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JBG SMITHMIRVAC gRoup
AnnuAl RepoRt 2013
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by mirvac
MIRVAC gRoup AnnuAl RepoRt
For the year ended 30 June 2013
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
10 Remuneration report
33 Auditor’s independence declaration
34 Corporate governance statement
44
Financial statements
108 Directors’ declaration
109
111 Securityholder information
113 Glossary of acronyms
114 Directory
Independent auditor’s report to the members of Mirvac Limited
Cover image: 8 Chifley, Sydney NSW
Above image: Broadway Shopping Centre, Broadway 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 2013. 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
– Susan Lloyd-Hurwitz (appointed as a Director on 5 November 2012)
– Nicholas Collishaw (resigned as a Director on 31 October 2012)
– Marina Darling
– Gregory Dyer (appointed as a Director on 4 September 2012 and resigned as a Director on 5 April 2013)
– Peter Hawkins
– James Millar AM
– John Mulcahy
– John Peters
– 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 which comprises third party, listed and unlisted funds
management; and the property asset management business, Mirvac Asset Management.
DIVIDenDs/DIstRIbutIons
Dividends/distributions paid to stapled securityholders during the year were as follows:
June 2012 quarterly dividend/distribution paid on 27 July 2012
2.40 cents (2012: 2.20 cents) per stapled security
September 2011 quarterly dividend/distribution paid on 28 October 2011
2.00 cents per stapled security
December 2012 half yearly dividend/distribution paid on 25 January 2013
4.20 cents (2012: 2.00 cents) per stapled security
March 2012 quarterly dividend/distribution paid on 27 April 2012
2.00 cents per stapled security
total dividends/distributions paid
2013
$m
82.0
—
143.9
—
2012
$m
75.2
68.3
68.3
68.4
225.9
280.2
The June 2013 half yearly dividend/distribution of 4.50 cents per stapled security totalling $164.9m was paid on 26 July 2013.
Dividends and distributions paid and payable by Mirvac for the year ended 30 June 2013 totalled $308.8m, being 8.70 cents
per stapled security (2012: $287.0m – 8.40 cents per stapled security). The payments for the year ended 30 June 2013 and the
previous year were distributions made by the Trust.
net CuRRent Asset DefICIenCy
As at 30 June 2013, the Group is in a net current liability position of $19.6m. This includes $172.1m related to bank borrowings
due to mature in January 2014. On 3 July, the Group completed the extension and increase of its unsecured syndicated bank
facility and it now has no current bank borrowings. Refer to note 20 for further details. Accordingly, the Directors expect that the
Group will have sufficient cash flows to meet all financial obligations as and when they fall due.
opeRAtIng AnD fInAnCIAl ReVIew
The statutory profit after tax attributable to the stapled securityholders of Mirvac for the year ended 30 June 2013 was $139.9m
(2012: $416.1m). Included in the statutory profit was a provision for loss on inventories totalling $242.9m (2012: $25.0m). The
operating profit (profit before specific non-cash and significant items) was $377.6m 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 on page 02 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 2013, which have been subject to audit, refer to pages 109 to 110 for the auditor’s report on the
financial statements.
01
mirvac group annual report 2013
Directors’ report
opeRAtIng AnD fInAnCIAl ReVIew / ContInueD
profit attributable to the stapled securityholders of Mirvac
specific non-cash items
Net gain on fair value of investment properties
Net loss on fair value of investment properties under construction (“IPUC”)
Net loss on fair value of derivative financial instruments and associated foreign exchange movements 2
Security based payment expense 3
Depreciation of owner-occupied investment properties 4
Straight-lining of lease revenue 5
Amortisation of lease fitout incentives 4
Net loss on fair value of investment properties, derivatives and other
specific non-cash items included in share of net profit of associates and joint ventures 6
significant items
Impairment of investments including associates and joint ventures
Impairment of loans
Provision for loss on inventories
Net loss/(gain) from sale of non-aligned assets 7
tax effect
Tax effect of non-cash and significant adjustments 8
Discontinued operations
Specific non-cash items and significant items included in profit from discontinued operations (net of tax) 9
operating profit (profit before specific non-cash and significant items)
2013
$m
139.9
(54.0)
3.6
12.4
4.1
7.5
(17.3)
10.9
4.4
12.3
18.0
242.9
3.7
2012 1
$m
416.1
(148.7)
15.8
82.0
8.5
7.6
(15.9)
14.4
4.5
—
6.0
25.0
(0.8)
(9.4)
(44.4)
(1.4)
377.6
(3.8)
366.3
The statutory and operating profit includes both continuing and discontinued operations; the tables below provide a
breakdown of this information:
profit attributable to the stapled securityholders of Mirvac
Continuing operations
Discontinued operations
profit attributable to the stapled securityholders of Mirvac
operating profit (profit before specific non-cash and significant items)
Continuing operations
Discontinued operations 10
operating profit (profit before specific non-cash and significant items)
2013
$m
138.5
1.4
139.9
377.6
—
377.6
2012
$m
384.5
31.6
416.1
338.5
27.8
366.3
1) Restated to show discontinued operations separately.
2) Total of (Loss)/gain on financial instruments and Foreign exchange loss in the SoCI.
3) Included within Employee benefits expenses in the SoCI.
4) Included within Depreciation and amortisation expenses in the SoCI.
5) Included within Investment properties rental revenue in the SoCI.
6) Included within Share of net profit of associates and joint ventures accounted for using the equity method in the SoCI.
7) Total of Net loss on sale of investments and Net loss on sale of investment properties in the SoCI.
8) Included in Income tax benefit in the SoCI.
9) Included within Profit from discontinued operations (net of tax) in the SoCI.
10) Discontinued operations in SoCI less specific non-cash items and significant items included in profit from discontinued operations (net of tax).
02
mirvac group annual report 2013
financial, capital management and operational highlights
Key financial highlights for the year ended 30 June 2013:
– profit attributable to the stapled securityholders of Mirvac
Key operational highlights for the year ended 30 June 2013:
– acquired a portfolio of office assets from GE Real Estate
Investments Australia (“GE”) for $584.0m 5;
of $139.9m (2012: $416.1m), a decrease of 66.4 per
cent, and was impacted by the impairment of $273.2m
(impairment of investments of $12.3m, impairment of loans
of $18.0m and provision for loss on inventories of $242.9m)
announced by Mirvac on 7 February 2013;
– strengthened strategic relationships with high quality
investment organisations with the sale of a 50.0 per cent
interest in 200 George Street, Sydney to AMP Capital
and a 50.0 per cent interest in the Treasury Building
development in Perth to Keppel REIT;
– operating profit after tax of $377.6m 1 (2012: $366.3m),
– secured Ernst & Young as an anchor tenant at 200
representing 10.9 cents per stapled security (“cpss”), which
was above the market guidance range of 10.7 to 10.8cpss;
– operating profit (from continuing operations only) rose by
$39.1m (11.6 per cent) to $377.6m;
– equity, reserves and retained earnings for the Group rose
by 4.5 per cent to $6,010.8m (2012: $5,754.7m) which was
driven by the Institutional Placement and Security Purchase
Plan undertaken during the year;
George Street, Sydney with the professional services firm
committing to approximately 74.0 per cent of the building’s
net lettable area over a 10 year term;
– executed an Agreement for Lease with AGL Energy for
office space in a new A grade building, to be developed by
Mirvac at 699 Bourke Street in Melbourne;
– maintained strong portfolio occupancy of 97.9 per cent 6
within the MPT portfolio;
– operating cash flow of $385.9m, an increase of 21.7
– leased 165,188 square metres (11.5 per cent of net lettable
area) within the MPT portfolio;
– achieved strong levels of residential exchanged contracts
of $1,005.4m 7;
– settled 1,809 residential lots ahead of the target of 1,600
to 1,700 lots; and
– achieved a 4.6 Star National Australian Built Environment
Rating System (“NABERS”) energy portfolio average rating
in December 2012, exceeding the target of 4.5 Stars, and
six months ahead of the June 2013 target date.
