99.6% achievement in FY17.
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
2018 Annual Report 41
Performance criteria for STI for FY18
Performance
criteria
Weighting
of total STI
FY18 performance measures
Segment
Sum
Achievement
of
Performance
criteria
weighted out
of 100%
Performance
criteria
weighted out
of 100%
Achievement of
weighting of total
STI
Segment
Sum
Financial
Of 70.0% weighting of STI
FFO per security
70.0% 1. Budget 23.7cps = 50%, stretch 24.9cps = 125%
100.0%
125.0%
87.5%
Non-financial
Of 30.0% weighting of STI
Sustainability
of increases in
distributions
7.5%
Reposition
and diversify
portfolio
6.3%
Enhance
existing assets
9.6%
30%
Securities
liquidity and
freefloat
1.2%
Debt capital
management
2.4%
Operate
sustainably
3.0%
1. Growth in distributions, both year on year and in
comparison with ASX300-AREIT average (excluding
GMG)
2. WARR comparison year on year
3. Acquisitions which enhance or secure income
4. Operating cost at or below budget on a like for like basis
1. Reposition of existing portfolio towards specified sectors
and geographies
2. Asset acquisitions
3. Asset disposals
1. Leasing and renewals
2. Tenant interaction
3. Capex and value enhancement
4. Development and change of use
1. Inclusion in indices
2. Increase in equity where appropriate
3. Increase in freefloat
4. Increase in liquidity
1. Maintain gearing within Board range
2. Maintain diversity in sources and tenor of debt
3. Additional debt capital issuance if appropriate
4. Ensure fixed debt is within Board range
1. Achievement against stated sustainability objectives
2. GRESB and CDP scores
3. Focus on long-term value over short-term
4. Improve integration of sustainability practices within
business operations
25.0%
24.0%
6.8%
21.0%
17.0%
5.1%
32.0%
27.0%
6.0%
25.1%
4.0%
2.5%
0.6%
8.0%
6.0%
2.1%
10.0%
7.0%
2.3%
Total non-financial score
100.0%
83.5%
Weighting of total STI
100%
Achievement of
weighting of total STI
112.6%
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 42
Growthpoint Properties Australia
2018 Annual Report
Remuneration report continued
The table below relates to FY18 STI, but will be paid in FY19 and so will appear in the 2019 Annual Report remuneration tables.
Short-term incentives payable to EMT in August 2018
Timothy Collyer (Managing Director)
Financial
Non-financial
Non-financial
Non-financial
Non-financial
Non-financial
Non-financial
Increase in FFO per security against budget
Sustainability of Increases in distributions
Reposition and diversify portfolio
Enhance existing assets
Securities liquidity and freefloat
Debt capital management
Operate sustainably
Aaron Hockly (Chief Operating Officer)1
Financial
Non-financial
Non-financial
Non-financial
Non-financial
Non-financial
Non-financial
Increase in FFO per security against budget
Sustainability of Increases in distributions
Reposition and diversify portfolio
Enhance existing assets
Securities liquidity and freefloat
Debt capital management
Operate sustainably
Dion Andrews (Chief Financial Officer)
Financial
Non-financial
Non-financial
Non-financial
Non-financial
Non-financial
Non-financial
Increase in FFO per security against budget
Sustainability of Increases in distributions
Reposition and diversify portfolio
Enhance existing assets
Securities liquidity and freefloat
Debt capital management
Operate sustainably
Michael Green (Chief Investment Officer)
Financial
Non-financial
Non-financial
Non-financial
Non-financial
Non-financial
Non-financial
Increase in FFO per security against budget
Sustainability of Increases in distributions
Reposition and diversify portfolio
Enhance existing assets
Securities liquidity and freefloat
Debt capital management
Operate sustainably
1. Pro rata to 14 April 2018, the date Mr. Hockly went on parental leave.
FY18 Max
FY18 actual1
$
$
805,350
805,350
69,030
57,985
88,358
11,045
22,090
27,612
66,269
46,940
74,552
6,903
16,567
19,328
1,081,470
1,035,909
176,955
15,168
12,741
19,415
2,427
4,854
6,067
237,627
176,955
14,561
10,314
16,381
1,517
3,640
4,247
227,615
225,048
225,048
19,290
16,203
24,691
3,086
6,173
7,716
18,518
13,117
20,833
1,929
4,630
5,401
302,207
289,476
228,309
228,309
19,569
16,438
25,049
3,131
6,262
7,828
18,787
13,307
21,135
1,957
4,697
5,479
306,586
293,671
Growthpoint Properties Australia
2018 Annual Report 43
Long-Term Incentives (“LTI”)
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.
LTI performance measures
The performance measures for the LTI are reviewed in advance of each financial year by the Committee and/or the Board.
The performance measures for the LTIs for FY15, FY16, FY17 and FY18 are1:
a) Total Securityholder returns (“TSR”) – Weighting 50%
TSR reflects the amount of dividends or distributions paid/payable by the Group plus the change in the trading price of the Group’s
securities over the financial year. TSR is calculated as a percentage return on the opening trading price of the Group’s securities on the
first day of the financial year.
TSR is benchmarked relative to the S&P/ASX A-REIT 300 Accumulation Index2 over a rolling 3-year period. At or below 50%
performance, nil rights vest, 50% of rights vest at the 51st percentile, up to 100% at the 75th percentile (pro rata vesting in between).
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 per
security over the financial year. ROE is calculated as a percentage return on the Group’s net tangible assets per security 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 Index2 over a rolling 3-year period using the
following methodology:
t Below the benchmark return - 0%.
t At the benchmark - 50%.
t 0.1% - 1.9% above the benchmark – 51.25% - 75% in increments of 1.125% for each 0.1% above the benchmark
t 2% or more above the benchmark - 100%.
LTI Maximum
In advance of each financial year, the Board and/or the 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 total fixed remuneration (“TFR”). The LTI Maximum for other KMP is 70% of
44
47
TFR. Other Employees currently have an LTI Maximum of 20%-30% of TFR. Refer to the table on page 44 for details of TFR
for senior executives for FY17 and FY18 and to page 47 for details of proposed TFR for senior executives for FY19.
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 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.
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”).
1. 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.
2. 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.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 44
Growthpoint Properties Australia
2018 Annual Report
Remuneration report continued
As each grant 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).
The LTI is cumulative meaning that Employees can receive up to four issues of securities in a particular year in respect of four prior
financial years. Subject to some exceptions, securities immediately vest in the case of a takeover of the Group or an Employee being
made redundant.
ASX Listing Rules
In accordance with ASX Listing Rule 10.14, the issue of any stapled securities to the Managing Director is subject to Securityholder
approval. It is intended that such approval be obtained at the Group’s annual general meeting each year and, if approved, stapled
securities be issued shortly after the relevant meeting.
FY18 Achievement
The LTI Maximum for the Managing Director and other KMP for the year ended 30 June 2018 is below. The FY18 LTI Achievement
cannot be calculated until the release of the benchmark data for the year ended 30 June 2018 so an estimated fair value at issue date
is provided. The estimated LTI Achievement is included in an equity reserve in the year to 30 June 2018, pro-rated over the period to
which any securities under the LTI are issued.
LTI maximum for KMP
FY18
LTI Maximum
of TFR
LTI
Maximum
LTI
Estimate
LTI Maximum
of TFR
LTI
Maximum
Timothy Collyer (Managing Director)
Aaron Hockly (Chief Operating Officer)
Dion Andrews (Chief Financial Officer)
Michael Green (Chief Investment Officer)
%
80
70
70
70
$
$
736,320
257,198
257,198
260,925
1,511,641
368,160
128,599
128,599
130,463
755,821
FY17
LTI
Actual
$
700,920
239,085
239,085
242,550
%
80
70
70
70
$
708,000
241,500
241,500
245,000
1,436,000
1,421,640
LTI Estimate
50%
LTI Actual
99%
As there is no minimum LTI Award, if none of the benchmarks were achieved for FY18, the LTI Award would be $0.
Hedging of issues by Employees
Under the Group’s “Securities Trading Policy” persons eligible to be granted securities as part of their remuneration are prohibited
from entering a transaction if the transaction effectively operates to hedge or limit the economic risk of securities allocated under the
incentive plan during the period those securities remain unvested or subject to restrictions under the terms of the plan.
Worked example of LTI (unaudited)
Sam Sample is a manager at Growthpoint with a TFR of $100,000. His TFR has not changed for three years and his LTI Maximum is
$30,000 (being 30% of his TFR).
The LTI Achievement for the financial years since his employment commenced were:
1. FY13 – 98.6% of $30,000 = $29,580
2. FY14 – 80.0% of $30,000 = $24,000
3. FY 15 - 78.0% of $30,000 = $23,400
The volume weighted average price for the 20 trading days prior to 30 September 2015 was $3.12.
As a result, Mr Sample would have been eligible to receive 6,168 Growthpoint Properties Australia securities in October 2015
comprising the following LTI Awards:
1. FY13 – 2,370 ($29,580/$3.12/4)
2. FY14 – 1,923 ($24,000/$3.12/4)
3. FY15 – 1,875 ($23,400/$3.12/4)
Growthpoint Properties Australia
2018 Annual Report 45
Details of Performance Rights that vested to KMP in FY18
Plan
participants
Plan
identification Issue date
Value of securities
issued on conversion of
performance rights
Number of securities
issued on conversion of
performance rights
Value of
performance
rights still to vest
Percentage of
plan that vested
during FY18
$
No.
$
Timothy Collyer
(Managing Director)
FY17 Plan
23/11/17
FY16 Plan
4/10/17
FY15 Plan
4/10/17
Aaron Hockly
(Chief Operating Officer)
Dion Andrews
(Chief Financial Officer)
Michael Green
(Chief Investment Officer)
FY14 Plan
FY17 Plan
FY16 Plan
FY15 Plan
FY14 Plan
FY17 Plan
FY16 Plan
FY15 Plan
FY14 Plan
FY17 Plan
FY16 Plan
FY15 Plan
FY14 Plan
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
4/10/17
175,231
83,427
129,540
128,653
59,771
24,292
29,813
29,240
59,771
23,557
28,035
27,151
60,639
23,557
28,035
27,151
55,104
26,235
40,736
40,457
18,796
7,639
9,375
9,195
18,796
7,408
8,816
8,538
19,069
7,408
8,816
8,538
N/A
N/A
N/A
N/A
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
937,865
294,926
%
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
Number of performance rights held by EMT at 30 June 2018
FY18
Names
1 July 2017
Granted
Vested
30 June 2018
Timothy Collyer (Managing Director)
Aaron Hockly (Chief Operating Officer)
Dion Andrews (Chief Financial Officer)
Michael Green (Chief Investment Officer)
Key change
200,634
220,416
(162,532)
258,518
50,862
48,394
48,394
75,184
75,184
76,276
(45,005)
(43,558)
(43,831)
81,041
80,020
80,839
Following the PwC review of the Group’s remuneration structures the Committee decided to move the current LTI structure from a
“backward looking” measurement period to a “forward looking” structure. For FY19, instead of measuring the 3-year period from
1 July 16 to 30 June 2019 and determining relative TSR and ROE for that period, the assessment period will instead be 1 July 2018
to 30 June 2021. The same relative TSR and ROE measures will be used with the same hurdle rates. Once the assessment of
performance is complete, 100% of performance right will vest (i.e. in three years time).
There will be a transition period between when the current plans cease and the new plans become fully effective (no vesting under
the new plan can occur until after the measurement of the first three-year performance period ending 30 June 2021 is complete).
The Group will continue to operate “backward looking” LTI plans in the transition period with steadily reducing opportunities under
each plan until they are phased out completely with the first vesting under the new structure. The Committee asked PwC to review
these transitional arrangements and they found that there is no advantage/disadvantage of the transitioned arrangements to either
the Group or the Employees.
The reason for this change is simply to bring the structure of the LTI measurement into line with general market practice.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 46
Growthpoint Properties Australia
2018 Annual Report
Remuneration report continued
Non-executive Director Remuneration
There are currently seven Non-Executive Directors. An aggregate pool of $1,200,000 available for the remuneration of Non-Executive
Directors was approved by Securityholders at the Company’s Annual General Meeting in November 2017.
Remuneration paid and payable
47
The total remuneration paid to Non-Executive Directors for FY18 is listed below and the proposed FY19 remuneration is on page
47.
