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STORE Capital25 August 2021
Appendix 4E
Results for the twelve months ended 30 June 2021
Results for announcement to the market
Revenue 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 2021
Interim distribution paid on 26 February 2021
Net tangible assets per stapled security
Net tangible assets per stapled security
Year ended
30-Jun-21
$m
294.2
198.3
553.2
154.4
Year ended
30-Jun-20
$m
292.7
197.2
272.1
168.3
Change
%
0.5%
0.6%
103.3%
(8.3%)
Amount per
security/unit
cents
10.00
10.00
Franked
amount per
security
%
Record
date
0%
0%
30-Jun-21
31-Dec-20
30-Jun-21
$
4.17
30-Jun-20
$
3.65
Change
%
14.2%
Additional information regarding the results for the year is contained in the FY21 annual report and the FY21 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 FY21 annual report and the FY21 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 FY21 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 FY21 annual report.
This announcement was authorised for release by Growthpoint’s Board of Directors.
For further information, please contact:
Virginia Spring
Investor Relations and Communications Manager
Telephone: +61 3 8681 2933
Growthpoint Properties Australia
Level 31, 35 Collins St, Melbourne, VIC 3000
growthpoint.com.au
About Growthpoint
Growthpoint provides spaces for people to thrive. For more than 11 years, we’ve been investing in high-quality industrial and office
properties across Australia. Today, we own and manage 56 properties, valued at approximately $4.6 billion.1
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. Moody’s has issued us
with an investment-grade rating of Baa2 for domestic senior secured debt.
1 Valuations as at 30 June 2021.
Growthpoint Properties Australia
Growthpoint Properties Australia Trust
ARSN 120 121 002
Growthpoint Properties Australia Limited
ABN 33 124 093 901 AFSL 316409
FY21
annual report
for the year ended 30 June 2021
space to thrive.
2
What’s
inside.
Directors’ Report
Operating and financial review
Business overview
FY21 highlights
Who we are
Our strategy
Introduction from the Chairman
and Managing Director
Property portfolio performance
The office market
Our office portfolio
The industrial market
Our industrial portfolio
FY21 sustainability performance
Financial performance
Risk management
Governance
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
Glossary
Contact details
3
3
4
6
8
12
12
14
16
18
20
22
28
32
32
34
36
59
61
62
66
98
99
100
105
107
109
110
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
2021 (FY21 or the year).
Reporting suite
Growthpoint’s reporting suite for FY21 includes the following
documents:
GOZ FY21 Annual Report
A review of Growthpoint’s financial and operational
performance for FY21, the Group’s remuneration report and
its financial statements.
GOZ FY21 Results Presentation
An overview of Growthpoint’s operational and financial
performance for the financial year.
GOZ FY21 Sustainability Report
A review of Growthpoint’s approach to sustainability and an
update on our progress in achieving our sustainability goals.
GOZ 2021 TCFD Statement
An overview of Growthpoint’s approach to managing the risks
and opportunities of climate change.
GOZ FY21 Property Compendium
A summary of Growthpoint’s property portfolio as at 30 June
2021.
GOZ FY21 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 (25 August 2021).
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 does
not undertake to update any forward-looking statements in
this report.
Front cover image: 120 Link Road, Melbourne Airport, VIC
Contents page image: 599 Main North Road, Gepps Cross, SA
3
FY21
highlights.
Property portfolio value
$4.5b
30 June 2020: $4.2b, +7.1%
Profit
after tax
Funds from
operations (FFO)
Distributions
$553.2m
25.7cps
20.0cps
FY20: $272.1m, +103.3%
FY20: 25.6cps, +0.4%
FY20: 21.8cps, -8.3%
Net tangible assets
(NTA) per security
$4.17
Portfolio
occupancy
97%
Weighted average
lease expiry (WALE)
6.2yrs
30 June 2020: $3.65, +14.2%
30 June 2020: 93%, +400bps
30 June 2020: 6.2yrs
Average NABERS
Energy rating
5.1
GRESB
score
74/100
FY20: 4.9 stars
PCP: 72/100, +2.8%
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 4
Directors’ report
Operating and financial review
Who
we are.
Total
properties
55
Property
portfolio value
$4.5b
Market
capitalisation
$3.1b
Total
employees
33
Number of
tenants
145
Number of
investors
>4,600
As at 30 June 2021
Growthpoint provides spaces for people to thrive. For
more than 11 years, we’ve been investing in high-
quality industrial and office properties across Australia.
Today, we own and manage 55 properties, valued at
approximately $4.5 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, service
providers, local communities, government and regulators.
Portfolio summary
as at 30 June 2021
Geographic diversity
by value
5
84%
located on
Eastern
seaboard
WA
$370.2m
1 office property
2 industrial properties
SA
$346.5m
1 office property
4 industrial properties
QLD
$1,173.8m
8 office properties
4 industrial properties
NSW
$1,137.1m
4 office properties
5 industrial properties
VIC
$1,317.4m
8 office properties
16 industrial properties
ACT
$176.0m
2 office properties
Geographic diversity
by value
Sector diversity
by value
Tenant type
by income
Victoria
29%
Queensland
26%
New
South
Wales
25%
Office
67%
Industrial
33%
Listed
company
60%
Western
Australia
8%
South
Australia
8%
Australian
Capital
Territory
4%
Government
23%
SME
3%1
Large
private
company
14%
1. Growthpoint estimate of proportion of tenants with revenue below $50 million.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 6
Directors’ report
Operating and financial review
Our
strategy.
Our goal is to provide Securityholders with sustainably growing
income returns and long-term capital appreciation.
We are focused on four strategic pillars.
1 Invest in
high-quality assets
2 Maximise
value
We seek to invest in high-
quality, modern commercial
real estate, that provide an
attractive income yield and
long-term capital appreciation
All our properties are located
in Australia, where we have an
in-depth understanding of the
market.
We develop asset retention
and management strategies
for each of our properties
to maximise income and
value. These include plans
for leasing, refurbishment,
expansion, development or
divestment.
3 Maintain
high-occupancy
4 Enter into
funds management
As we asset manage the
properties we own, we are
able to develop long-term
relationships with our tenants.
We are focused on ensuring
our properties meet our
tenants’ needs now and in
the future. This helps us to
maintain high occupancy levels
and consistent rental income.
We are exploring
opportunities to diversify our
income stream by entering
into funds management.
By leveraging our expertise,
we believe we can
generate higher returns on
capital employed for our
Securityholders.
7
3 Murray Rose Avenue,
Sydney Olympic Park, NSW
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 8
Directors’ report
Operating and financial review
Introduction
from the Chairman
and Managing Director.
Geoff Tomlinson
Independent Chairman and Director
Timothy Collyer
Managing Director
Looking back at FY21, it is impossible
not to reflect on the COVID-19 pandemic,
which continued to have a profound
impact on businesses and individuals
around the world. For Growthpoint,
it created challenges in our operating
environment, disrupted the way our team
worked together and delayed some of the
initiatives we had planned to undertake
in FY21.
However, we entered this period on
a strong footing and put in place the
necessary steps at the outset of the
pandemic to ensure we were able to
meet these challenges head-on. As a
result, we are pleased that in FY21 the
pandemic did not have a material direct
financial impact on the Group.
Financial performance exceeds
expectations
At the beginning of the financial
year, there still existed a great deal
of uncertainty about the longer-term
impact of the COVID-19 pandemic and
as a result, we did not provide earnings
guidance. As the year progressed,
however, we became more confident
in the outlook for the Group due to our
leasing success, which we discuss further
on page 10 and in February, we provided
earnings guidance of 25.2 – 25.5 cents
per security (cps). We subsequently
upgraded this guidance to 25.4 – 25.7
cps in April. Pleasingly, our final result,
25.7 cps, is at the upper end of our
upgraded guidance.
While FFO per security has only grown
0.4% year on year, this is a strong
result, as the Group started the year
with a $10.4 million reduction to its
earnings, due to Woolworths vacating
a large industrial asset during FY20.1
This loss has been offset by increased
income from our distribution centre in
Gepps Cross, following the completion
of a significant expansion in partnership
with Woolworths. In addition, we began
collecting income from Botanicca 3,
the Group’s new A-grade office building
in Richmond, Victoria, which has been
progressively leased over FY21 and is
expected to be fully leased by the end of
the calendar year.
Recognising the importance our
Securityholders place on receiving
distributions from the Group, the Board
provided FY21 distribution guidance of
20.0 cps at the beginning of the financial
Total securityholder return (TSR)
over 1, 3, 5 and 10 years (%)
34.0%
33.2%
10.1%
7.7%
11.6%
5.8%
15.5%
11.8%
1 year
3 years
5 years
10 years
Growthpoint TSR
S&P/ASX 200 REIT Accumulation Index TSR
Source: UBS Investment Research. Annual compound returns to 30 June 2021.
1. This includes eight months of rent and a surrender payment.
9
We are pleased that in FY21
the pandemic did not have
a material direct financial
impact on the Group
Return on equity (%)
to 30 June 2021 (per annum)
19.7%
15.6%
16.9%
15.1%
1 year
3 years
5 years
10 years
5 Murray Rose Avenue,
Sydney Olympic Park, NSW
year. Although our financial performance
has exceeded our initial expectations,
the Board decided not to increase the
FY21 distribution because we believe it is
prudent to maintain a lower payout ratio
going forward, between 75% and 85% of
FFO, as we expect incentives to remain
elevated in the near term.1 Maintaining
a more conservative payout ratio will
assist the Board in its efforts to provide
Securityholders with growing distributions
from FY21.
Growthpoint’s total
securityholder return
outperforms Index
In February, we initiated an on-market
buy-back program in response to market
volatility. At the time, our security price
was trading at a significant discount to
NTA, even though our business continued
to deliver a strong performance with no
significant direct financial impact from the
COVID-19 pandemic and we continued
to see strong valuation gains and leasing
success across both our office and
industrial portfolios.
Over the second half of the financial year,
Growthpoint’s security price significantly
appreciated and as a result, to date,
the Group has only purchased 416,643
securities (0.05% of issued capital).
As at 30 June 2021, Growthpoint’s
security price had made up the majority
of the ground lost at the outset of
pandemic. This drove the substantial
increase in our total securityholder return
(TSR) over the year and once again, we
delivered higher returns than the S&P/
ASX 200 REIT Accumulation Index. As
highlighted in the chart on page 8, the
Group has now outperformed the Index
over the last one, three, five and 10-year
time periods.
Growthpoint’s return on equity was
19.7% for the year. This result reflects
the significant valuation gains across the
Group’s office and industrial portfolio,
which we discuss further on the next
page.
1. Growthpoint’s distribution policy will be reviewed on an annual basis.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 10
Directors’ report
Operating and financial review
Introduction from the Chairman
and Managing Director.
Portfolio rationalisation to
improve quality
At Growthpoint, we regularly review our
$4.5 billion property portfolio to ensure
our assets continue to fit within our
strategy. During FY21, three assets were
successfully sold.
In August 2020, we sold a vacant
industrial property, located at 120
Northcorp Boulevard, Broadmeadows,
Victoria, rather than pursuing a lengthy
development project in an uncertain
operating environment, which we
decided was outside the Group’s risk and
return appetite. There were also costs
associated with holding this non-income
producing asset.
In March 2021, we announced that we
had exchanged contracts to sell our
leasehold interest in Quad 2, 6 Parkview
Drive and Quad 3, 102 Bennelong
Parkway, Sydney Olympic Park, New
South Wales (the Quads) as these
properties no longer fitted within the
Group’s portfolio of defensive assets. The
WALE of these assets was approximately
1.6 years as at 31 March 2021,
significantly below the Group’s office
portfolio’s WALE. In addition, around 17%
of our tenants were based at the Quads,
which was very management intensive,
despite these assets representing only
1.5% of our portfolio by value.
Although we divested the Quads, we
remain confident in the long-term outlook
for Sydney Olympic Park and we were
pleased that we were able to relatively
quickly re-invest the sale proceeds from
the Quads into an A-grade, modern office
asset, located nearby.1 The new property,
situated at 11 Murray Rose Avenue, is
fully leased to high-quality tenants with a
4.8 year WALE as at 30 June 2021.
Long WALE maintained due to
significant leasing success
During FY21, the portfolio’s occupancy
increased to 97% and we maintained
our long WALE of 6.2 years, due to
our substantial leasing success. Most
notably, in October we signed a 10-year
and seven-month lease with Bunnings
Group Limited (Bunnings) for 71% of
1. Settlement occurred 24 August 2021.
Botanicca 3. The lease was executed
in the middle of Melbourne’s extended
COVID-19 lockdown and was one of
the largest office leasing transactions
completed nationally in FY21.
We also signed a number of other
long leases with key tenants, including
Monash University, the South Australian
Government, Australia Post and
Autosports Group. For lease renewals,
we were pleased that there were no
significant changes to tenants’ space
requirements and our tenants continued
to seek long leases, with the average
lease term of all leases negotiated being
8.2 years.
Driven by the highly desirable nature
of Growthpoint’s portfolio, our
leasing success and proactive asset
management over a number of years, the
value of the Group’s portfolio increased
by 10.2% or $416.8 million, on a like-for-
like basis, over FY21. This was the largest
12-month like-for-like increase in the
Group’s history.
Accelerating our
sustainability initiatives
At Growthpoint, we are committed to
operating in a sustainable way and
reducing our environmental footprint.
During FY21, we significantly accelerated
our target to achieve net zero carbon
emission across our operationally
controlled office assets and corporate
activities. We are now targeting 2025,
25 years earlier than our previous target,
which was set to align to the 2015 Paris
Agreement.
We also significantly progressed our
sustainability reporting to further align
with the recommendations made by the
Task Force on Climate-related Financial
Disclosures (TCFD). This includes
publishing the results of high-level
scenario analysis, which considers the
likely impact of an increase in global
temperature on our portfolio (physical
risks) and stress-tests our resilience
to a rapid transition to a low-carbon
economy (transition risks). Pleasingly,
the analysis did not identify any material
downside financial risk under either
scenario. The findings highlighted that our
Driven by the highly desirable
nature of Growthpoint’s
portfolio, our leasing
success and proactive asset
management over a number
of years, the value of the
Group’s portfolio increased
by 10.2% or $416.8 million,
over FY21, on a like-for-like
basis. This was the largest
12-month like-for-like increase
in the Group’s history.
focus on maintaining a resilient portfolio,
of high sustainability-rated assets,
means we are well placed to respond
to the potential physical and transitional
impacts of climate change in the short
term (over the next 10 years). For more
information, please see our inaugural
TCFD Statement, which is available on
our website.
During the year, Growthpoint continued
to perform strongly in external ESG
benchmarks. The Group’s overall Global
Real Estate Sustainability Benchmark
(GRESB) score increased 3% to 74/100,
6% higher than the GRESB average
score and the Group maintained its
above-average Carbon Disclosure Project
(CDP) score of B.
Keeping our people connected
and motivated
We recognise that our people are integral
to our success and we are committed
to ensuring that Growthpoint is a great
place to work. In FY21, the COVID-19
pandemic continued to impact our ability
to work together in our Melbourne head
office. To ensure we stayed connected
and motivated while working from home
for an extended period of time, we
organised regular virtual social events.
We also asked the Black Dog Institute to
host a session which focused on mental
health and building resilience.
11
120 Link Road,
Melbourne Airport, VIC
At the outset of the pandemic, we
made a commitment to all permanent
employees that we would support them
through this period, with no reduction in
working hours or fixed remuneration. We
are pleased that at the end of the financial
year, our entire team was intact.
In February, we engaged an external
provider to undertake our annual
employee survey. Growthpoint’s
engagement and alignment scores were
in line with FY20 and we maintained
our position in the top quartile of our
benchmark group. This was a particularly
pleasing result, as we understand not
all companies within our benchmark
group faced the same extended work
from home government directives as
Growthpoint.
Looking ahead to FY22 and
beyond
As we look ahead, the future of our
operating environment, and the broader
Australian economy is less clear, when
compared with just a few months ago,
as many parts of Australia are now
under lockdown due to the threat of
the Delta-variant of COVID-19. Unless
a significantly higher proportion of the
population is vaccinated, which is unlikely
to occur until much later in the calendar
year, lockdowns of varying length and
severity are likely to remain an ongoing
occurrence in Australia.
Despite this near-term uncertainty,
Growthpoint is in a good position to
continue to perform strongly. Throughout
this unprecedented period, our business
has highlighted its resilience, underpinned
by our portfolio of modern, well-located
assets, leased predominately to large
organisations and government tenants.
As a result of this confidence, we are
pleased to provide FY22 FFO guidance
of at least 26.3 cps, representing at a
minimum growth of 2.3% over FY21, and
FY22 distribution guidance of 20.6 cps,
3.0% higher than FY21.
Looking further ahead, we believe the
Group is well placed to deliver long-term
value to its Securityholders. We remain
positive on the outlook for metropolitan
offices, which have performed better
during the pandemic than their CBD
counterparts, as we discuss on pages
12-13 of this report, and there continues
to be strong demand for our metropolitan
offices from our existing and potential
tenants.
Demand for well-located industrial assets
continues to grow, fueled by sustained
growth in online shopping and evolving
consumer expectations, which we
explore on pages 16-17 of this report.
These trends are expected to support
ongoing occupier and investor appetite
for this sector.
The Group’s gearing and payout ratio
are both at record lows and we are
actively pursuing growth opportunities
to capitalise on our strong position. This
includes acquiring high-quality properties
and entering funds management.
We would like to take this opportunity to
thank our employees for their dedication
this year. We are proud of what we have
accomplished together during FY21,
against an unprecedented backdrop.
We would also like to acknowledge
our tenants, suppliers and other key
stakeholders for their continued support.
And finally, we thank our Securityholders
for their ongoing commitment to
Growthpoint.
Geoff Tomlinson
Chairman
Timothy Collyer
Managing Director
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 12
Directors’ report
Operating and financial review
The office
market.
After a lengthy period of working
remotely to restrict the spread of the
COVID-19 virus, many commentators
began to question whether a
permanent shift to more flexible
working arrangements would lead to
a sustained decline in office demand.
While it remains too early to predict
long-term trends, we are starting to see
encouraging signs that while a degree
of flexibility is expected to remain, it is
unlikely that this will lead to a widescale
decline in office demand.
Workers are increasingly
returning to the office
As restrictions have eased around
Australia, increasingly workers have
returned to the office and enjoyed the
many benefits of working in the same
physical space as their colleagues,
such as face-to-face collaboration and
mentoring junior employees.
Analysis undertaken by the Property
Council of Australia (PCA) has found that
in June 2021, physical occupancy was
just below pre-pandemic levels on ‘peak’
days in many central business districts
(CBDs) around Australia, as highlighted
in the chart at right.1 This was particularly
evident in CBDs where COVID-19
restrictions have been relatively less
severe.
Interestingly, there was a notable
difference in office occupancy between
‘peak’ and ‘trough’ days, as employees
have maintained more flexible
arrangements and are continuing to work
from home for a proportion of the week,
generally one to two days. It appears as if
Peak and low day level of physical
occupancy in CBD office buildings (%)2
Peak day
Low day
Government-mandated
restrictions limited
office occupancy in
Melbourne for the
majority of June 2021
94
93
90
86
83
80
77
60
56
55
57
57
47
43
37
Hobart
CBD
Darwin
CBD
Adelaide
CBD
Perth
CBD
Brisbane
CBD
Sydney
CBD
Canberra
16
Melbourne
CBD
Source: PCA, June 2021.
workers are aligning their days working in
the office, either by choice or as required
by management, to maximise the benefits
of working together. If this is the case,
tenants are likely to require a similar
amount of space as before the pandemic
to facilitate everyone using the office on
the same days.
