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MIRVAC gRoup
AnnuAl RepoRt 2012
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MIRVAC gRoup
AnnuAl RepoRt
For the year ended 30 June 2012
Mirvac Group comprises Mirvac Limited (ABN 92 003 280 699)
and its controlled entities (including Mirvac Property Trust
(ARSN 086 780 645) and its controlled entities).
01 Directors’ report
08 Remuneration report
27 Auditor’s independence declaration
28 Corporate governance statement
39 Financial statements
106 Directors’ declaration
107 Independent auditor’s report to the members of Mirvac Limited
109 Securityholder information
111 Glossary of acronyms
112 Directory
CoveR IMAGe: ARTIST’S IMPReSSIoN oF 8 ChIFLey SquARe, SyDNey, NSw
DIReCtoRs’ RepoRt
The Directors of Mirvac Limited present their report, together with the consolidated report of Mirvac Group (“Mirvac”
or “Group”) for the year ended 30 June 2012. Mirvac comprises Mirvac Limited (“parent entity”) and its controlled entities,
which includes Mirvac Property Trust (“MPT” or “Trust”) and its controlled entities.
DiRectoRs
The following persons were Directors of Mirvac Limited during the whole of the year and up to the date of this report,
unless otherwise stated:
— James MacKenzie
— Nicholas Collishaw
— Marina Darling (appointed as a Director on 23 January 2012)
— Peter hawkins
— James Millar AM
— Penny Morris (retired as a Director on 17 November 2011)
— John Mulcahy
— John Peters (appointed as a Director on 17 November 2011)
— elana Rubin.
pRincipAl Activities
The principal continuing activities of Mirvac consist of real estate investment, development and investment management. Mirvac
has two core divisions: Investment (comprising MPT) and Development (comprising residential and commercial development).
There are also two business units, Mirvac Investment Management (“MIM”) which comprises two business activities for segment
reporting purposes: third party, listed and unlisted funds management; and the property asset management business, Mirvac
Asset Management (“MAM”).
on 16 December 2011, Mirvac announced it had entered into contracts for the sale of it hotel Management business, Mirvac
hotels & Resorts, to Accor Asia Pacific, together with various associated investments, to a consortium comprising Accor Asia
Pacific (“Accor”) and Ascendas. The sale transaction was completed on 22 May 2012. hotel Management was responsible for
the management of hotels across Australia and New Zealand. Details are provided within the review of operations and activities.
DiviDenDs/DistRibutions
Dividends/distributions paid to stapled securityholders during the year were as follows:
June 2011 quarterly dividend/distribution paid on 29 July 2011
2.20 cents (2011: 2.20 cents) per stapled security
September 2011 quarterly dividend/distribution paid on 28 october 2011
2.00 cents (2011: 2.00 cents) per stapled security
December 2011 quarterly dividend/distribution paid on 27 January 2012
2.00 cents (2011: 2.00 cents) per stapled security
March 2012 quarterly dividend/distribution paid on 27 April 2012
2.00 cents (2011: 2.00 cents) per stapled security
total dividends/distributions paid
2012
$m
75.2
68.3
68.3
68.4
2011
$m
65.3
68.3
68.3
68.3
280.2
270.2
The June 2012 quarterly dividend/distribution of 2.40 cents per stapled security totalling $82.0m declared on 29 June 2012
was paid on 27 July 2012.
Dividends and distributions paid and payable by Mirvac for the year ended 30 June 2012 totalled $287.0m, being 8.40 cents
per stapled security (2011: $280.1m — 8.20 cents per stapled security). The payments for the year ended 30 June 2012 and the
previous year were distributions made by the Trust.
Review of opeRAtions AnD Activities
The statutory profit after tax attributable to the stapled securityholders of Mirvac for the year ended 30 June 2012 was
$416.1m (2011: $182.3m). Included in the statutory profit was a provision for loss on inventories totalling $25.0m (2011: $295.8m).
The operating profit (profit before specific non-cash and significant items) was $366.3m which is above market guidance
provided previously.
operating profit is a financial measure which is not prescribed by Australian Accounting Standards (“AAS”) and represents
the profit under AAS adjusted for specific non-cash items and significant items. The Directors consider operating profit to reflect
the core earnings of the Group.
The following table summarises key reconciling items between statutory profit after tax attributable to the stapled
securityholders of Mirvac and operating profit. The operating profit information in the table has not been subject to any
specific audit procedures by the Group’s auditor but has been extracted from note 3 of the accompanying financial statements
for the year ended 30 June 2012, which have been subject to audit, refer to pages 107 to 108 for the auditor’s report on the
financial statements.
01
mirvac group annual report 2012
DIReCtoRs’ RepoRt
Review of opeRAtions AnD Activities / continueD
profit attributable to the stapled securityholders of Mirvac
specific non-cash items
Net gain on fair value of investment properties and owner-occupied
hotel management lots and freehold hotels
Net loss on fair value of investment properties under construction (“IPuC”)
Net loss/(gain) on fair value of derivative financial instruments
and associated foreign exchange movements
Security based payment expense
Depreciation of owner-occupied investment properties, hotels and hotel
management lots (including hotel property, plant and equipment)
Straight-lining of lease revenue
Amortisation of lease fitout incentives
Net loss/(gain) on fair value of investment properties, derivatives and other
specific non-cash items included in share of net profit of associates and joint ventures
Net loss on fair value of investment properties, derivatives and other
specific non-cash items included in non-controlling interest (“NCI”)
significant items
Impairment of loans
Provision for loss on inventories
Net (gain)/loss on sale of non-aligned assets
Net gain on sale of hotel Management business and related assets
Business combination transaction costs
tax effect
Tax effect of non-cash and significant adjustments
operating profit (profit before specific non-cash items and significant items)
2012
$m
416.1
(148.7)
15.8
82.0
8.5
9.5
(15.9)
14.4
13.7
—
6.0 —
25.0
(0.8)
(21.4) —
—
(37.9)
366.3
2011
$m
182.3
(110.4)
58.6
(7.5)
6.2
8.1
(16.4)
10.4
(11.0)
(0.4)
295.8
0.2
31.8
(89.2)
358.5
finAnciAl AnD opeRAtionAl highlights
Key financial highlights for the year ended 30 June
2012 included:
— profit attributable to the stapled securityholders of Mirvac
of $416.1m, an increase of 128.0 per cent, which included
a net gain on investment properties (including IPuC)
of $132.9m, profit of $21.4m from the sale of the hotel
Management business and, as previously announced in
February 2012, a provision for loss on inventories of $25.0m
in respect to Beachside Leighton, North Fremantle, wA;
— operating profit after tax of $366.3m 1, representing
10.7 cents per stapled security;
— net tangible assets (“NTA”) per stapled security of
$1.66 from $1.62 2;
— operating cash flow of $317.0m; and
— full year distribution of $287.0m, representing 8.40 cents
per stapled security.
Key operational highlights for the year ended 30 June
2012 included:
— successfully delivered on the Group’s strategy to simplify
its business with the sale of the hotel Management
business, realising a profit of $21.4m 3;
— established strategic relationships with K-ReIT Asia and
AvIvA Investors via the sale of 50.0 per cent of 8 Chifley
Square, Sydney NSw and hoxton Distribution Park,
hoxton Park NSw respectively;
— achieved 3.4 per cent like-for-like net operating income
growth within the Investment Division’s portfolio;
— maintained a high portfolio occupancy rate of 98.4 per cent 4
and a strong weighted average lease expiry of 7.4 years 4
within the Investment Division’s portfolio;
— leased 147,646 square metres (10.4 per cent of net lettable
area) within the Investment Division’s portfolio;
— disposed of four non-core retail properties within the
Investment Division’s portfolio, realising $132.0m in gross
sale proceeds;
— continued the strong focus on corporate responsibility
and sustainability with the Investment Division’s portfolio
achieving a National Australian Built environment Rating
System (“NABeRS”) office energy rating of 4.3 Star
average, six months ahead of the December 2012 target
of 4.0 Stars, and 8 Chifley Square, Sydney NSw awarded
a 6.0 Star Green Star office Design v2 rating;
— Mirvac’s safety performance continued to improve with a
lost time injury frequency rate of 7.3 for employees plus
service providers, representing a 17.0 per cent improvement
over the corresponding period for the year ended 30 June
2011. In addition, the number of workers’ compensation
claims reduced by 20.5 per cent and the average cost per
claim reduced by 34.7 per cent over the corresponding
period for the year ended 30 June 2011; and
— strong levels of exchanged pre-sales contracts at $907.7m 5
in residential projects and achieved 1,807 residential
lot settlements.
