More annual reports from Growthpoint Properties Australia Ltd:
2023 ReportPeers and competitors of Growthpoint Properties Australia Ltd:
Starwood Property Trust17 August 2023
Appendix 4E
Results for the year ended 30 June 2023
Results for announcement to the market
Revenue and other income from ordinary activities
Profit from ordinary activities after tax attributable to Securityholders1
Net (loss) / profit attributable to Securityholders
Distribution to Securityholders
Distributions
Final distribution payable on 31 August 2023
Interim distribution paid on 28 February 2023
Net tangible assets per stapled security
Net tangible assets per stapled security
Year ended
30-Jun-23
Year ended
30-Jun-22
$m
342.7
204.8
(245.6)
162.6
$m
311.5
214.0
459.2
160.6
Change
%
10.0%
(4.3%)
(153.5%)
1.2%
Amount per
security/unit
cents
10.70
10.70
Franked
amount per
security Record date
%
0%
0%
30-Jun-23
31-Dec-22
30-Jun-23
$
4.00
30-Jun-22
$
4.56
Change
%
(12.3%)
Additional information regarding the results for the year is contained in the FY23 annual report and the FY23 results
presentation which have been released to the Australian Securities Exchange (ASX).
1 In the FY23 annual report and the FY23 results 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
Entities over which control was gained or lost during the year
Growthpoint Properties Australia acquired the following entities during the year:
Entity
Artarmon Retail Centre TC Pty Ltd
Fortius Allendale No.1 Pty Ltd
Fortius Allendale No.2 Pty Ltd
Fortius Allendale No.3 Pty Ltd
Fortius Asset Management Pty Ltd
Fortius Barracks Pty Ltd
Fortius Bourke Street Pty Limited
Fortius Broadway No 1 Pty Ltd
Fortius Broadway No 2 Pty Ltd
Fortius Cammeray Pty Ltd
Fortius DC Pty Ltd
Fortius Debt Capital Pty Ltd
Fortius FAPT No.1 Pty Ltd
Fortius Funds Management Pty Ltd
Fortius Grenfell No.1 Pty Ltd
Fortius Grenfell No.2 Pty Ltd
Fortius Grenfell No.3 Pty Ltd
Fortius Heitman Barracks Pty Ltd
Fortius Home HQ Artarmon Holding Fund Pty Ltd
Fortius Home HQ Holding Pty Ltd
Fortius Home HQ Sub Entity Pty Ltd
Fortius Investment Management Pty Ltd
Fortius Investment Properties Pty Ltd
Fortius Junction Fair Pty Ltd
Fortius Properties Pty Limited
Fortius Property Investment Management Australia Ltd
Fortius QS No.1 Pty Ltd
Fortius QS No.2 Pty Ltd
Fortius QS No.3 Pty Ltd
Fortius Rundle No 1 Pty Ltd
Fortius Rundle No 2 Pty Ltd
Fortius Rundle No 3 Pty Ltd
Fortius Waterloo Pty Ltd
Rundle Car Park Leasing No 2 Pty Ltd
Rundle Car Park Leasing Pty Ltd
Date Control Gained
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
15 September 2022
Details of associates and joint venture entities
Nil.
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 FY23 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 FY23 annual report.
This announcement was authorised by Growthpoint’s Board of Directors.
Jacqueline Jovanovski
Company Secretary
For further information, please contact:
Luke Maffei
Investor Relations and Communications Manager
Telephone: +61 3 8681 2933
Growthpoint Properties Australia
Level 18, 101 Collins St, Melbourne, VIC 3000
growthpoint.com.au
About Growthpoint
Growthpoint provides space for you and your business to thrive. Since 2009, we’ve been investing in high-quality industrial and
office properties across Australia.
Today, we have $6.6 billion total assets under management. We directly own and manage 58 high quality, modern office and
industrial properties, valued at approximately $4.8 billion. We actively manage our portfolio and 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 manage a further $1.8 billion on behalf of third-party investors through our funds management business, which manages funds
that invest in office, retail and mixed-use properties across value-add and opportunistic strategies.
We are committed to operating in a sustainable way and reducing our impact on the environment. We are targeting net zero by
2025 across our 100% owned on balance sheet operationally controlled office assets and corporate activities.
Growthpoint Properties Australia (ASX: GOZ) 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.
Growthpoint Properties Australia Trust ARSN 120 121 002
Growthpoint Properties Australia Limited ABN 33 124 093 901 AFSL 316409
FY23
annual report.
for the year ended 30 June 2023
space to thrive.
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 2023 (FY23 or the year).
Data contained in this report relates to the Group’s
directly held assets, unless otherwise indicated.
FY23 reporting suite
Growthpoint’s reporting suite for FY23 includes the
following documents:
FY23 Annual Report
A review of Growthpoint’s financial and operational
performance for FY23, the Group’s remuneration
report and its financial statements.
FY23 Results Presentation
An overview of Growthpoint’s operational and
financial performance for the financial year.
FY23 Property Compendium
A summary of Growthpoint’s property portfolio as
at 30 June 2023.
FY23 Corporate Governance Statement
An overview of Growthpoint’s governance
framework and practices. Download a copy:
growthpoint.com.au/corporate-governance
FY23 Sustainability Report
A review of our approach to sustainability and
an update on our progress in achieving our
sustainability goals, which will be released prior to
Growthpoint’s AGM and will be available online at
that time.
Our corporate reporting suite
documents are available for
download on the Growthpoint
Investor Centre growthpoint.com.au/
investor-centre
Front cover image: 120 Link Road,
Melbourne Airport, VIC
2
What’s
inside.
Directors’ Report
Operating and financial review
Business overview
FY23 overview
Who we are
Our strategy
Introduction from the
Chair & Managing Director
Property portfolio performance
Property portfolio summary
Our office portfolio
Our industrial portfolio
FY23 sustainability performance
Financial performance
Governance
Board of Directors
Executive Management team
Risk management
Remuneration report
Additional information
Financial Report
Contents
Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
Additional information
Detailed portfolio information
Securityholder information
Glossary
Contact details
Important information
3
3
4
6
10
12
12
14
16
18
20
24
24
26
28
32
52
53
54
58
98
99
100
106
108
110
111
111
Acknowledgement of Country
Growthpoint Properties Australia
acknowledges the Traditional Custodians of
Country throughout Australia and recognise
their continued connection to land, water and
community. We pay our respects to Elders
past and present and extend that respect to
First Nations people.
3
FY23
overview.
Property portfolio
value
Third-party funds
under management
Loss
after tax
$4.8b
$1.8b
30 June 2022: $5.1b, -5.9%
FY22: $0.0
$245.6m
FY22: profit after tax $459.2
Funds from
operations (FFO)
Distribution
Net tangible assets
(NTA) per security
26.8cps
21.4cps
$4.00
FY22: 27.7cps, -3.2%
FY22: 20.8cps, +2.9%
30 June 2022: $4.56, -12.3%
Portfolio
occupancy
93%
30 June 2022: 97%
Weighted average
lease expiry (WALE)
6.0 years
30 June 2022: 6.3 years
Average NABERS
Energy rating
5.2 stars
30 June 2022: 5.2 stars
3 Maker Place, Truganina, VIC
This prime logistics warehouse, totalling
31,109 sqm, was successfully leased to
new tenant, 101 Warehousing, for a term
of 7.0 years
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 4
Directors’ report
Operating and financial review
Who
we are.
As at 30 June 2023
Total properties
58
Property portfolio value
$4.8b
Third party FUM
$1.8b
Market capitalisation
$2.1b
Total employees1
62
Number of tenants
161
Number of investors
4440
1. Excludes casual and contract
employees.
What we do
Growthpoint provides space for you and your business to
thrive. Since 2009, we’ve been investing in high-quality
industrial and office properties across Australia.
Today, we have $6.6 billion total assets under management. We directly
own and manage 58 high quality, modern office and industrial properties,
valued at approximately $4.8 billion.
We manage a further $1.8 billion on behalf of third-party investors through
our funds management business, which manages funds that invest in
office, retail and mixed-use properties across value-add and opportunistic
strategies.
We also retain a 15.5% securityholding in Dexus Industria REIT (ASX:DXI)
valued at $126.5 million1 as at 30 June 2023.
We actively manage our portfolio and 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. We are targeting net zero by 2025 across
our 100% on balance sheet operationally controlled office assets and
corporate activities.
Growthpoint Properties Australia (ASX: GOZ) is an internally managed 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.
How we do it
Our values underpin everything we do.
Respect:
dealing with
others openly,
honestly and
respectfully
Success:
valuing
performance,
hard work and
high standards
Inclusion:
appreciating
our diversity,
heritage and
perspectives
Integrity:
doing the
right thing
for tenants,
investors and
team
Fun:
enjoying work,
being sociable
and playing as
a team
Who we do it for
Tenants, employees, Securityholders, debt providers, service
providers and local communities.
1. Based on closing price of $2.58.
5
100 Skyring Terrace,
Newstead, QLD
This A-grade office property
located in the Gasworks
development, is now fully
leased, with 8,007 sqm
of leasing completed to
Government tenants during
the 12 months
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 6
Directors’ report
Operating and financial review
Our
strategy.
Our goal is to provide
Securityholders with
sustainable income
returns and capital
appreciation over the
long term
Invest in high-quality
Australian assets
Invest in high-quality, modern
office and industrial real
estate assets, that provide an
attractive income yield and
long-term capital appreciation
Maximise value
Develop asset management
and tenant retention strategies
for each of our properties to
maximise income and value
Strategies include leasing,
refurbishment, expansion,
low risk development and
divestment
Maintain high
occupancy
Active asset management
through the development of
long-term relationships with
tenants. Focus on ensuring
our properties meet tenants’
needs to maintain high
occupancy and drive rental
income
t Completed acquisition of
predominantly Government leased
A-Grade office asset GSO Dandenong,
165-169 Thomas Street, Dandenong,
VIC with long WALE of 9.4 years for
$165.0 million1. Settled July 2022
t Divested office asset, 333 Ann Street,
Brisbane, QLD for $141.1 million2.
Settled January 2023
t Recorded leading performance in
landlord satisfaction3
t Portfolio occupancy of 93%
t Industrial leasing of 124,148 sqm
completed
t Office leasing success with
31,994 sqm of leasing completed
t Fully leased 8,007 sqm vacancy at
100 Skyring Terrace, Newstead, QLD
to Government tenants
FUM growth
Targeting sustainable and
accretive growth in FUM
through the cycle via our funds
management business
t Completed successful purchase
and integration of Fortius Funds
Management in September 2022
t Significant retail leasing activity
undertaken in FY23 with c.18,000 sqm
completed
Capital management
Maintain balance sheet
strength and flexibility, manage
risk, optimise cost of capital
to support growth whilst
targeting an investment grade
credit rating
t Gearing of 37.2%, within target range
of 35%-45%
t Completed on market securities buy-
back of 2.5% of issued capital
1. Net sale price.
2. Gross sale price at book value.
3. Tenant engagement survey conducted by property research specialists Brickfields.
7
599 Main North Road,
Gepps Cross, SA
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 8
Directors’ report
Operating and financial review
Introduction from the
Chair & Managing Director.
FY23 was a challenging year
highlighted by an environment of
high inflation and higher interest
rates, which impacted sector
valuations and property market
transaction volumes. Despite
these challenges, Growthpoint
delivered funds from operations
(FFO) above guidance and
distributions in line with
guidance.
While the macroeconomic environment
has shifted, Growthpoint remained
focused on its strategic priorities of
driving resilient and growing income from
its high quality property portfolio, whilst
also expanding into funds management
to provide scale and exposure to mixed-
use assets.
Financial performance and
capital management
The Group’s performance in FY23 reflects
the successful execution of the Group’s
strategy and the underlying strength of
the portfolio. Growthpoint delivered FFO
of 26.8 cents per security (cps), down
3.2% on the prior year, but above original
guidance provided at the FY22 results of
between 25 - 26 cps.
Distributions to Securityholders were in
line with guidance of 21.4 cps, up 2.9%,
representing a payout ratio of 79.4%,
consistent with the Board’s target payout
ratio of between 75% and 85%.
The lower FFO performance reflects
a higher debt balance and increased
borrowing costs due to higher interest
rates on the Group’s debt as a result of
the Reserve Bank of Australia increasing
the cash rate from 1.35% in July 2022 to
4.10% by June 2023. As a consequence,
net borrowing costs increased from
$46.1 million in FY22 to $76.4 million in
FY23. This was partially offset by one-off
items included in net property income
(NPI) such as the early surrender of lease
payment received at 5 Murray Rose
Avenue, Sydney Olympic Park, NSW and
a bank guarantee drawn at 100 Skyring
Terrace, Newstead, QLD. Had these two
properties been leased for all of FY23 (as
per the original lease terms), then FFO
per security would have been around
1.6 cents lower.
Continued growth in net property income
and appropriate levels of interest rate
hedging assisted in minimising the impact
of higher interest rates on FFO per
security.
Capital Management remains a
key priority for the Group. In FY23,
Growthpoint completed the on-market
securities buy-back program which
was extended in February 2023. Under
the buy-back, Growthpoint acquired
19,304,879 securities (being 2.5% of
Growthpoint’s total securities on issue as
at the date the program was announced)
for a total consideration of $63,434,022
at an average discount of 17.9% to the
30 June 2023 net tangible assets (NTA)
of $4.00. The Group further strengthened
its capital position by entering into two
debt facilities with new lenders totalling
$200 million. As at 30 June 2023, Group
gearing was 37.2%, at the low end of the
target 35%-45% range.
During the year, the Group divested
333 Ann St, Brisbane, Queensland
for $141.1 million. This asset was
Growthpoint’s primary CBD asset and
not in keeping with the Group’s strategy
of holding metropolitan, fringe office
properties.
Portfolio
The Group’s portfolio continues to be
leased to predominantly government,
listed or large organisations with a
solid occupancy of 93% and WALE of
6.0 years as at 30 June 2023.
In FY23, Growthpoint saw its portfolio
value decline by 6.1%, or $312.1 million,
and on a like-for-like basis down 6.5%
or $325.6 million relative to FY22. The
decline reflects the increase in interest
rates which has resulted in higher
capitalisation and discount rates within
valuations.
Significant leasing activity in the year
totalled 156,142 sqm or 11.2% of
portfolio income, with key leases being
signed or renewed with the Australian
Government. Government tenants now
account for around 40% of our office
portfolio income.
We were pleased to see a mix of
new tenants and renewals across the
portfolio. Growthpoint maintained industry
leader status on landlord satisfaction in
office (first) and industrial (second) vs.
benchmarked peers.
Funds management
FY23 marked an important pivot in
the focus of the business following
the acquisition of the Fortius Funds
Management platform in September 2022.
The acquisition is Growthpoint’s first foray
into funds management and an important
achievement for the Group as it seeks to
expand and diversify its income base. At
the time of acquisition, Fortius was one
of Australia’s leading private real estate
funds management businesses with an
established track record of investing
in Australian real estate markets and
generating strong returns for its investors.
Consideration for the acquisition
comprised $45 million, with an additional
$10 million earnout component, subject
to achieving agreed milestones relating to
FUM and revenue growth over the period
to June 2024. The acquisition brings
enhanced sector and product capabilities,
including office, retail and mixed-use
investments across value-add and
opportunistic strategies.
The acquisition provides the ability to
scale up the platform significantly to
drive incremental growth to earnings
for securityholders over the long term.
Growthpoint is targeting sustainable and
accretive growth in FUM through the cycle.
Post the acquisition and following a
successful integration, the Group has seen
a challenging transaction environment
where market conditions have impacted
the ability to grow FUM. As a result of the
challenging transaction environment and a
higher risk free rate (Australian Government
10 year bond yield), when assessed at
30 June 2023, goodwill was impaired by
9
Return on equity (%)
to 30 June 2023 (per annum)
15.2
10.8
8.6
-7.6
1 year
3 years
5 years
10 years
L-R: Timothy Collyer, Managing Director and
Andrew Fay, Independent Chair and Director
$8.8 million. However, the Group remains
well placed to implement the value-add
strategy with the combined execution
capability and experience of the Group.
Governance
As foreshadowed at the 2022 Annual
General Meeting, the Growthpoint Board
embarked on a period of significant
renewal in FY23. A key outcome of this
renewal is that the Board now comprises
a majority of independent Directors, in
line with corporate governance best
practice. The following key changes were
made during the year:
õ New independent Chair Andrew
Fay, appointed in December 2022,
succeeded Geoffrey Tomlinson on his
retirement in March 2023
õ Retirement of Francois Marais who
joined the Board in 2009 as a Director
and was also Chair of the Group’s
majority Securityholder, Growthpoint
Properties Limited
õ Two new additions to the Board,
Michelle Tierney, independent Director
and Panico Theocharides, Director,
and representative of Growthpoint
Properties Limited
õ Josephine Sukkar replaced Norbert
Sasse as independent Chair of the
Nomination, Remuneration and
Human Resources Committee
Sustainability
Growthpoint remains committed to
operating in a sustainable way. Progress
has been made with respect to the
Group’s 2025 net zero target through the
execution of new electricity contracts,
which include GreenPower purchases.
GreenPower is expected to contribute
significantly to achieving the target. At
the same time there has also been a
significant increase in our onsite solar
rollout, with work commenced during the
year across seven commercial assets.
Net zero 2025 target is across 100%
owned on balance sheet operationally
controlled office assets and corporate
activities.
In addition, the Group entered into
Sustainability Linked Loans (SLLs),
converting $520 million of the Group’s
existing debt arrangements and
established an overarching Sustainable
Finance Governance Framework.
Interest margin reductions are tied to the
successful achievement of sustainability
KPIs and targets. The KPIs will be
measured against reductions in Scope
1, Scope 2 and Scope 3 emissions
and performance measured against the
NABERS and GRESB ratings.
Our FY23 Sustainability Report will be
published in early October 2023.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 10
Directors’ report
Operating and financial review
Introduction from the
Chair & Managing Director.
Our people
We are delighted that our commitment to
fostering a culture of active engagement
and continuous improvement has
yielded solid results in our recent
engagement survey, with an impressive
93% participation rate. This level of
involvement reflects the genuine interest
and dedication of our valued employees.
The positive results (74%) of the annual
employee engagement survey (compared
to the national benchmark of 72%)
demonstrate management’s focus on
building a positive, performance driven
team culture. Survey responses included
87% of employees indicating they would
recommend Growthpoint as a great place
to work and 100% of employees having
access to the learning and development
needed to do their job well.
TSR & ROE Performance
Growthpoint has underperformed the
S&P/ASX 200 REIT Accumulation Index
(the Index) over the short and medium
term but outperformed over the long
term. The total securityholder return
(TSR) performance in FY23 was -12.0%
vs 8.1% for the Index. The office sector
was particularly impacted, as the market
responded to higher interest rates and
higher vacancy rates. This negative
sentiment impacted the GOZ share price
and the office sub sector more broadly
in FY23. However, over the longer
Total Securityholder return
over 1, 3, 5 and 10 years (%)
Growthpoint TSR
S&P/ASX 200 REIT
Accumulation Index TSR
8.1
8.1
8.2
7.7
3.5
1.3
0.7
-12.0
1 year
3 years
5 years
10 years
Source: UBS Investment Research. Annual
compound returns to 30 June 2023.
term, Growthpoint has delivered TSR
performance that has outperformed the
Index over the last ten years. This reflects
the continued focus of the management
team and Board on successfully
executing the Group’s strategy for
growth and delivering long-term value for
Securityholders.
Managing Director intention to
retire
On 18 July 2023, the Group announced
the intended retirement plans of
Managing Director, Timothy Collyer, after
more than 13 years in the role. Mr Collyer
is expected to continue as Managing
Director for 12 months until July 2024,
allowing time for a smooth transition
to his successor. A formal process to
select Mr Collyer’s replacement has
commenced and will include both internal
and external candidates consistent with
the Board approved succession plan.
Outlook
The rate of Inflation has been declining
since the December 2022 quarter,
whilst interest rate futures indicate that
the official cash rate is near the peak,
however A-REIT prices remain at a
discount to NTA. Commercial real estate
transaction activity remains low relative
to longer term historical averages,
although volumes are likely to increase as
development pipelines and redemption
requests require funding. Growthpoint
is well placed to manage through the
cycle, with a portfolio of high-quality
modern office assets with strong WALE,
from Government, ASX listed and larger
corporate tenants. Industrial markets are
forecast to remain strong as land supply
remains constrained. The Group’s funds
management business is well positioned
with strong execution capability and
is targeting sustainable and accretive
growth in third-party funds under
management through the cycle.
As at 30 June 2023, the Group’s debt
was hedged at 70.5% and gearing was
37.2%, at the low end of the target
range. With higher average interest rates
and a recent slowing in office leasing
market activity, the Group provides FY24
FFO guidance of 22.5 - 23.1 cps and
FY24 distribution guidance of 19.3 cps.
A key assumption to guidance is in
respect of interest rates, with the Group
assuming an average FY24 floating rate
of 4.35%. The reduction in FY24 FFO and
distribution guidance reflects the one-off
items in FY23, higher interest expense
and the challenging property market.
However, with a strong WALE delivering
secure property rental cash flows, a solid
capital structure, appropriate hedging,
ample covenant headroom and liquidity
and no development projects to finance,
the Group is in a good position to
navigate through the cycle.
We would like to take this opportunity
to thank our employees for their
dedication and contribution to delivering
a successful performance in FY23.
We would also like to acknowledge
our tenants, suppliers and other key
stakeholders for their continued support.
Finally, we thank our former Chair
Geoff Tomlinson for his contribution
and service. Geoff was a Director since
September 2013 and Board Chair
since July 2014 and retired effective
1 March 2023. Geoff made an enormous
contribution to the performance of
Growthpoint and we wish him all the
best.
We also thank our Securityholders, for
their ongoing commitment to the Group.
Andrew Fay
Chair
Timothy Collyer
Managing Director
11
Central Park Mall, Sydney, NSW
(Funds Management asset)
Fortress Sydney, a world class eGaming and
sports facility across 2,553 sqm, opened in May
2023. The facility hosts live esports tournaments
and international playoffs
Rundle Place, Adelaide, SA
(Funds Management asset)
Secured Funlab to create an entertainment and
dining precinct across 2,278 sqm. This will be
Adelaide’s first day/night destination
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 12
Directors’ report
Operating and financial review
Property
portfolio summary.
Geographic diversity
by property value
Office metropolitan properties (25 assets)
Office CBD properties (2 assets)
Industrial properties (31 assets)
$4.8b
Property
portfolio value
2
1
8%
Western Australia
$378.2m
Office $92.0m
Industrial $286.2m
4
1
7%
South Australia
$353.6m
Office $71.0m
Industrial $282.6m
Growthpoint maintains a c.15.5% security
holding in Dexus Industria REIT (ASX: DXI)
valued at c.$133m1, representing an FY24
forecast distribution yield of 6.0%1
10 16
36%
Victoria
$1,711.9m
Office $1,176.7m
Industrial $535.2m
85%
of properties
located on
Eastern
seaboard
4
7
20%
Queensland
$976.0m
Office $684.8m
Industrial $291.2m
5
5
24%
New South Wales
$1,179m
Office $871.0m
Industrial $308.0m
1
2
5%
Australian
Capital Territory
$227.5m
Office $227.5m
Sector diversity
by value
Tenant type
by income
Tenant use
by income
Annual rent review type
by income
Office
65%
Industrial
35%
Listed
company
53%
Office
62%
Logistics/
distribution
31%
Fixed
3.00-3.99%
70%
Government
owned
28%
Large
private
company
14%
Other/
SME
5%
Retail
3%
Manu-
facturing
2%
Car
parking
1%
Other
1%
CPI
7%
CPI+1.00%
1%
Fixed
2.50-2.99%
14%
Fixed
over 4.00%
8%
1. Based on closing price of $2.72 on 15 August 2023 and FY24 distribution guidance of 16.4 cps.
13
16%
8%
26%
23%
165-169 Thomas Street,
Dandenong, VIC
(GSO Dandenong)
Settled in July 2022, the property is
fully leased to the VIC Government
with a WALE of 9.4 years
Portfolio lease expiry
per financial year, by income, as at 30 June 2023
FY23
FY22
Office
Office
Industrial
Industrial
WALE
6.0 years
30-Jun-22:
6.3 years
ANZ 2.2%
BOQ 3.2%
Australian
Commonwealth
Government
2.5%
Samsung 2.2%
Jacobs 1.6%
Woolworths 3.9%
Linfox 1.5%
5 Murray Rose Ave,
Sydney, NSW
2.1%
In advanced
negotiations
2.0%
1%
7%
1%
3%
3%
4%
3%
4%
7%
3%
Australian
Commonwealth
Government
2.6%
5%
2%
15%
14%
9%
9%
10%
9%
Australian
Commonwealth
Government
1.9%
1%
4%
2%
4%
Vacant
FY24
FY25
FY26
FY27
FY28
FY29+
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 14
Directors’ report
Operating and financial review
Our office
portfolio.