Principles of remuneration for Non-Executive Directors
The principles of non-executive director remuneration are:
1. Non-Executive Directors should receive total remuneration at market rates for equivalent positions at listed Australian entities of
similar size (measured by market capitalisation and gross assets), complexity and Non-Executive Director workload having regard to
the industry in which the Group operates.
2. Fees are set at a level to attract and retain suitably qualified and experienced persons to the Board.
3. The Chairman is entitled to a base annual fee and is not eligible for any additional fees for chairing or being a member of any Board
committees.
4. All Non-Executive Directors other than the Chair are entitled to a base annual fee plus additional fees for being a Chairman or a
member of a committee.
5. All Non-Executive Directors’ fees are paid on a base fee basis rather than per meeting.
6. All Non-Executive Directors’ fees are to be paid in cash and include superannuation where applicable. Where Australian GST is
applicable, this is paid in addition to the relevant director’s fees.
7.
89
From 1 July 2019, Non-Executive Directors are required to hold a certain amount of securities in the Group. Refer to page 89
for details of Director holdings at the date of this Report, as well as details on the MSR.
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
Short-term
Post employment
Geoff Tomlinson, Chair
(appointed 1 September 2013)
Grant Jackson
(appointed 5 August 2009)
Francois Marais
(appointed 5 August 2009)
Norbert Sasse
(appointed 5 August 2009)
Estienne de Klerk
(appointed 5 August 2009)
Maxine Brenner
(appointed 19 March 2012)
Josephine Sukkar
(appointed 1 October 2017)
Total
Period
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
Fees
$
179,027
170,502
91,618
88,950
100,322
97,400
100,322
97,400
100,322
97,400
91,618
88,950
68,714
–
731,944
640,602
Committee
Fees
Superannuation
benefits
$
–
–
10,911
10,594
10,609
10,300
15,960
15,200
11,948
11,600
18,342
17,808
7,266
–
75,037
65,502
$
17,008
16,198
9,740
9,457
–
–
–
–
–
–
10,446
10,142
7,218
–
44,412
35,796
Total
$
196,035
186,700
112,269
109,001
110,931
107,700
116,282
112,600
112,270
109,000
120,406
116,900
83,198
–
851,393
741,900
Growthpoint Properties Australia
2018 Annual Report 47
FY19 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 Committee are trying to encourage through remuneration, FY19 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 FY19.
FY19 Remuneration (unaudited)
Chairman
Geoff
Tomlinson
Non-
Executive
Directors
Managing
Director
Timothy Collyer
Chief
Operating
Officer
Aaron Hockly
Chief
Financial
Officer
Dion Andrews
Chief
Investment
Officer
Michael Green
Total fixed remuneration including
superannuation ("TFR")
Short-term
Incentive
(maximum)
Long-term
Incentive
(maximum)
$203,876 (4.0% increase from FY 18)
Nil
$104,335 (base fee 4.0% increase from
FY 18) 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
– Chair - Audit, Risk & Compliance
Committee - $22,094 (10.0% increase)
– Member - Audit, Risk & Compliance
Committee - $13,143 (10.0% increase)
– Chair - Nomination, Remuneration & HR
Committee - $18,354 (15.0% increase)
– Member - Nomination, Remuneration
& HR Committee - $11,670 (10.0%
increase)
$943,410 (2.5% increase from FY 18)
117.5% 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
$378,448 (3.0% increase from FY 18)1
82.3% of TFR 70.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
$400,000 (8.9% increase from FY 18)
82.3% of TFR 70.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
$400,000 (7.3% increase from FY 18)
82.3% of TFR 70.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
Various
Other
Management
Staff
30.0% of TFR 30.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
Other Staff
Various
20.0% of TFR 20.0% of TFR Payment of up to 1.5%
of TFR in lieu of premium
for Life, TPD and Income
Protection Cover
1.
Increase based on full year FY18 pay.
Six months'
notice
Six months'
notice
Six months'
notice
One month
(By either
party)
One month
(By either
party)
6 months
6 months
6 months
3 months
0-3
months
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
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 48
Growthpoint Properties Australia
2018 Annual Report
Remuneration report continued
LTI
The structure of the LTI for FY19 has changed from FY18 to move to a forward-looking plan. There will be a reduced opportunity
backward looking LTI plan in place as part of the transition to the new forward-looking plans. This will have the same structure as the
FY18 LTI, except the opportunity under the plan will be 50% rather than 100%. Refer to page 48 for details about the LTI for FY18
backward looking plan and, accordingly, the FY19 LTI backward looking plan. The measures for the forward-looking plan and
their hurdles are identical to the backward looking plans. For further explanation of this change, see the section “key change” on
page 45.
The figures included in the table on page 47 are the maximum available for award under this scheme in respect of FY19.
45
47
STI
For the EMT, an STI award may be payable in respect of FY19 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% – comprising the matters below
The Committee again reviewed non-financial measures for EMT based on market feedback and the PwC review of remuneration
structures. The changes to these criteria were based on simplification (reducing the overall number of measures) and introducing an
individual measure to the assessment.
The agreed criteria for FY19 and their weightings are as follows:
Performance Criteria
FY19 performance measures
Reason chosen
Execution of
Business Strategy
– Delivery of development pipeline of Botanicca, Gepps
Cross and Broadmeadows
– Undertake strategic acquisition and disposition of
property assets to maximise income and capital growth
opportunities
– Maintain the quality of property portfolio whilst
operating within the framework of the Group’s gearing
range, cost of capital and yields available in the
property market
Development and delivery of key
strategic initiatives will deliver long-
term and sustainable growth
Weighting
7.5%
Organisational
Performance
– Maintain a high employee engagement score
– Delivery of IT, compliance and risk management
business excellence projects
– Retain talented individuals in roles and provide for
advancement within the Group
Creating a talented and engaged
team and providing them with
the right functionality to support
Growthpoint will underpin ongoing
high performance
7.5%
Environmental, Social
and Governance (ESG)
Improvement
and Initiatives
– Promote and achieve diversity targets
– Maintain average high NABERS ratings, undertake
budgeted property specific energy reduction projects
and develop long-term energy reduction strategy
– Maintain investment grade credit rating
Individual Performance
of Executive
– Execution of key strategies to achieve annual budget/
guidance and longer-term earnings growth
– Role model values, leadership behaviours, collaboration
and inclusiveness
– Embedding strong governance, risk and compliance
culture
ESG goals form the foundation for
Growthpoint’s guiding principles.
7.5%
Having a focussed Executive Team
with clear targets, displaying strong
leadership and governance is
important to the Group’s success.
7.5%
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 the financial year. The STI amounts are determined by either the
Managing Director or the Committee based on recommendations of the Managing Director.
Growthpoint Properties Australia
2018 Annual Report 49
Other information
KMP and Non-Executive Director holdings of Growthpoint securities
Key change
From 1 July 18, the Committee implemented a Minimum Securityholding Requirement (MSR) for KMP and Non-Executive Directors.
Those covered must comply with the MSR within four years of the implementation date. The MSR is as follows:
t Non-Executive Directors – 100% of base fees in equivalent value of Growthpoint securities;
t Managing Director – 100% of TFR in equivalent value of Growthpoint securities; and
t Other KMP – 50% of TFR in equivalent value of Growthpoint securities.
The table below provides holdings as at the date of this report and indicates the current percentage holdings.
Name
Geoff Tomlinson
Grant Jackson
Francois Marais
Norbert Sasse
Estienne de Klerk
Maxine Brenner
Josephine Sukkar
Timothy Collyer
Aaron Hockly
Dion Andrews
Michael Green
Holding as at
16 August 2018
Current equivalent
value in
Growthpoint
securities1
MSR
No.
81,467
170,309
150,322
1,520,087
1,601,804
7,245
–
953,492
45,005
85,815
45,201
%
100
100
100
100
100
100
100
100
50
50
50
%
144
589
520
5,260
5,542
25
–
365
86
155
82
1. Current equivalent value takes the closing price of Growthpoint securities on 30 June 2018 ($3.61), multiplied by the holding and compares this to the relevant
FY19 measure (100% of base fees for Non-Executive Directors, for example). This is provided for information only at this time as compliance with the MSR is not
required until 30 June 22.
Nomination, Remuneration & HR Committee
The 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.
Committee members
The members of the Committee during the year and at the date of this Report are:
t Norbert Sasse (Chairman) – non-executive director
t Francois Marais – non-executive director
t Geoff Tomlinson – independent, non-executive director
t Josephine Sukkar – independent, non-executive director (appointed 1 October 2017)
Delegated authority
The 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.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information
50
Growthpoint Properties Australia
2018 Annual Report
Remuneration report continued
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 Committee has regard to the financial measures in
the table below in respect of the five financial years ended 30 June 2018.
2018
2017
2016
2015
2014
$'000
$'000
357,709
148,432
$
$
$
%
%
0.222
3.61
0.470
22.3
18.5
278,090
140,077
0.215
3.14
-0.010
6.3
18.6
219,377
118,134
283,004
110,685
117,348
86,790
0.205
3.15
0.020
7.4
13.5
0.197
3.13
0.680
36.4
23.9
0.190
2.45
0.050
10.8
17.5
Profit attributable to the owners of the Group
Dividends and distributions paid
Distribution per stapled security
Closing stapled security price
Change in stapled security price
Total Securityholder return¹
Return on equity
1. Source UBS Investment Research.
Independent consultants
During the year, the Committee engaged PwC as an independent consultant. PwC was paid a total of $86,700 for providing these
services.
The Committee is satisfied on behalf of the Board that PwC remained free from undue influence from those KMP in respect of whom it
was making recommendations. The Committee received the report directly from PwC and reviewed and discussed the report with PwC
when it was received. The company did not engage PwC for any other work during FY18.
The Committee also had regard to additional third-party industry remuneration benchmarking surveys.
Remuneration reviews
The 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
2018 Annual Report 51
Executive Director Remuneration and Service Contract
There is currently only one executive director being the Managing Director, Timothy Collyer.
Remuneration paid and payable
44
47
The total remuneration paid or payable to the Managing Director for FY18 is listed on page 44 of this report and the
proposed remuneration parameters for FY19 are on page 47.
Service contract
The Managing Director has a contract of employment dated 22 August 2016 with the Group that specifies the duties and obligations to
be fulfilled by the Managing Director and provides that the Board and the Managing Director will, early in each financial year, consult to
agree objectives for achievement during that year. Changes to the Managing Directors’ remuneration requires full Board approval and,
in certain circumstances, Securityholder approval.
The Managing Director can resign by providing six months’ written notice. The Group can terminate his employment immediately for
serious misconduct, bankruptcy, material breach of his employment agreement, failure to comply with a reasonable and lawful direction
by the Board, committing an act which brings the Group into disrepute or conviction of an offence punishable by imprisonment. In
addition, the Group can terminate the Managing Director’s employment without cause with not less than nine months’ severance pay.
On termination as Managing Director, he must resign as a director of any Group entity and he is restrained from a number of activities in
competition with or to the detriment of the Group for a period of 12 months from the date of termination.
Principles of remuneration for the Managing Director
The principles of remuneration for the Managing Director are:
1. The Managing Director should receive total remuneration which is competitive with rates for an equivalent position at listed and
unlisted Australian entities of similar size (measured by market capitalisation and gross assets), complexity and workload having
regard to the industry in which the Group operates and the relative profit and expenses versus the Group’s peers.
2. The Managing Director’s total remuneration should be set at a level to attract and retain a suitably qualified and experienced person
to this role and tailored to encourage Group performance which is in the best interests of all Securityholders.
3. The components of the Managing Director’s remuneration are:
a) total fixed remuneration (including applicable superannuation);
b)
41
if specified performance criteria are met, eligibility to receive a short-term incentive (“STI”) bonus payable in cash (up to
and including FY18, and cash and deferred performance rights for FY19 onwards) in respect of each financial year up to a
maximum set by the Board. Refer to page 41 for measures for the FY18 STI;
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.
6.
89
47
The Managing Director has a Minimum Securityholding Requirement. Refer to page 89 for details of his holdings as at the
date of this report and details of the MSR.
The Managing Director is entitled to receive certain payments including the vesting of all unvested securities under the LTI
if the Company decides to terminate his position without cause including through redundancy. Refer to page 47 for more
details of redundancy entitlements.
Other 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 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.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 52
Growthpoint Properties Australia
2018 Annual Report
Remuneration report continued
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
from 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 FY18.
The Chair of each Board sub-committee also regularly considers the performance of the committee they chair.
