20 August 2020
Appendix 4E
Results for the twelve months ended 30 June 2020
Results for announcement to the market
Revenue and other income from ordinary activities
Profit from ordinary activities after tax attributable to
Securityholders¹
Net profit attributable to Securityholders
Distribution to Securityholders
Distributions
Final distribution payable on 31 August 2020
Interim distribution paid on 28 February 2020
Interim dividend paid on 28 February 2020
Net tangible assets per stapled security
Net tangible assets per stapled security
Year ended
30-Jun-20
$m
292.7
197.2
272.1
168.3
Year ended
30-Jun-19
$m
282.6
178.0
375.3
167.4
Change
%
3.6%
10.8%
(27.5%)
0.5%
Amount per
security/unit
cents
10.00
10.80
1.00
Franked
amount per
security
%
Record
date
0%
0%
30-Jun-20
31-Dec-19
100%
31-Dec-19
30-Jun-20
$
3.65
30-Jun-19
$
3.50
Change
%
4.3%
Additional information regarding the results for the year is contained in the FY20 annual report and the FY20 results
presentation which have been released to the Australian Securities Exchange (ASX).
Entities over which control was gained or lost during the year
Nil.
Details of associates and joint venture entities
Nil.
¹ In our FY20 annual financial report and the FY20 presentation, profit from ordinary activities after tax attributable to Securityholders is referred to
as funds from operations (FFO)
Growthpoint Properties Australia Trust ARSN 120 121 002
Growthpoint Properties Australia Limited ABN 33 124 093 901 AFSL 316409
Distribution Reinvestment Plan
The Distribution Reinvestment Plan remains suspended and will not be in operation for the final distribution payment.
Audit
The above information is based on the financial report contained within the FY20 annual report which has been
audited and contains an independent auditor’s report.
The remaining disclosures required to comply with ASX listing rule 4.3A are contained within the FY20 annual report.
This announcement was authorised by Growthpoint’s Board of Directors.
Jacqueline Jovanovski
Company Secretary
For further information, please contact:
Virginia Spring
Investor Relations Manager
Telephone: +61 3 8681 2933
Growthpoint Properties Australia
Level 31, 35 Collins St, Melbourne, VIC 300
growthpoint.com.au
Growthpoint provides spaces for people to thrive. For more than 10 years, we’ve been investing in high-quality
industrial and office properties across Australia. Today, we own and manage 58 properties, valued at approximately
$4.2 billion.
We actively manage our portfolio. We invest in our existing properties, ensuring they meet our tenants’ needs now and
into the future. We are also focused on growing our property portfolio.
We are committed to operating in a sustainable way and reducing our impact on the environment.
Growthpoint is a real estate investment trust (REIT), listed on the ASX, and is part of the S&P/ASX 200 index.
Moody’s has issued Growthpoint an investment-grade rating of Baa2 for senior secured debt.
FY20
annual
report.
for the year ended
30 June 2020
Space to thrive.
Growthpoint Properties Australia
Growthpoint Properties Australia Trust
ARSN 120 121 002
Growthpoint Properties Australia Limited
ABN 33 124 093 901 AFSL 316409
2
What’s
inside.
Directors’ Report
Business overview
FY20 highlights
Who we are
How we differ
Introduction from the Chairman
and Managing Director
Portfolio performance
Office market
Office portfolio performance
Industrial market
Industrial portfolio performance
Sustainability highlights
Financial performance
Governance
Risk management
Board of Directors
Executive Management Team
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
Securityholder information
Contact details
Glossary
3
3
4
6
8
12
12
14
18
20
22
24
28
28
30
32
34
53
54
55
59
90
92
93
98
100
102
103
About this report
This report is a consolidated summary of Growthpoint Properties
Australia’s (comprising Growthpoint Properties Australia Limited,
Growthpoint Properties Australia Trust and their controlled
entities) (Growthpoint or the Group) operational and financial
performance for the 12 months ended 30 June 2020 (FY20 or
the year).
Reporting suite
Growthpoint’s reporting suite for FY20 includes the following
documents:
GOZ FY20 Annual Report
An in-depth review of Growthpoint’s financial and operational
performance for FY20, the Group’s remuneration report and its
detailed financial statements.
GOZ FY20 Results Presentation
An overview of Growthpoint’s operational and financial
performance for the financial year.
GOZ FY20 Sustainability Report
A review of Growthpoint’s approach to sustainability and an
update on our progress in achieving our sustainability goals.
GOZ FY20 Property Compendium
A detailed summary of Growthpoint’s property portfolio as at 30
June 2020.
GOZ FY20 Corporate Governance Statement
An overview of Growthpoint’s governance framework and
practices. Download a copy: growthpoint.com.au/corporate-
governance
Important information
This report contains forward looking statements, opinions
and estimates based on assumptions, contingencies and
market trends made by Growthpoint which are subject to
certain risks, uncertainties and may change without notice.
Should one or more of the risks or uncertainties materialise,
or should underlying assumptions prove incorrect, there can
be no assurance that actual outcomes for Growthpoint will
not differ materiality from statements made in this report. The
forward looking statements are based on information available
to Growthpoint as at the date of this report (20 August 2020).
Past performance is not a guarantee of future performance. The
actual results of Growthpoint may differ materially from those
expressed or implied by the forward-looking statements in this
report and you should not place undue reliance on forward-
looking statements. Except as required by law or regulation
(including the ASX Listing Rules), Growthpoint do not undertake
to update any forward looking statements in this report.
Growthpoint Properties Australia – FY20 Annual Report
3
FY20
highlights.
Property portfolio value
$4.2b
+5.0% on 30 June 2019
Profit
after tax
Funds from operations
(FFO) per security
Distributions per
security (DPS)
$272.1m
-27.5% on FY19
25.6¢
+2.0% on FY19
21.8¢
-5.2% on FY19
Net tangible assets
(NTA) per security
$3.65
Portfolio
occupancy
93%1
Weighted average
lease expiry (WALE)
6.2yrs
+4.3% on 30 June 2019
30 June 2019: 98%
30 June 2019: 5.0yrs
Average NABERS
Energy rating
4.9
30 June 2019: 4.8 stars
GRESB
score
72/100
PCP: 66/100
1. Portfolio occupancy excluding Botanicca 3 is 97%.
599 Main North Road, Gepps Cross, SAFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 4
Business Overview
Who
we are.
Growthpoint provides spaces for people to thrive.
For more than 10 years, we’ve been investing in
high-quality industrial and office properties across
Australia. Today, we own and manage 58 properties,
valued at approximately $4.2 billion.
What we do:
We actively manage our portfolio. We invest in our existing
properties, ensuring they meet our tenants’ needs now and into the
future. We are also focused on growing our property portfolio.
We are committed to operating in a sustainable way and reducing
our impact on the environment.
Growthpoint is a real estate investment trust (REIT), listed on the
ASX, and is a part of the S&P/ASX 200.
How we do it:
Our values underpin everything we do.
Respect
Success
Inclusion
Integrity
Fun
Who we do it for:
Tenants, employees, Securityholders, debt providers, suppliers,
local communities, government and regulators.
As at 30 June 2020
Total
properties
58
Property
portfolio value
$4.2b
Market
capitalisation
$2.5b
Total
employees
28
Number of
tenants
163
Number of
investors
>4,500
Growthpoint Properties Australia – FY20 Annual Report
5
Portfolio summary
as at 30 June 2020
Geographic diversity
by value
Sector diversity
by value
Office 68%
Industrial 32%
85%
located on
Eastern
seaboard
Queensland 28%
Victoria 28%
New South Wales 25%
Western Australia 8%
South Australia 7%
Australian Capital Territory 4%
Geographic diversity
by value
Tenant type
by income
Listed company 58%
Government 24%
Large private
company 15%
SME 3%1
WA
$321.6m
1 office property
2 industrial properties
SA
$295.6m
1 office property
4 industrial properties
QLD
$1,173.1m
8 office properties
4 industrial properties
NSW
$1,071.1m
6 office properties
5 industrial properties
VIC
$1,183.1m
8 office properties
17 industrial properties
ACT
$178.2m
2 office properties
1. Growthpoint estimate of proportion of tenants with revenue below $50 million.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 6
Business Overview
How
we differ.
100% investment
in Australia.
Close relationships
with our tenants.
All our properties are located in Australia
where we have a strong understanding of the
market. We invest in high-quality commercial
real estate properties.
Property portfolio
by value
Queensland 28%
Victoria 28%
New South Wales 25%
Western Australia 8%
South Australia 7%
Australian Capital Territory 4%
We asset manage the properties we own.
This means we know each of our tenants
and can ensure that our properties meet
their needs. Our asset managers are
responsible for renewing lease agreements,
preparing refurbishment plans and overseeing
development projects.
25-year
lease extension
with NSW Police
Force
15-year
lease extension
with Woolworths
Limited
development risk.
Income
focused.
We develop properties in our portfolio to
meet our tenants’ needs and to maximise
the property’s value. We will only acquire
properties under construction when there are
material leases in place.
Our aim is to provide Securityholders with
sustainably growing income returns. We do
this by maintaining high-occupancy levels,
combined with predominately-fixed annual
rent reviews.
$203 million
developments
completed in FY20
Weighted average
rent review
3.3%
Portfolio
occupancy
93%
as at 30 June 2020
as at 30 June 2020
Growthpoint Properties Australia – FY20 Annual Report
7
27-49 Lenore Drive, Erskine Park, NSWFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 8
Business Overview
Introduction from the
Chairman and Managing Director.
When we reflect on FY20, it is
almost impossible to talk about
‘one year’.
For the first eight months, it was business
as usual and we made good progress
towards achieving the Group’s financial
and strategic objectives. From March,
our business, like all others around
Australia, has been forced to respond
to a dramatically different operating
environment dictated by the COVID-19
virus. Fortunately, we entered this
period on a strong footing and have
been to date able to face the challenges
presented by the pandemic head-on.
Response to the
COVID-19 pandemic
Since the outset of the COVID-19
pandemic, our priority has been
safeguarding the health and safety of
our employees, tenants and the broader
community. We have implemented all
recommended steps to stop the spread
of the virus.
In mid-March, we temporarily closed our
head office and transitioned all employees
to working remotely. Growthpoint is
made up of a small team that works
well together and has done so for
many years. It was important that we
maintained this dynamic throughout the
COVID-19 pandemic and beyond. To
accomplish this, we made a commitment
to supporting all permanent employees
during this challenging period, with no
reductions in fixed salary or working
hours. We have also rolled-out a number
of initiatives to ensure we stay connected.
We have also remained in close contact
with our tenants. As workplaces around
Australia closed due to the COVID-19
lockdown, we reached out to operators
of cafes and other small retail businesses
to offer rent abatements to help them
financially during this period. We were
pleased that we were able to assist our
small tenants, when it mattered most.
Return on equity (%)
to 30 June 2020
15.5
15.7
13.8
10.8
1 year
3 years
5 years
10 years
Total Securityholder return
over 1, 3, 5 and 10 years (%)1
Growthpoint
S&P/ASX 200 REIT
Accumulation Index
13.9
9.2
6.8
6.8
4.4
2.0
1 year
3 years
5 years
10 years
-17.7
-21.3
For our larger tenants, we have
implemented a Board-approved process
to review rent relief requests. This
involved requesting detailed information
from tenants so we could understand
the impact the COVID-19 pandemic has
had on their business and direct our
support to those who most needed it.
We have now reviewed the majority of
requests received to date and agreed an
appropriate way forward on a case-by-
case basis.
Geoff Tomlinson
Independent Chairman and Director
Timothy Collyer
Managing Director
1. UBS Investment Research. Annual compound
returns to 30 June 2020.
Growthpoint Properties Australia – FY20 Annual Report
9
We entered this period with a strong
balance sheet and capital position, with
significant undrawn debt lines and no
debt maturing until FY22. To enhance our
liquidity, we entered a new $100 million
debt facility with a new banking partner in
May. We also extended an existing $150
million facility, which was due to expire
in FY22, for four years. As at 30 June
2020, the Group had undrawn debt lines
of $360 million and $43 million of cash on
its balance sheet.
Financial performance
The Group’s funds from operations (FFO)
for the year ending 30 June 2020 was
strong, marginally ahead of the market
guidance provided at the beginning of the
financial year.1
The value of our portfolio increased
by 5.0% to $4.2 billion. This uplift was
primarily driven by our strong leasing
performance in the first half of the
financial year. Our valuation did not
change significantly in the second half of
the year, which reflects the resilient nature
of our property portfolio.
While Growthpoint’s FY20 earnings
were not significantly impacted by the
COVID-19 pandemic, the Board made
the decision to reduce the Group’s
second half distribution to retain a higher
level of cash in the business than normal,
during these uncertain times. We believe
this is the prudent approach that will
protect the long-term value of the Group.
Reflecting the significant market volatility
in the last four months of the year, total
securityholder return (TSR) fell for both
the S&P/ASX A-REIT 200 Accumulation
Index and Growthpoint in FY20. We
were pleased, however, that Growthpoint
continued to outperform the Index, as we
have done over the past three, five and
ten-year time periods.
Growthpoint’s return on equity was
10.8% for the year. This is a good result,
which reflects positive property valuations
and the resilient income of the Group.
Investing in our portfolio
During the year, we completed two
development projects, both ahead of time
and on budget. In February, we achieved
practical completion on Botanicca 3,
a new A-grade office building in
Richmond, around five kilometres from
the Melbourne CBD. We are proud of
1. In March 2020, Growthpoint withdrew all forward-looking statements, including FFO guidance of at least 25.4 cps.
We entered this period
with a strong balance
sheet and capital
position, with significant
undrawn debt lines and
no debt maturing until
FY22.
this development and believe it is one of
the highest-quality metropolitan offices
in Australia. Unfortunately, leasing this
property has been more challenging
than we initially expected as businesses’
decision-making processes appears more
prolonged in the current environment. We
continue to get positive feedback from
prospective tenants and expect to lease
the property progressively over the next
18 months.
In June, practical completion on the
expansion of our distribution centre
in Gepps Cross, South Australia, was
reached. This distribution centre is used
Botanicca 3, 570 Swan Street, Richmond, VICFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 10
Business Overview
Chairman and
Managing Director review.
by Woolworths to supply all its stores in
South Australia, Northern Territory, and
parts of regional Victoria, with fresh and
ambient goods. Woolworths has now
entered a 15-year lease extension of the
property. As the works are now complete
and Woolworths has commenced their
lease extension, the value of the property
has increased by $47.8 million, after
development costs.1
Developing long-term
partnerships with our
tenants
Our tenants are at the centre of our
business and we are focused on ensuring
we meet their needs now and into the
future. This helps us to develop long-term
partnerships.
This year, we were pleased to sign two
long term leases with significant tenants.
In December, we agreed a 25-year
lease with our single largest tenant,
the New South Wales Police Force, for
their headquarters in Parramatta. Since
acquiring this asset six years ago, we
have developed a strong relationship with
the Police and gained an understanding
of their needs. This enabled us to work
together to develop a lease to support
their operational requirements.
As noted above, Woolworths entered
into a lease extension of their distribution
centre in Gepps Cross, South Australia
for 15 years. Since Growthpoint’s
inception, Woolworths have been a key
tenant for the Group. They currently
lease three large distribution centres,
which they use to transport groceries to
supermarkets.
Reducing our
environmental footprint
At Growthpoint, we are committed to
reducing our environmental footprint. Our
Climate Change Strategy is focused on
three key pillars:
õ Maintain and grow a portfolio of highly
efficient buildings
õ Progress decarbonisation by 2050
õ Build climate resilience across portfolio
This year, we continued to make progress
against each of these three pillars. Key
achievements included installing two
substantial solar photovoltaic systems,
taking the total number of installations
across our portfolio to six. We also made
a commitment to begin purchasing
accredited renewable power for a number
of key sites.
We were particularly pleased that
NABERS ranked 100 Skyring Terrace,
Newstead, Queensland as the
second most efficient office building in
Queensland.2 We now have two buildings
in our portfolio with a 6.0 star NABERS
Energy rating, the highest-possible rating,
an impressive feat as there are only thirty-
four 6.0 star rated properties in Australia.3
Ensuring Growthpoint is a
great place to work
Our employees are integral to our
success and we are committed to
creating a diverse workplace where
everyone is able to perform at their best.
Responding to feedback from recent
employee engagement surveys, we
implemented some significant changes
in FY20. We introduced greater flexibility,
through our new Working From Home
policy. We also reviewed our Parental
Leave Policy and are proud to have
significantly increased our primary and
secondary carer paid leave entitlements.
We hope that together these new policies
will help our team strike the right balance
between their professional and personal
lives.
Looking ahead
As we look ahead to FY21, there still
exists a great deal of uncertainty around
the impact that the COVID-19 pandemic
will have on Growthpoint’s operating
environment, including the effect and
duration of government measures
taken to stop the spread of the virus
and assistance to support businesses
and individuals. We expect the overall
impact of the pandemic on the broader
Australian economy will be significant.
As a result, we have not provided
FFO guidance for FY21. However, we
understand the value Securityholders
place on receiving distributions from the
Group and therefore have provided FY21
distribution guidance of 20.0 cps, which
we expect to be paid in equal half-yearly
instalments.
Undoubtedly, the COVID-19 pandemic
is going to have far-reaching implications
and the true impact of the virus will not
be known for many years. However, we
are confident that we have taken the right
steps to ensure our business will continue
to meet the challenges presented during
this period.
While the near-term outlook is less
clear, we believe that Growthpoint is
well placed to benefit from some of
the structural shifts, which appear to
be accelerating due to the COVID-19
pandemic. Indeed, this pandemic is
changing the way people work and live,
which may increase demand for both our
metropolitan offices and industrial assets
over the longer term. We explore these
themes in greater detail on pages 12-13
and 18-19 of this report.
On behalf of Growthpoint’s Board and
management, we would like to thank
our employees for their dedication to
our business this year. Without you, we
would not have been able to achieve this
result. We would also like to recognise
our tenants, suppliers and other key
stakeholders for their continued support.
And of course, we thank our
Securityholders for your commitment to
Growthpoint.
Geoff Tomlinson
Chairman
Timothy Collyer
Managing Director
1. After development costs. Valuation increase from 31 December 2018 (prior to expansion and new lease agreement) to 30 June 2020.
2. NABERS, as at 30 June 2020.
3. NABERS, as at 31 July 2020.
Growthpoint Properties Australia – FY20 Annual Report
11
While the near-term outlook
is less clear, we believe that
Growthpoint is well placed
to benefit from some of
the structural shifts, which
appear to be accelerating
due to the COVID-19
pandemic.
Curtis Cheng Centre, 1 Charles Street, Parramatta, NSWFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 12
Portfolio Performance
The office market.
As workplaces around Australia
temporarily closed to stop the
spread of the COVID-19 virus, and
employees transitioned to working
remotely, some commentators
have begun to question whether
demand for offices will significantly
decrease in the future, ‘is this the
death of the office?’.
While many individuals have enjoyed
some aspects of working from home,
such as no commute and flexible hours,
generally they do not want a full-time shift
to working remotely.
There are many benefits of working in
an office environment that cannot be
recreated at home. For employees,
commonly cited challenges of working
from home are missed social interaction,
difficulty collaborating with colleagues,
inability to switch off from work and hard
to stay motivated.
Challenges of
working from home
Employees
– Sub-par connectivity
– Inadequate workspace
– Missed social interaction
– Difficulty collaborating with
colleagues
– Inability to switch off from
work
Managers:
– Difficult to develop
company culture
– Challenging to mentor
and develop employees
– Hard to innovate
1. JLL, ‘Office precincts for 2030 and beyond’, May 2020.
For managers, working from home can
have additional challenges to those
described above. It is very difficult to
develop company culture or foster a
sense of belonging, without regular
in-person interaction between team
members. In addition, it is hard to be
nimble and innovate as a team, when
catch-ups are limited to scheduled video
conferences.
However, the COVID-19 pandemic has
changed the way people work and could
accelerate some structural shifts that
were starting to occur across Australia.
In particular, more organisations may
look to adopt a ‘hub and spoke’ office
model, leading to increased demand for
metropolitan offices. Adoption of this
model was already underway in Sydney
and is popular in mature markets around
the globe.
Hub and spoke office
model
‘Hub and spoke’ describes an office
model where an organisation has an
office in a central business district (CBD)
location and additional office(s) in another
location(s). The primary benefits of this
model are:
Patterns of office
occupier movement for
maturing markets1
Centralisation
Melbourne
CBD office stock totals
61% of all stock
Hub and spoke
Sydney
CBD office stock totals
52% of all stock
Cost saving
Metropolitan
Many non-CBD office buildings now
compete directly with CBD options, at a
lower rate. They are equally accessible,
provide equivalent amenity and have
more parking available.
By having a secondary office,
organisations can reduce the amount of
space required for their office in relatively
expensive CBD markets. This saving can
be significant if organisations choose
to house most of their employees in a
metropolitan location, with the few staff
who need to be located in the expensive
CBD accommodation remaining there.
The rental spread between CBD and
non-CBD rents has been increasing,
European model
CBD office stock totals
– Berlin 16%
– Paris 20%
– Barcelona 13%
– Munich 24%
– Amsterdam 25%
of all stock
Growthpoint Properties Australia – FY20 Annual Report
13
A recent survey of
40,000 individuals’
experience working
from home found3
only 50%
of respondents agree/
strongly agree they feel
personally connected
to the culture of their
company
only 56%
of respondents agree/
strongly agree they are
connecting and bonding
with colleagues
particularly in Sydney and Melbourne, as
highlighted in the graph to the right. In
2Q20, average face rents in the Sydney
CBD were more than double rents for an
office in Parramatta.1
Reduction in commute times
Housing close to the CBD has become
prohibitively expensive for many people
due to increased demand as populations
have grown. As a result, many people
face long daily commutes to the CBD.
Providing an office closer to residential
areas can be an attractive proposition for
new and existing employees.
Impact of the COVID-19
pandemic
The two drivers, described above, are
likely to accelerate due to the COVID-19
pandemic. For organisations, cost
reduction will become increasingly
important as Australia enters a recession,
making the financial benefits of adopting
a hub and spoke model even more
attractive.2 For employees, one of the
biggest concerns about returning to the
office is having to take public transport to
get to work. Metropolitan offices generally
have a higher ratio of car parks than
CBD offices and for those who need to
take public transport, the journey may be
much shorter.
Metro and fringe markets’ rent discount to CBD1
Sydney
Olympic Park
/ Rhodes
Parramatta
Melbourne
fringe
Melbourne
SES
Brisbane
fringe
West
Perth
-7%
-26%
-37%
-42%
-51%
-64%
0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
Commute times to metropolitan offices
are likely to get even shorter as numerous
government infrastructure projects
underway, which will further connect
metropolitan hubs, are completed. This
includes Melbourne’s Metro Tunnel,
Sydney Metro and Brisbane’s Cross
River Rail. Other mooted infrastructure
projects are expected to be accelerated
by governments across Australia looking
to stimulate their economies.
In addition to the acceleration of historic
drivers, metropolitan offices provide other
benefits which are likely to be attractive
due to the COVID-19 pandemic.
Metropolitan offices with less levels have
shorter lift wait times. They also generally
have larger floor plates to support social
distancing.
There still exists a great deal of
uncertainty around the post COVID-19
operating environment. However, the
office will continue to be an important
space, that can adapt to meet changes
in organisations’ and employees’
preferences.
1. JLL REIS Data – 2Q20. Discount to prime face rents.
2. JLL, ‘The future of global office demands’, June 2020.
3. Cushman & Wakefield, ‘The future of workplace’, May 2020.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 14
Portfolio Performance
Performance
property portfolio.
Growthpoint owns and manages
a property portfolio valued at $4.2
billion. We actively manage each
of our properties to maximise the
income it generates and its value.
Our property portfolio is diversified
across two sectors: office and
industrial.
Office
Our office portfolio consists of 26
high-quality office properties, which
represents 68% of our total property
portfolio by value. Our office properties
are predominately located on the fringe of
CBDs or in key metropolitan markets.
Leasing
During FY20, Growthpoint signed
42 office lease agreements, totaling
68,580 square metres or 24% of our
office portfolio by income. The weighted
average lease term for new and renewed
leases was 14.8 years and the weighted
average annual rent review was 3.6%.
Largely due to this leasing success, our
total portfolio WALE increased from 5.0
years to 6.2 years.
In December 2019, we signed our
longest lease agreement to date, entering
into a new 25-year lease with the New
South Wales Police Force. We also
renewed leases with key tenants, ANZ
and Optus, for six years and seven years
respectively, during FY20.
Most of the leasing was done in the first
eight months of the financial year before
the onset of the COVID-19 pandemic. In
this new operating environment, tenants
appear increasingly reluctant to leave
their existing accommodation, without
a strong impetus. Decision-making has
also become more prolonged. While this
has been beneficial for the majority of
our portfolio due to our historically high
occupancy rate, it has made leasing our
new A-grade office building, Botanicca 3,
more challenging.
As at 30 June 2020, we had 6% of lease
expiries remaining for FY21.
Eight per cent of the office portfolio was
vacant as at 30 June 2020 (30 June 2019:
2%). The increase in vacancy is primarily
driven by Botanicca 3. Growthpoint’s
office portfolio occupancy, excluding
Botanicca 3, was 97%.
Office portfolio lease
expiry profile (%)
per financial year,
by income
37
8
6
10
10
9
7
13
Vacant
FY21
FY22
FY23
FY24
FY25
FY26
FY27+
Development
In February, we achieved practical
completion on the development of a new
A-grade office building, Botanicca 3, in
Richmond, around five kilometres east of
the Melbourne CBD. We are proud of this
development and believe that Botanicca 3
is one of the highest-quality metropolitan
offices in Australia.
This building was designed to minimise its
environmental footprint. A defining feature
of the property is the curtain walling
façade system and perforated sunshades
which surround the building. While being
aesthetically pleasing, the energy rating of
the building is significantly enhanced by
the design of the system, which provides
shade in summer and allows sunlight to
heat the building in the cooler months.
As mentioned above, leasing of Botanicca
3 has been more challenging than we
initially expected. We continue to receive
good feedback from prospective tenants
and expect to progressively lease this
building over the next 18 months.