Unfortunately, the same PCA data is not
available for metropolitan offices. Across
our portfolio, we have generally observed
higher occupancy than recorded by
the PCA for CBDs. This may be driven
by some of the attractive features of
metropolitan offices in a post-pandemic
world, such as:
õ Lower density – Metropolitan offices
generally have less levels, meaning
shorter lift wait times and larger
floor plates, which support physical
distancing.
1. This analysis was undertaken before COVID-19 lockdowns were introduced in the Northern Territory, Victoria, South Australia, New South Wales and Queensland for differing
periods during July and August 2021
2. The PCA’s CBD office occupancy data is presented as a percentage of the pre-COVID rate of office occupancy, which is estimated at 90%.
1
2
3
4
5
20km
Parramatta
1
10km
2
North Sydney
3
Sydney Olympic Park
S Y D N E Y
M E L B O U R N E
10km
4
5
Richmond
13
30km
20km
õ Location – Metropolitan offices are
often located closer to where people
live, reducing time spent on public
transport, one of the largest concerns
cited by employees when returning to
the office.
õ Car parking – Metropolitan offices
generally have a higher ratio of car
parks than CBD offices.
Key metropolitan markets
proving more resilient than CBDs
Over the last 12 months, we have seen
a decline in net effective rents across
Australia, driven primarily by higher
incentives. While a proportion of this
decline can be attributed to reduced
demand during the pandemic, as many
tenants did not want to make leasing
decisions in an uncertain operating
environment, there was also an increase in
supply in many markets. The decline in net
effective rents has been most pronounced
in the Sydney CBD, where rents are
significantly higher than in other capital
cities around Australia following rapid
growth in the lead up to the pandemic.
In Sydney, the decline in net effective
rents has been far less pronounced in
key metropolitan markets compared to
the CBD, as highlighted in the graph at
right. While the dynamics of each market
differ, factors that influence this trend are
lower vacancy, lower supply and relative
attractiveness of metropolitan markets in
a post-pandemic world, as discussed on
the previous page. Despite the reduction,
Sydney CBD rents remain significantly
higher, at least two to three times more,
than metropolitan markets.
In Parramatta, net effective rents have
declined greater than the CBD, due to
increased incentives as more supply
has come to the market. Growthpoint’s
only asset in Parramatta has a 24-year
remaining lease term with the New South
Wales (NSW) Police Force.
High-quality tenants committing
to metropolitan locations during
COVID-19 pandemic
Historically, some commentators have
speculated that when CBD rents decline,
tenants based in metropolitan locations
will choose to relocate to the CBD, as it
becomes relatively more affordable. To
date, this trend has not been observed on
a wide scale.
Indeed, in Sydney, we have seen a
number of high-quality tenants commit
to metropolitan locations over FY21, as
highlighted in the map above. Many of
these tenants’ offices were already located
in metropolitan Sydney and their decision
to move appears to be motivated by a
desire to upgrade their accommodation,
which is often referred to as a ‘flight to
quality’. For example, NSW Ambulance
is moving from multiple lower grade
buildings in Lilyfield to a single A-grade
office in Sydney Olympic Park.
It has been a similar story in Melbourne,
where we have also observed a ‘flight
to quality’. For example, Bunnings, who
signed a 10-year and seven-month lease
at our recently-completed Botanicca
3 in October, are consolidating six
Melbourne offices into a single home at a
higher-quality asset in a more prominent
metropolitan location.
In Melbourne, we have also seen a few
examples of high-profile tenants choosing
to move to metropolitan locations
from the CBD. Most notably, Australia
Post is moving their longstanding
CBD headquarters to a new 35,000
square metre building on Swan Street,
Richmond.
While there still remains speculation
around the future office market, there
are certainly encouraging signs that
the metropolitan market will continue
to perform strongly in a post-pandemic
world. Growthpoint’s portfolio of
exclusively A-grade offices is well-placed
to benefit from the current trends which
continue to evolve.
Decline in Sydney markets’ net effective rents, 2Q21 vs 2Q20 (%)
Sydney CBD
Parramatta
Sydney Olympic Park
Macquarie Park
Sydney Fringe
-4.3%
-4.0%
-1.0%
Decline driven by increased
incentives. Growthpoint’s
exposure limited to one
asset, which has a 24-year
remaining lease term with
the NSW Police Force
-17.8%
-20.7%
Source: JLL REIS Data - 2Q21.
High-profile tenants committing to metro locations during COVID-19Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 14
Directors’ report
Operating and financial review
Our
office
portfolio.
Our office portfolio consists of
24 high-quality office properties,
which represent 67% 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 FY21, Growthpoint signed
26 office lease agreements, totalling
47,422 square metres or 12.7% of our
office portfolio by income. The weighted
average lease term for new and renewed
leases was 8.6 years and the weighted
average annual rent review was 2.7%.
Due to this leasing success, our office
portfolio WALE increased from 6.7 years
to 7.0 years.
In October 2020, we signed a 10-year
and seven-month lease with Australia’s
leading retailer of home and lifestyle
products, Bunnings, across 13,886
square metres, or 71%, of our new
A-grade office building, Botanicca 3.
The new lease has enabled Bunnings
to consolidate its Victorian and National
Store Support teams, previously
accommodated across six Melbourne
offices, into the one location.
After securing Bunnings as the key tenant
for Botanicca 3, we signed an additional
three leases, taking the building’s
occupancy to 78% at the end of FY21.
During FY21, we also renewed leases
with key tenants, Monash University,
the South Australian Government and
Autosports Group.
Due to our leasing success, the office
portfolio vacancy has decreased to 3%
as at 30 June 2021 (30 June 2020: 8%).
At the beginning of FY22, the Group
signed a further six leases across our
office portfolio, including extending
our lease with Samsung for five years,
which was a key expiry in FY22. One of
these leases was at Botanicca 3, taking
the building’s occupancy to 82%. We
1. Settlement occurred 24 August 2021.
also have agreed one further heads
of agreement at Botanicca 3, which
if executed, would take the building’s
occupancy to 92%.
Divestments and acquisitions
During the second half of FY21, after
running a competitive sale process,
the Group sold its leasehold interest in
Quad 2, 6 Parkview Drive and Quad 3,
102 Bennelong Parkway, Sydney Olympic
Park, New South Wales (the Quads)
for $66.1 million, as the properties no
longer fitted within the Group’s portfolio
of defensive assets. The WALE of these
assets was approximately 1.6 years as at
31 March 2021, significantly shorter than
the Group’s office portfolio’s WALE. In
addition, the assets accounted for 15%
of office portfolio vacancy by income
and approximately 17% of the Group’s
tenants, which was very management
intensive.
While the Group decided to divest the
Quads, we remain confident in the
long-term outlook for Sydney Olympic
Park, as it is well placed to benefit from
continued investment in infrastructure,
which will further connect it to population
centres and the CBD. We were pleased
to be able to re-invest the sale proceeds
from the Quads relatively quickly,
acquiring a 100% leasehold interest in an
A-grade, modern office asset, situated at
11 Murray Rose Avenue, Sydney Olympic
Park, for $52.0 million.1 This asset is
fully leased to high-quality tenants with a
4.8 year WALE as at 30 June 2021.
Valuation
Over FY21, the value of Growthpoint’s
office portfolio increased by $214.9
million, or 7.6% on a like-for-like basis,
to $3.0 billion. This uplift was primarily
driven by significant gains at three assets:
õ 1 Charles Street, Parramatta, New
South Wales increased in value by
$85 million or 19% as demand for
long-WALE assets strengthened over
Sydney
Olympic Park
$264m
total asset value
1
2
1
2
3
NEW
ACQUISITION
Purchase price: $52 million
Lettable area: 5,684 sqm
WALE: 4.8 years
Initial income yield: 5.5%*
Completed in 2018, this
A-grade office building
comprises five levels of office
space plus ground floor retail
and two levels of basement
parking. The building has a 4.5
star NABERS Energy rating and
5.5 star NABERS Water rating.
*Initial passing yield before
abatements
the year. The asset has a 23.5-year
WALE as Growthpoint entered into
a new 25-year lease with the NSW
Police Force in December 2019.
õ Botanicca 3, Richmond, Victoria
increased in value by $41 million or
29% as a number of lease agreements
were signed during the year increasing
the building’s occupancy to 78% as at
30 June 2021.
õ 75 Dorcas Street, South Melbourne,
Victoria increased in value by
$35 million or 16% as we entered into
a new 15-year and 11-month lease
with major tenant, Autosports Group.
Excluding these the three assets, the
remainder of the office portfolio increased
in value by 2.7% over FY21.
3 Murray Rose Avenue, Sydney Olympic Park5 Murray Rose Avenue, Sydney Olympic Park11 Murray Rose Avenue, Sydney Olympic Park Sydney
CBD
4
15
Office portfolio
snapshot
30 June 2021
30 June 2020
26
$2,879.3m
Number of assets
24
Total lettable area
317,409 sqm 327,579 sqm
Total portfolio value
$3,025.6m
WALE
7.0 years
Weighted average
capitalisation rate
5.3%
Weighted average
rent review1
3.6%
NPI
$152.5m
6.7 years
$151.9m
5.6%
3.5%
1. Assumes CPI change of 3.85% per annum as per
ABS release for FY21.
Office portfolio lease
expiry profile (%)
per financial year, by income
31
16
16
9
9
10
6
3
Vacant
FY22
FY23
FY24
FY25
FY26
FY27
FY28+
Top ten office tenants
as at 30 June 2021
NSW Police Force
Commonwealth of Australia
Country Road Group
Bank of Queensland
ANZ Banking Group
Bunnings Warehouse
Samsung Electronics
Lion
Jacobs Group
Fox Sports
Total/weighted average
Balance of portfolio
Total portfolio
%
portfolio
income
WALE
(yrs)
12 23.5
10
5.1
5 11.0
5
4
4
4
4
3
3
54
46
100
5.6
4.7
9.8
0.7
2.8
4.4
1.5
9.5
4.1
7.0
3
Olympic Park
train station
4
5
5
1
20km
SYDNEY OLYM PIC PAR K
10km
SYDNE Y OLY MPIC
PAR K METRO STATION
S Y D N E Y
WESTCONNEX M4
ENTRY/EXIT
SYDN EY METRO WEST
WESTCONNEX ROA D
WESTCONNEX TUNNEL
WestConnex – road projectStage one opened 2019Australia’s largest infrastructure project - ~$16.8 billion Future stages expected to further improve accessibility to the North Shore, South Sydney and Sydney AirportConstruction started 2020New underground railway to connect Greater Parramatta and the Sydney CBDStation confirmed for Sydney Olympic ParkExpected to more than halve the current travel times to Parramatta and the CBD to six minutes and 14 minutes respectivelySydney Metro West – rail projectSignificant investment in Sydney’s infrastructure will improve transport links to Sydney Olympic ParkGrowthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 16
Directors’ report
Operating and financial review
The industrial
market.
The industrial market continues
to perform strongly, driven by
sustained tenant demand, and
unmet investor appetite.
Further yield compression
across Australian industrial
sector
The Australian industrial property market
continues to be one of the most highly
sought-after sectors by both domestic
and offshore investors, particularly as
it has proven resilient throughout the
COVID-19 pandemic.
Despite continued restrictions on
international travel, transaction volumes
remain elevated in FY21, with $12.2
billion of assets changing hands across
Australia, more than double the 10-year
average.1 Most notably, Blackstone’s
Milestone Logistics portfolio, comprising
45 assets, sold for approximately
$3.8 billion in the second half of FY21,
the largest direct property transaction to
date in Australia. Demand was particularly
strong for institutional-grade assets, with
acquisitions offering scale being most
sought after.
This significant investor appetite appears
unrelenting, as strong occupier demand
supports the sector’s fundamentals.
JLL estimates that there is currently $45
billion of capital earmarked for investment
in Australian industrial assets.2 This is
more than three times the value of total
industrial transactions in FY21.
As a result of this strong investor
appetite, yields significantly tightened
The rise of e-commerce in Australia
online retail turnover as a % of total
Australian retail turnover
9.4%
9.3%
3.1%
3.5%
2.6%
4.2%
6.3%
5.6%
2014
2015
2016
2017
2018
2019
2020
2021
YTD
Source: ABS, May 2021.
over FY21. Prime yields are now
consistently between 4.00% and 5.00%
and ‘super-prime’ yields, for modern
assets with WALEs greater than 10 years,
are now approximately 3.50%.
The rise of e-commerce in
Australia expected to continue
Over the last decade, the penetration
of online shopping has been steadily
increasing in Australia, as highlighted in
the chart above. This trend accelerated
during the COVID-19 pandemic as many
bricks and mortar shops closed and
individuals were encouraged to stay at
home to reduce the risk of transmitting
the virus.
As restrictions have eased, many
individuals who tried online shopping
for the first time during the pandemic
have continued to shop online. In
May 2021, one of the Group’s largest
industrial occupiers, Australia Post’s
e-commerce parcel deliveries were up
47.5%, compared with May 2019. In the
12 months to 31 May 2021, year-on-year
growth was up 37.2%.3
What motivates individuals to shop
online has changed since the outset
of the pandemic, as highlighted in the
chart to the right. During the pandemic,
34% of individuals shopped online due
to COVID-19 restrictions and another
23% because they feared catching the
virus. In the following year, the number
of individuals citing these reasons
1. Savilles, April 2021. JLL, 2Q21 REIS data.
2. JLL, ‘Industrial & Logistics Investment Review & Outlook 2021’,
3. Australia Post, ‘Inside Australian Online Shopping’, June 2021.
17
Industrial floorspace gross take-up across Australia (sqm)
Annual average 2008-2020
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
YTD
Source: JLL July 2021.
dropped to 11% and 13%, respectively.
Between January 2021 and May 2021,
the three most commonly cited reasons
for shopping online were convenience,
access to greater range of products and
cheaper prices.
Adapting supply chains to meet
consumer expectations
To keep up with the rise in e-commerce,
many retailers have needed to make
changes to their supply chains to ensure
that they are able to meet consumer
expectations. Key considerations include:
õ
Increased inventory – The COVID-19
pandemic caused significant
disruptions to global supply chains,
making it difficult or even impossible
for retailers to access required
products, highlighting the risks
associated with just-in-time supply
chain operations. In addition, panic
buying led to surges in demand,
which retailers were frequently unable
to meet. As a result, many retailers
are increasing their inventory levels
to become more resilient to future
shocks.
õ Faster delivery times – Even before
the COVID-19 pandemic, many online
stores were offering faster delivery
times, such as next-day or even
same-day, to differentiate themselves.
Despite the value consumers place
on fast delivery, they seem reluctant
to pay much more for this service,
leaving retailers to bear the additional
cost.1
õ Reverse logistics – Customers are
putting increased importance on
the returns process when shopping
online. Retailers who have a relatively
cumbersome process in place for
the consumer, may lose business. It
is estimated that a reverse logistics
supply chain on average requires 20%
more warehouse space than forward
logistics.2
Retailers around Australia, grappling with
how to offer the best online customer
experience, are focused on ensuring they
have the right warehousing space(s) in
the optimal location(s), which is driving
increased demand for well-located
industrial assets.
Occupier demand for industrial
stock reached record high
Largely driven by the growth in
e-commerce, occupier demand for
industrial space reached a record high of
2.9 million square metres in 2020. For the
first time, retail trade sector floorspace
demand was the main driver of growth
across the industrial sector, contributing
34%.3 Other major contributors include
new trends in cold storage and growth in
the pharmaceutical sector.
The level of Australia’s gross industrial
floorspace take up has been above
the 2008-2020 annual average of
approximately 2.2 million square metres,
over the past five years, as highlighted in
the chart above. In the first half of 2021,
gross take-up has already exceeded the
annual average.
CBRE Research expects an additional
350,000 square metres of new industrial
space will need to be developed each
year to meet the forecast growth in
e-commerce.4
Consumers move to
shopping online for
convenience, greater
range and cheaper
prices
Reasons for shopping online in
2020 vs 2021 (%)
Jan-21 to May-21
At the start of the pandemic, Mar-20 to May-20
Shopping online is quicker /
more convenient / saves me time
Access to a greater range
of products online
49%
45%
44%
38%
Some shops were shut /
restrictions forced me to shop online
11%
34%
Access to bigger discounts /
cheaper prices
39%
31%
Fear of
catching COVID-19
13%
23%
Bored / shopping online
for entertainment
15%
18%
Shortages of some products
in bricks and mortar stores
13%
15%
I enjoy shopping online more than
in bricks and mortar stores
17%
14%
Other
reasons
7%
7%
1. McKinsey&Company, ‘Parcel delivery, the future of last mile’, September 2016.
2. CBRE Research, ‘Restart the uneven recovery’, 2021.
3. JLL, ‘Industrial & Logistics Investment Review & Outlook 2021’, March 2021.
4. CBRE Research, ‘Restart the uneven recovery’, 2021.
Source: Australia Post, ‘Inside Australian
Online Shopping’, June 2021
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 18
Directors’ report
Operating and financial review
Our
industrial
portfolio.
Substantial rerating in
industrial sector driving
strong valuation gains
across Growthpoint’s
portfolio
Our industrial portfolio consists
of 31 modern industrial
properties, which represent 33%
of Growthpoint’s total property
portfolio by value. Our industrial
properties are well-located, near
key logistics hubs or population
centres.
Leasing
During FY21, Growthpoint signed seven
industrial lease agreements, totalling
113,559 square metres or 11.7% of
our industrial portfolio by income. The
weighted average lease term for new
and renewed leases was 7.2 years and
the weighted average annual rent review
was 3.4%, which are both above the
existing industrial portfolio averages.
In February 2021, the Group signed
a 10.5 year lease with Australia Post
for 12-16 Butler Boulevard, Adelaide
Airport, South Australia. Australia
Post will use the 16,835 square metre
distribution facility as a parcel fulfilment
centre.
We were pleased to further build on
our partnership with Australia Post,
agreeing a new 10-year lease for 38-40
Annandale Road, Melbourne Airport,
Victoria in June. The facility is being
updated to become an automated
parcel and distribution centre.
During FY21, we also agreed leases
with Laminex Group, Opal Packaging
Australia and Volo Modular. As a
result of our leasing success, vacancy
decreased to 2% (30 June 2020: 4%).
The Group’s key expiry in FY22 is a
distribution centre, located in Larapinta,
Queensland, which is fully leased to
Woolworths. This lease represents
approximately 17% of the Group’s
industrial portfolio’s income, or 5% of
the Group’s total portfolio’s income.
Woolworths has indicated to the Group
that it plans to exercise a 5-year option
and a market rent review is underway.
Divestments
In August 2020, at the height of the
COVID-19 pandemic, we decided
to divest our vacant industrial
asset at 120 Northcorp Boulevard,
Broadmeadows, Victoria for
$50.2 million. After reviewing all options
for the site, we recognised that pursuing
a lengthy development project in an
uncertain operating environment at the
time was outside the Group’s risk and
return appetite. There were also costs
associated with holding this non-income
producing asset.
Valuation
Over FY21, the value of the industrial
portfolio increased by $202.0 million,
or 15.6% on a like-for-like basis, to
$1.5 billion. This uplift was driven
primarily by yield compression, as well
as leasing success.
Over the last 12-months, a significant
re-rating has occurred across the
Australian industrial sector, fueled by
substantial international and domestic
demand for high-quality industrial assets.
As a result of increased demand, the
weighted average capitalisation rate of
the industrial portfolio tightened 86 basis
points to approximately 5.2%.
Eighty-three percent of industrial assets
increased in value. The largest valuation
gains were seen at the following three
assets:
õ 599 Main North Road, Gepps
Cross, South Australia increased
in value by $39 million or 21% due
to further strengthening of investor
demand for long-WALE institutional
grade industrial assets. In FY20,
Growthpoint entered into a 15-year
lease extension with Woolworths over
this asset.