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, Grant Jackson and Josephine Sukkar have had, and continue to have,
extensive careers in Australian commercial property and have held, and continue to hold, senior positions in the property industry. The
Board is eager to ensure that where Board members are replaced, the Board’s property experience is not diminished.
Succession planning for directors
The 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
41
41
The Managing Director’s performance is formally considered annually by the 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 41.
The Managing Director reviews the performance of the other senior executives and makes recommendations to the Committee
on their remuneration based, in part, on the STI performance measures listed on page 41.
Meetings of Directors (FY18)
Board member
G. Tomlinson (Chairman)
M. Brenner
T. Collyer (Managing Director)1,2
E. de Klerk
G. Jackson
F. Marais
J. Sukkar3
N. Sasse
Growthpoint Board
Audit, Risk & Compliance
Committee
Nomination, Remuneration
& HR Committee
eligible
to attend
attended
eligible
to attend
attended
eligible
to attend
attended
9
9
9
9
9
9
8
9
9
8
9
8
8
9
8
9
4
4
–
4
4
–
–
–
4
3
4
4
4
–
1
–
7
–
–
–
–
7
6
7
7
–
6
–
–
7
6
7
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.
3. Josephine Sukkar was appointed as director and member of the Nomination, Remuneration & HR Committee effective from 1 October 2017.
Additional information
Growthpoint Properties Australia
2018 Annual Report 53
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.
Non-Audit services
During the year KPMG, the Group’s
auditor, has performed certain other
services in addition to the audit and
review of the financial 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.
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.
2018
$
Services other than audit and
review of financial statements:
Other regulatory audit services
59,410
Other assurance service and due
diligence services
9,000
Audit and review of financial
statements
Total paid to KPMG
140,966
209,376
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.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 54 Growthpoint Properties Australia
2018 Annual Report
836 Wellington Street, West Perth, WA
Growthpoint Properties Australia
2018 Annual Report 55
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 16 August 2018. The Directors have the
power to amend and reissue the financial report.
References to “the year” or “FY18” in this report refer
to the year ended 30 June 2018 unless the context
requires otherwise. References to “FY19” and “FY20”
relate to the twelve months ending 30 June in the year
listed.
References to “balance date” in this report refer to
30 June 2018 unless the context requires otherwise.
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 Investment in securities
2.4 Non-current assets held for sale
2.5 Trade and other assets
2.6 Trade and other liabilities
2.7 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
56
57
58
60
61
63
63
64
71
71
72
73
74
75
75
76
77
79
84
85
86
86
88
88
90
90
92
92
93
94
94
95
96
97
98
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 56
Growthpoint Properties Australia
2018 Annual Report
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2018
Notes
2018
$’000
2017
$’000
Revenue
Property revenue
Distributions from investment in securities
Straight line adjustment to property revenue
Net changes in fair value of investment properties
Profit / (loss) on sale of investment properties
Net change in fair value of investment in securities
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
2.1
254,239
261,463
2.2
2.3
2.1
3.2
4,886
5,962
166,958
24,419
10,368
(573)
-
466,259
(40,614)
(13,362)
(53,976)
-
2,522
118,157
(1,123)
-
16,161
(13,779)
383,401
(38,145)
(12,385)
(50,530)
412,283
332,871
316
(54,797)
(54,481)
501
(55,232)
(54,731)
357,802
278,140
4.3
(93)
(50)
357,709
278,090
358,762
(1,053)
357,709
279,324
(1,234)
278,090
Distribution to Securityholders
3.6
(148,432)
(140,077)
Change in net assets attributable to Securityholders / Total Comprehensive Income
209,277
138,013
Basic and diluted earnings per stapled security (cents)
3.7
53.5
42.7
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
Consolidated Statement of Financial Position
As at 30 June 2018
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
Investment in securities
Derivative financial instruments
Net 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
Trade and other 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
Growthpoint Properties Australia
2018 Annual Report 57
2.5
2.4
2.2
2.3
3.3
4.3
2.6
3.6
2.6
3.1
3.3
2018
$’000
31,463
6,583
64,250
102,296
2017
$’000
31,459
10,891
103,500
145,850
930
1,197
3,291,800
3,180,275
78,497
-
1,046
-
121
929
3,372,273
3,182,522
3,474,569
3,328,372
37,370
75,643
67
113,080
48,750
72,086
235
121,071
69
-
1,197,555
1,299,380
6,892
6,440
1,204,516
1,305,820
1,317,596
1,426,891
2,156,973
1,901,481
3.5
1,698,702
1,653,735
7,616
450,655
6,369
241,377
2,156,973
1,901,481
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 58
Growthpoint Properties Australia
2018 Annual Report
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Share-
based
payments
reserve
Deferred tax
expenses
charged to
equity
Contributed
equity
Profits
reserve
Accumulated
profits
$’000
$’000
$’000
$’000
$’000
Total
$’000
Balance at 30 June 2017
1,653,735
5,825
537
7
241,377
1,901,481
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
44,968
Distributions provided or paid
Share-based payment transactions
Deferred tax expense charged to equity
-
-
-
-
-
-
-
-
1,229
-
Total transactions with Securityholders
44,968
1,229
-
-
-
-
-
-
18
18
-
-
-
-
-
-
-
-
357,709
357,709
-
-
357,709
357,709
-
44,968
(148,432)
(148,432)
-
-
1,229
18
(148,432)
(102,218)
Balance at 30 June 2018
1,698,702
7,054
555
7
450,655
2,156,973
Total recognised income and expense for the
year is attributable to:
- Trust
- Company
Growthpoint Properties Australia
358,762
(1,053)
357,709
Growthpoint Properties Australia
2018 Annual Report 59
For the year ended 30 June 2017
Share-
based
payments
reserve
Deferred tax
expenses
charged to
equity
Contributed
equity
Profits
reserve
Accumulated
profits
$’000
$’000
$’000
$’000
$’000
Total
$’000
Balance at 30 June 2016
1,414,012
4,506
522
7
103,365
1,522,412
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
-
-
-
-
-
-
-
-
1,319
-
Total transactions with Securityholders
239,723
1,319
-
-
-
-
-
-
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
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 60
Growthpoint Properties Australia
2018 Annual Report
Consolidated Cash Flow Statement
For the year ended 30 June 2018
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
2.7 (b)
Cash flows from investing activities
Interest received
Distributions received from investment in securities
Receipts from sale of investment properties
Payments for investment properties
Payments for investment in securities
Payments for plant & equipment
Net cash inflow / (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 from financing activities
Net inflow in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
2.7 (a)
2018
$’000
247,928
(52,604)
195,324
(56,568)
(360)
138,396
317
3,673
194,766
(66,943)
(68,129)
(25)
63,659
322,547
(424,691)
44,968
-
-
(144,875)
(202,051)
4
31,459
31,463
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
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
Growthpoint Properties Australia
2018 Annual Report 61
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 FY18 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 (“the Trust”). In this report, the Trust includes all of its controlled entities. 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 its 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 2018. 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.
Working capital deficiency
The Group has unutilised facilities of $320 million and sufficient working capital and cashflows in order to fund all requirements arising
from the net current asset deficiency as at 30 June 2018. The deficiency is largely driven by the provision for the 30 June 2018
distribution.
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 16 August 2018.
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:
t derivative financial instruments measured at fair value;
t assets held for sale are measured at fair value;
t investment in securities is measured at fair value;
t investment property is measured at fair value; and
t 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.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 62
Growthpoint Properties Australia
2018 Annual Report
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:
t Note 2.2 – Investment properties;
t Note 2.3 – Assets held for sale;
t Note 3.3 – Derivative financial instruments; and
t 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 effective for annual periods beginning on or after 1 January
2018 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 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 annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. 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 annual reporting periods beginning on or after 1 January 2019, with early adoption permitted. The effect of the
Standard has been examined and would not have any material impact on the Group once implemented.
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 63
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 distributions
from investment in securities, change in fair value of investment in securities, 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 Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2018
Revenue, excluding straight line lease adjustment
Property expenses
Net Property Income Segment results
Profit on sale of investment properties
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
Industrial
$’000
$’000
Total
$’000
158,030
(25,471)
132,559
-
76,461
209,020
96,209
(15,143)
81,066
24,419
90,497
195,982
254,239
(40,614)
213,625
24,419
166,958
405,002
20,959
(68,159)
357,802
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 64
Growthpoint Properties Australia
2018 Annual Report
2.1 Revenue and segment information (continued)
Segmental information (continued)
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2017
Revenue, excluding straight line lease adjustment
Property expenses
Net Property Income Segment results
Loss on sale of investment properties
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
Industrial
$’000
$’000
Total
$’000
160,396
(23,583)
136,813
-
72,221
209,034
101,067
(14,562)
86,505
(1,123)
45,936
131,318
261,463
(38,145)
223,318
(1,123)
118,157
340,352
5,405
(67,617)
278,140
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 $41,400,000 (2017: $45,650,000) 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.
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 65
2.2 Investment properties (continued)
Determination of fair value (continued)
In the absence of current prices in an active market, the valuations are prepared on the basis of a discounted cash flow valuation where
the net annual cash flows derived from the property are discounted to a net present value at a target internal rate of return or discount
rate.
Valuations reflect, where appropriate, the types of tenants actually in occupation or responsible for meeting lease commitments or likely
to be in occupation, 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 frame.
Investment Properties Value
Industrial Properties
Date
Valuation
30-Jun-18
30-Jun-17
Latest External Valuation Consolidated Book Value
$’000
$’000
$’000
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
30-Jun-18
31-Dec-16
30-Jun-18
30-Jun-18
31-Dec-17
31-Dec-17
31-Dec-17
31-Dec-17
31-Dec-17
30-Jun-18
30-Jun-18
30-Jun-18
31-Dec-17
31-Dec-17
31-Dec-17
30-Jun-18
30-Jun-18
77,400
65,500
44,000
34,800
33,500
25,000
25,300
24,300
17,000
15,800
12,300
11,700
11,500
10,250
8,300
8,100
7,650
77,400
-
44,000
34,800
34,500
25,250
25,100
24,500
17,000
15,800
12,300
11,700
11,500
11,200
8,800
8,100
7,650
77,700
65,900
42,300
33,000
31,350
24,100
24,500
23,100
15,500
15,250
12,150
13,000
11,000
10,100
7,850
8,100
7,150
Melbourne Airport
Keysborough
Knoxfield
Melbourne Airport
Knoxfield
Kilsyth
Melbourne Airport
Keysborough
Melbourne Airport
Larapinta
Yatala
QLD 31-Dec-17
215,000
220,000
205,000
QLD 31-Dec-17
15,000
13,750
15,000
Brisbane Airport
QLD 31-Dec-17
Brisbane Airport
QLD 31-Dec-17
8,700
2,450
8,700
2,450
8,000
2,100
Perth Airport
Perth Airport
Perth Airport
Perth Airport
Perth Airport
WA
WA
WA
WA
WA
31-Dec-17
160,000
163,750
152,800
30-Jun-18
30-Jun-18
30-Jun-18
17,150
8,900
8,500
17,150
8,900
8,500
30-Jun-18
13,350
13,350
-
-
-
-
Victoria
120 Northcorp Boulevard
522-550 Wellington Road (i)
Broadmeadows
Mulgrave
1500 Ferntree Gully Road & 8 Henderson Road Knoxfield
40 Annandale Road
9-11 Drake Boulevard
120-132 Atlantic Drive
130 Sharps Road
Melbourne Airport
Altona
Keysborough
Melbourne Airport
Lots 2-4, 44-54 Raglan Street
Preston
120 Link Road
20 Southern Court
6 Kingston Park Court
60 Annandale Road
3 Millennium Court
31 Garden Street
101-111 South Centre Road
19 Southern Court
75 Annandale Road
Queensland
70 Distribution Street
13 Business Street
5 Viola Place
3 Viola Place
Western Australia
20 Colquhoun Road
2 Hugh Edwards Drive (ii)
10 Hugh Edwards Drive (ii)
36 Tarlton Crescent (ii)
58 Tarlton Crescent (ii)
(i) This property was sold in December 2017.