Botanicca 3
– a new dimension
in office space
19,447sqm
of office space
419
car parks
22
electric vehicle
charging stations
Green Star Rating
Designed to achieve
5 Star NABERS Energy
and Water ratings
Growthpoint Properties Australia – FY20 Annual Report
15
Creating long-term value
through leasing success
In December, we signed our longest lease
agreement to date, entering into a new 25-
year lease with the New South Wales Police
Force for their headquarters in Parramatta.
IRR
16.4%
per annum
We were one of the early movers to enter the Parramatta office
market, as we could see its potential to become Sydney’s
second CBD. Prior to acquiring the asset in 2014, we spent 12
months studying the Parramatta office market and had identified
several themes that we believed would underpin its long-term
value. We were encouraged by the multiple government-
supported infrastructure projects that were underway or mooted
and the strong population growth in western Sydney.
The outlook for Parramatta remains positive and we are pleased
to have a strong foothold in this market.
Tenant
Lettable area
Lease term
Annual rent
Rent escalation
Upgrade works
NSW Police Force
32,356 sqm, 444 car parks
25 years
$21.1 million
3.5% per annum1
$44 million
2014
2015
2016
2017
2018
2019
2020
June 2014
$241m
purchase
price
82%
Increase in
value since
acquired
June 2020
$440m
Book value
25%
Increase in
value since
30 June 2019
1. Except in January 2025. In January 2025, the rental escalation will be 0%.
Curtis Cheng Centre, 1 Charles Street, Parramatta, NSWBotanicca 3, 570 Swan Street, Richmond, VICBotanicca 3, 570 Swan Street, Richmond, VICFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 16
Portfolio Performance
Top ten office tenants
as at 30 June 2020
%
portfolio
income
WALE
(yrs)
NSW Police Force
Commonwealth of Australia
Country Road Group
Bank of Queensland
ANZ Banking Group
Samsung Electronics
Lion
Jacobs Group
Collection House
Fox Sports
12
10
5
5
4
4
3
3
3
2
24.5
6.1
12.0
6.6
5.7
1.7
3.8
6.3
5.9
2.5
Total / weighted average
Balance of portfolio
Total portfolio
51
49
100
10.2
3.0
6.7
Valuation
Over FY20, the value of the office
portfolio increased by $124.2 million
or 4.5% on a like-for-like basis. This
uplift was driven primarily by our leasing
success in the first half of the financial
year and the completion of Botanicca 3.
When comparing our office portfolio’s
value over the last six months of the
financial year (31 December 2019 to
30 June 2020), it decreased slightly,
by less than 1%. This decrease was
primarily driven by a change in valuers’
assumptions, as they expect that the
economic impacts of the COVID-19
pandemic will lead to lower growth
rates, higher incentives and longer
vacancy periods. The change in these
assumptions had a more significant
impact on our office properties with near-
term expiries.
This was partially offset by an increase
in the value of some of our long WALE
office properties, such as the NSW Police
Force Headquarters in Parramatta. As
mentioned above, the Police recently
agreed a new 25-year lease of this
property with an annual escalation of
3.5%.
1. Assumes CPI change of -0.35% per annum as per ABS release for FY20.
Office portfolio snapshot
30 June 2020
30 June 2019
26
$2,755.2m
Number of assets
26
Total lettable area
327,579sqm 308,401sqm
Total portfolio value
$2,879.3m
WALE
6.7 years
Weighted average
capitalisation rate
5.6%
Weighted average rent
review1
3.5%
NPI
$151.9m
5.1 years
$144.8m
3.6%
5.7%
15 Green Square Close, Fortitude Valley, QLD Growthpoint Properties Australia – FY20 Annual Report
17
Our response
to COVID-19
Our priority since the outbreak
of the COVID-19 pandemic has
been protecting the safety and
wellbeing of our employees,
our tenants, and the broader
community. We have followed
the advice of federal and
state governments and have
implemented all necessary steps
to reduce the spread of the virus.
In mid-March, we temporarily closed our
head office in Melbourne and transitioned
all employees to working remotely.
Maintaining our strong culture and
team dynamic has been a focus for our
leadership team throughout this period,
and we’ve introduced several initiatives to
stay connected.
We have engaged with our tenants to
understand the impact the COVID-19
pandemic has had on their business.
It was clear at a very early stage of the
pandemic that some of our tenants would
need our assistance to get through the
lockdown period, particularly the owners
of cafes and other small retail business
in our office buildings. Accordingly, we
reached out to a number of tenants and
offered rental abatements in early April.
In April, the National Cabinet introduced
a commercial tenancy code of conduct
to assist commercial landlords and
small and medium enterprise (SME)
tenants negotiate amendments to leasing
arrangements during the COVID-19
pandemic. The code has been given
effect through relevant state and territory
legislation or regulation. It provides a
useful framework which Growthpoint has
adopted for applicable tenants.
The code only applies to tenants
whose turnover is less than $50 million,
and are also eligible for the Australian
Government’s JobKeeper program.
Growthpoint estimates that SME
tenants, with revenue below $50
million, contribute approximately 3%
of the Group’s portfolio income. Not
all of Growthpoint’s SME tenants have
requested assistance.
We also received a number of rent relief
requests from non-SME tenants. To
assess these requests, we implemented
a Board-approved process to ensure that
rent relief was distributed fairly to those
tenants that were significantly impacted
by the virus and who most needed
our support. This included reviewing
tenants’ financial information to determine
the impact of the pandemic on their
business.
We have now reviewed the majority
of rent relief requests and agreed an
appropriate way forward. In FY20, the
total amount of rental abatement was
$0.8 million and total rent deferred was
$2.0 million. Deferred rent will begin to be
collected in FY21. It is possible that we
will receive additional rent relief requests
which we will review following the same
process.
Rental abatement
$0.8m
Rent deferred
$2.0m
Proportion of billings collected1
April to June 2020
Office
Industrial
96%
98%
Tenant type
by income, as at 30 June 2020
97%
of tenants are
large companies
or government
Large
companies or
government
97%
SME 3%2
11 March
WHO declares
Pandemic
18 March
GOZ transitions
all employees to
WFH
26 March
GOZ withdraws
guidance
7 April
Commercial code of
conduct announced
March
April
May
June
Government-mandated lockdown State by state easing of restrictions3
Ongoing: GOZ receives and reviews rent relief requests
1. Rent abatements are not included in total billings. Rent that has been deferred is included. Data as at 11 August 2020.
2. Growthpoint estimate of proportion of tenants with revenue below $50 million.
3. Lockdown measures were reintroduced in Victoria during July.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 18
Portfolio Performance
The industrial market.
Not all industrial assets
are the same
The rise of e-commerce
in Australia
For a number of years,
‘industrial’ has been the
favoured property sub sector.
Strong population growth and
sustained growth in online
shopping, has driven increased
demand for industrial assets.
This coupled with constrained
supply, due to residential
encroachment, has led to
higher valuations across the
sector.
The economic impacts of the
COVID-19 pandemic are far reaching
and the industrial sector is certainly
not immune. Several industries have
seen an uptick in demand as a result
of the pandemic. This includes non-
discretionary goods (grocery retailers,
pharmaceuticals, manufacturers of
essential products), online retailers/
businesses and cold storage
facilities. Other industries have not
fared so well, such as discretionary
goods, import/export businesses
(containers), the construction sectors
and hire related businesses.
As a result, the performance of
the industrial sector going forward
is likely to be less uniform, and
increased importance will be placed
on an asset’s age and design, as
well as tenant profile, industry and
use. Modern, well-located assets,
suited to logistics uses, are likely to
outperform, while secondary assets,
suited to manufacturing/storage, are
likely to underperform.
In recent years, the penetration of
online shopping in Australia has
been steadily rising. This trend has
accelerated during the COVID-19
pandemic, as individuals are
encouraged to ‘socially distance’.
To meet the surge in demand for online
shopping, many companies have
scrambled to find additional warehouse
space. Businesses are after well-located
industrial space, close to consumers,
enabling them to deliver their goods
quickly.
It is expected that many individuals
who chose to shop online during the
COVID-19 pandemic, will become
accustomed to it, and continue to do
so, going forward. This has the potential
to lead to a significant increase in online
retail sales across Australia, where
penetration of online shopping has been
relatively low, compared to overseas
markets, such as the UK.
As the prevalence of online shopping
continues to increase, so too will the
uptick in demand for well-located
industrial assets.
Australian online retail trade (million)2
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
Penetration of online shopping1
Australia
UK
Grocery and liquor
0-5%
5-10%
Health and beauty
5-10% 10-15%
Recreational and
other goods
Homewares and
appliances
20-25%+
40%+
10-15%
40%+
Apparel
10-15% 30-35%
1. KPMG Australia, ‘COVID-19: Retail’s survival and revival’, April 2020.
2. Australian Bureau of Statistics, July 2020.
Jan 17 May 17 Sep 17 Jan 18 May 18 Sep 18 Jan 19 May 19 Sep 19 Jan 20 May 20
13 Business Street, Yatala, QLD Growthpoint Properties Australia – FY20 Annual Report
19
1
2
3
Growthpoint’s industrial
tenants are heavily
weighted to grocery
distribution and logistics
93%
of industrial
assets are used
for logistics or
warehousing
Tenants by industry
by income
Grocery distribution 41%
Logistics 27%
Manufacturing 14%
Non-grocery retail 8%
Other consumer and business
services 6%
Health 3%
Resources, infrastructure and
construction 1%
Growthpoint’s largest
tenant: Woolworths
Woolworths have been
Growthpoint’s largest tenant since
our inception.
Today, Growthpoint owns three of their
largest distribution centres in South
Australia, Queensland and Western
Australia.
Woolworths Distribution Centres
1. 70 Distribution Street, Larapinta, QLD
2. 599 Main North Road, Gepps Cross, SA
3. 20 Colquhoun Road, Perth Airport, WA
% of industrial
portfolio value
as at 30 June 2020
45%
Woolworths
% of industrial
portfolio income
as at 30 June 2020
WALE
6.4yrs
39%
Woolworths
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 20
Portfolio Performance
Industrial
Our industrial portfolio consists of 32
modern industrial properties, which
represent 32% of Growthpoint’s total
property portfolio by value. Our industrial
properties are well-located, near key
logistics hubs or population centres.
Leasing
During FY20, Growthpoint signed nine
lease agreements, totaling 82,021 square
metres. The weighted average lease term
for new and renewed leases was 5.0
years and the weighted average annual
rent review was 3.5%.
The Group signed new leases with our
second largest industrial tenant, Linfox,
at 6-7 John Morphett Place, Erskine
Park, New South Wales, and key tenant,
Paper Australia, for Lots 2, 3 and 4, 34-
44 Raglan Street, Preston, Victoria. Both
leases were for five years.
Top ten industrial tenants
as at 30 June 2020
%
portfolio
income
WALE
(yrs)
Woolworths
Linfox
Australia Post
Laminex Group
Brown & Watson
International
HB Commerce
The Workwear Group
Cheap as Chips
Autocare Services
Symbion
Total / weighted average
Balance of portfolio
Total portfolio
39
11
4
4
3
2
2
2
2
2
71
29
100
6.4
4.7
4.0
2.0
5.1
2.2
7.0
0.4
10.3
8.5
5.6
3.5
5.0
Development
In June, practical completion on the
expansion of our distribution centre
in Gepps Cross, South Australia, was
achieved, ahead of schedule. The
distribution centre is used by Woolworths
to supply all its stores in South Australia,
the Northern Territory, and parts of
regional Victoria with fresh and ambient
goods. The expansion increased the
lettable area of the site by 36.4% to
91,686 square metres, solidifying its
position as one of Woolworths’ largest
distribution centres in Australia.
The $54 million project included an
extension of the existing temperature-
controlled warehouse and ambient
warehouse and construction of a new
returns transfer facility. A 1.6MVa roof-
top solar system was also installed.
Before the onset of the COVID-19
pandemic, we had been progressing
our development plans for 120
Northcorp Boulevard, Broadmeadows,
Victoria. As part of our response to
the crisis, we decided to delay all non-
essential capital expenditure, including
this project. We are reviewing
all options for this site, including
divestment.
Valuation
Over FY20, the value of our industrial
portfolio increased by $76.1 million
or 6.2% on a like-for-like basis.
The increase was primarily driven
by development projects and yield
compression.
Pleasingly, we saw an uplift in the
valuation of the portfolio in the second
half of the financial year, driven by
continued yield compression, following
several strong sales results of well-
leased industrial assets, and the
completion of the expansion of our
distribution centre in Gepps Cross.
Industrial portfolio snapshot
30 June 2020
30 June 2019
31
$1,228.6m
Number of assets
32
Total lettable area
715,351sqm 718,065sqm
Total portfolio value
$1,343.4m
WALE
5.0 years
Weighted average
capitalisation rate
6.0%
Weighted average rent
review1
2.7%
NPI
$85.1m
4.8 years
$80.6m
2.7%
6.3%
Industrial portfolio lease
expiry profile (%)
per financial year,
by income
24
9
9
9
4
3
26
16
Vacant
FY21
FY22
FY23
FY24
FY25
FY26
FY27+
1. Assumes CPI change of -0.35% per annum as per
ABS release for FY20.
Growthpoint Properties Australia – FY20 Annual Report
21
3 Maker Place,
Truganina, VIC
In September 2019,
Growthpoint acquired
a recently completed
logistics warehouse for
$40 million.
The industrial property is
located in Truganina in
Melbourne’s west, one
of the fastest growing
distribution locations in
Australia. The property is
leased to an international
eCommerce business.
599 Main North Road, Gepps Cross, SAFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 22
Portfolio Performance
FY20
sustainability
highlights.
At Growthpoint, we are committed to acting in a sustainable way and reducing
our impact on the environment, as we believe it is the right thing to do.
This year, we have made significant progress towards our environment, social and governance
(ESG) objectives. Below is a brief snapshot. A detailed overview of our performance can be found
in our sustainability report, which is available on our website, growthpoint.com.au.
Increased average
NABERS Energy rating
Maintained CDP Climate
Performance score
Increased GRESB
score
4.9
FY19: 4.8 stars
B
PCP: B
72/100
PCP: 66/100
Improved employee
engagement score
Improved employee
alignment score
77%
FY19: 75%
Committed
$3m
64%
FY19: 53%
100 Skyring Terrace,
Newstead
2nd
to upgrade
tenant amenities
most efficient building
in Queensland
Growthpoint Properties Australia – FY20 Annual Report
23
100 Skyring Terrace, Newstead, QLDFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 24
Financial Management
Financial
Management.
This year we delivered a solid
performance, highlighting the
resilience of our business.
across both our office and industrial
property portfolios in the first half of
the financial year.
In June 2019, Growthpoint provided its
guidance for the financial year ahead. We
expected to deliver FFO of at least 25.4
cps and distribution per security (DPS)
of 23.8 cents. Due to the uncertainty
around the COVID-19 pandemic in March
2020 we withdrew all forward-looking
statements, including our FY20 guidance.
In FY20, the Group delivered FFO of
25.6 cps, ahead of the withdrawn
guidance and up 2.0% on FY19. The
growth was driven by an increase in
net property income, reflecting the
contribution from recently-acquired
assets, surrender fees and annual rent
increases. Another key driver was a
reduction in interest expense due to
reduced cost of debt and increased
capitalised interest on development
projects.
Net tangible assets (NTA) per security
increased by 4.3% to $3.65, primarily
reflecting the strong valuation uplift
Impact of COVID-19
pandemic on FFO
Rent relief granted to assist tenants
severely impacted by the COVID-19
pandemic had a relatively small
impact on our FY20 earnings.
Rental abatements reduced FFO
by $0.8 million. Included within
our FFO results is $2.0 million of
rent deferred, which will start to be
collected in FY21.
While Growthpoint’s FY20 earnings
were not materially impacted by
the COVID-19 pandemic, the
Board of Directors decided to
lower Growthpoint’s distribution
to 21.8 cps to retain a higher level
of cash than normal during these
uncertain times. Our payout ratio,
calculated as distributions divided
by FFO, was 85.3% (FY19: 94.0%).
Financial performance
snapshot
30 June 2020
30 June 2019
Funds from operations
$197.2m
Funds from operations
(per security)
25.6¢
Distributions
$168.3m
Distributions
(per security)
21.8¢
Net tangible assets
(per security)
$3.65
$178.0m
25.1¢
$167.4m
23.0¢
$3.50
Movements in NTA per security
for the 12 months ended 30 June 2020
Valuation uplift driven
by leasing success
and development
projects
$0.16
$0.02
$0.02
$3.50
$3.70
$3.60
$3.50
$3.40
$3.30
Decrease in valuation of
office portfolio partially
offset by increase in
industrial valuation
Higher level of cash
retained in business due
to uncertainty caused by
COVID-19 pandemic
-$0.04
$3.66
-$0.02
-$0.05
$0.03
$0.01
$0.02
$3.65
30-Jun-19
Equity
raising
1H20
office
revaluations
1H20
industrial
revaluations
Other
31-Dec-19
2H20 ADI
revaluations
2H20
office
revaluations
2H20
industrial
revaluations
Retained
cash from
FFO
Other
30-Jun-20
Growthpoint Properties Australia – FY20 Annual Report
25
Funds from operations
Growthpoint uses FFO as its primary earnings measure. FFO enables Securityholders to identify the income which is available for
distribution and also assists in determining the relative performance of the Group.
The following table reconciles statutory profit to FFO and reports distributions paid to Securityholders.
Reconciliation from statutory profit to FFO
Profit after tax
Less non-FFO items:
- Straight line adjustment to property revenue
- Lease liability repayments
- Depreciation of right of use assets
- Interest expense on lease liabilities
- Net loss in fair value on sale of investment properties
FY2O
$m
272.1
1.0
(4.7)
4.1
4.0
0.0
FY19
$m
375.3
(6.2)
0.0
0.0
0.0
1.1
- Net gain in fair value of investment properties
(116.9)
(201.6)
- Net (gain)/loss in fair value of investment in securities
- Net gain in fair value of derivatives
- Net loss on exchange rate translation of interest-bearing liabilities
- Interest expense on non-current receivables
- Depreciation of plant and equipment
- Amortisation of incentives and leasing costs
- Deferred tax expense
FFO
Distributions provided for or paid during the year ($m)
FFO per security (cents)
Payout ratio to FFO (%)
15.7
(31.5)
28.5
0.1
0.2
20.8
3.8
197.2
168.3
25.6
85.3
(7.1)
(3.1)
0.0
0.0
0.3
19.3
0.0
178.0
167.4
25.1
94.0
Change
Change
$m
(103.3)
7.2
(4.7)
4.1
4.0
(1.1)
84.7
22.8
(28.4)
28.5
0.1
(0.1)
1.5
3.8
19.3
0.9
0.5
%
(27.5)
(116.5)
10.8
0.5
2.0
(8.7)
2 Hugh Edwards Drive, Perth Airport, WAFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 26
Financial Management
Stress testing
covenants
Growthpoint has three
main debt and lending
covenants which are
regularly stress tested.
They are:
LVR<60%
GOZ: 33.5%
ICR>1.6x
GOZ: 4.6x
To breach this covenant,
GOZ cap rate would need
to rise by 450 bps1
To breach this covenant,
NPI would need to fall by
65%1
Secured
property percentage
>85%
GOZ: 98%
Percentage must remain
above 85%
Gearing movement
for the 12 months ended 30 June 2020
45%
40%
35%
30%
25%
20%
15%
Gearing
target range
35%-45%
34.3%
-4.1%
-0.7%
4.3%
0.7%
1.1%
1.1%
32.2%
30-Jun-19
Equity
raising
Investment
revaluations
-4.5%
Cash from
operating
activities
210bps
reduction since
30 June 2019
Distributions
paid
Acquisition -
Truganina
Development
funding
General
capex
30-Jun-20
Operating expenses
Capital management
Total operating expenses
Average gross assets value
Operating expenses to average gross assets
Capital expenditure
Total portfolio capex
Average property asset value
Capital expenditure to average property portfolio value
$m
$m
%
$m
$m
%
FY20
14.4
FY19
13.9
Growthpoint entered FY20 with a robust
balance sheet, which has been further
strengthened over the year.
4,170.8
3,821.1
0.35
0.36
FY20
18.2
FY19
12.9
4,154.7
3,637.8
0.44
0.35
At the beginning of FY20, the Group
settled a $173 million equity raising. As
the proceeds were used to pay debt,
this was the primary driver in a significant
reduction in Growthpoint’s gearing. As at
30 June 2020, Growthpoint’s gearing was
32.2%, 210 basis points lower than 30
June 2019, and 280 basis points lower
than the bottom of our target range.
During the year, we refinanced
$400 million of debt on favourable terms,
reducing Growthpoint’s weighted average
cost of debt by 50 basis points to 3.4%
and extending our weighted average
maturity to 4.7 years. The Group now has
no debt maturing before FY22.
1. As at 30 June 2020. For illustrative purposes only. Assumes no change to other inputs that could impact the calculation of this metric.
Growthpoint Properties Australia – FY20 Annual Report
27
Key debt metrics and changes during FY20
30 June 2020
30 June 2019
Change
Gross assets
Interest bearing liabilities
Total debt facilities
Undrawn debt
Gearing
Weighted average cost of debt (based on drawn debt)
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
$m
$m
$m
$m
%
%
years
times
%
years
%
no.
4,500.7
1,446.0
1,813.0
360.0
32.2
3.4
4.7
4,117.9
1,433.3
1,684.5
245.7
34.3
3.9
4.6
4.6 / 1.6
33.5 / 60
4.1 / 1.6
36.2 / 60
5.0
67.3
21
5.6
66.6
17
382.8
12.7
128.5
114.3
(2.1)
(0.5)
0.1
0.5 / –
(2.7) / –
(0.6)
0.7
4
In May, we entered a new $100 million
debt facility, split into two equal tranches
of five and seven years, with a new
banking partner to increase our liquidity.
This facility also added further diversity in
both lender and tenor to Growthpoint’s
debt book. This facility was priced lower
than the Group’s weighted average cost
of debt, which was particularly pleasing as
we entered into this transaction during the
COVID-19 pandemic.
The Group has $360 million of undrawn
debt and $43 million of cash on its
balance sheet at 30 June 2020.
Outlook
There still exists a great deal of uncertainty
around the impact that the COVID-19
pandemic will have on Growthpoint’s
operating environment, including the effect
and duration of government measures
taken to stop the spread of the virus and
assistance to support businesses. We
expect the overall impact of the pandemic
on the broader Australian economy will
be significant. As a result, we have not
provided FFO guidance for FY21. In the
table below, we have highlighted our
expectations around key factors that we
anticipate will impact our performance in
FY21. We have also highlighted upside
and downside risks.
We understand the value Securityholders
place on receiving distributions from the
Group and therefore have provided FY21
distribution guidance of 20.0 cps, which
we expect to be paid in equal half-yearly
instalments.
In the second half of FY20, we delayed
all non-essential capital projects and
operating expenses as part of our
response to the COVID-19 pandemic. We
also implemented a Group-wide hiring
freeze for at least the first half of FY21.
We will continue to focus on cost control
in the year ahead. The Group is also
focused on extending our debt maturities
and further reducing the cost of debt over
FY21.
Looking further ahead, Growthpoint
is well positioned to deliver value to
Securityholders. The fundamentals
of our business remain robust with a
portfolio of high-quality, modern assets,
predominately leased to large companies
or government. Our exposure is limited to
office (primarily metropolitan) and industrial
property sectors, which we expect to
benefit from structural shifts, accelerated
by the COVID-19 pandemic. Growthpoint
also has a robust balance sheet and
continued access to finance on favourable
terms.
Key factors that could influence FFO in FY21
Performance variables
Base case
Upside risks
Downside risks
Property
portfolio
– Portfolio occupancy (excluding Botanicca 3)
– Quicker lease-up of
– New or extended
maintained at historical average ~98%
Botanicca 3
government regulation
– Botanicca 3 leased progressively by the end of CY21
– Accretive acquisition(s)
– Additional rent relief
– No income from Broadmeadows
– Higher tenant retention
(FY20: $10.4 million)
– Increased income from Gepps Cross as expansion
now complete
agreed
– Increased vacancy/
longer downtime
across portfolio
– Tenancy failure
– Reduced tax as development of Botanicca 3
completed
– Floating interest rates
continue to reduce
– Spreads on debt
refinancing increase
– Higher finance costs as Botanicca 3 and
– Lower interest rate on
Gepps Cross interest no longer capitalised
(FY20: $4.5 million)
existing debt
Corporate
and capital
management
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 28
Governance – Risk management
Risk management.
The Board has overall responsibility for the establishment and oversight
of the Group’s risk management framework. The Board has established
an Audit, Risk and Compliance Committee, which is responsible for
oversight of the framework and overseeing how management monitor
compliance with the Group’s risk management policies and procedures.
Refer to the Group’s 2020
Corporate Governance Statement
for more details on the Group’s
risk management framework.
growthpoint.com.au/corporate-
governance
Management provide regular reports to the Committee in relation to the risks facing the
Group. The Committee reviews the adequacy of the risk management framework in
relation to the risks faced by the Group and makes appropriate recommendations to the Board. The Committee also reports regularly
to the Board on its activities.
Risk management policies are established to identify and analyse the risks faced by the Group (including risks relating to its physical
assets, strategy and reputation, legal and regulatory framework, financial position and operations, and people and culture), to set
appropriate risk limits and controls, 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, standards and procedures,
aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The following table outlines key risks that could impact Growthpoint’s achievement of its strategic objectives and outlook and
summarises how we are managing these risks:1
Key risk
How Growthpoint is responding
Strategy and reputation
Financial performance
Not meeting financial performance expectations due
to a variety of risks and factors, could impact our
reputation, stakeholder confidence, the value of our
portfolio and our ability to pay or grow distributions.
Physical assets
Property portfolio
The value of our property portfolio could decrease
based on new sales evidence, change in valuers’
assumptions, the quality of tenant base, external
economic factors and the term of ground lease
tenancies.
We continually monitor the economic, financial and property markets to ensure
that all business decisions are supported by thorough research.
As our earnings are derived from rental income, we seek to maintain a high
occupancy rate across our property portfolio. We have a long WALE of 6.2 years
and a high proportion of fixed annual rent increases.