õ 20 Colquhoun Road, Perth Airport,
West Australia increased in value
by $36 million or 20% due to further
strengthening of investor demand
for institutional grade industrial
assets. The asset is fully leased to
Woolworths. The current lease expires
in four years.
õ 3 Maker Place, Truganina, Victoria
increased in value by $10 million or
25% due to strong market rent growth
in this highly sought-after location and
yield compression.
Excluding these the three assets, the
remainder of the industrial portfolio
increased in value by 13.3%.
Industrial portfolio
snapshot
30 June 2021
30 June 2020
19
32
$1,343.4m
Number of assets
31
Total lettable area
715,619 sqm 715,351 sqm
Total portfolio value
$1,495.4
WALE
4.7 years
Weighted average
capitalisation rate
5.2%
Weighted average
rent review1
3.1%
NPI
$77.7m
5.0 years
$85.1m
2.7%
6.0%
1. Assumes CPI change of 3.85% per annum as per
ABS release for FY21.
Industrial portfolio lease
expiry profile (%)
per financial year, by income
26
20
18
11
10
8
5
13.9 yr
WALE
+21%
valuation
increase
599 Main North Road,
Gepps Cross, SA
4.3 yr
WALE
+20%
valuation
increase
20 Colquhoun Road,
Perth Airport, WA
2
12-16 Butler Boulevard,
Adelaide Airport, SA
10.5 yr
new lease
10 yr
lease ext.
38-40 Annandale Road,
Melbourne Airport, VIC
Significant tenant
Australia Post makes
long-term commitment
to Growthpoint’s assets
to meet growth in
e-Commerce
During FY21, Growthpoint negotiated
two leases with Australia Post.
Australia Post is now Growthpoint’s
third largest industrial tenant
contributing 6% of our industrial
portfolio income.
Australia Post plans to use both
facilities as automated parcel
fulfilment centres in response to
growing parcel volumes.
Vacant
FY22
FY23
FY24
FY25
FY26
FY27
FY28+
Top ten industrial tenants
as at 30 June 2021
Woolworths
Linfox
Australia Post
Laminex Group
HB Commerce
Brown & Watson
International
The Workwear Group
Autocare Services
Symbion
Mainfreight Distribution
Total/weighted average
Balance of portfolio
Total portfolio
%
portfolio
income
WALE
(yrs)
40
10
5.4
3.7
6 10.0
4
3
3
2
2
2
1
73
27
100
4.0
1.2
4.1
6.0
9.3
7.5
1.4
5.4
2.9
4.7
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 20
Directors’ report
Operating and financial review
FY21
sustainability
performance.
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
existing environment, social and governance (ESG) objectives
and have announced new targets. Below is a brief snapshot.
A detailed overview of our performance can be found in
our sustainability report, which is available on our website,
sustainability/growthpoint.com.au.
Accelerated our
decarbonisation target to
net zero 2025
Previous commitment made in 2017 was for net zero by
2050 which was set to align with the Paris Agreement
Responsible and
transparent governance
Published inaugural
TCFD Statement
Maintained high-
average NABERS
Energy rating1
5.1
FY20: 4.9 stars
Increased
GRESB
score
74/100
PCP: 72/100
Maintained high employee engagement and
alignment scores in top quartile of
benchmark group
Employee
engagement
Employee
alignment
77%
FY20: 77%
63%
FY20: 64%
Published inaugural
Modern Slavery Statement
Growthpoint sponsors Healthy Heads in Trucks & Sheds, a foundation focused on mental health and wellbeing for workers in the road transport and logistics industries. 21
Roof-top solar
PV systems
totalling
230 kW
6.0
NABERS
Energy rated
3 and 5 Murray Rose Avenue,
Sydney Olympic Park
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 22
Directors’ report
Operating and financial review
Financial
performance.
Woolworths vacating a large distribution
centre in February 2020. This included
eight months of rental income, as well
as a surrender payment. The increase
in FFO was driven by increased income
from our recently expanded Woolworths
distribution centre in Gepps Cross and
Botanicca 3. We also had a reduction in
our tax expense, following the completion
of our profit-making developments in
FY20.
Reflecting our resilient business model,
and steps we put in place at the
beginning of the COVID-19 pandemic
to protect our business, there was no
material impact from the pandemic on
our FY21 financial results.
While our expectations for FFO increased
over the financial year, the Board decided
to maintain the Group’s distribution
at 20.0 cps. The Board believes that
maintaining a more conservative payout
ratio going forward, between 75% and
85% of FFO, is prudent as we expect
incentives to remain elevated in the near
term. This will assist the Board to achieve
its objective of providing Securityholders
with growing distributions from FY21.
The distribution policy will be reviewed
annually.
This year, the Group delivered
a solid performance, against a
challenging backdrop, ahead of
our expectations.
At the outset of FY21, there still existed
significant uncertainty around the
impact of the COVID-19 pandemic on
the Group’s operating environment
and the broader Australian economic
environment. As a result, the Group did
not provide FFO guidance. However,
acknowledging the importance that
Securityholders place on receiving
distributions from the Group, the Board
did provide distribution guidance of
20.0 cps at the outset of the financial
year.
As the year progressed, we became more
confident in the outlook for the Group
due to our substantial leasing success
which allowed Growthpoint to provide
FY21 FFO guidance of 25.2 – 25.5 cps in
February. This guidance was upgraded at
the end of April to 25.5 – 25.7 cps as a
result of further leasing successes during
3Q21. Our final result, 25.7 cps, was at
the upper end of our upgraded guidance.
This result represents a 0.4% increase
over FY20, which was a good result,
as the Group started the year with a
$10.4 million reduction to NPI due to
Movements in NTA per security
for the 12 months ended 30 June 2021
+$0.06
+$0.04
+$0.26
-$0.04
$4.17
+$0.20
$3.65
+14.2%
since
30 June 2020
NTA
30-Jun-20
Office
revaluations
Industrial
revaluations
ADI
revaluation
Retained cash
from FFO
Other
NTA
30-Jun-21
As the year progressed, we
became more confident in the
outlook for the Group due to
our substantial leasing success
which allowed Growthpoint to
provide FY21 FFO guidance. This
guidance was upgraded at the
end of April as a result of further
leasing successes during 3Q21.
NTA per security increased by 14.2%
to $4.17, primarily reflecting the strong
valuation uplift across both our office and
industrial property portfolios during the
financial year.
Operating expenses
The Group’s management expense ratio
(MER) was 0.35%, inline with FY20,
and slightly below the Group’s five-year
average of 0.38%. Going forward, the
Group expects its MER to be around
0.4%.
Capital expenditure
During FY21, the Group’s capital
expenditure increased, primarily due to
two significant one-off projects:
õ The replacement of aluminium
composite panels at 333 Ann St,
Brisbane, Queensland. This project is
now complete.
õ The Group has an obligation to
make available $6.0 million to spend
on capital works at 1 Charles St,
Parramatta, NSW. As at 30 June 2021,
$4.0 million of refurbishment works had
been carried out.
Capital expenditure to average property
portfolio value remained within the Group’s
guidance range of between 0.3% and
0.5%. Growthpoint expects to remain
towards the upper end of its guidance
range over the short to medium term.
Financial performance snapshot
30 June 2021
30 June 2020
23
Funds from operations
$198.3m
Funds from operations
(per security)
25.7¢
Distributions
$154.4m
Distributions
(per security)
20.0¢
Net tangible assets
(per security)
$4.17
$197.2m
25.6¢
$168.3m
21.8¢
$3.65
Operating expenses
Total operating
expenses
Average gross
assets value
Operating expenses
to average gross
assets
FY21
FY20
$15.7m
$14.4m
$4,425.3m $4,170.8m
0.35%
0.35%
Capital expenditure
FY21
FY20
Total portfolio capex
$21.2m
$18.2m
Average property
asset value
Capital expenditure
to average property
portfolio value
$4,384.8m $4,154.7m
0.48%
0.44%
27-49 Lenore Drive,
Erskine Park, NSW
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 24
Directors’ report
Operating and financial review
Financial performance.
Key debt metrics and changes during FY21
30 June 2021
30 June 2020
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.
4,777.8
1,327.1
1,720.0
387.5
27.9
3.3
4.1
4,500.7
1,446.0
1,813.0
360.0
32.2
3.4
4.7
4.8 / 1.6
29.6 / 60
4.6 / 1.6
33.5 / 60
4.3
65.0
20
5.0
67.3
21
277.1
(118.9)
(93.0)
27.5
(4.3)
(0.1)
(0.6)
(0.7)
(2.3)
Capital management
Stress testing covenants
In response to market volatility,
Growthpoint initiated an on-market
buy-back program in February for up to
2.5% of its issued capital.1 At the time,
the Group’s security price was trading
at a significant discount to NTA, despite
the Group continuing to deliver a robust
performance, as detailed throughout this
report. As at 30 June 2021, the Group
had purchased 416,643 securities (0.05%
of issued capital) at an average price of
$3.27. The buy-back program remains in
place.
During the year, Growthpoint successfully
refinanced $315 million of debt, which was
due to expire in December 2021, for two
additional years at market pricing. It also
converted a $90 million facility from fixed to
floating at significantly improved pricing. In
June 2021, following the divestment of the
Quads, the Group repaid and cancelled a
fixed-rate facility of $60 million. The Group
has no debt maturing before December
2022 and a weighted average debt
maturity of over four years.
The weighted average cost of debt
reduced to 3.3% over the financial year
and is expected to reduce further as
cheaper debt headroom is deployed in
FY22. The Group also altered its fixed debt
target range to 50% - 100% (previously
65% - 100%) to allow more flexibility for
treasury management in a low cost debt
environment.
The Group’s gearing reduced to 27.9%
from 32.2% during the year, driven
Growthpoint has three main debt and lending covenants which are
regularly stress tested. They are:
LVR<60%
GOZ: 29.6%
ICR>1.6x
GOZ: 4.8x
To breach this covenant,
GOZ cap rate would need
to rise by 535 bps1
To breach this covenant,
NPI would need to fall by
67%2
Secured
property %
>85%
GOZ: 98%
Percentage must
remain above 85%
by investment property divestments,
increased valuations and a lower
distribution payout ratio.
confident that we will be able to build on
this positive momentum over the financial
year.
The Group has $387.5 million of undrawn
debt and $33.5 million of cash on its
balance sheet at 30 June 2021. In
FY22, the Group will look to deploy its
uncommitted debt headroom on accretive
transactions and increase its gearing back
towards the bottom of its target gearing
range.
Outlook
Growthpoint has had a strong start to
FY22, with several lease agreements
signed after 30 June 2021 (representing
3% of portfolio income) and we reached
settlement on a modern A-grade office
asset, located at 11 Murray Rose, Sydney
Olympic Park, New South Wales. We are
The Group is pleased to announce FY22
FFO guidance of at least 26.3 cps, which
represents a minimum of 2.3% growth over
FY21. Earnings growth will be driven by
increased income from Botanicca 3, which
we continue to expect to be fully leased by
the end of the calendar year, and higher
occupancy across the portfolio. We are
actively looking for opportunities to deploy
approximately $387 million of undrawn
debt, which would take us to the bottom
of our target gearing range and would be
accretive to the Group’s FFO.
The Group is also pleased to provide FY22
distribution guidance of 20.6 cps, which
represents 3.0% growth over FY21.
1. For further details on Growthpoint’s buy-back program, please refer to the Group’s Appendix 3C which was lodged with the ASX on 25 February 2021.
2. As at 30 June 2021. For illustrative purposes only. Assumes no change to other inputs that could impact the calculation of this metric.
25
Funds from operations
Growthpoint uses FFO as its primary earnings measure. FFO enables Securityholders to identify the income which is available for
distribution and also assists in determining the relative performance of the Group.
The following table reconciles statutory profit to FFO and reports distributions paid to Securityholders.
Reconciliation from statutory profit to FFO
Profit after tax
Less FFO items:
- Straight line adjustment to property revenue
- Net loss in fair value on sale of investment properties
- Net (gain) in fair value of investment properties
- Net (gain) / loss in fair value of investment in securities
- Net (gain) / loss in fair value of derivatives
- Net (gain) / loss on exchange rate translation of interest-bearing liabilities
- Amortisation of incentives and leasing costs
- Deferred tax expense / (benefit)
- Other
FFO
Distributions provided for or paid during the year ($m)
FFO per security (cents)
Payout ratio to FFO (%)
FY21
$m
553.2
(8.5)
1.5
(356.5)
(29.3)
43.8
(33.0)
26.9
(3.3)
3.5
198.3
154.4
25.7
77.9
FY20
$m
272.1
1.0
0.0
(116.9)
15.7
(31.5)
28.5
20.8
3.8
3.7
197.2
168.3
25.6
85.3
Change
Change
$m
281.1
(9.5)
1.5
(239.6)
(45.0)
75.3
(61.5)
6.1
(7.1)
(0.2)
1.1
(13.9)
0.1
%
103.3
(8.3)
0.4
(7.4)
Gearing movement
for the 12 months ended 30 June 2021
Gearing
target range
35%-45%
32.2%
-2.6%
-1.7%
45%
40%
35%
30%
25%
20%
15%
-3.4%
-0.5%
+3.4%
+0.5%
27.9%
27.9%
430bps
reduction since
30 June 2020
30-Jun-20
Investment
revaluations
Divestments
Cash from
operating
activities
FX translation
and MTM
derivatives
Distribution
paid
Capex and
ADI securities
acquired
30-Jun-21
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
26
Directors’ report
Operating and financial review
Financial performance.
10 year financial performance summary
As at 30 June
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Financial performance
Profit for the period
$m
553.2
272.1
375.3
357.7
278.1
219.4
283.0
117.3
94.0
49.5
Financial position
Total assets (at 30 June)
$m 4,777.8
4,500.7
4,117.9 3,474.6 3,328.4
2,879.6
2,407.1
2,128.8 1,680.4
1,607.1
Total equity (at 30 June)
$m 3,221.4
2,822.6
2,546.5 2,157.0 1,901.5
1,522.4
1,411.5
1,165.1
804.1
733.2
Securityholder value
Basic earnings per security
Funds from operations per security
Distributions per security
Total securityholder return2
Return on equity
Gearing (at 30 June)
NTA per security (at 30 June)
¢
¢
¢
%
%
%
$
71.7
25.7
20.0
34.0
19.7
27.9
4.17
35.3
25.6
21.8
(17.7)
10.8
32.2
3.65
52.9
25.1
23.0
21.0
16.9
34.3
3.52
53.5
25.0
22.2
22.3
18.5
33.9
3.19
42.7
25.5
21.5
6.3
18.6
38.5
38.1
22.9
20.5
7.4
13.5
41.2
50.4
21.8
19.7
36.4
23.9
36.3
25.7
20.2
19.0
10.8
17.5
40.3
2.88
2.61
2.48
2.16
23.7
N/A1
18.3
23.6
13.1
46.8
2.00
15.2
N/A1
17.6
21.6
4.8
45.6
1.93
Market capitalisation (at 30 June)
$m 3,141.5
2,469.9
3,178.6 2,438.1 2,076.6
1,836.8
1,781.1
1,323.3
966.8
796.9
Market capitalisation and free float ($m)
Market capitalisation
Free float
3,178.6
3,141.5
2,438.1
2,469.9
1,781.1
1,836.8
2,076.6
1,323.3
966.8
796.9
227.4
271.1
409.2
623.9
634.2
724.3
839.9
1,200.9
1,187.8
933.9
June 2012
June 2013
June 2014
June 2015
June 2016
June 2017
June 2018
June 2019
June 2020
June 2021
1. Not applicable, no data available for these periods.
2. Source: UBS Investment Research.
27
333 Ann Street,
Brisbane, QLD
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 28
Directors’ report
Operating and financial review
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 (ARCC), which is responsible
for oversight of the framework and how management monitor
compliance with the Group’s risk management policies and procedures.
Refer to the Group’s 2021
Corporate Governance
Statement for more details
on the Group’s risk management
framework.
growthpoint.com.au/corporate-
governance
Management provide regular reports to the ARCC in relation to the risks facing the
Group. The ARCC 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 ARCC also reports regularly to the Board on its activities.
Risk management policies are established to identify and analyse the risks faced by the Group to set appropriate risk limits and controls
and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in
market conditions and the Group’s activities. The Group, through its training, 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 the material risks that could impact Growthpoint’s achievement of its strategic and financial
objectives and summarises how we are managing these risks:
Material business 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.
Risk factors that could impact our financial
performance include low or negative growth and an
increase in capital expenditure and incentives paid.
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 look to protect this by
maintaining high occupancy rates across our property portfolio through
active asset management and tenant engagement. Across the portfolio we
currently have an occupancy rate of 97%, a long WALE of 6.2 years and a
high proportion of fixed annual rent increases.
We also carefully select our tenants and as a result our assets are
predominately leased to government, listed organisations and large private
companies.
We also limit development risk. We only develop properties in our portfolio to
meet our tenants’ requirements or to maximise the property’s value and will
only acquire properties under construction when there are material leases in
place.
We have a structured and proactive approach to maintaining services across
the portfolio. This not only ensures that we are providing reliable services
and conditions at each asset but also allows us to proactively manage and
budget capital expenditure. This process is closely managed and regularly
reviewed in conjunction with lifecycle reporting to ensure that financial and
operational forecasts remain relevant.
We adopt and implement prudent capital management practices. This
includes maintaining sufficient liquidity, a percentage of fixed debt in
accordance with our Treasury Management Policy and a long weighted
average debt maturity of 4.1 years.
29
13 Business Street,
Yatala, QLD
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 30
Directors’ report
Operating and financial review
Risk management.
Material business risk
How Growthpoint is responding
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, the quality
of our property assets, the investment decisions we
make, external economic factors and the term of our
ground lease tenancies.
We have a resilient portfolio comprised of high-quality and modern
commercial real estate properties, predominately leased to government,
listed organisations or large private companies. 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 investing in our existing properties to add value to our portfolio.
Detailed due diligence is also undertaken for all investment proposals.
Leasing risk
An inability to lease our assets in line with asset
management plans and forecasts or prolonged
material portfolio vacancies due to weakened tenancy
demand.
We focus on proactively engaging with our tenants to understand their
tenancy requirements, so that we can best position Growthpoint’s assets to
meet their needs and exceed their expectations. Through this active asset
management and tenant engagement we endeavour to minimise vacancy
and exposure to high incentives and long downtime.
Structural changes due to disruptive industries
and trends
Our portfolio and the industry are continually monitored through active
research and industry market briefings and developments.
The rise of remote working, innovative competitors in
the market and building obsolescence can impact on
our current and future operations.
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.
We monitor the potential impacts of the increase of automation and how it
affects our logistics and industrial portfolio.
We are also monitoring whether a shift to more flexible working
arrangements could lead to a reduction in demand for office space
over the long term. To date, there continues to be strong demand for
our offices, primarily located in metropolitan markets, from existing and
potential tenants, with a number of long leases signed during the COVID-19
pandemic. This may be driven by several characteristics of metropolitan
offices, which have become more attractive in a post-pandemic world,
including lower density, higher ratio of car parks than CBD offices and often
being located closer to where people live.
Support from our banking partners is dependent on their financial covenants
being met. We regularly stress test these covenants. As at 30 June 2021,
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%.
Growthpoint also maintains strong relationships with its equity investors,
through its investor relations program.
31
Material business risk
How Growthpoint is responding
Operations, and people and culture
COVID-19 pandemic
Although the COVID-19 pandemic has had an immaterial
impact on us to date, the pandemic may continue
to create uncertainty for our operating environment,
including further outbreaks which may require further
government restrictions.
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.
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.