Portfolio
occupancy
90%
Office portfolio
value
WALE
WACR
6.3 yrs
30-Jun-22: 6.7 yrs
5.7%
30-Jun-22: 5.1%
Office portfolio lease
expiry profile (%)
per financial year, by income
39
20
13
7
10
5
6
Vacant FY24 FY25
FY26
FY27 FY28 FY29+
transaction was one of the largest
transactions in the market during FY23.
Upon sale, the multi-tenanted property
was fully leased, and represented 3.6% of
portfolio income and 2.6% of our portfolio
by value, with a weighted average lease
expiry of 3.7 years. Growthpoint’s office
portfolio is focused on modern A-grade
assets with high green credentials,
located on the fringe of CBD or in metro
locations, and predominantly leased to
government, listed or large organisations.
Divesting 333 Ann Street, the Group’s
primary CBD asset (at the time of sale),
further focusses the Group’s portfolio on
these target markets.
27
Leasing
$3.1b
30-Jun-22: 95%
30-Jun-22: $3.4b
Our office portfolio consists of
27 high-quality office properties,
which represent 65% of our total
property portfolio by value. Our
office properties are predominately
located on the fringe of CBD’s or
in key metropolitan markets.
The Group executed 33 leases for 31,994
sqm of space in FY23, representing
9.2% of office portfolio income. The
weighted average lease term of the new
leases was 3.9 years with a weighted
annual rent review of 3.7%. Major leases
included 8,007 sqm at 100 Skyring
Terrace, Newstead, QLD and a renewal
of 4,567 sqm at 75 Dorcas Street, South
Melbourne, VIC to Mondelez Australia.
The Group remains focused on filling a
major vacancy in the portfolio at 5 Murray
Rose Avenue, Sydney Olympic Park,
NSW, where over 12,000 sqm of space
remains available.
Of the 33 leases signed, 13 were
renewals and the remainder were new
tenants. Average incentives across the
leases signed in FY23 was 24%.
Capital transactions
During FY23, the Group divested 333 Ann
Street, Brisbane, QLD for $141.1 million
(gross sale price at book value). This
Office property valuation change, by value5
30 June 2022 to 30 June 2023
1% increased
99% decreased
1 property
25 properties
Like-for-like
decrease of
$307.1m or
-9.4%
Other office portfolio
key metrics
30 June 2023
30 June 2022
LFL1 change in portfolio valuation
-$307.1m or -9.4%
Number of assets
27
Total lettable area
348,861 sqm
Tenant retention
61%
Weighted average rent review2
3.6%2
NPI
$178.8m
72%
3.6%3
$161.3m
345,835 sqm
Top ten
office tenants
as at 30 June 2023
%
portfolio
income
WALE
(yrs)
Australian Commonwealth
Government
NSW Government (Police)
12
12
2.9
21.5
Country Road Group
Bank of Queensland
VIC Government
Bunnings Warehouse
Samsung Electronics
ANZ Banking Group
Fox Sports
Jacobs Group
5
5
5
4
3
3
3
2
Total/weighted average
Balance of portfolio4
Total portfolio
54
46
100
9.0
3.6
8.6
7.8
3.7
2.7
7.5
3.3
8.7
3.6
6.3
1. Like-for-like.
2. Assumes CPI change of 6.0% per annum as per ABS release at June 2023.
3. Assumes CPI change of 6.1% per annum as per ABS release at June 2022.
4. Includes vacancies.
5. Increased: valuation increased by more than 1%, Stable: valuation change between -1% and 1%, Decreased: valuation reduced more than 1%. Valuation movement excludes
165-169 Thomas Street, Dandenong, VIC which was acquired during the period.
15
Office
market overview.
Australian office markets continue to be impacted
by higher vacancy and interest rates. In response
to higher inflation, the Reserve Bank of Australia
(RBA) raised the cash rate from 1.35% in July 2022
to 4.10% by June 2023, the highest level since April
2012.
Transaction activity continued to slow in 2023 and
is well below the 10-year average. Buyers remain
selective while owners remain reluctant to divest
assets with a low volume of assets brought to
market over the year. Subsequently, the process of
price discovery has become challenging.
Physical occupancy levels continued to improve
as many employers implemented return to work
mandates, while net absorption has remained
positive. Flight-to-quality remains a significant factor
in the market, as higher quality buildings experience
strong demand. Vacancy remains elevated in most
markets, though modest face rent growth of around
5% occurred on average nationally and incentives
remain high, over 36%.
Vacancy in Growthpoint markets
consistently lower than other markets
Office market vacancy
16%
15%
Other markets
All
markets
GOZ
markets
14%
13%
12%
1H CY21
2H CY21
1H CY22
2H CY22
1H CY23
Source: JLL. All markets comprises all markets covered by JLL (19 in total).
Other markets comprises all markets excluding GOZ markets.
Growthpoint office markets remain resilient
Net absorption (sqm)
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
-50,000
-100,000
1H CY21
2H CY21
1H CY22
2H CY22
1H CY23
GOZ markets
Other markets
Total
Source: JLL
100 Skyring Terrace, Newstead, QLD
New tenant:
Australian Commonwealth
Government
NLA:
5,807 sqm
Term:
3.0 yrs
75 Dorcas Street, South Melbourne, VIC
Renewing tenant:
Mondelez Australia
NLA:
4,567 sqm
Term:
2.5 yrs
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
16
Directors’ report
Operating and financial review
Our industrial
portfolio.
Portfolio
occupancy
Industrial
portfolio value
WALE
WACR
100%
$1.7b
30-Jun-22: 100%
30-Jun-22: $1.7b
5.4 yrs
30-Jun-22: 5.3 yrs
5.4%
30-Jun-22: 4.7%
Industrial portfolio lease
expiry profile (%)
per financial year, by income
49
28
3
9
6
5
FY24 FY25
FY26
FY27 FY28 FY29+
0
Vacant
enabling the warehouse to be split into
two components and separately leased.
This was the largest industrial lease the
Group executed totalling 31,109 sqm for
a term of 7.0 years.
The Group renewed 18,221 sqm of
space at 1500 Ferntree Gully Road &
8 Henderson Road, Knoxfield, VIC to
Brown and Watson International, an
automotive products company. The term
of the lease is 8.0 years. The property
comprises a large warehouse with a
two-level office to the front and additional
self-contained office to the rear.
31
Leasing
Our industrial portfolio consists
of 31 modern industrial
properties, which represent 35%
of Growthpoint’s total property
portfolio by value. Our industrial
properties are well-located, near
key logistics hubs or population
centres.
The Group executed 12 leases for
124,148 sqm of space in FY23,
representing 15.4% of industrial portfolio
income. The weighted average lease term
of the new leases was 4.8 years with a
weighted annual rent review of 4.6%. The
Group continues to see strong demand
for industrial space which remains in
short supply. Overall leasing activity
remained strong, with demand originating
from a broad range of industries
including medical supplies, automotive,
supermarkets, transport/logistics and
warehousing. Of the 12 leases signed in
FY23, four were with new tenants and the
remainder were renewals. Given strong
demand for industrial space, incentives
remain low.
The Group added a new tenant,
101 Warehousing at 3 Maker Place,
Truganina, VIC. This prime logistics
property comprises a large warehouse
with office facilities located at each end,
Other industrial
portfolio key metrics
30 June 2023
30 June 2022
LFL1 change in portfolio valuation
-$18.5m or -1.1%
Number of assets
31
Total lettable area
717,799 sqm
Tenant retention
64%
Weighted average rent review2
3.7%2
NPI
$77.1m
98%
3.7%3
$78.6m
715,619 sqm
Top ten industrial
tenants
as at 30 June 2023
%
portfolio
income
WALE
(yrs)
Woolworths
Linfox
Australia Post
101 Warehousing
Brown & Watson
International
Laminex Group
The Workwear Group
Eagers Automotive
Symbion
Autocare Services
Total/weighted average
Balance of portfolio4
Total portfolio
38
11
6
3
3
3
3
2
2
2
73
27
100
6.6
2.6
8.0
6.3
10.1
2.0
4.0
9.6
8.5
7.3
6.1
3.3
5.4
Industrial property valuation change, by value5
30 June 2022 to 30 June 2023
27% increased
27% stable
46% decreased
16 properties
4 properties
11 properties
Like-for-like
decrease
of $18.5m or
-1.1%
1. Like-for-like.
2. Assumes CPI change of 6.0% per annum as per ABS release at June 2023.
3. Assumes CPI change of 6.1% per annum as per ABS release at June 2022.
4. Includes vacancies.
5. Increased: valuation increased by more than 1%, Stable: valuation change between -1% and 1%, Decreased: valuation reduced more than 1%.
1500 Ferntree Gully Road & 8 Henderson Road, Knoxfield, VIC
Renewing tenant:
Brown & Watson Intl.
NLA:
18,221 sqm
Term:
8.0 yrs
17
Industrial
market overview.
The positive momentum in the industrial markets
continued in FY23 due to a shortage of modern
warehouse space across all markets nationally
underpinned by growth in e-commerce and demand
for supply chain infrastructure. Vacancy continued to
fall in the Group’s markets, as demand outstripped
limited supply, with the national vacancy rate
reaching a record low of 0.6% in June 2023. Rent
growth continued over the year, with most markets
recording double digit growth in face rents. Investors
sought prime and secondary grade investments,
particularly those which provided near term positive
rent reversion opportunities (i.e. short-medium WALE
assets).
Net face rental growth, super prime
supply-weighted average (Y-o-Y)
Sydney
Melbourne
Brisbane
Perth
Adelaide
40%
30%
20%
10%
0%
-10%
2
1
-
n
u
J
3
1
-
n
u
J
4
1
-
n
u
J
5
1
-
n
u
J
6
1
-
n
u
J
7
1
-
n
u
J
8
1
-
n
u
J
9
1
-
n
u
J
0
2
-
n
u
J
1
2
-
n
u
J
2
2
-
n
u
J
3
2
-
n
u
J
Source: CBRE Research
Average vacancy rate (%)
Sydney
Melbourne
Brisbane
Perth
Adelaide
10%
8%
6%
4%
2%
0%
6 Kingston Park Court, Knoxfield, VIC
New tenant:
Automotive Imports
NLA:
7,677 sqm
Term:
5.0 yrs
9
1
H
2
0
2
H
1
0
2
H
2
1
2
H
1
1
2
H
2
2
2
H
1
2
2
H
2
3
2
H
1
Source: CBRE Research. As at 2Q23
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 18
Directors’ report
Operating and financial review
FY23 sustainability
performance.
Growthpoint’s 2023
Sustainability report will be
published in October
growthpoint.com.au/sustainability
Environment
Average NABERS
Energy rating
Average NABERS
Water rating
Average NABERS Indoor
Environment rating
5.2 stars
with 100% of eligible
office portfolio rated
5.1stars
4.5stars
with 100% of eligible
office portfolio rated
with 94% of eligible office
portfolio rated
$520m
7
Economic
of existing debt converted
to sustainability linked
loans (SLLs)
balance-sheet assets
comprehensively assessed for
climate-change risk
People
Employee
engagement score1
74%
placing the
Group 2% above
the Australian
benchmark
40%
of the Group’s senior
managers are women2
(maintained at or above
40% since FY21)
Gender diversity
(all employees)3
Increased tenant
customer satisfaction
rating4 to
77%
FY22: 74%
53%
47%
Governance
B Rating
maintained
1. The Group moved to a new survey provider for FY23, due to this, previous year results are not comparable.
2. Employees that report to an EMT member, excluding executive assistants.
3. Excludes casual and contract employees.
4. Tenant engagement survey conducted by property research specialists Brickfields.
19
52 Merivale Road,
South Brisbane, QLD
93kW Solar PV System
installation completed
during July 2022 and
commissioned in
September 2022
Our pathway to net zero 2025.
N Announced
target of net zero
emissions by
2025
N Carbon intensity:
39 kg CO2-e /sqm1
FY21
N Completed three
solar installations
(combined
capacity: 259 kW,
total portfolio solar:
10 assets)
N Developed
an energy
procurement
strategy to secure
our medium-term
energy needs
N Carbon intensity:
34 kg CO2-e /
sqm1,2
FY22
N Nearing
completion on
seven solar
installations
(combined
capacity: 458 kW,
total portfolio solar:
17 assets)
N Executed our
renewable
energy strategy,
including locking in
GreenPower for the
next five years
N Conducted
electrification
feasibility
assessments for
three commercial
assets
N Chiller upgrade
projects delivered
at three assets
N Carbon intensity:
28 kg CO2-e /
sqm1,3
FY23
Targeting one
onsite solar
installation
(capacity: 65kW,
total portfolio solar:
18 assets)
Increase
GreenPower
coverage to c.50%
of electricity needs
Develop our
carbon offset
strategy
Conduct
electrification
feasibility
assessments for
three commercial
assets
Carbon intensity
target: 14 kg
CO2-e /sqm
FY24
Completed
In progress
1. Market-based carbon intensity.
2. Based on re-stated FY22 data.
3. Pending audit as part of FY23 sustainability reporting.
Target more
commercially
feasible onsite
solar installations
Increase
GreenPower
coverage to
supply c.75%
of our electricity
needs
Consider buying
carbon offsets
Carbon intensity
target: 7 kg CO2-e
/sqm
FY25
Expected
target
achievement
1 July 2025
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 20
Directors’ report
Operating and financial review
Financial
performance.
Funds from
operations (FFO)
Distributions
26.8 cps
21.4 cps
FY22: 27.7 cps
30-Jun-22: 20.8 cps
NTA
per security
$4.00
30-Jun-22: $4.56
FY23 was a challenging year
highlighted by an environment of
high inflation and higher interest
rates, which impacted sector
valuations and property market
transaction volumes. Despite
these challenges, Growthpoint
delivered funds from operations
(FFO) above guidance and
distributions in line with guidance.
The Group’s performance in FY23 reflects
the successful execution of the Group’s
strategy and the underlying strength of
the portfolio. Growthpoint delivered FFO
of 26.8 cents per security (cps), down
3.2% on the prior year, but above original
guidance provided at the FY22 results
of between 25 - 26 cps. Distributions to
Securityholders were in line with guidance
of 21.4 cps, up 2.9%, representing a
payout ratio of 79.4%, consistent with the
Board’s target payout ratio of between
75% and 85%.
The lower FFO performance reflects
the higher debt balance and increased
borrowing costs incurred due to higher
interest rates on the Group’s debt as a
result of the Reserve Bank of Australia
increasing the cash rate from 1.35% in
July 2022 to 4.10% by June 2023. As
a consequence, net borrowing costs
increased from $46.1 million in FY22 to
Gearing movement
for the 12 months ended 30 June 2023
$76.4 million in FY23. Continued growth
in net property income and appropriate
levels of interest rate hedging assisted in
minimising the impact of higher interest
rates on FFO per security.
The Group’s portfolio value decreased by
6.1% or $312.1 million and on a like-for-
like basis declined by 6.5% or $325.6
million at 30 June 2023. NTA declined by
12.3% to $4.00 per security relative to 30
June 2022.
During the year the Group acquired
Fortius Funds Management and from
that transaction, $41.0 million of the
total consideration paid was recognised
as goodwill. When assessed at 30 June
2023, goodwill was impaired by $8.8
million, primarily due to a higher risk free
rate (Australian Government 10 year
bond yield) and reduced property market
transactions leading to lower assumed
growth in funds under management in the
near term.
Capital and operating
expenditure
The Group’s management expense ratio
(MER) was 0.40%, unchanged from
FY22. The MER relates to operating
expenses incurred from managing the
Group’s directly owned portfolio and
+2.5%
+1.2%
+3.3%
+3.4%
-3.0%
-1.8%
37.2%
+5.6%
increase since
30 June 2022
45%
40%
35%
30%
31.6%
25%
20%
15%
30-Jun-22
Distribution
paid
Acquisitions
and capex
Investment
revaluations
Securities
buy-back
Divestments
30-Jun-23
Cash from
operating
activities
Capital expenditure
(capex)
FY23
FY22
Total portfolio capex
$22.1m
$20.7m
Average property
asset value
Capital expenditure
to average property
portfolio value
$5,227.1m $4,956.2m
0.42%
0.42%
captures the increased headcount to
support the growth of the business.
Maintenance capital expenditure
increased slightly to $22.1 million, from
$20.7 million in FY22, but remains
unchanged as a percentage of the
total directly owned property portfolio
at 0.42% relative to FY22. Capital
expenditure remained within the Group’s
guidance range of between 0.3% and
0.5% of average property value. The
Group expects to remain towards the
upper end of its guidance range over the
short to medium term.
Capital Management
In February 2023, Growthpoint extended
its on-market securities buy-back
program for up to 2.5% of issued capital.
The program was completed in May
2023 having purchased 19,304,879
securities (being 2.5% of Growthpoint’s
total securities on issue as at the date
the program was announced) for a total
consideration of $63,434,022. Total
purchases represented an average
discount to 30 June 2023 NTA of 17.9%.
During the financial year Growthpoint
diversified its funding sources by adding
two new lenders (total facility limit $200
million), while repaying a maturing lender
(facility limit $90 million). The Group
entered into eight new AUD interest rate
swaps with a total notional amount of
$280 million at a weighted average fixed
rate of 3.48%. As at 30 June 2023 the
weighted average remaining term to
maturity is 3.46 years.
21
120-132 Atlantic Drive,
Keysborough, VIC
330 kW solar array installed to the
site in late 2022, as final part of an
expansion that kicked off in 2021.
The tenant, Symbion are committed
to the property until 2032
Stress testing covenants
Growthpoint has three
main debt and lending
covenants which are
regularly stress tested
LVR <60%
38.7%
To breach this covenant,
Growthpoint’s cap rate
would need to rise by
304 bps1
ICR >1.6x
3.4x
To breach this covenant,
NPI would need to fall by
53%1
% property
secured >85%
96.6%
Movements in NTA per security
for the 12 months ended 30 June 2023
$4.56
+$0.05
-$0.26
-$0.01
-$0.06
-$0.03
$4.25
-12.3%
since
30 June 2022
+$0.01
-$0.23
-$0.02
-$0.01
$4.00
NTA
30-Jun-22
Office
revaluations
Industrial
revaluations
Retained cash
from FFO
FFM
acquisition
Other
NTA
31-Dec-22
Office
revaluations
Industrial
revaluations
Retained cash
from FFO
Other
NTA
30-Jun-23
1. As at 30 June 2023. For illustrative purposes only. Assumes no change to other inputs that may impact the calculation of this metric.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 22
Directors’ report
Operating and financial review
Financial performance.
Key debt metrics and changes during FY23
30 June 2023
30 June 2022
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
$m
%
%
5,210.8
1,918.7
2,226.3
300.0
37.2
4.6
5,499.8
1,740.0
2,101.5
353.5
31.6
3.4
Years 3.4 4.2
Times
%
3.4 / 1.6
38.7 / 60
5.2 / 1.6
33.6 / 60
Years 2.9 3.8
%
No.
70.5
22
60.9
21
(289.1)
178.7
124.8
(53.5)
5.6
1.2
(0.7)
(1.8) / –
(5.1) / –
(0.9)
9.6
1
Funds from operations
Growthpoint uses FFO as its primary earnings measure. FFO enables Securityholders to identify the income which is available for
distribution and also assists in determining the relative performance of the Group.
The following table reconciles statutory profit to FFO and reports distributions paid to Securityholders.
Reconciliation of profit after tax to FFO
(Loss) / profit after tax
Adjustment for non-FFO items:
- Straight line adjustment to property revenue
- Net loss / (gain) in fair value of investment properties
- Net loss in fair value of investment in securities
- Net loss / (gain) in fair value of derivatives
- Net loss on exchange rate translation of interest-bearing liabilities
- Amortisation of incentives and leasing costs
- Amortisation of intangible assets
- Goodwill impairment
- Deferred tax (benefit) / expense
- Other
FFO
Distributions provided for or paid during the year ($m)
FFO per security (cents)
Payout ratio to FFO (%)
FY23
$m
(245.6)
(12.6)
388.4
6.2
1.1
14.8
39.3
1.7
8.8
(5.1)
7.8
FY22
$m
459.2
(12.1)
(285.1)
32.7
(57.2)
31.5
33.0
–
–
7.2
4.8
204.8
214.0
162.6
26.8
79.4
160.6
27.7
75.0
Change
Change
$m
%
(704.9)
(153.5)
(0.5)
673.5
(26.5)
58.3
(16.7)
6.3
1.7
8.8
(12.3)
3.0
(9.2)
2.0
(0.9)
4.4
(4.3)
1.2
(3.2)
23
10-year financial
performance summary.
As at 30 June
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
Financial performance
Profit for the period
$m (245.6)
459.2
553.2
272.1
375.3
357.7
278.1
219.4
283.0
117.3
Financial position
Total assets (at 30 June)
$m 5,210.8
5,499.8 4,777.8
4,500.7
4,117.9 3,474.6 3,328.4
2,879.6
2,407.1
2,128.8
Total equity (at 30 June)
$m 3,054.3
3,519.9 3,221.4
2,822.6
2,546.5 2,157.0 1,901.5
1,522.4
1,411.5
1,165.1
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)
¢
¢
¢
%
%
%
$
(32.1)
26.8
21.4
59.5
27.7
20.8
(12.0)
(11.7)
(7.6)
37.2
4.00
14.3
31.6
4.56
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
Market capitalisation (at 30 June)
$m 2,102.9
2,631.4 3,141.5
2,469.9
3,178.6 2,438.1 2,076.6
1,836.8
1,781.1
1,323.3
Market capitalisation and free float ($m)
Market capitalisation
Free float
3,178.6
3,141.5
1,781.1
1,836.8
2,076.6
1,323.3
623.9
634.2
409.2
2,438.1
2,469.9
2,631.4
2,102.9
724.3
839.9
1,200.9
1,187.8
933.9
994.5
763.6
June 2014
June 2015
June 2016
June 2017
June 2018
June 2019
June 2020
June 2021
June 2022
June 2023
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 24
Directors’ report
Governance
Board
of Directors.
Andrew Fay
BAgEc (Hons), A Fin –
Independent Chair and
Director
Term of office
Board renewal and succession
has been a focus for the Board
during the past 12 months.
Two Directors retired during
the period and three joined
the Board bringing valuable
insight and experience as well
as delivering on our gender
diversity objectives (of at
least 30% of each gender)
and creating a majority
independent Board. Further
renewal will be expected with
Grant Jackson’s anticipated
retirement in November 2023.
5/9
Independent Directors
30 June 2022: 4/8
3/9
Female Directors
30 June 2022: 2/8
Andrew was appointed
as a Director of the
Board in December 2022 and Chair in
March 2023.
Professional experience
Andrew is an experienced company director
across ASX listed, private and regulated
entities. He has over 30 years’ experience
in financial services, including investments,
funds, property, and infrastructure
management. Senior executive roles
included Chief Executive Officer and Chief
Investment Officer of Deutsche Asset
Management (Australia) as well as Regional
Chief Investment Officer (Asia Pacific) for
the broader Deutsche Asset Management
group.
Andrew was formerly a non-executive
Director of Pendal Group Limited, Spark
Infrastructure RE Limited, South Australian
and Victorian Power Networks, Gateway
Lifestyle Group, Deputy Chair of Cromwell
Property Group and an alternate Director for
Dexus Property Group.
Other directorships and positions
Andrew is currently a non-executive Director
of Integral Diagnostics Limited, National
Cardiac Pty Limited and Utilities of Australia
Pty Limited (trustee of Utilities Trust of
Australia).
Board Committee Membership
– Nomination, Remuneration and Human
Resources 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 34 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.
Board Committee Membership
– Investment Committee
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 27 years of experience in
banking and property investment. He has
held senior roles at Growthpoint Properties
Limited for over 21 years, with responsibility
for mergers, acquisitions, capital raisings
and operating service divisions.
Estienne is a past-President of the South
African Property Owners Association.
Other directorships and positions
Estienne is currently Growthpoint Properties
Limited’s Chief Executive Officer: South
Africa. He is also a Director of V&A
Waterfront Holdings and Chairman of the SA
REIT Association.
Estienne is not considered independent due
to his position at Growthpoint Properties
Limited.