We carefully select our tenants and our assets are predominately leased to large
companies and government.
We also limit development risk. We only develop properties in our portfolio
to meet our tenants’ needs or to maximise the property’s value and will only
acquire properties under construction when there are material leases in place.
We currently have no development projects underway, as we deferred all non-
essential capex projects as part of our response to the COVID-19 pandemic.
We adopt and implement prudent capital management practices. This includes
maintaining sufficient liquidity, a high percentage of fixed debt and a long
weighted average debt maturity of 4.7 years.
We have a resilient portfolio comprised of high-quality, modern assets,
predominately leased to large companies or government. Our exposure is limited
to office (primarily metropolitan) and industrial property sectors, with no exposure
to retail assets.
We continually monitor and look to improve the quality of our portfolio. This may
involve buying and selling properties at the right time of the property cycle or
reinvesting in our properties so that we can take advantage of adding value to
our portfolio.
Cladding
Our assets may require non-compliant cladding to be
remediated as it poses an increase to fire hazards and
associated health and safety risks for our tenants.
We regularly review our properties to ensure that they are up to relevant
standards and we have continued to progress the removal of required non-
compliant building cladding at identified properties.
1. All references to data, figures and initiatives in this table are as at 30 June 2020.
Growthpoint Properties Australia – FY20 Annual Report
29
Key risk
How Growthpoint is responding
Finance and economics
Access to capital markets
Continuous access to debt and equity markets is
important to the sustainability of our business. If our
ability to obtain capital is constrained, it may lead to
increased costs of financing and our strategic objectives
not being met.
Operations, and people and culture
COVID-19 pandemic
The COVID-19 pandemic has had a profound and wide-
reaching impact on businesses and individuals across
Australia. It has created uncertainty for Growthpoint’s
operating environment and the broader Australian
economy as the extent and duration of the pandemic is
unknown.
Data, information and cybersecurity
Cyber security attacks could potentially interrupt
business operations and lead to a loss in productivity
and loss of business records, which could cause
reputational or financial damage.
Our support from our banking partners is dependent on their financial covenants
being met. We regularly stress test these covenants. As at 30 June 2020,
Growthpoint was well within all its debt covenant limits. We also maintain an
investment grade credit rating of Baa2.
We exercise prudent capital management and our balance sheet gearing is
currently below our target range of 35 to 45 per cent.
Growthpoint also maintains strong relationships with its equity investors, through
its investor relations program.
Our priority since the outbreak of the COVID-19 pandemic has been protecting
the safety and wellbeing of our employees, our tenants, and the broader
community. We have followed the advice of federal and state governments and
have implemented all necessary steps to reduce the spread of the virus, including
temporarily closing our head office and transitioning all our employees to working
remotely from home.
We have proactively engaged with our tenants to understand the impact the
COVID-19 pandemic has had on their business and ensured rental relief has been
distributed fairly to those tenants who most needed our support.
We also have prudent capital management in place to ensure that the Group is
on a strong footing and able to capitalise on future opportunities.
We have a dedicated team that oversees our IT systems and regularly conduct
penetration testing. We also have a Disaster Recovery Plan in place, and provide
training and education to our employees, to assist in reducing the risk and impact
of any cybersecurity attack.
People and culture
A material loss of high-performing employees may
impact on the operations of our business and result
in a loss of knowledge and key business relationships
and an increase in operating costs. Not having the right
team size could also impact on our operations and
achievement of our initiatives and objectives.
Our remuneration framework is based on attracting and retaining suitability
qualified and experienced employees and is tailored to reward high performance.
We seek to foster a diverse and inclusive workplace culture where we celebrate
our successes. We undertake annual employee engagement surveys to identify
areas for improvement, which we act upon.
We also undertake regular workforce planning to ensure that we have the right
team size and experience to support our business.
Building operations
We own and operate large office buildings, where a
high number of individuals work which can expose
employees, tenants, contractors and visitors to the risk
of injury or loss of life. This includes the risk of terrorism
which could also result in reputational damage and
financial loss.
Legal and regulatory
Legal, compliance and regulatory
Non-compliance of laws or the Company’s AFSL or
changes in the legal or regulatory environment may
impact on our business and operations and lead to
reputational damage or an increase in compliance costs.
In addition, if our contracts are not as expected then
we may have incomplete legal rights on an increased in
litigation costs or unexpected liabilities.
There are appropriate health and safety management systems, emergency and
evacuation training and procedures in place for all of our operationally controlled
office properties.
We also work with higher-risk tenants to support their security practices and
protocols.
Our compliance culture is guided by our policies and procedures to ensure that
we operate within regulatory requirements. Our team members receive regular
training on their compliance obligations, and we have an internal compliance and
legal team that considers new and updated regulatory requirements.
We also have processes in place to review all contracts prior to execution by
relevant internal stakeholders, the internal legal team and external legal experts
as needed.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 30
Governance – Management
Board of Directors.
Geoffrey Tomlinson
Independent Chairman and
Director – BEC
Term of office
Geoff was appointed as
a Director of the Board in
September 2013 and Chairman
in July 2014.
Timothy Collyer
Managing Director
– B.Bus (Prop), Grad Dip Fin &
Inv, AAPI, F Fin, MAICD
Term of office
Tim was appointed as Manager
Director and to the Board in
July 2010.
Professional experience
Professional experience
Tim has over 31 years of
experience in property
investment and development,
property valuation and property
advisory at both ASX-listed and
unlisted property funds. He
has worked across the office,
industrial and retail property
sectors.
Prior to joining Growthpoint,
Tim was Property Trust
Manager at Australand Property
Group. He also held senior
positions at Heine Funds
Management.
Geoff has more than 47 years
of experience in the financial
services industry including
six years as Group Managing
Director of National Mutual
Holdings (which changed its
name to AXA Asia Pacific prior
to being acquired by AMP in
2011).
Geoff was previously a Director
of National Australia Bank and
the Chairman of MLC.
Other directorships and
positions
Geoff is currently a Director of
IRESS.
Board Committee
Membership
– Audit, Risk & Compliance
Committee
– Nomination, Remuneration
and HR Committee
Maxine Brenner
Independent Director
– BA, LLB
Term of office
Maxine was appointed as a
Director of the Board in March
2012.
Professional experience
Maxine has extensive
experience in corporate
advisory, particularly in relation
to corporate restructures,
funding and mergers and
acquisitions.
Maxine was formerly a
Managing Director of
Investment Banking at Investec
Bank (Australia) Limited. Prior
to this, she was a lawyer at
Freehill Hollingdale & Page (now
Herbert Smith Freehills) and a
lecturer at the Universities of
NSW and Sydney.
Maxine was previously a
director of Treasury Corporation
of NSW, Neverfail Springwater
Limited, Federal Airports
Corporation and Bulmer
Australia Limited. She also
served as a member of the
Takeovers Panel.
Other directorships and
positions:
Maxine is a Director of Orica
Limited, Origin Energy Limited
and Qantas Airways Limited.
She is also a member of the
Council of the University of
NSW (UNSW).
Board Committee
Membership
Chair - Audit, Risk &
Compliance Committee
Estienne de Klerk
Director – BCom (Industrial
Psych), BCom (Hons)
(Marketing), BCom (Hons)
(Accounting), CA (SA)
Term of office
Estienne was appointed as a
Director of the Board in August
2009.
Professional experience
Estienne has over 23 years
of experience in banking and
property finance. He has held
senior roles at Growthpoint
Properties Limited for over 18
years, with responsibility for
mergers, acquisitions, capital
raisings and operating service
divisions.
Estienne is a past-President
of the South African Property
Owners Association.
Other directorships and
positions
Estienne is currently
Growthpoint Properties
Limited’s Chief Executive
Officer: South Africa. He is also
a Director of V&A Waterfront
Holdings and Chairman of the
SA REIT Association.
Estienne is not considered
independent due to his position
at Growthpoint Properties
Limited.
Board Committee
Membership
– Audit, Risk & Compliance
Committee
Growthpoint Properties Australia – FY20 Annual Report
31
Grant Jackson
Independent Director
– Assoc. Dip. Valuations, FAPI
Francois Marais
Director – BCom, LLB, H Dip
(Company Law)
Norbert Sasse
Director – BCom (Hons) (Acc),
CA (SA)
Josephine Sukkar AM
Independent Director
– BSc (Hons), Grad Dip Ed
Term of office
Term of office
Term of office
Term of office
Grant was appointed as a
Director of the Board in August
2009.
Francois was appointed as a
Director of the Board in August
2009.
Norbert was appointed as a
Director of the Board in August
2009.
Professional experience
Professional experience
Professional experience
Grant has over 34 years of
experience in the property
industry including 30 years as
a qualified valuer. Grant has
expertise in a wide range of
valuation and property advisory
matters on a national basis
and he regularly provides
expert evidence to courts and
tribunals.
Other directorships and
positions
Grant is Chairman of
m3property.
Board Committee
Membership
– Audit, Risk & Compliance
Committee
Francois is an attorney and is
the practice leader and senior
director of Glyn Marais, a South
African corporate law firm which
specialises in corporate finance.
Other directorships and
positions
Francois is Chairman of
Growthpoint Properties
Limited and a Director of V&A
Waterfront Holdings (among
other directorships in South
Africa).
Francois is not considered
independent due to his position
at Growthpoint Properties
Limited.
Board Committee
Membership
– Nomination, Remuneration
and HR Committee
Norbert has over 24 years of
experience in corporate finance
dealing with listings, delistings,
mergers, acquisitions and
capital raisings, and over 17
years of experience in the listed
property market.
Other directorships and
positions
Norbert is the Group Chief
Executive Officer and a Director
of Growthpoint Properties
Limited. He is also a Director of
V&A Waterfront Holdings.
Norbert is not considered
independent due to his position
at Growthpoint Properties
Limited.
Board Committee
Membership
– Chair - Nomination,
Remuneration & HR
Committee
Josephine was appointed as a
Director in October 2017.
Professional experience
Josephine is the co-founder
and the Principal of Buildcorp
which she established with her
husband over 30 years ago.
Josephine was previously a
Director of The Trust Company,
YWCA NSW and the University
of Melbourne’s Infrastructure
Advisory Board.
Other directorships and
positions
In addition to her position
at Buildcorp, Josephine is
currently a non-executive
Director of Washington H. Soul
Pattinson, the Property Council
of Australia, Opera Australia,
the Australian Museum,
the Centenary Institute, the
Sydney University Football
Club Foundation. Josephine
is also Chair of the Buildcorp
Foundation.
Board Committee
Membership
– Nomination, Remuneration
and HR Committee
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 32
Governance – Management
Executive Management Team.
Timothy Collyer
Managing Director
– B.Bus (Prop), Grad Dip Fin &
Inv, AAPI, F Fin, MAICD
Tim joined Growthpoint in
2009 and has been Managing
Director since 2010.
Tim has over 31 years of
experience in property
investment and development,
property valuation and property
advisory at both ASX-listed and
unlisted property funds. He
has worked across the office,
industrial and retail property
sectors.
Prior to joining Growthpoint,
Tim was Property Trust
Manager at Australand Property
Group. He also held senior
positions at Heine Funds
Management.
Michael Green
Chief Investment Officer
– B.Bus (Prop), GAICD
Dion Andrews
Chief Financial Officer
– B.Bus, FCCA, GAICD
Dion joined Growthpoint in
2009 as Financial Controller. He
was appointed Chief Financial
Officer in 2011.
Dion is a Chartered Accountant,
with over 18 years of
experience in financial roles in
Melbourne and London.
Dion joined Growthpoint
from MacarthurCook, a listed
property funds group, where he
held a senior finance position.
Michael joined Growthpoint in
2009 and has been a member
of the Executive Team for over
a decade. He has held several
executive leadership roles and
is currently Chief Investment
Officer.
Michael has over 19 years of
experience in listed and unlisted
property fund management,
property investment and
development, both in Australia
and Europe.
Prior to joining Growthpoint,
Michael was based in London
and was Transaction Manager
for Cordea Savills.
Jacqueline Jovanovski
Chief Operating Officer
– LLB (Hons), BA, GradDipApp
(CorporateGov), FGIA FCIS
Jacquee joined Growthpoint
as Chief Operating Officer
in 2019. As part of this role,
Jacquee is also Growthpoint’s
General Counsel and Company
Secretary.
Previously, Jacquee held a
number of senior positions at
Vicinity Centres, most recently
Company Secretary and Head
of Compliance.
Prior to joining Vicinity Centres,
Jacquee was a lawyer with legal
firms Minter Ellison, Linklaters
and Herbert Smith Freehills, in
Melbourne and London.
Growthpoint Properties Australia – FY20 Annual Report
33
2 Hugh Edwards Drive, Perth Airport, WAFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 34
Governance – Remuneration Report
Remuneration
report.
After several years of strong performance,
the A-REIT index was not immune to
the volatility caused by the COVID-19
pandemic. Total Securityholder return
(TSR) for the S&P/ASX 200 REIT Index
was down 21.3% over the 12 months
to June 30, 2020.1 While Growthpoint’s
TSR also declined over this period, we
continued to outperform the index, as
highlighted in the graph at right.
The Group’s strong relative performance
reflects our careful portfolio construction
and timely reduction in balance sheet
gearing. Over the past 10 years, we
have remained focused on generating
income by maintaining high-occupancy
levels. We have achieved this by carefully
selecting our tenants, favouring large
listed companies and government
organisations, and signing long leases.
We have also purposefully decided not to
invest in the retail sector. Together, these
measures have made our business more
resilient in the current environment.
The Board is particularly pleased that in
FY20, the Group’s funds from operations
(FFO) continued to grow, increasing by
2.0% to 25.6 cents per security (cps),
as highlighted in the table below. This
result was ahead of our guidance set at
the beginning of the year2. Net tangible
assets also increased, primarily driven
by strong valuation uplift across both the
Group’s industrial and office portfolios.
This uplift was largely due to our strong
leasing performance during the year,
including a new 25-year lease to the
NSW Police Force, the Group’s single
largest tenant. As a result of our leasing
activity, the portfolio WALE increased
Norbert Sasse
Director
On behalf of the Board of
Growthpoint, I am pleased to
introduce the Group’s FY20
remuneration report.
An unprecedented year
Growthpoint had a strong start to FY20
and was on track to deliver its primary
objective to provide our Securityholders
with a growing income stream and long-
term capital appreciation. However, like
individuals and businesses around the
world, for the last four months of the
financial year, our priorities shifted to
protecting the health and wellbeing of
our employees, tenants and the wider
community, and facing the broader
challenges presented by the COVID-19
pandemic.
Growthpoint’s performance, FY15 – FY20
FY15
FY18
FY20
FFO per security
Distribution per security (cents)
21.8
19.7
25.0
22.2
25.6
21.8
NTA per security (cents)
248.0
319.0
365.0
2 year
CAGR
5 year
CAGR
1.2%
(0.9%)
7.0%
3.3%
2.0%
8.1%
1. UBS Investment Research. Annual compound returns to 30 June 2020
2. In March 2020, Growthpoint withdrew all forward-looking statements, including FFO guidance of at least 25.4 cps
and DPS guidance of at least of 23.8 cps.
Total Securityholder return
over 1, 3, 5 and 10 years (%)
Growthpoint
S&P/ASX 200 REIT
Accumulation Index
13.9
9.2
6.8
6.8
4.4
2.0
1 year
3 years
5 years
10 years
-17.7
-21.3
to 6.2 years, from 5.0 years at 30 June
2019.
Despite the Group delivering earnings
growth in FY20, the Board made the
decision, after 10 years of consistently
growing distributions, to reduce
Growthpoint’s second half distribution to
retain more cash within the Group. We
believe this is the prudent approach, as
the long-term economic and financial
impact of the COVID-19 pandemic is still
unknown.
FY20 awards
Determining the appropriate Short-term
Incentive (STI) award for FY20 was
challenging as FY20 was not a ‘normal’
year, and the Committee had to assess
the Executive Management Team’s
(EMT) performance before and during
the pandemic, as well as review the
Group’s broader operating environment.
The Committee also considered recent
significant changes to the Group’s
remuneration structure, introduced to
further align the EMT’s compensation
Growthpoint Properties Australia – FY20 Annual Report
35
with the interests of Securityholders.
These changes included awarding one
third of the EMT’s STI as performance
rights (previously all cash) and introducing
a Minimum Securityholding Requirement.
In addition to the financial achievements
discussed above, the Board was
pleased with how the EMT navigated
the challenges presented this year. To
ensure the safety and wellbeing of our
employees, tenants and the broader
community, the leadership team
implemented a number of measures,
including successfully transitioning all
employees to working remotely. The
leadership team have also remained in
close contact with our tenants throughout
this period and managed the Board-
approved rent relief process. The Board
was pleased to see rent collections
remain high, even while rent relief
discussions were ongoing.
Over FY20, the EMT made progress
towards achieving our sustainability
goals. The portfolio’s average NABERS
Energy rating increased to 4.9 stars, the
GRESB score increased by 9% to 72 and
the Group maintained an above-average
CDP score of B.
We also saw a marked improvement in
the results from our annual employee
engagement survey. The Group’s
employee engagement score increased
to 77% from 75% and its alignment score
increased to 64% from 53%, placing
Growthpoint in the top quartile of its
benchmark group.
Reflecting the EMT’s performance in a
difficult year, the Committee has decided
that the STI award for the EMT will be
equal to 56.3% of their STI opportunity.
In line with the Group’s policy, the
Committee will assess the Long-term
Incentive (LTI) award in October. The LTI
award focuses on the Group’s TSR and
return on equity and is based on the
Group’s relative performance to the S&P/
ASX 200 REIT Accumulation Index.
FY21 remuneration
As mentioned above, there still exists
a great level of uncertainty around the
long-term impacts of COVID-19 on the
Group’s operating environment and the
broader Australian economy. In this
environment, the Board decided not to
increase the total fixed remuneration
for the vast majority of the Group’s
employees in FY21, in line with other
Australian listed companies. In addition,
there will be no increase to Non-
Executive Directors’ fees.
Over the past few years, we have
implemented significant changes to the
EMT’s remuneration structure to ensure
the Group is adhering to best practice
The Group’s strong relative
performance reflects
our careful portfolio
construction and timely
reduction in balance sheet
gearing.
across the sector. We do not propose to
make any further amendments in FY21.
The Committee continues to engage
PwC as advisers to ensure that our
remuneration structure and policies are
aligned with the market.
We hope you find the following
Remuneration Report transparent
and informative. The Board and the
Committee remain committed to ensuring
the management team’s interests are
aligned with the long-term interests of
Securityholders.
Norbert Sasse
Chair – Nomination, Remuneration
and Human Resources Committee
Curtis Cheng Centre, 1 Charles Street, Parramatta, NSWFinancial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 36
Governance – Remuneration Report
What’s
inside.
Who this report covers
FY20 Executive KMP remuneration
policy and framework
FY20 short-term incentives (STI)
FY20 long-term incentives (LTI)
Executive KMP remuneration in detail
FY21 Executive KMP remuneration
Non-executive KMP arrangements
Executive and Non-Executive KMP
shareholdings
Remuneration policy and role
of the Nomination, Remuneration
& HR Committee
36
36
39
41
46
47
47
48
49
About the
remuneration report
The Directors present this ‘Remuneration
Report’ for the Group for the year ended
30 June 2020. This report summarises
key compensation policies and provides
detailed information on the compensation
for Directors and other KMP.
The specific remuneration arrangements
described in this 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
outlined in this report comply with best
practice governance guidelines, as per
ASX corporate governance principles and
recommendations.
Who this report covers
This report covers Key Management Personnel (KMP), comprising
Executive Management Team (Executive KMP) and Non-executive
Directors.
Executive KMP
õ Timothy Collyer - Managing Director
õ Dion Andrews - Chief Financial Officer and Company Secretary
õ Michael Green - Chief Investment Officer
õ Jacqueline (Jacquee) Jovanovski - Chief Operating Officer and
Company Secretary
Jacquee Jovanovski joined Growthpoint on 26 August 2019 as Chief Operating
Officer. Prior to her commencement, Yien Hong, LLB (Hons), B.Comm, B.Arts,
MAICD, held the position of General Counsel and Company Secretary on a
contract basis until 23 August 2019 and was not an Executive KMP.
Non-Executive Directors
õ Geoffrey Tomlinson - Independent Chairman and Director
õ Maxine Brenner - Independent Director
õ Estienne de Klerk - Director
õ Grant Jackson - Independent Director
õ Francois Marais - Director
õ Norbert Sasse - Director
õ Josephine Sukkar - Independent Director
FY20 Executive KMP remuneration policy and
framework
Components of remuneration
Total Fixed
Remuneration (TFR)
(including applicable
superannuation and
other benefits)
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.
Short-term
incentives (STI)
Long-term
incentives (LTI)
If specified performance criteria are
met, eligibility of each Executive
KMP to receive a STI bonus
payable as two thirds cash and
one third as deferred short-term
performance rights (Short-term
Performance Rights) in respect of
each financial year as determined
by the Committee up to a maximum
amount set by the Board.
39
Current year
(FY20)
47
Next year
(FY21)
LTI bonus payable under which,
upon meeting specified performance
criteria, each Executive KMP is
eligible to receive securities in the
Group that vest over time to help
ensure alignment of each Executive
KMP’s interests with those of
Securityholders.
41
Current year
(FY20)
47
Next year
(FY21)
Growthpoint Properties Australia – FY20 Annual Report
37
FY20 Executive KMP remuneration policy and framework (continued)
Executive KMP Remuneration delivery FY20
Executive KMP remuneration is structured to link rewards to individual performance and the execution of the Group’s strategy to
sustainably grow distributions and long-term capital growth. This leads to the creation of Securityholder value.
FY20
FY21
FY22
FY23
Fixed
Remuneration
100%
Base Salary,
Superannuation
and Other
Benefits1
STI
66.6% paid in Cash
Cash STI
33.3% deferred
Short-term
Performance Rights
16.65% deferred for one year
16.65% deferred for two years
LTI2
delivered as
long-term
performance rights
(Long-term performance
rights)
100% subject to a
3 year performance
period3
50% subject to Relative Total Securityholder
returns (TSR) growth
50% subject to Relative Return on Equity (ROE) growth
1. Other Benefits comprise wellbeing and insurance arrangements provided to all Executive KMP.
2. This diagram does not include information on the Transitional Plan in place. See page 41 for further detail.
3. The measurement period finishes at 30 June 2022 but vesting occurs early in FY23.
Executive KMP Remuneration mix FY20
The remuneration components for each Executive KMP are expressed as a percentage of total remuneration, with the STI and LTI
value varied to reflect performance. The following diagram sets out the structure for remuneration paid to Executive KMP for FY20.
Managing Director
Performance dependent
52%
18%
8%
22%
Total Fixed Remuneration
STI - Cash
STI - Deferred
LTI
Other Executive KMP
Performance dependent
46
60%
15%
5%
20%
See page 46 for detailed
information on Executive KMP
remuneration
Principles of remuneration for Executive KMP
1. Executive KMP should receive total remuneration which is competitive with rates for similar roles within the ASX A-REIT sector and
ASX listed companies of similar size (measured by market capitalisation), complexity, workload and the relative profit and expenses
versus the Group.
2. The total remuneration for Executive KMP 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. Executive KMP 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.
4. From 1 July 2018, the Committee implemented a Minimum Securityholding Requirement (MSR) for KMP (refer to page 48 for details
of KMP’s current holdings and details of the MSR).
5. Executive KMP are entitled to receive certain payments including the vesting of all unvested performance rates if the Company
decides to terminate a position without cause including through redundancy or takeover (refer to page 51 for further information).
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 38
Governance – Remuneration Report
Total Executive KMP remuneration FY20 (value received)
The following table presents the actual remuneration received by Executive KMP during FY20. This voluntary disclosure is provided to
increase transparency and includes:
õ Salary and other benefits received during FY20;
õ FY19 cash STI received during FY20; and
õ The value of securities that vested during FY20.
The actual remuneration presented in this table is distinct from the disclosed remuneration (as required by section 308(C) of the
Corporations Act 2001 (Cth) presented further below, which is calculated in accordance with statutory obligations and accounting
standards and is therefore recognised in the Statement of Comprehensive Income during FY20. These amounts can differ to the
amounts actually received. The numbers in the audited disclosed remuneration include accounting values for current and prior years’
LTI grants which have not been (or may not be) received, as they are dependent on performance hurdles and service conditions being
met.
Timothy Collyer – Managing Director
Dion Andrews – Chief Financial Officer
Michael Green – Chief Investment Officer
Jacquee Jovanovski – Chief Operating Officer1
Salary and
other benefits
$
1,025,386
509,761
502,338
302,387
Cash STI
$
474,583
140,854
140,854
–
Value of
securities
vested
$
613,075
202,433
203,621
–
Total
$
2,113,044
853,048
846,813
302,387
Total
2,339,872
756,291
1,019,129
4,115,292
1. Joined the Group on 26 August 2019.
Total Executive KMP remuneration (accounting expense)
Short-term
benefits
Long-term
benefits
Security based
payments
Base
salary
STI cash
award
Performance
rights cash
distribution
Annual
leave1
Non-
monetary
benefits
Super-
annuation
benefits
Long
service
leave1
Deferred
STI Plan
accrual
LTI Plan
accrual
$
$
$
$
$
$
$
$
$
Total
$
Timothy Collyer – Managing Director
989,981
375,152
7,649
(901)
2,756
25,000
32,237
156,742
449,775 2,038,391
932,543
474,583
– (12,841)
Dion Andrews – Chief Financial Officer
FY20
FY19
482,491
131,303
2,270
13,053
380,993
140,854
–
610
Michael Green – Chief Investment Officer
FY20
FY19
475,068
131,303
2,270
13,907
380,993
140,854
–
1,599
Jacquee Jovanovski – Chief Operating Officer
281,554
91,912
–
–
– 15,166
–
–
–
–
–
–
–
–
–
25,000
21,595
98,857
644,144 2,183,881
25,000
26,413
49,600
191,984
922,114
25,000
12,817
29,340
256,853
846,467
25,000
9,381
49,600
192,198
898,727
25,000
12,021
29,340
257,854
847,661
20,833
727
14,182
86,926
511,300
–
–
–
–
–
FY20
FY19
FY20
FY19
Total
FY20
FY19
% of
remuneration
performance-
based
51%
40%
41%
0%
43%
S300A (1) (e) (i)
proportion of
remuneration
performance
related
%
48%
56%
40%
50%
42%
50%
38%
–
44%
53%
2,229,094
729,670
12,189
41,225
2,756
95,833
68,758
270,124
920,883 4,370,532
1,694,529
756,291
– (10,632)
–
75,000
46,433
157,537 1,158,851 3,878,009
1. The accounting value of leave movements may be negative; for example, where an Executive’s annual leave balance decreases as a result of taking more than the 20 days’
annual leave they accrue during the current year.