(ii) These properties were acquired in October 2017.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 66
Growthpoint Properties Australia
2018 Annual Report
2.2 Investment properties (continued)
Investment Properties Value (continued)
Industrial Properties
Date
Valuation
30-Jun-18
30-Jun-17
Latest External Valuation Consolidated Book Value
$’000
$’000
$’000
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
Erskine Park
Erskine Park
Erskine Park
NSW 30-Jun-18
NSW 31-Dec-17
NSW 31-Dec-17
Kembla Grange
NSW 30-Jun-18
Silverwater
NSW 31-Dec-17
Gepps Cross
Beverley
Adelaide Airport
Adelaide Airport
SA
SA
SA
SA
31-Dec-17
30-Jun-18
31-Dec-17
31-Dec-17
68,750
45,600
33,750
26,000
18,000
77,500
22,500
15,600
9,100
68,750
46,500
34,500
26,000
18,500
79,000
22,500
15,800
9,100
63,500
45,000
32,000
24,000
16,600
73,400
21,250
14,300
8,400
Total Industrial Properties
1,198,250
1,146,800
1,103,400
Office Properties
Victoria
75 Dorcas Street
Vantage, 109 Burwood Road
Building 2, 572-576 Swan Street
Buildings 1&3, 572-576 Swan Street
Building B, 211 Wellington Road
Building C, 211 Wellington Road
Car Park, 572-576 Swan Street
Queensland
Latest External Valuation Consolidated Book Value
Date
Valuation
30-Jun-18
30-Jun-17
$’000
$’000
$’000
South Melbourne
Hawthorn
Richmond
Richmond
Mulgrave
Mulgrave
Richmond
VIC
VIC
VIC
VIC
VIC
VIC
VIC
30-Jun-18
190,000
190,000
180,000
30-Jun-18
106,000
106,000
30-Jun-18
31-Dec-17
31-Dec-17
31-Dec-17
30-Jun-18
90,600
80,750
73,500
57,000
1,200
90,600
82,750
74,000
57,250
1,200
89,250
80,900
62,000
72,400
55,500
1,125
Optus Centre, 15 Green Square Close
Fortitude Valley
QLD 30-Jun-18
144,000
144,000
138,000
Brisbane
QLD 30-Jun-18
130,000
130,000
121,000
South Brisbane
QLD 30-Jun-18
104,500
104,500
333 Ann Street
CB1, 22 Cordelia Street
A1, 32 Cordelia Street
A4, 52 Merivale Street
CB2, 42 Merivale Street
South Brisbane
QLD 31-Dec-17
South Brisbane
QLD 30-Jun-18
South Brisbane
QLD 31-Dec-17
83,000
82,500
59,500
27,000
Car Park, 32 Cordelia Street & 52 Merivale Street South Brisbane
QLD 31-Dec-17
South Australia
World Park, 33-39 Richmond Road
7 Laffer Drive
Keswick
Bedford Park
SA
SA
30-Jun-18
31-Dec-17
62,000
19,500
84,000
82,500
60,000
27,000
62,000
20,000
99,000
81,200
79,000
57,200
26,000
62,000
15,500
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 67
Latest External Valuation Consolidated Book Value
Date
Valuation
30-Jun-18
30-Jun-17
$’000
$’000
$’000
Parramatta
Artarmon
NSW 31-Dec-17
310,000
310,000
303,500
NSW 31-Dec-17
124,000
123,500
115,000
Sydney Olympic Park NSW 30-Jun-18
101,000
101,000
Sydney Olympic Park NSW 31-Dec-17
100,000
100,500
97,000
97,000
28,500
29,800
2.2 Investment properties (continued)
Investment Properties Value (continued)
Office Properties
New South Wales
1 Charles Street
Building C, 219-247 Pacific Highway
3 Murray Rose Avenue
5 Murray Rose Avenue
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
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-17
27,000
26,700
27,000
Canberra
Canberra
ACT
30-Jun-18
ACT
31-Dec-17
93,500
73,000
93,500
74,000
87,000
72,000
2,197,850
2,145,000
2,076,875
Total investment properties
3,396,100
3,291,800
3,180,275
(iii) These properties have been transferred to assets held for sale.
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 and m3property. The fair value of properties
not externally valued as at 30 June 2018 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’s
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:
t Current prices for comparable investment properties, as adjusted to reflect differences for location, building quality, tenancy profile
and other factors.
t Discounted cash flow projections based on estimates of future cash flows.
t Capitalised income projections based upon a property’s estimated net market income, and a capitalisation rate derived from analysis
of market evidence.
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Growthpoint Properties Australia
2018 Annual Report
2.2 Investment properties (continued)
Valuation basis (continued)
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 Australian Government bond rate
Implied property risk premium
2018
2017
6.8%-8.8%
7.3%-8.5%
6.0%-10.0%
6.3%-10.0%
5.8%-8.8%
5.8%-9.0%
3-12 months
3-12 months
2.5%-4.0%
2.5% - 5.0%
2018
2017
6.8%-9.0%
6.8%-10.5%
6.0%-8.5%
6.3%-10.3%
5.3%-14.4%
5.5%-13.4%
6-12 months
6-12 months
3.0%–4.5%
3.0% - 4.5%
30-Jun-18
30-Jun-17
7.11%
2.63%
4.48%
7.49%
2.60%
4.89%
As the above table shows, over the 12 months to 30 June 2018 discount rates utilised in the valuation of the Group’s property portfolio
have tightened (lowered) by approximately 38 basis points. Over the same period the implied property risk premium has decreased by
approximately 41 basis points. The implied property risk premium is the difference between the weighted average discount rate and the
10-year Australian Government bond rate. The decrease in the implied property risk premium is largely due to further tightening of the
Group’s weighted average discount rate.
Commentary on Capitalisation Rates
Office
Australian office markets, particularly Eastern seaboard markets, continue to attract significant volumes of capital and remain attractive
relative to international investment markets given healthy yields, improving leasing fundamentals and near historically low borrowing
rates. Melbourne and Sydney remain the focal point of investor attention given the strength of their local economies and occupier
markets, while Brisbane and Adelaide continue to attract investment given their favourable yield spreads (yield premiums) over
Melbourne and Sydney. Improving leasing market fundamentals in Perth have also encouraged counter-cyclical investor activity over
the past year. Transactional evidence over the past 12 months has demonstrated yield compression of between 12.5 and 50 basis
points in most major office markets. The weighted average capitalisation rate used in valuing the office portfolio has firmed from 6.3%
to 6.0% over the year to 30 June 2018.
Industrial
Strong investor demand and a re-assessment of return expectations led to further yield compression in the major Australian industrial
markets over the past 12 months. The Eastern seaboard remains the focus for both domestic and foreign capital, although a lack of
opportunity in both markets and improved confidence in local market conditions has encouraged investors to consider the Brisbane
and Perth markets. Prime yields are now generally placed between 5.75% and 6.50% for modern, well located assets with long-term
leases, while assets considered ‘super prime’ (modern assets with lease terms longer than 10 years) are now generally priced at or
below 5.50%. Transactional evidence over the past 12 months has provided good evidence for the Group’s own industrial properties.
The weighted average capitalisation rate used to value the industrial portfolio firmed from 6.9% to 6.6% over the year to 30 June 2018.
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 69
2.2 Investment properties (continued)
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 2018, the following contractual obligations relating to development and expansions at existing investment property are in
place:
t Under an expansion clause in the current lease to Symbion at 120-132 Atlantic Drive, Keysborough, Victoria the tenant can request a
3,000 sqm expansion at any point during the term (which currently expires on 20 December 2028). The Group would be responsible
for funding this expansion. Upon completion, the lease would be re-set so that at least seven years remained and rent would be
charged on the additional lettable area constructed under the expansion clause.
t 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.
The property expansions detailed above have an estimated aggregate cost of not more than $5.0 million.
Construction contract for Building 3, 572-576 Swan Street, Richmond, Victoria with Hacer Group for development of a new
19,300 sqm office property with a contract value of approximately $80.0 million.
The Group also has an obligation in June 2019 to make available $6.0 million to the tenant at 1 Charles Street, Parramatta, New South
Wales to spend on capital expenditure or refurbishment at the property.
The Group has an obligation in FY19, under a lease at Building 2, 572-576 Swan Street, Richmond, Victoria, to pay for lessor works
totalling $3.8 million.
Amounts recognised in profit and loss for investment properties
Rental income
Straight line adjustment to rental income
Net gain from fair value adjustment
Profit / (loss) on sale of investment properties
Direct operating expenses from property that generated rental income
2018
$’000
254,239
5,962
166,958
24,419
(40,614)
410,964
2017
$’000
261,463
2,522
118,157
(1,123)
(38,145)
342,874
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70
Growthpoint Properties Australia
2018 Annual Report
2.2 Investment properties (continued)
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
2018
$’000
226,109
747,117
345,803
2017
$’000
228,397
819,366
476,081
1,319,029
1,523,844
10 (2017: 10) of the investment properties are held on a leasehold basis with non-cancellable, long-term operating leases with ground
rent payable monthly. The minimum lease payments under these leases payable by the Trust are as follows:
Within one year
Later than one year but not later than five years
Later than five years
Reconciliation of value of investment properties
At fair value
Opening balance
Acquisitions
Capital expenditure
Lease incentives and leasing costs
Amortisation of lease incentives and leasing costs
Disposals
Reclassification (to) / from held for sale
Straight lining of revenue adjustment
Net gain from fair value adjustment
Closing balance at 30 June
2018
$’000
3,646
8,551
930
13,127
2018
$’000
3,180,275
48,847
10,315
25,934
(16,327)
(65,914)
(64,250)
5,962
166,958
2017
$’000
2,261
4,722
148
7,131
2017
$’000
2,651,144
510,867
10,042
17,238
(9,969)
(16,226)
(103,500)
2,522
118,157
3,291,800
3,180,275
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 71
2.3 Investment in securities
Determination of fair value
Investment in securities contains a financial asset designated at fair value through profit or loss at inception. The fair value of investment
in securities is the price that would be received to sell this asset in an orderly transaction between market participants at the
measurement date. This fair value is based on the last traded market price from the Australian Securities Exchange (ASX) of the relating
security at reporting date.
The following table represents the fair value movement in investment in securities for the year ended 30 June 2018.
Opening balance
Purchases
Sales
Closing balance
Gain in the net change in fair value of investment in securities
Fair value of Industria REIT
stapled securities
$’000
-
68,129
-
78,497
10,368
An off-market purchase of 29,621,555 Industria REIT (IDR) stapled securities was completed in July 2017. The last traded market price
of an IDR stapled security on the ASX was $2.65 as at 30 June 2018.
Fair value hierarchy
The fair value of investments in securities has been classified as Level 1 in the fair value hierarchy based on quoted prices in an active
market.
2.4 Non-current assets held for sale
Accounting policy
Non-current assets that are expected to be recovered primarily through sale rather than through continuing use are classified as held
for sale. Immediately before classification as held for sale, the assets are re-measured in accordance with the Group’s accounting
policies. Thereafter the assets are measured at the lower of their carrying amount and fair value with the exception of investment
property which continues to be measured in accordance with accounting policy note 2.2.
As at 30 June 2018, there were two properties classed as held for sale (2017: 1) and their value is shown on the table below:
1231-1241 Sandgate Road, Nundah, QLD
Quad 2, 6 Parkview Drive, Sydney Olympic Park, NSW
Quad 3, 102 Bennelong Parkway, Sydney Olympic Park, NSW
Total
2018
$’000
2017
$’000
-
103,500
32,500
31,750
64,250
-
-
103,500
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Growthpoint Properties Australia
2018 Annual Report
2.5 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.
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 73
2.5 Trade and other assets (continued)
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
Distribution receivables
Prepayments
Proceeds from sale of investment properties
Impaired rent receivables
As at 30 June 2018, there were no impaired rent receivables (2017: nil).
2.6 Trade and other liabilities
Accounting policies
2018
$’000
538
1,244
4,801
-
6,583
2017
$’000
1,335
-
4,756
4,800
10,891
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:
Current
Trade payables
Non-trade payables
GST payable
Accrued expenses - other
Prepaid rent
Other liabilities (i)
Non-current
Non-trade payables )
2018
$’000
2,340
865
1,881
12,378
18,052
1,854
37,370
69
69
2017
$’000
2,350
586
2,040
21,238
20,321
2,215
48,750
-
-
(i) Other liabilities represents an obligation to fund capital expenditure by the Company as the custodian of the Charles Street Property Trust. An equal amount was
received and is held as cash (see Note 2.7)
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Growthpoint Properties Australia
2018 Annual Report
2.7 Cash flow information
Accounting policies
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date
that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term
commitments.
Restricted cash
Cash and cash equivalents includes a balance of $1,854,000 (30 June 2017: $2,215,000) in restricted cash which is being held by the
Company as the custodian of the Charles Street Property Trust. These funds are not available for general use by the Group.