Board Committee Membership
– Investment Committee
Deborah Page
AM
BEc FAICD FCA –
Independent Director
Term of office
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 Pendal
Group Limited and Investa Office Fund, and
a former non-executive Director of Investa
Property Group, GBST Holdings Limited,
Australian Renewable Fuels Limited and
Service Stream Limited.
Other directorships and positions
Deborah is currently a non-executive
Director of Brickworks Limited and The
Star Entertainment Group Limited, and a
member of the Takeovers Panel.
Board Committee Membership
– Chair - Audit, Risk and Compliance
Committee
– Investment Committee
25
Grant Jackson
Assoc. Dip.
Valuations, FAPI –
Independent Director
Term of office
Grant was appointed
as a Director of the
Board in August 2009.
Josephine
Sukkar AM
BSc (Hons),
Grad Dip Ed –
Independent Director
Term of office
Michelle Tierney
BA, MBA, GAICD,
PostGradDip
BusAdmin –
Independent Director
Term of office
Josephine was
appointed as a Director in October 2017.
Michelle was appointed
as a Director of the Board in April 2023.
Professional experience
Professional experience
Professional experience
Grant has over 37 years of experience in
the property industry including 33 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 Executive Chairman of m3property.
Board Committee Membership
– Chair – Investment Committee
– Audit, Risk and Compliance Committee
Panico
Theocharides
BCom (Hons (Acc)),
CA (SA) – Director
Term of office
Panico was appointed
as a Director of the
Board in April 2023.
Professional experience
Panico has over 20 years of executive
leadership experience in listed real estate
investment trusts and the investment
banking advisory industries. He has held
senior financial and operational roles
at Investec and Sasfin Bank, and was
previously Joint CEO of Annuity Properties
Limited and CEO of Annuity Asset Managers
and Annuity Property Managers.
Panico was formerly a non-executive
Director of Transcend Residential Property
Fund Limited, a non-executive Director
and Chair of the Investment Committees
of two Westbrooke Group property
funds (Westbrooke Alternative Tourism
Property Fund and Westbrooke Student
Accommodation Property Fund) and an
Investment Committee member of EuroProp
Real Estate Fund plc.
Other directorships and positions
Panico is currently Group Head of
Investments at Growthpoint Properties
Limited and is a member of its Executive
Committee. He also serves as a non-
executive Director of Capital & Regional plc.
Panico is not considered independent due
to his position at Growthpoint Properties
Limited.
Josephine co-founded large Australian
construction company Buildcorp 33 years
ago of which she is a co-owner. She is an
experienced company director, a Fellow of
the University of Sydney and a Member of
the Order of Australia.
Josephine was formerly a Non-Executive
Director of The Trust Company, the Property
Council of Australia, Opera Australia and the
YWCA NSW.
Other directorships and positions
Josephine is currently a Non-Executive
Director of Washington H. Soul Pattinson
and the Green Building Council of Australia
where she is Chair of both Remuneration
Committees, and Chair of the Australian
Sports Commission. She is a Trustee of
the Australian Museum, a Governor of the
Centenary Institute of Medical Research and
Chair of the Buildcorp Foundation.
Board Committee Membership
– Chair – Nomination, Remuneration and
Human Resources Committee
Michelle is an experienced senior executive
and board member across ASX 50 and
NZX 50 organisations respectively. She has
over 20 years of executive experience in the
property and funds management industry
having held senior funds management
and property roles with National Australia
Bank and The GPT Group. Prior to her
appointment, Michelle was Chief Operating
Officer for Region Group (formerly SCA
Property Group). She is a member of the
Women’s Leadership Institute Australia.
Michelle was formerly an executive Director
of SCA Unlisted Retail Fund RE Limited and
served as alternate Director of the Shopping
Centre Council of Australia.
Other directorships and positions
Michelle is currently a non-executive
Director of Stride Property Group.
Board Committee Membership
– Audit, Risk and Compliance Committee
– Investment Committee
Prior Directors during the period:
– Francois Marais, Director – retired on 17
November 2022
– Geoffrey Tomlinson, Chair and
independent Director – retired on 1 March
2023
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 27 years of experience
in corporate finance dealing with listings,
delistings, mergers, acquisitions and capital
raisings, and over 20 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, and Capital &
Regional plc and Globalworth Real Estate
Investments Limited.
Norbert is not considered independent due
to his position at Growthpoint Properties
Limited.
Board Committee Membership
– Nomination, Remuneration and Human
Board Committee Membership
Resources Committee
– Audit, Risk and Compliance Committee
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 26
Directors’ report
Governance
Executive
Management team.
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.
Sam Sproats
B.Fin Admin, GAICD
– Executive Director,
Funds Management
Sam joined
Growthpoint in
2022 and leads
the Group’s funds
management business.
Sam has over 27 years of experience in
real estate funds management, project
delivery and asset management. Sam joined
the Executive Management Team on the
completion of the acquisition of Fortius
Funds Management Pty Ltd by Growthpoint
in September 2022.
Prior to joining Growthpoint, Sam was Chief
Executive Officer and Executive Director of
Fortius, holding senior executive positions
since joining in 1998.
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 34 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.
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
21 years of experience in financial roles in
Melbourne and London.
Dion joined Growthpoint from
MacarthurCook, a listed property funds
group, where he held a senior finance
position.
Michael 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 22 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.
27
Building 3, 570 Swan Street,
Richmond, VIC (Botanicca 3)
This asset is now 97% leased
with key tenant, Bunnings,
occupying 83% of the
A-grade office space
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 28
Directors’ report
Governance
Risk
management.
The Board has overall responsibility for the establishment and oversight
of the Group’s risk management framework. The Board has 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 2023
Corporate Governance
Statement for more details
on the Group’s risk management
framework.
Management provides regular reports to the ARCC in relation to the risks facing
Growthpoint. The ARCC reviews the adequacy of the risk management framework in
relation to the risks faced by Growthpoint and its operations and makes appropriate
recommendations to the Board. The ARCC also reports regularly to the Board on its
activities. A separate risk register for Growthpoint’s funds management business is
maintained and reported to the Fortius Funds Management Pty Ltd (Fortius) board (a
wholly owned subsidiary of Growthpoint, which oversees the governance of the Fortius managed funds) on a semi-annual basis.
growthpoint.com.au/corporate-
governance
Risk management policies are established to identify and analyse the risks faced by Growthpoint 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 and investor confidence, the value
of our portfolio and our ability to pay or grow
distributions.
Loss of funds management income or inability
to grow the funds management business due
to reduced investor sentiment, ability to attract
new capital partners and impact of adverse
market conditions.
Risk factors that could impact our financial
performance include macroeconomic impacts,
a climate of rising interest rates, high inflation
and 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, acquisitions and disposals are supported by thorough
research.
As our earnings are predominately 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 directly owned
portfolio, we currently have an occupancy rate of 93%, a WALE of 6 years and a
high proportion of fixed annual rent increases.
To ensure security of income, we 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.
Our funds management team actively engages with existing investors and potential
capital partners with regard to investment opportunities and regularly reviews
performance of our managed funds.
We adopt and implement prudent capital management practices. This includes
maintaining sufficient liquidity, holding a percentage of fixed debt in accordance with
our Treasury Management Policy (70.5% as at 30 June 2023) and have a weighted
average debt maturity of 3.4 years.
29
Material business risk
How Growthpoint is responding
Physical assets
Property portfolio
The value of our directly owned 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, tenant demand, external economic
factors and the term of our ground lease
tenancies.
We have a resilient and high-green credentialed portfolio comprised of high-
quality and modern commercial real estate properties, predominately leased to
government, listed organisations or large private companies. Our directly owned
portfolio exposure is limited to office (primarily metropolitan) and industrial property
sectors and is geographically diversified to mitigate the risk of localised valuation
impacts. We may also seek to co-invest in funds in other sectors where accretive
investment opportunities present as part of growing our funds management
business.
We continually monitor and look to improve the quality of our directly owned
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, with an
Investment Committee established by the Board to consider investment proposals
by Growthpoint over a certain monetary threshold.
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
changing needs and exceed their expectations. Through this active asset
management and tenant engagement we endeavour to minimise vacancy and
exposure to high incentives.
Structural changes due to disruptive
industries and trends
Our portfolio and the industry are continually monitored through active research,
industry market briefings and developments and overseas trends.
Remote working, innovative competitors in the
market and building obsolescence can impact
on our current and future operations.
We monitor the potential impacts of the increase of automation and how it affects
our industrial portfolio.
We continue to monitor 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 good demand for our offices, with strong environmental credentials,
primarily located in metropolitan markets, from existing and potential tenants, with
significant leasing activity in FY23, totalling 156,142 sqm or 11.2% of our portfolio.
Finance and economics
Access to capital markets
Continuous access to debt, equity markets and
third party investor capital is important to the
sustainability and growth 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, including
growing our funds management business.
Support from our banking partners is dependent on their financial covenants being
met. We regularly stress test these covenants. As at 30 June 2023, 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
at the low end of our target range of 35% to 45%. Growthpoint also maintains
strong relationships with its equity investors, through its investor relations program.
We actively engage with existing or new third party capital partners to understand
their needs and develop strategies to ensure ongoing satisfaction and repeat or new
investment to grow our funds under management, investment returns and revenue.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 30
Directors’ report
Governance
Risk management.
Material business risk
How Growthpoint is responding
Operations, and people and culture
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.
We have a dedicated team that oversees our IT systems and regularly conduct
penetration testing of our IT systems. We also have a Business Continuity Plan
which includes a Disaster Recovery Plan and provide training and education to our
employees, to assist in reducing the risk and impact of any cybersecurity attack.
We engage external specialists to review our cybersecurity framework including
cyber vulnerabilities and provide assurance on our controls environment.
We undertake IT security risk assessments of new key suppliers or suppliers of
key IT platforms and annually review the business continuity and disaster recovery
arrangements of existing key suppliers to minimise the impacts of third-party
providers outages on our business.
People and culture
The loss of key personnel, particularly in the
current environment of low unemployment, can
result in a productivity downturn, an increase
in operating costs and place a greater burden
on remaining employees. Not having the right
team size with the right skills may also adversely
affect productivity and the achievement of our
strategic objectives.
Our remuneration framework is based on attracting and retaining suitability qualified
and experienced employees and is tailored to reward high performance.
We seek to foster a diverse and inclusive workplace culture where we celebrate our
successes. We undertake annual employee engagement surveys to identify areas
for improvement, which we act upon.
We also undertake regular workforce planning to ensure that we have the right team
size, skills and experience to support our business.
Professional development programs are tailored for individuals based on their career
goals and plans and we conduct an active wellness program focussing on employee
health and wellbeing.
Legal and regulatory
Legal, compliance and regulatory
Non-compliance of laws or our AFSL or
changes in legislation, government policies or
regulatory environment that may impact the
business, increase the costs of compliance and
its operations, lead to reputational damage or
impact its financial performance.
Environmental and social sustainability
Environmental sustainability and climate
change
Inability to deliver on our environmental strategy
could result in poor asset performance, negative
reputation impacts and hamper our ability to
raise capital.
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 and actioned.
Our Sustainability Framework builds on our previous commitment to achieve net
zero carbon emissions by 2025. We invest in assets with strong environmental
credentials and seek to improve the resilience of physical assets via the
implementation of adaption plans to mitigate impacts of physical changes in climate
and investing in energy and building management systems.
We have recently established $520 million of sustainability linked loans where
interest margin reductions are tied to the successful achievement of sustainability
KPIs and targets. This approach underscores our commitment to environmental
stewardship and responsible business practices.
31
Material business risk
How Growthpoint is responding
Social sustainability
Failure to comply with relevant legislation and
have a positive social impact in the communities
in which we operate could result in damage to
our reputation and relationship with stakeholders
and erode our social licence to operate.
We have published modern slavery statements that detail our approach to
identifying and managing modern slavery risks in our supply chain. In conjunction
with a specialist consultant, we have previously undertaken a deep dive risk
assessment of our supply chain. In addition, we have provided modern slavery
training to staff and the Board.
Via our Community Program we continue to sponsor and support a range of
community and social causes.
Growthpoint’s FY23 Sustainability report (due for release in early October 2023) will provide an overview of Growthpoint’s approach
to managing the risks and opportunities of climate change. The report will be available via our website at growthpoint.com.au/
sustainability
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 32
Directors’ report
Governance
Remuneration
report.
Josephine Sukkar AM
Independent Director, Chair – Nomination,
Remuneration and Human Resources
Committee
Total Securityholder return
over 1, 3, 5 and 10 years (%)
Growthpoint TSR
S&P/ASX 200 REIT
Accumulation Index TSR
8.1
8.1
8.2
7.7
3.5
1.3
0.7
-12.0
1 year
3 years
5 years
10 years
Source: UBS Investment Research. Annual
compound returns to 30 June 2023.
On behalf of the Board, I am
pleased to present Growthpoint’s
remuneration report, which
provides an overview of our
FY23 remuneration structure and
outcomes, and our approach to
FY24.
Solid performance in a
challenging market
FY23 marked a successful year for
Growthpoint with several milestone
achievements, however higher inflation
and increases in interest rates have
impacted real estate valuations with
record low transaction volumes. In this
challenging environment Growthpoint’s
portfolio performed well, maintaining
solid occupancy and strong portfolio
weighted average lease expiry (WALE),
supporting a stable income stream for
securityholders.
Within this context, in FY23 the
Committee focused its attention on
ensuring that remuneration settings
were carefully balanced to retain
and motivate our people to deliver
superior performance while aligning
reward outcomes to Securityholders’
expectations. Other important
considerations for the Committee
included the continuation of an extremely
competitive talent market and the impact
of rising interest costs and inflation which
affected financial performance in FY23
and is expected to continue to be a
headwind in FY24.
In FY23, Growthpoint delivered funds
from operations (FFO) of 26.8 cents
per security (cps), down 3.2% relative
to FY22, but ahead of where guidance
was originally set of between 25.0
– 26.0 cps, whilst distributions were
in line with guidance of 21.4 cps, up
2.9%. Strategically, FY23 marked an
important pivot in the focus of the
business following the acquisition of the
Fortius Funds Management platform
in September 2022. The acquisition
is Growthpoint’s first foray into funds
management and an important evolution
for the Group as it seeks to expand and
diversify its income base.
Despite exceeding the original earnings
guidance, Growthpoint underperformed
the S&P/ASX 200 REIT Accumulation
Index (the Index) over the short term
with a total securityholder return (TSR) of
-12.0% vs 8.1% for the Index in FY23.
The underperformance is mainly due
to the impact of higher interest rates
and negative sentiment to office assets
as vacancy rates increased in a post
COVID ‘work from home’ environment.
These factors combined with lower rental
growth meant expanding capitalisation
rates had a significant impact on office
valuations industry wide. Growthpoint
was not immune, and with a relatively
higher weighting to office assets the
Group’s NTA declined by 12.3% to $4.00
per security relative to 30 June 2022.
At 30 June 2023, the Group’s portfolio
occupancy was 93% vs 97% at 30
June 2022. Whilst down, this compared
favourably relative to vacancy rates
experienced in the broader market.
With assets predominantly leased to
government, listed or large companies,
and a portfolio WALE of 6.0 years as
at 30 June 2023, the Group is well
positioned in the current challenging
market.
FY23 awards
The Executive Management Team’s
(EMT) FY23 short-term incentive
(STI) opportunity comprised financial
criteria (70% of total) and non-financial
criteria (30% of total). To be eligible for
the financial criteria component, the
EMT were required to deliver a base
target FY23 FFO of 26.5 cps. The
EMT outperformed the financial target,
delivering FY23 FFO of 26.8 cps, despite
being lower relative to FY22 by 3.2%, but
above guidance.
In addition to the financial achievements,
the Board was pleased with the EMT’s
progress on a number of the Group’s
strategic objectives and FY23 STI
non-financial criteria achievement over
the year. This includes the strategic
acquisition of the Fortius Funds
Management platform in FY23, with
integration having been completed
successfully.
The EMT also progressed the Group’s
ESG performance with good progress
on NABERS (National Australian Built
Environment Rating System) ratings
and a Global Real Estate Sustainability
Benchmark (GRESB) score increase
of one point to 81. Progress has been
made with respect to the Group’s 2025
net zero target through the execution of
new electricity contracts, which include
GreenPower purchases. GreenPower
is anticipated to materially contribute to
achieving the target. There has also been
a significant increase in our onsite solar
rollout, with work commenced during the
year across seven commercial assets.
33
the Board Chair and Committee Chairs
will remain the same as FY23.
The Committee oversees the recruitment
and appointment of Directors and has
made substantial progress on board
renewal and succession planning during
FY23 with a number of new appointments
made during the year. This has resulted
in the Board achieving its female
gender diversity target of 30% (33%
as at April 2023), as well as a majority
of independent Directors at both the
Board and Committee levels, including
independent Director Committee Chairs.
On 18 July 2023, the Group announced
the intended retirement plans of
Managing Director, Timothy Collyer, after
more than 13 years in the role. Mr Collyer
is expected to continue as Managing
Director for 12 months until July 2024,
allowing time for a smooth transition
to his successor. A formal process to
select Mr Collyer’s replacement has
commenced and will include both internal
and external candidates consistent with
the Board approved succession plan.
We hope that you find the following
report transparent and informative, and
welcome your feedback. The Board
remains committed to ensuring that the
EMT are rewarded for the right outcomes
and their remuneration is aligned with the
long-term interests of Securityholders.
Josephine Sukkar AM
Chair – Nomination, Remuneration and
Human Resources Committee
Growthpoint’s performance, FY18-23
FY18
FY21
FY23
2-year
CAGR
5-year
CAGR
FFO per security
Distribution per security (cents)
NTA per security ($)
25.0
22.2
3.19
25.7
20.0
4.17
26.8
21.4
4.00
2.1%
3.4%
(2.1%)
1.4%
(0.7%)
4.6%
The net zero 2025 target is across 100%
owned on balance sheet operationally
controlled office assets and corporate
activities.
In addition, the Group entered into
Sustainability Linked Loans (SLLs) in
respect of $520 million of the Group’s
existing debt arrangements and
established an overarching Sustainable
Finance Governance Framework.
Interest margin reductions are tied to the
successful achievement of sustainability
related KPIs and targets. The KPIs will be
measured against reductions in Scope
1, Scope 2 and Scope 3 emissions
and performance measured against the
NABERS and GRESB ratings.
The positive results of the annual
employee engagement survey
demonstrate the EMT’s focus on building
a positive, performance driven team
culture. The Group continues to record
a positive employee engagement score
compared to the national benchmark
for the survey. The Group has also
progressed gender diversity over FY23,
with its three-year gender diversity
targets being met by 30 June 2023.
These include consistently meeting
and maintaining the 40% female senior
management1 and overall workforce
targets over the three-year period.
Tenant engagement remains strong
with Growthpoint achieving 8/10
tenant satisfaction in its annual survey,
ranking as industry leaders on landlord
satisfaction ahead of the industry average
of 7.1. Growthpoint maintained industry
leader ranking for landlord customer
satisfaction in office (1st) and industrial
(2nd) vs. the benchmarked peer group.
Reflecting the Group’s performance in
FY23, and the EMT’s STI performance
criteria (financial and non-financial), the
Board has assessed the EMT’s STI award
as 61.6% of their maximum FY23 STI
opportunity.
In line with the Group’s remuneration
policy, the Committee will complete its
1. Permanent employees that report to an EMT member.
assessment of the long-term incentive
(LTI) award in October 2023 for the
LTI plan with a performance period of
1 July 2020 to 30 June 2023. 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 the three-year period.
The TSR tranche has been assessed,
with it not being met and resulting in a
0% vesting outcome. The ROE tranche
will be assessed once the required
information from all the Index members
becomes available, anticipated to be
around September 2023.
FY24 remuneration
During FY23, the Committee engaged
a remuneration consultant to undertake
a high-level review of the remuneration
framework for the EMT. Following
the review, the FY24 LTI opportunity
structure will remain the same as FY23
and the FY24 STI structure will be largely
consistent with FY23, but for some minor
changes. The STI assessment will include
targets for funds management growth in
the financial criteria. Financial measures
will be reweighted from 70% to 60%
and non-financial measures from 30% to
40%. The Committee again engaged the
remuneration consultant to benchmark
the EMT’s remuneration against an
industry peer group. Based on this work,
and the Group’s relative position to its
peers, the Board has agreed to increase
the EMT’s total fixed remuneration (TFR)
for FY24 by 3.5% for the Managing
Director and 4% for the other Executive
KMP.
Other matters
The Committee and Board also
considered Director and Board
Committee fees and has agreed that fees
payable to the Non-Executive Directors in
FY24 as part of their membership of the
Board and Committees will remain the
same as FY23. Similarly, fees payable to
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 34
Directors’ report
Governance
What’s
inside.
About the remuneration report
FY23 Executive KMP remuneration
policy and framework
FY23 short-term incentives (STI)
FY23 long-term incentives (LTI) Plan
FY24 Executive KMP remuneration
Non-Executive Directors’ arrangements
Executive and Non-Executive KMP shareholdings
Remuneration policy and role of the Nomination,
Remuneration and HR Committee.
34
35
38
41
45
45
47
48
Who this report covers
This report covers KMP, comprising certain members
of the 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 Andrew Fay - Independent Chair of the Board and
Director (appointed Director effective 1 December
2022 and Chair effective 1 March 2023)
õ Geoffrey Tomlinson - Independent Chair of the
Board and Director (retired effective 1 March 2023)
õ Deborah Page AM - Independent Director
õ Estienne de Klerk - Director
õ Francois Marais - Director (retired effective
17 November 2022)
õ Grant Jackson - Independent Director
õ Josephine Sukkar AM - Independent Director
õ Michelle Tierney - Independent Director (appointed
effective 1 April 2023)
õ Norbert Sasse - Director
õ Panico Theocharides – Director (appointed
effective 1 April 2023)
About the remuneration report
The Directors present this ‘Remuneration Report’ for
the Group for the year ended 30 June 2023. This report
summarises key compensation policies and provides
detailed information on the compensation for Directors
and other Key Management Personnel (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.
35
FY23 Executive KMP remuneration policy and framework
Components of FY23 remuneration
Fixed Remuneration
(including applicable
superannuation and
other benefits)
Set at a level to attract and retain suitably qualified and experienced
persons in each respective role and tailored to encourage overall
performance of the Group, which is in the best interests of all
Securityholders.
Short-term
incentives (STI)
Long-term
incentives (LTI)
If specified performance criteria are met, eligibility of each Executive
KMP to receive an STI bonus payable as 80% cash and 20%
as deferred short-term incentive performance rights (Short-term
Performance Rights) in respect of each financial year.
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.
38
45
41
45
Current year
(FY23)
Next year
(FY24)
Current year
(FY23)
Next year
(FY24)
Executive KMP Remuneration delivery FY23
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.
Year 1
Year 2
Year 3
Year 4
Fixed
Remuneration
Base Salary,
Superannuation and
Other Benefits1
STI
80% paid in cash
20% deferred Short-term
Performance Rights
80% Cash STI
LTI
Delivered as
Long-term Performance
Rights (subject to a 3-year
performance period2)
10% deferred for one year
10% deferred for two years
50% subject to relative total securityholder returns (TSR) growth
50% subject to relative return on equity (ROE) growth
1. Other Benefits comprise insurance arrangements provided to all Executive KMP
2. The measurement period finishes on 30 June 2025 with vesting in early FY26
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 36
Directors’ report
Governance
Executive KMP Remuneration mix FY23 ($000)
Fixed Remuneration
STI - Cash
STI - Deferred
LTI
Managing Director
Chief Financial Officer
$3,404
$921 (27%)
$1,554
$414 (27%)
$2,498
$2,514
$266 (8%)
$290 (12%)
$459 (18%)
$1,066 (31%)
$237 (9%)
$820 (33%)
$247 (10%)
$657 (26%)
Performance
dependent
$110 (7%)
$438 (28%)
$1,093
$127 (12%)
$84 (8%)
$290 (27%)
$1,155
$203 (18%)
$90 (8%)
$270 (23%)
Performance
dependent
$1,151
(34%)
$1,151
(46%)
$1,151
(46%)
$1,151
$1,151
(100%)
$592
(38%)
$592
(54%)
$592
(51%)
$592
$592
(100%)
Maximum
Actual
(take home)
Actual
(accounting)
Minimum
Maximum
Actual
(take home)
Actual
(accounting)
Minimum
Chief Investment Officer
Chief Operating Officer
$1,628
$434 (27%)
$1,199
$205 (17%)
$1,121
$127 (11%)
$115 (7%)
$459 (28%)
$84 (7%)
$91 (8%)
$290 (26%)
$283 (24%)
Performance
dependent
$620
(38%)
$620
(55%)
$620
(52%)
$620
$620
(100%)
$1,274
$355 (28%)
$916
$82 (6%)
$89 (10%)
$329 (26%)
$71 (8%)
$248 (27%)
$954
$168 (18%)
$75 (8%)
$203 (21%)
Performance
dependent
$508
(40%)
$508
(55%)
$508
(53%)
$508
$508
(100%)
Maximum
Actual
(take home)
Actual
(accounting)
Minimum
Maximum
Actual
(take home)
Actual
(accounting)
Minimum
Remuneration report. 37
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 Group’s AFSLs.