Legal and regulatory
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 proactively engage with our tenants to understand the impact that the
COVID-19 pandemic has had on their business and ensure rental relief has
been distributed fairly to those tenants who most need our support.
We maintained prudent capital management and high occupancy
throughout the financial year and to date, the COVID-19 pandemic has had
an immaterial impact on the Group’s operational performance or financial
position. Management and the Board will continue to monitor the impact of
COVID-19 on the business.
We have a dedicated team that oversees our IT systems and regularly
conduct penetration testing of our IT systems. We also have a Disaster
Recovery Plan and provide training and education to our employees, to
assist in reducing the risk and impact of any cybersecurity attack.
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.
Legal, compliance and regulatory
Non-compliance of laws or our 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.
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 ensures that new and updated regulatory
requirements are communicated throughout the business.
As part of the risk reviews that were undertaken in FY21, the risk relating to climate change was assessed and was not considered a
material business risk facing our business.
This is due to our high green credentialed portfolio and our response measures including climate change risk assessments and
adaption plans we undertake as part of our due diligence process, flood risk registers that inform adaptation plans and energy and
building management systems designed to respond to potentially higher energy requirements that may be required due to marginal
temperature increases.
See the Group’s inaugural 2021 TCFD Statement which provides an overview of Growthpoint’s approach to managing the risks and
opportunities of climate change and shows it is well placed to respond to the potential physical and transitional impacts of climate
change over the next 10 years.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
32
Directors’ report
Governance
Board
of Directors.
Geoffrey Tomlinson
BEc – Independent Chairman and Director
Term of office
Geoff was appointed as a Director of the
Board in September 2013 and Chairman in
July 2014.
Professional experience
Geoff has more than 48 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 IRESS Limited and the
Chairman of MLC.
Estienne de Klerk
BCom (Industrial Psych), BCom (Hons)
(Marketing), BCom (Hons) (Accounting),
CA (SA) – Director
Term of office
Estienne was appointed as a Director of the
Board in August 2009.
Professional experience
Estienne has 25 years of experience in
banking and property finance. He has held
senior roles at Growthpoint Properties
Limited for over 19 years, with responsibility
for mergers, acquisitions, capital raisings
and operating service divisions.
Estienne is a past-President of the South
African Property Owners Association.
Board Committee Membership
Other directorships and positions
– Audit, Risk & Compliance Committee
– Nomination, Remuneration and HR
Committee
Timothy Collyer
B.Bus (Prop), Grad Dip Fin & Inv, AAPI,
F Fin, MAICD – Managing Director
Term of office
Tim was appointed as Managing Director
and to the Board in July 2010.
Professional experience
Tim has over 32 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.
Francois Marais
BCom, LLB, H Dip (Company Law)
– Director
Term of office
Francois was appointed as a Director of the
Board in August 2009.
Professional experience
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
Deborah Page AM
BEc FAICD FCA – Independent Director
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
Term of office
Grant Jackson
Assoc. Dip. Valuations, FAPI
– Independent Director
Term of office
Grant was appointed as a Director of the
Board in August 2009.
Professional experience
Grant has over 35 years of experience in
the property industry including 31 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
Deborah was appointed as a Director of the
Board in March 2021.
Professional experience
Deborah has extensive executive
experience, having held senior financial and
operational roles at a number of leading
Australian companies, across the property,
financial services, technology and legal
sectors. Prior to this, she was a partner at
Touche Ross/ KPMG Peat Marwick.
Deborah was formerly Chair of Investa
Office Fund and a former non-executive
Director of Investa Property Group, GBST
Holdings Limited and Australian Renewable
Fuels Limited.
Other directorships and positions
Deborah is currently a non-executive
Director of Pendal Group Limited,
Brickworks Limited and Service Stream
Limited.
Board Committee Membership
Chair - Audit, Risk and Compliance
Committee
33
4
8
1. Geoffrey Tomlinson
2. Timothy Collyer
3. Estienne de Klerk
4. Grant Jackson
5. Francois Marais
6. Deborah Page AM
7. Norbert Sasse
8. Josephine Sukkar AM
1
5
2
6
3
7
Norbert Sasse
BCom (Hons) (Acc), CA (SA) – Director
Term of office
Norbert was appointed as a Director of the
Board in August 2009.
Professional experience
Norbert has over 25 years of experience
in corporate finance dealing with listings,
delistings, mergers, acquisitions and capital
raisings, and over 18 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 Sukkar AM
BSc (Hons), Grad Dip Ed
– Independent Director
Term of office
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 31 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 Governor of
the Centenary Institute, a Trustee of the
Australian Museum and a non-executive
Director of Washington H. Soul Pattinson
and Co. Ltd, the Property Council of
Australia, the Green Building Council of
Australia and Opera Australia. Josephine is
also Chair of the Buildcorp Foundation and
the Australian Sports Commission.
Board Committee Membership
– Nomination, Remuneration and HR
Committee
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 34
Directors’ report
Governance
Executive
Management Team.
Timothy Collyer
B.Bus (Prop), Grad Dip Fin & Inv, AAPI,
F Fin, MAICD – Managing Director
Tim joined Growthpoint in 2009 and has
been Managing Director since 2010.
Tim has over 32 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
B.Bus (Prop), GAICD
– Chief Investment Officer
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 20 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.
Dion Andrews
B.Bus, FCCA, GAICD
– Chief Financial Officer
Dion joined Growthpoint in 2009 as
Financial Controller. He was appointed Chief
Financial Officer in 2011.
Dion is a Chartered Accountant, with over
19 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.
Jacqueline Jovanovski
LLB (Hons), BA, GradDipApp
(CorporateGov), FGIA FCG (CS, CGP)
– Chief Operating Officer
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.
1
2
3
4
1. Timothy Collyer
2. Dion Andrews
3. Michael Green
4. Jacqueline Jovanovski
35
15 Green Square Close,
Fortitude Valley, QLD
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 36
Directors’ report
Governance
Remuneration
report.
On behalf of the Board, I am
pleased to present Growthpoint’s
remuneration report, which
provides an overview of our
FY21 remuneration structure and
outcomes and our approach to
FY22.
A robust year against a
challenging backdrop
For businesses and individuals around
the world, the COVID-19 pandemic
continued to have a profound impact
in FY21. Reflecting the Group’s careful
portfolio construction since its inception
and strong financial position coming
into the crisis, Growthpoint continued
to successfully navigate the challenges
presented by the pandemic throughout
the financial year.
We were pleased to see a significant
rebound in the Group’s security price
over FY21 and at 30 June 2021, it had
recovered most of the ground lost from
its record-high pre-pandemic level. This
drove the Group’s total securityholder
return (TSR) performance of 34.0%,
outperforming the S&P/ASX 200 REIT
Accumulation Index by 76 basis points in
FY21. The Group has outperformed the
Index over the last one, three, five and
ten-year time periods.
Given Growthpoint’s increasingly certain
performance over FY21, the Group
was in a position to provide funds from
operations (FFO) guidance in February
of 25.2 – 25.5 cents per security (cps),
which was upgraded to 25.4 – 25.7
cps in April. The final result of 25.7 cps
was at the upper end of the upgraded
guidance. This was a particularly
pleasing result, as the Group started the
year with a $10.4 million reduction to its
earnings compared to the prior year due
to Woolworths vacating a large industrial
asset during FY20.1
Net tangible assets (NTA) also increased
significantly over FY21 to $4.17 per
security, driven by strong valuation
gains across the Group’s office and
industrial portfolios. This uplift reflects the
substantial re-rating that has occurred
across the industrial sector, fuelled by
domestic and offshore investor demand
for high-quality assets. In addition, the
Group’s leasing success drove large
gains at a number of properties.
Despite FFO exceeding the Group’s initial
guidance, the Board decided to maintain
the distribution as per guidance set at the
beginning of the financial year. The Board
believes that maintaining a conservative
Total securityholder return (TSR)
over 1, 3, 5 and 10 years (%)
Growthpoint TSR
S&P/ASX 200 REIT Accumulation Index TSR
34.0%
33.2%
10.1%
7.7%
11.6%
5.8%
15.5%
11.8%
1 year
3 years
5 years
10 years
Source: UBS Investment Research. Annual compound returns to 30 June 2021.
1. This includes eight months of rent and a surrender payment.
Norbert Sasse
Director
payout ratio to retain additional capital
within the Group is a prudent approach,
as we expect leasing incentives to
remain elevated in the near term. It will
also assist us to achieve our objective of
providing Securityholders with growing
distributions from FY21.
FY21 awards
Setting the FY21 financial targets for the
Executive Management Team’s (EMT)
short term incentive (STI) awards was
challenging for the Board, as the longer-
term impacts of the COVID-19 pandemic
on the Group’s operating environment,
and the broader Australian economy,
were unclear at the beginning of the
financial year. As it was not possible
to accurately forecast the potential
impact, the Committee decided to not
risk adjust the EMT’s financial targets,
acknowledging that if required, it would
take into account the pandemic when
reviewing the EMT’s performance
at the end of the financial year. As
the Group financial results were not
materially impacted by the pandemic, the
Committee has not adjusted the results.
To be eligible for 50 per cent of their
STI entitlement, the EMT were required
to deliver FFO in line with FY20, a
challenging target, given the financial
headwinds facing the Group, as
mentioned above, and the broader
37
economic environment. The Board was
pleased to see the Group outperform this
target, increasing FFO by 0.4% over the
previous year.
In addition to the financial achievements,
the Board was pleased with the EMT’s
progress towards a number of the
Group’s strategic objectives. In FY21, the
portfolio’s occupancy increased to 97%
and the Group’s weighted average lease
expiry increased to 6.2 years. This result
was driven by a number of significant
leasing deals, which were executed in a
challenging market. This included signing
a 10 year and seven-month lease with
Bunnings over 13,886 square metres, or
71%, of Botanicca 3, one of the largest
office leasing transactions completed
nationally in FY21.
The EMT also progressed the Group’s
sustainability initiatives over FY21. The
Group’s overall Global Real Estate
Sustainability Benchmark (GRESB)
increased two points to 74, four points
higher than the GRESB average score,
and the Group maintained an above-
average CDP score of B. The Group also
revised its Net Zero Strategy, significantly
accelerating its target to achieve net zero
carbon emissions across its operationally
controlled assets and corporate activities
by 2025 (previously 2050).
The results of the annual employee
survey were once again positive. The
Group’s alignment and engagement
scores were in line with FY20, placing the
Group in the top quartile of its benchmark
group. This was a particularly positive
result given most employees worked from
home for a large proportion of FY21, due
to government-mandated restrictions,
which was not the case for all companies
in Growthpoint’s benchmark group,
and highlighted the leadership team’s
successful efforts to maintain the Group’s
strong culture.
Reflecting the EMT’s performance in
FY21, and the STI key performance
indicators (KPIs) (financial and non-
financial) set at the start of the year, the
Board has assessed that the EMT’s STI
award will be equal to a weighted average
of 69% of their STI opportunity. In line
with the Group’s remuneration policy,
the Committee will assess the long-term
incentive (LTI) award in October. The LTI
award assesses the Group’s TSR and
return on equity performance relative to
the constituents of the S&P ASX 200
REIT Index over a three-year period.
120 Link Road,
Melbourne Airport, VIC
Growthpoint’s performance, FY16-FY21
FY16
FY19
FY21
FFO per security
Distribution per security (cents)
22.9
20.5
25.1
23.0
25.7
20.0
NTA per security (cents)
261.0
350.0
417.0
2-year
CAGR
5-year
CAGR
1.2%
-6.7%
9.2%
2.3%
-0.5%
9.8%
FY22 remuneration
In FY21, the Board decided not to
increase the vast majority of the Group’s
employees’ FY20 total fixed remuneration
due to the uncertainty around the long-
term impacts of the COVID-19 pandemic
on the Group’s operating environment
and the broader Australian economy.
There was also no increase to Directors’
fees.
Over the last 12 months, the economic
environment and outlook in Australia has
improved significantly. The Group has
maintained its strong footing and is now
in the position to actively pursue growth
opportunities.
The Committee engaged PWC to
benchmark the EMT’s remuneration
packages against an industry peer group,
as well as other listed ASX companies
with a similar market capitalisation.
Further detail of PWC’s analysis is
provided on page 56. Based on this
study, and the Group’s relative position
in the market, the Board has decided it
is appropriate to implement a weighted
average 9.1% increase to the EMT’s total
fixed remuneration in FY22.
In line with the Group’s FY20
remuneration framework, and reflective
of the Group’s growth agenda, the
Board has also decided to reinstate the
maximum STI that the EMT can achieve
to 117.5%, which was temporarily
reduced to 100% in FY21. The EMT are
encouraged to grow FFO and earnings
via a ‘stretch’ target for the financial
component of the STI (70% weighting),
whilst a comprehensive set of non-
financial KPIs form the balance (30%
weighting). Any STI granted will be
awarded as two thirds paid in cash and
one third paid in securities, which vest
over a two-year period.
The Board also considered Directors’
fees and decided not to increase them
for FY22.
We hope you find the following report
transparent and informative. The Board
remain committed to ensuring the EMT’s
and Securityholder’s long-term interests
are aligned.
Norbert Sasse
Chair – Nomination, Remuneration
and Human Resources Committee
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 38
Directors’ report
Governance
What’s inside.
Who this report covers
FY21 Executive KMP remuneration policy and framework
FY21 short-term incentives (STI)
FY21 long-term incentives (LTI)
Executive KMP remuneration in detail
FY22 Executive KMP remuneration
Non-executive KMP arrangements
Executive and non-executive KMP shareholdings
Remuneration policy and role of the Nomination,
Remuneration and HR Committee.
38
39
43
45
50
51
52
54
55
About the remuneration report
The Directors present this ‘Remuneration Report’ for the Group
for the year ended 30 June 2021. 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.
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
Non-Executive Directors
õ Geoffrey Tomlinson - Independent Chairman and Director
õ Maxine Brenner - Independent Director, resigned effective 30
November 2020
õ Estienne de Klerk - Director
õ Grant Jackson - Independent Director
õ Francois Marais - Director
õ Norbert Sasse - Director
õ Josephine Sukkar AM - Independent Director
õ Deborah Page AM - Independent Director, appointed effective
1 March 2021
39
FY21 Executive KMP remuneration policy and framework
Components of remuneration
Total Fixed
Remuneration (TFR)
(including applicable
superannuation and
other benefits)
Short-term
incentives (STI)
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. TFR is targeting the straight-line midpoint between
the 25th and 50th percentile of the industry benchmark.
If specified performance criteria are met, eligibility of each Executive
KMP to receive an STI bonus payable as two thirds cash and one
third as deferred short-term incentive performance rights (Short-
term Performance Rights) in respect of each financial year.
Long-term
incentives (LTI)
LTI bonus payable under which, upon meeting specified
performance criteria, each Executive KMP is eligible to receive
securities in the Group over time to help align each Executive KMP’s
interests with those of Securityholders.
43
51
45
Current year
(FY21)
Next year
(FY22)
Current year
(FY21)
51
Next year
(FY22)
Executive KMP Remuneration delivery FY21
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.
FY21
FY22
FY23
FY24
Fixed
Remuneration
100%
Base Salary,
Superannuation
and Other
Benefits1
STI
66.7% 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 that was in place during FY21. See page 45 for further detail.
3. The measurement period finishes at 30 June 2023 with vesting in early FY24.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
40
Directors’ report
Governance
Executive KMP Remuneration mix FY21 ($000)
TFR
STI - Cash
STI - Deferred
LTI
Managing Director
Chief Financial Officer
$800 (29%)
$473 (23%)
$333 (12%)
$370 (19%)
Performance
dependent
$667 (24%)
$220 (11%)
$386 (19%)
$135 (7%)
$461 (23%)
$350 (29%)
$117 (10%)
$181 (20%)
$154 (18%)
$233 (19%)
$70 (8%)
$135 (15%)
$51 (6%)
$162 (19%)
Performance
dependent
$1000
(36%)
$1000
(48%)
$1000
(51%)
$1000
(100%)
$500
(42%)
$500
(56%)
$500
(58%)
$500
(100%)
Maximum
Actual
(take home)
Actual
(accounting)
Minimum
Maximum
Actual
(take home)
Actual
(accounting)
Minimum
Chief Investment Officer
Chief Operating Officer
$350 (29%)
$117 (10%)
$182 (21%)
$154 (18%)
$233 (19%)
$70 (8%)
$135 (15%)
$51 (6%)
$162 (19%)
$500
(42%)
$493
(56%)
$493
(57%)
$493
(100%)
$297 (29%)
Performance
dependent
Performance
dependent
$99 (10%)
$22 (4%)
$198 (19%)
$51 (9%)
$93 (16%)
$88 (13%)
$41 (6%)
$138 (20%)
$425
(42%)
$425
(72%)
$425
(61%)
$425
(100%)
Maximum
Actual
(take home)
Actual
(accounting)
Minimum
Maximum
Actual
(take home)
Actual
(accounting)
Minimum
Remuneration report. 41
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 54 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 rights if the Company
decides to terminate a position without cause including through redundancy or takeover (refer to page 57 for further information).
Total Executive KMP remuneration (Take home basis)
The following table presents the actual remuneration received by Executive KMP during FY21. This voluntary disclosure is provided to
increase transparency and includes:
õ Salary and other benefits received during FY21
õ FY20 cash STI received during FY21, and
õ The value of securities that vested during FY21.
The actual remuneration presented in this table is distinct from the disclosed remuneration 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 FY21. 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.
Salary
and other
benefits
Cash STI
Value of
deferred
STI rights
vested1
Value of
LTI rights
vested1
$
$
$
$
TOTAL
$
Timothy Collyer – Managing Director
Dion Andrews – Chief Financial Officer
Michael Green – Chief Investment Officer
Jacquee Jovanovski – Chief Operating Officer
1,000,954
500,000
492,577
425,000
385,976
134,746
134,746
92,976
220,264
472,882
2,080,076
70,069
70,069
21,644
181,033
181,946
51,325
885,848
879,338
590,945
Total
2,418,531
748,444
382,046
887,186
4,436,207
1. Based on market price at the time of vesting.
% of
remuneration
performance-
based
%
52%
44%
44%
28%
45%
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 42
Directors’ report
Governance
Total Executive KMP remuneration (accounting basis)
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
expense
LTI Plan
expense
$
$
$
$
$
$
$
$
$
Total
$
Timothy Collyer – Managing Director
FY21
FY20
990,000
461,024
9,753
15,143
989,981
375,152
7,649
(901)
954
2,756
25,000
1,827
135,409
369,761 2,008,871
25,000
32,237
156,742
449,775 2,038,391
Dion Andrews – Chief Financial Officer
FY21
FY20
482,500
162,198
3,241
9,231
482,491
131,303
2,270
13,053
Michael Green – Chief Investment Officer
FY21
FY20
475,077
162,198
3,241
5,533
475,068
131,303
2,270
13,907
Jacquee Jovanovski – Chief Operating Officer2
406,375
137,868
1,595
11,297
281,554
91,912
–
15,166
–
–
–
–
–
–
25,000
3,558
50,664
154,133
890,525
25,000
26,413
49,600
191,984
922,114
25,000
4,422
50,664
154,133
880,268
25,000
9,381
49,600
192,198
898,727
25,000
2,700
40,577
88,435
713,847
20,833
727
14,181
86,926
511,299
FY21
FY20
Total
FY21
FY20
S300A (1) (e) (i)
proportion of
remuneration
performance
related
%
49%
49%
42%
41%
42%
42%
38%
38%
44%
44%
2,353,952
923,288
17,830
41,204
954
100,000
12,507
277,314
766,462 4,493,511
2,229,093
729,671
12,190
41,225
2,756
95,833
68,757
270,124
920,883 4,370,532
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.