Cash flow information
(a) Reconciliation of cash at end of year
Cash and cash equivalents balance
2018
$’000
2017
$’000
31,463
31,459
(b) Reconciliation of net operating profit to net cash inflow from operating activities
Net profit for the period
357,709
278,090
Distributions from investment in securities
Fair value adjustment to investment properties
(Profit)/ loss on sale of investment properties
Fair value adjustment to investment in securities
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
– Decrease/ (Increase) in receivables
– Increase in prepayments
– Increase in deferred tax asset
– Increase/ (decrease) in payables
(4,886)
(166,958)
(24,419)
(10,368)
573
-
1,583
(317)
293
(9,607)
5,568
(1,308)
(104)
(9,363)
-
(118,157)
1,123
-
(16,161)
13,779
2,412
(501)
162
(7,304)
(5,141)
(2,612)
(221)
16,031
Net cash inflow from operating activities
138,396
161,500
Notes to the Financial Statements continued
Growthpoint Properties Australia
2018 Annual Report 75
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.
Opening balance
1 July 2017
Movement
during period
Balance as at
30 June 2018
Facility limit
Maturity
$’000
$’000
$’000
$’000
Secured loans
Syndicated bank facility
– 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
100,000
245,000
52,144
100,000
150,000
-
-
200,000
100,000
60,000
90,000
130,344
52,138
26,000
-
-
17,856
-
(120,000)
-
-
-
-
-
-
-
-
-
100,000
245,000
70,000
100,000
30,000
-
-
200,000
100,000
60,000
90,000
130,344
52,138
26,000
100,000
245,000
70,000
150,000
150,000
75,000
75,000
200,000
100,000
60,000
90,000
130,344
52,138
26,000
Mar-23
Dec-21
Dec-21
Jun-23
Sep-21
Nov-20
Sep-20
Mar-25
Dec-22
Dec-22
Dec-22
Jun-27
Jun-29
Jun-29
1,305,626
(102,144)
1,203,482
1,523,482
Less unamortised upfront costs
(6,246)
319
Total interest bearing liabilities
1,299,380
(101,825)
(5,927)
1,197,555
The weighted average all-in interest rate on interest bearing liabilities (including bank margin and amortisation of upfront fees paid) at 30
June 2018 was 4.44% per annum (2017: 4.29% per annum). Refer to note 3.3 for details on interest rate and cross currency swaps.
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.
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Growthpoint Properties Australia
2018 Annual Report
3.1 Interest bearing liabilities (continued)
Interest bearing liabilities (continued)
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
2018
$’000
2017
$’000
31,463
6,583
64,250
102,296
31,459
10,891
103,500
145,850
3,291,800
3,180,275
930
1,046
1,197
929
3,293,776
3,396,072
3,182,401
3,328,251
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
2018
$’000
53,215
1,582
54,797
2017
$’000
52,821
2,411
55,232
Notes to the Financial Statements continued
Growthpoint Properties Australia
2018 Annual Report 77
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 elected not to
designate these to qualify for hedge accounting under AASB 139.
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 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
2018
$’000
-
(6,892)
(6,892)
2017
$’000
121
(6,440)
(6,319)
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Growthpoint Properties Australia
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3.3 Derivative financial instruments (continued)
Derivative financial instruments (continued)
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 2018 covered 27% (30 June 2017: 25%) of the loan principal outstanding. With total fixed interest rate debt
of $984 million outstanding (30 June 2017: $984 million), the total fixed interest rate coverage of outstanding principle is 82% (30 June
2017: 75%).
The average fixed interest rate of swaps at 30 June 2018 was 2.30% per annum (2017: 2.30% per annum) and the variable interest
rate (excluding bank margin) is 1.97% per annum (30 June 17: 1.68% per annum) at balance date. See table below for further details of
swaps in effect at 30 June 2018:
Counter Party
Amount of Swap
Swap Expiry
Fixed Rate Term to Maturity
Interest rate swaps
NAB
CBA
CBA
ANZ
Westpac
Westpac
ANZ
Total / Weighted average
$’000
25,000
75,000
25,000
50,000
50,000
50,000
50,000
325,000
Jun-2020
Nov-2021
Jun-2020
Dec-2020
May-2021
Jun-2021
Jun-2021
%
Years
2.36
2.20
2.36
2.42
2.10
2.48
2.33
2.30
2.0
3.4
2.0
2.5
2.9
3.0
3.0
2.8
These 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. These contracts are settled on a net basis.
At balance date these contracts were a total liability with a fair value of $6,892,000 (30 June 17: net liability of $6,319,000) for the
Group. For the year ended 30 June 2018 there was a loss from the decrease in fair value of $573,000 for the Group (2017: gain of
$16,161,000).
Cross currency swap contracts – carried at fair value through profit and loss
Counter Party
Amount of Swap
Swap Expiry
Fixed Rate Term to Maturity
Cross Currency Swaps
NAB
Westpac
ANZ
CBA
NAB
Westpac
ANZ
CBA
Total / Weighted average
$’000
32,586
32,586
32,586
32,586
13,034
13,034
13,034
13,034
182,482
Jun-2027
Jun-2027
Jun-2027
Jun-2027
Jun-2029
Jun-2029
Jun-2029
Jun-2029
%
Years
5.29
5.29
5.27
5.26
5.47
5.47
5.45
5.44
5.33
9.0
9.0
9.0
9.0
11.0
11.0
11.0
11.0
9.5
Notes to the Financial Statements continued
Growthpoint Properties Australia
2018 Annual Report 79
3.3 Derivative financial instruments (continued)
Derivative financial instruments (continued)
Fair value hierarchy
The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as
follows:
t Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
t 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).
t Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
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.
30 June 2018
Derivative financial assets
Derivative financial liabilities
30 June 2017
Derivative financial assets
Derivative financial liabilities
Level 1
Level 2
Level 3
$’000
$’000
$’000
-
-
-
-
-
-
-
6,892
6,892
(121)
6,440
6,319
-
-
-
-
-
-
Total
$’000
-
6,892
6,892
(121)
6,440
6,319
3.4 Financial risk management
Overview
The Group has exposure to the following risks from their use of financial instruments:
t credit risk;
t liquidity risk; and
t 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.
46 Refer to page 46 of the Group’s 2018 Sustainability Report for more details.
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Growthpoint Properties Australia
2018 Annual Report
3.4 Financial risk management (continued)
Financial instruments used by the Group
The Group’s principal financial instruments, other than derivatives, comprise bank loans and Loan Notes (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
instruments 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 fluctuations is therefore removed.
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.
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 81
3.4 Financial risk management (continued)
Financial instruments used by the Group (continued)
Market risk
Market risk is the risk that changes in market prices (such as foreign exchange rates, interest rates and equity prices) will affect the
Group’s income or the value of its holding of financial instruments.
A potential market risk to the Group arises from changes in interest rates relating to its Syndicated Facility with a principal amount
outstanding of $545,000,000 at balance sheet date (2017: $647,144,000).
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
2018
$’000
31,463
-
31,463
6,892
658,482
325,000
220,000
2017
$’000
31,459
121
31,580
6,440
658,482
325,000
322,144
1,210,374
1,312,066
The following sensitivity analysis is based on the interest rate risk exposures in existence at balance sheet date. At 30 June 2018, 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)
2018
$’000
(1,885)
(8,933)
(2,178)
(12,996)
1,885
13,188
16,566
31,639
2017
$’000
(2,907)
(9,032)
(3,055)
(14,994)
2,907
14,549
14,077
31,533
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.
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Growthpoint Properties Australia
2018 Annual Report
3.4 Financial risk management (continued)
Financial instruments used by the Group (continued)
Other market price risk
The Group is exposed to equity price risk, which arises from its investment in securities measured at fair value through profit and loss.
The management of the Group monitors the proportion of equity securities in its investment portfolio based on market indices. Material
investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board.
The primary goal of the Group’s investment strategy is to maximise investment returns. Certain investments are designated as at fair
value through profit and loss because their performance is actively monitored and they are managed on a fair value basis.
Sensitivity analysis – equity price risk
The Group’s listed equity investments are listed on the Australian Securities Exchange (ASX). For such investments classified as
fair value through profit and loss, a 10% increase/decrease in the equity value would have increased/decreased post tax profit by
$7,850,000 (2017: nil).
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 $31,463,000 (2017: $31,459,000).
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
2018
$’000
865,000
545,000
320,000
2017
$’000
815,000
647,144
167,856
658,482
658,482
-
658,482
658,482
-
320,000
167,856
Notes to the Financial Statements continued
Growthpoint Properties Australia
2018 Annual Report 83
3.4 Financial risk management (continued)
Financial instruments used by the Group (continued)
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 2018.
Carrying
amount
Total
contractual
cashflows
6 months
or less
6 to
12 months
1 to
5 years
More than
5 years
$’000
$’000
$’000
$’000
$’000
$’000
2018
Non-derivative financial liabilities
Bank loans and Loan Notes
1,203,482
1,903,320
Trade and other liabilities
94,731
94,799
1,298,213
1,998,119
(16,029)
93,533
77,504
80,935
293,832
1,544,582
721
545
-
81,656
294,377
1,544,582
Derivative financial liabilities
Interest rate swaps used for hedging
2017
Non-derivative financial liabilities
6,892
6,892
1,713
1,713
873
873
736
736
104
104
-
-
Bank loans
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
6,440
6,440
4,508
4,508
1,208
1,208
1,113
1,113
2,187
2,187
-
-
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Growthpoint Properties Australia
2018 Annual Report
3.5 Contributed Equity and reserves
Accounting policies
Share capital
Stapled securities are classified as equity. Incremental costs directly attributable to the issue of stapled securities are recognised as a
deduction from equity, net of any tax effects.
Distributions and dividends
Provision is made for the amount of any distribution or dividend declared, determined or publicly recommended by the Directors on or
before the end of the period but not distributed at the balance sheet date.
Contributed Equity
Contributed equity can be analysed as follows:
2018
No. (‘000)
2018
$’000
2017
No. (‘000)
2017
$’000
Opening balance at 1 July
661,341
1,653,735
583,126
1,414,012
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
-
-
13,668
44,967
376
-
-
-
44,380
33,528
307
-
14,044
44,967
78,215
139,808
105,928
-
(6,013)
239,723
Closing balance at 30 June
675,385
1,698,702
661,341
1,653,735
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 is operative for the 31 December 2017 and 30 June 2018 distributions of the Group.
Capital risk management
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern, so that the Group can continue
to provide returns for Securityholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost
of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends and distributions paid to
Securityholders, return capital to Securityholders, vary the level of borrowings, issue new securities or sell assets.
During the year, the Group implemented several capital management initiatives, namely:
t The Distribution Reinvestment Plan was in operation for the 31 December 2017 distribution, raising a total of $44,967,000 for the
issue of 13,667,999 new stapled securities.
t In April 2018, the Group extended two tranches of bank debt with a facility limit of $315,000,000 by two years to 31 December
2021.
t In June 2018, the Group extended a tranche of bank debt with a facility limit of $100,000,000 by four years to 31 March 2023.
t In June 2018, the Group increased a tranche of bank debt by $50,000,000 to a facility limit of $150,000,000. It also extended the
maturity date by 4 years to 30 June 2023.
t The Distribution Reinvestment Plan was in operation for the 30 June 2018 distribution.
Notes to the Financial Statements continued
Growthpoint Properties Australia
2018 Annual Report 85
3.5 Contributed Equity and reserves (continued)
Capital risk management (continued)
The Group also holds an independent credit rating to aid it accessing debt capital markets. In April 2018, Moody’s confirmed the
Group’s independent credit rating of Baa2 on senior secured debt with a stable outlook.
The Group maintains undrawn debt facilities to aid in capital management. As at 30 June 2018 the Group had total debt facilities of
$1,523,482,000 of which $320,000,000 was undrawn at balance date.
The Group monitors capital by using a number of measures, such as gearing, interest cover and loan to valuation ratio. The gearing
ratio is calculated by dividing interest bearing liabilities less cash by total assets less cash.
The Group has a target gearing range of 35% - 45%. At 30 June 2018, the gearing ratio was 33.9% (30 June 17: 38.5%). The gearing
ratios at 30 June 2018 and 30 June 2017 were calculated as follows:
Total interest bearing liabilities less cash
Total assets less cash
Gearing ratio
Nature and purpose of reserves
Share-based payments reserve
2018
$’000
1,166,092
3,444,415
33.9%
2017
$’000
1,267,921
3,296,913
38.5%
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 (2017: nil).