1) excludes specific non-cash items, significant items and related taxation.
2) NTA per stapled security based on ordinary securities including employee Incentive Scheme (“eIS”) securities.
3) After costs.
4) By area, excluding assets under development.
5) Total exchanged pre-sales contracts as at 30 June 2012, adjusted for Mirvac’s share of joint ventures, associates and Mirvac’s managed funds.
02
mirvac group annual report 2012
cApitAl MAnAgeMent AnD funDing
For the year ended 30 June 2012, the Group maintained its
strong capital and liquidity position. on 22 May 2012, the
Group completed the sale of the hotel Management business
with the proceeds received (totalling $293.2m) used to
repay debt, which reduced gearing to 22.7 per cent 1. This
is comfortably within the Group’s targeted range of 20.0
to 25.0 per cent.
other key highlights for the Group included:
— no debt maturities in the year ending 30 June 2013;
— $530.0m of debt facilities maturing in January 2014,
of which only $237.9m is actually drawn;
— high levels of liquidity with $804.4m 2 in cash and undrawn
committed debt facilities on hand;
— repayment of $140.0m debt facility which was scheduled
to mature in January 2013;
— weighted average debt maturity of 3.5 years;
— average borrowing costs increased slightly to 7.6 per cent
per annum including margins and line fees;
— maintained the BBB credit rating from Standard & Poor’s; and
— continued to comfortably meet all debt covenants.
outlook
The volatility created by the european debt crisis dominated
international capital markets for most of the 2012 financial
year, resulting in funding costs remaining elevated and
reduced appetite for lending from european based lenders.
There will be limited impact of these events on the Group’s
borrowing costs for the next six to 12 months, allowing time
for conditions to stabilise before any refinancing is required.
The Group remains focused on managing its capital position
prudently by monitoring and accessing diversified sources
of capital, including both domestic and international markets.
This ensures Mirvac can continue to meet its strategic
objectives without increasing its overall risk profile.
opeRAtionAl highlights AnD DivisionAl stRAtegy
investment Division
At 30 June 2012, the Investment Division had invested capital
of $6,002.7m 3, with investments in 66 direct property assets,
covering the office, retail and industrial sectors, as well as
investments in other funds managed by Mirvac. The asset
allocation for MPT invested capital was as follows:
— office: 57.6 per cent;
— retail: 27.2 per cent; and
— other: 15.2 per cent 4.
For the year ended 30 June 2012, the Investment Division’s
statutory profit before tax was $495.5m and operating profit
before tax was $403.7m.
Key highlights for MPT for the year ended 30 June
2012 included:
— achieved 3.4 per cent like-for-like net operating income growth;
— occupancy remained high at 98.4 per cent 5;
— 29 properties (43.9 per cent 6) of the Trust’s assets were
independently valued resulting in a $163.4m or 3.0 per cent
increase over the previous book value for the 12 months
ended 30 June 2011;
— disposed of four non-core retail assets realising $132.0m in
gross sale proceeds (2.6 per cent premium to book value);
— established strategic relationships with K-ReIT Asia and
AvIvA Investors via the sale of 50.0 per cent of 8 Chifley
Square, Sydney NSw and hoxton Distribution Park,
hoxton Park NSw respectively;
— completed 325 leasing deals over 147,646 square metres
of net lettable area (10.4 per cent of the portfolio),
with significant office leasing commitments at:
— 10-20 Bond Street, Sydney NSw (99.3 per cent 7
of net lettable area secured); and
— 8 Chifley Square, Sydney NSw (42.0 per cent of net
lettable area secured with the asset’s first lease to Corrs
Chambers westgarth);
— progressed with Development Approvals for:
— the development of the old Treasury Building, Perth wA,
which incorporates 30,000 square metres of prime
office space that is 100.0 per cent pre-leased to the
wA Government for 25 years; and
— the Stage 2 Development Application at 190-200 George
Street, Sydney NSw which incorporates 38,500 square
metres of net lettable area over 32 office levels, and
includes 63 basement car spaces;
— the Development Division completed construction on
the final industrial building at Nexus Industry Park,
Prestons NSw in october 2011, which is now 100.0 per cent
leased to hPM Legrand Australia and held within MPT’s
investment portfolio;
— received authority approvals for expansions at Kawana
Shopping Centre, Buddina qLD, Stanhope village, Stanhope
Gardens NSw and orion Springfield, Springfield qLD; and
— Broadway Shopping Centre, Sydney NSw was ranked
second nationally in the Big Guns for MAT of $9,833 per
square metre 8.
The Group’s focus on corporate responsibility and
sustainability delivered results within the Trust’s portfolio,
with key achievements including:
— 8 Chifley Square, Sydney NSw awarded a 6.0 Star Green
Star office Design v2 rating;
— a NABeRS office energy rating of 4.3 Star average, six
months ahead of the December 2012 target of 4.0 stars;
— 275 Kent Street, Sydney NSw achieved a 4.5 Star NABeRS
energy rating for the first time since construction as a
result of management efficiencies within the building;
— 23 Furzer Street, Phillip ACT achieved 5.5 Star NABeRS
energy rating with the building contractually designed
to only achieve a 4.5 Star rating; and
— 340 Adelaide Street, Brisbane qLD achieved a NABeRS
energy rating of 5.0 Stars, a significant improvement
on the prior rating of 1.5 Stars.
The Trust’s earnings continue to be secure with a strong
weighted average lease expiry profile of 7.4 years 9,
72.7 per cent of Fy13 rent reviews being fixed or linked to
the Consumer Price Index (“CPI”), and 72.2 per cent of
revenue derived from multinational, Australian Securities
exchange (“ASX”) listed and government tenants.
1) Net debt (at foreign exchange hedged rate) excluding leases/(total tangible assets – cash).
2) Total liquidity includes total available liquidity of $721.1m and cash on hand of $77.3m.
3) By book value, includes assets under development.
4) Includes industrial assets, assets under development, indirect property investments, car park assets and a hotel.
5) By area, excluding assets under development.
6) By total number of investment properties.
7) Incorporates heads of Agreement and executed leases as at 30 June 2012.
8) The national magazine, Shopping Centre News, publish an annual awards for Big Guns shopping centres. Big Guns are defined as those centres
with a gross lettable area in excess of 45,000 square metres, and typically contain a department store/s, discount department store/s,
supermarket/s and specialties. Moving Annual Turnover (“MAT”) is the total retail sales for the past 12 months including GST.
9) By area, excluding assets under development.
03
mirvac group annual report 2012 DIReCtoRs’ RepoRt
opeRAtionAl highlights AnD DivisionAl
stRAtegy / continueD
outlook
The Investment Division remains focused on providing
secure passive income to the Group, with key areas of
focus including:
— improving the quality of the portfolio via non-aligned asset
sales and new development product;
— remaining strategically overweight in the office sector; and
— focusing on prime sub-regional shopping centres located
in growth markets.
Development Division
The Group announced a new organisational structure on
15 February 2012 with the formation of national product and
service functions to further leverage the Group’s integrated
model in the delivery of residential and commercial product.
The Development Division now operates four national
product lines consisting of Apartments, Masterplanned
Communities and Commercial, as well as a new product
line being Resource Partnerships, designed to meet the
increasing accommodation needs of the resource sector.