Growthpoint Properties Australia – FY20 Annual Report
39
FY20 short-term incentives (STI)
Performance criteria for Executive KMP STI for current year (FY20)
The STI provides Executive KMP with the opportunity to receive cash and equity based on a one-year
performance period following an assessment against specified financial and non-financial performance
conditions. Performance criteria for FY20 are set out below.
Weighting Strategic objectives
Result
Performance detail
Financial
70%
70% FFO per Security
50%
– Base target 25.6 cps = 50%
(set 0.2 cps ahead of budget)
– Stretch 26.7 cps = 125%
Funds from operations
25.6cps
+2.0% on FY19
Non-Financial
7.5% Execution of Business Strategy
55%
30%
– Delivery of development pipeline
of Botanicca 3, Gepps Cross and
Broadmeadows
– Undertake strategic acquisition and
disposition of property assets to maximise
longer term income and capital growth
opportunities
– Maintain the quality of property portfolio
– Financing growth of portfolio and
maintaining appropriate capital structure
– Strategic review of new property sector or
operating business to diversify sources of
revenue and grow asset base
7.5% Organisational Performance
63%
– Maintain a high employee alignment and
engagement score
– Retain talented individuals in roles and
provide for advancement within the Group
– Maintain high tenant satisfaction
– Maintain high levels of investor
engagement and confidence
7.5% Environmental, Social and
Governance (ESG) Improvement
and Initiatives
– Promote and achieve diversity targets
100%
– Maintain average high NABERS ratings
– Maintain high CDP and GRESB scores
– Maintain investment grade credit rating
– Maintain and improve market disclosures
– Improvement of Board reporting and
minutes
Strategic
acquisitions
$40m
-$301m on FY19
Strategic
divestments
$Nil
FY19: $45m
Development pipeline
_ Completed Botanicca and Gepps Cross
(both ahead of time and Botanicca ahead of
budget). Broadmeadows phase one planning
submitted.
_ Successfully completed $174m in Institutional
Placement and SPP, increased debt liquidity
by new facilities of $100m and extended a
further $400m of debt by a weighted average
4.1 years
Employee
alignment
64%
FY19: 53%
Employee
engagement
77%
FY19: 75%
Tenant and investor surveys for FY20
deferred due to the impact of COVID-19
pandemic
Average NABERS
Energy rating
4.9
FY19: 4.8 stars
Investment
grade rating
Baa2
since August 2014
Female employees
50%
FY19: 54%
GRESB
72
PCP: 66
CDP
B
PCP:B
7.5% Individual Performance of
Executive
– Execution of key strategies to achieve
75%
annual budget/guidance and longer-term
earnings growth
– Role model values, leadership behaviours,
collaboration and inclusiveness
– Embedding strong governance, risk and
compliance culture
Key performance outcomes included:
_ Execution of strategy regarding acquisitions,
development and leasing along with debt and
equity capital management
_ Positive reviews of culture, values,
governance and risk mitigation
_ Successful continuity of management of
operations and teams during COVID-19
Totals
100%
56.3%
See page 46 for detailed information on
Executive KMP remuneration
46
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 40
Governance – Remuneration Report
STI Plan overview for Executive KMP
In advance of each financial year the Committee, in consultation with the Managing Director, and with assistance from remuneration
consultants as required, establish performance targets and reward levels for STIs in respect of the year ahead.
A performance review is undertaken near the end of each financial year to determine the STI award payable to the Executive KMP,
based on performance targets set at the start of the financial year. Any award of STI to the Managing Director requires Board approval.
Cash STI payments are made in August following the financial year in which they were earned.
STI Criteria
The STI is divided into two criteria, namely;
a) Financial criteria – 70% of total
The financial criteria is based upon achieving above budgeted FFO per security (25.6cps for FY20 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 26.7 cps which is 5.1% above the budgeted figure). If FFO per security is below the base target, the Board has discretion whether
to grant achievement under the financial criteria. For FY20 the achievement was 50% for the financial criteria due to achievement of
25.6 cps.
b) Non-financial criteria – 30% of total
The non-financial criteria are based upon the performance criteria in the table on page 39. The criteria are reviewed and approved by
the Committee following the end of the financial year. Achievement of this component is capped at 100%. For FY20 the achievement
for non-financial criteria was 70.9% overall.
Results of FY20 STI
The table below shows the maximum in cash and Short-term Performance Rights that each Executive KMP could earn for FY20 and
the actual results achieved.
Names
Maximum for FY20
Result for FY20
Total
Cash
Short-term
Performance Rights
Total
Cash
Short-term
Performance Rights1
$
$
$
No.
$
$
$
No.
Timothy Collyer – Managing Director
1,175,000
783,255
391,745
90,682
562,700
375,152
187,548
43,414
Dion Andrews – Chief Financial Officer
411,250
274,139
137,111
31,739
196,945
131,303
65,642
15,195
Michael Green – Chief Investment Officer
411,250
274,139
137,111
31,739
196,945
131,303
65,642
15,195
Jacquee Jovanovski – Chief Operating Officer
287,875
191,897
95,978
22,217
137,862
91,912
45,949
10,636
Total
2,285,375 1,523,430
761,945
176,377
1,094,452
729,670
364,781
84,440
1. Grants to Timothy Collyer remain subject to approval at the November 2020 AGM.
The number of Short-term Performance Rights is derived by dividing the maximum dollar value by the Volume Weighted Average Price
of Growthpoint securities over the first 10 trading days of FY20, being $4.32. The actual number of Short-term Performance Rights
earned by Executive KMP will be split into two equal tranches with the first tranche converting to stapled securities on 30 June 2021
and the second tranche converting on 30 June 2022, as long as the individual is still employed and has not submitted their resignation
prior to conversion date.
Growthpoint Properties Australia – FY20 Annual Report
41
FY20 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 or Long-term Performance Rights issued under the LTI are issued on a zero exercise price basis.
LTI performance measures
The performance measures for the LTI are reviewed in advance of each financial year by the Committee and the Board.
LTI plans now in operation
There are three types of LTI plans in operation for Executive KMP as the Group continued its transition to the new forward looking plans
that commenced in FY19:
õ Historical backward-looking plans from FY17 and FY18
The performance measures of these plans have been tested with FY17 rights vesting in September 2020.
õ Transitional plans
These plans are also backward looking.
– The FY19 Transitional plan performance measurement period is for three years to 30 June 2019. Only 50% of the maximum
opportunity under this plan could convert to the issuing of stapled securities. This is because the transitional plans are designed
to run down until the first forward looking plan reaches vesting. The results of this plan were determined by the Committee in
October 2019, with stapled securities to be issued in two equal tranches, one in FY20 (which has occurred) and one in FY21.
– The FY20 Transitional plan operates on the same basis as the FY19 Transitional plan, with 25% of the maximum opportunity
available under this plan as part of the run down until the first forward looking plan reaches vesting. The performance results of
this plan will be determined in October 2020, with any stapled securities to be issued in one tranche in FY21.
– There will be no further transitional plans after FY20 (see diagram below).
õ Forward looking plans
– The performance measurement period for the FY19 forward looking plan is the three years to 30 June 2021. For this plan,
only 75% of the maximum opportunity can vest. This is to dovetail with the final 25% tranche of the FY18 plan that may have
converted to securities in the same year.
– The performance measurement period for the FY20 forward looking plan is the three years to 30 June 2022. For this plan, 100%
of the maximum opportunity may vest into stapled securities once the performance results are determined in October 2022.
The diagram below shows the different plans in operation from the commencement of the transition and the timing of vestings under
each.
LTI plans
Vesting date
30 Sept 2018
30 Sept 2019
30 Sept 2020
30 Sept 2021
30 Sept 2022
30 Sept 2022
Historical,
backward
looking
plans
Transitional,
backward
looking
plans
Forward
looking
plans
FY15
25%
FY16
25%
FY17
25%
FY18*
25%
FY19
FY20
FY19
FY20
FY21
25%
25%
25%
25%
25%
25%
25%
25%
25%
75%
100%
100%
* No LTI awards were made as
the performance condition hurdles
were not met.
100%
Opportunity
100%
Opportunity
100%
Opportunity
100%
Opportunity
100%
Opportunity
100%
Opportunity
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 42
Governance – Remuneration Report
LTI Performance measures
Total
securityholder
return (TSR)
TSR is defined as being the amount of dividends/distributions paid/payable by Growthpoint
Properties Australia during the measurement period and the change in the price at which Stapled
Securities are traded between the beginning and the end of the measurement period.
50%
TSR is benchmarked relative to the S&P/ASX A-REIT 300 Accumulation Index1 (for plans up to FY19) or the
S&P/ASX A-REIT 200 Accumulation Index (for FY20 plans onwards) over a rolling 3-year period2 as set out in
the following vesting schedule:
Growthpoint Properties Australia’s TSR rank in
the relevant comparator group
% of TSR Component to be granted as
Performance Rights
At or below the 50th percentile
At the 51st percentile
Between 51st and 76th percentile
Nil
50%
Straight line pro rata vesting between 50% and 100%
(i.e. plus 2% for each percentile above the 51st
percentile)
At or above 76th percentile
100%
Return on
equity (ROE)
50%
ROE measures the total return on equity employed and takes into account both capital appreciation
of the assets of Growthpoint Properties Australia and cash distributions of income. The return will be
calculated on the starting net tangible assets (NTA) per Stapled Security and includes the change in
NTA per Stapled Security over the measurement period plus the distribution made as a return on the
starting NTA per Stapled Security.
ROE is benchmarked relative to the ROEs of constituents of the S&P/ASX A-REIT 300 Index1 (for plans up to
FY19) or the S&P/ASX A-REIT 200 Accumulation Index (for FY20 plans onwards) over a rolling 3-year period2
as set out in the following vesting schedule:
Growthpoint Properties Australia’s ROE
% of ROE Component to be granted as
Performance Rights
Below benchmark return
Achievement of benchmark
Nil
50%
Between 1% and 2% above the benchmark
Straight line pro rata vesting between 50% and 100%
At 2% or more above benchmark
100%
1. For both Performance Conditions, the Board has the discretion to adjust the comparator group to take into account events including, but not limited to, de-listings, takeovers,
and mergers or de-mergers that might occur during the measurement period, or where it is no longer meaningful to include a company within the comparator group.
2. For the backward-looking plans, this is 3 years up to 30 June in the relevant financial year. For forward looking plans, this is 30 June in three years from 1 July of the current
financial year. For example, the FY20 Plan period ends on 30 June 2022.
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 Executive KMP (‘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
Executive KMP is 70% of TFR.
LTI Minimum
There is no minimum grant under the LTI. Accordingly, if minimum performance measures are not achieved, the Committee may
determine that no grant will be made under the LTI.
LTI Achievement
The LTI results are independently calculated by Grant Thornton and reviewed by the Committee.
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’).
Growthpoint Properties Australia – FY20 Annual Report
43
LTI Awards for backwards looking plans (transitional plans)
The LTI Maximum multiplied by the LTI Achievement provides the ‘LTI Award’ for each Executive KMP 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 Executive KMP for each subsequent vesting.
25% of the securities to be issued to each Executive KMP based on the LTI Award are issued to each Executive KMP in October or
November of each of the following four years. Each such vesting is subject to the Executive KMP remaining employed by Growthpoint
at the relevant vesting date.
As each grant is on the basis of a fixed number of securities rather than a fixed value, Executive KMP are exposed to variations in the
Group’s security price for securities which are yet to vest.
The LTI is cumulative, meaning that Executive KMP can receive up to four issues of securities in a particular year in respect of four prior
financial years.
The opportunity under transitional plans steadily reduces until the first Long-term Performance Rights under the new forward-looking
plans vest.
LTI Awards for forward looking plans
LTI Awards for forward looking plans are similar to the backward-looking plans except:
õ The number of Long-term Performance Rights granted is based on the volume weighted average price of securities over the first 10
trading days of the relevant performance period and rounded down to the nearest whole performance right.
õ Once the LTI Achievement is determined following the end of the performance period, this percentage is multiplied by the Long-term
Performance Rights to determine how many Long-term Performance Rights will actually vest and convert to issued securities.
ASX Listing Rules
In accordance with ASX Listing Rule 10.14, the issue of any stapled securities or performance rights 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 or performance rights will be issued shortly after the relevant meeting.
Performance rights to vest from historical backward-looking plans (FY17-FY18)
and the historical transitional backward-looking plan from FY19
The number of performance rights to convert from historical plans has already been determined. The table below indicates the number
of performance rights still to convert and the financial year in which the conversion will take place:
Plan participants
Plan identification
No. of securities to vest in FY21
Total securities still to issue
Timothy Collyer
– Managing Director
Dion Andrews
– Chief Financial Officer
Michael Green
– Chief Investment Officer
FY17
FY18
FY19
Total
FY17
FY18
FY19
Total
FY17
FY18
FY19
Total
55,104
-
35,486
90,590
18,796
-
13,165
31,961
19,070
-
13,165
32,235
55,104
-
35,486
90,590
18,796
-
13,165
31,961
19,070
-
13,165
32,235
Total to issue
154,786
154,786
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
44
Governance – Remuneration Report
FY20 Transitional Plan (backward looking)
The table below shows LTI grants made with respect to the FY20 transitional plan, subject to performance conditions over the three-
year performance period ending 30 June 2020. Accounting standards require the estimated valuation of the grants be recognised over
the performance period. The minimum value of the grant is nil if the vesting conditions are not met. The maximum value is based on the
estimated fair value and amortised in accordance with the accounting standard requirements.
Plan participants
Timothy Collyer
– Managing Director
Dion Andrews
– Chief Financial Officer
Michael Green
– Chief Investment Officer
Jacquee Jovanovski
– Chief Operating Officer
LTI max as a % of
remuneration1
Performance
measure
Number of
performance
rights granted2
Fair value per
performance right
Total estimated
fair value
%
Total
20.0
Total
17.5
Total
17.5
Total
17.5
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
No.
22,936
22,936
45,872
10,035
10,034
20,069
10,035
10,034
20,069
7,024
7,024
14,048
$
2.751
4.260
2.751
4.260
2.751
4.260
2.751
4.260
$
63,097
97,707
160,804
27,606
42,745
70,351
27,606
42,745
70,351
19,323
29,922
49,245
1. This includes the restriction to 25% opportunity for this plan. For example, Timothy Collyer’s maximum is 80% * 25% = 20% of remuneration.
2. To be trued up once the performance conditions are assessed; grants to Timothy Collyer remain subject to approval at the November 2020 AGM.
Key inputs used in valuing Long-term Performance Rights were as follows:
Key inputs:
Measurement date
TSR performance start date
TSR expiry date
Share price at issue date ($)
Exercise price
Expected life (years)
Volatility
Risk free interest rate
Distribution yield
Timothy Collyer
Other Executive KMP
29-Nov-19
1-Jul-17
30-Jun-20
$4.40
-
0.59
15%
0.57%
5.5%
29-Nov-19
1-Jul-17
30-Jun-20
$4.40
-
0.59
15%
0.57%
5.5%
The fair value is determined by Grant Thornton using a Monte-Carlo simulation for the relative TSR component and a Binomial
methodology for the relative ROE component.
Growthpoint Properties Australia – FY20 Annual Report
45
FY20 Forward Looking Plan
The table below shows LTI grants made during FY20 with respect to the Forward-Looking Plans, subject to performance conditions
over the three-year performance period ending 30 June 2022. Accounting standards require the valuation of the grants be recognised
over the performance period. The minimum value of the grant is nil if the vesting conditions are not met. The maximum value is based
on the fair value calculated at the time of the grant and amortised in accordance with the accounting standard requirements.
Plan participants
Timothy Collyer
– Managing Director
Dion Andrews
– Chief Financial Officer
Michael Green
– Chief Investment Officer
Jacquee Jovanovski
– Chief Operating Officer
Total
Total
Total
Total
LTI max as a % of
remuneration
Performance
measure
Number of
performance
rights granted
Fair value per
performance right
Total estimated
fair value
%
80
70
70
70
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
No.
92,593
92,592
185,185
40,510
40,509
81,019
40,510
40,509
81,019
28,357
28,357
56,713
$
1.566
3.817
1.566
3.817
1.566
3.817
1.566
3.817
$
145,001
353,424
498,425
63,439
154,623
218,062
63,439
154,623
218,062
44,407
108,235
152,642
Key inputs used in valuing Long-term Performance Rights were as follows:
Key inputs:
Grant date
TSR performance start date
TSR expiry date
Share price at issue date ($)
Exercise price
Expected life (years)
Volatility
Risk free interest rate
Distribution yield
Timothy Collyer
Other Executive KMP
29-Nov-19
1-Jul-19
30-Jun-22
$4.40
-
2.59
15%
0.60%
5.5%
29-Nov-19
1-Jul-19
30-Jun-22
$4.40
-
2.59
15%
0.60%
5.5%
The fair value is determined by Grant Thornton using a Monte-Carlo simulation for the relative TSR component and a Binomial
methodology for the relative ROE component.
Hedging of performance rights by Executive KMP
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.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
46
Governance – Remuneration Report
Executive KMP remuneration in detail
Details of Performance Rights that vested to Executive KMP in FY20
Plan participants
Plan identification
Timothy Collyer
– Managing Director
FY19 Deferred STI Plan
FY19 LTI Transitional Plan
FY17 LTI Plan
FY16 LTI Plan
Total
Dion Andrews
– Chief Financial Officer
FY19 Deferred STI Plan
FY19 LTI Transitional Plan
FY17 LTI Plan
FY16 LTI Plan
Total
Michael Green
– Chief Investment Officer
FY19 Deferred STI Plan
FY19 LTI Transitional Plan
FY17 LTI Plan
FY16 LTI Plan
Total
Value of securities
issued on
conversion of
performance
rights
Number of
securities issued
on conversion
of performance
rights
$
No.
103,718
154,719
240,253
114,385
613,075
30,784
57,399
81,951
32,299
202,433
30,784
57,399
83,139
32,299
203,621
32,412
35,486
55,104
26,235
149,237
9,620
13,165
18,796
7,408
48,989
9,620
13,165
19,069
7,408
49,262
Total
1,019,129
247,488
Value of
performance
rights still to vest
% of plan that
vested during
FY20
$
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
%
50%
50%
25%
25%
50%
50%
25%
25%
50%
50%
25%
25%
Movements in number of performance rights held by Executive KMP
during the year ended 30 June 2020
STI performance rights
Plan participants
Timothy Collyer – Managing Director
Dion Andrews – Chief Financial Officer
Michael Green – Chief Investment Officer
Jacquee Jovanovski – Chief Operating Officer
Balance at
1 July 2019
Rights
granted
(FY20 Plan)
Rights
lapsed
(FY19 Plan)
Rights
vested
Balance at
30 June 2020
No.
100,977
29,970
29,970
–
No.
90,682
31,739
31,739
22,217
No.
No.
No.
(36,153)
(10,731)
(10,731)
–
(32,412)
(9,620)
(9,620)
–
123,094
41,358
41,358
22,217
Total
160,917
176,377
(57,615)
(51,652)
228,027
LTI performance rights
Plan participants
Timothy Collyer – Managing Director
Dion Andrews – Chief Financial Officer
Michael Green – Chief Investment Officer
Jacquee Jovanovski – Chief Operating Officer
Total
Balance at
1 July 2019
No.
395,859
139,658
140,204
–
675,721
Rights
granted
No.
231,057
101,088
101,088
70,761
503,994
Rights lapsed
(FY19 Transitional
Plan)
Rights
vested
Balance at
30 June 2020
No.
No.
No.
(33,786)
(10,950)
(10,950)
–
(116,825)
(39,369)
(39,642)
–
(55,686)
(195,836)
476,305
190,427
190,700
70,761
928,193
Growthpoint Properties Australia – FY20 Annual Report
47
FY21 Executive KMP remuneration
Proposed performance criteria for STI for next year (FY21)
The structure for FY21 STI for Executive KMP will remain split between financial measures (70%) and non-financial measures (30%).
The financial measure will be based on a target FFO per security measure, with a base target and range up to a stretch target agreed
by the Committee at the beginning of the financial year.
The non-financial measures will be assessed across measures relating to the following categories:
õ Operational priorities
õ ESG initiatives
õ People and leadership
õ External stakeholders
õ
Individual Executive KMP objectives
The Board has ultimate discretion to apply judgement or make adjustments when approving the final performance outcomes in light of
COVID-19 environment.
Executive KMP FY21 remuneration
The remuneration for Executive KMP and staff payable in FY20 will generally not increase in FY21, other than in limited exceptions
which will result in an immaterial increase in remuneration overall.
Non-executive KMP arrangements
There are currently seven Non-Executive KMP. An aggregate pool of $1,200,000 available for the remuneration of
Non-Executive KMP was approved by Securityholders at the Company’s Annual General Meeting in November
2017.
Remuneration paid and payable
The total remuneration paid to Non-Executive Directors for FY20 is listed on the following page.
Principles of remuneration for Non-Executive KMP
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), 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. From 1 July 2018, the Committee implemented a Minimum Securityholding Requirement (MSR) for Non-Executive KMP (refer to
page 48 for details of current holdings and details of 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.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 48
Governance – Remuneration Report
FY20 Non-Executive KMP 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
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
Fees
$
194,612
186,184
99,543
95,283
109,000
104,335
109,000
104,335
109,000
104,335
105,263
95,283
99,543
95,283
825,961
785,038
Committee
Fees
Superannuation
benefits
$
–
–
12,420
12,003
12,300
11,670
19,400
18,354
13,600
13,143
20,913
20,177
11,233
10,658
89,866
86,005
$
18,488
17,688
10,637
10,192
–
–
–
–
–
–
5,722
10,969
10,524
10,064
45,371
48,913
Total
$
213,100
203,872
122,600
117,478
121,300
116,005
128,400
122,689
122,600
117,478
131,897
126,429
121,300
116,005
961,198
919,956
Non-Executive KMP FY21 remuneration
For Non-Executive KMP, the fees payable to the directors in FY21 as part of their membership of the Board and Committees will not
increase from the fees payable in FY20. Similarly, fees payable to the Board Chairman and Committee Chairs will not increase.
Executive and non-executive KMP shareholdings
From 1 July 2018, the Committee implemented a Minimum Securityholding Requirement (MSR) for Executive KMP and Non-Executive
KMP who must comply with the MSR by 30 June 2022 or four years from their employment or Directorship commencement, whichever
is later. The MSR is as follows:
õ Non-Executive Directors – 100% of base Directors fees in equivalent value of Growthpoint securities;
õ Managing Director – 100% of TFR in equivalent value of Growthpoint securities; and
õ Other Executive 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
Dion Andrews
Michael Green
Jacquee Jovanovski2
Holding as at
30 June 2019
Securities
granted as
compensation
Securities
acquired
Holding as at
30 June 2020
No.
88,776
190,087
169,284
1,656,460
1,752,863
7,245
14,000
886,507
127,682
4,561
0
–
–
–
–
–
–
–
149,237
48,989
49,262
–
–
–
–
–
–
11,111
–
–
–
–
–
88,776
190,087
169,284
1,656,460
1,752,863
18,356
14,000
1,035,744
176,671
53,823
0
MSR
%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
50%
Current equivalent
value in Growthpoint
securities1
%
133%
558%
497%
4863%
5146%
54%
41%
331%
226%
69%
0%
1. Current equivalent value takes the closing price of Growthpoint securities on 30 June 2020 ($3.20), multiplied by the holding and compares this to the relevant FY20 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 2022.
2. Jacquee Jovanovski commenced employment on 26 August 2019.
Growthpoint Properties Australia – FY20 Annual Report
49
Remuneration policy and role of the Nomination, Remuneration and 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.
How Governance and remuneration decisions are made
Board of Directors: oversees remuneration
Nomination,
Remuneration
and HR committee
Advises on policy and
practices and makes
recommendation to
the board.
:
s
e
v
i
t
c
e
b
O
j
Provide
competitive
rewards to
attract, motivate
and retain highly
skilled directors
and management.
Set challenging
but achievable
objectives for
short and long-
term incentive
plans.
Link rewards
to the creation
of value for
Securityholders.
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.
Recommendations made to the board using advice from:
Managing
Director
External
Advisors
Committee members
The members of the Committee during the year and at the date of this Report are:
õ Norbert Sasse (Chairman) – non-executive director
õ Francois Marais – non-executive director
õ Geoff Tomlinson – independent, non-executive director and Board Chairman
õ Josephine Sukkar – independent, non-executive director
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, for other Group Employees both on appointment and on a not less than annual basis.
d) Review the most senior executive officer’s recommendations for any bonus payments which are in excess of that delegated to the
most senior executive officer under the Group’s “Delegations of Authority Policy”. The Committee cannot approve payments which
exceed the bonus pool approved by the Board without Board approval.
e) Make recommendations to the Board in relation to the introduction of, and amendments to, any employee share plan established
by the Group.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 50
Governance – Remuneration Report
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 below in respect of the five financial years ended 30 June 2020.
2020
2019
2018
2017
2016
$m
$m
$
$
$
%
%
272.1
168.2
0.218
3.20
(0.92)
(17.7)
10.8
375.3
167.4
0.230
4.12
0.51
21.0
16.9
357.7
148.4
0.222
3.61
0.47
22.3
18.5
278.1
140.1
0.215
3.14
(0.01)
6.3
18.6
219.4
118.1
0.205
3.15
0.02
7.4
13.5
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 to provide an update and assistance on remuneration
trends. PwC was paid a total of $6,206 for providing these services. PwC did not provide any remuneration recommendations during
the year.