2. Joined the Group on 26 August 2019.
Remuneration report. 43
FY21 short-term incentives (STI)
Performance criteria for Executive KMP STI for current year (FY21)
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. The maximum opportunity was 100% of the potential
STI for FY21, temporarily reduced from 117.5% in the prior year due to Covid-19 and the general uncertainty this meant for the Group.
Performance criteria for FY21 are set out below.
Weighting Strategic objectives
Result
Performance detail
Financial
70%
70% FFO per Security
60%
– Base target 24.5 cps = 30%
– (set 0.2 cps ahead of budget)
– Maximum of 100% earned at 26.1 cps
FFO
25.7cps
+0.4% on FY20
Non-Financial
13.2% Operational priorities
85%
30%
– Identify opportunities for growth
– Continue to improve the commercial office
and industrial portfolio
– Leasing of Botanicca 3 and sale of
Broadmeadows
– Maintain appropriate debt structure
– Compliance and internal controls
4.8% People and leadership
99%
– Maintain high employee engagement
score
– Promote and achieve diversity objectives
– Identify talented staff and development
plans in place for all staff
– Maintain a strong governance, risk and
compliance culture
– Maintain safety and wellbeing of
employees
Strategic
acquisitions
$52m1
+$8m on FY20
Strategic
divestments
$114m
+$114m on FY20
_ Botanicca 3, 78% occupied as at 30 June 2021
and Broadmeadows sold
_ $315m of debt extended, $60m of debt cancelled
and gearing reduced to 27.9% (FY20: 32.2%)
_ FY21 employee alignment and engagement scores
in line with FY20, in top quartile of benchmark
group.
_ Maintained strong culture and kept entire team
intact, despite extended period working remotely.
_ Women in leadership positions increased to 38%
(FY20: 30%)
_ No OH&S incidents for 12th consecutive year.
6.0% Environmental, Social and Governance
(ESG) initiatives
– Maintain average high NABERS ratings
– Maintain high CDP and GRESB scores
– Progress initiatives to manage modern
slavery issues in the supply chain
– Provide a positive contribution to the
community
– Maintain quality of reporting
100%
_ NABERS Energy rating of 5.1 stars (FY20: 4.9
stars).
_ GRESB score increased to 74 (FY20: 72) and CDP
maintained at B.
_ Published inaugural Modern Slavery Statement.
_ Accelerated net zero target to 2025 (previously
2050).
_ Published inaugural TCFD Statement
1.5% External stakeholders
100%
– Maintain high level of engagement with
Securityholders and other stakeholders
_ Increased positive external survey results and direct
feedback on Growthpoint’s engagement with key
stakeholders
4.5% Individual EMT objectives
85%2
– Execution of key strategies to achieve
annual budget/guidance and longer-term
earnings growth
– Role model values, leadership behaviours,
collaboration and inclusiveness
_ Successfully navigated challenges presented by
COVID-19 pandemic
_ Execution of strategy in relative business area.
_ High scores for EMT in employee survey
Totals
100%
69%
See page 50 for more detailed information on Executive KMP remuneration.
1. Settlement of 11 Murray Rose, Sydney Olympic Park, NSW occurred on 24 August 2021.
2. Result of 85% is a weighted average of the four Executives’ individual results.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 44
Directors’ report
Governance
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 a STI to Executive KMP 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 (prior to COVID adjustments), whereby 24.5cps
provides a 30% score through to 26.1 cps (which is 7.4% above the budgeted figure) for a 100% score of this financial criteria
component. If FFO per security is below the base target, the Board has discretion whether to grant achievement under the financial
criteria. For FY21 the achievement was 60% for the financial criteria due to achievement of 25.7 cps.
b) Non-financial criteria – 30% of total
The non-financial criteria are based upon the performance criteria in the table on page 43. Achievement against this criteria was
assessed and approved by the Committee following the end of the financial year. Achievement of this component is capped at 100%.
For FY21 the achievement for non-financial criteria was 91% overall.
Results of FY21 STI
The table below shows the maximum in cash and Short-term Performance Rights that each Executive KMP could earn for FY21, and
the actual results achieved.
Names
Maximum for FY21
Result for FY21
Total
Cash
Short-term
Performance Rights
Total
Cash
Short-term
Performance Rights1
$
$
$
No.
$
$
$
No.
Timothy Collyer – Managing Director
1,000,000
666,700
333,300
101,306
691,500
461,023
230,477
70,053
Dion Andrews – Chief Financial Officer
350,000
233,345
116,655
35,457
243,285
162,198
81,087
24,646
Michael Green – Chief Investment Officer
350,000
233,345
116,655
35,457
243,285
162,198
81,087
24,646
Jacquee Jovanovski – Chief Operating Officer
297,500
198,343
99,157
30,138
206,792
137,868
68,924
20,949
Total
1,997,500 1,331,733
665,767
202,358
1,384,862
923,287
461,575
140,294
The number of Short-term Performance Rights is derived by dividing the maximum dollar value by the Volume Weighted Average Price
(VWAP) of Growthpoint securities over the first 10 trading days of FY21, being $3.29. 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
2022 and the second tranche converting on 30 June 2023, as long as the individual is still employed and has not submitted their
resignation prior to conversion date.
Remuneration report. 45
FY21 Def STI plan - valuation inputs (Binomial model)
Grant date
Performance period start
Performance period end
Security price at grant date
Fair value
Exercise price
Expected life (years)
Volatility
Risk free interest rate (per annum)
Distribution yield (per annum)
$
$
$
years
%
%
%
Managing Director
Other EMT members
Tranche 1
Tranche 2
Tranche 1
Tranche 2
19-Nov-20
19-Nov-20
1-Jul-20
1-Jul-20
30-Jun-22
30-Jun-23
27-Nov-20
1-Jul-20
30-Jun-22
27-Nov-20
1-Jul-20
30-Jun-23
3.73
3.40
–
1.61
27
0.04
5.75
3.73
3.21
–
2.61
27
0.08
5.75
3.73
3.40
–
1.59
27
0.04
5.75
3.73
3.21
–
2.59
27
0.07
5.75
FY21 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 LTI 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 were three types of LTI plans in operation for Executive KMP in FY21 as the Group completed its transition to forward-looking
plans that commenced in FY19. Given that there were no LTI awards made for the backward looking FY18 plan, all rights associated
with the historical and transitional plans have now either vested or lapsed. Only forward-looking plans will be reported on for future
reporting periods. Details of the three LTI plans are:
õ Historical backward-looking plan from FY17
The performance measures of this plan were tested and corresponding rights vested in October 2020.
õ Transitional plans
These plans are also backward looking.
– The FY19 Transitional plan performance measurement period was 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 was because the transitional plans were
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 corresponding stapled securities issued in two equal tranches, in October 2019 and October
2020 respectively.
– The FY20 Transitional plan operated 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 were determined in October 2020, with corresponding stapled securities issued in one tranche in October 2020.
– No further LTI performance rights were granted under transitional plans after FY20 (see diagram on the next page).
õ Forward-looking plans
– The performance measurement period for the FY19 forward looking plan was 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 into securities in the same year, notwithstanding that based on performance results, zero rights were issued under the
FY18 plan.
– The performance measurement period for the FY20, FY21 and FY22 forward looking plans are the three years to 30 June
2022, 30 June 2023 and 30 June 2024, respectively. For these plans, 100% of the maximum opportunity may vest into stapled
securities subject to the performance measures being met.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 46
Directors’ report
Governance
LTI plans now in operation (continued)
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
October 2019
October 2020
October 2021
October 2022
October 2023
October 2024
Historical,
backward
looking
plans
Transitional,
backward
looking
plans
Forward
looking
plans
FY16
25%
FY17
25%
FY18*
25%
FY19
25%
FY20
FY19
FY20
FY21
FY22
25%
25%
25%
25%
25%
75%
100%
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
Remuneration report. 47
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 Growthpoint
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 200 Accumulation Index1 (plans up to FY19 were
benchmarked against the S&P/ASX A-REIT 300 Accumulation Index) 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 of LTI Performance Rights that
vest
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 NTA per Growthpoint stapled security and includes the change in NTA per
Growthpoint 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 200 Index1 (plans up to
FY19 were benchmarked against the S&P/ASX A-REIT 300 Accumulation Index) 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 was 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
relevant financial year. For example, the FY21 Plan period ends on 30 June 2023.
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 their 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.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 48
Directors’ report
Governance
LTI Achievement
The LTI results are independently calculated by Grant Thornton and reviewed by the Committee after the conclusion of the performance
period.
In October of each year, the Committee assesses the achievement of the performance measures listed above to determine a
percentage achieved for the previous financial year (LTI Achievement).
LTI Awards for backwards looking plans (transitional plans)
The LTI Maximum multiplied by the LTI Achievement provided the ‘LTI Award’ for each Executive KMP for the relevant financial year.
The LTI Award was translated into an equivalent value of the Group’s securities through dividing the LTI Award by the VWAP of the
securities over the 20 trading days prior to 30 September following the financial year to which the LTI related. This gave a total number
of securities to be issued to each Executive KMP for each subsequent vesting. 25% of the securities issued to each Executive KMP
based on the LTI Award were issued to each Executive KMP in October or November of each of the following four years. Each such
vesting was subject to the Executive KMP remaining employed by Growthpoint at the relevant vesting date.
As each grant was on the basis of a fixed number of securities rather than a fixed value, Executive KMP were exposed to variations in
the Group’s security price for securities which were yet to vest.
The LTI was cumulative, meaning that Executive KMP could receive up to four issues of securities in a particular year in respect of four
prior financial years.
The opportunity under transitional plans steadily reduced and will be nil from FY22 during which the first LTI Performance Rights under
the new forward-looking plans are capable of vesting.
LTI Awards for forward looking plans
LTI Awards for forward looking plans are similar to the backward-looking plans except:
õ The number of LTI Performance Rights granted is based on the VWAP 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 LTI
Performance Rights to determine how many LTI 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. For issuances that occurred in FY21, Securityholder approval was obtained from the Group’s
previous annual general meetings. It is intended that approval for future issuances will 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.
Remuneration report. 49
FY21 Forward Looking Plan
The table below shows LTI grants made during the year for the FY21 LTI Plan, subject to performance conditions over the three-
year performance period ending 30 June 2023. Accounting standards require the valuation of the grants be recognised over the
performance period. The minimum value of the grant to participants is nil if the vesting conditions are not met. The fair value reported
was calculated at the time of the grant and amortised in accordance with the accounting standard requirements.
LTI max as a % of
remuneration
Performance
measure
Number of
performance
rights granted
Fair value per
performance
right
Total estimated
fair value
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
Key inputs used in valuing LTI 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
%
80
70
70
70
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
No.
121,581
121,580
243,161
53,191
53,191
106,382
53,191
53,191
106,382
45,213
45,212
90,425
$
1.587
3.179
1.566
3.183
1.566
3.183
1.566
3.183
$
192,949
386,503
579,452
83,297
169,307
252,604
83,297
169,307
252,604
70,804
143,910
214,714
Timothy Collyer
Other Executive KMP
19-Nov-20
1-Jul-20
30-Jun-23
$3.73
–
2.78
27%
0.09%
5.8%
27-Nov-20
1-Jul-20
30-Jun-23
$3.73
–
2.76
27%
0.08%
5.8%
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.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
50
Directors’ report
Governance
Executive KMP remuneration in detail
Details of Performance Rights that vested to Executive KMP in FY21
Value of securities
issued on
conversion of
performance
rights
Number of
securities issued
on conversion
of performance
rights
Value of
performance
rights still to vest1
% of plan that
vested during
FY21
Plan participants
Plan identification
Timothy Collyer
– Managing Director
Dion Andrews
– Chief Financial Officer
FY20 Deferred STI Plan
FY19 Deferred STI Plan
FY20 LTI Transitional Plan
FY19 LTI Transitional Plan
FY17 LTI Plan
Total
FY20 Deferred STI Plan
FY19 Deferred STI Plan
FY20 LTI Transitional Plan
FY19 LTI Transitional Plan
FY17 LTI Plan
Total
Michael Green
– Chief Investment Officer
FY20 Deferred STI Plan
FY19 Deferred STI Plan
FY20 LTI Transitional Plan
FY19 LTI Transitional Plan
FY17 LTI Plan
Total
Jacquee Jovanovski
– Chief Operating Officer
FY20 Deferred STI Plan
FY20 LTI Transitional Plan
Total
$
88,347
131,917
167,597
119,588
185,697
693,146
30,920
39,149
73,324
44,366
63,343
251,102
30,920
39,149
73,324
44,366
64,256
252,015
21,644
51,325
72,969
No.
21,707
32,412
49,732
35,486
55,103
194,440
7,597
9,619
21,758
13,165
18,796
70,935
7,597
9,619
21,758
13,165
19,067
71,206
5,318
15,230
20,548
Total
1,269,232
357,129
1. Actual value will depend upon the security price at the time of vesting.
%
50
50
100
50
25
50
50
100
50
25
50
50
100
50
25
50
100
$
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Remuneration report.
51
Movements in number of Performance Rights held by Executive KMP during FY21
STI performance rights
Plan participants
Balance at
1 July 2020
No.
Rights
granted1
No.
Timothy Collyer – Managing Director
123,094
101,306
Dion Andrews – Chief Financial Officer
Michael Green – Chief Investment Officer
Jacquee Jovanovski – Chief Operating Officer
41,358
41,358
22,217
35,457
35,457
30,138
Rights
lapsed1
No.
(78,521)
(27,355)
(27,355)
(20,770)
Rights
vested
Balance at
30 June 2021
No.
(54,119)
(17,216)
(17,216)
(5,318)
No.
91,760
32,244
32,244
26,267
Total
228,027
202,358
(154,001)
(93,869)
182,515
1. The maximum rights that may have be awarded under the FY21 deferred STI plan were granted during the year. The portion that lapsed based on the actual STI outcome for
the year are deemed to have lapsed on 30 June 2021.
LTI 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 2020
No.
480,163
192,115
192,386
71,943
Rights
granted
No.
243,161
106,382
106,382
90,425
Total
936,607
546,350
Rights
lapsed
No.
Rights
vested
Balance at
30 June 2021
No.
No.
–
–
–
–
–
(140,321)
(53,719)
(53,990)
(15,230)
583,003
244,778
244,778
147,138
(263,260)
1,219,697
FY22 Executive KMP remuneration
Proposed performance criteria for STI for next year (FY22)
The structure for FY22 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 for the financial year. The maximum STI outcome will return to 117.5% which had been in place for FY20 and was
temporarily reduced to 100% for FY21 as a COVID-19 cost reduction measure.
The non-financial measures will be assessed across measures relating to the following:
õ
Individual Executive KMP objectives which will include measures relating to the execution of operational and strategic priorities,
external stakeholder engagement, corporate reputation and profile, people, culture and leadership. The personal objectives set for
each Executive KMP will reflect their role and responsibilities;
õ ESG initiatives and diversity targets; and
õ Customer satisfaction.
The Board has ultimate discretion to apply judgement or make adjustments when approving the final performance outcomes, including
in light of the COVID-19 environment.
Executive KMP FY22 remuneration
The weighted average of total fixed remuneration for Executive KMP payable in FY21 will generally increase in FY22 by 9.1%.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 52
Directors’ report
Governance
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 to be paid to Non-Executive Directors for FY22 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 for the year rather than per meeting.
6. All Non-Executive Directors’ fees are to be paid in cash and include superannuation where applicable.
7. From 1 July 2018, the Committee implemented a Minimum Securityholding Requirement (MSR) for Non-Executive KMP (refer to
page 54 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.
Remuneration report. 53
FY21 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, resigned effective 30 November 2020)
Josephine Sukkar AM
(appointed 1 October 2017)
Deborah Page AM
(appointed 1 March 2021)
Total
Period
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY21
FY20
Fees
$
194,612
194,612
99,543
99,543
109,000
109,000
109,000
109,000
109,000
109,000
43,052
105,263
99,543
99,543
Committee
Fees
Superannuation
benefits
$
–
–
14,543
12,420
12,300
12,300
19,400
19,400
13,600
13,600
9,045
20,913
11,233
11,233
$
18,488
18,488
10,838
10,637
–
–
–
–
–
–
2,861
5,722
10,524
10,524
Total
$
213,100
213,100
124,924
122,600
121,300
121,300
128,400
128,400
122,600
122,600
54,958
131,898
121,300
121,300
33,181
6,971
3,814
43,966
796,931
825,961
87,092
89,866
46,525
45,371
930,548
961,198
Non-Executive KMP FY22 remuneration
Fees payable to the Non-Executive Directors in FY22 as part of their membership of the Board and Committees will remain the same
as the fees payable in FY21 which have not increased since July 2019. Similarly, fees payable to the Board Chairman and Committee
Chairs will remain the same as the fees payable in FY21.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
54
Directors’ report
Governance
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
Josephine Sukkar AM
Deborah Page AM
Timothy Collyer
Dion Andrews
Michael Green
Jacquee Jovanovski
Holding as at
30 June 2020
Securities
granted as
compensation
Securities
acquired
Holding as at
30 June 2021
MSR
Current equivalent
value in Growthpoint
securities1
No.
88,776
190,087
169,284
1,656,460
1,752,863
14,000
–
1,035,744
176,671
53,823
–
–
–
–
–
–
–
–
194,440
70,935
71,206
20,548
–
–
–
–
49,994
–
25,050
–
–
–
–
88,776
190,087
169,284
1,656,460
1,802,857
14,000
25,050
1,230,184
247,606
125,029
20,548
%
100
100
100
100
100
100
100
100
50
50
50
%
170
710
632
6,185
6,732
52
94
501
403
204
39
1. Current equivalent value takes the closing price of Growthpoint securities on 30 June 2021 ($4.07), multiplied by the holding and compares this to the relevant FY21 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.
Remuneration report. 55
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 AM – 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 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.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 56
Directors’ report
Governance
Impact of performance on Securityholders’ wealth
In considering the Group’s performance and benefits for Securityholders’ wealth, the Committee has regard to the financial measures in
the table below in respect of the five financial years ended 30 June 2021.
2021
2020
2019
2018
2017
$m
$m
$
$
$
%
%
553.2
154.4
0.200
4.07
0.87
34.0
19.7
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
144.9
0.215
3.14
(0.01)
6.3
18.6
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 advisory services in relation to Executive KMP
and Non-Executive Director remuneration. The PWC analysis compared the relative positioning of remuneration for each EMT role
against:
õ An industry peer group – 20 ASX listed A-REIT peer group
õ A market capitalisation peer group – 10 ASX listed companies above and below Growthpoint by market capitalisation
PWC also undertook a fixed regression analysis, using the industry peer group, to determine an implied remuneration positioning for
each EMT member to key metrics such as market capitalisation, square metres of portfolio, total assets, total liabilities and funds from
operations. The correlation of remuneration to the key metrics for each role varied from weak (low r-squared) to strong (high r-squared),
however, provided the Committee with additional analysis from which to set remuneration levels.
These services did not include specific recommendations to the Committee. PWC was paid a total of $39,000 for providing these
services.
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 as required.
2. Remuneration surveys and trends.
3. Benchmarking against peers.
4. Recommendations from the Managing Director (excluding in relation to his own remuneration).
Remuneration report. 57
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 FY21 is listed on page 50 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 41.
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).
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 58
Directors’ report
Governance
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.
Board composition
The Board currently comprises Directors with extensive experience and expertise in property, funds management, finance, law,
investment banking, accounting and corporate governance. Refer to pages 32-33 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 AM 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.
During the year Deborah Page AM was appointed to the Board. Deborah has extensive executive experience, having held senior
financial and operational roles at a number of leading Australian companies. 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 43.
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 43.