At 30 June 2012, the Development Division had invested
capital of $1,807.3m 1.
hotel Management
The Group completed the sale of its hotel Management
business to Accor on 22 May 2012.
For the year ended 30 June 2012, the Division’s statutory
loss before tax was $10.0m and operating profit before tax
was $15.2m.
Residential
In the Group’s core metropolitan markets, the Division
continued to deliver quality residential product, with new
release projects targeted at the right price points and right
locations such as:
Apartments:
— harold Park, Glebe NSw: launched the first residential
precinct (296 lots) and received Master Plan Development
Consent post 30 June 2012 with site works to commence
in August 2012, in line with the development program;
— Rhodes waterside, Rhodes NSw: achieved 223 settlements
for the 12 months ended 30 June 2012, with settlements at
waters edge (114 lots), elyina (106 lots) and Amarco (three
lots). The Division also commenced construction on the
final stage of Rhodes waterside (Pinnacle, 231 lots); and
— Array, yarra’s edge vIC: achieved planning approval for
Mirvac’s seventh apartment tower at Docklands and
successful vIP launch.
Masterplanned Communities:
— elizabeth hills, NSw: Stage 1 (96 lots) released with
86 contracts exchanged;
— Middleton Grange, NSw: 180 settlements with 46 contracts
exchanged; and
— Rockbank, vIC: the 5,780 lot site located in Melbourne’s
western growth corridor was identified by the State
Government for an accelerated planning approval process.
For the year ended 30 June 2012, the Division secured future
income with $907.7m 2 of residential exchanged pre-sales
contracts and settled 1,807 residential lots.
As at the settlement date, the hotel Management business
comprised a portfolio of 45 hotels covering 5,648 rooms
throughout Australia (42) and New Zealand (three) under
a suite of four core brands comprising Sea Temple
(five star resorts); quay west Suites (five star all-suite
hotels); Sebel (four and a half star hotels and resorts);
and Citigate (four star hotels).
For the period up to settlement (22 May 2012), the business
unit achieved a statutory profit before tax of $15.5m and
an operating profit before tax of $17.2m.
investment Management
MIM comprises two business activities for segment reporting
purposes: third party, listed and unlisted funds management;
and property asset management.
For the year ended 30 June 2012, MIM recorded a statutory
loss before tax of $9.0m and an operating loss before tax
of $6.7m.
At 30 June 2012, MIM remained responsible for the
management of four wholesale funds: Mirvac wholesale
Residential Development Partnership; Travelodge Group;
JF Infrastructure yield Fund; and, Australian Sustainable
Forestry Investors. MIM also managed the ASX listed
Mirvac Industrial Trust and two unlisted residential
development funds.
MIM continued to rationalise activities considered non-core
to Mirvac’s strategy as demonstrated by the exit from
the following:
— 25.0 per cent interest in the Mirvac City Regeneration
Partnership;
— investment in the RedZed residential mortgage warehouse; and
— roles as investment manager and responsible entity for:
— New Zealand Sustainable Forestry Investors; and
— Mirvac wholesale hotel Fund (as part of the Group’s exit
from its hotel management business).
MAM provides asset management services for the Investment
Division’s portfolio. MAM currently manages 78 properties
principally located in metropolitan locations on the east coast
of Australia.
outlook
MIM will continue to seek to exit its responsible entity,
trustee and investment manager responsibilities as the
opportunities arise. MAM will seek to continue to expand
its asset management services in accordance with growth
in the Investment Division’s portfolio.
1) Development Division’s total inventories, investments and loans in associates and joint ventures as at 30 June 2012.
2) Total exchanged pre-sales contracts as at 30 June 2012, adjusted for Mirvac’s share of joint ventures, associates and Mirvac’s managed funds.
04
mirvac group annual report 2012 opeRAtionAl highlights AnD DivisionAl stRAtegy / continueD
State based settlements for the year ended 30 June 2012 were as follows:
State
NSw
wA
vIC
qLD
total
State based settlements by product for the year ended 30 June 2012 were as follows:
State
NSw
wA
vIC
qLD
total
Masterplanned Communities
Apartments
812
318
179
145
248
—
37
68
Lots
1,060
318
216
213
1,807
Total
1,060
318
216
213
1,807
For the year ended 30 June 2012, the Development
Division’s residential pipeline totalled 29,787 lots, which was
supplemented by the acquisition of a number of key projects
that will contribute significantly to the Division’s Fy15 and
beyond development pipeline, including:
— Googong, NSw: acquired in December 2011. Stage 1 was
released with 174 exchanged contracts. Googong is a joint
venture with CIC Australia to develop a masterplanned
community comprising approximately 5,800 lots;
— Clyde North, vIC: secured site in November 2011 on capital
efficient terms. The 200 hectare site located in Melbourne’s
south east growth corridor will comprise approximately
2,100 lots on completion;
— Alex Avenue, NSw: in February 2012 Mirvac secured
259 lots on capital efficient terms. Alex Avenue is located
in Sydney’s north west growth centre; and
— Green Square, NSw: in March 2012 Mirvac executed
the project agreement with Landcom and joint venture
partner, Leighton Properties, to deliver the Green Square
Town Centre core sites. on completion, the core sites will
comprise approximately 1,600 lots, 48,000 square metres
of office space and 12,000 square metres of retail space
as well as substantial public domain and open space.
During the period, the Division completed the disposals of its
non-core inventory at Magenta Shores, The entrance NSw
and The Royal, Newcastle NSw (Stages 1c and 2), thereby
finalising the major provisioned englobo sales for the year
ended 30 June 2012.
commercial
Mirvac’s commercial development activities include office,
retail and industrial projects, and the Group’s strategy is
to sell a part share to aligned third parties and retain the
remaining share within the Investment Division’s property
portfolio. For the year ended 30 June 2012, Mirvac’s
commercial pipeline totalled $1,361.9m.
Key highlights for the year ended 30 June 2012 included:
— completed the sale of 50.0 per cent of 8 Chifley Square,
Sydney NSw to K-ReIT Asia and secured the first lease
to Corrs Chambers westgarth for 42.0 per cent of the
building’s net lettable area;
— completed the sale of 50.0 per cent of hoxton Distribution
Park, hoxton Park NSw to AvIvA Investors and achieved
practical completion on the Dick Smith and Big w
warehouses, five months ahead of schedule;
— progressed the Stage 2 Development Application at
190-200 George Street, Sydney NSw with architectural
firm, Francis-Jones Morehen Thorp, being selected
as preferred architect following a design excellence
competition;
— approval received for the development of the old Treasury
Building, Perth wA, which incorporates 30,000 square
metres of prime office space that is 100.0 per cent
pre-leased to the wA Government for 25 years;
— commenced construction at orion Springfield, Springfield
qLD and Kawana Shopping Centre, Buddina qLD 1
after building approvals for expansions at both centres
were approved;
— completed the final building at Nexus Industry Park,
Prestons NSw in october 2011, which is now 100.0 per cent
leased to hPM Legrand Australia;
— named as the preferred proponent by the wA Government
to deliver a major residential and hotel development at
Port hedland in partnership with the wA Government and
LandCorp; and
— shortlisted in July 2012 as the preferred proponent by the
wA Government to develop the mixed-use Perth City Link
project, in conjunction with Leighton Properties.
outlook
The Division remains on track towards achieving its 2014
recovery, with key areas of focus including:
— improving earnings to represent a 20.0 per cent
contribution to the overall Group result;
— continue to improve key metrics including return on
invested capital (10.0 plus per cent target) and gross
margin (18.0-22.0 per cent target);
— selectively restocking the development pipeline; and
— strong levels of pre-sales to mitigate future earning risks.
1) Construction at Kawana Shopping Centre commenced in late July 2012.