The Committee is satisfied on behalf of the Board that PwC remained free from undue influence from Executive KMP. The Committee
received the update and assistance directly from PwC and discussed it with them. The Company did not engage PwC for any other
work during FY20.
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 update and assistance from PwC.
2. Remuneration surveys and trends.
3. Benchmarking against peers.
4. Recommendations from the Managing Director (excluding in relation to his own remuneration).
Executive Director Remuneration and Service Contract
There is currently only one executive director being the Managing Director, Timothy Collyer.
Remuneration paid and payable
The total remuneration paid or payable to the Managing Director for FY20 is listed on page 46 of this report.
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’s employment continues until terminated by either the Group or the Managing Director. The Managing Director
can resign by providing six months’ written notice. The Group can terminate his employment immediately for cause. In addition, the
Group can terminate the Managing Director’s employment without cause on nine months’ notice. The Group may elect to pay the
Managing Director in lieu of some or all of this nine months’ notice period.
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 six months from the date of termination. Termination payments for
redundancy comprise nine months’ notice and redundancy policy benefits.
Principles of remuneration for the Managing Director
The principles of remuneration for the Managing Director are included as part of the Executive KMP principles listed on page 37.
Growthpoint Properties Australia – FY20 Annual Report
51
Other service contracts
The service contracts for other Executive KMP are unlimited in term but can be terminated by the Executive KMP on three months’
notice and by the Company immediately for cause and on six months’ notice. The Group may elect to pay the other Executive KMP in
lieu of some or all of this six month notice period. The restraint of trade period for the other Executive KMP is six months.
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.
Additional terms relating to LTI or STI performance rights issued to Executive KMP
Cessation of employment
Ceasing employment for cause or due to resignation
Where an Executive KMP’s employment with Growthpoint Properties Australia is terminated for cause or ceases due to resignation
(other than due to death, ill health or disability), all performance rights will lapse, unless the Board determines otherwise.
Ceasing employment for other reasons
If an Executive KMP’s employment ceases at any time for any other reason (including due to death, ill health, disability or bona fide
redundancy), all performance rights (whether or not the applicable performance conditions and/or service condition has been satisfied)
as at the date of cessation of employment will remain on foot and remain subject to the terms of the offer of the performance rights,
as though employment had not been ceased. However, the Board retains a discretion to determine to vest or lapse some or all of the
performance rights.
Takeover or Scheme
In summary, the Growthpoint Properties Australia Employee Incentive Plan Rules provide that in the event of each of:
õ a takeover bid being recommended by the Board or becoming unconditional; and
õ a scheme of arrangement, reconstruction or winding up of Growthpoint Properties Australia being put to members,
some or all performance rights may vest or may remain on foot at the Board’s discretion.
Clawback
The Board has broad “clawback” powers to determine that performance rights lapse, stapled securities are forfeited, or that amounts
are to be repaid in certain circumstances (for example, in the case of fraud or dishonesty).
Non-Executive and Executive KMP Reviews
Non-Executive KMP 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 FY20.
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 page 30 for full profiles of each Director.
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.
Executive KMP Reviews
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 39.
The Managing Director reviews the performance of the other Executive KMP and makes recommendations to the Committee on their
remuneration based, in part, on the STI performance measures listed on page 39.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 52
Governance – Remuneration Report
Meetings of Directors (FY20)
Board member
G. Tomlinson – Chairman
M. Brenner
T. Collyer – Managing Director1,2
E. de Klerk
G. Jackson
F. Marais
J. Sukkar
N. Sasse
Growthpoint Board
Audit, Risk and
Compliance Committee
Nomination, Remuneration
and HR Committee
eligible
to attend
attended
eligible
to attend
attended
eligible
to attend
attended
8
8
8
8
8
8
8
8
8
8
8
7
7
8
8
7
4
4
4
4
4
4
4
4
4
5
5
5
5
5
5
5
5
5
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 Audit, Risk &
Compliance 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 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.
Growthpoint Properties Australia – FY20 Annual Report
53
Additional
information.
Indemnification and
insurance of Directors,
Officers and Auditor
The Company has entered into a Deed
of Indemnity, Insurance and Access
with each of its directors, Dion Andrews
(Chief Financial Officer), Michael
Green (Chief Investment Officer) and
Jacqueline Jovanovski (Chief Operating
Officer) 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. 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
the negligence, wrongful or wilful acts or
omissions by the auditor.
Non-Audit services
Rounding of amounts
During the year EY, the Group’s auditor,
has performed no services other than the
audit and review of financial statements.
Details of the amounts paid to EY for
audit services provided during the year
are set out below
All financial information presented is in
Australian dollars and has been rounded
to the nearest hundred thousand unless
otherwise stated, in accordance with
Australian Securities and Investments
Commission Instrument 2016/191.
FY20
$
About the Directors’
Report
The Directors’ Report comprises pages
3 to 53 of this report except where
referenced elsewhere.
This report was approved in accordance
with a resolution of the Directors’ of
Growthpoint Properties Australia Limited.
Timothy Collyer
Managing Director
Growthpoint Properties Australia
20 August 2020
Audit and review of financial
statements
217,000
Other regulatory audit services
37,000
Total paid to EY
254,000
Auditor’s independence
A copy of the auditor’s independence
declaration as required under section
307C of the Corporations Act 2001 (Cth)
is set out on page 92.
Significant changes in the
state of affairs
The Directors are not aware of any matter
or circumstance, that is not discussed
in the operating and financial review
that has significantly or may significantly
impact the Group now, or in future years.
Environmental Regulations
As 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.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
54
Financial Report
Financial
report.
for the year ended 30 June 2020
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Cash Flows Statement
Notes to the Financial Statements
Section 1: Basis of preparation and new
accounting pronouncements
1.1 Basis of preparation
1.2 New accounting standard adopted by the
Group as at 1 July 2019 – AASB 16 Leases
Section 2: Operating results, assets and liabilities
2.1 Revenue and segment information
2.2 Investment properties
2.3 Investment in securities
2.4 Receivables and other assets
2.5 Trade and other liabilities
2.6 Cash flow information
Section 3: Capital structure and financing
3.1 Interest bearing liabilities
3.2 Borrowing costs
3.3 Lease liabilities
3.4 Derivative financial instruments
3.5 Financial instruments fair value hierarchy
3.6 Financial risk management
3.7 Contributed equity and reserves
3.8 Distributions to Securityholders
3.9 Earnings per stapled security (EPS)
3.10 Share-based payment arrangements
Section 4: Other notes
55
56
57
58
59
59
60
62
62
64
70
70
71
71
72
72
73
74
74
76
76
80
81
81
82
83
4.1 Income tax
83
4.2 Key Management Personnel (KMP) compensation 86
87
4.3 Related party transactions
87
4.4 Contingent liabilities
87
4.5 Commitments
88
4.6 Controlled entities
89
4.7 Parent entity disclosures
89
4.8 Remuneration of auditors
89
4.9 Subsequent events
Declarations / Reports
Directors’ declaration
Auditor’s independence declaration
Independent Auditor’s report
90
92
93
About the Financial Report
This report covers Growthpoint Properties
Australia Limited and its controlled entities,
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 dollars.
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 at 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 20 August 2020.
References to ‘the year’ or ‘FY20’ in this
report refer to the year ended 30 June
2020 unless the context requires otherwise.
References to ‘balance date’ in this report
refer to 30 June 2020 unless the context
requires otherwise.
Consolidated Statement of
Comprehensive Income.
For the year ended 30 June 2020
Revenue and other income
Property revenue
Distributions from investment in securities
Interest income
Total revenue and other income
Expenses
Property expenses
Borrowing costs
Other expenses
Depreciation of right of use assets
Total expenses
Other gains/losses
Net gain in fair value of investment properties
Net loss in fair value on sale of investment properties
Net (loss)/gain in fair value of investment in securities
Net gain in fair value of derivatives
Net loss in fair value on settlement of derivatives
Net loss on exchange rate translation of interest-bearing liabilities
Net gains from other items
Profit before tax
Income tax expense
Profit after tax
Other comprehensive income
Total comprehensive income
Total comprehensive income attributable to:
Owners of the Trust
Owners of the Company
Total comprehensive Income
Earnings per security attributable to Securityholders of the Group:
Basic earnings per security (cents)
Diluted earnings per security (cents)
Growthpoint Properties Australia – FY20 Annual Report
55
Notes
2.1
2.1
3.2
1.2
2.2
2.3
4.1
3.9
3.9
2020
$m
287.3
5.1
0.3
292.7
(47.0)
(51.9)
(14.4)
(4.1)
(117.4)
116.9
–
(15.7)
31.5
–
(28.5)
104.2
279.5
(7.4)
272.1
–
272.1
265.3
6.8
272.1
35.3
35.3
2019
$m
277.1
5.0
0.5
282.6
(45.6)
(56.1)
(13.9)
–
(115.6)
201.6
(1.1)
7.1
17.0
(13.8)
–
210.8
377.8
(2.5)
375.3
–
375.3
370.5
4.8
375.3
52.9
52.9
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
56
Financial Report
Consolidated Statement of
Financial Position.
As at 30 June 2020
Current assets
Cash and cash equivalents
Receivables and other assets
Total current assets
Non-current assets
Investment properties
Investment in securities
Receivables and other assets
Derivative financial instruments
Right-of-use assets
Plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Distribution to Securityholders
Trade and other liabilities
Current tax payable
Lease liabilities
Deferred tax liabilities
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Lease liabilities
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
Notes
2.4
2.2
2.3
2.4
3.4
1.2
4.1
3.8
2.5
4.1
1.2
4.1
3.1
1.2
3.4
3.7
2020
$m
42.7
5.5
48.2
2019
$m
30.2
5.4
35.6
4,325.7
3,983.8
69.9
1.9
51.9
1.5
0.7
0.9
85.6
–
11.2
–
0.7
1.0
4,452.5
4,500.7
4,082.3
4,117.9
77.2
31.3
1.4
0.7
3.6
114.2
1,446.0
107.6
10.3
1,563.9
1,678.1
2,822.6
2,049.9
10.3
762.4
2,822.6
84.4
50.2
2.3
–
–
136.9
1,433.3
–
1.2
1,434.5
1,571.4
2,546.5
1,879.4
8.5
658.6
2,546.5
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Growthpoint Properties Australia – FY20 Annual Report
57
Consolidated Statement
of Changes in Equity.
For the year ended 30 June 2020
Attributable to unitholders of
the Trust (Parent entity)
Attributable to shareholders of the
Company (other stapled entity)
Contri-
buted
equity
Notes
Retained
profits
Total
Contri-
buted
equity Reserves
Retained
profits
Equity as at 30 June 2019
1,814.5
656.8
2,471.3
$m
$m
$m
Profit after tax
Other comprehensive income
Total comprehensive income
Transactions with Securityholders in
their capacity as Securityholders:
Contributions of equity, net of
transaction costs
Distributions provided or paid
Share-based payment transactions
3.7
3.8
3.10
–
–
–
265.2
265.2
–
–
265.2
265.2
164.9
–
164.9
–
–
(160.6)
(160.6)
164.9
(160.6)
–
–
4.3
Equity as at 30 June 2020
1,979.4
761.4 2,740.8
$m
64.9
–
–
–
5.6
–
–
5.6
70.5
$m
8.5
–
–
–
–
–
1.8
1.8
10.3
Equity as at 30 June 2018
1,639.1
453.6
2,092.7
59.7
7.6
Profit after tax
Other comprehensive income
Total comprehensive income
Transactions with Securityholders in
their capacity as Securityholders:
Contributions of equity, net of
transaction costs
Distributions provided or paid
Share-based payment transactions
3.7
3.8
3.10
–
–
–
370.5
370.5
–
–
370.5
370.5
175.5
–
175.5
–
–
(167.4)
(167.4)
–
–
8.1
175.5
(167.4)
Equity as at 30 June 2019
1,814.6
656.7
2,471.3
–
–
–
5.2
–
–
5.2
64.9
–
–
–
–
–
0.9
0.9
8.5
Total
$m
Total
equity
$m
75.2
2,546.5
6.9
–
6.9
272.1
–
272.1
5.6
(7.7)
1.8
(0.3)
170.5
(168.3)
1.8
4.0
81.8 2,822.6
64.3
2,157.0
4.8
375.3
–
–
4.8
375.3
$m
1.8
6.9
–
6.9
–
(7.7)
–
(7.7)
1.0
(3.0)
4.8
–
4.8
–
–
–
–
5.2
–
0.9
6.1
180.7
(167.4)
0.9
14.2
1.8
75.2 2,546.5
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 58
Financial Report
Consolidated
Cash Flows Statement.
For the year ended 30 June 2020
Cash flows from operating activities
Cash receipts from customers
Cash payments to suppliers
Distributions from investment in securities
Borrowing costs
Interest received
Income tax paid
Notes
Net cash flows from operating activities
2.6
Cash flows from investing activities
Receipts from sale of investment properties
Payments for investment properties
Payments for plant & equipment
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from external borrowings
Repayments of external borrowings
Proceeds from equity raising
Equity raising costs
Repayments of lease liabilities
Payments for settlement of derivatives
Distributions to Securityholders
Net cash flows from financing activities
Net cash flows
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.
2020
$m
295.1
(59.7)
5.1
(55.2)
0.3
(4.4)
181.2
–
(148.5)
(0.2)
(148.7)
494.1
(508.4)
173.6
(3.1)
(0.7)
–
(175.5)
(20.0)
12.5
30.2
42.7
2019
$m
250.1
(61.0)
5.0
(54.0)
0.5
(0.2)
140.4
43.7
(428.9)
–
(385.2)
618.7
(383.4)
181.7
(1.1)
–
(13.8)
(158.6)
243.5
(1.3)
31.5
30.2
Growthpoint Properties Australia – FY20 Annual Report
59
Notes to the
Financial Statements.
Section 1: Basis of preparation and new accounting pronouncements
1.1 Basis of preparation
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’) which are collectively referred to as Growthpoint Properties Australia (‘the Group’).
The Group’s stapled structure was established for the purpose of facilitating a joint quotation of the Company and the Trust and their
controlled entities on the Australian Securities Exchange (ASX: 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 always act in the best interests of the Group. The Group is a for profit entity.
In accordance with AASB 3 Business Combinations, the Trust is the parent entity and deemed acquirer of the Company in the stapling
arrangement. This financial report includes consolidated financial statements for the Trust, comprising the Trust and its controlled entities
and the Company and its controlled entities, for the year ended 30 June 2020. The Group is domiciled in Australia and its registered
address is Level 31, 35 Collins Street, Melbourne, Victoria, 3000, Australia.
The ultimate parent of the Group is Growthpoint Properties Limited, a South African Real Estate Investment Trust listed on the
Johannesburg Stock Exchange.
Going Concern
The financial statements have been prepared on a going concern basis. The Directors have considered the impacts of the COVID-19
pandemic on the tenants in the Group’s investment properties, debt and capital markets, investment property valuations and the broader
economic environment and concluded none of these represent material uncertainty that may cast doubt upon the Group’s ability to
continue as a going concern.
Net current asset deficiency
Net current asset deficiency is calculated as the difference between the Group’s current assets and current liabilities. The Group reported
a net current asset deficiency of $66.0 million as at 30 June 2020 (30 June 2019: $101.2 million) which is a natural consequence of
its policy of using cash that is surplus to the Group’s short term needs to repay debt facilities. The Group has unutilised debt facilities
of $360.0 million which can be drawn at short notice. The Group has sufficient working capital and cashflows in order to fund all
requirements arising from the net current asset deficiency.
Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian
Accounting Standards 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 20 August 2020.
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 are measured at fair value;
t investment property is measured at fair value; and
t share-based payment arrangements are measured at fair value.
Changes to presentation of the financial statements
The Group made several changes to the presentation of its financial statements to more closely align with those of other ASX-listed REITs
and therefore enhance the understanding and comparability of its statements by users.
Consolidated Statement of Comprehensive Income
The subtotals of ‘net investment income’, ‘net finance costs’, and ‘total expenses’ have been replaced with ‘total revenue and other
income’ and ‘total expenses’ and ‘other gains/losses’. Comparatives have been re-presented accordingly, noting the changes did not
impact the Group’s profit nor comprehensive income.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 60
Financial Report – Notes to the Financial Statements
1.1 Basis of preparation (continued)
Changes to presentation of the financial statements (continued)
Consolidated Statement of Changes in Equity
The statement of changes in equity has been re-presented to equity attributable to unitholders of the Trust (as deemed parent of the
stapling arrangement) from equity attributable to shareholders of Growthpoint Properties Australia Limited as the other entity of the stapled
structure. Comparatives have been re-presented accordingly, noting the changes did not impact the Group’s consolidated changes in
equity.
Consolidated Cash Flows Statement
A subtotal titled ‘Cash generated from operating activities’ has been removed, noting the subtotal ‘Net cash inflow from operating activities’
remains. Interest income and distributions received from investment in securities have been reclassified from cash flows from investing
activities to cash flows from operating activities. Comparatives have been re-presented accordingly, noting the changes did not impact the
Group’s net cash flows during the year nor cash and cash equivalents at the end of the year.
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 hundred thousand dollars unless otherwise stated.
Use of estimates, assumptions and judgements
The preparation of financial statements in conformity with IFRS requires the Directors 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.
The COVID-19 pandemic has caused increased uncertainty in the property markets in which the Group operates as well as the economy
more broadly. This has increased the criticality of estimates, assumptions and judgements in the assessment of investment property
valuations and made it more difficult to assess key inputs for those valuations, compared to prior reporting periods.
Information about estimates, assumptions and judgements that have the most significant risk of causing a material misstatement of
amounts recognised in the consolidated financial statements is included in the following notes:
t Note 2.2 – Investment properties;
t Note 3.4 – Derivative financial instruments; and
t Note 3.10 – Share-based payment arrangements.
Determination of fair values
Several 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.
1.2 New accounting standard adopted by the Group as at 1 July 2019 – AASB 16 Leases
a) Transition
AASB 16 was adopted under the permitted transitionary election of the retrospective approach without restating comparatives.
Lease liabilities were recognised initially at the present value of the remaining lease payments, discounted using the Group’s prevailing
incremental borrowing rate of 3.73%. Corresponding right-of-use assets were recognised initially at an amount equal to the lease liability,
adjusted for any related prepaid and accrued lease payments recognised in the Consolidated Statement of Financial Position immediately
prior to the date of initial application.
The lease liabilities and corresponding right-of-use assets recognised are for the Group’s head office lease at 35 Collins Street, Melbourne
and several investment properties held under long term leasehold arrangements, of which the latter are classified and presented as
Investment Property. Fair values of investment property reflect a reduction for future lease payments, hence the carrying amounts are
grossed up by these amounts, offset by corresponding lease liabilities.
In applying the modified retrospective approach, the Group has applied the following practical expedients:
t A single discount rate has been applied to portfolios of leases with reasonably similar characteristics;
t Right-of-use assets have been recognised at an amount equal to the lease liability, adjusted for any prepayments or accrued lease
payments recognised immediately before the date of initial application;
t Leases with a remaining term of twelve months or less from the date of application have been accounted for as short-term leases
(i.e. not recognised on the Consolidated Statement of Financial Position) even though the initial term of the leases from lease
commencement date may have been more than twelve months; and
Growthpoint Properties Australia – FY20 Annual Report
61
1.2 New accounting standard adopted by the Group as at 1 July 2019 – AASB 16 Leases (continued)
t Initial direct costs have not been included in the measurement of the right-of-use asset as at the date of initial application.
b) Updated accounting policies
The following policy was adopted along with AASB 16 on 1 July 2019.
All leases are accounted for by recognising a lease liability and corresponding right-of-use asset with the exception of low value asset
leases and short-term leases that run for less than twelve months, which are expensed on a straight-line basis in the Consolidated
Statement of Comprehensive Income.
Lease liabilities are initially measured at the present value of future lease payments, discounted using the interest rate implicit in the lease
or if that cannot be determined, the Group’s incremental borrowing rate. Lease liabilities are subsequently measured by increasing the
carrying amount to reflect interest expense on the lease liabilities, reducing the carrying amount to reflect the lease payments made and
remeasuring the carrying amount to reflect any reassessment or lease modifications.
Interest expense on the lease liabilities and any variable lease payments not included in the measurement of the lease liabilities are
recognised in the Consolidated Statement of Comprehensive Income in the period to which they relate.
Right-of-use assets are initially measured at cost less depreciation and impairment and subsequently adjusted for any remeasurement of
the lease liability. Cost includes the amount of the initial lease liability, adjusted for any related lease prepayments or incentives received,
any initial indirect costs incurred and makegood costs.
Right-of-use assets that do not meet the definition of investment property are depreciated on a straight-line basis from commencement
date to the earlier of the end of lease term or its useful life. The lease term includes the periods of any options to extend only when
considered reasonably certain to be exercised. Right-of-use assets that meet the definition of Investment Property are measured at fair
value and reported with the Group’s other Investment Properties (Refer Note 2.2).
c) Impact on the year ended 30 June 2020:
Right of use assets
Amount recognised upon initial application 1 July 2019
Depreciation
Adjustment for re-assessment of the lease liability
Carrying amount as at 30 June 2020
Lease liabilities
Amount recognised upon initial application 1 July 2019
Interest expense
Lease payments
Adjustment for re-assessment of the lease liability
Carrying amount as at 30 June 2020
Comprising:
Current liabilities
Non-current liabilities
Carrying amount as at 30 June 2020
1.3 Other pronouncements
Head office
Investment
property
$m
1.8
(0.3)
–
1.5
2.2
0.1
(0.4)
–
1.9
$m
103.8
(3.8)
3.0
103.0
103.8
3.9
(4.3)
3.0
106.4
Total
$m
105.6
(4.1)
3.0
104.5
106.0
4.0
(4.7)
3.0
108.3
0.7
107.6
108.3
Other accounting pronouncements which have become effective from 1 July 2019 and have therefore been adopted, including IFRIC
Interpretation 23 Uncertainty over Income Tax Treatment, have not had a material impact on the Group’s financial results or position.
There are no new pronouncements effective in the near future that are anticipated to have a material impact on the Group’s results or
position.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
62
Financial Report – Notes to the Financial Statements
Section 2: Operating results, assets and liabilities
2.1 Revenue and operating segment information
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable. All revenue is stated net of the amount of goods
and services tax (GST). Rent from investment properties is recognised and measured in accordance with AASB 16 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. The Group also earns revenue from tenants as stipulated in the
lease agreements for services including cleaning, security, electricity and other outgoings. This revenue is recognised and measured in
accordance with AASB 15 Revenue from Contracts with Customers.
Group earnings and operating segment results
The primary measure of recurring earnings for the Group is funds from operations (FFO), which is used to make strategic decisions and as
a guide to assessing appropriate distributions to investors. FFO represents profit after tax adjusted for various non-cash accounting items
which are listed in the reconciliation further below.
The Group has two operating segments, namely Industrial property investments and Office property investments. The primary measure of
performance of each operating segment is net property income.
The Group’s FFO and operating segment results are reported monthly to the Group’s Managing Director, who is the chief operating
decision maker.
Changes to presentation of operating segment results
The categories of items within operating segment results were amended during the year. The previously used category of ‘segment
results’ has been replaced with ‘funds from operations (FFO)’. A reconciliation of FFO to Profit after tax and a reconciliation of Property
revenue from segments to Property revenue as reported on the Consolidated Statement of Comprehensive Income is included. Revenues
and expenses have been split to show those derived directly from leasing rent separate to those derived from additional services to
tenants. Comparatives have been re-presented accordingly, noting the net property income of each operating segment did not change.
2020
Segment items
Property rental income
Revenue from services to tenants
Property revenue, excluding straight line lease adjustment
Property expenses1
Expense from services to tenants2
Net property income
Unallocated items
Amortisation of incentives and leasing costs
Other expenses3
Distributions from investment in securities
Borrowing costs net of interest income
Income tax expense
FFO
Distributions
Weighted average securities on issue (m)
FFO per security (cents)
Distribution per security (cents)
Industrial
$m
91.2
12.6
103.8
(5.2)
(13.5)
85.1
Office
$m
160.9
23.6
184.5
(1.9)
(30.7)
151.9
Total
$m
252.1
36.2
288.3
(7.1)
(44.2)
237.0
20.8
(14.6)
5.1
(47.5)
(3.6)
197.2
770.9
25.6
21.8
1. Property expenses in FFO include $4.3 million of ground lease payments which are replaced with depreciation of right of use assets and interest expense associated with
leases on the Consolidated Statement of Comprehensive Income.
2. Outgoings expenses from services to tenants includes $8.0 million that was not recoverable under the terms of certain leases.
3. Operating and trust expenses in FFO of $14.6 million excludes $0.2 million depreciation of plant and equipment and includes $0.4 million rent payments for the Group’s head
office at 35 Collins Street, Melbourne which are replaced with depreciation of right of use assets and interest expense associated with leases on the Consolidated Statement
of Comprehensive Income.
2.1 Revenue and operating segment information (continued)
Changes to presentation of operating segment results (continued)
2019
Segment items
Property rental income
Revenue from services to tenants
Property revenue, excluding straight line lease adjustment
Property expenses
Expense from services to tenants1
Net property income
Unallocated items
Amortisation of incentives and leasing costs
Other expenses2
Distributions from investment in securities
Borrowing costs net of interest income
Income tax expense
FFO
Distributions
Weighted average securities on issue (m)
FFO per security (cents)
Distribution per security (cents)
Growthpoint Properties Australia – FY20 Annual Report
63
Industrial
Office
$m
$m
85.5
11.6
97.1
(4.8)
(11.7)
80.6
152.3
21.6
173.9
(1.0)
(28.1)
144.8
Total
$m
237.8
33.2
271.0
(5.8)
(39.8)
225.4
19.3
(13.6)
5.0
(55.6)
(2.5)
178.0
709.0
25.1
1. Outgoings expenses from services to tenants includes $6.6 million that was not recoverable under the terms of certain leases.