3.6 Distributions
Period for distribution
Half year to 31 December 2017
Half year to 30 June 2018
Total distribution for FY18
Half year to 31 December 2016
Half year to 30 June 2017
Total distribution for FY17
Total
distribution
Total stapled
securities
Distributions per
stapled security
$’000
(’000)
72,789
75,643
148,432
67,991
72,086
140,077
661,716
675,384
641,424
661,340
(cents)
11.00
11.20
22.20
10.60
10.90
21.50
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Growthpoint Properties Australia
2018 Annual Report
3.7 Earnings per stapled security (“EPS”)
Earnings per stapled security
Basic EPS is determined by dividing the profit or loss attributable to Securityholders of the Group by the weighted average number of
equivalent securities outstanding during the financial year.
Diluted EPS adjusts the figures used in the determination of basic EPS by taking into account amounts unpaid on securities and the
effect of all dilutive potential ordinary securities.
Profit attributable to Securityholders of the Group ($)
Weighted average number of stapled securities on issue for the year (no.)
Basic & diluted earnings per stapled security (cents)
3.8 Share-based payment arrangements
Accounting policies
Share-based payment transactions
2018
2017
357,709,000
278,090,000
668,456,752
651,245,952
53.5
42.7
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 2018, the Group has the following share-based payment arrangements:
Employee Incentive Plans FY15, FY16, FY17, FY18
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 43 (in the remuneration report section of the Directors’ report).
43
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.
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 87
3.8 Share-based payment arrangements (continued)
Share-based payment arrangements (continued)
During the year, the first tranche of the FY17, the second tranche of the FY16, the third tranche of the FY15 and the fourth tranche of
the FY 14 Employee Incentive Plan performance rights was determined with the results shown on the table below:
Plan identification
Plan participants
Tranche
FY17 Plan
FY17 Plan
FY16 Plan
FY16 Plan
FY15 Plan
FY15 Plan
FY14 Plan
FY14 Plan
Director
Employees
Director
Employees
Director
Employees
Director
Employees
1
1
2
2
3
3
4
4
Cost
$
175,230
300,222
83,427
112,019
129,540
140,308
128,653
125,944
The first tranche of the FY17 Employee Incentive Plan performance rights vested during the year.
The fair value of performance rights under the FY18 Employee Incentive Plan was determined on the grant date of those rights and
then “trued-up” at 30 June 2018 where allowed. The fair value of these rights for the director is estimated as $368,160 and for other
employees $705,201. This estimate is based on achieving 50.0% of the maximum payable under the FY18 plan. This is seen as a
reasonable estimate of fair value as it is based on the percentage achieved for comparable elements from the FY16 plan, adjusted for
information available on likely achievement as at 30 June 2018. The actual costs of performance rights cannot be determined until
FY19 and the first issue of securities under the FY18 plan will not occur until FY19.
During the year, $1,229,000 was recognised in the share based payments reserve (June 17: $1,319,000). 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 2018, 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
FY17 Plan
FY17 Plan
FY16 Plan
FY16 Plan
FY15 Plan
FY15 Plan
FY14 Plan
FY14 Plan
Director
Employees
Director
Employees
Director
Employees
Director
Employees
23-Nov-17
4-Oct-17
4-Oct-17
4-Oct-17
4-Oct-17
4-Oct-17
4-Oct-17
4-Oct-17
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
FY18
$
175,230
300,222
83,427
112,019
129,540
140,308
128,653
125,944
No.
55,104
94,410
26,235
35,227
40,736
44,123
40,457
39,605
$
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
%
25%
25%
25%
25%
25%
25%
25%
25%
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 88
Growthpoint Properties Australia
2018 Annual Report
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
Other long-term employee benefits
Post-employment benefits
Share-based payments
2018
$
2017
$
4,530,409
3,715,568
9,368
144,412
913,548
5,597,737
-
155,796
1,024,316
4,895,680
Individual directors’ and executives’ compensation disclosures
Information regarding individual directors’ and executives’ 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.
Notes to the Financial Statements continued
Growthpoint Properties Australia
2018 Annual Report 89
4.1 Key management personnel compensation (continued)
Compensation (continued)
Movements in securities
The movement in the number of ordinary stapled securities in the Group held, directly, indirectly or beneficially, by each key
management person, including their related parties, is as follows:
2018
Securityholder
G. Jackson
N. Sasse
E. de Klerk
T. Collyer
F. Marais
A. Hockly
D. Andrews
M. Green
G. Tomlinson
M. Brenner
J. Sukkar
Opening
securities
1 July
No.
164,799
1,470,908
1,549,983
790,960
150,322
-
42,257
47,370
78,831
7,245
-
Securities granted
as compensation
Acquired securities Disposed securities
Closing
securities
30 June
No.
-
-
-
162,532
-
45,005
43,558
43,831
-
-
-
No.
5,510
49,179
51,821
-
-
-
-
-
2,636
-
-
No.
No.
-
-
-
-
-
-
-
(46,000)
-
-
-
170,309
1,520,087
1,601,804
953,492
150,322
45,005
85,815
45,201
81,467
7,245
-
During the year to 30 June 2018, a total of 294,926 stapled securities with a total value of $937,865 were issued to key management
personnel upon vesting of performance rights under Employee Incentive Plans.
2017
Securityholder
G. Jackson
N. Sasse
E. de Klerk
T. Collyer
F. Marais
A. Hockly
D. Andrews
M. Green
G. Tomlinson
M. Brenner
Opening
securities
1 July
No.
144,707
1,293,762
1,354,592
625,612
134,451
107,558
120,851
32,399
59,332
7,245
Securities granted
as compensation
Acquired securities Disposed securities
Closing
securities
30 June
No.
-
-
-
150,033
-
35,719
33,511
33,321
-
-
No.
20,092
177,146
195,391
15,315
15,871
8,482
9,396
-
19,499
-
No.
No.
-
-
-
-
-
(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.
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.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 90
Growthpoint Properties Australia
2018 Annual 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
2018
$
2017
$
Valuation
68,720
52,150
(i) The Group used the valuation services of m3property, a company that Mr Jackson is a director of, to independently value 12 properties (2017: 7). 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 16% of the total valuation expense for the year (2017:
11%).
At 30 June 2018, $26,500 was payable for valuation services to m3property (2017: $11,500).
Transactions with significant shareholders
During the year there were no transactions with significant shareholders (FY 17: the ultimate parent entity, Growthpoint Properties
Limited, provided underwriting for the December 2016 half year DRP. No fees were charged for this underwriting and Securityholder
approval was obtained at the November 2016 Annual General Meeting for this underwriting.).
There were no balances outstanding from transactions with significant shareholders as at 30 June 2018 (2017: 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.
Notes to the Financial Statements continued Growthpoint Properties Australia
2018 Annual Report 91
4.3 Taxation (continued)
Accounting policies (continued)
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.
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:
Loss before income tax expense
Income tax benefit using the Company’s domestic rate of 30%
Increase in income tax due to:
Non-deductible expenses
2018
$’000
210
(117)
-
93
2018
$’000
(960)
(288)
381
93
2017
$’000
217
(185)
18
50
2017
$’000
(1,184)
(355)
405
50
The weighted average tax rate for FY18 and FY17 is not meaningful as there is a loss before tax expenses but for tax purposes there is
a profit.
As at 30 June 2018, the Company had franking credits of $2,256,486 available to it (30 June 2017: $1,896,021).
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information
92
Growthpoint Properties Australia
2018 Annual Report
4.3 Taxation (continued)
Income tax expense (continued)
Movement in temporary differences during the year
Non-current assets:
Property, plant and equipment
Equity raising costs
Total
Current liabilities:
Accrued expenses
Employee benefits
Prepayments
Total
Total movement in temporary differences
Non-current assets:
Equity raising costs
Total
Current liabilities:
Accrued expenses
Employee benefits
Prepayments
Total
Total movement in temporary differences
Opening
balance
1 July 2017
Charged to
profit and loss
Charged to
equity
Balance
30 June 2018
$’000
$’000
$’000
$’000
-
83
83
164
663
19
846
929
35
(31)
4
64
48
-
112
116
-
-
-
-
-
-
-
-
35
53
88
228
711
19
958
1,046
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
4.4 Contingent liabilities
The Group has no contingent liabilities as at the date of this report (2017: nil).
4.5 Commitments
For details of commitments on properties to be expanded see Note 2.2.
The Group has no other significant capital, lease or remuneration commitments in existence at reporting date, which have not been
recognised as liabilities in these financial statements (2017: nil).
Notes to the Financial Statements continued
Growthpoint Properties Australia
2018 Annual Report 93
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.
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
19 Southern Court Property Trust
Kilsyth 1 Property Trust
Kilsyth 2 Property Trust
Queensland Property Trust
New South Wales Property Trust
Coolaroo Property Trust
Broadmeadows Leasehold Trust
Atlantic Drive Property Trust
20 Southern Court Property Trust
Ravenhall Property Trust
Laverton Property Trust
Drake Boulevard Property Trust
Preston 2 Property Trust
Goulburn Property Trust
Growthpoint Properties Australia Limited
Growthpoint Nominees (Aust) Pty Limited
Derrimut Property Trust
Dandenong South Property Trust
Nundah Property Trust
Rabinov Property Trust
Rabinov Property Trust No. 2
Rabinov Property Trust No. 3
Ann Street Property Trust
CB Property Trust
New South Wales 2 Property Trust
Richmond Car Park Trust
Mort Street Property Trust
Erskine Park Pharmaceutical Trust
Erskine Park Truck Trust
Erskine Park Warehouse Trust
William Angliss Drive Trust
Charles Street Property Trust
Wellington Road Property Trust
Growthpoint Nominees (Aust) 2 Pty Limited
1500 Ferntree Gully Road Property Trust
Eagle Farm 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
Building 2 Richmond Property Trust
Lot S5 Property Trust
6 Kingston Park Court 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
Growthpoint Metro Office Fund
Growthpoint Developments Pty Ltd
Kewlink East Trust (i)
(i) Indicates entities established or purchased during the financial year ended 30 June 2018.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 94
Growthpoint Properties Australia
2018 Annual Report
4.7 Parent entity disclosures
As at, and throughout, the financial year ended 30 June 2018 the parent of the Group was Growthpoint Properties Australia Trust.
Result of the parent entity
Profit for the period
Other comprehensive expense
Total comprehensive income for the period
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising:
Contributed equity
Retained profits/ (losses)
Total equity
2018
$’000
2017
$’000
358,762
(148,432)
210,330
279,324
(140,077)
139,247
86,322
128,649
3,456,619
3,308,924
159,547
1,363,995
2,092,624
164,530
1,470,229
1,838,695
1,639,014
1,595,415
453,610
243,280
2,092,624
1,838,695
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 2018 the following fees were paid or payable for services provided by the auditor of the Group:
Audit services - KPMG
Audit and review of financial statements
Other regulatory audit services
Non-audit services - KPMG
Other assurance and due diligence services
2018
$
2017
$
140,966
59,410
124,522
58,728
9,000
209,376
9,600
192,850
Notes to the Financial Statements continued
Growthpoint Properties Australia
2018 Annual Report 95
4.9 Subsequent events
On 18 July 2018, the Group announced that the issue price for securities to be issued under the DRP for the distribution to be paid on
or around 31 August 2018 will be $3.58 per stapled security.
Approximately 72.5% of Growthpoint’s distribution payable on or around 31 August 2018 will be issued as new stapled securities
under the DRP, raising, after allowing for withholding tax, $46.7 million for the issue of 13.0 million new stapled securities. Total stapled
securities on issue following the DRP will be approximately 688.4 million.
On 18 July 2018, the Group announced that it had entered into a put and call option to acquire 836 Wellington Road, West Perth, WA.
The acquisition is scheduled to settle in October 2018 for a purchase price of $91,325,000.
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.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 96
Growthpoint Properties Australia
2018 Annual 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 36 to 95 are
in accordance with the Corporations Act 2001 (Cth), including:
(i) complying with Australian 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 2018 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 2018.
This declaration is made in accordance with a resolution of the Directors of the Group.