05
mirvac group annual report 2012
DIReCtoRs’ RepoRt
MARKet AnD gRoup outlooK
Market outlook
whilst the resource sector continues to underpin domestic
economic output, the easing of economic policy settings over
the past nine months has started to provide support to the
non-mining sectors of the economy.
commercial outlook
The european debt crisis has resulted in weaker levels of
activity in finance related industries, as demonstrated by the
softening in white collar employment resulting in an easing in
office demand in Sydney and Melbourne. with the exception
of Perth, vacancy rates have trended higher by varying
degrees. however, the low level of office construction should
limit the upside to vacancy rates.
Conditions in the retail sector remain subdued. even though
income growth is solid and saving appears to have stopped
increasing, there has been a growing tendency for consumers
to substitute goods for experiences. while vacancy rates
are expected to remain stable, this is expected to be at the
expense of incentives and rental growth.
Industrial sector rents and demand remain subdued. Limited
speculative construction, along with the majority of new
supply being pre-committed, should see support for modest
rental growth.
Residential outlook
The factors underpinning the residential property market
have improved over the past year and vary by state. The
combination of soft property prices and declining mortgage
interest rates has resulted in an improvement in affordability,
while population growth has started to pick up.
The bias towards medium density accommodation continues,
especially in the south eastern states. This trend is expected
to continue given housing affordability, the preference of new
migrants, transport infrastructure constraints, the cost of
travel and the ageing population.
housing approvals in NSw are now broadly in line with their
pre global financial crisis levels. A low rental vacancy rate and
rising rental growth are evident of strong underlying demand.
A further strengthening in population growth, together with
measures by the State Government to increase dwelling
supply, suggests a further improvement in market conditions.
with the appreciation of the Australian dollar continuing
to exert pressure on the state’s manufacturing base and
investment remaining biased towards the resource states,
the victorian property market is likely to continue to
underperform the other main states.
The qLD property market has been adversely affected by
the rising Australian dollar impacting on its tourism industry,
weak economic conditions and a slowing in population
growth. There are early signs the housing market is
undergoing a modest recovery. Longer term prospects are
underpinned by resource related activity, in conjunction with
an improvement in population growth.
The wA property market is showing signs of a recovery.
Population growth has increased significantly, while property
prices are starting to edge higher. Short-term prospects for
the property market are expected to improve while, in the
longer term, resource related activity is expected to lead both
stronger dwelling demand and prices.
06
group outlook
The Group remains focused on being an Australian real estate
expert concentrating on its two core Divisions.
The Investment Division remains focused on providing
secure passive income to the Group, whilst improving the
quality of the portfolio via non-aligned asset sales and new
development product. The Division also maintains a focus on
prime sub-regional shopping centres located in high growth
markets. In spite of the subdued retail environment, Mirvac’s
portfolio is comprised of shopping centres that are primarily
driven by non-discretionary spend.
The Development Division will continue to improve its return
on invested capital and increase its earnings contribution to
the Group by selectively restocking the development pipeline
and maintaining strong levels of pre-sales to mitigate future
earning risks.
on 15 August 2012, the Group announced that by agreement,
Nicholas Collishaw would be stepping down as Managing
Director on 31 october 2012, and that Susan Lloyd-hurwitz
has been appointed Chief executive officer and Managing
Director. Susan will take up the role before the end of the
2012 calendar year.
The Group also announced post 30 June 2012, the
appointment of Bevan Towning as Chief executive officer,
Platform, effective 9 July 2012, and the appointment of Greg
Dyer as Finance Director, effective 4 September 2012. Greg
will join the Mirvac Board as an executive Director on his
commencement and will assume the responsibilities of the
current Chief Financial officer, Justin Mitchell, who previously
announced his intention to leave the Group on 1 october 2012.
enviRonMentAl RegulAtions
A key initiative to reduce greenhouse gas emissions was a
commitment to achieve an average 4 Star NABeRS energy
rating on applicable office buildings by December 2012. The
Investment Division achieved this target during the 12 months
ended 30 June 2012, six months ahead of schedule. This
has resulted in improved environmental performance,
demonstrating excellent energy or water performance due
to design and management practices, and high efficiency
systems and equipment.
Mirvac and its business operations are subject to compliance
with both Federal and state environment protection legislation.
At the Federal level, Mirvac has triggered the energy efficiency
opportunities Act 2006 (“eeo”) threshold and is required
to participate. An eeo Assessment and Reporting Schedule
(“ARS”) has been approved under section 16 of the eeo and
Mirvac is progressing assessments in accordance with the
ARS. Mirvac has also triggered the participation threshold
of the National Greenhouse and energy Reporting Act 2007
(“NGeR”). The NGeR requires large energy-using companies
to report annually on greenhouse gas emissions, reductions,
removals and offsets, and energy consumption and production
figures. Mirvac must report annually by 31 october.
Mirvac is also subject to the commercial Building energy
efficiency Disclosure Act 2010. This involves the disclosure
of energy efficiency related information at the point of sale
or lease of office space greater than 2,000 square metres.
within Mirvac’s health, safety and environment performance
reporting systems, including internal and external audits
and inspections, no incidents of significant harm to the
environment occurred during the year ended 30 June
2012. Mirvac’s development projects across Australia were
issued a total of two environmental infringement notices
throughout the year with a total value of $3,000. The notices
related to minor incidents of potential environmental impact
at development sites and were rectified immediately. The
two instances related to the potential for uncontrolled
sediment run off.
mirvac group annual report 2012 enviRonMentAl RegulAtions / continueD
The Federal Government has introduced a price on carbon
pollution, which came in to affect on 1 July 2012. Mirvac is
not a liable entity under the legislation and is marginally
affected. The legislation bill provides for increases in the
total carbon cap and therefore does not preclude expansion
of the number of directly liable entities before the scheme
transitions to a cap and trade system in 2015.
infoRMAtion on DiRectoRs
Directors’ experience and areas of special responsibilities
The members of the Board, their qualifications, experience
and responsibilities are set out below:
James MacKenzie, BBus, FCA, FAICD — Chairman —
Independent Non-executive
Chair of the nomination committee
Member of the audit, risk and compliance committee
Member of the human resources committee
James MacKenzie was appointed to the Mirvac Board
in January 2005 and assumed the role of Chairman in
November 2005.
James led the transformation of the victorian Government’s
Personal Injury Schemes as Chairman of the Transport
Accident Commission (“TAC”) and victorian workCover
Authority from 2000 to 2007. he has previously held
senior executive positions with Australia and New Zealand
Banking Group Limited (“ANZ”), Norwich union and Standard
Chartered Bank, and was Chief executive officer of the
TAC. A Chartered Accountant by profession, James was a
partner in both the Melbourne and hong Kong offices of an
international accounting firm, now part of Deloitte.
nicholas collishaw, SAFin, AAPI, FRICS — Managing
Director — Dependent
Nicholas Collishaw was appointed Managing Director
on 26 August 2008. Prior to this appointment, he was
the executive Director — Investment responsible for
Mirvac’s Investment operations including MPT, Investment
Management and hotel Management, having been appointed
to the Mirvac Board on 19 January 2006.
Nicholas has been involved in property and property
investment management for over 25 years and has
extensive experience in development and investment
management of real estate in all major sectors and
geographies throughout Australia. Prior to joining Mirvac
in 2005 following its merger with James Fielding Group,
Nicholas was an executive Director and head of Property
at James Fielding Group. he has also held senior positions
with Deutsche Asset Management, Paladin Australia Limited
and Schroders Australia.
Marina Darling, BA (hons), LLB, FAICD — Independent
Non-executive
Member of the human resources committee
peter hawkins, BCA (hons), FAICD, SFFin, FAIM, ACA (NZ) —
Independent Non-executive
Chair of the human resources committee
Member of the audit, risk and compliance committee
Member of the nomination committee
Peter hawkins was appointed a Non-executive Director of
Mirvac on 19 January 2006, following his retirement from
the ANZ Bank after a career of 34 years. Prior to his
retirement, Peter was Group Managing Director, Group
Strategic Development, responsible for the expansion and
shaping of ANZ’s businesses, mergers, acquisitions and
divestments and for overseeing its strategic cost agenda.