4. From 1 July 2018, the Committee implemented a Minimum Securityholding Requirement (MSR) for KMP (refer to page 47 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 50 for further information).
Total Executive KMP remuneration (Take home basis)
The following table presents the actual remuneration received by Executive KMP during FY23. This voluntary disclosure is provided to
increase transparency and includes:
õ Salary and other benefits received during FY23
õ FY22 cash STI received during FY23, and
õ The value of securities that vested during FY23.
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 FY23. 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
benefits1
$
1,151,010
591,847
619,556
507,728
Value of
deferred STI
rights
vested2
Value of
LTI rights
vested2
$
$
237,195
83,647
83,647
71,485
289,816
126,796
126,796
88,758
Cash
STI
$
820,028
289,657
289,657
248,447
TOTAL
$
2,498,049
1,091,947
1,119,656
916,418
Timothy Collyer – Managing Director
Dion Andrews – Chief Financial Officer
Michael Green – Chief Investment Officer
Jacquee Jovanovski – Chief Operating Officer
Total
2,870,141
1,647,789
475,974
632,166
5,626,070
% of
remuneration
performance-
based
%
54%
46%
45%
45%
49%
1 Salary and Other Benefits comprises base salary, superannuation and insurance arrangements provided to all Executive KMP.
2 Based on market price at the time of vesting.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 38
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
Super-
annuation
benefits
Long
service
leave1
Deferred
STI Plan
expense
LTI Plan
expense
$
$
$
$
$
$
$
$
Total
$
Timothy Collyer – Managing Director
FY23
FY22
1,123,510
656,586
19,794
41,674
27,500
8,939
246,513
458,501 2,583,017
1,068,700
801,940
5,814 (21,804)
27,500
35,612
273,530
428,426
2,619,718
Dion Andrews – Chief Financial Officer
FY23
FY22
564,347
270,092
6,987
12,570
27,500
18,715
90,159
202,517 1,192,887
525,675
283,278
2,041
17,121
27,500
18,828
98,152
186,608
1,159,203
Michael Green – Chief Investment Officer
FY23
FY22
592,056
282,737
6,987
1,940
27,500
23,274
91,215
204,870 1,230,579
525,675
283,278
2,041 (14,078)
27,500
17,457
98,152
186,608
1,126,633
Jacquee Jovanovski – Chief Operating Officer
FY23
FY22
Total
FY23
FY22
480,228
202,741
5,983
5,946
27,500
2,515
74,818
168,136
967,867
447,013
242,995
1,621
9,841
27,500
1,234
82,409
147,545
960,158
2,760,141 1,412,156
39,751
62,130
110,000
53,443
502,705 1,034,024
5,974,350
2,567,063 1,611,491
11,517
(8,920)
110,000
73,131
552,243
949,187
5,865,712
S300A (1) (e) (i)
proportion of
remuneration
performance
related
%
53%
58%
48%
49%
48%
51%
47%
49%
50%
53%
FY23 short-term incentives (STI)
Performance criteria for Executive KMP STI for current year (FY23)
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. For FY23 the maximum STI opportunity for the
Managing Director’s total fixed remuneration (TFR) was 117.5%, 94.0% for the Chief Investment Officer and Chief Financial Officer2 and
82.25% for the Chief Operating Officer.
STI Plan and Performance Criteria
For each financial year the Committee, in consultation with the Managing Director and with assistance from remuneration consultants
as required, recommends performance targets and reward levels for STIs to the Board in respect of the year. The STI criteria is then set
by the Board.
For FY23, the STI was comprised of two criteria, namely;
a) Financial criteria – 70% of total
All of the Executive KMP were subject to the same financial criteria which was based upon achieving above budgeted FFO per security,
with the opportunity for outperformance of up to 125% of the financial criteria component via a stretch target of 27.7 cps (1.2 cps or
4.5% ahead of budget). If FFO per security is at or below the budget target, the Board has discretion whether to grant achievement
under the financial criteria.
An FFO target range was chosen because it demonstrates the closest correlation to Securityholder value creation (measured by total
Securityholder return).
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 leave they
accrue during the current year.
2 During FY23, the Chief Financial Officer’s maximum STI with a stretch target was revised from 82.25% of TFR to 94.0% of TFR.
Remuneration report. 39
For FY23, the achievement was 65% for the financial criteria, against a maximum possible stretch of 87.5%. This took into account an
adjustment for interest rates driving FY23 borrowing expenses materially higher than budgeted, noting the volatility of the interest rate
market and uncertainty of likely action by the RBA during the budget setting process and FY23.
b) Non-financial criteria – 30% of total
The non-financial criteria for the Executive KMP were based upon measures relating to the performance criteria in the table below and
on page 40. Achievement of this component is capped at 100%.
The non-financial measures were chosen as they represent the key drivers for the short-term success of the business and for
implementing strategies to drive long term securityholder value.
STI assessment
The Committee undertakes a half year and end of financial year performance review of the Executive KMP’s achievement against the
financial and non-financial criteria to recommend the STI award payable. Any award of a STI to Executive KMP requires Board approval.
Cash STI payments are made the following the financial year in which they were earned.
The Board has ultimate discretion to apply judgement or make adjustments when approving the final performance outcomes. Other
than the adjustment noted above, the Board did not exercise any other discretions or make any other adjustments in determining the
outcome of the Executive KMP’s STI award for FY23.
The Executive KMP’s performance criteria, achievements and outcomes for their FY23 STI opportunity are reflected below and on the
following page.
Criteria
Weighting
Strategic objectives
Result
Performance detail
Financial
70%
Non-
Financial
30%
FFO per Security targets
set by the Board:
– 26.5 cps (budget) = 0%
achievement
– Increase to a maximum
of 125% (stretch target)
earned at 27.7 cps
10% Funds management
– Successful integration
of the acquisition of
the Fortius Funds
Management business
in accordance with an
integration plan
5% Leadership and culture
– Embed a positive team
culture within Growthpoint,
measured by employee
engagement survey results
45.5% _ FFO budget exceeded: 26.8 cps - 65% of financial component
awarded. This represents 52% of the financial component with the
stretch opportunity
10%
_ Integration plan agreed as part of the acquisition. Integration
teams and Steering Committee established to oversee integration.
Completed all key deliverables in accordance with the plan
3.75% _ Positive FY23 employee engagement score of 74% compared to
national benchmarked score of 72%. Note the Group moved to a
new survey provider in FY23, and so last year’s results are not directly
comparable.) Survey responses included 87% of employees indicating
they would recommend Growthpoint as a great place to work and
100% of employees having access to the learning and development
needed to do their job well
_ Consistently positive employee pulse scores achieved during
integration phase
_ Progressed governance processes to integrate the funds
management business and culture within the broader Growthpoint
Group
_ Executive KMP succession plans and talent planning progressed
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
40
Directors’ report
Governance
Criteria
Weighting Strategic objectives
Result
Performance detail
Non-Financial
30%
(cont.)
7.5% Environmental, Social and
Governance (ESG) initiatives
and targets
– Deliver performance against
ESG and maintain high ESG
targets measured against
FY22 results
– Progress towards net zero
strategy1 by 2025
7.5% Customer satisfaction
– Maintain high levels of
customer satisfaction,
measured by reference to
FY22 tenant and investor
surveys
7.5% _ Portfolio average NABERS Energy rating2 of 5.2 stars (FY22: 5.2 stars)
and ranked in the top 10 for Energy in the NABERS Sustainable Portfolio
Index 2023 (SPI)
_ Portfolio average NABERS Water rating3 of 5.1 stars (FY22: 5.1 stars) and
the Group improved its SPI performance from 11th in 2022 to 4th in 2023
_ Portfolio average NABERS Indoor Environment rating4 increased to 4.5
stars (FY22: 4.2 stars)
_ GRESB score increased to 81 (FY22: 80) and Overall Regional Sector
Leader – Diversified – Office/Industrial position maintained
_ CDP above average score of B maintained
_ Progress has been made with respect to the Group’s 2025 net zero
target through the execution of new electricity contracts, which include
GreenPower purchases. GreenPower is expected to contribute
significantly to achieving the target. There has also been a significant
increase in our onsite solar rollout, with work commenced during the year
across seven commercial assets
_ Entered into Sustainability Linked Loans (SLLs) in respect of $520 million
of the Group’s existing debt arrangements and established overarching
Sustainable Finance Governance Framework for the selection of SLL
related targets and the day to day management and operation of the
SLLs
_ Published third Modern Slavery Statement detailing actions taken to
assess and address risks in the Group’s operations and supply chain
5.63% _ Positive direct feedback and external survey results on the Group’s
engagement with tenants, with:
– continued increase in customer satisfaction increasing from 74 in FY22
to 77 in FY23 for balance sheet assets (scored out of 100);
– positive landlord satisfaction result for balance sheet assets of 8 (out of
10), compared to 7.1 for the industry benchmark and 8.1 in FY22 for
the Group;
– Maintained industry leader ranking for landlord customer satisfaction in
office (first) and industrial (second) vs. benchmarked peer group
_ Positive feedback on Group’s performance and management from
direct investor and analyst meetings. Also positive results from externally
conducted investor perception study, with very slight reduction in
overall average score on prior year and maintained favourable score vs.
leading peer company. Management Responsiveness and Accessibility,
Management Discussion and Analysis, and Disclosure and Transparency
were the highest ranking categories in the survey
_ Positive media and analyst coverage, with Group coverage extended to
six from five analysts
_ Improved uptake on digital channels from FY22 including LinkedIn
followers and engagement and Group website visits
Total non-financial
30%
Totals of target STI
opportunity
100%
Totals of Maximum
STI opportunity
(with the stretch
opportunity)
117.5%
26.88%
72.38%
61.60%
1 Net zero 2025 target across 100% owned on balance sheet operationally controlled office assets and corporate activities.
2 100% of eligible, owned on balance sheet office assets rated.
3 100% of eligible, owned on balance sheet office assets rated. Recycled water not included.
4 94% of eligible, owned on balance sheet office assets rated.
Remuneration report. 41
Results of FY23 STI
The table below shows the maximum in cash and Short-term Performance Rights that each Executive KMP could earn for FY23, and
the actual results achieved.
Names
Total
Cash
Maximum for FY23
Short-term
Performance Rights
Result for FY23
Total
Cash
Short-term
Performance Rights1
$
$
$
No.
$
$
$
No.
Timothy Collyer – Managing Director
1,332,450 1,065,960
266,490
75,279
820,733
656,586
164,147
46,369
Dion Andrews – Chief Financial Officer
548,114
438,491
109,623
30,966
337,615
270,092
67,523
19,074
Michael Green – Chief Investment Officer
573,776
459,021
114,755
32,416
353,421
282,737
70,684
19,967
Jacquee Jovanovski – Chief Operating Officer
411,435
329,148
82,287
23,244
253,426
202,741
50,685
14,317
Total
2,865,775 2,292,620
573,155
161,905
1,765,195 1,412,156
353,039
99,727
FY23 Deferred 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)
Granted in November
Granted in June2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
17-Nov-22
17-Nov-22
21-Jun-23
21-Jun-23
1-Jul-22
1-Jul-22
1-Jul-22
1-Jul-22
28-Jun-24
30-Jun-25
28-Jun-24
30-Jun-25
$
$
$
years
%
%
%
3.23
2.91
–
1.61
25
3.48
6.58
3.23
2.73
–
2.62
25
3.29
6.58
2.94
2.74
–
1.02
25
3.95
7.00
2.94
2.56
–
2.03
25
3.52
7.00
FY23 long-term incentives (LTI) Plan
The Group has had an Employee Securities Plan (the Plan) in place for Executive KMP and certain other employees 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. The
performance measures for FY23 are set out below, with no change to the performance measures compared to recent prior years.
The performance measurement period for the FY21, FY22 and FY23 plans are the three years to 30 June 2023, 30 June 2024 and
30 June 2025, respectively. For these plans, 100% of the maximum opportunity may vest into stapled securities subject to the
performance measures being met.
1 The number of Short-term Incentive Performance Rights was derived by dividing the actual dollar value by the volume weighted average price (VWAP) of Growthpoint stapled
securities over the first 10 trading days in FY23 rounded down to the nearest whole Performance Right, being $3.54. The actual number of Short-term Incentive Performance
Rights earned by Executive KMP will be split into two equal tranches with the first tranche vesting into stapled securities on 28 June 2024 and the second tranche vesting on
30 June 2025, as long as the individual has not had their employment terminated for cause or submitted their resignation (other than for death, ill health or disability) prior to
conversion date
2 Post the initial performance rights offering in November 2022, the Chief Financial Officer’s maximum STI with a stretch target was revised from 82.25% of TFR to 94.0% of
TFR, requiring additional performance rights to be issued in June 2023
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 42
Directors’ report
Governance
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 over a rolling 3-year period 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
At or above 76th percentile
Nil
50%
Straight line pro rata vesting between 50% and 100% (i.e.
plus 2% for each percentile above the 51st 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 over a rolling 3-year
period as set out in the following vesting schedule:
Growthpoint Properties Australia’s ROE
Below benchmark return
Achievement of benchmark
% of ROE Component to be granted as Performance
Rights
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%
LTI Maximum
The maximum LTI opportunity each financial year is 80% of total fixed remuneration (TFR) for the Managing Director and 70% of TFR
for the other Executive KMP.
LTI Minimum
The Committee may determine that no grant will be made under the LTI.
LTI Rights Granted
The number of LTI Performance Rights granted is based on the VWAP of Growthpoint’s securities over the first 10 trading days of the
relevant performance period and rounded down to the nearest whole performance right.
LTI Achievement
The LTI performance results and vesting outcomes, being the percentage of granted rights in each tranche that shall successfully vest,
are independently calculated by Grant Thornton and reviewed by the Committee after the conclusion of the performance period. Any
rights that successfully vest are subsequently converted to issued stapled securities and any rights that fail to vest subsequently lapse.
The table below reports the LTI achievement outcomes for the FY20 LTI Plan that vested in October 2022, covering the performance
period of 1 July 2019 to 30 June 2022, and the outcome for the TSR tranche of the FY21 LTI Plan due to vest in October 2023,
covering the performance period of 1 July 2020 to 30 June 2023, noting that the ROE tranche will be assessed once the required
information from all the Index members becomes available.
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
Remuneration report. 43
Plan
Growthpoint
Benchmark
Vesting outcome
Growthpoint
Percentile
Vesting outcome
ROE Tranche
TSR Tranche
FY20 LTI Plan
FY21 LTI Plan
48.2%
TBD
40.7%
TBD
100.0%
TBD
(2.0%)
6.6%
35.0%
13.7%
0.0%
0.0%
ASX Listing Rules
In accordance with ASX Listing Rule 10.14, the issue of any stapled securities or the granting of performance rights to the Managing
Director is subject to Securityholder approval.
FY23 LTI Plan details
The table below shows LTI grants made during the year for the FY23 LTI Plan, subject to performance conditions over the three-
year performance period ending 30 June 2025. 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.
Plan participants
LTI max as a % of
remuneration
Performance
measure
Number of performance
rights granted
Fair value per
performance right
Total estimated
fair value
Timothy Collyer
– Managing Director
Total
Dion Andrews
– Chief Financial Officer
Total
Michael Green
– Chief Investment Officer
Total
Jacquee Jovanovski
– Chief Operating Officer
Total
%
80
70
70
70
TSR
ROE
TSR
ROE
TSR
ROE
TSR
ROE
No.
128,135
128,136
256,271
57,651
57,651
115,302
60,350
60,350
120,700
49,457
49,457
98,914
$
0.750
2.688
0.750
2.688
0.750
2.688
0.750
2.688
$
96,101
344,430
440,531
43,238
154,966
198,204
45,263
162,221
207,483
37,093
132,940
170,033
Key inputs used in valuing LTI Performance Rights were as follows:
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
17-Nov-22
1-Jul-22
30-Jun-25
$3.23
–
2.8
25%
3.27%
6.58%
The fair value is determined by Grant Thornton using a Monte-Carlo simulation for the relative TSR component and a Binomial
methodology for the relative ROE component.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
44
Directors’ report
Governance
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.
Details of Performance Rights that vested to Executive KMP in FY23
Plan identification
Timothy Collyer – Managing Director
FY22 Deferred STI Plan
FY21 Deferred STI Plan
FY20 LTI Plan2
Sub-total
Dion Andrews – Chief Financial Officer
FY22 Deferred STI Plan
FY21 Deferred STI Plan
FY20 LTI Plan2
Sub-total
Michael Green – Chief Investment Officer
FY22 Deferred STI Plan
FY21 Deferred STI Plan
FY20 LTI Plan2
Sub-total
Jacquee Jovanovski – Chief Operating Officer
FY22 Deferred STI Plan
FY21 Deferred STI Plan
FY20 LTI Plan2
Sub-total
Total
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 FY23
$
No.
139,469
97,725
289,816
527,010
49,266
34,381
126,796
210,443
49,266
34,381
126,796
210,443
42,260
29,225
88,757
160,242
49,989
35,027
92,593
177,609
17,658
12,323
40,510
70,491
17,658
12,323
40,510
70,491
15,147
10,475
28,357
53,979
1,108,138
372,570
$
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
%
50
50
50
50
50
50
50
50
50
50
50
50
Movements in number of Performance Rights held by Executive KMP during FY23
STI performance rights
Plan participants
Timothy Collyer – Managing Director
Dion Andrews – Chief Financial Officer
Michael Green – Chief Investment Officer
Jacquee Jovanovski – Chief Operating Officer
Balance at
1 July 2022
Rights
granted3
No.
135,004
47,639
47,639
40,769
No.
75,279
30,966
32,416
23,244
Rights
lapsed3
No.
(28,910)
(11,892)
(12,449)
(8,927)
Rights
vested
Balance at
30 June 2023
No.
No.
(85,016)
(29,981)
(29,981)
(25,622)
96,357
36,732
37,625
29,464
Total
271,051
161,905
(62,178)
(170,600)
200,178
1 Actual value will depend upon the security price at the time of vesting.
2. Performance measurement period ended on 30 June 2022.
3 The maximum rights that may have been awarded under the FY23 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 2023.
Remuneration report. 45
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 2022
No.
643,807
282,538
282,538
228,746
Rights
granted
No.
256,271
115,302
120,700
98,914
Rights
lapsed
No.
(92,592)
(40,509)
(40,509)
(28,356)
Rights
vested
Balance at
30 June 2023
No.
No.
(92,593)
(40,510)
(40,510)
(28,357)
714,893
316,821
322,219
270,947
Total
1,437,629
591,187
(201,966)
(201,970)
1,624,880
FY24 Executive KMP remuneration
Proposed performance criteria for STI for next year (FY24)
During FY23, the Committee engaged a remuneration consultant to undertake a high level review of the remuneration framework for the
Executive KMP. Following the review, the Committee and Board approved some changes to the STI structure for FY24 as noted below.
The structure for FY24 STI for Executive KMP will remain split between financial measures and non-financial measures, however the
components will be re-weighted as follows:
õ
financial measures, from 70% to 60%, with a stretch arrangement allowing for an opportunity of up to 129% of the financial
component criteria. There will now be two financial measures comprised of Group FFO per security targets approved by the
Committee and Board for the financial year (45%) and a new third-party funds management growth measure (15%); and
õ non-financial measures, from 30% to 40%.
The Managing Director’s FY24 target STI opportunity is 100% of his FY24 TFR. With a stretch target, his maximum FY24 STI
opportunity will be 117.5% of his FY24 TFR. The Chief Investment Officer and Chief Financial Officer’s FY24 target STI opportunity is
80% of their FY24 TFR. With a stretch target, their maximum FY24 STI opportunity will be 94% of their FY24 TFR. The Chief Operating
Officer’s FY24 target STI opportunity is 70% of her FY24 TFR. With a stretch target, her maximum FY24 STI opportunity is 82.25% of
her FY24 TFR.
The non-financial measures will be assessed across measures set by the Committee, and be tailored to each member of Executive
KMP’s role and responsibilities, relating to:
õ
the execution of operational and strategic priorities, external stakeholder engagement and people, culture and leadership;
õ ESG initiatives and targets; and
õ Customer satisfaction.
The Board has ultimate discretion to apply judgement or make adjustments when approving the final performance outcomes.
Executive KMP FY24 LTI opportunity
Following the review to the remuneration framework, there are no changes proposed to the LTI structure or performance conditions for
FY24.
Executive KMP FY24 remuneration
The total fixed remuneration for Executive KMP payable in FY23 will increase in FY24 by 3.5% for the Managing Director and by 4.0%
for the other Executive KMP.
Non-Executive Directors’ arrangements
There are currently eight Non-Executive Directors. An aggregate pool of $1,500,000 available for the remuneration of Non-Executive
Directors was approved by Securityholders at the Company’s Annual General Meeting in November 2022.
Remuneration paid and payable
The total remuneration to be paid to Non-Executive Directors for FY24 is listed on the following page.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 46
Directors’ report
Governance
Principles of remuneration for Non-Executive Directors
The principles of Non-Executive Director remuneration are:
1. Non-Executive Directors should receive total remuneration at market rates for equivalent positions at listed Australian entities of
similar size (measured by market capitalisation), 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 Chair 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 Chair 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 Directors (refer
to page 47 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 Chair, Non-Executive Directors may obtain independent advice at the Company’s cost.
FY23 Non-Executive Directors’ Remuneration
Andrew Fay – Board Chair (appointed as Director
on 1 December 2022 and Chair on 1 March 2023)
Geoff Tomlinson – Chair
(retired 1 March 2023)
Deborah Page AM
(appointed 1 March 2021)
Estienne de Klerk
(appointed 5 August 2009)
Francois Marais
(retired 17 November 2022)
Grant Jackson
(appointed 5 August 2009)
Josephine Sukkar AM
(appointed 1 October 2017)
Michelle Tierney
(appointed 1 April 2023)
Norbert Sasse
(appointed 5 August 2009)
Panico Theocharides
(appointed 1 April 2023)
Total
Short-term Post-employment
Committee
Fees
Superannuation
benefits
$
$
Fees
$
Total
$
97,839
5,301
10,829
113,969
–
142,240
193,727
108,507
99,091
119,900
109,000
49,958
109,000
108,507
99,091
108,507
99,091
27,127
–
119,900
109,000
29,975
–
–
–
–
31,756
27,080
13,695
13,600
5,638
12,300
28,471
22,801
14,011
11,182
5,624
–
26,813
26,288
3,740
–
–
–
14,935
157,175
19,373
213,100
14,727
154,990
12,617
138,788
–
–
–
–
133,595
122,600
55,596
121,300
14,382
151,360
12,189
134,081
12,865
135,383
11,027
121,300
3,439
36,190
–
–
–
–
–
–
146,713
135,288
33,715
–
912,459
135,048
71,178
1,118,685
818,000
113,251
55,206
986,457
Period
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
Remuneration report.
47
Non-Executive Directors’ FY24 remuneration
Fees payable to the Non-Executive Directors in FY24 as part of their membership of the Board and Committees will remain the same
as the fees payable in FY23. Similarly, fees payable to the Board Chair and Committee Chairs will remain the same as the fees payable
in FY23. These fees are set out below.
Board
Audit, Risk & Compliance Committee
Nomination, Remuneration & HR Committee
Investment Committee
Chair fee1
$234,410
$25,190
$21,340
$16,500
Member fee
$119,900
$14,960
$13,530
$9,900
Executive and Non-Executive KMP shareholdings
A Minimum Securityholding Requirement (MSR) exists for Executive KMP and Non-Executive Directors who are required to have met
the MSR within four years from their employment or Directorship commencement, respectively. 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.
During FY23, the Board approved a change to the MSR policy so that the value of Growthpoint securities (for the purposes of
determining compliance with the policy) is calculated at the higher of the acquisition/issue price or the closing price of Growthpoint
securities at the end of the relevant financial year multiplied by the holding, expressed as a percentage of the MSR.
The table below provides holdings for Executive KMP and Non-Executive Directors.
Name
Holding as at
30 June 2022
Securities
granted as
compensation
No.