Outlook 8
Whilst economic conditions remained challenging across
the markets in which the Group operates, Mirvac remains
well placed with its ongoing focus on building a strong and
resilient business that is positioned to perform across the
business cycle.
The Group’s capital position continued to be robust. The
Group remains focused on prudently managing its capital
position by monitoring and accessing diversified sources of
capital, including equity, domestic and international debt and
wholesale capital. This focus will ensure Mirvac can continue
to meet its strategic objectives without increasing its overall
capital management risk profile.
Mirvac will continue to enhance its capabilities as a
world-class Australian property group concentrating on
the secure income stream from the carefully structured
Investment portfolio and improving the return on invested
capital achieved by the Development business.
per cent on the previous year, largely attributable to a
reduction in borrowing costs, resulting from the proceeds
of the sales of the Hotel Management business and related
assets used to repay debt; refer to note 38 to the financial
statements for more detail;
– gearing increased to 23.6 per cent from 22.7 per cent at
30 June 2012; however, this remained within the Group’s
target range of 20.0 to 30.0 per cent 2;
– distributions of $308.8m, representing 8.70 cpss; and
– net tangible assets (“NTA”) 3 per stapled security of
$1.62 from $1.66 at 30 June 2012 which was impacted
by the Institutional Placement and Security Purchase Plan,
and distributions.
Key capital management highlights for the year ended
30 June 2013:
– completed a $403.7m (before costs) Institutional Placement
and Security Purchase Plan to fund the acquisition of the
portfolio of office assets from GE;
– issued $150.0m of medium term notes which will mature
in December 2017, further diversifying the Group’s
sources of debt and increasing the weighted average
debt maturity. Refer to note 20 to the financial statements
for more details;
– maintained strong liquidity with over $800m 4 of cash and
undrawn committed bank facilities;
– the weighted average debt maturity increased to 3.8 years 4;
– reduced average borrowing costs to 5.9 per cent per
annum as at 30 June 2013 (including margins and line fees)
and reduced by a further 20 basis points when the renewed
bank debt facilities became effective;
– maintained the BBB credit rating from Standard & Poor’s
with the outlook raised to positive;
– continued to comfortably meet all debt covenants;
– completed a $500.0m capital reallocation following
approval by securityholders at the 2012 Annual
General Meeting; and
– as announced to the market on 3 July 2013, the Group
extended the term and increased the size of its unsecured
syndicated bank loans, ensuring the Group has no
maturities until March 2015.
1) Excludes specific non-cash items, significant items and related taxation.
2) Net debt (at foreign exchanged hedged rate) excluding leases/(total tangible assets – cash). Pro forma as at 3 July 2013 post $1.7 billion syndicated loan transaction.
3) NTA per stapled security based on ordinary securities including Employee Incentive Scheme (“EIS”) securities.
4) Pro forma as at 3 July 2013 post $1.7 billion syndicated loan transaction.
5) Pre-acquisition costs.
6) By area, excluding assets under development, based on 100 per cent of building net lettable area.
7) Total exchanged pre-sales contracts as at 30 June 2013, adjusted for Mirvac’s share of joint ventures, associates and Mirvac’s managed funds.
8) These future looking statements should be read in conjunction with future releases to the Australian Securities Exchange (“ASX”).
03
mirvac group annual report 2013 Directors’ report
Divisional highlights
Investment
At 30 June 2013, Investment (comprising MPT and a small
number of assets held by the Company) had invested capital
of $6,776.6m 1, with investments in 68 direct property assets,
covering the office, retail and industrial sectors, as well as
investments in car parks, a hotel and other funds managed
by Mirvac. The asset allocation for MPT invested capital was
as follows:
– office: 60.4 per cent;
– retail: 25.0 per cent;
– industrial: 6.7 per cent; and
– other: 7.9 per cent 2.
For the 12 months to 30 June 2013, MPT’s statutory profit
before tax was $464.3m and operating profit before tax
was $418.8m, an increase of 3.7 per cent. This increase was
driven primarily by the acquisition of seven office assets and
reduced interest costs due to non-core asset sales and a
decrease in the average interest rate.
While the global economic climate remained challenging,
the Trust’s earnings continued to be secured by a strong
weighted average lease expiry (“WALE”) profile of
6.9 years 3, 96.2 per cent of financial year 2014 (“FY14”)
rent reviews being fixed or linked to the Consumer Price
Index (“CPI”), and 72.2 per cent of revenue being derived
from multinational, ASX listed and government tenants.
Key highlights for MPT for the year ended 30 June 2013:
– achieved 3.5 per cent like-for-like net operating
income growth;
– maintained high occupancy at 97.9 per cent 3;
– total investment property revaluations provided a net uplift
of $50.4m (or 0.8 per cent) over the previous book value
for the 12 months to 30 June 2013;
– completed 362 leasing deals over 165,188 square metres
of net lettable area (11.5 per cent of the portfolio), with
major leasing commitments at:
– 60 Margaret Street, Sydney NSW: lease to Cliftons
(3,469 square metres) for a new five-year lease term;
– Bay Centre, Pyrmont NSW: renewal of lease for five years
to Veolia (3,097 square metres);
– 101-103 Miller Street, North Sydney NSW: renewal of
lease for five years to Genworth Financial Mortgage
Insurance (5,898 square metres);
– 38 Sydney Avenue, Forrest ACT: renewal of lease for five
years to the Department of Broadband, Communications
and the Digital Economy (8,975 square metres);
– Riverside Quay, Southbank VIC: renewal of lease for
10 years to URS Australia (4,663 square metres);
– Nexus Industrial Park (Building 3), Prestons NSW: new lease
term to De-Longhi Australia (17,267 square metres); and
– Moonee Ponds Central, Moonee Ponds VIC: new 10 year
deal over 1,204 square metres with Aldi supermarket,
and a 10 year option exercised for Coles across
4,000 square metres.
– acquired a portfolio of seven office assets from GE for a
value of $584.0 million 4 aligning with the “Create and Buy”
office strategy. The acquisition comprised:
– two A grade landmark assets (Allendale Square, 77 St
Georges Terrace, Perth and 90 Collins Street, Melbourne)
which increased Mirvac’s core portfolio exposure to the
Perth and Melbourne CBDs; and
– five Sydney CBD assets located in the strategically
significant ‘Alfred, Pitt, Dalley and George Streets’
precinct, restocking Mirvac’s commercial development
pipeline with assets that can be held for the long term;
– established a second capital partnership with Keppel
REIT via the sale of a 50.0 per cent interest in the Treasury
Building, Perth on a fund through basis;
– further strengthened strategic relationships with a
high quality investment organisation, with the sale of a
50.0 per cent interest in 200 George Street, Sydney NSW
to AMP Capital;
– disposed of seven non-core assets including two office
buildings, three industrial properties and two retail centres 5
realising $189.7m in gross sale proceeds; and
– progressed with commercial developments as detailed
in the Commercial highlights section in this Report and
achieved the following:
– 200 George Street, Sydney NSW: secured an anchor tenant
with Ernst & Young agreeing to approximately 74.0 per cent
of the building’s net lettable area for a 10 year term;
– 8 Chifley, Sydney NSW: leased a further 2,800 square
metres to QBE Insurance Group, and post 30 June,
leased 2,594 square metres to Quantium, bringing the
total area leased to 70.0 per cent. This development
was delivered ahead of schedule and on budget by
the Development business with practical completion
achieved in July 2013;
– 699 Bourke Street, Melbourne VIC: secured an anchor
tenant with AGL Energy initially planning to occupy up to
15,000 square metres, or 79.0 per cent of the building’s
net lettable area for a 10 year term;
– Treasury Building, Perth WA: commenced construction on
the 30,800 square metre office tower, that will house the
WA Government which has pre-committed to a 25 year
lease across 98.0 per cent of the tower;
– Kawana Shoppingworld, Buddina QLD: commenced
construction on Stage 4 which includes a new Aldi
supermarket and additional specialty stores, expanding
the centre by approximately 9,000 square metres.