2. Operating and trust expenses in FFO of $13.6 million excludes $0.3 million depreciation of plant and equipment.
Reconciliation of FFO to profit after tax
FFO
Adjustments for non-FFO items
- Straight line adjustment to property revenue
- Lease liability repayments
- Depreciation of right of use assets
- Interest expense on lease liabilities
- Net loss in fair value on sale of investment properties
- Net gain in fair value of investment properties
- Net gain/(loss) in fair value of investment in securities
- Net gain in fair value of derivatives
- Net loss on exchange rate translation of interest-bearing liabilities
- Interest expense on non-current receivables
- Depreciation of plant and equipment
- Amortisation of incentives and leasing costs
- Deferred tax expense
Profit after tax
23.0
2020
$m
2019
$m
197.2
178.0
(1.0)
4.7
(4.1)
(4.0)
–
116.9
(15.7)
31.5
(28.5)
(0.1)
(0.2)
(20.8)
(3.8)
272.1
6.2
–
–
–
(1.1)
201.6
7.1
3.1
–
–
(0.3)
(19.3)
0.0
375.3
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
64
Financial Report – Notes to the Financial Statements
2.1 Revenue and operating segment information (continued)
Reconciliation of total property revenue per segment note to revenue per Consolidated Statement of
Comprehensive Income
Property revenue from segments
- Straight line adjustment to property revenue
Property revenue as reported on the Consolidated Statement of Comprehensive Income
2020
$m
288.3
(1.0)
287.3
2019
$m
270.9
6.2
277.1
Major customer
Revenues from Woolworths Group Limited, in the Group’s Industrial segment represents $46.0 million (2019: $40.1 million) of the Group’s
total revenues.
2.2 Investment properties
Investment properties
The Group’s investment properties represent freehold and leasehold interest in land and buildings held for rental income and capital
appreciation. 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 Consolidated
Statement of Comprehensive Income in the period incurred.
Subsequent to initial recognition, investment properties are measured at fair value. Directors revalue the property investments based on
valuations determined internally or by external 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 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 and any 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
The fair value of the investment properties is determined either solely by Directors’ valuations or together with verification from an external,
independent valuer, with recognised professional qualifications and recent experience in the location and category of property being
valued generally.
Fair value is 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 willing seller in an arm’s length transaction after proper marketing where the parties had each acted
knowledgeably, prudently and without compulsion.
The fair value of investment properties is classified as Level 3 in the fair value hierarchy based on the significant unobservable inputs into
the valuation techniques used. Further detail on the Group’s valuation process and valuation methods is described below.
Industrial properties
Victoria
Carrying amounts
Date Valuation 30-Jun-20
30-Jun-19
$m
$m
$m
120 Northcorp Boulevard
Broadmeadows
1500 Ferntree Gully Road & 8 Henderson Road
Knoxfield
3 Maker Place1
9-11 Drake Boulevard
Lots 2, 3 & 4, 34-44 Raglan Street
40 Annandale Road2
120-132 Atlantic Drive
130 Sharps Road2
120 Link Road2
1. Acquired in September 2019. 2. Held under leasehold.
Truganina
Altona
Preston
Melbourne Airport
Keysborough
Melbourne Airport
Melbourne Airport
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
30-June-20
30-June-20
30-June-20
31-Dec-19
31-Dec-19
30-June-20
31-Dec-19
31-Dec-19
31-Dec-19
50.0
46.0
38.7
36.2
35.0
33.3
28.0
24.8
17.5
50.0
46.0
38.7
35.7
35.0
33.3
28.4
23.8
17.5
56.5
46.0
N/A
35.3
30.0
33.0
28.0
24.8
18.0
Growthpoint Properties Australia – FY20 Annual Report
65
2.2 Investment properties (continued)
Determination of fair value (continued)
Industrial properties
Victoria (continued)
20 Southern Court
31 Garden Street
3 Millennium Court
6 Kingston Park Court
60 Annandale Road1
101-111 South Centre Road1
19 Southern Court
75 Annandale Road1
Queensland
70 Distribution Street
13 Business Street
5 Viola Place1
3 Viola Place1
Western Australia
20 Colquhoun Road
2 Hugh Edwards Drive
58 Tarlton Crescent
10 Hugh Edwards Drive
36 Tarlton Crescent
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 Boulevard1
10 Butler Boulevard1
Total industrial properties
1. Held under leasehold.
Office properties
Victoria
75 Dorcas Street
Building 2, 572-576 Swan Street
109 Burwood Road
Building 3, 570 Swan Street
Building B, 211 Wellington Road
Building 1, 572-576 Swan Street
Building C, 211 Wellington Road
Car Park, 572-576 Swan Street
Date Valuation 30-Jun-20
30-Jun-19
Carrying amounts
$m
16.7
12.9
12.8
12.4
12.3
9.5
9.4
8.0
239.0
12.5
9.6
3.2
$m
16.7
12.8
12.6
12.4
12.3
9.5
9.4
8.0
$m
15.8
12.6
12.3
12.7
12.3
9.1
8.2
7.9
239.0
232.5
11.6
8.7
2.8
13.1
9.5
2.5
30-June-20
31-Dec-19
31-Dec-19
30-June-20
30-June-20
31-Dec-19
30-June-20
30-June-20
30-June-20
31-Dec-19
31-Dec-19
31-Dec-19
31-Dec-19
177.5
177.5
175.0
30-June-20
30-June-20
30-June-20
30-June-20
30-June-20
31-Dec-19
31-Dec-19
30-June-20
31-Dec-19
16.8
13.5
10.3
8.8
77.5
56.7
38.0
28.5
23.0
16.8
13.5
10.3
8.8
77.5
56.0
37.5
28.5
22.6
17.2
13.7
9.2
8.5
74.8
51.8
38.0
27.0
20.4
30-June-20
186.0
186.0
126.0
30-June-20
31-Dec-19
31-Dec-19
22.0
15.3
10.0
22.0
13.8
8.8
21.9
15.9
9.4
1,351.3
1,343.4
1,228.6
Carrying amounts
Date Valuation 30-Jun-20
30-Jun-19
$m
$m
$m
30-June-20
30-June-20
30-June-20
30-June-20
31-Dec-19
31-Dec-19
31-Dec-19
30-June-20
214.0
112.5
113.0
142.5
73.0
68.4
62.4
1.2
214.0
112.5
113.0
142.5
72.0
66.0
60.0
1.2
212.5
115.0
113.5
111.0
73.5
62.5
60.0
1.2
Keysborough
Kilsyth
Knoxfield
Knoxfield
Melbourne Airport
Melbourne Airport
Keysborough
Melbourne Airport
Larapinta
Yatala
Brisbane Airport
Brisbane Airport
Perth Airport
Perth Airport
Perth Airport
Perth Airport
Perth Airport
Erskine Park
Erskine Park
Erskine Park
Kembla Grange
Silverwater
Gepps Cross
Beverley
Adelaide Airport
Adelaide Airport
South Melbourne
Richmond
Hawthorn
Richmond
Mulgrave
Richmond
Mulgrave
Richmond
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
QLD
QLD
QLD
QLD
WA
WA
WA
WA
WA
NSW
NSW
NSW
NSW
NSW
SA
SA
SA
SA
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
66
Financial Report – Notes to the Financial Statements
2.2 Investment properties (continued)
Determination of fair value (continued)
Office properties
Queensland
100 Skyring Terrace
15 Green Square Close
333 Ann Street
CB1, 22 Cordelia Street
A1, 32 Cordelia Street
A4, 52 Merivale Street
CB2, 42 Merivale Street
Newstead
Fortitude Valley
Brisbane
South Brisbane
South Brisbane
South Brisbane
South Brisbane
Car Park, 32 Cordelia Street & 52 Merivale Street South Brisbane
Carrying amounts
Date Valuation 30-Jun-20
30-Jun-19
$m
$m
$m
QLD
QLD
QLD
QLD
QLD
QLD
QLD
QLD
31-Dec-19
30-June-20
30-June-20
30-June-20
31-Dec-19
30-June-20
31-Dec-19
31-Dec-19
260.0
151.0
133.5
103.0
94.5
87.0
62.5
30.8
254.0
151.0
133.5
103.0
91.5
87.0
60.6
30.5
251.0
153.0
137.0
103.2
93.8
86.5
61.5
29.3
South Australia
33-39 Richmond Road
New South Wales
1 Charles Street
Building C, 219-247 Pacific Highway
5 Murray Rose Avenue
3 Murray Rose Avenue
102 Bennelong Parkway
6 Parkview Drive
Australian Capital Territory
10-12 Mort Street
255 London Circuit
Western Australia
836 Wellington Road
Total office properties
Total portfolio at fair value
Ground leases as right-of-use assets1
Total investment properties carrying amount
1. Refer note 1.2.
Valuation process
Keswick
SA
30-June-20
65.0
65.0
63.5
Parramatta
Artarmon
NSW
NSW
30-June-20
31-Dec-19
Sydney Olympic Park NSW
31-Dec-19
Sydney Olympic Park NSW
30-June-20
Sydney Olympic Park NSW
30-June-20
Sydney Olympic Park NSW
30-June-20
Canberra
Canberra
ACT
ACT
30-June-20
31-Dec-19
440.0
137.0
105.0
99.0
34.0
34.5
100.0
78.3
West Perth
WA
30-June-20
94.8
2,896.8
440.0
138.0
103.5
99.0
34.0
34.5
100.0
78.3
353.0
132.0
104.0
103.0
34.0
33.5
99.3
76.0
94.8
2,879.3
4,222.7
103.0
92.5
2755.2
3,983.8
–
4,325.7
3,983.8
Each investment property is valued either independently (externally) or internally in December and June each year as part of the biannual
valuation process. Investment properties are valued according to the Group’s valuation policy which requires:
t Independent valuations of investment properties at least once per year;
t External valuers are appropriately qualified. Qualified valuers must be authorised by law to carry out such valuations and have at least
five years’ valuation experience;
t External valuers may perform valuations on a property on no more than two consecutive occasions;
t Internal valuations are undertaken at the end of a reporting period (half year and year end) if a property is not due for an independent
valuation; and
t Where an internal valuation indicates a variance that exceeds prescribed percentage thresholds, an external valuation is undertaken
(even if this results in a property being independently valued twice in one year).
The valuation process is governed by the Board with input from the Executive Management Team. The process is reviewed periodically to
consider changes in market conditions and any other requirements that would need to be adopted.
At 30 June 2020, 31 investment properties representing approximately 65% of the portfolio were independently valued by external
valuers at seven valuation firms being Savills, Urbis, Knight Frank, m3property, JLL, CBRE and Colliers. Fair values for the remaining 27
investment properties were based solely on Directors’ valuations.
Growthpoint Properties Australia – FY20 Annual Report
67
2.2 Investment properties (continued)
Valuation process (continued)
Valuation methodology
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 properties, as adjusted to reflect differences for location, building quality, tenancy profile and other
factors;
t Discounted cash flow (DCF) projections based on estimates of future cash flows; and
t Capitalised income projections based upon a property’s estimated net market income, and a capitalisation rate derived from analysis of
market evidence.
Under the DCF approach, a property’s fair value is estimated by projecting a series of cash flows over a specified time horizon (typically
10 years) and discounting this cash flow, including the projected exit or terminal value, at a market-derived discount rate. Projected cash
flows are derived from contracted or expected market rents, operating costs, lease incentives, capital expenditure and future income on
vacant space. The net present value of the discounted cash flow represents the fair value of the property.
The income capitalisation approach involves estimating the potential sustainable gross market income of a property from which annual
outgoings are deducted to derive the net market income. Net market income is then capitalised in perpetuity at an appropriate market-
derived capitalisation rate (market yield). Appropriate capital adjustments are then made where necessary to reflect the specific cash flow
profile and general characteristics of the property.
At reporting date, the key assumptions used by the Group in determining fair value were as follows:
Industrial
Discount rate
Terminal yield
Capitalisation rate
Expected vacancy period
Rental growth rate
Office
Discount rate
Terminal yield
Capitalisation rate
Expected vacancy period
Rental growth rate
Discount Rates
30-Jun-20
30-Jun-19
6.0%-8.0%
5.0%-10.3%
4.8%-8.3%
6-12 months
1.7%-3.2%
6.5%-8.3%
5.5%-9.8%
5.3%-8.4%
3-18 months
2.5%-3.5%
30-Jun-20
30-Jun-19
6.0%-7.5%
4.9%-7.3%
4.4%-7.0%
6-15 months
2.3%-3.7%
6.5%-8.0%
5.5%-7.5%
5.0%-7.5%
6-12 months
3.0%-4.5%
As shown in the table below, over the 12 months to 30 June 2020 discount rates utilised in the valuation of the Group’s property portfolio
have tightened (i.e. lowered) by approximately 22 basis points. Over the same period, the implied property risk premium has increased by
approximately 23 basis points. The implied property risk premium is the difference between the weighted average discount rate and the
10-year Australian Government bond rate.
10-year Australian Government bond rate
Implied property risk premium
Weighted average 10-year discount rate used to value the Group’s properties
30-Jun-20
30-Jun-19
0.87%
5.70%
6.57%
1.32%
5.47%
6.79%
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 68
Financial Report – Notes to the Financial Statements
2.2 Investment properties (continued)
Capitalisation Rates
Office
Since the emergence of the COVID-19 virus in early 2020, transaction sale activity within the Australian office markets has declined, after
reaching historic highs in 2019. Many investors have elected to pause major investment decisions until such time when greater clarity
around the way out of the pandemic, and the impact on markets, is available. Notwithstanding, strong underlying investor demand from
both local and offshore capital continues to prevail for high-quality office assets. Although evidence since the outbreak of COVID-19
remains relatively scarce, a handful of prime grade assets have transacted indicating pricing has remained firm and capitalisation rates
have generally remained stable over the second half of the financial year for the asset class. The weighted average capitalisation rate used
in valuing the Group’s office portfolio is largely unchanged from 31 December 2019, after firming 22 basis points over the first half of the
year.
Industrial
The industrial and logistics sector has, to date, been the most resilient of the core commercial property market sectors since the outbreak
of the COVID-19 virus in early 2020. Institutional grade industrial property is proving to be a defensive asset despite uncertain market
conditions, with prime grade assets, particularly assets with long remaining lease terms and high-quality tenant covenants, remaining
highly sought after. While transaction volumes within the Australian industrial markets have declined, several notable industrial transactions
have concluded in recent months, highlighting demand for prime grade industrial assets. These sales have reflected similar, or in some
instances, firmer, yields to those that were likely achievable for the same assets before the COVID-19 outbreak. The weighted average
capitalisation rate of the Group’s industrial portfolio firmed 14 basis points between 31 December 2019 and 30 June 2020, after firming 16
basis points over the first half of the year.
Market (valuation) uncertainty
The fair value of investment property represents the price for which a property could be exchanged on the date of valuation, between
knowledgeable, willing parties in an arm’s length transaction. 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 the Group’s investment properties has been assessed having regard to market conditions at the reporting date. At the
reporting date, the COVID-19 pandemic was impacting market activity in most sectors, including the office and industrial sectors, leading
to a notable reduction in available comparable sales and leasing evidence. Consequently, the Group’s valuers have considered both pre-
COVID-19 and post-COVID-19 evidence, with less weight being placed on the former.
Assumptions made within the Group’s valuations in respect of investment parameters, market growth outlook, and re-letting assumptions
have sought to consider the impact of the COVID-19 pandemic on economic conditions, albeit in an environment where market
uncertainty exists. Subsequently, valuations prepared by the Group’s valuers have been reported based on material valuation uncertainty.
Less certainty and a higher degree of caution should be attached to the valuations than would normally be the case. Given the unknown
future impact the COVID-19 pandemic may have on the real estate market, the Group’s valuers have recommended that valuations are
kept under periodic review.
The key inputs used to measure fair value of investment properties held at fair value are disclosed below, along with the weighted average
value for each input:
Key valuation
input
Market
capitalisation
rate
Net market
rent (per sqm)
Discount rate
Description
The rate at which the net market rental income is capitalised
to determine the value of the property. The rate is determined
with regard to market evidence and the prior external
valuation. Used within the capitalisation method.
The estimated amount for which a property, or space within
a property, should lease between a lessor and a lessee on
appropriate lease terms in an arm’s length transaction. Used
within both the capitalisation method and DCF method.
The rate of return used to discount cash flows, payable
or receivable in the future, into present value. The rate is
determined with regard to market evidence and the prior
external valuation. Used within the DCF method.
Terminal
capitalisation
rate
The terminal capitalisation rate used to convert (capitalise)
the future net market rental income at the end of the holding
period into an indication of terminal value of the property.
Used in the DCF method.
Valuation input value
Impact on fair values
Jun-20 Dec-19 Jun-19
Increase
in the input
Decrease
in the input
5.7%
5.7% 5.9%
Decrease
Increase
$231
$230
$230
Increase
Decrease
6.6% 6.7% 6.8%
Decrease
Increase
6.1%
6.1%
6.4%
Decrease
Increase
Growthpoint Properties Australia – FY20 Annual Report
69
2.2 Investment properties (continued)
Market (valuation) uncertainty (continued)
The valuations of the Group’s investment properties are sensitive to increases or decreases in key inputs, including market rents, growth
rates and yields. An increase in discount rates, terminal yields and or capitalisation rates would decrease the fair value of investment
property, whereas a decrease in these inputs would increase the fair value of investment property. Similarly, lower market rents and market
rental growth rates would decrease the fair value of investment property, while higher rents and growth rates would increase fair values.
As an example, the impact of a 0.25% increase in the market capitalisation rate from 5.70% to 5.95% would result in a decrease of $178
million / 4.2% in the fair value of the Group’s investment property portfolio. With all other factors unchanged, this would decrease the
Group’s net tangible assets (NTA) by 23 cents per security and increase gearing by 1.4% to 33.6%.
Contractual obligations
At 30 June 2020, the Group had an obligation 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. As at 30 June 2020 $0.5 million of refurbishment works had
been carried out, leaving a balance of $5.5 million which is held as restricted cash (refer note 2.6). As part of the new 25-year lease
arrangements with the tenant, the Group also entered a refurbishment deed where it expects to fund $44.0 million of office fit out and
building upgrade works over the next few years. If the tenant does not spend all the $44.0 million on refurbishment works, the balance will
be provided as a rent abatement spread over the remaining lease term.
Leasing arrangements
Most of the investment properties are leased to tenants under non-cancellable, long-term 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
2020
$m
244.6
745.4
1,009.8
1,999.8
2019
$m
249.9
723.3
284.0
1,257.2
The Group holds ten investment properties on a leasehold basis which are subject to annual ground rent payments. The minimum lease
payments for these leases are presented in the table in note 3.3 Lease Liabilities.
Movement in investment properties’ carrying amounts
Opening balance
Acquisitions
Capital expenditure
Construction and expansion costs
Lease incentives and leasing costs
Amortisation of lease incentives and leasing costs
Provision for amortised lease incentives
Disposals
Reclassification from held for sale
Straight-lining of revenue adjustment
Recognition of ground leases as leasehold asset
Net gain from fair value adjustments
Closing balance
2020
$m
3,983.8
42.3
18.2
72.1
11.2
(20.8)
–
–
–
(1.0)
103.0
116.9
4,325.7
2019
$m
3,291.8
361.9
12.9
72.9
38.4
(19.3)
(1.7)
(45.2)
64.3
6.2
–
201.6
3,983.8
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
70
Financial Report – Notes to the Financial Statements
2.3 Investment in securities
Determination of fair value
The Group holds an investment in stapled securities of APN Industria REIT. This financial asset was designated at fair value through profit
or loss at inception. Fair value is the last traded market price on the Australian Securities Exchange (ASX) as at reporting date, which at
30 June 2020 was $2.36 (30 June 2019: $2.89). The fair value of Investment in securities has been categorised as Level 1 in the fair value
hierarchy; being quoted prices (unadjusted) in active markets for identical assets.
The following table represents the fair value movement in investment in securities for the year ended 30 June 2020.
Opening balance
Gain/(loss) in fair value
Closing balance
2.4 Receivables and other assets
2020
$m
85.6
(15.7)
69.9
2019
$m
78.5
7.1
85.6
Property revenue receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
rate method, less any allowance under the Expected Credit Loss (ECL) model. The amount of any impairment loss is recognised in the
Consolidated Statement of Comprehensive Income within property revenue. Non-current trade receivables are discounted to present value
based on the Group’s incremental borrowing rate.
Collectability of property revenue receivables is reviewed on an ongoing basis. Property revenue receivables are generally due for
settlement within 30 days. The Group often holds security deposits and/or bank guarantees from tenants in line with industry practice for
leasing agreements. Receivables are written off when assessed to be uncollectable relative to the cost and effort required to further pursue
collection.
Under its lifetime ECL model, the Group assesses the discounted cash flows expected to be received over the life of each receivable on a
probability weighted basis. Any difference between this and the amounts contractually receivable is recognised as an allowance for credit
losses. The assessment incorporates a provision matrix which assesses historic loss rates, relevant forward-looking macroeconomic
indicators and, for significant individual tenant balances, relevant circumstances known about the tenant including liquidity risk, financial
health and levels of engagement.
At 30 June 2020 the Group had $3.4 million in trade receivables outstanding (2019: $0.6 million). The Group granted $2.0 million of
rental relief to tenants in the form of deferrals as required for qualifying tenants under the National Cabinet’s Mandatory Code of Conduct
for SME commercial leasing principles during the COVID-19 pandemic which has been given effect by state and territory legislation. For
non-qualifying tenants the principles of the code were taken into account in the consideration of deferral requests. Deferrals granted have
been agreed with tenants to be repaid over periods between October 2020 and June 2023 and has been classified between current and
non-current receivables accordingly. Of the remaining trade receivables balance, $0.5 million is more than 30 days past its due date (2019:
$0.2 million).
Consideration of the impact of COVID-19 on tenants has been incorporated into the assessment as at 30 June 2020 based on
discussions held to date with each tenant and on any other information known about the tenant and/or their trading conditions. As at 30
June 2020, the Group recognised an allowance for credit losses of $0.2 million (2019: nil).
Receivables and other assets are presented as follows:
Current
Trade receivables
Allowance for credit losses
Distribution receivables
Prepayments
Non-Current
Trade receivables
2020
$m
1.7
(0.2)
1.2
2.8
5.5
1.9
1.9
2019
$m
0.6
–
1.3
3.5
5.4
–
–
Growthpoint Properties Australia – FY20 Annual Report
71
2.5 Trade and other liabilities
Trade and other liabilities are for goods and services provided to the Group prior to the end of the reporting period 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 are presented as follows:
Current
Trade payables
Employee entitlements
GST payable
Accrued expenses - other
Accrued expenses - development charges
Unearned income
Other liability1
2020
$m
1.0
0.9
2.9
9.7
–
15.5
1.3
31.3
2019
$m
1.4
1.0
1.4
15.8
15.0
14.3
1.3
50.2
1. The other liability of $1.3 million is an amount of cash received by a tenant which is required to be used to fund capital expenditure by the Company as the custodian of the
Charles Street Property Trust in relation to that tenancy. The amount held is classified as restricted cash (Refer to Note 2.6).
2.6 Cash flow information
Reconciliation of profit after tax to net cash inflow from operating activities
Profit after tax
Income relating to investment property disposals
Net gain in fair value of investment properties
Net loss on exchange rate translation of interest-bearing liabilities
Net loss in fair value on sale of investment properties
Net loss/(gain) in fair value of investment in securities
Net gain in fair value of derivatives
Interest expense capitalised to qualifying assets
Amortisation of borrowing costs
Depreciation of right of use assets
Depreciation of plant and equipment
Change in operating assets and liabilities:
2020
$m
2019
$m
272.1
375.3
–
0.2
(116.9)
28.5
(201.6)
–
–
1.1
15.7
(31.5)
(4.5)
(7.1)
(3.2)
–
1.4
1.4
4.1
–
0.2
0.3
- Decrease/ (Increase) in lease incentives and leasing costs
9.7
- Decrease/ (Increase) in receivables
- Decrease/ (Increase) in prepayments
- Increase in net deferred tax liabilities
- Increase/(decrease) in payables
Net cash inflow from operating activities
(17.2)
–
0.4
(1.7)
(1.1)
3.8
0.0
1.4
(9.2)
181.2
140.4
The Group held $6.8 million of restricted cash in trust at 30 June 2020 (30 June 2019: $7.3 million) in relation to its role as custodian of the
Charles Street Property Trust. The balance comprises $5.5 million of the Group’s own cash along with $1.3 million received from a tenant.
These funds are not available for general use by the Group.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
72
Financial Report – Notes to the Financial Statements
Section 3: Capital structure and financing
3.1 Interest bearing liabilities
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the redemption amount
is recognised in the Consolidated Statement of Comprehensive Income over the period of the borrowings using the effective interest
method. Foreign denominated debt is translated at the balance date spot rate in accordance with AASB 121 Effects of Changes in
Foreign Exchange Rates, with associated gains/losses recognised in the Consolidated Statement of Comprehensive Income. Borrowings
with maturities greater than 1 year from balance date are classified as non-current liabilities.
The table below shows the movements in the Group’s interest-bearing liabilities during the year along with facility limits and dates of
maturity. The carrying amounts and facility limits are reported in Australian dollars.
Movement during period
Opening
balance
1 July 2019
Net cash
(repayments)/
drawdowns of
borrowings
Foreign exchange
rate adjustments
recognised in
profit or loss1
Closing
balance
30 June 2020
Facility
limit
Maturity
$m
$m
$m
$m
$m
Secured loans
Syndicated bank facility
- Facility B
- Facility C
- Facility D
- Facility E
- Facility G
- Facility H
- Facility I
- Facility K
- Facility L
Loan note 1
Loan note 2
Loan note 3
Fixed bank facility 1
USPP 3
Total AUD Loans
USPP 1
USPP 2
USPP 4
Total USD Loans
Total
Less unamortised up-front costs
Carrying amount
100.0
245.0
70.0
150.0
54.3
0.0
0.0
0.0
0.0
200.0
100.0
60.0
90.0
26.0
–
–
–
–
(54.3)
–
–
40.0
–
–
–
–
–
–
1,095.3
(14.3)
130.4
52.1
161.0
343.5
1,438.8
(5.5)
1,433.3
–
–
–
–
(14.3)
(1.5)
(15.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15.6
6.2
6.7
28.5
100.0
245.0
70.0
150.0
0.0
0.0
0.0
40.0
0.0
200.0
100.0
60.0
90.0
26.0
100.0
245.0
70.0
150.0
150.0
75.0
75.0
50.0
50.0
200.0
100.0
60.0
90.0
26.0
1,081.0
1,441.0
146.0
58.3
167.7
372.0
146.0
58.3
167.7
372.0
Mar–23
Dec–21
Dec–21
Jun–23
Sep–25
Dec–24
Dec–24
May–25
May–27
Mar–25
Dec–26
Dec–22
Dec–22
Jun–29
Jun–27
Jun–29
May–29
28.5
1,453.0
1,813.0
–
28.5
(7.0)
1,446.0
1. Foreign exchange rate adjustments have been recognised for the first time during the year ended 30 June 2020. The movement includes a portion attributable to prior periods
that was not material to recognise earlier.