–
–
–
–
–
–
–
–
–
–
No.
–
88,776
30,050
1,802,857
144,284
190,087
14,000
–
1,656,460
–
1,364,246
177,609
296,216
138,639
36,340
70,491
70,491
53,979
Securities
acquired
Securities
disposed
Holding at time
of cessation of
KMP
Holding as at
30 June 20232
No.
59,000
–
3,000
31,000
–
–
36,000
–
–
–
–
–
–
–
No.
–
–
–
–
–
–
–
–
–
–
–
(92,547)
–
–
No
–
88,776
–
–
144,284
–
–
–
–
–
–
–
–
–
No.
59,000
–
33,050
1,833,857
–
190,087
50,000
–
1,656,460
–
1,541,855
274,160
209,130
90,319
Andrew Fay3
Geoff Tomlinson
Deborah Page AM
Estienne de Klerk
Francois Marais
Grant Jackson
Josephine Sukkar AM
Michelle Tierney
Norbert Sasse
Panico Theocharides
Timothy Collyer
Dion Andrews
Michael Green
Jacquee Jovanovski2
The MSR was met by KMP who were required to do so by 30 June 2023.
1 The Board Chair does not receive Committee fees.
2 Active KMP only.
3 Not required to meeting MSR by 30 June 2023 as commenced employment or Directorship within the last four years.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 48
Directors’ report
Governance
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 or benchmarking analysis from:
Managing
Director
External
Advisors
Committee members
The members of the Committee during the year and at the date of this Report are:
õ Josephine Sukkar AM (Committee Chair from 5 April 2023) – independent, Non-Executive Director
õ Norbert Sasse (Committee Chair until 5 April 2023) – Non-Executive Director
õ Andrew Fay – independent, Non-Executive Director and Chair of the Board. Appointed 1 December 2022.
õ Francois Marais – Non-Executive Director. Retired effective 17 November 2022.
õ Geoff Tomlinson – independent, Non-Executive Director and Chair of the Board. Retired effective 1 March 2023.
Delegated authority
The Committee operates under delegated authority from the Board. The duties of the Committee in relation to remuneration are to:
1. Recommend, for adoption by the Board, a remuneration package for the Chair of the Board and the other Directors on a not less
than annual basis.
2. Recommend, for adoption by the Board, a remuneration package, including bonus incentives and related key performance
indicators, for the Group’s Executive Management Team both on appointment and on a not less than annual basis.
3. Review and approve, having regard to the most senior executive officer’s recommendations, the overall remuneration packages,
including bonus incentives and related KPI’s, for other Group employees on a not less than annual basis.
4. Approve, having regard to the most senior executive officer’s recommendations, the bonus pool for Non-Executive Management
Team employees each year.
5. Make recommendations to the Board in relation to the introduction of, and amendments to, any employee share plan established
by the Group and the employees who will be eligible to participate in the plan.
Remuneration report. 49
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 2023.
(Loss) / 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
Independent consultants
2023
2022
2021
2020
2019
$m
$m
$
$
$
%
%
(245.6)
162.6
0.214
2.79
(0.62)
(12.0)
(7.6)
459.2
160.6
0.208
3.41
(0.66)
(11.7)
14.3
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
During the year, the Committee engaged Guerdon Associates as an independent consultant to provide benchmarking remuneration
services in relation to Executive KMP. The analysis compared the relative positioning of remuneration for each EMT role against an
industry A-REIT peer group comprised of 15 members.
Guerdon Associates also undertook a high level review of the remuneration framework for Executive KMP.
These services did not include remuneration recommendations to the Committee.
Remuneration reviews
The Committee reviews the appropriate levels of remuneration for all Directors and Employees based on:
1. Remuneration surveys and trends.
2. Benchmarking against peers (for employees).
3. Recommendations from the Managing Director (excluding in relation to his own remuneration).
Executive Director Remuneration and Service Contract
There is currently only one Executive Director being the Managing Director, Timothy Collyer.
Remuneration paid and payable
The total remuneration paid or payable to the Managing Director for FY23 is listed on page 37 to 38 of this report.
Service contract
The Managing Director has a contract of employment dated 22 August 2016 with the Group that specifies the duties and obligations to
be fulfilled by the Managing Director and provides that the Board and the Managing Director will, early in each financial year, consult to
agree objectives for achievement during that year. Changes to the Managing Directors’ remuneration requires full Board approval and,
in certain circumstances, Securityholder approval.
The Managing Director’s employment continues until terminated by either the Group or the Managing Director. The Managing Director
can resign by providing six months’ written notice. The Group can terminate his employment immediately for cause. In addition, the
Group can terminate the Managing Director’s employment without cause on nine months’ notice. The Group may elect to pay the
Managing Director in lieu of some or all of this nine months’ notice period.
On termination as Managing Director, he must resign as a Director of any Group entity and he is restrained from a number of activities
in competition with or to the detriment of the Group for a period of six months from the date of termination.
Termination payments for redundancy comprise nine months’ notice and redundancy policy benefits.
Principles of remuneration for the Managing Director
The principles of remuneration for the Managing Director are included as part of the Executive KMP principles listed on page 37.
1 Source UBS Investment Research.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 50
Directors’ report
Governance
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
(based on terms for the FY23 grants)
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. In the case of STI performance rights, if any of
these events occur before the Board has exercised its discretion, the STI Performance Rights will vest.
Claw back
The Board has broad “clawback” powers to determine that performance rights lapse, stapled securities are forfeited, or that amounts
are to be repaid in certain circumstances (for example, in the case of fraud or dishonesty).
Non-Executive and Executive KMP Reviews
Non-Executive Director reviews
The performance of the Board and individual Directors is regularly considered by the Chair 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 Chair 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, capital markets/
investment banking, finance/accounting and governance. Refer to pages 30 to 31 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 and experience. The Board is eager to ensure that where Board members are replaced, the Board’s
overall level of property experience is not diminished. See page 8 of Growthpoint’s Corporate Governance Statement which outlines the
current mix of skills represented on the Board, which includes extensive experience within the property industry.
Remuneration report. 51
Succession planning
The Committee undertakes Board succession planning activities and has also developed plans for the succession and/or temporary
replacement of the Managing Director and other Executive KMP.
On 18 July 2023, Growthpoint announced to the ASX the intended retirement plans of the Managing Director after more than 13 years
in the role. The Managing Director is expected to continue in his role for 12 months until July 2024, allowing time for a smooth transition
to his successor. A formal process to select the Managing Director’s replacement has commenced and will include both internal and
external candidates consistent with the Board approved succession plan.
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 Managing Director’s performance and any remuneration benchmarking analysis it has obtained.
The Managing Director reviews the performance of the other Executive KMP and makes recommendations to the Committee on their
remuneration based, in part, on their performance and any remuneration benchmarking analysis or remuneration survey information
obtained.
Meetings of Directors (FY23)
All Non-Executive Directors have a standing invitation to attend all Board Committee meetings. The Managing Director has a standing
invitation to attend all Board Committee meetings unless the members of the relevant Committee determine otherwise. The table below
only reflects attendance of members of the Board Committees.
Growthpoint Board
Audit, Risk and
Compliance Committee
Nomination,
Remuneration
and HR Committee
Investment
Committee
eligible
to attend
attended
eligible
to attend
attended
eligible
to attend
attended
eligible
to attend
attended
5
6
9
8
9
5
9
9
4
9
4
5
6
9
8
9
5
8
9
4
8
3
–
3
–
4
3
–
4
–
1
–
1
–
3
–
4
3
–
4
–
1
–
1
3
3
–
–
–
3
–
6
–
6
–
3
3
–
–
–
3
–
6
–
5
–
–
–
2
2
1
–
2
–
1
1
–
–
–
2
–
1
–
2
–
1
1
–
Board member
A. Fay – Chair1
G. Tomlinson – Chair2
T. Collyer – Managing Director
D. Page
E. de Klerk
F. Marais3
G. Jackson
J. Sukkar
M. Tierney4
N. Sasse
P. Theocharides5
1 Appointed 1 December 2022.
2 Retired 1 March 2023.
3 Retired 17 November 2022.
4 Appointed 1 April 2023.
5 Appointed 1 April 2023.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 52
Directors’ report
Governance
Additional
information.
Directors
The following persons were members
of the Board of Growthpoint Properties
Australia Limited (the Company) during
FY23:
õ Geoffrey (Geoff) Tomlinson,
Independent Chairman
õ Timothy Collyer, Managing Director
õ Estienne de Klerk (deemed non-
independent given role as CEO of
Growthpoint Properties Limited: South
Africa)
õ Grant Jackson, Independent Director
õ Francois Marais (deemed non-
independent given previous position at
Growthpoint Properties Limited)
õ Deborah Page AM, Independent
Director
õ Norbert Sasse (deemed non-
independent given role as Group CEO
of Growthpoint Properties Limited)
õ Josephine Sukkar AM, Independent
Director
õ Andrew Fay, Independent Chairman
õ Panico Theocharides (deemed non-
independent due to his position held
with Growthpoint Properties Limited)
õ Michelle Tierney, Independent Director
Details of each Director’s appointment,
qualifications and experience, together
with their recent directorships, are set
out on pages 24 to 25 of this report.
Information about attendance at the
meetings of Directors held during FY23 is
contained in the Remuneration Report on
page 51 of this report.
Company Secretaries
Jacqueline (Jacquee) Jovanovski
and Dion Andrews are the Company
Secretaries of each member of the
Group. Details of their qualifications and
experience are set out on page 26 of this
report.
Review of operations and results
Auditor’s independence
The Operating and Financial Review is
contained on pages 3 to 23 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 Company 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 applicable law and
professional regulations or due to the
negligence, wrongful or wilful acts or
omissions by the auditor.
Non-Audit services
During the year EY, the Group’s auditor, has
performed 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:
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
There have been no 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
52 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
17 August 2023
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.
Audit and review of
financial statements
Other regulatory
audit services
Other non-audit
services
FY23
FY22
$
$
392,000
261,600
85,970
54,000
105,000
35,000
Total paid to EY
582,970
350,600
53
Financial
report.
Financial Statements
Consolidated Statement of Comprehensive Income 54
55
Consolidated Statement of Financial Position
56
Consolidated Statement of Changes in Equity
57
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
58
58
59
59
Section 2: Operating results, assets and liabilities
60
2.1 Revenue and operating segment information
2.2 Business combination
2.3 Investment properties
2.4 Investment in securities
2.5 Receivables and other assets
2.6 Trade and other liabilities
2.7 Cash flow information
2.8 Intangible assets
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
60
62
64
70
71
72
72
73
76
76
78
78
78
80
82
86
87
87
88
90
90
93
95
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 18, 101 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
17 August 2023.
References to ‘the year’ in this report refer to the year ended 30
June 2023 unless the context requires otherwise. References
to ‘balance date’ in this report refer to 30 June 2023 unless the
context requires otherwise.
ADD IMAGEGrowthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 54
Financial report
Consolidated Statement of
Comprehensive income.
For the year ended 30 June 2023
Revenue and other income
Property revenue
Funds management revenue
Distributions from investment in securities
Interest income
Total revenue and other income
Expenses
Property expenses
Borrowing costs
Other expenses
Depreciation and amortisation expenses
Impairment of goodwill
Total expenses
Other gains/losses
Net (loss)/gain in fair value of investment properties
Net loss in fair value on sale of investment properties
Net loss in fair value of investment in securities
Net (loss)/gain in fair value of derivatives
Net loss on exchange rate translation of interest-bearing liabilities
Net (losses)/gains from other items
(Loss)/Profit before tax
Income tax benefit/(expense)
(Loss)/Profit after tax
Other comprehensive income
Total comprehensive (loss)/income
Total comprehensive (loss)/income attributable to:
Owners of the Trust
Owners of the Company
Total comprehensive (loss)/income
Notes
2.1
2.1
2.4
2.1
3.2
2.8
2.3
2.4
3.4
3.1
4.1
2023
$m
325.3
7.6
8.4
1.4
342.7
(52.3)
(81.8)
(32.7)
(6.7)
(8.8)
(182.3)
(388.4)
(0.6)
(6.2)
(1.1)
(14.8)
(411.1)
(250.7)
5.1
(245.6)
–
(245.6)
(229.2)
(16.4)
(245.6)
Earnings per security attributable to securityholders of the Group:
Basic earnings per stapled security (cents)
Diluted earnings per stapled security (cents)
3.9
3.9
(32.1)
(32.1)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
2022
$m
303.7
–
7.7
0.1
311.5
(47.1)
(49.7)
(21.8)
(3.9)
–
(122.5)
285.1
–
(32.7)
57.2
(31.5)
278.1
467.1
(7.9)
459.2
–
459.2
461.6
(2.4)
459.2
59.5
59.3
Consolidated Statement of
Financial Position.
As at 30 June 2023
Current assets
Cash and cash equivalents
Receivables and other assets
Intangible assets
Derivative financial instruments
Current tax receivable
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
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Distribution payable to Securityholders
Trade and other liabilities
Interest bearing liabilities
Lease liabilities
Current tax payable
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
55
Notes
2.7
2.5
2.8
3.4
4.1
2.3
2.4
2.5
3.4
2.8
4.1
3.8
2.6
3.1
3.3
4.1
4.1
3.1
3.3
3.4
3.7
2023
$m
49.4
10.8
4.5
1.3
1.6
67.6
2022
$m
49.2
7.2
–
–
–
56.4
4,917.2
129.5
5,233.1
132.4
–
56.4
3.0
2.8
33.7
0.6
16.7
59.1
–
0.6
–
1.6
5,143.2
5,210.8
5,443.5
5,499.9
80.6
46.7
–
1.8
–
3.5
80.3
46.1
40.0
0.7
0.4
8.3
132.6
175.8
1,918.7
105.2
–
2,023.9
2,156.5
3,054.3
1,986.4
15.8
1,052.1
3,054.3
1,700.0
103.9
0.3
1,804.2
1,980.0
3,519.9
2,046.5
13.1
1,460.3
3,519.9
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
56
Financial report
Consolidated Statement of
Changes in Equity.
For the year ended 30 June 2023
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
$m
Contri-
buted
equity Reserves
Retained
profits
Total
Total
equity
Equity as at 30 June 2022
1,976.0
1,462.3 3,438.3
70.5
Loss after tax
Other comprehensive income
Total comprehensive loss
Transactions with Securityholders in
their capacity as Securityholders:
–
–
–
(229.2)
(229.2)
–
–
(229.2)
(229.2)
–
–
–
Security buybacks
(58.8)
–
(58.8)
(1.3)
Distributions provided or paid
3.8
Share-based payment transactions
–
–
(162.6)
(162.6)
–
Total transactions with Securityholders
(58.8)
(162.6)
(221.4)
Other reserves
–
–
–
–
–
(1.3)
–
$m
13.1
–
–
–
–
–
2.7
2.7
–
$m
$m
$m
(2.0)
81.6
3,519.9
(16.4)
(16.4)
(245.6)
–
–
–
(16.4)
(16.4)
(245.6)
–
–
–
–
–
(1.3)
(60.1)
–
(162.6)
2.7
2.7
1.4
(220.0)
–
–
Equity as at 30 June 2023
1,917.2
1,070.5 2,987.7
69.2
15.8
(18.4)
66.6
3,054.3
Equity as at 30 June 2021
1,978.0
1,161.3
3,139.3
70.5
11.2
0.4
82.1
3,221.4
Profit after tax
Other comprehensive income
Total comprehensive income
Transactions with Securityholders in
their capacity as Securityholders:
Security buybacks
Distributions provided or paid
3.8
Share-based payment transactions
–
–
–
461.6
461.6
–
–
461.6
461.6
(2.0)
–
–
–
(2.0)
(160.6)
(160.6)
–
–
Total transactions with Securityholders
(2.0)
(160.6)
(162.6)
Other reserves
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.9
1.9
–
(2.4)
(2.4)
459.2
–
–
–
(2.4)
(2.4)
459.2
–
–
–
–
–
–
–
(2.0)
(160.6)
1.9
1.9
1.9
(160.7)
–
–
Equity as at 30 June 2022
1,976.0
1,462.3 3,438.3
70.5
13.1
(2.0)
81.6
3,519.9
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 2023
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
Cash flows from investing activities
Receipts from sale of investment properties
Payments for investment properties
Payments for acquisition of business (net of cash acquired)
Payments for investment in securities
Payments for plant & equipment
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from external borrowings
Repayments of external borrowings
Payments for securities buy back
Payments to restructure derivatives
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
57
Notes
2.7
2.2
2023
$m
367.5
(123.2)
8.3
(76.1)
1.4
(1.9)
176.0
128.7
(190.6)
(49.7)
(1.1)
(2.7)
(115.4)
428.0
(264.5)
(60.1)
–
(1.4)
(162.4)
(60.4)
0.2
49.2
49.4
2022
$m
325.1
(100.2)
7.0
(48.1)
0.1
(0.5)
183.4
–
(326.6)
–
(60.3)
(0.3)
(387.2)
922.5
(538.5)
(2.0)
(3.9)
(1.1)
(157.5)
219.5
15.7
33.5
49.2
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
58
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 2023. The Group is domiciled in Australia and its registered
address is Level 18, 101 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 $65.0 million as at 30 June 2023 (30 June 2022: $119.3 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 $300.0 million (30 June 2022: $353.5 million) which can be drawn at short notice to meet its current obligations as they fall due.
The Group has sufficient working capital and cashflows in order to fund all requirements arising from the net current asset deficiency.
Accordingly, the Financial Report has been prepared on a going concern basis.
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 (Cth). 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 17 August 2023.
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, business combination variable consideration classified as trade and other liabilities, 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.
59
1.1 Basis of preparation (continued)
Critical accounting 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 2.3 – Investment properties;
õ Note 2.8 – Intangible assets;
õ Note 3.4 – Derivative financial instruments; and
õ Note 3.5 – Financial instrument fair value hierarchy.
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 2023 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 AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 60
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.
The amount of revenue recognised in each period is based on the delivery of performance obligations and when control has been
transferred to customers in accordance with the principles set out in AASB 15. Where the Group enters into contracts with multiple service
components, judgement is applied to determine whether the components are:
i) distinct – accounted for as separate performance obligations;
ii) not distinct – combined with other promised services until a distinct bundle is identified; or
iii) part of a series of distinct services that are substantially the same and have the same pattern of transfer to the customer
For each performance obligation identified, it is determined whether revenue is recognised at a point in time or over time.
Revenue is recognised over time if:
i)
the customer simultaneously receives and consumes the benefits provided over the life of a contract as the services are performed;
ii) the customer controls the asset that the Group is creating or enhancing; or
iii) the Group’s performance does not create an asset with an alternative use to the Group and has an enforceable right to payment for
performance completed to date.
At contract inception, the Group estimates the consideration to which it expects to be entitled and has rights to receive under the
contract. Variable consideration, where the Group’s performance could result in further revenue, is only included to the extent that it is
highly probable that a significant reversal of revenue recognised will not occur. In assessing the amount of consideration to recognise,
key judgements and assumptions are made on a forward-looking basis where required. To the extent revenue has not been received at
reporting date, a receivable is recognised in the Consolidated Statement of Financial Position.
Fund management fees are received for performance obligations fulfilled over time with revenue recognised accordingly. Fund
management fees are determined in accordance with relevant agreements for each fund, generally based on the fund’s Gross Asset Value
(GAV) or loan amount for debt funds.
Accounting and Trustee fees are received for performance obligations fulfilled over time with revenue recognised accordingly, determined
in accordance with the relevant agreements for each fund.
Transaction fees and leasing fees are received for performance obligations fulfilled at a point in time with revenue recognised accordingly,
determined in accordance with the relevant agreements for each fund.
Notes to the Financial Statements. 61
2.1 Revenue and operating segment information (continued)
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 three operating segments, namely Industrial property investments, Office property investments and Funds management.
The primary measure of the Group’s property investment segments is net property income. The primary measure of performance of the
Group’s funds management segment is funds management revenue.
The Group’s FFO and operating segment results are reported monthly to the Group’s Managing Director, who is the chief operating
decision maker.
2023
2022
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
Funds management revenue
Total segment revenue
Unallocated items – FFO adjustments
Amortisation of incentives and leasing costs
Other expenses3
Distributions from investment in securities
Borrowing costs net of interest income4
Current income tax benefit / (expense)
FFO
Distributions
Weighted average securities on issue (m)
FFO per stapled security (cents)
Distribution per stapled security (cents)
82.7
14.9
97.6
(5.5)
(15.0)
190.4
24.7
215.1
(3.2)
(33.1)
77.1
178.8
273.1
39.6
312.7
(8.7)
(48.1)
255.9
7.6
263.5
39.3
(30.1)
8.4
(76.4)
0.1
204.8
162.6
764.4
26.8
21.4
84.3
13.4
97.7
(5.5)
(13.6)
78.6
–
170.5
254.8
23.4
193.9
(1.8)
(30.8)
36.8
291.6
(7.3)
(44.4)
161.3
239.9
–
–
78.6
161.3
239.9
33.0
(19.8)
7.7
(46.1)
(0.7)
214.0
160.6
771.8
27.7
20.8
1. Property expenses in FFO include $4.5 million (2022: $4.5 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 $8.5 million (2022: $7.6 million) that was not recoverable under the terms of certain leases.
3. Other expenses in FFO of $30.1 million (2022: $19.8 million) excludes $2.8 million (2022: $1.9 million) in discontinued and non-FFO project costs and $0.6 million expensed
for the Fortius Funds Management acquisition related retention rights, and includes $0.8 million (2022: $0.3 million) rent payments for the Group’s head offices at 101 Collins
St, Melbourne and 88 Phillip St, Sydney (2022: 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 $1.4 million (2022: $0.1 million) interest income and exclude the $4.0m (2022: $3.5 million) interest expense
associated with lease liabilities which is included on the Consolidated Statement of Comprehensive Income.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 62
Financial report
2.1 Revenue and operating segment information (continued)
Reconciliation of Profit after tax to FFO
(Loss)/Profit after tax
Adjustments for non-FFO items
- Straight line adjustment to property revenue
- Net loss/(gain) in fair value of investment properties
- Net loss in fair value of investment in securities
- Net loss/(gain) in fair value of derivatives
- Net loss on exchange rate translation of interest-bearing liabilities
- Amortisation of incentives and leasing costs
- Amortisation of intangible assets
- Goodwill impairment
- Deferred tax (benefit)/expense
- Other
FFO
2023
$m
(245.6)
(12.6)
388.4
6.2
1.1
14.8
39.3
1.7
8.8
(5.1)
7.8
2022
$m
459.2
(12.1)
(285.1)
32.7
(57.2)
31.5
33.0
-
-
7.2
4.8
204.8
214.0
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
2023
$m
312.7
12.6
325.3
2022
$m
291.6
12.1
303.7
Major customer
Revenues from Woolworths Group Limited, in the Group’s Industrial segment represents $35.7 million or 11.4% (2022: $38.9 million or
13.3%) of the Group’s property revenue from segments.
2.2 Business combination
Business combination
The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets
the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a
business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process
and whether the acquired set has the ability to produce outputs.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill
that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction
costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include
amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Any variable consideration is measured at fair value at the date of acquisition. Variable consideration is remeasured at fair value at each
reporting date and subsequent changes in the fair value of the variable consideration are recognised in profit or loss.
On 15 September 2022, the Group acquired 100% of the shares in Fortius Funds Management Pty Ltd. The acquisition involved a $45
million initial purchase price and subsequent $8.1 million net assets adjustment, paid in cash and funded from the Group’s existing debt
facilities.
Notes to the Financial Statements. 63
2.2 Business combination (continued)
As part of the purchase agreement, the Group agreed to pay the selling shareholders any performance fees earned from existing funds
during their current terms, net of any income tax expense. This earn-out component has been classified as variable consideration and
forms part of the total purchase consideration. The acquisition-date fair value of these fees was estimated at $4.1 million. Refer to note 3.5
Financial Instrument fair value hierarchy for the valuation method and fair value as at 30 June 2023.
As part of the purchase agreement, the Group agreed to pay the selling shareholders an additional earn-out component of up to $10
million, payable based on agreed milestones relating to funds under management (FUM) and funds management revenue growth targets
being met over the period to 30 June 2024. This earn-out component has been classified as compensation for post-combination services
and does not form part of the total purchase consideration.
Fortius was one of Australia’s leading privately-owned real estate funds management businesses with an established track record of
investing in Australian real estate markets and generating strong returns for its investors. Establishment of a funds management business
segment has been a key priority for the Group and this acquisition added $1.9 billion of FUM to the Group’s business as at the date of the
acquisition.
a) Total purchase consideration
The following table summarises the acquisition-date provisional fair value of each component of purchase consideration.