The project is currently 39.9 per cent leased 6;
– Stanhope Village, Stanhope Gardens NSW: commenced
construction on Stage 3 which includes the extension
of the Kmart mall and a new Aldi supermarket. The
project is 100.0 per cent leased 6 . Received development
application approval for the Stage 4 extension which
includes the creation of additional specialty stores and a
food court;
– Orion Springfield Town Centre, Springfield QLD
(Pad Sites): commenced construction with initial tenants
trading in December 2012. The Pad Sites will provide
a total gross lettable area of 5,108 square metres.
The project is 100.0 per cent leased 6; and
– Orion Springfield Town Centre, Springfield QLD
(Stage 2): received development application approval
for the Stage 2 extension which includes an additional
supermarket, specialty stores and commercial suites over
approximately 13,000 square metres.
1) By book value, includes assets under development.
2) Includes assets under development, indirect property investments, car parks and a hotel.
3) By area, excluding assets under development, based on 100 per cent of building net lettable area.
4) Pre-acquisition costs.
5) Includes two disposals that occurred post 30 June 2013; Manning Mall, Taree NSW (settled 11 July 2013) and Logan Megacentre, Logan QLD (settled 9 August 2013).
6) By area, includes signed leases and heads of agreement.
04
mirvac group annual report 2013 Divisional highlights / continued
The Group’s focus on corporate responsibility and
sustainability continued to deliver results within the Trust’s
portfolio, with key achievements:
– 6.0 Star Green Star Office Design v2 rating for 8 Chifley,
Sydney NSW;
– 4.6 Star NABERS energy portfolio average rating in
December 2012, exceeding the target of 4.5 Stars,
and six months ahead of the June 2013 target date;
– 3.4 Star NABERS water portfolio average target six months
ahead of schedule, and reached 3.5 Stars in June 2013;
– 5.5 Star NABERS energy rating for 1 Darling Island,
Pyrmont NSW, representing MPT’s second asset to achieve
a 5.5 Star rating; and
– 5.0 Star NABERS energy rating for 339 Coronation
Drive, Brisbane QLD. Energy intensity was reduced by
39.0 per cent and greenhouse emissions by 974 tonnes
CO2 per annum from 2010.
Outlook 1
Uncertainties surrounding US monetary policy, Chinese
economic growth, a softening in white collar employment
and the domestic economy transitioning away from
mining investment make for a challenging environment.
Nonetheless, an improvement in both economic and political
stability should result in continued interest for quality
products from both domestic and international investors.
The office portfolio, with low vacancy rates, high average
fixed rent increases, quality tenant profile, manageable
expiry profile and long weighted average lease term,
continues to be well positioned to deliver strong returns.
In the retail sector, greater consumer caution and a slowing
in household income growth have continued to increase
pressure on discretionary spending. MPT’s retail portfolio is
strongly biased towards non-discretionary spending, such as
food. This area of spending continues to be far more resilient
and, as a consequence, the Group’s retail assets, located in
core locations, should continue to perform strongly.
Overall, the Trust 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 creating new development product;
– extracting the benefit of the Group’s demonstrated
competitive advantages in remaining strategically
overweight in the office sector; and
– focusing on prime sub-regional, neighbourhood and CBD
shopping centres located in growth markets.
Investment Management
Mirvac 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 2013, MIM recorded a statutory
loss before tax of $13.7m and an operating loss before
tax of $11.9m. MIM’s result was impacted by a decline in
management fee income following the exit of funds under
management, and a reduction in income from the continued
exit of non-core investments and loans.
At 30 June 2013, MIM remained responsible for the
management of four wholesale funds: Mirvac Wholesale
Residential Development Partnership; Tucker Box Hotel
Group; JF Infrastructure Yield Fund; and Australian
Sustainable Forestry Investors. MIM also manages
the ASX listed Mirvac Industrial Trust and two unlisted
residential development funds.
In line with MIM’s continued focus on the rationalisation
of its non-core activities, the Group’s equity interest in the
US based funds manager, Quadrant Real Estate Advisors,
was disposed of on 3 June 2013.
Mirvac Asset Management (“MAM”) provides asset
management services primarily for the MPT portfolio.
MAM currently manages 68 properties inclusive of the
seven recently acquired properties as part of the GE office
portfolio acquisition.
Outlook 1
MIM will continue to seek to exit its non-core responsible
entity, trustee and investment manager responsibilities as
well as the underlying assets as opportunities arise. MAM
will seek to continue to expand its asset management
services in line with growth in the Investment Division’s
portfolio and assets owned by third parties where there
are common interests.
Development
Mirvac’s Development business unit operates across national
product lines consisting of Residential (comprising Apartments
and Masterplanned Communities) and Commercial.
At 30 June 2013, Development had $1,482.5m of
invested capital.
For the year ended 30 June 2013, Development’s statutory
loss before tax was $236.1m and operating profit before
tax was $37.1m. The statutory result was impacted by the
provisions announced on 7 February 2013. As part of the
regular review of all Development project assumptions, the
assessment as at 31 December 2012 provided evidence
that specific micro markets had not recovered as previously
expected which resulted in a $273.2m reduction in carrying
value, made up of provision for loss on inventories ($242.9m),
impairment of investments ($12.3m) and impairment of
loans ($18.0m). The majority of projects impacted are in
QLD representing 72.0 per cent of the provisions and in WA
representing 27.0 per cent of the provisions 2.
Residential
In the Group’s core metropolitan markets, the business
unit continued to deliver quality residential product, with
new release projects targeted at the right price points
and right locations. Key highlights across Apartments and
Masterplanned Communities were:
Apartments:
– Harold Park, Glebe NSW: achieved strong sales with
93.6 per cent of Precinct 1 and 78.8 per cent of Precinct
2 sold (279 and 145 exchanged contracts respectively).
The next stage is scheduled for release in the second
half of 2013;
– Rhodes Waterside, Rhodes NSW: progressed with
construction on the final apartment building at the Rhodes
precinct with 94.8 per cent sold (221 exchanged contracts);
1) These future looking statements should be read in conjunction with future releases to the ASX.
2) The remaining 1.0 per cent relates to projects outside of Queensland and Western Australia.
05
mirvac group annual report 2013 Directors’ report
Divisional highlights / continued
– Yarra’s Edge, Docklands VIC: completed construction at
Yarra Point with 86.6 per cent of the apartment tower
sold (174 settled and exchanged contracts). Construction
commenced on Mirvac’s seventh tower, Array, with 64.9 per
cent sold (133 exchanged contracts). Array is expected to
be completed in 2015; and
– ERA, Chatswood NSW: construction progressed ahead of
schedule and strong sales were achieved with 99.0 per cent
sold (291 exchanged contracts).
Masterplanned Communities:
– Googong NSW: continued strong sales with 60.3 per cent
of the first release sold (307 exchanged contracts);
– Elizabeth Hills NSW: continued strong sales with 77.0 per
cent sold (318 settled and exchanged contracts); and
– Enclave VIC: released the first stage of the project in April
2013 with 81 lots exchanged of the 83 lots released to date.
For the year ended 30 June 2013, Development’s residential
pipeline totalled 30,942 lots which was supplemented
by the acquisition of a number of key projects that will
contribute significantly to Development’s FY15 and beyond
pipeline, including:
– Dallas Brooks Centre, East Melbourne VIC: reached
an agreement with the Masonic Centre of Victoria for
the rights to redevelop the Dallas Brooks Centre for
predominately residential uses, subject to approvals;
– Alex Avenue NSW: secured 298 lots at the Alex Avenue
precinct at Schofield. In May 2013, Mirvac released the
first stage and achieved strong sales with 42 exchanged
contracts; and
– Enclave VIC: completed the acquisition of a 50.0 per
cent interest in Enclave. On completion, this project will
comprise in excess of 200 land lots and built form product.
As at 30 June 2013, Development settled 1,809 residential
lots and secured future income of $1,005.4m 1 through
residential exchange pre-sales contracts.
State based lot settlements by product for the year ended
30 June 2013 were as follows:
State
NSW
QLD
VIC
WA
total
Apartments
Masterplanned
Communities
14
80
170
68
332
765
200
216
296
1,477
Total
779
280
386
364
1,809
Commercial
Mirvac’s commercial development activities include office,
retail and industrial projects. For the year ended 30 June
2013, Mirvac’s commercial pipeline totalled $2,166.8m.