Peter was a member of ANZ’s Group Leadership Team and
sat on the Boards of esanda Limited, ING Australia Limited
and ING (NZ) Limited, the funds management and life
insurance joint ventures between ANZ and ING Group.
he was previously Group Managing Director, Personal
Financial Services, as well as holding a number of other
senior positions during his career with ANZ.
James Millar AM, BCom, FCA, FAICD — Independent
Non-executive
Chair of the audit, risk and compliance committee
Member of the human resources committee
James Millar AM was appointed a Non-executive Director
of Mirvac on 19 November 2009 and is the former Chief
executive officer and oceania Area Managing Partner
of ernst & young, one of the world’s leading professional
services firms. he was a member of the global Board
of ernst & young.
James commenced his career in the reconstruction practice,
conducting some of the largest corporate workouts of
the early 1990s. James has qualifications in business and
accounting, and is a Fellow of The Institute of Chartered
Accountants of Australia.
John Mulcahy, PhD (Civil engineering), FIeAust —
Independent Non-executive
Member of the audit, risk and compliance committee
Member of the human resources committee
Member of the nomination committee
John Mulcahy was appointed a Non-executive Director of
Mirvac on 19 November 2009 and is the former Managing
Director and Chief executive officer of Suncorp-Metway
Limited (“Suncorp”). Prior to Suncorp, John held a number
of senior executive roles at Commonwealth Bank, including
Group executive, Investment and Insurance Services.
he also held a number of senior roles during his 14 years at
Lend Lease Corporation, including Chief executive officer,
Lend Lease Property Investment and Chief executive officer,
Civil and Civic.
John has more than 27 years of management experience
in financial services and property investment.
Marina Darling was appointed to the Mirvac Board on
23 January 2012.
elana Rubin, BA (hons), MA, FFin, FAICD, FAIM, FAIST —
Independent Non-executive
Marina is currently the Managing Director of Caponero
Group, a diversified property development and investment
organisation. Alongside her executive role, she is currently
a Non-executive Director of Southern Cross Media Group
Limited and until recently a Non-executive Director of
Argo Investments Limited.
Marina has previously been a Non-executive Director of a
number of listed companies and other entities including
Southern Cross Broadcasting Limited, National Australia
Trustees Limited, GIo holdings Limited, Deacons (Lawyers)
and Southern hydro Limited.
Member of the audit, risk and compliance committee
Member of the nomination committee
elana Rubin was appointed a Non-executive Director of
Mirvac on 11 November 2010 and has extensive experience
in property and financial services.
elana is the former executive Director — Investments of
the Australian Retirement Fund, one of Australia’s leading
superannuation funds.
elana has been a Director on a number of listed companies
and other entities including Tower Australia Ltd and Bravura
Solutions Ltd.
07
mirvac group annual report 2012 DIReCtoRs’ RepoRt
infoRMAtion on DiRectoRs / continueD
John peters, BArch, Adv Dip BCM, ARAIA, MAIPM, GAICD — Independent Non-executive
Member of the audit, risk and compliance committee
John Peters was appointed a Non-executive Director of Mirvac on 17 November 2011.
John brings to the Board 35 years experience in architectural design, project management, property development and
property management.
For the last 16 years, John has been the principal of a private property development company focused on substantial mixed
use developments and redevelopments in South east queensland. During this period, he has also consulted to various investors
and other financial stakeholders in several queensland development projects.
Prior to this, John was with Lend Lease for 14 years, where he was queensland Manager Lend Lease Development, and Director,
Lend Lease Commercial.
company secretary
Margaret Mezrani, LLB, FCIS, FCSA
Margaret Mezrani was appointed Company Secretary in November 2011 after joining Mirvac in February 2011. Margaret has had
over 15 years experience as a company secretary in listed and unlisted companies, including onePath wealth Management
(formerly ING Australia Group), MLC wealth Management Group, Promina Group and westpac Banking Corporation.
Meetings of DiRectoRs
The number of meetings of the Board of Directors and of each Board standing committee of which the relevant Director was
a member held during the year ended 30 June 2012 and the number of meetings attended by each Director are detailed below:
Director
James MacKenzie
Nicholas Collishaw
Marina Darling 2
Peter hawkins
James Millar AM
Penny Morris 3
John Mulcahy
John Peters 4
elana Rubin
Board
B
A
16
16
6
16
16
6
16
10
16
16
16
6
16
16
6
16
10
16
Audit, risk and
compliance
committee
(“ARCC”)
B
A
Board
committee 1
B
A
human
resources
committee
(“hRC”)
B
A
Nomination
committee
B
A
3
4
—
—
2
—
—
—
—
3
4
—
—
2
—
—
—
—
7
—
—
7
7
—
7
2
7
7
—
—
7
7
—
7
2
7
6
—
2
6
6
2
6
—
—
6
—
2
6
6
2
6
—
—
3
—
—
3
—
—
3
—
3
3
—
—
3
—
—
3
—
3
1) Committees of the Board established to deal with particular purposes during the year.
2) Appointed as a Director on 23 January 2012 and appointed as a member of the hRC on 24 January 2012.
3) Retired as a Director on 17 November 2011.
4) Appointed as a Director on 17 November 2011 and appointed as a member of the ARCC on 20 February 2012.
A) Indicates number of meetings attended during the period the Director was a member of the Board or Committee.
B) Indicates the number of meetings held during the period the Director was a member of the Board or Committee.
ReMuneRAtion RepoRt
The remuneration report comprises the following sections:
1 highlights for the year ended 30 June 2012
2 Alignment of remuneration strategy and business strategy
3 Mirvac’s approach to executive remuneration design
4 Remuneration components and outcomes for the executive Leadership Team
5 Five year snapshot of business and executive remuneration outcomes
6 Service agreements for the executive Leadership Team
7 Non-executive Directors’ remuneration
8 Additional information
This report covers the key management personnel (“KMP”) of Mirvac. KMP are those people with authority and responsibility
for planning, directing and controlling the activities of the entity, directly or indirectly. In essence, the KMP are responsible
for determining and executing Mirvac’s strategy.
For Mirvac, the KMP are:
— members of the executive Leadership Team (“eLT”); and
— Non-executive Directors.
For the year ended 30 June 2012, the eLT comprised:
— Managing Director — Nicholas Collishaw;
— Chief executive officer — Investment — Andrew Butler;
— Chief executive officer — Development — Brett Draffen;
— Chief operating officer — Gary Flowers; and
— Chief Financial officer — Justin Mitchell.
08
mirvac group annual report 2012
ReMuneRAtion RepoRt / continueD
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
1 highlights foR the yeAR enDeD 30 June 2012 (“fy12”)
fixed remuneration
1
In accordance with its market positioning strategy, Mirvac assessed the remuneration
levels and mix for members of the eLT and identified where adjustments were
appropriate based on current market benchmarking. As a result, some members
of the eLT will have their fixed remuneration reduced effective 1 July 2012.
short-term incentives (“sti”)
2
To ensure that the STI pool was appropriately aligned to Mirvac’s strategic drivers,
Mirvac continued with its balanced scorecard of measures for determining the
STI pool for the year ended 30 June 2012.
3
The Fy12 STI pool was larger than the STI pool in Fy11. This was largely due to
Mirvac exceeding threshold performance levels on the return on assets and customer/
investor satisfaction measures in Fy12.
long-term incentives (“lti”)
4
introduction of Minimum
securityholding guidelines
Rebalancing remuneration
components
5
6
7
8
9
The three year performance period for the LTI grants made during the year ended
30 June 2010 finished on 30 June 2012. In total, 37.5% the performance rights from
this grant vested as the relative total securityholder return (“TSR”) performance
hurdle was met.
Consistent with the intention stated in the 2011 Remuneration Report, two performance
measures will be applied to the LTI grants made in the year ended 30 June 2012:
50 per cent of the LTI allocation will be tested against a Relative TSR hurdle and
50 per cent against a return on equity (“Roe”) hurdle. These two performance
measures will also be retained for the Fy13 LTP grants.