Cash – Initial purchase price
Cash – Net asset adjustment
Variable consideration – performance fee earn-out
Other consideration payable
Total purchase consideration
Notes
$m
45.0
8.1
4.1
0.3
57.5
A critical judgement was the classification of future variable components included in the purchase agreement as either variable purchase
consideration or compensation for post-combination services. Components that are contingent upon ongoing employee service
conditions being fulfilled have been classified as compensation for post-combination services and do not form part of the total purchase
consideration. Components that are not contingent upon ongoing employee service conditions being fulfilled have been classified as
variable consideration and are included as part of the total purchase consideration.
Critical judgements and estimates were made by the Group in assessing the fair value of the variable consideration. Refer Note 3.5 for
further information.
b) Identifiable assets acquired and liabilities assumed
The following table summarises the provisional fair value of net assets acquired at the date of acquisition:
Cash and cash equivalents
Investment in securities
Receivables and other assets
Intangible assets
Right of use assets
Plant and equipment
Current tax receivable
Lease liabilities
Net deferred tax liabilities
Trade and other liabilities
Total identifiable net assets acquired
Notes
2.4
2.5
2.8
2.6
$m
3.4
3.3
2.6
10.3
0.6
0.1
0.3
(0.8)
(1.9)
(1.4)
16.5
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
64
Financial report
2.2 Business combination (continued)
c) Goodwill
Goodwill arising from the acquisition has been recognised as follows:
Total purchase consideration
Fair value of identifiable net assets
Goodwill
Notes
(a)
(b)
2.8
$m
57.5
(16.5)
41.0
Goodwill is attributable to the funds management platform and investor base acquired, expected synergies from Growthpoint’s existing
management capabilities and the increased diversity of investment opportunities available to the Group and the funds’ investors. Goodwill
is not deductible for tax purposes.
d) Revenue and profit contribution
Fortius contributed revenue of $7.6 million and a net loss of $10.1 million to the Group, which includes goodwill impairment of $8.8 million
and amortisation of management rights of $1.7 million, for the period 15 September 2022 to 30 June 2023. If the acquisition had occurred
on 1 July 2022, total revenue for the Group, combining Growthpoint and Fortius, would have been $344.5 million and the net loss would
have been $246.4 million.
e) Acquisition-related costs
The Group incurred acquisition-related costs of $3.0 million relating to external investment bank advisory and legal fees as well as due
diligence costs. $2.0 million of these costs have been incurred in FY23, with the remaining $1.0 million incurred in FY22, and included in
‘other expenses’ in the Consolidated Statement of Comprehensive Income.
2.3 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.
Determination of fair value
The fair value of the investment properties is determined either solely by Director 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. Every property is valued externally at least once every financial year.
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.
Notes to the Financial Statements. 65
2.3 Investment properties (continued)
Determination of fair value (continued)
Latest external valuation
Carrying amounts
Industrial properties
Date Valuation
Victoria
3 Maker Place
Truganina
1500 Ferntree Gully Road & 8 Henderson Road
Knoxfield
9-11 Drake Boulevard
Lots 2, 3 & 4, 34-44 Raglan Street
120-132 Atlantic Drive
40 Annandale Road1
20 Southern Court
120 Link Road1
130 Sharps Road1
31 Garden Street
3 Millennium Court
6 Kingston Park Court
19 Southern Court
101-111 South Centre Road1
60 Annandale Road1
75 Annandale Road1
Queensland
70 Distribution Street
13 Business Street
5 Viola Place1
3 Viola Place1
Western Australia
20 Colquhoun Road
2 Hugh Edwards Drive
58 Tarlton Crescent
10 Hugh Edwards Drive
36 Tarlton Crescent
New South Wales
27-49 Lenore Drive
6-7 John Morphett Place
51-65 Lenore Drive
34 Reddalls Road
81 Derby Street
South Australia
599 Main North Road
1-3 Pope Court
12-16 Butler Boulevard1
10 Butler Boulevard1
Total industrial properties
1. Held under leasehold.
Altona
Preston
Keysborough
Melbourne Airport
Keysborough
Melbourne Airport
Melbourne Airport
Kilsyth
Knoxfield
Knoxfield
Keysborough
Melbourne Airport
Melbourne Airport
Melbourne Airport
Larapinta
Yatala
Brisbane Airport
Brisbane Airport
Perth Airport
Perth Airport
Perth Airport
Perth Airport
Perth Airport
Erskine Park
Erskine Park
Erskine Park
Kembla Grange
Silverwater
Gepps Cross
Beverley
Adelaide Airport
Adelaide Airport
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
NSW
NSW
NSW
NSW
NSW
SA
SA
SA
SA
$m
66.5
60.0
60.0
53.8
45.5
44.4
28.0
28.7
27.4
22.0
19.8
18.8
16.3
15.5
15.0
12.1
30-Jun-23
31-Dec-22
30-Jun-23
31-Dec-22
30-Jun-23
30-Jun-23
31-Dec-22
30-Jun-23
30-Jun-23
30-Jun-23
30-Jun-23
30-Jun-23
31-Dec-22
30-Jun-23
30-Jun-23
30-Jun-23
2023
$m
2022
$m
66.5
60.0
60.0
54.3
45.5
44.4
29.3
28.7
27.4
22.0
19.8
18.8
16.1
15.5
15.0
12.1
70.3
61.8
58.5
55.3
45.0
43.4
24.5
25.2
24.7
17.3
19.3
18.0
14.9
13.4
14.0
10.4
31-Dec-22
260.0
255.0
255.0
31-Dec-22
31-Dec-22
31-Dec-22
18.3
14.3
4.5
18.6
13.4
4.2
18.2
14.2
3.6
30-Jun-23
216.0
216.0
225.0
30-Jun-23
30-Jun-23
30-Jun-23
30-Jun-23
31-Dec-22
30-Jun-23
31-Dec-22
30-Jun-23
31-Dec-22
24.3
20.8
14.0
11.3
111.0
82.8
48.0
38.5
32.5
24.3
20.8
14.0
11.3
24.3
19.8
14.6
11.7
107.5
106.5
82.8
46.5
38.5
32.8
79.5
48.0
39.0
32.5
30-Jun-23
216.0
216.0
245.0
30-Jun-23
31-Dec-22
31-Dec-22
30.5
25.0
13.7
30.5
23.7
12.4
31.0
25.0
13.1
1,715.2
1,703.5
1,721.7
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
66
Financial report
2.3 Investment properties (continued)
Determination of fair value (continued)
Latest external valuation
Carrying amounts
Office properties
Date Valuation
Victoria
75 Dorcas Street
Building 3, 570 Swan Street
165-169 Thomas Street1
Building 2, 572-576 Swan Street
109 Burwood Road
141 Camberwell 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 Street2
104 Melbourne Street
32 Cordelia Street
52 Merivale Street
100 Melbourne Street
South Melbourne
Richmond
VIC
VIC
Dandenong VIC
Richmond
Hawthorn
Hawthorn East
Mulgrave
Richmond
Mulgrave
Richmond
Newstead
Fortitude Valley
Brisbane
South Brisbane
South Brisbane
South Brisbane
South Brisbane
VIC
VIC
VIC
VIC
VIC
VIC
VIC
QLD
QLD
QLD
QLD
QLD
QLD
QLD
QLD
$m
275.0
199.0
153.5
125.0
116.5
111.0
80.0
72.0
54.5
0.9
227.5
130.0
N/A
86.5
84.5
73.0
51.5
33.5
30-Jun-23
31-Dec-22
30-Jun-23
30-Jun-23
30-Jun-23
30-Jun-23
30-Jun-23
30-Jun-23
31-Dec-22
31-Dec-22
30-Jun-23
30-Jun-23
N/A
30-Jun-23
31-Dec-22
30-Jun-23
30-Jun-23
31-Dec-22
2023
$m
275.0
190.0
153.5
125.0
116.5
111.0
80.0
72.0
53.0
0.7
227.5
130.0
N/A
86.5
80.5
73.0
51.5
35.8
2022
$m
292.0
203.0
N/A
131.6
124.2
123.0
84.0
82.7
58.2
0.9
242.5
147.0
140.0
99.0
90.0
88.5
61.8
32.0
Car Park, 32 Cordelia Street & 52 Merivale Street South Brisbane
South Australia
33-39 Richmond Road
New South Wales
1 Charles Street
Building C, 219-247 Pacific Highway
3 Murray Rose Avenue
5 Murray Rose Avenue
11 Murray Rose Avenue
Australian Capital Territory
2-6 Bowes Street
255 London Circuit
10-12 Mort Street
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. Acquired in July 2022.
2. Divested in January 2023.
Keswick
SA
30-Jun-23
71.0
71.0
78.5
Parramatta
Artarmon
NSW
NSW
30-Jun-23
31-Dec-22
Sydney Olympic Park NSW
30-Jun-23
Sydney Olympic Park NSW
31-Dec-22
Sydney Olympic Park NSW
30-Jun-23
Canberra
Canberra
Canberra
ACT
ACT
ACT
31-Dec-22
31-Dec-22
30-Jun-23
500.0
145.5
98.4
85.0
49.0
83.1
76.5
74.0
500.0
142.0
98.4
81.6
49.0
79.0
74.5
74.0
555.0
146.0
116.0
106.0
53.8
84.6
82.5
90.0
West Perth
WA
31-Dec-22
96.5
3,152.7
92.0
104.0
3,122.7
3,416.6
4,867.9
4,826.2
5,138.3
91.0
94.8
4,917.2
5,233.1
Notes to the Financial Statements.
67
2.3 Investment properties (continued)
Valuation process
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 Any individual external valuer 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 2023, 36 investment properties representing approximately 69% (by value) of the portfolio were independently valued by
external valuers at eight valuation firms being JLL, Savills, Knight Frank, m3property, CBRE, Cushman & Wakefield, Colliers and Urbis. Fair
values for the remaining 22 investment properties were based solely on Director internal valuations.
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
2023
2022
6.0%-7.3%
4.8%-11.0%
4.5%-7.5%
5-10 months
2.8%-3.9%
5.3%-6.5%
4.0%-9.8%
4.0%-7.0%
4-9 months
2.5%-3.5%
2023
2022
5.8%-7.3%
4.9%-7.1%
4.3%-6.8%
6-18 months
2.5%-3.7%
5.5%-6.5%
4.1%-6.5%
3.8%-6.8%
6-18 months
2.2%-3.7%
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 68
Financial report
2.3 Investment properties (continued)
Discount Rates
As shown in the table below, over the twelve months to 30 June 2023 discount rates utilised in the valuation of the Group’s property
portfolio increased by approximately 55 basis points. Over the same time period, the implied property risk premium increased by
approximately 18 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 increase in the implied property risk premium is largely due to discount rates expanding at
a greater rate relative to 10-year Australian Government bond yields.
10-year Australian Government bond rate
Implied property risk premium
Weighted average 10-year discount rate used to value the Group’s properties
Capitalisation Rates1
Office
2023
4.03%
2.36%
6.39%
2022
3.66%
2.18%
5.84%
Office investment sales activity slowed in FY23, particularly in the second half of the year. A total of $9.4 billion of sales were recorded
nationally over the year to 30 June 2023 (1H $7.4 billion, 2H $2.0 billion) compared to $17.8 billion in FY22. Buyers remained selective
while owners remained reluctant to divest assets with a low volume of assets brought to market over the year. Noteworthy deals included
Dexus’s sales of 44 Market Street, Sydney, to an overseas purchaser for $393 million, and 8 Nicholson Street, Melbourne to a local
syndicator for $214 million. Investment yields expanded over the course of the year as investors adjust return expectations in response to
higher debt costs and elevated long-term bond yields. The weighted average capitalisation rate used to value the Group’s office portfolio
softened 52 basis points to 5.66% over the 12 months to 30 June 2023.
Industrial
Industrial and logistics investment sale volumes were notably subdued in FY23, particularly over the last six months of the year amid a
lack of stock on market, coupled with higher bond yields and continued rising cost of debt. A total of $5.6 billion of sales were recorded
nationally over the year to 30 June 2023 (1H $3.5 billion, 2H $2.1 billion) compared to $14.4 billion in FY22. Short WALE and value add
opportunities were more keenly sought after, as a means for capturing short-term rental growth. Foreign backed capital remained strong
with offshore purchasers accounting for a high proportion of sales. Significant transactions included Dexus’s sale of Axxess Corporate
Park in Melbourne to a foreign investor for $306 million, while GPT Group sold a business park portfolio in NSW and VIC for $261 million.
Investment yields continued to expand over the year in response to higher costs of capital. The weighted average capitalisation rate used
to value the Group’s industrial portfolio softened 67 basis points to 5.39% over the 12 months to 30 June 2023.
Estimation of fair value
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.
1. Transaction volume figures sourced from Cushman & Wakefield.
Notes to the Financial Statements. 69
2.3 Investment properties (continued)
Estimation of fair value (continued)
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
Market
capitalisation
rate
Net market rent
(per sqm)
Discount rate
Description
The rate at which the net market rental income is
capitalised to determine the value of the property. The
rate is determined with regard to market evidence
and the prior external valuation. Used within the
capitalisation method.
The estimated amount for which a property, or space
within a property, should lease between a lessor and
a lessee on appropriate lease terms in an arm’s length
transaction. Used within both the capitalisation method
and DCF method.
The rate of return used to discount cash flows, payable
or receivable in the future, into present value. The rate
is determined with regard to market evidence and the
prior external valuation. Used within the DCF method.
Terminal
capitalisation
rate
The terminal capitalisation rate used to convert
(capitalise) the future net market rental income at the
end of the holding period into an indication of terminal
value of the property. Used in the DCF method.
Valuation input value
Impact on fair values
Jun-23
Jun-22
Increase
in the input
Decrease in
the input
5.6%
5.0%
Decrease
Increase
$271
$249
Increase
Decrease
6.4%
5.8%
Decrease
Increase
6.0%
5.4%
Decrease
Increase
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.
Contractual obligations
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 2023, $4.1 million of refurbishment works had been carried out, leaving
a balance of $1.9 million which is held as restricted cash (refer note 2.7). As part of the lease arrangements with the tenant in 2020, 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. As at 30 June 2023, the Group has made $4.7 million of contributions. 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 which ends in 2044.
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
2023
$m
263.8
771.4
1,003.6
2,038.8
2022
$m
257.2
793.8
975.4
2,026.4
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.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
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Financial report
2.3 Investment properties (continued)
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
Net movement in ground leases as leasehold asset
Net (loss)/gain from fair value adjustments
Closing balance
2.4 Investment in securities
2023
$m
2022
$m
5,233.1
4,619.6
181.8
22.1
29.5
(39.3)
(130.4)
12.6
(3.8)
(388.4)
4,917.2
297.0
20.7
35.4
(33.0)
–
12.1
(3.8)
285.1
5,233.1
The Group’s investments in securities consists of minority equity interests in listed Dexus Industria REIT and co-investments in Fortius
managed property funds. Financial assets are initially recognised at cost, excluding transaction costs. Transaction costs are expensed
as incurred in the Consolidated Statement of Comprehensive Income. Financial assets are subsequently measured at fair value with any
realised or unrealised gains being recognised in the Consolidated Statement of Comprehensive Income in the period in which they arise.
Accounted for at fair value through profit and loss
Listed
Dexus Industria REIT1
Unlisted
Co-investments in Fortius Funds2
Closing Balance
2023
$m
126.5
3.0
129.5
The following table represents the fair value movement in investments in securities for the year ended 30 June 2023.
Opening balance
Acquisitions
Disposals
Loss in fair value
Closing balance
2023
$m
132.4
4.4
(1.1)
(6.2)
129.5
2022
$m
132.4
–
132.4
2022
$m
104.8
60.3
–
(32.7)
132.4
1. Fair value is at the last traded market price on the Australian Securities Exchange (ASX) as at the reporting date, which as at 30 June 2023 was $2.58 (30 June 2022: $2.70).
2. The fair value per security is the unit price for each fund, representing net asset value per unit as at 30 June 2023.
Notes to the Financial Statements. 71
2.5 Receivables and other assets
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.
As at 30 June 2023, the Group had $1.1 million in property revenue receivables outstanding (30 June 2022: $2.6 million).
Of the current property revenue receivables balance not subject to COVID-19 deferrals, $0.8 million was more than 30 days past its due
date (30 June 2022: $0.8 million). As at 30 June 2023, the Group maintained $0.2 million allowance for expected credit losses (ECL) (30
June 2022: $0.2 million). During FY23 the Group incurred negligible credit losses (30 June 2022: $0.1 million).
Receivables and other assets are presented as follows:
Current
Property revenue receivables
Property revenue receivables (COVID-19 deferrals)
Allowance for expected credit losses
Disposal of investment property retention receivable1
Distribution receivables
Prepayments
Contract asset receivables – performance fees
Non-Current
Deposit and acquisition costs for investment property
2023
$m
1.3
–
(0.2)
3.5
2.0
3.6
0.6
10.8
–
–
2022
$m
1.9
0.9
(0.2)
–
2.1
2.5
–
7.2
16.7
16.7
1. This retention is held in escrow as security against a breach of seller warranties in accordance with the contract of sale for 333 Ann St, Brisbane. The retention is due to be
released on 17 September 2023.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
72
Financial report
2.6 Trade and other liabilities
Trade and other liabilities are for goods and services provided to the Group prior to the end of the reporting period which are unpaid. The
amounts are unsecured and are usually paid within 30 days of recognition. Trade and other liabilities are initially recognised at fair value,
Business combination variable consideration is
net of transaction costs incurred and are subsequently measured at amortised cost.
measured at the date of acquisition and re-measured in line with the business combination accounting policy.
Trade and other liabilities are presented as follows:
2023
2022
Current
Trade payables
Employee entitlements
GST payable
Accrued expenses - other
Unearned income
Other liability1
Business combination variable consideration – performance fees
2.7 Cash flow information
Reconciliation of (loss)/profit after tax to net cash inflow from operating activities
(Loss)/profit after tax
Net loss/(gain) in fair value of investment properties
Net loss on exchange rate translation of interest-bearing liabilities
Net loss in fair value on sale of investment properties
Net loss in fair value of investment in securities
Net loss/(gain) in fair value of derivatives
Amortisation of borrowing costs
Depreciation of right of use assets
Depreciation of plant and equipment
Share based payments expense
Amortisation of intangible assets
Impairment of goodwill
Change in operating assets and liabilities:
– Decrease/(increase) in lease incentives and leasing costs
– Increase in receivables
– Decrease/(increase) in prepayments
– (Decrease)/increase in net deferred tax liabilities
– (Decrease)/increase in payables
Net cash inflow from operating activities
$m
1.9
2.7
2.4
17.5
18.4
1.1
2.7
46.7
2023
$m
(245.6)
388.4
14.8
0.6
6.2
1.1
2.1
4.5
0.6
2.7
1.7
8.8
10.0
(11.0)
1.6
(5.4)
(5.1)
176.0
$m
0.7
1.3
1.5
19.4
22.1
1.1
–
46.1
2022
$m
459.2
(285.1)
31.5
–
32.7
(57.2)
0.1
3.9
0.2
1.9
–
–
(2.4)
(8.0)
(6.8)
7.2
6.2
183.4
The Group held $3.0 million of restricted cash in trust as at 30 June 2023 (30 June 2022: $3.0 million) in relation to its role as custodian
of the Charles Street Property Trust. The balance comprises $1.9 million of the Group’s own cash along with $1.1 million received from a
tenant. These funds are not available for general use by the Group.
1. The other liability of $1.1 million is an amount of cash received by a tenant which is required to be used to fund capital expenditure by the Company as the custodian of the
Charles Street Property Trust in relation to that tenancy. The amount held is classified as restricted cash (Refer to Note 2.7).
Notes to the Financial Statements.
73
2.8 Intangible assets
Management rights
Management rights – base fees intangible assets, that are acquired by the Group and have finite useful lives, are initially measured at
fair value and then subsequently measured at initial value less accumulated amortisation and any accumulated impairment losses.
Management rights – base fees are classified as current where the funds are expected to crystallise within 12 months.
Management rights - performance fees intangible assets acquired by the Group as part of the Fortius acquisition, for which there is a
contractual obligation to forward any performance fee earned on existing funds during their current terms to the Fortius vendors net of
income tax, have finite useful lives are measured at fair value less any accumulated impairment losses. Management rights – performance
fees are classified as current where the funds are expected to crystallise within 12 months.
Amortisation is calculated to expense the cost of intangible assets using the straight-line method over their estimated useful lives and is
generally recognised in profit or loss. The estimated useful lives are calculated in line with the expected exit dates of each respective fund,
which range from acquisition date through to April 2027. Amortisation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if not appropriate.
Goodwill
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.
At each reporting date, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows of other assets or cash generating units (CGUs). Goodwill arising from a business combination
is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based
on the estimated future cash flows, discounted to their present value using a discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset
or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
Intangible assets are presented as follows:
Current
Management rights – base fees
Management rights – performance fees
Non-current
Management rights – base fees
Goodwill
2023
$m
1.2
3.3
4.5
1.5
32.2
33.7
2022
$m
–
–
–
–
–
–
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
74
Financial report
2.8 Intangible assets (continued)
The following table represents the movement in intangible assets for the year ended 30 June 2023:
Management rights – base fees
Opening balance
Acquisition through business combination
Amortisation
Closing balance
Management rights – performance fees
Opening balance
Acquisition through business combination
Impairment
Closing balance
Goodwill
Opening balance
Acquisition through business combination
Impairment
Closing balance
2023
$m
–
4.4
(1.7)
2.7
–
5.9
(2.6)
3.3
–
41.0
(8.8)
32.2
2022
$m
–
–
–
–
–
–
–
–
–
–
–
–
Funds Management CGU – goodwill impairment assessment
Goodwill was attributed to the Group’s Funds Management business as a single CGU. The goodwill carrying amount was tested for
impairment as at 30 June 2023.
The carrying amount of assets attributable to the Funds Management CGU comprised goodwill of $41.0 million, management rights –
base fees of $2.7 million and other net working capital of $3.1 million, totalling $46.8m.
The recoverable value of the Funds Management CGU was a value-in-use assessment of the five-year forecast of cash flows expected to
be generated from the CGU and a Gordon Growth Model perpetuity growth rate, discounted to net present value (NPV).
The recoverable amount assessed of $38.0 million was lower than the carrying amount of $46.8 million, therefore an impairment of $8.8
million was recognised at 30 June 2023. This impairment primarily resulted from an increase in the risk-free rate within the discount rate
and changed economic conditions affecting the funds management sector since acquisition.
Components of impairment recognised
Impairment from goodwill
Impairment management rights – performance fee intangibles
Corresponding reduction to business combination variable consideration
– performance fees and associated deferred tax liabilities
Net impairment
2023
$m
8.8
2.6
(2.6)
8.8
Notes to the Financial Statements.
75
2.8 Intangible assets (continued)
Key valuation assumptions
The key assumptions used by management in the estimation of the recoverable amount are set out below:
Input value
Impact on Value-in-use
Key valuation
assumption
Discount rate
Perpetuity
growth rate
Description
Jun-23
Jun-22
The rate of return used to discount forecast cash
flows into present value. The rate is determined
with regard to market evidence, comprising the
prevailing risk-free rate and a typical risk premium
for a funds management business
The perpetuity growth rate is incorporated into
the Gordon Growth Model formula to estimate the
terminal value. The rate is based on the Reserve
Bank of Australia’s long term target inflation range.