Timothy Collyer
Managing Director
Growthpoint Properties Australia Limited
Melbourne, 16 August 2018
Auditor’s Independence declaration
Growthpoint Properties Australia
2018 Annual Report 97
97 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. 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 2018 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Dean Waters Partner Melbourne 16 August 2018 Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 98
Growthpoint Properties Australia
2018 Annual Report
Independent Auditor’s report
98 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. 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 2018 and of its financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report of the Stapled Group comprises: Consolidated statement of financial position as at 30 June 2018 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. Basis for opinion 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 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. Growthpoint Properties Australia
2018 Annual Report 99
99 Valuation of Investment Properties ($3,292 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 $3.3 billion of investment properties, which constitutes 95.2% of the Group’s total assets as at 30 June 2018. 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, and CBRE 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 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. Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 100
Growthpoint Properties Australia
2018 Annual Report
Independent Auditor’s report continued
100 Recognition of Rental Income ($254.2m) and straight-line adjustment to property revenue ($5.6m) 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 55.8% 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 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; 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; and Created an expectation to compare to actual revenue reported by management by applying the weighted average annual rent increase to the office and the industrial base rent balances for FY17 and adjusting for changes in tenancy to arrive at an expected revenue balance for the year ended. 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 and will 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
2018 Annual Report 101
101 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 and whether the use of the going concern basis of accounting is appropriate. 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_responsibilities/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 In our opinion, the Remuneration Report of Growthpoint Properties Australia Limited for the year ended 30 June 2018, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of Growthpoint Properties Australia Limited 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 pages 37 to 52 of the Directors’ Report for the year ended 30 June 2018. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Dean Waters Partner Melbourne 16 August 2018 Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 102
Growthpoint Properties Australia
2018 Annual Report
Additional information
FY18 Portfolio information
Office Portfolio
Address
Book Value
Valuer
Cap
rate
Discount
rate
Major tenant WALE
Lettable
area
Site
area
$’000
%
%
years
sqm
sqm
75 Dorcas St
South Melbourne
109 Burwood Rd
Hawthorn
VIC
VIC
190,000
106,000
Urbis
JLL
5.8
5.8
7.0
6.8
ANZ Banking
Group
3.4 23,811
9,632
Orora
5.9 12,388
3,529
Country Road
Bldg 2, 572-576 Swan St
Richmond
VIC
90,600
CBRE
5.3
6.8
Group 14.0 14,602
8,459
Bldg B, 211 Wellington Rd Mulgrave
VIC
74,000
Directors
6.8
7.0
Monash
University
Country Road
2.5 12,780 11,040
Bldg 1, 572-576 Swan St
Richmond
VIC
59,750
Directors
5.3
6.8
Group 14.0
8,554
8,288
Bldg C, 211 Wellington Rd Mulgrave
Bldg 3, 572-576 Swan St
Richmond
VIC
VIC
57,250
Directors
6.8
7.3
BMW Australia
Finance
4.3 10,289 11,070
23,000
Directors
Development Site
1,355
8,545
Car Park, 572-576 Swan St Richmond
VIC
1,200
CBRE
14.4
–
15 Green Square Cl
Fortitude Valley
QLD
144,000
Urbis
6.0
7.0
333 Ann St
Brisbane
QLD
130,000
CBRE
6.0
7.3
CB1, 22 Cordelia St
South Brisbane
QLD
104,500
Colliers
A1, 32 Cordelia St
South Brisbane
QLD
84,000
Directors
A4, 52 Merivale St
South Brisbane
CB2, 42 Merivale St
South Brisbane
QLD
QLD
82,500
Colliers
60,000
Directors
Car Park, 32 Cordelia St
& 52 Merivale St
South Brisbane
QLD
27,000
Directors
33-39 Richmond Rd
Keswick
SA
SA
62,000
JLL
20,000
Directors
7 Laffer Dr
1 Charles St
Bedford Park
Parramatta
NSW 310,000
Directors
Bldg C, 219-247 Pacific Hwy Artarmon
NSW 123,500
Directors
3 Murray Rose Ave
Sydney Olympic Park NSW 101,000
Savills
5 Murray Rose Ave
Sydney Olympic Park NSW 100,500
Directors
102 Bennelong Pkwy
Sydney Olympic Park NSW 32,500 m3property
6.1
6.0
6.0
6.0
6.0
7.5
7.5
5.8
6.0
6.2
6.0
6.3
7.0
7.0
7.0
Country Road
Group
Queensland
Urban Utilities
Federation
University
Downer EDI
Mining
8.9
–
3,756
3.7 16,442
2,519
4.6 16,320
1,563
4.5 11,529
5,772
Jacobs Group
6.7 10,004
2,667
University of the
Sunshine Coast
7.0 Peabody Energy
4.6
6.6
9,405
2,331
6,598
3,158
7.3
Secure Parking
1.4
–
9,319
8.0 Coffey Corporate
5.1 11,835
4,169
Westpac Banking
Corporation
7.1
6,343 33,090
NSW Police
5.9 32,356
6,460
Fox Sports
4.8 14,375
4,212
Samsung
3.7 13,423
3,980
Lion
5.8 12,386
3,826
8.0
7.0
7.0
7.0
7.0
7.0 Alstom Australia
1.3
5,244
6,635
6 Parkview Dr
Sydney Olympic Park NSW 31,750 m3property
6.3
7.0
89 Cambridge Park Dr
Cambridge
TAS
26,700
Directors
8.3
9.0
Universities
Admissions
Centre
Hydro Tasmania
Consulting
3.2
5,145
7,788
5.8
6,876 28,080
10-12 Mort St
Canberra
ACT
93,500
KF
6.4
255 London Cct
Canberra
ACT
74,000
Directors
5.8
Commonwealth of
Australia
7.0
Commonwealth of
Australia
7.0
6.7 15,398
3,064
9.2
8,972
2,945
Total / Weighted Average
2,209,250
6.0
7.1
5.5 286,430 194,625
Growthpoint Properties Australia
2018 Annual Report 103
Industrial Portfolio
Address
Book Value
Valuer
Cap
rate
Discount
rate
Major
tenant WALE
Lettable
area
Site
area
$’000
%
%
years
sqm
sqm
120 Northcorp Blvd
Broadmeadows VIC
77,400
Urbis
6.5
7.3
Woolworths
3.1
58,320
250,000
1500 Ferntree Gully Rd
& 8 Henderson Rd
Knoxfield
VIC
44,000 m3property
6.0
7.3
40 Annandale Rd
Melbourne Airport VIC
34,800
Urbis
8.0
7.3
9-11 Drake Blvd
Altona
120-132 Atlantic Dr
Keysborough
VIC
VIC
34,500
Directors
25,250
Directors
130 Sharps Rd
Melbourne Airport VIC
25,100
Directors
Lots 2, 3 & 4,
44-54 Raglan St
Preston
VIC
24,500
Directors
120 Link Rd
Melbourne Airport VIC
17,000
Directors
20 Southern Crt
Keysborough
6 Kingston Park Crt
Knoxfield
VIC
VIC
15,800
Colliers
12,300 m3property
60 Annandale Rd
Melbourne Airport VIC
11,700 m3property
3 Millennium Crt
Knoxfield
31 Garden St
Kilsyth
VIC
VIC
11,500
Directors
11,200
Directors
101-111 South Centre
Rd
Melbourne Airport VIC
19 Southern Crt
Keysborough
VIC
8,800
8,100
Directors
Colliers
75 Annandale Rd
Melbourne Airport VIC
7,650 m3property
70 Distribution St
Larapinta
QLD
220,000
Directors
13 Business St
Yatala
QLD
13,750
Directors
5 Viola Pl
Brisbane Airport QLD
8,700
Directors
3 Viola Pl
Brisbane Airport QLD
2,450
Directors
20 Colquhoun Rd
Perth Airport
WA
163,750
Directors
Hugh Edwards Dr
& Tarlton Cr
Perth Airport
WA
47,900
27-49 Lenore Dr
Erskine Park
NSW 68,750
JLL
CBRE
6-7 John Morphett Pl
Erskine Park
NSW 46,500
Directors
51-65 Lenore Dr
Erskine Park
NSW 34,500
Directors
34 Reddalls Rd
Kembla Grange NSW 26,000
CBRE
81 Derby St
Silverwater
NSW 18,500
Directors
599 Main North Rd
Gepps Cross
SA
79,000
Directors
1-3 Pope Crt
Beverley
SA
22,500
Savills
12-16 Butler Blvd
Adelaide Airport SA
15,800
Directors
10 Butler Blvd
Adelaide Airport SA
9,100
Directors
6.3
5.8
8.3
7.0
8.3
6.3
6.5
8.3
6.5
6.5
7.8
6.5
8.0
6.8
6.8
7.5
7.5
6.1
7.7
5.8
6.3
5.8
6.0
6.0
6.8
7.5
8.8
8.4
Brown & Watson
International
Australian Postal
Corporation
Peter Stevens
Motorcycles
7.4
22,009
40,844
6.0
44,424
75,325
4.6
25,743
41,730
Symbion
10.5
12,864
26,181
Laminex Group
4.0
28,100
47,446
7.3
6.8
7.3
7.3
7.0
7.3
7.3
7.5
7.3
7.0
7.3
7.8
7.5
7.0
8.2
7.0
7.3
7.3
7.3
7.0
7.3
8.0
8.0
7.8
Paper Australia
7.3 The Workwear Group
7.0
7.3
Sales Force National
NGK Spark Plug
7.3 Garden City Planters
Orora
Cummins Filtration
Direct Couriers
Transms
Neovia Logistics
Services
Woolworths
Reward Supply Co.
CEVA Logistics
Cargo Transport
Systems
Woolworths
Mainfreight
Linfox
Linfox
Linfox
1.2
9.0
4.5
3.9
9.9
2.7
5.4
9.4
0.8
1.3
3.7
1.2
1.7
4.7
7.3
6.3
5.2
1.8
9.7
26,980
42,280
26,517
51,434
11,430
19,210
7,645
12,795
16,276
34,726
8,040
14,750
8,919
17,610
14,082
24,799
6,455
11,650
10,280
16,930
76,109
250,900
8,951
18,630
14,726
35,166
3,431
12,483
80,374
193,936
31,965
57,617
29,476
76,490
24,881
82,280
3,720
36,720
Autocare Services
12.3
355
141,100
IVE Group Australia
Woolworths
Aluminium Specialties
Group
Cheap as Chips
Toll Transport
4.2
3.1
2.9
2.4
3.6
7,984
13,490
67,238
233,500
14,459
25,660
16,800
30,621
8,461
16,100
Total / Weighted Average
1,146,800
6.6
7.2
4.9 717,014 1,952,403
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 104 Growthpoint Properties Australia
2018 Annual Report
Oxford Corner, Rosebank, Johannesburg
Growthpoint Properties Australia
2018 Annual Report 105
Additional information
About Growthpoint South Africa1
Growthpoint Properties Limited
of South Africa (“GRT”) owns
65.5% of the securities of
Growthpoint (at 30 June 2018)
and is its major Securityholder.
Other information about GRT
t Included in the JSE Top 40 Index
t Top ten constituent of FTSE EPRA /
NAREIT Emerging Index
t Included in the FTSE/JSE
Responsible Investment Index,
FTSE4Good Index and the Dow
Jones Sustainability Index
t Underpinned by high-quality, physical
property assets, diversified across
sectors (Retail, Office and Industrial)
t 15-year track record of uninterrupted
dividend growth
t Sustainable quality of earnings that
can be projected with a high degree
of accuracy
t Well capitalised and conservatively
geared
t Good corporate governance with
transparent reporting
t Proven management track record
t Recipient of multiple sustainability,
governance and reporting awards
t Baa3 global scale rating from
Moody’s
As of 31 December 2017
Growthpoint represents:
t 24.5% of GRT’s gross property
assets
t 23.1% of GRT’s net property income
t 14.2% of GRT’s total distributable
income
Growth in tangible assets and market
capitalisation (Rbn)
as at 31 December 2017
Growth in distributions (R¢)
per share,
as at 31 December 2017
Tangible Assets
Market Cap
103.8
124.6
116.1
6.5%
CAGR
195.8
71.5
71.5
70.7
183.8
173.3
161.3
149.0
82.0
62.8
49.9
56.5
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
Key Facts (as at 31 December 2017)1
Listing
GRT is listed on the Johannesburg Stock Exchange (JSE)
Ranking on the JSE
21 by market capitalisation
Closing exchange rate used AUD:ZAR=9.66
Market capitalisation
R80.4 / AUD8.3B
Gross assets
Net assets
R127.7B / AUD13.2B
R96.0B / AUD10.0B
Gearing (SA only)
33.8%
Distributable Income
R2.9B/ AUD282m (for the 6 month period using an average
exchange rate of R10.45 / AUD)
ICR (SA only)
3.4 times
No. of employees (SA only)
620
Properties
463 properties in South Africa, including 50% ownership
of the prestigious V&A Waterfront. 39 Properties in Eastern
Europe, 19 in Romania and 20 in Poland, through its 29%
holding of AIM listed Globalworth Real Estate Investments Ltd
1. All information supplied by GRT (figures as at 31 December 2017).
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 106 Growthpoint Properties Australia
2018 Annual Report
15 Green Square Close, Fortitude Valley, QLD
Growthpoint Properties Australia
2018 Annual Report 107
Top 20 Legal Securityholders as at 18 July 2018
Rank Name
No. of
Securities
% of
Securities
GROWTHPOINT PROPERTIES LIMITED
442,693,457
65.55
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
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
BNP PARIBAS NOMINEES PTY LTD
SHARON INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LIMITED
11.