Meetings of Directors (FY21)
Board member
eligible
to attend
attended
eligible
to attend
attended
eligible
to attend
attended
Growthpoint Board
Audit, Risk and
Compliance Committee
Nomination, Remuneration
and HR Committee
G. Tomlinson – Chairman
M. Brenner (resigned effective 30-Nov 20)
T. Collyer – Managing Director1,2
E. de Klerk
G. Jackson
F. Marais
J. Sukkar
N. Sasse
D. Page (commenced 1-Mar-21)
8
3
8
8
8
8
8
8
4
8
3
8
8
8
8
8
8
4
4
2
4
4
4
–
–
–
1
4
2
4
4
4
–
–
–
1
7
–
7
–
–
7
7
7
–
7
–
7
–
–
7
7
7
1
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.
Remuneration report. Additional
information.
59
Directors
The following persons were members of the Growthpoint Properties Australia Board during FY21:
õ Geoffrey (Geoff) Tomlinson, Independent Chairman
õ Timothy Collyer, Managing Director
õ Deborah Page AM, Independent Director (appointed 1 March 2021)
õ Estienne de Klerk (deemed non-independent given role as CEO of Growthpoint Properties Limited, South Africa)
õ Grant Jackson, Independent Director
õ Norbert Sasse (deemed non-independent given role as Group CEO of Growthpoint Properties Limited, South Africa)
õ Francois Marais (deemed non-independent given role as Chairman of Growthpoint Properties Limited, South Africa)
õ Josephine Sukkar AM, Independent Director
õ Maxine Brenner, former Independent Director (resigned effective 30 November 2020)
Details of each Director’s appointment, qualifications and experience, together with their recent directorships, are set out on pages
32 to 33 of this report. Information about attendance at the meetings of Directors held during FY21 is contained in the Remuneration
Report on page 58 of this report.
Company Secretaries
Jacqueline (Jacquee) Jovanovski and Dion Andrews are the Company Secretaries of the Group. Details of their qualifications and
experience are set out on page 34 of this report.
Principal activities
The principal activities of the Group during the year continued to be property investment. During the year there were no significant
changes in its state of affairs.
Review of operations and results
The Operating and Financial Review is contained on pages 3 to 31 of this report.
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.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 60
Directors’ report
Governance
Additional information.
Non-Audit services
During the year EY, the Group’s auditor, has performed no services other than the audit and review of financial statements and other
regulatory audit services.
Details of the amounts paid to EY for audit services provided during the year are set out below:
Audit and review of financial statements
Other regulatory audit services
Total paid to EY
Auditor’s independence
FY21
$
283,470
37,000
320,470
FY20
$
217,000
37,000
254,000
At the 2019 AGM, Securityholders approved the appointment of EY as auditor following a competitive tender process.
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 (Cth) is set out on
page 99.
Subsequent events
On 24 August 2021, settlement occurred on the acquisition of 11 Murray Rose Avenue, Sydney Olympic Park, New South Wales for
$52.0 million (net sale price excluding acquisition costs). There have been no other subsequent events from the end of the year to the
date of this report likely to significantly affect the operations of the business, the results of those operations or the state of affairs of the
Group in future financial 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.
Rounding of amounts
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.
About the Directors’ Report
The Directors’ Report comprises pages 3 to 60 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
25 August 2021
61
Financial
report.
Financial Statements
Consolidated Statement of Comprehensive Income 62
63
Consolidated Statement of Financial Position
64
Consolidated Statement of Changes in Equity
65
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Section 1: Basis of preparation, accounting
policies and other pronouncements
1.1 Basis of preparation
1.2 Significant accounting policies
1.3 Impact of new standards, amendments
and interpretations
66
66
67
67
Section 2: Operating results, assets and liabilities
68
2.1 Revenue and operating 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
4.1 Income tax
4.2 Key Management Personnel (KMP)
compensation
4.3 Related party transactions
4.4 Contingent liabilities
4.5 Commitments
4.6 Controlled entities
4.7 Parent entity disclosures
4.8 Remuneration of auditors
4.9 Subsequent events
Declarations / Reports
Directors’ declaration
Auditor’s independence declaration
Independent Auditor’s report
68
69
76
76
77
78
79
79
80
81
81
83
84
86
88
88
89
90
90
93
94
95
95
96
97
97
97
98
99
100
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
25 August 2021.
References to ‘the year’ in this report refer to the year ended 30
June 2021 unless the context requires otherwise. References
to ‘balance date’ in this report refer to 30 June 2021 unless the
context requires otherwise.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 62
Financial report
Consolidated Statement of
Comprehensive income.
For the year ended 30 June 2021
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 gain/(loss) in fair value of investment in securities
Net (loss)/gain in fair value of derivatives
Net gain/(loss) on exchange rate translation of interest-bearing liabilities
Net gains from other items
Profit before tax
Income tax benefit/(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 stapled security (cents)
Diluted earnings per stapled security (cents)
Notes
2.1
2.3
2.1
3.2
2.2
2.3
3.4
3.1
4.1
3.9
3.9
2021
$m
288.7
5.4
0.1
294.2
(45.7)
(52.3)
(15.4)
(4.1)
(117.5)
356.5
(1.5)
29.3
(43.8)
33.0
373.5
550.2
3.0
553.2
–
553.2
554.3
(1.1)
553.2
71.7
71.5
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
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Consolidated Statement of
Financial Position.
As at 30 June 2021
63
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
4.1
3.8
2.5
4.1
3.3
4.1
3.1
3.3
3.4
2021
$m
33.5
6.1
39.6
4,619.6
104.8
3.7
7.3
1.2
0.5
1.1
2020
$m
42.7
5.5
48.2
4,325.7
69.9
1.9
51.9
1.5
0.7
0.9
4,738.2
4,777.8
4,452.5
4,500.7
77.2
35.0
0.2
0.9
0.6
113.9
1,327.1
105.9
9.5
1,442.5
1,556.4
3,221.4
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
3.7
2,048.5
2,049.9
11.2
1,161.7
3,221.4
10.3
762.4
2,822.6
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
64
Financial report
Consolidated Statement of
Changes in Equity.
For the year ended 30 June 2021
Attributable to unitholders of
the Trust (Parent entity)
Attributable to shareholders of the
Company (other stapled entity)
Notes
Contri-
buted
equity
Retained
profits
$m
$m
Total
$m
Equity as at 30 June 2020
1,979.4
761.4
2,740.8
Profit after tax
Other comprehensive income
Total comprehensive income
Transactions with Securityholders in
their capacity as Securityholders:
Security buybacks
Distributions provided or paid
Share-based payment transactions
Total transactions with
Securityholders
Other reserves
–
–
–
554.3
554.3
–
–
554.3
554.3
(1.4)
–
–
–
(1.4)
(154.4)
(154.4)
–
–
(1.4)
(154.4)
(155.8)
–
–
–
Contri-
buted
equity Reserves
Retained
profits
$m
70.5
–
–
–
–
–
–
–
–
$m
10.3
–
–
–
–
–
1.4
1.4
(0.5)
11.2
Equity as at 30 June 2021
1,978.0
1,161.3 3,139.3
70.5
Equity as at 30 June 2019
1,814.5
656.8
2,471.3
64.9
8.5
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
–
–
–
5.6
–
–
5.6
70.5
–
–
–
–
–
1.8
1.8
10.3
Total
equity
$m
2,822.6
553.2
–
Total
$m
81.8
(1.1)
–
$m
1.0
(1.1)
–
(1.1)
(1.1)
553.2
–
–
–
–
–
(1.4)
(154.4)
1.4
1.4
–
1.4
(154.4)
0.5
0.4
1.8
6.9
–
6.9
–
(7.7)
–
(7.7)
1.0
–
–
82.1
3,221.4
75.2
2,546.5
6.9
–
6.9
272.1
–
272.1
5.6
(7.7)
1.8
(0.3)
81.8
170.5
(168.3)
1.8
4.0
2,822.6
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Consolidated Statement of
Cash Flows.
For the year ended 30 June 2021
Notes
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
Net cash flows from operating activities
2.6
Cash flows from investing activities
Receipts from sale of investment properties
Payments for investment in securities
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
Payments for securities buy back
Repayments of lease liabilities
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
65
2021
$m
286.3
(92.1)
5.5
(46.6)
0.1
(1.5)
151.7
113.9
(5.6)
(25.1)
(0.1)
83.1
297.0
(384.4)
–
–
(1.4)
(0.8)
(154.4)
(244.0)
(9.2)
42.7
33.5
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
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
66
Financial report
Notes to the Financial
Statements.
Section 1: Basis of preparation, accounting policies and other 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 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 2021. 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.
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 $74.3 million as at 30 June 2021 (30 June 2020: $66.0 million) which is an expected outcome from
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 $387.5 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 25 August 2021.
Basis of measurement
The consolidated financial statements have been prepared on a going concern basis using historical cost except for derivative financial
instruments, investment properties, investment in securities and share-based payment arrangements which are measured at fair value.
Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Group’s functional currency. The Group is of
a kind referred to in ASIC Corporations (Rounding in Directors’ / Financial Reports) Instrument 2016/191 and in accordance with that
Instrument, all financial information presented in Australian dollars has been rounded to the nearest hundred thousand dollars unless
otherwise stated.
67
1.1 Basis of preparation (continued)
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.
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:
õ Note 2.2 – Investment properties;
õ Note 3.4 – Derivative financial instruments; and
õ 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 Significant accounting policies
The significant accounting policies applied by the Group in this financial report are disclosed in the relevant notes in grey shaded text.
1.3 Impact of new standards, amendments and interpretations
No new accounting standards, amendments or interpretations have come into effect for the year ended 30 June 2021 that materially
affect the Group’s operations or reporting requirements.
No other standards, amendments or interpretations published that come into effect in a future reporting period are expected to materially
affect the Group’s operations or reporting requirements.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 68
Financial report
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.
2021
2020
Industrial
Office
Total
Industrial
Office
Total
$m
$m
$m
$m
$m
$m
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 income4
Current income tax expense
FFO
Distributions
Weighted average securities on issue (m)
FFO per stapled security (cents)
Distribution per stapled security (cents)
83.9
12.9
96.8
(5.2)
(13.9)
77.7
162.2
21.2
183.4
(2.0)
(28.9)
152.5
246.1
34.1
280.2
(7.2)
(42.8)
230.2
26.9
(15.7)
5.4
(48.2)
(0.3)
198.3
772.0
25.7
20.0
91.2
12.6
103.8
(5.2)
(13.5)
85.1
160.9
252.1
23.6
36.2
184.5
(1.9)
(30.7)
151.9
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 $4.4 million (2020: $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 $8.7 million (2020: $8.0 million) that was not recoverable under the terms of certain leases.
3. Other expenses in FFO of $15.7 million (2020: $14.6 million) excludes $0.2 million (2020: $0.2 million) depreciation of plant and equipment and includes $0.5 million (2020:
$0.4 million) rent payments for the Group’s head office at 35 Collins St, Melbourne which are replaced with depreciation of right of use assets and interest expense associated
with lease liabilities on the Consolidated Statement of Comprehensive Income.
4. Borrowing costs are shown in segment reporting net of $0.1 million (2020: $0.3million) interest income and exclude the $4.0m (2020: $4.0 million) interest expense
associated with lease liabilities which is included on the Consolidated Statement of Comprehensive Income.
Notes to the Financial Statements. 2.1 Revenue and operating segment information (continued)
Reconciliation of Profit after tax to FFO
Profit after tax
Adjustments for non-FFO items
- Straight line adjustment to property revenue
- 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 loss/(gain) in fair value of derivatives
- Net (gain)/loss on exchange rate translation of interest-bearing liabilities
- Amortisation of incentives and leasing costs
- Deferred tax (benefit)/expense
- Other
FFO
2021
$m
553.2
(8.5)
1.5
(356.5)
(29.3)
43.8
(33.0)
26.9
(3.3)
3.5
198.3
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
2021
$m
280.2
8.5
288.7
69
2020
$m
272.1
1.0
–
(116.9)
15.7
(31.5)
28.5
20.8
3.8
3.7
197.2
2020
$m
288.3
(1.0)
287.3
Major customer
Revenues from Woolworths Group Limited, in the Group’s Industrial segment represents $39.3 million (2020: $46.0 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 on balance sheet in investment property and subsequently amortised as a
reduction of revenue on a straight-line basis over the term of the lease.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
70
Financial report
2.2 Investment properties (continued)
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
Date Valuation
Victoria
1500 Ferntree Gully Road & 8 Henderson Road
Knoxfield
3 Maker Place
9-11 Drake Boulevard
Lots 2, 3 & 4, 34-44 Raglan Street
40 Annandale Road1
120-132 Atlantic Drive
130 Sharps Road1
120 Link Road1
20 Southern Court
3 Millennium Court
31 Garden Street
6 Kingston Park Court
19 Southern Court
60 Annandale Road1
101-111 South Centre Road1
75 Annandale Road1
120 Northcorp Boulevard2
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
1. Held under leasehold.
2. Disposed in September 2020.
Truganina
Altona
Preston
Melbourne Airport
Keysborough
Melbourne Airport
Melbourne Airport
Keysborough
Knoxfield
Kilsyth
Knoxfield
Keysborough
Melbourne Airport
Melbourne Airport
Melbourne Airport
Broadmeadows
Larapinta
Yatala
Brisbane Airport
Brisbane Airport
Perth Airport
Perth Airport
Perth Airport
Perth Airport
Perth Airport
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
QLD
QLD
QLD
QLD
WA
WA
WA
WA
WA
$m
55.3
48.3
48.0
41.1
38.3
34.8
26.0
21.1
19.4
15.4
15.0
14.5
12.8
11.9
11.2
8.3
N/A
235.0
15.4
9.2
3.3
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
N/A
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
Carrying amounts
2021
$m
2020
$m
55.3
48.3
48.0
41.1
38.3
34.8
26.0
21.1
19.4
15.4
15.0
14.5
12.8
11.9
11.2
8.3
N/A
235.0
15.4
9.2
3.3
46.0
38.6
35.6
35.0
33.2
28.4
23.8
17.5
16.7
12.6
12.8
12.4
9.4
12.3
9.5
8.0
50.0
239.0
11.6
8.7
2.8
30-Jun-21
213.0
213.0
177.5
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
17.8
17.2
12.0
10.3
17.8
17.2
12.0
10.3
16.8
13.5
10.3
8.8
Notes to the Financial Statements. 71
Carrying amounts
2021
$m
89.9
68.5
45.0
33.0
27.2
2020
$m
77.5
56.0
37.5
28.5
22.6
2.2 Investment properties (continued)
Determination of fair value (continued)
Industrial properties
Date Valuation
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.
2. Disposed in September 2020.
Office properties
Victoria
75 Dorcas Street
Building 3, 570 Swan Street
Building 2, 572-576 Swan Street
109 Burwood Road
Building B, 211 Wellington Road
Building 1, 572-576 Swan Street
Building C, 211 Wellington Road
Car Park, 572-576 Swan Street
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
Erskine Park
Erskine Park
Erskine Park
Kembla Grange
Silverwater
Gepps Cross
Beverley
Adelaide Airport
Adelaide Airport
South Melbourne
Richmond
Richmond
Hawthorn
Mulgrave
Richmond
Mulgrave
Richmond
Newstead
Fortitude Valley
Brisbane
South Brisbane
South Brisbane
South Brisbane
South Brisbane
Car Park, 32 Cordelia Street & 52 Merivale Street South Brisbane
NSW
NSW
NSW
NSW
NSW
SA
SA
SA
SA
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
QLD
QLD
QLD
QLD
QLD
QLD
QLD
QLD
$m
89.9
68.5
45.0
33.0
27.2
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
224.5
224.5
186.0
30-Jun-21
30-Jun-21
30-Jun-21
26.4
17.7
8.9
26.4
17.7
8.9
22.0
13.8
8.8
1,495.7
1,495.7
1,343.4
Carrying amounts
Date Valuation
$m
249.0
183.5
130.0
113.0
79.5
73.7
60.0
1.0
256.0
143.0
140.0
103.0
89.0
87.5
60.0
30.5
30-Jun-21
30-Jun-21
30-Jun-21
30-Jun-21
31-Dec-20
31-Dec-20
31-Dec-20
30-Jun-21
31-Dec-20
30-Jun-21
30-Jun-21
30-Jun-21
31-Dec-20
30-Jun-21
31-Dec-20
31-Dec-20
2021
$m
249.0
183.5
130.0
113.0
83.2
79.0
57.4
1.0
257.4
143.0
140.0
103.0
89.0
87.5
60.0
30.8
2020
$m
214.0
142.5
112.5
113.0
72.0
66.0
60.0
1.2
254.0
151.0
133.5
103.0
91.5
87.0
60.6
30.5
South Australia
33-39 Richmond Road
Keswick
SA
30-Jun-21
69.0
69.0
65.0
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
72
Financial report
2.2 Investment properties (continued)
Determination of fair value (continued)
Office properties
New South Wales
1 Charles Street
Building C, 219-247 Pacific Highway
3 Murray Rose Avenue
5 Murray Rose Avenue
102 Bennelong Parkway1
6 Parkview Drive1
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 assets
Total investment properties carrying amount
1. Disposed in June 2021.
Valuation process
Date Valuation
Parramatta
Artarmon
NSW
NSW
30-Jun-21
31-Dec-20
Sydney Olympic Park NSW
30-Jun-21
Sydney Olympic Park NSW
31-Dec-20
Sydney Olympic Park NSW
Sydney Olympic Park NSW
N/A
N/A
Canberra
Canberra
ACT
ACT
30-Jun-21
31-Dec-20
$m
525.0
137.0
111.0
103.3
N/A
N/A
95.0
79.5
West Perth
WA
30-Jun-21
100.0
3,018.5
Carrying amounts
2021
$m
525.0
137.0
111.0
100.5
N/A
N/A
95.0
81.0
2020
$m
440.0
138.0
99.0
103.5
34.0
34.5
100.0
78.3
100.0
3,025.3
4,521.0
98.6
94.7
2,879.3
4,222.7
103.0
4,619.6
4,325.7
Each investment property is valued either independently (externally) or internally in December and June each year. Investment properties
are valued according to the Group’s valuation policy which requires:
õ
Independent valuations of investment properties at least once per year;
õ 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;
õ External valuers may perform valuations on a property on no more than two consecutive occasions;
õ
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
õ 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 2021, 45 investment properties (including all of the industrial properties) representing approximately 78% (by value) of the
portfolio were independently valued by external valuers at eight valuation firms being JLL, Knight Frank, Colliers, Savills, CBRE, Urbis,
Cushman & Wakefield and m3property. Fair values for the remaining 10 investment properties were based solely on Directors’ internal
valuations.
Notes to the Financial Statements.
73
2.2 Investment properties (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:
õ Current prices for comparable properties, as adjusted to reflect differences for location, building quality, tenancy profile and other
factors;
õ Discounted cash flow (DCF) projections based on estimates of future cash flows; and
õ 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
2021
2020
5.3%-7.3%
6.0%-8.0%
4.3%-10.3%
5.0%-10.3%
4.0%-7.5%
4.8%-8.3%
4-12 months
6-12 months
2.4%-3.5%
1.7%-3.2%
2021
2020
5.5%-6.8%
4.4%-6.9%
3.8%-6.8%
6.0%-7.5%
4.9%-7.3%
4.4%-7.0%
6-18 months
6-15 months
2.2%-3.6%
2.3%-3.7%
As shown in the table below, over the 12 months to 30 June 2021 discount rates utilised in the valuation of the Group’s property portfolio
tightened (i.e. lowered) by approximately 49 basis points. Over the same period, the implied property risk premium decreased by
approximately 111 basis points. The implied property risk premium is the difference between the weighted average discount rate and the
10-year Australian Government bond yield. The decrease in the implied property risk premium is in part due to further tightening of the
Group’s weighted average discount rate in addition to a 62 basis points rise in the 10-year Australian Government bond yield since 30
June 2020.