The hRC approved the Minimum Securityholding Guidelines for the Managing Director
(100 per cent of fixed remuneration) and his direct reports (50 per cent of fixed
remuneration), in order to further align the interests of the eLT with the interests
of securityholders. executives covered by the guidelines will have five years to build
up their securityholding to the minimum level.
The hRC also approved the introduction of Minimum Securityholding Guidelines
for Non-executive Directors. under the guidelines, each Non-executive Director will
be required to hold a minimum of 25,000 Mirvac stapled securities. Non-executive
Directors will have two years to build up their securityholding to the minimum level.
To support the Minimum Securityholding Guidelines, commencing from Fy13 25 per
cent of STI awards for eLT members will be delivered in the form of Mirvac securities
(with the remainder paid in cash). while there is no set deferral period for securities
granted under the STI plan, members of the eLT will be expected to retain their
securities until they satisfy the Minimum Securityholding Guidelines. The combination
of the Minimum Securityholding Guidelines and the payment of STI in the form of
equity will reinforce the alignment between executive and securityholder interests and
focus the eLT on delivering consistently strong performance across the business cycle.
To recognise the acceptance of reduced fixed remuneration by some eLT members,
the affected executives will receive increased LTI awards in the Fy13 and Fy14 grants.
These additional awards will be “at risk” to the executive and subject to applicable
performance hurdles and service conditions.
non-executive Director fees
10 The maximum aggregate Non-executive Director remuneration for Fy12 remained
unchanged from the $1.95m limit approved by securityholders at the 2009 Mirvac
Annual General Meeting/General Meeting (“AGM”). No increase to this maximum
remuneration amount is proposed for Fy13.
2 AlignMent of ReMuneRAtion stRAtegy AnD business stRAtegy
Mirvac’s remuneration strategy is designed to support and reinforce its business strategy. linking the at-risk components
of remuneration (that is, our sti and lti schemes) to the drivers that support the business strategy ensures that
remuneration outcomes for executives are aligned with the creation of sustainable value for securityholders.
Mirvac’s remuneration arrangements support its strategic vision of being a globally recognised leader in real estate investment
and development. The Board has identified drivers that are critical to the achievement of this strategic vision, being:
1 financial performance and capital efficiency;
2 customer and investor satisfaction;
3 employee engagement; and
4 health, safety environment and sustainability (“hSe&S”) excellence.
The at-risk components of executive reward are directly tied to these four strategic drivers, as shown in the following diagram.
This is intended to motivate executives to focus on the areas the Board has identified as most important for delivering
the business strategy. Actual remuneration outcomes for executives are directly affected by, and aligned with, Group
performance in these areas.
09
mirvac group annual report 2012 DIReCtoRs’ RepoRt
2 AlignMent of ReMuneRAtion stRAtegy AnD business stRAtegy / continueD
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10
mirvac group annual report 2012
2 AlignMent of ReMuneRAtion stRAtegy AnD business stRAtegy / continueD
The following table sets out the actual value of the remuneration receivable by the eLT members during the year. The figures
in this table are different from those shown in the accounting table in section 4(f). The main difference between the two
tables is that the accounting table includes an apportioned accounting value for all LTI grants on foot during the year
(some of which remain subject to satisfaction of performance and service conditions and may not ultimately vest). The table
below, on the other hand, shows the LTI value based on the awards that actually vested and delivered value to eLT members.
executive
year
Fixed
remuneration
$
STI 1
$
LTI 2
$
employee Termination
benefits
$
loans 3
$
other
$
Total
$
Nicholas Collishaw 2012
2011
1,500,000
1,875,000
1,080,000
735,000
1,058,378
—
773,283
600,523
— 24,735 4,436,396
3,237,988
—
27,465
Andrew Butler
Brett Draffen
Gary Flowers
Justin Mitchell
2012
2011
2012
2011
2012
2011
2012
2011
618,000
604,815
308,876
205,800
—
—
604,279
511,980
1,000,000
1,000,000
464,800
269,500
238,584
—
648,900
630,000
433,790
216,100
126,608
—
810,080
638,693
266,158
216,652
700,001
700,001
470,400
240,100
88,023
—
604,279
511,980
—
—
—
—
—
—
—
—
8,918
11,414
1,540,073
1,334,009
15,231 2,528,695
1,925,322
17,129
8,962
10,211
11,403
11,374
1,484,418
1,072,963
1,874,106
1,463,455
1) STI values reflect payments to be made in September 2012 in recognition of performance during Fy12.
2) LTI amounts represent the value to the participant during Fy12 arising from performance rights whose performance period ended 30 June 2012.
3) Amount reported includes amounts forgiven during the year, imputed interest and related fringe benefits tax (“FBT”).
3 MiRvAc’s AppRoAch to eXecutive
ReMuneRAtion Design
the board and hRc are responsible for designing
remuneration arrangements that support the
business strategy.
Remuneration arrangements are designed to enable Mirvac
to derive maximum value from its remuneration spend, by
attracting, motivating and retaining the individuals who are
best equipped to successfully execute the business strategy.
a) how remuneration decisions are made
Board and HRC oversight and accountability
The Board, with assistance from the hRC, is ultimately
responsible for ensuring that remuneration at Mirvac is
consistent with the business strategy and aligned with the
creation of sustainable securityholder value.
The hRC, consisting of five independent Non-executive
Directors, has been delegated responsibility for reviewing the
remuneration strategy annually and advises the Board on
remuneration policies and practices generally. It also makes
specific recommendations to the Board on remuneration
packages, incentives and other terms of employment
for Non-executive and executive Directors, including the
Managing Director, and approves the remuneration packages,
incentives and other terms of employment for other KMP.
The hRC regularly reviews the at-risk components of
executive remuneration (that is, the STI and LTI schemes)
to ensure that executive remuneration continues to be
appropriately aligned with securityholders’ interests, while
also serving to attract, motivate and retain suitably qualified
people. The hRC also reviews and approves the performance
targets set for the STI and LTI schemes, as well as the
assessment of Mirvac’s performance against those targets,
which ultimately determines the size of the STI and LTI pools.
expert input from management and external advisors
To ensure it has the necessary information to make
remuneration decisions, the hRC seeks advice and input
from Mirvac’s Group General Manager, human Resources.
In addition, the hRC has appointed ernst & young as its
external remuneration advisor. ernst & young’s role in
this regard is to provide both information on current
market practice and independent input into key
remuneration decisions.
ernst & young’s terms of engagement include specific
measures designed to protect its independence. The
hRC recognises that, to effectively perform its role, it is
necessary for ernst & young to interact with members
of Mirvac management, particularly those in the human
Resources team. however, to ensure ernst & young remains
independent, members of Mirvac’s management are
precluded from requesting services that would be considered
to be a ‘remuneration recommendation’ as defined by the
Corporations Amendment (Improving Accountability on
Director and executive Remuneration) Act 2011.
During the year ended 30 June 2012, ernst & young
provided the hRC with:
— guidance in the review and design of executive
remuneration strategy;
— assistance in drafting of remuneration disclosures;
— relative TSR performance calculations; and
— market remuneration information which was used as an
input to the annual review of KMP and selected
executives’ remuneration.
No remuneration recommendations were provided by
ernst & young or any other advisor during the year.
b) Remuneration principles
The Board and hRC have developed six remuneration
principles to ensure remuneration continues to
support Mirvac’s business strategy and create value for
securityholders through all stages of the business cycle.
These principles underpin remuneration decision making
at Mirvac and provide a consistent framework to ensure
maximum value is derived from remuneration decisions.
Remuneration at Mirvac should:
1 align and contribute to Mirvac’s key strategic business
objectives and desired business outcomes;
2 align the interests of employees with those
of securityholders;
3 assist Mirvac in attracting and retaining the employees
required to execute the business strategy;
4 support Mirvac’s desired performance based culture;
5 encompass the concept of pay parity and be fair and
equitable; and
6 be simple and easily understood.