12.5%
2.5%
–
–
Increase
in the input
Decrease in
the input
Decrease
Increase
Increase
Decrease
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 76
Financial report
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-Jul-22
Net cash
(repayments)/
drawdowns of
borrowings
Foreign exchange
rate adjustments
recognised in
profit or loss
Closing
balance
30-Jun-23
Facility
limit
Facility
headroom Maturity
$m
$m
$m
$m
$m
$m
40.0
40.0
40.0
100.0
245.0
70.0
150.0
150.0
–
–
–
–
75.0
75.0
75.0
71.5
–
–
–
200.0
100.0
145.5
58.0
26.0
167.0
(40.0)
(40.0)
(40.0)
–
–
–
–
–
75.0
75.0
–
–
–
–
–
3.5
50.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.8
2.3
–
6.7
–
–
–
100.0
245.0
70.0
150.0
150.0
75.0
75.0
–
–
75.0
75.0
75.0
75.0
50.0
–
–
200.0
100.0
151.3
60.3
26.0
173.7
–
–
100.0
245.0
70.0
150.0
150.0
75.0
75.0
50.0
50.0
75.0
75.0
75.0
75.0
50.0
100.0
100.0
200.0
100.0
151.3
60.3
26.0
173.7
–
–
–
–
–
–
–
–
–
Dec-22
Mar–26
Dec–26
Dec–26
Jun–26
Sep–26
Dec–24
Dec–24
50.0 May–25
50.0 May–27
–
–
–
–
–
100.0
100.0
–
–
–
–
–
Nov–25
Nov–25
Apr–27
Apr–27
Apr–27
Apr–28
Nov–27
Mar–25
Dec–26
Jun–27
Jun–29
Jun–29
– May–29
Secured loans
Current
Floating bank facility 1
Total current loans
Carrying amount - Current
Non-current
Syndicated bank facility
– Facility B
– Facility C
– Facility D
– Facility E
– Facility G
– Facility H
– Facility I
– Facility K
– Facility L
– Facility M
– Facility N
– Facility O
– Facility P
– Facility Q
Floating bank facility 2
Floating bank facility 3
Loan note 1
Loan note 2
USPP 1 (USD 100.0m)1
USPP 2 (USD 40.0m)1
USPP 3 (AUD 26.0m)
USPP 4 (USD 115.0m)1
1. USD denominated debt closing balance and facility limits are reported in AUD at the 30 June 2023 spot rate of 0.66 (30 June 2022: 0.69).
Notes to the Financial Statements. 77
3.1 Interest bearing liabilities (continued)
Secured loans
Total non-current loans
Less unamortised up-front costs
Opening
balance
1-Jul-22
$m
1,708.0
(8.0)
Carrying amount – non-current
1,700.0
Total loans
1,748.0
Less: unamortised up-front costs
(8.0)
Total carrying amount
1,740.0
Movement during period
Net cash
(repayments)/
drawdowns of
borrowings
Foreign exchange
rate adjustments
recognised in
profit or loss
Closing
balance
30-Jun-23
Facility
limit
Facility
headroom Maturity
$m
203.5
0.4
203.9
163.5
0.4
163.9
$m
$m
$m
$m
14.8
1,926.3
2,226.3
300.0
–
(7.6)
14.8
1,918.7
14.8
1,926.3
2,226.3
300.0
–
(7.6)
14.8
1,918.7
The Group made the following changes to interest bearing liabilities during the year:
õ
õ
õ
õ
In September 2022, the Group established Floating bank facility 2, of $100 million, with 5.5 year tenor at current market pricing.
In November 2022, the Group established Floating bank facility 3, of $100 million, with 5 year tenor at current market pricing.
In December 2022, Floating bank facility 1 of $90 million matured and the drawn amount of $40 million was repaid on maturity date.
In June 2023, the Group converted $520 million of existing debt facilities into a sustainability linked loan with interest margin reductions
tied to the achievement of predetermined sustainability Key Performance Indicators (KPIs) and targets.
The weighted average all-in interest rate on interest bearing liabilities (including bank margin and amortisation of upfront fees paid) at
30 June 2023 was 4.55% per annum (30 June 2022: 3.38% per annum). Refer to note 3.4 for details on interest rate and cross currency
swaps.
Fair value
As at 30 June 2023, the Group’s interest-bearing liabilities had a fair value of $1,838.7 million (2022: $1,639.2 million).
The carrying amount of these interest-bearing liabilities was $1,918.7 million (2022: $1,740.0 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 bonds repayable by the Group are secured by first ranking mortgages over the Group’s real
property interests, including those classified as investment properties.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 78
Financial report
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
Amortisation of borrowing costs
Interest expense on lease liabilities
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
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
2023
$m
75.7
2.1
4.0
81.8
2023
$m
4.8
26.2
135.3
166.3
1.0
2.3
3.3
5.8
28.5
135.3
169.6
2022
$m
44.5
1.6
3.6
49.7
2022
$m
4.6
25.5
140.9
171.0
0.1
–
0.1
4.7
25.5
140.9
171.1
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.
Notes to the Financial Statements.
3.4 Derivative financial instruments (continued)
Derivative financial instruments
Derivative financial instruments can be analysed as follows:
Derivative financial instrument contracts
Total current derivative financial instrument assets
Total non-current derivative financial instrument assets
Total non-current derivative financial instrument liabilities
79
2023
$m
1.3
56.4
–
57.7
2022
$m
–
59.1
(0.3)
58.8
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 2023 covered 59% (30 June 2022: 31%) of the floating rate loan principal outstanding. With total fixed interest rate debt of
$1,357.5 million outstanding as at 30 June 2023 (30 June 2022: $1,069.4 million), the total fixed interest rate coverage of outstanding
principal is 70% (30 June 2022: 61%).
The average fixed interest rate of interest rate swaps at 30 June 2023 was 2.07% per annum (30 June 2022: 1.33% per annum) and the
variable interest rate (excluding bank margin) is 4.11% per annum (30 June 2022: 1.13% per annum) at balance date. See table below for
further details of interest rate swaps in effect at 30 June 2023:
Counter Party
Amount of Swap
Swap Expiry
Fixed Rate
Term to Maturity
Interest rate swaps
NAB
WBC
ANZ
WBC
NAB
ANZ
ANZ
ANZ
NAB
NAB
ANZ
WBC
NAB
WBC
ANZ
WBC
ANZ
NAB
ANZ
ANZ
CBA
Total / Weighted average
$m
20.0
15.0
25.0
75.0
25.0
100.0
100.0
50.0
35.0
25.0
20.0
15.0
30.0
30.0
25.0
35.0
50.0
20.0
30.0
60.0
35.0
820.0
Dec-23
Dec-23
Feb-24
Sep-24
Sep-24
Jun-25
Jun-25
Dec-25
Dec-25
Jun-26
Jun-26
Jun-26
Sep-26
Oct-26
Dec-26
Feb-27
Mar-27
Mar-27
Mar-27
Sep-27
Feb-29
%
0.22
0.21
0.22
0.50
0.44
0.60
1.29
3.51
1.48
4.08
3.73
3.72
3.55
3.59
3.20
3.41
2.08
3.50
3.40
3.57
2.29
2.07
Years
0.5
0.5
0.6
1.2
1.2
2.0
2.0
2.5
2.5
3.0
3.0
3.0
3.2
3.3
3.5
3.6
3.7
3.7
3.7
4.2
5.7
2.6
These contracts are settled on a net basis with the counterparty monthly. The settlement dates generally coincide with the dates on which
interest is payable on the underlying debt.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
80
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3.4 Derivative financial instruments (continued)
Instruments used by the Group (continued)
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.
Cross currency swap
The cross-currency swap hedges the quarterly coupon payments from a USD denominated principal at a fixed interest rate into an AUD
denominated principal exposed to BBSW plus a fixed margin. The USD denominated principal repayment at expiry is swapped for a fixed
AUD amount.
Counter Party
Amount of
Swap
Swap Expiry
Fixed Rate
3 months
BBSW+
Cross currency interest rate swaps
NAB
WBC
ANZ
CBA
NAB
WBC
ANZ
CBA
Cross currency swap
WBC
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
%
–
–
–
–
–
–
–
–
6.14
6.14
Term to
Maturity
Years
4.0
4.0
4.0
4.0
6.0
6.0
6.0
6.0
5.9
5.2
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).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
30 June 2023
Investment in securities
Derivative financial assets
Business combination variable consideration
30 June 2022
Investment in securities
Derivative financial assets
Derivative financial liabilities
Level 1
$m
126.5
–
–
126.5
132.4
–
–
132.4
Level 2
$m
Level 3
$m
–
57.7
–
57.7
–
59.1
(0.3)
58.8
3.0
–
(2.7)
0.3
–
–
–
–
Total
$m
129.5
57.7
(2.7)
184.5
132.4
59.1
(0.3)
191.2
Notes to the Financial Statements.
81
3.5 Financial instrument fair value hierarchy (continued)
Determination of fair value
Derivative financial assets and liabilities
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 and exchange rates for a substitute instrument at the measurement date.
Fair values reflect the credit risk of the instrument, the Group and counterparty when appropriate. Derivatives are classified as Level 2 on
the fair value hierarchy as the inputs used to determine fair value are observable market data but not quoted prices.
Investment in securities
Listed investments comprise the investment in Dexus Industria REIT (ASX: DXI). Fair value is at the last traded market price on the ASX as
at the reporting date. The Dexus Industria REIT investment has been classified as Level 1 in the fair value hierarchy as the inputs used to
determine fair value are quoted prices (unadjusted) in active markets for identical assets.
Unlisted investments comprise investments in unlisted property fund securities. They have been designated on initial recognition to be
treated at fair value through profit or loss. Movements in fair value during the period have been recognised in the consolidated statement
of comprehensive income. These assets have been acquired with the intention of being long-term investments. Where the assets in this
category are expected to be sold within 12 months, they are classified as current assets; otherwise they are classified as non-current.
The carrying amount of investments in securities held at fair value through profit and loss, which are investments in unlisted securities,
is determined by reference to the corresponding balance date unit price of the fund, which represents the net asset value attributable to
each unit. The net asset values are largely driven by the fair values of investment properties held by the funds. Each property is externally
valued at least annually. Recent arm’s length comparable transactions, if any, are taken into consideration. A change in the fair value of
investment properties results in a corresponding change in the fund’s unit price. The investments in unlisted funds have been classified as
Level 3 in the fair value hierarchy as the inputs for the assets are not based on observable market data.
Movement in investment in securities Level 3 fair value amounts
Opening balance
Additions (including from acquisition of business)
Disposals
Net movement from fair value adjustments
Closing balance
Business combination variable consideration
2023
$m
–
4.1
(0.9)
(0.2)
3.0
2022
$m
–
–
–
–
–
Performance fee earn-out liabilities from the Fortius Funds Management Share Sale Agreement are classified as variable consideration in
the business combination. They have been designated on initial recognition to be treated at fair value through profit or loss. Movements in
fair value during the period have been recognised in the consolidated statement of comprehensive income.
The fair value of the business combination variable consideration is classified as Level 3 in the fair value hierarchy based on the significant
unobservable inputs into the valuation techniques used.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 82
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3.5 Financial instrument fair value hierarchy (continued)
Key valuation inputs
The key inputs used to measure fair value of the business combination variable consideration held at fair value are disclosed below, along
with the directional impact an increase and decrease in the input has on fair values:
Impact on earn out liability fair values
Increase
in the input
Decrease
in the input
Increase
Decrease
Increase
Decrease
Decrease
Increase
2023
$m
–
4.1
0.6
(2.0)
2.7
2022
$m
–
–
_
–
–
Key valuation input
Description
Current property
valuation
Forecast fund
distributions
Discount rate
The fund’s current property valuation, used as proxy for the sale
price at expected exit date of the fund in the valuation cash flow,
has a significant influence on the performance fee outcome.
The forecast cashflow from fund distributions through to the
expected exit date of the fund, reflecting the net income of the
fund, primarily net property income from the underlying property,
offset by borrowing costs and any fund level expenses.
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 comparable acquisition fair value assessments.
Includes additional risk premium to allow for volatility in property
valuations and capitalisation rates over the remainder of each
fund’s expected term.
Movement in business combination variable consideration fair value amounts
Opening balance
Business combination variable consideration
Additional consideration corresponding to contract asset receivable
Fair value adjustments
Closing balance
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 2023 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 principal 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.
Notes to the Financial Statements. 83
3.6 Financial risk management (continued)
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, WBC, ANZ and CBA, which are
considered high quality financial institutions. At balance date, the fair value of these financial instruments is a net asset of the Group (refer
to Note 3.4).
The Group manages credit risk and the losses which could arise from default by ensuring that parties to contractual arrangements are of
an appropriate credit rating, or do not show a history of defaults. Cash at bank is held with a major Australian bank.
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 in accordance with the terms of the lease, subject to any applicable restrictions at law. 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 2.5 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 $1,215.0 million at balance date (2022: $1,051.5 million) and a cross currency swap with a principal amount of $161.0
million at balance date (2022: $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.
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
2023
$m
49.4
57.7
107.1
–
537.5
820.0
568.8
2022
$m
49.2
59.1
108.3
0.3
529.4
540.0
678.6
1,926.3
1,748.3
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84
Financial report
3.6 Financial risk management (continued)
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 uses interest rate swaps whereby the Group agrees with a bank to exchange at specified intervals, the difference between
fixed rate and floating rate interest amounts calculated by reference to an agreed notional principal amount. Any amounts paid or received
relating to interest rate swaps are recognised as adjustments to interest expense over the life of each swap contract, thereby adjusting the
effective interest rate on the underlying obligations.
Derivative financial instruments – cross currency swaps
The Group is exposed to financial risk from the movement in foreign exchange rates based on its USD $255.0 million 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 2023, 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)
2023
$m
(5.1)
18.8
(9.1)
4.6
5.1
(19.5)
9.7
(4.7)
2022
$m
(6.2)
15.0
(10.9)
(2.1)
6.2
(15.6)
11.7
2.3
These fair value gains or losses would be unrealised and non-cash unless the interest rate swaps were closed or sold.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its obligations in relation to investment activities or other operations of the
Group. The Group manages its liquidity risk by ensuring that on a daily basis there is sufficient cash on hand or available loan facilities
to meet the contractual obligations of financial liabilities as they fall due. The Board sets budgets to monitor cash flows. In addition, the
Company, as an Australian Financial Services Licensee, is required to prepare a rolling 12-month cashflow projection for approval by the
Directors. As at the balance date, the Group had cash and cash equivalents totalling $49.4 million (2022: $49.2 million) and undrawn debt
facilities of $300.0 million (2022: $353.5 million).
Notes to the Financial Statements.
85
3.6 Financial risk management (continued)
Maturities of financial liabilities
The maturity of financial liabilities (including trade and other payables, provision for distribution, provision for current tax payable, derivative
financial instruments and interest-bearing liabilities) at reporting date is shown below, based on the contractual terms of each liability in
place at reporting date. The amounts disclosed are based on undiscounted cash flows, including interest payments based on variable
rates at 30 June 2023.
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
2023
Non-derivative financial liabilities
Bank loans and Loan Notes
1,918.7
2,208.6
Lease liabilities
Trade and other liabilities
107.0
107.1
169.6
107.1
2,132.8
2,485.3
40.8
2.9
104.6
148.3
40.8
1,854.6
2.9
1.3
28.5
1.2
272.4
135.3
–
45.0
1,884.3
407.7
Derivative financial liabilities
Interest rate swaps used for hedging
2022
Non-derivative financial liabilities
–
–
–
–
–
–
Bank loans and Loan Notes
1,740.0
1,935.6
Lease liabilities
Trade and other liabilities
104.6
109.7
171.0
109.7
1,954.3
2,216.3
59.6
2.3
107.3
169.2
Derivative financial liabilities
Interest rate swaps used for hedging
0.3
0.3
10.0
10.0
0.8
0.8
–
–
18.9
2.3
1.3
22.5
0.8
0.8
–
–
–
–
1,596.4
25.5
1.1
1,623.0
8.4
8.4
260.7
140.9
-
401.6
–
–
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86
Financial report
3.7 Contributed equity and reserves
Contributed equity
Stapled securities are classified as equity. Costs directly attributable to the issue of stapled securities are recognised as a deduction from
equity, net of any tax effects.
Distributions and dividends
Provision is made for any distribution or dividend declared, determined or publicly recommended by the Directors on or before the end of
the period but not distributed at the balance date.
Contributed Equity
Contributed equity can be analysed as follows:
Opening balance at 1 July
2023
No. (m)
771.7
Securities issued through employee incentive plans
0.4
Securities bought back on market
Closing balance at 30 June
Ordinary stapled securities
2023
$m
2,046.5
–
(60.1)
2022
No. (m)
771.9
0.3
(0.5)
771.7
2022
$m
2,048.5
–
(2.0)
2,046.5
(18.4)
753.7
1,986.4
Ordinary stapled securities entitle the holder to vote at securityholder meetings in person or by proxy and to participate in dividends and
distributions in proportion to the number of stapled securities held, subject to being on the register at the relevant record date.
Distribution reinvestment plan
The Distribution Reinvestment Plan has remained suspended since the June 2018 distribution.
Capital risk management
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern, so that the Group can continue
to provide returns for Securityholders, 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, which was
completed in May 2023. At 30 June 2023, the Group had bought back and cancelled 19,304,879 ordinary stapled securities, representing
2.5% of the ordinary stapled securities on issue at the time of the announcement.
The Group holds an independent credit rating to aid it in accessing debt capital markets. In May 2023, 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 2023, the gearing ratio was 37.2% (30 June 2022: 31.6%). The gearing
ratios at 30 June 2023 and 30 June 2022 were calculated as follows:
Total interest-bearing liabilities less cash
Total assets less cash, right-of-use assets and intangibles
Gearing ratio
2023
$m
1,869.3
5,028 .6
37.2%
2022
$m
1,690.8
5,354.4
31.6%
Notes to the Financial Statements. 87
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 2022
Half year to 30 June 2023
Distributions
Total stapled
securities
Distributions
per stapled
security
$m
No. (m)
(cents)
82.0
766.0
10.7
80.6
753.7
10.7
Total distributions for the year ended 30 June 2023
162.6
21.4
Half year to 31 December 2021
Half year to 30 June 2022
Total distributions for the year ended 30 June 2022
3.9 Earnings per stapled security (EPS)
80.3
80.3
160.6
772.1
771.7
10.4
10.4
20.8
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.
(Loss) / Profit after tax of the Group
(Loss) / 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
2023
(245.6)
(229.2)
764.4
3.0
767.4
(32.1)
(32.1)
(30.0)
(30.0)
2022
459.2
461.6
771.8
2.3
774.1
59.5
59.3
59.8
59.6
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
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Financial report
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 page 43 of the Remuneration Report within the Directors’ Report.
At 30 June 2023, the Group had three security-based payment schemes in place (30 June 2022: two):
Deferred Short-term Incentive Performance Rights
Half of the Short-term Incentive (STI) Deferred Performance Rights granted to Executive Key Management Personnel (KMP) for STI plans
on foot (FY23 and prior) vest after one year and the other half after two years. Further details of this plan are reported on pages 34 to 38 of
the Remuneration Report.
Long-term Incentive Performance Rights
The Group has Long-term Incentive (LTI) Performance Rights plans in place for eligible employees. The plans are designed to align
participating 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 Human Resources Committee
and/or the Board. Details of the various LTI Plans in place, applicable performance measures, fair value calculation methodologies and
details are reported on pages 41 to 45 of the Remuneration Report.
Retention Rights
The Group granted Retention Rights to certain employees in August 2022, in relation to the Fortius Funds Management acquisition. The
vesting of rights is subject to successful completion of the acquisition and participants satisfying employment service conditions and
therefore is non-market based. No Retention Rights were provided to KMP.
Grant date
Vesting date
Security price at grant date
Fair value
Exercise price
Expected life (years)
Volatility
Risk free interest rate (per annum)
Distribution yield (per annum)
Tranche 1
Tranche 2
11-Aug-22
07-Jul-23
11-Aug-22
05-Jul-24
3.71
3.17
–
0.91
25
3.15
6.00
3.71
2.66
–
1.90
25
3.04
6.00
$
$
$
years
%
%
%
Notes to the Financial Statements.
89
3.10 Share-based payment arrangements (continued)
Retention Rights (continued)
The table below shows the movement in rights under each type of security-based payment scheme:
Rights outstanding at 30 June 2021
Rights granted
Rights lapsed
Rights vested to GOZ stapled securities1
Rights outstanding at 30 June 2022
Rights granted
Rights lapsed
Rights vested to GOZ stapled securities2
Rights outstanding at 30 June 2023
STI
Performance
Rights
LTI
Performance
Rights
Retention
Rights
No.
No.
182,515
211,951
(11,048)
(112,367)
271,051
1,797,383
820,610
(336,541)
(184,590)
2,096,862
No.
–
–
–
–
–
188,740
1,273,582
(72,484)
(170,600)
(416,880)
(265,157)
269,880
(19,602)
–
Total
No.
1,979,898
1,032,561
(347,589)
(296,957)
2,367,913
1,732,202
(508,966)
(435,757)
216,707
2,688,407
250,278
3,155,392
During the year, $2.7 million was expensed and recognised in the Company’s security-based payments reserve (2022: $1.9 million).
1. In October 2021, 184,590 rights under the FY19 LTI plans were converted to Growthpoint stapled securities with a total value of $778,970.
2. In September 2022, 265,157 rights under the FY20 LTI plans were converted to Growthpoint stapled securities with a total value of $829,941.
Growthpoint Properties AustraliaFY23 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. The Company and its wholly-owned controlled entities are in a tax consolidated group.
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.
Notes to the Financial Statements. 91
4.1 Income tax (continued)
Income tax expense
The tables below relate to income tax for the Group’s income tax paying entities.
(a) Income tax expense:
Current tax benefit / (expense)
Deferred tax benefit / (expense)
Income tax benefit / (expense) in the Statement of Comprehensive Income
2023
$m
0.1
5.0
5.1
2022
$m
(0.7)
(7.2)
(7.9)
(b) Reconciliation of accounting profit to prima facie tax at 30%, statutory income tax expense reported and current tax
expense:
(Loss) / profit before income tax expense
Less: Trust loss / (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:
Loss on sale
Impairment of goodwill
Non-deductible expenses
Long-term employee benefits
Short-term employee benefits
Non-deductible project expenses
Non-trade liabilities
Statutory income tax benefit / (expense)
Deferred tax benefit / (expense) (Refer section (d))
Current tax benefit / (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
2023
$m
(250.7)
218.3
(32.4)
9.7
(0.1)
(2.6)
(0.1)
(0.6)
(0.1)
(0.7)
(0.4)
5.1
5.0
0.1
2023
$m
(32.4)
5.1
(15.7%)
2022
$m
467.1
(443.7)
23.4
(7.0)
–
–
–
(0.4)
(0.2)
(0.3)
-
(7.9)
(7.2)
(0.7)
2022
$m
23.4
(7.9)
33.7%
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.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
92
Financial report
4.1 Income tax (continued)
Income tax expense (continued)
(c) (ii) Current income tax payable:
Income tax payable at beginning of financial year
Less: current tax refundable from acquisition
Less: income tax paid during the year
Add: Current tax expense
Current tax (receivable) / payable
(c) (iii) Deferred tax balances
Deferred tax assets (Growthpoint Properties Australia Limited and Fortius Funds Management Pty Ltd)
Deferred tax liabilities (Growthpoint Finance Pty Ltd)
Net deferred tax liabilities
As at 30 June 2023, the Company had franking credit balance of $9,083,813 (30 June 2022: $5,628,817).
(d) Reconciliation of deferred tax balances
2023
$m
0.4
(0.1)
(1.9)
–
(1.6)
2023
$m
0.6
(3.5)
(2.9)
2022
$m
0.2
–
(0.5)
0.7
0.4
2022
$m
1.6
(8.3)
(6.7)
Net deferred tax assets attributable to:
Right-of-use assets
Lease liability
Plant and equipment
Other accrued expenses
Short-term employee benefits
Co-investments
Non-trade payables
Intangible assets
Recognised tax losses
Other
Net deferred tax liabilities attributable to:
Interest-bearing liabilities
Derivative financial instruments
Recognised tax losses
Net total
Opening
balance
1 July 2022
Acquired
through
business
combination
Recognised in
profit or loss
Balance
30 June 2023
$m
–
–
0.1
0.1
0.8
–
0.4
–
–
0.2
1.6
0.7
(9.2)
0.2
(8.3)
(6.7)
$m
$m
$m
(0.2)
0.2
–
–
–
0.3
0.3
(2.5)
0.7
–
(1.2)
–
–
–
–
(1.2)
(0.7)
0.7
–
–
0.3
–
(0.3)
0.5
–
(0.3)
0.2
4.5
0.3
–
4.8
5.0
(0.9)
0.9
0.1
0.1
1.1
0.3
0.4
(2.0)
0.7
(0.1)
0.6
5.2
(8.9)
0.2
(3.5)
(2.9)
Notes to the Financial Statements.