10-year Australian Government bond rate
Implied property risk premium
Weighted average 10-year discount rate used to value the Group’s properties
2021
1.49%
4.59%
6.08%
2020
0.87%
5.70%
6.57%
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 74
Financial report
2.2 Investment properties (continued)
Capitalisation Rates
Office
Investment activity within Australian office markets continued to improve over the 12 months to 30 June 2021, particularly from offshore
groups. Demand for higher quality properties, particularly those with secure long term leases to high quality tenants, strengthened in the
second half of the year. Secondary investment assets with short lease terms, weak covenants or those which face near term vacancies
and/ or require repositioning have generated limited demand. Yields for short to medium weighted average lease expiry (WALE) assets
have remained relatively steady, while yields for long-WALE assets which offer stable cash flows, particularly those leased to high quality
tenants (e.g. government and large corporations), have firmed between 25 and 50 basis points over the year. The weighted average
capitalisation rate used to value the Group’s office portfolio firmed 30 basis points to 5.25% over the 12 months to 30 June 2021.
Industrial
Industrial yields continued to be ‘re-rated’ over the 12 months to 30 June 2021, as all major ownership groups including institutional (both
domestic and foreign), superannuation, syndication and private investors sought to increase their exposure to the sector given ongoing
structural tailwinds, such as growth of e-commerce, supply chain and infrastructure investment and strong occupier fundamentals,
including limited vacancy and reduced downtime. Demand for industrial investments, particularly investments which offer scale (i.e. large
individual assets and portfolios), is at an all-time high and is outweighing supply with recent (and current) sale campaigns recording
historically low yields for not only prime industrial investment stock, but also B and C grade stock. Prime yields are now consistently
placed between 4.00% and 5.00%, while ‘super prime’ yields (modern assets with greater than 10-year WALEs) are now placed at
or around 3.50%. Transactional evidence over the past 12 months has provided good evidence for the Group’s industrial properties,
demonstrating yield compression of between 50 and 100 basis points. The weighted average capitalisation rate used to value the Group’s
industrial portfolio firmed 86 basis points to 5.16% over the 12 months to 30 June 2021.
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. While
this represents the best estimates of fair value as at the balance sheet date, typical valuation uncertainty means that if an investment
property is sold in future the price achieved may be higher or lower than the most recent valuation, or higher or lower than the fair value
recorded in the financial statements. Valuations prepared for four of the Group’s properties have been reported based on material valuation
uncertainty. This represents 11% of the portfolio valuation.
The key inputs used to measure fair value of investment properties held at fair value are described below, along with the directional impact
an increase and decrease in the input has on fair values:
Key valuation input Description
Market
capitalisation rate
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.
Net market rent
(per sqm)
Discount rate
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.
Impact on fair values
Increase
in the input
Decrease
in the input
Decrease
Increase
Increase
Decrease
Decrease
Increase
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.
Decrease
Increase
Notes to the Financial Statements. 75
2.2 Investment properties (continued)
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 5.2% to 5.5% would result in a decrease of $224
million / 4.9% 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 29 cents per security and increase gearing by 1.4% to 29.3%.
Contractual obligations
On 11 June 2021, the Group exchanged conditional contracts to purchase a 100 per cent leasehold interest of an A-grade, modern office
asset, located at 11 Murray Rose Avenue, Sydney Olympic Park, New South Wales for $52.0 million (net sale price). The Group paid a
deposit of $2.6 million with the balance to be funded at settlement. Since balance date, the conditions precedent were satisfied and the
acquisition was settled on 24 August 2021.
The Group has 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 2021 $4.0 million of refurbishment works had been
carried out, leaving a balance of $2.0 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 under which it will contribute up to $44.0 million
of office fit out and building refurbishment works. To the extent the tenant does not utilise the $44.0 million on these 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
2021
$m
246.0
745.5
1,005.6
1,997.1
2020
$m
244.6
745.4
1,009.8
1,999.8
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 and expansion capital expenditure
Maintenance capital expenditure
Lease incentives and leasing costs
Amortisation of lease incentives and leasing costs
Disposals
Straight-lining of revenue adjustment
Recognition of ground leases as leasehold asset
Net gain from fair value adjustments
Closing balance
2021
$m
2020
$m
4,325.7
3,983.8
0.4
21.2
52.3
(26.9)
(113.7)
8.5
(4.4)
356.5
114.4
18.2
11.2
(20.8)
–
(1.0)
103.0
116.9
4,619.6
4,325.7
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
76
Financial report
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 2021 was $3.32 (30 June 2020: $2.36). 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 2021.
Opening balance
Acquisitions
Gain/(loss) in fair value
Closing balance
2.4 Receivables and other assets
2021
$m
69.9
5.6
29.3
104.8
2020
$m
85.6
–
(15.7)
69.9
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 2021 the Group had $2.9 million in property revenue receivables outstanding (2020: $3.4 million). During the year the Group
granted $0.2 million of rental relief to tenants in the form of deferrals (2020: $2.0 million) 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 was 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 during the pandemic have been agreed with tenants to be repaid over periods between October 2020
and June 2023 and have been classified between current and non-current receivables accordingly. During the year the Group collected
$0.1m in deferral repayments.
Of the current property revenue receivables balance not subject to COVID-19 deferrals, $0.8 million is more than 30 days past its due
date (2020: $0.5 million). Consideration of the impact of COVID-19 on tenants has been incorporated into the ECL assessment as at 30
June 2021 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 2021, the Group recognised $0.1 million allowance for ECL (2020: $0.2 million). During the year the Group
incurred $nil credit losses (2020: $nil).
Notes to the Financial Statements. 2.4 Receivables and other assets (continued)
Receivables and other assets are presented as follows:
Current
Property revenue receivables
Property revenue receivables (COVID-19 deferrals)
Allowance for expected credit losses
Distribution receivables
Prepayments
Non-Current
Property revenue receivables (COVID-19 deferrals)
Deposit and acquisition costs for investment property
2.5 Trade and other liabilities
77
2021
$m
0.9
1.2
(0.1)
1.4
2.7
6.1
0.9
2.8
3.7
2020
$m
1.6
0.1
(0.2)
1.2
2.8
5.5
1.9
–
1.9
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
Unearned income
Other liability1
2021
$m
0.4
1.2
1.7
13.7
16.9
1.1
35.0
2020
$m
1.0
0.9
2.9
9.7
15.5
1.3
31.3
1. The other liability of $1.1m is an amount of cash received from 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).
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
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Financial report
2.6 Cash flow information
Reconciliation of profit after tax to net cash inflow from operating activities
Profit after tax
Net gain in fair value of investment properties
Net loss/(gain) 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 loss/(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
Share based payments expense
Change in operating assets and liabilities:
– (Increase)/ decrease in lease incentives and leasing costs
– (Increase)/ decrease in receivables
– Decrease/ (Increase) in prepayments
– (Decrease)/ increase in net deferred tax liabilities
– Increase/(decrease) in payables
Net cash inflow from operating activities
2021
$m
2020
$m
553.2
272.1
(356.5)
(33.0)
1.5
(29.3)
43.8
–
0.9
4.1
0.2
1.4
(25.2)
(8.3)
2.0
(3.3)
0.2
151.7
(116.9)
28.5
–
15.7
(31.5)
(4.5)
1.4
4.1
0.2
1.9
9.7
(1.7)
(1.1)
3.8
(0.5)
181.2
The Group held $3.1 million of restricted cash in trust at 30 June 2021 (30 June 2020: $6.8 million) in relation to its role as custodian of the
Charles Street Property Trust. The balance comprises $2.0 million of the Group’s own cash along with $1.1million received from a tenant.
These funds are not available for general use by the Group.
Notes to the Financial Statements. 79
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 2020
Net cash
(repayments) /
drawdowns of
borrowings
Foreign
exchange rate
adjustments
recognised in
profit and loss
Closing
balance
30 June
2021
Facility
limit
Facility
headroom Maturity
$m
$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
Floating bank facility 1
Loan note 1
Loan note 2
Loan note 3
USPP 1 (USD 100.0m)1
USPP 2 (USD 40.0m)1
USPP 3 (AUD 26.0m)
USPP 4 (USD 115.0m)1
Total loans
Less unamortised upfront costs
Carrying amounts
100.0
245.0
70.0
150.0
–
–
–
40.0
–
90.0
200.0
100.0
60.0
146.0
58.3
26.0
167.7
1,453.0
(7.0)
1,446.0
–
–
–
–
–
–
62.5
(40.0)
–
(50.0)
–
–
(60.0)
–
–
–
–
(87.5)
1.6
(85.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
(12.9)
(5.2)
–
(14.9)
(33.0)
–
100.0
245.0
70.0
150.0
–
–
62.5
–
–
40.0
200.0
100.0
–
133.1
53.1
26.0
100.0
245.0
70.0
150.0
150.0
75.0
75.0
50.0
50.0
90.0
200.
100.0
–
133.1
53.1
26.0
152.8
152.8
–
–
–
–
150.0
75.0
12.5
50.0
50.0
50.0
–
–
–
–
–
–
–
Mar-23
Dec-23
Dec-23
Jun-23
Sep-25
Dec-24
Dec-24
May-25
May-27
Dec-22
Mar-25
Dec-26
N/A
Jun-27
Jun-29
Jun-29
May-29
1,332.5
1,720.0
387.5
(5.4)
(33.0)
1,327.1
1. USD denominated debt closing balance and facility limits are reported at the 30 June 2021 spot rate of 0.75 (30 June 2020: 0.69).
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 80
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3.1 Interest bearing liabilities (continued)
The Group made the following changes to interest bearing liabilities during the year:
õ
õ
õ
In September 2020, the Group amended the existing $90 million Fixed Bank Facility 1 to a variable interest rate which is now labelled
Floating Bank Facility 1.
In November 2020, the Group extended the existing $245 million Syndicated bank facility C and $70 million Syndicated bank facility D
by two years from December 2021 to December 2023.
In June 2021, the Group repaid the $60 million Loan note 3 and terminated the facility.
The weighted average all-in interest rate on interest bearing liabilities (including bank margin and amortisation of upfront fees paid) at
30 June 2021 was 3.32% per annum (2020: 3.43% per annum). Refer to note 3.4 for details on interest rate and cross currency swaps.
Fair value
As at 30 June 2021, the Group’s interest-bearing liabilities had a fair value of $1,389.5 million (2020: $1,553.4 million).
The carrying amount of these interest-bearing liabilities was $1,327.1 million (2020: $1,446.0 million). The difference between the carrying
amounts and the fair values is due to:
õ Unamortised up-front costs which are included in the carrying amounts but excluded from fair values; and
õ 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
2021
$m
46.0
–
2.3
4.0
–
52.3
2020
$m
50.9
(4.5)
1.4
4.0
0.1
51.9
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 Leases
Not later than one year
Later than one but not more than five years
More than five years
Total
3.4 Derivative financial instruments
81
2021
$m
4.5
24.9
145.0
174.4
0.4
1.3
–
1.7
4.9
26.2
145.0
176.1
2020
$m
4.4
24.1
152.6
181.1
0.4
1.7
–
2.1
4.8
25.8
152.6
183.2
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 Financial Instruments. 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:
Fair value carrying amounts on balance sheet
Non-current derivative financial instrument assets
Non-current derivative financial instrument liabilities
Net fair value by instrument type
Interest rate swaps
Cross currency interest rate swaps and cross currency swap
2021
$m
7.3
(9.5)
(2.2)
(5.8)
3.6
(2.2)
2020
$m
51.9
(10.3)
41.6
51.9
(10.3)
41.6
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
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Financial report
3.4 Derivative financial instruments (continued)
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 2021 covered 27% (30 June 2020: 21%) of the loan principal outstanding. With total fixed interest rate debt of
$868.5 million outstanding (30 June 2020: $980.3 million), the total fixed interest rate coverage of outstanding principal is 65% (30
June 2020: 67%).
The average fixed interest rate of interest rate swaps at 30 June 2021 was 1.05% per annum (2020: 1.21% per annum) and the
variable interest rate (excluding bank margin) is 0.06% per annum (30 June 2020: 0.14% per annum) at balance date. See table
below for further details of interest rate swaps in effect at 30 June 2021:
Counter Party
Amount of Swap
Swap Expiry
Fixed Rate
Term to Maturity
Interest rate swaps
NAB
WBC
NAB
WBC
ANZ
ANZ
ANZ
Total / Weighted average
$m
25.0
75.0
20.0
15.0
25.0
100.0
100.0
360.0
%
Years
Jun-23
Jun-23
Dec-23
Dec-23
Feb-24
Jun-24
Jun-25
1.15%
1.15%
0.22%
0.21%
0.22%
1.21%
1.29%
1.05%
2.0
2.0
2.5
2.5
2.6
3.0
4.0
2.9
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.
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 at a fixed AUD interest rate. The
USD denominated principal repayment at expiry is swapped into a fixed AUD amount.
Notes to the Financial Statements. 83
3.4 Derivative financial instruments (continued)
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+
Term to Maturity
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-27
Jun-27
Jun-27
Jun-27
Jun-29
Jun-29
Jun-29
Jun-29
May-29
%
5.29%
5.29%
5.27%
5.26%
5.47%
5.47%
5.45%
5.44%
–
5.33%
%
–
–
–
–
–
–
–
–
2.26%
2.26%
Years
6.0
6.0
6.0
6.0
8.0
8.0
8.0
8.0
7.9
7.2
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:
õ Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
õ 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).
õ Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
30-Jun-21
Investment in securities
Derivative financial assets
Derivative financial liabilities
30-Jun-20
Investment in securities
Derivative financial assets
Derivative financial liabilities
Level 1
Level 2
Level 3
$m
104.8
–
–
104.8
69.9
–
–
69.9
$m
–
7.3
(9.5)
(2.2)
–
51.9
(10.3)
41.6
$m
–
–
–
–
–
–
–
–
Total
$m
104.8
7.3
(9.5)
102.6
69.9
51.9
(10.3)
111.5
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
84
Financial report
3.6 Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
õ credit risk;
õ market risk (including interest rate risk); and
õ
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 2021 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 liability 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.
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. The Group
assesses aged amounts for collectability based on various criterion in its ECL model and where applicable, raises an ECL allowance
through profit or loss. Refer Note 2.4 for additional information on ECL allowances.
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. This relates to its floating debt facilities. with a principal
amount outstanding of $667.5 million at balance date (2020: $605.0 million) and a cross currency swap with a principal amount of
$161.0 million at balance date (2020: $161.0 million).
The Group is party to derivative financial instruments in the normal course of business to hedge its exposure to fluctuations in
interest rates.
Notes to the Financial Statements. 85
3.6 Financial risk management (continued)
Market risk (continued)
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
Fixed/Floating
Fixed
Fixed
Fixed
Floating
2021
$m
33.5
7.3
40.8
9.5
512.1
360.0
460.4
2020
$m
42.7
51.9
94.6
10.3
680.3
300.0
472.8
1,342.0
1,463.4
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 USD255m denominated debt. To
mitigate this exposure, the Group entered into cross currency swaps and cross currency interest rate swaps at inception of the USD
denominated debt facilities, which convert USD denominated debt principal repayments and all future interest payments from USD to
AUD, thereby eliminating its direct foreign currency exposure.
Sensitivity analysis – interest rate risk
The following sensitivity analysis is based on the interest rate risk exposures at balance date. At 30 June 2021, 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,
noting that all USD interest payments have been converted into AUD through swaps:
+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)
2021
$m
(4.4)
9.1
25.6
30.3
4.4
(9.3)
(25.6)
(30.5)
2020
$m
(4.2)
9.1
25.6
30.5
4.2
(9.3)
(25.6)
(30.7)
These fair value gains or losses would be unrealised and non-cash unless the interest rate swaps were closed or sold.
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
86
Financial report
3.6 Financial risk management (continued)
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 $33.5 million (2020: $42.7 million) and undrawn debt
facilities of $387.5 million (2020: $359.9 million).
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 2021.
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
2021
Non-derivative financial liabilities
Bank loans and Loan Notes
1,327.1
1,502.3
Lease liabilities
Trade and other liabilities
105.9
95.3
176.1
95.5
1,528.3
1,773.9
16.4
2.5
93.3
112.2
16.4
1,221.5
2.4
1.1
26.2
1.2
247.9
145.0
–
19.9
1,248.9
392.9
Derivative financial liabilities
Interest rate swaps used for hedging
2020
Non-derivative financial liabilities
Bank loans
Lease liabilities
Trade and other liabilities
Derivative financial liabilities
Interest rate swaps used for hedging
3.7 Contributed equity and reserves
Contributed equity
9.5
9.5
11.0
11.0
1.9
1.9
1.9
1.9
7.3
7.3
–
–
1,446.0
1,778.0
108.3
94.5
183.2
94.4
1,648.8
2,055.6
10.3
10.3
11.3
11.3
22.0
2.5
91.2
115.7
1.5
1.5
22.1
2.4
1.9
26.4
1.4
1.4
1,201.3
25.8
1.3
1,228.4
8.5
8.5
532.6
152.6
–
685.2
–
–
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.
Notes to the Financial Statements.
87
3.7 Contributed equity and reserves (continued)
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
Costs of raising capital
Equity issued through capital raises, net of costs
Securities issued through employee incentive plans
Total equity issued
Securities bought back on market
Total equity cancelled
Closing balance at 30 June
Ordinary stapled securities
2021
No. (m)
771.8
–
–
–
0.5
0.5
(0.4)
(0.4)
2021
$m
2,050.0
–
–
–
–
–
(1.4)
(1.4)
2020
No. (m)
727.8
43.7
–
43.7
0.3
44.0
–
–
2020
$m
1,879.4
173.6
(3.1)
170.6
–
170.6
–
–
771.9
2,048.6
771.8
2,050.0
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 2020 and 30 June 2021 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, issue new securities or buy back securities, vary the level of borrowings and/or sell
assets.
In February 2021, the Group announced an on-market buy-back of up to 2.5% of the ordinary stapled securities on issue. At 30 June
2021, the Group has bought back and cancelled 416,643 ordinary stapled securities.
The Group holds an independent credit rating to aid it in accessing debt capital markets. In November 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.
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 2021, the gearing ratio was 27.9% (30 June 20: 32.2%). The gearing
ratios at 30 June 2021 and 30 June 2020 were calculated as follows:
Total interest-bearing liabilities less cash
Total assets less cash and right-of-use assets
Gearing ratio
2021
$m
1,293.6
4,644.5
27.9%
2020
$m
1,403.2
4,353.5
32.2%
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
88
Financial report
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 2020
Half year to 30 June 2021
Total distributions for the year ended 30 June 2021
Half year to 31 December 2019
Half year to 30 June 2020
Total distributions for the year ended 30 June 2020
3.9 Earnings per stapled security (EPS)
Distributions
Total stapled
securities
Distributions
per stapled
security
$m
77.2
77.2
154.4
91.1
77.2
168.3
No. (m)
772.2
771.9
771.8
771.8
(cents)
10.0
10.0
20.0
11.8
10.0
21.8
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 of the Group
Profit after tax of the Trust as parent entity
Basic weighted average number of stapled securities on issue for the year
Adjustment for potential dilution from performance rights on issue
Diluted weighted average number of stapled securities on issue for the year
EPS attributable to securityholders of the Group
Basic EPS
Diluted EPS
EPS attributable to unitholders of the Trust as parent entity
Basic EPS
Diluted EPS
$m
$m
No. (m)
No. (m)
No. (m)
Cents
Cents
Cents
Cents
2021
553.2
554.3
772.0
1.7
773.7
71.7
71.5
71.8
71.6
2020
272.1
265.2
771.0
0.8
771,8
35.3
35.3
34.4
34.4
Notes to the Financial Statements. 89
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 49-50 of the Remuneration Report within the Directors’ Report.