Key operational highlights for Commercial for the year ended
30 June 2013 were outlined in the MPT highlights section of
this Report. Key development milestones and sustainability
highlights were:
– 200 George Street, Sydney NSW: commenced construction
during the year with completion due in early 2016. The
office tower is expected to achieve a 5.0 Star NABERS
energy rating and 5.0 Star Green Star rating;
– 699 Bourke Street, Melbourne VIC: commenced
construction in August 2013 with completion expected
in 2015. The A grade office building with premium grade
services is designed to achieve a 5.0 Star NABERS and
5.0 Star Green Star rating;
– Treasury Building, Perth WA: remained on track with
construction for a new A grade commercial building
located on the landmark site of the Old Treasury in Perth.
The office tower is scheduled for completion in early 2015
and is expected to achieve a 4.5 Star NABERS energy
rating and 5.0 Star Green Star rating;
– 8 Chifley, Sydney NSW: demonstrating the benefits of
Mirvac’s integrated model, Development successfully
delivered this premium grade asset to the joint owners
(MPT and Keppel REIT). The premium office tower
achieved a 6.0 Star Green Star Office Design V2 rating and
is expected to achieve a 5.0 Star NABERS energy rating.
Practical completion was achieved in July 2013;
– Stanhope Village, Stanhope NSW: commenced
construction on Stage 3 which includes the extension of
the Kmart mall and a new Aldi supermarket;
– Kawana Shopping Centre, Buddina QLD: commenced
construction on Stage 4 which includes a new Aldi
supermarket and additional specialty stores, expanding
the centre by approximately 9,000 square metres; and
– Orion Springfield Shopping Centre, Springfield QLD
(Pad Sites): commenced construction with initial tenants
trading in December 2012. The remaining Pad Sites are on
track for completion by December 2013. The Pad Sites will
provide a gross lettable area of 5,108 square metres.
Outlook 2
The outlook for capital city residential markets remains
mixed by location. Whilst there has not been a material
uplift in demand to date and purchasers maintain a cautious
position, the stronger fundamentals should result in a further
improvement in the residential property market over time,
with the trend towards medium density living continuing,
particularly in the south eastern states.
The Division remains on track towards achieving its 2014
recovery, with key areas of focus including:
– continuing 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);
– strategically restocking the development pipeline; and
– improving the strong levels of pre-sales to mitigate
future earning risks.
1) Total exchanged pre-sales contracts as at 30 June 2013, adjusted for Mirvac’s share of joint ventures, associates and Mirvac’s managed funds.
2) These future looking statements should be read in conjunction with future releases to the ASX.
06
mirvac group annual report 2013
Risk
As a property group involved in real estate investment,
residential and commercial development and investment
management, Mirvac faces a number of risks throughout
the business cycle which have the potential to affect the
Group’s achievement of its targeted financial outcomes.
The Group’s objective is to ensure those risks are identified
and appropriate strategies are implemented to control or
otherwise manage the impact of those risks. Mirvac’s risk
management framework is integrated with its day-to-day
business processes and is supported by a dedicated
Group Risk function. Further information on the Group’s
risk management framework is detailed in the Corporate
Governance Statement in this Annual Report.
group risks
For the year ended 30 June 2013, the Group continued
to review both internal and external risks which have the
potential to affect the Group’s targeted financial outcomes
and to implement strategies to minimise their impact.
As announced on 9 May 2013, as part of Mirvac’s annual
strategic review of each business unit, the Group established
clear and targeted directional mandates for all areas of
operation. Further information on the material risks identified
for each of the Investment and Development divisions is
outlined below. The Group also introduced a consolidated
Group-wide robust capital allocation process that encourages
decision making with a focus on Group outcomes rather
than divisional outcomes.
At a Group level, Mirvac faces certain risks to the
achievement of its financial outcomes, these risks are types of
risks that are typical for a property group. These may include
debt refinancing and compliance with debt covenants as well
as compliance with HSE regulations.
Divisional risks
At a divisional level, the key risks faced by Investment
and Development which have the potential to affect the
achievement of the financial prospects for the Group include:
– office: as detailed in the outlook section for Investment,
the demand for office space remains challenging across
markets in which the Group operates. This has the potential
to impact on the Group’s performance given that office
assets represent 60.4 per cent of the MPT portfolio. MPT’s
office portfolio metrics comprising a long WALE of 5.2
years, high occupancy of 96.8 per cent, strong like-for-
like rent growth of 3.9 per cent, along with the portfolio’s
outperformance against the IPD index over three and five
years, demonstrate Mirvac’s ability to maintain a strong
and robust portfolio through the cycles of demand. The
Group seeks to manage uncertainty around commercial
office demand in a number of ways including substantial
pre-letting of commercial development in advance
of construction (for example, the Ernst & Young pre-
commitment of 74.0 per cent of the lettable area at 200
George Street, Sydney, announced in January 2013) and
by partially selling-down commercial developments in
advance of completion (for example, Treasury Building,
Perth and 200 George Street, Sydney);
– retail: as detailed in the outlook section for Investment,
the current low retail sales growth environment continues
to place pressure on retailers. With 25.0 per cent of MPT’s
portfolio represented by retail assets, Mirvac is focused on
continually refreshing its retail assets (via refurbishment,
redevelopment or remixing) to adapt to changing market
dynamics. Furthermore, Mirvac maintains a focus on
non-discretionary offerings, and a diversified tenancy mix,
where no single specialty retailer contributes greater than
1.2 per cent of the total portfolio’s gross rent; and
– residential: as detailed in the outlook section for
Development, Australia’s residential market varies from
state to state (and within states) with some markets
expected to continue to strengthen over the next three
years, while activity over the medium term is expected
to slow in states with a heavier reliance on resource
investment. The Development division is focused on the
right product in the right location with diversification of
risk across residential sub-markets, across Australia and
between asset classes (Apartments and Masterplanned
Communities). Weighting to key growth markets such as
NSW, which is currently at 51.8 per cent of the portfolio,
further mitigates this risk, as do pre-sales.
enVIRonMentAl RegulAtIons
Mirvac and its business operations are subject to compliance
with both Federal and State environment protection
legislation, and the Board is satisfied that adequate
systems are in place for Mirvac’s compliance with the
applicable legislation.
Within Mirvac’s health, safety and environment performance
reporting systems, including internal and external audits and
inspections, Mirvac has not experienced any incidents that
have resulted in any significant harm to the environment.
There were three infringement notices issued for minor
environmental incidents at housing development sites due
to the potential for uncontrolled sediment run off. Immediate
action was undertaken to rectify all three of these minor
environmental infringements.
A key initiative to reduce greenhouse gas emissions was
a commitment to achieve an average 4.5 Star NABERS
Energy rating on applicable office buildings by June 2013.
The Investment Division achieved this target in December
2012, six months ahead of schedule. This has resulted
in reduced operating costs, improved environmental
performance, demonstrating excellent energy operational
and management practices, and high efficiency
systems and equipment.
Mirvac is required under National Greenhouse and Energy
Reporting Act 2007 (“NGER”) to report annually on
greenhouse gas emissions, reductions, removals and offsets,
and energy consumption and production figures.
Following the divestment of the Hotel Management business
Mirvac no longer triggers the Energy Efficiency Opportunities
Act 2006 (“EEO”) threshold and was not required to
participate in the year ended 30 June 2013. Mirvac
deregistered from EEO on December 2012.
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.
The Federal Government introduced price on carbon
pollution which became effective 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.
07
mirvac group annual report 2013 Directors’ report
James MacKenzie
Susan Lloyd-Hurwitz
Marina Darling
Peter Hawkins
InfoRMAtIon on DIReCtoRs
Directors’ experience and areas of special responsibilities
The members of the Mirvac Board and their qualifications,
experience and responsibilities are set out below:
James MacKenzie
BBus, FCA, FAICD – Chair – 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 on
7 January 2005 and assumed the role of Chair in November
2005. James was re-elected as a Director and Chair of Mirvac
Limited on 15 November 2012.