93
4.1 Income tax (continued)
Income tax expense (continued)
(d) Reconciliation of deferred tax balances (continued)
Opening
balance
1 July 2021
Recognised in
profit or loss
Balance
30 June 2022
$m
(0.4)
0.5
0.1
0.1
0.5
0.3
-
1.1
(8.7)
8.1
-
(0.6)
0.5
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 liabilities
Derivative financial instruments
Recognised tax losses
Net total
4.2 Key Management Personnel (KMP) compensation
Short-term employee benefits
Other long-term employee benefits
Post-employment benefits
Security-based payments
$m
0.4
(0.5)
-
-
0.3
0.1
0.2
0.5
9.4
(17.3)
0.2
(7.7)
(7.2)
2023
$
$m
-
-
0.1
0.1
0.8
0.4
0.2
1.6
0.7
(9.2)
0.2
(8.3)
(6.7)
2022
$
5,321,685
5,159,699
53,443
181,178
1,536,729
7,093,035
73,132
165,414
1,510,116
6,908,361
Individual Directors’ and KMP compensation disclosures
Information regarding individual Directors’ and Executive 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.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
94
Financial report
4.2 Key Management Personnel (KMP) compensation (continued)
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:
2023
Securityholder
A. Fay
G. Tomlinson
D. Page AM
E. de Klerk
F. Marais
G. Jackson
J. Sukkar AM
M. Tierney
N. Sasse
P. Theocharides
T. Collyer
D. Andrews
M. Green
J. Jovanovski
Opening
securities
1 July
Securities
granted as
compensation
Acquired
securities
Disposed
securities
Holding at time
of cessation of
KMP
–
88,776
30,050
1,802,857
144,284
190,087
14,000
–
1,656,460
–
–
–
–
–
–
–
–
–
–
–
1,364,246
177,609
296,216
138,639
36,340
70,491
70,491
53,979
59,000
–
3,000
31,000
–
–
36,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(92,547)
–
–
–
88,776
–
–
144,284
–
–
–
–
–
–
–
–
–
Closing
securities
30 June1
59,000
–
33,050
1,833,857
–
190,087
50,000
–
1,656,460
–
1,541,855
274,160
209,130
90,319
During the year to 30 June 2023, a total of 372,570 stapled securities with a total value at the time of vesting of $1,108,140 were issued
to Executive KMP upon vesting of performance rights under employee incentive plans.
2022
Securityholder
G. Tomlinson
D. Page AM
E. de Klerk
F. Marais
G. Jackson
J. Sukkar AM
N. Sasse
T. Collyer
D. Andrews
M. Green
J. Jovanovski
Opening
securities
1 July
Securities
granted as
compensation
Acquired
securities
Disposed
securities
88,776
25,050
1,802,857
169,284
190,087
14,000
1,656,460
1,230,184
247,606
125,029
20,548
–
–
–
–
–
–
–
134,062
48,610
48,610
15,792
–
5,000
–
–
–
–
–
–
–
–
–
–
–
–
(25,000)
–
–
–
–
–
(35,000)
–
Closing
securities
30 June
88,776
30,050
1,802,857
144,284
190,087
14,000
1,656,460
1,364,246
296,216
138,639
36,340
During the year to 30 June 2022, a total of 247,074 stapled securities with a total value at the time of vesting of $951,635 were issued to
Executive KMP upon vesting of performance rights under employee incentive plans.
1. Active KMP only.
Notes to the Financial Statements. 95
4.2 Key Management Personnel (KMP) compensation (continued)
KMP loans
The Group has not made, guaranteed or secured, directly or indirectly, any loans to any KMP or their personally related entities at any time
during the reporting period.
4.3 Related party transactions
Responsible Entity
There has been no change to the Responsible Entity of the Trust, being the Company, since its appointment on 5 August 2009.
Responsible Entity’s/Manager’s fees and other transactions
Under the current stapled structure, the management of the Trust is internalised and no Responsible Entity or management fees are paid
to external parties. No performance fee or other fees were paid or payable during the year.
Director transactions
Several Directors, or their related parties, hold positions in other entities that result in them having control or significant influence over the
financial or operating policies of those entities.
One of these entities transacted with the Group in the reporting period. The terms and conditions of the transaction were no more
favourable than those available, or which might reasonably be expected to be available, on similar transactions with non-related parties on
an arm’s length basis.
The aggregate value of transactions and outstanding balances relating to directors and entities over which they have significant control or
significant influence were as follows:
Director
Transaction
G. Jackson1
G. Jackson1
Investment property valuation
Statutory and other valuation
2023
$
82,445
6,050
2022
$
30,525
32,835
Aggregate amounts payable at the reporting date
72,270
39,545
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 other than distributions with significant securityholders as at 30 June 2023 (2022: nil).
4.4 Contingent liabilities
The Group has no contingent liabilities as at the date of this report (2022: nil).
4.5 Commitments
For details of commitments in relation to investment properties refer Note 2.3.
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 (2022: nil).
1. The Group used the valuation services of m3property, a company of which Mr Grant Jackson is a director, to independently value sixteen properties (2022: 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.
Growthpoint Properties AustraliaFY23 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 during the year ended 30 June 2023 are listed below, all entities were domiciled in Australia.
õ 11 Murray Rose Avenue Trust
õ Fortius Asset Management Pty Ltd
õ Fortius Waterloo Pty Ltd
õ 1500 Ferntree Gully Road Property Trust
õ Fortius Barracks Pty Ltd
õ Growthpoint Developments Pty Ltd
õ 19 Southern Court Property Trust
õ Fortius Bourke Street Pty Limited
õ Growthpoint Finance Pty Ltd
õ 20 Southern Court Property Trust
õ Fortius Broadway No 1Pty Ltd
õ Growthpoint Funds Management
õ 211 Wellington Road Property Trust
õ Fortius Broadway No 2 Pty Ltd
Limited
õ 255 London Circuit Trust
õ Fortius Cammeray Pty Ltd
õ 3 Maker Place Trust
õ Fortius DC Pty Ltd
õ 3 Millennium Court Property Trust
õ Fortius Debt Capital Pty Ltd
õ 6 Kingston Park Court Property Trust
õ Fortius FAPT No. 1 Pty Ltd
õ 75 Dorcas Street Trust
õ Fortius Funds Management Pty Ltd
õ Ann Street Property Trust
õ Fortius Grenfell No.1 Pty Ltd
õ Growthpoint Holding Trust No.1
õ Growthpoint Metro Office Fund
õ Growthpoint Nominees (Aust) 2 Pty
Limited
õ Growthpoint Nominees (Aust) 3 Pty
Limited
õ Growthpoint Nominees (Aust) 4 Pty
õ Artarmon Retail Centre TC Pty Ltd
õ Fortius Grenfell No.2 Pty Ltd
Limited
õ Atlantic Drive Property Trust
õ Fortius Grenfell No.3 Pty Ltd
õ Growthpoint Nominees (Aust) Pty
õ Bowes Street Property Trust
õ Fortius Heitman Barracks Pty Ltd
õ Broadmeadows Leasehold Trust
õ Fortius Home HQ Artarmon Holding
Fund Pty Ltd
Limited
õ Growthpoint Properties Australia Limited
õ Kembla Grange Property Trust
õ Building 2 Richmond Property Trust
õ Building C 211 Wellington Road
Property Trust
õ Fortius Home HQ Holding Pty Ltd
õ Kewlink East Trust
õ Fortius Home HQ Sub Entity Pty Ltd
õ Kilsyth 1 Property Trust
õ Camberwell Road Property Trust
õ Fortius Investment Management Pty Ltd
õ Kilsyth 2 Property Trust
õ CB Property Trust
õ Fortius Investment Properties Pty Ltd
õ Laverton Property Trust
õ Charles Street Property Trust
õ Fortius Junction Fair Pty Ltd
õ Lot S5 Property Trust
õ Coolaroo Property Trust
õ Derrimut Property Trust
õ Drake Boulevard Property Trust
õ Erskine Park Pharmaceutical Trust
õ Erskine Park Truck Trust
õ Erskine Park Warehouse Trust
õ Fortius Allendale No. 3 Pty Ltd
õ Fortius Allendale No.1 Pty Ltd
õ Fortius Allendale No.2 Pty Ltd
õ Fortius Properties Pty Limited
õ Mort Street Property Trust
õ Fortius Property Investment
Management Australia Ltd
õ Fortius QS No.1 Pty Ltd
õ Fortius QS No.2 Pty Ltd
õ Fortius QS No.3 Pty Ltd
õ Fortius Rundle No 1 Pty Ltd
õ Fortius Rundle No 2 Pty Ltd
õ Fortius Rundle No 3 Pty Ltd
õ New South Wales 2 Property Trust
õ New South Wales Property Trust
õ Newstead Property Trust
õ Nundah Property Trust
õ Pope Street Property Trust
õ Preston 2 Property Trust
õ Queensland Property Trust
õ Rabinov Diversified Property Trust No. 2
Notes to the Financial Statements. 97
4.6 Controlled entities (continued)
õ Rabinov Diversified Property Trust No. 3
õ South Brisbane 1 Property Trust
õ William Angliss Drive Trust
õ Rabinov Property Trust
õ Ravenhall Property Trust
õ South Brisbane 2 Property Trust
õ WorldPark Property Trust
õ SW1 Car Park Property Trust
õ Yatala 1 Property Trust
õ Richmond Car Park Trust
õ Thomas Street Property Trust
õ Yatala 2 Property Trust
õ Rundle Car Park Leasing No 2 Pty Ltd
õ Wellington Street Property Trust
õ Yatala 3 Property Trust
õ Rundle Car Park Leasing Pty Ltd
õ Wholesale Industrial Property Fund
4.7 Parent entity disclosures
The parent of the Group throughout the year was the Trust.
Financial position at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity comprising:
Contributed equity
Retained profits
Total equity
(Loss) / Profit after tax
Total comprehensive (loss) / income
2023
$’m
30.3
5,129.3
119.7
2,141.6
2,987.7
1,917.2
1,070.5
2,987.7
(229.2)
(229.2)
2022
$’m
20.4
5,453.4
117.7
2,015.1
3,438.3
1,976.0
1,462.3
3,438.3
461.6
461.6
The contractual commitments of the parent entity are identical to those disclosed in Note 2.3. The parent entity has no contingent liabilities
(2022: $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 non-audit services
paid to auditors during the year.
Audit services - EY
Audit and review of financial statements
Other regulatory audit services
Other non-audit services
4.9 Subsequent events
2023
$
392,000
85,970
105,000
582,970
2022
$
261,600
54,000
35,000
350,600
There have been no 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.
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance
98
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 32 to 51 are in
accordance with the Corporations Act 2001 (Cth), including:
ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001 (Cth); and
iii) giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its performance for the financial year ended
on that date;
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 2023.
This declaration is made in accordance with a resolution of the Directors.
Timothy Collyer
Managing Director
Growthpoint Properties Australia
17 August 2023
Auditor’s independence
declaration.
99
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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 2023, 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; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene 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 17 August 2023 Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 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 2023, 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. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023
and of its consolidated financial performance for the year ended on that date; and
b. 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 judgment, 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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 $4,917.2 million as at 30 June
2023, which represents 94% of total assets of the
Group.
As outlined in Note 2.3, 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.
The valuation of investment properties is inherently
subjective given there are alternative assumptions
and valuation methods that may result in a range of
values. We have, therefore, considered this a key
audit matter.
Note 2.3 of the financial report describes 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 in the determination of fair value of
investment properties and how this has been
considered by the directors in the preparation of the
financial report at 30 June 2023.
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 each property including an
understanding of key developments; and
• controls in place relevant to the valuation process, both
for internal director valuations, and independent external
valuations.
In conjunction with our real estate valuation specialists, on a
sample basis, we performed the following procedures:
• Evaluated the key assumptions applied in both internal
and external valuations, including rents, capitalisation
rates and capital expenditure;
• Compared the net income used in the valuations to the
actual financial performance of the underlying
properties. We performed tests of control over the
tenancy schedules, which are used as source data in the
property valuations;
• Reviewed the portfolio of assets with reference to
external market data and portfolio performance in order
to identify and investigate items that were outside of our
expectations;
• Tested the mathematical accuracy of the adopted
valuations;
• Assessed the competence, qualifications and objectivity
of the valuers; and
• Evaluated the suitability of the valuation methodology
across the portfolio.
We have also considered whether the financial report
disclosures are appropriate.
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Financial report
Independent Auditor’s report.
2. Fortius - Acquisition Accounting, Goodwill and Other Intangibles
Why significant
How our audit addressed the key audit matter
The Group entered into a Share Sale Agreement to
acquire 100% equity shares in Fortius Funds
Management Pty Ltd (‘Fortius’) on 3 August 2022.
Acquisition Accounting:
Our audit procedures included the following:
• Obtained and reviewed the underlying transaction
agreements and agreed the purchase price paid to bank
statements;
As outlined in Note 2.2, the acquisition was
completed on 15 September 2022 and involved a
$45.0 million initial purchase price and subsequent
$8.1 million net assets adjustment.
The Group determined the fair value of net assets
with the support of an independent external valuer.
The Group disclosed in Note 2.2 to the consolidated
financial report the method of assessing the nature of
the transaction, including the significant underlying
assumptions and the results of the assessment.
Goodwill impairment testing:
Through the purchase price accounting of the
acquisition of Fortius, the Group recognised goodwill
of $41.0 million.
The Group reviews the carrying amount of goodwill
annually, or more frequently, if impairment indicators
are present.
The Group estimated the value in use of the assets
based on conditions existing as at 30 June 2023.
These estimates are developed on an underlying
assumption that the business will continue to expand
its funds under management.
The goodwill balance was tested for impairment at
year-end applying a value-in-use model. The
recoverable amount has been assessed at $38.0
million which is lower than the carrying amount of
$46.8 million, therefore an impairment charge of $8.8
million was recognised at 30 June 2023.
The Group has disclosed in Note 2.8 to the
consolidated financial report the assessment method,
including the significant underlying assumptions and
the results of the assessment.
The Fortius acquisition accounting and subsequent
goodwill and other intangible impairment testing was
considered a key audit matter due to the quantum of
the balances and the significant judgements involved.
These judgements include determining the fair value
of acquired assets and liabilities through business
combinations and determining the future cashflows
for goodwill impairment testing.
• Evaluated the Group’s assessment that the transactions
constituted business combinations in accordance with the
requirements of AASB 3;
• Evaluated the Group’s determination of the acquisition
dates having regard to the date control of the business was
obtained;
• Assessed the accuracy of the fair value adjustments within
the fair value accounting for the transaction;
• Involving our valuation specialists, we assessed the key
assumptions underlying the fair value of net assets and
management rights and other intangibles acquired as
determined by the Group’s external valuation specialists;
and
Assessed the adequacy of the Group’s disclosures in the
financial statements.
Our audit procedures included the following:
• Tested the mathematical accuracy of the value-in-use
impairment model;
•
Involving our valuation specialists, we assessed the key
assumptions adopted in the forecast cash flows, including
cash flows related to management and acquisition fees
receivable from the funds;
• Assessed the Group’s current year actual results in
comparison to prior year forecasts to assess forecasting
accuracy;
• Assessed the Group’s assumptions for annual and terminal
growth rates in the discounted cash flow model in
comparison to economic and industry forecasts;
• Assessed the adequacy of the estimated EBITDA rates
utilised for calculation of future costs with reference to
historical performance of the business;
• Considered earnings multiples, involving our valuation
specialists, we assessed earnings multiples ofcomparable
businesses as a valuation cross check to the Group’s
determination of recoverable amount;
• Performed sensitivity analysis in respect of the assumptions
noted above, to ascertain the extent of changes in those
assumptions which either individually or collectively would
materially impact the recoverable amount; and
• Assessed the adequacy of the Group’s disclosures in the
financial statements.
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103
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 2023 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.
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
judgment 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.
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104
Financial report
Independent Auditor’s report.
► 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.
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.
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105
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 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 2023. In our opinion, the Remuneration Report of Growthpoint Properties Australia for the year ended 30 June 2023, 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 17 August 2023 Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 106
Additional information
Detailed portfolio
information.
Office portfolio
Address
75 Dorcas St
South Melbourne
Bldg 3, 570 Swan St
165-169 Thomas St
Richmond
Dandenong
Bldg 2, 572-576 Swan St
Richmond
109 Burwood Rd
Hawthorn
141 Camberwell Rd
Hawthorn East
Bldg B, 211 Wellington Rd
Mulgrave
Bldg 1, 572-576 Swan St
Richmond
VIC
VIC
VIC
VIC
VIC
VIC
VIC
VIC
Book
Value
$m
275.0
190.0
153.5
Valuer
Cap
rate
Discount
rate
Major
tenant WALE
Lettable
area
Site
area
years
sqm
sqm
JLL 5.38
6.25 ANZ Banking Group
5.4 28,312
9,632
Directors 5.38
6.00 Bunnings Warehouse
7.2 19,333
8,525
CBRE 5.25
6.13
VIC Government
8.5 15,071
2,502
125.0 m3property 5.50
6.50 Country Road Group
9.0 14,602
7,130
116.5
Colliers 5.63
6.25
Scope
4.8 12,388
3,529
Cushman &
111.0
Wakefield 5.25
JLL 6.25
6.50
6.25
Miele
5.3 10,233
–
Monash University
2.7 12,780 11,040
Colliers 5.50
6.38 Country Road Group
9.0
8,554
8,364
80.0
72.0
Bldg C, 211 Wellington Rd
Mulgrave
VIC
53.0
Directors 6.75
6.88
Car Park, 572-576 Swan St Richmond
VIC
0.7 m3property 29.89
6.50
Guardian Community
Early Learning
GE Capital Finance
Australasia
1.7 10,289 11,070
3.9
–
3,756
100 Skyring Ter
Newstead
QLD
227.5 Knight Frank 6.38
6.63 Bank of Queensland
3.8 24,665
5,157
15 Green Square Cl
Fortitude Valley
QLD
130.0 Knight Frank 6.50
6.75 Optus Administration
2.1 16,523
2,519
104 Melbourne St
32 Cordelia St
52 Merivale St
100 Melbourne St
South Brisbane
South Brisbane
South Brisbane
South Brisbane
QLD
QLD
QLD
QLD
86.5
80.5
Savills 6.63
Directors 6.50
Cushman &
73.0
Wakefield 6.50
51.5 Knight Frank 6.38
6.88
6.75
6.75
6.75
Integrated Clinical
Oncology Network
3.3 11,402
5,772
Jacobs Group
2.8 10,003
2,667
Stantec Australia
Peabody Energy
2.7
1.7
9,405
2,331
6,597
3,158
Car Park, 32 Cordelia St & 52
Merivale St
South Brisbane
QLD
35.8
Directors 6.00
7.25
Secure Parking
1.6
–
9,319
1 Charles St
Parramatta
NSW 500.0 Knight Frank 4.25
Bldg C, 219-247 Pacific Hwy Artarmon
NSW 142.0
Directors 5.63
5.75
6.38
NSW Government
(Police)
21.5 32,356
6,460
Fox Sports
4.5 14,406
4,212
3 Murray Rose Ave
Sydney Olympic Park NSW 98.4 m3property 5.73
6.50 Samsung Electronics
3.7 13,423
3,980
5 Murray Rose Ave
Sydney Olympic Park NSW 81.6
Directors 6.20
11 Murray Rose Ave
Sydney Olympic Park NSW 49.0
Savills 5.90
33-39 Richmond Rd
2-6 Bowes St
Keswick
Phillip
SA
ACT
71.0 Knight Frank 6.50
79.0
Directors 5.77
6.50
6.25
7.00
6.38
–
0.0 12,386
3,826
B2G Consortium
4.1
5,684
2,642
Tetra Tech
3.5 11,730
4,169
ACT Government
7.9 12,376
4,485
255 London Cct
Civic
ACT
74.5
Directors 6.14
6.50
10-12 Mort St
Civic
ACT
74.0 m3property 6.63
6.63
836 Wellington St
West Perth
WA
92.0
Directors 6.75
Total / weighted average
3,123.0
5.66
7.00
6.37
Australian
Commonwealth
Government
Australian
Commonwealth
Government
Australian
Commonwealth
Government
4.2
8,972
2,945
1.7 15,398
3,064
3.6 11,973
4,304
6.3 348,861 136,558
107
Industrial portfolio
Address
Book
Value
$m
Valuer
Cap
rate
Discount
rate
Major
tenant WALE
Lettable
area
%
%
years
sqm
Site
area
sqm
3 Maker Pl
Truganina
VIC
66.5
CBRE
4.75
7.00
101 Warehousing
6.3 31,109
49,810
9-11 Drake Blvd
Altona
VIC
60.0
JLL
4.75
6.00
1500 Ferntree Gully Rd
& 8 Henderson Rd
Knoxfield
Lots 2, 3 & 4, 34-44 Raglan St Preston
120-132 Atlantic Dr
Keysborough
VIC
VIC
VIC
60.0
54.3
45.5
Directors
5.00
Directors
5.00
JLL
4.50
Melbourne Airport VIC
44.4 m3property
7.00
Peter Stevens
Motorcycles
Brown & Watson
International
2.9 25,743
41,730
8.7 21,218
40,844
Paper Australia
1.6 27,978
42,280
Symbion
8.5 15,781
26,181
Australia Post
8.0 44,424
75,325
6.50
6.50
6.25
6.50
Keysborough
VIC
29.3
Directors
4.75
6.50 S&S Management Co
2.5 11,437
19,210
Melbourne Airport VIC
28.7 m3property
7.25
6.25 The Workwear Group
4.0 26,517
51,434
40 Annandale Rd
20 Southern Crt
120 Link Rd
130 Sharps Rd
31 Garden St
3 Millennium Crt
6 Kingston Park Crt
Melbourne Airport VIC
27.4 m3property
7.50
Kilsyth
Knoxfield
Knoxfield
VIC
VIC
VIC
VIC
22.0 m3property
4.75
19.8
18.8
16.1
JLL
4.75
Urbis
4.75
Directors
5.00
19 Southern Crt
Keysborough
101-111 South Centre Rd
Melbourne Airport VIC
15.5 m3property
7.50
60 Annandale Rd
Melbourne Airport VIC
15.0 m3property
7.25
75 Annandale Rd
70 Distribution St
13 Business St
5 Viola Pl
3 Viola Pl
Melbourne Airport VIC
12.1 m3property
7.50
Larapinta
QLD
255.0
Directors
5.62
Yatala
QLD
Brisbane Airport QLD
18.6
13.4
Directors
5.75
Directors
5.85
Brisbane Airport QLD
4.2
Directors
6.57
27-49 Lenore Dr
Erskine Park
NSW 107.5
Directors
5.00
6-7 John Morphett Pl
Erskine Park
NSW 82.8 Knight Frank
5.00
51-65 Lenore Dr
34 Reddalls Rd
81 Derby St
Erskine Park
NSW 46.5
Directors
4.50
Kembla Grange NSW 38.5
CBRE
4.88
Silverwater
NSW 32.8
Directors
4.75
599 Main North Rd
Gepps Cross
SA
216.0 Knight Frank
4.75
1-3 Pope Crt
12-16 Butler Blvd
10 Butler Blvd
Beverley
Adelaide Airport
Adelaide Airport
20 Colquhoun Rd
Perth Airport
Hugh Edwards Dr & Tarlton Cr Perth Airport
SA
SA
SA
WA
WA
30.5 Knight Frank
6.00
23.7
12.4
216.0
70.2
Directors
6.08
Directors
6.32
JLL
5.85
Savills
5.96
Total / weighted average
1,703.2
5.39
6.50
6.25
6.00
6.25
6.50
6.50
6.50
6.75
6.00
7.00
6.75
7.00
6.50
6.50
6.25
6.00
6.50
6.25
7.00
7.00
7.25
6.75
7.07
6.44
Laminex Group
2.0 28,100
47,446
Cummins Filtration
Opal Packaging
Automotive Imports
Wabtec Australia
5.4
2.7
4.1
3.8
8,919
8,040
7,677
6,455
17,610
14,750
12,795
11,650
Direct Couriers
4.4 14,082
24,799
Plantabl Packaging
7.4 16,274
34,726
Unipart Group
Australia
2.3 10,310
16,930
Woolworths
6.2 76,109
250,900
Volo Modular
2.1
8,951
18,630
Eagers Automotive
9.6 14,726
35,166
Cargo Transport
Systems
2.7
3,431
12,483
Linfox
2.2 29,476
76,490
Linfox
1.7 24,881
82,280
Linfox
Autocare Services
IVE Group Australia
4.7
7.3
2.2
3,720
36,720
355
141,100
8,253
13,490
Woolworths
11.9 91,686
233,500
Aluminium
Specialties Group
2.4 14,459
25,660
Australia Post
8.1 16,835
30,621
IPEC
1.6
8,461
16,100
Woolworths
2.3 80,374
193,936
Mainfreight
4.1 32,018
57,617
5.4 717,799 1,752,213
Growthpoint Properties AustraliaFY23 Annual ReportFinancial reportOperating and financial reviewAdditional informationGovernance 108
Additional information
Securityholder
information.
Top 20 legal Securityholders as at 1 August 2023
Rank Name
Number of securities % of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
GROWTHPOINT PROPERTIES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
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