Growthpoint Properties Australia – FY20 Annual Report
73
3.1 Interest bearing liabilities (continued)
The Group made the following changes to interest bearing liabilities during the year:
t In December 2019, the Group refinanced syndicated bank facilities H and I and Loan Note 2. Total available aggregated funding was
maintained at $250.0 million; maturities were extended to December 2024 for the syndicated facilities and December 2026 for Loan
Note 2.
t In May 2020, the Group entered a new $100 million debt facility, split into two equal tranches of five years (Facility K) and seven years
(Facility L) with a new banking partner.
t In June 20, the Group extended the existing $150 million Syndicated bank facility G by four years from September 2021 to September
2025.
The weighted average all-in interest rate on interest bearing liabilities (including bank margin and amortisation of upfront fees paid) at
30 June 2020 was 3.43% per annum (2019: 3.87% per annum). Refer to note 3.4 for details on interest rate and cross currency swaps.
Fair value
As at 30 June 2020, the Group’s interest-bearing liabilities had a fair value of $1,553.4 million (2019: $1,505.1 million).
The carrying amount of these interest-bearing liabilities was $1,446.0 million (2019: $1,433.3 million). The difference between the carrying
amounts and the fair values is due to:
t Unamortised up-front costs which are included in the carrying amounts but excluded from fair values; and
t Movements in discount rates applied in fair value discount cash flows based on current funding curves.
Assets pledged as security
The bank loans, Loan Notes and USPP payable by the Group are secured by first ranking mortgages over the Group’s real property
interests, including those classified as investment properties.
3.2 Borrowing costs
Borrowing costs are interest and other costs incurred in connection with interest bearing liabilities including derivatives, lease liabilities and
the discounting of non-current receivables 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
Interest capitalised to qualifying assets
Amortisation of borrowing costs
Interest expense on lease liabilities
Interest expense on non-current receivables
2020
$m
50.9
(4.5)
1.4
4.0
0.1
51.9
2019
$m
55.5
(0.8)
1.4
–
–
56.1
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 74
Financial Report – Notes to the Financial Statements
3.3 Lease liabilities
The Group’s minimum lease payments fall due as follows:
Ground Leases
Not later than one year
Later than one but not more than five years
More than five years
Total
Head Office Lease
Not later than one year
Later than one but not more than five years
More than five years
Total
Total
Not later than one year
Later than one but not more than five years
More than five years
Total
3.4 Derivative financial instruments
2020
$m
4.4
24.1
152.6
181.1
0.4
1.7
–
2.1
4.8
25.8
152.6
183.2
2019
$m
4.3
23.5
151.5
179.3
0.4
2.1
–
2.5
4.7
25.6
151.5
181.8
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at 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 9. Changes in fair value of derivative instruments are recognised in the Consolidated Statement
of Comprehensive Income.
Determination of fair value
The fair value of derivatives is estimated using valuation techniques including 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, the Group and counterparty when appropriate.
Derivative financial instruments
Derivative financial instruments can be analysed as follows:
Derivative financial instrument contracts
Total non-current derivative financial instrument assets
Total non-current derivative financial instrument liabilities
2020
$m
51.9
(10.3)
41.6
2019
$m
11.2
(1.2)
10.0
Instruments used by the Group
The Group is party to derivative financial instruments to hedge exposure to fluctuations in interest and currency rates in accordance with
the Group’s financial risk management policies.
Interest rate swap contracts
The Group uses interest rate swaps to economically hedge part of its floating rate debt to fixed rate debt. Interest rate swaps in effect
at 30 June 2020 covered 21% (30 June 2019: 21%) of the loan principal outstanding. With total fixed interest rate debt of $980 million
outstanding (30 June 2019: $958 million), the total fixed interest rate coverage of outstanding principal is 67% (30 June 2019: 67%).
The average fixed interest rate of interest rate swaps at 30 June 2020 was 1.21% per annum (2019: 1.21% per annum) and the variable
interest rate (excluding bank margin) is 0.14% per annum (30 June 2019: 1.29% per annum) at balance date. See table below for further
details of interest rate swaps in effect at 30 June 2020:
Growthpoint Properties Australia – FY20 Annual Report
75
3.4 Derivative financial instruments (continued)
Derivative financial instruments (continued)
Counter Party
Amount of Swap
Swap Expiry
Fixed Rate
Term to Maturity
Interest rate swaps
WBC
NAB
ANZ
ANZ
Total / Weighted average
$m
75.0
25.0
100.0
100.0
300.0
%
Years
Jun-2023
Jun-2023
Jun-2024
Jun-2025
1.15%
1.15%
1.21%
1.29%
1.21%
3.0
3.0
4.0
5.0
4.0
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 liabilities with a fair value of $10.3 million (30 June 2019: liabilities of $1.2 million). For the year ended
30 June 2020 there was a net loss on fair value adjustments of $9.5 million (2019: net gain of $1.5 million).
Cross currency swap and Cross currency interest rate swap contracts
The Group is a party to several swaps to mitigate the currency and/or interest rate risk exposures of its USPP bonds.
Cross currency interest rate swaps
The cross-currency interest rate swaps hedge both foreign exchange risk and interest rate risk. The quarterly coupon payments are
swapped from a USD denominated principal at a fixed interest rate into an AUD denominated principal exposed to BBSW plus a fixed
margin. The USD denominated principal repayment at expiry is swapped into a fixed AUD amount. The AUD floating rate debt is swapped
for fixed rate debt for the duration of the USPP note to which they relate.
Cross currency swap
The cross-currency swap hedges the quarterly coupon payments from a USD denominated principal at a fixed interest rate into an AUD
denominated principal exposed to BBSW plus a fixed margin. The USD denominated principal repayment at expiry is swapped for a fixed
AUD amount.
Counter Party
Amount of
Swap
Swap Expiry
Fixed Rate
3 months
BBSW+
Cross currency interest rate swaps
NAB
Westpac
ANZ
CBA
NAB
Westpac
ANZ
CBA
Cross currency swap
Westpac
Total / Weighted average
$m
32.6
32.6
32.6
32.6
13.0
13.0
13.0
13.0
161.0
343.4
Jun-2027
Jun-2027
Jun-2027
Jun-2027
Jun-2029
Jun-2029
Jun-2029
Jun-2029
May-2029
%
5.29%
5.29%
5.27%
5.26%
5.47%
5.47%
5.45%
5.44%
-
5.33%
%
–
–
–
–
–
–
–
–
2.32%
2.32%
Term to
Maturity
Years
7.0
7.0
7.0
7.0
9.0
9.0
9.0
9.0
8.9
8.2
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 76
Financial Report – Notes to the Financial Statements
3.5 Financial instrument 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).
30-Jun-20
Investment in securities
Derivative financial assets
Derivative financial liabilities
30-Jun-19
Investment in securities
Derivative financial assets
Derivative financial liabilities
Level 1
Level 2
Level 3
$m
$m
$m
69.9
–
–
69.9
85.6
–
–
85.6
–
51.9
(10.3)
41.6
–
11.2
(1.2)
10.0
–
–
–
–
–
–
–
–
Total
$m
69.9
51.9
(10.3)
111.5
85.6
11.2
(1.2)
95.6
3.6 Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
t credit risk;
t market risk (including interest rate risk); and
t liquidity 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.
Refer to the Group’s 2020 Corporate Governance Statement for details about its overall risk management framework. Specific risks faced
by the business are also addressed in the Directors’ report.
Financial instruments used by the Group
The Group’s principal financial instruments are those used to raise finance for the Group’s operations, comprising bank loans and Loan
Notes (including USPP Notes). The Group has various other financial instruments such as cash and cash equivalents, receivables and
payables, other assets and investments in securities which arise directly from its operations. The Group enters derivative transactions to
manage the interest rate risks arising from its financial instruments.
It is the Group’s policy that no speculative trading in financial instruments shall be undertaken. Details of the significant accounting policies
and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses
are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in the relevant note to the
financial statements.
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, which are
considered high quality financial institutions. At balance date, the fair value of these financial instruments is a net asset of the Group (refer
to Note 3.4).
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.
Growthpoint Properties Australia – FY20 Annual Report
77
3.6 Financial risk management (continued)
Credit risk (continued)
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, subject to any applicable restrictions in the National Cabinet’s Commercial Tenancy Code of Conduct, that has
been given effect through relevant state and territory legislation. The Group assesses aged amounts for collectability based on various
criterion in its expected credit losses (ECL) model and where applicable, raises an ECL allowance through profit or loss. Refer Note 2.4 for
additional information on ECL allowances.
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 a binding contractual relationship.
Fair values
The carrying values of the Group’s financial assets and liabilities approximate their fair values except for interest-bearing liabilities as
outlined in Note 3.1. Further information about the methods and assumptions adopted in determining fair values is disclosed in the
relevant notes.
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 $605.0 million at balance date (2019: $619.3 million).
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
Borrowing facilities
Borrowing facilities – hedged
Borrowing facilities – unhedged
Fixed/Floating
Floating
Floating
Floating
Fixed
Fixed
Floating
2020
$m
42.7
51.9
94.6
10.3
680.3
300.0
472.8
2019
$m
30.2
11.2
41.4
1.2
658.5
300.0
480.3
1,463.4
1,440.0
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.
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 mitigate
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.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
78
Financial Report – Notes to the Financial Statements
3.6 Financial risk management (continued)
Market risk (continued)
Sensitivity analysis – interest rate risk
The following sensitivity analysis is based on the interest rate risk exposures at balance date. At 30 June 2020, if interest rates had
increased or decreased 100 basis points (bps), with all other variables held constant, profit and equity would be impacted as follows:
+100 bps
Cash and borrowings
Interest rate derivatives
Cross currency derivatives
-100 bps
Cash and borrowings
Interest rate derivatives
Cross currency derivatives
Profit after tax higher/(lower)
2020
$m
(4.2)
9.1
25.6
30.5
4.2
(9.3)
(25.6)
(30.7)
2019
$m
(4.5)
14.1
22.4
32.0
4.5
(14.7)
(22.8)
(33.0)
These fair value gains or losses would be unrealised and non-cash unless the interest rate swaps were closed or sold.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations in relation to investment activities or other operations of the
Group. The Group manages its liquidity risk by ensuring that on a daily basis there is sufficient cash on hand or available loan facilities
to meet the contractual obligations of financial liabilities as they fall due. The Board sets budgets to monitor cash flows. In addition, the
Company, as an Australian Financial Services Licensee, is required to prepare a rolling 12-month cashflow projection for approval by the
Directors. As at the balance date, the Group had cash and cash equivalents totalling $42.7 million (2019: $30.2 million) and undrawn debt
facilities of $360 million (2019: $246 million).
Financing arrangements
The Group had access to the following borrowing facilities as at the balance date:
Syndicated bank facilities
Total facilities
Used at balance date
Unused at balance date
Fixed debt facilities
Total facilities
Used at balance date
Unused at balance date
Total facilities
Total used at balance date
Total unused bank facilities
2020
$m
965.0
605.0
360.0
848.0
848.0
–
1,813.0
1,453.0
360.0
2019
$m
865.0
619.3
245.7
819.5
819.5
–
1,684.5
1,438.8
245.7
Growthpoint Properties Australia – FY20 Annual Report
79
3.6 Financial risk management (continued)
Liquidity risk (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 2020.
Carrying
amount
Total
contractual
cashflows
6 months
or less
6 to 12
months
1 to 5
years
More than
5 years
$m
$m
$m
$m
$m
$m
2020
Non-derivative financial liabilities
Bank loans and Loan Notes
1,446.0
1,778.0
Lease liabilities
Trade and other liabilities
Derivative financial liabilities
Interest rate swaps used for hedging
2019
Non-derivative financial liabilities
Bank loans
Trade and other liabilities
Derivative financial liabilities
Interest rate swaps used for hedging
108.3
94.5
183.2
94.4
1,648.8
2,055.6
10.3
10.3
11.3
11.3
1,433.3
122.3
1,556.6
2,068.2
122.3
2,190.5
22.0
2.5
91.2
115.7
1.5
1.5
54.0
119.2
173.2
1.2
1.2
0.1
0.1
–
–
22.1
2.4
1.9
26.4
1.4
1.4
79.8
2.8
82.6
0.1
0.1
1,201.3
25.8
1.3
1,228.4
532.6
152.6
–
685.2
8.5
8.5
–
–
354.9
0.4
355.3
1,579.5
–
1,579.5
–
–
–
–
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
80
Financial Report – Notes to the Financial Statements
3.7 Contributed equity and reserves
Contributed equity
Stapled securities are classified as equity. 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 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 date.
Contributed equity
Contributed equity can be analysed as follows:
Opening balance at 1 July
Issue of ordinary stapled securities during the year:
Institutional placement and securities purchase plan
Rights offer
Costs of raising capital
Equity issued through capital raises, net of costs
Distribution reinvestment plans
Securities issued through employee incentive plans
Total equity raised
Closing balance at 30 June
Ordinary stapled securities
2020
No. (m)
727.8
43.7
–
43.7
–
0.3
44.0
771.8
2020
$m
1,879.4
173.6
–
(3.1)
170.5
–
–
170.5
2,049.9
2019
No. (m)
675.4
–
39.0
–
39.0
13.1
0.3
52.4
2019
$m
1,698.7
–
135.0
(1.1)
133.9
46.8
–
180.7
727.8
1,879.4
Ordinary stapled securities entitle the holder to vote at securityholder meetings in person or by proxy and to participate in dividends and
distributions in proportion to the number of stapled securities held, subject to being on the register at the relevant record date.
Distribution reinvestment plan
The Distribution Reinvestment Plan remained suspended for the 31 December 2019 and 30 June 2020 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, 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 amounts of dividends and distributions paid to
Securityholders, return capital to Securityholders, vary the level of borrowings, issue new securities and/or sell assets.
In July 2019 the Group finalised a fully underwritten Institutional Placement, raising $146.9 million after transaction costs for the issue
of 37.8 million new stapled securities. The Group also finalised a Security Purchase Plan (SPP), raising $23.6 million for the issue of 5.9
million new stapled securities.
The Group also holds an independent credit rating to aid it in accessing debt capital markets. In January 2020, Moody’s confirmed the
Group’s independent credit rating of Baa2 on senior secured debt with a stable outlook.
Refer to Note 3.1 for capital management initiatives made by the Group for its debt facilities. The Group maintains undrawn debt facilities
to aid in capital management. As at 30 June 2020, the Group had total debt facilities of $1.81 billion of which $360 million was undrawn.
The Group monitors capital by using several measures such as gearing, interest cover and loan to valuation ratios.
The Group has a target gearing range of 35% to 45%. At 30 June 2020, the gearing ratio was 32.2% (30 June 19: 34.3%). The gearing
ratios at 30 June 2020 and 30 June 2019 were calculated as follows:
Total interest-bearing liabilities less cash
Total assets less cash and right-of-use assets
Gearing ratio
2020
$m
1,403.2
4,353.5
32.2%
2019
$m
1,403.1
4,087.7
34.3%
Growthpoint Properties Australia – FY20 Annual Report
81
3.7 Contributed equity and reserves (continued)
Nature and purpose of reserves
Share-based payments reserve
The share-based payments reserve comprises the cumulative fair value expensed in the Consolidated Statement of Comprehensive
Income for performance rights issued, less any amounts transferred to equity upon vesting, or to retained profits upon forfeiture. Refer to
Note 3.10 for more share-based payment 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 4.1 for
further income tax information.
3.8 Distributions to Securityholders
Period for distribution
Half year to 31 December 2019
Half year to 30 June 2020
Total distributions for FY20
Half year to 31 December 2018
Half year to 30 June 2019
Total distributions for FY19
Distributions
Total stapled
securities
Distributions
per stapled
security
$m
91.1
77.2
168.3
83.0
84.4
167.4
(’m)
771.8
771.8
727.7
727.8
(cents)
11.8
10.0
21.8
11.4
11.6
23.0
The distribution for the half year to 31 December 2019 comprised a 10.8 cents per security distribution from the Trust and a 1.0 cent per
security fully franked dividend from the Company. All other distributions were from the Trust.
Due to uncertainty around the impact and duration of the COVID-19 pandemic on the Group’s operating environment and the broader
Australian economy, the Directors determined to pay a reduced distribution for the six months ending 30 June 2020 of 10.0 cents per
stapled security as it was deemed prudent to retain a higher level of cash within the Group during these uncertain times.
3.9 Earnings per stapled security (EPS)
Basic EPS is determined by dividing the profit after tax 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 including amounts unpaid on securities and the effect of all
dilutive potential ordinary securities.
Profit after tax
Basic weighted average number of stapled securities on issue for the year
Basic earnings per stapled security
Diluted weighted average number of stapled securities on issue for the year
Diluted earnings per stapled security
2020
272.1
2019
375.3
771,005,395
709,028,481
35.3
52.9
771,762,809
709,028,481
35.3
52.9
$m
No.
Cents
No.
Cents
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 82
Financial Report – Notes to the Financial Statements
3.10 Share-based payment arrangements
The fair value of share-based payment awards granted to employees is recognised as an expense over the period during which the
services are performed. For market-based performance rights, the fair value is independently valued using a Monte Carlo simulation
pricing model that takes into account the exercise price, the term of the rights, impact of dilution, stapled security price at grant date,
expected price volatility of the underlying stapled security, expected dividend yield and the risk-free interest rate for the term of the rights
and market vesting conditions. The impact of any non-market vesting conditions (for example, profitability, changes in net tangible assets)
are excluded. For non-market-based performance rights, the fair value is independently valued using a Binomial pricing methodology. The
amount recognised as an expense is adjusted to reflect the number of rights expected to vest. Details of valuations obtained during the
year are reported on pages 44-45 of the Remuneration Report within the Directors’ Report.
At 30 June 2020, the Group had two share-based payment schemes in place:
a) Deferred Short-term Incentive Performance Rights
During the year the Group introduced a plan whereby any Short-term Incentive (STI) payable to Executive KMP would be paid as 66.6%
cash with the remainder deferred and awarded as Deferred STI Performance Rights. Half of these rights will vest after one year and the
other half after two years. Further details of this plan are reported on page 39-40 of the Remuneration Report.
b) Long-term Incentive Performance Rights FY17, FY18, FY19 and FY20
The Group has Long-term Incentive Performance Rights plans in place for all employees. The plans are designed to align employees’
remuneration with the long-term goals and performance of the Group and the maximisation of returns for its Securityholders. The
measures for the plans are reviewed regularly by the Nomination, Remuneration & HR Committee and/or the Board. Details of the various
Long-term Incentive Plans in place, applicable performance measures, fair value calculation methodologies and details are reported on
pages 41-45 of the Remuneration Report.
The table below shows the movement in rights under each type of share-based payment scheme:
Rights outstanding 1 July 2018
Rights granted during FY19
Rights lapsed during FY19
Rights vested to GOZ stapled securities in FY191
Rights outstanding at 30 June 2019
Rights granted during FY202
Rights lapsed during FY20
Rights vested to GOZ stapled securities in FY203
Rights outstanding at 30 June 2020
Short-term
Performance
Rights
Long-term
Performance
Rights
No.
–
160,917
–
–
160,917
176,376
(57,614)
(51,652)
228,027
No.
651,740
470,306
(24,865)
(294,125)
803,056
178,145
(128,010)
(269,232)
583,959
Total
No.
651,740
631,223
(24,865)
(294,125)
963,973
354,521
(185,624)
(320,884)
811,986
1. In October 2018, 294,125 rights under the FY15, FY16 and FY17 Long-term Employee Plans were converted to Growthpoint stapled securities with a total value of
$1,128,941.
2. Includes 90,682 FY20 STI Plan rights for Timothy Collyer which remain subject to securityholder approval at the November 2020 AGM.
3. In October 2019, 269,232 rights under the FY16, FY17 and FY19 transitional Long-term Incentive Plans were converted to Growthpoint stapled securities with a total value of
$1,173,849.
During the year, $1.8 million was expensed and recognised in the Company’s share-based payments reserve (June 19: $0.9 million).
Growthpoint Properties Australia – FY20 Annual Report
83
Section 4: Other notes
4.1 Income tax
Trusts
Property investments are held by the Trust for the purpose of earning rental income. Under current tax legislation, the Trust is not liable for
income tax provided the taxable income of the Trust, including realised capital gains, is attributed in full to its securityholders each financial
year. Securityholders are subject to income tax at their own marginal tax rates on amounts attributable to them.
Company and other taxable entities
For the Company and other taxable entities, 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 and deferred tax
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 prior 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 balance date and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is
settled.
Deferred income tax liabilities and assets - recognition
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses. Deferred tax assets are reviewed each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax liabilities are recognised for all
taxable temporary differences.
Net deferred tax assets or liabilities
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities, when the
deferred tax balances relate to the same taxation authority and the Group intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
Tax relating to equity items
Current and deferred tax balances attributable to amounts recognised directly in equity are recognised directly in equity.
Income tax expense
The tables below relate to income tax for the Group’s income tax paying entities.
(a) Income tax expense:
Current tax expense
Deferred tax expense
Income tax expense in the Statement of Comprehensive Income
2020
$000
3,608
3,806
7,414
2019
$000
2,448
25
2,473
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
84
Financial Report – Notes to the Financial Statements
4.1 Income tax (continued)
Income tax expense (continued)
(b) Reconciliation of income tax expense to prima facie tax payable:
Profit before income tax expense
Less: Trust profit not subject to tax
Profit subject to taxation
Prima facie tax expense/(benefit) at 30%
Tax effect of amounts not deductible / assessable in calculating income tax expense:
Non-deductible expenses
Long-term employee benefits
Short-term employee benefits
Income tax expense
Effective tax rate
(c) (i) Current tax balances
Current tax payable
(c) (ii) Deferred tax balances
Deferred tax assets (GPAL)
Deferred tax (liabilities) (GFPL)
Net total
2020
$000
279,456
(256,803)
22,653
6,796
18
387
213
7,414
32.7%
2020
$000
1,441
2020
$000
854
(3,599)
(2,745)
2019
$000
377,766
(370,502)
7,264
2,179
17
275
–
2,471
34.0%
2019
$000
2,296
2019
$000
1,030
–
1,030
As at 30 June 2020, the Company had franking credits of $3,631,671 available to it (30 June 2019: $2,478,279).
4.1 Income tax (continued)
Income tax expense (continued)
(d) Reconciliation of deferred tax balances
Net deferred tax assets attributable to:
Right-of-use assets
Lease liability
Plant and equipment
Other accrued expenses
Short-term employee benefits
Non-trade payables
Other
Net deferred tax liabilities attributable to:
Interest-bearing liabilities1
Derivative financial instruments1
Recognised tax losses
Net total
Net deferred tax assets attributable to:
Plant and equipment
Other accrued expenses
Short-term employee benefits
Non-trade payables
Other
Net total
Growthpoint Properties Australia – FY20 Annual Report
85
Opening
balance
1 July 2019
Recognised in
profit or loss
Recognised
in equity
Balance
30 June 2020
$000
$000
$000
$000
–
–
72
201
523
193
41
1,030
–
–
–
–
1,030
(463)
576
13
(104)
(291)
44
18
(207)
1,157
(4,976)
220
(3,599)
(3,806)
–
–
–
–
–
–
31
31
–
–
–
–
31
(463)
576
85
97
232
236
91
854
1,157
(4,976)
220
(3,599)
(2,745)
Opening
balance
1 July 2018
Recognised in
profit or loss
Recognised
in equity
Balance 30
June 2019
$000
$000
$000
$000
35
246
530
182
53
1,046
37
(45)
(7)
11
(20)
(25)
–
–
–
–
8
8
72
201
523
193
41
1,030
1. Derivative instruments and interest-bearing liabilities entered by Growthpoint Finance Pty Ltd.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 86
Financial Report – Notes to the Financial Statements
4.2 Key Management Personnel (KMP) compensation
Short-term employee benefits
Other long-term employee benefits
Post-employment benefits
Share-based payments
2020
$
3,930,762
68,758
141,203
1,191,007
5,331,730
2019
$
3,311,231
46,433
123,913
1,316,388
4,797,965
Individual Directors’ and KMP compensation disclosures
Information regarding individual Directors’ and KMP compensation and equity instruments disclosure as required by Corporations
Regulation 2M.3.03 is provided in the Remuneration Report.
Apart from the details disclosed in this note, no Director has entered a material contract with the Group since the end of the prior financial
year and there were no material contracts involving Directors’ interests existing at year-end.
Movements in securities
The movement in the number of ordinary stapled securities in the Group held directly, indirectly or beneficially, by KMP including their
related parties is as follows:
2020
Securityholder
Opening securities
1 July
Securities granted
as compensation
Acquired
securities
Disposed
securities
Closing securities
30 June
G. Jackson
N. Sasse
E. de Klerk
T. Collyer
F. Marais
D. Andrews
M. Green
G. Tomlinson
M. Brenner
J. Sukkar
J Jovanovski
190,087
1,656,460
1,752,863
886,507
169,284
127,682
4,561
88,776
7,245
14,000
–
–
–
–
149,237
–
48,989
49,262
–
–
–
–
–
–
–
–
–
–
–
–
11,111
–
–
–
–
–
–
–
–
–
–
–
–
–
190,087
1,656,460
1,752,863
1,035,744
169,284
176,671
53,823
88,776
18,356
14,000
–
During the year to 30 June 2020, a total of 247,488 stapled securities with a total value of $1,019,129 were issued to KMP upon vesting
of performance rights under employee incentive plans.