James has served as a director of a number of public
companies listed on both Australian and international stock
exchanges. James was a Partner in both the Melbourne and
Hong Kong offices of an international accounting firm now
part of Deloitte. Subsequently, James led the transformation
of the Victorian Government’s Personal Injury Schemes
initially as Chief Executive Officer of the Transport Accident
Commission (TAC) and later as Chairman of TAC and the
Victorian WorkCover Authority (WorkSafe Victoria).
James was appointed as a member of the Australian B20
Group in February 2013 and is currently Co-Vice Chairman
of ASX listed Yancoal Australia Ltd.
susan lloyd-Hurwitz
BA(Hons), MBA (Dist) – Chief Executive Officer & Managing
Director – Executive
Susan Lloyd-Hurwitz was appointed Chief Executive Officer
(“CEO”) & Managing Director on 15 August 2012 and a
Director of Mirvac Board on 5 November 2012. Prior to
this appointment, Susan was Managing Director at LaSalle
Investment Management, where she was responsible for the
core investment accounts and funds business lines in the
European region, as well as the operation of the business.
Susan has also held senior executive positions at MGPA,
Macquarie Group and Lend Lease Corporation, working in
Australia, the US and Europe.
Susan has been involved in the real estate funds
management industry for over 23 years, with extensive
experience in fund and portfolio management in both the
direct and indirect markets, fund development, mergers and
acquisitions, dispositions, research and business strategy.
Susan is also a member of the UWS Foundation Council
which supports the University of Western Sydney in its
development and contribution to Greater Western Sydney.
Marina Darling
BA (Hons), LLB, FAICD – Independent Non-Executive
Member of the Human Resources Committee
Marina Darling was appointed to the Mirvac Board on
23 January 2012.
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),
Argo Investments and Southern Hydro Limited.
Marina is a Non-Executive Director of Southern Cross Media
Group Limited (appointed September 2011).
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 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. Peter was also
a Director of BHP (NZ) Steel Limited from 1990 to 1991 and
Visa Inc. from 2008 to 2011.
Peter is currently a Non-Executive Director of Westpac
Banking Corporation (appointed December 2008).
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.
He was also 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 in Australia.
James is a Non-Executive Director and Chair (appointed May
2012) of Fantastic Holdings Limited and a Non-Executive
Director of Fairfax Media Limited (appointed July 2012) and
Jetset Travelworld Limited (appointed September 2010).
08
mirvac group annual report 2013 James Millar AM
John Mulcahy
John Peters
Elana Rubin
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.
John is currently a Non-Executive Director of ALS Limited
(formerly Campbell Brothers Limited) (appointed February
2012), Coffey International Limited (appointed September
2009) and GWA Group Limited (appointed November 2010).
John peters
B Arch, Adv Dip BCM, ARAIA, 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 and was re-elected as a
Director on 15 November 2012.
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 Corporation for
14 years, where he was Queensland Manager Lend Lease
Development, and Director, Lend Lease Commercial.
elana Rubin
BA (Hons), MA, FFin, FAICD, FAIM, – Independent
Non-Executive
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, was re-elected as a Director
on 15 November 2012 and has extensive experience in
property and financial services.
Elana is the former Executive Director – Investments of the
Australian Retirement Fund, and was a Director (2006 to
2013) and Chair (July 2007 to April 2013) of AustralianSuper,
one of Australia’s leading superannuation funds.
Elana was previously a Non-Executive Director of TAL
(November 2007 to April 2013). She has also been a Director
on a number of listed companies and other entities including
Tower Australia Ltd and Bravura Solutions Ltd.
She is also a member of the Victorian Council of the
Australian Institute of Company Directors.
gregory Dyer
BEc, LLB, ACA – Finance Director – Executive
(resigned 5 April 2013)
Gregory Dyer was appointed a Director of Mirvac Board on
4 September 2012 and resigned on 5 April 2013. Prior to
this appointment, he was the Chief Financial Officer and a
Director at Mulpha Australia Limited (“Mulpha”). He also
served as a Non-Executive Director at FKP Property Group
(in which Mulpha has a 26 per cent interest) from 4 May 2009
to 30 July 2012. Prior to his role at Mulpha, Gregory was
Chief Financial Officer of APN News & Media Limited.
nicholas Collishaw
SAFin, AAPI, FRICS – Managing Director – Executive
(resigned 31 October 2012)
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
resigned as a Director of Mirvac Limited on 31 October 2012.
Company Secretary
natalie Allen
BEc, LLB
Natalie Allen was appointed Company Secretary on 21
January 2013. Natalie joined Mirvac as Group General
Counsel in August 2012, and has more than 14 years of legal
experience in real estate and equity capital markets. Prior to
joining Mirvac, Natalie was the Group General Counsel and
Company Secretary at Charter Hall Group, and before this,
was General Counsel and Company Secretary for a number
of listed and unlisted entities within Macquarie’s Real Estate
Funds Division. Natalie is a solicitor of the Supreme Court of
NSW and a member of the State Bar of California.
Margaret Mezrani
LLB, FCIS, FCSA (resigned 21 January 2013)
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. Margaret resigned as
Company Secretary on 21 January 2013.
09
mirvac group annual report 2013 Directors’ report
MeetIngs of DIReCtoRs
The number of meetings of the Board of Directors and of each standing Board committee of which the relevant Director was a
member held during the year ended 30 June 2013 and the number of meetings attended by each Director are detailed below:
Directors
James MacKenzie
Susan Lloyd-Hurwitz 4
Nicholas Collishaw 2
Marina Darling
Gregory Dyer 3
Peter Hawkins
James Millar AM
John Mulcahy
John Peters
Elana Rubin
Board
B
A
15
12
1
15
9
15
15
15
15
15
15
12
3
15
9
15
15
15
15
15
Audit, Risk and
Compliance
Committee
(“ARCC”)
B
A
B
Board
Committee 1
A
2
2
2
2
— —
— —
3
3
1
1
2
2
2
2
2
2
— —
6
6
— —
— —
— —
— —
6
6
6
6
6
6
6
6
6
6
Human
Resources
Committee
(“HRC”)
B
A
5
6
— —
— —
6
6
— —
6
6
6
6
6
6
— —
— —
Nomination
Committee
B
A
2
2
— —
— —
— —
— —
2
2
— —
2
2
— —
2
2
1) Committees of the Board established to deal with particular purposes during the year.
2) Resigned as a Director on 31 October 2012.
3) Appointed as a Director on 4 September 2012 and resigned as a Director on 5 April 2013.
4) Appointed as a Director on 5 November 2012.
A) Indicates the 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 2013
2) Alignment of remuneration strategy and business strategy
3) Mirvac’s approach to executive remuneration design
4) Remuneration components and outcomes for the Senior Executives
5) Five year snapshot of business and executive remuneration outcomes
6) Service agreements for the Senior Executives
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.
Mirvac has previously considered all members of the Executive Leadership Team (“ELT”) to be KMP. However, during the year
ended 30 June 2013 (“FY13”) the composition of ELT expanded significantly to include new business heads, as well as heads
of support functions. Under the expanded structure, the new ELT members who head business functions are considered KMP,
while the heads of support functions are not considered to be KMP.
For Mirvac, the KMP during FY13 were therefore:
– the CEO & Managing Director, Finance Director and members of the ELT who head a business (“Senior Executives”); and
– Non-Executive Directors.
For the year ended 30 June 2013, the Senior Executives were:
Position
Term as KMP
senior executives
Susan Lloyd-Hurwitz
Andrew Butler
Brett Draffen
Gregory Dyer 1
Gary Flowers 2
Jonathan Hannam
Bevan Towning 3
former senior executives
Nicholas Collishaw
Justin Mitchell
CEO & Managing Director (appointed 5 November 2012)
Chief Executive Officer, Investment
Chief Executive Officer, Development and Group Strategy
Finance Director (appointed 4 September 2012)
Chief Operating Officer (until 21 January 2013)
Group Executive, Business Initiatives (from 22 January 2013)
Group Executive, Capital (appointed 9 January 2013)
Chief Executive Officer, Capital Partnerships (from 9 July 2012)
Managing Director (ceased employment on 31 October 2012)
Chief Financial Officer (ceased employment on 1 October 2012)
1) Ceasing employment with Mirvac on 5 September 2013.