11
mirvac group annual report 2012
DIReCtoRs’ RepoRt
3 ouR AppRoAch to eXecutive ReMuneRAtion
Design / continueD
c) Market positioning
Consistent with the principles outlined above, Mirvac has
adopted a market positioning strategy designed to attract
and retain talented employees, and to reward them for
delivering strong performance. The market positioning
strategy also supports fair and equitable outcomes
between employees.
Definition of market
when determining the relevant market for each role, Mirvac
considers the companies from which it sources talent, and
to whom it could potentially lose talent. A distinction is made
between the market for business roles and the market for
corporate roles.
For business roles:
— the primary comparison group is the Australian Real estate
Investment Trust (“A-ReIT”) sector, plus Lend Lease, FKP
Property Group and Australand Property Group; and
— the secondary comparison group is a general industry
comparison group with a similar market capitalisation
(50-200 per cent of Mirvac’s 12 month average market
capitalisation).
For corporate roles:
— the primary comparison group is a general industry
comparison group with a similar market capitalisation
(50-200 per cent of Mirvac’s 12 month average market
capitalisation) to reflect the greater transferability of skills.
where disclosed data is unavailable, Mirvac relies on
published remuneration surveys covering relevant industries
and the broader market.
targeted market positioning
Fixed remuneration at Mirvac is positioned at the median
(50th percentile), with the ability to work within a range
around the median based on criteria such as:
— the criticality of the role to successful execution of the
business strategy;
— assessment of employee performance/potential; and
— the employee’s experience level.
Target total remuneration at Mirvac is positioned at the
median (50th percentile) with the opportunity to earn total
remuneration up to the upper quartile (75th percentile) in
the event that both the individual and the business achieve
stretch targets.
d) Remuneration mix
Mirvac’s remuneration structures strive to fairly and
responsibly reward employees, while complying with all
relevant regulatory requirements.
A significant portion of total remuneration for executives
is variable or at risk if applicable performance criteria are
not met or exceeded each year.
The average remuneration mix at target for eLT members
for the year ended 30 June 2012 was as follows:
In order to reweight executives’ remuneration mix towards
equity, Fy12 saw the introduction of Minimum Securityholding
Guidelines for eLT members, as follows:
Level
Minimum securityholding
Managing Director
other eLT members
100% of fixed remuneration
50% of fixed remuneration
This initiative will further align the interests of eLT members
with the interests of securityholders. executives covered
by the Minimum Securityholding Guidelines will have five
years to build up their securityholding to the suggested level.
Consistent with this approach, from Fy13 25 per cent of any
STI allocation to an eLT member will be paid in equity (rather
than cash), with the intention that executives will use those
securities to build up part of their minimum securityholding.
4 ReMuneRAtion coMponents AnD outcoMes
foR the elt
At Mirvac, the three components of executive remuneration
— fixed remuneration, sti grants and lti grants —
are weighted so as to direct executives’ focus towards
building long-term value for the group. to earn their
at-risk components, executives must first create
sustainable value for securityholders.
a) fixed remuneration
Fixed remuneration acts as a base-level reward for a
competent level of performance in an executive’s particular
role. It includes cash, compulsory superannuation and any
salary-sacrifice items (including FBT). The following factors
are taken into account when setting fixed remuneration
levels at Mirvac:
— the size and complexity of the role;
— role accountabilities;
— skills and experience of the individual; and
— market pay levels for comparable roles.
The opportunity value for the at-risk components
of remuneration is determined by reference to fixed
remuneration, so Mirvac is conscious that any adjustments
to fixed remuneration have a flow-on impact on the
executive’s potential STI and LTI awards.
Mirvac regularly considers benchmarking information
and, having regard to its market positioning strategy and
the desired remuneration mix, decides whether to adjust
fixed remuneration for each executive. Following a review
conducted during Fy12, the fixed remuneration levels for
some eLT members will be reduced effective 1 July 2012.
To recognise their acceptance of reduced fixed remuneration,
the affected executives will receive increased LTI awards
in the Fy13 and Fy14 grants. The additional awards will be
“at risk” to the executive and subject to applicable
performance hurdles and service conditions. Specific
details of the adjustments will be included in the Fy13
remuneration disclosures.
31%
23%
46%
37%
26%
37%
Managing Director
Other ELT members
Fixed remuneration
Target short-term incentives
Target long-term incentives
12
mirvac group annual report 2012 4 ReMuneRAtion coMponents AnD outcoMes foR the elt / continueD
b) the sti component — how does it work?
The purpose of STI is to motivate and reward employees for contributing to the delivery of annual business performance
as assessed against a balanced scorecard of measures. STI is an annual incentive based on Group, divisional and individual
performance. Mirvac’s STI plan has been structured as follows:
eligibility
— executives and managers at Mirvac are eligible to participate in the STI plan based on their
payment form
responsibility for achieving annual objectives.
— other employees are eligible for a discretionary bonus where management recognises
that exceptional individual performance has been achieved.
— STI awards with respect to the year ended 30 June 2012 were paid in cash.
— Commencing Fy13, 25 per cent of any STI award for an eLT member will be delivered in the
form of Mirvac securities, with the remaining 75 per cent delivered in cash. eLT members
will be expected to retain the securities they receive as part of their STI award until they
satisfy the Minimum Securityholding Guidelines.
sti pool formation
— A gateway requirement of Group operating earnings being at least 90 per cent of target
must be achieved before any STI payments are made.
— If the Group operating earnings gateway is satisfied, the size of the STI pool (from which
all STI payments are made) is determined based on Group performance against a balanced
scorecard of measures linked to Mirvac’s strategic drivers.
sti individual allocation
— An individual’s STI target opportunity is the amount earned for ‘on target’ Group and
individual performance.
— STI awards can range from zero to double the STI target opportunity.
— once the Group STI gateway has been met, actual STI awards are scaled up or down from
the individual’s STI target based on Group and individual performance. For employees
other than the Managing Director and Chief Financial officer, divisional performance
is also taken into account when determining the final STI award.
termination/forfeiture
— STI awards are forfeited if the executive terminates for any reason prior to the payment date.
stI performance measures
Group and divisional STI performance measures are directly linked to Mirvac’s strategic drivers, as shown in the diagram in
section 2. A description of each measure, its weighting and the rationale behind its inclusion in the Group’s balanced scorecard
is presented in the following table:
strategic driver
Aligned sti measure(s) explanation of measure
weighting % Rationale for using
operating earnings
Financial
performance
and capital
efficiency
Return on assets
Customer
and investor
satisfaction
Improvment
in investment
community
confidence
operating earnings reflect
how much revenue the
business has generated,
less its operating costs.
RoA is a measure of how
profitable a company is
relative to its total assets.
It is calculated by dividing
the company’s annual
earnings by its total assets.
Measures Mirvac’s year-
on-year improvement
against an independant
external benchmark
of investment
community confidence.
50 Reflects the underlying
performance of Mirvac’s normal
core business operations and
represents a key driver of
securityholder value.
20 Reflects how efficiently
Mirvac is using its assets
to generate earnings.
10 Represents how well Mirvac
is meeting the expectations
of key external stakeholders.
13
mirvac group annual report 2012 DIReCtoRs’ RepoRt
4 ReMuneRAtion coMponents AnD outcoMes foR the elt / continueD
strategic driver
Aligned sti measure(s) explanation of measure
weighting % Rationale for using
employee
engagement
employee engagement
survey outcomes
hSe&S
excellence
Balanced scorecard
of hSe&S excellence
employee engagement is
a measure of employees’
intellectual and emotional
commitment to their
organisation and its success.
It has been shown to be
linked to an organisation’s
financial performance.
Aon hewitt conducted an
anonymous survey of Mirvac’s
employees, and reported
back to Mirvac with a score
for the Group out of 100.
The ‘balanced scorecard’
of hSe&S grades a suite of
measures, such as lost time
injury frequency rate and
proportion of waste reused or
recycled using a traffic light
system. Mirvac looked at what
proportion of those measures
were rated ‘green’, which
corresponds to an industry
leading level of performance.