2019
Securityholder
Opening securities
1 July
Securities granted
as compensation
Acquired
securities
Disposed
securities
Closing securities
30 June
G. Jackson
N. Sasse
E. de Klerk
T. Collyer
F. Marais
D. Andrews
M. Green
G. Tomlinson
M. Brenner
J. Sukkar
170,309
1,520,087
1,601,804
953,492
150,322
85,815
45,201
81,467
7,245
–
–
–
–
122,075
–
35,020
35,293
–
–
–
19,778
136,373
151,059
60,940
18,962
6,847
4,561
7,309
–
14,000
–
–
–
(250,000)
–
–
(80,494)
–
–
–
190,087
1,656,460
1,752,863
886,507
169,284
127,682
4,561
88,776
7,245
14,000
During the year to 30 June 2019, a total of 192,388 stapled securities with a total value of $611,794 were issued to KMP upon vesting of
performance rights under employee incentive plans.
Growthpoint Properties Australia – FY20 Annual Report
87
4.2 Key Management Personnel (KMP) compensation (continued)
KMP loans
The Group has not made, guaranteed or secured, directly or indirectly, any loans to any KMP or their personally related entities at any time
during the reporting period.
4.3 Related party transactions
Responsible Entity
There has been no change to the Responsible Entity of Growthpoint Properties Australia Trust, being Growthpoint Properties Australia
Limited, 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
Several 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
Transaction
G. Jackson1
G. Jackson1
Investment property valuation
Statutory valuation
2020
$
44,825
20,048
2019
$
85,525
15,010
Aggregate amounts payable at the reporting date
15,125
30,525
1. The Group used the valuation services of m3property, a company of which Mr Jackson is a director, to independently value eight properties (2019: twelve). The Group has
also used m3property for statutory valuations reviews during the year. 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.
Transactions with significant securityholders
During the year there were no transactions with significant securityholders other than distributions to all Securityholders. There were no
balances outstanding from transactions with significant securityholders as at 30 June 2020 (2019: nil).
4.4 Contingent liabilities
The Group has no contingent liabilities as at the date of this report (2019: nil).
4.5 Commitments
For details of commitments in relation to investment properties refer 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 (2019: nil).
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 88
Financial Report – Notes to the Financial Statements
4.6 Controlled entities
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 Statement of Comprehensive Income 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.
Transactions 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. There were no new entities established or acquired during
the year ended 30 June 2020.
Ann Street Property Trust
Atlantic Drive Property Trust
Broadmeadows Leasehold Trust
Building 2 Richmond Property Trust
Newstead Property Trust
Nundah Property Trust
Pope Street Property Trust
Preston 2 Property Trust
Building C, 211 Wellington Road Property Trust
Queensland Property Trust
CB Property Trust
Charles Street Property Trust
Coolaroo Property Trust
Derrimut Property Trust
Drake Boulevard Property Trust
Eagle Farm Property Trust
Erskine Park Pharmaceutical Trust
Erskine Park Truck Trust
Erskine Park Warehouse Trust
Growthpoint Developments Pty Ltd
Growthpoint Finance Pty Ltd
Growthpoint Metro Office Fund
Growthpoint Nominees (Aust) 2 Pty Limited
Growthpoint Nominees (Aust) Pty Limited
Growthpoint Properties Australia Limited
Kembla Grange Property Trust
Kewlink East Trust
Kilsyth 1 Property Trust
Kilsyth 2 Property Trust
Laverton Property Trust
Lot S5 Property Trust
Mort Street Property Trust
New South Wales 2 Property Trust
New South Wales Property Trust
Rabinov Property Trust
Rabinov Diversified Property Trust No. 2
Rabinov Diversified Property Trust No. 3
Ravenhall Property Trust
Richmond Car Park Trust
South Brisbane 1 Property Trust
South Brisbane 2 Property Trust
SW1 Car Park Trust
Wellington Street Property Trust
Wholesale Industrial Property Fund
William Angliss Drive Trust
World Park Property Trust
Yatala 1 Property Trust
Yatala 2 Property Trust
Yatala 3 Property Trust
3 Makers Place Trust
3 Millennium Court Property Trust
6 Kingston Park Court Property Trust
19 Southern Court Property Trust
20 Southern Court Property Trust
75 Dorcas Street Trust
211 Wellington Road Property Trust
255 London Circuit Trust
1500 Ferntree Gully Road Property Trust
Growthpoint Properties Australia – FY20 Annual Report
89
4.7 Parent entity disclosures
The parent of the Group throughout the year was Growthpoint Properties Australia Trust.
Financial position at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity comprising:
Contributed equity
Retained profits
Total equity
Profit after tax
Total comprehensive expense
2020
$m
31.1
4,477.0
181.6
1,743.9
2,733.1
1,979.4
753.7
2,733.1
276.9
276.9
2019
$m
19.6
4,096.9
194.5
1,617.8
2,479.1
1,814.5
664.6
2,479.1
378.4
378.4
The contractual obligations of the parent entity are identical to those disclosed in Note 2.2.
4.8 Remuneration of auditors
The following fees were paid or payable for services provided by the auditor of the Group during the year. For the year ended 30 June
2020, EY replaced KPMG as auditor of the Group. There were no non-audit services paid to auditors during the year (2019: $nil):
Audit services - EY
Audit and review of financial statements
Other regulatory audit services
Audit services - KPMG
Audit and review of financial statements
Other regulatory audit services
4.9 Subsequent events
2020
$
217,000
37,000
254,000
2019
$
–
–
–
–
–
–
171,656
72,344
244,000
There have been no subsequent events 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 period to the date of this report.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
90
Financial Report
Directors’
declaration.
In the opinion of the Directors:
(a) the attached Financial Statements and notes, and the Remuneration Report in the Directors’ Report set out on pages 34 to 52 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 2020 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 2020.
This declaration is made in accordance with a resolution of the Directors of the Group.
Timothy Collyer
Managing Director
Growthpoint Properties Australia
Melbourne, 20 August 2020
Growthpoint Properties Australia – FY20 Annual Report
91
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Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 92
Financial Report - Auditor’s reports
Auditor’s independence
declaration.
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Growthpoint
Properties Australia Limited, being the Responsible Entity of
Growthpoint Properties Australia Trust
As lead auditor for the audit of the financial report of Growthpoint Properties Australia for the year
ended 30 June 2020, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Growthpoint Properties Australia and the entities it controlled during
the financial year.
Ernst & Young
David Shewring
Partner
20 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Growthpoint Properties Australia – FY20 Annual Report
93
Independent
Auditor’s report.
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
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 Limited and Growthpoint
Australia Trust (collectively Growthpoint Properties Australia or the ‘Group’), which comprises the
consolidated statement of financial position as at 30 June 2020, the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year then ended, notes to the financial statements, including a summary of
significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2020 and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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Financial Report - Auditor’s reports
Independent
Auditor’s report.
1. Investment Property Portfolio – Carrying Value and Revaluations
Why significant
How our audit addressed the key audit matter
The Group owns a portfolio of property assets with a
carrying value of $4,222.7 million at 30 June 2020,
which represents 95% of total assets of the Group.
The valuation of investment properties is inherently subjective
given that there are alternative assumptions and valuation
methods that may result in a range of values.
As outlined in Note 2.2, the property portfolio is
carried at fair value, which is based upon valuations
sourced from suitably qualified independent
valuation experts and internal valuations on a
rotation basis, based on market conditions existing
at the reporting date.
The valuation of the property portfolio, which
includes certain properties that completed
developments in the year, is based on a number of
assumptions, such as capitalisation rates, discount
rates and terminal yields, which require significant
estimation and judgement. This also includes the
estimations for costs to complete and an allowance
for developer’s risk and profit and stabilisation for
properties in the development phase. Minor
adjustments to certain assumptions can lead to
significant changes in the valuation of the office and
industrial property assets.
Refer to Note 2.2 for a description of the accounting
policy, overview of the valuation methodology,
process for valuations (including the use of
independent expert valuers and internal valuations),
significant assumptions and the relative sensitivity of
the valuation to changes in these assumptions.
We have, therefore, considered this a key audit
matter due to the number of judgements required in
determining fair value.
As at 30 June 2020 there is significant valuation
uncertainty arising from the COVID-19 pandemic and
the response of Governments to it. This means that
the property values may change significantly and
unexpectedly over a relatively short period of time.
Given the market conditions at balance date, the
independent valuers have reported on the basis of
the existence of ‘material valuation uncertainty’,
noting that less certainty, and a higher degree of
caution, should be attached to the valuations than
would normally be the case. COVID-19 has resulted
in a wider range of possible values than at past
valuation points.
In this situation the disclosures in the financial
statements provide particularly important
information about the assumptions made in the
property valuations and the market conditions at 30
June 2020.
Our audit procedures included the following:
We discussed the following matters with management:
● movements in the Group’s investment property
portfolio;
● changes in the condition of properties;
● controls in place relevant to the valuation process,
both for internal directors, and independent external
valuations; and
● the impact that COVID-19 has had on the Company’s
investment property portfolio including rent
abatements provided to tenants, tenant occupancy
risks and future rental growth expectations.
On a sample basis, we:
● Assessed the competence and qualifications of
valuers, as well as the objectivity of external valuers,
and appropriateness of the scope and methodology of
the valuation commissioned for the purposes of the
financial report;
● Evaluated the key assumptions and agreed key inputs
for both internal and external valuations to tenancy
schedules. These assumptions and inputs included
rents, capitalisation rates, occupancy rates and capital
expenditure;
● Assessed whether COVID-19 relief provided to tenants
had been factored into the valuations and that changes
in tenant occupancy risk or rental growth expectations
were also considered;
● Compared the data used in the valuations to the actual
financial performance of the underlying properties;
●
Involved our real estate valuation specialists to
determine a risk based sample of properties and assist
with the assessment of the key valuation assumptions
and methodologies;
● Evaluated the suitability of the valuation methodology
across the portfolio based on the type of asset. We
considered the reports of the independent valuers, to
gain an understanding of the assumptions and
estimates used and the valuation methodology applied.
This included the impact that COVID-19 has had on key
assumptions such as the capitalisation, discount or
growth rate and future forecast rentals;
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95
1. Investment Property Portfolio – Carrying Value and Revaluations (continued)
Why significant
How our audit addressed the key audit matter
For these reasons we consider it important
that attention is drawn to the information in
Notes 2.2 in assessing the property
valuations at 30 June 2020.
● For properties which had development during the financial
year, we compared the costs incurred to date plus the
estimated costs to complete to the expected value of the
completed project, as advised by the valuers;
●
Reviewed the portfolio assets with reference to external
market data and portfolio performance in order to identify and
investigate items that were outside of our audit expectations;
● We have considered whether there have been any indicators of
material changes in property valuations from 30 June 2020 up
to the date of our opinion. We involved our real estate
valuation specialists to assist us in making this assessment. No
material matters were identified to be disclosed as a
subsequent event in note 4.9; and
● We have considered whether the financial report disclosures
and in particular those relating to the valuation uncertainty are
appropriate.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2020 Annual Report, but does not include the financial report and
our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, 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
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
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Financial Report - Auditor’s reports
Independent
Auditor’s report.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Growthpoint Properties Australia – FY20 Annual Report
97
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2020.
In our opinion, the Remuneration Report of Growthpoint Properties Australia for the year ended 30
June 2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
David Shewring
Partner
Melbourne
20 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information
98
Additional information
Detailed
portfolio information.
Office portfolio
Address
75 Dorcas St
South Melbourne
Bldg 3, 570 Swan St
109 Burwood Rd
Richmond
Hawthorn
Bldg 2, 572-576 Swan St
Richmond
Bldg B, 211 Wellington Rd
Mulgrave
Bldg 1, 572-576 Swan St
Richmond
Bldg C, 211 Wellington Rd
Mulgrave
Car Park, 572-576 Swan St Richmond
100 Skyring Ter
Newstead
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
QLD
333 Ann St
Brisbane
CB1, 22 Cordelia St
South Brisbane
A1, 32 Cordelia St
South Brisbane
A4, 52 Merivale St
South Brisbane
CB2, 42 Merivale St
South Brisbane
QLD
QLD
QLD
QLD
QLD
Book
Value
$m
214.0
142.5
113.0
Valuer
Cap
rate
Discount
rate
Major tenant WALE
Lettable
area
Site
area
%
%
years
sqm
sqm
Colliers 5.38
6.25 ANZ Banking Group
4.9
23,811
9,632
JLL 5.75
Savills 5.50
6.75
6.50
Vacant
–
19,447
8,525
Orora
4.2
12,388
3,529
112.5
JLL 5.25
6.25
Country Road
Group
12.0
14,602
7,130
72.0
Directors 6.13
6.75 Monash University
1.2
12,780
11,040
66.0
Directors 5.25
6.50
60.0
Directors 6.25
7.00
1.2
JLL
–
6.50
Country Road
Group
BMW Australia
Finance
GE Capital Finance
Australasia
254.0
Directors 5.63
6.50 Bank of Queensland
133.5
103.0
Urbis 6.00
6.75
Urbis 5.88
7.00 Downer EDI Mining
91.5
Directors 5.75
6.75
Jacobs Group
87.0
60.6
Urbis 5.75
Directors 5.88
Queensland Urban
Utilities
Federation
University
University of the
Sunshine Coast
Peabody Energy
12.0
8,554
8,365
2.6
10,289
11,070
6.9
5.8
–
3,756
24,665
5,157
4.2
16,442
2,519
3.7
3.6
5.7
4.2
4.6
16,341
1,563
11,444
5,772
10,003
2,667
9,405
2,331
6,598
3,158
15 Green Square Cl
Fortitude Valley
QLD
151.0
Colliers 5.75
6.50
Car Park, 32 Cordelia St
& 52 Merivale St
South Brisbane
QLD
30.5
Directors 5.75
1 Charles St
Parramatta
NSW 440.0
Savills 4.38
Bldg C, 219-247 Pacific Hwy Artarmon
NSW 138.0
Directors 5.50
5 Murray Rose Ave
Sydney Olympic Park NSW 103.5
Directors 5.75
3 Murray Rose Ave
Sydney Olympic Park NSW
99.0 m3property 5.75
6.75
102 Bennelong Pkwy
Sydney Olympic Park NSW
34.0
Savills 6.05
6.75
6 Parkview Dr
Sydney Olympic Park NSW
34.5
Savills 6.06
6.75
Secure Parking
4.6
–
9,319
NSW Police
24.5
32,356
6,460
Fox Sports
Lion
Samsung
Electronics
Suzanne Grae
Corporation
Universities
Admissions Centre
2.8
3.8
14,375
4,212
12,386
3,826
1.7
13,423
3,980
1.6
5,085
6,635
1.6
5,007
7,788
33-39 Richmond Rd
Keswick
SA
65.0
10-12 Mort St
Canberra
ACT
100.0
Knight
Frank 7.00
Knight
Frank 6.27
7.50
Coffey Corporate
3.2
11,835
4,169
Commonwealth of
Australia
6.75
4.7
15,398
3,064
255 London Cct
Canberra
ACT
78.3
Directors 5.56
6.50
836 Wellington St
West Perth
WA
94.8
JLL 6.25
Total / Weighted Average
2,879.3
5.55
7.00
6.56
Commonwealth of
Australia
Commonwealth of
Australia
7.2
8,972
2,945
6.6
11,973
4,304
6.7 327,579 142,916
6.75
6.75
6.50
6.00
6.75
6.75
Growthpoint Properties Australia – FY20 Annual Report
99
Industrial portfolio
Address
Book
Value
$m
Valuer
Cap
rate
Discount
rate
Major tenant WALE
Lettable
area
%
%
years
sqm
Site
area
sqm
120 Northcorp Blvd
Broadmeadows
VIC
50.0
Savills 7.00
7.50
Vacant
–
–
250,000
1500 Ferntree Gully Rd
& 8 Henderson Rd
3 Maker Pl
Knoxfield
Truganina
9-11 Drake Blvd
Altona
Lots 2, 3 & 4, 34-44 Raglan St Preston
VIC
VIC
VIC
VIC
40 Annandale Rd
Melbourne Airport VIC
120-132 Atlantic Dr
Keysborough
VIC
130 Sharps Rd
Melbourne Airport VIC
46.0
38.7
35.7
35.0
33.3
28.4
23.8
CBRE
5.75
Urbis 6.00
Directors
6.00
Directors
6.00
Savills 8.25
Directors
5.25
Directors
7.75
6.75
6.25
6.50
6.75
6.75
6.50
6.50
120 Link Rd
Melbourne Airport VIC
17.5
Directors
8.00
6.75
Brown & Watson
International
HB Commerce
Peter Stevens
Motorcycles
Paper Australia
Australia Post
Symbion
Laminex Group
The Workwear
Group
Sales Force
National
20 Southern Crt
31 Garden St
3 Millennium Crt
6 Kingston Park Crt
Keysborough
Kilsyth
Knoxfield
Knoxfield
VIC
VIC
VIC
VIC
16.7 m3property
6.00
6.50
12.8
12.6
12.4
Directors
6.00
6.75 Cummins Filtration
Directors
5.75
6.50 Opal Packaging
CBRE
6.00
6.50 NGK Spark Plug
60 Annandale Rd
Melbourne Airport VIC
12.3
Urbis 8.00
101-111 South Centre Rd
Melbourne Airport VIC
9.5
Directors
8.00
6.75
6.75
Garden City
Planters
Direct Couriers
19 Southern Crt
Keysborough
VIC
9.4 m3property
5.50
6.50 Wabtec Australia
75 Annandale Rd
70 Distribution St
13 Business St
5 Viola Pl
3 Viola Pl
Melbourne Airport VIC
8.0
Urbis 7.75
Larapinta
Yatala
Brisbane Airport
QLD 239.0
Urbis 6.00
QLD
QLD
11.6
Directors
6.75
8.7
Directors
7.89
Brisbane Airport
QLD
2.8
Directors
7.89
27-49 Lenore Dr
Erskine Park
NSW 77.5
JLL
5.25
6-7 John Morphett Pl
Erskine Park
NSW 56.0
Directors
5.25
Erskine Park
NSW 37.5
Directors
4.75
51-65 Lenore Dr
34 Reddalls Rd
Unipart Group
Australia
Woolworths
Vacant
Vacant
Cargo Transport
Systems
Linfox
Linfox
Linfox
6.75
6.50
7.00
7.50
7.25
6.25
6.25
6.00
5.3
2.2
3.3
3.8
4.0
8.5
2.0
22,009
40,844
31,092
49,810
25,743
41,730
27,978
42,280
44,424
75,325
12,864
26,181
28,100
47,446
7.0
26,517
51,434
2.5
3.4
0.7
1.9
7.9
7.4
6.8
2.3
1.7
–
–
2.7
3.2
4.7
7.7
11,430
19,210
8,919
8,040
7,645
17,610
14,750
12,795
16,276
34,726
14,082
24,799
6,455
11,650
10,310
16,930
76,109
250,900
8,951
18,630
14,726
35,166
3,431
12,483
29,476
76,490
24,881
82,280
3,720
36,720
Kembla Grange
NSW 28.5
JLL
5.75
7.00 Autocare Services
10.3
355
141,100
81 Derby St
Silverwater
NSW 22.6
Directors
5.00
599 Main North Rd
Gepps Cross
SA
186.0 Knight Frank
5.00
6.50
6.00
IVE Group
Australia
2.2
7,984
13,490
Woolworths
14.9
91,686
233,500
1-3 Pope Crt
12-16 Butler Blvd
10 Butler Blvd
20 Colquhoun Rd
Beverley
Adelaide Airport
Adelaide Airport
Perth Airport
Hugh Edwards Dr & Tarlton Cres Perth Airport
SA
SA
SA
WA
WA
22.0 Knight Frank
7.25
7.75
Aluminium
Specialties Group
13.8
Directors
8.14
8.00 Cheap as Chips
8.8
Directors
7.90
177.5
Directors
6.00
49.3
Savills 7.36
Toll Transport
Woolworths
Mainfreight
7.75
6.75
7.72
6.60
2.8
0.4
1.6
5.3
5.4
14,459
25,660
16,835
30,621
8,461
16,100
80,374
193,936
32,018
57,617
5.0 715,351 2,002,213
Total / weighted average
1,343.4
6.02
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 100
Additional information
Securityholder
information.
Top 20 legal Securityholders as at 31 July 2020
Rank Name
Number of securities % of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
GROWTHPOINT PROPERTIES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
RABINOV HOLDINGS PTY LTD
SHARON INVESTMENTS PTY LTD
ONE MANAGED INVESTMENT FUNDS LIMITED
BNP PARIBAS NOMS (NZ) LTD
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
JONAERE PTY LTD
MR MAX KARL KOEP
AMP LIFE LIMITED
MS KYLIE MAREE CECILIA THOMAS
NAVIGATOR AUSTRALIA LTD
SANDHURST TRUSTEES LTD
Sub total
Balance of register
Total issued capital
480,025,424
105,999,857
49,639,617
40,774,879
18,483,386
8,113,589
4,514,170
3,116,814
2,347,279
2,255,779
1,600,000
1,159,656
1,024,339
980,784
790,000
750,000
704,032
627,872
615,918
583,763
724,107,158
47,724,503
771,831,661
62.19
13.73
6.43
5.28
2.39
1.05
0.58
0.40
0.30
0.29
0.21
0.15
0.13
0.13
0.10
0.10
0.09
0.08
0.08
0.08
93.82
6.18
100
Substantial Securityholders as at 31 July 2020
Name
Number of securities
% of issued capital
Growthpoint Properties Limited
480,025,424
62.2%
Growthpoint Properties Australia – FY20 Annual Report
101
Distribution of Securityholders as at 31 July 2020
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Securities
465,080
4,264,519
5,654,010
23,271,303
738,176,749
771,831,661
Number of holders
% of issued capital
1,184
1,569
772
928
92
4,545
0.06
0.55
0.73
3.02
95.64
100.00
Based on the 31 July 2020 closing price of $3.21, the number of Securityholders with less than a marketable parcel of 156 securities
($500) was 392 and they held a total of 10,012 Growthpoint securities.
Class of securities
Growthpoint has only one class of securities, ordinary securities, which are traded on the ASX.
Voting rights
Ordinary stapled securities entitle the holder to vote at securityholder meetings in person or by proxy and to participate in dividends
and distributions in proportion to the number of stapled securities held, subject to being on the register at the relevant record date.
Securities restricted or subject to voluntary escrow
There are no securities that are restricted or currently held subject to voluntary escrow.
On market buy-back
There was no on market buy-back in FY20.
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information 102
Additional information
Contact
details.
Corporate Directory
Contact us
Growthpoint Properties Australia
Limited
ABN 33 124 093 901; AFSL No 316409
Retail Investors
Computershare
Growthpoint Properties Australia Trust
ARSN 120 121 002
1300 665 792 (within Australia)
+61 (3) 9415 4366 (outside Australia)
webqueries@computershare.com.au
Registered Office
Level 31, 35 Collins Street,
Melbourne VIC 3000
Phone: +61 (3) 8681 2900
Fax: +61 (3) 8681 2910
growthpoint.com.au
Institutional Investors
Virginia Spring
Investor Relations Manager
+61 (3) 8681 2933
investor.relations@growthpoint.com.au
Directors
Growthpoint Properties Australia
Geoffrey Tomlinson, Timothy Collyer,
Maxine Brenner, Estienne de Klerk,
Grant Jackson, Francois Marais,
Norbert Sasse, Josephine Sukkar AM
Company Secretaries
Jacquee Jovanovski, Dion Andrews
Level 31, 35 Collins Street,
Melbourne VIC 3000
+61 (3) 8681 2900
info@growthpoint.com.au
growthpoint.com.au
Auditor
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000
ASX
Growthpoint Properties Australia’s
securities are listed on the ASX under the
ticker ‘GOZ’.
Growthpoint Properties Australia – FY20 Annual Report
103
Glossary.
1H First half of the financial year
ABS Australian Bureau of Statistics
JLL The Australian arm of Jones Lang
LaSalle, an international professional
services and investment management firm
ACT Australian Capital Territory, Australia
LVR Loan to value ratio
A-REIT Australian Real Estate Investment
Trust
m Million
ASX Australian Securities Exchange
b Billion
bps Basis points
capex Capital expenditure
cap rate or capitalisation rate The
market income produced by an asset
divided by its value or cost
NPI Net property income
NSW New South Wales, Australia
NTA Net tangible assets
Q Quarter
QLD Queensland, Australia
Payout ratio Distributions ($ million)
divided by FFO ($ million)
CBD Central business district
REIT Real Estate Investment Trust
cps Cents per security
CPI Consumer price index
CY Calendar year
ROE or return on equity Calculated as
the percentage change in NTA plus the
distributions for a given period divided by
the opening NTA
dps Distribution per security
SA South Australia, Australia
EMT Growthpoint’s Executive
Management Team
SES South eastern suburbs
SME Small and medium-sized enterprise
ESG Environment, social and governance
sqm Square metres
FFO Funds from operations
FY Financial year
gearing Interest bearing liabilities less
cash divided by total assets less finance
lease assets less cash
GOZ Growthpoint or Growthpoint’s ASX
trading code or ticker
Growthpoint or the Group Growthpoint
Properties Australia comprising the
Company, the Trust and their controlled
entities
GRESB Global Real Estate Sustainability
Benchmark
GRT Growthpoint Properties Limited’s
(South Africa) Johannesburg Stock
Exchange (JSE) trading code or ticker
ICR Interest coverage ratio
IRR Average annual return before gearing
and corporate costs
TSR or total securityholder
return Change in security price plus
distribution paid or payable for the relevant
period
USPP United States Private Placement
VIC Victoria, Australia
WA Western Australia, Australia
WALE Weighted average lease expiry
WARR Weighted average rent review
WFH Working from home
WHO World Health Organisation
Woolworths Woolworths Group Limited
yrs Years
Financial PerformanceBusiness OverviewGovernancePortfolio PerformanceFinancial ReportAdditional Information G
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FY20 Annual Report
Growthpoint Properties Australia
Level 31, 35 Collins Street, Melbourne VIC 3000
growthpoint.com.au