2) Ceasing employment with Mirvac on 1 October 2013.
3) Ceasing employment with Mirvac on 20 September 2013.
Part Year
Full Year
Full Year
Part Year
Full Year
Part Year
Part Year
Part Year
Part Year
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
10
mirvac group annual report 2013
1 HIgHlIgHts foR tHe yeAR enDeD 30 June 2013 (“fy13”)
fixed remuneration
1)
In accordance with its market positioning strategy, Mirvac assesses the remuneration
levels and mix for Senior Executives to identify where adjustments are appropriate
based on market benchmarking. As a result, no Senior Executives received an
increase to their fixed remuneration during FY13, while two Senior Executives had
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 2013.
3) The FY13 STI pool was smaller than the STI pool in the year ended 30 June 2012
(“FY12”). This was largely due to Mirvac not meeting threshold performance levels
on the Return on Assets (“ROA”) measure as a result of the impairments announced
during FY13.
4) Consistent with the intention stated in the FY12 Remuneration Report, 25 per cent
of FY13 STI awards for ELT members will be delivered in the form of Mirvac securities,
with the remainder paid in cash.
5) For FY14 the ROA measure will continue to be calculated in the same manner, but will
be relabelled as Return on Invested Capital (“ROIC”). This change in terminology will
ensure consistency between the terms used in Mirvac’s remuneration arrangements
and those used in Mirvac’s business strategy and external market communications.
6) Effective FY14, the ROIC weighting in the balanced scorecard will increase from
20 per cent to 35 percent, while the weighting for operating earnings will reduce from
50 per cent to 35 per cent. This change reflects the increased emphasis in Mirvac’s
strategy on generating returns on the assets it manages.
Introduction of stI deferral
7) Commencing from FY14, 25 per cent of STI awards for ELT members will be
long-term incentives (“ltI”)
Introduction of incentive
clawback arrangements
deferred into rights over Mirvac securities. Half of these deferred rights will vest after
12 months, with the balance vesting after 24 months. No dividends will be payable
on these deferred rights. The deferred rights are subject to service conditions.
8) The three year performance period for the LTI grants made during the year ended
30 June 2011 finished on 30 June 2013. None of the performance rights from this
grant vested as the relative total shareholder return (“TSR”) performance hurdle
was not met.
9) Consistent with the approach used for the FY12 LTI grants, two performance
measures will again be applied to the LTI grants made during FY13: 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.
10) To ensure that executives are only rewarded when performance hurdles have been
achieved at the end of the performance period, Mirvac continued with its policy of
not paying dividends on unvested LTI awards.
11) For FY14, ROIC will replace ROE as an LTI hurdle. The rationale behind this is to
ensure improved alignment between Mirvac’s business strategy, incentive scheme
measures, and external market communications.
12) In order to further strengthen Mirvac’s remuneration governance framework, Mirvac
has introduced a clawback policy for ELT members and other executives capable of
influencing the results of the Group. The policy gives the HRC the ability to clawback
incentives in the event of a material financial misstatement. The clawback provisions
will apply to future unvested STI and LTI awards.
Changes to remuneration mix
13) In order to facilitate the introduction of STI deferrals, effective FY14, the STI targets for
non-executive Director fees
ELT members (other than the Managing Director) will increase by 10 per cent of fixed
remuneration, while the LTI targets will reduce by 10 per cent of fixed remuneration.
The STI and LTI targets for the Managing Director will remain unchanged.
14) The maximum aggregate Non-Executive Director remuneration for FY13 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 FY14.
11
mirvac group annual report 2013 Directors’ report
2 AlIgnMent of ReMuneRAtIon stRAtegy wItH 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 setting the standard as a world-class Australian property
group that attracts the best. 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) high performing people and culture; and
4) health, safety, environment and sustainability (“HSE&S”) leadership.
The at-risk components of executive reward (i.e. Mirvac’s STI and LTI schemes) 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.
ouR stRAtegIC DRIVeRs...
ARe RefleCteD In
stI peRfoRMAnCe
MeAusRes...
AnD ltI peRfoRMAnCe
MeAsuRes...
so MIRVAC’s ACtuAl
peRfoRMAnCe...
DIReCtly AffeCts wHAt
eXeCutIVes ARe pAID.
Relative tsR
Measures the
performance of Mirvac
securities over time,
relative to other entities in
a comparison group.
Roe
Measures Mirvac’s
profitability relative to
securityholders’ investment
in the Group. Effective
FY14 ROIC will replace
ROE as the LTI measure.
from fy11 – fy13:
– Mirvac’s TSR was
ranked at the 44th
percentile relative to
its comparison group.
In fy13:
– Operating earnings
were $377.6m, up 3%
from $366.3m in FY12.
– FY13 ROA result was
down from FY12 largely
due to the impact of
the impairments.
In fy13:
– Mirvac improved
against the external
investment community
confidence benchmark
relative to FY12 results.
In fy13:
– Mirvac achieved target
on 5 out of 6 of the
key people measures
including a 12%
improvement on the
employee engagement
score from FY12.
In fy13:
– 83% of the measures
on the HSE&S
scorecard were
assessed as ‘green’.
CEO &
Managing
Director STI
outcome
in FY13
= 98%
of target.
Average
STI in FY13
for other
eligible
Senior
Executives
= 75%
of target.
LTI vesting
outcome
in FY13
= 0%
of target.
Capital efficiency and
financial performance
Deliver top 3
AREIT returns.
Customer and
investor satisfaction
Provide customers and
investors an experience
that delivers excellence,
consistently exceeds
expectations and
engenders loyalty.
High performing people
and culture
Have an engaged and
motivated workforce
with superior skills
and capabilities.
operating earnings
Reflects how much
revenue the business has
generated for the year, less
operating costs.
RoA
Measures Mirvac’s
profitability relative to its
total assets. It is calculated
by dividing the company’s
annual earnings by its total
assets. Effective FY14, ROA
will be relabelled as ROIC.
year-on-year
improvement in
Consumer Confidence
index (“CCI”)
An external measure of
a variety of attributes
that contribute to
the confidence that
institutional investors
have in Mirvac.
people “scorecard”
The balanced scorecard
includes measures
such as talent turnover,
diversity targets and
employee engagement.
Performance is assessed
based on the proportion
of those measures where
targets were met.
Hse&s leadership
Be recognised as a
leader in sustainability.
Provide workplaces
free from harm and
supported by a culture
where safety remains an
absolute priority.
Hse&s leadership
“scorecard”
The HSE&S priorities are
graded using a traffic
light system. Mirvac
looks at what proportion
of those measures are
rated ‘green’.
12
mirvac group annual report 2013 2 AlIgnMent of ReMuneRAtIon stRAtegy wItH busIness stRAtegy / ContInueD
The following table sets out the actual value of the remuneration receivable by the Senior Executives during the year.
The figures in this table are different from those shown in the accounting table in section 4(h). The main difference between
the two tables is that the accounting table in section 4(h) includes an apportioned accounting value for all unvested LTI grants
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 Senior Executives.
Fixed
remuneration
$
Year
STI 1
$
LTI 2
$
Employee Termination
benefits
$
loans 3
$
Other
$
Total
$
senior executives
Susan Lloyd-Hurwitz 4 2013
990,134
724,035
Andrew Butler
Brett Draffen
2013
2012
2013
2012
618,000
618,000
900,000
1,000,000
401,929
308,876
549,423
464,800
—
—
—
—
238,584
650,071
604,279
943,311
810,080
Gregory Dyer 6
2013
583,230
—
—
—
Gary Flowers
2013
2012
585,000
648,900
319,410
433,790
—
126,608
290,723
266,158
Jonathan Hannam 7
2013
258,619
141,206
Bevan Towning 9
2013
588,948
163,800
—
—
—
—
—
— 592,716 5 2,306,885
—
—
—
—
—
—
—
—
—
8,727
8,918
1,678,727
1,540,073
14,403
15,231
2,407,137
2,528,695
8,899
592,129
9,106
8,962
1,204,239
1,484,418
8,213 8
408,038
9,725
762,473
former senior
executives
Nicholas Collishaw
Justin Mitchell
2013
2012
2013
2012
502,745
1,500,000
—
1,080,000
—
1,058,378
895,508
773,283
1,188,462
—
174,956
700,001
—
470,400
—
88,023
650,071
604,279
687,580
—
1,280
24,735
3,738
11,403
2,587,995
4,436,396
1,516,345
1,874,106
1) STI values reflect payments to be made in September 2013 in recognition of performance during FY13.