RABINOV HOLDINGS PTY LTD
12. WARBONT NOMINEES PTY LTD
13.
14.
15.
16.
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
NAVIGATOR AUSTRALIA LTD
BNP PARIBAS NOMS (NZ) LTD
17. MR MAX KARL KOEP
18.
19.
JONAERE PTY LTD
BOND STREET CUSTODIANS LIMITED
20. MS KYLIE MAREE CECILIA THOMAS
58,594,535
35,060,627
26,058,566
25,952,261
17,699,481
6,631,947
4,344,441
2,252,000
2,250,655
2,000,000
1,101,701
922,279
891,996
779,420
754,968
745,000
680,000
607,427
594,205
630,614,966
44,769,402
8.68
5.19
3.86
3.84
2.62
0.98
0.64
0.33
0.33
0.30
0.16
0.14
0.13
0.12
0.11
0.11
0.10
0.09
0.09
93.37
6.63
Distribution of Securityholders as at 18 July 2018
There is currently only one class of Growthpoint securities, being ordinary securities, and
there are no securities currently held in escrow. All of Growthpoint’s securities are quoted on
the ASX and no other stock exchanges. Growthpoint does not currently have any share buy-
back plans in place.
The number of Securityholders holding less than a marketable parcel of 138 securities
(based on the 18 July 2018 closing price of $3.64) is 256 and they hold 2,795 Growthpoint
securities. In accordance with the ASX Listing Rules, a “marketable parcel” is “…a parcel of
securities of not less than $500…”
Additional
information
Securityholders
Dan Colman
Investor Relations Manager
Growthpoint Securityholders* (%)
as at 18 July 2018
0.7
7.5
26.3
65.5
GRT
Institutional
Retail
Directors and Employees
Location of Growthpoint
Securityholders* (%)
as at 18 July 2018
10
18
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
72
100,001 - 9,999,999,999
Rounding
Total
Total holders
Securities % of Issued Capital
984
1,485
655
782
90
461,503
4,077,864
4,807,225
20,406,320
645,631,456
3,996
675,384,368
0.07
0.60
0.71
3.02
95.59
0.01
100.00
As at 18 July 2018, there were 675,384,368 fully-paid stapled securities held by 3,996
individual Securityholders.
South Africa
Australia
Rest of World
* Figures are approximate and based on
beneficial ownership.
Substantial holders as at 18 July 2018
Name
No. of Securities % of issued capital
Growthpoint Properties Limited
442,693,457
65.55
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 108 Growthpoint Properties Australia
2018 Annual Report
33-39 Richmond Road, Keswick, SA
Growthpoint Properties Australia
2018 Annual Report 109
How to contact us
growthpoint.com.au
1800 260 453
info@growthpoint.com.au
Connect
@Growthpoint_Aus
Growthpoint Properties
Australia
Additional information
Frequently asked questions
How do I update my contact
details?
Please update your details via
Computershare. Please note you will
require your holder identification number.
How do I buy or sell
Growthpoint securities?
Growthpoint securities trade on the ASX
under the code ‘GOZ’. To buy or sell
securities directly you must transact via
an ASX approved broker (including on-
line brokers such as NAB, E-Trade and
Commsec). More details are available at
asx.com.au/products/shares/buying-
selling-shares.htm.
Growthpoint cannot sell direct to you
other than via the DRP or, in certain
limited circumstances, additional equity
raisings.
Why does Growthpoint
outsource its registry function
to Computershare?
Most ASX-listed entities outsource this
function to a third party registry provider.
Growthpoint does not have the scale or
in-house resources (including technology)
to in-source this function. Computershare
is one of the largest registry providers
in Australia and is included in the
ASX’s top 100 companies with a
market capitalisation of approximately
$7.0 billion. Growthpoint has chosen
Computershare on the basis of its
price and service offering. Growthpoint
regularly considers Computershare’s
performance (including any complaints or
feedback received from Securityholders),
pricing and services versus other
providers to determine if it should
continue to outsource this function to
Computershare.
I have lost or not received a tax
statement, holding statement
or report. How can I obtain a
replacement?
Contact Computershare in the first
instance. Details are supplied below.
Contacting Computershare
For direct holders for Growthpoint
securities, most matters can be dealt with
on-line at: www-au.computershare.
com/Investor/
Note that you will require your holder
identification number.
If you cannot resolve matters on-line,
contact details for Computershare are:
• Address: Computershare Investor
Services Pty Limited, Yarra Falls, 452
Johnston Street, Abbotsford, Victoria
3067 Australia
• Telephone: 1300 850 505 (within
Australia) or +61(0) 3 9415 4000 (from
outside of Australia)
• Facsimile: +61(0) 3 9473 2500
• Email: webqueries@computershare.
com.au
For indirect holders, i.e. holders that
hold securities via fund, custodian or
other third party, you should contact that
party. Computershare will only be able
to assist those with holdings directly on
Growthpoint’s Securityholder register.
Complaints
Growthpoint Properties Australia aims
to provide each Securityholder with
a professional and high level of client
service in managing the Stapled Group.
If you have a complaint, you may contact
us in writing to our registered address or
by email to complaints@growthpoint.
com.au, detailing the complaint. A
response will normally be provided
within 15 working days. All complaints
should be addressed to the Complaints
Manager.
The Responsible Entity is a member
of the Financial Ombudsman Service
Limited (FOS), an external, independent
complaints handling organisation. FOS
can be contacted on 1300 78 08 08,
should your complaint not be resolved by
Growthpoint Properties Australia.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 110
Growthpoint Properties Australia
2018 Annual Report
Notes
Growthpoint Properties Australia
2018 Annual Report 111
2018
Securityholder
Calendar*
16 August 2018
t Results for the full year ended 30 June
2018 announced to ASX
31 August 2018
t Distribution paid for the half year
ending 30 June 2018
t FY18 Annual Report sent to
Securityholders
18 October 2018
t Investor Update released to ASX
21 November 2018
t Annual General Meeting
* Dates indicative and subject to change
by the Board.
Financial ReportPortfolio ReviewFinancial ManagementBusiness OverviewGovernanceAdditional Information 112
Growthpoint Properties Australia
2018 Annual Report
Glossary
$ or dollar refers to Australian currency unless otherwise indicated
AFSL Australian Financial Services Licence
A-REIT Australian Real Estate Investment Trust
Growthpoint or the Group Growthpoint Properties Australia
comprising the Company, the Trust and its controlled entities
Growthpoint SA or GRT Growthpoint Properties Limited of South
Africa (Growthpoint’s majority Securityholder) which trades on the
JSE under the code “GRT”
IDR Industria REIT
IFRS International Financial Reporting Standards
JLL the Australian arm of Jones Lang LaSalle, an international
professional services and investment management firm
ASX Australian Securities Exchange
JSE Johannesburg Stock Exchange
AUD Australian Dollars
bn billion
Basis points one hundredth of one percentage point (used chiefly
in expressing differences of interest rates)
Board the board of directors of the Company
Cap rate or capitalisation rate refers to the market income
produced by an asset divided by its value or cost
CAGR compound annual growth rate
CBD central business district
CBRE an international professional services and investment
management firm formerly known as CB Richard Ellis
Company or responsible entity Growthpoint Properties Australia
Limited
cps cents per security
discount rate the interest rate used in a discounted cash flow
(DCF) analysis to determine the net present value of an asset’s
future cash flows
distributions the amount Securityholders receive by way of
income in their hand (before any tax or brokerage costs). It is similar
to a dividend by a company but it is payable by the Trust
dps distribution per security
Funds From Operations (FFO) refer to explanation at top of page
18
Fund-through a mechanism under which an entity (in this report
typically Growthpoint) funds development as completion of works
occur
FY14, FY15, FY16, FY17 and FY18 the 12 months ended on
30 June in the year listed i.e. “FY18” means the 12 months ended
30 June 2018
FY19, FY20, FY21, FY22 and FY23 the 12 months ending on
30 June in the year listed i.e. “FY19” means the 12 months ending
30 June 2019
kW kilowatt
LTI long-term incentive
m million
MW Megawatt Unit of power equal to one million watts
NABERS National Australian Built Environment Rating System
(a national system for measuring environmental performance of
buildings)
NGER National Greenhouse and Energy Reporting
NLA net lettable area
NPI net property income
NTA net tangible assets
Operational Control operational control is defined as having the
ability to introduce and implement operating, health & safety or
environmental policies and measures for a facility. This is based on
the approach for defining controlling corporations, as outlined in
NGER legislative framework.
PwC the professional services firm previously known as
PriceWaterhouseCoopers
Return on equity or ROE calculated as the percentage change in
NTA plus the distribution for a given period divided by the opening
NTA
REIT real estate investment trust
Securityholder an owner of Growthpoint securities
S&P Standard & Poor’s
sqm square metres
STI short-term incentive
sustainability a process for ensuring activities are able to be
continued and assets and resources are able to endure for a
medium-long-term
Syndicated Facility syndicated loan facility from CBA, NAB, WBC
and ANZ to Growthpoint
ICR Interest coverage ratio
TFR total fixed remuneration
Gearing interest bearing liabilities less cash divided by total assets
less cash
GHG greenhouse gas
GMF previously GPT Metro Office Fund which traded on the ASX
as GMF (renamed Growthpoint Metro Office Fund)
GOZ the ASX trading code that Growthpoint trades under.
Green Star an internationally recognised sustainability rating
system issued by the Green Building Council in Australia
GRESB Global Real Estate Sustainability Benchmark
GRI Global Reporting Initiative. Further information can be found
on page 62 of the 2018 Sustainability Report.
gross assets the total value of assets
tCO2-e Tonnes of carbon dioxide equivalents. The universal
unit of measurement to indicate the global warming potential of
greenhouse gases
Total Securityholder return change in security price plus
distributions paid or payable for the relevant period
TPD total and permanent disability
Trust Growthpoint Properties Australia Trust
USPP United States Private Placement
WADM weighted average debt maturity
WALE weighted average lease expiry
WARR weighted average rent review
Contact details
Retail Investors:
Computershare Investor Services Pty Limited
GPO Box 2975, Melbourne VIC 3001 Australia
Phone (within Australia): 1300 850 505
Phone (outside Australia): +61 (0)3 9415 4000
Fax: +61 (0)3 9473 2500
Email: webqueries@computershare.com.au
Institutional Investors:
Daniel Colman – Investor Relations Manager
Pooja Shetty – Investor Relations Administrator
Email: info@growthpoint.com.au
Investor Services Line: 1800 260 453
www.growthpoint.com.au
Corporate directory
Growthpoint Properties Australia Limited
ABN 33 124 093 901; AFSL No 316409
Growthpoint Properties Australia Trust
ARSN 120 121 002
Registered Office
Level 31, 35 Collins Street,
Melbourne VIC 3000 Australia
Phone: (03) 8681 2900
Fax: (03) 8681 2910
www.growthpoint.com.au
Directors
Geoffrey Tomlinson, Timothy Collyer, Maxine Brenner,
Estienne de Klerk, Grant Jackson, Francois Marais,
Norbert Sasse, Josephine Sukkar
Company Secretaries
Aaron Hockly1, Dion Andrews, Yien Hong
Auditor
KPMG
Tower 2, 727 Collins Street
Melbourne VIC 3008 Australia
ASX Code
Growthpoint Properties Australia securities are listed
on the Australian Securities Exchange (Code GOZ).
1. Aaron Hockly is on parental leave and will return in April 2019.
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2018 Annual Report
Growthpoint Properties Australia
Level 31, 35 Collins Street, Melbourne VIC Australia
Investor Services Line: 1800 260 453
www.growthpoint.com.au