At 30 June 2021, the Group had two share-based payment schemes in place:
a) Deferred Short-term Incentive Performance Rights
Any Short-term Incentive (STI) payable to Executive Key Management Personnel (KMP) is paid as 66.6% cash with the remainder deferred
and awarded as Deferred STI Performance Rights. Half of these rights vest after one year and the other half after two years. Further details
of this plan are reported on pages 43-45 of the Remuneration Report.
b) Long-term Incentive Performance Rights
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 and 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 45-49 of the Remuneration Report.
The table below shows the movement in rights under each type of share-based payment scheme:
Short-term
Performance
Rights
Long-term
Performance
Rights
Rights outstanding at 30 June 2019
Rights granted1
Rights lapsed
Rights vested to GOZ stapled securities2
Rights outstanding at 30 June 2020
Rights granted
Rights lapsed
Rights vested to GOZ stapled securities3
Rights outstanding at 30 June 2021
No.
160,917
176,376
(57,614)
(51,652)
228,027
202,358
(154,001)
(93,869)
182,515
No.
803,045
766,000
(133,490)
(269,232)
1,166,323
Total
No.
963,962
942,376
(191,104)
(320,884)
1,394,350
994,569
1,196,927
–
(363,509)
1,797,383
(154,001)
(457,378)
1,979,898
1. Includes 90,682 FY20 STI Plan rights for Timothy Collyer which were subsequently approved by securityholders at the November 2020 AGM.
2. 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.
3. In October 2020, 363,509 rights under the FY17 backward-looking plan, the FY19 and FY20 transitional Long-term incentive plans were converted to Growthpoint stapled
securities with a total value of $1,225,025.
During the year, $1.4 million was expensed and recognised in the Company’s share-based payments reserve (June 20: $1.9 million).
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 90
Financial report
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.
Adoption of Voluntary Tax Transparency Code
The Tax Transparency Code (TTC), a voluntary code, is a set of principles and minimum standards to guide medium and large businesses
on public disclosure of tax information. The TTC recommends specified tax information be publicly disclosed to help educate the public
about medium and large corporate compliance with Australia’s tax laws. Growthpoint has adopted the TTC and the required disclosures
are contained in this note.
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 benefit/(expense)
Income tax benefit/(expense) in the Statement of Comprehensive Income
2021
$000
(304)
3,243
2,939
2020
$000
(3,608)
(3,806)
(7,414)
Notes to the Financial Statements.
91
4.1 Income tax (continued)
Income tax expense (continued)
(b) Reconciliation of accounting profit to prima facie tax at 30%, statutory income tax expense reported and current tax
expense:
Profit before income tax expense
Less: Trust profit not subject to tax
(Loss)/Profit subject to taxation in the Group’s companies
Prima facie tax benefit/(expense) 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
Refundable tax offsets
2021 Tax loss carry back
Over provision
Statutory income tax benefit/(expense)
Deferred tax benefit/(expense) (Refer section (d))
Current tax expense (payable for the current year)
(c) (i) Effective tax rates:
(Loss)/Profit subject to taxation
Statutory income tax benefit/(expense)
Accounting and TTC Effective tax rate¹
2021
$000
550,195
(562,004)
(11,809)
3,543
(8)
(339)
(89)
51
(51)
(168)
2,939
3,243
(304)
2021
$000
(11,809)
2,939
(24.88%)
2020
$000
279,456
(256,803)
22,653
(6,796)
(18)
(387)
(213)
–
–
–
(7,414)
(3,806)
(3,608)
2020
$000
22,653
(7,414)
32.70%
1. The group operates in Australia and has no offshore operations, therefore is subject solely to Australian income tax. The accounting effective tax rate was the same as the
TTC effective tax rate in both the current and prior financial years. Whilst the accounting income tax benefit for the year was $2,939,000, equating to an effective tax rate of
(24.88%), the Group provisioned for income tax expense of $304,000 when it lodges its income tax return for the year, calculated at the Australian company tax rate of 30%
of taxable income in accordance with Australian taxation legislation.
(c) (ii) Current income tax payable:
Income tax payable at beginning of financial year
Less: income tax paid during the year
Add: Current tax expense
Current tax payable
(c) (iii) Deferred tax balances
Deferred tax assets (GPAL)
Deferred tax (liabilities) (GFPL)
Net deferred tax asset / (liabilities)
2021
$000
1,441
(1,499)
304
246
2021
$000
1,089
(586)
503
2020
$000
2,296
(4,463)
3,608
1,441
2020
$000
854
(3,599)
(2,745)
As at 30 June 2021, the Company had franking credit balance of $5,135,983 (30 June 2020: $3,631,671).
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
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Financial report
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
Derivative financial instruments1
Non-trade payables
Other
Net deferred tax liabilities attributable to:
Interest-bearing liabilities1
Derivative financial instruments1
Lease liability
Recognised tax losses
Opening
balance
1 July 2020
Recognised in
profit or loss
Recognised in
equity
Balance
30 June 2021
$000
$000
$000
$000
(463)
576
85
97
232
–
236
91
854
1,157
(4,976)
–
220
(3,599)
96
(100)
(1)
(55)
258
–
70
(33)
235
(9,905)
13,138
–
(220)
3,013
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(367)
476
84
42
490
–
306
58
1,089
(8,748)
8,162
–
–
(586)
503
Net total
(2,745)
3,248
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
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
–
–
–
–
(463)
576
13
(104)
(291)
44
18
(207)
1,157
(4,976)
220
(3,599)
–
–
–
–
–
–
31
31
–
–
–
–
(463)
576
85
97
232
236
91
854
1,157
(4,976)
220
(3,599)
Net total
1,030
(3,806)
31
(2,745)
1. Derivative instruments and interest-bearing liabilities entered by Growthpoint Finance Pty Ltd.
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
93
2021
$
2020
$
4,221,253
3,930,762
12,507
146,525
1,043,775
5,424,060
68,758
141,203
1,191,007
5,331,730
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 Directors and Executive
KMP including their related parties is as follows:
2021
Securityholder
G. Jackson
N. Sasse
E. de Klerk
T. Collyer
F. Marais
D. Andrews
M. Green
G. Tomlinson
J. Sukkar AM
J Jovanovski
D Page AM1
1. Appointed 1 March 2021
Opening
securities
1 July
Securities
granted as
compensation
Acquired
securities
Disposed
securities
190,087
1,656,460
1,752,863
1,035,744
169,284
176,671
53,823
88,776
14,000
–
–
–
–
–
194,440
–
70,935
71,206
–
–
20,548
–
–
–
49,994
–
–
–
–
–
–
–
25,050
–
–
–
–
–
–
–
–
–
–
–
Closing
securities
30 June
190,087
1,656,460
1,802,857
1,230,184
169,284
247,606
125,029
88,776
14,000
20,548
25,050
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Financial report
4.2 Key Management Personnel (KMP) compensation (continued)
Movements in securities (continued)
During the year to 30 June 2021, a total of 357,129 stapled securities with a total value at the time of vesting of $1,269,233 were issued
to KMP upon vesting of performance rights under employee incentive plans.
2020
Securityholder
G. Jackson
N. Sasse
E. de Klerk
T. Collyer
F. Marais
D. Andrews
M. Green
G. Tomlinson
M. Brenner1
J. Sukkar AM
J Jovanovski
Opening
securities
1 July
Securities
granted as
compensation
Acquired
securities
Disposed
securities
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
–
–
–
–
–
–
–
–
–
–
–
–
–
Closing
securities
30 June
190,087
1,656,460
1,752,863
1,035,744
169,284
176,671
53,823
88,776
18,356
14,000
–
1. Resigned effective 30 November 2020
During the year to 30 June 2020, a total of 247,488 stapled securities with a total value at the time of vesting of $1,019,129 were issued
to KMP upon vesting of performance rights under employee incentive plans.
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.
Notes to the Financial Statements. 95
4.3 Related party transactions (continued)
Director transactions (continued)
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
2021
$
42,075
6,545
2020
$
44,825
20,048
Aggregate amounts payable at the reporting date
12,375
15,125
1. The Group used the valuation services of m3property, a company of which Mr Jackson is a director, to independently value seven properties (2020: eight). 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 2021 (2020: nil).
4.4 Contingent liabilities
As at 30 June 2021, the Group had no contingent liabilities (2020: 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 (2020: nil).
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 96
Financial report
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 2021.
Ann Street Property Trust
Atlantic Drive Property Trust
Broadmeadows Leasehold Trust
Building 2 Richmond Property Trust
Nundah Property Trust
Pope Street Property Trust
Preston 2 Property Trust
Queensland Property Trust
Building C, 211 Wellington Road Property Trust
Rabinov Property Trust
CB Property Trust
Charles Street Property Trust
Coolaroo Property Trust
Derrimut Property Trust
Drake Boulevard 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
Newstead 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
11 Murray Rose Avenue 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
Notes to the Financial Statements. 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 income
97
2021
$m
22.6
4,757.3
113.4
1,618.2
3,139.1
1,978.0
1,161.1
3,139.1
554.3
554.3
2020
$m
31.1
4,477.0
181.6
1,743.9
2,733.1
1,979.4
753.7
2,733.1
265.2
265.2
The contractual commitments of the parent entity are identical to those disclosed in Note 2.2. The parent entity has no contingent liabilities
(2020: $nil).
4.8 Remuneration of auditors
The following fees were paid or payable for services provided by the auditor of the Group during the year. There were no non-audit
services paid to auditors during the year (2020: $nil):
Audit services - EY
Audit and review of financial statements
Other regulatory audit services
4.9 Subsequent events
2021
$
283,470
37,000
320,470
2020
$
217,000
37,000
254,000
On 24 August 2021, settlement occurred on the acquisition of 11 Murray Rose Avenue, Sydney Olympic Park, New South Wales for
$52.0 million (net sale price excluding acquisition costs). There have been no other subsequent events from the end of the year to the
date of this report likely to significantly affect the operations of the business, the results of those operations or the state of affairs of the
Group in future financial years.
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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 36 to 58 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 2021 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 2021.
This declaration is made in accordance with a resolution of the Directors of the Group.
Timothy Collyer
Managing Director
Growthpoint Properties Australia
Melbourne, 25 August 2021
Auditor’s independence declaration.
99
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 2021, 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
25 August 2021
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100
Financial report
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
Properties Australia Trust (collectively Growthpoint Properties Australia or the ‘Group’), which
comprises the consolidated statement of financial position as at 30 June 2021, 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
2021 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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101
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 $4,619.6 million at 30 June 2021,
which represents 96% 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 is based on a
number of assumptions, such as capitalisation rates,
discount rates and terminal yields, which require
significant estimation and judgement. 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.
Impact of COVID-19 on investment property values
Given the market conditions at balance date, 4
independent valuers have reported on the basis of
the existence of ‘material valuation uncertainty’ on
the respective office property valuations, noting that
less certainty, and a higher degree of caution, should
be attached to the valuations than would normally
be the case. This means that the property values
may change significantly and unexpectedly over a
relatively short period of time.
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 2021.
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 director valuations, 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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102
Financial report
Independent Auditor’s report.
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 2021.
● 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 2021 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
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 2021 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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103
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.
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104
Financial report
Independent Auditor’s report.
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 2021.
In our opinion, the Remuneration Report of Growthpoint Properties Australia for the year ended 30
June 2021, 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
25 August 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Detailed
portfolio information.
105
Office portfolio
Address
Book
Value
$m
Valuer
Cap
rate
Discount
rate
Major tenant WALE
Lettable
area
Site
area
%
%
years
sqm
sqm
75 Dorcas St
South Melbourne
VIC
249.0
Colliers 5.13
6.13 ANZ Banking Group
6.7
23,811
9,632
Bunnings
Warehouse
Country Road
Group
Orora
Bldg 3, 570 Swan St
Richmond
VIC
183.5
Savills 5.00
6.25
Bldg 2, 572-576 Swan St
Richmond
109 Burwood Rd
Hawthorn
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
QLD
130.0
113.0
CBRE 5.00
Savills 5.25
6.00
6.25
83.2
Directors 5.88
6.50 Monash University
79.0
Directors 5.00
6.00
57.5
Directors 6.25
6.75
Country Road
Group
BMW Australia
Finance
1.0
CBRE 20.01
GE Capital Finance
Australasia
–
257.5
Directors 5.63
6.25 Bank of Queensland
15 Green Square Cl
Fortitude Valley
QLD
143.0
Colliers 5.75
6.50
333 Ann St
Brisbane
CB1, 22 Cordelia St
South Brisbane
A1, 32 Cordelia St
A4, 52 Merivale St
South Brisbane
South Brisbane
CB2, 42 Merivale St
South Brisbane
QLD
QLD
QLD
QLD
QLD
140.0 Knight Frank 5.63
6.00
103.0
Urbis 5.88
6.75 Downer EDI Mining
89.0
87.5
60.0
Directors 5.75
Colliers 5.75
Directors 5.88
6.25
6.25
6.25
Jacobs Group
Stantec Australia
Peabody Energy
Queensland Urban
Utilities
Federation
University
7.6
19,427
8,525
11.0
14,602
7,130
3.6
4.6
12,388
3,529
12,780
11,040
11.0
8,554
8,365
1.6
10,289
11,070
5.9
5.3
–
3,756
24,665
5,157
3.2
16,442
2,519
3.8
2.7
4.0
4.3
3.6
16,342
1,563
11,460
5,772
10,003
2,667
9,405
2,331
6,598
3,158
Car Park, 32 Cordelia St
& 52 Merivale St
South Brisbane
QLD
30.9
Directors 5.63
6.50
Secure Parking
3.6
–
9,319
1 Charles St
Parramatta
NSW 525.0 Knight Frank 3.75
5.50 NSW Police Force
23.5
32,356
6,460
Bldg C, 219-247 Pacific Hwy Artarmon
NSW 137.0
Directors 5.50
6.25
Fox Sports
2.0
14,406
4,212
3 Murray Rose Ave
Sydney Olympic Park NSW 111.0
JLL 5.36
5 Murray Rose Ave
Sydney Olympic Park NSW 100.5
Directors 5.50
33-39 Richmond Rd
Keswick
SA
69.0
JLL 6.50
6.25
6.38
6.75
10-12 Mort St
Canberra
ACT
95.0 Knight Frank 6.76
6.75
255 London Cct
Canberra
ACT
81.0
Directors 5.20
6.00
836 Wellington St
West Perth
WA
100.0
JLL 6.00
Total / weighted average
3,025.6
5.25
6.75
6.17
Samsung
Electronics
Lion
Coffey Corporate
Commonwealth of
Australia
Commonwealth of
Australia
Commonwealth of
Australia
0.7
2.8
5.3
13,423
3,980
12,386
3,826
11,730
4,169
3.7
15,398
3,064
6.2
8,972
2,945
5.6
11,973
4,304
7.0 317,409 128,493
Growthpoint Properties AustraliaFY21 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 106
Additional information
Detailed portfolio information.
Industrial portfolio
Address
Book
Value
$m
Valuer
Cap
rate
Discount
rate
Major tenant WALE
Lettable
area
%
%
years
sqm
Site
area
sqm
1500 Ferntree Gully Rd
& 8 Henderson Rd
Knoxfield
VIC
55.3
3 Maker Pl
Truganina
VIC
48.3
Cushman &
Wakefield
Cushman &
Wakefield
4.75
6.00
Brown & Watson
International
4.3
22,009
40,844
4.75
5.75
HB Commerce
1.2
31,092
49,810
9-11 Drake Blvd
Altona
Lots 2, 3 & 4, 34-44 Raglan St Preston
VIC
VIC
48.0
CBRE
4.50
41.1 m3property
5.25
40 Annandale Rd
Melbourne Airport VIC
38.3
Urbis
6.50
120-132 Atlantic Dr
Keysborough
VIC
130 Sharps Rd
Melbourne Airport VIC
Cushman &
Wakefield
4.25
Colliers
7.25
34.8
26.0
5.75
6.25
6.00
5.75
6.00
Melbourne Airport VIC
21.1
Urbis
7.25
6.25
Symbion
Laminex Group
The Workwear
Group
Peter Stevens
Motorcycles
Paper Australia
2.3
2.8
25,743
41,730
27,978
42,280
Australia Post
10.0
44,424
75,325
120 Link Rd
20 Southern Crt
3 Millennium Crt
31 Garden St
6 Kingston Park Crt
19 Southern Crt
60 Annandale Rd
75 Annandale Rd
70 Distribution St
13 Business St
5 Viola Pl
3 Viola Pl
27-49 Lenore Dr
6-7 John Morphett Pl
51-65 Lenore Dr
34 Reddalls Rd
81 Derby St
19.4 m3property
5.00
6.00Sales Force National
15.3
15.0
14.5
Urbis
5.00
6.00
Opal Packaging
JLL
JLL
5.00
5.00
6.00 Cummins Filtration
6.00
NGK Spark Plug
12.7 m3property
4.75
6.00 Wabtec Australia
Urbis
7.50
6.25Garden City Planters
Urbis
7.50
6.25
Direct Couriers
Keysborough
Knoxfield
Kilsyth
Knoxfield
Keysborough
VIC
VIC
VIC
VIC
VIC
Melbourne Airport VIC
Melbourne Airport VIC
Larapinta
Yatala
QLD
QLD
Brisbane Airport QLD
11.9
11.2
8.3
235.0
15.4
9.2
Urbis
7.50
JLL
5.89
Savills
5.25
Urbis
6.75
6.25
6.00
6.00
6.50
6.50
5.75
5.50
5.50
Unipart Group
Australia
Woolworths
Volo Modular
Cargo Transport
Systems
Linfox
Linfox
Linfox
Brisbane Airport QLD
3.2
Urbis
6.25
Erskine Park
Erskine Park
Erskine Park
NSW
NSW
NSW
Kembla Grange NSW
68.5
45.0
33.0
89.9 Knight Frank
4.25
CBRE
4.25
CBRE
4.00
Silverwater
NSW
27.2 Knight Frank
4.50
5.75 IVE Group Australia
Savills
5.25
6.50 Autocare Services
7.5
4.0
6.0
1.5
4.7
2.4
0.9
5.8
1.9
6.4
1.3
0.7
4.1
12,864
26,181
28,100
47,446
26,517
51,434
11,430
19,210
8,040
8,919
7,645
6,455
14,750
17,610
12,795
11,650
16,276
34,726
14,082
24,799
10,310
16,930
76,109
250,900
8,951
18,630
1.7
2.2
3.7
6.7
9.3
1.2
3,431
12,483
29,476
76,490
24,881
82,280
3,720
36,720
355
141,100
8,253
13,490
Vacant
–
14,726
35,166
101-111 South Centre Rd
Melbourne Airport VIC
599 Main North Rd
Gepps Cross
SA
224.5 Knight Frank
4.25
5.25
Woolworths
13.9
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
Total / weighted average
SA
SA
SA
WA
WA
26.4
17.7
8.9
213.0
57.3
1,495.4
JLL
6.00
Savills
6.34
Savills
7.34
JLL
JLL
5.13
6.21
5.16
7.00
6.50
7.25
6.00
6.73
5.90
Aluminium
Specialties Group
3.1
14,459
25,660
Australia Post
10.1
16,835
30,621
Toll Transport
Woolworths
Mainfreight
0.6
4.3
4.7
8,461
16,100
80,374
193,936
32,018
57,617
4.7 715,619 1,752,213
Securityholder
information.
107
Top 20 legal Securityholders as at 31 July 2021
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
JP MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
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