2) LTI amounts represent the value to the participant during FY13 arising from performance rights whose performance period ended 30 June 2013.
3) Amount reported includes amounts forgiven during the year, imputed interest and related fringe benefits tax (“FBT”).
4) Commenced employment with Mirvac on 5 November 2012.
5) Includes relocation expenses and a payment of $530,000 as part compensation for the STI and LTI entitlements the Managing Director forfeited on resigning
from her previous employer.
6) Commenced employment with Mirvac on 4 September 2012.
7) Commenced employment with Mirvac on 9 January 2013.
8) Includes relocation expenses.
9) Commenced employment with Mirvac on 9 July 2012.
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 the remuneration approach 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. The HRC 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. More detailed information on the role and responsibilities of the HRC can be
found in section 9 of the Corporate Governance Statement, while information on each of the HRC members can be found
on page 8 and 9 of the Annual Report.
The HRC regularly reviews the at-risk components of executive remuneration (that is the STI and LTI schemes) to ensure that
the executive remuneration approach 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
STI and LTI outcomes.
13
mirvac group annual report 2013
Directors’ report
3 MIRVAC’s AppRoACH to eXeCutIVe ReMuneRAtIon
DesIgn / ContInueD
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 Executive, Services. In addition, the HRC
has appointed Ernst & Young as its external remuneration
adviser. 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 2013, 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.
c) Market positioning
Consistent with these principles, 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 pay 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 remuneration is comprised of fixed remuneration,
STI and LTI. 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 targets are
not met or exceeded each year. As described further in
section 4(b), commencing FY14, 25 per cent of STI awards
to ELT members will be deferred into rights over Mirvac
securities. This change was introduced to support the
introduction of the incentive clawback policy, and to further
align pay outcomes with Mirvac’s longer term security
price performance.
14
mirvac group annual report 2013 3 MIRVAC’s AppRoACH to eXeCutIVe ReMuneRAtIon DesIgn / ContInueD
In order to facilitate the introduction of STI deferrals, effective FY14, the STI targets for ELT members (other than the
Managing Director) will increase by 10 per cent of fixed remuneration, while the LTI targets will reduce by 10 per cent of
fixed remuneration. The STI and LTI targets for the Managing Director will remain unchanged. The following graphs compare
the remuneration mix at target for the Managing Director and other Senior Executives during FY13 with the mix after the
introduction of STI deferral in FY14.
Existing Target Pay Mix
New Target Pay Mix
46%
23%
31%
37%
26%
37%
46%
6%
17%
31%
33%
8%
22%
37%
Managing Director
Other Senior Executives
Managing Director
Other Senior Executives
Fixed remuneration
Target short-term incentive
Long-term incentive
Fixed remuneration
Target short-term incentive Cash
Target short-term incentive Deferred
Long-term incentive
The introduction of STI deferral in FY14 will also serve to ensure executives are rewarded for sustained performance over
the longer term.
FY14
FY15
FY16
Fixed Remuneration
Short Term Incentive – Cash
Short Term Incentive Deferred (12 months)
Short Term Incentive Deferred (24 months)
Long Term Incentive
The remuneration mix for Senior Executives has a significant weighting towards equity-based remuneration to ensure strong
alignment with securityholder interests. The following graph illustrates the cash versus equity remuneration mix for the
Managing Director and other Senior Executives following the introduction of STI deferrals in FY14.
Mix of cash vs equity
52%
48%
41%
59%
Managing Director
Other Senior Executives
Cash
Equity
15
mirvac group annual report 2013 Directors’ report
3 MIRVAC’s AppRoACH to eXeCutIVe ReMuneRAtIon DesIgn / ContInueD
Minimum Securityholding Guidelines for ELT members were introduced in FY12 in order to further weight executives’ remuneration
mix towards equity. Under the Guidelines, ELT members are expected to establish and maintain a securityholding to the value of:
Level
CEO & Managing Director
Other ELT members
Minimum securityholding
100% of fixed remuneration
50% of fixed remuneration
Executives covered by the Minimum Securityholding Guidelines have five years to build up their securityholding to the
suggested level. As at 30 June 2013, progress towards the Minimum Securityholding Guidelines for each continuing Senior
Executive was as follows:
Senior Executives
Susan Lloyd-Hurwitz
Andrew Butler
Brett Draffen
Jonathan Hannam
Date securityholding
to be attained
Value of securityholdings Minimum securityholding
guideline
($)
as at 30 June 2013
($)
November 2017
July 2017
July 2017
January 2018
—
139,796
473,606
—
1,500,000
309,000
450,000
270,000
4 ReMuneRAtIon CoMponents AnD outCoMes foR tHe senIoR eXeCutIVes
At Mirvac, the three components of executive remuneration – fixed remuneration, STI and LTI – 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 market remuneration 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 two Senior Executive members were reduced effective 1 July 2012.
To recognise their acceptance of reduced fixed remuneration, the affected executives received increased LTI awards in the FY13
grants, and will similarly receive an increased award in the FY14 grants. The additional awards will be “at risk” to the executive
and subject to applicable performance hurdles and service conditions.
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mirvac group annual report 2013
4 ReMuneRAtIon CoMponents AnD outCoMes foR tHe senIoR eXeCutIVes / 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
responsibility for achieving annual objectives.
– Other employees are eligible for a discretionary bonus where management recognises that
exceptional individual performance has been achieved. Commencing FY14, all permanent
Mirvac employees will participate in the STI plan and discretionary bonuses will no longer apply.
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.
– For FY14, the ROA measure will continue to be calculated in the same manner, but will be
relabelled as ROIC. This change will ensure consistency between the terminology used in
remuneration arrangements and that used when reporting on Mirvac’s performance.
– Effective FY14, the weighting on the balanced scorecard for the ROIC measure will increase
from 20 to 35 per cent, while the weighting for the operating earnings measure will reduce
from 50 to 35 per cent. This change reflects the increased emphasis in Mirvac’s strategy on
generating returns on the assets it manages. The gateway operating earnings requirement
willcontinue to apply.
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.
– FY13 STI targets were 75 per cent of fixed remuneration for the CEO & Managing Director
and 70 per cent for other Senior Executives. In order to facilitate the introduction of STI
deferrals, effective FY14, the STI targets for ELT members other than the Manager Director
will increase by 10 per cent of fixed remuneration. The STI target for the Managing Director
will remain unchanged.
– 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 Finance Director, divisional performance is also taken into account
when determining the final STI award.
– Effective FY14, all STI awards will be calculated with reference to only Group and individual
performance (that is, divisional performance will no longer form part of the calculation
of STI awards).
payment form
– For STI awards made to ELT members with respect to FY13, 25 per cent of the award will be
stI deferral
termination/
forfeiture
paid in the form of Mirvac securities, with the balance paid as 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.
– Commencing FY14, the 25 per cent of any STI award previously paid as securities will instead
be deferred into rights over Mirvac securities, with the balance paid as cash. Half of these rights
will vest 12 months after award, with the balance vesting after 24 months.
– No dividends will be payable on the deferred rights.
– If the deferred rights vest, entitlements will be satisfied by the purchase of existing securities
on-market that are then transferred to the participant.
– To be eligible for an STI award the executive must be employed on the award date.
– From FY14, the deferred portion of an STI award will be forfeited in the event that an employee
resigns or is dismissed for performance reasons prior to the vesting date. Unvested deferred
STI awards may be retained if an employee leaves due to circumstances such as retirement,
redundancy, total and permanent disablement or death.