10 There is a strong correlation
between high levels of
employee engagement and
total securityholder return.
10 Mirvac is committed to
providing a safe workplace
for all of its employees and to
ensuring its activities do not
have an adverse impact on
the environment.
For each performance measure on the STI scorecard:
— a threshold, target and stretch goal is set at the start
c) the sti component: how was reward linked to
performance this year?
of the financial year;
— 75 per cent of the target opportunity is awarded for
achieving threshold performance;
— 100 per cent of the target opportunity is awarded for
achieving target performance;
— 150 per cent of the target opportunity is awarded for
achieving stretch performance; and
— a sliding scale operates between threshold and target,
and between target and stretch.
Following an assessment of Group performance:
— the operating earnings result is assessed to determine
whether the gateway performance level has been achieved;
— if the operating earnings gateway has been achieved,
each performance measure is assigned an STI score
ranging from zero per cent (for performance below
threshold) to 150 per cent (for performance at or above
stretch) of target;
— the STI scores for each component are then converted
into an overall STI score for Group performance;
— the hRC then has an opportunity to exercise discretion to
adjust the Group STI score up or down in order to ensure
payments are consistent with Mirvac’s remuneration strategy,
and to prevent any anomalous remuneration outcomes;
— the STI score is used to determine the STI pool; and
— STI scores are also assigned to divisions, based on an
assessment their contribution to the Group result.
To calculate an individual’s STI award:
— each participant is awarded an individual STI score of
between zero and 150 per cent of their STI target based
on an assessment of their personal performance for
the year against objectives linked to Mirvac’s strategic
drivers; and
— the final STI outcomes are then calculated by scaling
each individual’s STI score up or down based on the
overall STI score for Group performance, adjusted,
as appropriate, for divisional performance scores.
2
1
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14
stI pool in fy12
The Group operating earnings gateway was achieved in Fy12
which meant that an STI pool was formed. The STI pool in
Fy12 was larger than the STI pool in Fy11. This was largely due
to Mirvac exceeding threshold performance levels on the RoA
and customer and investor satisfaction measures in Fy12. The
following graph summarises Mirvac’s performance against
each of the measures on the balanced scorecard for the year
ended 30 June 2012:
Stretch
Target
Threshold
%
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Financial
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Capital
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Customer
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against external
benchmark)
Employee
engagement
(Aon Hewitt
engagement score)
HSE&S
excellence
(HSE&S scorecard)
In light of Mirvac’s performance against these five measures
for the year ended 30 June 2012, the Board approved
an STI pool equivalent to 96 per cent of target, compared
to a maximum potential pool of 150 per cent of target.
mirvac group annual report 2012
4 ReMuneRAtion coMponents AnD outcoMes foR the elt / continueD
fy12 stI awards for the elt
The following table shows the actual STI outcomes for each of the eLT members for the year ended 30 June 2012. Note that
the STI maximum for an individual represents double his or her STI target. As noted previously, each individual’s actual STI
is based on the Group’s balanced scorecard, adjusted, as appropriate, for divisional and individual performance.
Nicholas Collishaw
Andrew Butler
Brett Draffen
Gary Flowers
Justin Mitchell
STI max
% of fixed
remuneration
Actual STI
% max
STI
forfeited
% max
Actual STI
(total)
$
150
140
140
140
140
48
36
33
48
48
52
64
67
52
52
1,080,000
308,876
464,800
433,790
470,400
d) the lti component: how does it work?
Mirvac’s LTI plans facilitate executive security ownership for those employees who have the largest strategic impact on the
long term success of Mirvac.
The purpose of LTI at Mirvac is to:
— assist in attracting and retaining the required executive talent;
— focus executive attention on driving sustainable long term growth; and
— align the interests of executives with those of securityholders.
Mirvac’s LTI plans have changed over time to align with market practice. A summary of previous plans is in section 8.
Mirvac’s current LTI plan, the Long Term Performance (“LTP”) plan, was originally introduced in the year ended 30 June 2008
following approval by securityholders at the 2007 AGM. Securityholders approved an update to the LTP plan at the 2010 AGM.
The purpose of the LTP plan is to drive performance, retain executives and facilitate executive security ownership.
Key details of the LTP plan are set out in the table below.
eligibility
instrument
— LTP grants are generally restricted to those senior executives who are most able to influence
securityholder value. Non-executive Directors are not eligible to participate in the LTP plan.
— Awards under this plan are made in the form of performance rights. Awards of options have also been
made under this plan in previous years. A performance right is a right to acquire one fully paid Mirvac
security provided a specified performance hurdle is met.
— No loans are made to participants under this plan.
grant value
— The maximum annual LTI opportunity is 150 per cent of fixed remuneration for the Managing Director
and 100 per cent of fixed remuneration for other eLT members.
performance
hurdles
— In determining the value of the performance rights to grant to eLT members, the hRC takes into
account the annual retention value associated with participation in the executive Retention Plan
(a legacy LTI plan described in section 8). The fair value of rights granted under the LTP equates to
the eLT member’s maximum annual LTI opportunity, less the annual retention value associated with
their eRP participation.
— A table included later in this section sets out full details of the performance rights granted to eLT
members under the LTP during Fy12.
— The hRC reviews the performance conditions annually to determine the appropriate hurdles based
on Mirvac’s strategy and prevailing market practice. Consistent with the intention stated in the 2011
Remuneration Report, two performance measures apply to the LTI grants made in the year ended
30 June 2012: 50 per cent of the LTI allocation will be tested against a Relative TSR hurdle and
50 per cent against a Roe hurdle. These two measures will be retained for the Fy13 LTP grants.
— Relative TSR is used because it is an objective measure of securityholder value creation and is widely
understood and accepted by the various key stakeholders. The entities against which Mirvac’s TSR
performance is compared are shown on the following page.
— Roe is used as the second performance condition because it is aligned to Mirvac’s strategic drivers,
in particular financial performance and capital efficiency, and to take into account investor feedback
that has been received on the LTP plan. Roe measures how well management has used securityholder
funds and reinvested earnings to generate additional earnings for securityholders.
15
mirvac group annual report 2012
DIReCtoRs’ RepoRt
4 ReMuneRAtion coMponents AnD outcoMes foR the elt / continueD
vesting/delivery
termination/
forfeiture
— The performance rights offered under the scheme can only be exercised if and when the performance
conditions are achieved over a three year period. If the performance rights vest, entitlements will be
satisfied by, at the Board’s discretion, either an allotment of new securities to participants or by the
purchase of existing securities on-market that are then transferred to the participant.
— At the end of the three year performance period, all performance rights that vest are automatically
converted to Mirvac securities. however, if the performance rights do not vest at the end of the three
year performance period, they will lapse. There are no further tests of the performance conditions.
Directors have also indicated that there is no intention to retest the performance conditions
in the future.
— If an employee resigns or is dismissed, all their unvested rights are forfeited. If an employee leaves due
to retirement, redundancy, total and permanent disablement or death, the hRC determines the number
of rights which will lapse or are retained, subject to both the original performance period and hurdles.
Consistent with the recent amendments to the Corporations Act 2001, participants are prohibited from
hedging their unvested performance rights or options.
— If a change of control event occurs, the hRC determines the number of performance rights that vest,
if any, taking into account the performance from the date of grant to the event.
Relative tsR performance hurdle
For the grant made during the year ended 30 June 2012, the vesting outcome at the end of the performance period will depend
on Mirvac’s TSR performance relative to the constituents of the comparison group. To ensure that performance is measured
objectively, the hRC receives the relative TSR data from an independent external consultant. The hRC then determines the
number of performance rights that will vest, if any, by applying the TSR data to the vesting schedule.
For the grant made during the year ended 30 June 2012, the vesting outcome at the end of the three year performance period
for the portion of the grant for which TSR is the performance measure will be based on the following schedule:
Performance level
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