17
mirvac group annual report 2013 Directors’ report
4 ReMuneRAtIon CoMponents AnD outCoMes foR tHe senIoR eXeCutIVes / ContInueD
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 FY13 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
financial
performance and
capital efficiency
Operating earnings
Operating earnings reflect
how much revenue the
business has generated, less
its operating costs.
Return on assets
Customer and
investor satisfaction
Improvement in
Investment community
confidence
High performing
people and culture
Balanced scorecard
of people measures
Hse&s leadership
Balanced scorecard
of HSE&S measures
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.
Effective FY14, the ROA
measure will continue
to be calculated in the
same manner, but will be
relabelled as ROIC.
Measures Mirvac’s year-on-
year improvement against
an independent external
benchmark of Investment
community confidence.
The balanced scorecard
includes measures such as
talent turnover, diversity
targets, and employee
engagement. Performance
is assessed based on
the proportion of those
measures where targets
were met.
The ‘balanced scorecard’
of HSE&S grades a suite of
measures using a traffic light
system. Measures include
lost time injury frequency
rate and proportion of waste
reused or recycled. Mirvac
looked at what proportion of
those measures were rated
‘green’, which corresponds
to an industry leading level
of performance.
50
20
10
10
Reflects the underlying
performance of Mirvac’s
core business operations
and represents a key driver
of securityholder value.
Reflects how efficiently
Mirvac is using its assets
to generate earnings.
Represents how well Mirvac
is meeting the expectations
of key external stakeholders.
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, plan and stretch goal is set at the start of the financial year.
The STI score for each performance level is calculated according to the following schedule:
Performance level
< Threshold
Threshold
Plan
Stretch
> Stretch
A sliding scale operates between threshold and plan, and between plan and stretch.
STI score
(% Target)
0
75
100
150
150
18
mirvac group annual report 2013
4 ReMuneRAtIon CoMponents AnD outCoMes foR tHe senIoR eXeCutIVes / ContInueD
Group and Divisional STI scores
The process for determining the FY13 Group STI and Divisional STI scores was as follows:
Operating earnings gateway
Requirement for operating earnings to be at least 90 per cent of target before STI is payable.
Calculation of STI scores for each balanced scorecard measure
Operating earnings
ROA
Customer & Investor
Satisfaction
People scorecard
HSE&S scorecard
Raw Group STI score is a number between 0 and 150 based on weighted average of STI scores for each measure on the balanced scorecard.
Calculation of raw Group STI score
HRC can exercise informed judgement to adjust the raw Group STI score up or down in order to ensure payments are consistent
with Mirvac’c renumeration strategy, and appropriately align with performance outcomes.
HRC determines final Group STI score
Divisonal STI scores determined
STI scores are also assigned to divisions, based on an assessment of their relative contribution to the Group result.
Individual STI score
Each participant is awarded an individual STI score 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.
Calculation of STI awards
Once the Group, Divisional and Individual STI scores are determined, an individual’s STI award is calculated as follows:
Fixed
remuneration
Individual
STI target
Group/
Divisional
STI score
Individual
STI score
Individual
STI award
c) the stI component: how was reward linked to performance this year?
STI pool in FY13
The Group operating earnings gateway was achieved in FY13 which meant that an STI pool was formed. The following graph
summarises Mirvac’s performance against each of the measures on the balanced scorecard for the year ended 30 June 2013:
3
1
Y
F
r
o
f
e
c
n
a
m
r
o
f
r
e
p
p
u
o
r
G
Weighting: 50%
% of Plan
awarded = 105%
Weighting: 20%
% of Plan
awarded = 0%
Financial
(Operating earnings)
Capital efficiency
(ROA%)
Weighting: 10%
% of Plan
awarded = 76%
Weighting: 10%
% of Plan
awarded = 100%
Weighting: 10%
% of Plan
awarded = 83%
Customer
and investor
satisfaction
(% Improvement
on CCI score)
High performance
people & culture
(People scorecard)
Health, Safety,
Environment
& Sustainability
(HSE&S scorecard)
Stretch
Plan
Threshold
19
mirvac group annual report 2013
Directors’ report
4 ReMuneRAtIon CoMponents AnD outCoMes foR tHe senIoR eXeCutIVes / ContInueD
In light of Mirvac’s performance against these five measures for the year ended 30 June 2013, the HRC approved an STI pool
equivalent to 78 per cent of target, compared to a maximum potential pool of 150 per cent of target. The resulting STI pool
for FY13 was $11.2m which represented 3 per cent of Mirvac’s operating profit.
The STI pool in FY13 was smaller than the STI pool in FY12. This was largely due to Mirvac failing to meet the threshold
performance levels on the ROA measure in FY13 as a result of the impairments announced during the year.
FY13 STI awards for the Senior Executives
The following table shows the actual STI outcomes for each of the Senior Executives for FY13. 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.
senior executives
Susan Lloyd-Hurwitz
Andrew Butler
Brett Draffen
Gregory Dyer
Gary Flowers
Jonathan Hannam
Bevan Towning
former senior executives
Nicholas Collishaw
Justin Mitchell
STI max
% of fixed
remuneration
Actual STI
% max
STI
forfeited
% max
Actual STI
(total)
$
150
140
140
140
140
140
140
150
140
49
46
44
—
39
39
20
—
—
51
54
56
100
61
61
80
100
100
724,035
401,929
549,423
—
319,410
141,206
163,800
—
—
d) the ltI component: how does it work?
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.
Key details of the LTP plan are set out in the table below.
– LTP grants are generally restricted to those 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 dividends are paid on unvested LTI awards. This ensures that executives are only rewarded
when performance hurdles have been achieved at the end of the performance period.
– No loans are made to participants under this plan.
– The maximum LTI opportunities during the year ended 30 June 2013 were equivalent to
150 per cent of fixed remuneration for the CEO & Managing Director, and 100 per cent of fixed
remuneration for other Senior Executives.
– Effective 1 July 2013, the maximum LTI opportunity for Senior Executives other than the
Managing Director will be reduced to 90 per cent of fixed remuneration, with a commensurate
increase in STI opportunity to facilitate the introduction of STI deferral. These reductions
form part of the adjustments to remuneration mix for ELT members made to facilitate the
introduction of STI deferrals.
– 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 (“ERP”), 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 value to the
individual associated with their ERP participation.
– A table included later in this section sets out full details of the performance rights granted to
Senior Executives under the LTP during FY13.
eligibility
Instrument
grant value
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mirvac group annual report 2013
4 ReMuneRAtIon CoMponents AnD outCoMes foR tHe senIoR eXeCutIVes / ContInueD
performance hurdles
– The HRC reviews the performance conditions annually to determine the appropriate hurdles
based on Mirvac’s strategy and prevailing market practice. Consistent with the approach used
for the FY12 LTI grants, two performance measures apply to the LTI grants made during FY13:
50 per cent of the LTI allocation will be tested against a relative TSR hurdle and 50 per cent
against a ROE hurdle.
– 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 below.
– ROE is used as the second performance condition because it is aligned to Mirvac’s strategic
drivers, in particular financial performance and capital efficiency. ROE measures how well
management has used securityholder funds and reinvested earnings to generate additional
earnings for securityholders.
– For FY14, ROIC will replace ROE as an LTI hurdle. The rationale behind this is to ensure
improved alignment between Mirvac’s business strategy, incentive scheme measures and
external market communications. Following this change, 50 per cent of the LTI allocation
will be tested against a relative TSR hurdle and 50 per cent against a ROIC hurdle.
– 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.
– ELT members will be expected to retain the securities they receive as a result of the vesting of
performance rights until they satisfy the Minimum Securityholding Guidelines.
– If an employee resigns or is dismissed, all their unvested performance 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.
– 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.
Vesting/delivery
termination/forfeiture
Hedging
– Consistent with the Corporations Act 2001, participants are prohibited from hedging their
unvested performance rights or options.
Relative TSR performance hurdle
For the grant made during FY13, the vesting outcome for half of the award 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 following vesting schedule:
Performance level
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